SOURCE: Peoples Bancorp of North Carolina, Inc.

Peoples Bancorp of North Carolina, Inc.

January 25, 2016 10:04 ET

Peoples Bancorp Announces Fourth Quarter and Annual Earnings Results

NEWTON, NC--(Marketwired - Jan 25, 2016) - Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company of Peoples Bank, reported fourth quarter and year to date earnings results with highlights as follows:

Fourth quarter highlights:

  • Net earnings were $2.2 million or $0.40 basic net earnings per share and $0.39 diluted net earnings per share for the three months ended December 31, 2015, as compared to $1.8 million or $0.32 basic and diluted net earnings per share for the same period one year ago.

Year to date highlights:

  • Net earnings were $9.6 million or $1.73 basic net earnings per share and $1.72 diluted net earnings per share for the year ended December 31, 2015, as compared to $9.4 million or $1.67 basic net earnings per share and $1.66 diluted net earnings per share for the same period one year ago.
  • Non-performing assets declined to $9.2 million or 0.88% of total assets at December 31, 2015, compared to $12.7 million or 1.2% of total assets at December 31, 2014.
  • Total loans increased $37.2 million to $689.1 million at December 31, 2015, compared to $651.9 million at December 31, 2014.
  • Core deposits were $801.2 million or 96.3% of total deposits at December 31, 2015, compared to $755.8 million or 92.8% of total deposits at December 31, 2014.

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

Net interest income was $9.1 million for the three months ended December 31, 2015, compared to $8.7 million for the three months ended December 31, 2014. The increase in net interest income was primarily due to a $243,000 increase in interest income, which was primarily attributable to an increase in the average outstanding balance of loans, and a $164,000 decrease in interest expense, which was primarily attributable to a decrease in the average outstanding balances of FHLB borrowings and time deposits during the three months ended December 31, 2015, 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 December 31, 2015, compared to $9.4 million for the three months ended December 31, 2014. The provision for loan losses for the three months ended December 31, 2015 was a credit of $210,000, as compared to a credit of $672,000 for the three months ended December 31, 2014. 

Non-interest income was $3.5 million for the three months ended December 31, 2015, compared to $3.0 million for the three months ended December 31, 2014. The increase in non-interest income is primarily attributable to a $576,000 increase in miscellaneous non-interest income and a $64,000 increase in mortgage banking income, which were partially offset by a $132,000 decrease in services charges and fees. The $576,000 increase in miscellaneous non-interest income is primarily due to $263,000 in net MasterCard debit card incentives recognized in fourth quarter 2015 and a $237,000 decrease in net losses on other real estate owned properties for the three months ended December 31, 2015, as compared to the three months ended December 31, 2014. 

Non-interest expense was $10.0 million for the three months ended December 31, 2015, compared to $10.9 million for the three months ended December 31, 2014. The decrease in non-interest expense was primarily due to a $145,000 decrease in salaries and benefits expense, a $65,000 decrease in occupancy expense and a $708,000 decrease in other non-interest expense during the three months ended December 31, 2015, as compared to the three months ended December 31, 2014. The decrease in other non-interest expenses is primarily due to $653,000 amortization expense incurred during the three months ended December 31, 2014 that was associated with North Carolina income tax credits purchased in 2014 that was not incurred in 2015. The decrease in income tax credit amortization expense was partially offset by a $318,000 increase in consulting fees for the three months ended December 31, 2015, as compared to the three months ended December 31, 2014. The increase in consulting fees is primarily 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. 

Year-to-date net earnings as of December 31, 2015 were $9.6 million, or $1.73 basic net earnings per share and $1.72 diluted net earnings per share, as compared to $9.4 million, or $1.67 basic net earnings per share and $1.66 diluted net earnings per share for the same period one year ago. The increase in year-to-date earnings is primarily attributable to an increase in net interest income and an increase in non-interest income, which were partially offset by a decrease in the credit to the provision for loan losses and an increase in non-interest expense, as discussed below. 

Year-to-date net interest income as of December 31, 2015 was $35.2 million compared to $34.1 million for same period one year ago. The increase in net interest income was primarily due to a $793,000 increase in loan interest income, which was primarily attributable to an increase in the average outstanding balance of loans and a $803,000 decrease in interest expense, which was primarily attributable to a decrease in the average outstanding balance of FHLB borrowings and time deposits, which were partially offset by a $379,000 decrease in interest income on investment securities due to a decrease in the average outstanding balance of available for sale securities during the year ended December 31, 2015, as compared to the year ended December 31, 2014. Net interest income after the provision for loan losses was $35.2 million for the year ended December 31, 2015, compared to $34.8 million for the year ended December 31, 2014. The provision for loan losses for the year ended December 31, 2015 was a credit of $17,000, as compared to a credit of $699,000 for the year ended December 31, 2014. 

Non-interest income was $13.3 million for the year ended December 31, 2015, compared to $12.2 million for the year ended December 31, 2014. The increase in non-interest income is primarily attributable to a $1.5 million increase in miscellaneous non-interest income and a $326,000 increase in mortgage banking income, which were partially offset by a $463,000 decrease in service charges and fees. The $1.5 million increase in miscellaneous non-interest income is primarily due to $245,000 in net gains on other real estate owned properties for the year ended December 31, 2015, as compared to $622,000 in net losses and write-downs on other real estate owned properties for the year ended December 31, 2014 combined with a $282,000 increase in debit card income for the year ended December 31, 2015, as compared to the year ended December 31, 2014 and $263,000 in net MasterCard debit card incentives recognized in fourth quarter 2015.

Non-interest expense was $35.8 million for the year ended December 31, 2015, as compared to $35.7 million for the year ended December 31, 2014. The increase in non-interest expense was primarily due to a $755,000 increase in salaries and benefits expense resulting primarily from an increase in the number of full-time equivalent employees and annual salary increases, which was partially offset by a $685,000 decrease in other non-interest expenses during the year ended December 31, 2015, as compared to the year ended December 31, 2014. The decrease in other non-interest expenses is primarily due to $870,000 amortization expense incurred during 2014 that was associated with North Carolina income tax credits purchased in 2014.

Total assets were $1.0 billion as of December 31, 2015 and 2014. Available for sale securities were $268.5 million as of December 31, 2015, compared to $281.1 million as of December 31, 2014. Total loans were $689.1 million as of December 31, 2015, compared to $651.9 million as of December 31, 2014.

Non-performing assets declined to $9.2 million or 0.88% of total assets at December 31, 2015, compared to $12.7 million or 1.2% of total assets at December 31, 2014. The decline in non-performing assets is due to a $2.3 million decrease in non-accrual loans and a $1.3 million decrease in other real estate owned properties. Non-performing loans include $8.1 million in commercial and residential mortgage loans, $146,000 in acquisition, development and construction ("AD&C") loans and $181,000 in other loans at December 31, 2015, as compared to $6.6 million in commercial and residential mortgage loans, $3.9 million in AD&C loans and $251,000 in other loans at December 31, 2014. The allowance for loan losses at December 31, 2015 was $9.6 million or 1.4% of total loans, compared to $11.1 million or 1.7% of total loans at December 31, 2014. 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 amounted to $832.2 million as of December 31, 2015, compared to $814.7 million at December 31, 2014. Core deposits, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, increased $45.4 million to $801.2 million at December 31, 2015, as compared to $755.8 million at December 31, 2014. Certificates of deposit in amounts of $250,000 or more totaled $26.9 million at December 31, 2015, as compared to $47.9 million at December 31, 2014. The decrease in certificates of deposit in amounts of $250,000 or more is attributable to a $7.1 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 $27.9 million at December 31, 2015, as compared to $48.4 million at December 31, 2014. This decrease is primarily due to a customer transferring $13.0 million from securities sold under agreements to repurchase to a non-interest bearing demand account in December 2015.

Shareholders' equity was $104.9 million, or 10.1% of total assets, as of December 31, 2015, compared to $98.7 million, or 9.5% of total assets, as of December 31, 2014. This increase is primarily due to an increase in retained earnings due to net income, which was partially offset by a decrease in common stock due to 102,050 shares of common stock repurchased during 2015 under the Company's stock repurchase program implemented in September 2014.

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 and Durham 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, 2014.

   
             
CONSOLIDATED BALANCE SHEETS  
December 31, 2015 and December 31, 2014  
(Dollars in thousands)  
             
             
             
             
    December 31, 2015     December 31, 2014  
    (Unaudited)     (Audited)  
ASSETS:                
Cash and due from banks   $ 29,194     $ 51,213  
Interest-bearing deposits     10,569       17,885  
    Cash and cash equivalents     39,763       69,098  
                 
Investment securities available for sale     268,530       281,099  
Other investments     3,636       4,031  
    Total securities     272,166       285,130  
                 
Mortgage loans held for sale     4,149       1,375  
                 
Loans     689,091       651,891  
Less: Allowance for loan losses     (9,589 )     (11,082 )
    Net loans     679,502       640,809  
                 
Premises and equipment, net     16,976       17,000  
Cash surrender value of life insurance     14,546       14,125  
Accrued interest receivable and other assets     11,379       12,957  
    Total assets   $ 1,038,481     $ 1,040,494  
                 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY:                
Deposits:                
  Noninterest-bearing demand   $ 244,231     $ 210,758  
  NOW, MMDA & savings     431,052       407,504  
  Time, $250,000 or more     26,891       47,872  
  Other time     130,001       148,566  
    Total deposits     832,175       814,700  
                 
Securities sold under agreements to repurchase     27,874       48,430  
FHLB borrowings     43,500       50,000  
Junior subordinated debentures     20,619       20,619  
Accrued interest payable and other liabilities     9,449       8,080  
    Total liabilities     933,617       941,829  
                 
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 12/31/15 and 5,612,588 shares at 12/31/14     46,171      
48,088
 
  Retained earnings     53,183       45,124  
  Accumulated other comprehensive income     5,510       5,453  
    Total shareholders' equity     104,864       98,665  
                 
    Total liabilities and shareholders' equity   $ 1,038,481     $ 1,040,494  
                 
                         
                         
CONSOLIDATED STATEMENTS OF INCOME  
For the three months and years ended December 31, 2015 and 2014  
(Dollars in thousands, except per share amounts)  
                         
                         
                         
    Three months ended     Years ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
    (Unaudited)     (Unaudited)     (Unaudited)     (Audited)  
INTEREST INCOME:                                
  Interest and fees on loans   $ 8,082     $ 7,749     $ 31,098     $ 30,305  
  Interest on due from banks     5       23       26       65  
  Interest on investment securities:                                
    U.S. Government sponsored enterprises     657       697       2,616       2,995  
    State and political subdivisions     1,135       1,163       4,600       4,677  
    Other     81       85       326       378  
      Total interest income     9,960       9,717       38,666       38,420  
                                 
INTEREST EXPENSE:                                
  NOW, MMDA & savings deposits     109       124       432       499  
  Time deposits     184       264       870       1,188  
  FHLB borrowings     441       516       1,735       2,166  
  Junior subordinated debentures     105       98       402       389  
  Other     11       12       45       45  
    Total interest expense     850       1,014       3,484       4,287  
                                 
NET INTEREST INCOME     9,110       8,703       35,182       34,133  
PROVISION FOR (REDUCTION OF PROVISION FOR) LOAN LOSSES    
(210
)    
(672
)    
(17
)    
(699
)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     9,320       9,375       35,199       34,832  
                                 
NON-INTEREST INCOME:                                
  Service charges     1,149       1,307       4,647       4,961  
  Other service charges and fees     214       188       931       1,080  
  Gain on sale of securities     -       -       -       266  
  Mortgage banking income     320       256       1,130       804  
  Insurance and brokerage commissions     170       180       714       701  
  Miscellaneous     1,651       1,075       5,890       4,352  
    Total non-interest income     3,504       3,006       13,312       12,164  
                                 
NON-INTEREST EXPENSES:                                
  Salaries and employee benefits     4,602       4,747       18,285       17,530  
  Occupancy     1,710       1,775       6,288       6,251  
  Other     3,711       4,419       11,205       11,890  
    Total non-interest expense     10,023       10,941       35,778       35,671  
                                 
EARNINGS BEFORE INCOME TAXES     2,801       1,440       12,733       11,325  
INCOME TAXES     613       (376 )     3,100       1,937  
                                 
NET EARNINGS   $ 2,188     $ 1,816     $ 9,633     $ 9,388  
                                 
PER SHARE AMOUNTS                                
Basic net earnings   $ 0.40     $ 0.32     $ 1.73     $ 1.67  
Diluted net earnings   $ 0.39     $ 0.32     $ 1.72     $ 1.66  
Cash dividends   $ 0.08     $ 0.06     $ 0.28     $ 0.18  
Book value   $ 19.03     $ 17.58     $ 19.03     $ 17.58  
                                 
                                 
                                 
FINANCIAL HIGHLIGHTS     
For the three months and years ended December 31, 2015 and 2014     
(Dollars in thousands)     
                         
                         
                         
    Three months ended     Years ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
    (Unaudited)     (Unaudited)     (Unaudited)     (Audited)  
SELECTED AVERAGE BALANCES:                                
  Available for sale securities   $ 261,512     $ 272,768     $ 266,830     $ 287,371  
  Loans     687,592       648,355       669,628       631,025  
  Earning assets     951,843       962,515       952,251       949,537  
  Assets     1,043,587       1,054,504       1,038,594       1,036,486  
  Deposits     819,638       824,706       816,628       808,399  
  Shareholders' equity     105,122       98,452       106,644       96,877  
                                 
SELECTED KEY DATA:                                
  Net interest margin (tax equivalent)     3.99 %     3.83 %     3.94 %     3.84 %
  Return on average assets     0.83 %     0.68 %     0.93 %     0.91 %
  Return on average shareholders' equity     8.26 %     7.32 %     9.03 %     9.69 %
  Shareholders' equity to total assets (period end)     10.10 %     9.48 %     10.10 %     9.48 %
                                 
ALLOWANCE FOR LOAN LOSSES:                                
  Balance, beginning of period   $ 10,420     $ 12,344     $ 11,082     $ 13,501  
  Provision for loan losses     (210 )     (672 )     (17 )     (699 )
  Charge-offs     (668 )     (718 )     (1,844 )     (2,637 )
  Recoveries     47       128       368       917  
  Balance, end of period   $ 9,589     $ 11,082     $ 9,589     $ 11,082  
                                 
ASSET QUALITY:                                
  Non-accrual loans                   $ 8,432     $ 10,729  
  90 days past due and still accruing                     17       -  
  Other real estate owned                     739       2,016  
  Total non-performing assets                   $ 9,188     $ 12,745  
  Non-performing assets to total assets                     0.88 %     1.22 %
  Allowance for loan losses to non-performing assets                     104.36 %     86.95 %
  Allowance for loan losses to total loans                     1.39 %     1.70 %
                                 
LOAN RISK GRADE ANALYSIS:                                
                    Percentage of Loans  
                    By Risk Grade  
                    12/31/2015     12/31/2014  
  Risk Grade 1 (excellent quality)                     1.66%       2.18%  
  Risk Grade 2 (high quality)                     24.40%       22.30%  
  Risk Grade 3 (good quality)                     53.64%       50.76%  
  Risk Grade 4 (management attention)                     14.26%       16.54%  
  Risk Grade 5 (watch)                     3.26%       4.62%  
  Risk Grade 6 (substandard)                     2.53%       3.30%  
  Risk Grade 7 (doubtful)                     0.00%       0.00%  
  Risk Grade 8 (loss)                     0.00%       0.00%  

                            
At December 31, 2015, including non-accrual loans, there were five relationships exceeding $1.0 million in the Watch risk grade (which totaled $10.6 million) and one relationship exceeding $1.0 million in the Substandard risk grade (which totaled $1.3 million). There were two relationship 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