Peoples Bancorp Inc. Announces Third Quarter Earnings

MARIETTA, Ohio, Oct. 23 /PRNewswire-FirstCall/ -- Peoples Bancorp Inc.
("Peoples") (Nasdaq: PEBO) today announced third quarter 2008 net income of
$3.0 million, or $0.28 per diluted share. This compares to $2.0 million, or
$0.19 per diluted share, last quarter and $5.1 million, or $0.49 per diluted
share, for the third quarter of 2007. On a year-to-date basis, net income
totaled $10.6 million and diluted earnings per share were $1.02, versus $16.1
million and $1.52, respectively, for the same period in 2007. In the third
quarter of 2008, provision for loan losses was $6.0 million compared to $6.8
million last quarter and $1.0 million in the third quarter of 2007. On a
year-to-date basis, Peoples' provision for loan losses totaled $14.2 million
versus $2.4 million a year ago.
"Like many financial services companies, our third quarter results were
negatively affected by the impact of the struggling economy and weakened
commercial real estate market," said Mark F. Bradley, President and Chief
Executive Officer. "While these conditions produced a higher loan loss
provision, third quarter earnings benefited from a stable net interest margin,
diversified revenue growth, controlled expense growth and a lower effective
tax rate. Over the last several months, we have taken steps to preserve and
enhance Peoples' healthy capital position and liquidity levels in light of
this difficult credit cycle."
Bradley continued, "During the third quarter, we downgraded the loan
quality ratings of certain commercial real estate loans as part of our normal
loan review process, which was the major driver of the increased loan loss
provision compared to last year. These downgrades were caused by
deterioration in the borrowers' financial condition from the weakened real
estate market, and economy as a whole, and resulted in certain loans being
placed on nonaccrual status."
The provision for loan losses resulted from management's quarterly
evaluation of the loan portfolio and procedural methodology that estimates the
amount of credit losses probable within the loan portfolio based on several
factors, such as changes in loss trends, risk ratings, and current economic
conditions.
At September 30, 2008, nonperforming loans totaled $35.7 million, or 3.21%
of total loans, up from $21.2 million, or 1.92%, at June 30, 2008, and $9.4
million, or 0.83% at December 31, 2007. The third quarter increase was
attributable to downgrades of three commercial real estate loan relationships,
totaling $14.4 million, which increased nonaccrual loans. These loans are
secured primarily by real estate in Ohio, with some collateral located in
Indiana. The remaining increase since year-end 2007 was the result of two
large commercial real estate loans, with balances of $7.0 million and $6.2
million, being placed on nonaccrual status in the first and second quarter of
2008, respectively.
"Despite recent market events, we believe our nonperforming loans are
manageable, given our ongoing communication with the borrowers and actions
intended to minimize losses," said Edward G. Sloane, Chief Financial Officer.
"Our consumer loan quality, including our residential real estate loans,
remains sound, with delinquency levels and losses comparable to those
experienced during the last several quarters. The steps taken in the third
quarter have bolstered our loan loss reserves and we continually monitor the
entire loan portfolio closely for signs of credit deterioration."
The allowance for loan losses grew to $19.2 million, or 1.72% of total
loans, at September 30, 2008, from $15.2 million, or 1.38%, at the prior
quarter-end and $15.7 million, or 1.40%, at year-end 2007. The increase in
the allowance for loan losses reflects the impact of commercial real estate
loan downgrades on management's estimate of losses within the portfolio.
Management appropriately considered all loans in establishing the allowance
for loan losses for each period and believes the allowance was adequate at
September 30, 2008, based on all information currently available.
Third quarter 2008 net loan charge-offs were $2.1 million, or 0.74% of
average loans on an annualized basis, down from $7.5 million, or 2.70%, in the
second quarter of 2008, due to the $6.4 million charge-off of a single
impaired commercial real estate loan in the second quarter. Net charge-offs
were $1.0 million, or 0.36%, for the third quarter of 2007. The increase in
2008 was attributable to a third quarter $1.1 million charge-off of one of the
previously mentioned nonaccrual loan relationships. Net loan charge-offs
totaled $10.8 million through nine months of 2008, versus $2.3 million a year
ago.
Despite the increased level of losses recognized in 2008 compared to prior
years, the capital position of Peoples and its banking subsidiary have
remained strong and well above amounts needed to be considered well-
capitalized by banking regulations. At September 30, 2008, Peoples' Tier 1
and Total Risk-Based capital ratios were 12.35% and 13.68%, respectively,
while the ratio of tangible equity to tangible assets was 7.03%. These strong
capital positions have allowed Peoples to increase dividends declared to
shareholders. In the third quarter of 2008, Peoples declared a cash dividend
of $0.23 per share, up 4.5% from the $0.22 per share declared for third
quarter of 2007. Through nine months of 2008, Peoples has declared dividends
of $0.68 per share in 2008 versus $0.66 per share declared through the same
period of 2007, resulting in a dividend payout ratio of 67.0% of net income in
2008 versus 43.1% a year ago. Based on current capital levels, management
anticipates continuation of quarterly dividend payments.
During 2008, Peoples has systematically sold the preferred stock issued by
the Federal National Mortgage Association ("Fannie Mae"), and the Federal Home
Loan Mortgage Corporation ("Freddie Mac") held in its investment portfolio,
due to the uncertainty surrounding these entities. In the third quarter of
2008, Peoples completely eliminated all holdings of these preferred stocks and
recognized a pre-tax loss of $594,000 ($386,000 after-tax). Peoples also
recognized a pre-tax gain of $479,000 ($311,000 after-tax) from the sale of
various investment securities, primarily obligations of U.S. government-
sponsored enterprises and tax-exempt municipal bonds, with a recorded value of
$21.4 million as part of management's ongoing efforts to reduce credit and
interest rate exposures in Peoples' investment portfolio.
In the third quarter of 2008, net interest income increased 11% to $14.6
