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8-K - FORM 8K - PEOPLES BANCORP OF NORTH CAROLINA INC | form_8-k.htm |
EXHIBIT (99)(a)
NEWS RELEASE
October
23, 2017
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
|
For Immediate Release
PEOPLES BANCORP ANNOUNCES
THIRD QUARTER EARNINGS RESULTS
Peoples
Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company
of Peoples Bank, reported third quarter and year to date earnings
results with highlights as follows:
Third quarter highlights:
●
Net earnings were
$3.2 million or $0.59 basic net earnings per share and $0.58
diluted net earnings per share for the three months ended September
30, 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.
●
Peoples Bank
received notice that the Consent Order issued on August 31, 2015
was terminated effective August 30, 2017.
Year to date highlights:
●
Net earnings were
$8.3 million or $1.52 basic net earnings per share and $1.49
diluted net earnings per share for the nine months ended September
30, 2017, as compared to $7.9 million or $1.43 basic net earnings
per share and $1.42 diluted net earnings per share for the same
period one year ago.
●
Total loans
increased $34.4 million to $747.4 million at September 30, 2017,
compared to $713.0 million at September 30, 2016.
●
Core deposits were
$879.6 million or 97.6% of total deposits at September 30, 2017,
compared to $835.6 million or 96.8% of total deposits at September
30, 2016.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
increase in third quarter net earnings to an increase in net
interest income, an increase in non-interest income and a decrease
in non-interest expense, which were partially offset by a decrease
in the credit to the provision for loan losses during the three
months ended September 30, 2017, as compared to the three months
ended September 30, 2016, as discussed below.
Net
interest income was $10.0 million for the three months ended
September 30, 2017, compared to $9.2 million for the three months
ended September 30, 2016. The increase in net interest income was
primarily due to a $716,000 increase in interest income, which was
primarily attributable to an increase in the average outstanding
balance of loans and a 0.75% increase in the prime rate since
September 2016, combined with a $178,000 decrease in interest
expense, which was primarily attributable to a decrease in the
average outstanding balances of Federal Home Loan Bank
(“FHLB”) borrowings and time deposits during the three
months ended September 30, 2017, as compared to the same period one
year ago. Net interest income after the provision for loan losses
was $10.3 million for the three months ended September 30, 2017,
compared to $9.5 million for the three months ended September 30,
2016. The provision for loan losses for the three months ended
September 30, 2017 was a
credit of $218,000, as compared to a credit of $360,000 for the
three months ended September 30, 2016. The decrease in the credit
to the provision for loan losses is primarily attributable to a
$34.4 million increase in loans from September 30, 2016 to
September 30, 2017.
Non-interest income
was $3.5 million for the three months ended September 30, 2017,
compared to $3.4 million for the three months ended September 30,
2016. The increase in non-interest income is primarily attributable
to a $266,000 increase in miscellaneous non-interest income during
the three months ended September 30, 2017, compared to the same
period one year ago.
5
Non-interest
expense was $9.4 million for the three months ended September 30,
2017, compared to $9.6 million for the three months ended September
30, 2016. The decrease in non-interest expense was primarily due to
a $265,000 decrease in other non-interest expense, which
was partially offset by a $104,000 increase in salaries and
benefits expense during the three months ended September 30, 2017,
as compared to the three months ended September 30, 2016. The
decrease in other non-interest expense is primarily due to
decreases in consulting fees and fraud losses during the three
months ended September 30, 2017, as compared to the three months
ended September 30, 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.
Year-to-date net
earnings as of September 30, 2017 were $8.3 million or $1.52 basic
net earnings per share and $1.49 diluted net earnings per share, as
compared to $7.9 million or $1.43 basic net earnings per share and
$1.42 diluted net earnings per share for the same period one year
ago. The increase in year-to-date net earnings is primarily
attributable to an increase in net interest income, which was
partially offset by a decrease in the credit to the provision for
loan losses, a decrease in non-interest income and an increase in
non-interest expense, which were partially offset by an increase in
net interest income, as discussed below.
Year-to-date net
interest income as of September 30, 2017 was $29.4 million compared
to $27.3 million for the same period one year ago. The increase in
net interest income was primarily due to a $1.5 million increase in
interest income, which was primarily attributable to an increase in
the average outstanding balance of loans and a 0.75% increase in
the prime rate since September 2016, combined with a $580,000
decrease in interest expense, which was primarily attributable to a
decrease in the average outstanding balances of FHLB borrowings and
time deposits during the nine months ended September 30, 2017, as
compared to the same period one year ago. Net interest income after
the provision for loan losses was $29.8 million for the nine months
ended September 30, 2017, compared to $28.4 million for the same
period one year ago. The provision for loan losses for the nine
months ended September 30, 2017 was a credit of $405,000, as
compared to a credit of $1.1 million for the nine months ended
September 30, 2016. The decrease in the credit to the provision for
loan losses is primarily attributable to a $34.4 million increase
in loans from September 30, 2016 to September 30,
2017.
