NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: Jack Conlon
April 15, 2003 Chief Financial Officer
(740) 373-3155
PEOPLES BANCORP INC. REPORTS
FIRST QUARTER RESULTS
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MARIETTA, Ohio - Peoples Bancorp Inc. (Nasdaq: PEBO) announced
net income of $5,014,000 for the first quarter of 2003, up 7% from $4,693,000 a
year ago. Compared to the fourth quarter of 2002, net income grew 11% from
$4,500,000. Diluted earnings per share were $0.51 for the first quarter of 2003
versus $0.59 for the same period last year and $0.54 for the fourth quarter of
2002. In the first quarter of 2002, Peoples purchased $7.0 million of trust
preferred securities issued by PEBO Capital Trust I, at a significant discount,
resulting in a nonrecurring after-tax gain of $410,000, or $0.05 per diluted
share.
While net income increased for the current quarter primarily due to
additional net interest income resulting from an investment growth strategy
initiated in late 2002, the combination of assets repricing downward and efforts
to lock in lower long-term rates on funding sources has reduced net margin
earned from both the loan and investment portfolios resulting in lower earnings
per share in the first quarter of 2003. Also, the issuance of 1.7 million of
Peoples' common shares in late 2002 and early 2003 had some impact to first
quarter 2003 per share earnings, although most of the dilutive effect of the new
shares outstanding was offset by the investment leverage strategy which was
essentially completed in early February 2003.
"Our earnings, although lower than previous quarters on a per share
basis, remain solid even as economic conditions and competitive factors have
challenged the financial services industry," said Robert E. Evans, Peoples'
President and CEO. "As we strive to create long-term stakeholder value, we also
recognize the need for short-term performance. We remain committed to our core
values that guide us in achieving future success and will not sacrifice
long-term potential simply for the sake of short-term growth."
Net income for the first quarter of 2002 reflects Peoples' adoption of
FASB Statement 147, "Acquisitions of Certain Financial Institutions" ("SFAS
147"), which was effective on October 1, 2002. Under SFAS 147, goodwill is no
longer amortized, but is subject to annual impairment tests. This standard is
applied retroactively and caused Peoples to restate amortization of goodwill on
qualifying branch purchases of $274,000 in the first quarter of 2002.
Net interest income totaled $13,643,000 for the first quarter of 2003
compared to $12,190,000 last quarter and $12,159,000 for 2002's first quarter.
For the three months ended March 31, 2003, net interest margin was 3.87% versus
4.05% and 4.52% for the fourth and first quarters of 2002, respectively. In
January 2003, Peoples purchased $260 million of mortgage-backed securities as
part of an investment growth strategy to offset the dilutive impact of the new
common shares issued in late 2002 and early 2003. The investment purchases were
funded using a mix of short- and long-term borrowings totaling $245 million.
This leverage program accounted for the majority of the increase in net interest
income in 2003 but also contributed to compression of net interest margin.
"The sustained low interest rate environment has challenged net
interest income and margin," said Jack Conlon, Peoples' Chief Financial Officer.
"While we have taken steps to secure longer-term, fixed rate borrowings to lock
in the low rates and eliminate our previous liability sensitive position,
significant volumes of assets continue to reprice downward and compress net
interest margin. Peoples' current interest rate position should produce income
growth when interest rates eventually increase."
For the quarter ended March 31, 2003, non-interest income was
$3,935,000, up 20% from $3,283,000 for the same period last year. The increase
in non-interest income was primarily the result of higher deposit service charge
income, with revenues from Peoples' e-banking services, business owned life
insurance ("BOLI"), and $230,000 of mortgage banking income also contributing to
the increase. Deposit account service charges grew 26% in the first quarter of
2003 to $1,725,000 as compared to the first quarter of 2002, due to higher
volumes of overdraft and non-sufficient funds fees, as well as an increased
number of checking accounts attributable to acquisitions and Peoples' Free
Checking campaign. E-banking revenues increased 23% to $454,000 in first quarter
of 2003, as customers increasingly complete more of their transactions using
Peoples' debit cards. BOLI produced tax-advantaged revenue of $365,000 in the
first quarter of 2003, up 12% from a year ago. Compared to the fourth quarter of
2002, non-interest income was down $175,000 in the first three months of 2003.
Starting in the second half of 2002, Peoples began selling long-term,
fixed rate real estate loans into the secondary market. As a result, Peoples
recognized mortgage banking income of $230,000 for the three months ended March
31, 2003. Prior to the third quarter of 2002, Peoples primarily originated one-
to five-year adjustable rate, fully amortizing real estate loans rather than
long-term, fixed rate loans due to the associated interest rate risk. Peoples
expects a continued focus on secondary market loan activity in 2003.
"Our strategic goals include to continue growing non-interest
revenues," commented Mark Bradley, President and Chief Operating Officer of
Peoples Bank. "And while various factors, including the impact of the struggling
equity markets on fiduciary and brokerage revenues, limited our ability to grow
revenues in the first quarter, we believe Peoples' needs-based approach to
selling and the implementation of a customer relationship management system will
provide our associates with additional opportunities to generate higher levels
of fee-based income."
Non-interest expense was $9,704,000 in the first quarter of 2003, up
12% compared to $8,677,000 for the first three months of 2002. Compared to the
fourth quarter of 2002, non-interest expense grew 5% in the first quarter, from
$9,261,000. Salaries and benefits, Peoples' largest non-interest expense,
totaled $4,724,000 for the quarter ended March 31, 2003, up 5% compared to
$4,484,000 a year ago. This increase was largely due to the addition of several
new associates and salary increases necessary to retain and recruit key
personnel. Professional fees were up 47% in the first quarter of 2003 compared
to a year ago, attributable in large part to costs associated with Peoples'
Overdraft Privilege program. Occupancy and equipment costs increased 19% as
recent acquisitions and investments in technology produced additional
depreciation expense in 2003.
"We will continue to invest in our associates and technology, as well
as make acquisitions that allow us to generate additional revenue and serve our
new and existing clients better," said Bradley. "These investments have resulted
in higher expenses in the first quarter compared to prior periods. We continue
to evaluate every opportunity to control costs and improve short-term
performance without sacrificing future opportunities and our ability to enhance
Peoples' long-term value."
At March 31, 2003, loans totaled $861.1 million, up $10.2 million since
year-end 2002. Commercial loan balances grew $30.3 million during the first
quarter of 2003, while real estate and consumer loans declined $12.8 million and
$6.8 million, respectively. The majority of the increase in commercial loans is
attributable to lending opportunities within Peoples' existing markets. Real
estate loan balances have declined in response to customer demand for long-term,
fixed-rate mortgages sold into the secondary market. Consumer loan balances
continue to drop as a result of both a decrease in demand and Peoples' focus on
loan quality, more than loan growth, due to economic conditions.
"Loan growth remains a key to reaching our 2003 goals, but we also
realize the importance of strong asset quality in these uncertain economic
times," stated Conlon. "We have dealt with the few troubled loan relationships
which impacted asset quality in 2002. Our lenders will remain focused on
generating loans which meet Peoples' sound underwriting criteria."
Nonperforming loans comprised 0.55% of total loans at March 31, 2003
and nonperforming assets comprised 0.34% of total assets, versus 0.88% and
0.55%, respectively, at year-end 2002. This improvement is due to a lower level
of nonperforming loans and an increase in assets.
Conlon added, "In the first quarter of 2003, a large commercial loan on
non-accrual status moved into other real estate owned, which provided
improvement in Peoples' loan quality ratios. We are confident our loan review
process will continue to identify problems loans in a timely manner which should
allow us to reduce future losses."
Since December 31, 2002, nonperforming loans have declined 36%, with
reduced renegotiated loan balances comprising the majority of the improvement,
while total assets increased 20% as a result of the investment leverage strategy
completed in the first quarter of 2003. The allowance for loan losses was $13.4
million at March 31, 2003, compared to $13.1 million at year-end 2002. Peoples'
provision for loan losses was $831,000 in the first quarter of 2003, down from
$1,044,000 in the prior quarter and $861,000 a year ago.
"The decreased provision reflects the overall improvement in the
quality of Peoples' loan portfolio," said Conlon. "In addition, provisions
relating to the Overdraft Privilege program declined as losses begin to
stabilize. Our evaluation of the adequacy for loan losses, loan growth and other
factors affecting probable loan losses is ongoing, but we believe the current
allowance for loan losses is adequate for the overall quality, inherit risk and
loan volume concentrations in the loan portfolio."
In the first quarter of 2003, net loan chargeoffs were $554,000
compared to $792,000 a year ago and $843,000 in the fourth quarter of 2002.
Consumer and commercial loans comprised the largest portion of net chargeoffs.
In the first quarter of 2003, net consumer loan chargeoffs totaled $201,000
compared to $218,000 and $167,000 for the first and fourth quarters of 2002,
respectively, while commercial loan chargeoffs totaled $186,000, $381,000 and
$448,000 for the same periods, respectively. Commercial loan chargeoffs were
lower in the first quarter of 2003 as a result of Peoples charging down troubled
loans last year to amounts deemed collectible. Chargeoffs relating to the
Overdraft Privilege program totaled $117,000 in the first three months of 2003
versus $104,000 and $196,000 in 2002's first and fourth quarters, respectively.
"Overall, our first quarter results reflect the challenges we faced in
building upon the success of 2002," summarized Evans. "Although various factors
limited our ability to improve earnings per share, our focus remains on Peoples'
long-term earnings potential, and we believe Peoples is positioned for long-term
growth and success."
Peoples Bancorp Inc., a diversified financial products and services
company with $1.7 billion in assets, makes available a complete line of banking,
investment, insurance, and trust solutions through Peoples Bank's 46 sales
offices and 30 ATMs in Ohio, West Virginia, and Kentucky. Peoples' common shares
are traded on the NASDAQ national market under the symbol "PEBO", and Peoples is
a member of the Russell 3000 index of US publicly traded companies. Learn more
about Peoples or enroll in Peoples' Internet banking product, at
www.peoplesbancorp.com.
This news release is also available on www.peoplesbancorp.com under the
"Bulletin Board" section.
Conference Call to Discuss Earnings:
Peoples will conduct a facilitated conference call to discuss first
quarter results of operations on April 16, 2003, at 3:00 p.m., local time, with
members of Peoples' executive management participating. The conference call,
consisting of brief opening remarks followed by a question and answer period, is
open to the public; however, management asks that questions be limited to
investment analysts, interested members of the media and shareholders. To
participate, please dial (877) 735-0939 approximately five minutes before the
scheduled start of the conference call. A complete transcript of the conference
call will be placed on peoplesbancorp.com on the "Investor Relations" page in
"Conference Call Transcripts" section under the caption of "April 16, 2003".
Safe Harbor Statement:
Except for the historical and present factual information contained in
this press release, the matters discussed in this press release, and other
statements identified by words such as "expects," "believes," "plans," and
similar expressions are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially, including, but not limited
to, the interest rate environment, the effect of federal and state banking and
tax regulations, the effect of technological changes, the effect of economic
conditions, the impact of competitive products and pricing, and other risk
factors relating to the banking industry or Peoples as detailed from time to
time in Peoples' reports filed with the SEC. Although management believes that
the expectations in these forward-looking statements are based on reasonable
assumptions within the bounds of management's knowledge of Peoples' business and
operations, it is possible that actual results may differ materially from these
projections. Peoples disclaims any responsibility to update these
forward-looking statements, except as may be required by applicable laws.
PEOPLES BANCORP INC. (Nasdaq: PEBO)
Financial Highlights (Unaudited)
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Three Months Ended
(in $000's, except share data) March 31,
2003 2002
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PER SHARE DATA (a) Net income per share:
Basic $ 0.52 $ 0.60
Diluted $ 0.51 $ 0.59
Dividends declared per share $ 0.15 $ 0.14
Book value per share $ 16.39 $ 12.26
Tangible book value per share (b) $ 13.22 $ 10.14
Dividend payout as a percentage of net income 28.86% 22.95%
Actual shares outstanding (net of treasury shares) 9,552,543 7,849,280
Weighted average shares outstanding:
Basic 9,577,729 7,841,605
Diluted 9,767,338 7,979,461
PERFORMANCE RATIOS
Return on average equity 13.00% 19.35%
Return on average assets 1.27% 1.56%
Non-interest income leverage ratio (c) 41.41% 38.33%
Efficiency ratio (d) 52.83% 54.24%
Net interest margin (fully tax equivalent) 3.87% 4.52%
Net loan chargeoffs as a percentage of average loans 0.07% 0.10%
NET CHARGEOFFS
Gross chargeoffs $ 785 $ 953
Recoveries $ 231 $ 161
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Net chargeoffs $ 554 $ 792
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<FN>
(a) Adjusted for 10% stock dividend issued June 28, 2002.
(b) Excludes balance sheet impact of intangible assets acquired through use of
purchase accounting for acquisitions.
(c) Non-interest income (less securities and asset disposal gains/losses) as a
percentage of non-interest expense (less intangible amortization).
(d) Non-interest expense (less intangible amortization) as a percentage of
fully tax equivalent net interest income plus non-interest income and gain
on sale of loans.
</FN>
PEOPLES BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME
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Three Months Ended
March 31,
(in $000's) 2003 2002
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Interest income $ 22,777 $ 20,315
Interest expense 9,134 8,156
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Net interest income 13,643 12,159
Provision for loan losses 831 861
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Net interest income after provision for loan losses 12,812 11,298
Net gain on securities transactions 2 51
Net loss on asset disposals (2) (7)
Gain on early debt extinguishment - 631
Non-interest income:
Service charges on deposits 1,725 1,366
Fiduciary revenues 586 616
Insurance and investment commissions 442 524
Electronic banking revenues 454 368
Business owned life insurance 365 325
Mortgage banking income 230 -
Other non-interest income 133 84
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Total non-interest income 3,935 3,283
Non-interest expense:
Salaries and benefits 4,724 4,484
Occupancy and equipment 1,098 926
Trust preferred 607 561
Professional fees 442 301
Data processing and software 330 323
Marketing 276 386
Franchise taxes 257 182
Amortization of intangible assets 201 111
Other non-interest expense 1,769 1,403
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Total non-interest expense 9,704 8,677
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Income before income taxes 7,043 6,579
Income taxes 2,029 1,886
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Net income $ 5,014 $ 4,693
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Fully tax equivalent net interest income $ 14,053 $ 12,510
PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
-------------------------------
Three Months Ended
March 31,
(in $000's) 2003 2002
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CONSOLIDATED AVERAGE BALANCES
Average gross loans $ 850,967 $ 778,223
Average earning assets 1,455,211 1,111,330
Average intangible assets 30,661 16,829
Average total assets 1,575,673 1,206,210
Average non-interest bearing deposits 108,315 93,961
Average interest bearing deposits:
Savings 150,168 84,798
Interest-bearing demand deposits 270,835 276,706
Time deposits 422,158 363,959
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Total average interest bearing deposits 843,161 725,463
Average stockholders' equity $ 154,302 $ 97,013
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PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
----------------- ----------------- -----------------
March 31, December 31, March 31,
2003 2002 2002
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LOAN PORTFOLIO (in $000's, end of period)
Commercial, financial, and agricultural $ 422,782 $ 392,528 $ 352,531
Real estate, construction 10,523 16,231 18,135
Real estate, mortgage 324,877 331,948 296,082
Consumer 96,857 103,635 107,757
Credit card 6,065 6,549 6,205
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Total loans $ 861,104 $ 850,891 $ 780,710
ASSET QUALITY
Allowance for loan losses as a percent of total loans 1.55% 1.54% 1.59%
Allowance for loan losses as a percent of
nonperforming loans (a) 280.6% 175.3% 157.8%
Nonperforming loans as a percent of total loans (a) 0.55% 0.88% 1.01%
Nonperforming assets as a percent of total assets (b) 0.34% 0.55% 0.67%
Nonperforming assets as a percent of total loans and
other real estate owned
real estate owned (b) 0.66% 0.89% 1.03%
Nonperforming assets (in $000's, end of period):
Loans 90 days or more past due $ 337 $ 407 $ 971
Renegotiated loans $ 685 $ 2,439 $ 2,864
Nonaccrual loans $ 3,741 $ 4,617 $ 4,040
Other real estate owned $ 924 $ 148 $ 167
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Total nonperforming assets $ 5,687 $ 7,611 $ 8,042
REGULATORY CAPITAL (in $000's, end of period)
Tier 1 risk-based capital 15.18% 15.43% 12.37%
Total risk-based capital ratio (Tier 1 and Tier 2) 16.55% 16.79% 13.72%
Leverage ratio 9.62% 10.56% 8.63%
Tier 1 capital $ 147,466 $ 139,208 $ 102,426
Total capital (Tier 1 and Tier 2) $ 160,806 $ 151,404 $ 113,567
Total risk-weighted assets $ 971,367 $ 901,973 $ 827,926
SUPPLEMENTAL DATA (in $000's, end of period)
Trust assets under management $ 460,945 $ 500,338 $ 517,221
Employees (full-time equivalent) 451 462 398
Full service offices 39 39 34
Supermarket offices 4 4 4
ATMs 30 30 26
Announced treasury share plans: (c)
Total shares in plan 300,000 192,500 192,500
Shares purchased (d) 40,000 - 139
Average price (d) $ 22.04 $ - $ 17.23
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<FN>
(a) Nonperforming loans include loans 90 days past due and accruing,
renegotiated loans, and nonaccrual loans.
(b) Nonperforming assets include
nonperforming loans, and other real estate owned.
(c) 2003 data reflects 2003
Stock Repurchase Program of 300,000 shares (or approximately 3% of
outstanding shares); 2002 data reflects 2002 Stock Repurchase Program of
192,500 shares (or approximately 2.5% of outstanding shares). All share
amounts adjusted for stock dividends.
(d) Reflects treasury shares purchased and average price paid for the
three-month period ended on the date indicated.
</FN>
PEOPLES BANCORP INC. CONSOLIDATED BALANCE SHEETS
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(in $000's) March 31, December 31,
2003 2002
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ASSETS
Cash and cash equivalents $ 44,054 $ 55,550
Available-for-sale investment securities, at estimated fair value
(amortized cost of $675,677 at March 31, 2003, and $402,048 at
December 31, 2002) 688,350 412,100
Loans, net of unearned interest 861,104 850,891
Allowance for loan losses (13,363) (13,086)
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Net loans 847,741 837,805
Bank premises and equipment, net of accumulated depreciation 17,752 18,058
Goodwill 25,147 25,504
Other intangible assets 5,118 5,234
Other real estate owned 924 148
Other assets 39,597 39,962
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TOTAL ASSETS $ 1,668,683 $ 1,394,361
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LIABILITIES
Non-interest bearing deposits $ 113,685 $ 115,907
Interest bearing deposits 856,171 839,970
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Total deposits 969,856 955,877
Federal funds purchased, securities sold under repurchase agreements,
and other short term borrowings 63,842 48,183
Long-term borrowings 439,329 203,829
Accrued expenses and other liabilities 9,974 10,199
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TOTAL LIABILITIES 1,483,001 1,218,088
Guaranteed preferred beneficial interests in junior subordinated debentures 29,111 29,090
STOCKHOLDERS' EQUITY
Common stock, no par value (12,000,000 shares authorized, 9,651,538 shares
issued at March 31, 2003, and
9,421,222 shares issued at December 31, 2002) 134,168 129,173
Accumulated comprehensive income, net of deferred income taxes 8,148 6,446
Retained earnings 16,217 12,650
Treasury stock, at cost (98,995 shares at March 31, 2003,
and 59,351 shares at December 31, 2002) (1,962) (1,086)
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TOTAL STOCKHOLDERS' EQUITY 156,571 147,183
TOTAL LIABILITIES, BENEFICIAL INTERESTS, AND
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STOCKHOLDERS' EQUITY $ 1,668,683 $ 1,394,361
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END OF RELEASE