Peoples Bancorp of North Carolina Inc.
Annual Report 2014

Plain-text annual report

4 1 0 2 ANNUAL REPORT our vision To be the Bank of Choice in our communities, including employees, customers and shareholders. R E P O R T A N N U A L 2014 Message From the President Financial Highlights Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Earnings Board of Directors and Officers Subsidiaries Shareholder and General Information Locations 2 4 5 6 7 8 9 9 Back from the president 2014 represented the 102nd year of service to the community by Peoples Bancorp of North Carolina, Inc., the parent company of Peoples Bank. We are delighted to report that net earnings amounted to $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. These results represented the second highest year of net earnings in Peoples Bancorp’s history. Net earnings for the year ended December 31, 2013 were $6.7 million or $1.19 basic and diluted net earnings per share, before adjustment for preferred stock dividends and accretion. 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. The increase in year-to-date earnings was primarily due 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. An ongoing focus for us is the preservation of our capital base. We have continued to maintain a capital ratio that exceeds regulatory guidelines resulting in our designation as a “well-capitalized“ financial institution. At December 31, 2014, total shareholders’ equity amounted to $98.7 million, or 9.5% of total assets as compared to $83.7 million, or 8.1% of total assets as of December 31, 2013. The Board of Directors declared quarterly cash dividends throughout 2014, amounting to a total of $0.18 per share. While total assets remained constant at $1.0 billion for both December 31, 2014 and 2013, we were encouraged to realize loan growth of 5.0% during 2014. Total loans were $651.9 million at December 31, 2014 as compared to $621.0 million at December 31, 2013. We are also pleased to report that non-performing assets declined to $12.7 million or 1.2% of total assets as of December 31, 2014, compared to $16.4 million or 1.6% of total assets as of December 31, 2013. The decline in non-performing assets consisted of a $3.1 million decrease in non-accrual loans and an $882,000 decrease in loans 90 days past due and still accruing, with such decreases being partially offset by a $337,000 increase in other real estate owned. 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 at 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 $250,000, increased $20.7 million to $755.8 million at December 31, 2014, as compared to $735.1 million at December 31, 2013. We are pleased with the continued level of growth in core deposits as such deposits represent the least costly source of funding on our balance sheet. Strategically, we feel that Peoples Bank is appropriately positioned to capitalize on opportunities that will lead toward the fulfillment of our corporate vision of becoming “the Bank of Choice” in the communities we serve. The manifestation of our corporate vision is directly attributable to our professional banking associates who consistently demonstrate commitment and dedication to our mission of providing exceptional customer service while selling to customer needs. I wish to thank each of them for their efforts and accomplishments that have successfully differentiated our customer-centered approach in the marketplace. The Directors of Peoples Bancorp have also played a vital role in the successful year we have experienced. They consistently look for ways to enhance shareholder value. We are grateful for their investment of time as they provide oversight relative to Peoples Bancorp’s financial condition and applicable policies and procedures. Please join me in thanking them for their commitment. In addition to Peoples Bank, which operates as a wholly owned subsidiary of Peoples Bancorp, we would like to remind you of our three subsidiary companies – Peoples Investment Services, Inc., Real Estate Advisory Services, Inc., and Community Bank Real Estate Solutions, LLC - which provide valuable financial resources in conjunction with our suite of traditional banking services. At Peoples Investment Services, licensed financial advisors provide access to investment products, which include stocks, bonds, mutual funds, annuities, and other suitable monetary investments through our affiliation with Raymond James Financial Services, Inc. Real Estate Advisory Services, Inc. continues to provide real estate appraisals (both residential and commercial) to Peoples