Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - PEOPLES BANCORP OF NORTH CAROLINA INC | pebk_8k.htm |
Exhibit 99(a)
NEWS RELEASE
October
19, 2020
Contact:
Lance
A. Sellers
President
and Chief Executive Officer
Jeffrey
N. Hooper
Executive
Vice President and Chief Financial Officer
828-464-5620,
Fax 828-465-6780
For Immediate Release
PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS
RESULTS
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
$4.5 million or $0.78 basic and diluted net earnings per share for
the three months ended September 30, 2020, as compared to $3.6
million or $0.62 basic net earnings per share and $0.61 diluted net
earnings per share for the same period one year ago.
Year to date highlights:
●
Net earnings were
$9.4 million or $1.62 basic and diluted net earnings per share for
the nine months ended September 30, 2020, as compared to $11.1
million or $1.87 basic net earnings per share and $1.86 diluted net
earnings per share for the same period one year ago.
●
Total loans
increased $128.3 million to $973.9 million at September 30, 2020,
compared to $845.6 million at September 30, 2019.
●
The Bank originated
1,127 Small Business Administration (SBA) Paycheck Protection
Program (PPP) loans, totaling $99.0 million, during the nine months
ended September 30, 2020. The Bank has received $4.0 million in
fees from the SBA for PPP loans originated as of September 30,
2020. The Bank has recognized $361,000 PPP loan fee income as of
September 30, 2020.
●
Core deposits were
$1.2 billion or 97.92% of total deposits at September 30, 2020,
compared to $928.3 million or 96.54% of total deposits at September
30, 2019.
Lance
A. Sellers, President and Chief Executive Officer, attributed the
increase in third quarter net earnings to an increase in
non-interest income, which was partially offset by a decrease in
net interest income, an increase in the provision for loan losses
and an increase in non-interest expense during the three months
ended September 30, 2020, compared to the three months ended
September 30, 2019, as discussed below.
Net
interest income was $10.9 million for the three months ended
September 30, 2020, compared to $11.4 million for the three months
ended September 30, 2019. The decrease in net interest income was
primarily due to a $562,000 decrease in interest income, which was
partially offset by a $52,000 decrease in interest expense. The
decrease in interest income was primarily due to a $497,000
decrease in interest income on loans resulting from the 1.50%
reduction in the Prime Rate in March 2020. The decrease in interest
expense was primarily due to a decrease in the average outstanding
balance of junior subordinated debentures. Net interest income
after the provision for loan losses was $10.4 million for the three
months ended September 30, 2020, compared to $11.0 million for the
three months ended September 30, 2019. The provision for loan
losses for the three months ended September 30, 2020
was $522,000, compared to
$422,000 for the three months ended September 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 $29.8 million increase in loans,
excluding $98.4 million in SBA PPP loans, from September 30, 2019
to September 30, 2020. PPP loans are excluded from ALLL as PPP
loans are 100 percent guaranteed by SBA. The ALLL model also
includes reserves on $119.7 million in loans with payment
modifications made in 2020 as a result of the COVID-19
pandemic.
Non-interest
income was $7.1 million for the three months ended September 30,
2020, compared to $4.7 million for the three months ended September
30, 2019. The increase in non-interest income is primarily
attributable to a $1.7 million increase in gains on sale of
securities, a $560,000 increase in appraisal management fee income
due to an increase in the volume of appraisals and a $374,000
increase in mortgage banking income due to increased mortgage loan
volume, which were partially offset by a $383,000 decrease in
service charges and fees primarily due to service charge and fee
concessions associated with the COVID-19 pandemic.
Non-interest
expense was $11.9 million for the three months ended September 30,
2020, compared to $11.3 million for the three months ended
September 30, 2019. The increase in non-interest expense was
primarily attributable to a $466,000 increase in appraisal
management fee expense due to an increase in the volume of
appraisals.
Year-to-date net
earnings as of September 30, 2020 were $9.4 million or $1.62 basic
and diluted net earnings per share for the nine months ended
September 30, 2020, as compared to $11.1 million or $1.87 basic net
earnings per share and $1.86 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 September 30, 2020 was $32.9 million,
compared to $34.5 million for the same period one year ago. The
decrease in net interest income was primarily due to a $1.2 million
decrease in interest income and a $363,000 increase in interest
expense. The decrease in interest income was primarily due to a
$1.2 million decrease in interest income on loans resulting from
the 1.50% reduction in the Prime Rate in March 2020. The increase
in interest expense was primarily due to an increase in average
outstanding balances of interest-bearing deposits and FHLB
borrowings. Net interest income after the provision for loan losses
was $29.4 million for the nine months ended September 30, 2020,
compared to $33.8 million for the same period one year ago. The
provision for loan losses for the nine months ended September 30,
2020 was $3.5 million, compared to $677,000 for the nine months
ended September 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 $29.8 million
increase in loans, excluding $98.4 million in SBA PPP loans, from
September 30, 2019 to September 30, 2020. PPP loans are excluded
from ALLL as PPP loans are 100 percent guaranteed by SBA. The ALLL
model also includes reserves on $119.7 million in loans with
payment modifications made in 2020 as a result of the COVID-19
pandemic.
Non-interest income
was $17.0 million for the nine months ended September 30, 2020,
compared to $13.2 million for the nine months ended September 30,
2019. The increase in non-interest income is primarily attributable
to a $1.9 million increase in gains on sale of securities, a $1.7
million increase in appraisal management fee income due to an
increase in the volume of appraisals and a $801,000 increase in
mortgage banking income due to increased mortgage loan volume,
which were partially offset by a $779,000 decrease in service
charges and fees primarily due to service charge and fee
concessions associated with the COVID-19 pandemic.
Non-interest
expense was $34.8 million for the nine months ended September 30,
2020, compared to $33.4 million for the nine months ended September
30, 2019. The increase in non-interest expense was primarily due to
an $1.3 million increase in appraisal management fee expense due to
an increase in the volume of appraisals.
Income
tax expense was $1.1 million for the three months ended September
30, 2020, compared to $834,000 for the three months ended September
30, 2019. The effective tax rate was 19.80% for the three months
ended September 30, 2020, compared to 18.72% for the three months
ended September 30, 2019. Income tax expense was $2.1 million for
the nine months ended September 30, 2020, compared to $2.5 million
for the nine months ended September 30, 2019. The effective tax
rate was 18.31% for the nine months ended September 30, 2020,
compared to 18.16% for the nine months ended September 30,
2019.
Total
assets were $1.5 billion as of September 30, 2020, compared to $1.2
billion at September 30, 2019. Available for sale securities were
$223.0 million as of September 30, 2020, compared to $186.3 million
as of September 30, 2019. Total loans were $973.9 million as of
September 30, 2020, compared to $845.6 million as of September 30,
2019.
Non-performing
assets were $3.7 million or 0.25% of total assets at September 30,
2020, compared to $3.3 million or 0.27% of total assets at
September 30, 2019. Non-performing assets include $3.3 million in
commercial and residential mortgage loans, $272,000 in other loans
and $128,000 in other real estate owned at September 30, 2020,
compared to $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.
The
allowance for loan losses at September 30, 2020 was $9.9 million or
1.02% of total loans, compared to $6.6 million or 0.78% of total
loans at September 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 September 30, 2020, compared to $961.6 million at
September 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 $1.2 billion at September 30, 2020, compared to
$928.3 million at September 30, 2019. Certificates of deposit in
amounts of $250,000 or more totaled $24.7 million at September 30,
2020, compared to $33.1 million at September 30, 2019.
Securities sold
under agreements to repurchase were $34.2 million at September 30,
2020, compared to $21.9 million at September 30, 2019.
FHLB
borrowings totaled $70.0 million at September 30, 2020 and
2019.
