Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - PEOPLES BANCORP OF NORTH CAROLINA INC | pebk_ex8k.htm |
EXHIBIT (99)(a)
|
NEWS
RELEASE
|
July
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 SECOND QUARTER EARNINGS
RESULTS
Peoples
Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company
of Peoples Bank, reported second quarter earnings results with
highlights as follows:
Second quarter highlights:
●
Net earnings were
$3.2 million or $0.53 basic and diluted net earnings per share for
the three months ended June 30, 2018, as compared to $2.8 million
or $0.47 basic and diluted net earnings per share for the same
period one year ago.
Year to date highlights:
●
Net earnings were
$6.5 million or $1.08 basic and diluted net earnings per share for
the six months ended June 30, 2018, as compared to $5.0 million or
$0.84 basic net earnings per share and $0.83 diluted net earnings
per share for the same period one year ago.
●
Total loans
increased $36.9 million to $781.9 million at June 30, 2018,
compared to $745.0 million at June 30, 2017.
●
Core deposits were
$896.8 million or 98.0% of total deposits at June 30, 2018,
compared to $869.3 million or 97.4% of total deposits at June 30,
2017.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
increase in second quarter net earnings to an increase in net
interest income and an increase in non-interest income, which were
partially offset by an increase in the provision for loan losses
and an increase in non-interest expense during the three months
ended June 30, 2018, as compared to the three months ended June 30,
2017, as discussed below.
Net
interest income was $10.5 million for the three months ended June
30, 2018, compared to $9.8 million for the three months ended June
30, 2017. The increase in net interest income was primarily due to
a $598,000 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 June 30, 2017,
combined with a $109,000 decrease in interest expense, which was
primarily attributable to a decrease in the average outstanding
balances of FHLB borrowings during the three months ended June 30,
2018, as compared to the same period one year ago due to the payoff
of remaining FHLB borrowings in October 2017. Net interest income
after the provision for loan losses was $10.3 million for the three
months ended June 30, 2018, compared to $9.8 million for the three
months ended June 30, 2017. The provision for loan losses for the
three months ended June 30, 2018 was an expense of $231,000, as compared
to an expense of $49,000 for the three months ended June 30, 2017.
The increase in the provision for loan losses is primarily
attributable to a $36.9 million increase in loans from June 30,
2017 to June 30, 2018.
Non-interest income
was $4.0 million for the three months ended June 30, 2018, compared
to $3.9 million for the three months ended June 30, 2017. The
increase in non-interest income is primarily attributable to a
$97,000 increase in miscellaneous non-interest income and a $50,000
increase in gain on sale of securities, which were partially offset
by a $79,000 decrease in mortgage banking income during the three
months ended June 30, 2018, compared to the same period one year
ago.
Non-interest
expense was $10.6 million for the three months ended June 30, 2018,
compared to $10.0 million for the three months ended June 30, 2017.
The increase in non-interest expense was primarily attributable to
a $514,000 increase in salaries and benefits expense, which was
primarily due to an increase in the number of full-time equivalent
employees and annual salary increases.
Year-to-date net
earnings as of June 30, 2018 were $6.5 million or $1.08 basic and
diluted net earnings per share, as compared to $5.0 million or
$0.84 basic net earnings per share and $0.83 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 and an increase in non-interest income,
which were partially offset by an increase in the provision for
loan losses and an increase in non-interest expense, as discussed
below.
Year-to-date net
interest income as of June 30, 2018 was $20.8 million compared to
$19.3 million for the same period one year ago. The increase in net
interest income was primarily due to a $1.3 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 June 2017, combined with a $240,000 decrease
in interest expense, which was primarily attributable to a decrease
in the average outstanding balances of FHLB borrowings during the
six months ended June 30, 2018, as compared to the same period one
year ago due to the
payoff of remaining FHLB borrowings in October 2017. Net interest
income after the provision for loan losses was $20.6 million for
the six months ended June 30, 2018, compared to $19.5 million for
the same period one year ago. The provision for loan losses for the
six months ended June 30, 2018 was an expense of $262,000, as
compared to a credit of $187,000 for the six months ended June 30,
2017. The increase in the provision for loan losses is primarily
attributable to a $36.9 million increase in loans from June 30,
2017 to June 30, 2018.
Non-interest income
was $7.8 million for the six months ended June 30, 2018, compared
to $7.4 million for the six months ended June 30, 2017. The
increase in non-interest income is primarily attributable to a
$518,000 increase in miscellaneous non-interest income, which was
partially offset by a $209,000 decrease in mortgage banking income
during the six months ended June 30, 2018, as compared to the six
months ended June 30, 2017. The increase in miscellaneous
non-interest income is primarily due to $3,000 in net gains on
other real estate owned properties for the six months ended June
30, 2018, as compared to $283,000 in net losses and write-downs on
other real estate owned properties for the six months ended June
30, 2017. The decrease in mortgage banking income is primarily due
to a decrease in mortgage loan volume resulting from an increase in
mortgage loan rates.
