Peoples Bancorp (PEBO) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements and accompanying notes for Peoples Bancorp Inc Consolidated Balance Sheets This section details the company's assets, liabilities, and equity at the end of the reporting period Consolidated Balance Sheet Summary (Unaudited) | (Dollars in thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $7,311,520 | $7,207,304 | | Total Investment Securities | $1,796,332 | $1,743,220 | | Net Loans and Leases | $4,706,415 | $4,653,988 | | Goodwill | $292,597 | $292,397 | | Total Liabilities | $6,491,977 | $6,421,976 | | Total Deposits | $5,788,527 | $5,716,941 | | Short-term Borrowings | $490,670 | $500,138 | | Total Stockholders' Equity | $819,543 | $785,328 | Consolidated Statements of Operations This section outlines the company's revenues, expenses, and resulting net income over the reporting period Consolidated Statements of Operations Summary (Unaudited) | (Dollars in thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Interest Income | $72,878 | $54,310 | | Provision for (recovery of) credit losses | $1,853 | $(6,807) | | Total Non-interest Income | $19,060 | $20,050 | | Total Non-interest Expense | $56,479 | $51,629 | | Net Income | $26,560 | $23,577 | | Earnings per common share - diluted | $0.94 | $0.84 | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of accounting policies and specific financial data from the statements - Effective January 1, 2023, the company adopted ASU 2022-02, eliminating Troubled Debt Restructuring (TDR) accounting guidance, with no material impact on financial statements[23][24] - The company utilizes an interest rate protection program for commercial loans involving offsetting interest rate swaps with a notional amount of $381.2 million as of March 31, 2023[144][145] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2023 financial performance, highlighting key drivers like net interest income and asset growth Executive Summary This section summarizes key financial results and balance sheet changes for the first quarter of 2023 Q1 2023 Key Financial Highlights | Metric | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Net Income | $26.6M | - | $23.6M | | Diluted EPS | $0.94 | $0.95 | $0.84 | | Net Interest Income | $72.9M | $70.6M | $54.3M | | Net Interest Margin | 4.53% | 4.44% | 3.41% | | Provision for Credit Losses | $1.9M | $2.3M | $(6.8)M (Recovery) | - Total assets grew to $7.31 billion, a $104.2 million increase from year-end 2022, driven by growth in held-to-maturity securities and net loans[196] - Total stockholders' equity increased by $34.2 million to $819.5 million, reflecting net income and a decrease in accumulated other comprehensive loss[199] Results of Operations This section analyzes the components of the company's operating results, including interest and non-interest income/expense - Net interest income increased by 34% year-over-year, with net interest margin expanding by 112 bps due to rising interest rates and a shift into higher-yielding leases[209][210] - A provision for credit losses of $1.9 million was recorded in Q1 2023, contrasting with a $6.8 million recovery in Q1 2022, due to deteriorating macroeconomic conditions[214][215] - Total non-interest income, excluding net gains/losses, increased by $1.2 million year-over-year, primarily driven by a 15% YoY growth in insurance income[192][223] - Total non-interest expense rose 9% year-over-year to $56.5 million, mainly due to higher costs related to organic growth and acquisitions[193] Financial Condition This section reviews the company's balance sheet, including loans, deposits, capital, and interest rate sensitivity - Total loans increased by $52.6 million (4% annualized) from year-end 2022, reaching $4.76 billion[269] - The allowance for credit losses stood at $53.3 million, or 1.12% of total loans, at March 31, 2023[278] - Total deposits increased by $71.6 million to $5.79 billion, driven by a $147.6 million increase in brokered CDs, while core deposits decreased[286] - The company's balance sheet is positioned to benefit from rising interest rates, with a +100 bps rate shock estimated to increase net interest income by 1.4% ($4.2 million)[299][306] Regulatory Capital Ratios | Capital Ratios | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Common Equity Tier 1 | 12.22% | 11.92% | | Tier 1 | 12.49% | 12.19% | | Total (Tier 1 and Tier 2) | 13.35% | 13.06% | | Tier 1 leverage ratio | 9.02% | 8.92% | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with the balance sheet positioned as asset-sensitive - The company's primary market risk is interest rate risk (IRR), managed by the Asset-Liability Committee (ALCO)[297][298] Estimated Impact of Interest Rate Shocks (as of March 31, 2023) | Change in Interest Rate (Basis Points) | Estimated Change in Net Interest Income (12-months) | Estimated Change in Economic Value of Equity | | :--- | :--- | :--- | | +300 | +3.7% | -7.5% | | +200 | +2.6% | -4.9% | | +100 | +1.4% | -2.4% | | -100 | -2.9% | +0.4% | Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[316] - No material changes occurred during the quarter that affected the company's internal control over financial reporting[317] PART II – OTHER INFORMATION Legal Proceedings The company faces no material litigation outside the ordinary course of business - The company is engaged in various litigation in the ordinary course of business, but management does not expect a material adverse effect on its financial condition[319] Risk Factors A new risk factor was added concerning the potential industry-wide impact of recent failures at other banks - A new risk factor was added in Q1 2023 regarding the potential negative impact from problems at other financial institutions, citing recent bank failures[320][321] - Potential impacts from peer bank failures include reduced customer confidence, adverse effects on funding and liquidity, and increased regulatory costs[321] Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the public program, though some were withheld for tax purposes on vested awards - No common shares were repurchased under the company's publicly announced $30 million share repurchase program during the first quarter of 2023[322] - A total of 29,006 shares were purchased or withheld during Q1 2023, primarily to satisfy income tax obligations on vested restricted stock awards[322][323][324] Other Information There is no other information to report for this item - None[327] Exhibits This section lists all exhibits filed with the report, including corporate documents and required certifications - Lists various corporate documents filed as exhibits, including merger agreements with Premier Financial Bancorp, Inc and Limestone Bancorp, Inc[329] - Includes required CEO and CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350[331]