Traditions Bancorp, Inc. Reports Third Quarter 2024 Earnings

Rhea-AI Summary

Traditions Bancorp (OTC Pink: TRBK) reported a net loss of $0.8 million for Q3 2024, compared to net income of $1.8 million in Q2 2024 and $1.4 million in Q3 2023. The loss was primarily due to $0.6 million in merger expenses and a $2.1 million loan loss reserve, including $1.6 million against a single substandard commercial loan. The company reported a loss per share of $0.28, compared to earnings of $0.66 in Q2 2024. Despite challenges, mortgage banking income remained solid, with gains on mortgage sales reaching $1.1 million. Book value per share increased to $24.85, up from $24.19 in Q2 2024.

Positive

• Book value per share increased to $24.85 from $23.31 year-over-year
• Loans grew by $10.0 million (1.5%) year-over-year
• Deposits increased by $35.3 million (5%) over 12 months
• Mortgage sale gains increased by $1.1 million (39%) year-over-year

Negative

• Net loss of $0.8 million in Q3 2024 vs. $1.4 million profit in Q3 2023
• Net interest margin contracted to 2.94% from 3.29% year-over-year
• Cost of deposits increased to 3.19% from 2.14% year-over-year
• Non-performing assets ratio increased to 0.68% from 0.44% year-over-year
• $2.1 million loan loss provision in Q3 2024

YORK, Pa., Oct. 25, 2024 /PRNewswire/ -- Traditions Bancorp, Inc. (OTC Pink: TRBK), the parent company of Traditions Bank, reported a net loss of $0.8 million for the third quarter ended September 30, 2024, compared to net income of $1.8 million in the linked quarter and $1.4 million for the third quarter of 2023. Net income for the current quarter was adversely impacted by $0.6 million in merger expenses and the company's decision to set aside $2.1 million in loan loss reserves. The company reported a loss per share (diluted) of 28 cents for the third quarter ended September 30, 2024, compared to earnings per share of 66 cents in the linked quarter and 51 cents for the third quarter of 2023. Unrealized investment portfolio losses, flowing through Accumulated Other Comprehensive Loss, have decreased to $8.3 million at quarter end compared to $11.1 million in the linked quarter. Book value per common share was $24.85 on September 30, 2024, versus $24.19 in the linked quarter and $23.31 for the third quarter of 2023.

"Traditions Bancorp reported a net loss for the third quarter because of merger expenses and the decision to reserve $1.6 million against the full exposure of a single substandard commercial loan in the interest of prudent risk management. The ultimate financial impact could be lower and will depend on the company's ability to recover the loan. An additional $0.5 million in reserves were added to cover loan growth and minor adjustments to our CECL model qualitative factors," stated Eugene J. Draganosky, Chair of the Board and Chief Executive Officer. "Quarterly mortgage banking income exceeded expectations, with gains on the sale of mortgages helping to offset the pressure of elevated funding costs on net interest income. We remain optimistic with the expected normalization of the yield curve and continue to manage expenses, conserve capital, and prudently grow our franchise as we approach the consummation of our merger with ACNB Corporation."

Quarterly Highlights – Third Quarter 2024 versus Third Quarter 2023

• Loans grew by $10.0 million, or 1.5%, over 3Q23.
• Over the previous 12 months, deposits increased by $35.3 million, or 5%. Most of this growth was concentrated in brokered deposits, higher-cost time deposits, and money market specials as depositors became more rate sensitive. Brokered CDs increased from $48.7 million in 3Q23 to $54.7 million at the end of 3Q24, representing 7% of total deposits.
• The cost of deposits increased to 3.19% for 3Q24, up from 3.08% for 2Q24 and 2.14% for 3Q23.
• Net interest margin contracted to 2.94% in 3Q24 compared to 3.29% in 3Q23. This was driven by an increase in the total cost of funds, including borrowings, from 2.43% in 3Q23 to 3.29% in 3Q24.
• Gains on the sale of mortgages were $1.1 million for 3Q24, compared to $0.8 million in 3Q23 and $1.5 million in 2Q24.
• Mortgage banking revenue remained solid in 3Q24 despite the ongoing challenges of higher-for-longer interest rates and the mortgage lock-in effect on home inventory levels. The mortgage pipeline decreased to $18.5 million from $25.8 million in the linked quarter and increased from $17.2 million on September 30, 2023.
• A cash dividend of eight cents per common share was declared on October 24, 2024, and is payable on November 18, 2024, to shareholders of record at the close of business on November 8, 2024.
• Net interest income in 3Q24 decreased $0.6 million, or 9%, from 3Q23 due to rising funding costs.
• Other expense increased by 9%, from $6.1 million in 3Q23 to $6.6 million in 3Q24, driven by $0.6 million in merger expenses related to the company's acquisition by ACNB Corporation.
• The 3Q24 credit loss provision was $2.1 million.

