What changed in this filing

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Item 1. Business

2022-03-15 compared with 2021-03-01 · 157 added, 109 removed, 476 unchanged (36% of the section changed)

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is a financial holding company, which was organized in 1980.

Peoples operates principally through its wholly-owned subsidiary, Peoples Bank, an Ohio state-chartered bank which was first chartered in 1902.

Peoples' other wholly-owned subsidiaries are Peoples Investment Company ("PIC") and Peoples Risk Management, Inc., a captive insurance subsidiary.

Peoples also holds all of the common securities of NB&T Statutory Trust III.

Peoples operates principally through its wholly-owned subsidiary, Peoples Bank, an Ohio state-chartered bank that was first chartered in 1902.

Peoples' other wholly-owned subsidiaries are Peoples Investment Company ("PIC"), Peoples Risk Management, Inc., a captive insurance subsidiary and Vantage Financial ("Vantage").

Peoples also holds all of the common securities of NB&T Statutory Trust III and FNB Capital Trust One.

Peoples Bank's operating subsidiaries include Peoples Insurance Agency, LLC ("Peoples Insurance"), and an asset management company, Peoples Tax Credit Equity, LLC.

Business Overview

Peoples makes available a complete line of commercial and consumer banking, trust and investment, insurance and premium financing solutions through its financial subsidiaries – Peoples Bank and Peoples Insurance.

Peoples makes available a complete line of commercial and consumer banking, trust and investment, insurance, premium financing solutions, equipment leases and equipment financing agreements through its financial subsidiaries – Peoples Bank and Peoples Insurance.

These products and services include the following:

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◦ person-to-person payment processing via Zelle®;

◦ mobile banking features including check deposit, withdrawals with cardless cash, alert notifications, Apple Pay® and Samsumg Pay®;

◦ mobile banking features including check deposit, withdrawals with cardless cash, alert notifications, Apple Pay® and Samsung Pay®;

◦ safe deposit rental facilities;

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◦ insurance premium financing;

◦ commercial equipment leasing;

◦ technology equipment leasing;

◦ brokerage services;

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◦ employee benefit, retirement, and health care plan administration services:

Peoples' financial products and services are primarily offered through its financial service locations and ATMs in Ohio, Kentucky and West Virginia, as well as through online resources that are web and mobile based.

Peoples' premium financing services are offered nationwide.

◦ underwriting, origination and servicing of equipment leases and equipment financing agreements.

Peoples' financial products and services are primarily offered through its financial service locations and ATMs in Ohio, West Virginia, Kentucky, Virginia, Washington, D.C.

and Maryland, as well as through online resources that are web-based and mobile-based.

Peoples' premium financing and equipment leasing services are offered nationwide.

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

Indirect consumer lending activities are offered through approved dealerships.

Peoples Bank credit card and merchant processing services are provided through joint marketing arrangements with third parties.

Indirect consumer lending activities are provided through approved dealerships.

Peoples Bank's credit card and merchant processing services are provided through joint marketing arrangements with third parties.

Peoples' business activities are currently limited to one reporting unit and reportable operating segment, which is community banking.

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Peoples has a history of expanding its business, including its customer base and primary market area, through a combination of internal growth and targeted acquisitions.

The internal growth may include the opening of de novo banking and loan production offices located in or near Peoples' existing market area.

Acquisitions have consisted of traditional banking offices and loan production offices, both individually and as part of entire financial institutions, insurance agencies and financial advisory books of business.

The internal growth may include opening de novo banking and loan production offices located in or near Peoples' existing market area.

Acquisitions have consisted of traditional banking offices and loan production offices, both individually and as part of entire financial institutions, insurance agencies, financial advisory books of business,

insurance premium financing and equipment leasing services.

The primary objectives of Peoples' expansion efforts include:

(1) providing opportunities to integrate non-traditional products and services, such as insurance and investment administration and management, and insurance premium financing, with the traditional banking products offered to Peoples' clients;

(1) providing opportunities to integrate non-traditional products and services, such as insurance, and investment administration and management, insurance premium financing and commercial leasing options, along with the traditional banking products offered to Peoples' clients;

(2) increasing market share in existing markets;

(3) expanding Peoples' core financial service businesses of banking, insurance and investment and investment management;

(3) expanding Peoples' core financial service businesses of banking, insurance, investment and investment management, insurance premium financing and equipment leasing services;

and (4) improving operating efficiency by directing resources toward offices and markets with the greatest earnings opportunities.

Recent Corporate Developments

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 previous share repurchase program, which had authorized Peoples to purchase up to an aggregate of $40 million of its outstanding common shares and under which an aggregate of $28.4 million had been purchased through the termination of the previous share repurchase program on January 28, 2021.

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 the "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 December 31, 2020, Peoples Premium Finance loans had grown to $114.8 million.

On March 7, 2022, Peoples wholly-owned subsidiary, Peoples Bank, closed on its acquisition of Vantage Financial, LLC ("Vantage"), a nationwide provider of equipment financing headquartered in Excelsior, Minnesota.

Under the terms of the agreement, Peoples Bank purchased 100% of the equity of Vantage for total cash consideration of $54.0 million.

