PEOPLES BANCORP INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2024 December 31, 2023 (Dollars in thousands) (Unaudited) Assets Cash and cash equivalents: Cash and balances due from banks $ 119,981 $ 111,680 Interest-bearing deposits in other banks 115,890 315,042 Total cash and cash equivalents 235,871 426,722 Available-for-sale investment securities, at fair value (amortized cost of $ 1,266,060 at June 30, 2024 and $ 1,184,288 at December 31, 2023) (a) 1,119,139 1,048,322 Held-to-maturity investment securities, at amortized cost (fair value of $ 622,593 at June 30, 2024 and $ 612,022 at December 31, 2023) (a) 701,984 683,657 Other investment securities 62,742 63,421 Total investment securities (a) 1,883,865 1,795,400 Loans and leases, net of deferred fees and costs (b) 6,325,371 6,159,196 Allowance for credit losses ( 66,247 ) ( 62,011 ) Net loans and leases (c) 6,259,124 6,097,185 Loans held for sale 3,832 1,866 Bank premises and equipment, net of accumulated depreciation 106,589 103,856 Bank owned life insurance 142,605 140,554 Goodwill 362,169 362,169 Other intangible assets 44,248 50,003 Other assets 188,158 179,627 Total assets $ 9,226,461 $ 9,157,382 Liabilities Deposits: Non-interest-bearing $ 1,472,697 $ 1,567,649 Interest-bearing 5,825,077 5,584,648 Total deposits 7,297,774 7,152,297 Short-term borrowings 482,733 601,121 Long-term borrowings 234,257 216,241 Accrued expenses and other liabilities 133,864 134,189 Total liabilities 8,148,628 8,103,848 Stockholders’ equity Preferred shares, no par value, 50,000 shares authorized, no shares issued at June 30, 2024 or at December 31, 2023 — — Common shares, no par value, 50,000,000 shares authorized, 36,760,516 shares issued at June 30, 2024 and 36,736,041 shares issued at December 31, 2023, including at each date shares held in treasury 863,975 865,227 Retained earnings 357,886 327,237 Accumulated other comprehensive loss, net of deferred income taxes ( 110,193 ) ( 101,590 ) Treasury stock, at cost, 1,347,476 shares at June 30, 2024 and 1,511,348 shares at December 31, 2023 ( 33,835 ) ( 37,340 ) Total stockholders’ equity 1,077,833 1,053,534 Total liabilities and stockholders’ equity $ 9,226,461 $ 9,157,382 (a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $ 0 and $ 238 , respectively, at June 30, 2024, and $ 0 and $ 238 , respectively, at December 31, 2023. (b) Also referred to throughout this Quarterly Report on Form 10-Q as "total loans" and "loans held for investment." (c) Also referred to throughout this Quarterly Report on Form 10-Q as "net loans." See Notes to the Unaudited Condensed Consolidated Financial Statements 3 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, (Dollars in thousands, except per share data) 2024 2023 2024 2023 Interest income: Interest and fees on loans and leases $ 112,433 91,848 $ 223,182 $ 163,610 Interest and dividends on taxable investment securities 14,841 12,771 28,760 23,774 Interest on tax-exempt investment securities 994 1,125 1,997 2,121 Other interest income 2,502 673 4,424 1,061 Total interest income 130,770 106,417 258,363 190,566 Interest expense: Interest on deposits 35,659 14,403 68,963 20,064 Interest on short-term borrowings 4,978 5,314 9,162 9,771 Interest on long-term borrowings 3,520 1,847 6,985 3,000 Total interest expense 44,157 21,564 85,110 32,835 Net interest income 86,613 84,853 173,253 157,731 Provision for credit losses 5,683 7,983 11,785 9,836 Net interest income after provision for credit losses 80,930 76,870 161,468 147,895 Non-interest income: Electronic banking income 6,470 6,466 12,516 11,909 Trust and investment income 4,999 4,414 9,598 8,498 Deposit account service charges 4,339 4,153 8,562 7,676 Insurance income 4,109 4,004 10,607 9,429 Lease income 1,116 1,719 2,352 2,796 Bank owned life insurance income 1,037 842 2,537 1,549 Mortgage banking income 243 189 564 503 Net loss on investment securities ( 353 ) ( 166 ) ( 354 ) ( 2,101 ) Net loss on asset disposals and other transactions ( 428 ) ( 1,665 ) ( 769 ) ( 1,911 ) Other non-interest income 2,172 1,059 3,870 1,727 Total non-interest income 23,704 21,015 49,483 40,075 Non-interest expense: Salaries and employee benefit costs 36,564 38,025 75,457 70,053 Data processing and software expense 6,743 4,728 12,512 9,290 Net occupancy and equipment expense 6,142 5,380 12,425 10,335 Professional fees 2,935 7,438 5,902 10,319 Amortization of other intangible assets 2,787 2,800 5,575 4,671 Electronic banking expense 1,941 1,832 3,722 3,323 Federal Deposit Insurance Corporation ("FDIC") insurance expense 1,251 1,464 2,437 2,265 Other loan expenses 1,036 538 2,112 1,277 Franchise tax expense 760 872 1,641 1,906 Communication expense 736 724 1,535 1,337 Marketing expense 681 1,357 1,737 2,287 Other non-interest expense 7,182 5,465 12,168 10,039 Total non-interest expense 68,758 70,623 137,223 127,102 Income before income taxes 35,876 27,262 73,728 60,868 Income tax expense 6,869 6,166 15,137 13,212 Net income $ 29,007 $ 21,096 $ 58,591 $ 47,656 Earnings per common share - basic $ 0.83 $ 0.64 $ 1.67 $ 1.57 Earnings per common share - diluted $ 0.82 $ 0.64 $ 1.66 $ 1.56 Weighted-average number of common shares outstanding - basic 34,764,489 32,526,962 34,752,419 30,222,165 Weighted-average number of common shares outstanding - diluted 35,117,648 32,649,976 35,071,550 30,314,504 Cash dividends declared $ 14,197 $ 13,422 $ 27,942 $ 24,147 Cash dividends declared per common share $ 0.40 $ 0.39 $ 0.79 $ 0.77 See Notes to the Unaudited Condensed Consolidated Financial Statements 4 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended Six Months Ended June 30, June 30, (Dollars in thousands) 2024 2023 2024 2023 Net income $ 29,007 $ 21,096 $ 58,591 $ 47,656 Other comprehensive (loss) income: Available-for-sale investment securities: Gross unrealized holding (loss) gain arising during the period ( 1,422 ) ( 12,034 ) ( 11,309 ) 8,328 Related tax benefit (expense) 236 3,154 2,576 ( 1,493 ) Reclassification adjustment for net loss included in net income 353 166 354 2,101 Related tax expense ( 82 ) ( 43 ) ( 82 ) ( 495 ) Net effect on other comprehensive (loss) income ( 915 ) ( 8,757 ) ( 8,461 ) 8,441 Defined benefit plan: Amortization of unrecognized loss and service cost on benefit plans — 7 — 9 Related tax benefit — ( 2 ) — ( 2 ) Net effect on other comprehensive (loss) income — 5 — 7 Cash flow hedges: Net (loss) gain arising during the period ( 443 ) 1,073 ( 187 ) ( 283 ) Related tax benefit (expense) 105 ( 262 ) 45 51 Net effect on other comprehensive (loss) income ( 338 ) 811 ( 142 ) ( 232 ) Total other comprehensive (loss) income, net of tax ( 1,253 ) ( 7,941 ) ( 8,603 ) 8,216 Total comprehensive income $ 27,754 $ 13,155 $ 49,988 $ 55,872 See Notes to the Unaudited Condensed Consolidated Financial Statements 5 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, March 31, 2024 $ 861,925 $ 343,076 $ ( 108,940 ) $ ( 34,059 ) $ 1,062,002 Net income — 29,007 — — 29,007 Other comprehensive loss, net of tax — — ( 1,253 ) — ( 1,253 ) Cash dividends declared — ( 14,197 ) — ( 14,197 ) Reissuance of treasury stock for common share awards 264 — — ( 264 ) — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 342 342 Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 182 ) ( 182 ) Common shares issued under dividend reinvestment plan 419 — — — 419 Common shares issued under compensation plan for Boards of Directors 21 — — 102 123 Common shares issued under employee stock purchase plan 34 — — 226 260 Stock-based compensation 1,312 — — — 1,312 Balance, June 30, 2024 $ 863,975 $ 357,886 $ ( 110,193 ) $ ( 33,835 ) $ 1,077,833 Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, December 31, 2023 $ 865,227 $ 327,237 $ ( 101,590 ) $ ( 37,340 ) $ 1,053,534 Net income — 58,591 — — 58,591 Other comprehensive loss, net of tax — — ( 8,603 ) — ( 8,603 ) Cash dividends declared — ( 27,942 ) — — ( 27,942 ) Reissuance of treasury stock for common share awards ( 6,598 ) — — 6,598 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 342 342 Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 1,051 ) ( 1,051 ) Common shares repurchased under share repurchase program — — — ( 3,000 ) ( 3,000 ) Common shares issued under dividend reinvestment plan 874 — — — 874 Common shares issued under compensation plan for Boards of Directors 42 — — 219 261 Common shares issued under employee stock purchase plan 94 — — 397 491 Stock-based compensation 4,336 — — — 4,336 Balance, June 30, 2024 $ 863,975 $ 357,886 $ ( 110,193 ) $ ( 33,835 ) $ 1,077,833 6 Table of Contents Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, March 31, 2023 $ 684,367 $ 281,771 $ ( 110,979 ) $ ( 35,616 ) $ 819,543 Net income — 21,096 — — 21,096 Other comprehensive loss, net of tax — — ( 7,941 ) — ( 7,941 ) Cash dividends declared — ( 13,422 ) — — ( 13,422 ) Reissuance of treasury stock for common share awards ( 725 ) — — 725 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 115 115 Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 134 ) ( 134 ) Common shares issued under dividend reinvestment plan 350 — — — 350 Common shares issued under compensation plan for Boards of Directors 11 — — 124 135 Common shares issued under employee stock purchase plan 19 — — 208 227 Stock-based compensation 1,009 — — — 1,009 Issuance of common shares related to merger with Limestone Bancorp, Inc. 177,929 — — — 177,929 Balance, June 30, 2023 $ 862,960 $ 289,445 $ ( 118,920 ) $ ( 34,578 ) $ 998,907 Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, December 31, 2022 $ 686,450 $ 265,936 $ ( 127,136 ) $ ( 39,922 ) $ 785,328 Net income — 47,656 — — 47,656 Other comprehensive income, net of tax — — 8,216 — 8,216 Cash dividends declared — ( 24,147 ) — — ( 24,147 ) Reissuance of treasury stock for common share awards ( 5,410 ) — — 5,410 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 115 115 Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 1,054 ) ( 1,054 ) Common shares issued under dividend reinvestment plan 752 — — — 752 Common shares issued under compensation plan for Boards of Directors 19 — — 252 271 Common shares issued under employee stock purchase plan 61 — — 621 682 Stock-based compensation 3,159 — — — 3,159 Issuance of common shares related to merger with Limestone Bancorp, Inc. 177,929 — — — 177,929 Balance, June 30, 2023 $ 862,960 $ 289,445 $ ( 118,920 ) $ ( 34,578 ) $ 998,907 See Notes to the Unaudited Condensed Consolidated Financial Statements 7 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, (Dollars in thousands) 2024 2023 Net cash provided by operating activities $ 69,123 $ 63,223 Investing activities: Available-for-sale investment securities: Purchases ( 147,734 ) ( 23,913 ) Proceeds from sales — 120,396 Proceeds from principal payments, calls and prepayments 64,356 73,318 Held-to-maturity investment securities: Purchases ( 37,120 ) ( 174,335 ) Proceeds from principal payments 18,812 60,672 Other investment securities: Purchases ( 18,327 ) ( 15,856 ) Proceeds from sales 19,312 9,665 Net increase in loans held for investment ( 164,489 ) ( 184,177 ) Net expenditures for premises and equipment ( 5,759 ) ( 7,182 ) Proceeds from sales of other real estate