What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-07-30 · 571 added, 284 removed, 988 unchanged (46% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

2021 December 31,

1 unchanged sentence

Cash and cash equivalents:

Cash and due from banks $ 57,239 $ 60,902

Cash and balances due from banks $ 129,842 $ 60,902

Interest-bearing deposits in other banks 369,840 91,198

Total cash and cash equivalents 499,682 152,100

Available-for-sale investment securities, at fair value (amortized cost of $ 839,682 at June 30, 2021 and $ 734,544 at December 31, 2020) (a)

Available-for-sale investment securities, at fair value (amortized cost of $ 1,294,654 at September 30, 2021 and $ 734,544 at December 31, 2020) (a)

1,297,090 753,013

Held-to-maturity investment securities, at amortized cost (fair value of $ 179,887 at June 30, 2021 and $ 68,082 at December 31, 2020) (a)

Held-to-maturity investment securities, at amortized cost (fair value of $ 240,000 at September 30, 2021 and $ 68,082 at December 31, 2020) (a)

243,100 66,458

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Stockholders’ equity

Preferred shares, no par value, 50,000 shares authorized, no shares issued at June 30, 2021 and at December 31, 2020

Common stock, no par value, 24,000,000 shares authorized, 21,208,689 shares issued at June 30, 2021 and 21,193,402 shares issued at December 31, 2020, including shares held in treasury

Preferred shares, no par value, 50,000 shares authorized, no shares issued at September 30, 2021 and at December 31, 2020

Common stock, no par value, 50,000,000 shares authorized, 29,806,435 shares issued at September 30, 2021 and 21,193,402 shares issued at December 31, 2020, including at each date shares held in treasury

685,428 422,536

1 unchanged sentence

Accumulated other comprehensive (loss) income, net of deferred income taxes ( 5,888 ) 1,336

Treasury stock, at cost, 1,605,492 shares at June 30, 2021 and 1,686,046 shares at December 31, 2020

Treasury stock, at cost, 1,599,593 shares at September 30, 2021 and 1,686,046 shares at December 31, 2020

( 37,166 ) ( 38,890 )

1 unchanged sentence

Total liabilities and stockholders’ equity $ 7,059,752 $ 4,760,764

(a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $ 0 and $ 201 , respectively, at June 30, 2021 and $ 0 and $ 60 , respectively, at December 31, 2020.

(a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $ 0 and $ 236 , respectively, at September 30, 2021 and $ 0 and $ 60 , respectively, at December 31, 2020.

(b) Also referred to throughout this document as "total loans" and "loans held for investment."

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands, except per share data) 2021 2020 2021 2020

Interest income:

Interest and fees on loans $ 38,711 $ 34,483 $ 74,448 $ 69,071

Interest and fees on loans and leases $ 40,748 $ 35,580 $ 115,196 $ 104,651

Interest and dividends on taxable investment securities 3,755 2,786 9,497 12,310

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Net interest income 42,578 35,119 117,816 104,615

Provision for (recovery of) credit losses 3,088 11,834 ( 1,661 ) 28,803

Net interest income after provision for (recovery of) credit losses 36,572 23,026 76,899 40,693

Provision for credit losses 8,994 4,728 7,333 33,531

Net interest income after provision for credit losses 33,584 30,391 110,483 71,084

Non-interest income:

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Amortization of other intangible assets 1,279 857 3,267 2,314

Franchise tax expense 822 881 1,677 1,763

Marketing expense 1,223 456 2,810 1,561

Franchise tax expense 810 882 2,487 2,645

FDIC insurance premium 807 570 1,596 717

Other loan expenses 487 342 1,443 1,255

Communication expense 411 283 1,079 857

FDIC insurance premium 326 152 789 147

Other non-interest expense 12,711 2,479 17,762 7,665

Total non-interest expense 57,860 34,315 135,746 100,445

Income before income taxes 12,494 5,885 31,737 4,964

Income tax expense 2,391 1,136 6,171 980

Net income $ 10,103 $ 4,749 $ 25,566 $ 3,984

Earnings per common share - basic $ 0.52 $ 0.24 $ 1.32 $ 0.19

Earnings per common share - diluted $ 0.51 $ 0.23 $ 1.31 $ 0.19

(Loss) income before income taxes ( 7,930 ) 12,846 23,807 17,810

Income tax (benefit) expense ( 2,172 ) 2,636 3,999 3,616

Net (loss) income $ ( 5,758 ) $ 10,210 $ 19,808 $ 14,194

(Loss) earnings per common share - basic $ ( 0.28 ) $ 0.52 $ 0.99 $ 0.70

(Loss) earnings per common share - diluted $ ( 0.28 ) $ 0.51 $ 0.99 $ 0.70

Weighted-average number of common shares outstanding - basic 20,640,519 19,504,503 19,751,853 19,862,409

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands) 2021 2020 2021 2020

Net income $ 10,103 $ 4,749 $ 25,566 $ 3,984

Other comprehensive income (loss):

Net (loss) income $ ( 5,758 ) $ 10,210 $ 19,808 $ 14,194

Other comprehensive (loss) income:

Available-for-sale investment securities:

Gross unrealized holding gain (loss) arising during the period 3,525 ( 3,814 ) ( 9,053 ) 18,454

Related tax (expense) benefit ( 741 ) 801 1,901 ( 3,875 )

Reclassification adjustment for net loss (gain) included in net income 202 ( 62 ) 538 ( 381 )

Gross unrealized holding (loss) gain arising during the period ( 7,685 ) ( 2,974 ) ( 16,738 ) 15,480

Related tax benefit (expense) 1,592 624 3,493 ( 3,251 )

Net effect on other comprehensive income (loss) 2,944 ( 3,062 ) ( 6,727 ) 14,278

Reclassification adjustment for net loss (gain) included in net (loss) income 166 ( 2 ) 704 ( 383 )

Related tax (benefit) expense ( 44 ) — ( 157 ) 80

Net effect on other comprehensive (loss) income ( 5,971 ) ( 2,352 ) ( 12,698 ) 11,926

Defined benefit plan:

Net gain (loss) arising during the period 1,818 ( 533 ) 1,826 ( 1,054 )

Related tax benefit (expense) — 33 ( 1 ) 109

Related tax (expense) benefit ( 407 ) 113 ( 408 ) 222

Amortization of unrecognized gain and service cost on benefit plans 20 33 81 97

4 unchanged sentences

Cash flow hedges:

Net (loss) gain arising during the period ( 294 ) ( 734 ) 3,942 ( 10,464 )

Related tax benefit (expense) 62 154 ( 828 ) 2,197

Net effect on other comprehensive (loss) income ( 232 ) ( 580 ) 3,114 ( 8,267 )

Total other comprehensive income (loss), net of tax 2,740 ( 3,618 ) ( 3,558 ) 6,059

Total comprehensive income $ 12,843 $ 1,131 $ 22,008 $ 10,043

Net gain (loss) arising during the period 858 803 4,800 ( 9,661 )

Related tax (expense) benefit ( 90 ) ( 168 ) ( 918 ) 2,029

Net effect on other comprehensive income (loss) 768 635 3,882 ( 7,632 )

Total other comprehensive (loss) income, net of tax ( 3,666 ) ( 1,692 ) ( 7,224 ) 4,367

Total comprehensive (loss) income $ ( 9,424 ) $ 8,518 $ 12,584 $ 18,561

See Notes to the Unaudited Condensed Consolidated Financial Statements

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AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Accumulated Other Comprehensive Loss Total Stockholders' Equity

Common Shares Retained Earnings Treasury Stock

(Dollars in thousands)

Balance, June 30, 2021 $ 422,652 $ 202,359 $ ( 2,222 ) $ ( 37,284 ) $ 585,505

Net loss — ( 5,758 ) — — ( 5,758 )

Other comprehensive loss, net of tax — — ( 3,666 ) — ( 3,666 )

Cash dividends declared — ( 7,093 ) — ( 7,093 )

Reissuance of treasury stock for common share awards ( 51 ) — — 51 —

Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 78 ) ( 78 )

Common shares issued under dividend reinvestment plan 277 — — — 277

Common shares issued under compensation plan for Boards of Directors 16 — — 44 60

Common shares issued under employee stock purchase plan 37 — — 101 138

Stock-based compensation 598 — — — 598

Issuance of common shares related to merger with Premier Financial Bancorp, Inc.

261,899 — — — 261,899

Balance, September 30, 2021 $ 685,428 $ 189,508 $ ( 5,888 ) $ ( 37,166 ) $ 831,882

Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

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Stock-based compensation 2,382 — — — 2,382

Issuance of common shares related to merger with Premier Financial Bancorp, Inc.

261,899 — — — 261,899

Balance, September 30, 2021 $ 685,428 $ 189,508 $ ( 5,888 ) $ ( 37,166 ) $ 831,882

Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

Common Shares Retained Earnings Treasury Stock

(Dollars in thousands)

Balance, June 30, 2020 $ 421,236 $ 173,572 $ 4,634 $ ( 30,265 ) $ 569,177

Net income — 10,210 — — 10,210

Other comprehensive income, net of tax — — ( 1,692 ) — ( 1,692 )

Cash dividends declared — ( 6,770 ) — — ( 6,770 )

Reissuance of treasury stock for common share awards ( 321 ) — — 321 —

Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 66 ) ( 66 )

Common shares repurchased under share repurchase program then in effect — — — ( 5,000 ) ( 5,000 )

Common shares issued under dividend reinvestment plan 220 — — — 220

Common shares issued under compensation plan for Boards of Directors ( 11 ) — — 63 52

Common shares issued under employee stock purchase plan ( 23 ) — — 134 111

Stock-based compensation 614 — — — 614

Balance, September 30, 2020 $ 421,715 $ 177,012 $ 2,942 $ ( 34,813 ) $ 566,856

Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity

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Impact of adoption of new accounting standard, net of taxes (a) — ( 3,709 ) — — ( 3,709 )

Balance, June 30, 2020 $ 421,236 $ 173,572 $ 4,634 $ ( 30,265 ) $ 569,177

Balance, September 30, 2020 $ 421,715 $ 177,012 $ 2,942 $ ( 34,813 ) $ 566,856

(a) On January 1, 2020, Peoples adopted ASU 2016-13, which resulted in a reduction to retained earnings of $ 3.7 million, net of statutory federal corporate income tax.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended

Nine Months Ended

September 30,

(Dollars in thousands) 2021 2020

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Investment in limited partnership and tax credit funds ( 2,900 ) ( 13 )

Net cash used in investing activities ( 230,007 ) ( 515,172 )

Net cash provided by (used in) investing activities 106,289 ( 517,709 )

Financing activities:

1 unchanged sentence

Net increase in interest-bearing deposits 95,881 348,779

Net decrease in short-term borrowings ( 21,765 ) ( 159,065 )

Net increase (decrease) in short-term borrowings 32,625 ( 154,914 )

Proceeds from long-term borrowings — 50,000

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Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020 ("Peoples' 2020 Form 10-K").

The accounting and reporting policies followed in the presentation of the accompanying Unaudited Condensed Consolidated Financial Statements are consistent with those described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2020 Form 10-K, as updated by the information contained in this Form 10-Q.

Management has evaluated all significant events and transactions that occurred after June 30, 2021 for potential recognition or disclosure in these unaudited condensed consolidated financial statements.

Management has evaluated all significant events and transactions that occurred after September 30, 2021 for potential recognition or disclosure in these unaudited condensed consolidated financial statements.

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly such information for the periods and at the dates indicated.

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Intercompany accounts and transactions have been eliminated.

The Condensed Consolidated Balance Sheet at December 31, 2020, contained herein, has been derived from the audited Condensed Consolidated Balance Sheet included in Peoples’ 2020 Form 10-K.

The Consolidated Balance Sheet at December 31, 2020, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2020 Form 10-K.

Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses.

Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement.

Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status.

Peoples considers a lease to be past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement.

Upon detection of the reduced ability of a lessee to meet cash flow obligations, the lease is typically charged down to the net realizable value, with the residual balance placed on nonaccrual status.

Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged off amounts are credited to the allowance for credit losses.

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The initial allowance for credit losses determined on a collective basis is allocated to individual leases.

The total of the purchase price and allowance for credit losses is the initial amortized cost basis of these leases.

The variance between the initial amortized cost basis and the fair value of the lease is considered an interest premium or discount, which is amortized or accreted into interest income on a level yield method over the life of the lease.

Leases acquired by Peoples in a business combination that are not considered purchased credit deteriorated are recorded at the fair value and the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the discount or premium to a leases' cost basis and is accreted or amortized to interest income over the leases' remaining life using the level yield method.

The total of the purchase price and the allowance for credit losses is the initial amortized cost basis of these leases.

The variance between the initial amortized cost basis and the fair value of a lease is considered an interest premium or discount, which is amortized or accreted into interest income on a level yield method over the life of the lease.

Leases acquired by Peoples in a business combination that are not considered purchased credit deteriorated are recorded at the fair value and the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the discount or premium to the leases' cost basis and is accreted or amortized to interest income over the leases' remaining life using the level yield method.

The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

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Lessors - Certain Leases with Variable Lease Payments.

This guidance addresses stakeholders' concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840.

This ASU addresses stakeholders' concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840.

This ASU is effective for fiscal years beginning after December 15, 2021, for all entities.

Peoples will adopt the guidance as required.

Peoples early adopted this ASU as of September 30, 2021.

The adoption of this ASU did not have an impact on Peoples' consolidated financial statements.

ASU 2020-04 - Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

This ASU is effective as of March 12, 2020 through

December 31, 2022.

Per the guidance, Peoples is continuing to evaluate the impact of ASU 2020-04 on Peoples' condensed consolidated financial statements.

ASU 2019-12 - Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.

The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

This ASU allows relief where the benchmark interest rate is changed on a loan, lease or hedging relationship between March 12, 2020

and December 31, 2022.

This ASU was early adopted as of September 30, 2021, and is not expected to have a significant impact on Peoples' consolidated financial statements, but is expected to reduce the accounting burden of assessing contracts impacted by reference rate reform.

ASU 2019-12 - Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

These amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The adoption of this ASU did not have a material effect on Peoples financial statements.

Peoples adopted this ASU as of January 1, 2021.

The adoption of this ASU did not have a material effect on Peoples' consolidated financial statements.

Note 2 Fair Value of Assets and Liabilities

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Those assets and liabilities are presented below in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.”

Depending on the nature of the asset or liability, Peoples uses various valuation methodologies and assumptions to estimate fair value.

Depending on the nature of the asset or the liability, Peoples uses various valuation methodologies and assumptions to estimate fair value.

The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2020 Form 10-K.

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Recurring Fair Value Measurements at Reporting Date

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(Dollars in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

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Available-for-Sale Investment Securities:

The fair values reported by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, LIBOR yield curves, credit spreads and prices from market makers and live trading systems (Level 2).

The fair values reported by Peoples are determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, London Interbank Offered Rate ("LIBOR") yield curves, credit spreads and prices from market makers and live trading systems (Level 2).

Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

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Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy.

Non-Recurring Fair Value Measurements at Reporting Date

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(Dollars in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Loans held for sale $ — $ 2,751 $ — $ — $ 4,733 $ —

Other real estate owned ("OREO") $ — $ — $ 11,268 $ — $ — $ 134

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Servicing rights are carried at the lower of cost or market value.

(b) Peoples established a valuation allowance on servicing rights of $ 16 at June 30, 2021 and $ 161 at December 31, 2020, as the fair value of the servicing rights was less than the carrying value.

(b) Peoples established a valuation allowance on servicing rights of $ 16 at September 30, 2021 and $ 161 at December 31, 2020, as the fair value of the servicing rights was less than the carrying value.

Loans Held for Sale:

Loans originated and intended to be sold in the secondary market, generally 1-4 family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value.

Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2).

Other Real Estate Owned:

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These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach (Level 3).

The increase in OREO for the nine months ended September 30, 2021 was due to the OREO acquired in the Premier Financial Bancorp Inc.

("Premier") acquisition.

Servicing Rights :

The fair value of the servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates (Level 3).

Servicing rights are included in "Other intangible assets" on the Unaudited Consolidated Balance Sheets.

The fair value of servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates (Level 3).

The carrying value of servicing rights is not re-measured to fair value on a recurring basis.

Peoples assesses the carrying value of servicing rights quarterly for impairment.

Financial Instruments Not Required to be Measured or Reported at Fair Value

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Fair Value Measurements of Other Financial Instruments

(Dollars in thousands) Fair Value Hierarchy Level June 30, 2021 December 31, 2020

(Dollars in thousands) Fair Value Hierarchy Level September 30, 2021 December 31, 2020

Carrying Amount Fair Value Carrying Amount Fair Value

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Other investment securities:

Federal Home Loan Bank ("FHLB") stock 2 16,523 16,523 21,718 21,718

Federal Reserve Bank ("FRB") stock 2 13,311 13,311 13,311 13,311

Other investment securities at cost:

Federal Home Loan Bank ("FHLB") stock n/a 17,918 17,918 21,718 21,718

Federal Reserve Bank ("FRB") stock n/a 13,311 13,311 13,311 13,311

Total other investment securities at cost 31,229 31,229 35,029 35,029

Other investment securities at fair value:

Nonqualified deferred compensation (a) 2 2,083 2,083 1,867 1,867

Other investment securities 2 365 365 365 365

Other investment securities (b) 2 784 784 365 365

Total other investment securities at fair value 2,867 2,867 2,232 2,232

Total other investment securities (b) 34,096 34,096 37,261 37,261

Loans and leases, net of deferred fees and costs 3 4,491,028 4,595,800 3,402,940 3,458,732

Loans held for sale 2 2,751 2,919 4,659 4,733

Bank owned life insurance 3 72,920 72,920 71,591 71,591

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(a) Nonqualified deferred compensation includes mutual funds as part of the investment.

(b) "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at June 30, 2021

(b) "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at September 30, 2021

and at December 31, 2020, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

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Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less.

The carrying amount for cash and due from banks is a reasonable estimate of fair value.

The carrying amount for cash and balances due from banks is a reasonable estimate of fair value (Level 1).

Held-to-Maturity Investment Securities:

The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, LIBOR yield curves, credit spreads and prices from market makers and live trading systems (Level 2).

Management reviews the valuation methodology and quality controls utilized by the pricing service in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

Other Investment Securities:

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Loans and Leases, Net of Deferred Fees and Costs:

The fair value of portfolio loans assumes sale of the underlying notes to a third-party financial investor.

The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor.

Accordingly, this value is not necessarily the value to Peoples if the notes were held to maturity.

Peoples considered interest rate, credit and market factors in estimating the fair value of loans (Level 3).

values for loans are estimated using a discounted cash flow methodology.

Fair values for loans are estimated using a discounted cash flow methodology.

The discount rates take into account interest rates currently being offered to customers for loans with similar terms, the credit risk associated with the loans and other market factors, including liquidity.

Loans Held for Sale:

Loans originated and intended to be sold in the secondary market, generally 1-4 family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value.

Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2).

Bank Owned Life Insurance:

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(Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

June 30, 2021

September 30, 2021

Obligations of:

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Total available-for-sale securities $ 734,544 $ 20,775 $ ( 2,306 ) $ 753,013

The gross unrealized losses related to residential mortgage-backed securities and obligations of states and political subdivisions at June 30, 2021 and at December 31, 2020, were attributed to changes in market interest rates and spreads since the securities were purchased.

The gross gains and losses realized by Peoples from sales of available-for-sale securities for the periods ended June 30 were as follows:

Three Months Ended Six Months Ended

June 30, June 30,

The gross gains and losses realized by Peoples from sales of available-for-sale securities for the periods ended September 30 were as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands) 2021 2020 2021 2020

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The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and recognized as of the trade date.

The following table presents a summary of available-for-sale investment securities that had an unrealized loss:

The following table presents a summary of available-for-sale investment securities that had been in a continuous unrealized loss loss position:

Less than 12 Months 12 Months or More Total

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Unrealized Loss

June 30, 2021

September 30, 2021

Obligations of:

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Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis.

At June 30, 2021, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses.

At June 30, 2021, Peoples did not have the intent to sell, nor was it more likely than not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery.

Further, the unrealized losses at both June 30, 2021 and December 31, 2020 were largely attributable to changes in market interest rates and spreads since the securities were purchased, and were not credit related losses.

At September 30, 2021, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses.

At September 30, 2021, Peoples did not have the intent to sell, nor was it more likely than not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery.

Further, the unrealized losses at both September 30, 2021 and December 31, 2020 were largely attributable to changes in market interest rates and spreads since the securities were purchased, and were not credit related losses.

Accrued interest receivable is not included in investment securities balances, and is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses.

Interest receivable on investment securities was $ 4.3 million at June 30, 2021 and $ 2.7 million at December 31, 2020.

