피플스 방코프(PEBO) 2026년 3분기 실적 발표회: 마진 성장 및 합병 전망

핵심 요약

• 피플스 반코프(Peoples Bancorp Inc.)는 2026년 3분기 희석 EPS $0.91, 조정 희석 EPS $1.04를 기록했다고 발표했습니다.
• 순이자이익은 전분기 대비 1%(110만 달러) 증가했고, 순이자마진(NIM)은 8bp 확대되었습니다. 경영진은 시티즌스(Citizens) 합병에 힘입어 4분기에도 마진이 8~10bp 추가 개선될 것으로 전망하고 있습니다.
• 수수료 기반 이익은 전분기 대비 5% 증가했습니다. 대손충당금 전입액은 360만 달러로 24% 감소했으나, 연환산 순상각률은 31bp에서 35bp로 상승했습니다.
• 1억 6,000만 달러 이상의 상업용 대출 상환에도 불구하고, 전체 대출은 1,900만 달러(연환산 1%) 증가했습니다. 시티즌스 합병을 통해 4분기 중 약 3억 5,000만 달러의 대출과 5억 5,000만 달러의 예금이 추가될 것으로 예상됩니다.
• 경영진은 인수되는 시티즌스 대출을 포함해 2026년 연간 순이자마진 4.2%~4.3%, 분기별 수수료 기반 이익 2,800만~3,000만 달러, 대출 성장률 6%~8%를 전망하고 있습니다.
• 피플스는 2026년 10월 말 시티즌스 합병을 마무리할 것으로 예상하고 있습니다. 캐피털 뱅크 Corp(Capital Bank Corp) 인수는 2027년 1분기 말 또는 2분기 초에 마감될 것으로 예상됩니다.

핵심 재무 데이터

이번 분기 실적에는 매도가능증권 처분손실 450만 달러(희석 EPS $0.10 감소 요인)와 인수 관련 비용 150만 달러(EPS $0.03 감소 요인)가 포함되었습니다. 인수 비용을 제외한 비이자비용은 전분기와 비슷한 수준을 유지했습니다.

사업 및 영업 실적

경영진에 따르면 상업용 대출 신규 취급액은 역대 3번째로 높은 분기 수준을 기록했으며, 대출 포트폴리오 비중이 상공업 대출 중심으로 계속 이동하고 있습니다. 건설 대출은 4,000만 달러, 상공업 대출은 3,400만 달러, 주택담보신용대출(HELOC)은 1,000만 달러 증가했습니다.

이러한 증가세는 상업용 부동산 대출 3,800만 달러 감소, 주거용 부동산 대출 1,400만 달러 감소, 리스 1,200만 달러 감소로 일부 상쇄되었습니다. 경영진은 상업용 부동산 대출 감소의 대부분이 대출 상환 때문이라고 설명했습니다. 피플스는 이번 분기 1억 6,000만 달러 이상, 2026년 첫 9개월간 총 약 4억 6,000만 달러의 상업용 대출 상환을 기록했습니다.

중개 양도성예금증서(CD)를 제외한 핵심 예금은 1,900만 달러 증가했습니다. 이자부 요구불예금이 5,200만 달러, 머니마켓계좌(MMA)가 4,600만 달러 증가한 반면, 개인 CD가 4,400만 달러, 무이자 예금이 3,400만 달러 감소하며 일부 상쇄되었습니다.

피플스는 수익률 약 1.5% 수준인 증권 약 5,900만 달러어치를 매각해 450만 달러의 손실을 냈습니다. 이번 구조조정은 연말까지 총자산을 100억 달러 미만으로 유지하고 투자 포트폴리오 수익률을 개선하기 위한 조치였습니다.

소액 리스 상각 건수는 지속적으로 감소했습니다. 경영진은 현재 약 1억 달러 규모인 이 포트폴리오가 2027년에 성장세로 돌아설 것으로 예상하며, 성장은 하반기에 집중되어 회사의 대출 성장 전망치에 반영되어 있다고 밝혔습니다.

경영진 가이던스

경영진의 2026년 전망치는 비핵심 비용을 제외하지만 시티즌스 합병 영향은 포함합니다.

경영진은 시티즌스 인수 거래, 증권 구조조정, 시티즌스 예금 기반 추가에 따라 4분기 순이자마진이 약 8~10bp 상승할 것으로 예상합니다.