million and the net interest margin expanded 24 basis points to 3.50% compared
to the prior year third quarter. These improvements were attributable to
Peoples' funding costs declining more than asset yields, due to lower short-
term market rates and wider credit spreads. Third quarter net interest income
and margin also benefited from retail deposit growth in 2008, which has
allowed Peoples to reduce its amount of higher-cost wholesale funding. As a
result, Peoples' third quarter cost of funds dropped 103 basis points year-
over-year to 3.01%, while asset yields declined only 69 basis points to 6.15%.
Compared to the second quarter of 2008, net interest income decreased 2% and
net interest margin compressed 11 basis points, due to the combination of an
increased level of nonaccrual loans recognized during the third quarter and
higher loan prepayment fees earned during the second quarter. Through nine
months of 2008, net interest income has grown 9% compared to the same period
last year and net interest margin was 3.54% versus 3.29%. On a year-to-date
basis, the average cost of funds decreased 81 basis points, outpacing the 49
basis point decline in asset yields.
Peoples' reported net interest income and margin include loan prepayment
fees, interest reductions for loans placed on nonaccrual status and interest
collected on nonaccrual loans. The net impact of these items was a $241,000
reduction in income, or five basis points of margin, in the third quarter of
2008, compared to $5,000 of additional income in the third quarter of 2007 and
$226,000 of additional income, or five basis points, in the second quarter of
2008.
"As expected, our third quarter net interest income and margin were
pressured by some assets repricing downward and limited additional
opportunities to lower funding costs," said Sloane. "In addition, we
experienced lower loan prepayment fees and an increase in nonaccrual loans in
the third quarter, which combined to reduce asset yields compared to the first
half of 2008. Current interest rate conditions may continue to put pressure
on net interest income and margin. Still, we are continuing to manage our
balance sheet position to optimize Peoples' net interest income stream, while
also minimizing the impact of future rate changes on our earnings."
Third quarter non-interest income increased 6% over the prior year,
totaling $8.2 million in 2008 versus $7.7 million in 2007. The largest gains
occurred in Peoples' insurance revenues, deposit account service charges, and
electronic banking ("e-banking") income, while mortgage banking income
declined. Compared to the second quarter of 2008, increases in deposit account
service charges and insurance income were partially offset by lower trust and
investment income, resulting in a total non-interest income increase of 3% in
the third quarter of 2008. Through nine months of 2008, total non-interest
income was $24.3 million compared to $23.7 million through nine months of
2007, with the increase primarily attributable to debit card revenues and
trust and investment income.
"Non-interest revenues remain a major component of our earnings stream,"
said Sloane. "While we managed to grow these revenues during the third
quarter, our efforts are challenged by the generally lower market value of
investments due to the current state of the financial markets and economy,
considering a portion of our fiduciary and brokerage revenues is based on the
value of managed assets."
Peoples has enhanced insurance revenues despite tighter pricing margins
within the insurance industry caused by insurance companies reducing property
and casualty insurance premiums in an effort to attract market share. Deposit
account service charges grew during the third quarter of 2008 as the result of
increased checking account overdraft activity. Peoples' efforts to attract
new trust business over the last several quarters have tempered the reduction
in revenues caused by the lower market value of managed assets from the
downturn in the financial markets.
Non-interest expense totaled $13.2 million for the third quarter of 2008,
up 5% from a year ago, and totaled $40.0 million through nine months of 2008
versus $39.1 million for the nine months ended September 30, 2007. These
increases were primarily attributable to higher salary and benefit costs and
increased net occupancy and equipment expense. Salary and benefit costs,
Peoples' largest non-interest expense, were up year-over-year due to the
combination of normal annual merit increases and higher employee medical
benefit costs, while modest increases in property taxes and utility costs
during 2008 were key drivers of higher net occupancy and equipment expense.
On a linked quarter basis, non-interest expense growth was contained, as
modest increases in salary and benefit costs, e-banking expense and
professional fees were partially offset by reduced marketing expenditures and
lower depreciation expense from assets becoming fully depreciated.
"Overall, we believe third quarter expense levels were reasonable, even
though total expense was higher than a year ago," said Sloane. "Still, we
continue to implement measures to reduce expenses and gain operating
efficiencies, while also preparing Peoples for possible future disciplined
expansion through establishing new sales offices."
For the nine months ended September 30, 2008, Peoples' effective tax rate
was 23.1%, which represents management's current estimate for the full year
2008 and a decrease from 26.0% in the first half of 2008 and 25.8% through
nine months of 2007. The lower projected effective tax rate is due mainly to
a greater utilization of estimated tax credits. In addition, income from tax-
exempt sources is expected to comprise a larger portion of Peoples' 2008 pre-
tax income, which further decreased the projected effective tax rate.
At September 30, 2008, total portfolio loan balances were $1.11 billion,
up $8.8 million for the quarter. Construction loan balances grew $17.7
million, due mostly to advances on existing commercial construction loans,
while commercial and commercial mortgage loan balances declined a combined
$12.6 million. Peoples also experienced modest increases in consumer and home
equity loan balances. Since year-end 2007, total portfolio loan balances were
down $7.3 million at quarter-end, due to commercial loan payoffs offsetting
new production and the impact of charge-offs in 2008. Peoples' serviced real
estate loan portfolio totaled $180.4 million at September 30, 2008, down
slightly from $182.3 million at June 30, 2008, but up versus $176.7 million at
December 31, 2007.
