Peoples Bancorp (PEBO) 8-K Peoples Bancorp Inc. Announces 2ND Quarter 2014 Earnings

P.O. BOX 738 - MARIETTA, OHIO - 45750	NEWS RELEASE
www.peoplesbancorp.com
FOR IMMEDIATE RELEASE	Contact:	Edward G. Sloane
July 22, 2014		Chief Financial Officer and Treasurer
		(740) 373-3155

PEOPLES BANCORP INC. ANNOUNCES 2ND QUARTER 2014 EARNINGS

_____________________________________________________________________

Summary second quarter 2014 results:

• Diluted earnings per share were $0.32 for the quarter and $0.76 through six months of 2014.

◦ Pension settlement charges of $536,000 were incurred during the quarter and totaled $1.0 million year-to-date.

◦ Acquisition activities resulted in pre-tax expenses of $1.4 million for the quarter and $1.6 million year-to-date.

• Total revenue grew 15% and 16% compared to the prior year quarter and year-to-date, respectively.

◦ Net interest income and margin improved due to continued loan growth and stabilization of asset yields.

◦ Net interest margin expanded 26 basis points versus second quarter 2013, to 3.39% for the quarter.

◦ Non-interest income growth was driven mostly by higher insurance income, which was 24% higher year-to-date.

• Higher operating expenses for the quarter were driven by acquisition costs.

◦ Acquisition costs incurred in the second quarter of 2014 were 6% of total operating expenses.

◦ Employee benefit costs for 2014 were impacted by timing of pension settlement charges and medical plan expenses.

◦ Other operating expenses were relatively flat for the quarter compared to the linked quarter.

• Period-end total loan balances reflected 11% annualized organic growth for the quarter and year.

◦ Commercial lending generated over 60% of the growth for the quarter and year-to-date.

◦ Non-mortgage consumer balances grew at a 33% annualized rate for the quarter and 30% for the year.

◦ Organic growth was supplemented by the Midwest acquisition, which included $59.7 million of loans.

◦ Average loan balances for the quarter were up 25% compared to second quarter 2013, and 24% for the year.

• Provision for loan losses was driven by loan growth, which was partially offset by favorable asset quality trends.

◦ Provision for loan losses was $0.6 million for the quarter, compared to a $1.5 million recovery a year ago.

◦ Nonperforming assets were 0.93% of total loans and OREO at quarter-end, and 0.57% of total assets.

◦ Second quarter net charge-offs were 0.02% of average loans on an annualized basis, and 0.04% for the year.

◦ Allowance for loan losses decreased to 1.32% of gross loans at June 30, 2014, from 1.43% at year-end 2013.

• Retail deposit balances experienced growth as a result of the Midwest acquisition.

◦ Peoples added $78.1 million of deposits during the second quarter due to the Midwest acquisition.

◦ Organic balances declined 3% compared to the linked quarter due partially to normal seasonal variances.

◦ Non-interest-bearing balances continued to comprise 26% of total deposits at June 30, 2014.

◦ Quarterly average retail balances were up 2% from the linked quarter and 10% year-over-year.

MARIETTA, Ohio - Peoples Bancorp Inc. ("Peoples") (NASDAQ: PEBO) today announced results for the three and six months ended June 30, 2014. Net income totaled $3.5 million for the second quarter of 2014, representing earnings per diluted share of $0.32. In comparison, net income was $4.8 million or $0.44 per diluted share for the first quarter of 2014, and $4.9 million or $0.46 per diluted share for the second quarter of 2013. On a year-to-date basis, net income totaled $8.3 million, or $0.76 per diluted share, through June 30, 2014, versus $9.9 million, or $0.93 per diluted share, a year ago.

"Our revenue growth remained positive for the quarter. Loan growth provided much of the momentum with 11% annualized organic growth," said Chuck Sulerzyski, President and Chief Executive Officer. "We are pleased with our second quarter earnings, given the increase in costs incurred was largely a result of our strategic actions. Our acquisition activity resulted in expenses during the quarter, and our continued loan growth resulted in increased provision for loan losses during the quarter, which we had not incurred since the third quarter of 2011."

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Sulerzyski continued, "We made further progress on our plan to grow through acquisitions by closing on the Midwest acquisition during the quarter, and are excited about expanding our presence in Jackson County, Ohio by adding the two branches from the deal which will supplement our insurance acquisitions completed in 2013. Our pending acquisitions of Ohio Heritage Bancorp, Inc. and North Akron Savings Bank remain on schedule, with closings expected to occur in the third and fourth quarters, respectively."

