NEWTON, N.C., Jan. 26, 2015 (GLOBE NEWSWIRE) -- Peoples Bancorp of North Carolina, Inc. (Nasdaq:PEBK), the parent company of Peoples Bank, reported fourth quarter and annual earnings results with highlights as follows:
Fourth quarter highlights:
- Net earnings were $1.8 million or $0.32 basic and diluted net earnings per share for the three months ended December 31, 2014, as compared to $1.4 million or $0.25 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, for the same period one year ago.
- Net earnings available to common shareholders were $1.8 million or $0.32 basic and diluted net earnings per common share for the three months ended December 31, 2014, as compared to $1.2 million or $0.21 basic and diluted net earnings per common share, for the same period one year ago.
- Core earnings*, as calculated in the Core Earnings Analysis table below, were $2.7 million for the three months ended December 31, 2014, compared to $2.0 million for the three months ended December 31, 2013.
- Average outstanding principal balance of loans increased $31.5 million to $648.4 million for the three months ended December 31, 2014 compared to $616.9 million for the three months ended December 31, 2013.
Year to date highlights:
- Net earnings were $9.4 million or $1.67 basic net earnings per share and $1.66 diluted net earnings per share for the year ended December 31, 2014, as compared to $6.7 million or $1.19 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, for the year ended December 31, 2013.
- Net earnings available to common shareholders were $9.4 million or $1.67 basic net earnings per common share and $1.66 diluted net earnings per common share for the year ended December 31, 2014, as compared to $6.0 million or $1.08 basic net earnings per common share and $1.07 diluted net earnings per common share, for the year ended December 31, 2013.
- Core earnings*, as calculated in the Core Earnings Analysis table below, were $10.2 million for the year ended December 31, 2014, compared to $7.2 million for the year ended December 31, 2013.
- Non-performing assets declined to $12.7 million or 1.2% of total assets at December 31, 2014, compared to $16.4 million or 1.6% of total assets at December 31, 2013.
- Total loans increased $30.9 million to $651.9 million at December 31, 2014, compared to $621.0 million at December 31, 2013.
- Core deposits were $708.1 million, or 86.9% of total deposits at December 31, 2014, compared to $683.9 million, or 85.6% of total deposits at December 31, 2013.
Lance A. Sellers, President and Chief Executive Officer, attributed the increase in fourth quarter earnings to an increase in net interest income, a decrease in the provision for loan losses and an increase in non-interest income, which were partially offset by an increase in non-interest expense.
Net interest income was $8.7 million for the three months ended December 31, 2014, compared to $8.3 million for the three months ended December 31, 2013. This increase was primarily due to an increase in interest income resulting from an increase in the yield on investment securities and an increase in the average outstanding principal balance of loans combined with a decrease in interest expense resulting primarily from a reduction in the cost of funds. Net interest income after the provision for loan losses increased to $9.4 million during the fourth quarter of 2014, compared to $7.8 million for the three months ended December 31, 2013. The provision for loan losses for the three months ended December 31, 2014 was a credit of $672,000, as compared to an expense of $419,000 for the three months ended December 31, 2013. The decrease in the provision for loan losses is primarily attributable to a $3.1 million reduction in non-accrual loans from December 31, 2013 to December 31, 2014.
Non-interest income was $3.0 million for the three months ended December 31, 2014, compared to $2.8 million for the year ended December 31, 2013. This increase is primarily attributable to a $187,000 increase in miscellaneous non-interest income resulting primarily from a $76,000 increase in SBIC income, a $60,000 reduction in losses and write-downs on other real estate owned properties and a $54,000 increase in debit card income for the three months ended December 31, 2014, as compared to the year ended December 31, 2013.
Non-interest expense was $10.9 million for the three months ended December 31, 2014, compared to $9.2 million for the year ended December 31, 2013. This increase in non-interest expense included: (1) a $510,000 increase in salaries and benefits expense resulting primarily from an increase in the number of full-time equivalent employees, salary increases and separation expense for selected employees taking early retirement, (2) a $224,000 increase in occupancy expense primarily due to a $106,000 increase in building maintenance expense and a $149,000 increase in depreciation expense and (3) a $973,000 increase in non-interest expenses other than salary, employee benefits and occupancy expenses primarily due to a $493,000 increase in amortization expense associated with North Carolina income tax credits and a $339,000 increase in prepayment penalties on FHLB borrowings during the three months ended December 31, 2014, as compared to the three months ended December 31, 2013.
