Peoples Bancorp Announces Fourth Quarter and Annual Earnings Results
NEWTON, NC / ACCESSWIRE / January 25, 2021 / Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), the parent company of Peoples Bank, reported fourth quarter and year to date earnings results with highlights as follows:
Fourth quarter highlights:
Net earnings were $1.9 million or $0.33 basic and diluted net earnings per share for the three months ended December 31, 2020, as compared to $3.0 million or $0.50 basic and diluted net earnings per share for the same period one year ago.
Year to date highlights:
Net earnings were $11.4 million or $1.95 basic and diluted net earnings per share for the year ended December 31, 2020, as compared to $14.1 million or $2.37 basic net earnings per share and $2.36 diluted net earnings per share for the same period one year ago.
Total loans increased $98.7 million to $948.6 million at December 31, 2020, compared to $849.9 million at December 31, 2019.
The Bank originated 1,127 Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, totaling $99.0 million, during the year ended December 31, 2020. The Bank has received $4.0 million in fees from the SBA for PPP loans originated as of December 31, 2020. The Bank has recognized $1.4 million PPP loan fee income as of December 31, 2020.
Core deposits were $1.2 billion or 97.89% of total deposits at December 31, 2020, compared to $932.2 million or 96.45% of total deposits at December 31, 2019.
Lance A. Sellers, President and Chief Executive Officer, attributed the decrease in fourth 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 expense during the three months ended December 31, 2020, compared to the three months ended December 31, 2019, as discussed below.
Net interest income was $11.3 million for the three months ended December 31, 2020, compared to $11.4 million for the three months ended December 31, 2019. The decrease in net interest income was primarily due to a $411,000 decrease in interest income, which was partially offset by a $284,000 decrease in interest expense. The decrease in interest income was primarily due to a $358,000 decrease in interest income on interest bearing cash resulting from the 1.50% reduction in the Fed Funds rate in March 2020. The decrease in interest expense was primarily due to a decrease in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $10.5 million for the three months ended December 31, 2020, compared to $11.2 million for the three months ended December 31, 2019. The provision for loan losses for the three months ended December 31, 2020 was $799,000, compared to $186,000 for the three months ended December 31, 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 reserves on loans with payment modifications made in 2020 as a result of the COVID-19 pandemic. At December 31, 2020, the balance of loans with existing modifications as a result of COVID-19 was $18.3 million: the balance of loans under the terms of a first modification was $12.6 million, and the balance of outstanding loans under the terms of a second modification was $5.7 million. The Company continues to track all loans that are currently modified or have been modified under COVID-19. At December 31, 2020, the balance for all loans that are currently modified or were modified during 2020 but have returned to their original terms was $119.6 million. These loan balances associated with COVID-19 related modifications have been grouped into their own pool within the 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, $101.3 million of these loans have returned to their original terms; however, the effects of stimulus in the current environment are still unknown, and additional losses may be currently present in loans that are currently modified and that were once modified.
Non-interest income was $5.9 million for the three months ended December 31, 2020, compared to $4.5 million for the three months ended December 31, 2019. The increase in non-interest income is primarily attributable to a $494,000 increase in gains on sale of securities, a $600,000 increase in appraisal management fee income due to an increase in the volume of appraisals and a $404,000 increase in mortgage banking income due to increased mortgage loan volume, which were partially offset by a $241,000 decrease in service charges and fees primarily due to service charge and fee concessions associated with the COVID-19 pandemic.
Non-interest expense was $14.1 million for the three months ended December 31, 2020, compared to $12.1 million for the three months ended December 31, 2019. The increase in non-interest expense was primarily attributable to a $863,000 increase in other non-interest expense and a $546,000 increase in appraisal management fee expense due to an increase in the volume of appraisals. The increase in other non-interest expense is primarily due to a $1.1 million FHLB ("Federal Home Loan Bank") borrowings prepayment penalty in December 2020.
Year-to-date net earnings as of December 31, 2020 were $11.4 million or $1.95 basic and diluted net earnings per share for the year ended December 31, 2020, as compared to $14.1 million or $2.37 basic net earnings per share and $2.36 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 December 31, 2020 was $44.1 million, compared to $45.8 million for the same period one year ago. The decrease in net interest income was primarily due to a $1.6 million decrease in interest income and a $79,000 increase in interest expense. The decrease in interest income was primarily due to a $987,000 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, which was partially offset by a decrease in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $39.9 million for the year ended December 31, 2020, compared to $45.0 million for the same period one year ago. The provision for loan losses for the year ended December 31, 2020 was $4.3 million, compared to $863,000 for the year ended December 31, 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 reserves on loans with payment modifications made in 2020 as a result of the COVID-19 pandemic.
