PRINCE GEORGE, Va., July 16, 2020 /PRNewswire/ -- Touchstone Bankshares, Inc. (the "Company") TSBA, and its wholly-owned subsidiary, Touchstone Bank (the "Bank"), reported net income of $457 thousand for the quarter ended June 30, 2020, a decrease of $379 thousand, or 45.3%, when compared to the $836 thousand of net income recorded for the same quarter in 2019. Return on average assets was 0.36% for the second quarter of 2020, a decrease of 39 basis points when compared to the 0.75% return on average assets recorded for the second quarter of 2019. Basic and diluted earnings per common share for the quarter ended June 30, 2020 was $0.13. For the six months ended June 30, 2020, net income was $848 thousand and basic and diluted earnings per common share was $0.25.
Strategic Initiatives
In announcing the Company's strategic initiatives, James Black, President and CEO said, "As part of our strategic initiatives and in response to the rapidly evolving banking landscape, we took decisive action to implement an efficiency improvement plan. Like many financial institutions, there are various headwinds facing the industry and it is important that we proactively address these so we can be better positioned to take advantage of opportunities that are sure to arise. The actions to improve efficiencies include consolidating the Boydton branch with the newest Clarksville branch effective December 31, 2020. The Boydton branch will remain as a drive-thru and appointment-only branch until it closes. We will continue to maintain a significant presence in Mecklenburg County, Virginia and remain committed to delivering excellent customer service in the community. Additionally, the Rivers Bend and Louisburg branch lobbies will not reopen but operate as drive-thru and appointment only. All other branch lobbies are now open and following CDC guidelines. As a result of better optimization within the branch infrastructure and lending division, we experienced a reduction in employees, including the Chief Lending Officer position. In aggregate, we expect the cost reductions to equate to over $500 thousand in annualized pre-tax savings. Meanwhile, significant advancements in digital offerings continue while customer acceptance and utilization has naturally elevated during these unprecedented times. We have recently found much success in this business model, realizing cost savings and exceeding customer needs. The team is committed and focused on maximizing productivity and efficiency while providing excellent customer service.
"Also noteworthy, we continued to bolster the loan loss reserve in the second quarter with the anticipation of credit challenges due to the impact of COVID-19, despite asset quality metrics that are currently favorable and a diversified loan portfolio.
"Even with these changes, our focus of providing superior customer service while creating outstanding value for our shareholders and communities remains the same. This was clearly demonstrated in our participation in the Paycheck Protection Program ("PPP") where Touchstone Bank did a phenomenal job helping existing and non-bank customers. The team served over 450 clients and distributed over $31 million in PPP funds. I am very proud of our employee's resilience, positive mindset, and performance during the quarter."
Earnings
Net interest income for both the quarters ended June 30, 2020 and June 30, 2019 was $4.3 million. Net interest income for the first quarter of 2020 was $4.6 million. The net interest margin for the second quarter of 2020 was 3.74% compared to 4.23% for the same period in 2019. The decline in the margin was mainly attributable to the 225 basis points drop of the Federal Funds target rates during the preceding twelve months. The net interest margin for the first quarter of 2020 was 4.36%, which was boosted by a $357 thousand recovery from a purchased credit impaired loan ("PCI") payoff. Net interest income for the six months ended June 30, 2020 was $8.9 million compared to $8.5 million for the same period in 2019. The net interest margin declined 23 basis points to 4.04% for the six months ended June 30, 2020 when compared to the 4.27% recorded for the six months ended June 30, 2019.
The Bank recorded a $300 thousand provision for loan losses in the second quarter of 2020, while a recovery of loan losses of $112 thousand was recorded in the second quarter of 2019. Year to date, the Bank has recorded provision for loan losses of $1.2 million compared to a recovery of loan losses of $37 thousand recorded for the same period in 2019. Though credit quality metrics as of June 30, 2020 remain sound, the Bank is taking proactive measures by adding to the reserve in anticipation of the credit challenges it believes it could face in late 2020 and early 2021 due to the pandemic.
