Touchstone Bank Reports First Quarter of 2019 Financial Results

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Apr 30, 2019, 17:11 ET

PRINCE GEORGE, Va., April 30, 2019 /PRNewswire/ -- Touchstone Bank (the "Bank") (OTC Pink: TSBA) today announced its unaudited results for the quarter ended March 31, 2019.

The Bank reported net income of $541 thousand to common shareholders for the quarter ended March 31, 2019. Basic and diluted earnings per common share for the quarter ended March 31, 2019 was $0.16. By comparison, the Bank had net income of $30 thousand, or $0.01 basic and diluted earnings per common share, for the quarter ended March 31, 2018. On a linked-quarter basis, net income for the quarter ended December 31, 2018 was $294 thousand, or $0.09 basic and diluted earnings per common share.

President & CEO James Black stated, "I am pleased with the first-quarter results and the team's commitment to further improve the Bank's performance. We experienced modest balance sheet growth and quarterly earnings continued to progress. Previously announced strategic initiatives have either been executed or are well underway. The Wake Forest, North Carolina loan center opened on April 1^st, the Henderson branch is scheduled to close on April 30^th, and the restructure of the Bank's secondary mortgage operations resulted in increased fee income for the first quarter of 2019. We are also aggressively managing our single largest nonperforming asset and anticipate its resolution during the third quarter. A removal of this loan would further improve the solid credit-quality position that exists. Our focus remains on significantly improving profitability with prudent risk management practices and delivering superior customer service. We are well-capitalized, have ample liquidity and are well positioned for changing interest rates."

Earnings

Return on average assets was 0.50% for the quarter ended March 31, 2019, compared to 0.03% and 0.28% for the quarters ended March 31, 2018 and December 31, 2018, respectively. Return on average common equity was 4.85% for the quarter ended March 31, 2019 compared to 0.28% for the same period in 2018 and 2.71% for the quarter ended December 31, 2018.

Net interest income for the quarter ended March 31, 2019 was $4.2 million, compared to $4.1 million for the same period in 2018, an increase of $78 thousand, or 1.9%. Net interest income for the fourth quarter of 2018 was $4.3 million. The net interest margin for the quarter ended March 31, 2019 was 4.31% compared to 4.33% for the same period in 2018, and 4.41% for the quarter ended December 31, 2018. Cost of funds rose 16 basis points during the first quarter of 2019, to 0.76%, when compared to the 0.60% cost of funds for the quarter ended December 31, 2018.

Provision for loan losses totaled $75 thousand for the first quarter of 2019 to support loan growth. Comparatively, the Bank recorded provisions for loan losses of $300 thousand during each of the first and fourth quarters of 2018.

Noninterest income totaled $648 thousand for quarter ended March 31, 2019, a decrease of $10 thousand, or 1.5%, from the same period in 2018. On a linked-quarter basis, noninterest income increased $72 thousand, or 12.5%, from the $576 thousand of noninterest income earned during the fourth quarter of 2018. The main driver of the increase in noninterest income on a linked-quarter basis was an additional $48 thousand of secondary mortgage origination fee income recorded in the first quarter of 2019. Total secondary mortgage origination fee income for the quarter ended March 31, 2019 was $57 thousand versus $8 thousand for the quarter ended December 31, 2018. The Bank also saw a net increase of $29 thousand in income from other investments when comparing the first quarter of 2019 to the fourth quarter of 2018.

Noninterest expense for the three months ended March 31, 2019 was $4.1 million, a decrease of $309 thousand or 7.0%, over the $4.4 million of noninterest expense incurred during the same period in 2018. This year-over-year decrease was mainly attributable to the $276 thousand decline in salaries and employee benefits expense when comparing the first quarter of 2019 to the first quarter of 2018. The additional salary and employee benefits expense incurred in the first quarter of 2018 were due to merger-related one-time payments as well as conversion bonuses paid. On a linked-quarter basis, noninterest expense remained steady, declining $18 thousand, or less than 1.0%.

Balance Sheet

At March 31, 2019, total assets were $439.3 million, compared to $427.0 million as of December 31, 2018, and $429.2 million as of March 31, 2018. Total loans increased $4.2 million, or 4.97% on an annualized basis, during the quarter from $338.0 million at December 31, 2018 to $342.2 million as of March 31, 2019. Loan activity throughout our markets remains stable, but competitive. The Bank continues to have a healthy loan pipeline and anticipates steady loan growth for the remainder of 2019.

On the liability side of the balance sheet, deposits totaled $374.6 million at March 31, 2019, as compared to $370.1 million as of December 31, 2018 and $376.5 million as of March 31, 2018. Deposit competition is heavy in the Bank's markets as well as nationally and continues to add pressure to the net interest margin. The Bank is implementing new deposit initiatives in 2019 which includes products and related services designed to appeal to changing markets as well as more robust treasury and commercial deposit services. Federal Home Loan Bank advances increased $8.5 million during the quarter.

Total equity at March 31, 2019 was $45.0 million, compared to $44.3 million at the end of 2018 and $44.0 million at March 31, 2018. The Bank remains well capitalized as defined by regulatory guidelines.

