PEOPLES BANCORP OF NORTH CAROLINA INC

Self Funded Insurance

The Company has a self-funded health insurance plan, which is administered by a third party provider (“TPP”). The TPP provides a monthly estimate of the cost of incurred but not reported (“IBNR”) claims. The Company’s unpaid claim liability for IBNR claims of $500,000 and $300,000 at December 31, 2025 and 2024, respectively, is separately classified on the balance sheets within Other Liabilities.

The Company has a stop-loss insurance policy to mitigate the risk of high self-funded health insurance claim amounts. This policy has a specific stop loss limit that covers individual claims in excess of $135,000 and an aggregating specific stop loss limit that covers aggregate claims in excess of $200,000. Due to large self-funded health insurance claims in process at December 31, 2024, the Company had an additional $1.3 million separately classified on the balance sheets within Other Liabilities at December 31, 2024, which was partially offset by a $968,000 stop loss insurance receivable separately classified on the balance sheets within Other Assets at December 31, 2024. There were no balances related to this large self-funded health insurance claim within Other Assets or Other Liabilities at December 31, 2025