Peoples Bancorp Inc.

Good morning, and welcome to People's PAN Corp ENG's conference call. My name is Sagar, and I will be your conference facilitator. Today's call will cover a discussion of results of operations for the quarter ended March 31st, 2025. 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, please press star then two. This call is also being recorded. If you object 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 future financial performance or future events. These statements are based on management's current expectations. The 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 filings. Management believes the forward-looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of people's business 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 first quarter 2025 earnings release and earnings conference call presentation were issued this morning and are available at peoplesbankcorp.com under investor relations. reconciliation of the non-generally accepted accounting principles or gap financial measures discussed during this call to the most directly comparable gap financial measures is included at the end of earnings release this call will include about 15 to 20 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 peoplespancorp.com in the Investor Relations section for one year. Participants in today's call will be Tyler Wilcox, President and Chief Executive Officer, and Katie Bailey, Chief Financial Officer and Treasurer. And each will be available for questions following opening statements. Mr. Wilcox, you may begin your conference.

Thank you, Sagar. Good morning, everyone. Thank you for joining our call today. For the first quarter, our diluted earnings per share were 68 cents. We had many positives for the first quarter compared to the linked quarter. Our annualized loan growth was over 4%. We had improvements in asset quality metrics, including reductions in our annualized net charge operate, non-performing assets, and criticized and classified loans. Posit balances grew 2%. which was driven by higher money market and governmental deposit account balances, while we reduced our brokered CDs by $96 million, resulting in core deposit growth of over 3%. Our book value per share grew 2% to $31.90 at quarter end, while our tangible book value per share improved 4% to $20.68 at quarter end. Our tangible equity to tangible assets ratio improved to 8.34% at March 31st, compared to 8.01% at year end. We announced an increase to our quarterly dividend for the 10th consecutive year. Our reported net interest income was down 1% compared to the linked quarter, and our net interest margin was down three basis points. However, on a core basis, which excludes accretion income, Net interest income grew, while net interest margin expanded three basis points. B-based income grew over 2%, and total non-interest expense increased slightly, but was impacted by annual first quarter one-time expenses, including stock-based compensation expense related to the annual forfeiture rate true-up on stock invested during the first quarter, along with upfront expense on stock grants to certain retirement-eligible employees totaling $1.3 million, which reduced diluted EPS by 3 cents per share, and employer health savings account contributions totaling $724,000, which negatively impacted diluted EPS by 2 cents. At March 31st, our key credit quality metrics improved compared to year-end. As we had anticipated, our annualized net charge-off rate declined compared to the linked quarter, and was 52 basis points for the first quarter compared to 61 basis points for the fourth quarter. While we experienced a meaningful decline, per our previous guidance, net charge-offs continued to be driven by our small ticket leasing business, which comprised 31 basis points of the first quarter rate and was 49 basis points of the fourth quarter rate. As we noted last quarter, We expected the fourth quarter to be our peak quarter of charge-offs for the leasing portfolio, and in turn, these net charge-offs declined by over $2 million during the first quarter as compared to the linked quarter. Our non-performing assets decreased over $3 million and were 50 basis points of total assets compared to 53 basis points at year-end. These improvements were driven by lower balances of loans, there were 90 or more days past due and accruing, which was largely due to administrative delinquencies in our leasing and premium finance portfolios at year end. Criticized and classified loans both declined compared to year end and were down $14 million and $5 million, respectively. Our delinquency rates were stable, as was the portion of our loan portfolio considered current at quarter end was 98.5%, compared to 98.7% at year end. Our overall allowance for credit losses grew nearly $2 million to 1.01% of total loans. Our provision for credit losses increased nearly $4 million compared to the linked quarter and was primarily driven by net charge-offs during the first quarter. The growth in our allowance for credit losses was attributable to a deterioration in the macroeconomic conditions used within our models, increase in reserves on individually analyzed loans, and loan growth during the quarter. While there is much uncertainty around tariffs and the market, current actual impacts to our clients and our business has so far been nominal. As far as business sentiment in our markets and from our clients, we see continued optimism around the regulatory and tax outlook. Recent headwinds of uncertainty with tariffs have led to declines in confidence nationally reflected in various small business indexes. Notwithstanding national declines in consumer confidence in the past couple of months, those declines have not materialized as reductions in consumer demand in our lines of business during that same time period. We have undertaken extensive reviews of our various portfolios in order to better understand the potential impacts of tariffs and executive orders on our loan demand or credit. Thus far, no material impact has been observed. Our portfolio assessment has focused on commercial relationships with credit exposure over $3 million, automotive dealer exposure, and our continued focus on our small ticket leasing business. The recent pause in tariffs will allow any impacted clients some additional time to address any concerns they may have and allow us to continue to refine our assessments. We will continue with our heightened monitoring and analysis while uncertainty remains. On a positive note, we could see some long-term benefit from reshoring in our markets. Moving on to loan balances, for the first quarter, we had 4% annualized loan growth, which was in the range of our 2025 guidance. Commercial real estate loans led the increase, contributing $75 million of growth, while our residential real estate loans were up $13 million and consumer indirect loans grew $10 million. Some of this production was offset by declines in commercial and industrial loans, leases, and construction loans. The decline in lease balances was driven by net charge-offs in the small ticket leasing portfolio during the quarter. The reduction in our construction loans was due to movement to commercial real estate loan balances as projects were completed. At quarter end, our commercial real estate loans comprised 35% of total loans, about 35% of which were owner-occupied, while the remainder were investment real estate. At quarter end, 47% of our total loans were fixed rate, with the remaining 53% at a variable rate. I will now turn the call over to Katie for a discussion of our financial performance.

Thanks, Tyler. Our net interest income declined 1% this quarter compared to the linked quarter end and was attributable to lower accretion income during the first quarter. Net interest margin was 4.12% compared to 4.15% for the fourth quarter, and on a core basis, which excludes accretion income, our margin expanded three basis points. Accretion income was $3.5 million, adding