owned — 106 Business acquisitions, net of cash received — 91,793 Proceeds from bank owned life insurance contracts 486 — Investment in limited partnership and tax credit funds ( 2,919 ) ( 1,699 ) Net cash used in investing activities ( 273,382 ) ( 51,212 ) Financing activities: Net decrease in non-interest-bearing deposits ( 94,952 ) ( 169,495 ) Net increase in interest-bearing deposits 240,446 178,373 Net (decrease) increase in short-term borrowings ( 118,388 ) 9,797 Proceeds from long-term borrowings 35,561 5,004 Payments on long-term borrowings ( 18,171 ) ( 16,626 ) Cash dividends paid ( 27,887 ) ( 24,276 ) Purchase of treasury stock under share repurchase program ( 3,000 ) — Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock ( 1,051 ) ( 1,054 ) Proceeds from issuance of common shares 850 726 Net cash provided by (used in) financing activities 13,408 ( 17,551 ) Net decrease in cash and cash equivalents ( 190,851 ) ( 5,540 ) Cash and cash equivalents at beginning of period 426,722 154,022 Cash and cash equivalents at end of period $ 235,871 $ 148,482 Supplemental cash flow information: Interest paid $ 76,909 $ 27,283 Income taxes paid 20,383 29,194 Supplemental noncash disclosures: Transfers from total loans to other real estate owned 235 — Noncash recognition of new leases 621 4,179 See Notes to the Unaudited Condensed Consolidated Financial Statements 8 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 Summary of Significant Accounting Policies Basis of Presentation: The accompanying Unaudited Condensed Consolidated Financial Statements of Peoples Bancorp Inc. and its subsidiaries ("Peoples" refers to Peoples Bancorp Inc. and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.) have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("Peoples' 2023 Form 10-K"). The accounting and reporting policies followed in the presentation of the accompanying Unaudited Condensed Consolidated Financial Statements are consistent with those described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2023 Form 10-K, as updated by the information contained in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (this "Form 10-Q"). Management has evaluated all significant events and transactions that occurred after June 30, 2024 for potential recognition or disclosure in these Unaudited Condensed Consolidated Financial Statements. In the opinion of management, these Unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary to present fairly such information for the periods and at the dates indicated. Such adjustments are normal and recurring in nature. Intercompany accounts and transactions have been eliminated. The Consolidated Balance Sheet at December 31, 2023, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2023 Form 10-K. The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year, due in part to seasonal variations and unusual or infrequently occurring items. New Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by Peoples as of the required effective dates. Refer to "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2023 Form 10-K. Unless otherwise discussed, management believes the impact of any recently issued standards, including those issued but not yet effective, will not have a material impact on Peoples' financial statements taken as a whole. Note 2 Fair Value of Assets and Liabilities Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or a non-recurring basis in the Unaudited Condensed Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.” Depending on the nature of the asset or the liability, Peoples uses various valuation methodologies and assumptions to estimate fair value. The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K. Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods presented. 9 Table of Contents Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy. Recurring Fair Value Measurements at Reporting Date June 30, 2024 December 31, 2023 (Dollars in thousands) Level 1 Level 2 Level 1 Level 2 Assets: Available-for-sale investment securities: Obligations of: U.S. Treasury and government agencies $ 28,343 $ — $ 30,296 $ — U.S. government sponsored agencies — 230,916 — 118,607 States and political subdivisions — 202,804 — 213,296 Residential mortgage-backed securities — 601,002 — 628,924 Commercial mortgage-backed securities — 50,035 — 51,234 Bank-issued trust preferred securities — 6,039 — 5,965 Total available-for-sale securities $ 28,343 $ 1,090,796 $ 30,296 $ 1,018,026 Equity investment securities (a) 181 236 191 237 Derivative assets (b) — 23,688 — 22,304 Liabilities: Derivative liabilities (c) $ — $ 20,642 $ — $ 19,122 (a) Included in "Other investment securities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements. (b) Included in " Other assets " on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements. (c) Included in " Accrued expenses and other liabilities " on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements. Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, secured overnight funding rate ("SOFR") (or other relevant) yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services or broker in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists. Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from q uoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2). Derivative Assets and Derivative Liabilities : Derivative assets and derivative liabilities are recognized on the Unaudited Consolidated Balance Sheets at their fair value within "Other assets" and "Accrued expenses and other liabilities", respectively. The fair value for derivative financial instruments is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters (Level 2). 10 Table of Contents Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy at June 30, 2024 and December 31, 2023. Non-Recurring Fair Value Measurements at Reporting Date June 30, 2024 December 31, 2023 (Dollars in thousands) Level 2 Level 3 Level 2 Level 3 Assets: Collateral dependent loans $ — $ 3,168 $ — $ 501 Loans held for sale (a) 3,347 — 1,663 — Other real estate owned — 171 — 7,118 (a) Loans held for sale are presented gross of a valuation allowance of $ 149 and $ 163 at June 30, 2024 and at December 31, 2023, respectively. Collateral Dependent Loans: Loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty, are considered collateral dependent. Peoples utilizes outside third-party appraisal services to value the underlying collateral, which Peoples then uses to report the loans at their fair value (Level 3). Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally one-to-four family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2). Other Real Estate Owned ("OREO"): OREO, included in "Other assets" on the Unaudited Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches, including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available (Level 3). 11 Table of Contents Financial Instruments Not Required to be Measured or Reported at Fair Value The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Unaudited Consolidated Balance Sheets. Fair Value Measurements of Other Financial Instruments (Dollars in thousands) Fair Value Hierarchy Level June 30, 2024 December 31, 2023 Carrying Amount Fair Value Carrying Amount Fair Value Assets: Cash and cash equivalents 1 $ 235,871 $ 235,871 $ 426,722 $ 426,722 Held-to-maturity investment securities: Obligations of: U.S. government sponsored agencies 2 212,023 203,137 188,475 180,825 States and political subdivisions (a) 2 144,134 112,082 144,496 114,288 Residential mortgage-backed securities 2 246,283 224,160 248,559 231,620 Commercial mortgage-backed securities 2 99,782 83,214 102,365 85,289 Total held-to-maturity securities 702,222 622,593 683,895 612,022 Other investment securities: Other investment securities at cost: Federal Home Loan Bank ("FHLB") stock N/A 27,848 27,848 29,949 29,949 Federal Reserve Bank ("FRB") stock N/A 27,114 27,114 26,896 26,896 Total other investment securities at cost 54,962 54,962 56,845 56,845 Other investment securities at fair value: Nonqualified deferred compensation (b) 1 4,190 4,190 3,162 3,162 Other investment securities (c) 2 3,173 3,173 2,985 2,985 Total other investment securities 62,325 62,325 62,992 62,992 Loans and leases, net of deferred fees and costs (d) 3 6,325,371 6,215,030 6,159,196 6,064,999 Bank owned life insurance 2 142,605 142,605 140,554 140,554 Liabilities: Deposits 2 $ 7,297,774 $ 6,454,543 $ 7,152,297 $ 6,319,885 Short-term borrowings 2 482,733 498,052 601,121 619,999 Long-term borrowings 2 234,257 241,691 216,241 222,743 (a) Obligations of states and political subdivisions are presented gross of an allowance for credit losses of $ 238 at both June 30, 2024 and December 31, 2023. (b) Nonqualified deferred compensation includes mutual funds as part of the investment. (c) "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at June 30, 2024 and at December 31, 2023, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis table above and not included in this table. (d) Loans and leases, net of deferred fees and costs, are presented gross of an allowance for credit losses of $ 66.2 million and $ 62.0 million at June 30, 2024 and at December 31, 2023, respectively. For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These financial instruments include cash and cash equivalents and overnight borrowings. Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments: Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash and cash equivalents balances are a reasonable estimate of fair value (Level 1). Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). When observable market data is absent, the independent pricing service estimates prices based on underlying cash flow characteristics and discount rates and compares them to similar securities (Level 3). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment 12 Table of Contents of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists. Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable securities. Other investment securities at fair value are valued using quoted prices in an active market (Level 1) or quoted prices in less active markets (Level 2). Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held to maturity. Peoples considers interest rate, credit and market factors in estimating the fair value of loans and leases (Level 3). Fair values for loans and leases are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans and leases with similar terms, the credit risk associated with the loans and leases and other market factors, including liquidity. Bank Owned Life Insurance: Peoples' bank owned life insurance policies are recorded at their cash surrender value (Level 2). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits. Deposits: The fair value of fixed-maturity certificates of deposit ("CDs") is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities. Demand and other non-fixed-maturity deposits are estimated using a discounted cash flow calculation based on maturity, attrition and re-pricing assumptions (Level 2). Short-term Borrowings: The fair value of short-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2). Long-term Borrowings: The fair value of long-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2). Certain financial assets and financial liabilities that are not required to be measured or reported at fair value can be subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and financial liabilities include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair value, which are not included in the above information. Accordingly, the fair values described above are not intended to represent the aggregate fair value of Peoples. 13 Table of Contents Note 3 Investment Securities Available-for-sale The following table summarizes Peoples' available-for-sale investment securities: (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value June 30, 2024 Obligations of: U.S. Treasury and government agencies $ 29,417 $ 65 $ ( 1,139 ) $ 28,343 U.S. government sponsored agencies 241,060 548 ( 10,692 ) 230,916 States and political subdivisions 232,514 9 ( 29,719 ) 202,804 Residential mortgage-backed securities 696,929 1,257 ( 97,184 ) 601,002 Commercial mortgage-backed securities 59,640 1 ( 9,606 ) 50,035 Bank-issued trust preferred securities 6,500 3 ( 464 ) 6,039 Total available-for-sale securities $ 1,266,060 $ 1,883 $ ( 148,804 ) $ 1,119,139 December 31, 2023 Obligations of: U.S. Treasury and government agencies $ 30,999 $ 292 $ ( 995 ) $ 30,296 U.S. government sponsored agencies 128,500 639 ( 10,532 ) 118,607 States and political subdivisions 239,906 485 ( 27,095 ) 213,296 Residential mortgage-backed securities 717,772 1,819 ( 90,667 ) 628,924 Commercial mortgage-backed securities 60,611 5 ( 9,382 ) 51,234 Bank-issued trust preferred securities 6,500 — ( 535 ) 5,965 Total available-for-sale securities $ 1,184,288 $ 3,240 $ ( 139,206 ) $ 1,048,322 The gross gains and losses realized by Peoples from sales or prepayments of available-for-sale securities for the periods ended June 30 were as follows: Three Months Ended Six Months Ended June 30, June 30, (Dollars in thousands) 2024 2023 2024 2023 Gross gains realized $ — $ 12 $ — $ 90 Gross losses realized 353 178 354 2,191 Net (loss) gain realized $ ( 353 ) $ ( 166 ) $ ( 354 ) $ ( 2,101 ) The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and recognized as of the trade date. 14 Table of Contents The following table presents a summary of available-for-sale investment securities that have been in a continuous unrealized loss position for the periods identified: Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss June 30, 2024 Obligations of: U.S. Treasury and government agencies $ 6,912 $ 71 9 $ 17,240 $ 1,068 19 $ 24,152 $ 1,139 U.S. government sponsored agencies 86,183 117 10 80,062 10,575 16 166,245 10,692 States and political subdivisions 20,633 675 54 171,173 29,044 149 191,806 29,719 Residential mortgage-backed securities 28,049 271 20 542,532 96,913 295 570,581 97,184 Commercial mortgage-backed securities 451 2 1 49,464 9,604 28 49,915 9,606 Bank-issued trust preferred securities 1,989 11 1 3,546 453 2 5,535 464 Total $ 144,217 $ 1,147 95 $ 864,017 $ 147,657 509 $ 1,008,234 $ 148,804 December 31, 2023 Obligations of: U.S. Treasury and government agencies $ 8,568 $ 83 22 $ 11,631 $ 912 5 $ 20,199 $ 995 U.S. government sponsored agencies 14,439 35 4 74,211 10,497 15 88,650 10,532 States and political subdivisions 18,268 136 32 167,346 26,959 138 185,614 27,095 Residential mortgage-backed securities 58,671 1,150 66 529,895 89,517 238 588,566 90,667 Commercial mortgage-backed securities 6,000 112 7 44,656 9,270 21 50,656 9,382 Bank-issued trust preferred securities 1,984 16 1 3,981 519 3 5,965 535 Total $ 107,930 $ 1,532 132 $ 831,720 $ 137,674 420 $ 939,650 $ 139,206 Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis. At June 30, 2024, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses. At June 30, 2024, Peoples did not have the intent to sell, nor was it more likely than not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both June 30, 2024 and December 31, 2023 were attributable to changes in market interest rates and spreads since the securities were purchased, and were not credit-related losses. The unrealized loss with respect to the two bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at June 30, 2024 was attributable to the subordinated nature of the trust preferred securities. 15 Table of Contents The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at June 30, 2024. The weighted-average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. (Dollars in thousands) Within 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total Amortized cost Obligations of: U.S. Treasury and government agencies $ 1,138 $ 15,218 $ 7,228 $ 5,833 $ 29,417 U.S. government sponsored agencies — 67,076 86,208 87,776 241,060 States and political subdivisions 9,756 44,335 64,855 113,568 232,514 Residential mortgage-backed securities 1 3,715 55,991 637,222 696,929 Commercial mortgage-backed securities — 12,095 26,908 20,637 59,640 Bank-issued trust preferred securities 2,000 1,000 3,500 — 6,500 Total available-for-sale securities $ 12,895 $ 143,439 $ 244,690 $ 865,036 $ 1,266,060 Fair value Obligations of: U.S. Treasury and government agencies $ 1,128 $ 14,233 $ 7,214 $ 5,768 $ 28,343 U.S. government sponsored agencies — 62,272 82,424 86,220 230,916 States and political subdivisions 9,718 41,387 54,369 97,330 202,804 Residential mortgage-backed securities 1 3,560 51,066 546,375 601,002 Commercial mortgage-backed securities — 10,978 22,672 16,385 50,035 Bank-issued trust preferred securities 1,989 948 3,102 — 6,039 Total available-for-sale securities $ 12,836 $ 133,378 $ 220,847 $ 752,078 $ 1,119,139 Total weighted-average yield 3.77 % 2.39 % 3.06 % 2.76 % 2.79 % Held-to-maturity The following table summarizes Peoples’ held-to-maturity investment securities: (Dollars in thousands) Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value June 30, 2024 Obligations of: U.S. government sponsored agencies $ 212,023 $ — $ 311 $ ( 9,197 ) $ 203,137 States and political subdivisions 144,134 ( 238 ) 112 ( 31,926 ) 112,082 Residential mortgage-backed securities 246,283 — 404 ( 22,527 ) 224,160 Commercial mortgage-backed securities 99,782 — — ( 16,568 ) 83,214 Total held-to-maturity investment securities $ 702,222 $ ( 238 ) $ 827 $ ( 80,218 ) $ 622,593 December 31, 2023 Obligations of: U.S. government sponsored agencies $ 188,475 $ — $ 489 $ ( 8,139 ) $ 180,825 States and political subdivisions 144,496 ( 238 ) 134 ( 30,104 ) 114,288 Residential mortgage-backed securities 248,559 — 1,643 ( 18,582 ) 231,620 Commercial mortgage-backed securities 102,365 — — ( 17,076 ) 85,289 Total held-to-maturity investment securities $ 683,895 $ ( 238 ) $ 2,266 $ ( 73,901 ) $ 612,022 There were no sales of held-to-maturity investment securities during either of the six months ended June 30, 2024 or 2023. Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. Peoples has determined that the loss given default for U.S. government sponsored agencies investment securities is zero , due to the fact that it is unlikely the ultimate guarantor (the U.S. government) would not perform on its implicit guarantee in the event of default. The remaining securities are included in the calculation of the allowance for credit losses for held-to-maturity investment securities. Peoples reported $ 0.2 million of allowance for credit losses for held-to-maturity securities at both June 30, 2024, and December 31, 2023. The following table presents a summary of held-to-maturity investment securities that had been in a continuous unrealized loss position for the periods identified: 16 Table of Contents Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss June 30, 2024 Obligations of: U.S. government sponsored agencies $ 20,014 $ 149 4 126,829 9,048 27 $ 146,843 $ 9,197 States and political subdivisions — — — 108,854 31,926 67 108,854 31,926 Residential mortgage-backed securities 42,985 511 10 153,531 22,016 48 196,516 22,527 Commercial mortgage-backed securities 3,014 1,103 3 78,201 15,465 32 81,215 16,568 Total $ 66,013 $ 1,763 17 $ 467,415 $ 78,455 174 $ 533,428 $ 80,218 December 31, 2023 Obligations of: U.S. government sponsored agencies $ 64,487 $ 356 14 $ 86,071 $ 7,783 18 $ 150,558 $ 8,139 States and political subdivisions — — — 111,040 30,104 67 111,040 30,104 Residential mortgage-backed securities 44,379 1,105 14 117,654 17,477 34 162,033 18,582 Commercial mortgage-backed securities 13,919 1,845 6 71,370 15,231 31 85,289 17,076 Total $ 122,785 $ 3,306 34 $ 386,135 $ 70,595 150 $ 508,920 $ 73,901 The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity investment securities by contractual maturity at June 30, 2024. The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 23.3 % at June 30, 2024. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. (Dollars in thousands) Within 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total Amortized cost Obligations of: U.S. government sponsored agencies $ 8,000 $ 10,634 $ 70,081 $ 123,308 $ 212,023 States and political subdivisions — 6,424 16,631 121,079 144,134 Residential mortgage-backed securities — 360 4,134 241,789 246,283 Commercial mortgage-backed securities 1,063 11,236 36,851 50,632 99,782 Total held-to-maturity investment securities $ 9,063 $ 28,654 $ 127,697 $ 536,808 $ 702,222 Fair value Obligations of: U.S. government sponsored agencies $ 7,950 $ 10,171 $ 69,459 $ 115,557 $ 203,137 States and political subdivisions — 6,290 13,874 91,918 112,082 Residential mortgage-backed securities — 353 3,595 220,212 224,160 Commercial mortgage-backed securities 1,057 10,353 31,319 40,485 83,214 Total held-to-maturity investment securities $ 9,007 $ 27,167 $ 118,247 $ 468,172 $ 622,593 Total weighted-average yield 3.85 % 2.46 % 4.00 % 3.66 % 3.67 % Other Investment Securities Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB stock and of FRB stock. 