Peoples Bancorp Announces Fourth Quarter and Full Year 2023 Results
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Insights
The reported financial results of Peoples Bancorp of North Carolina, Inc. indicate a mixed performance with a decrease in net earnings for both the fourth quarter and the full year of 2023. This is highlighted by the decrease from $4.1 million to $3.4 million in Q4 and from $16.1 million to $15.5 million for the full year. A key factor contributing to this reduction is the increase in interest expense, which outpaced the growth in interest income despite a rise in total loans and higher Federal Reserve rates. This dynamic is particularly important as it suggests margin compression, a common concern for banks in a rising rate environment.
Furthermore, the increase in the provision for credit losses, albeit modest, reflects a cautious outlook on loan performance amid changing economic conditions. This is a prudent approach under the new CECL accounting standard, which requires more forward-looking loss estimates. The effective tax rate also saw an uptick, which could impact profitability. Investors should note the shift in deposit composition, with a significant increase in time deposits, indicating a possible strategic move to lock in funding costs in anticipation of further rate hikes. The decline in core deposits as a percentage of total deposits could suggest a need for increased liquidity management scrutiny.
Overall, the report suggests that Peoples Bancorp is navigating a challenging interest rate landscape, with efforts to manage credit risk and funding sources. The bank's ability to adapt to these conditions will be critical for future profitability and stock performance.
Peoples Bancorp's operational strategy, as evidenced by the closure of a branch lease and the adjustments in its investment portfolio, demonstrates an emphasis on cost management and risk mitigation. The bank's decision to sell municipal securities early in the year to reduce risk and enhance loan growth flexibility indicates a tactical response to market conditions. This move, combined with the reported increase in non-interest income from appraisal management fees and deferred compensation plans, reflects a diversified approach to revenue generation.
However, the decrease in non-interest income year-over-year, driven by a net loss on securities sales and a decrease in appraisal management fee income, aligns with broader national real estate trends and suggests potential vulnerabilities in the bank's revenue stream. The bank's performance in adapting its service offerings and managing operational expenses in response to these trends will be a key indicator of its resilience and competitive standing in the regional banking sector.
Peoples Bancorp's adoption of the CECL accounting standard represents a significant shift in how the bank estimates credit losses. The initial reduction to retained earnings and the increase in the allowance for credit losses reflect a more conservative stance on potential future losses. The slight increase in non-performing assets, while still a small percentage of total assets, warrants attention as it could signal emerging credit quality issues.
The bank's capital position, as indicated by the increase in shareholders' equity, suggests a solid buffer for potential stress, which is reassuring for stakeholders. The reported expansion in the bank's loan production offices could indicate a strategic push for growth, but it also comes with inherent risks associated with loan portfolio expansion, especially in a potentially cooling economic environment.
Investors and analysts will likely monitor how the bank's loan portfolio performs in the context of its increased allowance for credit losses and the broader economic conditions that could affect borrower repayment abilities. The bank's strategic moves, including branch optimization and investment portfolio adjustments, will also be scrutinized for their effectiveness in maintaining profitability and managing risk.
NEWTON, NC / ACCESSWIRE / January 22, 2024 / Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) (the "Company"), the parent company of Peoples Bank (the "Bank"), reported fourth quarter and full year 2023 results with highlights as follows:
Fourth quarter 2023 highlights:
- Net earnings were
$3.4 million or$0.64 per share and$0.62 per diluted share for the three months ended December 31, 2023, as compared to$4.1 million or$0.76 per share and$0.74 per diluted share for the same period one year ago. - Net interest margin was
3.32% for the three months ended December 31, 2023, compared to3.78% for three months ended December 31, 2022.
