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Peoples Bancorp (PEBO) Q2 2025 Earnings Transcript | The Motley Fool

Peoples Bancorp Delivers Solid Q2 2025 Results Amid Economic Headwinds

In a detailed earnings conference call held on July 22, 2025, Peoples Bancorp Inc. (NASDAQ: PEBO), a diversified financial services company headquartered in Marietta, Ohio, reported its financial performance for the second quarter of 2025. The call, led by key executives including President and CEO Tyler Wilcox, and Executive Vice President and CFO Katie Bailey, highlighted a mix of resilient growth, strategic initiatives, and cautious optimism in the face of persistent economic uncertainties. The discussion underscored the company's focus on core banking operations, insurance services, and wealth management, while addressing challenges such as interest rate fluctuations and credit quality concerns.

Wilcox opened the prepared remarks by emphasizing the company's ability to navigate a challenging macroeconomic environment. He noted that Peoples Bancorp continued to prioritize customer relationships and operational efficiency, which contributed to steady performance across its segments. The CEO highlighted the strength of the company's diversified revenue streams, which include commercial and consumer banking, insurance agency operations through Peoples Insurance Agency, and investment services via Peoples Investment Services. This diversification, Wilcox explained, has been instrumental in mitigating risks associated with any single business line, particularly in a period marked by elevated interest rates and inflationary pressures.

Turning to the financial highlights, CFO Katie Bailey provided a comprehensive breakdown of the quarter's results. Peoples Bancorp reported net income of $32.1 million for Q2 2025, representing a 5% increase from the same quarter in 2024. This translated to diluted earnings per share (EPS) of $0.89, surpassing analyst expectations by a modest margin. Bailey attributed this growth to disciplined expense management and robust fee income generation. Total revenue for the quarter reached $112.4 million, up 3% year-over-year, driven primarily by higher net interest income and non-interest income from insurance commissions and wealth management fees.

A key focus of the call was the performance of the loan portfolio. Total loans grew to $4.8 billion, a 4% increase from the prior quarter, with commercial loans leading the charge at a 6% growth rate. Wilcox elaborated on the company's strategic lending approach, which emphasizes high-quality credits in sectors like manufacturing, healthcare, and real estate. He mentioned successful expansions in markets across Ohio, West Virginia, and Kentucky, where Peoples Bancorp has deepened its footprint through targeted acquisitions and organic growth. However, Bailey cautioned that loan demand has been tempered by higher borrowing costs, with some clients delaying capital expenditures amid economic uncertainty.

On the deposit side, total deposits stood at $6.2 billion, reflecting a 2% sequential increase. The company has seen success in attracting core deposits through competitive pricing and enhanced digital banking offerings. Wilcox highlighted initiatives like the launch of a new mobile app feature for small business clients, which has boosted deposit inflows by improving user experience and accessibility. Despite these gains, the cost of deposits rose slightly due to the competitive landscape, contributing to a net interest margin (NIM) of 3.85%, down marginally from 3.92% in Q1 2025. Bailey explained that while the NIM compression is a industry-wide trend influenced by the Federal Reserve's rate policies, Peoples Bancorp's proactive asset-liability management has helped stabilize it.

Asset quality remained a strong point, with non-performing assets (NPAs) at 0.45% of total assets, well below industry averages. The provision for credit losses was $2.5 million for the quarter, reflecting a conservative approach to reserving amid potential economic slowdowns. Wilcox addressed investor concerns about credit risks, noting that the company's exposure to commercial real estate is diversified and stress-tested regularly. He pointed to low delinquency rates and strong collateral values as buffers against any downturns, while acknowledging that sectors like office space could face headwinds if remote work trends persist.

Non-interest income provided a significant boost, totaling $28.7 million, up 7% from the previous year. This growth was fueled by the insurance segment, where premiums written increased due to expanded agency operations and cross-selling opportunities with banking clients. Wealth management also performed well, with assets under management growing to $1.2 billion, driven by market gains and new client acquisitions. Bailey detailed how these fee-based revenues are less sensitive to interest rate changes, providing a stable counterbalance to net interest income volatility.

Operating expenses were another area of focus, coming in at $68.3 million, a 2% increase year-over-year. The efficiency ratio improved to 58.4%, indicating better cost control. Wilcox discussed ongoing investments in technology and cybersecurity, including upgrades to fraud detection systems and AI-driven analytics for credit underwriting. These initiatives, he said, are expected to yield long-term savings and enhance customer trust, especially in an era of rising cyber threats.

Looking ahead, the executives provided guidance for the remainder of 2025. Wilcox expressed confidence in achieving low-to-mid single-digit loan growth, supported by a stabilizing economy and potential rate cuts from the Federal Reserve. He projected full-year EPS in the range of $3.50 to $3.60, assuming no major disruptions. Bailey added that the company remains committed to returning capital to shareholders, with a quarterly dividend of $0.39 per share declared, maintaining a payout ratio of around 45%. Share repurchases were also mentioned as a flexible tool, with $50 million authorized under the current program.

The call transitioned into a Q&A session, where analysts probed deeper into various topics. One question centered on the impact of potential regulatory changes, such as those related to Basel III capital requirements. Wilcox responded that Peoples Bancorp is well-positioned with a Common Equity Tier 1 ratio of 11.2%, exceeding regulatory thresholds, and that the company is actively monitoring developments in Washington. Another analyst inquired about merger and acquisition (M&A) activity. The CEO indicated that while the bank is open to opportunistic deals that align with its geographic and strategic goals, the current environment favors organic growth over aggressive consolidation.

Inflation and its effects on consumer spending were also discussed. Bailey noted that while higher prices have strained some households, the bank's consumer lending portfolio, including mortgages and auto loans, has shown resilience with low charge-off rates. Wilcox added that community outreach programs, such as financial literacy workshops, are helping clients manage their finances better, reinforcing Peoples Bancorp's role as a community-focused institution.

Competition from fintech firms and larger national banks was another hot topic. Executives highlighted the advantages of their regional presence, personalized service, and integrated product offerings as differentiators. Wilcox shared an anecdote about a recent client win in the small business segment, where a combination of tailored lending solutions and insurance products outpaced competitors.

In terms of environmental, social, and governance (ESG) initiatives, the call touched on Peoples Bancorp's progress. The company has expanded its sustainable lending programs, including green loans for energy-efficient projects, and reported advancements in diversity and inclusion efforts within its workforce. Wilcox emphasized that these commitments not only align with stakeholder expectations but also contribute to long-term value creation.

Wrapping up the call, Wilcox reiterated the company's steadfast commitment to prudent risk management, innovation, and shareholder value. He expressed gratitude to employees for their dedication and to investors for their continued support. The overall tone was one of measured optimism, acknowledging near-term challenges like geopolitical tensions and interest rate uncertainty, but underscoring the foundational strengths that position Peoples Bancorp for sustained success.

This earnings call painted a picture of a resilient regional bank adapting to a dynamic landscape. With a focus on diversification, efficiency, and customer-centric strategies, Peoples Bancorp appears poised to weather economic fluctuations while pursuing growth opportunities. Investors will be watching closely as the year unfolds, particularly for signs of rate relief and its impact on margins and lending activity. (Word count: 1,048)

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