Peoples Bancorp Inc. Q1 2008 Earnings Call Transcript

May.27.08 | About: Peoples Bancorp (PEBO)

Peoples Bancorp Inc. (NASDAQ:PEBO)

Q1 2008 Earnings Call

April 24, 2008 11:00 am ET

Executives

Mark Bradley - President, CEO

Carol Schneeberger - CFO, Treasurer

Analysts

Jason Werner - Howe Barnes Hoefer & Arnett

Daniel Arnold - Sandler O'Neill

Bernard Horn - Polaris Capital

Operator

Good morning and welcome to Peoples Bancorp's conference call. My name is Mike and I will be your conference facilitator today. Today's call will cover Peoples Bancorp discussion of results of operations for the quarter ended March 31, 2008.

Please be advised all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions) This call is also being recorded. If you object to the recording, please disconnect at this time.

Please be advised that the commentary in this call may contain projections or other forward-looking statements regarding future events for Peoples' future financial performance. These statements are based on management's current expectations.

The statements in this call which are not historical fact are forward-looking statements and involve a number of risks and uncertainties including, but not limited to the interest rate environment; the effect of federal and of state banking; insurance and tax regulations; the effects of technological changes; the effect of economic conditions; the impact of competitive products and pricing; and other risks detailed in Peoples' Securities and Exchange Commission filings.

Although management believes that the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management's knowledge of Peoples' business and operations, it is possible that actual results may differ materially from these projections. Peoples disclaim any responsibility to update these forward-looking statements.

People's first quarter 2008 earnings statement was released this morning and is available at PeoplesBancorp.com. This call will include about fifteen minutes of prepared commentary, followed by a question-and-answer period, which I will facilitate. An archived webcast of this call will be available on peoplesbancorp.com.

Peoples Bancorp participants in today's call will be Mark Bradley, President and Chief Executive Officer, and Carol Schneeberger, Chief Financial Officer and Treasurer. Both will be available for questions following opening statements.

Mr. Bradley, you may begin your conference, sir.

Mark Bradley

Thank you, Mike. Good morning and welcome to Peoples Bancorp's conference call. Today, Peoples Bancorp reported first quarter 2008 net income of $5.6 million or earnings per diluted share of $0.55, which is $0.02 better than last year's first quarter earnings per share of $0.53. First quarter 2008 return on average equity was 11%, and return on average assets was a healthy 1.21%.

First quarter highlights include higher net interest income and net interest margin, good non-interest income results and reasonable expense control. First quarter earnings also benefited from a net gain of $293,000 on sales of investment securities, which includes $134,000 from the partial redemption of our equity interest in Visa USA.

Challenges in the first quarter include a loan-loss provision of much higher levels than reported in the first quarter '07, plus an increase in nonperforming loans due primarily to a $7 million commercial loan related to a single credit relationship being placed in nonaccrual status at March 31, 2008. We will discuss this credit and loan quality in more detail later in this call.

But first, the bright spot for this quarter was net interest income and net interest margin, which were $14.3 million and 3.51%, respectively, with margin being up 11 basis points compared to fourth quarter '07. The major factor impacting the increase was a reduction in our cost of funds, which outpaced declines in earning asset yield. Our first quarter cost of interest-bearing liabilities dropped 39 basis points from the fourth quarter of '07 to 3.52%, due in large part to recent reductions in short-term interest rates, along with decreases of certain deposit rates and normal repricing of maturing liabilities to lower, current market rates. We also benefited from growth in our retail deposits that allowed us to shift some of our funding out of higher-cost borrowings and brokered CDs.

On the other side the balance sheet, our earning asset yield was 6.61% for the first quarter, down just 24 basis points from the fourth quarter of '07. Our first quarter earning asset yield included some enhancements to income, such as loan prepayment fees and collection of some nonaccrual interest, both of which were offset by reversals of accrued interest on the $7 million nonaccrual commercial loan. The net effect of these three items added approximately $126,000 to net interest income and therefore 3 basis points to the first quarter margin.

Our balance sheet has become neutral to slightly asset-sensitive in the one-year time horizon, which could mitigate any benefits of additional decreases in market rates. Prospectively, we look for net interest margin to decline slightly in the second quarter to the mid 340s, with earning asset balances to be similar to first quarter 2008 levels.

