Peoples Bancorp Announces Second Quarter 2023 Results

Rhea-AI Summary

Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) reported second quarter 2023 results. Net earnings were $4.8 million or $0.88 per share, compared to $3.2 million or $0.59 per share for the same period last year. Net interest margin increased to 3.56% from 2.87%. Year to date, net earnings were $8.0 million or $1.46 per share, compared to $6.7 million or $1.21 per share for the same period last year. Total loans increased to $1.1 billion from $1.0 billion. Non-performing assets were $3.6 million or 0.22% of total assets. Core deposits decreased to $1.3 billion or 92.26% of total deposits.

Positive

• Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) reported an increase in net earnings for the second quarter of 2023 compared to the same period last year. Net interest margin also improved. Total loans increased to $1.1 billion. Non-performing assets remained low at 0.22% of total assets. The company's core deposits decreased to $1.3 billion.

Negative

• None.

NEWTON, NC / ACCESSWIRE / July 24, 2023 / Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) (the "Company"), the parent company of Peoples Bank (the "Bank"), reported second quarter 2023 results with highlights as follows:

Second quarter 2023 highlights:

• Net earnings were $4.8 million or $0.88 per share and $0.85 per diluted share for the three months ended June 30, 2023, as compared to $3.2 million or $0.59 per share and $0.57 per diluted share for the same period one year ago.
• Net interest margin was 3.56% for the three months ended June 30, 2023, compared to 2.87% for the three months ended June 30, 2022.

Year to date highlights:

• Net earnings were $8.0 million or $1.46 per share and $1.41 per diluted share for the six months ended June 30, 2023, as compared to $6.7 million or $1.21 per share and $1.18 per diluted share for the same period one year ago.
• Cash dividends were $0.53 per share during the six months ended June 30, 2023, as compared to $0.51 per share for the prior year period.
• Total loans were $1.1 billion at June 30, 2023, as compared to $1.0 billion at December 31, 2022.
• Non-performing assets were $3.6 million or 0.22% of total assets at June 30, 2023, compared to $3.7 million or 0.23% of total assets at December 31, 2022.
• Total deposits were $1.4 billion at June 30, 2023 and December 31, 2022.
• Core deposits, a non-GAAP measure, were $1.3 billion or 92.26% of total deposits at June 30, 2023, compared to $1.4 billion or 98.14% of total deposits at December 31, 2022.
• Net interest margin was 3.67% for the six months ended June 30, 2023, compared to 2.83% for the six months ended June 30, 2022.

Net earnings were $4.8 million or $0.88 per share and $0.85 per diluted share for the three months ended June 30, 2023, as compared to $3.2 million or $0.59 per share and $0.57 per diluted share for the prior year period. Lance A. Sellers, President and Chief Executive Officer, attributed the increase in second quarter net earnings to an increase in net interest income, a decrease in non-interest expense and a decrease in the provision for credit losses, which were partially offset by a decrease in non-interest income, compared to the prior year period, as discussed below.

Net interest income was $13.8 million for the three months ended June 30, 2023, compared to $11.3 million for the three months ended June 30, 2022. The increase in net interest income is due to a $5.6 million increase in interest income, partially offset by a $3.2 million increase in interest expense. The increase in interest income is due to a $3.7 million increase in interest income and fees on loans, a $75,000 increase in interest income on balances due from banks and a $1.8 million increase in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans and rate increases by the Federal Reserve, partially offset by a $293,000 decrease in fee income on SBA PPP loans. The increase in interest income on balances due from banks is primarily due to rate increases by the Federal Reserve. The increase in interest income on investment securities is primarily due to higher yields on securities purchased after June 30, 2022. The increase in interest expense is primarily due to an increase in time deposits and an increase in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $13.4 million for the three months ended June 30, 2023, compared to $10.9 million for the three months ended June 30, 2022. The provision for credit losses for the three months ended June 30, 2023 was $375,000, compared to $410,000 for the three months ended June 30, 2022. The decrease in the provision for credit losses is primarily attributable to lower loan growth in the second quarter of 2023 compared to the second quarter of 2022, which was partially offset by an increase in qualitative adjustments for economic conditions and other factors. Total loans outstanding increased $6.9 million in the second quarter of 2023, compared to a $69.7 million increase in the second quarter of 2022.

Non-interest income was $6.4 million for the three months ended June 30, 2023, compared to $7.3 million for the three months ended June 30, 2022. The decrease in non-interest income is primarily attributable a $849,000 decrease in appraisal management fee income due to a decrease in appraisal volume.

Non-interest expense was $13.6 million for the three months ended June 30, 2023, compared to $14.2 million for the three months ended June 30, 2022. The decrease in non-interest expense is primarily attributable to a $708,000 decrease in appraisal management fee expense due to a decrease in appraisal volume.

Net earnings were $8.0 million or $1.46 per share and $1.41 per diluted share for the six months ended June 30, 2023, as compared to $6.7 million or $1.21 per share and $1.18 per diluted share for the prior year period. The increase in year-to-date net earnings is primarily attributable to an increase in net interest income and a decrease in non-interest expense, which were partially offset by a decrease in non-interest income and an increase in the provision for credit losses, compared to the prior year period, as discussed below.

Net interest income was $28.1 million for the six months ended June 30, 2023, compared to $22.0 million for the six months ended June 30, 2022. The increase in net interest income is due to a $11.1 million increase in interest income, partially offset by a $5.0 million increase in interest expense. The increase in interest income is due to a $6.9 million increase in interest income and fees on loans, a $347,000 increase in interest income on balances due from banks and a $3.9 million increase in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans and rate increases by the Federal Reserve, partially offset by a $893,000 decrease in fee income on SBA PPP loans. The increase in interest income on balances due from banks is primarily due to rate increases by the Federal Reserve. The increase in interest income on investment securities is primarily due to higher yields on securities purchased after June 30, 2022. The increase in interest expense is primarily due to an increase in time deposits and an increase in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $27.5 million for the six months ended June 30, 2023, compared to $21.5 million for the six months ended June 30, 2022. The provision for credit losses for the six months ended June 30, 2023 was $599,000, compared to $481,000 for the six months ended June 30, 2022. The increase in the provision for credit losses is primarily attributable to an increase in qualitative adjustments for economic conditions and other factors.

Non-interest income was $10.0 million for the six months ended June 30, 2023, compared to $14.4 million for the six months ended June 30, 2022. The decrease in non-interest income is primarily attributable to a $2.5 million net loss on the sale of securities and a $2.3 million decrease in appraisal management fee income due to a decrease in appraisal volume related to national trends in real estate purchases, which were partially offset by a $517,000 increase in miscellaneous non-interest income primarily due to an increase in deferred compensation income due to an increase in valuations for the assets in the deferred compensation plan. The securities sale transaction was executed in January and February 2023 to reduce risk in the investment portfolio, at a time when favorable sale conditions had developed for municipal securities. The sale also provides the Bank with more flexibility to support loan growth and reduce the need for other borrowings.

Non-interest expense was $27.3 million for the six months ended June 30, 2023, compared to $27.6 million for the six months ended June 30, 2022. The decrease in non-interest expense is primarily attributable to a $1.8 million decrease in appraisal management fee expense due to a decrease in appraisal volume related to national trends in real estate purchases, which was partially offset by a $494,000 increase in salaries and employee benefits expense primarily due to a reduction in loan origination costs due to lower loan demand and a $926,000 increase in other non-interest expenses primarily due to an increase in deferred compensation expense due to an increase in valuations for the assets in the deferred compensation plan.

Income tax expense was $1.4 million for the three months ended June 30, 2023, compared to $806,000 for the three months ended June 30, 2022. The effective tax rate was 22.20% for the three months ended June 30, 2023, compared to 20.03% for the three months ended June 30, 2022. Income tax expense was $2.2 million for the six months ended June 30, 2023, compared to $1.7 million for the six months ended June 30, 2022. The effective tax rate was 21.79% for the six months ended June 30, 2023, compared to 19.87% for the six months ended June 30, 2022. The increase in the effective tax rate is primarily due to a reduction in non-taxable investments.

Total assets were $1.6 billion as of June 30, 2023 and December 31, 2022. Available for sale securities were $394.1 million as of June 30, 2023, compared to $445.4 million as of December 31, 2022. Total loans were $1.1 billion as of June 30, 2023, compared to $1.0 billion as of December 31, 2022.

Non-performing assets were $3.6 million or 0.22% of total assets at June 30, 2023, compared to $3.7 million or 0.23% of total assets at December 31, 2022. Non-performing assets include $3.5 million in commercial and residential mortgage loans and $58,000 in other loans at June 30, 2023, compared to $3.7 million in commercial and residential mortgage loans and $8,000 in other loans at December 31, 2022.

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 $838,000, net of tax, due to a $1.1 million increase in the allowance for credit losses, comprised of a $2.3 million increase in the allowance for credit losses on unfunded commitments and a $1.2 million decrease in the allowance for credit losses on loans. The allowance for credit losses on loans was $9.8 million or 0.93% of total loans at June 30, 2023, compared to $10.5 million or 1.02% at December 31, 2022. The allowance for credit losses on unfunded commitments was $2.3 million at June 30, 2023 in the Company's CECL calculation, compared to zero at December 31, 2022 in the Company's incurred loss calculation. Management believes the current level of the allowance for credit 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 $1.4 billion at June 30, 2023 and December 31, 2022. Core deposits, a non-GAAP measure, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations of $250,000 or less, were $1.3 billion at June 30, 2023, compared to $1.4 billion at and December 31, 2022. 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 overall cost of funds and profitability. Certificates of deposit in amounts of more than $250,000 totaled $105.3 million at June 30, 2023, compared to $31.0 million at December 31, 2022. Other time deposits totaled $129.7 million at June 30, 2023, compared to $67.0 million at December 31, 2022. The increases in certificates of deposit in amounts of more than $250,000 and other time deposits are primarily due to promotional rates offered on select certificate of deposit products during the six months ended June 30, 2023.

Securities sold under agreements to repurchase were $93.2 million at June 30, 2023, compared to $47.7 million at December 31, 2022. The increase in securities sold under agreements to repurchase is primarily due to customers that transferred funds from deposits to securities sold under agreements to repurchase during the three months ended June 30, 2023. Junior subordinated debentures were $15.5 million at June 30, 2023 and December 31, 2022. Shareholders' equity was $112.4 million, or 6.97% of total assets, at June 30, 2023, compared to $105.2 million, or 6.49% of total assets, at December 31, 2022.

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
June 30, 2023, December 31, 2022 and June 30, 2022
(Dollars in thousands)

		June 30, 2023				December 31, 2022				June 30, 2022
		(Unaudited)				(Audited)				(Unaudited)
ASSETS:
Cash and due from banks		$	41,219			$	50,061			$	47,953
Interest-bearing deposits			47,822				21,535				175,754
Cash and cash equivalents			89,041				71,596				223,707
Investment securities available for sale			394,084				445,394				426,804
Other investments			2,602				2,656				2,791
Total securities			396,686				448,050				429,595
Mortgage loans held for sale			1,560				211				1,288
Loans			1,057,724				1,032,608				959,473
Less: Allowance for credit losses on loans			(9,789)				(10,494)				(9,789)
Net loans			1,047,935				1,022,114				949,684
Premises and equipment, net			16,734				18,205				16,001
Cash surrender value of life insurance			17,912				17,703				17,500
Accrued interest receivable and other assets			41,706				43,048				39,120
Total assets		$	1,611,574			$	1,620,927			$	1,676,895
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand		$	454,702			$	523,088			$	559,163
Interest-bearing demand, MMDA & savings			679,823				814,128				833,094
Time, over $250,000			105,284				31,001				30,856
Other time			129,715				66,998				70,857
Total deposits			1,369,524				1,435,215				1,493,970
Securities sold under agreements to repurchase			93,172				47,688				37,146
Junior subordinated debentures			15,464				15,464				15,464
Accrued interest payable and other liabilities			21,044				17,365				17,909
Total liabilities			1,499,204				1,515,732				1,564,489
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
5,590,799 at 6/30/23, 5,636,830 shares at 12/31/22,
5,641,030 shares at 6/30/22			51,809				52,636				52,752
Common stock held by deferred compensation trust,
at cost; 165,142 shares at 6/30/23, 169,094 shares
at 12/31/22, 165,984 shares at 6/30/22			(1,967)				(2,181)				(2,099)
Deferred compensation			1,967				2,181				2,099
Retained earnings			104,304				100,156				92,741
Accumulated other comprehensive loss			(43,743)				(47,597)				(33,087)
Total shareholders' equity			112,370				105,195				112,406
Total liabilities and shareholders' equity		$	1,611,574			$	1,620,927			$	1,676,895

CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 2023 and 2022
(Dollars in thousands, except per share amounts)

		Three months ended								Six months ended
		June 30,								June 30,
		2023				2022				2023				2022
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
INTEREST INCOME:
Interest and fees on loans		$	13,667			$	9,934			$	26,550			$	19,676
Interest on due from banks			517				442				900				553
Interest on investment securities:
U.S. Government sponsored enterprises			2,280				585				4,510				1,096
State and political subdivisions			696				1,010				1,558				1,953
Other			439				21				882				43
Total interest income			17,599				11,992				34,400				23,321
INTEREST EXPENSE:
Interest-bearing demand, MMDA & savings deposits			1,648				366				3,136				769
Time deposits			1,638				141				2,154				287
Junior subordinated debentures			259				103				507				178
Other			283				34				494				73
Total interest expense			3,828				644				6,291				1,307
NET INTEREST INCOME			13,771				11,348				28,109				22,014
PROVISION FOR CREDIT LOSSES			375				410				599				481
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES			13,396				10,938				27,510				21,533
NON-INTEREST INCOME:
Service charges			1,328				1,374				2,669				2,542
Other service charges and fees			163				178				345				371
Loss on sale of securities			-				-				(2,488)				-
Mortgage banking income			39				99				132				299
Insurance and brokerage commissions			206				256				434				496
Appraisal management fee income			2,590				3,439				4,684				6,945
Miscellaneous			2,077				1,982				4,238				3,721
Total non-interest income			6,403				7,328				10,014				14,374
NON-INTEREST EXPENSES:
Salaries and employee benefits			6,286				6,443				12,786				12,292
Occupancy			1,981				1,932				3,995				3,848
Appraisal management fee expense			2,049				2,757				3,699				5,529
Other			3,303				3,111				6,841				5,915
Total non-interest expense			13,619				14,243				27,321				27,584
EARNINGS BEFORE INCOME TAXES			6,180				4,023				10,203				8,323
INCOME TAXES			1,372				806				2,223				1,654
NET EARNINGS		$	4,808			$	3,217			$	7,980			$	6,669
PER SHARE AMOUNTS
Basic net earnings		$	0.88			$	0.59			$	1.46			$	1.21
Diluted net earnings		$	0.85			$	0.57			$	1.41			$	1.18
Cash dividends		$	0.19			$	0.18			$	0.53			$	0.51
Book value		$	20.71			$	20.53			$	20.71			$	20.53

