FRANKLIN, Ind.--()--Robert D. Heuchan, President and CEO of Third Century Bancorp (OTCBB: TDCB), the holding company of Mutual Savings Bank, announced net income of $242,000 for the year ended December 31, 2012, or $0.18 per share, as compared to net income of $250,000, or $0.19 per share for the year ended December 31, 2011.
The decrease in net income for the year ended 2012 as compared to the year ended 2011 was primarily due to an in increase of $196,000 in the provision for loan losses to $299,000 for the year ended December 31, 2012 from $103,000 for the year ended December 31, 2011. The provision in 2012 was made to maintain the allowance at a level Management and the Board deemed appropriate following the write-off of $657,000, which was partially reserved, in one commercial real estate mortgage loan and concerns about the potential impact of the economy, particularly relating to continued weaknesses in commercial real estate loans. Management and the Board continued to closely monitor commercial loans secured by real estate which remained in the portfolio and has done so since the economic downturn that started in 2008. In evaluating the adequacy of the allowance for loan losses, Management considers factors such as delinquency trends, portfolio composition, past loss experience and other factors such as general economic conditions. For the year ended December 31, 2012, Mutual Savings charged-off loans, net of recoveries, of $598,000 which represents a decrease in the level of charge offs of $444,000, or 42.61%, from the year ended December 31, 2011.
At December 31, 2012, non-performing assets totaled $6.9 million, or 5.40% of total assets, and included $6.2 million of non-performing loans. At December 31, 2011, non-performing assets totaled $9.4 million, or 7.94% of total assets, and included $8.4 million of non-performing loans. The decrease in non-performing loans was a result of increased collection and loan monitoring efforts. Loans are considered non-performing when one or more of the following occur: borrowers fail to make scheduled payments causing loans to become delinquent by 90 days or more; borrowers default on original loan terms and the Bank restructures such loans; or Management classifies loans as “substandard” in regards to full repayment according to loan agreements.
Non-interest income increased $130,000, or 16.75%, to $906,000 in 2012 from $776,000 in 2011. The primary reason for the increase in non-interest income was the increase of $121,000, or 484.00%, in net gains on sale of other real estate owned to $96,000 for the year ended December 31, 2012. In addition, net gains on loan sales increased $75,000 to $134,000 for the year ended December 31, 2012. In 2012, Mutual Savings sold $6.7 million of loans into the secondary market as compared to $3.1 million of such sales in 2011.
Non-interest expense decreased $168,000 or 3.57% to $4.5 million during 2012 from $4.7 million during 2011. The decrease in non-interest expense was primarily due to a decrease of $200,000 in salaries and employee benefits, reflecting the terminations of the Bank’s ESOP, to $2.3 million for the year ended December 31, 2012 from $2.5 million for the year ended December 31, 2011. The Bank maintained staffing at 42 full-time equivalents for the year of 2012 and benefited from changes made in 2011 to absorb duties of positions which were previously vacated, due to retirement or turnover.
Total assets increased $8.9 million to $127.8 million at December 31, 2012 from $118.9 million at December 31, 2011, an increase of 7.50%. The increase in assets was primarily the result of an increase in cash and cash equivalents of $7.3 million, or 121.79%, to $13.4 million at December 31, 2012 from $6.0 million at December 31, 2011. Net loans receivable increased $1.6 million or 1.63% to $97 million at December 31, 2012. During 2012, one-to-four family residential mortgages increased $6.9 million, or 16.16% and commercial loans secured by real estate mortgages increased $2.4 million, or 7.21%. During 2012, consumers continued to refinance their one-to-four family residential mortgages into lower fixed-rate loan products with longer maturities of which the Bank sold $6.7 million to the secondary market and then kept the remainder in its portfolio. Construction and land development loans decreased $5.7 million, or 60.65%.
Deposits totaled $90.8 million at December 31, 2012, which represented an increase of $1.9 million or 2.13% from $88.9 million at December 31, 2011. Time deposits decreased $1.2 million, or 4.18%, to $27.9 million at December 31, 2012 from $29.1 million at December 31, 2011. Demand deposits increased $3.1 million, or 24.26%, to $15.6 million at December 31, 2012 from $12.5 million at December 31, 2011.
Federal Home Loan Bank advances and other borrowings increased $7.0 million, or 48.28%, to $21.5 million at December 31, 2012 from $14.5 million at December 31, 2011. At December 31, 2012 the weighted average rate of all Federal Home Loan Bank advances was 2.22% compared to 2.98% at December 31, 2011 and the weighted average maturity of these borrowings was 3.1 years at December 31, 2012 compared with 2.4 years at December 31, 2011. The advances mature as follows: $5.0 million in 2013; $4.0 million in 2014; $2.5 million in 2015, 2016 and 2017; $2.0 million in 2018 and 2019; and, $1.0 million in 2020. During 2012, there was a focus on laddering the maturities of advances in an effort to extend the maturities of these liabilities for interest rate risk management purposes and to take advantage of historically low interest rates.
Stockholders’ equity was $15.2 million at December 31, 2012 and December 31, 2011. The Bank recorded net income of $242,000 for the year ended December 31, 2012. In September 2012, the Bank terminated its Employee Stock Ownership Plan by repurchasing 143,686 shares of common stock for $199,306. Stockholders’ equity as a percentage of assets decreased 0.85% to 11.92% at December 31, 2012 compared to 12.77% at December 31, 2011. The Company previously announced that the Board of Directors has suspended quarterly dividend payments until the Company achieves an acceptable and sustained level of earnings performance.
Founded in 1890, Mutual Savings Bank is a full-service financial institution based in Johnson County, Indiana. In addition to its main office at 80 East Jefferson Street, Franklin, Indiana, the bank operates branches in Franklin at 1124 North Main Street and the Franklin United Methodist Community, as well as in Edinburgh, Nineveh and Trafalgar, Indiana.
Selected Consolidated Financial Data
|At December 31,||At December 31,|
|Selected Consolidated Financial Condition Data:||(In Thousands)|
|Cash and cash equivalents||13,363||6,025|
|Interest-earning time deposits||4,465||2,985|
|FHLB advances and other borrowings||21,500||14,500|
|For the Year Ended December 31,|
|(Dollars In Thousands, Except Share Data)|
|Selected Consolidated Earnings Data:|
|Total interest income||$||5,200||$||5,494|
|Total interest expense||844||1,020|
|Net interest income||4,356||4,474|
|Provision of losses on loans||299||103|
Net interest income after provision for losses on loans
|Total other income||906||776|
|General, administrative and other expenses||4,544||4,712|
|Income tax expense||177||186|
|Earnings per share basic||$||0.18||$||0.19|
|Earnings per share diluted||$||0.18||$||0.19|
|Selected Financial Ratios and Other Data:|
|Interest rate spread during period||3.49||%||3.65||%|
|Net yield on interest-earning assets||3.70||3.90|
|Return on average assets||0.20||0.21|
|Return on average equity||1.58||1.66|
|Equity to assets||11.92||12.77|
Average interest-earning assets to average interest-bearing liabilities
|Non-performing assets to total assets||5.40||7.94|
Allowance for loan losses to total loans outstanding
Allowance for loan losses to non-performing loans
Net charge-offs to average total loans outstanding
|General, administrative and other expense to average assets||3.71||3.93|
|Effective income tax rate||42.24||42.66|
|Number of full service offices||6||6|
|Tangible book value per share||$||11.95||$||10.69|
|Market closing price at end of quarter||$||3.50||$||2.50|
|Price-to-tangible book value||29.30||23.38|