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Peoples Bancorp of North Carolina Inc. Reports Operating Results (10-Q)

August 14, 2009 | About:

Peoples Bancorp of North Carolina Inc. (PEBK) filed Quarterly Report for the period ended 2009-06-30.

Peoples Bancorp of North Carolina Inc. is the holding company for Peoples Bank. Peoples Bancorp of North Carolina Inc. has a market cap of $34.6 million; its shares were traded at around $6.25 with a P/E ratio of 9.8 and P/S ratio of 0.5. The dividend yield of Peoples Bancorp of North Carolina Inc. stocks is 4.5%. Peoples Bancorp of North Carolina Inc. had an annual average earning growth of 36.6% over the past 5 years.

Highlight of Business Operations:

Summary. Net earnings for the second quarter of 2009 were $1.4 million, or $0.25 basic and diluted net earnings per share before adjustment for preferred stock dividends and accretion as compared to $2.2 million, or $0.39 basic and diluted net earnings per share for the same period one year ago. After adjusting for $349,000 in dividends and accretion on preferred stock, net income available to common shareholders for the three months ended June 30, 2009 was $1.0 million or $0.18 basic and diluted net earnings per common share. Net earnings from recurring operations for the three months ended June 30, 2009 was $526,000, or $0.09 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion, as compared to second quarter 2008 net earnings from recurring operations of $2.2 million, or $0.39 basic net earnings per share and $0.38 diluted net earnings per share. The decrease in second quarter net earnings is attributable to an increase in provision for loan losses, a decrease in non-interest income and an increase in non-interest expense, which were partially offset by an increase in non-interest income. The decline in earnings for the second quarter reflects the continuing adverse impact on real estate values, new home sales and construction, necessitating an increase in the provision for loan losses as the risk of loss in the loan portfolio increases as a result of the recessionary environment.

Interest income decreased $1.6 million or 11% for the three months ended June 30, 2009 compared with the same period in 2008. The decrease was due to a 175 basis point reduction in the Bank s prime commercial lending rate, which was partially offset by an increase in interest earning assets. Net income from derivative instruments was $877,000 for the three months ended June 30, 2009 when compared to a net income of $899,000 for the same period in 2008. The average yield on earning assets for the quarters ended June 30, 2009 and 2008 was 5.38% and 6.65%, respectively. During the quarter ended June 30, 2009, average loans increased $43.9 million to $779.7 million from $735.8 million for the three months ended June 30, 2008. During the quarter ended June 30, 2009, average investment securities available-for-sale increased $33.7 million to $149.7 million from $116.0 million for the three months ended June 30, 2008.

Interest income decreased $3.5 million or 12% for the six months ended June 30, 2009 compared with the same period in 2008. The decrease was due to a reduction in the Bank s prime commercial lending rate, which was partially offset by an increase in interest earning assets and income from interest rate derivative contracts. Net income from derivative instruments was $2.0 million for the six months ended June 30, 2009 compared to $1.3 million for the same period one year ago. The average yield on earning assets for the six months ended June 30, 2009 and 2008 was 5.50% and 6.82%, respectively. During the six months ended June 30, 2009, average loans increased $51.7 million to $779.9 million from $728.2 million for the six months ended June 30, 2008. During the six months ended June 30, 2009, average investment securities available-for-sale increased $24.2 million to $141.3 million from $117.1 million for the six months ended June 30, 2008.

Non-Interest Income. Total non-interest income was $4.3 million in the second quarter of 2009 as compared to $2.8 million for the same period of 2008. The increase in non-interest income is primarily due to increases in gains on sale of securities and mortgage banking income. Service charges increased 8% to $1.4 million for the three months ended June 30, 2009 when compared to the same period one year ago. The increase in service charges and fees is primarily attributable to growth in the Bank s deposit base coupled with normal pricing changes. Other service charges and fees decreased to $503,000 for the three-month period ended June 30, 2009 when compared to the same period one year ago. Mortgage banking income increased to $311,000 during the three months ended June 30, 2009 from $182,000 for the same period in 2008 due to an increase in mortgage loan demand. Miscellaneous income was $586,000 for the three months ended June 30, 2009, a 3% decrease from $606,000 for the same period in 2008. Recurring non-interest income increased 3% to $2.9 million for the three months ended June 30, 2009, as compared to $2.8 million for the same period one year ago. Net non-recurring gains of $1.4 million for the three months ended June 30, 2009 included a $1.8 million gain on sale of securities partially offset by the write-down of two investments totaling $397,000. Management determined the market value of these investments had decreased significantly and were not temporary impairments, therefore write-downs were appropriate during the second quarter of 2009. This $1.4 million net gain on the sale and write-down of securities for the three months ended June 30, 2009 was partially offset by a $24,000 loss on the disposition of assets. Net non-recurring gains of $22,000 for the three months ended June 30, 2008 were due to gains on the disposition of assets.

Total non-interest income was $6.4 million in the six months ended June 30, 2009 as compared to $5.4 million for the same period of 2008. This increase in non-interest income is attributable to an increase in gains on sale of securities which were partially offset by an increase in write-downs of securities and a decrease in miscellaneous income when compared to the same period last year. Service charges increased 7% to $2.6 million for the six months ended June 30, 2009 when compared to the same period one year ago. The increase in service charges and fees is primarily attributable to growth in the Bank s deposit base coupled with normal pricing changes. Other service charges and fees decreased 13% to $1.1 million for the three-month period ended June 30, 2009 when compared to the same period one year ago. Mortgage banking income increased to $504,000 during the six months ended June 30, 2009 from $361,000 for the same period in 2008 due to an increase in mortgage loan demand. Miscellaneous income was $904,000 for the six months ended June 30, 2009, a 21% decrease from $1.2 million for the same period in 2008 primarily due to an increase in losses on the disposition of assets. Recurring non-interest income increased 3% to $5.5 million for the six months ended June 30, 2009, as compared to $5.4 million for the same period one year ago. Net non-recurring gains of $912,000 for the six months ended June 30, 2009 included a $1.8 million gain on sale of securities partially offset by write-downs of two securities totaling $645,000. This $1.2 million net gain on the sale and write-down of securities for the six months ended June 30, 2009 was partially offset by a $239,000 loss on the disposition of assets. Net non-recurring gains of $41,000 for the six months ended June 30, 2008 were due to gains on the disposition of assets.

Non-Interest Expense. Total non-interest expense increased 12% to $8.0 million for the second quarter of 2009 as compared to $7.1 million for the corresponding period in 2008. Salary and employee benefits totaled $4.1 million for the three months ended June 30, 2009, an increase of 6% over the same period in 2008. The increase in salary and employee benefits is primarily due to a $103,000 decrease in the allocation of the costs to originate loans associated with FAS 91 in second quarter 2009 compared to the same period last year due to lower loan volume in 2009. Occupancy expense increased 8% for the quarter ended June 30, 2009. The increase in occupancy expense is primarily attributable to an increase in furniture and equipment expense. Other non-interest expense increased 25% to $2.6 million for the three months ended June 30, 2009 as compared to the same period in 2008. This increase in other non-interest expense is primarily attributable to increase of $383,000 in FDIC insurance expense and an increase of $192,000 in debit card expense. The increase in FDIC insurance expense is due to an increase in 2009 FDIC insurance assessment rates and a $196,000 accrual for the FDIC special assessment booked in second quarter 2009.

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