At June 30, 2021, approximately 99 % of the mortgage-backed securities with a market value that had been at an unrealized loss position for twelve months or more were issued by U.S.

Interest receivable on investment securities was $ 5.7 million at September 30, 2021 and $ 2.7 million at December 31, 2020.

At September 30, 2021, approximately 99 % of the mortgage-backed securities with a market value that had been at an unrealized loss position for twelve months or more were issued by U.S.

government sponsored agencies.

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Management analyzed the underlying credit quality of these mortgage-backed securities and concluded the unrealized losses were primarily attributable to the floating rate nature of these investments and the low remaining number of loans underlying these securities.

The unrealized losses with respect to the two bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at June 30, 2021 were primarily attributable to the subordinated nature of the debt.

The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at June 30, 2021.

The unrealized losses with respect to the two bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at September 30, 2021 were attributable to the subordinated nature of the debt.

The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at September 30, 2021.

The weighted-average yields are based on the amortized cost.

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(Dollars in thousands) Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value

June 30, 2021

September 30, 2021

Obligations of:

10 unchanged sentences

Total held-to-maturity securities $ 66,518 $ ( 60 ) $ 1,789 $ ( 165 ) $ 68,082

There were no gross gains or gross losses realized by Peoples from sales of held-to-maturity securities for any of the three and six months ended June 30, 2021 and 2020.

There were no gross gains or gross losses realized by Peoples from sales of held-to-maturity securities for any of the three and nine months ended September 30, 2021 and 2020.

Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis.

2 unchanged sentences

Peoples analyzed these securities using cumulative default rate averages for investment grade municipal securities.

Since December 31, 2020, Peoples purchased securities and designated them as held-to maturity and, as a result, at June 30, 2021, Peoples recorded $ 201,000 of allowance for credit losses for held-to-maturity securities, compared to $ 60,000 at December 31, 2020.

The following table presents a summary of held-to-maturity investment securities that had an unrealized loss:

Since December 31, 2020, Peoples has purchased securities and designated them as held-to maturity and, as a result, at September 30, 2021, Peoples recorded $ 236,000 of allowance for credit losses for held-to-maturity securities, compared to $ 60,000 at December 31, 2020.

The following table presents a summary of held-to-maturity investment securities that had been in a continuous unrealized loss position:

Less than 12 Months 12 Months or More Total

5 unchanged sentences

Value Unrealized Loss

June 30, 2021

September 30, 2021

Obligations of:

1 unchanged sentence

States and political subdivisions 89,532 2,421 37 — — — 89,532 2,421

Residential mortgage-backed securities

17,426 195 2 — — — 17,426 195

Commercial mortgage-backed securities

5 unchanged sentences

Total $ 18,662 $ 165 5 $ — $ — — $ 18,662 $ 165

The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at June 30, 2021.

The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a statutory federal corporate income tax rate of 21 %.

The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at September 30, 2021.

The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 22.3 %.

In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.

15 unchanged sentences

Other Investment Securities

Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB of Cincinnati and FRB of Cleveland stock.

Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB and FRB stock.

The following table summarizes the carrying value of Peoples' other investment securities:

(Dollars in thousands) June 30, 2021 December 31, 2020

(Dollars in thousands) September 30, 2021 December 31, 2020

FHLB stock $ 17,918 $ 21,718

4 unchanged sentences

Total other investment securities $ 34,486 $ 37,560

During the six months ended June 30, 2021, Peoples redeemed $ 5.2 million of FHLB stock.

During the three and six months ended June 30, 2021, Peoples recorded the change in the fair value of equity investment securities held during the period, in "Other non-interest income", resulting in unrealized gain of $ 42,000 and $ 73,000 , respectively .

During the three and six months ended June 30, 2020, Peoples recorded the change in the fair value of equity investment securities held during the period, in "Other non-interest income", resulting in unrealized gain $ 16,000 and unrealized loss of $ 15,000 , respectively.

At June 30, 2021, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies.

During the nine months ended September 30, 2021, Peoples redeemed $ 7.5 million of FHLB stock as requested by the FHLB.

During the three months ended September 30, 2021, Peoples acquired $3.7 million in FHLB stock in the Merger with Premier.

During the three and nine months ended September 30, 2021 , Peoples recorded the change in the fair value of equity investment securities held during the period, in "Other non-interest income", resulting in an unrealized gain of $ 18,000 and $ 91,000 , respectively.

During the three and nine months ended September 30, 2020, Peoples recorded the change in the fair value of equity investment securities held during the period, in "Other non-interest income", resulting in an unrealized gain of $ 1,000 and an unrealized loss of $ 15,000 , respectively.

At September 30, 2021, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies.

There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity.

1 unchanged sentence

Peoples has pledged available-for-sale investment securities and held-to-maturity investment securities to secure public and trust department deposits, and repurchase agreements in accordance with federal and state requirements.

Peoples has also pledged available-for-sale investment securities to secure additional borrowing capacity at the FHLB and the FRB as well as to derivative counterparties as collateral on unrealized interest rate and cash flow hedge swaps.

The following table summarizes the carrying value of Peoples' pledged securities:

Carrying Amount

(Dollars in thousands) June 30, 2021 December 31, 2020

(Dollars in thousands) September 30, 2021 December 31, 2020

Securing public and trust department deposits, and repurchase agreements:

5 unchanged sentences

Available-for-sale 7,036 2,175

Held-to-maturity 556 —

Note 4 Loans and Leases

Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' primary market areas of northeastern, central, southwestern and southeastern Ohio, central and eastern Kentucky and west central West Virginia.

Peoples also originates insurance premium finance loans and leases nationwide through its Peoples Premium Finance and North Star Leasing divisions.

Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint.

Peoples also originates insurance premium finance loans and leases nationwide through its Peoples Premium Finance and North Star Leasing divisions, respectively.

Loans and leases throughout this document are referred to as "total loans" and "loans held for investment".

The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 December 31, 2020

10 unchanged sentences

Total loans, at amortized cost $ 4,491,028 $ 3,402,940

Peoples Bank entered into an Asset Purchase Agreement, dated March 24, 2021 (the “Asset Purchase Agreement”), with NS Leasing, LLC, which is headquartered in Burlington, Vermont, and does business as North Star Leasing (“NSL”).

Effective after the close of business on March 31, 2021, Peoples acquired $ 83.3 million in leases from NSL, of which $ 5.2 million were acquired as purchase d credit d eteriorated assets.

On September 17, 2021, Peoples completed the merger with Premier effective after the close of the business day.

Peoples acquired $ 1.1 billion in loans, of which $ 285.3 million were considered purchased credit deteriorated loans.

Acquisitions" for more detail on the merger with Premier.

Effective after the close of business on March 31, 2021, Peoples acquired $ 83.3 million in leases from NS Leasing, LLC (" NSL"), of which $ 5.2 million were considered purchase d credit d eteriorated leases.

Refer to "Note 13 Acquisitions" for more detail on the acquisition of leases from NSL.

Peoples began participating as a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender during the second quarter of 2020.

Peoples originated PPP loans of $ 159.2 million during the first six months of 2021 and $ 488.9 million of PPP loans during the full year of 2020.

At June 30, 2021, the PPP loans had an amortized cost of $ 187.6 million, and were included in commercial and industrial loan balances.

As of June 30, 2021, deferred loan origination fees, net of deferred origination costs, totaled $ 7.1 million.

During the second quarter of 2021, Peoples recorded amortization of net deferred loan origination fees of $ 3.4 million on PPP loans compared to $ 1.9 million for the second quarter of 2020.

Peoples recorded accretion of net deferred loan origination fees of $ 8.1 million and $ 1.9 million, for the six months ended June 30, 2021 and 2020, respectively.

Peoples originated PPP loans of $ 159.2 million during the first nine months of 2021 and $ 488.9 million of PPP loans during the full year of 2020.

At September 30, 2021, the PPP loans (including $28.2 million acquired from Premier) had an amortized cost of $ 135.8 million, and were included in commercial and industrial loan balance.

As of September 30, 2021, deferred loan origination fees, net of deferred origination costs, totaled $ 4.0 million.

During the third quarter of 2021, Peoples recorded amortization of net deferred loan origination fees of $ 3.8 million on PPP loans compared to $ 1.9 million for the third quarter of 2020.

Peoples recorded accretion of net deferred loan origination fees of $ 11.2 million and $ 3.8 million, for the nine months ended September 30, 2021 and 2020, respectively.

The remaining net deferred loan origination fees will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in "Net interest income".

Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses.

Total interest receivable on loans was $ 8.6 million at June 30, 2021 and $ 10.9 million at December 31, 2020.

Total interest receivable on loans was $ 12.4 million at September 30, 2021 and $ 10.9 million at December 31, 2020.

Nonaccrual and Past Due Loans

2 unchanged sentences

The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing were as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(Dollars in thousands) Nonaccrual (a)

11 unchanged sentences

Total loans, at amortized cost $ 36,034 $ 5,363 $ 25,793 $ 2,367

(a) There were $ 1.0 million of nonaccrual loans for which there was no allowance for credit losses at June 30, 2021 and $ 1.3 million at December 31, 2020.

During the first six months of 2021, nonaccrual loans decreased compared to December 31, 2020, mostly due to three commercial loans and two consumer loans being charged-off coupled with three commercial and one consumer loan payoffs.

As of June 30, 2021, the short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers, Peoples had made were insignificant.

(a) There were $ 0.6 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2021 and $ 1.3 million at December 31, 2020.

During the first nine months of 2021, nonaccrual loans increased compared to December 31, 2020, primarily due to the non-accrual loans acquired from Premier, which added $ 13.0 million in nonaccrual loans at the end of the third quarter of 2021.

As of September 30, 2021, the short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers, Peoples had made were insignificant.

Under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

As such, these modifications made under the CARES Act were not included in Peoples' nonaccrual or accruing loans 90+ days past due at June 30, 2021.

During the second quarter of 2021, accruing loans, 90+ days past due increased primarily due to the leases acquired from NSL.

The amount of interest income recognized on loans past due 90 days or more during the three and six months ended June 30, 2021 was $ 324,000 and $ 676,000 , respectively.

As such, these modifications made in accordance with the CARES Act were not included in Peoples' nonaccrual or accruing loans 90+ days past due at September 30, 2021.

During the third quarter of 2021, accruing loans 90+ days past due increased primarily due to the loans acquired from Premier.

The amount of interest income recognized on loans past due 90 days or more during the three and nine months ended September 30, 2021 was $ 0.2 million and $ 0.9 million, respectively.

