Peoples Bancorp of North Carolina(US:PEBK)2022-05-06 18:10Investment Securities - As of March 31, 2022, the total fair value of investment securities available for sale was $408.037 million, with an amortized cost of $431.723 million, resulting in unrealized losses of $25.216 million[43]. - The company reported unrealized losses on debt securities due to changing interest rates, which are considered temporary, totaling $25.2 million as of March 31, 2022, compared to $5.5 million at December 31, 2021[43]. - The investment securities portfolio included U.S. Treasuries valued at $10.369 million, with unrealized losses of $565, and mortgage-backed securities valued at $224.655 million, with unrealized losses of $9.901 million[38]. - No securities available for sale were sold during the three months ended March 31, 2022, and 2021, indicating a stable investment strategy[45]. - The amortized cost of securities due within one year was $2.608 million, with a fair value of $2.623 million, reflecting a slight increase[45]. - Securities with a fair value of approximately $99.7 million were pledged to secure public deposits and for other legal purposes as of March 31, 2022[46]. Loan Portfolio - As of March 31, 2022, total loans amounted to $889,758,000, a slight increase from $884,869,000 on December 31, 2021, representing a growth of approximately 1.0%[47]. - Total net loans as of March 31, 2022, were $880,332,000, compared to $875,514,000 at the end of 2021, indicating a net increase of about 0.9%[47]. - Real estate loans constituted approximately 90% of the total loan portfolio, with commercial real estate loans making up about 40% of the total[55]. - Single-family residential loans represented around 33% of the total loan portfolio, with Banco de la Gente non-traditional loans accounting for approximately 2%[50]. - As of March 31, 2022, impaired loans totaled $18,129,000, a decrease from $19,505,000 on December 31, 2021, reflecting a reduction of about 7.1%[61]. - The allowance for loan losses was $9,426,000 as of March 31, 2022, compared to $9,355,000 at the end of 2021, showing a slight increase of 0.8%[47]. - Non-accrual loans amounted to $3,309,000 as of March 31, 2022, down from $3,230,000 on December 31, 2021, indicating a decrease of approximately 2.4%[59]. - The bank's construction and land development loans comprised about 11% of the total loan portfolio as of March 31, 2022[49]. - The bank's commercial loans represented approximately 8% of the total loan portfolio, including $6.6 million in Paycheck Protection Program (PPP) loans[55]. - The age analysis of past due loans showed a total of $7,507,000 past due loans as of March 31, 2022, compared to $6,231,000 on December 31, 2021, indicating an increase of approximately 20.5%[54]. - Total impaired real estate loans amounted to $17,495,000 for the three months ended March 31, 2022, with an increase of 14.6% from $15,249,000 in the same period of 2021[62]. - The allowance for loan losses at the end of March 31, 2022, was $9,426,000, reflecting an increase from $9,532,000 at the end of March 31, 2021[65]. - The provision for loan losses for the three months ended March 31, 2022, was a recovery of $71,000 compared to a recovery of $455,000 in the same period of 2021[66]. - The ending balance of collectively evaluated loans for impairment was $8,724,000 as of March 31, 2022, compared to $8,692,000 at the end of March 31, 2021[66]. - The total impaired loans recognized for the three months ended March 31, 2022, was $17,690,000, a decrease from $19,201,000 in the same period of 2021[62]. - The average balance of single-family residential loans was $5,723,000 for the three months ended March 31, 2022, with interest income recognized of $47,000[62]. - The total ending balance of loans as of March 31, 2022, was $889,758,000, compared to $946,497,000 at the end of March 31, 2021, indicating a decrease of approximately 6%[66]. - The allowance for loan losses for individually evaluated loans for impairment was $702,000 as of March 31, 2022[65]. - The charge-offs for the three months ended March 31, 2022, totaled $160,000, compared to $85,000 in the same period of 2021[66]. - The total recoveries for the three months ended March 31, 2022, were $160,000, compared to $164,000 in the same period of 2021[66]. - The provision for loan losses