Noninterest income totaled $653 thousand for the quarter ended June 30, 2020, a decrease of $144 thousand, or 18.1%, when compared to the $797 thousand recorded for the same period in 2019. The following table is a comparison of the components of noninterest income for the quarters end June 30, 2020 and 2019:
For the three months ended | ||||||||
June 30, | ||||||||
2020 | 2019 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Service charges on deposit accounts | $ 367 | $ 403 | $ (36) | -8.9% | ||||
Secondary market origination fees | 68 | 55 | 13 | 23.6% | ||||
Bank-owned life insurance | 57 | 63 | (6) | -9.5% | ||||
Gain on security sales | 27 | 75 | (48) | -% | ||||
Other operating income | 134 | 201 | (67) | -33.3% | ||||
Total | $ 653 | $ 797 | $ (144) | -18.1% | ||||
The following table is a comparison of the components of noninterest income for the six months ended June 30, 2020 and 2019:
For the six months ended | ||||||||
June 30, | ||||||||
2020 | 2019 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Service charges on deposit accounts | $ 788 | $ 711 | $ 77 | 10.8% | ||||
Secondary market origination fees | 118 | 113 | 5 | 4.4% | ||||
Bank-owned life insurance | 118 | 126 | (8) | -6.3% | ||||
Gain on security sales | 111 | 75 | 36 | -% | ||||
Other operating income | 270 | 414 | (144) | -34.8% | ||||
Total | $ 1,405 | $ 1,439 | $ (34) | -2.4% | ||||
Notable variances for the two noninterest income tables above:
- The $36 thousand decline in service charges on deposit accounts for the three months ended June 30, 2020 compared to the same period in 2019 was mainly due to the $48 thousand decline in overdraft fee income, partially offset by an increase in ATM and card interchange fees.
- For the six months ended June 30, 2020, overdraft fee income is up $28 thousand when compared to the same period in 2019 due to the Bank implementing a new overdraft program late in the first of quarter 2019.
- Also, ATM and card interchange fees are up $67 thousand as of year-to-date June 30, 2020, when compared to the same period in 2019.
- The declines in other operating income for the three and six months ended June 30, 2020 compared to the same periods in 2019, respectively, were mainly due to declines of $49 thousand and $109 thousand in income from other investments, respectively.
Noninterest expense for each of the three-month periods ended June 30, 2020 and 2019 was $4.1 million. Noninterest expense for the first quarter of 2020 was $4.0 million.
The following table is a comparison of the components of noninterest expense for the quarters end June 30, 2020 and 2019:
For the three months ended | ||||||||
June 30, | ||||||||
2020 | 2019 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Salaries and employee benefits | $ 2,195 | $ 2,159 | $ 36 | 1.7% | ||||
Occupancy expense | 260 | 275 | (15) | -5.5% | ||||
Furniture and equipment expense | 282 | 300 | (18) | -6.0% | ||||
Data processing | 265 | 210 | 55 | 26.2% | ||||
Telecommunications | 173 | 182 | (9) | -4.9% | ||||
Legal and professional fees | 122 | 148 | (26) | -17.6% | ||||
OREO losses and related expenses | 11 | 9 | 2 | 22.2% | ||||
FDIC assessments | 45 | 91 | (46) | -50.5% | ||||
Other noninterest expenses | 717 | 774 | (57) | -7.4% | ||||
Total | $ 4,070 | $ 4,148 | $ (78) | -1.9% | ||||
For the six months ended June 30, 2020, noninterest expense was $8.1 million, an improvement of $147 thousand when compared to the $8.3 million of noninterest expense recorded in the first six months of 2019.
The following table is a comparison of the components of noninterest expense for the six months ended June 30, 2020 and 2019:
For the six months ended | ||||||||
June 30, | ||||||||
2020 | 2019 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Salaries and employee benefits | $ 4,365 | $ 4,343 | $ 22 | 0.5% | ||||
Occupancy expense | 535 | 531 | 4 | 0.8% | ||||
Furniture and equipment expense | 545 | 630 | (85) | -13.5% | ||||
Data processing | 515 | 421 | 94 | 22.3% | ||||
Telecommunications | 354 | 357 | (3) | -0.8% | ||||
Legal and professional fees | 247 | 290 | (43) | -14.8% | ||||
OREO losses and related expenses | 12 | 12 | - | 0.0% | ||||
FDIC assessments | 74 | 99 | (25) | -25.3% | ||||
Other noninterest expenses | 1,460 | 1,571 | (111) | -7.1% | ||||
Total | $ 8,107 | $ 8,254 | $ (147) | -1.8% | ||||
Notable variances for the two noninterest expense tables above:
- Data processing expense has increased for both the three and six months ended June 30, 2020 when compared to the same periods in 2019. This is mainly due to utilizing vendor credits in 2019.
- Legal and professional fees are lower for the three- and six-month periods ended June 30, 2020 when compared to the same periods in 2019 mainly due to adjusting our accruals in 2020.
- FDIC assessments are down due to credits being applied in 2020.
- Other noninterest expenses are down for both the quarter and six months ended June 30, 2020 when compared to the same periods in 2019 due to normal fluctuations in several categories.
Balance Sheet
At June 30, 2020, total assets were $507.4 million, compared to $468.2 million as of December 31, 2019, an increase of $39.2 million, or 8.4%. Total loans, net of the $31.6 million of outstanding PPP loans, were $340.6 million at June 30, 2020, which was a decrease of $9.7 million, or 2.8%, when compared to total loans of $350.3 million at December 31, 2019. Loan demand has softened in the Bank's markets due to the COVID-19 pandemic. Deposits totaled $430.6 million at June 30, 2020, compared to $382.9 million as of December 31, 2019. Borrowings from the Federal Home Loan Bank totaled $21.0 million at June 30, 2020, compared to $30.0 million at December 31, 2019.
