UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: September 30, 20212022
OR
| ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
000-27205
(Commission File No.)
 
PEOPLES BANCORP OF NORTH CAROLINA, INC. |
(Exact name of registrant as specified in its charter) |
North Carolina |
| 56-2132396 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
| ||
| ||
518 West C Street, Newton, North Carolina |
| 28658 |
(Address of principal executive offices) |
| (Zip Code) |
(828) 464-5620
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name on each exchange on which registered |
|
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated | ☒ | Smaller reporting company | ☒ |
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’sregistrant's classes of common stock, as of the latest practicable date. 5,661,5695,637,830 shares of common stock, outstanding at October 31, 2021.2022.
INDEX
PART I. FINANCIAL INFORMATION
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| 39 | |||
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39 |
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PART II. OTHER INFORMATION
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Certifications |
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2 |
Table of Contents |
FORWARD-LOOKING STATEMENTS
Statements made in this Quarterly Report on Form 10-Q, other than those concerning historical information, should be considered forward-looking statements pursuant to the safe harbor provisions of the Securities Exchange Act of 1934 and the Private Securities Litigation Act of 1995. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on the information available to management at the time that this Quarterly Report on Form 10-Q was prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate,” and “believe,” variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, (1) competition in the markets served by the registrant and its subsidiaries, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectibility of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environments and tax laws, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in other filings with the Securities and Exchange Commission, including but not limited to, those described in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2020.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||
|
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Consolidated Balance Sheets | ||||||||
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| ||
September 30, 2021 and December 31, 2020 | ||||||||
|
|
|
|
|
|
| ||
(Dollars in thousands) | ||||||||
|
| September 30, |
|
| December 31, |
| ||
Assets |
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
| (Audited) |
| ||
|
|
|
|
|
|
| ||
Cash and due from banks, including reserve requirements of $0 at both September 30, 2021 and December 31, 2020 |
| $ | 42,098 |
|
|
| 42,737 |
|
Interest-bearing deposits |
|
| 221,210 |
|
|
| 118,843 |
|
Cash and cash equivalents |
|
| 263,308 |
|
|
| 161,580 |
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale |
|
| 402,905 |
|
|
| 245,249 |
|
Other investments |
|
| 3,725 |
|
|
| 4,155 |
|
Total securities |
|
| 406,630 |
|
|
| 249,404 |
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
| 9,086 |
|
|
| 9,139 |
|
|
|
|
|
|
|
|
|
|
Loans |
|
| 891,005 |
|
|
| 948,639 |
|
Less allowance for loan losses |
|
| (8,963 | ) |
|
| (9,908 | ) |
Net loans |
|
| 882,042 |
|
|
| 938,731 |
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 16,625 |
|
|
| 18,600 |
|
Cash surrender value of life insurance |
|
| 17,265 |
|
|
| 16,968 |
|
Other real estate |
|
| 0 |
|
|
| 128 |
|
Right of use lease asset |
|
| 2,861 |
|
|
| 3,423 |
|
Accrued interest receivable and other assets |
|
| 18,434 |
|
|
| 18,202 |
|
Total assets |
| $ | 1,616,251 |
|
|
| 1,416,175 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Noninterest-bearing demand |
| $ | 529,118 |
|
|
| 456,980 |
|
Interest-bearing demand, MMDA & savings |
|
| 777,721 |
|
|
| 657,834 |
|
Time, $250,000 or more |
|
| 26,357 |
|
|
| 25,771 |
|
Other time |
|
| 76,769 |
|
|
| 80,501 |
|
Total deposits |
|
| 1,409,965 |
|
|
| 1,221,086 |
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase |
|
| 32,332 |
|
|
| 26,201 |
|
Junior subordinated debentures |
|
| 15,464 |
|
|
| 15,464 |
|
Lease liability |
|
| 2,922 |
|
|
| 3,471 |
|
Accrued interest payable and other liabilities |
|
| 12,026 |
|
|
| 10,054 |
|
Total liabilities |
|
| 1,472,709 |
|
|
| 1,276,276 |
|
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Shareholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock, no par value; authorized |
|
|
|
|
|
|
|
|
5,000,000 shares; no shares issued and outstanding |
|
| 0 |
|
|
| 0 |
|
Common stock, no par value; authorized |
|
|
|
|
|
|
|
|
20,000,000 shares; issued and outstanding 5,661,569 shares |
|
|
|
|
|
|
|
|
at September 30, 2021 and 5,787,504 shares at December 31, 2020 |
|
| 53,305 |
|
|
| 56,871 |
|
Common stock held by deferred compensation trust, at cost; 160,611 |
|
|
|
|
|
|
|
|
shares at September 30, 2021 and 155,469 shares at December 31, 2020 |
|
| (1,946 | ) |
|
| (1,796 | ) |
Deferred compensation |
|
| 1,946 |
|
|
| 1,796 |
|
Retained earnings |
|
| 86,927 |
|
|
| 77,628 |
|
Accumulated other comprehensive income |
|
| 3,310 |
|
|
| 5,400 |
|
Total shareholders' equity |
|
| 143,542 |
|
|
| 139,899 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 1,616,251 |
|
|
| 1,416,175 |
|
See accompanying Notes to Consolidated Financial Statements.2021.
3 |
Table of Contents |
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||||||||||
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Consolidated Statements of Earnings | ||||||||||||||||
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Three and Nine Months Ended September 30, 2021 and 2020 | ||||||||||||||||
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(Dollars in thousands, except per share amounts) | ||||||||||||||||
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| Three months ended |
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| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| ||||
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| ||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and fees on loans |
| $ | 9,807 |
|
|
| 10,507 |
|
|
| 31,474 |
|
|
| 31,367 |
|
Interest on due from banks |
|
| 89 |
|
|
| 19 |
|
|
| 172 |
|
|
| 103 |
|
Interest on federal funds sold |
|
| 0 |
|
|
| 33 |
|
|
| 0 |
|
|
| 178 |
|
Interest on investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises |
|
| 679 |
|
|
| 528 |
|
|
| 1,899 |
|
|
| 1,864 |
|
State and political subdivisions |
|
| 825 |
|
|
| 717 |
|
|
| 2,222 |
|
|
| 2,042 |
|
Other |
|
| 21 |
|
|
| 64 |
|
|
| 93 |
|
|
| 202 |
|
Total interest income |
|
| 11,421 |
|
|
| 11,868 |
|
|
| 35,860 |
|
|
| 35,756 |
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand, MMDA & savings |
|
| 577 |
|
|
| 482 |
|
|
| 1,617 |
|
|
| 1,455 |
|
Time deposits |
|
| 181 |
|
|
| 224 |
|
|
| 584 |
|
|
| 725 |
|
FHLB borrowings |
|
| 0 |
|
|
| 103 |
|
|
| 0 |
|
|
| 269 |
|
Junior subordinated debentures |
|
| 69 |
|
|
| 76 |
|
|
| 211 |
|
|
| 296 |
|
Other |
|
| 34 |
|
|
| 57 |
|
|
| 106 |
|
|
| 150 |
|
Total interest expense |
|
| 861 |
|
|
| 942 |
|
|
| 2,518 |
|
|
| 2,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
| 10,560 |
|
|
| 10,926 |
|
|
| 33,342 |
|
|
| 32,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (recovery of) loan losses |
|
| (182 | ) |
|
| 522 |
|
|
| (863 | ) |
|
| 3,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
| 10,742 |
|
|
| 10,404 |
|
|
| 34,205 |
|
|
| 29,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges |
|
| 1,023 |
|
|
| 809 |
|
|
| 2,859 |
|
|
| 2,635 |
|
Other service charges and fees |
|
| 187 |
|
|
| 188 |
|
|
| 570 |
|
|
| 543 |
|
Gain on sale of investment securities |
|
| 0 |
|
|
| 1,688 |
|
|
| 0 |
|
|
| 2,145 |
|
Mortgage banking income |
|
| 516 |
|
|
| 750 |
|
|
| 2,109 |
|
|
| 1,635 |
|
Insurance and brokerage commissions |
|
| 266 |
|
|
| 200 |
|
|
| 764 |
|
|
| 647 |
|
Appraisal management fee income |
|
| 1,954 |
|
|
| 1,871 |
|
|
| 5,775 |
|
|
| 4,955 |
|
Gain on sale of other assets |
|
| 104 |
|
|
| 0 |
|
|
| 104 |
|
|
| 0 |
|
Gain (loss) on sale of other real estate |
|
| 0 |
|
|
| (47 | ) |
|
| 21 |
|
|
| (47 | ) |
Miscellaneous |
|
| 1,990 |
|
|
| 1,673 |
|
|
| 5,855 |
|
|
| 4,453 |
|
Total non-interest income |
|
| 6,040 |
|
|
| 7,132 |
|
|
| 17,953 |
|
|
| 16,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 6,054 |
|
|
| 5,737 |
|
|
| 17,903 |
|
|
| 16,996 |
|
Occupancy |
|
| 1,999 |
|
|
| 1,943 |
|
|
| 5,891 |
|
|
| 5,725 |
|
Professional fees |
|
| 582 |
|
|
| 374 |
|
|
| 1,354 |
|
|
| 1,121 |
|
Advertising |
|
| 91 |
|
|
| 152 |
|
|
| 388 |
|
|
| 566 |
|
Debit card expense |
|
| 244 |
|
|
| 278 |
|
|
| 740 |
|
|
| 766 |
|
FDIC Insurance |
|
| 108 |
|
|
| 81 |
|
|
| 304 |
|
|
| 169 |
|
Appraisal management fee expense |
|
| 1,556 |
|
|
| 1,478 |
|
|
| 4,646 |
|
|
| 3,845 |
|
Other |
|
| 1,934 |
|
|
| 1,871 |
|
|
| 5,742 |
|
|
| 5,627 |
|
Total non-interest expense |
|
| 12,568 |
|
|
| 11,914 |
|
|
| 36,968 |
|
|
| 34,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
| 4,214 |
|
|
| 5,622 |
|
|
| 15,190 |
|
|
| 11,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 824 |
|
|
| 1,113 |
|
|
| 3,064 |
|
|
| 2,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
| $ | 3,390 |
|
|
| 4,509 |
|
|
| 12,126 |
|
|
| 9,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
| $ | 0.61 |
|
|
| 0.80 |
|
|
| 2.16 |
|
|
| 1.67 |
|
Diluted net earnings per share |
| $ | 0.59 |
|
|
| 0.78 |
|
|
| 2.10 |
|
|
| 1.62 |
|
Cash dividends declared per share |
| $ | 0.17 |
|
|
| 0.15 |
|
|
| 0.49 |
|
|
| 0.60 |
|
PART I. FINANCIAL INFORMATION
See accompanying Notes to ConsolidatedItem 1. Financial Statements.Statements
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||
|
|
|
|
|
|
| ||
Consolidated Balance Sheets | ||||||||
|
|
|
|
|
|
| ||
September 30, 2022 and December 31, 2021 | ||||||||
|
|
|
|
|
|
| ||
(Dollars in thousands) | ||||||||
|
| September 30, |
|
| December 31, |
| ||
Assets |
| 2022 |
|
| 2021 |
| ||
|
| (Unaudited) |
|
| (Audited) |
| ||
|
|
|
|
|
|
| ||
Cash and due from banks, including reserve requirements of $0 at both 9/30/22 and 12/31/21 |
| $ | 55,063 |
|
|
| 44,711 |
|
Interest-bearing deposits |
|
| 100,398 |
|
|
| 232,788 |
|
Cash and cash equivalents |
|
| 155,461 |
|
|
| 277,499 |
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale |
|
| 444,367 |
|
|
| 406,549 |
|
Other investments |
|
| 2,762 |
|
|
| 3,668 |
|
Total securities |
|
| 447,129 |
|
|
| 410,217 |
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
| 975 |
|
|
| 3,637 |
|
|
|
|
|
|
|
|
|
|
Loans |
|
| 1,004,907 |
|
|
| 884,869 |
|
Less allowance for loan losses |
|
| (10,030 | ) |
|
| (9,355 | ) |
Net loans |
|
| 994,877 |
|
|
| 875,514 |
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 18,508 |
|
|
| 16,104 |
|
Cash surrender value of life insurance |
|
| 17,601 |
|
|
| 17,365 |
|
Right of use lease asset |
|
| 5,770 |
|
|
| 4,612 |
|
Accrued interest receivable and other assets |
|
| 35,969 |
|
|
| 19,245 |
|
Total assets |
| $ | 1,676,290 |
|
|
| 1,624,193 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Noninterest-bearing demand |
| $ | 563,142 |
|
|
| 514,319 |
|
Interest-bearing demand, MMDA & savings |
|
| 839,532 |
|
|
| 797,179 |
|
Time, $250,000 or more |
|
| 30,118 |
|
|
| 26,333 |
|
Other time |
|
| 68,299 |
|
|
| 74,917 |
|
Total deposits |
|
| 1,501,091 |
|
|
| 1,412,748 |
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase |
|
| 37,986 |
|
|
| 37,094 |
|
Junior subordinated debentures |
|
| 15,464 |
|
|
| 15,464 |
|
Lease liability |
|
| 5,847 |
|
|
| 4,677 |
|
Accrued interest payable and other liabilities |
|
| 11,978 |
|
|
| 11,841 |
|
Total liabilities |
|
| 1,572,366 |
|
|
| 1,481,824 |
|
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock, no par value; authorized 5,000,000 shares; no shares issued and outstanding |
|
| - |
|
|
| - |
|
Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,641,030 shares at September 30, 2022 and 5,661,569 shares at December 31, 2021 |
|
| 52,752 |
|
|
| 53,305 |
|
Common stock held by deferred compensation trust, at cost; 167,889 shares at September 30, 2022 and 162,193 shares at December 31, 2021 |
|
| (2,150 | ) |
|
| (1,992 | ) |
Deferred compensation |
|
| 2,150 |
|
|
| 1,992 |
|
Retained earnings |
|
| 97,029 |
|
|
| 88,968 |
|
Accumulated other comprehensive income (loss) |
|
| (45,857 | ) |
|
| 96 |
|
Total shareholders' equity |
|
| 103,924 |
|
|
| 142,369 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 1,676,290 |
|
|
| 1,624,193 |
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements. |
|
|
|
|
|
|
|
|
4 |
Table of Contents |
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated Statements of Comprehensive Income | ||||||||||||||||
| ||||||||||||||||
Three and Nine Months Ended September 30, 2021 and 2020 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Dollars in thousands) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net earnings |
| $ | 3,390 |
|
|
| 4,509 |
|
|
| 12,126 |
|
|
| 9,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on securities available for sale |
|
| (844 | ) |
|
| 93 |
|
|
| (2,714 | ) |
|
| 5,204 |
|
Reclassification adjustment for gains on securities available for sale included in net earnings |
|
| 0 |
|
|
| (1,688 | ) |
|
| 0 |
|
|
| (2,145 | ) |
Total other comprehensive income (loss), before income taxes |
|
| (844 | ) |
|
| (1,595 | ) |
|
| (2,714 | ) |
|
| 3,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) related to other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Unrealized holding gains (losses) on securities available for sale |
|
| (194 | ) |
|
| 21 |
|
|
| (624 | ) |
|
| 1,196 |
|
Reclassification adjustment for gains on securities available for sale included in net earnings |
|
| 0 |
|
|
| (388 | ) |
|
| 0 |
|
|
| (493 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total income tax expense (benefit) related to other comprehensive income |
|
| (194 | ) |
|
| (367 | ) |
|
| (624 | ) |
|
| 703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total other comprehensive income (loss), net of tax |
|
| (650 | ) |
|
| (1,228 | ) |
|
| (2,090 | ) |
|
| 2,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
| $ | 2,740 |
|
|
| 3,281 |
|
|
| 10,036 |
|
|
| 11,793 |
|
See accompanying Notes to Consolidated Financial Statements.