FINANCIAL HIGHLIGHTS
For the three and six months ended June 30, 2023 and 2022, and the year ended December 31, 2022
(Dollars in thousands)

	Three months ended								Six months ended								Year ended
	June 30,								June 30,								December 31,
	2023				2022				2023				2022				2022
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Audited)
SELECTED AVERAGE BALANCES:
Available for sale securities	$	450,666			$	455,331			$	463,387			$	434,439			$	467,484
Loans		1,056,062				917,833				1,046,646				901,586				949,175
Earning assets		1,550,703				1,599,469				1,549,822				1,580,926				1,601,168
Assets		1,603,916				1,668,029				1,600,262				1,655,156				1,663,665
Deposits		1,403,751				1,485,729				1,410,542				1,462,320				1,480,113
Shareholders' equity		114,090				117,141				113,965				129,413				123,886
SELECTED KEY DATA:
Net interest margin (tax equivalent) (1)		3.56%				2.87%				3.67%				2.83%				3.22%
Return on average assets		1.20%				0.77%				1.01%				0.81%				0.97%
Return on average shareholders' equity		16.90%				11.02%				14.12%				10.39%				13.01%
Average shareholders' equity to total average assets		7.11%				7.02%				7.12%				7.82%				7.45%
									June 30, 2023				June 30, 2022				December 31, 2022
									(Unaudited)				(Unaudited)				(Audited)
ALLOWANCE FOR CREDIT LOSSES:
Allowance for credit losses on loans									$	9,789			$	9,789			$	10,494
Allowance for credit losses on unfunded commitments										2,259				-				-
Provision for credit losses (2)										599				481				1,472
Charge-offs (2)										(343)				(284)				(752)
Recoveries (2)										240				237				419
ASSET QUALITY:
Non-accrual loans									$	3,561			$	3,586			$	3,728
90 days past due and still accruing										-				-				-
Other real estate owned										-				-				-
Total non-performing assets									$	3,561			$	3,586			$	3,728
Non-performing assets to total assets										0.22%				0.21%				0.23%
Allowance for credit losses on loans to non-performing assets										274.89%				272.98%				281.49%
Allowance for credit losses on loans to total loans										0.93%				1.02%				1.02%
LOAN RISK GRADE ANALYSIS:
Percentage of loans by risk grade
Risk Grade 1 (excellent quality)										0.27%				0.57%				0.45%
Risk Grade 2 (high quality)										19.90%				19.38%				19.70%
Risk Grade 3 (good quality)										73.82%				72.85%				73.03%
Risk Grade 4 (management attention)										4.97%				5.79%				5.49%
Risk Grade 5 (watch)										0.49%				0.71%				0.68%
Risk Grade 6 (substandard)										0.55%				0.70%				0.65%
Risk Grade 7 (doubtful)										0.00%				0.00%				0.00%
Risk Grade 8 (loss)										0.00%				0.00%				0.00%

At June 30, 2023, including non-accrual loans, there was one relationship exceeding $1.0 million in the Watch risk grade ($1.6 million). There were no relationships exceeding $1.0 million in the Substandard risk grade.

(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.

(2) For the six months ended June 30, 2023 and 2022 and the year ended December 31, 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.

View source version on accesswire.com:
https://www.accesswire.com/769335/Peoples-Bancorp-Announces-Second-Quarter-2023-Results

FAQ

What were the net earnings for the second quarter of 2023?

The net earnings for the second quarter of 2023 were $4.8 million.

What was the net interest margin for the second quarter of 2023?

The net interest margin for the second quarter of 2023 was 3.56%.

What was the total loan amount at the end of June 2023?

The total loan amount at the end of June 2023 was $1.1 billion.

What were the non-performing assets as a percentage of total assets at the end of June 2023?

The non-performing assets were 0.22% of total assets at the end of June 2023.

What happened to the core deposits?

The core deposits decreased to $1.3 billion.