Peoples Bancorp Announces Fourth Quarter Earnings Results

Jan 27, 2010, 11:03 ET from Peoples Bancorp of North Carolina, Inc.

NEWTON, N.C., Jan. 27 /PRNewswire-FirstCall/ -- Peoples Bancorp of North Carolina, Inc. (Nasdaq: PEBK), the parent company of Peoples Bank, reported net earnings of $631,000 or $0.11 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, for the three months ended December 31, 2009 as compared to $397,000, or $0.07 basic and diluted net earnings per share, for the same period one year ago.  After adjusting for $348,000 in dividends and accretion on preferred stock, net earnings available to common shareholders for the three months ended December 31, 2009 was $283,000, or $0.05 basic and diluted net earnings per common share.  Net earnings from recurring operations for the three months ended December 31, 2009 were $613,000, or $0.11 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, as compared to fourth quarter 2008 net earnings from recurring operations of $588,000 or $0.11 basic and diluted net earnings per share.  Tony W. Wolfe, President and Chief Executive Officer, stated that he was pleased to report that Peoples Bancorp was profitable for the quarter and the year ended December 31, 2009.  Mr. Wolfe also pointed out that this was the first time since the third quarter 2007 that the Company has reported higher earnings than the same quarter in the prior year.  He attributed the increase in fourth quarter earnings to increases in net interest income and non-interest income combined with a decrease in non-interest expense, which were partially offset by an increase in provision for loan losses.

Year-to-date net earnings as of December 31, 2009 was $2.9 million, or $0.53 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, as compared to $6.4 million, or $1.14 basic net earnings per share and $1.13 diluted net earnings per share, for the same period one year ago.  After adjusting for $1.2 million in dividends and accretion on preferred stock, net earnings available to common shareholders for the year ended December 31, 2009 were $1.7 million, or $0.30 basic and diluted net earnings per common share.  Net earnings from recurring operations for the year ended December 31, 2009 was $2.5 million, or $0.46 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, as compared to net earnings from recurring operations of $6.7 million, or $1.20 basic net earnings per share and $1.19 diluted net earnings per share, for the same period one year ago.  The decrease in year-to-date earnings is primarily attributable to an increase in 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.  

Shareholders' equity was $99.2 million, or 9.48% of total assets, at December 31, 2009 as compared to $101.1 million, or 10.44% of total assets, at December 31, 2008, a decrease of $1.9 million.  This decrease is primarily due to a reduction in accumulated other comprehensive income resulting from maturities of interest rate derivative contracts in 2009.

Net interest income was $8.5 million for the three-month period ended December 31, 2009 compared to $8.1 million for the same period one year ago.  This increase in net interest income is primarily due to a reduction in interest expense due to a decrease in the cost of funds for time deposits.  Net interest income after the provision for loan losses decreased 5% to $5.1 million during the fourth quarter of 2009, compared to $5.4 million for the same period one year ago.  The provision for loan losses for the three months ended December 31, 2009 was $3.4 million as compared to $2.7 million for the same period one year ago, primarily attributable to a $2.0 million increase in net charge-offs during fourth quarter 2009 compared to fourth quarter 2008.

Recurring non-interest income amounted to $2.8 million for the three months ended December 31, 2009 and December 31, 2008.  Non-recurring gains of $22,000 for the three months ended December 31, 2009 were due to gains on the disposition of assets.  Non-recurring losses of $180,000 for the three months ended December 31, 2008 were due to a $153,000 loss on the disposition of assets and a $27,000 loss on the sale of securities.

Non-interest expense decreased 4% to $7.2 million for the three months ended December 30, 2009, as compared to $7.6 million for the same period last year.  The decrease in non-interest expense included a decrease of $232,000 or 6% in salaries and benefits expense primarily due to a $108,000 decrease in incentive expense and a decrease of $142,000 or 6% in non-interest expenses other than salary, employee benefits and occupancy expenses.  The decrease in non-interest expenses other than salary, benefits and occupancy expenses is primarily attributable to a decrease of $112,000 in consulting expense, a decrease of $85,000 in office supplies expense and a decrease of $72,000 in debit card expense.

