Peoples Bancorp Announces First Quarter Earnings Results

NEWTON, NC / ACCESSWIRE / April 19, 2021 / Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), the parent company of Peoples Bank, reported first quarter earnings results with highlights as follows:

First quarter highlights:

  • Net earnings were $4.1 million or $0.71 basic and diluted net earnings per share for the three months ended March 31, 2021, as compared to $2.4 million or $0.40 basic and diluted net earnings per share for the same period one year ago.
  • Total loans increased $65.9 million to $946.5 million at March 31, 2021, compared to $880.6 million at March 31, 2020.
  • The Bank originated 347 Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, totaling $25.8 million, during the three months ended March 31, 2021. The Bank recognized $999,000 in PPP loan fee income during the three months ended March 31, 2021.
  • Core deposits were $1.3 billion or 97.89% of total deposits at March 31, 2021, compared to $961.2 million or 97.69% of total deposits at March 31, 2020.

Lance A. Sellers, President and Chief Executive Officer, attributed the increase in first quarter net earnings to a decrease in the provision for loan losses and an increase in non-interest income, which were partially offset by a decrease in net interest income and an increase in non-interest expense during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, as discussed below.

Net interest income was $11.1 million for the three months ended March 31, 2021, compared to $11.2 million for the three months ended March 31, 2020. The decrease in net interest income was primarily due to a $328,000 decrease in interest income, which was partially offset by a $226,000 decrease in interest expense. The decrease in interest income was primarily due to a $131,000 decrease in interest income on interest bearing cash and federal funds sold resulting from the 1.50% reduction in the Fed Funds rate in March 2020, and a $147,000 reduction in U.S. Government sponsored enterprise securities income due to volume and rate reductions. The decrease in interest expense was primarily due to a decrease in rates paid on interest-bearing liabilities and a decrease in Federal Home Loan Bank ("FHLB") borrowings. Net interest income after the provision for loan losses was $11.6 million for the three months ended March 31, 2021, compared to $9.7 million for the three months ended March 31, 2020. The provision for loan losses for the three months ended March 31, 2021 was a credit of $455,000, compared to an expense of $1.5 million for the three months ended March 31, 2020. The decrease in the provision for loan losses is primarily attributable to a decrease in reserves on loans with payment modifications made as a result of the COVID-19 pandemic and a decrease in reserves due to generally flat volumes of loans in the general reserve pools. At March 31, 2021, the balance of loans with existing modifications as a result of COVID-19 was $1.9 million, of which $602,000 represents the balance of loans under the terms of a first modification and $1.3 million represents the balance of outstanding loans under the terms of a second or third modification. The Company continues to track all loans that are currently modified or have been modified under COVID-19. At March 31, 2021, the balance for all loans that are currently modified or previously modified but have returned to their original terms was $114.8 million. The loan balances associated with COVID-19 related modifications have been grouped into their own pool within the Company's Allowance for Loan and Lease Losses ("ALLL") model as they have a higher likelihood of risk, and a higher reserve rate has been applied to that pool. Of all loans modified as a result of COVID-19, $113.0 million have returned to their original terms; however, the effects of stimulus in the current environment are still unknown, and additional losses may be present in loans that are currently modified and/or loans that were once modified. At December 31, 2020, the balance for all loans that were then currently modified or previously modified but returned to their original terms was $119.6 million.

Non-interest income was $5.9 million for the three months ended March 31, 2021, compared to $4.6 million for the three months ended March 31, 2020. The increase in non-interest income is primarily attributable to a $548,000 increase in mortgage banking income due to an increased mortgage loan volume and a $466,000 increase in appraisal management fee income due to an increase in the volume of appraisals, which were partially offset by a $163,000 decrease in service charges and fees.

