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What changed in PEOPLES BANCORP OF NORTH CAROLINA INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PEOPLES BANCORP OF NORTH CAROLINA INC's 2024 and 2025 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 2025 report.

+94 added−75 removedSource: 10-K (2026-03-11) vs 10-K (2025-03-12)

Top changes in PEOPLES BANCORP OF NORTH CAROLINA INC's 2025 10-K

94 paragraphs added · 75 removed · 65 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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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.
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.
The final rule further requires that certain items be deducted from common equity Tier 1 capital, including (1) goodwill and other intangible assets, other than mortgage servicing rights, net of deferred tax liabilities (“DTLs”); (2) deferred tax assets that arise from operating losses and tax credit carryforwards, net of valuation allowances and DTLs; (3) after-tax gain-on-sale associated with a securitization exposure; and (4) defined benefit pension fund assets held by a depository institution holding company, net of DTLs.
The final rule further required that certain items be deducted from common equity Tier 1 capital, including (1) goodwill and other intangible assets, other than mortgage servicing rights, net of deferred tax liabilities (“DTLs”); (2) deferred tax assets that arise from operating losses and tax credit carryforwards, net of valuation allowances and DTLs; (3) after-tax gain-on-sale associated with a securitization exposure; and (4) defined benefit pension fund assets held by a depository institution holding company, net of DTLs.
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.
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.
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.
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. 13 Table of Contents Other.
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.
On December 31, 2025, 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.
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.
As of December 31, 2025, 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.
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.
See Item 1A, “Risk Factors,” and Item 1C, "Cybersecurity," for additional disclosures related to cybersecurity. 12 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.
In addition, the Economic Growth Act includes regulatory relief for community banks of certain sizes regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans.
In addition, the Economic Growth Act included regulatory relief for community banks of certain sizes regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans.
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.
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 15 banking offices, located in Lincolnton, Newton, Denver, Catawba, Conover, Maiden, Claremont, Hiddenite, Hickory, Charlotte, Huntersville and Mooresville, North Carolina. The Bank also operates loan production offices in Charlotte, Denver, Salisbury and Winston-Salem, North Carolina.
In addition, the SEC and Nasdaq have adopted regulations under the Sarbanes-Oxley Act of 2002 and the Dodd Frank Act that apply to the Company as a Nasdaq-traded, public company, which seek to improve corporate governance, provide enhanced penalties for financial reporting improprieties and improve the reliability of disclosures in SEC filings. 11 Table of Contents Transactions with Affiliates.
In addition, the SEC and Nasdaq have adopted regulations under the Sarbanes-Oxley Act of 2002 and the Dodd Frank Act that apply to the Company as a Nasdaq-traded, public company, which seek to improve corporate governance, provide enhanced penalties for financial reporting improprieties and improve the reliability of disclosures in SEC filings. Transactions with Affiliates.
We have not opted to utilize the Community Bank Leverage Ratio and have instead continued to use the Basel III standards (see discussion on Basel III standards under the heading “Capital Adequacy” below).
We have not opted to utilize the Community Bank Leverage Ratio and have instead continued to use the Basel III standards (see discussion on Basel III standards under the heading “Capital Adequacy” below). Capital Adequacy .
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 .
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 .
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.
At December 31, 2025, 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 Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and provides for an alternative capital rule which financial institutions and their holding companies with total consolidated assets of less than $10 billion may elect to utilize.
The Economic Growth Act, among other matters, expanded the definition of qualified mortgages which may be held by a financial institution and provided for an alternative capital rule which financial institutions and their holding companies with total consolidated assets of less than $10 billion may elect to utilize.
The FDIC has imposed additional limits on the amount a bank can loan to an executive officer. Loans to One Borrower. The Bank is subject to the loans-to-one-borrower limits established by North Carolina law, which are substantially the same as those applicable to national banks.
The FDIC has imposed additional limits on the amount a bank can loan to an executive officer. 10 Table of Contents Loans to One Borrower. The Bank is subject to the loans-to-one-borrower limits established by North Carolina law, which are substantially the same as those applicable to national banks.
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.
