Peoples Bancorp of North Carolina, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The company is a bank holding company whose principal business is Peoples Bank, serving communities in North Carolina.
Financial position and key metrics
- At December 31, 2021, total assets were approximately $1.6 billion; net loans were $875.5 million; deposits were $1.4 billion; securities were $410.2 million; and shareholders’ equity was $142.4 million.
- The Bank’s regulatory capital ratios were 9.50% Tier 1 leverage, 15.27% common equity Tier 1, 15.27% Tier 1 risk-based, and 16.19% total risk-based. The company’s corresponding ratios were 9.64%, 13.96%, 15.43%, and 16.35%. Both exceeded applicable minimum capital requirements.
- The filing excerpt does not provide clear values for annual revenue, net income, cash flow, net interest margin, or a complete debt and liquidity schedule. Those statements and the MD&A are incorporated from the Annual Report, which is referenced but not included in the supplied text.
- The company previously issued $20.6 million of trust preferred securities, redeeming $5.0 million in 2019. They accrue dividends at three-month LIBOR plus 163 basis points; the excerpt does not state the amount outstanding at year-end 2021.
- The five largest deposit relationships, including repurchase agreements, totaled $118.9 million, or 8.20% of combined deposits and repurchase agreements. The relationships included $100.5 million of deposits and $18.3 million of repurchase agreements.
Changes versus prior periods
- The supplied text does not provide sufficient comparative income-statement, balance-sheet, or cash-flow detail to assess year-over-year performance. FDIC insurance expense increased to approximately $415,000 in 2021 from $263,000 in 2020 and $119,000 in 2019.
- For 2021, the company reported 7,842 open-market share purchases for its deferred compensation plan, funded by participant contributions. The filing also reports purchases under the company’s repurchase program. In February 2022, it authorized a replacement program of up to $2.0 million.
Outlook, risks, and unusual items
- No specific earnings, growth, or margin guidance is provided in the supplied text. Management identifies competition, interest-rate changes, local economic conditions, credit quality, regulation, and cybersecurity as significant risks.
- COVID-19 remained a potential source of disruption to business activity, loan demand, credit quality, collateral values, staffing, and third-party services.
- The company expected to adopt CECL on January 1, 2023. It cautions that lifetime expected-loss measurement could increase or make the allowance for credit losses more volatile.
- A North Carolina tax dispute concerns credits claimed for 2014–2016. The proposed adjustments were approximately $1.4 million; the Bank paid $1.2 million in 2019 while contesting them. Management believes a related guaranty limits potential exposure to approximately $125,000, but recovery is not assured.
- The Bank reported $18.0 million of PPP loans at year-end and disclosed potential litigation and SBA-guaranty risks related to PPP loan processing and servicing.
- Management assessed disclosure controls and internal control over financial reporting as effective at year-end. The filing did not include an auditor attestation of internal controls because the company is a smaller reporting company.
Important facts for investors to verify
- Review the incorporated Annual Report and audited financial statements for 2021 earnings, margins, cash flows, loan-loss provision, liquidity, and full debt balances.
- Check subsequent developments in the tax-credit dispute, including guaranty coverage and recoverability of the amount paid.
- Assess deposit concentration, repurchase-agreement funding, and available borrowing capacity against liquidity needs.
- Review loan quality, allowance adequacy, and the potential effect of CECL adoption.
- Confirm implementation and remaining authorization under the February 2022 share repurchase program, and review dividend capacity and regulatory limits.