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2023 ReportPeers and competitors of Peoples Bancorp of North Carolina Inc.:
CresCom BankPeoplesBancorp 2 0 2 1 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 We are informed, encouraged, and committed. Integrity We are fair and truthful. Exceptional Customer Service We surpass our customers’ expectations. Table of Contents Message from the President Report of Independent Registered Public Accounting Firm employees, customers Accountability and shareholders. We are accountable for our own actions and bank goals. Financial Highlights Consolidated Balance Sheets Our Mission To provide exceptional customer service while selling to customer needs. Progressive and Positive We see change as an opportunity. Consolidated Statements of Earnings Our Leadership 2 4 5 6 7 8 From the President Our commitment to serve with purpose last year amid the continuing disruptions brought on by the pandemic resulted in more opportunities for Peoples Bank to continue to do right by others—and, in return, help the Bank achieve our vision. It is a privilege to present this 2021 Annual Report of business activity on behalf of Peoples Bancorp of North Carolina, Inc. In its 109th consecutive year of being presented, this report reflects the spirit, strength and quality of our employees who do extraordinary work every day to improve the lives of our customers and assist our communities. Year-to-date highlights are as follows: l Net earnings were a record $15.1 million or $2.71 per share and $2.63 per diluted share for the year ended December 31, 2021, as compared to $11.4 million or $2.01 per share and $1.95 per diluted share for the year ended December 31, 2020. “ Responding to l The Bank originated 419 PPP loans, totaling $29.1 million, during the year ended December 31, 2021. The Bank recognized $3.4 million in PPP loan fee income during the year ended December 31, 2021, as compared to $1.4 million in PPP loan fee income for the year ended December 31, 2020 2 0 2 1 A n n u a l R e p o r t l When you’re a stable and progressive-thinking Bank, there will be opportunities for growth. Peoples Bank opened a new Loan Production Office in Winston-Salem on November 16, 2021. It’s exciting to be able to bring our exceptional service, new ideas and product offerings to this new market, in addition to the many North Carolina communities we already serve. By expanding our footprint, we can support and inspire more people, businesses and communities. 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 real estate lending. 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. the needs of our communities with meaningful solutions and compassionate service has resulted in another successful year.” l Core deposits were $1.4 billion or 98.14% of total deposits at December 31, 2021, compared to $1.2 billion or 97.92% of total deposits at December 31, 2020. Sincerely, Lance A. Sellers President and Chief Executive Officer Over the years, our customers have learned to expect high standards with Peoples Bank—from the solutions we provide to the service we deliver. We thank our team of employees for delivering financial services to our customers. You meet every challenge with a can-do spirit, giving the best of your professional abilities. Your efforts and achievements do not go unnoticed. You make a real difference in the lives of our customers, in the businesses we support, and in the communities we serve. By staying true to the values we were founded on, Peoples Bank continues to be a well-capitalized Bank, with strong earnings and operating standards. In addition to thanking our employees for the Bank’s many successes, we wish to extend our gratitude to our board of directors for your extraordinary leadership and commitment. Here is a recap of some of our more noteworthy achievements and announcements this year. l The Bank is fortunate to be guided by passionate people who lead with wisdom, kindness, integrity, and diverse business insight. It’s truly an honor to recognize veteran banker Kimberly Boyd-Leaks on her recent appointment as the 11th member of the Board of Directors of the Company and the Bank. Kim has served the Bank for 27 years, most currently as Executive Vice President, Chief Retail Banking Support Officer. She is responsible for Human Resources, Marketing, Learning & Development, Call Center, Retail Sales Support and Customer Relationship Management (CRM) teams. 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 Report of Independent Registered Public Accounting Firm (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 income, shareholders' equity and cash flows for each of the three years in the period ended December To the Shareholders and the Board of Directors of Peoples Bancorp of North Carolina, Inc. 31, 2018 (not presented herein); and in our report, dated March 14, 2019, we expressed an unqualified opinion on those consolidated financial statements. 