Non-interest
expense was $20.6 million for the six months ended June 30, 2018,
as compared to $20.3 million for the six months ended June 30,
2017. The increase in non-interest expense was primarily due to a
$242,000 increase in salaries and benefits expense and a $294,000
increase in occupancy expense, which were partially offset by a
$310,000 decrease in other non-interest expense, during the six
months ended June 30, 2018, as compared to the six months ended
June 30, 2017. 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. The increase in occupancy
expense is primarily due to an increase in depreciation expense
during the six months ended June 30, 2018, as compared to the six
months ended June 30, 2017. The decrease in other non-interest
expense is primarily due to decreases in debit card expense,
fraud/forgery expense and internet banking expense during the six
months ended June 30, 2018, as compared to the six months ended
June 30, 2017.
Non-interest income
and non-interest expense for the three and six months ended June
30, 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. Prior to March 31, 2018, appraisal management
fee income and expense from the Bank’s
subsidiary, Community
Bank Real Estate Solutions, LLC, was 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 $595,000 for the three months ended June 30, 2018,
compared to $925,000 for the three months ended June 30, 2017. The
effective tax rate was 16% for the three months ended June 30,
2018, compared to 25% for the three months ended June 30, 2017.
Income tax expense was $1.2 million for the six months ended June
30, 2018, compared to $1.5 million for the six months ended June
30, 2017. The effective tax rate was 16% for the six months ended
June 30, 2018, compared to 23% for the six months ended June 30,
2017. The reduction in the effective tax rate is 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 June 30, 2018 and 2017. Available
for sale securities were $210.1 million as of June 30, 2018,
compared to $241.3 million as of June 30, 2017. Total loans were
$781.9 million as of June 30, 2018, compared to $745.0 million as
of June 30, 2017.
Non-performing
assets were $4.4 million or 0.39% of total assets at June 30, 2018,
compared to $4.7 million or 0.42% of total assets at June 30, 2017.
Non-performing loans include $4.2 million in commercial and
residential mortgage loans, $123,000 in acquisition, development
and construction (“AD&C”) loans and $104,000 in
other loans at June 30, 2018, as compared to $4.4 million in
commercial and residential mortgage loans, $18,000 in AD&C
loans and $269,000 in other loans at June 30, 2017.
The
allowance for loan losses at June 30, 2018 was $6.3 million or
0.80% of total loans, compared to $7.2 million or 0.96% of total
loans at June 30, 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
$915.0 million at June 30, 2018, compared to $892.5 million at June
30, 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 $27.5
million to $896.8 million at June 30, 2018, as compared to $869.3
million at June 30, 2017. Certificates of deposit in amounts of
$250,000 or more totaled $17.4 million at June 30, 2018, as
compared to $22.5 million at June 30, 2017.
Securities sold
under agreements to repurchase were $46.6 million at June 30, 2018,
as compared to $50.0 million at June 30, 2017.
Shareholders’
equity was $118.2 million, or 10.63% of total assets, as of June
30, 2018, compared to $113.9 million, or 10.29% of total assets, as
of June 30, 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.
|
CONSOLIDATED BALANCE SHEETS
|
|||
|
June
30, 2018, December 31, 2017 and June 30,
2017
|
|||
|
(Dollars in
thousands)
|
|||
|
|
|
|
|
|
|
June
30,
2018
|
December
31,
2017
|
June
30,
2017
|
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
|
ASSETS:
|
|
|
|
|
Cash and due from
banks
|
$45,481
|
$53,186
|
$54,100
|
|
Interest-bearing
deposits
|
24,074
|
4,118
|
20,955
|
|
Cash and cash
equivalents
|
69,555
|
57,304
|
75,055
|
|
|
|
|
|
|
Investment
securities available for sale
|
210,055
|
229,321
|
241,320
|
|
Other
investments
|
4,427
|
1,830
|
2,680
|
|
Total
securities
|
214,482
|
231,151
|
244,000
|
|
|
|
|
|
|
Mortgage loans held
for sale
|
671
|
857
|
3,513
|
|
|
|
|
|
|
Loans
|
