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): August 6, 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 August 6, 2021, Parkway Acquisition Corp. (the “Company”) issued a press release reporting its financial results for the period ended June 30, 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 August 6, 2021 announcing financial results for the period ending June 30, 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.<br><br> <br>(Registrant) | ||
|---|---|---|
| Date: August 6, 2021 | By: | /s/ Blake M. Edwards |
| Blake M. Edwards<br><br> <br>President and Chief Executive Officer |
ex_272904.htm
Exhibit 99.1
Parkway Acquisition Corp. Announces Second 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, August 6, 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 second quarter 2021 earnings.
Parkway recorded net income of $2.3 million, or $0.38 per share, for the quarter ended June 30, 2021 compared to net income of $1.1 million, or $0.18 per share, for the same period in 2020. For the six months ended June 30, 2021, net income was $4.1 million, or $0.69 per share, compared to net income of $2.8 million, or $0.46 per share, for the six months ended June 30, 2020.
President and CEO Blake Edwards stated, “Our second quarter and first half earnings increased despite the continued pressure on net interest margin from historically low interest rates and increasingly competitive loan pricing. Solid organic loan growth along with decreases in interest expense on deposits led to higher net interest income while we continued to manage operating expenses with only modest increases from recent branching activities. Our new branches in North Carolina have exceeded expectations despite the fact they were opened during a global pandemic and we are extremely pleased with the way the Skyline brand has been received in these communities. In addition to our strong organic loan growth, we were also able to close approximately 1,670 SBA-PPP loans funding $46.6 million during the first half of 2021, and our team remains committed to our customers in helping them to obtain forgiveness through the program.”
Highlights
| ● | Net income was $2.3 million, or $0.38 per share, in the second quarter of 2021, compared to $1.1 million, or $0.18 per share, in the second quarter of 2020. |
|---|---|
| ● | Net interest margin (“NIM”) was 3.69% for the second quarter of 2021, compared to 3.70% in the first quarter of 2021, and 3.95% in the second quarter of 2020. |
| --- | --- |
| ● | Total assets increased $152.7 million, or 19.23%, to $946.9 million at June 30, 2021 from $794.2 million a year earlier. |
| --- | --- |
| ● | Net loans increased $46.1 million, or 7.14%, to $692.0 million at June 30, 2021, from $645.9 million a year earlier. |
| --- | --- |
| ● | Total deposits increased $155.1 million, or 22.44%, to $846.3 million at June 30, 2021 from $691.2 million a year earlier. |
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| ● | Return on average assets increased to 0.99% for the quarter ended June 30, 2021, from 0.58% for the quarter ended June 30, 2020. |
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| ● | Return on average equity increased to 10.74% for the quarter ended June 30, 2021, from 5.36% for the quarter ended June 30, 2020. |
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| ● | The Company repurchased 35,000 shares through the share repurchase program during the second quarter of 2021. |
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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 June 30, 2021, four loans with total outstanding balances of $2.8 million remained in deferment status. |
| --- | --- |
| ● | The Bank participated in the Small Business Administration Paycheck Protection Program (“SBA-PPP”) and gross SBA-PPP loans totaling $65.6 million with net deferred fees of $4.2 million remain on the balance sheet as of June 30, 2021. Contractual interest earned on SBA-PPP loans totaled $183 thousand in the second quarter of 2021, while net fees recognized totaled $727 thousand in the second quarter of 2021. |
| --- | --- |
Second Quarter, First Half 2021 Income Statement Review
Net interest income after provision for loan losses in the second quarter of 2021 was $7.7 million compared to $6.4 million in the second quarter of 2020, reflecting a provision for loan losses of $195 thousand in the 2021 period and a $414 thousand provision in the second quarter of 2020. Total interest income was $8.5 million in the second quarter of 2021 compared to $7.7 million for the same period last year. Interest income on loans increased in the quarterly comparison primarily due to organic loan growth and SBA-PPP related interest and fees. Interest income on securities increased by $211 thousand in the quarterly comparison, as a result of the $69.9 million increase in the securities portfolio from June 30, 2020 to June 30, 2021.
The Company successfully reduced interest expense on deposits by $215 thousand, or 26.00%, in the quarterly comparison, reflecting continued rate reductions in deposit offerings. Lower-cost core deposits (demand deposits, savings, and money market accounts) grew by $31.2 million or 5.08% during the second quarter of 2021. The growth in core deposits can be attributed to SBA-PPP funding and government stimulus programs, in addition to organic growth in our current markets.
