Peoples Bancorp (US:PEBO)2021-03-01 22:01Loan Portfolio Composition - Peoples Bank's commercial loans represented approximately 59.0% of total loans as of December 31, 2020, compared to 55.2% as of December 31, 2019[26]. - The acquisition of Triumph Premium Finance added $84.7 million in loans at acquisition date, which grew to $114.8 million by December 31, 2020[21]. - Peoples Bank's portfolio of premium finance loans comprised 3.4% of total loans at December 31, 2020[38]. - Residential real estate loans made up 16.9% of total loans at December 31, 2020, down from 23.0% at December 31, 2019[39]. - Commercial and industrial loans comprised 28.6% of Peoples Bank's total loan portfolio at December 31, 2020, up from 23.1% at December 31, 2019[32]. - Peoples Bank's commercial real estate loans accounted for 27.3% of total loans at December 31, 2020, down from 29.0% at December 31, 2019[33]. - As of December 31, 2020, home equity lines of credit comprised 3.6% of Peoples Bank's total loans, down from 4.6% in 2019[43]. - Consumer indirect loans represented 14.8% of Peoples Bank's total loan portfolio at December 31, 2020, compared to 14.5% in 2019[46]. - Consumer direct loans accounted for 2.3% of Peoples Bank's total loan portfolio at December 31, 2020, down from 2.7% in 2019[48]. - At December 31, 2020, the unfunded commitment related to Overdraft Privilege was $50.1 million[49]. Financial Performance and Capital Management - The company authorized a share repurchase program for up to $30 million of its outstanding common shares, replacing a previous program of $40 million[20]. - Investment securities comprised 18.0% of Peoples Bank's total assets at December 31, 2020, down from 23.2% in 2019[50]. - Peoples Bank's primary sources of funds include interest-bearing and non-interest-bearing deposits, which are crucial for lending and investing activities[54]. - Peoples Bank utilizes short-term and long-term borrowings, including advances from the Federal Home Loan Bank, to manage liquidity needs[60]. - The Federal Reserve lowered the target range for the federal funds rate to 0% to 0.25% in response to COVID-19, which could negatively affect Peoples' net interest income and profitability[172]. - The Basel III Capital Rules require a minimum common equity tier 1 capital ratio of 4.5%, a tier 1 risk-based capital ratio of 6.0%, and a total risk-based capital ratio of 8.0%[107]. - Peoples Bank has fully phased in the Basel III Capital Rules as of January 1, 2019[106]. - To be considered "well capitalized," a bank must maintain a common equity tier 1 capital ratio of at least 6.5% and a tier 1 leverage ratio of at least 5.0%[118]. - The Federal Reserve Board restricts Peoples Bank from paying dividends that would reduce total capital below required minimum levels[121]. - Peoples Bank's ability to pay dividends may be further restricted if it needs to commit resources to support its banking subsidiaries[122]. Regulatory Environment - The Federal Reserve Board regulates Peoples as a financial holding company, requiring compliance with various capital and operational standards[74]. - The company is subject to extensive regulation, which may impact its ability to repurchase shares or pay dividends[73]. - Peoples Bank is subject to numerous federal and state laws aimed at protecting consumer privacy and financial information[127]. - The Anti-Money Laundering Act of 2020 aims to modernize U.S. bank secrecy and anti-money laundering laws, impacting compliance requirements for Peoples Bank[131]. - The Federal Reserve Board's monetary policies significantly affect the operating results of financial institutions, including Peoples Bank[134]. - Peoples Bank has established policies to comply with the USA Patriot Act, ensuring proper identification procedures for new accounts[132]. - The Federal Reserve Board issued a final rule effective January 1, 2020, allowing community banks to calculate a simple leverage ratio if they meet certain requirements[114]. - The regulatory capital treatment of credit loss allowances under the CECL model allows for a phased-in approach over three years to mitigate adverse effects on regulatory capital[115]. - The Federal Reserve Board and other regulatory agencies have adopted safety and soundness guidelines to manage risks and exposures in banking operations[119]. Impact of COVID-19 - The COVID-19 pandemic has negatively impacted the customers of Peoples, including businesses and individuals, due to various government and public actions[23]. - Peoples Bank continues to monitor legislative and regulatory developments related to COVID-19 response programs[98]. - During the COVID-19 pandemic, Peoples adapted by allowing remote work and providing paid time off for employees affected by the virus[69]. - The economic impact of COVID-19 has caused significant dislocation in the U.S., leading to increased unemployment and a slowdown in economic activity, which could adversely affect Peoples' business and financial condition[157]. - As of December 31, 2020, Peoples held and serviced PPP loans, with expectations that the majority of borrowers will seek loan forgiveness[158]. - The CARES Act provided $284.5 billion for new and expanded Paycheck Protection Program (PPP) loans to support eligible businesses during the COVID-19 pandemic[99]. - The PPP loans are guaranteed by the SBA and can be forgiven if certain conditions are met, with no collateral or personal guarantees required[99]. Employee and Community Engagement - As of December 31, 2020, Peoples had 894 full-time equivalent employees, a decrease from 900 in the previous year[65]. - Peoples has implemented a $15 minimum wage throughout the organization to enhance employee satisfaction and retention[65]. - The company emphasizes a culture of learning and provides various employee benefits, including wellness programs and a 401(k) program[66]. - Peoples is committed to community engagement through employee volunteering and donations[67]. Cybersecurity and Operational Risks - Peoples Bank employs a layered cybersecurity approach to protect sensitive data and manage risks associated with cyber threats[146]. - The company has security controls in place to prevent unauthorized access to its systems, but risks remain due to evolving cybersecurity threats[198]. - Peoples has not experienced any material losses from cyber-attacks to date, but the risk remains heightened due to the nature of these threats[201]. - Current and future restrictions on workforce access to facilities could adversely affect Peoples' ability to meet customer service expectations[188]. - Peoples has modified business practices in response to COVID-19, with a portion of employees working remotely to limit operational interruptions[189]. - Peoples maintains specific "cyber" insurance coverage, but the adequacy of this coverage may vary depending on breach scenarios[204]. - Peoples relies significantly on a single vendor for operational services, which poses risks related to cybersecurity and operational disruptions[208]. - Financial difficulties of third-party providers could materially adversely affect Peoples' operations if services are delayed or terminated[210]. Interest Rate and Economic Risks - A transition away from LIBOR as a reference rate could negatively impact Peoples' income and expenses, as LIBOR is widely used in financial contracts[174]. - The transition from LIBOR could create considerable costs and additional risk for Peoples, as many loans and financial instruments are dependent on LIBOR[178]. - Peoples' securities portfolio has LIBOR exposure in the agency collateralized mortgage obligation sector, which will be monitored during the transition[179]. - Peoples has implemented a LIBOR Change Committee to ensure an orderly transition away from LIBOR by the end of 2021[179]. - Changes in economic and political conditions, including inflation and recession, could adversely affect Peoples' earnings, capital, and loan demand[163].