EX-99.1 2 exhibit991q42017er.htm EXHIBIT 99.1 Exhibit


Filed by Peoples Bancorp Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Issuing Company: Peoples Bancorp Inc.
Registration Statement on Form S-4 File No. 333-222054
Subject Company: ASB Financial Corp.

pebonewlogoa07.jpg
P.O. BOX 738 - MARIETTA, OHIO - 45750
NEWS RELEASE
www.peoplesbancorp.com
 
 
 
 
 
FOR IMMEDIATE RELEASE
 
Contact:
John C. Rogers
January 23, 2018
 
 
Chief Financial Officer and Treasurer
 
 
 
(740) 373-3155

PEOPLES BANCORP INC. ANNOUNCES 4TH QUARTER EARNINGS AND
RECORD FULL YEAR NET INCOME FOR 2017
_____________________________________________________________________

MARIETTA, Ohio - Peoples Bancorp Inc. ("Peoples") (NASDAQ: PEBO) today announced results for the quarter and year ended December 31, 2017. Net income totaled $9.0 million for the fourth quarter of 2017, representing earnings per diluted common share of $0.49. During the fourth quarter of 2017, certain non-recurring items impacted earnings per diluted common share. Earnings per diluted common share for the fourth quarter of 2017 were positively impacted by $0.03 due to a gain on the sale of bank equity investment securities, and negatively impacted by $0.02 due to non-core charges and $0.05 due to the recently enacted Tax Cuts and Jobs Act. In comparison, earnings per diluted common share were $0.60 for the third quarter of 2017 and $0.41 for the fourth quarter of 2016. For the full year, net income was $38.5 million in 2017 versus $31.2 million in 2016, representing earnings per diluted common share of $2.10 and $1.71, respectively. Earnings per diluted common share for the full year of 2017 were positively impacted by $0.10 due to gains on sales of bank equity investment securities, and negatively impacted by $0.02 due to non-core charges and $0.05 due to the recently enacted Tax Cuts and Jobs Act.
"We continued to build on the momentum from 2016. We were able to generate positive operating leverage, loan growth, and improved asset quality metrics, while achieving an efficiency ratio below 63% during 2017, an improvement of nearly 300 basis points from the prior year," said Chuck Sulerzyski, President and Chief Executive Officer. "We were able to reap the benefits of our prior investments in people, facilities and systems. We completed the acquisition of a property and casualty focused independent insurance agency during 2017 and announced a pending bank merger that is expected to close during the second quarter of 2018. We are pleased with our accomplishments for the year, and will continue to focus on our clients and communities, while remaining committed to continual improvement throughout 2018."
As previously announced, on October 23, 2017, Peoples entered into a merger agreement with ASB Financial Corp. ("ASB") that calls for ASB to merge into Peoples, and for ASB's wholly-owned subsidiary, American Savings Bank, fsb, which operates six full service bank branches and two loan production offices located in southern Ohio and northern Kentucky, to merge into Peoples Bank. This transaction is expected to close during the second quarter of 2018, subject to the satisfaction of customary closing conditions, including regulatory approvals and the approval of the shareholders of ASB. As of September 30, 2017, ASB had approximately $292.6 million in total assets, which included approximately $247.5 million in net loans, and approximately $205.9 million in total deposits.

Statement of Operations Highlights:
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Net interest income for the fourth quarter of 2017 was essentially flat compared to the third quarter of 2017, and grew 9% compared to the fourth quarter of 2016, while increasing 8% for the full year of 2017.
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Net interest margin was 3.63% for the fourth quarter of 2017, compared to 3.67% for the linked quarter, and 3.54% for the fourth quarter of 2016.

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The third quarter of 2017 benefited from proceeds received on an investment security that had previously been written down due to an other-than-temporary impairment, which added 8 basis points to net interest margin.
•
Provision for loan losses was $1.1 million for the fourth quarter and $3.8 million for the full year of 2017.
•
Total fee-based income increased 4% during the fourth quarter of 2017 compared to the third quarter of 2017 and 8% compared to the fourth quarter of 2016, while increasing 3% for the full year of 2017.
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Fee-based income benefited from growth in trust and investment income throughout the year, which was up 8% for the fourth quarter of 2017 compared to the linked quarter, 12% compared to the fourth quarter of 2016 and 9% for the full year of 2017 compared to the full year of 2016.
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For the full year of 2017, fee-based income was 32% of total revenue, down from 33% for the full year of 2016, primarily due to increased net interest income, driven by loan growth and increasing interest rates.
•
Total non-interest expense for the fourth quarter of 2017 was up 3% compared to the linked quarter and relatively flat compared to the fourth quarter of 2016, while increasing 1% for the full year of 2017.
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The increase compared to the third quarter of 2017 was primarily attributable to $583,000 of non-core charges that were recognized during the fourth quarter of 2017, including acquisition-related costs and a pension settlement charge.
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The efficiency ratio was 62.1% for the fourth quarter of 2017, compared to 60.7% for the third quarter of 2017 and 66.9% for the fourth quarter of 2016.
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For the full year, the efficiency ratio was 62.2% in 2017 compared to 65.1% in 2016.
•
Operating leverage was positive for the fourth quarter of 2017 compared to the fourth quarter of 2016, and for the full year of 2017 compared to the full year of 2016.
◦ Compared to the full year of 2016, revenue for 2017 was up 6%, while expenses grew 1%.
•
Income tax expense during the fourth quarter of 2017 was impacted by an $897,000 write down of net deferred tax assets in connection with recent tax law changes.
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The write down of net deferred tax assets was within the range previously disclosed on January 9, 2018.

Balance Sheet Highlights:
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Average loan balances for the full year of 2017 grew 8% from 2016, while period-end loan balances grew 5% on an annualized basis compared to the end of the linked quarter.
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Commercial loan balances grew $37.5 million, or 11% annualized, during the fourth quarter of 2017, and $95.5 million, or 8%, for the full year of 2017.
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Indirect consumer loans grew $4.9 million, or 6% annualized, during the fourth quarter of 2017, and $87.9 million, or 35%, for the full year of 2017.
•
Asset quality metrics improved during the quarter and for the full year.
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Nonperforming assets decreased to 0.74% of total loans and other real estate owned ("OREO") at December 31, 2017, compared to 0.86% at September 30, 2017, and 1.16% at December 31, 2016.
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Nonperforming assets at December 31, 2017 decreased 13%, compared to September 30, 2017, and were down 32% compared to December 31, 2016.
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Allowance for loan losses as a percent of total loans was 0.80% at December 31, 2017, compared to 0.82% at September 30, 2017 and 0.83% at December 31, 2016.
•
Period-end total deposit balances at December 31, 2017 increased $65.6 million compared to September 30, 2017, or 10% on an annualized basis, and $220.6 million, or 9%, compared to December 31, 2016.
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Average deposits for the full year of 2017 grew 4% from 2016.
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Total demand deposit balances were 42% of total deposits at December 31, 2017 and September 30, 2017, compared to 40% at December 31, 2016.
Net Interest Income
Net interest income was $29.1 million for the fourth quarter of 2017, essentially flat compared to the linked quarter, and up 9% from the fourth quarter of 2016. Net interest margin was 3.63% for the fourth quarter of 2017, compared to 3.67% for the third quarter of 2017, and 3.54% for the fourth quarter of 2016. Net interest income increased 8% to $113.4 million for the year, while net interest margin grew from 3.54% to 3.62%. The increases in net interest income compared to the prior year quarterly period and the full year were largely attributable to loan growth and increasing interest rates. The linked quarter benefited from proceeds of $611,000 received on an investment security that had been previously written down due to an other-than-temporary impairment, which added 8 basis points to the net interest margin for the third quarter of 2017. For the full year of 2017, proceeds received on investment securities that had previously been written down totaled $814,000, adding 3 basis points to net interest margin.

