Peoples Bancorp of North Carolina(US:PEBK)2023-05-09 15:29Accounting Standards and Credit Losses - The Company adopted ASC 326 on January 1, 2023, resulting in an initial reduction to retained earnings of $838,000 due to a $1.1 million increase in the allowance for credit losses[34]. - The allowance for credit losses on loans is estimated using relevant information, with no loans individually evaluated as of March 31, 2023[38]. - The allowance for credit losses on off-balance sheet credit exposures is estimated using the same methodologies as portfolio loans[43]. - The allowance for credit losses on unfunded commitments increased by $2.3 million as part of the ASC 326 adoption[34]. - The allowance for credit losses decreased to $9.617 million as of March 31, 2023, from $10.494 million at December 31, 2022, indicating a reduction of about 8.3%[52]. - The total allowance for credit losses on loans was $9,617,000 as of March 31, 2023, with $2,075,000 allocated for loan commitments[72]. - The allowance for credit losses reflects management's assessment of credit risks, with qualitative adjustments for economic conditions[147]. - Provision for credit losses was $224,000 for the three months ended March 31, 2023, compared to $71,000 for the same period in 2022, indicating increased credit risk assessment[134]. - Provision for credit losses increased to $224,000 in Q1 2023 from $71,000 in Q1 2022, attributed to higher loan balances and economic adjustments[140]. Investment Securities - The Company’s total investment securities available for sale as of March 31, 2023, amounted to $399,148,000, with unrealized losses of $50,719,000[45]. - The fair value of U.S. Treasuries decreased to $10,008,000 as of March 31, 2023, with unrealized losses of $949,000[45]. - The Company’s mortgage-backed securities had a fair value of $273,820,000 with unrealized losses of $23,040,000 as of March 31, 2023[45]. - The Company did not have any other than-temporarily impaired investment securities as of December 31, 2022[35]. - As of March 31, 2023, unrealized losses in the investment securities portfolio related to debt securities totaled $50.7 million, down from $62.3 million at December 31, 2022, indicating a reduction of approximately 18.5%[48]. - The total amortized cost of investment securities available for sale was $449.031 million, with a fair value of $399.148 million, reflecting a decrease in fair value of about 11.1%[50]. - During the three months ended March 31, 2023, proceeds from sales of securities available for sale were $53.5 million, resulting in gross losses of $2.7 million and gross gains of $177,000[50]. - The fair value of investment securities available for sale was $399,148,000 as of March 31, 2023, down from $445,394,000 as of December 31, 2022[106][107]. Loans and Lending Operations - Total loans increased to $1.050871 billion as of March 31, 2023, compared to $1.032608 billion at December 31, 2022, representing a growth of approximately 1.8%[52]. - The total net loans amounted to $1.041254 billion as of March 31, 2023, compared to $1.022114 billion at December 31, 2022, reflecting an increase of about 1.9%[52]. - The company has a diversified loan portfolio, with real estate loans making up a significant portion, totaling $947.425 million as of March 31, 2023[52]. - The company reported that no securities available for sale were sold during the three months ended March 31, 2022, highlighting a change in strategy in the current period[50]. - The average balance of impaired loans collectively evaluated for impairment was $5.3 million at March 31, 2022, and $4.9 million at December 31, 2022[70]. - The total impaired real estate loans included $10,441,000 in non-traditional single-family residential loans, with an allowance of $611,000[67]. - The total loans not secured by real estate reached $103,446,000, indicating a diverse loan portfolio[80]. - The company’s commercial loans totaled $410,775,000, demonstrating strong performance in this segment[80]. - The company has a total of $1,050,871,000 in loans, reflecting a robust lending operation[80]. Financial Performance - The company reported net earnings of $3,172,000 for the three months ended March 31, 2023, resulting in a basic earnings per share of $0.58 and diluted earnings per share of $0.56[84]. - Net income for the three months ended March 31, 2023, was $3.2 million, or $0.58 per share, compared to $3.5 million, or $0.63 per share, for the same period in 2022, reflecting a decrease in non-interest income and an increase in non-interest expense[131]. - Net interest income increased to $14.3 million for the three months ended March 31, 2023, from $10.7 million for the same period in 2022, driven by a $5.5 million increase in interest income[134]. - Interest income rose to $16.8 million for the three months ended March 31, 2023, compared to $11.3 million for the same period in 2022, primarily due to a $3.1 million increase in interest income and fees on loans[135]. - The annualized return on average assets was 0.81% for the three months ended March 31, 2023, down from 0.85% for the same period in 2022[132]. - The annualized return on average shareholders' equity increased to 11.78% for the three months ended March 31, 2023, compared to 10.10% for the same period in 2022[132]. - Total assets as of March 31, 2023, were $1.602 billion, compared to $1.663 billion as of March 31, 2022[134]. - Non-interest expense increased to $12.1 million for the three months ended March 31, 2023, from $10.6 million for the same period in 2022[134]. Deposits and Funding - The company reported total deposits of $1,413,441,000 as of March 31, 2023, with a fair value of $1,415,287,000[107]. - Total deposits were $1.4 billion at March 31, 2023, consistent with December 31, 2022[162]. - Core deposits totaled $1.3 billion at March 31, 2023, down from $1.4 billion at December 31, 2022, representing 96.33% of total deposits[175]. - Estimated uninsured deposits were $407.8 million, or 28.85% of total deposits, at March 31, 2023, compared to $439.8 million, or 30.64% at December 31, 2022[163]. - The Bank's ratio of wholesale funding to total assets was 1.29% as of March 31, 2023, compared to 0.92% at December 31, 2022[176]. Capital and Liquidity - Shareholders' equity increased to $114.8 million, or 7.16% of total assets, at March 31, 2023, compared to $105.2 million, or 6.49% of total assets, at December 31, 2022[182]. - The liquidity ratio decreased to 28.23% at March 31, 2023, from 30.32% at December 31, 2022, while the minimum required liquidity ratio remained at 10%[180]. - The Company's Tier 1 capital ratio was 13.34% at March 31, 2023, compared to 13.21% at December 31, 2022[186]. - The total risk-based capital ratio was 14.27% at March 31, 2023, up from 14.04% at December 31, 2022[186]. - The Bank's Tier 1 risk-based capital ratio was 13.24% at March 31, 2023, compared to 13.10% at December 31, 2022[187]. - The Company has authorized a stock repurchase program of up to $2.0 million, with no shares repurchased as of March 31, 2023[184]. - The Bank had no borrowings from the Federal Reserve Bank (FRB) as of March 31, 2023, and the availability under the line of credit with the FRB was $449.2 million[178]. Other Financial Metrics - The average yield on loans for the three months ended March 31, 2023, was 5.04%, compared to 4.46% for the same period in 2022[135]. - The average number of shares outstanding for diluted earnings per share calculation was 5,656,250 for the first quarter of 2023[84]. - The total carrying amount of loans, net, was $1,041,254,000 as of March 31, 2023, with a fair value of $1,021,007,000[106]. - The fair value of mortgage loans held for sale increased to $417,000 as of March 31, 2023, compared to $211,000 as of December 31, 2022[104][106]. - The total operating lease liability as of March 31, 2023, was $5,033,000 after accounting for imputed interest[111]. - The fair value of mutual funds held in deferred compensation trust was $1,787,000 as of March 31, 2023, compared to $1,327,000 as of December 31, 2022[106][107]. - The total proposed adjustments sought by the North Carolina Department of Revenue (NCDOR) was approximately $1.4 million, which the Bank is contesting[190].