Peoples Bancorp Inc. Reports Quarterly Net Loss

MARIETTA, Ohio, April 21, 2020 /PRNewswire/ -- Peoples Bancorp Inc. ("Peoples") (Nasdaq: PEBO) today announced results for the quarter ended March 31, 2020.  Peoples recorded a net loss of $(0.8) million for the first quarter of 2020, representing a loss per diluted common share of $(0.04).  In comparison, earnings per diluted common share were $0.72 for the fourth quarter of 2019 and $0.73 for the first quarter of 2019.  Non-core items negatively impacted loss per diluted common share by $0.02 for the first quarter of 2020.  Earnings per diluted common share were negatively impacted by $0.01 for the fourth quarter of 2019, and positively impacted by $0.09 for the first quarter of 2019, by non-core items.

"Earnings for the first quarter of 2020 were heavily impacted by the provision for credit losses recorded for expected credit losses due to the expected economic downturn related to COVID-19.  This included a provision for credit losses of $17.0 million for the first quarter of 2020.  Through managing deposit costs, net interest margin remained relatively stable at 3.51% for the quarter despite the decline in interest rates on loans," said Chuck Sulerzyski, President and Chief Executive Officer.  "Credit quality remained stable and net charge-off levels were 0.07% of average total loans.  On an annualized basis, our loan portfolio grew 5% and deposits were up 13% compared to the linked quarter.  We are focused on supporting our clients, communities, and associates during this time of need while strengthening our diverse revenue streams."

As of close of business yesterday, we signed an asset purchase agreement under which Peoples Bank will acquire the operations and assets of Triumph Premium Finance ("TPF"), a division of TBK Bank, SSB.  Based in Kansas City, Missouri, TPF provides premium finance services for customers to purchase property and casualty insurance products through its growing network of independent insurance agency customers nationwide.  As of December 31, 2019, TPF had total receivables of approximately $100 million.  Upon consummation of the agreement, current Senior Vice President of TPF, John Binaggio, will manage the insurance premium financing operations for Peoples Bank.  The transaction is expected to be immediately accretive to PEBO's earnings per share, adding approximately $0.02 to $0.04 in 2020 and $0.11 to $0.14 in 2021.  Closing is expected during the third quarter of 2020 and is subject regulatory approval and other conditions set forth in the purchase agreement.

The comparison of income statement and balance sheet results between the quarters ended March 31, 2020 and March 31, 2019 was affected by the First Prestonsburg Bancshares Inc. ("First Prestonsburg") acquisition, which closed April 12, 2019.  The comparisons of income statement and balance sheet results between the quarter ended March 31, 2020 and the 2019 quarterly periods were affected by the recent developments related to COVID-19 and the reactions of government authorities, individuals and businesses, and the impact on the economy.  Additionally, as of January 1, 2020, Peoples adopted Accounting Standards Update ("ASU") 2016-13 "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments."

Statement of Operations Highlights:

• Net interest income declined $485,000, or 1%, compared to the linked quarter and grew $722,000, or 2%, compared to the first quarter of 2019.
• Net interest margin was 3.51% for the first quarter of 2020, compared to 3.56% for the linked quarter and 3.80% for the first quarter of 2019.
• The decrease compared to the linked quarter was impacted by one less calendar day compared to the linked quarter, combined with lower yields on loans due to a decline in interest rates. These declines were partially offset by lower interest rates paid on deposit accounts compared to the linked quarter.
• Compared to the first quarter of 2019, the improvement in net interest income was primarily due to the impact of the acquired First Prestonsburg loans and deposits, while the decline in the net interest margin was driven by lower yields on investment securities, given accelerated premium amortization due to higher prepayment speeds.
• Peoples recorded a provision for credit losses of $17.0 million for the first quarter of 2020, compared to a provision for loan losses of $1.1 million for the fourth quarter of 2019, and a recovery of loan losses of $263,000 for the first quarter of 2019.
• The increase in the provision for credit losses compared to the fourth and first quarters of 2019 was mainly due to the recent developments related to COVID-19 and its impact on the economic assumptions with the current expected credit loss ("CECL") model.
• Annualized net charge-off levels remained low, at 0.07% of average total loans for the first quarter of 2020, compared to 0.16% of average total loans for the linked quarter. For the first quarter of 2019, annualized net recoveries were 0.15% of average total loans.
• Total non-interest income, excluding net gains and losses, decreased $1.8 million, or 10%, compared to the linked quarter, and was relatively flat compared to the first quarter of 2019.
• Compared to the linked quarter, electronic banking income and mortgage banking income were negatively impacted by traditional seasonality factors combined with declining customer activity as the quarter progressed related to the COVID-19 pandemic. In the first quarter of 2020, commercial loan swap fees were down considerably from the linked quarter's record high level.
• Compared to the first quarter of 2019, increases in deposit account service charges, electronic banking income, mortgage banking income, and trust and investment income were offset by a decline in insurance income and the impact of additional income recorded during the 2019 first quarter of $787,000 related to the sale of restricted Class B Visa stock.
• Total non-interest expense increased $804,000, or 2%, compared to the linked quarter and $2.5 million, or 8%, compared to the first quarter of 2019.
• Compared to the linked quarter, salaries and employee benefit costs increased 5%, which included expenses that occur annually in the first quarter for annual stock grants and annual contributions to employee health benefit accounts. The increase was partially offset by lower professional fees.
• The increase compared to the first quarter of 2019 was driven by higher salaries and employee benefit costs, primarily due to the acquisition of First Prestonsburg, partially offset by lower Federal Deposit Insurance Corporation ("FDIC") insurance premiums. The first quarter of 2020 also included $368,000 of pension settlement charges and $140,000 of expenses related to COVID-19.
• For the first quarter of 2020, the efficiency ratio was 66.6% compared to 61.9% for the fourth quarter of 2020. The increase in the efficiency ratio was driven by the decrease in revenue, which was negatively impacted by COVID-19, combined with the increase in non-interest expense compared to the linked quarter.

Balance Sheet Highlights:

• Period-end total loan balances increased $37.9 million, or 5% annualized, compared to December 31, 2019, and $173.9 million, or 6% compared to March 31, 2019.
• Growth of period-end loan balances compared to December 31, 2019 was driven by commercial real estate and construction loan balances, partially offset by a decline in residential real estate loan balances.
• Compared to March 31, 2019, period-end total loans grew due to a combination of higher originated loan balances, which exclude acquired loan balances, and loans acquired from First Prestonsburg.
• Average loan balances grew $31.0 million, or 4% annualized, compared to the linked quarter, driven by higher commercial and industrial loan balances and construction loan balances.
• Asset quality metrics were generally stable during the quarter.
• The provision for credit losses during the quarter was driven by the impact of the recent developments related to COVID-19 on the economic assumptions utilized within the CECL model.
• Delinquency trends remained stable as loans considered current comprised 98.5% of the loan portfolio at March 31, 2020, and were relatively flat compared to 98.6% at both December 31, 2019 and March 31, 2019.
• Nonperforming assets were up $5.3 million, or 24%, compared to December 31, 2019 due to a $1.5 million commercial relationship and several smaller commercial relationships being placed on nonaccrual. The new accounting for purchased credit deteriorated loans under ASU 2016-13 resulted in the movement of $3.9 million of loans from the 90+ days past due and accruing category to the nonaccrual category as of January 1, 2020.
• Net charge-off levels remained low, at $498,000, or 0.07% of average total loans annualized, for the first quarter of 2020, and were muted by a recovery of $1.2 million recorded on a previously charged-off commercial loan.
• Period-end total deposit balances at March 31, 2020 increased $107.0 million, or 3%, compared to December 31, 2019, and $261.0 million, or 8%, compared to March 31, 2019.
• Governmental deposit account balances increased $106.3 million compared to December 31, 2019, mainly due to seasonality.
• The increase in total deposits compared to March 31, 2019 was driven primarily by the deposits acquired from First Prestonsburg.
• Total demand deposit balances were 40% of total deposit balances at both March 31, 2020 and December 31, 2019, compared to 38% at March 31, 2019.

Net Interest Income:Net interest income was $34.6 million for the first quarter of 2020, a decrease of $485,000, or 1%, compared to the linked quarter.  Net interest margin was 3.51% for the first quarter of 2020, compared to 3.56% for the linked quarter.  Net interest income was impacted by one less calendar day in the first quarter of 2020 compared to the linked quarter.  Net interest income and net interest margin were both impacted by the declining interest rate environment during the first quarter of 2020, which resulted in lower yields on the loan and the investment securities portfolios.  The Board of Governors of the Federal Reserve System lowered the Federal Funds effective target range 150 basis points during the first quarter of 2020 to 0.00% to 0.25%.  Peoples' variable rate commercial loans are subject to changes in the London Interbank Offered Rate and the prime rate, both of which declined during the first quarter of 2020.  Yields on investment securities were negatively impacted by higher prepayment speeds, which increased premium amortization.  These declines were partially offset by lower deposit costs, primarily due to a decrease in interest rates paid on deposits.

Accretion income, net of amortization expense, from acquisitions was $1.1 million for the first quarter of 2020 and $1.8 million for the fourth quarter of 2019, which added 11 basis points and 18 basis points, respectively, to net interest margin.  Net accretion income in the fourth quarter of 2019 was boosted by an acquired commercial loan that paid off during the quarter, which positively impacted the net interest margin by 6 basis points.

Net interest income for the first quarter of 2020 increased $722,000, or 2%, over the first quarter of 2019.  Net interest margin decreased 29 basis points compared to 3.80% for the first quarter of 2019.  The increase in net interest income compared to the first quarter of 2019 was driven by higher interest income on loans, combined with lower interest rates paid on deposits, which were partially offset by a decline in interest income on investment securities.  The increase in interest income on loans was primarily due to higher loan balances, which were impacted by the acquired First Prestonsburg loans.  The decrease in investment securities interest income was mostly related to the higher premium amortization associated with faster prepayment speeds.  The decline in net interest margin was largely driven by the lower yield on investment securities due to a decline in interest rates and higher premium amortization.

Accretion income, net of amortization expense, from acquisitions was $1.1 million for the first quarter of 2020 and $722,000 for the first quarter of 2019, which added 11 basis points and 8 basis points, respectively, to net interest margin.

Provision for (Recovery of) Credit Losses:The provision for credit losses was $17.0 million for the first quarter of 2020, compared to a provision for loan losses of $1.1 million for the linked quarter and a recovery of loan losses of $263,000 for the first quarter of 2019.  The increase in the provision for credit losses compared to the fourth and first quarters of 2019 was primarily due to the recent developments related to COVID-19 and the resulting impact on the economic assumptions used in the CECL model.  Net charge-offs for the first quarter of 2020 were $498,000, or 0.07% of average total loans annualized, compared to net charge-offs of $1.2 million, or 0.16% of average total loans annualized, for the linked quarter and net recoveries of $1.0 million, or 0.15% of average total loans annualized, for the first quarter of 2019.  For additional information on credit trends and the allowance for credit losses, see the "Asset Quality" section below.

Net Gains and Losses:Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Operations.  Net gains during the first quarter of 2020 were $232,000, compared to net losses of $135,000 for the linked quarter, and net losses of $152,000 in the first quarter of 2019.  During the first quarter of 2020, net gains include $319,000 of gains on the sales of investment securities, which were partially offset by net losses on repossessed assets.  Losses during the linked quarter were driven by a net loss on repossessed assets.  Losses during the first quarter of 2019 included $118,000 of market value write-downs related to closed offices that were held for sale.