781,884
|
759,764
|
745,038
|
|
Less: Allowance for
loan losses
|
(6,277)
|
(6,366)
|
(7,167)
|
|
Net
loans
|
775,607
|
753,398
|
737,871
|
|
|
|
|
|
|
Premises and
equipment, net
|
19,606
|
19,911
|
19,385
|
|
Cash surrender
value of life insurance
|
15,743
|
15,552
|
15,351
|
|
Accrued interest
receivable and other assets
|
15,508
|
13,993
|
11,809
|
|
Total
assets
|
$1,111,172
|
$1,092,166
|
$1,106,984
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY:
|
|
|
|
|
Deposits:
|
|
|
|
|
Noninterest-bearing
demand
|
$313,976
|
$285,406
|
$276,614
|
|
NOW, MMDA &
savings
|
489,426
|
498,445
|
483,440
|
|
Time, $250,000 or
more
|
17,371
|
18,756
|
22,462
|
|
Other
time
|
94,239
|
104,345
|
109,969
|
|
Total
deposits
|
915,012
|
906,952
|
892,485
|
|
|
|
|
|
|
Securities sold
under agreements to repurchase
|
46,570
|
37,757
|
49,977
|
|
FHLB
borrowings
|
-
|
-
|
20,000
|
|
Junior subordinated
debentures
|
20,619
|
20,619
|
20,619
|
|
Accrued interest
payable and other liabilities
|
10,805
|
10,863
|
9,971
|
|
Total
liabilities
|
993,006
|
976,191
|
993,052
|
|
|
|
|
|
|
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
|
|
|
|
|
5,995,256 shares at
6/30/18 and 12/31/17,
|
|
|
|
|
5,448,454 shares at
6/30/17
|
62,096
|
62,096
|
45,039
|
|
Retained
earnings
|
55,198
|
50,286
|
63,954
|
|
Accumulated other
comprehensive income
|
872
|
3,593
|
4,939
|
|
Total shareholders'
equity
|
118,166
|
115,975
|
113,932
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$1,111,172
|
$1,092,166
|
$1,106,984
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
||||
|
For
the three and six months ended June 30, 2018 and
2017
|
||||
|
(Dollars in
thousands, except per share amounts)
|
||||
|
|
|
|
|
|
|
|
Three
months ended
|
Six
months ended
|
||
|
|
June 30,
|
June 30,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
INTEREST
INCOME:
|
|
|
|
|
|
Interest and fees
on loans
|
$9,386
|
$8,689
|
$18,455
|
$16,969
|
|
Interest on due
from banks
|
124
|
48
|
169
|
78
|
|
Interest on
investment securities:
|
|
|
|
|
|
U.S. Government
sponsored enterprises
|
524
|
613
|
1,130
|
1,217
|
|
State and political
subdivisions
|
980
|
1,067
|
1,976
|
2,151
|
|
Other
|
45
|
44
|
88
|
110
|
|
Total interest
income
|
11,059
|
10,461
|
21,818
|
20,525
|
|
|
|
|
|
|
|
INTEREST
EXPENSE:
|
|
|
|
|
|
NOW, MMDA &
savings deposits
|
185
|
143
|
362
|
275
|
|
Time
deposits
|
110
|
120
|
215
|
248
|
|
FHLB
borrowings
|
-
|
201
|
-
|
393
|
|
Junior subordinated
debentures
|
198
|
145
|
369
|
280
|
|
Other
|
20
|
13
|
34
|
24
|
|
Total interest
expense
|
513
|
622
|
980
|
1,220
|
|
|
|
|
|
|
|
NET
INTEREST INCOME
|
10,546
|
9,839
|
20,838
|
19,305
|
|
PROVISION
FOR (REDUCTION OF PROVISION
|
|
|
|
|
|
FOR)
LOAN LOSSES
|
231
|
49
|
262
|
(187)
|
|
NET
INTEREST INCOME AFTER
|
|
|
|
|
|
PROVISION
FOR LOAN LOSSES
|
10,315
|
9,790
|
20,576
|
19,492
|
|
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
|
|
Service
charges
|
1,056
|
1,094
|
2,080
|
2,200
|
|
Other service
charges and fees
|
175
|
147
|
355
|
302
|
|
Gain on sale of
securities
|
50
|
-
|
50
|
-
|
|
Mortgage banking
income
|
240
|
319
|
456
|
665
|
|
Insurance and
brokerage commissions
|
203
|
179
|
385
|
347
|
|
Appraisal
management fee income
|
854
|
849
|
1,643
|
1,592
|
|
Miscellaneous
|
1,438
|
1,341
|
2,783
|
2,265
|
|
Total non-interest
income
|
4,016
|
3,929
|
7,752
|
7,371
|
|
|
|
|
|
|
|
NON-INTEREST
EXPENSES:
|
|
|
|
|
|
Salaries and
employee benefits
|
5,385
|
4,871
|
10,347
|
10,105
|
|
Occupancy
|
1,750
|
1,699
|
3,606
|
3,312
|
|
Appraisal
management fee expense
|
654
|
648
|
1,246
|
1,214
|
|
Other
|
2,771
|
2,765
|
5,403
|
5,713
|
|
Total non-interest
expense
|
10,560
|
9,983
|
20,602
|
20,344
|
|
|
|
|
|
|
|
EARNINGS BEFORE
INCOME TAXES
|
3,771
|
3,736
|
7,726
|
6,519
|
|
INCOME
TAXES
|
595
|
925
|
1,247
|
1,503
|
|
|
|
|
|
|
|
NET
EARNINGS
|
$3,176
|
$2,811
|
$6,479
|
$5,016
|
|
|
|
|
|
|
|
PER
SHARE AMOUNTS*
|
|
|
|
|
|
Basic net
earnings
|
$0.53
|
$0.47
|
$1.08
|
$0.84
|
|
Diluted net
earnings
|
$0.53
|
$0.47
|
$1.08
|
$0.83
|
|
Cash
dividends
|
$0.13
|
$0.11
|
$0.26
|
$0.22
|
|
Book
value
|
$19.71
|
$19.01
|
$19.71
|
$19.01
|
|
|
|
|
|
|
|
*Per
share computations have been restated to reflect a 10% stock
dividend during the fourth quarter of 2017.
