EXHIBIT (99)(a) |
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| NEWS RELEASE |
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October 15, 2007 |
Contact: | Tony W. Wolfe | | |
| | President and Chief Executive Officer | | |
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| | A. Joseph Lampron | | |
| | Executive Vice President and Chief Financial Officer | | |
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| | 828-464-5620, Fax 828-465-6780 | | |
For Immediate Release
PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS
Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company of Peoples Bank, reported net income of $2.6 million, or $0.46 basic net income per share and $0.45 diluted net income per share, for the three months ended September 30, 2007 as compared to $2.4 million or $0.42 basic net income per share and $0.41 diluted net income per share, for the same period one year ago. September 30, 2006 per share amounts have been restated to reflect the 3-for-2 stock split declared and distributed during the second quarter 2007. Tony W. Wolfe, President and Chief Executive Officer, attributed the increase in third quarter earnings to an increase in net interest income and a decrease in provision for loan losses, which were partially offset by an increase in non-interest expense.
Year-to-date net income as of September 30, 2007 was $8.0 million, or $1.40 basic net income per share and $1.37 diluted net income per share as compared to $7.3 million, or $1.28 basic net income per share and $1.26 diluted net income per share, for the same period one year ago. The increase in year-to-date earnings is primarily attributable to growth in interest-earning assets, which contributed to increases in net interest income and non-interest income. In addition, the Company had a decrease in the provision for loan losses for the nine months ended September 30, 2007 as compared to the same period one year ago. The increases in net interest income and non-interest income and the decrease in the provision for loan losses were partially offset by an increase in non-interest expense as discussed below.
Shareholders’ equity increased to $68.3 million, or 7.88% of total assets, at September 30, 2007 as compared to $60.9 million, or 7.66% of total assets, at September 30, 2006 as a result of net income earned less dividends paid for the period combined with a $1.5 million increase in accumulated other comprehensive income (loss) from September 30, 2006 to September 30, 2007. The increase in accumulated other comprehensive income (loss) is primarily due to an increase in the market value of available for sale securities.
Net interest income for the quarter ended September 30, 2007 increased 5% to $8.6 million compared to $8.1 million for the same period one year ago. This increase is attributable to an increase in the average outstanding balances of loans and investment securities available for sale for the three months ended September 30, 2007 compared to the three months ended September 30, 2006. Net interest income after the provision for loan losses increased 11% to $8.3 million during the third quarter of 2007, compared to $7.5 million for the same period one year ago. The provision for loan losses for the three months ended September 30, 2007 was $296,000 as compared to $686,000 for the same period one year ago, primarily attributable to a decrease in net charge-offs of $352,000.
Non-interest income was $2.0 million for the three months ended September 30, 2007 and the three months ended September 30, 2006. Increases in components of non-interest income for the three months ended September 30, 2007 compared to the same period last year include a $200,000 increase in service charges and fees resulting from activity in new branches, an increase of $97,000 in brokerage commission due to an increase in income from the Bank’s investment subsidiary and an increase in mortgage banking income of $20,000 due to an increase in brokered loan activity. These increases were offset by a $149,000
PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS – PAGE TWO
decrease in miscellaneous fee income primarily due to a $118,000 decrease in income received from SBIC investments, which is included in miscellaneous non-interest income and a $203,000 increase in losses on the sale of securities. The $367,000 in the loss on the sale of securities for the three months ended September 30, 2007 includes a $236,000 write-down of an asset classified as investment securities available for sale. Management determined the market value of this investment had decreased significantly and was not a temporary impairment therefore a write-down was appropriate during third quarter 2007.
Non-interest expense increased 7% to $6.2 million for the three months ended September 30, 2007, as compared to $5.8 million for the same period last year. The increase in non-interest expense included: (1) an increase of $234,000 or 8% in salaries and benefits expense due to normal salary increases and expense associated with additional staff for new branches, (2) an increase of $154,000 or 15% in occupancy expense due primarily to an increase in furniture and equipment expense and lease expense associated with new branches, and (3) a net increase of $39,000 or 2% in non-interest expenses other than salary, benefits and occupancy expenses. The increase in non-interest expenses other than salary, benefits and occupancy expenses is primarily attributable to an increase of $56,000 in advertising expense, an increase of $50,000 in professional fees and an increase of $26,000 in debit card expense. These increases in non-interest expenses other than salary, benefits and occupancy expenses were partially offset by a $152,000 decrease in amortization of trust preferred securities issuance costs.
