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 21, 2005 (740) 373-3155
PEOPLES BANCORP INC. REPORTS FIRST QUARTER
RESULTS OF OPERATIONS
---------------------------------------------------------------------
MARIETTA, Ohio - Peoples Bancorp Inc. ("Peoples")(NASDAQ: PEBO)
announced today first quarter of 2005 net income of $5,058,000, or $0.48 per
diluted share, compared to $5,366,000, or $0.50 per diluted share, earned a year
ago. Peoples' lower earnings were primarily attributable to reduced levels of
net interest income, which offset increases in net revenues generated by
acquisitions completed during 2004.
"Our first quarter earnings, although lower than last year, were in
line with our expectations considering the interest rate pressures caused by
intense competition for loans and deposits, a flattening yield curve and the
methodical increase in interest rates," commented Robert E. Evans, Chairman and
CEO. "We remain committed to reducing our reliance on net interest income and
are pleased with the growth in non-interest revenues during the first quarter."
Earnings in the first quarter of 2005 include the impact of some
significant transactions, which resulted in a net pre-tax gain of $54,000.
Peoples recognized a net gain on securities transactions and asset disposals of
$241,000 ($157,000 after-tax), with nearly all of the gain resulting from the
sale of an investment security due to a merger of the issuer with an unrelated
company. This gain was largely offset by a net loss of $187,000 ($122,000
after-tax) on the sale of $11.6 million of long-term fixed-rated mortgage loans,
acquired during the fourth quarter of 2004 as part of Peoples' acquisition of
two banking offices in the Ashland, Kentucky area. These loans were sold due to
their associated interest rate risk in the current rate environment.
Non-interest income, excluding net gains on securities and other
assets, was $7,127,000 for the three months ended March 31, 2005, up 48% from
$4,825,000 for the same period in 2004. The insurance agencies acquired in
mid-2004 accounted for $2.3 million of this increase and resulted in insurance
and investment commissions comprising the largest portion of non-interest
revenues in the first quarter of 2005, totaling $2,654,000 versus $299,000 in
2004's first quarter. In addition, e-banking revenues, primarily ATM and debit
card fees, remained strong during the first quarter, increasing 24% from a year
ago as a result of higher debit card activity and additional cards issued to
customers. Traditional banking revenues, including deposit account service
charges, continue to be a major source of non-interest revenue. For the first
three months of 2005, deposit account service charges were $2,274,000 compared
to $2,253,000 for 2004's first quarter. Mortgage banking income totaled $117,000
in the first quarter of 2005, down from $199,000 a year ago. This decline was
the result of the previously mentioned loss of $187,000 on the sale of acquired
fixed-rate loans.
"We are pleased with the impact of the acquired insurance agencies on
revenue diversification at Peoples," said Mark F. Bradley, President and Chief
Operating Officer. "As a result of recent acquisitions, non-interest income now
comprises over 35% of total revenues, compared to 26% a year ago."
In the first quarter of 2005, non-interest expense was $12.7 million
versus $10.3 million in 2004's first quarter, with operating expenses relating
to the acquired insurance agencies accounting for $1.5 million, or 60%, of the
increase. Other increased costs in the first quarter included salaries and
benefits, professional fees and marketing costs. Compared to the fourth quarter
of 2004, non-interest expense was down slightly in the first quarter of 2005.
Salaries and benefits remain Peoples' largest operating expense,
totaling $6.7 million and $5.4 million for the first quarters of 2005 and 2004,
respectively. Associates added in conjunction with acquisitions during 2004
accounted for 70% of the $1.3 million increase in salaries and benefits.
Compared to the fourth quarter of 2004, total salaries and benefits were
essentially unchanged. Professional fees were up 46% in the first quarter of
2005 compared to a year ago, but down 6% from the prior quarter. The increase in
professional fees from a year ago reflects higher exam and audit fees associated
with the new regulatory reporting environment under Sarbanes-Oxley. Marketing
costs totaled $381,000 in the first quarter, up from $108,000 in 2004's first
quarter, resulting from Peoples' efforts to promote new deposit products and
increase brand awareness in various markets.
Net interest income totaled $12,712,000 for the quarter ended March 31,
2005, down 6% compared to $13,548,000 a year ago and virtually unchanged from
$12,734,000 for the fourth quarter of 2004. The decline from 2004's first
quarter was largely attributable to a combination of the impact of the
flattening yield curve on new loan pricing and yields on securities
reinvestments, Peoples' strategy to match fund selected long-term, adjustable
rate commercial loans using borrowings with a similar interest rate risk
profile, conversion of earnings assets for the purchase of business owned life
insurance in early 2004 and an increase in borrowings to support non-earning
assets. These factors also caused net interest margin to compress to 3.27% in
the first quarter of 2005, from 3.29% the prior quarter and 3.56% in the first
quarter of 2004.
"Our ability to improve net interest income and margin continues to be
challenged by relatively low security reinvestment yields and increased
competitive pricing of loans and deposits," said Jack Conlon, Peoples' Chief
Financial Officer. "The Federal Reserve's actions to increase interest rates
have enabled loan yields to stabilize somewhat and eased some of the net
interest pressures. With the expectation of additional rate increases in 2005,
we would like to maintain a slight asset sensitive risk position, which should
benefit future earnings."
During the first quarter, portfolio loans declined $10.1 million, to
$1.01 billion at March 31, 2005, due to Peoples selling $11.6 million of
fixed-rated mortgage loans, acquired during the fourth quarter of 2004. As part
of Peoples' mortgage banking activities, $124.1 million of fixed-rate real
estate loans previously sold into the secondary markets due to the associated
interest rate risk, were being serviced at March 31, 2005 compared to $106.4
million at December 31, 2004. Peoples also had $1.1 million of fixed-rate
mortgage loans held for sale at March 31, 2005.
"Loan growth is a key factor in achieving our 2005 operating goals,
even though the sale of the acquired fixed-rate loans reduced overall loan
balances," stated Bradley. "Good loan originations in the first quarter of 2005
were offset by some expected loan payoffs in our commercial loan portfolio. Our
lenders remain committed to sound underwriting practices that should allow us to
grow loans without exposing Peoples to unnecessary risk that could weaken our
strong asset quality position."
In the first quarter of 2005, the provision for loan losses was
$441,000, compared to $794,000 a year ago, and $531,000 in the fourth quarter of
2004. The lower provision was based on management's quarterly evaluation of
factors affecting losses and is directionally consistent with Peoples' continued
strong asset quality in the loan portfolio, recent loss experience and
recoveries of previously charged-off loans during the first quarter.
Nonperforming loans comprised 0.72% of total loans at March 31, 2005, compared
to 0.64% at December 31, 2004, while nonperforming assets comprised 0.46% and
0.43% of total assets for the same periods, respectively. The increase in
nonperforming assets is attributable to Peoples placing a small number of loans
on nonaccrual status during the quarter, which offset the decline in other real
estate owned. Management does not anticipate any significant losses on these
loans since they are adequately collateralized.
"One of our successes over the last decade has been maintaining asset
quality comparable to, or better than, many of our peers," commented Bradley.
"Nonperforming loans continue to comprise less than 1% of total loans. We remain
diligent in our loan review process and collection efforts in order to identify
and deal with problem loans early, which should minimize the amount of any
losses."
Net chargeoffs were down 16% in the first quarter of 2005 compared to a
year ago. Real estate loans comprised the largest portion of net chargeoffs in
2005's first quarter, totaling $315,000 versus $155,000 a year ago, while
consumer loans accounted for $61,000 of 2005's first quarter net chargeoffs,
compared to $275,000 in the first quarter of 2004. At March 31, 2005, the
allowance for loan losses was $14.7 million, or 201.3% of nonperforming loans,
compared to $14.8 million, or 225.6% of nonperforming loans, at year-end 2004.
At March 31, 2005, total deposits were $1.10 billion, up $33.7 million
from $1.07 billion at year-end 2004. Interest-bearing deposits grew $29.6
million to $946.0 million, with $21.8 million attributable to increased public
funds and $14.9 million due to additional brokered deposits. Peoples also grew
non-interest-bearing deposits $4.1 million during the quarter, reflecting
management's focus on growing core deposits.
"Overall, we are pleased with our first quarter results," summarized
Bradley. "As anticipated, the interest rate environment continues to challenge
net interest income. We remain committed to enhancing long-term shareholder
value through diversified revenue growth and Peoples' long history of consistent
dividend growth."
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 first
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 Investor Relations section of Peoples' website,
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 in the "Investor Relations" section for 1 year.
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 Section
27A of the Securities Act of 1933, as amended, and Rule 175 promulgated
thereunder, and Section 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 which may
increase significantly; (2) changes in the interest rate environment which may
adversely impact interest margins; (3) prepayment speeds, loan originations and
sale volumes, charge-offs and loan loss provisions may be less favorable than
expected; (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 may adversely affect Peoples' business; (7)
changes and trends in the securities markets; (8) a delayed or incomplete
resolution of regulatory issues that could arise; (9) the impact of reputational
risk created by these developments on such matters as business generation and
retention, funding and liquidity; (10) the costs and effects of regulatory and
legal developments, including the outcome of regulatory or other governmental
inquiries and legal proceedings and results of regulatory examinations; (11) the
integration of acquired businesses, including the insurance agencies acquired in
mid-2004, may not be successful or the integration may take longer to accomplish
than expected; (12) the expected synergies from acquisitions may make it
difficult to maintain relationships with clients, associates and suppliers; and
(13) 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 does not commit to any 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 SEC's website at http://www.sec.gov and/or from
Peoples' website.
PEOPLES BANCORP INC. (NASDAQ: PEBO)
Financial Highlights (Unaudited)
-----------------------------------
Three Months Ended
March 31,
(in $000's, except per share data) 2005 2004
-----------------------------------
PER SHARE DATA
Net income (loss) per share:
Basic $ 0.49 $ 0.51
Diluted $ 0.48 $ 0.50
Cash dividends declared per share $ 0.19 $ 0.18
Book value per share $ 16.64 $ 16.70
Tangible book value per share (a) $ 9.88 $ 12.05
Closing stock price at end of period $ 26.90 $ 27.97
Dividend payout as a percentage of net income 39.30% 35.41%
Actual shares outstanding (net of treasury shares) 10,393,879 10,500,409
Weighted average shares outstanding:
Basic 10,419,189 10,560,241
Diluted 10,558,003 10,808,007
PERFORMANCE RATIOS (b)
Return on average equity 11.69% 12.50%
Return on average assets 1.13% 1.25%
Non-interest leverage ratio (c) 59.10% 46.67%
Efficiency ratio (d) 59.60% 53.24%
Net interest margin (fully tax equivalent) 3.27% 3.56%
Net loan chargeoffs as a percentage of average loans 0.20% 0.26%
PROVISION FOR LOAN LOSSES
Provision for Overdraft Privilege losses $ 30 $ 134
Provision for other loan losses $ 411 $ 660
---------------- ----------------
Total provision for loan losses $ 441 $ 794
NET CHARGEOFFS
Gross chargeoffs $ 1,068 $ 1,230
Recoveries $ 569 $ 635
---------------- ----------------
Net chargeoffs $ 499 $ 595
Real estate $ 315 $ 155
Overdrafts 88 135
Consumer 61 275
Commercial 43 (100)
Credit card (8) 130
---------------- ----------------
Total net chargeoffs $ 499 $ 595
---------------- ----------------
<FN>
(a) Excludes the balance sheet impact of intangible assets acquired through the
application of purchase accounting for acquisitions.
(b) Ratios are 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 AVERAGE BALANCES
------------------------------------------------------
Three Months Ended
March 31, December 31, March 31,
(in $000's) 2005 2004 2004
------------------------------------------------------
Average gross loans $ 1,023,825 $ 992,632 $ 912,242
Average investment securities 599,467 618,977 650,650
Average earning assets 1,611,015 1,601,388 1,575,126
Average intangible assets 70,614 65,743 48,652
Average total assets 1,809,373 1,791,585 1,731,528
Average non-interest-bearing deposits 155,607 153,253 135,505
Average interest-bearing deposits:
Savings 154,344 164,320 170,945
Interest-bearing demand deposits 279,319 269,634 262,864
Time deposits 495,992 456,664 460,956
---------------- ---------------- ----------------
Total average interest-bearing deposits 929,655 890,618 894,765
Average short-term borrowings 91,945 66,229 103,462
Average long-term borrowings 439,523 491,499 416,585
Average stockholders' equity $ 175,408 $ 174,157 $ 172,647
------------------------------------------------------
PEOPLES BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------
Three Months Ended
March 31,
(in $000's) 2005 2004
-----------------------------------
Interest income $ 22,643 $ 21,586
Interest expense 9,931 8,038
---------------- ----------------
Net interest income 12,712 13,548
Provision for loan losses 441 794
---------------- ----------------
Net interest income after provision for loan losses 12,271 12,754
Net gain on securities transactions 233 32
Net gain on asset disposals 8 30
Non-interest income:
Insurance and investment commissions 2,654 299
Service charges on deposits 2,274 2,253
Fiduciary revenues 757 774
Electronic banking revenues 647 523
Business owned life insurance 454 416
Mortgage banking income 117 199
Other non-interest income 224 361
---------------- ----------------
Total non-interest income 7,127 4,825
Non-interest expense:
Salaries and benefits 6,686 5,389
Occupancy and equipment 1,289 1,221
Amortization of intangible assets 688 401
Professional fees 665 456
Data processing and software 461 472
Franchise taxes 411 341
Marketing 381 108
Bankcard costs 282 324
Other non-interest expense 1,884 1,578
---------------- ----------------
Total non-interest expense 12,747 10,290
---------------- ----------------
Income before income taxes 6,892 7,351
Income tax expense 1,834 1,985
---------------- ----------------
Net income $ 5,058 $ 5,366
-----------------------------------
Fully tax equivalent net interest income $ 13,106 $ 13,962
PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
----------------- ---------------- ---------------
(in $000's, end of period) March 31, December 31, March 31,
LOAN PORTFOLIO 2005 2004 2004
----------------- ---------------- ---------------
Commercial, mortgage $ 457,667 $ 450,270 $ 413,167
Commercial, other 128,898 126,473 102,918
Real estate, construction 32,120 35,423 20,196
Real estate, mortgage 334,681 349,965 299,967
Consumer 59,634 60,927 74,545
----------------- ---------------------------------
Total loans $ 1,013,000 $ 1,023,058 $ 910,793
ASSET QUALITY
Allowance for loan losses as a percent of total loans 1.45% 1.44% 1.62%
Allowance for loan losses as a percent of
nonperforming loans (a) 201.3% 225.6% 214.4%
Nonperforming loans as a percent of total loans (a) 0.72% 0.64% 0.76%
Nonperforming assets as a percent of total assets 0.46% 0.43% 0.43%
Nonperforming assets as a percent of total loans and other real
estate owned 0.81% 0.75% 0.81%
Nonperforming assets (in $000's, end of period):
Loans 90 days or more past due $ 84 $ 285 $ 235
Renegotiated loans $ 1,116 $ 1,128 $ -
Nonaccrual loans $ 6,105 $ 5,130 $ 6,656
Other real estate owned $ 873 $ 1,163 $ 470
----------------- ---------------- ---------------
Total nonperforming assets $ 8,178 $ 7,706 $ 7,361
REGULATORY CAPITAL (b)
Tier 1 risk-based capital 11.19% 10.95% 13.79%
Total risk-based capital ratio (Tier 1 and Tier 2) 12.54% 12.30% 15.19%
Leverage ratio 7.62% 7.55% 8.80%
Tier 1 capital $ 131,912 $ 129,193 $ 147,273
Total capital (Tier 1 and Tier 2) $ 147,845 $ 145,134 $ 162,162
Total risk-weighted assets $ 1,179,110 $ 1,179,832 $ 1,067,656
SUPPLEMENTAL DATA
Trust assets under management $ 626,829 $ 645,509 $ 633,736
Employees (full-time equivalent) 530 537 497
Full service offices 41 41 42
Supermarket offices 4 4 4
ATMs 33 33 32
Announced treasury share plans: (c)
Total shares authorized for plan 525,000 625,000 425,000
Shares purchased 59,700 10,813 141,200
Average price $ 26.78 $ 27.71 $ 29.14
----------------- ---------------- ---------------
<FN>
(a) Nonperforming loans include loans 90 days past due and accruing,
renegotiated loans and nonaccrual loans.
(b) March 31, 2005, data based on preliminary analysis and is subject to
revision.
(c) 2005 data reflects 2005 Stock Repurchase Program of 525,000 shares. 2004
data reflects 2004 Stock Repurchase Program of 425,000 shares announced
December 17, 2003 and 200,000 shares announced August 13, 2004. 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) March 31, December 31,
2005 2004
------------------ ------------------
ASSETS
Cash and cash equivalents $ 34,345 $ 31,449
Available-for-sale investment securities, at estimated fair value
(amortized cost of $591,313 at March 31, 2005, and $594,457 at
December 31, 2004) 592,692 602,364
Loans held for sale 1,147 612
Loans, net of unearned interest 1,013,000 1,023,058
Allowance for loan losses (14,702) (14,760)
------------------ ------------------
Net loans 998,298 1,008,298
Bank premises and equipment, net of accumulated depreciation 22,126 22,640
Business owned life insurance 45,707 45,253
Goodwill 58,886 59,096
Other intangible assets 11,446 12,022
Other real estate owned 873 1,163
Other assets 26,609 26,189
------------------ ------------------
TOTAL ASSETS $ 1,792,129 $ 1,809,086
------------------ ------------------
LIABILITIES
Non-interest-bearing deposits $ 157,087 $ 152,979
Interest-bearing deposits 946,046 916,442
------------------ ------------------
Total deposits 1,103,133 1,069,421
Federal funds purchased, securities sold under repurchase agreements,
and other short term borrowings 83,724 51,895
Long-term borrowings 386,641 464,864
Junior subordinated notes held by subsidiary trusts 29,285 29,263
Accrued expenses and other liabilities 16,342 18,225
------------------ ------------------
TOTAL LIABILITIES 1,619,125 1,633,668
STOCKHOLDERS' EQUITY
Common stock, no par value (24,000,000 shares authorized, 10,855,010 shares
issued at March 31, 2005, and
10,850,641 shares issued at December 31, 2004) 162,277 162,284
Accumulated comprehensive income, net of deferred income taxes 734 4,958
Retained earnings 21,511 18,442
Treasury stock, at cost (461,131 shares at March 31, 2005,
and 415,539 shares at December 31, 2004) (11,518) (10,266)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 173,004 175,418
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,792,129 $ 1,809,086
------------------ ------------------
END OF RELEASE