10-Q 1 pebk_10q.htm FORM 10-Q pebk_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: June 30, 2024

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

000-27205

(Commission File No.)

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

(Exact name of registrant as specified in its charter)

 

North Carolina

 

56-2132396

 (State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

518 West C Street, Newton, North Carolina

 

28658

(Address of principal executive offices)

 

(Zip Code)

 

(828) 464-5620

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒       No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒      No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

 

 

Emerging growth company

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

Yes ☐       No ☒

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 5,457,646 shares of common stock, outstanding at July 31, 2024.

 

 

 

 

INDEX

 

PART I. FINANCIAL INFORMATION

PAGE(S)

Item 1.

Financial Statements

Consolidated Balance Sheets at June 30, 2024 (Unaudited) and December 31, 2023 (Audited)

4

Consolidated Statements of Earnings for the three and six months ended June 30, 2024 and 2023 (Unaudited)

5

Consolidated Statements of Comprehensive Income for the three and six and months ended June 30, 2024 and 2023 (Unaudited)

6

Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2024 and 2023 (Unaudited)

7

Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (Unaudited)

8-9

Notes to Consolidated Financial Statements (Unaudited)

10-29

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30-42

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

43

 

PART II.  OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

43

 

Item 1A.

Risk Factors

 

43

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

 

Item 3.

Defaults upon Senior Securities

 

44

 

Item 5.

Other Information

 

44

 

Item 6.

Exhibits

 

45

 

Signatures

 

 

46

 

Certifications

 

 

 

 

 

 
2

Table of Contents

 

FORWARD-LOOKING STATEMENTS

 

Statements made in this Quarterly Report on Form 10-Q, other than those concerning historical information, should be considered forward-looking statements pursuant to the safe harbor provisions of the Securities Exchange Act of 1934 and the Private Securities Litigation Act of 1995. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on the information available to management at the time that this Quarterly Report on Form 10-Q was prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate,” and “believe,” variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, (1) competition in the markets served by the registrant and its subsidiaries, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectibility of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environments and tax laws, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in other filings with the Securities and Exchange Commission, including but not limited to, those described in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

 
3

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Consolidated Balance Sheets

June 30, 2024 and December 31, 2023

(Dollars in thousands)

 

 

June 30

 

 

December 31,

 

Assets

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Audited)

 

 

 

 

 

 

 

 

Cash and due from banks

 

$31,909

 

 

 

32,819

 

Interest-bearing deposits

 

 

50,926

 

 

 

49,556

 

Cash and cash equivalents

 

 

82,835

 

 

 

82,375

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale

 

 

393,260

 

 

 

391,924

 

Other investments

 

 

2,779

 

 

 

2,874

 

Total securities

 

 

396,039

 

 

 

394,798

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale

 

 

1,288

 

 

 

686

 

 

 

 

 

 

 

 

 

 

Loans

 

 

1,110,672

 

 

 

1,093,066

 

Less allowance for credit losses

 

 

(10,016)

 

 

(11,041)

Net loans

 

 

1,100,656

 

 

 

1,082,025

 

 

 

 

 

 

 

 

 

 

Premises and equipment, net

 

 

15,888

 

 

 

16,702

 

Cash surrender value of life insurance

 

 

18,365

 

 

 

18,134

 

Right of use lease asset

 

 

4,374

 

 

 

4,731

 

Accrued interest receivable and other assets

 

 

35,953

 

 

 

36,459

 

Total assets

 

$1,655,398

 

 

 

1,635,910

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$415,977

 

 

 

432,687

 

Interest-bearing demand, MMDA & savings

 

 

710,446

 

 

 

620,244

 

Time, over $250,000

 

 

147,333

 

 

 

148,904

 

Other time

 

 

202,200

 

 

 

190,210

 

Total deposits

 

 

1,475,956

 

 

 

1,392,045

 

 

 

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

 

18,824

 

 

 

86,715

 

Junior subordinated debentures

 

 

15,464

 

 

 

15,464

 

Lease liability

 

 

4,487

 

 

 

4,832

 

Accrued interest payable and other liabilities

 

 

16,355

 

 

 

15,838

 

Total liabilities

 

 

1,531,086

 

 

 

1,514,894

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 5,457,646 shares at June 30, 2024 and 5,534,499 shares at December 31, 2023

 

 

48,678

 

 

 

50,625

 

Common stock held by deferred compensation trust, at cost: 166,247 shares at June 30, 2024 and 163,702 shares at December 31, 2023

 

 

 (1,980

) 

 

 

 (1,910

)

Deferred compensation

 

 

1,980

 

 

 

1,910

 

Retained earnings

 

 

115,623

 

 

 

109,756

 

Accumulated other comprehensive loss

 

 

(39,989)

 

 

(39,365)

Total shareholders' equity

 

 

124,312

 

 

 

121,016

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$1,655,398

 

 

 

1,635,910

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

 

 

 

 

 

  

 
4

Table of Contents

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Consolidated Statements of Earnings

Three and Six Months Ended June 30, 2024 and 2023

(Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

 2024

 

 

 2023

 

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$15,571

 

 

 

13,667

 

 

 

30,709

 

 

 

26,550

 

Interest on due from banks

 

 

725

 

 

 

517

 

 

 

1,632

 

 

 

900

 

Interest on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises

 

 

2,551

 

 

 

2,280

 

 

 

5,142

 

 

 

4,510

 

State and political subdivisions

 

 

695

 

 

 

696

 

 

 

1,390

 

 

 

1,558

 

Other

 

 

528

 

 

 

439

 

 

 

1,007

 

 

 

882

 

Total interest income

 

 

20,070

 

 

 

17,599

 

 

 

39,880

 

 

 

34,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW, MMDA & savings deposits

 

 

2,438

 

 

 

1,648

 

 

 

4,498

 

 

 

3,136

 

Time deposits

 

 

3,628

 

 

 

1,638

 

 

 

7,309

 

 

 

2,154

 

Junior subordinated debentures

 

 

283

 

 

 

259

 

 

 

567

 

 

 

507

 

Other

 

 

305

 

 

 

283

 

 

 

786

 

 

 

494

 

Total interest expense

 

 

6,654

 

 

 

3,828

 

 

 

13,160

 

 

 

6,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

13,416

 

 

 

13,771

 

 

 

26,720

 

 

 

28,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for (recovery of) credit losses

 

 

(468)

 

 

375

 

 

 

(377)

 

 

599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

 

13,884

 

 

 

13,396

 

 

 

27,097

 

 

 

27,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges

 

 

1,346

 

 

 

1,328

 

 

 

2,686

 

 

 

2,669

 

Other service charges and fees

 

 

180

 

 

 

163

 

 

 

364

 

 

 

345

 

Loss on sale of securities, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,488)

Mortgage banking income

 

 

74

 

 

 

39

 

 

 

125

 

 

 

132

 

Insurance and brokerage commissions

 

 

219

 

 

 

206

 

 

 

465

 

 

 

434

 

Appraisal management fee income

 

 

3,181

 

 

 

2,590

 

 

 

5,595

 

 

 

4,684

 

Miscellaneous

 

 

2,521

 

 

 

2,077

 

 

 

4,324

 

 

 

4,238

 

Total non-interest income

 

 

7,521

 

 

 

6,403

 

 

 

13,559

 

 

 

10,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

6,827

 

 

 

6,286

 

 

 

13,807

 

 

 

12,786

 

Occupancy

 

 

2,105

 

 

 

1,981

 

 

 

4,216

 

 

 

3,995

 

Professional fees

 

 

635

 

 

 

450

 

 

 

1,027

 

 

 

849

 

Advertising

 

 

95

 

 

 

156

 

 

 

377

 

 

 

345

 

Debit card expense

 

 

425

 

 

 

282

 

 

 

737

 

 

 

555

 

FDIC Insurance

 

 

192

 

 

 

260

 

 

 

383

 

 

 

370

 

Appraisal management fee expense

 

 

2,523

 

 

 

2,049

 

 

 

4,427

 

 

 

3,699

 

Miscellaneous

 

 

2,329

 

 

 

2,155

 

 

 

4,673

 

 

 

4,722

 

Total non-interest expense

 

 

15,131

 

 

 

13,619

 

 

 

29,647

 

 

 

27,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

 

6,274

 

 

 

6,180

 

 

 

11,009

 

 

 

10,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

1,386

 

 

 

1,372

 

 

 

2,173

 

 

 

2,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$4,888

 

 

 

4,808

 

 

 

8,836

 

 

 

7,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net earnings per share

 

$0.93

 

 

 

0.88

 

 

 

1.67

 

 

 

1.46

 

Diluted net earnings per share

 

$0.89

 

 

 

0.85

 

 

 

1.61

 

 

 

1.41

 

Cash dividends declared per share

 

$0.19

 

 

 

0.19

 

 

 

0.54

 

 

 

0.53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 
5

Table of Contents

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Consolidated Statements of Comprehensive Income (Loss)

Three and Six Months Ended June 30, 2024 and 2023

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$4,888

 

 

 

4,808

 

 

 

8,836

 

 

 

7,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) on securities available for sale

 

 

(882)

 

 

(6,905)

 

 

(811)

 

 

2,515

 

Reclassification adjustment for losses on securities available for sale included in net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive  income (loss), before income taxes

 

 

(882)

 

 

(6,905)

 

 

(811)

 

 

5,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit) related to other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) on securities available for sale

 

 

(203)

 

 

(1,586)

 

 

(187)

 

 

577

 

Reclassification adjustment for losses on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on securities available for sale included in net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

572

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income tax expense (benefit) related to other comprehensive income

 

 

(203)

 

 

(1,586)

 

 

(187)

 

 

1,149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), net of tax

 

 

(679)

 

 

(5,319)

 

 

(624)

 

 

3,854

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$4,209

 

 

 

(511)

 

 

8,212

 

 

 

11,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 
6

Table of Contents

  

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Consolidated Statements of Changes in Shareholders' Equity

Three and Six Months Ended June 30, 2024 and 2023

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Held By

 

 

 Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 Deferred

 

 

 Other

 

 

 

 

 

 Common Stock

 

 

 Retained

 

 

 Deferred

 

 

 Compensation

 

 

 Comprehensive

 

 

 

 

 

Shares

 

 

Amount

 

 

 Earnings

 

 

 Compensation

 

 

 Trust

 

 

 Loss

 

 

 Total

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2023

 

 

5,534,499

 

 

$50,625

 

 

 

109,756

 

 

 

1,910

 

 

 

(1,910)

 

 

(39,365)

 

 

121,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock repurchase

 

 

(78,500)

 

 

(1,998)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,998)

Cash dividends declared on common stock

 

 

-

 

 

 

-

 

 

 

(1,929)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,929)

Equity incentive plan, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

33

 

 

 

(33)

 

 

-

 

 

 

-

 

Net earnings

 

 

-

 

 

 

-

 

 

 

3,948

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,948

 

Change in accumulated other comprehensive income, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

55

 

 

 

55

 

Balance, March 31, 2024

 

 

5,455,999

 

 

$48,627

 

 

 

111,775

 

 

 

1,943

 

 

 

(1,943)

 

 

(39,310)

 

 

121,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on common stock

 

 

-

 

 

 

-

 

 

 

(1,040)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,040)

Restricted stock units issued

 

 

1,647

 

 

 

51

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

51

 

Equity incentive plan, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

37

 

 

 

(37)

 

 

-

 

 

 

-

 

Net earnings

 

 

-

 

 

 

-

 

 

 

4,888

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,888

 

Change in accumulated other comprehensive loss, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(679)

 

 

(679)

Balance, June 30, 2024

 

 

5,457,646

 

 

$48,678

 

 

 

115,623

 

 

 

1,980

 

 

 

(1,980)

 

 

(39,989)

 

 

124,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2022

 

 

5,636,830

 

 

$52,636

 

 

 

100,156

 

 

 

2,181

 

 

 

(2,181)

 

 

(47,597)

 

 

105,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adoption of new accounting standard, net of tax

 

 

-

 

 

 

-

 

 

 

(838)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(838)

Cash dividends declared on common stock

 

 

-

 

 

 

-

 

 

 

(1,925)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,925)

Restricted stock units issued

 

 

191

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6

 

Equity incentive plan, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(344)

 

 

344

 

 

 

-

 

 

 

-

 

Net earnings

 

 

-

 

 

 

-

 

 

 

3,172

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,172

 

Change in accumulated other comprehensive income, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,173

 

 

 

9,173

 

Balance, March 31, 2023

 

 

5,637,021

 

 

$52,642

 

 

 

100,565

 

 

 

1,837

 

 

 

(1,837)

 

 

(38,424)

 

 

114,783

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock repurchase

 

 

(46,222)

 

 

(833)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(833)

Cash dividends declared on common stock

 

 

-

 

 

 

-

 

 

 

(1,069)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,069)

Equity incentive plan, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130

 

 

 

(130)

 

 

-

 

 

 

-

 

Net earnings

 

 

-

 

 

 

-

 

 

 

4,808

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,808

 

Change in accumulated other comprehensive loss, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,319)

 

 

(5,319)

Balance, June 30, 2023

 

 

5,590,799

 

 

$51,809

 

 

 

104,304

 

 

 

1,967

 

 

 

(1,967)

 

 

(43,743)

 

 

112,370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 
7

Table of Contents

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2024 and 2023

(Dollars in thousands)

 

 

 

 

 

 

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

 

$8,836

 

 

 

7,980

 

Adjustments to reconcile net earnings to

 

 

 

 

 

 

 

 

net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

1,429

 

 

 

1,720

 

Provision for (recovery of) credit losses

 

 

(377)

 

 

599

 

Deferred income taxes

 

 

(218)

 

 

(238)

Loss on sale of investment securities net

 

 

-

 

 

 

2,488

 

Gain on sale of premises and equipment

 

 

-

 

 

 

(191)

Restricted stock expense

 

 

92

 

 

 

78

 

Proceeds from sales of mortgage loans held for sale

 

 

6,973

 

 

 

6,754

 

Origination of mortgage loans held for sale

 

 

(7,575)

 

 

(8,103)

Cash surrender value of life insurance

 

 

(231)

 

 

(209)

Change in:

 

 

 

 

 

 

 

 

Right of use lease asset

 

 

357

 

 

 

403

 

Other assets

 

 

961

 

 

 

595

 

Lease liability

 

 

(345)

 

 

(385)

Other liabilities

 

 

425

 

 

 

1,386

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

10,327

 

 

 

12,877

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of investment securities available for sale

 

 

(13,729)

 

 

(6,992)

Proceeds from sales, calls and maturities of investment securities

 

 

 

 

 

 

 

 

available for sale

 

 

3,000

 

 

 

52,023

 

Proceeds from paydowns of investment securities available for sale

 

 

8,160

 

 

 

8,206

 

Proceeds from paydowns of other investment securities

 

 

128

 

 

 

75

 

Redemption (purchase) of FHLB stock

 

 

(10)

 

 

2

 

Net change in loans

 

 

(18,254)

 

 

(25,219)

Purchases of premises and equipment

 

 

(215)

 

 

(953)

Proceeds from sale of premises and equipment

 

 

-

 

 

 

1,460

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by investing activities

 

 

(20,920)

 

 

28,602

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net change in deposits

 

 

83,911

 

 

 

(65,691)

Net change in securities sold under agreement to repurchase

 

 

(67,891)

 

 

45,484

 

Proceeds from Fed Funds purchased

 

 

-

 

 

 

43,275

 

Repayments of Fed Funds purchased

 

 

-

 

 

 

(43,275)

Common stock repurchased

 

 

(1,998)

 

 

(833)

Cash dividends paid on common stock

 

 

(2,969)

 

 

(2,994)

 

 

 

 

 

 

 

 

 

Net cash provided (used) by financing activities

 

 

11,053

 

 

 

(24,034)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

460

 

 

 

17,445

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

82,375

 

 

 

71,596

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$82,835

 

 

 

89,041

 

 

 
8

Table of Contents

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Consolidated Statements of Cash Flows, continued