Total Non-interest Income, Excluding Net Gains and Losses:Total non-interest income, excluding net gains and losses, for the first quarter of 2020 decreased $1.8 million, or 10%, compared to the linked quarter.  Insurance income increased $821,000, or 25%, due to annual performance-based insurance commissions of $1.3 million, which are primarily recognized in the first quarter of each year and are a core component of insurance income, partially offset by a decline in property and casualty insurance commissions driven by the market.  Mortgage banking income was down $586,000, or 44%, due to a seasonal decline combined with a disruption of customer activity as a result of the developments related to COVID-19.  Electronic banking income declined $569,000, or 15%, compared to the linked quarter, driven by reduced usage of debit cards, which is typically higher in the fourth quarter of each year and was negatively impacted during the first quarter of 2020 by the stay-at-home orders put in place in Peoples' markets at the end of the quarter.  Commercial loan swap fees declined $550,000, or 69%, from a record high in the linked quarter, reflecting a typically slower first quarter and the impact of COVID-19, which slowed customer demand late in the first quarter of 2020.  BOLI income decreased $386,000, or 40%, as the result of $109,000 of death benefits that were recorded in the first quarter of 2020, down from $482,000 recorded in the fourth quarter of 2019.  Income from deposit account service charges also declined $329,000, or 10%, mainly due to seasonal declines, primarily in overdraft fees.

Compared to the first quarter of 2019, non-interest income, excluding net gains and losses, was down $76,000.  Income from deposit account service charges, which increased $479,000, or 20%, compared to the prior year quarter, benefited from the additional accounts acquired from First Prestonsburg and fully implemented new deposit account fee schedules which were put in place in March 2019.  Electronic banking income increased $293,000, or 10%, which was positively impacted by the additional cardholders obtained in the First Prestonsburg acquisition, and trust and investment income was up $150,000, or 5%, driven by higher market values in the forepart of the first quarter of 2020, compared to the first quarter of 2019.  These increases were partially offset by a decline in insurance income of $491,000, or 11%, due to a decline in life and health insurance commissions combined with lower annual performance-based insurance commissions, which were down $128,000, or 9%, compared to the first quarter of 2019.  Additionally, during the first quarter of 2019, Peoples recognized income of $787,000 related to the sale of restricted Class B Visa stock.

Total Non-interest Expense:Total non-interest expense was up $804,000, or 2%, compared to the linked quarter, driven by an increase in salaries and employee benefit costs of $1.0 million, or 5%.  Salaries and employee benefit costs were driven by additional expenses which occur primarily in the first quarter of each year related to stock-based compensation and contributions to employee health benefit accounts.  Stock-based compensation during the first quarter of 2020 included $813,000 for annual stock grants, primarily related to employees who were retirement eligible and a true-up of expense related to the vesting of previously granted stock awards.  Annual contributions to employee health benefit accounts resulted in an expense of $427,000.  These were partially offset by a decline in base salaries and wages, which was driven by lower severance expenses, partially offset by annual merit increases and continued movement towards a $15 per hour minimum wage throughout Peoples' organization.  Total non-interest expense in the first quarter of 2020 also included pension settlement charges of $368,000 and expenses of $140,000 related to COVID-19, for which there were no similar expenses in the linked quarter.  COVID-19 expenses consisted primarily of a $100,000 donation to Peoples' employee hardship and disaster relief fund, and technology cost for enhanced remote access capabilities.  The increases in the areas described above were partially offset by a decline in professional fees of $238,000, or 12%, and amortization of other intangible assets of $159,000, or 18%.

Compared to the first quarter of 2019, total non-interest expense increased $2.5 million, or 8%, primarily due to an increase in salaries and employee benefit costs of $716,000, or 4%.  Salaries and employee benefit costs were impacted by the additional employees from the First Prestonsburg acquisition, annual merit increases, and continued movement towards a $15 per hour minimum wage throughout Peoples' organization.  These costs were partially offset by a decline in medical insurance expenses due to lower claims compared to the first quarter of 2019.  Professional fees were up $417,000, or 33%, due to recruiting fees and consulting work performed during the first quarter of 2020.  Foreclosed real estate and other loan expenses were up $323,000, more than double, due to higher real estate loan expense, credit bureau expense and dealer participation payments for the quarter.  Electronic banking expense increased $288,000, or 18%, driven by increased usage of debit cards by more customers, combined with an increase in the number of customer accounts and customer usage of mobile and online banking tools, which were impacted by the First Prestonsburg acquisition.  Partially offsetting these increases were lower FDIC insurance premiums, which reflected a credit of $5,000 in the first quarter of 2020, compared to an expense of $371,000 in the first quarter of 2019.  The FDIC insurance premiums credit was related to the level of the federal Deposit Insurance Fund ("DIF") that continued to be above the target threshold for banks with total consolidated assets of less than $10 billion to recognize credits.  Peoples cannot reasonably anticipate any future recognition of credits, as the DIF is analyzed on a quarterly basis, and is the premise for receiving credits.

The efficiency ratio for the first quarter of 2020 was 66.6%, compared to 61.9% for the linked quarter, and 62.7% for the first quarter of 2019.  The increase in the efficiency ratio compared to the linked quarter was primarily due to the decline in revenue, which was negatively impacted by the reactions to COVID-19 and the related impact on the interest rate environment, combined with the increase in non-interest expense.  The efficiency ratio, adjusted for non-core items, was 65.5% for the first quarter of 2020, compared to 61.3% for the linked quarter, and 62.2% for the first quarter of 2019.

Income Tax Expense: Peoples recorded an income tax benefit of $156,000 for the first quarter of 2020, compared to income tax expense of $2.8 million for the linked quarter and income tax expense of $3.4 million for the first quarter of 2019.  The income tax benefit during the first quarter of 2020 was driven by a pretax net loss, which was the result of a $17.0 million provision for credit losses recorded during the quarter.

Loans:Period-end total loan balances at March 31, 2020 increased $37.9 million, or 5% annualized, compared to December 31, 2019.  The increase compared to December 31, 2019 was driven by growth in commercial real estate loan balances of $64.6 million, and construction loan balances of $22.3 million.  These increases were partially offset by declines in residential real estate loan balances of $36.1 million and commercial and industrial loan balances of $8.5 million.

Total loan balances increased $173.9 million, or 6%, compared to March 31, 2019.  Originated loan balances increased $125.2 million, or 6%, compared to March 31, 2019.  Acquired loan balances increased $48.7 million, or 9%, driven by loans acquired from First Prestonsburg and residential real estate loan pool purchases.  The increase in total loan balances compared to March 31, 2019, was driven by growth in commercial real estate loan balances of $95.4 million, or 12%; commercial and industrial loan balances of $61.6 million, or 10%; residential real estate loan balances of $19.6 million, or 3%; and consumer indirect loans of $7.8 million, or 2%; partially offset by a decline in construction loan balances of $14.1 million, or 11%.

Quarterly average loan balances grew $31.0 million, or 4% annualized, in the first quarter of 2020 compared to the linked quarter.  Average commercial and industrial loan balances were up $24.5 million, or 4%, and average construction loan balances increased $10.1 million, or 12%, partially offset by a decline in average consumer indirect loan balances of $4.2 million, or 1%.

Compared to the first quarter of 2019, quarterly average loan balances increased $140.4 million, or 5%, driven by the First Prestonsburg acquisition, coupled with originated loan growth.  Average commercial and industrial loan balances and average residential real estate loan balances increased $70.5 million, or 12%, and $62.5 million, or 10%, respectively, compared to the first quarter of 2019.  Average commercial real estate loan balances provided growth of $31.4 million, or 4%, compared to the year-ago quarter.  Average construction loan balances declined $33.8 million, or 26%.

Asset Quality:Although asset quality metrics fluctuated during the quarter, overall asset quality was relatively stable.  Criticized loans, which are those categorized as special mention, substandard or doubtful, decreased $5.9 million, or 6%, compared to December 31, 2019, and were up $1.1 million, or 1%, compared to March 31, 2019.  As a percent of total loans, criticized loans were 3.12% at March 31, 2020, compared to 3.37% at December 31, 2019 and 3.28% at March 31, 2019.  The decline in criticized loans compared to December 31, 2019 was mostly due to paydowns and upgrades of several loans during the quarter.  Compared to March 31, 2019, the increase in criticized loans was largely due to acquired First Prestonsburg loans, partially offset by the upgrade of several commercial relationships.  Classified loans, which are those categorized as substandard or doubtful, increased $2.6 million, or 4%, compared to December 31, 2019, and were up $21.5 million, or 45%, from March 31, 2019.  As a percent of total loans, classified loans were 2.36% at March 31, 2020, compared to 2.30% at December 31, 2019 and 1.73% at March 31, 2019.  The increase in classified loans compared to December 31, 2019 was driven by the downgrade of a commercial loan relationship totaling $3.6 million.  Compared to March 31, 2019, the increase in classified loans was drive by the downgrades of four commercial loan relationships totaling $18.8 million.

Nonperforming assets increased $5.3 million, or 24%, compared to December 31, 2019, and were up $9.0 million, or 49%, compared to March 31, 2019.  The new accounting for purchased credit deteriorated loans under ASU 2016-13 resulted in the movement of $3.9 million of loans from the 90+ days past due and accruing category to the nonaccrual category as of January 1, 2020.  As of December 31, 2019, these loans were presented as 90+ days past due and accruing, although they were not accruing interest income, because they were accreting income from the discount that was recognized due to acquisition accounting.  The additional increases compared to December 31, 2019 and March 31, 2019 were due to a $1.5 million commercial relationship and several smaller commercial relationships being placed on nonaccrual.  The increase compared to March 31, 2019 was also partially due to acquired loans from First Prestonsburg. Nonperforming assets as a percent of total loans and OREO were 0.94% at March 31, 2020, up from 0.76% at December 31, 2019 and 0.67% at March 31, 2019.

Annualized net charge-offs were 0.07% of average total loans for the first quarter of 2020, compared to annualized net charge-offs of 0.16% for the linked quarter.  Annualized net recoveries were 0.15% of average total loans for the first quarter of 2019.  The first quarters of 2020 and 2019 included recoveries of $1.2 million and $1.8 million, respectively, recorded on a previously charged-off commercial loan.  Annualized gross charge-offs were $2.1 million, or 0.29% of average loans, for the first quarter of 2020, compared to $1.6 million, or 0.23% of average loans, for the linked quarter, and $1.0 million, or 0.15% of average loans, for the first quarter of 2019.

At March 31, 2020, the allowance for credit losses increased to $42.8 million, compared to the allowance for loan losses of $21.6 million at December 31, 2019 and $20.9 million at March 31, 2019.  The increases in the allowance for credit losses compared to December 31, 2019 and March 31, 2019 were primarily due to the recent developments related to COVID-19 and the resulting impact on the economic assumptions used in estimating the allowance of credit losses under the CECL model.  The adoption of ASU 2016-13 as of January 1, 2020 resulted in an increase to the allowance for credit losses of $5.8 million, which included a gross-up of loan balances to establish an allowance for credit losses for loans for purchased credit deteriorated loans of $2.6 million.  The ratio of the allowance for credit losses as a percent of total loans increased to 1.47% at March 31, 2020, compared to 0.75% at December 31, 2019 and 0.76% at March 31, 2019.  The ratio includes all acquired loans, from both First Prestonsburg and previous acquisitions since 2012, of $611.6 million.

Deposits:As of March 31, 2020, period-end deposit balances were up $107.0 million, or 3%, compared to December 31, 2019.  The majority of the increase was seasonal, driven by an increase in governmental deposits of $106.3 million.  Non-interest-bearing deposit account balances grew $56.1 million, or 8%, compared to the linked quarter.  Brokered certificates of deposit were down $74.4 million, or 36%, compared to the linked quarter.  Period-end deposits increased $261.0 million, or 8%, compared to March 31, 2019, largely due to the acquired deposits from First Prestonsburg.

Average deposit balances during the first quarter of 2020 were relatively flat compared to the linked quarter.  Increases in average non-interest-bearing, money market, and governmental deposit accounts were offset by lower average brokered certificates of deposit.  Compared to the first quarter of 2019, quarterly average deposits increased $285.8 million, or 9%, largely due to the First Prestonsburg acquisition.

Total demand deposit accounts comprised 40% of total deposits at both March 31, 2020 and December 31, 2019, compared to 38% at March 31, 2019.

Stockholders' Equity:At March 31, 2020, the tier 1 risk-based capital ratio was 14.13%, compared to 14.84% at December 31, 2019, and 14.22% at March 31, 2019.  The common equity tier 1 risk-based capital ratio was 13.88% at March 31, 2020, compared to 14.59% at December 31, 2019, and 13.96% at March 31, 2019.  The total risk-based capital ratio was 15.33% at March 31, 2020, compared to 15.58% at December 31, 2019, and 14.98% at March 31, 2019.  Peoples has adopted the five-year transition to phase in the impact of the adoption of CECL on regulatory capital ratios.  Compared to December 31, 2019, the capital ratios were impacted by the repurchase of common shares, which reduced capital.  Compared to March 31, 2019, capital ratios were impacted by the First Prestonsburg acquisition, which created increases in capital and risk-weighted assets.

Total shareholders' equity at March 31, 2020 decreased $10.7 million, or 2%, compared to December 31, 2019, which was driven by a combination of the repurchase of 436,137 common shares for a total of $10.2 million during the first quarter of 2020, dividends paid of $7.0 million, a $3.7 million adjustment related to the adoption of the CECL accounting standard, and a net loss of $765,000.  These were partially offset by an increase in accumulated other comprehensive income of $9.7 million.  The increase in accumulated other comprehensive income was primarily the result of a higher market value related to the available-for-sale investment securities portfolio, which was driven by overall decreases in market interest rates during the quarter.  Book value per share and tangible book value per share, which excludes goodwill and other intangible assets, at March 31, 2020 declined $0.03 and $0.17, respectively, compared to December 31, 2019 due to the decrease in shareholders' equity, partially offset by the decline in common shares outstanding resulting from the repurchase of common shares.  Compared to December 31, 2019, the ratio of total shareholders' equity to total assets and the tangible equity to tangible assets ratio, which excludes goodwill and other intangible assets, decreased 59 and 51 basis points, respectively.

Total shareholders' equity at March 31, 2020 increased $48.6 million, or 9%, compared to March 31, 2019, which was mainly due to net income of $38.6 million over the twelve-month period, an increase in stock outstanding related to the acquisition of First Prestonsburg, and an increase in accumulated other comprehensive income of $15.7 million, partially offset by dividends paid of $28.1 million and the repurchase of 462,564 of common shares for a total of $11.0 million between March 31, 2019 and March 31, 2020.  The increase in accumulated other comprehensive income was the result of a higher market value related to the available-for-sale investment securities portfolio, which was driven by overall declines in market interest rates from March 31, 2019 to March 31, 2020.  Compared to March 31, 2019, the increase in shareholders' equity drove increases in book value per share and tangible book value per share.  The ratio of total shareholders' equity to total assets and the tangible equity to tangible assets ratio increased 26 and 23 basis points, respectively, compared to March 31, 2019.

 

Peoples Bancorp Inc. is a diversified financial services holding company with $4.5 billion in total assets, 88 financial service locations, including 77 full-service bank branches, and 85 ATMs in Ohio, Kentucky and West Virginia.  Peoples makes available a complete line of banking, investment, insurance and trust solutions through its subsidiaries - Peoples Bank and Peoples Insurance Agency, LLC.  Peoples' common shares are traded on The Nasdaq Global Select Market® under the symbol "PEBO," and Peoples is a member of the Russell 3000 index of U.S. 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 2020 results of operations on April 21, 2020 at 11:00 a.m., Eastern Daylight Time, with members of Peoples' executive management participating.  Analysts, media and individual investors are invited to participate in the conference call by calling (866) 890-9285.  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 and, if required, to download and install the necessary software.  A replay of the call will be available on Peoples' website in the "Investor Relations" section for one year.

Use of Non-US GAAP Financial Measures:This news release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("US GAAP").  Management uses these "non-US GAAP" financial measures in its analysis of Peoples' performance and the efficiency of its operations. Management believes that these non-US GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods and peers.  These disclosures should not be viewed as substitutes for financial measures determined in accordance with US GAAP, nor are they necessarily comparable to non-US GAAP performance measures that may be presented by other companies.  Below is a listing of the non-US GAAP financial measures used in this news release:

• Core non-interest expense is non-US GAAP since it excludes the impact of acquisition-related expenses, pension settlement charges, severance expenses, and COVID-19 expenses.
• Efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income, excluding net gains and losses. This measure is non-US GAAP since it excludes amortization of other intangible assets and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income.
• Efficiency ratio adjusted for non-core items is calculated as core non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income, excluding net gains and losses. This measure is non-US GAAP since it excludes the impact of acquisition-related expenses, pension settlement charges, severance expenses, COVID-19 expenses, the amortization of other intangible assets and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income.
• Tangible assets, tangible equity and tangible book value per common share measures are non-US GAAP since they exclude the impact of goodwill and other intangible assets acquired through acquisitions on both total stockholders' equity and total assets.
• Total non-interest income, excluding net gains and losses, is a non-US GAAP measure since it excludes all gains and/or losses included in earnings.
• Pre-provision net revenue is defined as net interest income plus total non-interest income, excluding net gains and losses, minus total non-interest expense. This measure is non-US GAAP since it excludes the provision for credit losses and all gains and/or losses included in earnings.
• Return on average assets adjusted for non-core items is calculated as annualized net (loss) income (less the after-tax impact of all gains and/or losses, acquisition-related expenses, pension settlement charges, severance expenses, and COVID-19 expenses) divided by average assets. This measure is non-US GAAP since it excludes the after-tax impact of all gains and/or losses, acquisition-related expenses, pension settlement charges, severance expenses, and COVID-19 expenses.
• Return on average tangible stockholders' equity is calculated as annualized net (loss) income (less after-tax impact of amortization of other intangible assets) divided by tangible stockholders' equity. This measure is non-US GAAP since it excludes the after-tax impact of amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity.

A reconciliation of these non-US GAAP financial measures to the most directly comparable US GAAP financial measures is included at the end of this news release under the caption of "Non-US GAAP Financial Measures."

Safe Harbor Statement:Certain statements made in this news release regarding Peoples' financial condition, results of operations, plans, objectives, future performance and business, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate," "estimate," "may," "feel," "expect," "believe," "plan," "will," "will likely," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," and similar expressions.

These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations.  Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially.  These factors include, but are not limited to:

Peoples encourages readers of this news release to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance.  Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this news release or to reflect the occurrence of unanticipated events, except as required by applicable legal requirements.  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.

As required by US GAAP, Peoples is required to evaluate the impact of subsequent events through the issuance date of its March 31, 2020 consolidated financial statements as part of its Quarterly Report on Form 10-Q to be filed with the SEC.  Accordingly, subsequent events could occur that may cause Peoples to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Peoples Bancorp Inc.