Peoples Bancorp Announces Second Quarter 2022 Results

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Peoples Bancorp of North Carolina (NASDAQ:PEBK) reported second-quarter 2022 earnings of $3.2 million, or $0.59 per share, a decline from $4.6 million or $0.82 per share in Q2 2021. Year-to-date net earnings fell to $6.7 million or $1.21 per share, down from $8.7 million or $1.55 per share a year prior. Key factors include a decrease in net interest income, an increase in the provision for loan losses, and rising non-interest expenses. Total loans reached $959.5 million, a significant increase from $884.9 million at the end of 2021, while total deposits grew to $1.5 billion.

Positive

• Year-to-date total loans increased to $959.5 million from $884.9 million at end of 2021.
• Total deposits rose to $1.5 billion compared to $1.4 billion at December 31, 2021.
• Non-interest income increased to $7.3 million for Q2 2022 from $6.0 million in Q2 2021.

Negative

• Net earnings decreased to $3.2 million in Q2 2022 from $4.6 million a year ago.
• Net interest income fell to $11.3 million for Q2 2022 from $11.7 million in Q2 2021.
• Provision for loan losses increased to $410,000 in Q2 2022 from a recovery of $226,000 in Q2 2021.

NEWTON, NC / ACCESSWIRE / July 25, 2022 / Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) (the "Company"), the parent company of Peoples Bank (the "Bank"), reported second quarter 2022 results with highlights as follows:

Second quarter 2022 highlights:

• Net earnings were $3.2 million or $0.59 per share and $0.57 per diluted share for the three months ended June 30, 2022, as compared to $4.6 million or $0.82 per share and $0.80 per diluted share for the same period one year ago.
• The Bank recognized $293,000 in Small Business Administration (SBA) Paycheck Protection Program (PPP) loan fee income during the three months ended June 30, 2022, as compared to $1.5 million in PPP loan fee income for the same period one year ago.

Year to date highlights:

• Net earnings were $6.7 million or $1.21 per share and $1.18 per diluted share for the six months ended June 30, 2022, as compared to $8.7 million or $1.55 per share and $1.51 per diluted share for the same period one year ago.
• The Bank recognized $893,000 in SBA PPP loan fee income during the six months ended June 30, 2022, as compared to $2.5 million in PPP loan fee income for the same period one year ago.
• Cash dividends were $0.51 per share during the six months ended June 30, 2022, as compared to $0.32 per share for the prior year period.
• Total loans were $959.5 million at June 30, 2022, as compared to $884.9 million at December 31, 2021, despite a $16.6 million reduction in PPP loans during the six months ended June 30, 2022.
• Non-performing assets were $3.6 million or 0.21% of total assets at June 30, 2022, compared to $3.2 million or 0.20% of total assets at December 31, 2021.
• Total deposits were $1.5 billion at June 30, 2022, compared to $1.4 billion at December 31, 2021.
• Core deposits, a non-GAAP measure, were $1.5 billion or 97.93% of total deposits at June 30, 2022, compared to $1.4 billion or 98.14% of total deposits at December 31, 2021.
• Net interest margin was 2.83% for the six months ended June 30, 2022, compared to 2.99% for the year ended December 31, 2021.

Net earnings were $3.2 million or $0.59 per share and $0.57 per diluted share for the three months ended June 30, 2022, as compared to $4.6 million or $0.82 per share and $0.80 per diluted share for the prior year period. Lance A. Sellers, President and Chief Executive Officer, attributed the decrease in second quarter net earnings to a decrease in net interest income, an increase in the provision for loan losses and an increase in non-interest expense, which were partially offset by an increase in non-interest income compared to the prior year period, as discussed below.

Net interest income was $11.3 million for the three months ended June 30, 2022, compared to $11.7 million for the three months ended June 30, 2021. The decrease in net interest income is due to a $525,000 decrease in interest income, which was partially offset by a $198,000 decrease in interest expense. The decrease in interest income is primarily due to a $1.1 million decrease in interest income and fees on loans, which was partially offset by an increase in interest income on balances due from banks and an increase in interest income on investment securities. The decrease in interest income and fees on loans is primarily due to a decrease in fee income on SBA PPP loans. The increase in interest income on investment securities is primarily due to additional securities purchased with additional cash resulting from an increase in deposits. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $10.9 million for the three months ended June 30, 2022, compared to $11.9 million for the three months ended June 30, 2021. The provision for loan losses for the three months ended June 30, 2022 was $410,000, compared to a recovery of $226,000 for the three months ended June 30, 2021. The increase in the provision for loan losses is primarily attributable to an increase in reserves due to a net increase in the volume of loans in the general reserve pool.

Non-interest income was $7.3 million for the three months ended June 30, 2022, compared to $6.0 million for the three months ended June 30, 2021. The increase in non-interest income is primarily attributable to a $1.4 million increase in appraisal management fee income due to an increase in the volume of appraisals, which was partially offset by a $624,000 decrease in mortgage banking income due to a decrease in mortgage loan volume and additional mortgage loans being retained for the Bank's portfolio.

Non-interest expense was $14.2 million for the three months ended June 30, 2022, compared to $12.1 million for the three months ended June 30, 2021. The increase in non-interest expense is primarily attributable to a $1.1 million increase in appraisal management fee expense due to an increase in the volume of appraisals and a $777,000 increase in salaries and employee benefits expense primarily due to an increase in insurance costs.

Net earnings were $6.7 million or $1.21 per share and $1.18 per diluted share for the six months ended June 30, 2022, as compared to $8.7 million or $1.55 per share and $1.51 per diluted share for the prior year period. The decrease in year-to-date net earnings is primarily attributable to a decrease in net interest income, an increase in the provision for loan losses and an increase in non-interest expense, which were partially offset by an increase in non-interest income compared to the prior year period, as discussed below.

Net interest income was $22.0 million for the six months ended June 30, 2022, compared to $22.8 million for the six months ended June 30, 2021. The decrease in net interest income is due to a $1.1 million decrease in interest income, which was partially offset by a $350,000 decrease in interest expense. The decrease in interest income is primarily due to a $2.0 million decrease in interest income and fees on loans, which was partially offset by an increase in interest income on balances due from banks and an increase in interest income on investment securities. The decrease in interest income and fees on loans is primarily due to a decrease in fee income on SBA PPP loans. The increase in interest income on investment securities is primarily due to additional securities purchased with additional cash resulting from an increase in deposits. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $21.5 million for the six months ended June 30, 2022, compared to $23.5 million for the six months ended June 30, 2021. The provision for loan losses for the six months ended June 30, 2022 was $481,000, compared to a recovery of $681,000 for the six months ended June 30, 2021. The increase in the provision for loan losses is primarily attributable to an increase in reserves due to a net increase in the volume of loans in the general reserve pool.

Non-interest income was $14.4 million for the six months ended June 30, 2022, compared to $11.9 million for the six months ended June 30, 2021. The increase in non-interest income is primarily attributable to a $3.1 million increase in appraisal management fee income due to an increase in the volume of appraisals, which was partially offset by a $1.3 million decrease in mortgage banking income due to a decrease in mortgage loan volume and additional mortgage loans being retained for the Bank's portfolio.

Non-interest expense was $27.6 million for the six months ended June 30, 2022, compared to $24.4 million for the six months ended June 30, 2021. The increase in non-interest expense is primarily attributable to a $2.4 million increase in appraisal management fee expense due to an increase in the volume of appraisals and a $443,000 increase in salaries and employee benefits expense primarily due to an increase in insurance costs.

