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What changed in PEOPLES BANCORP OF NORTH CAROLINA INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PEOPLES BANCORP OF NORTH CAROLINA INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+123 added−127 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-07)

Top changes in PEOPLES BANCORP OF NORTH CAROLINA INC's 2024 10-K

123 paragraphs added · 127 removed · 105 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

48 edited+15 added−8 removed106 unchanged
Biggest changeWe dedicate resources to fostering professional and personal growth with continuing education, on-the-job training and development programs. Supervision and Regulation Bank holding companies and commercial banks are extensively regulated under both federal and state law. The following is a brief summary of certain statutes and rules and regulations that affect or will affect the Company, the Bank and their subsidiaries.
Biggest changeWe also seek to design careers within our organization that are fulfilling ones, with competitive compensation and benefits alongside a positive work-life balance. We dedicate resources to fostering professional and personal growth with continuing education, on-the-job training and development programs. Supervision and Regulation Bank holding companies and commercial banks are extensively regulated under both federal and state law.
The final rule: · established a new minimum common equity Tier 1 risk-based capital ratio (common equity Tier 1 capital to total risk-weighted assets) of 4.5% and increased the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%, while maintaining the minimum total risk-based capital ratio of 8.0% and the minimum Tier 1 leverage capital ratio of 4.0%; · revised the rules for calculating risk-weighted assets to enhance their risk sensitivity; · phased out trust preferred securities and cumulative perpetual preferred stock as Tier 1 capital; · added a requirement to maintain a minimum conservation buffer, composed of common equity Tier 1 capital, of 2.5% of risk-weighted assets, to be applied to the new common equity Tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio, which means that banking organizations, on a fully phased in basis no later than January 1, 2019, must maintain a minimum common equity Tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5% and a minimum Total risk-based capital ratio of 10.5%; and · changed the definitions of capital categories for insured depository institutions for purposes of the Federal Deposit Insurance Corporation Improvement Act of 1991 prompt corrective action provisions.
The final rule: 9 Table of Contents · established a new minimum common equity Tier 1 risk-based capital ratio (common equity Tier 1 capital to total risk-weighted assets) of 4.5% and increased the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%, while maintaining the minimum total risk-based capital ratio of 8.0% and the minimum Tier 1 leverage capital ratio of 4.0%; · revised the rules for calculating risk-weighted assets to enhance their risk sensitivity; · phased out trust preferred securities and cumulative perpetual preferred stock as Tier 1 capital; · added a requirement to maintain a minimum conservation buffer, composed of common equity Tier 1 capital, of 2.5% of risk-weighted assets, to be applied to the new common equity Tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio, which means that banking organizations, on a fully phased in basis no later than January 1, 2019, must maintain a minimum common equity Tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5% and a minimum Total risk-based capital ratio of 10.5%; and · changed the definitions of capital categories for insured depository institutions for purposes of the Federal Deposit Insurance Corporation Improvement Act of 1991 prompt corrective action provisions.
Management provides the Bank Board with the loan portfolio information as described below: Monthly: The following reports are submitted to the Bank Board for review and approval on a monthly basis: · Loan Quality/Yield/Growth/Trend Report · Risk Grade Report with Details of Loans Risk Graded 5-8 · Commercial Loan Delinquency · New Loans - $250,000 and Greater · Comparison on New Loans in Prior Month with Same Month in Prior Year · Outstanding Commitments - $500,000 and greater · Commitment Pipeline Report – Outstanding commitments of $2,000,000 and greater (pending final approval and/or acceptance by the applicant) · Underwriting Exception Report (Commercial, Consumer and Mortgage) · Documentation Exception Report (Commercial and Consumer – quarterly comparison with current month) · All New Loans for Prior Month – Details Quarterly: The following reports are submitted to the Bank Board for review and approval on a quarterly basis: · Real Estate Secured Loans with Non-Conforming Loan-To-Value Ratio · Status of Other Real Estate Owned · Nonaccrual · Impaired Loan Report · Letters of Credit Outstanding · Portfolio Status Report - Detailed analytical report summarizing the composition of the bank's loan portfolio · Portfolio Stress Tests · Mortgage Report (see Mortgage Policy for complete list of reports) · Matured Home Equity Loan Report Semi-annually: The following report is submitted to the Bank Board for review and approval on a semi-annual basis: · Participation Status Report Annually: On an annual basis, the Bank Board: · Reviews and approves the Bank’s credit underwriting policies and procedures · Reviews findings of the annual independent loan review of borrowing relationships of $1.5 million and greater as well as a periodic sample of commercial relationships with exposures below $1.5 million prepared by an independent loan review company engaged by the Bank · Receives information from management detailing all new committed borrowing relationships exceeding $3.0 million and is informed during the year if a borrowing relationship exceeds $2.5 million 6 Table of Contents Investment Policies and Procedures The Bank’s investment policy is designed to provide flexibility as necessary to maintain satisfactory liquidity while maximizing earnings on funds available for investment.
Management provides the Bank Board with the loan portfolio information as described below: Monthly: The following reports are submitted to the Bank Board for review and approval on a monthly basis: · Loan Quality/Yield/Growth/Trend Report · Risk Grade Report with Details of Loans Risk Graded 5-8 · Commercial Loan Delinquency · New Loans - $250,000 and Greater · Comparison of New Loans in Prior Month with Same Month in Prior Year · Outstanding Commitments - $500,000 and Greater · Commitment Pipeline Report – outstanding commitments of $2,000,000 and greater (pending final approval and/or acceptance by the applicant) · Underwriting Exception Report (Commercial, Consumer and Mortgage) · Documentation Exception Report (Commercial and Consumer – quarterly comparison with current month) · All New Loans for Prior Month – Details Quarterly: The following reports are submitted to the Bank Board for review and approval on a quarterly basis: · Real Estate Secured Loans with Non-Conforming Loan-To-Value Ratio · Status of Other Real Estate Owned · Nonaccrual · Impaired Loan Report · Letters of Credit Outstanding · Portfolio Status Report - Detailed analytical report summarizing the composition of the Bank's loan portfolio · Portfolio Stress Tests · Matured Home Equity Loan Report Semi-annually: The following report is submitted to the Bank Board for review and approval on a semi-annual basis: · Participation Status Report Annually: On an annual basis, the Bank Board: · Reviews and approves the Bank’s credit underwriting policies and procedures · Reviews findings of the annual independent loan review of borrowing relationships of $1.5 million and greater as well as a periodic sample of commercial relationships with exposures below $1.5 million prepared by an independent loan review company engaged by the Bank · Receives information from management detailing all new committed borrowing relationships exceeding $3.0 million and is informed during the year if a borrowing relationship exceeds $2.5 million · Mortgage Report Investment Policies and Procedures The Bank’s investment policy is designed to provide flexibility as necessary to maintain satisfactory liquidity while maximizing earnings on funds available for investment.