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, 2021 In our opinion, the information set forth in the accompanying condensed consolidated financial and 2020, and the related consolidated statements of earnings, comprehensive income, changes in statements is fairly stated, in all material respects, in relation to the consolidated financial statements shareholders' equity and cash flows for each of the three years in the period ended December 31, 2021 (not from which it has been derived. presented herein); and in our report, dated March 18, 2022, 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 Charlotte, North Carolina derived. March 14, 2019 Raleigh, North Carolina March 18, 2022 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 $ $ $ $ 2 021 47,179 3,205 43,974 (1,163) 45,137 24,919 51,127 3,796 15,133 2.71 2.63 0.66 27.59 25.89 875,514 406,549 1,624,193 1,412,748 142,369 0.96% 10.24% 24.83% 9.42% 2 0 2 1 A n n u a l R e p o r t Change -2% -16% 0% -127% 13% 9% 4% 53% 33% 35% 35% -12% 20% 4% -7% 66% 15% 16% 2% 2020 47,958 3,836 44,122 4,259 39,863 22,914 48,931 2,489 11,357 2.01 1.95 0.75 23.02 24.84 938,731 245,249 1,416,175 1,221,086 139,899 0.83% 8.04% 38.67% 10.35% elliottdavis.com elliottdavis.com 4 5 Consolidated Balance Sheets December 31, 2021 and December 31, 2020 Consolidated Statements of Earnings For the Years Ended December 31, 2021, 2020 and 2019 (Dollars in thousands) Assets Cash and due from banks, including reserve requirements of $0 at both 12/31/21 and 12/31/20 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 Right of use lease asset Accrued interest receivable and other assets Total assets Liabilities and Shareholders’ Equity Deposits: Noninterest-bearing demand Interest-bearing demand, 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: 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 5,661,569 shares at December 31, 2021 and 5,787,504 shares at December 31, 2020 Common stock, held by deferred compensation trust, at cost: 162,193 shares at December 31, 2021 and 155,469 shares at December 31, 2020 Deferred compensation Retained earnings Accumulated other comprehensive income Total shareholders’ equity Total liabilities and shareholders’ equity December 31, December 31, 2021 $ 44,711 232,788 277,499 406,549 3,668 410,217 3,637 884,869 (9,355) 875,514 16,104 17,365 - 4,612 19,245 2 020 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 18,202 $ 1,624,193 1,416,175 $ 514,319 797,179 26,333 74,917 456,980 657,834 25,771 80,501 1,412,748 1,221,086 37,094 15,464 4,677 11,841 26,201 15,464 3,471 10,054 1,481,824 1,276,276 - - 53,305 56,871 (1,992) 1,992 88,968 96 142,369 $ 1,624,193 (1,796) 1,796 77,628 5,400 139,899 1,416,175 (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: Demand deposits, 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 sale of other assets 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 2 021 $ 41,186 258 - 2,478 3,146 111 47,179 2,029 752 - 280 144 3,205 43,974 (1.163) 45,137 3,921 803 - 2,505 1,035 8,890 105 21 7,639 24,919 24,506 7,858 1,826 536 1,000 415 7,112 7,874 51,127 18,929 3,796 15,133 2.71 2.63 0.66 $ $ $ $ 2 0 2 1 A n n u a l R e p o r t 2020 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 22,914 23,538 7,933 1,580 787 1,012 263 5,274 8,544 48,931 13,846 2,489 11,357 2.01 1.95 0.75 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 (239) (11) 5,848 17,739 23,238 7,364 1,490 1,021 890 119 3,421 7,974 45,517 17,203 3,136 14,067 2.43 2.36 0.66 See accompanying Notes to Consolidated Financial Statements. See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 25, 2022, for a complete set of Consolidated Financial Statements See accompanying Notes to Consolidated Financial Statements. See Appendix A to the Peoples Bancorp of North Carolina, Inc. Proxy Statement, dated March 25, 2022, for a complete set of Consolidated Financial Statements. 6 7 Our Leadership Peoples Bank Subsidiaries’ Board of Directors and Officers Shareholder and General Information 2 0 2 1 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. Kim Boyd-Leaks EVP, Chief Retail Banking Support Officer Peoples Bank 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 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 Lance Sellers President & CEO Jeffrey N. Hooper EVP, Chief Financial Officer Bill Cable EVP, Chief Operating Officer Kim Boyd-Leaks EVP, Chief Retail Banking Support Officer Tim Turner EVP, Chief Credit Officer Jim Perry EVP, Chief Retail Banking Officer Retail Banking Centers, Mortgage Sales 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 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 The Annual Meeting of Shareholders of Peoples Bancorp will be conducted in a virtual-only format at 11:00 a.m. on Thursday, May 5, 2022. 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 5410 Trinity Road, Suite 320 Raleigh, NC 27607 PeoplesBankNC.com
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