What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-02-27 · 417 added, 407 removed, 1065 unchanged (44% of the section changed)

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Factors that might cause such a difference include, but are not limited to:

(1) the magnitude and continued duration of the recovery from the COVID-19 pandemic and its ongoing impact on the global economy and financial market conditions and Peoples’ businesses, results of operations and financial conditions;

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

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

(1) the effects of interest rate policies, changes in the interest rate environment due to economic conditions and/or the fiscal and monetary policy measures undertaken by the U.S.

government and the Federal Reserve Board, including changes in the Federal Funds Target Rate, in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;

(2) the effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay;

(4) the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the ongoing increasing interest rate policies of the Federal Reserve Board, the completion and successful integration of planned acquisitions, including the recently-completed Premier Merger, the recently-completed acquisition of Vantage and the pending Limestone Merger, and the expansion of commercial and consumer lending activities;

(3) the success, impact, and timing of the implementation of Peoples’ business strategies and Peoples’ ability to manage strategic initiatives, including the interest rate policies of the Federal Reserve Board, the completion and successful integration of acquisitions, including the Limestone Merger that closed in April 2023, and the expansion of commercial and consumer lending activities;

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

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

(5) uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the FDIC, the Federal Reserve Board, and the CFPB, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements;

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

(8) local, regional, national and international economic conditions (including the impact of potential or imposed tariffs, a U.S.

(7) current and future local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, supply-demand imbalances affecting local real estate prices, high unemployment rates in the local or regional economies in which Peoples operates and/or the U.S.

economy generally, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling, potential or imposed tariffs, a U.S.

withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S.

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

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

(9) changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties’ performance and creditworthiness generally, which may be less favorable than expected in light of recent inflationary pressures and continued elevated interest rates, and may adversely impact the amount of interest income generated;

(10) Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;

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

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

(14) adverse changes in the conditions and trends in the financial markets, including recent inflationary pressures, which may adversely affect the fair value of securities within Peoples’ investment portfolio, the interest rate sensitivity of Peoples’ consolidated balance sheet, and the income generated by Peoples’ trust and investment activities;

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(17) Peoples’ ability to maintain required capital levels and adequate sources of funding and liquidity;

(20) the impact of larger or similar-sized financial institutions encountering problems, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity;

(18) the impact of larger or similar-sized financial institutions encountering problems, such as the closures in 2023 of Silicon Valley Bank in California, Signature Bank in New York and First Republic Bank in California, which may adversely affect the banking industry and/or Peoples’ business generation and retention, funding and liquidity, including Peoples’ continued ability to grow deposits or maintain adequate deposit levels, and may further result in potential increased regulatory requirements, increased reputational risk and potential impacts to macroeconomic conditions;

(19) Peoples’ ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Peoples’ third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss;

(20) any misappropriation of the confidential information which Peoples possesses could have an adverse impact on Peoples’ business and could result in regulatory actions, litigation and other adverse effects;

(21) Peoples’ ability to anticipate and respond to technological changes, and Peoples’ reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Peoples’ primary core banking system provider, which can impact Peoples' ability to respond to customer needs and meet competitive demands;

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(25) the impact on Peoples’ businesses, personnel, facilities or systems of losses related to acts of fraud, theft, misappropriation or violence;

(27) the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics, cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts;

(28) the potential further deterioration of the U.S.

(26) the impact on Peoples’ businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics, cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts (including Russia’s war in Ukraine and the recent conflicts involving Israel and Hamas);

(27) the potential deterioration of the U.S.

economy due to financial, political or other shocks;

(28) the potential influence on the U.S.

financial markets and economy from the effects of climate change;

financial markets and economy from the effects of climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs;

(29) the impact on Peoples’ businesses and operating results of any costs associated with obtaining rights in intellectual property claimed by others and adequately protecting Peoples’ intellectual property;

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

(32) Peoples' ability to integrate the NS Leasing, LLC ("NSL") and Vantage acquisitions, the Premier Merger, and the pending Limestone Merger, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(33) the risk that expected revenue synergies and cost savings from the Premier Merger or the pending Limestone Merger, may not be fully realized or realized within the expected time frame;

(31) Peoples’ ability to integrate the Limestone Merger, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(32) the risk that expected revenue synergies and cost savings from the Limestone Merger may not be fully realized or realized within the expected time frame;

(33) changes in laws or regulations imposed by Peoples’ regulators impacting Peoples’ capital actions, including dividend payments and share repurchases;

(34) the vulnerability of Peoples’ network and online banking portals, and the systems of parties with whom Peoples contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches;

(35) Peoples’ business may be adversely affected by increased political and regulatory scrutiny of corporate environmental, social and governance (“ESG”) practices;

(36) the effect of a fall in stock market prices on the asset and wealth management business;

(36) Peoples' continued ability to grow deposits;

(37) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples’ reports filed with the SEC, including those risk factors included in the disclosures under the heading “ITEM 1A RISK FACTORS” of this Form 10-K.

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

◦ On October 25, 2022, Peoples announced the Limestone Merger, a transaction valued at approximately $208.2 million at the time of the announcement.

The Limestone Merger is expected to close in the second quarter of 2023, subject to the satisfaction of closing conditions, including regulatory approvals.

As of December 31, 2022, Peoples had recognized $0.6 million in acquisition-related expenses associated with this pending transaction.

◦ On April 1, 2022, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency with five locations in eastern Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Elite.

Mergers and Acquisitions

◦ During 2023, Peoples incurred $17.0 million of acquisition-related expenses, compared to $3.0 million for 2022 and $21.4 million for 2021.

The acquisition-related expenses in 2023 were primarily related to the Limestone Merger.

The acquisition-related expenses in 2022 were related to the Vantage acquisition (as defined below), the Premier Merger (as defined below), and the Limestone Merger, and the acquisition-related expenses during 2021 were primarily related to the NSL acquisition (as defined below) and the Premier Merger.

◦ On October 25, 2022, Peoples announced the Limestone Merger, a transaction valued at $177.9 million.

The Limestone Merger closed as of the close of business on April 30, 2023.

Peoples acquired Limestone’s loan portfolio totaling $1.1 billion, $1.2 billion of deposits, $172.7 million of total investment securities, an aggregate of $99.5 million of short-term and long-term borrowings, and $93.5 million of total cash and cash equivalents.

Peoples also recorded goodwill in the amount of $68.8 million and other intangible assets of $27.7 million, which consisted of core deposit intangibles.

(“Elite”), pursuant to an Asset Purchase Agreement between Peoples Insurance and Elite.

Total consideration for this transaction was $4.4 million.

Peoples recognized intangibles of $2.1 million, primarily comprised of a customer relationship intangible.

◦ On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing headquartered in Excelsior, Minnesota.

◦ On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing headquartered in Excelsior, Minnesota (the “Vantage acquisition”).

Peoples Bank acquired assets comprising Vantage’s lease business, including $154.9 million in leases and certain third-party debt in the amount of $106.9 million.

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Peoples recorded goodwill in the amount of $27.2 million and other intangible assets of $13.2 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.

◦ On September 17, 2021, Peoples completed the Premier Merger.

Premier merged and Premier's wholly-owned subsidiaries, Premier Bank and Citizens Deposit Bank & Trust, subsequently merged into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction resulting in the issuance of 8,589,685 common shares valued at $261.9 million.

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

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

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

(“Citizens”).

Under the terms and conditions of the definitive Agreement and Plan of Merger dated March 26, 2021, Premier merged with and into

Peoples and Premier’s wholly-owned subsidiaries, Premier Bank and Citizens, subsequently merged into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction resulting in the issuance of 8,589,685 common shares valued at $261.9 million (the “Premier Merger”).

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

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

◦ On March 31, 2021, Peoples acquired the equipment finance and leasing business of NSL.

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

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

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

Peoples Bank paid total consideration of $116.5 million, plus a potential earn-out payment to NSL of up to $3.1 million.

Peoples Bank paid total consideration of $116.5 million, plus an earn-out payment to NSL of $3.0 million.

Based in Burlington, Vermont, the North Star Leasing division underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States.

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

◦ Peoples began originating loans during the second quarter of 2020 and continued to originate loans during the first five months of 2021 under the loan guarantee program created under the CARES Act, called the PPP.

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

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

Additional information can be found later in this discussion under the caption “FINANCIAL CONDITION - COVID-19 Loan Impacts." As of December 31, 2022, Peoples had $2.4 million aggregate principal amount, net of deferred fees, in PPP loans outstanding, which were included in commercial and industrial loan balances, compared to $87.1 million at December 31, 2021 (including $23.4 million acquired in the Premier Merger).

Peoples recognized interest income of $2.2 million for deferred loan fees/cost accretion and $0.3 million of interest income on PPP loans during 2022, compared to interest income of $13.0 million for deferred loan fees/cost accretion and $2.3 million of interest income during 2021, and $7.5 million for deferred loan fees/cost accretion and $3.2 million of interest income during 2020.

Other Significant Developments

◦ During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $7.7 million.

The pension plan had been closed to new entrants since January 1, 2010.

Peoples recorded a settlement charge of $2.4 million in the third quarter of 2023 in relation to the termination of the pension plan.

Peoples does not anticipate further expenses related to the termination.

Peoples incurred $185,000 in pension settlement charges in 2022, compared to $143,000 in 2021, due to the aggregate amount of lump-sum distributions to participants in Peoples’ defined benefit pension plan exceeding the threshold for recognizing settlement charges during the period.

◦ During 2023, Peoples recorded a provision for credit losses of $15.2 million, compared to a recovery of credit losses of $3.5 million for 2022 and a provision for credit losses of $0.7 million for 2021.

The provision for credit losses during 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated (“non-PCD”) loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers.

The recovery of credit losses during 2022 was primarily due to the impact of economic forecast improvement in the CECL model, coupled with loan pay-offs during certain periods.

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

During 2023, Peoples repurchased 107,219 common shares totaling $3.0 million under the share repurchase program.

During 2022, Peoples repurchased 263,183 common shares totaling $7.4 million under the share repurchase program.

During 2021, Peoples did not repurchase any common shares under the share repurchase program authorized on January 28, 2021.

During 2020, Peoples repurchased 1,299,577 of Peoples' common shares through Peoples' then-effective common share repurchase program for a total of $29.3 million.

On October 25, 2022, after the announcement of the Limestone Merger, the share repurchase program was paused until the vote to approve the Limestone Merger by shareholders.

◦ During 2022, Peoples recorded a recovery of credit losses of $3.5 million, compared to a provision for credit losses of $0.7 million for 2021 and of $26.3 million for 2020.

The recovery of credit losses during 2022 compared to the provision for credit losses during 2021 was driven by improvements in economic forecasts, coupled with acquired purchased credit deteriorated ("PCD") loan payoffs.

◦ During 2022, Peoples incurred $3.0 million of acquisition-related expenses, compared to $21.4 million for 2021 and $0.5 million for 2020.

The acquisition-related expenses in 2022 were related to the Vantage acquisition, the Premier Merger, and the Limestone Merger.

The acquisition-related expenses in 2021 were primarily related to the NSL acquisition and the Premier Merger, and the acquisition-related expenses during 2020 were due to the acquisition of Triumph Premium Finance ("Premium Finance").

◦ Peoples incurred $185,000 in pension settlement charges in 2022, compared to $143,000 in 2021 and $1.1 million in 2020, due to the aggregate amount of lump-sum distributions to participants in Peoples' defined benefit pension plan exceeding the threshold for recognizing settlement charges during the period.

◦ During 2021, Peoples recorded $1.2 million of expenses related to the COVID-19 pandemic and $1.3 million during 2020.

During the fourth quarter of 2021, Peoples awarded common shares to all associates who were at the Assistant Vice President level or below.

The remainder of the COVID-19-related expenses were primarily related to providing Peoples' employees meals in support of local businesses, assisting employees with childcare and elder care needs, incentivizing employees to be vaccinated and taking extra precautions in cleaning facilities.

COVID-19 pandemic-related expenses were immaterial for 2022.

◦ On April 3, 2019, Peoples entered into a Loan Agreement with U.S.

Bank National Association (the “U.S.

On October 25, 2022, after the announcement of the Limestone Merger, the share repurchase program was paused until the vote to approve the Limestone Merger by shareholders, which occurred on February 23, 2023.

◦ On April 3, 2019, Peoples entered into the U.S.

Bank Loan Agreement.

A Fourth Amendment to the U.S.

A Fifth Amendment to the U.S.

Bank Loan Agreement, entered into on March 31, 2023, extended the maturity from April 1, 2023 to March 31, 2024.

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Bank Loan Agreement.

◦ During 2020, Peoples sold restricted Class B Visa stock for a gain of $680,000, which was recorded in "Other non-interest income."

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

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

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

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

Total consideration paid for this acquisition was $94.5 million.

◦ During 2020, Peoples recognized credits to its FDIC insurance expense as the FDIC issued credits to member banks to offset against the quarterly assessment as a result of the deposit insurance fund reaching its target threshold for smaller banks.

These credits were used by Peoples and were fully exhausted during the second quarter of 2020.

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

The Federal Funds Target Rate range was 0% - 0.25% as of March 31, 2020 and maintained this rate until March 16, 2022.

The Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% on March 16, 2022, to 0.75% to 1.00% on May 4, 2022, to 1.50% to 1.75% on June 15, 2022, to 2.25% to 2.50% on July 27, 2022, to 3.00% to 3.25% on September 21, 2022, to 3.75% to 4.00% on Nov 2, 2022, to 4.25% to 4.50% on Dec 14, 2022, to 4.50% to 4.75% on February 1, 2023, and has stated it anticipates continuing to raise rates in 2023.

◦ To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% beginning on March 16, 2022, and continued to raise rates up to 5.50% on July 27, 2023.

The Federal Reserve Board has kept rates unchanged since July 2023 but has signaled that it expects to begin reducing rates sometime in 2024.

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

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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.

internal or third-party credit scores or credit ratings, risk ratings or classifications, financial asset type, collateral type, loan 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 20 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.

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Peoples utilizes U.S.

unemployment, Ohio unemployment and Ohio Gross Domestic Product as economic factors in modeling.

unemployment and Ohio unemployment as economic factors in modeling.

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.

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The adverse scenario reflected increases of 100 basis points in both U.S.

and Ohio unemployment, and a decline in Ohio Gross Domestic Product of 100 basis points.

and Ohio unemployment.

Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in the allowance for credit losses of approximately $6.6 million at December 31, 2023.

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These assumptions can have a material impact on the estimated fair value, and as a result, the goodwill recorded in a business combination.

ASC 805 allows for a measurement period of 12 months beyond the acquisition date to finalize the fair value measurement of the acquired company’s net assets as additional information existing as of the acquisition date becomes available.