Six Months Ended June 30, 2024 and 2023

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$14,607

 

 

 

5,948

 

Income taxes

 

$1,837

 

 

 

1,498

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Change in unrealized loss on investment securities available for sale, net

 

$(624)

 

 

3,854

 

Restricted stock units issued

 

$51

 

 

 

6

 

Initial recognition of lease right-of-use asset and lease liability

 

$-

 

 

 

348

 

Allowance for credit losses recorded upon adoption of ASU 326, net of tax

 

$-

 

 

 

(838)

 

 

 

 

 

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

 

 

 

 

 

     

 
9

Table of Contents

 

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

 

Notes to Consolidated Financial Statements (Unaudited)

 

(1) Summary of Significant Accounting Policies

 

The Consolidated Financial Statements include the financial statements of Peoples Bancorp of North Carolina, Inc. (the “Company”) and its wholly owned subsidiary, Peoples Bank (the “Bank”), along with the Bank’s wholly owned subsidiaries, Peoples Investment Services, Inc. (“PIS”), Real Estate Advisory Services, Inc. (“REAS”), Community Bank Real Estate Solutions, LLC (“CBRES”) and PB Real Estate Holdings, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

 

In June 2006, the Company formed a wholly owned Delaware statutory trust, PEBK Capital Trust II (“PEBK Trust II”), to facilitate the issuance of $20.6 million of trust preferred securities. PEBK Trust II is not included in the Consolidated Financial Statements.

 

The Consolidated Financial Statements in this report (other than the Consolidated Balance Sheet at December 31, 2023) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States (“GAAP”). Actual results could differ from those estimates.

 

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management has determined that the Company has two significant operating segment: Banking Operations and CBRES, as discussed more fully in Note 7. In determining the appropriateness of segment definition, the Company considers the criteria of Accounting Standards Codification (“ASC”) 280, Segment Reporting.

 

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance. A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2023 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2024 Annual Meeting of Shareholders. There have been no significant changes to the application of significant accounting policies since December 31, 2023.

 

Recent Accounting Pronouncements

 

The following table provides a summary of Accounting Standards Updates (“ASU’s”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of June 30, 2024, which may impact the Company’s financial statements.

 

ASU

Description

Effective Date

Effect on Financial Statements or Other Significant Matters

 

 

 

 

ASU

Description

Effective Date

Effect on Financial Statements or Other Significant Matters

ASU 2023-07 Segment Reporting (Topic 280)

The ASU provides amendments to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses

Annual periods after 12/15/23 and interim periods after 12/15/24

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2023-09 Income Taxes (Topic 740)

The ASU provides amendments to  improve the transparency

of income tax disclosures.

January 1, 2025

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2024-01 Compensation—Stock Compensation (Topic 718)

The ASU adds an illustrative example (with four fact patterns) on how an entity would apply Accounting Standards Codification (ASC) 718 scope guidance.

January 1, 2025

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2024-02 Codification Improvements Amendments to Remove References to Concepts Statements

The ASU removes references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references are a substitute for actual wording from a Concepts Statement. In most cases, the ASU is not intended to result in significant accounting changes for most entities. 

January 1, 2025

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

   

 
10

Table of Contents

 

Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

 

Reclassification

Certain amounts in the 2023 consolidated financial statements have been reclassified to conform to the 2024 presentation. These reclassifications did not have any impact on shareholders’ equity or net earnings.

 

(2) Comprehensive Income

 

The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.

 

The following table presents the changes in accumulated other comprehensive loss for the three and six months ended June 30, 2024 and 2023:

 

 

 

For the three months ended

 

 

For the six months ended

 

(dollars in thousands)

 

June 30, 2024

 

 

June 30, 2023

 

 

June 30, 2024

 

 

June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$(39,310)

 

$(38,424)

 

$(39,365)

 

$(47,597)

Other comprehensive loss before reclassifications, net

 

 

(679)

 

 

(5,319)

 

 

(624)

 

 

1,938

 

Amounts reclassified from accumulated other comprehensive loss, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,916

 

Net current period other comprehensive loss

 

 

(679)

 

 

(5,319)

 

 

(624)

 

 

3,854

 

Ending balance

 

$(39,989)

 

$(43,743)

 

$(39,989)

 

$(43,743)

 

(3) Net Earnings Per Share

 

Net earnings per share is based on the weighted average number of shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The average market price during the applicable period is used to compute equivalent shares.

