Peoples Bancorp of North Carolina Inc.
Annual Report 2020

Plain-text annual report

PeoplesBancorp 2 0 2 0 A n n u a l R e p o r t Our Core Values: Employees 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. Our community recently lost an exceptional member. Christine Sigmon “Teen” Abernethy died on November 30, 2020 at age 94. She was a devoted mother to her sons and a loving wife to Julius (J.W.) Abernethy, Jr. who served on the Board of Peoples Bank from January 1962 until his death on December 11, 1991. Mrs. Abernethy was the principal shareholder of Peoples Bank and a dedicated supporter of the bank and the Progressive and Positive Table of Contents Message from the President Report of Independent Registered Public Accounting Firm Financial Highlights Consolidated Balance Sheets Consolidated Statements of Earnings We see change as an opportunity. Executive Leadership Team communities we serve. She continued to be involved in her family’s business as the chairwoman of Carolina Glove Co. and serving on the board of Carolina Mills. We offer our condolences to the family of Mrs. Abernethy as we applaud her extraordinary contributions to our community. 2 4 5 6 7 8 From the President While in the past year we experienced unexpected challenges, brought on by the COVID-19 pandemic, Peoples Bank remained committed to serving our communities. Despite the disruptions of the last year, I’m pleased to present this 2020 Annual Report of business activity on behalf of Peoples Bancorp of North Carolina, Inc. In its 108th consecutive year of being presented, this report reflects the exceptional dedication and commitment of our employees. Through their commitment to service, this company continues to positively impact the lives of our customers while strengthening our collective communities. Year-to-date highlights are as follows: • Net earnings were $11.4 million or $1.95 basic and diluted net earnings per share for the year ended December 31, 2020, as compared to $14.1 million or $2.37 basic net earnings per share and $2.36 diluted net earnings per share for the same period one year ago. • Total loans increased $98.7 million to $948.6 million at Decemember 31, 2020, compared to $849.9 million at December 31, 2019. • The Bank originated 1,127 Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, totaling $99.0 million, during the year ended December 31, 2020. The Bank has received $4 million in fees from the SBA for PPP for loans originated as of December 31, 2020. The Bank has recognized $1.4 million PPP loan fee income as of December 31, 2020. • Core deposits were $1.2 billion or 97.89% of total deposits at December 31, 2020, compared to $932.2 million or 96.45% of total deposits at December 31, 2019. Our customers trust us to deliver exceptional service and solutions that help support them in their lives and with their businesses. We thank our team of employees for the trust our customers place in us. Your work ethic and resilience embody our mission of striving to be exceptional in how we serve. We remain committed to providing exceptional customer service, while maintaining our bank’s integrity. We’re also proud to continue to be a well-capitalized bank, with strong earnings and operating standards. Peoples Bank strives to never lose sight of the core values upon which our bank is founded. We thank our shareholders for your support, appreciate our board of directors for their leadership, and value our employees who uphold these commitments on a daily basis. “Believing in our communities and having the capabilities to support them has resulted in a great year.” 2 0 2 0 A n n u a l R e p o r t - Deploying a large portion of our employees to work remotely to allow for appropriate social distancing and expanded safety measures in our Corporate and branch locations. - Installing partitions to support face to face service interactions. - Enhancing safety protocols and sanitation measures throughout the bank for the safety of our employees and customers. - Extending payment adjustments and broad scale fee exceptions to assist in alleviating financial pressure from customers. - Assisting local businesses in the PPP program and continue to work closely with these customers as a partner for them throughout the process. • We made the following changes in our Executive Team: - Jeff Hooper joined Peoples Bank in March 2020 as our CFO, with the planned retirement of Joe Lampron in June 2020. Jeff came to the bank with an extensive background in both accounting and the financial services industry and has been a valuable addition to our team. - Kim Boyd Leaks, Jim Perry and Tim Turner were each promoted to Executive Vice President. • Our new Raleigh office opened in August 2020 and is prepared to fully service both retail and commercial customers. 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 commitment. 