What changed in this filing

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Item 1. Business

2025-03-12 compared with 2024-03-07 · 26 added, 19 removed, 351 unchanged (11% of the section changed)

7 unchanged sentences

Our principal executive offices are located at 518 West C Street, Newton, North Carolina, 28658, and our telephone number is (828) 464-5620.

The Bank, founded in 1912, is a state-chartered commercial bank serving the citizens and business interests of the Catawba Valley and surrounding communities through 17 banking offices, located in Lincolnton, Newton, Denver, Catawba, Conover, Maiden, Claremont, Hiddenite, Hickory, Charlotte, Huntersville, Mooresville, Raleigh, and Cary, North Carolina.

The Bank, founded in 1912, is a state-chartered commercial bank serving the citizens and business interests of the Catawba Valley and surrounding communities through 16 banking offices, located in Lincolnton, Newton, Denver, Catawba, Conover, Maiden, Claremont, Hiddenite, Hickory, Charlotte, Huntersville, Mooresville and Raleigh, North Carolina.

The Bank also operates loan production offices in Charlotte, Denver, Salisbury and Winston-Salem North Carolina.

1 unchanged sentence

At December 31, 2024, the Company had total assets of $1.7 billion, net loans of $1.1 billion, deposits of $1.5 billion, total securities of $390.7 million, and shareholders’ equity of $130.6 million.

The Bank operates three banking offices focused on the Latino population that were formerly operated as a division of the Bank under the name Banco de la Gente (“Banco”).

These offices, which offer the same banking services as our other branches offer, now operate under the same name as our other offices;

however, we continue to separately categorize mortgage loans originated from these offices.

The Bank has a diversified loan portfolio, with no foreign loans and few agricultural loans.

2 unchanged sentences

The majority of the Bank’s deposit and loan customers are individuals and small-to medium-sized businesses located in the Bank’s market area.

The Bank’s loan portfolio also includes Individual Taxpayer Identification Number (ITIN) mortgage loans generated through the Bank’s former Banco offices.

Additional discussion of the Bank’s loan portfolio and sources of funds for loans can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages A-4 through A-19 of the Annual Report, which is included in this Form 10-K as Exhibit (13).

15 unchanged sentences

The Company redeemed $5.0 million of outstanding trust preferred securities in 2019.

Prior to September 15, 2023, the trust preferred securities accrued and paid interest quarterly at a floating rate of three-month LIBOR plus 163 basis points.

The three-month USD LIBOR rate ceased to be published after June 30, 2023.

Effective September 15, 2023, the trust preferred securities accrue and pay interest quarterly at a floating rate of three-month Secured Overnight Financing Rate (SOFR) plus 189 basis points, including a 26 basis point credit spread adjustment.

Market Area and Competition

7 unchanged sentences

and Pierre Foods, Inc.

Lincoln County’s largest employers include Lincoln County Schools, County of Lincoln, Atrium Health Lincoln, RSI Home Products (manufacturing), Wal-Mart Associates, Inc., The Timken Company (manufacturing), Blum, Inc.

Lincoln County’s largest employers include Lincoln County Schools, County of Lincoln, Atrium Health, Lincoln Charter Schools, Inc., American Woodmark - RSI Home Products (manufacturing), Wal-Mart Associates, Inc., The Timken Company (manufacturing), Blum, Inc.

(manufacturing), Lowes Home Centers, Inc.

5 unchanged sentences

Based upon June 30, 2024 comparative data, the Bank had 21.49% of the deposits in Catawba County, placing it second in deposit size among a total of 12 banks with branch offices in Catawba County;

16.09% of the deposits in Lincoln County, placing it second in deposit size among a total of nine banks with branch offices in Lincoln County;

16.37% of the deposits in Lincoln County, placing it second in deposit size among a total of 10 banks with branch offices in Lincoln County;

and 16.10% of the deposits in Alexander County, placing it fourth in deposit size among a total of four banks with branch offices in Alexander County.

17 unchanged sentences

The underwriting standards and loan origination procedures include officer lending limits, which are approved by the Bank Board.

The President/Chief Executive Officer of the Bank has loan authority of up to the legal lending limit of the Bank.

The Executive Loan Committee of the Bank has loan authority of up to the legal lending limit of the Bank.

As of December 31, 2024, the individual lending authority of the Chief Credit Officer/Executive Vice President was set at $8.0 million.

10 unchanged sentences

New Loans - $250,000 and Greater

Comparison on New Loans in Prior Month with Same Month in Prior Year

Comparison of New Loans in Prior Month with Same Month in Prior Year

Outstanding Commitments - $500,000 and Greater

10 unchanged sentences

Portfolio Stress Tests

Mortgage Report (see Mortgage Policy for complete list of reports)

Matured Home Equity Loan Report

6 unchanged sentences

Receives information from management detailing all new committed borrowing relationships exceeding $3.0 million and is informed during the year if a borrowing relationship exceeds $2.5 million

Mortgage Report

Investment Policies and Procedures

41 unchanged sentences

The collective sum of the individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities, and talent that our employees invest in their work represents a significant part of not only our culture but our reputation and our achievement as well.

We embrace our employee’s differences in age, color, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.

We embrace our employees’ differences in age, color, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.

By emphasizing a consistent set of principles that all employees follow, we believe that our employees work experience is more satisfying, and they are better able to serve their customers consistently and at a high level.

8 unchanged sentences

We launched our “Courageous Conversations” initiative in 2020, a program we will continue to build on annually.

We are an active member of the North Carolina Bankers Association DEI Council doing work to expand DEI programming and other resources for community banks.

We also seek to design careers within our organization that are fulfilling ones, with competitive compensation and benefits alongside a positive work-life balance.

84 unchanged sentences

The Bank received a “satisfactory” rating in its last CRA examination, which was conducted in May 2023.

In October 2023, the Federal Reserve, FDIC, and OCC issued a final rule to amend their regulations implementing the CRA.

The rule materially revises the current CRA framework, including the assessment areas in which a bank is evaluated to include activities associated with online and mobile banking, the tests used to evaluate the bank in its assessment areas, new methods of calculating credit for lending, investment and service activities, and additional data collection and reporting requirements.

The rule is expected to result in a significant increase in the thresholds for large banks to receive “Outstanding” ratings in the future.

Most of the provisions become applicable on January 1, 2026.

Reporting of the collected data will not be required until 2027.

Changes in Control.

43 unchanged sentences

The Financial Accounting Standards Board (“FASB”) has adopted a new accounting standard related to reserving for credit losses.

This standard, referred to as Current Expected Credit Loss (or “CECL”), requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets.The Company adopted CECL as of January 1, 2023.

The Company adopted CECL as of January 1, 2023.

Since the adoption of CECL, the allowance for credit losses represents management’s estimate of credit losses for the remaining estimated life of the Bank’s financial assets, including loan receivables and some off-balance sheet credit exposures.

13 unchanged sentences

Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services.

Under various policy statements, financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution.

Additionally, management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption, and maintenance of the institution’s operations after a cyber-attack involving destructive malware.

A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack.

The Company has multiple information security programs that reflect the requirements of this guidance.

If, however, we fail to observe the regulatory guidance in the future, we could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the federal banking regulators adopted a regulation that, among other things, requires a banking organization to notify its primary federal regulators as soon as possible and within 36 hours after identifying a “computer-security incident” that the banking organization believes in good faith is reasonably likely to materially disrupt or degrade its business or operations in a manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other accounts, result in a material loss of revenue, profit or stock price, or pose a threat to the financial stability of the U.S.

In July, 2023, the SEC adopted new cybersecurity disclosure rules for public companies that require disclosure regarding cybersecurity risk management (including the role of the Board in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks, and processes for assessing, identifying and managing cybersecurity risks) in annual reports.

These new cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents in a Form 8-K, generally within four days of determining an incident is material.

See Item 1A, “Risk Factors,” and Item 1C, "Cybersecurity," for additional disclosures related to cybersecurity.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data.

2 unchanged sentences

Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.

While to date we have not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.

Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

Risk Factors for a further discussion of risks related to cybersecurity.

While to date we have not detected a significant compromise, the risks of significant data loss or any material financial losses related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats.

Additional discussion of our cybersecurity risk management process and strategy are contained in Item 1C.

of this Report.

The Bank Secrecy Act (BSA).

48 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business