Touchstone Bankshares, Inc. Reports Financial Results for the First Quarter 2024
Touchstone Bankshares, Inc. reported net income of $327K and earnings per share of $0.10 for Q1 2024, with a positive impact on results excluding merger expenses. The pending merger with First National influenced financials, with plans to merge in Q4 2024. The Company postponed the 2024 annual meeting for a special meeting to consider the merger. The CEO highlighted challenges faced in the financial industry related to net interest margin compression due to rising deposit costs, an inverted yield curve, and competitive pressures. Despite challenges, the Company maintained progress and growth, focusing on stakeholders and preparation for the partnership with First National.
Net income of $327K in Q1 2024, representing a 266.8% increase compared to Q1 2023.
Excluding merger expenses, net income would be $756K with earnings per share of $0.23 in Q1 2024.
Plans for merger with First National , with the Company receiving 0.8122 shares of First National common stock for each Company share.
CEO's focus on stakeholders and preparation for the partnership with First National, highlighting progress despite industry challenges.
Net interest income decreased by 6.3% in Q1 2024 compared to Q1 2023, influenced by competitive pressures in the higher interest rate environment.
Merger related expenses negatively impacted the Company's results in Q1 2024, incurring $543K in expenses.
Postponement of the 2024 annual meeting for a special meeting to consider the merger with First National
Insights
The Company reported net income available to common shareholders of
The Company's results of operations for the three months ended March 31, 2024 were negatively impacted by incurring
As previously disclosed, on March 25, 2024, the Company and First National, the parent holding company for First Bank, entered into an Agreement and Plan of Merger (the "Agreement"), which provides that, subject to the terms and conditions set forth in the Agreement, the Company will merge with and into First National (the "Merger") with First National being the surviving corporation in the Merger. In addition, simultaneously with or immediately following the Merger of the Company with and into First National, the Bank will be merged with and into First Bank.
The boards of directors of the Company and First National have unanimously approved the Agreement. The Agreement and the transactions contemplated thereby are subject to the approval of the respective shareholders of the Company and First National, regulatory approvals, and other customary closing conditions. Pursuant to the Agreement, three directors of the Company will be (i) invited to serve on the boards of directors of First National and First Bank and (ii) nominated and recommended by First National for reelection at the first annual meeting of First National shareholders following the closing of the Merger.
Subject to the terms and conditions of the Agreement, the Company's shareholders, including the holders of shares of both the common stock and preferred stock (on an as-converted, one-for-one basis, which shares of preferred stock convert automatically to common stock at the effective time of the Merger) (collectively, "Company Stock"), will receive 0.8122 shares of First National common stock for each share of Company Stock (the "Merger Consideration"). Cash will also be paid in lieu of fractional shares. The Company and First National anticipate closing the mergers in the fourth quarter of 2024.
Additionally, considering the proposed Merger, the Company has postponed the 2024 annual meeting of shareholders. Instead, the Company will hold a special meeting of shareholders in 2024 to consider and vote on the proposed Merger. The Company will only hold the 2024 annual meeting of shareholders if the closing of the Merger is delayed until 2025, which the Company does not expect.
James R. Black, the Company's President and CEO commented, "While our core operating results for the first quarter of 2024 were in line with management's expectations and improving, the financial industry is facing fierce headwinds. During the first quarter of 2024, the Company's net interest margin compressed 32 basis points when compared to the same period of 2023 driven by rising deposit costs given the continued higher interest rate environment, inverted yield curve, deposits shifting to higher yielding products, and competitive pressures in the marketplace. Despite these challenges, the Company continued to make progress during the quarter because of the team's resiliency, of which I am extremely proud. Our previous efforts to improve operating efficiency contributed to total noninterest expenses, excluding merger related expenses, being
Earnings Analysis
Three Months Ended March 31, 2024, and 2023
As noted above, net income available to common shareholders for the three months ended March 31, 2024, was
Net interest income for the three months ended March 31, 2024, and 2023, was
The Company recorded no provision for credit losses for the three months ended March 31, 2024, as compared to
Noninterest income totaled
The following table is a comparison of the components of noninterest income for the three months ended March 31, 2024, and 2023:
For the Three Months Ended | ||||||||
March 31, | ||||||||
2024 | 2023 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Service charges on deposit accounts | $ 492 | $ 473 | $ 19 | 4.0 % | ||||
Secondary market origination fees | 58 | - | 58 | 100.0 % | ||||
Bank-owned life insurance | 60 | 75 | (15) | -20.0 % | ||||
Other operating income | 204 | 220 | (16) | -7.3 % | ||||
Total | $ 814 | $ 768 | $ 46 | 6.0 % | ||||
Notable variances for the noninterest income table above are as follows:
- The increase in service charges on deposit accounts was primarily due to an increase in ATM and debit card interchange fees, partially offset by small business and commercial accounts receiving higher earnings credit rates which offset previous fee opportunities.