Year-to-date net interest income as of September 30, 2007 increased 8% to $25.9 million compared to $23.9 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, which resulted from Federal Reserve interest rate increases. In addition, the average outstanding balances of loans and investment securities available for sale increased for the nine months ended September 30, 2007. Net interest income after the provision for loan losses increased 12% to $24.6 million for the nine months ended September 30, 2007, compared to $22.0 million for the same period one year ago. The provision for loan losses for the nine months ended September 30, 2007 was $1.3 million as compared to $1.9 million for the same period one year ago, primarily attributable to slower growth in loan balances for the first nine months of 2007 when compared to the same period in 2006 and a reduction in net charge-offs of $281,000.
Non-interest income increased 5% to $6.3 million for the nine months ended September 30, 2007, as compared to $6.0 million for the same period one year ago. The increase in non-interest income is primarily due to an increase in service charges and fees of $370,000 resulting from activity in new branches, an increase of $114,000 in insurance and brokerage commission primarily due to an increase in income from the Bank’s investment subsidiary and an increase in mortgage banking income of $80,000 primarily due to an increase in brokered loan activity. These increases were partially offset by a $224,000 increase in losses on the sale of securities.
Non-interest expense increased 11% to $18.4 million for the nine months ended September 30, 2007, as compared to $16.6 million for the same period last year. The increase in non-interest expense included: (1) an increase of $1.2 million or 14% in salaries and benefits expense due to normal salary increases and expenses associated with additional staff for the new branches, (2) an increase of $463,000 or 15% in occupancy expense due to an increase in furniture and equipment expense and lease expense associated with the new branches, and (3) a net increase of $117,000 or 2% in non-interest expenses other than salary, benefits and occupancy expenses. The increase in non-interest expenses other than salary, benefits and occupancy expenses is primarily attributable to an increase of $175,000 in professional fees, an increase of $145,000 in advertising expense, an increase of $85,000 in debit card expense and an increase of $55,000 in office supplies expense. These increases in non-interest expenses other than salary, benefits and occupancy expenses were partially offset by a $309,000 decrease in amortization of trust preferred securities issuance costs. The Company paid a $178,000 prepayment fee in the first quarter of 2006 on the early termination of a $5.0 million Federal Home Loan Bank advance. This fee was included in other non-interest expense.
PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS – PAGE THREE
Total assets as of September 30, 2007 amounted to $867.4 million, an increase of 9% compared to total assets of $795.0 million at September 30, 2006. This increase is primarily attributable to an increase in loans. Loans increased 10% to $689.4 million as of September 30, 2007 compared to $624.3 million as of September 30, 2006.
Non-performing assets totaled $7.3 million at September 30, 2007 or 0.84% of total assets, compared to $3.8 million at September 30, 2006 or 0.48% of total assets. This increase in non-performing assets is due to one large classified loan relationship that was moved to non-accrual status in fourth quarter 2006. This relationship totals $3.7 million at September 30, 2007 and has been appropriately reserved in the Bank’s allowance for loan losses. The allowance for loan losses at September 30, 2007 amounted to $8.7 million or 1.26% of total loans compared to $8.1 million or 1.30% of total loans at September 30, 2006.
Deposits amounted to $675.4 million as of September 30, 2007, representing an increase of 11% over deposits of $606.5 million at September 30, 2006. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and certificates of deposits of denominations less than $100,000, increased $55.6 million to $486.5 million at September 30, 2007 as compared to $430.9 million at September 30, 2006 due to concerted efforts to attract additional deposits from existing customers and to attract new customers in our existing offices along with deposits gathered in the two new offices opened since June 2006. The Bank has also introduced remote deposit capture for customers in 2007, which has enabled the Bank to gather additional deposits from several existing customers and has been helpful in attracting new customers at the new office in Cornelius. Certificates of deposit in amounts greater than $100,000 or more totaled $189.0 million at September 30, 2007 as compared to $175.6 million at September 30, 2006.