Peoples Bank repaid approximately $28.9 million in recourse debt on behalf of Vantage.

Vantage offers mid-ticket equipment leases, primarily for business essential information technology equipment across a wide array of industries.

Upon completion of the transaction, Vantage became a subsidiary of Peoples Bank.

As a subsidiary, Vantage will continue to operate under the name Vantage Financial, which will leverage Vantage's strong brand recognition within the equipment finance industry.

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, 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 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 $68.2 million in goodwill and $4.2 million in other intangible assets in connection with the Merger.

Refer to "Note 20 Acquisitions" of the Notes to the Consolidated Financial Statements for additional information.

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., pursuant to an Asset Purchase Agreement between Peoples Insurance and Justice & Stamper Insurance Agency, Inc.

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

Refer to "Note 20 Acquisitions" of the Notes to the Consolidated Financial Statements for additional information.

On March 31, 2021, Peoples completed its acquisition of NS Leasing, LLC ("NSL") pursuant to an Asset Purchase Agreement, dated March 24, 2021.

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 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 a customer relationship intangible, trade name intangible and non-compete agreements related to this transaction.

Peoples recorded an additional $0.6 million in non-interest expense during the last six months of 2021 related to an update to the estimated earn-out provision of $3.0 million.

As of December 31, 2021, equipment leases had grown to $122.5 million.

Refer to "Note 20 Acquisitions" of the Notes to the Consolidated Financial Statements for additional information.

On January 28, 2021, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $30 million of Peoples' outstanding common shares, replacing the share repurchase program which had authorized Peoples to purchase up to an aggregate of $40 million of Peoples' outstanding common shares.

There were no common share repurchases during 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 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 2020, Peoples repurchased 1,299,577 of Peoples' common shares through Peoples' then-effective common share repurchase program for a total of $29.3 million.

Primary Market Area and Customers

Peoples considers its primary market area to be comprised of those counties where it has a physical branch presence and their contiguous counties.

This includes northeastern, central, southwestern and southeastern Ohio, eastern and central Kentucky, and west central West Virginia.

Peoples currently operates 64 locations in Ohio, 13 locations in Kentucky, 10 locations in West Virginia and a premium finance lending office in Missouri.

Peoples' market area consists of rural, small urban and metropolitan markets and serves a diverse group of industries and employers.

Principal industries served in Peoples' primary markets include manufacturing, distribution, commercial real estate, health care, education, municipal, agricultural, automotive, wholesale and retail trade, franchise, and service-related industries.

This broad-based economic region provides diversity, which helps prevent Peoples' revenue and earnings from being largely dependent upon any single industry segment.

Peoples considers its primary market area to be those counties with a physical branch presence and their contiguous counties.

This includes Ohio, West Virginia, Kentucky, Virginia, Washington, D.C.

and Maryland.

Peoples currently operates 66 offices in

Ohio, 34 offices in West Virginia, 26 offices in Kentucky, three offices in Virginia, three offices in Washington D.C., one office in Maryland, an insurance premium finance lending office in Missouri, an equipment leasing office in Vermont and a technology equipment leasing office in Minnesota.

Peoples' market area consists of rural, small urban and metropolitan markets in which Peoples serves a diverse group of industries and employers.

Principal industries served in Peoples' primary market area include manufacturing, distribution, commercial real estate, health care, education, municipal, agricultural, automotive, wholesale and retail trade, franchise, and service-related industries.

This broad-based economic area provides diversity, which helps prevent Peoples' revenue and earnings from being largely dependent upon any single industry segment.

The COVID-19 pandemic has created disruptions throughout Peoples' primary market area.

Governments, businesses, and the public have taken unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, government fiscal stimulus, payment programs, and legislation designed to deliver monetary aid and other Federal Reserve Board monetary policy.

This has had a negative impact on the customers of Peoples, including businesses and individuals.

The effectiveness and timing of the rollout of vaccines to the general public is unpredictable, and therefore, the pandemic could continue to impact Peoples' market area and customers.

Governments, businesses, and the public have taken unprecedented actions to contain the spread of COVID-19, or variants thereof, and mitigate its effects.

These steps have included vaccines, quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, government fiscal stimulus, payment programs, and legislation designed to deliver monetary aid as well as other actions taken by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") with respect to monetary policy.

These actions had a negative impact on the customers of Peoples, including businesses and individuals.

The availability, effectiveness and acceptance of vaccines for COVID-19, or variants thereof, to the general public could continue to impact Peoples' market area and customers.

Lending Activities

Peoples Bank originates various types of loans, including commercial loans (comprised of commercial and industrial loans, commercial real estate loans, and construction loans), premium finance loans, residential real estate loans, home equity lines of credit, consumer loans (comprised of both indirect and direct loans) and Overdraft Privilege.

Peoples Bank's lending activities are focused principally on lending opportunities within its primary market areas, with the exception of its premium finance lending, although Peoples Bank may occasionally originate loans outside its primary markets.

In general, Peoples Bank retains the majority of loans it originates;

Peoples Bank's lending activities are focused principally on lending opportunities within its primary market areas, except for its premium finance lending and equipment leasing businesses.

However, Peoples Bank may occasionally originate loans outside its primary market area.

