Peoples Bancorp of North Carolina(PEBK) - 2021 Q1 - Quarterly Report

Financial Performance - The Company adjusted its basic earnings per share from $0.40 to $0.41 for the three months ended March 31, 2020, reflecting changes in the fair value of mutual funds and deferred compensation liability[29]. - Net earnings for the three months ended March 31, 2021, were $4.1 million, resulting in a basic earnings per share of $0.73, an increase from $2.4 million and $0.41 per share in the same period of 2020[77]. Revenue Generation - Total revenue recognized from contracts with customers was $260,000 and $241,000 for the three months ended March 31, 2021 and 2020, respectively, from investment advisory services[36]. - Revenue from debit and credit card clearing services was $1.2 million and $972,000 for the three months ended March 31, 2021 and 2020, respectively[36]. - Revenue from appraisal management services was $1.8 million and $1.4 million for the three months ended March 31, 2021 and 2020, respectively[36]. - Total revenue for the three months ended March 31, 2021 derived from contracts in which services are transferred at a point in time was approximately $2.2 million[37]. Assets and Liabilities - An increase of $1.3 million was made to total assets and total liabilities on the Consolidated Balance Sheets due to adjustments related to mutual fund investments held in trust[28]. - The Company has over 50,000 active contracts, with no material contract liabilities or accounts receivable balances on the balance sheet[38]. - As of March 31, 2021, the total fair value of investment securities available for sale is $325.5 million, with unrealized gains of $5.6 million and unrealized losses of $2.6 million[51]. - The total loans as of March 31, 2021, amounted to $946.50 million, a slight decrease from $948.64 million as of December 31, 2020[56]. - The allowance for loan losses was $9.53 million as of March 31, 2021, down from $9.91 million at the end of 2020[56]. Loan Portfolio - Real estate loans comprised approximately 82% of the total loan portfolio, with single-family residential loans making up about 31%[57]. - Past due loans totaled $7.98 million as of March 31, 2021, with 7,605 loans being 30-89 days past due and 377 loans being 90 or more days past due[60]. - Impaired loans totaled $22.50 million as of December 31, 2020, with $21.64 million reported as of March 31, 2021[62][63]. - The bank's commercial loans, including $78.2 million in SBA Paycheck Protection Program loans, represented approximately 17% of the total loan portfolio[57]. Credit Losses and Risk Management - The Company will apply ASU 2016-13 guidance for credit losses through a cumulative-effect adjustment to retained earnings, with ongoing evaluations of its impact on consolidated financial statements[46]. - The Company has formed a Current Expected Credit Losses (CECL) committee to implement the new credit loss model and is running parallel calculations ahead of the effective date[46]. - The internal risk grading matrix assigns risk grades from 1 to 8, with ongoing evaluations of loan quality[69]. - The total amount of loans classified as Risk Grade 4 (Management Attention) was $85.2 million, which is 9% of total loans, indicating a need for closer monitoring[71]. COVID-19 Impact - The balance of loans with COVID-19 related modifications decreased to $1.9 million as of March 31, 2021, down from $18.3 million at December 31, 2020[68]. - As of March 31, 2021, $112.9 million of loans modified due to COVID-19 have returned to their original terms[68]. - The company continues to track all loans modified due to COVID-19, with a higher reserve rate applied to those loans[68]. - The Company reported recoveries of $164,000 in Q1 2021, contributing to the overall improvement in loan loss provisions[67]. Securities and Investments - The Company reported $7.96 million in U.S. Treasuries and $185.7 million in mortgage-backed securities as part of its investment portfolio[51]. - The fair value of pledged securities was approximately $76.6 million as of March 31, 2021, compared to $77.3 million at December 31, 2020[54]. - The fair value of investment securities available for sale increased from $245,249,000 on December 31, 2020, to $325,517,000 on March 31, 2021[106]. Lease Liabilities - As of March 31, 2021, the Company had operating ROU assets and operating lease liabilities both amounting to $3.2 million[108]. - Operating lease cost decreased from $224,000 in 2020 to $195,000 in 2021, representing a reduction of approximately 13%[110]. - Total lease liabilities decreased from $3.872 million as of December 31, 2020, to $3.594 million as of March 31, 2021[112].