비핵심 비용 및 계획된 캐피털 합병 건을 제외한 2027년 전망에 대해 경영진은 다음과 같이 제시했습니다.

2027년 마진 전망은 2026년 말 연방준비제도(Fed)의 25bp 금리 인상 후 2027년 3월과 9월 추가 인상을 가정합니다. 경영진은 무이자 예금을 포함한 비만기 예금의 베타를 약 30%로 추정했습니다.

리스크 및 주요 관심 영역

2건의 상업용 부동산 대출과 1건의 상공업 대출 등급 하향 조정으로 분류여신(Classified loans)이 3,000만 달러 증가했습니다. 경영진은 해당 여신을 정리하고 있어 큰 손실은 예상하지 않으나, 시티즌스 대출이 편입됨에 따라 4분기에 요주의 및 분류여신 잔액이 증가할 것으로 전망합니다.

간접 소비자 대출 연체율이 소폭 상승했습니다. 경영진은 소비자의 경제적 부담, 금리 상승, 연료비 인상을 원인으로 꼽으면서도, 신규 대출 취급 건의 신용점수는 750점 근방을 유지하고 있다고 언급했습니다.

예금 유치 경쟁이 심화됨에 따라 경영진은 부분적으로 개인 CD 금리 조정을 통해 조달 비용 압박을 관리할 계획입니다. 또한 피플스는 시장 상황 및 자산 규모 관리에 따라 4분기에 200만~300만 달러의 추가 증권 처분 손실이 발생할 수 있다고 밝혔습니다.

회사는 더빈 규제 관련 한도에 따라 2028년 7월부터 연간 1,100만 달러의 가맹점 수수료 수입 감소가 발생할 것으로 계속 추정하고 있습니다. 경영진은 캐피털 인수 거래가 이 추정치를 실질적으로 변화시키지 않는다고 말했습니다.

애널리스트 Q&A 하이라이트

• 캐피털 인수 거래 시기: 경영진은 인수가 2027년 1분기 말 또는 2분기 초에 완료될 것으로 예상합니다. 캐피털의 전체 비용 절감 효과는 2028년이 되어서야 나타날 것으로 예상됩니다.
• 캐피털 인수 후 마진: 캐피털 실적이 분기 실적에 완전히 반영되면 경영진은 순이자마진이 5%에 접근하거나 달성 또는 5% 근처를 유지할 것으로 기대합니다. 다만 인수가 연 전체에 기여하지는 않기 때문에 2027년 연간 마진이 5%에 도달할 것으로 보지는 않습니다.
• 대출 상환 불확실성: 경영진은 1억 5,000만~1억 8,000만 달러의 추가 상환을 예상하고 있으며, 이것이 2026년 4분기에 발생할지 2027년 1분기로 이월될지는 불확실하다고 보고 있습니다.
• 2027년 대출 포트폴리오 구성: 경영진은 상업용 대출 약 5%, 리스 6%~7% 성장을 예상하고 있으며, 상업용 대출 확장은 상업용 부동산보다는 상공업(C&I) 대출에 더 비중을 둘 것으로 예상합니다.
• 충당금 적립률: 대출 대비 대손충당금 비율은 초기에는 1.11% 수준을 유지하다가 캐피털이 추가된 후 시간이 지나면서 1.2%까지 상승할 가능성이 있습니다. 시티즌스가 이 비율에 미치는 실질적인 영향은 없을 것으로 예상됩니다.
• 금리 민감도: 경영진은 피플스를 중립적이거나 약한 자산 민감형(asset-sensitive)으로 설명하며, 25bp 금리 인상이 약 5bp의 마진 개선 효과를 제공할 것으로 추정했습니다.

실적 발표 컨퍼런스 콜 전문

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전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Thank you. Good morning and welcome to Peoples Bancorp Inc.'s conference call. My name is Gary and I will be your conference facilitator. Today's call will cover a discussion of the results of operations for the three and nine months ended September 30, 2026. [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 will contain projections or other forward-looking statements regarding PPG'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 Peoples' Securities and Exchange Commission filings. The management believes the 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 2026 earnings release and earnings conference call presentation were issued this morning and are available at peoplesbankcorp.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 15 to 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 peoplesbankcorp.com in the Investor Relations section for one year. Participants in today's call will be Tyler Wilcox, President and Chief Executive Officer, and Kathryn Bailey, Chief Financial Officer and Treasurer, and each will be available for questions following opening statements. Mr. Wilcox, you may begin your conference.

Tyler Wilcox

Thank you, Gary. Good morning, everyone, and thank you for joining our call today. Activity levels at Peoples are high as we focus on a number of strategic priorities, working to close the Citizens merger at the end of this month. We also recently announced the pending acquisition of Capital Bank Corp, which we expect to close in 2027. We are excited about these strategic initiatives and the opportunity to enhance our capabilities, products, services, and company performance as a result of investments. Focusing on the present, we continue to be pleased with our consistent and high-performing core results as reflected in our third quarter 2026 earnings, which we released earlier this morning. For the third quarter, we reported diluted earnings per share of $0.91. When adjusted for one-time items, our diluted EPS for the quarter was $1.04, which exceeded consensus analysts' estimates of $0.93.

Our one-time items for the quarter included a $4.5 million loss on investment securities, which reduced diluted EPS by ¢10. This was part of our planned effort to remain below $10 billion in assets with the pending Citizens merger and acquisition-related expenses of $1.5 million, which reduced our diluted EPS by 3 cents. Some of our highlights for the third quarter include improvements in our net interest income, which was up 1%, expansion in our net interest margin of eight basis points, growth in our fee-based income of 5%, provision for credit losses declined 24%, improvement in our efficiency ratio adjusted for one-time items, higher return on average assets, which was 1.36%, increased return on average stockholders' equity of 10.44%, declines of 11% in our non-performing growth in our lower-cost interest-bearing demand deposit and money market accounts of nearly $100 million combined, and improved regulatory capital ratios. Our provision for credit losses declined to $3.6 million, a 24% reduction compared to the second quarter.

Our allowance for credit losses to total loans was 1.11%, a three basis point decrease compared to June 30th. The reduction in our provision for credit losses for the quarter was due to declines in reserves for individually analyzed loans, coupled with updates to our prepayment, curtailment, and funding rates, partially offset by higher net charge-offs. Our annualized quarterly net charge-off rate grew to 35 basis points compared to 31 basis points for the linked quarter. For the third quarter, we had higher commercial and industrial loan charge-offs, along with increases in commercial real estate and consumer indirect loan charge-offs. At the same time, we had a reduction of 25% in our lease charge-offs. As anticipated, our small ticket lease charge-offs have declined throughout 2026. We remain committed to our small-ticket leasing business, and see a return to growth coming throughout the year in 2027 with a focus on appropriate risk-adjusted returns and minimized volatility. For the third quarter, our non-performing loans declined $4 million, or 11%, compared to the linked quarter end, which was driven by lower non-accrual loans.

Indexed loans decreased $18 million, while classified loans grew $30 million. For the third quarter, we had downgrades of two commercial real estate relationships and one commercial and industrial relationship, which drove the increase. We do not anticipate significant losses as we are in the process of exiting these credits. We expect an increase in our Criticized and Classified Loan balances during the fourth quarter as we onboard the loan portfolio from the Citizens Merger. Our delinquency levels continue to improve with 99.2% of our loan portfolio considered current at September 30th compared to 99.1% at the linked quarter end. Moving on to loan balances, we had increases of $19 million or 1% annualized compared to June 30th. We mentioned on our last quarterly earnings call that we had expected payoffs later in the year that would be a headwind for loan growth, and we realized some of that this quarter with commercial payoffs of over $160 million.

We have also been selective with our lending activity, as we are strategically managing under the $10 billion mark through year-end. Most of our increases in balances was in construction loans, which were up $40 million, while commercial and industrial loans and home equity lines of credit grew $34 million and $10 million, respectively. We had reductions of $38 million in our commercial real estate loans, which were due to the aforementioned payoffs, while residential real estate loans declined $14 million and leases were down $12 million. For the fourth quarter, the Citizens merger is expected to add nearly $350 million of loans before purchase accounting adjustments. I will now turn the call over to Kathryn for a discussion of our financial performance.

Kathryn Bailey

Thanks, Tyler. Our net interest income grew 1% or $1.1 million, while our net interest margin improved 8 basis points. Increased investment in loan yields contributed to the higher margin, while net interest income benefited from higher loan income. Accretion income totaled $1 million compared to $1.1 million for the linked quarter, contributing four basis points and five basis points to net interest margin, respectively. For the first nine months of 2026, net interest income improved 5% or $12.8 million. Net interest margin expanded eight basis points over the same period and was mostly attributable to our lower deposit costs. Our interest expense on deposits declined nearly $19 million compared to the first nine months of 2025. Accretion income totaled $3.4 million compared to $7.8 million for 2025, five basis points and 12 basis points to net interest margin, respectively.

