• Diluted Earnings Per Share (EPS): $0.89 for Q3 2024, up from $0.82 in the previous quarter.
• Net Interest Income: Increased by 3% in Q3 2024.
• Net Interest Margin: Expanded by 9 basis points in Q3 2024.
• Fee-Based Income: Grew by 5% in Q3 2024.
• Total Non-Interest Expense: Declined by 4% in Q3 2024.
• Return on Average Assets: Improved to 1.38% in Q3 2024 from 1.27% in the previous quarter.
• Return on Average Stockholders' Equity: Increased to 11.5% from 11% in the previous quarter.
• Efficiency Ratio: Improved to 55.1% from 59.2% in the previous quarter.
• Deposits: Increased by $185 million compared to June 30, 2024.
• Tangible Equity to Tangible Assets: Improved by 65 basis points to 8.25%.
• Book Value Per Share: Improved by 4% to $31.65.
• Tangible Book Value: Grew by 7% to $20.29.
• Annualized Net Charge Off Rate: 38 basis points for Q3 2024, up from 27 basis points in the previous quarter.
• Non-Performing Assets: Increased to 0.76% of total assets at quarter end.
• Loan to Deposit Ratio: Declined to 84% from 87% at the previous quarter end.
• Common Equity Tier 1 Capital Ratio: 11.8% at quarter end.
• Total Risk-Based Capital Ratio: 13.5% at quarter end.
• Leverage Ratio: 9.9% at quarter end.

• Warning! GuruFocus has detected 4 Warning Signs with PEBO.

Release Date: October 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Peoples Bancorp Inc (Marietta OH) (NASDAQ:PEBO) reported an increase in diluted earnings per share to $0.89 for the third quarter, surpassing consensus estimates of $0.82.
• Net interest income improved by 3% and net interest margin expanded by 9 basis points compared to the previous quarter.
• The company experienced a 5% growth in fee-based income and a 4% decline in total non-interest expense.
• Deposits increased by $185 million, with over $100 million attributed to client deposit growth.
• Regulatory capital ratios improved, with tangible equity to tangible assets rising by 65 basis points to 8.25%.

Negative Points

• Classified loans increased during the third quarter due to the downgrade of two commercial relationships totaling nearly $10 million.
• The small ticket leasing division experienced higher net charge-offs, with expectations for continued elevated levels into the first quarter of 2025.
• Non-performing assets increased to 0.76% of total assets, driven by loans over 90 days past due.
• The company faced reductions in commercial balances due to paydowns exceeding new loan production.
• Consumer indirect loan net charge-offs have increased, driven by economic hardship on borrowers and softening used car prices.

Q & A Highlights

Q: Can you provide more details on the credit outlook for leases and expected charge-offs? A: Tyler Wilcox, President and CEO, explained that lease charge-offs in the small ticket leasing segment are expected to peak in the fourth quarter, with a full-year net charge-off rate between 5% and 6%. The company anticipates a modest increase in the fourth quarter, with stabilization expected in the first quarter of next year. The business is priced for a 4.5% net charge-off rate, which remains profitable on a risk-adjusted basis.

Q: What industries are you backing away from in the leasing business? A: Tyler Wilcox stated that the company has backed out of title fleet over-the-road trucking, garment printers, and significantly reduced exposure to hotel and hospitality. The focus is shifting towards core areas like manufacturing equipment, landscaping equipment, and plumbing.

Q: How is the M&A environment, and what is your appetite for additional deals? A: Tyler Wilcox noted an increase in M&A conversations, with the company leaning towards seeking larger deals. While open to all opportunities, they are being patient and focusing on larger acquisitions due to the current environment.

Q: How did competitors react to the Fed rate cut in terms of deposit pricing, and what was your strategy? A: Tyler Wilcox mentioned that competitors' reactions varied widely. Peoples Bancorp aimed to remain middle of the pack, lowering special rates to attract deposit growth while keeping durations short for flexibility.

Q: Is the small ticket leasing business accretive to shareholder value given its high ROA and margins? A: Tyler Wilcox affirmed that the small ticket leasing business is accretive to shareholder value, providing diversity and profitability despite its small size relative to total loans. The business's risk-adjusted returns justify its inclusion in the portfolio.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.