EX-99.1 2 exhibit991q22017er.htm EXHIBIT 99.1 Exhibit


pebonewlogo.jpg
P.O. BOX 738 - MARIETTA, OHIO - 45750
NEWS RELEASE
www.peoplesbancorp.com
 
 
 
 
 
FOR IMMEDIATE RELEASE
 
Contact:
John C. Rogers
July 25, 2017
 
 
Chief Financial Officer and Treasurer
 
 
 
(740) 373-3155

PEOPLES BANCORP INC. REPORTS THE SECOND CONSECUTIVE QUARTER OF RECORD QUARTERLY NET INCOME
__________________________________________________________________________________________________

MARIETTA, Ohio - Peoples Bancorp Inc. ("Peoples") (NASDAQ: PEBO) today announced results for the quarter ended June 30, 2017. Net income totaled $9.8 million for the second quarter of 2017, representing earnings per diluted common share of $0.53. In comparison, earnings per diluted common share were $0.48 for the first quarter of 2017 and $0.44 for the second quarter of 2016.
"We generated our second consecutive quarter of record quarterly net income. Our efficiency ratio showed significant improvement, which illustrates the focus that has been given to generating positive operating leverage. Annualized return on average assets improved to 1.12% for the quarter, and we had a 12% annualized improvement in our tangible book value per share during the second quarter of 2017," said Chuck Sulerzyski, President and Chief Executive Officer. "We are pleased with our second quarter results, and intend to continue to build on the momentum of those results as we proceed into the second half of 2017. We believe that our continued focus on our customers by our dedicated employees is paying dividends and is the foundation of our recent results."

Statement of Operations Highlights:
•
Net interest income for the second quarter of 2017 increased 4% compared to the linked quarter and 7% compared to the second quarter of 2016.
◦
Net interest margin was 3.62% for the second quarter of 2017, compared to 3.55% for the linked quarter and 3.57% for the second quarter of 2016.
•
Provision for loan losses was $0.9 million for the second quarter of 2017 and was impacted by the loan growth experienced during the quarter.
•
Total fee-based income for the second quarter of 2017 grew 2% compared to the linked quarter and 10% compared to the second quarter of 2016.
◦
The growth during the second quarter of 2017 was muted by the reduction of $1.3 million in annual performance-based insurance commissions that, for the most part, are recognized in the first quarter of each year.
•
Total non-interest expense was $26.7 million for the second quarter of 2017, a decrease of 2% compared to the linked quarter and up only 1% compared to the second quarter of 2016.
◦
The efficiency ratio was 61.2% for the second quarter of 2017, compared to 64.9% for the first quarter of 2017 and 65.1% in the second quarter of 2016.
•
Generated positive operating leverage of 7% for the second quarter of 2017 compared to the second quarter of 2016.
◦
Total revenue, which is net interest income plus total fee-based income, grew 8% for the second quarter of 2017 compared to the second quarter of 2016, while total non-interest expense growth was only 1% for the same period, which resulted in positive operating leverage of 7%.

Balance Sheet Highlights:
•
Period-end total loan balances at June 30, 2017 grew 8%, on an annualized basis, compared to March 31, 2017 and 8% compared to June 30, 2016.
◦
Indirect consumer loans at June 30, 2017 grew $22.4 million, or 32% annualized, compared to March 31, 2017.
◦
Commercial loan balances grew $31.8 million, or 10% annualized, at June 30, 2017 compared to March 31, 2017.

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•
Asset quality improved during the quarter.
◦
Nonperforming assets decreased to 0.88% of total loans and other real estate owned ("OREO") at June 30, 2017 compared to 0.98% at March 31, 2017.
◦
Nonaccrual loans at June 30, 2017 decreased $1.4 million, or 8%, compared to March 31, 2017.
◦
Net charge-offs as a percent of average gross loans were 0.11% annualized for the second quarter of 2017.
◦
Classified loans, which are those categorized as substandard or doubtful, decreased $3.5 million, or 6%, at June 30, 2017 compared to March 31, 2017.
◦
At June 30, 2017, allowance for loan losses of $18.8 million was up slightly compared to March 31, 2017, due primarily to loan growth experienced during the quarter.
•
Period-end total deposit balances decreased $25 million, or 1%, at June 30, 2017 compared to March 31, 2017.
◦
Governmental deposit balances decreased $32.9 million, or 10%, during the second quarter of 2017 due primarily to seasonality.
◦
Non-interest-bearing deposits remained at 29% of total deposits as of June 30, 2017.
Net Interest Income:
Net interest income was $28.1 million for the second quarter of 2017, a 4% increase compared to the linked quarter and a 7% increase over the second quarter of 2016. Net interest margin increased to 3.62% for the second quarter of 2017, compared to 3.55% for the first quarter of 2017 and 3.57% for the second quarter of 2016. For the first six months of 2017, net interest income grew 6% compared to 2016, and net interest margin improved 3 basis points to 3.58%. The increase in net interest income compared to all prior periods was due primarily to loan growth, with the increase in interest rates positively impacting the net interest margin as well.
The accretion income, net of amortization expense, from acquisitions was $0.7 million for the second quarter of 2017, compared to $0.8 million for the first quarter of 2017 and $0.9 million for the second quarter of 2016, which added 10 basis points, 11 basis points and 12 basis points, respectively, to the net interest margin.
Provision for Loan Losses:
The provision for loan losses was $0.9 million for the second quarter of 2017, compared to $0.6 million for the first quarter of 2017 and $0.7 million for the second quarter of 2016. The higher provision for loan losses recorded during the second quarter of 2017 was reflective of the growth in loan balances during the quarter. For the first six months of 2017, provision for loan losses was $1.6 million, compared to $1.7 million for the first six months of 2016.
Fee-based Income:
Total fee-based income increased $0.3 million, or 2%, compared to the linked quarter, and grew $1.2 million, or 10%, compared to the second quarter of 2016. The increase compared to the first quarter of 2017 was muted by the decrease in insurance income, which was largely the result of a reduction of $1.3 million in annual performance-based insurance commissions that, for the most part, are recognized in the first quarter of each year. Commercial loan swap fee income was $651,000 for the second quarter of 2017, which was over $380,000 more than the linked quarter and the second quarter of 2016. Trust and investment income increased 11% compared to the linked quarter and 7% compared to the second quarter of 2016. The increase in other income was impacted by the sale of the government guaranteed portion of a loan for $437,000 in the second quarter of 2017. Bank owned life insurance income increased $243,000 compared to the second quarter of 2016 due to the $35 million of polices that were purchased late in the second quarter of 2016. The increases compared to the second quarter of 2016 were partially offset by a decline in deposit account service charges, which was largely the result of a decrease in overdraft fees.
For the first six months of 2017, total fee-based income grew $1.5 million, or 6%, compared to 2016. The increase compared to the first six months of 2016 was mainly the result of growth in a number of categories. Bank owned life insurance income increased $569,000, trust and investment income increased $501,000, commercial loan swap fee income increased $491,000, and mortgage banking income increased $429,000. The increases were partially offset by declines in deposit account service charges of 9% and insurance income of 4%.
Non-interest Expense:
Total non-interest expense for the second quarter of 2017 was $26.7 million, compared to $27.3 million for the first quarter of 2017 and $26.5 million for the second quarter of 2016, resulting in a decrease of 2% compared to the linked quarter and an increase of 1% compared to the second quarter of 2016. The decline compared to the linked quarter was largely the result of decreased salaries and employee benefit costs, which were down $447,000, or 3%. Salaries and employee benefit costs decreased mainly due to lower health insurance costs, lower base salaries and wages, and associated payroll taxes. The decrease in health insurance costs was due to lower claims, while the decrease in base

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salaries and wages, and associated payroll taxes, was due to the continued focus on expense management. The decreases were partially offset by an increase in incentive compensation, which is tied to business performance. The increase compared to the second quarter of 2016 was primarily the result of an increase in incentive compensation, which was partially offset by a decrease in professional fees.
For the first six months of 2017, total non-interest expense increased $1.2 million, or 2%. The increase was primarily the result of an increase in incentive compensation. The improved financial results of the company and increased production for the first six months of 2017 compared to the first six months of 2016 have resulted in higher incentive compensation.
The efficiency ratio for the second quarter of 2017 was 61.2%, compared to 64.9% for the linked quarter and 65.1% for the second quarter of 2016. For the first six months of 2017, the efficiency ratio was 63.0%, compared to 64.7% for the first six months of 2016.
Loans:
Period-end total loan balances at June 30, 2017 increased $44.9 million, or 8% annualized, compared to March 31, 2017. Indirect consumer lending continued to be a key component of loan growth, as balances increased $22.4 million, or 32% annualized, during the quarter. The growth in indirect consumer lending included continued diversification in the portfolio beyond automobile loans, including loans for recreational vehicles and motorcycles. Commercial loans grew $31.8 million, or 10% annualized, with commercial real estate loans growing $29.0 million, or 14% annualized, during the quarter. From a bank regulatory perspective, non-owner-occupied commercial real estate loan balances as of June 30, 2017 remained well below the guidance from the regulators of financial institutions of 300% of total risk-based capital. The ratio at June 30, 2017 of non-owner-occupied commercial real estate loans to total risk-based capital was 162%, compared to 152% as of March 31, 2017.
Compared to December 31, 2016, period-end loan balances at June 30, 2017 increased $69.4 million, or 6% annualized. Indirect consumer loan balances increased $53.3 million, or 42% annualized. Commercial real estate loans grew $31.6 million, or 8% annualized, for the first six months of 2017.
At June 30, 2017, period-end loan balances increased $165.6 million, or 8%, compared to June 30, 2016. The increase was primarily the result of indirect consumer lending contributing loan growth of $99.0 million, or 48%, compared to June 30, 2016. Commercial loan balances grew $107.6 million, or 9%, from June 30, 2016, with the growth almost evenly split between commercial real estate and commercial and industrial loan balances. At June 30, 2017, indirect consumer loan balances comprised 13% of the total loan portfolio, compared to 13%, 11% and 10% at March 31, 2017, December 31, 2016 and June 30, 2016, respectively.
Quarterly average gross loan balances increased $27.4 million, or 5% annualized, compared to the linked quarter. The quarterly average gross loan balances for both the three and six months ended June 30, 2017 grew 7% compared to the same periods in 2016.
Asset Quality:
Asset quality metrics improved during the second quarter of 2017. Nonperforming assets as a percent of total loans and OREO decreased to 0.88% at June 30, 2017, compared to 0.98% at March 31, 2017 and 1.04% at June 30, 2016.
Annualized net charge-offs were 0.11% of average gross loans during the first and second quarter of 2017, compared to 0.03% in the second quarter of 2016. For the first six months of 2017, annualized net charge-offs were 0.11%, compared to 0.06% for the first six months of 2016.
Classified loans, which are those categorized as substandard or doubtful, decreased $3.5 million, or 6%, compared to March 31, 2017 and increased $1.3 million, or 2%, compared to June 30, 2016. As a percent of total loans, classified loans were 2.31% at June 30, 2017, compared to 2.51% at March 31, 2017 and 2.43% at June 30, 2016. Criticized loans, which are those categorized as special mention, substandard or doubtful, increased $10.2 million, or 10%, compared to March 31, 2017 and increased $4.9 million, or 5%, compared to June 30, 2016. As a percent of total loans, criticized loans were 4.86% at June 30, 2017, compared to 4.50% at March 31, 2017 and 5.01% at June 30, 2016. The increase in criticized loans at June 30, 2017, compared to March 31, 2017, was due primarily to two commercial loan relationships being downgraded to special mention status during the quarter.
At June 30, 2017, the allowance for loan losses increased to $18.8 million, compared to $18.5 million at March 31, 2017, and $17.8 million at June 30, 2016. The ratio of the allowance for loan losses as a percent of total loans was 0.82% at both June 30, 2017 and March 31, 2017, compared to 0.84% at June 30, 2016. The ratio includes total acquired loans of $463.7 million and allowance for acquired loan losses of $0.1 million. The continued decline in the ratio was due to the continued improvement in asset quality metrics.


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Deposits:
As of June 30, 2017, period-end deposits declined $25.0 million, or 1%, compared to March 31, 2017, and increased $167.4 million, or 7%, compared to December 31, 2016. The decrease compared to March 31, 2017 was split almost evenly between non-interest-bearing and interest-bearing deposits. The decline in non-interest-bearing deposits was due primarily to one commercial customer having a higher than normal balance in their account as of March 31, 2017, which was reduced during the second quarter of 2017. The decline in interest-bearing deposits was driven by a reduction in governmental deposits of $32.9 million, which was partially offset by increases in interest-bearing demand accounts and money market deposits. Balances in governmental deposits are seasonally higher in the first quarter of each year compared to the other quarters.
The increase in period-end deposit balances compared to December 31, 2016 was primarily due to an increase of $70.9 million in brokered certificates of deposit, $45.9 million in governmental deposits and $37.6 million in non-interest-bearing deposits. The increase in brokered certificates of deposit was the result of adding relatively shorter term funding on the balance sheet. The increase in non-interest-bearing deposits was due primarily to two commercial customers maintaining higher than usual balances as of June 30, 2017.
Period-end deposits increased $144.2 million, or 6%, compared to June 30, 2016, with the increase split almost evenly between non-interest-bearing and interest-bearing deposits, with growth of $72.4 million and $71.8 million, respectively. Almost 35% of the total increase in non-interest-bearing deposits was due to an increase for one commercial customer, with the remaining increase attributable to increases for both commercial and individual customers, with no significant change in any one deposit account. The growth in interest-bearing deposits was due primarily to an increase of $73.3 million in brokered certificates of deposit and $51.4 million in interest-bearing demand accounts, which were partially offset by a decrease of $49.3 million in retail certificates of deposit.
Average deposits for the second quarter of 2017 increased $75.6 million, or 3%, compared to the linked quarter, with an increase of $64.6 million in interest-bearing deposits and $11.0 million in non-interest-bearing deposits. The increase in interest-bearing deposits was due primarily to an increase in brokered certificates of deposit and governmental deposits. Compared to the second quarter of 2016, average deposits increased $90.0 million, or 3%, with interest-bearing deposits increasing $46.7 million and non-interest-bearing deposits increasing $43.3 million. The increase in interest-bearing deposits was due primarily to an increase in brokered certificates of deposit, which was largely offset by a decrease in retail certificates of deposit, and an increase in interest-bearing demand accounts.
For the first six months of 2017, average deposits increased $58.0 million, or 2%, compared to the first six months of 2016. The increase was primarily due to an increase of $45.8 million, or 6%, in non-interest bearing deposits.
Non-interest-bearing deposits comprised 29% of total deposits at June 30, 2017, March 31, 2017 and December 31, 2016, compared to 28% at June 30, 2016.
Stockholders' Equity:
At June 30, 2017, the tier 1 risk-based capital ratio was 13.47%, compared to 13.34% at March 31, 2017 and 13.33% at June 30, 2016. The total risk-based capital ratio was 14.40% at June 30, 2017, compared to 14.27% at March 31, 2017 and 14.23% at June 30, 2016. The improvement in these capital ratios compared to the linked quarter was due mainly to increased earnings, which exceeded the dividends declared and paid during the quarter by $6.1 million.

Peoples Bancorp Inc. is a diversified financial services holding company with $3.5 billion in total assets, 75 locations, including 67 full-service bank branches, and 75 ATMs in Ohio, West Virginia and Kentucky. Peoples makes available a complete line of banking, investment, insurance and trust solutions through its subsidiaries - Peoples Bank and Peoples Insurance Agency, LLC. Peoples' common shares are traded on the NASDAQ Global Select Market® under the symbol “PEBO”, and Peoples is a member of the Russell 3000 index of U.S. 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 2017 results of operations today at 11:00 a.m., Eastern Daylight Savings Time, with members of Peoples' executive management participating. Analysts, media and individual investors are invited to participate in the conference call by calling (866) 890-9285. A simultaneous webcast of the conference call audio will be available online via the "Investor Relations" section of Peoples' website, 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 and, if required, to download and install the necessary software. A replay of the call will be available on Peoples' website in the "Investor Relations" section for one year.


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Use of Non-GAAP Financial Measures
This news release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management uses these "non-GAAP" financial measures in its analysis of Peoples' performance and the efficiency of its operations. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods and peers. These disclosures should not be viewed as substitutes for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Below is a listing of the non-GAAP financial measures used in this news release:
◦
Core non-interest expenses are non-GAAP since they exclude the impact of costs associated with the system upgrade of Peoples' core banking system, acquisition-related costs, pension settlement charges, severance charges and legal settlement charges.
◦
Efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total fee-based income. This measure is non-GAAP since it excludes amortization of other intangible assets and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income.
◦
Tangible assets, tangible equity and tangible book value per common share measures are non-GAAP since they exclude the impact of goodwill and other intangible assets acquired through acquisitions on both total stockholders' equity and total assets.
◦
Pre-provision net revenue is defined as net interest income plus total fee-based income minus total non-interest expense. This measure is non-GAAP since it excludes the provision for (recovery of) loan losses and all gains and/or losses included in earnings.
◦
Return on tangible stockholders' equity is calculated as net income (less after-tax impact of amortization of other intangible assets) divided by tangible stockholders' equity. This measure is non-GAAP since it excludes the after-tax impact of amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity.
A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included at the end of this news release under the caption of "Non-GAAP Financial Measures".

Safe Harbor Statement:
Certain statements made in this news release regarding Peoples' financial condition, results of operations, plans, objectives, future performance and business, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate," "estimate," "may," "feel," "expect," "believe," "plan," "will," "would," "should," "could" and similar expressions.
These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These factors include, but are not limited to:
(1) the success, impact, and timing of the implementation of Peoples' business strategies, including the successful integration of acquisitions and the expansion of consumer lending activity;
(2) competitive pressures among financial institutions or from non-financial institutions which may increase significantly, including product and pricing pressures, changes to third-party relationships and revenues, and Peoples' ability to attract, develop and retain qualified professionals;
(3) changes in the interest rate environment due to economic conditions and/or the fiscal policies of the United States ("U.S.") government and the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which may adversely impact interest rates, interest margins, loan demand and interest rate sensitivity;
(4) uncertainty regarding the nature, timing and effect of legislative or regulatory changes or actions, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the Federal Deposit Insurance Corporation, the Federal Reserve Board and the Consumer Financial Protection Bureau, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses, including in particular the rules and regulations promulgated and to be promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;

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(5) changes in policy and other regulatory and legal developments accompanying the current presidential administration and uncertainty or speculation pending the enactment of such changes;
(6) Peoples' ability to leverage the core banking systems upgrade that occurred in the fourth quarter of 2016 (including the related core operating systems, data systems and products) without complications or difficulties that may otherwise result in the loss of customers, operational problems or one-time costs currently not anticipated to arise in connection with such upgrade;
(7) local, regional, national and international economic conditions and the impact these conditions may have on Peoples, its customers and its counterparties, and Peoples' assessment of the impact, which may be different than anticipated;
(8) Peoples' ability to integrate any future acquisitions which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;
(9) Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;
(10) changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans and charge-offs, which may be less favorable than expected and adversely impact the amount of interest income generated;
(11) adverse changes in the economic conditions and/or activities, including, but not limited to, continued economic uncertainty in the U.S., the European Union (including the uncertainty surrounding the actions to be taken to implement the referendum by British voters to exit the European Union), Asia, and other areas, which could decrease sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;
(12) deterioration in the credit quality of Peoples' loan portfolio, which may adversely impact the provision for loan losses;
(13) changes in accounting standards, policies, estimates or procedures which may adversely affect Peoples' reported financial condition or results of operations;
(14) Peoples' assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results;
(15) adverse changes in the conditions and trends in the financial markets, including political developments, which may adversely affect the fair value of securities within Peoples' investment portfolio, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities;
(16) Peoples' ability to receive dividends from its subsidiaries;
(17) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;
(18) the impact of minimum capital thresholds established as a part of the implementation of Basel III;
(19) the impact of larger or similar sized financial institutions encountering problems, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity;
(20) the costs and effects of regulatory and legal developments, including the outcome of potential regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations;
(21) Peoples' ability to secure confidential information through the use of computer systems and telecommunications networks, including those of Peoples' third-party vendors and other service providers, may prove inadequate, which could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss;
(22) ability to anticipate and respond to technological changes which can impact Peoples' ability to respond to customer needs and meet competitive demands;
(23) changes in consumer spending, borrowing and saving habits, whether due to changes in business and economic conditions, legislative or regulatory initiatives, or other factors, which may be different than anticipated;
(24) the overall adequacy of Peoples' risk management program;
(25) the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics, cyber attacks, civil unrest, military or terrorist activities or international conflicts;
(26) significant changes in the tax laws, which may adversely affect the fair values of deferred tax assets and obligations of states and political subdivisions held in Peoples' investment securities portfolio; and
(27) 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 (the “SEC”), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Peoples encourages readers of this news release to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance. Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this news release or to reflect the occurrence of unanticipated

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events, except as required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC's website at http://www.sec.gov and/or from Peoples' website.
As required by U.S. GAAP, Peoples is required to evaluate the impact of subsequent events through the issuance date of its June 30, 2017 consolidated financial statements as part of its Quarterly Report on Form 10-Q to be filed with the SEC. Accordingly, subsequent events could occur that may cause Peoples to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.


PER COMMON SHARE DATA AND SELECTED RATIOS
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
 
2017
 
2017
 
2016
 
2017
 
2016
PER COMMON SHARE:
 
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
   Basic
$
0.54

 
$
0.49

 
$
0.44

 
$
1.02

 
$
0.88

   Diluted
0.53

 
0.48

 
0.44

 
1.02

 
0.88

Cash dividends declared per common share
0.20

 
0.20

 
0.16

 
0.40

 
0.31

Book value per common share
24.69

 
24.25

 
24.07

 
24.69

 
24.07

Tangible book value per common share (a)
16.78

 
16.28

 
15.93

 
16.78

 
15.93

Closing stock price at end of period
$
32.13

 
$
31.66

 
$
21.79

 
$
32.13

 
$
21.79

 
 
 
 
 
 
 
 
 
 
SELECTED RATIOS:
 
 
 
 
 
 
 
 
 
Return on average stockholders' equity (b)
8.76
%
 
8.14
%
 
7.45
%
 
8.45
%
 
7.52
%
Return on average tangible stockholders' equity (b) (c)
13.71
%
 
12.95
%
 
12.31
%
 
13.34
%
 
12.50
%
Return on average assets (b)
1.12
%
 
1.04
%
 
0.97
%
 
1.08
%
 
0.98
%
Efficiency ratio (d)
61.19
%
 
64.89
%
 
65.08
%
 
63.01
%
 
64.67
%
Pre-provision net revenue to total average assets (b)(e)
1.72
%
 
1.52
%
 
1.48
%
 
1.63
%
 
1.51
%
Net interest margin (b)(f)
3.62
%
 
3.55
%
 
3.57
%
 
3.58
%
 
3.55
%
Dividend payout ratio (g)
37.32
%
 
41.25
%
 
36.47
%
 
39.19
%
 
35.42
%
(a)
This amount represents a non-GAAP financial measure since it excludes the balance sheet impact of goodwill and other intangible assets acquired through acquisitions on stockholders' equity. Additional information regarding the calculation of this ratio is included at the end of this news release.
(b)
Ratios are presented on an annualized basis.
(c)
This amount represents a non-GAAP financial measure since it excludes the after-tax impact of amortization of other intangible assets from earnings and it excludes the balance sheet impact of goodwill and other intangible assets acquired through acquisitions on stockholders' equity. Additional information regarding the calculation of this ratio is included at the end of this news release.
(d)
Total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total fee-based income. This amount represents a non-GAAP financial measure since it excludes amortization of other intangible assets, and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income. Additional information regarding the calculation of this ratio is included at the end of this news release.
(e)
This ratio represents a non-GAAP financial measure since it excludes the provision for (recovery of) loan losses and all gains and/or losses included in earnings. This measure is a key metric used by federal bank regulatory agencies in their evaluation of capital adequacy for financial institutions. Additional information regarding the calculation of this ratio is included at the end of this news release.
(f)
Information presented on a fully tax-equivalent basis.
(g)
Ratios are calculated based on dividends paid during the period divided by earnings for the period.


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CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
Total interest income
$
31,208

 
$
29,817

 
$
28,921

 
$
61,025

 
$
57,364

Total interest expense
3,118

 
2,872

 
2,613

 
5,990

 
5,289

Net interest income
28,090

 
26,945

 
26,308

 
55,035

 
52,075

Provision for loan losses
947

 
624

 
727

 
1,571

 
1,682

Net interest income after provision for loan losses
27,143

 
26,321

 
25,581

 
53,464

 
50,393

 
 
 
 
 
 
 
 
 
 
Net gain on investment securities
18

 
340

 
767

 
358

 
863

Loss on debt extinguishment
—

 
—

 
(707
)
 
—

 
(707
)
Net loss on loans held-for-sale and other real estate owned
(24
)
 
—

 
—

 
(24
)
 
(1
)
Net gain (loss) on other assets
133

 
(3
)
 
(62
)
 
130

 
(92
)
 
 
 
 
 
 
 
 
 
 
Fee-based income:
 
 
 
 
 
 
 
 
 
Insurance income
3,414

 
4,102

 
3,299

 
7,516

 
7,797

Trust and investment income
2,977

 
2,682

 
2,776

 
5,659

 
5,158

Electronic banking income
2,587

 
2,561

 
2,567

 
5,148

 
5,102

Deposit account service charges
2,294

 
2,429

 
2,563

 
4,723

 
5,166

Commercial loan swap fee income
651

 
268

 
264

 
919

 
428

Bank owned life insurance income
496

 
493

 
253

 
989

 
420

Mortgage banking income
467

 
387

 
265

 
854

 
425

Other income
704

 
412

 
380

 
1,116

 
925

  Total fee-based income
13,590

 
13,334

 
12,367

 
26,924

 
25,421

 
 
 
 
 
 
 
 
 
 
Non-interest expense:
 
 
 
 
 
 
 
 
 
Salaries and employee benefit costs
15,049

 
15,496

 
13,972

 
30,545

 
28,297

Net occupancy and equipment expense
2,648

 
2,713

 
2,581

 
5,361

 
5,387

Professional fees
1,529

 
1,610

 
2,123

 
3,139

 
3,582

Electronic banking expense
1,525

 
1,514

 
1,485

 
3,039

 
2,918

Data processing and software expense
1,096

 
1,142

 
1,013

 
2,238

 
1,762

Amortization of other intangible assets
871

 
863

 
1,007

 
1,734

 
2,015

Franchise tax expense
584

 
583

 
483

 
1,167

 
1,021

FDIC insurance expense
457

 
433

 
540

 
890

 
1,157

Communication expense
390

 
410

 
584

 
800

 
1,212

Marketing expense
354

 
280

 
414

 
634

 
812

Foreclosed real estate and other loan expenses
179

 
196

 
100

 
375

 
351

Other non-interest expense
1,998

 
2,091

 
2,203

 
4,089

 
4,273

  Total non-interest expense
26,680

 
27,331

 
26,505

 
54,011

 
52,787

  Income before income taxes
14,180

 
12,661

 
11,441

 
26,841

 
23,090

Income tax expense
4,414

 
3,852

 
3,479

 
8,266

 
7,133

    Net income
$
9,766

 
$
8,809

 
$
7,962

 
$
18,575

 
$
15,957

 
 
 
 
 
 
 
 
 
 
PER SHARE DATA:
 
 
 
 
 
 
 
 
 
Earnings per common share – Basic
$
0.54

 
$
0.49

 
$
0.44

 
$
1.02

 
$
0.88

Earnings per common share – Diluted
$
0.53

 
$
0.48

 
$
0.44

 
$
1.02

 
$
0.88

Cash dividends declared per common share
$
0.20

 
$
0.20

 
$
0.16

 
$
0.40

 
$
0.31

 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – Basic
18,044,574

 
18,029,991

 
17,980,797

 
18,037,333

 
18,026,272

Weighted-average common shares outstanding – Diluted
18,203,752

 
18,192,957

 
18,113,812

 
18,195,715

 
18,154,260

Actual common shares outstanding (end of period)
18,279,036

 
18,270,508

 
18,185,708

 
18,279,036

 
18,185,708


8


CONSOLIDATED BALANCE SHEETS
 
June 30,
 
December 31,
(in $000’s)
2017
 
2016
 
 
 
 
Assets
 
 
 
Cash and cash equivalents:
 
 
 
  Cash and due from banks
$
56,310

 
$
58,129

  Interest-bearing deposits in other banks
16,122

 
8,017

    Total cash and cash equivalents
72,432

 
66,146

 
 
 
 
Available-for-sale investment securities, at fair value (amortized cost of
 
 
 
  $792,803 at June 30, 2017 and $777,017 at December 31, 2016)
799,088

 
777,940

Held-to-maturity investment securities, at amortized cost (fair value of
 
 
 
  $43,768 at June 30, 2017 and $43,227 at December 31, 2016)
43,060

 
43,144

Other investment securities, at cost
38,371

 
38,371

    Total investment securities
880,519

 
859,455

 
 
 
 
Loans, net of deferred fees and costs
2,294,359

 
2,224,936

Allowance for loan losses
(18,815
)
 
(18,429
)
    Net loans
2,275,544

 
2,206,507

 
 
 
 
Loans held for sale
3,420

 
4,022

Bank premises and equipment, net of accumulated depreciation
52,188

 
53,616

Bank owned life insurance
61,214

 
60,225

Goodwill
132,631

 
132,631

Other intangible assets
12,061

 
13,387

Other assets
35,117

 
36,359

    Total assets
$
3,525,126

 
$
3,432,348

 
 
 
 
Liabilities
 
 
 
Deposits:
 
 
 
Non-interest-bearing deposits
$
772,061

 
$
734,421

Interest-bearing deposits
1,905,083

 
1,775,301

    Total deposits
2,677,144

 
2,509,722

 
 
 
 
Short-term borrowings
142,532

 
305,607

Long-term borrowings
219,014

 
145,155

Accrued expenses and other liabilities
35,083

 
36,603

    Total liabilities
3,073,773

 
2,997,087

 
 
 
 
Stockholders' Equity
 
 
 
 Preferred stock, no par value, 50,000 shares authorized, no shares issued
   at June 30, 2017 and December 31, 2016
—

 
—

Common stock, no par value, 24,000,000 shares authorized, 18,945,490 shares
   issued at June 30, 2017 and 18,939,091 shares issued at
   December 31, 2016, including shares in treasury
344,211

 
344,404

Retained earnings
121,590

 
110,294

Accumulated other comprehensive income (loss), net of deferred income taxes
1,439

 
(1,554
)
Treasury stock, at cost, 701,382 shares at June 30, 2017 and
   795,758 shares at December 31, 2016
(15,887
)
 
(17,883
)
    Total stockholders' equity
451,353

 
435,261

    Total liabilities and stockholders' equity
$
3,525,126

 
$
3,432,348

 
 
 
 

9


SELECTED FINANCIAL INFORMATION
 
June 30,
March 31,
December 31,
September 30,
June 30,
(in $000’s, end of period)
2017
2017
2016
2016
2016
Loan Portfolio
 
 
 
 
 
Commercial real estate, construction
$
112,169

$
103,317

$
94,726

$
81,080

$
98,993

Commercial real estate, other
750,219

730,055

736,023

728,878

708,910

Commercial and industrial
431,473

428,737

422,339

400,042

378,352

Residential real estate
512,887

524,212

535,925

545,161

555,123

Home equity lines of credit
111,710

110,028

111,492

111,196

109,017

Consumer, indirect
306,113

283,762

252,832

230,286

207,116

Consumer, other
69,267

68,670

70,519

71,491

70,065

Deposit account overdrafts
521

721

1,080

1,074

1,214

    Total loans
$
2,294,359

$
2,249,502

$
2,224,936

$
2,169,208

$
2,128,790

Total acquired loans (a)
$
463,684

$
491,819

$
516,832

$
551,021

$
591,967

    Total originated loans
$
1,830,675

$
1,757,683

$
1,708,104

$
1,618,187

$
1,536,823

Deposit Balances
 
 
 
 
 
Non-interest-bearing deposits
$
772,061

$
785,047

$
734,421

$
745,468

$
699,695

Interest-bearing deposits:
 
 
 
 
 
  Interest-bearing demand accounts
303,501

292,187

278,975

270,490

252,119

  Retail certificates of deposit (b)
352,758

353,918

360,464

390,568

402,102

  Money market deposit accounts
397,211

386,999

407,754

411,111

401,828

  Governmental deposit accounts
297,560

330,477

251,671

286,716

300,639

  Savings accounts
443,110

445,720

436,344

438,087

438,952

  Brokered certificates of deposit (b)
110,943

107,817

40,093

33,017

37,636

    Total interest-bearing deposits
1,905,083

1,917,118

1,775,301

1,829,989

1,833,276

    Total deposits
$
2,677,144

$
2,702,165

$
2,509,722

$
2,575,457

$
2,532,971

Asset Quality
 
 
 
 
 
Nonperforming assets (NPAs):
 
 
 
 
 
  Loans 90+ days past due and accruing
$
2,583

$
3,006

$
3,771

$
4,161

$
5,869

  Nonaccrual loans
16,921

18,293

21,325

19,346

15,582

    Total nonperforming loans (NPLs)
19,504

21,299

25,096

23,507

21,451

  Other real estate owned (OREO)
652

677

661

719

679

Total NPAs
$
20,156

$
21,976

$
25,757

$
24,226

$
22,130

Criticized loans (c)
111,480

101,284

99,182

99,294

106,616

Classified loans (d)
53,041

56,503

57,736

53,755

51,762

Allowance for loan losses as a percent of NPLs (e)(f)
96.47
%
86.71
%
73.43
%
77.50
%
83.16
%
NPLs as a percent of total loans (e)(f)
0.85
%
0.95
%
1.13
%
1.08
%
1.01
%
NPAs as a percent of total assets (e)(f)
0.57
%
0.64
%
0.75
%
0.72
%
0.66
%
NPAs as a percent of total loans and OREO (e)(f)
0.88
%
0.98
%
1.16
%
1.11
%
1.04
%
Criticized loans as a percent of total loans
4.86
%
4.50
%
4.46
%
4.58
%
5.01
%
Classified loans as a percent of total loans
2.31
%
2.51
%
2.59
%
2.48
%
2.43
%
Allowance for loan losses as a percent of total loans (e)
0.82
%
0.82
%
0.83
%
0.84
%
0.84
%
Capital Information (g)
 
 
 
 
 
Common Equity Tier 1 risk-based capital ratio
13.18
%
13.05
%
12.91
%
13.04
%
13.03
%
Tier 1 risk-based capital ratio
13.47
%
13.34
%
13.21
%
13.34
%
13.33
%
Total risk-based capital ratio (Tier 1 and Tier 2)
14.40
%
14.27
%
14.11
%
14.24
%
14.23
%
Leverage ratio
9.72
%
9.60
%
9.66
%
9.71
%
9.56
%
Common Equity Tier 1 capital
$
318,849

$
310,856

$
306,506

$
301,222

$
295,148

Tier 1 capital
325,865

317,826

313,430

308,099

301,977

Total capital (Tier 1 and Tier 2)
348,309

340,147

334,957

328,948

322,413

Total risk-weighted assets
$
2,419,335

$
2,382,874

$
2,373,359

$
2,309,951

$
2,265,022

Tangible equity to tangible assets (h)
9.07
%
8.98
%
8.80
%
9.13
%
9.10
%
(a) Includes all loans acquired in 2012 and thereafter.

10


(b) Prior periods reclassified.
(c) Includes loans categorized as a special mention, substandard, or doubtful.
(d) Includes loans categorized as substandard or doubtful.
(e) Data presented as of the end of the period indicated.
(f) Nonperforming loans include loans 90+ days past due and accruing, renegotiated loans and nonaccrual loans. Nonperforming assets include nonperforming loans and OREO.
(g) June 30, 2017 data based on preliminary analysis and subject to revision.
(h) This ratio represents a non-GAAP financial measure since it excludes the balance sheet impact of intangible assets acquired through acquisitions on both total stockholders' equity and total assets. Additional information regarding the calculation of this ratio is included at the end of this news release.


PROVISION FOR LOAN LOSSES INFORMATION
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
Provision for Loan Losses
 
 
 
 
 
 
 
 
 
Provision for loan losses
$
850

 
$
400

 
$
575

 
$
1,250

 
$
1,433

Provision for checking account overdrafts
97

 
224

 
152

 
321

 
249

  Total provision for loan losses
$
947

 
$
624

 
$
727

 
$
1,571

 
$
1,682

 
 
 
 
 
 
 
 
 
 
Net Charge-Offs
 
 
 
 
 
 
 
 
 
Gross charge-offs
$
957

 
$
1,100

 
$
855

 
2,057

 
$
2,857

Recoveries
357

 
515

 
705

 
872

 
2,234

  Net charge-offs
$
600

 
$
585

 
$
150

 
$
1,185

 
$
623

 
 
 
 
 
 
 
 
 
 
Net Charge-Offs (Recoveries) by Type
 
 
 
 
 
 
 
 
 
Commercial real estate, other
$
11

 
$
(102
)
 
$
(17
)
 
$
(91
)
 
$
(1,153
)
Commercial and industrial
—

 
117

 
(244
)
 
117

 
767

Residential real estate
78

 
19

 
194

 
97

 
333

Home equity lines of credit
14

 
—

 
—

 
14

 
3

Consumer, indirect
299

 
277

 
29

 
576

 
355

Consumer, other
73

 
(10
)
 
55

 
63

 
92

Deposit account overdrafts
125

 
284

 
133

 
409

 
226

  Total net charge-offs
$
600

 
$
585

 
$
150

 
$
1,185

 
$
623

 
 
 
 
 
 
 
 
 
 
As a percent of average gross loans (annualized)
0.11
%
 
0.11
%
 
0.03
%
 
0.11
%
 
0.06
%



SUPPLEMENTAL INFORMATION
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
(in $000’s, end of period)
2017
 
2017
 
2016
 
2016
 
2016
 
 
 
 
 
 
 
 
 
 
Trust assets under administration and management
$
1,393,435

 
$
1,362,243

 
$
1,301,509

 
$
1,292,044

 
$
1,280,004

Brokerage assets under administration and management
836,192

 
805,361

 
777,771

 
754,168

 
729,519

Mortgage loans serviced for others
$
402,516

 
$
399,279

 
$
398,134

 
$
389,090

 
$
380,741

Employees (full-time equivalent)
775

 
776

 
782

 
799

 
803





11


CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME
 
Three Months Ended
 
June 30, 2017
 
March 31, 2017
 
June 30, 2016
(in $000’s)
Balance
Income/
Expense
Yield/ Cost
 
Balance
Income/
Expense
Yield/ Cost
 
Balance
Income/
Expense
Yield/ Cost
Assets
 
 
 
 
 
 
 
 
 
 
 
Short-term investments
$
12,275

$
26

0.85
%
 
$
7,415

$
15

0.82
%
 
$
9,073

$
11

0.49
%
Investment securities (a)(b)
879,498

6,174

2.81
%
 
862,614

5,976

2.77
%
 
877,046

5,984

2.73
%
Loans (b)(c):
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate, construction
107,224

1,158

4.27
%
 
94,215

993

4.22
%
 
91,510

871

3.77
%
Commercial real estate, other
735,915

8,892

4.78
%
 
734,442

8,423

4.59
%
 
721,714

8,341

4.57
%
Commercial and industrial
433,277

4,858

4.44
%
 
433,068

4,545

4.20
%
 
373,220

4,017

4.26
%
Residential real estate (d)
520,863

5,564

4.27
%
 
531,457

5,769

4.34
%
 
562,565

6,106

4.34
%
Home equity lines of credit
111,185

1,233

4.45
%
 
111,112

1,159

4.23
%
 
107,919

1,203

4.48
%
Consumer, indirect
293,917

2,570

3.51
%
 
269,821

2,232

3.35
%
 
194,642

1,824

3.77
%
Consumer, other
69,329

1,229

7.11
%
 
70,206

1,218

7.04
%
 
70,430

1,066

6.09
%
Total loans
2,271,710

25,504

4.46
%
 
2,244,321

24,339

4.35
%
 
2,122,000

23,428

4.39
%
Allowance for loan losses
(18,554
)
 
 
 
(18,585
)
 
 
 
(17,362
)
 
 
Net loans
2,253,156

 
 
 
2,225,736

 
 
 
2,104,638

 
 
Total earning assets
3,144,929

31,704

4.01
%
 
3,095,765

30,330

3.93
%
 
2,990,757

29,423

3.92
%
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets
145,052

 
 
 
145,546

 
 
 
148,464

 
 
Other assets
199,720

 
 
 
205,040

 
 
 
167,435

 
 
Total assets
$
3,489,701

 
 
 
$
3,446,351

 
 
 
$
3,306,656

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
Savings accounts
$
444,824

$
61

0.06
%
 
$
439,206

$
59

0.05
%
 
$
438,368

$
58

0.05
%
Government deposit accounts
301,448

168

0.22
%
 
283,605

131

0.19
%
 
302,852

146

0.19
%
Interest-bearing demand accounts
295,080

98

0.13
%
 
286,487

78

0.11
%
 
251,773

46

0.07
%
Money market deposit accounts
393,807

197

0.20
%
 
398,839

187

0.19
%
 
400,286

165

0.17
%
Retail certificates of deposit
355,256

746

0.84
%
 
342,837

726

0.86
%
 
417,683

767

0.74
%
Brokered certificates of deposits
110,160

459

1.67
%
 
84,929

306

1.46
%
 
42,934

321

3.01
%
Total interest-bearing deposits
1,900,575

1,729

0.36
%
 
1,835,903

1,487

0.33
%
 
1,853,896

1,503

0.33
%
Short-term borrowings
159,505

233

0.58
%
 
205,296

251

0.50
%
 
142,888

105

0.29
%
Long-term borrowings
178,131

1,156

2.60
%
 
172,053

1,134

2.66
%
 
118,427

1,005

3.40
%
Total borrowed funds
337,636

1,389

1.65
%
 
377,349

1,385

1.48
%
 
261,315

1,110

1.70
%
Total interest-bearing liabilities
2,238,211

3,118

0.56
%
 
2,213,252

2,872

0.53
%
 
2,115,211

2,613

0.50
%
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposits
769,406

 
 
 
758,446

 
 
 
726,066

 
 
Other liabilities
34,685

 
 
 
35,663

 
 
 
35,307

 
 
Total liabilities
3,042,302

 
 
 
3,007,361

 
 
 
2,876,584

 
 
Stockholders’ equity
447,399

 
 
 
438,990

 
 
 
430,072

 
 
Total liabilities and equity
$
3,489,701

 
 
 
$
3,446,351

 
 
 
$
3,306,656

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income/spread (b)
 
$
28,586

3.45
%
 
 
$
27,458

3.40
%
 
 
$
26,810

3.42
%
Net interest margin (b)
 
 
3.62
%
 
 
 
3.55
%
 
 
 
3.57
%
 
 
 
 
 
 
 
 
 
 
 
 
(a) Average balances are based on carrying value.
(b) Interest income and yields are presented on a fully tax-equivalent basis using a 35% federal statutory tax rate.
(c) Average balances include nonaccrual and impaired loans. Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented.
(d) Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.

12


 
For the Six Months Ended
 
June 30, 2017
 
June 30, 2016
(in $000’s)
Balance
Income/
Expense
Yield/ Cost
 
Balance
Income/
Expense
Yield/ Cost
Assets
 
 
 
 
 
 
 
Short-term investments
9,859

41

0.84
%
 
$
10,754

$
27

0.50
%
Investment securities (a)(b)
871,103

12,150

2.79
%
 
876,345

11,912

2.72
%
Loans (b)(c):
 
 
 
 
 
 
 
Commercial real estate, construction
100,755

2,151

4.25
%
 
85,856

1,652

3.81
%
Commercial real estate, other
735,182

17,315

4.68
%
 
728,875

16,833

4.57
%
Commercial and industrial
433,173

9,403

4.32
%
 
364,797

7,711

4.18
%
Residential real estate (d)
526,131

11,333

4.31
%
 
564,039

12,271

4.35
%
Home equity lines of credit
111,149

2,392

4.34
%
 
107,444

2,393

4.48
%
Consumer, indirect
281,935

4,802

3.43
%
 
184,136

3,458

3.78
%
Consumer, other
69,766

2,447

7.07
%
 
71,722

2,117

5.97
%
Total loans
2,258,091

49,843

4.42
%
 
2,106,869

46,435

4.41
%
Allowance for loan losses
(18,570
)
 
 
 
(17,103
)
 
 
Net loans
2,239,521

 
 
 
2,089,766

 
 
Total earning assets
3,120,483

62,034

3.97
%
 
2,976,865

58,374

3.90
%
 
 
 
 
 
 
 
 
Intangible assets
145,298

 
 
 
148,996

 
 
Other assets
202,365

 
 
 
162,608

 
 
Total assets
$
3,468,146

 
 
 
$
3,288,469

 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
Savings accounts
442,030

120

0.05
%
 
$
430,082

$
114

0.05
%
Government deposit accounts
292,576

299

0.21
%
 
300,769

293

0.20
%
Interest-bearing demand accounts
290,807

176

0.12
%
 
251,557

91

0.07
%
Money market deposit accounts
396,309

384

0.20
%
 
399,401

326

0.16
%
Retail certificates of deposit
74,967

764

2.06
%
 
46,928

687

2.94
%
Brokered certificates of deposits
371,728

1,473

0.80
%
 
427,429

1,593

0.75
%
Total interest-bearing deposits
1,868,417

3,216

0.35
%
 
1,856,166

3,104

0.34
%
Short-term borrowings
182,274

484

0.53
%
 
139,288

192

0.28
%
Long-term borrowings
175,108

2,290

2.63
%
 
115,899

1,993

3.45
%
Total borrowed funds
357,382

2,774

1.56
%
 
255,187

2,185

1.72
%
Total interest-bearing liabilities
2,225,799

5,990

0.54
%
 
2,111,353

5,289

0.50
%
 
 
 
 
 
 
 
 
Non-interest-bearing deposits
763,956

 
 
 
718,181

 
 
Other liabilities
35,173

 
 
 
32,127

 
 
Total liabilities
3,024,928

 
 
 
2,861,661

 
 
Stockholders’ equity
443,218

 
 
 
426,808

 
 
Total liabilities and equity
$
3,468,146

 
 
 
$
3,288,469

 
 
 
 
 
 
 
 
 
 
Net interest income/spread (b)
 
$
56,044

3.43
%
 
 
$
53,085

3.40
%
Net interest margin (b)
 
 
3.58
%
 
 
 
3.55
%
(a) Average balances are based on carrying value.
(b) Interest income and yields are presented on a fully tax-equivalent basis using a 35% federal statutory tax rate.
(c) Average balances include nonaccrual and impaired loans. Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented.
(d) Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.
 

13


NON-GAAP FINANCIAL MEASURES
The following non-GAAP financial measures used by Peoples provide information useful to investors in understanding Peoples' operating performance and trends, and facilitate comparisons with the performance of Peoples' peers. The following tables summarize the non-GAAP financial measures derived from amounts reported in Peoples' consolidated financial statements:

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Core non-interest expenses:
 
 
 
 
 
 
 
 
 
Total non-interest expense
$
26,680

 
$
27,331

 
$
26,505

 
$
54,011

 
$
52,787

Less: System upgrade costs
—

 
—

 
90

 
—

 
90

Core non-interest expenses
$
26,680

 
$
27,331

 
$
26,415

 
$
54,011

 
$
52,697


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Efficiency ratio:
 
 
 
 
 
 
 
 
 
Total non-interest expense
$
26,680

 
$
27,331

 
$
26,505

 
$
54,011

 
$
52,787

Less: Amortization of intangible assets
871

 
863

 
1,007

 
1,734

 
2,015

Adjusted non-interest expense
$
25,809


$
26,468


$
25,498


$
52,277


$
50,772

 
 
 
 
 
 
 
 
 
 
Total fee-based income
$
13,590

 
$
13,334

 
$
12,367

 
26,924

 
25,421

 
 
 
 
 
 
 
 
 
 
Net interest income
$
28,090

 
$
26,945

 
$
26,308

 
$
55,035

 
$
52,075

Add: Fully tax-equivalent adjustment
496

 
513

 
502

 
1,009

 
1,010

Net interest income on a fully tax-equivalent basis
$
28,586

 
$
27,458

 
$
26,810

 
$
56,044

 
$
53,085

 
 
 
 
 
 
 
 
 
 
Adjusted revenue
$
42,176

 
$
40,792

 
$
39,177

 
$
82,968

 
$
78,506

 
 
 
 
 
 
 
 
 
 
Efficiency ratio
61.19
%
 
64.89
%
 
65.08
%
 
63.01
%
 
64.67
%
 
 
 
 
 
 
 
 
 
 
Efficiency ratio adjusted for non-core items:
 
 
 
 
 
 
 
 
Core non-interest expenses
$
26,680

 
$
27,331

 
$
26,415

 
$
54,011

 
$
52,697

Less: Amortization of intangible assets
871

 
863

 
1,007

 
1,734

 
2,015

Adjusted non-interest expense
$
25,809

 
$
26,468

 
$
25,408

 
$
52,277


$
50,682

Total fee-based income
$
13,590

 
$
13,334

 
$
12,367

 
$
26,924

 
$
25,421

Net interest income on a fully tax-equivalent basis
$
28,586

 
$
27,458

 
$
26,810

 
$
56,044

 
$
53,085

 
 
 
 
 
 
 
 
 
 
Adjusted revenue
$
42,176

 
$
40,792

 
$
39,177

 
$
82,968

 
$
78,506

 
 
 
 
 
 
 
 
 
 
Efficiency ratio adjusted for non-core items
61.19
%
 
64.89
%
 
64.85
%
 
63.01
%
 
64.56
%



14


 
At or For the Three Months Ended
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
(in $000’s)
2017
 
2017
 
2016
 
2016
 
2016
 
 
 
 
 
 
 
 
 
 
Tangible Equity:
 
 
 
 
 
 
 
 
 
Total stockholders' equity
$
451,353

 
$
443,009

 
$
435,261

 
$
440,637

 
$
437,753

Less: goodwill and other intangible assets
144,692

 
145,505

 
146,018

 
147,005

 
147,971

Tangible equity
$
306,661

 
$
297,504

 
$
289,243

 
$
293,632

 
$
289,782

 
 
 
 
 
 
 
 
 
 
Tangible Assets:
 
 
 
 
 
 
 
 
 
Total assets
$
3,525,126

 
$
3,459,276

 
$
3,432,348

 
$
3,363,585

 
$
3,333,455

Less: goodwill and other intangible assets
144,692

 
145,505

 
146,018

 
147,005

 
147,971

Tangible assets
$
3,380,434

 
$
3,313,771

 
$
3,286,330

 
$
3,216,580

 
$
3,185,484

 
 
 
 
 
 
 
 
 
 
Tangible Book Value per Common Share:
 
 
 
 
 
 
 
 
 
Tangible equity
$
306,661

 
$
297,504

 
$
289,243

 
$
293,632

 
$
289,782

Common shares outstanding
18,279,036

 
18,270,508

 
18,200,067

 
18,195,986

 
18,185,708

 
 
 
 
 
 
 
 
 
 
Tangible book value per common share
$
16.78

 
$
16.28

 
$
15.89

 
$
16.14

 
$
15.93

 
 
 
 
 
 
 
 
 
 
Tangible Equity to Tangible Assets Ratio:
 
 
 
 
Tangible equity
$
306,661

 
$
297,504

 
$
289,243

 
$
293,632

 
$
289,782

Tangible assets
$
3,380,434

 
$
3,313,771

 
$
3,286,330

 
$
3,216,580

 
$
3,185,484

 
 
 
 
 
 
 
 
 
 
Tangible equity to tangible assets
9.07
%
 
8.98
%
 
8.80
%
 
9.13
%
 
9.10
%

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Pre-Provision Net Revenue:
 
 
 
 
 
 
 
 
 
Income before income taxes
$
14,180

 
$
12,661

 
$
11,441

 
$
26,841

 
$
23,090

Add: provision for loan losses
947

 
624

 
727

 
1,571

 
1,682

Add: loss on debt extinguishment
—

 
—

 
707

 
—

 
707

Add: net loss on loans held-for-sale and OREO
24

 
—

 
—

 
24

 
1

Add: net loss on other assets
—

 
3

 
62

 
3

 
92

Less: net gain on securities transactions
18

 
340

 
767

 
358

 
863

Less: gain on other assets
133

 
—

 
—

 
133

 
—

Pre-provision net revenue
$
15,000

 
$
12,948

 
$
12,170

 
$
27,948

 
$
24,709

 
 
 
 
 
 
 
 
 
 
Pre-provision net revenue
$
15,000

 
$
12,948

 
$
12,170

 
$
27,948

 
$
24,709

Total average assets
$
3,489,701

 
$
3,446,351

 
$
3,306,656

 
$
3,468,146

 
$
3,288,469

 
 
 
 
 
 
 
 
 
 
Pre-provision net revenue to total average assets (annualized)
1.72
%
 
1.52
%
 
1.48
%
 
1.63
%
 
1.51
%


15


 
At or For the Three Months Ended
 
For the Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Annualized Net Income Excluding Amortization of Other Intangible Assets:
 
 
 
 
Net income
$
9,766

 
$
8,809

 
$
7,962

 
$
18,575

 
$
15,957

Add: amortization of other intangible assets
871

 
863

 
1,007

 
1,734

 
2,015

Less: tax effect (at 35% tax rate) of amortization of other intangible assets
305

 
302

 
352

 
607

 
705

Net income excluding amortization of other intangible assets
$
10,332

 
$
9,370

 
$
8,617

 
$
19,702

 
$
17,267

 
 
 
 
 
 
 
 
 
 
Days in the quarter
91

 
90

 
91

 
181

 
182

Days in the year
365

 
365

 
366

 
365

 
366

Annualized net income
$
39,171

 
$
35,725

 
$
32,023

 
$
37,458

 
$
32,089

Annualized net income excluding amortization of other intangible assets
$
41,442

 
$
38,001

 
$
34,657

 
$
39,731

 
$
34,724

 
 
 
 
 
 
 
 
 
 
Average Tangible Stockholders' Equity:
 
 
 
 
Total average stockholders' equity
$
447,399

 
$
438,990

 
$
430,072

 
$
443,218

 
$
426,808

Less: average goodwill and other intangible assets
145,052

 
145,546

 
148,464

 
145,298

 
148,996

Average tangible stockholders' equity
$
302,347

 
$
293,444

 
$
281,608

 
$
297,920

 
$
277,812

 
 
 
 
 
 
 
 
 
 
Return on Average Stockholders' Equity Ratio:
 
 
 
 
 
Annualized net income
$
39,171

 
$
35,725

 
$
32,023

 
$
37,458

 
$
32,089

Average stockholders' equity
$
447,399

 
$
438,990

 
$
430,072

 
$
443,218

 
$
426,808

 
 
 
 
 
 
 
 
 
 
Return on average stockholders' equity
8.76
%
 
8.14
%
 
7.45
%
 
8.45
%
 
7.52
%
 
 
 
 
 
 
Return on Average Tangible Stockholders' Equity Ratio:
 
 
 
 
 
Annualized net income excluding amortization of other intangible assets
$
41,442

 
$
38,001

 
$
34,657

 
$
39,731

 
$
34,724

Average tangible stockholders' equity
$
302,347

 
$
293,444

 
$
281,608

 
$
297,920

 
$
277,812

 
 
 
 
 
 
 
 
 
 
Return on average tangible stockholders' equity
13.71
%
 
12.95
%
 
12.31
%
 
13.34
%
 
12.50
%

 
 
 
 
 
 
 
 
 
 
END OF RELEASE

16