Peoples Bancorp of North Carolina(PEBK) - 2023 Q4 - Annual Report

Financial Position - As of December 31, 2023, the Company had total assets of $1.6 billion, net loans of $1.1 billion, deposits of $1.4 billion, total securities of $394.8 million, and shareholders' equity of $121.0 million[15]. - The Bank's legal lending limit was $28.0 million, with the largest credit relationship being $19.1 million as of December 31, 2023[30]. - The Company had total deposits of $1.4 billion as of December 31, 2023, which are subject to fluctuations due to competitive pressures and changes in interest rates[110]. - The five largest deposit relationships amounted to $134.5 million, representing 9.10% of total deposits as of December 31, 2023[108]. - As of December 31, 2023, the Bank's Tier 1 leverage capital ratio was 10.35%, and the common equity Tier 1 risk-based capital ratio was 13.83%[54]. - The Company exceeded its minimum capital requirements with a total risk-based capital ratio of 14.96% as of December 31, 2023[54]. - The minimum common equity Tier 1 risk-based capital ratio required is 7.0%, with a minimum Tier 1 risk-based capital ratio of 8.5% and a total risk-based capital ratio of 10.5%[64]. Employee and Corporate Culture - The Company employed 277 full-time employees and 15 part-time employees, equating to 285 full-time equivalent employees as of December 31, 2023[19]. - The Company is committed to fostering a culture of diversity and inclusion, with ongoing training and development programs for employees[46]. - The Board of Directors emphasizes the importance of corporate culture in achieving the Company's strategic goals[43]. - The Company is dedicated to providing a workplace that is inclusive and free of discrimination, promoting top-quality talent regardless of various characteristics[45]. Regulatory Compliance - The Company is subject to the Dodd-Frank Act and the Economic Growth Act, which have significant regulatory impacts on the financial services industry[51]. - The Company has not opted to utilize the Community Bank Leverage Ratio and continues to use the Basel III standards[52]. - The Company is subject to various federal and state regulations, including the Bank Secrecy Act, which mandates a risk-based system of internal controls to prevent money laundering[82]. - The Sarbanes-Oxley Act of 2002 has been implemented to enhance corporate governance and protect investors, with compliance efforts believed to strengthen the Company's governance structure[84]. - The Company must obtain Federal Reserve approval for acquiring control of more than 5% of voting stock or merging with another bank[68]. - Regulatory authorities routinely examine financial institutions for compliance with anti-money laundering obligations, with potential serious consequences for non-compliance[74]. - Future regulatory changes may impact the Company's business, but the specific effects cannot be predicted[89]. Risk Factors - The Company is exposed to credit risk, with potential losses if borrowers fail to repay loans, particularly in a downturn in economic conditions[99]. - Non-performing assets negatively impact net income, as interest income on non-accrual loans is not recorded[106]. - Changes in interest rates can adversely affect the Company's profitability, as the income is derived from the spread between interest earned on loans and interest paid on deposits[107]. - The allowance for credit losses may be insufficient, which could adversely affect the Company's earnings if future losses exceed reserves[105]. - The Company relies heavily on customer deposits for funding, and any loss of this deposit base could limit lending ability and negatively impact financial condition[110]. - Cybersecurity incidents pose a risk to business operations and could lead to reputational damage and increased costs[112]. - The Company’s business continuity plans may prove inadequate, potentially resulting in disruptions that negatively impact operations[113]. - Adverse economic conditions, including inflation and unemployment, could weaken the economies of the communities served, affecting financial performance[95]. - Operational risks include potential losses from errors or fraudulent behavior by employees and third parties, which could materially affect operations[149]. Investment and Securities - The Bank's investment policy aims to maximize earnings while maintaining liquidity and ensuring the safety of principal[34]. - The Bank's available for sale investment securities portfolio had unrealized losses totaling $51.3 million as of December 31, 2023, primarily due to changing interest rates[132]. - In January and February 2023, the Bank sold securities available for sale totaling $53.5 million, resulting in gross losses of $2.7 million and gross gains of $177,000[132]. - Management assesses impairment of investment securities and deferred tax assets, which could negatively impact earnings if not realized[146]. Competition - The Bank faces strong competition for deposits and loans from other commercial banks, credit unions, and mortgage banking companies in its primary market area[24]. - The Bank faces substantial competition from various financial institutions, which could affect its growth and profitability[133]. - The Bank's ability to compete successfully depends on maintaining long-term customer relationships and expanding its market position[140]. Shareholder Information - As of February 29, 2024, the Company had 668 shareholders of record[181]. - The Company's common stock is listed on NASDAQ under the symbol "PEBK" and is supported by market makers such as Raymond James Financial, Inc. and Hovde Group, LLC[179]. - The Company repurchased a total of 16,709 shares in Q4 2023 at an average price of $21.25 per share[187]. - The total dollar value available for repurchase under the Company's stock repurchase program at the end of the period was approximately $2,003,184[188]. - The Company’s cumulative shareholder return from December 31, 2018, to December 31, 2023, was 47.27%, compared to 36.17% for the NASDAQ Composite Index[185]. Internal Controls - The Company maintained effective internal control over financial reporting as of December 31, 2023, according to management's assessment[196]. - There were no changes in internal control over financial reporting during the quarter ended December 31, 2023, that materially affected the Company's internal controls[193]. - The company may face material adverse effects on its business and financial condition due to ineffective internal controls and potential regulatory non-compliance[145].