Non-interest expense was $12.3 million for the three months ended March 31, 2021, compared to $11.4 million for the three months ended March 31, 2020. The increase in non-interest expense was primarily attributable to a $422,000 increase in appraisal management fee expense due to an increase in the volume of appraisals and a $459,000 increase in salaries and employee benefits expense primarily due to increases in insurance costs and incentive compensation.

Income tax expense was $1.0 million for the three months ended March 31, 2021, compared to $467,000 for the three months ended March 31, 2020. The effective tax rate was 20.24% for the three months ended March 31, 2021, compared to 16.48% for the three months ended March 31, 2020.

Total assets were $1.5 billion as of March 31, 2021, compared to $1.4 billion at December 31, 2020. Available for sale securities were $325.5 million as of March 31, 2021, compared to $245.2 million as of December 31, 2020. Total loans were $946.5 million as of March 31, 2021, compared to $948.6 million as of December 31, 2020.

Non-performing assets were $3.7 million or 0.24% of total assets at March 31, 2021, compared to $3.9 million or 0.27% of total assets at December 31, 2020. Non-performing assets include $3.4 million in commercial and residential mortgage loans, $150,000 in other loans, and $128,000 in other real estate owned at March 31, 2021, compared to $3.5 million in commercial and residential mortgage loans, $226,000 in other loans, and $128,000 in other real estate owned at December 31, 2020.

The allowance for loan losses at March 31, 2021 was $9.5 million or 1.01% of total loans, compared to $9.9 million or 1.04% of total loans at December 31, 2020. Management believes the current level of the allowance for loan losses is adequate; however, there is no assurance that additional adjustments to the allowance will not be required because of changes in economic conditions, regulatory requirements or other factors.

Deposits were $1.3 billion at March 31, 2021, compared to $1.2 billion at December 31, 2020. Core deposits, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, were $1.3 billion at March 31, 2021, compared to $1.2 billion at December 31, 2020. Certificates of deposit in amounts of $250,000 or more totaled $28.1 million at March 31, 2021, compared to $25.8 million at December 31, 2020.

Securities sold under agreements to repurchase were $31.9 million at March 31, 2021, compared to $26.2 million at December 31, 2020. Junior subordinated debentures were $15.5 million at March 31, 2021 and December 31, 2020. Shareholders' equity was $140.0 million, or 9.12% of total assets, at March 31, 2021, compared to $139.9 million, or 9.89% of total assets, at December 31, 2020.

Peoples Bank currently operates 18 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Iredell and Wake Counties. The Bank also operates loan production offices in Lincoln and Mecklenburg Counties. The Company's common stock is publicly traded and is quoted on the Nasdaq Global Market under the symbol "PEBK."

Statements made in this press release, other than those concerning historical information, should be considered forward-looking statements pursuant to the safe harbor provisions of the Securities Exchange Act of 1934 and the Private Securities Litigation Act of 1995. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on the information available to management at the time that this release was 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. Factors that could cause actual results to differ include, but are not limited to, (1) competition in the markets served by Peoples Bank, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectibility of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environment and tax laws, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in the Company's other filings with the Securities and Exchange Commission, including but not limited to those described in the Company's annual report on Form 10-K for the year ended December 31, 2020.

Contact:
Lance A. Sellers
President and Chief Executive Officer

Jeffrey N. Hooper
Executive Vice President and Chief Financial Officer

828-464-5620, Fax 828-465-6780

CONSOLIDATED BALANCE SHEETS
March 31, 2021, December 31, 2020 and March 31, 2020
(Dollars in thousands)

 
  March 31,2021     December 31,2020     March 31,2020  
 
  (Unaudited)     (Audited)     (Unaudited)  
ASSETS:
                 
Cash and due from banks
  $ 43,726     $ 42,737     $ 46,164  
Interest-bearing deposits
    165,311       118,843       20,705  
Federal funds sold
    -       -       36,650  
Cash and cash equivalents
    209,037       161,580       103,519  
 
                       
Investment securities available for sale
    325,517       245,249       201,514  
Other investments
    3,791       4,155       7,229  
Total securities
    329,308       249,404       208,743  
 
