Peoples Bancorp of North Carolina Inc.
Annual Report 2018

Plain-text annual report

PeoplesBancorp 2 0 1 8 A n n u a l R e p o r t Our Promise Our Core Values: We strive to be exceptional Employees and inspire others to be exceptional too. Our Vision To be the bank that’s exceptional at serving our communities, including employees, customers and shareholders. Our Mission To provide exceptional customer service while selling to customer needs. We are informed, encouraged, and committed. Integrity We are fair and truthful. Exceptional Customer Service We surpass our customers’ expectations. Accountability We are accountable for our own actions and bank goals. Progressive and Positive We see change as an opportunity. Table of Contents Message from the President Report of Independent Registered Public Accounting Firm Financial Highlights Consolidated Balance Sheets Consolidated Statements of Earnings Board of Directors and Officers Subsidiaries / Shareholder and General Information 2 4 5 6 7 8 9 From the President 2 0 1 8 A n n u a l R e p o r t “When we blend intellect and passion, there are no limits to what we can accomplish.” The value of always striving to be exceptional cannot be underestimated. To that end, I am pleased to announce the 2018 Annual Report of business activity on behalf of Peoples Bancorp of North Carolina, Inc. In its 106th consecutive year of being presented, this report reflects the efforts of our employees who consistently demonstrate superior standards in service to our customers, our communities and the Company. Year-to-date highlights are as follows: Our customers look to our Bank to be their financial guide in both life and business. It’s a privilege to be a trusted partner during our customers’ achievements and significant moments in life. It’s an honor to have the opportunity to help lead the way toward a better future. When we deliver exceptional service, it creates a ripple effect in the community. Our final community is our shareholders. It’s important that our shareholders trust us to continue to uphold the highest operating standards, including being a well-capitalized bank with strong earnings. We are here to champion the exceptional strength of people and communities—to help people live their best lives. Our Bank is an institution that honors the past while ● Net earnings were a record $13.4 million or $2.23 basic net earnings per share and looking toward the future for innovative ways to meet the needs of all of our communities. When we blend intellect and $2.22 diluted net earnings per share for the year ended December 31, 2018, as passion, there are no limits to what we can accomplish. compared to $10.3 million or $1.71 basic net earnings per share and $1.69 diluted net earnings per share for the same period one year ago. The Directors of Peoples Bancorp play a direct and critical role in the success of our Company. They consistently endeavor to enhance shareholder value through their diligence, hard work and acumen. Please join me in thanking them for their ● Total loans increased $44.2 million to $804.0 million at December 31, 2018, commitment. In addition to the Bank, which operates as a wholly-owned subsidiary of the Company, we would like to compared to $759.8 million at December 31, 2017. remind you of our three subsidiary companies: ● Core deposits were $859.2 million or 98.0% of total deposits at December 31, 2018, Peoples Investment Services, Inc., licensed financial advisors who provide access to investment products, which include compared to $887.4 million or 97.9% of total deposits at December 31, 2017. stocks, bonds, mutual funds, annuities, and other suitable monetary investments through our affiliation with Raymond ● As of December 31, 2018 shareholders’ equity was $123.6 million, or 11.3% of total assets, compared to $116.0 million, or 10.6% of total assets, as of December 31, 2017. This increase is primarily due to an increase in retained earnings due to net income. This year was an especially exciting one for our Bank as we opened a new full- service branch in Cary. It’s inspiring to be able to offer our services as a trusted financial partner to the small businesses and consumers within this growing market. We’re confident that the Cary community will find exceptional value in what our Bank can offer them. We’re continuously striving to make a difference in the lives of our communities, including employees, customers and shareholders. We want our employees to know they fill an invaluable role for our Bank. It takes a special blend of talent, commitment, optimism and passion to be there for our customers and empower them with creative solutions. By serving with integrity, our employees build lasting relationships. It’s only fitting that our employees receive that same dedication to excellence for their own growth and success. Passionate people are the foundation of this Bank, so we invest in their success. In addition, we are always looking to attract new employees who want to help others progress. James Financial Services, Inc. Real Estate Advisory Services, Inc., which provides 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, assists community banks across the country with appraisal management services. The Annual Shareholders Meeting is scheduled for May 2, 2019 at Catawba Country Club beginning at 11 a.m. I hope each and every shareholder will attend the Annual Meeting. I want to express my appreciation for the loyalty and support of each of our shareholders, whom we hope will recommend our Bank and subsidiary companies to members of their communities. Sincerely, Lance A. Sellers President and Chief Executive Officer 2 3 Report of Independent Registered Public Accounting Firm  To the Shareholders and the Board of Directors of Peoples Bancorp of North Carolina, Inc.  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,  2018  and  2017,  and  the  related  consolidated  statements  of  earnings,  comprehensive  Report of Independent Registered Public Accounting Firm  income, shareholders' equity and cash flows for each of the three years in the period ended December  31, 2018 (not presented herein); and in our report, dated March 14, 2019, we expressed an unqualified  opinion on those consolidated financial statements.  To the Shareholders and the Board of Directors of Peoples Bancorp of North Carolina, Inc.  In  our  opinion,  the  information  set  forth  in  the  accompanying  condensed  consolidated  financial  We have audited, in accordance with the standards of the Public Company Accounting Oversight Board  statements is fairly stated, in all material respects, in relation to the consolidated financial statements  (United  States),  the  consolidated  balance  sheets  of  Peoples  Bancorp  of  North  Carolina,  Inc.  as  of  from which it has been derived.   December  31,  2018  and  2017,  and  the  related  consolidated  statements  of  earnings,  comprehensive  income, shareholders' equity and cash flows for each of the three years in the period ended December  31, 2018 (not presented herein); and in our report, dated March 14, 2019, we expressed an unqualified  opinion on those consolidated financial statements.  Charlotte, North Carolina  In  our  opinion,  the  information  set  forth  in  the  accompanying  condensed  consolidated  financial  March 14, 2019  statements is fairly stated, in all material respects, in relation to the consolidated financial statements  from which it has been derived.   Financial Highlights Dollars in Thousands Except Per Share Amounts 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 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 $ $ $ $ 2 018 45,350 2,146 43,204 790 42,414 16,166 42,574 2,624 13,382 2.23 2.22 0.52 24.46 20.62 797,578 194,578 1,093,251 877,213 123,617 1.22% 10.81% 23.41% 11.31% 2 0 1 8 A n n u a l R e p o r t Change 8% -10% 9% 256% 6% 5% 3% -34% 30% 30% 31% 18% -20% 7% 6% -15% 0% -3% 7% 2017 41,949 2,377 39,572 (507) 40,079 15,364 41,228 3,947 10,268 1.71 1.69 0.44 30.69 19.34 753,398 229,321 1,092,166 906,952 115,975 0.93% 8.78% 25.67% 10.64% Charlotte, North Carolina  March 14, 2019  elliottdavis.com elliottdavis.com 4 5                                                                             Consolidated Balance Sheets For the years ended December 31, 2018 and 2017 Consolidated Statements of Earnings For the Years Ended December 31, 2018, 2017 and 2016 (Dollars in thousands) Assets Cash and due from banks, including reserve requirements of $8,918 at 12/31/18 and $7,472 at 12/31/17 $ 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: Noninterest-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 (Note 10) 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 5,995,256 shares at December 31, 2018 and December 31, 2017 Retained earnings Accumulated other comprehensive income Total shareholders’ equity Total liabilities and shareholders’ equity December 31, December 31, 2018 40,553 2,817 43,370 194,578 4,361 198,939 680 804,023 (6,445) 797,578 18,450 15,936 27 18,271 2 017 53,186 4,118 57,304 229,321 1,830 231,151 857 759,764 (6,366) 753,398 19,911 15,552 118 13,875 $ 1,093,251 1,092,166 $ 298,817 475,223 16,239 86,934 877,213 58,095 - 20,619 13,707 969,634 285,406 498,445 18,756 104,345 906,952 37,757 - 20,619 10,863 976,191 - - 62,096 60,535 986 123,617 $ 1,093,251 62,096 50,286 3,593 115,975 1,092,166 (Dollars in thousands, except per share amounts) 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 Appraisal management fee income Gain (loss) on sales and write-downs of other real estate Miscellaneous Total non-interest income Non-interest expense: Salaries and employee benefits Occupancy Professional fees Advertising Debit card expense FDIC insurance Appraisal management fee expense Other Total non-interest expense Earnings before income taxes Income tax expense Net earnings Basic net earnings per share Diluted net earnings per share Cash dividends declared per share 2 018 38,654 304 2,333 3,877 182 45,350 769 472 - 790 115 2,146 43,204 790 42,414 4,355 705 15 851 824 3,206 17 6,193 16,166 21,530 7,170 1,525 922 994 328 2,460 7,645 42,574 16,006 2,624 13,382 2.23 2.22 0.52 $ $ $ $ $ 2 0 1 8 A n n u a l R e p o r t 2017 34,888 219 2,404 4,236 202 41,949 598 466 662 590 61 2,377 39,572 (507) 40,079 4,453 593 - 1,190 761 3,306 (239) 5,300 2016 32,452 123 2,531 4,454 249 39,809 495 586 1,661 485 44 3,271 36,538 (1,206) 37,744 4,497 890 729 1,428 632 3,146 64 4,850 15,364 16,236 20,058 6,701 1,236 1,195 1,248 347 2,526 7,917 41,228 14,215 3,947 10,268 1.71 1.69 0.44 19,264 6,765 2,439 1,136 1,141 494 2,260 8,743 42,242 11,738 2,561 9,177 1.53 1.50 0.35 See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 25, 2019, for a complete set of Consolidated Financial Statements. 6 7 See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 25, 2019, for a complete set of Consolidated Financial Statements. Directors and Officers Peoples Bank Subsidiaries’ Board of Directors and Officers Shareholder and General Information 2 0 1 8 A n n u a l R e p o r t 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 and Treasurer Denver Equipment Company 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 Jr Medical Consultants, PLLC Larry E. Robinson Chairman of the Board and Chief Executive Officer The Blue Ridge Distributing Company, Inc. W. Gregory Terry President DFH Holdings Operator/General Manager Drum & Willis-Reynolds Funeral Home & 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 Corporate Officers Lance A. Sellers President and Chief Executive Officer (CEO) William D. Cable, Sr. Executive Vice President, Chief Operating Officer (COO) A. Joseph Lampron, Jr. Executive Vice President, Chief Financial Officer (CFO) James Veasey First Vice President, Business Development Officer Ryan M. Waddle First Vice President, Area Executive - Mooresville Margaret C. Ward First Vice President Human Resources Director Vice Presidents Melissa R. Aldrich Vice President, Business Center Manager - Hiddenite Carol R. Allen Vice President, Business Center Manager – Maiden William Armstrong, Jr. Vice President, Mortgage Underwriter Kevin M. Brady Vice President, Mortgage Sales Manager Velvet L. Burton Vice President, Service Center Manager Lorena Castro Vice President, Business Center Manager - South Boulevard Jeanine L. Cohoon Vice President, Marketing Channel Analyst Wendy E. Cordero-Jones Vice President, Mortgage Lending Manager James Davenport Vice President, Business Development Officer Roger G. Decato Vice President, Commercial Banking Portfolio Manager Zachary M. Dellinger Vice President, Business Development Officer Cathleen H. Dillingham Vice President, Learning & Development Manager James R. Durham Vice President, Financial Advisor Heather N. Edwards Vice President, Business Center Manager – Mooresville Rhonda L. Fleming Vice President, Business Development Officer Maria P. Gibbs Vice President, Business Development Officer Lauren K. Hammond Vice President, Marketing Specialist Lamona J. Harbinson Vice President, E-Services Manager Vanessa Horvath Vice President, Business Development Officer Mitchell B. Johnson Vice President, Business Center Manager - Triangle David S. Lewis Jr. Vice President, Business Development Officer Mark N. Lewis Vice President, Business Development Officer Ryan T. Link Vice President, Senior Credit Analyst George “Marty” Lowder Vice President, Finance Analyst Brenda K. Mash Vice President, Business Center Manager – Denver Joshua E. McKinney Vice President, Business Development Officer – Hickory Bruce E. Meisner Vice President, REAS Manager Paula M. Parker Vice President, Business Center Manager – CVB 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 Jeanette E. Ringley Vice President, Business Center Manager - Newton C. Randy Rodgers Vice President, Financial Advisor Sandra B. Shuford Vice President, Data Management & Computer Operations Manager Shawn D. Sigmon Vice President, Mortgage Loan Origination System Analyst John W. Somers Vice President, Business Center Manager – Lincolnton Jon Bradley Southers Vice President, Commercial Credit Administration Robert D. Spencer Vice President, Business Center Manager – Viewmont Michael K. Stroud Vice President, Staff Appraiser Allison J. Taylor Vice President, Business Center Manager - Springs Road Tony J. Thomas Vice President, Business Development Officer Lisa G. Treadaway Vice President, Organizational Architect Adam P. Turbyfill Vice President, Business Development Officer Jennifer K. Turner Vice President, Credit Administration Loan Review Officer Freda B. Turnmire Vice President, Business Center Manager - West Lincoln Dominick Vertorano Vice President, Business Center Manager - Cornelius Tandra D. Wilkinson Vice President, Loan Balancing & Servicing Manager Senior Vice Presidents Kimberly L. Boyd Senior Vice President, Chief Banking Support Officer George S. Earp Senior Vice President, Finance Director Jeffery P. Gniadek Senior Vice President, Area Executive – Hickory Jan G. Griffin Senior Vice President, Director of Loan Operations Rafael Intriago Senior Vice President, Metro Market Executive Walter C. Joyce Senior Vice President, Chief Technology Officer James O. Perry Senior Vice President, Chief Retail Officer David E. Reitzel Senior Vice President, Real Estate Administration Daniel F. Richard Senior Vice President, Area Executive - Triangle Mark W. Sigmon Senior Vice President, Area Executive – Denver Jody G. Street Senior Vice President Area Executive - Newton Timothy P. Turner Senior Vice President, Chief Credit Officer First Vice Presidents Angela J. Abernethy First Vice President, Treasury Services Manager Heather A. Allen First Vice President, BSA Officer Kimberly D. Bazzle First Vice President, Marketing Director David C. Brown First Vice President, Investment Manager Martha P. Connors First Vice President Regional Sales Manager - Metro Region Leslie D. Hambrick First Vice President, Chief Internal Auditor Maria Fernanda Hoyos First Vice President Regional Sales Manager - Raleigh Region M. Beth LaBarbera First Vice President, Regional Sales Manager John J. Noonan First Vice President, CBRES Manager Connie P. Ollis First Vice President, Compliance Officer Lucretia K. Rogers First Vice President, Regional Sales Manager Carol S. Shinn First Vice President, Director of Deposit Operations Kyle E. Sigmon First Vice President, Consumer Credit Administration 8 Community Bank Real Estate Solutions, LLC Board of Directors Officers Robert C. Abernethy David E. Reitzel Dan Ray Timmerman, Sr. Lance A. Sellers David E. Reitzel President Lance A. Sellers Vice President John Noonan Vice President Krissy O. Price Secretary A. Joseph Lampron, Jr. Treasurer Peoples Investment Services, Inc. Board of Directors Officers 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. David C. Brown President Lance A. Sellers Vice President and Assistant Secretary Krissy O. Price Secretary A. Joseph Lampron, Jr. Treasurer Real Estate Advisory Services, Inc. Board of Directors Officers Robert C. Abernethy Dan Ray Timmerman, Sr. David E. Reitzel Lance A. Sellers David E. Reitzel President Lance A. Sellers Vice President Krissy O. Price Secretary A. Joseph Lampron, Jr. Treasurer Annual Meeting The Annual Meeting of Shareholders of Peoples Bancorp will be held at 11 a.m. on May 2, 2019 at Catawba Country Club located at 1154 Country Club Rd, 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 Elliott Davis, PLLC 500 East Morehead Street, Suite 700 Charlotte, NC 28202 9 PeoplesBankNC.com 

Continue reading text version or see original annual report in PDF format above