Good morning, and welcome to Peoples Bancorp’s conference call. My name is Denise 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 March 31, 2012. [Operator Instructions] This call is also being recorded. If you object 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 Bancorp’s future financial performance. These statements are based on management’s current expectations. The statements in this call, which are not historical facts, 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 effect of technological changes, the effect of economic conditions, the impact of competitive products and pricing, and other risks detailed in Peoples Bancorp’s 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 Bancorp disclaims any responsibility to update these forward-looking statements. Peoples Bancorp’s first quarter 2012 earnings release was issued this morning and is available at peoplesbancorp.com. This call will include about 15 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 www.peoplesbancorp.com. Peoples Bancorp’s participants in today’s call will be Chuck Sulerzyski, President and Chief Executive Officer; and Ed Sloane, Chief Financial Officer and Treasurer. And each will be available for questions following opening statements. Mr. Sulerzyski, you may begin your conference sir.

Good morning and welcome to our call. Earlier today Peoples Bancorp reported first quarter 2012 net earnings of $6.7 million or $0.63 per common share. Also these amounts represent all-time record highs for the company, as well as, significant improvements over prior periods. These achievements was the result of stronger performance in several key areas, coupled with a sizable release of loan loss reserves. Key successes for the quarter include revenue growing faster than expenses, 18% annualized growth in retail deposits, and higher period-end loan balances compared to year-end's 2011. We also experienced further improvement in credit quality, which allowed to additional reserve release. The return to positive operating leverage largely reflects the strength of our fee-based revenue and disciplined expense management. Total revenue was 3% higher than the prior year despite lower average loan balances and slightly less insurance contingent income. On the other hand, operating expenses were generally contained with the inquiries isolated to additional sales and incentive compensation. In terms of asset quality trends, we are encouraged by the continued reduction in our criticized assets. During the quarter, nonperforming loans decreased 32% as we exited 2 long standing problem loans. One of these loans was the large commercial real estate loan secured by property in North Eastern Kentucky discussed on and off over the last 2 years. Also during the first quarter, we sold the Health Spa Property in Central Ohio which has been carried as OREO since late 2009. As a result of our first quarter efforts, total nonperforming assets decreased to 2.25% of loans plus OREO from 3.41% at year-end 2011. Further, our allowance coverage improved by 25 basis points to a 104% of nonperforming loans at March 31. We are encouraged by the resolution of some of our more difficult problem assets during the quarter. The work outs were completed faster than we had anticipated and without the need for any additional significant losses. As a result, our net charge-offs remain fairly low for the fourth consecutive quarter. Over the last 12 months, our net loss rate has averaged 40 basis points of loans, in line with our long-term historic rates. For the rest of 2012, we believe asset quality trends will remain favorable. To the extent they do, we will evaluate the appropriateness of releasing additional reserves. In the meantime, we will remain diligent in restoring all credit metrics to their long-term historic levels. Our strategic focus for 2012 continues to emphasize 5 key areas; asset quality, expense management, revenue growth, liquidity, and capital are what we like to call our levers of success. I will now turn the call over to Ed to further discuss our first quarter results.

Thank, Chuck. Overall, our first quarter results reflect the various strategic initiatives that we began implanting in second half of 2011. This included adding talent in underserved areas and a renewed focus on expense control. We are pleased with the progress made in the first quarter towards achieving our 2012 goals. As Chuck mentioned, we had positive operating leverage in the first quarter. This success occurred despite the lack of growth in net interest income. The combination of lower average loan balances in a difficult interest rate environment continued to pressure our net interest margin. As a result, we experienced slight margin compression from the prior year first quarter. On a linked-quarter basis, net interest margin was impacted by additional investment accretion income recognized in the fourth quarter of 2011. Absent this income, we saw a modest margin compression due to asset yields following more than our funding costs. At March 31, period-end loan balances were $6 million higher than year-end. We had maintained a steady new loan production pipeline in recent months. As a result, we are optimistic average loan balances will be higher in the second quarter. On the other side of the balance sheet, our deposit costs benefited from solid growth in non-interest bearing balances in the first quarter. Nearly half of this point to point increase since year-end was the result of growth in commercial balances. The remaining increase reflects the seasonal growth in consumer balances typically experienced during the first quarter. Our deposit costs also are benefiting from the downward repricing of the $80 million of high cost CDs discussed in prior quarters. The last large block of these CDs matured in the first quarter. Thus we will see the full benefits starting in the second quarter. We believe deposit growth will occur at a…

Thanks, Ed. We are very pleased to start 2012 off with such strong earnings. Revenue is growing faster than expenses. Loan balances have stabilized and we made further progress towards restoring asset quality. A key element of our expense management plans for 2012 included cost savings from a reduction and staffing levels and branch rationalization. As of the end of the first quarter, I am pleased to report we have completed these initiatives and will achieve the expected cost savings during 2012. Our employee count finished the quarter at 499, 8% lower than the high mark of 543 in mid-2011. No further reductions are planned at this point. As we move throughout 2012, we will see a slight increase in headcount as we fill some key open positions. In the end, we expect to finish the year at or below the year-end 2011 levels of 513, barring any acquisition activity. Our capital position grew even stronger in the first quarter due to record earnings. This additional capital strength provides us with greater capacity to grow our company. As we start the second quarter, we have turned our full attention to profitable growth of the company. Along these lines, we are furthering our efforts to increase consumer lending activity. In addition, construction of our new banking office to be located in Vienna, West Virginia is scheduled to start in mid-May. We also are seeing an increased number of acquisition opportunities within our footprint. Our management team is devoting more attention to these expansion opportunities. All transactions must be accretive within 2 years and recover any tangible book value dilution in less than 4 years. We have been prudent with our due diligence and hope to bring some deals to fruition sooner rather than later. We are committed to sustaining the current earnings momentum in the coming quarters. I am confident we will succeed to a disciplined execution of our strategies and partnerships with our clients and communities. 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, Ed Sloane, Chief Financial Officer. I will now turn the call back to the hands of our call facilitator, Denise.

[Operator Instructions] And our first question this morning will come from Scott Siefers of Sandler O’Neill.

I just had a couple of quick questions, I think you actually answered most of them in your prepared remarks but either at or Chuck, I guess I am just curious the credit profile has improved pretty considerably over the last several quarters and in particular this quarter. What are the dynamics that you’re going to be looking out most closely assuming this continuation or this dynamic continues? What are the things you’re going to be looking at most closely as you evaluate the level of the reserve at whether or not to continue to draw it down?

Scott, it’s Ed. To your question, it’s really going to be based on the continued improvement in nonperforming assets and where we see net charge-offs trending as we go through the course of the year. If you look back the last 4 quarters and we mentioned this, we’ve averaged 40 basis points in net charge-offs, we’re under 40 basis points. And those are the types of metrics that we’ll continue to look at as we move forward. Our ability to move some of the nonperforming assets out is like we saw in the first quarter, 34% reduction in nonperforming assets. Will that trend continue along the same path and as I mentioned in the net charge-off piece? So those are the key dynamics that we would look at.

Okay, perfect. And then separately, Chuck, maybe you could speak to this, you noted the potential for some M&A opportunities, I wondered if you could just expand upon that thought a little bit or are you talking traditional bank deals or branch acquisitions or even fee business type deals? What kinds of things are you seeing as most likely and most attractive at this point?

All of the above. We’re looking at banks, we’re looking at insurance agencies, we’re looking at some small investment opportunities, so all of the above.

And our next question will come from Daniel Cardenas of Raymond James.

Quick question: on the loan side, could you maybe talk a little bit about how the pipeline is looking and how the second quarter is shaping up versus expectations?

Yes, the pipeline is strong and we feel really good. Even our first quarter numbers, while quarter-over-quarter on an average basis was down a hair, if you look at it from the end of the last day of December to the last day of March, we’re actually up $6 million, and that’s with a $10 million reduction in NPAs and OREO. And so I actually think that our loan originations are reasonably strong and will continue to be reasonably strong. And we were thrilled with getting out of some of those credits that we’re able to get out in the first quarter. Our portfolio is markedly better today than it was a year ago. And at some point, we still have a little more work to do but at some point, we’re going to slow the rate of outflow of credit. And if we can sustain the rate of inflow that we’ve had in the last 6 months, the portfolio was going to grow nicely. So we are optimistic about loan growth. We are pleased with our pipeline. We are thrilled with the credit improvements and we’re optimistic that the next few quarters will -- the next 4 quarters will show more loan growth than you’ve seen in the prior 4 quarters.

Okay. And so then as we look at this, I mean categorically, do you see more of the growth coming from the C&I portfolios or I mean where do you see as the key drivers here, is it going to be consumer?

I think the C&I will grow. I believe consumer will grow, I think you’ll see growth in some auto, I think you actually saw actually our loan balances grew in mortgage slightly and we’ll look to continue to broaden that out. And we are seeing some very good CRE loans right now and we continue to want to upgrade our CRE portfolio as we’ve flushed out some less desirable credits. If we can replace them with A-tier names, we’re taking advantage of that opportunity.

And then maybe just a quick comment or 2 on competition, what is that looking like right now? Is it primarily from the larger institutions and go from there?

Yes, I would say that we have the ability to improve our performance irregardless of the competition, but to answer you -- we still have lots of operating improvements in our businesses that are within our control, but with respect to the competition, I would say the large regional banks and the large national banks that are in our footprint, those are our best source of customers. That’s where we’re seeing commercial business, where folks are frustrated with the lack of attention and the lack of response. Not to give you too many vignettes, but we’ve actually closed loans before some of those competitors have been able to respond to customers' request. And so I think that nimbleness, that agility is where we’re looking to compete. On the smaller end of the market, the local community banks -- these are tough times for small banks. And I think the lot of them are feeling stressed from earnings pressure from the regulators, and I think it’s creating less aggressiveness out in the marketplace. I think it’s creating opportunities for us in terms of acquisition conversations. So I like where we are. We’re big enough that we can matter, be responsive, make a $10 million, $15 million loan small enough that we can nimble, yet big enough that we can add the talent to drive credit performance improvements that you’re seeing and have the technicians and the experts in-house to satisfy the regulators. So I actually think we’re in a pretty sweet spot for a number of years.

Excellent, excellent. And then just kind of switching gears quickly on the M&A front, I guess specifically as it applies to the bank side, can you comment a little bit on seller expectations and whether or not they are coming more in line with your thoughts?

I think that there is always a gap and there is always a negotiation and always some arm wrestling, but we’ve come close a few times. We’ve walked away from several deals where we weren’t satisfied with either the price of the quality and as Ed’s comments laid out or in the comments we laid out what we’re looking for in terms of dilution and impact, and then we’re going to stick to that. We want to do deals that help us from portfolio perspective. And I think we’re seeing enough opportunities that we will get some to the finish line and I think the ones that we do will be meaningfully accretive and I am optimistic. And I think that we’ve got a set of disciplines in place, the management and team in place that we have a lot of capability and we have a lot of scale here. So I think doing some meaningful acquisitions in the next 12 to 24 months is only going to help us greatly.

Okay. And then just one last question on the M&A front in terms of acquisition strategy, I mean, is the goal to remain in smaller towns or are you looking to go into some of the bigger markets?

Dan, I like the markets we’re in. I am not a fan of kind of -- if I am going to getting to fight, I am going to get the skinniest, tiniest looking person I can find. And I am not a fan of going into Columbus and try to go toe to toe with Huntington and their hometown or Chase where they’ve got 19,000 employees in the town. So I like these B and C tier markets and I like the fact that the PNC, the Fifth Third, the Chase, the Huntington, that their talent is 2 hours away when it comes from larger commercial deals or investments. So you will see us on the periphery of some large towns but it’s going to be a while before we go into large towns.

Okay, excellent. And then just one question on credit quality and I’ll step back. Just want to make sure TDRs, still at zero?

TDRs?

Troubled Debt Restructures, yes.

Yes, we had no TDRs for the quarter.

And our next question will come from Bernard Horn of Polaris Capital.

Most of my question was answered by your response to the competitive environment, but I guess I am maybe just one other twist on that. Your local market area is kind of -- it’s not a thriving metropolis market area I guess, and you’ve also got some good competition from across the river there, not a large huge bank but just a good competitive, well, big quality bank. So maybe you can just give us a sense for what the economic environment is like, because it’s interesting that most banks have a difficult time trying to increase loan balances and you seem to be able to do it. So is it underlying economic demand that’s doing well, that’s creating this loan demand or is it just people moving from bank to bank and then likewise on your side, how much pressure is there for you folks on refinancing existing loans that will potentially drive margins down as well?