Measurement period adjustments are recorded through goodwill.

Based on recent acquisitions, loans and leases acquired through business combinations have comprised the majority of purchase accounting adjustments in arriving at the fair values of acquired assets and liabilities, with the most significant adjustments relating to the creditworthiness of the acquired portfolios.

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In other cases, management must rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-down or whether a valuation reserve should be established.

Given the inherent volatility, the use of fair value measurements may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the Consolidated Financial Statements, from period to period.

Given the inherent volatility, the use of fair value measurements

may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the Consolidated Financial Statements, from period to period.

Detailed information regarding fair value measurements can be found in “Note 2 Fair Value of Financial Instruments.”

New Accounting Guidance Pending Adoption

Accounting Standards Update (“ASU”) 2023-06 - Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative:

The ASU was issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S.

GAAP requirements with those of the SEC and to facilitate the application of U.S.

GAAP for all entities.

ASU 2023-06 applies to all reporting entities within the scope of the amended subtopics.

The effective dates for each amendment will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, prospectively, with early adoption prohibited.

Peoples will adopt such requirements when they become effective and the guidance is not expected to materially impact Peoples’ consolidated financial statements.

ASU 2023-07 - Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures:

The FASB issued ASU 2023-07 on November 27, 2023.

The amendments “improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.” In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.”

The ASU applies to all public entities that are required to report segment information in accordance with ASC 280.

The enhanced segment disclosure requirements apply “retrospectively to all prior periods presented in the financial statements.” The significant segment expense and other segment item amounts “disclosed in prior periods shall be based on the significant segment expense categories identified and disclosed in the period of adoption.” The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

Peoples will adopt the expanded disclosure requirements beginning with its Annual Report on Form 10-K for the fiscal year ending December 31, 2024, and the guidance is not expected to materially impact Peoples’ consolidated financial statements.

ASU 2023-09 - Income Taxes (Topic 740):

Improvements to Income Tax Disclosures:

The FASB issued ASU 2023-09 on December 14, 2023.

The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

ASU 2023-09 applies to all entities subject to income taxes.

For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively with early adoption is permitted.

Peoples is still evaluating the applicability and materiality of the guidance.

EXECUTIVE SUMMARY

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Net interest margin was 4.56% in 2023, compared to 3.97% in 2022 and 3.40% in 2021.

The increases in net interest income and net interest margin when compared to 2021 were driven by (i) the Premier Merger and the Vantage acquisition, (ii) organic growth and (iii) increases in market interest rates.

Net interest margin increased during 2021 when compared to 2020 largely due to the impact of PPP loan forgiveness and lower funding costs due to customers' maintaining higher cash balances, as well as a higher volume of loans due to the Premier Merger and Premium Finance acquisition coupled with higher-yielding leases acquired from NSL and organic loan growth.

Net interest margin in 2020 was impacted by the low interest rate environment and lower investment securities yields, partially offset by premium amortization due to a high level of refinancing activity.

Accretion income, net of amortization expense, from acquisitions totaled $11.6 million for 2022, $3.2 million for 2021, and $2.8 million for 2020, adding 19 basis points to the 2022 net interest margin and 7 basis points to each of the 2021 and 2020 net interest margins.

Included in net interest income during 2022, 2021 and 2020 was the impact of the PPP loans.

Peoples recognized interest income on deferred loan fees/costs of $2.2 million, $13.0 million and $7.5 million during 2022, 2021 and 2020, respectively, along with $0.3 million, $2.3 million and $3.2 million of interest earned on PPP loans during 2022, 2021 and 2020, respectively.

The recovery of credit losses for 2022 was $3.5 million, compared to provisions for credit losses of $0.7 million for 2021 and $26.3 million for 2020.

Net charge-offs for 2022 were $7.3 million, compared to $4.7 million for 2021 and $1.8 million for 2020.

The increases in net interest income and net interest margin when compared to 2022 were driven by increases in market interest rates, the additional net interest income from the Limestone Merger, and improvement in investment yields.

Partially offsetting these benefits was an increase in interest expense resulting from a shift in the composition of funding sources combined with an increase in market interest rates for deposits and other funding sources.

Net interest margin increased during 2022 when compared to 2021 largely due to (i) the Premier Merger and the Vantage acquisition, (ii) organic growth and (iii) increases in market interest rates.

Net interest margin in 2021 was impacted by PPP loan forgiveness and lower funding costs due to customers’ maintaining higher cash balances, as well as a higher volume of loans due to the Premier Merger and and insurance premium finance acquisition coupled with higher-yielding leases acquired from NSL and organic loan growth.

Accretion income, net of amortization expense, from acquisitions totaled $25.3 million for 2023, $11.6 million for 2022, and $3.2 million for 2021, adding 34 basis points, 19 basis points, and 7 basis points, respectively, to the net interest margin.

The provision for credit losses for 2023 was $15.2 million, compared to a recovery of credit losses of $3.5 million for 2022 and a provision for credit losses of $0.7 million for 2021.

Net charge-offs for 2023 were $8.5 million, compared to $7.3 million for 2022 and

$4.7 million for 2021.

Net charge-offs as a percent of average total loans were 0.15% for 2023, 0.16% for 2022 and 0.13% for 2021.

The provision for credit losses during 2023 was driven by (i) the addition of the provision for the non-PCD loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers.

The recovery of credit losses during 2022 compared to the provision for credit losses during 2021 was driven by improvements in economic forecasts, coupled with loan pay-offs and sales during certain periods.

The lower provision for credit losses recognized in 2021 when compared to 2020 was the result of improvement in loss drivers and Moody's economic outlook published in December 2021.

The provision for credit losses recognized in 2020 was due to the impact the COVID-19 pandemic had on the economic forecasts and qualitative factors used in the CECL model.

Total non-interest income for 2023 increased $8.6 million, or 11%, when compared to 2022.

The increase was driven by growth of $4.4 million in service charges on deposit accounts and $3.1 million in electronic banking income, primarily attributable to customers added in the Premier Merger.

The increase was driven by (i) a $4.1 million increase in electronic banking income, (ii) a $2.3 million increase in insurance income primarily due to growth in the property and casualty insurance line, (iii) a $2.1 million increase in deposit account service charges, (iv) a $1.5 million increase in bank owned life insurance income, and (v) a $2.7 million increase in other non-interest income.

Insurance income increased due to new business and market increases for premiums.

The increase in other non-interest income was due to an increase in operating lease income, which was partially offset by operating lease expense recognized in other non-interest expense.

The other increases for the full year of 2023, when compared to the full year of 2022, were primarily due to the additional customers brought in from the Limestone Merger.

Partially offsetting the increases was a $3.6 million increase in net losses on investment securities, primarily driven by a $3.6 million pre-tax ($2.9 million after-tax) net loss on the sales of available-for-sale investment securities during the first and fourth quarters of 2023, and a $2.2 million increase in net losses on assets disposals and other transactions, mostly due to a $1.6 million write-down of an other real estate owned (“OREO”) property during the second quarter of 2023.

Total non-interest income for 2022 increased $10.0 million, or 14% when compared to 2021.

The increase was driven by growth of $4.4 million in deposit account service charges and $3.1 million in electronic banking income, primarily attributable to customers added in the Premier Merger.

Also contributing to the growth was a $3.0 million increase in lease income due to the Vantage acquisition.

Partially offsetting the impact of these 2022 increases when compared to 2021 was a $2.0 million decline in mortgage banking income due to the increased market interest rate environment in 2022 resulting in a lower volume of new loan originations.

In 2021, all non-interest income categories were impacted by the Premier Merger, with the exception of mortgage banking income and commercial loan swap fees.

Mortgage banking income in 2021 decreased when compared to 2020 due to the volume of refinance activity experienced in 2020 when interest rates declined, which was not repeated in 2021.

Swap fee income in 2021 also decreased when compared to 2020 as a result of lower customer demand caused by the sustained lower rate environment in 2021.

Total non-interest income for 2020 was largely impacted by a lower level of deposit account service charges, which was driven by the COVID-19 pandemic and the higher balances being maintained by customers throughout 2020.

Total non-interest expense for the year ended December 31, 2023, was impacted by the Limestone Merger and acquisition-related non-interest expenses, which added $17.0 million across various line-items within non-interest expense.

The table below summarizes the amount of acquisition-related expenses for each line item that is a component of non-interest expense.

Acquisition-related expenses are considered a non-core non-interest expense by Peoples.

This information is used by Peoples to provide information useful to investors in understanding Peoples’ operating performance and trends.

(Dollars in thousands) 2023 2022 2021

Non-interest expense:

Salaries and employee benefit costs $ 144,031 $ 112,690 94,612

Data processing and software expense 21,607 14,241 10,542

Net occupancy and equipment expense 21,368 19,516 14,918

Professional fees 17,041 12,094 15,783

Amortization of other intangible assets 11,222 7,763 4,775

Electronic banking expense 7,150 9,231 8,885

Marketing expense 5,017 3,728 3,658

FDIC insurance premiums 4,785 3,702 1,976

Franchise tax expense 3,540 3,487 3,357

Other loan expenses 2,859 2,735 2,001

Communication expense 2,834 2,484 1,657

Other non-interest expense 25,033 15,476 21,573

Total non-interest expense 266,487 207,147 183,737

Acquisition-related non-interest expense:

Salaries and employee benefit costs 5,827 29 3,818

Data processing and software expense 1,850 410 65

Net occupancy and equipment expense 109 50 212

Professional fees 6,062 2,407 7,144

Electronic banking expense 115 (92) —

Marketing expense 81 51 241

Other loan expenses 2 (4) 3

Communication expense 1 2 54

Other non-interest expense 2,923 163 9,886

Total acquisition-related non-interest expense 16,970 3,016 21,423

Non-interest expense excluding acquisition-related expense:

Salaries and employee benefit costs 138,204 112,661 90,794

Data processing and software expense 19,757 13,831 10,477

Net occupancy and equipment expense 21,259 19,466 14,706

Professional fees 10,979 9,687 8,639

Amortization of other intangible assets 11,222 7,763 4,775

Electronic banking expense 7,035 9,323 8,885

Marketing expense 4,936 3,677 3,417

FDIC insurance premiums 4,785 3,702 1,976

Franchise tax expense 3,540 3,487 3,357

Other loan expenses 2,857 2,739 1,998

Communication expense 2,833 2,482 1,603

Other non-interest expense 22,110 15,313 11,687

Total non-interest expense excluding acquisition-related expense $ 249,517 $ 204,131 $ 162,314

Total non-interest expense was $266.5 million for 2023, an increase of $59.3 million, or 29%, compared to 2022.

The growth was driven by increases of (i) $18.1 million in salaries and employee benefit costs, (ii) $4.6 million in net occupancy and equipment expense, (iii) $3.7 million in data processing and software expenses, and (iv) $3.0 million in intangible asset amortization.

increases were primarily due to growth over the last year, driven by mergers and acquisitions.

Partially offsetting the impact of these increases on non-interest expense was a decrease in acquisition-related expenses due to the amount of expenses incurred in connection with the Premier Merger in 2021.

Excluding acquisition-related expenses, non-interest expenses increased $45.4 million, or 22%, due to increases in all non-interest expense line items except for electronic banking expense, which decreased $2.3 million when compared to 2022.

The increases were primarily driven by non-interest expenses, excluding acquisition-related expenses, attributable to the Limestone Merger, as well as organic growth.

The increase in other non-interest expense was also driven by the previously discussed pension plan settlement charges and a $1.7 million increase in operating lease depreciation expenses.

Electronic banking expense decreased when compared to 2022 due to reduced costs for Peoples’ online banking platform and a reclassification of those costs relative to the prior period to data processing and software expense.

Total non-interest expense was $207.1 million for 2022, an increase of $23.4 million compared to 2021.

The Premier Merger and the acquisition of NSL increased acquisition-related expenses included in other expenses, professional fees, salaries and employee benefit costs, as well as net occupancy and equipment expenses, and amortization of intangible assets.

Included in total non-interest expense during 2022 were certain non-core expenses which included acquisition-related expenses of $3.0 million.

Non-core expenses for 2021 included acquisition-related expenses of $21.4 million, COVID-19-related expenses of $1.2 million, contract negotiation expenses of $1.2 million and a Peoples Bank Foundation, Inc.

These increases were primarily due to growth over the last year, driven by mergers and acquisitions.

Partially offsetting the impact of these increases on non-interest expense in 2022 was a decrease in acquisition-related expenses due to the amount of expenses incurred in connection with the Premier Merger in 2021.

Included in total non-interest expense during 2023 were certain non-core expenses which included acquisition-related expenses of $17.0 million compared to $3.0 million in 2022.

Non-core expenses for 2021 included acquisition-related expenses of $21.4 million (detailed in the table above), COVID-19-related expenses of $1.2 million, contract negotiation expenses of $1.2 million and a Peoples Bank Foundation, Inc.

contribution of $0.5 million.

Non-core expenses for 2020 included COVID-19-related expenses of $1.3 million, severance expenses and pension settlement charges that totaled $1.1 million each, and acquisition-related expenses of $0.5 million.

Peoples’ efficiency ratio, which is calculated as total non-interest expense less amortization of other intangible assets divided by fully tax-equivalent (“FTE”) net interest income, plus total non-interest income, excluding all gains and losses, was 58.7% for 2023, compared to 59.6% for 2022 and 73.6% for 2021.

The increase in the efficiency ratio during 2021 was caused by increased non-core expenses discussed above.

The efficiency ratio was elevated during 2021 primarily due to the non-core expenses discussed above.

The efficiency ratio, when adjusted for non-core items, was 54.4% for 2023, 58.6% for 2022 and 63.5% for 2021.

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The effective tax rate for 2023 was 21.9%, 21.3% for 2022 and 16.5%% for 2021.

The increase for 2022 compared to 2021 was driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states due to recent acquisitions.

The variance in income tax expense for 2021 compared to 2020, was the result of higher pre-tax income in 2021 that resulted from the Premier Merger and the NSL acquisition.

Income tax expense for 2021 was also impacted by an income tax benefit related to an adjustment from a prior period of $1.1 million.

The increases for 2023 compared to 2022, and for 2022 compared to 2021, were driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states due to recent acquisitions.

Total assets increased 27% to $9.16 billion at December 31, 2023, compared to $7.21 billion at year-end 2022.

The increase was primarily due to increases of $225.6 million in loan and lease balances and $186.1 million in held-to-maturity investment securities.

The increase in the period-end total loan and lease balances was primarily driven by $154.9 million of leases acquired from Vantage and increases of (i) $98.9 million in indirect consumer loans, (ii) $36.7 million in construction loans and (iii) $23.1 million in premium finance loans, partially offset by reductions of $126.6 million in other commercial real estate loans and $48.4 million in residential real estate loans.

