Peoples Bancorp (US:PEBO)2024-01-23 17:20Financial Data and Key Metrics Changes - The company reported record quarterly earnings of $33.8 million for Q4 2023, with diluted earnings per share improving to $0.96 from $0.90 in the previous quarter [35] - For the full year 2023, net interest income increased by 34% compared to 2022, driven by the Limestone merger and higher market interest rates [36][51] - The return on average assets adjusted for non-core expenses improved to 1.61% for 2023, up from 1.47% in 2022 [36] - The efficiency ratio improved to 56% for Q4 compared to 58.4% for the linked quarter [53][73] - The book value per share increased to $29.83 at year-end 2023, up from $28.06 at the end of Q3 2023 [42] Business Line Data and Key Metrics Changes - Fee-based income grew by 18% compared to 2022, with significant contributions from leasing and insurance income [36][88] - The leasing portfolio experienced a growth of 20% in 2023, with expectations for mid- to high teens growth in 2024 [19] - Non-performing assets decreased by 8% compared to the linked quarter, reaching their lowest level since the Great Recession [37][73] - Criticized loans to total loans increased to 3.82% at year-end, while classified loans declined to 1.95% [38] Market Data and Key Metrics Changes - Total deposits grew by $115 million or 2% compared to the linked quarter, with retail CDs being the largest contributor [58] - The company’s loan-to-deposit ratio slightly declined to 86.1% at year-end [54] - The commercial real estate loans comprised 36% of total loans, with nearly 40% being owner-occupied [79] Company Strategy and Development Direction - The company aims for loan growth between 6% and 8% in 2024, with a focus on maintaining strong credit quality [61] - The management emphasized a disciplined approach to acquisitions and maintaining a diverse set of businesses to mitigate risks [64][66] - The company plans to continue utilizing short-term higher rate CDs as part of its deposit acquisition strategy [18][58] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the credit portfolio despite an uptick in charge-offs, noting the lowest levels of non-performing assets [4][36] - The company anticipates potential rate cuts in 2024, which could impact net interest income and margin, but expects to maintain a net interest margin above 4% [59][60] - Management highlighted the importance of deposit competition in shaping future deposit rates and net interest income [60][123] Other Important Information - The company repurchased $3 million of its shares during the quarter, continuing a trend of share repurchases over the past few years [86] - The company recognized a loss of $1.7 million from the sale of investment securities, which was part of a strategy to reduce credit exposure [85] Q&A Session Summary Question: Any common theme among the criticized loans? - Management noted a combination of commercial and industrial (C&I) and commercial real estate (CRE) factors, but expressed optimism about the credit portfolio [4] Question: What is the expectation for fee income normalization? - Management indicated that fee income from leasing may be volatile due to customer discretion in buyouts, with Q4 being inflated by about $2 million [16][17] Question: What are the expectations for loan growth in 2024? - Management expects double-digit growth in the leasing portfolio, likely in the mid- to high teens [19] Question: How are deposit costs being managed? - Management stated that deposit costs are evaluated monthly, currently just over 5%, and are keeping terms short [18] Question: What is the outlook for net interest income in 2024? - Management anticipates a potential decline in net interest income if rates decrease, but expects to offset this with lower funding costs [59][121]