YORK, Pa., July 27, 2022 /PRNewswire/ — Traditions Bancorp, Inc. (OTC Pink: TRBK) reported net income of $1.5 million for the second quarter ended June 30, 2022, compared to $1.5 million in the linked quarter and $2.0 million for the second quarter of 2021. This 22% decrease from the second quarter of 2021 was caused by a $1.3 million decline in mortgage banking gains on the sale of loans due to waning home inventories and intense inflation pressure on mortgage interest rates. Favorable offsets to the trend in residential mortgage gains include continued strength in commercial loan production, retention of higher-yielding adjustable rate residential mortgage loans, improved variable rate loan yields associated with the Federal Reserve Bank’s recent short-term interest rate increases, and prudent management of loan funding costs. These factors resulted in a 16% increase in net interest income compared to the second quarter of 2021. On a per share basis, the company reported 54 cents earnings per share (diluted) for the second quarter ended June 30, 2022, compared to 52 cents per share in the linked quarter and 62 cents per share for the second quarter of 2021. Due to unrealized investment portfolio losses, Accumulated Other Comprehensive Loss was $9.7 million at quarter-end. It resulted in a book value per common share of $20.37 on June 30, 2022, versus $21.46 in the linked quarter and $22.08 for the second quarter of 2021.
“Traditions Bancorp continues to successfully navigate the headwinds of economic uncertainty and record inflation by focusing on its core strategies of generating superior business loan growth, optimizing balance sheet mix to take advantage of the recent increase in interest rates, prudently managing funding costs in a rising rate environment, and maintaining credit underwriting discipline,” stated Eugene J. Draganosky, President and Chief Executive Officer. “In the second quarter of 2022, we improved our margin and net interest income through increased commercial loan activity, retention of mortgage loans at favorable yields, and proactive management of our deposit betas while supporting balance sheet growth. We continue to capitalize on opportunities in our Lancaster and Capital Region markets, strengthening our franchise value. These efforts, coupled with the ongoing execution of our stock repurchase program and the recent announcement of the company’s intention to pay regular quarterly cash dividends, will continue to enhance our long-term shareholder value under challenging circumstances.”
Quarterly Highlights – Second Quarter 2022 versus Second Quarter 2021
- Loans grew by $64.2 million, or 13%, over 2Q21, despite being tempered by Paycheck Protection Program (PPP) loan forgiveness. Without the impact of PPP forgiveness, loans grew by $92.4 million, or 20%.
- As of June 30, 2022, PPP loan balances outstanding were $2.6 million. This included $0.3 million of remaining balances for first-round loans and $2.3 million of remaining balances for the second round.
- Deposits increased by $66.4 million, or 11%, during the last 12 months.
- Net interest margin expanded to 3.42% in 2Q22 compared to 3.22% in 2Q21, driven by the effective deployment of on-balance sheet liquidity, the Federal Reserve Bank’s recent interest rate increases, and a reduction in the cost of funds from 0.33% to 0.15% over the same time horizon.
- Excess cash was deployed to purchase additional investment securities, with balances growing 31% to $135.0 million in 2Q22 versus $102.7 million in 2Q21.
- Gains on the sale of mortgages were $1.6 million for 2Q22, declining 45% from $2.9 million in 2Q21. Volumes remain depressed as market interest rates increased due to continued inflationary pressure and a significant decline in consumer homebuying sentiment, as measured by Fannie Mae’s Home Purchase Sentiment Index.
- Residential mortgage loans sold in 2Q22 were $62.9 million compared to $55.2 million in the linked quarter and $109.2 million for 2Q21.
- The mortgage pipeline decreased to $53.3 million from $56.8 million in the linked quarter and decreased from $65.9 million on June 30, 2021.
- On April 19, 2022, the company announced its first quarterly regular cash dividend of eight cents per common share that was paid on May 13, 2022. Subsequently, a second-quarter eight cent per common share cash dividend was declared on July 21, 2022 and is payable on August 15, 2022 to shareholders of record at the close of business on August 5, 2022.
- As part of its Share Repurchase Plan announced on March 24, 2022, the company has repurchased 51,817 shares during the second quarter.
YTD Highlights – Six Months Ended June 30, 2022 versus Six Months Ended June 30, 2021
- Net interest income increased $1.5 million, or 15%, driven by growth in loans and investment securities, the Federal Reserve Bank’s recent interest rate increases, and a lower cost of funds.
- On a YTD basis through June, net fee revenue from PPP loans totaled $215 thousand versus $607 thousand in the second quarter of 2021. $76 thousand in gross fees have yet to be recognized.
- Other expense has increased 4% from $12.0 million in 2Q21 to $12.4 million in 2Q22. These expenses will continue to be managed closely for the remainder of 2022.
- Provision for loan losses decreased by $100 thousand, or 100%, from the prior year.
Credit Quality and Capital Insights:
- 2Q22 nonaccrual loans remained flat at $1.2 million compared to 1Q22.
- The company had no foreclosed other real estate owned, or net charge-offs, in the first half of the year.
- Non-performing assets to total assets fell slightly from 0.17% in the linked quarter to 0.16% in the current quarter.
- Delinquencies greater than 30 days were 0.39% of total loans as of June 30, 2022, up from 0.36% as of March 31, 2022.
- The loan loss reserve ratio on June 30, 2022, excluding the PPP portfolio, was 1.30%, and reserves were nearly six times greater than non-performing assets. The company will adopt CECL in 2023.
- The bank remains well capitalized.
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FINANCIAL HIGHLIGHTS (unaudited): |
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|
Selected Financial Data |
Jun 30, 2022 |
Dec 31, 2021 |
Jun 30, 2021 |
|||
|
Investment securities |
$ |
135,028 |
$ |
140,188 |
$ |
102,692 |
|
Loans, net of unearned income |
552,332 |
519,305 |
488,083 |
|||
|
Allowance for loan loss |
7,151 |
7,151 |
7,150 |
|||
|
Total assets |
762,803 |
749,094 |
705,752 |
|||
|
Deposits |
695,983 |
677,299 |
629,559 |
|||
|
Borrowings |
– |
– |
96 |
|||
|
Shareholders’ equity |
56,892 |
65,148 |
69,194 |
|||
|
Common book value per common share |
$ |
20.37 |
$ |
22.94 |
$ |
22.08 |
|
Tier 1 book value per common share |
$ |
23.86 |
$ |
22.87 |
$ |
21.70 |
|
Allowance/loans |
1.29 % |
1.38 % |
1.46 % |
|||
|
Non-performing assets/total assets |
0.16 % |
0.39 % |
0.50 % |
|||
|
Tier 1 capital/average assets |
8.78 % |
8.87 % |
9.94 % |
|||
|
Tier 1 capital/risk-weighted assets |
12.07 % |
12.67 % |
14.69 % |
|||
|
Total capital/risk-weighted assets |
13.37 % |
14.07 % |
15.94 % |
|||
|
Three months ended Jun 30, |
Six months ended June 30, |
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|
Selected Operations Data |
2022 |
2021 |
2022 |
2021 |
||||
|
Interest income |
$ |
6,315 |
$ |
5,649 |
$ |
12,224 |
$ |
11,236 |
|
Interest expense |
(200) |
(397) |
(411) |
(926) |
||||
|
Net interest income |
6,115 |
5,252 |
11,813 |
10,310 |
||||
|
Provision for loan losses |
– |
– |
– |
(100) |
||||
|
Investment securities gains(losses) |
– |
– |
– |
1 |
||||
|
Gains on sale of mortgages |
1,614 |
2,932 |
3,427 |
6,169 |
||||
|
Other income |
505 |
497 |
975 |
946 |
||||
|
Other expense |
(6,323) |
(6,220) |
(12,432) |
(11,967) |
||||
|
Income before income taxes |
1,911 |
2,461 |
3,783 |
5,359 |
||||
|
Income taxes |
(376) |
(491) |
(750) |
(1,070) |
||||
|
Net income |
$ |
1,535 |
$ |
1,970 |
$ |
3,033 |
$ |
4,289 |
|
Earnings per common share (basic) |
$ |
0.54 |
$ |
0.62 |
$ |
1.06 |
$ |
1.36 |
|
Earnings per common share (diluted) |
$ |
0.54 |
$ |
0.62 |
$ |
1.05 |
$ |
1.35 |
|
Return on average assets |
0.82 % |
1.15 % |
0.83 % |
1.29 % |
||||
|
Return on average equity |
10.42 % |
11.53 % |
9.89 % |
12.68 % |
||||
|
Net interest margin |
3.42 % |
3.22 % |
3.37 % |
3.26 % |
||||
|
Efficiency ratio |
76.79 % |
71.65 % |
76.67 % |
68.67 % |
||||
|
Net charge-offs(recoveries)/average loans |
0.00 % |
0.00 % |
0.00 % |
0.00 % |
||||
|
Average common shares |
2,846 |
3,165 |
2,860 |
3,158 |
||||
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.
