Peoples Bancorp Inc. · NASDAQ:PEBO
Peoples Bancorp — Q1 2019 Earnings Presentation
56 slides from Peoples Bancorp's earnings presentation, May 6, 2019
Slide 1: Investor Presentation 1st Quarter 2019
f Peoples ©), Nasdaq: PEBO Investor Presentation 1** Quarter 2019
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements in this presentation which are not historical are “forwardtooking 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
Slide 3: Overview
Overview a ¢ Profile, Investment Rationale, Strategy and Culture ¢ Strategic Priorities and Financial Results ¢ Acquisition Q1 2019 Performance ¢ Appendix 8 g 3 o
Slide 4: Profile, Investment Rationale, Strategy and Culture
Profile, Investment Rationale, Strategy and Culture BANCORP® /Peop ples
Slide 5: Corporate Profile
Corporate Profile ¢ Financial holding company headquartered in Marietta, Ohio. — Provides a broad range of banking, insurance, and investment services ¢ Current snapshot: — Assets: $4.3 billion; Loans: $2.9 billion — Deposits: $8.4 billion — Market capitalization: $656 million — Assets under admin/m
Slide 6: Investment Rationale
Investment Rationale (ay Unique community banking model — Greater revenue diversity (31% non-interest income, excluding gains and losses) than the average $1 - 10 billion bank — Strong community reputation and active involvement — Local market teams capable of out-maneuvering larger banks — More sop
Slide 7: What PEBO Stands For!
What PEBO Stands For! a ¢ Mission, Vision and Values ¢ Brand Promise * Go To Market Proposition ¢ Strategic Road Map for Best Community Bank in America
Slide 8: Mission, Vision and Values
Mission, Vision and Values Our Mission Our mission is to be the primary financial resource for our businesses and clients who value us as true financial partners. We grow these relationships by delivering trusted advice, extraordinary personal service, and a seamless, integrated suite of services th
Slide 9: Brand Promise
BrandPromse We will work side by side to overcome challenges and seize opportunities. We listen and work with you. Together, we will build and execute thoughtful plans and actions, blending our experience and expertise, to move you toward your goals. Our core difference is providing you peace of min
Slide 10: PEBO's Go To Market proposition of Insurance, Investment and Banking is unique
PEBO’s Go To Market proposition of Insurance, Investment and Banking is unique to our footprint and enables a complete financial rel: with our Clients Top 250 Most Profitable Clients Peoples has been in the banking business since 1902 50% 36% 29% Peoples Insuranceis 25% bail 24% among the 20 largest
Slide 11: Strategic Road Map for Best Community Bank in America
Strategic Road Map for Best Community Bank in America Best Community Bank in America + Commitmentto Superior Shareholder Returns + Great Placeto Work + Clients’ 1*Choice for Banking, Investing and Insurance + Meaningful Impacton Our Communities Responsible Risk Profitable Revenue = : first Class Wor
Slide 12: Strategic Priorities and Financial Results
Strategic Priorities and Financial Results BANCORP® /Peop ples
Slide 13: Expand revenue versus expense growth gap beyond 29%
-» * Expand revenue versus expense growth gap beyond 29% See page 24 ¢ Focused on sustainable revenue growth See page 25 ° Disciplined expense management See page 26 * Drive core efficiency ratio to 60% See page 27 ¢ Preserve key metrics superior to most of our peers See page 29 ¢ Balance growth wit
Slide 14: Financial metrics versus targets
NPAs as a percent of total loans and OREO (1) 0.71% 0.67% 0.70% to 1.00% 7 Net charge-offs as a percent of average total loans 0.15% __-0.15% 0.30% to 0.50% v Total loans to total assets 68.37% 68.15% 72.0%t0775% Total loans to total deposits 92.33% 87.26% 85.090 95.0% ¥ DDAs to total deposits 39.98
Slide 15: Financial Expectations - 2019
Financial Expectations - 2019* € <) ¢ Annualized organic loan growth of 5% to 7%, * We anticipate the quarterly levels of provision expense to be somewhat higher than for the prior year, as the first quarter was not indicative of our anticipated future costs ¢ A netinterest margin between 3.75% - 3.
Slide 16: PEBO Stock Performance - 1, 3, 5 Year
PEBO Stock Performance - 1, 3, 5 Year (ay Total Annual Return as of March 31, 2019 1-Year 3-Year 5-Year 20.0% 13.0% 14.2% 13.4% 11.0% 12,0% 10.9% 7.6% 7.0% 8.3% 9.5% -9.6% @PEBO @Peer Group & Russell 2000 Financial Services ™ Russell 2000 GOS&P 500 Total Return includes impact of dividends Peers inc
Slide 17: Products and Services
Products and Services ase Fa Yes | Yes | Yes |Yes| Yes Yes Yes | Yes Yes__| Yes | Yes Yes | Yes | Yes |Yes| Yes Yes Yes | Yes Yes__|_Yes_| Yes No [Yes | Yes |Yes[ Yes Yes ty | Yes [Yes Yes__|_Yes_| Yes No | No [Yes] Yes Yes No No Yes | Yes | No [General online and mobile capabil Yes [Yes | Yes |Yes|
Slide 18: Peoples Market
Peoples Market I ¢ Strongest deposit market share positions in more rural markets where we can affect pricing ¢ Presence near larger cities puts us in position to capture lending opportunities in more urban markets (e.g. Cleveland, Akron, Canton, Cincinnati and Columbus) Deposit i = x Deposits Marke
Slide 19: Acquisition
A Acquisition
Slide 20: First Prestonsburg Transaction
ansactl t Prestonsbu: First First Prestonsburg Bancshares Commonwealth Inc. was merged into Peoples Bank sion on April 12, 2019 Nine full service branches in and around the Prestonsburg and Pikeville markets in eastern Kentucky have become Peoples branches First Prestonsburg Bancshares Inc. ranked i
Slide 21: Q1 2019 Performance
Q1 2019 Performance
Slide 22: First Quarter 2019 Highlights
First Quarter 2019 Highlights a Diluted earnings per share of $0.73 compared to $0.64 for the first quarter of 2018 Return on average assets of 1.46%, adjusted ROA of 1.49% Growth of 16% in net interestincome compared to the first quarter of 2018 A 14 basis pointincrease in net interest margin compa
Slide 23: Business Highlights
Business Highlights (ay ¢ Commercial Banking — Average loans up 1% so far in 2019 — $25 million lending “house limit” although legal limit is over $50 million ¢ Retail Banking — Indirect loans grew by $62 million, or 18%, since March 31, 2018 — Consumer demand deposit accounts at 42.5% of total cons
Slide 24: Adjusted Operating Leverage
10% Adjusted Operating Leverage @ Expect to generate positive operating leverage, adjusted for non-core items, for the full year of 2019 Versus the same quarter in the prior year, adjusted operating leverage has been positive Versus the prior year, adjusted operating leverage was positive for fiscal
Slide 25: Total Revenue Growth
otal Revenue Growtl Oo 23% increase in total revenue from Q1-17 to Q1-19 $40,000 $35,000 $30,000 $25,000 $20,000 — > QLI7 Q217° Q317) Q417_— QLI8.—Q218.-QB18_— Q418.— QL-19 Net Interest Income = Non-Interest Income, Excluding Gains and Losses ‘Beginning ia the second quarter of 2018 Peoples benefite
Slide 26: Core Non-Interest Expense
Core Non-Interest Expense* ‘The recent escalation in expenses is do to the ASB acquisition, our move to a $15 minimum wage, an increasein FTE's for succession, growth and technology investments. We expect expensesto be in the range of $80.5 million and $81.5 million for the remaining 2019 quarters (
Slide 27: Efficiency Ratio Adjusted for Non-Core Items
66.00% 65.00% 64.00% 63.00% 62.00% 61.00% 60.00% Efficiency Ratio Adjusted for Non: 64.89% 62.21% 614 118% 61.04% 60.71 [ez 4% improvement from Q1 2017 to Sf af Se UF 8 oe FAX SSAA A 12019 core Items* +The eficency atioadjused for non-com itemsis definedas core nenintrestexpense less amonizatonof ot
Slide 28: Deposits Per Branch
Deposits Per Branch Deposits per full service branch has trended upward since 2015, assisting us in being a more efficient bank. Total Deposits Per Full Service Branch $46,000,000 $44,000,000 75 $42,000,000 $40,000,000 $38,000,000 $36,000,000 65 $34,000,000 ——- | | $30,000,000 60 12/2015 12/2016 12/
Slide 29: Improvement in Key Metrics
Improvementin Key Metrics Peoples’ focus on steadily growing loans and deposits, managing expenses, and increasing operating leverage, has resulted in improvementin key financial metrics ‘Return on Average Assets Adjusted for Non-Core Items! ‘Return on Average Tangible Stockholders’ Equity Adjusted
Slide 30: Asset Quality - NPAs/Assets
Asset Quality - NPAs/Assets € )), NPAsasa percentage of total assets have consistently been superior to midwest 1.40% 1.20% 1.00% 0.80% NPAs / Assets 0.60% 0.40% 0.20% 0.00% banks with $1 - $10 billion in total assets QU16 QV16 QBV-16 Q416 QUT QUIT Q317 QHIT QU-I8 QVZI8 QRS QeIS QUL-19 mm$1-10 billi
Slide 31: NPA Composition
NPA Composition (ay NPAs at 03/31/19 were primarily composed of well-collateralized commercial real estate and residential real estate loans, consistent with trend noted in recent quarters i tiitiit QUE Q216 QEIE QHIE QUIT Q2I7 QEI7 QeI7 QUIB Qz18 QS18 QeIs QlI9 sl si 5. SCRE mResdenal SC&I SHELOC =
Slide 32: Asset Quality
Asset Quality Criticized loans as a percent of Tier 1 Capital and ALLLis at an 18-year low as of March 31, 2019 40.0% 85.0% 32.3 32.2% 9) 30.4% 29.9% 30.1% 31.3% 39.0% 30.0% | =. Sse Nears 28.1% 25.6% 25.0% 20.0% ee EAM 14.4% 15.0% 10.0% 5.0% 0.0% Q316 Q416 QLIT Q217 QSI7 Q4I7 QIIS Q2I18 QzI8 Q4I8 Q
Slide 33: Loan Composition
Loan Compos The Commercial Real Estate Portfolio was comprised of loans to the following industries at March 81, 2019. Data as of March 31, 2019 Total loan portfolio = $2,787,580 = sancore Total CRE portfolio = $997,492 33
Slide 34: Total Loan Growth
tal Loan Growth © Organic loan growth was 4% from March 81, 2018 Q3-17 Q4l7 QL-18 Q218 Q3-18 Q418 QL-19 mm Total Loans Except ASB* mam ASB* Acquired Loans —Average Loan Balances "On April18, 2012, Peoples completed the acquisition ASB. ASB merged into Peoples, and ASB/swholly-owmed subsidiary, Ameri
Slide 35: Deposit Growth
Deposit Growth Total deposits were up 12% compared to March 31, 2018 For the quarter ended March 81, 2019, cost of deposits was 0.80% $3,041 seco 82 s90 $2,955 33,187 $2,780 eects . = . zi $2,000 31,500 51,000 29% 38% 38% DDAs** $500 aui7 aus azis ass aus aus sNondntrcstbearingDDAC* latrestearingDDA
Slide 36: Deposit Costs and Betas
Deposit Costs and Betas (ay Peoples has maintained low deposit and funding costs relative to banks in the $2B to $10B universe, midwest banks, and the banking industry as a whole 100% Peer Group Deposit Beta Metrics Over Time 120.00% == 120.0% 100.0% 80.00% 60.00% 40.00% 20.00% 0.0036 20.00% 40.00%
Slide 37: Earning Asset Mix
Earning Asset Mix Since 2018, the percentage of earning assets composed of investments has decreased, while the percentage composed of loans has increased. $4,000,000 80% $3,500,000 10% $3,000,000 : 3 60% 2 $2,500,000 $2,000,000 50% $1,500,000 40% $1,000,000 30% $500,000 Ss. 20% FY-13 FY-14 FY-15 FY
Slide 38: Prudent Use of Capital
Prudent Use of Capital « Dividends — Consistently evaluate dividend and adjust accordingly — annualized dividend yield at March 31, 2019 was 4.35% — Ona percentage basis, dividend growth has out paced earnings per share growth of the last two years Cash Dividends Declared Per Share 50.40 50.34 50.35
Slide 39: CRE Concentration Analysis
CRE Concentration Analysis (ay * CRE exposure is well below supervisory criteria established to identify institutions with heightened CRE concentration risk — Exposure levels also compare favorably to peer institution concentration levels — Concentration levels have improved relative to peers on a l
Slide 40: CRE Concentration Analysis
CRE Concentration Analysis (ay Peer Bank Subs -- Construction, Land, and Land Development Loans / Risk-Based Capital Lox, 10055 + 905% 805% Note: Forte followingpeess, 1231/18 data wasnotsequired tobe ‘reported for bans les than $3.0billo, so the dataahove epreseats the most recent that is avalable
Slide 41: based **
based ** 80.7% ** Approximately 9096 attributable to P&C Commercial Lines "Tray Tee Mons fon O9SUI9 Feta iorcamcat rene forthe wag weve oaths “Tota insures ereate fr he waig twckce montis from 0981/10" 5 12587, 0 a from 0381/19 = 8 14778,00 = sancore
Slide 42: Appendix
Appendix
Slide 43: Non-US GAAP Measures
Non-US GAAP Measures PRE-PROVISIO! Pre-provision net revenue (PPNR) has become a key financial measure used by federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus total non-interest income (excluding all gains an
Slide 44: Non-US GAAP Measures
Non-US GAAP Measures a PRE-PROVISION NET REVENUE ADJUSTED FOR NON-CORE ITEMS Pre-provision net revenue (PPNR) has become a key financial measure used by federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR adjusted for non-core items is defined as net
Slide 45: Non-US GAAP Measures
Non-US GAAP Measures CORE NON-INTEREST INCOME Core non-interest income is a financial measure used to evaluate Peoples’ recurring non-interest revenue stream. This measure is non-US GAAP since it excludes the impact of all gains and/or losses, and core banking system conversion revenue waived. (S in
Slide 46: Non-US GAAP Measures
Non-US GAAP Measures NTEREST EXPENSE Core non-interest expense is a financial measure used to evaluate Peoples’ recurring expense stream. This measure is non-US GAAP since it excludes the impact of core banking system conversion expenses, acquisition-related expenses, pension settlement charges, and
Slide 47: Non-US GAAP Measures
Non-US GAAP Measures EFFICIENCY RATIO The efficiency ratio is a key financial measure used to monitor performance. The 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 no
Slide 48: Non-US GAAP Measures
Non-US GAAP Measures EFFICIENCY RATIO The efficiency ratio is a key financial measure used to monitor performance. The 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 no
Slide 49: Non-US GAAP Measures
Non-US GAAP Measures EFFICIENCY RATIO ADJUSTED FOR NON-CORE ITEMS 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 core non-interest income excludin
Slide 50: Non-US GAAP Measures
Non-US GAAP Measures EFFICIENCY RATIO ADJUSTED FOR NON-CORE ITEMS 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 core non-interest income excludin
Slide 51: Non-US GAAP Measures
Non-US GAAP Measures TANGIBLE EQUITY TO TANGIBLE ASSETS AND TANGIBLE BOOK VALUE PER SHARE Peoples uses tangible capital measures to evaluate the adequacy of Peoples’ stockholders’ equi Such ratios represent non- US GAAP financial measures since the calculation removes the impact of goodwill and othe
Slide 52: Non-US GAAP Measures
Non-US GAAP Measures RETURN ON AVERAGE TANGIBLE STOCKHOLDERS’ EQUITY The return on average tangible stockholders’ equity atio is a key financial measure used to monitor performance. It is calculated as net income (less after-tax impact of amortization of other intangible assets) divided by average t
Slide 53: Non-US GAAP Measures
Non-US GAAP Measures RETURN ON AVERAGE TANGIBLE STOCKHOLDERS’ EQUITY Continued from previous slide. (Sin Thousands) Q4IT QUIS _Q218 QBS Q4IS_—QLI9_FY-16FY-17_—FY-I8-_—_YTD-19 Return on Average StockhoMers Equity Ratio: Anmuatized net income $35,710 $ 47616 $ 31,655 _$ 50485 _$ 55135 $ 58274 _$ 31157
Slide 54: Non-US GAAP Measures
Non-US GAAP Measures RETURN ON AVERAGE STOCKHOLDERS’ EQUITY ADJUSTED FOR NON-CORE ITEMS The return on average stockholders’ equity adjusted for non-core items represents an non-US GAAP financial measure since it excludes the release of the deferred tax asset valuation allowance, the impact of the Ta
Slide 55: Non-US GAAP Measures
Non-US GAAP Measures The return on average tangible stockholders’ equity adjusted for non-core items represents a non-US GAAP financial measure since it excludes the release of the deferred tax asset valuation allowance, the impact of the Tax Cuts and Jobs Act on the remeasurement of deferred tax as
Slide 56: Non-US GAAP Measures
Non-US GAAP Measures -) RETURN ON AVERAGE ASSETS ADJUSTED FOR. NON-COREITEMS The return on average assets adjusted for non-core items represents an non-US GAAP financial measure since it excludes the release of the deferred tax asset valuation allowance, the impact of the Tax Cuts and Jobs Act on th