Good morning, and welcome to Peoples Bancorp’s conference call. My name is Denise and I’ll be your conference facilitator today. Today’s call will cover Peoples Bancorp’s discussion of results of operations for the quarter ended December 31, 2012. 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 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 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, changes in economic condition, the success, impact and timing of the strategic initiative, 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 fourth 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 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.

Thank you, Denise. Good morning, and welcome to our call. Earlier today Peoples Bancorp reported fourth quarter 2012 earnings of $0.36 representing a 9% increase over the prior-year. For the full year earnings per share were $1.92 in 2012 versus a $1.07 in 2011, a 79% improvement. Our shareholders also saw the value of their investments increased by 41% during the year. The major accomplishment for 2012 was the return to positive operating leverage, which ended a 3-year negative trend. Revenue growth was driven mostly by our strong fee-based businesses. Operating expenses also were generally contained with increases tied directly to revenue growth, our new brand and acquisition activity. Ed will provide additional details we got in 2012 expenses later in this call. Another key success with the modest loan growth in 2012 ending a 5-year slide. Period end loan balances finish the year $47 million or 5% higher than the prior-year-end. The Sistersville acquisition completed in the third quarter was a key driver of this growth. We also experienced a sizable increase in new loan production during the year. Much of our new loan production in 2012 was offset by ongoing problem loan workout. We also experienced some sizable pay-offs during the fourth quarter. These pay-offs included a $10 million CRE credit that refinanced through the capital markets. As a result, loan balances felt slightly from the prior quarter end. Still, fourth quarter our average loan balances were up 5% year-over-year. Now that asset quality is mostly restored, we should see even stronger loan growth. Our 2012 earnings also benefited from a sustained improvement in asset quality. We reduced total non-performing assets by 54% during the year. Our 2012 net charge-off rate also was lower than our long-term historical level of 20 to 40 basis points. As a result,…

Thanks, Chuck. Our fourth quarter and full year 2012 operating results reflected success in several key areas. Bottom line earnings benefited from stronger revenue generation within our fee-based businesses, plus lower credit costs. Our operating efficiency improved due to disciplined expense management. We also maintained a relatively stable net interest margin in a tough interest rate environment. Overall, we’re pleased with these results and are working to build upon the earnings momentum created in 2012. As Chuck mentioned, our fourth quarter earnings were impacted by the redemption of our trust preferred securities in mid-December. These securities were issues originally in 1999 and not scheduled to repay until 2029. The decision to redeem the securities was based upon 2 factors, a short loss recovery period, and minimal impact on our capital position. As previously disclosed, we will realize $1.1 million interest expense savings beginning in 2013. Thus, we will recover the entire fourth quarter loss within 1 year. The savings would be greater in future years as we repay the new loan using earnings. From a capital perspective this transaction reduced our year-end Tier 1 capital ratio by nearly 2%. However, there was minimal impact on our tangible equity. In recent quarters our common equity has increased due to the earnings improvement. This stronger capital position afforded us the ability to execute this strategy. In addition, we fully expect trust preferred securities will lose their current regulatory capital treatment when the final rules are issued. Taking a closer look at our operating results, we had anticipated modest margin compression in the fourth quarter due to the lower rate environment. As it turns out, we saw a net interest margin expand 12 basis points to 3.42%. However, much of this improvement was a result of one-time income related to nonaccrual loans and…

Thanks, Ed. Improving our operating performance in 2012 was a significant accomplishment given the challenging conditions within the banking industry. We generated positive operating leverage in spite of very low interest rates and modest loan growth. Asset quality continued to improve resulting in sizable reserve releases. However we are more excited by the long-term benefits we will reap from the strategic actions taken in 2012. These included investing in our consumer lending activities, completing acquisitions in all 3 business lines, rolling out our new brand and repaying our high course trust preferred securities. As we start 2013, we're already working to build upon the successes of 2012. Earlier this month we expanded our insurance business by purchasing an office and related commercial accounts in Pikeville, Kentucky. The acquired accounts are expected to generate $1.6 million in annual revenue. This was a unique transaction. The seller was a large national insurance agency who was seeking to exit this market. As a result the pricing was lower and the structure less complex than what you normally see in a whole agency acquisition. As is typical with insurance acquisitions, most of the purchase price became an intangible asset that we must amortize in future years. Thus the bottom line contribution of this acquisition is not expected to be material to 2013 results; rather it demonstrates our commitment to maintain revenue diversity by completing acquisitions in all 3 business lines. On the banking side, we’re expecting meaningful loan growth in 2013, as Ed mentioned earlier. In 2012 our bank has generated over $500 million in new loans nearly 60% higher than the prior year. A quarter of the 2012 production was the result of individuals refinancing their home mortgages. The remainder was due to C&I lending opportunities within our markets, plus our expanded consumer…

