Good morning, and welcome to the Peoples Bancorp Inc's Conference Call. My name is Matt, and I will be your conference facilitator. Today's call will cover a discussion of results of operations for the quarterly and nine month periods ended September 30, 2022. [Operator Instructions] This call is being recorded.

If you object to the recording, please disconnect at this time. Please be advised that the commentary in this call will contain projections and other forward-looking statements regarding People's future financial performance or future events. 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 detailed in the Peoples Securities and Exchange Commission filings.

Management believes that forward-looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of Peoples business and operations. However, it is possible actual results may differ materially from these forward-looking statements.

Peoples disclaims any responsibility to update these forward-looking statements after this call, except as may be required by applicable legal requirements. Peoples third quarter 2022 earnings release was issued this morning and is available at peoplesbancorp.com under Investor Relations.

A reconciliation of the non-generally accepted accounting principles or GAAP financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release.

This call will include about 20 to 25 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 in the Investor Relations section for one year.

Participants in today's call will be Chuck Sulerzyski, President and Chief Executive Officer; and Katie Bailey, Chief Financial Officer and Treasurer, and each will be available for questions following opening statements. Mr. Sulerzyski, you may begin your conference..

Thank you, Matt. Good morning and we appreciate you joining our call today. Earlier this morning, we announced the merger of Limestone Bancorp Inc. Limestone has $1.5 billion in assets and operates 20 branches in 14 counties in Kentucky. We anticipate closing the merger during the second quarter of 2023.

We're excited about this partnership and our expansion into strategically important markets in Kentucky. Limestone's management team led by John Taylor has a very similar culture and credit discipline as us. We believe this merger will benefit all shareholders, employees and clients of both institutions.

I will go into more details on the merger later on the call. I would like to highlight our results issued this morning. With the third quarter, we reported an increase in our net income, which totaled $26 million, while our diluted earnings per share were $0.92. As we anticipated, our reported earnings improved for the third quarter.

Most notably, our efficiency ratio improved to 57.2% compared to 58.8% for the linked quarter. We generated positive operating leverage, meaning revenues grew faster than expenses compared to the linked quarter.

Our return on average stockholders equity grew 31 basis points to 12.92%, while return on average assets increased 5 basis points to 1.45% compared to the linked quarter. We had our highest ever quarterly pre-tax pre-provision net revenue as a percent of average assets, which stood at 1.96%.

Our net interest income was up 9% over the linked quarter to $67.1 million with net interest margin at 4.17%. We continue to control our deposit cost, which was 16 basis points and only up 2 basis points compared to the linked quarter. Fee-based income also grew and was up 4% over the linked quarter.

This was our highest quarterly revenue ever reported. We also had improvements in our credit quality compared to the linked quarter end with reduction in both criticized and classified loans. Our allowance for credit losses grew by 1% compared to the linked quarter end.

For the third quarter, we recorded a provision for credit losses of $1.8 million, which reduced diluted EPS by $0.05 for the quarter. Year-to-date, we have recorded a release of provision totaling $5.8 million, which has added $0.16 to diluted EPS.

Most of the increase in our allowance for credit losses compared to the linked quarter was driven by deterioration in macroeconomic forecasts, which were partially offset by improvements in reserves for individually analyzed loan.

Our allowance for credit losses comprised 1.15% of total loans at quarter end compared to 1.14% at June 30, 2022 and 1.43% at year-end. Moving on to our loan portfolio. Excluding PPP loans, our loan balances increased by over $35 million or 4% annualized compared to the linked quarter end.

Leading the growth this quarter was our consumer indirect loans, which were up $29 million or 21% annualized. Our commercial and industrial loan balances increased by $19 million, which is net of an $11 million decline in PPP balances due to forgiveness we see during the quarter.

Our remaining balances of PPP loans stood at $4 million at the end of September. So these loans should have little impact going forward. Premium finance loans were up $15 million, while our construction loans grew $13 million.

At the same time, our commercial real estate portfolio declined over $36 million and partially offset our other loan growth for the quarter. We had strong production levels for new loan originations as we had anticipated.

We continue to focus on strong credit quality and some of the reductions in our loan portfolio reflects our efforts to remain to maintain high credit standards. From a credit quality perspective, we have improved metrics compared to the linked quarter end.

The biggest improvement was reduction of both our criticized and classified loans compared to linked quarter end. Our criticized loans declined nearly $17 million or 9% compared to the linked quarter end.

This was driven by $18 million in pay downs and $7 million in upgrades, which were net of $10 million in downgrades, half of which was due to two commercial and industrial relationships.

At the same time, our classified loans decreased $21 million or 18% and was mostly due to the upgrade of a $12 million hospitality relationship from substandard to special mention and the payoff of three larger commercial relationships that were acquired.

Compared to September 30, 2021, our criticized and classified loans were down $70 million or 30% and $48 million or 33% respectively.

Our nonperforming loans also declined compared to the linked quarter end due to reductions in our non-accrual loans of nearly $2 million, which were partially offset by increases in loans 90-plus days past due and accruing.

The portion of our loan portfolio considered current stood at 98.9%, which was an improvement from 98.8% for the linked quarter end and year-end. Our quarterly annualized net charge-off rate was 15 basis points for the third quarter and first nine months of 2022.

Compared to the linked quarter, prior year quarter and first nine months of 2021, our net charge-off rates are relatively consistent. For the past six years, our quarterly net charge-off rate has averaged 12 basis points.

We are confident in our credit quality for future periods, but we're keeping a close eye on the impact of high interest rates and economic conditions. We remain disciplined from a credit perspective and will not compromise credit standards for loan growth. I will now turn the call over to Katie for additional details about our financial performance..

Thank you, Chuck. For the third quarter, our net interest income grew 9% compared to the linked quarter and our net interest margin expanded to 4.17%, up 33 basis points from the linked quarter. Our loan yields continue to be positively impacted by the higher interest rate environment and were up 33 basis points from the linked quarter.

At the same time, our investment yields grew by 17 basis points. Our funding costs rose two basis points compared to the linked quarter, and we continue to control our deposit costs, which were relatively flat, while also responding to competition for deposit balances.

Accretion income, net of amortization expense from acquisitions declined to $2.8 million, compared to $3.9 million for the linked quarter, adding 16 basis points and 25 basis points respectively to net interest margin. PPP income has been nominal in recent periods and only added one basis point to net interest margin for the quarter.

Compared to the prior year quarter, net interest income grew 57% and net interest margin expanded 67 basis points. The improvement continued to be driven by our acquisitions, core growth and increases in market interest rates. Loan yields expanded by 71 basis points and we controlled our deposit costs, which were down five basis points.

Our increased borrowing costs were due to the acquired Vantage borrowings coupled with the recent rise in market interest rates. Our net interest income and margin grew 55% and 40 basis points respectively through the first nine months of 2022, compared to 2021.

The majority of the increase was driven by the Premier and Vantage mergers, coupled with higher market interest rates during 2022. Our reported efficiency ratio improved to 57.2% for the third quarter, compared to 58.8% for the linked quarter and 94.7% for the prior year quarter.

On a year-to-date basis, our efficiency ratio improved to 60.7% from 78.4% in 2021. When adjusted for non-core expenses, our efficiency ratio was 56.6%, a sizable improvement over 58% for the linked quarter and 63.9% for the prior year quarter. Year-to-date, the adjusted efficiency ratio improved to 59.6% compared to 64.3% for 2021.

We are very pleased with by how quickly we have been able to lower our efficiency ratio, which has been a main focus for us this year. Compared to the linked quarter, our fee-based income grew 4%. Other non-interest income grew $1.2 million, which was due to the additional fee-based income from the leasing businesses.

Deposit account service charges were up mostly because of customer activity. At the same time, our trust and investment, electronic banking and bank-owned life insurance income declined.

