Traditions Bancorp, Inc. Reports Third Quarter 2021 Earnings

Rhea-AI Summary

Traditions Bancorp, Inc. (TRBK) announced a net income of $2.3 million for Q3 2021, down 19% from $2.8 million in Q3 2020, primarily due to decreased mortgage banking activity. For the nine months ended September 30, 2021, net income was $6.6 million, a 7% increase year-over-year. EPS for Q3 2021 was 74 cents, down from 89 cents in Q3 2020, while YTD EPS increased to $2.10 from $1.94. The bank's total assets grew to $720.4 million, and deposits rose by 22% year-over-year.

Positive

• Net income for nine months increased by $451 thousand, or 7%.
• Deposits increased by $115 million, or 22%, in the last 12 months.
• Loans grew by $16.4 million, or 3%, with a 12% increase excluding PPP impact.

Negative

• Net income for Q3 decreased by $544 thousand, or 19%, from Q3 2020.
• EPS for Q3 decreased to 74 cents from 89 cents in Q3 2020.
• Net interest margin contracted to 3.23% from 3.41% in Q3 2020.

YORK, Pa., Oct. 27, 2021 /PRNewswire/ -- Traditions Bancorp, Inc. (OTC Pink: TRBK) reported net income of $2.3 million for the third quarter ended September 30, 2021, compared to $2.8 million for the third quarter of 2020. This represents a $544 thousand, or 19%, decrease from the third quarter of 2020 and is a function of the stabilization of mortgage banking activities following the unprecedented prior year refinancing boom, favorable credit quality trends eliminating the current need for provisioning, and higher expenditures as the bank invests in its regional expansion beyond York County. Net income for the nine months ended September 30, 2021 was $6.6 million, an increase of $451 thousand, or 7%, over the first nine months of last year. On a per share basis, the bank reported
74 cents per share (diluted) for the third quarter ended September 30, 2021 compared to 89 cents per share for the third quarter of 2020. For the nine months ended September 30, 2021, earnings per share were $2.10 versus $1.94 for the first nine months of 2020. The book value per common share was $22.27 on September 30, 2021 versus $20.00 for the third quarter of 2020.

"We continue to build off the solid financial performance achieved through the first half of 2021, reporting one of the best quarters in our 19-year history," stated Eugene J. Draganosky, President and Chief Executive Officer. "Our core earnings engine remains strong, driven by a pickup in business loan growth during the current quarter despite significant SBA PPP loan forgiveness. We remain on track to attain our budgeted targets for 2021, notwithstanding the continuing headwinds of a limited supply of available housing in our local market, less refinancing activity due to higher interest rates, and increased competitive pressures on the pricing of loan deals. We believe Traditions Bank will enter 2022 from a position of strength due to increased demand for business loans, entry into Lancaster County, and expansion of activities in the Capital Region. This will be supported by the measured deployment of the bank's excess cash into investment securities and our disciplined approach to deposit pricing to manage the bank's overall cost of funds."

Quarterly Highlights – 3^rd Quarter 2021 versus 3^rd Quarter 2020

• Gains on the sale of mortgages remained strong at $2.6 million for 3Q21, despite dropping from record levels of $4.9 million for 3Q20.
• Residential mortgage loans sold in 3Q21 were $85.3 million compared to $117.9 million for 3Q20.
• The mortgage pipeline decreased to $50.5 million compared to $107.2 million on September 30, 2020.
• Loans grew by $16.4 million, or 3%, over 3Q20. Loan growth was muted as a result of PPP loan forgiveness. Without the impact of PPP loans, loans grew by $50.7 million, or 12%.
• As of September 30, 2021, PPP loan balances outstanding were $17.8 million. The balance included the forgiveness of 94.5% of first round loans and $14.9 million of remaining balances for the second round.
• Deposits increased $115.0 million, or 22%, during the last 12 months.
• Net interest margin contracted to 3.23% in 3Q21 compared to 3.41% in 3Q20, driven by excess on-balance sheet liquidity and the Federal Reserve's interest rate cuts in early 2020, which were partially offset by a reduction in the cost of funds from 0.72% to 0.25% over the same period.
• Excess cash continues to be deployed to purchase additional investment securities, with balances growing to $121.9 million in 3Q21 versus $80.9 million in 3Q20.
• Significant expenses incurred during the quarter were $138 thousand for rebranding, and $339 thousand for the Lancaster market initiative. The rebranding is part of a 3-year plan with the bulk of the expenses in the first half of 2021. The Lancaster initiative represents ongoing costs.

