PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS
Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company of Peoples Bank, reported second quarter earnings results with highlights as follows:
Highlights:
| · | Net earnings were $1.6 million or $0.29 basic and diluted net earnings per share for the three months ended June 30, 2013, before adjustment for preferred stock dividends and accretion, as compared to $1.5 million or $0.27 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, for the same period one year ago. |
| · | Net earnings available to common shareholders were $1.5 million or $0.26 basic and diluted net earnings per common share for the three months ended June 30, 2013, as compared to $1.2 million or $0.21 basic and diluted net earnings per common share, for the same period one year ago. |
| · | Earnings before securities gains and income taxes were $1.7 million for the three months ended June 30, 2013 compared to $1.3 million for the same period one year ago. |
| · | Core deposits were $665.4 million, or 84.4% of total deposits at June 30, 2013, compared to $622.6 million, or 79.8% of total deposits at June 30, 2012. |
Lance A. Sellers, President and Chief Executive Officer, attributed the increase in second quarter earnings to a decrease in the provision for loan losses, which was partially offset by a decrease in net interest income, a decrease in non-interest income and an increase in non-interest expense.
Year-to-date net earnings as of June 30, 2013 were $3.4 million, or $0.60 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, as compared to $3.2 million, or $0.57 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, for the same period one year ago. After adjusting for dividends and accretion on preferred stock, net earnings available to common shareholders for the six months ended June 30, 2013 were $3.1 million, or $0.55 basic and diluted net earnings per common share, as compared to $2.5 million, or $0.45 basic and diluted net earnings per common share, for the same period one year ago. The increase in year-to-date earnings is primarily attributable to a decrease in the provision for loan losses, which was partially offset by aggregate decreases in net interest income and non-interest income and aggregate increases in non-interest expense, as discussed below.
Net interest income was $7.5 million for the three months ended June 30, 2013, compared to $7.8 million for the same period one year ago. This decrease was primarily due to a decrease in interest income resulting from a decrease in loans and a decrease in the yield on earning assets, which were partially offset by a decrease in interest expense due to a reduction in the cost of funds and a reduction in interest bearing liabilities. Net interest income after the provision for loan losses increased to $6.8 million during the second quarter of 2013, compared to $6.2 million for the same period one year ago. The provision for loan losses for the three months ended June 30, 2013 was $773,000, as compared to $1.6 million for the same period one year ago. The decrease in the provision for loan losses is primarily attributable to a $5.0 million reduction in non-accrual loans from June 30, 2012 to June 30, 2013 and a reduction in net charge-offs of $419,000 during the three months ended June 30, 2013, as compared to the same period one year ago.
Non-interest income was $3.3 million for the three months ended June 30, 2013, compared to $3.6 million for the same period one year ago. This decrease is primarily attributable to a $312,000 decrease in the gains on sale of securities for the three months ended June 30, 2013, as compared to the same period one year ago.
Non-interest expense was $8.0 million for the three months ended June 30, 2013, as compared to $7.8 million for the same period one year ago. This increase is attributable to a $309,000 increase in salaries and employee benefits expense, which was primarily due to 2013 salary increases and bonuses accrued in the second quarter of 2013, which was partially offset by a $193,000 decrease in non-interest expenses other than salary, employee benefits and occupancy expenses for the three months ended June 30, 2013, as compared to the same period one year ago. The decrease in non-interest expenses other than salary, employee benefits and occupancy expenses is primarily due to $168,000 in expenses incurred in the second quarter of 2012 as a result of the Company’s purchase of 12,530 shares of the Company’s 25,054 outstanding shares of preferred stock from the U.S. Department of the Treasury (“UST”), which was issued to the UST in connection with the Company’s participation in the Capital Purchase Program (“CPP’) under the Troubled Asset Relief Program (“TARP”) in 2008.
Year-to-date net interest income as of June 30, 2013 decreased 5.1% to $15.2 million compared to $16.0 million for the same period one year ago. This decrease is primarily attributable to a decrease in interest income resulting from decreases in the year-to-date average balances outstanding on loans and investment securities and a decrease in the yield on earning assets, which were partially offset by a decrease in interest expense due to a reduction in the cost of funds and a reduction in interest bearing liabilities. Net interest income after the provision for loan losses increased 8.2% to $13.4 million for the six months ended June 30, 2013, compared to $12.3 million for the same period one year ago. The provision for loan losses for the six months ended June 30, 2013 was $1.8 million, as compared to $3.7 million for the same period one year ago. The decrease in the provision for loan losses is primarily attributable to a $1.4 million decrease in net charge-offs during the six months ended June 30, 2013 compared to the same period one year ago and a $5.0 million reduction in non-accrual loans from June 30, 2012 to June 30, 2013.