Full year 2023 highlights:
- Net earnings were
$15.5 million or$2.87 per share and$2.77 per diluted share for the year ended December 31, 2023, as compared to$16.1 million or$2.94 per share and$2.85 per diluted share for the year ended December 31, 2022. - Cash dividends were
$0.91 per share during the year ended December 31, 2023, as compared to$0.87 per share for the prior year. - Total loans were
$1.1 billion at December 31, 2023, as compared to$1.0 billion at December 31, 2022. - Non-performing assets were
$3.9 million or0.24% of total assets at December 31, 2023, compared to$3.7 million or0.23% at December 31, 2022. - Total deposits were
$1.4 billion at December 31, 2023 and December 31, 2022. - Core deposits, a non-GAAP measure, were
$1.2 billion or89.30% of total deposits at December 31, 2023, compared to$1.4 billion or98.14% of total deposits at December 31, 2022. - Net interest margin was
3.51% for the year ended December 31, 2023, compared to3.22% for the year ended December 31, 2022.
Net earnings were
Net interest income was
Non-interest income was
Non-interest expense was
Net earnings were
Net interest income was
Non-interest income was
Non-interest expense was
Income tax expense was
Total assets were
Non-performing assets were
On January 1, 2023, the Company adopted Accounting Standards Codification ("ASC") 326 ("CECL"), which replaced incurred loss methodology with current expected loss methodology. This new guidance resulted in an initial reduction to retained earnings of
Deposits were
Securities sold under agreements to repurchase were
Peoples Bank operates 17 banking offices in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Iredell and Wake Counties. The Bank also operates loan production offices in Lincoln, Mecklenburg, Rowan and Forsyth Counties. The Company's common stock is publicly traded and is listed on the Nasdaq Global Market under the symbol "PEBK."
Statements made in this earnings 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 the 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, 2022.
CONSOLIDATED BALANCE SHEETS
December 31, 2023 and 2022
(Dollars in thousands)
| December 31, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
ASSETS: | ||||||||
Cash and due from banks | $ | 32,819 | $ | 50,061 | ||||
Interest-bearing deposits | 49,556 | 21,535 | ||||||
Cash and cash equivalents | 82,375 | 71,596 | ||||||
Investment securities available for sale | 391,924 | 445,394 | ||||||
Other investments | 2,874 | 2,656 | ||||||
Total securities | 394,798 | 448,050 | ||||||
Mortgage loans held for sale | 686 | 211 | ||||||
Loans | 1,093,066 | 1,032,608 | ||||||
Less: Allowance for credit losses on loans | (11,041 | ) | (10,494 | ) | ||||
Net loans | 1,082,025 | 1,022,114 | ||||||
Premises and equipment, net | 16,702 | 18,205 | ||||||
Cash surrender value of life insurance | 18,134 | 17,703 | ||||||
Accrued interest receivable and other assets | 41,190 | 43,048 | ||||||
Total assets | $ | 1,635,910 | $ | 1,620,927 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 432,687 | $ | 523,088 | ||||
Interest-bearing demand, MMDA & savings | 620,244 | 814,128 | ||||||
Time, over | 148,904 | 31,001 | ||||||
Other time | 190,210 | 66,998 | ||||||
Total deposits | 1,392,045 | 1,435,215 | ||||||
Securities sold under agreements to repurchase | 86,715 | 47,688 | ||||||
Junior subordinated debentures | 15,464 | 15,464 | ||||||
