Peoples Bancorp Inc. Announces 3rd Quarter 2013 Earnings

MARIETTA, Ohio, Oct. 22, 2013 /PRNewswire/ --

Summary third quarter 2013 results:

  • Diluted earnings per share were $0.23 for the quarter and $1.16 through nine months of 2013.
    • Peoples incurred a $2.2 million additional income tax expense from surrendering BOLI during the quarter with the proceeds reinvested into higher-yielding assets.
    • Third quarter 2013 earnings also impacted by $264,000 of pension settlement charges.
    • Acquisition activities resulted in pre-tax expenses of $182,000 for the quarter and $284,000 year-to-date.
  • Total loan balances experienced 10% annualized growth from the linked quarter and grew 7% from a year ago.
    • Nearly half of the increase in total loan balances was due to residential mortgage loan growth.
    • Non-mortgage consumer balances grew at a 29% annualized rate for the quarter and 26% since year-end 2012.
    • Commercial loan growth in 2013 has been offset by unexpected prepayments and efforts to improve quality.
  • Bottom-line earnings continue to benefit from favorable asset quality trends and sizable recoveries of prior losses.  
    • Nonperforming assets were 1.06% of gross loans and OREO at September 30, 2013 versus 1.58% at year-end 2012.
    • Gross recoveries exceeded charge-offs by $0.7 million for the quarter and $2.5 million on a year-to-date basis.
    • Allowance for loan losses decreased to 1.60% of gross loans at September 30, 2013, from 1.81% at year-end 2012.
    • Peoples' earnings benefited from a $0.9 million recovery of loan losses for the quarter and $3.4 million year-to-date.
  • Third quarter total revenue was 4% higher than the linked quarter and up 6% over the prior year.
    • Non-interest income was up 4% from the linked quarter due largely to higher deposit service charge income.
    • Acquisitions and increased sales production resulted in double-digit year-over-year growth in fee-based revenues. 
    • Net interest income and margin benefited from continued loan growth and slightly higher long-term interest rates.
  • Operating expenses were generally in line with Peoples' prior guidance.
    • Total non-interest expense was $17.3 million versus the projected third quarter 2013 level of $16.7 million.
    • Peoples' prior estimates did not consider the $446,000 of pension settlement charges and acquisition-related costs.
    • Total expenses were higher than the prior year due to acquisitions and other initiatives to grow revenue.
  • Retail deposit balances were relatively flat, while overall mix continued to shift toward low-cost core deposits.
    • Period-end balances were impacted by a single commercial customer maintaining a higher than normal balance.
    • Average retail balances fell 3% from the linked quarter due to normal seasonal variances in certain deposit balances.
    • Non-interest-bearing deposits continued to comprise over one-fifth of Peoples' total deposits at September 30, 2013.

Peoples Bancorp Inc. ("Peoples") (NASDAQ: PEBO) today announced results for the quarter ended September 30, 2013.  Net income totaled $2.5 million for the third quarter of 2013, representing earnings per diluted share of $0.23.  In comparison, net income was $4.9 million or $0.46 per diluted share for the second quarter of 2013 and $4.8 million or $0.45 per diluted share for the third quarter of 2012.  Third quarter 2013 earnings were reduced by $2.2 million (or $0.21 per diluted share) for a federal income tax liability associated with Peoples' surrender of bank owned life insurance ("BOLI") contracts during the quarter.  On a year-to-date basis, net income totaled $12.5 million, or $1.16 per diluted share, through September 30, 2013, versus $16.5 million, or $1.56 per diluted share, for the same period a year ago.   

"Our third quarter results were generally positive despite the lower earnings due to the additional income tax expense related to our BOLI transaction," said Chuck Sulerzyski, President and Chief Executive Officer.  "We experienced another quarter of solid loan growth driven by increased consumer lending.  Overall revenue generation remained strong and growing, while operating costs were generally consistent with our target levels.  We also benefited from additional recoveries of prior loan losses which boosted bottom line earnings."

Sulerzyski continued, "However, our most exciting news for the quarter was the acquisition of Ohio Commerce Bank in the greater Cleveland area.  This recently completed transaction adds several new customer relationships with over $97 million of loans and $111 million in deposits.  We believe the potential for meaningful long-term growth exists in this region given its level of economic activity and attractive customer demographics."

As previously disclosed, Peoples has taken steps in 2013 to reduce its investment in BOLI, which included a partial withdrawal of the original premium paid, followed by a complete surrender of certain policies.  The full surrender caused Peoples to incur a $2.2 million federal income tax liability in the third quarter of 2013 for the gain associated with the policies surrendered.  At June 30, 2013, the BOLI polices surrendered had a cash surrender value of $42.8 million and cost basis of $36.5 million.  During the third quarter of 2013, Peoples received $36.2 million from the liquidation of the investments underlying the BOLI policies.  These funds were redeployed into Peoples' investment portfolio with the long-term goal of funding future loan growth, which is expected to contribute at least $1 million to Peoples' annual net interest income.  Peoples expects to receive the remaining cash surrender value during the first quarter of 2014.

