NEWTON, N.C., April 20, 2015 (GLOBE NEWSWIRE) -- Peoples Bancorp of North Carolina, Inc. (Nasdaq:PEBK), the parent company of Peoples Bank, reported first quarter earnings results with highlights as follows:
First quarter highlights:
- Net earnings available to common shareholders were $2.3 million or $0.41 basic and diluted net earnings per common share for the three months ended March 31, 2015, as compared to $2.6 million or $0.46 basic and diluted net earnings per common share for the same period one year ago.
- Average outstanding principal balance of loans increased $37.2 million to $654.7 million for the three months ended March 31, 2015 compared to $617.5 million for the three months ended March 31, 2014.
- Non-performing assets declined to $12.4 million or 1.2% of total assets at March 31, 2015, compared to $14.9 million or 1.4% of total assets at March 31, 2014.
- Total loans increased $42.5 million to $660.5 million at March 31, 2015, compared to $618.0 million at March 31, 2014.
- Core deposits were $786.2 million or 94.73% of total deposits at March 31, 2015, compared to $748.3 million or 92.3% of total deposits at March 31, 2014.
Lance A. Sellers, President and Chief Executive Officer, attributed the decrease in first quarter earnings 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.
Net interest income was $8.7 million for the three months ended March 31, 2015, compared to $8.4 million for the three months ended March 31, 2014. This increase was primarily due to an increase in interest income resulting from an increase in the average outstanding principal balance of loans combined with a decrease in interest expense resulting from a reduction in the cost of funds and a decrease in the average outstanding balance of interest bearing liabilities. Net interest income after the provision for loan losses decreased to $8.5 million during the first quarter of 2015, compared to $8.8 million for the three months ended March 31, 2014. The provision for loan losses for the three months ended March 31, 2015 was an expense of $173,000, as compared to a credit of $349,000 for the three months ended March 31, 2014. The increase in the provision for loan losses is primarily attributable to a $42.5 million increase in loans from March 31, 2014 to March 31, 2015 and a $238,000 increase in net charge-offs during the three months ended March 31, 2015, as compared to the same period one year ago.
Non-interest income was $3.2 million for the three months ended March 31, 2015, compared to $2.8 million for the three months ended March 31, 2014. This increase is primarily attributable to a $391,000 increase in miscellaneous non-interest income and a $135,000 increase in mortgage banking income. The increase in miscellaneous non-interest income is primarily due to $87,000 in net gains on other real estate owned properties for the three months ended March 31, 2015, as compared to $162,000 in net losses and write-downs on other real estate owned properties for the three months ended March 31, 2014.
Non-interest expense was $8.7 million for the three months ended March 31, 2015, compared to $8.1 million for the three months ended March 31, 2014. The increase in non-interest expense was primarily due to a $525,000 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 $138,000 increase in other non-interest expenses primarily due to a $49,000 increase in foreclosed property expense and a $25,000 increase in legal fees, which were partially offset by a $38,000 decrease in occupancy expense during the three months ended March 31, 2015, as compared to the three months ended March 31, 2014.
Total assets were $1.0 billion as of March 31, 2015 and 2014. Available for sale securities were $282.6 million as of March 31, 2015, compared to $281.1 million as of March 31, 2014. Total loans were $660.5 million as of March 31, 2015, compared to $618.0 million as of March 31, 2014.
Non-performing assets declined to $12.4 million or 1.2% of total assets at March 31, 2015, compared to $14.9 million or 1.4% of total assets at March 31, 2014. The decline in non-performing assets is primarily due to a $2.6 million decrease in non-accrual loans. Non-performing loans include $8.1 million in commercial and residential mortgage loans, $565,000 in acquisition, development and construction ("AD&C") loans and $192,000 in other loans at March 31, 2015, as compared to $6.0 million in commercial and residential mortgage loans, $5.3 million in AD&C loans and $324,000 in other loans at March 31, 2014. The allowance for loan losses at March 31, 2015 was $10.8 million or 1.6% of total loans, compared to $13.0 million or 2.1% of total loans at March 31, 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 $830.0 million as of March 31, 2015, compared to $810.5 million at March 31, 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 $37.9 million to $786.2 million at March 31, 2015, as compared to $748.3 million at March 31, 2014. Certificates of deposit in amounts of $250,000 or more totaled $36.2 million at March 31, 2015, as compared to $51.0 million at March 31, 2014. This decrease is attributable to a $3.8 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 $38.7 million at March 31, 2015, as compared to $43.3 million at March 31, 2014.