|
|
|
||
|
FINANCIAL HIGHLIGHTS
|
||||
|
For
the three and six months ended June 30, 2018 and
2017
|
||||
|
(Dollars in
thousands)
|
||||
|
|
|
|
|
|
|
|
Three
months ended
|
Six
months ended
|
||
|
|
June 30,
|
June 30,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
SELECTED
AVERAGE BALANCES:
|
|
|
|
|
|
Available for sale
securities
|
$210,097
|
$236,041
|
$213,746
|
$238,405
|
|
Loans
|
768,411
|
743,275
|
767,048
|
736,413
|
|
Earning
assets
|
1,010,215
|
1,001,652
|
1,004,253
|
995,293
|
|
Assets
|
1,100,666
|
1,101,284
|
1,090,579
|
1,093,917
|
|
Deposits
|
915,634
|
897,041
|
908,198
|
893,740
|
|
Shareholders'
equity
|
117,350
|
112,280
|
118,545
|
111,741
|
|
|
|
|
|
|
|
SELECTED
KEY DATA:
|
|
|
|
|
|
Net interest margin
(tax equivalent)
|
4.29%
|
4.16%
|
4.29%
|
4.13%
|
|
Return on average
assets
|
1.16%
|
1.02%
|
1.20%
|
0.92%
|
|
Return on average
shareholders' equity
|
10.86%
|
10.04%
|
11.02%
|
9.05%
|
|
Shareholders'
equity to total assets (period end)
|
10.63%
|
10.29%
|
10.63%
|
10.29%
|
|
|
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES:
|
|
|
|
|
|
Balance, beginning
of period
|
$6,373
|
$7,263
|
$6,366
|
$7,550
|
|
Provision for loan
losses
|
231
|
49
|
262
|
(187)
|
|
Charge-offs
|
(401)
|
(198)
|
(507)
|
(329)
|
|
Recoveries
|
74
|
53
|
156
|
133
|
|
Balance, end of
period
|
$6,277
|
$7,167
|
$6,277
|
$7,167
|
|
|
|
|
|
|
|
ASSET
QUALITY:
|
|
|
|
|
|
Non-accrual
loans
|
|
|
$4,292
|
$4,645
|
|
90 days past due
and still accruing
|
|
|
-
|
55
|
|
Other real estate
owned
|
|
|
90
|
-
|
|
Total
non-performing assets
|
|
|
$4,382
|
$4,700
|
|
Non-performing
assets to total assets
|
|
|
0.39%
|
0.42%
|
|
Allowance for loan
losses to non-performing assets
|
|
|
143.25%
|
152.49%
|
|
Allowance for loan
losses to total loans
|
|
|
0.80%
|
0.96%
|
|
LOAN
RISK GRADE ANALYSIS:
|
|
|
|
|
Percentage
of Loans
|
|
|
|
By
Risk Grade
|
|
|
|
6/30/18
|
6/30/17
|
|
Risk Grade 1
(excellent quality)
|
0.92%
|
1.19%
|
|
Risk Grade 2 (high
quality)
|
26.30%
|
25.08%
|
|
Risk Grade 3 (good
quality)
|
60.86%
|
60.22%
|
|
Risk Grade 4
(management attention)
|
8.47%
|
9.21%
|
|
Risk Grade 5
(watch)
|
2.11%
|
2.80%
|
|
Risk Grade 6
(substandard)
|
1.05%
|
1.20%
|
|
Risk Grade 7
(doubtful)
|
0.00%
|
0.00%
|
|
Risk Grade 8
(loss)
|
0.00%
|
0.00%
|
|
|
|
|
|
At
June 30, 2018, including non-accrual loans, there were three
relationships exceeding $1.0 million in the Watch risk grade (which
totaled $4.5 million). There were no relationships exceeding $1.0
million in the Substandard risk grade.
|
||