8-K: Peoples Bancorp of North Carolina Reports Third Quarter 2024 Earnings

Peoples Bancorp of North Carolina announced its third quarter 2024 results, showing a slight decrease in net earnings compared to the same period last year.

Summary

• Peoples Bancorp of North Carolina reported net earnings of $4.0 million, or $0.74 per share ($0.72 diluted), for the third quarter of 2024, compared to $4.1 million, or $0.76 per share ($0.74 diluted), for the same period in 2023.
• The net interest margin was 3.35% for the third quarter of 2024, slightly down from 3.39% in the third quarter of 2023.
• Year-to-date net earnings reached $12.8 million, or $2.41 per share ($2.33 diluted), compared to $12.1 million, or $2.22 per share ($2.15 diluted), for the same period last year.
• Total loans increased to $1.12 billion as of September 30, 2024, up from $1.09 billion at the end of 2023.
• Total deposits grew to $1.48 billion as of September 30, 2024, compared to $1.39 billion at the end of 2023.
• Core deposits were $1.34 billion, representing 90.30% of total deposits, up from $1.24 billion, or 89.30% of total deposits, at the end of 2023.
• The decrease in third quarter net earnings was attributed to a decrease in non-interest income and an increase in non-interest expense, partially offset by an increase in net interest income and a decrease in the provision for credit losses.
• The provision for credit losses decreased to $297,000 for the third quarter of 2024, compared to $562,000 for the same period in 2023, primarily due to a reduction in reserves on construction loans.
• Non-interest expense increased to $15.0 million for the third quarter of 2024, compared to $14.3 million for the same period in 2023, due to increased occupancy and appraisal management fees.
• The company's total assets were $1.66 billion as of September 30, 2024, compared to $1.64 billion as of December 31, 2023.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to a decrease in quarterly earnings and a slight decrease in net interest margin, although year-to-date results show improvement. The company is facing some headwinds with increased expenses and charge-offs.

Positives

• Year-to-date net earnings increased to $12.8 million, or $2.41 per share, compared to $12.1 million, or $2.22 per share, for the same period last year.
• Total loans increased to $1.12 billion as of September 30, 2024, up from $1.09 billion at the end of 2023.
• Total deposits grew to $1.48 billion as of September 30, 2024, compared to $1.39 billion at the end of 2023.
• Core deposits increased to $1.34 billion, representing 90.30% of total deposits, up from $1.24 billion, or 89.30% of total deposits, at the end of 2023.
• The provision for credit losses decreased to $297,000 for the third quarter of 2024, compared to $562,000 for the same period in 2023.
• Net interest income after the provision for credit losses was $13.3 million for the three months ended September 30, 2024, compared to $12.8 million for the three months ended September 30, 2023.
• The company's total assets were $1.66 billion as of September 30, 2024, compared to $1.64 billion as of December 31, 2023.

Negatives

• Third quarter 2024 net earnings decreased to $4.0 million, or $0.74 per share, compared to $4.1 million, or $0.76 per share, in the same period last year.
• The net interest margin for the third quarter of 2024 was 3.35%, slightly lower than the 3.39% reported in the third quarter of 2023.
• Non-interest expense increased to $15.0 million for the third quarter of 2024, compared to $14.3 million for the same period in 2023.
• Net charge-offs for the nine months ended September 30, 2024 were $956,000, compared to $297,000 for the nine months ended September 30, 2023.
• The increase in non-interest expense is primarily attributable to a $458,000 increase in occupancy expense primarily due to a 362,000 write-off of leasehold improvements for the Banks branch in Cary, North Carolina, which was closed in June 2024.

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 collectibility.
• Legislative or regulatory changes, including changes in accounting standards, could affect the company's operations.
• The company faces competition in the markets it serves.
• The impact of changes in monetary and fiscal policies, laws, rules and regulations could affect the company's performance.
• Hurricane Helene caused $669,000 in additional reserves for expected losses.

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 to reflect subsequent events or circumstances.

Management Comments

• William D. Cable, Sr., President and Chief Executive Officer, attributed the decrease in third quarter net earnings to a decrease in non-interest income and an increase in non-interest expense, which were partially offset by an increase in net interest income and a decrease in the provision for credit losses.
• Management believes the current level of the allowance for credit losses is adequate; however, there is no guarantee that additional adjustments to the allowance will not be required because of changes in economic conditions, regulatory requirements or other factors.
• Management believes it is useful to calculate and present core deposits because of the positive impact this low cost funding source provides to the Banks overall cost of funds and profitability.

Industry Context

The results reflect the current banking environment, with changes in interest rates and economic conditions impacting net interest margins and loan portfolios. The company's focus on core deposits and managing credit losses is consistent with industry trends.

Comparison to Industry Standards

• Peoples Bancorp's net interest margin of 3.35% is within the range of regional banks, but slightly lower than some peers.
• The company's non-performing asset ratio of 0.24% is relatively low, indicating good asset quality compared to industry averages.
• The increase in total loans and deposits is a positive sign, reflecting growth in the company's core business.
• The company's return on average assets of 0.95% and return on average shareholders' equity of 12.35% are within the range of regional banks, but could be improved.
• Compared to other regional banks like First Bancorp (FBNC) and United Community Banks (UCBI), Peoples Bancorp's growth in deposits and loans is moderate, but its asset quality is strong.

Stakeholder Impact

• Shareholders may be concerned about the slight decrease in third quarter earnings, but encouraged by the year-to-date growth.
• Employees may be affected by changes in expenses and branch closures.
• Customers may benefit from the increase in deposits and loans, but may be impacted by branch closures.
• Creditors may view the company's strong asset quality and capital position positively.

Key Dates

Keywords

earnings, net interest margin, loans, deposits, core deposits, credit losses, non-interest income, non-interest expense, financial results, banking