Peoples Bancorp Inc. Announces 4th Quarter And Full Year 2015 Earnings

MARIETTA, Ohio, Jan. 29, 2016 /PRNewswire/ -- Peoples Bancorp Inc. ("Peoples") (NASDAQ: PEBO) today announced results for the quarter and year ended December 31, 2015.  Net income totaled $2.6 million for the fourth quarter of 2015, representing earnings per diluted common share of $0.14.  In comparison, earnings per diluted common share were $0.22 and $0.28 for the third quarter of 2015 and fourth quarter of 2014, respectively.  For the year, net income was $10.9 million in 2015 versus $16.7 million in 2014, representing earnings per diluted common share of $0.61 and $1.35, respectively.

"We continue to see results from the execution of our strategy to reduce expenses, which were overshadowed again for the quarter by another large provision for loan losses.  The large provision for loan losses was the result of the one commercial loan relationship that had been evaluated throughout the year as the borrower's business continued to deteriorate, but is behind us now as our recorded investment in the loan is zero.  The amount charged-off related to the relationship was in line with the amount previously reported on December 1, 2015," said Chuck Sulerzyski, President and Chief Executive Officer.  "With respect to loans, we achieved our stated loan growth for the year of 7%, which given the large charge-off experienced during the quarter, and the slow start to 2015, was encouraging as we move into 2016."

Income Statement Highlights:

• Total revenue grew 25% compared to the fourth quarter of 2014, 1% compared to the linked quarter and 32% for the year.
  • Net interest income was the main contributor to the growth compared to the prior year periods.
    • Net interest income increased $5.7 million, or 28%, compared to the fourth quarter of 2014, $0.3 million, or 1%, compared to the linked quarter, and $28.1 million, or 40%, compared to the full year of 2014, due largely to loan growth, both organic and from acquisitions, and accretion income from acquisitions.
    • Net interest margin expanded 7 basis points compared to the fourth quarter of 2014, 1 basis point compared to the linked quarter, and 8 basis points compared to the full year of 2014, due largely to the reduced funding rate.
  • Non-interest income grew 19% compared to the fourth quarter of 2014, 2% compared to the linked quarter, and 18% compared to the full year of 2014.
• Provision for loan losses was $7.2 million for the quarter and $14.1 million for the year, due primarily to the charge-off for one large commercial loan relationship.
• Core non-interest expenses were $26.0 million, which was consistent with the linked quarter's core non-interest expenses.
  • Non-interest expenses for the fourth quarter of 2015 were $27.3 million and were impacted by the following non-core charges:
    • Acquisition-related charges were $0.8 million for the quarter and $10.7 million for the full year.
    • Pension settlement charges of $5,000 were incurred during the quarter, totaling $459,000 for the full year.
    • Other non-core charges totaled $407,000 for the quarter and $592,000 for the full year.

Balance Sheet Highlights:

• Period-end total loan balances, excluding NB&T acquired loans, reflected annualized growth of 10% for the quarter, and 7% for the year.
  • Commercial loan balances, excluding NB&T acquired loans, grew at an annualized rate of 12% for the quarter, or $27 million, and 8% for the full year, or $67 million.
  • Consumer loan balances, excluding NB&T acquired loans, grew at an annualized rate of 7% for the quarter and full year, or $13 million and $50 million, respectively.
• Asset quality negatively impacted earnings.
  • Net charge-offs for the quarter were elevated as a result of the full charge-off of the one large commercial relationship noted above.
  • Nonperforming assets decreased $6.2 million during the quarter driven mainly by the charge-off noted above.
  • Originated criticized loans increased due primarily to two large commercial relationships being downgraded, which was partially offset by the charge-off noted above.
  • Continued to evaluate exposure to the oil and gas industry during the quarter.
  • Allowance for loan losses decreased to 1.19% of originated loans at December 31, 2015.
• Period-end and quarterly average deposit balances remained relatively flat for the fourth quarter.
  • Non-interest-bearing balances grew $6.7 million, or 1%, compared to the linked quarter, and comprised 28% of total deposits at December 31, 2015, versus 26% a year ago.
  • Cost of interest-bearing deposit balances was flat compared to the linked quarter and 10 basis points less than the fourth quarter of 2014.

Net Interest Income:

Net interest income for the fourth quarter of 2015 was $25.9 million, up 1% compared to the linked quarter and 29% higher than the fourth quarter of 2014, while the net interest margin for these periods was 3.56%, 3.55% and 3.49%, respectively.  Net interest margin, excluding net accretion income, improved 3 basis points compared to the linked quarter.  The accretion income, net of amortization expense, from the acquisitions was $1.2 million for the fourth quarter of 2015 and added 16 basis points to net interest margin in the fourth quarter of 2015, compared to 18 basis points for the linked quarter and 20 basis points for the fourth quarter of 2014.  Net interest income for the full year of 2015 was $97.6 million, up 40% compared to 2014, due largely to loan growth, from both acquisitions and organic growth.  Net interest margin for these periods was 3.53% and 3.45%, respectively.  On a full year basis, net accretion income from the acquisitions added 17 basis points for 2015 and 13 basis points for 2014.

Provision for Loan Losses:

For the fourth quarter of 2015, provision for loan losses was $7.2 million, which included the previously mentioned charge-off associated with the one large commercial loan relationship.  The loan growth experienced during the quarter, coupled with the trends in criticized loans, accounted for the additional increase in the provision during the quarter, compared to the third quarter of 2015.  Provision for loan losses was $128,000 for the fourth quarter of 2014 and $339,000 for the full year of 2014, due primarily to net recoveries realized during those periods.

Non-interest Income:

Total non-interest income grew slightly compared to the linked quarter, was up 19% compared to the prior year fourth quarter and increased 18% for the full year.  The growth for the quarter compared to the linked quarter was primarily from the commercial loan swap program.  The growth in total non-interest income compared to the prior year fourth quarter and the full year of 2014 was due to growth in all categories, most notably electronic banking income, trust and investment income, and deposit account service charges, with growth of 31%, 23% and 17% for the quarter, respectively, and 35%, 25% and 18% for the full year, respectively.  The growth in 2015 was due largely to the NB&T Financial Group, Inc. ("NB&T") acquisition.

Non-interest Expenses:

Non-interest expenses, adjusted for non-core charges, were relatively flat compared to the linked quarter.  For the fourth quarter and full year, non-interest expenses, adjusted for non-core charges, were up 19% and 32%, respectively, compared to 2014, with the increase due largely to the operating costs of the NB&T acquisition, which closed March 6, 2015.  Non-core charges included in non-interest expenses for the fourth quarter and full year 2015 consisted of acquisition-related costs of $0.8 million and $10.7 million, respectively; pension settlement charges of $5,000 and $459,000, respectively; and other items totaling $407,000 and $592,000, respectively.  Included in other items are severance charges and search firm fees, and in the first half of the year, legal settlement charges that were incurred.  The efficiency ratio for the fourth quarter of 2015 was 67.94%, compared to 65.81% for the linked quarter and 76.55% for the fourth quarter of 2014.  The increase in the efficiency ratio for the quarter was the result of an increase in non-core charges.

Loans:

Period-end loan balances, excluding the loans acquired from NB&T, increased $40.4 million compared to the September 30, 2015 balances.  The growth was driven equally by growth in commercial and consumer loan balances.  Commercial loans, excluding loans acquired from NB&T, grew $27.0 million, or 12% annualized, with commercial real estate loan growth of $31.4 million more than offsetting a decrease in commercial and industrial loans for the quarter.  Non-mortgage consumer loans grew $12.6 million, or 23% annualized, during the quarter, while mortgage consumer loans were relatively flat.  The average net loan balances, inclusive of loans acquired from NB&T, for the quarter increased $28.1 million, or 1%, compared to the linked quarter, and $585.6 million, or 43%, for the year.

Asset Quality:

Peoples experienced some deterioration in asset quality during the quarter.  Net charge-offs increased during the quarter as Peoples recorded net charge-offs of $13.6 million, resulting in an annualized net charge-off rate of 2.63%.  The net charge-offs for the quarter were primarily the result of the one commercial loan relationship, which operates in the coal industry.  Nonperforming assets decreased by $6.2 million, or 24%, during the quarter.  The decrease was primarily due to the charge-off noted above related to one commercial loan relationship, which was partially offset by a large commercial real estate loan being placed on non-accrual status during the quarter.  Criticized assets, which are those classified as watch, substandard or doubtful, increased during the quarter largely due to two large commercial loan relationships being downgraded during the quarter, which was partially offset by the charge-off noted above.  Peoples continues to monitor its exposure to the oil and gas industry and has approximately $40 million of loan commitments, and approximately $30 million of loan balances outstanding at December 31, 2015, with borrowers operating in that industry.  At quarter-end, the ratio of the allowance for loan losses as a percent of originated loans (which does not include acquired loan balances), net of deferred fees and costs, was 1.19%, down from 1.72% reported for September 30, 2015 and 1.48% reported for December 31, 2014.  The increase in the ratio during the third quarter of 2015 was due to the build-up of reserves on the one commercial loan relationship noted above that was fully charged-off in the fourth quarter of 2015.

Deposits:

Period-end deposits increased $5.1 million during the quarter, with the growth in non-interest-bearing deposits more than offsetting the slight decline in interest-bearing deposit balances.  The increase in non-interest-bearing deposits was mainly due to growth of $24.8 million in individual demand accounts, which more than offset the decline of $21.3 million in commercial non-interest-bearing checking accounts.  The decline in commercial non-interest-bearing checking accounts was due to a customer temporarily maintaining a higher than normal balance on September 30, 2015.  Other non-interest-bearing deposit balances increased $3.2 million.  The $1.6 million decline in interest-bearing deposit balances was mainly due to a decline in certificates of deposit, which was partially offset by increases in savings and money market account deposit balances.  Average deposits for the quarter compared to the linked quarter decreased $10.2 million, as average interest-bearing deposits decreased $32.3 million, which was partially offset by an increase in average non-interest-bearing deposits of $22.1 million.  The decrease in interest-bearing deposits was due to a decrease in governmental deposits and certificates of deposit.

Peoples Bancorp Inc. is a diversified financial services holding company with $3.3 billion in total assets, 81 locations, including 74 full-service bank branches, and 81 ATMs in Ohio, West Virginia and Kentucky.  Peoples makes available a complete line of banking, investment, insurance and trust solutions through its subsidiaries - The Peoples Banking and Trust Company 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 2015 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

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" 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:

• Core non-interest expenses are non-GAAP since they exclude the impact of acquisition-related costs, pension settlement charges, severance charges, search firm fees and legal settlement charges.
• Efficiency ratio is calculated as non-interest expense (less intangible amortization) as a percentage of fully tax-equivalent net interest income plus non-interest income.  This measure is non-GAAP since it excludes intangible amortization and all gains and/or losses included in earnings, and uses fully tax-equivalent net interest income.
• Tangible assets and tangible equity measures are non-GAAP since they exclude the impact of intangible assets acquired through acquisitions on both total stockholders' equity and total assets and the related amortization from earnings.  
• Pre-provision net revenue is defined as net interest income plus non-interest income minus non-interest expense.  This measure is non-GAAP since it excludes (recovery of) provision for loan losses and all gains and/or losses included in earnings.

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", "could", "may", "feel", "expect", "believe", "plan", 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 recently completed acquisitions and the expansion of consumer lending activity; (2) Peoples' ability to integrate the NB&T acquisition and any future acquisitions may be unsuccessful, or may be more difficult, time-consuming or costly than expected; (3) Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders; (4) local, regional, national and international economic conditions and the impact they may have on Peoples, its customers and its counterparties, and Peoples' assessment of the impact, which may be different than anticipated; (5) competitive pressures among financial institutions or from non-financial institutions may increase significantly, including product and pricing pressures, third-party relationships and revenues, and Peoples' ability to attract, develop and retain qualified professionals; (6) changes in the interest rate environment due to economic conditions and/or the fiscal policies of the U.S. government and Board of Governors of the Federal Reserve System ("Federal Reserve Board"), which may adversely impact interest rates, interest margins and interest rate sensitivity; (7) changes in prepayment speeds, loan originations, levels of non-performing assets, delinquent loans and charge-offs, which may be less favorable than expected and adversely impact the amount of interest income generated; (8) adverse changes in the economic conditions and/or activities, including, but not limited to, continued economic uncertainty in the U.S., the European Union, Asia, and other areas, which could decrease sales volumes and increase loan delinquencies and defaults; (9) legislative or regulatory changes or actions, promulgated and to be promulgated thereunder by the state of Ohio, the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, 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 under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the regulations; (10) deterioration in the credit quality of Peoples' loan portfolio, which may adversely impact the provision for loan losses; (11) changes in accounting standards, policies, estimates or procedures which may adversely affect Peoples' reported financial condition or results of operations; (12) Peoples' assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results; (13) 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; (14) Peoples' ability to receive dividends from its subsidiaries; (15) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity; (16) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; (17) 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; (18) 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; (19) 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; (20) the overall adequacy of Peoples' risk management program; (21) the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international military or terrorist activities or conflicts; and (22) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission ("SEC"), 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, 2014.

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, 2015 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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:

 

 

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/peoples-bancorp-inc-announces-4th-quarter-and-full-year-2015-earnings-300212096.html

SOURCE Peoples Bancorp Inc.