Total equity at June 30, 2020 was $49.2 million, compared to $47.2 million at December 31, 2019. The Bank remains well capitalized as defined by regulatory guidelines.
Asset Quality
The allowance for loan losses at June 30, 2020 was $3.5 million, or 1.02% of total loans net of PPP loans, compared to $2.3 million, or 0.65% of total loans, at December 31, 2019. Charge offs, net of recoveries, for the quarter ended June 30, 2020, were $8 thousand, bringing the Bank to a year-to-date net recoveries position of $11 thousand. Nonperforming loans (excluding PCI loans) were $4.5 million, or 1.31% of total loans net of PPP loans, at June 30, 2020. This is an increase of $3.6 million, or 452.2%, when compared to nonperforming loans of $807 thousand at December 31, 2019. In response to the COVID-19 pandemic, the Bank offered its borrowers an option to defer loan payments for an initial three months. Total deferrals were $59.6 million, or 17% of the total loan portfolio, with the largest deferrals being in the hotel/motel industry ($17.6 million in deferrals) and restaurants ($5.6 million in deferrals). The pace of deferral requests appears to have plateaued. The Bank plans to grant an additional three-month deferral to borrowers after management evaluates each borrower's status when the initial three-month deferral period is over. Other real estate owned at June 30, 2020 was minimal at $53 thousand.
About Touchstone Bankshares, Inc.
Touchstone Bankshares, Inc. is the bank holding company for Touchstone Bank. The formation of Touchstone Bankshares, Inc. was finalized on July 1, 2020 with a one-for-one share exchange of Touchstone Bank preferred and common shares with Touchstone Bankshares, Inc. preferred and common shares, respectively. Touchstone Bank is a full-service community bank headquartered in Prince George, Virginia. 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
In addition to historical information, this press release may contain certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. For this purpose, any statement that is not a statement of historical fact may be deemed to be a forward-looking statement. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to, the impacts of the ongoing COVID-19 pandemic; changes in interest rates and general economic conditions; the legislative/regulatory climate; monetary and fiscal policies of the U.S. Government; the quality or composition of the loan or investment portfolios; demand for loan products; deposit flows; competition; demand for financial services in the Company's market area; mergers, acquisitions and dispositions; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; and tax and accounting rules, principles, policies and guidelines.
Touchstone Bank | ||||||||||
Financial Highlights | ||||||||||
(unaudited) | ||||||||||
For the Three Months Ended | ||||||||||
(in thousands, except per share data) | June 30, | March 31, | December 31, | September 30, | June 30, | |||||
Selected Operating Data: | 2020 | 2020 | 2019 | 2019 | 2019 | |||||
Net interest income | $ 4,255 | $ 4,639 | $ 4,283 | $ 4,388 | $ 4,296 | |||||
Provision for (recovery of) loan losses | 300 | 900 | 100 | - | (112) | |||||
Noninterest income | 653 | 752 | 902 | 750 | 797 | |||||
Noninterest expense | 4,070 | 4,037 | 3,811 | 4,080 | 4,148 | |||||
Income before income tax | 538 | 454 | 1,274 | 1,058 | 1,057 | |||||
Income tax expense | 81 | 63 | 211 | 212 | 221 | |||||
Net income | 457 | 391 | 1,063 | 846 | 836 | |||||
Less: Preferred dividends | - | - | 8 | - | - | |||||
Net income available to common shareholders | $ 457 | $ 391 | $ 1,055 | $ 846 | $ 836 | |||||
Income per share available to common shareholders: | ||||||||||
Basic | $ 0.13 | $ 0.12 | $ 0.32 | $ 0.26 | $ 0.25 | |||||
Diluted | $ 0.13 | $ 0.12 | $ 0.32 | $ 0.25 | $ 0.25 | |||||
Average common shares outstanding, basic | 3,327,287 | 3,325,600 | 3,321,850 | 3,321,458 | 3,321,443 | |||||
Average common shares outstanding, diluted | 3,356,639 | 3,354,952 | 3,351,202 | 3,350,810 | 3,350,795 | |||||
