Robert D. Heuchan, President and CEO of Third Century Bancorp (OTCBB: TDCB), the holding company of Mutual Savings Bank, announced net income of $250,000 for the year ended December 31, 2011. This compares with a net loss of $2.1 million for the year ended December 31, 2010.
The improvement in net income primarily resulted from a decrease of $3.1 million in recorded provisions for loan losses to $102,000 for the year ended December 31, 2011 from $3.2 million for the year ended December 31, 2010. The provision in 2010 was made to maintain the allowance at a level Management and the Board deemed advisable following the write-off of $1.3 million in commercial participation loans and concerns about the potential impact of the continuing economic downturn, particularly relating to weaknesses in commercial real estate loans. With these loans already addressed in 2010, Management and the Board continued to closely monitor the commercial loans secured by real estate which remained in the portfolio. In evaluating the adequacy of the allowance for loan losses, Management considers factors such as delinquency trends, portfolio composition, past loss experience and other factors such as general economic conditions. For the year ended December 31, 2011, Mutual charged-off loans, net of recoveries, of $1.0 million which represents a decrease in the level of charge offs of $814,000, or 43.86%, from the year ended December 31, 2010. At December 31, 2011 and 2010, the Bank’s non-performing assets as a percentage of total assets was 7.94% and 10.66%, respectively.
At December 31, 2011, non-performing assets totaled $9.4 million, or 7.94% of total assets, and included $8.4 million of non-performing loans. At December 31, 2010, non-performing assets totaled $12.6 million, or 10.66% of total assets, and included $11.2 million of non-performing loans. The decrease in non-performing loans was a result of increased collection efforts with delinquent borrowers prior to loans becoming non-performing. Loans are considered non-performing when one or more of the following occur: borrowers fail to make scheduled payments causing loans to become delinquent by 90 days or more; borrowers default on original loan terms and the Bank restructures such loans; or, Management classifies loans as “doubtful” in regards to full repayment according to loan agreements.
Non-interest expense decreased $1.2 million or 19.95% to $4.7 million during 2011 from $5.9 million during 2010. The decrease in non-interest expense was primarily due to four events. First, at December 31, 2010, the Bank performed an evaluation of goodwill recorded on its books and determined it to be fully impaired. As a result, the Bank recorded an impairment of $239,000 to fully write-off goodwill. Second, the Bank closed its Franklin Central branch in June 2010 and listed the property for sale. The Bank obtained appraisals on the property to determine its market value at December 31, 2011 and 2010. The appraised value for the Franklin Central branch was less than the value recorded on the Bank’s books at December 31, 2011 and 2010. As a result, the Bank recorded a loss on assets held for sale of $66,000 in 2011 and $471,000 in 2010. Third, salaries and employee benefits decreased $159,000 or 5.87% to $2.5 million for the year ended December 31, 2011 from $2.7 million for the year ended December 31, 2010. As of September 30, 2011, the chief financial officer of the Bank retired and was replaced by another officer of the Bank. Some of the duties impacted by this change in personnel were absorbed by other employees of the Bank, which contributed to a decrease in salaries of approximately $78,000 or 3.67% to $2.1 million for the year ended December 31, 2011. Finally, other non-interest expense decreased $239,000 or 33.90% in 2011 to $466,000 from $705,000 in 2010. The majority of this decrease was due to a reduction of $121,000 in expenses for maintenance costs related to real estate owned by the Bank.
Total assets increased $689,000 to $118.9 million at December 31, 2011 from $118.2 million at December 31, 2010, an increase of 0.58%. The increase in assets was primarily the result of a increase in net loans receivable of $492,000, or 0.52%, to $95.4 million at December 31, 2011 from $94.9 million at December 31, 2010. During 2011, one-to-four family residential mortgages increased $2.4 million, or 5.82%, while land development and construction loans and loans secured by commercial real estate decreased by $416,000 or 4.26% and $1.2 million or 3.41%, respectively. During 2011, consumers refinanced their one-to-four family residential mortgages into lower fixed-rate loan products with longer maturities of which the majority were kept in the Bank’s loan portfolio. The loans secured by commercial real estate decreased due to the decline in demand, the downturn in the commercial real estate market and the overall economy. The allowance for loan losses decreased to $2.5 million at December 31, 2011 from $3.5 million at December 31, 2010. The Bank decreased the provision for loan losses based on a review of the structure of the current loan portfolio and the loans charged-off in 2011.
Deposits totaled $89.0 million at December 31, 2011 and 2010. Time deposits decreased $1.0 million, or 3.41%, to $29.1 million at December 31, 2011 from $30.1 million at December 31, 2010. Savings, NOW and money market savings deposits increased $1.3 million, or 2.88%, to $47.3 million at December 31, 2011 from $46.0 million at December 31, 2010.
Federal Home Loan Bank advances and other borrowings increased $500,000, or 3.57%, to $14.5 million at December 31, 2011 from $14.0 million at December 31, 2010. At December 31, 2011 the weighted average rate of all Federal Home Loan Bank advances was 2.98% and the weighted average maturity was 2.4 years at December 31, 2011 compared with 2.3 years at December 31, 2010. The advances mature as follows: $2.0 million in 2012; $5.0 million in 2013; $4.0 million in 2014; $1.0 million in 2015 and $2.5 million in 2016.
Stockholders’ equity increased $256,000 to $15.2 million at December 31, 2011 from $14.9 million at December 31, 2010. Equity as a percentage of assets increased 0.14% to 12.77% at December 31, 2011 compared to 12.63% at December 31, 2010. The Company previously announced that the Board of Directors has suspended quarterly dividend payments until the Company achieves an acceptable and sustained level of earnings performance.
Founded in 1890, Mutual Savings Bank is a full-service financial institution based in Johnson County, Indiana. In addition to its main office at 80 East Jefferson Street, Franklin, Indiana, the bank operates branches in Franklin at 1124 North Main Street and the Franklin United Methodist Community, as well as in Edinburgh, Nineveh and Trafalgar, Indiana.
Selected Consolidated Financial Data
|At December 31,||At December 31,|
|Selected Consolidated Financial Condition Data:||(In Thousands)|
|Cash and cash equivalents||6,025||6,338|
|Interest-earning time deposits||2,985||3,483|
|FHLB advances and other borrowings||14,500||14,000|
|For the Year Ended December 31,|
|(Dollars In Thousands, Except Share Data)|
|Selected Consolidated Earnings Data:|
|Total interest income||$||5,494||$||6,158|
|Total interest expense||1,020||1,488|
|Net interest income||4,474||4,670|
|Provision of losses on loans||102||3,248|
Net interest income after provision for losses on loans
|Total other income||776||956|
|General, administrative and other expenses||4,712||5,886|
|Income tax expense (benefit)||186||(1,373||)|
|Net income (loss)||250||(2,135||)|
|Earnings (loss) per share basic||$||0.19||$||(1.62||)|
|Earnings (loss) per share diluted||$||0.19||$||(1.62||)|
|Selected Financial Ratios and Other Data:|
|Interest rate spread during period||3.65||%||3.57||%|
|Net yield on interest-earning assets||3.90||3.86|
|Return on average assets||0.21||-1.69|
|Return on average equity||1.66||-13.20|
|Equity to assets||12.77||12.63|
Average interest-earning assets to average interest-bearing liabilities
|Non-performing assets to total assets||7.94||10.66|
Allowance for loan losses to total loans outstanding
|Allowance for loan losses to non-performing loans||30.16||31.02|
Net charge-offs to average total loans outstanding
|General, administrative and other expense to average assets||3.93||4.65|
|Effective income tax rate||42.66||39.14|
|Number of full service offices||6||6|
|Tangible book value per share||$||10.69||$||10.54|
|Market closing price at end of quarter||$||2.50||$||2.75|
|Price-to-tangible book value||23.38||26.09|