Shareholders' equity was $101.5 million, or 9.7% of total assets, as of March 31, 2015, compared to $88.4 million, or 8.5% of total assets, as of March 31, 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.
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 | |||
| March 31, 2015, December 31, 2014 and March 31, 2014 | |||
| (Dollars in thousands) | |||
| March 31, 2015 | December 31, 2014 | March 31, 2014 | |
| (Unaudited) | (Audited) | (Unaudited) | |
| ASSETS: | |||
| Cash and due from banks | $ 47,730 | $ 51,213 | $ 50,906 |
| Interest-bearing deposits | 19,783 | 17,885 | 28,006 |
| Cash and cash equivalents | 67,513 | 69,098 | 78,912 |
| Investment securities available for sale | 282,575 | 281,099 | 300,756 |
| Other investments | 3,912 | 4,031 | 4,706 |
| Total securities | 286,487 | 285,130 | 305,462 |
| Mortgage loans held for sale | 806 | 1,375 | 635 |
| Loans | 660,477 | 651,891 | 618,040 |
| Less: Allowance for loan losses | (10,843) | (11,082) | (12,978) |
| Net loans | 649,634 | 640,809 | 605,062 |
| Premises and equipment, net | 16,745 | 17,000 | 16,419 |
| Cash surrender value of life insurance | 14,229 | 14,125 | 13,809 |
| Accrued interest receivable and other assets | 14,041 | 12,957 | 18,465 |
| Total assets | $ 1,049,455 | $ 1,040,494 | $ 1,038,764 |
| LIABILITIES AND SHAREHOLDERS' EQUITY: | |||
| Deposits: | |||
| Noninterest-bearing demand | $ 217,603 | $ 210,758 | $ 195,465 |
| NOW, MMDA & savings | 432,541 | 407,504 | 399,847 |
| Time, $250,000 or more | 36,237 | 47,872 | 51,046 |
| Other time | 143,579 | 148,566 | 164,177 |
| Total deposits | 829,960 | 814,700 | 810,535 |
| Securities sold under agreements to repurchase | 38,702 | 48,430 | 43,319 |
| FHLB borrowings | 50,000 | 50,000 | 65,000 |
| Junior subordinated debentures | 20,619 | 20,619 | 20,619 |
| Accrued interest payable and other liabilities | 8,660 | 8,080 | 10,880 |
| Total liabilities | 947,941 | 941,829 | 950,353 |
| 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 | |||
| 5,612,588 shares at 3/31/15 and 12/31/14 | |||
| 5,613,495 shares at 3/31/14 | 48,088 | 48,088 | 48,133 |
| Retained earnings | 47,110 | 45,124 | 39,109 |
| Accumulated other comprehensive income | 6,316 | 5,453 | 1,169 |
| Total shareholders' equity | 101,514 | 98,665 | 88,411 |
| Total liabilities and shareholders' equity | $ 1,049,455 | $ 1,040,494 | $ 1,038,764 |
| CONSOLIDATED STATEMENTS OF INCOME | ||
| For the three months ended March 31, 2015 and 2014 | ||
| (Dollars in thousands, except per share amounts) | ||
| Three months ended | ||
| March 31, | ||
| 2015 | 2014 | |
| (Unaudited) | (Unaudited) | |
| INTEREST INCOME: | ||
| Interest and fees on loans | $ 7,593 | $ 7,401 |
| Interest on due from banks | 10 | 12 |
| Interest on investment securities: | ||
| U.S. Government sponsored enterprises | 713 | 847 |
| State and political subdivisions | 1,163 | 1,177 |
| Other | 88 | 108 |
| Total interest income | 9,567 | 9,545 |
| INTEREST EXPENSE: | ||
| NOW, MMDA & savings deposits | 111 | 126 |
| Time deposits | 247 | 334 |
| FHLB borrowings | 418 | 545 |
| Junior subordinated debentures | 97 | 96 |
| Other | 11 | 10 |
