TowneBank: Ruby slippers
Focusing on its own community is what TowneBank (Nasdaq:TOWN) is all about. While other banks travel over the rainbow in search of profits, Towne is proving there is no place like home, reaping profits by concentrating on its own back yard.
Hometown efforts are keeping TowneBank above the fray. Net income grew 7% to $6.41 million in the quarter through September from the previous year. Quarterly earnings increased 4% to $0.25 per share. Year-to-date earnings were up 6% to $0.73.
In releasing the third-quarter results, TowneBank said it remains focused on growth strategies in the history-rich Hampton Roads region in southeast Virginia. The bank, with market capitalization of $510 million, runs 17 banking offices in Chesapeake, Hampton, Portsmouth, Newport News, Virginia Beach, Norfolk, Williamsburg and York County. Founded in 1998, Portsmouth, Va.-based TowneBank is the largest bank headquartered in Hampton Roads.
The sound local economy is buoyed by a large year-round harbor, which provides commerce and supports military facilities, and by extensive waterfront property. Real estate has been relatively stable through the mortgage debacle: September’s median sale price was $218,500 for existing homes, down 5.4% from August and 2.8% from year-ago, according to the Virginia Beach-based Real Estate Information Network. The median price for a new home in South Hampton Roads was down 17%, and the number of new homes sold rose to 199 from 186 a year ago.
TowneBank says it has no exposure to subprime mortgages. It has increased assets and continues to grow its loan portfolio, mainly because of its community’s strength. Loans reached $2.2 billion at the end of September, up 23% from a year ago. Total assets rose to $3.02 billion, up from $2.48 billion the previous year, and nonperforming assets were $2.73 million, or 0.09% of total. The bank’s loan loss provision rose to $1.57 million from $266,000, and net charge-offs for the quarter were immaterial at 0.01% of average outstanding loans.
In a wizardly move, TowneBank in August raised $59.8 million in capital by selling more than 598,000 shares of 8% non-cumulative convertible preferred stock — substantially above the original maximum offering amount of $30 million. The offering was over-subscribed by the bank's shareholders and members. The conversion price is $18.56 — the closing price on August 26 — and the preferred is equal to 5.388 shares of common.
The offering aids liquidity and allows TowneBank to pursue growth opportunities without tapping into stressed credit markets. Core retail deposits grew in the third quarter and the company held $268 million in cash or cash equivalents on Sept. 30. It also has liquidity in other funding arrangements.
Shares of TowneBank closed Tuesday at $20.77, gaining since the preferred offering. Indeed, TowneBank shares are up 29% for the year. Its P/E is 22 based on trailing 12-month earnings, higher than the regional bank average near 15. And why not? Expectations are high because TowneBank’s earnings growth rates are 7% for one year and 21% for the past five.
Sometimes, it pays to stay close to home. Particularly when the road elsewhere is stalked by lions, tigers and bears. Oh my.
Hometown efforts are keeping TowneBank above the fray. Net income grew 7% to $6.41 million in the quarter through September from the previous year. Quarterly earnings increased 4% to $0.25 per share. Year-to-date earnings were up 6% to $0.73.
In releasing the third-quarter results, TowneBank said it remains focused on growth strategies in the history-rich Hampton Roads region in southeast Virginia. The bank, with market capitalization of $510 million, runs 17 banking offices in Chesapeake, Hampton, Portsmouth, Newport News, Virginia Beach, Norfolk, Williamsburg and York County. Founded in 1998, Portsmouth, Va.-based TowneBank is the largest bank headquartered in Hampton Roads.
The sound local economy is buoyed by a large year-round harbor, which provides commerce and supports military facilities, and by extensive waterfront property. Real estate has been relatively stable through the mortgage debacle: September’s median sale price was $218,500 for existing homes, down 5.4% from August and 2.8% from year-ago, according to the Virginia Beach-based Real Estate Information Network. The median price for a new home in South Hampton Roads was down 17%, and the number of new homes sold rose to 199 from 186 a year ago.
TowneBank says it has no exposure to subprime mortgages. It has increased assets and continues to grow its loan portfolio, mainly because of its community’s strength. Loans reached $2.2 billion at the end of September, up 23% from a year ago. Total assets rose to $3.02 billion, up from $2.48 billion the previous year, and nonperforming assets were $2.73 million, or 0.09% of total. The bank’s loan loss provision rose to $1.57 million from $266,000, and net charge-offs for the quarter were immaterial at 0.01% of average outstanding loans.
In a wizardly move, TowneBank in August raised $59.8 million in capital by selling more than 598,000 shares of 8% non-cumulative convertible preferred stock — substantially above the original maximum offering amount of $30 million. The offering was over-subscribed by the bank's shareholders and members. The conversion price is $18.56 — the closing price on August 26 — and the preferred is equal to 5.388 shares of common.
The offering aids liquidity and allows TowneBank to pursue growth opportunities without tapping into stressed credit markets. Core retail deposits grew in the third quarter and the company held $268 million in cash or cash equivalents on Sept. 30. It also has liquidity in other funding arrangements.
Shares of TowneBank closed Tuesday at $20.77, gaining since the preferred offering. Indeed, TowneBank shares are up 29% for the year. Its P/E is 22 based on trailing 12-month earnings, higher than the regional bank average near 15. And why not? Expectations are high because TowneBank’s earnings growth rates are 7% for one year and 21% for the past five.
Sometimes, it pays to stay close to home. Particularly when the road elsewhere is stalked by lions, tigers and bears. Oh my.
About the Author
Contributing author Jennifer Allen has two decades of experience as a writer and editor, mainly as a financial wire service correspondent.
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