Touchstone Bankshares Reports 2022 Second Quarter Financial Results and Completion of Stock Repurchase Plan

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PRINCE GEORGE, Va., July 27, 2022 /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 $1.7 million and $605 thousand for the six and three months ended June 30, 2022, respectively.

Bankshares (PRNewsfoto/Touchstone Bankshares, Inc.)

Diluted earnings per common share for the quarter ended June 30, 2022, was $0.18 while return on average assets was 0.41% and return on average common equity was 5.34%. By comparison, the Company’s net income available to common shareholders for the quarter ended June 30, 2021, was $1.1 million and diluted earnings per common share was $0.33. The return on average assets was 0.77% and return on average common equity was 8.72% for the quarter ended June 30, 2021.

For the six months ended June 30, 2022, diluted earnings per common share was $0.52. This compares to $2.0 million of net income available to common shareholders for six months ended June 30, 2021, or $0.60 of diluted earnings per common share. Return on average assets was 0.59% and 0.73% for six months ended June 30, 2022, and 2021, respectively. Return on average common equity for the six months ended June 30, 2022, and 2021 was 7.40% and 8.08%, respectively.

The Company also announced it has completed its stock repurchase program which began in the fourth quarter of 2021. The total number of common shares repurchased under the program is 127,706 at an average price of $11.75.

James Black, President and CEO, stated, “During the second quarter we continued to leverage our momentum from both a financial and strategic standpoint. The Bank experienced outstanding loan growth, thereby effectively deploying excess cash and capital, and supporting our communities. Despite solid credit quality metrics, which improved from the first quarter, this level of growth coupled with changing macro-economic conditions led to a $500 thousand provision for loan losses. Additionally, the Company successfully completed its $1.5 million stock repurchase program, which began last year and we continued to reduce Paycheck Protection Program loans.”

He continued, “With the new interest rate hikes from the Federal Open Market Committee and the likelihood of additional moves higher, margin expansion should provide an earnings tailwind. This combined with a team performing well and focused on executing our strategic objectives, allows for expectations to remain solid for second half of the year.”

Earnings

Year-over-Year Second Quarter

Net income available to common shareholders for the quarter ended June 30, 2022, was $605 thousand, or $0.18 per diluted common share. This is a decrease of $495 thousand, or 45.0%, when compared with net income available to common shareholders of $1.1 million thousand, or $0.33 diluted earnings per common share for the same period in 2021.

The Company recorded a $500 thousand provision for loan losses in the second quarter of 2022 versus no provision for loan losses recorded in the same period in 2021. The increase in provision for loan losses was due to increased loan volume and a bleaker outlook on the national and local economies.

Net interest income for the quarters ended June 30, 2022, and 2021 was $5.1 million and $4.8 million, respectively. The net interest margin increased four basis points from 3.60% in the second quarter of 2021 to 3.64% for the same period in 2022.

Noninterest income totaled $791 thousand for the quarter ended June 30, 2022, a decrease of $199 thousand, or 20.1%, when compared to the same period in 2021.

The following table is a comparison of the components of noninterest income for the three months ended June 30, 2022, and 2021:

For the three months ended

June 30,

2022

2021

 Change $ 

 Change % 

(dollars in thousands)

Service charges on deposit accounts

$            521

$            472

$              49

10.4 %

Secondary market origination fees

35

89

(54)

-60.7 %

Bank-owned life insurance

75

51

24

47.1 %

Gain on security sales

201

(201)

-100.0 %

Loss on sale of fixed assets

(62)

(62)

-100.0 %

Other operating income

222

177

45

25.4 %

  Total 

$            791

$            990

$          (199)

-20.1 %

Notable variances for the noninterest income table above:

  • The increase in service charges on deposit accounts was mainly due to an increase in ATM and debit card interchange fees and increase in volume of overdraft fees.

  • The Company began seeing a decrease in secondary market origination fees in the second quarter of 2020 due to the increases in federal interest rates.