On December 31, 2023, the Bank was in compliance with this requirement. Community Reinvestment. Under the Community Reinvestment Act (“CRA”), as implemented by regulations of the FDIC, an insured institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods.
On December 31, 2024, the Bank was in compliance with this requirement. Community Reinvestment. Under the Community Reinvestment Act (“CRA”), as implemented by regulations of the FDIC, an insured institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods.
We embrace our employee’s differences in age, color, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.
We embrace our employees’ differences in age, color, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.
Our culture is guided by our guiding principles below: Our Core Values - Employees – We are informed, encouraged, and committed - Integrity – We are fair and truthful - Exceptional Customer Service – We surpass our customers’ expectation - Accountability – We are accountable for our own actions and bank goals - Progressive and Positive – We see change as an opportunity - Our brand story Our Bank Promise, Vision, and Mission We are committed to fostering, cultivating, and preserving a culture of diversity and inclusion.
Our culture is guided by our guiding principles below: 7 Table of Contents Our Core Values - Employees – We are informed, encouraged, and committed - Integrity – We are fair and truthful - Exceptional Customer Service – We surpass our customers’ expectation - Accountability – We are accountable for our own actions and bank goals - Progressive and Positive – We see change as an opportunity - Our brand story Our Bank Promise, Vision, and Mission We are committed to fostering, cultivating, and preserving a culture of diversity and inclusion.
In addition, the federal bank regulatory agencies are required by FDICIA to prescribe standards specifying: (i) maximum classified assets to capital ratios; (ii) minimum earnings sufficient to absorb losses without impairing capital; and (iii) to the extent feasible, a minimum ratio of market value to book value for publicly-traded shares of depository institutions and depository institution holding companies. Other.
In addition, the federal bank regulatory agencies are required by FDICIA to prescribe standards specifying: (i) maximum classified assets to capital ratios; (ii) minimum earnings sufficient to absorb losses without impairing capital; and (iii) to the extent feasible, a minimum ratio of market value to book value for publicly-traded shares of depository institutions and depository institution holding companies. 14 Table of Contents Other.
The Bank has operated in the Catawba Valley region of North Carolina for over 100 years and is the only financial institution headquartered in Newton, North Carolina. Nevertheless, the Bank faces strong competition both in attracting deposits and making loans.
The Bank has operated in the Catawba Valley region of North Carolina for over 110 years and is the only financial institution headquartered in Newton, North Carolina. Nevertheless, the Bank faces strong competition both in attracting deposits and making loans.
Definitions of “well capitalized,” “adequately capitalized” and “undercapitalized” are the same as the definitions adopted by federal banking agencies to implement the prompt corrective action provisions discussed above. Current Expected Credit Loss Accounting Standard. The Financial Accounting Standards Board (“FASB”) has adopted a new accounting standard related to reserving for credit losses.
Definitions of “well capitalized,” “adequately capitalized” and “undercapitalized” are the same as the definitions adopted by federal banking agencies to implement the prompt corrective action provisions discussed above. 12 Table of Contents Current Expected Credit Loss Accounting Standard. The Financial Accounting Standards Board (“FASB”) has adopted a new accounting standard related to reserving for credit losses.
States have the authority to waive the 30% deposit cap. State-level deposit caps are not preempted as long as they do not discriminate against out-of-state companies, and the federal deposit caps apply only to initial entry acquisitions. 12 Table of Contents Limits on Rates Paid on Deposits and Brokered Deposits .
States have the authority to waive the 30% deposit cap. State-level deposit caps are not preempted as long as they do not discriminate against out-of-state companies, and the federal deposit caps apply only to initial entry acquisitions. Limits on Rates Paid on Deposits and Brokered Deposits .
It includes a variety of recordkeeping and reporting requirements (such as cash and suspicious activity reporting) as well as due diligence/know-your-customer documentation requirements. The Bank has established an anti-money laundering program to comply with the BSA requirements. 13 Table of Contents The Sarbanes-Oxley Act.
It includes a variety of recordkeeping and reporting requirements (such as cash and suspicious activity reporting) as well as due diligence/know-your-customer documentation requirements. The Bank has established an anti-money laundering program to comply with the BSA requirements. The Sarbanes-Oxley Act.
Also, an insured depository institution, such as the Bank, is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is defined in the applicable law and regulations). Deposit Insurance .
Also, an insured depository institution, such as the Bank, is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is defined in the applicable law and regulations). 10 Table of Contents Deposit Insurance .
At December 31, 2023, the Bank had four subsidiaries, Peoples Investment Services, Inc., Real Estate Advisory Services, Inc., Community Bank Real Estate Solutions, LLC (“CBRES”) and PB Real Estate Holdings, LLC.
At December 31, 2024, the Bank had four subsidiaries, Peoples Investment Services, Inc., Real Estate Advisory Services, Inc., Community Bank Real Estate Solutions, LLC (“CBRES”) and PB Real Estate Holdings, LLC.
The Company cannot predict whether or in what form any proposed statute, rule or regulation will be adopted or the extent to which the business of the Company and the Bank may be affected by such statute or regulation. 8 Table of Contents General .
The Company cannot predict whether or in what form any proposed statute, rule or regulation will be adopted or the extent to which the business of the Company and the Bank may be affected by such statute or regulation. General .
Lincoln County’s largest employers include Lincoln County Schools, County of Lincoln, Atrium Health Lincoln, RSI Home Products (manufacturing), Wal-Mart Associates, Inc., The Timken Company (manufacturing), Blum, Inc. (manufacturing), Lowes Home Centers, Inc. and Cataler North America (manufacturing).
Lincoln County’s largest employers include Lincoln County Schools, County of Lincoln, Atrium Health, Lincoln Charter Schools, Inc., American Woodmark - RSI Home Products (manufacturing), Wal-Mart Associates, Inc., The Timken Company (manufacturing), Blum, Inc. (manufacturing), Lowes Home Centers, Inc. and Cataler North America (manufacturing).
For this protection, each insured bank pays a quarterly statutory assessment and is subject to the rules and regulations of the FDIC. We recognized approximately $745,000, $461,000 and $415,000 in FDIC insurance expense in 2023, 2022, and 2021, respectively.
For this protection, each insured bank pays a quarterly statutory assessment and is subject to the rules and regulations of the FDIC. We recognized approximately $764,000, $745,000 and $461,000 in FDIC insurance expense in 2024, 2023, and 2022, respectively.
Under these limits, no loans and extensions of credit to any borrower outstanding at one time and not fully secured by readily marketable collateral may exceed 15% of the Bank’s total equity capital. At December 31, 2023, this limit was $28.0 million.
