Traditions Bancorp, Inc. Reports Third Quarter 2022 Earnings

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Traditions Bancorp, Inc. (OTC Pink: TRBK) reported a net income of $1.6 million for Q3 2022, a decrease of 28% compared to Q3 2021. This decline was primarily due to an $1.8 million drop in mortgage banking gains. However, net interest income rose by 24% year-over-year, fueled by strong loan growth. The bank's credit quality remains stable, with reduced nonaccrual loans. Earnings per share (diluted) were 58 cents, up from 54 cents in the previous quarter. Unrealized investment losses increased to $13.3 million. A cash dividend of 8 cents per share was declared for Q3.

Positive

• Net interest income increased by 24% compared to Q3 2021.
• Robust loan growth of 17% year-over-year, translating to $86.6 million in new loans.
• Credit quality improved with a 10% decrease in nonaccrual loans.
• Earnings per share (diluted) rose to 58 cents from 54 cents in the linked quarter.

Negative

• Net income decreased 28% year-over-year from $2.3 million due to lower mortgage banking gains.
• Unrealized investment losses increased to $13.3 million, affecting book value.
• Gains on the sale of mortgages fell 68% to $0.9 million from $2.6 million in Q3 2021.
• Total deposits decreased by $34.4 million in Q3 2022.

YORK, Pa., Oct. 28, 2022 /PRNewswire/ -- Traditions Bancorp, Inc. (OTC Pink: TRBK) reported net income of $1.6 million for the third quarter ended September 30, 2022, compared to $1.5 million in the linked quarter and $2.3 million for the third quarter of 2021. This 28% decrease was driven by a $1.8 million decline in mortgage banking gains on the sale of loans due to the impact of surging inflation on mortgage interest rates, shrinking home inventory levels, and waning consumer sentiment around purchasing a home. Favorable offsets to these headwinds included robust loan growth, rising variable rate loan yields, and deposit pricing discipline, which contributed to a 24% increase in net interest income compared to the third quarter of 2021. Credit quality remains strong with a decrease in both nonaccrual loans and delinquencies from the prior quarter. The company reported earnings per share (diluted) of 58 cents for the third quarter ended September 30, 2022, compared to 54 cents in the linked quarter and 74 cents for the third quarter of 2021. Unrealized investment portfolio losses, flowing through Accumulated Other Comprehensive Loss, have grown to $13.3 million at quarter end compared to $9.7 million in the linked quarter. This resulted in a book value per common share of $19.61 on September 30, 2022, versus $20.37 in the linked quarter and $22.65 for the third quarter of 2021. Absent this accounting adjustment, Tier 1 book value per share stood at $24.39 on September 30, 2022.

"Traditions Bancorp has built upon the performance achieved in the first half of 2022, focusing our efforts on the fundamental elements of banking," stated Eugene J. Draganosky, Chief Executive Officer. "We bolstered our net interest income with robust commercial loan production in our core and expanded geographies. Through enhanced adjustable-rate mortgage generation, we are holding a greater volume of these loans in our portfolio. Lastly, we improved our net interest margin through disciplined deposit pricing. These initiatives, combined with an unwavering commitment to risk management, pristine credit quality, and expense control, collectively contribute to our performance. The immediate challenges include funding our strong commercial loan pipeline amid a nationwide reduction in liquidity and declines in mortgage volumes as 30-year mortgage rates more than doubled since last year at this time. Deposits were reduced by $34.4 million in the third quarter due to anticipated outflows. In response, and to mitigate further possible deposit contraction, we are initiating several steps, including proactive deposit generation strategies, greater use of wholesale funding, and selective increases in deposit rates."

Quarterly Highlights – Third Quarter 2022 versus Third Quarter 2021

• Loans grew by $86.6 million, or 17%, over 3Q21, despite being tempered by Paycheck Protection Program (PPP) loan forgiveness. Without the impact of PPP forgiveness, loans grew by $102.8 million, or 21%.
• As of September 30, 2022, PPP loan balances outstanding were nearly $1.7 million.
• Deposits increased by $11.6 million, or 2%, during the last 12 months.
• Net interest margin expanded to 3.66% in 3Q22 compared to 3.23% in 3Q21, driven by growth in commercial and adjustable rate residential mortgage loans, the positive impact of recent short-term interest rate increases on the loan portfolio's yield, and a 0.39% cost of funds for the quarter.
• Gains on the sale of mortgages were $0.9 million for 3Q22, declining 68% from $2.6 million in 3Q21.
• The mortgage pipeline decreased to $19.5 million from $53.3 million in the linked quarter and $50.5 million on September 30, 2021. Residential mortgage loans sold in 3Q22 were $58.5 million compared to $62.9 million in the linked quarter and $85.3 million for 3Q21. The associated mortgage gains have declined due to higher mortgage rates and lack of inventory.
• On April 19, 2022, the company announced regular cash dividends and paid quarterly distributions of eight cents per common share on May 13 and August 15, 2022. A third-quarter cash dividend of eight cents per common share was declared on October 20, 2022, and is payable on November 14, 2022, to shareholders of record at the close of business on November 4, 2022.
• As part of its Share Repurchase Plan announced on March 24, 2022, the company repurchased 11,700 shares during the third quarter. The total number of shares repurchased since the program's launch was 72,017.

