Peoples Bancorp Inc. · NASDAQ:PEBO
Peoples Bancorp — Q2 2020 Earnings Presentation
50 slides from Peoples Bancorp's earnings presentation, Jul 28, 2020
Slide 1: Investor Presentation 2nd Quarter 2020
INVESTOR PRESENTATION 2ND QUARTER 2020 NASDAQ: PEBO
Slide 2: Safe Harbor Statement
NASDAQ: PEBO SAFE HARBOR STATEMENT Statements in this presentation which are not historical 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 Litigat
Slide 3: Table of Contents
NASDAQ: PEBO WORKING TABLE OF CONTENTS PAGE 4 TOGETHER PROFILE, INVESTMENT RATIONALE, CULTURE AND STRATEGY PAGE 9 COVID-19 CREDIT IMPACT, CAPITAL & LIQUIDITY BUILDING PAGE 28 Q2 & YTD 2020 FINANCIAL INSIGHTS PAGE 41 Q2 & YTD 2020 APPENDIX SUCCESS 3 WORKING TOGETHER. BUILDING SUCCESS. ®
Slide 4: Profile, Investment Rationale, Culture and Strategy
PROFILE INVESTMENT NASDAQ: PEBO RATIONALE PROFILE, INVESTMENT RATIONALE, CULTURE AND STRATEGY CULTURE ® 4 WORKING TOGETHER. BUILDING SUCCESS.
Slide 5: PEBO Profile
PEBO PROFILE NASDAQ: PEBO PEBO MARKET INSIGHT PEBO GEOGRAPHIC FOOTPRINT • Strongest deposit market share positions in more rural markets where we can affect pricing Cleveland levelaand • Presence near larger cities puts us in a position PA to capture lending opportunities in more urban markets (e.g.
Slide 6: Investment Rationale
INVESTMENT RATIONALE NASDAQ: PEBO UNIQUE COMMUNITY BANKING MODEL • Greater revenue diversity (30% non-interest income, excluding gains and losses) than the average $1 - 10 billion bank • Strong community reputation and active involvement • 16 local market teams capable of out-maneuvering larger bank
Slide 7: Corporate Culture
CORPORATE CULTURE NASDAQ: PEBO OUR VISION CIRCLE Our vision is to be THE BEST COMMUNITY BANK IN AMERICA. OUR MISSION CLIENTS INTEGRITY FIRST ALWAYS We will work side by side to overcome challenges and seize opportunities. We listen and work with you. Together, we will PEBO UR build and execute thoug
Slide 8: Strategic Road Map
STRATEGIC ROAD MAP NASDAQ: PEBO STRATEGIC ROAD MAP FOR BEST COMMUNITY BANK IN AMERICA • Commitment to Superior Shareholder Returns • Great Place to Work • Clients’ 1st Choice for Banking, Investing and Insurance • Meaningful Impact on Our Communities RESPONSIBLE RISK EXTRAORDINARY PROFITABLE FIRST C
Slide 9: COVID-19 Credit Impact, Capital & Liquidity
COVID-19 NASDAQ: PEBO CREDIT IMPACT COVID-19 CREDIT IMPACT, CAPITAL & LIQUIDITY CAPITAL & LIQUIDITY 9 ® WORKING TOGETHER. BUILDING SUCCESS.
Slide 10: Our Response to COVID-19
OUR RESPONSE TO COVID-19 NASDAQ: PEBO THE CHANGES THAT THE PANDEMIC HAS HAD ON OUR INDUSTRY HAVE BEEN WIDESPREAD AND SWEEPING. • It changed the way we provide our products and services, which is now more digital. • Enabled remote work capabilities for associates as appropriate. • Temporarily moved t
Slide 11: Community Relations During COVID-19
COMMUNITY RELATIONS DURING COVID-19 NASDAQ: PEBO SOCIAL MEDIA POSTS RECOGNIZING PEOPLES 4.1 M Followers 383K Followers / Over 200K Views / Over 10K Likes & Retweets Jobs Ohio is providing a 90% guarantee on the first $25 million of increased exposure to small businesses. Clients may obtain up to $20
Slide 12: Credit Risk Management Process
CREDIT RISK MANAGEMENT PROCESS NASDAQ: PEBO LOAN PORTFOLIO COMPOSITION MANAGEMENT & MONITORING • Robust concentration management process focused on portfolio • Clear segregation of duties between sales & credit functions risk diversification • Signature approval process with Credit Administration re
Slide 13: Salient Credit Facts for Key COVID-19 Impacted Segments
SALIENT CREDIT FACTS FOR KEY COVID-19 IMPACTED SEGMENTS NASDAQ: PEBO SUMMARY OF COVID-RELATED RELIEF EFFORTS - Began relief program on March 16, 2020 CONSUMER CLIENTS - AS OF JULY 7, 2020 • Approved 1,369 modifications for 1,222 clients • $36MM or 1% of Total Loan Portfolio Balances / 3% of Total Ba
Slide 14: Salient Credit Facts for Key COVID-19 Impacted Segments
SALIENT CREDIT FACTS FOR KEY COVID-19 IMPACTED SEGMENTS NASDAQ: PEBO CONCENTRATIONS SUMMARY RESTAURANTS* • Loans to McDonald’s Franchise Operators account for 79% of the $157MM Portfolio • McDonald’s portfolio consists of 23 relationships with average loan size of $1.2MM. Top 5 Operators account for
Slide 15: Asset Quality
ASSET QUALITY NASDAQ: PEBO OUR DELINQUENCY AND NET CHARGE-OFF TRENDS HAVE REMAINED STABLE TO IMPROVING FOR FOUR PLUS YEARS. Percentage of Loans Considered “Current” Percentage of Loans considered Current Percentage of Net Charge-Offs to Average Loans Annualized Charge Offs Annualized 100% 0.375% 99.
Slide 16: Asset Quality - NPAs / Assets
ASSET QUALITY Asset Quality - NPAs/Assets NASDAQ: PEBO NPAS AS A PERCENTAGE OF TOTAL ASSETS HAVE CONSISTENTLY BEEN SUPERIOR TO MIDWEST BANKS 1.4% WITH $1 TO $10 BILLION IN TOTAL ASSETS. Q1 2020 UPTICK WAS PRIMARILY DRIVEN BY CECL ACCOUNTING. 1.2% 1.0% 0.8% NPAS / ASSETS 0.61% 0.57% 0.56% 0.6% 0.50%
Slide 17: Asset Quality - Peer NPAs / Total Assets
ASSET QUALITY CRE Concentration Analysis NASDAQ: PEBO 3.00% PEBO IS MEANINGFULLY BELOW THE $1 - $10 BILLION BANK UNIVERSE IN TERMS OF NPAS / TOTAL ASSETS AS OF MARCH 2020. PEER BANKS NPAS / TOTAL ASSETS 2.25% 1.50% 0.75% 0.00% TSC SYBT FRME FISI LKFN GABC TMP THFF HBNC PEBO SRCE FMNB PFC FCF CHCO UN
Slide 18: NPA Composition
ASSET QUALITY NASDAQ: PEBO NPA Composition NPAS AT 6/30/20 WERE PRIMARILY COMPOSED OF WELL-COLLATERALIZED COMMERCIAL REAL ESTATE AND RESIDENTIAL REAL ESTATE LOANS. INCREASE IN 2020 WAS MAINLY DUE TO ACCOUNTING CHANGE TO CECL. $30 $25 $20 $ MILLIONS $15 $10 $5 $0 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q
Slide 19: Asset Quality - Classified and Criticized Loans
ASSET QUALITY NASDAQ: PEBO CLASSIFIED AND CRITICIZED LOANS AS A PERCENTAGEAsset OF TIERQuality 1 CAPITAL ARE WELL MANAGED. 50% CRITICIZED LOANS / 45% TIER 1 CAPITAL + ALLL * 39.16% 40% 35% CLASSIFIED LOANS / 29.89% TIER 1 CAPITAL + ALLL * 30% 28.10% 25.61% 25% 28.72% 21.22% 22.42% 19.34% 19.58% 20%
Slide 20: CRE Concentration Analysis
CRE CONCENTRATION ANALYSIS NASDAQ: PEBO CRE EXPOSURE IS WELL BELOW SUPERVISORY CRITERIA ESTABLISHED TO IDENTIFY INSTITUTIONS WITH HEIGHTENEDCRE CRE Concentration CONCENTRATION RISK. Analysis • Exposure levels also compare favorably to peer institution concentration levels. 400% PEER BANK SUBS – CRE
Slide 21: CRE Concentration Analysis
CRE CONCENTRATION ANALYSIS NASDAQ: PEBO PEER BANK SUBS – CONSTRUCTION, LAND CREAND LAND DEVELOPMENT Concentration LOANS / RISK-BASED CAPITAL Analysis 110% 100% 90% 100% IS THE LEVEL CONSIDERED HEIGHTENED CONSTRUCTION, 80% LAND AND LAND DEVELOPMENT CONCENTRATION RISK PER 70% SUPERVISORY GUIDANCE 60%
Slide 22: Loan Composition
LOAN COMPOSITION NASDAQ: PEBO LOAN COMPOSITION REFLECTS HEALTHY RISK DIVERSITY. TOTAL LOAN PORTFOLIO* = $2.9 BILLION, Loan Composition WHICH EXCLUDES $458 MILLION OF PPP LOANS TOTAL CRE PORTFOLIO** = $0.9 BILLION Commercial Real Estate Portfolio Commercial Real Estate Portfolio Loan Portfolio (Exclu
Slide 23: CECL Summary
CECL SUMMARY NASDAQ: PEBO ECONOMIC FORECAST – KEY DRIVERS AT JUNE 30, 2020 Percentage of Loans considered Current 12% US Unemployment Ohio GDP Ohio Unemployment Percentage of Loans considered Current Percentage of Loans considered Current 12% 6% 12% 4.51% 10.49% 10.25% 10.47% 10.34% 9.54% 9.72% 9.68
Slide 24: Capital in a COVID-19 Environment
CAPITAL IN A COVID-19 ENVIRONMENT NASDAQ: PEBO WE HAVE LOOKED AT OUR CAPITAL LEVELS UNDER DIFFERENT STRESSED SCENARIOS. • The graph below is based on the following key stressed assumptions, related to bank capital: • No net income for the remainder of 2020 and 2021, dividend continues at $0.34 per q
Slide 25: Prudent Use of Capital
PRUDENT USE OF CAPITAL NASDAQ: PEBO ACQUISITIONS • Bank acquisitions completed in 2014 (3), 2015 (1), 2018 (1), and 2019 (1) • Insurance acquisitions completed in 2014 (1), 2015 (1), 2017 (2), and 2020 (1) • One investment acquisition was completed in 2016 • One premium finance acquisition effective
Slide 26: Liquidity in a COVID-19 Environment
LIQUIDITY IN A COVID-19 ENVIRONMENT NASDAQ: PEBO WE ARE WELL POSITIONED FROM A LIQUIDITY PERSPECTIVE • We had a loan-to-deposit ratio of 84% at June 30, 2020, which enables us to be flexible and grow loans when it is prudent. • We can leverage our investment securities to gain liquidity through sale
Slide 27: Deposit Franchise in a COVID-19 Environment
DEPOSIT FRANCHISE IN A COVID-19 ENVIRONMENT NASDAQ: PEBO AS OF MARCH 2020, OUR LOAN-TO-DEPOSIT RATIO IS LOW COMPARED TO PEER GROUP, WHICH POSITIONS US WELL FROM A LIQUIDITY PERSPECTIVE. 105% 100% 95% UNIV. $1- $10 B AVERAGE: 90.6% 90% NOT TO SCALE 87.3% 85% 80% MEDIAN 75% 70% NWBI STBA SMMF TSC LKFN
Slide 28: Q2 & YTD 2020 Financial Insights
NASDAQ: PEBO Q2 & YTD 2020 FINANCIAL INSIGHTS ® 28 WORKING TOGETHER. BUILDING SUCCESS.
Slide 29: Peoples Premium Finance
PEOPLES PREMIUM FINANCE NASDAQ: PEBO Effective July 1, 2020, Peoples closed on the asset purchase agreement 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, Peoples Premium Finance will contin
Slide 30: Q2 & YTD 2020 Highlights & Key Impacts
Q2 & YTD 2020 HIGHLIGHTS & KEY IMPACTS NASDAQ: PEBO FINANCIAL: • Recorded net income of $4.7 million for the second quarter of 2020, representing earnings per diluted common share of $0.23. • Net interest income was $34.9 million for the second quarter of 2020, an increase of $224,000, or 1%, compar
Slide 31: Stock Performance
STOCK PERFORMANCE NASDAQ: PEBO OUR STOCK, ALONG WITH INDUSTRY IS UNDER-PERFORMING THE MARKET IN 2020, GIVEN THE UNKNOWN RAMIFICATIONS OF COVID-19 ON FUTURE BANK PROFITABILITY. TOTAL ANNUAL RETURN AS OF DECEMBER 31, 2020 CUMULATIVE TOTAL RETURN YEAR TO DATE 35% AS OF JUNE 30, 2020 31% RUSSELL 2000 30
Slide 32: Total Revenue
TOTAL REVENUE NASDAQ: PEBO TOTAL REVENUE OF $100 MILLION FOR FIRST SIX MONTHS OF 2020. REVENUE IN THE LATER HALF OF 2020 WILL BENEFIT FROM PPP AND PREMIUM FINANCE ACQUISITION. COVID-19 AND INTEREST RATE ENVIRONMENT WILL MUTE YEAR OVER YEAR ORGANIC GROWTH. $250000 Beginning in the second quarter of 2
Slide 33: Insurance & Investment Income Composition
en om m st eC INSURANCE & INVESTMENT ve In om INCOME COMPOSITION nc tI en NASDAQ: PEBO m st ve In nd TOTAL INSURANCE REVENUE TOTAL INVESTMENT REVENUE a ce YTD 2020 YTD 2020 n ra $7.3 MILLION $6.6 MILLION su In 3 1 e* nu 5 ve Re 4 ce an 1 sur In 1 3 3 2 2 2 1 P&C COMMERCIAL LINES 54% 1 FIDUCIARY 52%
Slide 34: Core Non-Interest Expense
CORE NON-INTEREST EXPENSE* NASDAQ: PEBO THE RECENT ESCALATION IN EXPENSES WAS DUE TO ACQUISITIONS, OUR MOVE TO A $15 MINIMUM WAGE, AND AN INCREASE IN FTE’S FOR GROWTH AND TECHNOLOGY INVESTMENTS. COVID-19 IS NOT EXPECTED TO Core Non-Interest Expense* CAUSE A MATERIAL INCREASE IN EXPENSES. $150,000 $1
Slide 35: Efficiency Ratio Adjusted for Non-Core Items
EFFICIENCY RATIO ADJUSTED FOR NON-CORE ITEMS* NASDAQ: PEBO COVID-19 AND REDUCED NET INTEREST MARGIN Efficiency HAVE Ratio IMPACTEDfor Adjusted THENon-Core EFFICIENCYItems* RATIO IN FIRST HALF OF 2020 70% 69% 69.55% 68% 67% 67.49% 66% NOT TO SCALE 65% 64% 64.30% 63% 62% 62.76% 61.85% 61% 61.32% 61.09
Slide 36: Improvement in Key Metrics
IMPROVEMENT IN KEY METRICS NASDAQ: PEBO WE HAVE MADE STEADY PROGRESS ON THESE METRICS OVER THE RECENT YEARS. THE PROVISION FOR CREDIT LOSSES, INTEREST Improvement RATE ENVIRONMENT, In KeyAND OTHER ECONOMIC IMPACTS OF COVID-19 Metrics ARE SIGNIFICANTLY IMPACTING THESE METRICS INIn2020. Improvement Ke
Slide 37: Total Loan Growth
TOTAL LOAN GROWTH NASDAQ: PEBO TOTAL LOANS ARE $3.4 BILLIONTotal AS OFLoan JUNEGrowth 30, 2020, WHICH INCLUDES $458 MILLION OF PPP LOANS. $3400 $3000 $2600 TOTAL PPP LOANS ($ MILLIONS) NOT TO SCALE TOTAL LOANS EXCEPT ASB & FIRST PRESTONSBURG & PPP $2200 ASB ACQUIRED LOANS FIRST PRESTONSBURG ACQUIRED
Slide 38: Paycheck Protection Program
PAYCHECK PROTECTION PROGRAM SUCCESS NASDAQ: PEBO PPP RESULTS PEBO PPP GEOGRAPHIC FOOTPRINT • Assisted 3,688 businesses with SBA PPP loans with $488 million in loans authorized as of June 30, 2020. • Peoples Bank had the highest PPP loan production as a percentage of total loan balances in phase 1 (t
Slide 39: Earning Asset Mix
EARNING ASSET MIX NASDAQ: PEBO FROM 2013 TO 2018, THE PERCENTAGE OF EARNING ASSETS COMPOSED OF INVESTMENTS DECREASED. IN 2020, THE INCREASE IN LOANS ASEarning A PERCENTAGE OF EARNING ASSETS WAS DUE TO PPP LOANS. Asset Mix $4.5 80% 76% 73% 74% 72% 78% $4.0 PERCENTAGE OF TOTAL EARNING ASSETS 69% 70% 7
Slide 40: Deposit Growth
DEPOSIT GROWTH NASDAQ: PEBO TOTAL DEPOSIT BALANCES AT JUNE 30, 2020 INCREASED $733 MILLION COMPARED TO DECEMBER 31, 2019. DEPOSIT BALANCES BENEFITED FROMDeposit PPP LOAN PROCEEDS AND FISCAL STIMULUS FOR CONSUMERS AND Growth COMMERCIAL CLIENTS. $4,025 $4000 BROKERED CERTIFICATES OF DEPOSIT GOVERNMENT
Slide 41: Q2 & YTD 2020 Appendix
Q2 & YTD NASDAQ: PEBO 2020 Q2 & YTD 2020 APPENDIX ® 41 WORKING TOGETHER. BUILDING SUCCESS.
Slide 42: Non-US GAAP Measures: Pre-Provision Net Revenue
APPENDIX NON-US GAAP MEASURES NASDAQ: PEBO 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-inter
Slide 43: Non-US GAAP Measures: PPNR Adjusted for Non-Core Items
APPENDIX NON-US GAAP MEASURES NASDAQ: PEBO 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 item
Slide 44: Non-US GAAP Measures: Core Non-Interest Income
APPENDIX NON-US GAAP MEASURES NASDAQ: PEBO 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 CORE NON-I
Slide 45: Non-US GAAP Measures: Efficiency Ratio
APPENDIX NON-US GAAP MEASURES NASDAQ: PEBO 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 interes
Slide 46: Non-US GAAP Measures: Tangible Equity and Book Value
APPENDIX NON-US GAAP MEASURES NASDAQ: PEBO 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 imp
Slide 47: Non-US GAAP Measures: Return on Average Assets
APPENDIX NON-US GAAP MEASURES NASDAQ: PEBO RETURN ON AVERAGE ASSETS ADJUSTED FOR NON-CORE ITEMS 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
Slide 48: Non-US GAAP Measures: Return on Average Tangible Equity
APPENDIX NON-US GAAP MEASURES NASDAQ: PEBO 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 asset
Slide 49: Non-US GAAP Measures: Return on Average Equity
Annualized net income $ 16,684 $ 10,941 $ 31,157 $ 38,471 $ 46,255 $ 53,695 $ 8,012 Add: amortization of other intangible assets 1,428 4,077 4,030 3,516 3,338 3,359 2,929 APPENDIX Less: tax effect of amortization of other intangible assets Annualized net income excluding the amortization of intangib
Slide 50: Working Together. Building Success.
NASDAQ: PEBO CHUCK SULERZYSKI President and Chief Executive Officer P: 740.374.6163 Chuck.Sulerzyski@pebo.com JOHN C. ROGERS Executive Vice President Chief Financial Officer and Treasurer P: 740.376.7108 John.Rogers@pebo.com Peoples Bancorp® is a federally registered service mark of Peoples Bancorp