Peoples Bancorp (NASDAQ:PEBO) reported third-quarter 2026 diluted earnings per share of $0.91, or $1.04 excluding one-time items, as the company prepared to close its merger with Citizens later in October and advanced plans for its acquisition of Capital Bancorp.
President and Chief Executive Officer Tyler Wilcox said adjusted earnings exceeded the consensus analyst estimate of $0.93 per share. One-time items included a $4.5 million loss on investment securities, reducing diluted EPS by $0.10, and $1.5 million of acquisition-related expenses, reducing EPS by $0.03.
The securities sale was part of Peoples’ effort to remain below $10 billion in assets ahead of the Citizens transaction. Chief Financial Officer and Treasurer Katie Bailey said the company sold about $59 million of securities in August with a yield of roughly 1.5%. The sale is expected to provide a slight, several-basis-point benefit to net interest margin going forward.
Margin, Revenue and Expenses
Net interest income rose 1%, or $1.1 million, from the prior quarter, while net interest margin expanded 8 basis points. Bailey attributed the margin improvement to higher investment in loan yields and said net interest income benefited from higher loan income.
For the first nine months of 2026, net interest income increased 5%, or $12.8 million, and margin rose 8 basis points, primarily reflecting lower deposit costs. Interest expense on deposits declined nearly $19 million from the first nine months of 2025.
Fee-based income increased 5% from the second quarter, driven by lease income, deposit account service charges, trust and investment income, and bank-owned life insurance income. Third-quarter non-interest expenses increased 2%, including $1.5 million in acquisition-related professional fees. Excluding those expenses, non-interest expense was flat from the prior quarter.
The reported efficiency ratio was 58.5%, compared with 58.3% in the second quarter. On an adjusted basis excluding acquisition expenses, the efficiency ratio improved to 57.3% from 57.9%.
Bailey said the company’s third-quarter exit margin was modestly above its reported quarterly margin, with an estimated 5 to 8 basis points of benefit. She also said Peoples is seeing increased deposit competition and expects retail certificate-of-deposit pricing to remain an important tool for managing deposit costs.
Loan Growth and Credit Trends
Loans increased $19 million from June 30, representing 1% annualized growth. Peoples recorded more than $160 million in commercial payoffs during the quarter while selectively managing lending activity to stay below the $10 billion asset threshold through year-end.
Construction loans rose $40 million, commercial and industrial loans increased $34 million, and home-equity lines of credit grew $10 million. Commercial real estate balances declined $38 million, primarily because of payoffs, while residential real estate loans fell $14 million and leases declined $12 million.
Wilcox said commercial production during the quarter was the company’s third highest ever, with a growing contribution from C&I lending. Through the first nine months, Peoples had approximately $460 million in payoffs against an expected $480 million for the full year. The company forecasts another $150 million to $180 million of payoffs, which may occur in the fourth quarter or shift into the first quarter of 2027.
Credit-loss provision declined 24% from the second quarter to $3.6 million. The allowance for credit losses was 1.11% of total loans at Sept. 30, down 3 basis points from June 30. The annualized net charge-off rate rose to 35 basis points from 31 basis points in the prior quarter, reflecting higher commercial and industrial, commercial real estate, and consumer indirect charge-offs. Lease charge-offs declined 25%.
Nonperforming loans fell $4 million, or 11%, as non-accrual loans declined. Criticized loans decreased $18 million, while classified loans rose $30 million following downgrades involving two commercial real estate relationships and one C&I relationship. Wilcox said Peoples does not anticipate significant losses as it exits those credits.
The company said 99.2% of its loan portfolio was current at quarter-end, compared with 99.1% at the end of the prior quarter. Wilcox characterized core commercial credit as strong, though he noted somewhat higher delinquencies in the indirect consumer portfolio.
Citizens Closing and Capital Transaction
Peoples expects the Citizens merger to close by the end of October. The transaction is projected to add nearly $350 million of loans before purchase accounting adjustments and approximately $550 million of deposits in the fourth quarter.
Bailey said Peoples expects to sell a majority of Citizens’ securities portfolio at or near closing. Depending on asset levels and market conditions, the company could incur an additional $2 million to $3 million securities loss in the fourth quarter. Peoples also expects its cash position to decrease as it manages liquidity and asset size through year-end.
The company expects the Citizens acquisition to lift fourth-quarter net interest margin by roughly 8 to 10 basis points, supported by the acquired deposit franchise and securities restructuring.
Separately, Wilcox said Peoples expects its pending acquisition of Capital Bancorp to close near the end of the first quarter or beginning of the second quarter of 2027. He said management expects Capital’s historically higher growth profile to continue following the transaction. Bailey said full Capital cost savings will not be realized until 2028.
Outlook
For 2026, including Citizens but excluding non-core expenses, Peoples expects positive operating leverage compared with 2025, full-year net interest margin of 4.2% to 4.3%, quarterly fee-based income of $28 million to $30 million, and quarterly non-interest expense of $78 million to $80 million. The company expects loan growth of 6% to 8% for the year, including acquired Citizens loans, and expects lower net charge-offs than in 2025.
Peoples anticipates $11 million to $13 million in Citizens acquisition-related expenses during the fourth quarter.
For 2027, excluding non-core expenses and the planned Capital transaction, the company forecast net interest margin of 4.3% to 4.5%, quarterly fee-based income of $31 million to $33 million, quarterly non-interest expense of $80 million to $82 million for the second through fourth quarters, and loan growth of 3% to 5%. The outlook assumes three 25-basis-point Federal Reserve rate increases spanning late 2026 through September 2027.
About Peoples Bancorp (NASDAQ:PEBO)
Peoples Bancorp Inc is a financial holding company headquartered in Marietta, Ohio. Through its principal subsidiary, Peoples Bank, the company provides banking and financial services to individuals, businesses, nonprofit organizations and government entities.
Peoples Bank offers consumer and commercial deposit accounts, residential and commercial real estate loans, consumer lending, mortgage services, treasury management and other business financing solutions. The company also provides wealth management, trust, investment and insurance services through affiliated or related operations.
Founded in 1902, Peoples Bancorp serves communities primarily in Ohio, West Virginia, Kentucky and Virginia through a network of banking offices and digital banking channels.