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

Just had a couple of quick questions I think, Ed probably most appropriate for you. So, if you kind of wade through all the noise on the cost side, it sounds like you’re at sort of $16.5 million kind of core quarterly run rate, and then just taking your reported roughly $63.5 million of expenses from 2012 and just putting kind of a low single-digit growth rate on that, kind of implies that you’re probably not going to grow the expense dates much above the $16.5 million that you’re currently at. Is that a fair way to look at? In other words expenses will be higher by probably not much growth off where we’re currently at?

Yes, I think that’s probably reasonable Scott. $16.5 million I look at that as a forward run rate for the quarter. So, I think we’re there.

Okay. Perfect. And then, I was just hoping for a little more color on the insurance, the contingent revenue number, I just want to make sure I understand perfectly clearly, so I think you said maybe down 50% from what you saw a year ago in that number, but I just want to make sure for at about $2 million run rate as of the fourth quarter and in total insurance income, are you suggesting that could be down 50% sequentially in the one quarter -- pardon me in the first quarter before recovering? And then what's the full year outlook in terms of growth on the insurance side?

Yes, insurance income in total for 2012 is close to $10 million. One piece of that is the contingency income which is about $1 million for 2012, okay?

Yes.

So what we would expect to see is somewhere between $500,000 and $1 million as we move into 2013, so that’s where that 50% is coming from, Scott.

Scott, just a piggyback on that contingent; that $0.5 million reduction is in the first quarter.

Yes.

Yes.

And then I guess just a follow on and kind of close the loop on it, still though expecting on a year-over-year basis positive growth and I would hope kind of pretty positive growth on the insurance side?

Absolutely.

Yes.

And our next question will come from Chris McGratty of KBW.

This is Mike Perito stepping in for Chris. Just building on your comments about M&A, can you maybe just give us a little update on your outlook in terms of bank, non-bank deals, your appetite for those, size, footprint, stuff like that. Has any of that changed, or?

No, it’s pretty much where it has been. I mean we’re looking at doing deals in the 3 lines of business, banking, insurance and investments. In terms of bank deals, we’ll continue to focus in Ohio, West Virginia and Kentucky, both in markets that we’re in and markets along the I-77 corridor, in Ohio and in the southern portion of the state south of 70. In West Virginia we’d love to do deals on down I-77 to Charleston and then from Charleston west and in Eastern Kentucky we’d look at deals. It’s kind of similar with the investments and the insurance opportunities that we’re looking at, and so we continue to have conversations, multiple conversations going on in each line of business and we’ve done due diligence on a number of institutions in terms of banks, to date we’ve only done the one. We’ve walked away from a couple and we lost one, we came in kind of second place in the beauty contest where we think the buyer it’s going to take them probably close to 8 years to earn back the tangible book value dilution and we’re just not willing to do that.

Okay, great. And I guess moving on to the reserve, I know you guys, you said you’d take it on a quarter-by-quarter basis, but with the sustained credit improvement you guys have been having, do you expect the general trend of the reserve to kind of slowly bleed down still going forward?

I think there’s more reason to expect the reserves to go down certainly than they are to go up, but obviously we’ve had a tremendous amount of reserve reduction and as we grow the loan portfolio it’s going to be difficult to have the continued rate of decrease.

And then just one last housekeeping item. Could you guys give me, what you think for the effective tax rate going forward for you guys?

Mike, it’s Ed Sloane, I would expect the tax rate to be in the 31% to 32% range going forward.

[Operator Instructions] The next question will come from Daniel Cardenas of Raymond James.

Did I hear you guys right, you say you are looking for loan growth of 8% to 10% for 2013?

Correct.

Okay, and I guess, maybe if you could talk a little bit about geographically I mean, do you expect that to be across the footprint and then, maybe more on the competitive side, I mean, are you seeing a retraction of competition, I mean what gives you confidence in being able to grow the portfolio at a fairly substantial clip in still a pretty tough economy?

