Assessing the Dividend Strategy and Financial Health of Two Peoples Bancorp Entities (PEBK and PEBO)

The dividend strategies and financial health of two distinct entities under the Two Peoples Bancorp umbrella-PEBK (Peoples Bancorp of North Carolina) and PEBO (Peoples Bancorp Inc. of Ohio)-offer a compelling case study in the trade-offs between yield attractiveness and sustainability. As of November 2025, both institutions operate in the regional banking sector but exhibit divergent financial profiles, particularly in their dividend policies, earnings resilience, and leverage. This analysis evaluates their respective strengths and risks, drawing on recent disclosures and market data.

Dividend Sustainability: PEBK's Prudence vs. PEBO's Generosity

PEBK has maintained a consistent quarterly dividend of $0.20 per share in 2025, with no indication of changes in its payout policy. While its dividend payout ratio is not explicitly disclosed, calculations based on year-to-date (YTD) earnings suggest a conservative approach. For instance, PEBK's YTD net earnings through September 2025 stood at $13.2 million, or $2.49 per share, implying an annualized earnings per share (EPS) of approximately $3.32. At $0.80 in annual dividends ($0.20 per quarter), the implied payout ratio is roughly 24.1% according to financial analysis. This low ratio underscores a strong buffer for retaining earnings to reinvest in growth or absorb potential shocks.

In contrast, PEBO's Q3 2025 dividend payout ratio was 49.7%, reflecting a more aggressive distribution of earnings to shareholders according to market reports. While this ratio remains below the 50% threshold often cited as a sustainability benchmark, it leaves less room for reinvestment compared to PEBK. PEBO's Q3 EPS of $0.83, coupled with its 49.7% payout ratio, suggests a balance between rewarding shareholders and maintaining operational flexibility. However, this approach may be more vulnerable to earnings volatility, as evidenced by PEBO's $2.7 million loss from investment securities sales in Q3 2025, which reduced EPS by $0.06.

Financial Health: Leverage and Earnings Resilience

PEBK's financial leverage appears more aggressive than PEBO's. As of September 2025, PEBK's debt-to-equity ratio was approximately 1.74 (calculated as total assets minus equity divided by equity), reflecting a heavy reliance on debt to fund its $1.74 billion in total assets. This contrasts sharply with PEBO's debt-to-equity ratio of 0.55 as of June 2025, indicating a more conservative capital structure. While PEBK's net interest margin (3.55% YTD) and loan growth ($1.18 billion in total loans) suggest operational efficiency, its elevated leverage could amplify risks in a rising interest rate or credit downturn environment.

PEBO, meanwhile, has demonstrated resilience in cost management and asset quality. Its efficiency ratio improved to 57.1% in Q3 2025, down from 59.3% in the prior quarter, and its book value per share increased by 2% according to earnings call data. However, challenges persist: criticized loans rose by $24 million, and classified loans by $34 million, signaling potential credit risks. Management anticipates a slowdown in loan growth in 2026 due to refinancing activity and a cooling market for multi-family projects as management stated.

Yield Attractiveness: PEBO's Premium vs. PEBK's Caution

From a yield perspective, PEBO offers a significantly higher return. As of November 20, 2025, its dividend yield was 5.76%, driven by a stock price of approximately $29.02 and a $0.20 quarterly dividend. This outpaces PEBK's trailing twelve months (TTM) yield of 3.10%, though PEBK's Q4 2025 yield was a modest 0.65% due to its higher stock price of $30.69 according to market analysis. The disparity reflects PEBO's strategy to prioritize shareholder returns, albeit with a higher payout ratio and operational risks.

Conclusion: Balancing Risk and Reward

Investors seeking yield may find PEBO more appealing, given its 5.76% yield and moderate payout ratio. However, its higher leverage to earnings (49.7% vs. PEBK's ~24.1%) and recent credit risks warrant caution. PEBK, by contrast, offers a more conservative dividend policy and stronger earnings retention, supported by a robust net interest margin and asset growth. Its elevated debt-to-equity ratio, however, could pose long-term risks if interest rates or credit conditions deteriorate.

Ultimately, the choice between PEBK and PEBO hinges on an investor's risk tolerance. For those prioritizing sustainability over yield, PEBK's disciplined approach is compelling. For income-focused investors willing to accept higher risk, PEBO's premium yield and growth aspirations present an enticing, albeit more volatile, opportunity.