UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): January 12,
2009
 PEOPLES
BANCORP INC.
|
|
(Exact
name of Registrant as specified in its
charter)
|
|
Ohio
|
0-16772
|
31-0987416
|
||
|
(State
or other jurisdiction
|
(Commission
File
|
(I.R.S.
Employer
|
||
|
of
incorporation)
|
Number)
|
Identification
No.)
|
|
138
Putnam Street, PO Box 738
|
||
|
Marietta,
Ohio
|
45750
|
|
|
(Address
of principal executive office)
|
(Zip
Code)
|
|
Registrant's telephone number, including area code:
|
(740)
373-3155
|
|
Not
applicable
|
|
(Former
name or former address, if changed since last
report)
|
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|
[ ]
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
[ ]
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
[ ]
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
[ ]
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item 2.02 Results of
Operations and Financial Condition
Peoples
Bancorp Inc. (“Peoples”) plans to release its results of operations for the
quarter ended December 31, 2008, before the market opens on January 26, 2009,
and host a facilitated conference call at 11:00 a.m. Eastern Standard Time on
the same date. The following provides management’s estimates in
certain areas given the current economic environment and conditions based upon
information known to date. Actual results may differ from these
estimates since management has not completed all quarterly analyses and
procedures required under Peoples’ financial reporting processes for preparing
quarterly financial statements.
Allowance for Loan Losses
and Asset Quality
Due to
changes in loan quality during the fourth quarter, Peoples anticipates
increasing the allowance for loan losses to approximately $22.9 million, or
2.08% of total loans, at December 31, 2008, from $19.2 million, or 1.72%, at
September 30, 2008 and $15.7 million, or 1.40%, at December 31,
2007. Much of this increase is attributable to the sustained weakness
in the commercial real estate market and the economy in
general. These conditions continue to have a significant impact on
the financial condition of borrowers in various commercial real estate and land
development projects.
Fourth
quarter 2008 net loan charge-offs are estimated to be $9.7 million, or 3.45% of
average loans on an annualized basis, compared to $2.1 million, or 0.74%, and
$0.4 million, or 0.16%, for the third quarter of 2008 and fourth quarter of
2007, respectively. This increase is due primarily to $8.2 million of
declines in collateral values securing certain impaired loans during the fourth
quarter of 2008. These changes in the estimated net realizable fair value of the
underlying collateral were based on management’s analysis of updated appraised
values during the fourth quarter and in connection with the preparation of
financial statements for the year ended December 31, 2008.
Peoples
estimates that it will record a fourth quarter provision for loan losses of
approximately $13.4 million, versus $6.0 million and $1.5 million for the third
quarter of 2008 and fourth quarter of 2007, respectively. The
provision for loan losses for the fourth quarter of 2008 is impacted by further
declines in commercial real estate values and downgrades of loan quality ratings
on various commercial real estate loans during the fourth quarter based upon
changes in the financial condition of borrowers. Approximately $6.1
million, or 45%, of the $13.4 million in provision for loan losses is attributed
to continued deterioration in loan quality within the commercial loan portfolio,
while another $5.8 million, or 43%, is due to continued declines in commercial
real estate collateral values.
Nonperforming
assets are estimated to increase to approximately $42 million, or 2.09% of total
assets, at December 31, 2008, compared to $36.0 million, or 1.88%, at September
30, 2008 and $9.7 million, or 0.51%, at December 31, 2007. This
estimated increase is due to Peoples placing three commercial real estate loan
relationships totaling $10.3 million on nonaccrual status. The increase was
partially offset by charge-offs on existing nonaccrual loans.
These
preliminary estimates consider all information currently available regarding the
factors that affect losses, such as changes in Peoples’ loan quality, historical
loss experience and current economic conditions. However, there can
be no assurance that those estimates will not change, especially considering the
current economic uncertainty and its potential impact on Peoples’ loan
portfolio.
Other-Than-Temporary
Impairment Charges
At
December 31, 2008, Peoples’ available-for-sale investment portfolio included
various individual bank-issued trust preferred securities with an aggregate book
value of $22.8 million and four separate collateralized debt obligation (“CDO”)
investment securities, comprised mostly of bank-issued trust preferred
securities and other debt obligations issued by financial services companies,
with an aggregate book value of $6.1 million. The fair value of these
securities has been affected by the continued liquidity and credit concerns
within the financial markets, as well as the downgrading of these securities by
rating agencies.
2
Management
has performed a preliminary analysis on these securities and believes certain of
these securities may be other-than-temporarily impaired at December 31, 2008,
based upon an evaluation of the credit quality of underlying
issuers. As a result, Peoples anticipates recording a non-cash
impairment charge of approximately $4 million in the fourth quarter of 2008, of
which $2 million relates to a single individual bank-issued trust preferred
security previously carried at $2 million and $2 million relates to the four CDO
investments.
After the
fourth quarter impairment charges, the carrying value of Peoples’ individual
trust preferred and CDO portfolios will approximate $20.8 million and $4.1
million, respectively, at December 31, 2008.
Gains from Sale of
Securities and Other Transactions
During
the fourth quarter of 2008, Peoples sold selected low yielding long-term
investment securities, primarily U.S. agency mortgage-backed securities, with a
total recorded value of $90.5 million. Peoples reinvested the net
proceeds of $92.0 million into similar securities with better interest rate risk
characteristics. These sales and subsequent reinvestments were
designed to reposition Peoples’ investment portfolio to reduce credit and
interest rate exposures, as well as take advantage of opportunities that existed
in the market to enhance overall yield. As a result, Peoples will
recognize a pre-tax gain of $1.5 million for the fourth quarter of 2008 on these
sales.
Also
during the fourth quarter, Peoples completed the sale of its Grayson (Kentucky)
banking office and sold its merchant credit card payment processing
services. These transactions produced an aggregate fourth
quarter pre-tax gain of $775,000.
Net Interest
Margin
Peoples
anticipates reporting a fourth quarter net interest margin of approximately
3.44% versus 3.50% for the third quarter of 2008 and 3.40% for the fourth
quarter of 2007. The compression from the third quarter reflects the
decline in Peoples’ asset yields from the downward repricing of prime-based
loans in response to the Federal Reserve’s monetary actions, with limited
opportunities to lower funding costs.
Regulatory Capital
Levels
The
capital position of both Peoples and its subsidiary, Peoples Bank, National
Association (“Peoples Bank”), remain well above the amounts needed to be
considered well-capitalized under applicable regulatory standards. At
December 31, 2008, Peoples’ Tier 1 Capital ratio is estimated to be 11.9% and
Total Risk-Based Capital ratio is estimated to be 13.2%. Peoples’
Tier 1 Capital ratio was 12.32% at September 30, 2008 and 11.91% at December 31,
2007, while Peoples’ Total Risk-Based Capital ratio was 13.65% and 13.23%,
respectively.
As
previously disclosed, Peoples has received preliminary approval for a $39
million capital investment through the TARP Capital Purchase Program established
by the U.S. Department of Treasury. Peoples’ Total Risk-Based Capital
Ratio is expected to exceed 16% if it issues the entire $39 million.
Substantially all of these proceeds would be used to infuse additional capital
into Peoples Bank.
Effective Tax
Rate
Peoples’
effective tax rate is estimated to be 2.1% for the year ended December 31, 2008,
versus 23.3% for the year ended December 31, 2007. The lower
effective tax rate is largely attributable to a reduction in pre-tax income from
the higher loan loss provision and impairment charges without a corresponding
decrease in income from tax-exempt sources.
3
Conference Call to Discuss
Earnings
Analysts,
media and individual investors are invited to participate in the January 26,
2009 conference call to discuss fourth quarter and full year 2008 results of
operations 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
This
Current Report on Form 8-K contains certain statements regarding management’s
expectations for results of operations and financial condition for the quarterly
period ended December 31, 2008, that 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
“estimates”, “expects”, “believes”, “anticipates”, “could”, “may” and similar
expressions.
The
forward-looking statements contained in this Current Report on Form 8-K reflect
management’s current expectations based on all information available and its
knowledge of Peoples’ business and operations. In addition,
management has not completed all quarterly analyses and procedures required
under Peoples’ financial reporting processes for preparing quarterly financial
statements. As a result, these forward-looking statements are subject
to certain risks and uncertainties, including those risk factors included
in the disclosure under the heading “ITEM 1A. RISK FACTORS” of Part I of
Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2007
and the disclosure under the heading “ITEM 1A. RISK FACTORS” of Part II of
Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2008, and may differ significantly from actual results.
Peoples
encourages readers of this Current Report on Form 8-K to understand
forward-looking statements to be strategic objectives rather than absolute
targets of future performance. Peoples undertakes no obligation to
update these forward-looking statements to reflect events or circumstances after
the date of this news release or to reflect the occurrence of unanticipated
events, except as required by applicable legal requirements. Copies
of documents filed with the SEC are available free of charge at the SEC’s
website at http://www.sec.gov and/or from Peoples’ website.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| PEOPLES BANCORP INC. | ||||
|
Date: January
12, 2009
|
By: /s/ | EDWARD G. SLOANE | ||
|
|
|
Edward
G. Sloane
|
||
| Chief Financial Officer and Treasurer |
4