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Peoples Bancorp Announces First Quarter Earnings Results

NEWTON, NC / ACCESSWIRE / April 24, 2017 / 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 $2.2 million or $0.41 basic net earnings per share and $0.40 diluted net earnings per share for the three months ended March 31, 2017, as compared to $2.5 million or $0.45 basic net earnings per share and $0.44 diluted net earnings per share for the same period one year ago.
  • Non-performing assets declined to $3.6 million or 0.3% of total assets at March 31, 2017, compared to $8.5 million or 0.8% of total assets at March 31, 2016.
  • Total loans increased $42.9 million to $735.9 million at March 31, 2017, compared to $693.0 million at March 31, 2016.
  • Core deposits were $883.4 million or 97.2% of total deposits at March 31, 2017, compared to $826.0 million or 96.8% of total deposits at March 31, 2016.

Lance A. Sellers, President and Chief Executive Officer, attributed the decrease in first quarter net earnings to a decrease in non-interest income and an increase in non-interest expense, which were partially offset by an increase in net interest income and an increase in the credit to the provision for loan losses.

Net interest income was $9.5 million for the three months ended March 31, 2017, compared to $9.1 million for the three months ended March 31, 2016. The increase in net interest income was primarily due to a $159,000 increase in interest income, which was primarily attributable to an increase in the average outstanding balance of loans and a 0.25% increase in the prime rate in December 2016, combined with a $211,000 decrease in interest expense, which was primarily attributable to a decrease in the average outstanding balance of Federal Home Loan Bank borrowings during the three months ended March 31, 2017, as compared to the same period one year ago. Net interest income after the provision for loan losses was $9.7 million for the three months ended March 31, 2017, compared to $9.3 million for the three months ended March 31, 2016. The provision for loan losses for the three months ended March 31, 2017 was a credit of $236,000, as compared to a credit of $216,000 for the three months ended March 31, 2016.

Non-interest income was $2.9 million for the three months ended March 31, 2017, compared to $3.3 million for the three months ended March 31, 2016. The decrease in non-interest income is primarily attributable to a $360,000 increase in net losses on other real estate owned properties and a $114,000 decrease in service charges and fees during the three months ended March 31, 2017, compared to the same period one year ago.

Non-interest expense was $9.8 million for the three months ended March 31, 2017, compared to $9.5 million for the three months ended March 31, 2016. The increase in non-interest expense was primarily due to a $653,000 increase in salaries and benefits expense, which was partially offset by a $209,000 decrease in other non-interest expense during the three months ended March 31, 2017, as compared to the three months ended March 31, 2016. The increase in salaries and benefits expense is primarily due to an increase in the number of full-time equivalent employees and annual salary increases combined with an increase in expense associated with restricted stock units due to an increase in the Company's stock price from $25.07 at December 31, 2016 to $29.70 at March 31, 2017. The decrease in other non-interest expense is primarily due to a decrease in consulting fees during the three months ended March 31, 2017, as compared to the three months ended March 31, 2016.

Total assets were $1.1 billion as of March 31, 2017 and 2016. Available for sale securities were $244.9 million as of March 31, 2017, compared to $264.1 million as of March 31, 2016. Total loans were $735.9 million as of March 31, 2017, compared to $693.0 million as of March 31, 2016.

Non-performing assets declined to $3.6 million or 0.3% of total assets at March 31, 2017, compared to $8.5 million or 0.8% of total assets at March 31, 2016. The decline in non-performing assets is primarily due to a $4.7 million decrease in non-accrual loans. Non-performing loans include $3.5 million in commercial and residential mortgage loans, $20,000 in acquisition, development and construction ("AD&C") loans and $28,000 in other loans at March 31, 2017, as compared to $8.1 million in commercial and residential mortgage loans, $149,000 in AD&C loans and $141,000 in other loans at March 31, 2016.

The allowance for loan losses at March 31, 2017 was $7.3 million or 0.9% of total loans, compared to $9.1 million or 1.3% of total loans at March 31, 2016. 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 $908.4 million as of March 31, 2017, compared to $853.1 million at March 31, 2016. Core deposits, which include non-interest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, increased $57.4 million to $883.4 million at March 31, 2017, as compared to $826.0 million at March 31, 2016. Certificates of deposit in amounts of $250,000 or more totaled $24.3 million at March 31, 2017, as compared to $26.4 million at March 31, 2016.

Securities sold under agreements to repurchase were $42.2 million at March 31, 2017, as compared to $36.1 million at March 31, 2016.

Shareholders' equity was $110.1 million, or 9.9% of total assets, as of March 31, 2017, compared to $107.8 million, or 10.1% of total assets, as of March 31, 2016. The increase in shareholders' equity is primarily due to an increase in retained earnings due to net income, which was partially offset by a decrease in accumulated other comprehensive income resulting from a decrease in the unrealized gain on investment securities.

Peoples Bank operates 19 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Iredell and Wake Counties. Peoples Bank also operates a loan production office in Lincoln County. 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, 2016.

