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Classified in: Business, Covid-19 virus
Subject: ERN

Touchstone Bankshares Reports 2022 Financial Results


PRINCE GEORGE, Va., Jan. 30, 2023 /PRNewswire/ -- Touchstone Bankshares, Inc. (the "Company") (OTC Pink: TSBA), and its wholly owned subsidiary, Touchstone Bank (the "Bank"), reported unaudited results for the quarter and year ended December 31, 2022.

The Company reported net income available to common shareholders of $4.1 million and $1.2 million for the year and quarter ended December 31, 2022, respectively. For 2022, earnings per common share was $1.24 on a basic and diluted basis. This compares to $4.4 million of net income available to common shareholders for the year ended December 31, 2021, or $1.33 of earnings per common share on a basic and diluted basis. Return on average assets was 0.67% and 0.77% for years ended December 31, 2022, and 2021, respectively. Return on average common equity for the years ended December 31, 2022 and 2021 was 8.90% and 8.70%, respectively.

Basic and diluted earnings per common share for the quarter ended December 31, 2022, was $0.38 while return on average assets was 0.81% and return on average common equity was 11.72%. By comparison, the Company's net income available to common shareholders for the quarter ended December 31, 2021, was $1.2 million and basic and diluted earnings per common share was $0.37. The return on average assets was 0.81% for the quarter ended December 31, 2021.

James Black, President and CEO stated, "We experienced another year of positive momentum and success due to the commitment and diligence of the Touchstone team members. While the growth engine outpaced the earning performance for 2022, the larger asset base and market presence should add greater long-term value. With restrictive monetary policy and resilient economic conditions, albeit changing, we remain cautiously optimistic on macro-economic conditions and will navigate changing conditions accordingly."

He continued, "For 2022, we delivered double-digit loan growth, with total loans increasing $84.3 million or 21% over last year, while reducing nearly all Paycheck Protection Program loans. Additionally, we are strategically better postured for continued growth across our footprint with the hiring of various professionals and a new loan center in Raleigh, North Carolina. Like many financial institutions,  our focus in 2023 will be placed on deposit acquisition initiatives as liquidity is being drained from the financial system through restrictive monetary policy. During the fourth quarter, the Bank experienced a sizeable outflow of deposits that was concentrated with a few customers and deemed temporary. Management views the fourth quarter level of deposit outflow as a one-time event. However, we expect an especially competitive deposit market to pressure the net interest margin going forward."

He concluded by saying, "During the year, capital management was especially active with the completion of a $1.5 million common stock repurchase, a $10 million subordinated debt raise and a $.02 per share increase in the annual cash dividend. The Bank's capital position remained strong and is supported by favorable asset quality metrics."

Earnings

Year-over-Year Twelve Months

Net income available to common shareholders for the year ended December 31, 2022, was $4.1 million, or $1.24 per basic and diluted common share. This is a decrease of $400 thousand, or 9%, when compared with net income available to common shareholders of $4.4 million, or $1.33 basic diluted earnings per common share, for the year ended December 31, 2021.

Net interest income for the years ended December 31, 2022, and 2021, was $20.6 million and $18.8 million, respectively. The net interest margin improved 15 basis points from 3.52% in 2021 to 3.67% for 2022 as increases in volume and yields on interest-earning assets outpaced interest-bearing liabilities. However, the Bank experienced material repricing on its interest-bearing funding in the fourth quarter of 2022 and expects the margin to begin to contract during 2023 as competition for funding demand grows.

The Bank recorded no provision for loan losses in 2021. Comparatively, the Company recorded $605 million of provision for loan losses in 2022 as reserves were added in response to the Company's increase in total loans.

Noninterest income totaled $3.6 million for the year ended December 2022, a decrease of $296 thousand, or 7.7%, when compared to the $3.9 million recorded in 2021.

The following table is a comparison of the components of noninterest income for the years ended December 30, 2022, and 2021:

 



For the year ended







December 31,







2022


2021


 Change $ 


 Change % 

(dollars in thousands)









Service charges on deposit accounts


$           2,046


$           1,872


$              174


9.3 %

Secondary market origination fees


184


224


(40)


-17.9 %

Bank-owned life insurance


300


234


66


28.2 %

BOLI death benefits


343


-


343


- %

(Loss) Gain on security sales


(135)


218


(353)


-161.9 %

(Loss) gain on sale of fixed assets


(90)


320


(410)


-128.1 %

Other operating income


919


995


(76)


-7.6 %

  Total 


$           3,567


$           3,863


$            (296)


-7.7 %

Notable variances for the noninterest income table above:

For the year ended December 31, 2022, noninterest expense was $19.0 million, an increase of $1.8 million, or 10.5% when compared to the $17.2 million of noninterest expense recorded in 2021. The following table is a comparison of the components of noninterest expense for the years ended December 31, 2022, and 2021:

 



 For the year ended 







December 31,







2022


2021


 Change $ 


 Change % 

(dollars in thousands)









