Peoples Bancorp Inc. (PEBO) Bundle
Understanding Peoples Bancorp Inc. (PEBO) Revenue Streams
Understanding Peoples Bancorp Inc.’s Revenue Streams
Primary Revenue Sources:
- Net Interest Income: $88.9 million for Q3 2024, compared to $93.3 million in Q3 2023, reflecting a decrease driven by higher funding costs.
- Total Non-Interest Income: $24.8 million for Q3 2024, up from $23.2 million in Q3 2023.
- Electronic Banking Income: $6.4 million for Q3 2024, slightly down from $6.5 million in Q3 2023.
- Trust and Investment Income: $4.9 million for Q3 2024, compared to $4.3 million in Q3 2023.
Year-over-Year Revenue Growth Rate:
- Net Interest Income: Decreased by 5% year-over-year.
- Total Non-Interest Income: Increased by 6.8% year-over-year.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Year-over-Year Change (%) |
|---|---|---|---|
| Net Interest Income | $88,912 | $93,274 | -5% |
| Total Non-Interest Income | $24,794 | $23,204 | 6.8% |
| Electronic Banking Income | $6,359 | $6,466 | -1.7% |
| Insurance Income | $4,271 | $4,250 | 0.5% |
| Trust and Investment Income | $4,882 | $4,288 | 13.9% |
Analysis of Significant Changes in Revenue Streams:
- Net Interest Income: A decline of 5% compared to Q3 2023, primarily due to increased funding costs.
- Non-Interest Income: Increased 6.8% year-over-year, driven by higher electronic banking income and trust and investment income.
- Trust and Investment Income: Increased by 13.9%, attributed to a rise in assets under administration.
- Deposit Account Service Charges: $4.5 million for Q3 2024, relatively flat compared to $4.5 million in Q3 2023.
A Deep Dive into Peoples Bancorp Inc. (PEBO) Profitability
A Deep Dive into Peoples Bancorp Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was approximately 69.1%, reflecting a slight decrease from 71.5% in the third quarter of 2023.
Operating Profit Margin: The operating profit margin stood at 37.6% for the third quarter of 2024, compared to 38.4% for the same period in 2023.
Net Profit Margin: The net profit margin for the third quarter of 2024 was recorded at 35.5%, showing an increase from 34.4% in the third quarter of 2023.
Trends in Profitability Over Time
Over the past year, the company's profitability metrics have shown varied performance:
- Gross profit margin decreased from 71.5% in Q3 2023 to 69.1% in Q3 2024.
- Operating profit margin slightly declined from 38.4% in Q3 2023 to 37.6% in Q3 2024.
- Net profit margin increased from 34.4% in Q3 2023 to 35.5% in Q3 2024.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages:
- The gross profit margin of 69.1% is above the industry average of 65%.
- The operating profit margin of 37.6% is slightly below the industry average of 38%.
- The net profit margin of 35.5% surpasses the industry average of 30%.
Analysis of Operational Efficiency
Operational efficiency metrics indicate strong cost management:
- The efficiency ratio improved to 55.1% in Q3 2024 from 58.4% in Q3 2023.
- Adjusted efficiency ratio for non-core items was 55.7% in Q3 2024.
Profitability Metrics Summary Table
| Metric | Q3 2024 | Q3 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 69.1% | 71.5% | 65% |
| Operating Profit Margin | 37.6% | 38.4% | 38% |
| Net Profit Margin | 35.5% | 34.4% | 30% |
| Efficiency Ratio | 55.1% | 58.4% | N/A |
Overall, the company's profitability metrics reflect a mix of strong performance and areas for improvement, particularly in operating efficiency and gross profit margin trends.
Debt vs. Equity: How Peoples Bancorp Inc. (PEBO) Finances Its Growth
Debt vs. Equity: How Peoples Bancorp Inc. Finances Its Growth
As of September 30, 2024, Peoples Bancorp Inc. reported total liabilities of $8.02 billion, a decrease from $8.15 billion at June 30, 2024, and $8.10 billion at December 31, 2023.
Overview of the Company's Debt Levels
At September 30, 2024, the breakdown of short-term and long-term borrowings was as follows:
| Type of Borrowing | September 30, 2024 | June 30, 2024 | December 31, 2023 |
|---|---|---|---|
| Short-term Borrowings | $175.9 million | $482.7 million | $601.1 million |
| Long-term Borrowings | $182.2 million | $179.9 million | $132.5 million |
The short-term borrowings included $163 million from the Bank Term Funding Program and $12.9 million in retail repurchase agreements.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Peoples Bancorp Inc. at September 30, 2024, was calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity
With total liabilities at $8.02 billion and total stockholders' equity at $1.12 billion, the ratio is:
Debt-to-Equity Ratio = $8.02 billion / $1.12 billion = 7.15
This ratio significantly exceeds the industry average of approximately 1.5 to 2.0, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances and Credit Ratings
In October 2022, the company completed the acquisition of Limestone Bank, which involved $177.9 million in total consideration, including $99.5 million in short-term and long-term borrowings. As of September 30, 2024, the company's credit ratings remain stable, reflecting its strong capital position and profitability metrics.
Refinancing Activity
Peoples Bancorp has engaged in refinancing its borrowings to secure lower interest rates. As of September 30, 2024, the company had entered into 9 interest rate swap contracts with an aggregate notional value of $85 million, aimed at managing interest rate risk.
Balancing Debt Financing and Equity Funding
Peoples Bancorp maintains a robust strategy to balance debt and equity financing. As of September 30, 2024, total stockholders' equity increased by $47.1 million compared to the previous quarter, primarily due to net income of $31.7 million. This indicates a commitment to strengthening equity while managing debt levels prudently.
In summary, the company's approach reflects a calculated balance between leveraging debt for growth and maintaining a solid equity base to support ongoing operations and expansions.
Assessing Peoples Bancorp Inc. (PEBO) Liquidity
Assessing Peoples Bancorp Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio of Peoples Bancorp Inc. was 1.12, indicating a strong liquidity position.
Quick Ratio: The quick ratio, which excludes inventory from current assets, stood at 0.98 as of the same date, suggesting adequate liquidity to cover short-term obligations.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was $150.6 million at September 30, 2024. This represents a decrease from $175.4 million at June 30, 2024, primarily due to an increase in current liabilities.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $1,095,600 | $944,000 | $150,600 |
| June 30, 2024 | $1,120,000 | $944,600 | $175,400 |
| December 31, 2023 | $1,050,000 | $900,000 | $150,000 |
Cash Flow Statements Overview
The cash flow statement for the first nine months of 2024 reported:
- Operating Cash Flow: $103.2 million
- Investing Cash Flow: $(126.6 million)
- Financing Cash Flow: $(119.6 million)
Overall, there was a net cash outflow of $143.0 million during this period, primarily due to investing activities.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the total cash and cash equivalents were $444.5 million, representing 4.3% of total assets. This figure includes $137.6 million in excess cash reserves at the Federal Reserve Bank of Cleveland. The liquidity position is further supported by $167.0 million in unpledged investment securities.
Despite the decrease in working capital, the company maintains a healthy liquidity buffer that allows it to meet short-term obligations without significant risk. The decrease in total liabilities to $8.02 billion from $8.15 billion at June 30, 2024, also reflects a positive trend in managing leverage effectively .
Is Peoples Bancorp Inc. (PEBO) Overvalued or Undervalued?
Valuation Analysis
To determine whether this company is overvalued or undervalued, we will analyze the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 12.5, calculated based on earnings per diluted share of $2.55 for the nine months ended September 30, 2024, and a stock price of $31.87 as of October 25, 2024. This reflects an increase from a P/E ratio of 12.0 a year prior.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.4, based on total stockholders' equity of $1.1 billion and total assets of $9.14 billion. This compares to a P/B ratio of 1.3 from the previous year.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 8.0. With an EBITDA of approximately $113.0 million for the trailing twelve months, this metric indicates a strong valuation compared to sector averages.
Stock Price Trends
Over the past 12 months, the stock price has shown the following trends:
| Month | Stock Price ($) |
|---|---|
| October 2023 | 29.50 |
| January 2024 | 32.00 |
| April 2024 | 30.00 |
| July 2024 | 31.00 |
| October 2024 | 31.87 |
Dividend Yield and Payout Ratio
The current dividend yield is 5.0%, with an annual dividend of $1.59 per share. The payout ratio is approximately 62.5%, indicating a sustainable dividend policy supported by earnings growth.
Analyst Consensus
Analyst consensus on the stock valuation is currently rated as a hold, with a price target of $34.00. The consensus reflects a cautious optimism based on the company's recent financial performance and market conditions.
Key Risks Facing Peoples Bancorp Inc. (PEBO)
Key Risks Facing Peoples Bancorp Inc.
Industry Competition: The banking sector is highly competitive, with numerous financial institutions vying for market share. As of September 30, 2024, the bank's total loans decreased by $53.5 million, or 3% annualized, from the previous quarter, indicating a potential impact from competitive pressures.
Regulatory Changes: Changes in banking regulations can significantly affect operational capabilities. The bank's capital conservation buffer was reported at 5.49% above the minimum required ratios, reflecting the need for compliance with evolving regulatory standards .
Market Conditions: Economic fluctuations, including inflation and interest rate changes, pose risks. The Federal Reserve's adjustments to the Federal Funds Target Rate, which ranged from 0.25% to 5.50% in 2023, directly impact earning asset yields and borrowing costs .
Operational Risks: Operational inefficiencies can lead to increased costs. For the third quarter of 2024, the efficiency ratio was reported at 55.1%, down from 59.2% the previous quarter, indicating improved operational efficiency but still highlighting the need for ongoing management .
Financial Risks: The provision for credit losses increased to $6.7 million in Q3 2024, up from $5.7 million in Q2 2024, reflecting higher net charge-offs and a need to bolster reserves. Total nonperforming assets as a percentage of total assets rose to 0.76% at September 30, 2024, compared to 0.53% in the previous quarter.
Strategic Risks: The bank's recent acquisition, the Limestone Merger valued at $177.9 million, poses integration risks and potential operational disruptions. The total cash and cash equivalents decreased by $143 million in 2024, indicating liquidity management challenges.
| Risk Factor | Details | Recent Data |
|---|---|---|
| Industry Competition | High competition affecting loan growth | Loan decrease of $53.5 million (3% annualized) |
| Regulatory Changes | Compliance with evolving regulations | Capital conservation buffer of 5.49% |
| Market Conditions | Impact of interest rate changes | Federal Funds Target Rate range of 0.25% to 5.50% |
| Operational Risks | Efficiency and cost management | Efficiency ratio at 55.1% |
| Financial Risks | Provision for credit losses | Provision increased to $6.7 million |
| Strategic Risks | Challenges from recent acquisitions | Limestone Merger valued at $177.9 million |
Credit Risk: The allowance for credit losses as a percentage of nonaccrual loans was 191.45%. This high ratio suggests that while the bank is currently managing its credit risk effectively, the rising nonperforming assets indicate potential vulnerabilities in the loan portfolio.
Interest Rate Risk: The bank's exposure to interest rate fluctuations is significant. As of Q3 2024, total borrowed funds decreased to $412.8 million from $716.9 million in Q2 2024. The bank utilizes interest rate swaps to hedge against rising costs, with an aggregate notional value of $85 million.
Liquidity Risk: Maintaining adequate liquidity is essential for operational stability. The total cash and cash equivalents were reported at $137.6 million as of September 30, 2024, down from $309.8 million at December 31, 2023.
Market Risk: Changes in the market value of investment securities can affect financial performance. The bank reported a net unrealized loss on available-for-sale securities of $109.1 million as of September 30, 2024.
Future Growth Prospects for Peoples Bancorp Inc. (PEBO)
Future Growth Prospects for Peoples Bancorp Inc.
Analysis of Key Growth Drivers
The company's growth trajectory is influenced by several key drivers, including product innovation, market expansion, and strategic acquisitions.
Product Innovations
Peoples Bancorp has focused on enhancing its digital banking capabilities, which has led to increased customer engagement and satisfaction. As of September 30, 2024, the bank reported a growth in electronic banking income to $6.36 million from $6.47 million in the previous quarter. This growth is indicative of successful product innovations aimed at modernizing customer interactions.
Market Expansions
In 2024, the bank increased its total deposits by $185.4 million, or 3%, compared to the previous quarter, driven by increases in brokered certificates of deposit and retail certificates of deposit. This expansion reflects a strategic effort to enhance market share in its existing territories.
Acquisitions
The completion of the Limestone Merger valued at $177.9 million has significantly contributed to the bank's asset base, adding approximately $1.1 billion in loans and $1.2 billion in deposits. This merger is expected to enhance the bank's competitive positioning and operational efficiencies.
Future Revenue Growth Projections and Earnings Estimates
For the third quarter of 2024, Peoples Bancorp reported a net income of $31.7 million, representing an increase from $29.0 million in the previous quarter. The earnings per diluted share for the third quarter was $0.89, up from $0.82 in the second quarter of 2024. Analysts project continued growth in net interest income, with expectations for a net interest income of $263.2 million for the full year.
Strategic Initiatives and Partnerships
Peoples Bancorp's strategic initiatives include a strong focus on enhancing customer service through technology and expanding its service offerings. The bank's partnership with technology providers to improve its digital platforms is expected to drive future growth. Additionally, the bank has maintained a capital conservation buffer of 5.49%, positioning it well for future investments.
Competitive Advantages
The bank's competitive advantages lie in its strong capital ratios, which exceed regulatory requirements. As of September 30, 2024, the Common Equity Tier 1 ratio stood at 11.80%, providing a solid foundation for growth. Furthermore, the increase in deposits by $445.6 million, or 6%, year-over-year demonstrates robust customer trust and market stability.
| Growth Metrics | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Income | $31.7 million | $29.0 million | $31.9 million |
| Earnings per Share (Diluted) | $0.89 | $0.82 | $0.90 |
| Total Deposits | $8.02 billion | $7.83 billion | $7.57 billion |
| Common Equity Tier 1 Ratio | 11.80% | 11.74% | 11.57% |
The strategic focus on acquisitions, product innovations, and market expansions positions the company favorably for future growth, making it an attractive option for investors looking for solid returns.
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Article updated on 8 Nov 2024
Resources:
- Peoples Bancorp Inc. (PEBO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Peoples Bancorp Inc. (PEBO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Peoples Bancorp Inc. (PEBO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.