Non-interest income
was $9.7 million for the nine months ended September 30, 2017,
compared to $10.3 million for the nine months ended September 30,
2016. The decrease in non-interest income is primarily attributable
to a $324,000 decrease in gains on the sale of securities, a
$250,000 decrease in service charges and fees and a $143,000
decrease in mortgage banking income during the nine months ended
September 30, 2017, as compared to the nine months ended September
30, 2016.
Non-interest
expense was $28.5 million for the nine months ended September 30,
2017, as compared to $28.2 million for the nine months ended
September 30, 2016. The increase in non-interest expense was
primarily due to a $924,000 increase in salaries and benefits
expense, which was partially offset by a $262,000 decrease in
occupancy expense and a $379,000 decrease in other non-interest
expense, during the nine months ended September 30, 2017, as
compared to the nine months ended September 30, 2016. The increase
in salaries and benefits expense is primarily due to an increase in
the number of full-time equivalent employees, annual salary
increases and an increase in expenses associated with restricted
stock units due to an increase in the Company’s stock price.
The decrease in occupancy expense is primarily due to a reduction
in depreciation expense during the nine months ended September 30,
2017, as compared to the nine months ended September 30, 2016. The
decrease in other non-interest expense is primarily due to a
decrease in consulting fees during the nine months ended September
30, 2017, as compared to the nine months ended September 30,
2016 due to a reduction
in expenses associated with the Consent Order issued in August
2015, which was terminated effective August 31, 2017.
6
Total
assets were $1.1 billion as of September 30, 2017 and 2016.
Available for sale securities were $235.7 million as of September
30, 2017, compared to $262.4 million as of September 30, 2016.
Total loans were $747.4 million as of September 30, 2017, compared
to $713.0 million as of September 30, 2016.
Total
loans increased $2.4 million to $747.4 million at September 30,
2017, compared to $745.0 million at June 30, 2017. Loan activity
during the third quarter of 2017 reflects an $8.5 million payoff of
a syndication loan in which the Bank held a participation
interest. The Bank did
not have a participation interest in any syndicated loans at
September 30, 2017. Third quarter 2017 loan activity also reflects
an increase in construction lending. Unfunded construction loan
commitments were $44.2 million at September 30, 2017, compared to
$31.0 million at June 30, 2017 and $26.2 million at December 31,
2016.
Non-performing
assets were to $4.9 million or 0.4% of total assets at September
30, 2017, compared to $4.8 million or 0.4% of total assets at
September 30, 2016. Non-performing loans include $4.7 million in
commercial and residential mortgage loans, $16,000 in acquisition,
development and construction (“AD&C”) loans and
$251,000 in other loans at September 30, 2017, as compared to $4.6
million in commercial and residential mortgage loans, $31,000 in
AD&C loans and $107,000 in other loans at September 30,
2016.
The
allowance for loan losses at September 30, 2017 was $6.8 million or
0.92% of total loans, compared to $8.0 million or 1.1% of total
loans at September 30, 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
$901.6 million at September 30, 2017, compared to $861.9 million at
September 30, 2016. Core deposits, which include
noninterest-bearing demand deposits, NOW, MMDA, savings and
non-brokered certificates of deposit of denominations less than
$250,000, increased $45.0 million to $879.6 million at September
30, 2017, as compared to $834.6 million at September 30, 2016.
Certificates of deposit in amounts of $250,000 or more totaled
$21.3 million at September 30, 2017, as compared to $26.6 million
at September 30, 2016.
Securities sold
under agreements to repurchase were $53.3 million at September 30,
2017, as compared to $50.9 million at September 30,
2016.
Shareholders’
equity was $116.2 million, or 10.4% of total assets, as of
September 30, 2017, compared to $110.6 million, or 10.1% of total
assets, as of September 30, 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 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 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,
2016.
