Touchstone Bank Reports First Quarter of 2020 Financial Results

PRINCE GEORGE, Va., April 28, 2020 /PRNewswire/ -- Touchstone Bank (the "Bank") TSBA today announced its unaudited results for the quarter ended March 31, 2020.

After recording a provision for loan loss of $900 thousand in response to the recent downturn in the economy due to the COVID-19 pandemic, the Bank reported net income of $391 thousand available to common shareholders for the quarter ended March 31, 2020.  Basic and diluted earnings per common share for the quarter ended March 31, 2020 was $0.12 and return on average assets was 0.34%.  By comparison, the Bank had net income of $541 thousand available to common shareholders for the first quarter of 2019 and basic and diluted earnings per share was $0.16. For the fourth quarter of 2019, the Bank reported net income of $1.1 million available to common shareholders or $0.32 per share on a basic and diluted basis.

James Black, President and CEO commented, "The team executed in exemplary fashion supporting our customers and communities during the COVID-19 crisis and their actions are commendable. We provided various debt relief programs and initiatives, with the most notable being the Payment Protection Program, otherwise known as "PPP". To date, we have distributed over $15 million in proceeds through PPP. During the quarter, we removed a legacy problem loan which also significantly bolstered accretion income. Given that the economy and our customers will be impacted by COVID-19, we significantly added to our loan loss reserve and will continue to assess the need for additional reserves, as warranted. It is extremely difficult to presently assess the direct impact of the crisis; however, it is our philosophy to further strengthen the balance sheet in preparation for the unknown. We are in unique times and remain prepared with excess liquidity and a well-capitalized position."

Earnings

Net interest income for the first quarter of 2020 was $4.6 million, compared to $4.2 million for the same period in 2019, an increase of $460 thousand, or 11.0%. First quarter of 2020's net interest income was aided by the collection of all the principal and interest due upon a purchased credit impaired ("PCI") loan that was charged down at acquisition which resulted in additional interest income of $357 thousand.  Net interest income for the fourth quarter of 2019 was $4.3 million. The net interest margin for the quarter ended March 31, 2020 was 4.36% compared to 4.31% for the quarter ended March 31, 2019. Subtracting the $357 thousand of additional interest income discussed above from net interest income would result in a net interest margin of 4.02% for the first quarter of 2020. The net interest margin for the fourth quarter of 2019 was 3.92%.

The Bank recorded a $900 thousand provision for loan losses in the first quarter of 2020.  The provision for loan losses for the first quarter of 2019 totaled $75 thousand.  The $825 thousand increase is mainly attributable to the economic downturn due to the COVID-19 pandemic.  The provision for loan losses was $100 thousand for the fourth quarter of 2019.

Noninterest income totaled $752 thousand for the quarter ended March 31, 2020, an increase of $110 thousand, or 17.1%, when compared to the same period in 2019.  The increase in noninterest income year-over-year is mostly due to the $83 thousand gain on security sales recorded in the first quarter of 2020 versus no gain on security sales recorded in the first quarter of 2019.

The following table is a comparison of the components of noninterest income for the quarters end March 31, 2020 and 2019:

The increase in service charges on deposit accounts quarter-over-quarter was mainly driven by an increase in overdraft fees.  The Bank implemented a new overdraft program late in the first quarter of 2019 which has bolstered service charges on deposit accounts.  All other noninterest income categories remained relatively stable.

Noninterest expense for the quarters ended March 31, 2020 and 2019 was $4.0 million and $4.1 million, respectively. Noninterest expense for the fourth quarter of 2019 was $3.8 million.

The following table is a comparison of the components of noninterest expense for the quarters end March 31, 2020 and 2019:

Most noninterest expense categories experienced normal fluctuations, save the furniture and equipment expense and FDIC assessments categories.   The $67 thousand decline in furniture and equipment expense was mainly due to a one-time expense adjustment of $35 thousand in the first quarter of 2019. The improvement in FDIC assessments was due to the ability to use credits in the first quarter of 2020 to offset the quarterly assessments. 

Balance Sheet

At March 31, 2020, total assets were $473.0 million, compared to $468.2 million as of December 31, 2019, and $439.3 million at March 31, 2019. Total loans decreased $1.7 million, or 0.49%, when comparing total loans of $348.6 million at March 31, 2020 to total loans of $350.3 million at December 31, 2019.  Loan demand, outside of the SBA's PPP program, has declined throughout the Bank's markets due to the economic downturn related to COVID-19. Deposits totaled $390.7 million at March 31, 2020, as compared to $382.9 million as of December 31, 2019.  

Total equity at March 31, 2020 was $48.3 million, compared to $47.2 million at December 31, 2019. The Bank adopted the Community Bank Leverage Ratio ("CBLR") for the first quarter of 2020 and remains well capitalized as defined by regulatory guidelines with a CBLR of 9.83%. 

Asset Quality

The allowance for loan losses at March 31, 2020 was $3.2 million, or 0.92%, of total loans, compared to $2.3 million, or 0.65% of total loans, at December 31, 2019.  Nonperforming loans, excluding PCI loans, increased $1.6 million from $807 thousand at December 31, 2019 to $2.4 million at March 31, 2020.  This increase is mainly due to one relationship totaling $1.8 million that was impaired during the first quarter of 2020. Other real estate owned at March 31, 2020 and December 31, 2019 was $82 thousand.

About Touchstone Bank

Touchstone Bank is a full-service community bank headquartered in Prince George, Virginia, with $473.0 million in total assets.  The Bank has eleven branches serving Southern and Central Virginia and two branches and a loan center serving Northern North Carolina. Visit www.touchstone.bank for more information.

Forward-Looking Statements

Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors.

SOURCE Touchstone Bank