PEOPLES BANCORP INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples at and for the three months and six months ended June 30, 2024 and June 30, 2023. This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto. Certain statements in this Form 10-Q, which are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate," "estimate," "may," "feel," "expect," "believe," "plan," "will," "will likely," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," "continue," "remain," and similar expressions. These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, but are not limited to: (1) the effects of interest rate policies, changes in the interest rate environment due to economic conditions and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Federal Reserve Board, including changes in the Federal Funds Target Rate, in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity; (2) the effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay; (3) the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the interest rate policies of the Federal Reserve Board, the completion and successful integration of acquisitions, and the expansion of commercial and consumer lending activities; (4) competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, which can in turn impact Peoples' credit spreads, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals; (5) uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements; (6) the effects of easing restrictions on participants in the financial services industry; (7) current and future local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, supply-demand imbalances affecting local real estate prices, high unemployment rates in the local or regional economies in which Peoples operates and/or the U.S. economy generally, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling, potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S. and U.S. global trading partners) and the impact these conditions may have on Peoples, Peoples' customers and Peoples' counterparties, and Peoples' assessment of the impact, which may be different than anticipated; (8) Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders; (9) changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties' performance and creditworthiness generally, which may be less favorable than expected in light of recent inflationary pressures and continued elevated interest rates, and may adversely impact the amount of interest income generated; (10) Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral; (11) future credit quality and performance, including expectations regarding future credit losses and the allowance for credit losses; (12) changes in accounting standards, policies, estimates or procedures may adversely affect Peoples' reported financial condition or results of operations; 43 Table of Contents (13) the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model; (14) adverse changes in the conditions and trends in the financial markets, including recent inflationary pressures, which may adversely affect the fair value of securities within Peoples' investment portfolio, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities; (15) the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors; (16) Peoples' ability to receive dividends from Peoples' subsidiaries; (17) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity; (18) the impact of larger or similar-sized financial institutions encountering problems, such as the failure in 2024 of Republic First Bank, and closures in 2023 of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity, including potential increased regulatory requirements, increased reputational risk and potential impacts to macroeconomic conditions; (19) Peoples' ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Peoples' third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss; (20) any misappropriation of the confidential information which Peoples possesses could have an adverse impact on Peoples' business and could result in regulatory actions, litigation and other adverse effects; (21) Peoples' ability to anticipate and respond to technological changes, and Peoples' reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Peoples' primary core banking system provider, which can impact Peoples' ability to respond to customer needs and meet competitive demands; (22) operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Peoples and Peoples' subsidiaries are highly dependent; (23) changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions, legislative or regulatory initiatives, or other factors, which may be different than anticipated; (24) the adequacy of Peoples' internal controls and risk management program in the event of changes in strategic, reputational, market, economic, operational, cybersecurity, compliance, legal, asset/liability repricing, liquidity, credit and interest rate risks associated with Peoples' business; (25) the impact on Peoples' businesses, personnel, facilities, or systems, of losses related to acts of fraud, theft, misappropriation or violence; (26) the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics, cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts (including Russia’s war in Ukraine and the ongoing conflicts in the Middle East); (27) the potential deterioration of the U.S. economy due to financial, political or other shocks; (28) the potential influence on the U.S. financial markets and economy from the effects of climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; (29) the impact on Peoples' businesses and operating results of any costs associated with obtaining rights in intellectual property claimed by others and adequately protecting Peoples' intellectual property; (30) risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets; (31) Peoples' ability to integrate the Limestone Merger, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected; (32) the risk that expected revenue synergies and cost savings from the Limestone Merger, may not be fully realized or realized within the expected time frame; (33) changes in laws or regulations imposed by Peoples' regulators impacting Peoples' capital actions, including dividend payments and share repurchases; 44 Table of Contents (34) the vulnerability of Peoples' network and online banking portals, and the systems of parties with whom Peoples contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (35) Peoples' business may be adversely affected by increased political and regulatory scrutiny of corporate environmental, social and governance ("ESG") practices; (36) the effect of a fall in stock market prices on Peoples' asset and wealth management business; and (37) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' 2023 Form 10-K. Peoples encourages readers of this Form 10-Q to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance. Peoples undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the filing of this Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC's website at http://www.sec.gov and/or from Peoples' website – www.peoplesbancorp.com under the “Investor Relations” section. All forward-looking statements speak only as of the filing date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements. Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual results may differ materially from these projections. This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements, and Notes to the Audited Consolidated Financial Statements, contained in Peoples’ 2023 Form 10-K, as well as the Unaudited Condensed Consolidated Financial Statements, Notes to the Unaudited Condensed Consolidated Financial Statements, ratios, statistics and discussions contained elsewhere in this Form 10-Q. Business Overview The following discussion and analysis of Peoples’ Unaudited Condensed Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial condition and results of operations. Peoples is a diversified financial services holding company that makes available a complete line of banking, trust and investment, insurance, premium financing and equipment leasing solutions through its subsidiaries. Peoples provides services through traditional offices, automated teller machines ("ATMs"), interactive teller machines ("ITMs"), mobile banking, telephone and internet-based banking. Peoples offers a complete array of insurance products through Peoples Insurance, a subsidiary of Peoples Bank. Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices. Peoples Bank offers insurance premium finance lending nationwide through its Peoples Premium Finance division. Peoples also offers lease financing through its North Star Leasing division and through Vantage, a subsidiary of Peoples Bank. As of June 30, 2024, Peoples had 150 locations, including 130 full-service bank branches in Ohio, Kentucky, West Virginia, Virginia, Washington D.C. and Maryland. Peoples Bank is subject to regulation and examination primarily by the Ohio Division of Financial Institutions (the "ODFI"), the FRB of Cleveland and the FDIC. Peoples Bank must also follow the regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), which regulates consumer financial products and services and certain financial services providers. Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business. Critical Accounting Policies The accounting and reporting policies of Peoples conform to US GAAP. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements describes Peoples' significant accounting policies. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and this MD&A at June 30, 2024, which have been disclosed in Peoples' 2023 Form 10-K and updated in "Note 1 Summary of Significant Accounting Policies" in this Form 10-Q. This MD&A should be read in conjunction with the policies disclosed in Peoples’ 2023 Form 10-K. Summary of Recent Transactions and Events The following is a summary of recent transactions and events that have impacted or are expected to impact Peoples’ results of operations or financial condition: ◦ For the first six months of 2024, Peoples incurred $(0.1) million of acquisition-related expenses compared to $11.3 million for the first six months of 2023. Peoples recorded acquisition-related expenses, primarily related to the Limestone Merger, 45 Table of Contents which included $(0.1) million for the first quarter of 2024 and $10.7 million for the second quarter of 2023. There was no such expense for the three months ended June 30, 2024. ◦ For the second quarter of 2024, Peoples recorded a provision for credit losses of $5.7 million, compared to a provision for credit losses of $6.1 million for the linked quarter and a provision for credit losses of $8.0 million for the second quarter of 2023. For the first half of 2024, Peoples recorded a provision for credit losses of $11.8 million, compared to a provision for credit losses of $9.8 million for 2023. The provision for credit losses for the second quarter and the first six months of 2024 was mainly the result of (i) higher net charge-offs, (ii) an increase of reserves on individually analyzed loans and leases and (iii) loan growth. For more information, please refer to the section titled "RESULTS OF OPERATIONS - Provision for Credit Losses" found later in this discussion. ◦ On October 25, 2022, Peoples announced the Limestone Merger, a transaction valued at $177.9 million. The Limestone Merger closed as of the close of business on April 30, 2023. Peoples acquired Limestone's loan portfolio totaling $1.1 billion, $1.2 billion of deposits, $172.7 million of total investment securities, an aggregate of $99.5 million of short-term and long-term borrowings, and $93.5 million of total cash and cash equivalents. Peoples also recorded goodwill in the amount of $68.8 million and other intangible assets of $27.7 million, which consisted of core deposit intangibles. ◦ To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% beginning on March 16, 2022, and continued to raise rates up to 5.50% on July 27, 2023. The Federal Reserve Board has kept rates unchanged since July 2023 but has signaled that it may begin reducing rates sometime in 2024. The impact of these transactions and events, where material, is discussed in the applicable sections of this MD&A. EXECUTIVE SUMMARY Peoples reported net income of $29.0 million for the second quarter of 2024, representing earnings per diluted common share of $0.82. In comparison, Peoples reported net income of $29.6 million, representing earnings per diluted common share of $0.84, for the first quarter of 2024, and net income of $21.1 million, representing earnings per diluted common share of $0.64, for the second quarter of 2023. For the six months ended June 30, 2024, Peoples recorded net income of $58.6 million, or $1.66 per diluted common share, compared to $47.7 million, or $1.56 per diluted common share, for the six months ended June 30, 2023. Non-core items negatively impacted earnings per diluted common share by $0.02 for the second quarter of 2024, $0.01 for the first quarter of 2024, and $0.28 for the second quarter of 2023. Non-core items negatively impacted earnings per diluted share by $0.02 and $0.37 for the six months ended June 30, 2024 and 2023, respectively. Net interest income was $86.6 million for the second quarter of 2024, which was flat when to compared to the linked quarter. Net interest margin was 4.18% for the second quarter of 2024, compared to 4.26% for the linked quarter. The decrease in net interest margin was primarily driven by a decrease in accretion income, net of amortization, from our acquisitions and higher borrowing costs. Net interest income for the second quarter of 2024 increased $1.8 million, or 2%, compared to the second quarter of 2023. Net interest margin for the second quarter of 2024 was 4.18% and decreased 36 basis points compared to 4.54% for the second quarter of 2023, driven primarily by an increase in interest expense on deposits. For the first six months of 2024, net interest income increased $15.5 million, or 10%, compared to the first six months of 2023, while net interest margin decreased 32 basis points to 4.22%. The increase in net interest income was driven by increases in market interest rates and an additional four months of income from the Limestone Merger. The decrease in net interest margin for the first six months of 2024 compared to the first six months of 2023 was primarily driven by higher borrowing costs, which offset higher earning asset yields. Accretion income, net of amortization expense, from acquisitions was $5.8 million for the second quarter of 2024, $6.5 million for the first quarter of 2024 and $4.5 million for the second quarter of 2023, which added 28 basis points, 32 basis points and 23 basis points, respectively, to net interest margin. The decrease in accretion income for the second quarter of 2024 when compared to the linked quarter was driven by lower pay-offs. The increase in accretion income for the current quarter compared to the second quarter of 2023 was a result of the accretion from the Limestone Merger. Accretion income, net of amortization expense, from acquisitions was $12.3 million for the six months ended June 30, 2024, compared to $6.5 million for the six months ended June 30, 2023, which added 30 and 18 basis points, respectively, to net interest margin. The increase in accretion income for the first six months of 2024 compared to the same period in 2023 was due to an additional four months of accretion in 2024 from the Limestone Merger. The provision for credit losses was $5.7 million for the second quarter of 2024, compared to a provision for credit losses of $6.1 million for the linked quarter and a provision for credit losses of $8.0 million for the second quarter of 2023. The provision for credit losses for the second quarter of 2024 was a result of (i) higher net charge-offs, (ii) an increase of reserves for individually analyzed loans and leases, and (iii) loan growth. The provision for credit losses for the first quarter of 2024 was driven by (i) a deterioration in macro-economic conditions used within the CECL model, (ii) an increase of reserves on individually analyzed loans and leases and (iii) loan growth. Net charge-offs for the second quarter of 2024 were $4.2 million, or 0.27% of average total loans annualized, compared to net charge-offs of $3.3 million, or 0.22% of average total loans annualized, for the linked quarter and net charge-offs of 46 Table of Contents $1.2 million, or 0.09% of average total loans annualized, for the second quarter of 2024. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below. The provision for credit losses for the first six months of 2024 was $11.8 million, compared to a provision for credit losses of $9.8 million for the first six months of 2023. The provision for credit losses for the first six months of 2024 was mainly the result of (i) higher net charge-offs, (ii) an increase in reserves for individually analyzed loans and leases and (iii) loan growth. The provision for credit losses for the first six months of 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (iii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and leases and the use of updated loss drivers. Net charge-offs for the first six months of 2024 were $7.6 million, or 0.24% of average total loans annualized, compared to net charge-offs of $2.7 million, or 0.11% annualized, for the first six months of 2023. For additional information on credit trends and the allowance for credit losses, see the "Asset Quality" section below. Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Operations. The net loss realized during the second quarter of 2024 was $0.8 million, compared to a net loss of $0.3 million for the linked quarter and a net loss of $1.8 million for the second quarter of 2023. The net loss for the second quarter of 2024 was due to $0.4 million of net losses on repossessed assets. The net loss for the linked quarter was due to $0.3 million of net losses on repossessed assets. The net loss for the second quarter of 2023 was primarily driven by a $1.6 million write-down of an OREO property due to a potential sale of the property. The net loss realized during the first six months of 2024 was $1.1 million, compared to $4.0 million for the first six months of 2023. The net loss for the first six months of 2024 was driven by the $0.7 million of net losses on repossessed assets mentioned above. The net loss for the first six months of 2023 was primarily driven by a $2.0 million pre-tax net loss on the sale of available-for-sale investment securities and the $1.6 million writedown of the OREO property mentioned above. Peoples sold $96.7 million of it's lower yielding available-for-sale investment securities, with proceeds from the sale used to pay down overnight borrowings. Total non-interest income, excluding net gains and losses, for the second quarter of 2024 decreased $1.6 million compared to the linked quarter. The decrease in non-interest income, excluding net gains and losses, was primarily due to a decrease of $2.4 million in insurance income due primarily to seasonal performance-based commissions being paid in the first quarter of each year. Partially offsetting the decrease was an increase of $0.4 million in each of electronic banking income and trust and investment income. Compared to the second quarter of 2023, total non-interest income, excluding net gains and losses, increased $1.6 million, primarily due to a $1.1 million increase in other non-interest income, driven by operating lease income, and a $0.6 million increase in trust and investment income, partially offset by a decrease of $0.6 million in lease income. The other increases for the second quarter of 2024, when compared to the second quarter of 2023, were primarily due to the additional customers brought in from the Limestone Merger and increases of assets under administration and management. For the first six months of 2024, total non-interest income, excluding gains and losses, increased $6.5 million, or 15%, compared to the first six months of 2023. The increase was driven by (i) a $2.1 million increase in other non-interest income, driven by operating lease income, (ii) a $1.2 million increase in insurance income, (iii) a $1.1 million increase in trust and investment income, (iv) a $1.0 million increase in bank owned life insurance income, (v) a $0.9 million increase in deposit account service charge income, and (vi) a $0.6 million increase in electronic banking income, offset by a decrease of $0.4 million in lease income. The other increases for the first six months of 2024, when compared to the first six months of 2023, were primarily due to the additional customers brought in from the Limestone Merger, increases of assets under management, higher insurance performance-based commission, and market increases for insurance premiums. Total non-interest expense increased $0.3 million for the three months ended June 30, 2024, compared to the linked quarter. The increase in total non-interest expense was primarily due to increases of $2.2 million in other non-interest expense driven by a one-time true-up of $1.3 million of corporate expenses and $1.0 million in data processing and software expense driven by higher expenses attributable to recent technology projects, partially offset by a decrease of $2.3 million in salaries and employee benefit costs. The decrease in salaries and employee benefit costs was due to anticipated annual expenses that occur in the first quarter of each year including stock-based compensation expenses attributable to retirement-eligible employees and health savings account ("HSA") contributions. Compared to the second quarter of 2023, total non-interest expense decreased $1.9 million, or 3%. Excluding acquisition-related expenses, non-interest expenses increased $8.8 million, or 15%, primarily due to increases of $3.6 million in salaries and employee benefit costs due to additional employees added in the Limestone Merger and $2.0 million data processing and software expense due to recent technology projects. For the six months ended June 30, 2024, total non-interest expense increased $10.1 million, or 8%, compared to the first six months of 2023. Excluding acquisition-related expenses, non-interest expenses increased $21.5 million, or 19%, primarily due to increases of $10.5 million in salaries and employee benefit costs due to additional employees added in the Limestone Merger, $3.2 million and $2.1 million in data processing and software expense and in net occupancy and equipment expense, respectively, due to recent technology projects and growth, included through acquisitions. 47 Table of Contents The table below summarizes the amount of acquisition-related expenses for each line item that is a component of non-interest expense. This information is used by Peoples to provide information useful to investors in understanding Peoples' operating performance and trends. Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, (Dollars in thousands) 2024 2024 2023 2024 2023 Non-interest expense: Salaries and employee benefit costs $ 36,564 $ 38,893 $ 38,025 $ 75,457 $ 70,053 Net occupancy and equipment expense 6,142 6,283 5,380 12,425 10,335 Professional fees 2,935 2,967 7,438 5,902 10,319 Data processing and software expense 6,743 5,769 4,728 12,512 9,290 Amortization of other intangible assets 2,787 2,788 2,800 5,575 4,671 Electronic banking expense 1,941 1,781 1,832 3,722 3,323 Marketing expense 681 1,056 1,357 1,737 2,287 FDIC insurance premiums 1,251 1,186 1,464 2,437 2,265 Franchise tax expense 760 881 872 1,641 1,906 Communication expense 736 799 724 1,535 1,337 Other loan expenses 1,036 1,076 538 2,112 1,277 Other non-interest expense 7,182 4,986 5,465 12,168 10,039 Total non-interest expense 68,758 68,465 70,623 137,223 127,102 Acquisition-related non-interest expense: Salaries and employee benefit costs — 16 5,125 16 5,146 Net occupancy and equipment expense — — 20 — 29 Professional fees — (38) 4,812 (38) 5,103 Data processing and software expense — (18) 1 (18) 1 Electronic banking expense — (100) 115 (100) 115 Marketing expense — 10 13 10 23 Other loan expenses — — 1 — 1 Other non-interest expense — 46 622 46 842 Total acquisition-related non-interest expense — (84) 10,709 (84) 11,260 Non-interest