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| 8-K - FORM 8K APRIL 23, 2018 - PEOPLES BANCORP OF NORTH CAROLINA INC | form8kapril232018.htm |
NEWS RELEASE
April 23, 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
For Immediate Release
PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS
RESULTS
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 were $3.3 million or $0.55 basic and diluted net earnings
per share for the three months ended March 31, 2018, as compared to
$2.2 million or $0.37 basic net earnings per share and $0.36
diluted net earnings per share for the same period one year
ago.
●
Total loans
increased $29.9 million to $765.8 million at March 31, 2018,
compared to $735.9 million at March 31, 2017.
●
Core deposits were
$889.0 million or 97.94% of total deposits at March 31, 2018,
compared to $883.4 million or 97.25% of total deposits at March 31,
2017.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
increase in first 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 an increase
in the provision for loan losses during the three months ended
March 31, 2018, as compared to the three months ended March 31,
2017, as discussed below.
Net
interest income was $10.3 million for the three months ended March
31, 2018, compared to $9.5 million for the three months ended March
31, 2017. The increase in net interest income was primarily due to
a $695,000 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 March 31, 2017,
combined with a $131,000 decrease in interest expense, which was
primarily attributable to a decrease in the average outstanding
balances of FHLB borrowings during the three months ended March 31,
2018, 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 March 31, 2018, compared to $9.7 million for
the three months ended March 31, 2017. The provision for loan
losses for the three months ended March 31, 2018 was an expense of $31,000, as compared
to a credit of $236,000 for the three months ended March 31,
2017.
Non-interest
income was $3.7 million for the three months ended March 31, 2018,
compared to $3.4 million for the three months ended March 31, 2017.
The increase in non-interest income is primarily attributable to a
$421,000 increase in miscellaneous non-interest income, which was
partially offset by a $130,000 decrease in mortgage banking income
during the three months ended March 31, 2018, compared to the same
period one year ago. The increase in miscellaneous non-interest
income is primarily due to $6,000 in net gains on other real estate
owned properties for the three months ended March 31, 2018, as
compared to $283,000 in net losses and write-downs on other real
estate owned properties for the three months ended March 31,
2017.
Non-interest
expense was $10.0 million for the three months ended March 31,
2018, compared to $10.4 million for the three months ended March
31, 2017. The decrease in non-interest expense was primarily due to
a $272,000 decrease in salaries and benefits expense and a $316,000
decrease in other
non-interest expense, which were partially offset by a $243,000
increase in occupancy expense during the three months ended March
31, 2018, as compared to the three months ended March 31, 2017. The
decrease in salaries and benefits expense is primarily due to a
decrease in expense associated with restricted stock units issued
to officers. The decrease in other non-interest expense is
primarily due to reductions in expense associated with restricted
stock units issued to directors, debit card expense and
fraud/forgery expense. The increase in occupancy expense is
primarily due to an increase in depreciation and maintenance
expense.
5
Non-interest
income and non-interest expense for the three months ended March
31, 2018 and 2017 reflect the implementation of Financial
Accounting Standards Board Accounting Standards Update No. 2014-09,
(Topic 606): Revenue from Contracts with Customers, which was
effective for the Company’s reporting periods beginning after
December 15, 2017. Appraisal management fee income and expense from
the Bank’s subsidiary, Community Bank Real Estate
Solutions, LLC, was previously reported as a net amount, which was
included in miscellaneous non-interest income. This income and
expense is now reported on separate line items under non-interest
income and non-interest expense.
Income
tax expense was $652,000 for the three months ended March 31, 2018,
compared to $578,000 for the three months ended March 31, 2017. The
effective tax rate was 16% for the three months ended March 31,
2018, compared to 21% for the three months ended March 31, 2017.
The reduction in the effective tax rate was primarily due to the
passing of the Tax Cuts and Jobs Act in December, 2017, which
reduced the Company’s federal corporate tax rate from 34% to
21% effective January 1, 2018.
Total
assets were $1.1 billion as of March 31, 2018 and 2017. Available
for sale securities were $213.3 million as of March 31, 2018,
compared to $244.9 million as of March 31, 2017. Total loans were
$765.8 million as of March 31, 2018, compared to $735.9 million as
of March 31, 2017.
Non-performing
assets were $3.7 million or 0.34% of total assets at March 31,
2018, compared to $3.6 million or 0.32% of total assets at March
31, 2017. Non-performing loans include $3.4 million in commercial
and residential mortgage loans, $130,000 in acquisition,
development and construction (“AD&C”) loans and
$114,000 in other loans at March 31, 2018, as compared to $3.5
million in commercial and residential mortgage loans, $20,000 in
AD&C loans and $28,000 in other loans at March 31,
2017.