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The accretion income, net of amortization expense, from acquisitions was $715,000 for the fourth quarter of 2017, compared to $816,000 for the third quarter of 2017 and $874,000 for the fourth quarter of 2016, which added 8 basis points, 10 basis points and 11 basis points, respectively, to net interest margin. For the full year of 2017, accretion income, net of amortization expense, from acquisitions was $3.1 million, compared to $3.5 million in 2016, and added 10 basis points and 11 basis points, respectively, to net interest margin.
Provision for Loan Losses:
The provision for loan losses was $1.1 million for both the fourth quarter and the third quarter of 2017, compared to $0.7 million for the fourth quarter of 2016. Loan growth was the primary contributor to the increase in the provision for loan losses, and was offset by improvements in asset quality metrics compared to the third quarter of 2017. For the full year of 2017, provision for loan losses was $3.8 million, compared to $3.5 million for 2016, and was driven by loan growth.

Total Fee-Based Income:
Total fee-based income for the fourth quarter of 2017 increased $0.5 million, or 4%, compared to the linked quarter, and $1.0 million, or 8%, compared to the fourth quarter of 2016. The increase compared to the third quarter of 2017 was primarily attributable to increases in trust and investment income, commercial loan swap fee income, and electronic banking income. The increase compared to the fourth quarter of 2016 was largely due to higher insurance income, trust and investment income, electronic banking income, and commercial loan swap fee income. Trust and investment income benefited from increased fiduciary and brokerage income during the quarter due largely to growth in assets under administration and management, as well as annual fees received for the administration of employee benefit plans. Commercial loan swap fee income is dependent upon customer demand, and was up $161,000 in the fourth quarter of 2017 compared to the linked quarter, and $158,000 compared to the fourth quarter of 2016. Insurance income was up compared to the fourth quarter of 2016 primarily due to increased property and casualty insurance commission income.
For the full year of 2017, total fee-based income increased $1.6 million, or 3%, compared to 2016. The increase was primarily attributable to increases in trust and investment income, mortgage banking income, and bank owned life insurance income, partially offset by a decrease in deposit account service charges. The increase in trust and investment income was due largely to growth in assets under administration and management. Mortgage banking income increased due to customer demand. The increase in bank owned life insurance income was the result of the additional $35 million of bank owned life insurance policies that were purchased late in the second quarter of 2016, for which a full year of income was recognized in 2017.
Total Non-interest Expense:
Total non-interest expense for the fourth quarter of 2017 was $27.4 million, compared to $26.6 million for the third quarter of 2017, and $27.3 million for the fourth quarter of 2016. The increase compared to the linked quarter was due primarily to non-core charges and an increase in professional fees. Compared to the fourth quarter of 2016, total non-interest expense was relatively flat in the fourth quarter of 2017, as increases in Federal Deposit Insurance Corporation ("FDIC") insurance expense and marketing expense were offset by decreases in communications expense, professional fees, and data processing and software expense.
Total non-interest expense, adjusted for non-core charges, was up $265,000 compared to the linked quarter and $287,000 compared to the fourth quarter of 2016. In the fourth quarter of 2017, Peoples recognized $341,000 of acquisition-related costs and a $242,000 pension settlement charge. In the fourth quarter of 2016, Peoples incurred $746,000 of non-core charges related to the upgrade of Peoples' core banking systems.
For the full year of 2017, total non-interest expense was up $1.0 million, or 1%, compared to 2016, primarily due to higher salaries and employee benefits costs, and data processing and software costs. The increase in salaries and employee benefits costs was largely due to higher incentive compensation, which was tied to corporate performance for 2017, coupled with increased medical insurance costs and pension settlement charges recognized. These increases were partially offset by declines in professional fees, communications expense, and amortization of other intangible assets.
Total non-interest expense, adjusted for non-core charges, was up $1.7 million for the full year of 2017 compared to the full year of 2016 as charges related to the upgrade of Peoples' core banking system of $1.3 million in 2016 exceeded aggregate non-core charges of $583,000 in 2017, all of which were recognized during the fourth quarter of 2017.
The efficiency ratio for the fourth quarter of 2017 was 62.1%, compared to 60.7% for the linked quarter and 66.9% for the fourth quarter of 2016. The increase in the efficiency ratio compared to the linked quarter was largely the result of non-core charges. The efficiency ratio, when adjusted for non-core items, was 60.7% for both the fourth quarter and third quarter of 2017, and was 64.8% for the fourth quarter of 2016.

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For the full year of 2017, the efficiency ratio was 62.2% compared to 65.1% in 2016. The decrease in the efficiency ratio in 2017 compared to 2016 was the result of increases in both net interest income and fee-based income, as well as continued control over expenses. When adjusted for non-core items, the efficiency ratio for the full year of 2017 was 61.9%, compared to 64.3% in 2016.
Loans:
Period-end total loan balances at December 31, 2017 increased $30.1 million, or 5% annualized, compared to September 30, 2017. Commercial lending was a key component of loan growth, as commercial loan balances increased $37.5 million, or 11% annualized, during the quarter, with commercial and industrial loans growing $28.6 million, or 26% annualized. Indirect consumer lending also contributed to the increase, as indirect consumer loan balances grew $4.9 million, or 6% annualized, during the quarter, which partially offset decreases in other consumer lending categories. During the fourth quarter of 2017, growth in loan balances was partially offset by payoffs of certain criticized loans.
Compared to December 31, 2016, period-end loan balances at December 31, 2017 increased $132.2 million, or 6%. The increase was primarily the result of commercial loan growth of $95.5 million, or 8%, which was almost evenly split between commercial real estate and commercial and industrial loan balances. From a bank regulatory perspective, non-owner-occupied commercial real estate loan balances as of December 31, 2017 remained well below the financial institutions regulators' guidance of 300% of total risk-based capital. The ratio at December 31, 2017 of non-owner-occupied commercial real estate loans to total risk-based capital was 159%, compared to 161% at September 30, 2017, and 155% at December 31, 2016. Indirect consumer lending also contributed loan growth of $87.9 million, or 35%, compared to December 31, 2016, and was partially offset by reductions in residential real estate loans. At December 31, 2017 and September 30, 2017, indirect consumer loan balances comprised 14% of the total loan portfolio, compared to 11% at December 31, 2016.
Quarterly average gross loan balances increased $22.7 million, or 4% annualized, compared to the linked quarter. Commercial loans provided $18.3 million of growth compared to the third quarter of 2017, while consumer indirect loans grew $16.5 million, partially offset by an $11.6 million decline in residential real estate loans. Quarterly average gross loan balances for the three months ended December 31, 2017 increased 7% compared to the same period in 2016, with commercial loan growth of $114.6 million, and consumer indirect loan growth of $97.3 million. For the full year of 2017, average gross loan balances increased 8% compared to the full year of 2016, with the growth being almost evenly divided between commercial loans and consumer indirect loans.
Asset Quality:
Asset quality metrics improved during the fourth quarter of 2017. Nonperforming assets as a percent of total loans and OREO was 0.74% at December 31, 2017, compared to 0.86% at September 30, 2017 and 1.16% at December 31, 2016. At December 31, 2017, nonperforming assets had declined 13% from September 30, 2017, and 32% from December 31, 2016.
Annualized net charge-offs were 0.22% of average gross loans during the fourth quarter of 2017, compared to 0.16% in the linked quarter and 0.09% in the fourth quarter of 2016. The higher net charge-off rate during the fourth quarter of 2017 was primarily related to the partial charge-off of a single commercial real estate loan relationship. For the full year of 2017, net charge-offs were 0.15% of average gross loans, compared to 0.09% for the full year of 2016.
Criticized loans, which are those categorized as special mention, substandard or doubtful, decreased $6.3 million, or 7%, compared to September 30, 2017, and $8.8 million, or 9%, compared to December 31, 2016. Classified loans, which are those categorized as substandard or doubtful, increased $5.1 million, or 12%, compared to September 30, 2017 and declined $11.4 million, or 20%, compared to December 31, 2016. The increase in classified loans compared to the end of the linked quarter was mostly due to one large commercial loan relationship that was downgraded during the fourth quarter. As a percent of total loans, classified loans were 1.97% at December 31, 2017, compared to 1.77% at September 30, 2017, and 2.59% at December 31, 2016. Criticized loans were 3.83% of total loans at December 31, 2017, compared to 4.15% at September 30, 2017 and 4.46% at December 31, 2016.
At December 31, 2017, the allowance for loan losses was $18.8 million, compared to $19.0 million at September 30, 2017, and $18.4 million at December 31, 2016. The ratio of the allowance for loan losses as a percent of total loans was 0.80% at December 31, 2017, compared to 0.82% at September 30, 2017, and 0.83% at December 31, 2016. The ratio includes total acquired loans of $414.8 million and allowance for acquired loan losses of $0.1 million at December 31, 2017. The reductions in the ratio were due largely to continued improvement in asset quality metrics.



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Deposits:
In the third quarter of 2017, Peoples announced a new consumer checking account product suite to its customers. The migration of customer accounts began late in the third quarter of 2017 and was completed early in the fourth quarter, creating a shift of accounts from non-interest-bearing to interest-bearing demand deposit accounts.
As of December 31, 2017, period-end deposits increased $65.6 million, or 10% annualized, compared to September 30, 2017, and increased $220.6 million, or 9%, compared to December 31, 2016. The increase compared to September 30, 2017 was primarily attributable to a $66.6 million increase in brokered certificates of deposit, and a $40.3 million increase in demand deposit accounts, partially offset by a $25.4 million decrease in governmental deposit accounts and a $17.5 million decrease in money market deposit accounts. The increase compared to December 31, 2016 was largely due to a $119.5 million increase in brokered certificates of deposit, and a $136.0 million increase in demand deposit accounts.
Average deposits for the fourth quarter of 2017 increased $44.2 million, or 2%, compared to the linked quarter, which was largely attributable to increases of $58.8 million in demand deposit accounts and $31.6 million in brokered certificates of deposit, offset by reductions of $28.2 million in governmental deposit accounts and $11.5 million in money market deposit accounts. Compared to the fourth quarter of 2016, average deposits increased $168.7 million, or 7%, largely due to increases of $116.6 million in demand deposit accounts and $100.2 million in brokered certificates of deposit, offset by reductions of $33.2 million in retail certificates of deposit and $29.3 million in money market deposit accounts.
For the full year of 2017, average deposits increased $101.0 million, or 4%, compared to the full year of 2016. The increase was largely attributable to increases of $106.9 million in interest-bearing demand deposits and $57.2 million in brokered certificates of deposit, offset by decreases of $48.0 million in retail certificates of deposit and $11.8 million in money market deposit accounts.
Total demand deposit accounts comprised 42% of total deposits at both December 31, 2017 and September 30, 2017, compared to 40% at December 31, 2016.
Stockholders' Equity:
At December 31, 2017, the tier 1 risk-based capital ratio was 13.70%, compared to 13.60% at September 30, 2017 and 13.21% at December 31, 2016. The common equity tier 1 risk-based capital ratio was 13.41% at December 31, 2017, compared to 13.31% at September 30, 2017 and 12.91% at December 31, 2016. The total risk-based capital ratio was 14.58% at December 31, 2017, compared to 14.49% at September 30, 2017 and 14.11% at December 31, 2016. The improvement in these capital ratios compared to the end of the linked quarter was due primarily to increased earnings, which was largely driven by loan growth.
Peoples' capital position remained strong at December 31, 2017. The book value per share was $25.08 at December 31, 2017, compared to $25.02 at September 30, 2017 and $23.92 at December 31, 2016. The tangible book value per share was $17.17 at December 31, 2017, compared to $17.15 at September 30, 2017 and $15.89 at December 31, 2016. The tangible equity to tangible assets ratio was 9.14% at December 31, 2017, compared to 9.20% at September 30, 2017 and 8.80% at December 31, 2016.


Peoples Bancorp Inc. is a diversified financial services holding company with $3.6 billion in total assets, 74 locations, including 65 full-service bank branches, and 71 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 fourth quarter and full year 2017 results of operations today at 11:00 a.m., Eastern Standard 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.

Use of Non-GAAP Financial Measures:

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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 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 measures used in this news release:
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Core non-interest income is non-GAAP since it excludes the impact of revenue waived related to the system upgrade of Peoples' core banking system.
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Core non-interest expenses are non-GAAP since they exclude the impact of items such as costs associated with the system upgrade of Peoples core banking system, acquisition-related costs and pension settlement charges.
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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 (which are excluded from total fee-based income), and uses fully tax-equivalent net interest income.
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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.
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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 provision for loan losses and all gains and/or losses included in earnings, which are excluded from total fee-based income.
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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 balance sheet 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".

Important Information for Investors and Shareholders:
This news release does not constitute an offer to sell or the solicitation of an offer to buy securities of Peoples. Peoples has filed a registration statement on Form S-4 and will file other documents regarding the proposed merger with ASB referenced in this news release with the Securities and Exchange Commission ("SEC") to register the common shares of Peoples to be issued to the shareholders of ASB. The registration statement includes a proxy statement/prospectus, which will be sent to the shareholders of ASB after the registration statement has been declared effective by the SEC and in advance of ASB's special meeting of shareholders to be held to consider the proposed merger. Investors and security holders are urged to read the proxy statement/prospectus and any other relevant documents to be filed with the SEC in connection with the proposed transaction because they contain important information about Peoples, ASB and the proposed merger. Investors and security holders may obtain a free copy of these documents (when available) through the website maintained by the SEC at www.sec.gov. These documents may also be obtained, free of charge, on Peoples’ website at www.peoplesbancorp.com under the tab “Investor Relations” or by contacting Peoples’ Investor Relations Department at: Peoples Bancorp Inc., 138 Putnam Street, PO Box 738, Marietta, Ohio 45750, Attn: Investor Relations.
Peoples, ASB, and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of ASB in connection with the proposed merger. Information about the directors and executive officers of Peoples is set forth in the proxy statement for Peoples' 2017 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 8, 2017. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph, when it becomes available.

