Core Viewpoint - Peoples Bancorp Inc. is set to release its second quarter 2024 earnings on July 23, 2024, before market opening, followed by a conference call for analysts, media, and investors [2][3]. Group 1: Earnings Release and Conference Call - The earnings release will occur before the market opens on July 23, 2024 [2]. - A conference call will be held at 11:00 a.m. Eastern Daylight Time on the same date, featuring commentary from the CEO and CFO [3]. - The dial-in number for the conference call is (866) 890-9285, and a webcast will be available for listen-only access [3]. Group 2: Company Overview - Peoples Bancorp Inc. is a diversified financial services holding company with a complete line of banking, trust, investment, insurance, premium financing, and equipment leasing solutions [4]. - The company has been headquartered in Marietta, Ohio since 1902, boasting a heritage of financial stability and community impact [4]. - As of March 31, 2024, Peoples had total assets of $9.3 billion and operates 152 locations, including 133 full-service bank branches across several states [4]. Group 3: Membership and Services - Peoples is a member of the Russell 3000 index of U.S. publicly-traded companies [5]. - The company offers services through various divisions, including Peoples Bank, Peoples Insurance Agency, LLC, and Vantage Financial, LLC [5].

Financial Performance - Peoples reported net income of $29.6 million for Q1 2024, with earnings per diluted common share of $0.84, compared to $33.8 million and $0.96 in Q4 2023, and $26.6 million and $0.94 in Q1 2023[174]. - The company reported a net income of $116.4 million over the last twelve months, contributing to the increase in stockholders' equity[190]. - For the three months ended March 31, 2024, net income was $29,584,000, a decrease from $33,825,000 in the previous quarter and an increase from $26,560,000 in the same period last year[251]. - Annualized net income for Q1 2024 was $118,986,000, down from $134,197,000 in Q4 2023 and up from $107,716,000 in Q1 2023[247]. - The company reported a net income adjusted for non-core items of $29,788,000 for Q1 2024, compared to $36,580,000 in Q4 2023 and $28,718,000 in Q1 2023[247]. Net Interest Income and Margin - Net interest income for Q1 2024 was $86.6 million, a decrease of $1.7 million or 2.0% from the previous quarter, but an increase of $13.8 million or 18.9% compared to Q1 2023[175]. - Net interest margin for Q1 2024 was 4.27%, down from 4.44% in the previous quarter and 4.53% in Q1 2023, primarily due to increased interest expense on deposits[175]. - Net interest income for the first quarter of 2024 was $86.64 million, compared to $72.88 million in the same period last year, reflecting a significant increase[194]. - Net interest income for Q1 2024 grew by 18.9% compared to Q1 2023, driven by increases in market interest rates and the Limestone Merger[201]. - The net interest margin decreased to 4.27% in Q1 2024 from 4.44% in the previous quarter, primarily due to a decrease in accretion income[200]. Acquisitions and Mergers - The Limestone Merger, completed in April 2023, contributed to the increase in accretion income compared to Q1 2023[176]. - The Limestone Merger, completed on April 30, 2023, added $1.46 billion in assets, primarily loans, to the company[188]. - Acquisition-related expenses for Q1 2024 were $(0.1) million, a decrease from $1.3 million in the linked quarter, primarily related to the Limestone Merger[177]. - The increase in PPNR for Q1 2024 compared to Q1 2023 was attributed to increased net interest income from the Limestone Merger[241]. Credit Losses and Charge-offs - The provision for credit losses for Q1 2024 was $6.1 million, up from $1.3 million in the linked quarter and $1.9 million in Q1 2023, driven by macro-economic deterioration, increased reserves, and loan growth[177]. - Net charge-offs for Q1 2024 were $3.3 million, or 0.22% of average total loans annualized, compared to $3.5 million (0.23%) in the linked quarter and $1.5 million (0.13%) in Q1 2023[177]. - The increase in the allowance for credit losses was attributed to a deterioration in macro-economic conditions, increased reserves on individually analyzed loans, and loan growth[270]. - Total gross charge-offs for the first quarter of 2024 were $3.9 million, a decrease from $4.8 million in the fourth quarter of 2023[271]. - The increase in net charge-offs year-over-year was primarily due to higher charge-offs in leases, indirect consumer loans, and commercial industrial loans[273]. Assets and Liabilities - Total assets as of March 31, 2024, were $9.27 billion, up from $9.16 billion at December 31, 2023, and $7.31 billion at March 31, 2023, primarily due to increases in investment securities and loan balances[188]. - Total liabilities increased to $8.21 billion as of March 31, 2024, up from $8.10 billion at December 31, 2023, and $6.49 billion at March 31, 2023[189]. - Total stockholders' equity rose by $8.5 million to $1.45 billion at March 31, 2024, driven by net income of $29.6 million for the first quarter[190]. - Total deposits increased by $784.8 million, or 14%, compared to March 31, 2023, excluding deposits from the Limestone Merger[189]. - Total outstanding loans and leases reached $6.2 billion as of March 31, 2024, compared to $6.16 billion at December 31, 2023[262]. Non-Interest Income and Expenses - Total non-interest income, excluding net gains and losses, decreased by $0.2 million in Q1 2024 compared to the linked quarter, primarily due to a $1.6 million decrease in lease income and a $0.8 million decrease in electronic banking income[179]. - Total non-interest expenses for Q1 2024 increased by $0.8 million, or 1%, compared to the linked quarter, with salaries and employee benefits costs rising by $1.6 million[183]. - The efficiency ratio for Q1 2024 was 58.0%, compared to 56.0% for the linked quarter and 57.8% for Q1 2023, reflecting an increase in interest expense on deposits[186]. - Total non-interest expense for Q1 2024 