Traditions Bancorp, Inc. Reports Fourth Quarter Earnings and Results for 2023

Rhea-AI Summary

Traditions Bancorp, Inc. reported a decline in net income for the fourth quarter of 2023 compared to the previous year, as well as a decrease in earnings per share. The company's net interest margin contracted, and there was an increase in nonaccrual loans and non-performing assets. Despite these challenges, Traditions Bancorp has implemented strategic measures to preserve capital and better position the company for the future.

Positive

• Net income declined for the fourth quarter of 2023 compared to the previous year
• Earnings per share also decreased
• Net interest margin contracted
• Increase in nonaccrual loans and non-performing assets
• Strategic measures implemented to preserve capital and position the company for the future

Negative

• None.

YORK, Pa., Jan. 30, 2024 /PRNewswire/ -- Traditions Bancorp, Inc. (OTC Pink: TRBK), parent company of Traditions Bank, reported net income of $0.7 million for the fourth quarter ended December 31, 2023, compared to $1.4 million in the linked quarter and $1.1 million for the fourth quarter of 2022. Net income was $4.9 million for the full year versus $5.7 million for 2022. The company reported earnings per share (diluted) of 24 cents for the fourth quarter ended December 31, 2023, compared to 51 cents in the linked quarter and 38 cents for the fourth quarter of 2022. Full year earnings per share (diluted) was $1.77 compared to $2.01 for 2022. Unrealized investment portfolio losses, flowing through Accumulated Other Comprehensive Loss, have decreased to $11.1 million at quarter end compared to $14.3 million in the linked quarter. Book value per common share was $23.31 on December 31, 2023, versus $22.00 in the linked quarter and $20.44 for the fourth quarter of 2022.

"Traditions Bancorp's 2023 performance was impacted by slowed mortgage banking activity and higher funding costs driven by the FOMC's decision to keep interest rates higher for longer to stem inflation," stated Eugene J. Draganosky, Chair of the Board and Chief Executive Officer. "To offset these earnings pressures, we curtailed portfolio loan growth in the latter half of the year to preserve capital, prudently managed our cost of funds by employing laddered diversified funding strategies, and undertook a strategic realignment. This includes a $3.0 million reduction in 2024 non-interest expense. These proactive decisions have allowed us to better position the company for the future."

Quarterly Highlights – Fourth Quarter 2023 versus Fourth Quarter 2022

• Loans grew by $70.9 million, or 12%, over 4Q22. Loan growth was slowed and essentially flat in the fourth quarter to help insulate the margin from further compression as funding costs continued to rise.
• Over the previous 12 months, deposits increased by $58.8 million, or 9%, over 4Q22. As depositor preferences shifted, much of this growth was concentrated in higher cost time deposits, including brokered certificates of deposit. Brokered CDs grew from $38.7 million at the end of 2022 to $64.7 million at the end of 2023, representing 9% of total deposits.
• The cost of deposits has increased to 2.84% for 4Q23, up from 2.14% for 3Q23 and 1.02% for 4Q22.
• Net interest margin contracted to 2.94% in 4Q23 compared to 3.44% in 4Q22. This was driven by an increase in the total cost of funds, including borrowings, from 1.21% in 4Q22 to 3.00% in 4Q23.
• Gains on the sale of mortgages were $0.8 million for 4Q23, increasing from $0.4 million in 4Q22.
• Elevated market rates and limited home inventories continue to impact mortgage banking revenue. The mortgage pipeline declined to $9.2 million from $17.2 million in the linked quarter, and is down from $16.8 million on December 31, 2022. Residential mortgage loans sold in 4Q23 were $50.1 million compared to $51.8 million in the linked quarter and $41.3 million for 4Q22.
• A fourth-quarter cash dividend of eight cents per common share was declared on January 18, 2024, and is payable on February 12, 2024, to shareholders of record at the close of business on February 2, 2024.
• Net interest income decreased $0.4 million in 4Q23 from 4Q22, or 6%, driven by escalating funding costs.
• Other expense increased by 5%, from $6.1 million in 4Q22 to $6.4 million in 4Q23. In 4Q23, the company incurred $193 thousand of severance payments associated with the strategic realignment and $160 thousand related to increases in self-insured medical expenses due to a higher than normal claims.
• The 4Q23 loan loss provision was $194 thousand.

YTD Highlights – Twelve Months Ended December 31, 2023, versus Twelve Months Ended December 31, 2022

• Measured commercial and residential mortgage loan growth and the Federal Reserve Bank's interest rate increases helped interest income outpace interest expense for the year, as net interest income increased $0.8 million, or 3%, despite rising funding costs.
• Gains on sale of mortgages decreased by $1.1 million, or 24%, as a result of increased market rates and limited home inventories within the company's footprint.
• Other expense increased $0.4 million, or 2%, year over year.
• Net interest margin contracted 22 basis points, from 3.46% in 2022 to 3.24% in 2023, driven by an increase in the cost of funds.

Credit Quality and Capital Insights:

• Nonaccrual loans increased from $3.8 million in 3Q23 to $4.0 million in the current quarter. This is comprised of $2.9 million in residential mortgage and consumer loans, and $1.1 million in commercial loans. The overall increase in nonaccrual loans in 4Q23 was driven by the residential mortgage portfolio.
• The company reported a net recovery of $7 thousand in 2023. Non-performing assets to total assets increased from 0.44% in the linked quarter to 0.47% in the current quarter. On a year over year basis, non-performing assets to total assets increased from 0.30% at the end of 2022 to 0.47% at the end of 2023.
• Delinquencies greater than 30 days were 0.70% of total loans as of December 31, 2023, down from 0.88% as of September 30, 2023, but up from 0.65% as of December 31, 2022.
• Since adopting CECL in 1Q23, the company's ACL ratio has gradually increased from 0.52% in 1Q23 to 0.56% in 4Q23.
• Traditions Bancorp and Traditions Bank remain well capitalized.

 

FINANCIAL HIGHLIGHTS (unaudited): (Dollars in thousands, except per share data)
Selected Financial Data		Dec 31, 2023		Dec 31, 2022
Investment securities	$	111,817	$	126,972
Loans, net of unearned income		668,813		597,950
Allowance for credit losses		3,730		7,155
Total assets		840,073		776,833
Deposits		731,051		672,294
Borrowings		32,500		36,249
Shareholders' equity		63,786		56,983
Common book value per common share	$	23.31	$	20.44
Tier 1 book value per common share	$	27.35	$	24.69
Allowance/loans		0.56 %		1.20 %
Non-performing assets/total assets		0.47 %		0.30 %
Tier 1 capital/average assets		8.70 %		8.74 %
Tier 1 capital/risk-weighted assets		11.53 %		11.27 %
Total capital/risk-weighted assets		12.12 %		12.45 %
Common shares outstanding		2,737		2,788
	Three months ended Dec 31,				Twelve months ended Dec 31,
Selected Operations Data		2023		2022		2023		2022
Interest income	$	10,918	$	8,178	$	40,244	$	27,769
Interest expense		(4,853)		(1,716)		(14,395)		(2,669)
Net interest income		6,065		6,462		25,849		25,100
Provision for credit losses		(194)		-		(424)		-
Investment securities gains (losses)		-		-		-		-
Gains on sale of mortgages		787		402		3,568		4,686
Other income		496		485		2,181		1,985
Other expense		(6,363)		(6,067)		(25,110)		(24,731)
Income before income taxes		791		1,282		6,064		7,040
Income taxes		(135)		(208)		(1,135)		(1,294)
Net income	$	656	$	1,074	$	4,929	$	5,746
Earnings per common share (basic)	$	0.24	$	0.38	$	1.78	$	2.03
Earnings per common share (diluted)	$	0.24	$	0.38	$	1.77	$	2.01
Return on average assets		0.31 %		0.55 %		0.60 %		0.76 %
Return on average equity		4.29 %		7.77 %		8.07 %		9.69 %
Net interest margin		2.94 %		3.44 %		3.24 %		3.46 %
Efficiency ratio		86.59 %		82.56 %		79.47 %		77.84 %
Net charge-offs(recoveries)/average loans		0.07 %		0.00 %		0.00 %		0.00 %
Average common shares		2,755		2,811		2,771		2,828

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS:

This release contains forward-looking statements about Traditions Bancorp, Inc. that are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," "anticipate" or similar terminology. Such forward-looking statements include, but are not limited to, discussions of strategy, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives, goals, expectations or consequences; and statements about future performance, operations, products and services of Traditions Bancorp.

Traditions Bancorp cautions readers not to place undue reliance on forward-looking statements and to consider possible events or factors that could cause results or performance to materially differ from those expressed in the forward-looking statements, including, but not limited to: ineffectiveness of the organization's business strategy due to changes in current or future market conditions; the effects of competition, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products and services; interest rate movements; difficulties in integrating distinct business operations, including information technology difficulties; challenges in establishing and maintaining operations in new markets; volatilities in the securities markets; and deteriorating economic conditions.

Forward-looking statements in this release speak only as of the date of this release and Traditions Bancorp makes no commitment to review or update such statements to reflect changes that occur after the date the forward-looking statement was made.

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SOURCE Traditions Bancorp, Inc.

FAQ

What was Traditions Bancorp's net income for the fourth quarter of 2023?

Traditions Bancorp reported net income of $0.7 million for the fourth quarter of 2023.

How did Traditions Bancorp's earnings per share change in the fourth quarter of 2023?

Earnings per share (diluted) was 24 cents for the fourth quarter of 2023, compared to 38 cents for the fourth quarter of 2022.

What was Traditions Bancorp's net interest margin for the fourth quarter of 2023?

Net interest margin contracted to 2.94% in the fourth quarter of 2023 compared to 3.44% in the fourth quarter of 2022.

What was the increase in nonaccrual loans for Traditions Bancorp in 2023?

Nonaccrual loans increased from $3.8 million in the third quarter of 2023 to $4.0 million in the fourth quarter of 2023.

What strategic measures did Traditions Bancorp implement to address its earnings pressures?

The company curtailed portfolio loan growth, managed cost of funds, and undertook a strategic realignment to reduce non-interest expense by $3.0 million in 2024.