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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) Peoples' ability to integrate future acquisitions, including the pending merger with ASB, may be unsuccessful, or may be more difficult, time-consuming or costly than expected;
(3) Peoples' ability to obtain regulatory approvals of the proposed merger of Peoples with ASB on the proposed terms and schedule, and approval of the merger by the shareholders of ASB may be unsuccessful;
(4) 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;
(5) 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;
(6) 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;
(7) changes in policy and other regulatory and legal developments accompanying the current presidential administration, including the recently enacted Tax Cuts and Jobs Act, and uncertainty or speculation pending the enactment of such changes;
(8) uncertainties in Peoples' preliminary review of, and additional analysis of, the Tax Cuts and Jobs Act;
(9) 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;
(10) Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;
(11) 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;
(12) 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;
(13) deterioration in the credit quality of Peoples' loan portfolio, which may adversely impact the provision for loan losses;
(14) changes in accounting standards, policies, estimates or procedures which may adversely affect Peoples' reported financial condition or results of operations;
(15) Peoples' assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results;
(16) 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;
(17) Peoples' ability to receive dividends from its subsidiaries;

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(18) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;
(19) the impact of minimum capital thresholds established as a part of the implementation of Basel III;
(20) 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;
(21) 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;
(22) 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;
(23) ability to anticipate and respond to technological changes which can impact Peoples' ability to respond to customer needs and meet competitive demands;
(24) changes in consumer spending, borrowing and saving habits, whether due to the newly enacted tax legislation, changes in business and economic conditions, legislative or regulatory initiatives, or other factors, which may be different than anticipated;
(25) the overall adequacy of Peoples' risk management program;
(26) 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;
(27) 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
(28) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed
with 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, and in Peoples'
subsequent Quarterly Reports on Form 10-Q.
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 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 December 31, 2017 consolidated financial statements as part of its Annual Report on Form 10-K 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.


8


PER COMMON SHARE DATA AND SELECTED RATIOS (Unaudited)
 
Three Months Ended
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
 
2017
 
2017
 
2016
 
2017
 
2016
PER COMMON SHARE:
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
   Basic
$
0.50

 
$
0.60

 
$
0.41

 
$
2.12

 
$
1.72

   Diluted
0.49

 
0.60

 
0.41

 
2.10

 
1.71

Cash dividends declared per share
0.22

 
0.22

 
0.17

 
0.84

 
0.64

Book value per share
25.08

 
25.02

 
23.92

 
25.08

 
23.92

Tangible book value per share (a)
17.17

 
17.15

 
15.89

 
17.17

 
15.89

Closing stock price at end of period
$
32.62

 
$
33.59

 
$
32.46

 
$
32.62

 
$
32.46

 
 
 
 
 
 
 
 
 
 
SELECTED RATIOS:
 
 
 
 
 
 
 
 
 
Return on average equity (b)
7.79
%
 
9.47
%
 
6.72
%
 
8.54
%
 
7.20
%
Return on average tangible stockholders' equity (b)(c)
12.09
%
 
14.58
%
 
10.99
%
 
13.33
%
 
11.86
%
Return on average assets (b)
1.00
%
 
1.22
%
 
0.87
%
 
1.10
%
 
0.94
%
Efficiency ratio (d)
62.07
%
 
60.74
%
 
66.87
%
 
62.20
%
 
65.13
%
Pre-provision net revenue to average assets (b)(e)
1.65
%
 
1.71
%
 
1.35
%
 
1.65
%
 
1.48
%
Net interest margin (b)(f)
3.63
%
 
3.67
%
 
3.54
%
 
3.62
%
 
3.54
%
Dividend payout ratio (g)
44.75
%
 
36.90
%
 
41.70
%
 
39.86
%
 
37.40
%
 
 
 
 
 
 
 
 
 
 
(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 (which are excluded from total fee-based income), 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 loan losses and all gains and/or losses included in earnings, which are excluded from total fee-based income. 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 declared during the period divided by earnings for the period.


9


CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
Three Months Ended
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
Interest income
$
32,772

 
$
32,728

 
$
29,350

 
$
126,525

 
$
115,444

Interest expense
3,650

 
3,508

 
2,683

 
13,148

 
10,579

Net interest income
29,122

 
29,220

 
26,667

 
113,377

 
104,865

Provision for loan losses

1,115

 
1,086

 
711

 
3,772

 
3,539

Net interest income after provision for loan losses
28,007

 
28,134

 
25,956

 
109,605

 
101,326

 
 
 
 
 
 
 
 
 
 
Net gain on investment securities
764

 
1,861

 
68

 
2,983

 
930

Loss on debt extinguishment
—

 
—

 
—

 
—

 
(707
)
Net (loss) gain on loans held-for-sale and other real estate owned
(105
)
 
13

 
(33
)
 
(116
)
 
(34
)
Net (loss) gain on other assets
(39
)
 
(38
)
 
(76
)
 
53

 
(392
)
 
 
 
 
 
 
 
 
 
 
Fee-based income:
 
 
 
 
 
 
 
 
 
Insurance income
3,343

 
3,345

 
2,912

 
14,204

 
13,846

Trust and investment income
3,061

 
2,838

 
2,739

 
11,558

 
10,589

Electronic banking income
2,666

 
2,544

 
2,486

 
10,358

 
10,353

Deposit account service charges
2,484

 
2,407

 
2,663

 
9,614

 
10,662

Mortgage banking income
483

 
535

 
452

 
1,872

 
1,304

Bank owned life insurance income
479

 
482

 
503

 
1,950

 
1,414

Commercial loan swap fee income
237

 
76

 
79

 
1,232

 
1,076

Other non-interest income
366

 
383

 
277

 
1,865

 
1,826

  Total fee-based income
13,119

 
12,610

 
12,111

 
52,653

 
51,070

 
 
 
 
 
 
 
 
 
 
Non-interest expense:
 
 
 
 
 
 
 
 
 
Salaries and employee benefits costs
14,590

 
15,141

 
14,552

 
60,276

 
57,433

Net occupancy and equipment expense
2,653

 
2,619

 
2,580

 
10,633

 
10,735

Professional fees
2,043

 
1,393

 
2,193

 
6,575

 
7,436

Electronic banking expense
1,387

 
1,448

 
1,424

 
5,874

 
5,992

Data processing and software expense
1,111

 
1,092

 
1,260

 
4,441

 
3,763

Amortization of other intangible assets
913

 
869

 
1,007

 
3,516

 
4,030

Marketing expense
592

 
488

 
402

 
1,714

 
1,594

Franchise taxes
496

 
583

 
642

 
2,246

 
2,192

FDIC insurance expense
477

 
449

 
193

 
1,816

 
1,899

Communication expense
341

 
334

 
531

 
1,475

 
2,261

Foreclosed real estate and other loan expenses
284

 
214

 
319

 
873

 
859

Other non-interest expense
2,519

 
1,928

 
2,179

 
8,536

 
8,717

  Total non-interest expense
27,406

 
26,558

 
27,282

 
107,975

 
106,911

  Income before income taxes
14,340

 
16,022

 
10,744

 
57,203

 
45,282

Income tax expense
5,339

 
5,127

 
3,336

 
18,732

 
14,125

    Net income
$
9,001

 
$
10,895

 
$
7,408

 
$
38,471

 
$
31,157

 
 
 
 
 
 
 
 
 
 
PER COMMON SHARE DATA:
 
 
 
 
 
 
 
 
 
Earnings per share – Basic
$
0.50

 
$
0.60

 
$
0.41

 
$
2.12

 
$
1.72

Earnings per share – Diluted
$
0.49

 
$
0.60

 
$
0.41

 
$
2.10

 
$
1.71

Cash dividends declared per share
$
0.22

 
$
0.22

 
$
0.17

 
$
0.84

 
$
0.64

 
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding – Basic
18,069,467

 
18,056,202

 
18,009,056

 
18,050,189

 
18,013,693

Weighted-average shares outstanding – Diluted
18,240,092

 
18,213,533

 
18,172,030

 
18,208,684

 
18,155,463

Actual shares outstanding (end of period)
18,287,449

 
18,281,194

 
18,200,067

 
18,287,449

 
18,200,067


10


CONSOLIDATED BALANCE SHEETS (Unaudited)
 
December 31,
(in $000’s)
2017
 
2016
 
 
 
 
Assets
 
 
 
Cash and cash equivalents:
 
 
 
  Cash and due from banks
$
58,121

 
$
58,129

  Interest-bearing deposits in other banks
14,073

 
8,017

    Total cash and cash equivalents
72,194

 
66,146

 
 
 
 
Available-for-sale investment securities, at fair value (amortized cost of
 
 
 
  $797,732 at December 31, 2017 and $777,017 at December 31, 2016)
795,187

 
777,940

Held-to-maturity investment securities, at amortized cost (fair value of
 
 
 
  $41,213 at December 31, 2017 and $43,227 at December 31, 2016)
40,928

 
43,144

Other investment securities, at cost
38,371

 
38,371

    Total investment securities
874,486

 
859,455

 
 
 
 
Loans, net of deferred fees and costs
2,357,137

 
2,224,936

Allowance for loan losses
(18,793
)
 
(18,429
)
    Net loans
2,338,344

 
2,206,507

 
 
 
 
Loans held-for-sale
2,510

 
4,022

Bank premises and equipment, net of accumulated depreciation
52,510

 
53,616

Bank owned life insurance
62,176

 
60,225

Goodwill
133,111

 
132,631

Other intangible assets
11,465

 
13,387

Other assets
34,890

 
36,359

    Total assets
$
3,581,686

 
$
3,432,348

 
 
 
 
Liabilities
 
 
 
Deposits:
 
 
 
Non-interest-bearing deposits
$
556,010

 
$
734,421

Interest-bearing deposits
2,174,320

 
1,775,301

    Total deposits
2,730,330

 
2,509,722

 
 
 
 
Short-term borrowings
209,491

 
305,607

Long-term borrowings
144,019

 
145,155

Accrued expenses and other liabilities
39,254

 
36,603

    Total liabilities
3,123,094

 
2,997,087

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

 
—

Common stock, no par value, 24,000,000 shares authorized, 18,952,385 shares issued at December 31, 2017 and 18,939,091 shares issued at December 31, 2016, including shares in treasury
345,412

 
344,404

Retained earnings
133,438

 
110,294

Accumulated comprehensive loss, net of deferred income taxes
(4,291
)
 
(1,554
)
Treasury stock, at cost, 702,449 shares at December 31, 2017 and 795,758 shares at December 31, 2016
(15,967
)
 
(17,883
)
    Total stockholders' equity
458,592

 
435,261

    Total liabilities and stockholders' equity
$
3,581,686

 
$
3,432,348

 
 
 
 

11


SELECTED FINANCIAL INFORMATION (Unaudited)
 
December 31,
September 30,
June 30,
March 31,
December 31,
(in $000’s, end of period)
2017
2017
2017
2017
2016
Loan Portfolio
 
 
 
 
 
Commercial real estate, construction
$
115,437

$
119,752

$
112,169

$
103,317

$
94,726

Commercial real estate, other
760,567

747,413

750,219

730,055

736,023

Commercial and industrial
472,544

443,930

431,473

428,737

422,339

Residential real estate
489,387

499,044

512,887

524,212

535,925

Home equity lines of credit
109,477

110,787

111,710

110,028

111,492

Consumer, indirect
340,719

335,844

306,113

283,762

252,832

Consumer, other
68,157

69,758

69,267

68,670

70,519

Deposit account overdrafts
849

507

521

721

1,080

    Total loans
$
2,357,137

$
2,327,035

$
2,294,359

$
2,249,502

$
2,224,936

Total acquired loans (a)
$
414,847

$
438,350

$
463,189

$
491,270

$
516,832

    Total originated loans
$
1,942,290

$
1,888,685

$
1,831,170

$
1,758,232

$
1,708,104

Deposit Balances
 
 
 
 
 
Non-interest-bearing deposits (b)
$
556,010

$
724,846

$
772,061

$
785,047

$
734,421

Interest-bearing deposits:
 
 
 
 
 
  Interest-bearing demand accounts (b)
$
593,415

384,261

303,501

292,187

$
278,975

  Retail certificates of deposit (c)
338,673

343,122

352,758

353,918

360,464

  Money market deposit accounts
371,376

388,876

397,211

386,999

407,754

  Governmental deposit accounts
264,524

289,895

297,560

330,477

251,671

  Savings accounts
446,714

440,633

443,110

445,720

436,344

  Brokered certificates of deposits (c)
159,618

93,049

110,943

107,817

40,093

    Total interest-bearing deposits
2,174,320

1,939,836

1,905,083

1,917,118

1,775,301

    Total deposits
$
2,730,330

$
2,664,682

$
2,677,144

$
2,702,165

$
2,509,722

Asset Quality
 
 
 
 
 
Nonperforming assets (NPAs):
 
 
 
 
 
  Loans 90+ days past due and accruing
$
1,626

$
3,542

$
2,583

$
3,006

$
3,771

  Nonaccrual loans
15,692

16,219

16,921

18,293

21,325

    Total nonperforming loans (NPLs)
17,318

19,761

19,504

21,299

25,096

  Other real estate owned (OREO)
208

276

652

677

661

Total NPAs
$
17,526

$
20,037

$
20,156

$
21,976

$
25,757

Criticized loans (d)
90,381

96,671

111,480

101,284

99,182

Classified loans (e)
46,343

41,233

53,041

56,503

57,736

Allowance for loan losses as a percent of NPLs (f)(g)
108.52
%
96.11
%
96.47
%
86.71
%
73.43
%
NPLs as a percent of total loans (f)(g)
0.73
%
0.85
%
0.85
%
0.95
%
1.13
%
NPAs as a percent of total assets (f)(g)
0.49
%
0.56
%
0.57
%
0.64
%
0.75
%
NPAs as a percent of total loans and OREO (f)(g)
0.74
%
0.86
%
0.88
%
0.98
%
1.16
%
Criticized loans as a percent of total loans (f)
3.83
%
4.15
%
4.86
%
4.50
%
4.46
%
Classified loans as a percent of total loans (f)
1.97
%
1.77
%
2.31
%
2.51
%
2.59
%
Allowance for loan losses as a percent of total loans (f)
0.80
%
0.82
%
0.81
%
0.82
%
0.83
%
Capital Information (h)
 
 
 
 
 
Common Equity Tier 1 capital ratio
13.41
%
13.31
%
13.18
%
13.05
%
12.91
%
Tier 1 risk-based capital ratio
13.70
%
13.60
%
13.47
%
13.34
%
13.21
%
Total risk-based capital ratio (Tier 1 and Tier 2)
14.58
%
14.49
%
14.40
%
14.27
%
14.11
%
Leverage ratio
9.88
%
9.82
%
9.72
%
9.60
%
9.66
%
Common Equity Tier 1 capital
$
331,921

$
326,966

$
318,849

$
310,856

$
306,506

Tier 1 capital
339,028

334,027

325,865

317,826

313,430

Total capital (Tier 1 and Tier 2)
360,806

355,951

348,309

340,147

334,957

Total risk-weighted assets
$
2,475,265

2,456,797

2,419,335

2,382,874

$
2,373,359

Tangible equity to tangible assets (i)
9.14
%
9.20
%
9.07
%
8.98
%
8.80
%
(a) Includes all loans acquired in 2012 and thereafter.
(b) The sum of amounts presented is considered total demand deposits.

12


(c) Prior periods reclassified.
(d) Includes loans categorized as special mention, substandard or doubtful.
(e) Includes loans categorized as substandard or doubtful.
(f) Data presented as of the end of the period indicated.
(g) Nonperforming loans include loans 90+ days past due and accruing, renegotiated loans and nonaccrual loans. Nonperforming assets include nonperforming loans and OREO.
(h) December 31, 2017 data based on preliminary analysis and subject to revision.
(i) These ratios represent non-GAAP financial measures since they exclude 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 (Unaudited)
 
Three Months Ended
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
Provision for Loan Losses
 
 
 
 
 
 
 
 
 
Provision for loan losses
$
900

 
$
900

 
$
480

 
$
3,050

 
$
2,890

Provision for checking account overdrafts
215

 
186

 
231

 
722

 
649

  Total provision for loan losses
$
1,115

 
$
1,086

 
$
711

 
$
3,772

 
$
3,539

 
 
 
 
 
 
 
 
 
 
Net Charge-Offs
 
 
 
 
 
 
 
 
 
Gross charge-offs
1,602

 
$
1,219

 
$
1,076

 
4,878

 
$
5,198

Recoveries
288

 
310

 
575

 
1,470

 
3,309

  Net charge-offs
$
1,314

 
$
909

 
$
501

 
$
3,408

 
$
1,889

 
 
 
 
 
 
 
 
 
 
Net Charge-Offs (Recoveries) by Type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate, other
$
372

 
$
(19
)
 
$
3

 
$
262

 
$
(1,141
)
Commercial and industrial
10

 
47

 
(56
)
 
174

 
711

Residential real estate
162

 
226

 
(22
)
 
485

 
333

Home equity lines of credit
27

 
77

 
(7
)
 
118

 
17

Consumer, indirect
451

 
319

 
238

 
1,346

 
1,013

Consumer, other
77

 
60

 
143

 
200

 
357

Deposit account overdrafts
215

 
199

 
202

 
823

 
599

  Total net charge-offs
$
1,314

 
$
909

 
$
501

 
$
3,408

 
$
1,889

 
 
 
 
 
 
 
 
 
 
As a percent of average gross loans (annualized)
0.22
%
 
0.16
%
 
0.09
%
 
0.15
%
 
0.09
%





SUPPLEMENTAL INFORMATION (Unaudited)
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
(in $000’s, end of period)
2017
 
2017
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Trust assets under administration and management
$
1,452,959

 
$
1,418,360

 
$
1,393,435

 
$
1,362,243

 
$
1,301,509

Brokerage assets under administration and management
887,303

 
862,530

 
836,192

 
805,361

 
777,771

Mortgage loans serviced for others
$
412,965

 
$
409,199

 
$
402,516

 
$
399,279

 
$
398,134

Employees (full-time equivalent)
774

 
778

 
775

 
776

 
782

 
 
 
 
 
 
 
 
 
 




13


CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME (Unaudited)
 
Three Months Ended
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
(in $000’s)
Balance
Income/
Expense
Yield/ Cost
 
Balance
Income/
Expense
Yield/ Cost
 
Balance
Income/
Expense
Yield/ Cost
Assets
 
 
 
 
 
 
 
 
 
 
 
Short-term investments
$
17,847

$
61

1.36
%
 
$
12,812

$
42

1.30
%
 
$
8,520

$
13

0.61
%
Investment securities (a)(b)
875,653

6,204

2.83
%
 
885,744

6,739

3.04
%
 
862,355

5,816

2.70
%
Loans (b)(c):
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate, construction
120,471

1,312

4.26
%
 
118,208

1,337

4.43
%
 
89,113

889

3.90
%
Commercial real estate, other
753,172

9,035

4.69
%
 
750,260

8,890

4.64
%
 
722,003

8,456

4.58
%
Commercial and industrial
451,647

5,345

4.63
%
 
438,524

5,196

4.64
%
 
399,614

4,201

4.11
%
Residential real estate (d)
496,325

5,455

4.40
%
 
507,906

5,468

4.31
%
 
547,640

5,938

4.34
%
Home equity lines of credit
110,610

1,282

4.60
%
 
110,741

1,291

4.63
%
 
111,417

1,214

4.33
%
Consumer, indirect
338,615

3,217

3.77
%
 
322,072

2,955

3.64
%
 
241,290

2,130

3.51
%
Consumer, other
69,815

1,300

7.39
%
 
70,204

1,270

7.18
%
 
73,321

1,209

6.76
%
Total loans
2,340,655

26,946

4.54
%
 
2,317,915

26,407

4.49
%
 
2,184,398

24,037

4.34
%
Allowance for loan losses
(18,840
)
 
 
 
(18,869
)
 
 
 
(18,254
)
 
 
Net loans
2,321,815



 
 
2,299,046

 
 
 
2,166,144

 
 
Total earning assets
3,215,315

33,211

4.08
%
 
3,197,602

33,188

4.10
%
 
3,037,019

29,866

3.89
%
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets
143,942

 
 
 
144,267

 
 
 
146,489

 
 
Other assets
203,010

 
 
 
199,351

 
 
 
203,011

 
 
Total assets
$
3,562,267

 
 
 
$
3,541,220

 
 
 
$
3,386,519

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
Savings accounts
$
443,056

$
64

0.06
%
 
$
443,599

$
65

0.06
%
 
$
436,733

$
58

0.05
%
Government deposit accounts
281,389

205

0.29
%
 
309,623

200

0.26
%
 
273,263

126

0.18
%
Interest-bearing demand accounts
565,885

233

0.16
%
 
320,788

133

0.16
%
 
275,653

65

0.09
%
Money market deposit accounts
377,839

240

0.25
%
 
389,292

253

0.26
%
 
407,171

202

0.20
%
Retail certificates of deposit
342,165

765

0.89
%
 
348,047

760

0.87
%
 
375,347

807

0.86
%
Brokered certificates of deposits
138,013

566

1.63
%
 
106,448

454

1.69
%
 
37,859

151

1.59
%
Total interest-bearing deposits
2,148,347

2,073

0.38
%
 
1,917,797

1,865

0.39
%
 
1,806,026

1,409

0.31
%
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
189,976

680

1.42
%
 
174,466

369

0.84
%
 
213,852

207

0.39
%
Long-term borrowings
158,011

896

2.25
%
 
200,073

1,274

2.53
%
 
145,677

1,066

2.92
%
Total borrowed funds
347,987

1,576

1.80
%
 
374,539

1,643

1.74
%
 
359,529

1,273

1.41
%
Total interest-bearing liabilities
2,496,334

3,649

0.58
%
 
2,292,336

3,508

0.61
%
 
2,165,555

2,682

0.49
%
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposits
569,759

 
 
 
756,098

 
 
 
743,389

 
 
Other liabilities
37,526

 
 
 
36,588

 
 
 
39,337

 
 
Total liabilities
3,103,619

 
 
 
3,085,022

 
 
 
2,948,281

 
 
Stockholders’ equity
458,648

 
 
 
456,198

 
 
 
438,238

 
 
Total liabilities and equity
$
3,562,267

 
 
 
$
3,541,220

 
 
 
$
3,386,519

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income/spread (b)
 
$
29,562

3.50
%
 
 
$
29,680

3.49
%
 
 
$
27,184

3.40
%
Net interest margin (b)
 
 
3.63
%
 
 
 
3.67
%
 
 
 
3.54
%
 
 
 
 
 
 
 
 
 
 
 
 







14


 
Year Ended
 
 
December 31, 2017
 
December 31, 2016
 
(in $000’s)
Balance
Income/
Expense
Yield/ Cost
 
Balance
Income/
Expense
Yield/ Cost
 
Assets
 
 
 
 
 
 
 
 
Short-term investments
$
12,616

$
144

1.14
%
 
$
9,667

$
50

0.52
%
 
Investment securities (a)(b)
875,940

25,095

2.86
%
 
866,021

23,416

2.70
%
 
Loans (b)(c):
 
 
 
 
 
 
 
 
Commercial real estate, construction
110,124

4,800

4.30
%
 
88,559

3,455

3.84
%
 
Commercial real estate, other
743,517

35,240

4.67
%
 
721,535

33,651

4.59
%
 
Commercial and industrial
439,178

19,944

4.48
%
 
376,881

15,769

4.12
%
 
Residential real estate (d)
514,024

22,256

4.33
%
 
557,537

24,279

4.35
%
 
Home equity lines of credit
110,910

4,965

4.48
%
 
109,164

4,853

4.45
%
 
Consumer, indirect
306,338

10,975

3.58
%
 
207,095

7,432

3.59
%
 
Consumer, other
69,889

5,018

7.18
%
 
72,404

4,566

6.29
%
 
Total loans
2,293,980

103,198

4.50
%
 
2,133,175

94,005

4.41
%
 
Allowance for loan losses
(18,713
)
 
 
 
(17,564
)
 
 
 
Net loans
2,275,267

 
 
 
2,115,611

 
 
 
Total earning assets
3,163,823

128,437

4.03
%
 
2,991,299

117,471

3.90
%
 
 
 
 
 
 
 
 
 
 
Intangible assets
144,696

 
 
 
147,981

 
 
 
Other assets
201,769

 
 
 
181,167

 
 
 
Total assets
$
3,510,288

 
 
 
$
3,320,447

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
Savings accounts
$
442,684

$
249

0.06
%
 
$
434,140

$
231

0.05
%
 
Government deposit accounts
294,053

704

0.24
%
 
296,590

570

0.19
%
 
Interest-bearing demand accounts
367,699

543

0.15
%
 
260,788

217

0.08
%
 
Money market deposit accounts
389,885

877

0.22
%
 
401,693

702

0.17
%
 
Retail certificates of deposit
358,307

2,997

0.84
%
 
406,298

3,181

0.78
%
 
Brokered certificates of deposits
98,793

1,784

1.81
%
 
41,613

1,041

2.50
%
 
Total interest-bearing deposits
1,951,421

7,154

0.37
%
 
1,841,122

5,942

0.32
%
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
182,247

1,533

0.84
%
 
159,169

508

0.32
%
 
Long-term borrowings
177,091

4,460

2.52
%
 
131,386

4,129

3.14
%
 
Total borrowed funds
359,338

5,993

1.67
%
 
290,555

4,637

1.60
%
 
Total interest-bearing liabilities
2,310,759

13,147

0.57
%
 
2,131,677

10,579

0.50
%
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposits
713,027

 
 
 
722,291

 
 
 
Other liabilities
36,123

 
 
 
33,813

 
 
 
Total liabilities
3,059,909

 
 
 
2,887,781

 
 
 
Stockholders’ equity
450,379

 
 
 
432,666

 
 
 
Total liabilities and equity
$
3,510,288

 
 
 
$
3,320,447

 
 
 
 
 
 
 
 
 
 
 
 
Net interest income/spread (b)
 
$
115,290

3.46
%
 
 
$
106,892

3.40
%
 
Net interest margin (b)
 
 
3.62
%
 
 
 
3.54
%
 
 
 
 
 
 
 
 
 
 
(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.
NON-GAAP FINANCIAL MEASURES (Unaudited)
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
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Core non-interest income:
 
 
 
 
 
 
 
 
 
Total non-interest income
$
13,119

 
$
12,610

 
$
12,111

 
$
52,653

 
$
51,070

Plus: System upgrade revenue waived
—

 
—

 
85

 
—

 
85

Core non-interest income
$
13,119

 
$
12,610

 
$
12,196

 
$
52,653

 
$
51,155


 
Three Months Ended
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Core non-interest expenses:
 
 
 
 
 
 
 
 
 
Total non-interest expense
$
27,406

 
$
26,558

 
$
27,282

 
$
107,975

 
$
106,911

Less: system upgrade costs
—

 
—

 
746

 
—

 
1,259

Less: acquisition-related costs
341

 
—

 
—

 
341

 
—

Less: pension settlement charges
242

 
—

 
—

 
242

 
—

Core non-interest expenses
$
26,823

 
$
26,558

 
$
26,536

 
$
107,392

 
$
105,652


 
Three Months Ended
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Efficiency ratio:
 
 
 
 
 
 
 
 
 
Total non-interest expense
$
27,406

 
$
26,558

 
$
27,282

 
$
107,975

 
$
106,911

Less: Amortization of other intangible assets
913

 
869

 
1,007

 
3,516

 
4,030

Adjusted non-interest expense
26,493

 
25,689

 
26,275

 
104,459

 
102,881

 
 
 
 
 
 
 
 
 
 
Total fee-based income
13,119

 
12,610

 
12,111

 
52,653

 
51,070

 
 
 
 
 
 
 
 
 
 
Net interest income
29,122

 
29,220

 
26,667

 
113,377

 
104,865

Add: Fully tax-equivalent adjustment
440

 
460

 
517

 
1,913

 
2,027

Net interest income on a fully taxable-equivalent basis
29,562

 
29,680

 
27,184

 
115,290

 
106,892

 
 
 
 
 
 
 
 
 
 
Adjusted revenue
$
42,681

 
$
42,290

 
$
39,295

 
$
167,943

 
$
157,962

 
 
 
 
 
 
 
 
 
 
Efficiency ratio
62.07
%
 
60.74
%
 
66.87
%
 
62.20
%
 
65.13
%
 
 
 
 
 
 
 
 
 
 
Efficiency ratio adjusted for non-core items:
 
 
 
 
 
 
 
 
Core non-interest expenses
$
26,823

 
$
26,558

 
$
26,536

 
$
107,392

 
$
105,652

Less: Amortization of other intangible assets
913

 
869

 
1,007

 
3,516

 
4,030

Adjusted non-interest expense
25,910

 
25,689

 
25,529

 
103,876

 
101,622

 
 
 
 
 
 
 
 
 
 
Total fee-based income
$
13,119

 
$
12,610

 
$
12,196

 
$
52,653

 
$
51,155

Net interest income on a fully taxable-equivalent basis
29,562

 
29,680

 
27,184

 
115,290

 
106,892

 
 
 
 
 
 
 
 
 
 
Adjusted revenue
$
42,681

 
$
42,290

 
$
39,380

 
$
167,943

 
$
158,047

 
 
 
 
 
 
 
 
 
 
Efficiency ratio adjusted for non-core items
60.71
%
 
60.74
%
 
64.83
%
 
61.85
%
 
64.30
%


15


 
At or For the Three Months Ended
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Tangible Equity:
 
 
 
 
 
 
 
 
 
Total stockholders' equity, as reported
$
458,592

 
$
457,386

 
$
451,353

 
$
443,009

 
$
435,261

Less: goodwill and other intangible assets
144,576

 
143,859

 
144,692

 
145,505

 
146,018

Tangible equity
$
314,016

 
$
313,527

 
$
306,661

 
$
297,504

 
$
289,243

 
 
 
 
 
 
 
 
 
 
Tangible Assets:
 
 
 
 
 
 
 
 
 
Total assets, as reported
$
3,581,686

 
$
3,552,412

 
$
3,525,126

 
$
3,459,276

 
$
3,432,348

Less: goodwill and other intangible assets
144,576

 
143,859

 
144,692

 
145,505

 
146,018

Tangible assets
$
3,437,110

 
$
3,408,553

 
$
3,380,434

 
$
3,313,771

 
$
3,286,330

 
 
 
 
 
 
 
 
 
 
Tangible Book Value per Common Share:
 
 
 
 
 
 
 
 
 
Tangible equity
$
314,016

 
$
313,527

 
$
306,661

 
$
297,504

 
$
289,243

Common shares outstanding
18,287,449

 
18,281,194

 
18,279,036

 
18,270,508

 
18,200,067

 
 
 
 
 
 
 
 
 
 
Tangible book value per common share
$
17.17

 
$
17.15

 
$
16.78

 
$
16.28

 
$
15.89

 
 
 
 
 
 
 
 
 
 
Tangible Equity to Tangible Assets Ratio:
 
 
 
 
Tangible equity
$
314,016

 
$
313,527

 
$
306,661

 
$
297,504

 
$
289,243

Tangible assets
$
3,437,110

 
$
3,408,553

 
$
3,380,434

 
$
3,313,771

 
$
3,286,330

 
 
 
 
 
 
 
 
 
 
Tangible equity to tangible assets
9.14
%
 
9.20
%
 
9.07
%
 
8.98
%
 
8.80
%

 
Three Months Ended
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Pre-Provision Net Revenue:
 
 
 
 
 
 
 
 
 
Income before income taxes
$
14,340

 
$
16,022

 
$
10,744

 
$
57,203

 
$
45,282

Add: provision for loan losses
1,115

 
1,086

 
711

 
3,772

 
3,539

Add: loss on debt extinguishment
—

 
—

 
—

 
—

 
707

Add: net loss on OREO
105

 
—

 
33

 
129

 
34

Add: net loss on other assets
39

 
38

 
76

 
105

 
392

Less: net gain on OREO
—

 
13

 
—

 
13

 
—

Less: net gain on investment securities
764

 
1,861

 
68

 
2,983

 
930

Less: net gain on other assets
—

 
—

 
—

 
158

 
—

Pre-provision net revenue
$
14,835

 
$
15,272

 
$
11,496

 
$
58,055

 
$
49,024

 
 
 
 
 
 
 
 
 
 
Pre-provision net revenue
$
14,835

 
$
15,272

 
$
11,496

 
$
58,055

 
$
49,024

Total average assets
3,562,267

 
3,541,220

 
3,386,519

 
3,510,288

 
3,320,447

 
 
 
 
 
 
 
 
 
 
Pre-provision net revenue to total average assets (annualized)
1.65
%
 
1.71
%
 
1.35
%
 
1.65
%
 
1.48
%

16


 
At or For the Three Months Ended
 
Year Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
(in $000’s)
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Annualized Net Income Excluding Amortization of Other Intangible Assets:
 
 
 
 
Net income
$
9,001

 
$
10,895

 
$
7,408

 
$
38,471

 
$
31,157

Add: amortization of other intangible assets
913

 
869

 
1,007

 
3,516

 
4,030

Less: tax effect (at 35% tax rate) of amortization of other intangible assets
320

 
304

 
352

 
1,231

 
1,411

Net income excluding amortization of other intangible assets
$
9,594

 
$
11,460

 
$
8,063

 
$
40,756

 
$
33,776

 
 
 
 
 
 
 
 
 
 
Days in the period
92

 
92

 
92

 
365

 
366

Days in the year
365

 
365

 
366

 
365

 
366

Annualized net income
$
35,710

 
$
43,225

 
$
29,471

 
$
38,471

 
$
31,157

Annualized net income excluding amortization of other intangible assets
$
38,063

 
$
45,466

 
$
32,077

 
$
40,756

 
$
33,776

 
 
 
 
 
 
 
 
 
 
Average Tangible Stockholders' Equity:
 
 
 
 
Total average stockholders' equity
$
458,648

 
$
456,198

 
$
438,238

 
$
450,379

 
$
432,666

Less: average goodwill and other intangible assets
143,942

 
144,267

 
146,489

 
144,696

 
147,981

Average tangible stockholders' equity
$
314,706

 
$
311,931

 
$
291,749

 
$
305,683

 
$
284,685

 
 
 
 
 
 
 
 
 
 
Return on Average Stockholders' Equity Ratio:
 
 
 
 
 
Annualized net income
$
35,710

 
$
43,225

 
$
29,471

 
$
38,471

 
$
31,157

Average stockholders' equity
$
458,648

 
$
456,198

 
$
438,238

 
$
450,379

 
$
432,666

 
 
 
 
 
 
 
 
 
 
Return on average stockholders' equity
7.79
%
 
9.47
%
 
6.72
%
 
8.54
%
 
7.20
%
 
 
 
 
 
 
Return on Average Tangible Stockholders' Equity Ratio:
 
 
 
 
 
Annualized net income excluding amortization of other intangible assets
$
38,063

 
$
45,466

 
$
32,077

 
$
40,756

 
$
33,776

Average tangible stockholders' equity
$
314,706

 
$
311,931

 
$
291,749

 
$
305,683

 
$
284,685

 
 
 
 
 
 
 
 
 
 
Return on average tangible stockholders' equity
12.09
%
 
14.58
%
 
10.99
%
 
13.33
%
 
11.86
%

END OF RELEASE

17