Income tax expense was $806,000 for the three months ended June 30, 2022, compared to $1.2 million for the three months ended June 30, 2021. The effective tax rate was 20.03% for the three months ended June 30, 2022, compared to 20.55% for the three months ended June 30, 2021. Income tax expense was $1.7 million for the six months ended June 30, 2022, compared to $2.2 million for the six months ended June 30, 2021. The effective tax rate was 19.87% for the six months ended June 30, 2022, compared to 20.41% for the six months ended June 30, 2021.

Total assets were $1.7 billion as of June 30, 2022, compared to $1.6 billion at December 31, 2021. Available for sale securities were $426.8 million as of June 30, 2022, compared to $406.5 million as of December 31, 2021. Total loans were $959.5 million as of June 30, 2022, compared to $884.9 million as of December 31, 2021. The increase in loans was achieved despite a $16.6 million reduction in PPP loans during the six months ended June 30, 2022. The Bank had $1.4 million and $18.0 million in PPP loans at June 30, 2022 and December 31, 2021, respectively.

Non-performing assets were $3.6 million or 0.21% of total assets at June 30, 2022, compared to $3.2 million or 0.20% of total assets at December 31, 2021. Non-performing assets include $3.6 million in commercial and residential mortgage loans and $21,000 in other loans at June 30, 2022, compared to $3.2 million in commercial and residential mortgage loans and $51,000 in other loans at December 31, 2021.

The allowance for loan losses was $9.8 million or 1.02% of total loans at June 30, 2022, compared to $9.4 million or 1.06% at December 31, 2021. 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 $1.5 billion at June 30, 2022, compared to $1.4 billion at December 31, 2021. Core deposits, a non-GAAP measure, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, were $1.5 billion and $1.4 billion at June 30, 2022 and December 31, 2021, respectively. Management believes it is useful to calculate and present core deposits because of the positive impact this low cost funding source provides to the Bank's funding base. Certificates of deposit in amounts of $250,000 or more totaled $30.9 million at June 30, 2022, compared to $26.3 million at December 31, 2021.

Securities sold under agreements to repurchase were $37.1 million at June 30, 2022 and December 31, 2021. Junior subordinated debentures were $15.5 million at June 30, 2022 and December 31, 2021. Shareholders' equity was $112.4 million, or 6.70% of total assets, at June 30, 2022, compared to $142.4 million, or 8.77% of total assets, at December 31, 2021. The decrease in shareholders' equity is primarily due to an increase in the unrealized loss on investment securities available for sale due to rate changes from December 31, 2021 to June 30, 2022. The Company repurchased 22,000 shares of its common stock during the six months ended June 30, 2022 under the Company's stock repurchase program, which was authorized in January 2022.

Peoples Bank operates 17 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, Mecklenburg, Rowan and Forsyth 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 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, 2021.

CONSOLIDATED BALANCE SHEETS
June 30, 2022, December 31, 2021 and June 30, 2021
(Dollars in thousands)