| Total interest expense | 884 | 1,111 |
| NET INTEREST INCOME | 8,683 | 8,434 |
| PROVISION FOR LOAN LOSSES | 173 | (349) |
| NET INTEREST INCOME AFTER | ||
| PROVISION FOR LOAN LOSSES | 8,510 | 8,783 |
| NON-INTEREST INCOME: | ||
| Service charges | 1,134 | 1,129 |
| Other service charges and fees | 355 | 419 |
| Gain on sale of securities | -- | 26 |
| Mortgage banking income | 239 | 104 |
| Insurance and brokerage commissions | 161 | 198 |
| Miscellaneous | 1,356 | 965 |
| Total non-interest income | 3,245 | 2,841 |
| NON-INTEREST EXPENSES: | ||
| Salaries and employee benefits | 4,801 | 4,276 |
| Occupancy | 1,483 | 1,521 |
| Other | 2,464 | 2,326 |
| Total non-interest expense | 8,748 | 8,123 |
| EARNINGS BEFORE INCOME TAXES | 3,007 | 3,501 |
| INCOME TAXES | 679 | 923 |
| NET EARNINGS AVAILABLE TO | ||
| COMMON SHAREHOLDERS | $ 2,328 | $ 2,578 |
| PER COMMON SHARE AMOUNTS | ||
| Basic net earnings | $ 0.41 | $ 0.46 |
| Diluted net earnings | $ 0.41 | $ 0.46 |
| Cash dividends | $ 0.06 | $ 0.04 |
| Book value | $ 18.09 | $ 15.75 |
| FINANCIAL HIGHLIGHTS | ||
| For the three months ended March 31, 2015 and 2014 | ||
| (Dollars in thousands) | ||
| Three months ended | ||
| March 31, | ||
| 2015 | 2014 | |
| (Unaudited) | (Unaudited) | |
| SELECTED AVERAGE BALANCES: | ||
| Available for sale securities | $ 272,111 | $ 299,017 |
| Loans | 654,728 | 617,461 |
| Earning assets | 948,279 | 942,723 |
| Assets | 1,036,299 | 1,019,275 |
| Deposits | 819,654 | 798,297 |
| Shareholders' equity | 101,328 | 87,712 |
| SELECTED KEY DATA: | ||
| Net interest margin (tax equivalent) | 3.97% | 3.88% |
| Return on average assets | 0.91% | 1.03% |
| Return on average shareholders' equity | 9.32% | 11.92% |
| Shareholders' equity to total assets (period end) | 9.67% | 8.51% |
| ALLOWANCE FOR LOAN LOSSES: | ||
| Balance, beginning of period | $ 11,082 | $ 13,501 |
| Provision for loan losses | 173 | (349) |
| Charge-offs | (530) | (575) |
| Recoveries | 118 | 401 |
| Balance, end of period | $ 10,843 | $ 12,978 |
| ASSET QUALITY: | ||
| Non-accrual loans | $ 8,934 | $ 11,568 |
| 90 days past due and still accruing | -- | 60 |
| Other real estate owned | 3,424 | 3,282 |
| Total non-performing assets | $ 12,358 | $ 14,910 |
| Non-performing assets to total assets | 1.18% | 1.44% |
| Allowance for loan losses to non-performing assets | 87.74% | 87.04% |
| Allowance for loan losses to total loans | 1.64% | 2.10% |
| LOAN RISK GRADE ANALYSIS: | ||
| Percentage of Loans | ||
| By Risk Grade | ||
| 3/31/2015 | 3/31/2014 | |
| Risk Grade 1 (excellent quality) | 2.03% | 2.32% |
| Risk Grade 2 (high quality) | 23.44% | 19.32% |
| Risk Grade 3 (good quality) | 50.69% | 48.80% |
| Risk Grade 4 (management attention) | 16.36% | 18.55% |
| Risk Grade 5 (watch) | 4.28% | 5.72% |
| Risk Grade 6 (substandard) | 2.96% | 5.00% |
| Risk Grade 7 (doubtful) | 0.00% | 0.00% |
| Risk Grade 8 (loss) | 0.00% | 0.00% |
| At March 31, 2015, including non-accrual loans, there were six relationships exceeding $1.0 million in the Watch risk grade (which totaled $14.2 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 $1.3 million for loans in both risk grades combined. | ||