EX-99 2 ex99072004release.txt 7-20-2004 EARNINGS RELEASE EXHIBIT 99 PEOPLES BANCORP INC. - P.O. BOX 738 - MARIETTA, OHIO - 45750 www.peoplesbancorp.com NEWS RELEASE FOR IMMEDIATE RELEASE --------------------- Contact:John W. Conlon July 20, 2004 Chief Financial Officer (740) 373-3155 PEOPLES BANCORP INC. REPORTS SECOND QUARTER EARNINGS --------------------------------------------------------------------- MARIETTA, Ohio - Peoples Bancorp Inc. (NASDAQ: PEBO) announced net income of $5,053,000 for the second quarter of 2004 compared to $5,439,000 a year ago. Earnings per diluted share were $0.47 for the three months ended June 30, 2004, compared to $0.51 earned in last year's second quarter. On a year-to-date basis through June 30, 2004, net income totaled $10,419,000 compared to $10,453,000 through six months of 2003, while earnings per diluted share were $0.97 versus $1.00 for the same periods, respectively. Peoples' lower second quarter net earnings were attributable to reduced levels of net interest income and additional operating expenses as a result of acquisitions, which offset increases in non-interest revenues. Earnings per share were also negatively impacted by additional shares outstanding resulting from Peoples issuing over 800,000 common shares in connection with acquisitions in the last year. Due to pending acquisitions and related securities regulations prohibiting management from repurchasing shares, the majority of the 147,435 treasury share purchases occurred late in the second quarter and had little impact on weighted average shares. "As expected, net interest margin pressure continued in the second quarter," said Robert E. Evans, Chairman and CEO. "We made the decision to shrink our earning assets a bit in the second quarter to await better investing opportunities after the rate increase in late June. While our second quarter earnings were at the bottom end of our projections we are encouraged by performance in several key areas, including non-interest revenue growth, loan growth and asset quality." Evans added, "The improving economic and interest rate conditions, some expansion of our earning asset base, as well as the projected impact of recent acquisitions, are expected to serve as the foundation for earnings growth in the third quarter." During the second quarter, Peoples completed the acquisition of two full-service insurance agencies: the Putnam Agency, Inc. ("Putnam") (Ashland, Kentucky and Huntington, West Virginia offices), and Barengo Insurance Agency, Inc. ("Barengo") (Marietta, Ohio). In the acquisitions, Peoples used a combination of cash and Peoples' common shares as consideration. Peoples operates the former agencies as divisions of Peoples Insurance Agency, using the "Putnam Agency" and "Barengo Insurance Agency" names. Due in large part to the insurance acquisitions, non-interest income was up 37% in the second quarter of 2004 to $6,245,000, from $4,547,000 a year ago, and totaled $11,070,000 for the six months ended June 30, 2004, a 31% increase over 2003's six-month total of $8,482,000. Insurance and investment commissions totaled $1,428,000 in the second quarter of 2004 and $1,727,000 through six months of 2004, compared to $320,000 and $762,000 for the same periods a year ago, respectively, with the Putnam and Barengo divisions producing just over $1 million in combined revenue during the second quarter. Property and casualty insurance commissions, the primary focus of the acquired agencies, comprised the majority of Peoples' insurance and investment commissions and accounted for $1,004,000 of the overall increase in revenue. "The addition of Putnam and Barengo is an important step toward meeting our goal of revenue diversification and continued expansion of our business," commented Mark Bradley, Peoples' President and Chief Operating Officer. "Revenues from the acquired agencies were a significant driver of the second quarter non-interest income increase, while deposit account service charges were also a contributing factor. We anticipate insurance revenues to be even stronger in the third quarter since it will include a full-quarter's impact of the acquisitions." Deposit account service charges totaled $2,459,000 in the second quarter of 2004, up 20% compared to the same period in 2003. This increase was primarily the result of a combination of higher volumes of overdraft and non-sufficient