Peoples Bancorp Inc. Q2 2008 Earnings Call Transcript

Aug.25.08 | About: Peoples Bancorp (PEBO)

Peoples Bancorp Inc. (NASDAQ:PEBO)

Q2 2008 Earnings Call Transcript

July 29, 2008 11:00 am ET

Executives

Mark Bradley – President and CEO

Ed Sloane – CFO and Treasurer

Analysts

Phillip King – Trufton Investment Management

Jason Werner – Howe Barnes Hoefer & Arnett

Michael Lipman – FTN Financial

Operator

Good morning and welcome to Peoples Bancorp’s conference call. My name is Ryan, and I will be your conference facilitator today. Today's call will cover Peoples Bancorp's discussion of results of operations for the quarter ended June 30, 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 or 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/or 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 disclaims any responsibility to update these forward-looking statements.

Peoples' second quarter 2008 earnings release was issued this morning and is available at PeoplesBancorp.com. This call will include about 20 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's participants in today's call will be Mark Bradley, President and Chief Executive Officer, and Ed Sloane, Chief Financial Officer and Treasurer. And both will be available for questions following opening statements.

Mr. Bradley, you may begin your conference.

Mark Bradley

Thank you. Good morning and welcome to Peoples Bancorp's conference call. Today Peoples Bancorp reported second quarter 2008 net income of $2 million, or $0.19 per diluted share, compared to $5.3 million, or $0.51 per diluted share, from last year's second quarter. Peoples' second quarter results included higher net interest income, stronger net interest margin, positive deposit growth, and maintenance of our well capitalized equity position; however, as we disclosed last week in a Form 8-K filing, earnings were negatively impacted by a higher provision for loan losses related to a single credit relationship within our commercial loan portfolio.

Second quarter earnings included an additional provision for loan losses of $4.5 million, or $0.28 per share, after tax related to a single commercial real estate loan of $12.6 million, which was identified as impaired as of June 30, 2008. This specific loan was originated in 2006 when an Ohio-based customer as a $14.8 million real estate construction project in the Tampa, Florida area. The purpose of the loan was to finance the purchase of an apartment complex and subsequent conversion of the apartments to condominium units. When the loan was originated, the project had an appraised value on an as-completed basis, which assumes the planned renovations would be completed, of approximately $21 million or a loan-to-value ratio of 70%.

In second quarter 2008, this loan was exhibiting signs of impairment as the housing market in Florida continued to deteriorate and the liquidity of the borrower became strained. Management's review of updated information received on this loan in discussions with the borrower indicated that the borrower may be unable to meet its contractual payment obligations, and therefore the loan was placed on non-accrual status as of June 30.

Through management's review of a new appraisal received in mid July, we determined the value of the property had declined substantially, which caused the loan to be under-collateralized. At that point, the loan was determined to be impaired and charged down to fair value of the collateral of $6.5 million, less estimated selling costs of $300,000 resulting in an adjusted loan balance of $6.2 million. The allowance for loan losses at June 30, which included a general reserve of approximately $1.8 million on the loan, was therefore impacted by a charge-off of $6.4 million.

Additionally, the second quarter provision for loan losses was increased by $4.5 million and we recorded interest reversals of approximately $170,000 as a result of placing the loan on non-accrual status. We have considered the status of this loan in our quarterly loan loss reserve analysis and believe the remaining balance to be adequately collateralized; however, there can be no assurance that the allowance for loan losses will be sufficient to cover all future possible losses. We were proactive and moved quickly and aggressively to address the situation rather than allowing the uncertainty to linger.

Some good news regarding this loan is that the property is in good condition and sales of the condo units securing our loan have recently increased. The proceeds from the sales come directly to Peoples Bancorp. There is capable management on-site at the project. The apartments provide some positive monthly cash flow as well. We will soon be communicating with the borrower and guarantors to discuss next steps.

As I mentioned, this particular loan was related to a property based in Florida, which is outside of our primary market areas of Ohio, West Virginia and Kentucky. Our other loan exposure attributable to Florida real estate is limited to three unrelated relationships with an aggregate principal balance of $2.2 million at June 30, 2008. These three loans are performing in accordance with their original terms.

Our real estate loans outside our three state market area totaled $39 million at June 30 with our largest exposure other than collateral in Florida being in Arizona with $10 million with all other markets being less than $5 million each in exposure. The majority of the Arizona properties are retail and office centers in the Phoenix area, securing loans to an experienced Ohio-based real estate developer.

We will continue to monitor and proactively address our entire loan portfolio in light of changing market and borrower conditions. Our consumer loans, which include one-to-four family real estate and personal loans, continue to have reasonable delinquency levels that are not materially different than our experience over the last few quarters and even slightly improved in certain categories compared to year-end 2007.

At June 30, 2008, our allowance for loan losses stood at 1.38% of total loans, which when combined with our capital position gives us strength to weather this economic storm.

Also on a positive note, bright spots for the second quarter were net interest income and net interest margin, which were $14.9 million and 3.61% respectively. Net interest income was up 12% and net interest margin increased a healthy 30 basis points over last year's second quarter and was up 10 basis points over the linked quarter. The major driver of the increases has been a steady reduction in our cost of funding that has outpaced declines in earning asset yields.

Our second quarter cost of interest bearing liabilities was down 39 basis points over the linked-quarter to 3.13% 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. Our cost of funding also benefited from strong deposit growth during the second quarter as period-end total deposit balances were up 10% annualized over the linked quarter.

On the other side of the balance sheet, our earning asset yield of 6.36% for the second quarter, down just 25 basis points from the linked quarter. Earning asset yields benefited from the net impact of $226,000 of loan prepayment fees offset by reduced interest income from non-accrual loans. The net impact of these two items was an increase of 5 basis points of net interest margin.

In comparison, first quarter '08 net interest income included net prepayment fees of $126,000, which added 3 basis points to the margin while second quarter 2007 net interest income and margin were reduced by $309,000 and 7 basis points respectively due to loan and investment interest reductions.

Second quarter net interest income and margin exceeded our expectations due to wider credit spreads maintaining asset yields and positive deposit growth lowering funding costs. However, we expect net interest margin to be somewhat pressured in the near term by asset yields remaining somewhat flat and limited opportunities to lower funding costs.

Our balance sheet has become more neutral in the one-year time horizon and we continue to focus on positioning our balance sheet to optimize Peoples' net interest income stream while also minimizing the impact of future rate changes on our earnings. In addition, we do not anticipate the same level of loan prepayment fees in the second half of '08 compared to earlier this year. Therefore, we estimate net interest margin may decline a few basis points in the third quarter into the low 350s with earning asset balances similar to second quarter 2008 levels.

As we expected, loan growth continued to be a challenge in the second quarter as period-end gross loan balances were down $10.9 million from the linked quarter and average loan balances were essentially flat. Gains in consumer loans, home equity loans, and commercial loans were offset by declines in real estate and real estate construction loans. Construction loans were down $19.2 million for March 31, 2008, due to some large payoffs that we had anticipated and the write-down of the previously mentioned impaired loan.

Our loan production and pipeline continues to be steady but we anticipate loan growth to continue to be challenged throughout the third quarter and the rest of the year. We look for another period of flat loan growth in the third quarter with possible slight declines in total balances, especially with our continued selling of many one-to-four family loans to the secondary market.

Back to asset quality; primarily as a result of the new impaired loan discussed earlier, our June 30, 2008, non-performing loans increased $3.7 million over the prior quarter end and totaled $21.2 million, or 1.92% of total loans, at the end of the second quarter. Net charge offs were $7.5 million for the quarter, or 2.70% of annualized loan balances.

Provision for loan loss expense was $6.8 million, up $5.3 million from the linked quarter and $5.9 million more than last year's second quarter. For the third and fourth quarters of 2008, we expect the quarterly provision for loan losses to range between $2.0 million and $2.4 million each quarter, which is about what we expect in the recently completed second quarter before the impaired loan required further attention and an increase in loan loss provision.

We are intensely focused on loan quality and continue to apply a disciplined approach to the loan approval process as well as continuously monitor our entire loan portfolio for signs of credit deterioration. Although we are not pleased with the recent rise in non-performing assets, the majority of this increase is isolated to two specific customer relationships and we believe that the overall quality of our loan portfolio remains sound. We believe that the risk associated with the specific problem loans is manageable and is reflected in our level of loan loss reserves as of June 30.

And now I will turn the call over to Peoples Bancorp CFO, Ed Sloane, for his comments on second quarter results.

Ed Sloane

Think you, Mark. We have spent some time on our loan portfolio in this call, and now would like to spend a few minutes discussing our investment portfolio and more specifically, our Fannie Mae and Freddie Mac preferred stock exposure.