The following table presents the aging of the amortized cost of past due loans:

1 unchanged sentence

(Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total

June 30, 2021

September 30, 2021

Construction $ 146 $ 16 $ — $ 162 $ 174,622 $ 174,784

20 unchanged sentences

Total loans, at amortized cost $ 15,272 $ 5,774 $ 20,149 $ 41,195 $ 3,361,745 $ 3,402,940

Delinquency trends remained stable, as 99.1 % of Peoples' portfolio was considered “current” at June 30, 2021, compared to 98.8 % at December 31, 2020.

Delinquency trends remained stable, as 98.9 % of Peoples' loan portfolio was considered “current” at September 30, 2021, compared to 98.8 % at December 31, 2020.

Pledged Loans

2 unchanged sentences

Loans pledged are summarized as follows:

(Dollars in thousands) June 30, 2021 December 31, 2020

(Dollars in thousands) September 30, 2021 December 31, 2020

Loans pledged to FHLB $ 752,382 $ 740,584

7 unchanged sentences

Adversely classified loans are reviewed on a quarterly basis.

A description of the general characteristics of the risk grades used by Peoples is as follows:

A description of the general characteristics of the risk grades used by Peoples, including loans acquired from Premier, is as follows:

“Pass” (grades 1 through 4):

Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations.

Loans in this risk grade would possess sufficient mitigating

factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.

Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.

“Special Mention” (grade 5):

5 unchanged sentences

Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans.

They are characterized by the distinct possibility that Peoples will sustain some loss if the deficiencies are not corrected.

They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected.

“Doubtful” (grade 7):

6 unchanged sentences

Consequently, Peoples typically does not maintain a recorded investment in loans within this category.

Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” or “loss” based upon the regulatory definition of these classes and consistent with regulatory requirements when they meet those criteria.

Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” or “loss” consistent with the regulatory definitions and requirements of these classes.

Leases are categorized as "special mention", "substandard", or "loss" based upon delinquency status and the prospect of collecting the remaining net investment balance owed under the lease.

All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being “pass" for disclosure purposes.

The following table summarizes the risk category of loans within Peoples' loan portfolio based upon the most recent analysis performed at June 30, 2021:

All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as “pass" for disclosure purposes.

The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at September 30, 2021:

Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term

9 unchanged sentences

Doubtful — — — — — 669 — — 669

Loss — — — — — 16 — — 16

Total 195,269 278,296 255,659 163,212 174,523 537,971 24,186 12,220 1,629,116

2 unchanged sentences

Special mention 82 1,281 2,327 3,622 164 991 2,702 10 11,169

Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term

(Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Total

Substandard 94 2,858 2,739 875 6,921 3,853 5,690 608 23,030

Doubtful — — — — — 1,808 265 187 2,073

Loss 24 — — — — — — — 24

Total 242,053 139,258 95,737 71,604 37,928 109,123 162,835 15,245 858,538

22 unchanged sentences

Total loans, at amortized cost $ 1,063,862 $ 840,130 $ 555,450 $ 360,069 $ 310,905 $ 1,169,602 $ 191,010 $ 34,799 $ 4,491,028

At June 30, 2021, Peoples had a total of $ 1.3 million of loans secured by residential real estate mortgages that were in the process of foreclosure.

The following table summarizes the risk category of Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at December 31, 2020:

(Dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Total

Pass $ 27,670 $ 56,361 $ 554 $ 15,089 $ 824 $ 1,194 $ 3,199 $ 2,003 $ 104,891

Special mention — — 496 — — 143 — — 639

Substandard — — — 186 — 1,076 — — 1,262

Total 27,670 56,361 1,050 15,275 824 2,413 3,199 2,003 106,792

Commercial real estate, other

Pass 116,441 125,373 99,522 94,465 99,668 215,385 109,160 9,748 860,014

Special mention 297 5,806 999 5,296 5,125 12,932 3,967 60 34,422

Substandard — 1,191 677 1,709 1,663 27,066 3,033 110 35,339

Doubtful — — — — — 78 — — 78

Total 116,738 132,370 101,198 101,470 106,456 255,461 116,160 9,918 929,853

(Dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Total

Commercial and industrial

Pass 409,237 97,362 67,284 38,450 45,026 77,009 199,597 30,680 933,965

Special mention 1,034 366 2,018 287 1,453 1,452 12,429 526 19,039

Substandard 2,226 3,569 2,873 2,167 318 4,163 3,436 1,083 18,752

Doubtful — — — — 1,698 191 — 187 1,889

Total 412,497 101,297 72,175 40,904 48,495 82,815 215,462 32,476 973,645

Premium finance

Pass 114,758 — — — — — — — 114,758

Total 114,758 — — — — — — — 114,758

Residential real estate

Pass 47,147 40,223 24,235 29,142 43,105 309,795 65,168 305 558,815

Substandard — — — — — 15,048 — — 15,048

Loss — — — — — 144 — — 144

Total 47,147 40,223 24,235 29,142 43,105 324,987 65,168 305 574,007

Home equity lines of credit

Pass 16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913

Total 16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913

Consumer, indirect

Pass 210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527

Total 210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527

Consumer, direct

Pass 31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094

Total 31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094

Deposit account overdrafts 351 — — — — — — — 351

Total loans, at amortized cost $ 977,333 $ 452,383 $ 294,098 $ 243,312 $ 230,434 $ 722,058 $ 483,322 $ 48,793 $ 3,402,940

Collateral Dependent Loans

16 unchanged sentences

The following table details Peoples' amortized cost of collateral dependent loans:

(Dollars in thousands) June 30, 2021 December 31, 2020

(Dollars in thousands) September 30, 2021 December 31, 2020

Construction $ 4,276 $ —

4 unchanged sentences

Total collateral dependent loans $ 53,256 $ 16,873

The decrease in collateral dependent loans at June 30, 2021, compared to December 31, 2020, was due to one commercial and industrial relationship that was no longer collateral dependent at June 30, 2021.

The following tables summarize the loans that were modified as troubled debt restructurings ("TDRs") during the three and six months ended June 30:

The increase in collateral dependent loans at September 30, 2021, compared to December 31, 2020, was primarily due to $39.1 million in collateral dependent loans acquired from Premier.

Troubled Debt Restructurings

The following tables summarize the loans that were modified as troubled debt restructurings ("TDRs") during the three and nine months ended September 30:

Three Months Ended

1 unchanged sentence

(Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment

June 30, 2021

September 30, 2021

Construction 1 $ 6 $ 6 $ 6

Commercial real estate, other 2 14 14 14

Commercial and industrial 3 327 327 327

Leases 2 182 184 178

5 unchanged sentences

Total 71 $ 2,640 $ 2,646 $ 2,639

June 30, 2020

September 30, 2020

Commercial real estate, other 3 $ 2,214 $ 2,214 $ 1,112

Commercial and industrial 4 3,657 3,657 3,658

Residential real estate 10 608 608 608

1 unchanged sentence

Consumer, indirect 11 126 126 126

Consumer, direct 2 16 16 16

Consumer 13 142 142 142

Total 33 $ 6,689 $ 6,689 $ 5,588

1 unchanged sentence

Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Six Months Ended

Nine Months Ended

Recorded Investment (a)

(Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment

June 30, 2021

September 30, 2021

Construction 2 $ 350 $ 350 $ 350

Commercial real estate, other 3 37 37 37

Commercial and industrial 3 327 327 327

Leases 5 340 348 334

5 unchanged sentences

Total 100 $ 3,984 $ 4,001 $ 3,958

June 30, 2020

September 30, 2020

Commercial real estate, other 5 $ 2,533 $ 2,533 $ 1,430

14 unchanged sentences

federal government or any state government related to COVID-19 are not in the scope of accounting for TDRs, as defined in ASC 310-40.

Peoples did not have any loans that were modified as a TDR during the last twelve months that subsequently defaulted.

Peoples had no commitments to lend additional funds to the related borrowers whose loan terms have been modified in a TDR.

The following table presents those loans modified into a TDR during the year that subsequently defaulted (i.e., 90 days or more past due following a modification) during the nine-month periods ended September 30:

September 30, 2021 September 30, 2020

(Dollars in thousands) Number of Contracts Recorded Investment (a) Impact on the Allowance for Credit Losses Number of Contracts Recorded Investment (a) Impact on the Allowance for Credit Losses

Commercial real estate, other — $ — — 1 $ 54 —

Residential real estate 3 113 — — — —

Total 3 $ 113 $ — 1 $ 54 $ —

(a) The amounts shown are inclusive of all partial paydowns and charge-offs.

Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Peoples had no commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR.

Allowance for Credit Losses

Changes in the allowance for credit losses for the three months ended June 30, 2021 and June 30, 2020 are summarized below:

(Dollars in thousands) Beginning Balance, March 31, 2021

Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, June 30, 2021

Changes in the allowance for credit losses for the three months ended September 30, 2021 and September 30, 2020 are summarized below:

(Dollars in thousands) Beginning Balance, June 30, 2021

Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets (Recovery of) Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2021

Construction $ 914 $ 2,127 $ 638 $ ( 243 ) $ — $ — $ 3,436

10 unchanged sentences

(a) Amount does not include the provision for the allowance for credit losses on unfunded commitments.

(Dollars in thousands) Beginning Balance, March 31, 2020 Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, June 30, 2020

(Dollars in thousands) Beginning Balance, June 30, 2020 Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets (Recovery of) Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2020

Construction $ 2,662 $ — $ — $ ( 148 ) $ — $ — $ 2,514

1 unchanged sentence

Commercial and industrial 10,106 — — 3,139 ( 146 ) — 13,099

Premium finance — — 990 ( 2 ) ( 2 ) — 986

Residential real estate 6,380 — — ( 371 ) ( 121 ) 100 5,988

5 unchanged sentences

(a) Amount does not include the provision for the allowance for credit losses on unfunded commitments.

Changes in the allowance for credit losses for the six months ended June 30, 2021 and June 30, 2020 are summarized below:

Changes in the allowance for credit losses for the nine months ended September 30, 2021 and September 30, 2020 are summarized below:

(Dollars in thousands) Beginning Balance,

December 31, 2020

Construction $ 1,887 $ 2,127 $ 638 $ ( 1,216 ) $ — $ — $ 3,436

11 unchanged sentences

(Dollars in thousands) Beginning Balance,

January 1, 2020 (b) Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, June 30, 2020

January 1, 2020 (a) Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets Provision for (Recovery of) Credit Losses (b) Charge-offs Recoveries Ending Balance, September 30, 2020

Construction $ 600 $ 51 $ — $ 1,863 $ — $ — $ 2,514

1 unchanged sentence

Commercial and industrial 4,960 860 — 6,368 ( 1,098 ) 2,009 13,099

Premium finance — — 990 ( 2 ) ( 2 ) — 986

Residential real estate 3,977 383 — 1,626 ( 255 ) 257 5,988

4 unchanged sentences

Total $ 24,639 $ 2,686 $ 990 $ 30,677 $ ( 3,721 ) $ 2,857 $ 58,128

(a) Amount does not include the provision for the allowance for credit losses on unfunded commitments.

(b) Peoples adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) on January 1, 2020.

During the second quarter of 2021, Peoples recorded provision for credit losses to establish the allowance for credit losses of $ 3.3 million on the leases acquired from NSL.

Additionally, the decrease in specific reserves on individually evaluated loans resulted in a reduction of provision for credit losses of $ 916,000 during the second quarter of 2021.

Lastly, economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19 continued to improve.

The PPP loans originated during 2021 and 2020 are guaranteed by the SBA, and therefore, had no impact on the allowance for credit losses at June 30, 2021 and at December 31, 2020.

At June 30, 2021, Peoples had recorded an allowance for unfunded commitments of $ 2.2 million, a decrease compared to $ 2.4 million at March 31, 2021, and $ 2.9 million at December 31, 2020.

The total amount of unfunded commitments had increased

compared to March 31, 2021 and December 31, 2020, but the improved economic forecast resulted in a lower allowance for unfunded commitments at June 30, 2021.

(a) Peoples adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) on January 1, 2020.

(b) Amount does not include the provision for the allowance for credit losses on unfunded commitments.

During the third quarter of 2021, Peoples recorded a provision for credit losses of $ 11.0 million in order to establish an allowance for credit losses for non-purchase credit deteriorated loans of $ 10.6 million, and a liability for unfunded commitments of $ 0.4 million, both relating to the acquisition of Premier.

Peoples also recorded a $ 22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier.

During the second quarter of 2021, Peoples recorded provision for credit losses to establish the allowance for credit losses of $ 3.3 million for the acquired non-purchased credit deteriorated leases from NSL along with an increase in allowance for credit loss of $ 0.5 million related to the purchase credit

deteriorated leases acquired from NSL.

Lastly, economic assumptions and loss drivers used in the CECL model continued to improve in the current year, partially offsetting the increase in allowance driven by the aforementioned acquired loans and leases.

The PPP loans originated during 2021 and 2020 are guaranteed by the SBA, and therefore, had no impact on the allowance for credit losses at September 30, 2021 and at December 31, 2020.

At September 30, 2021, Peoples had recorded an allowance for unfunded commitments of $ 2.4 million, an increase compared to $ 2.2 million at June 30, 2021, and a decrease compared to $ 2.9 million at December 31, 2020.

The total amount of unfunded commitments had increased compared to June 30, 2021 due to the unfunded commitments associated with the Premier acquisition and decreased compared to December 31, 2020 due to the improved economic forecast conditions.

The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets.

The change in the allowance for unfunded commitments is also reflected in the "Provision for (recovery of) credit losses" line of the Unaudited Consolidated Statements of Operations.

Note 5 Goodwill and Other Intangible Assets

The following table details changes in the recorded amount of goodwill:

(Dollars in thousands) September 30, 2021 December 31, 2020

Goodwill, beginning of year $ 171,260 $ 165,701

Goodwill recorded from acquisitions 95,755 5,559

Goodwill, end of period $ 267,015 $ 171,260

Peoples Bank entered into the Asset Purchase Agreement, dated March 24, 2021 with NSL.

The transaction closed after the close of business on March 31, 2021 and Peoples Bank began operating the acquired business as a division of Peoples Bank on April 1, 2021.

On April 1, 2021, Peoples recorded $ 24.7 million of goodwill related to the acquisition from NSL.

On May 4, 2021, Peoples Insurance Agency, LLC ("Peoples Insurance") acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc.

Peoples recorded $ 46,000 of goodwill from this completed acquisition.

On September 17, 2021, Peoples completed the merger with Premier, for which Peoples recorded $ 71.0 million of goodwill.

In 2020, Peoples completed its acquisition of Premium Finance, recording $ 5.5 million in goodwill.

Also, in 2020 Peoples Insurance completed an acquisition of a property and casualty-focused independent insurance agency for which $ 0.1 million of goodwill was recorded.

For additional information on these acquisitions, refer to "Note 13 Acquisitions."

Other Intangible Assets

Other intangible assets were comprised of the following at end of period, September 30, 2021 and end of year, December 31, 2020:

(Dollars in thousands) Core Deposits Customer Relationships Total

September 30, 2021

Gross intangibles $ 25,805 $ 25,096 $ 50,901

Accumulated amortization ( 17,813 ) ( 8,256 ) ( 26,069 )

Total acquisition-related intangibles $ 7,992 $ 16,840 $ 24,832

Servicing rights 2,294

Indefinite-lived intangibles 1,274

Total other intangibles $ 28,400

December 31, 2020

Gross intangibles $ 22,233 $ 12,495 $ 34,728

Accumulated amortization ( 17,298 ) ( 6,579 ) ( 23,877 )

Total acquisition-related intangibles $ 4,935 $ 5,916 $ 10,851

Servicing rights 2,486

Total other intangibles $ 13,337

Other intangible assets recorded from the above-mentioned acquisitions year-to-date as of September 30, 2021 were $ 13.0 million of customer relationship intangible assets related to the NSL and Peoples Insurance acquisitions, and $ 4.2 million of core deposit intangible assets related to Premier.

Refer to "Note 13 Acquisitions" for additional information.

Other intangible assets recorded in 2020 included $ 5.0 million of customer relationship intangible assets from the Premium Finance and Peoples Insurance acquisitions.

The following table details estimated aggregate future amortization of other intangible assets at September 30, 2021:

(Dollars in thousands) Core Deposits Customer Relationships Total

2021 $ 574 $ 934 $ 1,508

2022 1,620 4,014 5,634

2023 1,257 3,712 4,969

2024 1,058 2,733 3,791

2025 891 1,941 2,832

Thereafter 2,592 3,506 6,098

Total $ 7,992 $ 16,840 $ 24,832

The weighted average amortization period of other intangible assets is 8.1 years.

Servicing Rights

The following is an analysis of activity of servicing rights for the periods ended September 30,2021 and December 31, 2020:

(Dollars in thousands) September 30, 2021 December 31, 2020

Balance, beginning of year $ 2,486 $ 2,742

Amortization ( 591 ) ( 1,121 )

Servicing rights originated 415 1,026

Valuation allowance ( 16 ) ( 161 )

Balance, end of period $ 2,294 $ 2,486

Peoples accounts for its servicing rights under the amortization method, recognizing a valuation allowance when amortized cost exceeds fair value.

As of September 30, 2021, Peoples has recorded a valuation allowance of $ 16,000 related to the decrease in the fair value of servicing rights.

During 2020, Peoples recorded a valuation allowance of $ 161,000 related to the decrease in the fair value of servicing rights.

The following is the breakdown of the discount rates and prepayment speeds of servicing rights for the periods ended September 30,2021 and December 31, 2020:

September 30, 2021 December 31, 2020

Minimum Maximum Minimum Maximum

Discount rates 8.3 % 10.8 % 8.3 % 10.8 %

Prepayment speeds 8.4 % 27.2 % 12.8 % 21.1 %

The fair value of servicing rights was $ 2.3 million and $ 2.6 million at September 30, 2021 and December 31, 2020, respectively.

Note 6 Deposits

Peoples’ deposit balances were comprised of the following:

(Dollars in thousands) June 30, 2021 December 31, 2020

(Dollars in thousands) September 30, 2021 December 31, 2020

$100 or more $ 343,324 $ 220,532

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Total deposits $ 5,832,020 $ 3,910,459

(a) Brokered deposit accounts include $ 50.0 million of 90-day brokered CDs and $ 110.0 million of

brokered demand deposits.

Time deposits that meet or exceed the Federal Deposit Insurance Corporation ("FDIC") limit of $ 250,000 were $ 70.5 million and $ 89.0 million at June 30, 2021 and December 31, 2020, respectively.

(a) At September 30, 2021, brokered deposit accounts included $ 100.0 million of brokered demand deposits.

At December 31, 2020, brokered deposit accounts included $ 50.0 million of 90-day brokered CDs and

$ 110.0 million of brokered demand deposits

Time deposits that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") limit of $ 250,000 were $ 134.3 million and $ 89.0 million at September 30, 2021 and December 31, 2020, respectively.

The increase compared to December 31, 2020 was mostly due to the deposits acquired from Premier.

The contractual maturities of retail CDs and brokered CDs and demand deposits for each of the next five years and thereafter are as follows:

(Dollars in thousands) Retail Brokered Total

Remaining six months ending December 31, 2021 (a) $ 194,268 $ 162,051 $ 356,319

Remaining three months ending December 31, 2021 (a) $ 142,996 $ 101,307 $ 244,303

Year ending December 31, 2022 375,448 4,216 379,664

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Total CDs $ 691,680 $ 106,013 $ 797,693

(a) Brokered deposit accounts include $ 50.0 million of 90-day brokered CDs and $ 110.0 million of brokered demand deposits.

At June 30, 2021, Peoples had seventeen effective interest rate swaps, with an aggregate notional value of $ 160.0 million, of which $ 50.0 million were funded by 90-day brokered CDs and $ 110.0 million were funded by brokered demand and savings deposits.

Brokered CDs and deposits used to fund interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps.

(a) Brokered deposit accounts include $ 100.0 million of brokered demand deposits.

At September 30, 2021, Peoples had sixteen effective interest rate swaps, with an aggregate notional value of $ 150.0 million, of which $ 100.0 million were funded by brokered demand and savings deposits.

Brokered demand deposits hedged by interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps.

Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments."

Note 7 Stockholders’ Equity

The following table details the progression in Peoples’ common shares and treasury stock during the six months ended June 30, 2021:

The following table details the progression in Peoples’ common shares and treasury stock during the nine months ended September 30, 2021:

Common Shares Treasury

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Common shares issued under employee stock purchase plan

Shares at June 30, 2021 21,208,689 1,605,492

On January 28, 2021, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $ 30.0 million of its outstanding common shares, replacing the February 27, 2020 share repurchase program which had authorized Peoples to purchase up to an aggregate of $ 40.0 million of its outstanding common shares.

At June 30, 2021, Peoples had no t repurchased any common shares under the share repurchase program authorized on January 28, 2021.

Under its Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by Peoples' Board of Directors.

