PEOPLES BANCORP INC 10-K

ITEM 9A CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Peoples’ management, with the participation and supervision of Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer, has evaluated the effectiveness of Peoples’ disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2021. Based upon that evaluation, Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer have concluded that our disclosure controls and procedures were not effective as of December 31, 2021 because of a material weakness in internal controls over financial reporting described in Management’s Annual Report on Internal Control Over Financial Reporting below. Management's Annual Report on Internal Control Over Financial Reporting The "Report of Management's Assessment of Internal Control Over Financial Reporting” required by Item 308(a) of SEC Regulation S-K is included on page 80 of this Form 10-K. Attestation Report of Independent Registered Public Accounting Firm The “Report of Independent Registered Public Accounting Firm” required by Item 308(b) of SEC Regulation S-K is included on page 81 of this Form 10-K. Ernst & Young LLP (U.S. PCAOB Auditor Firm I.D.: 42 ), the independent registered public accounting firm that audited Peoples' consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2021. The report, which expresses the opinion that management has not maintained effective internal control over financial reporting as of December 31, 2021, is included in the "Report of Independent Registered Public Accounting Firm" 77 Changes in Internal Control Over Financial Reporting Except for the material weakness identified, there were no changes in Peoples’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, Peoples’ internal control over financial reporting. However, as disclosed in the “Report of Management’s Assessment of Internal Control Over Financial Reporting”, Peoples’ management is in the process of implementing certain changes to Peoples’ internal controls to remediate the material weakness disclosed in the “Report of Management’s Assessment of Internal Control Over Financial Reporting.” ITEM 9B OTHER INFORMATION None. ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. 78 Report of Management's Assessment of Internal Control Over Financial Reporting Peoples' management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Peoples' internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation, integrity, and fair presentation of Peoples' Consolidated Financial Statements for external purposes in accordance with United States generally accepted accounting principles. With the supervision and participation of Peoples' President and Chief Executive Officer and its Peoples' Executive Vice President, Chief Financial Officer and Treasurer, Peoples' management evaluated the effectiveness of Peoples' internal control over financial reporting as of December 31, 2021, using the Internal Control-Integrated Framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). No matter how well designed, internal control over financial reporting may not prevent or detect all misstatements. Projection of the evaluation of effectiveness to future periods is subject to risks, including but not limited to (a) controls may become inadequate due to changes in conditions; (b) a deterioration may occur in the degree of compliance with policies or procedures; and (c) the possibility of control circumvention or override occurring, any of which may lead to misstatements due to undetected error or fraud. Effective internal control over financial reporting can provide only a reasonable assurance with respect to financial statement preparation and financial reporting. Control deficiencies were identified by Peoples’ management related to the accounting for loans acquired in the September 17, 2021 merger with Premier, specifically the designation of those acquired loans as either purchased credit deteriorated ("PCD") or non-PCD, the designation of PCD loans as either pooled or individually assessed, and the estimation and calculation of expected credit losses on individually assessed loans. Based upon an internal review by Peoples’ management, with the participation of Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer, it was determined that the deficiencies in the design of controls supporting acquired purchased credit deteriorated loan accounting and the related allowance for credit losses aggregated to a material weakness in internal control over financial reporting. A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Peoples’ annual or interim financial statements will not be prevented or detected on a timely basis. To address the financial disclosure impact by the identified control deficiencies, Peoples recorded a reduction in "Goodwill" of $6.1 million, a decrease in "Other Assets" of $1.7 million, a decrease in the “Allowance for credit losses” of $3.7 million, an increase in “Loans and leases, net of deferred fees and costs” of $2.2 million, and a decrease in “Accrued expenses and other liabilities” of $0.4 million as of December 31, 2021, with an offsetting reduction in net income for the 2021 fiscal year of approximately $1.5 million. The impact of the material weakness (and related control deficiencies) on Peoples’ consolidated financial statements for the interim periods ended September 30, 2021 and December 31, 2021 are not considered material. Materiality was evaluated both quantitatively and qualitatively in accordance with the guidance provided by Staff Accounting Bulletin No. 99 – Materiality. As such, the material weakness (and related control deficiencies) did not result in a material misstatement in Peoples’ previously filed condensed consolidated financial statements for the periods ended September 30, 2021, and such financial statements can still be relied upon. To remediate the material weakness, Peoples’ management is in the process of implementing certain changes to Peoples’ internal controls, and will implement additional internal controls during 2022 in order to remediate the control deficiencies that led to the material weakness. Specifically, Peoples’ management plans to enhance documentation and review of the criteria used to support the aforementioned designations relating to PCD accounting, and engage independent third-party advisors to assess the reasonableness of the allowance for credit losses assigned to individually assessed PCD loans. Peoples’ management believes these remediation measures will strengthen Peoples’ internal control over financial reporting and remediate the material weakness (and related control deficiencies) identified. Peoples' management assessed the effectiveness of Peoples' internal control over financial reporting as of December 31, 2021, and, based on this assessment, has concluded Peoples' internal control over financial reporting was not effective at a reasonable assurance level as of that date due to the material weakness in internal control over financial reporting noted above. Peoples' independent registered public accounting firm, Ernst & Young LLP has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and has issued an audit report on Peoples' internal control over financial reporting. By: /s/ CHARLES W. SULERZYSKI By: /s/ KATIE BAILEY Charles W. Sulerzyski Katie Bailey President and Chief Executive Officer Executive Vice President, Chief Financial Officer and Treasurer March 15, 2022 79 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Peoples Bancorp Inc. Opinion on Internal Control Over Financial Reporting We have audited Peoples Bancorp Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Peoples Bancorp Inc. and subsidiaries (the Company) has not maintained effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has identified a material weakness in controls related to the Company’s accounting for purchased credit deteriorated loans. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report dated March 15, 2022, which expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Charleston, West Virginia March 15, 2022 80 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Peoples Bancorp Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Peoples Bancorp Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 15, 2022 expressed an adverse opinion thereon. Adoption of New Accounting Standard As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for the allowance for credit losses in 2020, due to the adoption of ASU 2016-13, Financial Instruments – Credit Losses (ASU 326): Measurement of Credit Losses on Financial Statements. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 81 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Accounting for the Allowance for Credit Losses Description of the Matter As discussed in Note 1 and Note 4 of the financial statements, management estimates the allowance for credit losses (ACL) based on information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The ACL is made up of both a quantitative modeled component as well as a qualitative component. The methodology for determining the quantitative component includes (1) a pooled component for loans that exhibit similar risk characteristics and (2) a specific component for those loans that do not exhibit similar risk characteristics. For loans exhibiting similar risk characteristics, the Company uses a loss driver method, which analyzes one or more economic variables to the change in default rate using a regression analysis, and a discounted cash flow methodology in determining an ACL for each segment. Management applies judgment in determining the extent of qualitative factors used in the qualitative component to adjust the loss rates for loan segments to reflect the impact these factors may have on expected losses in the loan portfolio. These include economic conditions, collateral, concentrations, troubled assets, Peoples' loss trends, peer loss trends, delinquency trends, portfolio composition and loan growth, underwriting, and certain other risks. The Company’s loan and lease portfolio totaled $4.48 billion as of December 31, 2021, and the associated ACL was $64.0 million. Auditing management’s estimate of the ACL involves a high degree of subjectivity due to the judgment and estimates required in evaluating management’s determination of the qualitative factors applied to the ACL. Management’s identification and measurement of qualitative factors specific to economic conditions and collateral is highly judgmental and could have a significant effect on the ACL. How We Addressed the Matter in Our Audit We obtained an understanding of the Company’s processes for establishing the ACL through the year ended December 31, 2021, including the qualitative factor adjustments made to the loss rates for each segment. We evaluated the design and tested the operating effectiveness of controls over the Company’s ACL processes, which included, among others, management’s review and approval controls designed to assess the need and level of qualitative factors and the completeness and accuracy of the data utilized to support management’s assessment. To test the qualitative factors, we performed audit procedures that included, among others, the evaluation of the appropriateness of management’s methodology and assessment of whether all relevant risks were reflected in the ACL and the basis for the qualitative factors. Regarding the measurement of the qualitative factors, we evaluated the completeness, accuracy and relevance of the underlying internal and external market data utilized in management’s estimate and considered the existence of new or contrary information. We evaluated the data by independently obtaining and comparing it to other third party macro-economic data. We also compared the total ACL, inclusive of the qualitative factors, to the Company’s historical losses considering changes in the current economic environment to evaluate whether the ACL appropriately reflects losses expected in the portfolio. Additionally, we evaluated whether the overall ACL, inclusive of the qualitative factors, appropriately reflected losses expected in the loan portfolio by comparing to peer bank data. 82 Accounting for Business Combinations Description of the Matter As discussed in Note 20 to the consolidated financial statements, the Company acquired Premier Financial Bancorp, Inc. (Premier) on September 17, 2021 (Day 1) for total consideration of $261.9 million, consisting of 8.6 million common shares of Peoples Bancorp Inc. The Company acquired $1.16 billion of loans, net of fair value adjustments, a portion of which were classified as purchased credit deteriorated (PCD) loans. Management concluded that a portion of the PCD loans do not share similar risk characteristics with other PCD loans and identified these for individual analysis. The Day 1 ACL for the individually analyzed PCD loans involved significant management judgment. Auditing the Company's accounting for its acquisition of Premier was complex due to the estimation uncertainty in determining the Day 1 ACL for individually analyzed PCD loans, primarily due to the sensitivity of the ACL measurement to the significant underlying assumptions. How We Addressed the Matter in Our Audit To test the Day 1 ACL for the individually analyzed PCD loans, our audit procedures included, among others, evaluating the Company's selection of the valuation methodology, evaluating the significant assumptions used by the Company, and evaluating the completeness and accuracy of the underlying data supporting the analysis and significant assumptions. We involved our specialists to assist with our evaluation of the methodology used by the Company and certain significant assumptions used in the Day 1 ACL. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1995. Charleston, West Virginia March 15, 2022 83 PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (Dollars in thousands) 2021 2020 Assets Cash and cash equivalents: Cash and due from banks $ 74,354 $ 60,902 Interest-bearing deposits in other banks 341,373 91,198 Total cash and cash equivalents 415,727 152,100 Available-for-sale investment securities, at fair value (amortized cost of $ 1,283,146 at December 31, 2021 and $ 734,544 at December 31, 2020) (a) 1,275,493 753,013 Held-to-maturity investment securities, at amortized cost (fair value of $ 369,955 at December 31, 2021 and $ 68,082 at December 31, 2020) (a) 374,129 66,458 Other investment securities 33,987 37,560 Total investment securities (a) 1,683,609 857,031 Loans and leases, net of deferred fees and costs (b) 4,481,600 3,402,940 Allowance for credit losses ( 63,967 ) ( 50,359 ) Net loans 4,417,633 3,352,581 Loans held for sale 3,791 4,659 Bank premises and equipment, net of accumulated depreciation 89,260 60,094 Bank owned life insurance 73,358 71,591 Goodwill 264,193 171,260 Other intangible assets 26,816 13,337 Other assets 89,134 78,111 Total assets $ 7,063,521 $ 4,760,764 Liabilities Deposits: Non-interest-bearing $ 1,641,422 $ 997,323 Interest-bearing 4,221,130 2,913,136 Total deposits 5,862,552 3,910,459 Short-term borrowings 166,482 73,261 Long-term borrowings 99,475 110,568 Accrued expenses and other liabilities 89,987 90,803 Total liabilities 6,218,496 4,185,091 Stockholders’ Equity Preferred stock, no par value, 50,000 shares authorized and no shares issued at December 31, 2021 and December 31, 2020 — — Common stock, no par value, 50,000,000 shares authorized, 29,814,401 shares issued at December 31, 2021 and 21,193,402 shares issued at December 31, 2020, including shares held in treasury 686,282 422,536 Retained earnings 207,076 190,691 Accumulated other comprehensive (loss) income, net of deferred income taxes ( 11,619 ) 1,336 Treasury stock, at cost, 1,577,359 shares at December 31, 2021 and 1,686,046 shares at December 31, 2020 ( 36,714 ) ( 38,890 ) Total stockholders’ equity 845,025 575,673 Total liabilities and stockholders’ equity $ 7,063,521 $ 4,760,764 (a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $ 0 and $ 286 , respectively, as of December 31, 2021 and $ 0 and $ 60 , respectively, at December 31, 2020. (b) Also referred to throughout this Form 10-K as "total loans" and "loans held for investment." See Notes to the Consolidated Financial Statements 84 PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) 2021 2020 2019 Interest income: Interest and fees on loans $ 166,081 $ 140,090 $ 143,340 Interest and dividends on taxable investment securities 15,033 14,188 23,205 Interest on tax-exempt investment securities 3,362 2,484 2,631 Other interest income 313 342 919 Total interest income 184,789 157,104 170,095 Interest expense: Interest on deposits 9,922 13,500 22,210 Interest on short-term borrowings 541 2,571 4,712 Interest on long-term borrowings 1,773 2,110 2,335 Total interest expense 12,236 18,181 29,257 Net interest income 172,553 138,923 140,838 Provision for credit losses (a) 731 26,254 2,504 Net interest income after provision for credit losses 171,822 112,669 138,334 Non-interest income: Electronic banking income 18,010 14,246 13,680 Trust and investment income 16,456 13,662 13,159 Insurance income 15,252 14,042 14,802 Deposit account service charges 10,143 9,418 11,700 Mortgage banking income 3,439 6,499 4,328 Bank owned life insurance income 1,767 1,977 2,430 Net gain (loss) on asset disposals and other transactions 493 ( 290 ) ( 782 ) Commercial loan swap fees 543 1,741 2,228 Net (loss) gain on investment securities ( 862 ) ( 368 ) 164 Other non-interest income (b) 3,644 2,745 2,565 Total non-interest income 68,885 63,672 64,274 Non-interest expense: Salaries and employee benefit costs 94,612 76,361 77,860 Net occupancy and equipment expense 14,918 12,808 12,431 Professional fees 15,783 6,912 7,095 Data processing and software expense 10,542 7,441 6,332 Electronic banking expense 8,885 7,777 7,186 Amortization of other intangible assets 4,775 3,223 3,359 Marketing expense 3,658 2,101 2,291 Franchise tax expense 3,357 3,506 3,071 Other loan expenses 2,001 1,584 1,956 FDIC insurance expense 1,976 1,302 602 Communication expense 1,657 1,134 1,181 Other non-interest expense 21,573 9,546 13,886 Total non-interest expense 183,737 133,695 137,250 Income before income taxes 56,970 42,646 65,358 Income tax expense 9,415 7,879 11,663 Net income $ 47,555 $ 34,767 $ 53,695 Earnings per common share – basic $ 2.17 $ 1.74 $ 2.65 Earnings per common share – diluted $ 2.15 $ 1.73 $ 2.63 Weighted-average number of common shares outstanding – basic 21,816,511 19,721,772 20,120,119 Weighted-average number of common shares outstanding – diluted 21,959,883 19,843,806 20,273,725 (a) On January 1, 2020, Peoples adopted ASU 2016-13 and adopted the CECL model. Prior to the adoption of the CECL model, the provision for credit losses was the "provision for loan losses." The provision for credit losses includes changes related to the allowance for credit losses on loans, held-to-maturity investment securities, and the unfunded commitment liability. (b) Includes realized and unrealized gains on equity investment securities recorded in other non-interest income of $ 111 , $ 660 , and $ 831 for the years ended December 31, 2021, December 31, 2020 , and December 31, 2019, respectively. See Notes to the Consolidated Financial Statements 85 PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) 2021 2020 2019 Net income $ 47,555 $ 34,767 $ 53,695 Other comprehensive (loss) income: Available-for-sale investment securities: Gross unrealized holding (loss) gain arising in the period ( 26,985 ) 11,394 19,635 Related benefit (expense) 5,777 ( 2,393 ) ( 4,123 ) Reclassification adjustment for net loss (gain) included in net income 862 368 ( 164 ) Related tax (benefit) expense ( 192 ) ( 77 ) 34 Net effect on other comprehensive (loss) income ( 20,538 ) 9,292 15,382 Defined benefit plans: Net gain (loss) arising during the period 2,318 ( 1,072 ) ( 385 ) Related tax (expense) benefit ( 518 ) 225 81 Amortization of unrecognized gain on service benefit plans 103 127 72 Related tax expense ( 23 ) ( 27 ) ( 15 ) Reclassification from accumulated other comprehensive income or loss ("AOCI") 143 1,054 — Related tax expense ( 32 ) ( 221 ) — Net effect on other comprehensive income (loss) 1,991 86 ( 247 ) Cash flow hedges: Net income (loss) arising during the period 6,999 ( 8,376 ) ( 4,591 ) Related tax (expense) benefit ( 1,407 ) 1,759 964 Net effect on other comprehensive income (loss) 5,592 ( 6,617 ) ( 3,627 ) Total other comprehensive (loss) income, net of tax ( 12,955 ) 2,761 11,508 Total comprehensive income $ 34,600 $ 37,528 $ 65,203 See Notes to the Consolidated Financial Statements 86 PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Stockholders' Equity (Dollars in thousands) Balance, December 31, 2018 $ 386,814 $ 160,346 $ ( 12,933 ) $ ( 14,087 ) $ 520,140 Net income — 53,695 — — 53,695 Other comprehensive income, net of tax — — 11,508 — 11,508 Cash dividends declared — ( 26,892 ) — — ( 26,892 ) Reissuance of treasury stock for common share awards ( 2,931 ) — — 2,931 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 53 53 Repurchase of treasury stock in connection with employee incentive plan and under compensation plan for Boards of Directors — — — ( 845 ) ( 845 ) Common shares repurchased under share repurchase program — — — ( 805 ) ( 805 ) Common shares issued under dividend reinvestment plan 904 — — — 904 Common shares issued under compensation plan for Boards of Directors 78 — — 235 313 Stock-based compensation 3,462 — — — 3,462 Common shares issued under employee stock purchase plan 112 — — 311 423 Issuance of common shares related to merger with First Prestonsburg Bancshares Inc. ("First Prestonsburg") 32,437 — — — 32,437 Balance, December 31, 2019 $ 420,876 $ 187,149 $ ( 1,425 ) $ ( 12,207 ) $ 594,393 Net income — 34,767 — — 34,767 Other comprehensive income, net of tax — — 2,761 — 2,761 Cash dividends declared — ( 27,516 ) — — ( 27,516 ) Reissuance of treasury stock for common share awards ( 2,729 ) — — 2,729 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 59 59 Repurchase of treasury stock in connection with employee incentive plan and under compensation plan for Boards of Directors — — — ( 1,128 ) ( 1,128 ) Common shares repurchased under share repurchase program — — — ( 29,281 ) ( 29,281 ) Common shares issued under dividend reinvestment plan 799 — — — 799 Common shares issued under compensation plan for Boards of Directors 17 — — 360 377 Common shares issued under performance unit awards, net of tax 41 — — 138 179 Stock-based compensation 3,556 — — — 3,556 Common shares issued under employee stock purchase plan ( 24 ) — — 440 416 Impact of adoption of new accounting standard, net of taxes (a) — ( 3,709 ) — — ( 3,709 ) Balance, December 31, 2020 $ 422,536 $ 190,691 $ 1,336 $ ( 38,890 ) $ 575,673 87 PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED) Common Stock Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Stockholders' Equity (Dollars in thousands) Net income $ — $ 47,555 $ — $ — $ 47,555 Other comprehensive loss, net of tax — — ( 12,955 ) — ( 12,955 ) Cash dividends declared — ( 31,170 ) — — ( 31,170 ) Reissuance of treasury stock for common share awards ( 2,740 ) — — 2,740 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 74 74 Repurchase of treasury stock in connection with employee incentive plan and under compensation plan for Boards of Directors — — — ( 1,306 ) ( 1,306 ) Common shares issued under dividend reinvestment plan 910 — — — 910 Common shares issued under compensation plan for Boards of Directors 98 — — 276 374 Common shares issued under employee stock purchase plan 143 — — 392 535 Stock-based compensation 3,436 — — — 3,436 Issuance of common shares related to merger with Premier 261,899 — — — 261,899 Balance, December 31, 2021 $ 686,282 $ 207,076 $ ( 11,619 ) $ ( 36,714 ) $ 845,025 (a) On January 1, 2020, Peoples adopted ASU 2016-13, which resulted in a reduction to retained earnings of $ 3.7 million, net of statutory federal corporate income tax. See Notes to the Consolidated Financial Statements 88 PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) 2021 2020 2019 Operating activities: Net income $ 47,555 $ 34,767 $ 53,695 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion, net 24,643 25,639 17,861 Provision for credit losses 731 26,254 2,504 Bank owned life insurance income ( 1,767 ) ( 1,977 ) ( 2,430 ) Net loss (gain) on investment securities 862 368 ( 164 ) Fair value adjustment on equity investment securities ( 111 ) ( 660 ) ( 831 ) Loans originated for sale ( 94,154 ) ( 260,974 ) ( 156,058 ) Proceeds from sales of loans 157,349 268,363 157,752 Net gains on sales of loans ( 2,994 ) ( 6,446 ) ( 3,667 ) Deferred income tax expense (benefit) 2,874 ( 8,101 ) 109 Increase in accrued expenses 2,433 799 366 Decrease (increase) in interest receivable 1,435 ( 865 ) 613 Increase (decrease) in other assets 2,874 1,006 ( 1,227 ) Non cash lease expense 48 47 55 Other, net 14,642 7,263 ( 1,421 ) Net cash provided by operating activities 156,420 85,483 67,157 Investing activities: Available-for-sale investment securities: Purchases ( 852,542 ) ( 261,395 ) ( 271,924 ) Proceeds from sales 544,096 82,610 72,706 Proceeds from principal payments, calls and prepayments 297,693 356,854 199,870 Held-to-maturity investment securities: Purchases ( 316,346 ) ( 40,112 ) — Proceeds from principal payments 7,333 5,123 4,945 Other investment securities: Purchases ( 1,415 ) ( 6,261 ) ( 3,114 ) Proceeds from sales 9,299 12,180 7,340 Proceeds from insurance claim — — 26 Net increase (decrease) in loans held for investment 113,467 ( 444,128 ) ( 10,661 ) Net expenditures for premises and equipment ( 6,685 ) ( 4,299 ) ( 2,809 ) Proceeds from sales of other real estate owned 2,073 269 239 Proceeds from bank owned life insurance — 108 1,642 Business acquisitions, net of cash received 132,719 ( 94,856 ) 7,814 Investment in limited partnership and tax credit funds ( 4,125 ) ( 12 ) ( 5,021 ) Net cash (used in) provided by investing activities ( 74,433 ) ( 393,919 ) 1,053 Financing activities: Net increase in non-interest-bearing deposits 150,986 326,115 4,832 Net increase in interest-bearing deposits 49,774 292,822 72,841 Net increase (decrease) in short-term borrowings 14,414 ( 263,716 ) ( 76,809 ) Proceeds from long-term borrowings — 50,000 — Payments on long-term borrowings ( 2,132 ) ( 2,715 ) ( 3,501 ) Cash dividends paid ( 31,002 ) ( 27,052 ) ( 25,942 ) Repurchase of treasury stock under share repurchase program — ( 29,281 ) ( 805 ) Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock ( 1,306 ) ( 1,128 ) ( 845 ) Proceeds from issuance of common shares 906 594 6 Contingent consideration payments made after a business acquisition — ( 296 ) ( 406 ) Net cash provided by (used in) financing activities 181,640 345,343 ( 30,629 ) Net increase in cash, cash equivalents and restricted cash 263,627 36,907 37,581 Cash, cash equivalents and restricted cash at beginning of period 152,100 115,193 77,612 Cash, cash equivalents, and restricted cash at end of period $ 415,727 $ 152,100 $ 115,193 89 PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Dollars in thousands) 2021 2020 2019 Supplemental cash flow information: Interest paid $ 13,391 $ 18,939 $ 28,887 Income taxes paid 6,693 12,500 11,450 Supplemental noncash disclosures: Transfers from loans to other real estate owned $ 298 $ 296 $ 153 Lease right-of-use assets obtained in exchange for lessee operating lease liabilities 75 — 4 See Notes to the Consolidated Financial Statements 90 PEOPLES BANCORP INC. AND SUBSIDIARIES TABLE OF CONTENTS TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies 92 Note 2. Fair Value of Financial Instruments 100 Note 3. Investment Securities 104 Note 4. Loans and Leases 108 Note 5. Bank Premises and Equipment 108 Note 6. Leases 109 Note 7 . Goodwill and Other Intangible Assets 111 Note 8 . Deposits 113 Note 9 . Short-Term Borrowings 114 Note 10 . Long-Term Borrowings 115 Note 1 1 . Stockholders' Equity 116 Note 1 2 . Employee Benefit Plans 117 Note 1 3 . Income Taxes 120 Note 1 4 . Earnings Per Common Share 122 Note 1 5 . Derivative Financial Instruments 122 Note 1 6 . Off-Balance Sheet Risk 124 Note 1 7 . Regulatory Matters 124 Note 1 8 . Stock-Based Compensation 126 Note 1 9 . Revenue 127 Note 20 . Acquisitions 128 Note 2 1 . Parent Company Only Financial Information 134 91 PEOPLES BANCORP INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Peoples Bancorp Inc. is a financial holding company that offers a full range of financial services and products primarily offered through its 135 financial service offices and ATMs including 119 full-service branches 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' insurance 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 provided through approved dealerships. Peoples Bank's credit card and merchant processing services are provided through joint marketing arrangements with third parties. Note 1 Summary of Significant Accounting Policies The accounting and reporting policies of Peoples Bancorp Inc. and subsidiaries ("Peoples" refers to Peoples Bancorp Inc. and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.) conform to US GAAP and to general practices within the banking industry. 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 differ from those estimates. The following is a summary of significant accounting policies followed in the preparation of the financial statements: Business Combinations: Business combinations are accounted for using the acquisition method of accounting. Under this accounting method, the acquired company's net assets are recorded at fair value on the date of acquisition, and the results of operations of the acquired company are combined with those of Peoples from the acquisition date forward. Costs related to the acquisition are expensed as incurred. The purchase price paid over the fair value of the net assets acquired, including intangible assets with finite lives, is recorded as goodwill. Consolidation: Peoples' Consolidated Financial Statements include subsidiaries in which Peoples has a controlling financial interest, principally defined as owning a voting interest of greater than 50 %. The Consolidated Financial Statements include the accounts of Peoples and its consolidated subsidiaries, Peoples Bank (along with its wholly-owned subsidiaries), Peoples Investment Company, Peoples Risk Management, Inc., NB&T Statutory Trust III, and FNB Capital Trust One, for which Peoples holds all of the common securities. All intercompany accounts and transactions have been eliminated. Fair Value Measurements: The measurement of fair value under US GAAP uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows: Level 1: Quoted prices in active exchange markets for identical assets or liabilities; also includes certain U.S. Treasury and other U.S. government and agency securities actively traded in over-the-counter markets. Level 2: Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data; also includes derivative financial instruments whose value is determined using a pricing model with observable market inputs or can be derived principally from, or corroborated by, observable market data. This category generally includes certain U.S. government and agency securities, corporate debt securities, derivative instruments, and residential mortgage loans held for sale. Level 3: Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as financial instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain private equity investments, retained interests from securitizations, and certain collateralized debt obligations. Operating Segments: Peoples' business activities are currently confined to one reportable operating segment, which is community banking. As a community banking entity, Peoples offers its customers a full range of products including a complete line of banking, insurance, investment and trust solutions. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. Peoples had no restricted funds at December 31, 2021, and $ 41.0 million of restricted funds at December 31, 2020, held in interest-bearing deposits in other banks, which were being used as collateral and not available for withdrawal. During 2021, Peoples began collateralizing with investment securities in lieu of cash and cash equivalents held in other banks. 92 Investment Securities: Investment securities are recorded initially at cost, which includes premiums and discounts if purchased at other than par or face value. Peoples amortizes premiums and accretes discounts as an adjustment to interest income on a level yield basis. The cost of investment securities sold, excluding equity investment securities, and any resulting gain or loss, is based on the specific identification method and recognized as of the trade date. The cost of equity investment securities is based on the weighted-average method. Peoples determines the appropriate classification of investment securities at the time of purchase. Held-to-maturity securities are those securities that Peoples has the positive intent and ability to hold to maturity and are recorded at amortized cost. Available-for-sale securities are those securities that would be available to be sold in the future in response to Peoples' liquidity needs, changes in market interest rates, and asset-liability management strategies, among other considerations. Available-for-sale securities are reported at fair value, with unrealized gains and losses reported in total stockholders' equity as a separate component of AOCI, net of applicable deferred income taxes. Certain restricted equity investment securities that do not have readily determinable fair values and for which Peoples does not exercise significant influence, are carried at cost. These cost method securities are reported in "Other investment securities" on the Consolidated Balance Sheets and consist primarily of shares of the Federal Home Loan Bank of Cincinnati (the "FHLB") and the Federal Reserve Bank of Cleveland (the "FRB"). Peoples evaluates available-for-sale investment securities on a quarterly basis to determine how much, if any, allowance for credit losses is required. Peoples reviews available-for-sale investment securities at an unrealized loss position, with potential exposure to a credit event (which excludes U.S. government and U.S. government sponsored agency securities) to determine if the unrealized loss was credit-related. An allowance for credit losses is recorded to the extent that the unrealized losses are credit-related and likely to be permanent. Peoples evaluates held-to-maturity investment securities on a quarterly basis in determining an allowance for credit losses. Peoples has determined that the loss given default for U.S. government sponsored enterprise investment securities is zero , due to the fact that it is unlikely the ultimate guarantor (the U.S. government) would not perform on its implicit guarantee in the event of default. The remaining securities are included in the calculation of the allowance for credit losses for held-to-maturity investment securities. Loans and leases: Loans originated that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, purchase premiums and discounts, charge-offs and an allowance for credit losses. Leases originated by Peoples are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses. The foreseeable future is based upon current market conditions and business strategies, as well as balance sheet management and liquidity. As the conditions change, so may management's view of the foreseeable future. Peoples considers loans and leases past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan or lease agreement. Upon detection of the reduced ability of a borrower or lessee to meet cash flow obligations, consumer and residential real estate loans and leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Loans and leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged off amounts are credited to the allowance for credit losses. Loans and leases acquired in a business combination that have evidence of more than insignificant credit deterioration, which includes loans and leases that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" loans or leases. These loans are recorded at the purchase price, and an allowance for credit losses is determined using the same methodology as for other loans or leases. The initial allowance for credit losses determined on a collective basis is allocated to individual loans or leases. The total of the purchase price and allowance for credit losses is the net amount expected to be collected for purchased credit deteriorated loans or leases. The variance between the initial amortized cost basis and the par value of the loan is considered an interest premium or discount, which is amortized or accreted into interest income on a level yield method over the life of the loan. The variance between the initial amortized cost basis and the fair value of a lease is considered an interest premium or discount, which is amortized or accreted into interest income on a level yield method over the life of the lease. Loans and leases acquired in a business combination that are not considered purchased credit deteriorated are recorded at fair value and the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the discount or premium to each loan's or lease's cost basis and is accreted or amortized to interest income over the loan's or lease's remaining life using the level yield method. At acquisition date, Peoples records provision for credit losses to establish the allowance for credit losses for these acquired loans. Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally one-to-four family residential loans, are carried at the lower of cost or estimated fair value determined on an aggregate basis. Gains and losses on sales of loans held for sale are included in mortgage banking income. 93 Loans originated with the intent to be held in the portfolio are subsequently transferred to held for sale when a decision is made to sell these loans. At the time of a loan's transfer to the held for sale classification, the loan is recorded at the lower of cost or its fair value. Any reduction in the loan's fair value is reflected as a write-down of the recorded investment resulting in a new cost basis, with a corresponding charge against the allowance for credit losses. If the fair value of a loan classified as held for sale in subsequent periods is less than its cost basis, the carrying value of the loan is adjusted accordingly, with the corresponding loss recognized in income. Allowance for Credit Losses: The allowance for credit losses includes both the allowance for credit losses for loans and the allowance for credit losses on lending-related commitments. The allowance for credit losses is a valuation reserve established through the provision for credit losses charged against income. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is measured on a pool basis, with loans collectively evaluated when similar risk characteristics exist. Peoples evaluated risk characteristics, including but not limited to: internal or third-party credit scores or credit ratings, risk ratings or classifications, financial asset type, collateral type, size, effective interest rate, term, geographical location, industry of the borrower, vintage, historical or credit loss patterns and reasonable and supportable forecast periods. Peoples identified 18 segments for which it believes there are similar risk characteristics and utilized a discounted cash flow methodology in determining an allowance for credit losses for each segment. In estimating credit losses, Peoples uses a loss driver method, which analyzes one or more economic variables to the change in default rate using a regression analysis. Variables that had a strong correlation were selected as economic factors, or variables, for the model. If a single variable was not found to be strongly correlated, additional variables were included. Peoples utilizes the U.S. unemployment, Ohio unemployment, and Ohio Gross Domestic Product as economic factors in modeling. Probabilities of default are used in the loss driver model, and are analyzed on a quarterly basis to assess reasonableness. Peoples measured loss given default at the segment level due to statistical considerations using historical information. Peoples also utilized peer data due to somewhat volatile loss history in certain segments to normalize default curves, which provided more meaningful results. Peoples modeled amortizing loans with a prepayment rate annualized to one year. The prepayment rates were calculated using Peoples' historical data, at the segment level. Peoples models extensions of contractual terms in the following situations: when a loan is 60 days or more past due, when a partial charge-off has occurred, if the loan is in nonaccrual status, if a troubled debt restructuring ("TDR") has occurred, or if the loan is grade 5 or higher. When any of these criteria are met and the loan matures within the next 12 months, the loan will be modeled to extend for an additional 12 months. In general, Peoples completes a quarterly evaluation based on several qualitative factors to determine if there should be adjustments made to the allowance for credit losses. These factors include economic conditions, collateral, concentrations, troubled assets, Peoples' loss trends, peer loss trends, delinquency trends, portfolio composition and loan growth, underwriting, and certain other risks. The allowance for credit losses related to specific loans was based on management's estimate of potential losses on impaired loans as determined by (1) the present value of expected future cash flows, (2) the fair value of collateral if the loan is determined to be collateral dependent, or (3) the loan's observable market price. Peoples categorized loans involving commercial borrowers into risk categories based upon an established grading matrix. This system was used to manage the risk within Peoples' commercial lending activities, evaluate changes in the overall credit quality of the loan portfolio and evaluate the appropriateness of the allowance for credit losses. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Loans to borrowers with an aggregate unpaid principal balance in excess of $ 1 million are reviewed at least on an annual basis for possible credit deterioration. Loan relationships whose aggregate credit exposure to Peoples is equal to or less than $ 1 million are reviewed at least on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. The primary factors considered when assigning a risk grade to a loan include (1) reliability and sustainability of the primary source of repayment, (2) past, present and projected financial condition of the borrower, and (3) current economic and industry conditions. Other factors that could influence the risk grade assigned include the type and quality of collateral and the strength of any guarantors. The primary source of repayment for commercial real estate loans and commercial and industrial loans is normally the operating cash flow of the business available to repay debt. Management's analysis of operating cash flow for commercial real estate loans secured by non-owner occupied properties takes into account factors such as rent rolls and vacancy statistics. Management's analysis of operating cash flow for commercial real estate loans secured by owner occupied properties and all commercial and industrial loans considers the profitability, liquidity and leverage of the business. The evaluation of construction loans includes consideration of the borrower's ability to complete construction within the established budget. 94 The primary factors considered when classifying residential real estate loans, home equity lines of credit and consumer loans include the loan's past due status and any declaration of bankruptcy by the borrower(s). The classification of residential real estate loans and home equity lines of credit also takes into consideration the current value of the underlying collateral. Peoples has elected the practical expedient not to measure allowance for credit losses for accrued interest receivables. Unfunded Commitments: Peoples also completes a quarterly evaluation for unfunded commitments for loans that are not unconditionally cancellable, which includes construction loans, floor plan lines of credit, home equity lines of credit, other credit lines and letters of credit. Peoples performed a study to determine the historical funding rates of unadvanced portions of loans, and applied these funding rates to the unfunded commitments at period end. The loss rates, including qualitative factors, in determining the allowance for credit losses were applied at the segment level to the unfunded commitment amount to determine the allowance for credit loss liability for unfunded commitments. Troubled Debt Restructuring ("TDR"): The restructuring of a loan is considered a TDR if both (1) the borrower is experiencing financial difficulties and (2) the creditor has granted a concession. Loans acquired that are restructured after acquisition are not considered TDRs if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools of purchased credit deteriorated loans. In assessing whether or not a borrower is experiencing financial difficulties, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (1) the borrower is currently in payment default on any of the borrower's debt; (2) a payment default is probable in the foreseeable future without the modification; (3) the borrower has declared or is in the process of declaring bankruptcy; and (4) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification. Peoples considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by Peoples include the borrower's ability to access funds at a market rate for loans with similar risk characteristics, the significance of the modification relative to the unpaid principal loan balance or collateral value underlying the loan, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by Peoples generally include one or more modifications to the terms of the loan, such as (1) a reduction in the interest rate for the remaining life of the loan, (2) an extension of the maturity date at an interest rate lower than the current market rate for a new loan with similar risk, (3) a temporary period of interest-only payments, and (4) a reduction in the contractual payment amount for either a short period or the remaining term of the loan. All TDRs are evaluated individually to determine if a write-down is required and if they should be on accrual or nonaccrual status. On March 22, 2020, federal and state 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, based on provisions included in the CARES Act. In this guidance, short-term modifications, made on a good faith basis in response to COVID-19, to borrowers who were current prior to any relief, are not considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment which are insignificant. Under the guidance, borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not in the scope of accounting for TDRs defined in ASC 310-40. Based on this guidance, Peoples does not classify COVID-19 loan modifications as TDRs. On August 3, 2020, federal and state banking regulators issued a joint statement, encouraging financial institutions to consider prudent accommodation options to mitigate losses for the borrower and financial institution beyond the initial accommodation period. In this guidance, institutions should also provide consumers with available options for repaying missed payments at the end of their accommodation to avoid delinquencies, as well as options for changes to terms to support sustainable and affordable payments for the long term. These considerations should also include prudent risk management practices at the financial institution based on the credit risk of the borrower. Peoples is actively working with its affected customers to address any further accommodation needs while carefully evaluating the associated credit risk of the borrowers. Nonaccrual Loans: Peoples discontinues the accrual of interest on a loan when conditions cause management to believe collection of all or any portion of the loan's contractual interest is doubtful. Such conditions may include the borrower being 90 days or more past due on any contractual payments, or current information regarding the borrower's financial condition and repayment ability. All unpaid accrued interest deemed uncollectable is reversed, which reduces Peoples' net interest income. Interest received on nonaccrual loans is included in income only if principal recovery is reasonably assured. Under the Coronavirus Aid, Relief and Economic Security ("CARES") Act, which was subsequently extended under legislation enacted in December 2020, borrowers who were making payments as required and were not considered past due prior to becoming affected by COVID-19 and then received payment accommodations as a result of the effects of COVID-19 generally would not be reported as past due. If Peoples agrees to a payment deferral for a borrower under the CARES Act, this may result in no contractual payments being past due, and the loans are not considered past due during the period of the deferral. Under the 95 guidance, during the time that Peoples maintains these short-term arrangements with borrowers, it should not report the loans as nonaccrual. Bank Premises and Equipment: Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets owned. Major improvements to leased facilities are capitalized and included in bank premises at cost less accumulated depreciation, which is calculated on the straight-line method over the lesser of the remaining term for the leased facility or the estimated economic life of the improvement. Goodwill and Other Intangible Assets: Goodwill represents the excess of the cost of an acquisition or business combination over the fair value of the net assets acquired in the business combination. Goodwill is not amortized but is tested for impairment when indicators of impairment exist, or at least annually on October 1. Peoples' other intangible assets include customer relationship intangible assets, core deposit intangible assets, indefinite-lived trade name and servicing rights representing the net present value of future economic benefits to be earned from acquired customer relationships with definite useful lives. These intangible assets are amortized on an accelerated basis over their estimated lives ranging from 7 to 10 years. Servicing Rights: Servicing rights represent the right to service loans sold to third-party investors. Loans that are sold are primarily mortgage loans, but also include small business and agricultural loans. Servicing rights are recognized separately as a servicing asset whenever Peoples undertakes an obligation to service financial assets. Servicing rights are reported in other intangible assets on the Consolidated Balance Sheets. Serviced loans that have been completely sold are not included on the Consolidated Balance Sheets. Loan servicing income included in mortgage banking income includes servicing fees received from the third-party investors and certain charges collected from the borrowers. Peoples initially records servicing rights at fair value at the time of the sale of the loans to the third-party investor. Peoples follows the amortization method for the subsequent measurement of each class of separately recognized servicing assets and liabilities. Under the amortization method, Peoples amortizes the value of servicing assets or liabilities utilizing a straight-line basis approach over the period of estimated net servicing income or net servicing loss, and assesses servicing assets or liabilities for impairment or increased obligation based on the fair value at each reporting date. The fair value of the servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates. Derivatives: Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the value of which is determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions. Amounts reported in AOCI related to derivatives are reclassified to interest income or expense as interest payments are made or received on Peoples' variable-rate assets or liabilities. For derivative financial instruments designated as cash flow hedges, the effective portion of changes in the fair value of each derivative financial instrument is reported in AOCI (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative financial instrument is recognized directly in earnings. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transaction. Interest Rate Lock Commitments: Peoples enters into interest rate lock commitments with borrowers and best efforts commitments with investors on mortgage loans originated for sale into the secondary markets to manage the inherent interest rate and pricing risk associated with selling loans. An interest rate lock commitment generally terminates once the loan is funded, the lock period expires or the borrower decides not to contract for the loan. A best efforts commitment generally terminates once the loan is sold, the commitment period expires or the borrower decides not to contract for the loan. These commitments are considered derivatives, which are generally accounted for by recognizing their estimated fair value on the Consolidated Balance Sheets in either "Other assets" or "Accrued expenses and other liabilities". The valuation of such commitments considers the servicing release premium, but does not consider other expected cash flows related to the servicing of the future loan. Management determined these derivatives did not have a material effect on Peoples' financial position, results of operations or cash flows. Investments in Affordable Housing Limited Partnerships: Investments in affordable housing consist of investments in limited partnerships that operate qualified affordable housing projects or that invest in other limited partnerships formed to operate affordable housing projects. These investments are considered variable interest entities for which Peoples is not the primary beneficiary. Peoples generally utilizes the effective yield method to account for these investments with the tax credits, net of the amortization of the investment, reflected in the Consolidated Statements of Income as a reduction in income tax expense. The 96 unamortized amount of the investments is recorded in other assets and totaled $ 16.6 million and $ 13.0 million at December 31, 2021 and 2020, respectively. Other Real Estate Owned ("OREO"): OREO, included in "Other assets" on the Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. Peoples had OREO totaling $ 9.5 million at December 31, 2021 and $ 134,000 at December 31, 2020. Securities Sold Under Agreements to Repurchase ("Repurchase Agreements"): Peoples enters into Repurchase Agreements with customers and other financial services companies, which are considered financings. As such, these obligations are recorded as a liability on the Consolidated Balance Sheets and disclosed in "Note 9 Short-Term Borrowings" and "Note 10 Long-Term Borrowings," as appropriate. Securities pledged as collateral under Repurchase Agreements are included in investment securities on the Consolidated Balance Sheets and are disclosed in "Note 3 Investment Securities." The fair value of the collateral pledged to a third party is continually monitored and additional collateral is pledged or returned, as deemed appropriate. Interest Income Recognition: Interest income on loans and investment securities is recognized by methods that result in level rates of return on principal amounts outstanding. This includes yield adjustments resulting from the amortization of premiums on investment securities, loan costs and premiums, and accretion of discounts on investment securities, loan fees and discounts. Loans that have been placed on nonaccrual, and are subsequently returned to accruing status, recognize interest income similar to other accruing loans once they return to accruing status. Prior accrued interest that was reversed when the loan was placed on nonaccrual is recognized when received, after all of the principal of the loan outstanding has been paid. Since mortgage-backed securities comprise a sizable portion of Peoples' investment portfolio, a significant increase in principal payments on those securities can impact interest income due to the corresponding acceleration of premium amortization or discount accretion. Under the CARES Act, Peoples has made certain modifications that include the short-term deferral of interest for certain borrowers. In these cases, Peoples recognizes interest income as earned. The deferred interest will be repaid by the borrower in a future period. Revenue Recognition: Peoples recognizes revenues as they are earned based on contractual terms, or as services are provided and collectability is reasonably assured. Peoples’ principal source of revenue is interest income, which is recognized on an accrual basis primarily according to the terms in written contracts, such as loan agreements or securities contracts. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur, once the uncertainty is resolved. Peoples' contracts with customers are short-term in nature, and were recognized under the following revenue streams: Electronic Banking Income: Electronic banking income consists of two revenue streams related to interchange income, and promotional and usage income. Peoples recognizes interchange income over time, on a monthly basis, which is based on the transactional volume of debit card activity completed by its customers during the month in which income is recognized. Peoples is obligated, based on its contracts with third parties, to meet certain volumes of debit card activities, which are performed by Peoples' customers, over a certain period of time. Interchange income is variable as it is based on the transaction volume of debit card activity completed by Peoples' customers. Peoples estimates the variable consideration based upon the most likely amount method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due for all PIN transactions from the vendor within one month of the completed customer debit card activity, while all other interchange transaction fees are earned and recorded on a daily basis. Peoples has elected to apply a practical expedient of right to invoice when recognizing interchange income, as Peoples has fulfilled the required performance obligations, the vendor has consumed the service, and Peoples has a right to the related income. Peoples also recognizes promotional and usage income over time, on a monthly basis, which is related to branding of debit cards and promotion or use of certain services provided by third-party vendors. Peoples is obligated to brand its debit cards in a certain manner, and promote and use services provided by third-party vendors. Promotional and usage income is variable as it is based on certain metrics achieved for promotion and usage of services provided by the third-party vendors. Peoples estimates the variable consideration based upon the most likely amount method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due from the third-party vendors within 45 days of the monthly fulfillment of Peoples' performance obligation. Peoples has elected to apply a practical expedient of right to invoice when recognizing promotional and usage income, as Peoples has fulfilled the required performance obligations, the vendor has consumed the service, and Peoples has a right to the related income. Trust and Investment Income: Trust and investment income consists of revenue from fiduciary and brokerage activities, which includes fees for services such as asset management, record keeping, retirement services and estate management, and investment commissions and fees related to the sale of investments. Trust and investment income is recognized over time, which reflects the duration of the contract period for which services have been provided. Trust and investment income is variable as it is based on the value of assets under administration and management, and specific transactions. Peoples estimates the variable consideration 97 based upon the most likely amount method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due from the customer when billed, which is typically a monthly or quarterly billing for services rendered in the most recent period, for which the performance obligation has been satisfied. Peoples has elected to apply a practical expedient of right to invoice when recognizing trust and investment income, as Peoples has fulfilled the performance obligation, the customer has consumed the service, and Peoples has a right to the related income. Peoples has also elected to apply a practical expedient related to capitalizable costs, which are the commissions paid to financial advisors, and will expense these commissions paid to financial advisors as incurred, as these costs are related to the trust and investment income and would have been amortized within one year or less if they had been capitalized, the same period over which the income was earned. Insurance Income: Insurance income generally consists of commissions and fees from the sale of insurance policies, fees related to third-party administration services and performance-based commissions from insurance companies. Peoples recognizes commission income from the sale of insurance policies when it acts as an agent between the insurance carrier and policyholder, arranging for the insurance carrier to provide policies to policyholders, and acts on behalf of the insurance carrier by providing customer service to the policyholders during the respective policy periods. Commission income is recognized over time, using the output method of time elapsed, which corresponds with the underlying insurance policy period, during which Peoples is obligated to perform under contract with the insurance carrier. Commission income is variable, as it is comprised of a certain percentage of the underlying policy premium. Peoples estimates the variable consideration based upon the "most likely amount" method, and does not expect or anticipate a significant reversal of revenue in future periods, based upon historical experience. Payment is due from the insurance carrier for commission income once the insurance policy has been sold. Peoples has elected to apply a practical expedient related to capitalizable costs, which are the commissions paid to insurance producers, and will expense these commissions paid to insurance producers as incurred, as these costs are related to the commission income and would have been amortized within one year or less if they had been capitalized, the same period over which the commission income was earned. Fees related to third-party administration services performed are recognized over time, during the period in which services have been provided, and are recognized monthly in the month the services were performed. Performance-based commissions from insurance companies are recognized at a point in time, when received, and no contingencies remain. Deposit Account Service Charges: Deposit account service charges consist of two revenue streams related to ongoing maintenance fees for deposit accounts and transactional-based fees. Ongoing maintenance fees are recognized on a monthly basis, generally with the monthly period beginning on the day of the month on which the account was opened. Ongoing maintenance fee income is variable as these fees can be reduced if a customer meets certain qualifying metrics. Peoples estimates the variable consideration based upon the most likely amount method, and does not expect or anticipate a significant reversal of revenue in future periods. For accounts that are assessed maintenance fees through the account analysis process, payment is due from the customer within one month after the monthly period in which the account activity occurred. For all other accounts, monthly maintenance fees are assessed to the account on the last day of the monthly period. Peoples has elected to apply a practical expedient of right to invoice when recognizing ongoing maintenance fees for deposit accounts, as Peoples has fulfilled the required performance obligations, the customer has consumed the service, and Peoples has a right to the related income. Transactional-based fees are recognized at a point in time, which is at the completion of the relevant transaction. Peoples is obligated to perform certain transactions as requested by its consumer and business deposit account customers, which are outside of the normal maintenance requirements. Transactional-based fee income is variable as these fees are directly related to a service request from the customer. Peoples estimates the variable consideration based upon the most likely amount method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due from the customer at the time of completion of the requested transaction. Commercial Loan Swap Fees: Commercial loan swap fees consist of income related to transactions in which Peoples Bank originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples Bank on terms that match the terms of the loan. 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 institution. Commercial loan swap fees are recognized at a point in time, when the transaction has been completed, and there is no recourse or further performance obligation required of Peoples. Commercial loan swap fees are variable as these fees are a certain percentage of the total swap fee collected on a completed transaction. Peoples estimates the variable consideration based upon the most likely amount method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due from the customer at the time of completion of the requested transaction. Other Non-Interest Income: Other non-interest income includes certain revenues that are transactional-based, such as wire transfer fees, money order fees and other ancillary fees or services. These transactional-based fees are recognized as income at a 98 point in time, at the completion of the relevant transaction. Transactional-based fee income is variable as these fees are directly related to a service request from the customer. Peoples estimates the variable consideration based upon the most likely amount method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due from the customer at the time of completion of the requested transaction. Stock-Based Compensation: Stock-based compensation for restricted stock awards is measured at the fair value of these awards on their grant date. Stock-based compensation is recognized over the restriction period for restricted stock awards. Only the expense for the portion of the awards expected to vest is recognized. For service-based awards, stock-based compensation for awards granted to employees who are eligible for retirement is recognized on the date the employee is first eligible to retire. Advertising Costs: Advertising costs are expensed as incurred. Income Taxes: Peoples and its subsidiaries file a consolidated federal income tax return. Deferred income tax assets and liabilities are provided as temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Financial Statements at the statutory federal corporate income tax rate. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. A tax position is initially recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. Penalties and interest incurred under the applicable tax law are classified as income tax expense. The amount of Peoples' uncertain income tax positions and unrecognized benefits are disclosed in "Note 13 Income Taxes." Earnings per Share ("EPS"): Basic and diluted EPS are calculated using the two-class method since Peoples has issued share-based payment awards considered participating securities because they entitle holders the rights to dividends during the vesting term. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Basic EPS is computed by dividing net earnings allocated to common shareholders by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net earnings allocated to common shareholders by the weighted-average number of common shares outstanding adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include non-vested restricted common shares using the treasury stock method. New Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by Peoples as of the required effective dates. Unless otherwise discussed, management believes the impact of any recently issued standards, including those issued but not yet effective, will not have a material impact on Peoples' financial statements taken as a whole. Accounting Standards Update ("ASU") 2020-10 - Codification Improvements. This guidance provides clarification of the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create significant administrative cost to most entities. This update is effective for annual periods beginning after December 15, 2020 (effective January 1, 2021 for Peoples). Peoples has reviewed and applied the improvements as applicable. ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This guidance was further updated by ASU 2021-01. This update is effective as of March 12, 2020 through December 31, 2022. This ASU was early adopted as of September 30, 2021, and did not have a significant impact on Peoples' Consolidated Financial Statements, but is expected to reduce the accounting burden of assessing contracts impacted by reference rate reform. ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This update is effective for fiscal years beginning after December 15, 2021. Peoples adopted this guidance as of December 31, 2021, and it did not have a material impact on Peoples' Consolidated Financial Statements. ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This accounting guidance replaced the "incurred loss" model for recognizing credit losses with an "expected loss" model, referred to as the Current Expected Credit Loss ("CECL") methodology. Under the CECL methodology, Peoples is required to present certain financial assets carried at amortized cost, such as loans held-for-investment and held-to-maturity investment securities, at the net amount expected to be collected. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Accounting Standards Codification ("ASC") 326-20, and should be accounted for according to ASC 842. 99 The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The measurement takes place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" model under previous US GAAP accounting guidance, which delayed recognition until it was probable a loss had been incurred. Peoples adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost on January 1, 2020. Reporting periods beginning after December 31, 2019 are presented as required by ASU 2016-13, while prior period amounts continue to be reported in accordance with previously applicable US GAAP requirements. Peoples used the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as purchased credit impaired assets and accounted for under ASC 310-30. As of January 1, 2020, Peoples recorded a one-time cumulative-effect adjustment to reduce retained earnings by $ 3.7 million, net of statutory corporate federal income taxes, an increase in allowance for credit losses of $ 5.8 million and an increase in unfunded commitment liability of $ 1.5 million. On January 1, 2020, the amortized cost basis of the purchased credit deteriorated assets was adjusted to reflect the addition of $ 2.6 million to establish the allowance for credit losses. The remaining interest-related discount is being accreted into interest income at the effective interest rate beginning on January 1, 2020. As of January 1, 2020, Peoples did not record an allowance for credit losses for available-for-sale investment securities, as all unrealized losses on these securities were deemed to be non-credit in nature, with no credit deterioration upon review by Peoples. Peoples recorded an allowance for credit losses for held-to-maturity securities of $ 7,000 as of January 1, 2020. The following table illustrates the impact on the allowance for credit losses from the adoption of ASU 2016-13: (Dollars in thousands) As Reported Under ASC 326 January 1, 2020 Pre-ASC 326 Adoption December 31, 2019 Impact of ASC 326 Adoption Assets: Loans, at amortized cost $ 2,876,147 $ 2,873,525 $ 2,622 Allowance for credit losses on loans: Construction 651 1,188 ( 537 ) Commercial real estate, other 8,549 6,560 1,989 Commercial and industrial 5,820 8,568 ( 2,748 ) Residential real estate 4,360 1,296 3,064 Home equity lines of credit 1,572 612 960 Consumer, indirect 5,389 2,942 2,447 Consumer, direct 890 296 594 Deposit account overdrafts 94 94 — Allowance for credit losses on loans 27,325 21,556 5,769 Liabilities: Allowance for credit losses for unfunded commitments $ 1,495 $ — $ 1,495 Note 2 Fair Value of Financial Instruments Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or a non-recurring basis in the Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled "Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis" and "Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis." Depending on the nature of the asset or liability, Peoples uses various valuation methodologies and assumptions to estimate fair value. The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies." Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or 100 liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods presented in the Consolidated Financial Statements. Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Consolidated Balance Sheets by level in the fair value hierarchy. At December 31, 2021 and December 31, 2020, there were no assets and liabilities measured on a recurring basis that were considered Level 3 measurements. Recurring Fair Value Measurements at Reporting Date December 31, 2021 December 31, 2020 (Dollars in thousands) Level 1 Level 2 Level 1 Level 2 Assets: Available-for-sale investment securities: Obligations of: U.S. Treasury and government agencies $ 35,604 $ — $ — $ — U.S. government sponsored agencies — 81,739 — 5,363 States and political subdivisions — 259,319 — 114,919 Residential mortgage-backed securities — 828,517 — 623,218 Commercial mortgage-backed securities — 63,519 — 4,783 Bank-issued trust preferred securities — 6,795 — 4,730 Total available-for-sale securities 35,604 1,239,889 — 753,013 Equity investment securities (a) 160 184 107 192 Derivative assets (b) — 12,163 — 27,332 Liabilities: Derivative liabilities (c) $ — $ 17,183 $ — $ 39,395 (a) Included in "Other investment securities" on the Consolidated Balance Sheets. For additional information, see "Note 3 Investment Securities." (b) Included in "Other assets" on the Consolidated Balance Sheets. For additional information, see "Note 15 Derivative Financial Instruments." (c) Included in "Accrued expenses and other liabilities" on the Consolidated Balance Sheets. For additional information, see "Note 15 Derivative Financial Instruments." Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, LIBOR yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists. Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from q uoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2). Derivative Assets and Liabilities : Derivative assets and liabilities are recognized on the Consolidated Balance Sheets at their fair value within other assets, and accrued expenses and other liabilities, respectively. The fair value for derivative financial instruments is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters (Level 2). Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Consolidated Balance Sheets by level in the fair value hierarchy. At December 31, 2021 and December 31, 2020, there were no assets and liabilities measured on a non-recurring basis that were considered Level 1 measurements. Non-Recurring Fair Value Measurements at Reporting Date December 31, 2021 December 31, 2020 (Dollars in thousands) Level 2 Level 3 Level 2 Level 3 Loans held for sale $ 3,813 $ — $ 4,733 $ — OREO — 9,496 — 134 Servicing rights (a)(b) — 2,609 — 2,591 (a) Included in "Other intangible assets" on the Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or estimated fair value. (b) Peoples established a valuation allowance on servicing rights of $ 12 at December 31, 2021 and $ 161 at December 31, 2020, as the fair value of the servicing rights was less than the carrying value. 101 Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally 1-4 family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2). Other Real Estate Owned: OREO, included in "Other assets" on the Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available (Level 3). Servicing Rights : Servicing rights are included in "Other intangible assets" on the Consolidated Balance Sheets. The fair value of servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates (Level 3). The carrying value of servicing rights is not re-measured to fair value on a recurring basis. Peoples assesses the carrying value of servicing rights quarterly for impairment. Financial Instruments Not Required to be Measured and Reported at Fair Value The following table provides the carrying amount for each class of assets and liabilities, and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Consolidated Balance Sheets. Fair Value Measurements of Other Financial Instruments (Dollars in thousands) Fair Value Hierarchy Level December 31, 2021 December 31, 2020 Carrying Amount Fair Value Carrying Amount Fair Value Assets: Cash and cash equivalents 1 $ 415,727 $ 415,727 $ 152,100 $ 152,100 Held-to-maturity investment securities: Obligations of: U.S. government sponsored agencies 2 36,431 35,513 — — States and political subdivisions (a) 2 151,688 150,138 35,199 35,484 Residential mortgage-backed securities 2 110,708 110,159 25,890 26,742 Commercial mortgage-backed securities 2 75,588 74,145 5,429 5,856 Total held-to-maturity securities 374,415 369,955 66,518 68,082 Other investment securities: Other investment securities at cost: Federal Home Loan Bank ("FHLB") stock N/A 17,308 17,308 21,718 21,718 Federal Reserve Bank ("FRB") stock N/A 13,311 13,311 13,311 13,311 Total other investment securities at cost 30,619 30,619 35,029 35,029 Other investment securities at fair value: Nonqualified deferred compensation (b) 1 2,240 2,240 1,867 1,867 Other investment securities (c) 2 784 784 365 365 Total other investment securities at fair value 33,643 33,643 37,261 37,261 Loans and leases, net of deferred fees and cost (d) 3 4,481,600 4,510,605 3,402,940 3,408,373 Bank owned life insurance 2 73,358 73,358 71,591 71,591 Financial liabilities: Deposits 2 $ 5,862,552 $ 5,546,552 $ 3,910,459 $ 3,773,602 Short-term borrowings 2 166,482 164,990 73,261 74,170 Long-term borrowings 2 99,475 101,664 110,568 117,364 (a) Held-to-maturity investment securities are presented gross of allowance for credit losses of $ 286 and $ 60 , as of December 31, 2021 and December 31, 2020, respectively. (b) Nonqualified deferred compensation includes mutual funds as part of the investment. (c) "Other investment securities", as reported on the Consolidated Balance Sheets, also included equity investment securities at December 31, 2021 and at December 31, 2020, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis table above and not included in this table. (d) Loans and leases, net of deferred fees and cost are presented gross of allowance for credit losses of $64.0 million and $50.4 million, as of December 31,2021 and December 31,2020, respectively. 102 For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These financial instruments include cash and cash equivalents, demand and other non-fixed-maturity deposits, and overnight borrowings. Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments: Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash on hand and balances due from banks is a reasonable estimate of fair value (Level 1). Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists. Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable securities. Other investment securities at fair value are valued using quoted prices in an active market (Level 1) or quoted prices in less active markets (Level 2). Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held-to-maturity. Peoples considered interest rate, credit and market factors in estimating the fair value of loans (Level 3). Fair values for loans are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans with similar terms, the credit risk associated with the loans and other market factors, including liquidity. Bank Owned Life Insurance: Peoples' bank owned life insurance policies are recorded at their cash surrender value (Level 3). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits. Deposits: The fair value of fixed-maturity certificates of deposit ("CDs") is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities (Level 2). Short-term Borrowings: The fair value of short-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2). Long-term Borrowings: The fair value of long-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2). Certain financial assets and financial liabilities that are not required to be measured or reported at fair value can be subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and liabilities include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair value, which are not included in the above information. Accordingly, the above fair values are not intended to represent the aggregate fair value of Peoples. 103 Note 3 Investment Securities Available-for-sale The following table summarizes Peoples’ available-for-sale investment securities at December 31: (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value 2021 Obligations of: U.S. Treasury and government agencies $ 35,609 $ 12 $ ( 17 ) $ 35,604 U.S. government sponsored agencies 83,019 58 ( 1,338 ) 81,739 States and political subdivisions 259,508 3,187 ( 3,376 ) 259,319 Residential mortgage-backed securities 833,328 6,565 ( 11,376 ) 828,517 Commercial mortgage-backed securities 64,971 42 ( 1,494 ) 63,519 Bank-issued trust preferred securities 6,711 215 ( 131 ) 6,795 Total available-for-sale securities $ 1,283,146 $ 10,079 $ ( 17,732 ) $ 1,275,493 2020 Obligations of: U.S. government sponsored agencies $ 4,960 $ 403 $ — $ 5,363 States and political subdivisions 110,401 4,642 ( 124 ) 114,919 Residential mortgage-backed securities 609,865 15,377 ( 2,024 ) 623,218 Commercial mortgage-backed securities 4,622 161 — 4,783 Bank-issued trust preferred securities 4,696 192 ( 158 ) 4,730 Total available-for-sale securities $ 734,544 $ 20,775 $ ( 2,306 ) $ 753,013 The unrealized losses related to residential mortgage-backed securities at December 31, 2021 and 2020 were attributable to changes in market interest rates and spreads since the securities were purchased. The gross gains and gross losses realized by Peoples from sales of available-for-sale securities for the years ended December 31 were as follows: (Dollars in thousands) 2021 2020 2019 Gross gains realized $ 1,184 $ 655 $ 252 Gross losses realized 2,046 1,023 88 Net (loss) gain realized $ ( 862 ) $ ( 368 ) $ 164 The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and recognized as of the trade date. 104 The following table presents a summary of available-for-sale investment securities that had an unrealized loss at December 31: Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss 2021 Obligations of: U.S. Treasury and government agencies $ 16,914 $ 17 6 $ — $ — — $ 16,914 $ 17 U.S. government sponsored agencies 72,406 1,192 13 4,854 146 1 77,260 1,338 States and political subdivisions 101,397 2,075 71 30,853 1,301 11 132,250 3,376 Residential mortgage-backed securities 573,139 9,051 113 51,103 2,325 14 624,242 11,376 Commercial mortgage-backed securities 60,134 1,494 21 — — — 60,134 1,494 Bank-issued trust preferred securities 2,991 9 1 878 122 1 3,869 131 Total $ 826,981 $ 13,838 225 $ 87,688 $ 3,894 27 $ 914,669 $ 17,732 2020 Obligations of: States and political subdivisions $ 17,651 $ 124 5 $ — $ — — $ 17,651 $ 124 Residential mortgage-backed securities 156,659 1,795 45 9,892 229 13 166,551 2,024 Bank-issued trust preferred securities 494 6 1 1,848 152 2 2,342 158 Total $ 174,804 $ 1,925 51 $ 11,740 $ 381 15 $ 186,544 $ 2,306 Management systematically evaluates available-for-sale investment securities for an allowance of credit losses on a quarterly basis. At December 31, 2021, management concluded no individual securities at an unrealized loss position required an allowance for credit losses. At December 31, 2021, Peoples did not have the intent to sell, nor was it more-likely-than-not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both December 31, 2021 and 2020 were largely attributable to changes in market interest rates and spreads since the securities were purchased. Accrued interest receivable is not included in investment securities balances, and is presented in the "Other assets" line of the Consolidated Balance Sheets, with no recorded allowance for credit losses. Interest receivable on investment securities was $ 5.5 million at December 31, 2021 and $ 2.7 million at December 31, 2020. At December 31, 2021, approximately 99 % of the fair value of mortgage-backed securities that had been at an unrealized loss position for twelve months or more were issued by U.S. government sponsored agencies. The remaining 1 %, or two positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Neither of the two positions had a fair value of less than 90 % of its book value. Management analyzed the underlying credit quality of these mortgage-backed securities and concluded the unrealized losses were primarily attributable to the floating rate nature of these investments and the low number of loans underlying these securities. The unrealized losses with respect to the one bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at December 31, 2021 were primarily attributable to the subordinated nature of the debt. 105 The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at December 31, 2021. The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a statutory federal corporate income tax rate of 21%. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. (Dollars in thousands) Within 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total Amortized cost Obligations of: U.S. Treasury and government agencies $ — $ 35,609 $ — $ — $ 35,609 U.S. government sponsored agencies 2,000 3,423 69,274 8,322 83,019 States and political subdivisions 6,228 36,763 72,742 143,775 259,508 Residential mortgage-backed securities 3 5,371 58,364 769,590 833,328 Commercial mortgage-backed securities 1,480 923 35,174 27,394 64,971 Bank-issued trust preferred securities — — 6,711 — 6,711 Total available-for-sale securities $ 9,711 $ 82,089 $ 242,265 $ 949,081 $ 1,283,146 Fair value Obligations of: U.S. Treasury and government agencies $ — $ 35,604 $ — $ — $ 35,604 U.S. government sponsored agencies 2,020 3,461 68,176 8,082 81,739 States and political subdivisions 6,275 37,660 73,096 142,288 259,319 Residential mortgage-backed securities 3 5,384 58,058 765,072 828,517 Commercial mortgage-backed securities 1,488 926 34,396 26,709 63,519 Bank-issued trust preferred securities — — 6,795 — 6,795 Total available-for-sale securities $ 9,786 $ 83,035 $ 240,521 $ 942,151 $ 1,275,493 Total weighted-average yield 1.71 % 1.18 % 1.11 % 1.72 % 1.57 % Held-to-Maturity The following table summarizes Peoples’ held-to-maturity investment securities at December 31: (Dollars in thousands) Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value 2021 Obligations of: U.S. government sponsored agencies $ 36,431 $ — $ 86 $ ( 1,004 ) $ 35,513 States and political subdivisions 151,688 $ ( 286 ) 1,006 ( 2,270 ) 150,138 Residential mortgage-backed securities 110,708 — 370 ( 919 ) 110,159 Commercial mortgage-backed securities 75,588 — 182 ( 1,625 ) 74,145 Total held-to-maturity securities $ 374,415 $ ( 286 ) $ 1,644 $ ( 5,818 ) $ 369,955 2020 Obligations of: States and political subdivisions $ 35,199 $ ( 60 ) $ 510 $ ( 165 ) $ 35,484 Residential mortgage-backed securities 25,890 — 852 — 26,742 Commercial mortgage-backed securities 5,429 — 427 — 5,856 Total held-to-maturity securities $ 66,518 $ ( 60 ) $ 1,789 $ ( 165 ) $ 68,082 There were no sales of held-to-maturity securities for the years ended December 31, 2021 and December 31, 2020. Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. The majority of Peoples' held-to-maturity investment securities are issued by U.S. government sponsored agencies. The remaining securities are obligations of state and political subdivisions. Peoples analyzed these securities using cumulative default rate averages for investment grade municipal securities. 106 The following table presents a summary of held-to-maturity investment securities that had an unrealized loss at December 31: Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss 2021 Obligations of: U.S. government sponsored agencies $ 17,328 $ 504 6 $ 14,635 $ 500 2 $ 31,963 $ 1,004 States and political subdivisions 61,954 1,041 34 27,328 1,229 6 $ 89,282 $ 2,270 Residential mortgage-backed securities 88,937 919 17 — — — $ 88,937 $ 919 Commercial mortgage-backed securities 67,338 1,625 21 — — — $ 67,338 $ 1,625 Total $ 235,557 $ 4,089 78 $ 41,963 $ 1,729 8 $ 277,520 $ 5,818 2020 Obligations of: States and political subdivisions $ 18,662 $ 165 5 $ — $ — — $ 18,662 $ 165 Total $ 18,662 $ 165 5 $ — $ — — $ 18,662 $ 165 The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at December 31, 2021. The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a statutory federal corporate income tax rate of 21%. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. (Dollars in thousands) Within 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total Amortized cost Obligations of: U.S. government sponsored agencies $ — $ 6,546 $ — $ 29,885 $ 36,431 States and political subdivisions — 3,202 6,766 141,720 151,688 Residential mortgage-backed securities — 1,730 — 108,978 110,708 Commercial mortgage-backed securities 349 2,000 16,073 57,166 75,588 Total held-to-maturity securities $ 349 $ 13,478 $ 22,839 $ 337,749 $ 374,415 Fair value Obligations of: U.S. government sponsored agencies $ — $ 6,524 $ — $ 28,989 $ 35,513 States and political subdivisions — 3,384 7,013 139,741 150,138 Residential mortgage-backed securities — 1,784 — 108,375 110,159 Commercial mortgage-backed securities 350 1,987 16,062 55,746 74,145 Total held-to-maturity securities $ 350 $ 13,679 $ 23,075 $ 332,851 $ 369,955 Total weighted-average yield 2.22 % 2.08 % 1.96 % 2.03 % 2.03 % Other Investment Securities Peoples' other investment securities on the Consolidated Balance Sheets consist largely of shares of FHLB and FRB stock, and other equity investment securities. 107 The following table summarizes the carrying value of Peoples' other investment securities at December 31: (Dollars in thousands) 2021 2020 FHLB stock $ 17,308 $ 21,718 FRB stock 13,311 13,311 Nonqualified deferred compensation 2,240 1,867 Equity investment securities 344 299 Other investment securities 784 365 Total other investment securities $ 33,987 $ 37,560 Peoples redeemed $ 8.2 million and $ 10.5 million of FHLB stock in 2021 and 2020, respectively, in order to be in compliance with the requirements of the FHLB. Peoples purchased $ 3.8 million and $ 5.0 million of additional FHLB stock during 2021 and 2020, respectively, as a result of the FHLB's capital requirements on FHLB advances during the year. During 2021, Peoples recorded the change in the fair value of equity investment securities held at December 31, 2021 in other non-interest income, resulting in a realized net gain of $ 111,000 . During 2020, Peoples recorded the change in the fair value of equity investment securities held at December 31, 2020 in "Other non-interest income", resulting in unrealized gain of $ 19,000 . Net realized gains on sales of equity investment securities included in other non-interest income during 2020 consisted of a realized gain of $ 680,000 related to the sale of restricted Class B Visa stock, which had been held at a carrying cost and fair value of zero due to the litigation liability associated with the stock. At December 31, 2021, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity. Pledged Securities At December 31, 2021 and 2020, Peoples had pledged available-for-sale investment securities and held-to-maturity investment securities to secure public and trust department deposits, and Repurchase Agreements in accordance with federal and state requirements. Peoples also pledged available-for-sale investment securities and held-to-maturity securities as collateral for cash flow hedge swaps and to secure additional borrowing capacity at the FHLB and the FRB. The following table summarizes the carrying value of Peoples' pledged investment securities as of December 31: Carrying Amount (Dollars in thousands) 2021 2020 Securing public and trust department deposits, and Repurchase Agreements: Available-for-sale $ 795,496 $ 547,734 Held-to-maturity 160,643 16,971 Securing collateral for cash flow hedge swaps: Available-for-sale 18,208 — Held-to-maturity 9,936 — Securing additional borrowing capacity at the FHLB and the FRB: Available-for-sale 6,504 1,685 Held-to-maturity 549 11,316 Note 4 Loans and Leases Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint. Peoples also originates insurance premium finance loans and leases nationwide through its Peoples Premium Finance and North Star Leasing divisions, respectively. Loans and leases throughout this Form 10-K are referred to as "total loans" and "loans held for investment". The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows at December 31: (Dollars in thousands) 2021 2020 Construction $ 210,232 $ 106,792 Commercial real estate, other 1,550,081 929,853 Commercial and industrial 891,392 973,645 Premium finance 136,136 114,758 Leases 122,508 — Residential real estate 771,718 574,007 Home equity lines of credit 163,593 120,913 Consumer, indirect 530,532 503,527 Consumer, direct 104,652 79,094 Deposit account overdrafts 756 351 Total loans, at amortized cost $ 4,481,600 $ 3,402,940 Net deferred loan origination costs were $ 13.5 million and $ 5.1 million at December 31, 2021 and 2020, respectively. On September 17, 2021, Peoples completed the merger with Premier effective after the close of the business day. Peoples acquired $ 1.1 billion in net loans, of which $ 176.2 million were considered purchased credit deteriorated loans. Effective after the close of business on March 31, 2021, Peoples acquired $ 83.3 million in leases from NS Leasing, LLC ("NSL"), of which $ 5.2 million were considered purchase d credit d eteriorated leases. Refer to "Note 20 Acquisitions" for more detail on the loans acquired from Premier and of leases acquired from NSL. Peoples began participating as a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender during the second quarter of 2020, and originated $ 488.9 million of PPP loans during 2020 and $159.1 million during 2021. At December 31, 2021, the PPP loans had an amortized cost of $ 87.1 million, and were included in commercial and industrial loan balances. Peoples recorded deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which totaled $ 2.2 million at December 31, 2021. During 2021 and 2020, Peoples recorded accretion of net deferred loan origination fees of $ 13.0 million and $ 7.5 million, respectively, on PPP loans. The remaining net deferred loan origination fees will be accreted over the life of the respective loans, or until forgiven by the SBA, and will be recognized in net interest income. The PPP expired on May 31, 2021 and no new originations were made under the program; however, forgiveness proceeds will continue to be received until the loans are paid in full. Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Consolidated Balance Sheets, with no recorded allowance for credit losses as Peoples elected the practical expedient not to measure allowance for credit losses for accrued interest receivables. Interest receivable on loans was $ 12.0 million at December 31, 2021 and $ 10.9 million at December 31, 2020. Nonaccrual and Past Due Loans A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due. The amortized cost of loans on nonaccrual status and loans delinquent for 90 days or more and accruing were as follows at December 31: 2021 2020 (Dollars in thousands) Nonaccrual (a) Accruing Loans 90+ Days Past Due Nonaccrual (a) Accruing Loans 90+ Days Past Due Construction $ 6 $ 90 $ 4 $ — Commercial real estate, other 17,067 689 9,111 — Commercial and industrial 3,572 1,139 6,192 50 Premium finance — 865 — 589 Leases 1,581 — — — Residential real estate 9,647 805 8,375 1,975 Home equity lines of credit 1,039 50 867 82 Consumer, indirect 1,574 — 1,073 39 Consumer, direct 279 85 171 17 Total loans, at amortized cost $ 34,765 $ 3,723 $ 25,793 $ 2,752 (a) There were $ 2.6 million of nonaccrual loans for which there was no allowance for credit losses as of December 31, 2021 and $ 1.3 million of such loans at December 31, 2020. As of December 31, 2021, Peoples had made short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers, in amounts which were insignificant. Under the CARES Act, borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. As such, these modifications made in accordance with the CARES Act were not included in Peoples' nonaccrual or accruing loans 90+ days past due as of December 31, 2021 and 2020. The amount of interest income recognized on loans past due 90 days or more during 2021 and 2020 was $ 1.3 million and $ 1.6 million, respectively . The following tables present the aging of the recorded investment in past due loans at December 31: Loans Past Due Current Total (Dollars in thousands) 30 – 59 days 60 – 89 days 90 + Days Total 2021 Construction $ 658 $ — $ 90 $ 748 $ 209,484 $ 210,232 Commercial real estate, other 2,891 1,600 12,561 17,052 1,533,029 1,550,081 Commercial and industrial 1,132 1,278 3,595 6,005 885,387 891,392 Premium finance 751 266 865 1,882 134,254 136,136 Leases 426 247 1,581 2,254 120,254 122,508 Residential real estate 8,276 2,241 5,188 15,705 756,013 771,718 Home equity lines of credit 1,137 619 625 2,381 161,212 163,593 Consumer, indirect 4,220 895 615 5,730 524,802 530,532 Consumer, direct 457 135 200 792 103,860 104,652 Deposit account overdrafts — — — — 756 756 Total loans, at amortized cost $ 19,948 $ 7,281 $ 25,320 $ 52,549 $ 4,429,051 $ 4,481,600 2020 Construction $ — $ 344 $ 4 $ 348 $ 106,444 $ 106,792 Commercial real estate, other 1,943 283 8,643 10,869 918,984 929,853 Commercial and industrial 567 552 4,535 5,654 967,991 973,645 Premium finance 928 1,073 204 2,205 112,553 114,758 Residential real estate 6,739 2,688 5,512 14,939 559,068 574,007 Home equity lines of credit 309 58 780 1,147 119,766 120,913 Consumer, indirect 4,362 733 348 5,443 498,084 503,527 Consumer, direct 424 43 123 590 78,504 79,094 Deposit account overdrafts — — — — 351 351 Total loans, at amortized cost $ 15,272 $ 5,774 $ 20,149 $ 41,195 $ 3,361,745 $ 3,402,940 Delinquency trends remained stable as 98.8 % of Peoples' portfolio was considered "current" at December 31, 2021, compared to 98.8 % at December 31, 2020. Pledged Loans Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, commercial real estate and home equity lines of credit under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged commercial loans to secure borrowings with the FRB. Loans pledged are summarized as follows at December 31: (Dollars in thousands) 2021 2020 Loans pledged to FHLB $ 769,863 $ 740,584 Loans pledged to FRB 294,728 107,340 During 2021, Peoples pledged additional collateral to the FHLB and FRB to secure potential funding needs in light of the COVID-19 pandemic, as well as to fund the PPP loan originations that occurred during 2021 and 2020. Related Party Loans In the normal course of its business, Peoples Bank has granted loans to certain directors and officers of Peoples, including their affiliates, families and entities in which they are principal owners. At December 31, 2021, no related party loan was past due 90 or more days, a TDR or on nonaccrual status. Activity in related party loans is presented in the table below. Other changes primarily consist of changes in related party status, and the addition and exit of directors during the year, as applicable. (Dollars in thousands) Balance, December 31, 2020 $ 13,131 Acquired loans 14,868 New loans and disbursements 2,763 Repayments ( 4,899 ) Balance, December 31, 2021 $ 25,863 Credit Quality Indicators As discussed in "Note 1 Summary of Significant Accounting Policies," Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Loans to borrowers with an aggregate unpaid principal balance in excess of $ 1.0 million are reviewed at least on an annual basis for possible credit deterioration. Loan relationships whose aggregate credit exposure to Peoples is equal to or less than $ 1.0 million are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples is as follows: "Pass" (grades 1 through 4): Loans in this risk category are to borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk category would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loans if required, for any weakness that may exist. "Special Mention" (grade 5): Loans in this risk category are the equivalent of the regulatory "Other Assets Especially Mentioned" classification. Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loans or in Peoples' credit position. "Substandard" (grade 6): Loans in this risk category are inadequately protected by the borrower's current financial condition and payment capability, or by the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the deficiencies are not corrected. "Doubtful" (grade 7): Loans in this risk category have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of these loans as an estimated loss is deferred until their more exact status may be determined. "Loss" (grade 8): Loans in this risk category are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean each such loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken in the period in which the loan becomes uncollectable. Consequently, Peoples typically does not maintain a recorded investment in loans within this risk category. Consumer loans and other smaller-balance loans are evaluated and categorized as "substandard," "doubtful" or "loss" based upon the regulatory definition of these classes and consistent with regulatory requirements. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being "not rated." The following tables summarize the risk category of Peoples' loan portfolio based upon the most recent analysis performed at December 31, 2021: Term Loans at Amortized Cost by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Construction Pass $ 85,276 $ 78,026 $ 29,514 $ 3,498 $ 1,233 $ 2,982 $ 2,411 $ 6,948 $ 202,940 Special mention 290 — — 735 3,850 137 — — 5,012 Substandard — — 947 77 153 1,103 — — 2,280 Total 85,566 78,026 30,461 4,310 5,236 4,222 2,411 6,948 210,232 Commercial real estate, other Pass 253,259 259,113 217,938 143,094 143,975 392,212 21,320 11,940 1,430,911 Special mention 157 2,716 7,875 3,839 6,292 31,626 — 49 52,505 Substandard — 1,675 824 691 3,124 59,415 371 37 66,100 Doubtful — — — — — 542 — — 542 Loss — — — — — 23 — — 23 Total 253,416 263,504 226,637 147,624 153,391 483,818 21,691 12,026 1,550,081 Commercial and industrial Pass 299,117 105,646 84,144 56,361 22,182 100,030 174,848 15,888 842,328 Special mention 82 11,745 2,559 2,179 132 5,445 7,563 9 29,705 Substandard 465 2,059 2,691 812 4,995 3,342 3,085 367 17,449 Doubtful — — — — — 1,648 262 100 1,910 Total 299,664 119,450 89,394 59,352 27,309 110,465 185,758 16,364 891,392 Premium finance Pass 135,896 240 — — — — — — 136,136 Total 135,896 240 — — — — — — 136,136 Leases Pass 78,048 25,954 13,368 2,972 337 — — 120,679 Special mention 34 29 22 159 4 — 248 Substandard 196 438 462 479 6 — 1,581 Total 78,278 26,421 13,852 3,610 347 — — — 122,508 Residential real estate Pass 141,845 74,169 53,434 33,690 44,377 407,541 — — 755,056 Substandard — — — — — 16,302 — — 16,302 Loss — — — — — 360 — — 360 Total 141,845 74,169 53,434 33,690 44,377 424,203 — — 771,718 Home equity lines of credit Pass 35,898 23,276 18,035 16,124 14,991 53,302 1,967 3,287 163,593 Total 35,898 23,276 18,035 16,124 14,991 53,302 1,967 3,287 163,593 Consumer, indirect Pass 226,287 163,830 63,353 45,672 21,754 9,636 — — 530,532 Total 226,287 163,830 63,353 45,672 21,754 9,636 — — 530,532 Consumer, direct Pass 47,308 26,792 13,293 8,411 3,218 5,630 — — 104,652 Total 47,308 26,792 13,293 8,411 3,218 5,630 — — 104,652 Deposit account overdrafts 756 — — — — — — — 756 Total loans, at amortized cost $ 1,304,914 $ 775,708 $ 508,459 $ 318,793 $ 270,623 $ 1,091,276 $ 211,827 $ 38,625 $ 4,481,600 The following tables summarize the risk category of Peoples' loan portfolio based upon the most recent analysis performed at December 31, 2020: Term Loans at Amortized Cost by Origination Year (Dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Construction Pass $ 27,670 $ 56,361 $ 554 $ 15,089 $ 824 $ 1,194 $ 3,199 $ 2,003 $ 104,891 Special mention — — 496 — — 143 — — 639 Substandard — — — 186 — 1,076 — — 1,262 Total 27,670 56,361 1,050 15,275 824 2,413 3,199 2,003 106,792 Commercial real estate, other Pass 116,441 125,373 99,522 94,465 99,668 215,385 109,160 9,748 860,014 Special mention 297 5,806 999 5,296 5,125 12,932 3,967 60 34,422 Substandard — 1,191 677 1,709 1,663 27,066 3,033 110 35,339 Doubtful — — — — — 78 — — 78 Total 116,738 132,370 101,198 101,470 106,456 255,461 116,160 9,918 929,853 Commercial and industrial Pass 409,237 97,362 67,284 38,450 45,026 77,009 199,597 30,680 933,965 Special mention 1,034 366 2,018 287 1,453 1,452 12,429 526 19,039 Substandard 2,226 3,569 2,873 2,167 318 4,163 3,436 1,083 18,752 Doubtful — — — — 1,698 191 — 187 1,889 Total 412,497 101,297 72,175 40,904 48,495 82,815 215,462 32,476 973,645 Premium finance Pass 114,758 — — — — — — — 114,758 Total 114,758 — — — — — — — 114,758 Residential real estate Pass 47,147 40,223 24,235 29,142 43,105 309,795 65,168 305 558,815 Substandard — — — — — 15,048 — — 15,048 Loss — — — — — 144 — — 144 Total 47,147 40,223 24,235 29,142 43,105 324,987 65,168 305 574,007 Home equity lines of credit Pass 16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913 Total 16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913 Consumer, indirect Pass 210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527 Total 210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527 Consumer, direct Pass 31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094 Total 31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094 Deposit account overdrafts 351 — — — — — — — 351 Total loans, at amortized cost $ 977,333 $ 452,383 $ 294,098 $ 243,312 $ 230,434 $ 722,058 $ 483,322 $ 48,793 $ 3,402,940 Collateral Dependent Loans Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans: • Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development, and other commercial and industrial real estate in process of construction. • Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate. • Commercial and industrial loans are general secured by equipment, inventory, accounts receivable, and other commercial property. • Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage. • Home equity lines of credit are generally secured by second mortgages on residential real estate property. • Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral. • Leases are secured by commercial equipment and other essential business assets. • Premium finance loans are secured by the unearned portion of the insurance premium being financed. The following table details Peoples' amortized cost of collateral dependent loans at December 31: (Dollars in thousands) 2021 2020 Construction $ 1,291 $ — Commercial real estate, other 37,220 8,467 Commercial and industrial 8,340 6,333 Residential real estate 2,877 1,670 Home equity lines of credit 391 403 Total collateral dependent loans $ 50,119 $ 16,873 The increase in collateral dependent loans at December 31, 2021 compared to December 31, 2020, was primarily due to $ 37.1 million in collateral dependent loans acquired from Premier. The following table summarizes the loans that were modified as TDRs during the years ended 2021 and 2020. Recorded Investment (a) (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment 2021 Construction 1 $ 344 $ 344 $ 344 Commercial real estate, other 7 218 218 217 Commercial and industrial 1 187 188 100 Residential real estate 55 2,513 2,574 2,464 Home equity lines of credit 14 500 500 489 Consumer, indirect 16 207 207 184 Consumer, direct 11 59 60 53 Consumer 27 266 267 237 Total 105 $ 4,028 $ 4,091 $ 3,851 2020 Commercial real estate, other 5 $ 2,294 $ 2,294 $ 2,217 Commercial and industrial 6 3,820 3,820 3,736 Residential real estate 16 1,388 1,423 1,406 Home equity lines of credit 7 123 123 116 Consumer, indirect 27 349 349 313 Consumer, direct 7 99 99 89 Consumer 34 448 448 402 Total 68 $ 8,073 $ 8,108 $ 7,877 (a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported. The following table presents those loans modified into a TDR during year that subsequently defaulted (i.e., 90 days or more past due following a modification during the year). 2021 2020 (Dollars in thousands) Number of Contracts Recorded Investment (a) Impact on the Allowance for Credit Losses Number of Contracts Recorded Investment (a) Impact on the Allowance for Credit Losses Commercial real estate, other — $ — $ — 1 $ 54 $ — Residential real estate 3 156 — — — — Consumer, indirect 1 26 — 1 15 — Total 4 $ 182 $ — 2 $ 69 $ — (a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported. Peoples had no commitments to lend additional funds to the related borrowers whose loan terms have been modified in a TDR. Allowance for Credit Losses Changes in the allowance for credit losses for 2021 are summarized below: (Dollars in thousands) Beginning Balance, December 31, 2020 Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, December 31, 2021 Construction $ 1,887 $ 2,006 $ ( 894 ) $ — $ — $ 2,999 Commercial real estate, other 17,536 9,636 2,158 ( 387 ) 204 29,147 Commercial and industrial 12,763 4,048 ( 4,717 ) ( 1,057 ) 26 11,063 Premium finance 1,095 — ( 671 ) ( 45 ) — 379 Leases — 493 5,399 ( 1,434 ) 339 4,797 Residential real estate 6,044 1,206 225 ( 385 ) 143 7,233 Home equity lines of credit 1,860 66 235 ( 197 ) 41 2,005 Consumer, indirect 8,030 — ( 1,201 ) ( 1,756 ) 253 5,326 Consumer, direct 1,081 115 ( 195 ) ( 152 ) 112 961 Deposit account overdrafts 63 — 392 ( 575 ) 177 57 Total $ 50,359 $ 17,570 $ 731 $ ( 5,988 ) $ 1,295 $ 63,967 (a) Amount does not include the provision for unfunded commitment liability. Changes in the allowance for credit losses for 2020 are summarized below: (Dollars in thousands) Beginning Balance, January 1, 2020 Impact of CECL Implementation for Purchased Credit Deteriorated Assets Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, December 31, 2020 Construction $ 600 $ 51 $ 1,236 $ — $ — $ 1,887 Commercial real estate, other 7,193 1,356 9,315 ( 528 ) 200 17,536 Commercial and industrial 4,960 860 5,987 ( 1,565 ) 2,521 12,763 Premium finance — — 1,098 ( 3 ) — 1,095 Residential real estate 3,977 383 1,735 ( 353 ) 302 6,044 Home equity lines of credit 1,570 2 379 ( 103 ) 12 1,860 Consumer, indirect 5,389 — 4,262 ( 1,923 ) 302 8,030 Consumer, direct 856 34 329 ( 187 ) 49 1,081 Deposit account overdrafts 94 — 456 ( 673 ) 186 63 Total $ 24,639 $ 2,686 $ 24,797 $ ( 5,335 ) $ 3,572 $ 50,359 (a) Amount does not include the provision for unfunded commitment liability. During 2021, the increase in allowance for credit loss was largely due to the Premier and North Star Leasing acquisitions, and the related need to establish an allowance for credit losses on those portfolios, coupled with organic growth in loan balances. The North Star Leasing acquisition added $ 3.3 million in allowance for credit losses at the acquisition date, of which $ 0.5 million was established for purchased credit deteriorated loans as part of the acquisition accounting, and the remainder was established using provision for credit losses. The Premier acquisition added $ 28.6 million to the allowance for credit losses during the third quarter of 2021, of which $16.9 million was established for purchased credit deteriorated loans as part of the acquisition accounting, and the remainder was established using provision for credit losses. Also during 2021, economic factors and loss drivers improved compared to 2020, and had a positive impact on the CECL model. The allowance for credit losses as a percent of total loans decreased slightly during 2021, compared to 2020. There were no purchased credit deteriorated loans acquired in the acquisition of Premium Finance. As of December 31, 2021, Peoples had recorded an unfunded commitment liability of $ 2.5 million, a decrease compared to the $ 2.9 million that was recorded as of December 31, 2020. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Consolidated Balance Sheets. During 2021, Peoples recorded a recovery of credit losses on unfunded commitments of $360,000, compared to a provision for credit losses on unfunded commitments of $ 1.4 million for 2020. The change in the allowance for unfunded commitments is reflected in the "Provision for credit losses" line of the Consolidated Statements of Income. Note 5 Bank Premises and Equipment The major categories of bank premises and equipment, net of accumulated depreciation, at December 31 are summarized as follows: (Dollars in thousands) 2021 2020 Land $ 19,921 $ 15,035 Building and premises 101,234 74,807 Furniture, fixtures and equipment 36,319 32,482 Total bank premises and equipment 157,474 122,324 Accumulated depreciation ( 68,214 ) ( 62,230 ) Net book value $ 89,260 $ 60,094 Peoples depreciates its building and premises, and furniture, fixtures and equipment over estimated useful lives generally ranging from five to forty to years and two to ten years, respectively. Depreciation expense was $ 6.1 million in 2021 and $ 6.0 million in 2020. 108 Note 6 Leases Lessor Arrangements Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses. Peoples began originating leases with the acquisition of leases from NSL. The leases acquired were determined to be sales-type leases, as the premise for the leases is dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. Originated leases continue to be classified as sales-type leases. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases consist of automotive, construction, healthcare, manufacturing, office, restaurant, and other equipment. These sales-type leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. Other non-interest income noted in the table below includes gain on the early termination of leases, syndicated leases, and other fees. Additional information regarding Peoples' sales-type leases can be found in "Note 4 Loans and Leases". The table below details Peoples' lease income at December 31: (Dollars in thousands) 2021 Interest and fees on leases (a) $ 13,572 Other non-interest income 1,293 Total lease income $ 14,865 (a) Included in "Interest and fees on loans" on the Consolidated Statements of Income. For additional information, see "Note 4 Loans and Leases" of the Notes to the Consolidated Financial Statements. The following table summarizes the net investments in sales-type leases, which are included in "Loans and leases, net of deferred costs" on the Consolidated Balance Sheets at December 31: (Dollars in thousands) 2021 Lease payments receivable, at amortized cost $ 152,202 Estimated residual values 129 Initial direct costs 1,427 Deferred revenue ( 31,250 ) Total leases, at amortized cost 122,508 Allowance for credit losses - leases ( 4,797 ) Net investment in sales-type leases $ 117,711 The following table summarizes the contractual maturities of leases: (Dollars in thousands) Balance 2022 $ 54,090 2023 42,991 2024 29,620 2025 17,861 2026 6,759 Thereafter 881 Lease payments receivable, at amortized cost $ 152,202 Lessee Arrangements Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years . Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the 109 lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term. At December 31, 2021, Peoples did not have any finance leases or any significant lessor agreements. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement or remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives and nonlease components. The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Consolidated Statements of Income at December 31: (Dollars in thousands) 2021 2020 Operating lease expense $ 1,632 $ 1,308 Short-term lease expense 411 322 Total lease expense $ 2,043 $ 1,630 Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date. The following table details the ROU asset, the lease liability and other information related to Peoples' operating leases on the Consolidated Balance Sheet at December 31: (Dollars in thousands) 2021 2020 Right-of-use asset: Other assets $ 7,911 $ 6,522 Lease liability: Accrued expenses and other liabilities $ 8,674 $ 6,776 Other information: Weighted-average remaining lease term 9.5 years 12.4 years Weighted-average discount rate 2.36 % 3.14 % Cash paid during the year for operating leases $ 1,585 $ 1,260 Additions for right-of-use assets obtained during the year ended $ 2,482 $ 62 The following table summarizes the future lease payments of operating leases: (Dollars in thousands) Payments 2022 $ 2,287 2023 1,766 2024 956 2025 766 2026 589 Thereafter 3,806 Total undiscounted lease payments $ 10,170 Imputed interest ( 1,496 ) Total lease liability $ 8,674 110 Note 7 Goodwill and Other Intangible Assets Goodwill The following table details changes in the recorded amount of goodwill for the years ended December 31: (Dollars in thousands) 2021 2020 Goodwill, beginning of year $ 171,260 $ 165,701 Goodwill recorded from acquisitions 92,933 5,559 Goodwill, end of year $ 264,193 $ 171,260 Peoples performed a qualitative assessment of goodwill as of October 1, 2021, and concluded it was not more likely than not that the fair value of Peoples' reporting unit was less than its carrying amount. On April 1, 2021, Peoples preliminarily recorded $ 24.7 million of goodwill related to the acquisition of NSL. On May 4, 2021, Peoples Insurance recorded $ 46,000 of goodwill from the acquisition of an insurance agency. On September 17, 2021, Peoples completed the merger with Premier, for which Peoples preliminarily recorded $ 68.2 million of goodwill. On January 1, 2020, Peoples Insurance acquired a property and casualty-focused independent insurance agency, for which Peoples recorded $ 0.1 million of goodwill. On July 1, 2020, Peoples completed its acquisition of Triumph Premium Finance, for which Peoples recorded $ 5.5 million of goodwill. For additional information on these acquisitions, refer to "Note 20 Acquisitions." Other intangible assets Other intangible assets were comprised of the following at December 31: (Dollars in thousands) Core Deposits Customer Relationships Total 2021 Gross intangibles $ 22,233 $ 12,495 $ 34,728 Intangibles recorded from acquisitions (a) 4,233 13,014 17,247 Accumulated amortization ( 19,048 ) ( 9,603 ) ( 28,651 ) Total acquisition-related intangibles $ 7,418 $ 15,906 $ 23,324 Servicing rights 2,218 Indefinite-lived trade name intangible 1,274 Total other intangibles $ 26,816 2020 Gross intangibles $ 22,233 $ 7,480 $ 29,713 Intangibles recorded from acquisitions — 5,015 5,015 Accumulated amortization ( 17,298 ) ( 6,579 ) ( 23,877 ) Total acquisition-related intangibles $ 4,935 $ 5,916 $ 10,851 Servicing rights 2,486 Total other intangibles $ 13,337 (a) Peoples included in customer relationship intangibles an intangible asset related to a non-compete agreement in the amount of $ 0.3 million Peoples performed other intangible assets impairment testing as of October 1, 2021 and concluded there was no impairment in the recorded value of other intangible assets as of October 1, 2021. During the annual impairment test, Peoples assessed qualitative factors, including relevant events and circumstances, to determine that it was more-likely-than-not that the fair value of other intangible assets exceeded the carrying value. Other intangible assets recorded from the above mentioned acquisitions in 2021 were $ 12.7 million of customer relationship intangible assets and $ 4.2 million of core deposit intangible assets. Refer to "Note 20 Acquisitions" for additional information. Other intangible assets recorded in 2020 included $ 5.0 million of customer relationship intangible assets from the Premium Finance and Peoples Insurance acquisitions. 111 The following table details estimated aggregate future amortization of other intangible assets at December 31, 2021: (Dollars in thousands) Core Deposits Customer Relationships Total 2022 $ 1,620 $ 4,014 $ 5,634 2023 1,257 3,712 4,969 2024 1,058 2,733 3,791 2025 891 1,941 2,832 2026 731 1,369 2,100 Thereafter 1,861 2,137 3,998 Total $ 7,418 $ 15,906 $ 23,324 The weighted average amortization period of other intangibles is 9.6 years. The following is an analysis of activity of servicing rights for the years ended December 31: (Dollars in thousands) 2021 2020 2019 Balance, beginning of year $ 2,486 $ 2,742 $ 2,655 Amortization ( 775 ) ( 1,121 ) ( 871 ) Servicing rights originated 519 1,026 958 Servicing rights acquired — — — Valuation allowance ( 12 ) ( 161 ) — Balance, end of year $ 2,218 $ 2,486 $ 2,742 As of December 31, 2021 and 2020, Peoples recorded a valuation allowance of $ 12,000 and $ 161,000 related to the decrease in the fair value of servicing rights. The following is the breakdown of the discount rates and prepayment speeds of servicing rights for the years ended December 31: 2021 2020 Minimum Maximum Minimum Maximum Discount rates 8.3 % 10.8 % 8.3 % 10.8 % Prepayment speeds 8.9 % 27.1 % 12.8 % 21.1 % The fair value of servicing rights was $ 2.6 million at both December 31, 2021 and 2020. 112 Note 8 Deposits Peoples’ deposit balances were comprised of the following at December 31: (Dollars in thousands) 2021 2020 Retail CDs: $100 or more $ 320,574 $ 220,532 Less than $100 323,185 225,398 Total retail CDs 643,759 445,930 Interest-bearing deposit accounts 1,167,460 692,113 Savings accounts 1,036,738 628,190 Money market deposit accounts 651,169 591,373 Governmental deposit accounts 617,259 385,384 Brokered deposit accounts 104,745 170,146 Total interest-bearing deposits 4,221,130 2,913,136 Non-interest-bearing deposits 1,641,422 997,323 Total deposits $ 5,862,552 $ 3,910,459 Time deposits that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") limit of $ 250,000 , or otherwise uninsured, were $ 121.3 million and $ 89.0 million at December 31, 2021 and 2020, respectively, and are broken out below by time remaining until maturity. (Dollars in thousands) 2021 2020 3 months or less $ 23,779 $ 27,857 Over 3 to 6 months 26,964 20,441 Over 6 to 12 months 34,434 8,229 Over 12 months 36,115 32,424 Total $ 121,292 $ 88,951 The contractual maturities of CDs and brokered demand and savings deposits for each of the next five years and thereafter are as follows: (Dollars in thousands) Retail Brokered Total 2022 (a) $ 453,610 $ 104,252 $ 557,862 2023 77,311 493 77,804 2024 64,471 — 64,471 2025 21,676 — 21,676 2026 26,553 — 26,553 Thereafter 138 — 138 Total CDs $ 643,759 $ 104,745 $ 748,504 (a) Brokered includes $ 100.0 million of brokered demand and savings deposits. Deposits from related parties were $ 12.6 million and $ 11.5 million at December 31, 2021 and 2020, respectively. As of December 31, 2021, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $ 125.0 million, of which $ 85.0 million were funded by brokered demand deposits. In the fourth quarter of 2021, Peoples terminated three interest rate swap agreements with an aggregate notional value of $ 25.0 million, of which $ 15 million were brokered deposits that were not immediately terminated, but instead allowed to mature. Brokered deposits used to fund interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples' interest rate swaps can be found in "Note 15 Derivative Financial Instruments." 113 Note 9 Short-Term Borrowings Peoples utilizes various short-term borrowings as sources of funds, which are summarized as follows at December 31: (Dollars in thousands) Retail Repurchase Agreements FHLB Advances Other Total 2021 Ending balance $ 111,482 $ 55,000 $ — $ 166,482 Average balance 70,674 30,289 — 100,963 Highest month-end balance 119,693 65,017 — 184,693 Interest expense $ 66 $ 475 $ — $ 541 Weighted-average interest rate: End of year 0.09 % 0.74 % — % 0.31 % During the year 0.09 % 1.57 % — % 0.54 % 2020 Ending balance $ 53,261 $ 20,000 $ — $ 73,261 Average balance 44,902 129,928 1,803 176,633 Highest month-end balance 53,261 235,989 64,000 279,773 Interest expense $ 77 $ 2,489 $ 5 $ 2,571 Weighted-average interest rate: End of year 0.06 % 1.78 % — % 0.53 % During the year 0.17 % 1.92 % 0.25 % 1.46 % 2019 Ending balance $ 42,968 $ 274,009 $ — $ 316,977 Average balance 46,686 197,987 126 244,799 Highest month-end balance 49,081 274,009 2,200 316,977 Interest expense $ 257 $ 4,455 $ — $ 4,712 Weighted-average interest rate: End of year 0.37 % 1.74 % — % 1.55 % During the year 0.57 % 2.25 % — % 1.92 % Peoples’ retail Repurchase Agreements consist of overnight agreements with Peoples’ commercial customers and serve as a cash management tool. The FHLB advances consist of overnight borrowings, 90-day advances used to fund interest rate swaps, other advances with an original maturity of one year or less, and the current portion of long-term advances due in less than one year. These advances, along with the long-term advances disclosed in "Note 10 Long-Term Borrowings," are collateralized by residential mortgage loans and investment securities. Peoples’ borrowing capacity with the FHLB is based on the amount of collateral pledged and the amount of FHLB common stock owned. Peoples reclassified $ 15.0 million and $ 20.0 million of FHLB advances from long-term borrowings to short-term borrowings in 2021 and 2020, respectively, due to maturity dates of less than one year. Peoples' FHLB advances of $ 70.0 million and $ 163.0 million matured in 2021 and 2020, respectively. Other short-term borrowings consisted primarily of federal funds purchased and advances from the Federal Reserve Discount Window. Federal funds purchased are short-term borrowings from correspondent banks that typically mature within one to ninety days. Interest on federal funds purchased is set daily by the correspondent bank based on prevailing market rates. The Federal Reserve Discount Window provides credit facilities to financial institutions, which are designed to ensure adequate liquidity by providing a source of short-term funds. Federal Reserve Discount Window advances are typically overnight and must be secured by collateral acceptable to the FRB. At December 31, 2021, Peoples had available Federal Reserve Discount Window credit of $ 174.4 million. As of April 3, 2019, Peoples entered into a Loan Agreement (the “U.S. Bank Loan Agreement”) with U.S. Bank National Association. The U.S. Bank Loan Agreement has a one-year term, which was renewed as of April 1, 2021, and provides Peoples with a revolving line of credit in the maximum aggregate principal amount of $ 20.0 million that may be used: (i) for working capital purposes; (ii) to finance dividends or other distributions (other than stock dividends and stock splits) on or in respect of Peoples’ capital stock and redemptions, repurchases or other acquisitions of any of Peoples’ capital stock permitted under the U.S. Bank Loan Agreement and (iii) to finance acquisitions permitted under the U.S. Bank Loan Agreement. 114 The U.S. Bank Loan Agreement is unsecured, and contains certain negative and financial covenants. The financial covenants are applicable to Peoples and its subsidiaries, and are usual and customary for comparable transactions. As of December 31, 2021, Peoples was in compliance with the applicable covenants imposed by the U.S. Bank Loan Agreement. The U.S. Bank Loan Agreement matures on March 31, 2022. Peoples is in the process of renewing this facility and expects that it will be renewed prior to its expiration. Note 10 Long-Term Borrowings Long-term borrowings consisted of the following at December 31: 2021 2020 (Dollars in thousands) Balance Weighted- Average Rate Balance Weighted- Average Rate FHLB putable, non-amortizing, fixed rate advances $ 80,000 1.42 % $ 95,000 1.52 % FHLB amortizing, fixed rate advances 5,825 1.77 % 7,957 1.75 % Junior subordinated debt securities 13,650 3.37 % 7,611 4.25 % Long-term borrowings $ 99,475 1.71 % $ 110,568 1.72 % Peoples continually evaluates its overall balance sheet position given the interest rate environment. During 2021, Peoples did not borrow any additional long-term advances from the FHLB. At December 31, 2021, outstanding long-term FHLB non-amortizing advances, which have interest rates ranging from 0.77 % to 3.20 %, mature between 2026 and 2030. Outstanding long-term FHLB amortizing, fixed rate advances, which have interest rates ranging from 1.25 % to 3.83 %, mature between 2026 and 2031. Peoples also reclassified one long-term FHLB non-amortizing advance during 2021 totaling $ 15.0 million to short-term borrowings as the time to maturity became less than one year. The FHLB putable, non-amortizing, fixed rate advances have maturities ranging from five to nine years that may be repaid prior to maturity, subject to the payment of termination fees. The FHLB has the option, at its sole discretion, to terminate each advance after the initial fixed rate period of three months , requiring full repayment of the advance by Peoples, prior to the stated maturity. If an advance is terminated prior to maturity, the FHLB will offer Peoples replacement funding at the then-prevailing rate on an advance product then offered by the FHLB, subject to normal FHLB credit and collateral requirements. These advances require monthly interest payments, with no repayment of principal until the earlier of either an option to terminate being exercised by the FHLB or the stated maturity. The FHLB amortizing, fixed rate advances have a fixed rate for the term of each advance, with maturities ranging fro m five to ten years . Th ese advances require monthly principal and interest payments, with some having a constant prepayment rate requiring an additional principal payment annually. These advances are not eligible for optional prepayment prior to maturity. Long-term FHLB advances are collateralized by assets owned by Peoples. The “Junior subordinated debt securities” are comprised of two trust preferred securities assumed from two prior acquisitions. On March 6, 2015, Peoples completed its acquisition of NB&T Financial Group, Inc. (“NB&T”), which included a trust preferred security due in 2037 with a $ 9 million par value and a $ 6.6 million fair value at acquisition. As of December 31, 2021, this trust preferred security had a carrying value of $ 7.8 million with a yield of 3.52 %, inclusive of the impact of fair value adjustments. On September 17, 2021, Peoples completed its acquisition of Premier, which included a trust preferred security due in 2034 with a $ 6.2 million par value and a $ 6.1 million fair value at acquisition. As of December 31, 2021, this trust preferred security had a carrying value of $ 5.9 million and a yield of 3.18 %, inclusive of the impact of fair value adjustments. These trust preferred securities are considered tier 1 capital (with certain limitations applicable) under current regulatory guidelines. 115 At December 31, 2021, the aggregate minimum annual retirements of long-term borrowings in future periods were as follows: (Dollars in thousands) Balance Weighted-Average Rate (a) 2022 $ 1,528 1.53 % 2023 1,150 1.49 % 2024 856 1.46 % 2025 627 1.42 % 2026 20,362 2.16 % Thereafter 74,952 1.47 % Total long-term borrowings $ 99,475 1.61 % (a) The weighted-average rate includes the impact of accreting the current book value of the junior subordinated debt securities to face value over the period. The weighted-average rates for the FHLB advances are 1.72 % in 2022, 1.73 % in 2023, 1.74 % in 2024, 1.76 % in 2025, 2.16 % in 2026, and 1.18 % thereafter. Note 11 Stockholders’ Equity The following table details the activity in Peoples’ common stock and treasury stock during the years ended December 31: Common Stock Treasury Stock Shares at December 31, 2018 20,124,378 601,289 Changes related to stock-based compensation awards: Grant of restricted common shares — ( 133,926 ) Release of restricted common shares — 19,174 Cancellation of restricted common shares — 11,113 Grant of common shares — ( 5,130 ) Changes related to deferred compensation plan for Boards of Directors: Purchase of treasury stock — 7,227 Disbursed out of treasury stock — ( 2,187 ) Common shares purchased under repurchase program — 26,427 Common shares issued under dividend reinvestment plan 26,287 — Common shares issued under compensation plan for Boards of Directors — ( 6,755 ) Common shares issued under employee stock purchase plan — ( 13,050 ) Issuance of common shares related to acquisition of First Prestonsburg 1,005,478 — Shares at December 31, 2019 21,156,143 504,182 Changes related to stock-based compensation awards: Grant of restricted common shares — ( 128,402 ) Release of restricted common shares — 27,391 Cancellation of restricted common shares — 33,689 Grant of common shares — ( 23,482 ) Changes related to deferred compensation plan for Boards of Directors: Purchase of treasury stock — 12,005 Disbursed out of treasury stock — ( 2,362 ) Common shares repurchased under repurchase program — 1,299,577 Common shares issued under dividend reinvestment plan 37,259 — Common shares issued under compensation plan for Boards of Directors — ( 11,553 ) Common shares issued under performance unit awards — (6,127) Common shares issued under employee stock purchase plan — ( 18,872 ) Shares at December 31, 2020 21,193,402 1,686,046 Changes related to stock-based compensation awards: Grant of restricted common shares — ( 109,385 ) Release of restricted common shares — 34,732 Cancellation of restricted common shares — 8,129 Grant of common shares ( 21,587 ) Changes related to deferred compensation plan for Boards of Directors: Purchase of treasury stock — 7,089 Disbursed out of treasury stock — ( 2,983 ) Common shares issued under dividend reinvestment plan 31,314 — Common shares issued under compensation plan for Boards of Directors — ( 7,589 ) Common shares issued under performance unit awards — — Common shares issued under employee stock purchase plan — ( 17,093 ) Issuance of common shares related to acquisition of Premier 8,589,685 — Shares at December 31, 2021 29,814,401 1,577,359 On January 28, 2021, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $ 30.0 million of Peoples' outstanding common shares, replacing the February 27, 2020 share repurchase program which had authorized Peoples to purchase up to an aggregate of $ 40.0 million of its outstanding common shares. During 2021, Peoples did not repurchase any common shares under the share repurchase program authorized on January 28, 2021. On February 27, 2020, Peoples' Board of Directors authorized a share repurchase program authorizing Peoples to purchase up to an aggregate of $ 40.0 million of its outstanding common shares, replacing the previous share repurchase program which had authorized Peoples to purchase up to an aggregate of $ 20 million of its outstanding common shares. An aggregate of $ 6.3 million of Peoples' common shares were purchased under the previous share repurchase program from inception through its termination date, which was February 27, 2020. During 2020, Peoples purchased an aggregate of $ 29.3 million of its outstanding common shares, $ 843,000 of which were purchased under the previous share repurchase program and $ 28.5 million of which were purchased under the share repurchase program authorized on February 27, 2020 and later terminated on January 28, 2021. During 2019, Peoples purchased an aggregate of 26,427 of its common shares through the then-authorized share repurchase program. Under its Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by Peoples' Board of Directors. At December 31, 2021, Peoples had no preferred shares issued or outstanding. The following table details the cash dividends declared per common share for the year ended December 31: 2021 2020 First Quarter $ 0.35 $ 0.34 Second Quarter 0.36 0.34 Third Quarter 0.36 0.34 Fourth Quarter 0.36 0.35 Total dividends declared $ 1.43 $ 1.37 Accumulated Other Comprehensive (Loss) Income The following details the change in the components of Peoples’ accumulated other comprehensive (loss) income for the years ended December 31: (Dollars in thousands) Unrealized (Loss) Gain on Securities Unrecognized Net Pension and Postretirement Costs Unrealized Gain (Loss) on Cash Flow Hedge Accumulated Other Comprehensive (Loss) Income Balance, December 31, 2018 $ ( 10,082 ) $ ( 3,711 ) $ 860 $ ( 12,933 ) Reclassification adjustments to net income: Realized loss on sale of securities, net of tax ( 130 ) — — ( 130 ) Other comprehensive income (loss), net of reclassifications and tax 15,512 ( 247 ) ( 3,627 ) 11,638 Balance, December 31, 2019 $ 5,300 $ ( 3,958 ) $ ( 2,767 ) $ ( 1,425 ) Reclassification adjustments to net income: Realized gain on sale of securities, net of tax 291 — — 291 Realized loss due to settlement and curtailment, net of tax — 833 — 833 Other comprehensive income (loss), net of reclassifications and tax 9,001 ( 747 ) ( 6,617 ) 1,637 Balance, December 31, 2020 $ 14,592 $ ( 3,872 ) $ ( 9,384 ) $ 1,336 Reclassification adjustments to net income: Realized gain on sale of securities, net of tax 670 — — 670 Realized loss due to settlement and curtailment, net of tax — 111 — 111 Other comprehensive (loss) income, net of reclassifications and tax ( 21,208 ) 1,880 5,592 ( 13,736 ) Balance, December 31, 2021 $ ( 5,946 ) $ ( 1,881 ) $ ( 3,792 ) $ ( 11,619 ) 116 Note 12 Employee Benefit Plans Peoples sponsors a noncontributory defined benefit pension plan that covers substantially all employees hired before January 1, 2010. The plan provides retirement benefits based on an employee’s years of service and compensation. For employees hired before January 1, 2003, the amount of postretirement benefit is based on the employee’s average monthly compensation over the highest five consecutive years out of the employee’s last ten years with Peoples while an eligible employee. For employees hired on or after January 1, 2003, the amount of postretirement benefit is based on 2 % of the employee’s annual compensation during the years 2003 through 2009 plus accrued interest. Effective January 1, 2010, the pension plan was closed to new entrants. Effective March 1, 2011, the accrual of pension plan benefits for all participants was frozen. Peoples recognized this freeze as a curtailment as of December 31, 2010 and March 1, 2011, under the terms of the pension plan. Effective July 1, 2013, a participant in the pension plan who is employed by Peoples may elect to receive or to commence receiving such person's retirement benefits as of the later of such person's normal retirement date or the first day of the month first following the date such person makes an election to receive his or her retirement benefits. Peoples also provides post-retirement health and life insurance benefits to former employees and directors. Only those individuals who retired before January 27, 2012 were eligible for life insurance benefits. As of January 1, 2011, all retirees who desire to participate in the Peoples Bank medical plan do so by electing COBRA, which provides up to 18 months of coverage; retirees over the age of 65 also have the option to pay to participate in a group Medicare supplemental plan. Peoples only pays 100 % of the cost for those individuals who retired before January 1, 1993. For all others, the retiree is responsible for most, if not all, of the cost of the health benefits. Peoples’ policy is to fund the cost of the benefits as they arise. The following tables provide a reconciliation of the changes in the benefit obligations and fair value of assets of the plans for the years ended December 31, 2021 and 2020, and a statement of the funded status as of December 31, 2021 and 2020: Pension Benefits Post-retirement Benefits (Dollars in thousands) 2021 2020 2021 2020 Change in benefit obligation: Obligation at January 1 $ 12,310 $ 12,668 $ 71 $ 75 Interest cost 259 326 2 2 Plan participants’ contributions — — 51 59 Actuarial (gain) loss ( 1,367 ) 1,708 1 6 Benefit payments ( 220 ) ( 238 ) ( 63 ) ( 71 ) Settlements ( 519 ) ( 2,154 ) — — Accumulated benefit obligation at December 31 $ 10,463 $ 12,310 $ 62 $ 71 Change in plan assets: Fair value of plan assets at January 1 $ 10,852 $ 11,866 $ — $ — Actual return on plan assets 1,605 1,378 — — Employer contributions — — 12 12 Plan participants’ contributions — — 51 59 Benefit payments ( 220 ) ( 238 ) ( 63 ) ( 71 ) Settlements ( 519 ) ( 2,154 ) — — Fair value of plan assets at December 31 $ 11,718 $ 10,852 $ — $ — Funded status at December 31 $ 1,255 $ ( 1,458 ) $ ( 62 ) $ ( 71 ) Amounts recognized in Consolidated Balance Sheets: Prepaid benefit costs $ 1,255 $ — $ — $ — Accrued benefit liability $ — $ ( 1,458 ) $ ( 62 ) $ ( 71 ) Net amount recognized $ 1,255 $ ( 1,458 ) $ ( 62 ) $ ( 71 ) Amounts recognized in Accumulated Other Comprehensive Loss: Unrecognized prior service cost $ — $ — $ — $ — Unrecognized net loss (gain) 1,861 3,918 ( 37 ) ( 39 ) Total $ 1,861 $ 3,918 $ ( 37 ) $ ( 39 ) Weighted-average assumptions at year-end: Discount rate 2.71 % 2.38 % 2.71 % 2.38 % 117 The estimated costs relating to Peoples’ pension benefits that will be amortized from AOCI into net periodic cost over the next fiscal year are $ 83,000 . Net Periodic (Benefit) Cost The following table details the components of the net periodic (benefit) cost for the plans at December 31: Pension Benefits Post-retirement Benefits (Dollars in thousands) 2021 2020 2019 2021 2020 2019 Interest cost $ 259 $ 326 $ 438 $ 2 $ 2 $ 3 Expected return on plan assets ( 658 ) ( 747 ) ( 782 ) — — — Amortization of prior service credit — — — — — ( 1 ) Amortization of net loss (gain) 107 132 78 ( 4 ) ( 5 ) ( 5 ) Settlement of benefit obligation 143 1,054 — — — — Net periodic (benefit) cost $ ( 149 ) $ 765 $ ( 266 ) $ ( 2 ) $ ( 3 ) $ ( 3 ) Weighted-average assumptions: Discount rate 2.44 % 2.53 % 4.20 % 2.38 % 3.12 % 4.20 % Expected return on plan assets 7.00 % 7.50 % 7.50 % n/a n/a n/a Rate of compensation increase n/a n/a n/a n/a n/a n/a For measurement purposes, a 5.0 % annual rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) was assumed for 2021 and grade down to an ultimate rate of 4.0 % in 2070. The health care trend rate assumption does not have a significant effect on the contributory defined benefit postretirement plan; therefore, a one percentage point increase or decrease in the trend rate is not material in the determination of the accumulated postretirement benefit obligation or the ongoing expense. Under US GAAP, Peoples is required to recognize a settlement gain or loss when the aggregate amount of lump-sum distributions to participants equals or exceeds the sum of the service and interest cost components of the net periodic pension cost. The amount of settlement gain or loss recognized is the pro rata amount of the unrealized gain or loss existing immediately prior to the settlement. In general, both the projected benefit obligation and the fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss. There were $ 143,000 in settlement charges recorded in 2021, compared to $ 1.1 million recorded in 2020, and none recorded in 2019. Determination of Expected Long-term Rate of Return The expected long-term rate of return on the pension plan's total assets is based on a weighted average of the expected return of each category of the pension plan's assets. Peoples' investment strategy for the pension plan's assets continues to allocate 60 %- 75 % to equity securities. Plan Assets Peoples' investment strategy, as established by Peoples' Retirement Plan Committee, is to invest assets of the pension plan based upon established target allocations, which include a target range of 60 - 75 % allocation in equity securities, 20 - 40 % in debt securities and 0 - 15 % of other investments. The assets are reallocated periodically to meet the target allocations. The investment policy is reviewed periodically, under the advisement of a certified investment advisor, to determine if the policy should be changed. 118 The following table provides the fair values of investments held in Peoples' pension plan at December 31, by major asset category: (Dollars in thousands) Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) 2021 Equity securities: Mutual funds – equity $ 8,516 $ 8,516 Debt securities: Mutual funds – taxable income 2,912 2,912 Total fair value of pension assets $ 11,428 $ 11,428 2020 Equity securities: Mutual funds – equity $ 7,794 $ 7,794 Debt securities: Mutual funds – taxable income 2,898 2,898 Total fair value of pension assets $ 10,692 $ 10,692 Pension plan assets also included cash and cash equivalents of $ 284,000 and accrued income of $ 1,000 at December 31, 2021. Cash and cash equivalents were $ 152,000 and accrued income was $ 8,000 at December 31, 2020. For further information regarding levels of input used to measure fair value, refer to "Note 2 Fair Value of Financial Instruments." Equity securities held as investments in Peoples' pension plan did not include any securities of Peoples or related parties in 2021 or 2020. Cash Flows Peoples expects to make between $ 10,000 to $ 15,000 of contributions to its pension plan in 2022; however, actual contributions are made at the discretion of the Retirement Plan Committee and Peoples' Board of Directors. Estimated future benefit payments, which reflect benefits attributable to estimated future service, for the years ending December 31 are as follows: (Dollars in thousands) Pension Benefits Post-retirement Benefits 2022 $ 1,429 $ 10 2023 858 9 2024 903 8 2025 652 7 2026 914 6 2027 to 2031 3,199 19 Total $ 7,955 $ 59 Retirement Savings Plan Peoples also maintains a retirement savings plan, or 401(k) plan, which covers substantially all employees. The plan provides participants with the opportunity to save for retirement on a tax-deferred basis. From January 1, 2011, until December 31, 2019, matching contributions equaled 100% of participants' contributions that did not exceed 3 % of the participants' compensation, plus 50% of participants' contributions between 3 % and 5 % of the participants' compensation. Matching contributions made by Peoples totaled $ 3.5 million in 2021, $ 2.5 million in 2020 and $ 2.0 million in 2019. Beginning January 1, 2020, Peoples began matching 100% of participants' contributions that did not exceed 4 % of the participants' compensation, plus 50% of participants' contributions between 4 % and 6 % of the participants' compensation. As of January 1, 2021, Peoples began matching 100% of participants' contributions up to 6% of the participants' compensation. 119 Note 13 Income Taxes The reported income tax expense and effective tax rate in the Consolidated Statements of Income differ from the amounts computed by applying the statutory federal corporate income tax rate as follows for the years ended December 31: (Dollars in thousands) 2021 2020 2019 Amount Rate Amount Rate Amount Rate Income tax computed at statutory federal corporate income tax rate $ 11,954 21.0 % $ 8,956 21.0 % $ 13,725 21.0 % Differences in rate resulting from: Nondeductible acquisition costs 269 0.5 % — — % — — % Stock awards 74 0.1 % ( 5 ) — % ( 135 ) ( 0.2 ) % Bank owned life insurance ( 371 ) ( 0.6 ) % ( 415 ) ( 1.0 ) % ( 510 ) ( 0.8 ) % Investments in tax credit funds ( 381 ) ( 0.7 ) % ( 415 ) ( 1.0 ) % ( 530 ) ( 0.8 ) % Captive insurance benefit ( 435 ) ( 0.8 ) % ( 412 ) ( 1.0 ) % — — % Tax-exempt interest income ( 835 ) ( 1.5 ) % ( 668 ) ( 1.6 ) % ( 659 ) ( 1.0 ) % Fixed asset depreciation ( 1,142 ) ( 2.0 ) % — — % — — % Other, net 282 0.5 % 838 2.1 % ( 228 ) ( 0.4 ) % Income tax expense $ 9,415 16.5 % $ 7,879 18.5 % $ 11,663 17.8 % Peoples' reported income tax expense consisted of the following for the years ended December 31: (Dollars in thousands) 2021 2020 2019 Current income tax expense $ 6,541 $ 15,980 $ 11,554 Deferred income tax expense (benefit) 2,874 ( 8,101 ) 109 Income tax expense $ 9,415 $ 7,879 $ 11,663 The significant components of Peoples' deferred tax assets and deferred tax liabilities consisted of the following at December 31: (Dollars in thousands) 2021 2020 Deferred tax assets: Allowance for credit losses $ 17,473 $ 13,819 Accrued employee benefits 2,161 2,706 Lease obligation 1,960 1,423 Available-for-sale securities 1,905 — Tax credit investments 1,096 1,799 Derivative instruments 1,088 2,494 Net operating loss carryforward 223 — Other 561 5 Gross deferred tax assets $ 26,467 $ 22,246 Valuation allowance $ 158 $ — Total deferred tax assets $ 26,309 $ 22,246 Deferred tax liabilities: Bank premises and equipment $ 3,838 $ 3,274 Deferred loan income 5,249 2,174 Purchase accounting adjustments 3,166 4,522 Lease right-of-use assets 1,788 1,370 Available-for-sale securities — 3,886 Other 662 583 Total deferred tax liabilities $ 14,703 $ 15,809 Net deferred tax asset (liability) $ 11,606 $ 6,437 As of December 31, 2021, Peoples acquired a net operating loss carryforward of approximately $ 0.3 million related to the Premier merger, net of a valuation allowance of $158,000, which will be available to offset future taxable income. 120 The federal income tax benefit from sales of investment securities was $ 181,000 in 2021 and $ 77,000 in 2020. The federal income tax expense from sale of investment securities was $ 34,000 in 2019. Income tax benefits are recognized in the Consolidated Financial Statements for a tax position only if it is considered "more-likely-than-not" of being sustained in an audit, based solely on the technical merits of the income tax position. If the recognition criteria are met, the amount of income tax benefits to be recognized are measured based on the largest income tax benefit that is more than 50 percent likely to be realized on ultimate resolution of the tax position. The following table provides a reconciliation of uncertain tax positions at December 31: (Dollars in thousands) 2021 2020 Uncertain tax positions, beginning of year $ 149 $ 250 Gross increase based on tax positions related to current year $ — $ 12 Gross decrease due to the statute of limitations $ ( 43 ) $ ( 113 ) Uncertain tax positions, end of year $ 106 $ 149 Peoples is subject to U.S. federal income tax, as well as to tax in various state income tax jurisdictions. Peoples' income tax returns are subject to review and examination by federal and state taxing authorities. Peoples is currently open to audit under the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2018 through 2020. The years open to examination by state taxing authorities vary by jurisdiction. 121 Note 14 Earnings Per Common Share The calculations of basic and diluted earnings per common share for the years ended December 31 were as follows: (Dollars in thousands, except per common share data) 2021 2020 2019 Net income available to common shareholders $ 47,555 $ 34,767 $ 53,695 Less: Dividends paid on unvested shares ( 295 ) ( 367 ) ( 348 ) Add: Undistributed earnings (loss) allocated to unvested shares ( 26 ) ( 5 ) ( 47 ) Net earnings allocated to common shareholders $ 47,234 $ 34,395 $ 53,300 Weighted-average common shares outstanding 21,816,511 19,721,772 20,120,119 Effect of potentially dilutive common shares 143,372 122,034 153,606 Total weighted-average diluted common shares outstanding 21,959,883 19,843,806 20,273,725 Earnings per common share: Basic $ 2.17 $ 1.74 $ 2.65 Diluted $ 2.15 $ 1.73 $ 2.63 Anti-dilutive common shares excluded from calculation: Restricted shares 275 64,145 — Note 15 Derivative Financial Instruments Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of derivative financial instruments is included in "Other assets" and "Accrued expenses and other liabilities" in the Consolidated Balance Sheets and in the net other adjustments to reconcile net income to "Net cash provided by operating activities" in the Consolidated Statements of Cash Flows. Derivative Financial Instruments and Hedging Activities – Risk Management Objective of Using Derivative Financial Instruments Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions. Cash Flow Hedges of Interest Rate Risk Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps were 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 December 31, 2021, Peoples had entered into thirteen interest rate swaps with an aggregate notional value of $ 125.0 million. Peoples will pay a fixed rate of interest for up to ten years while receiving a floating rate component of interest equal to the three-month LIBOR rate. The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs and brokered demand deposits, which will continue to be rolled through the life of the swaps. At December 31, 2021, the interest rate swaps were designated as cash flow hedges of $ 85.0 million in brokered demand deposits, which are expected to be extended every 90 days through the maturity dates of the swaps. The remaining $ 40.0 million of interest rate swaps were designated as cash flow hedges of 90-day FHLB Advances. In the fourth quarter of 2021, Peoples terminated three interest rate swap agreements with an aggregate notional value of $ 25.0 million which were designated as cash flow hedges. The terminations resulted in a pre-tax loss of $ 0.2 million. The associated 122 $ 10.0 million in FHLB advances and $ 15.0 million in brokered demand deposits were not immediately terminated but instead allowed to mature. For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in AOCI (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the 90-day advances or brokered CDs are matched to the reset dates and payment dates on the receipt of the three-month LIBOR floating portion of the swaps to ensure effectiveness of the cash flow hedge. During the years ended December 31, 2021 and December 31, 2020, Peoples had reclassifications of loss to earnings of $ 3.5 million and gains to interest expense of $ 2.0 million, respectively. The following table summarizes information about the interest rate swaps designated as cash flow hedges at December 31: (Dollars in thousands) 2021 2020 Notional amount $ 125,000 $ 160,000 Weighted average pay rates 2.26 % 2.18 % Weighted average receive rates 1.10 % 0.38 % Weighted average maturity 3.6 years 4.4 years Pre-tax unrealized losses included in AOCI ( 4,879 ) ( 11,879 ) The following table presents net losses or gains recorded in AOCI and in the Consolidated Statements of Income related to the cash flow hedges for the years ended December 31: (Dollars in thousands) 2021 2020 Amount of loss recognized in AOCI, pre-tax $ 6,999 $ 8,376 The following table reflects the cash flow hedges, which are included in the Consolidated Balance Sheets at fair value, at December 31: 2021 2020 (Dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value Included in "Accrued expenses and other liabilities": Interest rate swaps related to debt $ 125,000 $ 5,020 $ 160,000 $ 12,063 Total included in "Accrued expenses and other liabilities" $ 125,000 $ 5,020 $ 160,000 $ 12,063 Non-Designated Hedges Peoples maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this program, Peoples originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples. Peoples offsets its exposure in the swap by entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated hedges; therefore, each swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a material impact on Peoples' results of operation or financial condition at the year ended December 31,2021 and 2020. 123 The following table reflects the non-designated hedges, which are included in the Consolidated Balance Sheets at fair value, at December 31: 2021 2020 (Dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value Included in "Other assets": Interest rate swaps related to commercial loans $ 419,733 $ 12,163 $ 415,044 $ 27,332 Total included in "Other assets" 419,733 12,163 415,044 27,332 Included in "Accrued expenses and other liabilities": Interest rate swaps related to commercial loans $ 419,733 $ 12,163 $ 415,044 $ 27,332 Total included in "Accrued expenses and other liabilities" 419,733 12,163 415,044 27,332 Pledged Collateral Peoples pledges or receives collateral for all interest swaps. When the fair value of Peoples' interest rate swaps are in a net liability position, Peoples must pledge collateral, and, when the fair value of Peoples' interest rate swaps are in a net asset position, the respective counterparties must pledge collateral. At December 31, 2021 and December 31, 2020, Peoples had $ 28.1 million and zero , respectively, in investment securities pledged. At December 31, 2021 and December 31, 2020, Peoples had zero and $ 41.0 million, respectively, of cash pledged. Cash pledged is included in "Interest-bearing deposits in other banks" on the Consolidated Balance Sheets. Investment securities pledged are included in "Available-for-sale investment securities" and "Held-to-maturity investment securities" on the Consolidated Balance Sheets. Note 16 Off-Balance Sheet Risk Loan Commitments and Standby Letters of Credit Loan commitments are made to accommodate the financial needs of Peoples' customers. Standby letters of credit are instruments issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank's customer in the nonperformance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused. Peoples' exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Peoples uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable; inventory; property, plant, and equipment; and income-producing commercial properties. The total amounts of loan commitments and standby letters of credit at December 31 were: (Dollars in thousands) 2021 2020 Home equity lines of credit $ 177,262 $ 117,792 Unadvanced construction loans 227,135 141,009 Other loan commitments 577,170 535,250 Loan commitments 981,567 794,051 Standby letters of credit $ 12,805 $ 14,342 Note 17 Regulatory Matters The following is a summary of certain regulatory matters affecting Peoples and its subsidiaries: Federal Reserve Board Requirements Peoples Bank is required to maintain a minimum level of reserves, consisting of cash on hand and non-interest-bearing balances with the FRB of Cleveland, based on the amount of total deposits. Average required reserve balances were $ 0 and $ 3.7 million in 2021 and 2020, respectively. Limits on Dividends The primary source of funds for the dividends paid by Peoples is dividends received from Peoples Bank. The payment of dividends by Peoples Bank is subject to various banking regulations. The most restrictive provision requires regulatory approval if dividends declared in any calendar year exceed the total net profits of that year plus the retained net profits of the preceding two years. 124 At December 31, 2021, Peoples Bank had approximately $ 33.6 million of net profits available for distribution to Peoples as dividends without regulatory approval. Capital Requirements Peoples and Peoples Bank are subject to various regulatory capital guidelines administered by the banking regulatory agencies. Under capital adequacy requirements and the regulatory framework for prompt corrective action, Peoples and Peoples Bank must meet specific capital guidelines that involve quantitative measures of each entity's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Peoples' and Peoples Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Failure to meet future minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a material effect on Peoples' financial results. Quantitative measures established by regulation to ensure capital adequacy, and in effect at December 31, 2021, required Peoples and Peoples Bank to maintain minimum amounts and ratios of common equity tier 1 capital, tier 1 capital and total capital (each as defined in the applicable regulations) to risk-weighted assets (as defined), and of tier I capital (as defined) to average assets (as defined). Peoples and Peoples Bank met all capital adequacy requirements at December 31, 2021. As of December 31, 2021, the most recent notification from the banking regulatory agencies categorized Peoples Bank as well capitalized under the regulatory framework for prompt corrective action applicable to Peoples Bank. Peoples maintained the capital required by the Federal Reserve Board to be deemed well capitalized and remain a financial holding company. To be categorized as well capitalized, Peoples and Peoples Bank must maintain minimum common equity tier 1, tier 1 risk-based, total risk-based and tier I leverage ratios as set forth in the table below. There are no conditions or events since this notification that management believes have changed Peoples' or Peoples Bank's category. Peoples' and Peoples Bank's actual capital amounts and ratios as of December 31 are also presented in the following table: 2021 2020 (Dollars in thousands) Amount Ratio Amount Ratio PEOPLES Common Equity Tier 1 (a) Actual $ 577,565 12.52 % $ 409,400 13.01 % For capital adequacy 207,642 4.50 % 141,605 4.50 % To be well capitalized 299,927 6.50 % 204,540 6.50 % Tier 1 (b) Actual $ 591,215 12.81 % $ 417,011 13.25 % For capital adequacy 276,856 6.00 % 188,806 6.00 % To be well capitalized 369,141 8.00 % 251,741 8.00 % Total Capital (c) Actual $ 648,948 14.06 % $ 456,384 14.50 % For capital adequacy 369,141 8.00 % 251,741 8.00 % To be well capitalized 461,426 10.00 % 314,677 10.00 % Tier 1 Leverage (d) Actual $ 591,215 8.67 % $ 417,011 8.97 % For capital adequacy 272,916 4.00 % 186,049 4.00 % To be well capitalized 341,145 5.00 % 232,561 5.00 % Capital Conservation Buffer $ 279,807 6.06 % $ 204,643 6.50 % Fully phased in 115,356 2.50 % 78,669 2.50 % Net Risk-Weighted Assets $ 4,614,259 $ 3,146,767 125 2021 2020 (Dollars in thousands) Amount Ratio Amount Ratio PEOPLES BANK Common Equity Tier 1 (a) Actual $ 566,594 12.30 % $ 395,753 12.58 % For capital adequacy 207,318 4.50 % 141,513 4.50 % To be well capitalized 299,460 6.50 % 204,408 6.50 % Tier 1 (b) Actual $ 566,594 12.30 % $ 395,753 12.58 % For capital adequacy 276,424 6.00 % 188,684 6.00 % To be well capitalized 368,566 8.00 % 251,579 8.00 % Total Capital (c) Actual $ 624,238 13.55 % $ 435,101 13.84 % For capital adequacy 368,566 8.00 % 251,579 8.00 % To be well capitalized 460,707 10.00 % 314,473 10.00 % Tier 1 Leverage (d) Actual $ 566,594 8.32 % $ 395,753 12.58 % For capital adequacy 272,284 4.00 % 185,845 4.00 % To be well capitalized 340,355 5.00 % 232,306 5.00 % Capital Conservation Buffer $ 255,672 5.55 % $ 183,522 5.84 % Fully phased in 115,177 2.50 % 78,618 2.50 % Net Risk-Weighted Assets $ 4,607,072 $ 3,144,734 (a) Ratio represents common equity tier 1 capital to net risk-weighted assets (b) Ratio represents tier 1 capital to net risk-weighted assets (c) Ratio represents total capital to net risk-weighted assets (d) Ratio represents tier 1 capital to average assets Note 18 Stock-Based Compensation Under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 891,340 . The maximum number of common shares that can be issued for incentive stock options is 500,000 common shares. Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. Additionally, in 2017, Peoples granted performance units to certain officers. In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares. Restricted Common Shares Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on the restricted common shares awarded to employees expire after periods ranging from one to five years . Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions. In 2021, Peoples granted an aggregate of 77,094 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date. During 2021, Peoples granted, to certain key employees, an aggregate of 32,291 restricted common shares subject to time-based vesting, the majority of which will vest three years after the grant date. 126 The following summarizes the changes to Peoples’ outstanding restricted common shares for the year ended December 31, 2021: Time-Based Vesting Performance-Based Vesting Number of Common Shares Weighted-Average Grant Date Fair Value Number of Common Shares Weighted-Average Grant Date Fair Value Outstanding at January 1 67,758 $ 23.71 250,992 $ 33.36 Awarded 32,291 32.45 77,094 31.48 Released ( 10,127 ) $ 35.54 ( 73,611 ) $ 35.43 Forfeited ( 1,000 ) 32.48 ( 7,129 ) 32.42 Outstanding at December 31 88,922 $ 25.44 247,346 $ 32.19 The total intrinsic value of restricted common shares released was $ 2.6 million, $ 2.0 million and $ 1.8 million in 2021, 2020 and 2019, respectively. Stock-Based Compensation Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted common shares and performance unit awards, as well as purchases made by participants in the employee stock purchase plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. For performance unit awards, Peoples recognizes stock-based compensation, over the performance period, based on the portion of the awards that is expected to vest based on the expected level of achievement of the established performance goals. Peoples also has an employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of up to 15%. The following summarizes the amount of stock-based compensation and related tax benefit recognized for the years ended December 31: (Dollars in thousands) 2021 2020 2019 Employee stock-based compensation expense: Restricted common share grant expense $ 3,436 $ 3,556 $ 3,462 Employee stock purchase plan expense 79 63 63 Performance stock unit (benefit) expense — ( 12 ) 130 Total employee stock-based compensation expense 3,515 3,607 3,655 Non-employee director stock-based compensation expense 375 340 308 Total stock-based compensation expense 3,890 3,947 3,963 Recognized tax benefit ( 867 ) ( 818 ) ( 832 ) Net expense recognized $ 3,023 $ 3,129 $ 3,131 Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in 2021, 2020 and 2019. The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares. Total unrecognized stock-based compensation related to unvested restricted common share awards was $ 2.6 million at December 31, 2021, which will be recognized over a weighted-average period of 1.8 years. In 2021, the Board of Directors granted 4,347 unrestricted common shares to non-employee directors, with related stock-based compensation of $ 135,000 . 127 Note 19 Revenue The following table details Peoples' revenue from contracts with customers for the year ended December 31: (Dollars in thousands) 2021 2020 Insurance income: Commission and fees from sale of insurance policies (a) $ 12,819 $ 12,137 Fees related to third-party administration services (a) 389 448 Performance-based commissions (b) 2,044 1,457 Trust and investment income (a) 16,456 13,662 Electronic banking income: Interchange income (a) 14,254 11,160 Promotional and usage income (a) 3,756 3,086 Deposit account service charges: Ongoing maintenance fees for deposit accounts (a) 3,807 3,573 Transactional-based fees (b) 6,336 5,845 Commercial loan swap fees (b) 543 1,741 Other non-interest income transactional-based fees (b) 968 820 Total $ 61,372 $ 53,929 Timing of revenue recognition: Services transferred over time $ 51,481 $ 44,066 Services transferred at a point in time 9,891 9,863 Total $ 61,372 $ 53,929 (a) Services transferred over time. (b) Services transferred at a point in time. Peoples records contract assets for income that has been recognized over a period of time for the fulfillment of performance obligations, but has not yet been received, related to electronic banking income. This income typically relates to bonuses for which Peoples is eligible, but will not receive until a certain time in the future. Peoples records contract liabilities for payments received for commission income related to the sale of insurance policies, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled, which is over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for which income is recognized during the period in which the performance obligations are fulfilled. The following table details the changes in Peoples' contract assets and contract liabilities for the period ended December 31, 2021: (Dollars in thousands) Contract Assets Contract Liabilities Balance, January 1, 2021 $ 1,247 $ 5,224 Additional income receivable 197 — Receipt of income previously receivable ( 701 ) — Recognition of income previously deferred — ( 413 ) Balance, December 31, 2021 $ 743 $ 4,811 For more information on Peoples' revenue recognition policies, see "Note 1 Summary of Significant Accounting Policies." Note 20 Acquisitions Premier Financial Bancorp, Inc. On September 17, 2021, Peoples completed its merger with Premier. Premier merged into Peoples, and Premier’s wholly-owned subsidiaries, Premier Bank, Inc., and Citizens Deposit Bank and Trust, Inc., which combined operate 48 branches in Kentucky, Maryland, Ohio, Virginia, West Virginia and Washington, D.C., merged into Peoples’ wholly-owned subsidiary, Peoples Bank. As consideration, Premier shareholders were paid 0.58 common shares of Peoples for each full share of Premier that was owned at the acquisition date, resulting in the issuance of 8,589,685 common shares by Peoples, or $ 261.9 million. Peoples accounted for this transaction as a business combination under the acquisition method. Peoples completed the merger in an effort to diversify and expand its franchise, and further enhance its size and scale. Peoples believes the growth potential, and attractive market areas will benefit its future financial performance. 128 Peoples recorded acquisition-related expenses of $19.5 million related to the Premier merger, which included $ 9.7 million in other non-interest expense; $ 5.1 million in professional fees; $ 3.8 million in salaries and employee benefit costs; $0.4 million in net occupancy and equipment expense, $ 0.2 million in marketing expense; $ 66,000 in net occupancy and equipment expense; $ 62,000 in data processing and software expense; and $ 54,000 in communication expense. The estimated fair values below were considered preliminary as of December 31, 2021, and are subject to adjustment for up to one year after September 17, 2021. Valuations subject to change include, but are not limited to, loans, including the designation of such as PCD, deferred tax assets and liabilities, and certain other assets and other liabilities. The following table provides the preliminary purchase price calculation as of the date of the merger with Premier, and the assets acquired and liabilities assumed at their estimated fair values. (Dollars in thousands) Unpaid Principal Balance Fair Value Premier common shares 14,811,200 Number of common shares of Peoples issued for each common share of Premier 0.58 Price per Peoples common share, based at closing date $ 30.49 Common share consideration 261,899 Cash paid in lieu of fractional common shares 25 Total consideration $ 261,924 Net assets at fair value Assets Cash and due from banks $ 248,360 Interest-bearing deposits in other banks 1,025 Total cash and cash equivalents 249,385 Available-for-sale investment securities 551,953 Other investment securities 4,159 Total investment securities 556,112 Loans: Construction 97,262 96,051 Commercial real estate, other 544,950 534,910 Commercial and industrial 132,293 132,097 Residential real estate 332,269 331,110 Home equity lines of credit 46,969 45,887 Consumer 21,083 21,636 Total loans 1,174,826 1,161,691 Allowance for Credit Losses (on PCD Loans) ( 16,944 ) Net loans 1,144,747 Bank premises and equipment 30,098 Other intangible assets 4,233 OREO 11,081 129 (Dollars in thousands) Unpaid Principal Balance Fair Value Other assets 27,335 Total assets $ 2,022,991 Liabilities Deposits: Non-interest-bearing $ 733,157 Interest-bearing 1,018,387 Total deposits 1,751,544 Short-term borrowings 63,807 Long-term borrowings 6,070 Accrued expenses and other liabilities 7,813 Total liabilities 1,829,234 Net assets 193,757 Goodwill $ 68,167 The estimated fair values presented in the above table reflect additional information that was obtained during the three months ended December 31, 2021, which resulted in changes to certain fair value estimates made as of the date of acquisition. Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously recorded results have changed. The below table reflects the changes in the estimated fair value as they impact goodwill at December 31, 2021: (Dollars in thousands) Change in fair value Net assets Cash and cash equivalents $ ( 3,403 ) Total investment securities ( 11,341 ) Net loans 10,857 Bank premises and equipment, net of accumulated depreciation ( 3,737 ) OREO ( 20 ) Other assets 7,664 Deposits 4,579 Accrued expenses and other liabilities ( 1,777 ) Change in goodwill $ 2,822 The recorded goodwill associated with the Premier merger is related to expected synergies and operational efficiencies to be gained from the combination of Premier with Peoples' operations. None of the goodwill associated with the Premier merger is expected to be deductible for tax purposes. The geographic locations of Premier will allow Peoples to continue to grow the loan and deposit portfolios, while also increasing Peoples' ability to penetrate the new markets with wealth management and insurance services, which should benefit Peoples in future periods. Additional information regarding other intangibles recognized in the acquisition can be found in "Note 7 Goodwill and Other Intangible Assets." The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash and due from banks is a reasonable estimate of fair value. Investment Securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies. Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan, related collateral, classification status, fixed or variable interest rate, term, amortization status and current discount rates. Loans were grouped together according to similar characteristics when applying various valuation techniques. The discount rates used for loans are based on current market rates at the acquisition date for new originations for comparable loans and include adjustments for liquidity. The discount rate does not include a factor for credit losses as that has been 130 included as a reduction to the estimated cash flows. Fair values for loans that were individually assessed were based on third-party valuations. Bank Premises and Equipment: The fair values of premises were based on a market approach, with third-party appraisals and broker opinions of value obtained for land, office and branch space. OREO: The fair values of OREO were based on a market approach, with third-party appraisals and broker opinions of value obtained for land and buildings. Customer Deposit Intangible: The customer deposit intangible represents the low cost of funding acquired core deposits provide relative to a marginal cost of funds. The fair value was estimated based on a discounted cash flow methodology that gave consideration to expected customer attrition rates, the net maintenance cost of the deposit base, the alternative cost of funds, and the interest costs associated with customer deposits. The customer deposit intangible is being amortized over 10 years based upon the period over which estimated economic benefits are estimated to be received. Deposits: The fair values used for the demand and savings deposits equal the amount payable on demand at the acquisition date. The fair values for time deposits were estimated using a discounted cash flow calculation that applies interest rates being offered at the acquisition date to the contractual interest rates on such time deposits. Borrowings: Short-term borrowings consist of overnight repurchase agreements, and given their short-term nature book value approximated fair value. The fair values of long-term borrowings, including trust preferred securities, are estimated using discounted cash flow analyses, based on incremental borrowing rates at acquisition date for similar types of instruments. Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes loans that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" loans. Acquired purchased credit deteriorated loans are reported net of the unamortized fair value adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The following table details the fair value adjustment for acquired purchased credit deteriorated loans as of the acquisition date: (Dollars in thousands) Par Value Allowance for Credit Losses Non-Credit (Discount) Premium Fair Value Purchased credit deteriorated loans Construction $ 20,231 $ ( 2,006 ) $ ( 198 ) $ 18,027 Commercial real estate, other 105,185 ( 9,503 ) ( 2,184 ) 93,498 Commercial and industrial 15,205 ( 4,048 ) 241 11,398 Residential real estate 31,973 ( 1,206 ) ( 669 ) 30,098 Home equity lines of credit 2,014 ( 66 ) ( 103 ) 1,845 Consumer 1,614 ( 115 ) 60 1,559 Fair value $ 176,222 $ ( 16,944 ) $ ( 2,853 ) $ 156,425 Peoples' operating results for 2021 include the operating results of the acquired assets and assumed liabilities of Premier subsequent to the acquisition on September 17, 2021. Due to the conversion of Premier systems during the third quarter of 2021, as well as other streamlining and integration of the operating activities into those of Peoples, historical reporting for the former Premier operations is impracticable and the disclosures of revenue from the assets acquired and income before income taxes is impracticable for the period subsequent to the acquisition. The following table presents unaudited pro forma information as if the acquisition of Premier had occurred on January 1, 2020. The pro forma adjustments include any changes in interest income due to the accretion of discounts, or amortization of premiums, associated with the fair value adjustments to acquired loans, interest-bearing deposits, long-term borrowings, trust preferred securities and customer deposit intangibles that would have resulted had the assets and liabilities been acquired as of January 1, 2020. The pro forma information excludes Peoples' acquisition-related expenses, which primarily included, but were not limited to, salaries and employee benefit costs, severance costs, professional fees, marketing expenses and deconversion costs. Those acquisition-related expenses totaled $ 19.0 million and $ 0.9 million for 2021 and 2020, respectively. The pro forma information also excludes a provision of credit losses of $12.1 million recorded to establish an allowance for credit losses for non-purchased credit deteriorated loans of $ 11.7 million, and a liability for unfunded commitments of $ 0.4 million, both relating to the acquired loans. The pro forma information does not necessarily reflect the results of operations that would have occurred had Peoples acquired Premier on January 1, 2020. Additionally, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts. 131 Unaudited Pro Forma For Twelve Months Ended (Dollars in thousands) December 31, 2021 December 31, 2020 Net interest income $ 240,143 $ 209,065 Non-interest income 79,540 72,118 Net income 91,394 58,663 Pikeville, Kentucky Insurance Agency On May 4, 2021, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc. Total consideration for this transaction was $ 325,000 . Peoples accounted for this transaction as a business combination under the acquisition method. NS Leasing, LLC Peoples Bank entered into an Asset Purchase Agreement, dated March 24, 2021 with NS Leasing, LLC, which is headquartered in Burlington, Vermont, and does business as “North Star Leasing”. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as a division of Peoples Bank on April 1, 2021. Peoples Bank acquired assets comprising NSL’s equipment finance business and assumed from NSL certain specified liabilities for total cash consideration of $ 116.5 million, plus 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 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 $ 0.7 million in non-interest expense during the third and fourth quarters of 2021 related to an update to the estimated earn-out provision of $ 3.0 million. The bonus earn-out provision recorded by Peoples related to the NSL acquisition was determined based on a weighting of probability of outcomes, at present value. Peoples predominately weighted the outcomes of the factors at approximately 100% payout expectation of the base earn-out, which is $ 2.5 million in total. Adjusting weighting into the bonus earn-out expectation in the third and fourth quarter resulted in an additional $ 0.7 million of potential payout. NSL met the minimums for the base earn-out payment and the targets set at acquisition for a 100% payout of the base earn-out. As of December 31, 2021, leases had grown to $ 122.5 million. Peoples accounted for this transaction as a business combination under the acquisition method. The recorded goodwill associated with the NSL acquisition is related to expected synergies and operational efficiencies to be gained from the combination of NSL with Peoples' operations. The employees retained from the NSL acquisition should allow Peoples to continue to grow the lease portfolio, along with Peoples' resources, and should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill. The following table provides the preliminary purchase price calculation as of the date of acquisition for NSL and the assets acquired and liabilities assumed at their estimated fair values. 132 (Dollars in thousands) Total purchase price (a) $ 118,846 Net assets at fair value Assets Cash and due from banks $ 216 Net leases 82,833 Bank premises and equipment, net of accumulated depreciation 470 Other intangible assets 14,009 Other assets 1,225 Total assets $ 98,753 Liabilities Accrued expenses and other liabilities $ 4,627 Total liabilities $ 4,627 Net assets $ 94,126 Goodwill $ 24,720 (a) Includes preliminary contingent consideration related to the bonus earn-out provision of $ 2.3 million. Peoples recorded an additional $ 0.7 million in non-interest expense related to an update to the estimated earn-out provision. Leases acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes leases that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" leases. These leases are recorded at the purchase price, and an allowance for credit losses is determined using the same methodology as for other leases. Acquired purchased credit deteriorated leases are reported net of the unamortized fair value adjustment. The following table details the fair value adjustment for acquired purchased credit deteriorated leases as of the acquisition date: (Dollars in thousands) NSL Purchased credit deteriorated leases Par value $ 5,248 Allowance for credit losses ( 493 ) Non-credit premium 85 Fair value $ 4,840 Peoples recorded acquisition-related expenses related to the NSL acquisition which included $ 2.1 million in professional fees; $ 0.2 million in other non-interest expense; $ 3,000 in salaries and employee benefit costs; $ 3,000 in data processing and software expense; $ 2,000 in net occupancy and equipment expense; and $ 2,000 in marketing expense. 133 Note 21 Parent Company Only Financial Information Condensed Balance Sheets December 31, (Dollars in thousands) 2021 2020 Assets: Cash and due from other banks $ 50 $ 50 Interest-bearing deposits in subsidiary bank 15,202 14,313 Due from subsidiary bank 547 659 Other investment securities 220 225 Investments in subsidiaries: Bank 834,037 561,870 Non-bank 12,278 11,771 Other assets 5,248 3,546 Total assets $ 867,582 $ 592,434 Liabilities: Accrued expenses and other liabilities $ 5,660 $ 6,253 Dividends payable 767 602 Mandatorily redeemable capital securities of subsidiary trusts 16,130 9,906 Total liabilities 22,557 16,761 Total stockholders' equity 845,025 575,673 Total liabilities and stockholders' equity $ 867,582 $ 592,434 Condensed Statements of Income Year Ended December 31, (Dollars in thousands) 2021 2020 2019 Income: Dividends from subsidiary bank $ 29,000 $ 49,000 $ 37,000 Dividends from non-bank subsidiary 1,750 — — Interest and other income 73 16 81 Total income 30,823 49,016 37,081 Expense: Trust preferred securities expense 367 373 534 Intercompany management fees 1,303 1,369 1,607 Other expense 5,675 5,376 5,432 Total expense 7,345 7,118 7,573 Income before federal income taxes and equity in undistributed earnings of subsidiaries 23,478 41,898 29,508 Applicable income tax expense ( 1,295 ) ( 1,128 ) ( 1,670 ) Equity in (excess dividends from) undistributed earnings of subsidiaries 22,782 ( 8,259 ) 22,517 Net income $ 47,555 $ 34,767 $ 53,695 134 Statements of Cash Flows Year Ended December 31, (Dollars in thousands) 2021 2020 2019 Operating activities Net income $ 47,555 $ 34,767 $ 53,695 Adjustments to reconcile net income to cash provided by operations: Depreciation, amortization and accretion, net 6,224 161 168 (Equity in) excess dividends from undistributed earnings of subsidiaries ( 22,782 ) 8,259 ( 22,517 ) Gain on investment securities — ( 8 ) — Other, net 3,930 8,492 3,801 Net cash provided by operating activities 34,927 51,671 35,147 Investing activities Net proceeds from sales and maturities of investment securities 10 10 — Investment in subsidiaries ( 16,282 ) ( 35,238 ) ( 18,874 ) Decrease in receivable from subsidiary 16,344 34,719 18,869 Business combinations, net of cash received ( 710 ) — ( 1,438 ) Other, net ( 1,998 ) ( 76 ) 226 Net cash used in investing activities ( 2,636 ) ( 585 ) ( 1,217 ) Financing activities Purchase of treasury stock ( 1,306 ) ( 30,409 ) ( 1,650 ) Proceeds from issuance of common shares 906 594 6 Cash dividends paid ( 31,002 ) ( 27,052 ) ( 25,942 ) Net cash used in financing activities ( 31,402 ) ( 56,867 ) ( 27,586 ) Net increase (decrease) in cash and cash equivalents 889 ( 5,781 ) 6,344 Cash and cash equivalents at the beginning of year 14,363 20,144 13,800 Cash and cash equivalents at the end of year $ 15,252 $ 14,363 $ 20,144 Supplemental cash flow information: Interest paid $ 331 $ 385 $ 544 135 PART III ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information concerning (a) directors of Peoples Bancorp Inc. ("Peoples"), (b) the procedures by which shareholders of Peoples may recommend nominees to Peoples' Board of Directors, (c) the Audit Committee of Peoples' Board of Directors and (d) the Board of Directors' determination that Peoples has an "audit committee financial expert" serving on its Audit Committee required by Items 401, 407(c)(3), 407(d)(4) and 407(d)(5) of SEC Regulation S-K will be included in the sections captioned "PROPOSAL NUMBER 1: ELECTION OF DIRECTORS," "THE BOARD AND COMMITTEES OF THE BOARD" and "NOMINATING PROCEDURES" of the definitive Proxy Statement of Peoples Bancorp Inc. relating to the Annual Meeting of Shareholders to be held on April 28, 2022 ("Peoples' Definitive Proxy Statement"), which sections are incorporated herein by reference. The procedures by which shareholders of Peoples may recommend nominees to Peoples' Board of Directors have not changed materially from those described in Peoples' definitive Proxy Statement for the 2021 Annual Meeting of Shareholders held on April 22, 2021. The information regarding Peoples' executive officers required by Item 401 of SEC Regulation S-K will be included in the section captioned "EXECUTIVE OFFICERS" of Peoples' Definitive Proxy Statement, which section is incorporated herein by reference. Information regarding beneficial ownership reporting compliance under Section 16(a) of the Securities Exchange Act of 1934, as amended, is incorporated by reference from the text to be included under the caption "DELINQUENT SECTION 16(a) REPORTS" of Peoples' Definitive Proxy Statement, to the extent that disclosure of information is required. The Board of Directors of Peoples has adopted charters for each of the Audit Committee, the Compensation Committee, the Executive Committee, the Governance and Nominating Committee, and the Risk Committee. In accordance with the requirements of Rule 5610 of the Nasdaq Stock Market Corporate Governance Requirements, the Board of Directors of Peoples has adopted a Code of Ethics covering the directors, officers and employees of Peoples and its subsidiaries, including, without limitation, the principal executive officer, the principal financial officer, the principal accounting officer and the controller of Peoples. Peoples intends to disclose the following events, if they occur, in a Current Report on Form 8-K and on the "Investor Relations" page of Peoples' Internet website at www.peoplesbancorp.com within four business days following their occurrence: (A) the date and nature of any amendment to a provision of Peoples' Code of Ethics that (a) applies to the principal executive officer, principal financial officer, principal accounting officer or controller of Peoples, or persons performing similar functions, (b) relates to any element of the code of ethics definition set forth in Item 406(b) of SEC Regulation S-K, and (c) is not a technical, administrative or other non-substantive amendment; and (B) a description (including the nature of the waiver, the name of the person to whom the waiver was granted and the date of the waiver) of any waiver, including an implicit waiver, from a provision of the Code of Ethics granted to the principal executive officer, principal financial officer, principal accounting officer or controller of Peoples, or persons performing similar functions, that relates to one or more of the elements of the code of ethics definition set forth in Item 406(b) of SEC Regulation S-K. In addition, Peoples will disclose any waivers from the provisions of the Code of Ethics granted to a director or an executive officer of Peoples in a Current Report on Form 8-K within four business days following their occurrence. Each of the Code of Ethics, the Audit Committee Charter, the Compensation Committee Charter, the Executive Committee Charter, the Governance and Nominating Committee Charter and the Risk Committee Charter is posted under the "Corporate Overview – Governance Documents" tab of the "Investor Relations" page of Peoples' Internet website. Interested persons may also obtain copies of the Code of Ethics without charge by writing to Peoples Bancorp Inc., Attention: Corporate Secretary, 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738. ITEM 11 EXECUTIVE COMPENSATION The information required by this Item 11 will be included in the sections captioned "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION," "EXECUTIVE COMPENSATION: COMPENSATION DISCUSSION AND ANALYSIS," "SUMMARY COMPENSATION TABLE FOR 2021," "GRANTS OF PLAN-BASED AWARDS FOR 2021," "OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2021," "OPTION EXERCISES AND STOCK VESTED FOR 2021," "PENSION BENEFITS FOR 2021," "NON-QUALIFIED DEFERRED COMPENSATION FOR 2021," "OTHER POTENTIAL POST-EMPLOYMENT PAYMENTS," "DIRECTOR COMPENSATION" and "COMPENSATION COMMITTEE REPORT" of Peoples' Definitive Proxy Statement, which sections are incorporated herein by reference. 136 ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item 12 regarding the security ownership of certain beneficial owners and management will be included in the section captioned "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" of Peoples' Definitive Proxy Statement, which section is incorporated herein by reference. Equity Compensation Plan Information The table below provides information as of December 31, 2021, with respect to compensation plans under which common shares of Peoples are authorized for issuance to directors, officers or employees in exchange for consideration in the form of goods or services. These compensation plans include: (i) the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"); (ii) the Peoples Bancorp Inc. Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries (the "Directors' Deferred Compensation Plan"); and (iii) the Peoples Bancorp Inc. Employee Stock Purchase Plan (the "ESPP"). All of these compensation plans were approved by the shareholders of Peoples. Plan Category (a) Number of common shares to be issued upon exercise of outstanding options, warrants and rights (b) Weighted-average exercise price of outstanding options, warrants and rights (c) Number of common shares remaining available for future issuance under equity compensation plans (excluding common shares reflected in column (a)) Equity compensation plans approved by shareholders 378,457 (1) $ — (2) 754,416 (3) Total 378,457 $ — 754,416 (1) Includes an aggregate of 336,268 restricted common shares subject to time-based or performance-based vesting restrictions granted under the 2006 Equity Plan, and 42,189 common shares allocated to participants' bookkeeping accounts under the Directors' Deferred Compensation Plan. (2) The weighted-average exercise price does not take into account the common shares allocated to participants' time-based or performance-based restricted common share awards granted under the 2006 Equity Plan or bookkeeping accounts under the Directors' Deferred Compensation Plan. (3) Includes 556,711 common shares remaining available for future grants under the 2006 Equity Plan at December 31, 2021, as well as 197,705 common shares remaining available for issuance and delivery under the ESPP. No amount is included for potential future allocations to participants' bookkeeping accounts under the Directors' Deferred Compensation Plan since the terms of the Directors' Deferred Compensation Plan do not provide for a specified limit on the number of common shares which may be allocated to participants' bookkeeping accounts. Additional information regarding Peoples' stock-based compensation plans can be found in "Note 18 Stock-Based Compensation" of the Notes to the Consolidated Financial Statements. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item 13 will be included in the sections captioned "TRANSACTIONS WITH RELATED PERSONS," "PROPOSAL NUMBER 1: ELECTION OF DIRECTORS," "THE BOARD AND COMMITTEES OF THE BOARD" and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" of Peoples' Definitive Proxy Statement, which sections are incorporated by reference. ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item 14 will be included in the section captioned "INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" of Peoples' Definitive Proxy Statement, which section is incorporated herein by reference. 137 PART IV ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements: The following reports of the independent registered public accounting firm and consolidated financial statements of Peoples Bancorp Inc. and subsidiaries are filed as required by "ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" and set forth immediately following "ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS" of this Form 10-K: Page Report of Independent Registered Public Accounting Firm (Ernst & Young LLP) on Effectiveness of Internal Control Over Financial Reporting 84 Report of Independent Registered Public Accounting Firm (Ernst & Young LLP) on Consolidated Financial Statements 86 Consolidated Balance Sheets as of December 31, 2021 and 2020 88 Consolidated Statements of Income for each of the fiscal years in the three-year period ended December 31, 2021 89 Consolidated Statements of Comprehensive Income for each of the fiscal years in the three-year period ended December 31, 2021 90 Consolidated Statements of Stockholders’ Equity for each of the fiscal years in the three-year period ended December 31, 2021 91 Consolidated Statements of Cash Flows for each of the fiscal years in the three-year period ended December 31, 2021 93 Notes to the Consolidated Financial Statements 96 Peoples Bancorp Inc. Parent Company Only Financial Information is included in Note 21 of the Notes to the Consolidated Financial Statements 142 (a)(2) Financial Statement Schedules All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (a)(3) Exhibits The documents listed in the Index to Exhibits that immediately precedes the signature page of this Form 10-K, are filed/furnished with this Form 10-K as exhibits or incorporated into this Form 10-K by reference as noted. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K is identified as such in the list below. (b) Exhibits The documents listed in the Index to Exhibits that immediately precedes the signature page of this Form 10-K are filed/furnished with this Form 10-K as exhibits or incorporated into this Form 10-K by reference as noted. (c) Financial Statement Schedules None ITEM 16 FORM 10-K SUMMARY Not applicable. 138 INDEX TO EXHIBITS Exhibit Number Description Exhibit Location 2.1 Agreement and Plan of Merger, dated as of October 23, 2017, between Peoples Bancorp Inc. and ASB Financial Corp. + Included as Annex A to the preliminary proxy statement/prospectus which forms a part of the Registration Statement of Peoples Bancorp Inc. on Form S-4/A filed on January 19, 2018 (Registration No. 333-222054) 2.2 Agreement and Plan of Merger, dated as of October 29, 2018, as amended on December 18, 2018, between Peoples Bancorp Inc. and First Prestonsburg Bancshares Inc. + Included as Annex A to the preliminary proxy statement/prospectus which forms a part of the Registration Statement of Peoples Bancorp Inc. on Form S-4/A filed on December 20, 2018 (Registration No. 333-228745) 2.3 Agreement and Plan of Merger, dated as of March 26, 2021, between Peoples Bancorp Inc. and Premier Financial Bancorp, Inc. ++ Included as Annex A to the preliminary proxy statement/prospectus which forms a part of the Registration Statement of Peoples Bancorp Inc. on Form S-4/A filed on June 1, 2021 (Registration No. 333-256040) 3.1(a) Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on May 3, 1993) P Incorporated herein by reference to Exhibit 3(a) to the Registration Statement of Peoples Bancorp Inc. on Form 8-B filed on July 20, 1993 (File No. 0-16772) 3.1(b) Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 22, 1994) Incorporated herein by reference to Exhibit 3.1(b) to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended September 30, 2017 (File No. 0-16772) ("Peoples' September 30, 2017 Form 10-Q") 3.1(c) Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 9, 1996) Incorporated herein by reference to Exhibit 3.1(c) to Peoples’ September 30, 2017 Form 10-Q 3.1(d) Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 23, 2003) Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended March 31, 2003 (File No. 0-16772) (“Peoples’ March 31, 2003 Form 10-Q”) 3.1(e) Certificate of Amendment by Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on January 22, 2009) Incorporated herein by reference to Exhibit 3.1 to the Current Report of Peoples Bancorp Inc. on Form 8-K dated and filed on January 23, 2009 (File No. 0-16772) 3.1(f) Certificate of Amendment by Directors to Articles filed with the Ohio Secretary of State on January 28, 2009, evidencing adoption of amendments by the Board of Directors of Peoples Bancorp Inc. to Article FOURTH of the Amended Articles of Incorporation to establish express terms of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value, of Peoples Bancorp Inc. Incorporated herein by reference to Exhibit 3.1 to the Current Report of Peoples Bancorp Inc. on Form 8-K dated and filed on February 2, 2009 (File No. 0-16772) 3.1(g) Certificate of Amendment by the Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on July 28, 2021) Incorporated herein by reference to Exhibit 3.1(g) to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended June 30, 2021 (File No. 0-16772) ("Peoples' June 30, 2021 Form 10-Q") + Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of SEC Regulation S-K, as in effect at the time of filing of the Agreement and Plan of Merger. A copy of any omitted schedules or exhibits will be furnished supplementally by Peoples Bancorp Inc. to the SEC on a confidential basis upon request. ++ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. A copy of any omitted schedules or exhibits will be furnished supplementally by Peoples Bancorp Inc. to the SEC on a confidential basis upon request. P Peoples Bancorp Inc. filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format. 139 Exhibit Number Description Exhibit Location 3.2(a) Code of Regulations of Peoples Bancorp Inc. P Incorporated herein by reference to Exhibit 3(b) to the Registration Statement of Peoples Bancorp Inc. on Form 8-B filed July 20, 1993 (File No. 0-16772) 3.2(b) Certified Resolutions Regarding Adoption of Amendments to Sections 1.03, 1.04, 1.05, 1.06, 1.08, 1.10, 2.03(C), 2.07, 2.08, 2.10 and 6.02 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 10, 2003 Incorporated herein by reference to Exhibit 3(c) to Peoples’ March 31, 2003 Form 10-Q 3.2(c) Certificate regarding adoption of amendments to Sections 3.01, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08 and 3.11 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 8, 2004 Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended March 31, 2004 (File No. 0-16772) 3.2(d) Certificate regarding adoption of amendments to Sections 2.06, 2.07, 3.01 and 3.04 of Peoples Bancorp Inc.’s Code of Regulations by the shareholders on April 13, 2006 Incorporated herein by reference to Exhibit 3.1 to the Current Report of Peoples Bancorp Inc. on Form 8-K dated and filed on April 14, 2006 (File No. 0-16772) 3.2(e) Certificate regarding adoption of an amendment to Section 2.01 of Peoples Bancorp Inc.'s Code of Regulations by the shareholders on April 22, 2010 Incorporated herein by reference to Exhibit 3.2(e) to the Quarterly Report on Form 10-Q/A (Amendment No. 1) of Peoples Bancorp Inc. for the quarterly period ended June 30, 2010 (File No. 0-16772) 3.2(f) Certificate regarding Adoption of Amendment to Division (D) of Section 2.02 of Code of Regulations of Peoples Bancorp Inc. by the Shareholders at the Annual Meeting of Shareholders on April 26, 2018 Incorporated herein by reference to Exhibit 3.1 to the Current Report of Peoples Bancorp Inc. on Form 8-K dated and filed on June 28, 2018 (File No. 0-16772) ("Peoples' June 28, 2018 Form 8-K") 3.2(g) Code of Regulations of Peoples Bancorp Inc. (This document represents the Code of Regulations of Peoples Bancorp Inc. in compiled form incorporating all amendments.) Incorporated herein by reference to Exhibit 3.2 to Peoples' June 28, 2018 Form 8-K 4.1 Agreement to furnish instruments and agreements defining rights of holders of long-term debt Filed herewith 4.2(a) Indenture, dated as of June 25, 2007, between NB&T Financial Group, Inc., as issuer, and Wilmington Trust Company, as trustee, relating to Fixed/Floating Rate Junior Subordinated Debt Securities due 2037 Incorporated herein by reference to Exhibit 4.1(a) to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended June 30, 2015 (File No. 0-16772) ("Peoples' June 30, 2015 Form 10-Q") 4.2(b) First Supplemental Indenture, dated June 5, 2015, and made to be effective as of 6:00 p.m., Eastern Standard Time, on March 6, 2015, between Wilmington Trust Company, as trustee, and Peoples Bancorp Inc., as successor to NB&T Financial Group, Inc. Incorporated herein by reference to Exhibit 4.1(b) to Peoples' June 30, 2015 Form 10-Q 4.3(a) Amended and Restated Declaration of Trust of NB&T Statutory Trust III, dated and effective as of June 25, 2007 NOTE: Pursuant to the First Supplemental Indenture, dated June 5, 2015, and made to be effective as of 6:00 p.m., Eastern Standard Time, on March 6, 2015, between Wilmington Trust Company, as trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc. succeeded to and was substituted for NB&T Financial Group, Inc. as "Sponsor" Incorporated herein by reference to Exhibit 4.2(a) to Peoples' June 30, 2015 Form 10-Q 4.3(b) Notice of Removal of Administrators and Appointment of Replacements, dated June 5, 2015, delivered to Wilmington Trust Company by the Successor Administrators named therein and Peoples Bancorp Inc. Incorporated herein by reference to Exhibit 4.2(b) to Peoples' June 30, 2015 Form 10-Q 4.3(c) Notice of Removal of Administrator and Appointment of Replacement, dated February 11, 2021, delivered to Wilmington Trust Company by the Continuing Administrators and the Successor Administrator named therein and Peoples Bancorp Inc. Incorporated herein by reference to Exhibit 4.3(c) to the Annual Report on Form 10-K of Peoples Bancorp Inc. for the fiscal year ended December 31, 2020 (File No. 0-16772) P Peoples Bancorp Inc. filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format. 140 Exhibit Number Description Exhibit Location 4.4 Guarantee Agreement, dated as of June 25, 2007, between NB&T Financial Group, Inc. and Wilmington Trust Company, as guarantee trustee, relating to the Capital Securities (as defined therein) NOTE: Pursuant to the First Supplemental Indenture, dated June 5, 2015, and made to be effective as of 6:00 p.m., Eastern Standard Time, on March 6, 2015, between Wilmington Trust Company, as trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc. succeeded to and was substituted for NB&T Financial Group, Inc. as "Guarantor" Incorporated herein by reference to Exhibit 4.3 to Peoples' June 30, 2015 Form 10-Q 4.5(a) Indenture, dated as of February 26, 2004, between First National Bankshares Corporation, as Issuer, and Wilmington Trust Company, as Trustee, relating to Floating Rate Junior Subordinated Debt Securities Due 2034 Incorporated herein by reference to Exhibit 4.1(a) to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended September 30, 2021 (File No. 0-16772) ("Peoples' September 30, 2021 Form 10-Q") 4.5(b) First Supplemental Indenture, dated as of January 15, 2016, between Wilmington Trust Company, as Trustee, and Premier Financial Bancorp, Inc., as successor to First National Bankshares Corporation Incorporated herein by reference to Exhibit 4.1(b) to Peoples' September 30, 2021 Form 10-Q 4.5(c) Second Supplemental Indenture, dated as of September 17, 2021, between Wilmington Trust Company, as Trustee, and Peoples Bancorp Inc., as successor to Premier Financial Bancorp, Inc. Incorporated herein by reference to Exhibit 4.1 (c) to Peoples' September 30, 2021 Form 10-Q 4.6 Amended and Restated Declaration of Trust of FNB Capital Trust One, dated as of February 26, 2004 NOTE: Pursuant to the First Supplemental Indenture, dated as of January 15, 2016, between Wilmington Trust Company, as Trustee, and Premier Bancorp, Inc., Premier Bancorp, Inc., succeeded to and was substituted for First National Bankshares Corporation as "Sponsor" and pursuant to the Second Supplemental Indenture, dated as of September 17, 2021, between Wilmington Trust Company, as Trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc., succeeded and was substituted for Premier Financial Bancorp, Inc. as "Sponsor" Incorporated herein by reference to Exhibit 4.2 to Peoples' September 30, 2021 Form 10-Q 4.7 Notice of Removal of Administrators and Appointment of Replacements, dated September 17, 2021, delivered to Wilmington Trust Company by the Successor Administrators named therein and Peoples Bancorp Inc. Incorporated herein by reference to Exhibit 4.3 to Peoples' September 30, 2021 Form 10-Q 4.8 Guarantee Agreement, dated as of February 26, 2004, between First National Bankshares Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee, related to the Capital Securities (as defined therein) NOTE: Pursuant to the First Supplemental Indenture, dated as of January 15, 2016, between Wilmington Trust Company, as Trustee, and Premier Financial Bancorp, Inc., Premier Financial Bancorp, Inc. succeeded to and was substituted for First National Bankshares Corporation as "Guarantor" and pursuant to the Second Supplemental Indenture, dated as of September 17, 2021, between Wilmington Trust Company, as Trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc. succeeded and was substituted for Premier Financial Bancorp, Inc. as "Guarantor" Incorporated herein by reference to Exhibit 4.4 to Peoples' September 30, 2021 Form 10-Q 4. 9 Description of Common Shares of Peoples Bancorp Inc. Filed herewith 10.1(a) Peoples Bancorp Inc. Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries (Amended and Restated Effective June 26, 2014)* Incorporated herein by reference to Exhibit 10.1(a) the Annual Report on Form 10-K of Peoples Bancorp Inc. for the fiscal year ended December 31, 2015 (File No. 0-16772) *Management Compensation Plan or Agreement 141 Exhibit Number Description Exhibit Location 10.1(b) Rabbi Trust Agreement, made January 6, 1998, between Peoples Bancorp Inc. and The Peoples Banking and Trust Company (predecessor to Peoples Bank, National Association and now known as Peoples Bank following conversion to state-chartered bank) as Trustee* Incorporated herein by reference to Exhibit 10.1(c) to the Annual Report on Form 10-K of Peoples Bancorp Inc. for the fiscal year ended December 31, 2007 (File No. 0-16772) 10.2 Summary of Peoples Bancorp Inc. Annual Incentive Program for Executive Officers and other employees of Peoples Bancorp Inc. [Effective beginning with the fiscal year beginning January 1, 2012 and ending with the fiscal year ended December 31, 2019]* Incorporated herein by reference to Exhibit 10.2(c) to the Annual Report on Form 10-K of Peoples Bancorp Inc. for the fiscal year ended December 31, 2011 (File No. 0-16772) 10.3 Summary of Peoples Bancorp Inc. Annual Incentive Program for Executive Officers and other employees of Peoples Bancorp Inc. [Effective for fiscal year ended December 31, 2020]* Incorporated herein by reference to Exhibit 10.3 to the Annual Report on Form 10-K of Peoples Bancorp Inc. for the fiscal year ended December 31, 2019 (File No. 0-16772) ("Peoples' 2019 Form 10-K") 10.4 Summary of Peoples Bancorp Inc. Annual Incentive Program for Executive Officers and other employees of Peoples Bancorp Inc. [Effective beginning with the fiscal year beginning January 1, 2021]* Incorporated herein by reference to Exhibit 10.4 to the Annual Report on Form 10-K of Peoples Bancorp Inc. for the fiscal year ended December 31, 2020 (File No. 0-16772) 10.5 Summary of Perquisites for Executive Officers of Peoples Bancorp Inc.* Filed herewith 10.6 Summary of Base Salaries for Executive Officers of Peoples Bancorp Inc.* Filed herewith 10.7 Summary of Compensation for Directors of Peoples Bancorp Inc.* Filed herewith 10.8 Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (approved by the shareholders of Peoples Bancorp Inc. on April 26, 2018; successor to the Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan, the Peoples Bancorp Inc. Amended and Restated 2006 Equity Plan and the Peoples Bancorp Inc. 2006 Equity Plan)* Incorporated herein by reference to Exhibit 99 to the Current Report of Peoples Bancorp Inc. on Form 8-K dated and filed on April 30, 2018 (File No. 0-16772) 10.9 Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan Time-Based Restricted Stock Award Agreement (for Executives) used and to be used to evidence awards of time-based restricted stock granted to executives of Peoples Bancorp Inc. on and after July 31, 2018 * Incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended September 30, 2018 (File No. 0-16772) ("Peoples' September 30, 2018 Form 10-Q") 10.10 Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan Performance-Based Restricted Stock Award Agreement (for Executives) used and to be used to evidence awards of performance-based restricted stock granted to executives of Peoples Bancorp Inc. on and after July 31, 2018* Incorporated herein by reference to Exhibit 10.2 to Peoples' September 30, 2018 Form 10-Q 10.11 Peoples Bancorp Inc. Amended and Restated Nonqualified Deferred Compensation Plan (adopted effective July 11, 2019)* Incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended June 30, 2019 (File No. 0-16772) 10.1 2 Peoples Bancorp Inc. Amended and Restated Change in Control Agreement between Peoples Bancorp Inc. and Charles W. Sulerzyski (adopted April 4, 2011)* Incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended June 30, 2011 (File No. 0-16772) 10.1 3 Peoples Bancorp Inc. Employee Stock Purchase Plan* Incorporated herein by reference to Exhibit 10.1 to the Current Report of Peoples Bancorp Inc. on Form 8-K dated and filed on April 28, 2014 (File No. 0-16772) 10.1 4 Form of Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan Performance-Based Restricted Stock Agreement used to evidence awards of performance-based restricted stock granted to employees of Peoples Bancorp Inc. on and after January 29, 2015 and prior to July 31, 2018* Incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended March 31, 2017 (File No. 0-16772) ("Peoples' March 31, 2017 Form 10-Q") *Management Compensation Plan or Agreement 142 Exhibit Number Description Exhibit Location 10.1 5 Form of Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan Performance-Based Restricted Stock Award Agreement used to evidence awards of performance-based restricted stock granted to executive officers of Peoples Bancorp Inc. on and after January 29, 2015 and prior to January 1, 2018* Incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended March 31, 2015 (File No. 0-16772) 10.1 6 Form of Peoples Bancorp Inc. Change in Control Agreement to be adopted by Peoples Bancorp Inc. and individuals who are first elected as executive officers of Peoples Bancorp Inc. after March 24, 2016* Incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended March 31, 2016 (File No. 0-16772) 10.1 7 Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Douglas Wyatt (adopted May 2, 2016)* Incorporated herein by reference to Exhibit 10.1 to Peoples' March 31, 2017 Form 10-Q 10. 18 Form of Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan Performance Unit Award Agreement used and to be used to evidence grants of performance units to executive officers of Peoples Bancorp Inc. on and after July 26, 2017* Incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended June 30, 2017 (File No. 0-16772) 10. 19 Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Ryan Kirkham (adopted January 1, 2019)* Incorporated herein by reference to Exhibit 10.24 to Peoples' 2019 Form 10-K 10. 20 Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Jason M. Eakle (adopted April 1, 2020)* Incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Peoples Bancorp Inc. for the quarterly period ended June 30, 2020 (File No. 0-16772) 10. 21 Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Kathryn M. Bailey (adopted October 1, 2020)* Incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form-10-Q of Peoples Bancorp Inc. for the quarterly period ended September 30, 2020 (File No. 0-16772) ("Peoples September 30, 2020 Form 10-Q") 10. 22 Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Mark J. Augenstein (adopted October 1, 2020)* Incorporated herein by reference to Exhibit 10.2 to Peoples' September 30, 2020 Form 10-Q 10.23 Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Tyler Wilcox (adopted October 1, 2020)* Incorporated herein by reference to Exhibit 10.3 to Peoples' September 30, 2020 Form 10-Q 21 Subsidiaries of Peoples Bancorp Inc. Filed herewith 23 Consent of Independent Registered Public Accounting Firm – Ernst & Young LLP Filed herewith 24 Powers of Attorney of Directors and Executive Officers of Peoples Bancorp Inc. Filed herewith 31.1 Rule 13a-14(a)/15d-14(a) Certifications [President and Chief Executive Officer] Filed herewith 31.2 Rule 13a-14(a)/15d-14(a) Certifications [Executive Vice President, Chief Financial Officer and Treasurer] Filed herewith 32 Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code [President and Chief Executive Officer; and Executive Vice President, Chief Financial Officer and Treasurer] Furnished herewith 101.INS Inline XBRL Instance Document ## Submitted electronically herewith # 101.SCH Inline XBRL Taxonomy Extension Schema Document Submitted electronically herewith # 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Submitted electronically herewith # 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Submitted electronically herewith # 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Submitted electronically herewith # *Management Compensation Plan or Agreement 143 Exhibit Number Description Exhibit Location 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Submitted electronically herewith # 104 Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) Submitted electronically herewith # Attached as Exhibit 101 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of Peoples Bancorp Inc. are the following documents formatted in Inline XBRL (eXtensive Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2021 and December 31, 2020; (ii) Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019; (iv) Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021, 2020 and 2019; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019; and (vi) Notes to the Consolidated Financial Statements. ## The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. 144 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. PEOPLES BANCORP INC. Date: March 15, 2022 By: /s/ CHARLES W. SULERZYSKI Charles W. Sulerzyski President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ CHARLES W. SULERZYSKI President, Chief Executive Officer and Director (Principal Executive Officer) 3/15/2022 Charles W. Sulerzyski /s/ KATIE BAILEY Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) 3/15/2022 Katie Bailey /s/ TARA M. ABRAHAM* Director 3/15/2022 Tara M. Abraham /s/ S. CRAIG BEAM* Director 3/15/2022 S. Craig Beam /s/ GEORGE W. BROUGHTON* Director 3/15/2022 George W. Broughton /s/ DAVID F. DIERKER* Director 3/15/2022 David F. Dierker /s/ JAMES S. HUGGINS* Director 3/15/2022 James S. Huggins /s/ BROOKE W. JAMES* Director 3/15/2022 Brooke W. James /s/ KEVIN R. REEVES* Director 3/15/2022 Kevin R. Reeves /s/ SUSAN D. RECTOR* Chairman of the Board and Director 3/15/2022 Susan D. Rector /s/ DOUGLAS V. REYNOLDS* Director 3/15/2022 Douglas V. Reynolds /s/ FRANCES A. SKINNER* Director 3/15/2022 Frances A. Skinner /s/ MICHAEL N. VITTORIO* Director 3/15/2022 Michael N. Vittorio * The undersigned, by signing his name hereto, does hereby sign this Annual Report on Form 10-K on behalf of each of the directors of the Registrant identified above pursuant to Powers of Attorney executed by the directors of the Registrant identified above, which Powers of Attorney are filed with this Annual Report on Form 10-K in Exhibit 24. By: /s/ CHARLES W. SULERZYSKI Charles W. Sulerzyski President and Chief Executive Officer Attorney-in-Fact 145