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 the Peoples Bank 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. We hope you will continue to recommend our Bank and subsidiary companies to members of your communities. Here is a recap of some of our more noteworthy achievements and announcements this year. Sincerely, • The COVID-19 pandemic presented the bank with challenges and opportunities. We are proud of our employees for overcoming obstacles, supporting each other, and serving our customers. Our bank was quick to respond to these unprecedented times by implementing measures that included: 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 $ $ $ $ 2 020 47,958 3,836 44,122 4,259 39,863 22,914 48,931 2,489 11,357 1.95 1.95 0.75 23.02 24.17 938,731 245,249 1,414,855 1,221,086 139,899 0.83% 8.04% 38.67% 10.35% 2 0 2 0 A n n u a l R e p o r t 2019 Change -3% 2% -4% 394% -11% 29% 8% -21% -19% -18% -17% 14% -30% 7% 11% 25% 23% 26% 4% 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% 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, 2020 and 2019, and the related consolidated statements of earnings, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020 (not presented herein); and in our report, dated March 19, 2021, 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 consolidated financial statements from which it has been derived. Charlotte, North Carolina March 19, 2021 elliottdavis.com 4 5 Consolidated Balance Sheets December 31, 2020 and December 31, 2019 Consolidated Statements of Earnings For the Years Ended December 31, 2020, 2019 and 2018 2 0 2 0 A n n u a l R e p o r t December 31, December 31, 2020 (Audited) 42,737 118,843 - 161,580 245,249 4,155 249,404 9,139 948,639 (9,908) 938,731 18,600 16,968 128 3,423 16,882 2 019 (Audited) 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 (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 loan losses $ 1,414,855 1,154,882 Net interest income after provision for loan losses (Dollars in thousands) Assets Cash and due from banks, including reserve requirements of $0 at 12/31/20 and $13,210 at 12/31/19 $ 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 liabilities Commitments Shareholders’ equity: $ 456,980 657,834 25,771 80,501 1,221,086 26,201 15,464 3,471 8,734 338,004 516,757 34,269 77,487 966,517 24,221 15,619 3,647 10,758 1,274,956 1,020,762 Preferred stock, no par value; authorized 5,000,000 shares; no shares issued and outstanding Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,787,504 shares at December 31, 2020 and 5,912,300 shares at December 31, 2019 Retained earnings Accumulated other comprehensive income Total shareholders’ equity Total liabilities and shareholders’ equity - - 56,871 77,628 5,400 139,899 $ 1,414,855 59,813 70,663 3,644 134,120 1,154,882 See accompanying Notes to Consolidated Financial Statements. See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 24, 2021, for a complete set of Consolidated Financial Statements 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, net 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 2 020 $ 42,314 127 204 2,361 2,691 261 47,958 1,962 947 357 370 200 3,836 44,122 4,259 39,863 3,528 742 2,639 2,469 897 6,754 (47) 5,932 2019 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 22,914 17,739 23,538 7,933 1,580 787 1,012 263 5,274 8,544 48,931 13,846 2,489 11,357 1.95 1.95 0.75 $ $ $ $ 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 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 6 7 See accompanying Notes to Consolidated Financial Statements. See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 24, 2021, for a complete set of Consolidated Financial Statements. Executive Leadership Team Lance Sellers President & CEO Jeffrey Hooper EVP, Chief Financial Officer Finance, Internal Audit, Investment Services Bill Cable EVP, Chief Operating Officer BSA, Compliance, Deposit Operations, Digital Banking Services, Information Technology, Loan Operations, Treasury Management, Mortgage Department, Mail Courier Services Kim Boyd Leaks EVP, Chief Retail Banking Support Officer Retail Sales Support, CRM Administrations, Human Resources, Learning & Development, Marketing, Service Center 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 Hole-In-One Advantage, LLC Director/Consultant Drum & Willis-Reynolds Funeral Homes & 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 Jim Perry EVP, Chief Retail Banking Officer Tim Turner EVP, Chief Credit Officer Retail Banking Centers, Mortgage Sales Commercial Credit, Consumer Credit 8 2 0 2 0 A n n u a l R e p o r t Peoples Bank Subsidiaries’ Board of Directors and Officers Shareholder and General Information 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 Jeffrey N. Hooper 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 Jeffrey N. Hooper 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 John Noonan Vice President Krissy O. Price Secretary Jeffrey N. Hooper Treasurer Annual Meeting This year, out of an abundance of caution and to continue to deal with the unprecedented health impact of COVID-19, the Annual Meeting of Shareholders of Peoples Bancorp will be conducted in a virtual-only format at 11:00 a.m. on Thursday, May 6, 2021. 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 Our Promise We strive to be exceptional 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. PeoplesBankNC.com 

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