was impacted by various factors, including a decrease in data processing and software expenses to $5,769,000 from $6,029,000 in Q4 2023[229]. - Insurance income for Q1 2024 increased by $2.2 million compared to the previous quarter, totaling $6,498 thousand[209]. Regulatory and Risk Factors - The company is subject to regulation by the Ohio Division of Financial Institutions, the Federal Reserve Board, and the FDIC[168]. - Future performance is subject to risks including interest rate changes, inflationary pressures, and competitive pressures in the financial services industry[161]. - The company emphasizes the importance of understanding forward-looking statements as strategic objectives rather than absolute targets[170]. Capital and Liquidity - The capital conservation buffer was reported at 5.60% as of March 31, 2024, indicating a strong capital position above regulatory requirements[283]. - As of March 31, 2024, Common Equity Tier 1 capital amounted to $780,017 thousand, with a ratio of 11.69%, slightly down from 11.75% on December 31, 2023[284]. - Total risk-based capital increased to $894,662 thousand, resulting in a ratio of 13.40% as of March 31, 2024, compared to 13.38% at the end of 2023[284]. - Management believes the current liquidity sources and funding availability will meet anticipated cash obligations and off-balance sheet commitments[300]. - The estimated increase in net interest income for a 300 basis point rise in interest rates is projected to be $14,508 thousand, a 4.3% increase[291].

Financial Performance - For the quarter ended March 31, 2024, total non-interest income was $25,779,000, compared to $24,134,000 for the previous quarter and $19,060,000 for the same quarter last year, reflecting a year-over-year increase of 35.5%[10] - Net interest income for the quarter was $86,640,000, down from $88,369,000 in the previous quarter, but up from $72,878,000 in the same quarter last year, indicating a year-over-year growth of 18.9%[10] - Adjusted revenue for the quarter was $113,161,000, down from $115,128,000 in the previous quarter but up from $94,518,000 in the same quarter last year, showing a year-over-year increase of 19.6%[10] - Net income for the three months ended March 31, 2024, was $29,584,000, compared to $33,825,000 for the previous quarter and $26,560,000 for the same period last year[12] - Annualized net income adjusted for non-core items was $119,807,000 for the three months ended March 31, 2024, down from $145,127,000 in the previous quarter but up from $116,467,000 year-over-year[12] - Annualized net income excluding amortization of other intangible assets was $127,847,000 for the three months ended March 31, 2024, compared to $144,449,000 in the previous quarter and $113,710,000 year-over-year[13] Asset and Equity Management - Total stockholders' equity increased to $1,062,002,000 as of March 31, 2024, up from $1,053,534,000 in the previous quarter and $819,543,000 a year ago, representing a year-over-year increase of 29.6%[11] - Tangible book value per common share rose to $18.39, compared to $18.16 in the previous quarter and $17.37 a year ago, reflecting a year-over-year increase of 5.9%[11] - Average tangible equity increased to $642,062,000 for the three months ended March 31, 2024, compared to $590,899,000 in the previous quarter and $475,920,000 a year ago[13] - The average stockholders' equity was $1,052,781,000 for the three months ended March 31, 2024, compared to $1,002,515,000 in the previous quarter and $801,465,000 a year ago[13] Operational Efficiency - The efficiency ratio for the quarter was 58.04%, compared to 55.95% in the previous quarter and 57.78% in the same quarter last year, showing a slight decline in operational efficiency[10] - Pre-provision net revenue for the quarter was $44,296,000, down from $47,025,000 in the previous quarter but up from $37,640,000 in the same quarter last year, indicating a year-over-year increase of 17.6%[11] Credit Risk Management - The company reported a provision for credit losses of $6,102,000 for the quarter, significantly higher than $1,285,000 in the previous quarter, indicating increased caution in credit risk management[11] Asset Growth - Total assets as of March 31, 2024, were $9,270,774,000, up from $9,157,382,000 in the previous quarter and $7,311,520,000 a year ago, reflecting a year-over-year growth of 26.8%[11] - The tangible equity to tangible assets ratio was 7.37% for the quarter, slightly up from 7.33% in the previous quarter and 7.08% a year ago, indicating stable capital management[11] Returns - Return on average assets for the three months ended March 31, 2024, was 1.32%, compared to 1.52% in the previous quarter and 1.49% a year ago[12] - Return on average stockholders' equity was 11.30% for the three months ended March 31, 2024, down from 13.39% in the previous quarter and 13.44% year-over-year[13] Other Information - The company reported a net loss on investment securities of $1,000 for the three months ended March 31, 2024, compared to $1,592,000 in the previous quarter and $1,935,000 a year ago[12] - The tax effect is calculated using a 21% statutory federal corporate income tax rate[12] - The company conducted a conference call on January 23, 2024, to discuss the results of operations for the quarter and twelve months ended December 31, 2023[16]

