Touchstone Bankshares Reports 2023 Second Quarter Financial Results
PRINCE GEORGE, Va., July 31, 2023 /PRNewswire/ -- Touchstone Bankshares, Inc. (the "Company") (OTC Pink: TSBA), and its wholly owned subsidiary, Touchstone Bank (the "Bank"), reported consolidated net income available to common shareholders of $285 thousand and $89 thousand for the three and six months ended June 30, 2023, respectively.
Diluted earnings per common share for the quarter ended June 30, 2023, was $0.09 while return on average assets was 0.18% and return on average common equity was 2.61%. By comparison, the Company's net income available to common shareholders for the quarter ended June 30, 2022, was $605 thousand and diluted earnings per common share was $0.18. The return on average assets was 0.41% and return on average common equity was 5.34% for the quarter ended June 30, 2022.
For the six months ended June 30, 2023, basic and diluted earnings per common share was $0.03. This compares to $1.7 million of net income available to common shareholders for six months ended June 30, 2022, or $0.52 of diluted earnings per common share. Return on average assets was 0.03% and 0.59% for six months ended June 30, 2023, and 2022, respectively. Return on average common equity for the six months ended June 30, 2023, and 2022 was 0.42% and 7.40%, respectively.
James Black, President and CEO, stated "The challenging market conditions negatively impacted second quarter earnings as funding pressures and higher operating costs offset revenue generation. While deposit levels remained steady, the deposit mix continued to shift into higher yielding accounts albeit at a much slower pace. The loan book continued its consistent growth over the quarter and was primarily funded with Federal Home Loan Bank borrowings. Our credit quality, loan loss reserve and capital position remained strong."
He continued, "The Company is extremely focused and actively engaged with deposit gathering initiatives as well as cost savings opportunities that should lead to long-term sustainable earnings growth. I am confident that the Touchstone team will deliver on these mission critical objectives. While this takes hold, we remain committed to providing our clients and businesses excellent customer service and the trusted value they deserve."
Earnings
Year-over-Year Second Quarter
Net income available to common shareholders for the quarter ended June 30, 2023, was $285 thousand, or $0.09 per diluted common share. This is a decrease of $320 thousand, or 52.9%, when compared with net income available to common shareholders of $605 thousand, or $0.18 diluted earnings per common share for the same period in 2022.
The Company recorded a $100 thousand provision for credit losses in the second quarter of 2023 versus a $500 thousand provision for credit losses recorded in the same period in 2022. Credit quality remains strong.
Net interest income for both quarters ended June 30, 2023, and 2022 was $5.1 million. The net interest margin decreased 20 basis points from 3.64% in the second quarter of 2022 to 3.44% for the same period in 2023 as funding costs have increased significantly.
Noninterest income totaled $956 thousand for the quarter ended June 30, 2023, an increase of $165 thousand, or 20.9%, when compared to the same period in 2022.
The following table is a comparison of the components of noninterest income for the three months ended June 30, 2023, and 2022:
For the three months ended | ||||||||
June 30, | ||||||||
2023 | 2022 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Service charges on deposit accounts | $ 506 | $ 521 | $ (15) | -2.9 % | ||||
Secondary market origination fees | 170 | 35 | 135 | 385.7 % | ||||
Bank-owned life insurance | 75 | 75 | - | - % | ||||
BOLI death benefits | 19 | - | 19 | 100.0 % | ||||
Loss on sale of fixed assets | - | (62) | 62 | 100.0 % | ||||
Other operating income | 186 | 222 | (36) | -16.2 % | ||||
Total | $ 956 | $ 791 | $ 165 | 20.9 % | ||||
Notable variances for the noninterest income table above:
The Company added mortgage staff over the past 13 months to increase its secondary mortgage operation. Despite the increased mortgage rates, which have significantly reduced demand, the increase in secondary mortgage fees is a result of the focus on increasing secondary mortgage operations.
The decrease in other operating income was mainly due to decreases in income from other investments.
The following table is a comparison of the components of noninterest expense for the quarters ended June 30, 2023, and 2022:
For the three months ended | ||||||||
June 30, | ||||||||
2023 | 2022 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Salaries and employee benefits | $ 3,103 | $ 2,557 | $ 546 | 21.4 % | ||||
Occupancy expense | 319 | 326 | (7) | -2.1 % | ||||
Furniture and equipment expense | 282 | 292 | (10) | -3.4 % | ||||
Data processing | 346 | 125 | 221 | 176.8 % | ||||
Telecommunications | 138 | 228 | (90) | -39.5 % | ||||
Legal and professional fees | 187 | 245 | (58) | -23.7 % | ||||
FDIC assessments | 113 | 54 | 59 | 109.3 % | ||||
Other noninterest expenses | 1,146 | 817 | 329 | 40.3 % | ||||
Total | $ 5,634 | $ 4,644 | $ 990 | 21.3 % | ||||
Notable variances for the noninterest expense table above:
The increase in salaries and employee benefits for 2023 when compared to the same period in 2022 was mainly due to added staff and wage inflation.
The increase in data processing expense in 2023 when compared to 2022 was mainly due to the use of credits provided by the Company's core provider in 2022 as well as the increase in expense associated with the updated core platform. The Bank converted to a newer core platform in March of 2023.
The decrease in telecommunications expense was mostly due to the favorably renegotiated telecommunications contract in late 2022.
Legal and professional fees were lower in 2023, when compared to the same period in 2022 mainly due to nonrecurring engagements.
FDIC assessments were increased for all banks for the first quarter of 2023.
The increase in other noninterest expenses is due to several factors including:
Year-over-Year Six Months
Net income available to common shareholders for the six months ended June 30, 2023, was $89 thousand, or $0.03 per diluted common share. This is a decrease of $1.7 million, or 94.9%, when compared with net income available to common shareholders of $1.7 million, or $0.52 diluted earnings per common share, for the six months ended June 30, 2022.
Net interest income for the six months ended June 30, 2023, and 2022, was $10.5 million and $9.6 million, respectively. The net interest margin increased twelve basis points from 3.49% in 2022 to 3.61% for 2023. This increase was due to both increases in rates and volume on the earning assets outpacing increases in volume and rates on the funding side of the balance sheet.
The Bank recorded $1.1 million in provision for credit losses in the first half of 2023, while $500 thousand provisions for credit losses were made in the first half of 2022. In March of 2023, the Company charged the provision for credit losses $1 million due to its writedown of the $1 million subordinated debt investment it had in Signature Bank of New York which failed and was placed into receivership with the FDIC in March of 2023.
Noninterest income totaled $1.7 for the first half of 2023, an increase of $65 thousand, or 3.9%, when compared to the $1.7 million recorded in the first half of 2022.
The following table is a comparison of the components of noninterest income for the six months ended June 30, 2023 and 2022:
For the six months ended | ||||||||
June 30, | ||||||||
2023 | 2022 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Service charges on deposit accounts | $ 979 | $ 1,000 | $ (21) | -2.1 % | ||||
Secondary market origination fees | 170 | 80 | 90 | 112.5 % | ||||
Bank-owned life insurance | 150 | 150 | - | - % | ||||
BOLI death benefits | 19 | - | 19 | 100.0 % | ||||
Loss on sale of fixed assets | - | (62) | 62 | 100.0 % | ||||
Other operating income | 406 | 491 | (85) | -17.3 % | ||||
Total | $ 1,724 | $ 1,659 | $ 65 | 3.9 % | ||||
Notable variances for the noninterest income table above:
The Company added mortgage staff over the past 13 months to increase its secondary mortgage operation. Despite the increased mortgage rates, the increase in secondary mortgage fees is a result of the focus on increasing secondary mortgage operations.
The decrease in other operating income was mainly due to increases in income from other investments.
For the six months ended June 30, 2023, noninterest expense was $11.2 million, an increase of $2.2 million, or 24.1%, when compared to the $9.0 million of noninterest expense recorded for the same period in 2022. The following table is a comparison of the components of noninterest expense for the six months ended June 30, 2023, and 2022:
For the six months ended | ||||||||
June 30, | ||||||||
2023 | 2022 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Salaries and employee benefits | $ 6,185 | $ 4,885 | $ 1,300 | 26.6 % | ||||
Occupancy expense | 632 | 620 | 12 | 1.9 % | ||||
Furniture and equipment expense | 559 | 571 | (12) | -2.1 % | ||||
Data processing | 653 | 202 | 451 | 223.3 % | ||||
Telecommunications | 287 | 451 | (164) | -36.4 % | ||||
Legal and professional fees | 362 | 438 | (76) | -17.4 % | ||||
FDIC assessments | 166 | 110 | 56 | 50.9 % | ||||
Other noninterest expenses | 2,315 | 1,714 | 601 | 35.1 % | ||||
Total | $ 11,159 | $ 8,991 | $ 2,168 | 24.1 % | ||||
See above discussion on variances for noninterest expenses.
Balance Sheet
At June 30, 2023, total assets were $644.4 million, compared to $622.6 million at December 31, 2022, an increase of $21.8 million, or 3.6%.
Total loans were $505.7 million at June 30, 2023. Total loans increased $18.4 million, or 3.7% during the first half of 2023. Total loans grew $8.8 million, or 1.8%, during the second quarter of 2023.
On the liability side of the balance sheet, deposits totaled $529.8 million at June 30, 2023, as compared to $526.6 million at December 31, 2022. This represents an increase of $3.2 million, or 0.58%, during the first half of 2023. The Company had $10.3 million and $20.4 million of outstanding brokered deposits included in its total deposits at June 30, 2023, and December 31, 2022, respectively.
At June 30, 2023, the Bank had $17.7 million of outstanding subordinated debt. In August of 2020, the Company issued $8 million of subordinated debt with a 10-year maturity and an initial 6.00% coupon. In January of 2022, the Company issued an additional $10.0 million of subordinated debt. These notes have a maturity date of January 30, 2032 and carried an initial coupon of 4%.
Shareholders' equity totaled $42.2 million at June 30, 2023. Included in Shareholders' equity at June 30, 2023 was $11.6 million of other comprehensive loss. Shareholders' equity totaled $42.6 million at December 31, 2022. Included in shareholders' equity at December 31, 2022 was $11.0 million of other comprehensive loss. The Bank's Community Bank Leverage Ratio was 9.80% at June 30, 2023 and the Bank remains well capitalized as defined by regulatory guidelines.
Asset Quality
The Bank's asset quality remains favorable. The allowance for loan losses at June 30, 2023, was $5.0 million, or 0.98% of total loans. Loans past due 30 days or more and still accruing were $122 thousand at June 30, 2023, while nonaccrual loans totaled $332 thousand. The Bank believes the current level of allowance for loan loss reserves are adequate to cover anticipated losses as credit metrics remain stable.
Liquidity/Funding
The Company believes it has sufficient on-and off-balance sheet liquidity sources to meet any liquidity event it may encounter. The Bank's estimated uninsured/uncollateralized deposits at March 31, 2023 was less than 20% of total deposits. Combined with unpledged available-for-sale securities, total liquid assets and unused borrowing capacity exceeded total estimated uninsured and uncollateralized deposits by 245%.
Source: Touchstone Bankshares, Inc.
About Touchstone Bankshares, Inc.
Touchstone Bankshares, Inc. is the bank holding company for Touchstone Bank. Most the Company's business activities are conducted through Touchstone Bank. Touchstone Bank is a full-service community bank headquartered in Prince George, Virginia. The Bank has ten 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. 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 represent only the beliefs, expectations, or opinions of the Company and its management regarding future events, many of which are, by their nature, inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." 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, 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; our allowance for credit losses may be insufficient due to market conditions, inflation, changing interest rates or other factors; adverse developments in the financial industry generally, such as the recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior; an unforeseen outflow of cash or deposits or an inability to access the capital markets, which could jeopardize our overall liquidity or capitalization; 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. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events, or otherwise.
Touchstone Bankshares, Inc. | ||||||||||
Consolidated 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: | 2023 | 2023 | 2022 | 2022 | 2022 | |||||
Net interest income | $ 5,108 | $ 5,434 | $ 5,555 | $ 5,405 | $ 5,075 | |||||
Provision for credit losses | 100 | 1,009 | - | 105 | 500 | |||||
Noninterest income | 956 | 768 | 1,067 | 841 | 791 | |||||
Noninterest expense | 5,634 | 5,525 | 5,176 | 4,834 | 4,644 | |||||
Income (loss) before income tax | 330 | (332) | 1,446 | 1,307 | 722 | |||||
Income tax expense (benefit) | 45 | (136) | 203 | 240 | 117 | |||||
Net income (loss) | 285 | (196) | 1,243 | 1,067 | 605 | |||||
Less: Preferred dividends | - | - | 9 | - | - | |||||
Net income (loss) available to common shareholders | $ 285 | $ (196) | $ 1,234 | $ 1,067 | $ 605 | |||||
Income per share available to common shareholders: | ||||||||||
Basic | $ 0.09 | $ (0.06) | $ 0.38 | $ 0.33 | $ 0.18 | |||||
Diluted | $ 0.09 | $ (0.06) | $ 0.38 | $ 0.33 | $ 0.18 | |||||
Average common shares outstanding, | 3,258,230 | 3,247,867 | 3,238,317 | 3,234,497 | 3,256,610 | |||||
Average common shares outstanding, | 3,287,378 | 3,277,015 | 3,267,465 | 3,263,645 | 3,285,758 | |||||
For the Six Months Ended | ||||||||||
June 30, | June 30, | |||||||||
2023 | 2022 | |||||||||
Net interest income | $ 10,542 | $ 9,639 | ||||||||
Provision for credit losses | 1,109 | 500 | ||||||||
Noninterest income | 1,724 | 1,659 | ||||||||
Noninterest expense | 11,159 | 8,991 | ||||||||
(Loss) income before income tax | (2) | 1,807 | ||||||||
Income tax (benefit) expense | (91) | 66 | ||||||||
Net income | $ 89 | $ 1,741 | ||||||||
Income per share available to common shareholders: | ||||||||||
Basic | $ 0.03 | $ 0.53 | ||||||||
Diluted | $ 0.03 | $ 0.52 | ||||||||
Average common shares outstanding, | 3,253,077 | 3,262,301 | ||||||||
Average common shares outstanding, | 3,282,225 | 3,291,449 | ||||||||
Touchstone Bankshares, Inc. | ||||||||||
Consolidated Financial Highlights (continued) | ||||||||||
(unaudited) | ||||||||||
(in thousands, except per share data) | June 30, | March 31, | December 31, | September 30, | June 30, | |||||
Balance Sheet Data: | 2023 | 2023 | 2022 | 2022 | 2022 | |||||
Total assets | $ 644,415 | $ 644,672 | $ 622,608 | $ 615,031 | $ 604,026 | |||||
Total loans | 505,661 | 496,820 | 487,216 | 470,293 | 458,380 | |||||
Allowance for loan losses | (4,973) | (4,910) | (4,881) | (4,895) | (4,825) | |||||
Core deposit intangible | 464 | 516 | 570 | 627 | 687 | |||||
Deposits | 529,752 | 549,527 | 526,553 | 546,863 | 538,692 | |||||
Borrowings | 51,000 | 31,000 | 31,000 | 6,000 | - | |||||
Subordinated debt | 17,676 | 17,648 | 17,621 | 17,593 | 17,565 | |||||
Preferred stock | 58 | 58 | 58 | 58 | 58 | |||||
Other comprehensive loss | (11,605) | (9,714) | (10,975) | (11,729) | (8,210) | |||||
Shareholders' equity | 42,208 | 43,747 | 42,647 | 41,641 | 44,206 | |||||
Book value per common share | $ 12.94 | $ 13.41 | $ 13.12 | $ 12.85 | $ 13.62 | |||||
Tangible book value per common share | $ 12.79 | $ 13.25 | $ 12.94 | $ 12.66 | $ 13.41 | |||||
Total common shares outstanding | 3,258,230 | 3,258,230 | 3,246,236 | 3,235,777 | 3,241,917 | |||||
Total preferred shares outstanding | 29,148 | 29,148 | 29,148 | 29,148 | 29,148 | |||||
June 30, | March 31, | December, | December, | September, | ||||||
2023 | 2023 | 2022 | 2022 | 2022 | ||||||
Performance Ratios: | (QTD annualized) | (QTD annualized) | (QTD annualized) | (QTD annualized) | (QTD annualized) | |||||
Return on average assets | 0.18 % | -0.13 % | 0.81 % | 0.70 % | 0.41 % | |||||
Return on average common equity | 2.61 % | -1.89 % | 11.72 % | 9.62 % | 5.34 % | |||||
Net interest margin | 3.44 % | 3.78 % | 3.87 % | 3.79 % | 3.64 % | |||||
Overhead efficiency (non-GAAP) | 93 % | 88 % | 79 % | 76 % | 78 % | |||||
June 30, | June 30, | |||||||||
2023 | 2022 | |||||||||
Performance Ratios: | (YTD Annualized) | (YTD Annualized) | ||||||||
Return on average assets | 0.03 % | 0.59 % | ||||||||
Return on average common equity | 0.42 % | 7.40 % | ||||||||
Net interest margin | 3.61 % | 3.49 % | ||||||||
Overhead efficiency (non-GAAP) | 91 % | 79 % | ||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||
Asset Quality Data: | 2023 | 2023 | 2022 | 2022 | 2022 | |||||
Allowance for loan losses | $ 4,973 | $ 4,910 | $ 4,881 | $ 4,895 | $ 4,825 | |||||
Nonperforming loans (excluding PCI loans) | 332 | 356 | 362 | 326 | 70 | |||||
Other real estate owned | - | - | - | - | - | |||||
Nonperforming assets | 332 | 356 | 362 | 326 | 70 | |||||
Net charge-offs (recoveries), QTD | 36 | (29) | 15 | 34 | 1 | |||||
Asset Quality Ratios: | ||||||||||
Allowance for loan losses to total loans | 0.98 % | 0.99 % | 1.00 % | 1.04 % | 1.05 % | |||||
Nonperforming loans to total loans | 0.07 % | 0.07 % | 0.07 % | 0.07 % | 0.02 % | |||||
Nonperforming assets to total assets | 0.05 % | 0.06 % | 0.06 % | 0.05 % | 0.01 % | |||||
YTD net charge-offs (recoveries) to average loans, annualized | <0.01 % | -0.02 % | 0.02 % | 0.02 % | <0.01% | |||||
Community Bank Leverage Ratio | 9.80 % | 9.89 % | 10.13 % | 10.11 % | 9.99 % | |||||
Tangible common equity/tangible assets ratio | 6.47 % | 6.70 % | 6.76 % | 6.67 % | 7.20 % | |||||
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SOURCE Touchstone Bankshares, Inc.
