April 7. Cornelius-based Aquesta Financial reported sharply higher first quarter results. The parent company of Aquesta Bank had unaudited net income of $2.5 million (46 cents per share) compared to the first quarter of 2020 net income of $881,000 (16 cents per share).

Earnings grew at the rate of 186.5 percent in the first quarter of 2021 compared to the first quarter of 2020.

CEO Jim Engel said the bank is kicking off 2021 with a focus on assisting customers and communities as the COVID-19 pandemic continues to negatively impact the global economy.

Aquesta is again “aggressively participating” in the Paycheck Protection Program.

The bank funded 461 PPP loans totaling $68.5 million in the first quarter of 2021, in addition to 1,053 PPP  loans totaling $146.6 million funded during 2020.

“We are excited by this opportunity to serve and look forward to  continuing to provide superior service and value to our customers, communities and shareholders,” Engel said.

Key Highlights

Total loan growth of $22.1 million for the three months ended March 31, 2021 or 3.99 percent (annualized  16.0 percent). Loan growth was primarily due to PPP loans as Aquesta focused resources on helping our  communities. The increase in total loan portfolio size related to these PPP loans is expected to be temporary  and will decrease as the PPP loans are forgiven and/or paid down. However, gross non-PPP organic loan  production for the first quarter of 2021 was $25.6 million. This non-PPP production was offset by non-PPP  payoffs totaling approximately $20.8 million. 

Total core deposit growth of $91.5 million for the three months ended March 31, 2021 or 18.5 percent (annualized 74.0 percent). Core deposit growth was due to PPP related deposits as well as organic growth. No loans on deferral as of March 31, 2021. 

Earnings growth for the three months ended March 31, 2021 compared to the three months ended March 31,  2020 of $1.6 million or 186.5 percent. 

Solid Balance Sheet Growth 

At March 31, 2021, Aquesta’s total assets were $752.3 million compared to $680.2 million at December 31, 2020.  Total loans were $576.4 million at March 31, 2021 compared to $554.3 million at December 31, 2020. First quarter  2021 loan growth was primarily driven by PPP loans, which totaled $68.5 million as of March 31, 2021. Core deposits  were $585.8 million at March 31, 2021 compared to $494.3 million at December 31, 2020. 

Asset Quality 

Nonperforming assets were at $5.7 million as of March 31, 2021 compared to $6.1 million as of December 31, 2020. Aquesta had $5.3 million in non-accrual loans as of March 31, 2021 compared to $5.7 million as of December 31, 2020.  Aquesta held Other Real Estate Owned (i.e., “OREO” or foreclosed property) of $381,000 as of March 31, 2021  and December 31, 2020. 

Net Interest Income 

Net interest income was $6.1 million for the three months ended March 31, 2021 compared to $4.3 million for the three months ended March 31, 2020. This is an increase of $1.9 million or 44.4 percent. The 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 $1.3 million of PPP fees into interest income for PPP loans that were held, forgiven or paid off  during the first quarter of 2021.

Provision for Loan Losses 

The provision for loan losses was $207,000 for the three months ended March 31, 2021 compared to $325,000 for the three months ended March 31, 2020. The ratio of ALLL to total loans is 0.92 percent as of March 31, 2021.  The ratio of ALLL to total loans, excluding PPP loans, is 1.20 percent as of March 31, 2021. The ratio of ALLL to total  loans, excluding PPP loans and balances guaranteed by the SBA, is 1.47 percent as of March 31, 2021. 

Non Interest Income 

Non interest income was $1.3 million for the three months ended March 31, 2021 compared to $629,000 for the  three months ended March 31, 2020. This is an increase of $664,000 or 105.6 percent. The increase is largely  attributable to SBA loan sale income which totaled $690,000 and $165,000 as of March 31, 2021 and March  31, 2020, respectively. This is an increase of $525,000 or 318.1 percent. 

Non Interest Expense 

Non interest expense was $3.9 million for the three months ended March 31, 2021 compared to $3.4 million for the  three months ended March 31, 2020. Personnel expense was at $2.3 million as of March 31, 2021 compared to $2.1 million as of March 31, 2020. 

Occupancy expense increased by $55,000 for the three months ended March 31, 2021 compared to the three months ending March 31, 2020. The increase is due to the addition of the Mt. Pleasant, South Carolina branch in  January 2021. While the lease began in January 2021, the Mt. Pleasant branch is not scheduled to open until Summer  2021.