For the first half of 2021, net interest income after provision for loan losses was $14.9 million compared to $13.0 million for the first half of 2020. Interest income increased by $1.2 million, primarily due to an increase in loan interest income of $974 thousand, and a $290 thousand increase from the securities portfolio during the first half of 2021, compared to the first half of 2020. Interest expense on deposits decreased by $359 thousand for the six-months ended June 30, 2021 compared to the same period last year. As previously discussed, this is a reflection of the reduced rates for interest bearing demand deposits, time deposits, and savings products.
Total noninterest income was $1.6 million in the second quarter of 2021 compared to $1.2 million in the second quarter of 2020. The increase was primarily a result of an increase in service charges and fees of $205 thousand and a one-time lease termination fee recorded in other income for the second quarter of 2021 totaling $200 thousand. For the first six months of 2021, noninterest income increased by $400 thousand compared to the same period last year. The increase was mainly due to an increase in mortgage origination income of $205 thousand and an increase in service charges and fees of $193 thousand. During the first half of 2020, there were realized gains on securities of $212 thousand. During the first six months of 2021, while there were no realized gains recognized, the Company had a one-time lease termination fee of $200 thousand.
Total noninterest expenses increased by $198 thousand for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020, primarily due to employee and branch costs associated with branch expansion in North Carolina that occurred in 2020. Salary and benefit costs increased by $20 thousand, while occupancy and equipment expenses increased by $100 thousand. Professional fees increased by $56 thousand in the quarter-to-quarter comparison. For the six-month period ended June 30, 2021, total noninterest expenses increased by $554 thousand compared to the same period in 2020, primarily due to employee and branch costs associated with branch expansion. Salary and benefit cost increased by $106 thousand, occupancy and equipment expenses increased by $231 thousand, and data processing expenses increased by $83 thousand from the first six months of 2020 to 2021.
Income tax expense increased by $334 thousand in the quarter-to-quarter comparison, and $376 thousand in the six-month period comparisons. The increase was primarily due to an increase in net income before taxes of $1.5 million in the quarterly comparison, and a $1.8 million increase in the six-month comparison.
Balance Sheet Review
Total assets increased in the second quarter of 2021 by $40.1 million, or 4.42%, to $946.9 million at June 30, 2021 from $906.8 million at March 31, 2021, and increased by $91.5 million, or 10.70%, from $855.4 million at December 31, 2020. The increase in total assets during the quarter can be primarily attributed to the $39.1 million increase in deposits.
Total loans decreased during the second quarter by $306 thousand, or 0.04%, to $697.4 million at June 30, 2021 from $697.7 million at March 31, 2021, and increased by $33.3 million, or 5.01%, compared to $664.1 million at December 31, 2020. SBA-PPP loans decreased by $10.2 million during the second quarter 2021; however, this decrease was offset by higher yielding organic loan growth of $10.7 million during the quarter. Gross loans for the second quarter of 2021 included $65.6 million in PPP loans, and net deferred fees of $4.2 million.
Asset quality has remained strong, with a ratio of nonperforming loans to total loans of 0.29% at June 30, 2021 compared to 0.73% at June 30, 2020. The allowance for loan losses at June 30, 2021 was approximately 0.77% of total loans, compared to 0.72% at June 30, 2020. The allowance ratio excluding $61.5 million of PPP loans would have been 0.84% at June 30, 2021. Management’s estimate of probable credit losses inherent in the acquired Cardinal Bankshares Corporation and Great State Bank loan portfolios was reflected as a purchase discount which will continue to be accreted into income over the remaining life of the acquired loans. As of June 30, 2021, the remaining unaccreted discount on the acquired loan portfolios totaled $1.4 million.
Investment securities increased by $13.3 million during the second quarter to $102.9 million at June 30, 2021 from $89.6 million at March 31, 2021, and increased by $69.4 million from $33.5 million at December 31, 2020. The increase in the second quarter of 2021 was the result of $14.4 million in purchases and unrealized gains of $588 thousand, primarily offset by paydowns of $1.4 million and maturities of $150 thousand.
Total deposits increased in the second quarter of 2021 by $39.1 million, or 4.84%, to $846.3 million at June 30, 2021 from $807.3 million at March 31, 2021, and increased $90.8 million, or 12.02%, compared to $755.5 million at December 31, 2020. Total deposits increased by $155.1 million, or 22.44%, from June 30, 2020 to June 30, 2021. The increases in deposit balances came as a result of the Bank’s participation in the SBA-PPP program, government stimulus programs, branch expansion into new markets, and growth in our existing locations. Total increases for the second quarter of 2021 included a $12.9 million increase in noninterest bearing deposits, while interest bearing deposits increased by $26.2 million over the same time period. The increase in interest bearing deposits was due to an $11.4 million increase in interest-bearing demand deposits, a $3.7 million increase in money markets, a $3.2 million increase in saving accounts, and a $7.8 million increase in time deposits.
Stockholders’ equity increased by $2.4 million, or 2.78%, to $87.1 million at June 30, 2021 from $84.7 million three months earlier, and increased $1.9 million, or 2.28%, from $85.1 million at December 31, 2020. The increase during the quarter was due to earnings of $2.3 million and a $464 thousand net change in unrealized gains during the quarter, offset by stock repurchases of $427 thousand. Book value increased from $14.08 per share at December 31, 2020, and $14.00 per share at March 31, 2021, to $14.47 per share at June 30, 2021.
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; accounting principles, policies, and guidelines; and other factors identified in Item 1A, “Risk Factors,” in the Company’s Annual Report on 10-K for the year ended December 31, 2020. 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 June 30, 2021)
Parkway Acquisition Corp.
Condensed Consolidated Balance Sheets
June 30, 2021; March 31, 2021; December 31, 2020; June 30, 2020
| June 30, | March 31, | December 31, | June 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands except share amounts) | 2021 | 2021 | 2020 | 2020 | ||||||||
| (Unaudited) | (Unaudited) | (Audited) | (Unaudited) | |||||||||
| Assets | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Cash and due from banks | $ | 11,049 | $ | 10,728 | $ | 10,009 | $ | 11,968 | ||||
| Interest-bearing deposits with banks | 70,520 | 44,760 | 84,863 | 36,835 | ||||||||
| Federal funds sold | 745 | 751 | 817 | 236 | ||||||||
| Investment securities available for sale | 102,895 | 89,557 | 33,507 | 33,006 | ||||||||
| Restricted equity securities | 2,209 | 2,209 | 2,416 | 2,416 | ||||||||
| Loans | 697,379 | 697,685 | 664,095 | 650,599 | ||||||||
| Allowance for loan losses | (5,342 | ) | (5,051 | ) | (4,900 | ) | (4,654 | ) | ||||
| Net loans | 692,037 | 692,634 | 659,195 | 645,945 | ||||||||
| Cash value of life insurance | 18,520 | 18,412 | 18,304 | 18,071 | ||||||||
| Properties and equipment, net | 28,150 | 26,691 | 26,591 | 26,074 | ||||||||
| Accrued interest receivable | 2,601 | 2,412 | 2,355 | 2,576 | ||||||||
| Core deposit intangible | 2,032 | 2,195 | 2,359 | 2,685 | ||||||||
| Goodwill | 3,257 | 3,257 | 3,257 | 3,257 | ||||||||
| Deferred tax assets, net | 1,783 | 1,828 | 1,019 | 1,588 | ||||||||
| Other assets | 11,143 | 11,391 | 10,695 | 9,531 | ||||||||
| Total assets | $ | 946,941 | $ | 906,825 | $ | 855,387 | $ | 794,188 | ||||
| Liabilities | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Deposits | ||||||||||||
| Noninterest-bearing | $ | 274,663 | $ | 261,734 | $ | 231,852 | $ | 219,845 | ||||
| Interest-bearing | 571,685 | 545,526 | 523,676 | 471,393 | ||||||||
| Total deposits | 846,348 | 807,260 | 755,528 | 691,238 | ||||||||
| Borrowings | 10,000 | 10,000 | 10,000 | 15,375 | ||||||||
| Accrued interest payable | 88 | 148 | 124 | 126 | ||||||||
| Other liabilities | 3,455 | 4,720 | 4,629 | 4,346 | ||||||||
| Total liabilities | 859,891 | 822,128 | 770,281 | 711,085 | ||||||||
| Stockholders’ Equity | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Common stock and surplus | 39,218 | 39,631 | 39,740 | 39,885 | ||||||||
| Retained earnings | 49,251 | 46,949 | 45,887 | 43,579 | ||||||||
| Accumulated other comprehensive loss | (1,419 | ) | (1,883 | ) | (521 | ) | (361 | ) | ||||
| Total stockholders’ equity | 87,050 | 84,697 | 85,106 | 83,103 | ||||||||
| Total liabilities and stockholders’ equity | $ | 946,941 | $ | 906,825 | $ | 855,387 | $ | 794,188 | ||||
| Book value per share | $ | 14.47 | $ | 14.00 | $ | 14.08 | $ | 13.71 | ||||
| Tangible book value per share | $ | 13.59 | $ | 13.10 | $ | 13.15 | $ | 12.73 | ||||
| Asset Quality Indicators | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Nonperforming assets to total assets | 0.21 | % | 0.32 | % | 0.56 | % | 0.60 | % | ||||
| Nonperforming loans to total loans | 0.29 | % | 0.41 | % | 0.72 | % | 0.73 | % | ||||
| Allowance for loan losses to total loans | 0.77 | % | 0.72 | % | 0.74 | % | 0.72 | % | ||||
| Allowance for loan losses to nonperforming loans | 268.17 | % | 175.26 | % | 102.02 | % | 97.65 | % |
Parkway Acquisition Corp.
