Touchstone Bank Reports 2018 Financial Results

PRINCE GEORGE, Va., Jan. 31, 2019 /PRNewswire/ -- Touchstone Bank (the "Bank") (OTC Pink: TSBA) today announced its unaudited results for the year ended December 31, 2018.

The Bank reported net income of $1.24 million to common shareholders for the year ended December 31, 2018.  Basic and diluted earnings per common share for the year ended December 31, 2018 amounted to $0.37 and return on average assets was 0.29%.  By comparison, the Bank had net income of $1.32 million for the year ended December 31, 2017. Basic and diluted earnings per common share for the year ended December 31, 2017 amounted to $0.63 and return on average assets was 0.52%.   For the fourth quarter of 2018, the Bank reported net income of $294 thousand available to common shareholders or $0.09 per share on a basic and diluted basis. For the quarter ended December 31, 2017, net income available to common shareholders was $734 thousand, or $0.27 per share on a basic and diluted basis. The 2017 and 2018 results were affected by the Bank's merger with Citizens Community Bankshares, Inc. ("CCB") in November of 2017.

President & CEO James Black stated, "I am proud of the Touchstone Bank team's performance for 2018. Though challenging, the team completed the integration process, produced modest results and set the stage for 2019. With the conversion and integration process behind us, we are keenly focused on implementation of value-added banking initiatives. We delivered solid loan growth in the fourth quarter and expect loan growth to continue in 2019. During this period, we added well-respected executive team members along with experienced loan professionals. We will continue to add key talent in the lending and treasury areas as we deepen and expand our markets." 

Mr. Black continued, "Earnings performance was stifled as a result of lingering merger and conversion related costs along with additional provisions for loan losses due primarily to a nonperforming legacy loan. During the year, we took decisive action to improve our credit risk profile and will continue to manage nonperforming loans until asset quality metrics align more closely with our strategic goals. Recently, we announced three strategic initiatives to enhance shareholder value and improve operating efficiency. The team is executing these along with other projects to amplify results for our customers and shareholders. We remain well-capitalized and rewarded shareholders with a $0.28 per share annual cash dividend. Touchstone Bank is poised for a more successful 2019 as the team is focused on generating superior results."

Earnings

Net interest income for the year ended December 31, 2018 was $16.7 million, compared to $10.1 million for the same period in 2017, an increase of $6.6 million, or 65.9%.  This year-over-year increase is mainly due to the added volume of net interest-earning assets acquired in the merger with CCB in November of 2017.  Net interest income for the fourth quarter of 2018 was $4.3 million, compared to $3.5 million for the same period in 2017, an increase of $768 thousand, or 21.9%.  Net interest income was $4.2 million for the third quarter of 2018. The net interest margin for the year ended December 31, 2018 was 4.38% compared to 3.88% for the same period in 2017. The net interest margin for the fourth quarter of 2018 was 4.41% compared to 3.55% for the same period in 2017.  The net interest margin for the third quarter of 2018 was 4.46%.  Several factors contributed to the increase in margin when comparing results for the three and twelve months ended 2018 to the same periods in 2017, including the added volume of net interest-earning assets acquired in the merger with CCB in November of 2017, acquisition accounting adjustments, and different product mixes with different pricing strategies for loans and deposits. 

Return on average common equity was 2.79% for the year ended December 31, 2018 compared to 4.50% for the same period in 2017 and return on average assets was 0.29% for the year ended December 31, 2018, compared to 0.52% for the year ended December 31, 2017. Return on average common equity was 2.71% for the quarter ended December 31, 2018 compared to 6.68% for the same period in 2017 and return on average assets was 0.28% for the quarter ended December 31, 2018, compared to 0.68% for the quarter ended December 31, 2017.  Return on average common equity and average assets were 4.06% and 0.43%, respectively, for the third quarter of 2018.

The Bank recorded a fourth quarter provision for loan losses of $300 thousand, bringing the 2018 year-to-date provision for loan losses to $1 million.  Comparatively, the Bank recorded provisions for loan losses of $0 and $240 thousand for the same periods in 2017, respectively.

Noninterest income totaled $2.96 million for year ended December 31, 2018, a decrease of $401 thousand, or 11.9%, from the same period in 2017. The decline was mainly due to the one-time bargain purchase gain of $1.4 million that was recorded in 2017 in conjunction with the merger with CCB.  Subtracting the bargain purchase gain from the noninterest total in 2017, the Bank shows an increase of $1.05 million, or 54.6%, when comparing noninterest income for the year ended December 31, 2018 with results for the year ended December 31, 2017. The increase in non-interest income was primarily driven by a $250 thousand one-time conversion-related credit from our core platform service provider in 2018, as well as increases in income from the additional bank owned life insurance acquired in the merger with CCB and from deposit service charges related to the additional deposit accounts acquired in the CCB merger.

Noninterest expense for the twelve months ended December 31, 2018 was $17.1 million, an increase of $5.7 million, or 49.6%, over the $11.4 million of noninterest expense incurred during the same period in 2017.  Subtracting $2.9 million of merger-related expenses incurred in 2017 from total noninterest expense, the increase of noninterest expense was $8.5 million, or 99.4% when comparing 2018 noninterest expense to 2017. This year-over-year increase was mainly attributable to a full calendar year of expenses associated with net assets acquired and additional personnel retained in the merger with CCB in November of 2017 as well as expenses associated with investments made in technology.  On a linked-quarter basis, noninterest expense declined slightly, down $154 thousand, or 3.5%, from $4.36 million for the quarter ended September 30, 2018 to $4.20 million for the quarter ended December 31, 2018.  Management expects noninterest expenses to decline beginning in 2019 as management focuses on improving efficiencies created by the merger.

Balance Sheet

At December 31, 2018, total assets were $426.3 million, compared to $ 439.0 million as of December 31, 2017 and $424.1 million as of September 30, 2018.  Net loans increased $7.2 million, or 2.19%, during the quarter from $328.5 million at September 30, 2018 to $335.7 million as of December 31, 2018. During 2018, net loans slightly decreased from $336.7 million at December 31, 2017 to $335.7 million as of December 31, 2018. Loan activity throughout our markets remains stable and competitive while the Bank remains committed to profitable growth without compromise of asset quality, liquidity, or interest rate risk. The Bank continues to have a healthy loan pipeline and anticipates steady loan growth for 2019. Deposits totaled $370.1 million at December 31, 2018, as compared to $ 382.0 million as of December 31, 2017 and $368.6 million as of September 30, 2018.  Deposit competition is heavy in the Bank's markets as well as nationally, and continues to add pressure to the margin.  The Bank is focused on implementing new deposit strategies in 2019 which include products and related services designed to appeal to changing markets. 

Total equity at December 31, 2018 was $44.3 million, compared to $44.1 million at the end of 2017 and $44.7 million at September 30, 2018.  The Bank remains well capitalized as defined by regulatory guidelines.

Asset Quality

The allowance for loan losses at December 31, 2018 was $2.3 million, or 0.67%, of total loans, compared to $1.6 million at December 31, 2017 and $2.2 at September 30, 2018.  Net charge offs for the quarter ended December 31, 2018 were $228 thousand, compared to $18 thousand for the same period last year and $113 thousand for the quarter ended September 30, 2018.  Net charge offs for the year ended December 31, 2018 were $341 thousand, compared to $202 thousand for the same period last year. Nonperforming loans were $2.4 million, or 0.71%, of total loans at December 31, 2018, compared to $1.9 million, or 0.57%, at December 31, 2017, and $2.8 million, or 0.85%, at September 30, 2018. The Bank had one credit that comprised 41% of the nonperforming asset total as of December 31, 2018.  Management continues to evaluate the risk embedded in nonperforming credits and take steps toward orderly resolutions. Fourth quarter 2018 provision expense was $300 thousand and was earmarked for loan growth and to ensure adequate reserves for specific problem credits. As always, appropriate risk management through maintenance of high asset quality standards and an adequate reserve for loan losses continue to be priorities for the Bank.    

Other real estate owned totaled $319 thousand at December 31, 2018, compared to $673 thousand at December 31, 2017, and $588 thousand at September 30, 2018.  The Bank sold several other real estate properties in the fourth quarter as well as writing down values on others. 

About Touchstone Bank

Touchstone Bank is a full-service community bank headquartered in Prince George, Virginia, with approximately $426.3 million in total assets.  The Bank has eleven branches serving Southern and Central Virginia and three branches serving Northern North Carolina. Visit www.touchstone.bank for more information.

Forward-Looking Statements

Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors.

SOURCE Touchstone Bank

Related Links

https://www.touchstone.bank