Peoples Bancorp Inc.

Good morning and welcome to the People's Bank Corps, Inc. conference call. My name is Anthony and I will be your conference facilitator. Today's call will cover a discussion of the results of operations for the three and nine months ended September 30, 2023. Please be advised that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then one on your telephone keypad and questions will be taken in the order they are received. If you would like to withdraw your question, press star, then two. This call is also being recorded. If you objected to the recording, please disconnect at this time. Please be advised that the commentary in this call will contain projections or other forward-looking statements regarding people's futures, financial performance, and future events. These statements are based on management's current expectations. Statements in this call which are not historical fact are forward-looking statements and involve a number of risks and uncertainties detailed in People's Securities and Exchange Commission's filings. Management believes that the forward-looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of People's businesses and operations. However, it is possible actual results may differ materially from these forward-looking statements. People's disclaims any responsibility to update these forward-looking statements after this call except as may be required by applicable legal requirements. People's third quarter 2023 earnings release was issued this morning and is available at peoplesbankcorp.com under Investor Relations. Reconciliation of the non-generally accepted accounting principles, or GAAP, financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release. This call will include about 25 to 30 minutes of prepared commentary, followed by a question and answer period, which I will facilitate. An archived webcast of this call will be available on peoplesbankcorp.com in the investor relations section for one year. Participants in today's call will be Chuck Selarzyski, President and Chief Executive Officer Tyler Wilcox, Chief Operating Officer Katie Bailey, Chief Financial Officer and Treasurer. And each will be available for questions following opening statements. Mr. Selarzyski, you may begin your conference.

Thank you, Anthony. Good morning and thank you for joining our call today. We are starting to realize the benefits of our limestone merger, along with our strong organic growth, which is evidenced in our record earnings for the third quarter. Compared to the linked quarter, our net interest income grew 10% and our fee-based revenue increased 3%. Our return on average stockholder equity improved to 12.6% for the quarter, while our return on average tangible stockholder equity was 23%. Our return on average assets also increased to 1.44% for the third quarter. Our net charge-off levels remained low and were 15 basis points of average loans on an annualized basis. We had strong loan growth of $110 million, or 7% annualized, compared to the linked quarter ends. We had increases in our deposit balances of 78 million compared to the linked quarter, which was mainly due to our successful campaign for retail CDs during the quarter. Our loan-to-deposit ratio stayed flat compared to the linked quarter at 86%. We generated positive operating leverage compared to the linked quarter, prior year quarter, and first nine months of 2022. Our earnings for the quarter totaled $31.9 million and increased 51% compared to the linked quarter and 23% from the prior year quarter. Diluted earnings per share were $0.90 and were negatively impacted by $0.15 of one-time cost during the third quarter, which included limestone acquisition-related expenses of $4.4 million, resulting in a $0.10 decrease and diluted EPS. A 2.4 million pension settlement charge associated with the final termination of our pension plan, which negatively impacted diluted EPS by five cents. We will no longer be recognizing any future ongoing cost or settlement charges related to our pension plan as a result of this final termination. Moving on to our credit quality. Our allowance for credit losses represented 1.03% of total loans at quarter end. A higher allowance compared to the linked quarter was attributed to several factors, including loan growth during the quarter, updates to our prepayment, curtailment, and funding rates, and deterioration of macroeconomic conditions used within our CECL model. All of these increases were partially offset by a decline in our reserve for individually analyzed loans. The reduction in our reserves for individually analyzed loans was largely due to the payoff of a single commercial real estate relationship. This relationship totaled $5.3 million at June 30th and was on non-accrual and included in our criticized and classified asset balances at the linked quarter end. We also recorded a $110,000 charge-off on this relationship at payoff during the third quarter. Non-performing assets remained flat compared to the linked quarter and were 48% of total assets at September 30th. A portion of our loan portfolio considered current at quarter end was 99%, which is flat compared to June 30th. For the quarter, our annualized net charge-off rate was 15 basis points, consistent with the prior year quarter, and an increase from nine basis points for the linked quarter. On a year-to-date basis, our annualized net charge-off rate was 13 basis points for 2023, compared to 15 basis points for the first nine months of 2022. Criticized loans declined to 3.5% of total loans at quarter end while our classified loans increased and were 2.05% of total loans. As it relates to commercial office space, which is a very small portion of our loan portfolio, our total outstanding balances were $136 million at quarter end and represented 2% of our total loan portfolio. We continue to see high demand and successful project execution with our construction portfolio. There have been occasional construction delays. However, these projects have generally been leasing up at appropriate speeds and often at higher rents than projected. We typically work with high net worth individuals who are able to withstand increases in interest carrying costs and delays in timing. We have witnessed a number of construction projects achieving certificate of occupancy in the third quarter and more are likely in the fourth quarter. As a result, construction loans saw a decline in outstanding balances at quarter close. The current portfolio has $374 million in outstanding balances compared to $689 million in commitments. Land development remains a small percentage of the portfolio, representing $106 million, or 1.7% of total loans at quarter end. Our multifamily balances continue to grow as projects come through the construction phase and now rest at $501 million. This sector has advanced not only due to construction seasonality, but also from the limestone merger, which had outstanding balances of $235 million at the end of the first quarter. Our top 10 multifamily loans accounted for 38% of the funded multifamily portfolio. six of which are in the construction phase. These projects are located within growth markets with strong metrics and notable guarantor support. Hospitality loan balances were 192 million at quarter end and comprised 3% of our total loan portfolio. Our hospitality loan balances have grown in 2023 due to the limestone merger. However, we were able to exit an out-of-market hotel in the third quarter that was acquired through the limestone merger. The limestone acquisition shifted the geographic distribution of our hospitality portfolio. Six of our 10 largest exposures are located in the state of Kentucky, including the suburbs of Cincinnati, Ohio. Other hotel projects span throughout our footprint with a concentration in Ohio. The top 10 funded loans with flag hotels represent 47% of the hospitality portfolio at quarter end. Occupancy trends within the portfolio generally remain above market competitors with trailing 12 and trailing three month occupancy reported at 76% and 82% respectively. We continue to be highly selective in this segment and are working with high net worth individuals that provide sponsor support, including liquidity. We do not plan to increase our hotel exposure as a percentage of total loans in a meaningful way, and we'll continue to manage our portfolio exposure where we can. Specific assets are anticipated to be sold or refinanced in the fourth quarter, which will shift the overall project mix. We continue to closely monitor our dealer floor plan portfolio and are assessing the potential impact of the United Auto Workers strike on the portfolio. At quarter end, we had 340 million of exposure to vehicle dealers, 30% of which was to domestic franchise auto dealers, and another 7% was to specialty vehicle dealers who are supplied by the domestic manufacturers. The remaining 63% of the portfolio was evenly distributed among independent auto, foreign franchise auto, commercial truck, and RV dealers. Our domestic franchise dealers are currently well stocked with new vehicle inventory, so the strikes have not yet had a meaningful impact on vehicle sales. We believe our larger clients have the liquidity positions to withstand short-term delays in the delivery of vehicles should the strike persist. Our largest 11 floor plan clients have an average debt service ratio of 3.3 times with a trust position approaching two times. Our top five floor plan commitments total 87 million, while the top 11 cover nearly $150 million in commitment. Compared to the linked quarter end, our total loan balances grew 110 million, or 7% annualized. The largest contributor of our growth compared to June 30th was our commercial real estate loans, which grew $118 million, while our specialty finance businesses provided over $51 million in growth. Consumer indirect loans were up $14 million, while we had some declines in construction and commercial and industrial loan balances compared to the linked quarter end. At quarter end, our commercial real estate loans comprised 36% of total loans, nearly 40% of which were owner-occupied. At the same time, our total consumer loans were 29% of total loans, commercial and industrial loans were 19%, specialty finance totaled 10%, and construction loans were 6%. At September 30th, 48% of our total loans were fixed rate, with the remaining 52% at a variable rate. Additionally, while our premium finance loans are fixed rate, these loans operate similar to variable rate loans and they reprice every nine months. I will now turn the call over to Tyler for additional details about our fee-based income deposits and the limestone systems conversions.

Thanks, Chuck. Our fee-based income improved 3% compared to the linked quarter, was 15% higher than the prior year quarter, and grew 13% compared to the first nine months of 2022. The increases were driven by the additional accounts from the limestone merger which resulted in higher deposit account service charge income compared to the linked quarter and prior year periods, as well as higher electronic banking income compared to the prior year periods. Our insurance income has increased considerably this year, mainly due to client acquisition efforts and hardening insurance markets. We also recorded a death benefit associated with our bank-owned life insurance during the third quarter of 2023, which totaled around $400,000.00. During the quarter, we recorded $1.3 million of operating lease income, which drove the increase in other non-interest income. At the same time, our lease income declined $1.8 million compared to the linked quarter as we recognized the unwind of a residual premium related to two leases from the Vantage acquisition, which paid off during the quarter. The residual premiums were a result of the fair values associated with the acquisition accounting for the Vantage acquisition. Moving on to our deposit book, we increased our deposit balances by $78 million compared to the linked quarter end. Our retail CDs grew $248 million as a result of our recent campaigns, which more than offset the decline in our non-interest-bearing deposits. We typically have seasonal increases in our governmental deposits during the third quarter of each year, which contributed a growth of $56 million. As we mentioned last quarter, we've utilized brokered CDs in recent periods as a funding mechanism, as it provides us with a lower funding cost than the FHLB borrowings we might otherwise use, and the brokered CDs do not require us to pledge collateral. Our demand deposits comprise 39% of total deposits at quarter end, compared to 42% at June 30th. At quarter end, our deposit composition included 79% in retail deposit balances. which is comprised of consumers and small businesses, and 21% in commercial deposit balances. Our average customer-deposit relationship was $29,000 at September 30th, while our median was $2,400. During August, we successfully completed the conversion of the limestone system to our core system. This helps our lines of business interact together in a more coordinated effort and allows for collaboration between business partners to optimize our offerings to our new clients. We continue to work on the expansion of our business model throughout our new footprint. As part of our culture and core values, we always make helping our communities a priority. I'm pleased to note that we now have over 65% of our associates contributing a portion of their paychecks to local food banks, which results in approximately $200,000 of annual contributions. Another part of our core values is providing our associates with a top-notch workplace and environment. We're excited to note that Energage recognized us for the second year in a row as one of the top workplaces in the financial services industry for 2023. Next, I will turn the call over to Katie, who will provide additional details around our financial performance.