As it relates to our interest rate exposure, we are relatively neutral to slightly asset sensitive. We have been in this position for several quarters and the two pending mergers will not have a meaningful impact on our overall interest rate risk position. Moving on to our fee-based income, we had growth of 5% compared to the linked quarter, driven by higher lease income, as well as increases in deposit account service charges, trust and investment income, and bank-owned life insurance income. For the first nine months of 2026, fee-based income grew 8%. The improvement was mostly due to increased lease income, trust and investment income, and deposit account service charges. Our non-interest expenses were up 2% compared to the linked quarter. This included $1.5 million of acquisition-related expenses, which were largely professional fees.

Excluding these expenses, non-interest expenses were flat compared to the second quarter. For the first nine months of 2026, non-interest expenses were up 4%. This included $1.9 million of acquisition-related expenses, which was the primary driver of our higher professional fees. Salaries and employee benefits also contributed to the growth, along with operating lease expense, which corresponds to our fee-based lease income. Our reported efficiency ratio was 58.5% for the third quarter, an increase compared to 58.3% for the linked quarter. Excluding acquisition-related expenses, our adjusted efficiency ratio was 57.3% for the third quarter compared to 57.9% for the second quarter. For the first nine months of 2026, our reported efficiency ratio was 58.5% compared to 59% for the prior year and was driven by higher revenue.

Excluding acquisition-related expenses, our adjusted efficiency ratio was 57.9% for 2026 compared to 59% for 2025. Looking at our balance sheet, our investment portfolio as a percent of total assets declined to 18.3% at quarter end compared to 19.1% at June 30th. We completed another sale of securities as part of our investment portfolio restructuring related to the Citizens Merger, which resulted in a $4.5 million loss for the quarter on the sale of approximately $59 million of securities. In addition to providing flexibility to remain under $10 billion, this will also improve the yield on our investment portfolio. Our loan-to-deposit ratio grew at quarter end to 91.9% compared to 91.5% at the linked quarter end, mostly due to lower deposits and some loan growth for the third quarter. Our core deposit balances, which excludes brokered CDs, were up $19 million compared to June 30th. We had significant increases in our interest-bearing demand and money market accounts, which were up $52 million and $46 million respectively.

These increases were partially offset by reductions of $44 million in retail CDs and $34 million in non-interest-bearing accounts. Our demand deposits as a percent of total deposits was flat at 36% for both September 30th and June 30th. Our non-interest-bearing deposits to total deposits ratio was unchanged at 21% at quarter end and at June 30th. The Citizens Merger is expected to add approximately $550 million of deposits for the fourth quarter of 2026. As far as our capital levels, all of our regulatory capital ratios improved compared to the linked quarter end as earnings outpaced dividends. Our tangible equity to tangible asset ratio declined this quarter and was negatively impacted by increased unrealized losses on our available for sale investment portfolio. I will now turn the call back over to Tyler for his closing comments.

Tyler Wilcox

Thank you, Kathryn. We are focusing on successfully closing the Citizens merger this month, while also prioritizing our work on the pending Capital merger. These mergers will set the stage for our future strategic growth, including expanded market areas within our footprint, through financial metrics such as higher net interest margin and lower efficiency ratio, and the ability for our associates to have more meaningful conversations with existing and new clients about the diversified products and services we provide. For the fourth quarter and full year of 2026, we have the following performance expectations, excluding the impact of non-core expenses, but including our Citizens merger. We expect to achieve positive operating leverage for 2026 compared to 2025. We anticipate our net interest margin will be between 4.2% and 4.3% for the full year of 2026. We believe our quarterly fee-based income will range between $28 million and $30 million. We expect quarterly total non-interest expense to be between $78 million and $80 million.

We believe loan growth will be between 6% to 8% for 2026 compared to 2025, which includes the acquired loans from Citizens. We continue to anticipate a reduction in our net charge-offs for 2026 compared to 2025, which we expect to continue to positively impact provision for credit losses, excluding any changes in the economic forecasts. We expect between $11 million and $13 million of acquisition-related expenses during the fourth quarter for the Citizens Merger. We would also like to provide some high-level expectations for 2027, excluding the impact of non-core expenses and the planned Capital merger. We expect to achieve positive operating leverage for 2027 compared to 2026. For the full year of 2027, we anticipate our net interest margin will be between 4.3% and 4.5%. This assumes a 25 basis point increase in rates from the Federal Reserve in late 2026, one in March 2027, and another in September of 2027.

We believe our quarterly fee-based income will range between $31 million and $33 million. Our first quarter fee-based income is typically elevated, as it includes annual performance-based insurance commissions. We expect quarterly total non-interest expense to be between $80 million and $82 million for the second, third, and fourth quarters of 2027, with the first quarter of 2027 being higher due to the annual expenses we typically recognize during the first quarter of each year. We believe our loan growth will be between 3% and 5% compared to 2026, which is dependent on the timing of paydowns on our portfolio. We anticipate similar charge-offs and net charge-off rate for 2027 compared to 2026, which includes projected increases related to the addition of the Citizens portfolio. We look to have a strong close to our 2026 performance and continue to be optimistic about our strategic plans and ability to execute on the pending mergers and future growth. Laying out a path beyond the $10 billion threshold is the culmination of years of strategic planning and patience.

The investments we have made in people, technology, and infrastructure are in place today and operating as if we have already crossed that milestone. We have proven our ability to provide reliable results for our shareholders and improve performance both organically and through acquisitions. We will continue to place importance on the value we provide as an investment to our shareholders and the return that we produce. We will focus on being a top-notch employer and sharing our culture with our new associates from our mergers. We will make meaningful investments in the communities we serve and provide high-quality, trusted solutions for all of our clients. That concludes our commentary and we will open the call for questions. Once again, this is Tyler Wilcox and joining me for the Q&A session is Kathryn Bailey, our Chief Financial Officer.

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

Operator

We will now begin the question and answer session. [Operator Instructions] The first question today is from Ryan Payne with DA-Davidson. Please go ahead.

질의응답

Ryan Payne

Good morning. This is Ryan Payne on for Jeff Roulis today. I heard you on the expected Citizens close later this month. Any update on close timing for Capital next year?

Tyler Wilcox

Yes, our expectation is sometime very end of first quarter, beginning of second quarter.

Ryan Payne

Got it. And on the security sale, some more detail on that. What was the timing of that during the quarter, the yield on those securities, and as well as the expected impact on NIM going forward?

Kathryn Bailey

Yes, so it happened in August, and the yield on the amount we sold was about 1.5%. And the impact to margin on a go-forward, I think was the third part of your question. I think we expect a slight increase of a few basis points.

Ryan Payne

Last for me, Durbin impact, we last heard an $11 million annual hit to those fees beginning July 2028. Just wanted to confirm that or if anything has changed there.

Kathryn Bailey

No, that's still the number. And again, as a reminder that we noted in the capital announcement that they have minimal impact to our Durbin into interchange income. So the number has not really changed. Understood.

Ryan Payne

Thanks, guys.

Tyler Wilcox

Thank you.

Kathryn Bailey

Thank you, Ryan.

Operator

The next question is from Tim DeLacy with Raymond James. Please go ahead.

Timothy DeLacey

Hey, good morning, Tyler. Good morning, Kathryn. Just filling in for Danny this morning. Hey, Tyler, maybe starting off on loan growth, you know, growth is obviously relatively modest this quarter. You kind of laid out some of the factors that played in there and kind of laid out the 3% to 5% target for next year. You know, just curious how the commercial pipelines are looking today, you know, where you're seeing the drivers of growth coming from in the near term, whether you're expecting some of those payoff headwinds to start easing as we move into '27 here.

Tyler Wilcox

Thanks for the question. My hope is, yes, we will see some of that easing. Let me lay out a few thoughts for you as to demand. This was actually our third highest quarter ever of commercial production, and I really like the kind of mixed shift into CNI that we've seen throughout the year. And so demand remains really positive. For reference, we expected this year about $480 million in payoffs. Through three quarters, we've seen about $460 million in payoffs. The vast majority of that, about 40%, is via sales of primarily multifamily projects, which says that there's a high demand for the high-quality stuff that our folks are producing.