Several months ago, management made a determination that our $12.1 million of Fannie Mae and Freddie Mac preferred stock was a credit risk not worth maintaining and began reducing our level of exposure. During the first quarter, Peoples sold $7.2 million of Fannie and Freddie preferred stocks at a loss of $199,000.

During the second quarter, we continued our exit strategy and sold another $2.7 million of Fannie Mae and Freddie Mac preferred stock at a pretax loss of $191,000. We recorded an impairment charge of $260,000 on the remaining preferred stock that we owned, which reduced the value of the remaining investment to $1.9 million at June 30. The remaining preferred stock was subsequently sold in July at a pretax loss of $594,000 or $386,000 after tax. As a result of the July sales, Peoples Bancorp no longer owns any preferred stock issued by either Fannie Mae or Freddie Mac.

While the losses associated with these securities have lowered Peoples Bancorp's earnings in the short term, we believe that actions were necessary to reduce our investment portfolio's long-term credit exposures and to reposition our portfolio going forward.

The losses incurred during the second quarter due to preferred stocks were partially offset by net gains totaling $138,000 from the sale of mortgage-backed securities with an aggregate book value of $18.7 million. These securities were sold as part of the ongoing management of Peoples' interest rate risk profile.

In regards to funding, total deposits excluding brokered CDs, at June 30 increased $32 million on a linked-quarter basis and were up $114.5 million or 20% annualized over December 31 of 2007. On a year-to-date basis, Peoples grew non-interest-bearing deposits by $18.2 million, money markets by $18.7 million, interest bearing transaction accounts by $10.7 million, and savings accounts by $9.1 million. We are very pleased to see our customer-centric strategic plan paying off in the form of stable long term core deposit funding, especially with non-interest bearing deposits being up 10.4% on a year-to-date basis.

Included in the $114.5 million of non-brokered CD deposit growth was approximately $58 million in out-of-market CD relationships. These CD relationships are mainly with school districts, municipalities, and credit unions located throughout the Midwest and do not require pledging. These CDs have been an excellent, somewhat, low cost funding alternative to brokered CDs, which should improve margin going forward.

As a result of the strong deposit growth that we have experienced this year, we have reduced our reliance on borrowings and brokered CDs, which have a relatively higher cost higher cost than retail deposits. Average borrowings and brokered CDs declined $40 million from the first quarter to the second quarter of 2008, which helped to lower funding costs.

Now for a look at our non-interest income and operating expenses for the quarter. Non-interest income was $7.9 million for the second quarter of 2008, unchanged from the prior year quarter. Fiduciary income and card services revenues showed strong growth for the quarter with increases of 9% and 13% respectively, compared to the second quarter of 2007, while insurance revenues and deposit account service charges were down slightly.

Second quarter non-interest income comprised 35% of Peoples' total revenues and continues to be a major component of our earnings stream. Growing our fee-based revenue remains a strategic priority as it reduces our reliance on interest rate driven sources of income.

Non-interest expense was $13 million for the second quarter, a 1% decrease in comparison to the same period in 2007 and a 5% decrease on a linked-quarter basis. We continue to focus on operating efficiencies in these challenging economic conditions. The decrease over the first quarter of 2008 was due mostly to lower salaries and benefits as stock-based compensation typically granted during the first quarter and incentive accruals based on corporate performance were lower in the second quarter.

Peoples' efficiency ratio for the first half of 2008 improved to 56.3% from 58.6% last year as revenue growth outpaced expense growth. Our efficiency ratio continues to compare favorably with our peers and we remain focused on both topline revenue growth as well as efficiency to optimize shareholder return.

Looking ahead to the remainder of the year, we expect our efficiency ratio to be in the 55% to 57% range for the second half of 2008 as cost control remains a priority. We will continue our strategic focus on efficiency through ongoing evaluation of our retail branch network to identify potential opportunities for office consolidation, if any, in preparation for future expansion.

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

Mark Bradley

Thanks, Ed. I think that with recent events in the economy and the news surrounding banks lately, it's important to comment on the strength and stability of Peoples Bancorp. Although we have not been immune to the impact that the struggling economy and declining real estate values have had on bank loan portfolios, Peoples Bancorp remains profitable, well capitalized, and adequately reserved for loan losses.

It has been said that ‘capital is king’ and we agree with that comment. We have been protecting and growing our capital levels in light of the unpredictable nature of current financial markets.