During the third quarter of 2008, total retail deposit balances, which
exclude brokered deposits, were essentially unchanged from $1.24 billion at
June 30, 2008, as an $8.4 million increase in interest-bearing balances was
offset by an $8.8 million decline in non-interest-bearing balances. For the
quarter, retail certificates of deposit ("CDs") balances grew $5.7 million,
while money market and savings balances grew $3.1 and $2.1 million,
respectively. The growth in retail interest-bearing deposits was tempered by
a single commercial customer transferring approximately $14 million of money
market deposits to an overnight repurchase agreement. The decline in non-
interest-bearing deposits was largely attributable to lower commercial
balances at September 30, 2008, although consumer balances saw a modest
decrease during the quarter. Since year-end 2007, total retail balances have
increased $114.1 million, or 10%, due mostly to higher interest-bearing retail
balances from Peoples attracting nearly $70 million of funds from customers
outside its primary market area instead of using higher-cost brokered
deposits. The retail deposit growth during 2008 has allowed Peoples to reduce
higher rate brokered certificates of deposit balances by $49.6 million and
contributed to the $20.5 million reduction in borrowed funds since year-end
2007.
"Overall, we saw several positives in the third quarter results, despite
lower net income caused by the ongoing credit challenges in the loan
portfolio," summarized Bradley. "Our core earnings stream remains strong,
driven by stable net interest margin, diversified revenue growth, controlled
operating expenses and retail deposit growth. Our capital and liquidity levels
continue to be healthy and a source of strength during this challenging
economic cycle."
Peoples Bancorp Inc. is a diversified financial products and services
company with $1.9 billion in assets, 49 locations and 38 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.
Conference Call to Discuss Earnings:
Peoples will conduct a facilitated conference call to discuss third
quarter 2008 results of operations today at 11:00 a.m. Eastern Daylight Time,
with members of Peoples' executive management participating. Analysts, media
and individual investors are invited to participate in the conference call by
calling (800) 860-2442. A simultaneous Webcast of the conference call audio
will be available online via the "Investor Relations" section of Peoples'
website, www.peoplesbancorp.com. Participants are encouraged to call or sign
in at least 15 minutes prior to the scheduled conference call time to ensure
participation and, if required, to download and install the necessary
software. A replay of the call will be available on Peoples' website in the
"Investor Relations" section for one year.
Safe Harbor Statement:
This news release may contain certain forward-looking statements with
respect to Peoples' financial condition, results of operations, plans,
objectives, future performance and business. Except for the historical and
present factual information contained in this news release, the matters
discussed in this news release, and other statements identified by words such
as "estimate", "anticipate", "feel," "expect," "believe," "plan," "will,"
"would," "should," "could" and similar expressions are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Rule 175 promulgated thereunder, and Section 21E of the
Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated
thereunder. These forward-looking statements are subject to risks and
uncertain ties that may cause actual results to differ materially. Factors
that might cause such a difference include, but are not limited to: (1)
deterioration in the credit quality of Peoples' loan portfolio could occur due
to a number of factors, such as adverse changes in economic conditions that
impair the ability of borrowers to repay their loans, the underlying value of
the collateral could prove less valuable than otherwise assumed and assumed
cash flows may be less favorable than expected, which may adversely impact the
provision for loan losses; (2) competitive pressures among financial
institutions or from non-financial institutions, which may increase
significantly; (3) changes in the interest rate environment, which may
adversely impact interest margins; (4) changes in prepayment speeds, loan
originations, and charge-offs, which may be less favorable than expected and
adversely impact the amount of interest income generated; (5) general economic
conditions and weakening in the economy, specifically the real estate market,
either national or in the states in which Peoples does business, which may be
less favorable than expected; (6) political developments, wars or other
hostilities, which may disrupt or increase volatility in securities markets or
other economic conditions; (7) legislative or regulatory changes or actions,
which may adversely affect the business of Peoples; (8) adverse changes in the
conditions and trends in the financial markets, which may adversely affect the
fair value of securities within Peoples' investment portfolio; (9) a delayed
or incomplete resolution of regulatory issues that could arise; (10) Peoples'
ability to receive dividends from its subsidiaries; (11) changes in accounting
standards, policies, estimates or procedures, which may impact Peoples'
reported financial condition or results of operations; (12) Peoples' ability
to maintain required capital levels and adequate sources of funding and
liquidity; (13) the impact of reputational risk created by these developments
on such matters as business generation and retention, funding and liquidity;
(14) the costs and effects of regulatory and legal developments, including the
outcome of regulatory or other governmental inquiries and legal proceedings
and results of regulatory examinations; and (15) other risk factors relating
to the banking industry or Peoples as detailed from time to time in Peoples'
reports filed with the Securities and Exchange Commission ("SEC"), including
those risk factors included in the disclosures under the heading "ITEM 1A.
RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended
December 31, 2007. Peoples undertakes no obligation to update these forward-
looking statements to reflect events or circumstances after the date of this
news release or to reflect the occurrence of unanticipated events, except as
required by applicable legal requirements. Copies of documents filed with the
SEC are available free of charge at the SEC's website at http://www.sec.gov
and/or from Peoples' website.

