Earnings and Financial Performance - For the three months ended September 30, 2025, the basic earnings per share was $0.70, with net earnings of $3,692,000 and a weighted average of 5,309,028 shares outstanding[37]. - For the nine months ended September 30, 2025, the basic earnings per share was $2.49, with net earnings of $13,197,000 and a weighted average of 5,303,953 shares outstanding[38]. - The diluted earnings per share for the three months ended September 30, 2025, was $0.67, with a total of 5,471,622 shares considered[37]. - The diluted earnings per share for the nine months ended September 30, 2025, was $2.41, with a total of 5,469,553 shares considered[39]. - Net earnings for the three months ended September 30, 2025, were $3.7 million, a decrease from $4.0 million in the prior year period[127]. - Net earnings for the nine months ended September 30, 2025, increased to $13.2 million from $12.8 million in the prior year period[128]. Investment Securities - The total fair value of investment securities available for sale as of September 30, 2025, was $376,868,000, with unrealized losses of $38,362,000[41]. - The amortized cost of investment securities available for sale was $414.9 million, with a fair value of $376.9 million as of September 30, 2025[44]. - The Company reported unrealized gains and losses on investment securities as the only component of other comprehensive income[33]. - The Company has not adopted several recent Accounting Standards Updates (ASUs) that may impact financial statements, including ASU 2023-09 and ASU 2024-03, effective December 15, 2024, and 2026 respectively[30][31]. - The Company’s accounting policies have not seen significant changes since December 31, 2024[29]. Loans and Credit Quality - The total net loans increased to $1,173.2 million as of September 30, 2025, compared to $1,128.4 million at December 31, 2024, reflecting a growth of approximately 4.0%[46]. - Real estate loans accounted for $1,105.9 million of total loans as of September 30, 2025, up from $1,048.0 million at December 31, 2024, indicating a growth of about 5.4%[46]. - The company has a diversified loan portfolio, with a significant portion collateralized by real estate, which is subject to market fluctuations[46]. - Non-accrual loans totaled $5.1 million as of September 30, 2025, compared to $4.4 million at December 31, 2024[50][51]. - The total allowance for credit losses, including loan commitments, is $11,382,000 as of September 30, 2025, indicating a comprehensive approach to managing credit risk[66]. - The allowance for credit losses increased from $9,792,000 at the beginning of the three months ended September 30, 2025, to $10,206,000 at the end of the period, reflecting a provision for loan losses of $612,000[66]. - The charge-offs for the three months ended September 30, 2025, amounted to $249,000, while recoveries were $51,000, resulting in a net charge-off of $198,000[66]. - The bank employs a loan grading system to monitor credit quality, which is reviewed monthly by the Bank Board to ensure appropriate reserve levels[62]. Deposits and Capital - Total deposits increased to $1.55 billion as of September 30, 2025, up from $1.48 billion at December 31, 2024, with core deposits at $1.39 billion[175]. - Shareholders' equity rose to $149.5 million, or 8.60% of total assets, compared to $130.6 million, or 7.90% of total assets, at December 31, 2024[189]. - The Company's Tier 1 capital ratio was 14.83% at September 30, 2025, compared to 14.47% at December 31, 2024[194]. - The total risk-based capital ratio was 15.70% at September 30, 2025, up from 15.34% at December 31, 2024[194]. - The liquidity ratio improved to 30.14% at September 30, 2025, compared to 28.16% at December 31, 2024[187]. Interest Income and Expense - Net interest income for the three months ended September 30, 2025, is $15,119,000, compared to $13,549,000 for the same period in 2024, reflecting an increase[116]. - Interest income for the three months ended September 30, 2025, was $21.4 million, compared to $20.5 million for the same period in 2024[132]. - The average yield on loans for the nine months ended September 30, 2025, was 5.76%, compared to 5.65% for the same period in 2024, while the average yield on investment securities available for sale decreased to 3.19% from 3.37%[139]. - Interest expense decreased to $18.4 million for the nine months ended September 30, 2025, from $20.1 million in 2024, primarily due to lower rates on interest-bearing liabilities[140]. - The average rate paid on interest-bearing liabilities was 2.20% for the nine months ended September 30, 2025, down from 2.46% in the prior year[140]. Non-Interest Income and Expense - Non-interest income for the nine months ended September 30, 2025, was $21.3 million, a 2.9% increase from $20.7 million in the same period in 2024[149]. - Non-interest expense for the three months ended September 30, 2025, was $16.9 million, an increase of 12.7% compared to $15.0 million in the same period in 2024[150]. - The increase in non-interest expense for the nine months ended September 30, 2025, was primarily due to a $1.6 million increase in appraisal management fee expense[151]. Legal and Compliance - The company conducted an evaluation of its disclosure controls and procedures, concluding they are effective for timely decision-making regarding material information[198]. - No changes in internal control over financial reporting have occurred that materially affect the company's reporting[198]. - The company is not involved in any material pending legal proceedings, only routine proceedings in the ordinary course of business[199].

Core Viewpoint - Peoples Bancorp of North Carolina, Inc. (PEBK) experienced a 9.9% increase in share price following its earnings report for Q3 2025, outperforming the S&P 500 Index's 1% gain during the same period [1] Earnings Summary - For Q3 2025, Peoples Bancorp reported net earnings of $3.7 million, or $0.70 per share, a decrease of 6.7% from $3.9 million, or $0.74 per share, in the same quarter of the previous year, primarily due to higher provisions for credit losses and rising non-interest expenses [2] - Year-to-date net earnings for the nine months ended Sept. 30, 2025, were $13.2 million, or $2.49 per share, reflecting a 3.1% increase from $12.8 million, or $2.41 per share, in the same period of 2024 [4] Income and Expenses - Net interest income rose 11.6% to $15.1 million from $13.5 million a year earlier, supported by a wider net interest margin (NIM) of 3.58% compared to 3.35% [3] - Non-interest income remained stable at $7.1 million, with a 17.2% increase in appraisal management fees offset by a 21.1% decline in miscellaneous income [3] - Non-interest expenses increased by 12.7% to $16.9 million from $15 million, driven by higher legal, debit card, and salary costs [3] Loan and Deposit Growth - Total loans increased to $1.18 billion as of Sept. 30, 2025, up from $1.14 billion at year-end 2024, while total deposits rose to $1.55 billion from $1.48 billion during the same period [5] - Core deposits were $1.39 billion, representing 89.65% of total deposits as of Sept. 30, 2025, compared to $1.34 billion or 90.17% at the end of 2024 [5] Asset Quality and Capital - Non-performing assets totaled $5.1 million, accounting for 0.29% of total assets, unchanged from the end of 2024 [7] - The allowance for credit losses on loans was $10.2 million, or 0.86% of total loans, slightly higher than $9.9 million, or 0.88%, at the end of 2024 [7] - Shareholders' equity increased to $149.5 million as of Sept. 30, 2025, from $130.6 million at the end of 2024, driven by a reduction in unrealized losses on securities [7] Management Commentary - The decline in quarterly earnings was attributed to higher provisions for credit losses and increased non-interest expenses, although core banking operations remained strong [8] - Management emphasized that asset quality and capital ratios remained solid, with a focus on prudent loan and deposit growth [9] Legal Developments - A significant legal ruling in September 2025 favored the bank in its dispute with the North Carolina Department of Transportation, resulting in an expected gain of $3.6 million [12]

[Earnings Release Announcement](index=1&type=section&id=Earnings%20Release%20Announcement) Peoples Bancorp of North Carolina, Inc. announced its third quarter 2025 results, providing key financial highlights and contact information [Company and Contact Information](index=1&type=section&id=Company%20and%20Contact%20Information) Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK) is the parent company of Peoples Bank, with key contacts for executive leadership - Peoples Bancorp of North Carolina, Inc. (NASDAQ: PEBK) is the parent company of Peoples Bank[2](index=2&type=chunk) - Contact persons are **William D. Cable, Sr.** (President and CEO) and **Jeffrey N. Hooper** (EVP and CFO)[1](index=1&type=chunk) [Overall Highlights](index=1&type=section&id=Overall%20Highlights) The company reported key financial highlights for Q3 2025 and year-to-date periods, including net earnings, net interest margin, and asset growth Third Quarter 2025 Key Financial Highlights | Metric | Q3 2025 | Q3 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Net earnings | $3.7 million | $4.0 million | -$0.3 million | | Basic EPS | $0.70 | $0.74 | -$0.04 | | Diluted EPS | $0.67 | $0.72 | -$0.05 | | Net interest margin | 3.58% | 3.35% | +0.23% | Year-to-Date September 30, 2025 Key Financial Highlights | Metric | YTD 2025 | YTD 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Net earnings | $13.2 million | $12.8 million | +$0.4 million | | Basic EPS | $2.49 | $2.41 | +$0.08 | | Diluted EPS | $2.41 | $2.33 | +$0.08 | | Cash dividends per share | $0.76 | $0.73 | +$0.03 | | Total loans (period end) | $1.18 billion | $1.14 billion (Dec 2024) | +$0.04 billion | | Non-performing assets (period end) | $5.1 million (0.29% of assets) | $4.8 million (0.29% of assets) (Dec 2024) | +$0.3 million | | Total deposits (period end) | $1.55 billion | $1.48 billion (Dec 2024) | +$0.07 billion | | Core deposits (period end) | $1.39 billion (89.65% of total) | $1.34 billion (90.17% of total) (Dec 2024) | +$0.05 billion | | Net interest margin | 3.55% | 3.34% | +0.21% | [Third Quarter 2025 Financial Performance](index=1&type=section&id=Third%20Quarter%202025%20Financial%20Performance) Third quarter 2025 performance saw a decrease in net earnings due to higher credit loss provisions and non-interest expenses, partially offset by increased net interest and non-interest income [Net Earnings](index=1&type=section&id=Third%20Quarter%20Net%20Earnings) Net earnings for Q3 2025 decreased to $3.7 million, primarily due to increased provision for credit losses and non-interest expense, despite higher net interest and non-interest income Q3 Net Earnings (YoY) | Metric | Q3 2025 | Q3 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Net earnings | $3.7 million | $4.0 million | -$0.3 million | | Basic EPS | $0.70 | $0.74 | -$0.04 | | Diluted EPS | $0.67 | $0.72 | -$0.05 | - The decrease in Q3 net earnings was attributed to increases in the provision for credit losses and non-interest expense, partially offset by increases in net interest income and non-interest income[3](index=3&type=chunk) [Net Interest Income and Provision for Credit Losses](index=1&type=section&id=Third%20Quarter%20Net%20Interest%20Income%20and%20Provision%20for%20Credit%20Losses) Net interest income increased by $1.6 million to $15.1 million, while the provision for credit losses significantly rose to $530,000, mainly due to construction loan reserves Q3 Net Interest Income & Provision (YoY) | Metric | Q3 2025 | Q3 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Net interest income | $15.1 million | $13.5 million | +$1.6 million | | Interest income | $21.4 million | $20.5 million | +$0.9 million | | Interest expense | $6.3 million | $6.9 million | -$0.6 million | | Provision for credit losses | $530,000 | $297,000 | +$233,000 | | Net interest income after provision | $14.6 million | $13.3 million | +$1.3 million | - The increase in interest income was primarily due to a **$1.1 million increase in interest income and fees on loans** and a **$401,000 increase in interest income on balances due from banks**[4](index=4&type=chunk) - The increase in the provision for credit losses is primarily attributable to an increase in reserves on construction loans[4](index=4&type=chunk) [Non-Interest Income](index=2&type=section&id=Third%20Quarter%20Non-Interest%20Income) Non-interest income remained stable at $7.1 million in Q3 2025, with increased appraisal management fees offset by decreases in miscellaneous non-interest income and service charges Q3 Non-Interest Income (YoY) | Metric | Q3 2025 | Q3 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Total non-interest income | $7.1 million | $7.1 million | $0 | | Appraisal management fee income | $3.6 million | $3.1 million | +$0.5 million | | Miscellaneous non-interest income | $1.5 million | $2.0 million | -$0.5 million | | Service charges and fees on deposits | $1.4 million | $1.5 million | -$0.1 million | - The increase in appraisal management fee income was due to an increase in appraisal volume[6](index=6&type=chunk) - The decrease in miscellaneous non-interest income was primarily due to a decrease in income on small business investment company (SBIC) investments[6](index=6&type=chunk) [Non-Interest Expense](index=2&type=section&id=Third%20Quarter%20Non-Interest%20Expense) Non-interest expense increased by $1.9 million to $16.9 million in Q3 2025, driven by higher other non-interest expenses, salaries, and appraisal management fees, partially offset by lower occupancy expense Q3 Non-Interest Expense (YoY) | Metric | Q3 2025 | Q3 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Total non-interest expense | $16.9 million | $15.0 million | +$1.9 million | | Other non-interest expense | $4.7 million | $3.5 million | +$1.2 million | | Salaries and employee benefits | $7.1 million | $6.6 million | +$0.5 million | | Appraisal management fee expense | $2.9 million | $2.4 million | +$0.5 million | | Occupancy expense | $2.3 million | $2.4 million | -$0.2 million | - The decrease in occupancy expense was primarily due to the **$362,000 write-off of leasehold improvements** for the Bank's former branch in Cary, North Carolina during Q3 2024[7](index=7&type=chunk) [Income Tax Expense](index=2&type=section&id=Third%20Quarter%20Income%20Tax%20Expense) Income tax expense for Q3 2025 decreased to $1.1 million, with the effective tax rate falling to 22.95%, primarily due to a prior-year deferred tax asset revaluation Q3 Income Tax Expense (YoY) | Metric | Q3 2025 | Q3 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Income tax expense | $1.1 million | $1.4 million | -$0.3 million | | Effective tax rate | 22.95% | 25.76% | -2.81% | - The decrease in the effective tax rate was primarily due to the revaluation of the deferred tax asset during Q3 2024 due to upcoming reductions in the North Carolina corporate income tax rate[12](index=12&type=chunk) [Nine Months Ended September 30, 2025 Financial Performance](index=2&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202025%20Financial%20Performance) Year-to-date net earnings increased, driven by higher net interest and non-interest income, partially offset by increased credit loss provisions and non-interest expenses [Net Earnings](index=2&type=section&id=YTD%20Net%20Earnings) Net earnings for the nine months ended September 30, 2025, increased to $13.2 million, primarily due to higher net interest and non-interest income, partially offset by increased credit loss provisions and non-interest expenses YTD Net Earnings (YoY) | Metric | YTD 2025 | YTD 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Net earnings | $13.2 million | $12.8 million | +$0.4 million | | Basic EPS | $2.49 | $2.41 | +$0.08 | | Diluted EPS | $2.41 | $2.33 | +$0.08 | - The increase in YTD net earnings is primarily attributable to increases in net interest income and non-interest income, partially offset by increases in the provision for credit losses and non-interest expense[8](index=8&type=chunk) [Net Interest Income and Provision for Credit Losses](index=2&type=section&id=YTD%20Net%20Interest%20Income%20and%20Provision%20for%20Credit%20Losses) Net interest income for the nine months ended September 30, 2025, increased by $3.4 million to $43.7 million, while the provision for credit losses shifted to an expense of $585,000, mainly due to loan growth YTD Net Interest Income & Provision (YoY) | Metric | YTD 2025 | YTD 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Net interest income | $43.7 million | $40.3 million | +$3.4 million | | Interest income | $62.1 million | $60.3 million | +$1.8 million | | Interest expense | $18.4 million | $20.1 million | -$1.7 million | | Provision for credit losses | $585,000 | -$80,000 (recovery) | +$665,000 | | Net interest income after provision | $43.1 million | $40.3 million | +$2.8 million | - The increase in YTD net interest income was due to a **$1.7 million increase in interest income** (primarily from loans) and a **$1.6 million decrease in interest expense** (due to lower rates on interest-bearing liabilities)[9](index=9&type=chunk) - The increase in the provision for credit losses is primarily attributable to a **$59.3 million increase in total loans** from September 30, 2024, to September 30, 2025[9](index=9&type=chunk) [Non-Interest Income](index=2&type=section&id=YTD%20Non-Interest%20Income) Non-interest income for the nine months ended September 30, 2025, increased by $0.6 million to $21.3 million, primarily driven by higher appraisal management fee income, partially offset by reduced miscellaneous non-interest income YTD Non-Interest Income (YoY) | Metric | YTD 2025 | YTD 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Total non-interest income | $21.3 million | $20.7 million | +$0.6 million | | Appraisal management fee income | $10.6 million | $8.7 million | +$1.9 million | | Miscellaneous non-interest income | $5.1 million | $6.3 million | -$1.2 million | - The increase in appraisal management fee income was due to an increase in appraisal volume[10](index=10&type=chunk) [Non-Interest Expense](index=2&type=section&id=YTD%20Non-Interest%20Expense) Non-interest expense for the nine months ended September 30, 2025, increased by $2.6 million to $47.3 million, mainly due to higher appraisal management fees, salaries, and other non-interest expenses, partially offset by lower occupancy expense YTD Non-Interest Expense (YoY) | Metric | YTD 2025 | YTD 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Total non-interest expense | $47.3 million | $44.7 million | +$2.6 million | | Appraisal management fee expense | $8.4 million | $6.9 million | +$1.5 million | | Salaries and employee benefits | $21.1 million | $20.4 million | +$0.7 million | | Other non-interest expense | $11.5 million | $10.7 million | +$0.8 million | | Occupancy expense | $6.4 million | $6.7 million | -$0.3 million | - The decrease in occupancy expense was primarily due to the **$362,000 write-off of leasehold improvements** for the Bank's former branch in Cary, North Carolina during Q3 2024[11](index=11&type=chunk) [Income Tax Expense](index=2&type=section&id=YTD%20Income%20Tax%20Expense) Income tax expense for the nine months ended September 30, 2025, increased to $3.9 million, with the effective tax rate rising to 22.77%, primarily due to a prior-year interest receivable from a tax settlement YTD Income Tax Expense (YoY) | Metric | YTD 2025 | YTD 2024 | Change | | :--------------------------------- | :---------- | :---------- | :----- | | Income tax expense | $3.9 million | $3.5 million | +$0.4 million | | Effective tax rate | 22.77% | 21.71% | +1.06% | - The increase in the effective tax rate is primarily due to a **$322,000 interest receivable** booked during YTD 2024 on a deposit for taxes paid prior to a settlement with the North Carolina Department of Revenue ("NCDOR")[12](index=12&type=chunk) [Financial Position and Asset Quality](index=3&type=section&id=Financial%20Position%20and%20Asset%20Quality) The company's financial position improved with increased total assets and deposits, while asset quality metrics remained stable with a slight rise in non-performing assets [Balance Sheet Overview](index=3&type=section&id=Balance%20Sheet%20Overview) Total assets increased to $1.74 billion at September 30, 2025, driven by growth in total loans, while available-for-sale securities experienced a slight decrease Key Balance Sheet Items (Period End) | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Total assets | $1.74 billion | $1.65 billion | +$0.09 billion | | Available for sale securities | $376.9 million | $388.0 million | -$11.1 million | | Total loans | $1.18 billion | $1.14 billion | +$0.04 billion | [Non-Performing Assets](index=3&type=section&id=Non-Performing%20Assets) Non-performing assets increased slightly to $5.1 million at September 30, 2025, maintaining 0.29% of total assets, with increases primarily in residential and commercial mortgage loans Non-Performing Assets (Period End) | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Non-performing assets | $5.1 million | $4.8 million | +$0.3 million | | Non-performing assets to total assets | 0.29% | 0.29% | 0% | | Residential mortgage loans | $4.1 million | $3.7 million | +$0.4 million | | Commercial mortgage loans | $1.0 million | $463,000 | +$0.5 million | [Allowance for Credit Losses](index=3&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses on loans increased to $10.2 million (0.86% of total loans) at September 30, 2025, primarily due to a $45.0 million increase in total loans, with management deeming the current allowance adequate Allowance for Credit Losses (Period End) | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Allowance for credit losses on loans | $10.2 million | $10.0 million | +$0.2 million | | Allowance for credit losses on loans to total loans | 0.86% | 0.88% | -0.02% | | Allowance for credit losses on unfunded commitments | $1.2 million | $1.1 million | +$0.1 million | - The increase in allowance for credit losses on loans was primarily due to a **$45.0 million increase in total loans** from December 31, 2024, to September 30, 2025[15](index=15&type=chunk) - Management believes the current level of the allowance for credit losses is adequate[15](index=15&type=chunk) [Deposits and Funding](index=3&type=section&id=Deposits%20and%20Funding) Total deposits grew to $1.55 billion at September 30, 2025, with core deposits increasing to $1.39 billion, representing 89.65% of total deposits and serving as a positive low-cost funding source Deposits (Period End) | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Total deposits | $1.55 billion | $1.48 billion | +$0.07 billion | | Core deposits (non-GAAP) | $1.39 billion | $1.34 billion | +$0.05 billion | | Core deposits as % of total deposits | 89.65% | 90.17% | -0.52% | | Certificates of deposit > $250,000 | $160.7 million | $145.9 million | +$14.8 million | - 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 overall cost of funds and profitability[16](index=16&type=chunk) [Shareholders' Equity](index=3&type=section&id=Shareholders%27%20Equity) Shareholders' equity increased to $149.5 million, or 8.60% of total assets, at September 30, 2025, primarily due to a decrease in the unrealized loss on available-for-sale investment securities Shareholders' Equity (Period End) | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Shareholders' equity | $149.5 million | $130.6 million | +$18.9 million | | Shareholders' equity as % of total assets | 8.60% | 7.90% | +0.70% | - The increase in shareholders' equity is primarily due to a decrease in the unrealized loss on investment securities available for sale due to rate changes[17](index=17&type=chunk) [Other Significant Events and Corporate Information](index=3&type=section&id=Other%20Significant%20Events%20and%20Corporate%20Information) This section details a significant property acquisition settlement and provides an overview of company operations and forward-looking statement disclaimers [Mooresville Branch Property Acquisition Settlement](index=3&type=section&id=Mooresville%20Branch%20Property%20Acquisition%20Settlement) A September 2025 bench ruling ordered the NCDOT to pay the Bank $5.1 million for its Mooresville branch property, with an expected additional $3.6 million gain upon formal order receipt - A September 2025 bench ruling ordered the NCDOT to pay the Bank **$5.1 million** for its Mooresville branch property, including a **$1.5 million payment received in 2023**[18](index=18&type=chunk) - The Bank expects to realize an additional **$3.6 million gain** on the involuntary disposal of this property after receiving the formal written order for the September 2025 bench ruling[18](index=18&type=chunk) - The Bank recorded **$553,000 in legal expenses** associated with this settlement as of September 30, 2025[18](index=18&type=chunk) [Company Operations and Forward-Looking Statements](index=3&type=section&id=Company%20Operations%20and%20Forward-Looking%20Statements) Peoples Bank operates 15 banking offices and loan production offices across North Carolina, with the report concluding with a standard disclaimer on forward-looking statements and associated risks - Peoples Bank operates **15 banking offices and loan production offices** in multiple North Carolina counties[19](index=19&type=chunk) - The Company's common stock is listed on the Nasdaq Global Market under the symbol "**PEBK**"[19](index=19&type=chunk) - Forward-looking statements involve risks and uncertainties, and actual results could differ materially due to factors such as market competition, interest rate changes, economic conditions, regulatory changes, and monetary/fiscal policies[19](index=19&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=4&type=section&id=Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the consolidated balance sheets, statements of income, and key financial highlights, offering a comprehensive overview of the company's financial performance and position [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) The consolidated balance sheets provide a detailed breakdown of assets, liabilities, and shareholders' equity for September 30, 2025, December 31, 2024, and September 30, 2024, showing growth in total assets and deposits Consolidated Balance Sheets (Selected Items, in thousands) | Metric | Sep 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :--------------------------------- | :----------- | :----------- | :----------- | | Total assets | $1,738,336 | $1,651,962 | $1,661,650 | | Cash and cash equivalents | $117,016 | $59,266 | $73,162 | | Total securities | $379,489 | $390,731 | $401,326 | | Net loans | $1,173,236 | $1,128,409 | $1,113,561 | | Total deposits | $1,552,890 | $1,484,731 | $1,479,977 | | Total liabilities | $1,588,869 | $1,521,399 | $1,525,368 | | Total shareholders' equity | $149,467 | $130,563 | $136,282 | [Consolidated Statements of Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) The consolidated statements of income present the financial performance for the three and nine months ended September 30, 2025, and 2024, detailing interest income, interest expense, net interest income, provision for credit losses, non-interest income, non-interest expenses, and net earnings Consolidated Statements of Income (Selected Items, Q3, in thousands) | Metric | Q3 2025 | Q3 2024 | | :--------------------------------- | :----------- | :----------- | | Total interest income | $21,405 | $20,467 | | Total interest expense | $6,286 | $6,918 | | NET INTEREST INCOME | $15,119 | $13,549 | | PROVISION FOR CREDIT LOSSES | $530 | $297 | | Total non-interest income | $7,127 | $7,095 | | Total non-interest expense | $16,924 | $15,016 | | NET EARNINGS | $3,692 | $3,958 | | Basic net earnings per share | $0.70 | $0.74 | | Diluted net earnings per share | $0.67 | $0.72 | Consolidated Statements of Income (Selected Items, YTD, in thousands) | Metric | YTD 2025 | YTD 2024 | | :--------------------------------- | :----------- | :----------- | | Total interest income | $62,095 | $60,347 | | Total interest expense | $18,435 | $20,078 | | NET INTEREST INCOME | $43,660 | $40,269 | | PROVISION FOR CREDIT LOSSES | $585 | -$80 | | Total non-interest income | $21,349 | $20,654 | | Total non-interest expense | $47,337 | $44,663 | | NET EARNINGS | $13,197 | $12,794 | | Basic net earnings per share | $2.49 | $2.41 | | Diluted net earnings per share | $2.41 | $2.33 | [Financial Highlights and Key Ratios](index=6&type=section&id=FINANCIAL%20HIGHLIGHTS) This section provides key financial metrics and ratios, including average balances, net interest margin, return on assets, return on equity, and asset quality indicators, offering a comprehensive view of the company's financial health and performance trends Selected Key Data (Q3 YoY) | Metric | Q3 2025 | Q3 2024 | | :--------------------------------- | :---------- | :---------- | | Net interest margin (tax equivalent) | 3.58% | 3.35% | | Return on average assets | 0.85% | 0.95% | | Return on average shareholders' equity | 10.28% | 12.35% | | Average shareholders' equity to total average assets | 8.29% | 7.71% | Selected Key Data (YTD YoY) | Metric | YTD 2025 | YTD 2024 | | :--------------------------------- | :---------- | :---------- | | Net interest margin (tax equivalent) | 3.55% | 3.34% | | Return on average assets | 1.05% | 1.04% | | Return on average shareholders' equity | 12.52% | 13.59% | | Average shareholders' equity to total average assets | 8.37% | 7.62% | Asset Quality Ratios (Period End) | Metric | Sep 30, 2025 | Sep 30, 2024 | Dec 31, 2024 | | :--------------------------------- | :----------- | :----------- | :----------- | | Non-performing assets to total assets | 0.29% | 0.24% | 0.29% | | Allowance for credit losses on loans to non-performing assets | 199.61% | 270.75% | 207.84% | | Allowance for credit losses on loans to total loans | 0.86% | 0.94% | 0.88% |

Core Insights - The company reported net earnings of $3.7 million or $0.70 per share for Q3 2025, a decrease from $4.0 million or $0.74 per share in Q3 2024 [1] - The diluted earnings per share also decreased to $0.67 from $0.72 year-over-year [1] - The net interest margin improved to 3.58% in Q3 2025, up from 3.35% in Q3 2024 [1]

Core Viewpoint - Zacks Investment Research has initiated coverage of Peoples Bancorp of North Carolina, Inc. (PEBK) with a "Neutral" recommendation, reflecting a mixed outlook for the company despite its progress in community banking services [1] Company Overview - Peoples Bancorp operates as a bank holding company for Peoples Bank, a state-chartered commercial bank established in 1912, providing community banking services primarily in the Catawba Valley and surrounding areas through 15 full-service banking offices and several loan production offices in North Carolina [2] Financial Performance - Peoples Bancorp has shown consistent earnings momentum in the first half of 2025, with second-quarter net income increasing by 5.6% year over year to $5.2 million, or 95 cents per share, driven by higher net interest and fee income [3] - Profitability metrics are strong, with a return on average assets of 1.23% and a return on equity of 15.08%, while net interest margin improved to 3.57% from 3.35% a year earlier, indicating effective asset-liability management [3] - Non-performing assets were only 0.28% of total assets as of June 30, 2025, reflecting strong asset quality and prudent credit provisioning [4] - Shareholders' equity rose to $144 million, representing 8.5% of total assets, showcasing healthy internal capital generation [4] Market Positioning - Peoples Bancorp's stock has outperformed its industry peers and the broader market over the past year, indicating that investors recognize its solid fundamentals and stable performance, although significant near-term growth or multiple expansion is not anticipated [6] - The company has a modest market capitalization of $149.7 million, which positions it within a promising but risky segment of the market [7]

Core Insights - The article discusses an update on Peoples Bancorp of North Carolina (NASDAQ: PEBK) after a five-month interval since the last analysis, indicating the bank has reported on two additional financial periods [1]. Company Overview - Peoples Bancorp of North Carolina is highlighted as a focus for investment, particularly in the small-cap space, emphasizing high-quality ideas that aim for capital gains and dividend income [1]. Investment Strategy - The investment group European Small Cap Ideas offers exclusive access to actionable research on appealing Europe-focused investment opportunities, with features including two model portfolios and weekly updates [1].

Earnings and Income - For the three months ended June 30, 2025, the basic earnings per share was $0.97, with net earnings of $5,160,000 and a weighted average of 5,303,370 shares outstanding[38]. - For the six months ended June 30, 2025, the basic earnings per share was $1.79, with net earnings of $9,505,000 and a weighted average of 5,300,841 shares outstanding[39]. - The Company reported a net income of $5,160,000 for the three months ended June 30, 2025, compared to $4,888,000 for the same period in 2024, an increase of about 5.5%[113]. - Year-to-date net earnings for the first half of 2025 were $9.5 million, or $1.79 per share, compared to $8.8 million, or $1.67 per share, in the same period of 2024, representing a growth of about 7.9%[125]. - Net interest income for the three months ended June 30, 2025, was $14,597,000, compared to $13,416,000 for the same period in 2024, reflecting an increase of about 8.8%[113]. - Noninterest income for the three months ended June 30, 2025, was $3,720,000, down from $4,340,000 in the same period of 2024, showing a decline of approximately 14.3%[113]. - Interest income for the six months ended June 30, 2025, totaled $40,690,000, compared to $39,880,000 for the same period in 2024, reflecting a growth of approximately 2.0%[113][114]. Investment Securities - The total fair value of investment securities available for sale as of June 30, 2025, was $371,614,000, with unrealized losses totaling $41,924,000[40]. - The unrealized losses in the investment securities portfolio relating to debt securities totaled $41.9 million as of June 30, 2025, attributed to changing interest rates[42]. - The total gross amortized cost of investment securities available for sale was $413,323,000 as of June 30, 2025[40]. - The amortized cost of investment securities available for sale was $413.323 million, with a fair value of $371.614 million as of June 30, 2025[43]. - Proceeds from sales of securities available for sale during the six months ended June 30, 2025, were $12.7 million, resulting in gross losses of $47,000[43]. Loans and Credit Quality - As of June 30, 2025, total loans amounted to $1,157.975 million, an increase from $1,138.404 million as of December 31, 2024, representing a growth of approximately 1.5%[45]. - The total net loans after allowance for credit losses was $1,148.183 million as of June 30, 2025, compared to $1,128.409 million at the end of 2024, indicating a net increase of about 1.8%[45]. - The total real estate loans reached $1,082.498 million as of June 30, 2025, up from $1,047.952 million at December 31, 2024, reflecting an increase of approximately 3.3%[45]. - Non-accrual loans totaled $4.607 million as of June 30, 2025, compared to $4.183 million at December 31, 2024, showing an increase of about 10.1%[48]. - The allowance for credit losses was $9.792 million as of June 30, 2025, slightly down from $9.995 million at the end of 2024[45]. - The total allowance for credit losses, including loan commitments, was $11,050 thousand as of June 30, 2025, compared to $9,995 thousand at the beginning of the year, reflecting a 10.6% increase[66]. - The provision for loan losses for the three months ended June 30, 2025, was a recovery of $185 thousand, indicating improved credit quality[65]. - The total charge-offs for the six months ended June 30, 2025, are to be detailed in the upcoming report[75]. Assets and Liabilities - As of June 30, 2025, total assets amounted to $1,693,845,000, an increase from $1,655,398,000 as of June 30, 2024, representing a growth of approximately 2.3%[113]. - Total liabilities, including deposits, were $1,516,160,000 as of June 30, 2025, compared to $1,487,475,000 as of December 31, 2024, indicating an increase in funding sources[113]. - The liquidity ratio for the Bank was 29.56% at June 30, 2025, up from 28.16% at December 31, 2024, exceeding the minimum required ratio of 10%[184]. - Shareholders' equity increased to $144.0 million (8.50% of total assets) at June 30, 2025, compared to $130.6 million (7.90% of total assets) at December 31, 2024[186]. Capital and Regulatory Compliance - The Company's Tier 1 capital ratio was 14.92% at June 30, 2025, compared to 14.47% at December 31, 2024, indicating strong capital adequacy[191]. - The total risk-based capital ratio was 15.78% at June 30, 2025, up from 15.34% at December 31, 2024, reflecting improved capital strength[191]. - The Company is considered "well capitalized" as of June 30, 2025, meeting all regulatory capital requirements[193]. - The annualized return on average equity for the six months ended June 30, 2025, was 14.06%, down from 14.69% for the same period in 2024[187]. Other Financial Metrics - The effective tax rate for the six months ended June 30, 2025, was 22.69%, up from 19.74% for the same period in 2024[150]. - The average yield on earning assets increased to 5.05% for the six months ended June 30, 2025, compared to 4.99% for the same period in 2024[137]. - The average rate paid on interest-bearing liabilities decreased to 2.19% in Q2 2025 from 2.46% in Q2 2024, reflecting a reduction in funding costs[131]. - The average yield on loans for Q2 2025 was 5.78%, up from 5.65% in Q2 2024, showing improved loan profitability[130].

[Executive Summary](index=1&type=section&id=1.%20Executive%20Summary) Peoples Bancorp reported strong financial performance for Q2 and YTD 2025, with increased net earnings, improved net interest margin, and growth in loans and deposits, while maintaining stable asset quality [Second Quarter 2025 Performance Highlights](index=1&type=section&id=1.1%20Second%20Quarter%202025%20Performance%20Highlights) Peoples Bancorp reported increased net earnings for Q2 2025, driven by higher net interest income and non-interest income, partially offset by increased provision for credit losses and non-interest expense. The net interest margin also improved significantly | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----------------------- | :------ | :------ | :----------- | | Net Earnings | $5.2M | $4.9M | +6.12% | | Basic EPS | $0.97 | $0.93 | +4.30% | | Diluted EPS | $0.95 | $0.89 | +6.74% | | Net Interest Margin | 3.57% | 3.35% | +0.22 pp | [Year-to-Date 2025 Performance Highlights](index=1&type=section&id=1.2%20Year-to-Date%202025%20Performance%20Highlights) For the first six months of 2025, the Company achieved higher net earnings and EPS compared to the prior year, supported by growth in total loans and deposits, and an improved net interest margin. Non-performing assets remained stable | Metric | YTD 2025 | YTD 2024 | Change (YoY) | | :----------------------- | :------- | :------- | :----------- | | Net Earnings | $9.5M | $8.8M | +7.95% | | Basic EPS | $1.79 | $1.67 | +7.19% | | Diluted EPS | $1.74 | $1.61 | +8.07% | | Cash Dividends per Share | $0.56 | $0.54 | +3.70% | | Net Interest Margin | 3.54% | 3.34% | +0.20 pp | | Metric | June 30, 2025 | Dec 31, 2024 | Change (vs. Dec 31, 2024) | | :------------------- | :------------ | :----------- | :------------------------ | | Total Loans | $1.16B | $1.14B | +1.75% | | Non-Performing Assets| $4.8M | $4.8M | 0.00% | | Total Deposits | $1.51B | $1.48B | +2.03% | | Core Deposits | $1.36B | $1.34B | +1.49% | [Consolidated Statements of Income Analysis](index=1&type=section&id=2.%20Consolidated%20Statements%20of%20Income%20Analysis) The company experienced increased net earnings driven by higher net interest and non-interest income, despite rising provision for credit losses and non-interest expenses [Net Earnings](index=1&type=section&id=2.1%20Net%20Earnings) Net earnings increased for both the second quarter and year-to-date periods in 2025, primarily due to growth in net interest income and non-interest income, despite higher provision for credit losses and non-interest expenses | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :---------------- | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Net Earnings | $5,160 | $4,888 | $9,505 | $8,836 | | Basic Net Earnings| $0.97 | $0.93 | $1.79 | $1.67 | | Diluted Net Earnings| $0.95 | $0.89 | $1.74 | $1.61 | [Net Interest Income](index=1&type=section&id=2.2%20Net%20Interest%20Income) Net interest income saw an increase in both Q2 and YTD 2025, driven by higher interest income from loans and a decrease in interest expense due to lower rates on interest-bearing liabilities, despite reduced interest income from bank balances and investment securities | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :---------------- | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Net Interest Income | $14,597 | $13,416 | $28,541 | $26,720 | | Total Interest Income | $20,720 | $20,070 | $40,690 | $39,880 | | Total Interest Expense| $6,123 | $6,654 | $12,149 | $13,160 | - Increase in interest income and fees on loans was primarily due to an increase in **total loans**[4](index=4&type=chunk)[9](index=9&type=chunk] - Decrease in interest income on balances due from banks was due to **Federal Reserve rate decreases** (Sept-Dec 2024)[4](index=4&type=chunk] - Decrease in interest expense was primarily due to a decrease in **rates paid on interest-bearing liabilities**[4](index=4&type=chunk)[9](index=9&type=chunk] [Provision for Credit Losses](index=1&type=section&id=2.3%20Provision%20for%20Credit%20Losses) The provision for credit losses shifted from a recovery in Q2 2024 to a smaller recovery in Q2 2025, and from a recovery to an expense for YTD 2025. This change is mainly attributed to a smaller reduction in reserves on construction loans in Q2 2025 and an increase in provision expense for unfunded construction loans YTD 2025 | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :------------------------ | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Provision for Credit Losses | $(213) | $(468) | $55 | $(377) | - The decrease in recovery for Q2 2025 was due to a **smaller reduction in reserves on construction loans** compared to Q2 2024[4](index=4&type=chunk][9](index=9&type=chunk] - The increase in provision for YTD 2025 was due to a reduction in construction loan reserves in YTD 2024 and an increase in **provision expense for unfunded construction loans** in YTD 2025[4](index=4&type=chunk][9](index=9&type=chunk] [Non-Interest Income](index=2&type=section&id=2.4%20Non-Interest%20Income) Non-interest income increased for both Q2 and YTD 2025, primarily driven by a significant increase in appraisal management fee income due to higher appraisal volume, partially offset by a decrease in miscellaneous non-interest income | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :------------------------ | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Total Non-Interest Income | $7,693 | $7,521 | $14,222 | $13,559 | | Appraisal Management Fee Income | $3,973 | $3,181 | $7,015 | $5,595 | | Miscellaneous Income | $1,893 | $2,521 | $3,522 | $4,324 | - Appraisal management fee income increased due to **higher appraisal volume**[6](index=6&type=chunk][10](index=10&type=chunk] - Miscellaneous non-interest income decreased primarily due to **lower income from small business investment company (SBIC) investments**[6](index=6&type=chunk][10](index=10&type=chunk] [Non-Interest Expense](index=2&type=section&id=2.5%20Non-Interest%20Expense) Non-interest expense rose in both Q2 and YTD 2025, mainly due to increased appraisal management fee expense and salaries and employee benefits, partially offset by decreases in other non-interest expenses like debit card and equipment maintenance | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :------------------------ | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Total Non-Interest Expense| $15,840 | $15,131 | $30,413 | $29,647 | | Salaries and Employee Benefits | $7,168 | $6,827 | $13,956 | $13,807 | | Appraisal Management Fee Expense | $3,156 | $2,523 | $5,575 | $4,427 | - Increases in appraisal management fee expense were due to **higher appraisal volume**[7](index=7&type=chunk][11](index=11&type=chunk] - Salaries and employee benefits increased due to **higher salary and insurance expenses**[7](index=7&type=chunk][11](index=11&type=chunk] - These were partially offset by decreases in **other non-interest expense (debit card)** and **occupancy expense (equipment maintenance)**[7](index=7&type=chunk][11](index=11&type=chunk] [Income Taxes](index=2&type=section&id=2.6%20Income%20Taxes) Income tax expense increased for both Q2 and YTD 2025, with a notable rise in the effective tax rate for the year-to-date period, primarily due to a specific interest receivable booked in the prior year related to a tax settlement | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :---------------- | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Income Tax Expense| $1,503 | $1,386 | $2,790 | $2,173 | | Effective Tax Rate| 22.56% | 22.09% | 22.69% | 19.74% | - The increase in the effective tax rate for YTD 2025 was primarily due to a **$322,000 interest receivable** booked during YTD 2024 on a deposit for taxes paid prior to a settlement with the NCDOR[12](index=12&type=chunk] [Consolidated Balance Sheets Analysis](index=2&type=section&id=3.%20Consolidated%20Balance%20Sheets%20Analysis) Total assets and liabilities grew, primarily due to increases in loans and deposits, while shareholders' equity also improved [Assets](index=2&type=section&id=3.1%20Assets) Total assets increased as of June 30, 2025, primarily driven by growth in total loans and interest-bearing deposits, while available for sale securities decreased | Metric | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------- | :-------------------------- | :------------------------- | :------------------- | | Total Assets | $1,693,845 | $1,651,962 | +$41,883 | | Available for Sale Securities | $371,614 | $388,003 | -$16,389 | | Total Loans | $1,157,975 | $1,138,404 | +$19,571 | | Cash and Cash Equivalents | $102,000 | $59,266 | +$42,734 | [Liabilities](index=3&type=section&id=3.2%20Liabilities) Total deposits increased as of June 30, 2025, with growth in both interest-bearing and noninterest-bearing demand deposits, contributing to a higher proportion of core deposits. Junior subordinated debentures remained stable | Metric | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------- | :-------------------------- | :------------------------- | :------------------- | | Total Deposits | $1,513,819 | $1,484,731 | +$29,088 | | Core Deposits | $1,363,761 | $1,338,792 | +$24,969 | | Core Deposits as % of Total Deposits | 90.09% | 90.17% | -0.08 pp | | Junior Subordinated Debentures | $15,464 | $15,464 | $0 | [Shareholders' Equity](index=3&type=section&id=3.3%20Shareholders'%20Equity) Shareholders' equity significantly increased as of June 30, 2025, improving its percentage of total assets, primarily driven by an increase in retained earnings and a reduction in accumulated other comprehensive loss | Metric | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------- | :-------------------------- | :------------------------- | :------------------- | | Total Shareholders' Equity | $144,005 | $130,563 | +$13,442 | | Shareholders' Equity as % of Total Assets | 8.50% | 7.90% | +0.60 pp | [Asset Quality and Loan Portfolio](index=3&type=section&id=4.%20Asset%20Quality%20and%20Loan%20Portfolio) Asset quality remained stable with non-performing assets largely unchanged, and the allowance for credit losses adjusted for specific loan categories [Non-Performing Assets](index=3&type=section&id=4.1%20Non-Performing%20Assets) Non-performing assets remained stable in total value as of June 30, 2025, with a slight decrease as a percentage of total assets. The composition shifted with an increase in residential mortgage loans and a decrease in other real estate owned | Metric | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------- | :-------------------------- | :------------------------- | :------------------- | | Total Non-Performing Assets | $4,822 | $4,809 | +$13 | | Non-Performing Assets to Total Assets | 0.28% | 0.29% | -0.01 pp | - Composition of non-performing assets at June 30, 2025 included **$4.2 million in residential mortgage loans**, **$442,000 in commercial mortgage loans**, and **$216,000 in other loans**[14](index=14&type=chunk] - This compares to **$3.7 million in residential mortgage loans**, **$463,000 in commercial mortgage loans**, **$257,000 in other loans**, and **$369,000 in other real estate owned** at December 31, 2024[14](index=14&type=chunk] [Allowance for Credit Losses](index=3&type=section&id=4.2%20Allowance%20for%20Credit%20Losses) The allowance for credit losses on loans slightly decreased, while the allowance for unfunded commitments increased due to higher unfunded construction loan commitments. Management believes the current allowance level is adequate | Metric | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------- | :-------------------------- | :------------------------- | :------------------- | | Allowance for Credit Losses on Loans | $9,792 | $9,995 | -$203 | | Allowance for Credit Losses on Unfunded Commitments | $1,258 | $1,101 | +$157 | | Allowance for Credit Losses on Loans to Total Loans | 0.85% | 0.88% | -0.03 pp | | Allowance for Credit Losses on Loans to Non-Performing Assets | 203.07% | 207.84% | -4.77 pp | - The decrease in allowance for credit losses on loans was primarily due to a **$90,000 decrease in allowance on construction loans** and the removal of a **$60,000 Hurricane Helene reserve**[15](index=15&type=chunk] - The increase in allowance for unfunded commitments was due to a **$161,000 increase for unfunded construction loans**[15](index=15&type=chunk] [Loan Risk Grade Analysis](index=6&type=section&id=4.3%20Loan%20Risk%20Grade%20Analysis) The loan portfolio maintained a strong credit quality profile, with the majority of loans classified as good or high quality. There was one significant relationship exceeding $1.0 million in the Watch risk grade, consistent with the prior period | Risk Grade | June 30, 2025 | Dec 31, 2024 | | :-------------------------- | :------------ | :----------- | | Risk Grade 1 (excellent quality) | 0.29% | 0.29% | | Risk Grade 2 (high quality) | 20.23% | 19.57% | | Risk Grade 3 (good quality) | 71.53% | 72.99% | | Risk Grade 4 (management attention) | 6.97% | 5.95% | | Risk Grade 5 (watch) | 0.46% | 0.66% | | Risk Grade 6 (substandard) | 0.52% | 0.54% | | Risk Grade 7 (doubtful) | 0.00% | 0.00% | | Risk Grade 8 (loss) | 0.00% | 0.00% | - At June 30, 2025, there was **one relationship exceeding $1.0 million in the Watch risk grade**, totaling **$1.4 million**, consistent with **$1.5 million** at December 31, 2024[24](index=24&type=chunk] - No relationships exceeded **$1.0 million** in the Substandard risk grade at either period[24](index=24&type=chunk] [Financial Highlights and Key Ratios](index=5&type=section&id=5.%20Financial%20Highlights%20and%20Key%20Ratios) Key financial ratios demonstrated improved profitability and balance sheet growth for both the quarter and year-to-date periods [Selected Average Balances](index=5&type=section&id=5.1%20Selected%20Average%20Balances) Average balances for loans, earning assets, total assets, deposits, and shareholders' equity all increased for both the second quarter and year-to-date periods in 2025 compared to the prior year, indicating overall growth in the balance sheet | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :-------------------------- | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Average Loans | $1,156,140 | $1,108,684 | $1,149,274 | $1,100,671 | | Average Earning Assets | $1,639,475 | $1,610,811 | $1,625,624 | $1,608,396 | | Average Assets | $1,680,854 | $1,650,008 | $1,666,177 | $1,648,905 | | Average Deposits | $1,513,519 | $1,461,596 | $1,502,234 | $1,444,950 | | Average Shareholders' Equity| $137,223 | $119,443 | $136,373 | $120,927 | [Key Performance Ratios](index=6&type=section&id=5.2%20Key%20Performance%20Ratios) Key performance ratios showed improvement in profitability, with net interest margin, return on average assets, and return on average shareholders' equity all increasing for both Q2 and YTD 2025 compared to the prior year | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Net Interest Margin (tax equivalent) | 3.57% | 3.35% | 3.54% | 3.34% | | Return on Average Assets | 1.23% | 1.19% | 1.15% | 1.08% | | Return on Average Shareholders' Equity | 15.08% | 16.46% | 14.06% | 14.69% | | Average Shareholders' Equity to Total Average Assets | 8.16% | 7.24% | 8.18% | 7.33% | [Company Operations and Forward-Looking Statements](index=3&type=section&id=6.%20Company%20Operations%20and%20Forward-Looking%20Statements) Peoples Bank maintains a strong regional presence with multiple banking offices and provides standard forward-looking statement disclaimers regarding potential risks [Company Operations](index=3&type=section&id=6.1%20Company%20Operations) Peoples Bank operates 16 banking offices across six counties in North Carolina and maintains loan production offices in four additional counties, demonstrating its regional presence - Peoples Bank operates **16 banking offices** in Catawba, Alexander, Lincoln, Mecklenburg, Iredell, and Wake Counties in North Carolina[18](index=18&type=chunk] - The Bank also operates **loan production offices** in Lincoln, Mecklenburg, Rowan, and Forsyth Counties[18](index=18&type=chunk] [Forward-Looking Statements](index=3&type=section&id=6.2%20Forward-Looking%20Statements) The report includes a standard disclaimer regarding forward-looking statements, highlighting various risks and uncertainties that could cause actual results to differ materially from projections, including competition, interest rate changes, economic conditions, and regulatory shifts - Forward-looking statements are subject to risks and uncertainties, including **competition**, **changes in the interest rate environment**, **general economic conditions**, **legislative or regulatory changes** (including accounting standards), **significant changes in the legal and regulatory environment and tax laws**, and the **impact of monetary and fiscal policies**[18](index=18&type=chunk]

Financial Performance - The Company reported a net earnings of $4,345 thousand for the three months ended March 31, 2025, resulting in a basic earnings per share of $0.82, compared to $3,948 thousand and $0.74 for the same period in 2024[37][38]. - Net income for the three months ended March 31, 2025, was $4.3 million, or $0.82 per share, compared to $3.9 million, or $0.74 per share, for the same period in 2024, reflecting an increase of approximately 8.5%[129]. - Net interest income increased to $13.9 million for the three months ended March 31, 2025, from $13.3 million in the prior year, driven by a $160,000 increase in interest income and a $480,000 decrease in interest expense[132]. - Non-interest income rose to $6.5 million for the three months ended March 31, 2025, compared to $6.0 million in the same period of 2024, driven by a $628,000 increase in appraisal management fee income[142]. - Non-interest expense was $14.6 million for the three months ended March 31, 2025, slightly up from $14.5 million in the same period of 2024, with a notable increase in appraisal management fee expense[143]. Investment Securities - The total unrealized losses in the investment securities portfolio relating to debt securities amounted to $43.8 million as of March 31, 2025, down from $51.1 million at December 31, 2024, indicating a temporary impact due to changing interest rates[42]. - The Company’s total investment securities available for sale decreased from $438.8 million at December 31, 2024, to $374.4 million at March 31, 2025[39]. - The amortized cost of investment securities available for sale at March 31, 2025, was $417.9 million, with a fair value of $374.4 million, reflecting a decrease in value[43]. - The total fair value of investment securities available for sale was $374.350 million as of March 31, 2025, down from $388.003 million on December 31, 2024, indicating a decrease of approximately 3.5%[116]. Loans and Credit Quality - The Company’s loans classification data is pending further details, with a focus on real estate loans as of March 31, 2025[46]. - The Company did not identify any credit-related losses in its analysis as of March 31, 2025, indicating a stable credit environment[42]. - Total real estate loans increased to $1,063,210 thousand as of March 31, 2025, up from $1,047,952 thousand at December 31, 2024, representing a growth of 1.5%[48]. - The allowance for credit losses was $10,047 thousand as of March 31, 2025, compared to $9,995 thousand at December 31, 2024, indicating a slight increase in risk assessment[48]. - Non-accrual loans totaled $4,686 thousand as of March 31, 2025, up from $4,440 thousand at December 31, 2024, reflecting a rise of 5.5%[54]. - The total allowance for credit losses for real estate loans was $27 thousand as of March 31, 2025, compared to no allowance at December 31, 2024, reflecting a new risk assessment[58]. - The total loans not secured by real estate reached $88,870 thousand, contributing to an overall total of $1,152,080 thousand in loans[78]. - The provision for credit losses increased to $268,000 for the three months ended March 31, 2025, compared to $91,000 for the same period in 2024, reflecting a rise due to increased unfunded commitments[132]. Deposits and Liquidity - Total deposits amounted to $1.518 billion as of March 31, 2025, compared to $1.485 billion on December 31, 2024, reflecting an increase of about 2.2%[116]. - Estimated uninsured deposits decreased to $354.7 million, or 23.37% of total deposits, down from $396.5 million, or 26.71% at December 31, 2024[166]. - The liquidity ratio improved to 29.70% at March 31, 2025, compared to 28.16% at December 31, 2024, exceeding the minimum required ratio of 10%[178]. Capital Adequacy - Shareholders' equity increased to $138.5 million, or 8.18% of total assets, from $130.6 million, or 7.90% at December 31, 2024[179]. - The Company's Tier 1 capital ratio was 14.58% at March 31, 2025, compared to 14.47% at December 31, 2024, indicating strong capital adequacy[185]. - Total risk-based capital ratio stood at 15.46% at March 31, 2025, up from 15.34% at December 31, 2024, reflecting a solid capital position[185]. - The Bank is classified as "well capitalized" based on regulatory guidelines as of March 31, 2025[187]. Accounting and Reporting - The Company’s accounting policies have not changed significantly since December 31, 2024, ensuring consistency in financial reporting[29]. - The adoption of new accounting standards is not expected to have a material impact on the Company’s financial position or results of operations[30][31]. - No changes in internal control over financial reporting occurred that materially affected the Bank's financial reporting during the reporting period[188]. Miscellaneous - The Company has two reportable segments: Banking Operations and CBRES, with the primary revenue source for Banking Operations being net interest income[117]. - The Company is not involved in any material pending legal proceedings, only routine proceedings in the ordinary course of business[189]. - A new stock repurchase program was authorized in March 2025, allowing up to $3.0 million for repurchasing common stock, with no shares repurchased as of March 31, 2025[182].

Financial Performance - Net earnings for Q1 2025 were $4.3 million, or $0.82 per share, compared to $3.9 million, or $0.74 per share, in Q1 2024, representing a 10.3% increase in earnings per share [3]. - Net earnings for the first quarter of 2025 were $4,345 thousand, reflecting an increase of 10.0% from $3,948 thousand in Q1 2024 [17]. - The return on average assets improved to 1.07% for the three months ended March 31, 2025, compared to 0.96% in Q1 2024 [18]. - Cash dividends increased to $0.36 per share in Q1 2025, compared to $0.35 per share in the prior year period [6]. - The effective tax rate for Q1 2025 was 22.85%, up from 16.62% in Q1 2024, primarily due to prior tax adjustments [8]. Income and Revenue - Net interest income increased to $13.9 million in Q1 2025 from $13.3 million in Q1 2024, driven by an increase in interest income on loans [4]. - Net interest income for the three months ended March 31, 2025, was $13,944 thousand, up 4.8% from $13,304 thousand in the same period of 2024 [17]. - Non-interest income rose to $6.5 million in Q1 2025, up from $6.0 million in Q1 2024, primarily due to a $628,000 increase in appraisal management fee income [5]. - Total non-interest income rose to $6,529 thousand, an increase of 8.1% from $6,038 thousand in Q1 2024 [17]. Assets and Loans - Total loans reached $1.15 billion as of March 31, 2025, compared to $1.14 billion at December 31, 2024, indicating a growth in lending activity [6]. - Net loans reached $1,142,033 thousand, a rise of 1.2% from $1,128,409 thousand at the end of 2024 [16]. - Total assets increased to $1,692,985 thousand as of March 31, 2025, up from $1,651,962 thousand at December 31, 2024, representing a growth of 2.0% [16]. Deposits and Equity - Total deposits increased to $1.52 billion as of March 31, 2025, up from $1.48 billion at December 31, 2024, reflecting a strong deposit base [12]. - Total deposits grew to $1,517,569 thousand, an increase of 2.2% compared to $1,484,731 thousand at December 31, 2024 [16]. - Shareholders' equity rose to $138.5 million, or 8.18% of total assets, as of March 31, 2025, compared to $130.6 million, or 7.90% of total assets, at December 31, 2024 [13]. Credit Quality - Non-performing assets were $5.1 million, or 0.30% of total assets, as of March 31, 2025, compared to $4.8 million, or 0.29% of total assets, at December 31, 2024 [10]. - The allowance for credit losses on loans was $10.0 million, or 0.87% of total loans, as of March 31, 2025, consistent with the previous quarter [11]. - The provision for credit losses was $268 thousand for the three months ended March 31, 2025, compared to $91 thousand in the same period of 2024 [18]. - The allowance for credit losses on loans decreased to $10,047 thousand as of March 31, 2025, down from $10,847 thousand a year earlier [18]. Margins - The net interest margin (tax equivalent) increased to 3.51% for the three months ended March 31, 2025, up from 3.33% in the same period of 2024 [18].