                       
Mortgage loans held for sale
    4,236       9,139       6,149  
 
                       
Loans
    946,497       948,639       880,564  
Less: Allowance for loan losses
    (9,532)       (9,908 )     (8,112 )
Net loans
    936,965       938,731       872,452  
 
                       
Premises and equipment, net
    18,184       18,600       18,370  
Cash surrender value of life insurance
    17,065       16,968       16,414  
Accrued interest receivable and other assets
    21,411       20,433       19,180  
Total assets
  $ 1,536,206     $ 1,414,855     $ 1,244,827  
 
                       
 
                       
LIABILITIES AND SHAREHOLDERS' EQUITY:
                       
Deposits:
                       
Noninterest-bearing demand
  $ 524,176     $ 456,980     $ 349,513  
Interest-bearing demand, MMDA & savings
    701,798       657,834       535,366  
Time, $250,000 or more
    28,109       25,771       22,725  
Other time
    80,382       80,501       76,354  
Total deposits
    1,334,465       1,221,086       983,958  
 
                       
Securities sold under agreements to repurchase
    31,916       26,201       28,535  
FHLB borrowings
    -       -       70,000  
Junior subordinated debentures
    15,464       15,464       15,464  
Accrued interest payable and other liabilities
    13,332       12,205       13,014  
Total liabilities
    1,395,177       1,274,956       1,110,971  
 
                       
Shareholders' equity:
                       
Preferred stock, no par value; authorized
                       
5,000,000 shares; no shares issued and outstanding
    -       -       -  
Common stock, no par value; authorized
                       
20,000,000 shares; issued and outstanding
                       
5,789,166 shares 3/31/21,
                       
5,787,504 shares 12/31/20 and 3/31/20
    56,910       56,871       56,871  
Retained earnings
    80,819       77,628       71,251  
Accumulated other comprehensive income
    2,300       5,400       5,734  
Total shareholders' equity
    140,029       139,899       133,856  
 
                       
Total liabilities and shareholders' equity
  $ 1,535,206     $ 1,414,855     $ 1,244,827  
                         

CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2021 and 2020
(Dollars in thousands, except per share amounts)

 
  Three months ended  
 
  March 31,  
 
  2021     2020  
 
  (Unaudited)     (Unaudited)  
INTEREST INCOME:
           
Interest and fees on loans
  $ 10,664     $ 10,680  
Interest on due from banks
    35       43  
Interest on federal funds sold
    -       123  
Interest on investment securities:
               
U.S. Government sponsored enterprises
    538       685  
State and political subdivisions
    639       641  
Other
    46       78  
Total interest income
    11,922       12,250  
 
               
INTEREST EXPENSE:
               
NOW, MMDA & savings deposits
    497       525  
Time deposits
    212       277  
FHLB borrowings
    -       64  
Junior subordinated debentures
    71       130  
Other
    35       45  
Total interest expense
    815       1,041  
 
               
NET INTEREST INCOME
    11,107       11,209  
PROVISION FOR (REDUCTION OF PROVISION
               
FOR) LOAN LOSSES
    (455)       1,521  
NET INTEREST INCOME AFTER
               
PROVISION FOR LOAN LOSSES
    11,562       9,688  
 
               
NON-INTEREST INCOME:
               
Service charges
    926       1,108  
Other service charges and fees
    212       193  
Mortgage banking income
    870       322  
Insurance and brokerage commissions
    260       242  
Appraisal management fee income
    1,816       1,350  
Miscellaneous
    1,789       1,380  
Total non-interest income
    5,873       4,595  
 
               
NON-INTEREST EXPENSES:
               
Salaries and employee benefits
    6,183       5,724  
Occupancy
    1,953       1,921  
Appraisal management fee expense
    1,456       1,034  
Other
    2,676       2,770  
Total non-interest expense
    12,268       11,449  
 
