YORK, Pa., July 28, 2023 /PRNewswire/ — Traditions Bancorp, Inc. (OTC Pink: TRBK) reported net income of $1.3 million for the second quarter ended June 30, 2023, compared to $1.5 million in the linked quarter and $1.5 million for the second quarter of 2022. Depressed mortgage banking revenue, higher deposit funding costs, and increasing reliance on wholesale borrowing drove the decrease in earnings. Growth in the cost of funds has put downward pressure on net interest margins. The company reported earnings per share (diluted) of 47 cents for the second quarter ended June 30, 2023, compared to 55 cents in the linked quarter and 54 cents for the second quarter of 2022. Unrealized investment portfolio losses, flowing through Accumulated Other Comprehensive Loss, have increased to $12.3 million at quarter end compared to $10.5 million in the linked quarter. Net of taxes, the company recorded a revised $2.9 million CECL adjustment due to a reclassification of off-balance sheet assets. Book value per common share was $22.29 on June 30, 2023, versus $22.41 in the linked quarter and $20.37 for the second quarter of 2022. Regulatory Tier 1 book value per share stood at $26.79 on June 30, 2023.
“Traditions Bancorp navigated a challenging second quarter, continuing our growth trajectory with measured commercial and residential mortgage lending despite the headwinds of rising funding costs and the impact of current market rates on our mortgage activity,” stated Eugene J. Draganosky, Chief Executive Officer. “We have selectively grown our earning assets, carefully considering the financial impact of the retail and wholesale funding costs required to fund this loan growth. We believe profitable and responsible growth will remain a strategic anchor in achieving favorable long-term total shareholder returns.”
Quarterly Highlights – Second Quarter 2023 versus Second Quarter 2022
- Loans grew by $100.8 million, or 18%, over 2Q22.
- Over the previous 12 months, deposits were essentially flat, decreasing by $2.4 million.
- The cost of deposits has increased to 1.87% for 2Q23, up from 1.52% for 1Q23 and 0.15% over 2Q22.
- Net interest margin contracted to 3.31% in 2Q23 compared to 3.42% in 2Q22, driven by an increase in the total cost of funds, including borrowings, from 0.15% in 2Q22 to 2.15% in 2Q23.
- Gains on the sale of mortgages were $1.0 million for 2Q23, declining from $1.6 million in 2Q22. Nevertheless, gains were up $45 thousand over 1Q23.
- The mortgage pipeline increased to $15.6 million from $10.0 million in the linked quarter and $53.3 million on June 30, 2022. Residential mortgage loans sold in 2Q23 were $41.3 million compared to $35.5 million in the linked quarter and $62.9 million for 2Q22. Rising market rates and limited home inventories continue to impact mortgage banking revenue.
- A second-quarter cash dividend of eight cents per common share was declared on July 20, 2023, and is payable on August 14, 2023, to shareholders of record at the close of business on August 4, 2023.
- As part of its Share Repurchase Plan announced on March 24, 2022, the company repurchased 71,015 shares during the second quarter. The total number of shares repurchased since the program’s inception was 150,532 at a cost of $3.0 million or $19.93 per share. The Share Repurchase Plan is now complete.
- Net interest income increased $0.4 million, or 7%, driven by commercial and residential mortgage loan growth and the Federal Reserve Bank’s short-term interest rate increases, partially offset by escalating funding costs.
- Despite inflation, through strategic cost-cutting measures, other expense has increased marginally by 1%, from $6.3 million in 2Q22 to $6.4 million in 2Q23.
- As of June 30, 2023, the bank had a loan loss provision of $221 thousand.
YTD Highlights – Six Months Ended June 30, 2023, versus Six Months Ended June 30, 2022
- While tempered by a rising cost of funds, net interest income increased $1.2 million, or 10%, driven by commercial and residential mortgage loan growth and the Federal Reserve Bank’s short-term interest rate increases.
- Gains on sale of mortgages decreased by $1.4 million, or 42%, due to increased market rates and limited home inventories within the bank’s geographic footprint.
- Other expense increased 2% from $12.4 million in 2Q22 to $12.7 million in 2Q23.
Credit Quality and Capital Insights:
- Nonaccrual loans increased in 2Q23, from $2.8 million in 1Q23 to $3.9 million in the current quarter. Residential mortgages comprised $2.6 million of the nonaccrual loan total, with the remaining $1.3 million being commercial loans. One $727 thousand commercial relationship and four residential mortgages totaling $464 thousand migrated to nonaccrual status in 2Q23.
- The bank reported a net recovery of $132 thousand through the first half of 2023.
- With the increase in nonaccrual loans, non-performing assets to total assets increased from 0.35% in the linked quarter to 0.48% in the current quarter. There was no foreclosed other real estate.
- Delinquencies greater than 30 days were 0.80% of total loans as of June 30, 2023, up from 0.49% as of March 31, 2023, and 0.65% as of December 31, 2022.
- After adopting CECL in 1Q23, a reclassification of off-balance sheet assets increased risk-weighted assets and decreased risk-based capital ratios. The revised CECL adjustment was a $2.9 million net of tax increase to retained earnings, compared to the $2.8 million adjustment that was initially reported. While future recessionary concerns influence our CECL qualitative adjustments, the Allowance for Credit Losses (ACL) is heavily weighted on historical losses, which have been minimal for many years. The bank’s ACL ratio was 0.53% as of June 30, 2023, compared to 0.52% as of March 31, 2023, and down from the ALLL-to-total loans ratio of 1.20% as of December 31, 2022.
- The bank remains well capitalized.
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FINANCIAL HIGHLIGHTS (unaudited): |
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|
Selected Financial Data |
Jun 30, 2023 |
Dec 31, 2022 |
Jun 30, 2022 |
|||||
|
Investment securities |
$ |
115,056 |
$ |
126,972 |
$ |
135,028 |
||
|
Loans, net of unearned income |
653,121 |
597,950 |
552,332 |
|||||
|
Allowance for credit losses |
3,472 |
7,155 |
7,151 |
|||||
|
Total assets |
837,661 |
776,833 |
762,803 |
|||||
|
Deposits |
693,599 |
672,294 |
695,983 |
|||||
|
Borrowings |
70,987 |
36,249 |
– |
|||||
|
Shareholders’ equity |
60,791 |
56,983 |
56,892 |
|||||
|
Common book value per common share |
$ |
22.29 |
$ |
20.44 |
$ |
20.37 |
||
|
Tier 1 book value per common share |
$ |
26.79 |
$ |
24.69 |
$ |
23.86 |
||
|
Allowance/loans |
0.53 % |
1.20 % |
1.29 % |
|||||
|
Non-performing assets/total assets |
0.48 % |
0.30 % |
0.16 % |
|||||
|
Tier 1 capital/average assets |
8.74 % |
8.74 % |
8.78 % |
|||||
|
Tier 1 capital/risk-weighted assets |
11.12 % |
11.27 % |
11.62 % |
|||||
|
Total capital/risk-weighted assets |
11.66 % |
12.45 % |
12.87 % |
|||||
|
Common shares outstanding |
2,727 |
2,788 |
2,793 |
|||||
|
Three months ended Jun 30, |
Six months ended June 30, |
|||||||
|
Selected Operations Data |
2023 |
2022 |
2023 |
2022 |
||||
|
Interest income |
$ |
9,855 |
$ |
6,315 |
$ |
18,686 |
$ |
12,224 |
|
Interest expense |
(3,296) |
(200) |
(5,656) |
(411) |
||||
|
Net interest income |
6,559 |
6,115 |
13,030 |
11,813 |
||||
|
Provision for credit losses |
(221) |
– |
8 |
– |
||||
|
Investment securities gains (losses) |
– |
– |
– |
– |
||||
|
Gains on sale of mortgages |
1,014 |
1,614 |
1,983 |
3,427 |
||||
|
Other income |
666 |
505 |
1,170 |
975 |
||||
|
Other expense |
(6,397) |
(6,323) |
(12,667) |
(12,432) |
||||
|
Income before income taxes |
1,621 |
1,911 |
3,524 |
3,783 |
||||
|
Income taxes |
(307) |
(376) |
(668) |
(750) |
||||
|
Net income |
$ |
1,314 |
$ |
1,535 |
$ |
2,856 |
$ |
3,033 |
|
Earnings per common share (basic) |
$ |
0.47 |
$ |
0.54 |
$ |
1.02 |
$ |
1.07 |
|
Earnings per common share (diluted) |
$ |
0.47 |
$ |
0.54 |
$ |
1.02 |
$ |
1.05 |
|
Return on average assets |
0.64 % |
0.82 % |
0.72 % |
0.83 % |
||||
|
Return on average equity |
8.53 % |
10.42 % |
9.40 % |
9.89 % |
||||
|
Net interest margin |
3.31 % |
3.42 % |
3.38 % |
3.37 % |
||||
|
Efficiency ratio |
77.64 % |
76.79 % |
78.27 % |
76.67 % |
||||
|
Net charge-offs(recoveries)/average loans |
0.01 % |
0.00 % |
-0.04 % |
0.00 % |
||||
|
Average common shares |
2,768 |
2,834 |
2,788 |
2,846 |
||||
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.