Junior
subordinated debentures were $15.5 million at September 30, 2020,
compared to $20.6 million at September 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 $139.5 million, or 9.54% of total assets, at September
30, 2020, compared to $132.7 million, or 10.85% of total assets, at
September 30, 2019. The Company repurchased 126,800 shares of its
common stock during the nine months ended September 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. The Bank opened a new branch office on
Westchase Boulevard in Raleigh, NC in August 2020 to relocate the
Raleigh office from its previous location, which was closed in
February 2020. The Bank closed its branch on Central Avenue in
Charlotte, NC on October 2, 2020 due to space limitations. Central
Avenue branch customers have been transferred to the Bank’s
South Boulevard, Charlotte, NC branch. The Bank also operates loan
production offices in Lincoln and Mecklenburg 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
September
30, 2020, December 31, 2019 and September 30, 2019
(Dollars
in thousands)
|
|
September
30,
2020
|
December
31,
2019
|
September
30,
2019
|
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
|
ASSETS:
|
|
|
|
|
Cash and due from
banks
|
$48,355
|
$48,337
|
$48,605
|
|
Interest-bearing
deposits
|
15,778
|
720
|
80,948
|
|
Federal funds
sold
|
140,095
|
3,330
|
-
|
|
Cash and cash
equivalents
|
204,228
|
52,387
|
129,553
|
|
|
|
|
|
|
Investment
securities available for sale
|
222,991
|
195,746
|
186,263
|
|
Other
investments
|
7,163
|
4,231
|
7,239
|
|
Total
securities
|
230,154
|
199,977
|
193,502
|
|
|
|
|
|
|
Mortgage loans held
for sale
|
8,960
|
4,417
|
4,263
|
|
|
|
|
|
|
Loans
|
973,871
|
849,874
|
845,599
|
|
Less: Allowance for
loan losses
|
(9,892)
|
(6,680)
|
(6,578)
|
|
Net
loans
|
963,979
|
843,194
|
839,021
|
|
|
|
|
|
|
Premises and
equipment, net
|
19,057
|
18,604
|
18,730
|
|
Cash surrender
value of life insurance
|
16,742
|
16,319
|
16,222
|
|
Accrued interest
receivable and other assets
|
19,128
|
19,984
|
21,908
|
|
Total
assets
|
$1,462,248
|
$1,154,882
|
$1,223,199
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY:
|
|
|
|
|
Deposits:
|
|
|
|
|
Noninterest-bearing
demand
|
$455,199
|
$338,004
|
$339,081
|
|
NOW, MMDA &
savings
|
626,674
|
516,757
|
509,611
|
|
Time, $250,000 or
more
|
24,717
|
34,269
|
33,082
|
|
Other
time
|
79,806
|
77,487
|
79,794
|
|
Total
deposits
|
1,186,396
|
966,517
|
961,568
|
|
|
|
|
|
|
Securities sold
under agreements to repurchase
|
34,151
|
24,221
|
21,927
|
|
FHLB
borrowings
|
70,000
|
-
|
70,000
|
|
Junior subordinated
debentures
|
15,464
|
15,619
|
20,619
|
|
Accrued interest
payable and other liabilities
|
16,786
|
14,405
|
16,402
|
|
Total
liabilities
|
1,322,797
|
1,020,762
|
1,090,516
|
|
|
|
|
|
|
