PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS
Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company of Peoples Bank, reported second quarter and year to date earnings results with highlights as follows:
Second quarter highlights:
| · | Net earnings were $2.624 million or $0.47 basic and diluted net earnings per share for the three months ended June 30, 2015, as compared to $2.551 million or $0.45 basic and diluted net earnings per share for the same period one year ago. |
Year to date highlights:
| · | Net earnings were $5.0 million or $0.89 basic net earnings per share and $0.88 diluted net earnings per share for the six months ended June 30, 2015, as compared to $5.1 million or $0.91 basic and diluted net earnings per share for the same period one year ago. |
| · | Non-performing assets declined to $11.1 million or 1.1% of total assets at June 30, 2015, compared to $14.8 million or 1.4% of total assets at June 30, 2014. |
| · | Total loans increased $33.5 million to $666.8 million at June 30, 2015, compared to $633.3 million at June 30, 2014. |
| · | Core deposits were $768.3 million or 95.0% of total deposits at June 30, 2015, compared to $751.8 million or 92.7% of total deposits at June 30, 2014. |
Lance A. Sellers, President and Chief Executive Officer, attributed the increase in second quarter earnings to a decrease in the provision for loan losses and an increase in non-interest income, which were partially offset by a decrease in net interest income and an increase in non-interest expense.
Net interest income was $8.3 million for the three months ended June 30, 2015, compared to $8.5 million for the three months ended June 30, 2014. The decrease in net interest income was primarily due to a $222,000 decrease in interest income on investment securities due to a $25.7 million decrease in the average outstanding balance of available for sale securities during the three months ended June 30, 2015, as compared to the same period one year ago. Net interest income after the provision for loan losses was $8.5 million for the three months ended June 30, 2015, compared to $8.4 million for the three months ended June 30, 2014. The provision for loan losses for the three months ended June 30, 2015 was a credit of $214,000, as compared to an expense of $67,000 for the three months ended June 30, 2014. The decrease in the provision for loan losses is primarily attributable to a $3.3 million reduction in non-accrual loans from June 30, 2014 to June 30, 2015 and a $119,000 reduction in net charge-offs during the three months ended June 30, 2015, as compared to the same period one year ago.
Non-interest income was $3.3 million for the three months ended June 30, 2015, compared to $3.1 million for the three months ended June 30, 2014. The increase in non-interest income is primarily attributable to a $185,000 increase in miscellaneous non-interest income and a $83,000 increase in mortgage banking income. The $185,000 increase in miscellaneous non-interest income is primarily due to a $67,000 increase in net gains on other real estate owned properties, a $41,000 increase in income from Peoples Investment Services, a $33,000 increase in income from Real Estate Advisory Services and a $26,000 increase in net appraisal management fee income from Community Bank Real Estate Solutions.
Non-interest expense was $8.3 million for the three months ended June 30, 2015, compared to $8.1 million for the three months ended June 30, 2014. The increase in non-interest expense was primarily due to a $175,000 increase in other non-interest expenses; which was primarily due to a $50,000 increase in foreclosed property expense, a $32,000 increase in marketing expense, a $23,000 increase in debit card expense and a $20,000 increase in legal fees during the three months ended June 30, 2015, as compared to the three months ended June 30, 2014.
Year-to-date net earnings as of June 30, 2015 were $5.0 million, or $0.89 basic net earnings per share and $0.88 diluted net earnings per share, as compared to $5.1 million, or $0.91 basic and diluted net earnings per share for the same period one year ago. The decrease in year-to-date earnings is primarily attributable to an increase in the provision for loan losses and an increase in non-interest expense, which were partially offset by an increase in non-interest income and an increase in net interest income, as discussed below.
Year-to-date net interest income as of June 30, 2015 was $17.0 million compared to $16.9 million for same period one year ago. Net interest income after the provision for loan losses was $17.0 million for the six months ended June 30, 2015, compared to $17.2 million for the same period one year ago. The provision for loan losses for the six months ended June 30, 2015 was a credit of $41,000, as compared to a credit of $282,000 for the six months ended June 30, 2014. The increase in the provision for loan losses is primarily attributable to a $33.5 million increase in loans from June 30, 2014 to June 30, 2015 and a $119,000 increase in net charge-offs during the six months ended June 30, 2015, as compared to the same period one year ago.