And for the remainder of the year, there's probably about $150 million to $180 million of expected, forecasted, payoffs and whether that materializes in the fourth quarter or materializes kind of or pushes into the first quarter is one of the main questions weighing on that loan growth for the forward guidance. So did I miss anything in your question there?

Timothy DeLacey

No, no, no, that was very helpful, Tyler. I appreciate that. And maybe, Kathryn, just flipping over to the margin, we appreciate the guidance for 2027. With the rate increases that you guys are assuming for next year, just curious about how you're thinking about what we should expect for betas on the deposit side. That should be factored into the 2027 guide.

Kathryn Bailey

Yes, non-interest or non-maturity beta is inclusive of non-interest bearing is about 30%.

Timothy DeLacey

Okay, appreciate that. And then maybe just finishing up, you know, just Tyler, maybe one on credit, you know, outside of the few relationships you highlight in the presentations, you know, are you seeing any meaningful changes in credit trends across the broader commercial portfolio or, you know, any particular areas you're keeping your eye on more closely with the recent move in rates?

Tyler Wilcox

No, not so far. Thankfully, commercial credit remains very strong. Last quarter, we were talking about the slight increase in criticize. That's come down. Now we see the slight increase in classified. As we guided, we expect those to pay off and exit the bank with minimal loss. So the core commercial credit remains incredibly strong. The significant reduction in the small ticket leasing is also, you know, extremely positive. I would say the one area where we've seen a slight increase in delinquency on the indirect portfolio, as I think you mentioned, I think there's some pressure on consumers in that area, which is also weighing on the production with interest rates and fuel prices increasing.

So that is an area where we're watching, but we continue to, you know, generate, um, you know, that, uh, production that, you know, near 750 credit scores consistent with our past practices. So very cautiously optimistic on credit overall, and particularly in the commercial space.

Timothy DeLacey

Okay. Well, that's terrific, Tyler. Guys, I'll step back. Thank you.

Operator

The next question is from Nathan Reyes with Piper Sandler. Please go ahead.

Adam Kroll

Hi, good morning. This is Adam Kroll on for Nate. Good morning, Tyler and Kathryn. And thanks for taking my questions. Maybe for Tyler to start, I know the loan growth guide excludes capital, but they've historically been a pretty high growth franchise. So I guess I'd be curious, you know, is there any transition period after the deal closes, where maybe growth is a little softer, or just any color there.

Tyler Wilcox

Thanks. I would say as the capital, one of the most exciting things to me is the level of mutual engagement that we have with the capital team and the capital leadership particularly. And a big part of that is obviously the continuity for their bankers, their clients, and, you know, their entire organization of our intent to, you know, continue the things that they're doing that made them attractive purchase in the first place. So I don't anticipate any kind of trough because the, you know, the lead-in of the next, you know, four, five, six months of engagement together. That includes our bankers, our credit staff, their leadership, their bankers, and their clients is, you know, mutually committed to continuing what it is they do. So we do expect that, you know, they're historically higher growth rates than ours, are something that we can perpetuate and is part of what makes the deal appealing.

Adam Kroll

Got it. I appreciate the call there. And, Tyler, I think you, on the last call you mentioned, uh, small ticket leasing could potentially begin to grow again in '27. Is that still the case? And, um, is any of that contemplated in the loan growth guide that you gave?

Tyler Wilcox

It is. It's baked in as part of our forecast and we do believe it will grow. Now it's not going to grow at double digits and the growth I think will be more heavily weighted to the second half of the year, you know, growing off of the now $100 million portfolio. But we have the right sales. We have the right leadership and we have the right credit box now that we've tested out to ensure that we grow in a positive way that we think can really impact and let it start punching above its weight again, which is the reason why we are excited about the future of that business.

Adam Kroll

Got it. Maybe one last one from me. Kathryn, I'd be curious to hear how we should think about provisioning in 2027, just given the likely step up in the reserve with the capital deal, and just maybe longer term where you see the reserve kind of settling out.

Kathryn Bailey

Yes, I mean, I think, to your point, I think the last couple quarters have been pretty nice from a provision perspective. I expect we get elevated from here. I think the coverage ratio, which is how I call it, the allowance to total loans, right now we're at 1.11%. I think we'll stay in that range, go up to maybe 1.2% over time with capital coming on board. That's where I would see us progress. Again, Citizens won't have any material impact to that ratio, but capital when it comes on board will help stabilize that.

