Attached files
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| 8-K - 8-K - PEOPLES BANCORP OF NORTH CAROLINA INC | pebk_8k.htm |
Exhibit 99-1
NEWS RELEASE
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October 22, 2018
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Contact:
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Lance A. Sellers
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President and Chief Executive Officer
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A. Joseph Lampron, Jr.
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Executive Vice President and Chief Financial Officer
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828-464-5620, Fax 828-465-6780
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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 earnings results with
highlights as follows:
Third quarter highlights:
●
Net earnings were
$3.5 million or $0.58 basic net earnings per share and $0.57
diluted net earnings per share for the three months ended September
30, 2018, as compared to $3.2 million or $0.54 basic net earnings
per share and $0.52 diluted net earnings per share for the same
period one year ago.
Year to date highlights:
●
Net earnings were
$9.9 million or $1.66 basic net earnings per share and $1.65
diluted net earnings per share for the nine months ended September
30, 2018, as compared to $8.3 million or $1.38 basic net earnings
per share and $1.35 diluted net earnings per share for the same
period one year ago.
●
Total loans
increased $39.3 million to $786.7 million at September 30, 2018,
compared to $747.4 million at September 30, 2017.
●
Core deposits were
$875.7 million or 98.0% of total deposits at September 30, 2018,
compared to $879.6 million or 97.6% of total deposits at September
30, 2017.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
increase in third quarter net earnings to an increase in net
interest income, which was partially offset by an increase in the
provision for loan losses, a decrease in non-interest income and an
increase in non-interest expense during the three months ended
September 30, 2018, as compared to the three months ended September
30, 2017, as discussed below.
Net
interest income was $11.1 million for the three months ended
September 30, 2018, compared to $10.0 million for the three months
ended September 30, 2017. The increase in net interest income was
primarily due to a $910,000 increase in interest income, which was
primarily attributable to an increase in the average outstanding
balance of loans and a 1.00% increase in the prime rate since
September 30, 2017, combined with a $93,000 decrease in interest
expense, which was primarily attributable to a decrease in the
average outstanding balances of FHLB borrowings during the three
months ended September 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
$10.9 million for the three months ended September 30, 2018,
compared to $10.3 million for the three months ended September 30,
2017. The provision for loan losses for the three months ended
September 30, 2018 was an
expense of $110,000, as compared to a credit of $218,000 for the
three months ended September 30, 2017. The increase in the
provision for loan losses is primarily attributable to a $39.3
million increase in loans from September 30, 2017 to September 30,
2018.
Non-interest income
was $3.9 million for the three months ended September 30, 2018,
compared to $4.2 million for the three months ended September 30,
2017. The decrease in non-interest income is primarily attributable
to a $64,000 decrease in mortgage banking income and a $80,000
decrease in miscellaneous non-interest income during the three
months ended September 30, 2018, compared to the same period one
year ago.
Non-interest
expense was $10.7 million for the three months ended September 30,
2018, compared to $10.0 million for the three months ended
September 30, 2017. The increase in non-interest expense was
primarily attributable to a $586,000 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 September 30, 2018 were $9.9 million or $1.66 basic
net earnings per share and $1.65 diluted net earnings per share, as
compared to $8.3 million or $1.38 basic net earnings per share and
$1.35 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 September 30, 2018 was $31.9 million compared
to $29.4 million for the same period one year ago. The increase in
net interest income was primarily due to a $2.2 million increase in
interest income, which was primarily attributable to an increase in
the average outstanding balance of loans and a 1.00% increase in
the prime rate since September 2017, combined with a $333,000
decrease in interest expense, which was primarily attributable to a
decrease in the average outstanding balances of FHLB borrowings
during the nine months ended September 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 $31.5 million for the nine months ended
September 30, 2018, compared to $29.8 million for the same period
one year ago. The provision for loan losses for the nine months
ended September 30, 2018 was an expense of $372,000, as compared to
a credit of $405,000 for the nine months ended September 30, 2017.
The increase in the provision for loan losses is primarily
attributable to a $39.3 million increase in loans from September
30, 2017 to September 30, 2018.
Non-interest income
was $11.7 million for the nine months ended September 30, 2018,
compared to $11.5 million for the nine months ended September 30,
2017. The increase in non-interest income is primarily attributable
to a $438,000 increase in miscellaneous non-interest income, which
was partially offset by a $273,000 decrease in mortgage banking
income during the nine months ended September 30, 2018, as compared
to the nine months ended September 30, 2017. The increase in miscellaneous
non-interest income is primarily due to $17,000 in net gains on
other real estate owned properties for the nine months ended
September 30, 2018, as compared to $240,000 in net losses and
write-downs on other real estate owned properties for the nine
months ended September 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 $31.3 million for the nine months ended September 30,
2018, as compared to $30.4 million for the nine months ended
September 30, 2017. The increase in non-interest expense was
primarily due to a $828,000 increase in salaries and benefits
expense and a $386,000 increase in occupancy expense, which were
partially offset by a $264,000 decrease in other non-interest
expense, during the nine months ended September 30, 2018, as
compared to the nine months ended September 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 nine months ended
September 30, 2018, as compared to the nine months ended September
30, 2017. The decrease in other non-interest expense is primarily
due to decreases in telecommunications expense, debit card expense
and internet banking expense during the nine months ended September
30, 2018, as compared to the nine months ended September 30,
2017.
Non-interest income
and non-interest expense for the three and nine months ended
September 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 $687,000 for the three months ended September 30,
2018, compared to $1.2 million for the three months ended September
30, 2017. The effective tax rate was 17% for the three months ended
September 30, 2018, compared to 27% for the three months ended
September 30, 2017. Income tax expense was $1.9 million for the
nine months ended September 30, 2018, compared to $2.7 million for
the nine months ended September 30, 2017. The effective tax rate
was 16% for the nine months ended September 30, 2018, compared to
25% for the nine months ended September 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 September 30, 2018 and 2017.
Available for sale securities were $206.0 million as of September
30, 2018, compared to $235.7 million as of September 30, 2017.
Total loans were $786.7 million as of September 30, 2018, compared
to $747.4 million as of September 30, 2017.
Non-performing
assets were $3.9 million or 0.36% of total assets at September 30,
2018, compared to $4.9 million or 0.44% of total assets at
September 30, 2017. Non-performing loans include $3.7 million in
commercial and residential mortgage loans, $39,000 in acquisition,
development and construction (“AD&C”) loans and
$136,000 in other loans at September 30, 2018, as compared to $4.7
million in commercial and residential mortgage loans, $16,000 in
AD&C loans and $251,000 in other loans at September 30,
2017.
The
allowance for loan losses at September 30, 2018 was $6.3 million or
0.80% of total loans, compared to $6.8 million or 0.92% of total
loans at September 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
$893.5 million at September 30, 2018, compared to $901.6 million at
September 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, were $875.7 million at September 30, 2018, compared to
$879.6 million at September 30, 2017. Certificates of deposit in
amounts of $250,000 or more totaled $17.0 million at September 30,
2018, as compared to $21.3 million at September 30,
2017.
Securities sold
under agreements to repurchase were $55.8 million at September 30,
2018, as compared to $53.3 million at September 30,
2017.
Shareholders’
equity was $119.7 million, or 10.88% of total assets, as of
September 30, 2018, compared to $116.2 million, or 10.36% of total
assets, as of September 30, 2017.
Peoples
Bank currently operates 19 banking offices entirely in North
Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg,
Iredell and Wake Counties. The Bank plans to open a new banking
office in Cary, North Carolina during the fourth quarter of 2018.
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.
