(OTCPINK: TDCB) - Third Century Bancorp (“Company”), the holding company for Mutual Savings Bank (“Bank”), announced it recorded net income of $319,000 for the quarter ended March 31, 2023, or $0.27 per basic and diluted share, compared to net income of $367,000 for the quarter ended March 31, 2022, or $0.31 per basic and diluted share.

“The economic environment continues to put pressure on the net interest margin for most banks. Third Century Bancorp is no exception. This is especially true now that deposit rates and other funding rates have increased substantially during the past calendar quarter,” commented President and CEO David A. Coffey. “While earnings were slightly lower than the prior year, we are pleased about the consistent level of our core deposits and our increased loan portfolio balances.” Coffey continued, “Even in this economic environment, we are excited about the remainder of 2023, especially our new office location in the Bargersville/Greenwood market that we look to have open in the 2^nd quarter.” Coffey concluded, “As Johnson County’s only local community bank, we have ample liquidity, are well capitalized and have a diversified customer base. Our team, of seasoned banking professionals, continues to work together to bring best in class products and services to the communities we serve.”

For the quarter ended March 31, 2023, net income decreased $48,000, or 12.96%, to $319,000 as compared to $367,000 for the same period in the prior year. The decrease in net income for the three-month period ended March 31, 2023 was driven primarily as a result of the $141,000, or 7.57%, increase in non-interest expense as compared to the same period in the prior year and a decrease in non-interest income of $104,000 or 26.26%, as compared to the same period in the prior year. The increase in non-interest expense was due to an increase of $119,000, or 10.76%, in personnel expenses for the quarter ended March 31, 2023 as compared to the same period in the prior year. The increase in personnel costs was largely driven by an increase of $85,000, or 10.66% in employee salaries as compared to the same period in the prior year. The decrease in non-interest income was due to a decrease in gains on the sale of one-to-four-family residential mortgage loans sold to Freddie Mac of $140,000, or 100.00% as compared to the same period in the prior year. The increase in non-interest expense and decrease in non-interest income was partially offset by an increase of $190,000, or 10.30%, in net interest income for the quarter ended March 31, 2023 as compared to the same period in the prior year. The increase in net interest income was supported by a $1.0 million, or 49.68% increase in interest income, which was offset by an increase of $827,000, or 409.41%, in interest expense for the quarter ended March 31, 2023 as compared to the same period in the prior year. The increase in interest income was a result of higher average yields, as well as increases in average assets largely due to an increase in the average balance of loans held for investment. Increases in interest expense were the result of higher average balances on interest-bearing deposits, FHLB advances, and subordinated notes, along with increases in average rates paid on interest-bearing liabilities primarily as a result of significant increases in market rates following the historically low interest rate environment. In addition, the provision for loan losses increased $30,000, or 100.00%, for the quarter ended March 31, 2023 as compared to the same period in the prior year. The decrease in net income was also partially offset by a $37,000, or 205.56%, decrease in income tax expense as compared to the same period in the prior year as a result of the decrease in income before income tax expense.

Total assets increased $10.5 million to $290.9 million at March 31, 2023 from $280.5 million at December 31, 2022, an increase of 4.01%. The increase was primarily due to a $12.8 million, or 7.50%, increase in loans held-for-investment to $184.5 million at March 31, 2023, primarily funded by a $13.0 million, or 59.58%, increase in FHLB Advances. Total deposits were $236.4 million at March 31, 2023, down slightly from $240.1 million as of December 31, 2022. At March 31, 2023, the weighted average rate of all FHLB advances was 4.88% compared to 4.29% at December 31, 2022, and the weighted average maturity was 0.4 years at March 31, 2023 compared to 0.1 years at December 31, 2022.

The allowance for credit losses increased by $889,000, or 45.80%, to $2.8 million at March 31, 2023 from $1.9 million at December 31, 2022. The increase was primarily due to the initial adjustment from the previous incurred loss model to the current expected credit loss model (CECL) in the quarter ended March 31, 2023. The allowance for credit losses totaled 1.53% of total loans as of March 31, 2023 as compared to 1.13% of total loans as of December 31, 2022. Nonperforming loans totaled $0 as of March 31, 2023 as compared to $52,000 or 0.03%, of total loans as of December 31, 2022.

Stockholders’ equity was $8.7 million at March 31, 2023, up from $8.0 million at December 31, 2022. Stockholders’ equity increased by $657,000 during the quarter ended March 31, 2023 as a result of a decrease in net unrealized loss of $1.2 million on available-for-sale securities due to improved market expectations. The available-for-sale securities are investments in government sponsored mortgage backed securities as well as investments in municipal bonds, which provide cash flow for business purposes. Due to the available sources of liquidity, there is no plan to sell securities at a loss. However, we are actively monitoring the market rates for opportunities to redeploy these investments. The increase in stockholders’ equity was also offset by a $763,000 adjustment to retained earnings from the initial CECL adjustment, dividends of $125,000 and stock awards of $15,000 and the net settlement of stock awards of $10,000. Equity as a percentage of assets increased to 2.98% at March 31, 2023 compared to 2.86% at December 31, 2022.

The Company did not repurchase any shares during the quarter ended March 31, 2023 pursuant to the Company’s stock repurchase program. At March 31, 2023, 25,578 shares of common stock remain available for future repurchase by the Company through the stock repurchase program.

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, Trafalgar and Greenwood, Indiana.

This press release contains certain forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Certain factors that could cause actual results to differ materially from expected results include inflation, changes in the interest rate environment, changes in general economic conditions, the COVID-19 pandemic, legislative and regulatory changes that adversely affect the business of the Company and the Bank, and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in belief, expectations or events.

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