Year-to-date net earnings as of December 31, 2014 were $9.4 million, or $1.67 basic net earnings per share and $1.66 diluted net earnings per share, as compared to $6.7 million, or $1.19 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, for the year ended December 31, 2013. After adjusting for dividends and accretion on preferred stock, net earnings available to common shareholders for the year ended December 31, 2014 were $9.4 million, or $1.67 basic net earnings per common share and $1.66 diluted net earnings per common share, as compared to $6.0 million, or $1.08 basic net earnings per common share and $1.07 diluted net earnings per common share, for the year ended December 31, 2013. The increase in year-to-date earnings is primarily attributable to an increase in net interest income and a decrease in the provision for loan losses, which were partially offset by an increase in non-interest expense and a decrease in non-interest income, as discussed below.
Year-to-date net interest income as of December 31, 2014 increased 8.9% to $34.1 million compared to $31.3 million for the year ended December 31, 2013. This increase was primarily due to an increase in interest income resulting from an increase in the yield on investment securities and an increase in the average outstanding principal balance of loans combined with a decrease in interest expense resulting primarily from a reduction in the cost of funds. Net interest income after the provision for loan losses increased 21.2% to $34.8 million for the year ended December 31, 2014, compared to $28.8 million for the year ended December 31, 2013. The provision for loan losses for the year ended December 31, 2014 was a credit of $699,000, as compared to an expense of $2.6 million for the year ended December 31, 2013. The decrease in the provision for loan losses is primarily attributable to a $1.8 million decrease in net charge-offs during the year ended December 31, 2014 compared to the year ended December 31, 2013 and a $3.1 million reduction in non-accrual loans from December 31, 2013 to December 31, 2014.
Non-interest income was $12.2 million for the year ended December 31, 2014, compared to $12.7 million for the year ended December 31, 2013. This decrease is primarily attributable to a $348,000 decrease in gains on the sale of securities, a $424,000 decrease in mortgage banking income and a $59,000 decrease in miscellaneous non-interest income, which were partially offset by a $303,000 increase in service charges and fees for the year ended December 31, 2014, as compared to the year ended December 31, 2013.
Non-interest expense was $35.7 million for the year ended December 31, 2014, as compared to $32.8 million for the year ended December 31, 2013. This increase in non-interest expense included: (1) a $395,000 increase in salaries and benefits expense resulting primarily from an increase in the number of full-time equivalent employees, salary increases and an increase in incentive expense, (2) a $712,000 increase in occupancy expense primarily due to a $205,000 increase in building maintenance expense and a $529,000 increase in depreciation expense and (3) a $1.4 million increase in non-interest expenses other than salary, employee benefits and occupancy expenses primarily due to a $710,000 increase in amortization expense associated with North Carolina income tax credits and a $339,000 increase in prepayment penalties on FHLB borrowings during the year ended December 31, 2014, as compared to the year ended December 31, 2013.
Total assets were $1.0 billion as of December 31, 2014 and 2013. Available for sale securities were $281.1 million as of December 31, 2014, compared to $297.9 million as of December 31, 2013. Total loans were $651.9 million as of December 31, 2014, compared to $621.0 million as of December 31, 2013.
Non-performing assets declined to $12.7 million or 1.2% of total assets at December 31, 2014, compared to $16.4 million or 1.6% of total assets at December 31, 2013. The decline in non-performing assets is due to a $3.1 million decrease in non-accrual loans and a $882,000 decrease in loans 90 days past due and still accruing, which were partially offset by a $337,000 increase in other real estate owned. Non-performing loans include $3.9 million in acquisition, development and construction ("AD&C") loans, $6.6 million in commercial and residential mortgage loans and $251,000 in other loans at December 31, 2014, as compared to $6.5 million in AD&C loans, $7.9 million in commercial and residential mortgage loans and $277,000 in other loans at December 31, 2013. The allowance for loan losses at December 31, 2014 was $11.1 million or 1.7% of total loans, compared to $13.5 million or 2.2% of total loans at December 31, 2013. 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 amounted to $814.7 million as of December 31, 2014, compared to $799.4 million at December 31, 2013. Core deposits, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $100,000, increased $24.2 million to $708.1 million at December 31, 2014, as compared to $683.9 million at December 31, 2013. Certificates of deposit in amounts of $100,000 or more totaled $106.5 million at December 31, 2014, as compared to $115.3 million at December 31, 2013. This decrease is attributable to a $4.5 million decrease in wholesale certificates of deposit combined with a decrease in retail certificates of deposit as intended as part of the Bank's pricing strategy to allow maturing high cost certificates of deposit to roll-off.
