Peoples Bancorp Announces Third Quarter Earnings Results

Rhea-AI Summary

Peoples Bancorp of North Carolina (NASDAQ:PEBK) reported third quarter earnings of $4.5 million, or $0.78 per share, up from $3.6 million in Q3 2019. Year-to-date earnings are $9.4 million, a decline from $11.1 million a year ago. Total loans rose by $128.3 million to $973.9 million, boosted by 1,127 PPP loans totaling $99 million. Non-interest income increased to $7.1 million, mainly due to higher gains on securities, while non-interest expenses grew to $11.9 million. The provision for loan losses increased to $522,000, reflecting the economic impact of COVID-19.

Positive

• Net earnings increased to $4.5 million in Q3 2020, up from $3.6 million in Q3 2019.
• Total loans rose by $128.3 million year-over-year, totaling $973.9 million as of September 30, 2020.
• Non-interest income increased significantly to $7.1 million, largely from gains on securities.

Negative

• Year-to-date net earnings decreased to $9.4 million, down from $11.1 million in 2019.
• Net interest income declined to $10.9 million in Q3 2020 from $11.4 million in Q3 2019.
• The provision for loan losses rose to $522,000 in Q3 2020, up from $422,000 in Q3 2019.

NEWTON, NC / ACCESSWIRE / October 19, 2020 / Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), the parent company of Peoples Bank, reported third quarter earnings results with highlights as follows:

Third quarter highlights:

• Net earnings were $4.5 million or $0.78 basic and diluted net earnings per share for the three months ended September 30, 2020, as compared to $3.6 million or $0.62 basic net earnings per share and $0.61 diluted net earnings per share for the same period one year ago.

Year to date highlights:

• Net earnings were $9.4 million or $1.62 basic and diluted net earnings per share for the nine months ended September 30, 2020, as compared to $11.1 million or $1.87 basic net earnings per share and $1.86 diluted net earnings per share for the same period one year ago.
• Total loans increased $128.3 million to $973.9 million at September 30, 2020, compared to $845.6 million at September 30, 2019.
• The Bank originated 1,127 Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, totaling $99.0 million, during the nine months ended September 30, 2020. The Bank has received $4.0 million in fees from the SBA for PPP loans originated as of September 30, 2020. The Bank has recognized $361,000 PPP loan fee income as of September 30, 2020.
• Core deposits were $1.2 billion or 97.92% of total deposits at September 30, 2020, compared to $928.3 million or 96.54% of total deposits at September 30, 2019.

Lance A. Sellers, President and Chief Executive Officer, attributed the increase in third quarter net earnings to an increase in non-interest income, which was partially offset by a decrease in net interest income, an increase in the provision for loan losses and an increase in non-interest expense during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, as discussed below.

Net interest income was $10.9 million for the three months ended September 30, 2020, compared to $11.4 million for the three months ended September 30, 2019. The decrease in net interest income was primarily due to a $562,000 decrease in interest income, which was partially offset by a $52,000 decrease in interest expense. The decrease in interest income was primarily due to a $497,000 decrease in interest income on loans resulting from the 1.50% reduction in the Prime Rate in March 2020. The decrease in interest expense was primarily due to a decrease in the average outstanding balance of junior subordinated debentures. Net interest income after the provision for loan losses was $10.4 million for the three months ended September 30, 2020, compared to $11.0 million for the three months ended September 30, 2019. The provision for loan losses for the three months ended September 30, 2020 was $522,000, compared to $422,000 for the three months ended September 30, 2019. The increase in the provision for loan losses is primarily attributable to increases in the qualitative factors applied in the Company's Allowance for Loan and Lease Losses ("ALLL") model due to the impact to the economy from the COVID-19 pandemic and a $29.8 million increase in loans, excluding $98.4 million in SBA PPP loans, from September 30, 2019 to September 30, 2020. PPP loans are excluded from ALLL as PPP loans are 100 percent guaranteed by SBA. The ALLL model also includes reserves on $119.7 million in loans with payment modifications made in 2020 as a result of the COVID-19 pandemic.

Non-interest income was $7.1 million for the three months ended September 30, 2020, compared to $4.7 million for the three months ended September 30, 2019. The increase in non-interest income is primarily attributable to a $1.7 million increase in gains on sale of securities, a $560,000 increase in appraisal management fee income due to an increase in the volume of appraisals and a $374,000 increase in mortgage banking income due to increased mortgage loan volume, which were partially offset by a $383,000 decrease in service charges and fees primarily due to service charge and fee concessions associated with the COVID-19 pandemic.