Under these limits, no loans and extensions of credit to any borrower outstanding at one time and not fully secured by readily marketable collateral may exceed 15% of the Bank’s total equity capital. At December 31, 2024, this limit was $29.1 million.
This limit is increased by an additional 10% of the Bank’s total equity capital, or $46.7 million as of December 31, 2023, for loans and extensions of credit that are fully secured by readily marketable collateral. Anti-Money Laundering and the USA Patriot Act.
This limit is increased by an additional 10% of the Bank’s total equity capital, or $48.6 million as of December 31, 2024, for loans and extensions of credit that are fully secured by readily marketable collateral. Anti-Money Laundering and the USA Patriot Act.
The Bank’s legal lending limit is set by law and is monitored by the FDIC and the Commissioner. As of December 31, 2023, the Bank’s legal lending limit was $28.0 million (absent fully marketable collateral), and the largest credit relationship was $19.1 million.
The Bank’s legal lending limit is set by law and is monitored by the FDIC and the Commissioner. As of December 31, 2024, the Bank’s legal lending limit was $29.1 million (absent fully marketable collateral), and the largest credit relationship was $19.1 million.
The preceding thresholds for the conservation buffer and related restrictions represent the fully phased in rules effective January 1, 2019. 10 Table of Contents Dividend and Repurchase Limitations .
The preceding thresholds for the conservation buffer and related restrictions represent the fully phased in rules effective January 1, 2019. Dividend and Repurchase Limitations .
The Bank, founded in 1912, is a state-chartered commercial bank serving the citizens and business interests of the Catawba Valley and surrounding communities through 17 banking offices, located in Lincolnton, Newton, Denver, Catawba, Conover, Maiden, Claremont, Hiddenite, Hickory, Charlotte, Huntersville, Mooresville, Raleigh, and Cary, North Carolina.
The Bank, founded in 1912, is a state-chartered commercial bank serving the citizens and business interests of the Catawba Valley and surrounding communities through 16 banking offices, located in Lincolnton, Newton, Denver, Catawba, Conover, Maiden, Claremont, Hiddenite, Hickory, Charlotte, Huntersville, Mooresville and Raleigh, North Carolina. The Bank also operates loan production offices in Charlotte, Denver, Salisbury and Winston-Salem North Carolina.
At December 31, 2023, the Bank exceeded each of its minimum capital requirements with a Tier 1 leverage capital ratio of 10.35%, common equity Tier 1 risk-based capital ratio of 13.83%, Tier 1 risk-based capital ratio of 13.83% and total risk-based capital ratio of 14.85%.
At December 31, 2024, the Bank exceeded each of its minimum capital requirements with a Tier 1 leverage capital ratio of 10.71%, common equity Tier 1 risk-based capital ratio of 14.35%, Tier 1 risk-based capital ratio of 14.35% and total risk-based capital ratio of 15.22%.
The Federal Reserve under the BHCA also has the authority to require a bank holding company to terminate any activity or to relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.
The Federal Reserve under the BHCA also has the authority to require a bank holding company to terminate any activity or to relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company. 8 Table of Contents As a result of the Company’s ownership of the Bank, the Company is also registered under the bank holding company laws of North Carolina.
Based upon June 30, 2023 comparative data, the Bank had 20.01% of the deposits in Catawba County, placing it second in deposit size among a total of 12 banks with branch offices in Catawba County; 16.09% of the deposits in Lincoln County, placing it second in deposit size among a total of nine banks with branch offices in Lincoln County; and 16.57% of the deposits in Alexander County, placing it fourth in deposit size among a total of four banks with branch offices in Alexander County.
Based upon June 30, 2024 comparative data, the Bank had 21.49% of the deposits in Catawba County, placing it second in deposit size among a total of 12 banks with branch offices in Catawba County; 16.37% of the deposits in Lincoln County, placing it second in deposit size among a total of 10 banks with branch offices in Lincoln County; and 16.10% of the deposits in Alexander County, placing it fourth in deposit size among a total of four banks with branch offices in Alexander County.
All of the Bank’s subsidiaries are incorporated in the state of North Carolina. 4 Table of Contents 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.
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.
PB Real Estate Holdings, LLC acquires, manages and disposes of real property, other collateral and assets obtained in the ordinary course of collecting debts previously contracted.
PB Real Estate Holdings, LLC acquires, manages and disposes of real property, other collateral and assets obtained in the ordinary course of collecting debts previously contracted. All of the Bank’s subsidiaries are incorporated in the state of North Carolina.
The Investment Officer may designate certain investment functions to other officers of the Bank and may also seek outside sources for investment advice or periodic appraisals of the portfolio.
The Investment Officer may designate certain investment functions to other officers of the Bank and may also seek outside sources for investment advice or periodic appraisals of the portfolio. The Executive Vice President/Chief Financial Officer serves as the Primary Investment Officer.
At December 31, 2023, the Company employed 277 full-time employees and 15 part-time employees, which equated to 285 full-time equivalent employees. Subsidiaries The Bank is a subsidiary of the Company.
At December 31, 2024, the Company employed 281 full-time employees and 13 part-time employees, which equated to 288 full-time equivalent employees. Subsidiaries The Bank is a subsidiary of the Company.
To assess the borrower’s ability to repay, we review the borrower’s employment, credit history, and other information on the historical and projected income and expenses of the borrower. 5 Table of Contents The objectives of our lending program are to: (i) establish a sound asset structure; (ii) provide a sound and profitable loan portfolio to (a) protect the depositor’s funds and (b) maximize our shareholders’ return on investment; (iii) promote the stable economic growth and development of the market area served by the Bank; and (iv) comply with all regulatory agency requirements and applicable law.
The objectives of our lending program are to: (i) establish a sound asset structure; (ii) provide a sound and profitable loan portfolio to (a) protect the depositor’s funds and (b) maximize our shareholders’ return on investment; (iii) promote the stable economic growth and development of the market area served by the Bank; and (iv) comply with all regulatory agency requirements and applicable law.
Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”). On July 21, 2010, the Dodd-Frank Act became law.
Accordingly, the Company is also subject to regulation and supervision by the Commissioner. Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”). On July 21, 2010, the Dodd-Frank Act became law.
Catawba County’s largest employers include Catawba County Schools, Catawba Valley Medical Center, Duke LifePoint/Frye Regional Medical Center, CommScope, Inc. (manufacturer of fiber optic cable and accessories), Corning Optical Communications (manufacturer of fiber optic cable and accessories), Target Stores Distribution Center (transportation and warehousing), Catawba County, GKN ePowertrain (manufacturing), Wal-Mart Associates, Inc. and Pierre Foods, Inc.
(manufacturer of fiber optic cable and accessories), Corning Optical Communications (manufacturer of fiber optic cable and accessories), Target Stores Distribution Center (transportation and warehousing), Catawba County, GKN ePowertrain (manufacturing), Wal-Mart Associates, Inc. and Pierre Foods, Inc.
Risk Factors for a further discussion of risks related to cybersecurity. The Bank Secrecy Act (BSA). The BSA requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
Additional discussion of our cybersecurity risk management process and strategy are contained in Item 1C. of this Report. The Bank Secrecy Act (BSA). The BSA requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
All institutions are required to make public disclosure of their CRA performance ratings. The Bank received a “satisfactory” rating in its last CRA examination, which was conducted in May 2023. Changes in Control.
All institutions are required to make public disclosure of their CRA performance ratings. The Bank received a “satisfactory” rating in its last CRA examination, which was conducted in May 2023. In October 2023, the Federal Reserve, FDIC, and OCC issued a final rule to amend their regulations implementing the CRA.
The rule, which became effective on January 1, 2015, implements in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act.
On July 2, 2013, the Federal Reserve approved a final rule that establishes an integrated regulatory capital framework that addresses shortcomings in certain capital requirements. The rule, which became effective on January 1, 2015, implements in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act.
Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services. In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data.
Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services.
The Bank is located only 40 miles north of Charlotte, North Carolina, and the Bank’s primary market area is and will continue to be significantly affected by its close proximity to this major metropolitan area. Employment in the Bank’s primary market area is diversified among manufacturing, retail and wholesale trade, technology, services and utilities.
The Bank also conducts a portion of its business outside of this area. The Bank is located only 40 miles north of Charlotte, North Carolina, and the Bank’s primary market area is and will continue to be significantly affected by its close proximity to this major metropolitan area.
Market Area and Competition The Bank’s primary market consists of the communities in an approximate 50-mile radius around its headquarters office in Newton, North Carolina. This area includes Catawba County, Alexander County, Lincoln County, Iredell County and portions of northeast Gaston County, North Carolina. The Bank also conducts a portion of its business outside of this area.
The Company redeemed $5.0 million of outstanding trust preferred securities in 2019. 4 Table of Contents Market Area and Competition The Bank’s primary market consists of the communities in an approximate 50-mile radius around its headquarters office in Newton, North Carolina. This area includes Catawba County, Alexander County, Lincoln County, Iredell County and portions of northeast Gaston County, North Carolina.
The underwriting standards and loan origination procedures include officer lending limits, which are approved by the Bank Board. The President/Chief Executive Officer of the Bank has loan authority of up to the legal lending limit of the Bank. As of December 31, 2023, the individual lending authority of the Chief Credit Officer/Executive Vice President was set at $6.5 million.
The underwriting standards and loan origination procedures include officer lending limits, which are approved by the Bank Board. The Executive Loan Committee of the Bank has loan authority of up to the legal lending limit of the Bank.
Neither the Company nor the Bank can predict whether or what form any proposed statute or regulation will be adopted or the extent to which the business of the Company or the Bank may be affected by such statute or regulation. 14 Table of Contents Available Information The Company makes its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports available free of charge on its internet website www.peoplesbanknc.com as soon as reasonably practicable after the reports are electronically filed with the SEC.
Available Information The Company makes its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports available free of charge on its internet website www.peoplesbanknc.com as soon as reasonably practicable after the reports are electronically filed with the SEC.
The Executive Vice President/Chief Financial Officer serves as the Primary Investment Officer. 7 Table of Contents Human Capital Management At December 31, 2023, the Company employed 277 full-time employees and 15 part-time employees, which equated to 285 full-time equivalent employees. We are not a party to any collective bargaining agreements, and we consider our employee relations to be good.
Human Capital Management At December 31, 2024, the Company employed 281 full-time employees and 13 part-time employees, which equated to 288 full-time equivalent employees. We are not a party to any collective bargaining agreements, and we consider our employee relations to be good.
The Bank makes investments that are marketable and capable of being converted to cash at their market values in a relatively short period of time. C.
Provide Liquidity – Remain sufficiently liquid to meet anticipated funding demands either through declines in deposits and/or increases in loan demand. The Bank makes investments that are marketable and capable of being converted to cash at their market values in a relatively short period of time. C.
The Bank maintains an investment portfolio of high-quality investment securities that is managed in a manner consistent with safe and sound banking practices. The characteristics and financial goals of the investment portfolio are complementary to the Bank’s broader business strategies and congruent with the Bank’s capital policies, technical expertise, and risk tolerances.
The Bank maintains an investment portfolio of high-quality investment securities that is managed in a manner consistent with safe and sound banking practices.
The majority of the Bank’s deposit and loan customers are individuals and small-to medium-sized businesses located in the Bank’s market area. The Bank’s loan portfolio also includes Individual Taxpayer Identification Number (ITIN) mortgage loans generated through the Bank’s former Banco offices.
The majority of the Bank’s deposit and loan customers are individuals and small-to medium-sized businesses located in the Bank’s market area.
This objective is fulfilled by investing in, holding, and divesting from individual securities that, when considered in combination, contribute to a superior risk/reward for the total portfolio. B. Provide Liquidity – Remain sufficiently liquid to meet anticipated funding demands either through declines in deposits and/or increases in loan demand.
Provide Earnings – Maximize the total return on invested funds in a manner that is consistent with the Bank’s overall financial goals and risk considerations. This objective is fulfilled by investing in, holding, and divesting from individual securities that, when considered in combination, contribute to a superior risk/reward for the total portfolio. B.
It is the policy of the Bank to ensure that the Bank Board is fully apprised of the status and critical factors affecting the quality and performance of the loan portfolio.
As of December 31, 2024, the individual lending authority of the Chief Credit Officer/Executive Vice President was set at $8.0 million. 5 Table of Contents It is the policy of the Bank to ensure that the Bank Board is fully apprised of the status and critical factors affecting the quality and performance of the loan portfolio.
At December 31, 2023, the Company also exceeded each of its minimum capital requirements with a Tier 1 leverage capital ratio of 10.51%, common equity Tier 1 risk-based capital ratio of 12.75%, Tier 1 risk-based capital ratio of 13.94% and total risk-based capital ratio of 14.96%. 9 Table of Contents On July 2, 2013, the Federal Reserve approved a final rule that establishes an integrated regulatory capital framework that addresses shortcomings in certain capital requirements.
At December 31, 2024, the Company also exceeded each of its minimum capital requirements with a Tier 1 leverage capital ratio of 10.88%, common equity Tier 1 risk-based capital ratio of 13.29%, Tier 1 risk-based capital ratio of 14.47% and total risk-based capital ratio of 15.34%.
The Bank also operates loan production offices in Charlotte, Denver, Salisbury and Winston-Salem North Carolina. The Company’s fiscal year ends December 31. At 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.
The Company’s fiscal year ends December 31. At December 31, 2024, the Company had total assets of $1.7 billion, net loans of $1.1 billion, deposits of $1.5 billion, total securities of $390.7 million, and shareholders’ equity of $130.6 million. The Bank has a diversified loan portfolio, with no foreign loans and few agricultural loans.
While to date we have not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.
While to date we have not detected a significant compromise, the risks of significant data loss or any material financial losses related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats.
Removed
The Bank operates three banking offices focused on the Latino population that were formerly operated as a division of the Bank under the name Banco de la Gente (“Banco”).
Added
Employment in the Bank’s primary market area is diversified among manufacturing, retail and wholesale trade, technology, services and utilities. Catawba County’s largest employers include Catawba County Schools, Catawba Valley Medical Center, Duke LifePoint/Frye Regional Medical Center, CommScope, Inc.
Removed
These offices, which offer the same banking services as our other branches offer, now operate under the same name as our other offices; however, we continue to separately categorize mortgage loans originated from these offices. The Bank has a diversified loan portfolio, with no foreign loans and few agricultural loans.
Added
To assess the borrower’s ability to repay, we review the borrower’s employment, credit history, and other information on the historical and projected income and expenses of the borrower.
Removed
The Company redeemed $5.0 million of outstanding trust preferred securities in 2019. Prior to September 15, 2023, the trust preferred securities accrued and paid interest quarterly at a floating rate of three-month LIBOR plus 163 basis points. The three-month USD LIBOR rate ceased to be published after June 30, 2023.
Added
The characteristics and financial goals of the investment portfolio are complementary to the Bank’s broader business strategies and congruent with the Bank’s capital policies, technical expertise, and risk tolerances. 6 Table of Contents The Bank’s specific investment objectives are as follows: A.
Removed
Effective September 15, 2023, the trust preferred securities accrue and pay interest quarterly at a floating rate of three-month Secured Overnight Financing Rate (SOFR) plus 189 basis points, including a 26 basis point credit spread adjustment.
Added
The following is a brief summary of certain statutes and rules and regulations that affect or will affect the Company, the Bank and their subsidiaries.
Removed
The Bank’s specific investment objectives are as follows: A. Provide Earnings – Maximize the total return on invested funds in a manner that is consistent with the Bank’s overall financial goals and risk considerations.
Added
The rule materially revises the current CRA framework, including the assessment areas in which a bank is evaluated to include activities associated with online and mobile banking, the tests used to evaluate the bank in its assessment areas, new methods of calculating credit for lending, investment and service activities, and additional data collection and reporting requirements.
Removed
We are an active member of the North Carolina Bankers Association DEI Council doing work to expand DEI programming and other resources for community banks. We also seek to design careers within our organization that are fulfilling ones, with competitive compensation and benefits alongside a positive work-life balance.
Added
The rule is expected to result in a significant increase in the thresholds for large banks to receive “Outstanding” ratings in the future. Most of the provisions become applicable on January 1, 2026. Reporting of the collected data will not be required until 2027. Changes in Control.
Removed
As a result of the Company’s ownership of the Bank, the Company is also registered under the bank holding company laws of North Carolina. Accordingly, the Company is also subject to regulation and supervision by the Commissioner.
Added
Under various policy statements, financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution.
Removed
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers. See Item 1A.
Added
Additionally, management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption, and maintenance of the institution’s operations after a cyber-attack involving destructive malware.
Added
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack. The Company has multiple information security programs that reflect the requirements of this guidance.
Added
If, however, we fail to observe the regulatory guidance in the future, we could be subject to various regulatory sanctions, including financial penalties.
Added
In November 2021, the federal banking regulators adopted a regulation that, among other things, requires a banking organization to notify its primary federal regulators as soon as possible and within 36 hours after identifying a “computer-security incident” that the banking organization believes in good faith is reasonably likely to materially disrupt or degrade its business or operations in a manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other accounts, result in a material loss of revenue, profit or stock price, or pose a threat to the financial stability of the U.S.
Added
In July, 2023, the SEC adopted new cybersecurity disclosure rules for public companies that require disclosure regarding cybersecurity risk management (including the role of the Board in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks, and processes for assessing, identifying and managing cybersecurity risks) in annual reports.
Added
These new cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents in a Form 8-K, generally within four days of determining an incident is material.
Added
See Item 1A, “Risk Factors,” and Item 1C, "Cybersecurity," for additional disclosures related to cybersecurity. 13 Table of Contents In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data.
Added
Neither the Company nor the Bank can predict whether or what form any proposed statute or regulation will be adopted or the extent to which the business of the Company or the Bank may be affected by such statute or regulation.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

35 edited+2 added−11 removed113 unchanged
Biggest changeWe could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements in material amounts. 22 Table of Contents Our internal controls may be ineffective. Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures.
Biggest changeThese changes are beyond our control, can be hard to predict and could materially impact how we report our results of operations and financial condition. We could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements in material amounts. Our internal controls may be ineffective.
These fluctuations are not predictable, cannot be controlled, and may have a material adverse impact on our operations and financial condition. Our banking operations are primarily locally oriented and community-based. Our retail and commercial banking activities are primarily concentrated within the same geographic footprint. Our market is primarily based in the Catawba Valley region of North Carolina and surrounding communities.
These fluctuations are not predictable, cannot be controlled, and may have a material adverse impact on our operationsand financial condition. Our banking operations are primarily locally oriented and community-based. Our retail and commercial banking activities are primarily concentrated within the same geographic footprint. Our market is primarily based in the Catawba Valley region of North Carolina and surrounding communities.
In the past, our business has been materially affected by these regulations. This trend is likely to continue in the future. 19 Table of Contents Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of our assets and the determination of the level of allowance for credit losses.
In the past, our business has been materially affected by these regulations. This trend is likely to continue in the future. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of our assets and the determination of the level of allowance for credit losses.
Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans. A significant amount of the Bank’s business is concentrated in lending which is secured by property located in the Catawba Valley and surrounding areas.
Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans. 16 Table of Contents A significant amount of the Bank’s business is concentrated in lending which is secured by property located in the Catawba Valley and surrounding areas.
Reliance on inaccurate or misleading financial statements, financial advisors and consultants, credit reports, or other financial information could cause us to enter into unfavorable transactions, which could have a material adverse effect on our financial condition and results of operations. We are subject to extensive regulation, which could have an adverse effect on our operations.
Reliance on inaccurate or misleading financial statements, financial advisors and consultants, credit reports, or other financial information could cause us to enter into unfavorable transactions, which could have a material adverse effect on our financial condition and results of operations. 19 Table of Contents We are subject to extensive regulation, which could have an adverse effect on our operations.
Credit losses on investment securities or deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations.
Credit losses on investment securities or inability to realize deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations.
The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations. The soundness of other financial institutions could adversely affect us.
The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations. 20 Table of Contents The soundness of other financial institutions could adversely affect us.
Weakness in any of our market areas could have an adverse impact on our earnings, and consequently our financial condition and capital adequacy. Inflation can have an adverse impact on our customers and their ability to repay.
Weakness in any of our market areas could have an adverse impact on our earnings, and consequently our financial condition and capital adequacy. 15 Table of Contents Inflation can have an adverse impact on our customers and their ability to repay.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. In recent years, there has been a pronounced rise in inflation and the Federal Reserve has raised certain benchmark interest rates in an effort to combat this trend.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. In recent years, there has been a pronounced rise in inflation and, until recently, the Federal Reserve has responded by raising certain benchmark interest rates in an effort to combat this trend.
Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in the Bank’s systems and could adversely affect its reputation and its ability to generate deposits. Additionally, we outsource the processing of our core data system, as well as other systems such as online banking, to third party vendors.
Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in the Bank’s systems and could adversely affect its reputation and its ability to generate deposits. Additionally, we outsource the processing of transactional activity, as well as other systems such as online banking, to third party vendors.
Risks related to decline in value of investment securities portfolio. At December 31, 2023, unrealized losses in our available for sale investment securities portfolio totaled $51.3 million.
Risks related to decline in value of investment securities portfolio. At December 31, 2024, unrealized losses in our available for sale investment securities portfolio totaled $51.1 million.
This could materially affect our business operations and financial condition. 18 Table of Contents While we have disaster recovery and other policies and procedures designed to prevent or limit the effect of any failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed.
While we have disaster recovery and other policies and procedures designed to prevent or limit the effect of any failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
Failure to keep pace with technological change could adversely affect our business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
Withdrawals of deposits by any one of our largest depositors could force us to rely more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely affecting our net interest margin and results of operations.
These balances represent 7.88% of total deposits at December 31, 2024. Withdrawals of deposits by any one of our largest depositors could force us to rely more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely affecting our net interest margin and results of operations.
The risk of credit losses on loans varies with, among other things, general economic conditions, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the value and marketability of the collateral for the loan.
Our allowance for credit losses may be insufficient and could therefore reduce earnings. The risk of credit losses on loans varies with, among other things, general economic conditions, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the value and marketability of the collateral for the loan.
These unrealized losses arose due to changing interest rates and are considered to be temporary; however, in the event that we sell these securities while they are in an unrealized loss position, we will recognize a corresponding loss.
These unrealized losses arose due to changing interest rates and are considered to be temporary; however, in the event that we sell these securities while they are in an unrealized loss position, we will recognize a corresponding loss, which could have a material adverse effect on our earnings and financial condition.
Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Our ability to compete successfully depends on a number of factors, including, among other things: · the ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets; · the ability to expand our market position; · the scope, relevance, and pricing of products and services offered to meet customer needs and demands; · the rate at which we introduce new products and services relative to our competitors; · customer satisfaction with our level of service; and · industry and general economic trends.
Our ability to compete successfully depends on a number of factors, including, among other things: · the ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets; · the ability to expand our market position; · the scope, relevance, and pricing of products and services offered to meet customer needs and demands; · the rate at which we introduce new products and services relative to our competitors; · customer satisfaction with our level of service; and · industry and general economic trends. 21 Table of Contents Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.
We can make no assurance that any such losses would not materially and adversely affect our business, financial condition or results of operations. 20 Table of Contents Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business.
We can make no assurance that any such losses would not materially and adversely affect our business, financial condition or results of operations. Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business. We rely on a number of different sources in order to meet our potential liquidity demands.
If the Bank is unsuccessful in managing the effects of changes in interest rates, the financial condition and results of operations could suffer. A small number of large deposit relationships provide a significant level of funding for the Bank. The Bank’s five largest deposit relationships, including securities sold under agreements to repurchase, amounted to $134.5 million at December 31, 2023.
If the Bank is unsuccessful in managing the effects of changes in interest rates, the financial condition and results of operations could suffer. 17 Table of Contents A small number of large deposit relationships provide a significant level of funding for the Bank. The Bank’s two largest deposit relationships, amounted to $117.0 million at December 31, 2024.
Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.
Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. 22 Table of Contents From time to time the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements.
In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.
The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.
We face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources. Such competitors primarily include national, regional and internet banks within the various markets in which we operate.
We could experience losses due to competition with other financial institutions. We face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources.
Consequently, a decline in local economic conditions may have a greater effect on the Bank’s earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse. 16 Table of Contents Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral.
Consequently, a decline in local economic conditions may have a greater effect on the Bank’s earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse.
Like many financial institutions, the Bank relies on customer deposits as its primary source of funding for its lending activities, and the Bank continues to seek customer deposits to maintain this funding base. The Bank’s future growth will largely depend on its ability to retain and grow its deposit base.
We may not be able to retain or grow our deposit base, which could adversely impact our funding costs. Like many financial institutions, the Bank relies on customer deposits as its primary source of funding for its lending activities, and the Bank continues to seek customer deposits to maintain this funding base.
Our customers may also be affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. 15 Table of Contents Recessionary conditions could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which would lead to lower revenue, higher loan losses and lower earnings.
Our customers may also be affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.
The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations.
The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations. 18 Table of Contents Our business continuity plans or data security systems could prove to be inadequate, resulting in a material interruption in, or disruption to, our business and a negative impact on our results of operations.
We rely on a number of different sources in order to meet our potential liquidity demands. Our primary sources of liquidity are increases in deposit accounts, cash flows from loan payments and our securities portfolio. Borrowings also provide us with a source of funds to meet liquidity demands.
Our primary sources of liquidity are increases in deposit accounts, cash flows from loan payments and our securities portfolio. Borrowings also provide us with a source of funds to meet liquidity demands. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity.
We may also be forced, as a result of any withdrawal of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources.
We may also be forced, as a result of any withdrawal of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources. Consequently, the occurrence of any of these events could have a material adverse effect on our business, results of operations, financial condition and future prospects.
If the appraisal does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property. Our allowance for credit losses may be insufficient and could therefore reduce earnings.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made. If the appraisal does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property.
We also face competition from many other types of financial institutions, including, without limitation, thrifts, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries, such as online lenders and banks. The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation.
Such competitors primarily include national, regional and internet banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, thrifts, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries, such as online lenders and banks.
In considering whether to make a loan secured by real property, we typically require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made.
Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral. In considering whether to make a loan secured by real property, we typically require an appraisal of the property.
We rely on our systems to accurately track and record our assets and liabilities.
We rely heavily on communications and information systems to conduct our business. Our daily operations depend on the operational effectiveness of our technology. We rely on our systems to accurately track and record our assets and liabilities.
Unfavorable changes in unemployment, real estate values, interest rates, inflation and other factors could weaken the economies of the communities we serve. While economic growth and business activity has been generally favorable in our market area in recent years, there can be no assurance that economic conditions will recover to pre-pandemic levels, and these conditions could worsen.
Unfavorable changes in unemployment, real estate values, interest rates, inflation and other factors could weaken the economies of the communities we serve.
As of December 31, 2023, the Bank had $1.4 billion in deposits.
The Bank’s future growth will largely depend on its ability to retain and grow its deposit base. As of December 31, 2024, the Bank had $1.48 billion in deposits.
Removed
In addition, unfavorable global economic conditions, including the lingering effects of the COVID-19 pandemic, have had a negative impact on financial markets and could adversely impact our customers, which in turn could lead to lower business activity and higher loan delinquencies.
Added
Recessionary conditions could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which would lead to lower revenue, higher loan losses and lower earnings.
Removed
These balances represent 9.10% of total deposits and securities sold under agreements to repurchase combined at December 31, 2023. Total deposits for the five largest relationships referenced above amounted to $108.4 million, or 7.79% of total deposits at December 31, 2023.
Added
This could materially affect our business operations and financial condition.
Removed
Total securities sold under agreements to repurchase for the five largest relationships referenced above amounted to $26.2 million, or 30.17% of total securities sold under agreements to repurchase at December 31, 2023.
Removed
Consequently, the occurrence of any of these events could have a material adverse effect on our business, results of operations, financial condition and future prospects. 17 Table of Contents We may not be able to retain or grow our deposit base, which could adversely impact our funding costs.
Removed
Our business continuity plans or data security systems could prove to be inadequate, resulting in a material interruption in, or disruption to, our business and a negative impact on our results of operations. We rely heavily on communications and information systems to conduct our business. Our daily operations depend on the operational effectiveness of our technology.
Removed
An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity.
Removed
In January and February 2023, we sold securities available for sale totaling $53.5 million, which resulted in gross losses of $2.7 million and gross gains of $177,000.
Removed
In the event that we decide to sell additional securities while they are in an unrealized loss position, we will experience additional losses, which could have a material adverse effect on our earnings and financial condition. We could experience losses due to competition with other financial institutions.
Removed
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations. 21 Table of Contents Failure to keep pace with technological change could adversely affect our business.
Removed
The Bank has benefited from consistency within its senior management team, with two of its top three executives averaging 27 years of service with the Bank.
Removed
From time to time the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements. These changes are beyond our control, can be hard to predict and could materially impact how we report our results of operations and financial condition.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

14 edited+1 added−2 removed2 unchanged
Biggest changeOur Chief Information Officer and our Information Security Officer, report directly to our Chief Operating Officer, along with key members of their teams, who collaborate with peer banks and industry groups to review cybersecurity trends and issues and identify best practices. The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions.
Biggest changeThe information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions. We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls.
Risk Factors. 25 Table of Contents Governance Our Chief Information Officer and Information Security Officer, along with their departments, are accountable for managing our enterprise information security and delivering our information security program. Their responsibilities include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience.
Risk Factors. 25 Table of Contents Governance Our Chief Operations Officer and Information Security Officer, along with their departments, are accountable for managing our enterprise information security and delivering our information security program. Their responsibilities include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience.
We also employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees, preparedness simulations and tabletop exercises, and recovery and resilience tests.
We employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees, preparedness simulations and tabletop exercises, and recovery and resilience tests.
Our Chief Information Officer and our Information Security Officer provide reports to the Bank Board, at least annually, regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Bank Board reviews and approves our information security and technology policies annually.
Our Information Security Officer and Director of Technology provide reports to the Bank Board, at least annually, regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Bank Board reviews and approves our information security and technology policies annually.
Our Chief Information Officer is primarily responsible for this cybersecurity component and is a key member of Bank management, reporting directly to the Chief Operating Officer and, as discussed below, periodically to the Bank Board.
Our Director of Technology, is primarily responsible for this cybersecurity component and is a key member of Bank management, reporting directly to the Chief Operations Officer and, as discussed below, periodically to the Bank Board.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. The structure of our cybersecurity program is designed around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance, and other industry standards.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. The structure of our cybersecurity program is designed around the MITRE Adversarial Tactics, Techniques and Common Knowledge (“ATT&CK”) Framework, regulatory guidance, and other industry standards.
Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks. At this time, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
At this time, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
Their departments, as a whole, consists of information security professionals with varying degrees of education and experience. Certain individuals within their departments are generally subject to professional education and certification requirements. In particular, our Chief Information Officer and Information Security Officer have relevant expertise in the areas of information security and cybersecurity risk management.
Certain individuals within their departments are generally subject to professional education and certification requirements. In particular, our Information Security Officer and Director of Technology have relevant expertise in the areas of information security and cybersecurity risk management. The Bank’s Technology Steering Committee provides oversight and governance of the Bank’s technology program and the information security program.
The Bank Board is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
The Chief Operations Officer regularly reports summaries of key issues that would include cybersecurity incidents or other related information from the Technology Steering Committee to the Bank Board. The Bank Board is ultimately responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
The Incident Response Plan is coordinated through the Chief Information Officer and key members of management are embedded into the Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually. Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe.
The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually. Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe. Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks.
This committee meets monthly to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks. The Chief Operating Officer regularly reports summaries of key issues that would include cybersecurity incidents or other related information from the Technology Steering Committee to the Bank Board.
Members of this committee include executive management, our Information Security Officer and Director of Technology. This committee meets monthly to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks.
We also actively monitor our email gateways for malicious phishing email campaigns and monitor remote connections. We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate management committees and Bank Board.
We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate management committees and Bank Board. The Incident Response Plan is coordinated through the Chief Operations Officer, and key members of management are embedded into the Plan by its design.
We engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party specialists. We also maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and our supply chain.
We maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and our supply chain. We actively monitor our email gateways for malicious phishing email campaigns and monitor remote connections.
In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence to facilitate and promote program effectiveness.
In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence to facilitate and promote program effectiveness. Our Director of Technology, Information Security Officer, Chief Operations Officer and key members of their teams collaborate with peer banks and industry groups to review cybersecurity trends and issues and identify best practices.
Removed
We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology. We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls.
Added
We provide regular updates across the Company to highlight recent examples of risks as they are identified. We engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party specialists.
Removed
The Bank’s Technology Steering Committee provides oversight and governance of the Bank’s technology program and the information security program. Members of this committee include executive management, our Chief Information Officer, and our Information Security Officer.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeHighway 90E Hiddenite, North Carolina 28636 200 Island Ford Road Maiden, North Carolina 28650 3310 Springs Road NE Hickory, North Carolina 28601 142 South Highway 16 Denver, North Carolina 28037 106 North Main Street Catawba, North Carolina 28609 2050 Catawba Valley Boulevard Hickory, North Carolina 28601 163 Plantation Ridge Drive Mooresville, North Carolina 28117 1910 East Main Street Lincolnton, North Carolina 28092 1333 2nd Street NE Hickory, North Carolina 28601 6350 South Boulevard Charlotte, North Carolina 28217 3752/3754 Highway 16 North Denver, North Carolina 28037 9617 Holly Point Drive Huntersville, NC 28078 4000 Westchase Boulevard Suite 100 Raleigh, North Carolina 27607 1117 Parkside Main Street Cary, North Carolina 27519 13840 Ballantyne Corporate Place Suite 150 Charlotte, North Carolina 28277 118 East Council Street Suite 1 Salisbury, NC 28144 380 Knollwood Street Suite D Winston-Salem, NC 27103
Biggest changeHighway 90E Hiddenite, North Carolina 28636 13840 Ballantyne Corporate Place Suite 150 Charlotte, North Carolina 28277 200 Island Ford Road Maiden, North Carolina 28650 118 East Council Street Suite 1 Salisbury, NC 28144 3310 Springs Road NE Hickory, North Carolina 28601 380 Knollwood Street Suite D Winston-Salem, NC 27103 142 South Highway 16 Denver, North Carolina 28037 615 East 6 th Street Suite 118 Charlotte, NC 28202 106 North Main Street Catawba, North Carolina 28609 2050 Catawba Valley Boulevard Hickory, North Carolina 28601 163 Plantation Ridge Drive Mooresville, North Carolina 28117 1910 East Main Street Lincolnton, North Carolina 28092
ITEM 2. PROPERTIES At December 31, 2023, the Company and the Bank conducted their business from their headquarters office in Newton, North Carolina and the Bank’s 17 branch offices in Lincolnton, Hickory, Newton, Catawba, Conover, Claremont, Maiden, Denver, Triangle, Hiddenite, Charlotte, Huntersville, Mooresville, Raleigh and Cary, North Carolina.
ITEM 2. PROPERTIES At December 31, 2024, the Company and the Bank conducted their business from their headquarters office in Newton, North Carolina and the Bank’s 16 branch offices in Lincolnton, Hickory, Newton, Catawba, Conover, Claremont, Maiden, Denver, Triangle, Hiddenite, Charlotte, Huntersville, Mooresville and Raleigh, North Carolina.
The following table sets forth certain information regarding the Bank’s properties at December 31, 2023. 26 Table of Contents Owned Leased Corporate Office 518 West C Street Newton, North Carolina 28658 420 West A Street Newton, North Carolina 28658 213 1st Street, West Conover, North Carolina 28613 3261 East Main Street Claremont, North Carolina 28610 6125 Highway 16 South Denver, North Carolina 28037 5153 N.C.
The following table sets forth certain information regarding the Bank’s properties at December 31, 2024. 26 Table of Contents Owned Leased Corporate Office 518 West C Street Newton, North Carolina 28658 1333 2nd Street NE Hickory, North Carolina 28601 420 West A Street Newton, North Carolina 28658 6350 South Boulevard Charlotte, North Carolina 28217 213 1st Street, West Conover, North Carolina 28613 3752/3754 Highway 16 North Denver, North Carolina 28037 3261 East Main Street Claremont, North Carolina 28610 9617 Holly Point Drive Huntersville, NC 28078 6125 Highway 16 South Denver, North Carolina 28037 4000 Westchase Boulevard Suite 100 Raleigh, North Carolina 27607 5153 N.C.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph was prepared by S&P Global Market Intelligence, using data as of December 31, 2023. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS Performance Report for Peoples Bancorp of North Carolina, Inc.
Biggest changeSTOCK PERFORMANCE GRAPH The following graph compares the Company’s cumulative shareholder return on its common stock with a NASDAQ index and with a southeastern bank index. The graph was prepared by S&P Global Market Intelligence, using data as of December 31, 2024.
All purchases were funded by participant contributions to the plan. (2) Reflects shares purchased under the Company's publicly announced stock repurchase program. (3) Reflects dollar value of balance available for repurchase at end of period under the Company's stock repurchase program, which was authorized in March 2023 and December 2023 and expires in March 2024.
All purchases were funded by participant contributions to the plan. (2) Reflects shares purchased under the Company's publicly announced stock repurchase program. (3) Reflects dollar value of balance available for repurchase at end of period under the Company's stock repurchase program, which was authorized in June 2024.
Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (3) October 1 - 31, 2023 8,750 $ 20.83 7,500 $ 171,592 November 1 - 30, 2023 7,800 $ 21.59 7,800 $ 3,184 December 1 - 31, 2023 159 $ 27.24 - $ 2,003,184 Total 16,709 $ 21.25 15,300 (1) The Company purchased 1,409 shares on the open market in the three months ended December 31, 2023 for its deferred compensation plan.
ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (3) October 1 - 31, 2024 1,095 $ 26.03 - $ 2,000,000 November 1 - 30, 2024 - $ - - $ 2,000,000 December 1 - 31, 2024 180 $ 31.93 - $ 2,000,000 Total 1,275 $ 26.86 - (1) The Company purchased 1,275 shares on the open market in the three months ended December 31, 2024 for its deferred compensation plan.
As of February 29, 2024, the Company had 668 shareholders of record, not including the number of persons or entities whose stock is held in nominee or street name through various brokerage firms or banks. 28 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares the Company’s cumulative shareholder return on its common stock with a NASDAQ index and with a southeastern bank index.
As of February 28, 2025, the Company had 657 shareholders of record, not including the number of persons or entities whose stock is held in nominee or street name through various brokerage firms or banks.
BMI Banks - Southeast Region Index 100.00 140.94 126.37 180.49 146.81 151.44 Source: S&P Global Market Intelligence © 2024 29 Table of Contents The information required by Item 201(d) concerning securities authorized for issuance under equity compensation plans is set forth in Item 12 hereof.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS Performance Report for Peoples Bancorp of North Carolina, Inc. 28 Table of Contents The information required by Item 201(d) concerning securities authorized for issuance under equity compensation plans is set forth in Item 12 hereof.
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Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Peoples Bancorp of North Carolina, Inc. 100.00 137.48 99.73 122.57 149.30 147.27 NASDAQ Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 S&P U.S.

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