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CONSOLIDATED
BALANCE SHEETS
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September 30, 2018,
December 31, 2017 and September 30, 2017
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(Dollars in
thousands)
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September 30,
2018
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December 31,
2017
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September 30,
2017
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(Unaudited)
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(Audited)
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(Unaudited)
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ASSETS:
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Cash and due from
banks
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$44,743
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$53,186
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$55,718
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Interest-bearing
deposits
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12,298
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4,118
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37,538
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Cash and cash
equivalents
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57,041
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57,304
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93,256
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Investment
securities available for sale
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205,966
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229,321
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235,736
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Other
investments
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4,394
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1,830
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2,680
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Total
securities
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210,360
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231,151
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238,416
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Mortgage loans held
for sale
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1,740
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857
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2,623
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Loans
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786,724
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759,764
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747,437
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Less: Allowance for
loan losses
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(6,295)
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(6,366)
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(6,844)
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Net
loans
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780,429
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753,398
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740,593
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Premises and
equipment, net
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19,453
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19,911
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19,697
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Cash surrender
value of life insurance
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15,839
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15,552
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15,452
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Accrued interest
receivable and other assets
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15,430
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13,993
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11,516
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Total
assets
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$1,100,292
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$1,092,166
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$1,121,553
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LIABILITIES
AND SHAREHOLDERS' EQUITY:
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Deposits:
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Noninterest-bearing
demand
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$306,834
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$285,406
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$287,794
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NOW, MMDA &
savings
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478,898
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498,445
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486,051
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Time, $250,000 or
more
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17,018
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18,756
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21,318
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Other
time
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90,709
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104,345
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106,476
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Total
deposits
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893,459
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906,952
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901,639
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Securities sold
under agreements to repurchase
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55,766
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37,757
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53,307
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FHLB
borrowings
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-
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-
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20,000
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Junior subordinated
debentures
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20,619
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20,619
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20,619
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Accrued interest
payable and other liabilities
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10,729
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10,863
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9,835
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Total
liabilities
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980,573
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976,191
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1,005,400
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Shareholders'
equity:
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Series A preferred
stock, $1,000 stated value; authorized
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5,000,000 shares;
no shares issued and outstanding
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-
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-
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-
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Common stock, no
par value; authorized
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20,000,000 shares;
issued and outstanding
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5,995,256 shares at
9/30/18 and 12/31/17,
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5,450,412 shares at
9/30/17
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62,096
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62,096
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45,102
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Retained
earnings
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57,882
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50,286
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66,539
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Accumulated other
comprehensive income
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(259)
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3,593
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4,512
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Total shareholders'
equity
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119,719
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115,975
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116,153
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Total liabilities
and shareholders' equity
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$1,100,292
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$1,092,166
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$1,121,553
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CONSOLIDATED
STATEMENTS OF INCOME
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For the three and
nine months ended September 30, 2018 and 2017
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(Dollars in
thousands, except per share amounts)
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Three
months ended
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Nine
months ended
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September
30,
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September
30,
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2018
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2017
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2018
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2017
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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INTEREST
INCOME:
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Interest and fees
on loans
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$9,907
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$8,966
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$28,362
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$25,935
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Interest on due
from banks
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86
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60
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255
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138
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Interest on
investment securities:
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U.S. Government
sponsored enterprises
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591
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578
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1,721
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1,795
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State and political
subdivisions
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974
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1,047
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2,950
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3,198
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Other
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50
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47
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138
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157
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Total
interest income
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11,608
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10,698
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33,426
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31,223
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INTEREST
EXPENSE:
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NOW, MMDA &
savings deposits
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189
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156
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551
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431
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Time
deposits
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127
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112
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342
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360
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FHLB
borrowings
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-
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211
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-
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604
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Junior subordinated
debentures
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209
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152
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578
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432
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Other
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32
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19
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66
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43
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Total interest
expense
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557
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650
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1,537
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1,870
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NET
INTEREST INCOME
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11,051
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10,048
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31,889
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29,353
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PROVISION
FOR (REDUCTION OF PROVISION
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FOR)
LOAN LOSSES
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110
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(218)
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372
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(405)
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NET
INTEREST INCOME AFTER
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PROVISION
FOR LOAN LOSSES
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10,941
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10,266
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31,517
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29,758
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NON-INTEREST
INCOME:
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Service
charges
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1,083
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1,140
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3,163
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3,340
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Other service
charges and fees
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173
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145
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528
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447
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Gain on sale of
securities
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-
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-
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50
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-
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Mortgage banking
income
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216
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280
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672
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945
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Insurance and
brokerage commissions
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206
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221
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591
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568
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Appraisal
management fee income
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799
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855
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2,442
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2,447
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Miscellaneous
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1,438
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1,518
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4,221
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3,783
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Total non-interest
income
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3,915
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4,159
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11,667
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11,530
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NON-INTEREST
EXPENSES:
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Salaries and
employee benefits
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5,519
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4,933
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15,866
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15,038
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Occupancy
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1,761
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1,669
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5,367
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4,981
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Appraisal
management fee expense
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627
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655
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1,873
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1,869
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Other
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2,795
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2,749
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8,198
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8,462
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Total non-interest
expense
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10,702
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10,006
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31,304
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30,350
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EARNINGS BEFORE
INCOME TAXES
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4,154
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4,419
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11,880
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10,938
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INCOME
TAXES
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687
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1,177
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1,934
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2,680
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NET
EARNINGS
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$3,467
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$3,242
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$9,946
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$8,258
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PER
SHARE AMOUNTS*
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Basic net
earnings
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$0.58
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$0.54
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$1.66
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$1.38
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Diluted net
earnings
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$0.57
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$0.52
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$1.65
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$1.35
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Cash
dividends
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$0.13
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$0.11
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$0.39
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$0.33
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Book
value
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$19.97
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$19.37
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$19.97
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$19.37
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*Per
share computations have been restated to reflect a 10% stock
dividend during the fourth quarter of 2017.