Non-interest income was $6.5 million for the six months ended June 30, 2015, compared to $6.0 million for the six months ended June 30, 2014. The increase in non-interest income is primarily attributable to a $575,000 increase in miscellaneous non-interest income and a $218,000 increase in mortgage banking income, which were partially offset by a $181,000 decrease in service charges and fees. The $575,000 increase in miscellaneous non-interest income is primarily due to $166,000 in net gains on other real estate owned properties for the six months ended June 30, 2015, as compared to $150,000 in net losses and write-downs on other real estate owned properties for the six months ended June 30, 2014.
Non-interest expense was $17.1 million for the six months ended June 30, 2015, as compared to $16.2 million for the six months ended June 30, 2014. The increase in non-interest expense was primarily due to a $603,000 increase in salaries and benefits expense resulting primarily from an increase in the number of full-time equivalent employees and annual salary increases combined with a $313,000 increase in other non-interest expenses primarily due to a $99,000 increase in foreclosed property expense, a $44,000 increase in marketing expense, a $44,000 increase in legal fees and a $40,000 increase in debit card expense, during the six months ended June 30, 2015, as compared to the six months ended June 30, 2014.
Total assets were $1.0 billion as of June 30, 2015 and 2014. Available for sale securities were $273.5 million as of June 30, 2015, compared to $297.2 million as of June 30, 2014. Total loans were $666.8 million as of June 30, 2015, compared to $633.3 million as of June 30, 2014.
Non-performing assets declined to $11.1 million or 1.1% of total assets at June 30, 2015, compared to $14.9 million or 1.4% of total assets at June 30, 2014. The decline in non-performing assets is primarily due to a $3.3 million decrease in non-accrual loans. Non-performing loans include $7.0 million in commercial and residential mortgage loans, $546,000 in acquisition, development and construction (“AD&C”) loans and $177,000 in other loans at June 30, 2015, as compared to $5.5 million in commercial and residential mortgage loans, $5.2 million in AD&C loans and $558,000 in other loans at June 30, 2014. The allowance for loan losses at June 30, 2015 was $10.4 million or 1.6% of total loans, compared to $12.7 million or 2.0% of total loans at June 30, 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 $808.8 million as of June 30, 2015, compared to $811.5 million at June 30, 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 $16.5 million to $768.3 million at June 30, 2015, as compared to $751.8 million at June 30, 2014. Certificates of deposit in amounts of $250,000 or more totaled $33.3 million at June 30, 2015, as compared to $48.7 million at June 30, 2014. The decrease in certificates of deposit in amounts of $250,000 or more is attributable to a $3.7 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 $48.3 million at June 30, 2015, as compared to $46.8 million at June 30, 2014.
Shareholders’ equity was $100.4 million, or 9.7% of total assets, as of June 30, 2015, compared to $93.0 million, or 8.9% of total assets, as of June 30, 2014. This increase is primarily due to an increase in retained earnings and an increase in accumulated other comprehensive income resulting from an increase in the unrealized gain on investment securities, which were partially offset by a decrease in common stock due to 67,213 shares of common stock repurchased as of June 30, 2015 under the Company’s stock repurchase program implemented in September 2014.
On April 2, 2013, the Bank received notice that a lawsuit was filed against it in the General Court of Justice, Superior Court Division, Lincoln County, North Carolina. The complaint alleged (i) breach of contract and the covenants of good faith and fair dealing by the Bank, (ii) conversion, (iii) unjust enrichment and (iv) violations of the North Carolina Unfair and Deceptive Trade Practices Act in its assessment and collection of overdraft fees. It seeks the refund of overdraft fees, treble damages, attorneys’ fees and injunctive relief. The Plaintiff sought to have the lawsuit certified as a class action. On June 10, 2015, the North Carolina Business Court granted summary judgment in favor of the Bank on all claims and ordered the case dismissed with prejudice. The Plaintiff has filed a notice of appeal to the North Carolina Court of Appeals. The Bank continues to believe that the allegations in the complaint are without merit and intends to vigorously defend the lawsuit on appeal.
