8-K: Peoples Bancorp of North Carolina Announces Fourth Quarter and Full Year 2023 Results

Peoples Bancorp of North Carolina reported a decrease in fourth quarter net earnings, but an increase in full year net interest margin, with total loans reaching $1.1 billion.

Summary

• Peoples Bancorp of North Carolina reported fourth quarter net earnings of $3.4 million, or $0.64 per share, down from $4.1 million, or $0.76 per share, in the same period last year.
• The company's net interest margin for the fourth quarter was 3.32%, compared to 3.78% in the prior year.
• Full year 2023 net earnings were $15.5 million, or $2.87 per share, slightly lower than the $16.1 million, or $2.94 per share, reported in 2022.
• The full year net interest margin increased to 3.51% from 3.22% in the previous year.
• Total loans reached $1.1 billion at the end of 2023, up from $1.0 billion the year before.
• Non-performing assets were $3.9 million, or 0.24% of total assets, compared to $3.7 million, or 0.23% in 2022.
• Total deposits remained stable at $1.4 billion, while core deposits decreased to $1.2 billion from $1.4 billion.
• The company paid cash dividends of $0.91 per share in 2023, compared to $0.87 per share in 2022.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to decreased earnings and net interest margin in the fourth quarter, offset by some positive trends in loan growth and full year net interest margin. The company is facing challenges but is managing them reasonably well.

Positives

• The company's full year net interest margin increased to 3.51% from 3.22% in the previous year.
• Total loans increased to $1.1 billion at the end of 2023, up from $1.0 billion in 2022.
• Cash dividends per share increased to $0.91 for the year, up from $0.87 in the prior year.
• Non-interest income increased in the fourth quarter due to higher appraisal management fee income and deferred compensation income.
• Non-interest expense decreased in the fourth quarter due to lower salaries and employee benefits and occupancy expenses.

Negatives

• Fourth quarter net earnings decreased to $3.4 million, or $0.64 per share, from $4.1 million, or $0.76 per share, year-over-year.
• The net interest margin for the fourth quarter decreased to 3.32% from 3.78% in the same period last year.
• Full year net earnings decreased to $15.5 million, or $2.87 per share, from $16.1 million, or $2.94 per share, in the previous year.
• Core deposits decreased to $1.2 billion from $1.4 billion year-over-year.
• Non-interest income decreased for the full year due to a net loss on the sale of securities and a decrease in appraisal management fee income.

Risks

• Changes in the interest rate environment could impact the company's profitability.
• General economic conditions could lead to a deterioration in credit quality and loan collectability.
• Legislative or regulatory changes, including changes in accounting standards, could affect the company.
• Competition in the markets served by the bank could impact performance.
• The company's forward-looking statements are subject to various risks and uncertainties.

Future Outlook

The press release contains forward-looking statements regarding the company's future performance, which are subject to various risks and uncertainties. The company undertakes no obligation to publicly revise these forward-looking statements.

Management Comments

• Lance A. Sellers, President and Chief Executive Officer, attributed the decrease in fourth quarter net earnings to a decrease in net interest income.
• Management believes the current level of the allowance for credit losses is adequate, but there is no assurance that additional adjustments will not be required.

Industry Context

The results reflect the challenges faced by regional banks in a changing interest rate environment, with increased interest expenses impacting net interest income. The decrease in appraisal management fee income reflects national trends in real estate purchases.

Comparison to Industry Standards

• The decrease in net interest margin in the fourth quarter is a common trend among regional banks due to rising interest rates and increased competition for deposits.
• The increase in total loans is a positive sign, but the decrease in core deposits suggests a shift in customer preferences towards higher-yielding alternatives.
• The non-performing asset ratio of 0.24% is relatively low, indicating good asset quality compared to some peers.
• The company's return on average assets of 0.97% is in line with industry averages for regional banks.

Stakeholder Impact

• Shareholders may be concerned about the decrease in fourth quarter earnings and the slight decrease in full year earnings.
• Customers may be impacted by changes in deposit rates and loan availability.
• Employees may be affected by changes in compensation and benefits.

Key Dates

Keywords

earnings, net interest margin, loans, deposits, non-performing assets, dividends, financial results, banking, PEBK