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    PEOPLES BANCORP (PEBO)

    Q1 2025 Earnings Summary

    Reported on May 1, 2025 (Before Market Open)
    Pre-Earnings Price$28.61Open (Apr 28, 2025)
    Post-Earnings Price$28.61Open (Apr 28, 2025)
    Price Change
    $0.00(0.00%)
    • Robust Loan Growth and Pipeline: Management highlighted a strong sales pipeline and record production—especially in small business and indirect lending—which signals potential top‐line expansion in the upcoming quarters.
    • Improving Asset Quality and Credit Metrics: The reduction in charge-offs from $7.5M in Q4 to $5.4M in Q1 and the net upgrades of approximately $28M over paydowns underscore enhanced credit quality and a healthier balance sheet.
    • Accretive Strategic Initiatives: The company is pursuing targeted M&A in key geographic areas to complement organic growth and has initiated a share buyback program, demonstrating confidence and a commitment to returning value to shareholders.
    • Credit Quality Risks: The small ticket leasing segment experienced $7.5 million in charge-offs in Q4 and $5.4 million in Q1. If these charge-offs do not continue to decline as expected, further deterioration in credit quality—especially in a volatile macro environment—could adversely impact profitability.
    • Margin Compression Pressures: Lower fee-based income—as indicated by softer performance-based insurance commissions and reduced commercial loan swap fees—combined with uncertainties in deposit repricing could pressure net interest margins, particularly if lower funding costs or rate cuts do not materialize as anticipated.
    • Operational and Growth Uncertainties: Despite guidance to moderate noninterest expenses, if loan growth and fee income underperform amid economic and tariff uncertainties, operating leverage could suffer. This, along with potential delays in strategic acquisitions, may restrict earnings expansion.
    MetricYoY ChangeReason

    Total Revenue

    –1.1%

    Total Revenue declined slightly in Q1 2025 ($151.641M) compared to Q1 2024 ($153.37M) due to a modest decline in overall income performance—likely reflecting lower net interest and fee-based income relative to the previous period, continuing a trend of subdued pre‐provision revenue growth.

    Net Income

    –17.6%

    Net income dropped significantly by approximately $5.3M ($24.336M vs. $29.584M) because lower pre‐provision net revenue (declining from $44.3M to $41.9M) and a sharp increase in the provision for credit losses (rising from $6.1M to $10.2M) impacted earnings, reflecting both market pressures and risk adjustments observed earlier.

    Provision for Credit Losses

    +67%

    Credit loss provisions surged from $6.102M in Q1 2024 to $10.190M in Q1 2025—a 67% increase—driven by higher net charge-offs (notably from the North Star Leasing division), deteriorating macroeconomic conditions affecting the CECL estimates, and increased reserves for individually analyzed loans, continuing an upward risk trend from the previous period.

    Earnings per Common Share (basic)

    –18.8%

    Basic EPS fell from $0.85 to $0.69, a decline of 18.8%, primarily due to the lower net income and its dilution over outstanding shares, mirroring the significant drop in net earnings observed in the period.

    Total Non‑Interest Income

    +5.1%

    Non‑interest income increased by 5.1%, rising from $25.779M to $27.099M, driven by higher insurance, lease, and trust & investment income, although partially offset by declines in areas like electronic banking and bank‐owned life insurance income, continuing efforts to diversify revenue streams seen in prior periods.

    Balance Sheet Deposits

    +5.6%

    Deposits grew by 5.6% YoY, from 7,326,556K to 7,734,749K, due to robust growth in retail certificates of deposit, money market deposit accounts, and governmental deposits—factors that have also underpinned deposit gains in earlier periods.

    Cash and Cash Equivalents

    –56.5%

    Cash balances declined sharply by 56.5%, falling from 429,720K to 186,978K, driven by significant cash outflows from financing activities (e.g., –$47.3M, notably from reduced short‑term borrowings) and investing activities (–$17.6M due to increased loans held for investment), which continued the trend of liquidity management changes seen in FY 2024.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Loan Growth

    FY 2025

    4% to 6%

    4% to 6%

    no change

    Net Interest Margin

    FY 2025

    4% to 4.2%

    4% to 4.2%

    no change

    Fee-Based Income Growth

    FY 2025

    mid- to high single-digit percentages

    mid-single-digit percentages

    lowered

    Tax Rate

    FY 2025

    no prior guidance

    22% to 22.5%

    no prior guidance

    Noninterest Expense

    Q2–Q4 2025

    $69 million to $71 million for Q2–Q4

    $69 million to $71 million for Q2, Q3, and Q4

    no change

    Provision for Credit Losses

    Q2–Q4 2025

    Similar to the 2024 quarterly run rate for 2025

    Normalize during H2 FY2025; similar to the FY 2024 quarterly rate

    no change

    MetricPeriodGuidanceActualPerformance
    Fee-Based Income Growth
    Q1 2025 (YoY)
    Mid- to high single-digit percentage growth
    5.1% YoY growth (from 25,779In Q1 2024 to 27,099In Q1 2025)
    Met
    Noninterest Expense
    Q1 2025
    First quarter of 2025 expected to be higher than subsequent quarters (those guided at $69M–$71M)
    70.8M
    Met
    Loan Growth
    Q1 2025 (YoY)
    4%–6% increase compared to 2024
    3.6% YoY increase (from 6,202,827In Q1 2024 to 6,428,526In Q1 2025)
    Missed
    Provision for Credit Losses
    Q1 2025
    Similar to 2024’s quarterly run rate (~6,200)
    10,190
    Missed
    Deposit Growth
    Q1 2025 (YoY)
    ~3% per year
    5.6% YoY increase (from 7,326,556In Q1 2024 to 7,734,749In Q1 2025)
    Beat
    Allowance for Credit Losses
    Q1 2025
    1%–1.25% of total loans
    ACL of 65,232 against total loans of 6,428,526→ ~1.02% ratio, within 1%–1.25%
    Met
    TopicPrevious MentionsCurrent PeriodTrend

    Loan Growth

    Q2 2024: Detailed breakdown by portfolio with 8% annualized growth and adjustments to guidance. Q3 2024: Emphasized full‐year guidance of 4%–6% and noted paydowns affecting segments. Q4 2024: Reported 5% annualized growth with detailed portfolio changes and reaffirmed 4%–6% guidance for 2025.

    Q1 2025: Annualized loan growth over 4% with strong visibility into the second‐quarter pipeline; detailed contributions from commercial real estate and other segments, while reiterating 4%–6% guidance.

    Consistent emphasis on meeting mid-single digit growth targets with ongoing portfolio analysis. The sentiment remains optimistic with slight portfolio adjustments.

    Sales Pipeline

    Q2 2024: Highlighted strong production and healthy pipeline with expectations to capitalize on market conditions. Q3 2024: Noted healthy production pipeline amid declining loan balances and strategic focus shifts. Q4 2024: Emphasized strong business optimism, proactive client engagement and deposit-linked sales efforts.

    Q1 2025: Expressed clear confidence in a robust second‐quarter pipeline, record production in March and tailwinds from talent additions in specialty finance.

    Continued positive sentiment with recurring optimism; the focus remains on building a strong pipeline while incorporating new talent as a tailwind.

    Credit Quality and Asset Quality

    Q2 2024: Described paydowns, declines in criticized and classified loans, and stable delinquency trends. Q3 2024: Reported mixed signals with improvements in some credit metrics but increases in nonperforming assets and net charge‐offs. Q4 2024: Noted improvements with lower net charge-offs, declining nonperforming assets, and stable delinquency rates.

    Q1 2025: Detailed improvements with net charge-off rate declining from 61 to 52 bps, reductions in nonperforming assets and lowered criticized loans, though higher provisions were noted.

    Steady improvement across periods with consistent portfolio management. The sentiment has become more positive in Q1 2025 compared to previous quarters as key quality metrics improve.

    Small-Ticket Leasing

    Q2 2024: Noted elevated net charge-offs, focus on risk-adjusted returns and adjustments to lending verticals, with yields over 14% but normalized to historical 4.5% levels. Q3 2024: Reported elevated charge-offs (projected 5%–6% full-year), risk appetite adjustments and profitability maintained via high origination yields. Q4 2024: Described elevated charge-offs peaking at 6.7% that are expected to decline gradually toward 4%–5%.

    Q1 2025: Reported lower charge-offs in small-ticket leasing (annualized rate dropping from 49 to 31 bps) and substantial balance reductions, with expectations of gradual improvement though not back to historical lows.

    Improving risk management is evident as charge-offs decrease and high-yield strategies continue; the management’s focus on lowering exposure to high-balance accounts remains consistent, with a positive long-term outlook.

    Margin Compression and Net Interest Margin Pressures

    Q2 2024: Identified compression due to tapering accretion income and higher borrowing costs; NIM at 4.18% versus 4.26% in Q1, with expectations to remain stable. Q3 2024: Reported a 9 bps NIM expansion quarter-over-quarter driven by accretion income, but overall YTD decline of 36 bps. Q4 2024: Noted a decline in full-quarter NIM (from 4.27% to 4.15%) yet an expansion in core margins after deposit cost reductions.

    Q1 2025: Despite some compression in loan yields, core NIM expanded by 3 bps (excluding accretion) while deposit costs fell by 12 bps; overall strategy remains to offset compression with cost and repricing benefits.

    Persistent margin challenges continue to be managed through strategic repricing and cost control. The recurring issues remain, but management demonstrates effective balancing with modest core margin expansion.

    Funding and Deposit Growth vs Rising Deposit Costs

    Q2 2024: Mentioned a decline in total deposits (–$29 million) but growth in core deposits; adjustments via shifting deposit compositions and some liquidity movements. Q3 2024: Detailed strong deposit growth of $185 million overall, with a mix of retail and brokered CDs; special pricing adjustments were used to manage costs. Q4 2024: Highlighted 6% deposit growth, with effective cost management keeping deposit rate increases below Fed hikes.

    Q1 2025: Deposits grew by 2% ($145 million increase) driven by money markets, governmental deposits, and retail CDs; deposit costs declined further by 12 bps through lower repricing rates compared to Q4 2024.

    Ongoing effective management of deposit growth and costs is noted across periods, with consistent adjustments to pricing strategies and deposit mix that help mitigate rising costs despite a higher rate environment.

    Strategic Initiatives (M&A and Share Buybacks)

    Q2 2024: Cautious “wait and see’’ approach for M&A with no share buybacks, with focus on dividends and strong capital deployment through organic growth. Q3 2024: Actively engaging in M&A conversations with a preference for larger deals to cross the $10B threshold; share buybacks were evaluated opportunistically. Q4 2024: Continued focus on M&A with a mild preference for larger deals; no discussion of share buybacks was noted.

    Q1 2025: Expressed a strategic and patient approach to M&A with a continued interest in crossing the $10B asset threshold along specific geographic lines; notably, share buybacks were executed in April 2025 and further actions are planned based on market conditions.

    A new development: While M&A remains a consistent priority, share buybacks have emerged as an additional tool in Q1 2025, indicating a broader capital deployment strategy as market conditions evolve.

    Macroeconomic Uncertainty and External Risks

    Q2 2024: Brief indirect references through interest rate impacts and a “wait and see” stance in the M&A environment. Q4 2024: More explicit discussion regarding recession risks, inflation, tariffs, and potential administrative changes impacting market conditions. Q3 2024: No specific discussion was recorded.

    Q1 2025: Detailed discussion of tariffs, consumer behavior in the face of uncertainty, and adjustments in credit loss provisions driven by deteriorating macroeconomic conditions; emphasis on proactive risk management in response to external uncertainties.

    Enhanced focus: External risks are now discussed in greater detail with proactive adjustments in credit provisions and portfolio assessments in Q1 2025, compared to earlier periods which were either brief or not mentioned.

    Fee Income Growth and Revenue Diversification

    Q2 2024: Fee-based income grew 15% in the first half; significant contribution from the Limestone merger; expected full-year growth of 6%–8%. Q3 2024: Reported 5% quarterly growth and 13% YTD growth with diversified revenue from lease, trust/investment and insurance income. Q4 2024: Fee-based income grew by 5% quarter-over-quarter and 10% for the full year, bolstered by merger contributions and diversified revenue streams.

    Q1 2025: Fee income increased modestly by 2% due to factors like performance-based insurance commissions, with some areas (e.g., commercial swap fees) declining; future guidance expects mid-single digit growth and continued diversification via strategic mortgage and specialty finance decisions.

    Continued diversification: Fee income remains a core focus with solid diversified streams; however, growth in Q1 2025 appears more modest which may reflect a normalization following merger-related boosts in previous quarters.

    Operational Efficiency and Technology Investments

    Q2 2024: Detailed emphasis on technology investments including implementation of a new CRM system, upgrades in insurance software, and a new business loan origination system aimed at dramatically reducing process times and consolidating systems. Q3 2024 & Q4 2024: Operational efficiency was primarily discussed via efficiency ratio improvements and expense management, with no new technology investments mentioned.

    Q1 2025: No specific discussion of operational efficiency or technology investments was provided.

    Not currently emphasized: Previously a key initiative in Q2 2024, this topic is not mentioned in Q1 2025, suggesting a possible temporary pause or integration of prior improvements into ongoing operations.

    1. Margin Repricing
      Q: What deposit repricing opportunities do you see?
      A: Management noted that even without further Fed cuts, they see meaningful opportunities to reprice retail CDs and lower deposit costs, supporting a stable margin outlook.

    2. CD Accretion
      Q: What accretion levels are expected going forward?
      A: They project accretion to remain around 15–17 basis points in Q1–Q2, with a potential slight decline later in 2025.

    3. Bond Redeployment
      Q: How will redeploying the bond book impact margins?
      A: Approximately $15–20 million monthly in paydowns is expected from the investment portfolio, enhancing loan funding and aiding margin stability.

    4. Loan Yields
      Q: How do new loan yields compare to rolling-off yields?
      A: New loans, especially in North Star Leasing, demonstrate yields in the 18–20% range, with commercial loans trading slightly lower yet strong overall spreads.

    5. Acquisitions Strategy
      Q: Which geographic areas are preferred for acquisitions?
      A: Management is focused on expanding in Ohio, Kentucky, West Virginia, Virginia, southwest Pennsylvania, and southern Indiana to fill franchise gaps.

    6. Share Buyback
      Q: What is the status on share repurchases?
      A: They have executed part of their buyback plan in April and will continue to monitor market conditions through Q2.

    7. Loan Growth Outlook
      Q: What risks affect loan growth expectations?
      A: Confidence remains high with a strong pipeline, though modest risks include tariff-related uncertainties and seasonal variations.

    8. Credit Quality Improvements
      Q: What drove the classified loans improvements?
      A: Enhancements were primarily due to upgrades, with roughly $28M in upgrades versus $22M in paydowns, reflecting stronger client performance.

    9. Leasing Business Normalization
      Q: When will leasing business returns normalize?
      A: The high balance leasing portfolio is expected to gradually normalize over the year, dropping from over $50M to approximately $8–10M.

    10. Leasing Charge-offs Trend
      Q: How are leasing charge-offs trending?
      A: Charge-offs in the small ticket leasing segment decreased from $7.5M in Q4 to $5.4M in Q1, in line with expectations.

    11. Fee Income Guidance
      Q: What factors drove lower fee income?
      A: A softer performance in insurance commissions and a shift in mortgage gains contributed to reduced fee income.

    12. Provision Normalization
      Q: Will provisions return to 2024 quarterly levels?
      A: Provisions are expected to slightly decline in Q2 but remain somewhat elevated due to leasing charge-offs.

    13. Domestic Lending Strategy
      Q: How is on-balance sheet lending being managed?
      A: Lending decisions are deliberate; the bank is weighting more on-balance sheet lending while factoring in fee income trade-offs.

    14. OpEx Guidance Flexibility
      Q: Can lower revenues lead to reduced expenses?
      A: Management indicated that lower production could temper salary and incentive costs, offering some expense flexibility.

    15. Consumer Behavior & Tariff Impact
      Q: How have tariffs influenced consumer behavior?
      A: Despite tariff uncertainty, they observed strong indirect lending activity, a robust mortgage pipeline, and increased deposits.

    16. Consumer Lending Risk
      Q: Will student loan collections affect consumer lending?
      A: Underwriting remains focused on debt-to-income ratios, with no significant change anticipated from student loan collections.

    17. Charge-Off Detail
      Q: Which industries are most affected by charge-offs?
      A: The charge-off mix is diversified but is largely centered on restaurants and hospitality, with minor exposure to trucking and brewing equipment.

    18. Tax Rate Guidance
      Q: What is the expected forward tax rate?
      A: Management now expects a tax rate closer to 22–22.5% going forward.

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