At June 30, 2021, Peoples had no preferred shares issued or outstanding.

On July 19, 2021, Peoples' Board of Directors declared a quarterly cash dividend of $ 0.36 per common share, payable on August 16, 2021, to shareholders of record on August 2, 2021.

The following table details the cash dividends declared per common share during the first three quarters of 2021 and the comparable periods of 2020:

Issuance of common shares related to the merger with Premier Financial Bancorp, Inc.

Shares at September 30, 2021 29,806,435 1,599,593

On January 28, 2021, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $ 30.0 million of Peoples' outstanding common shares, replacing the February 27, 2020 share repurchase program which had authorized Peoples to purchase up to an aggregate of $ 40.0 million of Peoples' outstanding common shares.

At September 30, 2021, Peoples had no t repurchased any common shares under the share repurchase program authorized on January 28, 2021.

Under Peoples' Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by Peoples' Board of Directors.

At September 30, 2021, Peoples had no preferred shares issued or outstanding.

On October 25, 2021, Peoples' Board of Directors declared a quarterly cash dividend of $ 0.36 per common share, payable on November 22, 2021, to shareholders of record on November 8, 2021.

The following table details the cash dividends declared per common share during the four quarters of 2021 and the comparable periods of 2020:

First quarter $ 0.35 0.34

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Third quarter 0.36 0.34

Fourth quarter $ 0.36 $ 0.35

Total dividends declared $ 1.43 $ 1.37

Accumulated Other Comprehensive (Loss) Income

The following table details the change in the components of Peoples’ accumulated other comprehensive (loss) income for the six months ended June 30, 2021:

The following table details the change in the components of Peoples’ accumulated other comprehensive (loss) income for the nine months ended September 30, 2021:

(Dollars in thousands) Unrealized Gain on Securities Unrecognized Net Pension and Postretirement Costs Unrealized Loss on Cash Flow Hedge Accumulated Other Comprehensive (Loss) Income

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Realized gain on sale of securities, net of tax 547 — — 547

Realized loss due to settlement and curtailment, net of tax — 111 — 111

Other comprehensive (loss) income, net of reclassifications and tax

( 13,245 ) 1,481 3,882 ( 7,882 )

Balance, June 30, 2021 $ 7,865 $ ( 3,817 ) $ ( 6,270 ) $ ( 2,222 )

Balance, September 30, 2021 $ 1,894 $ ( 2,280 ) $ ( 5,502 ) $ ( 5,888 )

Note 8 Employee Benefit Plans

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The expected long-term rate of return on plan assets, which was determined as of January 1, 2021, is 7.0 %.

The following tables detail the components of the net periodic cost for the plans described above, which is included in salaries and employee benefit costs on the Unaudited Consolidated Statements of Operations:

The following table details the components of the net periodic cost for the plan described above, which is included in salaries and employee benefit costs on the Unaudited Consolidated Statements of Operations:

Pension Benefits

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands) 2021 2020 2021 2020

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Settlement of benefit obligation 143 531 143 1,050

Net periodic (income) loss $ ( 76 ) $ 79 $ ( 152 ) $ 371

Net periodic loss (income) $ 81 $ 459 $ ( 71 ) $ 830

Under US GAAP, Peoples is required to recognize a settlement gain or loss when the aggregate amount of lump-sum distributions to participants equals or exceeds the sum of the service and interest cost components of the net periodic pension cost.

The amount of settlement gain or loss recognized is the pro rata amount of the unrealized gain or loss existing immediately prior to the settlement.

In general, both the projected benefit obligation and fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss.

Peoples did not record a settlement charge during the three and six months ended June 30, 2021.

Peoples recorded settlement charges of $ 151,000 and $ 519,000 , respectively, during the three and six months ended June 30, 2020 under the noncontributory defined benefit pension plan.

In general, both the projected benefit obligation and the fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss.

Peoples recorded a settlement charge of $ 143,000 during the three and nine months ended September 30, 2021 under the noncontributory defined benefit pension plan.

Peoples recorded settlement charges of $ 531,000 and $ 1.1 million, respectively, during the three and nine months ended September 30, 2020 under the noncontributory defined benefit pension plan.

Note 9 Earnings Per Common Share

The calculations of basic and diluted earnings per common share were as follows:

Three Months Ended Six Months Ended

June 30, June 30,

The calculations of basic and diluted (loss) earnings per common share were as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands, except per common share data) 2021 2020 2021 2020

Distributed earnings allocated to common shareholders $ 6,983 $ 6,709 $ 13,760 $ 13,652

Undistributed earnings (loss) allocated to common shareholders 3,034 ( 2,051 ) 11,656 ( 9,842 )

Net earnings allocated to common shareholders $ 10,017 $ 4,658 $ 25,416 $ 3,810

Net (loss) income available to common shareholders $ ( 5,758 ) $ 10,210 $ 19,808 $ 14,194

Dividends paid on unvested shares ( 79 ) ( 96 ) ( 214 ) ( 274 )

Undistributed earnings (loss) allocated to unvested shares 21 ( 2 ) 2 4

Net (loss) earnings allocated to common shareholders $ ( 5,816 ) $ 10,112 $ 19,596 $ 13,924

Weighted-average common shares outstanding 20,640,519 19,504,503 19,751,853 19,862,409

1 unchanged sentence

Total weighted-average diluted common shares outstanding 20,789,271 19,637,689 19,890,672 19,998,353

Earnings per common share:

(Loss) earnings per common share:

Basic $ ( 0.28 ) $ 0.52 $ 0.99 $ 0.70

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The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets and cash activity related to these derivatives is included in the activity in the net cash provided by operating activities in the Unaudited Condensed Consolidated Statements of Cash Flows.

The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivatives is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows.

Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments

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Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.

Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities, and through the use of derivative financial instruments.

Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities.

Peoples also manages interest rate risk through the use of derivative financial instruments.

Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates.

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These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments.

At June 30, 2021, Peoples had entered into seventeen interest rate swap contracts with an aggregate notional value of $ 160.0 million.

At September 30, 2021, Peoples had entered into sixteen interest rate swap contracts with an aggregate notional value of $ 150.0 million.

Peoples will pay a fixed rate of interest for up to ten years while receiving a floating rate component of interest equal to the three-month LIBOR rate.

The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs and brokered demand deposits, which will continue to be rolled through the life of the swaps.

At June 30, 2021, the interest rate swaps were designated as cash flow hedges of $ 110.0 million in brokered demand deposits, which are expected to be extended every 90 days through the maturity dates of

The remaining $ 50.0 million of interest rate swaps were designated as cash flow hedges of 90-day brokered CDs, which are also expected to be extended every 90 days through the maturity dates of the swaps.

Amounts reported in accumulated other comprehensive (loss) income ("AOCI") related to derivative financial instruments will be reclassified to interest income or interest expense as interest payments are made or received on Peoples' variable-rate liabilities.

During the three and six months ended June 30, 2021, Peoples had reclassifications of losses to earnings of $ 796,000 and $ 1.6 million, respectively.

During the three and six months ended June 30, 2020, Peoples had reclassifications of losses to earnings of $ 365,000 and $ 483,000 , respectively.

During the next twelve months, Peoples estimates that minimal interest expense will be reclassified.

For derivative financial instruments designated as cash flow hedges, the effective and ineffective portion of changes in the fair value of each derivative financial instrument is reported in AOCI (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings.

At September 30, 2021, the interest rate swaps were designated as cash flow hedges of $ 100.0 million in brokered demand deposits, which are expected to be extended every 90 days through the maturity dates of the swaps.

The remaining $ 50.0 million of interest rate swaps were designated as cash flow hedges of 90-day FHLB Advances.

For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities.

Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction.

The reset dates and the payment dates on the funding associated with 90-day brokered CDs used to fund the swaps are matched to the reset dates and payment dates on the receipt of the three-month LIBOR floating portion of the swaps to ensure effectiveness of the cash flow hedge.

The reset dates and the payment dates on the 90-day advances or brokered CDs are matched to the reset dates and payment dates on the receipt of the three-month LIBOR floating portion of the swaps to ensure effectiveness of the cash flow hedge.

During the three and nine months ended September 30, 2021, Peoples had reclassifications of losses to earnings of $ 766,000 and $ 2.3 million, respectively.

During the three and nine months ended September 30, 2020, Peoples had reclassifications of losses to earnings of $ 732,000 and $ 1.2 million, respectively.

During the next twelve months, Peoples estimates that minimal interest expense will be reclassified.

The following table summarizes information about the interest rate swaps designated as cash flow hedges:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 December 31,

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The following table presents net gains or losses recorded in AOCI and in the Unaudited Consolidated Statements of Operations related to the cash flow hedges:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands) 2021 2020 2021 2020

1 unchanged sentence

The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:

September 30,

2021 December 31,

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therefore, each swap is accounted for as a standalone derivative financial instrument.

These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the six months ended June 30, 2021 and at or for the year ended December 31, 2020.

These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the three and nine months ended September 30, 2021 and at or for the year ended December 31, 2020.

The following table reflects the non-designated hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:

September 30,

2021 December 31,

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Peoples pledges or receives collateral for all interest rate swaps.

When the fair value of Peoples' interest rate swaps is in a net liability position, Peoples must pledge collateral, and, when the fair value of Peoples' interest rate swaps is in a net asset position, the counterparties must pledge collateral.

At June 30, 2021 and December 31, 2020, Peoples had zero and $ 41.0 million, respectively, of cash pledged, while the counterparties had no amount of cash pledged at either date.

At September 30, 2021 and December 31, 2020, Peoples had zero and $ 41.0 million, respectively, of cash pledged, while the counterparties had no amount of cash pledged at either date.

Cash pledged was included in "Interest-bearing deposits in other banks" on the Audited Consolidated Balance Sheet as of December 31, 2020.

Peoples had pledged $ 39.6 million and zero in investment securities at June 30, 2021 and December 31, 2020, respectively.

Peoples had pledged $ 36.3 million and zero in investment securities at September 30, 2021 and December 31, 2020, respectively.

Note 11 Stock-Based Compensation

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Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions.

In the first six months of 2021, Peoples granted an aggregate of 76,819 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date;

In the first nine months of 2021, Peoples granted an aggregate of 76,819 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date;

provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date.