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FINANCIAL
HIGHLIGHTS
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For the three and
nine months ended September 30, 2018 and 2017
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(Dollars in
thousands)
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Three
months ended
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Nine
months ended
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September
30,
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September
30,
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2018
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2017
|
2018
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2017
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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SELECTED
AVERAGE BALANCES:
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Available for sale
securities
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$209,221
|
$231,135
|
$212,221
|
$235,947
|
|
Loans
|
781,596
|
746,633
|
771,951
|
739,857
|
|
Earning
assets
|
1,012,946
|
1,000,792
|
1,007,183
|
997,139
|
|
Assets
|
1,104,041
|
1,101,586
|
1,095,255
|
1,096,502
|
|
Deposits
|
907,536
|
888,746
|
907,975
|
892,057
|
|
Shareholders'
equity
|
119,710
|
115,512
|
121,237
|
115,161
|
|
|
|
|
|
|
|
SELECTED
KEY DATA:
|
|
|
|
|
|
Net interest margin
(tax equivalent)
|
4.43%
|
4.20%
|
4.34%
|
4.15%
|
|
Return on average
assets
|
1.25%
|
1.17%
|
1.21%
|
1.01%
|
|
Return on average
shareholders' equity
|
11.49%
|
11.14%
|
10.97%
|
9.59%
|
|
Shareholders'
equity to total assets (period end)
|
10.88%
|
10.36%
|
10.88%
|
10.36%
|
|
|
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES:
|
|
|
|
|
|
Balance, beginning
of period
|
$6,277
|
$7,167
|
$6,366
|
$7,550
|
|
Provision for loan
losses
|
110
|
(218)
|
372
|
(405)
|
|
Charge-offs
|
(259)
|
(152)
|
(766)
|
(481)
|
|
Recoveries
|
167
|
47
|
323
|
180
|
|
Balance, end of
period
|
$6,295
|
$6,844
|
$6,295
|
$6,844
|
|
|
|
|
|
|
|
ASSET
QUALITY:
|
|
|
|
|
|
Non-accrual
loans
|
|
|
$3,920
|
$4,931
|
|
90 days past due
and still accruing
|
|
|
-
|
-
|
|
Other real estate
owned
|
|
|
-
|
-
|
|
Total
non-performing assets
|
|
|
$3,920
|
$4,931
|
|
Non-performing
assets to total assets
|
|
|
0.36%
|
0.44%
|
|
Allowance for loan
losses to non-performing assets
|
|
|
160.59%
|
138.80%
|
|
Allowance for loan
losses to total loans
|
|
|
0.80%
|
0.92%
|
|
|
|
|
|
|
|
LOAN
RISK GRADE ANALYSIS:
|
|
|
|
|
|
|
|
|
Percentage
of Loans
|
|
|
|
|
|
By
Risk Grade
|
|
|
|
|
|
9/30/2018
|
9/30/2017
|
|
Risk Grade 1
(excellent quality)
|
|
|
0.82%
|
1.16%
|
|
Risk Grade 2 (high
quality)
|
|
|
26.30%
|
25.61%
|
|
Risk Grade 3 (good
quality)
|
|
|
60.82%
|
60.40%
|
|
Risk Grade 4
(management attention)
|
|
|
9.02%
|
8.61%
|
|
Risk Grade 5
(watch)
|
|
|
1.81%
|
2.67%
|
|
Risk Grade 6
(substandard)
|
|
|
0.90%
|
1.23%
|
|
Risk Grade 7
(doubtful)
|
|
|
0.00%
|
0.00%
|
|
Risk Grade 8
(loss)
|
|
|
0.00%
|
0.00%
|
|
|
|
|
|
|
|
At September 30, 2018, including non-accrual loans, there were two
relationships exceeding $1.0 million in the Watch risk grade (which
totaled $3.2 million). There were no relationships exceeding $1.0
million in the Substandard risk grade.
|