Non-interest income was $6.7 million for the six months ended June 30, 2013, as compared to $7.0 million for the same period one year ago. This decrease is primarily attributable to a $577,000 decrease in the gains on sale of securities, which was partially offset by a $202,000 increase in mortgage banking income and a $211,000 reduction in losses and write-downs on other real estate owned properties for the six months ended June 30, 2013, as compared to the same period one year ago.
Non-interest expense was $15.7 million for the six months ended June 30, 2013, as compared to $15.1 million for the same period one year ago. This increase is primarily due to a $658,000 increase in salaries and employee benefits expense, which was primarily due to salary increases, bonuses accrued and an increase in commissions on mortgage and real estate appraisal sales during the six months ended June 30, 2013, as compared to the same period one year ago.
Total assets amounted to $1.0 billion as of June 30, 2013 and 2012. Available for sale securities increased 4.4% to $293.2 million as of June 30, 2013, compared to $280.7 million as of June 30, 2012. This increase reflects the investment of additional funds received from growth in deposits and a decrease in loans. Total loans amounted to $608.1 million as of June 30, 2013, compared to $642.8 million as of June 30, 2012. This decrease is primarily due to the anticipated reduction in existing loans through the work-through of problem loans and normal principal repayments, which have exceeded loan originations.
Non-performing assets declined to $23.4 million or 2.3% of total assets at June 30, 2013, compared to $29.4 million or 2.8% of total assets at June 30, 2012, primarily due to a $5.0 million decrease in non-accrual loans and a $2.1 million decrease in other real estate owned. Non-performing loans include $7.7 million in acquisition, development and construction (“AD&C”) loans, $10.7 million in commercial and residential mortgage loans and $551,000 in other loans at June 30, 2013, as compared to $12.6 million in
AD&C loans, $9.7 million in commercial and residential mortgage loans and $591,000 in other loans at June 30, 2012. The allowance for loan losses at June 30, 2013 was $14.0 million or 2.3% of total loans, compared to $16.6 million or 2.6% of total loans at June 30, 2012. According to Mr. Sellers, 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 $788.4 million as of June 30, 2013, compared to $780.5 million at June 30, 2012. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $100,000, increased $42.8 million to $665.4 million at June 30, 2013, as compared to $622.6 million at June 30, 2012. Certificates of deposit in amounts of $100,000 or more totaled $123.6 million at June 30, 2013, as compared to $157.0 million at June 30, 2012. This decrease is attributable to a $4.5 million decrease in brokered certificates of deposit combined with a decrease in retail certificates of deposit as intended 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 $46.0 million at June 30, 2013, as compared to $50.5 million at June 30, 2012.
Shareholders’ equity was $95.4 million, or 9.3% of total assets, as of June 30, 2013, compared to $94.8 million, or 9.2% of total assets, as of June 30, 2012.
Peoples Bank operates 22 offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Union, Iredell and Wake 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 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 the Company’s annual report on Form 10-K for the year ended December 31, 2012.
| CONSOLIDATED BALANCE SHEETS | | |
| June 30, 2013, December 31, 2012 and June 30, 2012 | | |
| (Dollars in thousands) | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | June 30, 2013 | | December 31, 2012 | | June 30, 2012 | |
| | (Unaudited) | | (Audited) | | (Unaudited) | |
| ASSETS: | | | | | | |
| Cash and due from banks | $ | 28,082 | | $ | 32,617 | | $ | 25,350 | |
| Interest bearing deposits | | 52,634 | | | 16,226 | | | 44,127 | |
| Cash and cash equivalents | | 80,716 | | | 48,843 | | | 69,477 | |
| | | | | | | | | | |
