PEOPLES BANCORP INC.- P.O. BOX 738 - MARIETTA, OHIO - 45750
www.peoplesbancorp.com
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact:Jack Conlon
- --------------------- Chief Financial Officer
July 15, 2003 (740) 373-3155
PEOPLES BANCORP INC. REPORTS
SECOND QUARTER RESULTS
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MARIETTA, Ohio - Peoples Bancorp Inc. (Nasdaq: PEBO) announced net
income of $5,439,000 for the second quarter of 2003, up 14% from $4,763,000 a
year ago and up 8% from $5,014,000 for the first quarter of 2003. Diluted
earnings per share were $0.54 for the second quarter of 2003 versus $0.59 for
the same period last year and $0.51 the first quarter of 2003. For the six
months ended June 30, 2003, net income totaled $10,453,000, representing an 11%
increase over the $9,456,000 earned a year ago. Earnings per diluted share were
$1.05 for the six months ended June 30, 2003, versus $1.18 for the first six
months of 2002.
Peoples' increased net income in 2003 is due in large part to
additional net interest income resulting from an investment growth strategy
implemented in the first quarter of 2003, while lower earnings per share is
attributable to significant volumes of assets repricing downward, as well as
additional common shares outstanding, in part due to the issuance of 593,000
common shares in the second quarter of 2003 as partial consideration in the
Kentucky Bancshares, Incorporated acquisition. In addition, Peoples recognized
merger-related costs of approximately $215,000 after-tax (or $0.02 per share)
relating to this acquisition.
"We are pleased to report some earnings improvement in the second
quarter," said Robert E. Evans, Peoples' Chairman and CEO. "While interest rate
and economic challenges remain, we continue to explore opportunities to enhance
Peoples' financial performance and work to build long-term relationships with
new clients added from the Kentucky Bancshares acquisition."
During the second quarter, Peoples completed its acquisition of
Kentucky Bancshares, Incorporated, the holding company of Kentucky Bank & Trust.
As part of the transaction, Peoples acquired five full-service offices in
Kentucky's Boyd and Greenup Counties, with loans of $75 million, deposits of
$113 million and trust assets under management of $181 million. The former
Kentucky Bank & Trust offices now operate as sales offices of Peoples Bank.
Management expects this acquisition to positively impact Peoples' earnings, due
in part to enhanced future efficiencies through cost savings resulting from the
closure of Peoples Bank's existing Russell, Kentucky office concurrent with the
acquisition and the planned closure of Peoples Bank's Catlettsburg, Kentucky
office in October 2003. These office closings are primarily due to the proximity
of the newly acquired offices in Russell and Ashland, Kentucky, which will
continue to serve these markets.
In the second quarter of 2003, net interest income grew to $14,161,000,
from $13,643,000 last quarter and $12,511,000 a year ago. Net interest margin
was 3.64% in the second quarter of 2003 versus 3.87% and 4.54% for the first
quarter of 2003 and second quarter of 2002, respectively. On a year-to-date
basis through June 30, 2003, net interest income totaled $27,804,000 and net
interest margin was 3.74% compared to $24,670,000 and 4.53% for the same period
in 2002. In the first quarter of 2003, Peoples implemented an investment growth
strategy to offset the dilutive impact of the 1.7 million new common shares
issued in late 2002 and early 2003, which accounted for a significant portion of
the increase in net interest income in 2003, but also contributed to compression
of net interest margin.
"We continue to experience significant volumes of principal runoff from
the loan and investment portfolios which must be reinvested at lower rates,"
said Jack Conlon, Peoples' Chief Financial Officer. "In addition, there is
limited ability for a corresponding decrease in rates paid on interest-bearing
liabilities, further challenging both net interest income and margin. However,
we remain focused on minimizing the impact of interest rate changes on Peoples'
earnings."
For the quarter ended June 30, 2003, non-interest income was
$4,547,000, up 25% from $3,633,000 for the same period last year. On a
year-to-date basis, non-interest income totaled $8,482,000 through June 30,
2003, compared to $6,916,000 last year. Peoples' enhanced non-interest income
was primarily the result of higher deposit service charge income, with revenues
from Peoples' e-banking services, mortgage banking income and fiduciary
activities also contributing to the increase.
"Recent acquisitions, coupled with growth of our mortgage banking
activities, have generated additional non-interest revenues compared to the
first half of 2002," commented Mark Bradley, Peoples' Chief Operating Officer.
"Recognizing the importance of non-interest revenues in this challenging
interest rate environment, we believe the Kentucky Bancshares acquisition
affords us opportunities to expand product offerings and services in our
Kentucky markets."
Deposit account service charges totaled $2,052,000 in the second
quarter of 2003 and $3,777,000 for the six months ended June 30, 2003, increases
of 23% and 24%, respectively, compared to the same periods in 2002. These
increases resulted from a combination of higher volumes of overdraft and
non-sufficient funds fees and an increased number of checking accounts
attributable to acquisitions and Peoples' Free Checking campaign. E-banking
revenues grew 28% from a year ago, totaling $529,000 for second quarter of 2003,
as customers increasingly complete more of their transactions using Peoples'
debit cards. On a year-to-date basis, electronic banking revenues were $983,000
in 2003 versus $782,000 in 2002. As a result of the Kentucky Bancshares
acquisition, Peoples' fiduciary revenues improved to $858,000 for the second
quarter of 2003 and $1,444,000 for the six months ended June 30, 2003, compared
to $640,000 and $1,256,000 for the same periods in 2002. Peoples' mortgage
banking activities produced revenues of $337,000 and $567,000 for the three and
six months ended June 30, 2003, respectively, versus no income in the same
periods last year as Peoples did not sell loans into the secondary market during
that period.
"In recent periods, fees generated as a result of customers using
Peoples' debit card has enhanced non-interest income," added Bradley. "However,
as a result of recent litigation, MasterCard and Visa have implemented new rules
that are expected to reduce fees earned on signature-based debit card
transactions beginning in August. This adjustment will modestly reduce Peoples'
non-interest income based on current transaction volumes."
Non-interest expense was $10,042,000 in the second quarter of 2003, up
17% compared to $8,549,000 for the same period in 2002 largely attributable to
acquisitions and strategic initiatives. Salaries and benefits, Peoples' largest
non-interest expense, totaled $4,827,000 for the quarter ended June 30, 2003, an
increase of 11% from a year ago due primarily to Peoples adding several new
associates in conjunction with acquisitions. Marketing expense totaled $379,000
in the second quarter of 2003 versus $150,000 a year ago, with costs associated
with Peoples' new Freedom Checking product accounting for over half of the
increase. Occupancy and equipment costs increased 18%, as acquisitions and
investments in technology produced additional depreciation expense in 2003,
while intangible amortization more than doubled from a year ago, also due to
acquisitions. Compared to the first quarter of 2003, non-interest expense was up
3% in the second quarter of 2003, with salaries and benefits and marketing costs
comprising the majority of the increase. On a year-to-date basis, non-interest
expense totaled $19,746,000 and $17,227,000 through June 30, 2003 and 2002,
respectively.
Total deposits grew $187.5 million since December 31, 2002, reaching
$1.14 billion at June 30, 2003. The majority of this growth is the result of
acquiring $113 million of deposits in the Kentucky Bancshares acquisition. In
the acquisition, non-interest bearing deposits increased mainly due to an
acquired trust relationship that was liquidated on June 30, 2003. The
liquidation resulted in $60 million of non-interest bearing deposits on June 30,
2003, that were subsequently withdrawn. Average deposit balances grew $81.3
million in the second quarter of 2003, totaling $1.03 billion versus $951.5
million last quarter.
At June 30, 2003, loans totaled $916.6 million, up $65.7 million since
year-end 2002. While this increase is primarily attributable to loans acquired
in the Kentucky Bancshares acquisition, Peoples also experienced organic
commercial loan growth of nearly $35 million since year-end 2002. Real estate
loan balances have declined throughout the year 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.
"The current economic conditions require us to remain focused on asset
quality as we strive to grow loans," stated Bradley. "Our loan review process
continues to identify problem loans in a timely manner which allows us to reduce
future losses and keep asset quality ratios better than year-end 2002 levels."