"For many years, our BOLI performed very well, generating favorable returns compared to many other investment options," said Edward Sloane, Chief Financial Officer and Treasurer.  "However, the trend has been less favorable since 2008 due to adverse conditions in the financial markets, with minimal income being recognized for the past several quarters. We expected BOLI to continue underperforming for many years to come. Given this situation, we deemed it prudent to exit our BOLI investment, even with the one-time charge, considering the potential for improving long-term shareholder value. Essentially, we sold a $43 million non-earning asset and redeployed the proceeds into earning assets and expect to recover the one-time charge fairly quickly."    

For the third quarter of 2013, net interest income was $13.7 million and net interest margin was 3.26%, compared to $13.2 million and 3.15%, respectively, for the linked quarter.  These improvements were driven mostly by $405,000 of additional interest income for prepayment fees and interest recovered on nonaccrual loans, which added 10 basis points to net interest margin.  Absent this one-time income, the prolonged, low interest rate environment has continued to put downward pressure on asset yields.  However, the impact in the third quarter of 2013 was offset by the combination of higher average loan balances and continued reduction in total funding cost.  Both net interest income and margin also benefited from an improvement in the overall yield on Peoples' investment portfolio.  On a year-to-date basis, both net interest income and margin were down slightly from the prior year due to the relatively flat yield curve.

"We are pleased with the generally stable net interest income and margin for two straight quarters considering the challenges of the current interest rate environment," added Sloane.  "The relatively flat yield curve limits our ability, like many banks, to improve net interest income and puts downward pressure on net interest margin.  We are fortunate to be less reliant upon net interest income than most banks our size due to our sizable fee income.  However, we remain focused on generating meaningful loan growth each quarter as a means of increasing net interest income and enhancing our margin."

Third quarter 2013 non-interest income was 4% higher than the linked quarter, due mostly to increased deposit account service charges.  The higher deposit account service charges were primarily attributable to additional overdraft fees during the quarter.  Compared to the prior year, non-interest income was up 12% for the third quarter and 7% through nine months of 2013.  Much of this growth was the result of increased insurance and investment income due to acquisitions completed in the second half of 2012 and first half of 2013.  Peoples' insurance income also benefited from industry-wide increases in premiums for insurance policies.  Year-over-year, insurance income was up 38% for the quarter and 21% on a year-to-date basis, while trust and investment income increased by 12% and 16%, respectively.  These increases were partially offset by lower mortgage banking income due to fewer loans being sold in the secondary market. 

Total non-interest expenses were $17.3 million for the third quarter of 2013, higher than recent quarters but in line with Peoples' previous guidance.  Key drivers of the linked quarter increase were $264,000 of pension settlement charges associated with lump sum distributions and $182,000 of acquisition-related expenses.  These additional expenses caused the efficiency ratio to be outside Peoples' target range of 68% to 70%.  The pension settlement charges also accounted for the majority of the increase in Peoples' salary and employee benefit costs, while the acquisition-related expenses consisted primarily of fees for legal and other professional services.  In comparison, Peoples did not incur any pension settlement charges in the third quarter of 2012, while acquisition-related expenses totaled $337,000.  Peoples also has incurred additional expenses throughout 2013 due to various strategic investments to grow revenue over the past year.  These actions included acquisitions in each business line, adding new talent and the branch remodeling project.  These initiatives also have led to an increase in the number of full-time equivalent employees from 501 a year ago, to 539 at September 30, 2013. 

"Generating positive operating leverage in 2013 continues to be challenging," said Sulerzyski.  "While we are experiencing double-digit increases in our insurance and investment revenues in 2013, there has been pressure on other revenue sources, primarily net interest income.  In addition, the modest increase in long-term interest rates during the quarter had a dual impact on overall revenue growth.  The higher rates resulted in more stable net interest income but caused a significant decrease in mortgage banking activity.  On the expense side, we remained disciplined with operating costs and have been effective in managing the overall increase in total non-interest expense."

At September 30, 2013, period-end loan balances were $1.06 billion, $26.9 million higher than the prior quarter-end amount and up 7% compared to year-end 2012.  As a result of this growth, third quarter 2013 average loan balances were up 13% on an annualized basis versus the linked quarter and up 8% year-over-year.  The key driver of the linked quarter increase was higher residential mortgage loan balances, including lines of credit, which grew $13.4 million, or at an 18% annualized rate. Peoples also experienced another consecutive quarter of solid growth in non-mortgage consumer loans, with period-end balances up $8.8 million or 29% on an annualized basis.  Total group loan balances were impacted by some larger payoffs but finished the quarter $2.1 million higher than the prior quarter-end.  Peoples also made further progress on improving the overall quality of the commercial portfolio through a change in mix.  Over the last twelve months, commercial real estate loan balances have decreased 4% while commercial and industrial loan balances grew 12%.

"For the second consecutive quarter, we grew loan balances at a double-digit annualized pace due largely to increased production in each segment of the portfolio," said Sulerzyski.  "The strong growth in residential mortgages was somewhat unexpected as we had expected a greater customer preference for 30-year fixed-rate loans, which we sell on the secondary market.  Growth in other consumer loans was in line with our expectations, while commercial loan growth was limited by unexpected payoffs.  Still, we are on pace to achieve our 2013 goal of 8% to 10% growth."

At September 30, 2013, total nonperforming assets were $11.3 million, down slightly from the prior quarter-end and 28% lower than December 31, 2012.  As a result, nonperforming assets were 1.06% of total loans plus other real estate owned ("OREO") at quarter-end versus 1.18% at June 30, 2013 and 1.58% at year-end 2012. The linked quarter decreases occurred as a reduction in nonaccrual loans was partially offset by higher balances of loans 90 or more days past due at quarter-end.  Total criticized loans, which are those classified as watch, substandard or doubtful, maintained their declining trend during quarter primarily as a result of paydowns on nonaccrual commercial loans.  For the quarter, Peoples reduced criticized loans by 7%, while criticized loan balances were 32% lower than year-end 2012.

"Our continued focus on asset quality and credit discipline led to a further reduction in problem loans during the third quarter," said Sloane.  "We also saw recoveries exceed charge-offs for the third consecutive quarter.  In contrast, the amount of loans at least 90 days past due was up at quarter-end, although we consider this situation to be temporary as the majority of these balances are expected to be brought current prior to year-end." 

Through nine months of 2013, total gross recoveries have exceeded charge-offs by $3.4 million.  The combination of net recoveries and continued improvement in asset quality in 2013 led Peoples to decrease the allowance for loan losses to $16.9 million, or 1.60% of total loans, at September 30, 2013.  The ratio of the allowance for loan losses to total loans was 1.66% at June 30, 2013, 1.81% at year-end 2012 and 1.88% at September 30, 2012.  In contrast, Peoples' allowance for loan losses as a percentage of nonperforming loans was 151.8% versus 141.1% at June 30, 2013 and 119.8% at year-end 2012.

At September 30, 2013, Peoples' retail deposit balances were virtually unchanged from the prior quarter-end as higher non-interest-bearing balances were nearly offset by a decline in interest-bearing balances.  The increase in non-interest-bearing deposit balances was primarily the result of a single commercial customer maintaining a higher than normal balance on September 30, 2013.  Absent this increase, total non-interest-bearing balances were consistent with the prior quarter-end, with average balances of $325.1 million for the third quarter of 2013.  Non-interest-bearing deposits also continued to comprise over 20% of Peoples' total deposits.  Within Peoples' interest-bearing deposits, key drivers of the linked quarter decline were lower money market account and certificate of deposit ("CD") balances.  Peoples continued to experience a further reduction in money market balances associated with its trust customers.  The decline in CD balances was the result of management's ongoing funding strategy which emphasizes growing low-cost core deposits and reducing higher-costing funds.  Total borrowed funds have increased during 2013 as Peoples has utilized short-term borrowings to fund a portion of the loan growth.

Peoples' effective tax rate was 63.5% for the third quarter of 2013 and 42.5% on a year-to-date basis.  Both of these rates include the entire impact of the $2.2 million tax liability related to the BOLI surrender.  As a result of this additional expense, Peoples' effective tax rates were significantly higher than recent periods.  Management expects Peoples' effective tax rate to approximate 32% for the fourth quarter of 2013 and 40% for the full year.

"Overall, we continued to make good progress with several of our 2013 strategic goals during the third quarter," summarized Sulerzyski.  "Our most notable accomplishments included meaningful loan growth and the Ohio Commerce Bank acquisition.  In addition, we remain focused on growing our core revenue stream, improving overall operating efficiency and generating favorable long-term returns for our shareholders."

Peoples Bancorp Inc. is a diversified financial services holding company with $2.0 billion in total assets, 50 locations and 47 ATMs in Ohio, West Virginia and Kentucky.  Peoples makes available a complete line of banking, investment, insurance and trust solutions through its subsidiaries - Peoples Bank, National Association and Peoples Insurance Agency, LLC.  Peoples' common shares are traded on the NASDAQ Global Select Market® under the symbol "PEBO", and Peoples is a member of the Russell 3000 index of U.S. publicly-traded companies.  Learn more about Peoples at www.peoplesbancorp.com.

Conference Call to Discuss Earnings:
Peoples will conduct a facilitated conference call to discuss third quarter 2013 results of operations today at 11:00 a.m., Eastern Daylight Saving Time, with members of Peoples' executive management participating.  Analysts, media and individual investors are invited to participate in the conference call by calling (800) 860-2442.  A simultaneous webcast of the conference call audio will be available online via the "Investor Relations" section of Peoples' website, www.peoplesbancorp.com.  Participants are encouraged to call or sign in at least 15 minutes prior to the scheduled conference call time to ensure participation and, if required, to download and install the necessary software.  A replay of the call will be available on Peoples' website in the "Investor Relations" section for one year.

Use of Non-GAAP Financial Measures
This news release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP").  Management uses these "non-GAAP" measures in its analysis of Peoples' performance and the efficiency of its operations. Management believes that these non-GAAP measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods and peers. These disclosures should not be viewed as substitutes for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Below is a listing of the types of non-GAAP measures used in this news release:

  • Tangible assets and tangible equity measures are non-GAAP since they exclude the impact of intangible assets acquired through acquisitions on both total stockholders' equity and total assets and the related amortization from earnings.
  • Pre-provision net revenue is defined as net interest income plus non-interest income minus non-interest expense.  This measure is non-GAAP since it excludes the provision for loan losses and all gains and/or losses included in earnings.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included at the end of this news release under the caption of "Non-GAAP Financial Measures".

Safe Harbor Statement:
Certain statements made in this news release regarding Peoples' financial condition, results of operations, plans, objectives, future performance and business, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate", "could", "may", "feel", "expect", "believe", "plan", and similar expressions.

These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations.  Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially.  These factors include, but are not limited to: (1) the success, impact, and timing of Peoples' business strategies, including the successful integration of the recently completed Ohio Commerce Bank acquisition and the insurance business acquisitions completed in the first half of 2013, the expansion of consumer lending activity and rebranding efforts; (2) competitive pressures among financial institutions or from non-financial institutions may increase significantly, including product and pricing pressures and Peoples' ability to attract, develop and retain qualified professionals; (3) changes in the interest rate environment due to economic conditions and/or the fiscal policies of the U.S. government and Federal Reserve Board, which may adversely impact interest margins; (4) changes in prepayment speeds, loan originations and charge-offs, which may be less favorable than expected and adversely impact the amount of interest income generated; (5) adverse changes in the economic conditions and/or activities, including impacts from the implementation of the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012, as well as continuing economic uncertainty in the U.S., the European Union, and other areas, which could decrease sales volumes and increase loan delinquencies and defaults; (6) legislative or regulatory changes or actions, including in particular the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the regulations promulgated and to be promulgated thereunder, which may subject Peoples, its subsidiaries or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses; (7) deterioration in the credit quality of Peoples' loan portfolio, which may adversely impact the provision for loan losses; (8) changes in accounting standards, policies, estimates or procedures which may adversely affect Peoples' reported financial condition or results of operations; (9) adverse changes in the conditions and trends in the financial markets, including political developments, which may adversely affect the fair value of securities within Peoples' investment portfolio and interest rate sensitivity of Peoples' consolidated balance sheet; (10) Peoples' ability to receive dividends from its subsidiaries; (11) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity; (12) the impact of larger or similar sized financial institutions encountering problems, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity; (13) the costs and effects of regulatory and legal developments, including the outcome of potential regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations; (14) Peoples' ability to secure confidential information through the use of computer systems and telecommunications networks, including those of our third-party vendors and other service providers, may prove inadequate, which could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss; (15) the overall adequacy of our risk management program; and (16) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission ("SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Peoples encourages readers of this news release to understand forward-looking statements are strategic objectives rather than absolute targets of future performance.  Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this news release or to reflect the occurrence of unanticipated events, except as required by applicable legal requirements.  Copies of documents filed with the SEC are available free of charge at the SEC's website at http://www.sec.gov and/or from Peoples' website.

As required by U.S. GAAP, Peoples is required to evaluate the impact of subsequent events through the issuance date of its September 30, 2013 consolidated financial statements as part of its Quarterly Report on Form 10-Q to be filed with the SEC.  Accordingly, subsequent events could occur that may cause Peoples to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

PER COMMON SHARE DATA AND SELECTED RATIOS



Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,


2013


2013


2012


2013


2012

PER SHARE:










Earnings per share:










Basic

$

0.24



$

0.46



$

0.45



$

1.17



$

1.56


Diluted

0.23




0.46



0.45



1.16



1.56


Cash dividends declared per share

0.14




0.14



0.11



0.40



0.33


Book value per share

20.97




20.71



20.77



20.97



20.77


Tangible book value per share (a)

14.23




13.94



14.28



14.23



14.28


Closing stock price at end of period

$

20.88



$

21.08



$

22.89



$

20.88



$

22.89












SELECTED RATIOS:










Return on average equity (b)

4.61

%


8.74

%


8.86

%


7.52

%


10.41

%

Return on average assets  (b)

0.53

%


1.03

%


1.04

%


0.87

%


1.21

%

Efficiency ratio (c)

72.47

%


71.71

%


70.06

%


71.94

%


68.36

%

Pre-provision net revenue to average assets (b)(d)

1.26

%


1.25

%


1.34

%


1.25

%


1.47

%

Net interest margin (b)(e)

3.26

%


3.15

%


3.30

%


3.18

%


3.38

%

Dividend payout ratio

60.11

%


30.73

%


24.36

%


34.67

%


21.33

%



(a) 

This amount represents a non-GAAP financial measure since it excludes the balance sheet impact of intangible assets acquired through acquisitions on stockholders' equity.  Additional information regarding the calculation of this ratio is included at the end of this news release.

(b) 

Ratios are presented on an annualized basis.

(c)  

Non-interest expense (less intangible amortization) as a percentage of fully tax-equivalent net interest income plus non-interest income (less securities and asset disposal gains/losses).

(d)  

This amount represents a non-GAAP financial measure since it excludes the recovery of or provision for loan losses and net gains or losses on securities transactions, debt extinguishment, loans held-for-sale and other real estate owned, and other assets.  This measure is a key metric used by federal bank regulatory agencies in their evaluation of capital adequacy for financial institutions.  Additional information regarding the calculation of this ratio is included at the end of this news release.

(e)  

Information presented on a fully tax-equivalent basis.

 

 

CONSOLIDATED STATEMENTS OF INCOME



Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,

(in $000's)

2013


2013


2012


2013


2012

Interest income

$

16,509



$

16,111



$

16,942



$

48,686



$

51,895


Interest expense

2,833



2,956



3,621



8,880



11,530


Net interest income

13,676



13,155



13,321



39,806



40,365


Recovery of loan losses

(919)



(1,462)



(956)



(3,446)



(4,213)


Net interest income after recovery of loan losses

14,595



14,617



14,277



43,252



44,578












Net (loss) gain on securities transactions

(1)



26



112



443



3,275


Loss on debt extinguishment









(3,111)


Net gain on loans held-for-sale and other real estate owned

10



81





86



8


Net loss on other assets

(29)



(87)



(161)



(116)



(163)












Non-interest income:










Insurance income

3,261



3,220



2,367



9,359



7,756


Deposit account service charges

2,377



2,045



2,261



6,479



6,728


Trust and investment income

1,751



1,772



1,565



5,225



4,510


Electronic banking income

1,547



1,561



1,484



4,527



4,436


Mortgage banking income

360



365



638



1,443



1,869


Other non-interest income

290



253



257



841



853


Total non-interest income

9,586



9,216



8,572



27,874



26,152












Non-interest expense:










Salaries and employee benefits costs

9,358



8,934



8,051



27,009



24,711


Net occupancy and equipment

1,637



1,626



1,423



5,121



4,358


Professional fees

1,188



1,002



1,172



3,084



3,189


Electronic banking expense

920



885



887



2,645



2,451


Marketing expense

547



562



534



1,559



1,490


Data processing and software

530



488



470



1,479



1,442


Franchise taxes

412



413



415



1,238



1,241


Communication expense

342



361



294



1,006



930


FDIC insurance

224



250



257



754



789


Foreclosed real estate and other loan expenses

243



223



263



683



739


Amortization of intangible assets

180



164



134



533



350


Other non-interest expense

1,682



1,514



1,766



4,759



4,678


Total non-interest expense

17,263



16,422



15,666



49,870



46,368


Income before income taxes

6,898



7,431



7,134



21,669



24,371


Income tax expense

4,381



2,510



2,310



9,209



7,860


Net income

$

2,517



$

4,921



$

4,824



$

12,460



$

16,511












PER SHARE DATA:










Earnings per share – Basic

$

0.24



$

0.46



$

0.45



$

1.17



$

1.56


Earnings per share – Diluted

$

0.23



$

0.46



$

0.45



$

1.16



$

1.56


Cash dividends declared per share

$

0.14



$

0.14



$

0.11



$

0.40



$

0.33












Weighted-average shares outstanding – Basic

10,589,126



10,576,643



10,530,800



10,574,130



10,522,874


Weighted-average shares outstanding – Diluted

10,692,555



10,597,033



10,530,876



10,664,999



10,522,905


Actual shares outstanding (end of period)

10,596,797



10,583,161



10,534,445



10,596,797



10,534,445


 

 

CONSOLIDATED BALANCE SHEETS



September 30,


December 31,

(in $000's)

2013


2012





Assets




Cash and cash equivalents:




Cash and due from banks

$

41,348



$

47,256


Interest-bearing deposits in other banks

9,312



15,286


Total cash and cash equivalents

50,660



62,542






Available-for-sale investment securities, at fair value (amortized cost of $623,024 at September 30, 2013 and $628,584 at December 31, 2012)




616,036



639,185


Held-to-maturity investment securities, at amortized cost (fair value of $48,629 at September 30, 2013 and $47,124 at December 31, 2012)




49,758



45,275


Other investment securities, at cost

24,679



24,625


Total investment securities

690,473



709,085






Loans, net of deferred fees and costs

1,057,165



985,172


Allowance for loan losses

(16,902)



(17,811)


Net loans

1,040,263



967,361






Loans held-for-sale

3,179



6,546


Bank premises and equipment, net of accumulated depreciation

28,990



27,013


Bank owned life insurance

1,865



51,229


Goodwill

65,786



64,881


Other intangible assets

5,631



3,644


Other assets

32,858



25,749


Total assets

$

1,919,705



$

1,918,050






Liabilities




Deposits:




Non-interest-bearing deposits

$

356,767



$

317,071


Interest-bearing deposits

1,081,099



1,175,232


Total deposits

1,437,866



1,492,303






Short-term borrowings

106,843



47,769


Long-term borrowings

124,146



128,823


Accrued expenses and other liabilities

28,603



27,427


Total liabilities

1,697,458



1,696,322






Stockholders' Equity




Preferred stock, no par value (50,000 shares authorized, no shares issued at September 30, 2013 and December 31, 2012)







Common stock, no par value (24,000,000 shares authorized, 11,197,041 shares issued at September 30, 2013 and 11,155,648 shares issued at December 31, 2012), including shares in treasury







168,457



167,039


Retained earnings

77,298



69,158


Accumulated comprehensive (loss) income, net of deferred income taxes

(8,545)



654


Treasury stock, at cost (600,244 shares at September 30, 2013 and 607,688 shares at December 31, 2012)




(14,963)



(15,123)


Total stockholders' equity

222,247



221,728


Total liabilities and stockholders' equity

$

1,919,705



$

1,918,050






 

 

SELECTED FINANCIAL INFORMATION



September 30,

June 30,

March 31,

December 31,

September 30,

(in $000's, end of period)

2013

2013

2013

2012

2012

Loan Portfolio






Commercial real estate, construction

$

39,969


$

30,770


$

24,108


$

34,265


$

50,804


Commercial real estate, other

374,953


389,281


381,331


378,073


379,561


Commercial and industrial

192,238


184,981


174,982


180,131


172,068


Residential real estate

262,602


252,282


237,193


233,841


233,501


Home equity lines of credit

55,341


52,212


50,555


51,053


51,137


Consumer

127,785


119,029


108,353


101,246


100,116


Deposit account overdrafts

4,277


1,674


3,996


6,563


1,580


Total loans

$

1,057,165


$

1,030,229


$

980,518


$

985,172


$

988,767








Deposit Balances






Interest-bearing deposits:






Retail certificates of deposit

$

334,910


$

349,511


$

353,894


$

392,313


$

413,837


Money market deposit accounts

224,400


238,554


288,538


288,404


251,735


Governmental deposit accounts

151,910


146,817


167,441


130,630


157,802


Savings accounts

196,293


199,503


200,549


183,499


172,715


Interest-bearing demand accounts

123,966


125,875


124,969


124,787


112,854


Total retail interest-bearing deposits

1,031,479


1,060,260


1,135,391


1,119,633


1,108,943


Brokered certificates of deposits

49,620


50,393


52,648


55,599


55,168


Total interest-bearing deposits

1,081,099


1,110,653


1,188,039


1,175,232


1,164,111


Non-interest-bearing deposits

356,767


325,125


340,887


317,071


288,376


Total deposits

$

1,437,866


$

1,435,778


$

1,528,926


$

1,492,303


$

1,452,487








Asset Quality






Nonperforming assets:






Loans 90+ days past due and accruing

$

2,597


$

1,520


$

1,215


$

1,235


$

882


Nonaccrual loans

8,537


10,607


11,803


13,638


15,481


Total nonperforming loans

11,134


12,127


13,018


14,873


16,363


Other real estate owned

120


120


815


836


1,173


Total nonperforming assets

$

11,254


$

12,247


$

13,833


$

15,709


$

17,536








Allowance for loan losses as a percent of nonperforming loans






151.79

%

141.11

%

133.96

%

119.75

%

113.71

%

Nonperforming loans as a percent of total loans

1.05

%

1.17

%

1.32

%

1.50

%

1.63

%

Nonperforming assets as a percent of total assets

0.59

%

0.64

%

0.71

%

0.82

%

0.94

%

Nonperforming assets as a percent of total loans and other real estate owned






1.06

%

1.18

%

1.41

%

1.58

%

1.75

%

Allowance for loan losses as a percent of total loans

1.60

%

1.66

%

1.78

%

1.81

%

1.88

%







Capital Information(a)






Tier 1 common ratio

14.09

%

14.17

%

14.69

%

14.06

%

13.86

%

Tier 1 risk-based capital ratio

14.09

%

14.17

%

14.69

%

14.06

%

15.85

%

Total risk-based capital ratio (Tier 1 and Tier 2)

15.46

%

15.54

%

16.05

%

15.43

%

17.16

%

Leverage ratio

9.14

%

9.04

%

8.90

%

8.83

%

10.13

%

Tier 1 common capital

$

168,254


$

166,576


$

164,329


$

160,604


$

157,520


Tier 1 capital

168,254


166,576


164,329


160,604


180,147


Total capital (Tier 1 and Tier 2)

184,550


182,706


179,569


176,224


195,083


Total risk-weighted assets

$

1,194,016


$

1,175,647


$

1,118,644


$

1,141,938


$

1,136,532


Tangible equity to tangible assets (b)

8.16

%

8.07

%

8.35

%

8.28

%

8.37

%



(a)  

September 30, 2013 data based on preliminary analysis and subject to revision.

(b)  

These ratios represent non-GAAP financial measures since they exclude the balance sheet impact of intangible assets acquired through acquisitions on both total stockholders' equity and total assets.  Additional information regarding the calculation of these ratios is included at the end of this news release.

 

 

(RECOVERY OF) PROVISION FOR LOAN LOSSES INFORMATION



Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,

(in $000's)

2013


2013


2012


2013


2012

(Recovery of) Provision for Loan Losses










Provision for checking account overdrafts

$

131



$

138



$

144



$

254



$

212


Recovery of other loan losses

(1,050)



(1,600)



(1,100)



(3,700)



(4,425)


Total recovery of loan losses

$

(919)



$

(1,462)



$

(956)



$

(3,446)



$

(4,213)












Net (Recoveries) Charge-Offs










Gross charge-offs

$

1,013



$

616



$

858



$

2,620



$

4,941


Recoveries

1,721



1,752



496



5,157



4,044


Net (recoveries) charge-offs

$

(708)



$

(1,136)



$

362



$

(2,537)



$

897












Net (Recoveries) Charge-Offs by Type










Commercial real estate, construction

$



$



$



$



$


Commercial real estate, other

(1,308)



(1,215)



139



(3,331)



574


Commercial and industrial

(7)



7



(143)



(17)



(258)


Residential real estate

179



(57)



253



140



282


Home equity lines of credit

153



(5)



8



142



71


Consumer

176



53



(24)



284



(31)


Deposit account overdrafts

99



81



129



245



259


Total net (recoveries) charge-offs

$

(708)



$

(1,136)



$

362



$

(2,537)



$

897


As a percent of average gross loans (annualized)

(0.26)%



(0.45)%



0.15

%


(0.33)%



0.13

%

 

 

SUPPLEMENTAL INFORMATION



September 30,


June 30,


March 31,


December 31,


September 30,

(in $000's, end of period)

2013


2013


2013


2012


2012











Trust assets under management

$

994,683



$

939,292



$

927,675



$

888,134



$

874,293


Brokerage assets under management

449,196



433,651



433,217



404,320



398,875


Mortgage loans serviced for others

$

339,557



$

338,854



$

343,769



$

330,721



$

307,052


Employees (full-time equivalent)

539



545



517



494



501












 

 

CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME



Three Months Ended


September 30, 2013



June 30, 2013


September 30, 2012

(in $000's)

Balance

Income/

Expense

Yield/ Cost


Balance

Income/

Expense

Yield/ Cost


Balance

Income/

Expense

Yield/ Cost

Assets












Short-term investments

$

5,914


$

21


1.41

%


$

11,399


$

25


0.88

%


$

10,150


$

5


0.20

%

Investment securities (a)(b)

684,268


4,795


2.80

%


708,622


4,809


2.71

%


691,304


5,270


3.05

%

Gross loans (a)

1,041,901


12,000


4.59

%


1,009,515


11,576


4.61

%


966,758


11,942


4.92

%

Allowance for loan losses

(17,670)





(17,866)





(19,981)




Total earning assets

1,714,413


16,816


3.91

%


1,711,670


16,410


3.85

%


1,648,231


17,217


4.17

%













Intangible assets

71,517





71,081





65,912




Other assets

105,802





128,237





133,448




Total assets

$

1,891,732





$

1,910,988





$

1,847,591
















Liabilities and Equity












Interest-bearing deposits:












Savings accounts

$

199,592


$

27


0.05

%


$

199,065


$

27


0.05

%


$

164,771


$

24


0.06

%

Government deposit accounts

153,085


142


0.37

%


147,824


168


0.46

%


162,773


247


0.61

%

Interest-bearing demand accounts

124,093


25


0.08

%


124,199


25


0.08

%


114,030


23


0.08

%

Money market deposit accounts

226,453


86


0.15

%


266,602


93


0.14

%


244,857


96


0.16

%

Brokered certificates of deposits

49,810


464


3.70

%


51,952


468


3.61

%


55,158


491


3.54

%

Retail certificates of deposit

343,549


930


1.07

%


350,141


1,017


1.17

%


407,254


1,290


1.26

%

Total interest-bearing deposits

1,096,582


1,674


0.61

%


1,139,783


1,798


0.63

%


1,148,843


2,171


0.75

%













Short-term borrowings

101,099


29


0.11

%


68,802


22


0.13

%


47,772


19


0.16

%

Long-term borrowings

125,398


1,131


3.58

%


126,927


1,136


3.58

%


128,970


1,431


4.37

%

Total borrowed funds

226,497


1,160


2.03

%


195,729


1,158


2.36

%


176,742


1,450


3.23

%

Total interest-bearing liabilities

1,323,079


2,834


0.85

%


1,335,512


2,956


0.89

%


1,325,585


3,621


1.08

%













Non-interest-bearing deposits

325,129





326,020





280,223




Other liabilities

26,795





23,568





25,066




Total liabilities

1,675,003





1,685,100





1,630,874




Stockholders' equity

216,729





225,888





216,717




Total liabilities and equity

$

1,891,732





$

1,910,988





$

1,847,591
















Net interest income/spread (a)


$

13,982


3.06

%



$

13,454


2.96

%



$

13,596


3.09

%

Net interest margin (a)



3.26

%




3.15

%




3.30

%













(a) Information presented on a fully tax-equivalent basis.


(b) Average balances are based on carrying value.


 

 


Nine Months Ended



September 30, 2013


September 30, 2012

(in $000's)

Balance

Income/

Expense

Yield/ Cost


Balance

Income/

Expense

Yield/ Cost

Assets








Short-term investments

$

18,682


$

65


0.47

%


$

8,594


$

13


0.21

%

Investment securities (a)(b)

699,396


14,445


2.75

%


683,942


16,878


3.29

%

Gross loans (a)

1,012,366


35,070


4.64

%


957,563


35,802


4.99

%

Allowance for loan losses

(18,102)





(22,013)




Total earning assets

1,712,342


49,580


3.87

%


1,628,086


52,693


4.32

%









Intangible assets

70,868





65,028




Other assets

122,371





132,718




Total assets

$

1,905,581





$

1,825,832












Liabilities and Equity








Interest-bearing deposits:








Savings accounts

$

196,508


$

78


0.05

%


$

156,634


$

67


0.06

%

Government deposit accounts

148,901


512


0.46

%


154,106


736


0.64

%

Interest-bearing demand accounts

125,009


75


0.08

%


111,337


94


0.11

%

Money market deposit accounts

260,180


275


0.14

%


252,041


332


0.18

%

Brokered certificates of deposits

51,949


1,408


3.62

%


56,809


1,505


3.54

%

Retail certificates of deposit

358,307


3,062


1.14

%


405,045


4,273


1.41

%

Total interest-bearing deposits

1,140,854


5,410


0.63

%


1,135,972


7,007


0.82

%









Short-term borrowings

68,204


65


0.13

%


52,467


57


0.14

%

Long-term borrowings

126,904


3,406


3.58

%


137,044


4,466


4.31

%

Total borrowed funds

195,108


3,471


2.37

%


189,511


4,523


3.16

%

Total interest-bearing liabilities

1,335,962


8,881


0.89

%


1,325,483


11,530


1.16

%









Non-interest-bearing deposits

323,733





265,728




Other liabilities

24,447





22,670




Total liabilities

1,684,142





1,613,881




Stockholders' equity

221,439





211,951




Total liabilities and equity

$

1,905,581





$

1,825,832












Net interest income/spread (a)


$

40,699


2.98

%



$

41,163


3.16

%

Net interest margin (a)



3.18

%




3.38

%









(a) Information presented on a fully tax-equivalent basis.


(b) Average balances are based on carrying value.


 

 

NON-GAAP FINANCIAL MEASURES

The following non-GAAP financial measures used by Peoples provide information useful to investors in understanding Peoples' operating performance and trends, and facilitate comparisons with the performance of Peoples' peers. The following tables summarize the non-GAAP financial measures derived from amounts reported in Peoples' consolidated financial statements:


At or For the Three Months Ended


September 30,


June 30,


March 31,


December 31,


September 30,

(in $000's)

2013


2013


2013


2012


2012











Tangible Equity:










Total stockholders' equity, as reported

$

222,247



$

219,147



$

226,079



$

221,728



$

218,835


Less: goodwill and other intangible assets

71,417



71,608



69,977



68,525



68,422


Tangible equity

$

150,830



$

147,539



$

156,102



$

153,203



$

150,413












Tangible Assets:










Total assets, as reported

$

1,919,705



$

1,899,841



$

1,938,722



$

1,918,050



$

1,866,510


Less: goodwill and other intangible assets

71,417



71,608



69,977



68,525



68,422


Tangible assets

$

1,848,288



$

1,828,233



$

1,868,745



$

1,849,525



$

1,798,088












Tangible Book Value per Share:










Tangible equity

$

150,830



$

147,539



$

156,102



$

153,203



$

150,413


Common shares outstanding

10,596,797



10,583,161



10,568,147



10,547,960



10,534,445












Tangible book value per common share

$

14.23



$

13.94



$

14.77



$

14.52



$

14.28












Tangible Equity to Tangible Assets Ratio:





Tangible equity

$

150,830



$

147,539



$

156,102



$

153,203



$

150,413


Tangible assets

$

1,848,288



$

1,828,233



$

1,868,745



$

1,849,525



$

1,798,088












Tangible equity to tangible assets

8.16

%


8.07

%


8.35

%


8.28

%


8.37

%
































Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,

(in $000's)

2013


2013


2012


2013


2012











Pre-Provision Net Revenue:










Income before income taxes

$

6,898



$

7,431



$

7,134



$

21,669



$

24,371


Add: provision for loan losses










Add: loss on debt extinguishment









3,111


Add: loss on loans held-for-sale and OREO







5




Add: net loss on securities transactions

1







1




Add: loss on other assets

29



89



174



118



176


Less: recovery of loan losses

919



1,462



956



3,446



4,213


Less: gain on loans held-for-sale and OREO

10



81





91



8


Less: net gain on securities transactions



26



112



444



3,275


Less: gain on other assets



2



13



2



13


Pre-provision net revenue

$

5,999



$

5,949



$

6,227



$

17,810



$

20,149












Pre-provision net revenue

$

5,999



$

5,949



$

6,227



$

17,810



$

20,149


Total average assets

1,891,732



1,910,988



1,847,591



1,905,581



1,825,832












Pre-provision net revenue to total average assets (annualized)

1.26

%


1.25

%


1.34

%


1.25

%


1.47

%











 

SOURCE Peoples Bancorp Inc.



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