 

The reconciliation of the amounts used in the computation of both “basic earnings per share” and “diluted earnings per share” for the three and six months ended June 30, 2024 and 2023 is as follows:

 

For the three months ended June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 Net Earnings

(Dollars in

thousands)

 

 

 Weighted

Average

 Number of

Shares

 

 

 Per Share

 Amount

 

Basic earnings per share

 

$4,888

 

 

 

5,290,856

 

 

$0.93

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units - unvested

 

 

 

 

 

 

19,886

 

 

 

 

 

Shares held in deferred comp plan

 

 

 

 

 

 

 

 

 

 

 

 

by deferred compensation trust

 

 

 

 

 

 

165,608

 

 

 

 

 

Diluted earnings per share

 

$4,888

 

 

 

5,476,350

 

 

$0.89

 

 

For the six months ended June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 Net Earnings

 (Dollars in

thousands)

 

 

 Weighted

Average

Number of

Shares

 

 

 Per Share

Amount

 

Basic earnings per share

 

$8,836

 

 

 

5,304,763

 

 

$1.67

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units - unvested

 

 

 

 

 

 

19,015

 

 

 

 

 

Shares held in deferred comp plan by deferred compensation trust

 

 

 

 

 

 

164,975

 

 

 

 

 

Diluted earnings per share

 

$8,836

 

 

 

5,488,753

 

 

$1.61

 

   

 
11

Table of Contents

 

For the three months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 Net Earnings

 (Dollars in

thousands)

 

 

 Weighted

Average

Number of

Shares

 

 

 Per Share

 Amount

 

Basic earnings per share

 

$4,808

 

 

 

5,451,521

 

 

$0.88

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units - unvested

 

 

 

 

 

 

20,636

 

 

 

 

 

Shares held in deferred comp plan by deferred compensation trust

 

 

 

 

 

 

161,749

 

 

 

 

 

Diluted earnings per share

 

$4,808

 

 

 

5,633,906

 

 

$0.85

 

 

 

 

 Net Earnings

 (Dollars in

thousands)

 

 

 Weighted

Average

 Number of

 Shares

 

 

 Per Share

Amount

 

Basic earnings per share

 

$7,980

 

 

 

5,463,495

 

 

$1.46

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units - unvested

 

 

 

 

 

 

18,812

 

 

 

 

 

Shares held in deferred comp plan by deferred compensation trust

 

 

 

 

 

 

167,073

 

 

 

 

 

Diluted earnings per share

 

$7,980

 

 

 

5,649,380

 

 

$1.41

 

 

(4) Investment Securities

 

Investment securities available for sale at June 30, 2024 and December 31, 2023 are as follows:

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 June 30, 2024

 

 

 

 Amortized

Cost

 

 

 Gross

 Unrealized

Gains

 

 

 Gross

Unrealized

Losses

 

 

 Fair Value

 

U.S. Treasuries

 

$7,978

 

 

 

-

 

 

 

872

 

 

 

7,106

 

U.S. Government sponsored enterprises

 

 

10,163

 

 

 

-

 

 

 

590

 

 

 

9,573

 

GSE - Mortgage-backed securities

 

 

257,268

 

 

 

176

 

 

 

23,296

 

 

 

234,148

 

Private label mortgage-backed securities

 

 

39,971

 

 

 

11

 

 

 

1,854

 

 

 

38,128

 

State and political subdivisions

 

 

129,796

 

 

 

-

 

 

 

25,491

 

 

 

104,305

 

Total

 

$445,176

 

 

 

187

 

 

 

52,103

 

 

 

393,260

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 December 31, 2023

 

 

 

 Amortized

 Cost

 

 

 Gross

Unrealized

Gains

 

 

 Gross

 Unrealized

Losses

 

 

 Fair Value

 

U.S. Treasuries

 

