SOURCE: Peoples Bancorp of North Carolina, Inc.

Peoples Bancorp of North Carolina, Inc.

April 25, 2016 09:00 ET

Peoples Bancorp Announces First Quarter Earnings Results

NEWTON, NC--(Marketwired - Apr 25, 2016) -  Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company of Peoples Bank, reported first quarter earnings results with highlights as follows:

First quarter highlights:

  • Net earnings were $2.5 million or $0.45 basic net earnings per share and $0.44 diluted net earnings per share for the three months ended March 31, 2016, as compared to $2.3 million or $0.41 basic and diluted net earnings per share for the same period one year ago.
  • Average outstanding principal balance of loans increased $37.1 million to $691.8 million for the three months ended March 31, 2016 compared to $654.7 million for the three months ended March 31, 2015.
  • Non-performing assets declined to $8.5 million or 0.79% of total assets at March 31, 2016, compared to $12.4 million or 1.2% of total assets at March 31, 2015.
  • Total loans increased $32.5 million to $693.0 million at March 31, 2016, compared to $660.5 million at March 31, 2015.
  • Core deposits were $821.6 million or 96.3% of total deposits at March 31, 2016, compared to $786.2 million or 94.7% of total deposits at March 31, 2015.

Lance A. Sellers, President and Chief Executive Officer, attributed the increase in first quarter earnings to an increase in net interest income, a decrease in the provision for loan losses and an increase in non-interest income, which were partially offset by an increase in non-interest expense.

Net interest income was $9.1 million for the three months ended March 31, 2016, compared to $8.7 million for the three months ended March 31, 2015. The increase in net interest income was primarily due to a $338,000 increase in interest income, which was primarily attributable to an increase in the average outstanding balance of loans, and a $75,000 decrease in interest expense, which was primarily attributable to a decrease in the average outstanding balances of time deposits and FHLB borrowings during the three months ended March 31, 2016, as compared to the same period one year ago. Net interest income after the provision for loan losses was $9.3 million for the three months ended March 31, 2016, compared to $8.5 million for the three months ended March 31, 2015. The provision for loan losses for the three months ended March 31, 2016 was a credit of $216,000, as compared to an expense of $173,000 for the three months ended March 31, 2015. The decrease in the provision for loan losses is primarily attributable to a reduction in the required level of the allowance for loan losses resulting from lower historical loss rates used to calculate the ASC 450-20 reserve as the elevated level of loan losses incurred in 2011 and 2012 are no longer included in the historical loss calculations.

Non-interest income was $3.3 million for the three months ended March 31, 2016, compared to $3.2 million for the three months ended March 31, 2015. The increase in non-interest income is primarily attributable to a $130,000 increase in mortgage banking income and a $66,000 increase in miscellaneous non-interest income, which were partially offset by a $114,000 decrease in services charges and fees. 

Non-interest expense was $9.5 million for the three months ended March 31, 2016, compared to $8.7 million for the three months ended March 31, 2015. The increase in non-interest expense was primarily due to a $693,000 increase in other non-interest expense and a $271,000 increase in occupancy expense, which were partially offset by a $220,000 decrease in salaries and benefits expense during the three months ended March 31, 2016, as compared to the three months ended March 31, 2015. The increase in other non-interest expense is primarily due to a $718,000 increase in consulting fees due to expenses associated with the FDIC Consent Order (the "Order") issued in August 2015. The Bank continues to make progress in addressing the issues identified in the Order and expects that it will be able to undertake and implement all required actions within the time periods specified in the Order. 

Total assets were $1.1 billion and $1.0 billion as of March 31, 2016 and 2015, respectively. Available for sale securities were $264.1 million as of March 31, 2016, compared to $282.6 million as of March 31, 2015. Total loans were $693.0 million as of March 31, 2016, compared to $660.5 million as of March 31, 2015.

Non-performing assets declined to $8.5 million or 0.79% of total assets at March 31, 2016, compared to $12.4 million or 1.2% of total assets at March 31, 2015. The decline in non-performing assets is due to a $3.3 million decrease in other real estate owned properties and a $666,000 decrease in non-accrual loans. Non-performing loans include $8.1 million in commercial and residential mortgage loans, $149,000 in acquisition, development and construction ("AD&C") loans and $141,000 in other loans at March 31, 2016, as compared to $8.1 million in commercial and residential mortgage loans, $565,000 in AD&C loans and $192,000 in other loans at March 31, 2015. The allowance for loan losses at March 31, 2016 was $9.1 million or 1.3% of total loans, compared to $10.8 million or 1.6% of total loans at March 31, 2015. Management believes the current level of the allowance for loan losses is adequate; however, there is no assurance that additional adjustments to the allowance will not be required because of changes in economic conditions, regulatory requirements or other factors.

Deposits were $853.1 million as of March 31, 2016, compared to $830.0 million at March 31, 2015. Core deposits, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, increased $35.4 million to $821.6 million at March 31, 2016, as compared to $786.2 million at March 31, 2015. Certificates of deposit in amounts of $250,000 or more totaled $26.4 million at March 31, 2016, as compared to $36.2 million at March 31, 2015. The decrease in certificates of deposit in amounts of $250,000 or more is attributable to a $2.5 million decrease in wholesale certificates of deposit combined with a decrease in retail certificates of deposit which was expected as part of the Bank's pricing strategy to allow maturing high cost certificates of deposit to roll-off.

Securities sold under agreements to repurchase were $36.1 million at March 31, 2016, as compared to $38.7 million at March 31, 2015. 

Shareholders' equity was $107.8 million, or 10.1% of total assets, as of March 31, 2016, compared to $101.5 million, or 9.7% of total assets, as of March 31, 2015. The increase in shareholders' equity is primarily due to an increase in retained earnings due to net income.

Peoples Bank operates 20 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Union, Iredell and Wake Counties. Peoples Bank also operates loan production offices in Lincoln, Durham and Forsyth Counties. The Company's common stock is publicly traded and is quoted on the Nasdaq Global Market under the symbol "PEBK."

Statements made in this press release, other than those concerning historical information, should be considered forward-looking statements pursuant to the safe harbor provisions of the Securities Exchange Act of 1934 and the Private Securities Litigation Act of 1995. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on the information available to management at the time that this release was prepared. These statements can be identified by the use of words like "expect," "anticipate," "estimate," and "believe," variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, (1) competition in the markets served by Peoples Bank, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectibility of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environment and tax laws, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in the Company's other filings with the Securities and Exchange Commission, including but not limited to those described in the Company's annual report on Form 10-K for the year ended December 31, 2015.

   
   
CONSOLIDATED BALANCE SHEETS  
March 31, 2016, December 31, 2015 and March 31, 2015  
(Dollars in thousands)  
   
    March 31, 2016     December 31, 2015     March 31, 2015  
    (Unaudited)     (Audited)     (Unaudited)  
ASSETS:                        
Cash and due from banks   $ 45,566     $ 29,194     $ 47,730  
Interest-bearing deposits     30,826       10,569       19,783  
    Cash and cash equivalents     76,392       39,763       67,513  
                         
Investment securities available for sale     264,092       268,530       282,575  
Other investments     3,633       3,636       3,912  
    Total securities     267,725       272,166       286,487  
                         
Mortgage loans held for sale     996       4,149       806  
                         
Loans     693,033       689,091       660,477  
  Less: Allowance for loan losses     (9,116 )     (9,589 )     (10,843 )
    Net loans     683,917       679,502       649,634  
                         
Premises and equipment, net     16,408       16,976       16,745  
Cash surrender value of life insurance     14,652       14,546       14,229  
Accrued interest receivable and other assets     10,254       11,379       14,041  
    Total assets   $ 1,070,344     $ 1,038,481     $ 1,049,455  
                         
                         
LIABILITIES AND SHAREHOLDERS' EQUITY:                        
Deposits:                        
  Noninterest-bearing demand   $ 246,677     $ 244,231     $ 217,603  
  NOW, MMDA & savings     452,158       431,052       432,541  
  Time, $250,000 or more     26,352       26,891       36,237  
  Other time     127,930       130,001       143,579  
    Total deposits     853,117       832,175       829,960  
                         
Securities sold under agreements to repurchase     36,056       27,874       38,702  
FHLB borrowings     43,500       43,500       50,000  
Junior subordinated debentures     20,619       20,619       20,619  
Accrued interest payable and other liabilities     9,292       9,449       8,660  
    Total liabilities     962,584       933,617       947,941  
                         
Shareholders' equity:                        
  Series A preferred stock, $1,000 stated value; authorized 5,000,000 shares; no shares issued and outstanding     -       -       -  
  Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,510,538 shares at 3/31/16 and 12/31/15; 5,612,588 shares at 3/31/15     46,171       46,171       48,088  
  Retained earnings     55,189       53,183       47,110  
  Accumulated other comprehensive income     6,400       5,510       6,316  
    Total shareholders' equity     107,760       104,864       101,514  
                             
    Total liabilities and shareholders' equity   $ 1,070,344     $ 1,038,481     $ 1,049,455  
                         
                         
                         
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2016 and 2015
(Dollars in thousands, except per share amounts)
 