PEOPLES BANCORP INC. (NASDAQ: PEBO)
PER SHARE DATA AND PERFORMANCE RATIOS

Three Months Ended Nine Months
Sept. June Sept. Ended
(in $000's, except per share 30, 30, 30, Sept. 30,
data) 2008 2008 2007 2008 2007
Net income per share:
Basic $0.29 $0.19 $0.49 $1.02 $1.53
Diluted $0.28 $0.19 $0.49 $1.02 $1.52
Cash dividends declared per share $0.23 $0.23 $0.22 $0.68 $0.66
Book value per share $19.09 $19.55 $19.25 $19.09 $19.25
Tangible book value per share (a) $12.62 $13.03 $12.63 $12.62 $12.63
Closing stock price at end of
period $21.77 $18.98 $26.18 $21.77 $26.18
Dividend payout as a percentage
of net income 81.23% 122.38% 44.83% 67.02% 43.10%
Return on average equity (b) 5.82% 3.81% 10.27% 6.88% 10.88%
Return on average assets (b) 0.61% 0.41% 1.09% 0.74% 1.15%
Efficiency ratio (c) 55.33% 54.55% 57.03% 55.98% 58.06%
Net interest margin (fully tax-
equivalent) (b) 3.50% 3.61% 3.26% 3.54% 3.29%

