Springfield, Illinois, January 30, 2017. Town and Country Financial Corporation (OTC Pink: TWCF) reported fourth-quarter operating net income of $1.2 million, or $0.43 per share, a 31% increase from $936 thousand, or $0.33 per share in the fourth-quarter of 2015.
The current quarter’s reported earnings were impacted by security gains and adjustments to conversion and acquisition costs that collectively resulted in additional after-tax income of $651 thousand as compared to an after-tax loss of $242 thousand reported in the year-ago quarter for similar non-operating items. The year-ago quarter also included costs to set up the company’s captive insurance company. Reported net income including these non-operating items was $1.9 million and net income available to common shareholders was $0.66 per share compared with $695 thousand and $0.24 per share in the year-ago period, last year’s quarter net of the dividend paid on preferred stock.
Operating income for the full year was $4.6 million, or $1.61 per share, compared with $3.5 million, or $1.24 per share in 2015. Both years were impacted by acquisition and conversion costs and securities gains that contributed positive net income of $129 thousand in 2016 and $409 thousand in 2015. Reported net income for the current year including these non-operating items was $4.7 million and net income available to common shareholders was $1.66 per share. This compares to reported net income of $3.9 million, and $1.37 per share in 2015.
President and Chief Executive Officer, Micah R. Bartlett commented “Current year earnings were buoyed by the first-half bank and branch acquisitions and a vibrant purchase mortgage market, with loans originated up 36% over the prior year, and with stronger margins at their sale. But just as importantly, we saw strong organic growth in loans that were up 10% and core deposits up 15%. In particular, we are gratified to see the company’s return on average common equity exceed 10%.”
Discussion of Fourth Quarter Results
Net revenue was $8.9 million, up 40% compared with $6.4 million in 2015. Net interest income was up 33% over the year-ago quarter based upon the 2016 acquisitions and growth in loans and investment securities. Non-interest income was $3.4 million and up $1.2 million from the prior year due to security gains that were $897 thousand in the current quarter compared with $239 thousand in the year ago, a 24% increase in mortgage banking revenue, and the acquisitions.
Bartlett continued, “We are pleased to report another quarter of strong profitability positively impacted by the net earnings of the acquired entities, a 7% increase in mortgage originations, and a 2% reduction in normal operating expenses. Asset quality remains strong with an overall delinquent loan rate of 1.02% of total loans and an allowance for loan loss that is 1.75 times the level of non-performing loans.”
The tax equivalent net interest margin was 3.35% in the current quarter compared with 3.51% in the year-ago. The year-over-year change was primarily due to significant growth in investment securities, as well as borrowing costs, as a result of the first-quarter bank acquisition.
Noninterest expense was $5.9 million, an increase of $790 thousand, or 16%, over the prior year’s fourth-quarter. The change was primarily due to the first and second quarter 2016 bank and branch acquisitions and secondarily due to costs that supported a 36% quarter-over-quarter increase in mortgage originations.
The provision for loan loss was $406 thousand compared to $350 thousand in the fourth-quarter of 2015. Net charge offs were $285 thousand, or 0.06% of average loans compared with $204 thousand, or 0.06%, in the prior year’s quarter.
Loans that were past due 30 days or more, including non-accrual loans, totaled 1.02% of loans outstanding at December 31, 2016 compared with 1.67% at December 31, 2015. The allowance for loan loss was 1.09% of total loans, excluding loans held for sale. When excluding purchased loans, the allowance is 1.21% compared with 1.18% at the prior year-end. There is no allowance for loans associated with the acquisitions, as those purchased loans were recorded at their fair value.
Bartlett continued, “We are grateful for the efforts of our talented team of people who helped make 2016 a record year of achievement and who have built a strong platform for the future. We eagerly look ahead to 2017 as we seek to further optimize our performance and customer service. Based on our unique way of doing business, and one customer at a time, we invite you to join us and have fun with banking!”
At December 31, 2016, total assets were $738 million and total net loans were $477 million compared with $520 million and $365 million, respectively, at December 31, 2015. Total deposits were $584 million and common equity capital was $48 million. The reported book value was $16.84 per common share compared with $15.59 per share at December 31, 2015. Town and Country Financial Corporation is considered a small bank holding company and therefore Basel III capital standards do not apply. Town and Country Bank’s capital levels remained strong in the quarter under the Basel III transitional standardized approach with common equity tier 1 capital of $61 million, or 11.4%, and total regulatory capital of $67 million, or 12.4%, both stated as a percentage of risk-weighted assets.
The parent holding company reported an investment in Town and Country Bank of $70.5 million at December 31, 2016, compared with $51.0 million at the end of 2015. Borrowings were $13.4 million and trust preferred securities were $13.4 million, as compared with no borrowed debt and trust preferred securities of $11.5 million at year-end, both changes a result of the acquisition and purchase accounting adjustments.
The Board of Directors declared a $0.04 per share quarterly cash dividend payable on March 15, 2017 to stockholders of record March 1, 2017. This represents a 33% increase to the prior quarter’s dividend.
Town and Country Financial Corporation is the parent holding company for Town and Country Bank and Town and Country Banc Mortgage Services, Inc. with offices in Buffalo, Decatur, Edwardsville, Fairview Heights, Jacksonville, Lincoln, Mt. Zion, Springfield, Waverly, White Hall and Quincy. Quincy operates under the name of Peoples Prosperity Bank. Town and Country Financial Corporation shares are quoted under the symbol TWCF.