Peoples Bancorp Announces First Quarter Earnings Results

Peoples Bancorp Announces First Quarter Earnings Results

NEWTON, N.C., April 22, 2013 (GLOBE NEWSWIRE) -- Peoples Bancorp of North
Carolina, Inc. (Nasdaq:PEBK), the parent company of Peoples Bank, reported
first quarter earnings results with highlights as follows:

Highlights:

  *Net earnings were $1.8 million or $0.31 basic and diluted net earnings per
    share for the three months ended March 31, 2013, before adjustment for
    preferred stock dividends and accretion, as compared to $1.7 million or
    $0.30 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 $1.6 million or $0.29
    basic and diluted net earnings per common share for the three months ended
    March 31, 2013, as compared to $1.3 million or $0.24 basic and diluted net
    earnings per common share, for the same period one year ago.
  *Earnings before securities gains and income taxes were $2.0 million for
    the three months ended March 31, 2013 compared to $1.7 million for the
    same period one year ago.
  *Core deposits were $656.0 million, or 83.7% of total deposits at March 31,
    2013, compared to $630.4 million, or 78.0% of total deposits at March 31,
    2012.

Lance A. Sellers, President and Chief Executive Officer, attributed the
increase in first quarter earnings to a decrease in the provision for loan
losses, which was partially offset by a decrease in net interest income and an
increase in non-interest expense.

Net interest income was $7.6 million for the three months ended March 31,
2013, compared to $8.1 million for the same period one year ago. This decrease
was primarily due to a decrease in interest income resulting from decreases in
loans and investment securities and a decrease in the yield on earning assets,
which were partially offset by a decrease in interest expense due to a
reduction in the cost of funds and a reduction in interest bearing
liabilities. Net interest income after the provision for loan losses increased
to $6.6 million during the first quarter of 2013, compared to $6.1 million for
the same period one year ago. The provision for loan losses for the three
months ended March 31, 2013 was $1.1 million, as compared to $2.0 million for
the same period one year ago. The decrease in the provision for loan losses is
primarily attributable to a $4.3 million reduction in non-accrual loans from
March 31, 2012 to March 31, 2013.

Non-interest income was $3.4 million for the three months ended March 31, 2013
and 2012. Decreases in service charge income and gains on sale of securities
were offset by increases in mortgage banking income and miscellaneous
non-interest income.

Non-interest expense was $7.7 million for the three months ended March 31,
2013, as compared to $7.3 million for the same period one year ago.This
increase is attributable to a $349,000 increase in salaries and employee
benefits expense, which was primarily due to 2013 salary increases and bonuses
accrued in the first quarter of 2013, and a $107,000 increase in non-interest
expenses other than salary, employee benefits and occupancy expenses for the
three months ended March 31, 2013, as compared to the same period one year
ago.

Total assets amounted to $1.0 billion as of March 31, 2013, as compared to
$1.1 billion as of March 31, 2012.Available for sale securities decreased
1.8% to $293.9 million as of March 31, 2013, compared to $299.3 million as of
March 31, 2012.This decrease reflects investment securities sold and paydowns
of mortgage-backed securities during the previous twelve months, which were
partially offset by purchases of investment securities.Total loans amounted
to $610.0 million as of March 31, 2013, compared to $658.3 million as of March
31, 2012.This decrease is primarily due to the anticipated reduction in
existing loans through the work-through of problem loans and normal principal
repayments, which have exceeded loan originations, due primarily to the
current level of slow economic growth.

Non-performing assets declined to $24.3 million or 2.4% of total assets at
March 31, 2013, compared to $33.0 million or 3.1% of total assets at March 31,
2012 primarily due to a $4.3 million decrease in non-accrual loans and a $3.4
million decrease in other real estate owned.Non-performing loans include $9.6
million in acquisition, development and construction ("AD&C") loans, $9.4
million in commercial and residential mortgage loans and $729,000 in other
loans at March 31, 2013, as compared to $16.2 million in AD&C loans, $8.3
million in commercial and residential mortgage loans and $539,000 in other
loans at March 31, 2012.The allowance for loan losses at March 31, 2013 was
$14.4 million or 2.4% of total loans, compared to $16.6 million or 2.5% of
total loans at March 31, 2012.According to Mr. Sellers, 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 $783.8 million as of March 31, 2013, compared to $807.8
million at March 31, 2012.Core deposits, which include non-interest bearing
demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit
of denominations less than $100,000, increased $25.6 million to $656.0 million
at March 31, 2013, as compared to $630.4 million at March 31,
2012.Certificates of deposit in amounts of $100,000 or more totaled $127.8
million at March 31, 2013, as compared to $176.4 million at March 31,
2012.This decrease is attributable to a $17.1 million decrease in brokered
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 $37.4 million at March 31,
2013, as compared to $43.5 million at March 31, 2012.

Shareholders' equity was $98.3 million, or 9.7% of total assets, as of March
31, 2013, compared to $104.4 million, or 9.9% of total assets, as of March 31,
2012.This decrease reflects the Company's repurchase and retirement of a
portion of its preferred shares in the second quarter of 2012.The Company
purchased 12,530 shares of the Company's 25,054 outstanding shares of
preferred stock from the U.S. Department of the Treasury ("UST"), which was
issued to the UST in connection with the Company's participation in the
Capital Purchase Program ("CPP') under the Troubled Asset Relief Program
("TARP") in 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 the Company's annual report on Form 10-K for the
year ended December 31, 2012.

CONSOLIDATED BALANCE SHEETS                                                
March 31, 2013, December 31, 2012 and March 31, 2012                      
(Dollars in thousands)                                                     
                                                       
                            March 31, 2013 December 31, March 31, 2012
                                            2012
                            (Unaudited)  (Audited)   (Unaudited)
ASSETS:                                                 
Cash and due from banks      $19,754      $32,617     $23,944
Interest bearing deposits    52,624        16,226       24,160
Cash and cash equivalents    72,378        48,843       48,104
                                                       
Investment securities        293,925       297,823      299,303
available for sale
Other investments            5,215         5,599        6,205
Total securities             299,140       303,422      305,508
                                                       
Mortgage loans held for sale 3,834         6,922        6,256
                                                       
Loans                        609,965       619,974      658,343
Less:Allowance for loan     (14,412)      (14,423)     (16,612)
losses
Net loans                    595,553       605,551      641,731
                                                       
Premises and equipment, net  16,616        15,874       16,629
Cash surrender value of life 13,379        13,273       12,937
insurance
Accrued interest receivable  17,380        19,631       22,162
and other assets
Total assets                 $1,018,280   $1,013,516  $1,053,327
                                                       
                                                       
LIABILITIES AND                                         
SHAREHOLDERS' EQUITY:
Deposits:                                               
Non-interest bearing demand  $168,156     $161,582    $149,628
NOW, MMDA & savings          378,755       371,719      355,688
Time, $100,000 or more       127,772       134,733      176,428
Other time                  109,149       113,491      126,055
Total deposits               783,832       781,525      807,799
                                                       
Securities sold under        37,388        34,578       43,479
agreements to repurchase
FHLB borrowings              70,000        70,000       70,000
Junior subordinated          20,619        20,619       20,619
debentures
Accrued interest payable and 8,163         9,047        7,024
other liabilities
Total liabilities            920,002       915,769      948,921
                                                       
Shareholders' equity:                                   
Series A preferred stock,
$1,000 stated value;
authorized 5,000,000 shares; 12,524        12,524       24,793
issued and outstanding
12,524 shares at 3/31/13 and
12/31/12
Common stock, no par value;
authorized 20,000,000
shares; issued and           48,133        48,133       48,298
outstanding 5,613,495 shares
at 3/31/13 and 12/31/12
Retained earnings            32,911        31,478       27,817
Accumulated other            4,710         5,612        3,498
comprehensive income
Total shareholders' equity   98,278        97,747       104,406
                                                       
Total liabilities and        $1,018,280   $1,013,516  $1,053,327
shareholders' equity

                                                           
                                                                           
CONSOLIDATED STATEMENTS OF INCOME                                          
For the three months ended March 31, 2013 and 2012                          
(Dollars in thousands, except per share amounts)                            
                                                           
                                              Three months ended
                                               March 31,
                                              2013        2012
                                              (Unaudited) (Unaudited)
INTEREST INCOME:                                            
Interest and fees on loans                     $7,640      $8,425
Interest on due from banks                     12           3
Interest on investment securities:                          
U.S. Government sponsored enterprises          378          1,070
State and political subdivisions               984          800
Other                                          89           64
Total interest income                          9,103        10,362
                                                           
INTEREST EXPENSE:                                           
NOW, MMDA & savings deposits                   218          344
Time deposits                                  467          1,032
FHLB borrowings                                661          690
Junior subordinated debentures                 100          113
Other                                          17           39
Total interest expense                         1,463        2,218
                                                           
NET INTEREST INCOME                            7,640        8,144
PROVISION FOR LOAN LOSSES                      1,053        2,049
NET INTEREST INCOME AFTER PROVISION FOR LOAN   6,587        6,095
LOSSES
                                                           
NON-INTEREST INCOME:                                        
Service charges                                1,039        1,188
Other service charges and fees                 373          599
Gain on sale of securities                     263          527
Mortgage banking income                        384          226
Insurance and brokerage commissions            139          135
Miscellaneous                                 1,229        705
Total non-interest income                      3,427        3,380
                                                           
NON-INTEREST EXPENSES:                                      
Salaries and employee benefits                 4,190        3,841
Occupancy                                      1,312        1,301
Other                                          2,236        2,129
Total non-interest expense                     7,738        7,271
                                                           
EARNINGS BEFORE INCOME TAXES                   2,276        2,204
INCOME TAXES                                   518          545
                                                           
NET EARNINGS                                   1,758        1,659
                                                           
Dividends and accretion on preferred stock     157          348
                                                           
NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS  $1,601      $1,311
                                                           
PER COMMON SHARE AMOUNTS                                    
Basic net earnings                             $0.29       $0.24
Diluted net earnings                           $0.29       $0.24
Cash dividends                                 $0.03       $0.07
Book value                                     $15.28      $14.31

                                                     
FINANCIAL HIGHLIGHTS                                                        
For the three months ended March 31, 2013 and 2012                          
(Dollars in thousands)                                                      
                                  
                                  Three months ended
                                   March 31,
                                  2013              2012
                                  (Unaudited)       (Unaudited)
SELECTED AVERAGE BALANCES:                            
Available for sale securities      $286,527          $313,452
Loans                              621,077            671,580
Earning assets                     936,820            997,847
Assets                             1,004,257          1,059,411
Deposits                           773,644            814,258
Shareholders' equity               99,381             105,202
                                                     
                                                     
SELECTED KEY DATA:                                    
Net interest margin (tax           3.52%               3.44%
equivalent)
Return on average assets           0.71%               0.63%
Return on average shareholders'    7.17%               6.34%
equity
Shareholders' equity to total      9.65%               9.91%
assets (period end)
                                                     
                                                     
ALLOWANCE FOR LOAN LOSSES:                            
Balance, beginning of period       $14,423           $16,604
Provision for loan losses          1,053              2,049
Charge-offs                        (1,179)            (2,596)
Recoveries                         115                555
Balance, end of period             $14,412           $16,612
                                                     
                                                     
ASSET QUALITY:                                        
Non-accrual loans                  $19,667           $23,981
90 days past due and still         50                 1,023
accruing
Other real estate owned            4,588              8,020
Repossessed assets                 12                 --
Total non-performing assets        $24,317           $33,024
Non-performing assets to total     2.39%               3.14%
assets
Allowance for loan losses to       59.27%              50.30%
non-performing assets
Allowance for loan losses to total 2.36%               2.52%
loans
                                                     
LOAN RISK GRADE ANALYSIS:          Percentage of Loans
                                   By Risk Grade
                                  3/31/2013           3/31/2012
Risk Grade 1 (excellent quality)   2.86%               3.10%
Risk Grade 2 (high quality)        17.32%              16.36%
Risk Grade 3 (good quality)        48.29%              48.00%
Risk Grade 4 (management           19.00%              20.50%
attention)
Risk Grade 5 (watch)               5.41%               4.25%
Risk Grade 6 (substandard)         6.80%               7.45%
Risk Grade 7 (doubtful)            0.00%               0.00%
Risk Grade 8 (loss)                0.00%               0.00%
                                                     
At March 31, 2013, including non-accrual loans, there were nine
relationships exceeding $1.0 million in the Watch risk grade(which
totaled $16.7 million) andfour relationships exceeding $1.0 million in
the Substandard risk grade(which totaled $11.3 million).There were four
relationships with loans in the Watch risk grade and the Substandard risk
grade exceeding $1.0 million total (which totaled $5.7 million).

CONTACT: Lance A. Sellers
         President and Chief Executive Officer
        
         A. Joseph Lampron, Jr.
         Executive Vice President and Chief Financial Officer
        
         828-464-5620, Fax 828-465-6780
 
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