Non-interest expense was $11.9 million for the three months ended September 30, 2020, compared to $11.3 million for the three months ended September 30, 2019. The increase in non-interest expense was primarily attributable to a $466,000 increase in appraisal management fee expense due to an increase in the volume of appraisals.

Year-to-date net earnings as of September 30, 2020 were $9.4 million or $1.62 basic and diluted net earnings per share for the nine months ended September 30, 2020, as compared to $11.1 million or $1.87 basic net earnings per share and $1.86 diluted net earnings per share for the same period one year ago. 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, as discussed below.

Year-to-date net interest income as of September 30, 2020 was $32.9 million, compared to $34.5 million for the same period one year ago. The decrease in net interest income was primarily due to a $1.2 million decrease in interest income and a $363,000 increase in interest expense. The decrease in interest income was primarily due to a $1.2 million decrease in interest income on loans resulting from the 1.50% reduction in the Prime Rate in March 2020. The increase in interest expense was primarily due to an increase in average outstanding balances of interest-bearing deposits and FHLB borrowings. Net interest income after the provision for loan losses was $29.4 million for the nine months ended September 30, 2020, compared to $33.8 million for the same period one year ago. The provision for loan losses for the nine months ended September 30, 2020 was $3.5 million, compared to $677,000 for the nine months ended September 30, 2019. The increase in the provision for loan losses is primarily attributable to increases in the qualitative factors applied in the Company's ALLL model due to the impact to the economy from the COVID-19 pandemic and a $29.8 million increase in loans, excluding $98.4 million in SBA PPP loans, from September 30, 2019 to September 30, 2020. PPP loans are excluded from ALLL as PPP loans are 100 percent guaranteed by SBA. The ALLL model also includes reserves on $119.7 million in loans with payment modifications made in 2020 as a result of the COVID-19 pandemic.

Non-interest income was $17.0 million for the nine months ended September 30, 2020, compared to $13.2 million for the nine months ended September 30, 2019. The increase in non-interest income is primarily attributable to a $1.9 million increase in gains on sale of securities, a $1.7 million increase in appraisal management fee income due to an increase in the volume of appraisals and a $801,000 increase in mortgage banking income due to increased mortgage loan volume, which were partially offset by a $779,000 decrease in service charges and fees primarily due to service charge and fee concessions associated with the COVID-19 pandemic.

Non-interest expense was $34.8 million for the nine months ended September 30, 2020, compared to $33.4 million for the nine months ended September 30, 2019. The increase in non-interest expense was primarily due to an $1.3 million increase in appraisal management fee expense due to an increase in the volume of appraisals.

Income tax expense was $1.1 million for the three months ended September 30, 2020, compared to $834,000 for the three months ended September 30, 2019. The effective tax rate was 19.80% for the three months ended September 30, 2020, compared to 18.72% for the three months ended September 30, 2019. Income tax expense was $2.1 million for the nine months ended September 30, 2020, compared to $2.5 million for the nine months ended September 30, 2019. The effective tax rate was 18.31% for the nine months ended September 30, 2020, compared to 18.16% for the nine months ended September 30, 2019.

Total assets were $1.5 billion as of September 30, 2020, compared to $1.2 billion at September 30, 2019. Available for sale securities were $223.0 million as of September 30, 2020, compared to $186.3 million as of September 30, 2019. Total loans were $973.9 million as of September 30, 2020, compared to $845.6 million as of September 30, 2019.

Non-performing assets were $3.7 million or 0.25% of total assets at September 30, 2020, compared to $3.3 million or 0.27% of total assets at September 30, 2019. Non-performing assets include $3.3 million in commercial and residential mortgage loans, $272,000 in other loans and $128,000 in other real estate owned at September 30, 2020, compared to $3.1 million in commercial and residential mortgage loans, $146,000 in other loans and $26,000 in other real estate owned at September 30, 2019.

The allowance for loan losses at September 30, 2020 was $9.9 million or 1.02% of total loans, compared to $6.6 million or 0.78% of total loans at September 30, 2019. 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 $1.2 billion at September 30, 2020, compared to $961.6 million at September 30, 2019. Core deposits, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, were $1.2 billion at September 30, 2020, compared to $928.3 million at September 30, 2019. Certificates of deposit in amounts of $250,000 or more totaled $24.7 million at September 30, 2020, compared to $33.1 million at September 30, 2019.

Securities sold under agreements to repurchase were $34.2 million at September 30, 2020, compared to $21.9 million at September 30, 2019.

FHLB borrowings totaled $70.0 million at September 30, 2020 and 2019.

