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: March 31, 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. 5,291,029 shares of common stock, outstanding at April 30, 2024.

 

 

 

 

INDEX

 

PART I. FINANCIAL INFORMATION

 

 

 

 

PAGE(S)

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

 

 

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

 

4

 

 

 

 

 

 

 

Consolidated Statements of Earnings for the three months ended March 31, 2024 and 2023 (Unaudited)

 

5

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the three and months ended March 31, 2024 and 2023 (Unaudited)

 

6

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2024 and 2023 (Unaudited)

 

7

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)

 

8-9

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

10-28

 

 

 

 

 

 

Item 2.

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

 

29-38

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

39

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

39

 

 

PART II.  OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

39

 

Item 1A.

Risk Factors

 

39

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

 

Item 3.

Defaults upon Senior Securities

 

40

 

Item 5.

Other Information

 

40

 

Item 6.

Exhibits

 

41

 

Signatures

 

 

42

 

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

 

March 31, 2024 and December 31, 2023

(Dollars in thousands)

 

 

 

March 31,

 

 

December 31,

 

Assets

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Audited)

 

 

 

 

 

 

 

 

Cash and due from banks

 

$26,272

 

 

 

32,819

 

Interest-bearing deposits

 

 

71,824

 

 

 

49,556

 

Cash and cash equivalents

 

 

98,096

 

 

 

82,375

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale

 

 

394,664

 

 

 

391,924

 

Other investments

 

 

2,858

 

 

 

2,874

 

Total securities

 

 

397,522

 

 

 

394,798

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale

 

 

1,292

 

 

 

686

 

 

 

 

 

 

 

 

 

 

Loans

 

 

1,106,670

 

 

 

1,093,066

 

Less allowance for credit losses

 

 

(10,847)

 

 

(11,041)

Net loans

 

 

1,095,823

 

 

 

1,082,025

 

 

 

 

 

 

 

 

 

 

Premises and equipment, net

 

 

16,330

 

 

 

16,702

 

Cash surrender value of life insurance

 

 

18,250

 

 

 

18,134

 

Right of use lease asset

 

 

4,553

 

 

 

4,731

 

Accrued interest receivable and other assets

 

 

37,694

 

 

 

36,459

 

Total assets

 

$1,669,560

 

 

 

1,635,910

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$462,966

 

 

 

432,687

 

Interest-bearing demand, MMDA & savings

 

 

633,740

 

 

 

620,244

 

Time, over $250,000

 

 

148,819

 

 

 

148,904

 

Other time

 

 

206,839

 

 

 

190,210

 

Total deposits

 

 

1,452,364

 

 

 

1,392,045

 

 

 

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

 

59,216

 

 

 

86,715

 

Junior subordinated debentures

 

 

15,464

 

 

 

15,464

 

Lease liability

 

 

4,660

 

 

 

4,832

 

Accrued interest payable and other liabilities

 

 

16,764

 

 

 

15,838

 

Total liabilities

 

 

1,548,468

 

 

 

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 5,455,999 shares at March 31, 2024 and 5,534,499 shares at December 31, 2023

 

 

48,627

 

 

 

50,625

 

Common stock held by deferred compensation trust, at cost; 164,970 shares at March 31, 2024 and 158,356 shares at December 31, 2023

 

 

(1,943)

 

 

(1,910)

Deferred compensation

 

 

1,943

 

 

 

1,910

 

Retained earnings

 

 

111,775

 

 

 

109,756

 

Accumulated other comprehensive loss

 

 

(39,310)

 

 

(39,365)

Total shareholders' equity

 

 

121,092

 

 

 

121,016

 

Total liabilities and shareholders' equity

 

$1,669,560

 

 

 

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 Months Ended March 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

Interest and fees on loans

 

$15,138

 

 

 

12,883

 

Interest on due from banks

 

 

907

 

 

 

383

 

Interest on investment securities:

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises

 

 

2,591

 

 

 

2,230

 

State and political subdivisions

 

 

695

 

 

 

862

 

Other

 

 

479

 

 

 

443

 

Total interest income

 

 

19,810

 

 

 

16,801

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

Interest-bearing demand, MMDA & savings deposits

 

 

2,060

 

 

 

1,488

 

Time deposits

 

 

3,681

 

 

 

516

 

Junior subordinated debentures

 

 

284

 

 

 

248

 

Other

 

 

481

 

 

 

211

 

Total interest expense

 

 

6,506

 

 

 

2,463

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

13,304

 

 

 

