Attached files
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| 8-K - CURRENT REPORT - PEOPLES BANCORP OF NORTH CAROLINA INC | pebk_8k.htm |
Exhibit 99(a)
NEWS RELEASE
April 20, 2020
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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 FIRST QUARTER EARNINGS
RESULTS
Peoples
Bancorp of North Carolina, Inc. (NASDAQ: PEBK), the parent company
of Peoples Bank, reported first quarter earnings results with
highlights as follows:
First quarter highlights:
●
Net earnings were
$2.4 million or $0.40 basic and diluted net earnings per share for
the three months ended March 31, 2020, as compared to $3.7 million
or $0.61 basic and diluted net earnings per share for the same
period one year ago.
●
Total loans
increased $57.0 million to $880.6 million at March 31, 2020,
compared to $823.6 million at March 31, 2019.
●
Core deposits were
$961.2 million or 97.69% of total deposits at March 31, 2020,
compared to $887.6 million or 97.74% of total deposits at March 31,
2019.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
decrease in first 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
March 31, 2020, compared to the three months ended March 31, 2019,
as discussed below.
Net
interest income was $11.2 million for the three months ended March
31, 2020, compared to $11.4 million for the three months ended
March 31, 2019. The decrease in net interest income was primarily
due to a $284,000 increase in interest expense, which was partially
offset by a $67,000 increase in interest income. The increase in
interest income was primarily attributable to an increase in the
average outstanding balance of fed funds sold, 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 $9.7 million for the three months
ended March 31, 2020, compared to $11.2 million for the three
months ended March 31, 2019. The provision for loan losses for the
three months ended March 31, 2020 was $1.5 million, compared to $178,000
for the three months ended March 31, 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 $57.0
million increase in loans from March 31, 2019 to March 31, 2020.
The ALLL model also includes reserves on $57.4 million in loans
with payment modifications made in March 2020 as a result of the
COVID-19 pandemic.
Non-interest income
was $4.6 million for the three months ended March 31, 2020,
compared to $4.1 million for the three months ended March 31, 2019.
The increase in non-interest income is primarily attributable to a
$488,000 increase in appraisal management fee income due to an
increase in the volume of appraisals.
Non-interest
expense was $11.4 million for the three months ended March 31,
2020, compared to $10.9 million for the three months ended March
31, 2019. The increase in non-interest expense was primarily
attributable to a $77,000 increase in salaries and benefits
expense, a $184,000 increase in occupancy expense and a $372,000
increase in appraisal management fee expense. The increase in
salaries and benefits expense was primarily attributable to an
increase in salary expense primarily due to annual salary increases
and an increase in insurance costs. The increase in occupancy
expense was primarily due to increases in depreciation and
maintenance expenses. The increase in appraisal management fee
expense was primarily due to an increase in the volume of
appraisals.
Income
tax expense was $467,000 for the three months ended March 31, 2020,
compared to $785,000 for the three months ended March 31, 2019. The
effective tax rate was 16.48% for the three months ended March 31,
2020, compared to 17.63% for the three months ended March 31,
2019.
Total
assets were $1.2 billion as of March 31, 2020, compared to $1.1
billion at March 31, 2019. Available for sale securities were
$201.5 million as of March 31, 2020, compared to $184.4 million as
of March 31, 2019. Total loans were $880.6 million as of March 31,
2020, compared to $823.6 million as of March 31, 2019.
Non-performing
assets were $4.0 million or 0.32% of total assets at March 31,
2020, compared to $2.9 million or 0.25% of total assets at March
31, 2019. Non-performing assets include $3.6 million in commercial
and residential mortgage loans and $412,000 in other loans at March
31, 2020, compared to $2.7 million in commercial and residential
mortgage loans, $89,000 in other loans and $27,000 in other real
estate owned at March 31, 2019.
The
allowance for loan losses at March 31, 2020 was $8.1 million or
0.92% of total loans, compared to $6.6 million or 0.80% of total
loans at March 31, 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
$984.0 million at March 31, 2020, compared to $908.1 million at
March 31, 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 $961.2 million
at March 31, 2020, compared to $887.6 million at March 31, 2019.
Certificates of deposit in amounts of $250,000 or more totaled
$22.7 million at March 31, 2020, compared to $20.4 million at March
31, 2019.
Securities sold
under agreements to repurchase were $28.5 million at March 31,
2020, compared to $41.2 million at March 31, 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.
Borrowings from the
Federal Home Loan Bank of Atlanta (“FHLB”) totaled
$70.0 million at March 31, 2020, compared to zero at March 31,
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 March 31, 2020,
compared to $20.6 million at March 31, 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 $133.9 million, or 10.75% of total assets, at March 31,
2020, compared to $126.6 million, or 11.39% of total assets, at
March 31, 2019. The Company repurchased 126,800 shares of its
common stock during the three months ended March 31, 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, 2020.
CONSOLIDATED
BALANCE SHEETS
March
31, 2020, December 31, 2019 and March 31, 2019
(Dollars in
thousands)
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March
31,
2020
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December
31,
2019
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March
31,
2019
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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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$46,164
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$48,337
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$35,318
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Interest-bearing
deposits
|
20,705
|
720
|
15,896
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Federal funds
sold
|
36,650
|
3,330
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-
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Cash and cash
equivalents
|
103,519
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52,387
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51,214
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Investment
securities available for sale
|
201,514
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195,746
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184,428
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Other
investments
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7,229
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4,231
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4,329
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Total
securities
|
208,743
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199,977
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188,757
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Mortgage loans held
for sale
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6,149
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4,417
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361
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Loans
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880,564
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849,874
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823,557
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Less: Allowance for
loan losses
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(8,112)
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(6,680)
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(6,561)
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Net
loans
|
872,452
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843,194
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816,996
|
|
|
|
|
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Premises and
equipment, net
|
18,370
|
18,604
|
18,247
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|
Cash surrender
value of life insurance
|
16,414
|
16,319
|
16,031
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|
Accrued interest
receivable and other assets
|
19,180
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19,984
|
19,542
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Total
assets
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$1,244,827
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$1,154,882
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$1,111,148
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LIABILITIES
AND SHAREHOLDERS' EQUITY:
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Deposits:
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Noninterest-bearing
demand
|
$349,513
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$338,004
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$310,053
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NOW, MMDA &
savings
|
535,366
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516,757
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493,773
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Time, $250,000 or
more
|
22,725
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34,269
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20,362
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Other
time
|
76,354
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77,487
|
83,926
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Total
deposits
|
983,958
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966,517
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908,114
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Securities sold
under agreements to repurchase
|
28,535
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24,221
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41,231
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FHLB
borrowings
|
70,000
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-
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-
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Junior subordinated
debentures
|
15,464
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15,619
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20,619
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|
Accrued interest
payable and other liabilities
|
13,014
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14,405
|
14,600
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Total
liabilities
|
1,110,971
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1,020,762
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984,564
|
|
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|
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Shareholders'
equity:
|
|
|
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|
Series A preferred
stock, $1,000 stated value; authorized
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|
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5,000,000 shares;
no shares issued and outstanding
|
-
|
-
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-
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Common stock, no
par value; authorized
|
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|
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20,000,000 shares;
issued and outstanding
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5,787,504 shares
3/31/20,
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5,912,300 shares
12/31/19, 5,997,136 shares 3/31/19
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56,871
|
59,813
|
62,151
|
|
Retained
earnings
|
71,251
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70,663
|
62,757
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Accumulated other
comprehensive income
|
5,734
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3,644
|
1,676
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|
Total shareholders'
equity
|
133,856
|
134,120
|
126,584
|
|
|
|
|
|
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Total liabilities
and shareholders' equity
|
$1,244,827
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$1,154,882
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$1,111,148
|
CONSOLIDATED
STATEMENTS OF INCOME
For the
three months ended March 31, 2020 and 2019
(Dollars in
thousands, except per share amounts)
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|
Three
months ended
|
|
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March
31,
|
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2020
|
2019
|
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(Unaudited)
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(Unaudited)
|
|
INTEREST
INCOME:
|
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|
Interest and fees
on loans
|
$10,680
|
$10,619
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|
Interest on due
from banks
|
43
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14
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|
Interest on federal
funds sold
|
123
|
-
|
|
Interest on
investment securities:
|
|
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U.S. Government
sponsored enterprises
|
685
|
673
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|
State and political
subdivisions
|
641
|
834
|
|
Other
|
78
|
43
|
|
Total interest
income
|
12,250
|
12,183
|
|
|
|
|
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INTEREST
EXPENSE:
|
|
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|
NOW, MMDA &
savings deposits
|
525
|
282
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|
Time
deposits
|
277
|
151
|
|
FHLB
borrowings
|
64
|
46
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|
Junior subordinated
debentures
|
130
|
226
|
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Other
|
45
|
52
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|
Total interest
expense
|
1,041
|
757
|
|
|
|
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NET
INTEREST INCOME
|
11,209
|
11,426
|
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PROVISION
FOR LOAN LOSSES
|
1,521
|
178
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|
NET
INTEREST INCOME AFTER
|
|
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PROVISION
FOR LOAN LOSSES
|
9,688
|
11,248
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
Service
charges
|
1,108
|
1,093
|
|
Other service
charges and fees
|
193
|
169
|
|
Gain on sale of
securities
|
-
|
231
|
|
Mortgage banking
income
|
322
|
147
|
|
Insurance and
brokerage commissions
|
242
|
231
|
|
Appraisal
management fee income
|
1,350
|
862
|
|
Miscellaneous
|
1,380
|
1,387
|
|
Total non-interest
income
|
4,595
|
4,120
|
|
|
|
|
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NON-INTEREST
EXPENSES:
|
|
|
|
Salaries and
employee benefits
|
5,724
|
5,647
|
|
Occupancy
|
1,921
|
1,737
|
|
Appraisal
management fee expense
|
1,034
|
662
|
|
Other
|
2,770
|
2,870
|
|
Total non-interest
expense
|
11,449
|
10,916
|
|
|
|
|
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EARNINGS BEFORE
INCOME TAXES
|
2,834
|
4,452
|
|
INCOME
TAXES
|
467
|
785
|
|
|
|
|
|
NET
EARNINGS
|
$2,367
|
$3,667
|
|
|
|
|
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PER
SHARE AMOUNTS
|
|
|
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Basic net
earnings
|
$0.40
|
$0.61
|
|
Diluted net
earnings
|
$0.40
|
$0.61
|
|
Cash
dividends
|
$0.30
|
$0.24
|
|
Book
value
|
$23.13
|
$21.11
|
FINANCIAL
HIGHLIGHTS
For the
three months ended March 31, 2020 and 2019
(Dollars in
thousands)
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2020
|
2019
|
|
|
(Unaudited)
|
(Unaudited)
|
|
SELECTED
AVERAGE BALANCES:
|
|
|
|
Available for sale
securities
|
$188,870
|
$189,790
|
|
Loans
|
861,634
|
815,203
|
|
Earning
assets
|
1,103,948
|
1,013,310
|
|
Assets
|
1,196,938
|
1,091,822
|
|
Deposits
|
973,285
|
895,708
|
|
Shareholders'
equity
|
134,186
|
125,349
|
|
|
|
|
|
SELECTED
KEY DATA:
|
|
|
|
Net interest margin
(tax equivalent)
|
4.14%
|
4.66%
|
|
Return on average
assets
|
0.80%
|
1.36%
|
|
Return on average
shareholders' equity
|
7.09%
|
11.86%
|
|
Shareholders'
equity to total assets (period end)
|
10.75%
|
11.39%
|
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES:
|
|
|
|
Balance, beginning
of period
|
$6,680
|
$6,445
|
|
Provision for loan
losses
|
1,521
|
178
|
|
Charge-offs
|
(210)
|
(164)
|
|
Recoveries
|
121
|
102
|
|
Balance, end of
period
|
$8,112
|
$6,561
|
|
|
|
|
|
ASSET
QUALITY:
|
|
|
|
Non-accrual
loans
|
$3,966
|
$2,802
|
|
90 days past due
and still accruing
|
34
|
-
|
|
Other real estate
owned
|
-
|
27
|
|
Total
non-performing assets
|
$4,000
|
$2,829
|
|
Non-performing
assets to total assets
|
0.32%
|
0.25%
|
|
Loans modifications
related to COVID-19
|
$57,366
|
$-
|
|
Allowance for loan
losses to non-performing assets
|
202.80%
|
231.92%
|
|
Allowance for loan
losses to total loans
|
0.92%
|
0.80%
|
|
|
|
|
LOAN
RISK GRADE ANALYSIS:
|
|
Percentage
of Loans
|
|
|
|
By
Risk Grade
|
|
|
|
3/31/2020
|
3/31/2019
|
|
Risk Grade 1
(excellent quality)
|
0.52%
|
0.70%
|
|
Risk Grade 2 (high
quality)
|
23.89%
|
24.99%
|
|
Risk Grade 3 (good
quality)
|
63.29%
|
61.41%
|
|
Risk Grade 4
(management attention)
|
10.06%
|
10.57%
|
|
Risk Grade 5
(watch)
|
1.41%
|
1.56%
|
|
Risk Grade 6
(substandard)
|
0.83%
|
0.78%
|
|
Risk Grade 7
(doubtful)
|
0.00%
|
0.00%
|
|
Risk Grade 8
(loss)
|
0.00%
|
0.00%
|
At March 31, 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.