PEOPLES BANCORP INC. - P.O. BOX 738 - MARIETTA, OHIO - 45750
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact:Jack Conlon
- --------------------- Chief Financial Officer
October 15, 2003 (740) 373-3155
PEOPLES BANCORP INC. REPORTS
THIRD QUARTER RESULTS
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MARIETTA, Ohio - Peoples Bancorp Inc. (NASDAQ: PEBO) announced net
income of $5,940,000 for the third quarter of 2003, up 24% from $4,796,000 a
year ago and up 9% from $5,439,000 for the second quarter of 2003. Diluted
earnings per share were $0.55 for the third quarter of 2003 versus $0.56 for the
same period last year and $0.51 for the second quarter of 2003. On a
year-to-date basis through September 30, 2003, net income grew 15% to
$16,394,000, from $14,252,000 a year ago, while earnings per diluted share were
$1.55 for the nine months ended September 30, 2003, versus $1.68 for the first
nine months of 2002.
Peoples' increased net income is largely the result of additional net
interest income attributable to a higher level of earning assets, as well as
enhanced non-interest revenues. However, earnings per share continues to be
challenged by significant volumes of assets repricing downward and additional
common shares outstanding, including a full quarter's impact of the shares
issued as part of the Kentucky Bancshares acquisition last quarter.
"We are pleased with third quarter results, even as interest rate and
economic challenges persist," said Robert E. Evans, Peoples' Chairman and CEO.
"Although net interest income remains a key contributor to our earnings growth,
our associates are committed to enhancing Peoples' financial performance by
diversifying revenues. We believe this focus will help increase long-term
shareholder value."
In the third quarter of 2003, net interest income was $14,085,000
compared to $14,161,000 last quarter and $13,138,000 a year ago. Net interest
margin was 3.58% in the third quarter of 2003 versus 3.64% and 4.42% for the
second quarter of 2003 and third quarter of 2002, respectively. On a
year-to-date basis through September 30, 2003, net interest income totaled
$41,889,000 and net interest margin was 3.69% compared to $37,808,000 and 4.49%
for the same period in 2002.
"While the higher level of net interest income is primarily the result
of an increase in earning assets, the sustained low interest rate environment
continues to compress net interest margin," said Jack Conlon, Peoples' Chief
Financial Officer. "In addition, net interest income and margin for the third
quarter of 2003 were also impacted by new accounting rules for our trust
preferred securities. We continue to focus on minimizing the impact of interest
rate changes on Peoples' earnings while also preparing the balance sheet for
inevitable rate increases."
On July 1, 2003, Peoples adopted the reporting requirements of FASB
Statement of Financial Accounting Standards No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"), as required. This adoption resulted in Peoples reclassifying
$585,000 of expense on its Trust Preferred Securities to interest expense in the
third quarter of 2003. Prior to the adoption of SFAS 150, Peoples recognized the
cost of its Trust Preferred Securities as non-interest expense. While this
reclassification compressed third quarter net interest margin 14 basis points,
it positively impacted Peoples' efficiency and non-interest leverage ratios and
had no impact on net income or results of operations.
Non-interest income was $5,041,000 for the third quarter of 2003, up
24% from $4,066,000 for 2002's third quarter and up 11% from $4,547,000 for the
second quarter of 2003. For the nine months ended September 30, 2003,
non-interest income totaled $13,523,000 compared to $10,982,000 a year ago.
Peoples' increased non-interest income was primarily the result of higher
deposit service charge income and mortgage banking revenues, while revenues from
Peoples' e-banking services and fiduciary activities also contributed to the
increase.
"Growing non-interest revenues remains one of our key strategic goals,
especially in this challenging interest rate environment," commented Mark
Bradley, Peoples' Chief Operating Officer. "Recent acquisitions, such as the
Kentucky Bancshares acquisition, have provided opportunities to generate
additional fee-based revenues through our needs-based approach to fulfilling our
customers' financial needs."
Deposit account service charges totaled $2,196,000 in the third quarter
of 2003 and $5,973,000 for the nine months ended September 30, 2003, increases
of 12% and 19%, respectively, compared to the same periods last year as a result
of higher volumes of overdraft and non-sufficient funds fees. Peoples' fiduciary
revenues improved to $1,142,000 for the third quarter of 2003 and $2,586,000 for
the nine months ended September 30, 2003, compared to $626,000 and $1,882,000
for the same periods a year ago, respectively. These increases are largely
attributable to a one-time fee of $341,000 in the third quarter due to a large
special dividend received by several trust customers, as well as an increase in
trust assets under management due to the Kentucky Bancshares acquisition.
Peoples' mortgage banking activities produced revenues of $400,000 and $967,000
for the three and nine months ended September 30, 2003, respectively, versus
$22,000 for both periods last year, as Peoples began selling loans into the
secondary market late in the third quarter of 2002. E-banking revenues grew 15%
from a year ago, totaling $534,000 for third quarter of 2003 and were up 1% from
the prior quarter. The linked quarter increase was lower due to the expected
reduction in fees earned on certain debit card transactions as a result of the
recent litigation involving VISA and MasterCard. On a year-to-date basis,
electronic banking revenues were $1,517,000 in 2003 versus $1,246,000 in 2002,
an increase of 22%.
"Mortgage banking income has provided a boost to non-interest revenues
throughout 2003," added Bradley. "However, we anticipate mortgage originations
will slow down as the demand for loan refinancing appears to have peaked. We
have built our mortgage banking area to be an ongoing line of business, have a
good servicing portfolio, and have taken steps to pursue mortgage loan growth to
help offset lower mortgage banking revenues in the future."
Non-interest expense was $9,999,000 in the third quarter of 2003, up 5%
compared to $9,479,000 for the same period in 2002. Salaries and benefits,
Peoples' largest non-interest expense, totaled $5,031,000 for the quarter ended
September 30, 2003, an increase of 5% from a year ago. The increase was due
primarily to Peoples adding several new associates in conjunction with
acquisitions. For the third quarter of 2003, occupancy and equipment costs
increased 14%, 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. The change in classification of the
Trust Preferred expense due to the adoption of SFAS 150 partially offset these
increases and resulted in non-interest expense being down $43,000 in the third
quarter of 2003 compared to the prior quarter. On a year-to-date basis,
non-interest expense totaled $29,744,000 through September 30, 2003, up 11% from
$26,706,000 last year.
The non-interest income leverage ratio, defined as non-interest income
as a percentage of operating expenses (excluding intangible amortization),
serves as a measurement of efficiency and performance. Through the first nine
months of 2003, the non-interest income leverage ratio was 47.1%, an improvement
from 41.7% a year ago, due to stronger non-interest revenues, controlled expense
growth and the adoption of SFAS 150.
"The improvement in the non-interest leverage ratio reflects our
commitment to enhance earnings by reducing reliance on net interest income,"
commented Bradley. "We also monitor operating expense in order to try to
efficiently deliver products and services to our clients but will not sacrifice
our ability to satisfy customer needs just to control current expenses."
At September 30, 2003, loans totaled $921.4 million, up $70.5 million
since year-end 2002, due mainly to loans acquired in the Kentucky Bancshares
acquisition. In addition, Peoples has internally generated nearly $55 million of
commercial loans since year-end 2002, partially offsetting declines in real
estate and consumer loans. Throughout 2003, real estate loan balances have
declined, due in part to Peoples' increased mortgage banking activities and
related selling of loans into the secondary market, while consumer loan balances
continue to drop due to the combination of a decrease in demand and Peoples'
focus on loan quality. During the third quarter of 2003, total loans grew nearly
$5 million, as commercial loan growth exceeded the declines in consumer and real
estate loans.
Nonperforming loans comprised 0.61% of total loans at September 30,
2003 and nonperforming assets comprised 0.39% of total assets, versus 0.88% and
0.55%, respectively, at year-end 2002. In the third quarter of 2003, Peoples'
provision for loan losses was $920,000, down from $935,000 in the prior quarter
and down 22% from $1,182,000 a year ago, due to Peoples' good asset quality. At
September 30, 2003, the allowance for loan losses was $14.4 million compared to
$13.1 million at year-end 2002, with nearly half of the increase being the
result of the allowance for loan losses acquired in the Kentucky Bancshares
acquisition.
"Maintaining superior asset quality has always been an important
objective for Peoples, especially in times of economic uncertainty," stated
Bradley. "We are pleased with the overall improvement in our asset quality which
reflects a 24% decline in nonperforming loans since year-end 2002. Our loan
review programs should continue to identify problem loans in a timely manner
which should help us to control future losses and maintain our low nonperforming
asset levels."
In the third quarter of 2003, net loan chargeoffs were $648,000, a 37%
decline from $1,024,000 a year ago, which is attributable to fewer troubled
commercial loans. Consumer loans, which include overdrafts, comprise the largest
portion of net chargeoffs, totaling $370,000 and $474,000 for the three months
ended September 30, 2003 and 2002, respectively. Commercial loan net chargeoffs
were $39,000 for the third quarter of 2003, down from $374,000 for 2002's third
quarter, while real estate net chargeoffs totaled $176,000 and $123,000 for the
same periods, respectively.
"Overall, we are pleased with our third quarter results and short-term
performance," summarized Bradley. "We are optimistic that recent strategic
initiatives will allow us to produce additional benefits for our customers,
associates, and shareholders."
As previously announced, Peoples will close its Catlettsburg, Kentucky,
office later this month due to the proximity of Peoples Bank's full-service
office in Ashland. This office closing will allow Peoples to serve customers in
this market more efficiently and provide conveniences, such as drive-in service
and an ATM. Management does not expect this closure to have a material impact to
Peoples' results of operations or financial position.
Peoples Bancorp Inc., a diversified financial products and services
company with $1.8 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 third
quarter results of operations on October 16, 2003, at 4:00 p.m. EDT, with
members of Peoples' executive management participating. Analysts, media and
individual investors are invited to participate in the conference call by
calling (877) 735-0939. A webcast of the call can be accessed via the home page
and/or Investor Relations section of 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 or download and install the
necessary software. A replay of the call will be available on Peoples' website
for 30 days.
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)
PEOPLES BANCORP INC.
Third quarter 2003 Earnings Release
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Three Months Ended Nine Months Ended
(in $000's, except per share data) September 30, September 30,
2003 2002 2003 2002
---------------------------------- ----------------------------------
PER SHARE DATA(a) Net income per share:
Basic $ 0.56 $ 0.58 $ 1.58 $ 1.72
Diluted $ 0.55 $ 0.56 $ 1.55 $ 1.68
Cash dividends declared per share $ 0.17 $ 0.14 $ 0.47 $ 0.42
Book value per share $ 16.42 $ 13.47 $ 16.42 $ 13.47
Tangible book value per share (b) $ 12.05 $ 9.90 $ 12.05 $ 9.90
Dividend payout as a percentage of net income 30.89% 24.90% 29.99% 24.37%
Actual shares outstanding (net of treasury shares) 10,632,858 8,298,828 10,632,858 8,298,828
Weighted average shares outstanding:
Basic 10,653,999 8,291,496 10,372,617 8,263,928
Diluted 10,896,461 8,557,503 10,585,655 8,488,445
PERFORMANCE RATIOS
Return on average equity 13.85% 17.80% 13.26% 18.63%
Return on average assets 1.34% 1.43% 1.29% 1.50%
Non-interest income leverage ratio (c) 53.36% 43.86% 47.08% 41.71%
Efficiency ratio (d) 48.35% 52.61% 50.70% 52.58%
Net interest margin (fully tax equivalent) 3.58% 4.42% 3.69% 4.49%
Net loan chargeoffs as a percentage of average loans 0.07% 0.12% 0.22% 0.34%
NET CHARGEOFFS
Gross chargeoffs $ 935 $ 1,223 $ 2,675 $ 3,323
Recoveries $ 287 $ 199 $ 753 $ 524
--------------- --------------- --------------- ---------------
Net chargeoffs $ 648 $ 1,024 $ 1,922 $ 2,799
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<FN>
(a) Amounts adjusted for a 5% stock dividend issued August 29, 2003.
(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
------------------------------- -------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
(in $000's) 2003 2002 2003 2002
------------------------------- -------------------------------
Interest income $ 23,550 $ 21,683 $ 69,819 $ 62,310
Interest expense 9,465 8,545 27,930 24,502
-------------- -------------- -------------- --------------
Net interest income 14,085 13,138 41,889 37,808
Provision for loan losses 920 1,182 2,686 3,023
-------------- -------------- -------------- --------------
Net interest income after provision for loan losses 13,165 11,956 39,203 34,785
Net (loss) gain on securities transactions 2 51 (25) 102
Net loss on asset disposals 9 - (229) (14)
Gain on early debt extinguishment - - - 631
Non-interest income:
Service charges on deposits 2,196 1,958 5,973 4,999
Fiduciary revenues 1,142 626 2,586 1,882
Electronic banking revenues 534 464 1,517 1,246
Mortgage banking income 400 22 967 22
Business owned life insurance 342 384 1,060 1,085
Insurance and investment commissions 338 532 1,100 1,518
Other non-interest income 89 80 320 230
-------------- -------------- -------------- --------------
Total non-interest income 5,041 4,066 13,523 10,982
Non-interest expense:
Salaries and benefits 5,031 4,771 14,582 13,601
Occupancy and equipment 1,127 988 3,333 2,854
Amortization of intangible assets 551 208 1,023 431
Professional fees 458 554 1,442 1,468
Data processing and software 385 251 1,035 868
Franchise taxes 284 173 813 533
Marketing 200 242 855 778
Trust preferred - 621 1,169 1,775
Other non-interest expense 1,963 1,671 5,492 4,398
-------------- -------------- -------------- --------------
Total non-interest expense 9,999 9,479 29,744 26,706
-------------- -------------- -------------- --------------
Income before income taxes 8,218 6,594 22,728 19,780
Income taxes 2,278 1,798 6,334 5,528
-------------- -------------- -------------- --------------
Net income $ 5,940 $ 4,796 $ 16,394 $ 14,252
============== ============== ============== ==============
Fully tax equivalent net interest income $ 14,498 $ 13,577 $ 43,128 $ 39,007
PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
------------------------------- -------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
(in $000's) 2003 2002 2003 2002
------------------------------- -------------------------------
CONSOLIDATED AVERAGE BALANCES
Average gross loans $ 909,334 $ 863,924 $ 885,493 $ 813,296
Average earning assets 1,625,721 1,227,514 1,563,048 1,159,519
Average intangible assets 47,163 28,625 38,886 21,379
Average total assets 1,776,494 1,346,722 1,696,986 1,264,047
Average non-interest bearing deposits 131,456 105,604 121,983 99,096
Average interest bearing deposits:
Savings 183,508 128,870 170,000 107,579
Interest-bearing demand deposits 276,414 287,434 274,744 279,259
Time deposits 474,128 415,473 450,309 384,463
-------------- -------------- -------------- --------------
Total average interest bearing deposits 934,050 831,777 895,053 771,301
Average stockholders' equity $ 171,550 $ 107,747 $ 164,817 $ 101,982
------------------------------- -------------------------------
PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
----------------- ----------------- -----------------
(in $000's, end of period) September 30, December 31, September 30,
2003 2002 2002
----------------- ----------------- -----------------
LOAN PORTFOLIO
Commercial, financial, and agricultural $ 496,975 $ 392,528 $ 386,413
Real estate, construction 17,714 16,231 20,348
Real estate, mortgage 314,303 331,948 341,131
Consumer 86,108 103,635 113,533
Credit card 6,302 6,549 6,202
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Total loans $ 921,402 $ 850,891 $ 867,627
ASSET QUALITY
Allowance for loan losses as a percent of total loans 1.57% 1.54% 1.49%
Allowance for loan losses as a percent of
nonperforming loans (a) 254.7% 175.3% 171.2%
Nonperforming loans as a percent of total loans (a) 0.61% 0.88% 0.87%
Nonperforming assets as a percent of total assets 0.39% 0.55% 0.56%
Nonperforming assets as a percent of total loans and
other real estate owned
real estate owned 0.75% 0.89% 0.88%
Nonperforming assets (in $000's, end of period):
Loans 90 days or more past due $ 874 $ 407 $ 635
Renegotiated loans $ 684 $ 2,439 $ 2,439
Nonaccrual loans $ 4,105 $ 4,617 $ 4,455
Other real estate owned $ 1,279 $ 148 $ 124
----------------- ----------------- -----------------
Total nonperforming assets $ 6,942 $ 7,611 $ 7,653
REGULATORY CAPITAL (b)
Tier 1 risk-based capital 14.54% 15.43% 11.55%
Total risk-based capital ratio (Tier 1 and Tier 2) 15.88% 16.79% 12.91%
Leverage ratio 8.88% 10.56% 7.96%
Tier 1 capital $ 152,862 $ 139,208 $ 104,628
Total capital (Tier 1 and Tier 2) $ 166,952 $ 151,404 $ 116,223
Total risk-weighted assets $ 1,051,489 $ 901,973 $ 900,363
SUPPLEMENTAL DATA
Trust assets under management $ 578,958 $ 500,338 $ 485,074
Employees (full-time equivalent) 498 462 458
Full service offices 43 39 39
Supermarket offices 4 4 4
ATMs 33 30 29
Announced treasury share plans: (c)
Total shares authorized for plan 315,000 202,125 202,125
Shares purchased (d) 53,340 - -
Average price (d) $ 25.54 $ - $ -
----------------- ----------------- -----------------
<FN>
(a) Nonperforming loans include loans 90 days past due and accruing,
renegotiated loans, and nonaccrual loans.
(b) 2003 data based on preliminary analysis and is subject to revision.
(c) 2003 data reflects 2003 Stock Repurchase Program of 315,000 shares (or
approximately 3% of outstanding shares); 2002 data reflects 2002 Stock
Repurchase Program of 202,125 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) September 30, December 31,
2003 2002
------------------ ------------------
ASSETS
Cash and cash equivalents $ 29,823 $ 55,550
Available-for-sale investment securities, at estimated fair value
(amortized cost of $712,288 at September 30, 2003, and $402,048 at
December 31, 2002) 719,753 412,100
Loans, net of unearned interest 921,402 850,891
Allowance for loan losses (14,423) (13,086)
--------------- ---------------
Net loans 906,979 837,805
Bank premises and equipment, net of accumulated depreciation 22,496 18,058
Goodwill 38,908 25,504
Other intangible assets 7,586 5,234
Other real estate owned 1,279 148
Other assets 45,201 39,962
--------------- ---------------
TOTAL ASSETS $ 1,772,025 $ 1,394,361
=============== ===============
LIABILITIES
Non-interest bearing deposits $ 132,977 $ 115,907
Interest bearing deposits 923,352 839,970
--------------- ---------------
Total deposits 1,056,329 955,877
Federal funds purchased, securities sold under repurchase agreements,
and other short term borrowings 46,877 48,183
Long-term borrowings 454,568 203,829
Mandatorily redeemable capital securities of subsidiary trust 29,155 -
Accrued expenses and other liabilities 10,465 10,199
--------------- ---------------
TOTAL LIABILITIES 1,597,394 1,218,088
Guaranteed preferred beneficial interests in junior subordinated debentures - 29,090
STOCKHOLDERS' EQUITY
Common stock, no par value (24,000,000 shares authorized, 10,700,582 shares
issued at September 30, 2003, and
9,421,222 shares issued at December 31, 2002) 161,252 129,173
Accumulated comprehensive income, net of deferred income taxes 4,759 6,446
Retained earnings 9,841 12,650
Treasury stock, at cost ( 67,724 shares at September 30, 2003,
and 59,351 shares at December 31, 2002) (1,221) (1,086)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 174,631 147,183
TOTAL LIABILITIES, BENEFICIAL INTERESTS, AND
--------------- ---------------
STOCKHOLDERS' EQUITY $ 1,772,025 $ 1,394,361
=============== ===============
END OF RELEASE