Peoples Bancorp Announces First Quarter Earnings Results

NEWTON, N.C., April 21, 2010 (GLOBE NEWSWIRE) -- Peoples Bancorp of North Carolina, Inc. (Nasdaq:PEBK), the parent company of Peoples Bank, reported net earnings of $875,000 or $0.16 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, for the three months ended March 31, 2010 as compared to $625,000, or $0.11 basic and diluted net earnings per share, for the same period one year ago. After adjusting for dividends and accretion on preferred stock, net earnings available to common shareholders for the three months ended March 31, 2010 were $527,000, or $0.10 basic net earnings per common share and $0.09 diluted net earnings per common share as compared to $424,000, or $0.08 basic and diluted net earnings per common share, for the same period one year ago. Tony W. Wolfe, President and Chief Executive Officer, stated that he was pleased to report the increase in 2010 first quarter earnings as compared to first quarter 2009. He attributed the increase in first quarter earnings to increases in net interest income and non-interest income combined with a decrease in non-interest expense, which were partially offset by an increase in provision for loan losses.

Net interest income was $8.1 million for the three-month period ended March 31, 2010 compared to $7.9 million for the same period one year ago. This increase in net interest income is primarily due to a reduction in interest expense due to a decrease in the cost of funds for time deposits. Net interest income after the provision for loan losses decreased 6% to $5.7 million during the first quarter of 2010, compared to $6.1 million for the same period one year ago. The provision for loan losses for the three months ended March 31, 2010 was $2.4 million as compared to $1.8 million for the same period one year ago, primarily attributable to a $12.6 million increase in non-accrual loans from March 31, 2009 to March 31, 2010.

Recurring non-interest income amounted to $2.8 million for the three months ended March 31, 2010, as compared to $2.6 million for the same period last year. Net non-recurring losses of $182,000 for the three months ended March 31, 2010 were primarily attributable to write-downs and losses on foreclosed property. Non-recurring losses of $463,000 for the three months ended March 31, 2009 included $215,000 in write-downs and losses on foreclosed property and a $248,000 write-down of an asset classified as other investments.

Non-interest expense decreased 2% to $7.2 million for the three months ended March 31, 2009, as compared to $7.3 million for the same period last year. The decrease in non-interest expense included a decrease of $59,000 or 2% in salaries and benefits expense and a decrease of $90,000 or 4% in non-interest expenses other than salary, employee benefits and occupancy expenses. The decrease in non-interest expenses other than salary, benefits and occupancy expenses is primarily attributable to a decrease of $177,000 in FDIC insurance expense. FDIC insurance expense for the first quarter of 2009 included an accrual of $257,000 for the FDIC insurance special assessment paid September 30, 2009.  No FDIC insurance special assessments are anticipated in 2010 at this time.

Total assets as of March 31, 2010 amounted to $1.1 billion, an increase of 8% compared to total assets of $1.0 billion at March 31, 2009. This increase is primarily attributable to an increase in investment securities available for sale. Available for sale securities increased 49% to $218.6 million as of March 31, 2010 compared to $146.9 million as of March 31, 2009 primarily due

PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS

to $84.6 million in securities purchased to offset the cost of the Company's CPP dividend. Total loans amounted to $767.4 million as of March 31, 2010 compared to $778.1 million as of March 31, 2009. This decrease reflects a decline in loan originations combined with continuing payments on existing loans.

Non-performing assets increased 7% to $30.8 million or 2.86% of total assets at March 31, 2010, compared to $28.8 million or 2.74% of total assets at December 31, 2009 primarily due to a $3.6 million increase in non-accrual loans. Non-performing assets amounted to $15.5 million or 1.54% of total assets at March 31, 2009. Non-performing loans include $8.1 million in construction and acquisition and development loans, $17.3 million in commercial and residential mortgage loans and $1.0 million in other loans at March 31, 2010 as compared to $4.8 million in construction and acquisition and development loans, $18.3 million in commercial and residential mortgage loans and $1.7 million in other loans as of December 31, 2009. The allowance for loan losses at March 31, 2010 amounted to $16.8 million or 2.18% of total loans compared to $12.1 million or 1.55% of total loans at March 31, 2009.

Deposits amounted to $837.9 million as of March 31, 2010, representing an increase of 12% over deposits of $750.1 million at March 31, 2009. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposits of denominations less than $100,000, increased $76.2 million or 15% to $585.0 million at March 31, 2010 as compared to $508.9 million at March 31, 2009. Certificates of deposit in amounts greater than $100,000 or more totaled $246.3 million at March 31, 2010 as compared to $238.9 million at March 31, 2009. This increase is primarily due to a $12.3 million increase in certificates of deposit issued through the Certificate of Deposit Account Registry Service (CDARS) as of March 31, 2010 compared to March 31, 2009.

Securities sold under agreement to repurchase amounted to $38.5 million at March 31, 2010 as compared to $34.0 million at March 31, 2009. 

Shareholders' equity was $100.1 million, or 9.31% of total assets, at March 31, 2010 as compared to $100.2 million, or 10.01% of total assets, at March 31, 2009.

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 Peoples Bancorp of North Carolina, Inc.'s annual report on Form 10-K for the year ended December 31, 2009.