As we expected, first quarter earning asset growth proved to be difficult with gross loans declining $5.2 million from the end of '07, which added some income through loan prepayment fees. Commercial real estate balances were down $15.4 million due to large payoffs that we had anticipated. Some of these declines were offset by gains in other commercial loans and in consumer loans, which increased a combined $9.2 million. Our loan production and pipeline is okay, but we anticipate loan growth to continue to be challenged throughout the second quarter and the rest of the year, especially with some known loan payoffs already in motion. We look for another period a flat loan growth in the second quarter, with possible slight declines in total balances, especially with our continued selling of many one-to four-family loans to the secondary market.

Now, let's shift to asset quality. In the first quarter, much of our attention was focused on a single commercial customer relationship comprised of two separate loans, collateralized by real estate, which totaled $8 million at December 31, 2007. The loans were construction loans and the project was substantially completed in the fall of '07. This specific credit is based in central Ohio, and is a health, fitness and lifestyle club banquet facility for which we had provided a specific reserve of $1 million at December 31, 2007. Because the loan did not meet repayment requirements, we charged off $1 million of the relationship in the first quarter of '08. The remaining $7 million loan is secured by a first mortgage in favor of Peoples Bancorp, but it is now a nonaccrual loan.

Although the demographics of the central Ohio area are still strong, the current overall economic environment also causes uncertainty. We have considered the status of this loan relationship in our systematic quarterly loan-loss reserve analysis and believe the loan to be adequately collateralized based on updated appraisals completed in December of 2007, which we believe appropriately consider the special purpose of the facility.

Primarily as a result of this relationship, Peoples' March 31 nonperforming loans increased $8.1 million over year-end 2007 and totaled $17.5 million or 1.5% of total loans at the end of the first quarter. Net charge-offs were $1.2 million for the quarter or 0.43% of annualized loan balances, up $600,000 from 2007's first quarter. First quarter provision for loan losses was $1.4 million, down slightly from $1.5 million in the fourth quarter but up compared to $600,000 last year.

While we're not pleased with the impact this credit has had our asset quality ratios during the quarter, we think the risk is manageable and it has been appropriately factored into our determination of the adequacy of our allowance at March 31, 2008.

Now, I will turn the call over to Carol Schneeberger, our CFO, for her comments on first quarter 2008 results.

Carol Schneeberger

Thank you. As Mark mentioned, our first quarter 2008 results included a net gain of $293,000 on the sale of securities in our investment portfolio. The sales were the result of active portfolio management focused on reducing our credit exposure risk and interest rate risk in the event of a rising rate environment. We sold $7.2 million of preferred stock issued by Fannie Mae and Freddie Mac at a net loss of $200,000. We believe this reduces potential loss exposure from ongoing issues surrounding those entities. The $7.2 million in book value had previously been reduced by $3.2 million due to impairment charges recorded in the fourth quarter of 2007.

Losses on Fannie Mae and Freddie Mac were offset by net gains totaling $200,000 from the sale of two U.S. agency collateralized mortgage obligations with an aggregate book value of $7.6 million, which lessons our exposure to rising interest rates.

We also recognized a net gain of approximately $100,000 from the sale of several small-lot mortgage-backed securities, and a gain of $134,000 from the partial redemption of our equity interest in Visa USA. We think that first quarter's active management of our investment portfolio better positions our company from a credit and interest-rate risk perspective.

On the funding side, total deposits at March 31 increased $63 million from year-end 2007 with an $82 million gain in retail deposits, offset by planned declines in brokered CDs. Most of the deposit growth was due to seasonal increases in public fund accounts and growth in our retail CD portfolio. Total public funds checking balances increased by $27 million as real estate and income tax revenues were collected.

Retail CDs gained $50 million, due mostly to the attraction of funds from customers outside our primary market area as a lower-cost alternative to brokered CDs. Non-interest-bearing accounts saw modest gains for the quarter, up $2.4 million from year-end 2007. We also continued to see gains in money markets, which were up $3 million at March 31 over year-end.

Regular personal and business money markets were also up $14 million. As a result of deposit growth, we were able to reduce balances in higher-cost borrowed funds by $62 million.

We do not look for similar deposit growth in the second quarter as public funds tax revenues will begin to be distributed for summer projects and competition for retail deposits continues to be intense. Our strategy is to steadily grow our core posits and seek the most cost-effective ways of supplementing our funding needs, as we have done through our CD offerings.

Now, for a look for non-interest income and operating expense for the quarter. Total non-interest income was up $8.2 million for the first quarter of 2008 and represented 37% of Peoples' total revenues in the first quarter. Increases in brokerage, fiduciary and card services revenues were offset by lower account service charges and mortgage banking revenues. Brokerage and trust fees were up 9% year-over-year, due mostly to an increase of 5% in the market value of total assets under management. Card services revenues were up $94,000 or 11% over the first quarter of 2007 as the result of sustained increases in debit card activity.