Junior subordinated debentures were $15.5 million at September 30, 2020, compared to $20.6 million at September 30, 2019. The decrease in junior subordinated debentures is the result of a $5.0 million redemption of the Company's outstanding trust preferred securities during the fourth quarter of 2019.

Shareholders' equity was $139.5 million, or 9.54% of total assets, at September 30, 2020, compared to $132.7 million, or 10.85% of total assets, at September 30, 2019. The Company repurchased 126,800 shares of its common stock during the nine months ended September 30, 2020 under the Company's stock repurchase program, which was funded in January 2020.

Peoples Bank currently operates 19 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Iredell and Wake Counties. The Bank opened a new branch office on Westchase Boulevard in Raleigh, NC in August 2020 to relocate the Raleigh office from its previous location, which was closed in February 2020. The Bank closed its branch on Central Avenue in Charlotte, NC on October 2, 2020 due to space limitations. Central Avenue branch customers have been transferred to the Bank's South Boulevard, Charlotte, NC branch. 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, 2019.

CONSOLIDATED BALANCE SHEETS
September 30, 2020, December 31, 2019 and September 30, 2019
(Dollars in thousands)

		September 30, 2020				December 31, 2019				September 30, 2019
		(Unaudited)				(Audited)				(Unaudited)
ASSETS:
Cash and due from banks		$	48,355			$	48,337			$	48,605
Interest-bearing deposits			15,778				720				80,948
Federal funds sold			140,095				3,330				-
Cash and cash equivalents			204,228				52,387				129,553
Investment securities available for sale			222,991				195,746				186,263
Other investments			7,163				4,231				7,239
Total securities			230,154				199,977				193,502
Mortgage loans held for sale			8,960				4,417				4,263
Loans			973,871				849,874				845,599
Less: Allowance for loan losses			(9,892)				(6,680	)			(6,578)
Net loans			963,979				843,194				839,021
Premises and equipment, net			19,057				18,604				18,730
Cash surrender value of life insurance			16,742				16,319				16,222
Accrued interest receivable and other assets			19,128				19,984				21,908
Total assets		$	1,462,248			$	1,154,882			$	1,223,199
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand		$	455,199			$	338,004			$	339,081
NOW, MMDA & savings			626,674				516,757				509,611
Time, $250,000 or more			24,717				34,269				33,082
Other time			79,806				77,487				79,794
Total deposits			1,186,396				966,517				961,568
Securities sold under agreements to repurchase			34,151				24,221				21,927
FHLB borrowings			70,000				-				70,000
Junior subordinated debentures			15,464				15,619				20,619
Accrued interest payable and other liabilities			16,786				14,405				16,402
Total liabilities			1,322,797				1,020,762				1,090,516
Shareholders' equity:
Series A preferred stock, $1,000 stated value; authorized
5,000,000 shares; no shares issued and outstanding			-				-				-
Common stock, no par value; authorized
20,000,000 shares; issued and outstanding
5,787,504 shares 9/30/20
5,912,300 shares 12/31/19, 5,912,300 shares 9/30/19			56,871				59,813				59,813
Retained earnings			76,580				70,663				68,528
Accumulated other comprehensive income			6,000				3,644				4,342
Total shareholders' equity			139,451				134,120				132,683
Total liabilities and shareholders' equity		$	1,462,248			$	1,154,882			$	1,223,199

CONSOLIDATED STATEMENTS OF INCOME

For the three and nine months ended September 30, 2020 and 2019
(Dollars in thousands, except per share amounts)

		Three months ended								Nine months ended
		September 30,								September 30,
		2020				2019				2020				2019
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
INTEREST INCOME:
Interest and fees on loans		$	10,507			$	11,004			$	31,367			$	32,517
Interest on due from banks			19				87				103				136
Interest on federal funds sold			33				-				178				-
Interest on investment securities:
U.S. Government sponsored enterprises			528				628				1,864				1,942
State and political subdivisions			717				671				2,042				2,265
Other			64				40				202				128
Total interest income			11,868				12,430				35,756				36,988
INTEREST EXPENSE:
NOW, MMDA & savings deposits			482				455				1,455				1,057
Time deposits			224				259				725				581
FHLB borrowings			103				21				269				70
Junior subordinated debentures			76				210				296				656
Other			57				49				150				168
Total interest expense			942				994				2,895				2,532
NET INTEREST INCOME			10,926				11,436				32,861				34,456
PROVISION FOR LOAN LOSSES			522				422				3,460				677
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES			10,404				11,014				29,401				33,779
NON-INTEREST INCOME:
Service charges			809				1,178				2,635				3,409
Other service charges and fees			188				202				543				548
Gain/(loss) on sale of securities			1,688				(5	)			2,145				226
Mortgage banking income			750				376				1,635				834
Insurance and brokerage commissions			200				206				647				642
Appraisal management fee income			1,871				1,311				4,955				3,285
Miscellaneous			1,626				1,440				4,406				4,269
Total non-interest income			7,132				4,708				16,966				13,213
NON-INTEREST EXPENSES:
Salaries and employee benefits			5,737				5,695				16,996				17,060
Occupancy			1,943				1,861				5,725				5,409
Appraisal management fee expense			1,478				1,012				3,845				2,538
Other			2,756				2,699				8,249				8,420
Total non-interest expense			11,914				11,267				34,815				33,427
EARNINGS BEFORE INCOME TAXES			5,622				4,455				11,552				13,565
INCOME TAXES			1,113				834				2,115				2,464
NET EARNINGS		$	4,509			$	3,621			$	9,437			$	11,101
PER SHARE AMOUNTS
Basic net earnings		$	0.78			$	0.62			$	1.62			$	1.87
Diluted net earnings		$	0.78			$	0.61			$	1.62			$	1.86
Cash dividends		$	0.15			$	0.14			$	0.60			$	0.52
Book value		$	24.10			$	22.44			$	24.10			$	22.44