Non-interest income was $22.9 million for the year ended December 31, 2020, compared to $17.7 million for the year ended December 31, 2019. The increase in non-interest income is primarily attributable to a $2.4 million increase in gains on sale of securities, a $2.3 million increase in appraisal management fee income due to an increase in the volume of appraisals and a $1.2 million increase in mortgage banking income due to increased mortgage loan volume, which were partially offset by a $1.0 million decrease in service charges and fees primarily due to service charge and fee concessions associated with the COVID-19 pandemic.
Non-interest expense was $48.9 million for the year ended December 31, 2020, compared to $45.5 million for the year ended December 31, 2019. The increase in non-interest expense was primarily attributable to a $1.9 million increase in appraisal management fee expense due to an increase in the volume of appraisals and a $692,000 increase in other non-interest expense. The increase in other non-interest expense is primarily due to a $1.1 million FHLB borrowings prepayment penalty in December 2020.
Income tax expense was $374,000 for the three months ended December 31, 2020, compared to $672,000 for the three months ended December 31, 2019. The effective tax rate was 16.30% for the three months ended December 31, 2020, compared to 18.47% for the three months ended December 31, 2019. Income tax expense was $2.5 million for the year ended December 31, 2020, compared to $3.1 million for the year ended December 31, 2019. The effective tax rate was 17.98% for the year ended December 31, 2020, compared to 18.23% for the year ended December 31, 2019.
Total assets were $1.4 billion as of December 31, 2020, compared to $1.2 billion at December 31, 2019. Available for sale securities were $245.2 million as of December 31, 2020, compared to $195.7 million as of December 31, 2019. Total loans were $948.6 million as of December 31, 2020, compared to $849.9 million as of December 31, 2019.
Non-performing assets were $3.9 million or 0.27% of total assets at December 31, 2020, compared to $3.6 million or 0.31% of total assets at December 31, 2019. Non-performing assets include $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, compared to $3.4 million in commercial and residential mortgage loans and $154,000 in other loans at December 31, 2019.
The allowance for loan losses at December 31, 2020 was $9.9 million or 1.04% of total loans, compared to $6.7 million or 0.79% of total loans at December 31, 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 December 31, 2020, compared to $966.5 million at December 31, 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 December 31, 2020, compared to $932.2 million at December 31, 2019. Certificates of deposit in amounts of $250,000 or more totaled $25.8 million at December 31, 2020, compared to $34.3 million at December 31, 2019.
Securities sold under agreements to repurchase were $26.2 million at December 31, 2020, compared to $24.2 million at December 31, 2019.
Junior subordinated debentures were $15.5 million at December 31, 2020, compared to $15.6 million at December 31, 2019.
Shareholders' equity was $139.9 million, or 9.89% of total assets, at December 31, 2020, compared to $134.1 million, or 11.61% of total assets, at December 31, 2019. The Company repurchased 126,800 shares of its common stock during the year ended December 31, 2020 under the Company's stock repurchase program, which was funded in January 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, 2019.