(a) Excludes the balance sheet impact of intangible assets acquired
through acquisitions.
(b) Ratios are presented on an annualized basis.
(c) Non-interest expense (less intangible amortization) as a percentage of
fully tax-equivalent net interest income plus non-interest income
(less securities and asset disposal gains/losses)

PEOPLES BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Nine Months Ended
September 30, September 30,
(in $000's) 2008 2007 2008 2007

Interest income $26,063 $28,241 $79,910 $84,681
Interest expense 11,461 15,089 36,148 44,675

Net interest income 14,602 13,152 43,762 40,006
Provision for loan losses 5,996 967 14,198 2,437
Net interest income after
provision for loan losses 8,606 12,185 29,564 37,569
Net (loss) on securities
transactions (111) (613) (126) (575)
Net (loss) gain on asset
disposals (14) 42 (11) 76
Non-interest income:
Deposit account service
charges 2,761 2,562 7,431 7,375
Insurance income 2,439 2,230 7,701 7,657
Trust and investment
income 1,266 1,211 3,915 3,639
Electronic banking income 994 879 2,925 2,607
Bank owned life insurance 391 418 1,220 1,237
Mortgage banking income 104 251 500 722
Other 201 143 581 491
Total non-interest income 8,156 7,694 24,273 23,728
Non-interest expense:
Salaries and benefits 7,035 6,603 21,501 20,770
Net occupancy and
equipment 1,344 1,233 4,169 3,917
Electronic banking expense 638 554 1,678 1,568
Professional fees 528 469 1,594 1,714
Data processing and
software 521 530 1,622 1,594
Franchise taxes 416 449 1,248 1,336
Amortization of intangible
assets 390 478 1,208 1,467
Marketing 273 350 1,010 1,078
Other 2,048 1,933 5,949 5,647
Total non-interest expense 13,193 12,599 39,979 39,091
Income before income taxes 3,444 6,709 13,721 21,707
Income tax expense 493 1,594 3,169 5,597
Net income $2,951 $5,115 $10,552 $16,110

Net income per share:
Basic $0.29 $0.49 $1.02 $1.53
Diluted $0.28 $0.49 $1.02 $1.52

Cash dividends declared
per share $0.23 $0.22 $0.68 $0.66

Weighted average shares
outstanding:
Basic 10,319,534 10,421,548 10,309,010 10,502,866
Diluted 10,354,522 10,483,657 10,350,008 10,573,934

Actual shares outstanding
(end of period) 10,324,573 10,363,397 10,324,573 10,363,397

PEOPLES BANCORP INC. CONSOLIDATED BALANCE SHEETS

Sept. 30, Dec. 31,
(in $000's) 2008 2007

ASSETS
Cash and cash equivalents:
Cash and due from banks $38,311 $43,275
Interest-bearing deposits in other
banks 1,247 1,925
Total cash and cash equivalents 39,558 45,200

Available-for-sale investment
securities, at fair value (amortized
cost of $598,355 at September 30,
2008 and $535,979 at December 31, 2007) 589,017 542,231
Other investment securities, at cost 23,996 23,232
Total investment securities 613,013 565,463

Loans, net of unearned interest 1,113,610 1,120,941
Allowance for loan losses (19,156) (15,718)
Net loans 1,094,454 1,105,223

Loans held for sale 1,069 1,994
Bank premises and equipment, net of
accumulated depreciation 25,283 24,803
Bank owned life insurance 51,511 50,291
Goodwill 62,520 62,520
Other intangible assets 4,268 5,509
Other assets 28,712 24,550
TOTAL ASSETS $1,920,388 $1,885,553

LIABILITIES
Non-interest-bearing deposits $184,474 $175,057
Interest-bearing deposits 1,066,383 1,011,320
Total deposits 1,250,857 1,186,377

Federal funds purchased, securities
sold under repurchase agreements,
and other short-term borrowings 140,461 222,541
Long-term borrowings 293,565 231,979
Junior subordinated notes held by
subsidiary trusts 22,487 22,460
Accrued expenses and other
liabilities 15,924 19,360
TOTAL LIABILITIES 1,723,294 1,682,717

STOCKHOLDERS' EQUITY
Common stock, no par value
(24,000,000 shares authorized,
10,963,199 shares issued at
September 30, 2008, and 10,925,954
shares issued at December 31, 2007) 164,457 163,399
Retained earnings 56,007 52,527
Accumulated comprehensive (loss)
income, net of deferred income taxes (7,113) 3,014
Treasury stock, at cost (638,626
shares at September 30, 2008, and
629,206 shares at December 31, 2007) (16,257) (16,104)
TOTAL STOCKHOLDERS' EQUITY 197,094 202,836
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,920,388 $1,885,553

PEOPLES BANCORP INC. SELECTED FINANCIAL INFORMATION

(in $000's, end Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
of period) 2008 2008 2008 2007 2007

LOAN PORTFOLIO
Commercial,
mortgage $490,978 $499,043 $498,426 $513,847 $481,341
Commercial,
other 181,783 186,346 180,523 171,937 174,753
Real estate,
construction 70,899 53,170 72,326 71,794 83,714
Real estate,
mortgage 234,823 234,870 237,366 237,641 240,599
Home equity
lines of credit 46,909 44,595 43,101 42,706 43,506
Consumer 85,983 83,605 81,108 80,544 80,661
Deposit account
overdrafts 2,235 3,223 2,879 2,472 2,047
Total loans 1,113,610 1,104,852 1,115,729 1,120,941 1,106,621

DEPOSIT BALANCES
Interest-bearing
deposits:
Retail
certificates
of deposit $563,124 $557,406 $549,439 $499,684 $515,432
Interest-bearing
transaction
accounts 199,534 202,063 211,708 191,359 178,880
Money market
deposit accounts 175,120 172,048 156,206 153,299 147,848
Savings accounts 118,634 116,485 114,433 107,389 112,507
Total retail
interest-
bearing
deposits 1,056,412 1,048,002 1,031,786 951,731 954,667
Brokered
certificates
of deposits 9,971 39,781 39,756 59,589 57,507
Total
interest-
bearing
deposits 1,066,383 1,087,783 1,071,542 1,011,320 1,012,174
Non-interest-
bearing
deposits 184,474 193,265 177,449 175,057 171,319
Total deposits 1,250,857 1,281,048 1,248,991 1,186,377 1,183,493

ASSET QUALITY
Nonperforming assets:
Loans 90 days
or more past due $1,852 $290 $438 $378 $190
Nonaccrual loans 33,896 20,910 17,061 8,980 5,979
Total
nonperforming
loans 35,748 21,200 17,499 9,358 6,169
Other real estate
owned 260 411 343 343 343
Total
nonperforming
assets $36,008 $21,611 $17,842 $9,701 $6,512

Allowance for loan
losses as a percent
of nonperforming
loans 53.6% 71.8% 91.2% 168.0% 237.3%
Nonperforming loans
as a percent of
total loans 3.21% 1.92% 1.57% 0.83% 0.56%
Nonperforming assets
as a percent of
total assets 1.88% 1.13% 0.94% 0.51% 0.34%
Nonperforming assets
as a percent of
total loans and
other real estate
owned 3.23% 1.96% 1.60% 0.87% 0.59%
Allowance for loan
losses as a percent
of total loans 1.72% 1.38% 1.43% 1.40% 1.32%

CAPITAL INFORMATION(a)
Tier 1 risk-based
capital 12.35% 12.10% 12.12% 11.91% 11.82%
Total risk-based
capital ratio
(Tier 1
and Tier 2) 13.68% 13.33% 13.43% 13.23% 13.04%
Leverage ratio 8.66% 8.72% 8.81% 8.48% 8.67%
Tier 1 capital $160,556 $159,242 $158,919 $154,933 $156,209
Total capital
(Tier 1 and
Tier 2) $177,823 $175,397 $176,083 $172,117 $172,263
Total risk-
weighted assets $1,299,711 $1,316,021 $1,310,895 $1,301,056 $1,321,367
Tangible equity
to tangible
assets (b) 7.03% 7.30% 7.67% 7.42% 7.20%

(a) September 30, 2008 data based on preliminary analysis and subject to
revision.
(b) Excludes balance sheet impact of intangible assets acquired through
acquisitions on both total stockholders' equity and total assets.

PEOPLES BANCORP INC. PROVISION FOR LOAN LOSSES INFORMATION

Three Months Ended Nine Months
Sept. June Sept. Ended
30, 30, 30, Sept. 30,
(in $000's) 2008 2008 2007 2008 2007
PROVISION FOR LOAN LOSSES
Provision for Overdraft
Privilege losses $421 $160 $227 $618 $386
Provision for other loan
losses $5,575 $6,605 $740 $13,580 $2,051
Total provision for loan
losses $5,996 $6,765 $967 $14,198 $2,437

NET CHARGE-OFFS
Gross charge-offs $2,510 $7,720 $1,251 $11,868 $3,861
Recoveries 441 231 233 1,108 1,556
Net charge-offs $2,069 $7,489 $1,018 $10,760 $2,305

NET CHARGE-OFFS BY TYPE
Commercial $1,428 $6,900 $472 $9,190 $1,283
Real estate 140 294 232 594 231
Overdrafts 341 148 207 576 392
Consumer 161 148 107 410 404
Credit card (1) (1) - (10) (5)
Total net charge-offs $2,069 $7,489 $1,018 $10,760 $2,305

Net charge-offs as a percent
of loans (annualized) 0.74% 2.70% 0.36% 1.29% 0.27%

PEOPLES BANCORP INC. SUPPLEMENTAL INFORMATION

(in $000's, end of Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
period) 2008 2008 2008 2007 2007

Trust assets under
management $734,483 $770,714 $775,834 $797,443 $805,931
Brokerage assets under
management $207,284 $216,930 $221,340 $223,950 $218,573
Mortgage loans serviced
for others $180,441 $182,299 $178,763 $176,742 $176,380
Employees (full-time
equivalent) 545 554 556 559 553
Announced treasury share
plans: (a)
Total shares
authorized for plan 500,000 500,000 500,000 925,000 425,000
Shares purchased - - 13,600 84,600 139,000
Average price $- $- $21.59 $24.25 $24.05

(a) 2008 data reflects shares purchased under the repurchase plan
announced on November 9, 2007, authorizing the repurchase of up to
500,000 common shares, upon the completion of the 2007 Stock
Repurchase Program. 2007 data reflects shares purchased under the
repurchase plan announced on November 9, 2007, and under the 2007
Stock Repurchase Program announced on January 12, 2007, authorizing
the repurchase of up to 425,000 common shares. The number of common
shares purchased for treasury and average price paid are presented for
the three-month period ended on the date indicated.

PEOPLES BANCORP INC. CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST
INCOME

Three Months Ended
September 30, 2008
Income/ Yield/
(in $000's) Balance Expense Cost
ASSETS
Short-term investments $2,640 $12 1.87%
Investment securities (a) 620,475 8,381 5.40%
Gross loans (a) 1,109,478 18,052 6.45%
Allowance for loan losses (16,554)
Total earning assets 1,716,039 26,445 6.15%

Intangible assets 67,006
Other assets 130,991
Total assets 1,914,036

LIABILITIES AND EQUITY
Interest-bearing deposits:
Savings 117,590 155 0.52%
Interest-bearing demand deposits 202,402 900 1.77%
Money market 176,510 852 1.92%
Brokered time 23,716 291 4.88%
Retail time 560,463 5,260 3.73%
Total interest-bearing deposits 1,080,681 7,458 2.75%

Short-term borrowings 133,511 689 2.02%
Long-term borrowings 297,901 3,314 4.38%
Total borrowed funds 431,412 4,003 3.65%
Total interest-bearing liabilities 1,512,093 11,461 3.01%

Non-interest-bearing deposits 186,412
Other liabilities 13,729
Total liabilities 1,712,234

Stockholders' equity 201,802
Total liabilities and equity $1,914,036

Net interest income/spread (a) $14,984 3.14%
Net interest margin (a) 3.50%

Three Months Ended
June 30, 2008
Income/ Yield/
(in $000's) Balance Expense Cost
ASSETS
Short-term investments $3,391 $17 2.17%
Investment securities (a) 598,111 7,991 5.35%
Gross loans (a) 1,114,474 18,954 6.81%
Allowance for loan losses (16,243)
Total earning assets 1,699,733 26,962 6.36%

Intangible assets 67,395
Other assets 127,190
Total assets 1,894,318

LIABILITIES AND EQUITY
Interest-bearing deposits:
Savings 115,625 140 0.49%
Interest-bearing demand deposits 203,411 890 1.76%
Money market 165,592 816 1.98%
Brokered time 39,767 509 5.15%
Retail time 549,642 5,426 3.97%
Total interest-bearing deposits 1,074,037 7,781 2.91%

Short-term borrowings 148,854 778 2.07%
Long-term borrowings 270,746 3,115 4.58%
Total borrowed funds 419,600 3,893 3.69%
Total interest-bearing liabilities 1,493,637 11,674 3.13%