Held-to-maturity investment securities increased due to purchases throughout 2022.

The allowance for credit losses decreased to $53.2 million or 1.13% of total loans, net of deferred fees and costs, compared to $64.0 million and 1.43%, respectively, at December 31, 2021.

The decline in the allowance balance at December 31, 2022 when compared to at December 31, 2021 was driven by decreases in the allowances for individually analyzed loans, as well as changes in qualitative factors period-over-period and the use of updated prepayment speeds.

Those decreases were partially offset by loan growth and deterioration in the economic forecast.

Total liabilities were $6.42 billion at December 31, 2022, an increase of $203.5 million since at December 31, 2021.

Total deposits decreased $145.6 million, to $5.72 billion at December 31, 2022.

The 2022 decline in the total deposit balances from December 31, 2021 was driven by decreases of (i) $113.5 million in retail certificates of deposits, (ii) $52.0 million in total non-interest-bearing deposit accounts and (iii) $34.1 million in money market deposit accounts, partially offset by increases of $31.8 million in savings account deposits and $20.8 million in brokered deposit accounts.

Total demand deposits comprised 48% of total deposits at both December 31, 2022 and December 31, 2021.

Total stockholders' equity was $785.3 million at December 31, 2022, a decrease of 7% from December 31, 2021 due to (i) an other comprehensive loss of $115.5 million, (ii) dividends paid of $42.4 million and (iii) share repurchases of $7.4 million, partially offset by net income of $101.3 million for the full year of 2022.

The other comprehensive loss was the result of changes in the market value of available-for-sale investment securities, which were driven by changes in market interest rates.

The increase was primarily due to $1.46 billion of assets, primarily loans, acquired in the Limestone Merger.

Excluding the loans acquired in the Limestone Merger, the period-end loan and lease balance increased $472.2 million, or 10%, driven by increases of $203.6 million, $78.2 million, $68.9 million, $44.0 million, $37.9 million, and $37.0 million in other commercial real estate loans, commercial and industrial loans, leases, premium finance loans, construction loans, and indirect consumer loans, respectively.

The increase in total assets from at December 31, 2022 was also impacted by purchases of held-to-maturity investment securities and sales of lower-yielding available-for-sale investment securities.

Management underwent investment portfolio restructurings during 2023 to increase portfolio yield and reduce Peoples’ sensitivity to falling intermediate and long-term interest rates.

The allowance for credit losses increased to $62.0 million or 1.01% of total loans, net of deferred fees and costs, compared to $53.2 million and 1.13%, respectively, at December 31, 2022.

The increase in the allowance balance at December 31, 2023 when compared to at December 31, 2022 was driven by (i) the addition of the provision for the non-PCD loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers.

The decrease in the ratio of the allowance for credit losses to total loans was due to the items noted above, primarily the release of reserves on individually analyzed loans.

Total liabilities were $8.10 billion at December 31, 2023, an increase of $1.68 billion since at December 31, 2022, primarily due to $1.35 billion of liabilities, primarily deposits, acquired in the Limestone Merger.

Excluding Limestone deposit balances, total deposits at December 31, 2023 increased $615.3 million, or 11%, compared to at December 31, 2022, primarily due to increases of $785.6 million in retail certificates of deposit and $449.8 million in brokered certificates of deposit, partially offset by decreases of $226.8 million, $223.3 million, and $193.7 million, in non-interest bearing deposits, savings accounts, and interest-bearing demand deposit accounts, respectively.

Total demand deposit accounts comprised 38% and 48% of total deposits at December 31, 2023, and at December 31, 2022, respectively.

Total stockholders’ equity was $1.05 billion at December 31, 2023, an increase of $268.2 million, or 34%, from December 31, 2022 due to (i) the issuance of 6.8 million common shares (valued at $177.9 million) in the Limestone Merger, (ii) net income of $113.4 million for the full year of 2023, and (iii) a decrease in other comprehensive loss of $25.5 million, partially offset by dividends paid of $52.1 million and share repurchases of $3.0 million.

The decrease in other comprehensive loss was the result of changes in the market value of available-for-sale investment securities, which were primarily driven by changes in market interest rates.

Peoples continued to exceed the capital required by the Federal Reserve Board to be deemed “well capitalized.” Peoples’ tier 1 capital ratio was 12.58% at December 31, 2023, versus 12.19% at December 31, 2022, while the total capital ratio was 13.38% at December 31, 2023, versus 13.06% at December 31, 2022.

The common equity tier 1 risk-based capital ratio was 11.75% at December 31, 2023 compared to 11.92% at December 31, 2022.

Compared to December 31, 2021, the capital ratios decreased due to the Vantage acquisition and other comprehensive losses from unrealized losses on available-for-sale fixed maturities.

Compared to at December 31, 2022, the tier 1 risk-based capital and the total risk-based capital ratios improved due to higher net income, partially offset by the impact of the Limestone Merger and dividends paid.

The common equity tier 1 risk-based capital ratio at December 31, 2023 decreased compared to at December 31, 2022 due to the common shares issued in the Limestone Merger.

Peoples’ book value and tangible book value per share were $29.83 and $18.16, respectively, at December 31, 2023, compared to $27.76 and $16.23, respectively, at December 31, 2022.

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Net interest income, the amount by which interest income exceeds interest expense, remains Peoples’ largest source of revenue and was 80% of total revenue during 2023.

The amount of net interest income earned by Peoples is affected by various

factors, including changes in market interest rates due to the Federal Reserve Board's monetary policy, the level and degree of pricing competition for both loans and deposits in Peoples' markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities.

The amount of net interest income earned by Peoples is affected by various factors, including changes in market interest rates due to the Federal Reserve Board’s monetary policy, the level and degree of pricing competition for both loans and deposits in Peoples’ markets, and the amount and composition of Peoples’ earning assets and interest-bearing liabilities.

Peoples monitors net interest income performance and manages its balance sheet composition through regular ALCO meetings.

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However, the frequency and/or magnitude of changes in market interest rates are difficult to predict, and may have a greater impact on net interest income than adjustments management is able to make.

As part of the analysis of net interest income, management converts tax-exempt income earned on obligations of states and political subdivisions to the pre-tax equivalent of taxable income using a blended federal and state corporate income tax rate of 23.3% for 2022, 22.3% for 2021, and a statutory federal corporate income tax rate of 21% for 2020.

Management believes the resulting FTE net interest income allows for a more meaningful comparison of tax-exempt income and yields to their taxable equivalents.

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Average Balance Income/ Expense Yield/Cost Average Balance Income/Expense Yield/Cost Average Balance Income/ Expense Yield/Cost

Short-term investments $ 178,781 $ 1,710 0.96 % $ 219,849 $ 313 0.14 % $ 103,767 $ 343 0.33 %

Investment securities (a)(b):

Short-term investments (a) $ 57,464 $ 2,763 4.81 % $ 178,781 $ 1,710 0.96 % $ 219,849 $ 313 0.14 %

Investment securities (b)(c):

Taxable 1,621,852 49,469 3.05 % 1,481,368 29,091 1.96 % 1,042,419 15,219 1.46 %

1 unchanged sentence

Total investment securities 1,812,331 55,112 3.04 % 1,680,647 34,535 2.05 % 1,205,514 19,545 1.62 %

Loans (b)(c):

Loans (c)(d):

Construction 347,317 27,833 7.90 % 223,197 10,732 4.74 % 131,834 5,130 3.84 %

3 unchanged sentences

Leases 371,809 42,931 11.39 % 271,349 34,720 12.62 % 74,442 13,572 17.98 %

Residential real estate (d) 881,136 37,851 4.30 % 700,691 29,686 4.24 % 660,025 31,155 4.72 %

Residential real estate (e) 913,069 43,647 4.78 % 881,136 37,851 4.30 % 700,691 29,686 4.24 %

Home equity lines of credit 194,415 14,722 7.57 % 170,567 8,300 4.87 % 133,340 5,410 4.06 %

18 unchanged sentences

Retail certificates of deposit 948,310 25,198 2.66 % 580,660 2,978 0.51 % 497,181 3,952 0.79 %

Brokered deposits (e) 88,234 2,067 2.34 % 150,716 3,130 2.08 % 223,940 2,480 1.11 %

Brokered deposits (f) 483,483 21,712 4.49 % 88,234 2,067 2.34 % 150,716 3,130 2.08 %

Total interest-bearing deposits

18 unchanged sentences

Net interest margin (b) 4.56 % 3.97 % 3.40 %

(a) Average balances are based on carrying value.

(b) Interest income and yields are presented on a fully tax-equivalent basis, using a blended federal and state corporate income tax rate of 23.3% for 2022, 22.3% for 2021, and a statutory federal corporate income tax rate of 21% for 2020.

(a) Balances are primarily composed of interest bearing demand deposits at the FRB and FHLB.

(b) Average balances are based on carrying value.

(c) Interest income and yields are presented on a fully tax-equivalent basis, using a blended federal and state corporate income tax rate of 23.3% for 2023 and 2022, and 22.3% for 2021.

(d) Average balances include nonaccrual, impaired loans, and loans held for sale.

Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status.

Loan fees included in interest income were immaterial for all periods presented.

(d) Loans held for sale are included in the average loan balances listed.

(e) Loans held for sale are included in the average loan balances listed.

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

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

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

Peoples’ average balances compared to prior periods have been impacted by recent acquisitions, which included:

the acquisition of Vantage on March 7, 2022, which added to average lease and borrowed funds balances, and the Premier Merger on September 17, 2021, which added to average short-term investments, average total investment securities, average total loans and average total deposits.

Additionally, Peoples acquired North Star Leasing on April 1, 2021 and an insurance premium finance division on July 1, 2020.

Peoples has begun to reduce cash balances after previously maintaining high cash balances in recent prior periods due to an influx of deposits, coupled with PPP proceeds.

(i) the Limestone Merger as of the close of business on April 30, 2023, which added to average short-term investments, average total investment securities, and average loan, deposit and borrowed funds balances, (ii) the acquisition of Vantage on March 7, 2022, which added to average lease and borrowed funds balances, and (iii) the Premier Merger on September 17, 2021, which added to average short-term investments, average total investment securities, average total loans and average total deposits.

Additionally, Peoples completed the NSL acquisition on April 1, 2021 which also added to average lease balances.

Peoples’ cash balances have increased primarily due to an increase in interest-bearing deposits in other banks, mostly with the FRB.

The increases in market interest rates have increased asset yields and increased borrowing costs.

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

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

(b) Interest income and yields are presented on a fully tax-equivalent basis, using a blended federal and state corporate income tax rate of 23.3% for 2023 and 2022, and 22.3% for 2021.

Net interest income increased $85.9 million, or 34%, for 2023 when compared to 2022, and net interest margin increased 59 basis points to 4.56%.

The increase in net interest income was driven by (i) the Premier Merger and the Vantage acquisition, (ii) core growth and (iii) increases in market interest rates.

The increase in net interest income was driven by increases in market interest rates, the additional net interest income from the Limestone Merger, and improvement in investment yields.

Accretion income, net of amortization expense, from acquisitions was $25.3 million for 2023, which added 34 basis points to net interest margin for 2023.

Accretion income for 2023 was primarily the result of the Limestone Merger, the Premier Merger, and the acquisitions of Vantage and NSL.

During 2022, net interest income increased $80.9 million, or 47%, when compared to 2021.

The increase in net interest income was driven by (i) the Premier Merger and the Vantage acquisition, (ii) core growth and (iii) increases in market interest rates.

Net interest margin increased 57 basis points to 3.97% compared to 2021.

Accretion income, net of amortization expense,

from acquisitions was $11.6 million for 2022, which added 19 basis points to net interest margin for 2022.

Accretion income for 2022 was a result of the Premier Merger and the acquisitions of Vantage and NSL.

During 2021, net interest income grew 24% when compared to 2020.

The increase was primarily driven by the Premier Merger and the acquisition of NSL, coupled with growth in Peoples' core business.

Net interest margin improved 16 basis points compared to 2020, as loan yields improved and offset declining investment yields, while controlled funding costs benefited net interest margin.

Peoples recorded $15.3 million in PPP income during 2021, which was mostly due to the forgiveness of loans, resulting in accretion of net deferred loan fees and costs, and positively impacted net interest margin by 16 basis points.

Accretion income, net of amortization expense, from acquisitions, added $3.2 million to net interest income and 7 basis points to net interest margin.

Additional interest income in 2022 from prepayment fees and interest recovered on nonaccrual loans was $647,000, compared to $825,000 in 2021 and $738,000 in 2020.

Additional interest income in 2023 from prepayment fees and interest recovered on nonaccrual loans was $0.7 million, compared to $0.6 million in 2022 and $0.8 million in 2021.

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

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Provision for Credit Losses

On January 1, 2020, Peoples adopted the provisions of ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments", commonly referred to as the CECL model.

The following table details Peoples’ provision for credit losses recognized for the years ended December 31:

(Dollars in thousands) 2023 2022 2021

(Recovery of) Provision for other credit losses $ (4,560) $ 339 $ 25,798

Provision for (Recovery of) other credit losses $ 14,236 $ (4,560) $ 339

Provision for checking account overdrafts 938 1,050 392

(Recovery of) Provision for credit losses $ (3,510) $ 731 $ 26,254

Provision for (Recovery of) credit losses $ 15,174 $ (3,510) $ 731

As a percent of average total loans 0.27 % (0.08) % 0.02 %

1 unchanged sentence

The CECL methodology utilized by Peoples relies on economic forecasts, as well as other key assumptions including prepayments, probability of default and loss given default.

For 2022, the recovery of credit losses compared to a provision for credit losses for 2021 was driven by improvements in economic forecasts, coupled with loan pay-offs during certain periods of 2022.

During 2021, Peoples recorded a lower provision for credit losses compared to a sizable provision for credit losses during 2020.

2020 was impacted by the COVID-19 pandemic, which drove a higher provision for credit losses.

During 2021, economic factors and loss drivers improved and resulted in a reduction in the allowance for credit losses, resulting in a lower provision for credit losses.

The improvement in economic factors and loss drivers for 2021 were partially offset by the provision for credit losses required to establish the allowance for credit losses for acquired non-PCD loans and leases during 2021.

During 2020, the COVID-19 pandemic caused the economic outlook and assumptions used in the CECL model to be unfavorable, and as a result, caused the need for additional provision for credit losses to be recorded resulting in a higher allowance for credit losses at the end of the year.

For 2023, the provision for credit losses compared to a recovery of credit losses for 2022 was driven by (i) the addition of the provision for the non-PCD loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers.

