Good morning, and welcome to Peoples Bancorp Inc. Conference Call. My name is Eilidh, and I will be your conference facilitator. Today's call will cover a discussion of the results of operations for the quarterly period and 6 months ended June 30, 2021. Please be advised that all lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer period. 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 Peoples' 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's filings. These include, but are not limited to, the completion and integration of current and planned acquisitions, including the pending merger with Premier Financial Bancorp, Inc. And any future acquisitions, which may be unsuccessful or may be more difficult, time consuming or costly than expected and the risk of expansion into new markets People's ability to obtain all remaining regulatory approvals of the proposed merger with Premier Financial Bank Group Inc. Or on the proposed terms and schedule and the adoption of the merger agreement by the shareholders of Peoples, the ever changing effects of the COVID-nineteen pandemic on economies and markets and on our customers, counterparties, employees and third party service providers, as well as the effects of various responses of the governmental and non governmental authorities to the COVID-nineteen pandemic, including public health actions directed towards the containment of the COVID-nineteen pandemic and the development, availability and effectiveness of vaccines. Changes in the interest rate environment due to economic conditions related to the COVID-nineteen pandemic or other factors and or the fiscal and monetary policy measures taken in the implementation of related economic stimulus packages, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity.
This success impact and timing of the implementation of Peoples business strategies and Peoples' ability to manage strategic initiatives, including the expansion of the commercial and consumer lending activities in light of the continuing impact of the COVID-nineteen pandemic on customers' operations and financial condition, the competitive nature of the financial services industry, the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including in connection with the current expected CECL, the continuation of the LIBOR and other reference rates, which may result in increased expenses and litigation and adversely impact the effectiveness of hedging strategies uncertainty regarding the nature, timing, cost and effect of federal and or state banking insurance and tax legislative or regulatory changes or actions and changes in accounting standards, policies, estimates or procedures. Management believes the forward looking statements made during this call are based on reasonable assumptions within the bonds 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. People's 2nd quarter 2021 earnings release was issued this morning and is available at peoplesbancorp.comunderinvestorrelations.
A reconciliation of the non 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 1 year. Participants in today's call will be Chuck Soliriski, President and Chief Executive Officer and Katie Bailey, Chief Financial Officer and Treasurer, and each will be available for questions following opening statements. Mr.
Soliriski, you may begin your conference.
Thank you, Ali. Good morning, everyone. Thank you for joining us. We have some exciting news to share with you regarding our Q2, which includes Total loan balances declined 1% for the quarter. However, we had loan growth of 4% annualized compared to the linked quarter end, excluding PPP loans and the lease balances.
Net interest income growth of 11% compared to the linked quarter with a 19 basis point expansion of our net interest margin. Our fee based business income increased 10% compared to the Q2 of 2020. Our total revenue grew percent compared to the Q2 of 2020. And our efficiency ratio adjusted for non core cost improved compared to the linked quarter. During the last 3 months, we have also integrated and streamlined processes with our North Star Leasing division, which is a division of Peoples Bank.
We acquired North Star at the end of March, but began accounting for it we began accounting for on April 1. This division is growing as we had anticipated and benefited both our net interest income and margin during the Q2. This division has added over $12,000,000 to lease balances since acquisition, resulting in an annualized growth rate of 59% for the quarter. They also provided over $4,000,000 of interest income and added 29 basis points to net interest margin for the quarter. We have spent a lot of time in the recent months visiting and planning with our partners at Premium Financial Bancorp and their 2 banking subsidiaries, Premier Bank and Citizens Bank.
We have developed plans on integration, training, client impact and are working to communicate with both the associates and the clients of Premier to make this a seamless transition. At this point, we are on target to meet our anticipated expense reductions. We continue to move forward and plan to close the merger late in Q3 of 2021 subject to the satisfaction of customary closing conditions, including approval from the Ohio Department of Financial Institutions and People's Shareholders. In addition, in May, we acquired a small insurance agency located in Pikeville, Kentucky. This complements insurance services we already provide in that geographic area.
Recently, we were recognized by Forbes Magazine as the 2nd best in State Bank in both states of Ohio and West Virginia and are one of 16 banks in the country that we recognized in 2 or more states this year. We are the smallest as far as asset size of the banks being recognized in 2 states. Overall, there were nearly 5,000 banks eligible for the awards from Forbes. We are also honored with the top work place designation from cleveland.comandcincinnati.com. The recognition that we have received both from these designations and others proves that we work hard to do the right thing for our clients, associates, communities and shareholders.