funds fees and an overall increase in the number of checking accounts, as well as an increase in the per item amount of certain cost recovery fees. In the second quarter of 2004, business owned life insurance ("BOLI") produced tax-advantaged income of $506,000 versus $353,000 a year ago, a result of Peoples' $20 million BOLI purchase in early 2004. E-banking revenues, primarily ATM and debit card fees, grew 18% from a year ago, totaling $623,000 for the second quarter of 2004. Peoples' mortgage banking activities produced revenues of $283,000 for the three months ended June 30, 2004, versus $337,000 for 2003's second quarter, reflecting lower levels of real estate loan refinance activity. Non-interest expense was $11,531,000 in the second quarter of 2004 versus $9,458,000 for the same period in 2003. Approximately $1.2 million (or 60%) of this increase was the result of additional operating expense due to the insurance acquisitions and full-quarter impact of the May 2003 acquisition of Kentucky Bancshares. Salaries and benefits, Peoples' largest expense, totaled $5,819,000 for the quarter ended June 30, 2004, an increase of 21% from a year ago, with $580,000 (or 58%) of the increase attributable to the salaries and benefits of the approximately 80 associates added in conjunction with the acquisitions. Occupancy and equipment costs increased 16% in the second quarter of 2004 from a year ago, as acquisitions and investments in technology produced additional depreciation expense in 2004. Intangible amortization nearly doubled from a year ago as a result of recent acquisitions. Management projects intangible amortization to be about $100,000 higher next quarter due to a full-quarter's impact of the customer relationship intangibles acquired in the Putnam and Barengo acquisitions, with reductions in subsequent quarters thereafter due to the method of amortization. Professional fees were 21% lower in the second quarter of 2004 compared to a year ago, primarily attributable to expiration of the consulting agreement relating to the Overdraft Privilege program. The non-interest leverage ratio serves as a measurement of efficiency and performance and is a key performance indicator for Peoples. The ratio, defined as non-interest income as a percentage of operating expenses, excludes gains and losses on securities transactions and asset disposals, as well as intangible asset amortization. For the six months ended June 30, 2004, the non-interest leverage ratio was 52.0% compared to 47.0% a year ago. This improvement was the result of non-interest revenues growing at a greater rate than operating expense. "We are pleased with the improvement in the non-interest leverage ratio, which is now above our target of 50%," commented Bradley. "Cost control remains a primary focus, as we explore opportunities to enhance Peoples' operating efficiency and grow revenues. As part of this focus, we are currently reviewing our compensation structure for our fee-based revenues and anticipate a change to a more commission-based compensation arrangement with portions of our sales group. We are also looking at staffing levels in our retail offices to ensure we have proper sales and service personnel in position." Net interest income totaled $12,697,000 for the second quarter of 2004, compared to $13,548,000 last quarter and $13,577,000 in 2003's second quarter. Peoples' reduced net interest income is largely the result of lower average earning assets, coupled with lower asset yields due to the sustained low interest rate environment. Peoples also shifted $20 million of short-term borrowings to long-term borrowings, at a higher cost, during the quarter in anticipation of interest rate increases in the second half of 2004. These factors also compressed net interest margin, which dropped to 3.39% versus 3.56% for the prior quarter and 3.48% for the second quarter of 2003. For the six months ended June 30, 2004, net interest income totaled $26,245,000 and net interest margin was 3.48%, versus $26,635,000 and 3.58% for the same period in 2003. "As with most financial institutions, our ability to maintain net interest income and margin is challenged by rates remaining at low levels," said Jack Conlon, Peoples' Chief Financial Officer. "In addition, we used some of the principal runoff from the investment portfolio during the quarter to reduce debt and manage corporate