# EDGAR Filing Document

**Accession Number:** 0001093672
**File Stem:** 0001654954-23-000656
**Filing Date:** 2023-1
**Character Count:** 33175
**Document Hash:** 6c9aa2e636a3b188fc0a05450538116e
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001654954-23-000656.hdr.sgml**: 20230123

**ACCESSION NUMBER**: 0001654954-23-000656

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 15

**CONFORMED PERIOD OF REPORT**: 20230123

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230123

**DATE AS OF CHANGE**: 20230123

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PEOPLES BANCORP OF NORTH CAROLINA INC
- **CENTRAL INDEX KEY:** 0001093672
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **IRS NUMBER:** 562132396
- **STATE OF INCORPORATION:** NC
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-27205
- **FILM NUMBER:** 23542691

**BUSINESS ADDRESS:**
- **STREET 1:** 518 WEST C STREET
- **STREET 2:** PO BOX 467
- **CITY:** NEWTON
- **STATE:** NC
- **ZIP:** 28658-4007
- **BUSINESS PHONE:** 8284645620

**MAIL ADDRESS:**
- **STREET 1:** PO BOX 467
- **CITY:** NEWTON
- **STATE:** NC
- **ZIP:** 28658-0467

?xml version="1.0" encoding="utf-8"?pebk_8k.htm

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 8-K**

**CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)** 

**OF THE SECURITIES EXCHANGE ACT OF 1934**

Date of Report (Date of earliest event reported): **January 23, 2023**

---

| |
|:---|
| **Peoples Bancorp of North Carolina, Inc.** |
| (Exact Name of Registrant as Specified in Its Charter) |

---

&nbsp;&nbsp;&nbsp;&nbsp;

**<u>North Carolina</u>**

(State or Other Jurisdiction of Incorporation)

---

| | |
|:---|:---|
| **000-27205** | **56-2132396** |
| (Commission File No.) | (IRS Employer Identification No.) |

---

---

| | |
|:---|:---|
| **518 West C Street, Newton, North Carolina** | **28658** |
| (Address of Principal Executive Offices) | (Zip Code) |

---

---

| |
|:---|
| **<u>(828) 464-5620</u>** |
| (Registrant's Telephone Number, Including Area Code) |

---

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

---

| | |
|:---|:---|
| Peoples Bancorp of North Carolina, Inc. | Peoples Bancorp of North Carolina, Inc. |
| **<u>INDEX</u>**  | **<u>INDEX</u>**  |
|  | **Page** |
| [Item 2.02 – Results of Operations and Financial Condition](#i2) | 3 |
| [Item 9.01 – Financial Statements and Exhibits](#i9) | 3 |
| [Signatures](#s) | 4 |
| [Exhibit (99)(a) Press Release dated January 23, 2023](pebk_ex99a.htm) |  |

---

**Item 2.02. Results of Operations and Financial Condition**

On January 23, 2023, Peoples Bancorp of North Carolina, Inc. (the "Company") issued a press release announcing fourth quarter and full year 2022 earnings results. The press release contains forward-looking statements regarding the Company and includes cautionary language identifying important factors that could cause actual results to differ materially from those anticipated. The press release is furnished as Exhibit 99(a). Consequently, it is not deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. Such materials may only be incorporated by reference into another filing under the Exchange Act or the Securities Act of 1933 if such subsequent filing specifically references this Form 8-K.

**Item 9.01. Financial Statements and Exhibits**

---

| | |
|:---|:---|
| (d) | Exhibits |
| [(99)(a)](pebk_ex99a.htm) | [Press Release dated January 23, 2023](pebk_ex99a.htm) |

---

**Disclosure about forward-looking statements**

Statements made in this Form 8-K, 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 report 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 might cause such a difference include, but are not limited to, changes in interest rate environment, management's business strategy, national, regional, and local market conditions and legislative and regulatory conditions.

The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. Readers should also carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission.

**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 hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | PEOPLES BANCORP OF NORTH CAROLINA, INC. | PEOPLES BANCORP OF NORTH CAROLINA, INC. |
| Date: January 23, 2023 | By: | /s/ Jeffrey N. Hooper |
|  | Jeffrey N. Hooper | Jeffrey N. Hooper |
|  | Executive Vice President and Chief Financial Officer | Executive Vice President and Chief Financial Officer |

---

## Ex-99.A

&nbsp;&nbsp;&nbsp;&nbsp;**EXHIBIT 99 (a)**

**EARNINGS RELEASE**

---

| | |
|:---|:---|
|  | **January 23, 2023** |
| **Contact:** | **Lance A. Sellers**<br> **President and Chief Executive Officer** |
|  | **Jeffrey N. Hooper**<br> **Executive Vice President and Chief Financial Officer** |
|  | **828-464-5620, Fax 828-465-6780** |

---

**<u>For Immediate Release</u>**

**<u>PEOPLES BANCORP ANNOUNCES FOURTH QUARTER AND FULL YEAR 2022 RESULTS</u>**

Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK) (the "Company"), the parent company of Peoples Bank (the "Bank"), reported fourth quarter and full year 2022 results with highlights as follows:

***Fourth quarter 2022 highlights:***

· Net earnings were $4.1 million or $0.76 per share and $0.74 per diluted share for the three months ended December 31, 2022, as compared to $3.0 million or $0.55 per share and $0.53 per diluted share for the same period one year ago.

***Full year 2022 highlights:***

· Net earnings were $16.1 million or $2.94 per share and $2.85 per diluted share for the year ended December 31, 2022, as compared to $15.1 million or $2.71 per share and $2.63 per diluted share for the year ended December 31, 2021.

· The Bank recognized $948,000 in SBA PPP loan fee income during the year ended December 31, 2022, as compared to $3.4 million in PPP loan fee income for the previous year.

· Cash dividends were $0.87 per share during the year ended December 31, 2022, as compared to $0.66 per share for the prior year.

· Total loans were $1.0 billion at December 31, 2022, as compared to $884.9 million at December 31, 2021, despite a $17.9 million reduction in PPP loans during the year ended December 31, 2022.

· Non-performing assets were $3.7 million or 0.23% of total assets at December 31, 2022, compared to $3.2 million or 0.20% of total assets at December 31, 2021.

· Total deposits were $1.4 billion at December 31, 2022 and 2021.

· Core deposits, a non-GAAP measure, were $1.4 billion or 97.84% of total deposits at December 31, 2022, compared to $1.4 billion or 98.14% of total deposits at December 31, 2021.

· Net interest margin was 3.22% for the year ended December 31, 2022, compared to 2.99% for the year ended December 31, 2021.

**<u>Three months ended December 31, 2022</u>**

Net earnings were $4.1 million or $0.76 per share and $0.74 per diluted share for the three months ended December 31, 2022, as compared to $3.0 million or $0.55 per share and $0.53 per diluted share for the prior year period. Lance A. Sellers, President and Chief Executive Officer, attributed the increase in fourth quarter net earnings to an increase in net interest income which was partially offset by an increase in the provision for loan losses, a decrease in non-interest income and an increase in non-interest expense, compared to the prior year period, as discussed below.

Net interest income was $15.3 million for the three months ended December 31, 2022, compared to $10.6 million for the three months ended December 31, 2021. The increase in net interest income is due to a $5.2 million increase in interest income, partially offset by a $511,000 increase in interest expense. The increase in interest income is due to a $2.6 million increase in interest income and fees on loans,a $684,000 increase in interest income on balances due from banks and a $1.9 million increase in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans and rate increases by the Federal Reserve, partially offset by a $338,000 decrease in fee income on SBA PPP loans. The increase in interest income on balances due from banks is primarily due to rate increases by the Federal Reserve 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 in 2022. The increase in interest expense is primarily due to an increase in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $14.7 million for the three months ended December 31, 2022, compared to $10.9 million for the three months ended December 31, 2021. The provision for loan losses for the three months ended December 31, 2022 was $583,000, compared to a recovery of $300,000 for the three months ended December 31, 2021. The increase in the provision for loan losses is primarily attributable to an increase in reserves due to an increase in the balance of loans in the general reserve pool.

Non-interest income was $5.5 million for the three months ended December 31, 2022, compared to $7.0 million for the three months ended December 31, 2021. The decrease in non-interest income is primarily attributable to a $1.1 million decrease in appraisal management fee income due to a decrease in appraisal volume and a $361,000 decrease in mortgage banking income due to a decrease in mortgage loan volume and additional mortgage loans being retained in the Bank's portfolio, which were partially offset by a $189,000 increase in service charge income, primarily due to service charge changes implemented in March 2022.

Non-interest expense was $15.0 million for the three months ended December 31, 2022, compared to $14.2 million for the three months ended December 31, 2021. The increase in non-interest expense is primarily attributable to a $1.1 million increase in salaries and employee benefits expense primarily due to increases in supplemental retirement plan expense and insurance costs and a $461,000 increase in other non-interest expenses primarily due to increases in consulting expense and debit card expense, which were partially offset by a $882,000 decrease in appraisal management fee expense due to a decrease in appraisal volume.

**<u>Year ended December 31, 2022</u>**

Net earnings were $16.1 million or $2.94 per share and $2.85 per diluted share for the year ended December 31, 2022, as compared to $15.1 million or $2.71 per share and $2.63 per diluted share for the prior year. The increase in net earnings is primarily attributable to an increase in net interest income and an increase in non-interest income, which were partially offset by an increase in the provision for loan losses and an increase in non-interest expense, compared to the prior year, as discussed below.

Net interest income was $51.1 million for the year ended December 31, 2022, compared to $44.0 million for the year ended December 31, 2021. The increase in net interest income is due to a $7.3 million increase in interest income, partially offset by a $118,000 increase in interest expense. The increase in interest income is primarily due to a $1.9 million increase in interest income and fees on loans, a $2.0 million increase in interest income on balances due from banks and a $3.4 million increase in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans and rate increases by the Federal Reserve, partially offset by a $2.4 million decrease in fee income on SBA PPP loans. The increase in interest income on balances due from banks is primarily due to rate increases by the Federal Reserve 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 in 2022. The increase in interest expense is primarily due to an increase in rates paid on interest-bearing liabilities. Net interest income after the provision for loan losses was $49.6 million for the year ended December 31, 2022, compared to $45.1 million for the year ended December 31, 2021. The provision for loan losses for the year ended December 31, 2022 was $1.5 million, compared to a recovery of $1.2 million for the year ended December 31, 2021. The increase in the provision for loan losses is primarily attributable to an increase in reserves due to an increase in the balance of loans in the general reserve pool.

Non-interest income was $26.7 million for the year ended December 31, 2022, compared to $24.9 million for the year ended December 31, 2021. The increase in non-interest income is primarily attributable to a $2.8 million increase in appraisal management fee income due to an increase in appraisal volume and a $1.3 million increase in service charge income, primarily due to service charge changes implemented in March 2022, which were partially offset by a $2.1 million decrease in mortgage banking income due to a decrease in mortgage loan volume and additional mortgage loans being retained in the Bank's portfolio.

Non-interest expense was $56.0 million for the year ended December 31, 2022, compared to $51.1 million for the year ended December 31, 2021. The increase in non-interest expense is primarily attributable to a $2.2 million increase in appraisal management fee expense due to an increase in appraisal volume and a $1.6 million increase in salaries and employee benefits expense primarily due to increases in insurance costs and salary expense and a $937,000 increase in other non-interest expenses primarily due to increases in consulting expense, debit card expense, online banking expense, office supplies expense and advertising expense.

Income tax expense was $1.1 million for the three months ended December 31, 2022, compared to $732,000 for the three months ended December 31, 2021. The effective tax rate was 21.00% for the three months ended December 31, 2022, compared to 19.58% for the three months ended December 31, 2021. Income tax expense was $4.2 million for the year ended December 31, 2022, compared to $3.8 million for the year ended December 31, 2021. The effective tax rate was 20.56% for the year ended December 31, 2022, compared to 20.05% for the year ended December 31, 2021.

Total assets were $1.6 billion as of December 31, 2022 and 2021. Available for sale securities were $445.4 million as of December 31, 2022, compared to $406.5 million as of December 31, 2021. Total loans were $1.0 billion as of December 31, 2022, compared to $884.9 million as of December 31, 2021. The increase in loans was achieved despite a $17.9 million reduction in PPP loans during the year ended December 31, 2022. The Bank had $103,000 and $18.0 million in PPP loans at December 31, 2022 and December 31, 2021, respectively.

Non-performing assets were $3.7 million or 0.23% of total assets at December 31, 2022, compared to $3.2 million or 0.20% of total assets at December 31, 2021. Non-performing assets include $3.7 million in commercial and residential mortgage loans and $8,000 in other loansat December 31, 2022, compared to $3.2 million in commercial and residential mortgage loans and $51,000 in other loans at December 31, 2021.

The allowance for loan losses was $10.5 million or 1.02% of total loans at December 31, 2022, compared to $9.4 million or 1.06% at December 31, 2021. Management believes the current level of the allowance for loan losses is adequate; however, there is no assurance that additional adjustments to the allowance will not be required because of changes in economic conditions, regulatory requirements or other factors.

Deposits were $1.4 billion at December 31, 2022 and 2021. Core deposits, a non-GAAP measure, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations less than $250,000, were $1.4 billion at December 31, 2022 and 2021. Management believes it is useful to calculate and present core deposits because of the positive impact this low cost funding source provides to the Bank's funding base. Certificates of deposit in amounts of $250,000 or more totaled $31.0 million at December 31, 2022, compared to $26.3 million at December 31, 2021.

Securities sold under agreements to repurchase were $47.7 million at December 31, 2022, compared to $37.1 million at December 31, 2021. Junior subordinated debentures were $15.5 million at December 31, 2022 and December 31, 2021. Shareholders' equity was $105.2 million, or 6.49% of total assets, at December 31, 2022, compared to $142.4 million, or 8.77% of total assets, at December 31, 2021. The decrease in shareholders' equity is primarily due to an increase in the unrealized loss on investment securities available for sale due to rate changes from December 31, 2021 to December 31, 2022. The Company repurchased 26,200 shares of its common stock during the year ended December 31, 2022 under the Company's stock repurchase program, which was re-authorized in January 2022.

Peoples Bank operates 17 banking offices entirely in North Carolina, with offices in Catawba, Alexander, Lincoln, Mecklenburg, Iredell and Wake Counties. The Bank also operates loan production offices in Lincoln, Mecklenburg, Rowan and Forsyth Counties. The Company's common stock is publicly traded and is quoted on the Nasdaq Global Market under the symbol "PEBK."

**Statements made in this earnings release, 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 release 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 Bank, (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 environment 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 the Company's other filings with the Securities and Exchange Commission, including but not limited to those described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.** 

---

| | | |
|:---|:---|:---|
| **CONSOLIDATED BALANCE SHEETS** | **CONSOLIDATED BALANCE SHEETS** | **CONSOLIDATED BALANCE SHEETS** |
| December 31, 2021 and 2022 | December 31, 2021 and 2022 | December 31, 2021 and 2022 |
| (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) |
|  | **December 31, 2022** | December 31, 2021 |
|  |  ***(Unaudited)***  | *(Audited)*  |
| **ASSETS:** |  |  |
| Cash and due from banks | $**50061** | $44711 |
| Interest-bearing deposits | **21535** | 232788 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | **71596** | 277499 |
| Investment securities available for sale | **445394** | 406549 |
| Other investments | **2656** | 3668 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities | **448050** | 410217 |
| Mortgage loans held for sale | **211** | 3637 |
| Loans | **1032608** | 884869 |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Allowance for loan losses | **(10494)** | (9355) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loans | **1022114** | 875514 |
| Premises and equipment, net | **18205** | 16104 |
| Cash surrender value of life insurance | **17703** | 17365 |
| Accrued interest receivable and other assets | **43048** | 23857 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $**1620927** | $1624193 |
| **LIABILITIES AND SHAREHOLDERS' EQUITY:** |  |  |
| Deposits: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Noninterest-bearing demand | $**523088** | $514319 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest-bearing demand, MMDA & savings | **814128** | 797179 |
| &nbsp;&nbsp;&nbsp;&nbsp; Time, $250,000 or more | **31001** | 26333 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other time  | **66998** | 74917 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | **1435215** | 1412748 |
| Securities sold under agreements to repurchase | **47688** | 37094 |
| Junior subordinated debentures | **15464** | 15464 |
| Accrued interest payable and other liabilities | **17365** | 16518 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | **1515732** | 1481824 |
| Shareholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Preferred stock, no par value; authorized 5,000,000 shares; no shares issued and outstanding | **-** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,636,830 shares at 12/31/22, 5,661,569 shares at 12/31/21 | **52636** | 53305 |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock held by deferred compensation trust, at cost; 169,004 shares at 12/31/22, 162,193 shares at 12/31/21 | **(2181)** | (1992) |
| &nbsp;&nbsp;&nbsp;&nbsp; Deferred compensation | **2181** | 1992 |
| &nbsp;&nbsp;&nbsp;&nbsp; Retained earnings | **100156** | 88968 |
| &nbsp;&nbsp;&nbsp;&nbsp; Accumulated other comprehensive income (loss) | **(47597)** | 96 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total shareholders' equity | **105195** | 142369 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and shareholders' equity | $**1620927** | $1624193 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| **CONSOLIDATED STATEMENTS OF INCOME**  | **CONSOLIDATED STATEMENTS OF INCOME**  | **CONSOLIDATED STATEMENTS OF INCOME**  | **CONSOLIDATED STATEMENTS OF INCOME**  | **CONSOLIDATED STATEMENTS OF INCOME**  |
| For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 |
| (Dollars in thousands, except per share amounts) | (Dollars in thousands, except per share amounts) | (Dollars in thousands, except per share amounts) | (Dollars in thousands, except per share amounts) | (Dollars in thousands, except per share amounts) |
|  | **Three months ended**  | **Three months ended**  | **Years ended**  | **Years ended**  |
|  | **December 31,**  | **December 31,**  | **December 31,**  | **December 31,**  |
|  | **2022**  | 2021  | **2022**  | 2021  |
|  |  ***(Unaudited)***  | *(Unaudited)*  |  ***(Unaudited)***  | *(Audited)*  |
| **INTEREST INCOME:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest and fees on loans | $**12350** | $9712 | $**43077** | $41185 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest on due from banks | **770** | 86 | **2223** | 258 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest on investment securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. Government sponsored enterprises | **2286** | 579 | **4962** | 2478 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; State and political subdivisions | **1066** | 924 | **4075** | 3146 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | **27** | 18 | **94** | 112 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income | **16499** | 11319 | **54431** | 47179 |
| **INTEREST EXPENSE:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest-bearing demand, MMDA & savings deposits | **756** | 412 | **2019** | 2029 |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits | **141** | 168 | **562** | 752 |
| &nbsp;&nbsp;&nbsp;&nbsp; Junior subordinated debentures | **205** | 69 | **529** | 280 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other | **96** | 38 | **213** | 144 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest expense | **1198** | 687 | **3323** | 3205 |
| **NET INTEREST INCOME** | **15301** | 10632 | **51108** | 43974 |
| **PROVISION FOR (RECOVERY OF) LOAN LOSSES** | **583** | (300) | **1472** | (1163) |
| **NET INTEREST INCOME AFTER** |  |  |  |  |
| **PROVISION FOR LOAN LOSSES** | **14718** | 10932 | **49636** | 45137 |
| **NON-INTEREST INCOME:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Service charges | **1290** | 1062 | **5290** | 3921 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other service charges and fees | **194** | 233 | **734** | 803 |
| &nbsp;&nbsp;&nbsp;&nbsp; Mortgage banking income | **35** | 396 | **393** | 2505 |
| &nbsp;&nbsp;&nbsp;&nbsp; Insurance and brokerage commissions | **236** | 271 | **945** | 1035 |
| &nbsp;&nbsp;&nbsp;&nbsp; Appraisal management fee income | **2007** | 3115 | **11663** | 8890 |
| &nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous  | **1760** | 1889 | **7664** | 7765 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-interest income | **5522** | 6966 | **26689** | 24919 |
| **NON-INTEREST EXPENSES:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Salaries and employee benefits | **7661** | 6603 | **26130** | 24506 |
| &nbsp;&nbsp;&nbsp;&nbsp; Occupancy | **2162** | 1967 | **8048** | 7858 |
| &nbsp;&nbsp;&nbsp;&nbsp; Appraisal management fee expense | **1584** | 2466 | **9264** | 7112 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other | **3584** | 3123 | **12588** | 11651 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-interest expense | **14991** | 14159 | **56030** | 51127 |
| EARNINGS BEFORE INCOME TAXES | **5249** | 3739 | **20295** | 18929 |
| INCOME TAXES | **1102** | 732 | **4172** | 3796 |
| **NET EARNINGS** | $**4147** | $3007 | $**16123** | $15133 |
| **PER SHARE AMOUNTS** |  |  |  |  |
| Basic net earnings | $**0.76** | $0.55 | $**2.94** | $2.71 |
| Diluted net earnings | $**0.74** | $0.53 | $**2.85** | $2.63 |
| Cash dividends | $**0.18** | $0.17 | $**0.87** | $0.66 |
| Book value | $**19.24** | $25.89 | $**19.24** | $25.89 |

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| | | | | |
|:---|:---|:---|:---|:---|
| **FINANCIAL HIGHLIGHTS**  | **FINANCIAL HIGHLIGHTS**  | **FINANCIAL HIGHLIGHTS**  | **FINANCIAL HIGHLIGHTS**  | **FINANCIAL HIGHLIGHTS**  |
| For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 | For the three months and years ended December 31, 2022 and 2021 |
| (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) |
|  | **Three months ended**  | **Three months ended**  | **Years ended**  | **Years ended**  |
|  | **December 31,**  | **December 31,**  | **December 31,**  | **December 31,**  |
|  | **2022**  | 2021  | **2022**  | 2021  |
|  |  ***(Unaudited)***  | *(Unaudited)*  |  ***(Unaudited)***  | *(Audited)*  |
| **SELECTED AVERAGE BALANCES:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Available for sale securities | $**509362** | $408075 | $**467484** | $349647 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans | **1020383** | 882596 | **949175** | 908682 |
| &nbsp;&nbsp;&nbsp;&nbsp; Earning assets | **1618034** | 1545548 | **1601168** | 1483519 |
| &nbsp;&nbsp;&nbsp;&nbsp; Assets | **1657925** | 1630767 | **1663665** | 1568417 |
| &nbsp;&nbsp;&nbsp;&nbsp; Deposits | **1488566** | 1429888 | **1480113** | 1372857 |
| &nbsp;&nbsp;&nbsp;&nbsp; Shareholders' equity | **99864** | 139880 | **123886** | 147741 |
| **SELECTED KEY DATA:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net interest margin (tax equivalent) (1) | **3.78%** | 2.76% | **3.22%** | 2.99% |
| &nbsp;&nbsp;&nbsp;&nbsp; Return on average assets | **0.99%** | 0.73% | **0.97%** | 0.96% |
| &nbsp;&nbsp;&nbsp;&nbsp; Return on average shareholders' equity | **16.48%** | 8.53% | **13.01%** | 10.24% |
| &nbsp;&nbsp;&nbsp;&nbsp; Average shareholders' equity to total average assets | **6.02%** | 8.58% | **7.45%** | 9.42% |
| **ALLOWANCE FOR LOAN LOSSES:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Balance, beginning of period | $**10030** | $8963 | $**9355** | $9908 |
| &nbsp;&nbsp;&nbsp;&nbsp; Provision for (Recovery of) loan losses | **583** | (300) | **1472** | (1163) |
| &nbsp;&nbsp;&nbsp;&nbsp; Charge-offs | **(161)** | (220) | **(752)** | (762) |
| &nbsp;&nbsp;&nbsp;&nbsp; Recoveries | **42** | 912 | **419** | 1372 |
| &nbsp;&nbsp;&nbsp;&nbsp; Balance, end of period | $**10494** | $9355 | $**10494** | $9355 |

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | December 31, 2021 |
|  |  ***(Unaudited)***  | *(Audited)*  |
| **ASSET QUALITY:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Non-accrual loans | $**3728** | $3230 |
| &nbsp;&nbsp;&nbsp;&nbsp; 90 days past due and still accruing | **-** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Other real estate owned | **-** | - |
| &nbsp;&nbsp;&nbsp;&nbsp; Total non-performing assets | $**3728** | $3230 |
| &nbsp;&nbsp;&nbsp;&nbsp; Non-performing assets to total assets | **0.23%** | 0.20% |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans modifications related to COVID-19 | $**-** | $- |
| &nbsp;&nbsp;&nbsp;&nbsp; Allowance for loan losses to non-performing assets  | **281.49%** | 289.63% |
| &nbsp;&nbsp;&nbsp;&nbsp; Allowance for loan losses to total loans | **1.02%** | 1.06% |
| &nbsp;&nbsp;&nbsp;&nbsp; Allowance for loan losses to total loans, excluding PPP loans | **1.02%** | 1.08% |
| **LOAN RISK GRADE ANALYSIS:** |  |  |
| **Percentage of loans by risk grade** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 1 (excellent quality) | **0.45%** | 0.78% |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 2 (high quality) | **19.51%** | 19.12% |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 3 (good quality) | **73.27%** | 70.41% |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 4 (management attention) | **5.44%** | 7.70% |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 5 (watch) | **0.68%** | 1.23% |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 6 (substandard) | **0.65%** | 0.76% |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 7 (doubtful) | **0.00%** | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp; Risk Grade 8 (loss) | **0.00%** | 0.00% |

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*At December 31, 2022, including non-accrual loans, there was one relationship exceeding $1.0 million in the Watch risk grade ($1.7 million). There were no relationships exceeding $1.0 million in the Substandard risk grade.*

(1) This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax-exempt status. This amount has been computed using an effective tax rate of 22.98% and is reduced by the related nondeductible portion of interest expense.

 **(END)**