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, 2025, this limit was $31.4 million.
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.
On July 2, 2013, the Federal Reserve approved a final rule that established an integrated regulatory capital framework that addressed shortcomings in certain capital requirements. The rule, which became effective on January 1, 2015, implemented 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.
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.
This limit is increased by an additional 10% of the Bank’s total equity capital, or $52.3 million as of December 31, 2025, for loans and extensions of credit that are fully secured by readily marketable collateral. Anti-Money Laundering and the USA Patriot Act.
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.
Human Capital Management At December 31, 2025, the Company employed 268 full-time employees and eight part-time employees, which equated to 273 full-time equivalent employees. We are not a party to any collective bargaining agreements, and we consider our employee relations to be good.
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.
At December 31, 2025, the Company employed 268 full-time employees and eight part-time employees, which equated to 273 full-time equivalent employees. Subsidiaries The Bank is a subsidiary of the Company.
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.
The Company’s fiscal year ends December 31. At December 31, 2025, the Company had total assets of $1.70 billion, net loans of $1.20 billion, deposits of $1.51 billion, total securities of $380.0 million, and shareholders’ equity of $157.1 million. The Bank has a diversified loan portfolio, with no foreign loans and few agricultural 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. 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.
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. 11 Table of Contents Current Expected Credit Loss Accounting Standard.
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%.
At December 31, 2025, the Bank exceeded each of its minimum capital requirements with a Tier 1 leverage capital ratio of 11.13%, common equity Tier 1 risk-based capital ratio of 14.83%, Tier 1 risk-based capital ratio of 14.83% and total risk-based capital ratio of 15.70%.
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%.
At December 31, 2025, the Company also exceeded each of its minimum capital requirements with a Tier 1 leverage capital ratio of 11.33%, common equity Tier 1 risk-based capital ratio of 13.83%, Tier 1 risk-based capital ratio of 14.96% and total risk-based capital ratio of 15.82%.
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.
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 $776,000 and $764,000 in FDIC insurance expense in 2025 and 2024, respectively. The FDIC may conduct examinations of and require reporting by FDIC-insured institutions.
The final rule provides that the failure to maintain the minimum conservation buffer will result in restrictions on capital distributions and discretionary cash bonus payments to executive officers. If a banking organization’s conservation buffer is less than 0.625%, the banking organization may not make any capital distributions or discretionary cash bonus payments to executive officers.
If a banking organization’s conservation buffer is less than 0.625%, the banking organization may not make any capital distributions or discretionary cash bonus payments to executive officers.
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 Bank’s legal lending limit is set by law and is monitored by the FDIC and the Commissioner. As of December 31, 2025, the Bank’s legal lending limit was $31.4 million (absent fully marketable collateral) or $52.3 million (when fully secured by readily marketable collateral), and the largest credit relationship was $24.4 million.
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.
Based upon June 30, 2025 comparative data, the Bank had 23.54% of the deposits in Catawba County, placing it first in deposit size among a total of 11 banks with branch offices in Catawba County; 15.24% of the deposits in Lincoln County, placing it third in deposit size among a total of 10 banks with branch offices in Lincoln County; and 15.92% of the deposits in Alexander County, placing it third in deposit size among a total of four banks with branch offices in Alexander County.
The final rule also allows all but the largest banking organizations to make a one-time election not to recognize unrealized gains and losses on available for sale debt securities in regulatory capital, as under prior capital rules.
The final rule also allows all but the largest banking organizations to make a one-time election not to recognize unrealized gains and losses on available for sale debt securities in regulatory capital, as under prior capital rules. 9 Table of Contents The final rule provided that the failure to maintain the minimum conservation buffer will result in restrictions on capital distributions and discretionary cash bonus payments to executive officers.
This standard, referred to as Current Expected Credit Loss (or “CECL”), requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets. The Company adopted CECL as of January 1, 2023.
The Company accounts for credit losses in accordance with the Current Expected Credit Loss model (or "CECL") as prescribed by the Financial Accounting Standards Board ("FASB"). CECL requires companies to recognize credit losses expected over the life of certain financial assets. The Company adopted CECL as of January 1, 2023.
Removed
Employees have annual assignments related to “valuing differences” and diversity training is an integrated part of our leadership training as well. We expanded our Diversity, Equity & Inclusion (“DEI”) course library to support our ongoing culture sustainability program development. We launched our “Courageous Conversations” initiative in 2020, a program we will continue to build on annually.
Added
Employees have annual assignments related to “valuing differences” and diversity training is an integrated part of our leadership training as well. We also seek to design careers within our organization that are fulfilling ones, with competitive compensation and benefits alongside a positive work-life balance.
Removed
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.
Added
In July 2025, the federal banking agencies issued a joint Notice of Proposed Rulemaking, which, if finalized, would rescind the 2023 final rule and reinstate the CRA framework that existed prior to the issuance of that rule.
Removed
It is difficult at this time to predict when or how any new standards under the Economic Growth Act will ultimately be applied to, or what specific impact the Economic Growth Act and the yet-to-be-written implementing rules and regulations will have on us. Capital Adequacy .
Added
Implementation of the October 2023 final rule, which was subject to an injunction and has not taken effect, would have materially changed the CRA framework, including imposing additional costs and changing how CRA performance would be assessed. Changes in Control.
Removed
The increase in 2023 is primarily due to the FDIC insurance assessment rate changing from 0.03% to 0.05% effective January 1, 2023. The FDIC may conduct examinations of and require reporting by FDIC-insured institutions.
Removed
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
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
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.
For example, in deciding whether to extend credit to a client, we may assume that the client’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the client.
For example, in deciding whether to extend credit to a client, we may assume that the client’s financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the client.
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.
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.
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.
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.
Changes in the regulations that apply to us, or changes in our compliance with regulations, could have a material impact on our operations. We face a risk of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations and related enforcement actions.
Changes in the regulations that apply to us, or changes in our compliance with regulations, could have a material impact on our operations. 19 Table of Contents We face a risk of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations and related enforcement actions.
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.
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.
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.
These balances represent 8.13% of total deposits at December 31, 2025. 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 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.
The Bank’s future growth will largely depend on its ability to retain and grow its deposit base. As of December 31, 2025, the Bank had $1.51 billion in deposits.
Changes in market interest rates could reduce the value of the Bank’s financial assets. Fixed-rate investments, mortgage-backed and related securities and mortgage loans generally decrease in value as interest rates rise. In addition, interest rates affect how much money the Bank lends. For example, when interest rates rise, the cost of borrowing increases and the loan originations tend to decrease.
Fixed-rate investments, mortgage-backed and related securities and mortgage loans generally decrease in value as interest rates rise. In addition, interest rates affect how much money the Bank lends. For example, when interest rates rise, the cost of borrowing increases and the loan originations tend to decrease.
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.
If the Bank is unsuccessful in managing the effects of changes in interest rates, the financial condition and results of operations could suffer. 16 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 $122.7 million at December 31, 2025.
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.
This could materially affect our business operations and financial condition. 17 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.
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.
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.
If our third-party provider encounters difficulties or if we have difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations. In the normal course of business, we process large volumes of transactions involving millions of dollars.
If our third-party provider encounters difficulties or if we have difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations.
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.
Risks related to decline in value of investment securities portfolio. At December 31, 2025, unrealized losses in our available for sale investment securities portfolio totaled $35.3 million.
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.
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. 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.
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.
If our internal controls fail to work as expected, if our systems are used in an unauthorized manner, or if our employees subvert our internal controls, we could experience significant losses. We process large volumes of transactions on a daily basis involving millions of dollars and are exposed to numerous types of operational risk.
In the normal course of business, we process large volumes of transactions involving millions of dollars. If our internal controls fail to work as expected, if our systems are used in an unauthorized manner, or if our employees subvert our internal controls, we could experience significant losses.
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.
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.
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.
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.
When market rates of interest change, and in particular during periods of rapid rate movements as experienced in 2022 and 2023, the interest the Bank receives on its assets and the interest the Bank pays on its liabilities will fluctuate. This can cause decreases in the “spread” and can adversely affect the Bank’s income.
When market rates of interest change, the interest the Bank receives on its assets and the interest the Bank pays on its liabilities will fluctuate. This can cause decreases in the “spread” and can adversely affect the Bank’s income. Changes in market interest rates could reduce the value of the Bank’s financial assets.
If the Bank is required to liquidate the collateral securing a loan during a period of reduced real estate values to satisfy the debt, the Bank’s earnings and capital could be adversely affected.
If the Bank is required to liquidate the collateral securing a loan during a period of reduced real estate values to satisfy the debt, the Bank’s earnings and capital could be adversely affected. 15 Table of Contents Additionally, with most of the Bank’s loans concentrated in the Catawba Valley and surrounding areas, a decline in local economic conditions could adversely affect the values of the Bank’s real estate collateral.
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.
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. 14 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.
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.
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.
Our access to funding sources in amounts adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy in general.
An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. 20 Table of Contents Our access to funding sources in amounts adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy in general.
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.
Unfavorable changes in unemployment, real estate values, interest rates, inflation and other factors could weaken the economies of the communities we serve. 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.
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.
We rely on our systems to accurately track and record our assets and liabilities.
Removed
Unfavorable changes in unemployment, real estate values, interest rates, inflation and other factors could weaken the economies of the communities we serve.
Added
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
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.
Added
The adoption and use of artificial intelligence tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment or fraudulent behavior by our employees, clients, or counterparties, or other third parties.
Removed
Additionally, with most of the Bank’s loans concentrated in the Catawba Valley and surrounding areas, a decline in local economic conditions could adversely affect the values of the Bank’s real estate collateral.
Added
We are in the process of implementing artificial intelligence, including generative artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze or generate data or other materials or content (collectively, “AI”), for internal use. We expect to adopt such tools as appropriate to increase efficiency, in line with our AI Strategy.
Removed
This could materially affect our business operations and financial condition.
Added
In addition, we expect our third-party vendors and service providers to increasingly develop and incorporate AI into their product offerings faster than we are able to do so independently.
Added
There are significant and evolving risks involved in utilizing AI, and no assurance can be provided that our or our third-party vendors’ or service providers’ use of AI will enhance our or our third-party vendors’ or service providers’ products or services or produce the intended results.
Added
The adoption and incorporation of such AI tools can lead to concerns around safety and soundness, fair access to financial services, fair treatment of consumers, and compliance with applicable laws and regulations.
Added
Such risk can result from models being incorrectly or inadequately designed or trained, inadequate model testing or validation, narrow or limited human oversight, inadequate planning or due diligence, inappropriate or controversial data practices by developers or end-users, and other factors adversely affecting public opinion of AI and the acceptance of AI solutions.
Added
Further, generative AI has been known to, and may continue to, create biased, incomplete, inaccurate, misleading or poor-quality output or produce other discriminatory or unexpected results, errors, or inadequacies, any of which may not be easily detectable.
Added
AI solutions may also be adversely impacted by unforeseen defects, technical challenges, cyber-attacks, cybersecurity breaches, service outages or other similar incidents, or material performance issues. We have implemented an AI governance function and risk management framework that includes a risk assessment of internal and vendor AI solutions, due diligence, model validation, and controls.
Added
However, given the pace of rapid adoption of such tools by vendors and service providers, we may not be aware of the addition of AI solutions prior to such tools being introduced into our environment.
Added
Failure to adequately manage AI risks can result in erroneous results and decisions made by misinformation, unwanted forms of bias, unauthorized access to sensitive, confidential, proprietary or personal information, and violations of applicable laws and regulations, leading to operational inefficiencies, competitive harm, reputational harm, ethical challenges, legal liability, losses, fines, and other adverse impacts on our business and financial results.
Added
If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, or to use the output of such AI tools, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party.
Added
Further, our competitors or other third parties may incorporate AI into their business or operations more quickly or more successfully than us, which could impair our ability to compete effectively. 18 Table of Contents In addition, regulation of AI is rapidly evolving as legislatures and regulators are increasingly focused on these powerful emerging technologies.
Added
The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and cybersecurity, consumer protection, competition, equal opportunity, and fair lending laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.
Added
AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states are applying, or are considering applying, existing laws and regulations to AI or are considering general legal frameworks for AI.
Added
We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.
Added
Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all the legal, operational or technological risks that may arise relating to the use of AI.
Added
We expect our use of AI will require additional resources, including the incurrence of additional costs, to develop and maintain our products and services to minimize potentially harmful or unintended consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position, and to address any ethical, reputational, technical, operational, legal, competitive or regulatory issues which may arise as a result of any of the foregoing.
Added
We process large volumes of transactions on a daily basis involving millions of dollars and are exposed to numerous types of operational risk.
Added
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.
Added
We face increasing competition from fintechs and other technology-driven platforms Fintechs and other technology-driven platforms are expanding their presence, offering a wide variety of products and services that challenge traditional banking models.
Added
The growing experimentation with and adoption of technologies such as artificial intelligence, quantum computing, blockchain, stablecoins, and other digital currencies-including the potential issuance, acceptance, and integration of central bank digital currencies-have the potential to fundamentally reshape the financial services landscape.
Added
Developments in the regulatory landscape relating to emerging technologies, such as the enactment and implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (“GENIUS Act”) and potential enactment of the Digital Asset Market Clarity Act of 2025 (“CLARITY Act”) or similar market structure legislation, may affect our clients’ needs and expectations for products and services.
Added
Failure to keep pace with technological advancements may adversely affect our competitive position, diminish customer satisfaction, and reduce the accessibility and relevance of our products and services. 21 Table of Contents Failure to keep pace with technological change could adversely affect our business.
Added
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

1 edited+0 added−0 removed16 unchanged
Biggest changeOur 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.
Biggest changeOur 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 U.S. Department of Commerce National Institute of Standards and Technology (“NIST”) Framework, regulatory guidance, and other industry standards.

Item 2. Properties

Properties — owned and leased real estate

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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
Biggest changeHighway 90E Hiddenite, North Carolina 28636 118 East Council Street Suite 1 Salisbury, NC 28144 200 Island Ford Road Maiden, North Carolina 28650 380 Knollwood Street Suite D Winston-Salem, NC 27103 3310 Springs Road NE Hickory, North Carolina 28601 615 East 6 th Street Suite 118 Charlotte, NC 28202 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
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.
ITEM 2. PROPERTIES At December 31, 2025, the Company and the Bank conducted their business from their headquarters office in Newton, North Carolina and the Bank’s 15 branch offices in Lincolnton, Hickory, Newton, Catawba, Conover, Claremont, Maiden, Denver, Triangle, Hiddenite, Charlotte, Huntersville and Mooresville, North Carolina.
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.
The following table sets forth certain information regarding the Bank’s properties at December 31, 2025. 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 13840 Ballantyne Corporate Place Suite 150 Charlotte, North Carolina 28277 5153 N.C.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCOMPARISON 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.
Biggest changeBMI Banks - Southeast Region Index 100.00 142.83 116.18 119.85 155.47 187.40 Source: S&P Global Market Intelligence © 2026 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.
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.
As of February 28, 2026, the Company had 642 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.
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.
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 2025 and expired February 28, 2026.
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.
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, 2025 - $ - - $ 3,000,000 November 1 - 30, 2025 995 $ 29.78 - $ 3,000,000 December 1 - 31, 2025 70 $ 33.59 - $ 3,000,000 Total 1,065 $ 30.03 - (1) The Company purchased 1,065 shares on the open market in the three months ended December 31, 2025 for its deferred compensation plan.
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. The graph was prepared by S&P Global Market Intelligence, using data as of December 31, 2024.
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. The graph was prepared by S&P Global Market Intelligence, using data as of December 31, 2025. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS Performance Report for Peoples Bancorp of North Carolina, Inc.
Added
Period Ending Index 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 Peoples Bancorp of North Carolina, Inc. 100.00 122.91 149.71 147.68 153.96 184.35 NASDAQ Composite Index 100.00 122.18 82.43 119.22 154.48 187.14 S&P U.S.

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