Condensed Consolidated Statement of Operations
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||
| (dollars in thousands except share amounts) | 2021 | 2021 | 2020 | 2021 | 2020 | |||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
| Interest income | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Loans and fees on loans | $ | 8,080 | $ | 7,753 | $ | 7,440 | $ | 15,833 | $ | 14,859 |
| Interest-bearing deposits in banks | 29 | 37 | 26 | 66 | 153 | |||||
| Federal funds sold | - | - | - | - | 3 | |||||
| Interest on securities | 366 | 250 | 155 | 616 | 326 | |||||
| Dividends | 46 | 12 | 50 | 58 | 68 | |||||
| 8,521 | 8,052 | 7,671 | 16,573 | 15,409 | ||||||
| Interest expense | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Deposits | 612 | 689 | 827 | 1,301 | 1,660 | |||||
| Interest on borrowings | 21 | 20 | 24 | 41 | 45 | |||||
| 633 | 709 | 851 | 1,342 | 1,705 | ||||||
| Net interest income | 7,888 | 7,343 | 6,820 | 15,231 | 13,704 | |||||
| Provision for loan losses | 195 | 162 | 414 | 357 | 736 | |||||
| Net interest income after provision for loan losses | 7,693 | 7,181 | 6,406 | 14,874 | 12,968 | |||||
| Noninterest income | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Service charges on deposit accounts | 331 | 296 | 269 | 627 | 690 | |||||
| Other service charges and fees | 660 | 606 | 517 | 1,266 | 1,010 | |||||
| Net realized gains (losses) on securities | - | - | - | - | 212 | |||||
| Mortgage origination fees | 277 | 309 | 252 | 586 | 381 | |||||
| Increase in cash value of life insurance | 108 | 108 | 108 | 216 | 216 | |||||
| Other income | 242 | 92 | 22 | 334 | 120 | |||||
| 1,618 | 1,411 | 1,168 | 3,029 | 2,629 | ||||||
| Noninterest expenses | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Salaries and employee benefits | 3,612 | 3,555 | 3,592 | 7,167 | 7,061 | |||||
| Occupancy and equipment | 875 | 914 | 775 | 1,789 | 1,558 | |||||
| Data processing expense | 470 | 496 | 467 | 966 | 883 | |||||
| FDIC Assessments | 76 | 77 | 60 | 153 | 75 | |||||
| Advertising | 191 | 110 | 184 | 301 | 290 | |||||
| Bank franchise tax | 127 | 126 | 122 | 253 | 232 | |||||
| Director fees | 87 | 60 | 61 | 147 | 131 | |||||
| Professional fees | 161 | 187 | 105 | 348 | 247 | |||||
| Telephone expense | 93 | 105 | 99 | 198 | 183 | |||||
| Core deposit intangible amortization | 163 | 164 | 192 | 327 | 385 | |||||
| Other expense | 562 | 491 | 562 | 1,053 | 1,103 | |||||
| 6,417 | 6,285 | 6,219 | 12,702 | 12,148 | ||||||
| Net income before income taxes | 2,894 | 2,307 | 1,355 | 5,201 | 3,449 | |||||
| Income tax expense | 592 | 460 | 258 | 1,052 | 676 | |||||
| Net income | $ | 2,302 | $ | 1,847 | $ | 1,097 | $ | 4,149 | $ | 2,773 |
| Net income per share | $ | 0.38 | $ | 0.31 | $ | 0.18 | $ | 0.69 | $ | 0.46 |
| Weighted average shares outstanding | 6,039,011 | 6,043,269 | 6,066,704 | 6,041,129 | 6,094,160 | |||||
| Dividends declared per share | $ | 0.00 | $ | 0.13 | $ | 0.00 | $ | 0.13 | $ | 0.13 |