The decrease in our trust and investment income was primarily due to lower market values of trust and investment asset managed which were not able to be offset by the new accounts we have added.

Our lower bank owned life insurance income was driven by a onetime death benefit we recognized during the linked quarter, about half of which was offset by the additional policies we purchased last quarter. Compared to the prior year quarter, our fee-based income was up 21%.

Other non-interest income contributed a large portion of the growth and was up because of the fee-based income from the leasing businesses. Deposit account service charges also experienced a significant increase and were up 50%, while electronic banking income increased 22%.

Both of these items grew as a result of the acquired Premier account coupled with increased customer activity in recent periods. Other growth and fee-based income was within insurance, bank-owned life insurance and swap fee income.

As we noted last quarter, we purchased an additional $30 million in bank-owned life insurance during the linked quarter, which contributed to the increase. Through the first nine months of 2022, fee-based income was up 19% compared to the prior year.

Other non-interest income grew $2.5 million, which was primarily due to fee-based income from the leasing businesses. Deposit account service charges were up 64%, followed by electronic banking income and served as the main contributors for the growth.

We had increases in all other categories with the exception of mortgage banking income, which was directly related to the higher interest rate environment during 2022 compared to 2021, driving down demand from customers. Moving on to our total non-interest expense. We had a 5% increase compared to the linked quarter.

Professional fees, marketing expense and data processing and software expense experienced the largest increases. Our professional fees grew as we had - have engaged third parties to help create efficiencies and implement new software in an effort to support enhanced processes of our operational teams.

We also recorded $339,000 of acquisition-related expenses during the quarter. Our FDIC insurance premiums declined coupled with lower electronic banking expense and amortization of other intangible assets. Compared to the prior year quarter, our total non-interest expense declined 10%.

The decrease was largely due to the acquisition-related expenses associated with Premier, which totaled $16.2 million for the third quarter of 2021. We had increases in nearly all categories of expense excluding acquisition-related expenses, which reflected our recent growth through acquisitions.

Our professional fees declined $3.6 million, compared to the third quarter of 2021, which had been driven by acquisition-related expenses last year. For the first nine months of 2022, total non-interest expense grew 13% compared to 2021. This increase was mainly due to the growth in our size and footprint over the last year, driven by acquisitions.

On a balance sheet perspective, we were able to deploy a large portion of our cash and shrink our investment portfolio in total balance sheet compared to the linked quarter end. We utilized the proceeds to fund our loan growth, while also paying down a portion of our short-term borrowings. Our deposits declined 1% compared to the linked quarter end.

More than half of the reduction was in retail CDs with decreases in both money markets and non-interest bearing deposits being partially offset by higher interest bearing checking and governmental deposit accounts.

And looking forward to year end, I would note that we typically experience some seasonal declines in our governmental deposit balances during the fourth quarter of each year. From a capital perspective, our regulatory capital ratios continued to improve compared to the linked quarter end.

At September 30, 2022, our common equity Tier-1 capital ratio was 11.8%, our total risk-based capital ratio was 13% and our Tier-1 leverage ratio was 8.6%. Our tangible equity to tangible asset ratio declined slightly to 6.5% from 6.6% at the linked quarter end.

During 2022, improvements in net ratio from higher earnings have been more than offset by increased unrealized losses on our available for sale investment portfolio, which stems from the higher market interest rate environment.

While we are monitoring this decline and continually considering our investment options, we do not expect this to be a permanent impact on our ratio. Our unrealized losses on the available for sale investment portfolio grew $42 million resulting in a reduction to our stockholders equity during the third quarter of 2022.

Compared to year-end, this decline was $123 million. Our tangible book value, if you exclude the accumulated other comprehensive losses, grew at an 11% annualized rate compared to the linked quarter end. I will now turn the call back to Chuck for additional comments..

Thank you, Katie. The Limestone merger will move us into key markets within Kentucky. Louisville is the ninth largest manufacturing city in the United States, and the Limestone footprint covers some other high-profile Kentucky markets including Lexington, Frankfurt and Owensboro.

The merger will put our organization at six in terms of Kentucky deposit market share among community banks. The culture and credit profile of Limestone is very similar to ours, which makes us even more attractive. They have topnotch talent with a knowledgeable management team that has a great mix of big bank and community bank experience.

We think the partnership and the integration between our associates and the Limestone associates will be seamless. Our diversified product and service suite including a higher lending capacity will benefit the Limestone clients. This merger will also give our current clients more locations to more easily service their needs.

We look forward to partnering with the Limestone associates to deliver high quality customer service, while also providing a topnotch workplace. This deal is estimated to be valued at $210 million and consideration is 100% stock with a 0.9 fixed exchange ratio.

As far as assumptions, we anticipate realizing 30% cost savings associated with this transaction, 75% of which will be realized in 2023 and 100% realized in 2024. Based on our pro-forma, we expect these savings to drive continued improvement in our efficiency ratio.

We have completed a lot of work as far as projected fair values on the loans and deposit portfolios.

Our pro-formas included in the investor deck we published this morning are inclusive of marks on the loans, investments and borrowing portfolios, which also illustrate the core deposit intangible, which is up heavily at 3.6% due to the current rate environment. We have also sensitized these marks to account for various scenarios.

A portion of the expected EPS accretion run rate we have projected is due to the rate marks, but the benefits of the rate marks are generally free of execution risks. Currently, we expect the transaction to have a tangible book value earn back of 2.8 years and will be accretive to our '23 and '24 earnings by $0.16 and $0.37 respectively.

Excluding accumulated other comprehensive income, core deposit intangible and the assuming no rate marks on the acquired assets, the tangible book value earn back period would be zero and would be immediately accretive.

We believe the combined return on average assets for 2024 will be around 1.5%, while our return on average tangible equity will be approximately 22%. We also anticipate that our regulatory capital ratios will decline at the close of the merger based on pro-forma results. We believe this will build back quickly with improved earnings and efficiencies.

Excluding accumulated other comprehensive income and rate marks, our common equity Tier 1 capital ratio is projected to decline to 11.2%, while our Tier 1 capital ratio would be at 11.7%. The Limestone merger transaction is subject to the satisfaction of customary closing conditions, including regulatory and shareholder approvals.

Moving back to our performance. We are working to close out the year in a position of strength. We are focused on integrating our recent acquisitions in growing our business while becoming more efficient, both in terms of income and expense and operational processes.

We're making meaningful investments in our infrastructure in an effort to benefit our clients and employees. We have added high level talent to our organization this year to prepare for our bright future.

This includes a wide range of associates from experienced commercial and industrial bankers in Washington DC area to accounting professionals within our finance group. We increased our earnings for the quarter to $0.92 per diluted share, which exceeded the consensus estimate of $0.85 for the quarter.

Our increased earnings were not driven by releases of provision of credit losses. Here are our expectations for the fourth quarter and full year 2022 excluding one-time items. We expect loan growth for the full year to be between 4% to 6% excluding PPP loans.

While we have seen relatively low credit cost, we believe that these will grow in future quarters to our historic levels.

For the third quarter, our net charge-off rate was 15 basis points while we anticipate that our quarterly net charge-off rate including leases will be between 20 basis points to 30 basis points as a percent of balances for the fourth quarter of 2022.

We think there is still some opportunity for net interest margin expansion in the fourth quarter, but this will be at a slower pace than our third quarter growth. We expect between $51 million and $53 million for our total quarterly non-interest expenses for the fourth quarter.

There is a slight increase as we accelerated the merit increases for a portion of our employee base from January 1, 2023 to October 1, 2022 in light of the inflationary pressures. And we are still on track to have an efficiency ratio of between 60% - excuse me, an efficiency ratio of below 60% for full year of 2022.

As we close out the year and start looking ahead to 2023, we have some guidance to provide, which excludes the impact of Limestone. We believe net interest margin for 2023 will be between 4.4% and 4.6%, which assumes relatively flat rates for 2023 as compared to year-end 2022. We anticipate loan growth of between 5% and 7%.

We expect our fee-based income will be 5% to 7% higher in 2022. We are projecting quarterly non-interest expenses between $56 million and $58 million.

This projection includes our annual expenses that we normally see during the first quarter of each year such as higher stock compensation expense, employer contributions to health savings accounts and higher base salaries and related payroll due to merit increases. We expect our efficiency ratio to be between 58% and 59% for the full year.

We believe we will see an increase of about five basis points to net charge-offs during 2023 compared to 2022. Given the above, we are very optimistic about 2023 and believe that we will exceed all current analyst estimates. These estimates currently range from $3.18 to $3.60 and average $3.42.

Again, we are very comfortable, we will beat the highest of these estimates, and we will do so excluding the benefits of Limestone. We are pleased with our results for the third quarter and the investments we have made in our business at the same time.

Considering the recent changes in interest rate environment, we are keeping a close eye on credit quality. This concludes our commentary and we will open the call for questions. Once again, this is Chuck Sulerzyski and joining me for the Q&A session is Katie Bailey, our Chief Financial Officer.

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

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Brendan Nosal with Piper Sandler. Please go ahead..

Hi, good morning, Chuck and Katie.

How are you guys?.

Good morning, Brendan..

How are you doing?.

Perfect.

Maybe to start off, could you offer us a little bit of background on how the Limestone deal came about and thoughts on why now is the right time just given how the market is perceiving bank deals today just due to these heavy area remarks?.

Yes. So we've been talking to Limestone for many years. We have been very interested in joining - getting more in central Kentucky, Louisville, Lexington, Frankfurt, et cetera. Obviously, as time has gone by, several of the targets have disappeared. So there is a scarcity value, I think from the Limestone perspective.

They have had conversations with different institutions and thought we were the right partner for the long term, which we're very, very grateful. As far as timing, to me, it's a very, very good deal and very strategically important deal. And right now, we were the obvious buyer for them.

There are other banks that have been acquiring banks in the area that are tied up right now and waiting, this may not have been there. So we saw the scarcity value. I think we paid a respectable price. I think earn back is reasonable. And we are tremendously excited about the future.

We have a lot of capabilities, investments, insurance, leasing, indirect, larger lending limits. We're just going to bring a lot to the market, to their customers. They have a great team of people.

They're a great mix of community banks within, we use the term big bank refugees, but they have a lot of people with lot of large institution, capability and we just think there's tremendous upside..

All right. Fantastic. That's helpful color.

And then maybe moving on, can you just walk us through a lot of the work that Limestone has done in recent years to rectify the credit issues they experienced kind of during and in the aftermath of the last downturn and then your overall comfort with their book in credit quality today?.

First of all, I think Limestone has done an extraordinary job, all of the folks who have been working on it. We're not associated with the issues that they had. Those are very talented, very skilled capability. The quality of their credit portfolios very much mimics the quality of our credit portfolios. So we have no concern about their credit.

I think that's indicated in the credit mark on the deal..

All right. Fantastic. Thanks for taking the questions..

Thank you..

Thanks, Brendan..

Our next question will come from Tim Switzer with KBW. Please go ahead..

Hi, there. Thanks for taking my question..

Good morning..

Good morning..

Good morning.

I guess my first question is if you could just give us a little bit of background on the 30% cost savings, where you expect a lot of that to be coming from? And on the systems conversion, when that will occur and if they have the same system as you guys as well?.

They do not have the same system. We're on FIS, they're on Jack Henry. We expect the system conversion to happen first weekend in August. We expect the deal to close in the second quarter. The savings will come, kind of a combination of systems and labor..

Okay. Great. And then, on any revenue synergies that you guys are maybe hoping to achieve? I know you talked about possible cross selling and then the higher lending ability there.

Could you talk about that and the opportunities you see?.