Peoples Bank operates entirely in North Carolina, with eleven offices throughout Catawba County, one office in Alexander County, three offices in Lincoln County, three offices in Mecklenburg County and one office in Union County. The Company’s common stock is publicly traded over the counter 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 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, 2006.
PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE FOUR |
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CONSOLIDATED BALANCE SHEETS |
| September 30, 2007, December 31, 2006 and September 30, 2006 |
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| | | September 30, 2007 | | | December 31, 2006 | | | September 30, 2006 | |
| | | (Unaudited) | | | | | | (Unaudited) | |
ASSETS: | | | | | | | | | |
| Cash and due from banks | | $ | 24,187,186 | | | $ | 18,860,318 | | | $ | 19,727,439 | |
| Federal funds sold | | | 2,458,000 | | | | 2,640,000 | | | | 2,258,000 | |
| Cash and cash equivalents | | | 26,645,186 | | | | 21,500,318 | | | | 21,985,439 | |
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| Investment securities available for sale | | | 120,210,033 | | | | 117,581,000 | | | | 118,584,586 | |
| Other investments | | | 5,961,447 | | | | 7,295,449 | | | | 6,822,949 | |
| Total securities | | | 126,171,480 | | | | 124,876,449 | | | | 125,407,535 | |
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| Loans | | | 689,362,842 | | | | 651,381,129 | | | | 624,302,284 | |
| Mortgage loans held for sale | | | - | | | | - | | | | 1,289,217 | |
| Less: Allowance for loan losses | | | (8,687,033 | ) | | | (8,303,432 | ) | | | (8,132,844 | ) |
| Net loans | | | 680,675,809 | | | | 643,077,697 | | | | 617,458,657 | |
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| Premises and equipment, net | | | 17,239,716 | | | | 12,816,385 | | | | 12,870,691 | |
| Cash surrender value of life insurance | | | 6,713,988 | | | | 6,532,406 | | | | 6,466,938 | |
| Accrued interest receivable and other assets | | | 9,927,386 | | | | 10,144,283 | | | | 10,811,108 | |
| Total assets | | $ | 867,373,565 | | | $ | 818,947,538 | | | $ | 795,000,368 | |
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LIABILITIES AND SHAREHOLDERS' EQUITY: | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | |
| Non-interest bearing demand | | $ | 116,792,169 | | | $ | 101,393,142 | | | $ | 98,155,787 | |
| NOW, MMDA & Savings | | | 189,087,635 | | | | 174,577,641 | | | | 170,887,226 | |
| Time, $100,000 or more | | | 188,982,647 | | | | 194,176,291 | | | | 175,609,612 | |
| Other time | | | 180,586,078 | | | | 163,673,215 | | | | 161,831,432 | |
| Total deposits | | | 675,448,529 | | | | 633,820,289 | | | | 606,484,057 | |
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| Demand notes payable to U.S. Treasury | | | 1,600,000 | | | | 1,600,000 | | | | 1,600,000 | |
| Securities sold under agreement to repurchase | | | 20,315,345 | | | | 6,417,803 | | | | 8,602,041 | |
| FHLB borrowings | | | 77,000,000 | | | | 89,300,000 | | | | 78,800,000 | |
| Junior subordinated debentures | | | 20,619,000 | | | | 20,619,000 | | | | 35,052,000 | |
| Accrued interest payable and other liabilities | | | 4,061,992 | | | | 4,355,073 | | | | 3,594,467 | |
| Total liabilities | | | 799,044,866 | | | | 756,112,165 | | | | 734,132,565 | |
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| 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 5,650,020 shares in 2007 | | | | | | | | | | | | |
| and 3,830,634 shares in 2006 | | | 49,124,903 | | | | 51,122,147 | | | | 50,674,267 | |
| Retained earnings | | | 18,814,608 | | | | 12,484,463 | | | | 11,272,225 | |
