Peoples Bancorp (US:PEBO)2023-08-03 19:44Financial 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]