The
allowance for loan losses at March 31, 2018 was $6.4 million or
0.83% of total loans, compared to $7.3 million or 0.99% of total
loans at March 31, 2017. 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
$907.6 million at March 31, 2018, compared to $908.4 million at
March 31, 2017. Core deposits, which include noninterest-bearing
demand deposits, NOW, MMDA, savings and non-brokered certificates
of deposit of denominations less than $250,000, increased $5.6
million to $889.0 million at March 31, 2018, as compared to $883.4
million at March 31, 2017. Certificates of deposit in amounts of
$250,000 or more totaled $17.9 million at March 31, 2018, as
compared to $24.3 million at March 31, 2017.
Securities sold
under agreements to repurchase were $38.3 million at March 31,
2018, as compared to $42.2 million at March 31, 2017.
Shareholders’
equity was $116.5 million, or 10.65% of total assets, as of March
31, 2018, compared to $110.1 million, or 9.92% of total assets, as
of March 31, 2017.
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, 2017.
6
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
March 31, 2018, December 31, 2017 and March 31, 2017
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
March 31, 2018
|
December 31, 2017
|
March 31, 2017
|
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
|
ASSETS:
|
|
|
|
|
Cash and due from banks
|
$32,849
|
$53,186
|
$55,491
|
|
Interest-bearing deposits
|
34,985
|
4,118
|
31,959
|
|
Cash and cash equivalents
|
67,834
|
57,304
|
87,450
|
|
|
|
|
|
|
Investment securities available for sale
|
213,299
|
229,321
|
244,863
|
|
Other investments
|
1,834
|
1,830
|
2,679
|
|
Total securities
|
215,133
|
231,151
|
247,542
|
|
|
|
|
|
|
Mortgage loans held for sale
|
503
|
857
|
1,340
|
|
|
|
|
|
|
Loans
|
765,824
|
759,764
|
735,861
|
|
Less: Allowance for loan losses
|
(6,373)
|
(6,366)
|
(7,263)
|
|
Net loans
|
759,451
|
753,398
|
728,598
|
|
|
|
|
|
|
Premises and equipment, net
|
19,732
|
19,911
|
18,597
|
|
Cash surrender value of life insurance
|
15,647
|
15,552
|
15,251
|
|
Accrued interest receivable and other assets
|
14,931
|
13,993
|
11,496
|
|
Total assets
|
$1,093,231
|
$1,092,166
|
$1,110,274
|
|
|
|
|
|
|
|
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|
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LIABILITIES AND SHAREHOLDERS' EQUITY:
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|
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|
Deposits:
|
|
|
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|
Noninterest-bearing demand
|
$294,998
|
$285,406
|
$275,369
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|
NOW, MMDA & savings
|
496,044
|
498,445
|
494,273
|
|
Time, $250,000 or more
|
17,927
|
18,756
|
24,262
|
|
Other time
|
98,655
|
104,345
|
114,510
|
|
Total deposits
|
907,624
|
906,952
|
908,414
|
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
38,257
|
37,757
|
42,163
|
|
FHLB borrowings
|
-
|
-
|
20,000
|
|
Junior subordinated debentures
|
20,619
|
20,619
|
20,619
|
|
Accrued interest payable and other liabilities
|
10,249
|
10,863
|
8,941
|
|
Total liabilities
|
976,749
|
976,191
|
1,000,137
|
|
|
|
|
|
|
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
|
|
|
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|
5,995,256 shares at 3/31/18 and 12/31/17,
|
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|
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|
5,437,740 shares at 3/31/17
|
62,096
|
62,096
|
44,745
|
|
Retained earnings
|
52,806
|
50,286
|
61,801
|
|
Accumulated other comprehensive income
|
1,580
|
3,593
|
3,591
|
|
Total shareholders' equity
|
116,482
|
115,975
|
110,137
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
$1,093,231
|
$1,092,166
|
$1,110,274
|
|
CONSOLIDATED STATEMENTS OF INCOME
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|
|
|
For the three months ended March 31, 2018 and 2017
|
|
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|
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
Three months ended
|
|
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|
March 31,
|
|