Bancorp’s market area, thereby becoming a valued partner with respect to mortgage- related transactions. Community Bank Real Estate Solutions, LLC was created in response to the Dodd-Frank Act to assist community banks across the country with appraisal management services. As a shareholder, we invite you to join us for our Annual Meeting of Shareholders scheduled for Thursday, May 7, 2015. The meeting will be held at Catawba Country Club beginning at 11:00 A.M. We appreciate your loyalty, and we hope you will consider recommending our services to your colleagues and communities. Thank you for your continued support of Peoples Bank and Peoples Bancorp. Sincerely, Lance A. Sellers President and Chief Executive Officer Joseph F. Beaman, Jr. Executive Vice President, Chief Administrative Officer, and Corporate Secretary a special thank you Long-time executive officer Joe Beaman will retire this year. The Board of Directors wishes to extend a special “Thank You” to him for the significant contributions he has made to Peoples Bank during his 38 year career. During that time, he exercised his unique people skills to become a wonderful “bridge” between the bank and all its constituents, notably, as a respected voice to our shareholders. Because he is a pillar in the bank’s communities, and because he is highly regarded by so many, it is understandable that our goodbye is considered bittersweet by those that have been honored to work with him. Mr. Beaman has been an instrumental part of the Bank’s growth and consistent performance through the years. He joined Peoples Bank on August 1, 1977 and during his tenure, has worn many hats, including Assistant Vice President, Internal Auditor and Compliance Officer, Vice President of Operations, and Executive Vice President, Chief Financial Officer. He currently serves as the Executive Vice President, Chief Administrative Officer and Corporate Secretary of Peoples Bank and the Executive Vice President and Corporate Secretary of Peoples Bancorp of North Carolina, Inc. Upon retirement, we expect that his high level of community involvement will continue. We also expect that he will substantially increase the time he spends acting under one of his favorite titles, grandpa. One thing of which we are certain is that his wisdom, hard work and love for people will inspire the Bank for many years to come. 2 3 2014ANNUALREPORTOUR MISSION TO PROVIDE EXCEPTIONAL CUSTOMER SERVICE WHILE SELLING TO CUSTOMER NEEDS. financial highlights report of audit (Dollars in thousands, except per share amounts) 2014 2013 +/- Interest income Interest expense Net interest earnings Provision for loan losses Net interest earnings after provision for loan losses Non-interest income Non-interest expense Income taxes Net earnings Dividends and accretion of preferred stock Net earnings available to common shareholders PER SHARE OF COMMON STOCK Basic net earnings Diluted net earnings Cash dividends Market price at December 31 Book value at December 31 AT YEAR-END Loans, net Available for sale securities Assets Deposits Shareholders’ equity $ $ $ $ KEY PERFORMANCE RATIOS Return on average assets Return on average shareholders’ equity Dividend payout ratio* Average shareholders’ equity to total average assets * As a percentage of net earnings available to common shareholders. 38,420 4,287 34,133 (699) 34,832 12,164 35,671 1,937 9,388 — 9,388 1.67 1.66 0.18 17.99 17.58 640,809 281,099 1,040,494 814,700 98,665 0.91% 9.69% 10.88% 9.35% 5% -20% 9% -127% 21% -4% 9% 3% 40% -100% 56% 55% 55% 50% 27% 18% 5% -6% 1% 2% 18% 36,696 5,353 31,343 2,584 28,759 12,652 32,841 1,879 6,691 656 6,035 1.08 1.07 0.12 14.18 14.91 607,459 297,890 1,034,684 799,361 83,719 0.65% 6.67% 11.17% 9.79% REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Peoples Bancorp of North Carolina, Inc. Newton, North Carolina We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Peoples Bancorp of North Carolina, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of earnings, comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended (not presented herein); and in our report dated March 25, 2015, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the basic consolidated financial statements from which it has been derived. Atlanta, Georgia March 25, 2015 4 5 235 Peachtree Street NE | Suite 1800 | Atlanta, Georgia 30303 | Phone 404.588.4200 | Fax 404.588.4222 2014ANNUALREPORT consolidated balance sheets consolidated statements of earnings December 31, 2014 and 2013 (dollars in thousands) ASSETS Cash and due from banks, including reserve requirements