Peoples Bancorp Q4 Earnings Call Highlights

Peoples Bancorp (NASDAQ:PEBO) outlined fourth-quarter and full-year 2025 results that included higher earnings, stable operating efficiency, and continued loan growth, while management also addressed credit trends tied to its small-ticket leasing operation and provided financial expectations for 2026.

Fourth-quarter earnings included one-time items

President and CEO Tyler Wilcox said the company posted diluted earnings per share of $0.89 for the fourth quarter, up 7% from the linked quarter and slightly above the $0.88 consensus estimate he cited on the call.

Wilcox noted two items that reduced quarterly EPS by a combined $0.04:

• An $850,000 loss on the sale of an other real estate owned (OREO) property acquired through a prior merger, which reduced non-performing assets compared to the third quarter.
• A nearly $800,000 loss from redeeming a tranche of subordinated debt assumed in a previous acquisition, which management said should lower future funding costs.

For full-year 2025, Wilcox said Peoples achieved expected results, citing positive operating leverage compared to 2024 excluding the impact of accretion income, 6% loan growth versus 2024, and a 6% improvement in fee-based income year over year.

Credit costs driven by charge-offs; leasing remains a focus

Peoples recorded $8.1 million of provision for credit losses in the fourth quarter, which management said was largely driven by net charge-offs, loan growth, and a slight deterioration in economic forecasts, partly offset by reductions in reserves for individually analyzed loans and leases.

At year-end, the allowance for credit losses stood at 1.12% of total loans, up from 1.00% at the prior year-end. The annualized quarterly net charge-off rate was 44 basis points, compared with 41 basis points in the linked quarter.

Wilcox said small-ticket lease charge-offs accounted for 31 basis points of the annualized net charge-off rate. He described the quarter’s leasing-related charge-offs as expected, noting management anticipated elevated levels for several quarters and believes they should begin to taper off in the back half of 2026.

He added that Peoples has reduced its exposure to high-balance leases in the small-ticket leasing business to $13 million at year-end from $35 million at the end of 2024, and reiterated that the company is no longer originating those leases. Excluding lease charge-offs, the remainder of the loan portfolio had net charge-offs of $2.1 million, or an annualized 13 basis points.

In Q&A, management discussed North Star Leasing (the company’s small-ticket leasing operation) and said the plateau in charge-offs remains consistent with expectations. Wilcox said the fourth-quarter increase was tied largely to two high-balance accounts that had already been identified and reserved for, and he reiterated expectations that charge-offs would remain relatively consistent in the first half of 2026 before declining in the second half. He also described a “collections, credit, and production overhaul” and said the portfolio stands at $133 million “by design” after being right-sized.

Loan growth met guidance; deposit mix shifted in the quarter

Wilcox said Peoples reached the top end of prior guidance with 6% full-year loan growth versus 2024. In the fourth quarter, loans increased by nearly $30 million from September 30, led by growth of $46 million in commercial and industrial (C&I) loans and $40 million in construction loans. Declines in premium finance loans, leases, and residential real estate loans partially offset those increases.

Management had previously expected loan growth to be tempered by payoffs in late 2025 and potentially into early 2026; Wilcox said the company posted a near-record quarter of commercial loan production, offsetting some payoffs, while some expected payoffs shifted into the first and second quarters of 2026.

At quarter-end, commercial real estate loans were 35% of total loans, and management said 33% of those were owner-occupied. The loan portfolio was 44% fixed-rate and 56% variable-rate.

On the funding side, CFO Katie Bailey said deposits decreased $22 million from the linked quarter, primarily due to declines in governmental deposits (down $30 million) and retail CDs (down $25 million), partially offset by growth in interest-bearing demand accounts (up $24 million) and non-interest-bearing deposits (up more than $9 million). Compared with the prior year, total deposits excluding brokered CDs rose nearly $160 million, including a $38 million increase in non-interest-bearing deposits.

The loan-to-deposit ratio remained around 89%. In Q&A, management said it does not expect deposit growth to keep pace exactly with loan growth in 2026 and expects the loan-to-deposit ratio to increase over the year, while continuing to pursue deposit-focused initiatives.

Margin and expense trends; sub-debt redemption to reduce funding costs

Bailey said fourth-quarter net interest income was relatively flat versus the linked quarter, while net interest margin (NIM) declined four basis points. Loan yields fell 17 basis points, while overall funding costs declined 10 basis points. Accretion income totaled $1.8 million in the quarter and contributed eight basis points to NIM in both the fourth and third quarters.

For full-year 2025, net interest income increased 2% versus 2024, while NIM declined seven basis points. Bailey attributed the margin decline to lower accretion income: $9.6 million in 2025 (11 basis points of margin contribution) versus $25.2 million in 2024 (30 basis points). Excluding accretion income, she said net interest income rose more than $22 million and net interest margin expanded 12 basis points.

Bailey also discussed the October payoff of subordinated debt acquired from Limestone, which carried a rate of around 8.5%. She said the company replaced that funding with lower-cost sources, including FHLB advances and brokered CDs, and expects annual savings of around $1 million with a tangible book value earnback period of less than one year.

Non-interest income rose 5% from the linked quarter on higher lease income, deposit account service charges, mortgage banking income, and trust and investment income. For 2025, fee-based income grew 6% versus 2024, driven largely by higher lease income and trust and investment income. In Q&A, management said 2025’s lease income results (around $15 million to $16 million) are a reasonable expectation for 2026, while noting quarter-to-quarter variability tied to end-of-term activity.

On expenses, non-interest expense increased 2% from the linked quarter due to higher operating lease expense and higher sales and incentive-based compensation. For the full year, non-interest expense rose 3% versus 2024 on higher salaries and employee benefits, plus increased data processing and software costs. The efficiency ratio was 57.8% in the fourth quarter and 58.7% for the full year.

2026 outlook: margin, fees, expenses, loan growth, and charge-offs

Wilcox provided a framework for 2026 expectations (excluding non-core expenses). Key items included:

• Positive operating leverage in 2026 compared to 2025.
• Net interest margin of 4.0% to 4.2% for full-year 2026, including one 25-basis-point rate cut.
• A sensitivity that each 25-basis-point Fed rate cut would reduce full-year NIM by about 3 to 4 basis points.
• Quarterly fee-based income of $28 million to $30 million, with the first quarter typically elevated due to annual performance-based insurance commissions.
• Quarterly non-interest expense of $72 million to $74 million for the second through fourth quarters, with the first quarter higher due to annual expenses typically recognized early in the year.
• Loan growth of 3% to 5% compared to 2025, dependent on payoff timing.
• A slight reduction in net charge-offs for 2026 compared to 2025, which management expects to reduce the provision for credit losses excluding changes in economic forecasts.

During Q&A, management also addressed tax rate expectations, with Bailey noting the company benefited from a tax credit of about $650,000 in the fourth quarter and annual true-ups that contributed to a roughly 21% effective rate for 2025. She said a run-rate perspective for 2025 would be about 21.5%, and she expects a rate “probably in the 22 range” for 2026.

Wilcox also discussed balance sheet size, stating that absent acquisitions the company expects it would cross $10 billion in assets in 2027, but management currently has no plans to exceed that threshold organically and cited levers such as allowing investment portfolio paydowns. He reiterated an M&A focus on the company’s footprint—Ohio, Kentucky, West Virginia, and Virginia—with interest in adjacent states including Pennsylvania, Indiana, and Tennessee, and said a preferred deal size is in the $3 billion to $5 billion range while smaller deals remain possible.

About Peoples Bancorp (NASDAQ:PEBO)

Peoples Bancorp, Inc is a bank holding company headquartered in Marietta, Ohio. Through its subsidiary Peoples Bank, the company provides a comprehensive range of commercial and consumer banking services designed to serve individuals, businesses and institutional clients. Its deposit products include checking and savings accounts, money market accounts, certificates of deposit and digital banking platforms that enable secure online and mobile access.

On the lending side, Peoples Bancorp offers commercial and industrial loans, commercial real estate financing, construction and agricultural lending, as well as residential mortgage products.