EX-99.1 2 pebk_ex99a.htm PRESS RELEASE pebk_ex99a
  Exhibit 99(a)

NEWS RELEASE
April 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 FIRST QUARTER EARNINGS RESULTS
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.
 
 
 
 

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.