In general, Peoples Bank retains the majority of loans and leases it originates;

however, certain longer-term fixed-rate mortgage loan originations, primarily one-to-four family residential mortgages, and portions of select commercial real estate loans and commercial and industrial loans are sold into the secondary market or to other financial institutions.

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Commercial loans represented the largest portion of Peoples Bank's total loan portfolio, comprising approximately 59.3% and 59.0% of total loans at December 31, 2021 and December 31, 2020, respectively.

Commercial lending inherently carries a significant degree of risk of loss since commercial loan relationships generally involve larger loan balances than other loan classes.

Commercial lending inherently carries a significant risk of loss since commercial loan relationships generally involve larger loan balances than other loan classes.

Commercial loan terms include amortization schedules and interest rates commensurate with the purpose of each loan, the identified source of repayment, and the risk involved.

The majority of Peoples Bank's commercial loans carry variable interest rates equal to an underlying index rate plus a margin, although Peoples Bank also originates commercial loans with fixed interest rates for periods generally ranging from three to ten years.

The majority of Peoples Bank's commercial loans carry variable interest rates equal to an underlying index rate plus a margin.

However, Peoples Bank also originates commercial loans with fixed interest rates for periods generally ranging from three to ten years.

At December 31, 2021, the commercial loan portfolio consisted of 72.6% in variable interest rate loans and 27.4% in fixed interest rate loans.

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By entering into the interest rate swap with the customer, Peoples Bank effectively provides the customer with a fixed-rate loan while creating a variable rate asset for Peoples Bank.

Peoples Bank offsets its exposure in the swap by entering into an offsetting interest rate swap with an unaffiliated financial institution.

In addition, Peoples Bank offsets its exposure in each swap by entering into an offsetting interest rate swap with an unaffiliated financial institution.

These interest rate swaps do not qualify as designated hedges;

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

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

Peoples Bank evaluates all commercial loan relationships whose aggregate credit exposure is greater than $1.0 million on an annual basis for possible credit deterioration.

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The CARES Act amended the loan program of the Small Business Administration (the "SBA"), in which Peoples Bank participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program (the "PPP"), to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19.

An extension of these economic relief measures was taken upon the enactment in December 2020 of the Consolidated Appropriations Act, 2021.

These economic relief measures were extended through the enactment in December 2020 of the Consolidated Appropriations Act, 2021.

The PPP loan program ended on May 31, 2021, meaning no new PPP loans have been originated since this date.

Commercial and Industrial Loans

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The primary source of repayment of this type of loan is generally cash flows generated from operations of the business, which can be susceptible to adverse changes in economic conditions of the general economy as a whole or within a specific industry.

Also included in commercial and industrial loan balances were the PPP loans.

Also included in commercial and industrial loan balances are the PPP loans.

At December 31, 2021, commercial and industrial loans comprised 19.9% of Peoples Bank's total loan portfolio compared to 28.6% at December 31, 2020.

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If the estimated construction cost proves to be inaccurate, Peoples Bank may be required to advance funds beyond the amount originally committed to enable completion of the project.

If the estimate of value proves inaccurate, Peoples Bank may be confronted, at or prior to the maturity of the loan, with a property having a value insufficient to ensure full repayment, should the borrower default.

If the estimate of property's value upon completion proves inaccurate, Peoples Bank may be confronted, at or prior to the maturity of the loan, with a property having a value insufficient to ensure full repayment, should the borrower default.

In the event a default on a construction loan occurs and foreclosure follows, Peoples Bank must take control of the project and attempt to either arrange for completion of construction or sell the collateral of the unfinished project.

In certain cases, such as real estate development projects, repayment of construction loans occurs as a result of

subsequent sale of the developed real estate.

In certain cases, such as real estate development projects, repayment of construction loans occurs as a result of subsequent sale of the developed real estate.

Additional risk exists in these cases as the developer may lack funds to repay the loan if the property is not sold upon completion.

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Peoples Bank typically requires the term of its construction loans to be less than three years.

Premium Finance Loans

Peoples Bank's portfolio of premium finance loans comprised 3.4% of total loans at December 31, 2020, with the portfolio having been acquired during 2020.

The premium finance loans are originated through independent insurance agency partners nationwide and provide funding for the purchase by borrowers of property and casualty insurance policies from the insurance agency partners.

Insurance Premium Finance Loans

Peoples Bank's portfolio of insurance premium finance loans comprised 3.0% of total loans at December 31, 2021, with the portfolio having been acquired during 2020.

The insurance premium finance loans are originated through independent insurance agency partners nationwide and provide funding for the purchase by borrowers of property and casualty insurance policies from the insurance agency partners.

The loans are secured by the refundable, unearned premiums with respect to the underlying insurance policies.

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If the loan becomes delinquent, the underlying insurance policy is cancelled, and the unearned premiums are refunded directly to Peoples Bank.

Commercial Equipment Leases and Equipment Financing Agreements

Peoples Bank's portfolio of leases comprised 2.7% of total loans at December 31, 2021, with the portfolio having been acquired during 2021.

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.

These leases transfer substantially all of the benefits and risks of equipment ownership to the lessee.

The present value of future lease payments and the estimated residual value are recorded as leases on Peoples' Consolidated Balance Sheet.

Revenue is recognized as a constant percentage return on the lease's carrying value.

Lease origination costs are deferred and amortized as an adjustment of the related lease's yield.

Residential Real Estate Loans

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Consumer Lending

Peoples Bank's consumer lending activities include consumer indirect loans and consumer direct loans, which primarily involve loans secured by automobiles, motorcycles, recreational vehicles and other personal property, as well as unsecured loans and personal lines of credit.

and personal lines of credit.

Consumer loans generally involve more risk as to collectability than real estate mortgage loans because of the type and nature of the collateral or, in certain instances, the absence of collateral.

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Consumer direct loans differ from consumer indirect loans as they include expanded products, such as unsecured loans, or loans secured by stock or deposits.

Consumer direct loans comprised 2.3% of Peoples Bank's total loan portfolio at December 31, 2020 and 2.7% of total loans at December 31, 2019.

Consumer direct loans comprised 2.3% of Peoples Bank's total loan portfolio at each of December 31, 2021 and December 31, 2020.

Overdraft Privilege

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While Overdraft Privilege generates fee income, these fees may be offset by additions to the provision for credit losses necessary to ensure the maintenance of an appropriate allowance for credit losses against overdrafts deemed uncollectable.

This allowance, along with the related provision and net charge-offs, was included in determining Peoples Bank's allowance for credit losses.

At December 31, 2020, the unfunded commitment related to Overdraft Privilege w as $50.1 million.

This allowance, along with net charge-offs, was included in determining Peoples Bank's allowance for credit losses.

At December 31, 2021, the unfunded commitment related to Overdraft Privilege was $74.0 million.

Investment Activities

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Investment activity by Peoples Bank is subject to certain regulatory guidelines and limitations on the types of securities eligible for purchase.

As a result, the investment securities

owned by Peoples Bank at December 31, 2020 included agencies and corporations of the U.S.

As a result, the investment securities owned by Peoples Bank at December 31, 2021 included agencies and corporations of the U.S.

government, including mortgage-backed securities, bank eligible obligations of any state or political subdivision in the U.S.

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Peoples Bank also invests in tax credit funds.

The investments owned by Peoples are comprised of common stocks issued by unrelated bank holding companies.

The investments owned by PIC consist of tax credit funds, municipal obligations, privately issued mortgage-backed securities, and subordinated debt issued by a non-related banking entity.

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(1) employ excess funds not needed to support loan demand;

(2) provide a source of liquid assets to accommodate unanticipated deposit and loan fluctuations, and overall liquidity needs;

(2) provide a source of liquid

assets to accommodate unanticipated deposit and loan fluctuations, and overall liquidity needs;

(3) provide eligible securities to secure public and trust funds;

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Peoples Bank obtains deposits principally from individuals and businesses within its primary market area by offering a broad selection of deposit products to clients.

Deposits to individuals have account terms that vary with respect to the minimum balance required, the time the funds must remain on deposit, and service charge schedules.

Deposit products for individuals have account terms that vary with respect to the minimum balance required, the time the funds must remain on deposit, and service charge schedules.

Interest rates paid on specific deposit types are determined based on (1) the interest rates offered by competitors, (2) the anticipated amount and timing of funding needs, (3) the availability and cost of alternative sources of funding, and (4) the anticipated future economic conditions and interest rates.

Business deposits, which include traditional commercial business as well as governmental entities, are obtained through an offering of multiple deposit account types as well as cash management solutions.

Depending on the need of the entity, these deposits could be either interest or non-interest bearing.

Business deposits, which include deposits from traditional commercial businesses as well as governmental entities, are obtained through an offering of multiple deposit account types as well as cash management solutions.

Depending on the need of the entity, these deposits could be either interest-bearing or non-interest-bearing.

The ability of Peoples Bank to offer competitive cash management solutions to its customers, enables it to obtain valuable operating account funds as well as non-operating account funds.

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In recent years, Peoples has utilized interest rate swaps to obtain short-term borrowings at long-term fixed rates, effectively replacing maturing long-term borrowings.

Long-term borrowings provide cost-effective options for funding asset growth and satisfying capital needs, due to the variety of pricing and maturity options available.

Long-term borrowings provide cost-

effective options for funding asset growth and satisfying capital needs, due to the variety of pricing and maturity options available.

Additional information regarding the amounts and composition of Peoples' borrowed funds can be found in the "Borrowed Funds" section of "ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Form 10-K and in "Note 9 Short-Term Borrowings" and "Note 10 Long-Term Borrowings" of the Notes to the Consolidated Financial Statements.

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In addition, the deregulation of the financial services industry (see the discussion of the Gramm-Leach-Bliley Act of 1999 in the section of this item captioned "Supervision and Regulation – Bank Holding Company Regulation") has allowed securities firms and insurance companies that have elected to become financial holding companies to acquire commercial banks and other financial institutions, which can create additional competitive pressure.

In addition, financial technology, or "fintech", startups are emerging in key areas of banking.

Peoples primarily competes based on client service, convenience and responsiveness to customer needs, product characteristics, interest rates on loans and deposits, and the availability and pricing of fiduciary, employee benefit plan, brokerage and insurance services.

In addition, financial technology companies, or "fintechs" are also providing nontraditional, but increasingly strong, competition for our borrowers, depositors, and other customers.

Peoples primarily competes based on client service, convenience and responsiveness to customer needs, product characteristics, interest rates on loans, insurance premium financing, leases and deposits, and the availability and pricing of fiduciary, employee benefit plan, brokerage and insurance services.

However, some competitors may have greater resources, including additional technology offerings and higher lending limits than Peoples, which may adversely affect Peoples' ability to compete.

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Management believes Peoples has developed a level of expertise in serving the financial service needs of all communities.

Peoples' primary market area has expanded into larger metropolitan areas, such as central, southwestern and northeastern Ohio.

Peoples' primary market area has expanded into larger metropolitan areas, such as central, southwestern and northeastern Ohio along with eastern Virginia, southern Maryland, Minnesota and Washington, D.C.

Peoples also competes nationally when providing insurance premium financing and commercial equipment leases and equipment financing arrangements.

These larger areas typically contain entrenched service providers with existing customer bases much larger than Peoples' current position.

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Peoples offers paid time off, medical, dental and vision insurance, along with wellness programs, a 401(k) program, an employee stock purchase program, programs to assist with education-related costs, reward and recognition programs, as well as other various programs and benefits.

Peoples has also implemented a $15 minimum wage throughout the organization.

Peoples has also implemented a $15 minimum wage throughout the organization and is moving to have all associates at or above this threshold by January 2023.

Peoples strives to be an inclusive and diverse workplace, free of harassment, and encourages employees to voice their opinions.

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The safety of Peoples' employees is of utmost priority, and during 2021, the COVID-19 pandemic caused several changes.

A portion of Peoples' workforce began working remotely, to facilitate a smaller number of employees in the same location if not necessary.

Peoples has closed lobbies to appointment-only during times of heightened transmission of COVID-19 to protect the health of its employees.

It has also expanded the cleaning and sanitization of office locations, along with providing employees with appropriate protection equipment.

Peoples has supported its employees during the pandemic, and provided time off with pay for those who have either tested positive, or those caring for a family member who has tested positive, without requiring the employee to use paid time off that has been accrued.

A portion of Peoples' workforce continued working remotely, to facilitate a smaller number of employees in the same location if not necessary.

Peoples has also expanded the cleaning and sanitization of office locations, along with providing employees with appropriate protection equipment.

Peoples has supported its employees during the pandemic, and provided time off with pay for those

who were fully vaccinated and have either tested positive, or those caring for a family member who has tested positive, without requiring the employee to use paid time off that has been accrued.

In addition, Peoples is conducting scheduled calls to speak to employees about the changes and ask for feedback about plans regarding COVID-19, and encouraging employees who are sick to stay home.

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Peoples has registered the service marks "Peoples Bank (with logo)," "Peoples Bancorp," "Peoples Bank," Peoples in motion logo consisting of three arched ribbons, "Working Together.

Building Success.", "Peoples Insurance (with logo)", "Peoples Investment Services" "Peoples Premium Finance" and "peoplesbancorp.com" with the U.S.

Building Success.", "Peoples Insurance (with logo)", "Peoples Investment Services", “Peoples Premium Finance”, “North Star Leasing” and "peoplesbancorp.com" with the U.S.

Patent and Trademark Office (the "USPTO").

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Peoples is a legal entity separate and distinct from its subsidiaries and affiliated companies.

As a financial holding company, Peoples is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board").

The Federal Reserve Board has extensive enforcement authority over financial holding companies.

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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.

Various requirements and restrictions under the laws of the U.S, and the states of Ohio, Kentucky and West Virginia affect the operations of Peoples Bank, including requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon, restrictions relating to investments and other activities, limitations on credit exposure to correspondent banks, limitations on activities based on capital and surplus, limitations on transactions between Peoples Bank and Peoples, limitations on the payment of dividends, and limitations on branching.

Various requirements and restrictions under the laws of the U.S, and the states of Ohio, Kentucky, West Virginia, Virginia, Washington, D.C., Maryland and Minnesota affect the operations of Peoples Bank, including requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon, restrictions relating to investments and other activities, limitations on credit exposure to correspondent banks, limitations on activities based on capital and surplus, limitations on transactions between Peoples Bank and Peoples, limitations on the payment of dividends, and limitations on branching.

Consumer laws and regulations that are designed to prevent unfair, deceptive and abusive acts and practices and that ensure that consumers have access to fair, transparent and competitive markets for consumer financial products and services also affect the services provided by Peoples Bank.

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Peoples' non-banking subsidiaries are also subject to regulation by the Federal Reserve Board and other applicable federal and state agencies.

Peoples Insurance, as a licensed insurance agency, is subject to regulation by the Ohio Department of

Insurance and the state insurance regulatory agencies of those states where it conducts business.

Peoples Insurance, as a licensed insurance agency, is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states where it conducts business.

Peoples Risk Management, Inc., a Nevada-chartered captive insurance company, is subject to the laws and regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

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In addition, preliminary assessment credits were determined by the FDIC for banks with assets of less than $10 billion, which had previously contributed to the increase of the DRR to 1.35%.