YTD Highlights – Nine Months Ended September 30, 2022, versus Nine Months Ended September 30, 2021

• Net interest income increased $2.8 million, or 18%, primarily driven by growth in commercial and residential mortgage loans, the Federal Reserve Bank's interest rate increases, and a low cost of funds.
• On a YTD basis through September, net fee revenue from PPP loans totaled $250 thousand versus $1.0 million in the third quarter of 2021. $41 thousand in gross fees have yet to be recognized.
• Other expense has increased 5% from $17.8 million in 3Q21 to $18.7 million in 3Q22 as a result of the company's investment to build out the necessary infrastructure in the Lancaster and Capital Region markets. These expenses will be managed closely for the remainder of the year.
• Provision for loan losses decreased by $100 thousand, or 100%, from the prior year.

Credit Quality and Capital Insights:

• Nonaccrual loans decreased 10% in 3Q22, from $1.2 million in 2Q22 to $1.1 million in the current quarter.
• The company had no foreclosed other real estate owned, or net charge-offs, through the end of the third quarter.
• Non-performing assets to total assets fell from 0.16% in the linked quarter to 0.14% in the current quarter.
• Delinquencies greater than 30 days were 0.25% of total loans as of September 30, 2022, down from 0.39% as of June 30, 2022.
• The loan loss reserve ratio on September 30, 2022, excluding the PPP portfolio, was 1.23%, and reserves were over six and a half times greater than non-performing assets. The company will adopt CECL in 2023.
• The bank remains well capitalized.

 

FINANCIAL HIGHLIGHTS (unaudited): (Dollars in thousands, except per share data)
Selected Financial Data		Sep 30, 2022		Dec 31, 2021		Sep 30, 2021
Investment securities	$	126,917	$	140,188	$	121,916
Loans, net of unearned income		583,859		519,305		497,273
Allowance for loan loss		7,156		7,151		7,150
Total assets		773,241		749,094		720,360
Deposits		661,548		677,299		649,921
Borrowings		45,529		-		-
Shareholders' equity		54,645		65,148		64,297
Common book value per common share	$	19.61	$	22.94	$	22.65
Tier 1 book value per common share	$	24.39	$	22.87	$	22.27
Allowance/loans		1.23 %		1.38 %		1.44 %
Non-performing assets/total assets		0.14 %		0.39 %		0.44 %
Tier 1 capital/average assets		8.71 %		8.87 %		8.93 %
Tier 1 capital/risk-weighted assets		11.94 %		12.67 %		12.98 %
Total capital/risk-weighted assets		13.20 %		14.07 %		14.45 %
	Three months ended Sep 30,				Nine months ended Sep 30,
Selected Operations Data		2022		2021		2022		2021
Interest income	$	7,367	$	5,805	$	19,591	$	17,041
Interest expense		(542)		(307)		(953)		(1,233)
Net interest income		6,825		5,498		18,638		15,808
Provision for loan losses		-		-		-		(100)
Investment securities gains(losses)		-		-		-		1
Gains on sale of mortgages		856		2,644		4,283		8,813
Other income		527		492		1,501		1,438
Other expense		(6,232)		(5,794)		(18,663)		(17,761)
Income before income taxes		1,976		2,840		5,759		8,199
Income taxes		(336)		(568)		(1,086)		(1,638)
Net income	$	1,640	$	2,272	$	4,673	$	6,561
Earnings per common share (basic)	$	0.58	$	0.75	$	1.64	$	2.10
Earnings per common share (diluted)	$	0.58	$	0.74	$	1.63	$	2.09
Return on average assets		0.85 %		1.27 %		0.83 %		1.28 %
Return on average equity		11.07 %		13.24 %		10.28 %		12.87 %
Net interest margin		3.66 %		3.23 %		3.47 %		3.25 %
Efficiency ratio		75.93 %		67.11 %		76.42 %		68.15 %
Net charge-offs(recoveries)/average loans		0.00 %		0.00 %		0.00 %		0.00 %
Average common shares		2,821		3,049		2,847		3,122

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 Q3 2022?

Traditions Bancorp reported a net income of $1.6 million for Q3 2022.

How much did net interest income grow year-over-year for TRBK?

Net interest income increased by 24% compared to Q3 2021.

What were the earnings per share for TRBK in Q3 2022?

Earnings per share (diluted) for Q3 2022 were 58 cents.

What factors contributed to the decrease in net income for TRBK?

The decrease in net income was primarily due to a $1.8 million decline in mortgage banking gains.

What is the dividend declared for TRBK in Q3 2022?

Traditions Bancorp declared a cash dividend of 8 cents per common share for Q3 2022.