14,338

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

91

 

 

 

224

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

 

13,213

 

 

 

14,114

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

Service charges

 

 

1,340

 

 

 

1,341

 

Other service charges and fees

 

 

184

 

 

 

182

 

Loss on sale of securities, net

 

 

-

 

 

 

(2,488)

Mortgage banking income

 

 

51

 

 

 

93

 

Insurance and brokerage commissions

 

 

246

 

 

 

228

 

Appraisal management fee income

 

 

2,414

 

 

 

2,094

 

Miscellaneous

 

 

1,803

 

 

 

2,161

 

Total non-interest income

 

 

6,038

 

 

 

3,611

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

6,980

 

 

 

6,500

 

Occupancy

 

 

2,111

 

 

 

2,014

 

Professional fees

 

 

392

 

 

 

399

 

Advertising

 

 

199

 

 

 

189

 

Debit card expense

 

 

312

 

 

 

273

 

FDIC insurance

 

 

191

 

 

 

110

 

Appraisal management fee expense

 

 

1,904

 

 

 

1,650

 

Other

 

 

2,427

 

 

 

2,567

 

Total non-interest expense

 

 

14,516

 

 

 

13,702

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

 

4,735

 

 

 

4,023

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

787

 

 

 

851

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$3,948

 

 

 

3,172

 

 

 

 

 

 

 

 

 

 

Basic net earnings per share

 

$0.74

 

 

 

0.58

 

Diluted net earnings per share

 

$0.72

 

 

 

0.56

 

Cash dividends declared per share

 

$0.35

 

 

 

0.34

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 
5

Table of Contents

 

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

 

Consolidated Statements of Comprehensive Income

 

Three Months Ended March 31, 2024 and 2023

(Dollars in thousands)

 

 

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

Net earnings

 

$3,948

 

 

 

3,172

 

 

 

 

 

 

 

 

 

 

Other comprehensive income :

 

 

 

 

 

 

 

 

Unrealized holding gains on securities

 

 

 

 

 

 

 

 

available for sale

 

 

71

 

 

 

9,421

 

Reclassification adjustment for losses on

 

 

 

 

 

 

 

 

securities available for sale

 

 

 

 

 

 

 

 

included in net earnings

 

 

-

 

 

 

2,488

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income ,

 

 

 

 

 

 

 

 

before income taxes

 

 

71

 

 

 

11,909

 

 

 

 

 

 

 

 

 

 

Income tax benefit related to other

 

 

 

 

 

 

 

 

comprehensive income :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains  on securities

 

 

 

 

 

 

 

 

available for sale

 

 

(16)

 

 

(2,164)

Reclassification adjustment for losses on sales

 

 

 

 

 

 

 

 

of securities available for sale

 

 

 

 

 

 

 

 

included in net earnings

 

 

-

 

 

 

(572)

 

 

 

 

 

 

 

 

 

Total income tax expense related to

 

 

 

 

 

 

 

 

other comprehensive income

 

 

(16)

 

 

(2,736)

 

 

 

 

 

 

 

 

 

Total other comprehensive income,

 

 

 

 

 

 

 

 

net of tax

 

 

55

 

 

 

9,173

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$4,003

 

 

 

12,345

 

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 Months Ended March 31, 2024 and 2023

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Held By

 

 

 Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Deferred

 

 

 Other

 

 

 

 

 

 

 Common Stock

 

 

 Retained

 

 

 Deferred

 

 

 Compensation

 

 

 Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

 Earnings

 

 

 Compensation

 

 

 Trust

 

 

 Income (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 (loss), net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

55

 

 

 

55

 

Balance, March 31, 2024

 

 

5,455,999

 

 

$48,627

 

 

 

111,775

 

 

 

1,943

 

 

 

(1,943)

 

 

(39,310)

 

 

121,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 exercised

 

 

191

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6

 

Equity incentive plan, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(344)

 

 

344

 

 

 

-

 

 

 

-

 

Net earnings

 

 

-

 

 

 

-

 

 

 

3,172

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,172

 

Change in accumulated other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

comprehensive income (loss), 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

 

        

See accompanying Notes to Consolidated Financial Statements.

