Peoples Bancorp in Marietta, Ohio, is on the cusp of change at the top.
Coming off strong second-quarter earnings — it reported solid loan growth and a higher net interest margin when many peers went the other direction — the company's next CEO has no intention of fixing what he says is clearly not broken.
"You can expect consistency, predictability," Tyler Wilcox, Peoples' current chief operating officer and former head of community banking, said in an interview.
The $8.8 billion-asset company said in July that longtime Chief Executive Chuck Sulerzyski would
Peoples has more than 100 branches across Ohio, West Virginia, Kentucky, Virginia, Maryland and the District of Columbia. It long has professed a commitment to branch banking — even as it continually develops digital products and services — while others cull their brick-and-mortar operations.
Wilcox said Peoples' branches enable its bankers to connect with existing customers and, increasingly, to attract new clients. Bigger banks have steadily closed branches and retreated from markets throughout Peoples' footprint in recent years.
At the same time, smaller banks have struggled to keep pace with needed investments in digital platforms. Many of these banks have become sellers — and Peoples has established itself as an opportunistic buyer. Wilcox expects to remain acquisitive as well.
He said M&A is, in effect, a line of business and a key driver of growth. "We will look to continue that," Wilcox said.
Regulators noted the demise of Heartland Tri-State Bank involved an isolated problem. Industry observers cautioned against prediction of more failures to follow, saying second-quarter earnings show community banks generally remain in sound financial health.
During Sulerzyski's tenure, Peoples' assets increased by five times thanks to organic growth and a series of acquisitions. Most recently, Peoples completed its
Limestone was Peoples'
Sulerzyski said in an interview that, while recent bank failures and high interest rates infused heaping doses of uncertainty into the banking industry and stifled loan demand nationally, Peoples' core markets continued to prosper.
Manufacturers, for example, are increasingly producing materials and products once imported from China and elsewhere, he said. Supply chain snarls that emerged amid the pandemic spurred U.S. companies to make more at home, generating job growth and economic activity that endures. These firms continue to borrow and invest in growth.
As such, Peoples has kept pursuing that loan demand, according to Sulerzyski. It's growing partly because larger competitors are scaling back amid recession fears or are more focused on retaining deposits instead of expanding their funding bases in the current high-rate environment, he said.
"You have to perform," Sulerzyski said. "That's what you have to do to earn your independence — you perform."
Peoples reported net income of $21.1 million, or 64 cents per share, for the second quarter. That compared with net income of $26.6 million, or 94 cents, for the prior quarter.
One-time expenses related to the Limestone deal drove the decline. Otherwise, Sulerzyski said, earnings were "awesome."
D.A. Davidson analyst Manuel Navas agreed. He noted that the company reported second-quarter organic loan growth of $146 million, or 12% annualized — more than double what he had expected. Like almost every bank, deposit costs rose, but the loan growth and interest income Peoples generated more than offset higher funding expenses. Its net interest margin inched up a basis point to 4.54% — an impressive feat, Navas noted, given that most banks reported much tighter margins.
Looking ahead, Sulerzyski said he is cognizant that Peoples is approaching $10 billion of assets. That's an important threshold because banks that cross it face more regulations and new limits on debit card interchange fee income. Often, banks try to push well beyond the threshold with an acquisition, packing on added assets to absorb higher costs more easily.
Sulerzyski said on the company's earnings call that Peoples is having conversations with potential sellers.
"As we get closer, we'll make the best strategic decision," he said. "Maybe we have a whisker of a preference to do a large deal to shoot us over $10 billion. But I wouldn't be crushed if we went organically, and I wouldn't be crushed if we did a small deal."
Sulerzyski said Peoples is open to possible deals across its current markets and potentially in southwestern Pennsylvania.
"We have lots of places that we can do deals," he said. "We just have to find the right partners with the right mix of business and the right philosophies."