Moving on to our financial performance for the Q2, we reported diluted earnings per share at $0.51 and net income totaling $10,100,000 While diluted EPS declined compared to the linked quarter, This was mainly due to a higher provision for credit losses driven by the establishment of the allowance for credit losses related to the North Star leases. At the same time, we had significant growth in net interest income and net interest margin, both due to the acquired leases. Acquisition related costs totaled $5,500,000 for the quarter and was $7,600,000 for the first half of twenty 21. These costs reduced diluted EPS by $0.22 for the quarter and $0.31 for the 1st 6 months of 20 21. As we have noted previously, we anticipated that earnings will experience volatility related to our provision for credit losses in future quarters.
For the Q2, our allowance for credit losses was relatively unchanged in terms of dollars, while the addition of the acquired leases required us to record provisions to establish the allowance for credit losses on that portfolio. This resulted in $3,200,000 of provision for credit losses during the Q2. After the additional portfolio, provision for credit losses would have been minimal for the quarter. Moving on to our loan modifications. At the end of June, our COVID related loan modifications stood at over $17,000,000 Nearly all of this amount represented commercial consisting of 2 relationships, while consumer modifications totaled $500,000 The increase in commercial loan modification balances, which were around $12,000,000 at the end of March, was related to 1 hotel operator.
However, the aggregate payment release totaled 6 months, which is consistent with our approach to other customers operating in this industry. Both commercial relationships are set to resume normal principal and interest payments this quarter and no issues are anticipated. We continue to be pleased with our credit quality metrics. The current portion of our loan portfolio was 99.1%, which was higher than at the linked quarter end. Our quarterly annualized net charge off rate was 9 basis points, which improved from 13 basis points in the linked quarter.
This rate includes the lease net charge offs, which were lower than we anticipated and were around 2% of lease balances for the 2nd quarter. Our non performing assets grew $1,100,000 compared to the linked quarter Compared to the end of March, our non accrual loans declined $1,700,000 or 7% and was largely due to many smaller relationships. Also compared to the linked quarter end, our loans 90 plus days past due and accruing increased $2,700,000 and was driven by $1,500,000 of past due leases. In addition, we had 1 commercial loan of $1,400,000 move it to 90 plus days past due and accruing category during the Q2. Compared to March 31, our criticized loans decreased by nearly $3,000,000 and was due to the payoff of several smaller commercial relationships.
Additionally, our classified loans declined almost $7,000,000 as we had an upgrade of 1 commercial relationship and the payoff of some smaller relationships. As for our loan portfolio, balance declined over $37,000,000 compared to the linked quarter end. Although we added the lease portfolios during the quarter, which totaled around $96,000,000 at quarter end and had loan growth in other categories, these were more than offset by $162,000,000 decrease in PPP loan balances. For our PPP loans, we have originated to date, we have had 70% in terms of dollars of those loans either paid off, paid down or forgiven by the SBA. If you exclude PPP loans and leases, our loan growth compared to March 31 was 4% annualized.
Our construction loan balances increased $22,000,000 while our consumer indirect loans grew $18,000,000 for the 2nd quarter. The leasing division added over $12,000,000 in leases during the Q2. At the same time, our commercial loan production for the first half of this year was at its highest level in our company's history. However, our loan growth, which has been muted by the low line of credit utilization rates, which finally stabilized during the Q2, albeit at a historically low level. Instead of drastic decreasing, it increased $3,000,000 compared to the end of March.
When compared to utilization rates at the end of December 2019, we are still down nearly $80,000,000 in outstanding line of credit balances. We continue to grow our number of total households during the Q2. Our total households are up 2% compared to June of last year. I will now turn the call over to Katie for additional details around our financial performance.
Thank you, Chuck. As Chuck mentioned, the leases had a positive impact on our net interest income and margin during the quarter. Our net interest income grew 11% compared to the linked quarter and our margin expanded by 19 basis points. The leases provided over $4,000,000 of interest income and 29 basis points to margin. During the quarter, we recognized $3,400,000 of income related to deferred fees and costs on the PPP loans, which was a decline of $1,400,000 compared to the linked quarter.
The recognition of PPP income during the 2nd quarter added basis points to net interest margin compared to 28 basis points for the linked quarter. Our net interest margin, excluding the impact of leases and the PPP loans, was flat compared to the late quarter. Along with the improved loan yields, we were able to grow our investment yields by recent decisions to restructure some of our portfolio. In addition, we reduced our cost of deposits to 24 basis points, which is the lowest we have had in the last 5 years, while also reducing our funding cost to 27 basis points, which is the lowest in our history. The positive impact of these measures was offset by the excess liquidity we had during the quarter, which resulted in inflated cash balances and reduced our net interest margin by 13 basis points.
We continue to monitor and look for opportunities to grow our margin, which has been challenging in this low rate interest environment. Compared to the Q2 of 2020, our net interest income increased 14% and our margin grew by 26 basis points. Again, the lease division provided a significant portion of this improvement, while our investment yields were challenged and our funding costs were controlled. For the first half of twenty twenty one compared to the prior year, our net interest income grew 8% and margin was up 2 basis points. Through the 1st 6 months of 2021, we have recorded $8,100,000 of income related to deferred fees and costs on the PPP loan compared to $1,900,000 during the first half of twenty twenty.
For the first half of twenty twenty one, The PPP loan income added 21 basis points to net interest margin and for the 1st 6 months of 2020 reduced net interest margin by 1 basis point. For the 1st 6 months of the year, we maintained higher cash balances due to excess liquidity, which negatively impacted net interest margin by 12 basis points. For the Q2, our reported efficiency ratio improved to 68.6% compared to 70.4% in the linked quarter, but was still higher than 62.3 percent a year ago. For the 1st 6 months of 2021, Our reported efficiency ratio grew to 69.5 percent compared to 64.5 percent for 2020. Compared to the Q2 and 1st 6 months of 2020, the increases in our efficiency ratio were driven by the higher non core costs recognized during 2021.
On an adjusted basis, which excludes non core costs, our efficiency ratio improved to 64.2% compared to 65.2 percent for the linked quarter. We are optimistic that, excluding non core costs, We believe we can reduce the efficiency ratio to the very low 60s during 2022. During the Q2, we were able to generate positive operating leverage compared to the linked quarter. Our fee based income, which is non interest income excluding gains and losses, declined 6% compared to the linked quarter. The decrease was primarily due to the annual performance based insurance commission recognized in the Q1 of each year.
At the same time, our electronic banking income and trust and investment income each grew by double digit percentages compared to the linked quarter. Our fee based income grew 10% compared to the Q2 of 2020, which was almost was also mostly due to higher electronic banking income and trust income. For the 1st 6 months of 2021 compared to 2020, fee based income increased 11% due to the growth in electronic banking income, trust and investment income and insurance income. On a year to date basis, Our fee based income grew to 31% of total revenue compared to 30% for 2020. Our acquisitions this year will negatively impact this metric.
However, we continue to look for opportunities to grow our fee based businesses, which are beneficial to our overall our total revenue. Our total non interest expense grew 5% compared to the linked quarter. We had non core expenses of $2,500,000 for the Q2 of 2021. Our intangible amortization more than doubled compared to the linked quarter from the intangibles associated with the NorthStar and insurance acquisition. Salaries and employee benefits costs also grew compared to the late quarter, which reflected a full quarter of the North Star division associates.
Our total expenses related to the leasing division for the Q2 were around $2,000,000 and exclude the non core expenses. Our electronic banking expense was directionally aligned with the increased electronic banking income I already mentioned. Our total non interest expense increased 25% compared to the Q2 of 2020 and 18% from the first half of twenty twenty. Compared to the Q2 of 2020, our non core expenses increased $1,300,000 and were up $2,900,000 compared to the 1st 6 months 2020. We also had the additional $2,000,000 of expense associated with operating our new leasing division.
The remainder of the increase was driven by higher salaries and employee benefit costs and data processing and software costs. Our increases in salaries and employee benefits costs were driven by the impact of the deferred costs in early 2020 from the PPP loans we originated. Also contributing to the increase were higher medical costs and sales compensation related to production as well as an increase we made to our 401 match for associates during 2021. We had a lot of noise in our expenses compared to the prior period. If you exclude the non core expenses and the impact of the expenses associated with operating our Northstar division During the Q2 of 2021, which totaled $2,100,000 our total non interest expense was relatively flat compared to the linked quarter.
While we did see reductions from our annual first quarter items such as health savings account contributions, stock based compensation and higher payroll taxes, fee decreases were offset by higher sales and incentive compensation associated with our increased production and higher 401 costs due to the increase in our match to employees. If you exclude the non core expenses, the the operating expenses of Northstar and the operating expenses associated with the Premium Finance acquisition, were $661,000 for the Q2 of 2021. And compared to the Q2 of 2020, our total non interest increased 13% and was driven by higher salaries and employee benefit costs, which grew around $3,000,000 The impact of deferred costs associated with the PPP originations in 2020 accounted for much of this increase, while we also had higher sales and incentive compensation from increased production, higher 401 costs due to increase in our match to employees and higher medical insurance costs. In addition, our data processing and software costs grew $518,000 compared to the Q2 of 2020. On a year to date basis, if you exclude the non core expenses, the 2nd quarter operating expenses of Northstar and the $1,600,000 of operating expenses associated with the Premium Finance acquisition for the 1st 6 months of 2021, Then our total non interest expense increased 7%, mostly due to higher salaries and employee benefit costs.
We had the same increases in line items, as I mentioned, compared to the Q2 of 2020, which were partially offset by lower stock based compensation expense. We also recognized higher data processing and software costs and FDIC insurance expense. The increase in our FDIC insurance expense was due to the remaining credits that had been recognized during early 2020 along with higher premiums related our PPP loans impacting our calculation. In summary, we controlled our expenses while recognizing some necessary costs to grow our business in recent quarters. Moving to our balance sheet.
Our investment portfolio was relatively flat compared to the late quarter end and comprised 21% of total assets, which is slightly higher than the 18% to 20% that we typically target. Our core deposits, which exclude CD balances, declined 1% from linked quarter end. Most of the outflows of deposits were from money market accounts, while we also saw some reductions in non interest bearing checking as well as the seasonal reduction in governmental deposits, which usually carry a higher balance in the Q1. Our demand deposits continue to comprise 45 percent of total deposits at June 30, 2021, consistent with the linked quarter. We strive to have strong capital levels and continue to do so at the end of June.
While our ratios did decline somewhat, they were impacted by the Northstar acquisition for which we did not issue any equity. However, we anticipate that our capital ratios will improve upon the anticipated completion of the merger with Premier in the 3rd quarter and once we have moved past the acquisition related costs. We will continue to look for opportunities to effectively deploy our capital while maintaining well capitalized metrics. I will turn the call back to Chuck for his final comments.
Thank you, Katie. We are utilizing our skilled acquisition teams as we work to integrate the data, associates and clients of Premier. We have had great interactions with the teams from Premier and we'll work towards a smooth transition for everyone. We are optimistic about our future in the new market area and the opportunities we have to positively impact the new communities and the clients we will serve. We are pleased with the recent addition of our leasing division and the expert team from Northstar.
They have blended into our organization very quickly and are picking up speed, which we expect to continue through the remainder of the year. Turning back to our results for the quarter. Some of the highlights were improved net interest income and margin compared to the linked quarter, positive operating leverage compared to the linked quarter. Adjusted for the noise of the quarter, we believe our expenses were well controlled. We had loan growth of 4% annualized compared to the linked quarter end, excluding PPP loans and the acquired lease balances.
Our credit quality continued to be stable compared to prior quarters. We had increased households compared to both March 2021 year end, our return on average tangible equity was 14.6% compared to 2.5% for the first half of twenty twenty, and our return on average assets was 1.02% for the 1st 6 months of 2021 compared to 17 basis points for the same period in 2020. I would like to share a couple of thoughts related to the remainder of 2021. We anticipate our 3rd and 4th quarter core non interest expenses, which excludes the Premier acquisitions, will range between $37,000,000 $38,000,000 a quarter. We expect to produce loan growth of between 3% 5% annualized for the full year, excluding PPP loans and acquired loans and leases.
This will continue to be dependent on line of credit utilization rates remaining stable and any unexpected pay down activity. Although we had anticipated a higher gross charge off rate going forward with the added leasing division, we believe the charge offs from this line of business might come in slightly lower than we had expected originally. While it is early to talk about 2022, The current street consensus has our earnings per share projected at $2.99 which excludes Piper Sandler as their estimates do not incorporate our Premier acquisition. We are highly confident that we will be $2.99 This concludes our commentary, and we will open the call for questions. Once again, this is Chuck Selerestki.
