Peoples Bancorp (US:PEBO) The Motley Foolยท2025-07-22 19:01Core Insights - Peoples Bancorp Inc. reported diluted earnings per share of $0.59 for Q2 2025, with annualized loan growth of 11% and net interest margin expanding by three basis points to 4.15% [24][4]. - The company is facing challenges in its small ticket leasing portfolio, which has seen elevated charge-off levels and a decline in size from $220 million in June 2024 to $160 million in Q2 2025 [43][44]. - Management expects steady net interest margin performance, mid-single-digit loan growth, and a focus on fee-based income expansion while maintaining a neutral interest rate risk profile [12][46]. Financial Performance - Net interest income increased by over $2 million, or 3%, in Q2 2025, while fee-based income declined by 1% primarily due to the absence of performance-based insurance commissions [5][33]. - Noninterest expense decreased by 1% to $70.4 million in Q2 2025, driven by lower salaries and employee benefit costs [5][36]. - The efficiency ratio improved to 59.3% from 60.7% in Q2 2025, reflecting higher net interest income and reduced noninterest expenses [5][37]. Credit Quality - Provision for credit losses totaled $16.6 million in Q2 2025, up $6.5 million from the linked quarter, with net charge-offs of $7 million [6][26]. - The annualized net charge-off rate improved to 43 basis points from 52 basis points in the linked quarter, driven by lower small ticket leasing charge-offs [6][27]. - Allowance for credit losses increased to 1.13% of total loans, aligning closely with peers [7][25]. Loan and Deposit Trends - Annualized loan growth was 11%, with balanced growth across all loan categories, including commercial and industrial loans, residential real estate loans, and construction loans [4][30]. - Deposit balances declined by 1% ($98 million) in Q2 2025, impacted by seasonality and decreases in governmental and money market accounts [8][41]. - The loan to deposit ratio increased to 86% from 83%, reflecting robust loan growth amid seasonal deposit declines [14][38]. Guidance and Outlook - Management expects a full-year 2025 net interest margin of 4.00%-4.20% and loan growth of 4%-6% compared to 2024 [11][46]. - Fee-based income is forecasted to grow in the mid-single-digit percentages versus 2024, led by lease income and other noninterest categories [15][46]. - The company anticipates that small ticket leasing net charge-offs will plateau over the next two quarters, with a focus on managing delinquency trends [47][45].