Securities sold under agreements to repurchase were $48.4 million at December 31, 2014, as compared to $45.4 million at December 31, 2013.
Shareholders' equity was $98.7 million, or 9.5% of total assets, as of December 31, 2014, compared to $83.7 million, or 8.1% of total assets, as of December 31, 2013. This increase is primarily due to an increase in retained earnings and an increase in accumulated other comprehensive income resulting from an increase in the unrealized gain on investment securities. In September 2014, the Company's Board of Directors authorized a stock repurchase program, whereby up to $2 million was allocated to repurchase the Company's common stock. The Company has repurchased $82,000, or 4,537 shares, of its common stock under this program as of December 31, 2014.
Peoples Bank operates 21 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Union, Iredell and Wake Counties. The 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."
* See reconciliation of non-GAAP financial measures in the Core Earnings Analysis table below.
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, 2013.
| CONSOLIDATED BALANCE SHEETS | ||
| December 31, 2014 and December 31, 2013 | ||
| (Dollars in thousands) | ||
| December 31, 2014 | December 31, 2013 | |
| (Unaudited) | (Audited) | |
| ASSETS: | ||
| Cash and due from banks | $ 51,213 | $ 49,902 |
| Interest-bearing deposits | 17,885 | 26,871 |
| Cash and cash equivalents | 69,098 | 76,773 |
| Investment securities available for sale | 281,099 | 297,890 |
| Other investments | 4,031 | 4,990 |
| Total securities | 285,130 | 302,880 |
| Mortgage loans held for sale | 1,375 | 497 |
| Loans | 651,891 | 620,960 |
| Less: Allowance for loan losses | (11,082) | (13,501) |
| Net loans | 640,809 | 607,459 |
| Premises and equipment, net | 17,000 | 16,358 |
| Cash surrender value of life insurance | 14,125 | 13,706 |
| Accrued interest receivable and other assets | 12,957 | 17,011 |
| Total assets | $ 1,040,494 | $ 1,034,684 |
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||
| Deposits: | ||
| Noninterest-bearing demand | $ 210,758 | $ 195,265 |
| NOW, MMDA & savings | 407,504 | 386,893 |
| Time, $100,000 or more | 106,453 | 115,268 |
| Other time | 89,985 | 101,935 |
| Total deposits | 814,700 | 799,361 |
| Securities sold under agreements to repurchase | 48,430 | 45,396 |
| FHLB borrowings | 50,000 | 65,000 |
| Junior subordinated debentures | 20,619 | 20,619 |
| Accrued interest payable and other liabilities | 8,080 | 20,589 |
| Total liabilities | 941,829 | 950,965 |
| Shareholders' equity: | ||
| Series A preferred stock, $1,000 stated value; authorized | ||
| 5,000,000 shares; issued and outstanding | ||
| 12,524 shares at 9/30/13 | -- | -- |
| Common stock, no par value; authorized | ||
| 20,000,000 shares; issued and outstanding | ||
| 5,612,588 shares at 12/31/14 and | ||
| 5,613,495 shares at 12/31/13 | 48,088 | 48,133 |
| Retained earnings | 45,124 | 36,758 |
| Accumulated other comprehensive income (loss) | 5,453 | (1,172) |
| Total shareholders' equity | 98,665 | 83,719 |
| Total liabilities and shareholders' equity | $ 1,040,494 | $ 1,034,684 |
| CONSOLIDATED STATEMENTS OF INCOME | ||||
| For the three months and years ended December 31, 2014 and 2013 | ||||
| (Dollars in thousands, except per share amounts) | ||||
| Three months ended | Years ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| INTEREST INCOME: | ||||