And joining me for the Q and 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 our question and answer session. Our first question today will come from Scott Siefers with Piper Sandler.
Good morning, guys. Thanks for taking the question.
Good morning. Hey, Scott. Hi.
Let's see. So I guess just on the loan growth dynamics. I think Chuck, when you were talking about utilization in some of your prepared remarks, you gave them on sort of a dollar basis. Are you guys comfortable saying sort of where your commercial utilization rates are on a percentage basis and sort of what you think a typical level is?
Yes. Historically, we ran between 52% 55%. At the end of the quarter, we were at 33.5%. So for eternity, we've been in the low 50% range. So, it's about a 20% reduction.
Yes. Okay,
perfect. Thank you. And then, Kay, maybe just some thoughts on the margin. A lot of moving parts going on these days. But if we sort of take the reported level of 345 now and sort of you've got most recently the benefit from NSL, but then you've got kind of elevated PPP fees in there.
What's your best guess for where that level ends up going from here?
Yes. So you touched on it and we quoted it in the script. The 345 does include about 15 basis points of benefit for PPP loan. So to the extent that continues to run off, that will continue to decline and that declined from 28 basis points in the Q1. So 13 basis points were lost because of less forgiveness.
And then there is some accretion in there and that picked up because of the NSL acquisition, but it was only 7 basis points. So I think if you take out the 15 basis going through at 3:30. And again, that has the impact of the cash, the excess liquidity we still have, which we continue to maintain some of that. We are seeing it a little bit, so we might get some benefit. But the $330,000,000 is kind of a good starting point, and we think we'll hover around there.
Okay, perfect. Thank you. And then that, I guess, presumes some ongoing level of purchase accounting benefits that will lead the way sort of slowly over time, I imagine, like over a period of a few years. Is that right?
That's right.
Okay. Perfect.
All right. And then
I guess just final question. Maybe thoughts on drawing down the reserve from here. If we exclude the day 1 adjustment from You had basically no provision. I think I calculate like a $200,000 recapture, so call it effectively 0. Maybe thoughts on drawing down the reserve further from here, just given what you're seeing in the credit environment?
Remember, next quarter, we're going to have the closing and have to put up the reserve for Premier. Yes. But I would say that flat to some coming back our way, minimal amounts. Okay. All right,
perfect. Thank you, guys.
Thank you.
Our next question comes from Steve Moss with B. Riley.
Good morning.
Hi, Steve.
Maybe just following up on the reserve here, Chuck, just in terms of the drivers, economy seems to be improving. And I guess I was thinking it would probably be a bit more in terms of the reserve release, I hear you on the day 1 there. But in terms of what would it take ex Premier to get back towards the pre, call it, what was it, 90 basis point level or so before CECL was implemented?
Improvement in the forecast for GDP and unemployment, primarily in Ohio are the drivers to our model. And as they continue to improve, we will see more money come back. Okay. Do you
think it could be a pretty meaningful offset to the Premier Day 1 provision?
Yes.
Okay. Okay. That's helpful. And then just in terms of the loan pipeline, Here you are on good production, but lack of utilization. Just where are you seeing opportunities for growth on the commercial side, it does look like your consumer business is doing well as well.
Just kind of what are the drivers here going forward, if you will?
Well, first off, we had great production in the first half of the year in commercial. But I would say that the customers are washed with liquidity we're going to see good growth in our premium finance business. We're going to see great growth in the leasing business. And we continue, as I said, had record production in the first half of the year. So consumer businesses have been very solid.
Automobile business has really had a standout year. And as long as there's a cause to be sold, they're going to be bought. And there's obviously huge supply issues. So, I think under normal circumstances, we would be seeing double digit loan growth with our current production. It's just the payoffs and the excess liquidity.
Okay. That's helpful. And then just one more question just on mortgage here. I realize gain on sale margins came down. You're just kind of curious as to the drivers for you guys and how to think about that line of business going forward?
We're selling less. We're basically keeping more of the mortgages on our books.
Our next question comes from Russell Gunther with D. A. Davidson.
Hey, good morning guys.
Good morning.
Just a follow-up on the loan growth. Hey Chuck, I'm doing great. Thanks guys. A follow-up on the loan growth guidance, the 3% to 5% for the year ex PPP and acquired loans and leases, Just to clarify, does that assume that the utilization rate stays at these lower levels and doesn't return to something close to historical?
Correct.
Okay. Very good. And then on the efficiency ratio target, I appreciate the color you gave us there. Could you walk us through the main drivers of how you achieve that low 60? Is it largely revenue growth?
Are there anticipated expense catalyst beyond the model cost saves from the deal, just some of the puts and takes there would be helpful.
A big piece of that is the Premier acquisition. And that closing, we have 30% of the expenses coming out. And we continue to make investments in our infrastructure here, but we think we can have expense growth in around 3%, excluding the acquisitions. So those are the key pieces.
Okay. And then maybe just a follow-up to the revenue side of that and the margin discussion earlier. So I heard you at 3.30 is a good starting point near term as the PPP benefit declines. But how do we think about the timing of the cash balance reduction that would kind of get you close back up to that 345 and given the margin accretion from the leasing portfolio, Is the normalized NIM something closer to 345 or do you expect this 330 you're talking about to sustain for an extended period of time.
Yes. I think that's the all right. That's what we continue to scratch our heads about is liquidity and how long will the deposits and the cash stay with us. We quoted it in the script. I think we said that the cash the higher level of cash added 12 to 13 basis points or took was a drag on margin of 12 to 13 basis points for the quarter.
So if you add that back, if we get back to more standard cash levels, you would get back to that $345,000,000 in a reasonable time frame. It's just what is the time frame? And Unfortunately, I don't know. I think we are starting to see some of it, leave not at a drastic rate or anything. So I think it will be here through A portion of it will be here through the year at least and into next year.
Okay, great. One other thing for me guys. We may have some opportunity on that 330 to the extent that the premium finance and the leasing businesses grow faster than we expect.
Okay, understood. Well, thank you guys for taking my questions. That's it for me.
Thank you.
Our next question comes from Michael Perito with KBW.
Hey Chuck, Katie, good morning.
Good morning. Good morning.
I just had a couple follow-up questions, maybe to ask Russell's question a little bit differently. So I guess if we Kind of take away Premier for a second. I mean, it sounds like the overall balance sheet though, I mean, you guys would expect it to remain kind of in this $5,100,000,000 type range near term given everything you're seeing today. I mean with the mix is below that obviously can shift, but Is that generally a fair assumption as you see it for the time being?
Yes.
Okay. And then on the fee side, I was curious, The trusted investment unit had another nice quarter. I know there was some seasonality in the insurance, but you've generally seen some pretty solid growth there. Any kind of specific thoughts on the outlook for those two line items halfway through the year here?
Well, the investment business has been doing great and has been doing great for a long time. And as long as we have fewer days like yesterday and more days like today, it will continue to do great. In the insurance business, prices are hardening, and that always is to the benefit of folks that are in the agency business. So we like how that looks right now. So we're very, very bullish on both of them.
And just as a reminder, in the investment business, We have a retirement plan business, which is a little unusual to DataBank and particularly unusual to DataBank outside. And that business, while the smallest of our 3 investment businesses, is continues to grow very fast. Okay.
And I guess just lastly for me, I mean the expense guide near term is pretty clear, but I was wondering if you could maybe talk about the dynamics below that a little bit more as we start to think out towards next year. I mean, I'm sure you guys are investing in your business as we go. I mean, while the overall you gave us the overall kind of expense range for the next two quarters. I mean, is it fair to think that electronic banking, data processing costs, software costs should continue to grow? And Are there and kind of what are the offsets to some of those investments in growth?
And I guess how long do you think you guys can continue to maintain the expense kind of range while still investing at the rate you're investing?
I think over time, we will become more efficient, even investing at the rate that we're investing. I think that our data processing costs next year will be relatively as a percentage of If you measure the cost against the size of the institution, I think it will become more efficient. I'm pretty optimistic on all of that.
Yes. I would just echo that I don't think we have deferred maintenance on whether it's buildings or technology. We've been investing along the way. And so there's no major projects in the next 2 to 6 quarters that we have to undertake.
Okay, helpful. Thank you guys. I appreciate you taking my questions.
Thank you. Thank you.
At this time, there are no further questions. I'd like to turn the call back over to Mr. Silorisky for any closing remarks.
Sure. Well, we thank you for being with us today. If you remember nothing else about our call, Please remember that we are highly confident that we will beat $2.99 next year. Thank you again for joining. And remember that Our earnings release and the webcast of this call will be archived at peoplesbancorp.com under the Investor Relations section.
I wish everyone good health and have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now