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Peoples Bancorp Announces First Quarter Earnings Results

NEWTON, NC / ACCESSWIRE / April 22, 2019 / Peoples Bancorp of North Carolina, Inc. (PEBK), the parent company of Peoples Bank, reported first quarter earnings results with highlights as follows:

First quarter highlights:

  • Net earnings were $3.7 million or $0.61 basic and diluted net earnings per share for the three months ended March 31, 2019, compared to $3.3 million or $0.55 basic and diluted net earnings per share for the same period one year ago.
  • Total loans increased $57.8 million to $823.6 million at March 31, 2019, compared to $765.8 million at March 31, 2018.
  • Core deposits were $887.6 million or 97.74% of total deposits at March 31, 2019, compared to $889.0 million or 97.94% of total deposits at March 31, 2018.

Lance A. Sellers, President and Chief Executive Officer, attributed the increase in first quarter net earnings to an increase in net interest income and an increase in non-interest income, which were partially offset by an increase in the provision for loan losses and an increase in non-interest expense during the three months ended March 31, 2019, as compared to the three months ended March 31, 2018, as discussed below.

Net interest income was $11.4 million for the three months ended March 31, 2019, compared to $10.3 million for the three months ended March 31, 2018. The increase in net interest income was primarily due to a $1.4 million increase in interest income, which was partially offset by a $290,000 increase in interest expense. The increase in interest income was primarily attributable to an increase in the average outstanding balance of loans and a 0.75% increase in the prime rate since March 31, 2018. Net interest income after the provision for loan losses was $11.2 million for the three months ended March 31, 2019, compared to $10.3 million for the three months ended March 31, 2018. The provision for loan losses for the three months ended March 31, 2019 was $178,000, compared to $31,000 for the three months ended March 31, 2018. The increase in the provision for loan losses is primarily attributable to a $57.8 million increase in loans from March 31, 2018 to March 31, 2019.

Non-interest income was $4.1 million for the three months ended March 31, 2019, compared to $3.7 million for the three months ended March 31, 2018. The increase in non-interest income is primarily attributable to a $231,000 increase in gains on the sale of securities during the three months ended March 31, 2019, compared to the same period one year ago.

Non-interest expense was $10.9 million for the three months ended March 31, 2019, compared to $10.0 million for the three months ended March 31, 2018. The increase in non-interest expense was primarily attributable to a $685,000 increase in salaries and benefits expense, which was primarily due to an increase in the number of full-time equivalent employees and annual salary increases.

Income tax expense was $785,000 for the three months ended March 31, 2019, compared to $652,000 for the three months ended March 31, 2018. The effective tax rate was 17.63% for the three months ended March 31, 2019, compared to 16.49% for the three months ended March 31, 2018.

Total assets were $1.1 billion as of March 31, 2019 and 2018. Available for sale securities were $184.4 million as of March 31, 2019, compared to $213.3 million as of March 31, 2018. Total loans were $823.6 million as of March 31, 2019, compared to $765.8 million as of March 31, 2018.

Non-performing assets were $2.8 million or 0.25% of total assets at March 31, 2019, compared to $3.7 million or 0.34% of total assets at March 31, 2018. Non-performing loans include $2.7 million in commercial and residential mortgage loans and $89,000 in other loans at March 31, 2019, as compared to $3.4 million in commercial and residential mortgage loans, $130,000 in acquisition, development and construction loans and $114,000 in other loans at March 31, 2018.

The allowance for loan losses at March 31, 2019 was $6.6 million or 0.80% of total loans, compared to $6.4 million or 0.83% of total loans at March 31, 2018. 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 were $908.1 million at March 31, 2019, compared to $907.6 million at March 31, 2018. Core deposits, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, were $887.6 million at March 31, 2019, compared to $889.0 million at March 31, 2018. Certificates of deposit in amounts of $250,000 or more totaled $20.4 million at March 31, 2019, compared to $17.9 million at March 31, 2018.

Securities sold under agreements to repurchase were $41.2 million at March 31, 2019, compared to $38.3 million at March 31, 2018.

Shareholders' equity was $126.6 million, or 11.39% of total assets, at March 31, 2019, compared to $116.5 million, or 10.65% of total assets, at March 31, 2018. The Company repurchased 5,518 shares of its common stock during the first quarter of 2019 under the Company's stock repurchase program, which was funded in February 2019.

Peoples Bank currently operates 20 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Iredell and Wake Counties. Peoples Bank also operates loan production offices in Lincoln, Mecklenburg 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, 2018.

Contact:

Lance A. Sellers
President and Chief Executive Officer

A. Joseph Lampron, Jr.
Executive Vice President and Chief Financial Officer

828-464-5620, Fax 828-465-6780

CONSOLIDATED BALANCE SHEETS
March 31, 2019, December 31, 2018 and March 31, 2018
(Dollars in thousands)


