Peoples Bancorp of North Carolina, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 7, 2024. The company is a bank holding company whose principal business is conducted through Peoples Bank, a North Carolina community bank with 17 banking offices and four loan production offices.
Financial position and key metrics
- Year-end scale: Total assets were $1.6 billion, net loans $1.1 billion, deposits $1.4 billion, securities $394.8 million, and shareholders’ equity $121.0 million.
- Capital: The Bank reported a 10.35% Tier 1 leverage ratio, 13.83% common equity Tier 1 and Tier 1 risk-based ratios, and a 14.85% total risk-based capital ratio. The corresponding company ratios were 10.51%, 12.75%, 13.94%, and 14.96%. Both exceeded minimum requirements.
- Securities: Available-for-sale securities had $51.3 million of unrealized losses at year-end, attributed to interest-rate changes. The filing says these losses were considered temporary, but sales while securities remain in a loss position would realize losses. The Bank sold $53.5 million of available-for-sale securities in January and February 2023, recording $2.7 million of gross losses and $177,000 of gross gains.
- Funding concentration: The five largest deposit relationships, including repurchase agreements, totaled $134.5 million, or 9.10% of combined deposits and repurchase agreements. Deposits within those relationships were $108.4 million, or 7.79% of deposits; repurchase agreements were $26.2 million, or 30.17% of that funding category.
- FDIC insurance expense: $745,000 in 2023, versus $461,000 in 2022 and $415,000 in 2021. The filing attributes the increase primarily to the assessment rate rising from 0.03% to 0.05% effective January 1, 2023.
Results, comparison, and liquidity
The supplied filing text does not provide clear values for revenue, net income, earnings per share, net interest margin, cash flows, loan-loss provision, nonperforming assets, or detailed debt and liquidity balances. It points to the incorporated Annual Report for the financial statements and management’s discussion; therefore, year-over-year changes in these measures cannot be summarized from the supplied text. The filing describes deposits, loan repayments, the securities portfolio, and borrowings as liquidity sources, while warning that deposit outflows or impaired funding access could constrain liquidity.
The filing identifies a higher FDIC assessment expense in 2023 and securities sales at a net gross loss early in the year. It does not provide enough income-statement data here to assess the overall change in profitability or margins versus 2022.
Management commentary, risks, and contingencies
- Interest rates: Rapid rate movements in 2022 and 2023 may affect the spread between interest earned on assets and interest paid on funding, loan demand, and securities values. Trust preferred securities switched from three-month LIBOR plus 163 basis points to three-month SOFR plus 189 basis points effective September 15, 2023.
- Credit and local-market exposure: Lending is concentrated in the Catawba Valley and surrounding North Carolina communities. Commercial real estate, commercial, construction and land development, and residential lending carry risks from economic weakness, collateral-value declines, refinancing difficulty, and borrower repayment capacity. The company adopted CECL on January 1, 2023; management notes that allowance estimates involve judgment and could require additional provision.
- Deposits and funding: Management warns that competition, rate changes, customer confidence, or withdrawals by large relationships could increase funding costs or reliance on other funding sources.
- Legal and tax contingency: North Carolina’s Department of Revenue proposed approximately $1.4 million of adjustments related to tax credits for 2014–2016. The Bank paid $1.2 million in taxes and interest in 2019 while contesting the adjustments; penalties were waived. A potential settlement to withdraw the disallowance was being negotiated, but was not final at the filing date. The Bank obtained a tax-credit guaranty agreement.
- Cybersecurity and operations: The company reported no known cybersecurity threat or prior incident that materially affected it, but emphasized ongoing cyber, vendor, business-continuity, and operational risks. Management assessed disclosure controls and internal control over financial reporting as effective at year-end; there was no auditor attestation of internal controls because the company is a non-accelerated filer.
- Outlook: No numerical earnings or financial guidance is stated in the supplied text. Forward-looking statements are subject to risks including competition, interest rates, economic conditions, credit quality, regulation, and monetary and fiscal policy.
Important facts for investors to verify
- Review the incorporated Annual Report’s statements and MD&A for net income, revenue, net interest margin, cash flows, credit metrics, and year-over-year comparisons; those figures are not clear in the supplied filing text.
- Check the status and accounting treatment of the disputed North Carolina tax-credit adjustments and any settlement or guaranty recovery.
- Assess the $51.3 million unrealized securities loss, potential sale needs, and sensitivity of capital and earnings to interest rates.
- Examine deposit trends, funding costs, and concentration in the five largest relationships, particularly repurchase-agreement funding.
- Confirm current asset quality, CECL allowance adequacy, and exposure to local real estate and commercial lending conditions.