Total insurance revenues were basically flat from the prior year quarter, which is not bad considering the soft insurance market that has continued to decrease premiums in the insurance industry. First quarter insurance income also included $835,000 in one-time profit sharing revenues which are normally recognized during the first quarter of the year. These profit sharing revenues were slightly higher than 2007's total and helped to push total non-interest income 8% higher when compared with the fourth quarter of 2007. Total non-interest expense was $13.7 million through the first three months of 2008, versus $13.3 million for the same period in 2007.

First quarter salary benefit costs were up 4% over last year and accounted for most of the increase in total non-interest expense, due mostly to higher sales-based compensation and additional equity-based compensation.

We also experienced year-over-year increases in data processing and software expenses, net occupancy, marketing, and online banking expenses. Despite the 3% increase in total operating expense over the prior year, Peoples' efficiency ratio improved to 58.09% from 58.45% last year, as revenue growth outpaced expense growth. Our return on assets and efficiency ratios compare favorably with our peers, and we continue to focus on both top-line revenue growth as well as efficiency to optimize shareholder returns.

I will now turn the call back over to Mark for his final comments.

Mark Bradley

Thanks, Carol. Overall, we thought it was a good quarter as earnings per share improved over last year's first quarter, despite increased provision for loan loss and a tougher operating event in general for financial services companies. As we expected, loan growth took a small step backward, but we were able to grow deposits, therefore reducing borrowed funds. Our earnings benefited from increases in net interest income and margin and we had a strong -- we had strong non-interest income numbers.

Like many in our industry, we saw deterioration in asset quality, although the vast majority of our increase in nonperforming loans was due to a single commercial loan relationship. We think we are adequately collateralized on that nonperforming loan.

We had some increase in operating expense, but it was offset by stronger growth in revenues. As we mentioned in our last conference call, we are protecting and growing our capital levels in light of the unpredictable nature of current financial markets. We expect to be less active with stock buybacks in '08, and for the first quarter, we repurchased just 13,600 shares, down sharply from the 84,600 shares repurchased in the fourth quarter of '07.

Our capital ratios remain strong, as evidenced by our tangible equity to tangible assets ratio of 7.58% at the end of the first quarter and improvements in regulatory capital ratios where we continue to maintain well above well-capitalized standards. As always, we will continue to manage Peoples Bancorp for the long-term while making the best of a challenging operating environment.

This concludes our commentary and we will open the call for questions. Once again, this is Mark Bradley. Joining me for the Q&A session will be Carol Schneeberger, Chief Financial Officer.

I will now turn the call back into the hands of our call facilitator. Thank you.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) At this time, we will go ahead and proceed with the Q&A session. Your first question comes from Jason Werner of Howe Barnes.

Jason Werner - Howe Barnes Hoefer & Arnett

Good morning.

Mark Bradley

Hello, Jason.

Carol Schneeberger

Hello, Jason.

Jason Werner - Howe Barnes Hoefer & Arnett

The first question was regarding the $8 million relationship that was added to nonaccrual. Could you repeat what this credit was for? You said something about lifestyle?

Mark Bradley

Yes, it's a really large lifestyle health and fitness center. It also offers banquet facilities to the public. It would be like a very large clubhouse to a nice golf course without the golf course, if I had to explain it better. So, it's a large facility that provides health and fitness and lifestyle spa-type treatments for the clients in central Ohio and beyond.

Jason Werner - Howe Barnes Hoefer & Arnett

Okay. You said this project was completed?

Mark Bradley

Yes. It was completed in the fall of '07, so it is done. It just did not meet repayment requirements that were in place for first quarter of '08.

Jason Werner - Howe Barnes Hoefer & Arnett

Is the facility up and running? I mean, is it doing something?

Mark Bradley

Yes, it is up and running, yes.

Jason Werner - Howe Barnes Hoefer & Arnett

So, essentially it's not generating enough revenue to pay you guys back?

Mark Bradley

That is a fair assumption.

Jason Werner - Howe Barnes Hoefer & Arnett

Okay. What you think resolution on something like this? Does it go to foreclosure and you sell it or --?

Mark Bradley

Well, it could go a variety of ways, Jason. It's not my spot to say which way it will go, but it is just too early to tell. We are sitting back and working with management, but it's just too early to tell which direction this could go. This could be a nonperforming loan for several months for us, or longer, as they work to resolve the issues.

