WASHINGTON, July 31, 2020 /PRNewswire/ -- The National Capital Bank of Washington (NCB) reported net income of $357,000, or $1.25 per common share, for the three months ended June 30, 2020, compared to net income of $646,000 or $2.26 per share for the quarter ended June 30, 2019. For the six months ended June 30, 2020, NCB reported net income of $594,000, or $2.08 per share, compared to $1,322,000, or $4.64 for the six months ended June 30, 2019. The 45% decrease in second quarter net income compared with the same quarter of 2019 is due primarily to 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 half of 2020 was also low at 0.03% of average loans, the Bank has prudently built up its allowance for loan losses by $658,000 during the second quarter and by $1,242,000 during the first half 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 during the second quarter 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 at quarter-end represented 13% of total loans with deferments of both principal and interest representing 8% of total loans.
Total assets increased year-over-year to $590,137,000 at June 30, 2020 compared to $485,477,000 at June 30, 2019. Total loans of $445,090,000 at June 30, 2020 increased during the quarter by $60.0 million and have increased from $351,716,000 the year before. Total deposits increased during the quarter by $59.9 million to $512,354,000 at June 30, 2020 compared to $408,355,000 the year before. The quarterly increases in both loans and deposits were a result of the Bank's active participation in the SBA-guaranteed Paycheck Protection Program (PPP) which resulted in new loans exceeding $61 million. The Bank's net interest margin remained under pressure during the quarter as a result of the 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 decreased to 3.19% during the second quarter of 2020 compared to 3.35% in the first quarter of 2020 and 3.66% in the second quarter of 2019.
Total shareholders' equity increased to $51,844,000 at June 30, 2020 from $47,361,000 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 recent declines in longer-term interest rates. For the six-month period ended June 30, 2020 the return on average assets and return on average equity was 0.21% and 2.34%, respectively.
Richard B. (Randy) Anderson, Jr. President and Chief Executive Officer said, "Second quarter activities were primarily focused on addressing the economic impact of the COVID-19 pandemic on our communities and completing the core operating system upgrade to the FIS Horizon platform, which began in October 2019 and was completed at the end of April 2020. These challenges which included an aggressive rollout of the PPP lending product and a virtual system conversion necessitated by virus related travel restrictions required a maximum effort by the Bank's entire staff. I am pleased and proud to report that both activities were completed successfully. NCB provided support to its business community as should be expected of a premier community bank and we are well positioned to provide a number of new product and service offerings including advanced eBanking and treasury management solutions, new payment options, better sales and relationship management and broader MIS reporting options going forward." Anderson continued "Management continues to be laser focused on monitoring and managing the impacts of the COVID-19 pandemic on our loan portfolio and has implemented a number of measures designed to identify and mitigate these risks. It was also considered prudent to continue building the allowance for loan losses even though the negative impact of the pandemic on asset quality has yet to be seen."
NCB also announced today that its Board of Directors has declared a dividend of $0.55 per share for shareholders of record as of August 14, 2020. The dividend payout of $157,331.35 on 286,057 shares is payable August 31, 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 www.nationalcapitalbank.com. The Bank trades under the symbol NACB.
Forward Looking Statements
This news release may contain certain forward-looking statements, such as statements of the Bank's plans, objectives, expectations, estimates and intentions. Forward-looking statements may be identified using words such as "expects," "subject," "will," "intends," "will be" or "would," These statements are subject to change based on various important factors (some of which are beyond the Bank's control) and actual results may differ materially. Accordingly, readers should not place undue reliance on any forward-looking statements (which reflect management's analysis of factors only as of the date of which they are given). These factors include general economic conditions, trends in interest rates, the ability of the Bank to effectively manage its growth and results of regulatory examinations, among other factors. The foregoing list of important factors is not exclusive.