Peoples Bancorp of North Carolina, Inc. :PEBK-US: Earnings Analysis: Q3, 2016 By the Numbers : October 25, 2016

Peoples Bancorp of North Carolina, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Peoples Bancorp of North Carolina, Inc. – First South Bancorp, Inc., Yadkin Financial Corporation and BNC Bancorp (FSBK-US, YDKN-US and BNCN-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 12.57 million, Net Earnings of USD 2.46 million.
  • Net interest income margins narrowed from 73.46% to 72.84% compared to the same period last year.
  • Net loan assets changed 4.54% compared to same period last year and 1.66% from previous period, total deposits changed 6.87% compared to same period last year and 2.44% from previous period.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 12.35 12.7 12.42 12.58 12.57
Revenue Growth (%YOY) 3.02 6.68 4.14 8.28 1.76
Earnings (mil) 2.49 2.19 2.45 2.96 2.46
Earnings Growth (%YOY) 2.09 20.48 5.37 12.96 -1.4
Net Margin (%) 20.18 17.22 19.75 23.57 19.56
EPS 0.45 0.4 0.44 0.53 0.44
Return on Equity (%) 9.81 8.42 9.23 10.8 8.84
Return on Assets (%) 0.96 0.84 0.93 1.11 0.91

Access our Ratings and Scores for Peoples Bancorp of North Carolina, Inc.

Market Share Versus Profits

Revenues History
Earnings History

PEBK-US‘s change in revenue this period compared to the same period last year of 1.76% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that PEBK-US is holding onto its market share. Also, for comparison purposes, revenues changed by -0.06% and earnings by -17.07% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

PEBK-US‘s year-on-year earnings decline has been driven by the drop in net interest income margins from 73.46% to 72.84%. This fall in earnings would have been worse were it not for improvements in loan loss provisions, which helped improve the net interest income after provisions margins from 71.56% to 75.70%. In addition, loan loss provisions as a percentage of net interest income were -3.93% this period and 2.59% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s decline in net interest income margins was influenced by both the relative drops in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 4.54% compared to the same period last year and 1.66% from the previous period. Total deposits changed 6.87% compared to the same period last year and 2.44% from the previous period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 27.91% to 26.50% and (2) One-time items that contributed to a decrease in pretax margins from 27.81% to 26.50%

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Peoples Bancorp of North Carolina, Inc.

Company Profile

Peoples Bancorp of North Carolina, Inc. operates as a bank holding company for Peoples Bank (Newton, North Carolina). It provides commercial and consumer banking services primarily in Catawba, Alexander, Lincoln, Mecklenburg, Iredell, Union and Wake counties in North Carolina. The company offers investment and trust services through agreements with an outside party. Peoples Bancorp of North Carolina was founded on July 22, 1999 and is headquartered in Newton, NC.

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