$10,974

 

 

 

-

 

 

 

830

 

 

 

10,144

 

U.S. Government sponsored enterprises

 

 

11,111

 

 

 

-

 

 

 

596

 

 

 

10,515

 

GSE - Mortgage-backed securities

 

 

257,705

 

 

 

185

 

 

 

22,988

 

 

 

234,902

 

Private label mortgage-backed securities

 

 

33,317

 

 

 

16

 

 

 

2,063

 

 

 

31,270

 

State and political subdivisions

 

 

129,922

 

 

 

-

 

 

 

24,829

 

 

 

105,093

 

Total

 

$443,029

 

 

 

201

 

 

 

51,306

 

 

 

391,924

 

 

 
12

Table of Contents

 

The current fair value and associated unrealized losses on investments in securities with unrealized losses at June 30, 2024 and December 31, 2023 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2024

 

 

 

 Less than 12 Months

 

 

 12 Months or More

 

 

 Total

 

 

 

 Fair Value

 

 

 Unrealized Losses

 

 

 Fair Value

 

 

 Unrealized Losses

 

 

 Fair Value

 

 

 Unrealized Losses

 

U.S. Treasuries

 

$-

 

 

 

-

 

 

 

7,106

 

 

 

872

 

 

 

7,106

 

 

 

872

 

U.S. government sponsored enterprises

 

 

-

 

 

 

-

 

 

 

9,573

 

 

 

590

 

 

 

9,573

 

 

 

590

 

GSE -Mortgage-backed securities

 

 

10,239

 

 

 

144

 

 

 

210,829

 

 

 

23,152

 

 

 

221,068

 

 

 

23,296

 

Private label mortgage-backed securities

 

 

6,884

 

 

 

46

 

 

 

25,467

 

 

 

1,808

 

 

 

32,351

 

 

 

1,854

 

State and political subdivisions

 

 

-

 

 

 

-

 

 

 

104,305

 

 

 

25,491

 

 

 

104,305

 

 

 

25,491

 

Total

 

$17,123

 

 

 

190

 

 

 

357,280

 

 

 

51,913

 

 

 

374,403

 

 

 

52,103

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 Less than 12 Months

 

 

 12 Months or More

 

 

 Total

 

 

 

 Fair Value

 

 

 Unrealized Losses

 

 

 Fair Value

 

 

 Unrealized Losses

 

 

 Fair Value

 

 

 Unrealized Losses

 

U.S. Treasuries

 

$-

 

 

 

-

 

 

 

10,144

 

 

 

830

 

 

 

10,144

 

 

 

830

 

U.S. government sponsored enterprises

 

 

-

 

 

 

-

 

 

 

10,515

 

 

 

596

 

 

 

10,515

 

 

 

596

 

GSE -Mortgage-backed securities

 

 

24,167

 

 

 

546

 

 

 

203,234

 

 

 

22,442

 

 

 

227,401

 

 

 

22,988

 

Private label mortgage-backed securities

 

 

3,416

 

 

 

43

 

 

 

23,095

 

 

 

2,020

 

 

 

26,511

 

 

 

2,063

 

State and political subdivisions

 

 

-

 

 

 

-

 

 

 

105,093

 

 

 

24,829

 

 

 

105,093

 

 

 

24,829

 

Total

 

$27,583

 

 

 

589

 

 

 

352,081

 

 

 

50,717

 

 

 

379,664

 

 

 

51,306

 

 

At June 30, 2024, unrealized losses in the investment securities portfolio relating to debt securities totaled $52.1 million.  The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary.  From the June 30, 2024 tables above, both of the U.S. Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all seven of the securities issued by U.S. Government sponsored enterprises (“GSE”), 115 of the 124 GSE mortgage-backed securities, and 13 of the 16 private label mortgage backed securities contained unrealized losses.  The Company did not have any reserves on available for sale securities at June 30, 2024, as no credit related losses were identified in the Company’s June 30, 2024 analysis.  At December 31, 2023, unrealized losses in the investment securities portfolio relating to debt securities totaled $51.3 million.  The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary.  From the December 31, 2023 tables above, all three of the U.S. Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all seven of the securities issued by GSE, 114 of the 121 GSE mortgage-backed securities, and 12 of the 14 private label mortgage backed securities contained unrealized losses.  The Company did not have an allowance for credit losses on available for sale securities at December 31, 2023, as no credit related losses were identified in the Company’s December 31, 2023 CECL analysis. 