As previously announced, Peoples completed the acquisition of Midwest Bancshares, Inc. ("Midwest") as of the close of business on May 30, 2014. This cash and stock transaction resulted in Peoples acquiring two full-service banking offices in Wellston and Jackson, Ohio, adding approximately $59.7 million of loans and $78.1 million of deposits after fair value adjustments. The acquisition was accounted for as a business combination and the fair value adjustments are preliminary.

Second quarter net interest income was $16.0 million, up 4% compared to the linked quarter and 22% higher than the prior year's second quarter, while net interest margin for these periods was 3.39%, 3.35% and 3.13%, respectively. These improvements were driven largely by growth in earning assets due to higher loan balances, stabilization in asset yields and the change in the asset mix. The acquired balances and accretion income from the Midwest acquisition added approximately 3 basis points of net interest margin in the second quarter of 2014.

"During the quarter, we continued to make progress in improving our balance sheet structure by reducing the relative size of our investment portfolio. Our investments accounted for 31% of our total assets at the end of the second quarter, compared to 33% at year-end and 35% a year ago," said Ed Sloane, Chief Financial Officer and Treasurer. "We are pleased with this accomplishment, which was driven mostly by the strong loan growth over the last two quarters. We will continue to look for opportunities to reduce the size of the investment portfolio. Our net interest income also continued to benefit from the shift from higher-cost wholesale funding and deposits to low-cost core deposits."

Total non-interest income was up 5% in the second quarter and 9% for the first half of 2014, compared to the same periods in 2013, due largely to higher insurance income. During the second quarter of 2014, insurance income benefited from increased property and casualty commissions resulting from higher customer retention rates and referrals from other lines of business. In addition, deposit account service charges, and trust and investment income both grew 5% from the linked quarter and 9% from prior year. Mortgage banking income continues to be pressured as refinancing activity has declined in response to the higher long-term interest rates, leading to a $54,000 decline compared to the second quarter of 2013 and a $545,000 decline year-to-date. The slight increase compared to the linked quarter was due to the seasonality in the industry as home purchases typically increase during the spring and early summer.

Non-interest expenses were 6% higher than the linked quarter and 22% higher than the prior year second quarter. The increase included $1.3 million of acquisition-related costs, consisting primarily of deconversion costs, and professional and legal fees, during the second quarter of 2014 compared to $150,000 in the linked quarter and $37,000 in the second quarter of 2013. Salaries and employee benefit costs grew 4% over the linked quarter and 26% over the prior year quarter as employee medical benefit plan costs increased due to higher claim activity and pension settlement charges of $536,000 recognized in the second quarter of 2014. Pension settlement charges during the first half of 2014 were $1.0 million, while there were no pension settlement charges recognized in the first half of 2013. The efficiency ratio for the second quarter of 2014 was 75.58%, compared to 71.13% for the first quarter of 2014. The acquisition-related costs accounted for the increase in the ratio for the quarter.

"Positive operating leverage still remains a key priority for us during 2014, but will be challenging with the continued acquisition activity that will result in additional expenses in the second half of 2014," said Sulerzyski. "We continue to seek acquisition opportunities in all lines of business in order to maintain our revenue diversity and growth. Operating expenses during the year will continue to increase as we complete the two pending acquisitions later in the year."

For both the quarter and year-to-date 2014, period-end organic loan balances grew at an 11% annualized rate to $1.32 billion. Peoples continued to experience strong growth in non-mortgage consumer loans during the second quarter, with period-end balances up $12.0 million or 33% on an annualized basis. Commercial and industrial balances experienced an $18.0 million increase, or 31% annualized growth, during the quarter. The Midwest acquisition complemented the organic loan growth by adding $59.7 million of loans, of which $47.0 million were residential real estate loans, which resulted in the 14% growth in that category of loans during the quarter. The remaining $12.7 million of loans added from the Midwest acquisition included $7.3 million of non-mortgage consumer loans and $5.4 million of commercial loans. The combination of organic growth and acquired balances resulted in an increase of $47.9 million in average loan balances for the quarter compared to the linked quarter.