- The increase in secondary market origination fees was primarily due to prior year investments in personnel and related products and services, partially offset by the continued slowing of home refinancing and purchases.
- The decrease in other operating income was primarily due to a decrease in merchant services fees, partially offset by increases in income from other investments.
Noninterest expense totaled
The following table is a comparison of the components of noninterest expense for the three months ended March 31, 2024, and 2023:
For the Three Months Ended | ||||||||
March 31, | ||||||||
2024 | 2023 | Change $ | Change % | |||||
(dollars in thousands) | ||||||||
Salaries and employee benefits | $ 2,634 | $ 3,082 | $ (448) | -14.5 % | ||||
Occupancy expense | 336 | 313 | 23 | 7.3 % | ||||
Furniture and equipment expense | 281 | 277 | 4 | 1.4 % | ||||
Data processing | 365 | 307 | 58 | 18.9 % | ||||
Telecommunications | 146 | 149 | (3) | -2.0 % | ||||
Legal and professional fees | 135 | 174 | (39) | -22.4 % | ||||
FDIC insurance assessments | 98 | 53 | 45 | 84.9 % | ||||
Merger related expenses | 543 | - | 543 | 100.0 % | ||||
Other noninterest expenses | 945 | 1,170 | (225) | -19.2 % | ||||
Total | $ 5,483 | $ 5,525 | $ (42) | -0.8 % | ||||
Notable variances for the noninterest expense table above are as follows:
- The decrease in salaries and employee benefits was primarily due to managements focused efforts to streamline operations and improve efficiencies after the core conversion was completed during the first quarter of 2023. These efforts lead to a reduction in the work force that was implemented during the third quarter of 2023, with full cost savings becoming accretive in the fourth quarter of 2023. In addition, this decrease was driven by lower expenses related to bonus accruals, payroll taxes, benefit costs including 401(k) contributions, and deferred incentive compensation, which were partially offset by merit increases, wage inflation, and a lower impact from deferred loan origination costs.
- The increase in occupancy expense was primarily due to higher expenses related to leases, repairs and maintenance, utilities, and property taxes, which were partially offset by lower expenses related to depreciation.
- The increase in data processing was primarily due to additional services, as well as volume based and other one-time charges.
- The decrease in legal and professional fees was primarily due to lower expenses related to professional fees, which was partially offset by higher expenses related to legal, audit and compliance.
- The increase in FDIC insurance assessments was primarily due to growth in the Bank's assessment base and an increase to the initial base deposit insurance assessment rate schedules that began with the first quarterly assessment period of 2023.
- The increase in merger related expenses was primarily due to legal and investment banker fees, as well as other costs associated with the pending merger with First National that were incurred during the first quarter of 2024, as compared to no merger related expenses being incurred during the same period of 2023.
- The decrease in other noninterest expenses was primarily due to lower expenses related to network management services, marketing and advertising, loans, meals and entertainment, other losses, miscellaneous other operating, and core deposit intangible amortization, which were partially offset by higher expenses related to internet banking, shareholder relations, customer service, and state franchise taxes.
Balance Sheet
At March 31, 2024, total assets were
Cash and cash equivalents as of March 31, 2024, were
Investment securities available for sale, at fair value as of March 31, 2024, were
Total loans as of March 31, 2024, were
Total deposits as of March 31, 2024, were
Total Federal Home Loan Bank borrowings as of March 31, 2024, were
Total subordinated debt, net of issuance costs as of March 31, 2024, were
Total shareholders' equity as of March 31, 2024, was
Asset Quality
The allowance for credit losses as of March 31, 2024, was
About Touchstone Bankshares, Inc.
