For Immediate Release
PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS
Peoples Bancorp of North Carolina, Inc., the parent company of Peoples Bank, reported net income of $1.3 million, or $0.37 basic net income per share and $0.36 diluted net income per share, for the three months ended March 31, 2005 as compared to $1.2 million or $0.35 basic net income per share and $0.34 diluted net income per share, for the same period one year ago. During first quarter 2005, the Company declared and distributed a 10% stock dividend to its shareholders. March 31, 2004 per share amounts have been restated to reflect the stock dividend.
Tony W. Wolfe, President and Chief Executive Officer, attributed the increase in first quarter earnings to an increase in net interest income, an increase in non-interest income and a decrease in the provision for loan losses, which were partially offset by an increase in non-interest expense.
Net interest income increased 6% to $6.2 million for the three months ended March 31, 2005 compared to $5.9 million for the same period one year ago. This increase is attributable to an increase in interest income due to increases in the prime rate resulting from Federal Reserve interest rate increases combined with an increase in the average outstanding balance of investment securities available for sale. Net interest income after the provision for loan losses increased 11% to $5.5 million for the three months ended March 31, 2005 compared to $5.0 million for the same period one year ago. The provision for loan losses for the three months ended March 31, 2005 was $690,000 as compared to $859,000 for the same period one year ago. This decrease is due to an $11.2 million reduction in classified loans as of March 31, 2005 when compared to March 31, 2004.
Non-interest income increased 9% to $1.6 million for the three months ended March 31, 2005, as compared to $1.5 million for the same period one year ago. The increase in non-interest income is primarily due to an increase of $88,000 in fee income from the Bank’s Banco de la Gente branches, an increase of $54,000 in debit card fee income and an increase of $31,000 in mortgage banking income.
Non-interest expense increased 11% to $5.3 million for the three months ended March 31, 2005, as compared to $4.7 million for the same period last year. The increase in non-interest expense included; (1) an increase of $282,000 or 10% in salaries and benefits expense due to normal salary increases and increased incentive expense, (2) an increase of $84,000 or 9% in occupancy expense due to an increase in furniture and equipment expense and lease expense, and (3) an increase of $123,000 or 12% in non-interest expenses other than salary, benefits and occupancy expenses primarily due to an increase in advertising expense and deposit program expense.
Total assets as of March 31, 2005 amounted to $690.0 million, an increase of 1% compared to total assets of $686.5 million at March 31, 2004. This increase is primarily attributable to an increase in available for sale securities, which was
PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS - PAGE TWO
partially offset by a decrease in loans. Available for sale securities increased 23% to $103.9 million as of March 31, 2005 compared to $84.5 million as of March 31, 2004, the result of additional securities purchases, which were partially offset by paydowns on mortgage-backed securities, calls and maturities. Loans decreased 3% to $540.0 million as of March 31, 2005 compared to $555.4 million as of March 31, 2004. The increase in available for sale securities and the decrease in loans reflect management’s directed effort to increase investment securities as a percentage of total assets in an effort to reduce the credit risk in the balance sheet.
Non-performing assets totaled $8.3 million at March 31, 2005 or 1.20% of total assets, compared to $8.1 million at March 31, 2004 or 1.18% of total assets. The allowance for loan losses at March 31, 2005 amounted to $7.4 million or 1.37% of total loans compared to $8.9 million or 1.61% of total loans at March 31, 2004.
Deposits amounted to $558.3 million as of March 31, 2005, representing a decrease of 1% from deposits of $561.2 million at March 31, 2004. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and certificates of deposits of denominations less than $100,000, increased $21.6 million to $413.4 million at March 31, 2005 as compared to $391.8 million at March 31, 2004. This increase is primarily due to an increase in the Bank’s Investment Checking product, which was offset by a decrease in certificates of deposit less than $100,000. Certificates of deposit in amounts greater than $100,000 or more totaled $136.8 million at March 31, 2005 as compared to $144.3 million at March 31, 2004 as maturing brokered deposits were replaced with core deposits. The Company chose to price the Investment Checking account at a level which attracted new deposits but was more cost effective than brokered deposits.
Shareholders’ equity increased to $50.7 million, or 7.35% of total assets, at March 31, 2005 as compared to $50.3 million, or 7.33% of total assets, at March 31, 2004. The net increase in common stock and retained earnings from March 31, 2004 to March 31, 2005 amounted to $3.1 million due to net income earned for the period. This increase was partially offset by a $2.7 million decrease in accumulated other comprehensive income from March 31, 2004 to March 31, 2005 due to a decrease in the market value of available for sale securities and derivative instruments. Management expects that accumulated comprehensive income will continue to be less than prior periods due to anticipated reductions in the market value of available for sale securities and derivative instruments resulting from projected interest rate increases.
Peoples Bank operates entirely in North Carolina, with eleven offices throughout Catawba County, one office in Alexander County, three offices in Lincoln County and two offices in Mecklenburg County. The Company’s common stock is publicly traded over the counter and is quoted on the Nasdaq National Market under the symbol “PEBK.” Scott and Stringfellow, Inc., Ryan, Beck & Co., Sterne Agee & Leach, Inc. and Trident Securities, Inc. are market makers for the Company’s shares.
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 materially 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 Peoples Bancorp of North Carolina, Inc.’s annual report on Form 10-K for the year ended December 31, 2004.
