Peoples Bancorp Inc. Announces Third Quarter Results

• Press Release
• Source: Peoples Bancorp Inc.
• On 8:55 am EDT, Tuesday October 20, 2009

MARIETTA, Ohio, Oct. 20 /PRNewswire-FirstCall/ -- Peoples Bancorp Inc. ("Peoples") (Nasdaq: PEBO - News) today announced results for the quarter ended September 30, 2009. Higher provision for loan losses, coupled with other-than-temporary impairment ("OTTI") charges on investment securities, resulted in Peoples incurring a net loss of $4.6 million, or $0.44 per diluted common share, for the third quarter of 2009. In comparison, Peoples reported net income available to common shareholders of $2.3 million, or $0.23 per diluted common share, for the second quarter of 2009 (or "linked quarter") and $3.0 million, or $0.28 per diluted common share for the third quarter of 2008. On a year-to-date basis, net income available to common shareholders was $1.6 million through September 30, 2009, versus $10.6 million a year ago, while diluted earnings per common share were $0.16 and $1.02, respectively.

Summary points regarding third quarter 2009 results:

• Provision for loan losses totaled $10.2 million, or 0.93% of average loans, as net charge-offs were $7.1 million and the allowance for loan losses increased to 2.46% of total loans versus 2.12% at June 30, 2009. Nonperforming assets increased $2.5 million, or 6%, to 2.16% of total assets, from 2.00% at the prior quarter-end. These changes in asset quality reflect lower collateral value on existing commercial real estate loans, coupled with continued deterioration in financial condition of commercial borrowers.
• Peoples recognized a non-cash pre-tax OTTI charge of $5.9 million ($3.9 million or $0.37 per common share after-tax) for credit losses incurred on two available-for-sale investment securities involving bank-issued trust preferred securities.
• Total Risk-Based Capital ratio was 16.39% at quarter-end, substantially higher than the regulatory minimum amount needed to be considered "well-capitalized", and tangible common equity increased to 7.22% of tangible assets, from 6.78% at June 30, 2009.
• Both net interest income and margin were consistent with the linked quarter, while year-over-year, net interest income grew 6% and net interest margin experienced slight compression.
• Non-interest income was down 6% from the linked quarter, due mostly to lower mortgage banking income from a slow-down in refinancing activity, and down 5% year-over-year, attributable to lower insurance revenues and reduced bank owned life insurance income.
• Non-interest expense benefited from significantly lower FDIC insurance expense and incentive-related compensation costs compared to the linked quarter. FDIC insurance expense decreased as a result of Peoples recognizing $930,000 of expense in the second quarter of 2009 related to the special assessment imposed on all FDIC insured banks.

"Our third quarter results were impacted by losses caused by continued weakness in commercial real estate values and the general economy," said Mark F. Bradley, President and Chief Executive Officer. "These losses also overshadowed positive results in several key areas, including stable net interest margin and enhanced operating efficiency. We also preserved Peoples' healthy capital position, which continues to serve as a source of strength as we work through a challenging economy."

Bradley continued, "The build up of our allowance for loan losses during the third quarter reflects our continued proactive approach to identify and dispose of problem loans. While additional loans were placed on nonaccrual status, we were successful in resolving some existing nonaccrual loans. We are encouraged by this progress and remain committed to reducing the overall level of nonperforming assets."

Third quarter 2009 net interest income of $15.5 million was comparable to the second quarter of 2009, while net interest margin was unchanged at 3.45%. Interest income was impacted by loan payoffs during the third quarter of 2009, coupled with the impact of additional loans being placed on nonaccrual status. However, the lower interest income was offset by a reduction in interest expense from the linked quarter, due to lower overall cost of funds attributable to Peoples repaying maturing, high-cost borrowings. Compared to the third quarter of 2008, net interest income increased 6%, as average earning assets increased $122 million, or 7%, year-over-year. A portion of the earning asset growth was the result of Peoples maintaining higher cash balances as a result of limited opportunities for attractive long-term asset investments and Peoples' planned paydowns of high-cost wholesale funding. The higher cash balance also accounted for the 5 basis point reduction in third quarter 2009 net interest margin versus the same period last year.

"Both net interest income and margin remained stable, despite pressure from short-term interest rates remaining at low levels," said Edward G. Sloane, Chief Financial Officer and Treasurer. "Earning asset yields continue to decline from downward repricing of variable rate loans and new loans being originated at current market rates. However, our ability to grow and retain low-cost core deposits has allowed us to continue repaying higher-cost funding as it matures, which produced a greater reduction in overall funding costs. We will continue to seek out opportunities to enhance net interest income and margin, while managing risks inherent in our balance sheet."

Non-interest income totaled $7.8 million for the third quarter of 2009, down slightly compared to both the linked quarter and prior year third quarter. During the third quarter of 2009, mortgage loan refinancing activity slowed versus the linked quarter, resulting in decreased mortgage banking income from lower gains on sales of loans. However, secondary market loan production remained more robust than the prior year, resulting in year-over-year growth in mortgage banking income. Insurance income decreased in the third quarter of 2009, compared to both the linked quarter and prior year third quarter. This decrease was attributed to lower property and casualty insurance commissions. Through nine months of 2009, total non-interest income was consistent with the same period last year.

Non-interest expense decreased $1.4 million, or 9%, on a linked quarter basis, totaling $14.1 million for the third quarter of 2009. Much of this reduction was caused by decreased FDIC insurance expense and lower incentive-based compensation expense. Year-over-year growth in total non-interest expense occurred for both the three and nine months ended September 30, 2009, due mostly to the additional FDIC insurance expense and external legal and valuation expenses associated with problem loans. Other significant contributing factors included higher employee medical benefit and pension plan costs.

"Our efforts to control operating costs have been successful, although hampered by additional costs related to problem loans," said Sloane. "The recessionary economy has limited our ability to grow certain non-interest revenues, including insurance commissions and trust and investment income. We continue to explore opportunities to expand our client base and maximize the use of existing resources as a means of maintaining operating efficiency and lowering costs when possible."

In the third quarter of 2009, Peoples recorded $5.9 million of other-than-temporary impairment losses on investment securities, of which $4.0 million related to a single bank-issued trust preferred security deemed a total loss and $1.9 million related to a collateralized debt obligation ("CDO") security, consisting mostly of bank-issued trust preferred securities, previously carried at $2.7 million. Management concluded these losses were required under current accounting rules since it did not expect to recover the entire amortized cost of the securities. These determinations were based upon management's evaluation of the credit quality of the issuers during the third quarter and estimation of cash flows to be received from the securities. After the third quarter 2009 impairment charges, the carrying value of Peoples' remaining investments in individual bank-issued trust preferred securities and CDO securities were $16.7 million and $2.8 million, respectively.

During the third quarter of 2009, Peoples' loan balances decreased $26.1 million to $1.07 billion, due mostly to some commercial loan payoffs during the quarter, coupled with the impact of charge-downs on existing impaired commercial loans. Through nine months of 2009, total loan balances also were impacted by loans being refinanced and sold to the secondary market due to customer demand for long-term, fixed-rate residential real estate loans. As a result, Peoples' serviced loan portfolio increased 22% since year-end 2008, to $220.6 million at September 30, 2009.

Nonperforming assets were $43.4 million, or 2.16% of total assets, at September 30, 2009, versus $40.9 million, or 2.00%, at June 30, 2009. During the third quarter of 2009, Peoples placed $10.6 million of commercial loans on nonaccrual status, of which the majority are secured by commercial real estate and the remainder secured by other business assets. The overall increase in nonperforming assets was mostly offset by charge-downs and payoffs on existing nonaccrual loans, which totaled $6.6 million and $2.4 million, respectively. Peoples' nonperforming assets are comprised primarily of nonaccrual loans secured by commercial real estate.

Third quarter 2009 net loan charge-offs were $7.1 million, or 2.57% of average loans on an annualized basis, compared to $5.7 million, or 2.05%, and $2.1 million, or 0.74%, for the second quarter of 2009 and third quarter of 2008, respectively. Approximately $5 million of the third quarter 2009 charge-offs were attributable to existing impaired commercial real estate loans to four unrelated borrowers, with aggregate balances of $18 million, becoming under-collateralized during the quarter. Through nine months of 2009, net loan charge-offs were $15.6 million, or 1.90% of average loans on an annualized basis, versus $10.8 million, or 1.29%, for the same period in 2008.

Peoples' allowance for loan losses increased $3.1 million in the third quarter of 2009, to $26.2 million, or 2.46% of total loans, from $23.2 million, or 2.12%, at June 30, 2009. This increase was caused by credit deterioration of several commercial loan relationships and increases in specific reserves for impaired commercial real estate loans during the third quarter, coupled with the impact of charge-offs remaining at an elevated level. To maintain the adequacy of the allowance for loan losses, Peoples recorded a third quarter 2009 provision for loan losses of $10.2 million versus $4.7 million last quarter and $6.0 million in the third quarter of 2008.

At September 30, 2009, retail deposit balances were down $29.6 million from the prior quarter-end but remained nearly $10 million higher than December 31, 2008. During the third quarter, Peoples continued its planned reduction in higher-cost, non-core deposits, primarily consisting of certificates of deposits from customers outside Peoples' primary market area, given the growth in lower-cost and non-interest-bearing deposits. Money market balances increased 7% during the third quarter and 15% since year-end 2008, while savings account balances were up 14% at quarter-end compared to December 31, 2008.

At September 30, 2009, Peoples' Tier 1 Common, Total Tier 1 and Total Risk-Based Capital ratios were 10.26%, 15.06% and 16.39%, compared to the well capitalized minimum ratios of 4%, 6% and 10%, respectively. Since year-end 2008, tangible common equity has increased due to improvement in fair value of Peoples' available-for-sale investment portfolio. As a result, tangible common equity to tangible assets was 7.22% at September 30, 2009, versus 6.78% last quarter and 6.21% at year-end 2008, while tangible equity to tangible assets was 9.21%, 8.74% and 6.21%, respectively.

"Although third quarter results were well below our expectations, we believe our allowance for loan losses is adequate to absorb losses inherent in the loan portfolio and our strong capital position prepares us well for the future," summarized Bradley. "Our core earnings stream is still strong, plus we are working on strategies to further enhance operating efficiency as we expect challenging economic times to persist."

Peoples Bancorp Inc. is a diversified financial products and services company with $2.0 billion in assets, 47 locations and 39 ATMs in Ohio, West Virginia and Kentucky. Peoples makes available a complete line of banking, investment, insurance, and trust solutions through its financial service units - Peoples Bank, National Association; Peoples Financial Advisors (a division of Peoples Bank); and Peoples Insurance Agency, Inc. 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 US 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 2009 results of operations today at 11:00 a.m., Eastern Daylight Savings 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.

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", "may", "feel", "expect", "believe", "plan", and similar expressions.

These forward-looking statements reflect management's current expectations based on all information available 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) continued deterioration in the credit quality of Peoples' loan portfolio could occur due to a number of factors, such as adverse changes in economic conditions that impair the ability of borrowers to repay their loans, the underlying value of the collateral could prove less valuable than otherwise assumed and assumed cash flows may be less favorable than expected, which may adversely impact the provision for loan losses; (2) competitive pressures among financial institutions or from non-financial institutions, which may increase significantly; (3) changes in the interest rate environment, 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) general economic conditions and weakening in the economy, specifically the real estate market, either national or in the states in which Peoples does business, which may be less favorable than expected; (6) political developments, wars or other hostilities, which may disrupt or increase volatility in securities markets or other economic conditions; (7) legislative or regulatory changes or actions, which may adversely affect the business of Peoples and its subsidiaries; (8) adverse changes in the conditions and trends in the financial markets, which may adversely affect the fair value of securities within Peoples' investment portfolio; (9) a delayed or incomplete resolution of regulatory issues that could arise; (10) Peoples' ability to receive dividends from its subsidiaries; (11) the impact of larger or similar financial institutions encountering problems, which may adversely affect the banking industry and/or Peoples; (12) changes in accounting standards, policies, estimates or procedures, which may impact Peoples' reported financial condition or results of operations; (13) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity; (14) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity; (15) the costs and effects of regulatory and legal developments, including the outcome of regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations; 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, 2008, as updated by the disclosure under the heading "ITEM 1A. RISK FACTORS" of Peoples' Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.

Peoples encourages readers of this news release to understand forward-looking statements to be 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.

                        PER COMMON SHARE DATA AND SELECTED RATIOS

                              Three Months Ended          Nine Months Ended
                          Sept. 30,   June 30, Sept. 30,      Sept. 30,
                            2009        2009     2008     2009       2008
    PER COMMON SHARE:
    Earnings per share:
       Basic              $(0.44)     $0.23     $0.29     $0.16     $1.02
       Diluted            $(0.44)     $0.23     $0.28     $0.16     $1.02
    Cash dividends
     declared per share    $0.10      $0.23     $0.23     $0.56     $0.68
    Book value per share  $19.85     $19.30    $19.09    $19.85    $19.09
    Tangible book value
     per share (a)        $13.50     $12.92    $12.62    $13.50    $12.62
    Closing stock price
     at end of period     $13.05     $17.05    $21.77    $13.05    $21.77

    SELECTED RATIOS:
    Return on average
     equity (b)           (6.70%)      4.93%     5.82%     1.74%     6.88%
    Return on average
     common equity (b)    (8.97%)      4.85%     5.82%     1.11%     6.88%
    Return on average
     assets  (b)          (0.79%)      0.56%     0.61%     0.20%     0.74%
    Efficiency ratio (c)  58.28%      63.12%    55.33%    60.00%    55.98%
    Net interest
     margin (b)(d)         3.45%       3.45%     3.50%     3.47%     3.54%
    Dividend payout
     ratio (e)              n/a         103%       81%      363%       67%

    (a)  Excludes the balance sheet impact of intangible assets acquired
         through acquisitions.
    (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)  Information presented on a fully tax-equivalent basis.
    (e)  Dividends declared on common shares as a percentage of net income
         available to common shareholders.



                             CONSOLIDATED STATEMENTS OF INCOME

                               Three Months Ended         Nine Months Ended
                       Sept. 30,  June 30,   Sept. 30,        Sept. 30,
    (in $000's)          2009      2009         2008       2009       2008
    Interest income    $25,472    $25,745     $26,063     $77,551    $79,910
    Interest expense    10,003     10,315      11,461      31,125     36,148
      Net interest
      income            15,469     15,430      14,602      46,426     43,762
    Provision for loan
     Losses             10,168      4,734       5,996      18,965     14,198
        Net interest
         income after
         provision for
         loan losses     5,301     10,696       8,606      27,461     29,564

    Gross impairment
     losses on
     investment
     securities         (6,395)        --          --      (6,395)      (260)
    Less: Non-credit
     Losses included
     in other
     comprehensive income (465)        --          --        (465)        --
      Net other-than-
       temporary
       impairment
       losses           (5,930)        --          --      (5,930)      (260)

    Net gain (loss) on
     securities
     transactions          276        262        (111)        864        134
    Net (loss) gain on
     asset disposals       (41)        57         (14)       (103)       (11)

    Non-interest income:
    Deposit account
     service charges     2,703      2,616       2,761       7,718      7,431
    Insurance income     2,228      2,405       2,439       7,378      7,701
    Trust and investment
     income              1,189      1,237       1,266       3,484      3,915
    Electronic banking
     income                986      1,020         994       2,929      2,925
    Mortgage banking
     income                276        507         104       1,384        500
    Bank owned life
     insurance             254        254         391         807      1,220
    Other non-interest
     income                150        206         201         568        581
      Total non-interest
       income            7,786      8,245       8,156      24,268     24,273

    Non-interest expense:
    Salaries and employee
     benefits costs      7,015      7,499       7,035      22,038     21,501
    Net occupancy and
     equipment           1,398      1,496       1,344       4,366      4,169
    Professional fees      742        700         528       2,183      1,594
    FDIC insurance         687      1,608          55       2,782        142
    Electronic banking
     expense               618        491         638       1,781      1,678
    Data processing and
     software              603        564         521       1,704      1,622
    Franchise taxes        466        404         416       1,293      1,248
    Amortization of
     intangible assets     307        319         390         956      1,208
    Marketing              279        298         273         811      1,010
    Other non-interest
     expense             1,972      2,142       1,993       6,196      5,807
      Total non-interest
       expense          14,087     15,521      13,193      44,110     39,979
      (Loss) income
       before
       income taxes     (6,695)     3,739       3,444       2,450     13,721
    Income tax (benefit)
     expense            (2,630)       893         493        (526)     3,169
       Net (loss)
       income          $(4,065)    $2,846      $2,951      $2,976    $10,552
    Preferred dividends    512        511          --       1,364         --
    Net (loss) income
     available to
     common
     shareholders     $(4,577)     $2,335      $2,951      $1,612    $10,552

    PER COMMON SHARE
     DATA:
    Earnings per share:
      Basic            $(0.44)      $0.23       $0.29       $0.16      $1.02
      Diluted          $(0.44)      $0.23       $0.28       $0.16      $1.02

    Cash dividends
     declared
     per share          $0.10       $0.23       $0.23       $0.56      $0.68

    Weighted-average
     shares
     outstanding:
       Basic       10,372,946  10,360,590  10,319,534  10,359,569  10,309,010
       Diluted     10,390,275  10,377,105  10,354,522  10,372,630  10,350,008

    Actual shares
     outstanding
     (end of
      period)      10,371,357  10,358,852  10,324,573  10,371,357  10,324,573



                                CONSOLIDATED BALANCE SHEETS

                                             September 30,      December 31,
    (in $000's)                                  2009              2008

    Assets
    Cash and cash equivalents:
      Cash and due from banks                  $ 29,699           $34,389
      Interest-bearing deposits in other banks   11,999             1,209
        Total cash and cash equivalents          41,698            35,598

    Available-for-sale investment securities,
    at fair value (amortized cost of $704,388
    at September 30, 2009 and $696,855 at
    December 31, 2008)                          725,898           684,757
    Other investment securities, at cost         24,356            23,996
        Total investment securities             750,254           708,753

    Loans, net of deferred fees and costs     1,068,039         1,104,032
    Allowance for loan losses                   (26,249)          (22,931)
        Net loans                             1,041,790         1,081,101

    Loans held for sale                           2,591               791
    Bank premises and equipment, net of
    accumulated depreciation                     24,952            25,111
    Bank owned life insurance                    52,679            51,873
    Goodwill                                     62,520            62,520
    Other intangible assets                       3,285             3,886
    Other assets                                 24,985            32,705
        Total assets                         $2,004,754        $2,002,338

    Liabilities
    Deposits:
    Non-interest-bearing deposits              $187,011          $180,040
    Interest-bearing deposits                 1,206,564         1,186,328
        Total deposits                        1,393,575         1,366,368

    Short-term borrowings                        48,344            98,852
    Long-term borrowings                        277,085           308,297
    Junior subordinated notes held by
    subsidiary trust                             22,522            22,495
    Accrued expenses and other liabilities       18,865            19,700
        Total liabilities                     1,760,391         1,815,712

    Stockholders' Equity
    Preferred stock, no par value
     (50,000 shares authorized, 39,000
      shares issued at September 30, 2009,
       and no shares issued at
       December 31, 2008)                        38,518                --
    Common stock, no par value
     (24,000,000 shares authorized,
      11,023,079 shares issued at
      September 30, 2009, and 10,975,364
      shares issued at December 31, 2008),      166,090           164,716
      including shares in treasury
    Retained earnings                            46,576            50,512
    Accumulated comprehensive income (loss),
    net of deferred income taxes                  9,638          (12,288)
    Treasury stock, at cost (651,722 shares
    at September 30, 2009, and
    641,480 shares at December 31, 2008)        (16,459)          (16,314)
        Total stockholders' equity              244,363           186,626
        Total liabilities and stockholders'
         equity                              $2,004,754        $2,002,338



                              SELECTED FINANCIAL INFORMATION

    (in $000's, end       Sept. 30,  June 30,  March 31,  Dec. 31,  Sept. 30,
      of period)            2009       2009      2009       2008      2008

    Loan Portfolio
    Commercial, mortgage $478,518   $504,826   $498,395   $478,298   $490,978
    Commercial, other     160,677    173,136    174,660    178,834    181,783
    Real estate,
     construction          67,143     54,446     62,887     77,917     70,899
    Real estate, mortgage 216,571    216,280    224,843    231,778    234,823
    Home equity lines of
     credit                48,991     48,301     47,454     47,635     46,909
    Consumer               94,374     95,161     90,741     87,902     85,983
    Deposit account
     overdrafts             1,765      2,016      1,930      1,668      2,235
        Total loans     1,068,039  1,094,166  1,100,910  1,104,032  1,113,610

    Deposit Balances
    Interest-bearing
     deposits:
      Retail certificates
       of deposit        $561,619   $596,713   $637,125   $626,195   $563,124
      Interest-bearing
       demand accounts    206,514    206,866    214,922    187,100    199,534
      Money market deposit
       accounts           245,621    228,963    227,840    213,498    175,120
      Savings accounts    131,398    129,614    125,985    115,419    118,634
        Total retail
         interest-
         bearing
         deposits       1,145,152  1,162,156  1,205,872  1,142,212  1,056,412
      Brokered
       certificates of
       deposits            61,412     45,862     24,965     44,116      9,971
        Total interest-
         bearing
         deposits       1,206,564  1,208,018  1,230,837  1,186,328  1,066,383
    Non-interest-bearing
     deposits             187,011    199,572    190,754    180,040    184,474
        Total deposits  1,393,575  1,407,590  1,421,591  1,366,368  1,250,857

    Asset Quality
    Nonperforming assets:
      Loans 90+ days
       past due and
       accruing             $ 993      $ 242     $   41   $     --     $1,852
      Nonaccrual loans     41,136     40,460     38,535     41,320     33,896
        Total
         nonperforming
         loans             42,129     40,702     38,576     41,320     35,748
      Other real estate
       owned                1,238        163        265        525        260
    Total nonperforming
     assets               $43,367    $40,865    $38,841    $41,845    $36,008

    Allowance for loan
     losses as a percent
     of nonperforming
     loans                   62.3%      56.9%      62.4%      55.5%      53.6%
    Nonperforming loans
     as a percent of
     total loans             3.94%      3.72%      3.50%      3.74%      3.21%
    Nonperforming assets
     as a percent of
     total assets            2.16%      2.00%      1.89%      2.09%      1.88%
    Nonperforming assets
     as a percent of
     total loans and
     other real estate
     owned                   4.06%      3.73%      3.53%      3.79%      3.23%
    Allowance for loan
     losses as a percent
     of total loans          2.46%      2.12%      2.19%      2.08%      1.72%

    Capital Information(a)
    Tier 1 risk-based
     capital ratio          15.06%     14.88%     14.81%     11.88%     12.32%
    Total risk-based
     capital ratio (Tier 1
     and Tier 2)            16.39%     16.22%     16.10%     13.19%     13.65%
    Leverage ratio           9.82%      9.95%      9.97%      8.18%      8.66%
    Tier 1 capital       $193,013   $198,041   $197,258   $156,254   $160,558
    Total capital (Tier 1
     and Tier 2)         $209,986   $215,826   $214,373   $173,470   $177,869
    Total risk-weighted
     assets            $1,281,319 $1,330,979 $1,331,758 $1,315,657 $1,303,205
    Tangible equity to
     tangible assets (b)     9.21%      8.74%      8.24%      6.21%      7.03%
    Tangible common
     equity to tangible
     assets (b)              7.22%      6.78%      6.31%      6.21%      7.03%

    (a)  September 30, 2009 data based on preliminary analysis and subject to
         revision.
    (b)  These ratios represent non-GAAP 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 release.



                           PROVISION FOR LOAN LOSSES INFORMATION

                                Three Months Ended      Nine Months Ended
                          Sept. 30,  June 30,  Sept. 30,    Sept. 30,
    (in $000's)             2009      2009       2008    2009      2008

    Provision for Loan
     Losses
    Provision for checking
     account overdrafts    $  268    $  234    $  421    $  565    $  618
    Provision for other
     loan losses            9,900     4,500     5,575    18,400    13,580
      Total provision for
       loan losses        $10,168   $ 4,734   $ 5,996   $18,965   $14,198

    Net Charge-Offs
    Gross charge-offs     $ 7,479   $ 6,986   $ 2,510   $17,763   $11,868
    Recoveries                409     1,327       441     2,116     1,108
      Net charge-offs     $ 7,070   $ 5,659   $ 2,069   $15,647   $10,760

    Net Charge-Offs
     by Type
    Commercial            $ 6,499   $ 4,877   $ 1,428   $13,844   $ 9,190
    Real estate                92       271       140       549       594
    Overdrafts                260       261       341       684       576
    Consumer                  219       250       160       570       400
      Total net charge-
       offs               $ 7,070   $ 5,659   $ 2,069   $15,647   $10,760

    Net charge-offs as a
     percent of loans
     (annualized)            2.57%     2.05%     0.74%     1.90%     1.29%



                             SUPPLEMENTAL INFORMATION

    (in $000's, end      Sept. 30,  June 30, March 31,  Dec. 31,  Sept. 30,
     of period)            2009       2009     2009      2008       2008

    Trust assets under
     management          $738,535  $692,823  $664,784  $685,705  $734,483
    Brokerage assets
     under management    $210,743  $183,968  $169,268  $184,301  $207,284
    Mortgage loans
     serviced for others $220,605  $213,271  $199,613  $181,440  $180,441
    Employees (full-time
     equivalent)              544       548       547       546       545



            CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST INCOME

                                         Three Months Ended
                            September 30, 2009             June 30, 2009
    (in $000's)       Balance      Income/  Yield/   Balance   Income/  Yield/
                                   Expense  Cost              Expense    Cost
    Assets
    Short-term
     investments       $34,490         $22  0.25%   $38,546       $24    0.25%
    Investment
     securities (a)(b) 736,653       9,765  5.30%   716,288     9,849    5.50%
    Gross loans (a)  1,092,059      16,077  5.87% 1,106,928    16,282    5.91%
    Allowance for
     loan losses       (24,479)                      (24,495)
    Total earning
     assets          1,838,723      25,864  5.60% 1,837,267    26,155    5.70%

    Intangible assets   65,969                       66,144
    Other assets       129,745                      137,839
    Total assets    $2,034,437                   $2,041,250

    Liabilities
     and Equity
    Interest-bearing
     deposits:
    Savings accounts  $130,290        $176  0.54%  $128,790      $168    0.52%
    Interest-
     bearing demand
     accounts          210,855         823  1.55%   206,168       795    1.55%
    Money market
     deposit
    accounts           234,513         689  1.17%   223,442       631    1.13%
    Brokered
     certificates
     of deposits        56,232         567  4.00%    32,660       334    4.10%
    Retail
     certificates
     of deposit        580,281       4,235  2.90%   623,102     4,650    2.99%
    Total interest-
     bearing
     deposits        1,212,171       6,490  2.12% 1,214,162     6,578    2.17%

    Short-term
     borrowings         55,700         110  0.77%    49,924       108    0.86%
    Long-term
     borrowings        309,879       3,403  4.32%   330,505     3,629    4.37%
    Total borrowed
     funds             365,579       3,513  3.78%   380,429     3,737    3.91%
    Total interest-
     bearing
     liabilities     1,577,750      10,003  2.51% 1,594,591    10,315    2.59%


    Non-interest-
     bearing deposits  197,900                      198,515
    Other liabilities   17,952                       16,690
    Total
     liabilities     1,793,602                    1,809,796

    Preferred equity    38,506                       38,478
    Common equity      202,329                      192,976
    Stockholders'
     equity            240,835                      231,454
    Total liabilities
     and equity     $2,034,437                   $2,041,250

    Net interest
     income/
     spread (a)                    $15,861  3.09%             $15,840    3.11%
    Net interest
     margin (a)                             3.45%                        3.45%


                                                   Three Months Ended
                                                   September 30, 2008

    (in $000's)                             Balance      Income/      Yield/
                                                         Expense       Cost
    Assets
    Short-term investments                    $2,640         $12       1.87%
    Investment securities (a)(b)             620,475       8,381       5.40%
    Gross loans (a)                        1,109,478      18,052       6.45%
    Allowance for loan losses               (16,554)
    Total earning assets                   1,716,039      26,445       6.15%
    Intangible assets                         67,006
    Other assets                             130,991
    Total assets                          $1,914,036

    Liabilities and Equity
    Interest-bearing deposits:
    Savings accounts                        $117,590        $155       0.52%
    Interest-bearing demand accounts         202,402         900       1.77%
    Money market deposit accounts            176,510         852       1.92%
    Brokered certificates of deposits         23,716         291       4.88%
    Retail certificates of deposit           560,463       5,260       3.73%
    Total interest-bearing deposits        1,080,681       7,458       2.75%

    Short-term borrowings                    133,511         689       2.02%
    Long-term borrowings                     297,901       3,314       4.38%
    Total borrowed funds                     431,412       4,003       3.65%
    Total interest-bearing liabilities     1,512,093      11,461       3.01%

    Non-interest-bearing deposits            186,412
    Other liabilities                         13,729
    Total liabilities                      1,712,234

    Preferred equity                              --
    Common equity                            201,802
    Stockholders' equity                     201,802
    Total liabilities and equity          $1,914,036

    Net interest income/spread (a)                       $14,984       3.14%
    Net interest margin (a)                                            3.50%

    (a) Information presented on a fully tax-equivalent basis.
    (b) Average balances are based on carrying value.



                                         Nine Months Ended
                             September 30, 2009         September 30, 2008
    (in $000's)       Balance     Income/   Yield/    Balance  Income/  Yield/
                                  Expense   Cost               Expense   Cost
    Assets
    Short-term
     investments      $32,938       $61     0.25%     $3,346      $61    2.47%
    Investment
     securities (a)(b)721,563    29,625     5.47%    600,149   24,183    5.37%
    Gross loans (a) 1,102,037    49,091     5.93%  1,112,315   56,885    6.80%
    Allowance for
     loan losses      (24,320)                       (16,346)
    Total earning
     assets         1,832,218    78,777     5.74%  1,699,464   81,129    6.37%

    Intangible
     assets            66,123                         67,409
    Other assets      134,756                        128,170
    Total assets   $2,033,097                     $1,895,043

    Liabilities
     and Equity
    Interest-bearing
     deposits:
    Savings
     accounts        $125,921      $468     0.50%   $113,927     $416    0.49%
    Interest-
     bearing
     demand accounts  204,299     2,353     1.54%    201,275    2,772    1.84%
    Money market
     deposit
     accounts         226,912     1,970     1.16%    164,811    2,727    2.21%
    Brokered
     certificates
     of deposits       38,836     1,175     4.05%     38,883    1,496    5.14%
    Retail
     certificates
     of deposit       612,099    14,086     3.08%    544,736   16,293    4.00%
    Total interest-
     bearing
     deposits       1,208,067    20,052     2.22%  1,063,632   23,704    2.98%

    Short-term
     borrowings        58,258       388     0.88%    156,908    3,006    2.52%
    Long-term
     borrowings       325,002    10,685     4.36%    275,498    9,438    4.53%
    Total borrowed
     funds            383,260    11,073     3.83%    432,406   12,444    3.80%
    Total interest-
     bearing
     liabilities    1,591,327    31,125     2.61%  1,496,038   36,148    3.22%

    Non-interest-
     bearing
     deposits         195,211                        179,959
    Other
     liabilities       17,348                         14,269
    Total
     liabilities    1,803,886                      1,690,266

    Preferred
     equity            34,396                             --
    Common equity     194,815                        204,777
    Stockholders'
     equity           229,211                        204,777
    Total
     liabilities
     and equity    $2,033,097                     $1,895,043

    Net interest
     income/
     spread (a)                 $47,652     3.13%             $44,981    3.15%
    Net interest
     margin (a)                             3.47%                        3.54%

    (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' financial statements:

    (in $000's, end      Sept. 30,   June 30,   March 31,  Dec. 31,  Sept. 30,
     of period)             2009       2009       2009      2008       2008

    Tangible Equity:
    Total stockholders'
     equity, as reported $244,363   $238,449  $230,307   $186,626   $197,094
    Less: goodwill and
     other intangible
     assets                65,805     66,093    66,272     66,406     66,788
    Tangible equity      $178,558   $172,356  $164,035   $120,220   $130,306

    Tangible Common
     Equity:
    Tangible equity      $178,558   $172,356  $164,035   $120,220   $130,306
    Less: preferred
     stockholders'
     equity                38,518     38,494    38,470         --         --
    Tangible common
     equity              $140,040   $133,862  $125,565   $120,220   $130,306

    Tangible Assets:
    Total assets, as
     reported          $2,004,754 $2,039,251 $2,055,944 $2,002,338 $1,920,388
    Less: goodwill and
     other intangible
     assets                65,805     66,093     66,272     66,406     66,788
    Tangible assets    $1,938,949 $1,973,158 $1,989,672 $1,935,932 $1,853,600

    Tangible Book Value
     per Share:
    Tangible common
     equity              $140,040   $133,862   $125,565   $120,220   $130,306
    Common shares
     outstanding       10,371,357 10,358,852 10,343,974 10,333,884 10,324,573

    Tangible book
     value per share       $13.50     $12.92     $12.14     $11.63     $12.62

    Tangible Equity
     to Tangible Assets
     Ratio:
    Tangible equity      $178,558   $172,356   $164,035   $120,220   $130,306
    Total tangible
     assets            $1,938,949 $1,973,158 $1,989,672 $1,935,932 $1,853,600

    Tangible equity
     to tangible assets      9.21%      8.74%      8.24%      6.21%      7.03%

    Tangible Common
     Equity to Tangible
     Assets Ratio:
    Tangible common
     equity              $140,040   $133,862   $125,565   $120,220   $130,306
    Tangible assets    $1,938,949 $1,973,158 $1,989,672 $1,935,932 $1,853,600

    Tangible common
     equity to tangible
     assets                  7.22%      6.78%      6.31%      6.21%      7.03%

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