For the six months ended | ||||||||||
June 30, | June 30, | |||||||||
2020 | 2019 | |||||||||
Net interest income | $ 8,894 | $ 8,475 | ||||||||
Provision for (recovery of) loan losses | 1,200 | (37) | ||||||||
Noninterest income | 1,405 | 1,439 | ||||||||
Noninterest expense | 8,107 | 8,254 | ||||||||
Income before income tax | 992 | 1,697 | ||||||||
Income tax expense | 144 | 320 | ||||||||
Net income | $ 848 | $ 1,377 | ||||||||
Income per share available to common shareholders: | ||||||||||
Basic | $ 0.25 | $ 0.41 | ||||||||
Diluted | $ 0.25 | $ 0.41 | ||||||||
Average common shares outstanding, basic | 3,326,443 | 3,320,313 | ||||||||
Average common shares outstanding, diluted | 3,355,795 | 3,349,717 | ||||||||
Touchstone Bank | ||||||||||
Financial Highlights (continued) | ||||||||||
(unaudited) | ||||||||||
(in thousands, except per share data) | June 30, | March 31, | December 31, | September 30, | June 30, | |||||
Balance Sheet Data: | 2020 | 2020 | 2019 | 2019 | 2019 | |||||
Total assets | $ 507,378 | $ 472,950 | $ 468,189 | $ 471,623 | $ 458,083 | |||||
Total loans | 372,219 | 348,565 | 350,276 | 349,727 | 350,225 | |||||
Allowance for loan losses | (3,491) | (3,199) | (2,280) | (2,236) | (2,328) | |||||
Core deposit intangible | 1,262 | 1,347 | 1,434 | 1,523 | 1,615 | |||||
Deposits | 430,585 | 390,689 | 382,924 | 386,680 | 373,877 | |||||
Borrowings | 21,000 | 27,000 | 30,000 | 29,999 | 30,999 | |||||
Subordinated debt | 3,524 | 3,533 | 3,542 | 3,551 | 3,560 | |||||
Preferred stock | 59 | 59 | 59 | 59 | 59 | |||||
Shareholders' equity | 49,208 | 48,338 | 47,219 | 47,446 | 46,193 | |||||
Book value per common share | $ 14.77 | $ 14.51 | $ 14.18 | $ 14.27 | $ 13.89 | |||||
Tangible book value per common share | $ 14.39 | $ 14.11 | $ 13.75 | $ 13.81 | $ 13.40 | |||||
Total common shares outstanding | 3,327,287 | 3,327,287 | 3,325,043 | 3,321,371 | 3,321,491 | |||||
Total preferred shares outstanding | 29,352 | 29,352 | 29,352 | 29,352 | 29,352 | |||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||
2020 | 2020 | 2019 | 2019 | 2019 | ||||||
Performance Ratios: | (QTD annualized) | (QTD annualized) | (QTD annualized) | (QTD annualized) | (QTD annualized) | |||||
Return on average assets | 0.36% | 0.34% | 0.89% | 0.72% | 0.75% | |||||
Return on average common equity | 3.73% | 3.30% | 8.83% | 7.17% | 7.39% | |||||
Net interest margin | 3.74% | 4.36% | 3.92% | 4.12% | 4.23% | |||||
Overhead efficiency (non-GAAP) | 85.01% | 76.05% | 74.12% | 79.63% | 82.65% | |||||
June 30, | June 30, | |||||||||
2020 | 2019 | |||||||||
Performance Ratios: | YTD | YTD | ||||||||
Return on average assets | 0.35% | 0.63% | ||||||||
Return on average common equity | 3.52% | 6.16% | ||||||||
Net interest margin | 4.04% | 4.27% | ||||||||
Overhead efficiency (non-GAAP) | 79.56% | 83.90% | ||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||
Asset Quality Data: | 2020 | 2020 | 2019 | 2019 | 2019 | |||||
Allowance for loan losses | $ 3,491 | $ 3,199 | $ 2,280 | $ 2,236 | $ 2,328 | |||||
Nonperforming loans (excluding PCI loans) | 4,456 | 2,383 | 807 | 845 | 951 | |||||
Other real estate owned, net of allowance | 53 | 82 | 82 | 155 | 166 | |||||
Nonperforming assets | 4,509 | 2,465 | 889 | 1,000 | 1,117 | |||||
Net charge-offs (recoveries), QTD | 8 | (19) | 56 | 92 | (81) | |||||
Asset Quality Ratios: | ||||||||||
Allowance for loan losses to total loans | 0.94% | 0.92% | 0.65% | 0.64% | 0.66% | |||||
Nonperforming loans to total loans | 1.20% | 0.68% | 0.23% | 0.24% | 0.27% | |||||
Nonperforming assets to total assets | 0.89% | 0.52% | 0.19% | 0.21% | 0.24% | |||||
YTD net (recoveries) charge-offs to average loans, annualized | <0.01% | (0.02)% | 0.06% | 0.10% | (0.09)% | |||||
Community Bank Leverage Ratio | 9.33% | 9.83% | 9.61%* | 9.80%* | 9.93%* | |||||
*Tier 1 Leverage Ratio | ||||||||||
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SOURCE Touchstone Bankshares, Inc.
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