Peoples Bank operates 21 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Union, Iredell and Wake Counties. The 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 | | | | | | |
| June 30, 2015, December 31, 2014 and June 30, 2014 | | | | | | |
| (Dollars in thousands) | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | June 30, 2015 | | December 31, 2014 | | June 30, 2014 | |
| | (Unaudited) | | (Audited) | | (Unaudited) | |
| ASSETS: | | | | | | |
| Cash and due from banks | $ | 45,725 | | $ | 51,213 | | $ | 54,522 | |
| Interest-bearing deposits | | 9,954 | | | 17,885 | | | 20,546 | |
| Cash and cash equivalents | | 55,679 | | | 69,098 | | | 75,068 | |
| | | | | | | | | | |
| Investment securities available for sale | | 273,469 | | | 281,099 | | | 297,165 | |
| Other investments | | 3,911 | | | 4,031 | | | 4,706 | |
| Total securities | | 277,380 | | | 285,130 | | | 301,871 | |
| | | | | | | | | | |
| Mortgage loans held for sale | | 2,063 | | | 1,375 | | | 2,048 | |
| | | | | | | | | | |
| Loans | | 666,767 | | | 651,891 | | | 633,336 | |
| Less: Allowance for loan losses | | (10,378 | ) | | (11,082 | ) | | (12,675 | ) |
| Net loans | | 656,389 | | | 640,809 | | | 620,661 | |
| | | | | | | | | | |
| Premises and equipment, net | | 16,503 | | | 17,000 | | | 16,762 | |
| Cash surrender value of life insurance | | 14,333 | | | 14,125 | | | 13,914 | |
| Accrued interest receivable and other assets | | 14,864 | | | 12,957 | | | 17,528 | |
| Total assets | $ | 1,037,211 | | $ | 1,040,494 | | $ | 1,047,852 | |
| | | | | | | | | | |
| | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY: | | | | | | | | | |
| Deposits: | | | | | | | | | |
| Noninterest-bearing demand | $ | 216,475 | | $ | 210,758 | | $ | 206,655 | |
| NOW, MMDA & savings | | 417,026 | | | 407,504 | | | 397,305 | |
| Time, $250,000 or more | | 33,252 | | | 47,872 | | | 48,694 | |
| Other time | | 142,048 | | | 148,566 | | | 158,825 | |
| Total deposits | | 808,801 | | | 814,700 | | | 811,479 | |
| | | | | | | | | | |
| Securities sold under agreements to repurchase | | 48,285 | | | 48,430 | | | 46,764 | |
| FHLB borrowings | | 50,000 | | | 50,000 | | | 65,000 | |
| Junior subordinated debentures | | 20,619 | | | 20,619 | | | 20,619 | |
| Accrued interest payable and other liabilities | | 9,120 | | | 8,080 | | | 10,943 | |
| Total liabilities | | 936,825 | | | 941,829 | | | 954,805 | |
| | | | | | | | | | |
| 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 | | | | | | | | | |
| 5,540,838 shares at 6/30/15, 5,612,588 shares | | | | | | | | | |
| at 12/31/14 and 5,617,125 shares at 6/30/14 | | 46,748 | | | 48,088 | | | 48,170 | |
| Retained earnings | | 49,397 | | | 45,124 | | | 41,433 | |
| Accumulated other comprehensive income | | 4,241 | | | 5,453 | | | 3,444 | |
| Total shareholders' equity | | 100,386 | | | 98,665 | | | 93,047 | |
| | | | | | | | | | |
| Total liabilities and shareholders' equity | $ | 1,037,211 | | $ | 1,040,494 | | $ | 1,047,852 | |
| CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | |
| For the three and six months ended June 30, 2015 and 2014 | | | | | | | |
| (Dollars in thousands, except per share amounts) | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Three months ended | | Six months ended | |
| | June 30, | | June 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
| INTEREST INCOME: | | | | | | | | |
| Interest and fees on loans | $ | 7,333 | | $ | 7,491 | | $ | 14,926 | | $ | 14,893 | |
| Interest on due from banks | | 7 | | | 12 | | | 17 | | | 24 | |
| Interest on investment securities: | | | | | | | | | | | | |
| U.S. Government sponsored enterprises | | 613 | | | 804 | | | 1,326 | | | 1,651 | |
| State and political subdivisions | | 1,157 | | | 1,169 | | | 2,320 | | | 2,346 | |
| Other | | 81 | | | 100 | | | 169 | | | 207 | |
| Total interest income | | 9,191 | | | 9,576 | | | 18,758 | | | 19,121 | |
| | | | | | | | | | | | | |
| INTEREST EXPENSE: | | | | | | | | | | | | |
| NOW, MMDA & savings deposits | | 106 | | | 125 | | | 218 | | | 251 | |
| Time deposits | | 226 | | | 303 | | | 474 | | | 637 | |
| FHLB borrowings | | 433 | | | 549 | | | 851 | | | 1,094 | |
| Junior subordinated debentures | | 99 | | | 97 | | | 196 | | | 193 | |
| Other | | 11 | | | 11 | | | 20 | | | 21 | |
| Total interest expense | | 875 | | | 1,085 | | | 1,759 | | | 2,196 | |
| | | | | | | | | | | | | |
| NET INTEREST INCOME | | 8,316 | | | 8,491 | | | 16,999 | | | 16,925 | |
| PROVISION FOR (REDUCTION OF PROVISION | | | | | | | | | | | | |
| FOR) LOAN LOSSES | | (214 | ) | | 67 | | | (41 | ) | | (282 | ) |
| NET INTEREST INCOME AFTER | | | | | | | | | | | | |
| PROVISION FOR LOAN LOSSES | | 8,530 | | | 8,424 | | | 17,040 | | | 17,207 | |
| | | | | | | | | | | | | |
| NON-INTEREST INCOME: | | | | | | | | | | | | |
| Service charges | | 1,171 | | | 1,223 | | | 2,305 | | | 2,352 | |
| Other service charges and fees | | 190 | | | 260 | | | 545 | | | 679 | |
| Gain on sale of securities | | - | | | - | | | - | | | 26 | |
| Mortgage banking income | | 271 | | | 188 | | | 510 | | | 292 | |
| Insurance and brokerage commissions | | 203 | | | 162 | | | 365 | | | 361 | |
| Miscellaneous | | 1,462 | | | 1,277 | | | 2,817 | | | 2,242 | |
| Total non-interest income | | 3,297 | | | 3,110 | | | 6,542 | | | 5,952 | |
| | | | | | | | | | | | | |
| NON-INTEREST EXPENSES: | | | | | | | | | | | | |
| Salaries and employee benefits | | 4,286 | | | 4,207 | | | 9,086 | | | 8,483 | |
| Occupancy | | 1,482 | | | 1,466 | | | 2,966 | | | 2,988 | |
| Other | | 2,569 | | | 2,394 | | | 5,033 | | | 4,720 | |
| Total non-interest expense | | 8,337 | | | 8,067 | | | 17,085 | | | 16,191 | |
| | | | | | | | | | | | | |
| EARNINGS BEFORE INCOME TAXES | | 3,490 | | | 3,467 | | | 6,497 | | | 6,968 | |
| INCOME TAXES | | 866 | | | 916 | | | 1,545 | | | 1,838 | |
| | | | | | | | | | | | | |
| NET EARNINGS | $ | 2,624 | | $ | 2,551 | | $ | 4,952 | | $ | 5,130 | |
| | | | | | | | | | | | | |
| PER SHARE AMOUNTS | | | | | | | | | | | | |
| Basic net earnings | $ | 0.47 | | $ | 0.45 | | $ | 0.89 | | $ | 0.91 | |
| Diluted net earnings | $ | 0.47 | | $ | 0.45 | | $ | 0.88 | | $ | 0.91 | |
| Cash dividends | $ | 0.06 | | $ | 0.04 | | $ | 0.12 | | $ | 0.08 | |
| Book value | $ | 18.12 | | $ | 16.56 | | $ | 18.12 | | $ | 16.56 | |
| FINANCIAL HIGHLIGHTS | | | | | | | | |
| For the three and six months ended June 30, 2015 and 2014 | | | | | | | |
| (Dollars in thousands) | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Three months ended | | Six months ended | |
| | June 30, | | June 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
| SELECTED AVERAGE BALANCES: | | | | | | | | |
| Available for sale securities | $ | 269,470 | | $ | 295,185 | | $ | 270,783 | | $ | 297,090 | |
| Loans | | 659,712 | | | 619,675 | | | 657,234 | | | 618,574 | |
| Earning assets | | 946,185 | | | 938,245 | | | 947,226 | | | 940,472 | |
| Assets | | 1,037,899 | | | 1,024,988 | | | 1,037,103 | | | 1,022,147 | |
| Deposits | | 816,503 | | | 797,820 | | | 818,070 | | | 798,058 | |
| Shareholders' equity | | 102,137 | | | 92,388 | | | 103,040 | | | 91,331 | |
| | | | | | | | | | | | | |
| SELECTED KEY DATA: | | | | | | | | | | | | |
| Net interest margin (tax equivalent) | | 3.77% | | | 3.88% | | | 3.87% | | | 3.88% | |
| Return on average assets | | 1.01% | | | 1.00% | | | 0.96% | | | 1.01% | |
| Return on average shareholders' equity | | 10.30% | | | 11.08% | | | 9.69% | | | 11.33% | |
| Shareholders' equity to total assets (period end) | | 9.68% | | | 8.88% | | | 9.68% | | | 8.88% | |
| | | | | | | | | | | | | |
| ALLOWANCE FOR LOAN LOSSES: | | | | | | | | | | | | |
| Balance, beginning of period | $ | 10,843 | | $ | 12,978 | | $ | 11,082 | | $ | 13,501 | |
| Provision for loan losses | | (214 | ) | | 67 | | | (41 | ) | | (282 | ) |
| Charge-offs | | (332 | ) | | (597 | ) | | (862 | ) | | (1,172 | ) |
| Recoveries | | 81 | | | 227 | | | 199 | | | 628 | |
| Balance, end of period | $ | 10,378 | | $ | 12,675 | | $ | 10,378 | | $ | 12,675 | |
| | | | | | | | | | | | | |
| ASSET QUALITY: | | | | | | | | | | | | |
| Non-accrual loans | | | | | | | $ | 7,596 | | $ | 10,921 | |
| 90 days past due and still accruing | | | | | | | | 100 | | | 392 | |
| Other real estate owned | | | | | | | | 3,424 | | | 3,532 | |
| Total non-performing assets | | | | | | | $ | 11,120 | | $ | 14,845 | |
| Non-performing assets to total assets | | | | | | | | 1.07% | | | 1.42% | |
| Allowance for loan losses to non-performing assets | | | | | | | | 93.33% | | | 85.38% | |
| Allowance for loan losses to total loans | | | | | | | | 1.56% | | | 2.00% | |
| LOAN RISK GRADE ANALYSIS: | | |
| | Percentage of Loans |
| | By Risk Grade |
| | 6/30/2015 | 6/30/2014 |
| Risk Grade 1 (excellent quality) | 1.91% | 2.17% |
| Risk Grade 2 (high quality) | 24.60% | 20.56% |
| Risk Grade 3 (good quality) | 49.96% | 50.74% |
| Risk Grade 4 (management attention) | 16.37% | 16.75% |
| Risk Grade 5 (watch) | 4.20% | 4.84% |
| Risk Grade 6 (substandard) | 2.73% | 4.62% |
| Risk Grade 7 (doubtful) | 0.00% | 0.00% |
| Risk Grade 8 (loss) | 0.00% | 0.01% |
| | | |
At June 30, 2015, including non-accrual loans, there were six relationships exceeding $1.0 million in the Watch risk grade (which totaled $14.0 million) and one relationship exceeding $1.0 million in the Substandard risk grade (which totaled $1.3 million). There was one relationship with loans in both the Watch and Substandard risk grades, which totaled $1.2 million for loans in both risk grades combined. |
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| (END) | | |