 

 
7

Table of Contents

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

 

Consolidated Statements of Cash Flows

 

Three Months Ended March 31, 2024 and 2023

(Dollars in thousands)

 

 

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

 

$3,948

 

 

 

3,172

 

Adjustments to reconcile net earnings to

 

 

 

 

 

 

 

 

net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

671

 

 

 

903

 

Provision for credit losses

 

 

91

 

 

 

224

 

Deferred income taxes

 

 

(208)

 

 

(229)

Loss on sale of investment securities net

 

 

-

 

 

 

2,488

 

Restricted stock expense

 

 

6

 

 

 

(49)

Proceeds from sales of mortgage loans held for sale

 

 

3,097

 

 

 

4,621

 

Origination of mortgage loans held for sale

 

 

(3,703)

 

 

(4,827)

Cash surrender value of life insurance

 

 

(116)

 

 

(103)

Change in:

 

 

 

 

 

 

 

 

Right of use lease asset

 

 

178

 

 

 

167

 

Other assets

 

 

(1,043)

 

 

(380)

Lease liability

 

 

(172)

 

 

(152)

Other liabilities

 

 

920

 

 

 

2,207

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

3,669

 

 

 

8,042

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of investment securities available for sale

 

 

(9,710)

 

 

-

 

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

 

 

3,859

 

 

 

3,305

 

Proceeds from paydowns of other investment securities

 

 

37

 

 

 

37

 

Redemption (purchase) of FHLB stock

 

 

(10)

 

 

2

 

Net change in loans

 

 

(13,889)

 

 

(19,566)

Purchases of premises and equipment

 

 

(128)

 

 

(566)

 

 

 

 

 

 

 

 

 

Net cash provided (used) by investing activities

 

 

(16,841)

 

 

35,235

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net change in deposits

 

 

60,319

 

 

 

(21,774)

Net change in securities sold under agreement to repurchase

 

 

(27,499)

 

 

(8,153)

Proceeds from Fed Funds purchased

 

 

-

 

 

 

43,275

 

Repayments of Fed Funds purchased

 

 

-

 

 

 

(43,275)

Common stock repurchased

 

 

(1,998)

 

 

-

 

Cash dividends paid on common stock

 

 

(1,929)

 

 

(1,925)

 

 

 

 

 

 

 

 

 

Net cash provided (used) by financing activities

 

 

28,893

 

 

 

(31,852)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

15,721

 

 

 

11,425

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

82,375

 

 

 

71,596

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$98,096

 

 

 

83,021

 

 

 
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Table of Contents

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

 

Consolidated Statements of Cash Flows, continued

 

Three Months Ended March 31, 2024 and 2023 

(Dollars in thousands)

 

 

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$7,991

 

 

 

2,275

 

Income taxes

 

$236

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Change in unrealized loss on investment securities

 

 

 

 

 

 

 

 

available for sale, net

 

$55

 

 

 

9,173

 

Restricted stock units exercised

 

$-

 

 

 

6

 

Allowance for credit losses record 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. 

 
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Recent Accounting Pronouncements

 

The following table provides a summary of Accounting Standards Updates (“ASU’s”) issued by the FASB that the Company has not adopted as of March 31, 2024, which may impact the Company’s financial statements.

   

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

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.

 

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 months ended March 31, 2024 and 2023:

 

 

 

For the three months ended

 

(dollars in thousands)

 

March 31, 2024

 

 

March 31, 2023

 

 

 

 

 

 

 

 

Beginning balance

 

$(39,365)

 

$(47,597)

Other comprehensive loss before reclassifications, net

 

 

55

 

 

 

9,173

 

Amounts reclassified from accumulated other comprehensive loss, net

 

 

-

 

 

 

-

 

Net current period other comprehensive loss

 

 

55

 

 

 

9,173

 

Ending balance

 

$(39,310)

 

$(38,424)

 

(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 months ended March 31, 2024 and 2023 is as follows:

 

For the three months ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 Net Earnings (Dollars in thousands)

 

 

 Weighted Average Number of Shares

 

 

 Per Share Amount

 

Basic earnings per share

 

$3,948

 

 

 

5,318,671

 

 

$0.74

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units - unvested

 

 

 

 

 

 

18,143

 

 

 

 

 

Shares held in deferred comp plan

 

 

 

 

 

 

 

 

 

 

 

 

by deferred compensation trust

 

 

 

 

 

 

164,336

 

 

 

 

 

Diluted earnings per share

 

$3,948

 

 

 

5,501,150

 

 

$0.72

 

 

 
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For the three months ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 Net Earnings (Dollars in thousands)

 

 

 Weighted Average Number of Shares

 

 

 Per Share

Amount

 

Basic earnings per share

 

$3,172

 

 

 

5,475,603

 

 

$0.58

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units - unvested

 

 

 

 

 

 

16,967

 

