Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - PEOPLES BANCORP OF NORTH CAROLINA INC | pebk_8k.htm |
Exhibit 99(a)
NEWS RELEASE
July
19, 2021
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
For Immediate Release
PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS
RESULTS
Peoples
Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company
of Peoples Bank, reported second quarter earnings results with
highlights as follows:
Second quarter highlights:
●
Net earnings were
$4.6 million or $0.82 basic net earnings per share and $0.80
diluted net earnings per share for the three months ended June 30,
2021, as compared to $2.6 million or $0.46 basic net earnings per
share and $0.44 diluted net earnings per share for the same period
one year ago.
●
The Bank originated
72 Small Business Administration (SBA) Paycheck Protection Program
(PPP) loans, totaling $3.3 million, during the three months ended
June 30, 2021. The Bank recognized $1.5 million in PPP loan fee
income during the three months ended June 30, 2021.
Year to date highlights:
●
Net earnings were
$8.7 million or $1.55 basic net earnings per share and $1.51
diluted net earnings per share for the six months ended June 30,
2021, as compared to $4.9 million or $0.87 basic net earnings per
share and $0.84 diluted net earnings per share for the same period
one year ago.
●
The Bank originated
419 SBA PPP loans, totaling $29.1 million, during the six months
ended June 30, 2021. The Bank recognized $2.5 million in PPP loan
fee income during the six months ended June 30, 2021.
●
Core deposits were
$1.4 billion or 98.09% of total deposits at June 30, 2021, compared
to $1.1 billion or 97.88% of total deposits at June 30,
2020.
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 the provision for loan losses and an increase
in non-interest income, which were partially offset by an increase
in non-interest expense during the three months ended June 30,
2021, compared to the three months ended June 30, 2020, as
discussed below.
Net
interest income was $11.7 million for the three months ended June
30, 2021, compared to $10.7 million for the three months ended June
30, 2020. The increase in net interest income was due to a $879,000
increase in interest income and a $70,000 decrease in interest
expense. The increase in interest income was primarily due to a
$823,000 increase in interest income and fees on loans, which was
primarily due to a $1.5 million increase in fee income on SBA PPP
loans. The decrease in interest expense was primarily due to a
decrease in Federal Home Loan Bank (“FHLB”) borrowings.
Net interest income after the provision for loan losses was $11.9
million for the three months ended June 30, 2021, compared to $9.3
million for the three months ended June 30, 2020. The provision for
loan losses for the three months ended June 30, 2021 was a credit
of $226,000, compared to an expense of $1.4 million for the three
months ended June 30, 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 a net decrease in the
volume of loans in the general reserve pool. At June 30, 2021, the
balance of loans with existing modifications as a result of the
COVID-19 pandemic was $283,000. At December 31, 2020, the balance
of loans with existing modifications as a result of the COVID-19
pandemic was $18.3 million. The Company continues to track all
loans that are currently modified or have been modified as a result
of the COVID-19 pandemic. The loan balances associated with
COVID-19 pandemic 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 the COVID-19
pandemic, $108.2 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. The $11.4 million decrease from
December 31, 2020 to June 30, 2021 in the balance of currently or
previously modified loans that had returned to their original terms
is primarily due to loans paid off during the six months ended June
30, 2021.
Non-interest income
was $6.0 million for the three months ended June 30, 2021, compared
to $5.2 million for the three months ended June 30, 2020. The
increase in non-interest income is primarily attributable to a
$593,000 increase in miscellaneous non-interest income primarily
due to an increase in debit card income resulting from increased
debit card activity and an increase in income on Small Business
Investment Company (“SBIC”) investments, and a $271,000
increase in appraisal management fee income due to an increase in
the volume of appraisals.
Non-interest
expense was $12.1 million for the three months ended June 30, 2021,
compared to $11.5 million for the three months ended June 30, 2020.
The increase in non-interest expense was primarily attributable to
a $301,000 increase in appraisal management fee expense due to an
increase in the volume of appraisals and a $170,000 increase in
other non-interest expenses.
Year-to-date net
earnings as of June 30, 2021 were $8.7 million or $1.55 basic net
earnings per share and $1.51 diluted net earnings per share for the
six months ended June 30, 2021, as compared to $4.9 million or
$0.87 basic net earnings per share and $0.84 diluted net earnings
per share for the same period one year ago. The increase in
year-to-date net earnings is primarily attributable to an increase
in net interest income, a decrease in the provision for loan losses
and an increase in non-interest income, which were partially offset
by an increase in non-interest expense during the six months ended
June 30, 2021, compared to the six months ended June 30, 2020, as
discussed below.
Year-to-date net
interest income as of June 30, 2021 was $22.8 million, compared to
$21.9 million for the same period one year ago. The increase in net
interest income was due to a $551,000 increase in interest income
and a $296,000 decrease in interest expense. The increase in
interest income was primarily due to a $807,000 increase in
interest income and fees on loans, which was primarily due to a
$2.5 million increase in fee income on SBA PPP loans. The decrease
in interest expense was primarily due to a decrease in rates paid
on interest-bearing liabilities and a decrease in FHLB borrowings.
Net interest income after the provision for loan losses was $23.5
million for the six months ended June 30, 2021, compared to $19.0
million for the same period one year ago. The provision for loan
losses for the six months ended June 30, 2021 was a credit of
$681,000, compared to an expense of $2.9 million for the six months
ended June 30, 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 a net decrease in the volume of loans
in the general reserve pool.
Non-interest income
was $11.9 million for the six months ended June 30, 2021, compared
to $9.8 million for the six months ended June 30, 2020. The
increase in non-interest income is primarily attributable to a
$708,000 increase in mortgage banking income due to an increase in
mortgage loan volume, a $737,000 increase in appraisal management
fee income due to an increase in the volume of appraisals and a
$1.0 million increase in miscellaneous non-interest income
primarily due to an increase in debit card income resulting from
increased debit card activity and an increase in income on SBIC
investments.
Non-interest
expense was $24.4 million for the six months ended June 30, 2021,
compared to $22.9 million for the six months ended June 30, 2020.
The increase in non-interest expense was primarily attributable to
a $723,000 increase in appraisal management fee expense due to an
increase in the volume of appraisals and a $590,000 increase in
salaries and employee benefits expense primarily due to increases
in insurance costs and incentive compensation.
Income
tax expense was $1.2 million for the three months ended June 30,
2021, compared to $535,000 for the three months ended June 30,
2020. The effective tax rate was 20.55% for the three months ended
June 30, 2021, compared to 17.28% for the three months ended June
30, 2020. Income tax expense was $2.2 million for the six months
ended June 30, 2021, compared to $1.0 million for the six months
ended June 30, 2020. The effective tax rate was 20.41% for the six
months ended June 30, 2021, compared to 16.90% for the six months
ended June 30, 2020.
Total
assets were $1.6 billion as of June 30, 2021, compared to $1.4
billion at December 31, 2020. Available for sale securities were
$367.5 million as of June 30, 2021, compared to $245.2 million as
of December 31, 2020. Total loans were $888.4 million as of June
30, 2021, compared to $948.6 million as of December 31, 2020. The
decrease in loans is primarily due to a $38.3 million decrease in
PPP loans primarily due to PPP loans being forgiven by the SBA
during the six months ended June 30, 2021 and a $33.7 million
decrease in commercial loans due to loan payoffs during the six
months ended June 30, 2021. The Company had $37.5 million and $75.8
million in PPP loans at June 30, 2021 and December 31, 2020,
respectively.
Non-performing
assets were $3.4 million or 0.21% of total assets at June 30, 2021,
compared to $3.9 million or 0.27% of total assets at December 31,
2020. Non-performing assets include $3.3 million in commercial and
residential mortgage loans and $67,000 in other loans at June 30,
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 June 30, 2021 was $9.3 million or
1.05% 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 $1.4
billion at June 30, 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 $1.4 billion at
June 30, 2021, compared to $1.2 billion at December 31, 2020.
Certificates of deposit in amounts of $250,000 or more totaled
$26.6 million at June 30, 2021, compared to $25.8 million at
December 31, 2020.
