Peoples Bancorp of North Carolina Inc.
Annual Report 2019

Plain-text annual report

2 0 1 9 A N N U A L R E P O R T PeoplesBancorp 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 We are informed, encouraged, and committed. Integrity We are fair and truthful. Exceptional Customer Service We surpass our customers’ expectations. employees, customers Accountability and shareholders. We are accountable for our own actions and bank goals. Progressive and Positive We see change as an opportunity. Our Mission To provide exceptional customer service while selling to customer needs. 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 9 A n n u a l R e p o r t “Believing in our communities and having the capabilities to support them has resulted in a great year.” When we commit to delivering exceptional service to our communities, the results speak. I’m pleased to present this 2019 Annual Report of business activity on behalf of Peoples Bancorp of North Carolina, Inc. In its 107th consecutive year of being presented, this report is a reflection of the dedication, integrity and work of our employees. Through their consistent service, this company continues to positively impact the lives of our customers while strengthening our collective communities. Year-to-date highlights are as follows: l Net earnings were a record $14.1 million or $2.37 basic net earnings per share and $2.36 diluted net earnings per share for the year ended December 31, 2019, as compared to $13.4 million or $2.23 basic net earnings per share and $2.22 diluted net earnings per share for the same period one year ago. Brand Focus The Peoples Bank brand continues to be embraced both internally and externally, from our human resources efforts to product promotions and community service. It’s inspiring to be that bank that strives to be exceptional and encourages others to be exceptional too. Our 92% Customer Service Index score is proof of our continuing efforts to deliver on our brand promise. Joe Lampron’s Retirement We’d like to recognize Joe Lampron for the incredible contributions he has made to our company and wish him well as he transitions into retirement, which is planned for mid-2020. Joe has been an exceptional member of our management team since 2001 and he has played a significant role in the successful financial performance of the bank during that time. We are fortunate to have had his expertise and leadership and hope that he enjoys this next phase of his life. The Directors of Peoples Bancorp are instrumental to the success of our company. Their continued dedication to Peoples Bank is a consistent reminder for us to deliver on our mission. Please join me in thanking them for their hard work and l Total loans increased $45.9 million to $849.9 million at December 31, 2019, compared commitment. to $804.0 million at December 31, 2018. l Core deposits were $932.2 million or 96.45% of total deposits at December 31, 2019, compared to $859.2 million or 97.95% of total deposits at December 31, 2018. l Shareholders’ equity was $134 .1 million, or 11 .61% of total assets, at December 31, 2019, compared to $123.6 million, or 11.31% of total assets, at December 31, 2018. The Company repurchased 90,354 shares of its common stock during the year ended December 31, 2019 under the Company’s stock repurchase program, which was funded in February 2019. Our team of employees are the reason our customers trust us to serve them. People do business with people they trust and who deliver. Our employees carry out our vision and deliver on our mission of striving to be exceptional at serving. Our customers depend on us to support them on their financial journeys. What we do here is more than transactional; we’re building relationships and, providing financial services and information that can make a meaningful difference in our customer’s lives. To our shareholders: the exceptional service we deliver to our customers and employees aligns with our focus on maintaining the highest operating standards, including being a well-capitalized bank with strong earnings. In everything we do, we stay true to the core values and guiding principles upon which our bank was founded. Here is a recap of some of our more noteworthy achievements and announcements this year. Investment in Technology To keep pace with the modern conveniences our customers expect, we made numerous investments in technology, such as installing new ATMs and making upgrades to existing ones. In addition, we upgraded our in-branch displays with video capabilities, refreshed our website design, and rolled out customer interaction tablets in some of our offices. In addition to the Bank, which operates as a wholly owned subsidiary of the Company, we would like to remind you of our three subsidiary companies: Peoples Investment Services, Inc., licensed financial advisors who 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., 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 7, 2020 at Catawba Country Club beginning at 11 a.m. I look forward to seeing all shareholders at the Annual Meeting, so that I may have the privilege of personally thanking each and every one of you for your continued support. We hope you will continue to recommend our Bank and subsidiary companies to members of your communities. Sincerely, Lance A. Sellers President and Chief Executive Officer 2 3 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 $ $ $ $ 2 019 49,601 3,757 45,844 863 44,981 17,739 45,517 3,136 14,067 2.37 2.36 0.66 32.85 22.68 843,194 195,746 1,154,882 966,517 134,120 1.23% 10.45% 28.00% 11.78% 2 0 1 9 A n n u a l R e p o r t Change 9% 75% 6% 9% 6% 10% 7% 20% 5% 6% 6% 27% 34% 10% 6% 1% 6% 10% 8% 2018 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% 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  Report  of  Independent  Registered  Public  Accounting  Firm   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.  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,   2019   and   2018,   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,  2019  (not  presented  herein);  and  in  our  report,  dated  March  13,  2020,  we  expressed  an   unqualified  opinion  on  those  consolidated  financial  statements.   Charlotte, North Carolina  March 14, 2019  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  consolidated  financial  statements   from  which  it  has  been  derived.   Charlotte,  North  Carolina   March  13,  2020   elliottdavis.com 4 5 Elliott  Davis  PLLC  |  www.elliottdavis.com                                                                         Consolidated Balance Sheets For the years ended December 31, 2019 and 2018 Consolidated Statements of Earnings For the Years Ended December 31, 2019, 2018 and 2017 (Dollars in thousands) Assets Cash and due from banks, including reserve requirements of $13,210 at 12/31/19 and $8,918 at 12/31/18 $ December 31, December 31, Interest-bearing deposits Federal funds sold 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 Right of use lease asset 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 Junior subordinated debentures Lease liability Accrued interest payable and other liabilities Total liability Commitments (Note 10) Shareholders’ equity: 2019 48,337 720 3,330 52,387 195,746 4,231 199,977 4,417 849,874 (6,680) 843,194 18,604 16,319 - 3,622 16,362 $ 1,154,882 $ 338,004 516,757 34,269 77,487 966,517 24,221 15,619 3,647 10,758 1,020,762 2 018 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 1,093,251 298,817 475,223 16,239 86,934 877,213 58,095 20,619 - 13,707 969,634 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 5,912,300 shares at December 31, 2019 and 5,995,256 shares at December 31, 2018 Retained earnings Accumulated other comprehensive income Total shareholders’ equity Total liabilities and shareholders’ equity - - 59,813 70,663 3,644 134,120 $ 1,154,882 62,096 60,535 986 123,617 1,093,251 (Dollars in thousands, except per share amounts) Interest income: Interest and fees on loans Interest on due from banks Interest on federal funds sold 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 Provision for (reduction of) 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 2 019 $ 43,301 213 331 2,670 2,915 171 49,601 1,596 909 205 844 203 3,757 45,844 863 44,981 4,576 714 226 1,264 877 4,484 (11) 5,609 17,739 23,238 7,364 1,490 1,021 890 119 3,421 7,974 45,517 17,203 3,136 14,067 2.37 2.36 0.66 $ $ $ $ 2 0 1 9 A n n u a l R e p o r t 2018 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 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 15,364 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 See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 25, 2020, for a complete set of Consolidated Financial Statements. See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 25, 2020, for a complete set of Consolidated Financial Statements. 6 7 Directors and Officers Peoples Bank Subsidiaries’ Board of Directors and Officers Shareholder and General Information 2 0 1 9 A n n u a l R e p o r t Peoples Bank and Peoples Bancorp Board of Directors Senior Vice Presidents Kimberly L. Boyd Senior Vice President, Chief Banking Support Officer Vice Presidents Melissa R. Aldrich Vice President, Business Center Manager - Hiddenite Bruce E. Meisner Vice President, REAS Manager Kyle Merck Vice President Service Delivery Manager Community Bank Real Estate Solutions, LLC Board of Directors Officers 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) Amy Morton Vice President, Business Center Manager - Conover Paula M. Parker Vice President, Business Center Manager – CVB Lynn H. Poole Vice President, Business Center Manager – Catawba Krissy O. Price Vice President, Shareholder Services & Assistant Corporate Secretary Andrew R. Puntch Vice President, Application & Project Management Manager 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 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 William Walton Vice President, Tech Support Unit & Architect Manager Tandra D. Wilkinson Vice President, Loan Balancing & Servicing Manager Joshua Williams Vice President, Business Development Officer I - Cornelius 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 Leslie D. Hambrick First Vice President, Chief Internal Auditor 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 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 8 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 Roger G. Decato Vice President, Commercial Banking Portfolio Manager Tammy Deel Vice President, Review & Quality Control Manager Zachary M. Dellinger Vice President, Business Development Officer Cathleen H. Dillingham Vice President, Learning & Development Manager James R. Durham Vice President, Financial Advisor 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 Kacee King Vice President, Business Center Manager II - Mooresville Graziella La Rosa Vice President, Business Center Manager II - Raleigh 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 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 7, 2020 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 

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