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Peoples Bancorp Announces First Quarter Earnings Results

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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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