expense excluding acquisition-related expense: Salaries and employee benefit costs 36,564 38,877 32,900 75,441 64,907 Net occupancy and equipment expense 6,142 6,283 5,360 12,425 10,306 Professional fees 2,935 3,005 2,626 5,940 5,216 Data processing and software expense 6,743 5,787 4,727 12,530 9,289 Amortization of other intangible assets 2,787 2,788 2,800 5,575 4,671 Electronic banking expense 1,941 1,881 1,717 3,822 3,208 Marketing expense 681 1,046 1,344 1,727 2,264 FDIC insurance premiums 1,251 1,186 1,464 2,437 2,265 Franchise tax expense 760 881 872 1,641 1,906 Communication expense 736 799 724 1,535 1,337 Other loan expenses 1,036 1,076 537 2,112 1,276 Other non-interest expense 7,182 4,940 4,843 12,122 9,197 Total non-interest expense excluding acquisition-related expense $ 68,758 $ 68,549 $ 59,914 $ 137,307 $ 115,842 48 Table of Contents The efficiency ratio for the second quarter of 2024 was 59.2%, compared to 58.1% for the linked quarter, and 62.8% for the second quarter of 2023. The improvement in the efficiency ratio compared to the prior year quarter was largely a result of a decrease in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 59.2% for the second quarter of 2024, compared to 58.1% for the linked quarter and 53.3% for the second quarter of 2023. The efficiency ratio and the adjusted efficiency ratio for non-core items increased compared to the linked quarterly mainly as a result of a reduction in non-interest income. The efficiency ratio for the first six months of 2024 was 58.6%, compared to 60.4% for the first six months of 2023. The efficiency ratio improved compared to the prior year first six months due to the decrease in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 58.7% for the first six months of 2024, compared to 55.2% for the first six months of 2023. Peoples continues to focus on controlling expenses, while recognizing necessary costs in order to continue growing the business. Peoples recorded income tax expense of $6.9 million with an effective tax rate of 19.1% for the second quarter of 2024, compared to income tax expense of $8.3 million with an effective tax rate of 21.8% for the linked quarter, and income tax expense of $6.2 million with an effective tax rate of 22.6% for the second quarter of 2023. The decrease in income tax expense for the second quarter of 2024 compared to the linked quarter was driven by a $1.1 million one-time benefit related to a prior year amended return. Peoples recorded income tax expense of $15.1 million with an effective tax rate of 20.5% for the first six months of 2024 and $13.2 million with an effective tax rate of 21.7% for the first six months of 2023. The increase was driven by higher pre-tax income. At June 30, 2024, total assets were $9.23 billion, compared to $9.27 billion at March 31, 2024, $9.16 billion at December 31, 2023 and $8.79 billion at June 30, 2023. Total assets at June 30, 2024 decreased when compared to at March 31, 2024 primarily due to a decrease in interest-bearing deposits in other banks, partially offset by increases in loans and investment securities. The period-end total loan and lease balances at June 30, 2024 increased $122.5 million, or 8% annualized, compared to at March 31, 2024. The increase in the period-end total loan and lease balances was primarily driven by increases of (i) $54.4 million in premium finance loans, (ii) $43.4 million in commercial and industrial loans, (iii) $25.9 million in construction loans, and (iv) $24.8 million in indirect consumer loans, partially offset by a reduction of $47.8 million in other commercial real estate loans. Total assets at June 30, 2024 increased compared to December 31, 2023 due to increases of $166.2 million in total loans and leases and $88.5 million in investment securities, partially offset by a decrease of $190.9 million in total cash and cash equivalents. Total assets at June 30, 2024 increased compared to June 30, 2023 due to an increase of $350.8 million in total loans and leases. The period-end loan and lease balance at June 30, 2024 increase compared to June 30, 2023 was primarily driven by organic growth in our premium finance, other commercial real estate, commercial and industrial, and lease portfolios of $130.1 million, $124.5 million, $97.8 million, and $52.9 million, respectively. Total liabilities were $8.15 billion at June 30, 2024, down from $8.21 billion at March 31, 2024, $8.10 billion at December 31, 2023 and $7.79 billion at June 30, 2023. The decrease in total liabilities when compared to at March 31, 2024 was primarily due to a decrease of $28.8 million in period-end total deposits. The decrease was primarily driven by decreases of (i) $70.8 million in brokered CDs, (ii) $58.8 million in governmental deposit accounts, and (iii) $24.2 million in interest-bearing demand deposit accounts, partially offset by an increase