Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - PEOPLES BANCORP OF NORTH CAROLINA INC | pebk_8k.htm |
Exhibit 99(a)
NEWS RELEASE
July 20, 2020
|
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
$2.6 million or $0.44 basic and diluted net earnings per share for
the three months ended June 30, 2020, as compared to $3.8 million
or $0.64 basic and diluted net earnings per share for the same
period one year ago.
●
The Bank originated
1,116 Small Business Administration (SBA) Paycheck Protection
Program (PPP) loans, totaling $98.8 million, during the second
quarter of 2020. The Bank has received $4.0 million in fees from
the SBA for PPP loans originated as of June 30, 2020.
Year to date highlights:
●
Net earnings were
$4.9 million or $0.84 basic and diluted net earnings per share for
the six months ended June 30, 2020, as compared to $7.5 million or
$1.25 basic and diluted net earnings per share for the same period
one year ago.
●
Total loans
increased $133.2 million to $966.5 million at June 30, 2020,
compared to $833.3 million at June 30, 2019.
●
Core deposits were
$1.1 billion or 97.88% of total deposits at June 30, 2020, compared
to $889.8 million or 98.41% of total deposits at June 30,
2019.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
decrease in second quarter net earnings to a decrease in net
interest income, an increase in the provision for loan losses and
an increase in non-interest expense, which were partially offset by
an increase in non-interest income during the three months ended
June 30, 2020, compared to the three months ended June 30, 2019, as
discussed below.
Net
interest income was $10.7 million for the three months ended June
30, 2020, compared to $11.6 million for the three months ended June
30, 2019. The decrease in net interest income was primarily due to
a $737,000 decrease in interest income and a $131,000 increase in
interest expense. The decrease in interest income was primarily due
to a $714,000 decrease in interest income on loans resulting from
the 1.50% reduction in Prime Rate in March 2020. The increase in
interest expense was primarily due to an increase in interest
bearing deposits and borrowings from the Federal Home Loan Bank of
Atlanta (FHLB). Net interest income after the provision for loan
losses was $9.3 million for the three months ended June 30, 2020,
compared to $11.5 million for the three months ended June 30, 2019.
The provision for loan losses for the three months ended June 30,
2020 was $1.4 million,
compared to $77,000 for the three months ended June 30, 2019. The
increase in the provision for loan losses is primarily attributable
to increases in the qualitative factors applied in the
Company’s Allowance for Loan and Lease Losses
(“ALLL”) model due to the impact to the economy from
the COVID-19 pandemic and a $133.2 million increase in loans from
June 30, 2019 to June 30, 2020. The ALLL model also includes
reserves on $120.6 million in loans with payment modifications made
in 2020 as a result of the COVID-19 pandemic. Reserves associated
with COVID-19 payment modifications increased $1.2 million from
$439,000 at March 31, 2020 to $1.6 million at June 30,
2020.
Non-interest income
was $5.2 million for the three months ended June 30, 2020, compared
to $4.4 million for the three months ended June 30, 2019. The
increase in non-interest income is primarily attributable to a
$622,000 increase in appraisal management fee income due to an
increase in the volume of appraisals, a $457,000 increase in gains
on the sale of securities and a $252,000 increase in mortgage
banking income, which were partially offset by a $435,000 decrease
in service charges and fees primarily due to service charge and fee
concessions associated with the COVID-19 pandemic.
Non-interest
expense was $11.5 million for the three months ended June 30, 2020,
compared to $11.2 million for the three months ended June 30, 2019.
The increase in non-interest expense was primarily attributable to
a $469,000 increase in appraisal management fee expense due to an
increase in the volume of appraisals.
Year-to-date net
earnings as of June 30, 2020 were $4.9 million or $0.84 basic and
diluted net earnings per share for the six months ended June 30,
2020, as compared to $7.5 million or $1.25 basic and diluted net
earnings per share for the same period one year ago. The decrease
in year-to-date net earnings is primarily attributable
to a decrease in net
interest income, an increase in the provision for loan losses and
an increase in non-interest expense, which were partially offset by
an increase in non-interest income, as discussed
below.
Year-to-date net
interest income as of June 30, 2020 was $21.9 million, compared to
$23.0 million for the same period one year ago. The decrease in net
interest income was primarily due to a $670,000 decrease in
interest income and a $415,000 increase in interest expense. The
decrease in interest income was primarily due to a $653,000
decrease in interest income on loans resulting from the 1.50%
reduction in Prime Rate in March 2020. The increase in interest
expense was primarily due to an increase in interest bearing
deposits and FHLB borrowings. Net interest income after the
provision for loan losses was $19.0 million for the six months
ended June 30, 2020, compared to $22.8 million for the same period
one year ago. The provision for loan losses for the six months
ended June 30, 2020 was $2.9 million, compared to $255,000 for the
six months ended June 30, 2019. The increase in the provision for
loan losses is primarily attributable to increases in the
qualitative factors applied in the Company’s ALLL model due
to the impact to the economy from the COVID-19 pandemic and a
$133.2 million increase in loans from June 30, 2019 to June 30,
2020. The ALLL model also includes reserves on $120.6 million in
loans with payment modifications made in 2020 as a result of the
COVID-19 pandemic. Reserves associated with COVID-19 payment
modifications increased $1.2 million from $439,000 at March 31,
2020 to $1.6 million at June 30, 2020.
Non-interest income
was $9.8 million for the six months ended June 30, 2020, compared
to $8.5 million for the six months ended June 30, 2019. The
increase in non-interest income is primarily attributable to a $1.1
million increase in appraisal management fee income due to an
increase in the volume of appraisals, a $427,000 increase in
mortgage banking income and a $226,000 increase in gains on the
sale of securities, which were partially offset by a $396,000
decrease in service charges and fees primarily due to service
charge and fee concessions associated with the COVID-19
pandemic.
Non-interest
expense was $22.9 million for the six months ended June 30, 2020,
compared to $22.2 million for the six months ended June 30, 2019.
The increase in non-interest expense was primarily due to an
$841,000 increase in appraisal management fee expense due to an
increase in the volume of appraisals.
Income
tax expense was $535,000 for the three months ended June 30, 2020,
compared to $845,000 for the three months ended June 30, 2019. The
effective tax rate was 17.28% for the three months ended June 30,
2020, compared to 18.14% for the three months ended June 30, 2019.
Income tax expense was $1.0 million for the six months ended June
30, 2020, compared to $1.6 million for the six months ended June
30, 2019. The effective tax rate was 16.90% for the six months
ended June 30, 2020, compared to 17.89% for the six months ended
June 30, 2019.
Total
assets were $1.4 billion as of June 30, 2020, compared to $1.1
billion at June 30, 2019. Available for sale securities were $207.5
million as of June 30, 2020, compared to $189.0 million as of June
30, 2019. Total loans were $966.5 million as of June 30, 2020,
compared to $833.4 million as of June 30, 2019.
Non-performing
assets were $4.0 million or 0.28% of total assets at June 30, 2020,
compared to $3.0 million or 0.27% of total assets at June 30, 2019.
Non-performing assets include $3.7 million in commercial and
residential mortgage loans and $299,000 in other loans at June 30,
2020, compared to $2.9 million in commercial and residential
mortgage loans and $102,000 in other loans at June 30,
2019.
The
allowance for loan losses at June 30, 2020 was $9.4 million or
0.98% of total loans, compared to $6.5 million or 0.78% of total
loans at June 30, 2019. 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 $1.2
billion at June 30, 2020, compared to $904.2 million at June 30,
2019. Core deposits, which include noninterest-bearing demand
deposits, NOW, MMDA, savings and non-brokered certificates of
deposit of denominations less than $250,000, were $1.1 billion at
June 30, 2020, compared to $889.8 million at June 30, 2019.
Certificates of deposit in amounts of $250,000 or more totaled
$24.5 million at June 30, 2020, compared to $14.1 million at June
30, 2019.
Securities sold
under agreements to repurchase were $31.7 million at June 30, 2020,
compared to $47.7 million at June 30, 2019. The decrease in
securities sold under agreements to repurchase is primarily due to
approximately $21.0 million transferred from securities sold under
agreements to repurchase to MMDA during the third quarter of
2019.
FHLB
borrowings totaled $70.0 million at June 30, 2020, compared to zero
at June 30, 2019. The increase in FHLB borrowings reflects a new
$70.0 million FHLB advance executed in February 2020 to take
advantage of a ten-year convertible advance program available from
the FHLB at a rate of 0.58%.
Junior
subordinated debentures were $15.5 million at June 30, 2020,
compared to $20.6 million at June 30, 2019. The decrease in junior
subordinated debentures is the result of a $5.0 million redemption
of the Company’s outstanding trust preferred securities
during the fourth quarter of 2019.
Shareholders’
equity was $137.0 million, or 9.61% of total assets, at June 30,
2020, compared to $130.0 million, or 11.64% of total assets, at
June 30, 2019. The Company repurchased 126,800 shares of its common
stock during the six months ended June 30, 2020 under the
Company’s stock repurchase program, which was funded in
January 2020.
Peoples
Bank currently 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, Mecklenburg 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, 2019.
CONSOLIDATED
BALANCE SHEETS
June
30, 2020, December 31, 2019 and June 30, 2019
(Dollars in
thousands)
|
|
June 30,
2020
|
December 31,
2019
|
June 30,
2019
|
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
|
ASSETS:
|
|
|
|
|
Cash and due from
banks
|
$48,990
|
$48,337
|
$38,138
|
|
Interest-bearing
deposits
|
15,694
|
720
|
684
|
|
Federal funds
sold
|
124,955
|
3,330
|
-
|
|
Cash and cash
equivalents
|
189,639
|
52,387
|
38,822
|
|
|
|
|
|
|
Investment
securities available for sale
|
207,469
|
195,746
|
188,972
|
|
Other
investments
|
7,196
|
4,231
|
4,296
|
|
Total
securities
|
214,665
|
199,977
|
193,268
|
|
|
|
|
|
|
Mortgage loans held
for sale
|
10,594
|
4,417
|
2,309
|
|
|
|
|
|
|
Loans
|
966,543
|
849,874
|
833,367
|
|
Less: Allowance for
loan losses
|
(9,433)
|
(6,680)
|
(6,541)
|
|
Net
loans
|
957,110
|
843,194
|
826,826
|
|
|
|
|
|
|
Premises and
equipment, net
|
18,480
|
18,604
|
19,184
|
|
Cash surrender
value of life insurance
|
16,507
|
16,319
|
16,126
|
|
Accrued interest
receivable and other assets
|
18,886
|
19,984
|
20,037
|
|
Total
assets
|
$1,425,881
|
$1,154,882
|
$1,116,572
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY:
|
|
|
|
|
Deposits:
|
|
|
|
|
Noninterest-bearing
demand
|
$457,637
|
$338,004
|
$321,154
|
|
NOW, MMDA &
savings
|
594,948
|
516,757
|
488,461
|
|
Time, $250,000 or
more
|
24,477
|
34,269
|
14,096
|
|
Other
time
|
77,267
|
77,487
|
80,516
|
|
Total
deposits
|
1,154,329
|
966,517
|
904,227
|
|
|
|
|
|
|
Securities sold
under agreements to repurchase
|
31,747
|
24,221
|
47,733
|
|
FHLB
borrowings
|
70,000
|
-
|
-
|
|
Junior subordinated
debentures
|
15,464
|
15,619
|
20,619
|
|
Accrued interest
payable and other liabilities
|
17,300
|
14,405
|
14,066
|
|
Total
liabilities
|
1,288,840
|
1,020,762
|
986,645
|
|
|
|
|
|
|
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
|
|
|
|
|
5,787,504 shares
6/30/20
|
|
|
|
|
5,912,300 shares
12/31/19, 5,933,140 shares 6/30/19
|
56,871
|
59,813
|
60,390
|
|
Retained
earnings
|
72,942
|
70,663
|
65,738
|
|
Accumulated other
comprehensive income
|
7,228
|
3,644
|
3,799
|
|
Total shareholders'
equity
|
137,041
|
134,120
|
129,927
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$1,425,881
|
$1,154,882
|
$1,116,572
|
CONSOLIDATED
STATEMENTS OF INCOME
For the
three and six months ended June 30, 2020 and 2019
(Dollars in
thousands, except per share amounts)
|
|
Three
months ended
|
Six months
ended
|
||
|
|
June
30,
|
June
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
INTEREST
INCOME:
|
|
|
|
|
|
Interest and fees
on loans
|
$10,180
|
$10,894
|
$20,860
|
$21,513
|
|
Interest on due
from banks
|
41
|
35
|
84
|
49
|
|
Interest on federal
funds sold
|
22
|
-
|
145
|
-
|
|
Interest on
investment securities:
|
|
|
|
|
|
U.S. Government
sponsored enterprises
|
651
|
641
|
1,336
|
1,314
|
|
State and political
subdivisions
|
684
|
760
|
1,325
|
1,594
|
|
Other
|
60
|
45
|
138
|
88
|
|
Total interest
income
|
11,638
|
12,375
|
23,888
|
24,558
|
|
|
|
|
|
|
|
INTEREST
EXPENSE:
|
|
|
|
|
|
NOW, MMDA &
savings deposits
|
448
|
320
|
973
|
602
|
|
Time
deposits
|
224
|
171
|
501
|
322
|
|
FHLB
borrowings
|
102
|
3
|
166
|
49
|
|
Junior subordinated
debentures
|
90
|
220
|
220
|
446
|
|
Other
|
48
|
67
|
93
|
119
|
|
Total interest
expense
|
912
|
781
|
1,953
|
1,538
|
|
|
|
|
|
|
|
NET
INTEREST INCOME
|
10,726
|
11,594
|
21,935
|
23,020
|
|
PROVISION
FOR LOAN LOSSES
|
1,417
|
77
|
2,938
|
255
|
|
NET
INTEREST INCOME AFTER
|
|
|
|
|
|
PROVISION
FOR LOAN LOSSES
|
9,309
|
11,517
|
18,997
|
22,765
|
|
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
|
|
Service
charges
|
718
|
1,138
|
1,826
|
2,231
|
|
Other service
charges and fees
|
162
|
177
|
355
|
346
|
|
Gain on sale of
securities
|
457
|
-
|
457
|
231
|
|
Mortgage banking
income
|
563
|
311
|
885
|
458
|
|
Insurance and
brokerage commissions
|
205
|
205
|
447
|
436
|
|
Appraisal
management fee income
|
1,734
|
1,112
|
3,084
|
1,974
|
|
Miscellaneous
|
1,400
|
1,442
|
2,780
|
2,829
|
|
Total non-interest
income
|
5,239
|
4,385
|
9,834
|
8,505
|
|
|
|
|
|
|
|
NON-INTEREST
EXPENSES:
|
|
|
|
|
|
Salaries and
employee benefits
|
5,535
|
5,718
|
11,259
|
11,365
|
|
Occupancy
|
1,861
|
1,811
|
3,782
|
3,548
|
|
Appraisal
management fee expense
|
1,333
|
864
|
2,367
|
1,526
|
|
Other
|
2,723
|
2,851
|
5,493
|
5,721
|
|
Total non-interest
expense
|
11,452
|
11,244
|
22,901
|
22,160
|
|
|
|
|
|
|
|
EARNINGS BEFORE
INCOME TAXES
|
3,096
|
4,658
|
5,930
|
9,110
|
|
INCOME
TAXES
|
535
|
845
|
1,002
|
1,630
|
|
|
|
|
|
|
|
NET
EARNINGS
|
$2,561
|
$3,813
|
$4,928
|
$7,480
|
|
|
|
|
|
|
|
PER
SHARE AMOUNTS
|
|
|
|
|
|
Basic net
earnings
|
$0.44
|
$0.64
|
$0.84
|
$1.25
|
|
Diluted net
earnings
|
$0.44
|
$0.64
|
$0.84
|
$1.25
|
|
Cash
dividends
|
$0.15
|
$0.14
|
$0.45
|
$0.38
|
|
Book
value
|
$23.68
|
$21.90
|
$23.68
|
$21.90
|
FINANCIAL
HIGHLIGHTS
For the
three and six months ended June 30, 2020 and 2019
(Dollars in
thousands)
|
|
Three
months ended
|
Six months
ended
|
||
|
|
June
30,
|
June
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
SELECTED
AVERAGE BALANCES:
|
|
|
|
|
|
Available for sale
securities
|
$195,101
|
$185,195
|
$191,986
|
$187,480
|
|
Loans
|
947,344
|
832,150
|
904,489
|
823,723
|
|
Earning
assets
|
1,258,583
|
1,027,721
|
1,181,237
|
1,020,556
|
|
Assets
|
1,360,408
|
1,114,880
|
1,278,673
|
1,103,415
|
|
Deposits
|
1,104,394
|
913,820
|
1,038,839
|
904,814
|
|
Shareholders'
equity
|
134,803
|
127,865
|
135,775
|
128,510
|
|
|
|
|
|
|
|
SELECTED
KEY DATA:
|
|
|
|
|
|
Net interest margin
(tax equivalent)
|
3.48%
|
4.61%
|
3.79%
|
4.63%
|
|
Return on average
assets
|
0.76%
|
1.37%
|
0.78%
|
1.37%
|
|
Return on average
shareholders' equity
|
7.64%
|
11.96%
|
7.30%
|
11.74%
|
|
Shareholders'
equity to total assets (period end)
|
9.61%
|
11.64%
|
9.61%
|
11.64%
|
|
|
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES:
|
|
|
|
|
|
Balance, beginning
of period
|
$8,112
|
$6,561
|
$6,680
|
$6,445
|
|
Provision for loan
losses
|
1,417
|
77
|
2,938
|
255
|
|
Charge-offs
|
(168)
|
(196)
|
(378)
|
(360)
|
|
Recoveries
|
72
|
99
|
193
|
201
|
|
Balance, end of
period
|
$9,433
|
$6,541
|
$9,433
|
$6,541
|
|
|
|
|
|
|
|
ASSET
QUALITY:
|
|
|
|
|
|
Non-accrual
loans
|
|
|
$3,999
|
$3,027
|
|
90 days past due
and still accruing
|
|
|
-
|
-
|
|
Other real estate
owned
|
|
|
-
|
10
|
|
Total
non-performing assets
|
|
|
$3,999
|
$3,037
|
|
Non-performing
assets to total assets
|
|
|
0.28%
|
0.27%
|
|
Loans modifications
related to COVID-19
|
|
|
$120,569
|
$-
|
|
Allowance for loan
losses to non-performing assets
|
|
|
235.88%
|
215.38%
|
|
Allowance for loan
losses to total loans
|
|
|
0.98%
|
0.78%
|
|
|
|
|
|
|
|
LOAN
RISK GRADE ANALYSIS:
|
|
|
|
|
Percentage
of Loans
|
|
|
|
By
Risk Grade
|
|
|
|
6/30/2020
|
6/30/2019
|
|
Risk Grade 1
(excellent quality)
|
0.57%
|
0.71%
|
|
Risk Grade 2 (high
quality)
|
21.64%
|
25.25%
|
|
Risk Grade 3 (good
quality)
|
66.34%
|
61.56%
|
|
Risk Grade 4
(management attention)
|
9.39%
|
10.28%
|
|
Risk Grade 5
(watch)
|
1.26%
|
1.47%
|
|
Risk Grade 6
(substandard)
|
0.78%
|
0.73%
|
|
Risk Grade 7
(doubtful)
|
0.00%
|
0.00%
|
|
Risk Grade 8
(loss)
|
0.00%
|
0.00%
|
|
|
|
|
|
At
June 30, 2020, including non-accrual loans, there were two
relationships exceeding $1.0 million in the Watch risk grade (which
totaled $3.1 million). There were no relationships exceeding $1.0
million in the Substandard risk grade.
|
||