of $12,569 and $11,472 Interest-bearing deposits Cash and cash equivalents Investment securities available for sale Other investments Total securities Mortgage loans held for sale Loans Less allowance for loan losses Net loans Premises and equipment, net Cash surrender value of life insurance Other real estate Accrued interest receivable and other assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits: Non-interest bearing demand NOW, MMDA & savings Time, $250,000 or more Other time Total deposits Securities sold under agreements to repurchase FHLB borrowings Junior subordinated debentures Accrued interest payable and other liabilities Total liabilities Commitments and Contingencies Shareholders’ equity: Series A preferred stock, $1,000 stated value; authorized 5,000,000 shares; no shares issued and outstanding Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,612,588 shares in 2014 and 5,613,495 shares in 2013 Retained earnings Accumulated other comprehensive (loss) income Total shareholders’ equity Total liabilities and shareholders’ equity See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 27, 2015, for a complete set of Consolidated Financial Statements. 2014 2013 For the Years Ended December 31, 2014, 2013 and 2012 (dollars in thousands, except per share amounts) 2014 2013 2012 $ $ $ $ 51,213 17,885 69,098 281,099 4,031 285,130 1,375 651,891 (11,082) 640,809 17,000 14,125 2,016 10,941 1,040,494 210,758 407,504 47,872 148,566 814,700 48,430 50,000 20,619 8,080 941,829 49,902 26,871 76,773 297,890 4,990 302,880 497 620,960 (13,501) 607,459 16,358 13,706 1,679 15,332 1,034,684 195,265 386,893 49,168 168,035 799,361 45,396 65,000 20,619 20,589 950,965 — — 48,088 45,124 5,453 98,665 1,040,494 48,133 36,758 (1,172) 83,719 1,034,684 INTEREST INCOME: Interest and fees on loans Interest on due from banks Interest on investment securities: U.S. Government sponsored enterprises States and political subdivisions Other Total interest income INTEREST EXPENSE: NOW, MMDA & savings deposits Time deposits FHLB borrowings Junior subordinated debentures Other Total interest expense Net interest income (Reduction of) provision for loan losses Net interest income after provision for loan losses NON-INTEREST INCOME: Service charges Other service charges and fees Gain on sale of securities Mortgage banking income Insurance and brokerage commissions Loss on sales and write-downs of other real estate Miscellaneous Total non-interest income NON-INTEREST EXPENSE: Salaries and employee benefits Occupancy Other Total non-interest expense Earnings before income taxes Income tax expense Net earnings Dividends and accretion of preferred stock Net earnings available to common shareholders Basic net earnings per common share Diluted net earnings per common share Cash dividends declared per common share $ $ $ $ $ 30,305 65 2,995 4,677 378 38,420 499 1,188 2,166 389 45 4,287 34,133 (699) 34,832 4,961 1,080 266 804 701 (622) 4,974 12,164 17,530 6,251 11,890 35,671 11,325 1,937 9,388 — 9,388 1.67 1.66 0.18 30,194 85 1,639 4,427 351 36,696 732 1,650 2,518 398 55 5,353 31,343 2,584 28,759 4,566 1,172 614 1,228 661 (581) 4,992 12,652 16,851 5,539 10,451 32,841 8,570 1,879 6,691 656 6,035 1.08 1.07 0.12 32,758 51 2,746 3,403 287 39,245 1,180 3,205 2,744 438 129 7,696 31,549 4,924 26,625 4,764 1,940 1,218 1,229 517 (1,136) 4,005 12,537 16,426 5,236 10,120 31,782 7,380 1,587 5,793 1,010 4,783 0.86 0.86 0.18 See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 27, 2015, for a complete set of Consolidated Financial Statements. 6 7 2014ANNUALREPORTdirectors and officers subsidiaries PEOPLES BANK AND PEOPLES BANCORP BOARD OF DIRECTORS Robert C. Abernethy Chairman of the Board Peoples Bancorp of North Carolina, Inc. and Peoples Bank President, Secretary and Treasurer Carolina Glove Company, Inc. James S. Abernethy President and Assistant Secretary Midstate Contractors, Inc. Douglas S. Howard Vice President, Secretary and Treasurer Denver Equipment of Charlotte, Inc. John W. Lineberger, Jr. President Lincoln Bonded Warehouse Company Gary E. Matthews President and Director Matthews Construction Company, Inc. Billy L. Price, Jr., M.D. Practitioner of Internal Medicine BL Price Medical Consultants, PLLC Larry E. Robinson President and Chief Executive Officer The Blue Ridge Distributing Company, Inc. W. Gregory Terry General Manager Drum and Willis-Reynolds Funeral Homes and Crematory Dan Ray Timmerman, Sr. Chairman of the Board and Chief Executive Officer Timmerman Manufacturing, Inc. Benjamin I. Zachary President, Treasurer, General Manager and Director, Alexander Railroad Company PEOPLES BANCORP OFFICERS Lance A. Sellers President and Chief Executive Officer Joseph F. Beaman, Jr. Executive Vice President and Corporate Secretary A. Joseph Lampron, Jr. Executive Vice President, Chief Financial Officer and Corporate Treasurer William D. Cable, Sr. Executive Vice President, Assistant Corporate Treasurer and Assistant Corporate Secretary PEOPLES BANK OFFICERS Lance A. Sellers President and Chief Executive Officer Joseph F. Beaman, Jr. Executive Vice President, Chief Administrative Officer and Corporate Secretary A. Joseph Lampron, Jr. Executive Vice President, Chief Financial Officer William D. Cable, Sr. Executive Vice President, Chief Operating Officer Kimberly L. Boyd Senior Vice President, Banking Support Manager Jeffrey P. Gniadek Senior Vice President, Area Executive Rafael Intriago Senior Vice President, Banco de la Gente Retail Director WALTER C. JOYCE Senior Vice President, Chief Technology Director James O. Perry Senior Vice President, Retail Banking Manager David E. Reitzel Senior Vice President, Real Estate Administration Daniel F. Richard Senior Vice President, Area Executive Mark W. Sigmon Senior Vice President, Area Executive Timothy P. Turner Senior Vice President, Commercial Credit Kimberly D. Bazzle First Vice President, Marketing Director J. LaShae Bock First Vice President, Human Resources Director David C. Brown First Vice President, Certified Financial Planner George S. Earp First Vice President, Finance Director Jan G. Griffin First Vice President, Loan Operations Director Leslie D. Hambrick First Vice President, Internal Auditor M. Beth LaBarbera First Vice President, Regional Sales Manager Connie P. Ollis First Vice President, Compliance/Security Officer Lucretia K. Rogers First Vice President, Regional Sales Manager Kyle E. Sigmon First Vice President, Consumer Credit Jody G. Street First Vice President, Area Executive Angela J. Abernethy Vice President, Treasury Management Manager carol r. allen Vice President, Business Center Manager, Maiden Martha P. Avendano Vice President, Sales Relationship Manager suzanne l. blackwell Vice President, Mortgage Sales Manager Velvet L. Bowman Vice President, Service Center Manager Wendy E. Cordero Vice President, Banco de la Gente Mortgage Manager Kay F. Deal Vice President, Business Center Manager, Conover Roger G. Decato Vice President, Business Development Officer James R Durham Vice President, Financial Advisor heather n. edwards Vice President, Business Center Manager, Mooresville barbara w. erwin Vice President, Commercial Credit Mark W. Gustafson Vice President, Investment Account Executive Tommie A. Hall Vice President, Loan Documentation Lamona J. Harbinson Vice President, Electronic Banking Manager Diane L. Klein Vice President, Business Center Manager, Viewmont David S. Lewis, Jr. Vice President, Business Development Officer brenda k. mash Vice President, Business Center Manager, Denver Bruce E. Meisner Vice President, REAS Manager Paula M. Parker Vice President, Business Center Manager, Catawba Valley Blvd wesley s. pittman Vice President, Business Center Manager, Lincolnton/West Lincoln Lynn H. Poole Vice President, Business Center Manager, Catawba Krissy O. Price Vice President, Assistant Corporate Secretary andrew r. puntch Vice President, Application & Project Management Manager Hight D. Reid Vice President, Business Development Officer Jeanette R. Ringley Vice President, Business Center Manager, Newton Shawn D. Sigmon Vice President, Mortgage Department Manager robert d. spencer Vice President, Business Center Manager dominick Vertorano Vice President, Business Center Manager, Cornelius Allison J. Taylor Vice President, Business Center Manager, Springs Road Vickie E. Miller Vice President, Retail Support Coordinator Wendy H. Moran Vice President, Business Center Manager, Triangle Lisa G. Treadaway Vice President, Deposit Operations Manager Ryan M. Waddle Vice President, Business Development Officer PEOPLES BANCORP SUBSIDIARY BOARD OF DIRECTORS AND OFFICERS Community Bank Real Estate Solutions, LLC Board of Directors Robert C. Abernethy David E. Reitzel Dan Ray Timmerman, Sr. Lance A. Sellers Officers David E. Reitzel - President Lance A. Sellers - Vice President Joseph F. Beaman, Jr. - Secretary A. Joseph Lampron, Jr. – Treasurer PEOPLES BANK SUBSIDIARIES’ BOARD OF DIRECTORS AND OFFICERS Peoples Investment Services, Inc. Board of Directors Robert C. Abernethy Billy L. Price, Jr., M.D. David C. Brown Larry E. Robinson Douglas S. Howard Lance A. Sellers William D. Cable, Sr. Officers Lance A. Sellers - President David C. Brown - Vice President and Assistant Secretary Joseph F. Beaman, Jr. - Secretary A. Joseph Lampron, Jr. – Treasurer Real Estate Advisory Services, Inc. Board of Directors Robert C. Abernethy Dan Ray Timmerman, Sr. David E. Reitzel Lance A. Sellers Officers David E. Reitzel – President Lance A. Sellers – Vice President Bruce Meisner – Vice President Joseph F. Beaman, Jr. – Secretary A. Joseph Lampron, Jr. – Treasurer SHAREHOLDER AND GENERAL INFORMATION Annual Meeting The Annual Meeting of Shareholders of Peoples Bancorp will be held at 11:00 a.m. on Thursday, May 7, 2015, at the Catawba Country Club located at 1154 Country Club Road, Newton, North Carolina. Shareholders’ Luncheon Shareholders in attendance at the Annual Meeting are cordially invited to remain for a luncheon to be served immediately upon adjournment. Common Stock Peoples Bancorp common stock is listed on the NASDAQ (National Association of Securities Dealers Automated Quotations) Global Market, where our symbol is PEBK. Dividend Reinvestment & Stock Purchase Peoples Bancorp offers a Dividend Reinvestment and Stock Purchase Plan for the benefit of the Company’s shareholders. The Plan provides for the full or partial reinvestment of cash dividends, optional cash purchases of the Company’s stock, safekeeping of the share certificates, liquidation of shares, and gifting of shares and enrollment of the designated recipients. Broadridge Corporate Issuer Solutions, Inc. is the Plan Administrator. For more information, one may call Peoples Bancorp at 828-464-5620 or 800-948-7195 or contact the Plan Administrator at 855-263-4988. Shareholders of Peoples Bancorp are entitled to receive dividends when and as declared by the Board of Directors out of funds legally available therefore. Such dividend payments are declared based upon the guidelines of North Carolina and federal banking law. Corporate Office Peoples Bancorp of North Carolina, Inc. 518 West C Street PO Box 467 Newton, NC 28658 828-464-5620 Stock Transfer Agent & Registrar Broadridge Corporate Issuer Solutions, Inc. P.O. Box 1342 Brentwood, NY 11717 www.broadridge.com Independent Auditors Porter Keadle Moore, LLC 235 Peachtree Street, NE Suite 1800 Atlanta, GA 30303 8 9 2014ANNUALREPORTcore values Employees - We are valued so we add value. Integrity - We are fair and truthful. Exceptional Customer Service - We surpass our customers’ expectations. Accountability - We are accountable for our own actions and each other. Progressive and Positive - We see change as an opportunity. Catawba 106 North Main Street Catawba, NC 28609 (828) 241-3123 Catawba Valley Boulevard 2050 Catawba Valley Blvd. SE Hickory, NC 28602 (828) 322-6372 Claremont 3261 East Main Street Claremont, NC 28610 (828) 459-7152 Conover 213 1st Street West Conover, NC 28613 (828) 464-8456 Cornelius 9624-I Bailey Road Cornelius, NC 28031 (704) 237-9270 Denver 6125 Highway 16 South Denver, NC 28037 (704) 483-3050 Hiddenite 5153 NC Highway 90 East Hiddenite, NC 28636 (828) 632-0118 (704) 585-6631 Lincolnton 1910 East Main Street Lincolnton, NC 28092 (704) 732-0097 Maiden 200 Island Ford Road Maiden, NC 28650 (828) 428-9874 Mooresville 1074 River Highway Mooresville, NC 28117 (704) 658-3600 Newton 420 West A Street Newton, NC 28658 (828) 464-5663 North Newton 2619 North Main Avenue Newton, NC 28658 (828) 464-8664 Springs Road 3310 Springs Road NE Hickory, NC 28601 (828) 256-9229 Triangle 142 Highway 16 South Denver, NC 28037 (704) 483-7727 (704) 827-2370 Viewmont 1333 2nd Street NE Hickory, NC 28601 (828) 345-6262 West Lincoln 760 Highway 27 West Lincolnton, NC 28092 (704) 736-1447 Satellite Location Abernethy Laurels 102 Leonard Avenue Newton, NC 28658 (828) 464-3077 Denver Loan Production Office 3754 Highway 16 North Denver, NC 28037 (704) 489-8940 Banco de la Gente Administrative Office 800 East Arrowood Road Charlotte, NC 28217 (704) 909-5460 Banco de la Gente 6350 South Boulevard Charlotte, NC 28217 (704) 554-7494 Banco de la Gente 4451-A Central Avenue Charlotte, NC 28205 (704) 531-4571 Banco de la Gente 501 West Roosevelt Boulevard Monroe, NC 28110 (704) 261-2020 Banco de la Gente 3023-105 Capital Boulevard Raleigh, NC 27604 (919) 747-8000 BANCO DE LA GENTE LOAN PRODUCTION OFFICE 2000 Avondale Drive Durham, NC 27704 (919) 747-8003 Peoples Bancorp Center 518 West C Street PO Box 467 Newton, NC 28658 (828) 464-5620 Toll-free (800) 948-7195 Customer Service Center (828) 466-1765 Toll-free (877) 802-1212 TheRealPeoplesBank.com 

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