NEWTON, NC / ACCESSWIRE / January 23, 2017 / Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company of
Peoples Bank, reported fourth quarter and year to date earnings results with highlights as follows:
Fourth quarter highlights:
- Net earnings were $1.3 million or $0.24 basic and diluted net earnings per share for the three
months ended December 31, 2016, as compared to $2.2 million or $0.40 basic net earnings per share and $0.39 diluted net earnings
per share for the same period one year ago. - Prepaid $23.5 million FHLB borrowings with weighted average rate of 4.28%. A
prepayment penalty of $1.3 million, which is included in other non-interest expenses, was incurred as the result of prepaying $23.5
million in FHLB borrowings.
Year to date highlights:
- Net earnings were $9.2 million or $1.68 basic net earnings per share and $1.65 diluted net
earnings per share for the year ended December 31, 2016, as compared to $9.6 million or $1.73 basic net earnings per share and
$1.72 diluted net earnings per share for the same period one year ago. - Non-performing assets declined to $4.1 million or 0.4% of
total assets at December 31, 2016, compared to $9.1 million or 0.9% of total assets at December 31, 2015. - Total loans increased
$34.7 million to $723.8 million at December 31, 2016, compared to $689.1 million at December 31, 2015. - Core deposits were $865.4
million or 96.9% of total deposits at December 31, 2016, compared to $805.0 million or 96.7% of total deposits at December 31,
2015. - 2016 non-interest expense reflects the following non-recurring expenses totaling $2.8 million: - $1.5 million consulting
fees associated with the FDIC Consent Order (the "Order") issued in August 2015. - $1.3 million penalties on FHLB borrowing
prepayments.
Lance A. Sellers, President and Chief Executive Officer, attributed the decrease in fourth quarter net earnings to an increase
in non-interest expense and a decrease in the credit to the provision for loan losses, which were partially offset by an increase
in net interest income and an increase in non-interest income.
Net interest income was $9.3 million for the three months ended December 31, 2016, compared to $9.1 million for the three months
ended December 31, 2015. The increase in net interest income was primarily due to a $146,000 increase in interest income, which was
primarily attributable to an increase in the average outstanding balance of loans and a 0.25% increase in the prime rate in
December 2015, combined with a $30,000 decrease in interest expense, which was primarily attributable to a decrease in the average
outstanding balance of time deposits and FHLB borrowings during the three months ended December 31, 2016, as compared to the same
period one year ago. Net interest income after the provision for loan losses was $9.4 million for the three months ended December
31, 2016, compared to $9.3 million for the three months ended December 31, 2015. The provision for loan losses for the three months
ended December 31, 2016 was a credit of $98,000, as compared to a credit of $210,000 for the three months ended December 31, 2015.
The decrease in the credit to the provision for loan losses is primarily attributable to a $10.8 million increase in loans
outstanding during the fourth quarter of 2016, as compared to a $4.3 million increase in loans outstanding during the fourth
quarter of 2015.
Non-interest income was $3.7 million for the three months ended December 31, 2016, compared to $3.5 million for the three months
ended December 31, 2015. The increase in non-interest income is primarily attributable to a $405,000 gain on the sale of securities
during the three months ended December 31, 2016, compared to no gain on sale of securities for the same period one year ago.
Non-interest expense was $11.8 million for the three months ended December 31, 2016, compared to $10.0 million for the three
months ended December 31, 2015. The increase in non-interest expense was primarily due to a $1.4 million increase in other
non-interest expense and a $548,000 increase in salaries and benefits expense, during the three months ended December 31, 2016, as
compared to the three months ended December 31, 2015. The increase in other non-interest expense is primarily due to a $757,000
increase in FHLB prepayment penalties, a $173,000 increase in consulting fees and a $140,000 increase in marketing expense during
the three months ended December 31, 2016, as compared to the three months ended December 31, 2015.
Year-to-date net earnings as of December 31, 2016 were $9.2 million or $1.68 basic net earnings per share and $1.65 diluted net
earnings per share, as compared to $9.6 million or $1.73 basic net earnings per share and $1.72 diluted net earnings per share for
the same period one year ago. The decrease in year-to-date net earnings is primarily attributable to an increase in non-interest
expense, which was partially offset by an increase in net interest income, an increase in the credit to the provision for loan
losses and an increase in non-interest income, as discussed below.
Year-to-date net interest income as of December 31, 2016 was $36.5 million compared to $35.2 million for same period one year
ago. The increase in net interest income was primarily due to a $1.1 million increase in interest income, which was primarily
attributable to an increase in the average outstanding balance of loans and a 0.25% increase in the prime rate in December 2015,
combined with a $213,000 decrease in interest expense, which was primarily attributable to a decrease in the average outstanding
balance of time deposits and FHLB borrowings during the year ended December 31, 2016, as compared to the same period one year ago.
Net interest income after the provision for loan losses was $37.7 million for the year ended December 31, 2016, compared to $35.2
million for the same period one year ago. The provision for loan losses for the year ended December 31, 2016 was a credit of $1.2
million, as compared to a credit of $17,000 for the year ended December 31, 2015. The increase in the credit to the provision for
loan losses is primarily attributable to a reduction in the required level of the allowance for loan losses resulting from lower
historical loss rates used to calculate the ASC 450-20 reserve as the elevated level of loan losses incurred in 2010 and 2011 are
no longer included in the historical loss calculations.
Non-interest income was $14.0 million for the year ended December 31, 2016, compared to $13.3 million for the year ended
December 31, 2015. The increase in non-interest income is primarily attributable to $729,000 in gains on the sale of securities
during the year ended December 31, 2016 and a $298,000 increase in mortgage banking income during the year ended December 31, 2016,
as compared to the year ended December 31, 2015.
Non-interest expense was $40.0 million for the year ended December 31, 2016, as compared to $35.8 million for the year ended
December 31, 2015. The increase in non-interest expense was primarily due to a $2.7 million increase in other non-interest expense,
a $979,000 increase in salaries and benefits expense and a $477,000 increase in occupancy expense during the year ended December
31, 2016, as compared to the year ended December 31, 2015. The increase in other non-interest expense is primarily due to a
$757,000 increase in penalties associated with the prepayment of FHLB borrowings and a $1.2 million increase in consulting fees due
to expenses associated with the Order issued in August 2015. The Bank continues to make progress in addressing the issues
identified in the Order and expects that it will be able to undertake and implement all required actions within the time periods
specified in the Order.
Total assets were $1.1 billion as of December 31, 2016, as compared to $1.0 billion as of December 31, 2015. Available for sale
securities were $249.9 million as of December 31, 2016, compared to $268.5 million as of December 31, 2015. Total loans were $723.8
million as of December 31, 2016, compared to $689.1 million as of December 31, 2015.
Non-performing assets declined to $4.1 million or 0.4% of total assets at December 31, 2016, compared to $9.2 million or 0.9% of
total assets at December 31, 2015. The decline in non-performing assets is due to a $4.6 million decrease in non-accrual loans and
a $456,000 decrease in other real estate owned properties. Non-performing loans include $3.7 million in commercial and residential
mortgage loans, $21,000 in acquisition, development, and construction ("AD&C") loans and $55,000 in other loans at December 31,
2016, as compared to $8.1 million in commercial and residential mortgage loans, $146,000 in AD&C loans and $181,000 in other
loans at December 31, 2015.
The allowance for loan losses at December 31, 2016 was $7.6 million or 1.0% of total loans, compared to $9.6 million or 1.4% of
total loans at December 31, 2015. 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 $892.9 million as of December 31, 2016, compared to $832.2 million at December 31, 2015. Core deposits, which
include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than
$250,000, increased $60.4 million to $865.4 million at December 31, 2016, as compared to $805.0 million at December 31, 2015.
Certificates of deposit in amounts of $250,000 or more totaled $26.8 million at December 31, 2016, as compared to $26.9 million at
December 31, 2015.
Securities sold under agreements to repurchase were $36.4 million at December 31, 2016, as compared to $27.9 million at December
31, 2015.
Shareholders' equity was $107.4 million, or 9.9% of total assets, as of December 31, 2016, compared to $104.9 million, or 10.1%
of total assets, as of December 31, 2015. The increase in shareholders' equity is primarily due to an increase in retained earnings
due to net income, which was partially offset by a decrease in accumulated other comprehensive income resulting from a decrease in
the unrealized gain on investment securities and a $2.0 million decrease in common stock due to 92,738 shares of common stock being
repurchased under the Company's stock repurchase program implemented during the second quarter of 2016.
Peoples Bank operates 20 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg,
Union, Iredell, and Wake Counties. Peoples Bank also operates loan production offices in Lincoln, Durham, and Forsyth 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, 2015.
CONSOLIDATED BALANCE SHEETS December 31, 2016 and 2015 (Dollars in thousands)
December 30, 2016 December 31, 2015 (Unaudited)
(Audited) ASSETS: Cash and due from banks $ 53,613 $ 29,194 Interest-bearing deposits 16,481 10,569 Cash and cash equivalents
70,094 39,763 Investment securities available for sale 249,946 268,530 Other investments 2,635 3,636 Total securities 252,581
272,166 Mortgage loans held for sale 5,709 4,149 Loans 723,811 689,091 Less: Allowance for loan losses (7,550 ) (9,589 ) Net loans
716,261 679,502 Premises and equipment, net 16,452 16,976 Cash surrender value of life insurance 14,952 14,546 Accrued interest
receivable and other assets 11,942 11,379 Total assets $ 1,087,991 $ 1,038,481 LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits:
Non-interest-bearing demand $ 271,851 $ 244,231 NOW, MMDA & savings 477,054 431,052 Time, $250,000 or more 26,771 26,891 Other time
117,242 130,001 Total deposits 892,918 832,175 Securities sold under agreements to repurchase 36,434 27,874 FHLB borrowings 20,000
43,500 Junior subordinated debentures 20,619 20,619 Accrued interest payable and other liabilities 10,592 9,449 Total liabilities
980,563 933,617 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 5,417,800 shares at 12/31/16
and 5,510,538 shares at 12/31/2015 44,187 46,171 Retained earnings 60,254 53,183 Accumulated other comprehensive income 2,987 5,510
Total shareholders' equity 107,428 104,864 Total liabilities and shareholders' equity $ 1,087,991 $ 1,038,481
CONSOLIDATED STATEMENTS OF INCOME For the three months and years ended December 31, 2016 and 2015 (Dollars in thousands, except
per share amounts)
Three months ended Years ended December 31, December 31, 2016 2015 2016 2015 (Unaudited) (Unaudited)
(Unaudited) (Audited) INTEREST INCOME: Interest and fees on loans $ 8,267 $ 8,082 $ 32,452 $ 31,098 Interest on due from banks 56 5
123 26 Interest on investment securities: U.S. Government sponsored enterprises 621 657 2,531 2,616 State and political
subdivisions 1,105 1,135 4,454 4,600 Other 57 81 249 326 Total interest income 10,106 9,960 39,809 38,666 INTEREST EXPENSE: NOW,
MMDA & savings deposits 128 109 495 432 Time deposits 133 184 586 870 FHLB borrowings 413 441 1,661 1,735 Junior subordinated
debentures 132 105 485 402 Other 14 11 44 45 Total interest expense 820 850 3,271 3,484 NET INTEREST INCOME 9,286 9,110 36,538
35,182 PROVISION FOR (REDUCTION OF PROVISION FOR) LOAN LOSSES (98 ) (210 ) (1,206 ) (17 ) NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 9,384 9,320 37,744 35,199 NON-INTEREST INCOME: Service charges 1,206 1,149 4,497 4,647 Other service charges and fees
143 214 890 931 Gain on sale of securities 405 - 729 - Mortgage banking income 340 320 1,428 1,130 Insurance and brokerage
commissions 156 170 632 714 Miscellaneous 1,416 1,651 5,800 5,890 Total non-interest income 3,666 3,504 13,976 13,312 NON-INTEREST
EXPENSES: Salaries and employee benefits 5,150 4,602 19,264 18,285 Occupancy 1,522 1,710 6,765 6,288 Other 5,112 3,711 13,953
11,205 Total non-interest expense 11,784 10,023 39,982 35,778 EARNINGS BEFORE INCOME TAXES 1,266 2,801 11,738 12,733 INCOME TAXES
(36 ) 613 2,561 3,100 NET EARNINGS $ 1,302 $ 2,188 $ 9,177 $ 9,633 PER SHARE AMOUNTS Basic net earnings $ 0.24 $ 0.40 $ 1.68 $ 1.73
Diluted net earnings $ 0.24 $ 0.39 $ 1.65 $ 1.72 Cash dividends $ 0.10 $ 0.08 $ 0.38 $ 0.28 Book value $ 19.83 $ 19.03 $ 19.83 $
19.03
FINANCIAL HIGHLIGHTS For the three months and years ended December 31, 2016 and 2015 (Dollars in thousands)
Three months
ended Years ended December 31, December 31, 2016 2015 2016 2015 (Unaudited) (Unaudited) (Unaudited) (Audited) SELECTED AVERAGE
BALANCES: Available for sale securities $ 248,525 $ 261,512 $ 252,725 $ 266,830 Loans 718,884 687,592 703,484 669,628 Earning
assets 1,014,156 951,843 985,236 952,251 Assets 1,112,191 1,043,587 1,076,604 1,038,594 Deposits 880,955 819,638 856,313 816,628
Shareholders' equity 109,286 105,122 113,196 106,644 SELECTED KEY DATA: Net interest margin (tax equivalent) 3.86 % 3.99 % 3.94 %
3.94 % Return on average assets 0.47 % 0.83 % 0.85 % 0.93 % Return on average shareholders' equity 4.74 % 8.26 % 8.11 % 9.03 %
Shareholders' equity to total assets (period end) 9.87 % 10.10 % 9.87 % 10.10 % ALLOWANCE FOR LOAN LOSSES: Balance, beginning of
period $ 8,045 $ 10,420 $ 9,589 $ 11,082 Provision for loan losses (98 ) (210 ) (1,206 ) (17 ) Charge-offs (484 ) (668 ) (1,238 )
(1,844 ) Recoveries 87 47 405 368 Balance, end of period $ 7,550 $ 9,589 $ 7,550 $ 9,589 ASSET QUALITY: Non-accrual loans $ 3,825 $
8,432 90 days past due and still accruing - 17 Other real estate owned 283 739 Total non-performing assets $ 4,108 $ 9,188
Non-performing assets to total assets 0.38 % 0.88 % Allowance for loan losses to non-performing assets 183.79 % 104.36 % Allowance
for loan losses to total loans 1.04 % 1.39 % LOAN RISK GRADE ANALYSIS: Percentage of Loans By Risk Grade 12/31/2016 12/31/2015 Risk
Grade 1 (excellent quality) 1.32 % 1.66 % Risk Grade 2 (high quality) 26.82 % 24.40 % Risk Grade 3 (good quality) 55.10 % 53.64 %
Risk Grade 4 (management attention) 11.99 % 14.26 % Risk Grade 5 (watch) 3.07 % 3.26 % Risk Grade 6 (substandard) 1.40 % 2.53 %
Risk Grade 7 (doubtful) 0.00 % 0.00 % Risk Grade 8 (loss) 0.00 % 0.00 %
At December 31, 2016, including non-accrual loans, there were four relationships exceeding $1.0 million in the Watch risk grade
(which totaled $7.2 million) and one relationship exceeding $1.0 million in the Substandard risk grade (which totaled $1.3
million).
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
SOURCE: Peoples Bancorp of North Carolina, Inc.
