The Company’s provision for loan losses was $257,000 through nine months of 2020 representing a $106,000, or 70%, increase as compared to $151,000 for the same time period of 2019. The Company’s provision for loan losses for the nine months of 2020 includes the impact of qualitative adjustments to the Company’s allowance for loan losses required due to the COVID-19 pandemic. Provision for the third quarter of 2020 was $31,000 compared to $150,000 for the third quarter of 2019. The allowance for loan losses was $3,528,000 as of September 30, 2020, which represented 0.84% of total loans outstanding. In comparison, the allowance for loan losses was $3,472,000, or 0.88%, of total loans outstanding as of December 31, 2019.
Loans with deferred payments due to impacts of the pandemic totaled $2,794,000, or less than 1%, of the total loan portfolio as of September 30, 2020 compared to $35,663,000 as of June 30, 2020. These loans are principally comprised of loans that received short-term payment deferrals pursuant to guidance from the federal banking regulators and relief contained in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and there was no additional provision for loan losses for these loans during the third quarter. Non-performing loans to total loans increased slightly to 0.33% as of September 30, 2020 compared to 0.29% as of year-end 2019. Allowance coverage of non-performing loans as of September 30, 2020 decreased to 257% from 306% as of year-end 2019. Management views the allowance balance as of September 30, 2020 as being sufficient to offset potential future losses associated with problem loans.
Noninterest income through nine months of 2020 increased $438,000, or approximately 13%, to $3,846,000 from $3,408,000 for the same time period of 2019. This improvement was mainly driven by a $253,000 increase in fees generated from sales of mortgage loans. The Company also experienced a $94,000 increase in loan fees primarily associated with the origination of over $28,000,000 in Paycheck Protection Program loans authorized by the CARES Act and guaranteed by the Small Business Administration and a $90,000 increase in income derived from the Bank’s investment in Bankers Insurance, LLC.
Noninterest income for the third quarter of 2020 increased $167,000, or approximately 15%, to $1,307,000 from $1,140,000 for the third quarter of 2019 as mortgage loan fees increased by $133,000 or 77% and investment and insurance commissions increased by $34,000 or 26%.
Noninterest expense through nine months of 2020 increased $2,208,000, or approximately 18%, to $14,203,000 from $11,995,000 for the same time period of 2019. The increase is primarily attributed to $1,109,000 in merger related legal, accounting and investment banking fees. The Company also experienced a $597,000 increase in salaries and benefits and a $207,000 increase in furniture, equipment and occupancy expenses, primarily associated with strategic growth initiatives.
Noninterest expense for the third quarter of 2020 increased $887,000, or approximately 22%, to $4,962,000 from $4,075,000 for the third quarter of 2019 due primarily to $431,000 in merger related legal, accounting and investment banking fees.
Total assets as of September 30, 2020 were $573,746,000, up $73,216,000 or 15% from $500,530,000 as of December 31, 2019. The principal components of the Company’s assets as of September 30, 2020 were $420,720,000 in total loans, $44,828,000 in securities and $78,306,000 in cash and cash equivalents. During the first nine months of 2020, cash and cash equivalents increased $45,403,000 or 138% from $32,903,000 as of December 31, 2019 due mainly to an influx of deposits as discussed below. Total loans increased $27,200,000, or 7%, from $393,520,000 as of December 31, 2019, primarily due to the origination of over $28,000,000 in Paycheck Protection Program loans. None of these loans have been forgiven or started repayment as of September 30, 2020. Securities decreased $130,000, or less than 1%, from $44,958,000 as of December 31, 2019.
Total liabilities as of September 30, 2020 were $526,345,000, up $71,260,000 or 16% from $455,085,000 as of December 31, 2019. The growth of liabilities was driven by a $43,109,000, or 18%, increase in savings and NOW accounts and a $19,917,000, or 18%, increase in demand deposits since the prior year-end as a result of federal government stimulus in response to the pandemic, an overall “flight to safety” by depositors and relationships moved to the Bank as a result of branch closures in the Bank’s markets served by larger national financial institutions.
Total stockholders’ equity as of September 30, 2020 was $47,401,000 and consisted primarily of $43,324,000 in retained earnings. In comparison, as of December 31, 2019, total stockholders’ equity was $45,445,000. Both the Company and Bank remain “well capitalized” per all regulatory definitions.
In other news, the Company previously announced in a press release issued on November 2, 2020 that the merger between the Company and Virginia Bank was closed on October 30, 2020. The Company also previously announced on September 21, 2020, that it had completed a private placement of $8,000,000 in fixed-to-floating rate subordinated notes due 2030 (the “Notes”). The Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines. The proceeds from the sale of the Notes were utilized to fund a portion of the cash consideration paid by the Company in connection with its merger with Virginia Bank and to provide optionality for various growth opportunities and for general corporate purposes.
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