  • The increase in other operating income was mainly due to increases in income from other investments.

The following table is a comparison of the components of noninterest expense for the quarters ended June 30, 2022, and 2021:

For the three months ended

June 30,

2022

2021

 Change $ 

 Change % 

(dollars in thousands)

Salaries and employee benefits

$         2,557

$         2,121

$            436

20.6 %

Occupancy expense

326

285

41

14.4 %

Furniture and equipment expense

292

285

7

2.5 %

Data processing

125

278

(153)

-55.0 %

Telecommunications

228

212

16

7.5 %

Legal and professional fees

245

191

54

28.3 %

FDIC assessments

54

46

8

17.4 %

Other noninterest expenses

817

991

(174)

-17.6 %

  Total 

$         4,644

$         4,409

$            235

5.3 %

Notable variances for the noninterest expense table above:

  • The increase in salaries and employee benefits for 2022 when compared to the same period in 2021 was mainly due to added staff and various one-time bonuses. Also, The Company had across-the-board salary increases due to salary inflation. The Bank is having to increase salaries for its employees to remain competitive.

  • The increase in occupancy expense is mainly due to the increase in lease expense.  In late 2021, the Bank executed a sales-leaseback transaction on its headquarters building.

  • The decrease in data processing expense in 2022 when compared to 2021 was mainly due to the use of additional credits provided by the Company’s core provider. Also, in the fourth quarter of 2021, the Company renegotiated its contract with the core provider and expects to see a reduction of data processing expenses going forward.

  • The increase in telecommunications was mostly due the transitioning of communications providers. During this transition, the Bank is paying for both services. The Bank expects for a reduction in expenses in September of this year as the legacy provider phases out.

  • Legal and professional fees were higher in 2022, when compared to the same period in 2021, mainly due to paying outsourced credit analysis assistance and human resources support as well as recruiter fees.

Year-over-Year Six Months

Net income available to common shareholders for the six months ended June 30, 2022, was $1.7 million, or $0.52 per diluted common share. This is a decrease of $278 thousand, or 13.8%, when compared with net income available to common shareholders of $2.0 million, or $0.60 diluted earnings per common share for the six months ended June 30, 2021.

Net interest income for the six months ended June 30, 2022, and 2021, was $9.6 million and $9.1 million, respectively. The net interest margin decreased six basis points from 3.55% in 2021 to 3.49% for 2022. This decline was mainly due to the reduction of interest income from the Paycheck Protection Program loans. However, this reduction was mostly offset by the increase in loan volume as well as the higher interest rate environment.

The Bank recorded $500 thousand in provision for loan losses in the first half of 2022, while no provisions for loan losses were made in the first half of 2021.

Noninterest income totaled $1.7 million for the first half of 2022, a decrease of $201 thousand, or 10.8%, when compared to the $1.9 million recorded in the first half of 2021.

The following table is a comparison of the components of noninterest income for the six months ended June 30, 2022 and 2021:

For the six months ended

June 30,

2022

2021

 Change $ 

 Change % 

(dollars in thousands)

Service charges on deposit accounts

$         1,000

$            896

$            104

11.6 %

Secondary market origination fees

80

142

(62)

-43.7 %

Bank-owned life insurance

150

102

48

47.1 %

Gain on security sales

211

(211)

-100.0 %

Loss on sale of fixed assets

(62)

(62)

-100.0 %

Other operating income

491

509

(18)

-3.5 %

  Total 

$         1,659

$         1,860

$          (201)

-10.8 %

Notable variances for the noninterest income table above:

  • The increase in service charges on deposit accounts was mainly due to an increase in ATM and debit card interchange fees and an increase in volume of overdraft fees.

  • The Company began seeing a decrease in secondary market origination fees in the second quarter of 2020 due to the increases in federal interest rates.