		June 30, 2022				December 31, 2021					June 30, 2021
		(Unaudited)				(Audited)					(Unaudited)
ASSETS:
Cash and due from banks		$	47,953			$	44,711			$	47,151
Interest-bearing deposits			175,754				232,788				240,158
Cash and cash equivalents			223,707				277,499				287,309
Investment securities available for sale			426,804				406,549				367,529
Other investments			2,791				3,668				3,758
Total securities			429,595				410,217				371,287
Mortgage loans held for sale			1,288				3,637				5,501
Loans			959,473				884,869				888,360
Less: Allowance for loan losses			(9,789	)			(9,355	)			(9,287	)
Net loans			949,684				875,514				879,073
Premises and equipment, net			16,001				16,104				17,217
Cash surrender value of life insurance			17,500				17,365				17,164
Accrued interest receivable and other assets			39,120				23,857				22,022
Total assets		$	1,676,895			$	1,624,193			$	1,599,573
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand		$	559,163			$	514,319			$	512,577
Interest-bearing demand, MMDA & savings			833,094				797,179				775,009
Time, $250,000 or more			30,856				26,333				26,631
Other time			70,857				74,917				77,837
Total deposits			1,493,970				1,412,748				1,392,054
Securities sold under agreements to repurchase			37,146				37,094				31,249
Junior subordinated debentures			15,464				15,464				15,464
Accrued interest payable and other liabilities			17,909				16,518				15,432
Total liabilities			1,564,489				1,481,824				1,454,199
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
5,641,030 shares at 6/30/22, 5,661,569 shares at
12/31/21, 5,789,166 shares at 6/30/21			52,752				53,305				56,910
Common stock held by deferred compensation trust,
at cost; 165,984 shares at 6/30/22, 162,193 shares
at 12/31/21, 158,985 shares at 6/30/21			(2,099	)			(1,992	)			(1,901	)
Deferred compensation			2,099				1,992				1,901
Retained earnings			92,741				88,968				84,504
Accumulated other comprehensive income (loss)			(33,087	)			96				3,960
Total shareholders' equity			112,406				142,369				145,374
Total liabilities and shareholders' equity		$	1,676,895			$	1,624,193			$	1,599,573

CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 2022 and 2021
(Dollars in thousands, except per share amounts)

		Three months ended								Six months ended
		June 30,								June 30,
		2022				2021				2022				2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
INTEREST INCOME:
Interest and fees on loans		$	9,934			$	11,003			$	19,676			$	21,667
Interest on due from banks			442				48				553				83
Interest on investment securities:
U.S. Government sponsored enterprises			585				682				1,096				1,220
State and political subdivisions			1,010				758				1,953				1,397
Other			21				26				43				72
Total interest income			11,992				12,517				23,321				24,439
INTEREST EXPENSE:
Interest-bearing demand, MMDA & savings deposits			366				543				769				1,040
Time deposits			141				191				287				403
Junior subordinated debentures			103				71				178				142
Other			34				37				73				72
Total interest expense			644				842				1,307				1,657
NET INTEREST INCOME			11,348				11,675				22,014				22,782
PROVISION FOR (RECOVERY OF) LOAN LOSSES			410				(226	)			481				(681	)
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES			10,938				11,901				21,533				23,463
NON-INTEREST INCOME:
Service charges			1,374				910				2,542				1,836
Other service charges and fees			178				171				371				383
Mortgage banking income			99				723				299				1,593
Insurance and brokerage commissions			256				238				496				498
Appraisal management fee income			3,439				2,005				6,945				3,821
Miscellaneous			1,982				1,993				3,721				3,782
Total non-interest income			7,328				6,040				14,374				11,913
NON-INTEREST EXPENSES:
Salaries and employee benefits			6,443				5,666				12,292				11,849
Occupancy			1,932				1,939				3,848				3,892
Appraisal management fee expense			2,757				1,634				5,529				3,090
Other			3,111				2,893				5,915				5,569
Total non-interest expense			14,243				12,132				27,584				24,400
EARNINGS BEFORE INCOME TAXES			4,023				5,809				8,323				10,976
INCOME TAXES			806				1,194				1,654				2,240
NET EARNINGS		$	3,217			$	4,615			$	6,669			$	8,736
PER SHARE AMOUNTS
Basic net earnings		$	0.59			$	0.82			$	1.21			$	1.55
Diluted net earnings		$	0.57			$	0.80			$	1.18			$	1.51
Cash dividends		$	0.18			$	0.16			$	0.51			$	0.32
Book value		$	20.53			$	25.82			$	20.53			$	25.82

FINANCIAL HIGHLIGHTS
For the three and six months ended June 30, 2022 and 2021, and the year ended December 31, 2021
(Dollars in thousands)

		Three months ended								Six months ended								Year ended
		June 30,								June 30,								December 31,
		2022				2021				2022				2021				2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Audited)
SELECTED AVERAGE BALANCES:
Available for sale securities		$	455,331			$	346,889			$	434,439			$	305,127			$	349,647
Loans			917,833				916,393				901,586				931,714				908,682
Earning assets			1,599,469				1,477,256				1,580,926				1,425,990				1,483,519
Assets			1,668,029				1,563,570				1,655,156				1,510,789				1,568,417
Deposits			1,485,729				1,370,159				1,462,320				1,319,755				1,372,857
Shareholders' equity			117,141				141,167				129,413				142,566				147,741
SELECTED KEY DATA:
Net interest margin (tax equivalent) (1)			2.87	%			3.20	%			2.83	%			3.26	%			2.99	%
Return on average assets			0.77	%			1.18	%			0.81	%			0.89	%			0.96	%
Return on average shareholders' equity			11.02	%			13.11	%			10.39	%			9.43	%			10.24	%
Average shareholders' equity to total average assets			7.02	%			9.03	%			7.82	%			9.44	%			9.42	%
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period		$	9,426			$	9,532			$	9,355			$	9,908			$	9,908
Provision for (Recovery of) loan losses			410				(226	)			481				(681	)			(1,163	)
Charge-offs			(124	)			(151	)			(284	)			(236	)			(762	)
Recoveries			77				132				237				296				1,372
Balance, end of period		$	9,789			$	9,287			$	9,789			$	9,287			$	9,355

		June 30, 2022				June 30, 2021				December 31, 2021
		(Unaudited)				(Unaudited)				(Audited)
ASSET QUALITY:
Non-accrual loans		$	3,586			$	3,378			$	3,230
90 days past due and still accruing			-				-				-
Other real estate owned			-				-				-
Total non-performing assets		$	3,586			$	3,378			$	3,230
Non-performing assets to total assets			0.21	%			0.21	%			0.20	%
Loans modifications related to COVID-19		$	-			$	283			$	-
Allowance for loan losses to non-performing assets			272.98	%			274.93	%			289.63	%
Allowance for loan losses to total loans			1.02	%			1.05	%			1.06	%
Allowance for loan losses to total loans, excluding PPP loans			1.02	%			1.09	%			1.08	%
LOAN RISK GRADE ANALYSIS:
Percentage of loans by risk grade
Risk Grade 1 (excellent quality)			0.57	%			0.63	%			0.78	%
Risk Grade 2 (high quality)			19.38	%			19.16	%			19.12	%
Risk Grade 3 (good quality)			72.85	%			68.78	%			70.41	%
Risk Grade 4 (management attention)			5.79	%			8.68	%			7.70	%
Risk Grade 5 (watch)			0.71	%			1.97	%			1.23	%
Risk Grade 6 (substandard)			0.70	%			0.78	%			0.76	%
Risk Grade 7 (doubtful)			0.00	%			0.00	%			0.00	%
Risk Grade 8 (loss)			0.00	%			0.00	%			0.00	%

At June 30, 2022, including non-accrual loans, there were no relationships exceeding $1.0 million in the Watch and Substandard risk grades.

(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 22.98% and is reduced by the related nondeductible portion of interest expense.

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.

View source version on accesswire.com:
https://www.accesswire.com/708728/Peoples-Bancorp-Announces-Second-Quarter-2022-Results

FAQ

What were the earnings per share for PEBK in Q2 2022?

Earnings per share for Peoples Bancorp of North Carolina (PEBK) in Q2 2022 were $0.59.

How did PEBK's net earnings change from Q2 2021 to Q2 2022?

Net earnings decreased from $4.6 million in Q2 2021 to $3.2 million in Q2 2022.

What was the total loan amount reported by PEBK as of June 30, 2022?

Total loans were reported at $959.5 million as of June 30, 2022.

How much did PEBK's total deposits increase by in the first half of 2022?

Total deposits increased from $1.4 billion at the end of 2021 to $1.5 billion by June 30, 2022.