Peoples Bancorp Inc. · NASDAQ:PEBO
Peoples Bancorp — Investor Presentation (March 2019)
57 slides from Peoples Bancorp's investor presentation, Mar 5, 2019
Slide 1: Investor Presentation 4th Quarter 2018
Y Peoples), Nasdaq: PEBO Investor Presentation 4‘ Quarter 2018
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 Q4 and Full Year 2018 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: Financial holding company headquartered in Marietta, Ohio
¢ Financial holding company headquartered in Marietta, Ohio. — Provides a broad range of banking, insurance, and investment services ¢ Current snapshot: — Assets: $4.0 billion; Loans: $2.7 billion — Deposits: $3.0 billion — Market capitalization: $665 million — Assets under admin/mgmt: $2.2 billion
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
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 nts Peoples has been in the a banking business since 1902 42% 29% 26% PeoplesInsuranceis 25% 22% among the 20 largest 16% ban
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: Focused on sustainable revenue growth
-» * Focused on sustainable revenue growth See page 26 ° Disciplined expense management See page 27 ¢ Expand revenue versus expense growth gap beyond 2% See page 28 * Drive core efficiency ratio to 60% See page 29 ¢ Preserve key metrics superior to most of our peers See page 31 ¢ Balance growth with
Slide 14: Financial metrics versus targets
NPAs as a percent of total loans and OREO (1) 0.749% 0.71% 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 65.81% 68.37% 72.0%t0775% Total loans to total deposits 86.33% 92.33% 85.0% 10 95.0% ¥ DDAs to total deposits 42.10
Slide 15: Financial Expectations - 2019
Financial Expectations - 2019 (a) Annualized organic loan growth of 6% to 8% Long-term rates could increase but remain more volatile than in prior years, which could impact ability to produce meaningful loan growth An increase in credit costs, as unusually low charge-offs were experienced in the ind
Slide 16: PEBO Stock Performance - 1, 3, 5 Year
PEBO Stock Performance - 1, 3, 5 Year (ay Total Annual Return as of December 31, 2018 1-Year 3-Year 5-Year @PEBO @PeerGroup ™NASDAQBanks @SPX 500 *YTD not annualized Total Return includes impact of dividends Peers include: SRCE, CHCO, CCNE, CTBI, FMNB, FISI, FCF, FDEF, THFF, FRME, GABC, HBNC, LKFN,
Slide 17: Products and Services
Y at Te) Products and Services a esBa 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 Yes [Yes Yes__|_Yes_| Yes a ed Insurance Age No [No | No [Yes] Yes Yes | No No Yes | Yes | No [General online and mobile
Slide 18: Peoples Market Positions
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
t Prestonsbu: ansacti First First Prestonsburg Bancshares Inc. is the rs Ith parent company of First Commonwealth Came cal Bank of Prestonsburg, Inc. sect mic Deal announced on October 29, 2018 Nine full service branches in and around the Prestonsburg and Pikeville markets in eastern Kentucky First
Slide 21: Q4 and Full Year 2018 Performance
Q4 and Full Year 2018 Performance BANCORP® /Peop ples
Slide 22: Fourth Quarter 2018 Highlights
Fourth Quarter 2018 Highlights a Return on average assets of 1.38% annualized for the fourth quarter of 2018 Over a 50% increase in net income for the fourth quarter of 2018 compared to the fourth quarter of 2017, anda 9% increase over the linked quarter Growth of 17% in net interestincome and 8% in
Slide 23: Full Year 2018 Highlights
Full Year 2018 Highlights ay Total revenue growth of 18% compared to the full year of 2017 Improvementin the efficiency ratio, adjusted for non-core items, compared to 2017 Stable asset quality metrics, with continually growing loan portfolio, and net charge-offs at 0.15% of average total loans, con
Slide 24: Business Highlights
Business Highlights (ay ¢ Commercial Banking — Average loans for 2018 up 13% from 2017 — $25 million lending “house limit” although legal limit is over $50 million ¢ Retail Banking — Indirect loans grew by $67.0 million, or 20%, since December 31, 2017 — Consumer Demand Deposit Account accounts at 3
Slide 25: Total Revenue Growth
Total Revenue Growth 25% increase in total revenue from Q4-16 to Q4-18 $45,000 $40,000 $35,000 $30,000 : L $25,000 sg. : $23,224 S269 $20,000 $15,000 Q416 QLIT Q217 Q317 Q4I7 QLI8 Q218* QBs" Q4I8* m Net Interest Income = Non-Interest Income, Excluding Gains and Losses + The second through foun ques
Slide 26: Non-Interest Expense
on-Interest Expense* Twelve consecutive quarters of controlled expenses m Core Non-Interest Expenses * _ Ongoing Expenses Resulting from ASB Acqusition $30,000 $29,000 | $28,000 a $27,000 | $26,000 | 3 Z $25,000 a = s24,000 | a & $23,000 | $22,000 a $21,000 | $20,000 © © S S A “ “\ ay Soo S S x s x
Slide 27: Adjusted Operating Leverage
Adjusted Operating Leverage (ay Adjusted operating leverage is the difference between total revenue growth and non- interest expense growth, ona percentage basis, excluding acquisition-related expenses and pension settlement charges. Versus the prior year, adjusted operating Versus the same quarter
Slide 28: 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% 61.4 61.19% e108 60.71% oo Er 6% improvement from QI 2017 to Q42018 QUI? Q2.17 Q8-17 Q£17 QL-18 Q218 QS-18 Qe18 core Items* 7.49% 64.30% 61.85% 61.32% 9% improvement from F¥ 2015to FY 2018 Fvis F¥i6 +The efice
Slide 29: 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 544,000,000 $42,000,000 $40,000,000 $38,000,000 ‘Total Deposits $36,000,000 ‘Number of Branches, 65 $34,000,000 + $32,000,000 [| $30
Slide 30: 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 1.40% ‘Return on Average Assets Adjusted for Non-Core Items" ‘Return on Average Tangible Stockholders’ Equity Adj
Slide 31: Asset Quality - NPAs/Assets
Asset Quality - NPAs/Assets a 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 QUE QL BWC Q4e16 QUT QUIT QBI7 QHIT QUIS Q2Z18 Q3-18 QUI8 mm$1-10 billion Midwest Bank
Slide 32: NPA Composition
NPA Composition (ay NPAs at 12/31/18 were primarily composed of well-collateralized commercial real estate and residential real estate loans, consistent with trend noted in recent quarters Q2ls Qs18 Qei8 QUI6 Q216 Q816 QeIG QLIT Q2I7) Q8I7QkI7 Ls sl si 5. SCRE mResdenal SC&I SHELOC = Consumer People
Slide 33: Asset Quality
Asset Quality Criticized and classified loan levels remain reasonable 50,000 32.3% 32.2% 34.3% 45,000 | 304% 29.9% 30.1% __« z 30.0% 7A ewe 40,000 26.64 16.5% 174% 16.8% 46.49 14.4% 13.1% 9, 9 Q316- O46 Quiz Qei7 317 Q417 “Quis” eis” 3.18 Q418 mmm Nonaccrual Loans —e—Criticized Loans / Tier 1 Capita
Slide 34: Loan Composition
» Loan Composition The Commercial Real Estate Portfolio was comprised of loans to the following industries at December 31, 2018. Data as of December 31,2018 yy ‘Total loan portfolio = $2,798,778 = sancore 384
Slide 35: Total Loan Growth
tal Loan Growth © Organic loan growth was 7% over December 31, 2017 $2,700 $2,600 $2,500 $2,400 $2,800 $2,900 $2,100 $2,000 Q3-17 Q4l7 Ql-1s Q2-18 Q3-18 Q418 mm Total Loans Except ASB* mam ASB* Acquired Loans —Average Loan Balances "On April18, 2012, Peoples completed the acquisition ASB. ASB merged
Slide 36: Total deposits were up 8% compared to December 31, 2017
é Total deposits were up 8% compared to December 31, 2017 For the quarter ended December 31, 2018, cost of deposits was 0.73% ee _ ial $3,041 $2,955 $2,730 = . = = = = 2,000 51,000 42% 1% 39% 38% 40% } boas $500 Qui quis eis eis ei wNoninterestbeariog DDAs"* WIateestbeasng DDAs** = Savings accounts
Slide 37: Deposit and Funding Costs and Betas
Deposit and Funding Costs and Betas @ 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 55% 45% 35% 25% 15% Costof Interest Bearing Deposits S2B:S10B — Midnest Banks Industry Average Cumulative Hike
Slide 38: Earning Asset Mix
Earning Asset Mix Since 2018, the percentage of earning assets composed of investments has decreased, $4,000,000 $3,500,000 $3,000,000 2 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 7 Peoples (a while the percentage composed of loans has increased. 80% 70% 1 60% 50% 40% 30% 20% FY-13 FY-1
Slide 39: Prudent Use of Capital
Prudent Use of Capital « Dividends — Consistently evaluate dividend and adjust accordingly — annualized dividend yield at December 31, 2018 was 3.99% — Ona percentage basis, dividend increase has out paced earnings per share growth of the last two years Cash Dividends Declared Per Share 50.35 30.30
Slide 40: 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 41: CRE Concentration Analysis
CRE Concentration Analysis Peer Bank Subs-- Construction, Land, and Land Development Loans / Risk-Based Capital 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% ies Note: Forte followingpeers, 1231/18 data was not avalible, so the data above represes the mostrecenthatisavaleforthesepeess: CEC, SMAME
Slide 42: Insurance revenue
** Approximately 9096 attributable to P&C Commercial Lines "Tray Tee Mons foen 12818 Feta iarcamcat rene forthe waking wee montis “Tota insarnee erate fr he wag cco montis from SVR“ 12515 00) » from 1281/18 ~8 14812,00 = sancore
Slide 43: Appendix
Appendix
Slide 44: Non-US GAAP Measures
Non-US GAAP Measures PRE-PROVISION NET REVENUE 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
Slide 45: Non-US GAAP Measures
Non-US GAAP Measures 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 in
Slide 46: 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. Gin T
Slide 47: Non-US GAAP Measures
Non-US GAAP Measures CORE NON-INTEREST 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 ch
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 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 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 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 52: 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’ equity. Such ratios represent non- US GAAP financial measures since the calculation removes the impact of goodwill and o
Slide 53: Non-US GAAP Measures
Non-US GAAP Measures RETURN ON AVERAGE TANGIBLE STOCKHOLDERS’ EQUITY The return on average tangible stockholders’ equity ratio 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
Slide 54: Non-US GAAP Measures
Non-US GAAP Measures RETURN ON AVERAGE TANGIBLE STOCKHOLDERS’ EQUITY Continued from previous slide. (S in Thousands) QeI7 QUIS _Q21s__Q348 Qeis__FVAT__—FYAS Return on Average Stockho Mens" Equity Ratio: Annualized net income S$ 35710 _$ 47616 $ 31,655 $ 50485 $ 55135 _$ 38471 $ 46255 Average stockho
Slide 55: 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 56: 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 57: 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 the re