Well, first off, none of the revenue synergies are in anything that we modeled. We think that we'll have a similar experience to what we're having in the Premier, Citizen acquisition that we did last year where we're having hundreds of thousands of dollars of fee income from trust and investments.

We are doing a lot more indirect lending in that marketplace than we were doing previously, beginning to evidentially introduce some leasing opportunities. So we've got a really robust retirement plan offerings. So this is a tremendous upside and the lending capacity that we bring will be helpful.

But I think that it will be more just bread and butter $5 million, $10 million, $15 million customers, but we can obviously do much more than that if we need to..

Okay. Great.

The last question I had is, it's really helpful giving us a range for the NIM in 2023, but could you talk a little bit about the, I guess, the path of getting there? Would you expect some NIM expansion more at the front end of, say, the end of this year and next year? And then, Kate, deposit repricing catch up when you see maybe NIM compression at the end of next year.

I just want to know how you're thinking about that?.

Yes. Sure. I'll take this one. So I think you're right. I think we do expect some more expansion in margin in the fourth quarter. I think we are expecting some rate increases next week and end of December. And then, there's a couple of factors at play. So the rate increases, I think we do expect some deposit cost increases.

But then, if you recall, we have a mix shift on our balance sheet going on.

So early this year, we put some fund, some cash in to work in the investment portfolio, but then also within our lending portfolio, we have the leases that are decently higher yielding than our core banking lending platforms provide, and so there're some stronger growth in those portfolios than what we would experience for the core bank.

And so that mix shift is providing some expansion in that margin number as well..

I got you.

So growth in the leasing portfolio might be able to offset some of the deposit repricing once a lot of the other asset yields have already repriced?.

Correct..

And I would just add to that, that the value of our franchise is really in the quality of the deposit of book, relatively very low beta. I think you've seen some of that already. But I think you'll see more of that as the rates keep going up..

Yes. And I think you guys talked about a 25% deposit beta last quarter.

Is that still a good number for you guys?.

That's what we use in our model. That I would say it's not what we have been experiencing in '22 and we used that as the upper range and some projections we did. But I think that's a little higher than what we - definitely higher than what we've seen and what we expect to see at least in the next few quarters..

Got it. Understood. Thank you for taking all my questions..

Thank you..

Our next question will come from David Long with Raymond James. Please go ahead..

Good morning, Katie. Good morning, Chuck..

Good morning, David..

I wanted to follow up on the deposit discussion here. Maybe just quickly, you talked about the asset mix changing.

Do you see the deposit mix changing over the course of the next few quarters, obviously excluding the acquisition?.

No. I don't think we expect major shift. I think you'll see in the fourth quarter as we noted, is a seasonal low point for our governmental deposits. So they kind of peak in the March timeframe and in the September timeframe. And as you've probably - as you've seen in our numbers, we've had decent run off of our retail CDs.

So excluding those two kind of the seasonality of the governmental deposits and then the run-off of the CDs, I don't think we expect much mix shift within the deposit portfolio from that - beyond that..

And I would add, 47% of the deposits are DDA, non-interest bearing and interest-bearing. That's a pretty high percentage. So I think you're going to see a more stable deposit base than normal..

Got you.

Do you think that 47% sticks or can you see that - you'll see that coming down over the next several quarters?.

No, I think it's fixed..

Got it. Okay. Cool. Thanks for the color. And then, I wanted to switch over to the acquisition and really just big picture with that transaction.

Can you maybe talk about what you see in the Kentucky landscape from a competitive perspective and how that compares to your current footprint?.

First of all, I think Ohio, West Virginia and Kentucky, right now, we're experiencing incredible capital investments. There are multiple multi-billion dollar investments going on in each state. And that is much more than what you've seen over the last 30 years.

So I think that both seeing a renaissance driven by onshoring from a manufacturing standpoint. And you see the big national headlines, whether it's Intel or whether it's Ford's commitments to Kentucky on their battery plant. But there are so many more things going on.

So we like - we like the Kentucky market place and we're very, very optimistic that there's going to be a positive upturn in both Kentucky, West Virginia and Ohio over the next few years..