At June 30, 2008, our tangible equity to tangible assets ratio stood at 7.30%, up from 7.14% at year-end 2007. We've also enhanced our regulatory capital ratios over last year and remain strongly above well capitalized levels, as evidenced by our total risk-based capital ratio of 13.33% at June 30.

While some financial services companies have been cutting dividends, Peoples Bancorp's capital position has allowed us to raise our dividend to shareholders in the first half of 2008.

Despite the increase in the provision for loan losses, we see many positives to the second quarter, including net interest margin expansion, continued revenue diversification, and cost control. As expected, loan growth continued to prove difficult but we were able to grow deposits and reduce borrowed funds. Like many in our industry, we saw deterioration in asset quality although the majority of our increase in non-performing loans in the first half of the year is related to two larger commercial credits and we think we are adequately collateralized on those non-performing loans.

Year-over-year revenue growth was driven by higher net interest income and margin, and expense growth was contained. Our thoughts for earnings in the second half of the year are tough to predict, but we will share our thoughts anyway. Assuming a loan loss provision of $2.0 million to $2.4 million per quarter and some stability in net interest margin, we look for third-quarter earnings per share to be in the $0.43 to $0.45 range, which includes $0.04 of losses or $386,000 after tax from sales in the third quarter of Fannie Mae and Freddie Mac preferred stocks, as we described earlier.

As always, we will continue to manage Peoples Bancorp for the long term, while making the best of the challenging operating environment. This concludes our commentary. We will open the call for questions. Once again, this is Mark Bradley and joining me for the Q&A session will be Ed Sloane, Chief Financial Officer.

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

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from Phillip King of Trufton Investment Management.

Phillip King – Trufton Investment Management

Hi yes, the problem loan in this quarter and the problem loan in the previous quarter, these are both fairly large loans relative to your capital. I was wondering what is your house limit?

Mark Bradley

Our legal lending limit is in the $22 million to $23 million range. We don't have an established house limit. Typically, we look at once the deal is in the $15 million range is about where we would go. We occasionally would go a little bit north of that based on guarantors’ strength. But really any deal in the $10 million to $15 million range is typically as large as we go, but we have gone higher than that previously.

Phillip King – Trufton Investment Management

So how many loans, $10 million to $15 million do you have in your portfolio offhand?

Mark Bradley

I would say a handful. Relationship wise, you say loans – this is Mark Bradley, by the way – relationship wise probably in the five to six range. When I say relationship meaning one customer or a group of guarantors.

Phillip King – Trufton Investment Management

Okay, the loan in the first quarter would be one and then the Florida condominium would be two and then you mentioned a $10 million loan in Arizona and then a couple more beyond that.

Mark Bradley

That is correct.

Phillip King – Trufton Investment Management

That’s what you are saying. Okay.

Mark Bradley

Yes. That is correct.

Phillip King – Trufton Investment Management

And for this condo project, just curious what was the debt to cash flow that you are looking at that when you originated the loan? It probably had to be on a prospective base. What were some of the other characteristics of that loan apart from the LTV, which was 70% I think you said?

Mark Bradley

Correct, 70%.

Phillip King – Trufton Investment Management

Did you just look at the LTV or did you look at prospective cash flow as well?

Ed Sloane

Well, I don't have those numbers right here on my fingertips, Philip, but we looked at the value of the property, the cash flow that was expected to be created from the sales of those condos. The original appraisal was based on a much faster absorption rate than this most previous appraisal. So a lot of things have changed in that market that changed the value of that property very quickly.

Phillip King – Trufton Investment Management

Okay, let's see. How many of the condos have been sold? Do you know?

Mark Bradley

Yes, I do. The number is in the 20 to 25 range over the life of the project. There's probably – the entire project did not convert to condos. Half of it roughly is still apartments, so there's probably 40 to 50 of condos that could still be sold that are either renovated or partly renovated. So it's still half – these are actually separate buildings. They're not just one building per se. So there are still apartments located on the property.

Phillip King – Trufton Investment Management

And you expected a lot more units to be sold by now obviously?

Mark Bradley

Yes, we did.

Phillip King – Trufton Investment Management

Okay, thank you.

Operator

Our next question comes from Jason Werner of Howe Barnes.

Jason Werner – Howe Barnes Hoefer & Arnett

Good morning.

Mark Bradley

Hi, Jason.

Jason Werner – Howe Barnes Hoefer & Arnett

I guess just to kind of clarify it a little bit the Florida credit here, that originally was a construction loan. At this point all the buildings are finished?

Mark Bradley

Yes, the buildings were already up. They were being converted to condos, so it was a construction loan as categorized on our balance sheet. They did not convert all the condos – or all the apartments to condos.

Jason Werner – Howe Barnes Hoefer & Arnett

Okay, then the other – the $2.2 million other Florida exposure, what types of loans are those?

Mark Bradley

Those are – the majority of that would be a warehouse loan that is actually owner occupied and then there is a couple of other condo units. They are smaller dollar amounts.

Jason Werner – Howe Barnes Hoefer & Arnett

Is it – to individuals, not necessarily a development?

Mark Bradley

That I don't know for sure.

Jason Werner – Howe Barnes Hoefer & Arnett

Okay, just to clarify the Arizona exposure, that is one relationship?

Mark Bradley

That is one relationship. That is correct.

Jason Werner – Howe Barnes Hoefer & Arnett

Okay. And you said that was retail and office space?

Mark Bradley

That is correct.

Jason Werner – Howe Barnes Hoefer & Arnett

Okay. Now this quarter you offset some of the security losses with some sales and had some gains and the mortgage stuff. What is the likelihood you could do that in the third quarter to offset some of the losses that you have already incurred?

Ed Sloane

This is Ed Sloane. We continue to look for opportunities in that particular area. We have not pinpointed anything specific in terms of gains to offset, but we continue to evaluate the portfolio for that.

Jason Werner – Howe Barnes Hoefer & Arnett

Okay, so the guidance that you gave would not necessarily include that already. That could change if you do find something?

Ed Sloane

Correct.

Mark Bradley

That is correct. We are pleased to be out of the Fannie and Freddie situation that we were in at the start of the year.

Jason Werner – Howe Barnes Hoefer & Arnett

What about the CDO that you guys had that you previously had in other than temporary write down? Where is that? Is that still there?

Mark Bradley

Yes, it is, Jason. That is about a $6 million value on our books. Based on our cash flow analysis and the credit stress and analytics that we did, we believe those book values fairly represent the cash flows of the underlying securities. If you remember, it's a blend of bank, insurance, REIT, there is some age on some of them. So we continue to do a lot of analysis on those. But our total exposure on that is limited to $6.1 million.

Jason Werner – Howe Barnes Hoefer & Arnett

Okay, that is all I have.

Mark Bradley

Okay, thank you.

Operator

Our next question comes from Michael Lipman of FTN Financial.

Michael Lipman – FTN Financial

Good morning Mark and Ed.

Edward Sloane

Hi.

Mark Bradley

Hi, Michael.

Michael Lipman – FTN Financial

I was just wondering if you could possibly give us a little update on the banquet center NPL from 1Q '08? How is that proceeding? Do you expect any resolution in the near term?

Mark Bradley

That's a good question, Michael. Just for the callers who may be joining us for the first time, the other large non-performing loan in our portfolio is a – I think Michael called it a banquet facility – it is a lifestyle spa treatment center, banquet facility. It is a $7 million non-performing loan for us, which we wrote down by $1 million in the first quarter. It is still in operations, Michael. We are working with those borrowers. We are meeting with them on a frequent basis. They are adding new members as they try to work their way to breakeven.

There is a new management team in there that we are working with, so there is nothing new to report. I don't expect any resolution to it certainly in the next three months.

Michael Lipman – FTN Financial

Okay, great. I missed it earlier but can you kind of go over the margin expectations again and how many basis points in the next quarter or next two quarters are you expecting?

Ed Sloane

Yes. This is Ed Sloane. On the margin, yes, that has been a – it’s been a great story for us this year as we have seen considerable expansion of that margin during the course of the year in the area of 30 basis points. And so for, on a year-to-date basis, margin at approximately 3.61, and that was a nice surprise for us in the second quarter. Really what we have seen so far this year is a much lower cost of funds than what we originally anticipated. And then asset yields holding up nicely as credit spreads have widened. And we mentioned some of that in the press release.

So it has been a nice growth in revenue for us in that particular category. Expectations for the rest of the year, we are looking in the low 3.50’s. As we have re-priced most of our liabilities, our interest bearing liabilities down, so we are not expecting to get a lot of additional benefit out of that. On the asset side, we should see some downward pressure on our asset yields, our loan yields in particular, and of course the wild card remains whether or not we will see any prepayment fees additionally in the second half of the year.