| Accumulated other comprehensive income (loss) | | | 389,188 | | | | (771,237 | ) | | | (1,078,689 | ) |
| Total shareholders' equity | | | 68,328,699 | | | | 62,835,373 | | | | 60,867,803 | |
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| Total liabilities and shareholders' equity | | $ | 867,373,565 | | | $ | 818,947,538 | | | $ | 795,000,368 | |
PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE FIVE |
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CONSOLIDATED STATEMENTS OF INCOME | | |
| For the three and nine months ended September 30, 2007 and 2006 |
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| | | Three months ended | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | |
INTEREST INCOME: | | | | | | | | | | | | |
| Interest and fees on loans | | $ | 14,095,485 | | | $ | 12,907,042 | | | $ | 41,466,693 | | | $ | 36,187,827 | |
| Interest on federal funds sold | | | 32,634 | | | | 40,818 | | | | 367,331 | | | | 62,020 | |
| Interest on investment securities: | | | | | | | | | | | | | | | | |
| U.S. Government agencies | | | 1,150,619 | | | | 1,114,266 | | | | 3,411,555 | | | | 3,206,274 | |
| States and political subdivisions | | | 220,344 | | | | 201,248 | | | | 661,536 | | | | 587,409 | |
| Other | | | 125,663 | | | | 126,404 | | | | 363,625 | | | | 389,311 | |
| Total interest income | | | 15,624,745 | | | | 14,389,778 | | | | 46,270,740 | | | | 40,432,841 | |
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INTEREST EXPENSE: | | | | | | | | | | | | | | | | |
| NOW, MMDA & savings deposits | | | 1,077,858 | | | | 817,878 | | | | 2,975,499 | | | | 2,174,238 | |
| Time deposits | | | 4,378,968 | | | | 3,715,792 | | | | 12,983,826 | | | | 10,136,246 | |
| FHLB borrowings | | | 964,334 | | | | 909,702 | | | | 2,781,347 | | | | 2,763,657 | |
| Junior subordinated debentures | | | 371,225 | | | | 700,220 | | | | 1,095,572 | | | | 1,277,540 | |
| Other | | | 245,997 | | | | 99,234 | | | | 543,468 | | | | 183,077 | |
| Total interest expense | | | 7,038,382 | | | | 6,242,826 | | | | 20,379,712 | | | | 16,534,758 | |
NET INTEREST INCOME | | | 8,586,363 | | | | 8,146,952 | | | | 25,891,028 | | | | 23,898,083 | |
PROVISION FOR LOAN LOSSES | | | 296,000 | | | | 686,282 | | | | 1,253,000 | | | | 1,858,282 | |
NET INTEREST INCOME AFTER | | | | | | | | | | | | | | | | |
PROVISION FOR LOAN LOSSES | | | 8,290,363 | | | | 7,460,670 | | | | 24,638,028 | | | | 22,039,801 | |
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NON-INTEREST INCOME: | | | | | | | | | | | | | | | | |
| Service charges | | | 1,082,248 | | | | 976,515 | | | | 3,017,921 | | | | 2,918,390 | |
| Other service charges and fees | | | 488,737 | | | | 394,030 | | | | 1,423,461 | | | | 1,153,059 | |
| Gain (loss) on sale of securities | | | (367,430 | ) | | | (163,702 | ) | | | (561,832 | ) | | | (337,453 | ) |
| Mortgage banking income | | | 135,863 | | | | 115,802 | | | | 435,475 | | | | 355,678 | |
| Insurance and brokerage commission | | | 177,140 | | | | 80,523 | | | | 408,704 | | | | 294,206 | |
| Miscellaneous | | | 490,602 | | | | 639,683 | | | | 1,543,955 | | | | 1,605,443 | |
| Total non-interest income | | | 2,007,160 | | | | 2,042,851 | | | | 6,267,684 | | | | 5,989,323 | |
NON-INTEREST EXPENSE: | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 3,235,765 | | | | 3,001,507 | | | | 9,907,668 | | | | 8,714,719 | |
| Occupancy | | | 1,204,188 | | | | 1,049,911 | | | | 3,518,721 | | | | 3,055,732 | |
| Other | | | 1,774,127 | | | | 1,735,066 | | | | 4,988,601 | | | | 4,871,335 | |
| Total non-interest expenses | | | 6,214,080 | | | | 5,786,484 | | | | 18,414,990 | | | | 16,641,786 | |