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
9/30/20
|
|
|
|
|
5,912,300 shares
12/31/19, 5,912,300 shares 9/30/19
|
56,871
|
59,813
|
59,813
|
|
Retained
earnings
|
76,580
|
70,663
|
68,528
|
|
Accumulated other
comprehensive income
|
6,000
|
3,644
|
4,342
|
|
Total shareholders'
equity
|
139,451
|
134,120
|
132,683
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$1,462,248
|
$1,154,882
|
$1,223,199
|
CONSOLIDATED STATEMENTS OF INCOME
For the
three and nine months ended September 30, 2020 and
2019
(Dollars
in thousands, except per share amounts)
|
|
Three
months ended
|
Nine
months ended
|
||
|
|
September
30,
|
September
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
INTEREST
INCOME:
|
|
|
|
|
|
Interest and fees
on loans
|
$10,507
|
$11,004
|
$31,367
|
$32,517
|
|
Interest on due
from banks
|
19
|
87
|
103
|
136
|
|
Interest on federal
funds sold
|
33
|
-
|
178
|
-
|
|
Interest on
investment securities:
|
|
|
|
|
|
U.S. Government
sponsored enterprises
|
528
|
628
|
1,864
|
1,942
|
|
State and political
subdivisions
|
717
|
671
|
2,042
|
2,265
|
|
Other
|
64
|
40
|
202
|
128
|
|
Total interest
income
|
11,868
|
12,430
|
35,756
|
36,988
|
|
|
|
|
|
|
|
INTEREST
EXPENSE:
|
|
|
|
|
|
NOW, MMDA &
savings deposits
|
482
|
455
|
1,455
|
1,057
|
|
Time
deposits
|
224
|
259
|
725
|
581
|
|
FHLB
borrowings
|
103
|
21
|
269
|
70
|
|
Junior subordinated
debentures
|
76
|
210
|
296
|
656
|
|
Other
|
57
|
49
|
150
|
168
|
|
Total interest
expense
|
942
|
994
|
2,895
|
2,532
|
|
|
|
|
|
|
|
NET
INTEREST INCOME
|
10,926
|
11,436
|
32,861
|
34,456
|
|
PROVISION
FOR LOAN LOSSES
|
522
|
422
|
3,460
|
677
|
|
NET
INTEREST INCOME AFTER
|
|
|
|
|
|
PROVISION
FOR LOAN LOSSES
|
10,404
|
11,014
|
29,401
|
33,779
|
|
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
|
|
Service
charges
|
809
|
1,178
|
2,635
|
3,409
|
|
Other service
charges and fees
|
188
|
202
|
543
|
548
|
|
Gain/(loss) on sale
of securities
|
1,688
|
(5)
|
2,145
|
226
|
|
Mortgage banking
income
|
750
|
376
|
1,635
|
834
|
|
Insurance and
brokerage commissions
|
200
|
206
|
647
|
642
|
|
Appraisal
management fee income
|
1,871
|
1,311
|
4,955
|
3,285
|
|
Miscellaneous
|
1,626
|
1,440
|
4,406
|
4,269
|
|
Total non-interest
income
|
7,132
|
4,708
|
16,966
|
13,213
|
|
|
|
|
|
|
|
NON-INTEREST
EXPENSES:
|
|
|
|
|
|
Salaries and
employee benefits
|
5,737
|
5,695
|
16,996
|
17,060
|
|
Occupancy
|
1,943
|
1,861
|
5,725
|
5,409
|
|
Appraisal
management fee expense
|
1,478
|
1,012
|
3,845
|
2,538
|
|
Other
|
2,756
|
2,699
|
8,249
|
8,420
|
|
Total non-interest
expense
|
11,914
|
11,267
|
34,815
|
33,427
|
|
|
|
|
|
|
|
EARNINGS BEFORE
INCOME TAXES
|
5,622
|
4,455
|
11,552
|
13,565
|
|
INCOME
TAXES
|
1,113
|
834
|
2,115
|
2,464
|
|
|
|
|
|
|
|
NET
EARNINGS
|
$4,509
|
$3,621
|
$9,437
|
$11,101
|
|
|
|
|
|
|
|
PER