Jason Werner - Howe Barnes Hoefer & Arnett

Okay. When you originated this loan, it was obviously a construction loan. Were you intending to be a [construction to perm] or did you get stuck with it?

Mark Bradley

No, we were in for the permanent. I don't know if we thought we would have the loan for 10 or 20 years, if the capital markets were to get involved at some point, but we have a first mortgage, as I said. It's a $7 million relationship. Now, we're just trying to work through it.

Jason Werner - Howe Barnes Hoefer & Arnett

Okay. You obviously had said that you think it's adequately collateralized. I'm curious if you can tell us what the loan-to-value is on it.

Mark Bradley

Well, the appraisals were all above the $7 million mark. That's probably what I should just stop there with that much information. We think we are adequately collateralized, but with the way the economy is going and the capital markets, etc., that's the way we feel today. But who knows several months from now?

Jason Werner - Howe Barnes Hoefer & Arnett

Okay. Alright, and then the other question I had is on the margin. You had said that you were guiding down to the 340s for the second quarter. I'm just guessing. I mean I'm curious what your assumptions are. Are you assuming -- what kind of Fed cuts are you assuming and what I guess is really pushing that down?

Mark Bradley

Yes, it's a good question. Remember, we picked up about 3 basis points from prepay fees in the first quarter; we picked up some nonaccrual interest. So probably the run-rate is close to the high 340s.

We don't think we will pick up any more benefit from any more rate cuts. We are actually about as close to neutral as you can be right now, so whether it stays flat or it stays neutral, our simulation is saying we will be right in that mid 340s range, assuming no major changes in the balance sheet.

So, that's pretty much the basis of our assumptions. We do pretty detailed assumptions, but we also do some back-of-the-envelope stuff and we also look at what our customers are doing, whether it's loan refinancings; really repricing is a better way to describe it. We're getting hit with more of those. And yes, our funding costs are going down, but it's probably every week we see a $1 million-plus loan reprice downward to where we may get a prepay fee out of it, we may not. So, those are the kinds of things that will push us down a little bit from that 3.51% we reported in the first quarter.

Jason Werner - Howe Barnes Hoefer & Arnett

Okay. Now, you say you are more neutral now. Kind of going back to your 10-K, if you looked at the net interest income analysis that you did, that suggested that the impact to net interest income would be positive in a down-rate scenario. Has that really changed, or --?

Mark Bradley

Yes, we've made -- and I will let Carol speaker a little bit. We've made a lot of changes in the last three months. We do believe, at some point as most probably everybody does, rates will go back up at some point, so we're trying to turn the ship a little bit. But Carol has some stuff to add.

Carol Schneeberger

We continue to look at the balance sheet and try to match funding to the extent possible, as well as we've shortened duration on some things by the investment securities that we did sell. So, there are several things we're trying to do to reposition the balance sheet.

Jason Werner - Howe Barnes Hoefer & Arnett

Okay. And then last question, I didn't catch any kind of guidance for earnings in your prepared remarks. Are you still comfortable with what your previous guidance was?

Mark Bradley

A good question, Jason. I would say we are. The wild card is of course loan loss provision, as it is with every financial company. We still own some CDOs that we always look at for potential impairment. So, borrowing any wild cards, I would feel comfortable with what we stated, where we put our guidance out for the year, three months ago.

Jason Werner - Howe Barnes Hoefer & Arnett

All right, thank you.

Operator

The next question we have comes from Daniel Arnold with Sandler O'Neill.

Daniel Arnold - Sandler O'Neill

Hey good morning, guys.

Mark Bradley

Hi, Dan.

Daniel Arnold - Sandler O'Neill

The first question, just kind of going back to that large single credit, just so if I can understand, it sounds like you guys had a specific reserve of $1 million against that and then you took a $1 million charge-off, bringing the total value down to $7 million?

Mark Bradley

That is correct.

Daniel Arnold - Sandler O'Neill

Does that imply that there's no longer a specific reserve against that loan right now?

Mark Bradley

At this point, there's no specific loan loss reserve against that loan. That is something we will monitor going forward as we see how the credit performs and see how the markets are, getting updated appraisals that type of situation. But yes, you're correct in your assumptions, Dan.

Daniel Arnold - Sandler O'Neill

Okay. And then just kind of sticking with credit, the reserve to NPA coverage ratio dropped quite a bit this quarter to 89%. Now, you've kind of traditionally held that at over 200%. Is that a level you guys are comfortable with? Do you foresee having to build that back up possibly in future quarters as charge-off trends?

Mark Bradley

Yes, good question, Dan. I'm comfortable with it because the big loan we just talked five minutes about is really the driver of that. At this point, we think we are adequately collateralized. If it was an assortment of 10 to 20 different commercial loans, or consumer or real estate loans driving some of that, I would probably answer the question differently.

We have a fairly sophisticated approach to measuring what our loan loss reserve should be. I think it's a good process. It is one that we really crank through every quarter, but I'm comfortable with that number. I mean, obviously, at face value, that number is a lot lower than you're used to seeing it, but I think it is explainable and manageable.

Daniel Arnold - Sandler O'Neill

And if you take out that $1 million in charge-offs related to this credit. So, it looks like charge-offs actually came in quite a bit from prior quarters.

Mark Bradley

Yes, you are right. It was a good, I will say low quarter for net charge-offs. We are seeing a slight tick-up on delinquencies in commercial loans when I compare ourselves to, say, December 31 or September 30, or June 30. I'm throwing out the large $7 million to $8 million credit there, but slight tick-up in delinquencies. So yes, charge-offs were low, but we are still keeping our eye on the situation because there was a slight tick-up in delinquencies on the commercial loan side.

Daniel Arnold - Sandler O'Neill

What about the watch list credits? Where are those (inaudible)?

Mark Bradley

Really not a significant change. Obviously, we don't publish that list, but not big enough changes that we would have to discuss. There is always a couple of credits that move in, or onto the watch list; there's also a couple we think could move off, so nothing really of significant change there.

Daniel Arnold - Sandler O'Neill

Okay. Just kind of moving on from credit, you mentioned that you still do own some CDOs even after the sale. Can you just outline what your CDO or CMO exposure is right now, or the total value?

Mark Bradley

It was hard to hear you, Dan. Could you repeat that?

Daniel Arnold - Sandler O'Neill

Sorry. You said, to that, you did still own some CDOs even after this large sale in the quarter. I was just hoping you could give us your total exposure to that.

Carol Schneeberger

We're just over $6 million in CDOs, the income notes. That's our current book value.

Mark Bradley

The sales in the first quarter were Fannie and Freddie preferred stock, so book value of the CDOs are just about $6 million.

Daniel Arnold - Sandler O'Neill

Have you written those down at all, or are those at face value still?

Carol Schneeberger

No, that would be the value after the write-downs of fourth quarter.

Daniel Arnold - Sandler O'Neill

Okay. All right, so that includes the write-downs. Okay, and then just one last question on the insurance revenue, it sounded like you had about a little over $800,000 in one-time expenses. So, that should come down a little bit from this quarter, kind of trend back towards the fourth-quarter level?

Carol Schneeberger

That $800,000 represents the annual payment that we receive in the first quarter, that's the performance based earnings. So, we will not see that again this year. Almost all of it gets recorded in the first quarter.

Daniel Arnold - Sandler O'Neill

Okay, so that will recur again (multiple speakers)?

Mark Bradley

Yes. Dan, I think you might have referred to it as expense. It's income to us.

Daniel Arnold - Sandler O'Neill

I'm sorry, yes, I apologize if I did that. (inaudible) the insurance revenue.

Mark Bradley

Yes, 98% of it is in the first quarter. It was roughly equivalent to what we were able to record last year, so we are pretty pleased with that. That's a very unpredictable number.

Daniel Arnold - Sandler O'Neill

Okay. All right. Well, I think that covers it for me, guys. Thanks a lot.

Mark Bradley

All right. Thank you, Dan.

Operator

The next question we have comes from Bernard Horn with Polaris Capital.

Bernard Horn - Polaris Capital

Good morning and good quarter. There's a few questions. On the sale of the preferred stock, is there any notion that you need to keep any preferred stock just to maintain your borrowing abilities? That wouldn't have any effect on the Fannie and Freddie?

Mark Bradley

No.

Carol Schneeberger

No, it does not.

Bernard Horn - Polaris Capital

Federal home loan bank preferred, do you have any of that, or is that just kind of --?

Carol Schneeberger

We do.

Mark Bradley

Yes, and that would impact that situation. The Fannie and Freddie preferred do not affect borrowing. We have a good amount of Federal Home Loan Bank, more than we need, actually, but now, it does not affect our borrowings.

Bernard Horn - Polaris Capital

Okay. You are comfortable with that position?