Salaries and employee benefits


$         10,564


$           8,639


$           1,925


22.3 %

Occupancy expense


1,263


1,072


191


17.8 %

Furniture and equipment expense


1,165


1,164


1


0.1 %

Data processing


624


1,152


(528)


-45.8 %

Telecommunications


777


841


(64)


-7.6 %

Legal and professional fees


812


716


96


13.4 %

FDIC assessments


220


186


34


18.3 %

Other noninterest expenses


3,576


3,426


150


4.4 %

  Total 


$         19,001


$         17,196


$           1,805


10.5 %

Notable variances for the noninterest expense table above:

Year-over-Year Fourth Quarter

Net income available to common shareholders for the quarter ended December 31, 2022, was $1.2 million, or $0.38 per basic and diluted common share. This is an increase of $16 thousand, or 1.3%, when compared with net income available to common shareholders of $1.2 million, or $0.37 basic and diluted earnings per common share for the same period in 2021.

Net interest income for the quarters ended December 31, 2022, and 2021, was $5.6 million and $4.7 million, respectively. The net interest margin increased 56 basis points from 3.31% in the fourth quarter of 2021 to 3.87% for the same quarter in 2022 for the same factors as discussed above in the Year-over-Year Twelve Months section.

Noninterest income totaled $1.1 million for the quarter ended December 31, 2022, a decrease of $163 thousand, or 13.3%, 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 December 31, 2022, and 2021:

 



For the three months ended







December 31,







2022


2021


 Change $ 


 Change % 

(dollars in thousands)









Service charges on deposit accounts


$              514


$              497


$                17


3.4 %

Secondary market origination fees


35


58


(23)


-39.7 %

Bank-owned life insurance


75


75


-


0.0 %

BOLI death benefits


343


-


343


- %

Gain on security sales


-


6


(6)


- %

(Loss) gain on sale of fixed assets


(28)


320


(348)


-108.8 %

Other operating income


128


274


(146)


-53.3 %

  Total 


$           1,067


$           1,230


$            (163)


-13.3 %

Notable variances for the noninterest income table above:

The following table is a comparison of the components of noninterest expense for the quarters ended December 31, 2022, and 2021:

 



For the three months ended







December 31,







2022


2021


 Change $ 


 Change % 

(dollars in thousands)









Salaries and employee benefits


$           2,990


$           2,222


$              768


34.6 %

Occupancy expense


309


264


45


17.0 %

Furniture and equipment expense


285


287


(2)


-0.7 %

Data processing


282


361


(79)


-21.9 %

Telecommunications


158


227


(69)


-30.4 %

Legal and professional fees


142


123


19


15.4 %

FDIC assessments


54


48


6


12.5 %

Other noninterest expenses


956


861


95


11.0 %

  Total 


$           5,176


$           4,393


$              783


17.8 %

See discussion in Year-over-Year Twelve Months section above for noninterest expense variances.  The increase in other noninterest expenses in the above table was due to several noninterest expense categories.

Balance Sheet

At December 31, 2022, total assets were $622.4 million, compared to $581.1 million at December 31, 2021, an  increase of $41.3 million, or 7.1%.

Total loans were $487.2 million at December 31, 2022. Total loans increased $84.3 million, or 20.9% during the year. Total loans increased $16.9 million, or 3.6%, during the fourth quarter of 2022 and the Bank has a healthy pipeline entering 2023. 

On the liability side of the balance sheet, deposits totaled $526.6 million at December 31, 2022, as compared to $517.4 million at December 31, 2021. Included in total deposits at December 31, 2022 were $20.4 million in brokered deposits. Retail deposits declined $10.6 million in 2022 as the Bank experienced an outflow of $40.7 million of retail deposits in the fourth quarter of 2022. The Bank replaced those deposits with the aforementioned $20.4 million in brokered CDs and $25 million in additional FHLB Borrowings.

In the fourth quarter of 2022, the Bank had $31.0 million in FHLB Borrowings. The Bank had no outstanding FHLB borrowings at December 31, 2021.

In August of 2020, the Company issued $8 million of subordinated debt with a 10-year maturity and an initial 6.00% coupon. In February of 2021, the Company redeemed the $3.5 million of legacy subordinated debt issued in February of 2016. Those notes carried a 7% coupon. Subordinated debt totaled $7.8 million at 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%. 

Shareholders' Equity totaled $42.6 million at December 31, 2022, a decline of $8.2 million, or 16.2% when compared to the $50.9 million of Shareholders' Equity at December 31, 2021. The decline was mainly due to the $10.9 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 $1.5 million 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 10.13% at December 31, 2022 and remains well capitalized as defined by regulatory guidelines

Asset Quality

The allowance for loan losses at December 31, 2022, was $4.9 million, or 1.00%, of total loans. Loans past due 30 days or more and still accruing were $188 thousand at December 31, 2022, while nonaccrual loans, excluding purchased credit impaired loans, totaled $362 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. 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 two loan centers 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)


December 31,


September 30,


June 30,


March 31,


December 31,

Selected Operating Data:


2022


2022


2022


2022


2021

Net interest income


$                     5,555


$                5,405


$                5,075


$                4,564


$                4,674

Provision for loan losses


-


105


500


-


-

Noninterest income


1,067


841


791


868


1,230

Noninterest expense


5,176


4,834


4,644


4,347


4,393

Income before income tax 


1,446


1,307


722


1,085


1,511

Income tax (benefit) expense


203


240


117


(51)


284

Net income 


1,243


1,067


605


1,136


1,227

Less: Preferred dividends


9


-


-


-


9

Net income available to
common shareholders


$                     1,234


$                1,067


$                   605


$                1,136


$                1,218












Income per share available to
common shareholders:











Basic 


$                       0.38


$                  0.33


$                  0.18


$                  0.35


$                  0.37

Diluted


$                       0.38


$                  0.33


$                  0.18


$                  0.34


$                  0.37












Average common shares outstanding,
basic


3,238,317


3,234,497


3,256,610


3,268,056


3,301,674

Average common shares outstanding,
diluted


3,267,465


3,263,645


3,285,758


3,297,204


3,330,822

 



Year to Date



December 31,


December 31,



2022


2021

Net interest income


$                   20,599


$              18,803

Provision for loan losses


605


-

Noninterest income


3,567


3,863

Noninterest expense


19,001


17,196

Income before income tax 


4,560


5,470

Income tax expense 


509


1,022

Net income 


4,051


4,448

Less: Preferred dividends


9


9

Net income available to common





shareholders


$                     4,042


$                4,439






Income per share available to common
shareholders:





Basic 


$                       1.24


$                  1.33

Diluted


$                       1.24


$                  1.33






Average common shares outstanding,
basic


3,249,248


3,326,511

Average common shares outstanding,
diluted


3,278,396


3,355,659

 

Touchstone Bankshares, Inc.

Consolidated Financial Highlights (continued)

(unaudited)












(in thousands, except per
share data)


 December,


 September,


June 30,


March 31,


December 31,

Balance Sheet Data:


2022


2022


2022


2022


2021

Total assets


$                   622,402


$                   615,031


$              604,026


$              594,192


$                581,136

Total loans


487,216


470,293


458,380


426,995


402,910

Allowance for loan losses


(4,881)


(4,895)


(4,825)


(4,326)


(4,375)

Core deposit intangible


570


627


687


749


815

Deposits


526,553


546,863


538,692


537,879


517,396

Borrowings


31,000


6,000


-


-


-

Subordinated debt


17,621


17,593


17,565


17,537


7,825

Preferred stock


58


58


58


58


58

Shareholders' equity


42,647


41,641


44,206


47,558


50,896

Book value per common
share 


$                       13.12


$                       12.85


$                  13.62


$                  14.49


$                    15.57

Tangible book value per
common share 


$                       12.94


$                       12.66


$                  13.41


$                  14.26


$                    15.32

Total common shares
outstanding


3,246,236


3,235,777


3,241,917


3,278,558


3,265,615

Total preferred shares
outstanding


29,148


29,148


29,148


29,148


29,148

























 December,


 September,


June 30,


March 31,


December 31,



2022


2022


2022


2022


2021

Performance Ratios:


(QTD annualized)


(QTD annualized)


(QTD annualized)


(QTD annualized)


(QTD annualized)

Return on average assets


0.81 %


0.70 %


0.41 %


0.78 %


0.81 %

Return on average
common equity


11.72 %


9.62 %


5.34 %


9.30 %


9.36 %

Net interest margin 


3.87 %


3.79 %


3.64 %


3.34 %


3.31 %

Overhead efficiency (non-
GAAP)


79 %


76 %


78 %


80 %


79 %

























 December,


 December,









2022


2021







Performance Ratios:


YTD


YTD







Return on average assets


0.67 %


0.77 %







Return on average
common equity


8.90 %


8.70 %







Net interest margin 


3.67 %


3.52 %







Overhead efficiency (non-
GAAP)


78 %


78 %










































 December,


 September,


June 30,


March 31,


December 31,

Asset Quality Data:


2022


2022


2022


2022


2021

Allowance for loan losses


$                       4,881


$                       4,895


$                  4,825


$                  4,326


$                    4,375

Nonperforming loans
(excluding PCI loans)


362


326


70


254


253

Other real estate owned,
net of allowance


-


-


-


-


-

Nonperforming assets


362


326


70


254


253

Net charge-offs, QTD


15


34


1


49


70












Asset Quality Ratios:











Allowance for loan losses
to total loans


1.00 %


1.04 %


1.05 %


1.01 %


1.09 %

Nonperforming loans to
total loans


0.07 %


0.07 %


0.02 %


0.06 %


0.06 %

Nonperforming assets to
total assets


0.06 %


0.05 %


0.01 %


0.04 %


0.04 %

YTD net charge-offs
to average
loans, annualized 


0.02 %


0.02 %


<0.01%


0.05 %


0.05 %












Community Bank
Leverage Ratio


10.13 %


10.11 %


9.99 %


9.59 %


9.27 %

 

SOURCE Touchstone Bankshares, Inc.


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