The following table summarizes the changes to Peoples’ restricted common shares for the six months ended June 30, 2021:

The following table summarizes the changes to Peoples’ restricted common shares for the nine months ended September 30, 2021:

Time-Based Vesting Performance-Based Vesting

4 unchanged sentences

Forfeited ( 500 ) 34.75 ( 6,668 ) 32.42

Outstanding at June 30 83,503 $ 25.37 250,093 $ 32.19

For the six months ended June 30, 2021, the total intrinsic value for restricted common shares released was $ 2.5 million compared to $ 2.0 million for the six months ended June 30, 2020.

Outstanding at September 30 83,238 $ 25.01 247,532 $ 32.19

For the nine months ended September 30, 2021, the total intrinsic value for restricted common shares released was $ 2.6 million compared to $ 2.0 million for the nine months ended September 30, 2020.

Stock-Based Compensation

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The estimated fair value is then expensed over the vesting period, which is normally three years.

For performance unit awards, Peoples recognized stock-based compensation over the performance period, based on the portion of the awards that was expected to vest based on the expected level of achievement of the two performance goals.

For performance unit awards, Peoples recognizes stock-based compensation over the performance period, based on the portion of the awards that was expected to vest based on the expected level of achievement of the two performance goals.

Peoples also has an employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of 15 %.

The following table summarizes the amount of stock-based compensation expense and related tax benefit recognized for each period:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands) 2021 2020 2021 2020

8 unchanged sentences

Net stock-based compensation expense $ 527 $ 541 $ 2,134 $ 2,586

Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in the six months ended June 30, 2021 and 2020.

Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in the nine months ended September 30, 2021 and 2020.

The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date.

Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $ 3.7 million at June 30, 2021, which will be recognized over a weighted-average period of 2.1 years.

On April 1, 2020, an aggregate of 18,952 unrestricted common shares were granted as a one-time special award to employees under the level of Vice

President, with a related stock-based compensation expense of $ 396,000 being recognized.

In addition to the portion of directors' fees paid in common shares, non-employee director stock-based compensation expense included $ 135,000 during the first six months of 2021, and $ 120,000 during the first six months of 2020, reflecting separate grants of unrestricted common shares aggregating 4,347 and 3,680 common shares, respectively.

Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $ 3.0 million at September 30, 2021, which will be recognized over a weighted-average period of 1.9 years.

On April 1, 2020, an aggregate of 18,952 unrestricted common shares were granted as a one-time special award to employees under the level of Vice President, with a related stock-based compensation expense of $ 396,000 being recognized.

In addition to the portion of directors' fees paid in common shares, non-employee director stock-based compensation expense included $ 135,000 during the first nine months of 2021, and $ 120,000 during the first nine months of 2020, reflecting separate grants of unrestricted common shares aggregating 4,347 and 3,680 common shares, respectively.

Note 12 Revenue

The following table details Peoples' revenue from contracts with customers:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(Dollars in thousands) 2021 2020 2021 2020

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The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled related to electronic banking income.

As of June 30, 2021, there were no material changes to Peoples' revenue contracts related to the COVID-19 pandemic, and there were no changes to the likelihood of collectability under the contracts.

The following table details the change in Peoples' contract assets and contract liabilities for the six-month period ended June 30, 2021:

The following table details the changes in Peoples' contract assets and contract liabilities for the nine-month period ended September 30, 2021:

Contract Assets Contract Liabilities

2 unchanged sentences

Additional income receivable 144 —

Receipt of income previously receivable ( 701 ) —

Recognition of income previously deferred — ( 488 )

Balance, June 30, 2021 $ 1,389 $ 5,002

Balance, September 30, 2021 $ 690 $ 4,736

Note 13 Acquisitions

Premier Financial Bancorp, Inc.

On September 17, 2021, Peoples completed its merger with Premier.

Premier merged into Peoples, and Premier’s wholly-owned subsidiaries, Premier Bank, Inc., and Citizens Deposit Bank and Trust, Inc., which combined operate 48 branches in Kentucky, Maryland, Ohio, Virginia, West Virginia and Washington, D.C., merged into Peoples’ wholly-owned subsidiary, Peoples Bank.

As consideration, Premier shareholders were paid 0.58 common shares of Peoples for each full share of Premier that was owned at the acquisition date, resulting in the issuance of 8,589,685 common shares by Peoples, or $ 261.9 million.

Peoples accounted for this transaction as a business combination under the acquisition method.

Peoples completed the merger in an effort to diversify and expand its franchise, and further enhance its size and scale.

Peoples believes the growth potential, and attractive market areas will benefit its future financial performance.

Peoples recorded acquisition-related expenses related to the Premier merger which included $ 9.8 million in other non-interest expense;

$ 4.2 million in professional fees;

$ 3.7 million in salaries and employee benefit costs;

$ 181,000 in marketing expense;

and $ 83,000 in data processing and software expense.

Peoples recorded the estimate of fair value based on initial valuations available at September 17, 2021.

Due to the timing of the transaction closing date and this Form 10-Q, these estimated fair values are considered preliminary as of September 30, 2021, and are subject to adjustment for up to one year after September 17, 2021.

Valuations subject to change include, but are not limited to, loans, bank premises, customer deposit intangibles (included in other intangible assets), certain deposits, trust preferred securities, deferred tax assets and liabilities, and certain other assets and other liabilities.

The following table provides the preliminary purchase price calculation as of the date of the Merger with Premier, and the assets acquired and liabilities assumed at their estimated fair values.

(Dollars in thousands) Unpaid Principal Balance Fair Value

Premier common shares 14,811,200

Number of common shares of Peoples issued for each common share of Premier 0.58

Price per Peoples common share, based at closing date $ 30.49

Common share consideration 261,899

Cash paid in lieu of fractional common shares 25

Total consideration $ 261,924

Net assets at fair value

Cash and due from banks $ 251,763

Interest-bearing deposits in other banks 1,025

Total cash and cash equivalents 252,788

Available-for-sale investment securities 563,294

Other investment securities 4,159

Total investment securities 567,453

Construction 97,262 93,819

Commercial real estate, other 544,950 517,315

Commercial and industrial 132,293 127,880

Residential real estate 332,269 327,508

Home equity lines of credit 46,969 45,841

Consumer 21,083 21,527

Total loans 1,174,826 1,133,890

Bank premises and equipment 33,835

Other intangible assets 4,233

Other assets 19,671

Total assets $ 2,022,971

(Dollars in thousands) Unpaid Principal Balance Fair Value

Non-interest-bearing $ 735,236

Interest-bearing 1,020,887

Total deposits 1,756,123

Short-term borrowings 63,807

Long-term borrowings 6,070

Accrued expenses and other liabilities 6,036

Total liabilities 1,832,036

Net assets 190,935

Goodwill $ 70,989

The recorded goodwill associated with the Premier merger is related to expected synergies and operational efficiencies to be gained from the combination of Premier with Peoples' operations.

None of the goodwill associated with the Premier merger is expected to be deductible for tax purposes.

The geographic locations of Premier will allow Peoples to continue to grow the loan and deposit portfolios, while also increasing Peoples' ability to penetrate the new markets with wealth management and insurance services, which should benefit Peoples in future periods.

Additional information regarding other intangibles recognized in the acquisition can be found in "Note 5 Goodwill and Other Intangible Assets."

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.

Cash and Cash Equivalents:

The carrying amount for cash and due from banks is a reasonable estimate of fair value.

Investment Securities:

Fair values for investment securities are based on quoted market prices, where available.

If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market.

In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.

Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan, related collateral, classification status, fixed or variable interest rate, term, amortization status and current discount rates.

Loans were grouped together according to similar characteristics when applying various valuation techniques.

The discount rates used for loans are based on current market rates at the acquisition date for new originations for comparable loans and include adjustments for liquidity.

The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows.

Bank Premises and Equipment:

The fair values of premises were based on a market approach, with third-party appraisals and broker opinions of value for land, office and branch space.

The fair values of OREO were based on a market approach, with third-party appraisals and broker opinions of value for land and buildings.

Customer Deposit Intangible:

The customer deposit intangible represents the low cost of funding acquired core deposits provide relative to a marginal cost of funds.

The fair value was estimated based on a discounted cash flow methodology that gave consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits.

The customer deposit intangible is being amortized over 10 years based upon the period over which estimated economic benefits are estimated to be received.

The fair values used for the demand and savings deposits equal the amount payable on demand at the acquisition date.

The fair values for time deposits were estimated using a discounted cash flow calculation that applies interest rates being offered at the acquisition date to the contractual interest rates on such time deposits.

Short-term borrowings consist of overnight repurchase agreements and rates, and given their short-term nature book value approximated fair value.

The fair values of long-term borrowings are estimated using discounted cash flow analyses, based on incremental borrowing rates at acquisition date for similar types of instruments.

Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes loans that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" loans.

Acquired purchased credit deteriorated loans are reported net of the unamortized fair

value adjustment.

These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans.

The following table details the fair value adjustment for acquired purchased credit deteriorated loans as of the acquisition date:

(Dollars in thousands) Par Value Allowance for Credit Losses Non-Credit (Discount) Premium Fair Value

Purchased credit deteriorated loans

Construction $ 23,232 $ ( 2,127 ) $ ( 219 ) $ 20,886

Commercial real estate, other 176,122 ( 13,374 ) ( 8,022 ) 154,726

Commercial and industrial 26,341 ( 4,286 ) 281 22,336

Residential real estate 56,005 ( 2,394 ) ( 2,166 ) 51,445

Home equity lines of credit 2,014 ( 41 ) ( 68 ) 1,905

Consumer 1,614 ( 112 ) 63 1,565

Fair value $ 285,328 $ ( 22,334 ) $ ( 10,131 ) $ 252,863

Peoples' operating results for the three-month and nine-month periods ended September 30, 2021 include the operating results of the acquired assets and assumed liabilities of Premier subsequent to the acquisition on September 17, 2021.

Due to the conversion of Premier systems during the third quarter of 2021, as well as other streamlining and integration of the operating activities into those of Peoples, historical reporting for the former Premier operations is impracticable and the disclosures of revenue from the assets acquired and income before income taxes is impracticable for the period subsequent to the acquisition.

The following table presents unaudited pro forma information as if the acquisition of Premier had occurred on January 1, 2020.

The pro forma adjustments include any changes in interest income due to the accretion of discounts, or amortization of premiums, associated with the fair value adjustments to acquired loans, interest-bearing deposits, long-term borrowings, trust preferred securities and customer deposit intangibles that would have resulted had the assets and liabilities been acquired as of January 1, 2020.

The pro forma information excludes Peoples' acquisition-related expenses, which primarily included, but were not limited to, salaries and employee benefit costs, severance costs, professional fees, marketing expenses and deconversion costs.

