Blueharbor bank : 2022 Annual Report

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ANNUAL REPORT

2022 Annual Report

Table of Contents

Letter to Shareholders ........................................................................................................................................................... 1

Independent Auditor's Report ............................................................................................................................................... 2

Balance Sheets ....................................................................................................................................................................... 4

Income Statements ................................................................................................................................................................ 5

Statements of Comprehensive Income ................................................................................................................................. 6

Statements of Changes in Shareholders' Equity ................................................................................................................... 7

Statements of Cash Flows ..................................................................................................................................................... 8

Notes to Financial Statements ............................................................................................................................................... 9

Board of Directors and Employees ..................................................................................................................................... 37

Shareholders' Information .................................................................................................................................................. 38

This Annual Report to Shareholders contains forward-looking statements. Such forward-looking statements may be identified by the use of such words as "may," "will," "believe," "expect," "anticipate," should," "planned," "estimated" and "potential." Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, changes in the interest rate environment, management's business strategy, national, regional and local market conditions and legislative and regulatory conditions.

Readers should not place undue reliance on forward-looking statements, which reflect management's view only as of the date hereof. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

Dear Shareholder:

As I write this letter, the state of blueharbor, its asset base and key financial ratios have never been stronger since our inception 15 years ago. Our stated goals from the beginning were to build a very solid foundation, to withstand the trials and tribulations we may endure. Today we are consistently ranked among the top two or three best performing banks in North Carolina having worked thru the great recession of 2008-2010, a pandemic and strong recessionary pressures currently, all while serving our customers and assisting thousands make their dreams come true. While we have never tried to be the biggest bank in the neighborhood, we just want to be the best and, thru it all we recognize our ultimate responsibility is to our depositors, large and small. Our deposit base is largely comprised of consumer and small businesses with the majority of these covered by FDIC insurance. Without these depositors, the local home loans and small businesses we have funded by the millions since January 2008 would not have been possible. Our responsibilities continue to the communities we serve in our commitment to give back generously, with deep involvement in over 75 different civic clubs, churches, charities, local Chambers and Economic Development Corporations being important to our very fiber. We are the leader of these efforts in the communities we serve!

Each year our financial results eclipse those of the previous year by record numbers and 2022 was no exception. Net income for 2022 was $6,903,000 and a 43% increase over record levels in 2021. Asset quality continues to be very strong at .02% of non-performing assets to total assets of $406.4 million at year end. The .02% is one loan less than $75,000 and is making payments each month I might add. Our bond portfolio is small, relative to our peers, representing 10% of our total assets. We have been fortunate to deploy our assets in high quality loans vs. lower yielding but high-quality U.S. Treasuries and Government backed bonds. We have zero held to maturity (HTM) bonds that have caused liquidity problems with some banks recently in California and New York. We have zero exposure to cryptocurrency, private equity, venture capital, and technology related companies or industries. Capital levels remain very solid and well above industry guidelines for banks to be considered at the level of "well capitalized" at December 31, 2022, with total risked based capital at 14.3%, and both common equity tier 1 and tier 1 to risk-weighted assets of 13.4%, and tier 1 leverage ratio of 11.2% respectively.

In conclusion, our Board of Directors and I could not be more grateful for your support and confidence shown in blueharbor bank. To our employees we express our deep appreciation and gratitude. This team represents us in an outstanding fashion and is a key reason our bank continues to grow and prosper in the manner we have become accustom.

As always, please feel free to contact me if I can ever be of assistance.

Sincerely,

Joe I. Marshall, Jr.

President and Chief Executive Officer March 24, 2023