Bernie, I’ll take a whack at it, you asked a lot of different questions, so if I miss anything come back to me. You’re right, United is a very small respected competitor and disciplines in the underwriting which we thoroughly appreciate. By and large, our footprint is slow growth, lower average earnings. A surprising number of our counties, though, the unemployment rate is lower than the national average right now, Ohio’s unemployment rate has dropped significantly. One of the stimulus to that is the oil and gas boom. That has caused some demand, a small amount of our credits have been geared towards that. That’s probably the only sign of growth that we have. The rest of it comes from taking business away from the competitors. We think that we have gotten better at that. Part of that has been upgrading talent in all of our lines of business. We have let some folks go who were not producing and we have trained everyone in every line of business on a set of sales disciplines and processes, but also we’re really focusing on how to improve the quality of the advice, the quality of the dialog we have with borrowers, with investors. And we think we see improvements. When we do our line of business reviews every month and every line of business and we look at the metrics that we use to track the drivers to revenue growth, we are seeing more and more of positives on the fee income businesses, on new customer acquisition, a decrease on customer attrition. So it’s kind of 3 yards and a pile of dust kind of day after day after day. It’s nothing sexy, it’s just kind of fundamental trying to outwork the other institutions. So we will do well. We will do better than we’ve been doing if the economy stays where it is or even if it declines a little bit. We can execute better than we’re executing. I don’t think the economy is going to get worse than where it is. I think our execution will improve and I think that there is a lot of fatigue out there in the marketplace in terms of competitors. Every time we talk to people, competitors, particularly the large ones, are cutting resources, taking feet off the street, and I think that gives us more opportunity.

All right, that’s very helpful. And then just in a lot of markets the whole rush to refinance is just, with rates where they are kind of endless. Do you have a sense of that’s a very big topic in your -- among your customers and competitors?

I don’t know what it’s doing for the competitors. As for us and the customers, we have seen some mortgage refinancing activity and we have had large mortgage volume in the first quarter of this year. In terms of our commercial loan portfolio, we really have not had too many challenges in terms of being stuck up for rate, I think that the price pressure in the marketplace is greater today than it was 90 days ago or 6 months ago, but by and large we’re not seeing terrible deterioration.

And our next question will come from Brian Horey of Aurelian.

I was wondering if you could give any detail on what you consider to be the sweet spot of your acquisition targets from a size standpoint.

Brian, we’re looking at a couple of different things. On the bank side, we’re looking at banks less than -- certainly less than a $1 billion. We looked at a bunch of really tiny banks, sub $200 million banks and just kind give you some examples of some $50 million institutions give or take $10 million. They are running on what, in one case up to 28 people. We probably run them with 6 people, 7 people. So you look at some of the economics of doing that. Picking up an office in a town that’s in your footprint, it’s not necessarily a bad thing. And then we’re looking at other opportunities that to the higher side of that range that I put out. And so we kind of nowhere we want to be from a geography standpoint and just looking at opportunities that we think are good strategic fits and position us better for the future.

Okay. And then you mentioned the oil and gas. Can you talk about what part of the footprint that’s having the biggest impact on, and what do you see there in terms of prospects for growth going forward?

First off in terms of geography, it’s in the Eastern portion of the -- South Eastern portion of Ohio. So the kind of Cambridge area, we have an office in Cambridge and Waynesville, they are kind of right in the heart of it. We have branches -- some branches throughout it, and also in West Virginia. We’ve seen lot of money flowing into clients’ hands, long-term residents, farmers, people with acreage. That money is going to be used for quite frankly, it’s going way too often for my taste to pay down debt. The loans that we’re seeing that are going the other way are some of the companies that are related to the business. So we’re not obviously doing the funding of the wells, I mean those are the $5 million to $8 million each and those have been done by Chesapeake and other large Fortune 100 companies. But we are funding some of the related ancillary businesses to that. It also had some side benefits for us. In a lot of our communities, you see much more volume in restaurants, much more volume in hotels. And some of these places that have been hurting for a number of years, you can't get a hotel room. And so restaurants are busy, hotels are busy, there is a little bit more money flowing in these towns and that has benefits to us.

And are you seeing any -- on the industrial side, any growth from firms that are supporting a supporting role to the drillers?

We have a couple of organizations but very, very minor and good customers that the companies and provide pipes for some of that stuff and we’ve seen some increases there. But for the most part, that’s been very minor.

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

Yes. Thank you. I want to thank everybody for participating. Please remember that our earnings release and webcast of this call will be archived on www.peoplesbancorp.com under the Investor Relations section. Thank you for the time and have a good day. And we look forward to continuing many good releases for the quarters to come.

This will conclude today’s conference call. You may now disconnect you lines.