17 Table of Contents The following table summarizes the carrying value of Peoples' other investment securities: (Dollars in thousands) June 30, 2024 December 31, 2023 FHLB stock $ 27,848 $ 29,949 FRB stock 27,114 26,896 Nonqualified deferred compensation 4,190 3,162 Equity investment securities 2,721 2,545 Other investment securities 869 869 Total other investment securities $ 62,742 $ 63,421 During the six months ended June 30, 2024, Peoples redeemed $ 19.3 million of FHLB stock in order to be in compliance with the requirements of the FHLB. Peoples purchased $ 17.2 million of additional FHLB stock during the six months ended June 30, 2024, as a result of the FHLB's capital requirements on FHLB advances. For the three months ended June 30, 2024 and 2023, Peoples recorded the change in the fair value of equity investment securities held during the period in "Other non-interest income", resulting in an unrealized gain of $ 21,000 and an unrealized loss of $ 138,000 , respectively. For the six months ended June 30, 2024 and 2023, Peoples recognized an unrealized gain of $ 68,000 and an unrealized loss of $ 117,000 , respectively, for the change in fair value of equity investment securities in "Other non-interest income". At June 30, 2024, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity at June 30, 2024. Pledged Securities Peoples has pledged available-for-sale investment securities and held-to-maturity investment securities to secure public and trust department deposits, and repurchase agreements in accordance with federal and state requirements. Peoples has also pledged available-for-sale investment securities to secure additional borrowing capacity at the FHLB and the FRB. The following table summarizes the carrying amount of Peoples' pledged securities: Carrying Amount (Dollars in thousands) June 30, 2024 December 31, 2023 Securing public and trust department deposits, and repurchase agreements: Available-for-sale $ 670,969 $ 713,033 Held-to-maturity 517,799 559,142 Securing additional borrowing capacity at the FHLB and the FRB: Available-for-sale 96,078 85,899 Held-to-maturity 52,659 39,607 Accrued Interest Accrued interest receivable is not included in investment securities balances, and is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Interest receivable on investment securities was $ 11.2 million at June 30, 2024 and $ 8.8 million at December 31, 2023. Note 4 Loans and Leases Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint. Peoples also originates insurance premium finance loans nationwide through its Peoples Premium Finance division, and originates leases nationwide through its North Star Leasing ("NSL") division and its Vantage Financial, LLC ("Vantage") subsidiary. 18 Table of Contents The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows: (Dollars in thousands) June 30, 2024 December 31, 2023 Construction $ 340,601 $ 364,019 Commercial real estate, other 2,195,979 2,196,957 Commercial and industrial 1,258,063 1,184,986 Premium finance 293,349 203,177 Leases 430,651 414,060 Residential real estate 789,344 791,095 Home equity lines of credit 227,608 208,675 Consumer, indirect 675,054 666,472 Consumer, direct 113,655 128,769 Deposit account overdrafts 1,067 986 Total loans, at amortized cost $ 6,325,371 $ 6,159,196 Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $ 24.4 million at June 30, 2024 and $ 24.5 million at December 31, 2023. Nonaccrual and Past Due Loans A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due. The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing was as follows: June 30, 2024 December 31, 2023 (Dollars in thousands) Nonaccrual (a) Accruing Loans 90+ Days Past Due Nonaccrual (a) Accruing Loans 90+ Days Past Due Construction $ — $ — $ — $ — Commercial real estate, other 4,833 106 2,816 78 Commercial and industrial 6,030 208 2,758 316 Premium finance — 2,546 — 1,355 Leases 11,849 3,193 8,436 3,826 Residential real estate 7,078 1,209 7,921 877 Home equity lines of credit 1,454 230 1,022 171 Consumer, indirect 2,261 67 2,412 68 Consumer, direct 164 33 112 25 Total loans, at amortized cost $ 33,669 $ 7,592 $ 25,477 $ 6,716 (a) There were $ 1.4 million of nonaccrual loans for which there was no allowance for credit losses at June 30, 2024 and $ 1.2 million of nonaccrual loans for which there was no allowance for credit losses at December 31, 2023. During the first six months of 2024, nonaccrual loans increased compared to at December 31, 2023, which was primarily due to one large commercial and industrial loan of approximately $ 2.0 million that went on nonaccrual status during the first half of 2024. Further, eight leases and four commercial real estate loans went on nonaccrual status during the second quarter of 2024 which increased the amount reported by $ 3.4 million and $ 1.8 million, respectively. The increase in accruing loans 90+ days past due at June 30, 2024 when compared to at December 31, 2023, was primarily due to an increase in accruing premium finance loans 90+ days past due of approximately $ 1.2 million and an increase in accruing residential real estate loans 90+ days past due of approximately $ 0.3 million which was partially offset by a decrease in accruing leases and commercial and industrial loans 90+ days past due. The amount of interest income recognized on accruing loans 90+ days past due during the six months ended June 30, 2024 was $ 0.9 million. The following table presents the aging of the amortized cost of past due loans: 19 Table of Contents Loans Past Due Current Loans Total Loans (Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total June 30, 2024 Construction $ — $ 70 $ — $ 70 $ 340,531 $ 340,601 Commercial real estate, other 2,509 2,551 2,799 7,859 2,188,120 2,195,979 Commercial and industrial 821 2,191 4,166 7,178 1,250,885 1,258,063 Premium finance 4,051 4,332 2,546 10,929 282,420 293,349 Leases 2,690 9,395 14,831 26,916 403,735 430,651 Residential real estate 3,543 3,065 4,259 10,867 778,477 789,344 Home equity lines of credit 1,071 474 979 2,524 225,084 227,608 Consumer, indirect 5,928 1,119 1,168 8,215 666,839 675,054 Consumer, direct 553 51 86 690 112,965 113,655 Deposit account overdrafts — — — — 1,067 1,067 Total loans, at amortized cost $ 21,166 $ 23,248 $ 30,834 $ 75,248 $ 6,250,123 $ 6,325,371 December 31, 2023 Construction $ 13 $ 52 $ — $ 65 $ 363,954 $ 364,019 Commercial real estate, other 2,728 4,556 1,572 8,856 2,188,101 2,196,957 Commercial and industrial 1,717 1,491 3,052 6,260 1,178,726 1,184,986 Premium finance 1,288 867 1,355 3,510 199,667 203,177 Leases 12,743 4,932 12,014 29,689 384,371 414,060 Residential real estate 14,021 2,733 4,481 21,235 769,860 791,095 Home equity lines of credit 1,561 691 683 2,935 205,740 208,675 Consumer, indirect 7,488 1,550 1,230 10,268 656,204 666,472 Consumer, direct 536 282 43 861 127,908 128,769 Deposit account overdrafts — — — — 986 986 Total loans, at amortized cost $ 42,095 $ 17,154 $ 24,430 $ 83,679 $ 6,075,517 $ 6,159,196 Delinquency trends improved slightly, as 98.8 % of Peoples' loan portfolio was considered “current” at June 30, 2024, compared to 98.6 % at December 31, 2023. Pledged Loans Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, home equity lines of credit and commercial real estate loans under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged eligible commercial and industrial loans to secure borrowings with the FRB. Loans pledged are summarized as follows: (Dollars in thousands) June 30, 2024 December 31, 2023 Loans pledged to FHLB $ 1,206,145 $ 1,206,134 Loans pledged to FRB 470,048 419,245 Credit Quality Indicators As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Commercial loans to borrowers with an aggregate unpaid principal balance in excess of $ 1.0 million are reviewed at least on an annual basis for possible credit deterioration. Commercial leases, as well as loan relationships whose aggregate credit exposure to Peoples is equal to or less than $ 1.0 million, are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, follows: “Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk category would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist. 20 Table of Contents “Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position. “Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected. “Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of each of these loans as an estimated loss is deferred until its more exact status may be determined. “Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category. Consumer loans and other smaller-balance loans are evaluated and categorized as "substandard," "doubtful" or "loss" based upon the regulatory definition of these classes and consistent with regulatory requirements. Leases are categorized as "special mention", "substandard", or "loss" based upon delinquency status and the prospect of collecting the remaining net investment balance owed under the lease. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being "not rated." The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at June 30, 2024: Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Construction Pass $ 16,666 $ 110,671 $ 132,711 $ 57,833 $ 3,265 $ 15,568 $ — $ — $ 336,714 Special mention — — 998 — — 119 — — 1,117 Substandard — 1,185 1,560 — — 25 — — 2,770 Total 16,666 111,856 135,269 57,833 3,265 15,712 — — 340,601 Current period gross charge-offs — — — — — — — Commercial real estate, other Pass 51,930 225,385 356,931 371,474 209,331 826,545 40,467 267 2,082,063 Special mention 106 750 16,444 8,513 4,871 19,118 594 35 50,396 Substandard — 2,056 2,310 12,737 8,553 37,474 380 — 63,510 Doubtful — — — — — 10 — — 10 Total 52,036 228,191 375,685 392,724 222,755 883,147 41,441 302 2,195,979 Current period gross charge-offs — — 212 — — — 212 Commercial and industrial Pass 123,848 221,740 148,939 158,314 75,049 190,182 247,238 4,993 1,165,310 Special mention 69 3,965 11,960 11,314 11,070 4,420 22,259 5,500 65,057 Substandard — 276 2,134 14,522 4,911 2,403 1,233 — 25,479 Doubtful — — 2,048 — — 169 — — 2,217 Total 123,917 225,981 165,081 184,150 91,030 197,174 270,730 10,493 1,258,063 21 Table of Contents Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Current period gross charge-offs — — — 15 70 206 291 Premium Finance Pass 250,326 42,781 242 — — — — — 293,349 Total 250,326 42,781 242 — — — — — 293,349 Current period gross charge-offs 1 76 32 — — — 109 Leases Pass 114,756 164,561 88,396 36,381 8,486 3,247 — — 415,827 Special mention 294 1,842 679 128 23 9 — — 2,975 Substandard 403 2,921 5,394 2,305 439 387 — — 11,849 Total 115,453 169,324 94,469 38,814 8,948 3,643 — — 430,651 Current period gross charge-offs — 1,499 1,498 565 47 38 3,647 Residential real estate Pass 45,622 71,719 88,373 134,905 55,916 382,908 — — 779,443 Substandard — 375 45 738 175 8,484 — — 9,817 Loss — 6 — — — 78 — — 84 Total 45,622 72,100 88,418 135,643 56,091 391,470 — — 789,344 Current period gross charge-offs — — 46 5 — 93 144 Home equity lines of credit Pass 31,066 40,667 40,425 30,901 18,285 64,766 25 1,119 226,135 Substandard — 19 43 86 34 1,281 — — 1,463 Loss — — — — — 10 — — 10 Total 31,066 40,686 40,468 30,987 18,319 66,057 25 1,119 227,608 Current period gross charge-offs — — — — — 9 9 Consumer, indirect Pass 132,042 213,380 184,569 75,211 43,458 23,473 — — 672,133 Substandard 25 689 660 778 392 347 — — 2,891 Loss — 12 14 4 — — — — 30 Total 132,067 214,081 185,243 75,993 43,850 23,820 — — 675,054 Current period gross charge-offs 47 1,268 1,042 454 100 117 3,028 Consumer, direct Pass 28,303 32,440 28,430 12,999 5,992 5,188 — — 113,352 Substandard — 60 70 49 7 81 — — 267 22 Table of Contents Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Loss — 6 — — — 30 — — 36 Total 28,303 32,506 28,500 13,048 5,999 5,299 — — 113,655 Current period gross charge-offs — 79 169 30 10 79 367 Deposit account overdrafts 1,067 — — — — — — — 1,067 Current period gross charge-offs 674 — — — — — 674 Total loans, at amortized cost 796,523 1,137,506 1,113,375 929,192 450,257 1,586,322 312,196 11,914 6,325,371 Total current period gross charge-offs $ 722 $ 2,922 $ 2,999 $ 1,069 $ 227 $ 542 $ 8,481 The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the then most recent analysis performed at December 31, 2023: Term Loans at Amortized Cost by Origination Year (Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Construction Pass $ 80,273 $ 141,245 $ 85,913 $ 27,169 $ 9,995 $ 12,723 $ — $ — $ 357,318 Special mention — 3,757 — — — 123 — — 3,880 Substandard 1,200 1,590 — — — 31 — — 2,821 Total 81,473 146,592 85,913 27,169 9,995 12,877 — — 364,019 Current period gross charge-offs — — 9 — — — 9 Commercial real estate, other Pass 199,565 327,762 366,752 227,604 262,099 650,265 37,177 189 2,071,224 Special mention 999 12,975 4,850 10,324 7,074 22,186 408 41 58,816 Substandard 287 2,421 5,878 8,679 1,972 47,213 457 — 66,907 Doubtful — — — — — 10 — — 10 Total 200,851 343,158 377,480 246,607 271,145 719,674 38,042 230 2,196,957 Current period gross charge-offs — — — 39 — 575 614 Commercial and industrial Pass 225,894 180,068 212,938 86,934 55,434 132,675 213,714 38 1,107,657 Special mention 540 12,051 533 9,723 4,722 6,336 16,236 8,614 50,141 Substandard 78 6,441 5,104 5,617 1,602 6,278 1,889 779 27,009 Doubtful — — — — — 179 — — 179 Total 226,512 198,560 218,575 102,274 61,758 145,468 231,839 9,431 1,184,986 Current period gross charge-offs — 36 202 25 173 415 851 Premium finance Pass 201,659 1,517 1 — — — — — 203,177 Total 201,659 1,517 1 — — — — — 203,177 Current period gross charge-offs 25 97 — — — — 122 Leases 23 Table of Contents Term Loans at Amortized Cost by Origination Year (Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Pass 216,559 114,327 51,307 14,061 4,883 1,501 — — 402,638 Special mention 363 1,529 476 81 1 5 — — 2,455 Substandard 1,937 3,006 2,944 448 321 311 — — 8,967 Total 218,859 118,862 54,727 14,590 5,205 1,817 — — 414,060 Current period gross charge-offs 963 1,328 1,173 233 165 135 3,997 Residential real estate Pass 75,957 91,506 140,157 58,144 45,507 369,552 — — 780,823 Substandard 43 243 585 182 529 8,604 — — 10,186 Loss — — — — — 86 — — 86 Total 76,000 91,749 140,742 58,326 46,036 378,242 — — 791,095 Current period gross charge-offs — — — — — 170 170 Home equity lines of credit Pass 39,706 42,565 33,406 19,838 14,297 57,482 27 1,346 207,321 Substandard 19 — 61 34 123 1,109 — — 1,346 Loss — — — — — 8 — — 8 Total 39,725 42,565 33,467 19,872 14,420 58,599 27 1,346 208,675 Current period gross charge-offs — — — — — 110 110 Consumer, indirect Pass 247,829 225,225 96,698 59,044 18,644 15,977 — — 663,417 Substandard 333 934 789 558 190 206 — — 3,010 Loss 7 34 2 — 2 — — — 45 Total 248,169 226,193 97,489 59,602 18,836 16,183 — — 666,472 Current period gross charge-offs 609 2,091 865 255 63 147 4,030 Consumer, direct Pass 58,445 37,050 17,434 8,282 3,185 4,081 — — 128,477 Substandard 55 79 47 28 30 27 — — 266 Loss — — — — — 26 — — 26 Total 58,500 37,129 17,481 8,310 3,215 4,134 — — 128,769 Current period gross charge-offs 36 154 77 100 14 35 416 Deposit account overdrafts 986 — — — — — — — 986 Current period gross charge-offs 1,161 1,161 Total loans, at amortized cost $ 1,352,734 $ 1,206,325 $ 1,025,875 $ 536,750 $ 430,610 $ 1,336,994 $ 269,908 $ 11,007 $ 6,159,196 Current period gross charge-offs $ 2,794 $ 3,706 $ 2,326 $ 652 $ 415 $ 1,587 $ 11,480 Collateral Dependent Loans Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans: • Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, 24 Table of Contents and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by multi-family complexes, warehouse buildings, industrial buildings, land under development, and other commercial real estate in process of construction. • Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by multifamily complexes, retail facilities, office buildings and complexes, warehouses, industrial buildings, land under development, as well as other commercial real estate. • Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property. • Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage, on residential real estate property. • Home equity lines of credit are generally secured by second mortgages on residential real estate property. • Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral. • Leases are secured by commercial equipment and other essential business assets. • Premium finance loans are secured by the unearned portion of the insurance premium being financed. The following table details Peoples' amortized cost of collateral dependent loans: (Dollars in thousands) June 30, 2024 December 31, 2023 Amortized Cost Amortized Cost Commercial real estate, other $ 689 $ — Leases 2,479 — Residential real estate — 501 Total collateral dependent loans $ 3,168 $ 501 The increase in collateral dependent loans at June 30, 2024, compared to December 31, 2023, was primarily due to the addition of ten leases associated with three customer relationships during the three months ended June 30, 2024. Modifications for Borrowers Experiencing Financial Difficulty As part of Peoples' loss mitigation activities, Peoples may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. The most common modifications to the contractual terms of a loan to a borrower experiencing financial difficulty include an extension of the maturity date, a reduction in the interest rate for the remaining life of the loan, a temporary period of interest-only payments, and a reduction in the contractual payment amount for either a short period or the remaining term of the loan. In addition to loan modifications, Peoples also provides other loss mitigation options, such as forbearance and repayment plans, to assist borrowers who experience financial difficulties. In assessing whether or not a borrower is experiencing financial difficulty, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (1) the borrower is currently in payment default on any of the borrower's debt; (2) a payment default is probable in the foreseeable future without the modification; (3) the borrower has declared or is in the process of declaring bankruptcy; and (4) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification. The following tables display the amortized cost of loans that were restructured during the three and six months ended June 30, 2024 and June 30, 2023, presented by loan classification. 25 Table of Contents Payment Delay (Only) (Dollars in thousands) Payment Deferral Term Extension Total Percentage of Total by Loan Category (a)(b)(c) During the Three Months Ended June 30, 2024 Commercial and industrial — 687 687 0.05 % Leasing 174 — 174 0.04 % Home equity lines of credit — 64 64 0.03 % Consumer, indirect — 8 8 — % Total $ 174 $ 759 $ 933 0.01 % During the Three Months Ended June 30, 2023 Commercial real estate — 48 48 — % Commercial and industrial — 3,319 3,319 0.29 % Total $ — $ 3,367 $ 3,367 0.06 % (a) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable. (b) The table presented above excludes loans that were paid off or otherwise no longer included in the loan portfolio of period end. (c) Each with --% not meaningful Payment Delay (Only) (Dollars in thousands) Forbearance Plan Payment Deferral Term Extension Forbearance Plan and Term Extension Total Percentage of Total by Loan Category (a)(b)(c) During the Six Months Ended June 30, 2024 Commercial real estate — — $ 561 $ — $ 561 0.03 % Commercial and industrial — — 11,171 — 11,171 0.89 % Leasing — 199 — — 199 0.05 % Residential real estate — — 76 — 76 0.01 % Home equity lines of credit — — 64 — 64 0.03 % Consumer, indirect — — 8 — 8 — % Total $ — $ 199 $ 11,880 $ — $ 12,079 0.19 % During the Six Months Ended June 30, 2023 Construction $ — $ 1,600 $ — $ — $ 1,600 0.38 % Commercial real estate 194 — 48 — 242 0.01 % Commercial and industrial — — 3,325 306 3,631 0.31 % Residential real estate — — 220 — 220 0.03 % Total $ 194 $ 1,600 $ 3,593 $ 306 $ 5,693 0.10 % (a) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable. (b) The table presented above excludes loans that were paid off or otherwise no longer included in the loan portfolio as of period end. (c) Each with --% not meaningful The following tables summarizes the financial impacts of loan modifications and payment deferrals made to loans during both the three and six months ended June 30, 2024 and June 30, 2023, presented by loan classification. 26 Table of Contents Weighted-Average Term Extension (in months) Average Amount Capitalized as a Result of a Payment Delay (a) During the Three Months Ended June 30, 2024 Commercial and industrial 28 — Home equity lines of credit 120 — Consumer, indirect 2 — During the Three Months Ended June 30, 2023 Commercial real estate 12 — Commercial and industrial 5 — (a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars. Weighted-Average Term Extension (in months) Average Amount Capitalized as a Result of a Payment Delay (a) During the Six Months Ended June 30, 2024 Commercial real estate 6 $ — Commercial and industrial 7 — Leasing 9 — Residential real estate 2 — Home equity lines of credit 120 — Consumer, indirect 2 — During the Six Months Ended June 30, 2023 Commercial real estate 12 — Commercial and industrial 5 — Residential real estate 210 8,969 Consumer, indirect 2 — (a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars. The following tables display the amortized cost of loans that received a completed modification or payment deferral within the previous 12 months and that had a payment default in the periods presented. For purposes of this disclosure, Peoples defines loans that had a payment default as loans that were 90 days or more past due following a modification. 27 Table of Contents Payment Delay as a Result of a Payment Deferral (Only) (a) For the Three Months Ended June 30, 2024 Commercial real estate $ 193 Commercial and industrial $ 28 Residential real estate $ 76 Total loans that subsequently defaulted $ 297 For the Six Months Ended June 30, 2024 Commercial real estate $ 193 Commercial and industrial $ 31 Residential real estate $ 76 Total loans that subsequently defaulted $ 300 For the Three and Six Month Ended June 30, 2023 (b) Consumer, indirect $ 11 Total loans that subsequently defaulted $ 11 (a) Represents the sum of amortized cost and gross charge-off as of period end. Excludes loans that liquidated either through foreclosure, deed-in-lieu of foreclosure, or a short sale. (b) Accounting standard was implemented as of January 1, 2023, thus information above reflects loan modifications made on or after that date. The following table displays an aging analysis of loans that were modified during the 12 months prior to June 30, 2024, presented by classification and class of financing receivable. As of June 30, 2024 (Dollars in thousands) 30-59 Days Delinquent 60-89 Days Delinquent 90+ Days Delinquent Total Delinquent Current Total Construction $ — $ 70 $ — $ 70 $ — $ 70 Commercial real estate — — 193 193 2,321 2,514 Commercial and industrial — — 31 31 12,583 12,614 Leasing — — — — 199 199 Residential real estate — — 76 76 25 101 Home equity lines of credit — — — — 122 122 Consumer, indirect — — — — 8 8 Total loans modified (a) $ — $ 70 $ 300 $ 370 $ 15,258 $ 15,628 (a) Represents the amortized cost basis as of period end. The following table displays an aging analysis of loans that were modified on or after January 1, 2023, the date Peoples adopted ASU 2022-02, through June 30, 2023, presented by classification and class of financing receivable. 28 Table of Contents As of June 30, 2023 (Dollars in thousands) 30-59 Days Delinquent 60-89 Days Delinquent 90+ Days Delinquent Total Delinquent Current Total Construction $ — $ — $ — $ — $ 1,600 $ 1,600 Commercial real estate — — — — 242 242 Commercial and industrial — — — — 3,631 3,631 Residential real estate — — — — 220 220 Total loans modified (a) $ — $ — $ — $ — $ 5,693 $ 5,693 (a) Represents the amortized cost basis as of period end. Allowance for Credit Losses As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K, Peoples estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In management's estimation of expected credit losses, Peoples uses a one-year reasonable and supportable period across all segments. Following the reasonable and supportable period, Peoples reverts the macroeconomic variables to their long run average over a four-quarter reversion period. Changes in the allowance for credit losses for the three and six months ended June 30, 2024 and June 30, 2023 are summarized below: (Dollars in thousands) Beginning Balance, March 31, 2024 Initial Allowance for Acquired PCD Assets (Recovery of) Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, June 30, 2024 Construction $ 701 $ — $ ( 28 ) $ — $ — $ 673 Commercial real estate, other 21,788 — ( 1,856 ) — ( 80 ) 19,852 Commercial and industrial 10,581 — 408 ( 56 ) 10 10,943 Premium finance 607 — 207 ( 55 ) 4 763 Leases 12,889 — 4,533 ( 2,377 ) 173 15,218 Residential real estate 5,866 — 69 ( 64 ) 68 5,939 Home equity lines of credit 1,689 — 57 ( 9 ) — 1,737 Consumer, indirect 8,301 — 1,803 ( 1,567 ) 117 8,654 Consumer, direct 2,279 — 179 ( 141 ) 15 2,332 Deposit account overdrafts 121 — 286 ( 338 ) 67 136 Total $ 64,822 $ — $ 5,658 $ ( 4,607 ) $ 374 $ 66,247 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. 29 Table of Contents (Dollars in thousands) Beginning Balance, March 31, 2023 Initial Allowance for Acquired PCD Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, June 30, 2023 Construction $ 1,273 $ — $ 223 $ — $ — $ 1,496 Commercial real estate, other 16,474 280 2,968 ( 7 ) 16 19,731 Commercial and industrial 8,307 376 1,905 ( 11 ) 451 11,028 Premium finance 433 — 18 ( 23 ) 3 431 Leases 9,109 — 1,783 ( 604 ) 89 10,377 Residential real estate 6,504 254 ( 656 ) ( 59 ) 69 6,112 Home equity lines of credit 1,717 13 1 ( 55 ) — 1,676 Consumer, indirect 7,781 — 641 ( 941 ) 129 7,610 Consumer, direct 1,619 85 981 ( 78 ) 35 2,642 Deposit account overdrafts 86 — 232 ( 263 ) 53 108 Total $ 53,303 $ 1,008 $ 8,096 $ ( 2,041 ) $ 845 $ 61,211 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. (Dollars in thousands) Beginning Balance, December 31, 2023 Initial Allowance for Acquired PCD Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, June 30, 2024 Construction $ 699 $ — $ ( 26 ) $ — $ — $ 673 Commercial real estate, other 20,915 — ( 854 ) ( 212 ) 3 19,852 Commercial and industrial 10,490 — 727 ( 291 ) 17 10,943 Premium finance 484 — 376 ( 109 ) 12 763 Leases 10,850 — 7,630 ( 3,647 ) 385 15,218 Residential real estate 5,937 — ( 5 ) ( 144 ) 151 5,939 Home equity lines of credit 1,588 — 151 ( 9 ) 7 1,737 Consumer, indirect 8,590 — 2,904 ( 3,028 ) 188 8,654 Consumer, direct 2,343 — 332 ( 367 ) 24 2,332 Deposit account overdrafts 115 — 554 ( 674 ) 141 136 Total $ 62,011 $ — $ 11,789 $ ( 8,481 ) $ 928 $ 66,247 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. 30 Table of Contents (Dollars in thousands) Beginning Balance, December 31, 2022 Initial Allowance for Acquired PCD Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, June 30, 2023 Construction $ 1,250 $ — $ 255 $ ( 9 ) $ — $ 1,496 Commercial real estate, other 17,710 280 1,738 ( 40 ) 43 19,731 Commercial and industrial 8,229 376 1,984 ( 12 ) 451 11,028 Premium finance 344 — 121 ( 46 ) 12 431 Leases 8,495 — 2,786 ( 1,073 ) 169 10,377 Residential real estate 6,357 254 ( 497 ) ( 100 ) 98 6,112 Home equity lines of credit 1,693 13 44 ( 74 ) — 1,676 Consumer, indirect 7,448 — 1,824 ( 1,870 ) 208 7,610 Consumer, direct 1,575 85 1,114 ( 182 ) 50 2,642 Deposit account overdrafts 61 — 412 ( 490 ) 125 108 Total $ 53,162 $ 1,008 $ 9,781 $ ( 3,896 ) $ 1,156 $ 61,211 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. During the second quarter of 2024, Peoples recorded a total provision for credit losses of $ 5.7 million, which was a result of (i) higher net-charge offs, (ii) an increase of reserves on individually analyzed loans and leases, and (iii) loan growth. Net charge-offs for the second quarter of 2024 were $ 4.2 million, primarily driven by an increase in charge-offs on leases originated by our North Star Leasing business, partially offset by decreases in net charge-offs on commercial and industrial loans and other commercial real estate loans.The increase in the allowance for credit losses at June 30, 2024 when compared to at March 31, 2024 and at December 31, 2023 was primarily due to an increase on reserves for individually analyzed loans and leases. During the second quarter of 2023, Peoples recorded a provision for credit losses of $ 8.1 million, largely attributable 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 leases and a recovery of $ 1.0 million due to improvements in macro-economic conditions. Net charge-offs for the second quarter of 2023 were $ 1.2 million, primarily due to net charge-offs of indirect consumer loans of $ 0.8 million. Peoples had recorded an allowance for unfunded commitments of $ 1.8 million and $ 1.8 million as of June 30, 2024 and December 31, 2023, respectively. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets. The change in the allowance for unfunded commitments is also reflected in the "Provision for (recovery of) credit losses" line of the Unaudited Consolidated Statements of Operations. Note 5 Goodwill and Other Intangible Assets Goodwill The following table details changes in the recorded amount of goodwill: For the Six Months Ended For the Year Ended (Dollars in thousands) June 30, 2024 December 31, 2023 Goodwill, beginning of period $ 362,169 $ 292,397 Goodwill recorded from acquisitions — 69,772 Goodwill, end of period $ 362,169 $ 362,169 As of the close of business on April 30, 2023, Peoples completed its merger with Limestone Bancorp, Inc. ("Limestone") pursuant to an Agreement and Plan of Merger dated October 24, 2022, at which point Limestone merged with and into Peoples, and immediately thereafter, Limestone Bank, Inc., the subsidiary bank of Limestone, merged with and into Peoples Bank (collectively, the “Limestone Merger”). As of June 30, 2024, Peoples recorded $ 68.8 million of Goodwill related to the Limestone Merger. 31 Table of Contents Other Intangible Assets Other intangible assets were comprised of the following at June 30, 2024 , and at December 31, 2023 : (Dollars in thousands) Core Deposits Customer Relationships Indefinite-Lived Trade Names Total June 30, 2024 Gross intangibles $ 54,186 $ 37,920 $ 2,491 $ 94,597 Intangibles recorded from acquisitions — — — — Accumulated amortization ( 28,606 ) ( 23,196 ) — ( 51,802 ) Total acquisition-related intangibles $ 25,580 $ 14,724 $ 2,491 $ 42,795 Servicing rights 1,204 Non-compete agreements 249 Total other intangibles $ 44,248 December 31, 2023 Gross intangibles $ 26,464 $ 37,920 $ 2,491 $ 66,875 Intangibles recorded from acquisitions 27,722 — — 27,722 Accumulated amortization ( 25,670 ) ( 20,680 ) — ( 46,350 ) Total acquisition-related intangibles $ 28,516 $ 17,240 $ 2,491 $ 48,247 Servicing rights 1,385 Non-compete agreements 371 Total other intangibles $ 50,003 As of June 30, 2024, Peoples recorded $ 27.7 million of core deposit intangibles related to the Limestone Merger. Refer to "Note 13 Acquisitions" for additional information. The following table details estimated aggregate future amortization of other intangible assets at June 30, 2024: (Dollars in thousands) Core Deposits Customer Relationships Non-Compete Agreements Total Remaining six months of 2024 $ 2,938 $ 2,512 $ 121 $ 5,571 2025 4,609 4,038 112 $ 8,759 2026 3,736 2,954 16 $ 6,706 2027 3,043 2,112 — $ 5,155 2028 2,608 1,392 — $ 4,000 Thereafter 8,646 1,716 — $ 10,362 Total $ 25,580 $ 14,724 $ 249 $ 40,553 The weighted average amortization period of other intangible assets is 8.5 years. 32 Table of Contents Note 6 Deposits Peoples’ deposit balances were comprised of the following: (Dollars in thousands) June 30, 2024 December 31, 2023 Retail certificates of deposits ("CDs"): $100 or more $ 1,029,442 $ 815,300 Less than $100 783,432 628,117 Total Retail CDs 1,812,874 1,443,417 Interest-bearing deposit accounts 1,083,512 1,144,357 Savings accounts 880,542 919,244 Money market deposit accounts 869,159 775,488 Governmental deposit accounts 766,337 726,713 Brokered CDs 412,653 575,429 Total interest-bearing deposits 5,825,077 5,584,648 Non-interest-bearing deposits $ 1,472,697 1,567,649 Total deposits $ 7,297,774 $ 7,152,297 Uninsured deposits were $ 2.0 billion at June 30, 2024 and at December 31, 2023 . Uninsured deposit amounts are estimated based on the portion of the respective customer account balances that exceeded the FDIC limit of $250,000. Peoples pledges investment securities against certain governmental deposit accounts, which covered over $ 748.3 million of the uninsured deposit balances at June 30, 2024 . Uninsured time deposits are broken out below by time remaining until maturity. (Dollars in thousands) June 30, 2024 December 31, 2023 3 months or less $ 133,606 $ 58,708 Over 3 to 6 months 164,129 99,928 Over 6 to 12 months 95,038 131,263 Over 12 months 19,725 37,180 Total $ 412,498 $ 327,079 The contractual maturities of CDs for each of the next five years, including the remainder of 2024, and thereafter are as follows: (Dollars in thousands) Retail Brokered Total Remaining six months ending December 31, 2024 $ 1,286,633 $ 406,493 $ 1,693,126 Year ending December 31, 2025 470,615 5,023 475,638 Year ending December 31, 2026 21,250 224 21,474 Year ending December 31, 2027 24,032 913 24,945 Year ending December 31, 2028 7,452 — 7,452 Thereafter 2,892 — 2,892 Total CDs $ 1,812,874 $ 412,653 $ 2,225,527 At June 30, 2024, Peoples had 9 effective interest rate swaps, with an aggregate notional value of $ 85.0 million, all of which were funded by brokered CDs. Brokered CDs used to fund interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments." Note 7 Stockholders’ Equity The following table details the progression in Peoples’ common shares and treasury stock during the six months ended June 30, 2024: Common Shares Treasury Stock Shares at December 31, 2023 36,736,041 1,511,348 Changes related to stock-based compensation awards: Release of restricted common shares — 27,633 Cancellation of restricted common shares — 30,111 Grant of restricted common shares — ( 292,524 ) Grant of unrestricted common shares — ( 1,200 ) Purchase of treasury stock — 8,718 Disbursed out of treasury stock — ( 12,833 ) Common shares repurchased under share repurchase program — 100,905 Common shares issued under dividend reinvestment plan 24,475 — Common shares issued under compensation plan for Boards of Directors — ( 8,740 ) Common shares issued under employee stock purchase plan — ( 15,942 ) Shares at June 30, 2024 36,760,516 1,347,476 On January 28, 2021, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $ 30.0 million of Peoples' outstanding common shares. As of June 30, 2024, Peoples had repurchased 471,307 common shares totaling $ 13.4 million under the share repurchase program. There were 100,905 common shares totaling $ 3.0 million repurchased during the first six months of 2024. Under Peoples' Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as designated by Peoples' Board of Directors. At June 30, 2024, Peoples had no preferred shares issued or outstanding. On July 22, 2024, Peoples' Board of Directors declared a quarterly cash dividend of $ 0.40 per common share, payable on August 19, 2024, to shareholders of record on August 5, 2024. The following table details the cash dividends declared per common share during the first three quarters of 2024 and the comparable periods of 2023: 2024 2023 First quarter $ 0.39 $ 0.38 Second quarter 0.40 0.39 Third quarter 0.40 0.39 Total dividends declared $ 1.19 $ 1.16 Accumulated Other Comprehensive (Loss) Income The following table details the change in the components of Peoples’ accumulated other comprehensive (loss) income during the six months ended June 30, 2024: (Dollars in thousands) Unrealized (Loss) Gain on Securities Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive (Loss) Income Balance, December 31, 2023 $ ( 104,222 ) $ 2,632 $ ( 101,590 ) Reclassification adjustments to net income: Realized loss on securities, net of tax 272 — 272 Other comprehensive (loss) income, net of reclassifications and tax ( 8,733 ) ( 142 ) ( 8,875 ) Balance, June 30, 2024 $ ( 112,683 ) $ 2,490 $ ( 110,193 ) 33 Table of Contents Note 8 Employee Benefit Plans Peoples sponsored a noncontributory defined benefit pension plan that covered substantially all employees hired before January 1, 2010. The plan provided retirement benefits based on an employee’s years of service and compensation. For employees hired before January 1, 2003, the amount of post-retirement benefit was based on the employee’s average monthly compensation over the highest five consecutive years out of the employee’s last ten years with Peoples while an eligible employee. For employees hired on or after January 1, 2003, the amount of post-retirement benefit was based on 2 % of the employee’s annual compensation during the years 2003 through 2009, plus accrued interest. During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $ 7.7 million. The pension plan had been closed to new entrants since January 1, 2010. Peoples recorded a settlement charge of $ 2.4 million in the third quarter of 2023 in relation to the termination of the pension plan. Peoples does not anticipate further expenses related to the termination. Retirement Savings Plan Peoples also maintains a retirement savings plan, or 401(k) plan, which covers substantially all employees. The plan provides participants with the opportunity to save for retirement on a tax-deferred basis. As of January 1, 2021, Peoples matches 100 % of participants’ contributions up to 6 % of the participants’ compensation. Matching contributions made by Peoples totaled $ 3.1 million during the six months ended June 30, 2024 and $ 2.7 million for the six months ended June 30, 202 3. Note 9 Earnings Per Common Share The calculations of basic and diluted earnings per common share were as follows: Three Months Ended Six Months Ended June 30, June 30, (Dollars in thousands, except per common share data) 2024 2023 2024 2023 Net income available to common shareholders $ 29,007 $ 21,096 $ 58,591 $ 47,656 Less: Dividends paid on unvested common shares ( 218 ) 144 ( 361 ) 246 Less: Undistributed income allocated to unvested common shares 55 13 119 45 Net earnings allocated to common shareholders $ 29,170 $ 20,939 $ 58,833 $ 47,365 Weighted-average common shares outstanding 34,764,489 32,526,962 34,752,419 30,222,165 Effect of potentially dilutive common shares 353,159 123,014 319,131 92,339 Total weighted-average diluted common shares outstanding 35,117,648 32,649,976 35,071,550 30,314,504 Earnings per common share: Basic $ 0.83 $ 0.64 $ 1.67 $ 1.57 Diluted $ 0.82 $ 0.64 $ 1.66 $ 1.56 Anti-dilutive common shares excluded from calculation: Restricted common shares 3,180 171,843 3,180 152,741 Note 10 Derivative Financial Instruments Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivative financial instruments is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows. Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or 34 Table of Contents payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions. Cash Flow Hedges of Interest Rate Risk Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At June 30, 2024, Peoples had entered into 9 interest rate swap contracts with an aggregate notional value of $ 85.0 million. Peoples will pay a fixed rate of interest for up to ten years while receiving a floating rate component of interest equal to term SOFR. The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs, which will continue to be rolled through the life of the interest rate swaps. At both June 30, 2024 and at December 31, 2023, the interest rate swaps were designated as cash flow hedges of $ 85.0 million and $ 105.0 million, respectively, in brokered CDs, which are expected to be extended every 90 days through the maturity dates of the interest rate swaps. For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the brokered CDs are matched to the reset dates and payment dates on the receipt of the term SOFR rate (or the three-month LIBOR floating portion prior to June 30, 2023) of the swaps to ensure effectiveness of the cash flow hedge. For the six months ended June 30, 2024, and 2023, Peoples recorded reclassifications of losses to earnings of $ 1.7 million and $ 130,000 , respectively. During the next twelve months, Peoples estimates that $ 1.4 million of AOCI will be reclassified as an addition to interest expense. The following table summarizes information about the interest rate swaps designated as cash flow hedges: (Dollars in thousands) June 30, 2024 December 31, 2023 Notional amount $ 85,000 $ 105,000 Weighted average pay rates 2.34 % 2.22 % Weighted average receive rates 5.00 % 4.63 % Weighted average maturity 1.8 years 2.0 years Pre-tax changes in fair value included in AOCI $ 4,699 $ 3,434 The following table presents changes in fair value recorded in AOCI and in the Consolidated Statements of Operations related to the cash flow hedges: Three Months Ended Six Months Ended June 30, June 30, (Dollars in thousands) 2024 2023 2024 2023 Amount of losses (gains) recorded in AOCI, pre-tax $ 443 $ ( 1,073 ) $ 187 $ 283 The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value: June 30, 2024 December 31, 2023 (Dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value Included in "Other assets": Interest rate swaps related to debt $ 85,000 $ 3,146 $ 105,000 $ 3,314 Non-Designated Hedges Peoples Bank maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this program, Peoples Bank originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples Bank on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples Bank 35 Table of Contents effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples Bank. Peoples Bank offsets its exposure in the interest rate swap by entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated hedges; therefore, each interest rate swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the three and six months ended June 30, 2024 and at or for the year ended December 31, 2023. The following table reflects the non-designated hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value: June 30, 2024 December 31, 2023 (Dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value Included in "Other assets": Interest rate swaps related to commercial loans $ 390,963 $ 20,542 $ 416,106 $ 18,990 Included in "Accrued expenses and other liabilities": Interest rate swaps related to commercial loans $ 390,963 $ 20,643 $ 416,106 $ 19,122 Pledged Collateral Peoples Bank pledges or receives collateral for all interest rate swaps. When the fair value of Peoples Bank interest rate swaps is in a net liability position, Peoples Bank must pledge collateral, and, when the fair value of Peoples Bank interest rate swaps is in a net asset position, the respective counterparties must pledge collateral. At June 30, 2024 and at December 31, 2023, Peoples Bank had no cash pledged, while counterparties had $ 15.4 million of cash pledged at June 30, 2024 and $ 12.8 million of cash pledged at December 31, 2023. Peoples Bank had no pledged investment securities at June 30, 2024 or at December 31, 2023, while the counterparties had pledged investment securities in the amounts of $ 2.0 million at June 30, 2024 and $ 2.2 million at December 31, 2023. Note 11 Stock-Based Compensation Under the Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 1,493,297 . The maximum number of common shares that can be issued for incentive stock options is 750,000 . Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares. Restricted Common Shares Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on the restricted common shares awarded to officers and key employees expire after periods ranging from one to five years . Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions. In the first six months of 2024, Peoples granted an aggregate of 283,712 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date. The following table summarizes the changes to Peoples’ restricted common shares for the six months ended June 30, 2024: Time-Based Vesting Performance-Based Vesting Number of Common Shares Weighted-Average Grant Date Fair Value Number of Common Shares Weighted-Average Grant Date Fair Value Outstanding at January 1, 2024 142,419 $ 28.78 403,970 $ 31.21 Awarded 8,812 28.93 283,712 27.92 Released ( 12,357 ) 32.37 ( 72,550 ) 31.48 Forfeited ( 9,779 ) 29.65 ( 20,332 ) 29.41 Outstanding at June 30, 2024 129,095 $ 28.38 594,800 $ 29.67 For the six months ended June 30, 2024, the intrinsic value for restricted common shares released was $ 2.4 million compared to $ 2.5 million for the six months ended June 30, 2023. 36 Table of Contents Stock-Based Compensation Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted and unrestricted common shares, as well as purchases made by participants in the employee stock purchase plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years . Peoples also has an employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of 15 %. The following table summarizes the amount of stock-based compensation expense and related tax benefit recognized for each period: Three Months Ended Six Months Ended June 30, June 30, (Dollars in thousands) 2024 2023 2024 2023 Employee stock-based compensation expense: Stock grant expense $ 1,278 $ 1,009 $ 4,303 $ 3,159 Employee stock purchase plan expense 73 34 139 73 Total employee stock-based compensation expense 1,351 1,043 $ 4,442 $ 3,232 Non-employee director stock-based compensation expense 123 135 $ 261 $ 271 Total stock-based compensation expense 1,474 1,178 $ 4,703 $ 3,503 Recognized tax benefit ( 344 ) ( 282 ) ( 1,096 ) ( 825 ) Net stock-based compensation expense $ 1,130 $ 896 $ 3,607 $ 2,678 The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date. Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $ 8.2 million at June 30, 2024, which will be recognized over a weighted-average period of 2.2 years. Note 12 Revenue The following table details Peoples' revenue from contracts with customers: Three Months Ended Six Months Ended June 30, June 30, (Dollars in thousands) 2024 2023 2024 2023 Insurance income: Commission and fees from sale of insurance policies (a) $ 4,104 $ 3,969 $ 8,389 $ 7,867 Performance-based commissions (b) 5 35 2,218 1,562 Trust and investment income: Fiduciary income (a) 3,010 2,747 5,767 5,204 Brokerage income (a) 1,989 1,667 3,831 3,294 Electronic banking income: Interchange income (a) 5,086 5,036 9,883 9,217 Promotional and usage income (a) 1,384 1,430 2,633 2,692 Deposit account service charges: Ongoing maintenance fees for deposit accounts (a) 1,716 1,623 3,434 3,084 Transaction-based fees (b) 2,623 2,530 5,128 4,592 Commercial loan swap fees (b) 59 118 111 118 Other non-interest income transaction-based fees (b) 589 378 1,093 808 Total revenue from contracts with customers $ 20,565 $ 19,533 $ 42,487 $ 38,438 Timing of revenue recognition: Services transferred over time $ 17,289 $ 16,472 $ 33,937 $ 31,358 Services transferred at a point in time 3,276 3,061 8,550 7,080 Total revenue from contracts with customers $ 20,565 $ 19,533 $ 42,487 $ 38,438 (a) Services transferred over time. (b) Services transferred at a point in time. 37 Table of Contents Peoples records contract assets for income that has been recognized over a period of time for fulfillment of performance obligations, but has not yet been received related to electronic banking income and certain insurance income. This income typically relates to bonuses for which Peoples is eligible, but will not receive until a certain time in the future. Peoples records contract liabilities for payments received for commission income related to the sale of insurance policies, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled, which is over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled related to electronic banking income. The following table details the changes in Peoples' contract assets and contract liabilities for the six-month period ended June 30, 2024: Contract Assets Contract Liabilities (Dollars in thousands) Balance, January 1, 2024 $ 753 $ 5,776 Additional income receivable 81 — Additional deferred income — 117 Receipt of income previously receivable ( 45 ) — Recognition of income previously deferred — ( 93 ) Balance, June 30, 2024 $ 789 $ 5,800 Note 13 Acquisitions Limestone Bancorp, Inc. As of the close of business on April 30, 2023, Peoples completed the Limestone Merger. In connection with the Limestone Merger, Limestone Bank, Inc., which operated 20 branches in Kentucky, merged into Peoples Bank. As consideration in the Limestone Merger, Limestone shareholders were paid 0.90 common shares of Peoples for each full share of Limestone that was owned at the merger date, resulting in the issuance of 6,827,668 common shares by Peoples, or aggregate consideration of $ 177.9 million. Peoples accounted for this transaction as a business combination under the acquisition method. Peoples recorded no acquisition-related expenses related to the Limestone Merger for the three months ended June 30, 2024 and $( 0.1 ) million for the six months ended June 30, 2024. Peoples recorded acquisition-related expenses related to the Limestone Merger, which included $ 10.8 million and $ 11.2 million in non-interest expense for the three months and the six months ended June 30, 2023, respectively. For the second quarter of 2023, the $ 10.8 million of non-interest expense consisted of $ 5.2 million in salaries and employee benefit costs, $ 4.8 million in professional fees, $ 0.5 million in insurance expense, and $ 0.3 million in various other non-interest expense line items. For the six months ended June 30, 2023, the $ 11.2 million of non-interest expense consisted of $ 5.2 million in salaries and employee benefit costs, $ 5.1 million in professional fees, $ 0.5 million in insurance expense, $ 0.4 million in various other non-interest expense line items.. The following table provides the purchase price calculation as of the date of the Limestone Merger, and the assets acquired and liabilities assumed at their estimated fair values. (Dollars in thousands) Fair Value Total purchase price $ 177,931 Assets Cash and balances due from banks 6,422 Interest-bearing deposits in other banks 87,115 Total cash and cash equivalents 93,537 Available-for-sale investment securities, at fair value 166,944 Other investment securities 5,716 Total investment securities 172,660 Loans 1,077,929 Allowance for credit losses (on PCD loans) ( 2,051 ) Net loans 1,075,878 38 Table of Contents (Dollars in thousands) Fair Value Bank premises and equipment, net of accumulated depreciation 17,690 Bank owned life insurance 31,343 Other intangible assets 27,722 Other assets 36,874 Total assets 1,455,704 Liabilities Deposits: Non-interest-bearing 262,727 Interest-bearing 971,457 Total deposits 1,234,184 Short-term borrowings 60,000 Long-term borrowings 39,453 Accrued expenses and other liabilities 12,967 Total liabilities 1,346,604 Net assets 109,100 Goodwill $ 68,831 The goodwill recorded in connection with the Limestone Merger is related to expected synergies to be gained from the combination of Limestone with Peoples' operations. The employees retained from the Limestone Merger and the geographic locations of Limestone should allow Peoples to continue to grow the loan and deposit portfolios while also increasing Peoples' ability to penetrate the new markets, which should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill. Peoples recorded a core deposit asset in other intangible assets related to the Limestone Merger. Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes loans as to which Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" (or "PCD") loans. Acquired PCD loans are reported net of the unamortized fair value adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The following table details the fair value adjustment for acquired PCD loans as of the acquisition date: (Dollars in thousands) Par Value Allowance for Credit Losses Non-Credit (Discount) Premium Fair Value PCD loans Commercial real estate, other 30,907 ( 1,340 ) ( 2,160 ) 27,407 Commercial and industrial 16,466 ( 379 ) ( 610 ) 15,477 Residential real estate 6,328 ( 228 ) ( 770 ) 5,330 Home equity lines of credit 774 ( 18 ) 11 767 Consumer 1,029 ( 86 ) 78 1,021 Fair value $ 55,504 $ ( 2,051 ) $ ( 3,451 ) $ 50,002 Note 14 Leases Peoples has elected certain practical expedients, in accordance with ASC 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842. 39 Table of Contents Lessor Arrangements Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment in the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, a lease is typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses. Peoples originates sales-type leases through its NSL division, as these leases are structured as dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. Peoples also originates leases through its Vantage subsidiary, which are classified as either sales-type, direct financing leases, or operating leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate to automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. Finance leases include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Lease income noted in the table below includes (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. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases." The table below details Peoples' lease income: Three Months Ended Six Months Ended (Dollars in thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Interest and fees on leases (a) $ 11,982 $ 10,275 $ 24,049 $ 19,918 Lease income 1,116 1,719 2,352 2,796 Other non-interest income (b) 1,052 — 1,837 — Total lease income $ 14,150 $ 11,994 $ 28,238 $ 22,714 (a) Included in "Interest and fees on loans and leases" in the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements. (b) Included in "Other non-interest income" is operating lease income. The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred fees and costs" on the Unaudited Consolidated Balance Sheets: (Dollars in thousands) June 30, 2024 December 31, 2023 Lease payments receivable, at amortized cost $ 483,473 $ 463,742 Estimated residual values 34,829 33,448 Initial direct costs 7,723 7,114 Deferred revenue ( 95,374 ) ( 90,244 ) Net investment in leases 430,651 414,060 Allowance for credit losses - leases ( 15,218 ) ( 10,850 ) Net investment in leases, after allowance for credit losses $ 415,433 $ 403,210 40 Table of Contents The following table summarizes the contractual maturities of leases: (Dollars in thousands) Balance Remaining six months ending December 31, 2024 $ 75,253 Year ending December 31, 2025 111,531 Year ending December 31, 2026 101,126 Year ending December 31, 2027 90,747 Year ending December 31, 2028 60,600 Thereafter 44,216 Lease payments receivable, at amortized cost $ 483,473 Lessee Arrangements Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years . Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability. At June 30, 2024, Peoples did not have any leases that met the criteria for finance leases. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement or the remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets are presented net of any lease incentives. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have an ROU asset or lease liability. The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations: Three Months Ended Six Months Ended (Dollars in thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Operating lease expense $ 733 $ 766 $ 1,468 $ 1,461 Short-term lease expense 327 322 633 417 Variable lease expense 5 — 5 — Total lease expense $ 1,065 $ 1,088 $ 2,106 $ 1,878 Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease. The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown: (Dollars in thousands) June 30, 2024 December 31, 2023 ROU assets: Other assets $ 11,237 $ 11,689 Lease liabilities: Accrued expenses and other liabilities $ 11,792 $ 12,080 Other information: Weighted-average remaining lease term 9.1 years 9.5 years Weighted-average discount rate 4.08 % 3.34 % Additions for ROU assets obtained during the year $ 621 $ 4,428 41 Table of Contents During both the three months ended June 30, 2024 and 2023, Peoples paid cash of $ 0.7 million for operating leases. During the six months ended June 30, 2024 and 2023, Peoples paid cash of $ 1.4 million and $ 1.4 million, respectively, for operating leases. The following table summarizes the maturity of remaining lease liabilities: (Dollars in thousands) Balance Remaining six months ending December 31, 2024 $ 1,449 Year ending December 31, 2025 2,315 Year ending December 31, 2026 2,027 Year ending December 31, 2027 1,816 Year ending December 31, 2028 1,338 Thereafter 5,401 Total undiscounted lease payments $ 14,346 Imputed interest $ ( 2,554 ) Total lease liabilities $ 11,792 42 Table of Contents