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Peoples Bancorp Stock Slips Post Q3 Earnings Despite NIM Expansion

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Shares of Peoples Bancorp of North Carolina, Inc. (PEBK - Free Report) have lost 1.9% since the company reported its earnings for the quarter ended Sept. 30, 2026. This compares to the S&P 500 Index’s 1.1% gain over the same time frame. Over the past month, the stock has gained 1.9% compared with the S&P 500’s 0.5% rise.

Peoples Bancorp’s Earnings Snapshot

Peoples Bancorp reported net earnings of $5.7 million for the third quarter of 2026, up 55.1% from $3.7 million in the year-ago quarter. Earnings per share increased 56.7% to $1.05 from 67 cents a year earlier.

Net interest income rose 10.4% to $16.7 million from $15.1 million, supported by higher loan-related income and lower funding costs. However, non-interest income declined 6.1% to $6.7 million from $7.1 million, primarily due to reduced appraisal management activity.

PEBK did not report separate operating segment results.

PEBK's Net Interest Income and Margin

Peoples Bancorp's net interest margin (NIM) improved to 3.85% in the third quarter from 3.58% in the prior-year period, reflecting favorable developments in its core lending and funding operations.

Total interest income increased 4.4% to $22.3 million from $21.4 million, primarily driven by a $1.9 million increase in interest income and fees on loans. This improvement was partially offset by lower income from balances due from banks and investment securities.

Interest expense decreased 10.1% to $5.7 million from $6.3 million, benefiting from lower rates paid on interest-bearing liabilities following Federal Reserve rate reductions between September and December 2025.

The combination of higher loan income and reduced funding expenses supported profitability despite weaker non-interest revenues.

Peoples Bancorp’s Operating Expenses

Non-interest expenses decreased 6.9% to $15.8 million from $16.9 million in the year-ago quarter, reflecting lower professional fees, debit card expenses and appraisal management costs.

Professional fees declined 56.7% primarily due to reduced legal expenses. Appraisal management expenses fell 19.1% as appraisal volumes decreased, while debit card expenses declined 38.6%.

These savings were partially offset by higher occupancy and miscellaneous expenses, including costs associated with deferred compensation arrangements.

The provision for credit losses declined to $0.3 million from $0.5 million, reflecting reductions in certain commercial construction and non-owner-occupied commercial real estate loan balances, alongside lower net charge-offs.

PEBK's Loan Portfolio and Deposits

Total loans reached $1.30 billion as of Sept. 30, 2026, compared with $1.20 billion as of Dec. 31, 2025.

Total deposits increased to $1.57 billion from $1.51 billion over the same period. Core deposits, a non-GAAP measure, reached $1.44 billion, representing 91.90% of total deposits, compared with $1.35 billion, or 89.44%, as of Dec. 31, 2025.

Management emphasized the importance of core deposits as a relatively inexpensive funding source that supports PEBK's profitability.

Total assets were $1.76 billion as of Sept. 30, 2026, compared with $1.70 billion as of Dec. 31, 2025.

Peoples Bancorp’s Asset Quality

Non-performing assets totaled $4.3 million as of Sept. 30, 2026, compared with $4.2 million as of Dec. 31, 2025. Their proportion of total assets remained unchanged at 0.25%.

The allowance for credit losses on loans increased to $10.7 million from $10.1 million, although the allowance-to-total-loans ratio declined to 0.82% from 0.84% over the same period.

Management considers the existing allowance adequate but acknowledged that changing economic conditions and regulatory requirements could necessitate future adjustments.

PEBK's Other Developments

Peoples Bancorp reported cash dividends of 21 cents per share for the third quarter compared with 20 cents in the prior-year period.

Shareholders' equity was $157.7 million as of Sept. 30, 2026, compared with $157.1 million as of Dec. 31, 2025. However, the equity-to-assets ratio declined to 8.95% from 9.23%, primarily reflecting increased unrealized losses on available-for-sale investment securities.

PEBK did not disclose any acquisitions, divestitures or major restructuring activities during the quarter.

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