Accrued interest payable and other liabilities | 20,670 | 17,365 | ||||||
Total liabilities | 1,514,894 | 1,515,732 | ||||||
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 | ||||||||
5,534,499 shares at 12/31/23, | ||||||||
5,636,830 shares at 12/31/22 | 50,625 | 52,636 | ||||||
Common stock held by deferred compensation trust, | ||||||||
at cost; 163,702 shares at 12/31/23, 169,094 shares | ||||||||
at 12/31/22 | (1,910 | ) | (2,181 | ) | ||||
Deferred compensation | 1,910 | 2,181 | ||||||
Retained earnings | 109,756 | 100,156 | ||||||
Accumulated other comprehensive loss | (39,365 | ) | (47,597 | ) | ||||
Total shareholders' equity | 121,016 | 105,195 | ||||||
Total liabilities and shareholders' equity | $ | 1,635,910 | $ | 1,620,927 | ||||
CONSOLIDATED STATEMENTS OF INCOME
For the three months and years ended December 31, 2023 and 2022
(Dollars in thousands, except per share amounts)
| Three months ended | Years ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
INTEREST INCOME: | ||||||||||||||||
Interest and fees on loans | $ | 14,812 | $ | 12,350 | $ | 55,507 | $ | 43,077 | ||||||||
Interest on due from banks | 710 | 770 | 2,216 | 2,223 | ||||||||||||
Interest on investment securities: | ||||||||||||||||
U.S. Government sponsored enterprises | 2,497 | 1,870 | 9,365 | 4,150 | ||||||||||||
State and political subdivisions | 695 | 1,066 | 2,949 | 4,075 | ||||||||||||
Other | 442 | 443 | 1,825 | 906 | ||||||||||||
Total interest income | 19,156 | 16,499 | 71,862 | 54,431 | ||||||||||||
INTEREST EXPENSE: | ||||||||||||||||
Interest-bearing demand, MMDA & savings deposits | 1,843 | 756 | 6,731 | 2,019 | ||||||||||||
Time deposits | 3,250 | 141 | 7,916 | 562 | ||||||||||||
Junior subordinated debentures | 288 | 205 | 1,079 | 529 | ||||||||||||
Other | 505 | 96 | 1,417 | 213 | ||||||||||||
Total interest expense | 5,886 | 1,198 | 17,143 | 3,323 | ||||||||||||
NET INTEREST INCOME | 13,270 | 15,301 | 54,719 | 51,108 | ||||||||||||
PROVISION FOR CREDIT LOSSES | 405 | 583 | 1,566 | 1,472 | ||||||||||||
NET INTEREST INCOME AFTER | ||||||||||||||||
PROVISION FOR CREDIT LOSSES | 12,865 | 14,718 | 53,153 | 49,636 | ||||||||||||
NON-INTEREST INCOME: | ||||||||||||||||
Service charges | 1,415 | 1,290 | 5,496 | 5,290 | ||||||||||||
Other service charges and fees | 187 | 194 | 697 | 734 | ||||||||||||
Loss on sale of securities | - | - | (2,488 | ) | - | |||||||||||
Mortgage banking income | 97 | 35 | 301 | 393 | ||||||||||||
Insurance and brokerage commissions | 204 | 236 | 929 | 945 | ||||||||||||
Appraisal management fee income | 2,123 | 2,007 | 9,592 | 11,663 | ||||||||||||
Miscellaneous | 2,101 | 1,760 | 8,387 | 7,664 | ||||||||||||
Total non-interest income | 6,127 | 5,522 | 22,914 | 26,689 | ||||||||||||
NON-INTEREST EXPENSES: | ||||||||||||||||
Salaries and employee benefits | 7,132 | 7,661 | 26,640 | 26,130 | ||||||||||||
Occupancy | 1,979 | 2,162 | 7,962 | 8,048 | ||||||||||||
Appraisal management fee expense | 1,678 | 1,584 | 7,559 | 9,264 | ||||||||||||
Other | 3,779 | 3,584 | 13,983 | 12,588 | ||||||||||||
Total non-interest expense | 14,568 | 14,991 | 56,144 | 56,030 | ||||||||||||
EARNINGS BEFORE INCOME TAXES | 4,424 | 5,249 | 19,923 | 20,295 | ||||||||||||
INCOME TAXES | 984 | 1,102 | 4,377 | 4,172 | ||||||||||||
NET EARNINGS | $ | 3,440 | $ | 4,147 | $ | 15,546 | $ | 16,123 | ||||||||
PER SHARE AMOUNTS | ||||||||||||||||