| Interest and fees on loans | $ 7,749 | $ 7,523 | $ 30,305 | $ 30,194 |
| Interest on due from banks | 23 | 23 | 65 | 85 |
| Interest on investment securities: | -- | |||
| U.S. Government sponsored enterprises | 697 | 669 | 2,995 | 1,639 |
| State and political subdivisions | 1,163 | 1,194 | 4,677 | 4,427 |
| Other | 85 | 86 | 378 | 351 |
| Total interest income | 9,717 | 9,495 | 38,420 | 36,696 |
| INTEREST EXPENSE: | ||||
| NOW, MMDA & savings deposits | 124 | 154 | 499 | 732 |
| Time deposits | 264 | 365 | 1,188 | 1,650 |
| FHLB borrowings | 516 | 604 | 2,166 | 2,518 |
| Junior subordinated debentures | 98 | 99 | 389 | 398 |
| Other | 12 | 12 | 45 | 55 |
| Total interest expense | 1,014 | 1,234 | 4,287 | 5,353 |
| NET INTEREST INCOME | 8,703 | 8,261 | 34,133 | 31,343 |
| PROVISION FOR LOAN LOSSES | (672) | 419 | (699) | 2,584 |
| NET INTEREST INCOME AFTER | ||||
| PROVISION FOR LOAN LOSSES | 9,375 | 7,842 | 34,832 | 28,759 |
| NON-INTEREST INCOME: | ||||
| Service charges | 1,307 | 1,233 | 4,961 | 4,566 |
| Other service charges and fees | 188 | 272 | 1,080 | 1,172 |
| Gain on sale of securities | -- | -- | 266 | 614 |
| Mortgage banking income | 256 | 228 | 804 | 1,228 |
| Insurance and brokerage commissions | 180 | 183 | 701 | 661 |
| Miscellaneous | 1,075 | 888 | 4,352 | 4,411 |
| Total non-interest income | 3,006 | 2,804 | 12,164 | 12,652 |
| NON-INTEREST EXPENSES: | ||||
| Salaries and employee benefits | 4,747 | 4,237 | 17,530 | 16,851 |
| Occupancy | 1,775 | 1,551 | 6,251 | 5,539 |
| Other | 4,419 | 3,446 | 11,890 | 10,451 |
| Total non-interest expense | 10,941 | 9,234 | 35,671 | 32,841 |
| EARNINGS BEFORE INCOME TAXES | 1,440 | 1,412 | 11,325 | 8,570 |
| INCOME TAXES | (376) | 31 | 1,937 | 1,879 |
| NET EARNINGS | 1,816 | 1,381 | 9,388 | 6,691 |
| Dividends and accretion on preferred stock | -- | 186 | -- | 656 |
| NET EARNINGS AVAILABLE TO | ||||
| COMMON SHAREHOLDERS | $ 1,816 | $ 1,195 | $ 9,388 | $ 6,035 |
| PER COMMON SHARE AMOUNTS | ||||
| Basic net earnings | $ 0.32 | $ 0.21 | $ 1.67 | $ 1.08 |
| Diluted net earnings | $ 0.32 | $ 0.21 | $ 1.66 | $ 1.07 |
| Cash dividends | $ 0.06 | $ 0.03 | $ 0.18 | $ 0.12 |
| Book value | $ 17.58 | $ 14.91 | $ 17.58 | $ 14.91 |
| FINANCIAL HIGHLIGHTS | ||||||||
| For the three months and years ended December 31, 2014 and 2013 | ||||||||
| (Dollars in thousands) | ||||||||
| Three months ended | Years ended | |||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | 2014 | 2013 | |||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
| SELECTED AVERAGE BALANCES: | ||||||||
| Available for sale securities | $ 272,768 | $ 300,433 | $ 287,371 | $ 293,770 | ||||
| Loans | 648,355 | 616,920 | 631,025 | 614,532 | ||||
| Earning assets | 962,515 | 960,687 | 949,537 | 950,451 | ||||
| Assets | 1,054,504 | 1,040,563 | 1,036,486 | 1,023,609 | ||||
| Deposits | 824,706 | 800,212 | 808,399 | 787,640 | ||||
| Shareholders' equity | 97,334 | 97,271 | 95,759 | 100,275 | ||||
| SELECTED KEY DATA: | ||||||||
| Net interest margin (tax equivalent) | 3.83% | 3.66% | 3.84% | 3.53% | ||||
| Return on average assets | 0.68% | 0.53% | 0.91% | 0.65% | ||||
| Return on average shareholders' equity | 7.40% | 5.63% | 9.80% | 6.67% | ||||
| Shareholders' equity to total assets (period end) | 9.48% | 8.09% | 9.48% | 8.09% | ||||
| CORE EARNINGS ANALYSIS: | ||||||||
| Income Before Taxes (GAAP) | 1,440 | 1,412 | 11,325 | 8,570 | ||||
| Adjustments: | ||||||||
| Loss on sale and write-down of other real estate | 238 | 298 | 622 | 581 | ||||
| Gain on sale of securities | -- | -- | (266) | (614) | ||||
| NC tax credit amortization expense | 653 | 160 | 870 | 160 | ||||
| Prepayment penalties on FHLB borrowings | 869 | 530 | 869 | 530 | ||||
| Provision for loan losses | (672) | 419 | (699) | 2,584 | ||||
| Core earnings before provision for loan losses and income taxes | 2,528 | 2,819 | 12,721 | 11,811 | ||||
| Provision for loan losses | (672) | 419 | (699) | 2,584 | ||||
| Core earnings before taxes | 3,200 | 2,400 | 13,420 | 9,227 | ||||
| Income tax calculation (1) | 496 | 392 | 3,193 | 2,025 | ||||
| Core earnings | 2,704 | 2,008 | 10,227 | 7,202 | ||||
| (1) Income tax calculation reflects the following estimated effective tax rates excluding NC tax credits: | ||||||||
| Effective tax rates | 15.51% | 16.35% | 23.79% | 21.95% | ||||
| * This table includes non-GAAP financial measures that management believes are useful for evaluating our financial condition and performance over periods of time, as well as in managing and evaluating our business and in discussions about our performance. We also believe these non-GAAP financial measures provide users of our financial information with a meaningful measure for assessing our financial condition as well as comparison to financial results for prior periods. These results should not be viewed as a substitute for results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that other companies may use. | ||||||||
| ALLOWANCE FOR LOAN LOSSES: | ||||||||
| Balance, beginning of period | $ 12,344 | $ 13,854 | $ 13,501 | $ 14,423 | ||||
| Provision for loan losses | (672) | 419 | (699) | 2,584 | ||||
| Charge-offs | (718) | (888) | (2,637) | (4,372) | ||||
| Recoveries | 128 | 116 | 917 | 866 | ||||
| Balance, end of period | $ 11,082 | $ 13,501 | $ 11,082 | $ 13,501 | ||||
| ASSET QUALITY: | ||||||||
| Non-accrual loans | $ 10,729 | $ 13,836 | ||||||
| 90 days past due and still accruing | -- | 882 | ||||||
| Other real estate owned | 2,016 | 1,679 | ||||||
| Total non-performing assets | $ 12,745 | $ 16,397 | ||||||
| Non-performing assets to total assets | 1.22% | 1.58% | ||||||
| Allowance for loan losses to non-performing assets | 86.95% | 82.34% | ||||||
| Allowance for loan losses to total loans | 1.70% | 2.17% | ||||||
| LOAN RISK GRADE ANALYSIS: | Percentage of Loans | |||||||
| By Risk Grade | ||||||||
| 12/31/2014 | 12/31/2013 | |||||||
| Risk Grade 1 (excellent quality) | 2.18% | 2.40% | ||||||
| Risk Grade 2 (high quality) | 22.30% | 18.82% | ||||||
| Risk Grade 3 (good quality) | 50.76% | 49.49% | ||||||
| Risk Grade 4 (management attention) | 16.54% | 18.69% | ||||||
| Risk Grade 5 (watch) | 4.62% | 5.05% | ||||||
| Risk Grade 6 (substandard) | 3.30% | 5.25% | ||||||
| Risk Grade 7 (doubtful) | 0.00% | 0.00% | ||||||
| Risk Grade 8 (loss) | 0.00% | 0.00% | ||||||
| At December 31, 2014, including non-accrual loans, there were six relationships exceeding $1.0 million in the Watch risk grade (which totaled $14.2 million) and two relationships exceeding $1.0 million in the Substandard risk grade (which totaled $4.7 million). There was one relationship with loans in both the Watch and Substandard risk grades, which totaled $1.3 million for loans in both risk grades combined. | ||||||||