liquidity, as we sought out higher yielding investments. While the recent action by the Federal Reserve to increase interest rates should help to ease some of the margin pressures, we continue to shift to longer-term funding to lock in rates, which may offset any short-term improvement in asset yields. We believe additional rate increases in the second half of 2004 should provide opportunities to enhance Peoples' net interest income and margin based on the current asset-liability position." During the second quarter, loans grew $24.8 million, or 11% annualized, to $935.6 million at June 30, 2004, due primarily to commercial and real estate loan growth, which offset a decline in consumer loan balances. Peoples also had $807,000 of fixed-rate real estate loans originated and held for sale into the secondary market. Peoples is also servicing $95 million of fixed-rate real estate loans previously sold into the secondary markets due to the associated interest rate risk. "Loan growth remains an integral part of our strategic plans and operating goals," stated Bradley. "The majority of our second quarter loan growth occurred late in the quarter, and with economic conditions showing signs of improvement, we anticipate additional lending opportunities in the second half of 2004. We are committed to meeting the loan demand of our customers and generating quality loans without compromising asset quality." Nonperforming loans comprised 0.62% of total loans at June 30, 2004, compared to 0.73% at December 31, 2003, while nonperforming assets comprised 0.35% and 0.41% of total assets for the same periods, respectively. These improvements were attributable to a 13% decrease in nonperforming loans. In the second quarter of 2004, Peoples' provision for loan losses was $616,000, down from $794,000 in the prior quarter and $935,000 a year ago. At June 30, 2004, the allowance for loan losses was $14.7 million, or 251.6% of nonperforming loans, compared to $14.6 million, or 216.1% of nonperforming loans, at year-end 2003. "Our ability to maintain solid asset quality during the recent economic slowdown reflects our long-standing commitment to sound underwriting standards and diligent loan review process," stated Bradley. "In addition, a lower level of loan delinquencies and nonperforming loans during the second quarter allowed us to reduce Peoples' provision expense. We believe Peoples' asset quality remains favorable compared to most peers and the allowance is adequate to absorb probable losses based on our latest analysis." In the second quarter of 2004, net loan chargeoffs were $697,000, down from $720,000 a year ago but up compared to $595,000 in the first quarter of 2004. Commercial loans comprised the largest portion of net chargeoffs, totaling $475,000 and $210,000 for the three months ended June 30, 2004 and 2003, respectively. Net chargeoffs relating to the Overdraft Privilege Program were $211,000 in the second quarter of 2004 versus $150,000 in 2003's second quarter. Real estate net chargeoffs totaled $47,000 for the second quarter of 2004, down from $129,000 for the same period in 2003. In the second quarter of 2004, Peoples' consumer loan recoveries exceeded chargeoffs, resulting in net recoveries of $32,000 compared to net chargeoffs of $189,000 in 2003's second quarter. "Our second quarter results reflect the challenge of growing earnings with interest rates remaining at low levels," summarized Bradley. "As we strive to improve short-term performance, we maintained our long-term focus in the second quarter by delaying the purchase of some investments until yields improve and worked to integrate our acquisitions. In the third quarter, we expect stronger performance from our nontraditional lines of business, as well as continued loan growth and solid asset quality, which should also benefit future earnings." Peoples Bancorp Inc., a diversified financial products and services company with $1.8 billion in assets, makes available a complete line of banking, investment, insurance, and trust solutions through 51 locations and 33 ATMs in Ohio, West Virginia and Kentucky. Peoples' financial service units include Peoples Bank, Peoples Financial Advisors (a division of Peoples Bank) and Peoples Insurance Agency, Inc. Peoples' common shares are traded on the NASDAQ national market under the symbol "PEBO", and Peoples is a member of the Russell 3000 index of US publicly traded companies. Learn more about Peoples at www.peoplesbancorp.com. CONFERENCE CALL TO DISCUSS EARNINGS: Peoples will conduct a facilitated conference call to discuss second quarter results of operations today at 11:00 a.m. eastern time, with members of Peoples' executive management participating. Analysts, media and individual investors are invited to participate in the conference call by calling (888) 424-5801. A simultaneous Webcast of the conference call audio will be available online via the home page and/or Investor Relations section of www.peoplesbancorp.com. Participants are encouraged to call or sign in at least 15 minutes prior to the scheduled conference call time to ensure participation or download and install the necessary software. A replay of the call will be available on Peoples' website for 30 days. SAFE HARBOR STATEMENT: This press release may contain certain forward-looking statements with respect to Peoples' financial condition, results of operations, plans, objectives, future performance and business. Except for the historical and present factual information contained in this press release, the matters discussed in this press release, and other statements identified by words such as "expects," "believes," "plans," "will," "would," "should," "could" and similar expressions are forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions increase significantly; (2) changes in the interest rate environment impact interest margins; (3) prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions are less favorable than expected; (5) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (6) legislative or regulatory changes or actions adversely affect Peoples' business; (7) changes and trends in the securities markets; (8) a delayed or incomplete resolution of regulatory issues; (9) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity; (10) the outcome of regulatory and legal proceedings and (11) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission ("SEC"). Peoples undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release. Copies of documents filed with the SEC are available free of charge at the Commission's website at http://www.sec.gov and/or from Peoples' website. PEOPLES BANCORP INC. (NASDAQ: PEBO) Financial Highlights (Unaudited)
---------------------------------- ---------------------------------- Three Months Ended Six Months Ended June 30, June 30, (in $000's, except per share data) 2004 2003 2004 2003 ---------------------------------- ---------------------------------- PER SHARE DATA (a) Net income per share: Basic $ 0.48 $ 0.52 $ 0.98 $ 1.02 Diluted $ 0.47 $ 0.51 $ 0.97 $ 1.00 Cash dividends declared per share $ 0.18 $ 0.15 $ 0.36 $ 0.30 Book value per share $ 16.01 $ 16.72 $ 16.01 $ 16.72 Tangible book value per share (b) $ 9.86 $ 12.14 $ 9.86 $ 12.14 Closing stock price at end of period $ 26.95 $ 24.06 $ 26.95 $ 24.06 Dividend payout as a percentage of net income 38.33% 30.04% 36.83% 29.47% Actual shares outstanding (net of treasury shares) 10,602,767 10,665,884 10,602,767 10,665,884 Weighted average shares outstanding: Basic 10,603,599 10,400,673 10,581,923 10,229,595 Diluted 10,766,378 10,598,820 10,787,911 10,428,220 PERFORMANCE RATIOS (c) Return on average equity 11.83% 12.92% 12.17% 12.95% Return on average assets 1.17% 1.25% 1.21% 1.26% Non-interest leverage ratio (d) 56.75% 49.49% 51.98% 46.96% Efficiency ratio (e) 56.87% 49.55% 55.09% 50.37% Net interest margin (fully tax equivalent) 3.39% 3.48% 3.48% 3.58% Net loan chargeoffs as a percentage of average loans 0.30% 0.32% 0.28% 0.29% NET CHARGEOFFS Gross chargeoffs $ 980 $ 955 $ 2,210 $ 1,740 Recoveries $ 283 $ 235 $ 918 $ 466 --------------- --------------- --------------- --------------- Net chargeoffs $ 697 $ 720 $ 1,292 $ 1,274 ------------------------------------------------------------------------ (a) Amounts adjusted for a 5% stock dividend issued August 29, 2003. (b) Excludes balance sheet impact of intangible assets acquired through use of purchase accounting for acquisitions. (c) Ratios presented on an annualized basis. (d) Non-interest income (less securities and asset disposal gains/losses) as a percentage of non-interest expense (less intangible amortization). (e) Non-interest expense (less intangible amortization) as a percentage of fully tax equivalent net interest income plus non-interest income.
PEOPLES BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME
----------------------------------- ----------------------------------- Three Months Ended Six Months Ended June 30, June 30, (in $000's) 2004 2003 2004 2003 ----------------------------------- ----------------------------------- Interest income $ 21,145 $ 23,492 $ 42,731 $ 46,269 Interest expense 8,448 9,915 16,486 19,634 ---------------- ---------------- ---------------- ---------------- Net interest income 12,697 13,577 26,245 26,635 Provision for loan losses 616 935 1,410 1,766 ---------------- ---------------- ---------------- ---------------- Net interest income after provision for loan losses 12,081 12,642 24,835 24,869 Net gain (loss) on securities transactions 5 (29) 37 (27) Net gain (loss) on asset disposals 17 (236) 47 (238) Non-interest income: Service charges on deposits 2,459 2,052 4,712 3,777 Insurance and investment commissions 1,428 320 1,727 762 Fiduciary revenues 812 858 1,586 1,444 Electronic banking revenues 623 529 1,146 983 Business owned life insurance 506 353 922 718 Mortgage banking income 283 337 482 567 Other non-interest income 134 98 495 231 ---------------- ---------------- ---------------- ---------------- Total non-interest income 6,245 4,547 11,070 8,482 Non-interest expense: Salaries and benefits 5,819 4,827 11,208 9,551 Occupancy and equipment 1,289 1,108 2,510 2,206 Amortization of intangible assets 526 271 927 472 Data processing and software 441 320 913 650 Professional fees 411 520 867 984 Marketing 402 379 510 655 Bankcard costs 378 276 702 581 Franchise taxes 371 272 712 529 Other non-interest expense 1,894 1,485 3,472 2,949 ---------------- ---------------- ---------------- ---------------- Total non-interest expense 11,531 9,458 21,821 18,577 ---------------- ---------------- ---------------- ---------------- Income before income taxes 6,817 7,466 14,168 14,509 Income tax expense 1,764 2,027 3,749 4,056 ---------------- ---------------- ---------------- ---------------- Net income $ 5,053 $ 5,439 $ 10,419 $ 10,453 ================ ================ ================ ================ Fully tax equivalent net interest income $ 13,106 $ 13,993 $ 27,069 $ 27,461
PEOPLES BANCORP INC. CONSOLIDATED AVERAGE BALANCES
----------------------------------- ----------------------------------- Three Months Ended Six Months Ended June 30, June 30, (in $000's) 2004 2003 2004 2003 ----------------------------------- ----------------------------------- Average gross loans $ 920,818 $ 895,538 $ 916,530 $ 873,375 Average investment securities 639,727 703,610 645,188 656,057 Average earning assets 1,550,368 1,606,339 1,562,747 1,531,192 Average intangible assets 57,682 38,654 53,167 34,680 Average total assets 1,731,166 1,742,151 1,731,349 1,659,372 Average non-interest-bearing deposits 142,901 125,922 139,205 117,167 Average interest-bearing deposits: Savings 178,938 175,957 174,941 163,134 Interest-bearing demand deposits 257,677 276,920 260,270 273,894 Time deposits 450,615 454,069 455,786 438,202 ---------------- ---------------- ---------------- ---------------- Total average interest bearing deposits 887,230 906,946 890,997 875,230 Average stockholders' equity $ 171,762 $ 168,409 $ 172,204 $ 161,394 ----------------------------------- -----------------------------------
PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION
----------------- --------------- ---------------- -------------- (in $000's, end of period) June 30, March 31, December 31, June 30, LOAN PORTFOLIO 2004 2004 2003 2003 ----------------- --------------- ---------------- -------------- Commercial, mortgage $ 428,580 $ 413,167 $ 380,372 $ 353,767 Commercial, other 110,208 102,918 131,697 121,833 Real estate, construction 22,853 20,196 21,056 10,339 Real estate, mortgage 304,328 299,967 301,726 327,423 Consumer 69,587 74,545 79,926 94,549 Credit card (a) - - 221 6,407 ----------------- --------------- ---------------- -------------- Total loans $ 935,556 $ 910,793 $ 914,998 $ 914,318 ASSET QUALITY Allowance for loan losses as a percent of total loans 1.57% 1.62% 1.59% 1.55% Allowance for loan losses as a percent of nonperforming loans (b) 251.6% 214.4% 216.1% 250.8% Nonperforming loans as a percent of total loans (b) 0.62% 0.76% 0.73% 0.62% Nonperforming assets as a percent of total assets 0.35% 0.43% 0.41% 0.35% Nonperforming assets as a percent of total loans and other real estate owned real estate owned 0.67% 0.81% 0.78% 0.72% Nonperforming assets (in $000's, end of period): Loans 90 days or more past due $ 374 $ 235 $ 188 $ 569 Renegotiated loans $ - $ - $ - $ 685 Nonaccrual loans $ 5,465 $ 6,656 $ 6,556 $ 4,389 Other real estate owned $ 392 $ 470 $ 392 $ 960 ----------------- --------------- ---------------- -------------- Total nonperforming assets $ 6,231 $ 7,361 $ 7,136 $ 6,603 REGULATORY CAPITAL (c) Tier 1 risk-based capital 12.27% 13.85% 14.08% 13.87% Total risk-based capital ratio (Tier 1 and Tier 2) 13.60% 15.24% 15.43% 15.34% Leverage ratio 8.17% 8.80% 8.68% 8.80% Tier 1 capital $ 135,740 $ 147,274 $ 147,591 $ 147,366 Total capital (Tier 1 and Tier 2) $ 150,344 $ 162,113 $ 161,780 $ 162,938 Total risk-weighted assets $ 1,105,858 $ 1,063,572 $ 1,048,295 $ 1,062,100 SUPPLEMENTAL DATA Trust assets under management $ 618,376 $ 633,736 $ 632,868 $ 624,201 Employees (full-time equivalent) 545 497 511 486 Full service offices 42 42 42 43 Supermarket offices 4 4 4 4 ATMs 33 32 32 33 Announced treasury share plans: (d) Total shares authorized for plan 425,000 425,000 315,000 315,000 Shares purchased 147,435 141,200 61,300 - Average price $ 24.93 $ 29.14 $ 27.96 $ - ----------------- --------------- ---------------- -------------- (a) Balance at December 31, 2003, represents nonqualifying balances not included in preliminary settlement of the credit card portfolio sale subject to final settlement. (b) Nonperforming loans include loans 90 days past due and accruing, renegotiated loans and nonaccrual loans. (c) June 30, 2004 data based on preliminary analysis and is subject to revision. (d) 2004 data reflects 2004 Stock Repurchase Program of 425,000 shares. 2003 data reflects 2003 Stock Repurchase Program of 315,000 shares. Reflects treasury shares purchased and average price paid for the three-month period ended on the date indicated. All share amounts have been adjusted for stock dividends.
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PEOPLES BANCORP INC. CONSOLIDATED BALANCE SHEETS ------------------ ------------------ (in $000's) June 30, December 31, 2004 2003 ------------------ ------------------ ASSETS Cash and cash equivalents $ 55,319 $ 73,426 Available-for-sale investment securities, at estimated fair value (amortized cost of $641,269 at June 30, 2004, and $634,801 at December 31, 2003) 639,190 641,464 Loans held for sale 807 2,847 Loans, net of unearned interest 935,556 914,998 Allowance for loan losses (14,693) (14,575) ------------------ ------------------ Net loans 920,863 900,423 Bank premises and equipment, net of accumulated depreciation 21,720 22,155 Business owned life insurance 44,277 23,355 Goodwill 53,770 41,407 Other intangible assets 11,504 7,298 Other real estate owned 392 392 Other assets 26,419 23,337 ------------------ ------------------ TOTAL ASSETS $ 1,774,261 $ 1,736,104 ================== ================== LIABILITIES Non-interest-bearing deposits $ 137,335 $ 133,709 Interest-bearing deposits 875,989 894,821 ------------------ ------------------ Total deposits 1,013,324 1,028,530 Federal funds purchased, securities sold under repurchase agreements, and other short term borrowings 113,953 108,768 Long-term borrowings 434,126 388,647 Junior subordinated notes held by subsidiary trusts 29,220 29,177 Accrued expenses and other liabilities 13,836 10,102 ------------------ ------------------ TOTAL LIABILITIES 1,604,459 1,565,224 STOCKHOLDERS' EQUITY Common stock, no par value (24,000,000 shares authorized, 10,841,020 shares issued at June 30, 2004, and 10,704,938 shares issued at December 31, 2003) 162,535 161,005 Accumulated comprehensive income, net of deferred income taxes (1,436) 4,255 Retained earnings 14,363 7,781 Treasury stock, at cost (238,253 shares at June 30, 2004, and 101,146 shares at December 31, 2004) (5,660) (2,161) ------------------ ------------------ TOTAL STOCKHOLDERS' EQUITY 169,802 170,880 ------------------ ------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,774,261 $ 1,736,104 ================== ==================
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