Peoples Bancorp (US:PEBO)2023-07-25 18:56Financial 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]