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
Consolidated Statements of Earnings | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
Three and Nine Months Ended September 30, 2022 and 2021 | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
|
|
|
|
|
|
| ||||||||||
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and fees on loans |
| $ | 11,051 |
|
|
| 9,807 |
|
|
| 30,727 |
|
|
| 31,474 |
|
Interest on due from banks |
|
| 900 |
|
|
| 89 |
|
|
| 1,453 |
|
|
| 172 |
|
Interest on investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises |
|
| 1,580 |
|
|
| 679 |
|
|
| 2,676 |
|
|
| 1,899 |
|
State and political subdivisions |
|
| 1,056 |
|
|
| 825 |
|
|
| 3,009 |
|
|
| 2,222 |
|
Other |
|
| 24 |
|
|
| 21 |
|
|
| 67 |
|
|
| 93 |
|
Total interest income |
|
| 14,611 |
|
|
| 11,421 |
|
|
| 37,932 |
|
|
| 35,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW, MMDA & savings deposits |
|
| 494 |
|
|
| 577 |
|
|
| 1,263 |
|
|
| 1,617 |
|
Time deposits |
|
| 134 |
|
|
| 181 |
|
|
| 421 |
|
|
| 584 |
|
Junior subordinated debentures |
|
| 146 |
|
|
| 69 |
|
|
| 324 |
|
|
| 211 |
|
Other |
|
| 44 |
|
|
| 34 |
|
|
| 117 |
|
|
| 106 |
|
Total interest expense |
|
| 818 |
|
|
| 861 |
|
|
| 2,125 |
|
|
| 2,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
| 13,793 |
|
|
| 10,560 |
|
|
| 35,807 |
|
|
| 33,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (recovery of) loan losses |
|
| 408 |
|
|
| (182 | ) |
|
| 889 |
|
|
| (863 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
| 13,385 |
|
|
| 10,742 |
|
|
| 34,918 |
|
|
| 34,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges |
|
| 1,458 |
|
|
| 1,023 |
|
|
| 4,000 |
|
|
| 2,859 |
|
Other service charges and fees |
|
| 169 |
|
|
| 187 |
|
|
| 540 |
|
|
| 570 |
|
Mortgage banking income |
|
| 59 |
|
|
| 516 |
|
|
| 358 |
|
|
| 2,109 |
|
Insurance and brokerage commissions |
|
| 213 |
|
|
| 266 |
|
|
| 709 |
|
|
| 764 |
|
Appraisal management fee income |
|
| 2,711 |
|
|
| 1,954 |
|
|
| 9,656 |
|
|
| 5,775 |
|
Gain on sale of other assets |
|
| - |
|
|
| 104 |
|
|
| - |
|
|
| 104 |
|
Gain on sale of other real estate |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 21 |
|
Miscellaneous |
|
| 2,183 |
|
|
| 1,990 |
|
|
| 5,904 |
|
|
| 5,751 |
|
Total non-interest income |
|
| 6,793 |
|
|
| 6,040 |
|
|
| 21,167 |
|
|
| 17,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 6,177 |
|
|
| 6,054 |
|
|
| 18,469 |
|
|
| 17,903 |
|
Occupancy |
|
| 2,038 |
|
|
| 1,999 |
|
|
| 5,886 |
|
|
| 5,891 |
|
Professional fees |
|
| 413 |
|
|
| 582 |
|
|
| 1,241 |
|
|
| 1,354 |
|
Advertising |
|
| 175 |
|
|
| 91 |
|
|
| 509 |
|
|
| 388 |
|
Debit card expense |
|
| 228 |
|
|
| 244 |
|
|
| 826 |
|
|
| 740 |
|
FDIC Insurance |
|
| 121 |
|
|
| 108 |
|
|
| 346 |
|
|
| 304 |
|
Appraisal management fee expense |
|
| 2,151 |
|
|
| 1,556 |
|
|
| 7,680 |
|
|
| 4,646 |
|
Miscellaneous |
|
| 2,152 |
|
|
| 1,934 |
|
|
| 6,082 |
|
|
| 5,742 |
|
Total non-interest expense |
|
| 13,455 |
|
|
| 12,568 |
|
|
| 41,039 |
|
|
| 36,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
| 6,723 |
|
|
| 4,214 |
|
|
| 15,046 |
|
|
| 15,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 1,416 |
|
|
| 824 |
|
|
| 3,070 |
|
|
| 3,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
| $ | 5,307 |
|
|
| 3,390 |
|
|
| 11,976 |
|
|
| 12,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
| $ | 0.96 |
|
|
| 0.61 |
|
|
| 2.18 |
|
|
| 2.16 |
|
Diluted net earnings per share |
| $ | 0.93 |
|
|
| 0.59 |
|
|
| 2.11 |
|
|
| 2.10 |
|
Cash dividends declared per share |
| $ | 0.18 |
|
|
| 0.17 |
|
|
| 0.69 |
|
|
| 0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
Table of Contents |
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Consolidated Statements of Changes in Shareholders' Equity | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Three and Nine Months Ended September 30, 2021 and 2020 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
| Held By |
|
| Accumulated |
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| Deferred |
|
| Other |
|
|
| ||||||||||||
|
| Common Stock |
|
| Retained |
|
| Deferred |
|
| Compensation |
|
| Comprehensive |
|
|
| |||||||||||
|
| Shares |
|
| Amount |
|
| Earnings |
|
| Compensation |
|
| Trust |
|
| Income |
|
| Total |
| |||||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, December 31, 2020 |
|
| 5,787,504 |
|
| $ | 56,871 |
|
|
| 77,628 |
|
|
| 1,796 |
|
|
| (1,796 | ) |
|
| 5,400 |
|
|
| 139,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared on common stock |
|
| - |
|
|
| 0 |
|
|
| (930 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (930 | ) |
Restricted stock units exercised |
|
| 1,662 |
|
|
| 39 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 39 |
|
Equity incentive plan, net |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 53 |
|
|
| (53 | ) |
|
| 0 |
|
|
| 0 |
|
Net earnings |
|
| - |
|
|
| 0 |
|
|
| 4,121 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,121 |
|
Change in accumulated other comprehensive loss, net of tax |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (3,100 | ) |
|
| (3,100 | ) |
Balance, March 31, 2021 |
|
| 5,789,166 |
|
| $ | 56,910 |
|
|
| 80,819 |
|
|
| 1,849 |
|
|
| (1,849 | ) |
|
| 2,300 |
|
|
| 140,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared on common stock |
|
| - |
|
|
| 0 |
|
|
| (930 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (930 | ) |
Equity incentive plan, net |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 52 |
|
|
| (52 | ) |
|
| 0 |
|
|
| 0 |
|
Net earnings |
|
| - |
|
|
| 0 |
|
|
| 4,615 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,615 |
|
Change in accumulated other comprehensive income, net of tax |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,660 |
|
|
| 1,660 |
|
Balance, June 30, 2021 |
|
| 5,789,166 |
|
| $ | 56,910 |
|
|
| 84,504 |
|
|
| 1,901 |
|
|
| (1,901 | ) |
|
| 3,960 |
|
|
| 145,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock repurchase |
|
| (127,597 | ) |
|
| (3,605 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (3,605 | ) |
Cash dividends declared on common stock |
|
| - |
|
|
| 0 |
|
|
| (967 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (967 | ) |
Equity incentive plan, net |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 45 |
|
|
| (45 | ) |
|
| 0 |
|
|
| 0 |
|
Net earnings |
|
| - |
|
|
| 0 |
|
|
| 3,390 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,390 |
|
Change in accumulated other comprehensive loss, net of tax |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (650 | ) |
|
| (650 | ) |
Balance, September 30, 2021 |
|
| 5,661,569 |
|
| $ | 53,305 |
|
|
| 86,927 |
|
|
| 1,946 |
|
|
| (1,946 | ) |
|
| 3,310 |
|
|
| 143,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 |
|
| 5,912,300 |
|
| $ | 59,813 |
|
|
| 70,663 |
|
|
| 1,588 |
|
|
| (1,588 | ) |
|
| 3,644 |
|
|
| 134,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock repurchase |
|
| (126,800 | ) |
|
| (2,999 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (2,999 | ) |
Cash dividends declared on common stock |
|
| - |
|
|
| 0 |
|
|
| (1,779 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,779 | ) |
Restricted stock units exercised |
|
| 2,004 |
|
|
| 57 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 57 |
|
Equity incentive plan, net |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 64 |
|
|
| (64 | ) |
|
| 0 |
|
|
| 0 |
|
Net earnings |
|
| - |
|
|
| 0 |
|
|
| 2,367 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,367 |
|
Change in accumulated other comprehensive income, net of tax |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,090 |
|
|
| 2,090 |
|
Balance, March 31, 2020 |
|
| 5,787,504 |
|
| $ | 56,871 |
|
|
| 71,251 |
|
|
| 1,652 |
|
|
| (1,652 | ) |
|
| 5,734 |
|
|
| 133,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared on common stock |
|
| - |
|
|
| 0 |
|
|
| (870 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (870 | ) |
Equity incentive plan, net |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 48 |
|
|
| (48 | ) |
|
| 0 |
|
|
| 0 |
|
Net earnings |
|
| - |
|
|
| 0 |
|
|
| 2,561 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,561 |
|
Change in accumulated other comprehensive income, net of tax |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,494 |
|
|
| 1,494 |
|
Balance, June 30, 2020 |
|
| 5,787,504 |
|
| $ | 56,871 |
|
|
| 72,942 |
|
|
| 1,700 |
|
|
| (1,700 | ) |
|
| 7,228 |
|
|
| 137,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared on common stock |
|
| - |
|
|
| 0 |
|
|
| (871 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (871 | ) |
Equity incentive plan, net |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 47 |
|
|
| (47 | ) |
|
| 0 |
|
|
| 0 |
|
Net earnings |
|
| - |
|
|
| 0 |
|
|
| 4,509 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,509 |
|
Change in accumulated other comprehensive loss, net of tax |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,228 | ) |
|
| (1,228 | ) |
Balance, September 30, 2020 |
|
| 5,787,504 |
|
| $ | 56,871 |
|
|
| 76,580 |
|
|
| 1,747 |
|
|
| (1,747 | ) |
|
| 6,000 |
|
|
| 139,451 |
|
See accompanying Notes to Consolidated Financial Statements.
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||
| ||||||||||||||||
Three and Nine Months Ended September 30, 2022 and 2021 | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
(Dollars in thousands) | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net earnings |
| $ | 5,307 |
|
|
| 3,390 |
|
|
| 11,976 |
|
|
| 12,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available for sale |
|
| (16,578 | ) |
|
| (844 | ) |
|
| (59,661 | ) |
|
| (2,714 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit related to other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available for sale |
|
| (3,808 | ) |
|
| (194 | ) |
|
| (13,708 | ) |
|
| (624 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of tax |
|
| (12,770 | ) |
|
| (650 | ) |
|
| (45,953 | ) |
|
| (2,090 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
| $ | (7,463 | ) |
|
| 2,740 |
|
|
| (33,977 | ) |
|
| 10,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
Table of Contents |
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||
|
|
|
|
| ||||
Consolidated Statements of Cash Flows | ||||||||
|
|
|
|
| ||||
Nine Months Ended September 30, 2021 and 2020 | ||||||||
|
|
|
|
| ||||
(Dollars in thousands) | ||||||||
|
|
|
|
| ||||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net earnings |
| $ | 12,126 |
|
|
| 9,437 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion |
|
| 3,991 |
|
|
| 3,080 |
|
Provision for (recovery of) loan losses |
|
| (863 | ) |
|
| 3,460 |
|
Deferred income taxes |
|
| (27 | ) |
|
| (25 | ) |
Gain on sale of investment securities |
|
| 0 |
|
|
| (2,145 | ) |
Gain on sale of other real estate |
|
| (21 | ) |
|
| 0 |
|
Write-down of other real estate |
|
| 0 |
|
|
| 47 |
|
Gain on sale of other assets |
|
| (104 | ) |
|
| 0 |
|
Restricted stock expense |
|
| (166 | ) |
|
| (73 | ) |
Proceeds from sales of mortgage loans held for sale |
|
| 76,086 |
|
|
| 78,526 |
|
Origination of mortgage loans held for sale |
|
| (76,033 | ) |
|
| (83,069 | ) |
Change in: |
|
|
|
|
|
|
|
|
Cash surrender value of life insurance |
|
| (297 | ) |
|
| (283 | ) |
Right of use lease asset |
|
| 562 |
|
|
| 525 |
|
Other assets |
|
| 416 |
|
| (219 | ) | |
Lease liability |
|
| (549 | ) |
|
| (508 | ) |
Other liabilities |
|
| 2,138 |
|
|
| (677 | ) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
| 17,259 |
|
|
| 8,076 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of investment securities available for sale |
|
| (186,793 | ) |
|
| (90,233 | ) |
Proceeds from sales, calls and maturities of investment securities available for sale |
|
| 6,010 |
|
|
| 52,289 |
|
Proceeds from paydowns of investment securities available for sale |
|
| 18,335 |
|
|
| 14,635 |
|
Proceeds from paydowns on other investments |
|
| 132 |
|
|
| 132 |
|
Redemptions (purchases) of FHLB stock |
|
| 331 |
|
|
| (3,031 | ) |
Net change in loans |
|
| 57,552 |
|
|
| (120,781 | ) |
Purchases of premises and equipment |
|
| (379 | ) |
|
| (2,298 | ) |
Purchases of bank owned life insurance |
|
| 0 |
|
|
| (140 | ) |
Proceeds from sale of other assets |
|
| 515 |
|
|
| 0 |
|
Proceeds from sale of other real estate and repossessions |
|
| 149 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities |
|
| (104,148 | ) |
|
| (149,427 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net change in deposits |
|
| 188,879 |
|
|
| 219,879 |
|
Net change in securities sold under agreement to repurchase |
|
| 6,131 |
|
|
| 9,930 |
|
Proceeds from FHLB borrowings |
|
| 0 |
|
|
| 70,000 |
|
Repayment of Junior Subordinated Debt |
|
| 0 |
|
|
| (155 | ) |
Proceeds from Fed Funds purchased |
|
| 0 |
|
|
| (6,935 | ) |
Repayments of Fed Funds purchased |
|
| 0 |
|
|
| 6,935 |
|
Restricted stock units exercised |
|
| 39 |
|
|
| 57 |
|
Common stock repurchased |
|
| (3,605 | ) |
|
| (2,999 | ) |
Cash dividends paid on common stock |
|
| (2,827 | ) |
|
| (3,520 | ) |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 188,617 |
|
|
| 293,192 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 101,728 |
|
|
| 151,841 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
| 161,580 |
|
|
| 52,387 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
| $ | 263,308 |
|
|
| 204,228 |
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
Consolidated Statements of Changes in Shareholders' Equity | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
Three and Nine Months Ended September 30, 2022 and 2021 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
| Held By |
|
| Accumulated |
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| Deferred |
|
| Other |
|
|
| ||||||||||||
|
| Common Stock |
|
| Retained |
|
| Deferred |
|
| Compensation |
|
| Comprehensive |
|
|
| |||||||||||
|
| Shares |
|
| Amount |
|
| Earnings |
|
| Compensation |
|
| Trust |
|
| Income (Loss) |
|
| Total |
| |||||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, December 31, 2021 |
|
| 5,661,569 |
|
| $ | 53,305 |
|
|
| 88,968 |
|
|
| 1,992 |
|
|
| (1,992 | ) |
|
| 96 |
|
|
| 142,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock repurchase |
|
| (7,000 | ) |
|
| (199 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (199 | ) |
Cash dividends declared on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
| - |
|
|
| - |
|
|
| (1,877 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,877 | ) |
Restricted stock units exercised |
|
| 1,461 |
|
|
| 41 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 41 |
|
Equity incentive plan, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 50 |
|
|
| (50 | ) |
|
| - |
|
|
| - |
|
Net earnings |
|
| - |
|
|
| - |
|
|
| 3,452 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,452 |
|
Change in accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (18,342 | ) |
|
| (18,342 | ) |
Balance, March 31, 2022 |
|
| 5,656,030 |
|
| $ | 53,147 |
|
|
| 90,543 |
|
|
| 2,042 |
|
|
| (2,042 | ) |
|
| (18,246 | ) |
|
| 125,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock repurchase |
|
| (15,000 | ) |
|
| (395 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (395 | ) |
Cash dividends declared on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
| - |
|
|
| - |
|
|
| (1,019 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,019 | ) |
Equity incentive plan, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 57 |
|
|
| (57 | ) |
|
| - |
|
|
| - |
|
Net earnings |
|
| - |
|
|
| - |
|
|
| 3,217 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,217 |
|
Change in accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (14,841 | ) |
|
| (14,841 | ) |
Balance, June 30, 2022 |
|
| 5,641,030 |
|
| $ | 52,752 |
|
|
| 92,741 |
|
|
| 2,099 |
|
|
| (2,099 | ) |
|
| (33,087 | ) |
|
| 112,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
| - |
|
|
| - |
|
|
| (1,019 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,019 | ) |
Equity incentive plan, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 51 |
|
|
| (51 | ) |
|
| - |
|
|
| - |
|
Net earnings |
|
| - |
|
|
| - |
|
|
| 5,307 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,307 |
|
Change in accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (12,770 | ) |
|
| (12,770 | ) |
Balance, September 30, 2022 |
|
| 5,641,030 |
|
| $ | 52,752 |
|
|
| 97,029 |
|
|
| 2,150 |
|
|
| (2,150 | ) |
|
| (45,857 | ) |
|
| 103,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
| 5,787,504 |
|
| $ | 56,871 |
|
|
| 77,628 |
|
|
| 1,796 |
|
|
| (1,796 | ) |
|
| 5,400 |
|
|
| 139,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
| - |
|
|
| - |
|
|
| (930 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (930 | ) |
Restricted stock units exercised |
|
| 1,662 |
|
|
| 39 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 39 |
|
Equity incentive plan, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 53 |
|
|
| (53 | ) |
|
| - |
|
|
| - |
|
Net earnings |
|
| - |
|
|
| - |
|
|
| 4,121 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,121 |
|
Change in accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,100 | ) |
|
| (3,100 | ) |
Balance, March 31, 2021 |
|
| 5,789,166 |
|
|
| 56,910 |
|
|
| 80,819 |
|
|
| 1,849 |
|
|
| (1,849 | ) |
|
| 2,300 |
|
|
| 140,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
| - |
|
|
| - |
|
|
| (930 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (930 | ) |
Equity incentive plan, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 52 |
|
|
| (52 | ) |
|
| - |
|
|
| - |
|
Net earnings |
|
| - |
|
|
| - |
|
|
| 4,615 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,615 |
|
Change in accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive income, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,660 |
|
|
| 1,660 |
|
Balance, June 30, 2021 |
|
| 5,789,166 |
|
| $ | 56,910 |
|
|
| 84,504 |
|
|
| 1,901 |
|
|
| (1,901 | ) |
|
| 3,960 |
|
|
| 145,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock repurchase |
|
| (127,597 | ) |
|
| (3,605 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,605 | ) |
Cash dividends declared on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
| - |
|
|
| - |
|
|
| (967 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (967 | ) |
Equity incentive plan, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 45 |
|
|
| (45 | ) |
|
| - |
|
|
| - |
|
Net earnings |
|
| - |
|
|
| - |
|
|
| 3,390 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,390 |
|
Change in accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (650 | ) |
|
| (650 | ) |
Balance, September 30, 2021 |
|
| 5,661,569 |
|
| $ | 53,305 |
|
|
| 86,927 |
|
|
| 1,946 |
|
|
| (1,946 | ) |
|
| 3,310 |
|
|
| 143,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
Table of Contents |
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||
|
|
|
|
| ||||
Consolidated Statements of Cash Flows, continued | ||||||||
|
|
|
|
| ||||
Nine Months Ended September 30, 2021 and 2020 | ||||||||
|
|
|
|
| ||||
(Dollars in thousands) | ||||||||
|
|
|
|
| ||||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
|
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
|
| ||
Interest |
| $ | 1,658 |
|
|
| 1,908 |
|
Income taxes |
| $ | 3,221 |
|
|
| 1,651 |
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
Change in unrealized gain on investment securities available for sale, net |
| $ | (2,090 | ) |
|
| 2,356 |
|
Issuance of accrued restricted stock units |
| $ | 39 |
|
|
| 57 |
|
Transfers of loans to other real estate and repossessions |
| $ | 0 |
|
|
| 175 |
|
Transfers of premises and equipment to other assets held for sale |
| $ | 408 |
|
|
| 0 |
|
See accompanying Notes to Consolidated Financial Statements.
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||
|
|
|
|
|
|
| ||
Consolidated Statements of Cash Flows | ||||||||
|
|
|
|
|
|
| ||
Nine Months Ended September 30, 2022 and 2021 | ||||||||
|
|
|
|
|
|
| ||
(Dollars in thousands) | ||||||||
|
|
|
|
|
|
| ||
|
| 2022 |
|
| 2021 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net earnings |
| $ | 11,976 |
|
|
| 12,126 |
|
Adjustments to reconcile net earnings to |
|
|
|
|
|
|
|
|
net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion |
|
| 4,914 |
|
|
| 3,991 |
|
Provision for (recovery of) loan losses |
|
| 889 |
|
|
| (863 | ) |
Deferred income taxes |
|
| (31 | ) |
|
| (27 | ) |
Gain on sale of other real estate |
|
| - |
|
|
| (21 | ) |
Gain on sale of other assets |
|
| - |
|
|
| (104 | ) |
Restricted stock expense |
|
| (95 | ) |
|
| (166 | ) |
Proceeds from sales of mortgage loans held for sale |
|
| 20,475 |
|
|
| 76,086 |
|
Origination of mortgage loans held for sale |
|
| (17,813 | ) |
|
| (76,033 | ) |
Change in: |
|
|
|
|
|
|
|
|
Cash surrender value of life insurance |
|
| (301 | ) |
|
| (297 | ) |
Right of use lease asset |
|
| 568 |
|
|
| 562 |
|
Other assets |
|
| (2,944 | ) |
|
| 455 |
|
Lease liability |
|
| (556 | ) |
|
| (549 | ) |
Other liabilities |
|
| 232 |
|
|
| 2,138 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
| 17,314 |
|
|
| 17,298 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of investment securities available for sale |
|
| (139,657 | ) |
|
| (186,793 | ) |
Proceeds from sales, calls and maturities of investment securities |
|
|
|
|
|
|
|
|
available for sale |
|
| 7,870 |
|
|
| 6,010 |
|
Proceeds from paydowns of investment securities available for sale |
|
| 31,186 |
|
|
| 18,335 |
|
Proceeds from paydowns on other investments |
|
| 1,011 |
|
|
| 132 |
|
Redemptions (purchases) of FHLB stock |
|
| (105 | ) |
|
| 331 |
|
Net change in loans |
|
| (120,252 | ) |
|
| 57,552 |
|
Purchases of premises and equipment |
|
| (4,196 | ) |
|
| (379 | ) |
Proceeds from sale of other assets |
|
| - |
|
|
| 515 |
|
Proceeds from sale of other real estate |
|
| - |
|
|
| 149 |
|
Proceeds from bank owned life insurance |
|
| 65 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities |
|
| (224,078 | ) |
|
| (104,148 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net change in deposits |
|
| 88,343 |
|
|
| 188,879 |
|
Net change in securities sold under agreement to repurchase |
|
| 892 |
|
|
| 6,131 |
|
Common stock repurchased |
|
| (594 | ) |
|
| (3,605 | ) |
Cash dividends paid on common stock |
|
| (3,915 | ) |
|
| (2,827 | ) |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 84,726 |
|
|
| 188,578 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (122,038 | ) |
|
| 101,728 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
| 277,499 |
|
|
| 161,580 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
| $ | 155,461 |
|
|
| 263,308 |
|
8 |
Table of Contents |
PEOPLES BANCORP OF NORTH CAROLINA, INC.
Notes to Consolidated Financial Statements (Unaudited)
|
|
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||||||||
|
|
|
|
|
|
| ||
Consolidated Statements of Cash Flows, continued | ||||||||
|
|
|
|
|
|
| ||
Nine Months Ended September 30, 2022 and 2021 | ||||||||
|
|
|
|
|
|
| ||
(Dollars in thousands) | ||||||||
|
|
|
|
|
|
| ||
|
| 2022 |
|
| 2021 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
|
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
|
| ||
Interest |
| $ | 2,112 |
|
|
| 1,658 |
|
Income taxes |
| $ | 3,069 |
|
|
| 3,221 |
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
Change in unrealized loss on investment securities |
|
|
|
|
|
|
|
|
available for sale, net |
| $ | (45,953 | ) |
|
| (2,090 | ) |
Issuance of accrued restricted stock units |
| $ | 41 |
|
|
| 39 |
|
Transfer of premises and equipment to other assets held for sale |
| $ | - |
|
|
| 408 |
|
Initial recognition of lease right-of-use asset and lease liability |
| $ | 1,726 |
|
|
| 952 |
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements. |
|
|
|
|
|
|
|
|
9 |
Table of Contents |
PEOPLES BANCORP OF NORTH CAROLINA, INC. Notes to Consolidated Financial Statements (Unaudited) (1) Summary of Significant Accounting PoliciesThe Consolidated Financial Statements include the financial statements of Peoples Bancorp of North Carolina, Inc. (the “Company”) and its wholly owned subsidiary, Peoples Bank (the “Bank”), along with the Bank’s wholly owned subsidiaries, Peoples Investment Services, Inc. (“PIS”), Real Estate Advisory Services, Inc. (“REAS”), Community Bank Real Estate Solutions, LLC (“CBRES”) and PB Real Estate Holdings, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. 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. The Bank operates three banking offices focused on the Latino population that were formerly operated as a separate division of the Bank under the name Banco de la Gente (“Banco”). 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 Consolidated Financial Statements in this report (other than the Consolidated Balance Sheet at December 31, 2021) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States (“GAAP”). Actual results could differ from those estimates. The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance. A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2021 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2022 Annual Meeting of Shareholders. Recent Accounting Pronouncements The following table provides a summary of Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of September 30, 2022, which may impact the Company’s financial statements.
|
Recently AdoptedIssued Accounting Guidance Not Yet Adopted
ASU | Description | Effective Date | Effect on Financial Statements or Other Significant Matters | |
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
ASU 2016-13: Measurement of Credit Losses on Financial Instruments | Provides guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. | See ASU 2019-10 below. | The Company will apply this guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The Company is still evaluating the impact of this guidance on its consolidated financial statements. The Company has formed a Current Expected Credit Losses (“CECL”) committee and implemented a model from a third-party vendor for running CECL calculations. The Company |
10 |
Table of Contents |
ASU | Description | Effective Date | Effect on Financial Statements or Other Significant Matters | |
ASU 2018-19: Codification Improvements to Topic 326, Financial Instruments—Credit Losses | Aligns the implementation date of the topic for annual financial statements of nonpublic companies with the implementation date for their interim financial statements. The guidance also clarifies that receivables arising from operating leases are not within the scope of the topic, but rather, should be accounted for in accordance with the leases topic. | See ASU 2019-10 below. | The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. See ASU 2016-13 above. | |
ASU 2019-04: Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments | Addresses unintended issues accountants flagged when implementing ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, ASU 2016-13, Measurement of Credit Losses on Financial Instruments, and ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. | See ASU 2019-10 below. | The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. See ASU 2016-13 above. | |
ASU 2019-05: Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief | Guidance to provide entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. | See ASU 2019-10 below. | The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. See ASU 2016-13 above. | |
ASU 2019-10: Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates | Guidance to defer the effective dates for private companies, not-for-profit organizations, and certain smaller reporting companies applying standards on current expected credit losses (CECL), leases and hedging. | January 1, 2023 | The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. | |
ASU 2019-11: Codification Improvements to Topic 326, Financial Instruments—Credit Losses | Guidance that addresses issues raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect a variety of Topics in the ASC. | January 1, 2023 | The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. |
|
|
|
| |
ASU 2020-03: Codification Improvements to Financial Instruments | Guidance to clarify that the contractual term of a net investment in a lease, determined in accordance with the leases standard, should be the contractual term used to measure expected credit losses under ASC 326. | January 1, 2023 | The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. | |
ASU 2020-04: Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting | Guidance that provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, it will be in effect for a limited time through December 31, 2022. | March 12, 2020 through December 31, 2022 | The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. | |
ASU 2022-02: Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures |
|
| January 1, |
|
|
|
| The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. |
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| September 30, 2021 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
U.S Treasuries |
| $ | 7,963 |
|
|
| 39 |
|
|
| 12 |
|
|
| 7,990 |
|
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sponsored enterprises |
|
| 14,566 |
|
|
| 289 |
|
|
| 178 |
|
|
| 14,677 |
|
Mortgage-backed securities |
|
| 222,526 |
|
|
| 2,427 |
|
|
| 1,648 |
|
|
| 223,305 |
|
State and political subdivisions |
|
| 153,551 |
|
|
| 4,327 |
|
|
| 945 |
|
|
| 156,933 |
|
Total |
| $ | 398,606 |
|
|
| 7,082 |
|
|
| 2,783 |
|
|
| 402,905 |
|
Table of Contents |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| December 31, 2020 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
| ||||
sponsored enterprises |
| $ | 7,384 |
|
|
| 331 |
|
|
| 208 |
|
|
| 7,507 |
|
Mortgage-backed securities |
|
| 143,095 |
|
|
| 2,812 |
|
|
| 593 |
|
|
| 145,314 |
|
State and political subdivisions |
|
| 87,757 |
|
|
| 4,758 |
|
|
| 87 |
|
|
| 92,428 |
|
Total |
| $ | 238,236 |
|
|
| 7,901 |
|
|
| 888 |
|
|
| 245,249 |
|
Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
(2) Investment Securities
Investment securities available for sale at September 30, 2022 and December 31, 2021 are as follows:
(Dollars in thousands) |
|
|
|
|
|
|
|
| ||||||||
|
| September 30, 2022 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
U.S. Treasuries |
| $ | 10,946 |
|
|
| - |
|
|
| 1,169 |
|
|
| 9,777 |
|
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sponsored enterprises |
|
| 12,827 |
|
|
| - |
|
|
| 685 |
|
|
| 12,142 |
|
Mortgage-backed securities |
|
| 296,204 |
|
|
| 271 |
|
|
| 24,576 |
|
|
| 271,899 |
|
State and political subdivisions |
|
| 183,924 |
|
|
| 14 |
|
|
| 33,389 |
|
|
| 150,549 |
|
Total |
| $ | 503,901 |
|
|
| 285 |
|
|
| 59,819 |
|
|
| 444,367 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| December 31, 2021 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
U.S Treasuries |
| $ | 7,964 |
|
|
| - |
|
|
| 75 |
|
|
| 7,889 |
|
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sponsored enterprises |
|
| 14,252 |
|
|
| 200 |
|
|
| 185 |
|
|
| 14,267 |
|
Mortgage-backed securities |
|
| 218,402 |
|
|
| 1,769 |
|
|
| 3,019 |
|
|
| 217,152 |
|
State and political subdivisions |
|
| 165,804 |
|
|
| 3,694 |
|
|
| 2,257 |
|
|
| 167,241 |
|
Total |
| $ | 406,422 |
|
|
| 5,663 |
|
|
| 5,536 |
|
|
| 406,549 |
|
The current fair value and associated unrealized losses on investments in securities with unrealized losses at September 30, 20212022 and December 31, 20202021 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| September 30, 2021 |
| |||||||||||||||||||||
|
| Less than 12 Months |
|
| 12 Months or More |
|
| Total |
| |||||||||||||||
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
| ||||||
U.S. Treasuries |
| $ | 4,994 |
|
|
| 12 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,994 |
|
|
| 12 |
|
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sponsored enterprises |
|
| 5,386 |
|
|
| 5 |
|
|
| 3,442 |
|
|
| 173 |
|
|
| 8,828 |
|
|
| 178 |
|
Mortgage-backed securities |
|
| 114,889 |
|
|
| 1,505 |
|
|
| 5,897 |
|
|
| 143 |
|
|
| 120,786 |
|
|
| 1,648 |
|
State and political subdivisions |
|
| 37,729 |
|
|
| 800 |
|
|
| 3,757 |
|
|
| 145 |
|
|
| 41,486 |
|
|
| 945 |
|
Total |
| $ | 162,998 |
|
|
| 2,322 |
|
|
| 13,096 |
|
|
| 461 |
|
|
| 176,094 |
|
|
| 2,783 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| December 31, 2020 |
| |||||||||||||||||||||
|
| Less than 12 Months |
|
| 12 Months or More |
|
| Total |
| |||||||||||||||
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
| ||||||
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
sponsored enterprises |
| $ | 0 |
|
|
| 0 |
|
|
| 4,193 |
|
|
| 208 |
|
|
| 4,193 |
|
|
| 208 |
|
Mortgage-backed securities |
|
| 80,827 |
|
|
| 565 |
|
|
| 4,762 |
|
|
| 28 |
|
|
| 85,589 |
|
|
| 593 |
|
State and political subdivisions |
|
| 7,126 |
|
|
| 87 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,126 |
|
|
| 87 |
|
Total |
| $ | 87,953 |
|
|
| 652 |
|
|
| 8,955 |
|
|
| 236 |
|
|
| 96,908 |
|
|
| 888 |
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| September 30, 2022 |
| |||||||||||||||||||||
|
| Less than 12 Months |
|
| 12 Months or More |
|
| Total |
| |||||||||||||||
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
| ||||||
U.S. Treasuries |
| $ | 2,868 |
|
|
| 109 |
|
|
| 6,909 |
|
|
| 1,060 |
|
|
| 9,777 |
|
|
| 1,169 |
|
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sponsored enterprises |
|
| 5,098 |
|
|
| 513 |
|
|
| 7,044 |
|
|
| 172 |
|
|
| 12,142 |
|
|
| 685 |
|
Mortgage-backed securities |
|
| 136,374 |
|
|
| 9,243 |
|
|
| 109,222 |
|
|
| 15,333 |
|
|
| 245,596 |
|
|
| 24,576 |
|
State and political subdivisions |
|
| 90,030 |
|
|
| 14,557 |
|
|
| 57,040 |
|
|
| 18,832 |
|
|
| 147,070 |
|
|
| 33,389 |
|
Total |
| $ | 234,370 |
|
|
| 24,422 |
|
|
| 180,215 |
|
|
| 35,397 |
|
|
| 414,585 |
|
|
| 59,819 |
|
Table of Contents |
September 30, 2021 |
|
|
|
| ||||
(Dollars in thousands) |
|
|
|
| ||||
|
| Amortized Cost |
|
| Fair Value |
| ||
Due within one year |
| $ | 11,591 |
|
|
| 11,689 |
|
Due from one to five years |
|
| 10,143 |
|
|
| 10,763 |
|
Due from five to ten years |
|
| 136,387 |
|
|
| 139,315 |
|
Due after ten years |
|
| 17,959 |
|
|
| 17,833 |
|
Mortgage-backed securities |
|
| 222,526 |
|
|
| 223,305 |
|
Total |
| $ | 398,606 |
|
|
| 402,905 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| December 31, 2021 |
| |||||||||||||||||||||
|
| Less than 12 Months |
|
| 12 Months or More |
|
| Total |
| |||||||||||||||
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
| ||||||
U.S. Treasuries |
| $ | 7,889 |
|
|
| 75 |
|
|
| - |
|
|
| - |
|
|
| 7,889 |
|
|
| 75 |
|
U.S. Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sponsored enterprises |
|
| 5,232 |
|
|
| 15 |
|
|
| 3,263 |
|
|
| 170 |
|
|
| 8,495 |
|
|
| 185 |
|
Mortgage-backed securities |
|
| 131,483 |
|
|
| 2,477 |
|
|
| 19,632 |
|
|
| 542 |
|
|
| 151,115 |
|
|
| 3,019 |
|
State and political subdivisions |
|
| 80,076 |
|
|
| 1,981 |
|
|
| 5,922 |
|
|
| 276 |
|
|
| 85,998 |
|
|
| 2,257 |
|
Total |
| $ | 224,680 |
|
|
| 4,548 |
|
|
| 28,817 |
|
|
| 988 |
|
|
| 253,497 |
|
|
| 5,536 |
|
At September 30, 2022, unrealized losses in the investment securities portfolio relating to debt securities totaled $59.8 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the September 30, 2022 tables above, all three U.S. Treasury securities, 152 out of 166 securities issued by state and political subdivisions and 127 out of 139 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses. These unrealized losses are considered temporary because of the acceptable financial condition and results of operations of the entities that issued each security and the repayment sources of principal and interest on U.S. Government sponsored enterprises, including mortgage-backed securities, are government backed. At December 31, 2021, unrealized losses in the investment securities portfolio relating to debt securities totaled $5.5 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2021 tables above, both of the U.S. Treasury securities, 70 of the 146 securities issued by state and political subdivisions contained unrealized losses and 54 of the 99 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses. These unrealized losses are considered temporary because of the acceptable financial condition and results of operations of the entities that issued each security and the repayment sources of principal and interest on U.S. Government sponsored enterprises, including mortgage-backed securities, are government backed.
The amortized cost and estimated fair value of investment securities available for sale at September 30, 2022, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
September 30, 2022 |
|
|
|
| ||||
(Dollars in thousands) |
|
|
|
| ||||
|
| Amortized Cost |
|
| Fair Value |
| ||
Due within one year |
| $ | 2,395 |
|
|
| 2,396 |
|
Due from one to five years |
|
| 9,173 |
|
|
| 8,962 |
|
Due from five to ten years |
|
| 59,376 |
|
|
| 51,386 |
|
Due after ten years |
|
| 136,753 |
|
|
| 109,724 |
|
Mortgage-backed securities |
|
| 296,204 |
|
|
| 271,899 |
|
Total |
| $ | 503,901 |
|
|
| 444,367 |
|
No securities available for sale were sold during the three and nine months ended September 30, 2022 and 2021.
Securities with a fair value of approximately $101.8 million and $98.6 million at September 30, 2022 and December 31, 2021, respectively, were pledged to secure public deposits and for other purposes as required by law.
|
13 | |
|
|
|
(3) Loans
(Dollars in thousands) |
|
|
|
|
|
| ||
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Real estate loans: |
|
|
|
|
|
| ||
Construction and land development |
| $ | 80,009 |
|
|
| 94,124 |
|
Single-family residential |
|
| 258,403 |
|
|
| 272,325 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 24,043 |
|
|
| 26,883 |
|
Commercial |
|
| 363,174 |
|
|
| 332,971 |
|
Multifamily and farmland |
|
| 58,856 |
|
|
| 48,880 |
|
Total real estate loans |
|
| 784,485 |
|
|
| 775,183 |
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
Commercial loans |
|
| 94,376 |
|
|
| 161,740 |
|
Farm loans |
|
| 633 |
|
|
| 855 |
|
Consumer loans |
|
| 6,321 |
|
|
| 7,113 |
|
All other loans |
|
| 5,190 |
|
|
| 3,748 |
|
|
|
|
|
|
|
|
|
|
Total loans |
|
| 891,005 |
|
|
| 948,639 |
|
|
|
|
|
|
|
|
|
|
Less allowance for loan losses |
|
| (8,963 | ) |
|
| (9,908 | ) |
|
|
|
|
|
|
|
|
|
Total net loans |
| $ | 882,042 |
|
|
| 938,731 |
|
Major classifications of loans at September 30, 2022 and December 31, 2021 are summarized as follows:
(Dollars in thousands) |
|
|
|
|
|
| ||
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Real estate loans: |
|
|
|
|
|
| ||
Construction and land development |
| $ | 112,854 |
|
|
| 95,760 |
|
Single-family residential |
|
| 312,208 |
|
|
| 266,111 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 20,469 |
|
|
| 23,147 |
|
Commercial |
|
| 399,015 |
|
|
| 337,841 |
|
Multifamily and farmland |
|
| 62,040 |
|
|
| 58,366 |
|
Total real estate loans |
|
| 906,586 |
|
|
| 781,225 |
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
Commercial loans |
|
| 76,434 |
|
|
| 91,172 |
|
Farm loans |
|
| 961 |
|
|
| 796 |
|
Consumer loans |
|
| 6,438 |
|
|
| 6,436 |
|
All other loans |
|
| 14,488 |
|
|
| 5,240 |
|
|
|
|
|
|
|
|
|
|
Total loans |
|
| 1,004,907 |
|
|
| 884,869 |
|
|
|
|
|
|
|
|
|
|
Less allowance for loan losses |
|
| (10,030 | ) |
|
| (9,355 | ) |
|
|
|
|
|
|
|
|
|
Total net loans |
| $ | 994,877 |
|
|
| 875,514 |
|
The Bank makes loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Wake, Rowan and Forsyth counties of North Carolina. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market. Risk characteristics of the major components of the Bank’s loan portfolio are discussed below:
| ||
| · | Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral. |
| · | Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans. |
|
|
|
| · | Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over |
|
|
|
| · | Commercial loans – Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business. |
|
|
|
|
| Multifamily and |
Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due if the required principal and interest payments have not been received within 30 days of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Generally, a loan is placed on non-accrual status when it is over 90 days past due and there is reasonable doubt that all principal will be collected. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
14 |
|
Table of |
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Loans 30-89 Days Past Due |
|
| Loans 90 or More Days Past Due |
|
| Total Past Due Loans |
|
| Total Current Loans |
|
| Total Loans |
|
| Accruing Loans 90 or More Days Past Due |
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Construction and land development |
| $ | 6 |
|
|
| 0 |
|
|
| 6 |
|
|
| 80,003 |
|
|
| 80,009 |
|
|
| 0 |
|
Single-family residential |
|
| 850 |
|
|
| 230 |
|
|
| 1,080 |
|
|
| 257,323 |
|
|
| 258,403 |
|
|
| 0 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 450 |
|
|
| 39 |
|
|
| 489 |
|
|
| 23,554 |
|
|
| 24,043 |
|
|
| 0 |
|
Commercial |
|
| 28 |
|
|
| 37 |
|
|
| 65 |
|
|
| 363,109 |
|
|
| 363,174 |
|
|
| 0 |
|
Multifamily and farmland |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 58,856 |
|
|
| 58,856 |
|
|
| 0 |
|
Total real estate loans |
|
| 1,334 |
|
|
| 306 |
|
|
| 1,640 |
|
|
| 782,845 |
|
|
| 784,485 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 176 |
|
|
| 0 |
|
|
| 176 |
|
|
| 94,200 |
|
|
| 94,376 |
|
|
| 0 |
|
Farm loans |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 633 |
|
|
| 633 |
|
|
| 0 |
|
Consumer loans |
|
| 66 |
|
|
| 1 |
|
|
| 67 |
|
|
| 6,254 |
|
|
| 6,321 |
|
|
| 0 |
|
All other loans |
|
| 8 |
|
|
| 0 |
|
|
| 8 |
|
|
| 5,182 |
|
|
| 5,190 |
|
|
| 0 |
|
Total loans |
| $ | 1,584 |
|
|
| 307 |
|
|
| 1,891 |
|
|
| 889,114 |
|
|
| 891,005 |
|
|
| 0 |
|
The following tables present an age analysis of past due loans, by loan type, as of September 30, 2022 and December 31, 2021:
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| Loans 30-89 Days Past Due |
|
| Loans 90 or More Days Past Due |
|
| Total Past Due Loans |
|
| Total Current Loans |
|
| Total Current Loans |
|
| Total Loans |
|
| Accruing Loans 90 or More Days Past Due |
| |||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Construction and land development |
| $ | 513 |
|
|
| - |
|
|
| 513 |
|
|
| 112,341 |
|
|
| - |
|
|
| 112,854 |
|
|
| - |
|
Single-family residential |
|
| 1,050 |
|
|
| 158 |
|
|
| 1,208 |
|
|
| 311,000 |
|
|
| - |
|
|
| 312,208 |
|
|
| - |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 602 |
|
|
| 191 |
|
|
| 793 |
|
|
| 19,676 |
|
|
| - |
|
|
| 20,469 |
|
|
| - |
|
Commercial |
|
| 123 |
|
|
| - |
|
|
| 123 |
|
|
| 398,892 |
|
|
| - |
|
|
| 399,015 |
|
|
| - |
|
Multifamily and farmland |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 62,040 |
|
|
| - |
|
|
| 62,040 |
|
|
| - |
|
Total real estate loans |
|
| 2,288 |
|
|
| 349 |
|
|
| 2,637 |
|
|
| 903,949 |
|
|
| - |
|
|
| 906,586 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 1,237 |
|
|
| - |
|
|
| 1,237 |
|
|
| 75,197 |
|
|
| - |
|
|
| 76,434 |
|
|
| - |
|
Farm loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 961 |
|
|
| - |
|
|
| 961 |
|
|
| - |
|
Consumer loans |
|
| 41 |
|
|
| 3 |
|
|
| 44 |
|
|
| 6,394 |
|
|
| - |
|
|
| 6,438 |
|
|
| - |
|
All other loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,488 |
|
|
| - |
|
|
| 14,488 |
|
|
| - |
|
Total loans |
| $ | 3,566 |
|
|
| 352 |
|
|
| 3,918 |
|
|
| 1,000,989 |
|
|
| - |
|
|
| 1,004,907 |
|
|
| - |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Loans 30-89 Days Past Due |
|
| Loans 90 or More Days Past Due |
|
| Total Past Due Loans |
|
| Total Current Loans |
|
| Total Loans |
|
| Accruing Loans 90 or More Days Past Due |
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Construction and land development |
| $ | - |
|
|
| - |
|
|
| - |
|
|
| 95,760 |
|
|
| 95,760 |
|
|
| - |
|
Single-family residential |
|
| 2,323 |
|
|
| 634 |
|
|
| 2,957 |
|
|
| 263,154 |
|
|
| 266,111 |
|
|
| - |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 2,593 |
|
|
| 112 |
|
|
| 2,705 |
|
|
| 20,442 |
|
|
| 23,147 |
|
|
| - |
|
Commercial |
|
| 488 |
|
|
| - |
|
|
| 488 |
|
|
| 337,353 |
|
|
| 337,841 |
|
|
| - |
|
Multifamily and farmland |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 58,366 |
|
|
| 58,366 |
|
|
| - |
|
Total real estate loans |
|
| 5,404 |
|
|
| 746 |
|
|
| 6,150 |
|
|
| 775,075 |
|
|
| 781,225 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 43 |
|
|
| - |
|
|
| 43 |
|
|
| 91,129 |
|
|
| 91,172 |
|
|
| - |
|
Farm loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 796 |
|
|
| 796 |
|
|
| - |
|
Consumer loans |
|
| 38 |
|
|
| - |
|
|
| 38 |
|
|
| 6,398 |
|
|
| 6,436 |
|
|
| - |
|
All other loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,240 |
|
|
| 5,240 |
|
|
| - |
|
Total loans |
| $ | 5,485 |
|
|
| 746 |
|
|
| 6,231 |
|
|
| 878,638 |
|
|
| 884,869 |
|
|
| - |
|
15 |
Table of Contents |
The following table presents non-accrual loans as of September 30, 2022 and December 31, 2021:
(Dollars in thousands) |
|
|
|
|
|
| ||
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Real estate loans: |
|
|
|
|
|
| ||
Construction and land development |
| $ | - |
|
|
| - |
|
Single-family residential |
|
| 1,999 |
|
|
| 1,642 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 1,462 |
|
|
| 1,232 |
|
Commercial |
|
| 133 |
|
|
| 200 |
|
Multifamily and farmland |
|
| 96 |
|
|
| 105 |
|
Total real estate loans |
|
| 3,690 |
|
|
| 3,179 |
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
Commercial loans |
|
| - |
|
|
| 49 |
|
Consumer loans |
|
| 18 |
|
|
| 2 |
|
Total |
| $ | 3,708 |
|
|
| 3,230 |
|
At each reporting period, the Bank determines which loans are impaired. Accordingly, the Bank’s impaired loans are reported at their estimated fair value on a non-recurring basis. An allowance for each impaired loan that is collateral-dependent is calculated based on the fair value of its collateral less estimated selling costs. The fair value of the collateral is based on appraisals performed by REAS, a subsidiary of the Bank. REAS is staffed by certified appraisers that also perform appraisals for other companies. Factors, including the assumptions and techniques utilized by the appraiser, are considered by management. If the recorded investment in the impaired loan exceeds the measure of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for loan losses. An allowance for each impaired loan that is not collateral dependent is calculated based on the present value of projected cash flows. If the recorded investment in the impaired loan exceeds the present value of projected cash flows, a valuation allowance is recorded as a component of the allowance for loan losses. Impaired loans under $250,000 are not individually evaluated for impairment with the exception of the Bank’s Troubled Debt Restructurings (“TDR”) loans in the residential mortgage loan portfolio, which are individually evaluated for impairment. Impaired loans were $15.7 million and $18.3 million at September 30, 2022 and December 31, 2021, respectively. Interest income recognized on accruing impaired loans was $649,000 and $754,000 for the nine months ended September 30, 2022 and 2021, respectively. Interest income recognized on accruing impaired loans was $217,000 and $253,000 for the three months ended September 30, 2022 and the three months ended September 30, 2021, respectively. No interest income is recognized on non-accrual impaired loans subsequent to their classification as non-accrual.
The following table presents impaired loans as of September 30, 2022:
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Unpaid Contractual Principal Balance |
|
| Recorded Investment With No Allowance |
|
| Recorded Investment With Allowance |
|
| Recorded Investment in Impaired Loans |
|
| Related Allowance |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Construction and land development |
| $ | 59 |
|
|
| - |
|
|
| 59 |
|
|
| 59 |
|
|
| 1 |
|
Single-family residential |
|
| 3,929 |
|
|
| 240 |
|
|
| 3,381 |
|
|
| 3,621 |
|
|
| 62 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 10,557 |
|
|
| - |
|
|
| 9,890 |
|
|
| 9,890 |
|
|
| 619 |
|
Commercial |
|
| 1,996 |
|
|
| 426 |
|
|
| 1,502 |
|
|
| 1,928 |
|
|
| 9 |
|
Multifamily and farmland |
|
| 107 |
|
|
| - |
|
|
| 96 |
|
|
| 96 |
|
|
| - |
|
Total impaired real estate loans |
|
| 16,648 |
|
|
| 666 |
|
|
| 14,928 |
|
|
| 15,594 |
|
|
| 691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 130 |
|
|
| - |
|
|
| 130 |
|
|
| 130 |
|
|
| 1 |
|
Consumer loans |
|
| 21 |
|
|
| - |
|
|
| 20 |
|
|
| 20 |
|
|
| - |
|
Total impaired loans |
| $ | 16,799 |
|
|
| 666 |
|
|
| 15,078 |
|
|
| 15,744 |
|
|
| 692 |
|
16 |
Table of Contents |
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Loans 30-89 Days Past Due |
|
| Loans 90 or More Days Past Due |
|
| Total Past Due Loans |
|
| Total Current Loans |
|
| Total Loans |
|
| Accruing Loans 90 or More Days Past Due |
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Construction and land development |
| $ | 298 |
|
|
| 0 |
|
|
| 298 |
|
|
| 93,826 |
|
|
| 94,124 |
|
|
| 0 |
|
Single-family residential |
|
| 3,660 |
|
|
| 270 |
|
|
| 3,930 |
|
|
| 268,395 |
|
|
| 272,325 |
|
|
| 0 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 3,566 |
|
|
| 105 |
|
|
| 3,671 |
|
|
| 23,212 |
|
|
| 26,883 |
|
|
| 0 |
|
Commercial |
|
| 36 |
|
|
| 0 |
|
|
| 36 |
|
|
| 332,935 |
|
|
| 332,971 |
|
|
| 0 |
|
Multifamily and farmland |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 48,880 |
|
|
| 48,880 |
|
|
| 0 |
|
Total real estate loans |
|
| 7,560 |
|
|
| 375 |
|
|
| 7,935 |
|
|
| 767,248 |
|
|
| 775,183 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 161,740 |
|
|
| 161,740 |
|
|
| 0 |
|
Farm loans |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 855 |
|
|
| 855 |
|
|
| 0 |
|
Consumer loans |
|
| 45 |
|
|
| 2 |
|
|
| 47 |
|
|
| 7,066 |
|
|
| 7,113 |
|
|
| 0 |
|
All other loans |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,748 |
|
|
| 3,748 |
|
|
| 0 |
|
Total loans |
| $ | 7,605 |
|
|
| 377 |
|
|
| 7,982 |
|
|
| 940,657 |
|
|
| 948,639 |
|
|
| 0 |
|
The following table presents impaired loans as of and for the year ended December 31, 2021:
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Unpaid Contractual Principal Balance |
|
| Recorded Investment With No Allowance |
|
| Recorded Investment With Allowance |
|
| Recorded Investment in Impaired Loans |
|
| Related Allowance |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Construction and land development |
| $ | 73 |
|
|
| - |
|
|
| 73 |
|
|
| 73 |
|
|
| 3 |
|
Single-family residential |
|
| 5,138 |
|
|
| 524 |
|
|
| 4,374 |
|
|
| 4,898 |
|
|
| 86 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 11,753 |
|
|
| - |
|
|
| 10,922 |
|
|
| 10,922 |
|
|
| 687 |
|
Commercial |
|
| 2,138 |
|
|
| 435 |
|
|
| 1,608 |
|
|
| 2,043 |
|
|
| 11 |
|
Multifamily and farmland |
|
| 113 |
|
|
| - |
|
|
| 105 |
|
|
| 105 |
|
|
| - |
|
Total impaired real estate loans |
|
| 19,215 |
|
|
| 959 |
|
|
| 17,082 |
|
|
| 18,041 |
|
|
| 787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 282 |
|
|
| 49 |
|
|
| 170 |
|
|
| 219 |
|
|
| 2 |
|
Consumer loans |
|
| 8 |
|
|
| - |
|
|
| 4 |
|
|
| 4 |
|
|
| - |
|
Total impaired loans |
| $ | 19,505 |
|
|
| 1,008 |
|
|
| 17,256 |
|
|
| 18,264 |
|
|
| 789 |
|
(Dollars in thousands) |
|
|
|
|
|
| ||
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Real estate loans: |
|
|
|
|
|
| ||
Single-family residential |
| $ | 1,020 |
|
|
| 1,266 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 1,244 |
|
|
| 1,709 |
|
Commercial |
|
| 271 |
|
|
| 440 |
|
Multifamily and farmland |
|
| 109 |
|
|
| 117 |
|
Total real estate loans |
|
| 2,644 |
|
|
| 3,532 |
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
Commercial loans | �� |
| 54 |
|
|
| 212 |
|
Consumer loans |
|
| 6 |
|
|
| 14 |
|
Total |
| $ | 2,704 |
|
|
| 3,758 |
|
The following table presents the average impaired loan balance and the interest income recognized by loan class for the three and nine months ended September 30, 2022 and 2021.
Impaired loans collectively evaluated for impairment totaled $5.1 million at September 30, 2022 and December 31, 2021 and are included in the tables above. Allowance on impaired loans collectively evaluated for impairment totaled $44,000 and $52,000 at September 30, 2022 and December 31, 2021, respectively. The following tables present changes in the allowance for loan losses for the three and nine months ended September 30, 2022 and 2021. Unallocated balances in the following tables include allowance for loan losses based on qualitative factors such as economic outlook, concentrations of credit, interest rate risk and loan volume trends. Paycheck Protection Program (“PPP”) loans are excluded from the allowance for loan losses as PPP loans are 100 percent guaranteed by the Small Business Administration (“SBA”). |
|
17 |
Table of Contents |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente Non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer and All Other |
|
| Unallocated |
|
| Total |
| ||||||||||
Nine months ended September 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Beginning balance |
| $ | 1,193 |
|
|
| 2,013 |
|
|
| 864 |
|
|
| 2,234 |
|
|
| 150 |
|
|
| 711 |
|
|
| - |
|
|
| 110 |
|
|
| 2,080 |
|
|
| 9,355 |
|
Charge-offs |
|
| - |
|
|
| (120 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (20 | ) |
|
| - |
|
|
| (450 | ) |
|
| - |
|
|
| (590 | ) |
Recoveries |
|
| - |
|
|
| 219 |
|
|
| - |
|
|
| 6 |
|
|
| - |
|
|
| 64 |
|
|
| - |
|
|
| 87 |
|
|
| - |
|
|
| 376 |
|
Provision |
|
| 180 |
|
|
| 78 |
|
|
| (101 | ) |
|
| 885 |
|
|
| 5 |
|
|
| (14 | ) |
|
| - |
|
|
| 467 |
|
|
| (611 | ) |
|
| 889 |
|
Ending balance |
| $ | 1,373 |
|
|
| 2,190 |
|
|
| 763 |
|
|
| 3,125 |
|
|
| 155 |
|
|
| 741 |
|
|
| - |
|
|
| 214 |
|
|
| 1,469 |
|
|
| 10,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 1,272 |
|
|
| 2,171 |
|
|
| 813 |
|
|
| 3,156 |
|
|
| 157 |
|
|
| 633 |
|
|
| - |
|
|
| 216 |
|
|
| 1,371 |
|
|
| 9,789 |
|
Charge-offs |
|
| - |
|
|
| (89 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (13 | ) |
|
| - |
|
|
| (204 | ) |
|
| - |
|
|
| (306 | ) |
Recoveries |
|
| - |
|
|
| 92 |
|
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| 8 |
|
|
| - |
|
|
| 37 |
|
|
| - |
|
|
| 139 |
|
Provision |
|
| 101 |
|
|
| 16 |
|
|
| (50 | ) |
|
| (33 | ) |
|
| (2 | ) |
|
| 113 |
|
|
| - |
|
|
| 165 |
|
|
| 98 |
|
|
| 408 |
|
Ending balance |
| $ | 1,373 |
|
|
| 2,190 |
|
|
| 763 |
|
|
| 3,125 |
|
|
| 155 |
|
|
| 741 |
|
|
| - |
|
|
| 214 |
|
|
| 1,469 |
|
|
| 10,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses at September 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | - |
|
|
| 37 |
|
|
| 605 |
|
|
| 6 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 648 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
|
| 1,373 |
|
|
| 2,153 |
|
|
| 158 |
|
|
| 3,119 |
|
|
| 155 |
|
|
| 741 |
|
|
| - |
|
|
| 214 |
|
|
| 1,469 |
|
|
| 9,382 |
|
Ending balance |
| $ | 1,373 |
|
|
| 2,190 |
|
|
| 763 |
|
|
| 3,125 |
|
|
| 155 |
|
|
| 741 |
|
|
| - |
|
|
| 214 |
|
|
| 1,469 |
|
|
| 10,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at September 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 112,854 |
|
|
| 312,208 |
|
|
| 20,469 |
|
|
| 399,015 |
|
|
| 62,040 |
|
|
| 76,434 |
|
|
| 961 |
|
|
| 20,926 |
|
|
| - |
|
|
| 1,004,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | - |
|
|
| 547 |
|
|
| 8,703 |
|
|
| 1,401 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,651 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 112,854 |
|
|
| 311,661 |
|
|
| 11,766 |
|
|
| 397,614 |
|
|
| 62,040 |
|
|
| 76,434 |
|
|
| 961 |
|
|
| 20,926 |
|
|
| - |
|
|
| 994,256 |
|
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Unpaid Contractual Principal Balance |
|
| Recorded Investment With No Allowance |
|
| Recorded Investment With Allowance |
|
| Recorded Investment in Impaired Loans |
|
| Related Allowance |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Construction and land development |
| $ | 75 |
|
|
| 0 |
|
|
| 75 |
|
|
| 75 |
|
|
| 3 |
|
Single-family residential |
|
| 4,506 |
|
|
| 275 |
|
|
| 4,021 |
|
|
| 4,296 |
|
|
| 80 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 12,269 |
|
|
| 0 |
|
|
| 11,383 |
|
|
| 11,383 |
|
|
| 724 |
|
Commercial |
|
| 2,229 |
|
|
| 439 |
|
|
| 1,692 |
|
|
| 2,131 |
|
|
| 12 |
|
Multifamily and farmland |
|
| 115 |
|
|
| 0 |
|
|
| 109 |
|
|
| 109 |
|
|
| 0 |
|
Total impaired real estate loans |
|
| 19,194 |
|
|
| 714 |
|
|
| 17,280 |
|
|
| 17,994 |
|
|
| 819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 299 |
|
|
| 54 |
|
|
| 183 |
|
|
| 237 |
|
|
| 3 |
|
Consumer loans |
|
| 12 |
|
|
| 0 |
|
|
| 8 |
|
|
| 8 |
|
|
| 0 |
|
Total impaired loans |
| $ | 19,505 |
|
|
| 768 |
|
|
| 17,471 |
|
|
| 18,239 |
|
|
| 822 |
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| Three months ended |
|
| Nine months ended |
| ||||||||||||||||||||||||||
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||||
|
| Average Balance |
|
| Interest Income Recognized |
|
| Average Balance |
|
| Interest Income Recognized |
|
| Average Balance |
|
| Interest Income Recognized |
|
| Average Balance |
|
| Interest Income Recognized |
| ||||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Construction and land development |
| $ | 76 |
|
|
| 1 |
|
|
| 153 |
|
|
| 0 |
|
|
| 91 |
|
|
| 5 |
|
|
| 123 |
|
|
| 7 |
|
Single-family residential |
|
| 5,875 |
|
|
| 49 |
|
|
| 5,107 |
|
|
| 63 |
|
|
| 5,683 |
|
|
| 166 |
|
|
| 4,451 |
|
|
| 181 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente stated income |
|
| 10,349 |
|
|
| 140 |
|
|
| 13,402 |
|
|
| 197 |
|
|
| 11,090 |
|
|
| 477 |
|
|
| 13,785 |
|
|
| 617 |
|
Commercial |
|
| 2,280 |
|
|
| 20 |
|
|
| 2,665 |
|
|
| 31 |
|
|
| 2,617 |
|
|
| 85 |
|
|
| 2,772 |
|
|
| 103 |
|
Multifamily and farmland |
|
| 110 |
|
|
| 2 |
|
|
| 0 |
|
|
| 0 |
|
|
| 113 |
|
|
| 4 |
|
|
| 0 |
|
|
| 0 |
|
Total impaired real estate loans |
|
| 18,690 |
|
|
| 212 |
|
|
| 21,327 |
|
|
| 291 |
|
|
| 19,594 |
|
|
| 737 |
|
|
| 21,131 |
|
|
| 908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 248 |
|
|
| 5 |
|
|
| 494 |
|
|
| 7 |
|
|
| 330 |
|
|
| 16 |
|
|
| 553 |
|
|
| 22 |
|
Consumer loans |
|
| 9 |
|
|
| 0 |
|
|
| 74 |
|
|
| 1 |
|
|
| 19 |
|
|
| 1 |
|
|
| 57 |
|
|
| 4 |
|
Total impaired loans |
| $ | 18,947 |
|
|
| 217 |
|
|
| 21,895 |
|
|
| 299 |
|
|
| 19,943 |
|
|
| 754 |
|
|
| 21,741 |
|
|
| 934 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente Non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer and All Other |
|
| Unallocated |
|
| Total |
| ||||||||||
Nine months ended September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Beginning balance |
| $ | 1,196 |
|
|
| 1,843 |
|
|
| 1,052 |
|
|
| 2,212 |
|
|
| 122 |
|
|
| 1,345 |
|
|
| - |
|
|
| 128 |
|
|
| 2,010 |
|
|
| 9,908 |
|
Charge-offs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (293 | ) |
|
| - |
|
|
| (249 | ) |
|
| - |
|
|
| (542 | ) |
Recoveries |
|
| 121 |
|
|
| 165 |
|
|
| - |
|
|
| 50 |
|
|
| 3 |
|
|
| 7 |
|
|
| - |
|
|
| 114 |
|
|
| - |
|
|
| 460 |
|
Provision |
|
| (421 | ) |
|
| (306 | ) |
|
| (162 | ) |
|
| 46 |
|
|
| 22 |
|
|
| (153 | ) |
|
| - |
|
|
| 98 |
|
|
| 13 |
|
|
| (863 | ) |
Ending balance |
| $ | 896 |
|
|
| 1,702 |
|
|
| 890 |
|
|
| 2,308 |
|
|
| 147 |
|
|
| 906 |
|
|
| - |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 1,038 |
|
|
| 1,723 |
|
|
| 980 |
|
|
| 2,180 |
|
|
| 148 |
|
|
| 996 |
|
|
| - |
|
|
| 89 |
|
|
| 2,133 |
|
|
| 9,287 |
|
Charge-offs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (215 | ) |
|
| - |
|
|
| (91 | ) |
|
| - |
|
|
| (306 | ) |
Recoveries |
|
| 31 |
|
|
| 86 |
|
|
| - |
|
|
| 2 |
|
|
| 4 |
|
|
| 1 |
|
|
| - |
|
|
| 40 |
|
|
| - |
|
|
| 164 |
|
Provision |
|
| (173 | ) |
|
| (107 | ) |
|
| (90 | ) |
|
| 126 |
|
|
| (5 | ) |
|
| 124 |
|
|
| - |
|
|
| 53 |
|
|
| (110 | ) |
|
| (182 | ) |
Ending balance |
| $ | 896 |
|
|
| 1,702 |
|
|
| 890 |
|
|
| 2,308 |
|
|
| 147 |
|
|
| 906 |
|
|
| - |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses at September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 1 |
|
|
| 58 |
|
|
| 710 |
|
|
| 7 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 776 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
|
| 895 |
|
|
| 1,644 |
|
|
| 180 |
|
|
| 2,301 |
|
|
| 147 |
|
|
| 906 |
|
|
| - |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,187 |
|
Ending balance |
| $ | 896 |
|
|
| 1,702 |
|
|
| 890 |
|
|
| 2,308 |
|
|
| 147 |
|
|
| 906 |
|
|
| - |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 80,009 |
|
|
| 258,403 |
|
|
| 24,043 |
|
|
| 363,174 |
|
|
| 58,856 |
|
|
| 94,376 |
|
|
| 633 |
|
|
| 11,511 |
|
|
| - |
|
|
| 891,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 6 |
|
|
| 1,398 |
|
|
| 10,236 |
|
|
| 1,450 |
|
|
| - |
|
|
| 54 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 13,144 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 80,003 |
|
|
| 257,005 |
|
|
| 13,807 |
|
|
| 361,724 |
|
|
| 58,856 |
|
|
| 94,322 |
|
|
| 633 |
|
|
| 11,511 |
|
|
| - |
|
|
| 877,861 |
|
18 |
Table of Contents |
The Bank utilizes an internal risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 8. These risk grades are evaluated on an ongoing basis. A description of the general characteristics of the eight risk grades is as follows: |
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| Unpaid Contractual Principal Balance |
|
| Recorded Investment With No Allowance |
|
| Recorded Investment With Allowance |
|
| Recorded Investment in Impaired Loans |
|
| Related Allowance |
|
| Average Outstanding Impaired Loans |
|
| Interest Income Recognized |
| |||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Construction and land development |
| $ | 108 |
|
|
| 0 |
|
|
| 108 |
|
|
| 108 |
|
|
| 4 |
|
|
| 134 |
|
|
| 8 |
|
Single-family residential |
|
| 5,302 |
|
|
| 379 |
|
|
| 4,466 |
|
|
| 4,845 |
|
|
| 33 |
|
|
| 4,741 |
|
|
| 262 |
|
Single-family residential - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco de la Gente non-traditional |
|
| 13,417 |
|
|
| 0 |
|
|
| 12,753 |
|
|
| 12,753 |
|
|
| 862 |
|
|
| 13,380 |
|
|
| 798 |
|
Commercial |
|
| 2,999 |
|
|
| 1,082 |
|
|
| 1,891 |
|
|
| 2,973 |
|
|
| 14 |
|
|
| 2,940 |
|
|
| 139 |
|
Multifamily and farmland |
|
| 119 |
|
|
| 0 |
|
|
| 117 |
|
|
| 117 |
|
|
| 0 |
|
|
| 29 |
|
|
| 6 |
|
Total impaired real estate loans |
|
| 21,945 |
|
|
| 1,461 |
|
|
| 19,335 |
|
|
| 20,796 |
|
|
| 913 |
|
|
| 21,224 |
|
|
| 1,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| 515 |
|
|
| 211 |
|
|
| 244 |
|
|
| 455 |
|
|
| 5 |
|
|
| 564 |
|
|
| 32 |
|
Consumer loans |
|
| 41 |
|
|
| 0 |
|
|
| 37 |
|
|
| 37 |
|
|
| 1 |
|
|
| 60 |
|
|
| 5 |
|
Total impaired loans |
| $ | 22,501 |
|
|
| 1,672 |
|
|
| 19,616 |
|
|
| 21,288 |
|
|
| 919 |
|
|
| 21,848 |
|
|
| 1,250 |
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente Non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer and All Other |
|
| Unallocated |
|
| Total |
| ||||||||||
Nine months ended September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Beginning balance |
| $ | 1,196 |
|
|
| 1,843 |
|
|
| 1,052 |
|
|
| 2,212 |
|
|
| 122 |
|
|
| 1,345 |
|
|
| 0 |
|
|
| 128 |
|
|
| 2,010 |
|
|
| 9,908 |
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (293 | ) |
|
| 0 |
|
|
| (249 | ) |
|
| 0 |
|
|
| (542 | ) |
Recoveries |
|
| 121 |
|
|
| 165 |
|
|
| 0 |
|
|
| 50 |
|
|
| 3 |
|
|
| 7 |
|
|
| 0 |
|
|
| 114 |
|
|
| 0 |
|
|
| 460 |
|
Provision |
|
| (421 | ) |
|
| (306 | ) |
|
| (162 | ) |
|
| 46 |
|
|
| 22 |
|
|
| (153 | ) |
|
| 0 |
|
|
| 98 |
|
|
| 13 |
|
|
| (863 | ) |
Ending balance |
| $ | 896 |
|
|
| 1,702 |
|
|
| 890 |
|
|
| 2,308 |
|
|
| 147 |
|
|
| 906 |
|
|
| 0 |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 1,038 |
|
|
| 1,723 |
|
|
| 980 |
|
|
| 2,180 |
|
|
| 148 |
|
|
| 996 |
|
|
| 0 |
|
|
| 89 |
|
|
| 2,133 |
|
|
| 9,287 |
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (215 | ) |
|
| 0 |
|
|
| (91 | ) |
|
| 0 |
|
|
| (306 | ) |
Recoveries |
|
| 31 |
|
|
| 86 |
|
|
| 0 |
|
|
| 2 |
|
|
| 4 |
|
|
| 1 |
|
|
| - |
|
|
| 40 |
|
|
| 0 |
|
|
| 164 |
|
Provision |
|
| (173 | ) |
|
| (107 | ) |
|
| (90 | ) |
|
| 126 |
|
|
| (5 | ) |
|
| 124 |
|
|
| 0 |
|
|
| 53 |
|
|
| (110 | ) |
|
| (182 | ) |
Ending balance |
| $ | 896 |
|
|
| 1,702 |
|
|
| 890 |
|
|
| 2,308 |
|
|
| 147 |
|
|
| 906 |
|
|
| 0 |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses at September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 1 |
|
|
| 58 |
|
|
| 710 |
|
|
| 7 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 776 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
|
| 895 |
|
|
| 1,644 |
|
|
| 180 |
|
|
| 2,301 |
|
|
| 147 |
|
|
| 906 |
|
|
| 0 |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,187 |
|
Ending balance |
| $ | 896 |
|
|
| 1,702 |
|
|
| 890 |
|
|
| 2,308 |
|
|
| 147 |
|
|
| 906 |
|
|
| 0 |
|
|
| 91 |
|
|
| 2,023 |
|
|
| 8,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 80,009 |
|
|
| 258,403 |
|
|
| 24,043 |
|
|
| 363,174 |
|
|
| 58,856 |
|
|
| 94,376 |
|
|
| 633 |
|
|
| 11,511 |
|
|
| 0 |
|
|
| 891,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 6 |
|
|
| 1,398 |
|
|
| 10,236 |
|
|
| 1,450 |
|
|
| 0 |
|
|
| 54 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 13,144 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 80,003 |
|
|
| 257,005 |
|
|
| 13,807 |
|
|
| 361,724 |
|
|
| 58,856 |
|
|
| 94,322 |
|
|
| 633 |
|
|
| 11,511 |
|
|
| 0 |
|
|
| 877,861 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente Non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer and All Other |
|
| Unallocated |
|
| Total |
| ||||||||||
Nine months ended September 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Beginning balance |
| $ | 694 |
|
|
| 1,274 |
|
|
| 1,073 |
|
|
| 1,305 |
|
|
| 120 |
|
|
| 688 |
|
|
| 0 |
|
|
| 138 |
|
|
| 1,388 |
|
|
| 6,680 |
|
Charge-offs |
|
| (5 | ) |
|
| (65 | ) |
|
| 0 |
|
|
| (7 | ) |
|
| 0 |
|
|
| (109 | ) |
|
| 0 |
|
|
| (343 | ) |
|
| 0 |
|
|
| (529 | ) |
Recoveries |
|
| 2 |
|
|
| 59 |
|
|
| 0 |
|
|
| 45 |
|
|
| 0 |
|
|
| 27 |
|
|
| 0 |
|
|
| 148 |
|
|
| - |
|
|
| 281 |
|
Provision |
|
| 573 |
|
|
| 482 |
|
|
| (11 | ) |
|
| 751 |
|
|
| (4 | ) |
|
| 355 |
|
|
| 0 |
|
|
| 254 |
|
|
| 1,060 |
|
|
| 3,460 |
|
Ending balance |
| $ | 1,264 |
|
|
| 1,750 |
|
|
| 1,062 |
|
|
| 2,094 |
|
|
| 116 |
|
|
| 961 |
|
|
| 0 |
|
|
| 197 |
|
|
| 2,448 |
|
|
| 9,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 1,531 |
|
|
| 1,813 |
|
|
| 1,114 |
|
|
| 2,051 |
|
|
| 115 |
|
|
| 980 |
|
|
| 0 |
|
|
| 162 |
|
|
| 1,667 |
|
|
| 9,433 |
|
Charge-offs |
|
| 0 |
|
|
| (65 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (87 | ) |
|
| 0 |
|
|
| (152 | ) |
Recoveries |
|
| 0 |
|
|
| 34 |
|
|
| 0 |
|
|
| 11 |
|
|
| 0 |
|
|
| 2 |
|
|
| 0 |
|
|
| 42 |
|
|
| 0 |
|
|
| 89 |
|
Provision |
|
| (267 | ) |
|
| (32 | ) |
|
| (52 | ) |
|
| 32 |
|
|
| 1 |
|
|
| (21 | ) |
|
| 0 |
|
|
| 80 |
|
|
| 781 |
|
|
| 522 |
|
Ending balance |
| $ | 1,264 |
|
|
| 1,750 |
|
|
| 1,062 |
|
|
| 2,094 |
|
|
| 116 |
|
|
| 961 |
|
|
| 0 |
|
|
| 197 |
|
|
| 2,448 |
|
|
| 9,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses at September 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 2 |
|
|
| 4 |
|
|
| 859 |
|
|
| 11 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 876 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
|
| 1,262 |
|
|
| 1,746 |
|
|
| 203 |
|
|
| 2,083 |
|
|
| 116 |
|
|
| 961 |
|
|
| 0 |
|
|
| 197 |
|
|
| 2,448 |
|
|
| 9,016 |
|
Ending balance |
| $ | 1,264 |
|
|
| 1,750 |
|
|
| 1,062 |
|
|
| 2,094 |
|
|
| 116 |
|
|
| 961 |
|
|
| 0 |
|
|
| 197 |
|
|
| 2,448 |
|
|
| 9,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at September 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 96,866 |
|
|
| 272,246 |
|
|
| 28,099 |
|
|
| 318,596 |
|
|
| 49,584 |
|
|
| 182,862 |
|
|
| 851 |
|
|
| 21,128 |
|
|
| 0 |
|
|
| 970,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 8 |
|
|
| 1,582 |
|
|
| 11,630 |
|
|
| 1,685 |
|
|
| 0 |
|
|
| 255 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 15,160 |
|
Ending balance: collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment |
| $ | 96,858 |
|
|
| 270,664 |
|
|
| 16,469 |
|
|
| 316,911 |
|
|
| 49,584 |
|
|
| 182,607 |
|
|
| 851 |
|
|
| 21,128 |
|
|
| 0 |
|
|
| 955,072 |
|
|
| ||
| · | Risk Grade 1 – Excellent Quality: Loans are well above average quality and a minimal amount of credit risk exists. |
| · | Risk Grade 2 – High Quality: Loans are of good quality with risk levels well within the |
| · | Risk Grade 3 – Good Quality: Loans of average quality with risk levels within the |
| · | Risk Grade 4 – Management Attention: These loans have higher risk and servicing needs but still are acceptable. Evidence of marginal performance or deteriorating trends is observed. These are not problem credits presently, but may be in the future if the borrower is unable to change its present course. |
| · | Risk Grade 5 – Watch: These loans are currently performing satisfactorily, but there has been some recent past due history on repayment and there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the |
| · | Risk Grade 6 – Substandard: A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the |
| · | Risk Grade 7 – Doubtful: Loans classified as Doubtful have all the weaknesses inherent in loans classified |
| · | Risk Grade 8 – Loss: Loans classified as Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be realized in the future. Loss is a temporary grade until the appropriate authority is obtained to charge the loan off. |
|
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer |
|
| All Other |
|
| Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
1- Excellent Quality |
| $ | 0 |
|
|
| 7,380 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 382 |
|
|
| 0 |
|
|
| 613 |
|
|
| 0 |
|
|
| 8,375 |
|
2- High Quality |
|
| 8,982 |
|
|
| 104,288 |
|
|
| 0 |
|
|
| 35,384 |
|
|
| 19 |
|
|
| 17,846 |
|
|
| 0 |
|
|
| 1,979 |
|
|
| 1,413 |
|
|
| 169,911 |
|
3- Good Quality |
|
| 67,245 |
|
|
| 124,534 |
|
|
| 9,028 |
|
|
| 283,657 |
|
|
| 55,335 |
|
|
| 69,324 |
|
|
| 621 |
|
|
| 3,415 |
|
|
| 3,777 |
|
|
| 616,936 |
|
4- Management Attention |
|
| 3,626 |
|
|
| 16,239 |
|
|
| 10,878 |
|
|
| 33,620 |
|
|
| 2,841 |
|
|
| 5,122 |
|
|
| 12 |
|
|
| 290 |
|
|
| 0 |
|
|
| 72,628 |
|
5- Watch |
|
| 82 |
|
|
| 2,904 |
|
|
| 1,722 |
|
|
| 9,802 |
|
|
| 552 |
|
|
| 1,644 |
|
|
| 0 |
|
|
| 1 |
|
|
| 0 |
|
|
| 16,707 |
|
6- Substandard |
|
| 74 |
|
|
| 3,058 |
|
|
| 2,415 |
|
|
| 711 |
|
|
| 109 |
|
|
| 58 |
|
|
| 0 |
|
|
| 23 |
|
|
| 0 |
|
|
| 6,448 |
|
7- Doubtful |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
8- Loss |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Total |
| $ | 80,009 |
|
|
| 258,403 |
|
|
| 24,043 |
|
|
| 363,174 |
|
|
| 58,856 |
|
|
| 94,376 |
|
|
| 633 |
|
|
| 6,321 |
|
|
| 5,190 |
|
|
| 891,005 |
|
The following tables present the credit risk profile of each loan type based on internally assigned risk grades as of September 30, 2022 and December 31, 2021:
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer |
|
| All Other |
|
| Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
1- Excellent Quality |
| $ | 228 |
|
|
| 9,867 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 406 |
|
|
| 0 |
|
|
| 678 |
|
|
| 0 |
|
|
| 11,179 |
|
2- High Quality |
|
| 9,092 |
|
|
| 121,331 |
|
|
| 0 |
|
|
| 40,569 |
|
|
| 22 |
|
|
| 19,187 |
|
|
| 0 |
|
|
| 2,237 |
|
|
| 1,563 |
|
|
| 194,001 |
|
3- Good Quality |
|
| 76,897 |
|
|
| 115,109 |
|
|
| 10,170 |
|
|
| 241,273 |
|
|
| 44,890 |
|
|
| 128,727 |
|
|
| 832 |
|
|
| 3,826 |
|
|
| 1,477 |
|
|
| 623,201 |
|
4- Management Attention |
|
| 4,917 |
|
|
| 20,012 |
|
|
| 12,312 |
|
|
| 39,370 |
|
|
| 3,274 |
|
|
| 11,571 |
|
|
| 23 |
|
|
| 336 |
|
|
| 708 |
|
|
| 92,523 |
|
5- Watch |
|
| 2,906 |
|
|
| 2,947 |
|
|
| 1,901 |
|
|
| 10,871 |
|
|
| 694 |
|
|
| 1,583 |
|
|
| 0 |
|
|
| 6 |
|
|
| 0 |
|
|
| 20,908 |
|
6- Substandard |
|
| 84 |
|
|
| 3,059 |
|
|
| 2,500 |
|
|
| 888 |
|
|
| 0 |
|
|
| 266 |
|
|
| 0 |
|
|
| 30 |
|
|
| 0 |
|
|
| 6,827 |
|
7- Doubtful |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
8- Loss |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Total |
| $ | 94,124 |
|
|
| 272,325 |
|
|
| 26,883 |
|
|
| 332,971 |
|
|
| 48,880 |
|
|
| 161,740 |
|
|
| 855 |
|
|
| 7,113 |
|
|
| 3,748 |
|
|
| 948,639 |
|
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer |
|
| All Other |
|
| Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
1- Excellent Quality |
| $ | - |
|
|
| 3,808 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,381 |
|
|
| - |
|
|
| 523 |
|
|
| - |
|
|
| 5,712 |
|
2- High Quality |
|
| 18,162 |
|
|
| 129,784 |
|
|
| - |
|
|
| 30,197 |
|
|
| 17 |
|
|
| 16,163 |
|
|
| - |
|
|
| 2,064 |
|
|
| 1,427 |
|
|
| 197,814 |
|
3- Good Quality |
|
| 93,266 |
|
|
| 163,179 |
|
|
| 7,777 |
|
|
| 334,206 |
|
|
| 59,539 |
|
|
| 56,973 |
|
|
| 961 |
|
|
| 3,600 |
|
|
| 12,782 |
|
|
| 732,283 |
|
4- Management Attention |
|
| 1,307 |
|
|
| 11,046 |
|
|
| 9,130 |
|
|
| 31,732 |
|
|
| 1,869 |
|
|
| 1,127 |
|
|
| - |
|
|
| 225 |
|
|
| 133 |
|
|
| 56,569 |
|
5- Watch |
|
| 60 |
|
|
| 915 |
|
|
| 1,150 |
|
|
| 2,321 |
|
|
| 519 |
|
|
| 786 |
|
|
| - |
|
|
| - |
|
|
| 146 |
|
|
| 5,897 |
|
6- Substandard |
|
| 59 |
|
|
| 3,476 |
|
|
| 2,412 |
|
|
| 559 |
|
|
| 96 |
|
|
| 4 |
|
|
| - |
|
|
| 26 |
|
|
| - |
|
|
| 6,632 |
|
7- Doubtful |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
8- Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total |
| $ | 112,854 |
|
|
| 312,208 |
|
|
| 20,469 |
|
|
| 399,015 |
|
|
| 62,040 |
|
|
| 76,434 |
|
|
| 961 |
|
|
| 6,438 |
|
|
| 14,488 |
|
|
| 1,004,907 |
|
Table of Contents |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Real Estate Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Construction and Land Development |
|
| Single-Family Residential |
|
| Single-Family Residential - Banco de la Gente non-traditional |
|
| Commercial |
|
| Multifamily and Farmland |
|
| Commercial |
|
| Farm |
|
| Consumer |
|
| All Other |
|
| Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
1- Excellent Quality |
| $ | - |
|
|
| 5,923 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 371 |
|
|
| - |
|
|
| 581 |
|
|
| - |
|
|
| 6,875 |
|
2- High Quality |
|
| 11,752 |
|
|
| 109,337 |
|
|
| - |
|
|
| 28,546 |
|
|
| 19 |
|
|
| 16,177 |
|
|
| - |
|
|
| 2,039 |
|
|
| 1,309 |
|
|
| 169,179 |
|
3- Good Quality |
|
| 80,325 |
|
|
| 129,856 |
|
|
| 8,712 |
|
|
| 272,786 |
|
|
| 54,945 |
|
|
| 68,183 |
|
|
| 792 |
|
|
| 3,510 |
|
|
| 3,931 |
|
|
| 623,040 |
|
4- Management Attention |
|
| 3,534 |
|
|
| 14,964 |
|
|
| 10,478 |
|
|
| 30,937 |
|
|
| 2,754 |
|
|
| 5,214 |
|
|
| 4 |
|
|
| 284 |
|
|
| - |
|
|
| 68,169 |
|
5- Watch |
|
| 76 |
|
|
| 2,464 |
|
|
| 1,703 |
|
|
| 4,938 |
|
|
| 543 |
|
|
| 1,177 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 10,902 |
|
6- Substandard |
|
| 73 |
|
|
| 3,567 |
|
|
| 2,254 |
|
|
| 634 |
|
|
| 105 |
|
|
| 50 |
|
|
| - |
|
|
| 21 |
|
|
| - |
|
|
| 6,704 |
|
7- Doubtful |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
8- Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total |
| $ | 95,760 |
|
|
| 266,111 |
|
|
| 23,147 |
|
|
| 337,841 |
|
|
| 58,366 |
|
|
| 91,172 |
|
|
| 796 |
|
|
| 6,436 |
|
|
| 5,240 |
|
|
| 884,869 |
|
There were no new TDR modifications during the three and nine months ended September 30, 2022 and 2021. |
|
|
For the three months ended September 30, 2021 |
|
|
|
|
|
|
|
|
| |||
|
| Net Earnings (Dollars in thousands) |
|
| Weighted Average Number of Shares |
|
| Per Share Amount |
| |||
Basic earnings per share |
| $ | 3,390 |
|
|
| 5,544,596 |
|
| $ | 0.61 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units |
|
| 0 |
|
|
| 14,690 |
|
|
|
|
|
Shares held in deferred comp plan |
|
|
|
|
|
| 159,797 |
|
|
|
|
|
Diluted earnings per share |
| $ | 3,390 |
|
|
| 5,719,083 |
|
| $ | 0.59 |
|
There were no loans modified as TDR loans that defaulted during the nine months ended September 30, 2022 and 2021, which were within 12 months of their modification date.
For the nine months ended September 30, 2021 |
|
|
|
|
|
|
|
|
| |||
|
| Net Earnings (Dollars in thousands) |
|
| Weighted Average Number of Shares |
|
| Per Share Amount |
| |||
Basic earnings per share |
| $ | 12,126 |
|
|
| 5,601,879 |
|
| $ | 2.16 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units |
|
| 0 |
|
|
| 13,190 |
|
|
|
|
|
Shares held in deferred comp plan |
|
|
|
|
|
| 158,039 |
|
|
|
|
|
Diluted earnings per share |
| $ | 12,126 |
|
|
| 5,773,108 |
|
| $ | 2.10 |
|
On March 27, 2020, President Trump signed the CARES Act, which established a $2 trillion economic stimulus package, including cash payments to individuals, supplemental unemployment insurance benefits and a $349 billion loan program administered through the PPP. Under the PPP, small businesses, sole proprietorships, independent contractors and self-employed individuals were able to apply for loans from existing SBA lenders and other approved regulated lenders, subject to certain limitations and eligibility criteria. A second round of PPP funding provided a total of $320 billion additional funding for the PPP. The Bank participated as a lender in the PPP. Total PPP loans originated during the years ended December 31, 2020 and 2021 amounted to $128.1 million. The outstanding balance of PPP loans was $103,000 and $18.0 million at September 30, 2022 and December 31, 2021, respectively. These loans are classified as commercial loans in the tables above. The Bank recognized $54,000 and $489,000 of PPP loan fee income for the three months ended September 30, 2022 and the three months ended September 30, 2021, respectively. The Bank recognized $948,000 and $3.0 million of PPP loan fee income for the nine months ended September 30, 2022 and nine months ended September 30, 2021, respectively.
(4) Net Earnings Per Share
Net earnings per share is based on the weighted average number of shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The average market price during the applicable period is used to compute equivalent shares.
The reconciliation of the amounts used in the computation of both “basic earnings per share” and “diluted earnings per share” for the three and nine months ended September 30, 2022 and 2021 is as follows:
For the three months ended September 30, 2022 |
|
|
|
|
|
|
|
|
| |||
|
| Net Earnings (Dollars in thousands) |
|
| Weighted Average Number of Shares |
|
| Per Share Amount |
| |||
Basic earnings per share |
| $ | 5,307 |
|
|
| 5,473,443 |
|
| $ | 0.96 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units - unvested |
|
|
|
|
|
| 17,188 |
|
|
|
|
|
Shares held in deferred comp plan |
|
|
|
|
|
|
|
|
|
|
|
|
by deferred compensation trust |
|
|
|
|
|
| 166,937 |
|
|
|
|
|
Diluted earnings per share |
| $ | 5,307 |
|
|
| 5,657,568 |
|
| $ | 0.93 |
|
Table of Contents |
For the three months ended September 30, 2020 |
|
|
|
| ||||||||||||||||||||
For the nine months ended September 30, 2022 |
|
|
|
|
|
|
| |||||||||||||||||
|
| Net Earnings (Dollars in thousands) |
| Weighted Average Number of Shares |
| Per Share Amount |
|
| Net Earnings (Dollars in thousands) |
|
| Weighted Average Number of Shares |
|
| Per Share Amount |
| ||||||||
Basic earnings per share |
| $ | 4,509 |
| 5,634,964 |
| $ | 0.80 |
|
| $ | 11,976 |
| 5,484,063 |
| $ | 2.18 |
| ||||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Restricted stock units |
| 0 |
| 15,299 |
|
|
| |||||||||||||||||
Restricted stock units - unvested |
|
|
| 15,090 |
|
|
| |||||||||||||||||
Shares held in deferred comp plan |
|
| - |
|
|
| 151,658 |
|
|
|
|
|
|
|
|
|
|
|
| |||||
by deferred compensation trust |
|
|
|
|
|
| 165,041 |
|
|
|
| |||||||||||||
Diluted earnings per share |
| $ | 4,509 |
|
| 5,801,921 |
| $ | 0.78 |
|
| $ | 11,976 |
|
|
| 5,664,194 |
|
| $ | 2.11 |
|
For the nine months ended September 30, 2020 |
|
|
|
|
|
|
| |||||||||||||||||
For the three months ended September 30, 2021 |
|
|
|
|
|
|
| |||||||||||||||||
|
| Net Earnings (Dollars in thousands) |
| Weighted Average Number of Shares |
| Per Share Amount |
|
| Net Earnings (Dollars in thousands) |
|
| Weighted Average Number of Shares |
|
| Per Share Amount |
| ||||||||
Basic earnings per share |
| $ | 9,437 |
| 5,665,294 |
| $ | 1.67 |
|
| $ | 3,390 |
| 5,544,596 |
| $ | 0.61 |
| ||||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Restricted stock units |
| 0 |
| 13,960 |
|
|
| |||||||||||||||||
Restricted stock units - unvested |
| - |
| 14,690 |
|
|
| |||||||||||||||||
Shares held in deferred comp plan |
|
| - |
|
|
| 149,163 |
|
|
|
|
|
|
|
|
|
|
|
| |||||
by deferred compensation trust |
|
|
|
|
|
| 159,797 |
|
|
|
| |||||||||||||
Diluted earnings per share |
| $ | 9,437 |
|
| 5,828,417 |
| $ | 1.62 |
|
| $ | 3,390 |
|
|
| 5,719,083 |
|
| $ | 0.59 |
|
|
|
| |
|
For the nine months ended September 30, 2021 |
|
|
|
|
|
|
|
|
| |||
|
| Net Earnings (Dollars in thousands) |
|
| Weighted Average Number of Shares |
|
| Per Share Amount |
| |||
Basic earnings per share |
| $ | 12,126 |
|
|
| 5,601,879 |
|
| $ | 2.16 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units - unvested |
|
| - |
|
|
| 13,190 |
|
|
|
|
|
Shares held in deferred comp plan |
|
|
|
|
|
|
|
|
|
|
|
|
by deferred compensation trust |
|
|
|
|
|
| 158,039 |
|
|
|
|
|
Diluted earnings per share |
| $ | 12,126 |
|
|
| 5,773,108 |
|
| $ | 2.10 |
|
The Company is required to disclose fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in the value of financial instruments held by the Company since purchase, origination, or issuance.
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: |
|
|
|
| · | Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. |
| · | Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. |
| · | Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
Cash and Cash Equivalents
For cash, due from banks and interest-bearing deposits, the carrying amount is a reasonable estimate of fair value. Cash and cash equivalents are reported in the Level 1 fair value category.
Investment Securities Available for Sale
Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Fair values for investment securities with quoted market prices are reported in the Level 1 fair value category. Fair value measurements obtained from independent pricing services are reported in the Level 2 fair value category. All other fair value measurements are reported in the Level 3 fair value category.
Other Investments
For other investments, the carrying value is a reasonable estimate of fair value. Other investments are reported in the Level 3 fair value category.
Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at the lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Mortgage loans held for sale are reported in the Level 3 fair value category.
Loans
In accordance with ASU No. 2016-01, the fair value of loans, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans. Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments.
Table of Contents |
Investment Securities Available for Sale Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Fair values for investment securities with quoted market prices are reported in the Level 1 fair value category. Fair value measurements obtained from independent pricing services are reported in the Level 2 fair value category. All other fair value measurements are reported in the Level 3 fair value category. Other Investments For other investments, the carrying value is a reasonable estimate of fair value. Other investments are reported in the Level 3 fair value category. Mortgage Loans Held for Sale Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Mortgage loans held for sale are reported in the Level 3 fair value category. Loans The fair value of loans, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans. Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments.
| Mutual Funds For mutual funds held in the deferred compensation trust, the carrying value is a reasonable estimate of fair value. Mutual funds held in the deferred compensation trust are included in other assets on the balance sheet and reported in the Level 2 fair value category.
Deposits The fair value of demand deposits, interest-bearing demand deposits and savings is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. Deposits are reported in the Level 3 fair value category.
Securities Sold Under Agreements to Repurchase For securities sold under agreements to repurchase, the carrying value is a reasonable estimate of fair value. Securities sold under agreements to repurchase are reported in the Level 2 fair value category.
FHLB Borrowings The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings. FHLB borrowings are reported in the Level 3 fair value category.
Junior Subordinated Debentures Because the Company’s junior subordinated debentures were issued at a floating rate, the carrying amount is a reasonable estimate of fair value. Junior subordinated debentures are reported in the Level 2 fair value category.
Commitments to Extend Credit and Standby Letters of Credit Commitments to extend credit and standby letters of credit are generally short-term and at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial.
Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of September 30, 2022 and December 31, 2021.
The fair value measurements for mortgage loans held for sale and impaired loans on a non-recurring basis at September 30, 2022 and December 31, 2021 are presented below. The fair value measurement process uses certified appraisals and other market-based information; however, in many cases, it also requires significant input based on management’s knowledge of, and judgment about, current market conditions, specific issues relating to the collateral and other matters. As a result, all fair value measurements for impaired loans and other real estate are considered Level 3.
The carrying amount and estimated fair value of financial instruments at September 30, 2022 and December 31, 2021 are as follows:
As of September 30, 2022, the Bank had operating right of use assets of $5.8 million and operating lease liabilities of $5.8 million. The Bank maintains operating leases on land and buildings for some of the Bank’s branch facilities and loan production offices. Most leases include one option to renew, with renewal terms extending up to 15 years. The exercise of renewal options is based on the judgment of management as to whether or not the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Bank if the option is not exercised. Leases with a term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term. The following table presents lease cost and other lease information as of September 30, 2022 and 2021.
The following table presents lease maturities as of September 30, 2022 and December 31, 2021.
The Company has reviewed and evaluated subsequent events and transactions for material subsequent events through the date the financial statements are issued. Management has concluded that there were no material subsequent events.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of the financial position and results of operations of the Company and should be read in conjunction with the information set forth under Item 1A Risk Factors in the Company’s Annual Report of Form 10-K and the Company’s Consolidated Financial Statements and Notes thereto on pages
Introduction
Management’s discussion and analysis of earnings and related data are presented to assist in understanding the consolidated financial condition and results of operations of the Company. The Company is the parent company of the Bank and a registered bank holding company operating under the supervision of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Bank is a North Carolina-chartered bank, with offices in Catawba, Lincoln, Alexander, Mecklenburg, Iredell, Wake, Rowan and
Overview
Our business consists principally of attracting deposits from the general public and investing these funds in commercial loans, real estate mortgage loans, real estate construction loans and consumer loans. Our profitability depends primarily on our net interest income, which is the difference between the income we receive on our loan and investment securities portfolios and our cost of funds, which consists of interest paid on deposits and borrowed funds. Net interest income also is affected by the relative amounts of our interest-earning assets and interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, a positive interest rate spread will generate net interest income. Our profitability is also affected by the level of other income and operating expenses. Other income consists primarily of miscellaneous fees related to our loans and deposits, mortgage banking income and commissions from sales of annuities and mutual funds. Operating expenses consist of compensation and benefits, occupancy related expenses, federal deposit and other insurance premiums, data processing, advertising and other expenses.
Our operations are influenced significantly by local economic conditions and by policies of financial institution regulatory authorities. The earnings on our assets are influenced by the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rates, market and monetary fluctuations. Lending activities are affected by the demand for commercial and other types of loans, which in turn is affected by the interest rates at which such financing may be offered. Our cost of funds is influenced by interest rates on competing investments and by rates offered on similar investments by competing financial institutions in our market area, as well as general market interest rates. These factors can cause fluctuations in our net interest income and other income. In addition, local economic conditions can impact the credit risk of our loan portfolio, in that (1) local employers may be required to eliminate employment positions of individual borrowers, and (2) small businesses and commercial borrowers may experience a downturn in their operating performance and become unable to make timely payments on their loans. Management evaluates these factors in estimating the allowance for loan and lease losses (“ALLL”, “allowance for loan losses”, or “allowance”) and changes in these economic factors could result in increases or decreases to the provision for loan losses.
COVID-19 has adversely affected, and may continue to adversely affect economic activity globally, nationally and locally. Following the COVID-19 outbreak in December 2019 and January 2020, market interest rates declined significantly, with the 10-year Treasury bond falling below 1.00% on March 3, 2020 for the first time. Such events generally had an adverse effect on business and consumer confidence and the Company and its customers. On March 3, 2020, the Federal Reserve Federal Open Market Committee (“FOMC”) reduced the target federal funds rate by 50 basis points to a range of 1.00% to 1.25%. Subsequently on March 16, 2020, the FOMC further reduced the target federal funds rate by an additional 100 basis points to a range of 0.00% to 0.25%. These reductions in interest rates and other effects of the COVID-19 pandemic had an adverse effect on the Company’s financial condition and results of operations. Prior to the occurrence of the COVID-19 pandemic, economic conditions, while not as robust as the economic conditions during the period from 2004 to 2007, had stabilized such that businesses in our market area were growing and investing again. The uncertainty expressed in the local, national and international markets through the primary economic indicators of activity were previously sufficiently stable to allow for reasonable economic growth in our markets.
Although we are unable to control the external factors that influence our business, by maintaining high levels of balance sheet liquidity, managing our interest rate exposures and by actively monitoring asset quality, we seek to minimize the potentially adverse risks of unforeseen and unfavorable economic trends. Because the assets and liabilities of a bank are primarily monetary in nature (payable in fixed, determinable amounts), the performance of a bank is affected more by changes in interest rates than by inflation. Interest rates generally increase as the rate of inflation increases, but the magnitude of the change in rates may not be the same. The effect of inflation on banks is normally not as significant as its influence on those businesses that have large investments in plants and inventories. During periods of high inflation there are normally corresponding increases in the money supply, and banks will normally experience above average growth in assets, loans, and deposits. Also, general increases in the price of goods and services can be expected to result in increased operating expenses.
Our business emphasis has been and continues to be to operate as a well-capitalized, profitable and independent community-oriented financial institution dedicated to providing quality customer service. We are committed to meeting the financial needs of the communities in which we operate. We expect growth to be achieved in our local markets and through expansion opportunities in contiguous or nearby markets. While we would be willing to consider growth by acquisition in certain circumstances, we do not consider the acquisition of another company to be necessary for our continued ability to provide a reasonable return to our shareholders. We believe that we can be more effective in serving our customers than many of our non-local competitors because of our ability to quickly and effectively provide senior management responses to customer needs and inquiries. Our ability to provide these services is enhanced by the stability and experience of our Bank officers and managers.
Summary of Significant Accounting Policies
The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of specific accounting guidance. The following is a summary of some of the more subjective and complex accounting policies of the Company. A more complete description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s The allowance for loan losses reflects management’s assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance for loan losses that management believes will be adequate in light of anticipated risks and loan losses.
Many of the Company’s assets and liabilities are recorded using various techniques that require significant judgment as to recoverability. The
There are other complex accounting standards that require the Company to employ significant judgment in interpreting and applying certain of the principles prescribed by those standards. These judgments include, but are not limited to, the determination of whether a financial instrument or other contract meets the definition of a derivative in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Management of the Company has made a number of estimates and assumptions relating to reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the accompanying Consolidated Financial Statements in conformity with GAAP. Actual results could differ from those estimates. Results of Operations
Summary. Net earnings were
The annualized return on average assets was
Year-to-date net earnings as of September 30,
The annualized return on average assets was
Net Interest Income. Net interest income, the major component of the Company’s net Net interest income was $13.8 million for the three months ended September 30, 2022, compared to $10.6 million for the three months ended September 30,
Interest income was $14.6 million for the three months ended September 30, 2022, compared to $11.4 million for the three months ended September 30,
Interest expense was $818,000 for the three months ended September 30, 2022, compared to $861,000 for the three months ended September 30,
The following table sets forth for each category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding, the interest incurred on such amounts and the average rate earned or incurred for the three months ended September 30,
Year-to-date net interest income as of September 30, 2022 was $35.8 million for the nine months ended September 30, 2022, compared to $33.3 million for the nine months ended September 30, 2021. The increase in net interest income is due to a $2.1 million increase in interest income and a $393,000 decrease in interest expense. The increase in interest income is primarily due to a $1.5 million increase in interest income on investment securities and a $1.3 million increase in interest income on balances due from banks, which were partially offset by a $747,000 decrease in interest income and fees on loans. The increase in interest income on investment securities is primarily due to additional securities purchased with additional cash resulting from an increase in deposits combined with higher yields on securities purchased during the second and third quarters of 2022. The increase in interest income on balances due from banks is primarily due to rate increases by the Federal Reserve. The decrease in interest income and fees on loans is primarily due to a decrease in fee income on SBA PPP loans. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. Interest income was $37.9 million for the nine months ended September 30, 2022, compared to $35.9 million for the nine months ended September 30, 2021. The increase in net interest income is due to a $2.1 million increase in interest income and a $393,000 decrease in interest expense. The increase in interest income is primarily due to a $1.5 million increase in interest income on investment securities and a $1.3 million increase in interest income on balances due from banks, which were partially offset by a $747,000 decrease in interest income and fees on loans. The increase in interest income on investment securities is primarily due to additional securities purchased with additional cash resulting from an increase in deposits combined with higher yields on securities purchased during the second and third quarters of 2022. The increase in interest income on balances due from banks is primarily due to rate increases by the Federal Reserve. The decrease in interest income and fees on loans is primarily due to a decrease in fee income on SBA PPP loans, which offset the increase in interest income resulting from rate increases by the Federal Reserve. The Bank recognized $948,000 and $3.0 million of PPP loan fee income for the nine months ended September 30, 2022 and the nine months ended September 30, 2021, respectively. During the nine months ended September 30, 2022, average loans were $925.2 million, an increase of $7.7 million from average loans of $917.5 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, average PPP loans were $9.1 million, a decrease of $41.6 million from average PPP loans of $50.7 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, average investment securities available for sale were $453.4 million, an increase of $123.4 million from average investment securities available for sale of $330.0 million for the nine months ended September 30, 2021. The average yield on loans for the nine months ended September 30, 2022 and 2021 was 4.44% and 4.59%, respectively. The average yield on investment securities available for sale was 1.75% and 1.81% for the nine months ended September 30, 2022 and 2021, respectively. The average yield on earning assets was 3.20% and 3.31% for the nine months ended September 30, 2022 and 2021, respectively. Interest expense was $2.1 million for the nine months ended September 30, 2022, compared to $2.5 million for the nine months ended September 30, 2021. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. During the nine months ended September 30, 2022, average interest-bearing non-maturity deposits were $822.3 million, an increase of $90.3 million from average interest-bearing non-maturity deposits of $732.0 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, average certificates of deposit were $100.6 million, a decrease of $5.5 million from average certificates of deposit of $106.1 million for the nine months ended September 30, 2021. The average rate paid on interest-bearing checking and savings accounts was 0.21% and 0.30% for the nine months ended September 30, 2022 and 2021, respectively. The average rate paid on certificates of deposit was 0.56% for the nine months ended September 30, 2022, compared to 0.74% for the same period one year ago. The average rate paid on interest-bearing liabilities was 0.29% for the nine months ended September 30, 2022, compared to 0.38% for the same period one year ago. The following table sets forth for each category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding, the interest incurred on such amounts and the average rate earned or incurred for the nine months ended September 30, 2022 and 2021. The table also sets forth the average rate earned on total interest-earning assets, the average rate paid on total interest-bearing liabilities, and the net yield on total average interest-earning assets for the same periods. Yield information does not give effect to changes in fair value that are reflected as a component of shareholders’ equity. Yields and interest income on tax-exempt investments for the nine months ended September 30, 2022 and 2021 have been adjusted to a tax equivalent basis using an effective tax rate of 22.98% for securities that are both federal and state tax exempt and an effective tax rate of 20.48% for federal tax-exempt securities. Non-accrual loans and the interest income that was recorded on non-accrual loans, if any, are included in the yield calculations for loans in all periods reported. The Company believes the presentation of net interest income on a tax-equivalent basis provides comparability of net interest income from both taxable and tax-exempt sources and facilitates comparability within the industry. Although the Company believes these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are presented below.
Changes in interest income and interest expense can result from variances in both volume and rates. The following table
Provision for Loan Losses. The provision for loan losses for the three months ended September 30,
The provision for loan losses for the nine months ended September 30,
Non-Interest Income. Total non-interest income was $6.8 million for the three months ended September 30, 2022, compared to $6.0 million for the three months ended September 30,
Non-interest income was $21.2 million for the nine months ended September 30, 2022, compared to $18.0 million for the nine months ended September 30, 2021. The increase in non-interest income is primarily attributable to a $3.9 million increase in Non-Interest Expense. Total non-interest Non-interest expense was $41.0 million for the nine months ended September 30, 2022, compared to $37.0 million for the nine months ended September 30, 2021. The increase in non-interest expense is primarily attributable to a $3.0 million increase in appraisal management fee expense due to an increase in
Analysis of Financial Condition
Investment Securities. Available for sale securities were
Loans.
The
Although the
Past due TDR loans and non-accrual TDR loans totaled
There were no new TDR modifications during the three and nine months ended September 30,
Allowance for Loan
Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration. Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan. The
As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent
Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk.
Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the
The allowance
The general allowance reflects reserves established under GAAP for collective loan impairment. These reserves are based upon historical net charge-offs using the greater of the last two, three, four, or five years’ loss experience. This charge-off experience may be adjusted to reflect the effects of current conditions. The Bank considers information derived from its loan risk ratings and external data related to industry and general economic trends in establishing reserves. Qualitative factors applied in the Bank’s ALLL model include the impact to the economy from the COVID-19 pandemic and reserves on loans with payment modifications as a result of the COVID-19 pandemic. At September 30, 2022 and December 31, 2021, there were no loans with existing modifications as a result of the COVID-19 pandemic. At
The unallocated allowance is determined through management’s assessment of probable losses that are in the portfolio but are not adequately captured by the other two components of the allowance, including consideration of current economic and business conditions and regulatory requirements. The unallocated allowance also reflects management’s acknowledgement of the imprecision and subjectivity that underlie the modeling of credit risk. Due to the subjectivity involved in determining the overall allowance, including the unallocated portion, the unallocated portion may fluctuate from period to period based on management’s evaluation of the factors affecting the assumptions used in calculating the allowance.
There were no significant changes in the estimation methods or fundamental assumptions used in the evaluation of the allowance for
Effective December 31, 2012, certain mortgage loans from the former Banco division of the Bank were analyzed separately from other single-family residential loans in the Bank’s loan portfolio. These loans are first mortgage loans made to the Latino market, primarily in Mecklenburg,
PPP loans are excluded from the allowance as PPP loans are 100 percent guaranteed by the SBA.
Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s
At September 30,
Non-performing Assets. Non-performing assets totaled
Deposits. Total deposits at September 30,
Borrowed Funds. There were no FHLB borrowings outstanding at September 30,
Securities sold under agreements to repurchase were
Junior Subordinated Debentures (related to Trust Preferred Securities). Junior subordinated debentures were $15.5 million at September 30,
In June 2006, the Company formed a wholly owned Delaware statutory trust, PEBK Capital Trust II (“PEBK Trust II”), which issued $20.0 million of guaranteed preferred beneficial interests in the Company’s junior subordinated deferrable interest debentures. All of the common securities of PEBK Trust II are owned by the Company. The proceeds from the issuance of the common securities and the trust preferred securities were used by PEBK Trust II to purchase $20.6 million of junior subordinated debentures of the
The trust preferred securities issued by PEBK Trust II accrue and pay interest quarterly at a floating rate of three-month LIBOR plus 163 basis points. The Company has guaranteed distributions and other payments due on the trust preferred
These trust preferred securities are mandatorily redeemable upon maturity of the debentures on June 28,
The Company has no financial instruments tied to LIBOR other than the trust preferred securities issued by PEBK Trust II, which are tied to three-month LIBOR. The one-week and two-month U.S. dollar-denominated (USD) LIBOR rates
Asset Liability and Interest Rate Risk Management. The objective of the Company’s Asset Liability and Interest Rate Risk strategies is to identify and manage the sensitivity of net interest income to changing interest rates and to minimize the interest rate risk between interest-earning assets and interest-bearing liabilities at various maturities. This is
The Company manages its exposure to fluctuations in interest rates through policies established by
The Company’s rate sensitive assets are those earning interest at variable rates and those with contractual maturities within one year. Rate sensitive assets therefore include both loans and available for sale securities. Rate sensitive liabilities include interest-bearing checking accounts, money market deposit accounts, savings accounts, time deposits and borrowed funds. Average rate sensitive assets for the nine months ended September 30,
The Company has an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk is equal to the extent of the fair-value gain in the derivative. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically by the Company. The Company did not have any interest rate derivatives outstanding as of September 30,
Included in the rate sensitive assets are
Liquidity. The objectives of the Company’s liquidity policy are to provide for the availability of adequate funds to meet the needs of loan demand, deposit withdrawals, maturing liabilities and to satisfy regulatory requirements. Both deposit and loan customer cash needs can fluctuate significantly depending upon business cycles, economic conditions and yields and returns available from alternative investment opportunities. In addition, the Company’s liquidity is affected by off-balance sheet commitments to lend in the form of unfunded commitments to extend credit and standby letters of credit. As of September 30,
The
The other sources of funding for the
The Bank has a line of credit with the FHLB equal to 20% of the Bank’s total assets. There were no FHLB borrowings outstanding at September 30,
The Bank also had the ability to borrow up to $110.5 million for the purchase of overnight federal funds from five correspondent financial institutions as of September 30,
The liquidity ratio for the Bank, which is defined as net cash, interest-bearing deposits, federal funds sold and certain investment securities, as a percentage of net deposits and short-term liabilities was
Contractual Obligations and Off-Balance Sheet Arrangements. The Company’s contractual obligations and other commitments as of September 30,
Capital Resources. Shareholders’ equity was
Annualized return on average equity for the nine months ended September 30,
In February of
In 2013, the FRB approved its final rule on the Basel III capital standards, which implement changes to the regulatory capital framework for banking organizations. The Basel III capital standards, which became effective January 1, 2015, include new risk-based capital and leverage ratios, which were phased in from 2015 to 2019. The new minimum capital level requirements applicable to the Company and the Bank under the final rules are as follows: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total risk based capital ratio of 8% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 4% (unchanged from previous rules). An additional capital conservation buffer was added to the minimum requirements for capital adequacy purposes beginning on January 1, 2016 and was phased in through 2019 (increasing by 0.625% on January 1, 2016 and each subsequent January 1, until it reached 2.5% on January 1, 2019). This resulted in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained earnings that could be utilized for such actions.
Under the regulatory capital guidelines, financial institutions are currently required to maintain a total risk-based capital ratio of 8.0% or greater, with a Tier 1 risk-based capital ratio of 6.0% or greater and a common equity Tier 1 capital ratio of 4.5% or greater, as required by the Basel III capital standards referenced above. Tier 1 capital is generally defined as shareholders’ equity and trust preferred securities less all intangible assets and goodwill. Tier 1 capital includes $15.0 million in trust preferred securities at September 30,
The Bank’s Tier 1 risk-based capital ratio was
A bank is considered to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a common equity Tier 1 capital ratio of 6.5% or greater and a leverage ratio of 5.0% or greater. Based upon these guidelines, the Bank was considered to be “well capitalized” at September 30,
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Quantitative and Qualitative Disclosures About Market Risk from those previously disclosed in
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 19, 2018, the Bank received a draft audit report from the North Carolina Department of Revenue (“NCDOR”) setting forth certain proposed adjustments to the North Carolina income tax returns for the Bank for the tax years January 1, 2014 through December 31, 2016. The NCDOR
Item 1A. Risk Factors
For information regarding the risk factors that could affect the Company’s business, results of operations, financial condition and liquidity, see the information under Part I, Item 1A. “Risk Factors” in the Form 10-K filed with the SEC on March
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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