Those acquisition-related expenses totaled $16.2 million and $18.1 million for the quarter and year-to-date, respectively.

The pro forma information also excludes a provision of credit losses of $11.0 million recorded to establish an allowance for credit losses for non-purchased credit deteriorated loans of $10.6 million, and a liability for unfunded commitments of $0.4 million, both relating to the acquired loans.

The pro forma information does not necessarily reflect the results of operations that would have occurred had Peoples acquired Premier on January 1, 2020.

Additionally, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts.

Unaudited Pro Forma For

Three Months Ended Nine Months Ended

(Dollars in thousands) September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Net interest income $ 59,248 $ 52,646 $ 168,644 $ 156,285

Non-interest income 19,071 18,967 57,061 53,507

Net income 17,492 16,151 56,862 31,529

Pikeville, Kentucky Insurance Agency

On May 4, 2021, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc.

Total consideration for this transaction was $ 325,000 .

Peoples accounted for this transaction as a business combination under the acquisition method.

On March 29, 2021, Peoples announced that it had entered into an Agreement and Plan of Merger dated March 26, 2021 (“Merger Agreement”) with Premier Financial Bancorp, Inc.

The Merger Agreement calls for Premier to merge into Peoples and for Premier’s wholly-owned subsidiaries, Premier Bank, Inc., and Citizens Deposit Bank and Trust, Inc., which combined operate 48 branches in Kentucky, Maryland, Ohio, Virginia, West Virginia and the District of Columbia, to merge into Peoples’ wholly-owned subsidiary, Peoples Bank.

The transaction is subject to certain closing conditions and is anticipated to close during the third quarter of 2021.

NS Leasing, LLC

Peoples Bank entered into an Asset Purchase Agreement, dated March 24, 2021 with NS Leasing, LLC, which is headquartered in Burlington, Vermont, and does business as “North Star Leasing”.

The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as a division of Peoples Bank on April 1, 2021.

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Peoples Bank acquired $ 83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $ 69.1 million.

NSL originates, underwrites and services equipment leases and equipment financing agreements to businesses throughout the United States.

Peoples recorded preliminary goodwill in the amount of $ 25.2 million and preliminary other intangibles of $ 13.5 million, which included customer relationship intangible and non-compete agreements related to this transaction.

Peoples also recorded preliminary contingent consideration related to the bonus earn-out provision of $ 2.3 million.

As of June 30, 2021, leases had grown to $ 95.6 million.

NSL underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States.

Peoples recorded preliminary goodwill in the amount of $ 24.7 million and preliminary other intangibles of $ 14.0 million, which included a customer relationship intangible, trade-name intangible and non-compete agreements related to this transaction.

Peoples recorded an additional $ 0.4 million in non-interest expense during the third quarter of 2021 related to an update to the estimated earn-out provision of $ 2.7 million.

September 30, 2021, leases had grown to $ 111.4 million.

Peoples accounted for this transaction as a business combination under the acquisition method.

The goodwill recorded associated with the NSL acquisition is related to expected synergies to be gained from the combination of NSL with Peoples' operations.

The recorded goodwill associated with the NSL acquisition is related to expected synergies and operational efficiencies to be gained from the combination of NSL with Peoples' operations.

The employees retained from the NSL acquisition should allow Peoples to continue to grow the lease portfolio, along with Peoples' resources, and should benefit Peoples in future periods.

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The bonus earn-out provision recorded by Peoples related to the NSL acquisition was determined based on a weighting of probability of outcomes, at present value.

Peoples predominately weighted the outcomes of the factors at around a 100% payout expectation of the base earn-out, which is approximately $ 2.5 million in total, with some weighting into the bonus expectation, which is an additional $ 625,000 of potential payout.

Peoples predominately weighted the outcomes of the factors at around a 100% payout expectation of the base earn-out, which is $ 2.7 million in total.

Adjusting weighting into the bonus expectation in the third quarter resulted in an additional $ 625,000 of potential payout.

Peoples anticipates that NSL will meet the minimums for the base earn-out payment, and will likely meet the targets set at acquisition for a 100% payout of the base earn-out.

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Cash and due from banks $ 216

Leases 83,326

Allowance for credit losses ( 493 )

Net leases 82,833

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(a) Includes preliminary contingent consideration related to the bonus earn-out provision of $ 2.3 million.

Acquired leases are reported net of the unamortized fair value adjustment.

The following table details the fair value adjustment for acquired leases as of the acquisition date:

(Dollars in thousands)

Non-purchased credit deteriorated leases

Contractual cash flows $ 85,762

Nonaccretable difference 3,456

Expected cash flows 82,306

Accretable yield 1,020

Fair value $ 83,326

Peoples recorded an additional $ 0.4 million in non-interest expense related to an update to the estimated earn-out provision.

The estimated fair values presented in the above table reflect additional information that was obtained during the three months ended September 30, 2021, which resulted in changes to certain fair value estimates made as of the date of acquisition.

Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously recorded results have changed.

The below table reflects the changes in the estimated fair value as they impact goodwill at September 30, 2021:

(Dollars in thousands) Change in fair value

Other intangible assets $ ( 474 )

Other assets ( 380 )

Accrued expenses and other liabilities 380

Change in goodwill $ ( 474 )

Leases acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes leases that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" leases.

These leases are recorded at the purchase price, and an allowance for credit losses is determined using the same methodology as for other leases.

Acquired purchased credit deteriorated leases are reported net of the unamortized fair value adjustment.

The following table details the fair value adjustment for acquired purchased credit deteriorated leases as of the acquisition date:

(Dollars in thousands)

(Dollars in thousands) NSL

Purchased credit deteriorated leases

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Allowance for credit losses ( 493 )

Non-credit premium 85

Fair value $ 4,840

Peoples recorded acquisition-related expenses during the second quarter of 2021, which included $ 7,000 in salaries and employee benefit costs;

$ 2.0 million in professional fees;

$ 6,000 in net occupancy and equipment expense;

Peoples recorded acquisition-related expenses related to the NSL acquisition during the third quarter of 2021, which included $ 13,000 in professional fees.

For the first nine months of 2021, Peoples recorded acquisition-related expenses related to the NSL acquisition which included $ 2.1 million in professional fees;

$ 209,000 in other non-interest expense;

$ 3,000 in salaries and employee benefit costs;

$ 3,000 in data processing and software expense;

$ 15,000 in marketing expense;

and $ 334,000 in other non-interest expense.

For the first six months of 2021, Peoples recognized acquisition-related expenses of $ 7,000 in salaries and employee benefit costs;

$ 3.8 million in professional fees;

$ 2,000 in net occupancy and equipment expense;

$ 43,000 in data processing and software expense;

$ 17,000 in marketing expense;

and $ 445,000 in other non-interest expense.

and $ 2,000 in marketing expense.

Note 14 Leases

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Lessor Arrangements

Peoples began investing in leases with the acquisition of leases from NSL.

The leases acquired were determined to be sales-type leases, as the premise for the leases are dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment.

Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement.

Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status.

Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses.

Peoples began originating leases with the acquisition of leases from NSL.

The leases acquired were determined to be sales-type leases, as the premise for the leases is dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment.

Originated leases continue to be classified as sales-type leases.

As a lessor, Peoples' originates commercial leases either directly to the customer or indirectly through vendor programs.

Leases consist of automotive, construction, healthcare, manufacturing, office, restaurant, and other equipment.

These sales-type leases do not typically contain residual value guarantees, however, Peoples reduces its residual asset risk by obtaining security deposits from the lessee.

Additional information regarding Peoples' sales-type leases can be found in "Note 1 Summary of Significant Accounting Policies" and "Note 4 Loans and Leases."

As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs.

Equipment leases consist of automotive, construction, healthcare, manufacturing, office, restaurant, and other equipment.

These sales-type leases do not typically contain residual value guarantees;

however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee.

Other non-interest income noted in the table below includes gain on the early termination of leases, syndicated leases, and other fees.

Additional information regarding Peoples' sales-type leases can be found in "Note 4 Loans and Leases."

The table below details Peoples' lease income:

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2021 June 30, 2021

Three Months Ended Nine Months Ended

(Dollars in thousands) September 30, 2021 September 30, 2021

Interest and fees on leases (a) $ 4,810 9,025

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The following table summarizes the net investments in sales-type leases, which are included in "Loans and leases, net of deferred costs" on the Unaudited Consolidated Balance Sheets:

(Dollars in thousands) June 30, 2021

(Dollars in thousands) September 30, 2021

Lease payments receivable, at amortized cost $ 139,445

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(Dollars in thousands) Balance

Remaining six months ending December 31, 2021 $ 23,671

Remaining three months ending December 31, 2021 $ 13,980

Year ending December 31, 2022 46,706

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Thereafter 4,537

Lease payment receivables, at amortized cost $ 120,404

Lease payments receivable, at amortized cost $ 139,445

Lessee Arrangements

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Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability.

Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term.

At June 30, 2021, Peoples did not have any finance leases or any significant lessor agreements.

At September 30, 2021, Peoples did not have any leases that met the criteria for finance leases.

Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease.

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Operating lease ROU assets exclude lease incentives.

Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have a ROU asset or lease liability.

The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

(Dollars in thousands) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Operating lease expense $ 358 $ 334 1,038 995

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The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date.

The following table details the ROU asset, the lease liability and other information related to Peoples' operating leases:

(Dollars in thousands) June 30, 2021 December 31, 2020

The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases:

(Dollars in thousands) September 30, 2021 December 31, 2020

Other assets $ 8,732 $ 6,522

Lease liability:

Lease liabilities:

Accrued expenses and other liabilities $ 9,040 $ 6,776

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Weighted-average discount rate 2.39 % 3.14 %

During the three and six months ended June 30, 2021, Peoples paid cash of $ 340,000 and $ 660,000 , respectively, for operating leases.

During the three and six months ended June 30, 2020, Peoples paid cash of $ 319,000 and $ 640,000 , respectively, for operating leases.

During the three and nine months ended September 30, 2021, Peoples paid cash of $ 345,000 and $ 1,005,000 , respectively, for operating leases.

During the three and nine months ended September 30, 2020, Peoples paid cash of $ 320,000 and $ 960,000 , respectively, for operating leases.

The following table summarizes the maturity of remaining lease liabilities:

(Dollars in thousands) Balance

Remaining six months ending December 31, 2021 $ 789

Remaining three months ending December 31, 2021 $ 728

Year ending December 31, 2022 2,270

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Imputed interest $ ( 1,685 )

Total lease liability $ 6,863

Total lease liabilities $ 9,040

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements