PEOPLES BANCORP OF NORTH CAROLINA, INC. 
By 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
========== ========
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 - 3 1 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.