On June 30, 2019, the DRR reached 1.40%, and the FDIC applied credits for banks with assets of less than $10 billion ("small bank credits") beginning with the September 30, 2019 assessment invoice (for the second quarter of 2019), and on the December 31, 2019 assessment invoice (for the third quarter of 2019), the March 31, 2020 assessment invoice (for the fourth quarter of 2019) and the June 30, 2020 assessment invoice (for the first quarter of 2020).

Peoples utilized all available credits, which were exhausted during the first quarter of 2020 (which was on the June 30, 2020 assessment invoice).

On June 30, 2019, the DRR reached 1.40%, and the FDIC applied credits for banks with assets of less than $10 billion.

On June 30, 2020, the DRR fell below the statutory minimum to 1.30%.

This resulted in the FDIC adopting a restoration plan designed to restore the DRR to 1.35% within eight years, by September 30, 2028.

As part of this restoration plan, all scheduled assessment rates for all insured institutions were maintained.

On September 30, 2021, the DRR was 1.27%

Bank Holding Company Regulation

In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks, and other activities that the Federal Reserve Board determines to be so closely related to banking as to be a proper incident thereto.

As a result of the Gramm-Leach-Bliley Act of 1999 – also known as the Financial Services Modernization Act of 1999 – which

amended the BHC Act, bank holding companies that are financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (1) financial in nature or incidental to such financial activity (as determined by the Federal Reserve Board in consultation with the Secretary of the Treasury), or (2) complementary to a financial activity, and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

As a result of the Gramm-Leach-Bliley Act of 1999 – also known as the Financial Services Modernization Act of 1999 – which amended the BHC Act, bank holding companies that are financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (1) financial in nature or incidental to such financial activity (as determined by the Federal Reserve Board in consultation with the Secretary of the Treasury), or (2) complementary to a financial activity, and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial

system generally.

Activities that are financial in nature include securities underwriting and dealing, insurance underwriting and making merchant banking investments.

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The Coronavirus Aid, Relief, and Economic Security Act of 2020 and Initiatives Related to COVID-19

In response to the novel COVID-19 pandemic (“COVID-19”), the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), was signed into law on March 27, 2020, to provide national emergency economic relief measures.

In response to the novel COVID-19 pandemic (“COVID-19”), the CARES Act was signed into law on March 27, 2020, to provide national emergency economic relief measures.

Many of the CARES Act’s programs are dependent upon the direct involvement of U.S.

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Department of Treasury, the Federal Reserve Board and other federal banking agencies, including those with direct supervisory jurisdiction over Peoples and Peoples Bank.

Furthermore, as the ongoing COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

Furthermore, as COVID-19 is ongoing and continues to evolve, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

In addition, it is possible that the U.S.

Congress will enact supplementary COVID-19 response legislation, including amendments to the

CARES Act or new bills comparable in scope to the CARES Act.

Peoples is continuing to assess the impact of the CARES Act and other statutes, regulations and supervisory guidance related to the COVID-19 pandemic.

Section 1102 of the CARES Act amended the loan program of the SBA, in which Peoples Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund operational costs of eligible businesses, organizations and self-employed persons during the COVID-19 pandemic.

Congress will enact supplementary COVID-19 response legislation, including amendments to the CARES Act or new bills comparable in scope to the CARES Act.

persons during COVID-19.

These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA.

In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which, among other things, gave borrowers additional time and flexibility to use PPP loan proceeds.

Shortly thereafter, and due to the evolving impact of the COVID-19 pandemic, additional legislation was enacted authorizing the SBA to resume accepting PPP applications on July 6, 2020, and extending the PPP application deadline to August 8, 2020.

No collateral or personal guarantees were required.

Neither the government nor lenders are permitted to charge the recipients of PPP loans any fees.

It is anticipated that additional revisions to the SBA's interim final rules on forgiveness and loan review procedures will be forthcoming to address these and related changes.

After previously being extended by Congress, the application deadline for PPP loans expired on May 31, 2021.

No collateral or personal guarantees were required for PPP loans.

In addition, neither the government nor lenders have been permitted to charge the recipients of PPP loans any fees.

On December 27, 2020, the President signed into law omnibus federal spending and economic stimulus legislation titled the "Consolidated Appropriations Act, 2021" that included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the "HHSB Act").

Among other things, the HHSB Act renewed the PPP, allocating $284.5 billion for both new first-time PPP loans under the existing PPP and the expansion of existing PPP loans for certain qualified, existing PPP borrowers.

In addition to extending and amending the PPP, the HHSB Act also created a new program for "shuttered venue operators." As a participating lender in the PPP, Peoples Bank continues to monitor legislative, regulatory, and supervisory developments related thereto.

The PPP program ended May 31, 2021 and no new loans can be originated under that program.

On September 29, 2020, the federal bank regulatory agencies issued a final rule that neutralizes the regulatory capital and liquidity coverage ratio effects of participating in certain COVID-19 liquidity facilities due to the fact there is no credit or market risk in association with exposures pledged to such facilities.

As a result, the final rule supports the flow of credit to households and businesses affected by COVID-19.

