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Peoples Bancorp (PEBO) Q2 2025 Earnings Transcript

July 22, 2025

03:01 PM

14 min read

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The research indicates that What caught my attention is Image source: The Motley Fool. DATETuesday, July 22, 2025 at 11 a. ETCALL PARTICIPANTSPresident and Chief Executive Officer — Tyler WilcoxChief...

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SUMMARYPeoples Bancorp Inc. 68%) dered sequential loan and margin expansion in Q2 2025, while navigating persistent pressure in its small ticket leasing portfolio

Vision expense spiked, largely due to reserve builds and specific loan downgrades in Q2 2025

Meanwhile, The company guided for steady margin performance, mid-single-digit loan growth, and a continued focus on fee-based income expansion while maintaining a neutral interest rate risk file (which is quite significant)

Chief Financial Officer Bailey confirmed accretion income is jected to remain in the 'mid to low teens' basis points as a contribution to net interest margin through year-end 2025

CEO Wilcox indicated, "We expect balances to continue to decline in the near future

However, " and is working towards returning that line to a 4%-5% net charge-off rate

The loan to deposit ratio increased to 86% from 83% in Q2 2025, reflecting robust loan growth and seasonal deposit declines

Conversely, Wilcox stated, "We have a slight preference for overlapping deals in existing foots or expanding where we already are, such as states Virginia or adjacent states Pennsylvania

Moreover, " The review of tariff risk revealed no observed credit impact, with a transient spike in indirect loan applications attributed to "prebuying in anticipation of tariffs, amid market uncertainty

Meanwhile, "Bailey noted deposit cost management remains active, with further reductions targeted even in a stable Federal Reserve rate environment

Meanwhile, Noninterest-bearing deposits remained flat at 20% of the deposit mix in Q2 2025, and average retail client deposit relationships stood at $23,000

Fee-based income is forecast to grow in the 'mid-single-digit percentages' versus 2024, led by lease income and other noninterest in 2025, in today's financial world

INDUSTRY GLOSSARYSmall Ticket Leasing: Portfolio of equipment lease loans targeting lower principal amounts, often for small es, typically higher-yielding and riskier than conventional C&I lending

Furthermore, Nevertheless, Accretion Income: Earnings recognized as previously marked-down/acquired loans accrete to par value over time, boosting interest margin temporarily above core levels

CECL Model: Current Expected Credit Losses model; a regulatory framework requiring banks to regularly estimate and vision for expected future loan losses

Administrative Delinquencies: Delinquencies arising due to cessing or timing issues (not borrower nonperformance), often resolved once funds are received

However, Criticized Loans: Loans rated as special mention, substandard, or doubtful due to potential credit weakness but not yet classified as nonperforming (something worth watching)

Classified Loans: Loans graded as substandard, doubtful, or loss, indicating elevated credit risk per regulatory guidance (an important development)

Conversely, Full Conference Call TranscriptOperator: Good morning (something worth watching)

And welcome to Peoples Bancorp Inc

Moreover, My name is Betsy, and I will be your conference facilitator

Additionally, Today's call will cover a discussion of the results of operations for the three and six months 06/30/2025

Furthermore, Please be advised that all lines have been placed on mute to prevent any background noise

After the speakers' remarks, there will be a question and answer period

If you would to ask a question during this time, simply press star 1 on your telephone keypad and questions will be taken in the order they are received

If you would to withdraw your question, please press star 2

Moreover, At the same time, This call is also being recorded

In contrast, If you object to the recording, please disconnect at this time

Moreover, Please be advised that the ary in this call will contain jections and other forward-looking statements regarding Peoples' future financial performance or future events

Nevertheless, This leads to the conclusion that se statements are based on management's current expectations

The statements in this call which are not historical facts, are forward-looking statements and involve a number of risks and uncertainties detailed in the People's Securities and Exchange Commission filings

Management believes the forward-looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of Peoples and operations

However, it is possible actual results may differ materially from these forward-looking statements

Peoples disclaims any responsibility to these forward-looking statements after this call, except as may be required by applicable legal requirements

Additionally, Peoples second quarter 2025 earnings release and earnings conference call presentation issued this morning and are available at peoplesbancorp

Moreover, However, Com under investor relations, amid market uncertainty

Nevertheless, A reconciliation of the non-generally accepted accounting principles or GAAP financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release

At the same time, This call will include fifteen to twenty minutes of prepared remarks ed by a question and answer period, which I will facilitate, in today's market environment

Additionally, An d webcast of this call will be available on peoplesbancorp

Furthermore, Com in the investor relations section for one year, in this volatile climate

Participants in today's call will be Tyler Wilcox, President and Chief Executive Officer, and Katie Bailey, Chief Financial Officer and Treasurer

Each will be available for questions ing opening statements

Wilcox, you may begin your conference

Tyler Wilcox: Thank you, Betsy (an important development)

Additionally, Good morning, everyone, and thank you for joining our call today (something worth watching)

This morning, we reported diluted earnings per of $0, given current economic conditions

On the other hand, 59 for the second quarter of 2025

Furthermore, We had imvements in our quarterly results in many areas, including annualized loan growth of 11%, in today's market environment

Our net interest income increased over $2 million while our net interest margin expanded three basis points, which includes reductions in accretion income of nearly $1 million

For the second quarter, accretion income added 12 basis points to net interest margin compared to 17 basis points for the linked quarter, amid market uncertainty

However, This's the fourth straight quarter that we have had core net interest margin expansion, which excludes accretion income, in light of current trends

Our fee-based income was relatively stable as imvements in several areas mostly offset the reduction in insurance income due to the annual performance-based insurance commissions we recognized in the first quarter (remarkable data)

On the other hand, Our noninterest expense declined and was within our guided range

At the same time, Our pre-vision net revenue exceeded consensus estimates for the quarter, and our tangible equity to tangible assets ratio was stable at 8

During the second quarter, our overall allowance for credit losses grew $9

Furthermore, However, 4 million to 1

Moreover, 13% of total loans, given current economic conditions

This increase in our ratio puts us more in line with the median of our peers, which was at 1. 17% at March 31

For the second quarter, our vision for credit losses totaled $16. 6 million, an increase of $6

Furthermore, 5 million from the linked quarter

Our second quarter vision for credit losses was comprised of $7 million in net charge-offs, which was down from $8, given the current landscape

Furthermore, 1 million for the linked quarter, a $3. 8 million increase in reserves on individually analyzed loans, a $2 (which is quite significant), in today's financial world. 5 million increase in reserves on small ticket leases, a $2. 3 million net increase related to a periodic refresh in our loss drivers utilized within the CECL model, and the remainder of the increase was due to the deterioration in economic forecast coupled with loan growth during the quarter

For more information on our vision for credit loss, please refer to our accompanying slide

Nevertheless, Our annualized quarterly net charge-off rate was 43 basis points, an imvement from 52 basis points for the linked quarter, in light of current trends

Meanwhile, The reduction was driven by lower small ticket leasing charge-offs

Furthermore, As we mentioned last quarter, we expected a reduction in our charge-offs from our small ticket leasing but that they would remain elevated

We were down from $5. 4 million in net charge-offs for the previous quarter to $4. 8 million for this quarter

For the second quarter, our annualized net charge-off rate for the small ticket leasing was 11. 51% compared to 11

On the other hand, 97% for the first quarter and down from the peak of 13. 35% for the fourth quarter of 2024

For additional details on our small ticket leasing, please refer to the accompanying slides in our presentation (an important development)

Our nonperforming assets increased a little over $800,000 and were 49 basis points of total assets compared to 50 basis points at March 31

The increase was due to higher balances in ninety or more days past due and accruing, and was due to increases mostly within our premium finance portfolio

However, Furthermore, The past due premium finance loans are mostly due to the timing of the receipt of expected ceeds from carriers on canceled policies, which we have noted previously on occasion as administrative delinquencies

Conversely, These increases were partially offset by lower nonaccrual loans

Our criticized loans grew $18 million, which was largely due to the downgrade of one commercial relationship

We're optimistic that we will be able to exit this credit with little loss exposure

Our classified loan balances as a percent of total loans declined to 1. 89% compared to 1. 93% at March 31, in today's financial world

Furthermore, Our second quarter delinquency rates imved, as the portion of our loan portfolio considered current was 99. 1% compared to 98 (remarkable data)

On the other hand, In contrast, 5% at the linked quarter end

Furthermore, At this point, we have not observed impacts to our loan growth or credit metrics from the tariffs

But we continue to closely monitor our portfolio for the potential effects tariffs to both

Nevertheless, We have experienced increased loan demand, which was reflected in our pipelines last quarter in our loan growth this quarter

Moving on to loan balances, we have loan growth of $173 million, or 11% annualized compared to the linked quarter end

On the other hand, Conversely, We had balanced loan growth in all, which included commercial and industrial loans of $64 million, residential real estate loans of $30 million, construction loans of $22 million, commercial real estate loans of $18 million, premium finance loans of $14 million, and consumer indirect loans of $12 million

Additionally, We had lease balance growth of $5 million during the quarter, which was driven by our mid-ticket leasing

At quarter end, our commercial real estate loans comprised 34% of total loans, 35% of which were owner-occupied, while the remainder were investment real estate, considering recent developments

At quarter end, 46% of our total loans were fixed rate, with the remaining 54% at a variable rate (something worth watching)

Meanwhile, I will now turn the call over to Katie for a brief discussion of our financial performance

Moreover, Katie Bailey: Thanks, Tyler

Nevertheless, We had imvements in our net interest income this quarter, which was up over $2 million or 3% compared to the linked quarter, while our net interest margin expanded three basis points to 4

This demonstrates that primary driver of the increase was the reduction in our deposit and borrowing costs, which declined 10 basis points and 18 basis points, respectively

For the second quarter, our deposit costs were 1, in this volatile climate

Our accretion income declined to $2 (which is quite significant). 6 million and contributed 12 basis points to net interest margin compared to $3. 5 million and 17 basis points for the linked quarter, in today's market environment

As Tyler mentioned, excluding accretion income, our core net interest margin has expanded for the last four consecutive quarters

In contrast, For the first half of 2025, our net interest income was relatively stable and our net interest margin was down eight basis points compared to 2024, in today's financial world

The reduction in our net interest margin was entirely due to lower accretion income, which was $6

In contrast, 1 million for 2025 contributing 15 basis points to margin com.

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