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:
• Advertising expense was up $150 thousand as the Bank launched a rebranding campaign in the early part of 2023. This elevated expense should be lower moving forward;
• Internet banking expenses were up $100 thousand quarter over quarter as the Bank used available credits in 2022 to offset internet banking expenses; and
• Printing and supplies expense was up $20 thousand, but is expected to lower moving forward.

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, Basic		3,258,230		3,247,867		3,238,317		3,234,497		3,256,610
Average common shares outstanding, Diluted		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, Basic		3,253,077		3,262,301
Average common shares outstanding, Diluted		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.