 

The amortized cost and estimated fair value of investment securities available for sale at June 30, 2024, presented by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

 

June 30, 2024

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 Amortized Cost

 

 

  Fair Value

 

Due within one year

 

$2,997

 

 

 

2,951

 

Due from one to five years

 

 

17,620

 

 

 

15,955

 

Due from five to ten years

 

 

59,340

 

 

 

49,675

 

Due after ten years

 

 

107,951

 

 

 

90,531

 

Mortgage-backed securities

 

 

257,268

 

 

 

234,148

 

Total

 

$445,176

 

 

 

393,260

 

 

No securities available for sale were sold during the six months ended June 30, 2024. No securities available for sale were sold during the three months ended June 30, 2023. During the six months ended June 30, 2023, proceeds from sales of securities available for sale were $51.0 million and resulted in gross losses of $2.7 million and gross gains of $177,000.

 

 
13

Table of Contents

 

Securities with a fair value of approximately $61.3 million and $132.0 million at June 30, 2024 and December 31, 2023, respectively, were pledged to secure public deposits and for other purposes as required by law.

 

(5) Loans

 

Major classifications of loans at June 30, 2024 and December 31, 2023 are summarized as follows:

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

June 30, 2024

 

 

December 31, 2023

 

Real estate loans:

 

 

 

 

 

 

Construction and land development

 

$119,606

 

 

 

136,401

 

Single-family residential

 

 

376,657

 

 

 

372,825

 

Commercial

 

 

456,088

 

 

 

425,820

 

Multifamily and farmland

 

 

70,701

 

 

 

63,042

 

Total real estate loans

 

 

1,023,052

 

 

 

998,088

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

Commercial

 

 

64,464

 

 

 

70,544

 

Farm

 

 

523

 

 

 

550

 

Consumer

 

 

6,483

 

 

 

6,966

 

All other

 

 

16,150

 

 

 

16,918

 

 

 

 

 

 

 

 

 

 

Total loans

 

 

1,110,672

 

 

 

1,093,066

 

 

 

 

 

 

 

 

 

 

Less allowance for credit losses

 

 

(10,016)

 

 

(11,041)

 

 

 

 

 

 

 

 

 

Total net loans

 

$1,100,656

 

 

 

1,082,025

 

 

The Bank makes loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Wake, Rowan and Forsyth counties of North Carolina.  Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market.  Risk characteristics of the major components of the Bank’s loan portfolio are discussed below:

 

 

·

Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral.

 

 

 

 

·

Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.

 

 

 

 

·

Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over the loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property.

 

 

 

 

·

Commercial loans – Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business.

 

 

 

 

·

Multifamily and farmland loans – Decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.

 

 

 
14

Table of Contents

 

Loans are considered past due if the required principal and interest payments have not been received within 30 days of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Generally, a loan is placed on non-accrual status when it is over 90 days past due and there is reasonable doubt that all principal will be collected.  When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

 

The following tables present an age analysis of past due loans, by loan type, as of June 30, 2024 and December 31, 2023:

 

June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Loans 30-89 Days Past Due

 

 

 Nonaccrual Loans

 

 

 Total Past Due Loans

 

 

 Total Current Loans

 

 

 Total Loans

 

 

 Accruing Loans 90 or More Days Past Due

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and land development

 

$-

 

 

 

41

 

 

 

41

 

 

 

119,565

 

 

 

119,606

 

 

 

-

 

Single-family residential

 

 

1,965

 

 

 

3,779

 

 

 

5,744

 

 

 

370,913

 

 

 

376,657

 

 

 

-

 

Commercial

 

 

1,025

 

 

 

-

 

 

 

1,025

 

 

 

455,063

 

 

 

456,088

 

 

 

-

 

Multifamily and farmland

 

 

-

 

 

 

69