Touchstone Bankshares, Inc. (the "Company") is the bank holding company for Touchstone Bank (the "Bank"). Most of the Company's business activities are conducted through the Bank. The Bank is a full-service community bank headquartered in
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 completion and benefits of the Merger with First National; the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the Agreement between the Company and First National; the outcome of any legal proceedings that may be instituted against the Company or First National; the possibility that the proposed transaction will not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated (and the risk that required regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction); the ability of the Company and First National to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of either or both parties to the proposed transaction; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company and First National do business; certain restrictions during the pendency of the proposed transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the Merger within the expected timeframes or at all and to successfully integrate the Company's operations and those of First National, which may be more difficult, time-consuming or costly than expected; revenues following the proposed transaction may be lower than expected; the Company's and First National's success in executing their respective business plans and strategies and managing the risks involved in the foregoing; effects of the announcement, pendency or completion of the proposed transaction on the ability of the Company and First National to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally; 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
Touchstone Bankshares, Inc. | ||||||||||
Consolidated Financial Highlights | ||||||||||
(unaudited) | ||||||||||
For the Three Months Ended | ||||||||||
(in thousands, except per share data) | March 31, | December 31, | September 30, | June 30, | March 31, | |||||
Selected Operating Data: | 2024 | 2023 | 2023 | 2023 | 2023 | |||||
Net interest income | $ 5,094 | $ 5,229 | $ 5,078 | $ 5,108 | $ 5,434 | |||||
(Recovery of) provision for credit losses | - | (206) | 75 | 100 | 1,009 | |||||
Noninterest income | 814 | 876 | 930 | 956 | 768 | |||||
Noninterest expense | 5,483 | 5,075 | 5,321 | 5,634 | 5,525 | |||||
Income (loss) before income tax | 425 | 1,236 | 612 | 330 | (332) | |||||
Income tax expense (benefit) | 98 | 170 | 159 | 45 | (136) | |||||
Net income (loss) | 327 | 1,066 | 453 | 285 | (196) | |||||
Less: Preferred dividends | - | 9 | - | - | - | |||||
Net income (loss) available to common shareholders | $ 327 | $ 1,057 | $ 453 | $ 285 | $ (196) | |||||
Income (loss) per share available to common shareholders: | ||||||||||
Basic | $ 0.10 | $ 0.32 | $ 0.14 | $ 0.09 | $ (0.06) | |||||
Diluted | $ 0.10 | $ 0.32 | $ 0.14 | $ 0.09 | $ (0.06) | |||||
Average common shares outstanding, basic | 3,270,982 | 3,273,588 | 3,260,093 | 3,258,230 | 3,247,867 | |||||
Average common shares outstanding, diluted | 3,300,130 | 3,302,736 | 3,289,241 | 3,287,378 | 3,277,015 | |||||
Touchstone Bankshares, Inc. | ||||||||||
Consolidated Financial Highlights (continued) | ||||||||||
(unaudited) | ||||||||||
(in thousands, except per share data) | March 31, | December 31, | September 30, | June 30, | March 31, | |||||
Balance Sheet Data: | 2024 | 2023 | 2023 | 2023 | 2023 | |||||
Total assets | $ 673,182 | $ 658,695 | $ 660,883 | $ 644,415 | $ 644,672 | |||||
Total loans | 506,028 | 508,810 | 512,478 | 505,661 | 496,820 | |||||
Allowance for credit losses | (4,981) | (4,979) | (4,999) | (4,973) | (4,910) | |||||
Core deposit intangible | 326 | 369 | 416 | 464 | 516 | |||||
Deposits | 557,598 | 542,239 | 549,876 | 529,752 | 549,527 | |||||
Borrowings | 49,000 | 49,000 | 49,000 | 51,000 | 31,000 | |||||
Subordinated debt, net of issuance costs | 17,759 | 17,731 | 17,704 | 17,676 | 17,648 | |||||
Preferred stock | 58 | 58 | 58 | 58 | 58 | |||||
Other comprehensive (loss) | (9,982) | (9,568) | (13,111) | (11,605) | (9,714) | |||||
Shareholders' equity | 44,750 | 44,809 | 41,209 | 42,208 | 43,747 | |||||
Book value per common share | $ 13.67 | $ 13.68 | $ 12.61 | $ 12.94 | $ 13.41 | |||||
Tangible book value per common share | $ 13.57 | $ 13.57 | $ 12.48 | $ 12.79 | $ 13.25 | |||||
Total common shares outstanding | 3,270,141 | 3,270,676 | 3,263,794 | 3,258,230 | 3,258,230 | |||||
Total preferred shares outstanding | 29,148 | 29,148 | 29,148 | 29,148 | 29,148 | |||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||
2024 | 2023 | 2023 | 2023 | 2023 | ||||||
Performance Ratios: | (QTD annualized) | (QTD annualized) | (QTD annualized) | (QTD annualized) | (QTD annualized) | |||||
Return on average assets | 0.20 % | 0.63 % | 0.28 % | 0.18 % | -0.13 % | |||||
Return on average common equity | 2.93 % | 9.85 % | 4.34 % | 2.61 % | -1.89 % | |||||
Net interest margin | 3.46 % | 3.47 % | 3.45 % | 3.44 % | 3.78 % | |||||
Overhead efficiency (non-GAAP) | 93 % | 83 % | 89 % | 93 % | 88 % | |||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||
Asset Quality Data: | 2024 | 2023 | 2023 | 2023 | 2023 | |||||
Allowance for credit losses | $ 4,981 | $ 4,979 | $ 4,999 | $ 4,973 | $ 4,910 | |||||
Nonperforming loans (excluding PCD loans) | 141 | 326 | 314 | 332 | 356 | |||||
Other real estate owned, net of allowance | 32 | - | - | - | - | |||||
Nonperforming assets | 173 | 326 | 314 | 332 | 356 | |||||
Net (recoveries) charge-offs, QTD | (2) | 20 | 50 | 36 | (29) | |||||
Asset Quality Ratios: | ||||||||||
Allowance for credit losses to total loans | 0.98 % | 0.98 % | 0.98 % | 0.98 % | 0.99 % | |||||
Nonperforming loans to total loans | 0.03 % | 0.06 % | 0.06 % | 0.07 % | 0.07 % | |||||
Nonperforming assets to total assets | 0.03 % | 0.05 % | 0.05 % | 0.05 % | 0.06 % | |||||
YTD net charge-offs (recoveries) to average loans, annualized | 0.00 % | 0.02 % | 0.02 % | < | -0.03 % | |||||
Community Bank Leverage Ratio | 9.89 % | 9.68 % | 9.71 % | 9.99 % | 9.59 % | |||||
Tangible common equity/tangible assets ratio | 6.59 % | 6.74 % | 6.17 % | 6.47 % | 6.70 % | |||||
Year to Date | ||
(in thousands, except per share data) | March 31, | |
Reconciliation of non-GAAP Financial Measures (1): | 2024 | |
Net income before one-time adjustments | $ 327 | |
Merger related expenses, net of tax effect | 429 | |
Core earnings (1) | $ 756 | |
Core earnings per share available to common shareholders: | ||
Basic | $ 0.23 | |
Diluted | $ 0.23 | |
Average common shares outstanding, basic | 3,270,982 | |
Average common shares outstanding, diluted | 3,300,130 | |
Performance Ratios: | ||
Return on average assets (annualized) | 0.46 % | |
Return on average common equity (annualized) | 6.76 % | |
Overhead efficiency (non-GAAP) | 84 % | |
(1) Core earnings is determined by methods other than in accordance with |
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SOURCE Touchstone Bankshares, Inc.
FAQ
What was the net income for Touchstone Bankshares, Inc. in Q1 2024?
The net income for Touchstone Bankshares, Inc. in Q1 2024 was $327K.
What was the impact of merger expenses on the Company's results in Q1 2024?
Merger expenses negatively impacted the Company's results in Q1 2024, incurring $543K in expenses.
When do Touchstone Bankshares, Inc. and First National anticipate closing the mergers?
Touchstone Bankshares, Inc. and First National anticipate closing the mergers in the fourth quarter of 2024.
Why was the 2024 annual meeting of shareholders postponed?
The 2024 annual meeting of shareholders was postponed for a special meeting to consider and vote on the proposed merger with First National
