Traditions Bancorp, Inc. Reports First Quarter 2022 Earnings

YORK, Pa., April 27, 2022

"Traditions Bancorp generated solid results for the first quarter of 2022, building upon the positive momentum gained at the end of 2021 through increased brand recognition, a successful expansion into Lancaster and the Capital Region, and strong commercial loan production," stated Eugene J. Draganosky, President and Chief Executive Officer. "In addition, our prudent capital management has permitted the company to implement a stock repurchase plan and approve the payout of our first regular quarterly dividend of 8 cents per share. We have begun executing on the recently announced $3 million common stock repurchase plan. The stock buyback will maximize earnings per share and further enhance long-term shareholder value. While the headwinds of economic uncertainty and the pandemic remain, we are prepared to tackle these challenges head-on and remain optimistic for the future. We are systematically deploying excess cash into business loans and investments to optimize earnings. At the same time, we are taking advantage of economic conditions to recruit seasoned mortgage and commercial relationship sales professionals who will drive continued growth over the longer term."

Quarterly Highlights – First Quarter 2022 versus First Quarter 2021

• Loans grew by $50.8 million, or 11%, over 1Q21, despite being tempered by Paycheck Protection Program (PPP) loan forgiveness. Without the impact of PPP forgiveness, loans grew by $81.0 million, or 18%.
• As of March 31, 2022, PPP loan balances outstanding were $7.1 million. This included $1.4 million of remaining balances for first-round loans and $5.7 million of remaining balances for the second round.
• Deposits increased $76.2 million, or 13%, during the last 12 months.
• Net interest margin expanded to 3.33% in 1Q22 compared to 3.30% in 1Q21, driven by the effective deployment of on-balance sheet liquidity, coupled with a reduction in the cost of funds from 0.45% to 0.17% over the same time horizon.
• Excess cash continues to be deployed to purchase additional investment securities when it is prudent to do so, with balances growing 55% to $139.7 million in 1Q22 versus $90.1 million in 1Q21.
• Gains on the sale of mortgages were $1.8 million for 1Q22, declining 44% from near-record levels of $3.2 million for 1Q21. Refinancing activity continues to be muted, and construction and purchase money mortgage volumes have begun to wane as market interest rates rose on inflation concerns.
• Residential mortgage loans sold in 1Q22 were $55.2 million compared to $81.9 million in the linked quarter and $121.1 million for 1Q21.
• The mortgage pipeline increased to $56.8 million from $40.9 million in the linked quarter, but decreased from $70.5 million on March 31, 2021.

YTD Highlights – Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021

• Net interest income increased $640 thousand, or 13%, driven by growth in loans and investment securities and a lower cost of funds.
• On a YTD basis through March, net fee revenue from PPP loans totaled $96 thousand versus $338 thousand in the first quarter of 2021. $197 thousand in gross fees have yet to be recognized.
• Growth in other expenses has moderated in 1Q22, remaining stable at $6.1 million from 4Q21. This was driven, in part, by timing differences and will be monitored closely in the remainder of 2022 to ensure that these expenses track in alignment with our annual budget.
• Provision for loan losses decreased $100 thousand, or 100%, from the prior year.

Credit Quality and Capital Insights:

• Nonaccrual loans decreased 58% in 1Q22, from $2.9 million in the linked quarter to $1.2 million in the current quarter.
• The company had no net charge-offs for the first calendar quarter.
• Nonperforming assets to total assets contracted to 0.17% from 0.39% in the linked quarter.
• Delinquencies greater than 30 days were 0.36% of total loans as of March 31, 2022, down from 0.57% as of year-end 2021.
• The loan loss reserve ratio at March 31, 2022, excluding the PPP portfolio, was 1.37%, and reserves were nearly 4.5x greater than non-performing assets.
• The bank remains well capitalized.