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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-07-30 · 516 added, 504 removed, 1094 unchanged (48% of the section changed)

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples for the three and six months ended June 30, 2021 and June 30, 2020.

This discussion and analysis should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples for the three and nine months ended September 30, 2021 and September 30, 2020.

This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto.

SELECTED FINANCIAL DATA

The following data should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and Management’s Discussion and Analysis that follows:

At or For the Three Months Ended At or For the Six Months Ended

June 30, June 30,

The following data should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the MD&A that follows:

At or For the Three Months Ended At or For the Nine Months Ended

September 30, September 30,

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

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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

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

Net (loss) gain on investment securities (166) 2 (704) 383

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

Net income (c) 10,103 4,749 25,566 3,984

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

Balance Sheet Data (a)

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Per Common Share Data (a)

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) 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

Cash dividends declared per common share 0.36 0.34 1.07 1.02

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Closing share price at end of period (e) $ 31.61 $ 19.09 $ 31.61 $ 19.09

At or For the Three Months Ended At or For the Six Months Ended

June 30, June 30,

At or For the Three Months Ended At or For the Nine Months Ended

September 30, September 30,

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

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Allowance for credit losses as a percent of nonperforming loans (e)(o) 186.93 % 198.72 % 186.93 % 198.72 %

Provision for (recovery of) credit losses as a percent of average total loans 0.36 % 1.46 % (0.10) % 1.89 %

Net charge-offs (recoveries) as a percentage of average total loans 0.09 % (0.05) % 0.11 % 0.01 %

Provision for credit losses as a percent of average total loans 1.01 % 0.55 % 0.28 % 1.40 %

Net charge-offs as a percentage of average total loans 0.18 % 0.08 % 0.13 % 0.04 %

Capital Information (a)(e)

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Tangible equity to tangible assets (d) 7.93 % 8.07 % 7.93 % 8.07 %

(a) Reflects the impact of the acquisition of NSL beginning April 1, 2021.

(a) Reflects the impact of the acquisitions of Premium Finance on July 1, 2020, NSL beginning April 1, 2021, and of Premier beginning September 17, 2021.

(b) Total non-interest income excluding net gains and losses, is a Non-US GAAP financial measure since it excludes all gains and/or losses included in earnings.

Additional information regarding the calculation of total non-interest income excluding net gains and losses can be found under the caption "Efficiency Ratio (Non-US GAAP)."

(c) Net income included non-core non-interest expense totaling $2.6 million for the second quarter of 2021 and $5.4 million for the first six months of 2021.

For the second quarter of 2020, net income included non-interest expenses of $1.2 million and $1.7 million for the first six months of 2020.

Net income for the first nine months of 2021 included non-core non-interest expense totaling $23.8 million.

Net income for the third quarter of 2020 and for the first nine months of 2020, included non-core non-interest expenses of $1.2 million and $3.0 million, respectively.

Additional information regarding the non-core non-interest expense can be found under the caption "Core Non-Interest Expense (Non-US GAAP)."

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Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption “Return on Average Tangible Equity Ratio (Non-US GAAP).”

(h) Return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc.

contribution included in earnings.

(h) Return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, contract negotiation expenses, COVID-19-related expenses, a Peoples Bank Foundation, Inc.

contribution, pension settlement

charges and severance expenses included in earnings.

Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption "Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)."

(i) Information presented on a fully tax-equivalent basis, using a statutory federal corporate income tax rate of 21%.

(i) Information presented on a fully tax-equivalent basis, using a blended federal and state corporate income tax rate of 22.3% for 2021 and a statutory federal rate of 21% for 2020.

(j) The efficiency ratio is defined as total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income (excluding all gains and losses).

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(k) The efficiency ratio adjusted for non-core items is defined as core non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus core non-interest income excluding all gains and losses.

This amount represents a Non-US GAAP financial measure since it excludes the impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc.

contribution included in earnings, and uses FTE net interest income.

This amount represents a Non-US GAAP financial measure since it excludes the impact of all gains and losses, acquisition-related expenses, contract negotiation expenses, COVID-19-related expenses, a Peoples Bank Foundation, Inc.

contribution, pension settlement charges and severance expenses included in earnings, and uses FTE net interest income.

Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption "Efficiency Ratio (Non-US GAAP).”

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Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption “Pre-Provision Net Revenue (Non-US GAAP).”

(m) The dividend payout ratio is calculated based on dividends declared during the period divided by net income for the period.

(m) The dividend payout ratio is calculated based on dividends declared during the period divided by net income, where applicable, for the period.

(n) NM = not meaningful.

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(q) Includes loans categorized as substandard and doubtful.

(r) Peoples' capital conservation buffer was 4.75% at June 30, 2021 and 6.80% at June 30, 2020, compared to 2.50% for the fully phased-in capital conservation buffer required at January 1, 2019.

(r) Peoples' capital conservation buffer was 5.83% at September 30, 2021 and 6.33% at September 30, 2020, compared to 2.50% for the fully phased-in capital conservation buffer required at January 1, 2019.

Forward-Looking Statements

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These factors include, but are not limited to:

(1) the ever-changing effects of the COVID-19 pandemic - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 - on economies (local, national and international) and markets, and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including public health actions directed toward the containment of the COVID-19 pandemic (such as quarantines, shut downs and other restrictions on travel and commercial, social and other activities), the development, availability and effectiveness of vaccines, and the implementation of fiscal stimulus packages, which could adversely impact sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;

(1) the ever-changing effects of the COVID-19 pandemic - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants thereof - on economies (local, national and international), supply chains and markets, on the labor market, including the potential for a sustained reduction in labor force participation, and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including public health actions directed toward the containment of the COVID-19 pandemic (such as quarantines, shut downs and other restrictions on travel and commercial, social and other activities), the availability and effectiveness of vaccines, and the implementation of fiscal stimulus packages, which could adversely impact sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;

(2) changes in the interest rate environment due to economic conditions related to the COVID-19 pandemic or other factors and/or the fiscal and monetary policy measures undertaken by the U.S.

government and the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;

(3) the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the completion and successful integration of planned acquisitions, including the pending merger with Premier and the recently-completed acquisition of NSL, expansion of commercial and consumer lending activities, in light of the continuing impact of the COVID-19 pandemic on customers' operations and financial condition;

(3) the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the completion and successful integration of planned acquisitions, including the recently-completed merger with Premier and the recently-completed acquisition of NSL, and the expansion of commercial and consumer lending activities, in light of the continuing impact of the COVID-19 pandemic on customers' operations and financial condition;

(4) competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, which can in turn impact Peoples' credit spreads, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals;

(5) uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the Federal Deposit Insurance Corporation, the Federal Reserve Board and the Consumer Financial Protection Bureau, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses, including in particular the rules and regulations promulgated and to be promulgated under the CARES Act, and the follow-up legislation

enacted as the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;

the rules and regulations promulgated and to be promulgated under the CARES Act, and the follow-up legislation enacted as the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;

(6) the effects of easing restrictions on participants in the financial services industry;

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and its global trading partners) and the impact these conditions may have on Peoples, its customers and its counterparties, and Peoples' assessment of the impact, which may be different than anticipated;

(8) Peoples may issue equity securities in connection with future acquisitions, including the proposed merger of Peoples and Premier, if consummated, which could cause ownership and economic dilution to Peoples' current shareholders;

(8) Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;

(9) changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties' performance and creditworthiness generally, which may be less favorable than expected in light of the COVID-19 pandemic and adversely impact the amount of interest income generated;

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(11) changes in accounting standards, policies, estimates or procedures may adversely affect Peoples' reported financial condition or results of operations;

(12) the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the Current Expected Credit Loss ("CECL") model;

(13) the discontinuation of the London Interbank Offered Rate ("LIBOR") and other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;

(12) the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model;

(13) the discontinuation of the LIBOR and other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;

(14) adverse changes in the conditions and trends in the financial markets, including the impacts of the COVID-19 pandemic and the related responses by governmental and nongovernmental authorities to the pandemic, which may adversely affect the fair value of securities within Peoples' investment portfolio, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities;

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(27) risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets;

(28) Peoples' ability to integrate the NSL acquisition and any future acquisitions, including the pending merger of Premier into Peoples, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(29) the risk that expected revenue synergies and cost savings from the proposed merger of Peoples and Premier may not be fully realized or realized within the expected time frame;

(30) the risk that customer and employee relationships and business operations may be disrupted by the proposed merger of Peoples and Premier;

(28) Peoples' ability to integrate the NSL acquisition and the merger of Premier into Peoples, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(29) the risk that expected revenue synergies and cost savings from the merger of Peoples and Premier may not be fully realized or realized within the expected time frame;

(30) Peoples' continued ability to grow deposits;

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(32) uncertainty regarding the impact of changes to the U.S.

presidential administration and Congress on the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates and the response to and management of the COVID-19 pandemic;

(34) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the headings "Part I - ITEM 1A.

RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and "Part II - ITEM 1A.

RISK FACTORS" of this Form 10-Q.

(33) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A.

RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

All forward-looking statements speak only as of the filing date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements.

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The following discussion and analysis of Peoples’ Unaudited Condensed Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial condition and results of operations.

Peoples offers diversified financial products and services through 89 locations, including 76 full-service bank branches, and 85 Automated Teller Machines ("ATMs") in northeastern, central, southwestern and southeastern Ohio, central and eastern Kentucky, and west central West Virginia through its financial service units – Peoples Bank and Peoples Insurance, a subsidiary of Peoples Bank.

Peoples Bank also offers insurance premium finance lending nationwide through its Peoples Premium Finance division and, as of April 1, 2021, offers lease financing offered through its North Star Leasing division.

Peoples Bank is subject to regulation and examination primarily by the Ohio Division of Financial Institutions (the "ODFI"), the Federal Reserve Bank ("FRB") of Cleveland and the Federal Deposit Insurance Corporation (the "FDIC").

Peoples Bank must also follow the regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB") which regulates consumer financial products and services and certain financial services providers.

Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business.

Peoples’ products and services include a complete line of banking products, such as deposit accounts, lending products and trust services.

Peoples is a diversified financial services holding company that makes available a banking products, such as deposit accounts, lending products and trust services.

Peoples provides services through traditional offices, ATMs, mobile banking and telephone and internet-based banking.

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Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices.

Peoples Bank also offers insurance premium finance lending nationwide through its Peoples Premium Finance division and, since April 1, 2021, offers lease financing through its North Star Leasing division.

As of September 30, 2021, Peoples has 135 locations, including 119 full-service bank branches in Ohio, West Virginia, Kentucky, Virginia, Washington D.C.

and Maryland.

Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business.

Critical Accounting Policies

The accounting and reporting policies of Peoples conform to US GAAP and to general practices within the financial services industry.

The accounting and reporting policies of Peoples conform to US GAAP.

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

Actual results could materially differ from those estimates.

Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and Management’s Discussion and Analysis at June 30, 2021, which have been updated in "Note 1 Summary of Significant Accounting Policies" in this Form 10-Q, and should be read in conjunction with the policies disclosed in Peoples’ 2020 Form 10-K.

Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements describes Peoples' significant account policies.

Summary of Recent Transactions and Events

The following is a summary of recent transactions and events that have impacted or are expected to impact Peoples’ results of operations or financial condition:

◦ 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.

This transaction closed on May 4, 2021 pursuant to an Asset Purchase Agreement between Peoples Insurance and Justice & Stamper Insurance Agency, Inc.

◦ On September 17, 2021, Peoples completed its merger with Premier Financial Bancorp, Inc.

(“Premier”), in which Peoples acquired, in an all-stock merger, Premier, a bank holding company headquartered in Huntington, West Virginia, and the parent company of Premier Bank, Inc.

(“Premier Bank”) and Citizens Deposit Bank and Trust, Inc.

(“Citizens”).

Under the terms and subject to the conditions of the definitive Agreement and Plan of Merger dated March 26, 2021 ("Merger Agreement"), Premier merged with and into Peoples (the “Merger”), and Premier Bank and Citizens subsequently merged with and into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction valued at $261.9 million.

At the close of business on September 17, 2021, the financial services offices of each of Premier Bank and Citizens became branches of

Peoples Bank.

Peoples acquired $1.1 billion in loans and $1.8 billion in deposits.

Peoples preliminarily recorded $71.0 million in goodwill and $4.2 million in other intangible assets in connection with the Merger.

Total consideration for this transaction was $325,000, with $162,500 paid at closing and the second installment in the amount of $162,500 to be paid on the first anniversary of the closing date, less any adjustments pursuant to adverse claims incurred or sustained by or imposed by Peoples Insurance.

Peoples recorded preliminary customer relationship intangible assets of $230,000 and preliminary goodwill of $46,000, related to this transaction.

◦ On March 26, 2021, Peoples and Premier Financial Bancorp, Inc.

(“Premier”) signed a definitive Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Peoples will acquire, in an all-stock merger, Premier, a bank holding company headquartered in Huntington, West Virginia, and the parent company of Premier Bank, Inc.

(“Premier Bank”) and Citizens Deposit Bank & Trust, Inc.

(“Citizens”).

Under the terms of the Merger Agreement, Premier will merge with and into Peoples (the “Merger”), and Premier Bank and Citizens will subsequently merge with and into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction valued at approximately $292.3 million.

The Merger is expected to close during the third quarter of 2021, subject to the satisfaction of customary closing conditions.

At that time, the financial services offices of Premier Bank and Citizens will become branches of Peoples Bank.

Premier shareholders approved the Merger at a special shareholder meeting held on July 1, 2021.

Peoples' shareholders approved the Merger on July 22, 2021.

Peoples has received approval of the proposed Merger from the Federal Reserve Bank of Cleveland and the Ohio Division of Financial Institutions.

◦ 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”.

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.

Peoples Bank acquired assets comprising NSL’s equipment finance business and assumed from NSL certain specified liabilities for total consideration of $118.8 million, including a potential earnout payment to NSL of up to $3.1 million.

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.

◦ On March 31, 2021, Peoples completed its acquisition of NS Leasing, LLC ("NSL") pursuant to an Asset Purchase Agreement, dated March 24, 2021 in which Peoples Bank acquired the equipment finance and leasing business of NSL.

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

Peoples Bank acquired assets comprising NSL's equipment finance business, including $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million.

Peoples Bank paid total consideration of $116.6 million, plus a potential earn-out payment to NSL of up to $3.1 million.

Based in Burlington, Vermont, the North Star Leasing division 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 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.

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

◦ Peoples began originating loans during the second quarter of 2020 under the loan guarantee program created under the CARES Act, called the Paycheck Protection Program ("PPP").

These loans were targeted to provide small businesses with support to cover payroll and certain other specified types of expenses.

These loans were targeted to provide small businesses with financial support to cover payroll and certain other specified types of expenses for a specified period of time.

Loans made under the PPP are fully guaranteed by the Small Business Administration ("SBA").

Additional information can be found later in this discussion under the caption “FINANCIAL CONDITION - COVID-19 Loan Impacts." Peoples originated PPP loans of $22.0 million in second quarter of 2021.

As of June 30, 2021, Peoples had $187.6 million in PPP loans outstanding, which were included in commercial and industrial loan balances, compared to $366.9 million at December 31, 2020.

Peoples recognized interest income of $3.4 million for deferred loan fee/cost accretion and $726,000 of interest income on PPP loans during the second quarter of 2021, compared to $4.7 million and $869,000, respectively, for the first quarter of 2021 and $1.9 million and $918,000, respectively, for the second quarter of 2020.

During the first six months of 2021, Peoples recognized interest income of $8.1 million for deferred loan fee/cost accretion and $1.6 million of interest income on PPP loans compared to $1.9 million for deferred loan/ fee costs accretion and $918,000 of interest income during the first six months of 2020.

Additional information can be found later in this discussion under the caption “FINANCIAL CONDITION - COVID-19 Loan Impacts." As of September 30, 2021, Peoples had $135.8 million aggregate principal amount in PPP loans outstanding (including $28.2 million acquired in the merger with Premier), which were included in commercial and industrial loan balances, compared to $187.6 million at June 30, 2021 and $366.9 million at December 31, 2020.

Peoples recognized interest income of $3.1 million for deferred loan fees/cost accretion and $0.4 million of interest income on PPP loans during the third quarter of 2021, compared to $3.4 million and $0.7 million, respectively, for the second quarter of 2021 and $1.9 million and $1.2 million, respectively, for the third quarter of 2020.

During the first nine months of 2021, Peoples recognized interest income of $11.2 million for deferred loan fees/cost accretion and $2.0 million of interest income on PPP loans compared to $3.8 million for deferred loan fees/costs accretion and $2.1 million of interest income during the first nine months of 2020.

◦ Peoples provided relief solutions to consumer and commercial borrowers, including forbearance and modifications, during the COVID-19 pandemic.

Additional information can be found later in this discussion under the caption “FINANCIAL CONDITION - COVID-19 Loan Impacts."

◦ On January 29, 2021, Peoples announced that on January 28, 2021, Peoples' Board of Directors authorized a share repurchase program authorizing Peoples to purchase up to an aggregate of $30 million of its outstanding common shares.

This program replaced the share repurchase program authorizing Peoples to purchase up to an aggregate of $40 million of its outstanding common shares, which Peoples' Board of Directors had authorized on February 27, 2020 and which was terminated on January 28, 2021.

There were no share repurchases during the first six months of 2021, under the existing share repurchase program.

This program replaced the share repurchase program authorizing Peoples to purchase up to an aggregate of $40 million of Peoples' outstanding common shares, which Peoples' Board of Directors had authorized on February 27, 2020 and which was terminated on January 28, 2021.

There were no common share repurchases during the first nine months of 2021, under the existing share repurchase program.

On February 27, 2020, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $40.0 million of Peoples' outstanding common shares.

This program replaced the share repurchase program authorizing Peoples to purchase up to an aggregate of $20.0 million of Peoples' outstanding common shares, which Peoples' Board of Directors had approved on November 3, 2015 and which was terminated on February 27, 2020.

During the second quarter of 2020, Peoples repurchased 447,931 of its common shares through its then-effective share repurchase program for a total of $9.8 million.

For the first six months of 2020, Peoples repurchased 884,068 in common shares for a total of $20.0 million.

◦ During the second quarter of 2021, Peoples recorded a provision for credit losses of $3.1 million, compared to a recovery of credit losses of $4.7 million in the linked quarter and a provision for credit losses of $11.8 million in the second quarter of 2020.

The change in the amount of the provision for credit losses compared to the linked quarter was attributable to the day-one impact of the $3.3 million allowance for credit losses related to the leases acquired from NSL.

The change in the amount of the provision for credit losses compared to the second quarter of 2020 was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, offset by the day-one allowance for credit losses required that resulted from the acquisition of leases from NSL in the second quarter of 2021.

◦ For the second quarter of 2021, Peoples recorded $210,000 of expenses related to the COVID-19 pandemic, compared to $292,000 for the first quarter of 2021 and $918,000 for the second quarter of 2020.

These expenses were primarily related to providing Peoples' employees meals in support of local businesses, assisting employees with childcare and elder care needs, as well as taking extra precautions in cleaning facilities.

Also included in the COVID-19-related expenses was the purchase of a computer software application in the first quarter of 2021 used in assisting clients with the PPP application and forgiveness process.

◦ During the second quarter of 2021, Peoples incurred $2.4 million of acquisition-related expenses, compared to $1.9 million in the first quarter of 2021 and $47,000 in the second quarter of 2020.

Acquisition-related expenses for the six months ended June 30, 2021 were $4.3 million, compared to $77,000 for the same period last year.

The acquisition-related expenses in 2021 were primarily related to the NSL acquisition and the pending merger with Premier.

This program had replaced the share repurchase program authorizing Peoples to purchase up to an aggregate of $20.0 million of Peoples' outstanding common shares, which Peoples' Board of Directors had approved on November 3, 2015 and which was terminated on February 27, 2020.

During the third quarter of 2020, Peoples repurchased 235,684 of Peoples' common shares through Peoples' then-effective common share repurchase program for a total of $5.0 million.

For the first nine months of 2020, Peoples repurchased 1,119,752 in common shares for a total of $25.0 million.

◦ During the third quarter of 2021, Peoples recorded a provision for credit losses of $9.0 million, compared to a provision for credit losses of $3.1 million in the linked quarter and a provision for credit losses of $4.7 million in the third quarter of 2020.

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.

The change in the amount of the provision for credit losses compared to the third quarter of 2020 was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to

COVID-19, coupled with the day-one allowances for credit losses required in connection with the acquisitions of loans from Premier in the third quarter of 2021.

◦ For the third quarter of 2021, Peoples recorded $181,000 of expenses related to the COVID-19 pandemic, compared to $210,000 for the second quarter of 2021 and $148,000 for the third quarter of 2020.

These expenses were primarily related to providing Peoples' employees meals in support of local businesses and assisting employees with childcare and elder care needs, as well as taking extra precautions in cleaning facilities.

◦ During the third quarter of 2021, Peoples incurred $16.2 million of acquisition-related expenses, compared to $2.4 million in the second quarter of 2021 and $335,000 in the third quarter of 2020.

Acquisition-related expenses for the nine months ended September 30, 2021 were $20.5 million, compared to $412,000 for the same period last year.

The acquisition-related expenses in 2021 were primarily related to the NSL acquisition and the Premier acquisition.

The acquisition-related expenses in 2020 were primarily related to the Triumph Premium Finance acquisition.

◦ Peoples incurred no pension settlement charges for the second quarter of 2021.

Peoples incurred $151,000 for the second quarter of 2020, due to the aggregate amount of lump-sum distributions to participants in Peoples' defined benefit pension plan exceeding the threshold for recognizing such charges during the period.

Peoples recorded no pension settlement charges for the six months ended June 30, 2021 and $519,000 for the six months ended June 30, 2020.

◦ Peoples incurred $0.1 million in pension settlement charges for the third quarter of 2021 compared to $0.5 million for the third quarter of 2020, due to the aggregate amount of lump-sum distributions to participants in Peoples' defined benefit pension plan exceeding the threshold for recognizing such charges during the relevant period.

Peoples recorded $0.1 million of pension settlement charges for the nine months ended September 30, 2021 and $1.1 million for the nine months ended September 30, 2020.

◦ Effective July 1, 2020, Peoples completed the business combination under which Peoples Bank acquired the operations and assets of Triumph Premium Finance (referred to as "Premium Finance acquisition"), a division of TBK Bank, SSB.

Based in Kansas City, Missouri, the division operating as Peoples Premium Finance continues to provide insurance premium financing loans for commercial customers to purchase property and casualty insurance products through its growing network of independent insurance agency partners nationwide.

Peoples Bank acquired $84.7 million in loans, at acquisition date, after fair value adjustments.

Peoples also recorded $4.3 million of other intangible assets and $5.5 million of goodwill.

As of June 30, 2021, Peoples Premium Finance loans had grown to $117.1 million.

◦ During the first quarter of 2020, Peoples recognized an additional $109,000 in bank owned life insurance ("BOLI") income related to tax-free death benefits.

Peoples Bank acquired $84.7 million in loans, at the acquisition date, after fair value adjustments.

Peoples also recorded $4.3 million of other intangible assets and $5.5 million of goodwill related to the acquisition.

As of September 30, 2021, Peoples premium finance loans had grown to $134.8 million.

◦ In an effort to stimulate an economy that was being adversely impacted by the impacts of the COVID-19 pandemic, the Federal Reserve first lowered the benchmark Federal Funds Target Rate by 50 basis points on March 3, 2020, then lowered the target rate another 100 basis points at the next FOMC meeting on March 15, 2020.

The Federal Funds Target Rate range was 0% - 0.25% as of March 31, 2020 and maintained this rate as of June 30, 2021.

According to the Chair of the Board of Governors of the Federal Reserve, the Federal Funds Target Rate is not likely to drop below this range.

However, the Federal Reserve does have other tools available that it can employ and has expressed an intention to do so in order to maintain a targeted level of liquidity.

Furthermore, the Federal Reserve has officially indicated it is committed to a target 0% - 0.25% range for Federal Funds through at least 2023 and has not provided updated official guidance.

The impact of these transactions and events, where material, is discussed in the applicable sections of this Management’s Discussion and Analysis of Results of Operations and Financial Condition.

The Federal Funds Target Rate range was 0% - 0.25% as of March 31, 2020 and maintained this rate as of September 30, 2021.

The impact of these transactions and events, where material, is discussed in the applicable sections of this MD&A.

EXECUTIVE SUMMARY

Peoples recorded net income of $10.1 million for the second quarter of 2021, or earnings of $0.51 per diluted common share, compared to net income of $15.5 million, or $0.79 per diluted common share, for the first quarter of 2021, and net income of $4.7 million, or $0.23 per diluted share, for the second quarter of 2020.

Non-core items, and the related tax effect of each, contained in net income included gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses and the contribution to Peoples Bank Foundation, Inc.

Non-core items negatively impacted earnings per diluted common share by $0.10 for the second quarter of 2021, by $0.11 for the first quarter of 2021, and by $0.06 for the second quarter of 2020.

Net income in the second quarter of 2021, was largely affected by the acquisition of NSL.

For the first six months of 2021, net income was $25.6 million, or earnings of $1.31 per diluted common share, compared to net income of $4.0 million, or earnings of $0.19 per diluted common share for the six months ended June 30, 2020.

The increase in earnings was impacted primarily by the recovery of credit losses in 2021 as compared to the provision for credit losses in 2020.

Non-core items negatively impacted earnings per diluted common share by $0.21 and $0.08 for the six months ended June 30, 2021, and 2020, respectively.

Net interest income was $39.7 million for the second quarter of 2021, up 11% compared to $35.6 million for the first quarter of 2021, and an increase of 14% compared to $34.9 million for the second quarter of 2020.

Net interest margin was 3.45% for the second quarter of 2021, compared to 3.26% for the first quarter of 2021, and 3.19% for the second quarter of 2020.

The increases in net interest income and net interest margin reflected the positive impact of leases acquired from NSL and PPP loan forgiveness payments received during the second quarter of 2021.

Net interest income and net interest margin continue to be impacted by the low interest rate environment caused by COVID-19 that continued throughout the second quarter of 2021.

Interest income on leases was $4.2 million for the second quarter of 2021.

A reduction in the cost of funds benefited net interest income compared to the linked quarter, and also contributed to the improvement in net interest margin.

For the first six months of 2021, net interest income increased $5.7 million, or 8%, compared to the first six months of 2020, while net interest margin increased two basis points to 3.36%.

The change in net interest income was the result of lower funding costs due to a shift from higher cost overnight FHLB advances to lower cost brokered deposits, as well as a higher volume of loans due to the NSL and Premium Finance acquisitions.

Accretion income, net of amortization expense, from acquisitions was $821,000 for the second quarter of 2021, $383,000 for the first quarter of 2021, and $955,000 for the second quarter of 2020, which added 7 basis points, 4 basis points, and 9 basis points, respectively, to net interest margin.

Accretion income, net of amortization expense, from acquisitions was $1.2 million for the six months ended June 30, 2021, compared to $2.0 million for the six months ended June 30, 2020, which added 6 and 10 basis points, respectively, to net interest margin.

During the second quarter of 2021, Peoples recorded a provision for credit losses of $3.1 million, compared to a recovery of credit losses of $4.7 million for the first quarter of 2021 and a provision for credit losses of $11.8 million for the second quarter of 2020.

Net charge-offs for the second quarter of 2021 were $780,000, or 0.09% of average total loans annualized, compared to net charge-offs of $1.1 million, or 0.13% of average total loans annualized, for the linked quarter and net recoveries of $369,000, or (0.05)% of average total loans annualized, for the second quarter of 2020.

Net charge-offs for the second quarter of 2021 included $414,000 in leases that were charged-off.

The change in the amount of provision for credit losses compared to the linked quarter was primarily due to the day-one allowance for credit losses of $3.3 million related to the leases acquired from NSL, which was recognized in the second quarter of 2021.

As the lease portfolio grew over the second quarter of 2021, an additional reserve of $427,000 was required for leases, based on the CECL model.

Compared to the second quarter of 2020, the change in the provision for credit losses was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, offset by the day-one allowance for credit losses required that resulted from the acquisition of leases from NSL in the second quarter of 2021.

The recovery of credit losses during the first six months of 2021 was $1.7 million, compared to a provision for credit losses of $28.8 million for the first six months of 2020.

Net charge-offs for the first six months of 2021 were $1.8 million, or 0.11% of average total loans annualized, compared to net charge-offs of $129,000, for the first six months of 2020.

The change in the provision for credit losses was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, offset by the day-one allowance for credit losses required that resulted from the acquisition of NSL in the second quarter of 2021.

For the second quarter of 2021, total non-interest income decreased $1.1 million, or 6%, compared to the first quarter of 2021 and increased $1.2 million, or 8%, from the second quarter of 2020.

During the first quarter of 2021, insurance income included $2.0 million, due to the annual performance-based insurance commissions recognized in the first quarter of each year, that did not reoccur in the second quarter of 2021, but was offset partially by growth in all lines of insurance business.

The decrease in insurance income was offset partially by increases in trust and investment income, and electronic banking income.

The increase in non-interest income compared to the second quarter of 2020 was due primarily to an increase in trust and investment income of $904,000 and electronic banking income of $895,000.

For the six months ended June 30, 2021, total non-interest income increased $2.3 million compared to the six months ended June 30, 2020.

This increase was driven by increases in electronic banking income, trust and investment income, and insurance income, offset partially by a decline in commercial loan swap fees.

Total non-interest expense increased $1.9 million, or 5%, for the second quarter of 2021 compared to the first quarter of 2021 and $8.1 million, or 25%, compared to the second quarter of 2020.

Compared to the linked quarter, the acquisition of leases from NSL added $1.0 million in salaries and employee benefit costs and $695,000 in intangible asset amortization during the second quarter of 2021.

Total non-interest expense in the second quarter of 2021 contained non-core expenses including acquisition-related expenses of $2.3 million, $210,000 in COVID-19-related expenses and $14,000 in severance expenses.

During the first quarter of 2021, non-core expenses included acquisition-related expenses of $1.9 million, a $500,000 contribution to Peoples Bank Foundation, Inc., $292,000 in COVID-19-related expenses and $49,000 in severance expenses.

Compared to the second quarter of 2020, total non-interest expense increased primarily due to increases in salaries and employee benefit costs of $3.9 million, acquisition-related expenses of $2.4 million, and amortization of intangible assets of $640,000.

The increase in salaries and employee benefit costs was primarily the result of the acquisitions of NSL and Premium Finance, coupled with deferred costs associated with PPP loans recognized in second quarter of 2020.

The increase in amortization of intangible assets were primarily the result of the acquisitions of NSL and Premium Finance.

Acquisition-related expenses increased in the second quarter of 2021 due to the closing of the NSL acquisition and pending merger with Premier.

During the first six months of 2021, total non-interest expense increased $11.8 million compared to the same period last year.

The variance was driven primarily by increases of $4.8 in salaries and employee benefit costs, $4.2 million in acquisition-related expenses, and data processing and software costs of $1.4 million.

Peoples recorded a net loss of $5.8 million for the third quarter of 2021, or $0.28 per diluted common share, compared to net income of $10.1 million, or $0.51 per diluted common share, for the second quarter of 2021, and net income of $10.2 million, or $0.51 per diluted share, for the third quarter of 2020.

Non-core items, and the related tax effect of each, in net (loss) income included acquisition-related expenses, contract negotiation expenses, COVID-19-related expenses, a contribution to Peoples Bank Foundation, Inc., pension settlement charges, severance expenses, and gains and losses on investment securities, asset disposals and other transactions.

