Business Overview and History
Peoples Bancorp of North Carolina, Inc. was founded in 1999 as the parent company of Peoples Bank, a North Carolina-chartered bank that operates primarily in the Catawba Valley region of North Carolina. The company started with a single banking office in Newton, North Carolina and has since grown to 16 banking offices across multiple counties in the state.
In its early years, Peoples Bank focused on providing quality customer service and meeting the financial needs of the local communities it served. The bank successfully weathered the financial crisis of the late 2000s, which impacted many banks across the country, by maintaining a conservative lending approach and a strong capital position.
In 2010, Peoples Bancorp expanded its footprint by acquiring a smaller community bank, adding four additional branches and growing its asset base. This acquisition allowed the company to further enhance its product and service offerings for customers. The integration of the acquired bank was completed smoothly, demonstrating Peoples Bancorp’s ability to execute strategic transactions.
Over the years, Peoples Bancorp has faced various challenges common to the banking industry, such as fluctuating interest rates, changing regulations, and evolving customer preferences. The company has navigated these challenges by diversifying its revenue streams, investing in technology, and maintaining a focus on risk management. For example, in 2023 the company faced a rise in interest rates, which impacted its net interest margin, but was able to offset this to some degree through growth in its loan portfolio and non-interest income businesses.
Despite the challenges, Peoples Bancorp has remained a well-capitalized and profitable community bank, committed to serving its local markets. The company has built a strong reputation for its customer service, community involvement, and prudent management.
Peoples Bancorp operates as a community-oriented financial institution, providing commercial loans, real estate mortgage loans, real estate construction loans and consumer loans primarily in its North Carolina market area. The bank’s profitability depends primarily on its net interest income, which is the difference between the income it receives on its loan and investment securities portfolios and its cost of funds. The bank also generates non-interest income from miscellaneous fees, mortgage banking income, and commissions.
The bank faces competition from other financial institutions in its market area and is influenced by local economic conditions and financial institution regulatory authorities. The bank actively manages its exposure to interest rate risk and monitors asset quality to minimize risks.
Financial Performance and Ratios
As of the most recent fiscal year-end (December 31, 2023), Peoples Bancorp reported total assets of $1.64 billion, an increase of 1.2% from the prior year. The company’s loan portfolio stood at $1.09 billion, up 1.9% year-over-year, reflecting its focus on supporting the local economy through lending activities.
Peoples Bancorp’s profitability metrics have remained solid, with a net interest margin of 3.51% for the full year 2023, compared to 3.47% in the previous year. The company’s return on assets (ROA) and return on equity (ROE) for 2023 were 0.95% and 13.97%, respectively, demonstrating its ability to generate consistent earnings.
The bank’s asset quality remains strong, with non-performing assets (NPAs) accounting for just 0.24% of total assets as of December 31, 2023, a slight increase from 0.23% in the prior year. The allowance for credit losses, which serves as a buffer against potential loan defaults, stood at 1.01% of total loans, reflecting the company’s prudent risk management practices.
Financials
Peoples Bancorp’s capital position remains robust, with a Tier 1 capital ratio of 13.83% and a total risk-based capital ratio of 14.85% as of the end of 2023, well above the regulatory minimums for a “well-capitalized” institution. This solid capital base provides the company with the flexibility to support future growth and withstand potential economic headwinds.
For the fiscal year 2023, Peoples Bancorp reported revenue of $68.64 million and net income of $15.55 million. The company’s operating cash flow (OCF) for the year was $22.78 million, while free cash flow (FCF) stood at $20.83 million.
In the most recent quarter (Q3 2024), the company reported revenue of $17.875 million, representing a 2.2% increase compared to the same quarter last year. Net income for the quarter was $3.958 million, a 4.1% decrease year-over-year. Operating cash flow for Q3 2024 was $4.949 million, down 6.1% from the previous year, while free cash flow increased by 20.7% to $7.208 million. The decrease in net income was primarily due to an increase in non-interest expense, partially offset by an increase in net interest income and a decrease in the provision for credit losses.
Liquidity
Throughout its history, Peoples Bancorp has maintained strong liquidity positions, ensuring it can meet its financial obligations and customer needs. The company’s liquidity management strategies have enabled it to navigate through various economic cycles and market conditions effectively.
As of September 30, 2024, Peoples Bancorp reported a debt-to-equity ratio of 0.11, indicating a conservative capital structure. The company’s cash and cash equivalents stood at $73.16 million. Peoples Bancorp maintains a line of credit with the Federal Home Loan Bank (FHLB) equal to 20% of the bank’s total assets. As of September 30, 2024, there were no FHLB borrowings outstanding, and the remaining availability under the line of credit was $125.2 million.
Navigating Challenges and Adapting to Change
Throughout its history, Peoples Bancorp has demonstrated its ability to navigate through challenging economic environments. During the COVID-19 pandemic, the company proactively worked with its customers to provide loan modifications and deferrals, helping them weather the storm. The bank’s technological investments in digital banking platforms also enabled it to seamlessly serve its customers during the height of the pandemic.
More recently, Peoples Bancorp has been navigating the impact of rising interest rates, which have affected the broader banking industry. The company has adapted its asset-liability management strategies, focusing on maintaining a strong net interest margin and minimizing the compression of its interest spreads. Additionally, the bank has been closely monitoring its loan portfolio for any signs of stress and has remained disciplined in its underwriting practices.
Business Segments
Peoples Bancorp operates through two main reportable segments: Banking Operations and Community Bank Real Estate Solutions (CBRES).
The Banking Operations segment represents the consolidated Peoples Bank, excluding CBRES. This is the primary segment of PEBK’s business, generating the majority of the company’s revenue. During the nine months ended September 30, 2024, this segment reported net interest income of $41.09 million, a decrease from $42.21 million in the prior year period. The decrease was due to an $8.80 million increase in interest expense, partially offset by a $7.60 million increase in interest income. The segment also reported a recovery of credit losses of $80,000, compared to a provision for credit losses of $1.16 million in the prior year period.
The CBRES segment represents the Bank’s wholly-owned subsidiary, Community Bank Real Estate Solutions, LLC, which provides appraisal management services to community banks. During the nine months ended September 30, 2024, this segment reported appraisal management fee income of $8.67 million, up from $7.47 million in the prior year period. The CBRES segment contributed net income of $491,000 for the nine-month period, compared to $380,000 in the prior year.
Geographic Markets
Peoples Bancorp primarily operates in North Carolina, with offices in Catawba, Lincoln, Alexander, Mecklenburg, Iredell, Wake, Rowan and Forsyth counties. The company does not have significant operations outside of its North Carolina market area.
Outlook and Guidance
Despite the ongoing economic uncertainties, Peoples Bancorp remains cautiously optimistic about its future prospects. The company has provided guidance for the full year 2024, expecting net earnings to be in the range of $15.0 million to $16.0 million, with diluted earnings per share between $2.70 and $2.90.
The bank’s strategic priorities for the year include continued expansion of its commercial and consumer lending activities, further enhancement of its digital capabilities, and a focus on maintaining strong credit quality and prudent risk management practices. Peoples Bancorp is also exploring potential opportunities for organic growth and selective acquisitions within its core markets, as it seeks to enhance its market presence and drive long-term shareholder value.
Conclusion
Peoples Bancorp of North Carolina Inc has demonstrated its resilience and adaptability in the face of economic challenges. With a strong balance sheet, prudent risk management, and a commitment to serving its local communities, the company is well-positioned to navigate the current environment and capitalize on future growth opportunities. As Peoples Bancorp continues to evolve and adapt to the changing landscape, investors will undoubtedly keep a close eye on the bank’s ability to deliver consistent financial performance and shareholder returns.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.