Nonperforming loans comprised 0.62% of total loans at June 30, 2003 and
nonperforming assets comprised 0.35% of total assets, versus 0.88% and 0.55%,
respectively, at year-end 2002. These improvements were a result of a lower
level of nonperforming loans and an increase in assets. Since December 31, 2002,
nonperforming loans have declined 24%, with reduced renegotiated loan balances
comprising the majority of the improvement, while total assets increased 33% as
a result of the Kentucky Bancshares acquisition and the investment leverage
strategy completed in the first quarter of 2003. The allowance for loan losses
was $14.2 million at June 30, 2003, compared to $13.1 million at year-end 2002,
with the majority of the increase due to the allowance for loan losses of $0.6
million acquired in the Kentucky Bancshares acquisition. Peoples' provision for
loan losses was $935,000 in the second quarter of 2003, up from $831,000 in the
prior quarter and down from $980,000 a year ago.
In the second quarter of 2003, net loan chargeoffs were $720,000, a 27%
decline from $983,000 a year ago. While commercial and consumer loans, including
overdraft chargeoffs, comprise the largest portion of net chargeoffs, the lower
level of chargeoffs in the second quarter of 2003 is attributable to fewer
troubled commercial loans, as net commercial loan chargeoffs totaled $210,000 in
the second quarter of 2003 compared to $690,000 a year ago. Consumer loan
chargeoffs totaled $189,000 and $68,000 for the three months ended June 30, 2003
and 2002, respectively, while chargeoffs relating to the Overdraft Privilege
program totaled $150,000 and $147,000 for the same periods, respectively.
Late in the second quarter of 2003, management initiated a plan to
improve the performance of Peoples' investment securities portfolio in response
to the high rate of prepayments on mortgage-backed securities and the
corresponding downward pressure on yields due to accelerated amortization of
bond premiums. As part of this plan, Peoples sold $48.6 million of
mortgage-backed securities resulting in a net loss of $37,000. Management
expects to sell additional securities in July and reinvest all the proceeds from
these sales into other securities by the end of July. Peoples expects the
repositioning to improve both cash flows and yields from this portfolio. The
combination of the timing of the reinvestment of sale proceeds into other
investment securities and the $60 million of funds from the trust relationship
resulted in a higher level of cash and cash equivalents. At June 30, 2003, cash
and cash equivalents totaled $155.2 million, up $99.7 million since year-end;
with additional Federal funds sold accounting for the majority of the increase.
"Overall, our second quarter results demonstrate our ability to
deliver solid earnings despite challenging conditions," summarized Bradley. "In
the second half of 2003, we will continue to develop client relationships with
the objective of enhancing Peoples' long-term value for every stakeholder."
Peoples Bancorp Inc., a diversified financial products and services
company with $1.86 billion in assets, makes available a complete line of
banking, investment, insurance, and trust solutions through Peoples Bank's 50
sales offices and 33 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.
Conference Call to Discuss Earnings:
- ------------------------------------
Peoples will conduct a facilitated conference call to discuss second
quarter results of operations on July 16, 2003, at 4:00 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 "July 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 Six Months Ended
(in $000's, except per share data) June 30, June 30,
2003 2002 2003 2002
---------------------------------- ----------------------------------
PER SHARE DATA Net income per share:
Basic $ 0.55 $ 0.60 $ 1.07 $ 1.20
Diluted $ 0.54 $ 0.59 $ 1.05 $ 1.18
Dividends declared per share $ 0.16 $ 0.15 $ 0.31 $ 0.29
Book value per share $ 17.56 $ 13.30 $ 17.56 $ 13.30
Tangible book value per share (a) $ 12.75 $ 9.71 $ 12.75 $ 9.71
Dividend payout as a percentage of net income 30.04% 25.24% 29.47% 24.10%
Actual shares outstanding (net of treasury shares) 10,157,985 7,878,182 10,157,985 7,878,182
Weighted average shares outstanding:
Basic 9,905,403 7,873,795 9,742,471 7,857,062
Diluted 10,094,114 8,102,047 9,931,638 8,045,609
PERFORMANCE RATIOS
Return on average equity 12.92% 18.85% 12.95% 19.10%
Return on average assets 1.25% 1.54% 1.26% 1.55%
Non-interest income leverage ratio (b) 46.54% 43.06% 44.01% 40.68%
Efficiency ratio (c) 51.10% 50.97% 51.93% 52.57%
Net interest margin (fully tax equivalent) 3.64% 4.54% 3.74% 4.53%
Net loan chargeoffs as a percentage of average loans 0.08% 0.12% 0.15% 0.23%
NET CHARGEOFFS
Gross chargeoffs $ 955 $ 1,147 $ 1,740 $ 2,100
Recoveries $ 235 $ 164 $ 466 $ 325
--------------- --------------- --------------- ---------------
Net chargeoffs $ 720 $ 983 $ 1,274 $ 1,775
<FN>
(a) Excludes balance sheet impact of intangible assets acquired through use of
purchase accounting for acquisitions.
(b) Non-interest income (less securities and asset disposal gains/losses) as a
percentage of non-interest expense (less intangible amortization).
(c) 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
------------------------------- -------------------------------
Three Months Ended Six Months Ended
June 30, June, 30
(in $000's) 2003 2002 2003 2002
------------------------------- -------------------------------
Interest income $ 23,492 $ 20,312 $ 46,269 $ 40,627
Interest expense 9,331 7,801 18,465 15,957
-------------- -------------- -------------- --------------
Net interest income 14,161 12,511 27,804 24,670
Provision for loan losses 935 980 1,766 1,841
-------------- -------------- -------------- --------------
Net interest income after provision for loan losses 13,226 11,531 26,038 22,829
Net (loss) gain on securities transactions (29) - (27) 51
Net loss on asset disposals (236) (7) (238) (14)
Gain on early debt extinguishment - - - 631
Non-interest income:
Service charges on deposits 2,052 1,675 3,777 3,041
Fiduciary revenues 858 640 1,444 1,256
Electronic banking revenues 529 414 983 782
Insurance and investment commissions 320 462 762 986
Business owned life insurance 353 376 718 701
Mortgage banking income 337 - 567 -
Other non-interest income 98 66 231 150
-------------- -------------- -------------- --------------
Total non-interest income 4,547 3,633 8,482 6,916
Non-interest expense:
Salaries and benefits 4,827 4,346 9,551 8,830
Occupancy and equipment 1,108 940 2,206 1,866
Trust preferred 606 623 1,213 1,184
Professional fees 499 582 941 883
Marketing 379 150 655 536
Data processing and software 320 294 650 617
Franchise taxes 272 178 529 360
Amortization of intangible assets 271 112 472 223
Other non-interest expense 1,760 1,324 3,529 2,728
-------------- -------------- -------------- --------------
Total non-interest expense 10,042 8,549 19,746 17,227
-------------- -------------- -------------- --------------
Income before income taxes 7,466 6,608 14,509 13,186
Income taxes 2,027 1,845 4,056 3,730
-------------- -------------- -------------- --------------
Net income $ 5,439 $ 4,763 $ 10,453 $ 9,456
============== ============== ============== ==============
Fully tax equivalent net interest income $ 14,577 $ 12,919 $ 28,630 $ 25,430
PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
------------------------------- -------------------------------
Three Months Ended Six Months Ended
June 30, June, 30
(in $000's) 2003 2002 2003 2002
------------------------------- -------------------------------
CONSOLIDATED AVERAGE BALANCES
Average gross loans $ 895,538 $ 796,798 $ 873,375 $ 787,563
Average earning assets 1,606,339 1,138,435 1,531,192 1,124,958
Average intangible assets 38,654 18,552 34,680 17,696
Average total assets 1,742,151 1,238,088 1,659,372 1,222,046
Average non-interest bearing deposits 125,922 97,594 117,167 95,788
Average interest bearing deposits:
Savings 175,957 108,583 163,134 96,756
Interest-bearing demand deposits 276,920 273,528 273,894 275,108
Time deposits 454,069 373,394 438,202 368,702
-------------- -------------- -------------- --------------
Total average interest bearing deposits 906,946 755,505 875,230 740,566
Average stockholders' equity $ 168,409 $ 101,068 $ 161,394 $ 99,052
PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
----------------- ----------------- -----------------
June 30, December 31, June 30,
2003 2002 2002
----------------- ----------------- -----------------
LOAN PORTFOLIO (in $000's, end of period)
Commercial, financial, and agricultural $ 475,600 $ 392,528 $ 379,243
Real estate, construction 10,339 16,231 15,782
Real estate, mortgage 329,708 331,948 345,795
Consumer 94,549 103,635 115,398
Credit card 6,407 6,549 6,159
----------------- ----------------- -----------------
Total loans $ 916,603 $ 850,891 $ 862,377
ASSET QUALITY
Allowance for loan losses as a percent of total loans 1.54% 1.54% 1.44%
Allowance for loan losses as a percent of
nonperforming loans (a) 250.8% 175.3% 165.3%
Nonperforming loans as a percent of total loans (a) 0.62% 0.88% 0.87%
Nonperforming assets as a percent of total assets (b) 0.35% 0.55% 0.57%
Nonperforming assets as a percent of total loans and
real estate owned (b) 0.72% 0.89% 0.89%
Nonperforming assets (in $000's, end of period):
Loans 90 days or more past due $ 569 $ 407 $ 227
Renegotiated loans $ 685 $ 2,439 $ 2,864
Nonaccrual loans $ 4,389 $ 4,617 $ 4,425
Other real estate owned $ 960 $ 148 $ 124
----------------- ----------------- -----------------
Total nonperforming assets $ 6,603 $ 7,611 $ 7,640
REGULATORY CAPITAL (in $000's, end of period)
Tier 1 risk-based capital 14.05% 15.43% 11.26%
Total risk-based capital ratio (Tier 1 and Tier 2) 15.40% 16.79% 12.62%
Leverage ratio 8.80% 10.56% 8.42%
Tier 1 capital $ 147,366 $ 139,208 $ 101,451
Total capital (Tier 1 and Tier 2) $ 161,541 $ 151,404 $ 113,704
Total risk-weighted assets $ 1,048,707 $ 901,973 $ 901,032
SUPPLEMENTAL DATA (in $000's, end of period)
Trust assets under management $ 624,201 $ 500,338 $ 489,641
Employees (full-time equivalent) 486 462 447
Full service offices 43 39 39
Supermarket offices 4 4 4
ATMs 33 30 28
Announced treasury share plans: (c)
Total shares authorized for plan 300,000 192,500 192,500
Shares purchased (d) - - 4,756
Average price (d) $ - $ - $ 23.39
<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
------------------ ------------------
(in $000's) June 30, December 31,
2003 2002
------------------ ------------------
ASSETS
Cash and cash equivalents $ 155,234 $ 55,550
Available-for-sale investment securities, at estimated fair value
(amortized cost of $671,815 at June 30, 2003, and $402,048 at
December 31, 2002) 689,680 412,100
Loans, net of unearned interest 916,603 850,891
Allowance for loan losses (14,151) (13,086)
------------------ ------------------
Net loans 902,452 837,805
Bank premises and equipment, net of accumulated depreciation 22,102 18,058
Goodwill 40,771 25,504
Other intangible assets 8,032 5,234
Other real estate owned 960 148
Other assets 40,859 39,962
------------------ ------------------
TOTAL ASSETS $ 1,860,090 $ 1,394,361
================== ==================
LIABILITIES
Non-interest bearing deposits $ 196,576 $ 115,907
Interest bearing deposits 946,843 839,970
------------------ ------------------
Total deposits 1,143,419 955,877
Federal funds purchased, securities sold under repurchase agreements,
and other short term borrowings 42,826 48,183
Long-term borrowings 456,129 203,829
Accrued expenses and other liabilities 10,259 10,199
------------------ ------------------
TOTAL LIABILITIES 1,652,633 1,218,088
Guaranteed preferred beneficial interests in junior subordinated debentures 29,133 29,090
STOCKHOLDERS' EQUITY
Common stock, no par value (24,000,000 shares authorized, 10,218,955 shares
issued at June 30, 2003, and
9,421,222 shares issued at December 31, 2002) 147,905 129,173
Accumulated comprehensive income, net of deferred income taxes 11,523 6,446
Retained earnings 20,022 12,650
Treasury stock, at cost ( 60,970 shares at June 30, 2003,
and 59,351 shares at December 31, 2002) (1,126) (1,086)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 178,324 147,183
TOTAL LIABILITIES, BENEFICIAL INTERESTS, AND
------------------ ------------------
STOCKHOLDERS' EQUITY $ 1,860,090 $ 1,394,361
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END OF RELEASE