During 2022, the recovery of credit losses was driven by improvements in economic forecasts, coupled with loan pay-offs during certain periods of 2022.

During 2021, the provision for credit losses was impacted by improvements in economic factors and loss drivers, partially offset by the provision for credit losses required to establish the allowance for credit losses for acquired non-PCD loans and leases during 2021.

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

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Net (loss) gain on asset disposals and other transactions $ (2,837) $ (616) $ 493

For 2022, Peoples' net loss on asset disposals and other transactions was primarily due to net losses on other assets, which was mainly due to net losses on repossessed assets.

During 2021, net gains on other transactions were driven by the sale of $59.8 million of predominantly PCD loans acquired in the Premier Merger ($52.9 million of which were criticized or classified) primarily in the hospitality industry.

Peoples recognized a gain of $897,000 related to the discount recorded on those loans when they were acquired from Premier.

The net loss on other assets during 2020 was primarily due to the loss of $145,000 on the sale of a closed branch from the ASB Financial Corporation ("ASB") acquisition, and market value write-down of $108,000 related to closed offices that were held for sale.

The net gain on other transactions during 2020 was due to receiving $197,000 in funds from a limited partnership investment.

For 2023, Peoples’ net loss on investment securities was primarily due to the $3.7 million pre-tax net loss on the sales of available-for-sale investment securities in the first and fourth quarters of 2023.

During the first quarter of 2023, Peoples executed sales of $96.7 million of lower yielding available-for-sale investment securities for a pre-tax loss of $2.0 million.

Proceeds from sales were used to pay down overnight borrowings.

During the fourth quarter of 2023, Peoples executed the sales of an additional $36.5 million of lower yielding available-for-sale investment securities for a pre-tax loss of $1.7 million.

Proceeds from the sales were used to purchase higher yielding agency investment securities.

The loss on the sales of these available-for-sale investment securities had a nominal impact on tangible book value as such loss was previously reflected in capital through accumulated other comprehensive loss.

The realized losses recognized due to the first

quarter transactions were earned back within the 2023 fiscal year, and the realized losses recognized due to the fourth quarter transactions are expected to be earned back within 14 months.

Peoples’ net loss on asset disposals and other transactions during 2023 was primarily driven by a $1.6 million write-down of an OREO property during the second quarter of 2023, and net losses on repossessed assets.

During 2022, Peoples’ net loss on asset disposals and other transactions was primarily due to net losses on other assets, which was mainly due to net losses on repossessed assets.

During 2021, net gains on other transactions were driven by the sale of $59.8 million of predominantly purchased credit deteriorated (“PCD”) loans acquired in the Premier Merger ($52.9 million of which were criticized or classified) primarily in the hospitality industry.

Peoples recognized a gain of $0.9 million related to the discount recorded on those PCD loans when they were acquired from Premier.

Total Non-Interest Income Excluding Net Gains and Losses

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Total non-interest income excluding net gains and losses accounted for 21.7% of Peoples’ total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) in 2023, compared to 23.9% in 2022 and 28.6% in 2021.

The decline in Peoples' total non-interest income excluding net gains and losses, as a percent of total revenue during 2022 compared to 2021, was largely due to having a full year of the customers gained from the Premier Merger as well as the Vantage acquisition, which caused improved net interest income, resulting in a smaller portion of total revenue being provided by other revenue sources.

The decline in Peoples’ total non-interest income excluding net gains and losses, as a percent of total revenue during 2023 compared to 2022, was largely due to the growth in net interest income of 34% outpacing the growth in non-interest income excluding gains and losses of 18% during 2023.

The growth in net interest income was primarily driven by the Limestone Merger and rate increases.

E-banking income comprised the largest portion of Peoples’ total non-interest income excluding net gains and losses, for 2023.

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

For 2022 compared to 2021, e-banking income grew 17%, primarily from a full year's impact of the acquired Premier accounts in addition to increased customer activity.

During 2021, e-banking income increased 26% when compared to 2020 and was driven by the combination of the addition of the Premier acquired accounts, along with increased usage of debit cards.

In 2022, Peoples' customers used their debit cards to complete $1.7 billion of transactions, versus $1.4 billion in 2021 and $1.0 billion in 2020.

For 2023 compared to 2022, e-banking income grew 20%, primarily due to additional customers from the Limestone Merger as well as organic growth.

For 2022 compared to 2021, e-banking income increased 17%, primarily from a full year’s impact of the acquired Premier accounts in addition to increased customer activity.

In 2023, Peoples’ customers used their debit cards to complete $1.9 billion of transactions, up from $1.7 billion in 2022 and $1.4 billion in 2021.

Peoples’ fiduciary and brokerage revenues continue to be based primarily upon the value of assets under administration and management.

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Trust and investment income $ 17,160 $ 16,391 $ 16,456

For 2022, trust and investment income was relatively flat compared to 2021, as the increase in brokerage income was offset by the decrease in fiduciary income.

For 2021, trust and investment income grew 20% when compared to 2020, as Peoples added new

accounts and the underlying market values of assets under administration and management grew.

Peoples also increased its employee benefit plans business during 2021 when compared to 2020.

For 2023, trust and investment income increased primarily due to increases in brokerage income, as Peoples added new accounts and the underlying market values of assets under administration and management grew, and employee benefit plan fees.

trust and investment was relatively flat compared to 2021, as the increase in brokerage income was offset by the decrease in fiduciary income.

The following table details Peoples’ assets under administration and management at December 31:

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Annual average $ 3,236,449 $ 2,965,985 $ 3,053,807

The decline in total assets under administration and management at December 31, 2022, compared to December 31, 2021, was driven by a decrease in market values throughout 2022 due to the recent economic downturn.

During 2021, Peoples grew assets under administration and management by over 10% when compared to 2020, which was partially due to new accounts as well as improved market values, resulting in increased fiduciary and brokerage income.

Peoples has had success in recent years in increasing client accounts within its fiduciary and brokerage business.

The increase in total assets under administration and management at December 31, 2023, compared to December 31, 2022, was primarily due to market value increases in 2023, new account activity and an acquisition of an independent financial advisor in January of 2023 which increased brokerage assets by $30 million.

During 2022, Peoples’ assets under administration and management declined, driven by a decrease in market values throughout 2022 due to the economic downturn.

The following table details Peoples’ insurance income for the years ended December 31:

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Insurance income $ 18,016 $ 15,727 $ 15,252

Insurance income for 2023 increased compared to 2022, primarily driven by the increases in (i) property and casualty insurance commissions, (ii) performance-based commissions and (iii) life and health insurance commissions, which were slightly offset by the decrease in other fees and charges.

Peoples Insurance increased its clientele throughout 2023, which drove the increases in commissions.

Insurance income for 2022 was relatively flat when compared to 2021, as the increases in property and casualty insurance commissions and life and health insurance commissions were substantially offset by the decrease in performance-based commissions.

Insurance income grew 9% for 2021, compared to 2020.

This increase was driven by higher property and casualty insurance commissions, as Peoples added new accounts, and higher performance-based commissions.

Deposit account service charges are based on the costs associated with services provided by Peoples.

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Management periodically evaluates these fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples’ markets by competitors.

Deposit account service charges in 2023 increased compared to 2022 due to the additional customers associated with the Limestone Merger, as well as organic growth.

Deposit account service charges in 2022 increased compared to 2021 due to increased customer activity compared to the very low levels of early 2021, which had been impacted by fiscal stimulus payments and PPP loan proceeds provided to customers, along with changed customer spending habits due to the COVID-19 pandemic.

Also contributing to the increases in 2022 when compared to 2021 were the additional customers associated with the Premier Merger, as 2022 had a full year of the benefit from the additional Premier accounts, whereas 2021 only had three and a half months of the benefit.

Deposit account service charges were positively impacted during 2021 by the Premier Merger and associated additional accounts, while growth was also experienced within fees on existing accounts, which had previously declined since the beginning of the COVID-19 pandemic.

During 2020, deposit account service charges were down as customer habits changed as a result of the COVID-19 pandemic, with customers maintaining higher balances, coupled with fiscal stimulus funds provided by the government to individuals and proceeds from PPP loans to businesses.

Deposit account service charges were positively impacted during 2021 by the Premier Merger and associated additional accounts.

The following table details the other items included within Peoples’ total non-interest income for the years ended December 31:

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Other non-interest income $ 6,101 $ 3,430 $ 2,894

Lease income is primarily comprised of (i) gains on the early termination of leases, (ii) fees received for referrals and (iii) gains and losses recognized on the sales of residual assets.

Lease income is primarily comprised of (i) gains on the early termination of leases, net of any associated purchase accounting adjustments, (ii) month-to-month lease payments in excess of net investment in the lease, (iii) fees received for referrals, (iv) gains and losses recognized on the sales of residual assets, and (v) syndication income.

The increase in lease income for 2023 when compared to 2022 was driven primarily by an increase in month-to-month lease income from Vantage.

The 2022 increase in lease income when compared to 2021 was due to the Vantage acquisition.

In 2021, Peoples acquired NSL which brought in the lease portfolio to begin recognizing lease income.

Bank owned life insurance income ("BOLI") for 2022, increased when compared to 2021 due to a $248,000 death benefit related to the cash surrender value of the underlying policy in the third quarter of 2022 and $30.0 million of additional investments in policies.

BOLI income declined 11% during 2021, compared to 2020, and was mostly due to the 2020 recognition of a $109,000 tax-free death benefit that exceeded the cash surrender value of the insurance policies.

Peoples purchased no additional BOLI policies during 2021 and 2020.

In 2021, Peoples acquired NSL which first introduced lease income as a component of non-interest income.

Bank owned life insurance income (“BOLI”) for 2023 increased when compared to 2022 due to a $0.4 million death benefit related to the cash surrender value of the underlying policy in the fourth quarter of 2023, and additional income from policies acquired in the Limestone Merger.

BOLI income for 2022 increased when compared to 2021 due to a $248,000 death benefit related to the cash surrender value of the underlying policy in the third quarter of 2022 and $30.0 million of additional investments in policies.

Peoples purchased no additional BOLI policies during 2023 or 2021.

Mortgage banking income is comprised mostly of net gains from the origination and sale of long-term, fixed-rate real estate loans in the secondary market, as well as servicing income for sold loans.

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

Mortgage banking income declined for 2022 when compared to 2021 due to the increased market interest rate environment and a lower volume of new loan originations.

During 2021, mortgage banking income declined by 47% when compared to 2020 and was driven by lower customer demand due to the low rate environment that had been in place since the beginning of 2020.

Mortgage banking income declined for 2023 when compared to 2022 and declined for 2022 when compared to 2021 due to lower volumes of new loan originations as a result of the rising market interest rate environment.

In 2023, Peoples sold approximately $2.7 million of loans to the secondary market with servicing retained and sold approximately $30.7 million in loans with servicing released, compared to approximately $18.5 million and $31.1 million, respectively, in 2022.

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

For 2022, other non-interest income increased when compared to 2021 due primarily to increased other operating income.

Other non-interest income declined during 2021, primarily due to a decline in the fair value of equity securities.

Other non-interest income during 2020 included additional income related to gains recorded on the sale of restricted Class B Visa stock of $680,000.

There were no similar gains recorded during 2022 and 2021.

For 2023, other non-interest income increased when compared to 2022 due primarily to increased operating lease income.

Other non-interest income increased during 2022, primarily due to increased other operating income.

Other non-interest income during 2021 was impacted by a decline in the fair value of equity securities during 2021.

Total Non-Interest Expense

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Average during the period 1,411 1,245 1,003

Base salaries and wages increased compared to 2021, driven by the additional salaries associated with the acquisition of Vantage, and the Premier Merger.

Base salaries and wages increased in 2021 compared to 2020, and were impacted by the Premier Merger and the acquisition of North Star Leasing.

Base salaries and wages increased for 2023 compared to 2022, driven by the additional salaries associated with the Limestone Merger, including $5.8 million in acquisition-related salary and employee benefit expenses related to the Limestone Merger in 2023.

Base salaries and wages increased in 2022 compared to 2021, driven by the additional salaries associated with the acquisition of Vantage, and the Premier Merger.

Base salaries and wages in 2021 were impacted by the Premier Merger and the NSL acquisition.

During 2021, Peoples incurred $3.8 million of one-time expenses associated with acquisitions.

whereas, Peoples incurred $1.1 million in severance expenses in 2020, due primarily to a management restructuring that occurred in the latter half of 2020.

Base salaries and wages were impacted by merit increases, as well as continued movement towards a $15 per hour minimum wage throughout Peoples' organization.

Base salaries and wages were impacted by merit increases, as well as movement towards a $15 per hour minimum wage throughout Peoples’ organization.

The $15 per hour minimum was phased in and fully implemented by January of 2023.

The increase in sales-based and incentive compensation for 2022 compared to 2021 was primarily due to sales incentives earned by Vantage employees.

Sales-based and incentive compensation increased in 2021 compared to 2020, largely due to higher incentive

compensation related to the overall company performance measures combined with trust and investment income growth.

Peoples' sales-based and incentive compensation plans are designed to grow core earnings while managing risk, and do not encourage unnecessary and excessive risk-taking that could threaten the value of Peoples.

The sales-based and incentive compensation plans reward employees for appropriate behaviors and include provisions addressing inappropriate practices with respect to Peoples and its customers, including clawbacks for executives.

The increase in employee benefits for 2022 compared to 2021 was due to higher medical costs with the addition of the Premier and Vantage employees.

Employee benefit costs in 2021 increased $2.6 million compared to 2020, and were impacted by the Premier Merger and North Star Leasing acquisition, creating an increase in the number of participants in the insurance plan.

The increase in sales-based and incentive compensation for 2023 compared to 2022 was primarily due to the overall company performance measures used in calculating incentive awards and $1.3 million in Vantage-related sales-based and incentive compensation.

Sales-based and incentive compensation increased in 2022 compared to 2021, largely due to sales incentives earned by Vantage employees.

Peoples’ sales-based and incentive compensation plans are designed to grow core earnings while managing risk, while not encouraging unnecessary and excessive risk-taking that could threaten the value of Peoples.

The sales-based and incentive compensation plans are designed to reward employees for appropriate behaviors and include provisions addressing inappropriate practices with respect to Peoples and its customers, including clawbacks for executives.

The increase in employee benefit costs for 2023 compared to 2022 was due to increased medical and 401(k) costs with the addition of the Limestone employees.

Employee benefit costs in 2022 increased compared to 2021 due to higher medical and 401(k) costs with the addition of the Premier and Vantage employees.

Employee stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years, and an adjustment is made at the vesting date to reverse expense for non-vested awards.

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During the years presented in the table above, Peoples granted restricted common shares to officers and key employees with performance-based vesting periods and time-based vesting periods, generally with a three-year cliff vesting.

Employee stock-based compensation for 2022 increased when compared to 2021 due to employees added in the acquisition of Vantage and the Premier Merger.

Employee stock-based compensation was relatively flat for 2021 compared to 2020.

Employee stock-based compensation for 2023 increased when compared to 2022 due to additional employees primarily as a result of the Limestone Merger, as well as a full year with Vantage employees.

Employee stock-based compensation increased for 2022 compared to 2021 due to employees added in the acquisition of Vantage and the Premier Merger.

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

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

Deferred personnel costs in 2023 decreased compared to 2022, primarily due to a decrease in business loan origination volume.

Higher deferred personnel costs in 2022 compared to 2021 was primarily due to an increase in loan origination volume.

Deferred personnel costs decreased in 2021 compared to 2020.

Materially impacting the comparison was the recognition of $921,000 in deferred personnel costs during 2020 related to the origination of PPP loans.

Additional information regarding Peoples’ loan activity can be found later in this discussion under the caption “Loans” within “FINANCIAL CONDITION.”

For 2022, payroll taxes and other employment costs increased compared to 2021, primarily due to recent mergers and acquisitions.

Payroll taxes and other employee costs increased during 2021 as a result of the higher base salaries, sales-based and incentive compensation, and employee benefits.

During 2020, $454,000 in dividends were received by Peoples from Ohio Bureau of Workers' Compensation in an effort to ease the impact of COVID-19 on the state's business community and workforce.

For 2023, payroll taxes and other employment costs increased compared to 2022, primarily due to the employees added from the Limestone Merger.

Payroll taxes and other employee costs increased during 2022 compared to 2021, primarily due to recent mergers and acquisitions.

Peoples’ net occupancy and equipment expense for the years ended December 31 was comprised of the following:

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Net occupancy and equipment expense $ 21,368 $ 19,516 $ 14,918

For 2022, net occupancy and equipment expense increased when compared to 2021 due to the additional locations and equipment from recent mergers and acquisitions.

Net occupancy and equipment expense grew during 2021 when compared to 2020, driven by the recent acquisitions and ongoing costs related to the larger footprint.

For 2023, net occupancy and equipment expense increased when compared to 2022 due to the additional locations and equipment from the Limestone Merger.

Net occupancy and equipment expense grew during 2022 when compared to 2021 due to the additional locations and equipment from recent mergers and acquisitions.

The following table details the other items included within Peoples’ total non-interest expense for the years ended December 31:

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Professional fees 17,041 12,094 15,783

E-banking expense 9,231 8,885 7,777

Amortization of other intangible assets 11,222 7,763 4,775

E-banking expense 7,150 9,231 8,885

Marketing expense 5,017 3,728 3,658

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Data processing and software expense includes software support, maintenance and depreciation expense.

Data processing and software expense for 2022 increased relative to 2021, driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization.

During 2021, data processing and software expense grew when compared to 2020 due to systems and software upgrades, annual contractual increases and overall growth, which included:

the implementation of enhanced

functionalities for Peoples' core banking system, including making certain mobile banking tools available to customers;

software upgrades;

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

The higher expense during 2021 when compared to 2020 also reflected increases related to the Premier Merger.

Professional fees decreased for 2022 when compared 2021, primarily driven by acquisition-related expenses related to the Premier Merger which had been realized in 2021.

Professional fees during 2021 increased considerably when compared to 2020 due to acquisition-related expenses associated with the Premier Merger and the NSL acquisition during 2021.

Data processing and software expense for 2023 increased relative to 2022, driven by (i) software upgrades, (ii) implementation of new systems, (iii) growth from the Limestone Merger, and (iv) $1.9 million in acquisition-related expenses related to the Limestone Merger.

During 2022, data processing and software expense grew when compared to 2021 due to software upgrades and implementation of new systems, coupled with the increased size of Peoples’ organization.

Professional fees increased for 2023 when compared to 2022, primarily driven by a $3.7 million increase in acquisition-related expenses, due to increased expenses related to the Limestone Merger in 2023.

Professional fees during 2022 decreased when compared 2021, primarily driven by acquisition-related expenses related to the Premier Merger which had been realized in 2021.

Amortization of other intangible assets increased for 2023 when compared to 2022 due to the increased intangible assets recognized as a result of the Limestone Merger.

During 2022, amortization of other intangible assets increased when compared to 2021 due to the increased intangible assets recognized as a result of the recent mergers and acquisitions.

Peoples’ e-banking expense is comprised of costs associated with debit and ATM cards, as well as Internet and mobile banking costs.

E-banking expense increased for 2022 when compared to 2021 due to growth, both core and through mergers and acquisitions.

E-banking expense increased during 2021 when compared to 2020, as customer usage increased, coupled with the additional accounts acquired in the Premier Merger.

Amortization of other intangible assets increased for 2022 when compared to 2021 due to the increased intangible assets recognized as a result of the recent mergers and acquisitions.

During 2021, amortization of other intangible assets increased when compared to 2020 as a result of the recent Premier Merger, the North Star Leasing acquisition and the full-year impact of Premium Finance.

Marketing expense, which includes advertising, donations, marketing campaigns, and other public relations costs, for 2022 was relatively flat when compared to 2021.

Marketing expense was higher for 2021, compared to 2020, which increase was mostly due to additional advertising campaigns relating to the addition of the Premier locations.

Additionally, Peoples' donations increased during 2021, which included a $500,000 special contribution to the Peoples Bank Foundation, Inc., and donations to each of Marietta College and the Ohio Valley Museum of Discovery.

FDIC insurance premiums for 2022 increased when compared to 2021 due to organic and acquisitive growth.

FDIC insurance expense increased during 2021, compared to 2020, which increase was partially due to credits used by Peoples during the first two quarters of 2020 to offset its FDIC insurance premium, coupled with a lower leverage ratio during early 2020, which negatively impacted insurance expense for 2021.

E-banking expense decreased for 2023 when compared to 2022 due to decreased costs for Peoples’ online banking platform.

E-banking expense increased for 2022 when compared to 2021 due to both core growth, and growth through mergers and acquisitions.

Marketing expense, which includes advertising, donations, marketing campaigns, and other public relations costs, for 2023 increased when compared to 2022, primarily driven by increased marketing related to the Limestone Merger, an increase in donations, and a full year of expenses from Vantage.

Marketing expense was relatively flat for 2022, compared to 2021.

FDIC insurance premiums for 2023 increased when compared to 2022 due to organic and acquisitive growth, in addition to an increase in rates assessed by the FDIC.

FDIC insurance expense increased during 2022 compared to 2021 due to organic and acquisitive growth.

The FDIC quarterly assessment rate is applied to average total assets less average tangible equity, and is based on the leverage ratio, net income before taxes, nonperforming loans as a percent of total assets, OREO, loan mix and asset growth.

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Peoples is subject to state franchise taxes, which are based largely on Peoples’ equity at year-end, in the states where Peoples has a physical presence.

The 2022 increase versus 2021 was driven by recent growth through acquisitions and organic means.

Franchise tax expense declined slightly for 2021, and was driven by a change in the calculation for Kentucky, which became an income-based instead of an equity-based calculation, and reduced the related tax expense for 2021, compared to 2020.

Franchise tax expense for 2023 when compared to 2022 was relatively flat.

Franchise tax expense increased during 2022 versus 2021, driven by recent growth through acquisitions and organic means.

Franchise tax expense also includes the Ohio Financial Institution Tax (“FIT”), which is a business privilege tax that is imposed on financial institutions organized for profit and doing business in Ohio.

The Ohio FIT is based on the total equity capital in proportion to the taxpayer’s gross receipts in Ohio.

Other loan expenses during 2022 increased when compared to 2021 primarily due to higher indirect lending volume and increased collection expense driven by the Premier Merger.

During 2021, other loan expenses increased mostly due to the higher volume of indirect consumer loan originations during 2020 and related recognition of deferred costs, which lowered expense during 2020, and was not duplicated during 2021.

Other loan expenses during 2023 increased when compared to 2022 primarily due to Limestone-related expenses and increases in business loan expenses and credit bureau expenses.

During 2022, other loan expenses increased primarily due to higher indirect lending volume and increased collection expense driven by the Premier Merger.

Communications expense increased during 2023 when compared to 2022 and increased during 2022 when compared to 2021, in each case due to upgraded networking to certain branches (including new branches acquired in acquisitions and mergers) and increased costs compared to the prior period among certain vendors that provide communication services.

Other non-interest expense for 2022 decreased when compared to 2021 primarily due to less acquisition-related expenses.

Other non-interest expense increased considerably during 2021 when compared to 2020, which increase was primarily related to acquisition-related expenses recognized.

Other non-interest expense for 2023 increased when compared to 2022 primarily due to $2.8 million in additional acquisition-related expenses related to the Limestone Merger, a $2.4 million settlement charge in relation to the termination of the pension plan and $1.7 million in operating lease expense.

Other non-interest expense decreased for 2022 when compared to 2021, which was primarily due to less acquisition-related expenses.

Income Tax Expense

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For the full year of 2023, income tax expense totaled $31.8 million, compared to $27.3 million in 2022, and $9.4 million in 2021, and the effective tax rate for 2023 was 21.9%, compared to 21.3% for 2022, and 16.5% for 2021.

The 2022 increase in income tax expense when compared to 2021 was driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states due to recent acquisitions.

Income tax expense increased during 2021 when compared to 2020, which was due to higher pre-tax income, benefiting from the recent merger and acquisitions and reduced provision for credit losses.

Income tax expense

for 2021 was impacted by an income tax benefit related to an adjustment from the prior period of $1.1 million.

During 2020, income tax expense and the effective tax rate were positively impacted by tax-exempt interest income, non-taxable BOLI income and the full-year impact of the investment in Peoples Risk Management, Inc., which reduced income tax expense by $412,000.

Income tax expense for 2020 was also impacted by additional income tax expense related to an adjustment from the prior year of $863,000.

Peoples also recorded a tax benefit of $5,000 in 2022, a tax expense of $74,000 in 2021, and a tax benefit of $5,000 in 2020 related to common share awards that settled or vested during the year, with the substantial majority recorded in the first quarter of each year.

The 2023 increase in income tax expense when compared to 2022 was driven by higher pre-tax income.

Income tax expense increased during 2022 when compared to 2021, which was driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states due to recent acquisitions.

Income tax expense for 2021 was impacted by an income tax benefit related to an adjustment from the prior period of $1.1 million.

Peoples also recorded a tax benefit of $128,000 in 2023, a tax benefit of $5,000 in 2022, and a tax expense of $74,000 in 2021 related to common share awards that settled or vested during the year, with the substantial majority recorded in the first quarter of each year.

Pre-Provision Net Revenue (non-US GAAP)

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Pre-provision net revenue per common share - diluted $ 5.06 $ 4.48 $ 2.63

PPNR grew in 2022 when compared to 2021 mostly due to (i) the impact of the Premier Merger and the Vantage and NSL acquisitions in improving net interest income, (ii) the recent increases in market interest rates, (iii) higher non-interest income, and (iv) lower acquisition-related expenses.

During 2021, PPNR declined when compared to 2020, and was heavily impacted by $21.4 million in acquisition-related expenses, which more than offset the positive impact of higher total revenue compared to 2020.

PPNR grew in 2023 when compared to 2022 mostly due to (i) the impact of the Limestone Merger in improving net interest income, (ii) increases in market interest rates, and (iii) higher non-interest income.

During 2022, PPNR grew when compared to 2021 mostly due to (i) the impact of the Premier Merger and the Vantage and NSL acquisitions in improving net interest income, (ii) the increases in market interest rates, (iii) higher non-interest income, and (iv) lower acquisition-related expenses.

Core Non-Interest Expense (non-US GAAP)

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

contribution, and contract negotiation expenses.

The following tables provide reconciliations of this non-US GAAP financial measure to the amount of total non-interest expense reported in Peoples' Consolidated Financial Statements for the years presented:

contribution, and contract negotiation non-recurring expenses.

The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total non-interest expense reported in Peoples’ Consolidated Financial Statements for the years presented:

(Dollars in thousands) 2023 2022 2021

8 unchanged sentences

contract negotiation expenses — — 1,248

COVID-19 Employee Retention Credit 548 — —

Core non-interest expense $ 247,641 $ 203,812 $ 159,096

The 2022 increase in core non-interest expense when compared to 2021 was due to an increase in total non-interest expenses as noted in the above section captioned "Total Non-Interest Expense." The increase in core non-interest expense for 2021, compared to 2020, was driven by higher ongoing costs associated with recent mergers and acquisitions.

This includes the impact of the Premier Merger since September 17, 2021, the North Star Leasing acquisition since April 1, 2021, and the impact of the Premium Finance acquisition since July 1, 2020.

Efficiency Ratio (non-US GAAP)

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This financial measure is non-US GAAP since it excludes amortization of other intangible assets and all gains and/or losses included in earnings, and uses FTE net interest income.

The following table provides a reconciliation of this non-US GAAP financial measure to the amount of total non-interest income and total non-interest expense reported in Peoples' Consolidated Financial Statements for the years presented:

The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total non-interest income and total non-interest expense reported in Peoples’ Consolidated Financial Statements for the years presented:

(Dollars in thousands) 2023 2022 2021

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

The efficiency ratio and the efficiency ratio adjusted for non-core items for 2023 improved when compared to 2022, due to higher net interest income driven by the Limestone Merger, increases in market interest rates, and higher non-interest income.

The efficiency ratio and the efficiency ratio adjusted for non-core items for 2022 improved when compared to 2021, due to higher net interest income driven by increases in market interest rates.

Additionally, the efficiency ratio and adjusted efficiency ratio for 2022 both improved when compared to 2021 due to improvements in net interest income from the recent acquisitions, coupled with higher non-interest income, outpacing increases in total non-interest expense.

The efficiency ratio increased during 2021 when compared to 2020, and was largely due to the acquisition-related expenses.

The efficiency ratio, when adjusted for non-core items, increased for 2021 compared to 2020, which was driven by the higher non-interest expense, coupled with the continued low interest rate environment and related impact to net interest income.

Managing expenses has been a major focus over recent years;

however, during this time Peoples has continued to make meaningful investments in its infrastructure and systems.

Peoples was positively impacted in 2022 by the rising market interest rate environment and the related increase to net interest income;

whereas, 2021 and 2020 net interest incomes were negatively impacted by the lower market interest rate environment.

Peoples was positively impacted in 2023 and 2022 by the rising market interest rate environment and the related increase to net interest income;

whereas, 2021 net interest income was negatively impacted by a lower market interest rate environment.