SHARE AMOUNTS
|
|
|
|
|
|
Basic net
earnings
|
$0.78
|
$0.62
|
$1.62
|
$1.87
|
|
Diluted net
earnings
|
$0.78
|
$0.61
|
$1.62
|
$1.86
|
|
Cash
dividends
|
$0.15
|
$0.14
|
$0.60
|
$0.52
|
|
Book
value
|
$24.10
|
$22.44
|
$24.10
|
$22.44
|
FINANCIAL HIGHLIGHTS
For the
three and nine months ended September 30, 2020 and
2019
(Dollars
in thousands)
|
|
Three
months ended
|
Nine
months ended
|
||
|
|
September
30,
|
September
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
SELECTED
AVERAGE BALANCES:
|
|
|
|
|
|
Available for sale
securities
|
$200,101
|
$180,439
|
$194,710
|
$185,107
|
|
Loans
|
970,529
|
840,523
|
926,663
|
829,385
|
|
Earning
assets
|
1,343,323
|
1,044,159
|
1,235,660
|
1,028,573
|
|
Assets
|
1,438,238
|
1,139,256
|
1,332,249
|
1,122,226
|
|
Deposits
|
1,170,627
|
939,254
|
1,083,089
|
916,420
|
|
Shareholders'
equity
|
140,007
|
131,890
|
140,191
|
132,053
|
|
|
|
|
|
|
|
SELECTED
KEY DATA:
|
|
|
|
|
|
Net interest margin
(tax equivalent)
|
3.28%
|
4.41%
|
3.60%
|
4.56%
|
|
Return on average
assets
|
1.25%
|
1.26%
|
0.95%
|
1.32%
|
|
Return on average
shareholders' equity
|
12.81%
|
10.89%
|
8.99%
|
11.24%
|
|
Shareholders'
equity to total assets (period end)
|
9.54%
|
10.85%
|
9.54%
|
10.85%
|
|
|
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES:
|
|
|
|
|
|
Balance, beginning
of period
|
$9,433
|
$6,541
|
$6,680
|
$6,445
|
|
Provision for loan
losses
|
522
|
422
|
3,460
|
677
|
|
Charge-offs
|
(152)
|
(551)
|
(529)
|
(911)
|
|
Recoveries
|
89
|
166
|
281
|
367
|
|
Balance, end of
period
|
$9,892
|
$6,578
|
$9,892
|
$6,578
|
|
|
|
|
|
|
|
ASSET
QUALITY:
|
|
|
|
|
|
Non-accrual
loans
|
|
|
$3,475
|
$3,258
|
|
90 days past due
and still accruing
|
|
|
84
|
-
|
|
Other real estate
owned
|
|
|
128
|
26
|
|
Total
non-performing assets
|
|
|
$3,687
|
$3,284
|
|
Non-performing
assets to total assets
|
|
|
0.25%
|
0.27%
|
|
Loans modifications
related to COVID-19
|
|
|
$119,706
|
$-
|
|
Allowance for loan
losses to non-performing assets
|
|
|
268.29%
|
200.30%
|
|
Allowance for loan
losses to total loans
|
|
|
1.02%
|
0.78%
|
|
LOAN
RISK GRADE ANALYSIS:
|
|
|
|
|
Percentage
of Loans
|
|
|
|
By
Risk Grade
|
|
|
|
9/30/20
|
9/30/19
|
|
Risk Grade 1
(excellent quality)
|
0.68%
|
0.60%
|
|
Risk Grade 2 (high
quality)
|
20.89%
|
25.00%
|
|
Risk Grade 3 (good
quality)
|
65.93%
|
61.91%
|
|
Risk Grade 4
(management attention)
|
9.89%
|
10.32%
|
|
Risk Grade 5
(watch)
|
1.90%
|
1.43%
|
|
Risk Grade 6
(substandard)
|
0.71%
|
0.74%
|
|
Risk Grade 7
(doubtful)
|
0.00%
|
0.00%
|
|
Risk Grade 8
(loss)
|
0.00%
|
0.00%
|
At September 30, 2020, including non-accrual loans, there were
three relationships exceeding $1.0 million in the Watch risk grade
(which totaled $8.0 million). There were no relationships exceeding
$1.0 million in the Substandard risk grade.
(END)