Securities sold
under agreements to repurchase were $31.2 million at June 30, 2021,
compared to $26.2 million at December 31, 2020. Junior subordinated
debentures were $15.5 million at June 30, 2021 and December 31,
2020. Shareholders’ equity was $145.4 million, or 9.09% of
total assets, at June 30, 2021, compared to $139.9 million, or
9.89% of total assets, at December 31, 2020.
Peoples
Bank currently 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 and Rowan 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.
CONSOLIDATED BALANCE SHEETS
June
30, 2021, December 31, 2020 and June 30, 2020
(Dollars
in thousands)
|
|
June
30,
2021
|
December
31,
2020
|
June
30,
2020
|
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
|
ASSETS:
|
|
|
|
|
Cash and due from
banks
|
$47,151
|
$42,737
|
$48,990
|
|
Interest-bearing
deposits
|
240,158
|
118,843
|
15,694
|
|
Federal funds
sold
|
-
|
-
|
124,955
|
|
Cash and cash
equivalents
|
287,309
|
161,580
|
189,639
|
|
|
|
|
|
|
Investment
securities available for sale
|
367,529
|
245,249
|
207,469
|
|
Other
investments
|
3,758
|
4,155
|
7,196
|
|
Total
securities
|
371,287
|
249,404
|
214,665
|
|
|
|
|
|
|
Mortgage loans held
for sale
|
5,501
|
9,139
|
10,594
|
|
|
|
|
|
|
Loans
|
888,360
|
948,639
|
966,543
|
|
Less: Allowance for
loan losses
|
(9,287)
|
(9,908)
|
(9,433)
|
|
Net
loans
|
879,073
|
938,731
|
957,110
|
|
|
|
|
|
|
Premises and
equipment, net
|
17,217
|
18,600
|
18,480
|
|
Cash surrender
value of life insurance
|
17,164
|
16,968
|
16,507
|
|
Accrued interest
receivable and other assets
|
22,022
|
21,753
|
19,994
|
|
Total
assets
|
$1,599,573
|
$1,416,175
|
$1,426,989
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY:
|
|
|
|
|
Deposits:
|
|
|
|
|
Noninterest-bearing
demand
|
$512,577
|
$456,980
|
$457,637
|
|
Interest-bearing
demand, MMDA & savings
|
775,009
|
657,834
|
594,948
|
|
Time, $250,000 or
more
|
26,631
|
25,771
|
24,477
|
|
Other
time
|
77,837
|
80,501
|
77,267
|
|
Total
deposits
|
1,392,054
|
1,221,086
|
1,154,329
|
|
|
|
|
|
|
Securities sold
under agreements to repurchase
|
31,249
|
26,201
|
31,747
|
|
FHLB
borrowings
|
-
|
-
|
70,000
|
|
Junior subordinated
debentures
|
15,464
|
15,464
|
15,464
|
|
Accrued interest
payable and other liabilities
|
15,432
|
13,525
|
18,408
|
|
Total
liabilities
|
1,454,199
|
1,276,276
|
1,289,948
|
|
|
|
|
|
|
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 at
6/30/21,
|
|
|
|
|
5,787,504 shares at
12/31/20 and 6/30/20
|
56,910
|
56,871
|
56,871
|
|
Common stock held
by deferred compensation trust,
|
|
|
|
|
at cost; 158,985
shares at 6/30/21, 155,469 shares
|
|
|
|
|
at 12/31/20 and
150,309 shares at 6/30/20
|
(1,901)
|
(1,796)
|
(1,700)
|
|
Deferred
compensation
|
1,901
|
1,796
|
1,700
|
|
Retained
earnings
|
84,504
|
77,628
|
72,942
|
|
Accumulated other
comprehensive income
|
3,960
|
5,400
|
7,228
|
|
Total shareholders'
equity
|
145,374
|
139,899
|
137,041
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$1,599,573
|
$1,416,175
|
$1,426,989
|
CONSOLIDATED STATEMENTS OF INCOME
For the
three and six months ended June 30, 2021 and 2020
(Dollars
in thousands, except per share amounts)
|
|
Three
months ended
|
Six months
ended
|
||
|
|
June
30,
|
June
30,
|
||
|
|
2021
|
2020
|
2021
|
2020
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
INTEREST
INCOME:
|
|
|
|
|
|
Interest and fees
on loans
|
$11,003
|
$10,180
|
$21,667
|
$20,860
|
|
Interest on due
from banks
|
48
|
41
|
83
|
84
|
|
Interest on federal
funds sold
|
-
|
22
|
-
|
145
|
|
Interest on
investment securities:
|
|
|
|
|
|
U.S. Government
sponsored enterprises
|
682
|
651
|
1,220
|
1,336
|
|
State and political
subdivisions
|
758
|
684
|
1,397
|
1,325
|
|
Other
|
26
|
60
|
72
|
138
|
|
Total interest
income
|
12,517
|
11,638
|
24,439
|
23,888
|
|
|
|
|
|
|
|
INTEREST
EXPENSE:
|
|
|
|
|
|
Interest-bearing
demand, MMDA & savings deposits
|
543
|
448
|
1,040
|
973
|
|
Time
deposits
|
191
|
224
|
403
|
501
|
|
FHLB
borrowings
|
-
|
102
|
-
|
166
|
|
Junior subordinated
debentures
|
71
|
90
|
142
|
220
|
|
Other
|
37
|
48
|
72
|
93
|
|
Total interest
expense
|
842
|
912
|
1,657
|
1,953
|
|
|
|
|
|
|
|
NET
INTEREST INCOME
|
11,675
|
10,726
|
22,782
|
21,935
|
|
PROVISION
FOR (RECOVERY OF) LOAN LOSSES
|
(226)
|
1,417
|
(681)
|
2,938
|
|
NET
INTEREST INCOME AFTER
|
|
|
|
|
|
PROVISION
FOR LOAN LOSSES
|
11,901
|
9,309
|
23,463
|
18,997
|
|
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
|
|
Service
charges
|
910
|
718
|
1,836
|
1,826
|
|
Other service
charges and fees
|
171
|
162
|
383
|
355
|
|
Mortgage banking
income
|
723
|
563
|
1,593
|
885
|
|
Insurance and
brokerage commissions
|
238
|
205
|
498
|
447
|
|
Appraisal
management fee income
|
2,005
|
1,734
|
3,821
|
3,084
|
|
Miscellaneous
|
1,993
|
1,400
|
3,782
|
2,780
|
|
Total non-interest
income
|
6,040
|
5,239
|
11,913
|
9,834
|
|
|
|
|
|
|
|
NON-INTEREST
EXPENSES:
|
|
|
|
|
|
Salaries and
employee benefits
|
5,666
|
5,535
|
11,849
|
11,259
|
|
Occupancy
|
1,939
|
1,861
|
3,892
|
3,782
|
|
Appraisal
management fee expense
|
1,634
|
1,333
|
3,090
|
2,367
|
|
Other
|
2,893
|
2,723
|
5,569
|
5,493
|
|
Total non-interest
expense
|
12,132
|
11,452
|
24,400
|
22,901
|
|
|
|
|
|
|
|
EARNINGS BEFORE
INCOME TAXES
|
5,809
|
3,096
|
10,976
|
5,930
|
|
INCOME
TAXES
|
1,194
|
535
|
2,240
|
1,002
|
|
|
|
|
|
|
|
NET
EARNINGS
|
$4,615
|
$2,561
|
$8,736
|
$4,928
|
|
|
|
|
|
|
|
PER
SHARE AMOUNTS
|
|
|
|
|
|
Basic net
earnings
|
$0.82
|
$0.46
|
$1.55
|
$0.87
|
|
Diluted net
earnings
|
$0.80
|
$0.44
|
$1.51
|
$0.84
|
|
Cash
dividends
|
$0.16
|
$0.15
|
$0.32
|
$0.45
|
|
Book
value
|
$25.82
|
$24.82
|
$25.82
|
$24.82
|
FINANCIAL HIGHLIGHTS
For the
three and six months ended June 30, 2021 and 2020, and the year
ended December 31, 2020
(Dollars
in thousands)
|
|
Three
months ended
|
Six months
ended
|
Year
