PEOPLES BANCORP INC. - P.O. BOX 738 - MARIETTA, OHIO - 45750
www.peoplesbancorp.com
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact:John W. Conlon
- --------------------- Chief Financial Officer
April 15, 2004 (740) 373-3155
PEOPLES BANCORP INC. REPORTS FIRST QUARTER EARNINGS
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MARIETTA, Ohio - Peoples Bancorp Inc. (NASDAQ: PEBO) announced net
income of $5,366,000 for the first quarter of 2004, up 7% from $5,014,000 a year
ago. Earnings per diluted shares were $0.50 for the three months ended March 31,
2004, compared to $0.49 earned in last year's first quarter. Peoples' increased
first quarter earnings were attributable to higher levels of net interest income
and non-interest revenues, primarily the result of the Kentucky Bancshares
Incorporated ("KBI") acquisition completed in mid-2003 and balance sheet
restructuring initiatives in late 2003.
"Completing the first quarter with a 7% net income growth over the same
quarter last year is a good start for the year," said Robert E. Evans, Chairman,
President and CEO. "We are confident that recent strategic actions provide us
with a solid foundation for long-term earnings growth."
Evans added, "We continue the drive to expand our financial and
insurance customer base through selective business acquisitions, like the
recently announced addition of the Putnam Agency in the Ashland, Kentucky and
Huntington, West Virginia markets. The Putnam Agency has been developing
relationships since 1904."
Through the first three months of 2004, net interest income totaled
$13,548,000 compared to $13,058,000 in 2003's first quarter. This increase was
due to earning assets added through the KBI acquisition, as well as Peoples'
efforts to reduce cost of funds more than the corresponding decline in yields
from assets repricing downward in the current rate environment. For the quarter
ended March 31, 2004, Peoples' average cost of funds was 2.28% compared to 3.03%
for the same quarter a year ago, while the average yield on earning assets was
5.60% and 6.41% for the same periods, respectively. Although these factors have
produced additional net interest income, they have also contributed to
compression of net interest margin from a year ago. In the first quarter of
2004, net interest margin was 3.56% versus 3.70% for the same quarter in 2003
and 3.32% for the fourth quarter of 2003. The net interest margin for fourth
quarter of 2003 was also impacted by $376,000 of combined additional premium
amortization and reduction in interest income on mortgage-backed securities.
Excluding these adjustments, the fourth quarter net interest margin would have
been 3.41%.
"The Federal Reserve's decision to leave rates at such low levels for
an unprecedented period continues to impact Peoples' net interest income and
margin," said Jack Conlon, Peoples' Chief Financial Officer. "However, a modest
increase in earning assets, due to acquisitions and an investment growth
strategy, plus the balance sheet restructuring in late 2003, mitigated some of
the impact of declining asset yields. Since net interest income remains a key
component of our earnings, we continue to manage Peoples' interest rate risk
position for the inevitable increase in market rates, while attempting to make
the best of current conditions."
Non-interest income was $4,825,000 for the first quarter of 2004, up
23% from $3,935,000 a year ago. Revenues from offices added in the KBI
acquisition, primarily deposit account service charges and fiduciary income, and
additional business owned life insurance ("BOLI") were the main factors
contributing to the overall increase in non-interest income.
"Our disciplined acquisition and expansion strategy over the last
several years has afforded us the ability to grow both traditional and
non-traditional revenues," commented Mark Bradley, Peoples' Chief Operating
Officer. "In addition, we believe non-traditional revenues, such as insurance
and investment commissions and fiduciary revenues, remain viable sources for
future non-interest income growth. With earnings pressures from net interest
margin compression likely to linger, we continue to focus our efforts on further
diversifying revenues and reducing Peoples' reliance on net interest income."
Deposit account service charges totaled $2,253,000 for the first
quarter of 2004, a 31% increase compared to the same period in 2003. This
increase was primarily the result of a combination of higher volumes of
overdraft and non-sufficient funds fees and an overall increase in the number of
checking accounts from the KBI acquisition, as well as an increase in the per
item amount of certain cost recovery fees. Peoples' fiduciary revenues improved
to $774,000 in the first quarter, from $586,000 for the same period in 2003,
attributable to additional assets under management. E-banking revenues,
primarily ATM and debit card fees, grew 15% from a year ago, totaling $523,000
for the first quarter of 2004. Peoples' mortgage banking activities produced
revenues of $199,000 for the three months ended March 31, 2004, versus $230,000
for 2003's first quarter, reflecting lower levels of real estate loan refinance
activity.
Non-interest expense was $10,290,000 in the first quarter of 2004
versus $9,119,000 for the same period in 2003. Salaries and benefits, Peoples'
largest expense, totaled $5,389,000 for the quarter ended March 31, 2004, an
increase of 14% from a year ago, due mostly to annual salary adjustments
necessary to retain and recruit key associates and the addition of approximately
30 associates in conjunction with the KBI acquisition. For the first quarter of
2004, occupancy and equipment costs increased 11%, as acquisitions and
investments in technology produced additional depreciation expense in 2004,
while intangible amortization doubled from a year ago due to the KBI
acquisition. Compared to the fourth quarter of 2003, non-interest expense was
down $7,039,000 in the first quarter of 2004, with long-term debt prepayment
penalties which occurred in the fourth quarter of 2003 accounting for $6,817,000
of the decline. Excluding the prepayment penalties and intangible amortization,
non-interest expense decreased 2% due to a reduction in various operating
expenses.
The non-interest leverage ratio serves as a measurement of efficiency
and performance and is a key performance indicator for Peoples. The ratio,
defined as non-interest income as a percentage of operating expenses, excludes
gains and losses on securities transactions and asset disposals, as well as
intangible asset amortization. For the three months ended March 31, 2004, the
non-interest leverage ratio was 46.7%, an improvement from 44.1% a year ago.
"The improvement in the non-interest leverage ratio is a reflection of
our commitment to grow non-interest revenues without proportional increases in
operating expense," commented Bradley. "We continue to analyze opportunities to
enhance revenues and limit expenses, as we work towards our strategic goal of a
non-interest leverage ratio in excess of 50%."
In the first quarter of 2004, Peoples' tax advantaged investments
produced additional benefits, which reduced Peoples' effective tax rate to 27.0%
compared to 28.8% a year ago. The lower effective tax rate also accounted for a
portion of Peoples' first quarter earnings growth. The tax strategies employed
are long-term and will help Peoples manage its overall tax burden in future
years.
Nonperforming loans comprised 0.76% of total loans at March 31, 2004,
compared to 0.73% at December 31, 2003, while nonperforming assets comprised
0.43% and 0.41% of total assets for the same periods, respectively. In the first
quarter of 2004, Peoples' provision for loan losses was $794,000, down from
$915,000 in the prior quarter and down from $831,000 a year ago. At March 31,
2004, the allowance for loan losses was $14.8 million, or 1.62% of total loans,
compared to $14.6 million, or 1.59% of total loans, at year-end 2003.
"Our long-standing commitment to sound underwriting standards, coupled
with a diligent loan review process, have produced good quality loans," stated
Bradley. "In addition, our loan delinquencies have decreased modestly, and we
have maintained solid asset quality ratios that compare favorably to our peers."
In the first quarter of 2004, net loan chargeoffs were $595,000, up
from $554,000 a year ago but down from $763,000 in the fourth quarter of 2003.
Consumer loans comprised the largest portion of net chargeoffs, totaling
$275,000 and $201,000 for the three months ended March 31, 2004 and 2003,
respectively. Net chargeoffs relating to the Overdraft Privilege Program were
$135,000 in the first quarter of 2004 versus $117,000 in 2003's first quarter.
Real estate net chargeoffs totaled $155,000 for the first three months of 2004,
up from $7,000 for the same period in 2003. In the first quarter of 2004,
Peoples' commercial loan recoveries exceeded chargeoffs, resulting in net
recoveries of $100,000 compared to net chargeoffs of $186,000 in 2003's first
quarter. A significant portion of the commercial loan recoveries relate to a
group of loans, in a single customer relationship, which had been charged-down
in the first half of 2002.
At March 31, 2004, loans totaled $910.8 million, down $4.2 million
since year-end 2003, due to declines in real estate and consumer loans. Peoples
also had $2.2 million of fixed-rate real estate loans originated and held for
sale into the secondary market. Peoples is also servicing $85 million of
fixed-rate real estate loans previously sold into the secondary markets due to
the associated interest rate risk.
In late 2003, Peoples entered into an agreement to sell its existing
credit card portfolio and formed an affiliation with an unrelated financial
institution to serve the credit card needs of Peoples' customers. Final
settlement of the sale, which did not materially impact Peoples' results of
operation or financial position, occurred in the first quarter of 2004.
"Our first quarter results reflect the challenge of growing earnings
with interest rates remaining at extremely low levels," summarized Bradley. "We
remain committed to a needs-based approach that fulfills the financial needs of
our customers as a means of enhancing Peoples' profitability. Our long-term
objectives are best achieved in more normal economic and interest rate
conditions."
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 49 locations
and 32 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 first
quarter results of operations on April 16, 2004, at 4:00 p.m. eastern time, with
members of Peoples' executive management participating. Analysts, media and
individual investors are invited to participate in the conference call by
calling (888) 424-5801. A simultaneous Webcast of the conference call audio will
be available online 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:
- ----------------------
This press release may contain certain forward-looking statements with
respect to Peoples' financial condition, results of operations, plans,
objectives, future performance and business. 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," "will," "would," "should," "could" and
similar expressions are forward-looking statements within the meaning of
Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated
thereunder, and 21E of the Securities Exchange Act of 1934, as amended, and Rule
3b-6 promulgated thereunder. These forward looking statements are subject to
risks and uncertainties that may cause actual results to differ materially.
Factors that might cause such a difference include, but are not limited to: (1)
competitive pressures among depository institutions increase significantly; (2)
changes in the interest rate environment impact interest margins; (3) prepayment
speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general
economic conditions are less favorable than expected; (5) political
developments, wars or other hostilities may disrupt or increase volatility in
securities markets or other economic conditions; (6) legislative or regulatory
changes or actions adversely affect Peoples' business; (7) changes and trends in
the securities markets; (8) a delayed or incomplete resolution of regulatory
issues; (9) the impact of reputational risk created by these developments on
such matters as business generation and retention, funding and liquidity; (10)
the outcome of regulatory and legal proceedings and (11) 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").
Peoples undertakes no obligation to release revisions to these forward-looking
statements or reflect events or circumstances after the date of this release.
Copies of documents filed with the SEC are available free of charge at the
Commission's website at http://www.sec.gov and/or from Peoples' website.
PEOPLES BANCORP INC. (NASDAQ: PEBO)
Financial Highlights (Unaudited)
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Three Months Ended
March 31,
(in $000's, except per share data) 2004 2003
-----------------------------------
PER SHARE DATA (a) Net income per share:
Basic $ 0.51 $ 0.50
Diluted $ 0.50 $ 0.49
Cash dividends declared per share $ 0.18 $ 0.14
Book value per share $ 16.70 $ 15.61
Tangible book value per share (b) $ 12.05 $ 12.59
Closing stock price at end of period $ 27.97 $ 22.06
Dividend payout as a percentage of net income 35.41% 28.86%
Actual shares outstanding (net of treasury shares) 10,500,409 10,030,170
Weighted average shares outstanding:
Basic 10,560,241 10,056,615
Diluted 10,808,007 10,255,705
PERFORMANCE RATIOS (c)
Return on average equity 12.50% 13.00%
Return on average assets 1.25% 1.27%
Non-interest leverage ratio (d) 46.67% 44.12%
Efficiency ratio (e) 53.24% 51.24%
Net interest margin (fully tax equivalent) 3.56% 3.70%
Net loan chargeoffs as a percentage of average loans 0.26% 0.28%
NET CHARGEOFFS
Gross chargeoffs $ 1,230 $ 785
Recoveries $ 635 $ 231
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Net chargeoffs $ 595 $ 554
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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) Ratios presented on an annualized basis.
(d) Non-interest income (less securities and asset disposal gains/losses) as
a percentage of non-interest expense (less intangible amortization).
(e) Non-interest expense (less intangible amortization) as a percentage of
fully tax equivalent net interest income plus non-interest income.
</FN>
PEOPLES BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------
Three Months Ended
March 31,
(in $000's) 2004 2003
-----------------------------------
Interest income $ 21,586 $ 22,777
Interest expense 8,038 9,719
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Net interest income 13,548 13,058
Provision for loan losses 794 831
--------------- ----------------
Net interest income after provision for loan losses 12,754 12,227
Net gain on securities transactions 32 2
Net gain (loss) on asset disposals 30 (2)
Non-interest income:
Service charges on deposits 2,253 1,725
Fiduciary revenues 774 586
Electronic banking revenues 523 454
Business owned life insurance 416 365
Insurance and investment commissions 299 442
Mortgage banking income 199 230
Other non-interest income 361 133
--------------- ----------------
Total non-interest income 4,825 3,935
Non-interest expense:
Salaries and benefits 5,389 4,724
Occupancy and equipment 1,221 1,098
Data processing and software 472 330
Professional fees 456 464
Amortization of intangible assets 401 201
Franchise taxes 341 257
Bankcard costs 324 305
Marketing 108 276
Other non-interest expense 1,578 1,464
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Total non-interest expense 10,290 9,119
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Income before income taxes 7,351 7,043
Income tax expense 1,985 2,029
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Net income $ 5,366 $ 5,014
===================================
Fully tax equivalent net interest income $ 13,962 $ 13,450
PEOPLES BANCORP INC. CONSOLIDATED AVERAGE BALANCES
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Three Months Ended
March 31, December 31, March 31,
(in $000's) 2004 2003 2003
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Average gross loans $ 912,242 $ 920,903 $ 850,967
Average earning assets 1,575,126 1,608,011 1,455,211
Average intangible assets 48,652 46,378 30,661
Average total assets 1,731,528 1,753,326 1,575,673
Average non-interest-bearing deposits 135,505 132,263 108,315
Average interest-bearing deposits:
Savings 170,945 178,886 150,168
Interest-bearing demand deposits 262,864 267,029 270,835
Time deposits 460,957 462,919 422,158
Total average interest bearing deposits 894,766 908,834 843,161
Average stockholders' equity $ 172,647 $ 172,049 $ 154,302
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PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
----------------- ----------------- -----------------
(in $000's, end of period) March 31, December 31, March 31,
2004 2003 2003
----------------- ----------------- -----------------
LOAN PORTFOLIO
Commercial, mortgage $ 413,167 $ 380,372 $ 316,115
Commercial, other 102,918 131,697 106,667
Real estate, construction 20,196 21,056 10,523
Real estate, mortgage 299,967 301,726 322,169
Consumer 74,545 79,926 96,857
Credit card (a) - 221 6,065
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Total loans $ 910,793 $ 914,998 $ 858,396
ASSET QUALITY
Allowance for loan losses as a percent of total loans 1.62% 1.59% 1.55%
Allowance for loan losses as a percent of
nonperforming loans (b) 214.4% 216.1% 280.6%
Nonperforming loans as a percent of total loans (b) 0.76% 0.73% 0.55%
Nonperforming assets as a percent of total assets 0.43% 0.41% 0.34%
Nonperforming assets as a percent of total loans and
other real estate owned
real estate owned 0.81% 0.78% 0.66%
Nonperforming assets (in $000's, end of period):
Loans 90 days or more past due $ 235 $ 188 $ 337
Renegotiated loans $ - $ - $ 685
Nonaccrual loans $ 6,656 $ 6,556 $ 3,741
Other real estate owned $ 470 $ 392 $ 924
----------------- ----------------- -----------------
Total nonperforming assets $ 7,361 $ 7,136 $ 5,687
REGULATORY CAPITAL (c)
Tier 1 risk-based capital 13.85% 14.08% 15.43%
Total risk-based capital ratio (Tier 1 and Tier 2) 15.24% 15.43% 16.79%
Leverage ratio 8.80% 8.68% 10.56%
Tier 1 capital $ 147,274 $ 147,591 $ 139,208
Total capital (Tier 1 and Tier 2) $ 162,113 $ 161,780 $ 151,404
Total risk-weighted assets $ 1,063,572 $ 1,048,295 $ 901,973
SUPPLEMENTAL DATA
Trust assets under management $ 633,736 $ 632,868 $ 460,945
Employees (full-time equivalent) 497 511 451
Full service offices 42 42 39
Supermarket offices 4 4 4
ATMs 32 32 30
Announced treasury share plans: (d)
Total shares authorized for plan 425,000 315,000 315,000
Shares purchased 141,200 61,300 42,000
Average price $ 29.14 $ 27.96 $ 20.99
----------------- ----------------- -----------------
<FN>
(a) Balance at December 31, 2003, represents nonqualifying balances not
included in preliminary settlement of the credit card portfolio sale
subject to final settlement.
(b) Nonperforming loans include loans 90 days past due and accruing,
renegotiated loans and nonaccrual loans.
(c) March 31, 2004 data based on preliminary analysis and is subject to
revision.
(d) 2004 data reflects 2004 Stock Repurchase Program of 425,000 shares. 2003
data reflects 2003 Stock Repurchase Program of 315,000 shares. Reflects
treasury shares purchased and average price paid for the three-month
period ended on the date indicated. All share amounts have been adjusted
for stock dividends.
</FN>
PEOPLES BANCORP INC. CONSOLIDATED BALANCE SHEETS
------------------ ------------------
(in $000's) March 31, December 31,
2004 2003
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ASSETS
Cash and cash equivalents $ 30,860 $ 73,426
Available-for-sale investment securities, at estimated fair value
(amortized cost of $643,602 at March 31, 2004, and $634,801 at
December 31, 2003) 657,300 641,464
Loans held for sale 2,177 2,847
Loans, net of unearned interest 910,793 914,998
Allowance for loan losses (14,774) (14,575)
------------------ ------------------
Net loans 896,019 900,423
Bank premises and equipment, net of accumulated depreciation 21,764 22,155
Goodwill 41,989 41,407
Other intangible assets 6,928 7,298
Other real estate owned 470 392
Business owned life insurance 43,770 23,355
Other assets 20,759 23,337
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TOTAL ASSETS $ 1,722,036 $ 1,736,104
================== ==================
LIABILITIES
Non-interest-bearing deposits $ 134,284 $ 133,709
Interest-bearing deposits 895,280 894,821
------------------ ------------------
Total deposits 1,029,564 1,028,530
Federal funds purchased, securities sold under repurchase agreements,
and other short term borrowings 87,329 108,768
Long-term borrowings 390,998 388,647
Junior subordinated notes held by subsidiary trusts 29,198 29,177
Accrued expenses and other liabilities 9,547 10,102
------------------ ------------------
TOTAL LIABILITIES 1,546,636 1,565,224
STOCKHOLDERS' EQUITY
Common stock, no par value (24,000,000 shares authorized, 10,709,081 shares
issued at March 31, 2004, and
10,704,938 shares issued at December 31, 2003) 160,617 161,005
Accumulated comprehensive income, net of deferred income taxes 8,930 4,255
Retained earnings 11,247 7,781
Treasury stock, at cost (208,672 shares at March 31, 2004,
and 101,146 shares at December 31, 2004) (5,394) (2,161)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 175,400 170,880
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,722,036 $ 1,736,104
================== ==================
END OF RELEASE