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

2 unchanged sentences

contributions and contract negotiation non-recurring expenses included in net income.

The following table provides a reconciliation of this non-US GAAP financial measure to the amount of net income reported in Peoples' Consolidated Financial Statements for the years presented:

The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of net income reported in Peoples’ Consolidated Financial Statements for the years presented:

(Dollars in thousands) 2023 2022 2021

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

The decrease in the return on average assets for 2023 compared to 2022 was attributable to a greater impact from non-core items, primarily due to (i) an increase in net acquisition-related expenses as a result of the Limestone Merger, (ii) higher net losses on

investment securities and asset disposals and other transactions, and (iii) pension settlement charges of $2.4 million in relation to the termination of the pension plan.

Return on average assets adjusted for non-core items for 2023 increased when compared to 2022 due to higher net interest income and non-interest income, which were driven by the Limestone Merger, and increases in market interest rates.

The increase in the return on average assets for 2022 compared to 2021 was attributable to higher net interest income and non-interest income, which were driven by the recent acquisitions and mergers and increases in market interest rates.

The 2021 return on average assets and return on average assets adjusted for non-core items, both increased compared to 2020, as Peoples recorded a lower provision for credit losses during 2021 compared to 2020, while net income improved due to recent acquisitions and mergers and core growth.

Return on Average Tangible Equity (non-US GAAP)

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

The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total average stockholders’ equity and the return on average stockholders’ equity ratios reported in Peoples’ Consolidated Financial Statements for the years presented:

(Dollars in thousands) 2023 2022 2021

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

The return on total average stockholders' equity and average tangible equity ratios were higher in 2022 relative to 2021, due to higher total net interest income driven by the recent increases in market interest rates and loans and leases added in the Premier Merger and the acquisitions of Vantage and NSL, coupled with higher non-interest income.

At the same time, the average tangible equity was negatively impacted by the Vantage acquisition, for which People did not issue any equity, and recorded additional goodwill and other intangible assets.

Return on average stockholders' equity and return on average tangible equity in 2021 both improved compared to 2020, and were driven by the recent acquisitions and mergers, core growth and reduced provision for credit losses.

The return on total average stockholders’ equity and average tangible equity ratios were lower in 2023 relative to 2022, due to (i) the issuance of 6.8 million common shares as consideration in the Limestone Merger, (ii) an increase in acquisition-related expenses, and (iii) an increase in the provision for credit losses due to the initial provision for the non-PCD loans acquired from Limestone, partially offset by an increase in total net interest income driven by the recent increases in market interest rates and additional net interest income from Limestone following the Limestone Merger.

At the same time, average tangible equity for 2023 was negatively impacted by the Limestone Merger, for which Peoples recorded additional goodwill and other intangible assets.

Return on total average stockholders’ equity and average tangible equity ratios were higher in 2022 relative to 2021, due to higher total net interest income driven by the recent increases in market interest rates and loans and leases added in the Premier Merger and the acquisitions of Vantage and NSL, coupled with higher non-interest income.

At the same time, average tangible equity for 2022 was negatively impacted by the Vantage acquisition, for which People did not issue any equity, and recorded additional goodwill and other intangible assets.

FINANCIAL CONDITION

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The amount of cash and cash equivalents fluctuates on a daily basis due to customer activity and Peoples’ liquidity needs.

At December 31, 2022, excess cash reserves at the FRB of Cleveland were $33.1 million, compared to $318.1 million at December 31, 2021.

Peoples also acquired $248.4 million in cash and cash equivalents in the Premier Merger in 2021.

At December 31, 2023, excess cash reserves at the FRB were $309.8 million, compared to $33.1 million at December 31, 2022.

The amount of excess cash reserves maintained is dependent upon Peoples’ daily liquidity position, which is driven primarily by changes in deposit and loan balances.

In 2023, Peoples’ total cash and cash equivalents increased $272.7 million, due to cash provided by financing activities of $262.0 million and cash provided by operating activities of $143.6 million, partially offset by cash used in investing activities of $132.9 million.

Peoples’ investing activities reflected a net increase of $356.1 million in loans held for investment and $282.8 million in purchases of available-for-sale investment securities and held-to-maturity investment securities, which were more than offset by $434.1 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment securities.

Financing activities included a $201.4 million net increase in deposits, an increase of $41.0 million in short-term borrowings, a net increase of $74.9 million in long-term borrowings, as well as $51.8 million of cash dividends paid.

In 2022, Peoples’ total cash and cash equivalents decreased $261.7 million, due to cash used in investing activities of $414.2 million, partially offset by cash provided by operating activities and financing activities of $119.8 million and $32.7 million, respectively.

Peoples' investing activities reflected a net decrease of $58.1 million in loans and $452.9 million in purchases of available-for-sale investment securities and held-to-maturity investment securities, which were primarily offset by $237.8 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment securities.

Peoples’ investing activities reflected a net decrease of $58.1 million in loans held for investment and $452.9 million in purchases of available-for-sale investment securities and held-to-maturity investment securities, which were primarily offset by $237.8 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment securities.

Financing activities included a $145.1 million net decrease in deposits and an increase of $328.6 million in short-term borrowings, as well as $42.4 million of cash dividends paid.

In 2021, Peoples' total cash and cash equivalents increased $263.6 million, as cash provided by operating activities and financing activities of $156.4 million and $181.6 million, respectively, were partially offset by cash used in investing activities of $74.4 million.

Peoples' investing activities reflected a net increase of $113.5 million in loans and $852.5 million in purchases of available-for-sale investment securities, which were partially offset by $849.1 million in net proceeds from sales, principal payments, calls and

prepayments on available-for-sale and held-to-maturity investment securities.

Financing activities included a $200.8 million net increase in deposits and increase of $14.4 million in short-term borrowings, as well as $31.0 million of cash dividends paid.

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

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Total amortized cost $ 1,184,288 $ 1,300,719 $ 1,283,146

Net unrealized (loss) gain $ (169,320) $ (7,653) $ 18,469

Net unrealized loss $ (135,966) $ (169,320) $ (7,653)

Held-to-maturity securities, at amortized cost:

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At December 31, 2023, Peoples’ investment securities represented approximately 19.6% of total assets, compared to 24.2% at December 31, 2022.

For 2022, total investment securities increased compared to the prior year, largely due to investments made in held-to-maturity securities, in an effort to deploy cash, improve investment yields and reduce risk, partially offset by the reduction in market value of available-for-sale securities driven by the recent increases in market interest rates.

For 2023, total investment securities increased compared to the prior year, largely due to purchases of held-to-maturity securities, partially offset by available-for-sale securities sold, both of which were part of portfolio restructurings throughout 2023.

During the first quarter of 2023, Peoples executed the sales of $96.7 million of its lower yielding available-for-sale investment securities for an after-tax loss of $1.6 million.

Proceeds from the sales were used to pay down overnight borrowings.

During the fourth quarter of 2023, Peoples executed the sales of an additional $36.5 million of its lower yielding available-for-sale investment securities for an after-tax loss of $1.3 million.

Proceeds from the sales were used to purchase higher yielding agency investment securities.

During 2022, total investment securities increased compared to the prior year, largely due to investments made in held-to-maturity securities, in an effort to deploy cash, improve investment yields and reduce risk, partially offset by the reduction in market value of

available-for-sale securities driven by the increases in market interest rates during 2022.

During 2021, Peoples acquired, in the Premier Merger, investment securities totaling $552.0 million and subsequently sold $395.2 million of available-for-sale securities.

The 2021 increase in investment securities compared to 2020 also reflected Peoples' continued reinvestment of proceeds from available-for-sale investment securities and the investment of excess cash in higher-yielding investment securities.

During 2021, Peoples acquired from Premier, and made investments into, tax-exempt securities, which are included in obligations of state and political subdivisions.

The investments into these securities were made in an effort to reduce exposure to amortizing investment securities, while also maintaining an appropriate level of risk-adjusted yield.

During 2020, Peoples sold $82.6 million of available-for-sale securities and reinvested the majority of the proceeds in held-to-maturity investment securities to minimize the volatility in the securities portfolio, should interest rates begin to rise.

Peoples designates certain securities as “held-to-maturity” at the time of their purchase if management determines Peoples would have the intent and ability to hold the purchased securities until maturity.

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Home equity lines of credit 60,520 45,765 59,417

Consumer, indirect — — 1

Consumer, direct 16,477 9,657 23,322

Consumer 9,657 23,322 3,504

Total acquired loans (a) $ 1,825,129 $ 1,108,728 $ 1,430,810

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(b) NM=not meaningful.

As of December 31, 2023, total loans increased $1.5 billion, compared to at December 31, 2022, primarily due to the Limestone Merger.

Excluding the loans acquired in the Limestone Merger, the period-end loan and lease balance increased $472.2 million, or 10%, driven by increases of $203.6 million in other commercial real estate loans, $78.2 million in commercial and industrial loans, $68.9 million in leases, $44.0 million in premium finance loans, $37.9 million in construction loans, and $37.0 million in indirect consumer loans, respectively.

As of December 31, 2022, total loans increased 5%, compared to at December 31, 2021.

The increase in 2022 total loan and lease balances was primarily driven by $89.4 million in leases acquired from Vantage remaining at December 31, 2022 and increases of (i) $98.9 million in indirect consumer loans, (ii) $36.7 million in construction loans and (iii) $23.1 million in premium finance loans, partially offset by reductions of $126.6 million in other commercial real estate loans and $48.4 million in residential real estate loans.

As of December 31, 2021, total loans increased 32%, compared to December 31, 2020, which was driven by the Premier Merger and the North Star Leasing acquisition, coupled with core growth.

The Premier Merger added $1.1 billion in loans at December 31, 2021, which were comprised of $96.1 million in construction;

$534.9 million in commercial real estate, other;

$132.1 million in commercial and industrial;

$331.1 million in residential real estate;

$45.9 million in home equity lines of credit;

and $21.6 million of consumer, direct loan balances.

During 2021, the outstanding balance of SBA PPP loans declined $279.8 million, from $366.9 million at December 31, 2020, to $87.1 million at December 31, 2021, which was mainly due to forgiveness proceeds received from the SBA.

The following table details the maturities of Peoples’ loan portfolio at December 31, 2023:

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Apartment complexes $ 202,217 $ 228,038 $ 430,255 61.7 %

Assisted living facilities and nursing homes 37,484 17,508 54,992 10.7 %

Mixed-use facilities 29,282 10,910 40,192 7.8 %

Land development 40,508 17,150 57,658 8.3 %

Land only 31,538 2,808 34,346 4.9 %

Office buildings and complexes 10,100 9,180 19,280 3.7 %

Retail 23,643 5,012 28,655 4.1 %

Lodging and lodging related 3,677 16,456 20,133 2.9 %

Industrial 10,108 7,002 17,110 2.5 %

Student housing 7,022 7,978 15,000 2.2 %

Other (a) 45,306 48,998 94,304 13.4 %

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Commercial real estate, other:

Apartment complexes 307,060 4,565 311,625 13.7 %

Retail facilities:

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Total retail 279,270 2,422 281,692 12.4 %

Office buildings and complexes:

Owner occupied 74,125 2,418 76,543 5.0 %

Non-owner occupied 82,279 2,780 85,059 5.6 %

Total office buildings and complexes 156,404 5,198 161,602 10.6 %

Light industrial facilities:

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Total light industrial facilities 240,846 8,217 249,063 10.9 %

Mixed commercial use facilities:

Office buildings and complexes:

Owner occupied 85,004 3,616 88,620 3.9 %

Non-owner occupied 135,423 7,011 142,434 6.3 %

Total mixed commercial use facilities 109,468 1,112 110,580 7.3 %

Total office buildings and complexes 220,427 10,627 231,054 10.2 %

Lodging and lodging related:

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Total lodging and lodging related 162,378 1,903 164,281 7.2 %

Apartment complexes 96,890 54,135 151,025 10.0 %

Assisted living facilities and nursing homes 130,907 6,412 137,319 6.0 %

Warehouse facilities:

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Total warehouse facilities 91,859 1,173 93,032 4.1 %

Assisted living facilities and nursing homes 53,333 250 53,583 3.5 %

Education services:

Owner occupied 16,896 98 16,994 1.1 %

Non-owner occupied 30,395 5,558 35,953 2.4 %

Total education services 47,291 5,656 52,947 3.5 %

Restaurant/bar facilities:

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Total healthcare facilities 49,311 990 50,301 2.3 %

Education services:

Owner occupied 16,519 — 16,519 0.7 %

Non-owner occupied 29,983 4,000 33,983 1.5 %

Total education services 46,502 4,000 50,502 2.2 %

Mixed commercial use facilities:

Owner occupied 22,655 1,227 23,882 1.1 %

Non-owner occupied 24,090 1,636 25,726 1.1 %

Total mixed commercial use facilities 46,745 2,863 49,608 2.2 %

Other (a) 543,556 31,032 574,588 25.3 %

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Additional information regarding Peoples’ loan portfolio can be found in “Note 4 Loans and Leases.”

COVID-19 Loan Impacts

Small Business Administration Paycheck Protection Program

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

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

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

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

The PPP expired on May 31, 2021 and no new originations have been or will be made under the program;

however, forgiveness proceeds will continue to be received until the loans are paid in full.

Peoples is a PPP participating lender, and the PPP loans originated (including $23.4 million acquired in the Premier Merger as of the merger date) are included in commercial and industrial loans.

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

The following table details Peoples' PPP loans and related income at and for the years ended December 31:

(Dollars in thousands) 2022 2021 2020

PPP aggregate outstanding principal balances $ 2,458 $ 89,307 $ 374,753

PPP net deferred loan origination fees 27 2,210 7,851

Amortization of net deferred loan origination fees 2,183 13,025 7,516

Allowance for Credit Losses

The amount of the allowance for credit losses at the end of each period represents management’s estimate of expected credit losses from existing loans based upon its formal quarterly analysis of the loan portfolio described in the “Critical Accounting Policies” section of this discussion.

While this process involves allocations being made to specific loans and pools of loans, the entire allowance is available for all losses incurred within the loan portfolio.

While this process involves making allocations to specific loans and pools of loans, the entire allowance is available for all losses incurred within the loan portfolio.

The following details management’s allocation of the allowance for credit losses at December 31:

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As a percent of total loans 1.01 % 1.13 % 1.43 %

The increase in the allowance balance at December 31, 2023 when compared to at December 31, 2022 was driven by (i) the additional allowance related to the loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of the reserves on individually analyzed loans and the use of updated loss drivers.

Those decreases were partially offset by loan growth and deterioration in the economic forecast.

Peoples recorded $0.8 million of provision for credit losses to establish the allowance for credit losses for non-purchase credit deteriorated leases

acquired from Vantage.

The allowance for credit losses as a percent of total loans at December 31, 2022 decreased compared to at December 31, 2021, which was mostly due to the composition of Peoples' loan and lease portfolio as well as aforementioned the reduction in the allowance for credit losses.

During 2021, the allowance for credit losses grew 27% when compared to 2020, which was largely due to the Premier Merger and the North Star Leasing acquisition, and the related need to establish an allowance for credit losses on those portfolios, coupled with organic growth in loan balances during 2021.

The North Star Leasing acquisition added $3.3 million to the allowance for credit losses at the acquisition date, of which $493,000 was established for PCD loans as part of the acquisition accounting, and the remainder was established through the recording of a provision for credit losses.

The Premier Merger added $28.6 million to the allowance for credit losses during the third quarter of 2021, of which $16.9 million was established for PCD 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 was relatively stable at December 31, 2021 compared to December 31, 2020, and was mostly due to the composition of Peoples' loan and lease portfolio.

The 2020 allowance for credit losses was impacted by the COVID-19 pandemic, and the resulting impact on economic forecasts utilized in the CECL model.

Peoples recorded $0.8 million of provision for credit losses to establish the allowance for credit losses for non-PCD leases acquired from Vantage.

The allowance for credit losses as a percent of total loans at December 31, 2022 decreased compared to at December 31, 2021, which was mostly due to the composition of Peoples’ loan and lease portfolio as well as the aforementioned reduction in the allowance for credit losses.

Additional information regarding Peoples’ allowance for credit losses can be found in “Note 1 Summary of Significant Accounting Policies” and “Note 4 Loans and Leases.”

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Total net charge-offs $ 8,547 $ 7,272 $ 4,693

(Recovery of) Provision for credit losses, December 31 (a) (2,904) 731 26,254

Provision for (recovery of) credit losses, December 31 (a) 15,345 (2,904) 731

Initial allowance for PCD assets $ 2,051 $ (629) $ 17,570

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(a) Amount does not include the provision for unfunded commitment liability.

Net charge-offs as a percent of average total loans for 2022 increased to 0.16% compared to 0.13% at 2021.

The increase was due to increases in net charge-offs related to (i) lease balances, (ii) total consumer loan balances, and (iii) deposit account overdraft balances.

Net charge-offs as a percent of average total loans for 2023 decreased to 0.15% compared to 0.16% at 2022.

The decrease was due to (i) an increase in average loan balances, primarily driven by the loans acquired in the Limestone Merger, (ii) decreases in net charge-offs of residential real estate loan balances and commercial and industrial loan balances, and (iii) net recoveries in 2023 compared to net charge-offs in 2022 of other commercial real estate loan balances, mostly offset by increases in net charge-offs related to total consumer loan balances and lease balances.

During 2022, net charge-offs as a percent of average total loans increased to 0.16%, compared to 0.13% for 2021.

This increase was driven by the additional net charge-offs related to lease balances, coupled with the impact of a recovery of $2.5 million on a single commercial loan relationship during 2020, which lowered the ratio for that period.

Prior to the acquisition, North Star Leasing was experiencing net charge-off rates of around 3% of average lease balances, and Peoples anticipates that net charge-off levels will increase in future periods as the net charge-offs for the leasing division return to this historical rate.

The increase was due to increases in net charge-offs related to (i) lease balances, (ii) total consumer loan balances, and (iii) deposit account overdraft balances.

The following table details Peoples’ nonperforming assets at December 31:

(Dollars in thousands) 2023 2022 2021

Loans 90+ days past due and accruing (a):

Loans 90+ days past due and accruing:

Construction $ — $ — $ 90

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Total loans 90+ days past due and accruing 6,716 4,842 3,723

Nonaccrual loans (a):

Nonaccrual loans:

Construction — 12 6

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Total nonaccrual loans 25,477 31,473 34,765

(Dollars in thousands) 2022 2021 2020

Nonaccrual troubled debt restructurings (TDRs):

Commercial real estate, other $ 2,599 $ 218 $ 367

Commercial and industrial 317 1,067 2,175

Residential real estate 979 1,631 2,295

Home equity lines of credit 140 352 159

Consumer, indirect 150 272 190

Consumer, direct 8 6 11

Total nonaccrual TDRs 4,193 3,546 5,197

Total nonperforming loans (“NPLs”) 32,193 36,315 38,488

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Total nonperforming assets (“NPAs”) $ 39,367 $ 45,210 $ 47,984

Criticized loans (b) $ 191,355 $ 194,016 $ 126,619

Classified loans (c) 89,604 106,547 72,518

Criticized loans (a) $ 235,239 $ 191,355 $ 194,016

Classified loans (b) 120,027 89,604 106,547

Asset Quality Ratios:

Nonaccrual loans as a percent of total loans (d) 0.67 % 0.78 % 0.76 %

NPLs as a percent of total loans (d)(e) 0.77 % 0.86 % 0.82 %

NPAs as a percent of total assets (d)(e) 0.63 % 0.68 % 0.59 %

NPAs as a percent of total loans and OREO (d)(e) 0.96 % 1.07 % 0.84 %

Allowance for credit losses as a percent of nonaccrual loans (d) 168.91 % 184.00 % 195.24 %

Allowance for credit losses as a percent of NPLs (d)(e) 146.39 % 166.20 % 180.14 %

Criticized loans as a percent of total loans (b)(d) 4.07 % 4.33 % 3.72 %

Classified loans as a percent of total loans (c)(d) 1.90 % 2.38 % 2.13 %

(a) On January 1, 2020, Peoples adopted ASU 2016-13 and implemented the CECL model.

The accounting for PCD loans under CECL resulted in the movement of $3.9 million of loans from the 90+ days past due and accruing category to the nonaccrual category as of January 1, 2020.

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

(d) Data presented as of the end of the year indicated.

(e) Nonperforming loans include loans 90+ days past due and accruing, troubled debt restructured loans and nonaccrual loans.

Nonaccrual loans as a percent of total loans (c) 0.41 % 0.67 % 0.78 %

NPLs as a percent of total loans (c)(d) 0.52 % 0.77 % 0.86 %

NPAs as a percent of total assets (c)(d) 0.43 % 0.63 % 0.68 %

NPAs as a percent of total loans and OREO (c)(d) 0.64 % 0.96 % 1.07 %

Allowance for credit losses as a percent of nonaccrual loans (c) 245.79 % 168.91 % 184.00 %

Allowance for credit losses as a percent of NPLs (c)(d) 194.38 % 146.39 % 166.20 %

Criticized loans as a percent of total loans (a)(c) 3.82 % 4.07 % 4.33 %

Classified loans as a percent of total loans (b)(c) 1.95 % 1.90 % 2.38 %

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

(b) Includes loans categorized as substandard or doubtful.

(d) Nonperforming loans include loans 90+ days past due and accruing, troubled debt restructured loans and nonaccrual loans.

Nonperforming assets include nonperforming loans and OREO.

Compared to December 31, 2021, Peoples' NPAs decreased to 0.63% of total assets at December 31, 2022.

Loans 90+ days past due and accruing increased compared to at December 31, 2021, mostly due to the leases acquired in the Vantage acquisition.

Peoples’ NPAs decreased to 0.43% of total assets at December 31, 2023, compared to 0.63% of total assets at December 31, 2022.

Loans 90+ days past due and accruing increased compared to at December 31, 2022, primarily due to the loans acquired in the Limestone Merger and an increase in leases and premium finance loans 90+ days past due and accruing.

During 2023, both criticized and classified loans increased when compared to 2022, primarily due to criticized and classified loans acquired in the Limestone Merger.

Nonperforming assets decreased to 0.63% of total assets at December 31, 2022 compared to 0.68% of total assets at December 31, 2021.

Loans 90+ days past due and accruing increased compared to at December 31, 2021, mostly due to the leases acquired in the

Vantage acquisition.

During 2022, both criticized and classified loans declined when compared to 2021.

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The decrease in classified loans when compared to December 31, 2021 was largely attributable to pay-offs and upgrades of classified loans acquired in the Premier Merger.

Nonperforming assets grew 67% during 2021 compared to 2020.

This increase was primarily driven by the Premier Merger.

At the same time, criticized loans, which are those categorized as special mention, substandard or doubtful, grew $67.4 million, or 53%, while classified loans, which are those categorized as substandard or doubtful, increased $34.0 million, or 47%, compared to at December 31, 2020.

These increases were also due to the Premier Merger.

Based on the provisions provided by the CARES Act, on March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19.

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 ASC 310-40.

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 customers to address any further accommodation needs while carefully evaluating the associated credit risk of the borrowers.

The majority of Peoples’ nonaccrual commercial real estate loans consists primarily of owner occupied commercial properties.

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(a) The sum of amounts presented are considered total demand deposits.

The increase in total deposits between December 31, 2023 and December 31, 2022 was primarily due to deposits acquired in the Limestone Merger.

Excluding Limestone deposit balances, total deposits at December 31, 2023 increased $615.3 million, or 11%, compared to at December 31, 2022, primarily due to increases of $785.6 million in retail certificates of deposit (“CDs”) and $449.8 million in brokered deposits, partially offset by decreases of $226.8 million, $223.3 million, and $193.7 million, in non-interest bearing deposits, savings accounts, and interest-bearing demand deposit accounts, respectively.

Total demand deposits comprised 38% and 48% of total deposits at December 31, 2023 and December 31, 2022, respectively.

The decrease in total deposits between December 31, 2022 and December 31, 2021 was due to decreases in both interest-bearing and non-interest-bearing deposits.

The variance was driven by decreases of (i) $113.5 million in retail CDs, (ii) $52.0 million in total non-interest-bearing deposit accounts and (iii) $34.1 million in money market deposit accounts, partially offset by increases of $31.8 million in savings account deposits and $20.8 million in brokered deposits.

Total demand deposits comprised 48% of total deposits at each of December 31, 2022 and December 31, 2021.

The variance was driven by decreases of (i) $113.5 million in retail certificates of deposits, (ii) $52.0 million in total non-interest-bearing deposit accounts and (iii) $34.1 million in money market deposit accounts, partially offset by increases of $31.8 million in savings account deposits and $20.8 million in brokered deposits.

The significant increase in deposits between December 31, 2021 and December 31, 2020 was largely due to deposits acquired in the Premier Merger.

Total demand deposits comprised 48% of total deposits at December 31, 2021 and were 43% of total deposits at December 31, 2020.

At December 31, 2021, the period-end deposit increase of $2.0 billion, or 50%, compared to December 31, 2020, was primarily due to deposits acquired from Premier.

Also, throughout 2021 and 2020, customers maintained higher balances due to changes in customer habits in light of the COVID-19 pandemic, as well as fiscal stimulus funds and PPP loan proceeds.

As part of its funding strategy, Peoples hedges 90-day brokered deposits with interest rate swaps.

The swaps pay a fixed rate of interest while receiving three-month LIBOR, which offsets the rate on the brokered deposits.

As of December 31, 2022, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $125.0 million, of which $125.0 million were designated as cash flow hedges of brokered deposits, which are expected to be extended every 90 days through the maturity dates of the swaps.

The swaps pay a fixed rate of interest while receiving three-month SOFR, which offsets the rate on the brokered deposits.

As of December 31, 2023, Peoples had eleven effective interest rate swaps, with an aggregate notional value of $105.0 million, which were designated as cash flow hedges of brokered deposits, and are expected to be extended every 90 days through the maturity dates of the swaps.

Peoples continually evaluates the overall balance sheet position given the interest rate environment.

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These funds are subject to periodic fluctuations based on the timing of tax collections and subsequent expenditures or disbursements.

Peoples normally experiences an increase in balances annually during the first and third quarter, corresponding with tax collections, with declines normally in the second and fourth quarter of each year, corresponding with expenditures by the governmental entities.

Peoples normally experiences an increase in balances annually during the first and third quarters, corresponding with tax collections, with declines normally in the second and fourth quarters of each year, corresponding with expenditures by the governmental entities.

Peoples continues to emphasize growth of low-cost deposits that do not require Peoples to pledge assets as collateral, which is required in the case of governmental deposit accounts.

15 unchanged sentences

Repurchase agreements 99,121 100,138 111,482

Bank Term Funding Program (“BTFP”) 133,000 — —

Total short-term borrowings 601,121 500,138 166,482

2 unchanged sentences

Vantage non-recourse debt 49,572 53,147 —

Junior subordinated debt securities 13,788 13,650 7,611

Other long-term borrowings 53,804 13,788 13,650

Total long-term borrowings 216,241 101,093 99,475

1 unchanged sentence

Total borrowed funds, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances.

Peoples continually evaluates the overall balance sheet position given the interest rate environment.

Total borrowed funds increased at December 31, 2022 compared to at December 31, 2021 due to FHLB overnight borrowings of $400.0 million at December 31, 2022.

During 2021, Peoples' repurchase agreements grew when compared to 2020 mostly due to accounts associated with the Premier Merger.

Peoples also acquired additional junior subordinated debt securities in the Premier Merger, leading to the increase in long-term borrowings compared to 2020.

Other long-term borrowings include trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures.

Peoples continually evaluates its overall balance sheet position given the interest rate environment and liquidity needs.

Total borrowed funds increased at December 31, 2023 compared to at December 31, 2022 due to the addition of $133.0 million of BTFP borrowings at December 31, 2023, an increase in FHLB long-term advances, and an increase in other long-term borrowings assumed in the Limestone Merger.

Peoples’ borrowed funds increased at December 31, 2022 compared to at December 31, 2021 due to FHLB overnight borrowings of $400.0 million at December 31, 2022.

On April 3, 2019, Peoples entered into the U.S.

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Capital/Stockholders’ Equity

Peoples' total stockholders' equity at December 31, 2022 decreased 7% when compared to at December 31, 2021, which was due to (i) an other comprehensive loss of $115.5 million, (ii) dividends paid of $42.4 million and (iii) common share repurchases of $7.4 million, partially offset by net income of $101.3 million for 2022.

The other comprehensive loss was the result of changes in the market value of available-for-sale investment securities, which were driven by changes in market interest rates.

At December 31, 2022, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" under banking regulations.

Peoples’ total stockholders’ equity at December 31, 2023 increased 34% when compared to at December 31, 2022, which was due to (i) 6.8 million common shares (valued at $177.9 million) issued in the Limestone Merger, (ii) net income of $113.4 million for 2023, and (iii) a decrease in other comprehensive loss of $25.5 million, partially offset by dividends paid of $52.1 million and share repurchases of $3.0 million.

The decrease in other comprehensive loss was the result of changes in the fair market value of available-for-sale investment securities, which were driven by changes in market interest rates.

At December 31, 2023, capital levels for both

Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered “well capitalized” under banking regulations.

These higher capital levels reflect Peoples’ desire to maintain a strong capital position.

During 2021, total stockholders' equity grew 47% when compared to 2020 mostly due to the issuance of $261.9 million in common shares related to the Premier Merger, in addition to net income of $47.6 million, which was partially offset by dividends paid to shareholders of $31.2 million.

During 2022, total stockholders’ equity decreased 7% when compared to 2021 due to (i) an other comprehensive loss of $115.5 million, (ii) dividends paid of $42.4 million and (iii) common share repurchases of $7.4 million, partially offset by net income of $101.3 million for 2022.

The other comprehensive loss was the result of changes in the market value of available-for-sale investment securities, which were driven by changes in market interest rates.

On January 1, 2020, Peoples recorded a one-time transition adjustment to reduce retained earnings by $3.7 million.

This adjustment reflected the increase in the allowance for credit losses for loans (excluding the gross up of loan balances related to the establishment of an allowance for credit losses for PCD loans, the allowance for credit losses for held-to-maturity investment securities and the addition of an unfunded commitment liability, net of statutory federal corporate income taxes.

Peoples elected to utilize the five-year phase-in period for the transition adjustment due to the implementation of ASU 2016-13.

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

For the first two years of the phase-in period, 100% of the transition adjustment due to ASU 2016-13 is excluded for regulatory capital purposes, along with 25% of the increase in the allowance for credit losses compared to the January 1, 2020 allowance for credit losses.

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

Under the risk-based capital rules, in order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer.

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

For the first two years of the phase-in period, 100% of the transition adjustment due to ASU 2016-13 was excluded for regulatory capital purposes, along with 25% of the increase in the allowance for credit losses compared to the January 1, 2020 allowance for credit losses.

In year three of the phase-in (i.e., 2023), 75% of the transition adjustment, and the cumulative 25% increase in the allowance for credit losses compared to January 1, 2020, were excluded from regulatory capital, while 50% and 25% of these amounts will be excluded in years four and five, respectively, under this phase-in period.

These three minimum required ratios are the common equity tier 1 capital ratio, tier 1 risk-based capital ratio and total risk-based capital ratio.

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Tangible equity to tangible assets 7.33 % 6.67 % 8.18 %

The increase in tangible book value per common share at December 31, 2023 from at December 31, 2022 was due to tangible equity increasing as a result of common shares issued throughout 2023, including shares issued due to the Limestone Merger, a decrease in other comprehensive losses recognized on available-for-sale investment securities, which was driven by changes in market interest rates, and net income for 2023.

The decline in tangible book value per common share at December 31, 2022 from December 31, 2021 was due to tangible equity declining as a result of other comprehensive losses recognized on available-for-sale investment securities, which were driven by changes in market interest rates.

The tangible equity to tangible assets ratio declined during 2021, compared to 2020.

This reduction was mainly due to the acquisition of North Star Leasing, for which no stockholders' equity was issued and additional goodwill and intangibles were recorded.

Future Outlook

Peoples improved its performance considerably during 2022, recording record annual net income while reaping the benefits of the market interest rate increases and prior acquisitions.

Peoples was recognized by Newsweek as the 2023 Best Small Bank in the state of Ohio as well as a Best Bank To Work For 2022 by American Banker.

Peoples intends to keep this momentum moving into 2023, with a focus on strengthening the pipeline of referrals between lines of businesses for new clients, as well as growing the specialty finance lending and leasing portfolios, while also working to seamlessly integrate the Limestone Merger into Peoples' current operations.

Peoples has been able to capitalize on the recent mergers and acquisitions by (i) substantially reducing its efficiency ratio, (ii) building on its positive operating leverage by growing revenues and (iii) offering state of the art technology to new clients.

Management believes it can continue these trends with the pending Limestone Merger while expanding its business into larger markets in Kentucky to be in position to continue to provide a profitable return for shareholders during 2023.

During 2023, net interest income is expected to grow due to the Limestone Merger and organic growth, as well as the full year benefits of higher market interest rates as loans reprice to the newest rate.

Net interest margin expansion is expected to slow in 2023 when compared to 2022, as Peoples will need to increase its funding costs in future periods.

Net interest margin for 2023 is projected to be between 4.50% and 4.65%, which assumes modest increases in rates for 2023 as compared to year-end 2022.

Peoples projects total revenue growth to be between 20% and 25% in 2023, which includes the impact of the pending Limestone Merger.

Total non-interest income, excluding net gains and losses, growth is projected to be between 10% and 15% in 2023 compared to 2022, which includes the impact of the Limestone Merger.

Total non-interest expenses, excluding acquisition-related expenses, for 2023 are expected to increase 20% compared to 2022.

The efficiency ratio is projected to be between 55% and 57% for 2023, including Limestone.

Peoples improved its performance for the second consecutive year during 2023, recording record annual net income despite the challenges that were presented to the banking industry due to the bank failures in 2023.

In 2024, Peoples expects net interest income to benefit from the full year impact of the Limestone Merger, but to also be impacted by the projected market interest rate reductions in 2024.

For 2024, Peoples expects net interest margin to be between 4.10% and 4.30% for the full year, which is based on between 75 to 150 basis points of reductions in the Federal Funds effective rate.

These projections will vary depending on the timing and magnitude of the anticipated rate cuts and the level of competition for deposits.

Peoples projects growth in total non-interest income, excluding net gains and losses, to be in the high single-digits to low double-digits in 2024 compared to 2023.

Total non-interest expenses, excluding acquisition-related expenses, are expected to be between $67 million and $69 million for the second, third and fourth quarters of 2024, with the first quarter of 2024 being higher due to annual expenses typically recognized during the first quarter of each year.

The efficiency ratio is projected to be between 55% and 60% for 2024.

Peoples will continue to place importance on loan growth.

Peoples anticipates that the annual loan growth for 2023, compared to 2022, will be between 25% and 30%, including Limestone balances.

Peoples' annual organic growth without the acquired loans from Limestone, will likely be between 5% and 7%.

Net charge-off rate during 2023, compared to 2022, is expected to increase by roughly 5 basis points.

The balance sheet mix of Peoples will be continually evaluated in an effort to mitigate exposure risk, as interest rates are anticipated to increase during 2023.

Total deposit balances are expected to grow between 20% and 25%, primarily due to the deposits acquired in the Limestone Merger.

Peoples expects annual organic growth without the acquired deposits from Limestone to be between 2% to 4%.

Throughout 2022, deposits balances declined due to customers returning to pre-COVID-19 pandemic balances as well as rising market interest rates due to high levels of inflation.

Management believes Peoples is in position to continue the trend throughout 2022 of meaningfully exceeding all current analyst estimates for 2023 EPS.

The anticipated benefits of the Limestone Merger as well as organic growth are anticipated to put Peoples in an advantageous situation to further improve its performance throughout 2023.

For more information regarding risks and uncertainties that could impact the projections described, please refer to "ITEM 1A RISK FACTORS" of this Form 10-K.

Peoples anticipates that the annual loan growth for 2024, compared to 2023, will be between 6% and 8%.

With the anticipated loan growth and return of net charge-offs to pre-pandemic levels, there is an expectation of an increase in the provision for credit losses during 2024 with a charge-off rate of approximately 20 basis points.

The balance sheet mix of Peoples will be continually evaluated in an effort to mitigate exposure risk during 2024.

Total deposit balances are expected to grow by approximately 2% in 2024.

Peoples expects continued growth despite increased competition in its markets plus additional upward pressure on rates paid.

Throughout 2023, deposits balances increased primarily due to the Limestone Merger, as well as promotional efforts throughout the second half of the year.

Management believes Peoples is in position to maintain strong asset quality metrics and continued growth into 2024.

Peoples came through 2023 with positive financial results despite the challenging economic environment and believes it will continue this trend into 2024.

For more information regarding risks and uncertainties that could impact the projections described above, please refer to “ITEM 1A RISK FACTORS” of this Form 10-K.

Interest Rate Sensitivity and Liquidity

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Increase (Decrease) in Interest Rates Estimated Increase (Decrease) in

Net Interest Income Estimated Decrease in Economic Value of Equity

Net Interest Income Estimated (Decrease) Increase in Economic Value of Equity

(in Basis Points) December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022

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Increased asset yields would not be offset by increases in deposit or funding costs, resulting in an increased amount of net interest income and higher net interest margin.

At December 31, 2022, the bear steepener scenario resulted in an increase in both net interest income and the economic value of equity of 0.1% and 3.0%, respectively.

At December 31, 2023, the bear steepener scenario resulted in an increase in net interest income of 0.90% and a decrease in economic value of equity of 1.00%.

The bear flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates rise while long-term rates remain constant.

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resulting in an increased amount of net interest income and higher net interest margin.

At December 31, 2022, the bear flattener scenario resulted in an increase in net interest income of 0.6% and a decline in the economic value of equity of 1.9%.

During 2022, Peoples' Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income.

The table illustrates this point as net interest income increases in the rising rate scenarios.

At December 31, 2023, the bear flattener scenario resulted in an increase in net interest income of 2.00%% and an increase in economic value of equity of 0.50%

During 2023, Peoples’ Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income, while in 2024, Peoples is positioned to see slight declines in net interest income in a projected falling interest rate environment.

The table above illustrates this point as net interest income increases in the rising rate scenarios and decreases in the falling rate scenarios.

Peoples has entered into interest rate swaps as part of its interest rate risk management strategy.

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

making fixed payments.

As of December 31, 2022, Peoples had thirteen interest rate swap contracts, with an aggregate notional value of $125.0 million.

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

As of December 31, 2023, Peoples had eleven interest rate swap contracts, with an aggregate notional value of $105.0 million.

Additional information regarding Peoples’ interest rate swaps can be found in “Note 15 Derivative Financial Instruments.”

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Management believes that its methodology for developing such assumptions is reasonable;

however, there can be no assurance that modeled results will be achieved.

however, there can be no assurance that modeled results will be achieved or are indicative of future

The asset/liability model along with key modeling assumptions are subjected to a third-party review annually for effectiveness and regulatory compliance.

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An additional strategy used by Peoples in the management of liquidity risk is maintaining a targeted level of liquid assets.

Management defines liquid assets as unencumbered cash (including cash on deposit at the FRB of Cleveland), and the market value of unpledged U.S.

Management defines liquid assets as unencumbered cash (including cash on deposit at the FRB), and the market value of unpledged U.S.

government and agency securities.

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Peoples maintains multiple contingent sources of liquidity including secured wholesale funding lines and unsecured brokered deposit networks.

Peoples' primary sources of secured wholesale funding are the FHLB of Cincinnati and the FRB of Cleveland.

As of December 31, 2022, Peoples had unused collateral-based borrowing capacities of $241.1 million and $264.1 million, respectively, available with the FHLB of Cincinnati and the FRB of Cleveland.

Peoples’ primary sources of secured wholesale funding are the FHLB of Cincinnati and the FRB.

As of December 31, 2023, Peoples had unused collateral-based borrowing capacities of $322.2 million and $318.7 million, respectively, available with the FHLB of Cincinnati and the FRB.

Together, these unused borrowing capacities represent 6.3% of total assets and unfunded loan commitments.

Additionally, Peoples had $107.9 million of unpledged loan collateral eligible to secure additional borrowing capacity with the FRB of Cleveland.

Additionally, Peoples had $150.9 million of unpledged loan collateral eligible to secure additional borrowing capacity with the FRB as of December 31, 2023.

Disruptions in the sources and uses of cash can occur which can drastically alter the actual cash flows and negatively impact Peoples’ ability to access internal and external sources of cash.

Such disruptions might occur due to increased withdrawals of

deposits, increases in the funding required for loan commitments, a decrease in the ability to access external funding sources and other factors that would increase the need for funding and limit Peoples' ability to access needed funds.

Such disruptions might occur due to increased withdrawals of deposits, increases in the funding required for loan commitments, a decrease in the ability to access external funding sources and other factors that would increase the need for funding and limit Peoples’ ability to access needed funds.

As a result, Peoples maintains a liquidity contingency funding plan (“LCFP”) that considers various degrees of disruptions and develops action plans around these scenarios.

Peoples’ LCFP identifies scenarios where funding disruptions might occur and creates scenarios of varying degrees of severity.

The disruptions considered include an increase in funding of unfunded loan commitments, unanticipated withdrawals of deposits, decreases in the renewal of maturing CDs and reductions in cash earnings.

Additionally, the LCFP creates stress scenarios where access to external funding sources, or contingency funding, is suddenly limited, which includes a significant increase in the margin requirements where securities or loans are pledged, limited access to funding from other banks and limited access to funding from the FHLB of Cincinnati and the FRB of Cleveland.

The disruptions considered include an increase in funding of unfunded loan commitments, unanticipated withdrawals of

deposits, decreases in the renewal of maturing CDs, and reductions in cash earnings.

Peoples’ LCFP scenarios include a base scenario, a mild stress scenario, a moderate stress scenario and a severe stress scenario.

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During 2022, deposit balances declined due to customers returning to pre-COVID-19 pandemic balances as well as rising market interest rates due to high levels of inflation.

During 2023, the Federal Reserve continued a historically aggressive rate-hiking campaign, leading to higher interest rates.

As a result, competition for deposits increased.

Peoples responded to the increased competition by offering various CD special rates to retain current clients and attract new clients.

Overall, management believes the current balance of cash and cash equivalents, anticipated investment portfolio cash flows and the availability of other funding sources will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments.

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The following is a summary of Peoples’ significant off-balance sheet activities and contractual obligations.

Detailed information regarding these activities and obligations can be found in the Notes to the Consolidated Financial Statements as follows:

Detailed information regarding these activities and obligations can be found in the Notes to the Consolidated Financial Statements.

Activity or Obligation Note

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However, since certain off-balance sheet commitments, particularly standby letters of credit, are expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements.

Peoples continues to lease certain facilities and equipment under noncancellable operating leases with terms providing for fixed monthly payments over periods generally ranging from two to thirty years.

Peoples continues to lease certain facilities and equipment under noncancellable operating leases with terms providing for fixed monthly payments over periods generally ranging from two to 25 years.

Several of Peoples’ leased facilities are inside retail shopping centers or office buildings and, as a result, are not available for purchase.

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For certain acquisitions, often those involving insurance businesses and wealth management books of business, a portion of the consideration is contingent upon revenue metrics being achieved.

US GAAP requires that the amounts be recorded upon acquisition

based on the best estimate of the future amounts to be paid at the time of acquisition.

US GAAP requires that the amounts be recorded upon acquisition based on the best estimate of the future amounts to be paid at the time of acquisition.

Any subsequent adjustment to the estimate is recorded in net income.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis