Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K JAN 22, 2018 - PEOPLES BANCORP OF NORTH CAROLINA INC | form8kjan222018.htm |
NEWS RELEASE
January
22, 2018
Contact:
Lance
A. Sellers
President
and Chief Executive Officer
A.
Joseph Lampron, Jr.
Executive
Vice President and Chief Financial Officer
828-464-5620,
Fax 828-465-6780
For Immediate Release
PEOPLES BANCORP ANNOUNCES FOURTH QUARTER AND ANNUAL EARNINGS
RESULTS
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
$2.0 million or $0.34 basic and diluted net earnings per share for
the three months ended December 31, 2017, as compared to $1.3
million or $0.22 basic and diluted net earnings per share for the
same period one year ago.
●
Incurred a
$588,000 charge to income
tax expense due to the revaluation of deferred taxes as required
due to the passing of the Tax Cuts and Jobs Act (“TCJA”) in December,
2017.
●
Prepaid remaining
$20.0 million Federal Home Loan Bank (“FHLB”)
borrowings with weighted average rate of 4.19%. A prepayment
penalty of $508,000, which is included in other non-interest
expenses, was incurred as the result of prepaying the remaining
$20.0 million in FHLB borrowings.
Year to date highlights:
●
Net earnings were a
record $10.3 million or $1.71 basic net earnings per share and
$1.69 diluted net earnings per share for the year ended December
31, 2017, as compared to $9.2 million or $1.53 basic net earnings
per share and $1.50 diluted net earnings per share for the same
period one year ago.
●
Total loans
increased $36.0 million to $759.8 million at December 31, 2017,
compared to $723.8 million at December 31, 2016.
●
Core deposits were
$887.4 million or 97.9% of total deposits at December 31, 2017,
compared to $865.4 million or 96.9% of total deposits at December
31, 2016.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
increase in fourth quarter net earnings to an increase in net
interest income and a decrease in non-interest expense, which were
partially offset by a decrease in non-interest income during the
three months ended December 31, 2017, as compared to the three
months ended December 31, 2016, as discussed below. Mr. Sellers
also stated that the earnings for the fourth quarter of 2017 and
the year ended December 31, 2017 were reduced by the charge to
income tax expense of $588,000 due to the revaluation of deferred
taxes as required due to the passing of the TCJA in December, 2017. Without this
charge to earnings, the Company would have had net earnings
totaling $2.6 million and $10.9 million for the quarter and year
ended December 31, 2017, respectively.
Net
interest income was $10.2 million for the three months ended
December 31, 2017, compared to $9.3 million for the three months
ended December 31, 2016. The increase in net interest income was
primarily due to a $620,000 increase in interest income, which was
primarily attributable to an increase in the average outstanding
balance of loans and a 0.75% increase in the prime rate since
December 2016, combined with a $313,000 decrease in interest
expense, which was primarily attributable to a decrease in the
average outstanding balances of FHLB borrowings during the three
months ended December 31, 2017, as compared to the same period one
year ago. Net interest income after the provision for loan losses
was $10.3 million for the three months ended December 31, 2017,
compared to $9.4 million for the three months ended December 31,
2016. The provision for loan losses for the three months ended
December 31, 2017 was a
credit of $102,000, as compared to a credit of $98,000 for the
three months ended December 31, 2016.
Non-interest income
was $3.2 million for the three months ended December 31, 2017,
compared to $3.7 million for the three months ended December 31,
2016. The decrease in non-interest income is primarily attributable
to a $405,000 decrease in gains on the sale of securities during
the three months ended December 31, 2017, compared to the same
period one year ago.
5
Non-interest
expense was $10.2 million for the three months ended December 31,
2017, compared to $11.8 million for the three months ended December
31, 2016. The decrease in non-interest expense was primarily due to
a $1.7 million decrease in other non-interest expense during
the three months ended December 31, 2017, as compared to the three
months ended December 31, 2016. The decrease in other non-interest
expense is primarily due to a $753,000 decrease in FHLB prepayment
penalties and a $356,000 decrease in consulting fees during the
three months ended December 31, 2017, as compared to the three
months ended December 31, 2016.
The
Company had income tax expense of $1.3 million for the three months
ended December 31, 2017, compared to an income tax benefit of
$36,000 for the three months ended December 31, 2016. Income tax
expense for the three months ended December 31, 2017 includes
$588,000 additional tax expense due to the revaluation of the
Company’s deferred tax asset as a result of the TCJA, which reduced the
Company’s federal corporate tax rate from 34% to 21%
effective January 1, 2018. The Company’s revaluation of its
deferred tax asset is subject to further refinement as additional
information becomes available and further analysis is completed in
connection with the preparation of the Company’s audited
financial statements. The Company does not anticipate future cash
expenditures as a result of the reduction to the deferred tax
asset. The income tax benefit for the three months ended December
31, 2016 was primarily due to a reduction in taxable income due to
FHLB prepayment penalties incurred during the fourth quarter of
2016.
Year-to-date net
earnings as of December 31, 2017 were $10.3 million or $1.71 basic
net earnings per share and $1.69 diluted net earnings per share, as
compared to $9.2 million or $1.53 basic net earnings per share and
$1.50 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 a decrease
in non-interest expense, which were partially offset by a decrease
in non-interest income and a decrease in the credit to the
provision for loan losses, as discussed below.
Year-to-date net
interest income as of December 31, 2017 was $39.6 million compared
to $36.5 million for the same period one year ago. The increase in
net interest income was primarily due to a $2.1 million increase in
interest income, which was primarily attributable to an increase in
the average outstanding balance of loans and a 0.75% increase in
the prime rate since December 2016, combined with a $894,000
decrease in interest expense, which was primarily attributable to a
decrease in the average outstanding balances of FHLB borrowings
during the year ended December 31, 2017, as compared to the same
period one year ago. Net interest income after the provision for
loan losses was $40.1 million for the year ended December 31, 2017,
compared to $37.7 million for the same period one year ago. The
provision for loan losses for the year ended December 31, 2017 was
a credit of $507,000, as compared to a credit of $1.2 million for
the year ended December 31, 2016. The decrease in the credit to the
provision for loan losses is primarily attributable to a $36.0
million increase in loans from December 31, 2016 to December 31,
2017.
Non-interest income
was $12.8 million for the year ended December 31, 2017, compared to
$14.0 million for the year ended December 31, 2016. The decrease in
non-interest income is primarily attributable to a $729,000
decrease in gains on the sale of securities, a $341,000 decrease in
service charges and fees and a $238,000 decrease in mortgage
banking income during the year ended December 31, 2017, as compared
to the year ended December 31, 2016.
Non-interest
expense was $38.7 million for the year ended December 31, 2017, as
compared to $40.0 million for the year ended December 31, 2016. The
decrease in non-interest expense was primarily due to a $2.1
million decrease in other
non-interest expense, which was partially offset by a $794,000
increase in salaries and benefits expense during the year ended
December 31, 2017, as compared to the year ended December 31, 2016.
The decrease in other non-interest expense is primarily due to a
$753,000 decrease in FHLB prepayment penalties and a $1.5 million
decrease in consulting fees during the year ended December 31,
2017, as compared to the year ended December 31, 2016. The decrease in consulting fees was
a result of the termination of the Consent Order, which was issued
in August of 2015 and terminated effective August 31, 2017, and the
increase in salaries and benefits expense is primarily due to an
increase in the number of full-time equivalent employees, annual
salary increases and an increase in expenses associated with
restricted stock units due to an increase in the Company’s
stock price.
6
Income
tax expense was $4.0 million and $2.6 million for the year ended
December 31, 2017 and 2016, respectively. This represented an
effective tax rate of 28% and 22% for the respective periods. The
increase in the effective tax rate is primarily due to $588,000
additional tax expense incurred during the fourth quarter of 2017
due to the revaluation of the Company’s deferred tax asset as
a result of the TCJA, which reduced the Company’s federal
corporate tax rate from 34% to 21% effective January 1, 2018. The
Company’s revaluation of its deferred tax asset is subject to
further refinement as additional information becomes available and
further analysis is completed in connection with the preparation of
the Company’s audited financial statements. The Company does
not anticipate future cash expenditures as a result of the
reduction to the deferred tax asset.
Total
assets were $1.1 billion as of December 31, 2017 and 2016.
Available for sale securities were $229.3 million as of December
31, 2017, compared to $249.9 million as of December 31, 2016. Total
loans were $759.8 million as of December 31, 2017, compared to
$723.8 million as of December 31, 2016.
Non-performing
assets were $3.8 million or 0.35% of total assets at December 31,
2017, compared to $4.1 million or 0.38% of total assets at December
31, 2016. Non-performing loans include $3.6 million in commercial
and residential mortgage loans, $14,000 in acquisition, development
and construction (“AD&C”) loans and $112,000 in
other loans at December 31, 2017, as compared to $3.7 million in
commercial and residential mortgage loans, $21,000 in AD&C
loans and $55,000 in other loans at December 31, 2016.
The
allowance for loan losses at December 31, 2017 was $6.4 million or
0.84% of total loans, compared to $7.6 million or 1.04% of total
loans at December 31, 2016. 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
$907.0 million at December 31, 2017, compared to $892.9 million at
December 31, 2016. Core deposits, which include noninterest-bearing
demand deposits, NOW, MMDA, savings and non-brokered certificates
of deposit of denominations less than $250,000, increased $22.0
million to $887.4 million at December 31, 2017, as compared to
$865.4 million at December 31, 2016. Certificates of deposit in
amounts of $250,000 or more totaled $18.8 million at December 31,
2017, as compared to $26.8 million at December 31,
2016.
Securities sold
under agreements to repurchase were $37.8 million at December 31,
2017, as compared to $36.4 million at December 31,
2016.
Shareholders’
equity was $116.0 million, or 10.6% of total assets, as of December
31, 2017, compared to $107.4 million, or 9.9% of total assets, as
of December 31, 2016. The increase in shareholders’ equity is
primarily due to an increase in retained earnings due to net
income.
Peoples
Bank operates 19 banking offices entirely in North Carolina, with
offices in Catawba, Alexander, Lincoln, Mecklenburg, Iredell and
Wake Counties. Peoples Bank also operates loan production offices
in Lincoln and Durham Counties. The Company’s common stock is
publicly traded and is quoted on the Nasdaq Global Market under the
symbol “PEBK.”
Statements made
in this press release, other than those concerning historical
information, should be considered forward-looking statements
pursuant to the safe harbor provisions of the Securities Exchange
Act of 1934 and the Private Securities Litigation Act of 1995.
These forward-looking statements involve risks and uncertainties
and are based on the beliefs and assumptions of management and on
the information available to management at the time that this
release was prepared. These statements can be identified by the use
of words like “expect,” “anticipate,”
“estimate,” and “believe,” variations of
these words and other similar expressions. Readers should not place
undue reliance on forward-looking statements as a number of
important factors could cause actual results to differ materially
from those in the forward-looking statements. Factors that could
cause actual results to differ include, but are not limited to, (1)
competition in the markets served by Peoples Bank, (2) changes in
the interest rate environment, (3) general national, regional or
local economic conditions may be less favorable than expected,
resulting in, among other things, a deterioration in credit quality
and the possible impairment of collectibility of loans, (4)
legislative or regulatory changes, including changes in accounting
standards, (5) significant changes in the federal and state legal
and regulatory environment and tax laws, (6) the impact of changes
in monetary and fiscal policies, laws, rules and regulations and
(7) other risks and factors identified in the Company’s other
filings with the Securities and Exchange Commission, including but
not limited to those described in the Company’s annual report
on Form 10-K for the year ended December 31,
2016.
7
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
December
31, 2017 and 2016
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
December
31, 2016
|
|
|
(Unaudited)
|
(Audited)
|
|
ASSETS:
|
|
|
|
Cash
and due from banks
|
$53,186
|
$53,613
|
|
Interest-bearing
deposits
|
4,118
|
16,481
|
|
Cash
and cash equivalents
|
57,304
|
70,094
|
|
|
|
|
|
Investment
securities available for sale
|
229,321
|
249,946
|
|
Other
investments
|
1,830
|
2,635
|
|
Total
securities
|
231,151
|
252,581
|
|
|
|
|
|
Mortgage
loans held for sale
|
857
|
5,709
|
|
|
|
|
|
Loans
|
759,764
|
723,811
|
|
Less:
Allowance for loan losses
|
(6,366)
|
(7,550)
|
|
Net
loans
|
753,398
|
716,261
|
|
|
|
|
|
Premises
and equipment, net
|
19,911
|
16,452
|
|
Cash
surrender value of life insurance
|
15,552
|
14,952
|
|
Accrued
interest receivable and other assets
|
13,993
|
11,942
|
|
Total
assets
|
$1,092,166
|
$1,087,991
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY:
|
|
|
|
Deposits:
|
|
|
|
Noninterest-bearing
demand
|
$285,405
|
$271,851
|
|
NOW,
MMDA & savings
|
498,446
|
477,054
|
|
Time,
$250,000 or more
|
18,756
|
26,771
|
|
Other
time
|
104,345
|
117,242
|
|
Total
deposits
|
906,952
|
892,918
|
|
|
|
|
|
Securities
sold under agreements to repurchase
|
37,757
|
36,434
|
|
FHLB
borrowings
|
-
|
20,000
|
|
Junior
subordinated debentures
|
20,619
|
20,619
|
|
Accrued
interest payable and other liabilities
|
10,863
|
10,592
|
|
Total
liabilities
|
976,191
|
980,563
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Series A preferred stock, $1,000 stated value;
authorized
|
|
|
|
5,000,000
shares; no shares issued and outstanding
|
-
|
-
|
|
Common
stock, no par value; authorized
|
|
|
|
20,000,000
shares; issued and outstanding
|
|
|
|
5,995,256 shares at 12/31/17 and 5,417,800 shares
|
|
|
|
at
12/31/16
|
45,102
|
44,187
|
|
Retained
earnings
|
67,280
|
60,254
|
|
Accumulated
other comprehensive income
|
3,593
|
2,987
|
|
Total
shareholders' equity
|
115,975
|
107,428
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
$1,092,166
|
$1,087,991
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
For
the three months and years ended December 31, 2017 and
2016
|
||||
|
(Dollars
in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
Years ended
|
||
|
|
December 31,
|
December 31,
|
||
|
|
2017
|
2016
|
2017
|
2016
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
INTEREST INCOME:
|
|
|
|
|
|
Interest
and fees on loans
|
$8,953
|
$8,267
|
$34,888
|
$32,452
|
|
Interest
on due from banks
|
81
|
56
|
219
|
123
|
|
Interest
on investment securities:
|
|
|
|
|
|
U.S.
Government sponsored enterprises
|
609
|
621
|
2,404
|
2,531
|
|
State
and political subdivisions
|
1,038
|
1,105
|
4,236
|
4,454
|
|
Other
|
45
|
57
|
202
|
249
|
|
Total
interest income
|
10,726
|
10,106
|
41,949
|
39,809
|
|
|
|
|
|
|
|
INTEREST EXPENSE:
|
|
|
|
|
|
NOW,
MMDA & savings deposits
|
167
|
128
|
598
|
495
|
|
Time
deposits
|
106
|
133
|
466
|
586
|
|
FHLB
borrowings
|
58
|
413
|
662
|
1,661
|
|
Junior
subordinated debentures
|
158
|
132
|
590
|
485
|
|
Other
|
18
|
14
|
61
|
44
|
|
Total
interest expense
|
507
|
820
|
2,377
|
3,271
|
|
|
|
|
|
|
|
NET INTEREST INCOME
|
10,219
|
9,286
|
39,572
|
36,538
|
|
PROVISION FOR (REDUCTION OF PROVISION
|
|
|
|
|
|
FOR) LOAN LOSSES
|
(102)
|
(98)
|
(507)
|
(1,206)
|
|
NET INTEREST INCOME AFTER
|
|
|
|
|
|
PROVISION FOR LOAN LOSSES
|
10,321
|
9,384
|
40,079
|
37,744
|
|
|
|
|
|
|
|
NON-INTEREST INCOME:
|
|
|
|
|
|
Service
charges
|
1,113
|
1,206
|
4,453
|
4,497
|
|
Other
service charges and fees
|
146
|
143
|
593
|
890
|
|
Gain
on sale of securities
|
-
|
405
|
-
|
729
|
|
Mortgage
banking income
|
245
|
340
|
1,190
|
1,428
|
|
Insurance
and brokerage commissions
|
193
|
156
|
761
|
632
|
|
Miscellaneous
|
1,480
|
1,416
|
5,841
|
5,800
|
|
Total
non-interest income
|
3,177
|
3,666
|
12,838
|
13,976
|
|
|
|
|
|
|
|
NON-INTEREST EXPENSES:
|
|
|
|
|
|
Salaries
and employee benefits
|
5,020
|
5,150
|
20,058
|
19,264
|
|
Occupancy
|
1,720
|
1,522
|
6,701
|
6,765
|
|
Other
|
3,429
|
5,112
|
11,891
|
13,953
|
|
Total
non-interest expense
|
10,169
|
11,784
|
38,650
|
39,982
|
|
|
|
|
|
|
|
EARNINGS
BEFORE INCOME TAXES
|
3,329
|
1,266
|
14,267
|
11,738
|
|
INCOME
TAXES
|
1,319
|
(36)
|
3,999
|
2,561
|
|
|
|
|
|
|
|
NET EARNINGS
|
$2,010
|
$1,302
|
$10,268
|
$9,177
|
|
|
|
|
|
|
|
PER SHARE AMOUNTS*
|
|
|
|
|
|
Basic
net earnings
|
$0.34
|
$0.22
|
$1.71
|
$1.53
|
|
Diluted
net earnings
|
$0.34
|
$0.22
|
$1.69
|
$1.50
|
|
Cash
dividends
|
$0.11
|
$0.09
|
$0.44
|
$0.35
|
|
Book
value
|
$19.34
|
$18.03
|
$19.34
|
$18.03
|
|
|
|
|
|
|
|
*Per share computations have been retroactively restated to reflect
a 10% stock dividend during the fourth quarter of
2017.
|
|
|||
|
FINANCIAL HIGHLIGHTS
|
|
|
|
|
|
For the three months and years ended December 31, 2017 and
2016
|
||||
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
Years ended
|
||
|
|
December 31,
|
December 31,
|
||
|
|
2017
|
2016
|
2017
|
2016
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
SELECTED AVERAGE BALANCES:
|
|
|
|
|
|
Available
for sale securities
|
$229,323
|
$248,525
|
$234,278
|
$252,725
|
|
Loans
|
746,987
|
718,884
|
741,655
|
703,484
|
|
Earning
assets
|
1,003,815
|
1,014,156
|
998,821
|
985,236
|
|
Assets
|
1,106,381
|
1,112,191
|
1,098,992
|
1,076,604
|
|
Deposits
|
904,246
|
880,955
|
895,129
|
856,313
|
|
Shareholders'
equity
|
116,026
|
109,286
|
116,883
|
113,196
|
|
|
|
|
|
|
|
SELECTED KEY DATA:
|
|
|
|
|
|
Net
interest margin (tax equivalent)
|
4.25%
|
3.86%
|
4.18%
|
3.94%
|
|
Return
on average assets
|
0.72%
|
0.47%
|
0.93%
|
0.85%
|
|
Return
on average shareholders' equity
|
6.87%
|
4.74%
|
8.78%
|
8.11%
|
|
Shareholders'
equity to total assets (period end)
|
10.62%
|
9.87%
|
10.62%
|
9.87%
|
|
|
|
|
|
|
|
ALLOWANCE FOR LOAN LOSSES:
|
|
|
|
|
|
Balance,
beginning of period
|
$6,844
|
$8,045
|
$7,550
|
$9,589
|
|
Provision
for loan losses
|
(102)
|
(98)
|
(507)
|
(1,206)
|
|
Charge-offs
|
(501)
|
(484)
|
(982)
|
(1,238)
|
|
Recoveries
|
125
|
87
|
305
|
405
|
|
Balance,
end of period
|
$6,366
|
$7,550
|
$6,366
|
$7,550
|
|
|
|
|
|
|
|
ASSET QUALITY:
|
|
|
|
|
|
Non-accrual
loans
|
|
|
$3,711
|
$3,825
|
|
90
days past due and still accruing
|
|
|
-
|
-
|
|
Other
real estate owned
|
|
|
118
|
283
|
|
Total
non-performing assets
|
|
|
$3,829
|
$4,108
|
|
Non-performing
assets to total assets
|
|
|
0.35%
|
0.38%
|
|
Allowance
for loan losses to non-performing assets
|
|
|
166.26%
|
183.79%
|
|
Allowance
for loan losses to total loans
|
|
|
0.84%
|
1.04%
|
|
LOAN RISK GRADE ANALYSIS:
|
|
|
|
|
|
|
|
|
Percentage of Loans
|
|
|
|
|
|
By Risk Grade
|
|
|
|
|
|
12/31/2017
|
12/31/2016
|
|
Risk
Grade 1 (excellent quality)
|
|
|
1.07%
|
1.32%
|
|
Risk
Grade 2 (high quality)
|
|
|
26.23%
|
26.82%
|
|
Risk
Grade 3 (good quality)
|
|
|
60.62%
|
55.10%
|
|
Risk
Grade 4 (management attention)
|
|
|
8.19%
|
11.99%
|
|
Risk
Grade 5 (watch)
|
|
|
2.54%
|
3.07%
|
|
Risk
Grade 6 (substandard)
|
|
|
1.04%
|
1.40%
|
|
Risk
Grade 7 (doubtful)
|
|
|
0.00%
|
0.00%
|
|
Risk
Grade 8 (loss)
|
|
|
0.00%
|
0.00%
|
|
|
|
|
|
|
|
At December 31, 2017, including non-accrual loans, there were three
relationships exceeding $1.0 million in the Watch risk grade (which
totaled $5.7 million). There were no relationships exceeding $1.0
million in the Substandard risk grade.
|
||||
|
(END)
|
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