Peoples Bancorp of North Carolina, Inc.

What they do

The Company has no operations of its own beyond owning Peoples Bank and PEBK Capital Trust II, so its income is principally dividends from the Bank. The Bank gathers deposits from individuals and small-to-medium-sized businesses and invests them in commercial, real estate mortgage, real estate construction and consumer loans. It operates 15 banking offices across Lincolnton, Newton, Denver, Catawba, Conover, Maiden, Claremont, Hiddenite, Hickory, Charlotte, Huntersville and Mooresville, plus loan production offices in Charlotte, Denver, Salisbury and Winston-Salem. Subsidiaries provide investment services through Raymond James, real estate appraisal and brokerage, an appraisal clearing-house for other community banks, and real estate owned asset management.

Revenue drivers

• Net interest income — The largest earnings source, the spread between interest earned on loans and securities and interest paid on deposits and borrowings; it was $16.0 million in Q2 2026 versus $14.6 million a year earlier.
• Loan portfolio — Net loans were $1.20 billion at December 31, 2025 and grew to $1.28 billion at June 30, 2026; interest and fees on loans rose $1.5 million year over year in Q2 2026 and drove the interest income increase.
• Non-interest income — Fees from loans and deposits, mortgage banking income, annuities and mutual fund commissions, and appraisal management; it was $7.1 million in Q2 2026, down from $7.7 million a year earlier.
• Deposit funding base — Deposits of $1.57 billion at June 30, 2026 (91.63% core deposits) fund the loan book; the decline in rates paid on interest-bearing liabilities and an $18.8 million drop in time deposits reduced interest expense by $565,000 year over year in Q2 2026.

Recent performance

Second quarter 2026 net earnings were $5.2 million, or $0.98 per share and $0.96 per diluted share, essentially flat with $5.2 million, or $0.97 and $0.95 per diluted share, a year earlier. Net interest income rose to $16.0 million from $14.6 million, while the provision for credit losses swung to $293,000 from a $213,000 recovery. Non-interest income fell to $7.1 million from $7.7 million, largely on a $929,000 decrease in appraisal management income. Net interest margin improved to 3.80% from 3.57% in the prior-year quarter, and total loans grew to $1.28 billion from $1.20 billion at December 31, 2025. For the first half of 2026, net earnings were $9.6 million and dividends were $0.59 per share, versus $9.5 million and $0.56 per share a year earlier.

Strategy

Management describes the emphasis as operating as a well-capitalized, profitable and independent community bank focused on its Catawba Valley and surrounding North Carolina markets. The Bank maintains high balance sheet liquidity, manages interest rate exposures and actively monitors asset quality to limit the effect of unfavorable economic trends. Loan growth is being pursued through the existing office and loan production office footprint, with total loans up $36.3 million during the second quarter of 2026. Core deposit growth is a stated focus, with core deposits rising to $1.44 billion, or 91.63% of total deposits, from $1.35 billion at December 31, 2025.

Risks

• Geographic concentration — Lending and deposits are concentrated in the Catawba Valley region and surrounding North Carolina communities, so weakness in those local economies, real estate values or employment could hurt results.
• Credit losses with loan growth — The provision for credit losses increased to $293,000 in Q2 2026 from a $213,000 recovery a year earlier, reflecting $36.3 million of quarterly loan growth and higher net charge-offs.
• Nonperforming assets rising — Non-performing assets were $5.2 million, or 0.29% of total assets, at June 30, 2026, up from $4.2 million, or 0.25%, at December 31, 2025.
• Interest rate and inflation sensitivity — Falling short-term rates reduced interest income on balances due from banks and investment securities, and the Company notes inflation can impair borrowers' ability to repay loans.

Outlook

Management states that economic conditions in its market area continue to be relatively stable and that businesses there continue to grow and invest. It expects continued moderate economic growth in its market area, noting that national and international market uncertainty has been less pronounced locally. No specific earnings, margin or balance sheet guidance was provided in the excerpts.