| Investment securities available for sale | | 293,151 | | | 297,823 | | | 280,735 | |
| Other investments | | 5,215 | | | 5,599 | | | 5,734 | |
| Total securities | | 298,366 | | | 303,422 | | | 286,469 | |
| | | | | | | | | | |
| Mortgage loans held for sale | | 6,002 | | | 6,922 | | | 3,753 | |
| | | | | | | | | | |
| Loans | | 608,072 | | | 619,974 | | | 642,815 | |
| Less: Allowance for loan losses | | (14,029 | ) | | (14,423 | ) | | (16,640 | ) |
| Net loans | | 594,043 | | | 605,551 | | | 626,175 | |
| | | | | | | | | | |
| Premises and equipment, net | | 16,635 | | | 15,874 | | | 16,342 | |
| Cash surrender value of life insurance | | 13,487 | | | 13,273 | | | 13,040 | |
| Accrued interest receivable and other assets | | 18,791 | | | 19,631 | | | 19,833 | |
| Total assets | $ | 1,028,040 | | $ | 1,013,516 | | $ | 1,035,089 | |
| | | | | | | | | | |
| | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY: | | | | | | | | | |
| Deposits: | | | | | | | | | |
| Non-interest bearing demand | $ | 172,055 | | $ | 161,582 | | $ | 147,825 | |
| NOW, MMDA & savings | | 385,014 | | | 371,719 | | | 353,076 | |
| Time, $100,000 or more | | 123,612 | | | 134,733 | | | 156,974 | |
| Other time | | 107,752 | | | 113,491 | | | 122,671 | |
| Total deposits | | 788,433 | | | 781,525 | | | 780,546 | |
| | | | | | | | | | |
| Securities sold under agreements to repurchase | | 45,971 | | | 34,578 | | | 50,510 | |
| FHLB borrowings | | 70,000 | | | 70,000 | | | 70,000 | |
| Junior subordinated debentures | | 20,619 | | | 20,619 | | | 20,619 | |
| Accrued interest payable and other liabilities | | 7,665 | | | 9,047 | | | 18,574 | |
| Total liabilities | | 932,688 | | | 915,769 | | | 940,249 | |
| | | | | | | | | | |
| Shareholders' equity: | | | | | | | | | |
| Series A preferred stock, $1,000 stated value; authorized | | | | | | | | | |
| 5,000,000 shares; issued and outstanding | | | | | | | | | |
| 12,524 shares at 6/30/13 and 12/31/12 | | 12,524 | | | 12,524 | | | 12,298 | |
| Common stock, no par value; authorized | | | | | | | | | |
| 20,000,000 shares; issued and outstanding | | | | | | | | | |
| 5,613,495 shares at 6/30/13 and 12/31/12 | | 48,133 | | | 48,133 | | | 48,298 | |
| Retained earnings | | 34,218 | | | 31,478 | | | 29,617 | |
| Accumulated other comprehensive income | | 477 | | | 5,612 | | | 4,627 | |
| Total shareholders' equity | | 95,352 | | | 97,747 | | | 94,840 | |
| | | | | | | | | | |
| Total liabilities and shareholders' equity | $ | 1,028,040 | | $ | 1,013,516 | | $ | 1,035,089 | |
| CONSOLIDATED STATEMENTS OF INCOME | | | | |
| For the three and six months ended June 30, 2013 and 2012 | | | | |
| (Dollars in thousands, except per share amounts) | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2013 | | 2012 | | 2013 | | 2012 |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) |
| INTEREST INCOME: | | | | | | | |
| Interest and fees on loans | $ | 7,439 | | $ | 8,211 | | $ | 15,079 | | $ | 16,633 |
| Interest on due from banks | | 28 | | | 16 | | | 40 | | | 19 |
| Interest on investment securities: | | | | | | | | | | | |
| U.S. Government sponsored enterprises | | 286 | | | 737 | | | 664 | | | 1,807 |
| State and political subdivisions | | 1,069 | | | 787 | | | 2,053 | | | 1,587 |
| Other | | 87 | | | 84 | | | 176 | | | 151 |
| Total interest income | | 8,909 | | | 9,835 | | | 18,012 | | | 20,197 |
| | | | | | | | | | | | |
| INTEREST EXPENSE: | | | | | | | | | | | |
| NOW, MMDA & savings deposits | | 200 | | | 295 | | | 418 | | | 639 |
| Time deposits | | 422 | | | 864 | | | 889 | | | 1,896 |
| FHLB borrowings | | 635 | | | 684 | | | 1,296 | | | 1,374 |
| Junior subordinated debentures | | 100 | | | 110 | | | 199 | | | 222 |
| Other | | 15 | | | 34 | | | 32 | | | 73 |
| Total interest expense | | 1,372 | | | 1,987 | | | 2,834 | | | 4,204 |
| | | | | | | | | | | | |
| NET INTEREST INCOME | | 7,537 | | | 7,848 | | | 15,178 | | | 15,993 |
| PROVISION FOR LOAN LOSSES | | 773 | | | 1,603 | | | 1,827 | | | 3,652 |
| NET INTEREST INCOME AFTER | | | | | | | | | | | |
| PROVISION FOR LOAN LOSSES | | 6,764 | | | 6,245 | | | 13,351 | | | 12,341 |
| | | | | | | | | | | | |
| NON-INTEREST INCOME: | | | | | | | | | | | |
| Service charges | | 1,104 | | | 1,192 | | | 2,143 | | | 2,379 |
| Other service charges and fees | | 268 | | | 258 | | | 642 | | | 599 |
| Gain on sale of securities | | 352 | | | 664 | | | 614 | | | 1,191 |
| Mortgage banking income | | 315 | | | 271 | | | 699 | | | 497 |
| Insurance and brokerage commissions | | 178 | | | 119 | | | 317 | | | 254 |
| Miscellaneous | | 1,092 | | | 1,089 | | | 2,321 | | | 2,052 |
| Total non-interest income | | 3,309 | | | 3,593 | | | 6,736 | | | 6,972 |
| | | | | | | | | | | | |
| NON-INTEREST EXPENSES: | | | | | | | | | | | |
| Salaries and employee benefits | | 4,240 | | | 3,931 | | | 8,430 | | | 7,772 |
| Occupancy | | 1,320 | | | 1,300 | | | 2,632 | | | 2,600 |
| Other | | 2,419 | | | 2,612 | | | 4,655 | | | 4,742 |
| Total non-interest expense | | 7,979 | | | 7,843 | | | 15,717 | | | 15,114 |
| | | | | | | | | | | | |
| EARNINGS BEFORE INCOME TAXES | | 2,094 | | | 1,995 | | | 4,370 | | | 4,199 |
| INCOME TAXES | | 461 | | | 486 | | | 979 | | | 1,031 |
| | | | | | | | | | | | |
| NET EARNINGS | | 1,633 | | | 1,509 | | | 3,391 | | | 3,168 |
| | | | | | | | | | | | |
| Dividends and accretion on preferred stock | | 156 | | | 348 | | | 313 | | | 697 |
| | | | | | | | | | | | |
| NET EARNINGS AVAILABLE TO | | | | | | | | | | | |
| COMMON SHAREHOLDERS | $ | 1,477 | | $ | 1,161 | | $ | 3,078 | | $ | 2,471 |
| | | | | | | | | | | | |
| PER COMMON SHARE AMOUNTS | | | | | | | | | | | |
| Basic net earnings | $ | 0.26 | | $ | 0.21 | | $ | 0.55 | | $ | 0.45 |
| Diluted net earnings | $ | 0.26 | | $ | 0.21 | | $ | 0.55 | | $ | 0.45 |
| Cash dividends | $ | 0.03 | | $ | 0.02 | | $ | 0.03 | | $ | 0.09 |
| Book value | $ | 14.76 | | $ | 14.89 | | $ | 14.76 | | $ | 14.89 |
| FINANCIAL HIGHLIGHTS | | | | | |
| For the three and six months ended June 30, 2013 and 2012 | | | | | |
| (Dollars in thousands) | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Three months ended | | Six months ended | |
| | June 30, | | June 30, | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
| SELECTED AVERAGE BALANCES: | | | | | | | | |
| Available for sale securities | $ | 290,995 | | $ | 284,129 | | $ | 288,773 | | $ | 298,790 | |
| Loans | | 607,481 | | | 654,343 | | | 614,241 | | | 662,962 | |
| Earning assets | | 952,898 | | | 972,963 | | | 944,903 | | | 985,405 | |
| Assets | | 1,021,044 | | | 1,036,560 | | | 1,012,697 | | | 1,047,985 | |
| Deposits | | 784,372 | | | 788,459 | | | 779,038 | | | 801,359 | |
| Shareholders' equity | | 100,054 | | | 106,671 | | | 100,532 | | | 106,691 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| SELECTED KEY DATA: | | | | | | | | | | | | |
| Net interest margin (tax equivalent) | | 3.40% | | | 3.40% | | | 3.46% | | | 3.42% | |
| Return on average assets | | 0.64% | | | 0.59% | | | 0.68% | | | 0.61% | |
| Return on average shareholders' equity | | 6.55% | | | 5.69% | | | 6.80% | | | 5.97% | |
| Shareholders' equity to total assets (period end) | | 9.28% | | | 9.16% | | | 9.28% | | | 9.16% | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES: | | | | | | | | | | | | |
| Balance, beginning of period | $ | 14,412 | | $ | 16,612 | | $ | 14,423 | | $ | 16,604 | |
| Provision for loan losses | | 773 | | | 1,603 | | | 1,827 | | | 3,652 | |
| Charge-offs | | (1,334 | ) | | (1,780 | ) | | (2,513 | ) | | (4,376 | ) |
| Recoveries | | 178 | | | 205 | | | 292 | | | 760 | |
| Balance, end of period | $ | 14,029 | | $ | 16,640 | | $ | 14,029 | | $ | 16,640 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| ASSET QUALITY: | | | | | | | | | | | | |
| Non-accrual loans | | | | | | | $ | 16,107 | | $ | 21,074 | |
| 90 days past due and still accruing | | | | | | | | 2,861 | | | 1,797 | |
| Other real estate owned | | | | | | | | 4,401 | | | 6,505 | |
| Repossessed assets | | | | | | | | - | | | 11 | |
| Total non-performing assets | | | | | | | $ | 23,369 | | $ | 29,387 | |
| Non-performing assets to total assets | | | | | | | | 2.27% | | | 2.84% | |
| Allowance for loan losses to non-performing assets | | | | | | | | 60.03% | | | 56.62% | |
| Allowance for loan losses to total loans | | | | | | | | 2.31% | | | 2.59% | |