The CARES Act encouraged the Federal Reserve Board, in coordination with the Secretary of the Treasury, to establish or implement various programs to help mitigate the adverse effects of COVID-19 on midsize businesses, nonprofits, and municipalities.

In April 2020, the Federal Reserve established the Main Street Lending Program (“MSLP”) to implement certain of these recommendations.

The MSLP supported lending to small and medium-sized businesses that were in sound financial condition before the onset of COVID-19.

On November 19, 2020, Treasury Secretary Steven Mnuchin indicated that he would not reauthorize extending the MSLP past December 31, 2020.

However, the Federal Reserve Board extended the program to January 8, 2021, in order to process loans that were submitted on or before December 14, 2020.

The program ended on January 8, 2021.

Peoples did not participate in the MSLP.

On November 20, 2020, the federal bank regulatory agencies announced an interim final rule that provides temporary relief for specified community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the response to COVID-19.

On December 2, 2020, the federal bank regulatory agencies issued an interim final rule that provides temporary relief for specified community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the response to COVID-19.

Community banking organizations are subject to different rules and requirements based on their risk profile and asset size.

Due to their involvement in federal COVID-19 response programs (such as the PPP) and other lending that supports the U.S.

economy, many community banking organizations have experienced rapid and unexpected increases in their sizes, which are generally expected to be temporary.

The temporary increase in size could subject community banking organizations to new regulations or reporting requirements.

Community banking organizations with assets approaching the $10.0 billion threshold and that would otherwise become subject to additional regulatory requirements upon crossing such threshold, including requirements related to capital adequacy standards, debit card interchange fees and routing, and management official interlocks, will generally will have until 2022 to either reduce their size or to prepare for new regulatory and reporting standards.

Due to their involvement in federal COVID-19 response programs (such as the PPP) and other lending that supported the U.S.

economy, many community banking organizations experienced rapid and unexpected increases in their sizes, which were generally expected to be temporary.

The temporary increase in size could have subjected community banking organizations to new regulations or reporting requirements.

However community banking organizations with assets approaching the $10.0 billion threshold and that would otherwise have become subject to additional regulatory requirements upon crossing such threshold, including requirements related to capital adequacy standards, debit card interchange fees and routing, and management official interlocks, had until January 1, 2022 to either reduce their size or to prepare for new regulatory and reporting standards.

Capital Adequacy and Prompt Corrective Action

The Federal Deposit Insurance Corporation Improvement Act of 1991, as amended ("FDICIA"), identifies five capital categories for insured depository institutions and requires the applicable regulatory agencies to implement systems for "prompt corrective action" for insured depository institutions that do not meet minimum capital requirements within such categories.

The regulatory agencies, including the Federal Reserve Board, the FDIC, the ODFI, and the Office of Comptroller of the Currency, have adopted substantially similar regulatory capital guidelines and regulations consistent with the requirements of FDICIA, and have established a system of prompt corrective action to resolve certain problems of undercapitalized institutions.

The regulatory agencies, including the Federal Reserve Board, the FDIC, the ODFI, and the Office of Comptroller of the Currency (the "OCC"), have adopted substantially similar regulatory capital guidelines and regulations consistent with the requirements of FDICIA, and have established a system of prompt corrective action to resolve certain problems of undercapitalized institutions.

This system is based on five capital level categories for insured depository institutions:

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Under the rule, a community bank was eligible to elect the Community Bank Leverage Ratio ("CBLR") framework if the community bank had less than $10 billion in total consolidated assets, limited amounts of certain trading assets and liabilities and of off-balance sheet exposures, and a leverage ratio greater than 9.0%.

Qualifying institutions that elected to use the CBLR framework and that maintain a leverage ratio of greater than 9.0% were be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies' generally applicable capital rules and to have met the well-capitalized ratio requirements.

Qualifying institutions that elected to use the CBLR framework and that maintained a leverage ratio of greater than 9.0% were be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies' generally applicable capital rules and to have met the well-capitalized ratio requirements.

Peoples has opted out of the simplified framework and continues to follow existing capital rules.

In October 2021, effective in November 2021, the FDIC issued a final rule to incorporate the CBLR rule into the Real Estate Lending Standards.

This rule calculates the ratio of loans in excess of the supervisory loan-to-value limits ("LTV Limits") using Tier 1 capital plus the appropriate allowance for credit losses in the denominator.

This rule was adopted to allow a consistent approach for calculating the ratio of loans in excess of the supervisory LTV Limits at all FDIC supervised institutions, and to avoid any regulatory burden that could arise if an FDIC supervised institution subsequently decides to switch between different capital frameworks.

In December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss allowances under the current expected credit loss (“CECL”) model (accounting standard).

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This additional phase-in period includes a 25% deferment of the impact on regulatory capital of the estimated increase in the allowance for credit losses related to the CECL model, which is applied during the first two years of application.

For the first two years of the phase-in

period, 100% of the transition adjustment due to the implementation of the CECL model is excluded for regulatory capital purposes, along with 25% of the increase in the allowance for credit losses compared to the January 1, 2020 allowance for credit losses.