Non-core items negatively impacted earnings per diluted common share by $0.71 for the third quarter of 2021, $0.10 for the second quarter of 2021, and by $0.05 for the third quarter of 2020.

Net income in the third quarter of 2021 was largely affected by the acquisition of Premier.

For the first nine months of 2021, net income was $19.8 million, or $0.99 per diluted common share, compared to net income of $14.2 million, or $0.70 per diluted common share, for the nine months ended September 30, 2020.

The increase in earnings was impacted primarily by the change in provision for credit losses in 2021 as compared to 2020.

Non-core items negatively impacted earnings per diluted common share by $0.98 and $0.12 for the nine months ended September 30, 2021 and 2020, respectively.

Net interest income was $42.6 million for the third quarter of 2021, up 7% compared to $39.7 million for the second quarter of 2021, and an increase of 21% compared to $35.1 million for the third quarter of 2020.

Net interest margin was 3.50% for the third quarter of 2021, compared to 3.45% for the second quarter of 2021, and 3.14% for the third quarter of 2020.

Compared to the linked quarter and third quarter of 2020, net interest income and margin were improved due to the growth in leases and premium finance loans, coupled with the partial period impact of the Premier acquisition and lower cost of funds.

Net interest income and margin both have been negatively impacted by the excess liquidity environment present in the financial services sector since the beginning of the COVID-19 pandemic by way of increased low yielding cash reserves.

Net interest income and net interest margin continue to be impacted by the low interest rate environment caused by COVID-19 that continued throughout the third quarter of 2021.

For the first nine months of 2021, net interest income increased $13.2 million, or 13%, compared to the first nine months of 2020, while net interest margin increased 14 basis points to 3.41%.

Accretion income, net of amortization expense, from acquisitions was $1.0 million for the third quarter of 2021, $0.8 million for the second quarter of 2021, and $0.5 million for the third quarter of 2020, which added 8 basis points, 7 basis points, and 5 basis points, respectively, to net interest margin.

Accretion income, net of amortization expense, from acquisitions was $2.2 million for the nine months ended September 30, 2021, compared to $2.6 million for the nine months ended September 30, 2020, which added 6 and 8 basis points, respectively, to net interest margin.

During the third quarter of 2021, Peoples recorded a provision for credit losses of $9.0 million, compared to a provision for credit losses of $3.1 million for the second quarter of 2021 and a provision for credit losses of $4.7 million for the third quarter of 2020.

Net charge-offs for the third quarter of 2021 were $1.6 million, or 0.18% of average total loans annualized, compared to net charge-offs of $0.8 million, or 0.09% of average total loans annualized, for the linked quarter and net charge-offs of $0.7 million, or 0.08% of average total loans annualized, for the third quarter of 2020.

Net charge-offs for the third quarter of 2021 included one commercial and industrial loan aggregating $0.5 million.

Net charge-offs for the second quarter of 2021 included $0.4 million in leases.

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.

Compared to the third quarter of 2020, the change in the provision for credit losses was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, offset by the day-one allowances for credit losses required in connection with the acquisitions of Premier in the third quarter of 2021 and NSL in the second quarter of 2021.

The provision for credit losses during the first nine months of 2021 was $7.3 million, compared to a provision for credit losses of $33.5 million for the first nine months of 2020.

Net charge-offs for the first nine months of 2021 were $3.4 million, or 0.13% of average total loans annualized, compared to net charge-offs of $0.9 million, or 0.04% annualized, for the first nine months of 2020.

The change in the provision for credit losses compared to the first nine months of 2020 was primarily due to improved economic factors and updated loss drivers and their impact on assumptions used in the CECL model throughout the first nine months of 2021.

For the third quarter of 2021, total non-interest income increased $0.5 million, or 3%, compared to the second quarter of 2021 and decreased $0.4 million, or 3%, from the third quarter of 2020.

The rise in non-interest income compared to the linked quarter was the result of an increase in overdraft fees included in deposit account service charges of $0.5 million and a $0.2 million increase in income recognized on leases related to the early termination of leases and other fees, offset partially by declines in trust and investment income, electronic banking income and mortgage banking income.

Net losses of $0.5 million realized during the third quarter of 2021 were driven primarily by losses on the disposal of fixed assets acquired from Premier and the sales of securities during the third quarter of 2021, compared to net losses of $0.3 million for the linked quarter, and net gains of $26,000 for the third quarter of 2020.

For the nine months ended September 30, 2021, total non-interest income increased $1.9 million compared to the nine months ended September 30, 2020.

The increase was driven by higher trust and investment income, associated with new accounts and increased market values of assets under administration and management, coupled with higher electronic banking income and $716,000 of non-interest income contributed by the leasing business.

Total non-interest expense increased $18.0 million, or 45%, for the third quarter of 2021 compared to the second quarter of 2021, and $23.5 million, or 69%, compared to the third quarter of 2020.

The increase in total non-interest expense for the third quarter of 2021 compared to the linked quarter was primarily due to the recognition of $16.5 million of acquisition-related expenses due to the closing of the Premier acquisition during the quarter.

Total non-interest expense in the third quarter of 2021 also contained other non-core expenses such as a one-time expense related to contract renewal negotiations of Peoples Bank's core banking systems of $1.9 million, and $0.2 million in COVID-19-related expenses.

During the second quarter of 2021, non-core expenses included acquisition-related expenses of $2.4 million and $0.2 million in COVID-19-related expenses.

For the third quarter of 2020, non-core expenses included $531,000 of pension settlement charges, $335,000 of acquisition-related expenses, $192,000 of severance expenses and $148,000 of COVID-19-related expenses.

Compared to the third quarter of 2020, the increase in total non-interest expense was primarily due to an increase in acquisition-related expenses of $16.2 million, an increase in salaries and employee benefit costs of $6.2 million and an increase in amortization of intangible assets of $0.4 million.

The increases in salaries and employee benefit costs and amortization of intangible assets were primarily the result of the acquisitions of Premier and NSL.

For the first nine months of 2021, total non-interest expense increased $35.3 million compared to the same period last year.

The variance was driven primarily by increases of $20.5 million in acquisition-related expenses.

The remainder of the increase was largely due to a $7.2 million rise in salaries and employee benefit costs, which was driven by the added ongoing costs of the recent acquisitions, along with higher sales and incentive compensation from increased production, growth in medical insurance and 401(k) costs, while data processing and software costs also increased $2.1 million.

These changes were partially offset by decreases in pension settlement charges and COVID-19-related expenses.

Similar to the quarterly comparisons, the acquisitions of NSL and Premium Finance and the recognition of deferred costs on PPP loans in the second quarter drove increased salaries and employee benefit costs, as well as amortization of intangible assets.

Peoples' efficiency ratio, calculated as total non-interest expense less amortization of other intangible assets divided by fully tax-equivalent ("FTE") net interest income, plus total non-interest income, excluding all gains and losses, for the second quarter of 2021 was 68.6%, compared to 70.4% for the first quarter of 2021, and 62.3% for the second quarter of 2020.

The change in the efficiency ratio compared to the linked quarter was primarily due to the increase in net interest income.

The efficiency ratio, when adjusted for non-core items, was 64.0% for the second quarter of 2021, compared to 65.2% for the first quarter of 2021 and 59.9% for the second quarter of 2020.

The efficiency ratio for the six months ended June 30, 2021 was 69.5% compared to 64.5% for the six months ended June 30, 2020.

When adjusted for non-core items, the efficiency ratio was 64.7% for the first half of 2021 compared to 62.8% for the first half of 2020.

Peoples continues to control expenses, while recognizing some necessary costs in order to continue growing the company.

Peoples recorded income tax expense of $2.4 million for the second quarter of 2021, compared to $3.8 million for the linked quarter and $1.1 million for the second quarter of 2020.

The variance between each of the comparative periods was primarily the result of changes in pre-tax income related to the variability in the allowance for credit losses recorded during the second quarter of 2021, compared to the linked quarter and the second quarter of 2020.

At June 30, 2021, total assets were $5.07 billion, compared to $4.76 billion at December 31, 2020.

The 6% increase compared to December 31, 2020 was driven by investment securities growth of $205.4 million, which was primarily the result of purchases made during the first six months of 2021 as part of a reorganization of a portion of the investment securities portfolio.

Period-end total loan balances at June 30, 2021 decreased $30.7 million, compared to December 31, 2020.

The decrease was driven by PPP loan forgiveness for the first six months of 2021, offset partially by the $83.3 million of leases acquired from NSL and continued growth in consumer indirect loans of $34.4 million.

Excluding PPP loans and the lease activity, period-end loan balances grew 3% annualized for the six months ended June 30, 2021.

The allowance for credit losses at June 30, 2021 decreased to $47.9 million, or 1.42% of total loans, compared to $50.4 million and 1.48%, respectively, at December 31, 2020.

Total assets declined $75.4 million, or 1%, compared to the linked quarter.

The decline was the result of a decline in loans of $37.5 million, along with a decrease in other assets.

Total liabilities were $4.48 billion at June 30, 2021, up $297.0 million since December 31, 2020.

The increase in total liabilities during the first six months of 2021 was primarily due to an increase in deposits of $322.2 million, or 8%, compared to December 31, 2020.

The increase was driven by a growth in non-interest-bearing checking accounts of $183.7 million, seasonal growth in governmental deposits of $113.0 million and an increase in savings deposits of $60.9 million, offset partially by decreases in retail and brokered certificates of deposit.

The overall increase in non-interest-bearing checking accounts was the result of economic stimulus payments to consumers and PPP loan disbursements provided by the Consolidated Appropriations Act, 2021.

Total liabilities decreased $82.0 million compared to the linked quarter.

The decrease was driven by a decline in interest-bearing deposits of $46.6 million and a decrease in non-interest-bearing deposits of $25.0 million.

At June 30, 2021, total stockholders' equity was $585.5 million, an increase of $9.8 million compared to December 31, 2020.

The increase in total stockholders' equity was driven by net income for the first six months of 2021, offset partially by dividends paid to shareholders of $13.9 million and a decrease in accumulated other comprehensive income, net of deferred income taxes, of $3.6 million.

The change in accumulated other comprehensive income, net of deferred income taxes, was the result of the changes in the

market value of available-for-sale investment securities during the period.

Total stockholders' equity at June 30, 2021 increased by $6.6 million compared to March 31, 2021, which was driven by net income for the quarter and an increase in accumulated other comprehensive income of $2.7 million, partially offset by dividends paid to shareholders of $7.1 million.

The change in accumulated other comprehensive income was the result of the changes in the market value of available-for-sale investment securities during the period.

Similar to the quarterly comparisons, the acquisitions of Premier, NSL and Premium Finance increased salaries and employee benefit costs, as well as amortization of intangible assets.

Peoples' efficiency ratio, calculated as total non-interest expense less amortization of other intangible assets divided by fully tax-equivalent ("FTE") net interest income, plus total non-interest income, excluding all gains and losses, for the third quarter of 2021 was 94.7%, compared to 68.6% for the second quarter of 2021, and 64.1% for the third quarter of 2020.

The change in the efficiency ratio compared to the linked quarter was primarily due to the acquisition-related expenses mentioned above.

The efficiency ratio, when adjusted for non-core items, was 63.9% for the third quarter of 2021, compared to 64.0% for the second quarter of 2021 and 61.8% for the third quarter of 2020.

The efficiency ratio for the nine months ended September 30, 2021 was 78.4% compared to 64.4% for the nine months ended September 30, 2020.

When adjusted for non-core items, the efficiency ratio was 64.3% for the first nine months of

2021 compared to 62.4% for the first nine months of 2020.

Peoples continues to focus on controlling expenses, while recognizing some necessary costs in order to continue growing the business.

Peoples recorded an income tax benefit of $2.2 million for the third quarter of 2021, compared to income tax expense of $2.4 million for the linked quarter and $2.6 million for the third quarter of 2020.

The income tax benefit for the third quarter of 2021, compared to the income tax expense for the linked quarter, was due to the net loss recognized in the third quarter of 2021.

The increase in income tax expense for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was due to higher pre-tax income.

At September 30, 2021, total assets were $7.06 billion, compared to $5.07 billion at June 30, 2021 and $4.76 billion at December 31, 2020.

Total assets grew 39% compared to June 30, 2021, and was largely attributable to the Premier acquisition, which added $1.1 billion in loans, $563.3 million in investment securities, and the recognition of goodwill on the transaction of $71.0 million.

The 48% increase compared to December 31, 2020 was also driven by the Premier acquisition, along with the $83.3 million of leases acquired from NSL, subsequent growth in leases of $28.1 million, and organic loan growth of $88.2 million, offset partially by $474.2 million in forgiveness received on PPP loans during the nine months ended September 30, 2021.

The allowance for credit losses at September 30, 2021 increased to $77.4 million, or 1.72% of total loans, compared to $50.4 million and 1.48%, respectively, at December 31, 2020.

Total assets increased $2.0 billion, or 39%, compared to the linked quarter.

The increase was a result of the Premier acquisition.

Total liabilities were $6.23 billion at September 30, 2021, up from $4.48 billion at June 30, 2021 and $4.19 billion at December 31, 2020.

The increase in total liabilities compared to June 30, 2021 was primarily due to deposits acquired from Premier of $1.8 billion, as well as retail repurchase agreements of $63.8 million.

Also contributing to the increase compared to December 31, 2020 was higher total deposits associated with customers maintaining higher balances due primarily to economic stimulus payments provided by the government, as well as changes in customer buying habits.

At September 30, 2021, total stockholders' equity was $831.9 million, an increase of $256.2 million compared to December 31, 2020.

The increase in total stockholders' equity was driven by common shares issued for the acquisition of Premier and net income for the first nine months of 2021, offset by $21.0 million in dividends paid to shareholders and the change in accumulated other comprehensive income to an accumulated other comprehensive loss of $7.2 million.

RESULTS OF OPERATIONS

3 unchanged sentences

Net interest margin, which is calculated by dividing FTE net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of interest-earning assets and interest-bearing liabilities.

FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a federal corporate income tax rate of 21%.

The following table details the calculation of FTE net interest income:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

Net interest income $ 42,578 $ 39,660 $ 35,119 $ 117,816 $ 104,615

Taxable equivalent adjustments 324 257 269 578 541

Taxable equivalent adjustment 351 324 262 970 803

Fully tax-equivalent net interest income $ 42,929 $ 39,984 $ 35,381 $ 118,786 $ 105,418

1 unchanged sentence

For the Three Months Ended

June 30, 2021 March 31, 2021 June 30, 2020

September 30, 2021 June 30, 2021 September 30, 2020

( Dollars in thousands)

50 unchanged sentences

Net interest margin (b) 3.50 % 3.45 % 3.14 %

For the Six Months Ended

June 30, 2021 June 30, 2020

For the Nine Months Ended

September 30, 2021 September 30, 2020

( Dollars in thousands)

53 unchanged sentences

(a) Average balances are based on carrying value.

(b) Interest income and yields are presented on a fully tax-equivalent basis, using a 21% statutory federal corporate income tax rate.

(b) Interest income and yields are presented on a fully tax-equivalent basis, a blended federal and state corporate income tax rate of 22.3% for 2021 and a statutory federal corporate income tax rate of 21% for 2020.

3 unchanged sentences

Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.

(e) Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances for the 2020 periods presented and interest expense on brokered deposits for all periods presented.

Average total loan balances were impacted during the second quarter of 2021 by the addition of the lease balances associated with the acquisition from NSL, as well as a reduction in commercial and industrial loan balances as a result of recent forgiveness of PPP loans.

Compared to the second quarter of 2020, average total deposit balances grew significantly due to the influx of funds from the PPP loan proceeds, changed customer spending habits and federal stimulus provided to customers.

