8-K: Peoples Bancorp Reports Strong Q4 and Full Year 2025 Earnings

Peoples Bancorp of North Carolina, Inc. announced significant increases in net earnings and diluted EPS for both the fourth quarter and full year 2025, driven by higher net interest income and a one-time gain.

Summary

• Net earnings for Q4 2025 were $6.6 million ($1.21 diluted EPS), a substantial increase from $3.6 million ($0.65 diluted EPS) in Q4 2024.
• Full year 2025 net earnings reached $19.8 million ($3.62 diluted EPS), up from $16.4 million ($2.98 diluted EPS) in 2024.
• A $3.0 million net gain was recognized in Q4 2025 from the North Carolina Department of Transportation (NCDOT) eminent domain acquisition of the former Mooresville branch office.
• Net interest margin improved to 3.62% for Q4 2025 (from 3.39% in Q4 2024) and 3.57% for the full year 2025 (from 3.36% in 2024).
• Total loans grew to $1.20 billion at December 31, 2025, compared to $1.14 billion at December 31, 2024.
• Non-performing assets decreased to $4.2 million (0.25% of total assets) at December 31, 2025, from $4.8 million (0.29% of total assets) at December 31, 2024.
• Shareholders' equity increased to $157.1 million (9.23% of total assets) at December 31, 2025, from $130.6 million (7.90% of total assets) at December 31, 2024.
• Cash dividends per share increased to $0.96 for the full year 2025, up from $0.92 in the prior year.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance with significant increases in net earnings, diluted EPS, and net interest margin. Asset quality improved, and shareholders' equity grew. While there was an increase in the provision for credit losses, it was largely attributable to loan growth and a prior year recovery, not a deterioration in credit quality. The one-time gain from the NCDOT acquisition also boosted non-interest income. Overall, the results are very positive.

Positives

• Fourth quarter net earnings increased 83.3% to $6.6 million, with diluted EPS rising 86.2% to $1.21.
• Full year net earnings increased 20.7% to $19.8 million, with diluted EPS rising 21.5% to $3.62.
• Net interest margin expanded significantly in both the fourth quarter (3.62% vs 3.39%) and full year (3.57% vs 3.36%).
• Total loans increased by $60 million to $1.20 billion, indicating healthy loan growth.
• Non-performing assets decreased by $0.6 million, and as a percentage of total assets, improved from 0.29% to 0.25%.
• Shareholders' equity increased by $26.5 million, improving the ratio of shareholders' equity to total assets from 7.90% to 9.23%.
• Cash dividends per share increased from $0.92 to $0.96.
• Net interest income increased by $1.6 million in Q4 and $4.9 million for the full year.
• Non-interest income increased by $2.5 million in Q4 and $3.3 million for the full year, significantly boosted by the NCDOT gain and appraisal management fee income.
• Non-interest expense decreased by $0.6 million in Q4, primarily due to lower salaries, employee benefits, and legal expenses.
• Other real estate owned decreased to $0 at December 31, 2025, from $369,000 at December 31, 2024.
• Allowance for credit losses on loans to non-performing assets improved to 242.48% from 207.84%, indicating stronger coverage.

Negatives

• Provision for credit losses was an expense of $353,000 in Q4 2025, compared to a recovery of $205,000 in Q4 2024, primarily due to a decrease in the Hurricane Helene reserve in the prior year.
• Full year provision for credit losses was an expense of $938,000 in 2025, compared to a recovery of $285,000 in 2024, mainly due to increased total loans and unfunded loan commitments.
• Full year non-interest expense increased by $2.0 million, primarily due to a $1.6 million increase in appraisal management fee expense and a $262,000 increase in occupancy expense.
• Effective tax rate increased to 24.31% in Q4 2025 (from 22.44% in Q4 2024) due to a $109,000 deferred tax asset write-off.
• Effective tax rate for the full year increased to 23.29% in 2025 (from 21.86% in 2024) due to an interest receivable booked in 2024 related to a tax settlement.
• Interest income on investment securities decreased by $382,000 in Q4 and $1.5 million for the full year due to reduced balances and lower yields on variable rate securities.
• Core deposits as a percentage of total deposits slightly decreased from 90.17% to 89.44%.

Risks

• Changes in the interest rate environment could materially affect financial results.
• Management's business strategy may not achieve anticipated results.
• National, regional, and local market conditions could be less favorable than expected, potentially deteriorating credit quality and impairing loan collectibility.
• Legislative or regulatory changes, including changes in accounting standards, could impact operations and financial performance.
• Significant changes in the federal and state legal and regulatory environment and tax laws could affect the company.
• The impact of changes in monetary and fiscal policies, laws, rules, and regulations could negatively affect the business.
• Competition in the markets served by the Bank could intensify, affecting profitability.

Future Outlook

The filing contains standard forward-looking statements cautioning that actual results could differ materially due to factors such as changes in interest rates, economic conditions, regulatory changes, and competition. The company undertakes no obligation to publicly revise these statements.

Management Comments

• William D. Cable, Sr., President and Chief Executive Officer, attributed the increase in fourth quarter net earnings to increases in net interest income and non-interest income and a decrease in non-interest expense, which were partially offset by an increase in the provision for credit losses, compared to the prior year period.

Industry Context

Peoples Bancorp's strong performance, particularly in net interest margin expansion and loan growth, suggests effective management of its balance sheet in a potentially fluctuating interest rate environment. The decrease in non-performing assets and improved asset quality ratios indicate a healthy credit portfolio, which is a positive sign in the regional banking sector. The increase in appraisal management fee income also points to a robust real estate market or increased activity in related services within its operating regions in North Carolina.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or global benchmarks to assess the results against industry standards. However, the reported net interest margin of 3.62% for Q4 2025 and 3.57% for the full year 2025 is generally competitive within the community and regional banking sector, which has seen varying NIM performance depending on asset sensitivity and funding costs.
• The non-performing assets ratio of 0.25% of total assets at December 31, 2025, is exceptionally low and compares favorably to many industry peers, indicating strong asset quality and effective risk management.
• The return on average assets of 1.52% for Q4 2025 and 1.17% for the full year 2025, along with a return on average shareholders' equity of 17.25% for Q4 2025 and 13.33% for the full year 2025, are robust metrics that generally outperform the average for community banks, suggesting efficient operations and strong profitability.

Legal Proceedings

• The Bank recognized a $3.0 million net gain on the NCDOT eminent domain acquisition of its former Mooresville branch office, resolving a prior litigation where $553,000 in legal expenses were incurred and subsequently reclassified.

Stakeholder Impact

• Shareholders: Benefited from increased net earnings, diluted EPS, and higher cash dividends per share, along with an increase in shareholders' equity.
• Customers: Continued access to banking services through 15 offices and loan production offices in North Carolina.
• Employees: Salaries and employee benefits expense decreased in Q4, but overall full-year expenses increased slightly, indicating stable to growing employment costs.
• Creditors: Improved asset quality and increased shareholders' equity suggest a stronger financial position, potentially reducing credit risk.

Next Steps

• Continue to monitor interest rate environment and its impact on net interest income and expense.
• Focus on managing credit quality given the increase in total loans and unfunded commitments.
• Evaluate the impact of legislative and regulatory changes on operations and financial performance.

Key Dates

Recommendation

The company delivered exceptionally strong financial results for both the fourth quarter and full year 2025, demonstrating robust growth in net earnings and diluted EPS. Key metrics such as net interest margin, loan growth, and asset quality all showed significant improvement. The substantial increase in shareholders' equity and the low non-performing asset ratio underscore a healthy balance sheet and effective risk management. While the provision for credit losses increased, it was primarily driven by loan growth, which is a positive indicator of business expansion. The increase in cash dividends also signals confidence from management. These strong fundamentals, coupled with a favorable industry context for well-managed regional banks, make Peoples Bancorp an attractive investment.

Keywords

Community Banking, Financial Results, Earnings Report, Net Interest Margin, Loan Growth, Asset Quality, Shareholders Equity, North Carolina, Regional Bank, PEBK