7
|
|
|
|
September 30, 2017,
December 31, 2016 and September 30, 2016
|
|
|
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
December
31, 2016
|
September 30, 2016
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
ASSETS:
|
|
|
|
Cash and due from
banks
|
$55,718
|
$53,613
|
$47,653
|
Interest-bearing
deposits
|
37,538
|
16,481
|
35,191
|
Cash and cash
equivalents
|
93,256
|
70,094
|
82,844
|
|
|
|
|
Investment
securities available for sale
|
235,736
|
249,946
|
262,423
|
Other
investments
|
2,680
|
2,635
|
3,634
|
Total
securities
|
238,416
|
252,581
|
266,057
|
|
|
|
|
Mortgage loans held
for sale
|
2,623
|
5,709
|
2,776
|
|
|
|
|
Loans
|
747,437
|
723,811
|
713,019
|
Less: Allowance for
loan losses
|
(6,844)
|
(7,550)
|
(8,045)
|
Net
loans
|
740,593
|
716,261
|
704,974
|
|
|
|
|
Premises and
equipment, net
|
19,697
|
16,452
|
16,553
|
Cash surrender
value of life insurance
|
15,452
|
14,952
|
14,853
|
Accrued interest
receivable and other assets
|
11,516
|
11,942
|
9,551
|
Total
assets
|
$1,121,553
|
$1,087,991
|
$1,097,608
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY:
|
|
|
|
Deposits:
|
|
|
|
Noninterest-bearing
demand
|
$287,794
|
$271,851
|
$253,134
|
NOW, MMDA &
savings
|
486,051
|
477,054
|
460,767
|
Time, $250,000 or
more
|
21,318
|
26,771
|
26,627
|
Other
time
|
106,476
|
117,242
|
121,419
|
Total
deposits
|
901,639
|
892,918
|
861,947
|
|
|
|
|
Securities sold
under agreements to repurchase
|
53,307
|
36,434
|
50,920
|
FHLB
borrowings
|
20,000
|
20,000
|
43,500
|
Junior subordinated
debentures
|
20,619
|
20,619
|
20,619
|
Accrued interest
payable and other liabilities
|
9,835
|
10,592
|
9,974
|
Total
liabilities
|
1,005,400
|
980,563
|
986,960
|
|
|
|
|
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
|
|
|
|
5,450,412 shares at
9/30/17 and 5,417,800 shares
|
|
|
|
at 12/31/16 and
9/30/16
|
45,102
|
44,187
|
44,188
|
Retained
earnings
|
66,539
|
60,254
|
59,502
|
Accumulated other
comprehensive income
|
4,512
|
2,987
|
6,958
|
Total shareholders'
equity
|
116,153
|
107,428
|
110,648
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$1,121,553
|
$1,087,991
|
$1,097,608
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
|
|
For the three and
nine months ended September 30, 2017 and 2016
|
|
|
|
|
|
(Dollars in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
|
|
Nine months
ended
|
||
|
September
30,
|
|
September
30,
|
||
|
2017
|
2016
|
|
2017
|
2016
|
|
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
(Unaudited)
|
INTEREST
INCOME:
|
|
|
|
|
|
Interest and fees
on loans
|
$8,966
|
$8,188
|
|
$25,935
|
$24,185
|
Interest on due
from banks
|
60
|
32
|
|
138
|
67
|
Interest on
investment securities:
|
|
|
|
|
|
U.S. Government
sponsored enterprises
|
578
|
603
|
|
1,795
|
1,910
|
State and political
subdivisions
|
1,047
|
1,105
|
|
3,198
|
3,350
|
Other
|
47
|
54
|
|
157
|
191
|
Total interest
income
|
10,698
|
9,982
|
|
31,223
|
29,703
|
|
|
|
|
|
|
INTEREST
EXPENSE:
|
|
|
|
|
|
NOW, MMDA &
savings deposits
|
156
|
126
|
|
431
|
367
|
Time
deposits
|
112
|
142
|
|
360
|
452
|
FHLB
borrowings
|
211
|
426
|
|
604
|
1,248
|
Junior subordinated
debentures
|
152
|
122
|
|
432
|
353
|
Other
|
19
|
12
|
|
43
|
30
|
Total interest
expense
|
650
|
828
|
|
1,870
|
2,450
|
|
|
|
|
|
|
NET
INTEREST INCOME
|
10,048
|
9,154
|
|
29,353
|
27,253
|
PROVISION
FOR (REDUCTION OF PROVISION
|
|
|
|
|
|
FOR)
LOAN LOSSES
|
(218)
|
(360)
|
|
(405)
|
(1,108)
|
NET
INTEREST INCOME AFTER
|
|
|
|
|
|
PROVISION
FOR LOAN LOSSES
|
10,266
|
9,514
|
|
29,758
|
28,361
|
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
|
|
Service
