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Peoples Bancorp Inc. Reports Quarterly Net Income

MARIETTA, Ohio, July 23, 2019 /PRNewswire/ -- Peoples Bancorp Inc. ("Peoples") (PEBO) today announced results for the quarter ended June 30, 2019.  Net income totaled $9.6 million for the second quarter of 2019, representing earnings per diluted common share of $0.46.  In comparison, earnings per diluted common share were $0.73 for the first quarter of 2019 and $0.41 for the second quarter of 2018.  For the six months ended June 30, 2019, earnings per diluted common share were $1.19, compared to $1.04 for the six months ended June 30, 2018.  Acquisition-related costs negatively impacted earnings per diluted common share by $0.28, $0.01, and $0.25 during the second quarter of 2019, first quarter of 2019, and second quarter of 2018, respectively, and by $0.29 and $0.27 during the first six months of 2019 and 2018, respectively.

On April 12, 2019, Peoples completed the previously-announced merger with First Prestonsburg Bancshares Inc. ("First Prestonsburg").  First Prestonsburg merged into Peoples, and First Prestonsburg's wholly-owned subsidiary, First Commonwealth Bank of Prestonsburg Inc. ("First Commonwealth"), which operated nine full-service bank branches in eastern and central Kentucky, merged into Peoples Bank.  As of April 12, 2019, First Prestonsburg had $294.1 million in total assets, which included $130.4 million in total loans, and $257.2 million in total deposits, after preliminary fair value adjustments.  Consideration of $43.7 million was paid in the merger, of which $11.3 million was in the form of a special cash dividend paid to shareholders of First Prestonsburg prior to the merger, with the remainder paid in the form of an aggregate of 1,005,478 Peoples common shares.

"During the second quarter of 2019, we completed our acquisition of First Prestonsburg and grew net interest income by 6% compared to the first quarter of 2019," said Chuck Sulerzyski, President and Chief Executive Officer.  "We are excited about the new capabilities and product offerings available to our new customers as a result of the acquisition.  For the first six months of 2019, net interest margin grew to 3.78%, compared to 3.70% for the same period of 2018.  Non-interest income was also a highlight for the first six months of 2019 as we have grown those sources of income by 9% over the same 2018 period.  Asset quality remains strong, with annualized net charge-offs at 3 basis points of average total loans for the quarter.  We are committed to maintaining focus on building strong, reliable results for our shareholders as we proceed into the second half of 2019."

Statement of Income Highlights:

  • Net interest income grew $2.1 million, or 6%, compared to the linked quarter and $3.2 million, or 10%, compared to the second quarter of 2018.
  • Peoples recorded a provision for loan losses of $0.6 million during the second quarter of 2019, compared to a recovery of loan losses of $0.3 million during the first quarter of 2019, and a provision for loan losses of $1.2 million for the second quarter of 2018.
  • Total non-interest income, excluding net gains and losses, increased $58,000 compared to the linked quarter, and increased $1.8 million, or 13%, compared to the second quarter of 2018.
  • Total non-interest expense increased $7.0 million, or 22%, compared to the linked quarter and grew $2.9 million, or 8%, compared to the second quarter of 2018.

Balance Sheet Highlights:

  • As of June 30, 2019, loan balances acquired from First Prestonsburg totaled $125.3 million, and deposit balances acquired from First Prestonsburg totaled $232.2 million.
  • Period-end total loan balances increased $96.0 million compared to the end of the linked quarter.
  • Asset quality metrics remained strong during the quarter.
  • Period-end total deposit balances grew $226.2 million, or 7%, compared to March 31, 2019, and increased $414.4 million, or 14%, compared to June 30, 2018.

Net Interest Income:
Net interest income was $36.0 million for the second quarter of 2019, an increase of 6% compared to the linked quarter.  Net interest margin was 3.77% for the second quarter of 2019, compared to 3.80% for the linked quarter.  The slight decline in interest margin during the quarter was driven by higher costs for time deposits and governmental deposits, which more than offset increased loan yields, driven by the First Prestonsburg acquisition.  Compared to the first quarter of 2019, net interest income was positively impacted by the acquisition of First Prestonsburg.

Accretion income, net of amortization expense, from acquisitions was $1.2 million for the second quarter of 2019 and $722,000 for the first quarter of 2019, which added 13 basis points and 8 basis points, respectively, to net interest margin.  The growth in net accretion income compared to the first quarter of 2019 was due to the First Prestonsburg acquisition, specifically the loan discount that was accreted during the quarter.

Net interest income for the current quarter increased $3.2 million, or 10%, over the second quarter of 2018. Net interest margin increased 3 basis points compared to 3.74% for the second quarter of 2018.  The increase in net interest income compared to the second quarter of 2018 was driven by higher yields on loans, combined with the impact of acquired First Prestonsburg loans.  These were partially offset by higher deposit costs due to increased competition for deposits, combined with additional interest expense related to the acquired First Prestonsburg deposits.  The second quarter of 2018 also benefited from proceeds of $248,000 received on an investment security that had been previously written down due to an other-than-temporary impairment ("OTTI"), which added 3 basis points to the net interest margin.  Peoples recorded no similar proceeds during the current quarter.

Accretion income, net of amortization expense, from acquisitions was $1.2 million for the second quarter of 2019 and $523,000 for the second quarter of 2018, which added 13 basis points and 6 basis points, respectively, to net interest margin.  The increase in net accretion income compared to the second quarter of 2018 was due to the First Prestonsburg acquisition.

For the first six months of 2019, net interest income grew 13% compared to 2018, and net interest margin grew 8 basis points to 3.78%. The increases were driven by higher interest income on loans due to a combination of loan growth, which was primarily the result of the First Prestonsburg and ASB Financial Corp. ("ASB") acquisitions, and higher yields from interest rate increases.  The interest income from higher average loan balances outpaced interest expense from deposits, which increased due to the recent acquisitions and increased competition for deposits.  The first six months of 2018 benefited from proceeds of $589,000 received on investment securities that had been previously written down due to OTTI, which added 3 basis points to net interest margin.

Accretion income, net of amortization expense, from acquisitions was $1.9 million for the first six months of 2019 and $1.1 million for the first six months of 2018, which added 10 basis points and 6 basis points, respectively, to net interest margin.  The growth in net accretion income compared to the first six months of 2018 was largely due to the First Prestonsburg acquisition.

Provision for (Recovery of) Loan Losses:
The provision for loan losses was $626,000 for the second quarter of 2019, compared to recovery of loan losses of $263,000 for the linked quarter and provision for loan losses of $1,188,000 for the second quarter of 2018.  Net charge-offs for the second quarter of 2019 were $208,000, or 0.03% of average total loans, compared to net recoveries of $1,007,000, or 0.15% of average total loans, for the linked quarter and net charge-offs of $720,000, or 0.11% of average total loans, for the second quarter of 2018.  Net recoveries during the first quarter of 2019 were driven by a $1.8 million recovery recorded on a previously charged-off commercial loan.  Gross charge-offs were $665,000, or 0.09% of average total loans, for the second quarter of 2019, compared to $1.0 million, or 0.15% of average total loans, for the first quarter of 2019, and $1.0 million, or 0.15% of average total loans, for the second quarter of 2018.

For the first six months of 2019, the provision for loan losses was $363,000, compared to $3.2 million for the first six months of 2018.  Net recoveries for the first six months of 2019 were $799,000, compared to net charge-offs of $2.7 million for the first six months of 2018.  The first six months of 2019 included the $1.8 million recovery recorded on a previously charged-off commercial loan.  The first six months of 2018 included a charge-off of $827,000 on an acquired commercial loan relationship.  Gross charge-offs were $1.7 million, or 0.12% of average total loans, for the first six months of 2019, compared to $3.3 million, or 0.26% of average total loans, for the first six months of 2018.

Net Gains and Losses:
Net gains and losses include gains and losses on investment securities, and on asset disposals and other transactions, which are included in non-interest income.  Net losses during the second quarter of 2019 were $350,000, compared to $152,000 for the linked quarter, and $552,000 in the second quarter of 2018.  During the second quarter of 2019, losses included $253,000 of write-offs of fixed assets acquired from First Prestonsburg.  Losses during the linked quarter included $118,000 of market value write-downs related to closed offices that were held for sale.  During the second quarter of 2018, losses included $192,000 related to fixed assets acquired from ASB and $147,000 in market value write-downs for buildings that were held for sale.

For the first six months of 2019, net losses were $502,000, compared to $477,000 for the first six months of 2018.  Net losses during the year-to-date period through June 30, 2019 were driven by the write-offs of fixed assets acquired from First Prestonsburg and market value write-downs related to closed offices that were held for sale.  In the year-to-date period in 2018, the second quarter losses on fixed asset disposals, loss on investment securities and market value write-downs on properties held for sale were partially offset by net gains on repossessed assets that had been recorded in the first quarter of 2018.

Total Non-interest Income, Excluding Net Gains and Losses:
Total non-interest income, excluding net gains and losses, for the second quarter of 2019 increased $58,000 compared to the linked quarter.  The first quarter of 2019 included $1.4 million of annual performance-based insurance commissions, which are primarily received in the first quarter each year.  Additionally, other non-interest income in the first quarter of 2019 included $787,000 of income related to the sale of restricted Class B Visa stock.  These two items were offset by increases in a number of categories in the second quarter of 2019.  Income from deposit account service charges was up 27% compared to the linked quarter, due to a combination of the additional accounts acquired from First Prestonsburg and a new deposit account fee schedule that was implemented in March 2019.  Commercial loan swap fee income was up $370,000, driven by higher customer demand and an increase in the average size of each transaction, given the current rate environment.  Trust and investment income, and electronic banking income each increased 9%, while mortgage banking income increased 27% compared to the linked quarter due to more sales of residential real estate loans to the secondary market.

Compared to the second quarter of 2018, non-interest income, excluding net gains and losses, grew $1.8 million, or 13%.  All non-interest income categories increased, with the exception of bank owned life insurance, which had a slight decrease.  Income from deposit account service charges, which increased 25% compared to the prior year quarter, benefited from the additional accounts acquired from First Prestonsburg and the new deposit account fee schedule implemented in March 2019.  Electronic banking income was up 17% primarily as the result of increased debit card usage, which was positively impacted by the additional cardholders obtained in the First Prestonsburg acquisition.  Commercial loan swap fee income increased, driven by an increase in the average size of each transaction and customer demand as a result of the current rate environment.

For the first six months of 2019, non-interest income, excluding net gains and losses, grew $2.5 million, or 9%, compared to the same period in the prior year.  Income from deposit account service charges was up 18% compared to a year ago primarily due to the ASB and First Prestonsburg acquisitions, coupled with changes in fee schedules.  Electronic banking increased 12%, as it was positively impacted by the additional customers and accounts obtained in the acquisitions.  Commercial loan swap fee income increased, driven by an increase in the average size of each transaction and customer demand as a result of the current rate environment.  Year-over-year, mortgage banking income increased 35% due to more sales as the result of the mortgage operation acquired from ASB.  Realized and unrealized gains on equity investment securities increased $585,000 compared to the first six months of 2018, driven by $787,000 of income related to the sale of restricted Class B Visa stock during the first quarter of 2019.  These increases were partially offset by lower Small Business Administration income, which declined $550,000 compared to the first six months of 2018 as the result of lower volume.

Total Non-interest Expense:
Total non-interest expense increased $7.0 million, or 22%, compared to the linked quarter, and grew $2.9 million, or 8%, compared to the second quarter of 2018.  Core non-interest expense, which excludes acquisition-related expenses, increased $499,000, or 2%, compared to the linked quarter, and grew $2.2 million, or 7%, compared to the second quarter of 2018.  For the first six months of 2019, total non-interest expense increased $6.5 million, or 10%, compared to the first six months of 2018.  Core non-interest expense for the first six months of 2019 increased $5.7 million, or 10%, compared to the first six months of 2018.

The table below summarizes core non-interest expense by category of non-interest expense.  Core non-interest expense is a non-US GAAP financial measure derived from amounts reported in Peoples' consolidated financial statements.  This non-US GAAP financial measure used by Peoples provides information useful to investors in understanding Peoples' operating performance and trends, and facilitates comparisons with the performance of Peoples' peers.


Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,

(Dollars in thousands)

2019


2019


2018


2019


2018

Non-interest expense:










Salaries and employee benefit costs

20,824



19,202



18,025



40,026



34,015


Net occupancy and equipment expense

3,132



2,978



2,803



6,110



5,669


Professional fees

2,344



1,276



3,022



3,620



4,740


Electronic banking expense

1,693



1,577



1,407



3,270



2,857


Data processing and software expense

1,567



1,545



1,359



3,112



2,681


Amortization of other intangible assets

824



694



861



1,518



1,615


Franchise tax expense

772



705



614



1,477



1,258


Marketing expense

490



594



656



1,084



981


FDIC insurance expense

381



371



416



752



782


Foreclosed real estate and other loan expenses

469



255



338



724



550


Communication expense

317



278



300



595



644


Other non-interest expense

6,063



2,385



6,170



8,448



8,400


  Total non-interest expense

38,876



31,860



35,971



70,736



64,192


Acquisition-related expenses:










Salaries and employee benefit costs

2,368



3



1,923



2,371



1,923


Net occupancy and equipment expense

20



17



12



37



14


Professional fees

562



58



652



620



711


Data processing and software expense

12



79



25



91



59


Marketing expense

87



36



55



123



91


Foreclosed real estate and other loan expenses



5



2



5



2


Communication expense



1





1




Other non-interest expense

3,721



54



3,387



3,775



3,405


  Total acquisition-related expenses

6,770



253



6,056



7,023



6,205


Core non-interest expense:










Salaries and employee benefit costs

18,456



19,199



16,102



37,655



32,092


Net occupancy and equipment expense

3,112



2,961



2,791



6,073



5,655


Professional fees

1,782



1,218



2,370



3,000



4,029


Electronic banking expense

1,693



1,577



1,407



3,270



2,857


Data processing and software expense

1,555



1,466



1,334



3,021



2,622


Amortization of other intangible assets

824



694



861



1,518



1,615


Franchise tax expense

772



705



614



1,477



1,258


Marketing expense

403



558



601



961



890


FDIC insurance expense

381



371



416



752



782


Foreclosed real estate and other loan expenses

469



250



336



719



548


Communication expense

317



277



300



594



644


Other non-interest expense

2,342



2,331



2,783



4,673



4,995


  Total core non-interest expense

32,106



31,607



29,915



63,713



57,987



The following three paragraphs discuss changes to core non-interest expense.  Each comparison was affected by added core expenses in the second quarter of 2019 related to the First Prestonsburg acquisition.

The increase in core non-interest expense compared to the linked quarter was driven by increases in professional fees, and foreclosed real estate and other loan expenses, partially offset by a decline in salaries and employee benefit costs.  The increase in professional fees was mainly the result of additional audit and consulting procedures performed during the second quarter of 2019.  Salaries and employee benefit costs declined compared to the linked quarter as the result of expenses that occur annually in the first quarter, which included those associated with annual stock grants, primarily related to employees who were retirement eligible, and annual contributions to employee health benefit accounts.  The acquisition of First Prestonsburg mainly impacted the following line items: salaries and employee benefit costs, net occupancy and equipment expenses, and amortization of other intangible assets, in the linked quarter comparison.

Core non-interest expense increased compared to the second quarter of 2018 primarily due to higher salaries and employee benefit costs, partially offset by a decline in professional fees.  Base salaries, stock-based compensation, and medical insurance were the main contributors to the increase in salaries and employee benefit costs.   Base salaries were primarily impacted by the First Prestonsburg and ASB acquisitions, and annual merit increases, which included the continued movement towards a $15 per hour minimum wage throughout the company.  The $15 per hour minimum wage was announced in early 2018 and will be largely implemented by January 1, 2020.  The increase in medical insurance was driven by higher medical claims.  Stock-based compensation increased as a result of the employees that have been added in the last twelve months for future growth.  Professional fees declined 25% compared to the second quarter of 2018, primarily due to consulting procedures performed during the second quarter of 2018.

The increase in core non-interest expense for the first six months of 2019, compared to the first six months of 2018, was driven by higher salaries and employee benefit costs, partially offset by a decline in professional fees.  Salaries and employee benefit costs were up primarily due to higher base salaries, medical insurance and stock-based compensation.  Base salaries were impacted by the acquisitions, and annual merit increases, which included the continued movement towards a $15 per hour minimum wage throughout the company.  The increase in medical insurance was driven by higher medical claims.  Stock-based compensation increased as a result of the employees that have been added in the last twelve months for future growth.  Professional fees declined 26% compared to the second quarter of 2018, mostly due to consulting procedures performed during the first six months of 2018.  Net occupancy and equipment expenses also increased compared to the first six months of 2018, primarily due to the acquisitions.  Peoples also made investments in technology, which resulted in increased electronic banking, and data processing and software expenses.

The efficiency ratio for the second quarter of 2019 was 73.2%, compared to 62.7% for the linked quarter, and 75.0% for the second quarter of 2018.  The efficiency ratio increased compared to the linked quarter, driven by higher acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 60.2% for the second quarter of 2019, compared to 62.2% for the linked quarter, and 62.0% for the second quarter of 2018.  For the first six months of 2019, the efficiency ratio was 68.1%, compared to 68.5% for the first six months of 2018.  Adjusted for non-core items, the efficiency ratio for the first six months of 2019 was 61.2%, compared to 61.7% for the same period in the prior year.

Income Tax Expense:
Income tax expense was $2.2 million for the second quarter of 2019, compared to $3.4 million for the linked quarter and $1.0 million for the second quarter of 2018.  The decline in income tax expense compared to the linked quarter was due to lower pre-tax income.  The current quarter included a tax benefit of $59,000 recorded for the vesting of restricted stock during the current quarter, compared to a tax benefit of $133,000 in the linked quarter.  The vesting of a majority of stock awards granted by Peoples occurs annually in the first quarter.  The increase in income tax expense compared to the second quarter of 2018 was primarily due to higher pre-tax income.

For the first six months of 2019, Peoples recorded income tax expense of $5.6 million, compared to $3.4 million for the same period in the prior year, and the effective tax rate for the first six months of 2019 was 18.9%, compared to 14.7% for the first six months of 2018.  The year-over-year increase in income tax expense was primarily due to higher pre-tax income.  The first six months of 2019 included a tax benefit of $192,000 recorded for the vesting of restricted stock during the period.  The first six months of 2018 included an $805,000 valuation allowance release, as well as a tax benefit of $296,000 recorded for the vesting of restricted stock during the period.

Loans:
Period-end total loan balances at June 30, 2019 increased $96.0 million compared to March 31, 2019, and $104.8 million compared to December 31, 2018.  The increases were primarily due to the First Prestonsburg acquisition.  Originated loan balances declined $187,000 during the quarter, and increased $18.4 million compared to December 31, 2018.  Loan originations during the first half of 2019 were higher than in recent years for the same period; however, significantly higher loan paydowns experienced during the first half of 2019 minimized the impact of the increased production on loan growth for all comparison periods.  Total commercial loan balances increased $32.3 million compared to March 31, 2018.  Consumer loans continued to provide additional growth, driven by an increase in residential real estate loans of $41.8 million, or 28% annualized.

Compared to June 30, 2018, total loan balances increased $147.0 million, or 5%.  Commercial loan balances were up $60.7 million, or 4%, residential real estate loans increased $38.0 million, or 6%, and consumer indirect loans were up $46.1 million, or 12%, in each case from balances as of June 30, 2018.

As of June 30, 2019, the First Prestonsburg acquisition added:

  • $52.1 million in residential real estate loans;
  • $42.4 million in commercial real estate loans;
  • $7.4 million in consumer, direct loans;
  • $17.7 million in commercial and industrial loans, and;
  • $5.8 million in home equity lines of credit.

Quarterly average loan balances grew $96.0 million compared to the linked quarter, driven by the First Prestonsburg acquisition.  Commercial loan balances were up $40.9 million and residential real estate loans grew $43.7 million.

Quarterly average loan balances increased $202.8 million, or 8%, compared to the second quarter of 2018, driven by the recent acquisitions, coupled with the originated loan growth experienced during 2018.  Commercial loan balances increased $95.5 million, or 7%, compared to the second quarter of 2018.  Consumer indirect loans provided growth of $53.0 million, or 15%, compared to the year-ago quarter, and residential real estate loans increased $46.2 million, or 8%.

For the six months ended June 30, 2019, average gross loan balances increased $280.6 million, or 11%, compared to the same period in the prior year, driven by the recent acquisitions, coupled with the originated loan growth.  Average commercial and industrial loan balances grew $97.6 million, or 20%, while residential real estate balances grew $78.7 million, or 14%, and consumer indirect loans were up $59.9 million, or 17%, compared to the first six months of 2018.

Asset Quality:
Asset quality was impacted by the loans acquired from First Prestonsburg; however, overall asset quality metrics remained strong.  Criticized loans, which are those categorized as special mention, substandard or doubtful, increased $7.2 million, or 8%, compared to March 31, 2019, and decreased $23.8 million, or 20%, compared to June 30, 2018.  As a percent of total loans, criticized loans were 3.42% at June 30, 2019, compared to 3.28% at March 31, 2019 and 4.50% at June 30, 2018.  The increase in criticized loans was largely related to acquired First Prestonsburg loans.  Classified loans, which are those categorized as substandard or doubtful, increased $15.7 million, or 33%, compared to March 31, 2019, and were up $7.5 million, or 13%, from June 30, 2018.  As a percent of total loans, classified loans were 2.23% at June 30, 2019, compared to 1.73% at March 31, 2019 and 2.07% at June 30, 2018. The increase in classified loans was largely related to acquired First Prestonsburg loans, coupled with downgrades of two commercial loan relationships during the second quarter of 2019.

Nonperforming assets increased $1.9 million, or 11%, compared to March 31, 2019, and were up $2.1 million, or 11%, compared to June 30, 2018.  The increase compared to March 31, 2019, was partially due to acquired loans from First Prestonsburg, which comprised $0.7 million of nonperforming assets at June 30, 2019, with the remainder due to smaller relationships that have become past due and are still accruing.  Nonperforming assets as a percent of total loans and OREO were 0.71% at June 30, 2019, up from 0.67% at March 31, 2019 and 0.67% at June 30, 2018.  Annualized net charge-offs were 0.03% of average total loans for the second quarter of 2019.  Annualized net recoveries were 0.15% of average total loans for the linked quarter, which reflected the recognition during the quarter of a $1.8 million recovery on a previously charged-off commercial loan.  Annualized net charge-offs were 0.11% of average total loans for the second quarter of 2018.  For the first six months of 2019, annualized net recoveries were 0.06% of average total loans, which reflected the large recovery during the first quarter of 2019.  Annualized net charge-offs were 0.22% of average total loans for the first six months of 2018, which was higher due to a charge-off of $827,000 on an acquired commercial loan relationship.

At June 30, 2019, the allowance for loan losses increased to $21.4 million, compared to $20.9 million at March 31, 2019 and $19.3 million at June 30, 2018.  The increase in the allowance for loan losses compared to March 31, 2019 was minimal due to the decline in originated loans coupled with the lower amount of gross charge-offs.  The increase in the allowance for loan losses compared to June 30, 2018 was driven by loan growth.  The ratio of the allowance for loan losses as a percent of total loans declined to 0.75% at June 30, 2019, compared to 0.76% at March 31, 2019 and increased from 0.72% at June 30, 2018.  The ratio includes all acquired loans, from both First Prestonsburg and previous acquisitions since 2012, of $659.1 million and allowance for acquired loan losses of $533,000.  The increase in the ratio compared to June 30, 2018 was attributable to a combination of loan growth and an increase in the reserve on impaired loans of $802,000.

Deposits:
Period-end deposit balances increased $226.2 million, or 7%, compared to March 31, 2019, and were up $414.4 million, or 14% compared to June 30, 2018, both driven by the deposits acquired from First Prestonsburg.  Compared to March 31, 2019, the increase from the acquisition was partially offset by a decline in governmental deposits of $31.9 million, due to seasonality.  As of June 30, 2019, the acquired First Prestonsburg deposits added:

  • $65.3 million of CDs;
  • $62.8 million of interest-bearing demand accounts;
  • $55.7 million of savings accounts;
  • $33.4 million of non-interest-bearing demand accounts, and;
  • $15.1 million of money market accounts.

Average deposit balances during the second quarter of 2019 increased $217.3 million, or 7%, compared to the linked quarter, and $343.6 million, or 12%, from the second quarter of 2018.  For the first six months of 2019, average deposits increased $337.9 million, or 12%, compared to the first six months of 2018.  Most of the growth compared to the prior periods was related to the acquired First Prestonsburg deposits.  Compared to the linked quarter, increases in retail certificates of deposit of $80.6 million and savings accounts of $50.6 million were partially offset by a decline in brokered certificates of deposit of $41.5 million.  The increase compared to the second quarter of 2018 was driven by brokered certificates of deposit growth of $85.3 million and retail certificates of deposit growth of $82.2 million.  The increase compared to the first six months of 2018 was driven by brokered certificates of deposit growth of $121.2 million and retail certificates of deposit growth of $70.6 million.

Total demand deposit accounts comprised 37% of total deposits at June 30, 2019, compared to 38% at March 31, 2019 and 39% at June 30, 2018.

Stockholders' Equity:
At June 30, 2019, the tier 1 risk-based capital ratio was 14.07%, compared to 14.22% at March 31, 2019, and 13.29% at June 30, 2018.  The common equity tier 1 risk-based capital ratio was 13.82% at June 30, 2019, compared to 13.96% at March 31, 2019, and 13.03% at June 30, 2018.  The total risk-based capital ratio was 14.81% at June 30, 2019, compared to 14.98% at March 31, 2019, and 13.99% at June 30, 2018.  These capital ratios were impacted by the First Prestonsburg acquisition, which created increases in capital and risk-weighted assets.  In addition, net income earned during the second quarter of 2019 exceeded the dividends declared and paid during the quarter by $2.6 million.

The book value per share grew to $27.98 at June 30, 2019, compared to $27.19 at March 31, 2019, and $25.57 at June 30, 2018.  The tangible book value per share, which excludes goodwill and other intangible assets, was $18.89 at June 30, 2019, compared to $19.00 at March 31, 2019, and $17.17 at June 30, 2018.  The ratio of total shareholders' equity to total assets was 13.54% at June 30, 2019, compared to 13.32% at March 31, 2019 and 12.57% at June 30, 2018.  The tangible equity to tangible assets ratio, which excludes goodwill and other intangible assets, was 9.56% at June 30, 2019, compared to 9.70% at March 31, 2019, and 8.81% at June 30, 2018.  The primary contributor to the increase in the book value per share at June 30, 2019 compared to both March 31, 2019 and June 30, 2018, was the issuance of common stock associated with the First Prestonsburg acquisition.  While increases in equity and asset balances were experienced as a result of the First Prestonsburg acquisition, the tangible equity to tangible assets ratio decreased slightly compared to the end of the linked quarter as a result of increased intangible assets associated with the acquisition.

Total shareholders' equity at June 30, 2019 increased $43.9 million, or 8%, compared to March 31, 2019, which was mainly caused by the common shares issued for the First Prestonsburg acquisition, net income of $9.6 million and other comprehensive income of $7.8 million, partially offset by dividends paid of $7.0 million.  Other comprehensive income was the result of a higher market value adjustment related to the available-for-sale investment securities portfolio, which was driven by overall declines in market interest rates during the quarter.


Peoples Bancorp Inc. is a diversified financial services holding company with $4.3 billion in total assets, 89 locations, including 79 full-service bank branches, and 86 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 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 second quarter 2019 results of operations on July 23, 2019 at 11:00 a.m., Eastern Daylight Time, with members of Peoples' executive management participating.  Analysts, media and individual investors are invited to participate in the conference call by calling (866) 890-9285.  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-US 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 ("US GAAP").  Management uses these "non-US GAAP" financial measures in its analysis of Peoples' performance and the efficiency of its operations. Management believes that these non-US GAAP financial 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-US GAAP performance measures that may be presented by other companies. Below is a listing of the non-US GAAP financial measures used in this news release:

  • Core non-interest expenses are non-US GAAP since they exclude the impact of acquisition-related expenses and pension settlement charges.
  • Efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income, excluding net gains and losses. This measure is non-US GAAP since it excludes amortization of other intangible assets and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income.
  • Efficiency ratio adjusted for non-core items is calculated as core non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income, excluding net gains and losses. This measure is non-US GAAP since it excludes the impact of acquisition-related expenses and pension settlement charges, the amortization of other intangible assets and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income.
  • Tangible assets, tangible equity and tangible book value per common share measures are non-US GAAP since they exclude the impact of goodwill and other intangible assets acquired through acquisitions on both total stockholders' equity and total assets.
  • Pre-provision net revenue is defined as net interest income plus total non-interest income, excluding net gains and losses, minus total non-interest expense. This measure is non-US GAAP since it excludes the provision for loan losses and all gains and/or losses included in earnings.
  • Return on average assets adjusted for non-core items is calculated as annualized net income (less the impact of the Tax Cuts and Jobs Act on the remeasurement of deferred tax assets and deferred tax liabilities, and the after-tax impact of all gains and/or losses, acquisition-related expenses, and pension settlement charges) divided by average assets. This measure is non-US GAAP since it excludes the impact of the Tax Cuts and Jobs Act on the remeasurement of deferred tax assets and deferred tax liabilities, and the after-tax impact of all gains and/or losses, acquisition-related expenses, and pension settlement charges.
  • Return on average tangible stockholders' equity is calculated as annualized net income (less after-tax impact of amortization of other intangible assets) divided by tangible stockholders' equity. This measure is non-US GAAP since it excludes the after-tax impact of amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity.

A reconciliation of these non-US 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-US 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," "estimate," "may," "feel," "expect," "believe," "plan," "will," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," 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 the implementation of Peoples' business strategies, including the successful integration of the business of First Prestonsburg following the merger, and the expansion of consumer lending activity;

(2)

risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets;

(3)

Peoples' ability to integrate future acquisitions, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(4)

competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals;

(5)

changes in the interest rate environment due to economic conditions and/or the fiscal policies of the United States ("U.S.") government and the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which may adversely impact interest rates, interest margins, loan demand and interest rate sensitivity; 

(6)

uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, promulgated and to be promulgated by governmental and regulatory agencies in the state of Ohio, the Federal Deposit Insurance Corporation, the Federal Reserve Board and the Consumer Financial Protection Bureau, 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, including in particular the rules and regulations promulgated and to be promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;

(7)

the effects of easing restrictions on participants in the financial services industry;

(8)

local, regional, national and international economic conditions (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations) and the impact these conditions may have on Peoples, its customers and its counterparties, and Peoples' assessment of the impact, which may be different than anticipated;

(9)

the existence or exacerbation of general geopolitical instability and uncertainty;

(10)

changes in policy and other regulatory and legal developments, and uncertainty or speculation pending the enactment of such changes;

(11)

Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;

(12)

changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans and charge-offs, which may be less favorable than expected and adversely impact the amount of interest income generated;

(13)

adverse changes in economic conditions and/or activities, including, but not limited to, continued economic uncertainty in the U.S., the European Union (including the uncertainty surrounding the actions to be taken to implement the referendum by British voters to exit the European Union), Asia, and other areas, which could decrease sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;

(14)

deterioration in the credit quality of Peoples' loan portfolio, which may adversely impact the provision for loan losses;

(15)

Peoples may have more credit risk and higher credit losses to the extent loans are concentrated by location or industry of the borrowers or collateral;

(16)

changes in accounting standards, policies, estimates or procedures, including the new current expected credit loss rule issued by the Financial Accounting Standard Board in June 2016, which will require banks to record, at the time of origination, credit losses expected throughout the life of the asset portfolio on loans and held-to-maturity securities, as opposed to the current practice of recording losses when it is probable that a loss event has occurred, which may adversely affect Peoples' reported financial condition or results of operations;

(17)

Peoples' assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results;

(18)

the discontinuation of the London Inter-Bank Offered Rate and other reference rates may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;

(19)

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, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities;

(20)

the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors;

(21)

Peoples' ability to receive dividends from its subsidiaries;

(22)

Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;

(23)

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;

(24)

the costs and effects of new federal and state laws, and other regulatory and legal developments, including the outcome of potential regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations;

(25)

Peoples' ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Peoples' third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss;

(26)

Peoples' ability to anticipate and respond to technological changes, and Peoples' reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including its primary core banking system provider, which can impact Peoples' ability to respond to customer needs and meet competitive demands;

(27)

operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Peoples and its subsidiaries are highly dependent;

(28)

changes in consumer spending, borrowing and saving habits, whether due to tax reform legislation, changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions, legislative or regulatory initiatives, or other factors, which may be different than anticipated;

(29)

the adequacy of Peoples' internal controls and risk management program in the event of changes in strategic, reputational, market, economic, operational, cyber security, compliance, legal, asset/liability repricing, liquidity, credit and interest rate risks associated with Peoples' business;

(30)

the impact on Peoples' businesses, personnel, facilities, or systems, related to fraud, theft, or violence;

(31)

the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics, cyber attacks, civil unrest, military or terrorist activities or international conflicts;

(32)

Peoples' continued ability to grow deposits; and

(33)

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 (the "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, 2018.



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.

As required by US GAAP, Peoples is required to evaluate the impact of subsequent events through the issuance date of its June 30, 2019 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 (Unaudited)





Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,


2019


2019


2018


2019


2018











PER COMMON SHARE:










Earnings per common share:










   Basic

$

0.47



$

0.74



$

0.41



$

1.20



$

1.05


   Diluted

0.46



0.73



0.41



1.19



1.04


Cash dividends declared per common share

0.34



0.30



0.28



0.64



0.54


Book value per common share

27.98



27.19



25.57



27.98



25.57


Tangible book value per common share (a)

18.89



19.00



17.17



18.89



17.17


Closing stock price at end of period

$

32.26



$

30.97



$

37.78



$

32.26



$

37.78












SELECTED RATIOS:










Return on average stockholders' equity (b)

6.81

%


11.12

%


6.46

%


8.87

%


8.39

%

Return on average tangible equity (b)(c)

10.82

%


16.69

%


10.47

%


13.67

%


13.21

%

Return on average assets (b)

0.91

%


1.46

%


0.81

%


1.17

%


1.06

%

Return on average assets adjusted for non-core items
(b)(d)

1.44

%


1.49

%


1.35

%


1.47

%


1.34

%

Efficiency ratio (e)

73.24

%


62.71

%


74.96

%


68.09

%


68.53

%

Efficiency ratio adjusted for non-core items (f)

60.21

%


62.21

%


62.03

%


61.19

%


61.73

%

Pre-provision net revenue to total average assets (b)(g)

1.21

%


1.79

%


1.10

%


1.49

%


1.44

%

Net interest margin (b)(h)

3.77

%


3.80

%


3.74

%


3.78

%


3.70

%

Dividend payout ratio (i)

73.30

%


40.84

%


69.27

%


53.84

%


52.15

%


(a)

This amount represents a non-US GAAP financial measure since it excludes the balance sheet impact of goodwill and other 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)

This percentage represents a non-US GAAP financial measure since it excludes the after-tax impact of amortization of other intangible assets from earnings and it excludes the balance sheet impact of goodwill and other 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.

(d)

Return on average assets adjusted for non-core items represents a non-US GAAP financial measure since it excludes the impact of the Tax Cuts and Jobs Act on the remeasurement of deferred tax assets and deferred tax liabilities, and the after-tax impact of all gains and/or losses, acquisition-related expenses, and pension settlement charges.

(e)

Total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income (excluding all gains and losses).  This amount represents a non-US GAAP financial measure since it excludes amortization of other intangible assets, and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income.  Additional information regarding the calculation of this ratio is included at the end of this news release.

(f)

The efficiency ratio adjusted for non-core items is defined as core non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income, excluding all gains and losses. This amount represents a non-US GAAP financial measure since it excludes the impact of all gains and/or losses, acquisition-related expenses, and pension settlement charges included in earnings, and uses fully tax-equivalent net interest income.

(g)

Pre-provision net revenue is defined as net interest income plus total non-interest income (excluding all gains and losses) minus total non-interest expense.  This ratio represents a non-US GAAP financial measure since it excludes the provision for loan losses and all gains and/or losses included in earnings.  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.

(h)

Information presented on a fully tax-equivalent basis.

(i)

Ratios are calculated based on dividends declared during the period divided by net income for the period.

 

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,

(Dollars in thousands)

2019


2019


2018


2019


2018

Total interest income

$

43,621



$

40,576



$

37,769



$

84,197



$

70,995


Total interest expense

7,572



6,662



4,961



14,234



8,828


Net interest income

36,049



33,914



32,808



69,963



62,167


Provision for (recovery of) loan losses

626



(263)



1,188



363



3,171


Net interest income after provision for (recovery of) loan
losses

35,423



34,177



31,620



69,600



58,996












Non-interest income:










Insurance income

3,486



4,621



3,369



8,107



8,024


Trust and investment income

3,401



3,112



3,232



6,513



6,300


Electronic banking income

3,267



2,987



2,785



6,254



5,570


Deposit account service charges

2,977



2,341



2,388



5,318



4,508


Mortgage banking income

1,000



788



969



1,788



1,320


Bank owned life insurance income

490



485



497



975



965


Commercial loan swap fees

516



146



146



662



262


Net (loss) gain on investment securities

(57)



30



(147)



(27)



(146)


Net loss on asset disposals and other transactions

(293)



(182)



(405)



(475)



(331)


Other non-interest income

502



1,101



421



1,603



1,752


  Total non-interest income

15,289



15,429



13,255



30,718



28,224












Non-interest expense:










Salaries and employee benefit costs

20,824



19,202



18,025



40,026



34,015


Net occupancy and equipment expense

3,132



2,978



2,803



6,110



5,669


Professional fees

2,344



1,276



3,022



3,620



4,740


Electronic banking expense

1,693



1,577



1,407



3,270



2,857


Data processing and software expense

1,567



1,545



1,359



3,112



2,681


Amortization of other intangible assets

824



694



861



1,518



1,615


Franchise tax expense

772



705



614



1,477



1,258


Marketing expense

490



594



656



1,084



981


FDIC insurance expense

381



371



416



752



782


Foreclosed real estate and other loan expenses

469



255



338



724



550


Communication expense

317



278



300



595



644


Other non-interest expense

6,063



2,385



6,170



8,448



8,400


  Total non-interest expense

38,876



31,860



35,971



70,736



64,192


  Income before income taxes

11,836



17,746



8,904



29,582



23,028


Income tax expense

2,238



3,377



1,012



5,615



3,395


    Net income

$

9,598



$

14,369



$

7,892



$

23,967



$

19,633












PER COMMON SHARE DATA:










Earnings per common share – basic

$

0.47



$

0.74



$

0.41



$

1.20



$

1.05


Earnings per common share – diluted

$

0.46



$

0.73



$

0.41



$

1.19



$

1.04


Cash dividends declared per common share

$

0.34



$

0.30



$

0.28



$

0.64



$

0.54












Weighted-average common shares outstanding – basic

20,277,028



19,366,008



19,160,728



19,824,035



18,646,266


Weighted-average common shares outstanding – diluted

20,442,366



19,508,868



19,293,381



19,972,350



18,773,169


Actual common shares outstanding (end of period)

20,696,041



19,681,692



19,528,952



20,696,041



19,528,952


 

CONSOLIDATED BALANCE SHEETS



June 30,


December 31,


2019


2018

(Dollars in thousands)

(Unaudited)







Assets




Cash and cash equivalents:




  Cash and due from banks

$

56,731



$

61,775


  Interest-bearing deposits in other banks

36,692



15,837


    Total cash and cash equivalents

93,423



77,612






Available-for-sale investment securities, at fair value (amortized cost of




  $910,431 at June 30, 2019 and $804,655 at December 31, 2018)

919,364



791,891


Held-to-maturity investment securities, at amortized cost (fair value of




 $35,747 at June 30, 2019 and $36,963 at December 31, 2018)

34,839



36,961


Other investment securities

43,508



42,985


    Total investment securities

997,711



871,837






Loans, net of deferred fees and costs (a)

2,833,533



2,728,778


Allowance for loan losses

(21,357)



(20,195)


    Net loans

2,812,176



2,708,583






Loans held for sale

5,928



5,470


Bank premises and equipment, net of accumulated depreciation

64,451



56,542


Bank owned life insurance

69,909



68,934


Goodwill

174,567



151,245


Other intangible assets

13,471



10,840


Other assets

44,740



40,391


    Total assets

$

4,276,376



$

3,991,454






Liabilities




Deposits:




Non-interest-bearing

$

643,058



$

607,877


Interest-bearing

2,720,555



2,347,588


    Total deposits

3,363,613



2,955,465






Short-term borrowings

186,457



356,198


Long-term borrowings

85,691



109,644


Accrued expenses and other liabilities

61,593



50,007


    Total liabilities

$

3,697,354



$

3,471,314






Stockholders' equity




 Preferred stock, no par value, 50,000 shares authorized, no shares issued

   at June 30, 2019 and December 31, 2018




Common stock, no par value, 24,000,000 shares authorized, 21,142,256 shares

   issued at June 30, 2019 and 20,124,378 shares issued at December 31, 2018,

   including shares in treasury

418,950



386,814


Retained earnings

171,410



160,346


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

316



(12,933)


Treasury stock, at cost, 489,802 shares at June 30, 2019 and 601,289 shares

  at December 31, 2018

(11,654)



(14,087)


    Total stockholders' equity

$

579,022



$

520,140


    Total liabilities and stockholders' equity

$

4,276,376



$

3,991,454






(a)  Also referred throughout the document as "total loans".

 

SELECTED FINANCIAL INFORMATION (Unaudited)



June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

Loan Portfolio






Commercial real estate, construction

$

109,679


$

124,958


$

136,417


$

116,612


$

122,035


Commercial real estate, other

842,970


802,464


816,911


822,713


857,707


Commercial and industrial

599,966


592,907


565,744


551,779


512,208


Residential real estate

647,612


605,804


593,797


607,946


609,563


Home equity lines of credit

131,636


128,915


133,979


135,853


135,890


Consumer, indirect

419,685


410,283


407,303


396,862


373,582


Consumer, direct

81,309


71,731


74,044


75,313


74,646


Deposit account overdrafts

676


518


583


649


860


    Total loans

$

2,833,533


$

2,737,580


$

2,728,778


$

2,707,727


$

2,686,491


Total acquired loans (a)

$

659,081


$

562,941


$

572,748


$

600,243


$

621,774


    Total originated loans

$

2,174,452


$

2,174,639


$

2,156,030


$

2,107,484


$

2,064,717


Deposit Balances






Non-interest-bearing deposits (b)

$

643,058


$

628,464


$

607,877


$

617,447


$

585,861


Interest-bearing deposits:






  Interest-bearing demand accounts (b)

610,464


572,316


573,702


547,172


570,359


  Retail certificates of deposit

497,221


404,186


394,335


402,309


406,214


  Money market deposit accounts

428,213


403,642


379,878


391,377


389,893


  Governmental deposit accounts

331,754


363,636


267,319


344,320


305,255


  Savings accounts

526,746


477,824


468,500


473,240


480,615


  Brokered certificates of deposit

326,157


287,345


263,854


265,258


211,062


    Total interest-bearing deposits

$

2,720,555


$

2,508,949


$

2,347,588


$

2,423,676


$

2,363,398


    Total deposits

$

3,363,613


$

3,137,413


$

2,955,465


$

3,041,123


$

2,949,259


Total demand deposits

$

1,253,522


$

1,200,780


$

1,181,579


$

1,164,619


$

1,156,220


Asset Quality






Nonperforming assets (NPAs):






  Loans 90+ days past due and accruing

$

3,449


$

1,074


$

2,256


$

1,885


$

1,975


  Nonaccrual loans

16,591


17,089


17,098


16,235


16,069


    Total nonperforming loans (NPLs)

20,040


18,163


19,354


18,120


18,044


  Other real estate owned (OREO)

123


81


94


106


63


Total NPAs

$

20,163


$

18,244


$

19,448


$

18,226


$

18,107


Criticized loans (c)

$

97,016


$

89,812


$

114,188


$

118,703


$

120,809


Classified loans (d)

63,048


47,327


43,818


49,058


55,596


Allowance for loan losses as a percent of NPLs (e)(f)

106.57

%

115.28

%

104.35

%

109.71

%

106.77

%

NPLs as a percent of total loans (e)(f)

0.71

%

0.66

%

0.71

%

0.67

%

0.67

%

NPAs as a percent of total assets (e)(f)

0.47

%

0.45

%

0.49

%

0.46

%

0.46

%

NPAs as a percent of total loans and OREO (e)(f)

0.71

%

0.67

%

0.71

%

0.67

%

0.67

%

Criticized loans as a percent of total loans (e)

3.42

%

3.28

%

4.18

%

4.38

%

4.50

%

Classified loans as a percent of total loans (e)

2.23

%

1.73

%

1.61

%

1.81

%

2.07

%

Allowance for loan losses as a percent of total loans (e)

0.75

%

0.76

%

0.74

%

0.73

%

0.72

%

Capital Information (g)






Common equity tier 1 risk-based capital ratio (h)

13.82

%

13.96

%

13.61

%

13.29

%

13.03

%

Tier 1 risk-based capital ratio

14.07

%

14.22

%

13.87

%

13.55

%

13.29

%

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

14.81

%

14.98

%

14.60

%

14.27

%

13.99

%

Leverage ratio

9.99

%

10.31

%

9.99

%

9.69

%

9.73

%

Common equity tier 1 capital

$

399,704


$

389,393


$

378,855


$

367,537


$

358,987


Tier 1 capital

407,072


396,719


386,138


374,776


366,182


Total capital (tier 1 and tier 2)

428,429


417,657


406,333


394,655


385,448


Total risk-weighted assets

$

2,892,352


$

2,788,934


$

2,782,995


$

2,764,951


$

2,755,112


Total shareholders' equity to total assets

13.54

%

13.32

%

13.06

%

12.60

%

12.57

%

Tangible equity to tangible assets (i)

9.56

%

9.70

%

9.35

%

8.88

%

8.81

%


(a)  

Includes all loans acquired in 2012 and thereafter.

(b)  

The sum of amounts presented is considered total demand deposits.

(c)  

Includes loans categorized as a special mention, substandard, or doubtful.

(d)  

Includes loans categorized as substandard or doubtful.

(e)  

Data presented as of the end of the period indicated.

(f)  

Nonperforming loans include loans 90+ days past due and accruing, renegotiated loans and nonaccrual loans. Nonperforming assets include nonperforming loans and OREO.

(g)  

June 30, 2019 data based on preliminary analysis and subject to revision.

(h)  

Peoples' capital conservation buffer was 6.81% at June 30, 2019, 6.98% at March 31, 2019, 6.60% at December 31, 2018, 6.27% at September 30, 2018, and 5.99% at June 30, 2018, compared to 2.50% for the fully phased-in capital conservation buffer required by January 1, 2019.

(i)  

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

 

...

PROVISION FOR (RECOVERY OF) LOAN LOSSES INFORMATION (Unaudited)



Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,

(Dollars in thousands)

2019


2019


2018


2019


2018

Provision for (recovery of) loan losses










Provision for (recovery of) loan losses

$

475



$

(360)



$

1,000



$

115



$

2,842


Provision for checking account overdrafts

151



97



188



248



329


  Total provision for (recovery of) loan losses

$

626



$

(263)



$

1,188



$

363



$

3,171












Net charge-offs (recoveries)










Gross charge-offs

$

665



$

1,003



$

990



$

1,668



$

3,289


Recoveries

457



2,010



270



2,467



591


  Net charge-offs (recoveries)

$

208



$

(1,007)



$

720



$

(799)



$

2,698












Net charge-offs (recoveries) by type










Commercial real estate, other

$

41



$

103



$

(21)