Basic net earnings | $ | 0.64 | $ | 0.76 | $ | 2.87 | $ | 2.94 | ||||||||
Diluted net earnings | $ | 0.62 | $ | 0.74 | $ | 2.77 | $ | 2.85 | ||||||||
Cash dividends | $ | 0.19 | $ | 0.18 | $ | 0.91 | $ | 0.87 | ||||||||
Book value | $ | 22.53 | $ | 19.24 | $ | 22.53 | $ | 19.24 | ||||||||
FINANCIAL HIGHLIGHTS
For the three months and years ended December 31, 2023 and 2022
(Dollars in thousands)
| Three months ended | Years ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
SELECTED AVERAGE BALANCES: | ||||||||||||||||
Available for sale securities | $ | 444,754 | $ | 509,362 | $ | 454,823 | $ | 467,484 | ||||||||
Loans | 1,086,403 | 1,020,383 | 1,061,075 | 949,175 | ||||||||||||
Earning assets | 1,585,966 | 1,618,034 | 1,561,825 | 1,601,168 | ||||||||||||
Assets | 1,618,053 | 1,657,925 | 1,605,386 | 1,663,665 | ||||||||||||
Deposits | 1,387,224 | 1,488,566 | 1,395,265 | 1,480,113 | ||||||||||||
Shareholders' equity | 107,322 | 99,864 | 116,295 | 123,886 | ||||||||||||
SELECTED KEY DATA: | ||||||||||||||||
Net interest margin (tax equivalent) (1) | 3.32 | % | 3.78 | % | 3.51 | % | 3.22 | % | ||||||||
Return on average assets | 0.84 | % | 0.99 | % | 0.97 | % | 0.97 | % | ||||||||
Return on average shareholders' equity | 12.72 | % | 16.48 | % | 13.37 | % | 13.01 | % | ||||||||
Average shareholders' equity to total average assets | 6.63 | % | 6.02 | % | 7.24 | % | 7.45 | % | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||||
| (Unaudited) | (Audited) | |||||||||||||||
ALLOWANCE FOR CREDIT LOSSES: | ||||||||||||||||
Allowance for credit losses on loans | $ | 11,041 | $ | 10,494 | ||||||||||||
Allowance for credit losses on unfunded commitments | 1,770 | - | ||||||||||||||
Provision for credit losses (2) | 1,566 | 1,472 | ||||||||||||||
Charge-offs (2) | (698 | ) | (752 | ) | ||||||||||||
Recoveries (2) | 392 | 419 | ||||||||||||||
ASSET QUALITY: | ||||||||||||||||
Non-accrual loans | $ | 3,887 | $ | 3,728 | ||||||||||||
90 days past due and still accruing | - | - | ||||||||||||||
Other real estate owned | - | - | ||||||||||||||
Total non-performing assets | $ | 3,887 | $ | 3,728 | ||||||||||||
Non-performing assets to total assets | 0.24 | % | 0.23 | % | ||||||||||||
Allowance for credit losses on loans to non-performing assets | 284.05 | % | 281.49 | % | ||||||||||||
Allowance for credit losses on loans to total loans | 1.01 | % | 1.02 | % | ||||||||||||
LOAN RISK GRADE ANALYSIS: | ||||||||||||||||
Percentage of loans by risk grade | ||||||||||||||||
Risk Grade 1 (excellent quality) | 0.30 | % | 0.45 | % | ||||||||||||
Risk Grade 2 (high quality) | 19.78 | % | 19.70 | % | ||||||||||||
Risk Grade 3 (good quality) | 72.96 | % | 73.03 | % | ||||||||||||
Risk Grade 4 (management attention) | 5.59 | % | 5.49 | % | ||||||||||||
Risk Grade 5 (watch) | 0.84 | % | 0.68 | % | ||||||||||||
Risk Grade 6 (substandard) | 0.53 | % | 0.65 | % | ||||||||||||
Risk Grade 7 (doubtful) | 0.00 | % | 0.00 | % | ||||||||||||
Risk Grade 8 (loss) | 0.00 | % | 0.00 | % | ||||||||||||
At December 31, 2023, including non-accrual loans, there were two relationships exceeding
(1) This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax-exempt status. This amount has been computed using an effective tax rate of
(2) For the years ended December 31, 2023 and 2022.
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
SOURCE: Peoples Bancorp of North Carolina, Inc.
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