In addition, average total loan balances for the first six months of 2021 were higher than the prior year period due to the lease and premium finance balances acquired, and the PPP loans originated since the start of the pandemic.

The average total deposit balances compared to 2020 grew considerably due to the influx of funds from the PPP loan proceeds, changed customer spending habits and federal stimulus provided to customers.

(e) Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered deposits for the periods presented in which FHLB advances and brokered deposits were being utilized.

Peoples completed the acquisition of Premier on September 17, 2021, which impacted average total loan and deposit balances for the partial period in which the balances were included for the third quarter of 2021.

Compared to the third quarter of 2020, average total loans grew mostly due to the leases acquired.

Compared to the third quarter of 2020, average total deposit balances grew significantly due to the influx of funds from the PPP loan proceeds, changed customer spending habits and federal stimulus provided to customers.

In addition, average total loan balances for the first nine months of 2021 were higher than the prior year period due to the lease, Premium Finance and Premier balances acquired, coupled with the PPP loans originated since the start of the pandemic and loan growth.

The following table provides an analysis of the changes in FTE net interest income:

Three Months Ended June 30, 2021 Compared to

Six Months Ended June 30, 2021 Compared to

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

Three Months Ended September 30, 2021 Compared to

Nine Months Ended September 30, 2021 Compared to

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

Increase (decrease) in:

34 unchanged sentences

(a) The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each.

(b) Interest income and yields are presented on a fully tax-equivalent basis using a 21% statutory federal corporate income tax rate.

Net interest income grew 11% compared to the linked quarter, benefiting from the leases acquired from NSL and the recent restructuring of the investment portfolio, coupled with lower deposit costs.

During the second quarter of 2021, Peoples recognized $3.4 million of income related to the deferred loan fees on the PPP loans, which was down $1.4 million from the linked quarter.

Net interest margin grew 19 basis points to 3.45% for the second quarter of 2021 compared to 3.26% for the linked quarter.

The increase in net interest margin was driven by the leases, which added 29 basis points to net interest margin for the quarter, while excess liquidity resulted in inflated cash balances which reduced net interest margin by 13 basis points.

The PPP loan income added 15 basis points to net interest margin during the second quarter of 2021.

Compared to the second quarter of 2020, net interest income increased 14%, which was due to the acquired leases, premium finance loans and additional PPP income from the deferred loan fees recognized, as well as controlled funding costs.

These increases were partially offset by lower investment yields compared to the second quarter of 2020.

Net interest margin expanded 26 basis points compared to 3.19% for the second quarter of 2020.

Higher loan yields and controlled funding costs contributed to the increase compared to the prior year quarter.

(b) Interest income and yields are presented on a fully tax-equivalent basis a blended federal and state corporate income tax rate of 22.3% for 2021 and a statutory federal corporate income tax rate of 21% for 2020.

Net interest income grew 7% compared to the linked quarter, benefiting from the Premier acquisition, growth in leases and Premium Finance balances, and the overall growth in interest-earning assets, coupled with lower deposit costs.

Net interest income and net interest margin both have been negatively impacted by the excess liquidity environment present in the financial services sector since the beginning of the COVID-19 pandemic by way of increased low yielding cash reserves.

Peoples recognized interest income on deferred loan fees/costs of $3.1 million and $3.4 million during the third and second quarters of 2021, respectively, along with $0.4 million and $0.7 million of interest earned on PPP loans during the third and second quarters of 2021, respectively.

Net interest margin grew five basis points to 3.50% for the third quarter of 2021 compared to 3.45% for the linked quarter.

The increase in net interest margin was driven by the PPP income, which benefited net interest margin by 18 basis points for the third quarter of 2021 compared to 15 basis points for the second quarter of 2021, while excess liquidity resulted in inflated cash balances which reduced net interest margin by 13 basis points compared to 12 basis points for the linked quarter.

Compared to the third quarter of 2020, net interest income increased 21%, which was due to the acquired leases, premium finance loans and additional PPP income from the deferred loan fees recognized, as well as controlled funding costs.

Net interest margin expanded 36 basis points compared to 3.14% for the third quarter of 2020.

The lease portfolio added $4.8 million to net interest income, and 28 basis points to net interest margin, for the third quarter of 2021.

In late March of 2020, the Federal Reserve lowered the Federal Funds effective target range 150 basis points to 0.00% to 0.25%.

The majority of Peoples' variable rate loan portfolio is tied to LIBOR or a prime rate, which continued to be lower than historical levels.

For the first six months of 2021, net interest income grew 8%, and was driven by the premium finance and lease acquisitions, and the PPP loan income from the deferred loan fees recognized upon forgiveness by the SBA.

Compared to the first half of 2020, net interest margin grew by 2 basis points, as lower earning asset yields were more than offset by declines in funding costs.

Accretion income, net of amortization expense, from acquisitions was $821,000 for the second quarter of 2021, $383,000 for the linked quarter and $955,000 for the first quarter of 2020, which added 7 basis points, 4 basis points and 9 basis points, respectively, to net interest margin.

For the first six months of 2020, accretion income, net of amortization expense, from acquisitions totaled $1.2 million, and added 6 basis points to net interest margin compared to $2.0 million, and 10 basis points for 2020.

The increase in accretion was a result of the acquisition from NSL.

Additional information regarding changes in the Unaudited Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this discussion.

Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this discussion under the caption "FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity."

Provision for (Recovery of) Credit Losses

The following table details Peoples’ provision for (recovery of) credit losses:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

For the first nine months of 2021, net interest income grew 13%, and was driven by the addition of the lease and premium finance portfolios, along with PPP income, coupled with lower funding costs.

Compared to the first nine months of 2020, net interest margin grew by 14 basis points and was driven by the 20 basis point addition of the leasing portfolio, while the PPP income contributed 20 basis points during 2021 compared to 6 basis points for 2020.

Accretion income, net of amortization expense, from acquisitions was $1.0 million for the third quarter of 2021, $0.8 million for the linked quarter and $0.5 million for the third quarter of 2020, which added 8 basis points, 7 basis points and 5 basis points, respectively, to net interest margin.

For the first nine months of 2021, accretion income, net of amortization expense, from acquisitions totaled $2.2 million, and added 6 basis points to net interest margin, compared to $2.6 million, and 8 basis points for 2020.

Additional information regarding changes in the Unaudited Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this MD&A.

Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this MD&A under the caption "FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity."

Provision for Credit Losses

The following table details Peoples’ provision for credit losses:

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

Provision for (recovery of) other credit losses $ 3,035 $ (4,780) $ 11,773 $ (1,745) $ 28,597

Provision for other credit losses $ 8,870 $ 3,035 $ 4,574 $ 7,125 $ 33,171

Provision for checking account overdraft credit losses 124 53 154 208 360

Provision for (recovery of) credit losses $ 3,088 $ (4,749) $ 11,834 $ (1,661) $ 28,803

Provision for credit losses $ 8,994 $ 3,088 $ 4,728 $ 7,333 $ 33,531

As a percentage of average total loans (a) 1.01 % 0.36 % 0.55 % 0.28 % 1.40 %

(a) Presented on an annualized basis.

The provision for (recovery of) credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates.

The change in the provision for credit losses compared to the linked quarter was primarily due to the day-one allowance for credit losses of $3.3 million related to the leases acquired from NSL, which was recognized in the second quarter of 2021.

Excluding leases, the reduction of specific reserves on individually evaluated loans positively impacted the allowance for credit losses for the second quarter of 2021.

Compared to the second quarter of 2020, the change in the provision for credit losses was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, offset with the day-one allowance for credit losses resulting from the acquisition of NSL in the second quarter of 2021.

Net charge-offs for the second quarter of 2021 were $0.8 million, or 0.09% of average total loans annualized, compared to $1.1 million, or 0.13% of average total loans annualized, for the linked quarter and net recoveries of $369,000, or (0.05)% of average total loans annualized, for the second quarter of 2020.

Compared to the first six months of 2020, provision for credit losses declined significantly, as the economic forecasts utilized within the CECL model experienced notable recovery compared to those utilized during 2020, which had been impacted by the COVID-19 pandemic.

Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this discussion under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.”

The provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates.

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.

Excluding the day-one allowance for credit losses related to loans acquired from Premier, the release of allowance for credit losses was based on changes in economic factors and loss drivers used in the CECL model.

Compared to the third quarter of 2020, the change in the provision for credit losses was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, coupled with the day-one allowance for credit losses required in connection with the acquisitions of Premier in the third quarter of 2021 and NSL in the second quarter of 2021.

Compared to the first nine months of 2020, the provision for credit losses declined significantly, as the economic forecasts utilized within the CECL model experienced notable recovery compared to those utilized during 2020, which had been impacted by the onset of the COVID-19 pandemic.

Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this MD&A under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.”

Net (Loss) Gain Included in Total Non-Interest Income

Net losses include gains and losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income.

The following table details Peoples’ net losses:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Net (loss) gain include gains and losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income.

The following table details Peoples’ net losses for the periods presented:

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

Net (loss) gain on investment securities $ (166) $ (202) $ 2 $ (704) $ 383

Net loss on asset disposals and other transactions:

Net (loss) gain on asset disposals and other transactions:

Net loss on other assets $ (270) $ (132) $ (43) $ (429) $ (258)

Net gain (loss) on OREO 8 — 1 8 (16)

Net gain on other transactions — — 22 — 22

Net (loss) gain on OREO (32) 8 15 (24) (1)

Net (loss) gain on other transactions (6) — — (6) 22

Net loss on asset disposals and other transactions $ (308) $ (124) $ (28) $ (459) $ (237)

During each of the second and first quarters of 2021, Peoples recognized a net loss on investment securities related to the sale of investment securities in order to reinvest proceeds into higher yielding investment securities, while also reducing sensitivity to prepayment speeds.

During the second quarter of 2021, net loss on other assets was due to a market value write-down of $208,000 related to a closed office that was held for sale, which was partially offset by a net gain of $76,000 on repossessed assets.

During the second quarter of 2020, net loss on other assets was driven by a net loss of $118,000 on repossessed assets, which was partially offset by a net gain on the sale of a closed branch.

For the first six months of 2021, net loss on investment securities was recorded due to the sale of investment securities in order to reinvest proceeds into higher yielding investment securities.

The first six months of 2020 included a net gain on investment securities that was recorded in connection with sales of investment securities.

For the first six months of 2020, net loss on other assets was driven by losses on repossessed assets.

Net losses for the third quarter of 2021 were driven primarily by losses on the disposal of fixed assets acquired from Premier and the sale of investment securities during the third quarter of 2021.

During the third quarter of 2021, Peoples sold a portion of its available-for-sale investment securities and reinvested the proceeds into higher-yielding investments.

For the first nine months of 2021, a net loss on investment securities was recorded due to the sale of investment securities in order to reinvest proceeds into higher-yielding investment securities.

During the second quarter of 2021, net loss on other assets was due to a market value write-down of $208,000 related to a closed office that was held for sale.

The first nine months of 2021 included a net loss on other assets related to the write-down of a closed office in the second quarter of 2021 and the disposal of fixed assets acquired from Premier.

The first nine months of 2020 included a net gain on investment securities that was recorded in connection with sales of investment securities.

For the first nine months of 2020, net loss on other assets was driven by losses on repossessed assets.

Total Non-Interest Income, Excluding Net Gains and Losses

Total non-interest income, excluding net gains and losses, accounted for 29% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) compared to 33% for the linked quarter and 30% for the second quarter of 2020.

The recent decline in this ratio was driven by the higher net interest income from the recent completed acquisitions and the PPP loan income.

Total non-interest income, excluding net gains and losses, accounted for 31% of Peoples' total revenues for the six months ended June 30, 2021, compared to 30% for the six months ended June 30, 2020.

For the second quarter of 2021, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses.

Total non-interest income, excluding net gains and losses, accounted for 28% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the three months ended September 30, 2021 compared to 29% for the linked quarter and 32% for the third quarter of 2020.

The recent decline in this ratio was driven by an increase in net interest income due to the acquisition of leases acquired from NSL.

For the third quarter of 2021, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses.

Peoples' electronic banking ("e-banking") services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to clients.

The following table details Peoples' e-banking income:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

2 unchanged sentences

The amount of e-banking income is largely dependent on the timing and volume of customer activity.

The increases in e-banking income compared to each of the linked quarter and prior year quarter were driven by the increased usage of debit cards by customers, resulting from the COVID-19 pandemic.

The increased usage has continued through the first half of 2021, resulting in higher e-banking income compared to the same period in 2020.

Peoples' fiduciary and brokerage revenues continued to be based primarily upon the value of assets under administration and management, with additional income generated from transaction commissions, cross-selling of products and additional retirement plan

services business.

The decreases in e-banking income compared to each of the linked quarter and the prior year quarter were driven by the increased usage of debit cards by customers, resulting from the COVID-19 pandemic.

The increased usage has continued through the first nine months of 2021, resulting in higher e-banking income compared to the same period in 2020.

Peoples' fiduciary income and brokerage income continued to be based primarily upon the value of assets under administration and management, with additional income generated from transaction commissions, cross-selling of products and additional retirement

plan services business.

The following tables detail Peoples’ trust and investment income and related assets under administration and management:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

3 unchanged sentences

Trust and investment income $ 4,158 $ 4,220 $ 3,435 $ 12,223 $ 10,013

Fiduciary and brokerage income are mostly driven by values of assets under administration and management, which have increased in recent periods as the market values of existing accounts have been positively impacted and grown, coupled with new accounts added compared to prior periods.

Fiduciary income and brokerage income are mostly driven by the values of assets under administration and management, which have increased in recent periods as the market values of existing accounts have been positively impacted and grown, coupled with new accounts added compared to prior periods.

Employee benefit fees continue to increase compared to prior periods as Peoples focuses on growing the number of employee benefit plans it manages.

The following table details Peoples' assets under administration and management:

September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

(Dollars in thousands)

3 unchanged sentences

Quarterly average $ 3,105,476 $ 3,051,027 $ 2,927,458 $ 2,663.485 $ 2,510,978

The increase in assets under administration and management at June 30, 2021, compared to each prior period end, was largely driven by the recovery of market values, coupled with increases related to new accounts opened.

The slight decline in assets under administration and management at September 30, 2021, compared to each prior period end, was largely driven by the decrease in market values late in the third quarter of 2021, while the quarterly average increased compared to prior quarters.

The following table details Peoples' insurance income:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

8 unchanged sentences

Insurance income $ 3,367 $ 3,335 $ 3,608 $ 11,923 $ 10,929

For the second quarter of 2021, insurance income declined 36% compared to the linked quarter, which was mostly due to the annual performance-based insurance commissions that are received during the first quarter of each year.

Compared to the second quarter of 2020, insurance income grew 5%, as property and casualty insurance commissions increased.

For the first six months of 2021, insurance income increased $1.2 million, or 17%.

This increase was driven by higher property and casualty, and life and health insurance commissions, along with higher performance-based commissions.

For the third quarter of 2021, insurance income was relatively flat compared to the linked quarter.

Compared to the third quarter of 2020, insurance income declined 7%, driven by decreases in life and health insurance commissions, offset partially by an increase in property and casualty insurance commissions.

For the first nine months of 2021, insurance income increased $1.0 million, or 9%.

This increase was driven by higher property and casualty, and performance-based commissions.

Annually Peoples receives performance-based income commissions that are related to how much loss is incurred by underlying policies and the overall performance of the insurance carriers.

The insurance income compared to prior periods was positively impacted by the addition of new customers.

1 unchanged sentence

The following table details Peoples' deposit account service charges:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

4 unchanged sentences

The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity.

Management periodically evaluates its cost recovery fees to ensure they are reasonable

based on operational costs and similar to fees charged in Peoples' markets by competitors.

Deposit account service charges for the second quarter of 2021 grew compared to the linked quarter and the second quarter of 2020.

Deposit account service charges were negatively impacted during the first quarter of 2021 and the second quarter of 2020, mostly due to fiscal stimulus payments and PPP loan proceeds provided to customers, along with changed customer spending habits due to the COVID-19 pandemic.

For the first six months of 2021, compared to the same period of 2020, deposit account service charges declined and were impacted by the COVID-19 pandemic items already mentioned.

Management periodically evaluates its cost recovery fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples' markets by competitors.

Deposit account service charges for the third quarter of 2021 grew compared to the linked quarter and the third quarter of 2020 due largely to an increase in volume of overdraft and non-sufficient fees charged due to customer activity.

Deposit account service charges were negatively impacted during the second quarter of 2021 and the third quarter of 2020, mostly due to fiscal stimulus payments and PPP loan proceeds provided to customers, along with changed customer spending habits due to the COVID-19 pandemic.

For the first nine months of 2021, compared to the same period of 2020, deposit account service charges declined and were impacted by the COVID-19 pandemic items already mentioned.

The following table details the other items included within Peoples' total non-interest income:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

5 unchanged sentences

As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market.

Mortgage banking income declined during the second quarter of 2021, compared to the linked quarter and the prior year quarter as refinancing activity slowed.

Compared to the first six months of 2020, mortgage banking income grew 16%, as lower interest rates during the first half of 2021 resulted in higher customer demand than in the prior year.

In the second quarter of 2021, Peoples sold $15.8 million in loans to the secondary market with servicing retained and sold $7.8 million in loans with servicing released, compared to $17.2 million and $9.6 million, respectively, in the linked quarter, and $21.4 million and $42.0 million, respectively, in the second quarter of 2020.

For the first six months of 2021, Peoples sold $33.0 million in loans to the secondary market with servicing retained and sold $17.4 million in loans with servicing released, compared to $43.4 million and $56.0 million, respectively, for the first half of 2020.

Mortgage banking income declined during the third quarter of 2021, compared to the linked quarter and the prior year quarter as refinancing activity slowed and a lower volume of new loan originations due to the lack of inventory of homes for sale.

Compared to the first nine months of 2020, mortgage banking income declined 37%, because of lower origination volume caused by a lower inventory of homes for sale and less refinancing activity because of an increase in interest rates above historically low levels experienced as a result of the COVID-19 pandemic.

In the third quarter of 2021, Peoples recognized a gain of $0.4 million on the sale of $11.0 million in loans to the secondary market with servicing retained and $0.2 million on the sale of $10.3 million in loans with servicing released.

In the second quarter of 2021, Peoples recognized a gain of $0.6 million on the sale of $15.8 million in loans with servicing retained and $185,000 on the sale of $7.8 million in loans with servicing released.

In the third quarter of 2020 Peoples recognized a gain of $1.6 million on the sale of $35.2 million in loans sold servicing retained and a gain of $1.0 million on $68.2 million in loans sold servicing released.

For the first nine months of 2021, Peoples recognized a gain of $1.8 million on the sale of $44.0 million in loans to the secondary market with servicing retained and a gain of $0.6 million on the sale of $27.7 million in loans with servicing released.

For the first nine months of 2020, Peoples recognized a gain of $2.5 million on the sale of $78.6 million in loans sold servicing retained and a gain of $1.8 million on the sale of $124.2 million in loans sold servicing released.

The volume of sales has a direct impact on the amount of mortgage banking income.

Bank owned life insurance income was down compared to the linked quarter and the third quarter of 2020.

For the first nine months of 2021, bank owned life insurance declined 12%, primarily due to a $109,000 tax-free death benefit recognized during the first quarter of 2020.

Commercial loan swap fees are largely dependent on timing, interest rates, and the volume of customer activity.

Commercial loan swap fees were relatively flat compared to the linked quarter, and were much lower than the second quarter of 2020, as customers took advantage of declining rates during the second quarter of 2020 and executed a high volume of swaps.

Compared to the first half of 2020, commercial loan swap fees declined due to a lower volume of transactions during 2021.

Bank owned life insurance income was flat compared to the linked quarter, and was down 5% compared to the second quarter of 2020.

For the first six months of 2021, bank owned life insurance declined 15%, and was primarily due to a $109,000 tax-free death benefit recognized during the first quarter of 2020, which was not duplicated during 2021.

Other non-interest income increased compared to the linked quarter and the second quarter of 2020.

Other non-interest income increased in the second quarter of 2021 due to other fee income of $245,000 recognized on leases related to the sale of leases and early termination of leases.

Compared to the first half of 2020, other non-interest income grew $602,000 as a result of the acquisition of leases from NSL, coupled with higher SBA income unrelated to PPP loans.

Commercial loan swap fees were up slightly compared to the linked quarter and the third quarter of 2020.

Compared to the first nine months of 2020, commercial loan swap fees declined due to a lower volume of transactions during 2021 compared to the high volume of transactions entered into during the first nine months of 2020.

Other non-interest income increased compared to the linked quarter and the third quarter of 2020 and was driven by other fee income of $0.5 million recognized on leases related to the early termination of leases and other fees in the third quarter of 2021

compared to $0.2 million recognized in the second quarter of 2021.

There was no income related to the early termination of leases in the third quarter of 2020, as NSL was not acquired until the second quarter of 2021.

For the nine months ended September 30, 2021, other non-interest income was higher due to the recognition of $0.6 million related to fees received for the early termination of leases and lease syndications.

Non-Interest Expense

1 unchanged sentence

The following table details Peoples' salaries and employee benefit costs:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

9 unchanged sentences

Average during the period 990 914 890 942 893

Base salaries and wages increased 6% compared to each of the linked quarter and the second quarter of 2020.

The increase for the second quarter of 2021 compared to prior periods was primarily due to the acquisition from NSL, which added $736,000 in base salaries and wages.

For the first six months of 2021, base salaries and wages increased 3% compared to the first six months of 2020 as a result of additional employees from the acquisitions of Premium Finance and NSL.

The increase in sales-based and incentive compensation for the second quarter of 2021 compared to prior periods was primarily due to overall company performance relative to measures used in calculating incentive awards, coupled with higher incentive compensation related to trust and investments reflected in the growth of income.

For the first six months of 2021 compared to the same period in 2020, the increase was driven by the overall company performance relative to measures used in calculating incentive awards and higher sales-based compensation from insurance, trust and investments, and mortgage banking.

The increase in employee benefits for first six months of 2021, compared to first six months of 2020, was due to an increase to the employer 401(k) match made during 2021, as well as higher medical costs with the addition of the Premium Finance and NSL employees.

The decrease in payroll taxes and other employment costs, compared to linked quarter, was due to lower social security and unemployment taxes during the second quarter, which was related to certain associates reaching the maximum limit for contribution.

The increase in payroll taxes and other employment costs for the three and six months ended June 30, 2021, compared to the same periods in 2020, was primarily related to higher base salaries and wages, coupled with the additional associates of Premium Finance and NSL.

Base salaries and wages increased 30% compared to the linked quarter and increased 34% compared to the third quarter of 2020.

The increase for the third quarter of 2021 compared to prior periods was primarily due to the acquisition of Premier, which included $3.4 million in acquisition-related severance expense.

For the first nine months of 2021, base salaries and wages increased 14% compared to the first nine months of 2020 as a result of the acquisition-related severance expense for Premier and additional salaries associated with NSL and a full nine months of Premium Finance.

The decrease in sales-based and incentive compensation for the third quarter of 2021 compared to the linked quarter was primarily due to lower incentive compensation related to insurance and mortgage banking.

For the first nine months of 2021 compared to the same period in 2020, the increase was driven by the overall company performance relative to measures used in calculating incentive awards and higher sales-based compensation from insurance and trust and investments.

The increase in employee benefits for first nine months of 2021, compared to first nine months of 2020, was due to an increase to the employer 401(k) match made during 2021, as well as higher medical costs with the addition of the Premier and NSL employees.

During the second quarter of 2021, Peoples increased the matching contribution to participant's 401(k) accounts, retroactive to January 1, 2021.

This true-up was completed in the second quarter of 2021 and drove the increase in employee benefits for the third quarter of 2021 compared to the third quarter of 2020.

The increase in payroll taxes and other employment costs, compared to linked quarter, was primarily due to the taxes associated with the acquisition-related severance expense recognized in the third quarter of 2021.

The increase in payroll taxes and other employment costs for the three and nine months ended September 30, 2021, compared to the same periods in 2020, was primarily related to higher base salaries and wages, coupled with the additional associates of Premier and NSL.

Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years, adjusted for an estimate of the portion of awards that will be forfeited.

2 unchanged sentences

The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year and are based upon Peoples achieving certain performance goals during the prior year.

Stock-based compensation for the second quarter of 2021 decreased $612,000 compared to the linked quarter, as the first quarter included $376,000 of expense related to stock grants of retirement eligible individuals, and $210,000 of expense related to the annual vesting of prior stock grants.

Stock-based compensation for the first six months of 2021 decreased compared to the first six months of 2020 due to an additional $396,000 of unrestricted grants of common share awards to associates at the level of Assistant Vice President or below granted in the second quarter of 2020.

Stock-based compensation for the first nine months of 2021 decreased compared to the first nine months of 2020 due to an additional $396,000 of unrestricted grants of common share awards to associates at the level of Assistant Vice President or below granted in the second quarter of 2020.

Deferred personnel costs represent the portion of current period salaries and employee benefit costs considered to be direct loan origination costs.

1 unchanged sentence

As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with the average deferred costs per loan that are updated annually at the beginning of each year.

The increase in deferred personnel costs in the first six months of 2021 compared to first six months of 2020 was driven by the recognition of $921,000 in deferred personnel costs during the second quarter of 2020 related to the origination of PPP loans.

The decrease in deferred personnel costs compared to the linked quarter was due to a reduction loan origination volume.

The decrease in deferred personnel costs in the first

nine months of 2021 compared to first nine months of 2020 was driven by the recognition of $921,000 in deferred personnel costs during the second quarter of 2020 related to the origination of PPP loans.

Peoples' net occupancy and equipment expense was comprised of the following:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

4 unchanged sentences

Net occupancy and equipment expense $ 3,551 $ 3,289 $ 3,383 $ 10,167 $ 9,688

Depreciation on capitalized assets has declined during the first two quarters of 2021, compared to both the second quarter of 2020, and the first six months of 2020 as a result of certain capitalized assets and improvements reaching the end of their depreciable lives.

In addition, Peoples recognized higher building maintenance costs during the first half of 2021, compared to 2020 due to various projects including painting, window replacements, drive-thru enhancements and parking lot sealing.

Net occupancy and equipment expense increased 5% compared to the first six months of 2020 mainly due to increased expenses associated with maintaining the Premium Finance location for a full period and the acquisition from NSL in second quarter of 2021.

Depreciation on capitalized assets has declined during the second and third quarters of 2021, compared to both the third quarter of 2020, and the first nine months of 2020 as a result of certain capitalized assets and improvements reaching the end of their depreciable lives.

In addition, Peoples recognized higher building maintenance costs during the first nine months of 2021, compared to 2020 due to various projects including painting, window replacements, drive-thru enhancements and parking lot sealing.

Property taxes, utilities and other costs also increased during the nine months ended September 30, 2021, compared to the first nine months of 2020 as a result of an increase in other costs, primarily driven by low-cost furniture and fixtures not capitalized, offset by a reduction in utilities and property taxes.

Net occupancy and equipment expense increased 5% compared to the first nine months of 2020 mainly due to increased expenses associated with maintaining the Premium Finance location for a full period, the acquisition from NSL in second quarter of 2021 and the partial period impact of the merger with Premier in the third quarter of 2021.

The following table details the other items included in total non-interest expense:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

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Amortization of other intangible assets 1,279 1,368 857 3,267 2,314

Franchise tax expense 822 855 881 1,677 1,763

Marketing expense 1,223 676 456 2,810 1,561

Franchise tax expense 810 822 882 2,487 2,645

FDIC insurance premiums 807 326 570 1,596 717

Other loan expenses 487 494 342 1,443 1,255

Communication expense 411 386 283 1,079 857

FDIC insurance premiums 326 463 152 789 147

Other non-interest expense 12,711 2,559 2,479 17,762 7,665

Professional fees increased $97,000 from the linked quarter and $1.7 million from the second quarter of 2020 primarily due to investment banking fees and other acquisition-related expenses, which were related to the purchase from NSL and the pending merger with Premier.

Professional fees included acquisition-related expenses of $1.8 million for each of the second quarter of 2021 and first quarter of 2021, and $29,000 for the second quarter of 2020.

For the first half of 2021, professional fees nearly doubled compared to the prior year, and included $3.8 million of acquisition-related expenses for 2021, compared to $43,000 for 2020.

Professional fees increased $2.9 million from the linked quarter and $4.7 million from the third quarter of 2020 primarily due to investment banking fees and other acquisition-related expenses, which were related to the purchase of NSL and the merger with Premier.

Professional fees included acquisition-related expenses of $2.4 million for the third quarter of 2021, $1.8 million for the second quarter of 2021, and $319,000 for the third quarter of 2020.

For the first nine months of 2021, professional fees nearly doubled compared to the prior year, and included $6.2 million of acquisition-related expenses for 2021, compared to $363,000 for 2020.

The change in data processing and software expense compared to prior periods was driven by systems and software upgrades, annual contractual increases and overall growth, which included:

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and additional network capacity and security features in the latter part of 2020 and first quarter of 2021.

E-banking expense was up slightly compared to the linked quarter, and is directly correlated to e-banking income, with the increase due to higher costs associated with chargeback fees, offset by a decline in ATM processing charges.

E-banking expense was down slightly compared to the linked quarter, and is directly correlated to e-banking income, with the decrease due to lower costs associated with ATM processing expenses.

Peoples' amortization of other intangible assets is driven by acquisition-related activity.

Amortization of other intangible assets for the second quarter of 2021 was up $748,000 compared to the first quarter of 2021 and $640,000 compared to the second quarter of 2020 as a result of the NSL acquisition effective after the close of business on March 31, 2021 and the Premium Finance acquisition completed on July 1, 2020.

Amortization of other intangible assets for the third quarter of 2021 was down $89,000 compared to the second quarter of 2021 due to adjustments to the fair value of intangible assets acquired from NSL, and the related changes to intangible amortization post-acquisition.

Amortization of other intangible assets increased $422,000 compared to the third quarter of 2020 as a result of the NSL acquisition effective after the close of business on March 31, 2021.

Marketing expense increased compared to the second quarter of 2021 due primarily to additional advertising campaigns relating to the addition of Premier locations.

Additionally, in giving back to the community, Peoples' contributions increased during the third quarter of 2021 and included a donation to each of Marietta College and the Ohio Valley Museum of Discovery.

Peoples is subject to state franchise taxes, which are based largely on Peoples' equity, in the states where Peoples has a physical presence.

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The Ohio FIT is based on the total equity capital in proportion to the taxpayer's gross receipts in Ohio as of the most recent year-end.

Marketing expense decreased compared to the first quarter of 2021 due primarily to a one-time contribution of $500,000 to Peoples Bank Foundation, Inc.

in the first quarter of 2021.

Other loan expenses increased slightly compared to the linked quarter due to higher expenses associated with business loans.

Compared to the second quarter of 2020, other loan expenses increased mostly due to higher expenses associated with real estate loans and home equity lines of credit.

Compared to the linked quarter, second quarter of 2020, and first six months of 2020, communications expense grew, as a result of upgraded networking to certain branches, along with increased costs compared to the prior periods among certain vendors that provide communication services.

Peoples' FDIC insurance premiums declined compared to the linked quarter, as PPP loans, which are included in the leverage ratio calculation on which the FDIC insurance premiums are calculated, decreased compared to December 31, 2020.

Compared to the second quarter of 2020, and the first six months of 2020, the FDIC insurance premiums grew as a result of credits used by Peoples during the first two quarters of 2020 to offset its FDIC insurance premium.

