PEOPLES BANCORP INC. ANNOUNCES 4TH QUARTER AND ANNUAL RESULTS FOR 2021

Company Release - 1/25/2022 6:00 AM ET

MARIETTA, Ohio, Jan. 25, 2022 /PRNewswire/ -- Peoples Bancorp Inc. ("Peoples") (NASDAQ: PEBO) today announced results for the quarter and year ended December 31, 2021.  Net income totaled $27.9 million for the fourth quarter of 2021, representing earnings per diluted common share of $0.99.  In comparison, earnings (loss) per diluted common share were ($0.28) for the third quarter of 2021 and $1.05 for the fourth quarter of 2020.  For the full year, net income was $47.7 million in 2021 versus $34.8 million in 2020, representing earnings per diluted common share of $2.16 and $1.73, respectively.

 Non-core items, and the related tax effect of each, in net income (loss) included acquisition-related expenses, contract negotiation expenses, COVID-19-related expenses, a contribution to Peoples Bank Foundation, Inc., pension settlement charges, severance expenses, losses on investment securities, and gains and losses on asset disposals and other transactions.  Non-core items positively impacted diluted earnings per common share for the fourth quarter of 2021 by $0.02 and negatively impacted earnings per diluted common share by $0.71 for the third quarter of 2021, and by $0.07 for the fourth quarter of 2020.  Non-core items negatively impacted earnings per diluted common share by $0.85 and $0.22 for the full years of 2021 and 2020, respectively.

"We are very optimistic that 2022 will be an even better year for Peoples," said Chuck Sulerzyski, President and Chief Executive Officer.  "We look forward to seeing greater loan growth, greater efficiency and strengthening of our excellent client and employee experience."

Completion of Premier Acquisition:
 On March 29, 2021, Peoples and Premier Financial Bancorp, Inc. ("Premier") jointly announced the signing of a definitive Agreement and Plan of Merger, dated March 26, 2021 (the "Merger Agreement"), pursuant to which Peoples acquired, in an all-stock merger, Premier, a bank holding company headquartered in Huntington, West Virginia, and the parent company of Premier Bank, Inc. ("Premier Bank") and Citizens Deposit Bank and Trust, Inc. ("Citizens").  Under the terms and subject to the conditions of the Merger Agreement, Premier merged with and into Peoples (the "Merger"), and Premier Bank and Citizens subsequently merged with and into Peoples' wholly-owned subsidiary, Peoples Bank, in a transaction valued at $261.9 million.  At the close of business on September 17, 2021, the financial services offices of each of Premier Bank and Citizens became branches of Peoples Bank.  Peoples acquired $1.1 billion in loans and $1.8 billion in deposits.  Peoples preliminarily recorded $73.8 million in goodwill and $4.2 million in other intangible assets in connection with the Merger.

COVID-19:
 The operating results and financial condition for the three and twelve months ended and as of December 31, 2021 continued to be affected by ongoing developments related to COVID-19, the reactions of government authorities, individuals and businesses, and the associated impact to the economy, specifically in Peoples' footprint.  Many of the limitations imposed by state and local governments were largely removed by the end of the second quarter of 2021; however, the impact caused by the previous closures continued to significantly impact the economy during the fourth quarter of 2021.  The Board of Governors of the Federal Reserve System (the "Federal Reserve Board") maintained the Federal Funds interest rate effective target range at 0.00% to 0.25% during the fourth quarter of 2021.  Additionally, the London Interbank Offered Rate ("LIBOR") and the U.S. Prime Rate both remained historically low throughout the fourth quarter of 2021, which impacted results for the quarter.

The federal government's passage of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act resulted in the creation of the Paycheck Protection Program ("PPP") targeted to provide small businesses with financial support to cover payroll and certain other specific types of expenses for a specified period of time. Loans made under the PPP are fully guaranteed by the Small Business Administration ("SBA") and, therefore, carry no related allowance for credit losses.  These loans earn 1% interest, and participating banks receive an origination fee of between 1% and 5%, based on the size of the PPP loan. An extension of this economic relief occurred with the enactment of the Consolidated Appropriations Act, 2021 in December 2020.  As of December 31, 2021, Peoples had $87.1 million aggregate principal amount in PPP loans outstanding (including $23.4 million acquired in the Merger with Premier), which were included in commercial and industrial loan balances, compared to $135.8 million at September 30, 2021.  During the fourth quarter of 2021, Peoples received forgiveness payments on behalf of customers from the SBA of $49.2 million on previously originated PPP loans.   During the third quarter of 2021, Peoples received forgiveness payments on behalf of customers from the SBA of $132.2 million on previously originated PPP loans.  During the fourth quarter of 2020, Peoples received $96.7 million in forgiveness payments on behalf of customers from the SBA on previously originated PPP loans.  Peoples recognized interest income on deferred loan fees/costs of $1.8 million, $3.1 million and $3.7 million during the fourth and third quarters of 2021 and the fourth quarter of 2020, respectively, along with $0.3 million, $0.4 million and $1.2 million of interest earned on PPP loans during the fourth and third quarters of 2021 and the fourth quarter of 2020, respectively.  At December 31, 2021, Peoples had $2.2 million in net deferred loan fees/costs to recognize over the remaining terms of the PPP loans, which are generally five years or until forgiven by the SBA, whichever occurs first. 

Interest income was negatively impacted by the reduction in interest rates initiated by the Federal Reserve Board in 2020 and interest rates remained low throughout 2021.  Additionally, the average yield on variable rate commercial loans that are subject to changes in the LIBOR and the U.S. Prime Rate moved downward in 2020 and remained low throughout 2021, impacting interest income and net interest margin.  The addition of the North Star Leasing equipment leasing business has partially offset this impact by adding 23 basis points to the net interest margin during the fourth quarter of 2021 and 21 basis points during the full year of 2021.     

Peoples incurred non-core non-interest expenses as a result of COVID-19.  COVID-19-related expenses recognized during the fourth and third quarters of 2021 were $0.6 million and $0.2 million, respectively, and $125,000 during the fourth quarter of 2020.  During the fourth quarter of 2021, Peoples awarded common shares to all associates who were at the Assistant Vice President level or below.  The remainder of the COVID-19-related expenses were primarily related to providing Peoples' employees meals in support of local businesses, assisting employees with childcare and elder care needs, incentivizing employees to be vaccinated and taking extra precautions in cleaning facilities.  

North Star Leasing:
 Peoples Bank entered into an Asset Purchase Agreement, dated March 24, 2021 (the "Asset Purchase Agreement"), with NS Leasing, LLC ("NSL") pursuant to which Peoples Bank acquired the equipment finance and leasing business of NSL. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as North Star Leasing, a division of Peoples Bank, on April 1, 2021.  Peoples Bank acquired assets comprising NSL's equipment finance business, including $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million. Peoples Bank paid total consideration of $116.6 million, plus a potential earn-out payment to NSL of up to $3.1 million. Based in Burlington, Vermont, the North Star Leasing division underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded goodwill in the amount of $24.7 million and other intangibles of $14.0 million, which included customer relationship intangible, trade-name intangible and non-compete agreements related to this transaction. Peoples recorded an additional $0.2 million and $0.4 million in non-interest expense during the fourth and third quarters of 2021, respectively, related to updates to the estimated earn-out provision of $3.0 million. As of December 31, 2021, equipment leases had grown to $122.5 million.

Peoples Premium Finance:
 Effective after the close of business on June 30, 2020, Peoples closed on the business combination under which Peoples Bank acquired the operations and assets of Triumph Premium Finance ("TPF"), a division of TBK Bank, SSB.  Based in Kansas City, Missouri, the division operating as Peoples Premium Finance provides insurance premium financing loans for commercial customers to purchase property and casualty insurance products through Peoples Premium Finance's growing network of independent insurance agency partners nationwide. Peoples Bank acquired $84.4 million in loans at the acquisition date, after fair value adjustments.  Peoples also recorded $4.3 million of other intangible assets and $5.5 million of goodwill related to the acquisition.  As of December 31, 2021, Peoples Premium Finance's loans had grown to $136.1 million. 

Statement of Operations Highlights:

  • Net interest income increased $12.0 million, or 28%, compared to the linked quarter and increased $20.3 million, or 59%, compared to the fourth quarter of 2020. Net interest income also increased 24% for the full year of 2021 compared to 2020.
    • Net interest margin decreased 14 basis points to 3.36% for the fourth quarter of 2021, compared to the linked quarter, and increased 24 basis points compared to the fourth quarter of 2020. The decrease in net interest margin compared to the linked quarter was primarily driven by Peoples maintaining higher cash balances, which negatively impacted margin by 18 basis points. A decline in lease accretion income also negatively impacted margin for the fourth quarter of 2021. Net interest margin was 3.39% for the full year of 2021, compared to 3.24% for the full year of 2020.
    • The increases in net interest income for the fourth quarter of 2021, compared to the third quarter of 2021 and the fourth quarter of 2020, were caused by the full-quarter impact of the Premier acquisition and organic growth.
  • Peoples recorded a recovery of credit losses of $7.6 million for the fourth quarter, compared to a provision for credit losses of $9.0 million for the third quarter of 2021, and a recovery of credit losses of $7.3 million for the fourth quarter of 2020.
    • The decline in the provision for credit losses for the fourth quarter of 2021 compared to the linked quarter was due primarily to the sale of $59.8 million of predominantly purchased credit deteriorated loans acquired from Premier as well as a favorable outlook on Moody's most recent economic forecast.
    • Net charge-offs were $1.3 million, or 0.11% of average total loans, annualized, for the fourth quarter of 2021.
    • For the full year of 2021, net charge-offs were $4.7 million, or 0.13% of average total loans, up from $1.8 million, or 0.05% of average total loans, for 2020.
  • Net gains on asset disposals and other transactions recognized during the fourth quarter of 2021 were $1.8 million, compared to net losses of $0.3 million for the linked quarter and $53,000 for the fourth quarter of 2020.
    • Net gains for the fourth quarter of 2021 were driven by the sale of $59.8 million of loans acquired from Premier. The net gain recognized from this sale aggregated $1.5 million during the fourth quarter of 2021. Management felt it was prudent to sell these loans to restore Peoples' exposure in the hospitality industry to pre-acquisition levels and reduce criticized and classified loans.
  • Total non-interest income, excluding net gains and losses, increased $2.2 million, or 13%, for the fourth quarter of 2021 compared to the linked quarter, and $1.7 million, or 10%, compared to the fourth quarter of 2020. Total non-interest income, excluding gains and losses, increased $4.9 million, or 8% for the full year of 2021, compared to 2020.
    • The increase in total non-interest income, excluding gains and losses, compared to the third quarter of 2021 was largely driven by an increase in electronic banking income and higher service charges on deposit accounts.
    • Total non-interest income, excluding net gains and losses, for the fourth quarter of 2021 was 26% of total revenue.
    • For the full year of 2021 compared to 2020, all non-interest income categories were impacted by the Premier acquisition, with the exception of mortgage banking income and swap fee income. Mortgage banking income decreased due to the volume of refinance activity experienced in 2020 when interest rates declined, which was not repeated in 2021. Swap fee income also decreased as a result of lower customer demand caused by the sustained lower rate environment in 2021.
  • Total non-interest expense decreased $9.8 million, or 17%, compared to the linked quarter and increased $14.7 million, or 44%, compared to the fourth quarter of 2020. Total non-interest expense increased $50.0 million, or 37% for the full year of 2021 compared to 2020.
    • The fourth quarter of 2021 contained non-core expenses of $0.9 million, which included $0.9 million of acquisition-related expenses, $0.6 million of expenses related to COVID-19 and a $0.6 million benefit recognized for core system contract negotiations.
    • The efficiency ratio was 62.8% for the fourth quarter of 2021 and 73.7% for the full year of 2021. When adjusted for non-core expenses, the efficiency ratio was 61.6% for the fourth quarter of 2021 and 63.5% for the full year of 2021.

Balance Sheet Highlights:

  • Period-end investment securities balances at December 31, 2021 increased $107.3 million, or 7%, compared to September 30, 2021, and increased $825.0 million, or 96%, compared to December 31, 2020.
    • The increase in investment securities compared to the linked quarter was a result of Peoples' continued reinvestment of proceeds from available-for-sale investment securities acquired from Premier that were sold in the third quarter and the investment of excess cash in higher-yielding investment securities. The increase compared to December 31, 2020 was driven primarily by the Premier acquisition.
  • Period-end loan balances decreased $12.1 million compared to September 30, 2021, and increased $1.1 billion compared to December 31, 2020.
    • Growth of $81.6 million in commercial and industrial loans, $35.2 million in construction loans and $11.1 million in leases excludes the sale of $59.8 million of loans acquired from Premier and PPP loans.
      • Excluding the impact of the loan sale and PPP loans, loans grew 8.8% annualized during the quarter.
    • The increase in period-end loan balances compared to December 31, 2020 was driven by loans and leases acquired from Premier and NSL.
  • Asset quality metrics remained strong during the fourth quarter and for the full year of 2021.
    • Delinquency trends remained relatively stable as loans considered current comprised 98.8% of the loan portfolio at December 31, 2021, compared to 98.9% at September 30, 2021, and 98.8% at December 31, 2020.
    • Nonperforming assets decreased $4.7 million compared to September 30, 2021.
    • Criticized loans decreased $40.8 million during the quarter. The decrease in the fourth quarter was due to the disposal of criticized loans included in the sale of $59.8 million of loans acquired from Premier.
    • Classified loans decreased $36.1 million during the fourth quarter of 2021. The decrease in classified loans compared to the linked quarter was driven by the disposal of classified loans included in the sale of $59.8 million of loans acquired from Premier.
    • Annualized net charge-offs for the quarter remained low at 0.11% of average loans.
  • Period-end total deposit balances at December 31, 2021 increased $30.8 million, or 1%, compared to September 30, 2021, and increased $2.0 billion, or 50%, compared to December 31, 2020.
    • The increase in deposits compared to the linked quarter was primarily due to growth in non-interest bearing deposits, which made up 28% of total deposits at December 31, 2021.
    • Compared to December 31, 2020, the increase in deposits was the result of deposits acquired from Premier.
    • Total demand deposit balances were 48% of total deposits at December 31, 2021, compared to 46% at September 30, 2021 and 43% at December 31, 2020.

Net Interest Income
 Net interest income was $54.6 million for the fourth quarter of 2021, an increase of $12.0 million, or 28%, compared to the linked quarter.  Net interest margin was 3.36% for the fourth quarter, compared to 3.50% for the linked quarter.  The increase in net interest income primarily reflected higher cash balances, reducing net interest margin by 19 basis points.  A reduction in the cost of funds benefited net interest income compared to the linked quarter, and also contributed to the improvement in net interest margin.  Net interest income and net interest margin both have been negatively impacted by the excess liquidity environment present in the financial services sector since the beginning of the COVID-19 pandemic by way of increased low yielding cash reserves and the low interest rate environment caused by COVID-19 that continued throughout the fourth quarter of 2021.  Peoples recognized interest income on deferred loan fees/costs of $1.8 million and $3.1 million during the fourth and third quarters of 2021, respectively, along with $0.3 million and $0.4 million of interest earned on PPP loans during the fourth and third quarters of 2021, respectively. At December 31, 2021, Peoples had $2.2 million in net deferred loan fees/costs to recognize over the remaining terms of the PPP loans, which are generally five years or until forgiven by the SBA, whichever occurs first.

Net interest income for the fourth quarter of 2021 increased $20.3 million, or 59%, compared to the fourth quarter of 2020.  Net interest margin increased 24 basis points compared to 3.13% for the fourth quarter of 2020.  The increase in net interest income compared to the fourth quarter of 2020 was driven by a full-quarter impact of interest earning assets acquired from Premier, lease income and premium finance loan income.  Peoples recognized interest income on deferred loan fees/costs of $1.8 million and $3.7 million during the fourth quarters of 2021 and 2020, respectively, and $0.3 million and $1.1 million in interest earned on PPP loans during the fourth quarters of 2021 and 2020, respectively.  Also contributing to the increase in net interest income was an increase in the average balance of investment securities.   

Accretion income, net of amortization expense, from acquisitions was $1.4 million for the fourth quarter of 2021 and $1.0 million for the third quarter of 2021, which added 8 basis points in net interest margin for each period. 

Net interest income increased $33.5 million, or 24%, for 2021 compared to 2020, and net interest margin increased 16 basis points to 3.39%.  For the yearly period, the changes in net interest income and margin were the result of lower funding costs due to customers' maintaining higher cash balances, as well as a higher volume of loans due to the Premier and Premium Finance acquisitions coupled with higher-yielding leases acquired from NSL and organic loan growth.  Peoples recognized interest income on deferred loan fees/costs of $13.0 million and $7.5 million during the 2021 and 2020, respectively, along with $2.3 million and $3.2 million of interest earned on PPP loans during 2021 and 2020, respectively.

Accretion income, net of amortization expense, from acquisitions was $3.5 million for 2021 and $2.8 million for 2020, respectively, which added 7 basis points to net interest margin for both 2021 and 2020. 

(Recovery of) Provision for Credit Losses:
 The recovery of credit losses was $7.6 million for the fourth quarter of 2021, compared to a provision for credit losses of $9.0 million for the linked quarter and a recovery of credit losses of $7.3 million for the fourth quarter of 2020.  The change in the provision for credit losses compared to the linked quarter was primarily due to the establishment of the day-one allowance for credit losses of $10.6 million related to the non-purchased credit deteriorated loans acquired from Premier recognized in the third quarter as well as a favorable outlook on Moody's most recent economic forecast.  Also impacting this change was a release of reserves related to the sale of $59.8 million in predominantly purchased credit deteriorated loans acquired from Premier.

The recovery of credit losses for the fourth quarter of 2021 was the result of improvement in loss drivers and Moody's economic outlook published in December 2021 and the release of reserves mentioned above.  The recovery of credit losses of $7.3 million for the fourth quarter of 2020 was due primarily to the improvement in Moody's economic outlook published in December 2020.

Net charge-offs for the fourth quarter of 2021 were $1.3 million, or 0.11% annualized, of average total loans, compared to $1.6 million, or 0.18% annualized, of average total loans, for the linked quarter and $0.9 million, or 0.10% annualized, of average total loans, for the fourth quarter of 2020.  For additional information on credit trends and the allowance for credit losses, see the "Asset Quality" section below.

For the full year of 2021, the recovery of credit losses was $0.3 million, compared to a provision for credit losses of $26.3 million for 2020.  The recovery of credit losses recognized in 2021 was the result of improvement in loss drivers and Moody's economic outlook published in December 2021.  The provision for credit losses recognized in 2020 was due to the impact the COVID-19 pandemic had on the economic forecasts and qualitative factors used in the CECL model.  Net charge-offs for the full year of 2021 were $4.7 million, or 0.13%, of average total loans, compared to $1.7 million, or 0.05%, of average total loans, for 2020.  The decrease in the provision for loan losses was primarily due to improved economic factors and updated loss drivers and their impact on assumptions used in the CECL model throughout 2021.

