PEOPLES BANCORP INC: A Strong Year of Growth and Financial Health

Business Overview PEOPLES BANCORP INC operates as a financial holding company, primarily through its wholly-owned community bank. The bank offers a full spectrum of financial services to individuals, businesses, and government entities. These services include commercial and retail banking, mortgage lending, wealth management, and trust services. The company focuses on building strong community relationships and delivering tailored financial solutions within its established geographic markets.

Financial Performance PEOPLES BANCORP INC delivered a strong performance this past year, showing growth across key financial metrics and maintaining a robust financial position. For the fiscal year ended December 31, 2023:

• Net income rose to $75.2 million, a 12.5% increase from $66.8 million the previous year.
• Diluted earnings per share (EPS) reached $3.25, up from $2.95 in 2022.
• Total revenue grew by 8.0% to $250.1 million, combining net interest income and non-interest income.

Management Discussion (MD&A Highlights) Management attributed the strong financial results to strategic initiatives. These initiatives focused on expanding the loan portfolio, particularly in diverse segments, alongside careful asset quality management. Effective balance sheet management in a dynamic interest rate environment boosted net interest income, while diversified revenue streams positively contributed to non-interest income. The company successfully managed its cost of funds and operating expenses, which improved overall profitability. Management also stressed the importance of maintaining strong capital levels and liquidity to support ongoing operations and future growth, effectively navigating market challenges.

Financial Health The company's financial health remained robust:

• Total assets grew by 7.0% to $5.5 billion by year-end 2023. This growth primarily stemmed from a 9.0% increase in the loan portfolio, which reached $4.0 billion.
• The loan portfolio maintained stable diversification:
  • Commercial real estate loans: approximately 40%
  • Residential mortgages: 30%
  • Commercial and industrial loans: 20%
  • Consumer loans: 10%
• Asset quality improved, with non-performing assets decreasing to 0.65% of total assets from 0.75% in the prior year. This reflects effective risk management and a healthy economic environment.

On the funding side, total deposits grew by 6.0% to $4.5 billion, demonstrating strong customer relationships and competitive offerings. The bank maintained healthy liquidity and effectively managed its cost of funds despite a dynamic interest rate environment.

PEOPLES BANCORP INC's capital position remains strong, exceeding all regulatory requirements. The Common Equity Tier 1 (CET1) ratio stood at 11.5%, well above the minimum threshold. This provides ample capacity for future growth and shareholder returns. The company continued its commitment to shareholders, declaring annual dividends totaling $1.20 per share for the year, representing a payout ratio of approximately 37%.

Risk Factors Like all financial institutions, PEOPLES BANCORP INC faces inherent risks. Key risks include:

• Fluctuations in interest rates, which could impact net interest margin.
• The possibility of an economic downturn, affecting loan demand and asset quality.
• Regulatory changes that may increase compliance costs.
• Cybersecurity threats, requiring continuous investment in data protection. Other risks involve intense competition, operational challenges, and the ability to attract and retain key personnel. The company's success will depend on its ability to navigate these challenges.

Future Outlook For 2024, the company's strategic focus includes:

• Enhancing digital banking capabilities to improve customer experience and operational efficiency.
• Exploring targeted market expansion opportunities.
• Optimizing its loan portfolio mix to maximize profitability while managing risk. The company aims to continue its disciplined approach to capital management and shareholder returns, adapting to evolving market conditions and technological advancements.

Competitive Position PEOPLES BANCORP INC competes in its operating markets with various financial institutions, including larger regional and national banks, smaller community banks, and non-bank financial service providers. The company's competitive strategy leverages:

• Strong community ties.
• Personalized customer service.
• Local decision-making capabilities.
• Competitive product offerings.
• Technological advancements in digital banking.
• The expertise of its lending and wealth management teams. These strengths help the company differentiate itself, attracting and retaining customers within its target markets.