EXHIBIT (99)(a)
NEWS RELEASE
60; July 18, 2005
Contact: Tony W. Wolfe
President and Chief Executive Officer
A. Joseph Lampron
Executive Vice President and Chief Financial Officer
828-464-5620, Fax 828-465-6780
For Immediate Release
PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS
Peoples Bancorp of North Carolina, Inc., the parent company of Peoples Bank, reported net income of $1.6 million, or $0.47 basic net income per share and $0.46 diluted net income per share, for the three months ended June 30, 2005 as compared to $1.1 million or $0.31 basic and 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. June 30, 2004 per share amounts have been restated to reflect the stock dividend.
Tony W. Wolfe, President and Chief Executive Officer, attributed the increase in second 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 14% to $6.7 million for the three months ended June 30, 2005 compared to $5.8 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 19% to $5.9 million for the three months ended June 30, 2005 compared to $5.0 million for the same period one year ago. The provision for loan losses for the three months ended June 30, 2005 was $723,000 as compared to $868,000 for the same period one year ago. This decrease is due to a $10.3 million reduction in classified loans as of June 30, 2005 when compared to June 30, 2004.
Non-interest income increased 20% to $1.8 million for the three months ended June 30, 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 $73,000 in NSF fees, $70,000 in check cashing fees, $39,000 in miscellaneous fee income, $41,000 in debit card fee income and an increase of $17,000 in mortgage banking income.
Non-interest expense increased 9% to $5.3 million for the three months ended June 30, 2005, as compared to $4.9 million for the same period last year. The increase in non-interest expense included: (1) an increase of $205,000 or 7% in salaries and benefits expense due to normal salary increases and increased incentive expense, (2) an increase of $95,000 or 11% in occupancy expense due to an increase in furniture and equipment expense and lease expense, and (3) an increase of $127,000 or 10% in non-interest expenses other than salary, benefits and occupancy expenses, which included an increase in advertising expense of $40,000.
PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE TWO
Year-to-date net income as of June 30, 2005 was $2.9 million, or $0.84 basic net income per share and $0.82 diluted net income per share as compared to $2.3 million, or $0.66 basic net income per share and $0.65 diluted net income 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, 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 10% to $12.9 million for the six months ended June 30, 2005 compared to $11.7 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 15% to $11.5 million for the six months ended June 30, 2005 compared to $10.0 million for the same period one year ago. The provision for loan losses for the six months ended June 30, 2005 was $1.4 million as compared to $1.7 million for the same period one year ago. This decrease is due to a reduction in classified loans.
Non-interest income increased 15% to $3.5 million for the six months ended June 30, 2005, as compared to $3.0 million for the same period one year ago. The increase in non-interest income is primarily due to an increase of $241,000 in fee income from the Bank’s Banco de la Gente branches, an increase of $94,000 in debit card fee income and an increase of $48,000 in mortgage banking income.
Non-interest expense increased 10% to $10.6 million for the six months ended June 30, 2005, as compared to $9.6 million for the same period last year. The increase in year-to-date non-interest expense included an increase of $487,000 or 9% in salaries and benefits expense primarily due to normal salary increases and increased incentive expense, an increase of $179,000 or 10% in occupancy expense, primarily due to an increase in furniture and equipment expense and lease expense, and an increase of $301,000 or 13% in non-interest expenses other than salary, benefits and occupancy expenses primarily due to an increase of $118,000 in advertising expense.
Total assets as of June 30, 2005 amounted to $709.6 million, an increase of 3% compared to total assets of $686.1 million at June 30, 2004. This increase is primarily attributable to an increase in available for sale securities combined with an increase in loans. Available for sale securities increased 15% to $105.8 million as of June 30, 2005 compared to $91.8 million as of June 30, 2004, the result of additional securities purchases, which were partially offset by paydowns on mortgage-backed securities, calls and maturities. Loans increased 1% to $551.1 million as of June 30, 2005 compared to $546.6 million as of June 30, 2004. The 15% increase in available for sale securities and the 1% increase 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 $7.7 million at June 30, 2005 or 1.09% of total assets, compared to $5.7 million at June 30, 2004 or 0.84% of total assets. The allowance for loan losses at June 30, 2005 amounted to $8.0 million or 1.46% of total loans compared to $9.2 million or 1.67% of total loans at June 30, 2004. While non-performing loans increased at June 30, 2005 compared to June 30, 2004, total classified loans, including non-performing loans decreased by $10.3 million. That is the primary factor contributing to the decrease in the allowance for loan losses at June 30, 2005 when compared to 2004.
PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE THREE
Deposits amounted to $568.8 million as of June 30, 2005, representing an increase of 3% over deposits of $551.0 million at June 30, 2004. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and certificates of deposits of denominations less than $100,000, increased $19.0 million to $417.8 million at June 30, 2005 as compared to $398.7 million at June 30, 2004 primarily due to an increase of $19.2 in non-interest bearing demand deposits. Certificates of deposit in amounts greater than $100,000 or more totaled $151.1 million at June 30, 2005 as compared to $152.3 million at June 30, 2004.
Shareholders’ equity increased to $52.6 million, or 7.42% of total assets, at June 30, 2005 as compared to $48.1 million, or 7.02% of total assets, at June 30, 2004. The net increase in common stock and retained earnings from June 30, 2004 to June 30, 2005 amounted to $3.5 million due to net income earned for the period, which was combined with a $964,000 increase in accumulated other comprehensive income from June 30, 2004 to June 30, 2005 due to an increase in the market value of available for sale securities.
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.
PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE FOUR
CONSOLIDATED BALANCE SHEETS | | | | | | | |
| June 30, 2005, December 31, 2004 and June 30, 2004 | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | |
| | | | June 30, 2005 | | | December 31, 2004 | | | June 30, 2004 | |
| | | | (Unaudited) | | | | | | (Unaudited) | |
ASSETS: | | | | | | | | | | |
| Cash and due from banks | | $ | 20,211,985 | | $ | 15,067,871 | | $ | 16,460,131 | |
| Federal funds sold | | | 2,767,000 | | | 1,723,000 | | | 4,293,000 | |
| Cash and cash equivalents | | | 22,978,985 | | | 16,790,871 | | | 20,753,131 | |
| | | | | | | | | | | |
| Investment securities available for sale | | | 105,768,532 | | | 105,598,106 | | | 91,828,182 | |
| Other investments | | | 6,494,249 | | | 5,396,959 | | | 4,621,973 | |
| Total securities | | | 112,262,781 | | | 110,995,065 | | | 96,450,155 | |
| | | | | | | | | | | |
| Loans | | | 551,104,351 | | | 535,467,733 | | | 546,596,277 | |
| Mortgage loans held for sale | | | 3,356,750 | | | 3,783,175 | | | 2,929,920 | |
| Less: Allowance for loan losses | | | (8,021,456 | ) | | (8,048,627 | ) | | (9,153,088 | ) |
| Net loans | | | 546,439,645 | | | 531,202,281 | | | 540,373,109 | |
| | | | | | | | | | | |
| Premises and equipment, net | | | 13,008,791 | | | 12,742,730 | | | 12,683,803 | |
| Accrued interest receivable and other assets | | | 14,868,797 | | | 14,617,125 | | | 15,810,828 | |
| Total assets | | $ | 709,558,999 | | $ | 686,348,072 | | $ | 686,071,026 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY: | | | | | | | | | | |
| Deposits: | | | | | | | | | | |
| Non-interest bearing demand | | $ | 94,679,521 | | $ | 78,024,194 | | $ | 75,433,797 | |
| NOW, MMDA & Savings | | | 184,084,578 | | | 193,917,507 | | | 180,408,549 | |
| Time, $100,000 or more | | | 151,069,343 | | | 154,300,926 | | | 152,285,659 | |
| Other time | | | 139,014,564 | | | 130,279,446 | | | 142,900,246 | |
| Total deposits | | | 568,848,006 | | | 556,522,073 | | | 551,028,251 | |
| | | | | | | | | | | |
| Demand notes payable to U.S. Treasury | | | 801,899 | | | 1,184,392 | | | 1,215,526 | |
| FHLB borrowings | | | 69,000,000 | | | 59,000,000 | | | 67,500,000 | |
| Junior subordinated debentures | | | 14,433,000 | | | 14,433,000 | | | 14,433,000 | |
| Accrued interest payable and other liabilities | | | 3,832,783 | | | 4,270,755 | | | 3,745,709 | |
| Total liabilities | | | 656,915,688 | | | 635,410,220 | | | 637,922,486 | |
| | | | | | | | | | | |
| Shareholders' Equity: | | | | | | | | | | |
| Preferred stock, no par value; authorized | | | | | | | | | | |
| 5,000,000 shares; no shares issued | | | | | | | | | | |
| and outstanding | | | - | | | - | | | - | |
| Common stock, no par value; authorized | | | | | | | | | | |
| 20,000,000 shares; issued and | | | | | | | | | | |
| outstanding 3,453,312 shares in 2005 | | | | | | | | | | |
| and 3,448,341 shares in 2004 | | | 41,378,990 | | | 35,040,390 | | | 35,301,274 | |
| Retained earnings | | | 11,933,784 | | | 16,018,206 | | | 14,480,780 | |
| Accumulated other comprehensive income | | | (669,463 | ) | | (120,744 | ) | | (1,633,514 | ) |
| Total shareholders' equity | | | 52,643,311 | | | 50,937,852 | | | 48,148,540 | |
| | | | | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 709,558,999 | | $ | 686,348,072 | | $ | 686,071,026 | |