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

PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS

CONSOLIDATED BALANCE SHEETS
March 31, 2017, December 31, 2016 and March 31, 2016
(Dollars in thousands)

March 31,
2017
December 31,
2016
March 31,
2016
(Unaudited)
(Audited)
(Unaudited)
ASSETS:
Cash and due from banks
$ 55,491 $ 53,613 $ 45,566
Interest-bearing deposits
31,959 16,481 30,826
Cash and cash equivalents
87,450 70,094 76,392
Investment securities available for sale
244,863 249,946 264,092
Other investments
2,679 2,635 3,633
Total securities
247,542 252,581 267,725
Mortgage loans held for sale
1,340 5,709 996
Loans 735,861 723,811 693,033
Less: Allowance for loan losses
(7,263 ) (7,550 ) (9,116 )
Net loans
728,598 716,261 683,917
Premises and equipment, net
18,597 16,452 16,408
Cash surrender value of life insurance
15,251 14,952 14,652
Accrued interest receivable and other assets
11,496 11,942 10,254
Total assets
$ 1,110,274 $ 1,087,991 $ 1,070,344
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Non-interest-bearing demand
$ 275,369 $ 271,851 $ 246,677
NOW, MMDA & savings
494,273 477,054 452,158
Time, $250,000 or more
24,262 26,771 26,352
Other time
114,510 117,242 127,930
Total deposits
908,414 892,918 853,117
Securities sold under agreements to repurchase
42,163 36,434 36,056
FHLB borrowings
20,000 20,000 43,500
Junior subordinated debentures
20,619 20,619 20,619
Accrued interest payable and other liabilities
8,941 10,592 9,292
Total liabilities
1,000,137 980,563 962,584
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
5,437,740 shares at 3/31/17; 5,417,800 shares at
12/31/16 and 5,510,538 shares at 3/31/16
44,745 44,187 46,171
Retained earnings
61,801 60,254 55,189
Accumulated other comprehensive income
3,591 2,987 6,400
Total shareholders' equity
110,137 107,428 107,760
Total liabilities and shareholders' equity
$ 1,110,274 $ 1,087,991 $ 1,070,344

PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS

CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2017 and 2016
(Dollars in thousands, except per share amounts)

Three months ended
March 31,
2017
2016
(Unaudited)
(Unaudited)
INTEREST INCOME:
Interest and fees on loans
$ 8,280 $ 8,023
Interest on due from banks
30 17
Interest on investment securities:
U.S. Government sponsored enterprises
604 658
State and political subdivisions
1,084 1,127
Other 66 80
Total interest income
10,064 9,905
INTEREST EXPENSE:
NOW, MMDA & savings deposits
132 120
Time deposits
128 162
FHLB borrowings
192 406
Junior subordinated debentures
135 113
Other 11 8
Total interest expense
598 809
NET INTEREST INCOME
9,466 9,096
PROVISION FOR (REDUCTION OF PROVISION
FOR) LOAN LOSSES
(236 ) (216 )
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
9,702 9,312
NON-INTEREST INCOME:
Service charges
1,106 1,041
Other service charges and fees
155 334
Mortgage banking income
346 369
Insurance and brokerage commissions
168 158
Miscellaneous
1,101 1,422
Total non-interest income
2,876 3,324
NON-INTEREST EXPENSES:
Salaries and employee benefits
5,234 4,581
Occupancy 1,613 1,754
Other 2,948 3,157
Total non-interest expense
9,795 9,492
EARNINGS BEFORE INCOME TAXES
2,783 3,144
INCOME TAXES
578 691
NET EARNINGS $ 2,205 $ 2,453
PER SHARE AMOUNTS
Basic net earnings
$ 0.41 $ 0.45
Diluted net earnings
$ 0.40 $ 0.44
Cash dividends $ 0.12 $ 0.08
Book value $ 20.25 $ 19.56

PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS

FINANCIAL HIGHLIGHTS
For the three months ended March 31, 2017 and 2016
(Dollars in thousands)

Three months ended
March 31,
2017
2016
(Unaudited)
(Unaudited)
SELECTED AVERAGE BALANCES:
Available for sale securities
$ 240,796 $ 256,922
Loans
729,475 691,834
Earning assets
988,864 967,945
Assets
1,086,469 1,047,013
Deposits
890,402 838,986
Shareholders' equity
108,385 108,038
SELECTED KEY DATA:
Net interest margin (tax equivalent)
4.11 % 4.02 %
Return on average assets
0.82 % 0.94 %
Return on average shareholders' equity
8.25 % 9.13 %
Shareholders' equity to total assets (period end)
9.92 % 10.07 %
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period
$ 7,550 $ 9,589
Provision for loan losses
(236 ) (216 )
Charge-offs
(131 ) (322 )
Recoveries
80 65
Balance, end of period
$ 7,263 $ 9,116
ASSET QUALITY:
Non-accrual loans
$ 3,584 $ 8,268
90 days past due and still accruing
- 127
Other real estate owned
- 85
Total non-performing assets
$ 3,584 $ 8,480
Non-performing assets to total assets
0.32 % 0.79 %
Allowance for loan losses to non-performing assets
202.65 % 107.50 %
Allowance for loan losses to total loans
0.99 % 1.32 %

LOAN RISK GRADE ANALYSIS:

Percentage of Loans
By Risk Grade
3/31/2017
3/31/2016
Risk Grade 1 (excellent quality)
1.31 % 1.56 %
Risk Grade 2 (high quality)
25.52 % 25.23 %
Risk Grade 3 (good quality)
57.57 % 53.92 %
Risk Grade 4 (management attention)
11.09 % 13.78 %
Risk Grade 5 (watch)
3.14 % 2.82 %
Risk Grade 6 (substandard)
1.09 % 2.39 %
Risk Grade 7 (doubtful)
0.00 % 0.00 %
Risk Grade 8 (loss)
0.00 % 0.00 %

At March 31, 2017, including non-accrual loans, there were five relationships exceeding $1.0 million in the Watch risk grade (which totaled $8.4 million) and no relationships exceeding $1.0 million in the Substandard risk grade.

SOURCE: Peoples Bancorp of North Carolina, Inc.