The National Capital Bank of Washington Reports Third Quarter Earnings


The National Capital Bank of Washington (NCB) reported net income of $1,050,000, or $3.67 per common share, for the three months ended September 30, 2020, compared to net income of $735,000 or $2.57 per share for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, NCB reported net income of $1,645,000, or $5.75 per share, compared to $2,057,000, or $7.21 for the nine months ended September 30, 2019. The current quarter results include the favorable after-tax impact of $327,000 for two related transactions. The Bank recognized a $619,000 gain on the sale of securities which is included in non-interest income, and partially offset by a loss of $168,000 on the termination of a swap used as an interest rate hedge and which is reported in non-interest expense. The third quarter results also reflect the Bank's continued aggressive response to the COVID-19 pandemic which included a significant increase in the Bank's allowance for loan loss. While non-performing loans to total loans remains very low at 0.03% and the annual charge-off rate for loans during the first nine months of 2020 was also low at 0.02% of average loans, the Bank has prudently built up its allowance for loan losses by $452,000 during the third quarter and by $1,694,000 during the first nine months of 2020. The adjustments were determined by performing an industry-sector analysis of the Bank's loan portfolio and providing additional reserve on those sectors most at risk. This sector analysis was further informed by an analysis of the loan modifications made by the Bank since the beginning of the pandemic, as allowed for under the CARES Act. Loans with payment deferments granted during the pandemic represented 13% of total loans while loans in current deferments at quarter-end represented 6% of total loans.

Total assets increased year-over-year to $592,501,000 at September 30, 2020 compared to $514,286,000 at September 30, 2019. Total loans of $439,852,000 at September 30, 2020 decreased during the quarter by $5.2 million but have increased from $357,869,000 the year before. Total deposits decreased during the quarter by $4.0 million to $508,309,000 at September 30, 2020 but have increased from $436,834,000 the year before. The year-over-year increase in loans was primarily a result of the Bank's active participation in the SBA-guaranteed Paycheck Protection Program (PPP) which resulted in new loans exceeding $63 million. The Bank collected $2.1 million of processing fees on these loans, which were deferred and are being recognized in income over the life of the loans; the Bank recognized $279,000 in interest income during the third quarter of 2020 and $531,000 for the nine months ending September 30, 2020. The Bank's net interest margin stabilized during the quarter after the negative impact of steadily declining interest rates in the last half of 2019 along with the dramatic decreases in interest rates during March of 2020. Net interest margin increased to 3.35% during the third quarter of 2020 compared to 3.19% in the second quarter of 2020 but remained somewhat below the net interest margin of 3.42% in the third quarter of 2019.

Total shareholders' equity increased to $52,398,000 at September 30, 2020 from $48,794,000 a year ago. The increase resulted from retained earnings for the past twelve months along with an increase in the market value of the Bank's investment portfolio due to declines in longer-term interest rates. For the nine-month period ended September 30, 2020 the return on average assets and return on average equity was 0.38% and 4.27%, respectively.

Richard B. (Randy) Anderson, Jr. President and Chief Executive Officer said, "Highlights during the third quarter included a more than 50% decrease in loans granted deferrals earlier in the pandemic, the meaningful gain on sale of securities facilitated by a well-timed purchase of municipal bonds early in the second quarter to take advantage of a spike in yields, and improvement in the net interest margin over the preceding quarter." Anderson continued, "Looking forward into the remainder of 2020 and early 2021 signals remain mixed regarding the pandemic's duration and impact on the economy. Accordingly, we will continue to hedge our activities with an eye towards monitoring asset quality and serving the needs of our communities through greater digital access and product offerings."

NCB also announced today that its Board of Directors has declared a dividend of $0.55 per share for shareholders of record as of November 16, 2020. The dividend payout of $157,331.35 on 286,057 shares is payable November 30, 2020.

The National Capital Bank of Washington was founded in 1889 and is Washington's Oldest Bank. NCB is headquartered on Capitol Hill with offices in the Friendship Heights community in Northwest D.C., the Courthouse/Clarendon community in Arlington, Virginia and the Fox Hill senior living community of Bethesda, Maryland. NCB also operates residential mortgage and commercial lending offices and a wealth management services division. NCB product and service offerings include personal and business deposit accounts, robust eBanking, sophisticated treasury management solutions, remote deposit capture and merchant processing – all delivered with top-rated personal service. NCB is well-positioned to serve all the banking needs of those in our communities. For more information about NCB, visit The Bank trades under the symbol NACB.

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