ended
|
||
|
|
June
30,
|
June
30,
|
December
31,
|
||
|
|
2021
|
2020
|
2021
|
2020
|
2020
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
SELECTED
AVERAGE BALANCES:
|
|
|
|
|
|
|
Available for sale
securities
|
$346,889
|
$195,101
|
$305,127
|
$191,986
|
$200,821
|
|
Loans
|
916,393
|
947,344
|
931,714
|
904,489
|
935,970
|
|
Earning
assets
|
1,477,256
|
1,258,583
|
1,425,990
|
1,181,237
|
1,271,764
|
|
Assets
|
1,563,570
|
1,360,408
|
1,510,789
|
1,278,673
|
1,365,642
|
|
Deposits
|
1,370,159
|
1,104,394
|
1,319,755
|
1,038,839
|
1,115,019
|
|
Shareholders'
equity
|
141,167
|
134,803
|
142,566
|
135,775
|
141,287
|
|
|
|
|
|
|
|
|
SELECTED
KEY DATA:
|
|
|
|
|
|
|
Net interest margin
(tax equivalent)
|
3.20%
|
3.48%
|
3.26%
|
3.79%
|
3.52%
|
|
Return on average
assets
|
1.18%
|
0.76%
|
1.17%
|
0.78%
|
0.83%
|
|
Return on average
shareholders' equity
|
13.11%
|
7.64%
|
12.36%
|
7.30%
|
8.04%
|
|
Average
shareholders' equity to total average assets
|
9.03%
|
9.91%
|
9.44%
|
9.91%
|
9.89%
|
|
|
|
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES:
|
|
|
|
|
|
|
Balance, beginning
of period
|
$9,532
|
$8,112
|
$9,908
|
$6,680
|
$6,680
|
|
Provision for
(Recovery of) loan losses
|
(226)
|
1,417
|
(681)
|
2,938
|
4,259
|
|
Charge-offs
|
(151)
|
(168)
|
(236)
|
(378)
|
(1,414)
|
|
Recoveries
|
132
|
72
|
296
|
193
|
383
|
|
Balance, end of
period
|
$9,287
|
$9,433
|
$9,287
|
$9,433
|
$9,908
|
|
|
June
30,
2021
|
June
30,
2020
|
December
31,
2020
|
|
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
ASSET
QUALITY:
|
|
|
|
|
Non-accrual
loans
|
$3,378
|
$3,999
|
$3,758
|
|
90 days past due
and still accruing
|
-
|
-
|
-
|
|
Other real estate
owned
|
-
|
-
|
128
|
|
Total
non-performing assets
|
$3,378
|
$3,999
|
$3,886
|
|
Non-performing
assets to total assets
|
0.21%
|
0.28%
|
0.27%
|
|
Loans modifications
related to COVID-19
|
$283
|
$120,569
|
$18,246
|
|
Allowance for loan
losses to non-performing assets
|
274.93%
|
235.88%
|
254.97%
|
|
Allowance for loan
losses to total loans
|
1.05%
|
0.98%
|
1.04%
|
|
Allowance for loan
losses to total loans, excluding PPP loans
|
1.09%
|
1.09%
|
1.14%
|
|
LOAN
RISK GRADE ANALYSIS:
|
|
|
|
|
Percentage
of loans by risk grade
|
|
|
|
|
|
|
|
|
|
Risk Grade 1
(excellent quality)
|
0.63%
|
1.58%
|
1.18%
|
|
Risk Grade 2 (high
quality)
|
19.16%
|
21.64%
|
20.45%
|
|
Risk Grade 3 (good
quality)
|
68.78%
|
65.35%
|
65.70%
|
|
Risk Grade 4
(management attention)
|
8.68%
|
9.39%
|
9.75%
|
|
Risk Grade 5
(watch)
|
1.97%
|
1.26%
|
2.20%
|
|
Risk Grade 6
(substandard)
|
0.78%
|
0.78%
|
0.72%
|
|
Risk Grade 7
(doubtful)
|
0.00%
|
0.00%
|
0.00%
|
|
Risk Grade 8
(loss)
|
0.00%
|
0.00%
|
0.00%
|
At June 30, 2021, including non-accrual loans, there were three
relationships exceeding $1.0 million in the Watch risk grade (which
totaled $8.3 million). There were no relationships exceeding $1.0
million in the Substandard risk grade.