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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-02 · 383 added, 584 removed, 889 unchanged (52% of the section changed)

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

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples for the three months and the nine months ended September 30, 2023 and September 30, 2022.

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples at and for the three months ended March 31, 2024 and March 31, 2023.

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

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These risks and uncertainties include, but are not limited to:

(1) ongoing increasing 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.

(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;

(3) 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 acquisition of Vantage and the 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 ongoing increasing interest rate policies of the Federal Reserve Board, the completion and successful integration of planned 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;

(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 Consumer Financial Protection Bureau, including the FDIC’s recently issued notice of proposed rulemaking for a special assessment to recover the uninsured deposit losses from recent bank failures that adversely affect their respective businesses, 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) potential adverse impacts as a result of the Inflation Reduction Act of 2022, which may negatively impact Peoples' operations and financial results;

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

(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, ineffective management of the U.S.

federal budget or debt, potential or imposed tariffs, a 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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(11) future credit quality and performance, including expectations regarding future credit losses and the allowance for credit losses;

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

(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, such as the closures earlier in 2023 of Silicon Valley Bank in California, Signature Bank in New York, First Republic Bank in California, and Heartland Tri-State Bank in Kansas, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity, including potential increased regulatory requirements, and increased reputational risk and potential impacts to macroeconomic conditions;

(21) in light of the recent bank failures, Peoples' continued ability to grow deposits or maintain adequate deposit levels may be adversely impacted, and Peoples may experience an unexpected outflow of uninsured deposits, which may require Peoples to sell investment securities at a loss;

(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, First Republic Bank in California, and Heartland Tri-State Bank in Kansas, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity, including potential increased regulatory requirements, and 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;

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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;

(29) 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);

(30) 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 ongoing conflicts in the Middle East);

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

economy due to financial, political or other shocks;

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(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;

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

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

RISK FACTORS" of Peoples' 2022 Form 10-K, under the heading "Item 1A.

RISK FACTORS" in Part II of Peoples' Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023 and under the heading "ITEM 1A.

RISK FACTORS" of Peoples' 2023 Form 10-K and under the heading "ITEM 1A.

RISK FACTORS" in Part II of this Form 10-Q.

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Peoples is a diversified financial services holding company that makes available a complete line of banking, trust and investment, insurance, premium financing and equipment leasing solutions through its subsidiaries.

Peoples provides services through traditional offices, automated teller machines ("ATMs"), mobile banking, telephone and internet-based banking.

Peoples provides services through traditional offices, automated teller machines ("ATMs"), interactive teller machines ("ITMs"), mobile banking, telephone and internet-based banking.

Peoples offers a complete array of insurance products through Peoples Insurance, a subsidiary of Peoples Bank.

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Peoples also offers lease financing through its North Star Leasing division and through Vantage, a subsidiary of Peoples Bank.

As of September 30, 2023, Peoples had 149 locations, including 132 full-service bank branches in Ohio, Kentucky, West Virginia, Virginia, Washington D.C.

As of March 31, 2024, Peoples had 152 locations, including 133 full-service bank branches in Ohio, Kentucky, West Virginia, Virginia, Washington D.C.

and Maryland.

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

Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and MD&A at September 30, 2023, which have been disclosed in Peoples' 2022 Form 10-K and updated in "Note 1 Summary of Significant Accounting Policies" in this Form 10-Q.

Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and MD&A at March 31, 2024, which have been disclosed in Peoples' 2023 Form 10-K and updated in "Note 1 Summary of Significant Accounting Policies" in this Form 10-Q.

This MD&A should be read in conjunction with the policies disclosed in Peoples’ 2023 Form 10-K.

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

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◦ For the first quarter of 2024, Peoples incurred $(0.1) million of acquisition-related expenses, compared to $1.3 million for the fourth quarter of 2023 and $0.6 million for the first quarter of 2023.The acquisition-related expenses in 2024 and 2023 were primarily related to the Limestone Merger.

◦ During the first quarter of 2024, Peoples recorded a provision for credit losses of $6.1 million, compared to a provision for credit losses of $1.3 million in the linked quarter and a provision for credit losses of $1.9 million in the first quarter of 2023.

The provision for credit losses for the first quarter of 2024 was driven by (i) a deterioration in macro-economic conditions used within the CECL model, (ii) an increase of reserves on individually analyzed loans and (iii) loan growth.

The provision for credit losses in the linked quarter was largely attributable to higher net charge-offs, offset by an improvement of macro-economic conditions and the release of reserves on individually analyzed loans.

The provision for credit losses in the first quarter of 2023 was largely attributable to a deterioration of macro-economic conditions, partially offset by a reduction in reserves for individually analyzed loans.

For more information, please refer to the section titled "RESULTS OF OPERATIONS - Provision for Credit Losses" found later in this discussion.

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

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

◦ For the third quarter of 2023, Peoples incurred $4.4 million of acquisition-related expenses, compared to $10.7 million for the second quarter of 2023 and $0.3 million for the third quarter of 2022.

For the first nine months of 2023, Peoples incurred $15.7 million of acquisition-related expenses compared to $2.3 million for the first nine months of 2022.The acquisition-related expenses in 2023 were primarily related to the Limestone Merger, while the acquisition-related expenses in 2022 were primarily related to the Vantage acquisition.

◦ During the third quarter of 2023, Peoples recorded a provision for credit losses of $4.1 million, compared to a provision for credit losses of $8.0 million in the linked quarter and a provision for credit losses of $1.8 million in the third quarter of 2022.

The provision for credit losses for the third quarter of 2023 was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans.

The provision for credit losses in the linked quarter was due to a provision of $9.4 million for the non-purchased credit deteriorated loans acquired in the Limestone Merger, partially offset by the release of reserves of $1.7 million on individually analyzed loans and a recovery of $1.0 million due to improvements in macro-economic conditions.

The provision for credit losses for the third quarter of 2022 was largely attributable to a deterioration of macro-economic conditions, partially offset by a release of reserves on individually analyzed loans.

The provision for credit losses for the first nine months of 2023 was $13.9 million, compared to a recovery of credit losses of $5.8 million for the first nine months of 2022.

The provision for credit losses during the first nine months of 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (ii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and the use of updated loss drivers.

The recovery of credit losses for the first nine months of 2022 was primarily due to the impact of economic assumptions used in the CECL model.

For more information, please refer to the section titled "RESULTS OF OPERATIONS - Provision for (Recovery of) Credit Losses" found later in this discussion.

◦ 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% 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 November 2, 2022, to 4.25% to 4.50% on December 14, 2022, to 4.50% to 4.75% on February 1, 2023, to 4.75% to 5.00% on March 22, 2023, to 5.00% to 5.25% on May 3, 2023, and to 5.25% to 5.50% on July 27, 2023 and has signaled it may raise rates again in 2023, if necessary to combat inflation.

◦ 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 and events, where material, is discussed in the applicable sections of this MD&A.

EXECUTIVE SUMMARY

Peoples reported net income of $31.9 million for the third quarter of 2023, representing earnings per diluted common share of $0.90.

In comparison, Peoples reported net income of $21.1 million, representing earnings per diluted common share of $0.64, for the second quarter of 2023, and net income of $26.0 million, representing earnings per diluted common share of $0.92, for the third

quarter of 2022.

For the nine months ended September 30, 2023, Peoples recorded net income of $79.5 million, or $2.47 per diluted common share, compared to $74.4 million, or $2.65 per diluted common share, for the nine months ended September 30, 2022.

Non-core items, and the related tax effect of each, in net income primarily included acquisition-related expenses and a $2.4 million pension settlement charge recognized in the third quarter of 2023.

Non-core items negatively impacted earnings per diluted common share by $0.16 for the third quarter of 2023, $0.28 for the second quarter of 2023, and $0.01 for the third quarter of 2022.

Non-core items negatively impacted earnings per diluted share by $0.52 and $0.07 for the nine months ended September 30, 2023 and 2022, respectively.

Net interest income was $93.3 million for the third quarter of 2023, an increase of $8.4 million, or 10%, compared to the linked quarter.

The increase in net interest income was primarily due to a full quarter of net interest income provided by the Limestone Merger in the third quarter compared to only two months of net interest income in the linked quarter.

Net interest margin was 4.70% for the third quarter of 2023, compared to 4.54% for the linked quarter.

The increase in net interest margin was primarily driven by a full quarter of the accretion on the acquired Limestone portfolio compared to two months in the linked quarter.

The increase in net interest margin was also impacted by a true-up of $3.6 million in the third quarter of 2023 to the preliminary Limestone-related accretion, $1.9 million of which would have benefited the second quarter of 2023.

Also impacting the increases in net interest income and net interest margin was 6 basis points of improvement in investment yields due to sales of lower-yielding investment securities and a full quarter of yields from the securities acquired in the Limestone Merger compared to two months in the linked quarter.

Partially offsetting these benefits was an increase in interest expense resulting from a shift in the composition of funding sources to retail and brokered CDs from non-interest bearing deposits, combined with an increase in market interest rates for deposits and other funding sources.

Net interest income for the third quarter of 2023 increased $26.2 million, or 39%, compared to the third quarter of 2022.

Net interest margin for the third quarter of 2023 increased 53 basis points compared to 4.17% for the third quarter of 2022.

The increase in net interest income compared to the third quarter of 2022 was driven by increases in market interest rates, the Limestone Merger and organic growth.

For the first nine months of 2023, net interest income increased $68.2 million, or 37%, compared to the first nine months of 2022, while net interest margin increased 79 basis points to 4.60%.

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.

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.

Accretion income, net of amortization expense, from acquisitions was $9.8 million for the third quarter of 2023, $4.5 million for the second quarter of 2023 and $2.8 million for the third quarter of 2022, which added 49 basis points, 24 basis points and 16 basis points, respectively, to net interest margin.

The increases in accretion income for the third quarter of 2023 when compared to the linked quarter and the third quarter of 2022 were driven by accretion from the Limestone Merger and the aforementioned third quarter 2023 true-up to the preliminary Limestone-related accretion.

Accretion income, net of amortization expense, from acquisitions was $16.3 million for the nine months ended September 30, 2023, compared to $9.4 million for the nine months ended September 30, 2022, which added 30 and 20 basis points, respectively, to net interest margin.

The increase in accretion income for the first nine months of 2023 compared to the same period in 2022 was due to higher accretion recognized from the Limestone Merger than was recorded due to the acquisitions of Vantage and NSL, and the merger with Premier in the prior period.

The provision for credit losses was $4.1 million for the third quarter of 2023, compared to a provision for credit losses of $8.0 million for the linked quarter and a provision for credit losses of $1.8 million for the third quarter of 2022.

The provision for credit losses for the linked quarter was due to a provision of $9.4 million for the non-purchased credit deteriorated loans acquired in the Limestone Merger, partially offset by the release of reserves of $1.7 million on individually analyzed loans and a recovery of $1.0 million due to improvements in macro-economic conditions.

Net charge-offs for the third quarter of 2023 were $2.3 million, or 0.15% of average total loans annualized, compared to net charge-offs of $1.2 million, or 0.09% of average total loans annualized, for the linked quarter and net charge-offs of $1.7 million, or 0.15% of average total loans annualized, for the third quarter of 2022.

Peoples reported net income of $29.6 million for the first quarter of 2024, representing earnings per diluted common share of $0.84.

In comparison, Peoples reported net income of $33.8 million, representing earnings per diluted common share of $0.96, for the fourth quarter of 2023, and net income of $26.6 million, representing earnings per diluted common share of $0.94, for the first quarter of 2023.

Non-core items negatively impacted earnings per diluted common share by $0.01 for the first quarter of 2024, $0.08 for the fourth quarter of 2023, and $0.05 for the first quarter of 2023.

Net interest income was $86.6 million for the first quarter of 2024, a decrease of $1.7 million, or 2.0%, compared to the linked quarter.

Net interest margin was 4.27% for the first quarter of 2024, compared to 4.44% for the linked quarter.

The decreases in net interest income and net interest margin were primarily driven by a decrease in accretion income, net of amortization, from our acquisitions.

The linked quarter was impacted by a true-up of $1.3 million to the preliminary Limestone-related accretion, which added to net interest income.

The small remaining decline in net interest margin, compared to the linked quarter, was mostly due to excess cash on-hand during the quarter for liquidity purposes.

Net interest income for the first quarter of 2024 increased $13.8 million, or 18.9%, compared to the first quarter of 2023.

Net interest margin for the first quarter of 2024 decreased 26 basis points compared to 4.53% for the first quarter of 2023, driven primarily by an increase in interest expense on deposits.

Accretion income, net of amortization expense, from acquisitions was $6.6 million for the first quarter of 2024, $9.0 million for the fourth quarter of 2023 and $2.0 million for the first quarter of 2023, which added 32 basis points, 45 basis points and 13 basis points, respectively, to net interest margin.

The decrease in accretion income for the first quarter of 2024 when compared to the linked quarter was driven by a fourth quarter 2023 true-up to the preliminary Limestone-related accretion.

The increase in accretion income for the current quarter compared to the first quarter of 2023 was a result of the accretion from the Limestone Merger.

The provision for credit losses was $6.1 million for the first quarter of 2024, compared to a provision for credit losses of $1.3 million for the linked quarter and a provision for credit losses of $1.9 million for the first quarter of 2023.

The provision for credit losses for the fourth quarter of 2023 was largely attributable to higher net charge-offs, offset by an improvement of macro-economic conditions and the release of reserves on individually analyzed loans.

Net charge-offs for the first quarter of 2024 were $3.3 million, or 0.22% of average total loans annualized, compared to net charge-offs of $3.5 million, or 0.23% of average total loans annualized, for the linked quarter and net charge-offs of $1.5 million, or 0.13% of average total loans annualized, for the first quarter of 2023.

For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below.

The provision for credit losses for the first nine months of 2023 was $13.9 million, compared to a recovery of credit losses of $5.8 million for the first nine months of 2022.

The provision for credit losses for the first nine months of 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (iii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and the use of updated loss drivers.

The recovery of credit losses for the first nine months of 2022 was primarily due to the impact of economic assumptions used in the CECL model.

Net charge-offs for the first nine months of 2023 were $5.1 million, or 0.12% of average total loans annualized, compared to net charge-offs of $5.1 million, or 0.15% annualized, for the first nine months of 2022.

For additional information on credit trends and the allowance for credit losses, see the "Asset Quality" section below.

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Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Operations.

The net loss realized during the third quarter of 2023 was $0.3 million, compared to a net loss of $1.8 million for the linked quarter, and a net loss of $14,000 for the third quarter of 2022.

The net loss for the third quarter of 2023 was due to $0.3 million of net losses on repossessed assets.

The net loss for the linked quarter was primarily due to the $1.6 million write-down of an OREO property due to a pending sale of the property.

The net loss realized during the first nine months of 2023 was $4.3 million, compared to $207,000 for the first nine months of 2022.

The net loss for the first nine months of 2023 was primarily driven by the $2.0 million pre-tax ($1.6 million after-tax) net loss on the sales of the available-for-sale investment securities during the first quarter of 2023, as mentioned above, and the $1.6 million write-down of the OREO property during the second quarter of 2023, as mentioned above.

The net loss recognized in the first nine months of 2022 was attributable to (i) a $119,000 loss recorded on repossessed assets, (ii) a $44,000 loss on the sale of investment securities in order to reinvest into higher-yielding securities and (iii) an adjustment to the gain on sale of loans recognized in the fourth quarter of 2021 due to a measurement period adjustment to the acquisition-date fair value of Premier loans acquired that were subsequently sold.

Total non-interest income, excluding net gains and losses, for the third quarter of 2023 increased $0.7 million compared to the linked quarter.

The increase in non-interest income, excluding net gains and losses, was due to a $1.4 million increase in other non-interest income and a $0.5 million increase in bank owned life insurance income, mostly offset by a $1.8 million decrease in lease income.

The increase in other non-interest income was attributable to a $1.0 million increase in operating lease income, which was partially offset by a $0.6 million increase in operating lease expense recognized in other non-interest expense when compared to the linked quarter.

Compared to the third quarter of 2022, non-interest income, excluding net gains and losses, increased $3.1 million, due to (i) a $1.5 million increase in other non-interest income, (ii) a $1.2 million increase in electronic banking income, (iii) a $0.7 million increase in deposit account service charges, (iv) a $0.7 million increase in bank owned life insurance income, and (v) a $0.6 million increase in insurance income.

The increase in other non-interest income was due to the increase in operating lease income mentioned above.

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

The other increases were primarily due to the additional customers brought in from the Limestone Merger when compared to the third quarter of 2022.

For the first nine months of 2023, total non-interest income, excluding gains and losses, increased $7.6 million, or 13%, compared to the first nine months of 2022.

The increase was driven by (i) a $2.4 million increase in electronic banking income, (ii) a $1.7 million increase in insurance income due to growth in the property and casualty insurance line, (iii) a $1.4 million increase in deposit account service charges, (iv) a $1.4 million increase in other non-interest income, and (v) a $1.0 million increase in bank owned life insurance income.

The increase in other non-interest income was due to the increase in operating lease income mentioned above.

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

The other increases were primarily due to the additional customers brought in from the Limestone Merger when compared to the first nine months of 2022.

Total non-interest expenses for the third quarter and the nine months ended September 30, 2023 were impacted by the Limestone Merger and acquisition-related non-interest expenses.

Total acquisition-related non-interest expenses added $4.4 million and $15.7 million, respectively, across various line-items within non-interest expense.

During the third quarter of 2023, the acquisition-related expenses recognized were primarily attributable to early contract termination fees, system conversion costs, salaries and employee benefit costs, and professional fees attributable to the Limestone Merger.

For the second quarter of 2023, the acquisition-related non-interest expenses were primarily attributable to salaries and employee benefit costs and professional fees related to the Limestone Merger.

The net loss realized during the first quarter of 2024 was $0.3 million, compared to a net loss of $2.2 million for each of the linked quarter and the first quarter of 2023.

The net loss for the first quarter of 2024 was due to $0.3 million of net losses on repossessed assets.

The net loss for the linked quarter was primarily due to the sales of $36.5 million of lower yielding available-for-sale investment securities for a pre-tax loss of $1.7 million.

The net loss for the first quarter of 2023 was primarily due to a pre-tax net loss of $2.0 million on the sale of $96.7 million of its lower yielding available-for-sale securities.

Total non-interest income, excluding net gains and losses, for the first quarter of 2024 decreased $0.2 million compared to the linked quarter.

The decrease in non-interest income, excluding net gains and losses, was primarily due to decreases of $1.6 million in lease income and $0.8 million in electronic banking income.

The decrease in lease income was due to a large lease buyout in the fourth quarter of 2023, while the decrease in electronic banking income was due to a decline in customer activity.

Partially offsetting the decreases was a $2.2 million increase in insurance income due to seasonal performance-based commissions being paid in the first quarter of the year.

Compared to the first quarter of 2023, total non-interest income, excluding net gains and losses, increased $4.9 million, primarily due to (i) a $1.1 million increase in insurance income, (ii) a $1.0 million increase in other non-interest income, (iii) a $0.8 million increase in bank owned life insurance income, (iv) a $0.7 million increase in deposit account service charges, (v) a $0.6 million increase in electronic banking income.

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

Bank owned life insurance increased due to a $0.5 million death benefit in the first quarter of 2024 and additional income from policies acquired in the Limestone Merger.

The other increases for the first quarter of 2024, when compared to the first quarter of 2023, were primarily due to the additional customers brought in from the Limestone Merger.

Total non-interest expenses for the first three months ended March 31, 2024 were impacted by anticipated annual expenses that occur in the first quarter of each year including annual merit increases, stock-based compensation expenses attributable to retirement-eligible employees and health savings account ("HSA") contributions.

Total non-interest expense for the prior periods were impacted by the Limestone Merger and acquisition-related 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.

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

Three Months Ended Nine Months Ended

September 30, June 30, September 30, September 30,

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Three Months Ended

March 31, December 31, March 31,

(Dollars in thousands) 2024 2023 2023

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Marketing expense 10 20 10

Communication expense 1 — — 1 1

Other loan expenses — 1 —

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Total non-interest expense excluding acquisition-related expense $ 68,549 $ 66,413 $ 55,928

Total non-interest expense increased $1.1 million, or 2%, for the three months ended September 30, 2023, compared to the linked quarter.

Excluding acquisition-related expense, total non-interest expense increased $7.3 million, or 12%, primarily due to increases of (i) $3.1 million in salaries and employee benefit costs, (ii) $2.9 million in other non-interest expense, (iii) $0.5 million in amortization of other intangible assets, and (iv) $0.4 million in professional fees.

The increases in the third quarter of 2023 total non-interest expenses when compared to the linked quarter were due to a full quarter of expenses in the third quarter from the Limestone Merger compared to only two months of expenses in the linked quarter.

Excluding the impact from the Limestone Merger, the increase in other non-interest expenses was also due to the previously discussed pension plan settlement charge as well as a $0.6 million increase

in operating lease depreciation expenses.

The increases in salaries and employee benefit costs and data processing and professional fees were primarily due to growth.

Compared to the third quarter of 2022, total non-interest expense for the third quarter of 2023 increased $19.4 million, or 37%.

Excluding acquisition-related expenses, non-interest expenses increased $15.3 million, or 30%, primarily due to a $7.4 million increase in salaries and employee benefit costs, a $3.7 million increase in other non-interest expense, a $1.8 million increase in data processing and software expense, and a $1.3 million increase in amortization of other intangible assets.

The increases were primarily due to total non-interest expenses attributable to the Limestone Merger, excluding acquisition-related expense.

The increase in other non-interest expenses was also impacted by the previously discussed pension plan settlement charges and a $0.9 million increase in operating lease depreciation expenses.

The increases in salaries and employee benefit costs and in data processing and software expense, excluding non-acquisition-related expenses attributable to the Limestone Merger, were due to growth.

For the nine months ended September 30, 2023, total non-interest expense increased $45.0 million, or 29.3%, compared to the first nine months of 2022.

Excluding acquisition-related expenses, non-interest expenses increased $31.6 million, or 20.9%.

This variance was driven by increases of $17.1 million, $6.2 million, $5.5 million and $2.2 million in salaries and employee benefit costs, other non-interest expense, data processing and software expense and amortization of other intangible assets, respectively, partially offset by a $3.2 million decrease in electronic banking expense.

The increases were impacted by total non-interest expenses attributable to the Limestone Merger, excluding acquisition-related expenses, which impacted various non-interest expense line items.

The increase in other non-interest expenses was also impacted by the previously discussed pension plan settlement charges and a $1.1 million increase in operating lease depreciation expenses, while the other increases were also impacted by growth.

The efficiency ratio for the third quarter of 2023 was 58.4%, compared to 62.7% for the linked quarter, and 57.2% for the third quarter of 2022.

The decrease in the efficiency ratio compared to the linked quarter was primarily due to higher net interest income due to an increase in market interest rates and a full quarter with the additional customers from the Limestone Merger compared to two months in the linked quarter and less acquisition-related expenses, partially offset by an increase in non-acquisition-related non-interest expenses.

The increase in the efficiency ratio compared to the prior year quarter was primarily due to the increases in non-interest expenses, primarily from the Limestone Merger, which was mostly offset by higher net interest income due to increases in the market interest rates and additional customers from the Limestone Merger.

The efficiency ratio, adjusted for non-core items, was 52.5% for the third quarter of 2023, compared to 53.3% for the linked quarter and 56.6% for the third quarter of 2022.

Total non-interest expense increased $0.8 million, or 1%, for the three months ended March 31, 2024, compared to the linked quarter.

Excluding acquisition-related expense, total non-interest expense increased $2.1 million, or 3%, primarily due to increases of $1.6 million in salaries and employee benefit costs.

The increase in salaries and employee benefit costs was due to anticipated annual expenses that occur in the first quarter of each year including annual merit increases, stock-based compensation expenses attributable to retirement-eligible employees and HSA contributions.

Compared to the first quarter of 2023, total non-interest expense increased $12.0 million, or 21%.

Excluding acquisition-related expenses, non-interest expenses increased $12.6 million, or 23%, primarily due to a increases of $6.9 million in salaries and employee

Table of Co n tents

benefits costs due to additional employees added in the Limestone Merger and $1.3 million and $1.2 million in net occupancy and equipment expense and data processing and software expense, respectively, due to the recent growth, including through acquisitions.

The efficiency ratio for the first quarter of 2024 was 58.0%, compared to 56.0% for the linked quarter, and 57.8% for the first quarter of 2023.

The increase in the efficiency ratio compared to the linked quarter was largely a result of an increase in interest expense on deposits.

The efficiency ratio compared to the prior year quarter was relatively flat.

The efficiency ratio, adjusted for non-core items, was 58.1% for the first quarter of 2024, compared to 54.8% for the linked quarter and 57.19% for the first quarter of 2023.

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

Peoples recorded income tax expense of $8.8 million with an effective tax rate of 21.7% for the third quarter of 2023, compared to income tax expense of $6.2 million with an effective tax rate of 22.6% for the linked quarter, and income tax expense of $7.4 million with an effective tax rate of 22.2% for the third quarter of 2022.

Income tax expense for the third quarter of 2023 compared to the linked quarter and third quarter of 2022, increased due to higher net income before income taxes.

The effective rate decrease for the third quarter of 2023 when compared to the linked quarter and the third quarter of 2022 was primarily due to updates to the blended state tax rate.

Peoples recorded income tax expense of $22.1 million with an effective tax rate of 21.7% in the first nine months of 2023 and $20.2 million with an effective tax rate of 21.4% in the first nine months of 2022.

The increase in income tax expense for the first nine months of 2023 when compared to the same 2022 period was driven by higher pre-tax income.

At September 30, 2023, total assets were $8.94 billion, compared to $8.79 billion at June 30, 2023, $7.21 billion at December 31, 2022 and $7.01 billion at September 30, 2022.

Total assets at September 30, 2023 increased when compared to at June 30, 2023 primarily due to an increase in interest-bearing deposits in other banks, mostly with the FRB, and an increase in period-end total loan and lease balances.

The period-end total loan and lease balances at September 30, 2023 increased $109.8 million, or 7% annualized, compared to at June 30, 2023.

The increase in the period-end loan and lease balance was primarily driven by increases of (i) $118.5 million in other commercial real estate loans, (ii) $26.9 million in premium finance loans and (iii) $24.8 million in leases, partially offset by decreases of (i) $44.7 million in construction loans and (ii) $31.5 million in commercial and industrial loans.

Total assets at September 30, 2023 increased compared to December 31, 2022 and September 30, 2022 due to $1.51 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 at September 30, 2023 increased $358.6 million, or 10% annualized, compared to at December 31, 2022, driven by increases of $182.8 million, $57.5 million, $48.4 million, $38.9 million and $30.1 million in other commercial real estate loans, leases, construction loans, indirect consumer loans, and premium finance loans, respectively.

These increases were partially offset by a decrease of $13.1 million in consumer residential real estate loans.

The increase in total assets from at December 31, 2022 was also impacted by purchases of held-to-maturity investment securities.

Management purchased these securities to increase portfolio yield and reduce Peoples' sensitivity to falling intermediate and long-term interest rates.

Excluding the loans acquired in the Limestone Merger, period-end loan and lease balance at September 30, 2023 increased $454.6 million, or 10% annualized, compared to at September 30, 2022 primarily due to increases of $182.9 million, $89.8 million, $79.8 million, $76.1 million and $21.6 million in other commercial real estate loans, leases, construction loans, indirect consumer loans, and premium finance loans, respectively.

These increases were partially offset by a reduction of $23.1 million in consumer residential real estate loans.

Total liabilities were $7.95 billion at September 30, 2023, up from $7.79 billion at June 30, 2023, $6.42 billion at December 31, 2022 and $6.25 billion at September 30, 2022.

The increase in total liabilities when compared to at June 30, 2023 was primarily due to an increase of $77.6 million, or 1%, in period-end total deposits.

The increase in period-end total deposits when compared to at

June 30, 2023 was primarily driven by increases of (i) $248.0 million in retail CDs, (ii) $56.0 million in governmental deposits and (iii) $49.0 million in brokered deposits, which are primarily used as a source of funding, partially offset by decreases of (a) $129.5 million in savings accounts, (c) $113.5 million in non-interest-bearing demand deposit accounts, and (c) $44.6 million in interest-bearing demand deposit accounts.

The increase in governmental deposit accounts was due to the seasonality of the balances, which are typically higher in the first quarter and third quarter of each year.

The increases in total liabilities when compared to at December 31, 2022 and at September 30, 2022 were primarily due to $1.14 billion of liabilities, primarily deposits, acquired in the Limestone Merger.

Excluding the deposits acquired in the Limestone Merger, period-end total deposits at September 30, 2023 increased $399.8 million, or 7%, compared to at December 31, 2022, primarily due to increases of $483.3 million in brokered CDs and of $444.1 million in retail CDs, partially offset by decreases of $203.5 million, $180.6 million, and $174.0 million in non-interest bearing deposits, savings accounts, and interest-bearing demand deposit accounts, respectively.

Excluding deposits acquired in the Limestone Merger, period-end total deposits at September 30, 2023 increased $251.1 million, or 4%, compared to at September 30, 2022.

The increase was primarily driven by increases of $522.8 million in brokered deposits and $429.6 million in retail CDs, partially offset by decreases of $250.0 million, $189.5 million, $175.9 million and $78.8 million in non-interest-bearing demand deposit accounts, savings accounts, interest-bearing demand deposit accounts, and governmental deposit accounts, respectively.

Total stockholders' equity at September 30, 2023 decreased by $5.7 million compared to at June 30, 2023, which was primarily due to an increase in accumulated other comprehensive loss of $24.9 million and dividends paid of $13.8 million, partially offset by net income for the third quarter of 2023 of $31.9 million.

Peoples recorded income tax expense of $8.3 million with an effective tax rate of 21.8% for the first quarter of 2024, compared to income tax expense of $9.7 million with an effective tax rate of 22.3% for the linked quarter, and income tax expense of $7.0 million with an effective tax rate of 21.0% for the first quarter of 2023.

Income tax expense for the first quarter of 2024 compared to the linked quarter decreased due to lower pre-tax income.

The increase for the first quarter of 2024 compared to the first quarter of 2023, was driven by higher pre-tax income.

At March 31, 2024, total assets were $9.27 billion, compared to $9.16 billion at December 31, 2023 and $7.31 billion at March 31, 2023.

Total assets at March 31, 2024 increased when compared to at December 31, 2023 primarily due to increases in investment securities and period-end total loan and lease balances.

The period-end total loan and lease balances at March 31, 2024 increased $43.6 million, or 3% annualized, compared to at December 31, 2023.

The increase in the period-end loan and lease balance was primarily driven by increases of (i) $46.8 million in other commercial real estate loans, (ii)$35.8 million in premium finance loans, and (iii) $29.6 million in commercial and industrial loans, partially offset by reductions of (a) $49.3 million in construction loans, (b) $16.2 million in indirect consumer loans, and (c) $15.2 million in direct consumer loans.

Total assets at March 31, 2024 increased compared to March 31, 2023 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 at March 31, 2024 increased $499.3 million, or 10%, driven by increases of $198.1 million, $100.6 million, $80.7 million, $68.1 million, $37.3 million, and $23.5 million in other commercial real estate loans, commercial and industrial loans, premium finance loans, leases, construction loans, and home equity lines of credit, respectively.

Total liabilities were $8.21 billion at March 31, 2024, up from $8.10 billion at December 31, 2023 and $6.49 billion at March 31, 2023.

The increase in total liabilities when compared to at December 31, 2023 was primarily due to an increase of $174.3 million in period-end total deposits, partially offset by a decrease of $87.6 million in short-term borrowings.

The increase in period-end total deposits when compared to at December 31, 2023 was primarily driven by increases of (i) $237.0 million in retail CDs, (ii) $98.5 million in governmental deposits and (iii) $84.5 million in money market deposit accounts, partially offset by decreases of (a) $99.3 million in non-interest bearing deposit accounts, (b) $41.8 million in brokered CDs, (c) $36.6 million in interest-bearing demand deposit accounts, and (d) $17.8 million in savings accounts.

The increase in governmental deposit accounts was due to the seasonality of the balances, which are typically higher in the first quarter each year.

The increase in total liabilities when compared to at March 31, 2023 was primarily due to $1.35 billion of liabilities, primarily deposits, acquired in the Limestone Merger.

Excluding deposits acquired in the Limestone Merger, period-end total deposits at March 31, 2024 increased $784.8 million, or 14%, compared to at March 31, 2023.

The increase was primarily driven by increases of $956.9 million in retail CDs, $210.3 million in brokered CDs, and $191.2 million in money market deposit accounts, partially offset by decreases of $270.9 million, $191.8 million, and $158.4 million in non-interest-bearing deposit accounts, savings accounts, and interest-bearing demand deposit accounts, respectively.

Total stockholders' equity at March 31, 2024 increased by $8.5 million compared to at December 31, 2023, which was primarily due to net income for the first quarter of 2024 of $29.6 million, partially offset by dividends paid of $13.7 million and a $7.4 million increase in accumulated other comprehensive loss.

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

Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $148.1 million and $121.5 million at September 30, 2023 and at June 30, 2023, respectively.

Total stockholders' equity at September 30, 2023 increased by $207.9 million and $232.7 million compared to at December 31, 2022 and at September 30, 2022, respectively, primarily due to 6.8 million common shares issued in the Limestone Merger.

The increase in total stockholders' equity at September 30, 2023 when compared to at December 31, 2022 was also impacted by net income for the first nine months of 2023 of $79.5 million, partially offset by dividends paid of $37.9 million and an increase in accumulated other comprehensive loss of $16.7 million.

Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $129.9 million at December 31, 2022.

The increase in total stockholders' equity at September 30, 2023 when compared to at September 30, 2022 was also impacted by net income of $106.4 million in the last twelve months, partially offset by dividends paid of $48.7 million and an increase in accumulated other comprehensive loss of $8.9 million.

The increase in accumulated other comprehensive loss was the result of an increase of $10.0 million in unrealized losses related to the available-for-sale investment securities portfolio from September 30, 2022 to September 30, 2023, partially offset by the realization of $2.4 million of pre-tax accumulated losses for the pension plan when it was terminated during the third quarter of 2023.

Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $138.1 million at September 30, 2022.

Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $111.8 million and $104.2 million at March 31, 2024 and at December 31, 2023, respectively.

The increase in total stockholders' equity at March 31, 2024 when compared to at March 31, 2023 was also impacted by net income of $116.4 million in the last twelve months and a decrease in accumulated other comprehensive loss of $2.0 million, partially offset by dividends paid of $55.1 million and share repurchases of $6.0 million.

RESULTS OF OPERATIONS

3 unchanged sentences

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

FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a blended corporate income tax rate of 23.3% for the three months and the nine months ended September 30, 2023, 23.6% for the three months ended June 30, 2023, and 23.3% for the three months and the nine months ended September 30, 2022.

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using a blended corporate income tax rate of 23.2% for the three months ended March 31, 2024, and 23.3% for the three months ended December 31, 2023 and March 31, 2023.

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

2 unchanged sentences

FTE net interest income $ 87,040 $ 88,783 $ 73,277

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The following tables detail Peoples’ average balance sheets for the periods presented:

For the Three Months Ended

September 30, 2023 June 30, 2023 September 30, 2022

March 31, 2024 December 31, 2023 March 31, 2023

( Dollars in thousands)

51 unchanged sentences

Net interest margin (b) 4.27 % 4.44 % 4.53 %

For the Nine Months Ended

September 30, 2023 September 30, 2022

( Dollars in thousands)

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

Short-term investments $ 57,271 $ 1,862 4.35 % $ 224,060 $ 1,306 0.78 %

Investment securities (a)(b):

Taxable 1,632,594 36,548 2.98 % 1,488,609 20,712 1.86 %

Nontaxable 194,667 4,255 2.91 % 199,515 3,991 2.67 %

Total investment securities 1,827,261 40,803 2.98 % 1,688,124 24,703 1.95 %

Loans (b)(c):

Construction 333,895 20,437 8.07 % 219,478 7,136 4.29 %

Commercial real estate, other 1,671,019 82,403 6.50 % 1,338,375 46,974 4.63 %

Commercial and industrial 1,021,573 56,747 7.33 % 872,601 27,878 4.21 %

Premium finance 160,729 8,374 6.87 % 146,345 4,891 4.41 %

Leases 362,222 31,426 11.44 % 253,231 26,271 13.68 %

Residential real estate (d) 903,622 32,414 4.78 % 890,499 28,531 4.27 %

Home equity lines of credit 190,225 10,634 7.47 % 168,137 5,577 4.43 %

Consumer, indirect 651,578 23,947 4.91 % 547,438 16,195 3.96 %

Consumer, direct 125,826 6,401 6.80 % 110,509 5,006 6.06 %

Total loans 5,420,689 272,783 6.66 % 4,546,613 168,459 4.91 %

Allowance for credit losses

(55,757) (56,237)

Net loans 5,364,932 272,783 6.73 % 4,490,376 168,459 4.97 %

Total earning assets 7,249,464 315,448 5.76 % 6,402,560 194,468 4.03 %

Goodwill and other intangible assets 374,924 321,043

Other assets 496,497 380,376

$ 8,120,885 $ 7,103,979

Interest-bearing deposits:

Savings accounts $ 1,066,783 $ 1,166 0.15 % $ 1,068,912 $ 218 0.03 %

Governmental deposit accounts

696,359 7,408 1.42 % 705,891 1,462 0.28 %

Interest-bearing demand accounts

1,160,698 1,232 0.14 % 1,169,284 397 0.05 %

Money market accounts 661,272 5,774 1.17 % 638,061 492 0.10 %

Retail CDs 817,512 13,120 2.15 % 596,335 2,262 0.51 %

Brokered CDs (e) 452,574 13,846 4.09 % 88,336 1,552 2.35 %

Total interest-bearing deposits

4,855,198 42,546 1.17 % 4,266,819 6,383 0.20 %

Borrowed funds:

Short-term FHLB advances (e) 373,304 13,969 5.00 % 50,132 816 2.18 %

Repurchase agreements and other 104,522 971 1.24 % 119,228 176 0.20 %

Total short-term borrowings 477,826 14,940 4.18 % 169,360 992 0.78 %

Long-term FHLB advances 42,870 930 2.90 % 59,440 775 1.74 %

Long-term notes payable 44,903 1,837 5.45 % 57,989 1,900 4.37 %

Other long-term borrowings (f) 38,676 2,901 9.89 % 13,700 473 4.55 %

Total long-term borrowings 126,449 5,668 5.98 % 131,129 3,148 3.20 %

Total borrowed funds 604,275 20,608 4.14 % 300,489 4,140 1.83 %

Total interest-bearing liabilities

5,459,473 63,154 1.50 % 4,567,308 10,523 0.31 %

Non-interest-bearing deposits 1,607,411 1,637,053

Other liabilities 134,003 91,749

Total liabilities 7,200,887 6,296,110

Total stockholders’ equity 919,998 807,869

Total liabilities and stockholders’ equity $ 8,120,885 $ 7,103,979

Interest rate spread (b) $ 252,294 4.26 % $ 183,945 3.72 %

Net interest margin (b) 4.60 % 3.81 %

Table of Co n tents

(a) Average balances are based on carrying value.

(b) Interest income and yields are presented on an FTE basis, using a 23.3% blended corporate income tax rate for the three months and the nine months ended September 30, 2023, 23.6% for the three months ended June 30, 2023, and 23.3% for the three months and the nine months ended September 30, 2022.

(b) Interest income and yields are presented on an FTE basis, using a 23.2% blended corporate income tax rate for the three months ended March 31, 2024, and 23.3% for the three months ended December 31, 2023 and March 31, 2023.

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

Three Months Ended September 30, 2023 Compared to

Nine Months Ended September 30, 2023 Compared to

(Dollars in thousands) June 30, 2023 September 30, 2022 September 30, 2022

Three Months Ended March 31, 2024 Compared to

(Dollars in thousands) December 31, 2023 March 31, 2023

Increase (decrease) in:

1 unchanged sentence

Rate Volume Total (a)

INTEREST INCOME:

17 unchanged sentences

Savings accounts $ 35 $ (37) $ (2) $ 206 $ (116) $ 90

Governmental deposit accounts 1,431 251 1,682 3,457 12 3,469 5,979 (33) 5,946

Interest-bearing demand accounts 156 (77) 79 271 1 272

Money market accounts 504 172 676 3,687 376 4,063

Governmental deposit accounts 173 67 240 3,767 251 4,018

Retail CDs 1,583 2,238 3,821 8,036 6,114 14,150

7 unchanged sentences

FTE net interest income $ (6,485) $ 4,742 $ (1,743) $ (7,687) $ 21,450 $ 13,763

Table of Co n tents

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

Compared to the linked quarter, net interest income increased 10% and net interest margin expanded by 16 basis points.

The increase in net interest income was primarily due to net interest income provided by Limestone following the Limestone Merger and increases in market interest rates.

Net interest margin was 4.70% for the third quarter of 2023, compared to 4.54% for the linked quarter.

The increase in net interest margin for the third quarter of 2023 compared to the linked quarter was primarily driven by a full quarter of accretion on the acquired Limestone portfolio in the third quarter compared to only two months in the second quarter.

The third quarter was also impacted by a true-up of $3.6 million to the preliminary Limestone-related accretion, $1.9 million of which would have benefited the second quarter of 2023.

Net interest income for the third quarter of 2023 grew 39% over the prior year quarter and net interest margin increased by 53 basis points.

The increase in net interest income compared to the third quarter of 2022 was driven by increases in market interest rates, the Limestone Merger, and organic growth.

Compared to the prior year quarter, loan yields grew 187 basis points due to the rising market interest rate environment and both acquisitive and organic growth, while borrowing costs increased 281 basis points due primarily to a change in the composition of borrowings and increases in market interest rates.

For the first nine months of 2023, net interest income and net interest margin grew 37% and 79 basis points, respectively, compared to 2022.

During that same time, loan yields increased 175 basis points, which was partially offset by higher borrowing costs.

The increase in net interest income was driven by increases in market interest rates and the additional net interest income provided by Limestone following the Limestone Merger.

Peoples recognized interest income on deferred loan fees/costs associated with PPP loans of $0.4 million during the third quarter of 2022 along with $22,000 of interest earned on PPP loans.

The interest income recognized on PPP loans added 1 basis point to net interest margin for the third quarter of 2022.

For the first nine months of 2022, interest income recognized on deferred loan fees/costs related to PPP loans was $2.2 million, and interest earned was $0.3 million.

The interest income recognized on PPP loans added 3 basis points to net interest margin for the first nine months of 2022.

The deferred loan fees/costs associated with PPP loans and interest earned on PPP loans were minimal for the third quarter of 2023, the linked quarter and the first nine months of 2023.

Accretion income, net of amortization expense, from acquisitions was $9.8 million for the third quarter of 2023, $4.5 million for the linked quarter and $2.8 million for the third quarter of 2022, which added 49 basis points, 24 basis points and 16 basis points, respectively, to net interest margin.

The increases in accretion income for the third quarter of 2023, when compared to the linked quarter and the third quarter of 2022 were driven by accretion from the Limestone Merger and the aforementioned third quarter 2023 true-up to preliminary Limestone-related accretion.

For the first nine months of 2023, accretion income, net of amortization expense, totaled $16.3 million and added 30 basis points to net interest margin compared to $9.4 million and 20 basis points for the first nine months of 2022.

Compared to the linked quarter, net interest income decreased $1.7 million, or 2.0%.

Net interest margin was 4.27% for the first quarter of 2024, compared to 4.44% for the linked quarter.

The decreases in net interest income and net interest margin were primarily due to a decrease in accretion income, net of amortization, from our acquisitions as well as excess cash on hand during the first quarter of 2024 for liquidity purposes.

Net interest income for the first quarter of 2024 grew 18.9% over the prior year quarter and net interest margin decreased by 26 basis points.

The increase in net interest income compared to the first quarter of 2023 was driven by increases in market interest rates, the Limestone Merger, and organic growth.

The decrease in net interest margin for the first quarter of 2024 compared to the first quarter of 2023, was driven primarily by an increase in interest expense on deposits.

Accretion income, net of amortization expense, from acquisitions was $6.6 million for the first quarter of 2024, $9.0 million for the linked quarter and $2.0 million for the first quarter of 2023, which added 32 basis points, 45 basis points and 13 basis points, respectively, to net interest margin.

The decrease in accretion income for the first quarter of 2024, when compared to the linked quarter was driven by a fourth quarter 2023 true-up to the preliminary Limestone-related accretion.

The increase in accretion income for the first quarter of 2024 compared to the first quarter of 2023 was a result of accretion from the Limestone Merger.

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

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

Provision for (Recovery of) Credit Losses

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Provision for Credit Losses

The following table details Peoples’ provision for credit losses:

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

Provision for (recovery of) other credit losses $ 3,764 $ 7,751 $ 1,558 $ 13,188 $ (6,583)

Provision for other credit losses $ 5,834 $ 1,048 $ 1,673

Provision for checking account overdraft credit losses 268 237 180

Provision for (recovery of) credit losses $ 4,053 $ 7,983 $ 1,776 $ 13,889 $ (5,811)

Provision for credit losses $ 6,102 $ 1,285 $ 1,853

As a percentage of average total loans (a) 0.40 % 0.08 % 0.16 %

(a) Presented on an annualized basis.

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

individually analyzed loans.

The provision for credit losses for the third quarter of 2022 was largely attributable to a deterioration of macro-economic conditions, partially offset by the release of reserves on individually analyzed loans.

For the first nine months of 2023, the provision for credit losses was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (ii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and the use of updated loss drivers.

The recovery of credit losses for the first nine months of 2022 was primarily due to the impact of economic assumptions used in the CECL model.

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

The provision for credit losses for the first quarter of 2023 was largely attributable to a deterioration of macro-economic conditions and an increase in charge-off activity, partially offset by a reduction in reserves for individually analyzed loans.

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

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

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

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Table of Co n tents

Net Loss Included in Total Non-Interest Income

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

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

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

Net (loss) gain on investment securities $ (7) $ (166) $ 21 $ (2,108) $ 107

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

Net (loss) gain on other assets (284) (44) 94 (557) (47)

Net loss on investment securities $ (1) $ (1,592) $ (1,935)

Net loss on asset disposals and other transactions:

Net loss on other assets (309) (586) (229)

Net loss on OREO — — (10)

1 unchanged sentence

Net loss on asset disposals and other transactions $ (341) $ (619) $ (246)

The net loss on investment securities in the first nine months of 2023 was primarily due to a $2.0 million pre-tax net loss on sales of available-for-sale investment securities.

During the fourth quarter of 2023, Peoples executed the sale of $36.5 million of lower yielding available-for-sale investment securities.

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

During the first quarter of 2023, Peoples executed sales of $96.7 million of its lower yielding available-for-sale securities which were used to pay down overnight borrowings.

The loss on the sale of the 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 these transactions are projected to be earned back within the end of the 2023 fiscal year.

The net loss on asset disposals and other transactions for the third quarter of 2023 was due to $0.3 million of net losses on repossessed assets.

The net loss for the linked quarter was primarily due to the $1.6 million write-down of an OREO property due to a pending sale of the property.

The loss on the sales of the 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 net loss on asset disposals and other transactions for the first quarter of 2024 and the linked quarter was due to $0.3 million of net losses on repossessed assets.

Total Non-Interest Income, Excluding Net Gains and Losses

Total non-interest income, excluding net gains and losses, comprised 20% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the third quarter of 2023, compared to 21% and 23% for the linked quarter and the third quarter of 2022, respectively.

For the first nine months of 2023, total non-interest income, excluding net gains and losses, totaled 21% of total revenues compared to 25% for the first nine months of 2022.

The decreases in these ratios for the third quarter and the first nine months of 2023 when compared to prior periods were primarily due to higher net interest income associated with income from Limestone following the Limestone Merger, coupled with increases in the market interest rates.

For the third quarter of 2023, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses.

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

The following table details Peoples' e-banking income:

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

(Dollars in thousands) 2023 2022

E-banking income $ 6,466 $ 6,466 $ 5,261 $ 18,375 $ 15,933

Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers.

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

E-banking income increased for the third quarter of 2023 compared to the prior year third quarter primarily due to additional income provided by

E-banking income for the first nine months of 2023 was also impacted by increased customer activity including the additional customers from the Limestone Merger, when compared to the same period in 2022.

Total non-interest income, excluding net gains and losses, comprised 23% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the first quarter of 2024, for the linked quarter, and the for first quarter of 2023.

For the first quarter of 2024, insurance income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses.

The following table details Peoples' insurance income:

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

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Life and health insurance commissions

548 535 508 1,647 1,464

Other fees and charges

77 74 88 233 252

Insurance income $ 6,498 $ 4,337 $ 5,425

Peoples' insurance income for the third quarter of 2023 increased when compared to that for the linked quarter and the third quarter of 2022, which was driven by higher performance-based property and casualty insurance commissions due to client acquisition efforts and hardening insurance markets.

Insurance income in the first nine months of 2023 increased 14% when compared to the first nine months of 2022 due to higher commissions and additional customers.

Peoples' insurance income for the first quarter of 2024 increased $2.2 million when compared to linked quarter.

This increase in insurance income was due to seasonal performance-based commissions being paid, which are annual in nature and typically occur in the first quarter of each year.

Insurance income for the first quarter of 2024 increased $1.1 million when compared to first quarter of 2023, primarily due to new business and market increases for premiums.

The following table details Peoples' e-banking income:

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

E-banking income $ 6,046 $ 6,835 $ 5,443

Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers.

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

E-banking income decreased for the first quarter of 2024 compared to the linked quarter primarily driven by a decrease in customer activity.

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

The following table details Peoples’ trust and investment income:

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

3 unchanged sentences

Trust and investment income $ 4,599 $ 4,374 $ 4,084

Fiduciary income and brokerage income decreased slightly in the third quarter of 2023 relative to the linked quarter due to market volatility.

When compared to the third quarter of 2022, fiduciary income and brokerage income increased, which was driven by an increase in brokerage income due to an increase in assets under administration and management.

For the first nine months of 2023, trust and investment income increased when compared to the same period in 2022 due to an increase in brokerage income, partially offset by less fiduciary income, primarily reflecting market volatility.

Fiduciary income and brokerage income increased in the first quarter of 2024 relative to the linked quarter due to market volatility.

When compared to the first quarter of 2023, fiduciary income and brokerage income increased, which was driven by an increase in fiduciary income due to an increase in assets under administration and management.

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

2024 December 31,

2023 September 30,

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2023 March 31,

2023 December 31,

2022 September 30,

(Dollars in thousands)

3 unchanged sentences

Quarterly average $ 3,521,188 $ 3,341,868 $ 3,319,655 $ 3,205,186 $ 3,076,285

The decreases in assets under administration and management at September 30, 2023 compared to at June 30, 2023 was driven by a decrease in trust assets and market value fluctuations.

The increase in assets under administration and management at September 30, 2023 when compared to at September 30, 2022 was primarily due to the acquisition of an independent financial advisor in January of 2023 which increased brokerage assets by $30 million.

The increases in assets under administration and management at March 31, 2024 compared to at December 31, 2023 were driven by market value fluctuations.

The increases in assets under administration and management at March 31, 2024 when compared to at March 31, 2023 were primarily due to increases in brokerage income, as Peoples added new accounts and the underlying market values of assets under management grew.

Deposit account service charges are based on the recovery of costs associated with services provided.

The following table details Peoples' deposit account service charges:

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

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

Deposit account service charges increased for the third quarter of 2023 compared to the linked quarter due to a full quarter of income from Limestone customers compared to only two months in the linked quarter.

Deposit account service charges increased when comparing the third quarter and the year to date of 2023 to the same 2022 periods due to the Limestone Merger and increased maintenance fee rates.

Deposit account service charges decreased for the first quarter of 2024 compared to the linked quarter due to seasonality of customer activity.

Deposit account service charges increased when comparing the first quarter of 2024 to the first quarter of 2023 due to the Limestone Merger and increased maintenance fee rates.

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

3 unchanged sentences

Mortgage banking income 321 338 314

The increases in non-interest income when comparing the three and the nine months ended September 30, 2023 to their respective prior periods of 2022 were primarily due to increases in operating lease income.

Bank owned life insurance income for the third quarter of 2023 increased compared to the linked quarter primarily due to a cumulative adjustment related to the acquired Limestone portfolio.

Bank owned life insurance income for the third quarter and year to date of 2023, increased when compared to the same periods of 2022, due to the Limestone Merger as well as additional investments in bank owned life insurance.

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

The third quarter of 2023 decrease in lease income when compared to the linked quarter and third quarter of 2022 was due to $1.6 million in net losses on the disposition of lease residuals during the quarter, partially offset by other lease income.

The first nine months of 2023 decrease in lease income when compared to the same period of 2022 was also due to lease residual activity in the third quarter of 2023, partially offset by increases in lease income from Vantage.

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The decrease in other non-interest income when comparing the three months ended March 31, 2024 to the linked quarter was primarily due to an excess recovery of a previously charged-off loan.

The increase in other non-interest income for the first quarter of 2024 when compared to the first quarter of 2023 was driven by increased operating lease income.

Bank owned life insurance income for the first quarter of 2024 increased compared to the linked quarter primarily due to a $0.5 million death benefit.

Bank owned life insurance income for the first quarter of 2024 increased when compared to the first quarter of 2023, due to the additional insurance policies acquired in the Limestone Merger.

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, net of any associated purchase accounting adjustment (iii) fees received for referrals, (iv) gains and losses recognized on the sales of residual assets and (v) syndication income.

The first quarter of 2024 decrease in lease income when compared to the linked quarter was due to a large lease buyout in the fourth quarter of 2023.

Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained.

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 for the third quarter of 2023 and the first nine months of 2023 declined when compared to the comparative prior periods of 2022 primarily due to the rising market interest rate environment.

In the third quarter of 2023, Peoples sold $0.8 million in loans into the secondary market with servicing retained and $9.4 million in loans with servicing released, compared to $1.1 million and $6.1 million, respectively, in the second quarter of 2023, and $4.4 million and $7.6 million, respectively, in the third quarter of 2022.

For the first nine months of 2023, Peoples sold $2.7 million in loans into the secondary market with servicing retained, and $22.8 million in loans with servicing released, compared to $16.1 million and $21.6 million, respectively, for the first nine months of 2022.

Mortgage banking income for the first quarter of 2024 was relatively flat when compared to each of the prior periods.

In the first quarter of 2024, Peoples sold $0.2 million in loans into the secondary market with servicing retained and $6.9 million in loans with servicing released, compared to $26,000 and $7.9 million, respectively, in the fourth quarter of 2023, and $0.8 million and $7.4 million, respectively, in the first quarter of 2023.

Non-Interest Expense

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

9 unchanged sentences

Average during the period 1,492 1,483 1,283

Base salaries and wages for the third quarter of 2023 decreased compared to the linked quarter due to a $4.8 million decrease in acquisition-related expenses, partially offset by an increase in non-acquisition related expenses due to growth and a full quarter of expenses from Limestone employees compared to two months of expenses in the linked quarter.

Base salaries and wages for the third quarter of 2023 and the first nine months of 2023 increased compared to the comparative prior periods due to $0.2 million and $5.3 million of acquisition-related expenses related to the Limestone Merger for the third quarter of 2023 and the first nine months of 2023, respectively, and additional expenses from Limestone employees in the third quarter of 2023 and the first nine months of 2023.

Base salaries and wages for the first nine months of 2023 also increased when compared to the same period of 2022 due to annual merit increases as well as a full nine months of expenses related to the additional salaries associated with the acquisition of Vantage compared to seven months of expenses in the first nine months of 2022.

The increases in sales-based and incentive compensation for the third quarter of 2023 and the first nine months of 2023 compared to the comparative prior periods presented were primarily due to the overall company performance measures used in calculating incentive awards.

The increase in employee benefits for the third quarter of 2023 compared to the linked quarter, was primarily due to increased medical costs as well as a full quarter of expenses from Limestone employees compared to two months of expenses in the linked quarter.

The increases in employee benefits for the third quarter of 2023 and the first nine months of 2023 compared to the third quarter of 2022 and the first nine months of 2022 were primarily due to the addition of Limestone employee benefits expenses.

The increase in employee benefits for the first nine months of 2023 compared to the first nine months of 2022 was also due to higher medical costs reflecting a full nine months of expenses in 2023 for the Vantage employees versus seven months of expenses in the first nine months of 2022.

Payroll taxes and other employment costs for the third quarter of 2023 increased compared to the linked quarter due to an increase in payroll taxes due to growth and a full quarter of expenses from Limestone employees compared to two months of expenses in the linked quarter.

The increases in payroll taxes and other employment costs for the three months and the nine months ended September 30, 2023, when compared to the three months and the nine months ended September 30, 2022, were primarily due to additional Limestone-related non-acquisition-related expenses and $0.1 million and $0.2 million, respectively, of acquisition-related expenses in the third quarter and first nine months of 2023.

Base salaries and wages for the first quarter of 2024 increased compared to the linked quarter primarily due to annual merit increases.

The current quarter increase compared to the first quarter of 2023 was primarily driven by the additional employees added in the Limestone Merger as well as annual merit increases.

The decrease in sales-based and incentive compensation for the first quarter of 2024 compared to the linked quarter was primarily due to $1.3 million of Vantage-related sales-based incentive compensation.

Sales-based and incentive compensation increased in the first quarter of 2024 when compared to the prior year quarter due to overall company performance measures used in calculating incentive awards.

The decrease in employee benefits for the first quarter of 2024 compared to the linked quarter and the first quarter of 2023 was primarily due to decreased medical costs.

Payroll taxes and other employment costs for the first quarter of 2024 increased compared to the linked quarter and the first quarter of 2024 and were primarily related to higher base salaries and wages.

Also impacting the increase in payroll taxes and other employment costs when compared to the first quarter of 2023 were the additional employees added in the Limestone Merger.

Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years.

An adjustment is made at the vesting date to reverse expense relating to forfeitures for performance awards, and at the date of forfeiture to reverse expense for non-vested restricted common share awards.

Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years.

Stock grants to retirement

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eligible grantees are expensed either immediately or over a shorter period than three years.

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

Stock-based compensation for the third quarter of 2023 and the first nine months of 2023 increased when compared to the third quarter of 2022 and the first nine months of 2022 due to additional employees, including the ones added in the acquisition of Vantage.

Stock-based compensation for the first quarter of 2024 increased when compared to the fourth quarter of 2023 and the first three months of 2023 due to additional employees, including the ones added in the Limestone Merger.

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

These costs are capitalized and recognized over the life of the loan as a yield adjustment in interest income.

As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with

the average deferred costs per loan that are updated annually at the beginning of each year.

The increases in deferred personnel costs for the third quarter and the first nine months of 2023 compared to the comparative prior periods were primarily due to an increase in loan origination volume.

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 for the first quarter of 2024 remained relatively flat when compared to both the fourth quarter of 2023 and the first quarter of 2023.

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

4 unchanged sentences

Net occupancy and equipment expense $ 6,283 $ 5,532 $ 4,955

The third quarter of 2023 net occupancy and equipment expense increased when compared to the linked quarter due to a full quarter of Limestone-related net occupancy and equipment expense compared to two months of expense in the linked quarter.

The third quarter and the first nine months of 2023 net occupancy and equipment expense increased when compared to the comparative periods in 2022 due to additional net occupancy and equipment expense from the Limestone Merger.

The first quarter of 2024 net occupancy and equipment expense increased when compared to the linked quarter due to a prior period one time benefit to rent expense.

The first quarter of 2024 net occupancy and equipment expense increased when compared to the first quarter of 2023 due to additional net occupancy and equipment expense from the Limestone Merger.

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

3 unchanged sentences

E-banking expense 1,781 1,991 1,491

Marketing expense 1,267 1,357 1,136 3,554 2,991

FDIC insurance premiums 1,186 1,260 801

Franchise tax expense 772 872 1,075 2,678 2,941

Other loan expenses 1,076 726 739

Marketing expense 1,056 1,463 930

Franchise tax expense 881 862 1,034

Communication expense 799 745 613

Other non-interest expense 4,986 5,174 4,574

Data processing and software expenses for the third quarter and the first nine months of 2023 were impacted by $1.3 million of acquisition-related data processing and software expenses attributable to Limestone in the third quarter of 2023, which was the primary driver of the increase when compared to the linked quarter.

The increases for the third quarter and the first nine months of 2023 when compared to the third quarter and first nine months of 2022 were also driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization.

Professional fees for the third quarter of 2023 decreased when compared to the linked quarter due to less acquisition-related expenses.

Professional fees for the third quarter and the first nine months of 2023 increased when compared to the comparative prior periods in 2022 due to $0.4 million and $5.5 million of acquisition-related expenses during the third quarter and first nine months of 2023, respectively, related to the Limestone Merger.

Amortization of other intangible assets for the third quarter and the first nine months of 2023 increased when compared to the linked quarter and comparative prior periods in 2022 due to additional expenses attributable to the Limestone Merger during the third quarter and the first nine months of 2023, respectively.

Data processing and software expenses for the first quarter 2024 decreased compared to the linked quarter due to $0.6 million of acquisition-related expense in the linked quarter.

The increase for the first quarter 2024 when compared to the first quarter 2023 was driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization.

Professional fees for the first quarter of 2024 decreased when compared to the linked quarter due to less acquisition-related expenses.

Professional fees for the first quarter of 2024 was relatively flat when compared to the first quarter of 2023.

Amortization of other intangible assets for the first quarter of 2024 decreased when compared to the linked quarter due to additional expenses attributable to the Limestone Merger during the fourth quarter of 2023.

Amortization of other intangible assets for the current quarter increased when compared to the first quarter of 2023 due to amortization of intangible assets recognized in the Limestone Merger during the first quarter of 2023.

Peoples' e-banking expense is comprised of costs associated with debit and ATM cards.

E-banking expense decreased for the third quarter and first nine months of 2023 when compared to the same periods of 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.

Marketing expense and communication expense for the third quarter of 2023 decreased when compared to the linked quarter due to additional marketing campaigns to promote the Limestone Merger in the second quarter of 2023.

Marketing expense and communication expense for the third quarter and the first nine months of 2023 increased when compared to the comparative prior periods in 2022 due to additional marketing campaigns in 2023.

Additionally, Limestone added additional communication expenses in the third quarter and the first nine months of 2023, respectively.

Peoples' FDIC insurance premiums for the third quarter of 2023 decreased when compared to the linked quarter due to a prior period true-up related to an increase in rates assessed by the FDIC.

FDIC insurance premiums for the third quarter and the first nine months of 2023 increased when compared to the comparative prior periods in 2022 due to organic and acquisitive growth and an increase in rates assessed by the FDIC.

The first nine months of 2022 was also impacted by an adjustment in the first quarter of 2022 relating to prior acquisitions.

The decrease in electronic banking income compared to the linked quarter was due to a decline in customer activity.

E-banking expense increased for the first quarter of 2024 when compared to the first quarter of 2023 due to additional customers brought in from the Limestone Merger.

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Peoples' FDIC insurance premiums for the first quarter of 2024 were relatively flat when compared to the linked quarter.

FDIC insurance premiums for the first quarter of 2024 increased when compared to the first quarter of 2023 due to organic and acquisitive growth and an increase in rates assessed by the FDIC.

Other loan expenses during the first quarter of 2024 increased when compared to the respective prior comparative periods primarily due to increases in miscellaneous loan and collection expenses.

Marketing expense for the first quarter of 2024 decreased when compared to the linked quarter due to lower advertising expense.

Marketing expense for the first quarter of 2024 increased when compared to the first quarter of 2023 due to higher donations.

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

1 unchanged sentence

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

The decreases for the third quarter and the first nine months of 2023 versus the respective prior comparative periods were driven by a lower apportionment in Ohio compared to all comparative prior periods.

Other loan expenses during the third quarter of 2023 and the first nine months of 2023 increased when compared to the respective prior comparative periods primarily due to increases in miscellaneous loan and collection expenses.

The third quarter and the first nine months of 2023 increases when compared to the same periods of 2022 were also impacted by Limestone-related expenses and increases in business loan expenses and credit bureau expenses.

Other non-interest expense for the third quarter of 2023 and the first nine months of 2023 increased when compared to the linked quarter and comparative prior periods in 2022 due to a $2.4 million settlement charge in relation to the termination of the pension plan and $1.8 million of acquisition-related expenses related to the Limestone Merger, mostly due to early contract termination fees, recorded in the third quarter of 2023.

The increases in other non-interest expense for the third quarter of 2023 and the first nine months of 2023 were also impacted by increases of $0.6 million, $0.9 million, and $1.1 million in operating lease expense when compared to the linked quarter, third quarter of 2022, and first nine months of 2022, respectively.

The decrease in franchise tax expense for the first quarter of 2024 when compared to the first quarter of 2023 was driven by a lower apportionment in Ohio.

Other non-interest expense for the first quarter of 2024 decreased when compared to the linked quarter due to a decrease in postage expense.

The increase for the first quarter of 2024 when compared to the first quarter of 2023 was driven by the increase in depreciation expense for operating leases.

Income Tax Expense

Peoples recorded income tax expense of $8.8 million with an effective tax rate of 21.7% for the third quarter of 2023, compared to income tax expense of $6.2 million with an effective tax rate of 22.6% for the linked quarter and income tax expense of $7.4 million with an effective tax rate of 22.2% for the third quarter of 2022.

Income tax expense for the third quarter of 2023 compared to the linked quarter and the third quarter of 2022, increased due to higher net income before income taxes.

The effective rate decrease for the third quarter of 2023 when compared to the linked quarter and the third quarter of 2022 was primarily due to updates to the blended state tax rate.

The increase in income tax expense for the first nine months of 2023 when compared to the same 2022 period was driven by higher pre-tax income.

Peoples recorded income tax expense of $8.3 million with an effective tax rate of 21.8% for the first quarter of 2024, compared to income tax expense of $9.7 million with an effective tax rate of 22.3% for the linked quarter and income tax expense of $7.0 million with an effective tax rate of 21.0% for the first quarter of 2023.

The decrease in income tax expense when compared to the fourth quarter of 2023 was primarily due to lower pre-tax income.

Additional information regarding income taxes can be found in "Note 13.

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

6 unchanged sentences

loss on other transactions 32 33 7

recovery of credit losses — — — — 7,587

gain on investment securities — — 21 — 151

gain on other assets — — 94 — 94

Pre-provision net revenue $ 44,296 $ 47,025 $ 37,640

3 unchanged sentences

Pre-provision net revenue per common share - diluted $ 1.26 $ 1.34 $ 1.34

The increase in the PPNR for the third quarter of 2023 compared to the second quarter of 2023 was driven by increased net interest income due to a full quarter of income from the Limestone Merger compared to two months in the linked quarter and the positive impact of recent increases in market interest rates, partially offset by an increase in non-interest expense, primarily due to the Limestone Merger.

The increases in PPNR for the third quarter and the first nine months of 2023 when compared to the same periods in 2022 were due to increased net interest income reflecting the positive impact of recent increases in market interest rates as well as the additional net interest income from Limestone customers after the Limestone Merger.

The decrease in the PPNR for the first quarter of 2024 compared to the fourth quarter of 2023 was driven by decreased net interest income and lower accretion income.

The increase in PPNR for the first quarter of 2024 when compared to the first quarter of 2023 was

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due to increased net interest income reflecting the positive impact of the additional net interest income from Limestone customers after the Limestone Merger.

Core Non-Interest Expense (Non-US GAAP)

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

This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses, pension settlement charges, COVID-19-related expenses and the COVID-19 Employee Retention Credit.

This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses.

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

2 unchanged sentences

acquisition-related expenses (84) 1,276 551

pension settlement charges 2,424 — 139 2,424 139

COVID-19-related expenses — — 9 — 132

COVID-19 Employee Retention Credit — 548 — 548 —

Core non-interest expense $ 68,549 $ 66,413 $ 55,928

4 unchanged sentences

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

4 unchanged sentences

Total non-interest income 25,779 24,134 19,060

net (loss) gain on investment securities (7) (166) 21 (2,108) 107

net loss on investment securities (1) (1,592) (1,935)

net loss on asset disposals and other transactions (341) (619) (246)

Total non-interest income excluding net gains and losses 23,518 22,846 20,380 67,605 60,009

Total non-interest income excluding net losses 26,121 26,345 21,241

Net interest income 86,640 88,369 72,878

7 unchanged sentences

Adjusted core non-interest expense 65,761 63,142 54,057

Non-interest income excluding net gains and losses 23,518 22,846 20,380 67,605 60,009

Non-interest income excluding net losses 26,121 26,345 21,241

Net interest income on an FTE basis 87,040 88,783 73,277

1 unchanged sentence

Efficiency ratio adjusted for non-core items 58.11 % 54.85 % 57.19 %

(a) Tax effect is calculated using a 23.3% blended corporate income tax rate for the three months and the nine months ended September 30, 2023, a 23.6% blended corporate income tax rate for the three months ended June 30, 2023, and a 23.3% blended corporate income tax rate for the three months and the nine months ended September 30, 2022.

The efficiency ratio decreased for the third quarter of 2023 when compared to the second quarter of 2023 and increased when compared to the third quarter of 2022.

The efficiency ratio for the first nine months of 2023 improved when compared to the first nine months of 2022 due to increased net interest income driven by increases in the market interest rates and additional net interest income provided by Limestone after the Limestone Merger, partially offset by an increase in non-interest expenses due to the Limestone Merger.

The efficiency ratios adjusted for non-core items for the third quarter of 2023 and the first nine months of 2023 improved when compared to the comparative prior periods of 2022 due to increased net interest income driven by increases in the market interest rates and additional net interest income provided by Limestone after the Limestone Merger, partially offset by an increase in core non-interest expense due to the Limestone Merger.

(a) Tax effect is calculated using a 23.2% blended corporate income tax rate for the three months ended March 31, 2024, and a 23.3% blended corporate income tax rate for the three months ended December 31, 2023 and March 31, 2023.

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The efficiency ratio increased compared to the linked quarter mainly as the result of an increase of interest expense on deposits.

The efficiency ratio compared to the prior year quarter was relatively flat.

The efficiency ratio, adjusted for non-core items, was 58.1% for the first quarter of 2024, compared to 54.9% for the linked quarter, and 57.2% for the first quarter of 2023.

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

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

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

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

The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses and acquisition-related expenses..

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

4 unchanged sentences

tax effect of net loss on investment securities (a)

net gain on investment securities

tax effect of net gain on investment securities (a)

net loss on asset disposals and other transactions

307 1,665 35 2,218 314

tax effect of net loss on asset disposals and other transactions (a)

65 349 7 466 66

acquisition-related expenses

1 unchanged sentence

tax effect of acquisition-related expenses (a)

931 2,249 71 3,296 486

pension settlement charges

2,424 — 139 2,424 139

tax effect of pension settlement charges (a)

509 — 29 509 29

COVID-19-related expenses — — 9 — 132

tax effect of COVID-19-related expenses (a) — — 2 — 28

COVID-19 Employee Retention Credit — 548 — 548 —

tax effect of COVID-19 Employee Retention Credit (a) — 115 — 115 —

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

20 unchanged sentences

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

The return on average assets adjusted for non-core items for the third quarter of 2023 increased when compared to the linked quarter, due to an increase in annualized net income resulting from an increase in net interest income and a decrease in acquisition-related expenses, partially offset by an increase in average assets resulting from the Limestone Merger as well as increases in non-interest expenses.

The increase in the return on average assets adjusted for non-core items for the third quarter of 2023, compared to the third quarter of 2022, was attributable to an increase in annualized net income primarily due to an increase in net interest income, partially offset by the assets acquired in the Limestone Merger and an increase in expenses.

The return on average assets adjusted for non-core items for the first nine months of 2023 increased when compared to the first nine months of 2022, due to a higher annualized net income due to an increase in net interest income, partially offset by an increase in average assets, higher non-interest expenses, and a provision for credit losses compared to a recovery of credit losses in the first nine months of 2022.

The return on average assets adjusted for non-core items for the first quarter of 2024 decreased when compared to the linked quarter, due to a decrease in annualized net income resulting from lower net interest income, partially offset by an increase in average assets resulting from the excess cash held on balance sheet as well as increases in non-interest expenses.

The decrease in the return on average assets adjusted for non-core items for the first quarter of 2024, compared to the first quarter of 2023, was attributable to an increase in annualized net income primarily due to an increase in net interest income, partially offset by the assets acquired in the Limestone Merger and an increase in expenses.

Return on Average Tangible Equity Ratio (Non-US GAAP)

1 unchanged sentence

This ratio is calculated as annualized net income (less the after-tax impact of amortization of other intangible assets) divided by average tangible equity.

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

Three Months Ended Nine Months Ended

September 30,

2023 June 30,

2023 September 30,

2022 September 30,

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

Three Months Ended

2024 December 31,

2023 March 31,

(Dollars in thousands)

4 unchanged sentences

tax effect of amortization of other intangible assets (a)

689 588 425 1,670 1,211

Net income excluding amortization of other intangible assets

1 unchanged sentence

Days in the period

92 91 92 273 273

Days in the year

365 365 365 365 365

Annualized net income

24 unchanged sentences

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

The return on total average stockholders' equity and average tangible equity ratios increased when compared to the linked quarter due to an increase in annualized net income mainly attributable to an increase in net interest income, partially offset by an increase in acquisition-related expenses and non-acquisition-related expenses.

The decreases in the return on total average stockholders' equity and average tangible equity ratios in the third quarter of 2023 when compared to the same period of 2022 were due to the issuance of 6.8 million common shares as consideration in the Limestone Merger, an increase in acquisition-related expenses, and an increase in the provision for credit losses due to the initial provision for the non-purchased credit deteriorated 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.

The decrease in the return on total average stockholders' equity and average tangible equity ratios in the first nine months of 2023 when compared to the same period of 2022 was primarily due to the factors that increased equity mentioned above, partially offset by an increase in net annualized income due to an increase in net interest income.

The return on total average stockholders' equity and average tangible equity ratios decreased when compared to the linked quarter due to a decrease in annualized net income mainly attributable to a decrease in net interest income and an increase in non-interest expense.

The decreases in the return on total average stockholders' equity and average tangible equity ratios in the first quarter of 2024 when compared to the same period of 2023 were due to the issuance of 6.8 million common shares as consideration in the Limestone Merger, an increase in acquisition-related expenses, partially offset by an increase in total net interest income driven by the 2023 increases in market interest rates and additional net interest income from Limestone following the Limestone Merger.

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FINANCIAL CONDITION

Cash and Cash Equivalents

At September 30, 2023, Peoples' interest-bearing deposits in other banks had increased $131.7 million from December 31, 2022.

The total cash and cash equivalents balance included $167.8 million of excess cash reserves being maintained at the FRB of Cleveland at September 30, 2023, compared to $33.1 million at December 31, 2022.

At March 31, 2024, Peoples' interest-bearing deposits in other banks had increased $10.9 million from December 31, 2023.

The total cash and cash equivalents balance included $318.5 million of excess cash reserves being maintained at the FRB of Cleveland at March 31, 2024, compared to $309.8 million at December 31, 2023.

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.

Through the first nine months of 2023, Peoples' total cash and cash equivalents increased $145.1 million, which reflected cash inflows of $113.1 million of cash provided by operating activities and $111.1 million of cash provided by financing activities, partially offset by cash outflows of $79.1 million of cash used in investing activities.

The cash provided by financing activities was largely driven by a $369.6 million net increase in interest-bearing deposits and $70.1 million of proceeds from long-term borrowings, partially offset by (i) a net decrease in non-interest bearing deposits of $283.0 million, (ii) $37.9 million in cash dividends paid and (iii) $32.5 million in payments on long-term borrowings.

Peoples' use of cash in investing activities reflected cash outflows from a $285.2 million net decrease in loans held for investment and net cash outflows from held-to-maturity investment securities of $115.1 million, partially offset by net cash inflows from available-for-sale investment securities of $249.5 million and $93.0 million of cash received in the Limestone Merger.

Through the first three months of 2024, Peoples' total cash and cash equivalents increased $3.0 million, which reflected cash inflows of $37.0 million of cash provided by operating activities and $89.1 million of cash provided by financing activities, mostly offset by cash outflows of $123.1 million of cash used in investing activities.

The cash provided by financing activities was largely driven by a $273.6 million net increase in interest-bearing deposits and $26.8 million of proceeds from long-term borrowings, partially offset by a net decrease in non-interest bearing deposits of $99.3 million and a net decrease in short-term borrowings of $87.6 million.

Peoples' use of cash in investing activities reflected a net cash outflow from available-for-sale investment securities of $78.7 million and a $43.3 million net increase in loans held for investment.