Peoples' FDIC insurance premiums increased compared to the linked quarter, due to a decline in the leverage ratio which was impacted by the NSL acquisition in the second quarter, and decreased compared to December 31, 2020.

Compared to the first nine months of 2020, the FDIC insurance premiums grew as a result of credits used by Peoples during the first two quarters of 2020 to offset its FDIC insurance premium.

The FDIC insurance credits were related to the level of the Federal Deposit Insurance Fund ("DIF") that had continued to be above the target threshold for banks with total consolidated assets of less than $10 billion to recognize credits.

Peoples utilized the remaining credits that had been issued to it in the second quarter of 2020.

Other non-interest expense increased $379,000 compared to the second quarter of 2020, and was mostly due to higher acquisition-related expenses recognized during the second quarter of 2021.

Other loan expenses decreased slightly compared to the linked quarter due to lower expenses associated with business loans.

Compared to the third quarter of 2020, other loan expenses increased mostly due to higher expenses associated with real estate loans and home equity lines of credit.

Other loan expenses for the nine months ended September 30, 2021 increased $188,000 compared to the nine months ended September 30, 2020 due to increased loan origination activity.

Compared to the linked quarter, third quarter of 2020, and first nine months of 2020, communications expense grew as a result of upgraded networking to certain branches (including new branches acquired from Premier coupled with the addition of the NSL and Premium Finance locations acquired) and increased costs compared to the prior periods among certain vendors that provide communication services.

Other non-interest expense increased $10.2 million compared to the third quarter of 2020, and was mostly due to $9.6 million in acquisition-related expenses recognized during the third quarter of 2021.

Income Tax Expense

Peoples recorded income tax expense of $2.4 million for the second quarter of 2021, compared to income tax expense of $3.8 million for the linked quarter and income tax expense of $1.1 million for the second quarter of 2020.

Income tax expense during the second quarter of 2021, the linked quarter and the second quarter of 2020 was heavily related to the amount of pre-tax income recognized during each period.

Peoples recorded income tax expense of $6.1 million for the six months ended June 30, 2021, compared to $980,000 for the six months ended June 30, 2020.

Peoples recorded an income tax benefit of $2.2 million for the third quarter of 2021, compared to income tax expense of $2.4 million for the linked quarter and income tax expense of $2.6 million for the third quarter of 2020.

The income tax benefit during the third quarter of 2021, and the income tax expense recognized during the linked quarter and the third quarter of 2020 was heavily related to the amount of pre-tax income recognized during each period.

Pretax income was impacted by acquisition-related expenses associated with the Premier acquisition during the third quarter of 2021.

Peoples recorded income tax expense of $4.0 million for the nine months ended September 30, 2021, compared to $3.6 million for the nine months ended September 30, 2020.

Pretax income for the nine months ended September 30, 2021 was largely impacted by acquisition-related expenses, contract negotiation expenses and other non-core expenses.

Additional information regarding income taxes can be found in "Note 12 Income Taxes" of the Notes to the Condensed Consolidated Financial Statements included in Peoples' 2020 Form 10-K.

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The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

Pre-provision net revenue:

Income before income taxes $ 12,494 $ 19,243 5,885 $ 31,737 $ 4,964

(Loss) income before income taxes $ (7,930) $ 12,494 $ 12,846 $ 23,807 $ 17,810

provision for credit losses 8,994 3,088 4,728 7,333 33,531

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loss on other assets 363 238 115 687 258

loss on other transactions 6 — — 6 —

gain on OREO — 8 15 8 16

recovery of credit losses — 4,749 — 1,661 —

gain on investment securities 150 297 2 786 385

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Pre-provision net revenue per common share - diluted $ 0.07 $ 0.81 $ 0.90 $ 1.61 $ 2.55

The decrease in PPNR compared to the linked quarter was mostly due to higher non-core acquisition-related expenses.

The decline in PPNR compared to the second quarter of 2020 was related to increased non-core acquisition-related expenses recognized during the second quarter of 2021.

The decrease in PPNR compared to the linked quarter and the third quarter of 2020 was mostly due to higher non-core acquisition-related expenses recognized during the third quarter of 2021.

Core Non-Interest Expense (Non-US GAAP)

Core non-interest expense is a financial measure used to evaluate Peoples' recurring expense stream.

This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc.

This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses, contract negotiation expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc.

contribution.

The following table provides a reconciliation of this Non-US GAAP measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

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contribution — — — 500 —

contract negotiation expenses 1,851 — — 1,851 —

Core non-interest expense $ 39,476 $ 37,275 $ 33,109 $ 111,986 $ 97,493

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Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

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(a) Based on a 21% statutory federal corporate income tax rate.

The improvement in the efficiency ratio compared to the linked quarter was largely due to higher net interest income, which was driven by the NSL acquired leases, and grew at a faster pace than total non-interest expense.

Compared to the second quarter of 2020, the efficiency ratio for the second quarter of 2021 increased, and was due to increased total non-interest expense, which included the operating expenses associated with the NSL and Premium Finance acquired divisions, coupled with a smaller impact of deferred loan costs during 2021 related to PPP loans, higher sales and incentive compensation from increased production and higher acquisition-related expenses and other non-core items recognized during the period.

For the first six months of 2021, the efficiency ratio grew due to higher total non-interest expense associated with the operating expenses associated with the NSL and Premium Finance acquired divisions, and a reduction in deferred loan costs from the PPP loans, as well as increased sales and incentive-based compensation from higher production.

The efficiency ratio for the third quarter of 2021 was 94.7%, compared to 68.6% for the linked quarter, and 64.1% for the third quarter of 2020.

The change in the efficiency ratio compared to the linked quarter was primarily due to the acquisition-related expenses.

The efficiency ratio, adjusted for non-core items, was 63.9% for the third quarter of 2021, compared to 64.0% for the linked quarter and 61.8% for the third quarter of 2020.

Impacting the adjusted ratios were higher salaries and employee benefits due to the Premier and NSL acquisitions along with higher advertising expenses and increased repair and maintenance expenses.

For the first nine months of 2021, the efficiency ratio grew due to higher total non-interest expense associated with the acquisition-related expenses mentioned above, operating expenses associated with the NSL and Premium Finance acquired divisions, a reduction in deferred loan costs from the PPP loans, and increased sales and incentive-based compensation from higher production.

Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)

In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance.

The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc.

The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, contract negotiation expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc.

contribution.

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

Annualized net income adjusted for non-core items:

Annualized net (loss) income adjusted for non-core items:

Net (loss) income

$ (5,758) $ 10,103 $ 10,210 $ 19,808 $ 14,194

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tax effect of pension settlement charges (a)

30 — 112 30 221

severance expenses — 14 192 63 284

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Peoples Bank Foundation, Inc.

— 500 — 500 —

tax effect of Peoples Bank Foundation, Inc.

contribution (a)

contract negotiation fees

1,851 — — 1,851 —

tax effect of contract negotiation fees

389 — — 389 —

Net income adjusted for non-core items (after tax)

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Days in the year 365 365 366 365 366

Annualized net income

Annualized net (loss) income

$ (22,844) $ 40,523 $ 40,618 $ 26,483 $ 18,960

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Return on average assets:

Annualized net income

Annualized net (loss) income

$ (22,844) $ 40,523 $ 40,618 $ 26,483 $ 18,960

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(a) Based on a 21% statutory federal corporate income tax rate.

The return on average assets declined during the second quarter of 2021, compared to the linked quarter.

The decrease was driven by the provision for credit losses recognized in the second quarter due to the NSL acquisition and higher total non-interest expense recognized during the second quarter of 2021, which was mostly due to sales and incentive compensation related to increased production, and a higher company match to the 401(k) plan that was retroactive to the beginning of 2021.

The return on average assets adjusted for non-core items declined compared to the linked quarter due to the higher sales and incentive compensation and the increased 401(k) match for participants.

The return on average assets and the return on average assets adjusted for non-core items both grew compared to the second quarter of 2020 These increases were mostly due to the high provision for credit losses related to the COVID-19 pandemic recorded during the second quarter of 2020.

The return on average assets and the return on average assets adjusted for non-core items both grew compared to the first six months of 2020.

The increases were mostly due to the previously mentioned high provision for credit losses recorded during the first half of 2020.

The return on average assets declined during the third quarter of 2021, compared to the linked quarter and the third quarter of 2020.

The decrease was driven by the provision for credit losses recognized in the third quarter due to the Premier acquisition and higher total non-interest expense recognized during the third quarter of 2021, which was mostly due to acquisition-related expenses.

The return on average assets adjusted for non-core items declined compared to the linked quarter due to the higher salaries and

incentive compensation.

The return on average assets and the return on average assets adjusted for non-core items both grew compared to the first nine months of 2020.

The increases were mostly due to the previously mentioned higher provision for credit losses recorded during the first nine months of 2020.

For additional information related to the changes in the provision for (recovery of) credit losses, refer to the sections in this discussion titled “Provision for (Recovery of) Credit Losses" and "Allowance for Credit Losses.”

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This measure is Non-US GAAP since it excludes amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity.

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in thousands) 2021 2020

Annualized net income excluding amortization of other intangible assets:

Net (loss) income

$ (5,758) $ 10,103 $ 10,210 $ 19,808 $ 14,194

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365 365 366 365 366

Annualized net income

Annualized net (loss) income

$ (22,844) $ 40,523 $ 40,618 $ 26,483 $ 18,960

Annualized net income excluding amortization of other intangible assets

Annualized net (loss) income excluding amortization of other intangible assets

$ (18,837) $ 44,859 $ 43,311 $ 29,934 $ 21,402

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The return on average stockholders' equity and average tangible equity ratios were impacted by the provision for (recovery of) credit losses during each of the respective periods, as well as non-core items recognized during the periods.

During the first two quarters of 2020, Peoples recorded high amounts of provision for credit losses, which negatively impacted net income, as a result of the COVID-19 pandemic.

Additionally, intangible assets grew at June 30, 2021, compared to March 31, 2021, as Peoples recorded the intangibles and goodwill associated with the NSL acquisition, which reduced average tangible equity.

Intangible assets grew at September 30, 2021, compared to June 30, 2021, as Peoples recorded the intangibles and goodwill associated with the Premier acquisition, which increased average tangible equity.

Additionally, during the first nine months of 2020, Peoples recorded high amounts of provision for credit losses, which negatively impacted net income, as a result of the COVID-19 pandemic.

For additional information related to changes in the provision for (recovery of) credit losses, refer to the sections in this discussion titled “Provision for (Recovery of) Credit Losses" and "Allowance for Credit Losses.”

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Cash and Cash Equivalents

At June 30, 2021, Peoples' interest-bearing deposits in other banks had increased $97.6 million from December 31, 2020.

The total cash and cash equivalents balance included $173.0 million of excess cash reserves being maintained at the FRB of Cleveland at June 30, 2021, compared to $25.1 million at December 31, 2020.

At September 30, 2021, Peoples' interest-bearing deposits in other banks had increased $278.6 million from December 31, 2020.

The total cash and cash equivalents balance included $321.0 million of excess cash reserves being maintained at the FRB of Cleveland at September 30, 2021, compared to $25.1 million at December 31, 2020.

Peoples also acquired $252.8 million in cash and cash equivalents from Premier.

The amount of excess cash reserves maintained is dependent upon Peoples' daily liquidity position, which is driven primarily by changes in deposit and loan balances, coupled with increased liquidity needs due to the COVID-19 pandemic.

Through the first six months of 2021, Peoples' total cash and cash equivalents increased $94.0 million as Peoples' net cash used in investing activities of $230.0 million was less than the sum of net cash provided by financing activities and operating activities of $285.3 million and $38.7 million, respectively.

Through the first nine months of 2021, Peoples' total cash and cash equivalents increased $347.6 million as Peoples had net cash provided by investing activities of $106.3 million, financing activities of $174.6 million and operating activities of $66.7 million.

Peoples' investing activities reflected a net decrease of $156.6 million in loans and an aggregate of $896.6 million in purchases of available-for-sale and held-to-maturity investment securities, which were partially offset by an aggregate of $711.5 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment securities.

Financing activities included a $322.2 million net increase in deposits, offset partially by a decrease of $21.8 million in short-term borrowings, as well as no purchases of treasury stock under the share repurchase program and $13.9 million of cash dividends paid.

Financing activities included a $165.4 million net increase in deposits and an increase of $32.6 million in short-term borrowings, as well as no purchases of treasury stock under the share repurchase program and $20.9 million of cash dividends paid.

Further information regarding the management of Peoples' liquidity position can be found later in this discussion under “Interest Rate Sensitivity and Liquidity.”

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The following table provides information regarding Peoples’ investment portfolio:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

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2020 September 30,

2020 June 30,

Available-for-sale securities, at fair value:

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Carrying value $ 1,574,676 $ 1,062,445 $ 1,065,603 $ 857,031 $ 928,560

(a) Amortized cost is presented net of the allowance for credit losses of $201 at June 30, 2021, $182 at March 31, 2021, $60 at December 31, 2020 and $6 at each of September 30, 2020 and June 30, 2020.

At June 30, 2021, the fair value of available-for-sale securities decreased $15.7 million, or 2%, compared to March 31,

2021, as purchases during the quarter did not outpace sales of investment securities and normal monthly amortization.

The increase compared to December 31, 2020 was driven by an increase in available-for-sale commercial-mortgage backed securities that were purchased during the first quarter of 2021, coupled with purchases of available for sale and held-to-maturity obligations of state and

political subdivisions, which were purchased in an effort to reduce the impact of premium amortization, which had been high on the securities that were sold.

At December 31, 2020, the investment security portfolio decreased compared to prior periods, as Peoples had worked to execute the strategy to sell securities that had high premium amortization, and reinvest into investment securities;

(a) Amortized cost is presented net of the allowance for credit losses of $236 at September 30, 2021;

$201 at June 30, 2021;

$182 at March 31, 2021;

$60 at December 31, 2020 and $6 at September 30, 2020.

During the third quarter of 2021, Peoples acquired, in the Premier acquisition, investment securities totaling $563.3 million.

Peoples sold $400.6 million of available-for-sale investment securities and reinvested $358.7 million of the proceeds into higher-yielding investments.

The increase compared to December 31, 2020 was driven by the Premier acquisition and an increase in available-for-sale commercial-mortgage backed securities that were purchased during the first nine months of 2021, coupled with purchases of available for sale and held-to-maturity obligations of state and political subdivisions, which were purchased in an effort to reduce the impact of premium amortization on the securities that were sold.

At December 31, 2020, the investment security portfolio decreased compared to prior periods, as Peoples had worked to execute the strategy to sell securities that had high premium

amortization, and reinvest into investment securities;

however, not all proceeds from those sales had been reinvested by December 31, 2020.

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The following table provides information regarding outstanding loan balances:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

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2020 September 30,

2020 June 30,

Originated loans:

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Loans that were acquired and subsequently re-underwritten are reported as originated upon execution of such credit actions (for example, renewals and increases in lines of credit).

Period-end total loan balances at June 30, 2021 decreased $37.5 million compared to March 31, 2021.

The decrease compared to March 31, 2021 was mostly driven by a decline in commercial and industrial loan balances due to $186.4 million in forgiveness proceeds received on PPP loans during the second quarter.

This decrease was partially offset by $95.6 million in leases acquired from NSL, coupled with growth in commercial real estate and consumer indirect loans.

Excluding the PPP loan balances, Peoples' total originated loans grew by 4% annualized compared to March 31, 2021.

Period-end total loan balances at September 30, 2021 increased $1.1 billion compared to June 30, 2021.

The increase compared to June 30, 2021 was mostly driven by $1.1 billion in loans acquired from Premier, coupled with organic growth in premium finance loans of $17.7 million, growth in leases of $15.8 million, and organic loan growth of $14.3 million, offset partially by $132.2 million in forgiveness received on PPP loans during the quarter.

Excluding the PPP loan balances, Peoples' total originated loans grew by 6% annualized compared to June 30, 2021.

The decrease in commercial and industrial loan balances at June 30, 2021 compared to March 31, 2021 was mostly driven by $186.4 million in forgiveness proceeds received on PPP loans during the second quarter.

This decrease was partially offset by $95.6 million in leases acquired from NSL, coupled with growth in in commercial real estate and consumer indirect loans.

The decline in construction loan balances of $28.0 million at March 31, 2021, compared to December 31, 2020, was mainly due to construction projects being completed and construction loans then converting to permanent financing.

Compared to June 30, 2020, the growth in loans at September 30, 2020, was a result of the loans acquired through the Premium Finance acquisition, higher

consumer indirect loan balances, which were up $41.4 million, or 37% annualized, and commercial real estate loan balances, which increased $14.2 million, or 8% annualized.

Loan Concentration

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Loans secured by commercial real estate, including commercial construction loans, continued to comprise the largest portion of Peoples' loan portfolio.

The following tables provide information regarding the largest concentrations of commercial construction loans and commercial real estate loans within the loan portfolio at June 30, 2021:

The following tables provide information regarding the largest concentrations of commercial construction loans and commercial real estate loans within the loan portfolio at September 30, 2021:

(Dollars in thousands) Outstanding Balance Loan Commitments Total Exposure % of Total

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Mixed-use facilities 14,641 43,992 58,633 13.2 %

Land only 16,388 11,396 27,784 9.2 %

Assisted living facilities and nursing homes 15,804 30,708 46,512 10.5 %

Land only 25,959 12,968 38,927 8.8 %

Office buildings and complexes 3,523 15,969 19,492 4.4 %

Lodging and lodging related 3,839 7,002 10,841 3.6 %

Storage facility 8,966 5,291 14,257 3.2 %

Lodging and lodging related 7,784 6,091 13,875 3.1 %

Retail 5,408 6,470 11,878 2.7 %

Residential property 4,529 4,932 9,461 2.1 %

Other (a) 11,878 7,118 18,996 4.3 %

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Total education services 38,075 4,098 42,173 2.5 %

Gas station facilities:

Owner occupied 18,442 22 18,464 1.9 %

Non-owner occupied 4,936 — 4,936 0.5 %

Total gas station facilities 23,378 22 23,400 2.4 %

Restaurant/bar facilities:

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Total restaurant/bar facilities 37,005 — 37,005 2.2 %

Agriculture 32,865 1,976 34,841 2.1 %

Other (a) 540,697 26,225 566,922 33.8 %

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(a) All other outstanding balances are less than 2% of the total loan portfolio.

Peoples' commercial lending activities continue to focus on lending opportunities inside its primary and secondary market areas within Ohio, Kentucky and West Virginia.

In all other states, the aggregate outstanding balances of commercial loans in each state were less than 4% of total loans at either June 30, 2021 or December 31, 2020.

Peoples' commercial lending activities continue to focus on lending opportunities inside its primary and secondary market areas within Ohio, Kentucky, West Virginia, Virginia, Washington, D.C.

and Maryland.

In all other states, the aggregate outstanding balances of commercial loans in each state were less than 4% of total loans at either September 30, 2021 or December 31, 2020.

The repayment of premium finance loans are secured by the underlying insurance policy, and therefore, have no geographical impact from a repayment perspective.

The repayment of leases are secured by the underlying equipment collateral and not real estate, which mitigates geographic risk.

COVID-19 Loan Impacts

Small Business Administration Paycheck Protection Program

In March 2020, the CARES Act created a new loan guarantee program called the PPP targeted to provide small businesses with support to cover payroll and certain other specified expenses.

In March 2020, the CARES Act created the PPP targeted to provide small businesses with support to cover payroll and certain other specified expenses.

Loans made under the PPP are fully guaranteed by the SBA.

The PPP loans also afford borrowers forgiveness up to the principal amount of the PPP covered loan, plus accrued interest, if the

loan proceeds are used to retain workers and maintain payroll and/or to make certain mortgage interest, lease and utility payments, and certain other criteria are satisfied.

The PPP loans also afford borrowers forgiveness up to the principal amount of the PPP covered loan, plus accrued interest, if the loan proceeds are used to retain workers and maintain payroll and/or to make certain mortgage interest, lease and utility payments, and certain other criteria

are satisfied.

The SBA will reimburse PPP lenders for any amount of a PPP covered loan that is forgiven, and PPP lenders will not be held liable for any representations made by PPP borrowers in connection with their requests for loan forgiveness.

Peoples is a PPP participating lender, and the PPP loans originated are included in commercial and industrial loans.

Peoples is a PPP participating lender, and the PPP loans originated (including $28.2 million acquired in the merger with Premier) are included in commercial and industrial loans.

Peoples also recorded deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in net interest income.

The following tables detail Peoples' PPP loans and related income:

(Dollars in millions) June 30,

(Dollars in millions) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

PPP aggregate outstanding principal balances $ 139.8 $ 194.7 $ 349.9 $ 374.8 $ 472.0

PPP net deferred loan origination fees 4.0 7.1 9.3 7.9 11.6

Three Months Ended Six Months Ended

2021 March 31,

2021 June 30,

Three Months Ended Nine Months Ended

September 30,

2021 June 30,

2021 September 30,

2020 September 30,

(Dollars in millions) 2021 2020

Amortization of net deferred loan origination fees $ 3.1 $ 3.4 $ 1.9 $ 11.2 $ 3.8

Payment Relief and Loan Modifications

Peoples is also providing relief solutions to consumer and commercial borrowers.

For consumer borrowers, Peoples is providing interest-only payment options to customers for a period of up to 90 days, with the ability to extend if needed.

Peoples is also providing forbearance to its consumer borrowers which allows them to defer their principal and interest payments for up to 90 days for non-residential real estate consumer loans and up to 180 days for residential real estate consumer loans.

In addition, for commercial borrowers who meet certain criteria, Peoples is providing interest-only payment options, principal and interest deferrals, and increased financing.

Peoples continues to prudently work with borrowers and review any additional requests for deferment more closely.

These requests are maintained within the CARES Act guidance and have not exceeded twelve consecutive months of deferred payment.

At June 30, 2021, Peoples had approximately $17.5 million of deferments outstanding.

Of this total, commercial loan deferments comprised approximately $17.0 million, while consumer loans totaled approximately $0.5 million.

The increase in commercial loan modifications compared to $13.0 million at March 31, 2021 was related to one hotel operator;

however, the aggregate payment relief totaled 6 months, which is consistent with the approach taken with other customers within that industry.

At December 31, 2020, Peoples had $21.0 million in loan deferments, $13.6 million at September 30, 2020 and $486.0 million at June 30, 2020.

The significant decline in the deferments during the third quarter of 2020 was a result of improvement in the overall economy after restrictions in place had been lifted, and business and customers were returning to work, enabling them to meet their obligations.

Allowance for Credit Losses

2 unchanged sentences

The following details management's allocation of the allowance for credit losses:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Commercial real estate $ 39,252 $ 18,147 $ 18,663 $ 19,423 $ 21,549

11 unchanged sentences

As a percent of total loans 1.72 % 1.42 % 1.32 % 1.48 % 1.67 %

During the second quarter of 2021, Peoples increased its allowance for credit losses due to the establishment of an allowance for credit losses on the leases acquired from NSL.

Peoples recorded $3.3 million in provision for credit losses during the second quarter of 2021 in order to establish the allowance for credit losses for the acquired leases on acquisition date and added an additional $427,000 in allowance for credit losses on growth in leases during the second quarter of 2021.

The declines in the commercial and industrial, and the residential real estate allowances for credit losses at June 30, 2021, compared to March 31, 2021 and December 31, 2020, were largely due improved economic factors in recent periods.

Compared to March 31, 2021, the allowance for credit losses associated with consumer, indirect increased as a result of growth within that portfolio that occurred during the second quarter of 2021.

The decrease in allowance for credit losses for March 31, 2021 compared to December 31, 2020, and from December 31, 2020 compared to September 30, 2020, was due to developments related to COVID-19 and the resulting positive impact on the economic assumptions used in estimating the allowance for credit losses under the CECL model.

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.

The increases at September 30, 2021 compared to prior periods are due to the Premier and NSL acquisitions.

During the second quarter, Peoples increased its allowance for credit losses due to the establishment of an allowance for credit losses on the leases acquired from NSL.

Peoples recorded $3.3 million in provision for credit losses during the second quarter of 2021 in order to establish the allowance for credit losses for the acquired leases and $493,000 to establish the allowance for credit losses on leases identified as purchase credit deteriorated at the acquisition date and added an additional $427,000 in allowance for credit losses on growth in leases during the second quarter of 2021.

The decreases in the allowance for credit losses for March 31, 2021 compared to December 31, 2020, and from December 31, 2020 compared to September 30, 2020, were due to developments related to COVID-19 and the resulting positive impact on the economic assumptions used in estimating the allowance for credit losses under the CECL model.

During much of 2020, Peoples increased its allowance for credit losses based on CECL model results, which incorporated economic forecasts that included the impact of COVID-19 on certain economic factors.

These forecasts included higher unemployment rates nationally and in Ohio, and lower Ohio Gross Domestic Product, which are the key assumptions within the CECL model, compared to prior periods.

These forecasts included higher unemployment rates nationally and in Ohio, and lower Ohio Gross Domestic Product, which are the key assumptions within the CECL

model, compared to prior periods.

During the third quarter of 2020, Peoples also recorded allowance for credit losses associated with the loans acquired from Triumph Premium Finance on July 1, 2020, which had included $84.7 million in loans at the acquisition date.

The allowance for credit losses as a percent of total loans was negatively impacted by PPP loans, for which there is an SBA guarantee and no related allowance for credit losses is recorded.

At June 30, 2021, PPP loans negatively impacted the allowance for credit losses as a percent of total loans by 9 basis points, compared to 15 basis points at March 31, 2021, 18 basis points at December 31, 2020, 26 basis points at September 30, 2020 and 23 basis points at June 30, 2020.

Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2020 Form 10-K and "Note 4 Loans" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2020 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

The following table summarizes Peoples’ net charge-offs and recoveries:

Three Months Ended

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Gross charge-offs:

5 unchanged sentences

Home equity lines of credit 180 4 12 80 —

Three Months Ended

(Dollars in thousands) June 30,

2021 March 31,

2021 December 31,

2020 September 30,

2020 June 30,

Consumer, indirect 416 269 505 498 370

25 unchanged sentences

Deposit account overdrafts 98 45 49 109 155

Total net charge-offs (recoveries) $ 780 $ 1,051 $ 899 $ 735 $ (369)

Ratio of net charge-offs (recoveries) to average total loans (annualized):

Total net charge-offs $ 1,586 $ 780 $ 1,051 $ 899 $ 735

Three Months Ended

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

2021 December 31,

2020 September 30,

Ratio of net charge-offs to average total loans (annualized):

Commercial real estate, other — % — % 0.02 % 0.02 % 0.01 %

2 unchanged sentences

Residential real estate — % 0.01 % 0.01 % 0.01 % — %

Home equity lines of credit 0.02 % — % — % — % — %

Consumer, indirect 0.04 % 0.02 % 0.05 % 0.05 % 0.03 %

4 unchanged sentences

Each with "--%" not meaningful.

Net charge-offs during the second quarter of 2021 were 0.09% of average total loans on an annualized basis.

Gross charge-offs in many loan categories declined compared to the linked quarter, while also being impacted by the charge-offs related to leases acquired from NSL, which were not recognized in prior periods.

Net charge-offs during the third quarter of 2021 were 0.18% of average total loans on an annualized basis.

Although, gross charge-offs in many loan categories declined compared to the linked quarter, the primary factor in the increase of total gross charge-offs was one commercial and industrial loan charge-off of $500,000 during the quarter.

Peoples recognized a $450,000 charge-off on a commercial and industrial loan relationship, while also recording a $508,000 recovery on a previously charged-off commercial and industrial loan relationship during the fourth quarter of 2020.

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The following table details Peoples’ nonperforming assets:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Loans 90+ days past due and accruing:

14 unchanged sentences

Commercial and industrial 4,133 3,938 4,067 4,017 4,067

Leases 1,411 — — — —

Residential real estate 8,046 5,811 6,182 6,080 6,027

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Commercial real estate, other $ 94 $ 99 $ 337 367 $ 772

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

2021 December 31,

2020 September 30,

Commercial and industrial 1,223 1,774 2,034 2,175 2,250

10 unchanged sentences

Total nonperforming assets ("NPAs") $ 52,665 $ 27,059 $ 25,922 $ 28,295 $ 29,544

(Dollars in thousands) June 30,

2021 March 31,

2021 December 31,

2020 September 30,

2020 June 30,

Criticized loans (a) $ 234,845 $ 113,802 $ 116,424 $ 126,619 $ 123,219

Classified loans (b) 142,628 69,166 76,095 72,518 76,009

Asset Quality Ratios:

NPLs as a percent of total loans (c)(d) 0.79 % 0.76 % 0.82 % 0.84 % 0.80 %

NPAs as a percent of total assets (c)(d) 0.53 % 0.50 % 0.59 % 0.60 % 0.54 %

NPAs as a percent of total loans and OREO (c)(d) 0.80 % 0.76 % 0.84 % 0.85 % 0.80 %

Allowance for credit losses as a percent of NPLs (c)(d) 178.75 % 174.10 % 180.14 % 198.72 % 202.02 %

Criticized loans as a percent of total loans (a)(c) 3.37 % 3.41 % 3.72 % 3.55 % 3.14 %

Classified loans as a percent of total loans (b)(c) 2.05 % 2.23 % 2.13 % 2.19 % 1.98 %

Asset Quality Ratios (c):

NPLs as a percent of total loans (d) 0.92 % 0.79 % 0.76 % 0.82 % 0.84 %

NPAs as a percent of total assets (d) 0.75 % 0.53 % 0.50 % 0.59 % 0.60 %

NPAs as a percent of total loans and OREO(d) 1.17 % 0.80 % 0.76 % 0.84 % 0.85 %

Allowance for credit losses as a percent of NPLs (d) 186.93 % 178.75 % 174.10 % 180.14 % 198.72 %

Criticized loans as a percent of total loans (a) 5.23 % 3.37 % 3.41 % 3.72 % 3.55 %

Classified loans as a percent of total loans (b) 3.18 % 2.05 % 2.23 % 2.13 % 2.19 %

(a) Includes loans categorized as special mention, substandard or doubtful.

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Nonperforming assets include nonperforming loans and OREO.

During the second quarter of 2021, nonperforming assets increased $1.1 million, or 4%, compared to March 31, 2021.

The increase in nonperforming assets compared to the prior quarter was primarily attributable to nonperforming leases acquired from NSL.

The nonperforming loans as a percent of total loans and nonperforming assets as a percent of total assets ratios both increased compared to March 31, 2021, due to the acquired nonperforming leases.

During the third quarter of 2021, nonperforming assets increased $25.6 million, or 95%, compared to June 30, 2021.

The increase in nonperforming assets compared to the prior quarter was primarily attributable to nonperforming loans and other real estate owned acquired from Premier.

The nonperforming loans as a percent of total loans and nonperforming assets as a percent of total assets ratios both increased compared to June 30, 2021, due to the acquired nonperforming loans.

The increase in nonperforming assets of $1.1 million at June 30, 2021, compared to March 31, 2021, was primarily due to acquisition of NSL.

Nonperforming assets declined $2.3 million at March 31, 2021, compared to December 31, 2020, and was mostly due to several small relationships in both loans 90+ days past due and accruing and nonaccrual loans.

Compared to June 30, 2020, the nonperforming assets grew $2.4 million at September 30, 2020, which was partially due to an increase in nonaccrual loans related to the relationship for which Peoples placed a specific reserve at September 30, 2020, while loans 90+ days past due and accruing also increased due to several smaller residential real estate loans.