Year-to-date net interest income as of December 31, 2009 increased to $32.9 million compared to $32.8 million for the same period one year ago.   This increase is primarily attributable to a reduction in interest expense due to a decrease in the cost of funds for time deposits.  Net interest income after the provision for loan losses decreased 20% to $22.3 million for the year ended December 31, 2009, compared to $28.0 million for the same period one year ago.  The provision for loan losses for the year ended December 31, 2009 was $10.5 million as compared to $4.8 million for the same period one year ago, primarily attributable to an increase in non-performing assets and a $3.3 million increase in net charge-offs during the year ended December 31, 2009 compared to the same period last year.  Net charge-offs during the year ended December 31, 2009 included $1.7 on construction and acquisition and development loans, $3.2 million on mortgage loans and $1.2 million on non-real estate loans, which included $587,000 on commercial loans.

Recurring non-interest income increased 2% to $11.2 million for the year ended December 31, 2009, as compared to $11.0 million for the same period one year ago.  The increase in recurring non-interest income is primarily due to a $167,000 increase in mortgage banking income resulting from increased mortgage loan demand.  Net non-recurring gains of $574,000 for the year ended December 31, 2009 included a $1.8 million gain on sale of securities, which was partially offset by write-downs of three securities totaling $723,000.  This $1.1 million net gain on the sale and write-down of securities for the year ended December 31, 2009 was partially offset by a $498,000 net loss on the disposition of assets.  Net non-recurring losses of $456,000 for the year ended December 31, 2008 were due to a $167,000 loss on the sale of securities and a $289,000 net loss on the disposition of assets.

Non-interest expense increased 3% to $29.9 million for the year ended December 31, 2009, as compared to $28.9 million for the same period last year. The increase in non-interest expense included an increase of $380,000 or 8% in occupancy expense due to an increase in furniture and equipment expense and a net increase of $1.0 million or 12% in non-interest expenses other than salary, employee benefits and occupancy expenses due to a $1.2 million increase in FDIC insurance expense due to an increase in 2009 FDIC insurance assessment rates combined with a $453,000 FDIC insurance special assessment paid in September 2009.

Total assets as of December 31, 2009 amounted to $1.0 billion, an increase of 8% compared to total assets of $968.8 million at December 31, 2008.  This increase is primarily attributable to an increase in investment securities available for sale.  Available for sale securities increased 56% to $195.1 million as of December 31, 2009 compared to $124.9 million as of December 31, 2008 primarily due to $87.9 million in securities purchased in a leverage transaction used to offset the cost of the Company's CPP dividend.  Total loans amounted to $778.1 million as of December 31, 2009 compared to $781.2 million as of December 31, 2008.  

Non-performing assets decreased 1% to $28.8 million or 2.74% of total assets at December 31, 2009, compared to $29.1 million or 2.79% of total assets at September 30, 2009 primarily due to a $1.2 million decrease in non-accrual loans.  Non-performing assets amounted to $14.2 million or 1.47% of total assets at December 31, 2008.  Non-performing loans include $4.8 million in construction and acquisition and development loans, $18.3 million in commercial and residential mortgage loans and $1.7 million in other loans at December 31, 2009 as compared to $5.7 million in construction and acquisition and development loans, $18.6 million in commercial and residential mortgage loans and $1.1 million in other loans as of September 30, 2009.  The allowance for loan losses at December 31, 2009 amounted to $15.4 million or 1.98% of total loans compared to $11.0 million or 1.41% of total loans at December 31, 2008.

Deposits amounted to $809.3 million as of December 31, 2009, representing an increase of 12% over deposits of $721.1 million at December 31, 2008.  Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposits of denominations less than $100,000, increased $71.8 million or 14% to $569.0 million at December 31, 2009 as compared to $497.2 million at December 31, 2008.  Certificates of deposit in amounts greater than $100,000 or more totaled $233.1 million at December 31, 2009 as compared to $220.4 million at December 31, 2008.  This increase is primarily due to a $10.8 million increase in certificates of deposit issued through the Certificate of Deposit Account Registry Service (CDARS) as of December 31, 2009 compared to December 31, 2008.

Securities sold under agreement to repurchase amounted to $36.9 million at December 31, 2009 as compared to $37.5 million at December 31, 2008.  

Peoples Bank operates 22 offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Union, Iredell and Wake 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 materially 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 Peoples Bancorp of North Carolina, Inc.'s annual report on Form 10-K for the year ended December 31, 2008.

CONSOLIDATED BALANCE SHEETS

December 31, 2009 and December 31, 2008

(Dollars in thousands)

December 31, 2009

December 31, 2008

(Unaudited)

ASSETS:

Cash and due from banks

$                          29,633 

$                  19,743 

Interest bearing deposits

5,052 

1,453 

Federal funds sold

6,733 

Cash and cash equivalents

34,685 

27,929 

Investment securities available for sale

195,115 

124,916 

Other investments

6,346 

6,303 

Total securities

201,461 

131,219 

Mortgage loans held for sale

2,840 

Loans

778,056 

781,188 

Less:  Allowance for loan losses

(15,413)

(11,025)

Net loans

762,643 

770,163 

Premises and equipment, net

17,947 

18,297 

Cash surrender value of life insurance

7,282 

7,019 

Accrued interest receivable and other assets

21,636 

14,135 

Total assets

$                     1,048,494 

$                968,762 

LIABILITIES AND SHAREHOLDERS' EQUITY:

Deposits:

Non-interest bearing demand

$                        117,636 

$                104,448 

NOW, MMDA & Savings

290,273 

210,058 

Time, $100,000 or more

233,142 

220,374 

Other time

168,292 

186,182 

Total deposits

809,343 

721,062 

Demand notes payable to U.S. Treasury

636 

1,600 

Securities sold under agreement to repurchase

36,876 

37,501 

Short-term Federal Reserve Bank borrowings

5,000 

FHLB borrowings

77,000 

77,000 

Junior subordinated debentures

20,619 

20,619 

Accrued interest payable and other liabilities

4,797 

4,852 

Total liabilities

949,271 

867,634 

Shareholders' equity:

Series A preferred stock, $1,000 stated value; authorized

5,000,000 shares; issued and outstanding

25,054 shares in 2009 and 2008

24,476 

24,350 

Common stock, no par value; authorized

20,000,000 shares; issued and outstanding

5,539,056 shares in 2009 and 2008

48,269 

48,269 

Retained earnings

23,573 

22,985 

Accumulated other comprehensive income

2,905 

5,524 

Total shareholders' equity

99,223 

101,128 

Total liabilities and shareholders' equity

$                     1,048,494 

$                968,762 

CONSOLIDATED STATEMENTS OF INCOME  

For the three months and years ended December 31, 2009 and 2008

(Dollars in thousands, except per share amounts)

Three months ended

Years ended

December 31,

December 31,

2009

2008

2009

2008

(Unaudited)

(Unaudited)

(Unaudited)

INTEREST INCOME:

Interest and fees on loans

$                          10,608 

$           12,197 

$                  43,211 

$     50,604 

Interest on federal funds sold

55 

Interest on investment securities:

U.S. Government sponsored enterprises

1,514 

1,087 

5,461 

4,392 

States and political subdivisions

376 

237 

1,242 

904 

Other

32 

52 

122 

367 

Total interest income

12,530 

13,576 

50,037 

56,322 

INTEREST EXPENSE:

NOW, MMDA & savings deposits

899 

734 

2,965 

3,249 

Time deposits

2,018 

3,541 

9,687 

15,008 

FHLB borrowings

911 

894 

3,577 

3,616 

Junior subordinated debentures

101 

227 

546 

1,016 

Other

100 

124 

412 

637 

Total interest expense

4,029 

5,520 

17,187 

23,526 

NET INTEREST INCOME

8,501 

8,056 

32,850 

32,796 

PROVISION FOR LOAN LOSSES

3,379 

2,687 

10,535 

4,794 

NET INTEREST INCOME AFTER

PROVISION FOR LOAN LOSSES

5,122 

5,369 

22,315 

28,002 

NON-INTEREST INCOME:

Service charges

1,479 

1,389 

5,573 

5,203 

Other service charges and fees

490 

557 

2,058 

2,399 

Gain (loss) on sale and write-down of securities

(27)

1,072 

(167)

Mortgage banking income

194 

134 

827 

660 

Insurance and brokerage commission

128 

96 

414 

426 

Miscellaneous

592 

431 

1,879 

1,974 

Total non-interest income

2,883 

2,580 

11,823 

10,495 

NON-INTEREST EXPENSES:

Salaries and employee benefits

3,527 

3,760 

14,758 

15,194 

Occupancy

1,419 

1,377 

5,409 

5,029 

Other

2,295 

2,435 

9,716 

8,670 

Total non-interest expense

7,241 

7,572 

29,883 

28,893 

EARNINGS BEFORE INCOME TAXES

764 

377 

4,255 

9,604 

INCOME TAXES

133 

(20)

1,339 

3,213 

NET EARNINGS

631 

397 

2,916 

6,391 

Dividends and accretion on preferred stock

348 

1,246 

NET EARNINGS (LOSS) AVAILABLE TO

COMMON SHAREHOLDERS

$                               283 

$                397 

$                    1,670 

$       6,391 

PER COMMON SHARE AMOUNTS

Basic net earnings (loss)

$                              0.05 

$               0.07 

$                      0.30 

$         1.14 

Diluted net earnings (loss)

$                              0.05 

$               0.07 

$                      0.30 

$         1.13 

Cash dividends

$                              0.02 

$               0.12 

$                      0.26 

$         0.48 

Book value

$                            13.37 

$             13.73 

$                    13.37 

$       13.73 

FINANCIAL HIGHLIGHTS

For the three months and years ended December 31, 2009 and 2008

(Dollars in thousands)

Three months ended

Years ended

December 31,

December 31,

2009

2008

2009

2008

(Unaudited)

(Unaudited)

(Unaudited)

SELECTED AVERAGE BALANCES:

     Available for sale securities

$                        189,232   

$         115,717   

$                161,135   

$   115,852   

     Loans

781,617   

774,496   

782,465   

747,203   

     Earning assets

981,359   

905,943   

956,680   

876,425   

     Assets

1,053,448   

957,735   

1,016,252   

929,799   

     Deposits

811,451   

744,996   

772,075   

720,919   

     Shareholders' equity

100,012   

76,258   

101,162   

76,241   

SELECTED KEY DATA:

     Net interest margin (tax equivalent)

3.54%

3.62%

3.53%

3.83%

     Return of average assets

0.24%

0.17%

0.29%

0.69%

     Return on average shareholders' equity

2.51%

2.08%

2.88%

8.38%

     Shareholders' equity to total assets (period end)

9.46%

10.44%

9.46%

10.44%

ALLOWANCE FOR LOAN LOSSES:

Balance, beginning of period

$                          15,474   

$             9,763   

$                  11,026   

$       9,103   

Provision for loan losses

3,379   

2,687   

10,535   

4,794   

Charge-offs

(3,504)  

(1,480)  

(6,670)  

(3,147)  

Recoveries

64   

55   

522   

275   

Balance, end of period

$                          15,413   

$           11,025   

$                  15,413   

$     11,025   

ASSET QUALITY:

     Non-accrual loans

$                  22,789   

$     11,815   

     90 days past due and still accruing

1,977   

514   

     Other real estate owned

3,997   

1,867   

     Total non-performing assets

$                  28,763   

$     14,196   

     Non-performing assets to total assets

2.74%

1.47%

     Allowance for loan losses to non-performing assets

53.59%

77.67%

     Allowance for loan losses to total loans

1.98%

1.41%

LOAN RISK GRADE ANALYSIS:

Percentage of Loans

By Risk Grade*

12/31/2009

12/31/2008

    Risk Grade 1 (excellent quality)

3.52%

4.08%

    Risk Grade 2 (high quality)

16.34%

17.95%

    Risk Grade 3 (good quality)

51.12%

63.08%

    Risk Grade 4 (management attention)

17.16%

10.42%

    Risk Grade 5 (watch)

7.43%

2.14%

    Risk Grade 6 (substandard)

1.45%

0.80%

    Risk Grade 7 (low substandard)

0.04%

0.00%

    Risk Grade 8 (doubtful)

0.00%

0.00%

    Risk Grade 9 (loss)

0.00%

0.00%

*Excludes non-accrual loans

At December 31, 2009 there were sixteen relationships exceeding $1.0 million (which totaled $33.6 million) in the Watch risk grade, three relationships exceeding $1.0 million in the Substandard risk grade  (which totaled $8.5 million) and no relationships exceeding $1.0 million in the Low Substandard risk grade.  These customers continue to meet payment requirements and these relationships would not become non-performing assets unless they are unable to meet those requirements.

SOURCE Peoples Bancorp of North Carolina, Inc.



RELATED LINKS

http://www.peoplesbanknc.com