For the first two years of the phase-in period, 100% of the transition adjustment due to the implementation of the CECL model is excluded for regulatory capital purposes, along with 25% of the increase in the allowance for credit losses compared to the January 1, 2020 allowance for credit losses.

In year three of the phase-in, 75% of the transition adjustment, and the cumulative 25% increase in the allowance for credit losses compared to January 1, 2020, are excluded from regulatory capital, while 50% and 25% of these amounts are excluded in years four and five, respectively, under this phase-in period.

Additional information on the impact of Peoples' adoption of the CECL methodology can be found under the "FINANCIAL CONDITION - Allowance for Credit Losses" section of "ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Form 10-K.

In order to be "well capitalized," a bank must have a common equity tier 1 capital ratio of at least 6.5%, a tier 1 risk-based capital ratio of at least 8.0%, a total risk-based capital of at least 10.0%, and a tier 1 leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measures.

must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measures.

Peoples' management believes that Peoples Bank meets the ratio requirements to be deemed "well capitalized" according to the guidelines described above.

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Depository institutions are periodically examined for compliance with the CRA and are assigned ratings.

The most recent performance evaluation by the Federal Reserve Board (which was Peoples Bank's primary federal banking regulator at the time of the examination) of Peoples Bank was conducted in 2017 and resulted in an overall rating of "Satisfactory." The most recent CRA examination for Peoples Bank occurred in March of 2020, and is still pending final results.

Dividend Restrictions

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The Federal Reserve Board has also issued a policy statement with regard to the payment of cash dividends by financial holding companies and other bank holding companies.

retention appears to be consistent with the financial holding company's or bank holding company's capital needs, asset quality and overall financial condition.

The policy statement provides that, as a matter of prudent banking, a financial holding company or bank holding company should not maintain a rate of cash dividends unless its net income available to common shareholders over the current year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the financial holding company's or bank holding company's capital needs, asset quality and overall financial condition.

Accordingly, a financial holding company or bank holding company should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the financial holding company's or bank holding company's financial health, such as by borrowing.

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Specifically, Peoples Bank is prohibited from paying dividends in an amount greater than permitted by law without requiring prior Federal Reserve Board or other regulatory approval.

In addition, if Peoples were to elect to defer payments of interest on the junior subordinated debt securities held by the NB&T Statutory Trust III, or an event of default were to occur under the indenture governing those junior subordinated debt securities, Peoples will be prohibited from declaring or paying any dividends on Peoples' common shares.

In addition, if Peoples were to elect to defer payments of interest on the junior subordinated debt securities held by the NB&T Statutory Trust III or FNB Capital Trust One, or an event of default were to occur under the indenture governing those junior subordinated debt securities, Peoples will be prohibited from declaring or paying any dividends on Peoples' common shares.

Even where the declaration or payment of a dividend would not otherwise be restricted under applicable laws, Peoples or Peoples Bank may decide to limit the payment of dividends in order to retain earnings for corporate use.

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and (iv) establish related definitions, reporting, and recordkeeping requirements.

No lenders are required to comply until the later of November 19, 2020, or until the court in litigation challenging the Final Small Dollar Rule lifts its stay of the compliance date.

In August 2021, the court overseeing the litigation challenging the Final Small Dollar Rule found in the CFPB's favor, and ordered the compliance date to be 286 days after the final judgment.

Lenders are required to comply by June 13, 2022.

The federal bank regulatory agencies also issued interagency guidance on May 20, 2020, to encourage banks, savings associations, and credit unions to offer responsible small-dollar loans to customers for consumer and small business purposes.

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requires the development of standards for evaluating technology and internal processes for BSA compliance;

expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

and expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

USA Patriot Act

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In March 2015, federal regulators issued two related statements regarding cybersecurity.

One statement indicates that financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to

reliably authenticate customers accessing Internet-based services of the financial institution.

The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cybersecurity attack involving destructive malware.

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These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

In November 2021, the federal bank regulatory agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify certain entities.

A computer-security incident occurs when actual or potential harm to the confidentiality, integrity or availability of information or the information system occurs, or there is a violation or imminent threat of a violation to banking security policies and procedures.

The affected bank must notify its respective federal regulator of the computer-security incident has occurred.

These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into bigger incidents.

This rule also requires bank service providers to notify their customers of a computer-security incident.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.

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Peoples limits its exposure to environmental risk by lending to a diverse range of consumer and commercial customers.

In cases where management believes environmental risk potentially exists, Peoples Bank mitigates its environmental risk exposure by requiring environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites.

In cases where management believes environmental risk potentially exists, Peoples Bank mitigates its environmental risk exposure by requiring

environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites.

In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate collateral.

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These Acts provided significant funding for PPP loans for businesses and fiscal stimulus funding for individuals, as well as updates related to reporting for troubled debt restructurings and other various changes.

The PPP loan program expired on May 31, 2021 and no originations have been permitted after this date.

Additionally, in September 2021, guidance issued for the reporting of troubled debt restructurings expired and no COVID-19-related deferments remained as of September 30, 2021.

There were sweeping reforms in the Dodd-Frank Act adopted in 2010, and the rollback of the Dodd-Frank Act that began in 2018.

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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-K

Item 1. Business