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Third Century Bancorp Releases Earnings for Year Ended December 31, 2008; Announces Suspension of Dividend Payment

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^{Published in Business and Finance on Friday, February 13th 2009 at 6:17 GMT, Last Modified on 2009-02-13 06:19:38 by Market Wire}  

FRANKLIN, Ind.--([ BUSINESS WIRE ])--Robert D. Heuchan, President and CEO of Third Century Bancorp (OTCBB:TDCB), the holding company of Mutual Savings Bank, announced that for the year ended December 31, 2008, the company reported a net loss of $763,000 compared with $270,000 in net income for the year ended December 31, 2007.

The net loss for the year ended December 31, 2008 as compared to the net income reported for the year ended December 31, 2007, was primarily due to an increase of $1.2 million or 2,737.78% in the provision for loan losses. There were two primary reasons for the significant increase in the provision for loan losses: Mutual Savings Bank recorded a $456,000 provision in June 2008 due to losses incurred in the construction loan portfolio and a $750,000 provision in December 2008 to account for the increased risk associated with a shift in the concentration of the loan portfolio from primarily residential mortgage loans to commercial loans. The latter adjustment to the provision for loan losses increased the Bank's allowance for loan losses to a level more reflective of the risk associated with the loan portfolio under the current economic conditions. As of December 31, 2008, Mutual Savings Bank's allowance for loan losses represented 1.24% of total loans outstanding. Based on the Quarterly Banking Profile published by The Federal Deposit Insurance Corporation ("FDIC") as of September 30, 2008, the allowance for loan losses for commercial banks with total assets of $100 million to $1 billion represents 1.28% of its total loans outstanding.

In evaluating the adequacy of loan loss allowances, management considers factors such as delinquency trends, portfolio composition, past loss experience and other factors such as general economic conditions, which declined dramatically during the fourth quarter of 2008. Mutual Savings Bank recorded total provisions for loan losses of $1.3 million for the year ended December 2008 as compared to $45,000 for the year ended December 31, 2007. For the year ended December 31, 2008, Mutual Savings Bank charged off loans net of recoveries of $548,000 which represents an increase of $316,000, or 136.25%, from the year ended December 31, 2007. Of the $577,000 charged off for the year ended December 31, 2008, $425,000 was the result of losses in the Bank's residential construction portfolio.

General, administrative and other expenses increased $682,000 or 13.82%. This increase was primarily due to the following: payment to the plan administrator for the termination of the defined benefit pension plan in the amount of $275,000 in 2008; increased occupancy costs and personnel costs of $101,000 due to the acquisition of the Edinburgh branch; an increase of $120,000 in real estate taxes due to rate increases and initial payments on branch sites acquired in 2006 through 2008; and, an increase of $59,000 in premiums paid to the FDIC for deposit insurance.

Total assets increased $6.5 million at December 31, 2008 to $135.9 million from $129.4 million at December 31, 2007. Loans receivable-net increased $8.6 million, or 7.83%, to $118.9 million at December 31, 2008. The increase in loans receivable-net was primarily due to the net increase of $8.8 million, or 25.61%, in commercial loans secured by real estate and the net increase of $4.0 million or 72.58%, in other secured and unsecured commercial loans. In addition, the allowance for loan losses increased to $1.5 million at December 31, 2008 from $749,000 at December 31, 2007. The Bank increased the provision for loan losses based on a review of the current loan portfolio structure, the loans charged off in 2008 and concerns about the current economy.

Deposits increased to $98.3 million at December 31, 2008 from $87.2 million at December 31, 2007, an increase of $11.1 million or 12.74%. Time deposits increased $4.9 million, or 14.08%, to $39.6 million at December 31, 2008 from $34.7 million at December 31, 2007. Savings, money market, and NOW accounts and demand deposits increased $2.3 million to $45.1 million and $4.0 million or 41.34% to $13.6 million, respectively, at December 31, 2008 from $42.9 million and $9.6 million at December 31, 2007, respectively. On February 25, 2008, Mutual Savings Bank recorded an increase of $5.5 million in deposits from the acquisition of the Edinburgh Branch, which consisted of $4.1 million in time deposits and $1.4 million in savings, money market, and NOW deposits.

Stockholders' equity decreased by $1.7 million to $17.0 million at December 31, 2008 from $18.6 million at December 31, 2007. The Company announced its second stock repurchase program on November 30, 2007. The Company paid $362,000 in January 2008 to repurchase 36,725 shares in completion of that program. On July 31, 2008, the Company announced a third repurchase program for the purchase of up to 5% of its outstanding shares of common stock. The Company paid $569,000 to repurchase 74,546 shares during 2008 in completion of that program. The Company paid total dividends of $220,000 in 2008.

Based on the continuing concerns about the economy and its impact on the Company, including recent charges the Bank incurred as a result of adverse asset quality in the loan portfolio, the board of directors has determined to suspend quarterly dividend payments until the Company achieves an acceptable 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, in Indianapolis at 5630 South Franklin Road, as well as in Edinburgh, Nineveh and Trafalgar, Indiana.