    Three months ended
    March 31,
    2016     2015
    (Unaudited)     (Unaudited)
INTEREST INCOME:              
  Interest and fees on loans   $ 8,023     $ 7,593
  Interest on due from banks     17       10
  Interest on investment securities:              
    U.S. Government sponsored enterprises     658       713
    State and political subdivisions     1,127       1,163
    Other     80       88
      Total interest income     9,905       9,567
               
INTEREST EXPENSE:              
  NOW, MMDA & savings deposits     120       111
  Time deposits     162       247
  FHLB borrowings     406       418
  Junior subordinated debentures     113       97
  Other     8       11
    Total interest expense     809       884
               
NET INTEREST INCOME     9,096       8,683
PROVISION FOR (REDUCTION OF PROVISION FOR) LOAN LOSSES     (216 )     173
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     9,312       8,510
               
NON-INTEREST INCOME:              
  Service charges     1,041       1,134
  Other service charges and fees     334       355
  Mortgage banking income     369       239
  Insurance and brokerage commissions     158       161
  Miscellaneous     1,422       1,356
    Total non-interest income     3,324       3,245
               
NON-INTEREST EXPENSES:              
  Salaries and employee benefits     4,581       4,801
  Occupancy     1,754       1,483
  Other     3,157       2,464
    Total non-interest expense     9,492       8,748
               
EARNINGS BEFORE INCOME TAXES     3,144       3,007
INCOME TAXES     691       679
               
NET EARNINGS   $ 2,453     $ 2,328
               
PER SHARE AMOUNTS              
Basic net earnings   $ 0.45     $ 0.41
Diluted net earnings   $ 0.44     $ 0.41
Cash dividends   $ 0.08     $ 0.06
Book value   $ 19.56     $ 18.09
               
               
               
FINANCIAL HIGHLIGHTS  
For the three months ended March 31, 2016 and 2015  
(Dollars in thousands)  
   
    Three months ended  
    March 31,  
    2016     2015  
    (Unaudited)     (Unaudited)  
SELECTED AVERAGE BALANCES:                
  Available for sale securities   $ 256,922     $ 272,111  
  Loans     691,834       654,728  
  Earning assets     967,945       948,279  
  Assets     1,047,013       1,036,299  
  Deposits     838,986       819,654  
  Shareholders' equity     108,038       101,328  
                 
SELECTED KEY DATA:                
  Net interest margin (tax equivalent)     4.02 %     3.97 %
  Return on average assets     0.94 %     0.91 %
  Return on average shareholders' equity     9.13 %     9.32 %
  Shareholders' equity to total assets (period end)     10.07 %     9.67 %
                 
ALLOWANCE FOR LOAN LOSSES:                
  Balance, beginning of period   $ 9,589     $ 11,082  
  Provision for loan losses     (216 )     173  
  Charge-offs     (322 )     (530 )
  Recoveries     65       118  
  Balance, end of period   $ 9,116     $ 10,843  
                 
ASSET QUALITY:                
  Non-accrual loans   $ 8,268     $ 8,934  
  90 days past due and still accruing     127       -  
  Other real estate owned     85       3,424  
  Total non-performing assets   $ 8,480     $ 12,358  
  Non-performing assets to total assets     0.79 %     1.18 %
  Allowance for loan losses to non-performing assets     107.50 %     87.74 %
  Allowance for loan losses to total loans     1.32 %     1.64 %
                 
LOAN RISK GRADE ANALYSIS:                
    Percentage of Loans  
    By Risk Grade  
    3/31/2016     3/31/2015  
  Risk Grade 1 (excellent quality)     1.56 %     2.03 %
  Risk Grade 2 (high quality)     25.23 %     23.44 %
  Risk Grade 3 (good quality)     53.92 %     50.69 %
  Risk Grade 4 (management attention)     13.78 %     16.36 %
  Risk Grade 5 (watch)     2.82 %     4.28 %
  Risk Grade 6 (substandard)     2.39 %     2.96 %
  Risk Grade 7 (doubtful)     0.00 %     0.00 %
  Risk Grade 8 (loss)     0.00 %     0.00 %
                 
At March 31, 2016, including non-accrual loans, there were five relationships exceeding $1.0 million in the Watch risk grade (which totaled $9.4 million) and one relationship exceeding $1.0 million in the Substandard risk grade (which totaled $1.3 million). There were two relationships with loans in both the Watch and Substandard risk grades, which exceeded $1.0 million for loans in both risk grades combined.  
   

Contact Information

  • Contact:
    Lance A. Sellers
    President and Chief Executive Officer


    A. Joseph Lampron, Jr.
    Executive Vice President and Chief Financial Officer


    828-464-5620
    Fax 828-465-6780