In comparison, Peoples reported net income available to common shareholders of $2.3 million, or .23 per diluted common share, for the second quarter of 2009 (or "linked quarter") and $3.0 million, or .28 per diluted common share for the third quarter of 2008. On a year-to-date basis, net income available to common shareholders was $1.6 million through September 30, 2009, versus $10.6 million a year ago, while diluted earnings per common share were .16 and $1.02, respectively.
"Our third quarter results were impacted by losses caused by continued weakness in commercial real estate values and the general economy," Mark F. Bradley, President and Chief Executive Officer, said in a company press release. "These losses also overshadowed positive results in several key areas, including stable net interest margin and enhanced operating efficiency. We also preserved Peoples' healthy capital position, which continues to serve as a source of strength as we work through a challenging economy."
Bradley continued, "The build up of our allowance for loan losses during the third quarter reflects our continued proactive approach to identify and dispose of problem loans. While additional loans were placed on nonaccrual status, we were successful in resolving some existing nonaccrual loans. We are encouraged by this progress and remain committed to reducing the overall level of nonperforming assets."
Third quarter 2009 net interest income of $15.5 million was comparable to the second quarter of 2009, while net interest margin was unchanged at 3.45%. Interest income was impacted by loan payoffs during the third quarter of 2009, coupled with the impact of additional loans being placed on nonaccrual status. However, the lower interest income was offset by a reduction in interest expense from the linked quarter, due to lower overall cost of funds attributable to Peoples repaying maturing, high-cost borrowings. Compared to the third quarter of 2008, net interest income increased 6%, as average earning assets increased $122 million, or 7%, year-over-year. A portion of the earning asset growth was the result of Peoples maintaining higher cash balances as a result of limited opportunities for attractive long-term asset investments and Peoples' planned paydowns of high-cost wholesale funding. The higher cash balance also accounted for the 5 basis point reduction in third quarter 2009 net interest margin versus the same period last year.
In the third quarter of 2009, Peoples recorded $5.9 million of other-than-temporary impairment losses on investment securities, of which $4.0 million related to a single bank-issued trust preferred security deemed a total loss and $1.9 million related to a collateralized debt obligation ("CDO") security, consisting mostly of bank-issued trust preferred securities, previously carried at $2.7 million. Management concluded these losses were required under current accounting rules since it did not expect to recover the entire amortized cost of the securities. These determinations were based upon management's evaluation of the credit quality of the issuers during the third quarter and estimation of cash flows to be received from the securities. After the third quarter 2009 impairment charges, the carrying value of Peoples' remaining investments in individual bank-issued trust preferred securities and CDO securities were $16.7 million and $2.8 million, respectively.
During the third quarter of 2009, Peoples' loan balances decreased $26.1 million to $1.07 billion, due mostly to some commercial loan payoffs during the quarter, coupled with the impact of charge-downs on existing impaired commercial loans. Through nine months of 2009, total loan balances also were impacted by loans being refinanced and sold to the secondary market due to customer demand for long-term, fixed-rate residential real estate loans. As a result, Peoples' serviced loan portfolio increased 22% since year-end 2008, to $220.6 million at September 30, 2009.
Nonperforming assets were $43.4 million, or 2.16% of total assets, at September 30, 2009, versus $40.9 million, or 2.00%, at June 30, 2009. During the third quarter of 2009, Peoples placed $10.6 million of commercial loans on nonaccrual status, of which the majority are secured by commercial real estate and the remainder secured by other business assets. The overall increase in nonperforming assets was mostly offset by charge-downs and payoffs on existing nonaccrual loans, which totaled $6.6 million and $2.4 million, respectively. Peoples' nonperforming assets are comprised primarily of nonaccrual loans secured by commercial real estate.
At September 30, 2009, retail deposit balances were down $29.6 million from the prior quarter-end but remained nearly $10 million higher than December 31, 2008. During the third quarter, Peoples continued its planned reduction in higher-cost, non-core deposits, primarily consisting of certificates of deposits from customers outside Peoples' primary market area, given the growth in lower-cost and non-interest-bearing deposits. Money market balances increased 7% during the third quarter and 15% since year-end 2008, while savings account balances were up 14% at quarter-end compared to December 31, 2008.
Peoples Bancorp Inc. is a financial products and services company with $2.0 billion in assets, 47 locations and 39 ATMs in Ohio, West Virginia and Kentucky. Peoples makes available a complete line of banking, investment, insurance, and trust solutions through its financial service units - Peoples Bank, National Association; Peoples Financial Advisors (a division of Peoples Bank); and Peoples Insurance Agency, Inc. Peoples' common shares are traded on the NASDAQ Global Select Market under the symbol "PEBO", and Peoples is a member of the Russell 3000 index of US publicly-traded companies. Learn more about Peoples at www.peoplesbancorp.com .
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