Adam Kroll

Got it. Thanks for taking my questions.

Tyler Wilcox

No problem.

Kathryn Bailey

Thanks.

Adam Kroll

Thank you.

Operator

The next question is from Brendan Nosal with Hovde. Please go ahead.

Brendan Nosal

Hey, good morning folks. Thanks for taking the questions.

Kathryn Bailey

Hey, no problem, Brendan.

Brendan Nosal

Maybe starting off here, just kind of on prepping the balance sheet for year end, are there any other security sales that need to take place to stay under $10 billion? And I think you initially were contemplating like $300 million.

Kathryn Bailey

Well, as we articulated with the Citizens acquisition closing here later this month, we will sell a majority of their portfolio at close or very near to close. As it relates to any more of our portfolio that we will sell, that will just be dependent on how we transition through the remainder of the year where we are from an asset size. We might take another $2 million to $3 million loss in the fourth quarter, but we'll just continue to evaluate the market and evaluate our asset size as we proceed through the remainder of the fourth quarter.

Brendan Nosal

Yes, okay. That's perfect. Then maybe turning to the margin, can you just narrow down kind of the NIM that you're expecting to see next quarter? There's a lot of moving pieces with kind of movement in both your and Citizens' securities books and then their impact on both the core margin and, you know, fair value market creation.

Kathryn Bailey

Yes, so I think in the next quarter we could see, you know, I'm going to project somewhere in the 8 to 10 basis point lift with the addition of Citizens, given the securities restructure we just talked about, their portfolio, and then just the deposit franchise, that it makes that organization very attractive.

Brendan Nosal

Okay. All right. Awesome. Thanks, Kathryn. Moving on, on a kind of related note. Just thinking about your rate positioning, I think back to last quarter, I think you folks said that each 25 basis point hike was six to eight basis points of margin improvement. That reads to me as being fairly asset sensitive, but it kind of sounds like now you're more neutral to only slightly asset sensitive. So I'm wondering what changed over the past couple of months.

Kathryn Bailey

Yes, I think that number, I mean it ebbs and flows with each rate increase. It varies a little bit, but I think that 25 basis points now, I think we would quantify be about five basis points of benefit to us. And so I think it's... I mean, we could debate whether that's significantly asset sensitive or slightly, but that's where the new number is.

Brendan Nosal

Yes, yes, okay. That's fair and also helpful. Okay, thanks for taking my questions.

Kathryn Bailey

Thank you.

Operator

Thank you. The next question is from Matthew Brees with Stephens. Please go ahead.

Matthew Breese

Good morning.

Tyler Wilcox

Good morning, Matt.

Matthew Breese

You know, just thinking about your loan growth guide for next year, could you give us some idea on what it contemplates for commercial real estate and leasing growth? And if it does include positive growth from those segments, what type of growth are you anticipating?

Tyler Wilcox

Yeah, I think overall commercial growth is about 5% or so as one of the main drivers. The leasing overall growth is probably about 6% to 7%. The kind of drag on the loan growth is going to be, you know, kind of coming from our expectations on the consumer book in a rising rate environment. You know, we're not seeing the refi business on the residential indirect has slowed down a bit. And so that's kind of the outlook on those pieces. I will say the growth as well in commercial is probably a little bit more weighted to the CNI as opposed to the CRE, still still good CRE growth.

Matthew Breese

Okay. So you do anticipate positive commercial real estate growth next year?

Tyler Wilcox

We do. Okay. It is a bit of running on a treadmill, as I noted, because of the heavily weighting to the sales and the payoffs in that space particularly.

Matthew Breese

Yep. And then Kathryn, just thinking about the '27 NIM guide, but including capital, you know, if I go back to the deal deck, I think it suggested a 5% NIM or higher. Could you talk about that in the context of the updated '27 NIM guide on the standalone and whether or not that 5% still holds and what would put you at the upper versus the lower end?

Kathryn Bailey

Well, I think with it not being in, capital not closing until probably, let's say, early in the second quarter or end of the first quarter, we won't have the benefit of that in the first quarter. So the full year guide with that, with capital in next year, I don't think we would get to the 5%. I think once they are in our numbers on a quarterly basis, I think we will approach five, be at five or slightly around the 5% rate that we previously quoted. Full year, I don't think we will get to five in 2027. Correct.

Matthew Breese

Right, but you'll be in and around 5% with them and beyond. Fair enough. Okay. I hate to pick pile on the $10 billion question, but you do have some excess cash at the end of the quarter as well. I'm curious how you see kind of the cash and securities components playing out as you pull the levers and stay below $10 billion by year-end.

Kathryn Bailey

Yes, I think you will see our cash position decrease over time. I think some of that is just on balance sheet liquidity as we approach the end of the quarter, given the securities portfolio is was smaller. So I think you'll see it diminish, especially as we kind of manage through year end.

Matthew Breese

Okay. That's all I had. I'll leave it there. Thank you.

Kathryn Bailey

Thank you.

Operator

The next question is from Emily Lee with KBW. Please go ahead.

Unknown Speaker

Hey everyone, this is Emily stepping in for Tim Switzer. Thanks for taking my question.

Kathryn Bailey

Sure, morning.

Unknown Speaker

Just to go back to the NIM, I was just wondering what was the exit margin in Q3 and how are deposit rates looking at the end of the quarter too?

Kathryn Bailey

The exit margin on the quarter was a little higher than where we reported for the full quarter. An accretion was a similar impact for the month of September as it was for the quarter. A slight benefit, call it five to eight basis points as we exited from where we reported for the full quarter. As it relates to deposits, I think we're starting to see some more competition in the market for deposits and I think we'll continue to see that as this rate outlook plays out and as we start to see rates potentially move upward. And so we've been slowly following that trend and we'll continue to actively manage it as we have been in the past. And that will continue to likely come through our retail CD pricing product.

Unknown Speaker

Understood. Very helpful. And then what does guidance imply for expenses of capital once all the cost saves are achieved? So basically the run rate for 4Q'27.

Kathryn Bailey

So, the full cost saves for capital will not be realized in 2027. They won't be fully realized until 2028.

Unknown Speaker

Okay. Okay, thank you. That's all.

Tyler Wilcox

Okay.

Kathryn Bailey

Thank you.

Tyler Wilcox

Thank you.

Operator

Again, if you have a question, please press star then 1. The next question is a follow-up from Brendan Nosal with Hovde. Please go ahead.

Brendan Nosal

Hey, one more for me on kind of expenses. I was trying to bridge the gap from this quarter's $73 million in core expenses to the the first quarter number, you know, at the higher end of your $80 million to $82 million range. And I'm asking because it looks like Citizens is running like $4.5 million on costs. So, you know, 73 and $4.5 million gets you to like $77.5 million. So, kind of where does that other, you know, several million dollars kind of come from in the updated expense outlook for both 4Q'26 and then 1Q'27?

Kathryn Bailey

A couple things. I think Q3 was a little lighter than we anticipated. I think some of that was just the timing that we'll see move into the fourth quarter. Again, therefore, starting at the 73, I think you're starting off a little light, $1 million, call it, for a round number. I think then you have the annual increase in predominantly our largest expense item as it relates to salaries and benefits. I think we are seeing a meaningful increase in benefit cost expectations for '27 over '26. I'd say those are the big factors that are probably influencing that number higher than where you just quoted, Brendan. Thank you.

Brendan Nosal

Yep, okay, that's helpful, Kathryn.

Kathryn Bailey

Thank you.

Operator

The next question is a follow-up from Nathan Race with Piper Sandler. Please go ahead.

Adam Kroll

I'm going to go to the fourth quarter. It looks like it takes a slight step down at the midpoint of $29 million, even with the contribution from Citizens. So I guess I'd be curious, is that just from lower lease income or any color on the primary drivers there?

Kathryn Bailey

I think you had, I think it's lease income. As we've quoted over time, that's a little bit of a volatile, that creates volatility in the fee income when it relates to lease income as we can have some end-of-term transactions that result in some gains that are reflected in that number on a quarterly basis. And I think you see that to the tune of $1 million, $1.5 million in the third quarter. So I think that run rate was a little little elevated versus the trend in Q3. And that's the biggest variance, I would say.

Adam Kroll

Thanks, Kathryn.

Kathryn Bailey

Thank you.

Operator

There are no further questions. Sir, do you have any closing remarks?

Tyler Wilcox

Yes, I want to thank everyone for joining our call this morning. Please remember that our earnings release and a webcast of this call, including our earnings conference call presentation, will be archived at peoplesbankcorp.com under the investor relations section. Thank you for your time and have a great day.

Operator

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