charges
|
1,140
|
1,163
|
|
3,340
|
3,291
|
Other service
charges and fees
|
145
|
210
|
|
447
|
746
|
Gain on sale of
securities
|
-
|
-
|
|
-
|
324
|
Mortgage banking
income
|
280
|
426
|
|
945
|
1,088
|
Insurance and
brokerage commissions
|
221
|
163
|
|
568
|
476
|
Miscellaneous
|
1,718
|
1,452
|
|
4,361
|
4,384
|
Total non-interest
income
|
3,504
|
3,414
|
|
9,661
|
10,309
|
|
|
|
|
|
|
NON-INTEREST
EXPENSES:
|
|
|
|
|
|
Salaries and
employee benefits
|
4,933
|
4,829
|
|
15,038
|
14,114
|
Occupancy
|
1,669
|
1,755
|
|
4,981
|
5,243
|
Other
|
2,749
|
3,014
|
|
8,462
|
8,841
|
Total non-interest
expense
|
9,351
|
9,598
|
|
28,481
|
28,198
|
|
|
|
|
|
|
EARNINGS BEFORE
INCOME TAXES
|
4,419
|
3,330
|
|
10,938
|
10,472
|
INCOME
TAXES
|
1,177
|
872
|
|
2,680
|
2,597
|
|
|
|
|
|
|
NET
EARNINGS
|
$3,242
|
$2,458
|
|
$8,258
|
$7,875
|
|
|
|
|
|
|
PER
SHARE AMOUNTS
|
|
|
|
|
|
Basic net
earnings
|
$0.59
|
$0.45
|
|
$1.52
|
$1.43
|
Diluted net
earnings
|
$0.58
|
$0.44
|
|
$1.49
|
$1.42
|
Cash
dividends
|
$0.12
|
$0.10
|
|
$0.36
|
$0.28
|
Book
value
|
$21.31
|
$20.42
|
|
$21.31
|
$20.42
|
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
For the three and
nine months ended September 30, 2017 and 2016
|
|
|
|
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
|
Nine
months ended
|
||
|
September
30,
|
September
30,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
SELECTED
AVERAGE BALANCES:
|
|
|
|
|
Available for sale
securities
|
$231,135
|
$252,281
|
$235,947
|
$254,135
|
Loans
|
746,633
|
709,742
|
739,857
|
698,313
|
Earning
assets
|
1,000,792
|
992,602
|
997,139
|
975,526
|
Assets
|
1,101,586
|
1,087,155
|
1,096,502
|
1,064,655
|
Deposits
|
888,746
|
860,629
|
892,057
|
848,041
|
Shareholders'
equity
|
115,512
|
112,581
|
115,161
|
113,207
|
|
|
|
|
|
SELECTED
KEY DATA:
|
|
|
|
|
Net interest margin
(tax equivalent)
|
4.20%
|
3.89%
|
4.15%
|
3.97%
|
Return on average
assets
|
1.17%
|
0.90%
|
1.01%
|
0.99%
|
Return on average
shareholders' equity
|
11.14%
|
8.68%
|
9.59%
|
9.29%
|
Shareholders'
equity to total assets (period end)
|
10.36%
|
10.08%
|
10.36%
|
10.08%
|
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES:
|
|
|
|
|
Balance, beginning
of period
|
$7,167
|
$8,540
|
$7,550
|
$9,589
|
Provision for loan
losses
|
(218)
|
(360)
|
(405)
|
(1,108)
|
Charge-offs
|
(152)
|
(246)
|
(481)
|
(754)
|
Recoveries
|
47
|
111
|
180
|
318
|
Balance, end of
period
|
$6,844
|
$8,045
|
$6,844
|
$8,045
|
|
|
|
|
|
ASSET
QUALITY:
|
|
|
|
|
Non-accrual
loans
|
|
|
$4,931
|
$4,757
|
90 days past due
and still accruing
|
|
|
-
|
-
|
Other real estate
owned
|
|
|
-
|
26
|
Total
non-performing assets
|
|
|
$4,931
|
$4,783
|
Non-performing
assets to total assets
|
|
|
0.44%
|
0.44%
|
Allowance for loan
losses to non-performing assets
|
|
|
138.80%
|
168.20%
|
Allowance for loan
losses to total loans
|
|
|
0.92%
|
1.13%
|
|
|
|
|
|
LOAN
RISK GRADE ANALYSIS:
|
|
|
|
|
|
Percentage
of Loans
|
|
|
By
Risk Grade
|
|
|
9/30/2017
|
9/30/2016
|
Risk Grade 1
(excellent quality)
|
1.16%
|
1.38%
|
Risk Grade 2 (high
quality)
|
25.61%
|
26.50%
|
Risk Grade 3 (good
quality)
|
60.40%
|
54.53%
|
Risk Grade 4
(management attention)
|
8.61%
|
12.68%
|
Risk Grade 5
(watch)
|
2.67%
|
2.74%
|
Risk Grade 6
(substandard)
|
1.23%
|
1.86%
|
Risk Grade 7
(doubtful)
|
0.00%
|
0.00%
|
Risk Grade 8
(loss)
|
0.00%
|
0.00%
|
At September 30, 2017, including non-accrual loans, there were
three relationships exceeding $1.0 million in the Watch risk grade
(which totaled $5.8 million) and one relationship exceeding $1.0
million in the Substandard risk grade (which totaled $1.0
million).
(END)