YTD Highlights – Nine Months Ended September 30, 2021 versus Nine Months Ended September 30, 2020

• Net interest income increased $1.4 million, or 10%, driven by PPP fee income recognition, lower cost of funds, and loan growth.
• For the year, net fee revenue from PPP loans totaled $1.0 million. Nearly $651 thousand in gross fees have yet to be recognized. Net PPP fees realized year to date for 2020 were $684 thousand.
• Provision for loan losses decreased $3.5 million, or 97%, which is consistent with the broader industry trend for lower than anticipated loan losses in 2021 to date.
• Gains on the sale of mortgages decreased $485 thousand, or 5%.
• Noteworthy expenses incurred during the year include $728 thousand for rebranding, $800 thousand for the Lancaster market initiative, and $146 thousand of one-time costs for the holding company formation.

Credit Quality and Capital Insights:

• As of September 30, 2021, the bank's credit exposure to industries most impacted by the pandemic (i.e., restaurants/bars, entertainment venues, lodging) was $30.6 million, or 6.1%, of the total loan portfolio versus $32.7 million, or 6.7%, of the total loan portfolio as of June 30, 2021.
• Excluding nonaccruals, there were no loans modified for temporary payment relief at the end of 3Q21, versus $2.6 million, or 0.5%, of the total loan portfolio in the linked quarter.
• Nonaccrual loans decreased to $3.2 million in the current quarter from $3.6 million in the linked quarter. This included $102 thousand in temporary payment relief loans.
• Nonperforming assets to total assets contracted to 0.44% from 0.50% in the linked quarter.
• The loan loss reserve ratio in 3Q2021 fell to 1.49% from 1.56% in the linked quarter, excluding the PPP portfolio.
• The bank remains well capitalized.

 

FINANCIAL HIGHLIGHTS (unaudited): (Dollars in thousands, except per share data)
Selected Financial Data		Sep 30, 2021		Dec 31, 2020		Sep 30, 2020
Investment securities	$	121,916	$	79,357	$	80,946
Loans, net of unearned income		497,273		465,513		480,903
Allowance for loan loss		7,150		7,046		6,363
Total assets		720,360		640,562		647,851
Deposits		649,921		567,075		543,886
Borrowings		-		42		40,456
Shareholders' equity		64,297		66,628		64,434
Book value per common share	$	22.27	$	20.72	$	20.00
Allowance/loans		1.44%		1.51%		1.32%
Non-performing assets/total assets		0.44%		0.55%		0.18%
Tier 1 capital/average assets		8.93%		10.13%		10.07%
Tier 1 capital/risk-weighted assets		12.98%		14.38%		14.05%
Total capital/risk-weighted assets		14.45%		15.63%		15.30%
	Three months ended Sep 30,				Nine months ended Sep 30,
Selected Operations Data		2021		2020		2021		2020
Interest income	$	5,805	$	5,882	$	17,041	$	17,386
Interest expense		(307)		(820)		(1,233)		(3,010)
Net interest income		5,498		5,062		15,808		14,376
Provision for loan losses		-		(2,000)		(100)		(3,638)
Investment securities gains(losses)		-		-		1		181
Gains on sale of mortgages		2,644		4,894		8,813		9,298
Other income		492		521		1,438		1,564
Other expense		(5,794)		(4,941)		(17,761)		(14,153)
Income before income taxes		2,840		3,536		8,199		7,628
Income taxes		(568)		(720)		(1,638)		(1,518)
Net income	$	2,272	$	2,816	$	6,561	$	6,110
Earnings per common share (basic)	$	0.75	$	0.90	$	2.11	$	1.95
Earnings per common share (diluted)	$	0.74	$	0.89	$	2.10	$	1.94
Return on average assets		1.27%		1.80%		1.28%		1.38%
Return on average equity		13.52%		18.15%		13.15%		13.80%
Net interest margin		3.23%		3.41%		3.25%		3.41%
Efficiency ratio		67.11%		47.16%		68.15%		55.68%
Net charge-offs(recoveries)/average loans		0.00%		-0.03%		0.00%		0.35%
Average common shares		3,041		3,145		3,107		3,139

 

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 were Traditions Bancorp's earnings for Q3 2021?

Traditions Bancorp reported a net income of $2.3 million for Q3 2021.

How did Traditions Bancorp perform compared to Q3 2020?

Net income for Q3 2021 decreased by 19% compared to Q3 2020.

What was Traditions Bancorp's EPS for Q3 2021?

The earnings per share (EPS) for Q3 2021 was 74 cents.

What are the key financial highlights for Traditions Bancorp in 2021?

Traditions Bancorp reported a 7% increase in net income for the nine months ended September 30, 2021.

What challenges did Traditions Bancorp face in Q3 2021?

The bank faced reduced mortgage banking activity and increased competitive pressures.