Mark Bradley

Yes. At this time, we think it's pretty solid.

Bernard Horn - Polaris Capital

But which Federal Home Loan Bank is it that you would have borrowings from?

Mark Bradley

We are in the Cincinnati district.

Bernard Horn - Polaris Capital

Okay. Then, on the charge-offs, it looks like you may have had a -- did you possibly also have a recovery on the commercial side? Because it looked like that was a lower number than the $1 million you were talking about. On the charge-offs coverage right type.

Mark Bradley

You are correct, Bernard. We did have some recoveries in the commercial portfolio. We also had a strong recovery in the first quarter of '07, which pushed that number down a little bit when looking at comparisons. But we did have some recoveries on the commercial side, yes.

Bernard Horn - Polaris Capital

Okay. Then, you said that deposit pricing was still pretty intense. Any particular further color on that, in terms of which institutions that's coming from? Is it large, small, credit unions versus others?

Carol Schneeberger

It is kind of all over the place, but especially some of the larger institutions are rising funding that way. We are aware of a competitor that's close to 5%, offering 5% on CDs, and that's how they are raising, meeting some of their funding requirements.

Bernard Horn - Polaris Capital

Without mentioning names, I suppose it's some of your competitors looking for more capital. Is it related to that or --?

Carol Schneeberger

That's what we believe.

Bernard Horn - Polaris Capital

Okay. Then on the loan side, can you just give us a little bit of an idea what the competitive situation is on loans, if deposits are really competitively priced, what about loans?

Mark Bradley

Yes. Loans, I would say is not as cutthroat right now. We are still in some dogfights for good credits, but the widening credit spreads -- I mean, it's just a different market right now. The capital markets are not as active as they were a year or two ago. So, it is different. We are trying to price risk accordingly. I think we are seeing some success there, but still you get the occasional loan quote out of nowhere if somebody really wants a loan. So, just when you think things have stabilized, you get surprised by something. But we're working on our loan pricing as well.

Bernard Horn - Polaris Capital

Okay. Then in terms of the capital market competition, is that still there or has it just kind of gone away? Do you even get competition from that with your (multiple speakers)?

Mark Bradley

Oh, yes, we do get competition. I wouldn't say it's gone away; it has definitely slowed down. The needle is pointing towards gone away, but it won't stay there forever. We have some deals still on the books that we thought would go to the capital markets. They have not yet, but I think, at some point, they will. But it has definitely cooled off compared to where it was a year ago.

Bernard Horn - Polaris Capital

Then lastly, you talked about the delinquencies and watch list. It sounds like that's reasonably under control. But as you look through deeper into or a little bit further out into the loan portfolio, not just with respect to construction but other things, are you concerned that, given the direction that the economy is going, that you're likely to see either improvements or further deterioration on what you see in the local economy there, or beyond?

Mark Bradley

Well, our local -- I will say the very local economy is relatively stable. Obviously, the national economy worries me. If things deteriorate further, I think loan quality will be challenged. There's just -- I think a lot of banks will be in that situation. We tend to think our underwriting practices are good. We're not taking on more risk. We did not take on risk or more risk unnecessarily in the last few years, so I hope our underwriting standards prove that we will be a better loan quality company than some our peers because of some of our past practices. But the national economy does concern me, the commodity prices. That puts a drain on people and it makes people, go back more into a shell and not try not grow their businesses, which could impact our economy even more. So, it kind of has a trickle-down effect that does concern me.

Bernard Horn - Polaris Capital

Would you say that any of your customers are exposed more toward the weak dollar in the sense of export oriented? We are hearing some reports that that's actually (multiple speakers) better?

Mark Bradley

No, not really. It's probably just more of the slower real estate market. That's really what it is. It's not the import/export concept, but it does have an impact on the entire economy, so it does slowdown some of our clients.

Bernard Horn - Polaris Capital

Okay. Well, thanks very much. Congratulations on a good quarter.

Mark Bradley

Thank you.

Carol Schneeberger

Thank you.

Operator

(Operator Instructions) Mr. Bradley, at this time, sir, it looks like we have no further questions. Do you have any closing remarks?

Mark Bradley

Just simply to say I want to thank everyone for participating. Please remember that our earnings release and webcast of this call will be archived on peoplesbancorp.com under the Investor Relations section. Thanks for your time and have a great day.

Operator

Thank you, Mr. Bradley. Thank you, Ms. Schneeberger. This will conclude today's conference call. At this time, you may disconnect your lines. Thank you.

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