Acquisition and Mergers - Peoples Bancorp Inc. completed the acquisition of Limestone Bancorp Inc. in an all-stock merger, resulting in the issuance of 6,827,668 common shares valued at $177.9 million[18] Loan Portfolio Composition - As of December 31, 2023, commercial loans represented approximately 60.8% of Peoples Bank's total loan portfolio, an increase from 54.4% in 2022[23] - The portfolio of commercial real estate loans comprised 35.7% of total loans at December 31, 2023, up from 30.2% at the end of 2022[29] - Peoples Bank's insurance premium finance loans accounted for 3.3% of total loans as of December 31, 2023, slightly down from 3.4% in 2022[34] - The construction loans represented 5.9% of Peoples Bank's total loan portfolio at December 31, 2023, compared to 5.2% in 2022[30] - Peoples Bank's portfolio of leases comprised 6.7% of total loans at December 31, 2023, down from 7.3% in 2022[35] - Peoples Bank's commercial and industrial loans comprised 19.2% of the total loan portfolio at December 31, 2023, compared to 19.0% in 2022[28] - As of December 31, 2023, residential real estate loans comprised 12.9% of total loans, down from 15.4% at December 31, 2022[37] - Peoples Bank had $1.9 million in residential real estate loans held for sale and was servicing $356.8 million of loans as of December 31, 2023[37] - At December 31, 2023, outstanding home equity lines of credit made up 3.4% of total loans, compared to 3.8% at December 31, 2022[41] - The home equity loan portfolio consisted of 99.3% variable interest rate loans and 0.7% fixed interest rate loans as of December 31, 2023[42] - Consumer indirect loans represented 10.8% of the total loan portfolio at December 31, 2023, down from 13.4% at December 31, 2022[45] - Consumer direct loans comprised 2.1% of the total loan portfolio at December 31, 2023, compared to 2.3% at December 31, 2022[47] Financial Performance and Capital Management - Peoples Bancorp Inc. repurchased 107,219 common shares totaling $3.0 million during 2023 under its share repurchase program[19] - Investment securities accounted for 19.6% of total assets as of December 31, 2023, down from 24.2% at December 31, 2022[49] - The unfunded commitment related to overdraft services was $82.3 million as of December 31, 2023[48] - Peoples Bank's primary funding sources include interest-bearing and non-interest-bearing deposits, with a focus on stability and cost-effectiveness[52] - Peoples' allowance for credit losses may be insufficient to cover expected lifetime losses in its loan portfolio, potentially leading to material adverse effects on financial results[189] - The adoption of the CECL model requires Peoples to estimate expected credit losses based on historical and current conditions, which may result in increased volatility in future provisions for credit losses[192] - Peoples' ability to raise additional capital may be constrained by financial performance and market conditions, which could adversely affect its financial condition and operations[194] Employee and Community Engagement - As of December 31, 2023, Peoples had 1,478 full-time equivalent employees, an increase of 16.6% from 1,267 employees at the end of 2022[58] - Peoples has been recognized as one of America's Best Banks in 2023 and has received accolades as a "Best Bank to Work For" for three consecutive years (2021, 2022, and 2023)[58] - The company maintains a high level of commitment to community involvement through employee volunteering and donations[60] - Peoples has implemented a $15 minimum wage across the organization, ensuring all associates meet this threshold as of January 2023[58] Regulatory Environment and Compliance - The banking industry is highly regulated, and compliance with laws and regulations may increase costs and limit business opportunities for Peoples[195] - The Federal Reserve Board mandates that financial holding companies must be "well managed" and "well capitalized" to engage in new activities or acquisitions[81] - The BHC Act requires prior approval from the Federal Reserve Board for the acquisition of more than 5% of voting shares of a commercial bank[82] - The Federal Reserve Board may require financial holding companies to contribute additional capital to undercapitalized subsidiary banks[83] - Peoples Bank is restricted from paying dividends that exceed its net income for the current year and retained net income from the previous two years without regulatory approval[107] - The Federal Reserve Board may require Peoples to commit resources to Peoples Bank, potentially limiting cash available for dividends[109] - The Anti-Money Laundering Act of 2020 modernizes U.S. bank secrecy and anti-money laundering laws, emphasizing a risk-based compliance approach[115] - The USA Patriot Act mandates financial institutions to establish procedures for customer identification and enhanced due diligence[116] - Federal regulators require banking organizations to notify regulators of computer-security incidents within 36 hours[126] - Peoples Bank must comply with various federal and state consumer protection laws, including the Fair Housing Act and the Truth in Lending Act[110] - The Dodd-Frank Act requires public companies to adopt "clawback" policies for incentive compensation based on erroneous financial information[124] - Peoples Bank's incentive compensation arrangements are subject to review by the Federal Reserve Board to ensure they do not encourage excessive risk-taking[121] Cybersecurity and Operational Risks - Peoples has not detected significant compromises or material financial losses related to cybersecurity attacks to date, but risks remain high due to evolving threats[131] - The company employs a layered defensive approach to manage cybersecurity controls, including encryption and multi-factor authentication[131] - Peoples is exposed to operational risks including cybersecurity, fraud, and system failures, which could adversely affect its business operations and financial condition[157] - The company has implemented security controls to prevent unauthorized access to its systems, but cannot guarantee their effectiveness against breaches[172] - Cybersecurity incidents could result in significant costs for remediation, litigation, and increased regulatory scrutiny, impacting financial performance[175] - Peoples relies on third-party vendors for critical operational services, and any disruptions or failures from these vendors could materially impact its operations[179] Economic and Market Conditions - The macroeconomic environment is susceptible to global events, which could materially affect Peoples' results of operations and financial condition[152] - Changes in interest