               
EARNINGS BEFORE INCOME TAXES
    5,167       2,834  
INCOME TAXES
    1,046       467  
 
               
NET EARNINGS
  $ 4,121     $ 2,367  
 
               
PER SHARE AMOUNTS
               
Basic net earnings
  $ 0.71     $ 0.40  
Diluted net earnings
  $ 0.71     $ 0.40  
Cash dividends
  $ 0.16     $ 0.30  
Book value
  $ 24.19     $ 23.13  
                 

FINANCIAL HIGHLIGHTS
For the three months ended March 31, 2021 and 2020, and the year ended December 31, 2020
(Dollars in thousands)

 
  Three months ended     Year ended  
 
  March 31,     December 31,  
 
  2021     2020     2020  
 
  (Unaudited)     (Unaudited)     (Audited)  
SELECTED AVERAGE BALANCES:
                 
Available for sale securities
  $ 264,942     $ 188,870     $ 200,821  
Loans
    947,205       861,634       935,970  
Earning assets
    1,376,195       1,103,948       1,271,765  
Assets
    1,459,461       1,196,938       1,365,642  
Deposits
    1,268,790       973,285       1,115,019  
Shareholders' equity
    139,366       134,186       141,287  
 
                       
SELECTED KEY DATA:
                       
Net interest margin (tax equivalent)
    3.31%       4.14%       3.52%  
Return on average assets
    1.15%       0.80%       0.83%  
Return on average shareholders' equity
    11.99%       7.09%       8.04%  
Average shareholders' equity to total average assets
    9.55%       11.21%       9.89%  
 
                       
ALLOWANCE FOR LOAN LOSSES:
                       
Balance, beginning of period
  $ 9,908     $ 6,680     $ 6,680  
Provision for loan losses
    (455)       1,521       4,259  
Charge-offs
    (85)       (210 )     (1,414 )
Recoveries
    164       121       383  
Balance, end of period
  $ 9,532     $ 8,112     $ 9,908  
                         
 
  March 31,2021     March 31,2020     December 31,2020  
 
  (Unaudited)     (Unaudited)     (Audited)  
ASSET QUALITY:
                 
Non-accrual loans
  $ 3,566     $ 3,966     $ 3,758  
90 days past due and still accruing
    -       34       -  
Other real estate owned
    128       -       128  
Total non-performing assets
  $ 3,694     $ 4,000     $ 3,886  
Non-performing assets to total assets
    0.24%       0.32%       0.27%  
Loans modifications related to COVID-19
  $ 1,857%     $ 57,366%     $ 18,246%  
Allowance for loan losses to non-performing assets
    258.04%       202.80%       254.97%  
Allowance for loan losses to total loans
    1.01%       0.92%       1.04%  
Allowance for loan losses to total loans, excluding PPP loans
    1.10%       0.92%       1.14%  
 
                       
LOAN RISK GRADE ANALYSIS:
                       
Percentage of loans by risk grade
                       
 
                       
Risk Grade 1 (excellent quality)
    0.67%       1.08%       1.18%  
Risk Grade 2 (high quality)
    19.43%       23.89%       20.45%  
Risk Grade 3 (good quality)
    67.88%       62.73%       65.70%  
Risk Grade 4 (management attention)
    9.01%       10.06%       9.75%  
Risk Grade 5 (watch)
    2.28%       1.41%       2.20%  
Risk Grade 6 (substandard)
    0.73%       0.83%       0.72%  
Risk Grade 7 (doubtful)
    0.00%       0.00%       0.00%  
Risk Grade 8 (loss)
    0.00%       0.00%       0.00%  
 
                       

At March 31, 2021, including non-accrual loans, there were four relationships exceeding $1.0 million in the Watch risk grade (which totaled $10.2 million). There were no relationships exceeding $1.0 million in the Substandard risk grade.

SOURCE: Peoples Bancorp of North Carolina, Inc.



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