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Peoples Bancorp Announces First Quarter Earnings Results

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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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