8-K
Skyline Bankshares, Inc. (SLBK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2021
___________
PARKWAY ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
| Virginia<br><br> <br>(State or other jurisdiction<br><br> <br>of incorporation) | 333-209052<br><br> <br>(Commission File Number) | 47-5486027<br><br> <br>(I.R.S. Employer<br><br> <br>Identification No.) |
|---|---|---|
| 101 Jacksonville Circle<br><br> <br>Floyd, Virginia<br><br> <br>(Address of principal executive offices) | 24091<br><br> <br>(Zip Code) | |
| --- | --- |
Registrant’s telephone number, including area code: (540) 745-4191
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br> <br>Symbol(s) | Name of each exchange<br><br> <br>on which registered |
|---|---|---|
| None |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On May 5, 2021, Parkway Acquisition Corp. (the “Company”) issued a press release reporting its financial results for the period ended March 31, 2021. A copy of the press release is being furnished as Exhibit 99.1 to this report and is incorporated by reference into this Item 2.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
99.1 Press Release dated May 5, 2021 announcing financial results for the period ending March 31, 2021
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PARKWAY ACQUISITION CORP. | ||
|---|---|---|
| (Registrant) | ||
| Date: May 5, 2021 | By: | /s/ Blake M. Edwards |
| Blake M. Edwards | ||
| President and Chief Executive Officer |
ex_247051.htm
Exhibit 99.1
Parkway Acquisition Corp. Announces First Quarter 2021 Results
FOR IMMEDIATE RELEASE
For more information contact:
Blake Edwards, President & CEO – 276-773-2811
Lori Vaught, EVP & CFO – 276-773-2811
FLOYD, VA, and INDEPENDENCE, VA, May 5, 2021 /PRNewswire-FirstCall/ -- Parkway Acquisition Corp. (“Parkway” or the “Company”) (OTC QX: PKKW) – the holding company for Skyline National Bank (“Skyline” or the “Bank”) – announced its results of operations for the first quarter 2021. Parkway reported net income of $1.8 million for the quarter ended March 31, 2021, and finished the first quarter of 2021 with total assets of $906.8 million.
Net income for the three months ended March 31, 2021 was $1.8 million or $0.31 per share, compared with $1.7 million or $0.27 per share for the three months ended March 31, 2020. First quarter 2021 earnings represented an annualized return on average assets (“ROAA”) of 0.86% and an annualized return on average equity (“ROAE”) of 8.79%, compared to 0.94% and 8.23%, respectively, for the same period last year.
“We are pleased with our results for the first quarter 2021, despite the margin compression that continues to impact earnings as the Federal Reserve maintains its accommodative, near-zero interest rate policy. While this continues to be a challenging time for us all, we have continued, along with other community banks around us, to lead the way in administering the Small Business Administration Paycheck Protection Program (“SBA-PPP”). To date our bank alone has processed over 2,800 SBA-PPP applications for approximately $125.0 million in funding which helped to preserve thousands of jobs throughout our communities. Also, many of these SBA-PPP loans were to customers who were new to Skyline. This has helped us to continue to grow our customer base in 2021 as we did in 2020. We continue to believe we are well positioned for growth and success in the future despite the continued short-term impacts of COVID-19,” stated Blake Edwards, President & CEO.
Highlights
| ● | Net income in the first quarter of 2021 reflected fees earned from SBA-PPP loans originated totaling $711 thousand, as well as a year-over-year decrease in interest expense on deposits of $144 thousand, and a decrease in loan loss provision of $160 thousand. First quarter 2021 noninterest expenses also increased by $356 thousand from first quarter 2020 primarily due to additional overhead cost from branch expansions in 2020. |
|---|---|
| ● | Net interest margin (“NIM”) was 3.70% for the first quarter 2021, compared to 3.95% in the fourth quarter of 2020, and 4.28% in the first quarter of 2020. The continued NIM compression is a reflection of the exceptionally low interest rate environment as well as competitive pressure on loan rates. |
| --- | --- |
| ● | Net loans were $692.6 million at March 31, 2021, up 5.07% when compared to December 31, 2020 and up 20.89% compared to March 31, 2020. The year over year increase primarily reflects the addition of $118.1 million in originated SBA-PPP loans, as well as net organic growth of $48.8 million. |
| --- | --- |
| ● | Total deposits were $807.3 million at March 31, 2021, an increase of $51.8 million from $755.5 million at December 31, 2020, and an increase of $186.0 million from $621.3 million at March 31, 2020. The increase reflects core deposit growth (noninterest and interest-bearing demand, savings and money market accounts) primarily attributed to funds related to the SBA-PPP loan program, government economic stimulus funds, as well as growth in our expanding markets. |
| --- | --- |
| ● | Total stockholders’ equity was $84.7 million at March 31, 2021 compared to $81.5 million at March 31, 2020. Book value per share rose to $14.00 per share from $13.43 for the same period last year. |
| --- | --- |