Non-interest-bearing deposits 180,399
Other liabilities 14,214
Total liabilities 1,688,250

Stockholders' equity 206,068
Total liabilities and equity $1,894,318

Net interest income/spread (a) $15,288 3.23%
Net interest margin (a) 3.61%

Three Months Ended
September 30, 2007
Income/ Yield/
(in $000's) Balance Expense Cost
ASSETS
Short-term investments $4,035 $50 4.91%
Investment securities (a) 571,632 7,590 5.31%
Gross loans (a) 1,105,592 21,008 7.55%
Allowance for loan losses (14,662)
Total earning assets 1,666,597 28,648 6.84%

Intangible assets 68,754
Other assets 129,015
Total assets 1,864,366

LIABILITIES AND EQUITY
Interest-bearing deposits:
Savings 113,740 190 0.66%
Interest-bearing demand deposits 181,352 1,048 2.29%
Money market 149,753 1,463 3.88%
Brokered time 64,518 827 5.09%
Retail time 519,063 5,919 4.52%
Total interest-bearing deposits 1,028,426 9,447 3.64%

Short-term borrowings 232,586 2,975 5.03%
Long-term borrowings 217,440 2,667 4.89%
Total borrowed funds 450,026 5,642 4.92%
Total interest-bearing liabilities 1,478,452 15,089 4.03%

Non-interest-bearing deposits 172,164
Other liabilities 16,125
Total liabilities 1,666,741

Stockholders' equity 197,625
Total liabilities and equity $1,864,366

Net interest income/spread (a) $13,559 2.81%
Net interest margin (a) 3.26%

Nine Months Ended
September 30, 2008
Income/ Yield/
(in $000's) Balance Expense Cost
ASSETS
Short-term investments $3,346 $61 2.47%
Investment securities (a) 600,149 24,183 5.37%
Gross loans (a) 1,112,315 56,885 6.80%
Allowance for loan losses (16,346)
Total earning assets 1,699,464 81,129 6.37%

Intangible assets 67,409
Other assets 128,170
Total assets 1,895,043

LIABILITIES AND EQUITY
Interest-bearing deposits:
Savings 113,927 416 0.49%
Interest-bearing demand deposits 201,275 2,772 1.84%
Money market 164,811 2,727 2.21%
Brokered time 38,883 1,496 5.14%
Retail time 544,736 16,293 4.00%
Total interest-bearing deposits 1,063,632 23,704 2.98%
Short-term borrowings 156,908 3,006 2.52%
Long-term borrowings 275,498 9,438 4.53%
Total borrowed funds 432,406 12,444 3.80%
Total interest-bearing liabilities 1,496,038 36,148 3.22%

Non-interest-bearing deposits 179,959
Other liabilities 14,269
Total liabilities 1,690,266

Stockholders' equity 204,777
Total liabilities and equity $1,895,043

Net interest income/spread (a) $44,981 3.15%
Net interest margin (a) 3.54%

Nine Months Ended
September 30, 2007
Income/ Yield/
(in $000's) Balance Expense Cost
ASSETS
Short-term investments $3,808 $139 4.89%
Investment securities (a) 557,225 21,689 5.19%
Gross loans (a) 1,121,801 63,917 7.61%
Allowance for loan losses (14,683)
Total earning assets 1,668,151 85,745 6.86%

Intangible assets 68,496
Other assets 128,645
Total assets 1,865,292

LIABILITIES AND EQUITY
Interest-bearing deposits:
Savings 115,006 544 0.63%
Interest-bearing demand deposits 178,002 2,804 2.11%
Money market 146,211 4,282 3.92%
Brokered time 67,536 2,591 5.13%
Retail time 526,726 17,700 4.49%
Total interest-bearing deposits 1,033,481 27,921 3.61%

Short-term borrowings 234,164 9,031 5.05%
Long-term borrowings 211,522 7,723 4.87%
Total borrowed funds 445,686 16,754 4.97%
Total interest-bearing liabilities 1,479,167 44,675 4.02%

Non-interest-bearing deposits 172,288
Other liabilities 15,921
Total liabilities 1,667,376

Stockholders' equity 197,916
Total liabilities and equity $1,865,292

Net interest income/spread (a) $41,070 2.84%
Net interest margin (a) 3.29%

(a) Information presented on a fully tax-equivalent basis.

SOURCE Peoples Bancorp Inc.

Edward G. Sloane, Chief Financial Officer and Treasurer, Peoples Bancorp Inc.,
+1-740-373-3155