Asset Quality

The allowance for loan losses at March 31, 2019 was $2.4 million, or 0.69% of total loans, compared to $2.3 million, or 0.71% of total loans, at December 31, 2018. No loans were charged off during the first quarter of 2019 and the Bank had recoveries of $14 thousand during the quarter. Nonperforming loans were $2.4 million, or 0.71%, of total loans at March 31, 2019 and December 31, 2018. Other real estate owned, net of allowance totaled $174 thousand at March 31, 2019, down $145 thousand from the $319 thousand total at December 31, 2018.

About Touchstone Bank

Touchstone Bank is a full-service community bank headquartered in Prince George, Virginia, with approximately $439.3 million in total assets. The Bank has eleven branches serving Southern and Central Virginia and three branches and a loan center 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.




Touchstone Bank
Financial Highlights
(unaudited)

(in thousands, except per share data)	March 31,	December 31,	September 30,	June 30,	March 31,
Balance Sheet Data:	2019	2018	2018	2018	2018

Total assets	$ 439,348	$ 426,964	$ 424,118	$ 427,762	$ 429,158
Loans, net of allowance	339,859	335,747	328,547	325,992	334,753
Core deposit intangible	1,710	1,808	1,909	2,012	2,118
Deposits	374,627	370,147	368,614	372,672	376,497
Borrowings	12,998	4,463	4,078	4,160	4,242
Subordinated debt	3,569	3,579	3,588	3,597	3,606
Preferred stock	59	59	59	59	59
Shareholders' equity	44,951	44,343	44,689	44,362	43,994
Book value per common share	$ 13.52	$ 13.36	$ 13.46	$ 13.37	$ 13.26
Tangible book value per common share	$ 13.01	$ 12.81	$ 12.89	$ 12.77	$ 12.62
Total common shares outstanding	3,319,319	3,315,172	3,315,172	3,313,018	3,312,914
Total preferred shares outstanding	29,352	29,577	29,577	29,577	29,681

	March 31,	December 31,	September 30,	June 30,	March 30,
	2019	2018	2018	2018	2018
Performance Ratios:	(QTD ^annualized)	(QTD ^annualized)	(QTD ^annualized)	(QTD ^annualized)	(QTD ^annualized)
Return on average assets	0.50%	0.28%	0.43%	0.43%	0.03%
Return on average common equity	4.85%	2.71%	4.06%	4.17%	0.28%
Net interest margin	4.31%	4.41%	4.46%	4.31%	4.33%
Overhead efficiency	85.33%	85.32%	84.84%	85.67%	92.90%

	March 31,	December 31,	September 30,	September 30,	March 31,
Asset Quality Data:	2019	2018	2018	2018	2018
Allowance for loan loss	$ 2,358	$ 2,269	$ 2,225	$ 2,029	$ 1,919
Nonperforming loans	2,422	2,387	2,821	2,567	2,489
Other real estate owned, net of allowance	174	319	588	739	673
Nonperforming assets	2,596	2,706	3,409	3,306	3,162
Net charge-offs (recoveries), QTD	(14)	228	113	-	-

Asset Quality Ratios:
Allowance for loan loss to total loans	0.69%	0.67%	0.67%	0.62%	0.57%
Nonperforming loans to total loans	0.71%	0.71%	0.85%	0.78%	0.74%
Nonperforming assets to total assets	0.59%	0.63%	0.80%	0.78%	0.74%
Net charge-offs (recoveries) to average loans, annualized	<(0.01)%	0.27%	0.14%	-	-

Capital Ratios:
Total risk-based capital	14.08%	14.23%	14.92%	14.64%	13.99%
Tier 1 risk-based capital	12.38%	12.52%	13.15%	12.93%	12.36%
Tier 1 leverage capital	10.00%	10.03%	10.19%	9.93%	9.81%



Touchstone Bank
Financial Highlights (continued)
(unaudited)

(in thousands, except per share data)	For the Three Months Ended
	March 31,	December 31,	September 30,	June 30,	March 31,
Selected Operating Data:	2019	2018	2018	2018	2018

Net interest income	$ 4,179	$ 4,277	$ 4,217	$ 4,096	$ 4,101
Provision for loan losses	75	300	300	100	300
Noninterest income	648	576	920	737	658
Noninterest expense	4,112	4,130	4,357	4,141	4,421
Income before income tax	$ 640	$ 423	$ 480	$ 592	$ 38
Income tax expense	99	121	24	134	8
Net income	$ 541	$ 302	$ 456	$ 458	$ 30
Less: Preferred dividends	$ -	$ 8	$ -	$ -	$ -
Net income available to common
shareholders	$ 541	$ 294	$ 456	$ 458	$ 30

Income per share available to
common shareholders:
Basic	$0.16	$0.09	$0.14	$0.14	$0.01
Diluted	$0.16	$0.09	$0.14	$0.14	$0.01

Average common shares outstanding, basic	3,319,170	3,315,172	3,313,814	3,312,997	3,312,819
Average common shares outstanding, diluted	3,348,627	3,344,749	3,343,391	3,342,595	3,312,819