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
October 21, 2004 (740) 373-3155
PEOPLES BANCORP INC. REPORTS THIRD QUARTER EARNINGS
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MARIETTA, Ohio - Peoples Bancorp Inc. (NASDAQ: PEBO) announced third
quarter net income of $5,138,000, or $0.48 per diluted share, in 2004 compared
to $5,940,000, or $0.55 per diluted share, earned in 2003's third quarter. For
the nine months ended September 30, 2004, net income totaled $15,557,000
compared to $16,394,000 through nine months of 2003, while earnings per diluted
share were $1.45 versus $1.55 for the same periods, respectively. Peoples'
earnings grew 2% in the third quarter, from $5,053,000, or $0.47 per diluted
share, reported in the second quarter of 2004.
"Our third quarter results, while lower than last year due primarily to
net interest margin compression, reflect positive trends in key areas,
especially when compared to the second quarter," commented Robert Evans,
Chairman and CEO. "Non-interest revenues remain strong, as we integrate our new
insurance agencies with our total financial services offering. Our already solid
asset quality continues to improve and loans grew at a double digit annualized
rate for the second consecutive quarter."
Evans continued, "In addition to the challenges posed by the low
interest rate environment, our third quarter earnings were negatively impacted
by costs of approximately $100,000 incurred to cleanup and repair damage caused
by the significant flooding in mid-September brought on by the remnants of
Hurricane Ivan. We were fortunate to sustain only minor damage to a limited
number of locations and quickly reopened the affected offices, which is a
reflection of the efforts of many associates and volunteers. However, various
communities we serve continue to recover from the financial and emotional impact
of the flooding."
In the third quarter of 2004, net interest income totaled $12,891,000,
down 8% compared to $14,085,000 in 2003's third quarter, but up 2% from
$12,697,000 for the second quarter of 2004. Net interest margin was 3.34% for
the third quarter of 2004, compared to 3.39% for the prior quarter and 3.57% for
the third quarter of 2003. For the nine months ended September 30, 2004, net
interest income totaled $39,136,000 and net interest margin was 3.44%, versus
$40,720,000 and 3.59%, respectively, for the same period in 2003.
"While a modest expansion in our earning assets resulted in increased
interest income compared to the prior quarter, net interest margin continues to
compress due to declining asset yields as a result of intense competition for
quality loans and the extended period of historically low rates," said Jack
Conlon, Peoples' Chief Financial Officer. "While the recent actions by the
Federal Reserve to increase interest rates have helped ease some of the margin
pressures, we continue to shift to longer-term funding to lock in rates, which
can offset some of the recent improvement in asset yields. We believe our
efforts to position the balance sheet for future rate increases will benefit
Peoples' net interest income and help stabilize net interest margin."
In the third quarter of 2004, non-interest income totaled $7,248,000,
up 44% compared to $5,041,000 a year ago and up 16% from $6,245,000 last
quarter. These increases were due largely to the $1.9 million of combined
revenue generated by the acquired insurance agencies, which was nearly double
their second quarter's total and reflects the first full-quarter impact of the
agencies. On a year-to-date basis through September 30, 2004, non-interest
income grew 35% to $18,318,000, from $13,523,000 for the same period last year.
Enhanced insurance commissions, coupled with increased deposit account services
charges and revenues from business owned life insurance ("BOLI"), accounted for
most of this improvement.
"Growing non-interest revenues and reducing reliance on net interest
income remains a key component of our long-term success," stated Mark Bradley,
Peoples' President and Chief Operating Officer. "We are pleased revenues have
grown through both the successful integration of recent acquisitions and the
efforts of our associates to build long-term customer relationships. In
addition, the planned expansion of our presence and customer base in the
Ashland, Kentucky area during the fourth quarter should afford us opportunities
to further increase revenues."
During the third quarter of 2004, Peoples announced its subsidiary,
Peoples Bank, had signed a definitive agreement to acquire two full-service
banking offices from Advantage Bank, a subsidiary of Camco Financial
Corporation, located at 1640 Carter Avenue in downtown Ashland (which Peoples
Bank does not plan to operate following completion of the acquisition) and 6601
US Route 60 just outside Ashland. As part of the acquisition, Peoples expects to
acquire approximately $65 million in deposits and $45 million of loans. In
addition, Peoples Bank plans to close its banking offices located in Flatwoods,
Kentucky, and at 1410 Eagle Drive outside Ashland, Kentucky, due to their
proximity to existing and to-be-acquired offices and sales activity. Management
expects the acquisition to be completed in early December 2004, subject to
regulatory approval, and accretive to earnings in the first full year.
In the third quarter of 2004, deposit account service charges totaled
$2,510,000 versus $2,196,000 for the same period in 2003, a 14% increase
resulting from a combination of higher volumes of overdraft and non-sufficient
funds fees and an overall increase in the number of checking accounts, as well
as an increase in the per item amount of certain cost recovery fees. Insurance
and investment commissions were $2,272,000 for the three months ended September
30, 2004, compared to $1,428,000 last quarter and $338,000 for the third quarter
of 2003. As a result of Peoples' $20 million BOLI purchase in early 2004, BOLI
produced tax-advantaged income of $494,000 in the third quarter of 2004 versus
$342,000 a year ago. E-banking revenues, primarily ATM and debit card fees, grew
14% from the same quarter a year ago, while Peoples' mortgage banking revenues
continue to decline compared to last year, reflecting lower levels of real
estate loan refinance activity.
In addition to generating additional revenues, the insurance agency
acquisitions also accounted for approximately $1.3 million of non-interest
expense in the third quarter of 2004, principally salaries and benefits,
occupancy costs and intangible amortization. Consequently, non-interest expense
grew $2.5 million to $12.5 million for the quarter ended September 30, 2004, up
from $10.0 million for the same period in 2003. Compared to the second quarter
of 2004, non-interest expense was up 9% in the third quarter, with 64% of the
increase attributable to a full-quarter's impact of the insurance agency
acquisitions.
Peoples' largest operating expense, salaries and benefits, totaled $6.7
million for the third quarter of 2004, an increase of 33% from a year ago, with
$0.8 million, or nearly half of the increase, attributable to the approximately
50 associates added in conjunction with the insurance agency acquisitions.
Occupancy and equipment costs increased 20% in the third quarter of 2004 from a
year ago, as acquisitions and investments in technology produced additional
depreciation expense in 2004. A significant portion of this increase is also the
result of Peoples incurring costs to cleanup and repair damage to several of its
locations due to flooding in mid-September 2004. Intangible amortization totaled
$635,000 in the third quarter of 2004 versus $551,000 a year ago as a result of
recent acquisitions.
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 nine months ended September 30, 2004, the
non-interest leverage ratio was 55.2% compared to 49.2% a year ago, while in the
third quarter of 2004, the non-interest leverage ratio improved to 60.9%, from
56.8% last quarter and 53.4% in 2003's third quarter.
"The improvement in the non-interest leverage ratio reflects our
ability to grow non-interest revenues without a proportional increase in
operating expense," commented Bradley. "Our goal is to enhance Peoples'
operating efficiency and grow revenues without jeopardizing customer service
levels. However, several factors, including rising medical and health insurance
costs and compliance with new Sarbanes-Oxley regulatory requirements, limit our
ability to control future increases in operating expense."
During the third quarter, loans grew $22.3 million, or 10% annualized,
to $957.9 million at September 30, 2004, due primarily to commercial and real
estate loan growth, which offset a decline in consumer loan balances. Peoples
also had $1.4 million of fixed-rate real estate loans originated and held for
sale into the secondary market. Peoples is also servicing $101 million of
fixed-rate real estate loans previously sold into the secondary markets due to
the associated interest rate risk.
"One of our strategic objectives is to grow loans in a disciplined
manner, which preserves asset quality," stated Bradley. "Although we do not
expect loan growth in the fourth quarter to continue at the same rate as the
third quarter due to expected payoffs, economic conditions are improving in our
markets and commercial loan demand remains strong, which should provide our
lenders with opportunities to generate additional loans in the fourth quarter."
Peoples' provision for loan losses was down 34% in the third quarter of
2004 to $605,000, from $920,000 a year ago, and down slightly compared to the
second quarter of 2004. The lower provision reflects the continued improvement
in Peoples' asset quality and reduction in loan losses during the third quarter.
Nonperforming loans comprised 0.53% of total loans at September 30, 2004,
compared to 0.62% at June 30, 2004, and 0.73% at December 31, 2003, while
nonperforming assets comprised 0.30%, 0.35% and 0.41% of total assets for the
same periods, respectively. Net chargeoffs were down 24% in the third quarter of
2004 compared to a year ago and down 29% from the second quarter of 2004. Net
chargeoffs relating to the Overdraft Privilege Program comprised the largest
portion of the 2004 third quarter net chargeoffs, totaling $243,000 versus
$222,000 a year ago, while commercial net chargeoffs comprised $475,000 in the
second quarter of 2004 but only $42,000 in the third quarter of 2004. At
September 30, 2004, the allowance for loan losses was $14.8 million, or 293.5%
of nonperforming loans, compared to $14.6 million, or 216.1% of nonperforming
loans, at year-end 2003.
"Overall, our third quarter results reflect favorable earnings momentum
which we expect to continue in the fourth quarter," summarized Bradley. "While
the expected period of rising interest rates pose new challenges, our solid
asset quality and active balance sheet management, coupled with continued loan
growth and revenue diversification, should allow us to grow future earnings."
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 51 locations and 33 ATMs in
Ohio, West Virginia and Kentucky. Peoples' financial service units include
Peoples Bank, Peoples Financial Advisors (a division of Peoples Bank) and
Peoples Insurance Agency, Inc. 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 at
www.peoplesbancorp.com.
Conference Call to Discuss Earnings:
- ------------------------------------
Peoples will conduct a facilitated conference call to discuss third
quarter results of operations today at 11:00 a.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)
PEOPLES BANCORP INC.
Third Quarter 2004 Earnings Release
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Three Months Ended Nine Months Ended
September 30, September 30,
(in $000's, except per share data) 2004 2003 2004 2003
---------------------------------- ----------------------------------
PER SHARE DATA Net income per share:
Basic $ 0.49 $ 0.56 $ 1.47 $ 1.58
Diluted $ 0.48 $ 0.55 $ 1.45 $ 1.55
Cash dividends declared per share $ 0.18 $ 0.17 $ 0.54 $ 0.47
Book value per share $ 16.61 $ 16.42 $ 16.61 $ 16.42
Tangible book value per share (a) $ 10.41 $ 12.05 $ 10.41 $ 12.05
Closing stock price at end of period $ 26.32 $ 26.76 $ 26.32 $ 26.76
Dividend payout as a percentage of net income 36.75% 30.89% 36.80% 29.99%
Actual shares outstanding (net of treasury shares) 10,426,380 10,632,858 10,426,380 10,632,858
Weighted average shares outstanding:
Basic 10,524,304 10,653,999 10,562,547 10,372,617
Diluted 10,669,798 10,896,461 10,748,064 10,585,655
PERFORMANCE RATIOS (b)
Return on average equity 11.95% 13.85% 12.10% 13.26%
Return on average assets 1.15% 1.34% 1.19% 1.29%
Non-interest leverage ratio (c) 60.86% 53.36% 55.20% 49.15%
Efficiency ratio (d) 57.97% 48.35% 56.10% 49.59%
Net interest margin (fully tax equivalent) 3.34% 3.57% 3.44% 3.59%
Net loan chargeoffs as a percentage of average loans 0.21% 0.29% 0.26% 0.29%
NET CHARGEOFFS
Gross chargeoffs $ 712 $ 935 $ 2,921 $ 2,675
Recoveries $ 220 $ 287 $ 1,137 $ 753
--------------- --------------- --------------- ---------------
Net chargeoffs $ 492 $ 648 $ 1,784 $ 1,922
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<FN>
(a) Excludes balance sheet impact of intangible assets acquired through use of
purchase accounting for acquisitions.
(b) Ratios presented on an annualized basis.
(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.
</FN>
PEOPLES BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME
----------------------------------- -----------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
(in $000's) 2004 2003 2004 2003
----------------------------------- -----------------------------------
Interest income $ 21,850 $ 23,550 $ 64,581 $ 69,819
Interest expense 8,959 9,465 25,445 29,099
---------------- ---------------- ---------------- ----------------
Net interest income 12,891 14,085 39,136 40,720
Provision for loan losses 605 920 2,015 2,686
---------------- ---------------- ---------------- ----------------
Net interest income after provision for loan losses 12,286 13,165 37,121 38,034
Net (loss) gain on securities transactions (7) 2 30 (25)
Net (loss) gain on asset disposals (25) 9 22 (229)
Non-interest income:
Service charges on deposits 2,510 2,196 7,222 5,973
Insurance and investment commissions 2,272 338 3,999 1,100
Fiduciary revenues 988 1,142 2,574 2,586
Electronic banking revenues 608 534 1,754 1,517
Business owned life insurance 494 342 1,416 1,060
Mortgage banking income 227 400 709 967
Other non-interest income 149 89 644 320
---------------- ---------------- ---------------- ----------------
Total non-interest income 7,248 5,041 18,318 13,523
Non-interest expense:
Salaries and benefits 6,688 5,031 17,896 14,582
Occupancy and equipment 1,350 1,127 3,860 3,333
Amortization of intangible assets 635 551 1,562 1,023
Professional fees 452 458 1,319 1,442
Data processing and software 431 385 1,344 1,035
Bankcard costs 404 305 1,106 886
Franchise taxes 374 284 1,086 813
Marketing 315 200 825 855
Other non-interest expense 1,895 1,658 5,367 4,606
---------------- ---------------- ---------------- ----------------
Total non-interest expense 12,544 9,999 34,365 28,575
---------------- ---------------- ---------------- ----------------
Income before income taxes 6,958 8,218 21,126 22,728
Income tax expense 1,820 2,278 5,569 6,334
---------------- ---------------- ---------------- ----------------
Net income $ 5,138 $ 5,940 $ 15,557 $ 16,394
---------------- ---------------- -----------------------------------
Fully tax equivalent net interest income $ 13,296 $ 14,498 $ 40,365 $ 41,959
PEOPLES BANCORP INC. CONSOLIDATED AVERAGE BALANCES
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Three Months Ended Nine Months Ended
September 30, September 30,
(in $000's) 2004 2003 2004 2003
----------------------------------- -----------------------------------
Average gross loans $ 944,782 $ 909,334 $ 926,016 $ 885,493
Average investment securities 651,120 699,213 647,180 670,599
Average earning assets 1,591,511 1,625,721 1,572,406 1,563,048
Average intangible assets 64,981 47,163 57,134 38,886
Average total assets 1,783,313 1,776,494 1,748,799 1,696,986
Average non-interest-bearing deposits 146,478 131,456 141,647 121,983
Average interest-bearing deposits:
Savings 172,686 183,508 174,184 170,000
Interest-bearing demand deposits 258,608 276,414 259,712 274,744
Time deposits 450,957 474,128 454,164 450,309
---------------- ---------------- ---------------- ----------------
Total average interest bearing deposits 882,251 934,050 888,060 895,053
Average stockholders' equity $ 171,021 $ 171,550 $ 171,809 $ 164,817
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PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
---------------- --------------- --------------- ----------------
(in $000's, end of period) September 30, June 30, December 31, September 30,
LOAN PORTFOLIO 2004 2004 2003 2003
---------------- --------------- --------------- ----------------
Commercial, mortgage $ 430,513 $ 428,580 $ 380,372 $ 357,304
Commercial, other 116,621 110,208 131,697 139,671
Real estate, construction 37,847 22,853 21,056 17,714
Real estate, mortgage 307,648 304,328 301,726 314,303
Consumer 65,235 69,587 79,926 86,108
Credit card (a) - - 221 6,302
---------------- --------------------------------------------------
Total loans $ 957,864 $ 935,556 $ 914,998 $ 921,402
ASSET QUALITY
Allowance for loan losses as a percent of total loans 1.55% 1.57% 1.59% 1.57%
Allowance for loan losses as a percent of
nonperforming loans (b) 293.5% 251.6% 216.1% 254.7%
Nonperforming loans as a percent of total loans (b) 0.53% 0.62% 0.73% 0.61%
Nonperforming assets as a percent of total assets 0.30% 0.35% 0.41% 0.39%
Nonperforming assets as a percent of total loans and
other real estate owned
real estate owned 0.56% 0.67% 0.78% 0.75%
Nonperforming assets (in $000's, end of period):
Loans 90 days or more past due $ 298 $ 374 $ 188 $ 874
Renegotiated loans $ - $ - $ - $ 684
Nonaccrual loans $ 4,747 $ 5,465 $ 6,556 $ 4,105
Other real estate owned $ 301 $ 392 $ 392 $ 1,279
---------------- --------------- --------------- ----------------
Total nonperforming assets $ 5,346 $ 6,231 $ 7,136 $ 6,942
REGULATORY CAPITAL (c)
Tier 1 risk-based capital 11.97% 12.27% 14.08% 14.54%
Total risk-based capital ratio (Tier 1 and Tier 2) 13.29% 13.58% 15.43% 15.88%
Leverage ratio 7.85% 8.17% 8.68% 8.88%
Tier 1 capital $ 134,630 $ 135,740 $ 147,591 $ 152,862
Total capital (Tier 1 and Tier 2) $ 149,526 $ 150,344 $ 161,780 $ 166,953
Total risk-weighted assets $ 1,124,683 $ 1,105,858 $ 1,048,295 $ 1,051,489
SUPPLEMENTAL DATA
Trust assets under management $ 620,686 $ 618,376 $ 632,868 $ 578,958
Employees (full-time equivalent) 547 545 511 498
Full service offices 42 42 42 43
Supermarket offices 4 4 4 4
ATMs 33 33 32 33
Announced treasury share plans: (d)
Total shares authorized for plan 625,000 425,000 315,000 315,000
Shares purchased 211,900 147,435 61,300 53,340
Average price $ 25.84 $ 24.93 $ 27.96 $ 25.54
---------------- --------------- --------------- ----------------
<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) September 30, 2004, data based on preliminary analysis and is subject to
revision.
(d) 2004 data reflects 2004 Stock Repurchase Program of 425,000 shares
announced December 17, 2003 and 200,000 shares announced August 13, 2004.
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) September 30, December 31,
2004 2003
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ASSETS
Cash and cash equivalents $ 41,487 $ 73,426
Available-for-sale investment securities, at estimated fair value
(amortized cost of $638,518 at September 30, 2004, and $634,801 at
December 31, 2003) 644,472 641,464
Loans held for sale 1,386 2,847
Loans, net of unearned interest 957,864 914,998
Allowance for loan losses (14,806) (14,575)
------------------ ------------------
Net loans 943,058 900,423
Bank premises and equipment, net of accumulated depreciation 22,133 22,155
Business owned life insurance 44,770 23,355
Goodwill 53,807 41,407
Other intangible assets 10,892 7,298
Other real estate owned 301 392
Other assets 21,343 23,337
------------------ ------------------
TOTAL ASSETS $ 1,783,649 $ 1,736,104
------------------ ------------------
LIABILITIES
Non-interest-bearing deposits $ 143,147 $ 133,709
Interest-bearing deposits 884,595 894,821
------------------ ------------------
Total deposits 1,027,742 1,028,530
Federal funds purchased, securities sold under repurchase agreements,
and other short term borrowings 91,802 108,768
Long-term borrowings 447,088 388,647
Junior subordinated notes held by subsidiary trusts 29,242 29,177
Accrued expenses and other liabilities 14,543 10,102
------------------ ------------------
TOTAL LIABILITIES 1,610,417 1,565,224
STOCKHOLDERS' EQUITY
Common stock, no par value (24,000,000 shares authorized, 10,845,869 shares
issued at September 30, 2004, and
10,704,938 shares issued at December 31, 2003) 162,240 161,005
Accumulated comprehensive income, net of deferred income taxes 3,721 4,255
Retained earnings 17,613 7,781
Treasury stock, at cost (419,489 shares at September 30, 2004,
and 101,146 shares at December 31, 2004) (10,342) (2,161)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 173,232 170,880
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,783,649 $ 1,736,104
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END OF RELEASE