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|
2018
|
2017
|
|
|
(Unaudited)
|
(Unaudited)
|
|
INTEREST INCOME:
|
|
|
|
Interest and fees on loans
|
$9,069
|
$8,280
|
|
Interest on due from banks
|
45
|
30
|
|
Interest on investment securities:
|
|
|
|
U.S. Government sponsored enterprises
|
606
|
604
|
|
State and political subdivisions
|
996
|
1,084
|
|
Other
|
43
|
66
|
|
Total interest income
|
10,759
|
10,064
|
|
|
|
|
|
INTEREST EXPENSE:
|
|
|
|
NOW, MMDA & savings deposits
|
176
|
132
|
|
Time deposits
|
105
|
128
|
|
FHLB borrowings
|
-
|
192
|
|
Junior subordinated debentures
|
171
|
135
|
|
Other
|
15
|
11
|
|
Total interest expense
|
467
|
598
|
|
|
|
|
|
NET INTEREST INCOME
|
10,292
|
9,466
|
|
PROVISION FOR (REDUCTION OF PROVISION
|
|
|
|
FOR) LOAN LOSSES
|
31
|
(236)
|
|
NET INTEREST INCOME AFTER
|
|
|
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PROVISION FOR LOAN LOSSES
|
10,261
|
9,702
|
|
|
|
|
|
NON-INTEREST INCOME:
|
|
|
|
Service charges
|
1,024
|
1,106
|
|
Other service charges and fees
|
180
|
155
|
|
Mortgage banking income
|
216
|
346
|
|
Insurance and brokerage commissions
|
182
|
168
|
|
Appraisal management fee income
|
789
|
743
|
|
Miscellaneous
|
1,345
|
924
|
|
Total non-interest income
|
3,736
|
3,442
|
|
|
|
|
|
NON-INTEREST EXPENSES:
|
|
|
|
Salaries and employee benefits
|
4,962
|
5,234
|
|
Occupancy
|
1,856
|
1,613
|
|
Appraisal management fee expense
|
592
|
566
|
|
Other
|
2,632
|
2,948
|
|
Total non-interest expense
|
10,042
|
10,361
|
|
|
|
|
|
EARNINGS BEFORE INCOME TAXES
|
3,955
|
2,783
|
|
INCOME TAXES
|
652
|
578
|
|
|
|
|
|
NET EARNINGS
|
$3,303
|
$2,205
|
|
|
|
|
|
PER SHARE AMOUNTS*
|
|
|
|
Basic net earnings
|
$0.55
|
$0.37
|
|
Diluted net earnings
|
$0.55
|
$0.36
|
|
Cash dividends
|
$0.13
|
$0.11
|
|
Book value
|
$19.43
|
$18.41
|
|
|
|
|
|
*Per share computations have been restated to reflect a 10% stock
dividend during the fourth quarter of 2017.
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||
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FINANCIAL HIGHLIGHTS
|
|
|
|
For the three months ended March 31, 2018 and 2017
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2018
|
2017
|
|
|
(Unaudited)
|
(Unaudited)
|
|
SELECTED AVERAGE BALANCES:
|
|
|
|
Available for sale securities
|
$217,437
|
$240,796
|
|
Loans
|
765,670
|
729,475
|
|
Earning assets
|
998,226
|
988,864
|
|
Assets
|
1,080,772
|
1,086,469
|
|
Deposits
|
900,679
|
890,402
|
|
Shareholders' equity
|
116,578
|
108,385
|
|
|
|
|
|
SELECTED KEY DATA:
|
|
|
|
Net interest margin (tax equivalent)
|
4.29%
|
4.11%
|
|
Return on average assets
|
1.24%
|
0.82%
|
|
Return on average shareholders' equity
|
11.49%
|
8.25%
|
|
Shareholders' equity to total assets (period end)
|
10.65%
|
9.92%
|
|
|
|
|
|
ALLOWANCE FOR LOAN LOSSES:
|
|
|
|
Balance, beginning of period
|
$6,366
|
$7,550
|
|
Provision for loan losses
|
31
|
(236)
|
|
Charge-offs
|
(106)
|
(131)
|
|
Recoveries
|
82
|
80
|
|
Balance, end of period
|
$6,373
|
$7,263
|
|
|
|
|
|
ASSET QUALITY:
|
|
|
|
Non-accrual loans
|
$3,665
|
$3,584
|
|
90 days past due and still accruing
|
-
|
-
|
|
Other real estate owned
|
62
|
-
|
|
Total non-performing assets
|
$3,727
|
$3,584
|
|
Non-performing assets to total assets
|
0.34%
|
0.32%
|
|
Allowance for loan losses to non-performing assets
|
171.00%
|
202.65%
|
|
Allowance for loan losses to total loans
|
0.83%
|
0.99%
|
|
LOAN RISK GRADE ANALYSIS:
|
|
|
|
|
Percentage of Loans
|
|
|
|
By Risk Grade
|
|
|
|
3/31/2018
|
3/31/2017
|
|
Risk Grade 1 (excellent quality)
|
0.95%
|
1.31%
|
|
Risk Grade 2 (high quality)
|
26.20%
|
25.52%
|
|
Risk Grade 3 (good quality)
|
60.94%
|
57.57%
|
|
Risk Grade 4 (management attention)
|
8.33%
|
11.09%
|
|
Risk Grade 5 (watch)
|
2.31%
|
3.14%
|
|
Risk Grade 6 (substandard)
|
0.99%
|
1.09%
|
|
Risk Grade 7 (doubtful)
|
0.00%
|
0.00%
|
|
Risk Grade 8 (loss)
|
0.00%
|
0.00%
|
At March 31, 2018, including non-accrual loans, there were three relationships exceeding $1.0 million in the Watch risk grade (which totaled $5.1 million). There were no relationships exceeding $1.0 million in the Substandard risk grade.
(END)