LENOIR, N.C., Nov. 14 /PRNewswire-FirstCall/ -- Parkway Bank (OTC Bulletin Board: PKWY) today reported results for the three- and nine-month periods ended September 30, 2008. For the third quarter ended September 30, 2008, the Company reported a net loss of $512,093, or $0.36 per diluted share, versus net income of $210,607, or $0.15 per diluted share, for the third quarter of 2007. For the nine months ended September 30, 2008, the net loss was $598,269, or $0.42 per share, versus net income of $724,185, or $0.50 per diluted share, for the year-ago period. The Company and its banking subsidiary remain well capitalized based on regulatory capital measures.
Lower revenues, a higher provision for loan losses and an increase in noninterest expense were all factors contributing to the net loss for the quarter. While noninterest income increased modestly, the contraction in the Bank's net interest margin, due in part to the Federal Reserve lowering interest rates, led to a 13% decline in net interest income. Additionally, the provision for loan losses, which was $1,088,144 in the third quarter of 2008 versus $91,400 in the year-ago quarter, increased as a result of higher delinquencies and greater uncertainties as to collateral valuations given the weakening economic environment. Finally, noninterest expenses increased 20%, largely due to expansion related costs, professional fees and other charges. The net loss for 2008's year-to-date period was generally from the same factors that led to the quarterly loss.
The Company's nonperforming assets, including nonaccrual loans and other real estate owned, was $7.4 million or 6.0% of assets, at September 30, 2008, versus $854,000, or 0.78% of assets, at September 30, 2007. Of this $7.4 million, approximately $6 million related to loans the Bank made through loan participations that were outside of our local market area and which have experienced dramatic declines in real estate values. Additionally, approximately $2 million of these nonaccruing loans are current in terms of the payment of interest and principal but were considered impaired due to uncertainties as to collateral value.
The allowance for loan losses was $2,154,275, or 2.33% of gross loans, as of September 30, 2008, versus $832,000, or 1.05% of gross loans, at the year-ago date. Although no assurances can be given that future periods will not require additional provisions for these credits, the Bank considered the allowance for loan losses to be adequate at September 30, 2008.
Parkway's total assets grew 15% from $109.3 million at September 30, 2007 to $125.1 million at September 30, 2008. Net loans outstanding rose 15% to $90.2 million at September 30, 2008 from $78.7 million at September 30, 2007, while deposits increased 18% to $110.3 million at September 30, 2008 from $93.1 million at September 30, 2007. At September 30, 2008, shareholders' equity was $13.5 million, representing an equity-to-assets ratio of 10.8%, while the Company's book value per share was $9.60. As of September 30, 2008, the Bank had a total capital ratio of 14.20%, versus a minimum regulatory requirement of 10.00% for "well capitalized" banks.
In commenting on the results, Parkway Bank President and CEO, Jim Sponenberg, noted, "We are operating in one of the most challenging economic environments our Nation has ever seen, and none of us are immune to those strains. The non-local market loans that comprise the majority of nonaccruing loans were originated at a time when there was little reason to expect the current credit and real estate crisis and were made in order to achieve greater diversity and to improve yields on our loan portfolio. We have since revised our lending policies to greatly restrict loans that are out of our local market area. We do have remaining commitments on some of these loans, which could lead to an increase in nonaccruing assets at the end of the year, though we do not expect the increase to be significant. Given these challenges, it is important to note that your Bank remains well capitalized, with higher capital ratios than other banks based in North Carolina. We will continue to monitor these credits very closely and to make every effort to resolve these issues."
Parkway Bank is a community bank operating three branches in Caldwell County, North Carolina. For more information about the Bank and our products and services, contact Parkway Bank at 828-758-1414, or visit http://www.parkwaybanknc.com/.
This release contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Bank. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Bank and on the information available to management at the time that these disclosures were prepared. These statements can be identified by the use of words like "expect," "anticipate," "estimate" and "believe," variations of these words and other similar expressions. Readers should not place undue reliance on forward- looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. The Bank undertakes no obligation to update any forward-looking statements.
