Peoples Bancorp Inc.

Good morning and welcome to People's Bancorp Inc.'s conference call. My name is Nick and I will be your conference facilitator. Today's call will cover a discussion of the results of operations for the three and six months ended June 30th, 2026. 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'd like to ask a question during this time, simply press star then 1 on your telephone keypad and questions will be taken in the order that they are received. If you would like to withdraw your question, please press star and then 2. 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 future looking statements regarding people's futures 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. Peoples disclaims any responsibility to update these forward-looking statements after this call, except as may be required by applicable legal requirements. Peoples' second quarter 2026 earnings release and earnings conference call presentation were issued this morning and are available at peoplesbancorp.com under Investor Relations. A 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 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 peoplesbancorp.com in the Investor Relations section for one year. Participants on 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, Nick. Good morning, everyone, and thank you for joining our call today. Earlier, we reported diluted earnings per share of 78 cents for the second quarter. When adjusted for one-time items, our diluted EPS for the quarter was 96 cents, which exceeded consensus analysts' estimates of 85 cents. These one-time items included an $8.2 million loss, which reduced diluted EPS by 18 cents, related to the strategic sale of investment securities from our portfolio in preparation for the citizens' merger and our current strategic objective to remain below $10 billion in assets. We also recorded acquisition-related expenses of $410,000 during the second quarter, which reduced our diluted EPS by one cent. We recently purchased an energy tax credit, lowering our income tax expense by $480,000 in the second quarter and positively impacting diluted EPS by one cent. We have several highlights for the second quarter. as many of our performance metrics improved compared to the linked quarter. Our net interest income increased 3%, while our net interest margin expanded 7 basis points. De-based income grew over $340,000. Provision for credit losses declined 51%. The efficiency ratio improved to 58.3% compared to 58.6%. Our loans grew $51 million, or 3% annualized. Non-interest-bearing deposits grew $7 million or 2% annualized. Our tangible equity to tangible assets ratio increased 34 basis points to 9.25%. Book value per share increased to $34.41 from $33.85, a 7% annualized growth rate. Our tangible book value per share improved at an 11% annualized rate and all of our regulatory capital ratios improved. Our provision for credit losses totaled $4.7 million for the second quarter, a decline of $5 million or 51% compared to the first quarter. Our allowance for credit losses declined to 1.14% of total loans from 1.16% in March 31st. Our lower provision for credit losses for the quarter was driven by a reduction in net charge-offs, coupled with a stabilization of macroeconomic conditions used within our model. Our annualized quarterly net charge-off rate improved to 31 basis points compared to 40 basis points for the linked quarter. Our indirect consumer loan net charge-offs decreased $751,000 which was driven by lower charge-offs and improved recoveries. We continued to see declines in our small ticket lease charge-offs which were $3.4 million compared to $3.8 million for the first quarter. These charge-offs contributed 20 basis points to the annualized net charge-off rate for the second quarter. We have significantly reduced our position in high balance accounts which totaled $7.2 million at June 30th and we have limited residual risk remaining within this segment of the small ticket leasing portfolio. For additional details on our small ticket leasing business, please refer to the accompanying slides. Our non-performing loans increased slightly and were 0.6% of total loans at quarter end. Criticized loans grew $50 million compared to March 31st, comprising 4.01% of total loans at quarter end. while classified loans declined $1 million. The increase in criticized loans was mostly related to two commercial credits, one of which was acquired. We do not currently expect any charge-offs to arise from these relationships. As a reminder, our first quarter criticized loans as a percent of total loans was 3.3%, which was lower than our typical historical run rate of around 4%. Our delinquency levels improved, as 99.1% of our loan portfolio was considered current at June 30th compared to 98.9% at the linked quarter end. Moving on to loan balances, we generated loan growth of $51 million or 3% annualized. Commercial and industrial loans contributed $43 million of growth, followed by increases in premium finance loans of $37 million, construction loans of $25 million, and Home Equity lines of credit of $13 million. Overall, our lease balances grew with our mid-ticket leasing business adding over $15 million in balances, partially offset by declines in our small ticket leasing portfolio. At the same time, our other commercial real estate loan balances declined $58 million as we experienced the elevated first half payoffs we had anticipated. I will now turn the call over to Katie for a discussion of our financial performance.

Thanks, Tyler. For the second quarter, we saw improvement in our net interest income, which grew $2.3 million, while our net interest margin expanded seven basis points. A reduction in our deposit costs benefited both net interest income and margin for the second quarter. Accretion income totaled $1.2 million compared to $1.3 million for the first quarter, contributing five basis points and six basis points to net interest margin, respectively. For the first six months of 2026, net interest income improved $10.3 million, or 6%, while net interest margin expanded six basis points. Our deposit cost discipline, along with higher interest income, contributed to the increase. Accretion income totaled $2.4 million compared to $6.1 million for 2025, contributing six basis points and 15 basis points to net interest margin, respectively. As far as our balance sheet structure, at this time, we are positioned to benefit more from a rising rate environment. A falling rate environment would cause a nominal reduction in our net interest income. However, rate uncertainty validates our relatively neutral position. As it relates to our fee-based income, we had growth of over $340,000 compared to the linked quarter. We had improvements in the majority of our fee-based income lines, which more than offset the decline in insurance income driven by the annual performance-based insurance commissions received in the first quarter of each year. For the first six months of 2026, fee-based income grew $3 million mostly due to higher lease income and trust and investment income. Our non-interest expenses were up 2% compared to the linked quarter, which included $410,000 of acquisition-related expenses, the majority of which contributed to the increase in professional fees. For the first six months of 2026, non-interest expenses were up 2%. The growth was driven by higher operating lease expense, which corresponds to our fee-based lease income, as well as salaries and employee benefits costs, and data processing and software expense. For the first half of 2026, we have recorded $426,000 of acquisition-related expenses. Our reported efficiency ratio was 58.3% for the second quarter and 58.6% for the linked quarter. The improvement in our efficiency ratio is driven by higher revenue compared to the first quarter. For the first six months of 2026, our reported efficiency ratio was 58.4% compared to 60% for the prior year and was also driven by higher revenue. Looking at our balance sheet at quarter end, Our loan-to-deposit ratio increased to 91.5% compared to 88.5% at March 31, as we had loan growth for the second quarter, coupled with a reduction in deposits. Our investment portfolio as a percent of total assets declined to 19.1% at June 30, compared to 20.3% at the linked quarter end. The decline was driven by the sale of approximately $135 million of available for sale investment securities, resulting in a loss of $8.2 million for the second quarter. These sales were part of our current plan to stay below $10 billion in total assets and restructure our portfolio in conjunction with the pending citizen's merger. Our core deposit balances, which exclude brokered CDs, declined $155 million compared to March 31. As expected, we had seasonal decreases in our governmental deposits, which were down $87 million. We also had reductions in our interest-bearing demand accounts of $17 million. During the second quarter, we also had reductions of $92 million in retail CDs. However, We improved our deposit costs by six basis points compared to the linked quarter. These declines were partially offset by an increase of $37 million in money markets and $7 million in non-interest-bearing deposits. Our demand deposits as a percent of total deposits grew to 36% at June 30th compared to 35% at the linked quarter end. Our non-interest-bearing deposits to total deposits ratio was flat at 21% for both June 30th and March 31st. As it relates to our capital levels, all of our regulatory capital ratios improved compared to the linked quarter end as earnings outpaced dividends. I will now turn the call back over to Tyler for his closing comments.