Oct. 21. Aquesta Financial Holdings reported third-quarter unaudited net income rose 10.7 percent to $1.1 million (20 cents per share) compared to third quarter of 2019 net income of $1.0 million (19 cents per share).

Jim Engel, CEO, said despite the continued economic uncertainty caused by the COVID-19 pandemic, the Cornelius-based bank had another quarter of solid growth in earnings, core deposits and loans.

After aggressively participating in the Payroll Protection Program (“PPP”) earlier in the year, the bank is shift its focus to helping “1,052 PPP customers seek forgiveness of their loans as well as assisting all our customers in any way possible,” Engel said.

Highlights

—Total loan grew $163.4 million for the first nine months of 2020.  “Loan growth was primarily due to PPP loans as Aquesta focused resources on helping our communities,” Engel said.

—The increase in total loan portfolio size related to PPP loans is expected to be temporary and will decrease as the PPP loans are forgiven and/or paid down.

—Organic loan growth was strong in the third quarter of 2020 as the net increase in non-PPP loans was $21.1 million.

—Total core deposit growth of $100.0 million for the first nine months of 2020 (annualized 35.7 percent).  Core deposit growth was due to the large number of new deposit customers brought to Aquesta by PPP loans and organic growth.

Assets

Aquesta’s total assets were $685.0 million compared to $523.0 million at Dec. 31, 2019.  Total loans were $578.5 million at September 30, 2020 compared to $415.1 million at year-end 2019.  2020 loan growth was primarily driven by PPP loans, which totaled $146.3 million as of Sept. 30. Organic loan growth continues to improve as the net increase in non-PPP loans was $21.1 million in the third quarter of 2020.

Deposits

Core deposits were $473.6 million at September 30, 2020 compared to $373.6 million at December 31, 2019.

Asset quality

Nonperforming assets were at $7.9 million as of Sept. 30, compared to $1.2 million as of year-end 2019.   Aquesta had $7.9 million in non-accrual loans as of Sept. 30, compared to $1.2 million as of year-end 2019.  The increase of both nonperforming assets and non-accrual loans is primarily related to a small concentration of customers.  Aquesta held no Other Real Estate Owned at the end of the 3Q quarter 2020 or at the end of 2019.

Net interest income

Net interest income was $13.8 million for the nine months ended September 30, compared to $12.3 million for the nine months ended Sept. 30, 2019.  The 12.4 percent increase in net interest income is associated with an increased reliance on lower cost core deposits replacing higher cost funding.  Additionally, Aquesta was able to accrete $876,000 of PPP fees into interest income for PPP loans that were held during the quarter.  Aquesta deferred $3.2 million of PPP fee income which will be recognized in subsequent quarters as PPP loans are forgiven or paid down.

Provision for Loan Losses
The provision for loan losses was $1.5 million for the nine months ended Sept. 30, compared to $340,000 for the nine months ended Sept. 30, 2019.  The increase is due to the ongoing COVID-19 pandemic and management’s estimation of potential losses in the loan portfolio.