Parkway Acquisition Corp. Announces Fourth Quarter 2018 Results

FLOYD, Va. and INDEPENDENCE, Va., Feb. 11, 2019 /PRNewswire/ — On February 11, 2019, Parkway Acquisition Corp. (“Parkway” or the “Company”) (OTC QX: PKKW) – the holding company for Skyline National Bank (“Skyline” or the “Bank”) – announced fourth quarter 2018 earnings.

As previously announced, Parkway acquired Great State Bank (“Great State”) on July 1, 2018.  As such, all information contained herein as of and for periods subsequent to July 1, 2018 reflects the combined operations of Parkway and Great State.

Results of Operations for the Three Months ended December 31, 2018 and 2017

Parkway recorded net income of $1.4 million, or $0.22 per share for the quarter ended December 31, 2018 compared to a net loss of $214 thousand, or $0.04 per share for the same period in 2017.  The loss in 2017 was due to a nonrecurring charge to income tax expense to reflect the impact of the Tax Cuts and Jobs Act which was signed into law on December 22, 2017.  The new legislation reduced tax rates effective January 1, 2018, resulting in a re-measurement of the Company’s deferred tax assets and liabilities.  The change in value of the Company’s deferred tax assets was recorded as an addition to current income tax expense of $1.4 million for the three-month period ended December 31, 2017.  Income tax expense related to ordinary operations totaled $431 thousand for the fourth quarter of 2018 compared to $522 thousand for the fourth quarter of 2017.  Net income before income taxes totaled $1.8 million or $0.29 per share for the quarter ended December 31, 2018 compared to $1.7 million or $0.35 per share for the same period in 2017.  The increase in pretax earnings of $73 thousand from the fourth quarter of 2017 to the fourth quarter of 2018 was due primarily to additional revenue from the merger with Great State which was completed on July 1, 2018.

Total interest income increased by $1.9 million for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017, while interest expense on deposits increased by $205 thousand over the same period.  The increase in interest income was attributable primarily to the merger with Great State which added approximately $95.1 million in loans to the Company’s earning assets.  Accretion of purchased loan discounts increased interest income by $482 thousand in the fourth quarter of 2018 compared to just $214 thousand in the fourth quarter of 2017, representing an increase of $268 thousand.  The increase came mainly as a result of the Great State merger. 

Interest expense on deposits increased by $205 thousand due to the addition of interest-bearing deposits from the Great State merger.  Amortization of premiums on acquired time deposits, which reduces interest expense, totaled $130 thousand in the fourth quarter of 2018, compared to just $36 thousand in the fourth quarter of 2017, representing an increase of $94 thousand.  The increase was again due to the Great State merger.

The provision for loan losses was $67 thousand for the quarter ended December 31, 2018, compared to a negative $16 thousand for the quarter ended December 31, 2017.  The reserve for loan losses at December 31, 2018 was approximately 0.65% of total loans, compared to 0.81% at December 31, 2017.  Management’s estimate of probable credit losses inherent in the acquired Great State loan portfolio was reflected as a purchase discount which will continue to be accreted into income over the remaining life of the acquired loans in addition to the previously acquired loan portfolio from the merger with Cardinal Bankshares Corporation.  As of December 31, 2018, the remaining unaccreted discount on the acquired loan portfolios totaled $5.0 million.

Total noninterest income was $1.2 million in the fourth quarter of 2018 compared to $1.3 million in the fourth quarter of 2017.  Noninterest income in the fourth quarter of 2017 included nonrecurring securities gains of $116 thousand and a gain on the disposal of fixed assets totaling $188 thousand.  Excluding these nonrecurring items in 2017, noninterest income increased by $194 thousand for the quarter ended December 31, 2018 compared to the same period last year.

Total noninterest expenses increased by $1.4 million for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017.  Salary and benefit costs increased by $589 thousand due to the increase in employees resulting from the Great State acquisition, combined with an overall increase in health insurance costs, as actual claims have exceeded both current year expected claims as well as prior year actual claims, and a year-end discretionary contribution to the Bank’s 401(k) plan.  Amortization of core deposit intangibles and other merger related expenses increased by a combined total of $471 thousand for the fourth quarter of 2018 as compared to the same quarter in 2017 due to the Great State acquisition. 

Income tax expense decreased by $1.5 million for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017, due mainly to the aforementioned $1.4 million charge to the value of our deferred tax assets in the fourth quarter of 2017. 

Results of Operations for the Years ended December 31, 2018 and 2017

For the year ended December 31, 2018, total interest income increased by $3.9 million compared to the year ended December 31, 2017.  The increase in interest income was attributable primarily to the merger with Great State as discussed above.  Accretion of purchased loan discounts increased interest income by $1.2 million in 2018 compared to $1.0 million in 2017, representing an increase of $195 thousand.

Interest expense on deposits increased by $394 thousand due to the addition of interest-bearing deposits from the Great State merger.  Amortization of premiums on acquired time deposits, which reduces interest expense, totaled $327 thousand for the year ended December 31, 2018, compared to $228 thousand for the year ended December 31, 2017.  Interest on borrowings increased by $33 thousand due to overnight borrowings which were accessed in the second and third quarters of 2018 along with FHLB Advances that were acquired as part of the Great State merger.

The provision for loan losses for the year ended December 31, 2018 was $325 thousand, compared to $217 thousand for the year ended December 31, 2017.  Asset quality has remained relatively consistent over the past year therefore the noted increase in loan loss provisions was due primarily to overall growth in the loan portfolio.

Noninterest income increased by $409 thousand in 2018 compared to 2017.  The increase was due to service-related income from the Company’s increased customer base following the merger with Great State as well as nonrecurring proceeds from life insurance contracts totaling $303 thousand in 2018.  Securities gains decreased by $237 thousand for the year ended December 31, 2018 compared to the same period last year as increases in interest rates led to decreases in the market value of the Bank’s investment securities portfolio.

Total noninterest expenses increased by $2.8 million for the year ended December 31, 2018, compared to the year ended December 31, 2017.  As noted above, the overall increase in expenses for the comparative periods was due primarily to the Great State merger.  Specifically, salaries and employee benefits increased by $1.5 million due to an increase in the total number of employees, and benefit costs discussed above.   Merger related expenses increased by $480 thousand in 2018 compared to 2017. 

In total, income before taxes increased by $958 thousand in 2018 compared to 2017.  Income tax expense decreased by $1.7 million due mainly to the aforementioned $1.4 million charge to the value of our deferred tax assets in 2017.  Net income for 2018 totaled $5.1 million or $0.91 per share, compared to $2.4 million, or $0.48 per share for 2017.   

Balance Sheet

Effective July 1, 2018 the Company completed its previously announced merger with Great State, pursuant to the Agreement and Plan of Merger, dated March 1, 2018.  In connection with the merger with Great State, the Company acquired $145.5 million in assets at fair value, including $95.1 million in loans.  The Company also assumed $133.6 million of liabilities at fair value, including $130.6 million of total deposits with a core deposit intangible asset recorded of $2.4 million, and goodwill of $3.8 million.

With the Great State merger, total assets increased by $132.9 million from December 31, 2017 to December 31, 2018.  Net loans increased by $111.6 million, federal funds sold increased by $11.2 million, and interest-bearing deposits in banks increased by $3.4 million

Total deposits increased by $113.4 million from December 31, 2017 to December 31, 2018 as a result of the merger.  Noninterest bearing deposits increased by $29.3 million from December 31, 2017 to December 31, 2018, while interest bearing deposits increased by $84.1 million over the same time period. 

Stockholders’ equity totaled $76.2 million at December 31, 2018 compared to $57.2 million at December 31, 2017. $15.5 million of the increase is due to the issuance of common stock in connection with the merger with Great State.  The remaining increase was due to earnings of $5.1 million, less a net change in accumulated other comprehensive losses totaling $456 thousand, and the payment of dividends of $1.1 million.  Book value increased from $11.39 per share at December 31, 2017 to $12.27 per share at December 31, 2018.  Skyline remains well capitalized with Common equity tier 1 capital, Tier 1 risk-based capital, Total risk based capital, and Tier 1 leverage ratios of 12.36%, 12.36%, 13.00%, and 10.09%, respectively, as of December 31, 2018.

President and CEO, Blake Edwards stated, “We are extremely pleased with the results of what was a very busy 2018 for Parkway.  Highlights from 2018 included the opening of a new full-service branch in West Jefferson, North Carolina, in April, followed by the completion of our merger with Great State Bank in July and the related information systems conversion in September.  We believe our hard work and success in 2018 has positioned us well to grow and prosper in 2019 and beyond.”

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 the benefits of or other expectations regarding the Great State merger, future financial performance, and any other statements …

Full story available on Benzinga.com

Positive Stocks
Positive Stocks Investor Awareness
About the Author
We Specialize in Covering MicroCap Stocks, Small Cap Stocks & Providing Small Cap Investor Relations / Investor Awareness - CEO Podcast & Video Cast, With Real Time Stock Alerts, Exclusive CEO interviews. Learn more with our Investing Tools, not just for the Small Cap Investor. www.positivestocks.com

Enjoy this blog? Please spread the word :)

%d bloggers like this: