(Source: PRNewswire)MARIETTA, Ohio, July 21 /PRNewswire-FirstCall/ -- Peoples Bancorp Inc. ("Peoples") (Nasdaq: PEBO) today announced results for the quarter ended June 30, 2009. Net income available to common shareholders totaled $2.3 million, or $0.23 per diluted common share, compared to $2.0 million, or $0.19 per diluted common share, for the second quarter of 2008, and $3.9 million, or $0.37 per diluted common share, for the first quarter of 2009 (or "linked quarter"). On a year-to-date basis, net income available to common shareholders was $6.2 million through June 30, 2009 versus $7.6 million a year ago, while diluted earnings per common share were $0.60 and $0.73, respectively.

Highlights of second quarter 2009 results:

-- Total revenue was comparable to the first quarter of 2009, despite a

seasonal decline in insurance income, and increased 4% over the prior

year second quarter, due to stronger net interest income and mortgage

banking income.

-- Non-interest expense growth was isolated to higher FDIC insurance

expense, while other second quarter operating costs were contained.

FDIC insurance expense increased $1.1 million on a linked quarter basis,

of which $930,000 ($605,000 or $0.06 per diluted common share after-tax)

related to the special assessment imposed on all FDIC insured banks.

-- Nonperforming assets increased a modest 5%, or $2 million, compared to

the prior quarter-end. Net charge-offs were higher than first quarter

2009 due to continued deterioration of commercial real estate loans.

These changes in asset quality caused a $0.7 million, or 17%, increase

in provision for loan losses on a linked quarter basis.

-- Retail deposits increased $40 million, or 3%, from year-end 2008

balances due to growth in non-interest bearing and low-cost core

deposits.

-- Capital remained substantially higher than the regulatory minimum amount

needed to be considered "well-capitalized" and tangible common

equity to tangible assets improved to 6.78%.

-- Quarterly dividend to common shareholders was maintained at $0.23 per

share.

"Overall, we believe second quarter results were positive in many aspects, considering the significant increase in FDIC assessments, which lowered after-tax earnings by $0.06 per share," said Mark F. Bradley, President and Chief Executive Officer. "While the recessionary economy continues to negatively impact charge-offs and provision for loan losses, second quarter earnings benefited from stable revenues and effective operating expense control. In addition, Peoples' strong capital position continues to afford us greater flexibility in working through problem loans."

Second quarter 2009 net interest income was comparable to the prior quarter, as lower interest income was mostly offset by reduced interest expense. Interest income continued to be impacted by higher levels of nonperforming loans, coupled with modest declines in loan yields from refinancing activity and downward repricing of variable rate loans. Second quarter interest expense benefited from opportunities to reduce overall funding costs, as matured deposits and long-term borrowings were repaid using short-term assets and growth in lower-cost retail deposits.

Peoples continued to maintain a higher volume of short-term assets in the second quarter compared to recent periods, due to limited opportunities for attractive long-term asset investments. These short-term assets, which consist of excess cash reserves held at the Federal Reserve Bank, caused some net interest margin compression on a linked quarter basis. Interest reversals for loans placed on nonaccrual status also contributed to lower second quarter net interest margin.

"Both net interest income and margin were in line with our expectations, given the current interest rate environment," said Edward G. Sloane, Chief Financial Officer and Treasurer. "In the second half of 2009, we plan to continue paying down higher-rate wholesale funding as maturities occur and reduce the level of short- term assets. We expect these actions will help us to maintain net interest income, while net interest margin could expand slightly."

Non-interest income remained strong in the second quarter of 2009, totaling $8.2 million. Deposit account service charges and property and casualty insurance sales commissions were both higher than the first quarter of 2009, while fiduciary revenues benefited from improvement in market values of managed assets. These increased revenues offset the seasonal decline in insurance income attributable to performance based insurance revenue, the majority of which is recognized annually in the first quarter, as well as a modest decrease in mortgage banking income. During the second quarter, long-term mortgage rates rose slightly causing residential mortgage refinancing activity to moderate. However, secondary market loan production remained more robust than the prior year. As a result of the increase in mortgage banking revenues, second quarter non-interest income was up 5% year-over-year. On a year-to- date basis, higher mortgage banking revenue and increased deposit account service charges were mostly offset by reductions in trust and investment revenues and bank owned life insurance income, resulting in a modest 2% increase in total non-interest income.

Second quarter 2009 non-interest expense was impacted by higher FDIC insurance expense, while other operating costs were consistent with first quarter 2009 levels. Year-over-year growth in total non- interest expense occurred for both the three and six months ended June 30, 2009, due mostly to the additional FDIC insurance expense. Other significant contributing factors included increased employee benefit costs and higher loan-related expenses, primarily external legal and valuation services associated with problem loans. The majority of the linked quarter increase in FDIC insurance expense was due to the impact of the special assessment imposed on all banks, with the remainder attributed to higher base assessment rates. Second quarter 2008 FDIC expense also was lower due to the utilization of a one-time credit received in 2007. Salary and employee benefit costs were up 9% in the second quarter of 2009 versus the same quarter last year, due almost entirely to higher employee medical benefit and incentive-related costs. Electronic banking expense decreased 27% from the prior quarter, largely attributable to a reduction in bankcard processing costs from Peoples receiving a one-time discount as part of changing its card network membership.

"In the second quarter of 2009, our diversified revenue stream remained strong and operating expenses were reasonable, considering the impact of the FDIC's actions to restore the deposit insurance fund through higher assessments," said Sloane. "The recent changes to our branch network, which included the consolidation of four banking offices into new or existing offices, should help control our operating costs. We continue to evaluate our delivery channels and growth opportunities as a means of improving operating efficiency without sacrificing client service levels."

During the second quarter of 2009, Peoples' loan balances decreased $6.7 million to $1.09 billion, due to continued demand for fixed-rate residential real estate loans, which are sold to the secondary market, and write-downs on impaired commercial loans. The sale of fixed-rate residential real estate loans to the secondary market was also a key driver of the $9.9 million reduction in total loan balance through six months of 2009. Sluggish economic conditions have slowed commercial lending activity, while consumer lending continues to experience steady growth, with consumer balances up $7.3 million, or 8.3%, since year-end 2008.

Nonperforming assets were $40.9 million, or 2.00% of total assets, at June 30, 2009, versus $38.8 million, or 1.89%, at March 31, 2009. During the second quarter, Peoples placed commercial real estate loans to four unrelated borrowers on nonaccrual status, with loan balances totaling $6.8 million at June 30, 2009. This increase in nonaccrual loans in the second quarter of 2009 was tempered by charge-downs and payments on other nonaccrual loans during the quarter. Despite the second quarter increase, nonperforming assets remained lower than the prior year-end total of $41.8 million, or 2.09% of total assets. Peoples' nonperforming assets continue to be comprised primarily of nonaccrual loans secured by commercial real estate.

Second quarter 2009 net charge-offs were $5.7 million, compared to $2.9 million for the prior quarter. Approximately $3.4 million of second quarter charge-offs represented losses on four relationships provided for in prior quarters through the allowance for loan losses, while $2.0 million was the result of costs associated with the workout of three relationships, which further reduced the estimated net realizable value of the properties during the quarter. These losses were partially offset by a $1.0 million recovery on a single impaired commercial relationship. On a year- to-date basis, net charge-offs for the first six months of 2009 were comparable to the first half of 2008. Based on management's quarterly estimation of losses inherent in the loan portfolio, the allowance for loan losses decreased $0.9 million, to $23.2 million, or 2.12% of total loans. To maintain the adequacy of the allowance for loan losses, Peoples recorded a provision for loan losses of $4.7 million in the second quarter of 2009, compared to $4.1 million in the first quarter of 2009.

"The increase in unemployment and depressed real estate values in certain markets continue to adversely affect asset quality," commented Sloane. "However, the credit issues in our loan portfolio have remained mostly isolated to non-owner-occupied commercial properties and real estate development projects, which have been hit extremely hard in the economic downturn. We continue to monitor all of the risks within our portfolio very closely and proactively deal with problem loans identified by our loan review process."

Retail deposit balances decreased $34.9 million during the quarter, reflecting planned reductions in non-core funding from customers outside Peoples' primary market area, but remained nearly $40 million higher than year-end, due to higher savings, money market and non-interest bearing checking balances. Total wholesale funding increased slightly since March 31, 2009, as additional long- term brokered deposits were mostly offset by repayments of long- term FHLB advances. Since year-end 2008, total borrowed funds were down $56.1 million at June 30, 2009, while brokered deposits increased only slightly.

At June 30, 2009, Peoples' Tier 1 Common, Total Tier 1 and Total Risk-Based Capital ratios were 10.24%, 14.85% and 16.19%, compared to the well capitalized minimum ratios of 4%, 6% and 10%, respectively. Tangible equity to tangible assets was 8.74% at June 30, 2009, versus 8.24% last quarter and 6.21% at year-end, while tangible common equity to tangible assets was 6.78%, 6.31% and 6.21%, respectively.

Peoples Bancorp Inc. is a diversified financial products and services company with $2.0 billion in assets, 47 locations and 39 ATMs in Ohio, West Virginia and Kentucky. Peoples makes available a complete line of banking, investment, insurance, and trust solutions through its financial service units - Peoples Bank, National Association; Peoples Financial Advisors (a division of Peoples Bank); and Peoples Insurance Agency, Inc. Peoples' common shares are traded on the NASDAQ Global Select Market under the symbol "PEBO", and Peoples is a member of the Russell 3000 index of US publicly-traded companies. Learn more about Peoples at www.peoplesbancorp.com.

Conference Call to Discuss Earnings:

Peoples will conduct a facilitated conference call to discuss second quarter 2009 results of operations today at 11:00 a.m., Eastern Daylight Savings Time, with members of Peoples' executive management participating. Analysts, media and individual investors are invited to participate in the conference call by calling (800) 860-2442. A simultaneous Webcast of the conference call audio will be available online via the "Investor Relations" section of Peoples' website, www.peoplesbancorp.com. Participants are encouraged to call or sign in at least 15 minutes prior to the scheduled conference call time to ensure participation and, if required, to download and install the necessary software. A replay of the call will be available on Peoples' website in the "Investor Relations" section for one year.

Safe Harbor Statement:

Certain statements made in this news release regarding Peoples' financial condition, results of operations, plans, objectives, future performance and business, 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 Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate", "may", "feel", "expect", "believe", "plan", and similar expressions.

These forward-looking statements reflect management's current expectations based on all information available and its knowledge of Peoples' business and operations.