of $132.5 million in retail CDs. The increase in retail CDs was due to current specials being offered, while the decrease in governmental deposit accounts was due to the seasonality of those balances, which are typically higher in the first quarter. Excluding a decrease in brokered CDs of $70.8 million, core deposits were up $42.0 million compared to the linked quarter, driven by the aforementioned increase in retail CDs and higher money market deposit accounts. The increase in total liabilities when compared to at December 31, 2023 was primarily due to increases of $369.5 million in retail CDs and $93.7 million in money market deposit accounts, partially offset by decreases of (i) $162.8 million in brokered deposits, (ii) $95.0 million in non-interest bearing deposits, and (iii) $60.8 million in interest-bearing demand deposit accounts. The increase in total liabilities when compared to at June 30, 2023 was primarily due to a $337.9 million increase in period in deposits. The increase was primarily driven by increases of $862.1 million in retail CDs, $150.5 million in money market deposit accounts, and $60.7 million in governmental deposit accounts, offset by decreases of $236.1 million, $209.9 million, $147.3 million, and $142.1 million in savings accounts, non-interest bearing deposits, brokered CDs, and interest-bearing demand deposit accounts, respectively. The increase in retail CDs was driven by current promotions being offered. Total stockholders' equity at June 30, 2024 increased by $15.8 million compared to at March 31, 2024, which was primarily due to net income for the second quarter of 2024 of $29.0 million, partially offset by dividends paid of $14.2 million. Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $110.2 million and $111.8 million at June 30, 2024 and at March 31, 2024, respectively. Total stockholders' equity at June 30, 2024 increased by $24.3 million compared to at December 31, 2023 was primarily due to net income of $58.6 million for the first six months of 2024, partially offset by dividends paid of $27.9 million. Total stockholders' equity at June 30, 2024 increased by $78.9 million compared to at June 30, 2023. The increase in total stockholders' equity at June 30, 2024 when compared to at June 30, 2023 was impacted by net income of $124.3 million in the last twelve months and a decrease in accumulated other comprehensive loss of $8.7 million, partially offset by dividends paid of $55.9 million. 49 Table of Contents RESULTS OF OPERATIONS Net Interest Income Net interest income, the amount by which interest income exceeds interest expense, remains Peoples' largest source of revenue. The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve’s monetary policy, the level and degree of pricing competition for loans and deposits in Peoples’ markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities. Net interest margin, which is calculated by dividing fully tax-equivalent ("FTE") net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of interest-earning assets and interest-bearing liabilities. FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a federal statutory corporate income tax rate of 21% for the three months ended June 30, 2024, for the three months ended March 31, 2024 and for the three and six months ended June 30, 2023. The following table details the calculation of FTE net interest income: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Net interest income $ 86,613 $ 86,640 $ 84,853 $ 173,253 $ 157,731 Taxable equivalent adjustment 352 352 386 705 738 FTE net interest income $ 86,965 $ 86,992 $ 85,239 $ 173,958 $ 158,469 50 Table of Contents The following tables detail Peoples’ average balance sheets for the periods presented: For the Three Months Ended June 30, 2024 March 31, 2024 June 30, 2023 ( Dollars in thousands) Average Balance Income/ Expense Yield/Cost Average Balance Income/ Expense Yield/Cost Average Balance Income/ Expense Yield/Cost Short-term investments $ 178,094 $ 2,502 5.65 % $ 142,381 $ 1,922 5.43 % $ 58,245 $ 673 4.64 % Investment securities (a)(b): Taxable 1,684,939 14,886 3.54 % 1,657,967 13,964 3.37 % 1,673,441 12,816 3.06 % Nontaxable 185,433 1,258 2.71 % 174,632 1,270 2.91 % 200,503 1,424 2.84 % Total investment securities 1,870,372 16,144 3.45 % 1,832,599 15,234 3.33 % 1,873,944 14,240 3.04 % Loans (b)(c): Construction 328,943 6,595 7.93 % 339,448 6,404 7.46 % 358,732 6,491 7.16 % Commercial real estate, other 2,074,718 36,420 6.94 % 2,076,219 37,242 7.10 % 1,735,466 28,240 6.44 % Commercial and industrial 1,230,290 23,897 7.68 % 1,203,196 23,515 7.73 % 1,069,529 19,561 7.24 % Premium finance 260,513 5,746 8.73 % 210,405 4,564 8.58 % 154,557 2,659 6.81 % Leases 419,764 11,982 11.29 % 409,870 12,067 11.65 % 359,016 10,276 11.32 % Residential real estate (d) 925,629 11,460 4.95 % 930,989 11,322 4.86 % 921,012 10,818 4.70 % