Peoples Bancorp Q2 2025 slides: Loan growth strong despite leasing headwinds

Introduction & Market Context

Peoples Bancorp Inc . (NASDAQ:PEBO) presented its second quarter 2025 earnings results on July 22, 2025, revealing solid loan growth and expanding net interest margin, though earnings were impacted by higher credit provisions. The bank reported net income of $21.2 million, or $0.59 per diluted share, down from $0.68 in the first quarter of 2025.

The stock closed at $31.55 on July 21, 2025, showing minimal movement in after-hours trading despite the earnings decline, suggesting investors may have already priced in the challenges in the company’s leasing portfolio.

Quarterly Performance Highlights

Peoples Bancorp delivered mixed results for the second quarter, with strong operational performance offset by credit quality concerns in specific segments. The company reported annualized loan growth of 11%, while its net charge-off rate declined to 43 basis points from 52 basis points in the previous quarter.

As shown in the following financial highlights, the bank’s book value per share grew 1% to $32.33, while tangible book value per share increased 2% to $21.18. The company’s tangible equity to tangible assets ratio remained stable at 8.26%.

Net interest income increased by over $2 million compared to the linked quarter, with net interest margin expanding 3 basis points. Excluding accretion income, the margin expansion was even stronger at 8 basis points. Non-interest expenses declined and remained within the guided range, while pre-provision net revenue exceeded consensus estimates.

Loan Growth and Asset Quality

Peoples Bancorp’s loan portfolio showed robust growth, with total loan balances increasing at an 11% annualized rate compared to March 31, 2025. As of June 30, 2025, 46% of loans were fixed rate and 54% were variable rate.

The following chart illustrates the loan portfolio composition and growth trends:

Asset quality metrics remained generally stable, with the allowance for credit losses growing to 1.13% of total loans. Nonperforming assets declined compared to March 31, though criticized loans increased by $18 million due to one commercial relationship. Management expressed optimism about exiting this credit with minimal loss exposure.

The following chart shows key asset quality trends:

Net Interest Income and Margin Trends

Net interest income, a key driver of the bank’s profitability, grew by over $2 million compared to the first quarter of 2025. This growth occurred despite a decline in accretion income, which fell by $0.9 million to $2.6 million in the second quarter.

The bank’s net interest margin expanded to 4.15%, with accretion income contributing 12 basis points compared to 17 basis points in the previous quarter. Excluding this effect, core net interest margin expanded by 8 basis points, reflecting improved earning asset yields and lower funding costs.

As shown in the following chart, deposit costs declined 10 basis points, while borrowing costs decreased 23 basis points from the linked quarter:

North Star Leasing Challenges

A significant factor affecting Peoples Bancorp’s second quarter results was the performance of its North Star Leasing portfolio, particularly in the small-ticket leasing segment. While the overall North Star business has experienced higher net charge-off levels, management noted that risk-adjusted returns remain within their appetite and provide a diversified revenue stream.

The following chart illustrates the performance of the North Star Leasing portfolio:

The company has significantly reduced its exposure to high-balance small-ticket leasing accounts, with the portfolio declining more than 50% in the last year after ceasing new originations in mid-2024. Despite these efforts, Peoples booked an additional $2.5 million provision related to this business during the second quarter and expects higher-than-initially-anticipated charge-offs in the second half of 2025.

The provision for credit losses increased compared to the linked quarter, with $16.6 million total provision in Q2 2025. As shown in the following breakdown, North Star Leasing contributed nearly $11 million to this provision:

Forward-Looking Statements

Looking ahead, Peoples Bancorp expects to generate positive operating leverage for 2025 compared to 2024. Assuming three 25 basis point rate reductions by the Federal Reserve in the second half of 2025, management anticipates full-year net interest margin to be between 4.00% and 4.20%.

The bank projects non-interest income growth in the mid-single-digit percentages compared to 2024, while quarterly non-interest expense is expected to range between $69 million and $71 million for the third and fourth quarters of 2025.

For loan growth, the company forecasts an increase of 4% to 6% for the full year of 2025 compared to 2024, moderating from the 11% annualized rate seen in the second quarter. Management believes small-ticket leasing net charge-offs will plateau over the last two quarters of 2025 and anticipates a decline in provision for credit losses over the next two quarters, excluding any negative impacts to economic forecasts.

These projections suggest improved earnings potential in the second half of 2025 as credit costs normalize and core banking operations continue to perform well.

Full presentation:

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