YTD Highlights – Nine Months Ended September 30, 2024, versus Nine Months Ended September 30, 2023

• Interest expense grew more rapidly than interest income due to the rising cost of funds, as net interest income decreased $1.6 million, or 8%, over the nine months ended September 30, 2023.
• Gains on sale of mortgages increased by $1.1 million, or 39%, despite a challenging rate environment and limited home inventories within the company's geographic footprint.
• Other expense remained relatively flat, decreasing by $0.1 million, or 0.6%, year over year.
• Net interest margin contracted 40 basis points, from 3.35% in 3Q23 to 2.95% in 3Q24, driven by an increased cost of funds.

Credit Quality and Capital Insights

• Nonaccrual loans increased by $1.5 million in 3Q24, from $4.4 million in 2Q24 to $5.9 million in the current quarter, driven by the transfer of a commercial loan to nonaccrual status. Consumer and residential mortgage loan nonaccruals fell by $0.1 million in the current quarter.
• The company reported a $6 thousand net recovery in 3Q24, with net charge-offs totaling $14 thousand for the current quarter after reporting $20 thousand in 2Q24.
• Non-performing assets to total assets increased to 0.68% in the current quarter compared to 0.51% in 2Q24 and 0.44% in 3Q23. The aforementioned $1.6 million commercial loan that migrated to nonaccrual status accounted for 19 basis points of the 68-basis point total as of September 30, 2024.
• Delinquencies greater than 30 days were 1.09% of total loans as of September 30, 2024, up from 1.05% as of June 30, 2024, and 0.88% as of September 30, 2023.
• The company's ACL ratio was 0.84% as of September 30, 2024, compared to 0.56% as of June 30, 2024, and 0.54% as of September 30, 2023. The reserve for the non-performing commercial loan drove the 3Q24 increase.
• Traditions Bancorp and Traditions Bank remain well-capitalized.

FINANCIAL HIGHLIGHTS (unaudited): (Dollars in thousands, except per share data)
Selected Financial Data		Sep 30, 2024		Dec 31, 2023		Sep 30, 2023
Investment securities	$	104,640	$	111,817	$	109,957
Loans, net of unearned income		683,250		668,813		673,252
Allowance for credit losses		5,773		3,730		3,656
Total assets		859,963		840,073		850,486
Deposits		739,988		731,051		704,716
Borrowings		40,000		32,500		71,965
Shareholders' equity		68,446		63,786		60,096
Common book value per common share	$	24.85	$	23.31	$	22.00
Tier 1 book value per common share	$	27.87	$	27.35	$	27.22
Allowance/loans		0.84 %		0.56 %		0.54 %
Non-performing assets/total assets		0.68 %		0.47 %		0.44 %
Tier 1 capital/average assets		8.80 %		8.70 %		8.68 %
Tier 1 capital/risk-weighted assets		11.36 %		11.53 %		11.17 %
Total capital/risk-weighted assets		12.23 %		12.12 %		11.75 %
Common shares outstanding		2,754		2,737		2,732
	Three months ended Sep 30,				Nine months ended Sep 30,
Selected Operations Data		2024		2023		2024		2023
Interest income	$	11,625	$	10,640	$	33,796	$	29,326
Interest expense		(5,471)		(3,886)		(15,643)		(9,542)
Net interest income		6,154		6,754		18,153		19,784
Provision for credit losses		(2,075)		(238)		(2,036)		(230)
Investment securities gains (losses)		-		-		-		-
Gains on sale of mortgages		1,122		798		3,870		2,781
Other income		587		515		1,741		1,685
Other expense		(6,629)		(6,080)		(18,641)		(18,747)
Income (loss) before income tax (provision) benefit		(841)		1,749		3,087		5,273
Income tax (provision) benefit		60		(332)		(686)		(1,000)
Net income (loss)	$	(781)	$	1,417	$	2,401	$	4,273
Earnings (loss) per common share (basic)	$	(0.28)	$	0.51	$	0.87	$	1.54
Earnings (loss) per common share (diluted)	$	(0.28)	$	0.51	$	0.87	$	1.53
Return on average assets		(0.36) %		0.67 %		0.38 %		0.70 %
Return on average equity		(4.57) %		9.18 %		4.87 %		9.33 %
Net interest margin		2.94 %		3.29 %		2.95 %		3.35 %
Efficiency ratio		84.31 %		75.37 %		78.44 %		77.31 %
Net charge-offs(recoveries)/average loans		0.00 %		0.00 %		0.00 %		(0.03) %
Average common shares		2,765		2,752		2,751		2,776

 

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 caused Traditions Bancorp (TRBK) to report a loss in Q3 2024?

Traditions Bancorp reported a Q3 2024 loss due to $0.6 million in merger expenses and $2.1 million in loan loss reserves, including $1.6 million set aside for a single substandard commercial loan.

How much did Traditions Bancorp (TRBK) loan portfolio grow in Q3 2024?

Traditions Bancorp's loans grew by $10.0 million, or 1.5%, compared to Q3 2023.

What was Traditions Bancorp's (TRBK) net interest margin in Q3 2024?

Traditions Bancorp's net interest margin was 2.94% in Q3 2024, down from 3.29% in Q3 2023.

What was Traditions Bancorp's (TRBK) book value per share as of September 30, 2024?

Traditions Bancorp's book value per share was $24.85 as of September 30, 2024, up from $24.19 in the previous quarter.