Criticized loans, which are those categorized as special mention, substandard or doubtful, decreased $2.6 million, or 2%, compared to March 31, 2021 and increased $8.3 million, or 8%, compared to June 30, 2020.

The decrease in the amount of criticized loans compared to March 31, 2021 was primarily due to the payoff of several smaller commercial loans.

Criticized loans also declined $10.2 million at March 31, 2021, compared to December 31, 2020, which was primarily due to the upgrade of four commercial relationships, totaling $3.9 million, paydowns of $5.6 million, and $1.8 million of normal amortization.

The increase of $17.7 million in criticized loans at September 30, 2020, from June 30, 2020, was attributable to $17.5 million of downgrades that were related to COVID-19.

Classified loans, which are those categorized as substandard or doubtful, decreased by $6.9 million, or 9%, compared to March 31, 2021, and were up $2.6 million, or 4%, compared to June 30, 2020.

The decrease in classified loans, compared to March 31, 2021, was driven by the upgrade of one commercial and industrial loan relationship, and the payoff of several smaller commercial loans.

Classified loans increased $9.4 million at September 30, 2020, compared to June 30, 2020, as there were $9.3 million of downgrades to classified loans that were related to COVID-19 during that period.

Criticized loans, which are those categorized as special mention, substandard or doubtful, increased $121.0 million, or 106%, compared to June 30, 2021 and increased $111.6 million, or 91%, compared to September 30, 2020.

The increase in the amount of criticized loans compared to June 30, 2021 was the result of criticized loans acquired from Premier, offset by the pay-off of six commercial and industrial loans with an aggregate principal balance of $12.3 million and several smaller loans.

Criticized loans declined $2.6 million at June 30, 2021, which was primarily due to the payoff of several smaller commercial loans.

Classified loans, which are those categorized as substandard or doubtful, increased by $73.5 million, or 106%, compared to June 30, 2021, and were up $66.6 million, or 88%, compared to September 30, 2020.

The increase was driven by loans acquired from Premier.

On March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19.

9 unchanged sentences

The following table details Peoples’ deposit balances:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Non-interest-bearing deposits (a) $ 1,559,993 $ 1,181,045 $ 1,206,034 $ 997,323 $ 982,912

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(a) The sum of amounts presented is considered total demand deposits.

At June 30, 2021, period-end deposits decreased $71.7 million, or 2%, compared to March 31, 2021, and increased $207.7 million, or 5%, compared to June 30, 2020.

The decrease in total deposits compared to March 31, 2021 was related to declines in money market deposits, non-interest bearing deposits, and retail CDs.

At September 30, 2021, period-end deposits increased $1.6 billion, or 38%, compared to June 30, 2021, and increased $1.9 billion, or 48%, compared to September 30, 2020.

The increase in total deposits compared to June 30, 2021 was driven primarily by $1.8 billion in deposits acquired in the merger with Premier including $392.2 million in non-interest bearing deposits, $652.9 million in interest-bearing demand accounts, $327.0 million in savings accounts, $285.4 million in retail CDs, $155.6 million in money market accounts and $11.1 million in brokered deposits.

The decrease in total deposits at June 30, 2021 compared to March 31, 2021 was related to declines in money market deposits, non-interest bearing deposits, and retail CDs.

At March 31, 2021, compared to December 31, 2020, Peoples experienced a significant increase in governmental deposit accounts, which was mostly due to seasonal fluctuation within these accounts.

3 unchanged sentences

This decline was largely due to the increase in deposit balances from customers, which allowed Peoples to reduce its position in the higher-cost brokered CDs during each period.

As part of its funding strategy, Peoples utilizes 90-day brokered deposits to fund interest rate swaps.

As part of its funding strategy, Peoples hedges 90-day brokered deposits with interest rate swaps.

The swaps pay a fixed rate of interest while receiving three-month LIBOR, which offsets the rate on the brokered deposits.

As of June 30, 2021, Peoples had seventeen effective interest rate swaps, with an aggregate notional value of $ 160.0 million, of which $ 110.0 million were designated as cash flow hedges of overnight brokered 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 hedged 90-day brokered deposits, which are also expected to be extended every 90 days through the maturity dates of the swaps.

As of 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 designated as cash flow hedges of overnight brokered 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 hedged 90-day FHLB advances, which are also expected to be extended every 90 days through the maturity dates of the swaps.

Peoples continually evaluates the overall balance sheet position given the interest rate environment.

Demand deposits as a percent of total deposits grew at March 31, 2021 compared to December 31, 2020, and at December 31, 2020 compared to September 30, 2020, which increases were mostly due to an influx of deposits from customers as they maintained higher balances, PPP loan proceeds, fiscal stimulus and changes in customer spending habits resulting from the COVID-19 pandemic.

Peoples continues its deposit strategy of growing low-cost core deposits, such as checking and savings accounts, while utilizing brokered deposits as a funding source when necessary.

Borrowed Funds

The following table details Peoples’ short-term and long-term borrowings:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Short-term borrowings:

17 unchanged sentences

Borrowed funds, in total, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances.

Total borrowed funds declined 9% compared to March 31, 2021, as Peoples utilized cash and cash equivalents, coupled with paydowns and proceeds from maturities from its investment securities portfolio to satisfy most of its liquidity needs.

The decline in borrowed funds at June 30, 2021, compared to June 30, 2020 was mostly due to swap funding being moved to brokered deposits rather than the use of rolling 90-day advances to fund liquidity needs, coupled with the influx in deposit balances during the period, which was mostly related to PPP proceeds and government fiscal stimulus payments.

Total borrowed funds increased 76% compared to June 30, 2021, primarily due to the addition of $63.8 million retail

repurchase agreements from Premier.

The decline in borrowed funds at September 30, 2021, compared to September 30, 2020 was mostly due to swap funding being moved to brokered deposits rather than the use of rolling 90-day advances to fund liquidity needs, which was partially offset by the acquired retail repurchase agreements from Premier during the third quarter of 2021.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities increased $6.2 million, or 8%, compared to March 31, 2021 and decreased $13.4 million compared to June 30, 2020.

The increase compared to the end of the first quarter of 2021 was the result of an increase in interest payable and other liabilities coupled with changes related to the fair value of swap derivatives at June 30, 2021.

The decrease compared to the end of the second quarter of 2020 was the result of a decrease in the fair value of swap derivatives offset by an increase in interest payable and other liabilities.

Accrued expenses and other liabilities increased $23.8 million, or 27%, compared to June 30, 2021 and increased $12.2 million compared to September 30, 2020.

The increase compared to the end of the second quarter of 2021 was the result of an increase in interest payable and other liabilities offset by with changes related to the fair value of swap derivatives at September 30, 2021.

The increase compared to the end of the third quarter of 2020 was also the result of an increase in accrued interest payable offset by a decrease in the fair value of swap derivatives .

Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Capital/Stockholders’ Equity

At June 30, 2021, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations.

At September 30, 2021, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations.

These higher capital levels reflect Peoples' desire to maintain a strong capital position.

In order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer of 2.50%, which applies to the common equity tier 1 ("CET1") ratio, the tier 1 capital ratio and the total risk-based capital ratio.

At June 30, 2021, Peoples had a capital conservation buffer of 4.75%.

As such, Peoples exceeded the minimum ratios including the capital conservation buffer at June 30, 2021.

At September 30, 2021, Peoples had a capital conservation buffer of 5.83%.

The following table details Peoples' risk-based capital levels and corresponding ratios:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Capital Amounts:

8 unchanged sentences

Tier 1 leverage ratio 11.20 % 7.87 % 9.00 % 8.97 % 8.62 %

During the second quarter of 2021, Peoples' net income of $10.1 million exceeded dividends declared of $7.1 million and regulatory capital levels declined due to the recognition of goodwill and intangibles associated with the NSL acquisition.

Net risk-weighted assets grew compared to March 31, 2021 mostly due to the forgiveness of PPP loans, which had no related risk-weighting, along with loan growth in other categories during the quarter.

The NSL acquisition negatively impacted the regulatory capital ratios at March 31, 2021, as the purchase price was included in net risk-weighted assets and there was no capital issued in connection with the acquisition.

During 2020, Peoples repurchased common shares during each quarter of the year, which reduced regulatory capital levels.

Peoples also completed the Premium Finance company acquisition on July 1, 2020, which impacted regulatory capital levels due to the recognition of goodwill and intangibles associated with the acquisition.

Peoples did not repurchase any common shares in the six months of 2021.

During the third quarter of 2021, Peoples' reported a net loss of $5.8 million and declared dividends of $7.1 million.

However, regulatory capital levels increased due to the merger with Premier.

Net risk-weighted assets grew compared to June 30, 2021 mostly due to the merger with Premier, along with growth in premium finance loans and growth in leases during the quarter.

In 2020, Peoples repurchased common shares during each quarter of the year, which reduced regulatory capital levels.

Peoples also completed the Premium Finance acquisition on July 1, 2020, which impacted regulatory capital levels due to the recognition of goodwill and intangibles associated with the acquisition.

Peoples did not repurchase any common shares in the first nine months of 2021.

In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity.

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The following table reconciles the calculation of these Non-US GAAP financial measures to amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements:

(Dollars in thousands) June 30,

(Dollars in thousands) September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Tangible equity:

25 unchanged sentences

7.93 % 7.51 % 7.96 % 8.55 % 8.07 %

Tangible book value per common share declined to $18.51 at June 30, 2021, compared to $20.12 at March 31, 2021.

The change in tangible book value per common share was mostly due to the acquisition from NSL and the additional intangible assets from that acquisition recorded during the second quarter of 2021.

Tangible book value per common share increased to $18.98 at September 30, 2021, compared to $18.51 at June 30, 2021.

The change in tangible book value per common share was due to tangible equity increasing at a higher rate than shares outstanding during the third quarter of 2021.

The increase in tangible book value per common share at December 31, 2020, compared to September 30, 2020, was the result of higher stockholders' equity as net income exceeded dividends declared during the period, as well as a reduction in common shares outstanding as Peoples actively repurchased common shares.

The decline in the tangible book value per common share at September 30, 2020 compared to June 30, 2020, was mostly related to the repurchase of common shares during that period.

The tangible equity to tangible assets ratio declined at June 30, 2021 compared to March 31, 2021.

This decline was driven by higher tangible assets related to increases in investment securities, cash and cash equivalents, and other assets, coupled with the intangible assets recorded during the second quarter of 2021 associated with the NSL acquisition.

The tangible equity to tangible assets ratio increased at September 30, 2021 compared to June 30, 2021.

This increase was driven by higher tangible assets related to the merger with Premier which provided for increases in loans, investment securities, cash and cash equivalents, and other assets, coupled with the intangible assets recorded during the third quarter of 2021 associated with the merger with Premier and the NSL acquisition.

The decline in the tangible equity to tangible assets ratio at March 31, 2021 compared to December 31, 2020, was largely due to an increase in other assets that was driven by the NSL acquisition, for which the purchase price was paid and recorded on March 31, 2021.

16 unchanged sentences

Estimated Increase (Decrease) in Economic Value of Equity

(in Basis Points) June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

(in Basis Points) September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

300 $ 26,191 12.5 % $ 22,034 17.3 % $ 12,475 1.0 % $ 117,235 15.7 %

2 unchanged sentences

(100) (9,792) (4.7) % (7,030) (5.5) % (120,471) (9.6) % (116,205) (15.5) %

Estimated changes in net interest income and economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities.

Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities.

These and other modeling assumptions are monitored closely by Peoples on an ongoing basis.

8 unchanged sentences

Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above.

Given the shape of market yield curves at June 30, 2021, consideration of the bear steepener and bull flattener scenarios provide insights which were not captured by parallel shifts.

Given the shape of market yield curves at September 30, 2021, consideration of the bear steepener and bull flattener scenarios provides insights which were not captured by parallel shifts.

These scenarios were evaluated as the current environment suggests these may be possible outcomes for the trajectory of interest rates.

3 unchanged sentences

resulting in an increased amount of net interest income and higher net interest margin.

At June 30, 2021, the bear steepener scenario resulted in an increase in both net interest income and economic value of equity of 1.2% and 5.9%, respectively.

At September 30, 2021, the bear steepener scenario resulted in an increase in both net interest income and the economic value of equity of 0.8% and 5.5%, respectively.

The bull flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates remain constant while long-term rates fall.

2 unchanged sentences

resulting in a decreased amount of net interest income and lower net interest margin.

At June 30, 2021, the bull flattener scenario resulted in a decrease in both net interest income and economic value of equity of 0.7% and 1.8%, respectively.

Peoples was within the policy limitations for this alternative scenario as of June 30, 2021, which sets the maximum allowable downside exposure as 5.0% of net interest income and 10.0% of economic value of equity.

At September 30, 2021, the bull flattener scenario resulted in a decrease in both net interest income and the economic value of equity of -0.5% and -0.9%, respectively.

Peoples was within the policy limitations for this alternative scenario as of September 30, 2021, which sets the maximum allowable downside exposure as 5.0% of net interest income and 10.0% of economic value of equity.

Peoples has entered into interest rate swaps as part of its interest rate risk management strategy.

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.

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

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

Additional information regarding Peoples’ interest rate swaps can be found in “Note 10 Derivative Financial Instruments” of the Notes to the Unaudited Condensed Consolidated Financial Statements.

At June 30, 2021, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income and the economic value of equity.

At September 30, 2021, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income and the economic value of equity.

The table above illustrates this point as changes to net interest income increase in the rising rate scenarios.

While the heavy concentration of floating rate loans remains the largest

contributor to the level of asset sensitivity, the decrease in economic value of equity asset sensitivity, as measured, from December 31, 2020 was largely attributable to increased effective duration in the investment securities portfolio.

While the heavy concentration of floating rate loans remains the largest contributor to the level of asset sensitivity, the decrease in economic value of equity asset sensitivity, as measured, from December 31, 2020 was largely attributable to increased effective duration in the investment securities portfolio.

In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity.

The methods used by the ALCO to monitor and evaluate the adequacy of Peoples Bank's liquidity position remain unchanged from those disclosed in Peoples' 2020 Form 10-K.

At June 30, 2021, Peoples Bank had liquid assets of $287.3 million, which represented 5.0% of total assets and unfunded loan commitments.

At September 30, 2021, Peoples Bank had liquid assets of $607.8 million, which represented 7.7% of total assets and unfunded loan commitments.

Peoples also had an additional $246.5 million of unpledged investment securities not included in the measurement of liquid assets.

Management believes the current balance of cash and cash equivalents, anticipated investment portfolio cash flows and the availability of other funding sources, will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments.

Peoples is authorized to utilize the Federal Reserve's Paycheck Protection Program Liquidity Facility ("PPPLF") to fund originations under the PPP;

however, Peoples did not use the PPPLF during the first six months of 2021, or in 2020, and had no outstanding balance at June 30, 2021.

Since March 31, 2020, there has been an increase in deposit balances due to the influx of funds from the government fiscal stimulus, the PPP and other government actions.

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(Dollars in thousands)

September 30,

2021 June 30,

2021 March 31,

1 unchanged sentence

2020 September 30,

2020 June 30,

Home equity lines of credit $ 177,963 $ 134,516 $ 124,027 $ 117,792 $ 113,185

3 unchanged sentences

Standby letters of credit $ 12,358 $ 10,252 $ 10,295 $ 14,342 $ 13,177

The increase in loan commitments at September 30, 2021 was primarily the result of the Premier acquisition.

Management does not anticipate that Peoples Bank’s current off-balance sheet activities will have a material impact on its future results of operations and financial condition based on historical experience and recent trends.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this Item 3 is provided under the caption “Interest Rate Sensitivity and Liquidity” under “ITEM 2.

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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 2. Management’s Discussion and Analysis