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Peoples Bancorp Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 22, 2010 04:21PM
Peoples Bancorp Inc. (PEBO) filed Quarterly Report for the period ended 2010-06-30.
Highlight of Business Operations:
Net income available to common shareholders was $2.8 million, or $0.27 per diluted common share during the second quarter of 2010, a favorable increase compared to $0.8 million and $0.08, respectively, for the first quarter of 2010 (or “linked quarter”), and also higher than $2.3 million and $0.23 per diluted common share in the second quarter of 2009. The key driver of the linked quarter increase was a lower provision for loan losses, plus a net gain of $870,000 on investment securities and other assets in the second quarter of 2010 versus a net loss of $953,000 for the linked quarter. The year-over-year earnings improvement was largely attributable to lower second quarter FDIC insurance expense in 2010, due to the impact of the special assessment a year ago. On a year-to-date basis, net income available to common shareholders was $3.6 million through June 30, 2010, versus $6.2 million for the same period in 2009, representing earnings per diluted common share of $0.34 and $0.60, respectively. The lower earnings in 2010 was due mostly to higher provision for loan losses and foreclosed real estate and other loan workout costs.
Provision for loan losses totaled $5.5 million in the second quarter of 2010 compared to $6.5 million for the linked quarter and $4.7 million for the second quarter of 2009. The recorded provision reflects the amount needed to maintain the adequacy of the allowance for loan losses based on management s formal quarterly analysis. Second quarter 2010 provision for loan losses benefited from continued stabilization of Peoples asset quality, supported by a decreased level of net charge-offs and isolated nature of the increase in nonperforming loans. Still, provision for loan losses totaled $12.0 million for the first six months of 2010 compared to $8.8 million for the first half of 2009.
Net interest income for the second quarter of 2010 was $15.2 million, a slight decrease from $15.4 million for the linked quarter. Net interest income also was down slightly year-over-year for both the three and six months ended June 30, 2010. These decreases occurred as a result of lower interest income that outpaced reductions in interest expense. Net interest margin was 3.49% in the second quarter of 2010, down from 3.52% in the first quarter of 2010 due to a lack of attractive long-term investments and the impact of lower reinvestment rates in the current interest rate environment. Compared to the prior year, net interest margin expanded modestly in 2010, from management s ongoing efforts to decrease funding costs to offset the impact of lower earning asset levels.
Non-interest income, which excludes gains and losses on securities and asset disposals, was $7.8 million in the second quarter of 2010, versus $8.0 million in the linked quarter and $8.2 million in the second quarter of 2009. During the second quarter of 2010, increased deposit account service charges were offset by a reduction in insurance income from performance based commissions recorded in the first quarter. Also contributing to the linked quarter decline was the recognition of $255,000 of estate settlement fees in the first quarter of 2010. Year-over-year, non-interest income was impacted by decreased mortgage banking income due to slower refinancing activity in 2010.
At June 30, 2010, total assets were 2% lower than both the previous quarter and year-end, totaling $1.97 billion. These reductions were caused mostly by lower loan balances, which decreased 3% due to commercial loan payoffs and charge-offs exceeding new production. Total investments also decreased $19.3 million in the second quarter of 2010 and $28.1 million since year-end 2009, due to a lack of attractive long-term investments meeting management s risk-return criteria. Management s efforts to improve the overall balance sheet risk profile were contributing factors to the reductions in loan and investment security balances compared to December 31, 2009.
At June 30, 2010, total liabilities decreased to $1.73 billion from December 31, 2009. Deposits experienced significant increases during the first quarter of 2010, and tapered off during the second quarter because of adjustments to the pricing on selected deposit products, such as public funds and other non-core deposits. As a result, total retail deposit balances were up $6.6 million since year-end 2009 but down $36.2 million compared to March 31, 2010. During early 2010, short-term and long-term borrowings were reduced by $33.3 million from funding provided by increased deposit balances.