| ● | In January 2021, the Company’s board of directors authorized the extension of the share repurchase program through January 19, 2023. The Company repurchased 10,000 shares during the first quarter of 2021 and expects to continue to repurchase shares as conditions are deemed favorable. |
| --- | --- |
Coronavirus (COVID-19) Response
| ● | The Bank has shifted its branch lobby operations over the past year in accordance with government mandates and by taking case count data into consideration. In the first quarter of 2021, the Bank reopened its lobby doors in addition to continuing to serve its customers through drive-thru and online banking services. |
|---|---|
| ● | The Bank began receiving requests for loan deferments on March 23, 2020 and as of March 31, 2021, 10 loans with total outstanding balances of $3.3 million remained in deferment status. |
| --- | --- |
| ● | The Bank participated in the SBA-PPP and originated loans totaling $81.9 million during the year ended December 31, 2020, and has originated an additional $36.2 million during the first quarter of 2021. Gross SBA-PPP loans totaling $75.2 million with net deferred fees of $3.6 million remain on the balance sheet at March 31, 2021. Contractual interest earned on SBA-PPP loans totaled $153 thousand, while net fees recognized totaled $711 thousand for the first quarter of 2021. |
| --- | --- |
| ● | The Bank has received approval on approximately $45.8 million in funding to date in 2021 on the second round of the SBA-PPP loan program, which includes the $36.2 million originated in the first quarter of 2021. |
| --- | --- |
Balance Sheet Review
Total assets increased by $51.4 million, or 6.01%, to $906.8 million at March 31, 2021 from $855.4 million at December 31, 2020, and increased by $190.3 million, or 26.57% from $716.5 million at March 31, 2020. Net loans increased during the first quarter of 2021 by $33.4 million as a result of newly originated SBA-PPP loans of $36.2 million less paydowns of $14.0 million from the 2020 SBA-PPP loan program, and organic growth of $12.9 million. Investment securities increased by $56.1 million and cash and cash equivalent balances decreased by $39.5 million during the quarter as the company invested funds received from SBA-PPP forgiveness into higher yielding assets.
Asset quality has remained strong with a ratio of nonperforming loans to total loans of 0.41% at March 31, 2021 compared to 0.72% at December 31, 2020. The allowance for loan losses to total loans was 0.72% (approximately 0.81%, excluding guaranteed SBA-PPP loans) at March 31, 2021. Total nonperforming loans were $2.9 million at March 31, 2021 compared to $4.8 million at December 31, 2020. As of March 31, 2021, 10 loans were in payment deferral status with a total outstanding balance of $3.3 million.
Total deposits increased by $51.8 million, or 6.85%, to $807.3 million at March 31, 2021 from $755.5 million at December 31, 2020, and increased by $186.0 million, or 29.93% compared to $621.3 million at March 31, 2020. The increases in deposit balances can be attributed to the Bank’s participation in the SBA-PPP program, economic stimulus payments, as well as branch expansion into new markets and growth in our existing locations. Total increases for the first quarter of 2021 included a $29.8 million increase in noninterest bearing deposits, while interest bearing deposits increased by $21.8 million over the same time period. The increase in interest bearing deposits was due to a $11.6 million increase in money markets, a $1.5 million increase in interest-bearing demand deposits, a $10.4 million increase in saving accounts, which was offset by a $1.6 million decrease in time deposits.
Stockholders’ equity decreased from $85.1 million at December 31, 2020 to $84.7 million at March 31, 2021, and increased by $3.2 million, or 3.96%, from $81.5 million at March 31, 2020. The first quarter 2021 earnings of $1.8 million were offset by dividend payments of $785 thousand, stock repurchases of $109 thousand, and a $1.4 million increase in accumulated other comprehensive losses due to unrealized losses on investment securities. Book value decreased from $14.08 per share at December 31, 2020 to $14.00 per share at March 31, 2021.
First Quarter 2021 Income Statement Review
Total interest income was $8.1 million for the quarter ended March 31, 2021 compared to $7.7 million for the quarter ended March 31, 2020, representing an increase of $314 thousand. Interest income on loans increased by $334 thousand from March 31, 2020 to March 31, 2021. The increase in the quarterly comparison was primarily attributed to SBA-PPP fees accreted into interest income during the first quarter of 2021 of $711 thousand. There remains $3.6 million in SBA-PPP fees to be accreted into income as of March 31, 2021. Accretion of purchased loan discounts increased interest income by $197 thousand in the first quarter of 2021 compared to $446 thousand in the first quarter of 2020, representing a decrease of $249 thousand. Interest earned on investments increased by $79 thousand from March 31, 2020 to March 31, 2021. The Bank strategically increased its investment portfolio during the quarter ended March 31, 2021 to help offset the historically low short-term interest rates being paid on overnight funds.
Interest expense on deposits decreased by $144 thousand for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020. This decrease is a reflection of the bank’s lowering of interest rates paid on deposits throughout 2020 as well as further reductions early in the first quarter of 2021. Amortization of premiums on acquired time deposits, which reduces interest expense, totaled $35 thousand in the first quarter of 2021, compared to $60 thousand in the first quarter of 2020, representing a decrease of $25 thousand.
The provision for loan losses was $162 thousand for the quarter ended March 31, 2021, compared to $322 thousand for the quarter ended March 31, 2020. During the first quarter of 2021, Parkway recorded $11 thousand in net charge-offs compared to $37 thousand in net recoveries for the first quarter of 2020. The reserve for loan losses at March 31, 2021 was approximately 0.72% of total loans, compared to 0.74% at March 31, 2020. Management’s estimate of probable credit losses inherent in the acquired loan portfolio from Cardinal Bankshares Corporation and Great State Bank was reflected as a purchase discount which will continue to be accreted into income over the remaining life of the acquired loans. As of March 31, 2021, the remaining unaccreted discount on the acquired loan portfolios totaled $1.8 million. This remaining discount can be used for credit losses if a loss occurs on individual loans in the purchased portfolios.
Total noninterest income was $1.4 million in the first quarter of 2021 compared to $1.5 million in the first quarter of 2020. The majority of the decrease was due to nonrecurring gains realized on the sale of investments during the first quarter of 2020 of $212 thousand. This decrease was partially offset by an increase in mortgage origination fees of $180 thousand in the quarter-to-quarter comparison. Service charges on deposit accounts decreased by $125 thousand while other service charges and fees increased by $113 thousand in the quarter-to-quarter comparison. The reduction in deposit account-based service charges is attributed to the economic stimulus payments received during the first quarter of 2021. Other service charges and fees have increased as consumer spending trends have increased from the same period last year.
Total noninterest expenses increased by $356 thousand for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 primarily due to employee and branch costs associated with recent branch expansion in North Carolina that occurred in 2020. Salary and benefit costs increased by $86 thousand, while occupancy and equipment expenses increased by $131 thousand. Data processing expenses also increased by $80 thousand in the quarter-to-quarter comparison, due mainly to the addition of new branch facilities. Amortization of core deposit intangibles decreased by $29 thousand in the quarter-to-quarter comparison.
In total, income before taxes totaled $2.3 million or $0.38 per share for the quarter ended March 31, 2021 compared to $2.1 million, or $0.34 per share for the quarter ended March 31, 2020. Income tax expense increased by $42 thousand in the quarter-to-quarter comparison, totaling $460 thousand for the quarter ended March 31, 2021 compared to $418 thousand for the quarter ended March 31, 2020. Net income for the quarter ended March 31, 2021 totaled $1.8 million or $0.31 per share, compared to $1.7 million, or $0.27 per share for the quarter ended March 31, 2020.
Forward-looking statements
This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934 as amended. These include statements as to expectations regarding future financial performance and any other statements regarding future results or expectations. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by the use of words such as "believe," "expect," "intend," "anticipate," "estimate," or "project" or similar expressions. Our ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the combined company and its subsidiaries include, but are not limited to: changes in interest rates, general economic conditions; the effects of the COVID-19 pandemic, including the Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions; the effect of changes in banking, tax and other laws and regulations and interpretations or guidance thereunder; monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality and composition of the loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in the combined company’s market area; the implementation of new technologies; the ability to develop and maintain secure and reliable electronic systems; and accounting principles, policies, and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or clarify these forward‐looking statements, whether as a result of new information, future events or otherwise.
(See Attached Financial Statements for quarter ending March 31, 2021)
Parkway Acquisition Corp.