March 31,
2019
December 31, 2018
March 31,
2018
(Unaudited)
(Audited)
(Unaudited)
ASSETS:
Cash and due from banks
$ 35,318 $ 40,553 $ 32,849
Interest-bearing deposits
15,896 2,817 34,985
Cash and cash equivalents
51,214 43,370 67,834
Investment securities available for sale
184,428 194,578 213,299
Other investments
4,329 4,361 1,834
Total securities
188,757 198,939 215,133
Mortgage loans held for sale
361 680 503
Loans
823,557 804,023 765,824
Less: Allowance for loan losses
(6,561 ) (6,445 ) (6,373 )
Net loans
816,996 797,578 759,451
Premises and equipment, net
18,247 18,450 19,732
Cash surrender value of life insurance
16,031 15,936 15,647
Accrued interest receivable and other assets
19,542 18,298 14,931
Total assets
$ 1,111,148 $ 1,093,251 $ 1,093,231
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand
$ 310,053 $ 298,817 $ 294,998
NOW, MMDA & savings
493,773 475,223 496,044
Time, $250,000 or more
20,362 16,239 17,927
Other time
83,926 86,934 98,655
Total deposits
908,114 877,213 907,624
Securities sold under agreements to repurchase
41,231 58,095 38,257
FHLB borrowings
- - -
Junior subordinated debentures
20,619 20,619 20,619
Accrued interest payable and other liabilities
14,600 13,707 10,249
Total liabilities
984,564 969,634 976,749
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
5,997,136 shares 3/31/19,
5,995,256 shares 12/31/18 and 3/31/18
62,151 62,096 62,096
Retained earnings
62,757 60,535 52,806
Accumulated other comprehensive income
1,676 986 1,580
Total shareholders' equity
126,584 123,617 116,482
Total liabilities and shareholders' equity
$ 1,111,148 $ 1,093,251 $ 1,093,231


CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2019 and 2018
(Dollars in thousands, except per share amounts)


Three months ended
March 31,
2019
2018
(Unaudited)
(Unaudited)
INTEREST INCOME:
Interest and fees on loans
$ 10,619 $ 9,069
Interest on due from banks
14 45
Interest on investment securities:
U.S. Government sponsored enterprises
673 606
State and political subdivisions
834 996
Other
43 43
Total interest income
12,183 10,759
INTEREST EXPENSE:
NOW, MMDA & savings deposits
282 176
Time deposits
151 105
FHLB borrowings
46 -
Junior subordinated debentures
226 171
Other
15
Total interest expense
757 467
NET INTEREST INCOME
11,426 10,292
PROVISION FOR (REDUCTION OF PROVISION
FOR) LOAN LOSSES
178 31
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
11,248 10,261
NON-INTEREST INCOME:
Service charges
1,093 1,024
Other service charges and fees
169 180
Gain on sale of securities
231 -
Mortgage banking income
147 216
Insurance and brokerage commissions
231 182
Appraisal management fee income
862 789
Miscellaneous
1,387 1,345
Total non-interest income
4,120 3,736
NON-INTEREST EXPENSES:
Salaries and employee benefits
5,647 4,962
Occupancy
1,737 1,856
Appraisal management fee expense
662 592
Other
2,870 2,632
Total non-interest expense
10,916 10,042
EARNINGS BEFORE INCOME TAXES
4,452 3,955
INCOME TAXES
785 652
NET EARNINGS
$ 3,667 $ 3,303
PER SHARE AMOUNTS
Basic net earnings
$ 0.61 $ 0.55
Diluted net earnings
$ 0.61 $ 0.55
Cash dividends
$ 0.14 $ 0.13
Book value
$ 21.11 $ 19.43


FINANCIAL HIGHLIGHTS
For the three months ended March 31, 2019 and 2018
(Dollars in thousands)


Three months ended
March 31,
2019
2018
(Unaudited)
(Unaudited)
SELECTED AVERAGE BALANCES:
Available for sale securities
$ 189,790 $ 217,437
Loans
815,203 765,670
Earning assets
1,013,310 998,226
Assets
1,091,822 1,080,772
Deposits
895,708 900,679
Shareholders' equity
125,349 116,578
SELECTED KEY DATA:
Net interest margin (tax equivalent)
4.66 % 4.29 %
Return on average assets
1.36 % 1.24 %
Return on average shareholders' equity
11.86 % 11.49 %
Shareholders' equity to total assets (period end)
11.39 % 10.65 %
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period
$ 6,445 $ 6,366
Provision for loan losses
31
Charge-offs
(164 ) (106 )
Recoveries
82
Balance, end of period
$ 6,561 $ 6,373
ASSET QUALITY:
Non-accrual loans
$ 2,802 $ 3,665
90 days past due and still accruing
-
Other real estate owned
27 62
Total non-performing assets
$ 2,829 $ 3,727
Non-performing assets to total assets
0.25 % 0.34 %
Allowance for loan losses to non-performing assets
231.92 % 171.00 %
Allowance for loan losses to total loans
0.80 % 0.83 %


LOAN RISK GRADE ANALYSIS:


Percentage of Loans
By Risk Grade
3/31/2019
3/31/2018
Risk Grade 1 (excellent quality)
0.70 % 0.95 %
Risk Grade 2 (high quality)
24.99 % 26.20 %
Risk Grade 3 (good quality)
61.41 % 61.22 %
Risk Grade 4 (management attention)
10.57 % 8.33 %
Risk Grade 5 (watch)
1.56 % 2.31 %
Risk Grade 6 (substandard)
0.78 % 0.99 %
Risk Grade 7 (doubtful)
0.00 % 0.00 %
Risk Grade 8 (loss)
0.00 % 0.00 %

At March 31, 2019, including non-accrual loans, there were two relationships exceeding $1.0 million in the Watch risk grade (which totaled $3.2 million). There were no relationships exceeding $1.0 million in the Substandard risk grade.

SOURCE: Peoples Bancorp of North Carolina, Inc.



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