Well let’s take it by business line and let’s kind of talk through the geography in the competition. First off, if I think on the commercial side, if we sell as much as we did in 2012, if we sell that, the 2012 amount in 2013 I think we’ll get the loan growth. We’ve had, as we’ve gone through the last 8 quarters, really made dramatic improvements in that portfolio. What has hampered our growth on the commercial side has really been the outflows, not necessarily the inflows. We think that we’ve got most of that credit quality in the portfolio improvement in place and we expect the rate of outflows to decrease. Also, don’t forget there is a fair amount of activity in our geography with this energy opportunities, and we’re poised to take advantage of those. And then finally on the consumer lending portion which is going to grow as much as the commercial in absolute dollars, the company has been less involved in consumer lending than one might expect for a company with our footprint and size and we're making investments, we’ve hired last year someone who ran consumer lending at a institution couple of times larger than us. We’re hiring people to help us with that in terms of representatives to work with the dealerships and, that are in our footprint. So, while the percentage increase in consumer lending will be large, the actual dollar volume will be pretty small. So, it’s a combination of putting emphasis on businesses like indirect which historically we’ve been in, but not really growing, focusing on sectors that provide opportunity for us like the energy business and then finally the continued curing of our portfolio will give us growth.

Okay, and then is what you’re seeing in the energy sector, is that playing out as you anticipated it would play out, or is it little bit faster or little bit slower?

We remain very cautious, what’s beginning to see on a daily, almost daily, certainly weekly basis investment in deposit opportunities. And that’s where most of our focus has been on kind of the estate planning and the wealth management pieces. We’re selective in lending to companies that are in the business and we’re taking those opportunities selectively. I would say what is perhaps unusual when you think about our geography, because we clearly are in Appalachia and all of us for generations think of this as a dying and depressed area. I think one of the things that’s kind of interesting right now is you have, Ohio, use Ohio data because most of our market is in Ohio, most of your bank is still largely an Ohio bank. Ohio’s unemployment is 1% better than the national average and then you look at the counties where we’re in, for instance the Washington County which is where Marietta is, that unemployment level is almost 1% better than Ohio. So, the oil and gas play is helping us revitalize the overall economy of the area and we’re seeing benefits everything from hotel occupancy to the vitality and vibrancy of the income statements that are, merchants are producing, so I think the oil and gas has been more beneficial to us, in terms of wealth management, deposits, investments and the overall vitality of the area than it has been necessarily from the probably $20 million, $30 million worth of loans we garnered last year in that category.

And then just kind of given in expectations for loan growth, I mean I appreciate the guidance for the first quarter margin, but I mean as the years goes on I mean, do you think you would be able to sustain a margin in the 330 - mid 330 levels?

I think so. I think that you’re going to see the mix of our loan production change, so we’ll be doing more consumer lending with a much higher margin. That will help mitigate some of the investment portfolio issues that we’ve been experiencing.

And Dan, if I could just add to that, you have to also assume that the yield curve stays essentially where it’s at. If we see that steepen a bit then that could have a more positive impact on margin. If we see a drop off then, it would be the other way. So, you always have to think about where interest rates are in relative terms to where they are today.

Great. Okay. And then maybe if you could just -- last question here, if you could just talk a little bit about what you’re seeing from competitors, are you seeing the larger banks step up competition? And is it mostly if they are, is it mostly on the rate side or are you seeing some give up on terms?

I would say that it’s mainly on rate, less on terms. And I would say also, I think most of the larger banks are involved in cost cutting in one way or another and I think their ability to serve our markets continues to decrease and continues to come our way. Most of our geography is, 2 hours, 2.5 hours or more away from Columbus or Pittsburg or Cincinnati. And when you get to any sizable loan over a couple of million bucks or any sizable investment opportunity, that -- those are the markets where the customer’s being serviced at, and their ability to be responsive continues to decrease. So, we remain very, very optimistic. Most of our new business comes from the larger players. If you look at the mid-range regional or community -- the large community banks, however you want to view the United, the WesBancos, the Parks, we have very little business being lost to them and very little business being taken away from them. And certainly the community banks, the smaller banks are pretty insignificant and pretty passive at this point in time, where our major wins come from the larger -- the Huntingtons, the PNCs, the Fifth Thirds, the Chases and so forth. So, that’s how we see it.

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

Yes. I just want to thank everybody for participating. We remain extremely optimistic about what’s happening here and very excited about 2013. Please remember that our earnings release and a webcast of this call will be archived on peoplesbank.com under the Investor Relations section. Thanks for your time and have a great day.

And ladies and gentlemen, the conference has now concluded. We thank you for attending today’s presentation. You may now disconnect your lines.