Got it. Thanks for the color, Chuck. Thanks, again, Katie..

Thanks, David..

Thank you..

Our next question will come from Manuel Navas with D.A. Davidson. Please go ahead..

Hi. Good morning. This is actually [Cameron Sholgreen] on behalf of Manuel Navas.

How are you both doing this morning?.

We're good, Cameron..

We're good.

How're you?.

Doing well. Thank you. So sticking with the recent acquisition.

Do you guys plan on seeing anymore in the upcoming future or what are your opportunities post this transaction in regards to M&A?.

I think that we will take some time to digest this. We also are getting closer to $10 billion and we have no urgency to go over $10 billion. So this is certainly going to keep associated for 2023 and look forward to the benefits accruing..

Thank you. And then just one follow-up question regarding this specific acquisition.

Do you expect to see any customer attrition or do you have that worked in anywhere?.

You always see customer attrition in every deal that you do. Saying that you're going to retain 100% of all customers is a bit of a pipe dream, but we don't see any reason for there to be any significant customer attrition..

Thank you, both..

Thank you..

Thank you..

[Operator Instructions] Our next question will come from Terry McEvoy with Stephens. Please go ahead..

Hi. Thanks. Good morning, both..

Good morning..

Good morning..

Maybe just start with the - some of the lending in the third quarter. Maybe talk about what was behind the growth in C&I and Kate, I think you mentioned maybe some planned kind of slowing in certain areas just to manage credit risk and the one area that was down was leasing.

So I didn't know if you were kind of pointing at that portfolio or something else. And if not, it sounds like your outlook for growth in the leasing portfolios, it's pretty optimistic based on some earlier comments..

Yes. I'll start on that. First off, we are optimistic on leasing and in fact have good growth in leasing and our expectation is that the leasing businesses will grow in the neighborhood of 20% next year. And we did have good C&I growth. And I would just say, it's kind of ongoing slower business over time.

We also had really good indirect growth and the consumers continue to stay and look strong. And we didn't - October looks positive on the indirect front. Our pipelines are very robust.

Our loan growth this year, if we had not selected some of - if we had not made some changes to existing credits for overall portfolio improvement, we would have had very robust loan growth. As it is, we're going to be in that 4% to 6% for the year, we think we're going to do a little better next year.

And this portfolio that we're acquiring is significantly better than the portfolio we picked up with Premier and the Premier acquisition. So we are - we are optimistic..

And just a follow-up.

The $4.40 to $4.60 margin for next year, what are your thoughts on accretion income within that outlook?.

Yes. I think it stays in the range of what we saw for the third quarter. So, I think last quarter, I guided 15 to 20 basis points the quarter. I think it will stay in that range. It might dip down 13 basis points, 14 basis points. But I think around the 15 basis point impact on a quarterly basis..

Maybe one more. Could you talk about the - I think you referred to as - like enhanced efficiencies of your operational teams when you were citing the increase in professional fees, maybe.

What parts of the company are you looking at? And how should we think about the potential positive kind of benefits from what you're evaluating internally?.

Yes. I think it's a couple fold. It's in - again in the operational areas of credit and finance and just looking, and true operations, both loans and deposits, looking for automation, technology to support the growth. So it's not - growth is not as incremental to head count. We're not as dependent on head count going forward as we grow..

Right. Thank you, both. Appreciate it..

Thank you..

At this time, there are no further questions.

Sir, do you have any closing remarks?.

Yes, I'd like to thank everybody for joining us. I'd like to just reiterate that we feel extremely comfortable that we're going to beat the highest level of analyst estimates out there, and we'll do that without the help of Limestone.

So if anybody needs help with their modeling, I encourage them to give Katie or I a call, and I'd love to help you see what we see. Again, thank you for joining us. Please remember that our earnings release and a webcast of this call will be archived at peoplesbancorp.com under the Investor Relations section.

Thank you for your time and have a great day..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..