 

 

 

 

Shares held in deferred comp plan

 

 

 

 

 

 

 

 

 

 

 

 

by deferred compensation trust

 

 

 

 

 

 

163,680

 

 

 

 

 

Diluted earnings per share

 

$3,172

 

 

 

5,656,250

 

 

$0.56

 

 

(4) Investment Securities

 

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

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 March 31, 2024

 

 

 

 Amortized Cost

 

 

 Gross Unrealized Gains

 

 

 Gross Unrealized Losses

 

 

 Fair Value

 

U.S. Treasuries

 

$7,977

 

 

 

-

 

 

 

891

 

 

 

7,086

 

U.S. Government sponsored enterprises

 

 

10,669

 

 

 

-

 

 

 

625

 

 

 

10,044

 

GSE - Mortgage-backed securities

 

 

259,899

 

 

 

204

 

 

 

22,987

 

 

 

237,116

 

Private label mortgage-backed securities

 

 

37,294

 

 

 

6

 

 

 

1,948

 

 

 

35,352

 

State and political subdivisions

 

 

129,859

 

 

 

-

 

 

 

24,793

 

 

 

105,066

 

Total

 

$445,698

 

 

 

210

 

 

 

51,244

 

 

 

394,664

 

 

 

(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

 

 

The current fair value and associated unrealized losses on investments in securities with unrealized losses at March 31, 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 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

 

$-

 

 

 

-

 

 

 

7,086

 

 

 

891

 

 

 

7,086

 

 

 

891

 

U.S. government sponsored enterprises

 

 

-

 

 

 

-

 

 

 

10,044

 

 

 

625

 

 

 

10,044

 

 

 

625

 

GSE -Mortgage-backed securities

 

 

21,715

 

 

 

550

 

 

 

199,648

 

 

 

22,437

 

 

 

221,363

 

 

 

22,987

 

Private label mortgage-backed securities

 

 

8,142

 

 

 

35

 

 

 

26,089

 

 

 

1,913

 

 

 

34,231

 

 

 

1,948

 

State and political subdivisions

 

 

-

 

 

 

-

 

 

 

105,066

 

 

 

24,793

 

 

 

105,066

 

 

 

24,793

 

Total

 

$29,857

 

 

 

585

 

 

 

347,933

 

 

 

50,659

 

 

 

377,790

 

 

 

51,244

 

 

(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

 

 

 
12

Table of Contents

 

At March 31, 2024, unrealized losses in the investment securities portfolio relating to debt securities totaled $51.2 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the March 31, 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”), 114 of the 124 GSE mortgage-backed securities, and 15 of the 16 private label mortgage backed securities contained unrealized losses. The Company did not have any reserves on available for sale securities at March 31, 2024, as no credit related losses were identified in the Company’s March 31, 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 March 31, 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.

 

March 31, 2024

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 Amortized Cost

 

 

  Fair Value

 

Due within one year

 

$2,996

 

 

 

2,938

 

Due from one to five years

 

 

16,180

 

 

 

14,702

 

Due from five to ten years

 

 

57,483

 

 

 

48,321

 

Due after ten years

 

 

71,846

 

 

 

56,235

 

Mortgage-backed securities

 

 

297,193

 

 

 

272,468

 

Total

 

$445,698

 

 

 

394,664

 

 

No securities available for sale were sold during the three months ended March 31, 2024. During the three months ended March 31, 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.

 

Securities with a fair value of approximately $109.0 million and $132.0 million at March 31, 2024 and December 31, 2023, respectively, were pledged to secure public deposits and for other purposes as required by law.

 

 
13

Table of Contents

 

(5) Loans

 

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

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

March 31,

2024

 

 

December 31,

2023

 

Real estate loans:

 

 

 

 

 

 

Construction and land development

 

$129,284

 

 

 

136,401

 

Single-family residential

 

 

375,621

 

 

 

372,825

 

Commercial

 

 

438,683

 

 

 

425,820

 

Multifamily and farmland

 

 

71,545

 

 

 

63,042

 

Total real estate loans

 

 

1,015,133

 

 

 

998,088

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

Commercial

 

 

68,138

 

 

 

70,544

 

Farm

 

 

534

 

 

 

550

 

Consumer

 

 

6,643

 

 

 

6,966

 

All other

 

 

16,222

 

 

 

16,918

 

 

 

 

 

 

 

 

 

 

Total loans

 

 

1,106,670

 

 

 

1,093,066

 

 

 

 

 

 

 

 

 

 

Less allowance for credit losses

 

 

(10,847)

 

 

(11,041)

 

 

 

 

 

 

 

 

 

Total net loans

 

$1,095,823

 

 

 

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.

 

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.

 

 
14

Table of Contents

 

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

 

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans 30-

89 Days

Past Due

 

 

 Nonaccrual

 

 

 Total Past Due Loans

 

 

 Total Current Loans

 

 

 Total Loans

 

 

 Accruing Loans 90 or More Days Past Due

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and land development

 

$-

 

 

 

43

 

 

 

43

 

 

 

129,241

 

 

 

129,284

 

 

 

-

 

Single-family residential

 

 

5,787

 

 

 

3,323

 

 

 

9,110

 

 

 

366,511

 

 

 

375,621

 

 

 

-

 

Commercial

 

 

915

 

 

 

-

 

 

 

915

 

 

 

437,768

 

 

 

438,683

 

 

 

-

 

Multifamily and farmland

 

 

-

 

 

 

72

 

 

 

72

 

 

 

71,473

 

 

 

71,545

 

 

 

-

 

Total real estate loans

 

 

6,702

 

 

 

3,438

 

 

 

10,140

 

 

 

1,004,993

 

 

 

1,015,133

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

143

 

 

 

552

 

 

 

695

 

 

 

67,443

 

 

 

68,138

 

 

 

-

 

Farm

 

 

-

 

 

 

-

 

 

 

-

 

 

 

534

 

 

 

534

 

 

 

-

 

Consumer

 

 

29

 

 

 

1

 

 

 

30

 

 

 

6,613

 

 

 

6,643

 

 

 

-

 

All other

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,222

 

 

 

16,222

 

 

 

-

 

Total loans

 

$6,874

 

 

 

3,991

 

 

 

10,865

 

 

 

1,095,805

 

 

 

1,106,670

 

 

 

-

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Loans 30-

 89 Days

Past Due

 

 

 Nonaccrual

 

 

 Total Past Due Loans

 

 

 Total Current Loans

 

 

 Total Loans

 

 

 Accruing Loans 90 or More Days Past Due

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and land development

 

$5

 

 

 

45

 

 

 

50

 

 

 

136,351

 

 

 

136,401

 

 

 

-

 

Single-family residential

 

 

3,761

 

 

 

3,302

 

 

 

7,063

 

 

 

365,762

 

 

 

372,825

 

 

 

-

 

Commercial

 

 

13

 

 

 

-

 

 

 

13

 

 

 

425,807

 

 

 

425,820

 

 

 

-

 

Multifamily and farmland

 

 

-

 

 

 

76

 

 

 

76

 

 

 

62,966

 

 

 

63,042

 

 

 

-

 

Total real estate loans

 

 

3,779

 

 

 

3,423

 

 

 

7,202

 

 

 

990,886

 

 

 

998,088

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

125

 

 

 

463

 

 

 

588

 

 

 

69,956

 

 

 

70,544

 

 

 

-

 

Farm

 

 

-

 

 

 

1

 

 

 

1

 

 

 

549

 

 

 

550

 

 

 

-

 

Consumer

 

 

63

 

 

 

-

 

 

 

63

 

 

 

6,903

 

 

 

6,966

 

 

 

-

 

All other

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,918

 

 

 

16,918

 

 

 

-

 

Total loans

 

$3,967

 

 

 

3,887

 

 

 

7,854

 

 

 

1,085,212

 

 

 

1,093,066

 

 

 

-

 

 

The following table presents non-accrual loans as of March 31, 2024 and December 31, 2023:

 

 

 

March 31, 2024

 

 

 

 Nonaccrual Loans

 

 

 Nonaccrual Loans

 

 

 Total

 

 

 

 With No

 

 

 With

 

 

 Nonaccrual 

 

(Dollars in thousands)

 

Allowance

 

 

Allowance

 

 

 Loans

 

Real estate loans:

 

 

 

 

 

 

 

 

 

Construction and land development

 

$43

 

 

 

-

 

 

 

43

 

Single-family residential

 

 

3,197

 

 

 

126

 

 

 

3,323

 

Commercial

 

 

-

 

 

 

-

 

 

 

-

 

     Multifamily and farmland

 

 

72

 

 

 

-

 

 

 

72

 

Total real estate loans

 

 

3,312

 

 

 

126

 

 

 

3,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

254

 

 

 

298

 

 

 

552

 

Consumer

 

 

1

 

 

 

-

 

 

 

1

 

Total

 

$3,567

 

 

 

424

 

 

 

3,991

 

 

 
15

Table of Contents

 

 

 

December 31, 2023

 

 

 

 Nonaccrual Loans

 

 

 Nonaccrual Loans

 

 

 Total

 

 

 

 With No

 

 

 With

 

 

 Nonaccrual 

 

(Dollars in thousands)

 

Allowance

 

 

Allowance

 

 

 Loans

 

Real estate loans:

 

 

 

 

 

 

 

 

 

Construction and land development

 

$45

 

 

 

-

 

 

 

45

 

Single-family residential

 

 

3,302

 

 

 

-

 

 

 

3,302

 

Commercial

 

 

-

 

 

 

-

 

 

 

-

 

     Multifamily and farmland

 

 

76

 

 

 

-

 

 

 

76

 

Total real estate loans

 

 

3,423

 

 

 

-

 

 

 

3,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

31

 

 

 

432

 

 

 

463

 

Consumer

 

 

1

 

 

 

-

 

 

 

1

 

Total

 

$3,455

 

 

 

432

 

 

 

3,887

 

 

No interest income was recognized on non-accrual loans for the three months ended March 31, 2024 and 2023.

 

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition.  The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty.  An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

 

Because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification.  Occasionally, the Bank modifies loans by providing principal forgiveness on certain loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses.  The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. 

 

In some cases, the Bank may modify a certain loan by providing multiple types of concessions.  Typically, one type of concession, such as a term extension, is granted initially.  If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

 

The following tables show the amortized cost basis at March 31, 2024 and 2023 of the loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2024 and 2023, disaggregated by loan class and type of concession granted.  

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 Term Extension

 

 

 

Amortized Cost Basis at March 31, 2024

 

 

% of Loan Class

 

Loan class:

 

 

 

 

 

 

Commercial not secured by real estate

 

 

73

 

 

 

0.11%

Total

 

$73

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 Term Extension

 

 

 

Amortized Cost Basis at March 31, 2023

 

 

% of Loan Class

 

Loan class:

 

 

 

 

 

 

Commercial real estate

 

 

686

 

 

 

0.17%

Total

 

$686

 

 

 

 

 

 

 
16

Table of Contents

 

The following tables describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023

 

March 31, 2024

 Term Extension

Loan Class

Financial Effect

Commercial real estate

Line of credit converted to amortizing term loan.

 

March 31, 2023

 Term Extension

Loan Class

Financial Effect

Commercial real estate

Extended existing amortization from 148 months to 173 months to keep existing payment the same with the current market rate.

 

No loans modified in the three months ended March 31, 2024 and 2023 that were made to borrowers experiencing financial difficulty had been written off at March 31, 2024 and 2023.

 

The Bank closely monitors the performance of those loans that are modified because borrowers are experiencing financial difficulty so as to understand the effectiveness of its modification efforts.  The following tables show the performance of loans that have been modified in the three months ended March 31, 2024 and 2023.

 

 

March 31, 2024

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 Payment Status (Amortized Cost Basis)

 

 

 

Current

 

 

30 - 89 Days Past Due

 

 

90 + Days Past Due

 

Loan type:

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

73

 

 

 

-

 

 

 

-

 

Total

 

$73

 

 

 

-

 

 

 

-

 

 

March 31, 2023

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 Payment Status (Amortized Cost Basis)

 

 

 

Current

 

 

30 - 89 Days Past Due

 

 

90 + Days Past Due

 

Loan type:

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

686

 

 

 

-

 

 

 

-

 

Total

 

$686

 

 

 

-

 

 

 

-

 

 

 
17

Table of Contents

 

The following tables present changes in the allowance for credit losses for the three months ended March 31, 2024 and 2023. 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development

 

 

Single-Family Residential

 

 

Commercial

 

 

Multifamily and Farmland

 

 

Commercial

 

 

Farm

 

 

Consumer and All Other

 

 

Total

 

Three months ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$3,913

 

 

 

3,484

 

 

 

2,317

 

 

 

268

 

 

 

812

 

 

 

2

 

 

 

245

 

 

 

11,041

 

Charge-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(446)

 

 

-

 

 

 

(210)

 

 

(656)

Recoveries

 

 

-

 

 

 

56

 

 

 

201

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

36

 

 

 

299

 

Provision (recovery) for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  loan losses (1)

 

 

(233)

 

 

57

 

 

 

(173)

 

 

45

 

 

 

300

 

 

 

-

 

 

 

167