Executive Summary

Q3 2025 EPS of $0.67 diluted declined vs. Q2 2025 ($0.95) and vs. prior year ($0.72) as higher provision for credit losses and elevated non-interest expense offset revenue growth .
Net interest margin expanded to 3.58% (TE), up vs. Q2 2025 (3.57%) and up YoY (3.35%), supported by lower deposit costs amid Fed rate decreases .
“Revenue” as defined by S&P Global (net interest income after provision + non-interest income) was $21.72m*, down sequentially from $22.50m* and up YoY from $20.35m*; no sell-side consensus was available to assess a beat/miss*.
A September 2025 bench ruling in the NCDOT eminent domain case is expected to yield an additional ~$3.6m gain upon receipt of a formal order, a potential near-term catalyst for book value/capital, though Q3 incurred ~$0.6m legal expense tied to the matter .

What Went Well and What Went Wrong

What Went Well
- Net interest margin improved to 3.58% (TE); management cited lower rates paid on interest-bearing liabilities following Fed rate decreases as a tailwind .
- Net interest income rose YoY to $15.1m on loan growth and higher interest on balances due from banks; growth in loan interest and fees was the primary driver .
- Appraisal management fee income increased YoY (+$0.53m) on higher appraisal volume, supporting non-interest income stability .
What Went Wrong
- Provision for credit losses increased to $0.53m (vs. $0.30m YoY), driven by higher reserves on construction loans (vs. prior-year reduction), pressuring earnings .
- Non-interest expense rose to $16.9m (vs. $15.0m YoY) due to higher legal fees, debit card expense, salaries/benefits, and appraisal-related expense, weighing on profitability .
- Miscellaneous non-interest income declined YoY (SBIC investment income lower), partially offsetting strength in appraisal-related fees .

Financial Results

Headline metrics

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue (S&P definition, $m)*	20.35*	22.50*	21.72*
Net Income ($m)	3.96	5.16	3.69
Diluted EPS ($)	0.72	0.95	0.67
NIM (Tax-Equivalent, %)	3.35%	3.57%	3.58%
ROA (%)	1.05%	1.23%	0.85%
ROE (%)	12.52%	15.08%	10.28%

Income statement detail (dollars in millions except per share)

Line Item	Q3 2024	Q2 2025	Q3 2025
Net Interest Income	13.55	14.60	15.12
Provision for Credit Losses	0.30	(0.21)	0.53
Net Interest Income After Provision	13.25	14.81	14.59
Non-Interest Income	7.10	7.69	7.13
Non-Interest Expense	15.02	15.84	16.92
Pre-Tax Income	5.33	6.66	4.79
Income Taxes	1.37	1.50	1.10
Net Income	3.96	5.16	3.69
Diluted EPS ($)	0.72	0.95	0.67

Non-interest income breakdown (dollars in millions)

Category	Q3 2024	Q2 2025	Q3 2025
Service Charges	1.52	1.37	1.40
Other Service Charges & Fees	0.16	0.16	0.18
Mortgage Banking	0.14	0.04	0.15
Insurance & Brokerage	0.25	0.26	0.25
Appraisal Mgmt Fee Income	3.07	3.97	3.60
Miscellaneous	1.95	1.89	1.54
Total Non-Interest Income	7.10	7.69	7.13

Balance sheet and credit (period-end; dollars in millions)

Metric	Sep 30, 2024	Jun 30, 2025	Sep 30, 2025
Total Assets	1,661.65	1,693.85	1,738.34
Total Loans	1,124.18	1,157.98	1,183.44
Total Deposits	1,479.98	1,513.82	1,552.89
Shareholders’ Equity	136.28	144.01	149.47
Non-Performing Assets (NPAs)	4.81	4.82	5.11
NPAs / Total Assets (%)	0.29%	0.28%	0.29%
Allowance for Credit Losses (Loans)	10.62	9.79	10.21
ACL / Loans (%)	0.94%	0.85%	0.86%

Notes on “Revenue”: S&P Global’s revenue for banks typically equals net interest income after provision for credit losses plus non-interest income (matches 14.59 + 7.13 = 21.72 for Q3 2025) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
—	—	—	—	The company did not provide formal financial guidance in the Q3 2025 earnings press release .

Dividends reported for the quarter were $0.20 per share (historical, not forward guidance) .

Earnings Call Themes & Trends

(We did not locate an earnings call transcript for Q3 2025; themes reflect company press releases.)

Topic	Previous Mentions (Q1 2025, Q2 2025)	Current Period (Q3 2025)	Trend
Net interest margin & rates	NIM 3.51% in Q1; tailwind from lower rates paid as Fed decreased rates; NIM 3.57% in Q2 .	NIM 3.58%; interest expense fell as rates paid declined with Fed cuts .	Improving/stable.
Credit provisioning	Q1 provision $0.27m on higher construction unfunded commitments ; Q2 recovery of $(0.21)m .	Provision rose to $0.53m on higher construction reserves .	Mixed; uptick in Q3.
Non-interest income (appraisal)	Appraisal fee income growth: +$0.63m YoY in Q1; +$0.79m YoY in Q2 .	Appraisal fee income +$0.53m YoY; offset by lower SBIC-related income .	Solid but moderating; mix shift.
Expenses	Q1 flat YoY with higher appraisal expense, lower insurance/fraud/occupancy .	Q2 higher on appraisal and salaries; some offsets (debit card, occupancy) .	Q3 up on legal fees, debit card, salaries, appraisal expense .
Asset quality	NPAs ~0.30% in Q1; 0.28% in Q2 .	NPAs 0.29%; ACL/loans ~0.86% .	Stable/benign.
Legal/regulatory	—	NCDOT bench ruling implies ~$3.6m additional gain; ~$0.55m legal expense recorded .	One-time positive pending.
Deposits/mix	Core deposits ~90% of total in Q1–Q2 .	Core deposits 89.65% of total .	Stable, slight mix shift.

Management Commentary

“The increase in net interest income is due to a $938,000 increase in interest income and a $632,000 decrease in interest expense… The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities resulting from rate decreases implemented by the Federal Reserve.”
“The increase in the provision for credit losses is primarily attributable to an increase in reserves on construction loans during the three months ended September 30, 2025, as compared to a reduction in reserves on construction loans during the three months ended September 30, 2024.”
“A September 2025 bench ruling… stated that the NCDOT pay the Bank total of $5.1 million… The Bank expects to realize an additional $3.6 million gain on the involuntarily disposal of this property after receiving the formal written order.”

Q&A Highlights

No earnings call transcript was available in our document set for Q3 2025; no Q&A items to summarize from a call. Analysis is based on the company’s 8-K/press release materials .

Estimates Context

Sell-side consensus for EPS and revenue for Q3 2025 was not available from S&P Global for PEBK (small-cap community bank with limited coverage)*.
S&P Global “Revenue” actuals indicate $21.72m* for Q3 2025 (vs. $22.50m* in Q2 2025 and $20.35m* in Q3 2024). With no published consensus, we cannot classify a beat/miss*.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Profitability normalized from a very strong Q2 as Q3 EPS fell to $0.67 on higher provision expense and operating costs, despite continuing NIM expansion .
Core banking trends remain constructive: loan growth (+$25m QoQ, +$59m YoY), deposit growth (+$39m QoQ, +$73m YoY), stable NPA ratio (~0.29%) and steady ACL coverage (0.86%) .
Non-interest income is resilient, led by appraisal management fees; however, SBIC-related income remains a headwind, and expense pressure (legal, debit card, compensation) bears monitoring .
The NCDOT ruling could add ~$3.6m in a subsequent period upon receipt of the formal order, supporting capital/book value and potentially the stock, but the timing is uncertain and Q3 legal costs were recognized .
Funding mix is favorable (core deposits ~90% of total) and should continue to support NIM if deposit costs remain contained; further Fed policy moves may influence funding costs and securities AOCI dynamics .
With no active consensus coverage, near-term stock moves may hinge on internal catalysts (legal gain recognition, expense normalization) and credit performance in construction lending .

PEOPLES BANCORP OF NORTH CAROLINA INC (PEBK)·Q3 2025 Earnings Summary