Peoples Bancorp (NASDAQ:PEBO) Inc. reported record earnings for the third quarter of 2023 during its recent earnings call. The bank highlighted a 10% increase in net interest income and a 3% rise in fee-based revenue. The return on average stockholder equity improved to 12.6% for the quarter, while the return on average tangible stockholder equity reached 23%. The bank also noted a $110 million increase in loan growth and a $78 million rise in deposit balances compared to the previous quarter.
Key takeaways from the call include:
- Peoples Bancorp's loan portfolio saw growth in commercial real estate, specialty finance, and multifamily loans.
- The bank reported positive growth in fee-based income, primarily driven by the Limestone merger and increased insurance income.
- Non-performing assets remained flat, and net charge-off rates were consistent with the prior year.
- The bank completed the conversion of the Limestone system to its core system, contributing to its strong financial performance.
- Peoples Bancorp expects some compression in net interest income and margin in the fourth quarter but anticipates growth in fee-based income.
During the call, the bank emphasized its commitment to community support and was recognized as one of the top workplaces in the financial services industry. However, it also noted a decrease in lease income due to the unwind of a residual premium related to two leases from the Vantage acquisition. The bank utilized brokered CDs as a funding mechanism and saw a decrease in demand deposits.
Peoples Bancorp provided guidance for 2024, expecting higher net interest income and fee-based income growth in the low double digits. The bank also expects loan growth and an increase in provision for credit losses. The bank is confident in its ability to achieve the consensus estimate for diluted EPS for the full year of 2024.
Executives discussed various topics related to the company's financial performance, including the impact of accretion and the potential for future accretion benefits. They also provided insights into CD maturities and expected margin compression in the fourth quarter and beyond, as well as the potential impact of a rate cut by the Fed.
Peoples Bancorp reported a premium amortization of around $1.7 to $1.8 million in the third quarter, which was significant compared to prior quarters. The increase in nonperformers and delinquencies was primarily driven by the small ticket leasing business. The company expects the charge-off rate to rise but is comfortable with it being in the 2% to 3% range. They are cautious about lending to hotels but remain open to opportunities with cash-flowing and well-sponsored projects. The company believes they have room for growth due to competitors' liquidity issues. They will adjust provisions based on the forecast and anticipate future yields to reflect competitors' pullback.
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