So we have recognized the fact that we could see a little bit of additional pressure on margin in the second half.

Mark Bradley

Michael, this is Mark. To add to that, we don't expect any loan growth, so if we have some shrinkage in the portfolio, we probably be putting earning assets on in a slightly lower yield, and then combined with the fact we don't really see a lot more pickup on the liability side, I think that's where our guidance comes in that we expect it to be in that 3.50 to 3.53 range.

Michael Lipman – FTN Financial

Okay, will you expect the majority of the compression to be in this next quarter, though, and some stability thereafter?

Mark Bradley

I would say it is probably spread over the final half of the year. Obviously everybody is waiting for rates to change at some point. So we are working to get our way in that position.

Michael Lipman – FTN Financial

Okay, great. Thank you, Mark and Ed.

Mark Bradley

Thank you.

Edward Sloane

Thank you.

Operator

Our next question comes from Philip King of Trufton Investment Management.

Phillip King – Trufton Investment Management

Yes, just as a follow-up, when do you put loans on non-accrual, after how many days?

Mark Bradley

That really changes from loan to loan. This is Mark. I think we are probably – as I look around the world, the country here, I think we are probably pretty quick to put things on non-accrual if we think there are problems with repayment. So, there is no hard-and-fast rule like 90 days past due. In fact, I don't think the Florida condo loan was at 90 days past due yet and actually sold some units in June.

So, we don't have a hard and fast rule here. When we see that there is no documentation that we can find that we can clearly identify repayment of our loan, that’s when we start looking into it and considering impairment.

Phillip King – Trufton Investment Management

How about a range of days? Are you willing to go out for half a year, 180 days?

Mark Bradley

I have been here 17 years and I have never seen that. So, that is not going to be – no, I would say when we are at 30 to 40 days, the nervous level starts. When we are at 60, the nervous level is much higher. When we are at 90, we know we have issues.

Phillip King – Trufton Investment Management

Are you aware that there are some banks that are at 180 days?

Mark Bradley

I am totally aware of that. That is why I say I think we are a little different than others that we proactively analyze and take action on these loans.

Phillip King – Trufton Investment Management

Do you have any loans that are 90 days past due and still accruing?

Mark Bradley

A very, very small amount. It's actually in a – we are all fumbling for our earnings release here.

Ed Sloane

Yes, it is noted on the earnings release. Phillip, this is Ed Sloane. Loans 90 days or more past due are $290,000.

Mark Bradley

$290,000, so it's a small number.

Ed Sloane

Very low level.

Mark Bradley

We don't –

Phillip King – Trufton Investment Management

How about delinquencies, 30 to 60 days, do you happen to have that number?

Mark Bradley

Yes, I do. Those have decreased compared to year end, and they are also roughly similar to what we saw 12 months ago. So the business category has jumped up just a little bit, but the other categories are doing well. So delinquencies have not significantly increased for us.

Phillip King – Trufton Investment Management

But they have gone down since the start of the year, is what you are saying, compared to December 31?

Mark Bradley

Yes, they have. I am just verifying, yes.

Phillip King – Trufton Investment Management

Okay, thank you.

Mark Bradley

You're welcome.

Operator

(Operator instructions) Our next question is from Philip King of Trufton Investment

Management.

Phillip King – Trufton Investment Management

Sorry about that, just one more follow-up. Could you just describe how the auto industry – how prominent that is in your neck of the woods or you are closer to West Virginia but how important is the auto industry to the economy in your general area?

Mark Bradley

Good question. This is Mark. The automobile industry itself manufacturers don't really – are not prevalent in our market. They do employ some people that work for automobile or related industries, but we are south enough, I will call it, from a lot of those that we don't – we are not heavily dependent on that.

Phillip King – Trufton Investment Management

Okay, thank you.

Mark Bradley

But I was just saying, I'm sure we have some consumer loans that are related, their employer of choice is either automobile or related industries, so that is where we watch that. There are some manufacturers throughout our market but we are not dependent on it. We are actually pretty diversified.

Phillip King – Trufton Investment Management

Okay, thank you.

Mark Bradley

You're welcome.

Operator

(Operator instructions) At this time, there are no further questions. Sir, do you have any closing remarks?

Mark Bradley

Yes, I just want to thank everyone for participating, especially Philip. Very good questions. 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 good day.

Operator

This will conclude today's conference call.

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