Traditions Bancorp, Inc. Reports Second Quarter 2021 Earnings

Rhea-AI Summary

Traditions Bancorp (TRBK) reported a net income of $2 million for Q2 2021, a 7% decrease from $2.1 million in Q2 2020. Year-to-date, net income rose to $4.3 million, a 30% increase over the previous year. Earnings per share (EPS) for Q2 were 62 cents, down from 67 cents. Loan growth was modest, with a $15.7 million increase over the prior year. Significant expenses included $308,000 for a new branch and $590,000 for rebranding. The bank's book value per share rose to $21.70, showing solid capital presence despite challenges in loan demand.

Positive

• Year-to-date net income increased by $995,000, or 30%.
• EPS for the six months ended June 30, 2021, rose to $1.36 from $1.05.
• Deposits surged by $86.2 million, or 16%.
• Provision for loan losses decreased by $1.5 million, or 94%.
• Book value per common share increased from $19.08 to $21.70.

Negative

• Net income for Q2 decreased by $152,000, or 7%.
• Pre-tax/pre-provision income declined to $1.9 million from $2.5 million.
• Net interest margin contracted from 3.42% to 3.22%.
• Gains on the sale of mortgages decreased slightly from $3 million to $2.9 million.

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YORK, Pa., July 26, 2021 /PRNewswire/ -- Traditions Bancorp, Inc. (OTC Pink: TRBK) reported net income of $2.0 million for the second quarter ended June 30, 2021, compared to $2.1 million for the second quarter of 2020. This represents a $152 thousand, or 7%, decrease from the second quarter of 2020. Net income for the six months ended June 30, 2021 was $4.3 million, an increase of $995 thousand, or 30%, over the first six months of last year. On a per share basis, the bank reported 62 cents per share (diluted) for the second quarter ended June 30, 2021 compared to 67 cents per share for the second quarter of 2020. For the six months ended June 30, 2021, earnings per share were $1.36 versus $1.05 for the first six months of 2020. The book value per common share was $21.70 on June 30, 2021 versus $19.08 for the second quarter of 2020.

"We are pleased to report another quarter of satisfactory results and continue to build off of a solid start to the year," stated Eugene J. Draganosky, President and Chief Executive Officer. "Pre-tax/pre-provision income for the quarter was $1.9 million versus $2.5 million for the second quarter ended June 30, 2020. We continue to work toward our budgeted targets for 2021, facing headwinds from slower than expected demand for business loans, a shrinking supply of housing in our local market, and less refinancing activity due to higher interest rates. Despite these challenges, we remain optimistic about the future due to the state of Pennsylvania reopening and lifting its universal masking order on June 28."

Quarterly Highlights – Second Quarter 2021 versus Second Quarter 2020

• Gains on the sale of mortgages remained strong at $2.9 million for 2Q21 versus $3.0 million for 2Q20.
• Residential mortgage loans sold in 2Q21 were $109.2 million compared to $88.7 million for 2Q20.
• The mortgage pipeline decreased to $65.9 million compared to $73.4 million on June 30, 2020.
• Loans grew by $15.7 million, or 3%, over 2Q20. Loan growth was muted as a result of first-round PPP loan forgiveness. Without the impact of PPP loans, loans grew by $36.8 million, or 9%.
• As of June 30, 2021, PPP loan balances outstanding were $30.7 million. The balance included the forgiveness of 79% of first round loans and $19.2 million of remaining balances for the second round.
• Deposits increased $86.2 million, or 16%.
• Net interest margin contracted to 3.22% in 2Q21 compared to 3.42% in 2Q20, 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 0.87% to 0.33% over the same period.
• Excess cash has been deployed to purchase additional investment securities, with balances growing to $102.7 million in 2Q21 versus $77.2 million in 2Q20.
• Significant expenses incurred during the quarter were $308 thousand for the launch of our first branch in the Lancaster (PA) market, $192 thousand for our rebranding campaign under the Traditions Bank name, and $131 thousand for expenses associated with the formation of the Traditions Bancorp, Inc. holding company.

Year to Date Highlights – Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

• Net interest income increased $996 thousand, or 11%, driven by mortgage gains and PPP fee income recognition.
• Net fees realized from PPP loans totaled $607 thousand, with nearly $1.1 million to be recognized in the future. PPP fees recognized year to date for 2020 were $300 thousand.
• Provision for loan losses decreased $1.5 million, or 94%, which is consistent with the broader industry trend for lower than anticipated provisioning in 2021 to date.
• Gains on the sale of mortgages increased $1.8 million, or 40%.
• Pre-tax/pre-provision income for the six months ended June 30, 2021, was $6.5 million versus $4.1 million for the six months ended June 30, 2020, an increase of $2.4 million, or 59%.
• Significant expenses incurred through the six months ended June 30, 2021, included $461 thousand for the launch of the Lancaster (PA) branch, $590 thousand for the rebranding campaign, and $131 thousand for the formation of the holding company.

Credit Quality and Capital Insights:

• As of June 30, 2021, the bank's credit exposure to industries most impacted by the pandemic (i.e., restaurants/bars, entertainment venues, lodging) was $32.7 million, or 6.7%, of the total loan portfolio versus $34.2 million, or 7.1%, of the total loan portfolio as of March 31, 2021.
• At the end of 2Q21, loans modified for temporary payment relief, excluding nonaccrual loans, totaled $2.6 million, or 0.5%, of the total loan portfolio versus $3.9 million, or 0.8%, of the total loan portfolio in the linked quarter.
• Nonaccrual loans increased slightly to $3.6 million in the current quarter from $3.5 million in the linked quarter. This included $2.4 million in temporary payment relief loans, which remained unchanged from the linked quarter.
• Nonperforming assets to total assets contracted to 0.50% from 0.53% in the linked quarter.
• The loan loss reserve ratio in 2Q2021 decreased to 1.56% from 1.62% in the linked quarter, excluding the PPP portfolio.
• The bank remains well capitalized.

In May, the bank unveiled a formal Diversity, Equity, and Inclusion policy. An official ribbon cutting was held for the Oregon Pike, Lancaster branch on June 3, 2021. The bank's legal name change from York Traditions Bank to Traditions Bank became effective on June 17, 2021.

FINANCIAL HIGHLIGHTS (unaudited): (Dollars in thousands, except per share data)
Selected Financial Data		June 30, 2021		Dec 31, 2020		June 30, 2020
Investment securities	$	102,692	$	79,357	$	77,155
Loans, net of unearned income		488,083		465,513		472,359
Allowance for loan loss		7,150		7,046		4,322
Total assets		705,752		640,562		622,446
Deposits		629,559		567,075		543,388
Borrowings		96		42		10,208
Shareholders' equity		69,194		66,628		61,595
Book value per common share	$	21.70	$	20.72	$	19.08
Allowance/loans		1.46%		1.51%		0.91%
Non-performing assets/total assets		0.50%		0.55%		0.17%
Tier 1 capital/average assets		9.94%		10.13%		9.90%
Tier 1 capital/risk-weighted assets		14.69%		14.38%		13.99%
Total capital/risk-weighted assets		15.94%		15.63%		15.01%
	Three months ended June 30,				Six months ended June 30,
Selected Operations Data		2021		2020		2021		2020
Interest income	$	5,649	$	5,821	$	11,236	$	11,504
Interest expense		(397)		(949)		(926)		(2,190)
Net interest income		5,252		4,872		10,310		9,314
Provision for loan losses		-		(1,245)		(100)		(1,638)
Investment securities gains(losses)		-		65		1		181
Gains on sale of mortgages		2,932		3,029		6,169		4,404
Other income		497		589		946		1,043
Other expense		(6,220)		(4,656)		(11,967)		(9,212)
Income before income taxes		2,461		2,654		5,359		4,092
Income taxes		(491)		(532)		(1,070)		(798)
Net income	$	1,970	$	2,122	$	4,289	$	3,294
Earnings per common share (basic)	$	0.63	$	0.68	$	1.36	$	1.05
Earnings per common share (diluted)	$	0.62	$	0.67	$	1.36	$	1.05
Pre-tax/pre-provision income	$	1,850	$	2,479	$	6,506	$	4,095
Return on average assets		1.15%		1.41%		1.29%		1.15%
Return on average equity		11.74%		14.55%		12.96%		11.45%
Net interest margin		3.22%		3.42%		3.26%		3.41%
Efficiency ratio		71.65%		54.42%		68.67%		61.65%
Net charge-offs(recoveries)/average loans		0.00%		0.52%		0.00%		0.56%
Average common shares		3,148		3,142		3,146		3,136

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 Q2 2021?

Traditions Bancorp reported net income of $2 million for Q2 2021.

How did earnings per share (EPS) change for TRBK in Q2 2021?

EPS for Q2 2021 was 62 cents, down from 67 cents in Q2 2020.

What is the book value per share for Traditions Bancorp as of June 30, 2021?

The book value per common share was $21.70.

What were the key challenges mentioned in the Traditions Bancorp press release?

Challenges included slower demand for business loans and a shrinking housing supply.

How did Traditions Bancorp's deposits perform in Q2 2021?

Deposits increased by $86.2 million, or 16%, compared to the previous year.