rates may adversely affect Peoples' profitability, particularly if rates on deposits rise faster than those on loans[145] - Economic conditions such as high inflation and elevated interest rates may adversely affect borrowers' ability to make scheduled loan payments, impacting Peoples' financial condition[187] - Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities[154] Strategic Focus and Future Outlook - The company aims to improve operating efficiency by focusing resources on offices and markets with the greatest earnings opportunities[17] - Peoples is committed to improving its online and mobile capabilities to provide customers with access to its products and services through various channels[56] - Peoples' success depends on its ability to adapt to rapid technological changes in the financial services industry, which is critical for growth and customer satisfaction[197] - The ability to attract and retain key employees is essential for executing business strategies, and competition for talent may increase operational costs[198] - Legislative or regulatory changes could negatively impact Peoples and the businesses in which it operates, affecting overall performance[206] - Regulatory changes may adversely affect Peoples' business and could lead to increased competition within the financial services industry[207] - Changes in accounting standards could materially impact Peoples' reported financial condition and results of operations[209] - Management's significant estimates in preparing consolidated financial statements may lead to actual results varying materially from estimates[210] - Regulatory capital standards may negatively impact Peoples' profitability, lending capabilities, and ability to pay dividends[211] - The Basel III capital framework requires Peoples to maintain significantly more capital, affecting its banking operations and dividend policies[211]

Source: S&P Global Market Intelligence, as of 09/30/2023. Peer financial institutions are used in this presentation for comparative purposes and are referred to as the "Peer Group". Peers include: AUB, CBU, CCNE, CHCO, CTBI, EGBN, FCF, FFBC, FISI, FMNB, FRME, GABC, HBNC, LKFN, NBTB, NWBI, PFC, PRK, SASR, SRCE, STBA, SYBT, THFF, TMP, TOWN, WSBC. WORKING TOGETHER. BUILDING SUCCESS. 13 ® LOW LOAN TO DEPOSIT RATIO PROVIDES LOW COST LIQUIDITY TO FUND FUTURE GROWTH Source: S&P Global Market Intelligence, as of 09 ...

Financial Data and Key Metrics Changes - The company reported record quarterly earnings of $33.8 million for Q4 2023, with diluted earnings per share improving to $0.96 from $0.90 in the previous quarter [35] - For the full year 2023, net interest income increased by 34% compared to 2022, driven by the Limestone merger and higher market interest rates [36][51] - The return on average assets adjusted for non-core expenses improved to 1.61% for 2023, up from 1.47% in 2022 [36] - The efficiency ratio improved to 56% for Q4 compared to 58.4% for the linked quarter [53][73] - The book value per share increased to $29.83 at year-end 2023, up from $28.06 at the end of Q3 2023 [42] Business Line Data and Key Metrics Changes - Fee-based income grew by 18% compared to 2022, with significant contributions from leasing and insurance income [36][88] - The leasing portfolio experienced a growth of 20% in 2023, with expectations for mid- to high teens growth in 2024 [19] - Non-performing assets decreased by 8% compared to the linked quarter, reaching their lowest level since the Great Recession [37][73] - Criticized loans to total loans increased to 3.82% at year-end, while classified loans declined to 1.95% [38] Market Data and Key Metrics Changes - Total deposits grew by $115 million or 2% compared to the linked quarter, with retail CDs being the largest contributor [58] - The company’s loan-to-deposit ratio slightly declined to 86.1% at year-end [54] - The commercial real estate loans comprised 36% of total loans, with nearly 40% being owner-occupied [79] Company Strategy and Development Direction - The company aims for loan growth between 6% and 8% in 2024, with a focus on maintaining strong credit quality [61] - The management emphasized a disciplined approach to acquisitions and maintaining a diverse set of businesses to mitigate risks [64][66] - The company plans to continue utilizing short-term higher rate CDs as part of its deposit acquisition strategy [18][58] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the credit portfolio despite an uptick in charge-offs, noting the lowest levels of non-performing assets [4][36] - The company anticipates potential rate cuts in 2024, which could impact net interest income and margin, but expects to maintain a net interest margin above 4% [59][60] - Management highlighted the importance of deposit competition in shaping future deposit rates and net interest income [60][123] Other Important Information - The company repurchased $3 million of its shares during the quarter, continuing a trend of share repurchases over the past few years [86] - The company recognized a loss of $1.7 million from the sale of investment securities, which was part of a strategy to reduce credit exposure [85] Q&A Session Summary Question: Any common theme among the criticized loans? - Management noted a combination of commercial and industrial (C&I) and commercial real estate (CRE) factors, but expressed optimism about the credit portfolio [4] Question: What is the expectation for fee income normalization? - Management indicated that fee income from leasing may be volatile due to customer discretion in buyouts, with Q4 being inflated by about $2 million [16][17] Question: What are the expectations for loan growth in 2024? - Management expects double-digit growth in the leasing portfolio, likely in the mid- to high teens [19] Question: How are deposit costs being managed? - Management stated that deposit costs are evaluated monthly, currently just over 5%, and are keeping terms short [18] Question: What is the outlook for net interest income in 2024? - Management anticipates a potential decline in net interest income if rates decrease, but expects to offset this with lower funding costs [59][121]

PART I – FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The unaudited condensed consolidated financial statements for Peoples Bancorp Inc. as of September 30, 2023, show a significant increase in total assets to $8.9 billion from $7.2 billion at year-end 2022, primarily driven by the Limestone Bancorp acquisition, with net income for the nine months ended September 30, 2023, at $79.5 million, up from $74.4 million in the prior-year period [Consolidated Balance Sheets](index=3&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of September 30, 2023, total assets grew to $8.94 billion, a 24% increase from $7.21 billion at December 31, 2022, primarily driven by a $1.37 billion increase in net loans and leases due to the Limestone acquisition, while total deposits rose to $7.04 billion and stockholders' equity increased to $993.2 million Consolidated Balance Sheet Highlights (Unaudited) | (Dollars in thousands) | September 30, 2023 | December 31, 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | **$8,942,534** | **$7,207,300** | **$1,735,234** | **24.1%** | | Total cash and cash equivalents | $299,109 | $154,020 | $145,089 | 94.2% | | Net loans and leases | $6,021,466 | $4,653,980 | $1,367,486 | 29.4% | | Goodwill | $355,106 | $292,390 | $62,716 | 21.4% | | **Total Liabilities** | **$7,949,315** | **$6,421,970** | **$1,527,345** | **23.8%** | | Total deposits | $7,037,518 | $5,716,940 | $1,320,578 | 23.1% | | **Total Stockholders' Equity** | **$993,219** | **$785,320** | **$207,899** | **26.5%** | [Consolidated Statements of Operations](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the nine months ended September 30, 2023, net income increased to $79.5 million from $74.4 million year-over-year, driven by a 37% rise in net interest income to $251.0 million, despite a $13.9 million provision for credit losses and a 29% increase in non-interest expense due to acquisition costs Key Operating Results (Unaudited, Nine Months Ended September 30) | (Dollars in thousands, except per share data) | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net interest income | $251,005 | $182,829 | 37.3% | | Provision for (recovery of) credit losses | $13,889 | $(5,811) | N/A | | Total non-interest income | $63,279 | $59,802 | 5.8% | | Total non-interest expense | $198,798 | $153,781 | 29.3% | | **Net income** | **$79,538** | **$74,443** | **6.8%** | | **Earnings per common share - diluted** | **$2.47** | **$2.65** | **(6.8%)** | Key Operating Results (Unaudited, Three Months Ended September 30) | (Dollars in thousands, except per share data) | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net interest income | $93,274 | $67,051 | 39.1% | | Provision for credit losses | $4,053 | $1,776 | 128.2% | | **Net income** | **$31,882** | **$25,978** | **22.7%** | | **Earnings per common share - diluted** | **$0.90** | **$0.92** | **(2.2%)** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20THE%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail accounting policies, fair value measurements, investment and loan composition, credit quality, and acquisitions, highlighting the adoption of ASU 2022-02, significant goodwill from the Limestone Merger, increased uninsured deposits, and the termination of the defined benefit pension plan - Effective January 1, 2023, the company adopted ASU 2022-02, which eliminated the accounting guidance for Troubled Debt Restructurings (TDRs) and enhanced disclosure requirements for loan modifications to borrowers experiencing financial difficulty[25](index=25&type=chunk)[26](index=26&type=chunk) - The company completed its merger with Limestone Bancorp, Inc. on April 30, 2023, resulting in preliminary goodwill of **$62.1 million** and core deposit intangibles of **$27.7 million**[127](index=127&type=chunk)[131](index=131&type=chunk) - During the third quarter of 2023, the company terminated its defined benefit pension plan, settling the remaining obligation of **$7.7 million** and recording a settlement charge of **$2.4 million**[144](index=144&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=48&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes strong Q3 2023 performance to the Limestone Merger's full impact, boosting net interest income and margin, while provision for credit losses rose due to loan growth and macroeconomic outlook, and non-interest expenses increased from acquisition costs and a pension settlement charge, with the company maintaining a strong capital position [Executive Summary](index=51&type=section&id=EXECUTIVE%20SUMMARY) Peoples reported Q3 2023 net income of $31.9 million ($0.90 per diluted share), an increase from $21.1 million in Q2 2023, significantly influenced by the Limestone Merger, which contributed to a 10% sequential increase in net interest income to $93.3 million and a net interest margin expansion to 4.70%, with total assets reaching $8.94 billion Q3 2023 Key Performance Metrics | Metric | Q3 2023 | Q2 2023 | Q3 2022 | | :--- | :--- | :--- | :--- | | Net Income | $31.9M | $21.1M | $26.0M | | Diluted EPS | $0.90 | $0.64 | $0.92 | | Net Interest Income | $93.3M | $84.9M | $67.1M | | Net Interest Margin | 4.70% | 4.54% | 4.17% | | Provision for Credit Losses | $4.1M | $8.0M | $1.8M | | Total Assets | $8.94B | $8.79B | $7.01B | - Non-core items, including acquisition expenses and a **$2.4 million** pension settlement charge, negatively impacted Q3 2023 diluted EPS by **$0.16**[201](index=201&type=chunk) - The increase in net interest margin was driven by a full quarter of accretion from the Limestone portfolio, including a **$3.6 million** true-up adjustment, and improved investment yields[202](index=202&type=chunk)[203](index=203&type=chunk) [Results of Operations](index=56&type=section&id=RESULTS%20OF%20OPERATIONS) Net interest income grew 39% year-over-year to $93.3 million in Q3 2023, with net interest margin expanding 53 basis points to 4.70%, driven by higher market rates and the Limestone Merger, while non-interest expense increased 37% to $71.7 million, including $4.4 million in acquisition costs and a $2.4 million pension settlement charge, resulting in an adjusted efficiency ratio of 52.5% - Accretion income from acquisitions added **49 basis points** to net interest margin in Q3 2023, compared to **24 basis points** in Q2 2023 and **16 basis points** in Q3 2022[238](index=238&type=chunk) - Salaries and employee benefit costs were **$36.6 million** in Q3 2023, down from **$38.0 million** in Q2 2023 due to lower acquisition-related expenses, but up from **$28.6 million** in Q3 2022 due to the Limestone Merger and organic growth[257](index=257&type=chunk) Non-US GAAP Pre-Provision Net Revenue (PPNR) | (Dollars in thousands) | Q3 2023 | Q2 2023 | Q3 2022 | | :--- | :--- | :--- | :--- | | Income before income taxes | $40,729 | $27,262 | $33,388 | | Add: provision for credit losses | $4,053 | $7,983 | $1,776 | | Add/Less: Net (gains)/losses | $316 | $1,834 | $(14) | | **Pre-provision net revenue** | **$45,096** | **$37,076** | **$35,178** | [Financial Condition](index=72&type=section&id=FINANCIAL%20CONDITION) As of September 30, 2023, total assets were $8.9 billion, with total loans and leases at $6.1 billion, up 7% annualized, and deposits at $7.0 billion, while nonperforming assets remained stable at 0.48% of total assets, and capital levels remained strong, with a Common Equity Tier 1 ratio of 11.57% Loan Portfolio Composition (September 30, 2023) | Loan Category | Balance ($ in thousands) | % of Total | | :--- | :--- | :--- | | Commercial real estate | $2,563,997 | 42.1% | | Commercial and industrial | $1,128,809 | 18.6% | | Consumer | $782,531 | 13.2% | | Leases | $402,635 | 6.6% | | Construction | $374,016 | 6.1% | | Premium finance | $189,251 | 3.1% | | **Total Loans & Leases** | **$6,084,390** | **100.0%** | Asset Quality Ratios | Ratio | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | :--- | | Nonperforming assets to total assets | 0.48% | 0.48% | 0.63% | | Allowance for credit losses to total loans | 1.03% | 1.02% | 1.13% | | Net charge-offs to average loans (annualized) | 0.15% | 0.09% | 0.18% | - The company's balance sheet is positioned to benefit from rising interest rates, with a **+100 basis point** parallel rate shock estimated to increase net interest income by **0.7%** over 12 months, while a **-100 basis point** shock would decrease it by **1.3%**[328](index=328&type=chunk)[334](index=334&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=86&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section incorporates by reference the information provided under the 'Interest Rate Sensitivity and Liquidity' section within Item 2, Management's Discussion and Analysis, with the key market risk being interest rate risk, managed by the Asset-Liability Committee (ALCO) through various strategies, including interest rate swaps - Information regarding market risk is incorporated by reference from the 'Interest Rate Sensitivity and Liquidity' section of the MD&A[342](index=342&type=chunk) [Controls and Procedures](index=86&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the third quarter - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[343](index=343&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[344](index=344&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=79&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various litigation matters in the ordinary course of business, with management believing the outcomes will not have a material adverse effect on its consolidated financial position, results of operations, or liquidity - Peoples is engaged in various litigation matters from time to time, but management does not expect any material adverse effect on the company's financial condition or results[346](index=346&type=chunk) [Risk Factors](index=79&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company identified new risk factors, including potential inability to obtain needed liquidity exacerbated by bank failures, contagion risk from other financial institutions reducing customer confidence, and increasing sophistication of information security risks from external parties - A new risk factor highlights that an unexpected inability to obtain needed liquidity could adversely affect business, profitability, and viability, referencing the 2023 bank failures as an example of how quickly deposit outflows can accelerate[348](index=348&type=chunk) - The company notes the risk that failures of other large or similar-sized banks could reduce customer confidence, affect funding, and increase regulatory costs for the entire industry, including Peoples[349](index=349&type=chunk) - Increased information security risks from organized crime, hackers, and other external parties pose a threat, where a security breach could impair reputation, disrupt operations, and result in costly remediation[350](index=350&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=80&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%2C%20USE%20OF%20PROCEEDS%2C%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) During Q3 2023, no common shares were repurchased under the publicly announced program, though 9,374 shares were acquired for other purposes, including a Rabbi Trust and to satisfy tax obligations on vested restricted stock awards - No common shares were repurchased under the company's **$30 million** share repurchase program during the three months ended September 30, 2023, with approximately **$22.6 million** remaining available under the program[354](index=354&type=chunk) - A total of **9,374 shares** were acquired by the company during the quarter, primarily consisting of shares withheld to satisfy income taxes on vested restricted stock (**5,847 shares**) and shares purchased for a Rabbi Trust (**3,527 shares**)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk) [Exhibits](index=82&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including merger agreements, articles of incorporation, new change in control agreements, CEO/CFO certifications, and XBRL data files

Financial Data and Key Metrics Changes - The company reported earnings of $31.9 million for Q3 2023, a 51% increase compared to the linked quarter and a 23% increase from the prior year quarter [4] - Net interest income grew by 10% compared to the linked quarter, while fee-based revenue increased by 3% [3] - Return on average stockholder equity improved to 12.6%, and return on average tangible stockholder equity was 23% [3] - Return on average assets increased to 1.44% for the third quarter [3] - Diluted earnings per share were $0.90, negatively impacted by one-time costs totaling $0.15 [4] Business Line Data and Key Metrics Changes - The construction loan portfolio saw a decline in outstanding balances, with $374 million in outstanding balances compared to $689 million in commitments [31] - Multifamily loans accounted for 38% of the funded multifamily portfolio, with six projects in the construction phase [7] - Hospitality loan balances grew to $192 million, comprising 3% of the total loan portfolio, with occupancy trends remaining above market competitors [32] - The dealer floor plan portfolio had $340 million of exposure, with strong liquidity positions among larger clients [9] Market Data and Key Metrics Changes - The company experienced a 7% annualized growth in total loan balances, with commercial real estate loans being the largest contributor [9] - Deposit balances increased by $78 million compared to the linked quarter, driven by retail CDs and seasonal increases in governmental deposits [12] - The average customer deposit relationship was $29,000, with a median of $2,400 [37] Company Strategy and Development Direction - The company is focused on achieving a successful transition to cross $10 billion in assets, making investments in systems, associates, and processes [19] - The efficiency ratio is expected to be between 55% and 57% for the full year, excluding one-time expenses [20] - The company anticipates organic loan growth of 6% to 8% for 2023, with fee-based income growth in the low to mid double digits compared to 2022 [44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the current core consensus estimate for diluted EPS for 2023, which is $3.87 [20] - The company expects some compression in net interest income and margin in Q4 2023 but remains optimistic about overall performance [44] - Management noted that the current economic environment has not significantly impacted vehicle sales, with larger clients having the liquidity to withstand short-term delays [9] Other Important Information - The company recorded a pension settlement charge of $2.4 million, which will not incur future ongoing costs [4] - The investment securities portfolio declined to 19.7% of total assets, with cash flows utilized to fund loan growth [17] - The company was recognized as one of the top workplaces in the financial services industry for 2023 [13] Q&A Session Summary Question: What are the expectations for loan yields and margin? - Management indicated that loan yields were at 8.5% and suggested there might be room for improvement, depending on future rate increases [23] Question: How are deposit costs expected to trend? - The company expects deposit costs to be around 18% to 20% in the current environment, with a focus on managing short-term borrowings [88] Question: What are the expectations for leasing income and credit quality? - Leasing income saw a significant drop due to purchase accounting related to the Vantage transaction, but management expects stability moving forward [97] - Charge-off rates in the leasing business are anticipated to increase but remain manageable [99] Question: How is the company managing its balance sheet? - The company is actively managing its balance sheet in response to loan growth and deposit flows, with ongoing evaluations of the investment securities portfolio [68]

Financial Performance - For the three months ended June 30, 2023, Peoples reported a significant increase in net income, reaching $XX million, compared to $XX million for the same period in 2022, reflecting a year-over-year growth of XX%[189] - Peoples reported net income of $21.1 million for Q2 2023, down from $26.6 million in Q1 2023 and $24.9 million in Q2 2022, with earnings per diluted share of $0.64[195] - Net interest income for Q2 2023 increased by 38% year-over-year, reaching a significant growth driven by market interest rates and the Limestone Merger[224] - The annualized net income adjusted for non-core items for Q2 2023 was $30,570 thousand, compared to $28,718 thousand in Q1 2023 and $25,542 thousand in Q2 2022, reflecting a year-over-year increase of 19.9%[275] - The return on average assets for Q2 2023 decreased to 1.01% from 1.49% in Q1 2023 and 1.40% in Q2 2022, primarily due to an increase in average assets from the Limestone Merger and higher non-interest expenses[276] Acquisitions and Mergers - The recent acquisition of Vantage and the Limestone Merger are expected to enhance Peoples' commercial and consumer lending activities, contributing to future revenue growth[183] - The Limestone Merger, valued at $177.9 million, closed on April 30, 2023, adding $1.1 billion in loans and $1.2 billion in deposits to Peoples' portfolio[195] - The company completed the Limestone Merger on April 30, 2023, which positively impacted average loan, deposit, and borrowed funds balances[220] - Loans acquired in the Limestone Merger totaled $1.1 billion, significantly contributing to the increase in loan balances[290] Interest Income and Expenses - Net interest income increased by $12.0 million, or 16%, to $84.9 million in Q2 2023 compared to the linked quarter, driven by the Limestone Merger and rising market interest rates[196] - The company reported a total interest expense of $26,132 thousand for the six months ended June 30, 2023, compared to $17,976 thousand in the same period last year, reflecting a rise of about 45.4%[221] - The interest rate spread improved to 4.20% for the six months ended June 30, 2023, compared to 3.55% for the same period in 2022[221] Credit Quality and Losses - Future credit losses and the allowance for credit losses are areas of concern, with management closely monitoring economic indicators[183] - The provision for credit losses was $8.0 million in Q2 2023, compared to $1.9 million in the linked quarter and a recovery of $0.8 million in Q2 2022, primarily due to non-purchased credit deteriorated loans from the Limestone Merger[198] - The allowance for credit losses increased to $61,211,000 as of June 30, 2023, representing 1.02% of total loans, driven by the establishment of an allowance for loans acquired in the Limestone Merger[299] Deposits and Liquidity - As of June 30, 2023, total deposits increased by $1.2 billion, or 20%, compared to March 31, 2023, primarily due to deposits from the Limestone Merger[306] - Total interest-bearing deposits reached $5.28 billion as of June 30, 2023, compared to $4.23 billion at March 31, 2023[306] - The company maintained $50.7 million in excess cash reserves at the FRB of Cleveland as of June 30, 2023, an increase from $33.1 million at December 31, 2022[283] Operational Efficiency - The efficiency ratio for Q2 2023 was 62.7%, up from 57.8% in the previous quarter and 58.8% in Q2 2022, primarily due to increased non-interest expenses from the Limestone Merger[205] - Core non-interest expense for Q2 2023 was $60.5 million, up from $55.9 million in Q1 2023, reflecting ongoing costs associated with the Limestone Merger[268] Risk Management - Peoples' exposure to interest rate risk is primarily due to differences in the maturity or repricing of earning assets and interest-bearing liabilities[317] - The overall management of interest rate risk is assigned to the Asset-Liability Committee (ALCO), which has established guidelines for monitoring and managing IRR[318] - Peoples has entered into twelve interest rate swap contracts with an aggregate notional value of $115.0 million as part of its interest rate risk management strategy[325] Market Conditions - Peoples anticipates ongoing challenges due to rising interest rates, which may impact loan demand and interest margins, with the Federal Funds Target Rate being a key focus[183] - Inflationary pressures and economic conditions are projected to affect borrowers' liquidity and repayment capabilities, posing risks to credit quality[183]

Financial Data and Key Metrics Changes - Net income for the quarter totaled $21.1 million with diluted earnings per share at $0.64, impacted by one-time acquisition-related expenses of $10.7 million which reduced diluted EPS by $0.25 [16] - The provision for credit losses increased by $10 million, negatively impacting diluted EPS by $0.23 [18] - Net interest income improved by 16% compared to the linked quarter, totaling $12 million [18] - Fee-based income grew by 8% compared to the linked quarter, totaling $1.6 million [18] - The adjusted efficiency ratio improved to 53.3%, down from 57.2% for the linked quarter [19] Business Line Data and Key Metrics Changes - Fee-based income increased by 17% compared to the prior year quarter, driven by higher electronic banking income and increased trust and investment income [4] - The total deposit balances grew by $1.2 billion, primarily due to deposits acquired in the Limestone merger [5] - Excluding acquired deposits, total deposits declined by $141 million or 3% compared to the linked quarter [5] - Non-performing assets improved to 0.48% of total assets, down from 0.58% at March 31 [20] Market Data and Key Metrics Changes - Demand deposits comprised 42% of total deposits at June 30, down from 46% at March 31 [6] - The average customer deposit relationship was $29,000 at June 30 [6] - The weighted average loan to value of the hospitality portfolio was 62% [26] Company Strategy and Development Direction - The company is focused on fully absorbing the Limestone merger and is not in a hurry to grow through another bank acquisition [1] - The company aims to cross the $10 billion asset mark and is preparing for the regulatory and compliance changes that will follow [9] - The company is optimistic about expanding its business in areas where larger banks have limited presence, particularly in Ohio and surrounding regions [44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future, highlighting the positive impact of the Limestone merger and organic growth [38] - The company expects net interest income to continue to grow due to the Limestone merger and higher market interest rates [39] - Management anticipates a slowdown in net interest margin expansion due to increased funding costs [40] Other Important Information - The Limestone merger was valued at $178 million, with preliminary goodwill of $64 million [33] - The company recorded a total non-interest expense increase of 25% compared to the linked quarter, primarily due to acquisition-related expenses [32] Q&A Session Summary Question: Outlook for expenses and merger costs - Management indicated that the increase in expenses is due to investments in people and technology as they prepare for the remainder of the year [50] Question: Margin compression and loan growth funding - Management clarified that the 6% to 8% loan growth guidance does not include Limestone loans and that they plan to use cash flows from the investment portfolio to fund loan growth [66] Question: Credit quality and watch list trends - Management expressed minimal concerns regarding credit quality, noting improvements during the quarter [120] Question: Tax rate for the back half of the year - The expected tax rate is around 22.5% to 23%, influenced by the Limestone acquisition [122] Question: Runoff of deposits acquired with Limestone - Management stated that it is too early to assess runoff as the conversion is scheduled for the first weekend in August [123]