FINANCIAL HIGHLIGHTS
For the three and nine months ended September 30, 2020 and 2019
(Dollars in thousands)

		Three months ended								Nine months ended
		September 30,								September 30,
		2020				2019				2020				2019
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
SELECTED AVERAGE BALANCES:
Available for sale securities		$	200,101			$	180,439			$	194,710			$	185,107
Loans			970,529				840,523				926,663				829,385
Earning assets			1,343,323				1,044,159				1,235,660				1,028,573
Assets			1,438,238				1,139,256				1,332,249				1,122,226
Deposits			1,170,627				939,254				1,083,089				916,420
Shareholders' equity			140,007				131,890				140,191				132,053
SELECTED KEY DATA:
Net interest margin (tax equivalent)			3.28%				4.41%				3.60%				4.56%
Return on average assets			1.25%				1.26%				0.95%				1.32%
Return on average shareholders' equity			12.81%				10.89%				8.99%				11.24%
Shareholders' equity to total assets (period end)			9.54%				10.85%				9.54%				10.85%
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period		$	9,433			$	6,541			$	6,680			$	6,445
Provision for loan losses			522				422				3,460				677
Charge-offs			(152)				(551	)			(529)				(911	)
Recoveries			89				166				281				367
Balance, end of period		$	9,892			$	6,578			$	9,892			$	6,578
ASSET QUALITY:
Non-accrual loans										$	3,475			$	3,258
90 days past due and still accruing											84				-
Other real estate owned											128				26
Total non-performing assets										$	3,687			$	3,284
Non-performing assets to total assets											0.25%				0.27%
Loans modifications related to COVID-19										$	119,706			$	-
Allowance for loan losses to non-performing assets											268.29%				200.30%
Allowance for loan losses to total loans											1.02%				0.78%

LOAN RISK GRADE ANALYSIS:
		Percentage of Loans
		By Risk Grade
		9/30/20				9/30/19
Risk Grade 1 (excellent quality)			0.68%				0.60%
Risk Grade 2 (high quality)			20.89%				25.00%
Risk Grade 3 (good quality)			65.93%				61.91%
Risk Grade 4 (management attention)			9.89%				10.32%
Risk Grade 5 (watch)			1.90%				1.43%
Risk Grade 6 (substandard)			0.71%				0.74%
Risk Grade 7 (doubtful)			0.00%				0.00%
Risk Grade 8 (loss)			0.00%				0.00%

At September 30, 2020, including non-accrual loans, there were three relationships exceeding $1.0 million in the Watch risk grade (which totaled $8.0 million). There were no relationships exceeding $1.0 million in the Substandard risk grade.

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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https://www.accesswire.com/610686/Peoples-Bancorp-Announces-Third-Quarter-Earnings-Results

FAQ

What were Peoples Bancorp's earnings results for Q3 2020?

Peoples Bancorp reported net earnings of $4.5 million or $0.78 per share for Q3 2020.

How did total loans perform for Peoples Bancorp by September 30, 2020?

Total loans increased by $128.3 million to $973.9 million as of September 30, 2020.

What factors contributed to the decline in year-to-date earnings for Peoples Bancorp?

The decline in year-to-date earnings to $9.4 million was primarily attributed to decreased net interest income and a higher provision for loan losses.

What is the provision for loan losses for Peoples Bancorp in Q3 2020?

The provision for loan losses for Q3 2020 was $522,000, compared to $422,000 in Q3 2019.