For the six months ended June 30, 2022, noninterest expense was $9.0 million, an increase of $488 thousand, or 5.7% when compared to the $8.5 million of noninterest expense recorded for the same period in 2021. The following table is a comparison of the components of noninterest expense for the years ended June 30, 2022, and 2021:

 For the six months ended 

June 30,

2022

2021

 Change $ 

 Change % 

(dollars in thousands)

Salaries and employee benefits

$         4,885

$         4,185

$            700

16.7 %

Occupancy expense

620

557

63

11.3 %

Furniture and equipment expense

571

571

– %

Data processing

202

547

(345)

-63.1 %

Telecommunications

451

398

53

13.3 %

Legal and professional fees

438

311

127

40.8 %

FDIC assessments

110

84

26

31.0 %

Other noninterest expenses

1,714

1,850

(136)

-7.4 %

  Total 

$         8,991

$         8,503

$            488

5.7 %

See above discussion on variances for noninterest expenses.

Balance Sheet

At June 30, 2022, total assets were $604.0 million, compared to $581.1 million at December 31, 2021, an  increase of $22.9 million, or 3.9%.

Total loans were $458.4 million at June 30, 2022. Total loans increased $55.5 million, or 13.8% during the first half of 2022. Annualized loan growth was 27.5% during the first half of 2022. Total loans grew $31.4 million, or 7.4% during the second quarter of 2022.

On the liability side of the balance sheet, deposits totaled $538.7 million at June 30, 2022, as compared to $517.4 million at December 31, 2021.  This represents an increase of $21.3 million, or 4.1% during the first half of 2022.

In the fourth quarter of 2021, the Bank prepaid its outstanding $3.0 million FHLB note. The Bank had no outstanding FHLB borrowings at June 30, 2022, or December 31, 2021.

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%. This issuance, net of capitalized expenses, brings the total outstanding subordinated debt to $17.6 million at June 30, 2022.

Shareholders’ Equity totaled $44.2 million at June 30, 2022, down from the $50.9 million of total Shareholders’ Equity at December 31, 2021. The decline was mainly due to the $8.1 million decrease in Accumulated Other Comprehensive Income which represents the unrealized loss of fair value in the Bank’s available-for-sale investment securities. The decline in the fair value of the investment securities was attributed to the increases of the federal interest rates. Also, the Company initiated a stock repurchase program in the fourth quarter of 2021 which was completed in early third quarter of 2022. The Bank’s Community Bank Leverage Ratio   was 9.99% at June 30, 2022 and 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, 2022, was $4.8 million, or 1.05% of total loans. Loans, excluding purchased credit impaired loans, past due 30 days or more and still accruing were $70 thousand at June 30, 2022, while nonaccrual loans, excluding purchased credit impaired loans, totaled $253 thousand. The Bank believes the current level of allowance for loan loss reserves are adequate to cover anticipated losses as credit metrics remain stable.

About Touchstone Bankshares, Inc.

Touchstone Bankshares, Inc. is the bank holding company for Touchstone Bank. The majority of 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 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 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:

2022

2022

2021

2021

2021

Net interest income

$                  5,075

$              4,564

$              4,674

$              5,009

$              4,772

Provision for loan losses

500

Noninterest income

791

868

1,230

772

990

Noninterest expense

4,644

4,374

4,393

4,300

4,409

Income before income tax 

722

1,085

1,511

1,481

1,353

Income tax expense

117

(51)

284

279

253

Net income 

605

1,136

1,227

1,202

1,100

Less: Preferred dividends

9

Net income available to
common shareholders

$                     605

$              1,136

$              1,218

$              1,202

$              1,100

Income per share available to
common shareholders:

Basic 

$                    0.18

$                0.35

$                0.37

$                0.36

$                0.33

Diluted

$                    0.18

$                0.34

$                0.37

$                0.36

$                0.33

Average common shares outstanding,
Basic

3,256,610

3,268,056

3,301,674

3,336,504

3,336,504

Average common shares outstanding,
Diluted

3,285,758

3,297,204

3,330,822

3,365,652

3,365,652

For the Six Months Ended

June 30,

June 30,

2022

2021

Net interest income

$                  9,639

$              9,120

Provision for loan losses

500

Noninterest income

1,659

1,860

Noninterest expense

8,991

8,503

Income before income tax 

1,807

2,477

Income tax expense 

66

458

Net income 

1,741

2,019

Basic 

$                    0.53

$                0.61

Diluted

$                    0.52

$                0.60

Average common shares outstanding,
Basic

3,262,301

3,335,573

Average common shares outstanding,
Diluted

3,291,449

3,364,721

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:

2022

2022

2021

2021

2021

Total assets

$                 604,026

$                 594,192

$            581,136

$            586,843

$              563,828

Total loans

458,380

426,995

402,910

377,015

383,981

Allowance for loan losses

(4,825)

(4,326)

(4,375)

(4,445)

(4,440)

Core deposit intangible

687

749

815

882

953

Deposits

538,692

537,879

517,396

521,104

498,682

Borrowings

3,000

3,000

Subordinated debt

17,565

17,537

7,825

7,813

7,801

Preferred stock

58

58

58

58

58

Shareholders’ equity

44,206

47,558

50,896

51,921

51,339

Book value per common
share 

$                     13.62

$                     14.49

$                15.57

$                15.54

$                  15.37

Tangible book value per
common share 

$                     13.41

$                     14.26

$                15.32

$                15.28

$                  15.08

Total common shares
outstanding

3,241,917

3,278,558

3,265,615

3,336,504

3,336,504

Total preferred shares
outstanding

29,148

29,148

29,148

29,148

29,148

June 30,

March 31,

December 31,

September 30,

June 30,

2022

2022

2021

2021

2021

Performance Ratios:

(QTD annualized)

(QTD annualized)

(QTD annualized)

(QTD annualized)

(QTD annualized)

Return on average assets

0.41 %

0.78 %

0.81 %

0.82 %

0.77 %

Return on average
common equity

5.34 %

9.30 %

9.36 %

9.19 %

8.72 %

Net interest margin 

3.64 %

3.34 %

3.31 %

3.68 %

3.60 %

Overhead efficiency (non-
GAAP)

78.33 %

80.04 %

78.67 %

74.37 %

79.30 %

June 30,

June 30,

2022

2021

Performance Ratios:

(YTD Annualized)

(YTD Annualized)

Return on average assets

0.59 %

0.73 %

Return on average
common equity

7.40 %

8.08 %

Net interest margin 

3.49 %

3.55 %

Overhead efficiency (non-
GAAP)

79.15 %

78.96 %

June 30,

March 31,

December 31,

September 30,

June 30,

Asset Quality Data:

2022

2022

2021

2021

2021

Allowance for loan losses

$                     4,825

$                     4,326

$                4,375

$                4,445

$                  4,440

Nonperforming loans
(excluding PCI loans)

70

254

253

1,259

1,738

Other real estate owned,
net of allowance

22

Nonperforming assets

70

254

253

1,259

1,760

Net charge-offs
(recoveries), QTD

1

49

70

(5)

(54)

Asset Quality Ratios:

Allowance for loan losses
to total loans

1.05 %

1.01 %

1.09 %

1.18 %

1.16 %

Nonperforming loans to
total loans

0.02 %

0.06 %

0.06 %

0.33 %

0.45 %

Nonperforming assets to
total assets

0.01 %

0.04 %

0.04 %

0.21 %

0.31 %

YTD net charge-offs
(recoveries) to average
loans, annualized 

<0.01%

0.05 %

0.05 %

(0.01 %)

(0.06 %)

Community Bank
Leverage Ratio

9.99 %

9.59 %

9.27 %

9.48 %

9.37 %

Cision

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SOURCE Touchstone Bankshares, Inc.