“We are very pleased with our loan production, in both the commercial and consumer lending areas. We are on pace to achieve, or potentially exceed, our goal of 8% to 10% point-to-point loan growth this year,” said Sulerzyski. "What is equally as exciting is that we have been able to maintain our strong asset quality, even with the loan growth we have experienced. Our net charge-offs have remained historically low throughout the first half of 2014."

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Peoples' asset quality remained favorable during the second quarter of 2014. Net charge-offs remained lower than Peoples' long-term historical average during the quarter, totaling $69,000 or 2 basis points of average loans on an annualized basis. Total nonperforming assets increased by $2.6 million during the quarter mainly because of the increase in loans 90 or more days past due. The higher balances of loans 90 or more days past due at quarter-end was due largely to one relationship that is expected to pay-off in the third quarter of 2014, as well as the acquired Midwest loan balances. As a percentage of total loans plus other real estate owned ("OREO"), total nonperforming assets were 0.93% at quarter-end versus 0.81% at year-end 2013 and 1.18% a year ago. Nonperforming loans as a percent of total loans was 0.86% at quarter-end versus 0.73% at year-end 2013 and 1.17% a year ago. The increase in loan balances led to an increase of Peoples' allowance for loan losses. At quarter-end, the ratio of the allowance for loan losses to loans, net of deferred fees and costs, was 1.32%, compared to 1.43% at December 31, 2013 and 1.66% at June 30, 2013.

During the second quarter of 2014, Peoples' retail deposits grew $32.3 million, or 2%, as the Midwest acquisition added $78.1 million of deposits. The organic decline of $45.8 million, or 3%, was mostly a result of lower certificates of deposits and money market balances due to management's ongoing funding strategy of reducing high-cost funding. Also contributing to the decrease was the normal seasonal decline in governmental deposits.

"Overall, during the second quarter we made good progress with several of our 2014 strategic goals," summarized Sulerzyski. "Our most notable accomplishments included meaningful loan growth, reducing the relative size of our investment portfolio and completing another acquisition. We remain committed to growing our core revenue stream, improving operating efficiency and generating superior returns for our shareholders."

Peoples Bancorp Inc. is a diversified financial services holding company with $2.2 billion in total assets, 50 locations and 50 ATMs in Ohio, West Virginia and Kentucky. Peoples makes available a complete line of banking, investment, insurance and trust solutions through its subsidiaries - Peoples Bank, National Association and Peoples Insurance Agency, LLC. Peoples' common shares are traded on the NASDAQ Global Select Market® under the symbol "PEBO", and Peoples is a member of the Russell 3000 index of U.S. publicly-traded companies. Learn more about Peoples at www.peoplesbancorp.com.

Conference Call to Discuss Earnings:

Peoples will conduct a facilitated conference call to discuss second quarter 2014 results of operations today at 11:00 a.m., Eastern Daylight Saving Time, with members of Peoples' executive management participating. Analysts, media and individual investors are invited to participate in the conference call by calling (800) 860-2442. A simultaneous webcast of the conference call audio will be available online via the "Investor Relations" section of Peoples' website, www.peoplesbancorp.com. Participants are encouraged to call or sign in at least 15 minutes prior to the scheduled conference call time to ensure participation and, if required, to download and install the necessary software. A replay of the call will be available on Peoples' website in the "Investor Relations" section for one year.

Use of Non-GAAP Financial Measures

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

◦ Tangible assets and tangible equity measures are non-GAAP since they exclude the impact of intangible assets acquired through acquisitions on both total stockholders’ equity and total assets and the related amortization from earnings.

◦ Pre-provision net revenue is defined as net interest income plus non-interest income minus non-interest expense. This measure is non-GAAP since it excludes the provision for loan losses and all gains and/or losses included in earnings.

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

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Safe Harbor Statement:

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

These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These factors include, but are not limited to: (1) the success, impact, and timing of the implementation of Peoples' business strategies, including the successful integration of recently completed acquisitions and the expansion of consumer lending activity; (2) Peoples' ability to complete and, if completed, successfully integrate future acquisitions, including the pending mergers of Ohio Heritage Bancorp, Inc. and North Akron Savings Bank with and into Peoples; (3) competitive pressures among financial institutions or from non-financial institutions may increase significantly, including product and pricing pressures and Peoples' ability to attract, develop and retain qualified professionals; (4) changes in the interest rate environment due to economic conditions and/or the fiscal policies of the U.S. government and Board of Governors of the Federal Reserve System ("Federal Reserve Board"), which may adversely impact interest margins and interest rate sensitivity; (5) 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; (6) adverse changes in the economic conditions and/or activities, including, but not limited to, impacts from the implementation of the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012, as well as continuing economic uncertainty in the U.S., the European Union, and other areas, which could decrease sales volumes and increase loan delinquencies and defaults; (7) legislative or regulatory changes or actions, including in particular the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the regulations promulgated and to be promulgated thereunder by the Office of the Comptroller of the Currency, 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; (8) deterioration in the credit quality of Peoples' loan portfolio, which may adversely impact the provision for loan losses; (9) changes in accounting standards, policies, estimates or procedures which may adversely affect Peoples' reported financial condition or results of operations; (10) 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; (11) Peoples' ability to receive dividends from its subsidiaries; (12) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity; (13) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; (14) 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; (15) the costs and effects of regulatory and legal developments, including the outcome of potential regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations; (16) Peoples' ability to secure confidential information through the use of computer systems and telecommunications networks, including those of Peoples' third-party vendors and other service providers, may prove inadequate, which could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss; (17) the overall adequacy of Peoples' risk management program; and (18) 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, 2013.

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

As required by U.S. GAAP, Peoples is required to evaluate the impact of subsequent events through the issuance date of its June 30, 2014 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.

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PER COMMON SHARE DATA AND SELECTED RATIOS

	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
	2014			2014			2013			2014			2013
PER SHARE:
Earnings per share:
Basic	$	0.32		$	0.45		$	0.46		$	0.77		$	0.93
Diluted	0.32			0.44			0.46			0.76			0.93
Cash dividends declared per share	0.15			0.15			0.14			0.30			0.26
Book value per share	22.36			21.63			20.71			22.36			20.71
Tangible book value per share (a)	15.10			14.38			13.94			15.10			13.94
Closing stock price at end of period	$	26.45		$	24.73		$	21.08		$	26.45		$	21.08
SELECTED RATIOS:
Return on average equity (b)	5.91		%	8.56		%	8.74		%	7.20		%	8.96		%
Return on average assets (b)	0.67		%	0.95		%	1.03		%	0.80		%	1.05		%
Efficiency ratio (c)	75.58		%	71.13		%	71.71		%	73.35		%	71.66		%
Pre-provision net revenue to average assets (b)(d)	1.11		%	1.38		%	1.25		%	1.24		%	1.25		%
Net interest margin (b)(e)	3.39		%	3.35		%	3.13		%	3.37		%	3.11		%
Dividend payout ratio	46.98		%	33.91		%	30.73		%	39.43		%	28.23		%

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

(b) Ratios are presented on an annualized basis.

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

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

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

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CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
(in $000’s)	2014			2014			2013			2014			2013
Interest income	$	18,616		$	18,152		$	16,111		$	36,768		$	32,177
Interest expense	2,571			2,672			2,956			5,243			6,047
Net interest income	16,045			15,480			13,155			31,525			26,130
Provision for (recovery of) loan losses	583			8			(1,462		)	591			(2,527		)
Net interest income after provision for (recovery of) loan losses	15,462			15,472			14,617			30,934			28,657
Net gain (loss) on securities transactions	66			(30		)	26			36			444
Net gain on loans held-for-sale and other real estate owned	—			18			81			18			76
Net loss on other assets	(187		)	(7		)	(87		)	(194		)	(87		)
Non-interest income:
Insurance income	3,443			4,116			3,220			7,559			6,098
Deposit account service charges	2,227			2,111			2,045			4,338			4,102
Trust and investment income	1,933			1,847			1,772			3,780			3,474
Electronic banking income	1,562			1,539			1,561			3,101			2,980
Mortgage banking income	311			227			365			538			1,083
Other non-interest income	243			455			253			698			551
Total non-interest income	9,719			10,295			9,216			20,014			18,288
Non-interest expense:
Salaries and employee benefits costs	11,241			10,792			8,934			22,033			17,651
Net occupancy and equipment	1,739			1,816			1,626			3,555			3,484
Professional fees	1,320			854			1,002			2,174			1,896
Electronic banking expense	951			1,082			885			2,033			1,725
Data processing and software	555			570			488			1,125			949
Franchise taxes	442			385			413			827			826
Marketing expense	413			459			562			872			1,012
Communication expense	390			359			361			749			664
FDIC insurance	287			260			250			547			530
Amortization of intangible assets	282			263			164			545			353
Foreclosed real estate and other loan expenses	197			135			162			332			317
Other non-interest expense	2,186			1,842			1,575			4,028			3,200
Total non-interest expense	20,003			18,817			16,422			38,820			32,607
Income before income taxes	5,057			6,931			7,431			11,988			14,771
Income tax expense	1,579			2,148			2,510			3,727			4,828
Net income	$	3,478		$	4,783		$	4,921		$	8,261		$	9,943
PER SHARE DATA:
Earnings per share – Basic	$	0.32		$	0.45		$	0.46		$	0.77		$	0.93
Earnings per share – Diluted	$	0.32		$	0.44		$	0.46		$	0.76		$	0.93
Cash dividends declared per share	$	0.15		$	0.15		$	0.14		$	0.30		$	0.26
Weighted-average shares outstanding – Basic	10,755,509			10,636,089			10,576,643			10,696,129			10,566,508
Weighted-average shares outstanding – Diluted	10,880,090			10,740,884			10,597,033			10,807,688			10,584,383
Actual shares outstanding (end of period)	10,926,436			10,657,569			10,583,161			10,926,436			10,583,161

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CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
(in $000’s)	2014			2013
Assets
Cash and cash equivalents:
Cash and due from banks	$	47,737		$	36,016
Interest-bearing deposits in other banks	6,225			17,804
Total cash and cash equivalents	53,962			53,820
Available-for-sale investment securities, at fair value (amortized cost of
$592,954 at June 30, 2014 and $621,126 at December 31, 2013)	593,803			606,108
Held-to-maturity investment securities, at amortized cost (fair value of
$49,239 at June 30, 2014 and $46,094 at December 31, 2013)	49,376			49,222
Other investment securities, at cost	21,808			25,196
Total investment securities	664,987			680,526
Loans, net of deferred fees and costs	1,319,352			1,196,234
Allowance for loan losses	(17,384		)	(17,065		)
Net loans	1,301,968			1,179,169
Loans held-for-sale	3,436			1,688
Bank premises and equipment, net of accumulated depreciation	33,122			29,809
Goodwill	71,843			70,520
Other intangible assets	7,430			7,083
Other assets	27,144			36,493
Total assets	$	2,163,892		$	2,059,108
Liabilities
Deposits:
Non-interest-bearing deposits	$	426,384		$	409,891
Interest-bearing deposits	1,234,534			1,170,867
Total deposits	1,660,918			1,580,758
Short-term borrowings	115,869			113,590
Long-term borrowings	118,815			121,826
Accrued expenses and other liabilities	24,019			21,381
Total liabilities	1,919,621			1,837,555
Stockholders' Equity
Preferred stock, no par value (50,000 shares authorized, no shares issued
at June 30, 2014 and December 31, 2013)	—			—
Common stock, no par value (24,000,000 shares authorized, 11,529,732 shares
issued at June 30, 2014 and 11,206,576 shares issued at
December 31, 2013), including shares in treasury	176,406			168,869
Retained earnings	85,902			80,898
Accumulated other comprehensive loss, net of deferred income taxes	(2,994		)	(13,244		)
Treasury stock, at cost (603,296 shares at June 30, 2014 and
600,794 shares at December 31, 2013)	(15,043		)	(14,970		)
Total stockholders' equity	244,271			221,553
Total liabilities and stockholders' equity	$	2,163,892		$	2,059,108

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SELECTED FINANCIAL INFORMATION

	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, end of period)	2014			2014			2013			2013			2013
Loan Portfolio
Commercial real estate, construction	$	56,421		$	55,935		$	47,539		$	39,969		$	30,770
Commercial real estate, other	463,734			458,580			450,170			374,953			389,281
Commercial and industrial	254,561			233,329			232,754			192,238			184,981
Residential real estate	314,190			268,794			268,617			262,602			252,282
Home equity lines of credit	61,838			60,319			60,076			55,341			52,212
Consumer	163,326			143,541			135,018			127,785			119,029
Deposit account overdrafts	5,282			6,008			2,060			4,277			1,674
Total loans	$	1,319,352		$	1,226,506		$	1,196,234		$	1,057,165		$	1,030,229
Deposit Balances
Interest-bearing deposits:
Retail certificates of deposit	$	373,072		$	355,345		$	363,226		$	334,910		$	349,511
Money market deposit accounts	268,939			276,226			275,801			224,400			238,554
Governmental deposit accounts	165,231			177,590			132,379			151,910			146,817
Savings accounts	244,472			227,695			215,802			196,293			199,503
Interest-bearing demand accounts	142,170			133,508			134,618			123,966			125,875
Total retail interest-bearing deposits	1,193,884			1,170,364			1,121,826			1,031,479			1,060,260
Brokered certificates of deposits	40,650			45,072			49,041			49,620			50,393
Total interest-bearing deposits	1,234,534			1,215,436			1,170,867			1,081,099			1,110,653
Non-interest-bearing deposits	426,384			417,629			409,891			356,767			325,125
Total deposits	$	1,660,918		$	1,633,065		$	1,580,758		$	1,437,866		$	1,435,778
Asset Quality
Nonperforming assets (NPAs):
Loans 90+ days past due and accruing	$	3,390		$	159		$	910		$	2,597		$	1,520
Nonaccrual loans	8,004			8,806			7,881			8,537			10,607
Total nonperforming loans (NPLs)	11,394			8,965			8,791			11,134			12,127
Other real estate owned (OREO)	915			773			893			120			120
Total NPAs	$	12,309		$	9,738		$	9,684		$	11,254		$	12,247
Allowance for loan losses as a percent of NPLs	152.57		%	188.19		%	194.13		%	151.79		%	141.11		%
NPLs as a percent of total loans	0.86		%	0.73		%	0.73		%	1.05		%	1.17		%
NPAs as a percent of total assets	0.57		%	0.47		%	0.47		%	0.59		%	0.64		%
NPAs as a percent of total loans and OREO	0.93		%	0.79		%	0.81		%	1.06		%	1.18		%
Allowance for loan losses as a percent of loans, net
of deferred fees and costs (c)	1.32		%	1.38		%	1.43		%	1.60		%	1.66		%
Capital Information(a)
Tier 1 risk-based capital ratio	12.33		%	12.56		%	12.42		%	14.09		%	14.17		%
Total risk-based capital ratio (Tier 1 and Tier 2)	13.65		%	13.92		%	13.78		%	15.46		%	15.54		%
Leverage ratio	8.76		%	8.56		%	8.52		%	9.14		%	9.04		%
Tier 1 common capital	$	177,394		$	170,677		$	166,217		$	168,254		$	166,576
Tier 1 capital	177,394			170,677			166,217			168,254			166,576
Total capital (Tier 1 and Tier 2)	196,426			189,145			184,457			184,550			182,706
Total risk-weighted assets	$	1,438,683		$	1,358,691		$	1,338,811		$	1,194,016		$	1,175,647
Tangible equity to tangible assets (b)	7.92		%	7.66		%	7.26		%	8.16		%	8.07		%

(a) June 30, 2014 data based on preliminary analysis and subject to revision.

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

(c) Data presented as of the end of the period indicated.

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PROVISION FOR (RECOVERY OF) LOAN LOSSES INFORMATION

	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
(in $000’s)	2014			2014			2013			2014			2013
Provision for (Recovery of) Loan Losses
Provision for (recovery of) checking account overdrafts	$	83		$	8		$	138		$	91		$	123
Provision for (recovery of) other loan losses	500			—			(1,600		)	500			(2,650		)
Total provision for (recovery of) loan losses	$	583		$	8		$	(1,462	)	$	591		$	(2,527	)
Net Charge-Offs (Recoveries)
Gross charge-offs	$	501		$	618		$	616		$	1,119		$	1,607
Recoveries	432			415			1,752			847			3,436
Net charge-offs (recoveries)	$	69		$	203		$	(1,136	)	$	272		$	(1,829	)
Net Charge-Offs (Recoveries) by Type
Commercial real estate, construction	$	—		$	—		$	—		$	—		$	—
Commercial real estate, other	(96		)	(112		)	(1,215		)	(208		)	(2,023		)
Commercial and industrial	(54		)	44			7			(10		)	(10		)
Residential real estate	56			99			(57		)	155			(39		)
Home equity lines of credit	19			14			(5		)	33			(11		)
Consumer	83			118			53			201			108
Deposit account overdrafts	61			40			81			101			146
Total net charge-offs (recoveries)	$	69		$	203		$	(1,136	)	$	272		$	(1,829	)
As a percent of average gross loans (annualized)	0.02		%	0.07		%	(0.45		)%	0.04		%	(0.37		)%

SUPPLEMENTAL INFORMATION

	June 30,		March 31,		December 31,		September 30,		June 30,
(in $000’s, end of period)	2014		2014		2013		2013		2013
Trust assets under management	$	1,014,865	$	995,861	$	1,000,171	$	994,683	$	939,292
Brokerage assets under management	513,890		494,246		474,384		449,196		433,651
Mortgage loans serviced for others	$	341,893	$	340,057	$	341,183	$	339,557	$	338,854
Employees (full-time equivalent)	576		557		546		539		545

9

CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME

	Three Months Ended
	June 30, 2014								March 31, 2014							June 30, 2013
(in $000’s)	Balance			Income/ Expense			Yield/ Cost		Balance			Income/ Expense		Yield/ Cost		Balance			Income/ Expense		Yield/ Cost
Assets
Short-term investments	$	7,076		$	(44	)	(2.49	)%	$	7,058		$	20	1.15	%	$	11,399		$	25	0.88	%
Other long-term investments	2,170			2			0.37	%	2,254			3		0.54	%	—			—		—	%
Investment securities (a)(b)	668,715			4,872			2.91	%	675,311			5,024		2.98	%	708,622			4,809		2.71	%
Gross loans (a)	1,262,518			14,118			4.45	%	1,214,664			13,410		4.43	%	1,009,515			11,576		4.57	%
Allowance for loan losses	(17,126		)						(17,228		)					(17,866		)
Total earning assets	1,923,353			18,948			3.92	%	1,882,059			18,457		3.93	%	1,711,670			16,410		3.82	%
Intangible assets	77,917								77,448							71,081
Other assets	89,681								91,095							128,237
Total assets	$	2,090,951							$	2,050,602						$	1,910,988
Liabilities and Equity
Interest-bearing deposits:
Savings accounts	$	230,431		$	31		0.05	%	$	220,935		$	30	0.06	%	$	199,065		$	27	0.05	%
Government deposit accounts	159,476			113			0.28	%	149,057			123		0.33	%	147,824			168		0.46	%
Interest-bearing demand accounts	138,745			29			0.08	%	137,026			28		0.08	%	124,199			25		0.08	%
Money market deposit accounts	268,480			107			0.16	%	278,413			111		0.16	%	266,602			93		0.14	%
Brokered certificates of deposits	42,976			382			3.57	%	47,335			436		3.74	%	51,952			468		3.61	%
Retail certificates of deposit	356,286			803			0.90	%	360,457			840		0.95	%	350,141			1,017		1.17	%
Total interest-bearing deposits	1,196,394			1,465			0.49	%	1,193,223			1,568		0.53	%	1,139,783			1,798		0.63	%
Short-term borrowings	111,953			37			0.13	%	102,874			31		0.12	%	68,802			22		0.13	%
Long-term borrowings	120,051			1,069			3.56	%	121,517			1,072		3.55	%	126,927			1,136		3.58	%
Total borrowed funds	232,004			1,106			1.91	%	224,391			1,103		1.98	%	195,729			1,158		2.36	%
Total interest-bearing liabilities	1,428,398			2,571			0.72	%	1,417,614			2,671		0.76	%	1,335,512			2,956		0.89	%
Non-interest-bearing deposits	405,282								385,471							326,020
Other liabilities	21,103								20,876							23,568
Total liabilities	1,854,783								1,823,961							1,685,100
Stockholders’ equity	236,168								226,641							225,888
Total liabilities and equity	$	2,090,951							$	2,050,602						$	1,910,988
Net interest income/spread (a)				$	16,377		3.20	%				$	15,786	3.17	%				$	13,454	2.93	%
Net interest margin (a)							3.39	%						3.35	%						3.13	%
(a) Information presented on a fully tax-equivalent basis.
(b) Average balances are based on carrying value.

10

	Six Months Ended
	June 30, 2014								June 30, 2013
(in $000’s)	Balance			Income/ Expense			Yield/ Cost		Balance			Income/ Expense		Yield/ Cost
Assets
Short-term investments	$	7,067		$	(24	)	(0.68	)%	$	25,172		$	44	0.35	%
Other long-term investments	2,211			4			0.36	%	—			—		—	%
Investment securities (a)(b)	671,995			9,895			2.94	%	707,084			9,652		2.73	%
Gross loans (a)	1,238,723			27,527			4.43	%	997,354			23,071		4.63	%
Allowance for loan losses	(17,177		)						(18,322		)
Total earning assets	1,902,819			37,402			3.92	%	1,711,288			32,767		3.82	%
Intangible assets	77,684								70,538
Other assets	90,385								130,794
Total assets	$	2,070,888							$	1,912,620
Liabilities and Equity
Interest-bearing deposits:
Savings accounts	$	225,709		$	61		0.05	%	$	194,940		$	51	0.05	%
Government deposit accounts	154,295			236			0.31	%	146,775			370		0.51	%
Interest-bearing demand accounts	137,890			57			0.08	%	125,474			50		0.08	%
Money market deposit accounts	273,419			218			0.16	%	277,322			189		0.14	%
Brokered certificates of deposits	45,143			818			3.65	%	53,037			944		3.59	%
Retail certificates of deposit	358,360			1,644			0.93	%	365,808			2,132		1.18	%
Total interest-bearing deposits	1,194,816			3,034			0.51	%	1,163,356			3,736		0.65	%
Short-term borrowings	107,439			68			0.13	%	51,484			35		0.14	%
Long-term borrowings	120,779			2,141			3.56	%	127,670			2,274		3.57	%
Total borrowed funds	228,218			2,209			1.94	%	179,154			2,309		2.58	%
Total interest-bearing liabilities	1,423,034			5,243			0.74	%	1,342,510			6,045		0.91	%
Non-interest-bearing deposits	395,431								323,024
Other liabilities	20,992								23,252
Total liabilities	1,839,457								1,688,786
Stockholders’ equity	231,431								223,834
Total liabilities and equity	$	2,070,888							$	1,912,620
Net interest income/spread (a)				$	32,159		3.18	%				$	26,722	2.91	%
Net interest margin (a)							3.37	%						3.11	%
(a) Information presented on a fully tax-equivalent basis.
(b) Average balances are based on carrying value.

11

NON-GAAP FINANCIAL MEASURES

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

	At or For the Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s)	2014			2014			2013			2013			2013
Tangible Equity:
Total stockholders' equity, as reported	$	244,271		$	230,576		$	221,553		$	222,247		$	219,147
Less: goodwill and other intangible assets	79,273			77,288			77,603			71,417			71,608
Tangible equity	$	164,998		$	153,288		$	143,950		$	150,830		$	147,539
Tangible Assets:
Total assets, as reported	$	2,163,892		$	2,078,253		$	2,059,108		$	1,919,705		$	1,899,841
Less: goodwill and other intangible assets	79,273			77,288			77,603			71,417			71,608
Tangible assets	$	2,084,619		$	2,000,965		$	1,981,505		$	1,848,288		$	1,828,233
Tangible Book Value per Share:
Tangible equity	$	164,998		$	153,288		$	143,950		$	150,830		$	147,539
Common shares outstanding	10,926,436			10,657,569			10,605,782			10,596,797			10,583,161
Tangible book value per common share	$	15.10		$	14.38		$	13.57		$	14.23		$	13.94
Tangible Equity to Tangible Assets Ratio:
Tangible equity	$	164,998		$	153,288		$	143,950		$	150,830		$	147,539
Tangible assets	$	2,084,619		$	2,000,965		$	1,981,505		$	1,848,288		$	1,828,233
Tangible equity to tangible assets	7.92		%	7.66		%	7.26		%	8.16		%	8.07		%

	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
(in $000’s)	2014			2014			2013			2014			2013
Pre-Provision Net Revenue:
Income before income taxes	$	5,057		$	6,931		$	7,431		$	11,988		$	14,771
Add: provision for loan losses	583			8			—			591			—
Add: net loss on loans held-for-sale and OREO	—			—			—			—			—
Add: net loss on securities transactions	—			30			—			30			—
Add: net loss on other assets	187			7			87			194			87
Less: recovery of loan losses	—			—			1,462			—			2,527
Less: net gain on loans held-for-sale and OREO	—			18			81			18			76
Less: net gain on securities transactions	66			—			26			66			444
Pre-provision net revenue	$	5,761		$	6,958		$	5,949		$	12,719		$	11,811
Pre-provision net revenue	$	5,761		$	6,958		$	5,949		$	12,719		$	11,811
Total average assets	$	2,090,951		$	2,050,602		$	1,910,988		$	2,070,888		$	1,912,620
Pre-provision net revenue to total average assets (annualized)	1.11		%	1.38		%	1.25		%	1.24		%	1.25		%

END OF RELEASE

12