Net Gains and Losses:
 Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Income.  Net gains during the fourth quarter of 2021 were $1.6 million, compared to net losses of $0.5 million for the linked quarter, and net losses of $0.8 million in the fourth quarter of 2020.  Net gains for the fourth quarter of 2021 were driven primarily by gains of $1.5 million recognized on the sale of $59.8 million in loans acquired from Premier and the disposal of other real estate owned of $0.3 million, offset by a loss on the sale of investment securities.  During the fourth quarter of 2021, Peoples sold $59.8 million of predominantly purchased credit deteriorated loans, ($53.0 million of which were criticized or classified) primarily in the hospitality industry, and recognized a gain related to the acceleration of the discount recorded on those loans when they were acquired. 

Net losses for the third quarter of 2021 were driven primarily by losses on the disposal of fixed assets acquired from Premier and the sales of securities during the third quarter of 2021. Net losses for the fourth quarter of 2020 were driven by net losses on the sale of investment securities.  During the fourth quarter of 2020, management felt it was prudent to restructure a portion of the investment securities portfolio to minimize the impact of premium amortization that was experienced due to higher than historical prepayment speeds in that portfolio.  

 For the full year of 2021, net gains were $0.5 million compared to net losses of $0.7 million in 2020.  Net gains during 2021 were driven by the aforementioned activity related to the sale of loans acquired from Premier and gains recognized on the sale of other real estate owned, offset by losses on the sale of investment securities.  Net losses during 2020 were driven by the sale of investment securities. 

Total Non-interest Income, Excluding Net Gains and Losses:
 Total non-interest income, excluding net gains and losses, for the fourth quarter of 2021 increased $2.2 million, or 13%, compared to the linked quarter.  The rise in non-interest income, excluding net gains and losses, was the result of increases in electronic banking income of $1.0 million, deposit account service charges of $1.0 million and commercial loan swap fee income of $0.3 million, offset partially by declines in mortgage banking income. 

Compared to the fourth quarter of 2020, total non-interest income, excluding net gains and losses, increased $1.7 million, or 10%.   The increase was driven primarily by increases in electronic banking income of $1.7 million, deposit account service charges of $1.1 million and trust and investment income of $0.6 million.  A decline in mortgage banking income of $1.4 million partially offset those increases and was due to a lower volume of refinance activity in the fourth quarter of 2021, compared to the fourth quarter of 2020. 

For the full year of 2021, total non-interest income, excluding net gains and losses, increased $4.9 million, or 8%, compared to 2020.  The increase was caused by increases in electronic banking income of $3.8 million, trust and investment income of $2.8 million and insurance income of $1.2 million.  These increases were offset by declines in mortgage banking income and commercial loan swap fee income.  Electronic banking income was up due to an increase in debit transactions.  Insurance income was higher as a result of new accounts added during the year.  The increase in trust and investment income was due to an increase in the market value of assets under management along with new accounts added during 2021.  Mortgage banking income was down because of a lower origination volume caused by a lower inventory of homes for sale.

Total Non-interest Expense:
 Total non-interest expense was down $9.8 million, or 17%, for the fourth quarter of 2021, compared to the linked quarter, driven by an overall decrease in acquisition-related expenses and other non-core expenses.   During the third quarter of 2021, Peoples recognized $16.2 million of acquisition-related expenses due to the closing of the Premier merger.  Total non-interest expense in the third quarter of 2021 also contained other non-core expenses related to a one-time expense for contract negotiations related to the renewal of Peoples Bank's core banking systems of $1.9 million.  The non-core expenses recognized in the third quarter of 2021 did not recur in the fourth quarter; however, Peoples recorded a benefit of $0.6 million in the fourth quarter of 2021 related to a true-up of expense recognized for contract negotiations.  The decline in non-core expenses in the fourth quarter of 2021 was offset partially by increased salary expenses that are not included in acquisition-related expenses or COVID-19 related expenses. 

Compared to the fourth quarter of 2020, total non-interest expense increased $14.7 million, or 44%, primarily due to higher expenses incurred to manage a larger company.  Most notably, salaries and employee benefits increased due to the addition of full-time equivalent employees that resulted from the Premier and NSL acquisitions.  Additionally, occupancy expense increased due to an increase in the number of retail locations.   

For the full year of 2021, total non-interest expense was $183.7 million, an increase of $50.0 million compared to 2020.  Similar to the quarterly comparisons, the acquisitions of Premier and NSL increased acquisition-related expenses included in other expenses, professional fees, salaries and employee benefit costs, as well as occupancy expenses, and amortization of intangible assets.

The efficiency ratio for the fourth quarter of 2021 was 62.8%, compared to 94.7% for the linked quarter and 62.4%  for the fourth quarter of 2020.  The efficiency ratio improved compared to the linked quarter mainly as the result of the decline in total core non-interest expense and an increase in core non-interest income.  The efficiency ratio, adjusted for non-core items, was 61.6% for the fourth quarter of 2021, compared to 63.9% for the linked quarter, and 60.5% for the fourth quarter of 2020.  For the full year of 2021, the efficiency ratio was 73.7% compared to 63.9% for 2020.  Adjusted for non-core items, the efficiency ratio for the full year of 2021 was 63.5%, compared to 61.9% for 2020. 

Income Tax Expense:  
Peoples recorded income tax expense of $6.9 million for the fourth quarter of 2021, compared to a tax benefit of $2.2 million for the linked quarter and income tax expense of $4.3 million for the fourth quarter of 2020.  The income tax expense recognized during the fourth quarter of 2021 was primarily due to increased pre-tax income caused by the release of a portion of the allowance for credit losses during the current quarter and the impact of a full quarter's income related to the Premier acquisition. The income tax benefit for the third quarter of 2021 was due to the net loss recognized in the third quarter of 2021 due to the acquisition-related expenses and the establishment of the day 1 allowance for credit losses for non-purchased credit deteriorated loans acquired from Premier.  The income tax expense recognized in the fourth quarter of 2020 was due to the level of pre-tax income that resulted from a release of a portion of the allowance for credit losses during that quarter.

Peoples recognized income tax expense of $10.9 million in 2021, compared to $7.9 million in 2020, and the effective tax rate for 2021 remained at 18.6%, consistent with 2020.  The variance in income tax expense for 2021 compared to 2020, was the result of higher pre-tax income in 2021 that resulted from the acquisitions of Premier and NSL.  

Loans:
 The period-end total loan balances at December 31, 2021 decreased $12.1 million, compared to September 30, 2021.  During the fourth quarter of 2021, Peoples recognized increases of $32.9 million in commercial and industrial loans, $35.2 million in construction loans and $11.1 million in leases.  This growth was more than offset by the sale of $59.8 million of predominantly purchased credit deteriorated loans acquired from Premier, and the forgiveness of $48.7 million in PPP loans during the quarter.  The loans were sold at par which was done to restore Peoples' exposure in the hospitality industry to pre-acquisition levels and reduce criticized and classified loans.   

Quarterly average total loan balances increased $964.7 million compared to the linked quarter, primarily due to the full-quarter impact of loans acquired from Premier and, to a lesser extent, growth in commercial and industrial loans and construction loans. 

Compared to the fourth quarter of 2020, quarterly average loan balances increased $1.1 billion, or 31%, driven by the Premier and NSL acquisitions, offset by a decline in the amount of PPP loans as a result of those forgiven during 2021. 

Compared to December 31, 2020, total loan balances increased $1.1 billion, or 32%.  The increase in the period-end loan balances was driven by loans acquired from Premier, along with leases acquired and growth in leases of $39.2 million, growth of premium finance loans of $21.4 million, and organic loan growth of $249.6 million, offset partially by a $279.8 million reduction in PPP loans during the year.

Asset Quality:
 Overall, asset quality remained relatively stable through the fourth quarter of 2021.  Total nonperforming assets decreased $4.7 million, or 9%, compared to September 30, 2021, and increased $19.3 million, or 67%, compared to December 31, 2020.  The increase in nonperforming assets compared to December 31, 2020 was primarily attributable to nonperforming loans acquired from Premier.  Nonperforming assets as a percent of total loans and OREO was 1.07% at December 31, 2021, down from 1.17% at September 30, 2021 and up from 0.84% at December 31, 2020.

 Criticized loans, which are those categorized as special mention, substandard or doubtful, decreased $40.8 million, or 17%, compared to September 30, 2021 and increased $67.4 million, or 53%, compared to December 31, 2020.  As a percent of total loans, criticized loans were 4.33% at December 31, 2021, compared to 5.23% at September 30, 2021, and 3.72% at December 31, 2020.  The decrease in criticized loans compared to September 30, 2021 was due to the disposal of criticized loans that were included in the sale of $59.8 million of loans acquired from Premier.  The increase in criticized loans compared to December 31, 2020 was driven by the criticized loans acquired from Premier.  Classified loans, which are those categorized as substandard or doubtful, decreased $36.1 million, or 25%, compared to September 30, 2021, and were up $34.0 million, or 47%, compared to December 31, 2020.  As a percent of total loans, classified loans were 2.38% at December 31, 2021, compared to 3.18% at September 30, 2021, and 2.13% at December 31, 2020.  The decrease in classified loans compared to September 30, 2021 was driven by the disposal of classified loans that were included in the sale of $59.8 million of loans acquired from Premier.

Annualized net charge-offs were 0.11% of average total loans during the fourth quarter of 2021, compared to 0.18% in the linked quarter, and 0.10% in the fourth quarter of 2020.  Net charge-offs were 0.13% of average total loans for 2021, compared to 0.05% for 2020.

At December 31, 2021, the allowance for credit losses decreased to $67.5 million, from $77.4 million at September 30, 2021, and increased compared to an allowance for credit losses of $50.4 million at December 31, 2020.  The decrease in the allowance for credit losses compared to September 30, 2021 was due primarily to the sale of $59.8 million of predominantly purchased credit deteriorated loans acquired from Premier as well as a favorable outlook on Moody's most recent economic forecast.  The ratio of the allowance for credit losses as a percent of total loans decreased to 1.51% at December 31, 2021, compared to 1.72% at September 30, 2021, and increased from 1.48% at December 31, 2020.  The ratio of the allowance for credit losses as a percent of total loans includes PPP loans that do not have an allowance for credit losses because of the guarantee by the SBA.  Excluding PPP loans, the ratio of the allowance for credit losses as a percent of total loans would have been 1.54% at December 31, 2021, compared to 1.78% at September 30, 2021, and 1.66% at December 31, 2020.  

Deposits:
 As of December 31, 2021, period-end deposits were up $30.8 million, or 1%, compared to September 30, 2021.  The increase was driven primarily by an increase in non-interest bearing deposits, offset by a seasonal decline in governmental deposits and a decline in retail certificates of deposit.

Compared to December 31, 2020, period-end deposit balances grew $2.0 billion, or 50%.  The increase in total deposits compared to the prior year end was a result of deposits acquired from Premier and organic growth of $210.0 million in non-interest bearing deposits.  

Average deposit balances during the fourth quarter of 2021 increased $1.3 billion, or 28%, compared to the linked quarter and increased $1.9 billion, or 48%, compared to the fourth quarter of 2020.  These increases were the result of the full-quarter impact of deposits acquired from Premier and organic growth.  For the full year of 2021, average deposit balances grew $945.6 million, or 25%.  The increase was driven by deposits acquired from Premier coupled with changes in customer buying habits as the pandemic continued throughout 2021.  Total demand deposit accounts comprised 48% of total deposits at December 31, 2021 compared to 46% at September 30, 2021 and to 43% at December 31, 2020.

Stockholders' Equity:
 At December 31, 2021, the tier 1 risk-based capital ratio was 12.97%, compared to 12.58% at September 30, 2021 and 13.25% at December 31, 2020.  The common equity tier 1 risk-based capital ratio was 12.67% at December 31, 2021, compared to 12.30% at September 30, 2021 and 13.01% at December 31, 2020.  The total risk-based capital ratio was 14.10% at December 31, 2021, compared to 13.83% at September 30, 2021 and 14.50% at December 31, 2020.  Peoples adopted the five-year transition to phase in the impact of the adoption of CECL on regulatory capital ratios.  Compared to  September 30, 2021, these ratios improved as provision for credit losses declined and Peoples recorded a recovery of credit losses during the quarter, positively impacting stockholders' equity.  Compared to December 31, 2020, the change in the capital ratios was due to the level of provision for credit losses recognized during 2021, offset by increased acquisition-related expenses and dividends paid to shareholders.

Total stockholders' equity at December 31, 2021 increased $13.3 million, or 2%, compared to September 30, 2021.  This change was impacted by net income of $27.9 million during the quarter and the equity award granted to employees at the Assistant Vice President level or below during the fourth quarter, which was partially offset by dividends paid of $10.2 million and an increase in accumulated other comprehensive loss of $5.7 million.  The change in accumulated other comprehensive loss was the result of the changes in the market value of available-for-sale investment securities during the period. 

Total stockholders' equity at December 31, 2021 increased $269.5 million, or 47%, compared to December 31, 2020.  This increase was driven by common shares issued in the acquisition of Premier and net income for the full year of 2021, offset by $31.2 million in dividends paid to shareholders and $13.0 million in other comprehensive losses.

At December 31, 2021, book value per common share and tangible book value per common share, which excludes goodwill and other intangible assets, were $29.87 and $19.39, respectively, compared to $29.43 and $18.98, respectively, at September 30, 2021, and $29.43 and $19.99, respectively, at December 31, 2020.  The ratio of total stockholders' equity to total assets increased 18 basis points compared to September 30, 2021.  The tangible equity to tangible assets ratio, which excludes goodwill and other intangible assets, increased 17 basis points compared to September 30, 2021, due primarily to the changes in equity noted above.  Compared to December 31, 2020, the total stockholders' equity to total assets ratio declined from 12.09% to 11.96%, and the tangible equity to tangible assets ratio declined from 8.55% to 8.10%, respectively.

Peoples Bancorp Inc. ("Peoples", Nasdaq: PEBO) is a diversified financial services holding company and makes available a complete line of banking, trust and investment, insurance and premium financing solutions through its subsidiaries. Headquartered in Marietta, Ohio since 1902, Peoples has established a heritage of financial stability, growth and community impact. Peoples had $7.1 billion in total assets as of December 31, 2021, and 135 locations, including 119 full-service bank branches in Ohio, West Virginia, Kentucky, Virginia, Washington D.C. and Maryland. Peoples' vision is to be the Best Community Bank in America and is one of only sixteen banks nationwide to be recognized by Forbes in 2021 as a Best-In-State Bank in more than one state.

Peoples is a member of the Russell 3000 index of U.S. publicly-traded companies.  Peoples offers services through Peoples Bank (which includes the divisions of Peoples Investment Services, Peoples Premium Finance and North Star Leasing) and Peoples Insurance Agency, LLC.

Conference Call to Discuss Earnings:
Peoples will conduct a facilitated conference call to discuss fourth quarter and full year 2021 results of operations on January 25, 2022 at 11:00 a.m., Eastern 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-US 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 ("US GAAP").  Management uses these "non-US GAAP" financial measures in its analysis of Peoples' performance and the efficiency of its operations. Management believes that these non-US GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods and peers.  These disclosures should not be viewed as substitutes for financial measures determined in accordance with US GAAP, nor are they necessarily comparable to non-US GAAP performance measures that may be presented by other companies.  Below is a listing of the non-US GAAP financial measures used in this news release:

  • Core non-interest expense is non-US GAAP since it excludes the impact of acquisition-related expenses, pension settlement charges, severance expenses, COVID-19 related expenses, the contribution to Peoples Bank Foundation, Inc. and contract negotiation expenses.
  • 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 non-interest income, excluding net gains and losses. This ratio is non-US GAAP since it excludes amortization of other intangible assets and all gains and losses included in earnings, and uses fully tax-equivalent net interest income.
  • Efficiency ratio adjusted for non-core items is calculated as core non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income, excluding net gains and losses. This ratio is non-US GAAP since it excludes the impact of acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses, the contribution to Peoples Bank Foundation, Inc., contract negotiation expenses, the amortization of other intangible assets and all gains and losses included in earnings, and uses fully tax-equivalent net interest income.
  • Tangible assets, tangible equity, tangible equity to tangible assets ratio and tangible book value per common share measures are non-US GAAP since they exclude the impact of goodwill and other intangible assets acquired through acquisitions on both total stockholders' equity and total assets.
  • Total non-interest income, excluding net gains and losses, is a non-US GAAP measure since it excludes all gains and losses included in earnings.
  • Pre-provision net revenue is defined as net interest income plus total non-interest income, excluding net gains and losses, minus total non-interest expense. This measure is non-US GAAP since it excludes the provision for (recovery of) credit losses and all gains and losses included in net income.
  • Return on average assets adjusted for non-core items is calculated as annualized net income (less the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses, the contribution to Peoples Bank Foundation Inc. and contract negotiation expenses) divided by average assets. This measure is non-US GAAP since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses, the contribution to Peoples Bank Foundation, Inc. and contract negotiation expenses.
  • Return on average tangible equity is calculated as annualized net income (less after-tax impact of amortization of other intangible assets) divided by average tangible equity. This measure is non-US GAAP since it excludes the after-tax impact of amortization of other intangible assets from net income and the impact of average goodwill and other average intangible assets acquired through acquisitions on average stockholders' equity.

A reconciliation of these non-US GAAP financial measures to the most directly comparable US GAAP financial measures is included at the end of this news release under the caption of "Non-US GAAP Financial Measures (Unaudited)."

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," "will likely," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," 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 ever-changing effects of the COVID-19 pandemic - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants thereof - on economies (local, national and international), supply chains and markets, on the labor market, including the potential for a sustained reduction in labor force participation and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including public health actions directed toward the containment of the COVID-19 pandemic (such as quarantines, shut downs and other restrictions on travel and commercial, social and other activities), the availability, effectiveness and acceptance of vaccines, and the implementation of fiscal stimulus packages, which could adversely impact sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;

(2)

government-imposed COVID-19 vaccine mandates could have a material adverse impact on our business, results of operation and ability to retain and recruit key management  and other personnel;

(3)

changes in the interest rate environment due to economic conditions related to the COVID-19 pandemic or other factors and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;

(4)

the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the completion and successful integration of planned acquisitions, including the recently-completed merger with Premier and the recently-completed acquisition of NSL, and the expansion of commercial and consumer lending activities, in light of the continuing impact of the COVID-19 pandemic on customers' operations and financial condition;

(5)

competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, which can in turn impact Peoples' credit spreads, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals;

(6)

uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, 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 CARES Act, and the follow-up legislation enacted as the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;

(7)

the effects of easing restrictions on participants in the financial services industry;

(8)

local, regional, national and international economic conditions (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, closing of border crossings and changes in the relationship of the U.S. and its global trading partners) 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;

(9)

Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;

(10)

changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties' performance and creditworthiness generally, which may be less favorable than expected in light of the COVID-19 pandemic and adversely impact the amount of interest income generated;

(11)

Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;

(12)

future credit quality and performance, including expectations regarding future loan losses and the allowance for credit losses;

(13)

changes in accounting standards, policies, estimates or procedures may adversely affect Peoples' reported financial condition or results of operations;

(14)

the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model;

(15)

the discontinuation of the London Interbank Offered Rate ("LIBOR") and other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;

(16)

adverse changes in the conditions and trends in the financial markets, including the impacts of the COVID-19 pandemic and the related responses by governmental and nongovernmental authorities to the pandemic, 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)

the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors;

(18)

the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income and our loan originations;

(19)

Peoples' ability to receive dividends from its subsidiaries;

(20)

Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;

(21)

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;

(22)

Peoples' ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Peoples' third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss;

(23)

Peoples' ability to anticipate and respond to technological changes, and Peoples' reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Peoples' primary core banking system provider, which can impact Peoples' ability to respond to customer needs and meet competitive demands;

(24)

operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Peoples and its subsidiaries are highly dependent;

(25)

changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions (including as a result of the COVID-19 pandemic), legislative or regulatory initiatives (including those in response to the COVID-19 pandemic), or other factors, which may be different than anticipated;

(26)

the adequacy of Peoples' internal controls and risk management program in the event of changes in strategic, reputational, market, economic, operational, cybersecurity, compliance, legal, asset/liability repricing, liquidity, credit and interest rate risks associated with Peoples' business;

(27)

the impact on Peoples' businesses, personnel, facilities, or systems, of losses related to acts of fraud, theft, misappropriation or violence;

(28)

the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics (including COVID-19), cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts;

(29)

the impact on Peoples' businesses and operating results of any costs associated with obtaining rights in intellectual property claimed by others and adequately protecting Peoples' intellectual property;

(30)

risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets;

(31)

changes in law or requirements imposed by Peoples' regulators impacting Peoples' capital actions, including dividend payments and share repurchases;

(32)

the effect of a fall in stock market prices on the asset and wealth management business;

(33)

Peoples' continued ability to grow deposits;

(34)

the impact of future governmental and regulatory actions upon Peoples' participation in and execution of government programs related to the COVID-19 pandemic;

(35)

uncertainty regarding the impact of the current U.S. presidential administration and Congress on the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates and the response to and management of the COVID-19 pandemic, infrastructure spending and social programs; and,

(36)

other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2020.  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, 2021 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.

 

PER COMMON SHARE DATA AND SELECTED RATIOS (Unaudited)



Three Months Ended


     Year Ended


December 31,


September 30,


December 31,


December 31,


2021


2021


2020


2021


2020

PER COMMON SHARE(a):










Earnings (loss) per common share:










   Basic

$              1.00



$             (0.28)



$              1.06



$         2.17



$          1.74


   Diluted

0.99



(0.28)



1.05



2.16



1.73


Cash dividends declared per common share

0.36



0.36



0.35



1.43



1.37


Book value per common share (b)

29.87



29.43



29.43



29.87



29.43


Tangible book value per common share (b)(c)

19.39



18.98



19.99



19.39



19.99


Closing stock price at end of period

$            31.81



$             31.61



$            27.09



$       31.81



$        27.09












SELECTED RATIOS (a):










Return on average stockholders' equity (d)

13.24

%


(3.64)

%


14.45

%


7.27

%


6.04

%

Return on average tangible equity (d)(e)

21.45

%


(4.76)

%


22.22

%


12.21

%


9.47

%

Return on average assets (d)

1.56

%


(0.42)

%


1.69

%


0.84

%


0.73

%

Return on average assets adjusted for non-core items (d)(f)

1.53

%


0.66

%


1.81

%


1.18

%


0.83

%

Efficiency ratio (g)

62.83

%


94.70

%


62.36

%


73.65

%


63.86

%

Efficiency ratio adjusted for non-core items (h)

61.62

%


63.93

%


60.47

%


63.51

%


61.94

%

Pre-provision net revenue to total average assets (d)(i)

1.43

%


0.11

%


1.51

%


1.02

%


1.47

%

Net interest margin (d)(j)

3.36

%


3.50

%


3.13

%


3.39

%


3.24

%

Dividend payout ratio (k)(l)

36.45

%


NM



33.51

%


65.30

%


79.14

%



(a)  

Reflects the impact of the acquisition of Premium Finance beginning July 1, 2020, of NSL beginning April 1, 2021, and of Premier beginning September 17, 2021.

(b) 

Data presented as of the end of the period indicated.

(c)  

Tangible book value per common share represents a non-US 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 under the caption of "Non-US GAAP Financial Measures (Unaudited)."

(d) 

Ratios are presented on an annualized basis.

(e)  

Return on average tangible equity represents a non-US GAAP financial measure since it excludes the after-tax impact of amortization of other intangible assets from net income and it excludes the balance sheet impact of average goodwill and other intangible assets acquired through acquisitions on average stockholders' equity.  Additional information regarding the calculation of this ratio is included at the end of this news release under the caption of "Non-US GAAP Financial Measures (Unaudited)."

(f)  

Return on average assets adjusted for non-core items represents a non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses, the contribution to Peoples Bank Foundation, Inc. and contract negotiation expenses/refunds.  Additional information regarding the calculation of this ratio is included at the end of this news release under the caption of "Non-US GAAP Financial Measures (Unaudited)."

(g) 

The efficiency ratio is defined as total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income (excluding all gains and losses).  This ratio represents a non-US GAAP financial measure since it excludes amortization of other intangible assets, and all gains and losses included in earnings, and uses fully tax-equivalent net interest income.  Additional information regarding the calculation of this ratio is included at the end of this news release under the caption of "Non-US GAAP Financial Measures (Unaudited)."

(h) 

The efficiency ratio adjusted for non-core items is defined as core non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income (excluding all gains and losses). This ratio represents a non-US GAAP financial measure since it excludes the impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses, the contribution to Peoples Bank Foundation, Inc. and contract negotiation expenses included in earnings, and uses fully tax-equivalent net interest income.  Additional information regarding the calculation of this ratio is included at the end of this news release under the caption of "Non-US GAAP Financial Measures (Unaudited)."

(i)   

Pre-provision net revenue is defined as net interest income plus total non-interest income (excluding all gains and losses) minus total non-interest expense.  This measure represents a non-US GAAP financial measure since it excludes the provision for (recovery of) credit losses and all gains and losses included in net 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 under the caption of "Non-US GAAP Financial Measures (Unaudited)."

(j)   

Information presented on a fully tax-equivalent basis, using a 22.3% blended tax rate for the third and fourth quarters of 2021 and the 2021 full-year while prior periods used 21% statutory federal corporate income tax rate.

(k) 

This ratio, when applicable, is calculated based on dividends declared during the period divided by net income for the period.

(l)   

NM - not meaningful.

 

CONSOLIDATED STATEMENTS OF INCOME 



Three Months Ended


Year Ended


December 31,


September 30,


December 31,


December 31,


2021


2021


2020


2021


2020

(Dollars in thousands, except per share data)

(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)



Total interest income

$              57,405


$               45,467


$              37,923


$        184,631


$         157,104

Total interest expense

2,826


2,889


3,615


12,236


18,181

Net interest income

54,579


42,578


34,308


172,395


138,923

(Recovery of) provision for credit losses

(7,613)


8,994


(7,277)


(280)


26,254

Net interest income after (recovery of) provision for credit losses

62,192


33,584


41,585


172,675


112,669











Non-interest income:










Electronic banking income

5,355


4,326


3,678


18,010


14,246

Trust and investment income

4,233


4,158


3,649


16,456


13,662

Deposit account service charges

3,565


2,549


2,423


10,143


9,418

Insurance income

3,329


3,367


3,113


15,252


14,042

Net gain (loss) on asset disposals and other transactions

1,784


(308)


(53)


1,325


(290)

Mortgage banking income

713


766


2,153


3,439


6,499

Bank owned life insurance income

439


437


463


1,768


1,977

Commercial loan swap fees

349


73


474


543


1,741

Net loss on investment securities

(158)


(166)


(751)


(862)


(368)

Other non-interest income

1,038


1,144


1,352


3,643


2,745

  Total non-interest income

20,647


16,346


16,501


69,717


63,672











Non-interest expense:










Salaries and employee benefit costs

26,336


25,589


19,048


94,612


76,361

Net occupancy and equipment expense

4,751


3,551


3,120


14,918


12,808

Data processing and software expense

3,148


2,529


2,097


10,542


7,441

Electronic banking expense

2,879


2,037


1,938


8,885


7,777

Professional fees

2,324


6,426


1,665


15,783


6,912

Amortization of other intangible assets

1,508


1,279


909


4,775


3,223

Franchise tax expense

870


810


861


3,357


3,506

Marketing expense

848


1,223


540


3,658


2,101

Communication expense

578


411


277


1,657


1,134

Other loan expenses

558


487


329


2,001


1,584

FDIC insurance expense

380


807


585


1,976


1,302

Other non-interest expense

3,811


12,711


1,881


21,573


9,546

  Total non-interest expense

47,991


57,860


33,250


183,737


133,695

  Income (loss) before income taxes

34,848


(7,930)


24,836


58,655


42,646

Income tax expense (benefit)

6,922


(2,172)


4,263


10,921


7,879

    Net income (loss)

$              27,926


$                (5,758)


$              20,573


$          47,734


$           34,767











PER COMMON SHARE DATA:










Earnings (loss) per common share – basic

$                  1.00


$                  (0.28)


$                  1.06


$              2.17


$               1.74

Earnings (loss) per common share – diluted

$                  0.99


$                  (0.28)


$                  1.05


$              2.16


$               1.73

Cash dividends declared per common share

$                  0.36


$                   0.36


$                  0.35


$              1.43


$               1.37











Weighted-average common shares outstanding – basic

27,942,794


20,640,519


19,302,919


21,816,511


19,721,772

Weighted-average common shares outstanding – diluted

28,114,980


20,789,271


19,442,284


21,959,883


19,843,806

Common shares outstanding at the end of period

28,297,771


28,265,791


19,563,979


28,297,771


19,563,979

 

CONSOLIDATED BALANCE SHEETS



December 31,


2021


2020

(Dollars in thousands)

(Unaudited)



Assets




Cash and cash equivalents:




  Cash and due from banks

$              76,491


$              60,902

  Interest-bearing deposits in other banks

341,373


91,198

    Total cash and cash equivalents

417,864


152,100

Available-for-sale investment securities, at fair value (amortized cost of




 $1,281,511 at December 31, 2021 and $734,544 at December 31, 2020) (a)

1,273,858


753,013

Held-to-maturity investment securities, at amortized cost (fair value of




  $369,955 at December 31, 2021 and $68,082 at December 31, 2020) (a)

374,129


66,458

Other investment securities, at cost

33,987


37,560

    Total investment securities (a)

1,681,974


857,031

Loans, net of deferred fees and costs (b)

4,478,894


3,402,940

Allowance for credit losses

(67,471)


(50,359)

    Net loans

4,411,423


3,352,581

Loans held for sale

3,791


4,659

Bank premises and equipment, net of accumulated depreciation

89,260


60,094

Bank owned life insurance

73,358


71,591

Goodwill

269,811


171,260

Other intangible assets

26,816


13,337

Other assets

94,079


78,111

    Total assets

$         7,068,376


$         4,760,764

Liabilities




Deposits:




Non-interest-bearing

$         1,641,666


$            997,323

Interest-bearing

4,221,130


2,913,136

    Total deposits

5,862,796


3,910,459

Short-term borrowings

166,482


73,261

Long-term borrowings

99,475


110,568

Accrued expenses and other liabilities

94,419


90,803

    Total liabilities

$         6,223,172


$         4,185,091





Stockholders' Equity




Preferred stock, no par value, 50,000 shares authorized, no shares issued at December 31, 2021 and 
     December 31, 2020

—


—

Common stock, no par value, 50,000,000 shares authorized, 29,814,401 shares issued at December 31, 2021 
     and 21,193,402 shares issued at December 31, 2020, including shares in treasury

686,282


422,536

Retained earnings

207,255


190,691

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

(11,619)


1,336

Treasury stock, at cost, 1,577,359 shares at December 31, 2021 and 1,686,046 shares at December 31, 2020

(36,714)


(38,890)

    Total stockholders' equity

845,204


575,673

    Total liabilities and stockholders' equity

$         7,068,376


$         4,760,764







(a)  

Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $0 and $286, respectively, as of December 31, 2021 and $0 and $60, respectively, as of December 31, 2020.

(b) 

Also referred to throughout this document as "total loans" and "loans held for investment."

 

SELECTED FINANCIAL INFORMATION (Unaudited)  



December 31,

September 30,

June 30,

March 31,

December 31,

(Dollars in thousands)

2021

2021

2021

2021

2020

Loan Portfolio






Construction

$        209,993


$         174,784


$        100,599


$          78,699


$        106,792


Commercial real estate, other

1,547,818


1,629,116


948,260


965,249


929,853


Commercial and industrial

891,420


858,538


805,751


964,761


973,645


Premium finance

136,136


134,755


117,088


110,590


114,758


Leases

122,508


111,446


95,643


—


—


Residential real estate

771,469


768,134


566,597


573,700


574,007


Home equity lines of credit

163,608


161,370


118,401


117,426


120,913


Consumer, indirect

530,532


543,256


537,926


519,749


503,527


Consumer, direct

104,654


108,702


81,436


79,204


79,094


Deposit account overdrafts

756


927


498


298


351


    Total loans

$     4,478,894


$      4,491,028


$     3,372,199


$     3,409,676


$     3,402,940


Total acquired loans (a)(b)

$     1,373,970


$      1,586,413


$        481,927


$        462,784


$        521,465


    Total originated loans

$     3,104,924


$      2,904,615


$     2,890,272


$     2,946,892


$     2,881,475


Deposit Balances (a)








Non-interest-bearing deposits (c)

$     1,641,666


$      1,559,993


$     1,181,045


$     1,206,034


$        997,323


Interest-bearing deposits:






  Interest-bearing demand accounts (c)

1,167,460


1,140,639


732,478


722,470


692,113


  Retail certificates of deposit

643,759


691,680


417,466


433,214


445,930


  Money market deposit accounts

651,169


637,635


547,412


586,099


591,373


  Governmental deposit accounts

617,259


679,305


498,390


511,937


385,384


  Savings accounts

1,036,738


1,016,755


689,086


676,345


628,190


Brokered deposits

104,745


106,013


166,746


168,130


170,146


    Total interest-bearing deposits

$     4,221,130


$      4,272,027


$     3,051,578


$     3,098,195


$     2,913,136


    Total deposits

$     5,862,796


$      5,832,020


$     4,232,623


$     4,304,229


$     3,910,459


Total demand deposits (c)

$     2,809,126


$      2,700,632


$     1,913,523


$     1,928,504


$     1,689,436


Asset Quality (a)






Nonperforming assets (NPAs):






  Loans 90+ days past due and accruing

$            3,723


$             5,363


$            3,741


$            1,044


$            2,752


  Nonaccrual loans

34,765


36,034


23,079


24,744


25,793


    Total nonperforming loans (NPLs) (g)

38,488


41,397


26,820


25,788


28,545


  Other real estate owned (OREO) (l)

9,496


11,268


239


134


134


Total NPAs

$          47,984


$           52,665


$          27,059


$          25,922


$          28,679


Criticized loans (d)

$        194,016


$         234,845


$        113,802


$        116,424


$        126,619


Classified loans (e)

106,547


142,628


69,166


76,095


72,518


Allowance for credit losses as a percent of NPLs (g)

175.30

%

186.93

%

178.75

%

174.10

%

180.14

%

NPLs as a percent of total loans (g)

0.89

%

0.92

%

0.79

%

0.76

%

0.82

%

NPAs as a percent of total assets (g)

0.68

%

0.75

%

0.53

%

0.50

%

0.59

%

NPAs as a percent of total loans and OREO (g)

1.07

%

1.17

%

0.80

%

0.76

%

0.84

%

Criticized loans as a percent of total loans (d)

4.33

%

5.23

%

3.37

%

3.41

%

3.72

%

Classified loans as a percent of total loans (e)

2.38

%

3.18

%

2.05

%

2.23

%

2.13

%

Allowance for credit losses as a percent of total loans

1.51

%

1.72

%

1.42

%

1.32

%

1.48

%

Capital Information (a)(f)(h)(j)






Common equity tier 1 capital ratio (i)

12.67

%

12.30

%

11.34

%

12.42

%

13.01

%

Tier 1 risk-based capital ratio

12.97

%

12.58

%

11.56

%

12.65

%

13.25

%

Total risk-based capital ratio (tier 1 and tier 2)

14.10

%

13.83

%

12.75

%

13.78

%

14.50

%

Leverage ratio

8.79

%

11.20

%

7.87

%

9.00

%

8.97

%

Common equity tier 1 capital

$        585,346


$         567,172


$        383,502


$        418,089


$        409,400


Tier 1 capital

598,996


580,100


391,190


425,739


417,011


Total capital (tier 1 and tier 2)

651,248


637,802


431,424


463,872


456,384


Total risk-weighted assets

$     4,619,613


$      4,611,321


$     3,382,736


$     3,365,637


456,384


Total stockholders' equity to total assets

11.96

%

11.78

%

11.55

%

11.26

%

12.09

%

Tangible equity to tangible assets (k)

8.10

%

7.93

%

7.51

%

7.96

%

8.55

%



(a)  

Reflects the impact of the acquisition of NSL beginning April 1, 2021, and of Premier beginning September 17, 2021.

(b) 

Includes all loans and leases acquired and purchased in 2012 and thereafter.

(c)  

The sum of non-interest-bearing deposits and interest-bearing deposits is considered total demand deposits.

(d) 

Includes loans categorized as a 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, 2021 data based on preliminary analysis and subject to revision.

(i)   

Peoples' capital conservation buffer was 6.10% at December 31, 2021, 5.83% at September 30, 2021, 4.75% at June 30, 2021, 5.78% at March 31, 2021, and 6.5% at December 31, 2020, compared to required capital conservation buffer of 2.50%

(j)   

Peoples has adopted the five-year transition to phase in the impact of the adoption of CECL on regulatory capital ratios.

(k) 

This ratio represents a non-US GAAP financial measure since it excludes the balance sheet impact of intangible assets acquired through acquisitions on both total stockholders' equity and total assets.  Additional information regarding the calculation of this ratio is included at the end of this news release under the caption of "Non-US GAAP Financial Measures (Unaudited)."

(l)   

The change in OREO for the quarter ended September 30, 2021 compared to the quarter ended June 30, 2021 was a result of property acquired from Premier.

 

(RECOVERY OF) PROVISION FOR CREDIT LOSSES INFORMATION



Three Months Ended


     Year Ended


December 31,


September 30,


December 31,


December 31,


2021


2021


2020


2021


2020

(Dollars in thousands)

(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

(Recovery of) provision for credit losses










(Recovery of) provision for credit losses

$          (7,797)



$              8,870



$           (7,373)



$          (672)



$     25,798


Provision for checking account overdrafts

184



124



96



392



456


  Total (recovery of) provision for credit losses

$          (7,613)



$              8,994



$           (7,277)



$          (280)



$     26,254












Net Charge-Offs










Gross charge-offs

$           1,767



$              1,896



$            1,614



$        5,988



$       5,335


Recoveries

491



310



715



1,295



3,572


  Net charge-offs

$           1,276



$              1,586



$               899



$        4,693



$       1,763












Net Charge-Offs (Recoveries) by Type










Commercial real estate, other

$                30



$                    (4)



$               200



$           183



$          328


Commercial and industrial

101



650



(47)



1,031



(956)


Premium Finance

15



7



1



45



3


Leases

369



311



—



1,095



—


Residential real estate

32



(4)



53



242



51


Home equity lines of credit

1



143



79



156



91


Consumer, indirect

524



373



457



1,503



1,621


Consumer, direct

(2)



12



47



40



40


Deposit account overdrafts

206



98



109



398



487


  Total net charge-offs

$           1,276



$              1,586



$               899



$        4,693



$       1,665












As a percent of average total loans (annualized)

0.11

%


0.18

%


0.10

%


0.13

%


0.05

%

 

SUPPLEMENTAL INFORMATION (Unaudited)



December 31,


September 30,


June 30,


March 31,


December 31,

(Dollars in thousands)

2021


2021


2021


2021


2020











Trust assets under administration and
management

$         2,009,871


$          1,937,123


$           1,963,884


$          1,916,892


$         1,885,324

Brokerage assets under administration and
management

1,183,927


1,133,668


1,119,247


1,071,126


1,009,521

Mortgage loans serviced for others

$            430,597


441,085


454,399


469,788


$            485,972

Employees (full-time equivalent)

1,188


1,181


925


887


894











 

CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME (Unaudited)



Three Months Ended


December 31, 2021


September 30, 2021


December 31, 2020

(Dollars in thousands)

Balance

Income/
 Expense

Yield/
Cost


Balance

Income/
 Expense

Yield/
Cost


Balance

Income/
 Expense

Yield/
Cost

Assets












Short-term investments

$    350,692

$           138

0.16

%


$    199,007

$         82

0.16

%


$      79,685

$         26

0.13

%

Investment securities (a)(b)

1,669,439

6,874

1.65

%


1,152,737

4,935

1.71

%


890,658

2,659

1.19

%

Loans (b)(c):












Construction

200,009

1,961

3.84

%


125,178

1,196

3.74

%


106,181

1,227

4.52

%

Commercial real estate, other

1,450,542

15,629

4.22

%


993,259

9,507

3.75

%


874,248

8,715

3.90

%

Commercial and industrial

865,519

8,492

3.84

%


789,555

8,933

4.43

%


1,022,086

10,047

3.85

%

Premium finance

134,023

1,735

5.07

%


122,828

1,542

4.91

%


109,228

984

3.53

%

Leases

112,694

4,547

15.79

%


97,068

4,810

19.39

%


—

—

—

%

Residential real estate (d)

925,309

9,577

4.14

%


652,184

6,648

4.08

%


630,755

6,657

4.22

%

Home equity lines of credit

164,851

1,772

4.26

%


126,888

1,271

3.97

%


124,218

1,253

4.01

%

Consumer, indirect

539,176

5,455

4.01

%


541,329

5,509

4.04

%


496,846

5,298

4.24

%

Consumer, direct

107,780

1,605

5.91

%


86,935

1,385

6.32

%


79,835

1,308

6.52

%

Total loans

4,499,903

50,773

4.44

%


3,535,224

40,801

4.55

%


3,443,397

35,489

4.06

%

Allowance for credit losses

(75,526)




(51,610)




(57,725)



Net loans

4,424,377




3,483,614




3,385,672



Total earning assets

6,444,508

57,785

3.54

%


4,835,358

45,818

3.74

%


4,356,015

38,174

3.46

%













Goodwill and other intangible
assets

298,337




232,361




185,093



Other assets

356,082




407,428




296,870



Total assets

$ 7,098,927




$ 5,475,147




$ 4,837,978















Liabilities and Equity












Interest-bearing deposits:












Savings accounts

$ 1,021,821

$             33

0.01

%


$    737,771

$         23

0.01

%


$    610,876

$         35

0.02

%

Governmental deposit accounts

648,013

433

0.27

%


542,855

458

0.33

%


402,605

555

0.55

%

Interest-bearing demand accounts

1,159,995

98

0.03

%


795,565

74

0.04

%


676,133

70

0.04

%

Money market deposit accounts

637,681

96

0.06

%


533,497

67

0.05

%


555,188

145

0.10

%

Retail certificates of deposit (e)

665,513

898

0.54

%


457,073

951

0.83

%


455,552

1,295

1.13

%

Brokered deposits (e)

105,364

571

2.15

%


155,779

826

2.10

%


252,007

818

1.29

%

Total interest-bearing deposits

4,238,387

2,129

0.20

%


3,222,540

2,399

0.30

%


2,952,361

2,918

0.39

%

Short-term borrowings

181,348

258

0.56

%


80,400

91

0.45

%


89,473

216

0.96

%

Long-term borrowings

99,622

439

1.75

%


95,031

399

1.67

%


110,759

481

1.73

%

Total borrowed funds

280,970

697

0.99

%


175,431

490

1.11

%


200,232

697

1.39

%

Total interest-bearing liabilities

4,519,357

2,826

0.25

%


3,397,971

2,889

0.34

%


3,152,593

3,615

0.46

%













Non-interest-bearing deposits

1,642,579




1,358,652




1,021,586



Other liabilities

100,192




90,741




97,507



Total liabilities

6,262,128




4,847,364




4,271,686



Stockholders' equity

836,799




627,783




566,292



Total liabilities and stockholders'
equity

$ 7,098,927




$ 5,475,147




$ 4,837,978















Net interest income/spread (b)


$      54,959

3.29

%



$  42,929

3.40

%



$  34,559

3.00

%

Net interest margin (b)



3.36

%




3.50

%




3.13

%

 

CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME (Unaudited) -- (Continued)



Year Ended



December 31, 2021


December 31, 2020


(Dollars in thousands)

Balance

Income/
 Expense

Yield/
Cost


Balance

Income/
 Expense

Yield/
Cost


Assets









Short-term investments

$    219,849

$           313

0.14

%


$     103,767

$           343

0.33

%


Investment securities (a)(b)

1,205,509

19,545

1.62

%


970,895

17,516

1.80

%


Loans (b)(c):









Construction

131,834

5,130

3.84

%


107,862

4,883

4.45

%


Commercial real estate, other

1,061,317

42,567

3.96

%


854,749

36,499

4.20

%


Commercial and industrial

870,682

37,265

4.22

%


925,060

34,458

3.66

%


Premium finance

118,242

5,872

4.90

%


50,687

2,855

5.54

%


Leases

74,442

13,572

17.98

%


—

—

—

%


Residential real estate (d)

700,689

29,326

4.19

%


660,025

31,155

4.72

%


Home equity lines of credit

133,340

5,410

4.06

%


127,454

5,799

4.55

%


Consumer, indirect

529,994

21,480

4.05

%


453,379

19,364

4.27

%


Consumer, direct

88,611

5,501

6.21

%


79,138

5,286

6.68

%


Total loans

3,709,151

166,123

4.44

%


3,258,354

140,299

4.26

%


Allowance for credit losses

(56,048)




(47,692)




Net loans

3,653,103




3,210,662




Total earning assets

5,078,461

185,981

3.63

%


4,285,324

158,158

3.66

%











Goodwill and other intangible assets

234,683




181,526




Other assets

359,463




272,439




Total assets

$  5,672,607




$  4,739,289













Liabilities and Equity









Interest-bearing deposits:









Savings accounts

$    772,726

$           112

0.01

%


$     571,676

$           175

0.03

%


Governmental deposit accounts

529,955

2,035

0.38

%


375,305

2,226

0.59

%


Interest-bearing demand accounts

848,526

303

0.04

%


658,214

455

0.07

%


Money market deposit accounts

575,237

390

0.07

%


549,276

1,416

0.26

%


Retail certificates of deposit (e)

497,181

3,952

0.79

%


473,244

6,748

1.43

%


Brokered  deposit (e)

150,716

3,130

2.08

%


223,940

2,480

1.11

%


Total interest-bearing deposits

3,374,341

9,922

0.29

%


2,851,655

13,500

0.47

%


Short-term borrowings

100,963

541

0.54

%


176,634

2,571

1.46

%


Long-term borrowings

103,414

1,773

1.71

%


116,692

2,110

1.81

%


Total borrowed funds

204,377

2,314

1.13

%


293,326

4,681

1.59

%


Total interest-bearing liabilities

3,578,718

12,236

0.34

%


3,144,981

18,181

0.58

%











Non-interest-bearing deposits

1,347,702




924,799




Other liabilities

89,554




94,123




Total liabilities

5,015,974




4,163,903




Stockholders' equity

656,633




575,386




Total liabilities and stockholders' equity

$ 5,672,607




$  4,739,289













Net interest income/spread (b)


$    173,745

3.29

%



$    139,977

3.08

%


Net interest margin (b)



3.39

%




3.24

%




(a)  

Average balances are based on carrying value.

(b) 

Interest income and yields are presented on a fully tax-equivalent basis, using a 22.3% blended corporate income tax rate in the third and fourth quarters of  2021 an the full year 2021 and 21% a statuary federal corporate income tax rate for prior periods..

(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.

(e)  

Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered deposits for the periods presented in which FHLB advances and brokered deposits were being utilized.

NON-US GAAP FINANCIAL MEASURES (Unaudited)

The following non-US 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-US 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,

(Dollars in thousands)

2021


2021


2020


2021


2020











Core non-interest expense:










Total non-interest expense

$               47,991



$               57,860



$               33,250



$         183,737



$         133,695


Less: acquisition-related expenses

918



16,209



77



21,423



489


Less: pension settlement charges

—



143



4



143



1,054


Less: severance expenses

16



—



771



79



1,055


Less: COVID-19 related expenses

566



181



126



1,248



1,332


Less: Peoples Bank Foundation, Inc. contribution

—



—



—



500



—


Less: contract negotiation expenses

(603)



1,851



—



1,248



—


Core non-interest expense

$               47,094



$               39,476



$               32,272



$         159,096



$         129,765







Three Months Ended


     Year Ended


December 31,


September 30,


December 31,


December 31,

(Dollars in thousands)

2021


2021


2020


2021


2020











Efficiency ratio:










Total non-interest expense

$           47,991



$            57,860



$           33,250



$ 183,737



$ 133,695


Less: amortization of other intangible assets

1,508



1,279



909



4,775



3,223


Adjusted total non-interest expense

46,483



56,581



32,341



178,962



130,472












Total non-interest income

20,647



16,346



16,501



69,717



63,672


Add: net loss on investment securities

(158)



(166)



(751)



(862)



(368)


Add: net gain (loss) on asset disposals and other
transactions

1,784



(308)



(53)



1,325



(290)


Total non-interest income, excluding net gains and
losses

19,021



16,820



17,305



69,254



64,330













Net interest income

54,579



42,578



34,308



172,395



138,923


Add: fully tax-equivalent adjustment (a)

380



351



251



1,350



1,054


Net interest income on a fully tax-equivalent basis

54,959



42,929



34,559



173,745



139,977












Adjusted revenue

$           73,980



$            59,749



$           51,864



$ 242,999



$ 204,307












Efficiency ratio

62.83

%


94.70

%


62.36

%


73.65

%


63.86

%











Efficiency ratio adjusted for non-core items:









Core non-interest expense

$           47,094



$            39,476



$           32,272



$ 159,096



$ 129,765


Less: amortization of other intangible assets

1,508



1,279



909



4,775



3,223


Adjusted core non-interest expense

45,586



38,197



31,363



154,321



126,542












Adjusted revenue

$           73,980



$            59,749



$           51,864



$ 242,999



$ 204,307












Efficiency ratio adjusted for non-core items

61.62

%


63.93

%


60.47

%


63.51

%


61.94

%













(a) Tax effect is calculated using a 21% statutory federal corporate income tax rate.

 

NON-US GAAP FINANCIAL MEASURES (Unaudited) -- (Continued)




At or For the Three Months Ended


December 31,


September 30,


June 30,


March 31,


December 31,

(Dollars in thousands, except per share data)

2021


2021


2021


2021


2020











Tangible equity:










Total stockholders' equity

$        845,204



$        831,882



$        585,505



$        578,893



$        575,673


Less: goodwill and other intangible assets

296,627



295,415



221,576



184,007



184,597


Tangible equity

$        548,577



$        536,467



$        363,929



$        394,886



$        391,076












Tangible assets:










Total assets

$     7,068,376



$     7,059,752



$     5,067,634



$     5,143,052



$     4,760,764


Less: goodwill and other intangible assets

296,627



295,415



221,576



184,007



184,597


Tangible assets

$     6,771,749



$     6,764,337



$     4,846,058



$     4,959,045



$     4,576,167












Tangible book value per common share:










Tangible equity

$        548,577



$        536,467



$        363,929



$        394,886



$        391,076


Common shares outstanding

28,297,771



28,265,791



19,660,877



19,563,979



19,563,979












Tangible book value per common share

$            19.39



$            18.98



$            18.51



$            20.18



$            19.99












Tangible equity to tangible assets ratio:





Tangible equity

$        548,577



$        536,467



$        363,929



$        394,886



$        391,076


Tangible assets

$     6,771,749



$     6,764,337



$     4,846,058



$     4,959,045



$     4,576,167












Tangible equity to tangible assets

8.10

%


7.93

%


7.51

%


7.96

%


8.55

%

 

Three Months Ended

Year Ended


December 31,


September 30,


December 31,


December 31,

(Dollars in thousands)

2021


2021


2020


2021


2020











Pre-provision net revenue:










Income (loss) before income taxes

$            34,848



$             (7,930)



$            24,836



$        58,655



$        42,646


Add: provision for credit losses

—



8,994



—



—



26,254


Add: loss on OREO

2



32



162



34



197


Add: loss on investment securities

556



316



1,020



2,046



1,023


Add: loss on other assets

235



363



148



714



601


Add: net loss on other transactions

—



6



—



—



—


Less: recovery of credit losses

7,613



—



7,277



280



—


Less: gain on OREO

307



—



43



315



77


Less: gain on investment securities

397



150



269



1,184



655


Less: gain on other transactions

1,511



—



—



1,504



—


Less: gain on other assets

203



93



214



462



431


Pre-provision net revenue

$            25,610



$              1,538



$            18,363



$        57,704



$        69,558













Total average assets

7,098,927



5,475,147



4,837,978



5,672,607



4,739,289












Pre-provision net revenue to total average assets
(annualized)

1.43

%


0.11

%


1.51

%


1.02

%


1.47

%

Weighted-average common shares outstanding –
diluted

28,114,980



20,789,271



19,442,284



21,959,883



19,843,806


Pre-provision net revenue per common share –
diluted

$                0.91



$                0.07



$                0.94



$            2.62



$            3.49


 

NON-US GAAP FINANCIAL MEASURES (Unaudited) -- (Continued)



Three Months Ended

Year Ended


December 31,


September 30,


December 31,


December 31,

(Dollars in thousands)

2021


2021


2020


2021


2020











Annualized net income adjusted for non-core items:





Net income (loss)

$         27,926



$             (5,758)



$        20,573



$    47,734



$     34,767


Add: net loss on investment securities

158



166



751



862



368


Less: tax effect of net loss on investment securities (a)

33



35



158



181



77


Add: loss on asset disposals and other transactions

—



308



53



—



290


Less: tax effect of net loss on asset disposals and other
transactions (a)

—



65



11



—



61


Less: gain on asset disposals and other transactions (a)

1,784



—



—



1,325



—


Add: tax effect of net loss on asset disposals and other
transactions (a)

375



—



—



278



—


Add: acquisition-related costs

918



16,209



77



21,420



1,459


Less: tax effect of acquisition-related costs (a)

193



3,404



16



4,498



306


Add: severance expenses

16



—



771



79



1,055


Less: tax effect of severance expenses (a)

3



—



162



17



222


Add: pension settlement charges

—



143



4



143



1,054


Less: tax effect of pension settlement charges (a)

—



30



1



30



221


Add: COVID-19-related expenses

566



181



126



1,248



1,332


Less: tax effect of COVID-19-related expenses (a)

119



38



26



262



280


Add: Peoples Bank Foundation, Inc. contribution

—



—



—



500



—


Less: tax effect of Peoples Bank Foundation, Inc.
   contribution

—



—



—



105



—


Add: contract negotiation expenses

—



1,851



—



1,851



—


Less: tax effect of contract negotiation expenses

—



389



—



389



—


Less: refund of contract negotiation expense

603



—



—



603



—


Add: tax effect of refund of contract negotiation expense

127



—



—



127



—


Net income adjusted for non-core items

$         27,351



$               9,139



$        21,981



$    66,832



$     39,158












Days in the period

92



92



92



365



366


Days in the year

365



365



366



365



366


Annualized net income (loss)

$       110,793



$           (22,844)



$        81,845



$    47,734



$     34,767


Annualized net income adjusted for non-core items

$       108,512



$             36,258



$        87,446



$    66,832



$     39,158


Return on average assets:










Annualized net income (loss)

$       110,793



$           (22,844)



$        81,845



$    47,734



$     34,767


Total average assets

$    7,098,927



$        5,475,147



$   4,837,978



$  5,672,607



$  4,739,289


Return on average assets

1.56

%


(0.42)

%


1.69

%


0.84

%


0.73

%

Return on average assets adjusted for non-core items:





Annualized net income adjusted for non-core items

$       108,512



$             36,258



$        87,446



$       66,832



$       39,158


Total average assets

$    7,098,927



$        5,475,147



$   4,837,978



$  5,672,607



$  4,739,289


Return on average assets adjusted for non-core items

1.53

%


0.66

%


1.81

%


1.18

%


0.83

%



(a)

Tax effect is calculated using a 21% statutory federal corporate income tax rate.

 

NON-US GAAP FINANCIAL MEASURES (Unaudited) -- (Continued)



For the Three Months Ended

For the Year Ended


December 31,


September 30,


December 31,


December 31,

(Dollars in thousands)

2021


2021


2020


2021


2020











Annualized net income excluding amortization of other intangible assets:





Net income (loss)

$         27,926



$         (5,758)



$        20,573



$        47,734



$         34,767


Add: amortization of other intangible assets

1,508



1,279



909



4,775



3,223


Less: tax effect of amortization of other
intangible assets (a)

317



269



191



1,003



677


Net income (loss) excluding amortization of
other intangible assets

$         29,117



$         (4,748)



$        21,291



$        51,506



$         37,313












Days in the period

92



92



92



365



366


Days in the year

365



365



366



365



366


Annualized net income (loss)

$       110,793



$       (22,844)



$        81,845



$        47,734



$         34,767


Annualized net income (loss) excluding
amortization of other intangible assets

$       115,519



$       (18,837)



$        84,701



$        51,506



$         37,313












Average tangible equity:





Total average stockholders' equity

$       836,799



$      627,783



$      566,292



$      656,633



$       575,386


Less: average goodwill and other intangible

assets

298,337



232,361



185,093



234,683



181,526


Average tangible equity

$       538,462



$      395,422



$      381,199



$      421,950



$       393,860












Return on average stockholders' equity ratio:






Annualized net income (loss)

$       110,793



$       (22,844)



$        81,845



$        47,734



$         34,767


Average stockholders' equity

$       836,799



$      627,783



$      566,292



$      656,633



$       575,386












Return on average stockholders' equity

13.24

%


(3.64)

%


14.45

%


7.27

%


6.04

%







Return on average tangible equity ratio:






Annualized net income (loss) excluding
amortization of other intangible assets

$       115,519



$       (18,837)



$        84,701



$        51,506



$         37,313


Average tangible equity

$       538,462



$      395,422



$      381,199



$      421,950



$       393,860












Return on average tangible equity

21.45

%


(4.76)

%


22.22

%


12.21

%


9.47

%













(a)

Tax effect is calculated using a 21% statutory federal corporate income tax rate.

 

Cision View original content:https://www.prnewswire.com/news-releases/peoples-bancorp-inc-announces-4th-quarter-and-annual-results-for-2021-301467119.html

SOURCE Peoples Bancorp Inc.