for Q1 2022 was $71,000, compared to a recovery of $455,000 in Q1 2021, indicating a significant increase in reserves due to heightened loan risks related to COVID-19[67]. - Loans modified due to COVID-19 totaled $82.2 million as of March 31, 2022, down from $88.7 million at December 31, 2021, reflecting ongoing management of pandemic-related risks[67]. - The total outstanding balance of PPP loans was $6.6 million at March 31, 2022, a decrease from $18.0 million at December 31, 2021, with total PPP loans originated amounting to $128.1 million[73]. Financial Performance - Basic earnings per share for Q1 2022 was $0.63, down from $0.73 in Q1 2021, while diluted earnings per share was $0.61 compared to $0.71 in the prior year[74][75]. - Net earnings for the three months ended March 31, 2022, were $3.5 million, or $0.63 per share, a decrease from $4.1 million, or $0.73 per share, in the prior year period[126]. - The annualized return on average assets was 0.85% for the three months ended March 31, 2022, down from 1.14% for the same period one year ago[127]. - Net interest income decreased to $10.7 million for the three months ended March 31, 2022, from $11.1 million in the same period of 2021, primarily due to a $593,000 decrease in interest income[130]. - Total non-interest income increased to $7.0 million for the three months ended March 31, 2022, from $5.9 million in the prior year, driven by a $1.7 million increase in appraisal management fee income[139]. - Total non-interest expense increased to $13.3 million for the three months ended March 31, 2022, from $12.3 million in the same period of 2021, primarily due to a $1.3 million rise in appraisal management fees[140]. - Income tax expense decreased to $848,000 for the three months ended March 31, 2022, compared to $1.0 million for the same period in 2021, with an effective tax rate of 19.72%[141]. Risk Management - The allowance for loan losses reflects management's assessment of credit risks, with ongoing evaluations of the loan portfolio to ensure adequacy[122]. - The general allowance for loan losses is based on historical net charge-offs, with adjustments for current economic conditions, including impacts from the COVID-19 pandemic[155]. - The bank's internal risk grading matrix assigns loans a risk grade from 1 (Excellent Quality) to 8 (Loss), with ongoing evaluations to manage credit risk effectively[68][69]. - The bank has not classified any loans modified due to COVID-19 as TDRs, in compliance with the CARES Act, which provides exemptions for qualified loan modifications[67]. - The company continues to monitor asset quality and manage interest rate exposures to mitigate risks from economic fluctuations[112]. Capital and Liquidity - Shareholders' equity was $125.4 million, or 7.54% of total assets, at March 31, 2022, down from $142.4 million, or 8.77% of total assets, at December 31, 2021[182]. - The Company's Tier 1 capital ratio was 14.91% at March 31, 2022, compared to 15.43% at December 31, 2021, indicating a decrease in capital adequacy[186]. - The Bank's total risk-based capital ratio was 15.64% at March 31, 2022, down from 16.19% at December 31, 2021, remaining above the regulatory requirement of 10%[187]. - The liquidity ratio for the Bank was 43.65% at March 31, 2022, compared to 43.28% at December 31, 2021, significantly above the minimum required liquidity ratio of 10%[179]. - The Company had $317.9 million in unfunded commitments to extend credit as of March 31, 2022, an increase from $304.3 million at December 31, 2021[174]. COVID-19 Impact - The COVID-19 pandemic has significantly impacted economic activity, with the Federal Reserve reducing the federal funds target rate by 1.5% in March 2020[116]. - The company participated in the Paycheck Protection Program (PPP) to support local businesses during the pandemic, contributing to community financial stability[119]. - The company has implemented measures to maintain business continuity during the pandemic, including remote work and digital banking promotion[120]. - Economic conditions in North Carolina have been adversely affected by COVID-19, leading to increased unemployment and reduced business operations[115]. - The bank continues to monitor loans previously modified due to COVID-19, indicating a proactive approach to managing potential future risks[67].