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TowneBank: Trading At Its Book Value And With A 3%+ Dividend Yield

Published Wed, 23 Dec 2020 09:31:00 -0500 on Seeking Alpha

Seeking AlphaDividend Ideas | Financials TowneBank: Trading At Its Book Value And With A 3%+ Dividend YieldDec. 23, 2020 9:31 AM ET|| About: TowneBank (TOWN)by: The Investment DoctorThe Investment Doctor European Small-Cap IdeasWe zoom in on capital gains and dividend income in European small-capsSummaryTownebank's loan book appears to be very CRE-heavy, but the total amount of loans past due is very low.
The total amount of loans where deferrals and/or modifications were in place has fallen by more than 90% since April.
Townebank is trading just under its book value, but higher than its tangible book value. A purchase price in between would probably be fair.
Introduction
I have been digging a bit deeper into a bunch of regional banks lately, and after being pleasantly surprised by the asset quality of the Bank of South Carolina (BKSC), I wanted to have a closer look at Virginia-based Townebank (TOWN). Surprisingly, this bank hasn’t ben discussed here on Seeking Alpha since 2018, and after checking the bank’s recent results, I feel it deserves more attention.
Data by YChartsDespite elevated loan loss provisions, the EPS remains strong and the dividend remains fully covered
Townebank was able to keep the impact of the lower interest rate climate limited as the expanded balance sheet (thanks to the PPP loans) kept the decrease of the interest income limited to just over 3% in the third quarter. As the interest expenses decreased by almost $10M, the net interest income actually increased, from $91.1M in Q3 2019 to almost $97M in Q3 2020. A very positive development!

Source: SEC filings
Townebank also reported a very strong non-interest result. Whereas the net non-interest expense was approximately $43M in Q3 2019, the net expense decreased to just under $7M in Q3 2020 thanks to a very strong residential mortgage banking income and some other non-recurring events. This boosted the pre-tax pre-loan loss provision income from less than... Read more