Condensed Consolidated Balance Sheets
March 31, 2021; December 31, 2020; March 31, 2020
| March 31, | December 31, | March 31, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands except share amounts) | 2021 | 2020 | 2020 | ||||||
| (Unaudited) | (Audited) | (Unaudited) | |||||||
| Assets | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Cash and due from banks | $ | 10,728 | $ | 10,009 | $ | 12,704 | |||
| Interest-bearing deposits with banks | 44,760 | 84,863 | 36,176 | ||||||
| Federal funds sold | 751 | 817 | 204 | ||||||
| Investment securities available for sale | 89,557 | 33,507 | 29,170 | ||||||
| Restricted equity securities | 2,209 | 2,416 | 2,416 | ||||||
| Loans | 697,685 | 664,095 | 577,191 | ||||||
| Allowance for loan losses | (5,051 | ) | (4,900 | ) | (4,252 | ) | |||
| Net loans | 692,634 | 659,195 | 572,939 | ||||||
| Cash value of life insurance | 18,412 | 18,304 | 17,963 | ||||||
| Properties and equipment, net | 26,691 | 26,591 | 25,950 | ||||||
| Accrued interest receivable | 2,412 | 2,355 | 1,936 | ||||||
| Core deposit intangible | 2,195 | 2,359 | 2,877 | ||||||
| Goodwill | 3,257 | 3,257 | 3,257 | ||||||
| Deferred tax assets, net | 1,828 | 1,019 | 970 | ||||||
| Other assets | 11,391 | 10,695 | 9,892 | ||||||
| Total assets | $ | 906,825 | $ | 855,387 | $ | 716,454 | |||
| Liabilities | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Deposits | |||||||||
| Noninterest-bearing | $ | 261,734 | $ | 231,852 | $ | 172,533 | |||
| Interest-bearing | 545,526 | 523,676 | 448,772 | ||||||
| Total deposits | 807,260 | 755,528 | 621,305 | ||||||
| FHLB advances | 10,000 | 10,000 | 10,000 | ||||||
| Accrued interest payable | 148 | 124 | 204 | ||||||
| Other liabilities | 4,720 | 4,629 | 3,474 | ||||||
| Total liabilities | 822,128 | 770,281 | 634,983 | ||||||
| Stockholders’ Equity | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Common stock and surplus | 39,631 | 39,740 | 39,952 | ||||||
| Retained earnings | 46,949 | 45,887 | 42,482 | ||||||
| Accumulated other comprehensive loss | (1,883 | ) | (521 | ) | (963 | ) | |||
| Total stockholders’ equity | 84,697 | 85,106 | 81,471 | ||||||
| Total liabilities and stockholders’ equity | $ | 906,825 | $ | 855,387 | $ | 716,454 | |||
| Book value per share | $ | 14.00 | $ | 14.08 | $ | 13.43 | |||
| Tangible book value per share | $ | 13.10 | $ | 13.15 | $ | 12.42 |
Asset Quality Indicators
| Nonperforming assets to total assets | 0.32 | % | 0.56 | % | 0.65 | % |
|---|---|---|---|---|---|---|
| Nonperforming loans to total loans | 0.41 | % | 0.72 | % | 0.81 | % |
| Allowance for loan losses to loans at end of period | 0.72 | % | 0.74 | % | 0.74 | % |
| Allowance for loan losses to nonperforming loans | 175.26 | % | 102.02 | % | 90.87 | % |
Parkway Acquisition Corp.
Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2021 and 2020
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31, | ||||
| (dollars in thousands except share amounts) | 2021 | 2020 | ||
| (Unaudited) | (Unaudited) | |||
| Interest income | ****** | ****** | ****** | ****** |
| Loans and fees on loans | $ | 7,753 | $ | 7,419 |
| Interest-bearing deposits in banks | 37 | 127 | ||
| Federal funds sold | - | 3 | ||
| Interest on securities | 250 | 171 | ||
| Dividends | 12 | 18 | ||
| 8,052 | 7,738 | |||
| Interest expense | ****** | ****** | ****** | ****** |
| Deposits | 689 | 833 | ||
| Interest on borrowings | 20 | 21 | ||
| 709 | 854 | |||
| Net interest income | 7,343 | 6,884 | ||
| Provision for loan losses | 162 | 322 | ||
| Net interest income after provision for loan losses | 7,181 | 6,562 | ||
| Noninterest income | ****** | ****** | ****** | ****** |
| Service charges on deposit accounts | 296 | 421 | ||
| Other service charges and fees | 606 | 493 | ||
| Net realized gains (losses) on securities | - | 212 | ||
| Mortgage origination fees | 309 | 129 | ||
| Increase in cash value of life insurance | 108 | 108 | ||
| Other income | 92 | 98 | ||
| 1,411 | 1,461 | |||
| Noninterest expenses | ****** | ****** | ****** | ****** |
| Salaries and employee benefits | 3,555 | 3,469 | ||
| Occupancy and equipment | 914 | 783 | ||
| Data processing expense | 496 | 416 | ||
| FDIC Assessments | 77 | 15 | ||
| Advertising | 110 | 106 | ||
| Bank franchise tax | 126 | 110 | ||
| Director fees | 60 | 70 | ||
| Professional fees | 187 | 142 | ||
| Telephone expense | 105 | 84 | ||
| Core deposit intangible amortization | 164 | 193 | ||
| Other expense | 491 | 541 | ||
| 6,285 | 5,929 | |||
| Net income before income taxes | 2,307 | 2,094 | ||
| Income tax expense | 460 | 418 | ||
| Net income | $ | 1,847 | $ | 1,676 |
| Net income per share | $ | 0.31 | $ | 0.27 |
| Weighted average shares outstanding | 6,043,269 | 6,121,616 | ||
| Dividends declared per share | $ | 0.13 | $ | 0.13 |