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| INCOME BEFORE INCOME TAXES | | | 4,083,443 | | | | 3,717,037 | | | | 12,490,722 | | | | 11,387,338 | |
| INCOME TAXES | | | 1,470,800 | | | | 1,344,300 | | | | 4,500,841 | | | | 4,118,100 | |
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NET INCOME | | $ | 2,612,643 | | | $ | 2,372,737 | | | $ | 7,989,881 | | | $ | 7,269,238 | |
PER SHARE AMOUNTS | | | | | | | | | | | | | | | | |
| Basic net income | | $ | 0.46 | | | $ | 0.42 | | | $ | 1.40 | | | $ | 1.28 | |
| Diluted net income | | $ | 0.45 | | | $ | 0.41 | | | $ | 1.37 | | | $ | 1.26 | |
| Cash dividends | | $ | 0.12 | | | $ | 0.07 | | | $ | 0.29 | | | $ | 0.21 | |
| Book value | | $ | 12.09 | | | $ | 10.64 | | | $ | 12.09 | | | $ | 10.64 | |
PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE SIX |
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FINANCIAL HIGHLIGHTS | | |
| For the three and nine months ended September 30, 2007 and 2006 |
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| | | Three months ended | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| | | 2007 | 2006 | | | 2007 | 2006 | |
| | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | |
SELECTED AVERAGE BALANCES: | | | | | | | | | | | | |
| Available for sale securities | | $ | 120,507,482 | | | $ | 119,760,454 | | | $ | 120,390,142 | | | $ | 118,191,325 | |
| Loans | | | 672,561,916 | | | | 608,628,890 | | | | 654,197,497 | | | | 595,203,134 | |
| Earning assets | | | 803,686,601 | | | | 739,620,439 | | | | 792,091,510 | | | | 723,063,827 | |
| Assets | | | 849,343,069 | | | | 779,022,149 | | | | 835,890,065 | | | | 762,289,868 | |
| Deposits | | | 658,620,691 | | | | 605,544,233 | | | | 652,900,510 | | | | 598,891,616 | |
| Shareholders' equity | | | 67,515,802 | | | | 59,763,341 | | | | 69,321,766 | | | | 60,435,124 | |
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SELECTED KEY DATA: | | | | | | | | | | | | | | | | |
| Net interest margin (tax equivalent) | | | 4.34% | | | | 4.47% | | | | 4.48% | | | | 4.52% | |
| Return of average assets | | | 1.22% | | | | 1.21% | | | | 1.28% | | | | 1.27% | |
| Return on average shareholders' equity | | | 15.35% | | | | 15.75% | | | | 15.41% | | | | 16.08% | |
| Shareholders' equity to total assets (period end) | | | 7.88% | | | | 7.66% | | | | 7.88% | | | | 7.66% | |
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ALLOWANCE FOR LOAN LOSSES: | | | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 8,514,417 | | | $ | 7,922,419 | | | $ | 8,303,432 | | | $ | 7,424,782 | |
| Provision for loan losses | | | 296,000 | | | | 686,282 | | | | 1,253,000 | | | | 1,858,282 | |
| Charge-offs | | | (224,776 | ) | | | (519,833 | ) | | | (1,178,791 | ) | | | (1,420,320 | ) |
| Recoveries | | | 101,392 | | | | 43,976 | | | | 309,392 | | | | 270,100 | |
| Balance, end of period | | $ | 8,687,033 | | | $ | 8,132,844 | | | $ | 8,687,033 | | | $ | 8,132,844 | |
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ASSET QUALITY: | | | | | | | | | | | | | | | | |
| Non-accrual loans | | | | | | | | | | $ | 6,691,661 | | | $ | 3,149,424 | |
| 90 days past due and still accruing | | | | | | | | | | | 369,289 | | | | - | |
| Other real estate owned | | | | | | | | | | | 260,768 | | | | 650,261 | |
| Repossessed assets | | | | | | | | | | | - | | | | 20,000 | |
| Total non-performing assets | | | | | | | | | | $ | 7,321,718 | | | $ | 3,819,685 | |
| Non-performing assets to total assets | | | | | | | | | | | 0.84% | | | | 0.48% | |
| Allowance for loan losses to non-performing assets | | | | | | | | 118.65% | | | | 212.92% | |
| Allowance for loan losses to total loans | | | | | | | | | | | 1.26% | | | | 1.30% | |
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(END) |