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

1 unchanged sentence

The following table provides information regarding Peoples’ investment portfolio:

(Dollars in thousands) Weighted Average Yield September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) Weighted Average Yield March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Available-for-sale securities, at fair value:

21 unchanged sentences

Carrying value $ 1,859,149 $ 1,795,400 $ 1,760,322 $ 1,870,943 $ 1,796,332

(a) Amortized cost is presented net of the allowance for credit losses of $238 at September 30, 2023, $241 at December 31, 2022 and $238 at September 30, 2022.

For the third quarter of 2023, total investment securities decreased compared to the linked quarter, largely due to sales of lower-yielding available-for-sale securities and an increase in unrealized losses on available-for-sale securities due to the rising market interest rate environment.

During the first quarter of 2023, Peoples executed the sale of $96.7 million of its lower yielding available-

for-sale securities for an after-tax loss of $1.6 million.

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

The realized losses recognized due to these transactions are projected to be earned back within the 2023 fiscal year.

(a) Amortized cost is presented net of the allowance for credit losses of $238 at March 31, 2024 and at December 31, 2023, and $241 at March 31, 2023.

For the first quarter of 2024, total investment securities increased compared to the linked quarter, largely due to purchases of higher yielding government sponsored agency securities which were used to collateralize certain government deposits.

During the fourth quarter of 2023, Peoples executed the sales of $36.5 million of 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 the first quarter of 2023, Peoples executed the sales of $96.7 million of its lower yielding available-for-sale securities for an after-tax loss of $1.6 million.

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

The realized losses recognized due to the first

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

Additional information regarding Peoples' investment portfolio can be found in "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

1 unchanged sentence

The following table provides information regarding outstanding loan balances:

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Originated loans and leases:

29 unchanged sentences

242,424 246,327 268,402 286,924 50,945

Premium finance — — — — —

Leases 49,068 56,843 74,270 89,843 102,930

3 unchanged sentences

57,060 60,520 63,153 66,999 41,852

Consumer, indirect

Consumer, direct

14,566 16,477 20,402 36,233 8,107

20,402 36,233 8,107 9,657 14,032

Total acquired loans and leases

27 unchanged sentences

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

The period-end total loan and lease balances at September 30, 2023 increased $109.8 million, or 7% annualized, compared to at June 30, 2023.

The increase in the period-end loan and lease balance at September 30, 2023 compared to June 30, 2023 was primarily driven by increases of (i) $118.5 million in other commercial real estate loans, (ii) $26.9 million in premium finance loans and (iii) $24.8 million in leases, partially offset by decreases of $44.7 million in construction loans and $31.5 million in commercial and industrial loans.

The increase in the period-end loan and lease balances at June 30, 2023 compared to at March 31, 2023 was primarily driven by loans acquired in the Limestone Merger totaling $1.1 billion.

Excluding the loans acquired in the Limestone Merger, period-end loan and lease balances increased $358.6 million, or 10% annualized, when compared to at December 31, 2022, driven by increases of $182.8 million, $57.5 million, $48.4 million, $38.9 million, and $30.1 million in other commercial real estate loans, leases, construction loans, indirect consumer loans, and premium finance loans, respectively.

These increases were partially offset by a decrease of $13.1 million in consumer residential real estate loans.

Excluding the loans acquired in the Limestone Merger, period-end loan and lease balances increased $454.6 million, or 10% annualized, when compared to at September 30, 2022 primarily due to increases of $182.9 million, $89.8 million, $79.8 million, $76.1 million and $21.6 million in other commercial real estate loans, leases, construction loans, indirect consumer loans and premium finance loans, respectively.

These increases were partially offset by a reduction of $23.1 million in consumer residential real estate loans.

The period-end total loan and lease balances at March 31, 2024 increased $43.6 million, or 3% annualized, compared to at December 31, 2023.

The increase in the period-end loan and lease balance at March 31, 2024 compared to December 31, 2023 was primarily driven by increases of (i) $46.8 million in other commercial real estate loans, (ii) $35.8 million in premium finance loans and

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(iii) $29.6 million in commercial and industrial loans, partially offset by decreases of (a) $49.3 million in construction loans, (b) $16.2 million in indirect consumer loans and (c) $15.2 million in direct consumer loans.

The increase in the period-end loan and lease balances at March 31, 2024 compared to at March 31, 2023 was primarily driven by loans acquired in the Limestone Merger totaling $1.1 billion.

Excluding the loans acquired in the Limestone Merger, the period-end loan and lease balance increased $499.3 million, or 10%, driven by increases of $198.1 million, $100.6 million, $80.7 million, $68.1 million, $37.3 million, and $23.5 million in other commercial real estate loans, commercial and industrial loans, premium finance loans, leases, construction loans, and home equity lines of credit, respectively.

Loan Concentration

2 unchanged sentences

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

The following tables provide information regarding the largest concentrations of commercial construction loans and commercial real estate loans within the loan portfolio at September 30, 2023:

The following tables provide information regarding the largest concentrations of commercial construction loans and commercial real estate loans within the loan portfolio at March 31, 2024:

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

2 unchanged sentences

Residential property 19,607 32,085 51,692 8.1 %

Land development 36,985 14,583 51,568 8.0 %

Land only 24,612 7,674 32,286 5.0 %

Retail facilities 22,576 1,545 24,121 3.3 %

Assisted living facilities and nursing homes 1,408 19,672 21,080 3.3 %

Lodging and lodging related 3,578 16,456 20,034 3.1 %

Industrial 10,619 5,287 15,906 2.5 %

Student housing 10,107 4,893 15,000 2.4 %

Lodging and lodging related 3,406 16,749 20,155 2.8 %

Land development 35,128 51,559 86,687 11.9 %

Other (a) 26,822 23,223 50,045 7.8 %

1 unchanged sentence

(a) All other total exposures by industry are less than 2% of the Total Exposure.

Table of Co n tents

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

Commercial real estate, other:

Office buildings and complexes:

Owner occupied $ 83,274 $ 3,274 $ 86,548 3.8 %

Non-owner occupied 134,771 8,477 143,248 6.3 %

Total office buildings and complexes $ 218,045 $ 11,751 $ 229,796 10.1 %

Apartment complexes $ 345,711 $ 3,495 $ 349,206 15.1 %

Retail facilities:

2 unchanged sentences

Total retail facilities $ 299,536 $ 2,304 $ 301,840 13.1 %

Mixed-use facilities:

Owner occupied $ 22,035 $ 467 $ 22,502 1.0 %

Non-owner occupied 22,749 1,084 23,833 1.0 %

Total mixed-use facilities $ 44,784 $ 1,551 $ 46,335 2.0 %

Apartment complexes 280,260 4,812 285,072 12.6 %

Light industrial facilities:

2 unchanged sentences

Total light industrial facilities $ 241,473 $ 7,521 $ 248,994 10.8 %

Assisted living facilities and nursing homes $ 129,912 $ 6,994 $ 136,906 6.0 %

Warehouse facilities:

Office buildings and complexes:

Owner occupied $ 84,118 $ 3,598 $ 87,716 3.8 %

Non-owner occupied 132,981 8,292 141,273 6.1 %

Total warehouse facilities $ 101,556 $ 1,915 $ 103,471 4.6 %

Total office buildings and complexes $ 217,099 $ 11,890 $ 228,989 9.9 %

Lodging and lodging related:

2 unchanged sentences

Total lodging and lodging related $ 154,794 $ — $ 154,794 6.7 %

Education services:

Owner occupied $ 17,547 $ — $ 17,547 0.8 %

Non-owner occupied 30,216 4,000 34,216 1.5 %

Total education services $ 47,763 $ 4,000 $ 51,763 2.3 %

Healthcare facilities:

Assisted living facilities and nursing homes $ 140,712 $ 5,167 $ 145,879 6.3 %

Warehouse facilities:

Owner occupied $ 41,361 $ 592 $ 41,953 1.8 %

Non-owner occupied 44,530 128 44,658 1.9 %

Total healthcare facilities $ 45,729 $ 532 $ 46,261 2.0 %

Total warehouse facilities $ 85,891 $ 720 $ 86,611 3.7 %

Restaurant/bar facilities:

2 unchanged sentences

Total restaurant/bar facilities $ 76,174 $ 20 $ 76,194 3.3 %

Mixed-use facilities:

Owner occupied $ 37,696 $ 1,233 $ 38,929 1.7 %

Non-owner occupied 27,130 1,586 28,716 1.2 %

Total mixed-use facilities $ 64,826 $ 2,819 $ 67,645 2.9 %

Education services:

Owner occupied $ 16,279 $ — $ 16,279 0.7 %

Non-owner occupied 29,749 4,000 33,749 1.5 %

Total education services $ 46,028 $ 4,000 $ 50,028 2.2 %

Other (a) 571,536 31,808 603,344 26.0 %

3 unchanged sentences

and Maryland.

For all other states, the aggregate outstanding balances of commercial loans in each state were less than 3% of total loans at both September 30, 2023 and December 31, 2022.

For all other states, the aggregate outstanding balances of commercial loans in each state were less than 3% of total loans at both March 31, 2024 and December 31, 2023.

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

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

Small Business Administration Paycheck Protection Program ("PPP")

In March 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act created the PPP targeted to provide small businesses with support to cover payroll and certain other specified expenses.

Loans made under the PPP are fully guaranteed by the U.S.

Small Business Administration (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 will not be held liable for any representations made by PPP borrowers in connection with their requests for loan forgiveness.

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

Peoples 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 loan balances and related income:

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

2023 December 31,

2022 September 30,

PPP aggregate outstanding principal balances $ 1,129 $ 1,418 $ 2,184 $ 2,458 $ 3,789

PPP net deferred loan origination fees 9 11 25 27 61

Accretion of net deferred loan origination fees 1 14 2 34 360

Table of Co n tents

Allowance for Credit Losses

2 unchanged sentences

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

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Construction $ 701 $ 699 $ 1,241 $ 1,496 $ 1,273

10 unchanged sentences

As a percent of total loans 1.05 % 1.01 % 1.03 % 1.02 % 1.12 %

The increase in the allowance for credit losses at September 30, 2023 compared to June 30, 2023 was largely attributable to the deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans.

The increase in the allowance for credit losses at September 30, 2023 and at June 30, 2023, when compared to the prior periods presented was driven by the establishment of an allowance for credit losses for loans acquired in the Limestone Merger that were not considered purchased credit deteriorated.

The increase in the allowance for credit losses at March 31, 2024 compared to December 31, 2023 was largely attributable to (i) a deterioration in macro-economic conditions used within the CECL model, (ii) an increase of reserves on individually analyzed loans and (iii) loan growth.

Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2023 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.

1 unchanged sentence

Three Months Ended

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Gross charge-offs:

6 unchanged sentences

Home equity lines of credit — 4 32 55 19

Three Months Ended

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

2023 December 31,

2022 September 30,

Consumer, indirect 1,461 1,234 926 941 929

11 unchanged sentences

Consumer, direct 9 12 11 35 15

Table of Co n tents

Three Months Ended

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Consumer 80 142 160 164 94

28 unchanged sentences

Each with "--%" not meaningful.

Total net charge-offs during the third quarter of 2023 were $2.3 million, or 0.15% of average total loans on an annualized basis, compared to $1.2 million, or 0.09% of average total loans on an annualized basis, during the second quarter of 2023 and $1.7 million, or 0.15% of average total loans on an annualized basis, during the third quarter of 2022.

The increase for the third quarter of 2023 when compared to the linked quarter was driven by an increase in net charge-offs on leases, commercial real estate loans and commercial and industrial loans during the third quarter of 2023.

The increase in net charge-offs during the third quarter of 2023 versus the prior year third quarter was primarily attributable to an increase in charge-offs on indirect consumer loans, commercial real estate loans and leases, partially offset by an increase in recoveries.

Total net charge-offs during the first quarter of 2024 were $3.3 million, or 0.22% of average total loans on an annualized basis, compared to $3.5 million, or 0.23% of average total loans on an annualized basis, during the fourth quarter of 2023 and $1.5 million, or 0.13% of average total loans on an annualized basis, during the first quarter of 2023.

The decrease for the first quarter of 2024 when compared to the linked quarter was driven by a decrease in net charge-offs on leases and commercial and industrial loans during the first quarter of 2024.

The increase in net charge-offs during the first quarter of 2024 versus the prior year first quarter was primarily attributable to an increase in charge-offs on (i) leases, (ii) indirect consumer loans, (iii) commercial industrial loans, and (iv) other commercial real estate loans, partially offset by an increase in recoveries on leases during the first quarter of 2024.

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The following table details Peoples’ nonperforming assets:

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Loans 90+ days past due and accruing:

40 unchanged sentences

(d) NPLs include loans 90+ days past due and accruing and nonaccrual loans.

NPLs in periods prior to March 31, 2023 also included TDRs.

NPAs include nonperforming loans and OREO.

Compared to at June 30, 2023, Peoples' NPAs were stable at 0.48% of total assets.

Total loans 90+ days past due and accruing increased at September 30, 2023 compared to at June 30, 2023, mostly due to increases in nonperforming leases and premium finance loans.

Total nonaccrual loans decreased at September 30, 2023 compared to at June 30, 2023, mostly due to a decrease in nonaccrual commercial real estate loans, partially offset by an increase in nonaccrual leases.

During the third quarter of 2023, criticized loans decreased $6.7 million, while classified loans increased $13.9 million when compared to at June 30, 2023.

The decrease in the amounts of criticized loans compared to at June 30, 2023 was primarily driven by criticized loan pay-offs, partially offset by loan downgrades.

The increase in the amount of classified loans compared to at June 30, 2023 was primarily driven by loan downgrades, partially offset by classified loan pay-offs.

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Compared to at December 31, 2023, Peoples' NPAs increased from 0.43% of total assets to 0.50% at March 31, 2024.

Total loans 90+ days past due and accruing increased at March 31, 2024 compared to at December 31, 2023, mostly due to increases in nonperforming premium finance loans.

Total nonaccrual loans increased at March 31, 2024 compared to at December 31, 2023, mostly due to increases in nonaccrual commercial and industrial loans and leases.

During the first quarter of 2024, criticized loans increased $21.3 million, while classified loans increased $27.5 million when compared to at December 31, 2023.

The increase in the amounts of criticized loans compared to at December 31, 2023 was primarily driven by loan downgrades, partially offset by loan upgrades and criticized loan pay-offs.

The increase in the amount of classified loans compared to at December 31, 2023 was primarily driven by loan downgrades, partially offset by loan upgrades and classified loan pay-offs.

The following table details Peoples’ deposit balances:

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Non-interest-bearing deposits (a) $ 1,468,363 $ 1,567,649 $ 1,569,095 $ 1,682,634 $ 1,555,064

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

At September 30, 2023, period-end total deposits increased $77.6 million, or 1%, compared to at June 30, 2023, primarily driven by increases of (i) $248.0 million in retail CDs, (ii) $56.0 million in governmental deposits and (iii) $49.0 million in brokered CDs, which are primarily used as a source of funding, partially offset by decreases of (i) $129.5 million in savings accounts, (ii) $113.5 million in non-interest-bearing demand deposit accounts, and (iii) $44.6 million in interest-bearing demand deposit accounts.

At March 31, 2024, period-end total deposits increased $174.3 million, or 2%, compared to at December 31, 2023, primarily driven by increases of (i) $237.0 million in retail CDs, (ii) $98.5 million in governmental deposits, partially offset by decreases of (a) $99.3 million in non-interest-bearing demand deposit accounts, (b) $92.0 million in brokered CDs, (c) $36.6 million in interest-bearing demand deposit accounts, and (d) $17.8 million in savings accounts.

The increase in governmental deposit accounts was due to the seasonality of those balances, which are typically higher in the first quarter and third quarter of each year.

At September 30, 2023, period-end total deposits increased $1.2 billion, or 20%, compared to at September 30, 2022, primarily driven by deposits acquired in the Limestone Merger.

Excluding Limestone deposit balances, period-end deposit balances at September 30, 2023 increased $251.1 million compared to at September 30, 2022.

The increase was primarily driven by increases of $522.8 million in brokered deposits and $429.6 million in retail CDs, partially offset by decreases of $250.0 million, $189.5 million, $175.9 million and $78.8 million in non-interest bearing demand deposit accounts, savings accounts, interest-bearing demand deposit accounts and governmental deposit accounts, respectively.

At March 31, 2024, period-end total deposits increased $1.5 billion, or 27%, compared to at March 31, 2023, primarily driven by deposits acquired in the Limestone Merger.

Excluding Limestone deposit balances, total deposits at March 31, 2024 increased $784.8 million, or 14%, compared to at March 31,2023, primarily due to increases of $956.9 million in retail CDs, $210.3 million in brokered CDs, and $191.2 million in money market deposit accounts, partially offset by decreases of $270.9 million, $191.8 million, and $158.4 million in non-interest bearing deposits, savings accounts, and interest-bearing demand deposit accounts, respectively.

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

The interest rate swaps pay a fixed rate of interest while receiving a floating rate component of interest tied to term SOFR, which offsets the rate on the brokered CDs.

As of September 30, 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 overnight brokered CDs and are expected to be extended every 90 days through the maturity dates of the interest rate swaps.

As of March 31, 2024, Peoples had 11 effective interest rate swaps, with an aggregate notional value of $105.0 million, which were designated as cash flow hedges of overnight brokered CDs and are expected to be extended every 90 days through the maturity dates of the interest rate swaps.

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

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Borrowed Funds

The following table details Peoples’ short-term borrowings and long-term borrowings:

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Short-term borrowings:

Overnight borrowings

$ 484,000 $ 444,000 $ 390,000 $ 400,000 $ (5,000)

FHLB 90-day advances

FHLB Overnight borrowings

$ 260,192 $ 369,000 $ 484,000 $ 444,000 $ 390,000

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90,304 99,121 101,437 125,935 100,670

Bank Term Funding Program ("BTFP") 163,000 133,000 — — —

Total short-term borrowings

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Other long-term borrowings include trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures.

Total borrowed funds at September 30, 2023 increased compared to June 30, 2023, primarily due to an increase in long-term FHLB advances and higher overnight borrowings.

Total short-term borrowings at September 30, 2023 increased when compared to at September 30, 2022 due to outstanding FHLB overnight borrowings of $484.0 million at September 30, 2023, partially offset by a decrease in retail repurchase agreements.

Total long-term borrowings at September 30, 2023 increased when compared to at September 30, 2022 due to an increase in FHLB advances and other long-term borrowings assumed in the Limestone Merger, partially offset by a reduction in Vantage non-recourse debt.

Total borrowed funds at March 31, 2024 decreased compared to at December 31, 2023, primarily due to lower overnight borrowings.

Total long-term borrowings at March 31, 2024 increased when compared to at March 31, 2023 due to an increase in FHLB advances and other long-term borrowings assumed in the Limestone Merger as well as additional borrowings under the BTFP.

Capital/Stockholders’ Equity

At September 30, 2023, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations.

At March 31, 2024, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations.

These higher capital levels reflect Peoples' desire to maintain a strong capital position.

In order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer of 2.50%, which applies to the common equity tier 1 ("CET1") ratio, the tier 1 capital ratio and the total risk-based capital ratio.

At September 30, 2023, Peoples had a capital conservation buffer of 5.14%.

At March 31, 2024, Peoples had a capital conservation buffer of 5.60%.

The following table details Peoples' risk-based capital levels and corresponding ratios:

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Capital Amounts:

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Tier 1 leverage ratio 9.43 % 9.57 % 9.34 % 9.64 % 9.02 %

Peoples' risk-risk based capital ratios at September 30, 2023 increased slightly when compared to June 30, 2023, due to higher net income, primarily due to a full quarter of net income from the Limestone Merger compared to only two months of income in the linked quarter, partially offset by an increase in expenses from the Limestone Merger.

Compared to at September 30, 2022 and 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 September 30, 2023 decreased compared to at December 31, 2022 and September 30, 2022 due to the common shares issued in the Limestone Merger.

Peoples' risk-risk based capital ratios at March 31, 2024 decreased slightly when compared to December 31, 2023, due to lower net income, partially offset by an increase in expenses from the Limestone Merger.

Compared to at March 31, 2023, 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 March 31, 2024 decreased compared to at March 31, 2023 due to the common shares issued in the Limestone Merger.

In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity.

Such ratios represent Non-US GAAP financial measures since their calculation removes the impact of goodwill and other intangible assets acquired through acquisitions on amounts reported in the Unaudited Consolidated Balance Sheets.

Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance, financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples.

Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance,

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financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples.

Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in value should there be deterioration in the overall franchise value.

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The following table reconciles the calculation of these Non-US GAAP financial measures to amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements:

(Dollars in thousands) September 30,

2023 June 30,

2023 March 31,

(Dollars in thousands) March 31,

2024 December 31,

2023 September 30,

2023 June 30,

2023 March 31,

Tangible equity:

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7.37 % 7.33 % 6.85 % 7.00 % 7.08 %

The decrease in tangible book value per common share at September 30, 2023 and at June 30, 2023, compared to at March 31, 2023, was due to the 6.8 million common shares issued as consideration in the Limestone Merger.

Tangible book value per common share at September 30, 2023 increased compared to at September 30, 2022 primarily due to net income over the last twelve months, which was partially offset by an increase in accumulated other comprehensive loss as well as the impact of the common shares issued in the Limestone Merger mentioned above.

Tangible book value per common share increased to $18.39 at March 31, 2024 compared to $18.16 at December 31, 2023.

The change in tangible book value per common share was due to tangible equity increasing during the first quarter of 2024 primarily due to net income over the last three months, which was partially offset by an increase in other comprehensive losses recognized on available-for-sale securities.

Tangible book value per common share at March 31, 2024 increased compared to at March 31, 2023 primarily due to net income over the last twelve months, which was partially offset by an increase in accumulated other comprehensive loss as well as the impact of the common shares issued in the Limestone Merger.

Interest Rate Sensitivity and Liquidity

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In addition, other factors, such as prepayments of loans and investment securities, or early withdrawal of deposits, can affect Peoples' exposure to IRR and impact interest costs or revenue streams.

Peoples has assigned overall management of IRR to its Asset-Liability Committee (the “ALCO”), which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level of IRR.

In light of recent bank failures, Peoples revisited the model assumptions during 2023, and determined the methods used by the ALCO to assess IRR remain appropriate and are largely unchanged from those disclosed in Peoples' 2022 Form 10-K.

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The following table shows the estimated changes in net interest income and the economic value of equity based upon a standard, parallel shock analysis with balances held constant (dollars in thousands):

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Net Interest Income Estimated (Decrease) Increase in Economic Value of Equity

(in Basis Points) September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

(in Basis Points) March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

300 $ 14,508 4.3 % $ 15,063 4.6 % $ (164,796) (9.5) % $ (157,625) (9.4) %

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Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above.

Given the shape of market yield curves at September 30, 2023, consideration of the bear steepener and bear flattener scenarios provide insights which were not captured by parallel shifts.

Given the shape of market yield curves at March 31, 2024, consideration of the bear steepener and bear flattener scenarios provide insights which were not captured by parallel shifts.

The bear steepener scenario highlights the risk to net interest income and economic value of equity when short-term interest rates remain constant while long-term interest rates rise.

In such a scenario, Peoples' deposit and borrowing costs, which are generally correlated with short-term interest rates, remain constant, while asset yields, which are correlated with long-term interest rates, rise.

At September 30, 2023, the bear steepener scenario produced an increase in net interest income of 0.10% and a decline in the economic value of equity of 2.20%.

At March 31, 2024, the bear steepener scenario produced an increase in net interest income of 0.7% and a decline in the economic value of equity of 0.7%.

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 a higher net interest margin.

At September 30, 2023, the bear flattener scenario produced a decline of 0.80% to net interest income and a decline in the economic value of equity of 0.90%.

At March 31, 2024, the bear flattener scenario produced an increase of 3.0% to net interest income and a decline in the economic value of equity of 1.0%.

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 September 30, 2023, Peoples had entered into eleven interest rate swap contracts with an aggregate notional value of $105.0 million.

As of March 31, 2024, Peoples had entered into 11 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 10 Derivative Financial Instruments” of the Notes to the Unaudited Condensed Consolidated Financial Statements.

At September 30, 2023, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income.

At March 31, 2024, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income.

The table above illustrates this point as changes to net interest income increase in the rising interest rate scenarios.

While the heavy concentration of floating rate loans remains the largest contributor to the level of asset sensitivity, the decrease in economic value of equity asset sensitivity, as measured, from December 31, 2022 was largely attributable to increased effective duration within the investment securities portfolio.

In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity.

In light of recent bank failures, Peoples revisited the model assumptions, and determined the methods used by the ALCO to monitor and evaluate the adequacy of Peoples Bank's liquidity position remain appropriate and are largely unchanged from those disclosed in Peoples' 2022 Form 10-K.

At September 30, 2023, Peoples Bank had liquid assets of $357.6 million, which represented 3.6% of total assets and unfunded loan commitments.

In light of the bank failures in 2023, Peoples revisited the model assumptions, and determined the methods used by the ALCO to monitor

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and evaluate the adequacy of Peoples Bank's liquidity position remain appropriate and are largely unchanged from those disclosed in Peoples' 2023 Form 10-K.

At March 31, 2024, Peoples Bank had liquid assets of $565.4 million, which represented 5.4% of total assets and unfunded loan commitments.

Peoples also had an additional $158.7 million of unpledged investment securities not included in the measurement of liquid assets.

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(Dollars in thousands)

2024 December 31,

2023 September 30,

1 unchanged sentence

2023 March 31,

2023 December 31,

2022 September 30,

Home equity lines of credit $ 246,035 $ 244,367 $ 245,764 $ 208,805 $ 201,692

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis