Peoples Bancorp, a diversified financial services holding company, has delivered another quarter of solid results, showcasing its ability to navigate the current economic landscape. For the second quarter of 2024, the company reported net income of $29.0 million, or $0.82 per diluted share, compared to $29.6 million, or $0.84 per diluted share, in the previous quarter. For the first half of 2024, Peoples Bancorp reported net income of $58.6 million, or $1.66 per diluted share, compared to $47.7 million, or $1.56 per diluted share, in the same period of 2023.

Financials

The company's annual net income for 2023 was $113,363,000, while its annual revenue reached $526,957,000. Peoples Bancorp's annual operating cash flow was $142,798,000, and its annual free cash flow was $129,340,000.

Loan Growth and Asset Quality

One of the key highlights for the second quarter was the company's loan growth, which increased by 8% on an annualized basis compared to the previous quarter. This growth was driven by strong performance in the premium finance, commercial and industrial, and consumer loan portfolios, which offset a decline in the commercial real estate segment. Notably, the company's criticized and classified loans declined by 6% and 19%, respectively, compared to the linked quarter, indicating improvements in asset quality.

Net Interest Margin

Peoples Bancorp's net interest margin for the second quarter of 2024 was 4.18%, compared to 4.26% in the previous quarter. The decrease was primarily due to lower accretion income, net of amortization, and higher borrowing costs, which offset the increase in earning asset yields. For the first half of 2024, the company's net interest margin was 4.22%, down from 4.54% in the same period of 2023.

Fee-Based Income

The company's fee-based income, excluding the annual performance-based insurance commissions recognized in the first quarter, grew compared to the linked quarter. This was driven by increases in electronic banking income and trust and investment income, which offset declines in bank-owned life insurance and lease income. For the first half of 2024, Peoples Bancorp's fee-based income grew 15%, primarily due to the Limestone Merger completed in April 2023.

Non-Interest Expenses

In terms of non-interest expenses, the company reported relatively flat results compared to the first quarter of 2024, as a one-time prior period true-up of corporate expenses impacted the other non-interest expense category. For the first half of 2024, non-interest expenses increased by 8%, primarily due to higher operating costs from the additional footprint acquired through the Limestone Merger, partially offset by lower acquisition-related expenses.

Liquidity

Peoples Bancorp's balance sheet remained strong, with its investment securities portfolio comprising 20% of total assets as of June 30, 2024. The company's loan-to-deposit ratio increased to 87% during the quarter. The company was able to gain additional liquidity by moving some of its governmental deposits and repurchase agreements to insured cash sweep products, which allowed it to free up previously pledged investment securities.

Deposits

From a deposit perspective, the company's total deposits declined by $29 million from the linked quarter, primarily due to reductions in brokered CDs and seasonal declines in governmental deposits. Excluding brokered CDs, Peoples Bancorp's deposits grew by $42 million, driven by a $132 million increase in retail CDs, partially offset by declines in other deposit categories.

Capital Position

The company's capital position remained strong, with its common equity Tier 1 capital ratio at 11.8% and its total risk-based capital ratio at 13.5% as of June 30, 2024. The company's tangible equity to tangible assets ratio improved to 7.6% from 7.4% in the previous quarter.

Outlook

Looking ahead, Peoples Bancorp expects its net interest income to benefit from the full-year impact of the Limestone Merger. The company anticipates its quarterly net interest margin to be between 4.1% and 4.3% for the remainder of 2024, assuming no significant short-term interest rate changes. The company has also lowered its 2024 loan growth guidance to 5% to 7%, down from the previous range of 6% to 8%, due to expected paydowns on criticized and classified loans, as well as some reduction in the leasing business.

Regarding the company's provision for credit losses, Peoples Bancorp expects the amounts recognized in the third and fourth quarters of 2024 to be relatively consistent with the first half of the year. The company anticipates a full-year net charge-off rate of around 25 basis points to 30 basis points, primarily driven by trends in small-ticket leasing and indirect consumer loans.

Conclusion

In conclusion, Peoples Bancorp has demonstrated its ability to deliver consistent performance amidst the current economic challenges. The company's diversified business model, prudent risk management, and strategic initiatives have positioned it well to navigate the evolving market conditions. As the company continues to invest in technology, infrastructure, and talent, it remains focused on enhancing its capabilities and serving its customers, while generating value for its shareholders.