CONSOLIDATED BALANCE SHEETS
December 31, 2020 and 2019
(Dollars in thousands)
December 31, 2020 | December 31, 2019 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS: | ||||||||
Cash and due from banks | $ | 42,737 | $ | 48,337 | ||||
Interest-bearing deposits | 118,843 | 720 | ||||||
Federal funds sold | - | 3,330 | ||||||
Cash and cash equivalents | 161,580 | 52,387 | ||||||
Investment securities available for sale | 245,249 | 195,746 | ||||||
Other investments | 4,155 | 4,231 | ||||||
Total securities | 249,404 | 199,977 | ||||||
Mortgage loans held for sale | 9,139 | 4,417 | ||||||
Loans | 948,639 | 849,874 | ||||||
Less: Allowance for loan losses | (9,908) | (6,680 | ) | |||||
Net loans | 938,731 | 843,194 | ||||||
Premises and equipment, net | 18,600 | 18,604 | ||||||
Cash surrender value of life insurance | 16,968 | 16,319 | ||||||
Accrued interest receivable and other assets | 20,433 | 19,984 | ||||||
Total assets | $ | 1,414,855 | $ | 1,154,882 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 456,980 | $ | 338,004 | ||||
NOW, MMDA & savings | 657,834 | 516,757 | ||||||
Time, $250,000 or more | 25,771 | 34,269 | ||||||
Other time | 80,501 | 77,487 | ||||||
Total deposits | 1,221,086 | 966,517 | ||||||
Securities sold under agreements to repurchase | 26,201 | 24,221 | ||||||
FHLB borrowings | - | - | ||||||
Junior subordinated debentures | 15,464 | 15,619 | ||||||
Accrued interest payable and other liabilities | 12,205 | 14,405 | ||||||
Total liabilities | 1,274,956 | 1,020,762 | ||||||
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 12/31/20 and | ||||||||
5,912,300 shares 12/31/19 | 56,871 | 59,813 | ||||||
Retained earnings | 77,628 | 70,663 | ||||||
Accumulated other comprehensive income | 5,400 | 3,644 | ||||||
Total shareholders' equity | 139,899 | 134,120 | ||||||
Total liabilities and shareholders' equity | $ | 1,414,855 | $ | 1,154,882 | ||||
CONSOLIDATED STATEMENTS OF INCOME
For the three months and years ended December 31, 2020 and 2019
(Dollars in thousands, except per share amounts)
Three months ended | Years ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Audited) | |||||||||||||
INTEREST INCOME: | ||||||||||||||||
Interest and fees on loans | $ | 10,947 | $ | 10,784 | $ | 42,314 | $ | 43,301 | ||||||||
Interest on due from banks | 24 | 77 | 127 | 213 | ||||||||||||
Interest on federal funds sold | 26 | 331 | 204 | 331 | ||||||||||||
Interest on investment securities: | ||||||||||||||||
U.S. Government sponsored enterprises | 497 | 728 | 2,361 | 2,670 | ||||||||||||
State and political subdivisions | 649 | 650 | 2,691 | 2,915 | ||||||||||||
Other | 59 | 43 | 261 | 171 | ||||||||||||
Total interest income | 12,202 | 12,613 | 47,958 | 49,601 | ||||||||||||
INTEREST EXPENSE: | ||||||||||||||||
NOW, MMDA & savings deposits | 507 | 539 | 1,962 | 1,596 | ||||||||||||
Time deposits | 222 | 328 | 947 | 909 | ||||||||||||
FHLB borrowings | 88 | 135 | 357 | 205 | ||||||||||||
Junior subordinated debentures | 74 | 188 | 370 | 844 | ||||||||||||
Other | 50 | 35 | 200 | 203 | ||||||||||||
Total interest expense | 941 | 1,225 | 3,836 | 3,757 | ||||||||||||
NET INTEREST INCOME | 11,261 | 11,388 | 44,122 | 45,844 | ||||||||||||
PROVISION FOR LOAN LOSSES | 799 | 186 | 4,259 | 863 | ||||||||||||
NET INTEREST INCOME AFTER | ||||||||||||||||
PROVISION FOR LOAN LOSSES | 10,462 | 11,202 | 39,863 | 44,981 | ||||||||||||
NON-INTEREST INCOME: | ||||||||||||||||
Service charges | 893 | 1,167 | 3,528 | 4,576 | ||||||||||||
Other service charges and fees | 199 | 166 | 742 | 714 | ||||||||||||
Gain on sale of securities | 494 | - | 2,639 | 226 | ||||||||||||
Mortgage banking income | 834 | 430 | 2,469 | 1,264 | ||||||||||||
Insurance and brokerage commissions | 250 | 235 | 897 | 877 | ||||||||||||
Appraisal management fee income | 1,799 | 1,199 | 6,754 | 4,484 | ||||||||||||
Miscellaneous | 1,479 | 1,329 | 5,885 | 5,598 | ||||||||||||
Total non-interest income | 5,948 | 4,526 | 22,914 | 17,739 | ||||||||||||
NON-INTEREST EXPENSES: | ||||||||||||||||
Salaries and employee benefits | 6,542 | 6,178 | 23,538 | 23,238 | ||||||||||||
Occupancy | 2,208 | 1,955 | 7,933 | 7,364 | ||||||||||||
Appraisal management fee expense | 1,429 | 883 | 5,274 | 3,421 | ||||||||||||
Other | 3,937 | 3,074 | 12,186 | 11,494 | ||||||||||||
Total non-interest expense | 14,116 | 12,090 | 48,931 | 45,517 | ||||||||||||
EARNINGS BEFORE INCOME TAXES | 2,294 | 3,638 | 13,846 | 17,203 | ||||||||||||
INCOME TAXES | 374 | 672 | 2,489 | 3,136 | ||||||||||||
NET EARNINGS | $ | 1,920 | $ | 2,966 | $ | 11,357 | $ | 14,067 | ||||||||
PER SHARE AMOUNTS | ||||||||||||||||
Basic net earnings | $ | 0.33 | $ | 0.50 | $ | 1.95 | $ | 2.37 | ||||||||
Diluted net earnings | $ | 0.33 | $ | 0.50 | $ | 1.95 | $ | 2.36 | ||||||||
Cash dividends | $ | 0.15 | $ | 0.14 | $ | 0.75 | $ | 0.66 | ||||||||
Book value | $ | 24.17 | $ | 22.68 | $ | 24.17 | $ | 22.68 | ||||||||
FINANCIAL HIGHLIGHTS
For the three months and years ended December 31, 2020 and 2019
(Dollars in thousands)
Three months ended | Years ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Audited) | |||||||||||||
SELECTED AVERAGE BALANCES: | ||||||||||||||||
Available for sale securities | $ | 219,021 | $ | 185,880 | $ | 200,821 | $ | 185,302 | ||||||||
Loans | 963,691 | 849,745 | 935,970 | 834,517 | ||||||||||||
Earning assets | 1,379,293 | 1,136,318 | 1,271,765 | 1,055,730 | ||||||||||||
Assets | 1,465,094 | 1,225,963 | 1,365,642 | 1,143,338 | ||||||||||||
Deposits | 1,210,109 | 980,795 | 1,115,017 | 932,646 | ||||||||||||
Shareholders' equity | 138,831 | 133,630 | 141,286 | 134,669 | ||||||||||||
SELECTED KEY DATA: | ||||||||||||||||
Net interest margin (tax equivalent) | 3.29% | 4.04% | 3.52% | 4.42% | ||||||||||||
Return on average assets | 0.52% | 0.96% | 0.83% | 1.23% | ||||||||||||
Return on average shareholders' equity | 5.50% | 8.81% | 8.04% | 10.45% | ||||||||||||
Shareholders' equity to total assets (period end) | 9.89% | 11.61% | 9.89% | 11.61% | ||||||||||||
ALLOWANCE FOR LOAN LOSSES: | ||||||||||||||||
Balance, beginning of period | $ | 9,892 | $ | 6,578 | $ | 6,680 | $ | 6,445 | ||||||||
Provision for loan losses | 799 | 186 | 4,259 | 863 | ||||||||||||
Charge-offs | (885) | (166) | (1,414) | (1,076) | ||||||||||||
Recoveries | 102 | 82 | 383 | 448 | ||||||||||||
Balance, end of period | $ | 9,908 | $ | 6,680 | $ | 9,908 | $ | 6,680 | ||||||||
ASSET QUALITY: | ||||||||||||||||
Non-accrual loans | $ | 3,758 | $ | 3,553 | ||||||||||||
90 days past due and still accruing | - | - | ||||||||||||||
Other real estate owned | 128 | - | ||||||||||||||
Total non-performing assets | $ | 3,886 | $ | 3,553 | ||||||||||||
Non-performing assets to total assets | 0.27% | 0.31% | ||||||||||||||
Loans modifications related to COVID-19 | $ | 18,246 | $ | - | ||||||||||||
Allowance for loan losses to non-performing assets | 254.97% | 188.01% | ||||||||||||||
Allowance for loan losses to total loans | 1.04% | 0.79% | ||||||||||||||
LOAN RISK GRADE ANALYSIS:
Percentage of Loans | |||||||
By Risk Grade | |||||||
12/31/2020 | 12/31/2019 | ||||||
Risk Grade 1 (excellent quality) | 1.18% | 1.16% | |||||
Risk Grade 2 (high quality) | 20.45% | 24.46% | |||||
Risk Grade 3 (good quality) | 65.70% | 62.15% | |||||
Risk Grade 4 (management attention) | 9.75% | 10.02% | |||||
Risk Grade 5 (watch) | 2.20% | 1.45% | |||||
Risk Grade 6 (substandard) | 0.72% | 0.76% | |||||
Risk Grade 7 (doubtful) | 0.00% | 0.00% | |||||
Risk Grade 8 (loss) | 0.00% | 0.00% | |||||
At December 31, 2020, including non-accrual loans, there were three relationships exceeding $1.0 million in the Watch risk grade (which totaled $7.9 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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