Peoples Bancorp Announces Third Quarter Earnings Results

Peoples Bancorp of North Carolina, Inc.

Companies Mentioned:

Primary Exchange: NASDAQ
Under the Symbol: PEBK

Peoples Bancorp Announces Third Quarter Earnings Results

Monday, October 21, 2019 9:00 AM

NEWTON, NC / ACCESSWIRE / October 21, 2019 / 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 $3.6 million or $0.62 basic net earnings per share and $0.61 diluted net earnings per share for the three months ended September 30, 2019, compared to $3.5 million or $0.58 basic net earnings per share and $0.57 diluted net earnings per share for the same period one year ago.
  • Total assets reached $1.2 billion at September 30, 2019 primarily due to a new $70 million borrowing from the Federal Home Loan Bank of Atlanta ("FHLB") in September 2019.

Year to date highlights:

  • Net earnings were $11.1 million or $1.87 basic net earnings per share and $1.86 diluted net earnings per share for the nine months ended September 30, 2019, compared to $9.9 million or $1.66 basic net earnings per share and $1.65 diluted net earnings per share for the same period one year ago.
  • Total loans increased $58.9 million to $845.6 million at September 30, 2019, compared to $786.7 million at September 30, 2018.
  • Core deposits were $928.3 million or 96.54% of total deposits at September 30, 2019, compared to $875.7 million or 98.01% of total deposits at September 30, 2018.

Lance A. Sellers, President and Chief Executive Officer, attributed the increase in third 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 September 30, 2019, compared to the three months ended September 30, 2018, as discussed below.

Net interest income was $11.4 million for the three months ended September 30, 2019, compared to $11.1 million for the three months ended September 30, 2018. The increase in net interest income was primarily due to a $822,000 increase in interest income, which was partially offset by a $437,000 increase in interest expense. The increase in interest income was primarily attributable to an increase in the average outstanding balance of loans and a higher average prime rate during the third quarter of 2019, compared to the same period last year. The increase in interest expense was primarily due to an increase in interest rates on deposits. Net interest income after the provision for loan losses was $11.0 million for the three months ended September 30, 2019, compared to $10.9 million for the three months ended September 30, 2018. The provision for loan losses for the three months ended September 30, 2019 was $422,000, compared to $110,000 for the three months ended September 30, 2018. The increase in the provision for loan losses is primarily attributable to a $58.9 million increase in loans from September 30, 2018 to September 30, 2019.

Non-interest income was $4.7 million for the three months ended September 30, 2019, compared to $3.9 million for the three months ended September 30, 2018. The increase in non-interest income is primarily attributable to a $512,000 increase in appraisal management fee income due to an increase in the volume of appraisals.

Non-interest expense was $11.3 million for the three months ended September 30, 2019, compared to $10.7 million for the three months ended September 30, 2018. The increase in non-interest expense was primarily attributable to a $385,000 increase in appraisal management fee expense due to an increase in the volume of appraisals and a $176,000 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, 2019 were $11.1 million or $1.87 basic net earnings per share and $1.86 diluted net earnings per share, compared to $9.9 million or $1.66 basic net earnings per share and $1.65 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, 2019 was $34.5 million, compared to $31.9 million for the same period one year ago. The increase in net interest income was primarily due to a $3.6 million increase in interest income, which was partially offset by a $995,000 increase in interest expense. The increase in interest income was primarily attributable to an increase in the average outstanding balance of loans and a higher average prime rate during the nine months ended September 30 2019, compared to the same period last year. The increase in interest expense was primarily due to an increase in interest rates on deposits. Net interest income after the provision for loan losses was $33.8 million for the nine months ended September 30, 2019, compared to $31.5 million for the same period one year ago. The provision for loan losses for the nine months ended September 30, 2019 was $677,000, compared to $372,000 for the nine months ended September 30, 2018. The increase in the provision for loan losses is primarily attributable to a $58.9 million increase in loans from September 30, 2018 to September 30, 2019.

Non-interest income was $13.2 million for the nine months ended September 30, 2019, compared to $11.7 million for the nine months ended September 30, 2018. The increase in non-interest income is primarily attributable to an $843,000 increase in appraisal management fee income due to an increase in the volume of appraisals.

Non-interest expense was $33.4 million for the nine months ended September 30, 2019, compared to $31.3 million for the nine months ended September 30, 2018. The increase in non-interest expense was primarily due to a $665,000 increase in appraisal management fee expense due to an increase in the volume of appraisals and a $1.2 million increase in salaries and benefits expense primarily due to an increase in the number of full-time equivalent employees and annual salary increases.

Income tax expense was $834,000 for the three months ended September 30, 2019, compared to $687,000 for the three months ended September 30, 2018. The effective tax rate was 18.72% for the three months ended September 30, 2019, compared to 16.54% for the three months ended September 30, 2018. Income tax expense was $2.5 million for the nine months ended September 30, 2019, compared to $1.9 million for the nine months ended September 30, 2018. The effective tax rate was 18.16% for the nine months ended September 30, 2019, compared to 16.28% for the nine months ended September 30, 2018.

Total assets were $1.2 billion as of September 30, 2019, compared to $1.1 billion at September 30, 2018. Available for sale securities were $186.3 million as of September 30, 2019, compared to $206.0 million as of September 30, 2018. Total loans were $845.6 million as of September 30, 2019, compared to $786.7 million as of September 30, 2018.

Non-performing assets were $3.3 million or 0.27% of total assets at September 30, 2019, compared to $3.9 million or 0.36% of total assets at September 30, 2018. Non-performing assets include $3.1 million in commercial and residential mortgage loans, $146,000 in other loans and $26,000 in other real estate owned at September 30, 2019, compared to $3.7 million in commercial and residential mortgage loans, $39,000 in acquisition, development and construction loans and $136,000 in other loans at September 30, 2018.

The allowance for loan losses at September 30, 2019 was $6.6 million or 0.78% of total loans, compared to $6.3 million or 0.80% of total loans at September 30, 2018. 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 $961.6 million at September 30, 2019, compared to $893.5 million at September 30, 2018. Core deposits, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, were $928.3 million at September 30, 2019, compared to $875.7 million at September 30, 2018. Certificates of deposit in amounts of $250,000 or more totaled $33.1 million at September 30, 2019, compared to $17.0 million at September 30, 2018. The increase in certificates of deposit in amounts of $250,000 or more is primarily attributable to a $18.5 million increase in wholesale certificates of deposit from September 30, 2018 to September 30, 2019.

Securities sold under agreements to repurchase were $21.9 million at September 30, 2019, compared to $55.8 million at September 30, 2018. 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.

Borrowings from the FHLB totaled $70.0 million at September 30, 2019, compared to zero at September 30, 2018. The increase in FHLB borrowings reflects a new $70.0 million FHLB advance executed in September 2019 to take advantage of a ten-year convertible advance program available from the FHLB of Atlanta at a rate of 0.83%. The funds will be utilized to replace higher cost funding along with investing in low risk, short-term assets at yields higher than the advance rate in order to increase the Bank's net interest income.

Shareholders' equity was $132.7 million, or 10.85% of total assets, at September 30, 2019, compared to $119.7 million, or 10.88% of total assets, at September 30, 2018. The Company repurchased 90,354 shares of its common stock during the nine months ended September 30, 2019 under the Company's stock repurchase program, which was funded in February 2019.

Peoples Bank currently operates 20 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, 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

 

CONSOLIDATED BALANCE SHEETS
September 30, 2019, December 31, 2018 and September 30, 2018
(Dollars in thousands)

 

 
  September 30, 2019   December 31, 2018     September 30, 2018
 
  (Unaudited)   (Audited)     (Unaudited)
ASSETS:
             
Cash and due from banks
  $ 48,605   $ 40,553     $ 44,743
Interest-bearing deposits
    80,948     2,817       12,298
Cash and cash equivalents
    129,553     43,370       57,041
 
                   
Investment securities available for sale
    186,263     194,578       205,966
Other investments
    7,239     4,361       4,394
Total securities
    193,502     198,939       210,360
 
                   
Mortgage loans held for sale
    4,263     680       1,740
 
                   
Loans
    845,599     804,023       786,724
Less: Allowance for loan losses
    (6,578)     (6,445 )     (6,295)

Net loans
    839,021     797,578       780,429
 
                   
Premises and equipment, net
    18,730     18,450       19,453
Cash surrender value of life insurance
    16,222     15,936       15,839
Accrued interest receivable and other assets
    21,908     18,298       15,430
Total assets
  $ 1,223,199   $ 1,093,251     $ 1,100,292
 
                   
 
                   
LIABILITIES AND SHAREHOLDERS' EQUITY:
                   
Deposits:
                   
Noninterest-bearing demand
  $ 339,081   $ 298,817     $ 306,834
NOW, MMDA & savings
    509,611     475,223       478,898
Time, $250,000 or more
    33,082     16,239       17,018
Other time
    79,794     86,934       90,709
Total deposits
    961,568     877,213       893,459
 
                   
Securities sold under agreements to repurchase
    21,927     58,095       55,766
FHLB borrowings
    70,000     -       -
Junior subordinated debentures
    20,619     20,619       20,619
Accrued interest payable and other liabilities
    16,402     13,707       10,729
Total liabilities
    1,090,516     969,634       980,573
 
                   
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
                   
5,912,300 shares 9/30/19,
                   
5,995,256 shares 12/31/18 and 9/30/18
    59,813     62,096       62,096
Retained earnings
    68,528     60,535       57,882
Accumulated other comprehensive income
    4,342     986       (259)
Total shareholders' equity
    132,683     123,617       119,719
 
                   
Total liabilities and shareholders' equity
  $ 1,223,199   $ 1,093,251     $ 1,100,292

 

CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2019 and 2018
(Dollars in thousands, except per share amounts)

 

 
  Three months ended     Nine months ended  
 
  September 30,     September 30,  
 
  2019     2018     2019     2018  
 
  (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
INTEREST INCOME:
                       
Interest and fees on loans
  11,004     9,907     32,517     28,362  
Interest on due from banks
    87       86       136       255  
Interest on investment securities:
                               
U.S. Government sponsored enterprises
    628       591       1,942       1,721  
State and political subdivisions
    671       974       2,265       2,950  
Other
    40       50       128       138  
Total interest income
    12,430       11,608       36,988       33,426  
 
                               
INTEREST EXPENSE:
                               
NOW, MMDA & savings deposits
    455       189       1,057       551  
Time deposits
    259       127       581       342  
FHLB borrowings
    21       -       70       -  
Junior subordinated debentures
    210       209       656       578  
Other
    49       32       168       66  
Total interest expense
    994       557       2,532       1,537  
 
                               
NET INTEREST INCOME
    11,436       11,051       34,456       31,889  
PROVISION FOR (REDUCTION OF PROVISION
                               
FOR) LOAN LOSSES
    422       110       677       372  
NET INTEREST INCOME AFTER
                               
PROVISION FOR LOAN LOSSES
    11,014       10,941       33,779       31,517  
 
                               
NON-INTEREST INCOME:
                               
Service charges
    1,178       1,083       3,409       3,163  
Other service charges and fees
    202       173       548       528  
Gain on sale of securities
    (5)       -       226       50  
Mortgage banking income
    376       216       834       672  
Insurance and brokerage commissions
    206       206       642       591  
Appraisal management fee income
    1,311       799       3,285       2,442  
Miscellaneous
    1,440       1,438       4,269       4,221  
Total non-interest income
    4,708       3,915       13,213       11,667  
 
                               
NON-INTEREST EXPENSES:
                               
Salaries and employee benefits
    5,695       5,519       17,060       15,866  
Occupancy
    1,861       1,761       5,409       5,367  
Appraisal management fee expense
    1,012       627       2,538       1,873  
Other
    2,699       2,795       8,420       8,198  
Total non-interest expense
    11,267       10,702       33,427       31,304  
 
                               
EARNINGS BEFORE INCOME TAXES
    4,455       4,154       13,565       11,880  
INCOME TAXES
    834       687       2,464       1,934  
 
                               
NET EARNINGS
  3,621     3,467     11,101     9,946  
 
                               
PER SHARE AMOUNTS
                               
Basic net earnings
  0.62     0.58     1.87     1.66  
Diluted net earnings
  0.61     0.57     1.86     1.65  
Cash dividends
  0.14     0.13     0.42     0.39  
Book value
  22.44     19.97     22.44     19.97  
 
                               

 

FINANCIAL HIGHLIGHTS
For the three and nine months ended September 30, 2019 and 2018
(Dollars in thousands)

 

 
  Three months ended     Nine months ended  
 
  September 30,     September 30,  
 
  2019     2018     2019     2018  
 
  (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
SELECTED AVERAGE BALANCES:
                       
Available for sale securities
  180,439     209,221     185,107     212,221  
Loans
    840,523       781,596       829,385       771,951  
Earning assets
    1,044,159       1,012,946       1,028,573       1,007,183  
Assets
    1,139,256       1,104,041       1,122,226       1,095,255  
Deposits
    939,254       907,536       916,420       907,975  
Shareholders' equity
    131,890       119,710       132,053       121,237  
 
                               
SELECTED KEY DATA:
                               
Net interest margin (tax equivalent)
    4.41 %     4.43 %     4.56 %     4.34 %
Return on average assets
    1.26 %     1.25 %     1.32 %     1.21 %
Return on average shareholders' equity
    10.89 %     11.49 %     11.24 %     10.97 %
Shareholders' equity to total assets (period end)
    10.85 %     10.88 %     10.85 %     10.88 %
 
                               
ALLOWANCE FOR LOAN LOSSES:
                               
Balance, beginning of period
  6,541     6,277     6,445     6,366  
Provision for loan losses
    422       110       677       372  
Charge-offs
    (551 )     (259 )     (911 )     (766 )
Recoveries
    166       167       367       323  
Balance, end of period
  6,578     6,295     6,578     6,295  
 
                               
ASSET QUALITY:
                               
Non-accrual loans
                  3,258     3,920  
90 days past due and still accruing
                    -       -  
Other real estate owned
                    26       -  
Total non-performing assets
                  3,284     3,920  
Non-performing assets to total assets
                    0.27 %     0.36 %
Allowance for loan losses to non-performing assets
                    200.30 %     160.59 %
Allowance for loan losses to total loans
                    0.78 %     0.80 %
 
                               
LOAN RISK GRADE ANALYSIS:
                               
 
                  Percentage of Loans  
 
                  By Risk Grade  
 
                  9/30/2019     9/30/2018  
Risk Grade 1 (excellent quality)
                    0.60 %     0.82 %
Risk Grade 2 (high quality)
                    25.00 %     26.30 %
Risk Grade 3 (good quality)
                    61.91 %     61.14 %
Risk Grade 4 (management attention)
                    10.32 %     9.02 %
Risk Grade 5 (watch)
                    1.43 %     1.81 %
Risk Grade 6 (substandard)
                    0.74 %     0.90 %
Risk Grade 7 (doubtful)
                    0.00 %     0.00 %
Risk Grade 8 (loss)
                    0.00 %     0.00 %
 
                               

At September 30, 2019, 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.

SOURCE:  Peoples Bancorp of North Carolina, Inc.


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