TowneBank – Value Analysis (NASDAQ:TOWN) : November 24, 2017

Capitalcube gives TowneBank a score of 68.

Our analysis is based on comparing TowneBank with the following peers – Union Bankshares Corporation, Access National Corporation, Xenith Bankshares, Inc., Old Point Financial Corporation, First Community Bancshares, Inc., American National Bankshares Inc., Fauquier Bankshares, Inc. and Bank of the James Financial Group, Inc. (UBSH-US, ANCX-US, XBKS-US, OPOF-US, FCBC-US, AMNB-US, FBSS-US and BOTJ-US).

Fundamental Overview

TowneBank has a fundamental score of 68 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It currently trades at a Price/Book ratio of (1.83).
  • TOWN-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • TOWN-US‘s relative capital efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, TOWN-US‘s return on equity has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • While TOWN-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company is likely overinvesting in a business with only median returns.
  • TOWN-US might have enough interest coverage to take-on additional debt prudently.

Drivers of Margin

  • TOWN-US‘s lending operations might be constrained on pricing.
  • The company’s comparatively low proportion of net interest income (net interest income/total revenues) of 58.31% versus peer median of 79.16% suggests that TOWN-US‘s lending operations might be constrained on pricing. However, TOWN-US‘s pre-tax margin of 31.69% is around the peer median suggesting lower operating costs relative to peers.
  • The company’s comparatively healthy proportion of fee based income (i.e. non interest income/total revenues) of 41.69% versus peer median of 20.84% — suggests that TOWN-US‘s operating margins are likely to be less volatile. In addition, TOWN-US‘s proportion of overhead costs (i.e. non interest expense/total revenues) of 66.47x is around peer median — suggesting no cost advantage on fee-based overhead operations.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

TowneBank provides retail and commercial banking services to the individuals and small & medium size businesses. It operates through the following segments: Banking, Realty, and Insurance. The Banking segment provides loan and deposit services to retail and commercial customers. It also includes commercial mortgage brokerage services and a variety of investment and asset management services. The Realty segment handles complete residential real estate services, originations of a variety of mortgage loans, resort property management and commercial residential title insurance. The Insurance segment manages property and casualty insurance as well as employee and group benefits through Towne Insurance and TFA Benefits. The company was founded by R. Scott Morgan on September 3, 1998 and is headquartered in Portsmouth, VA.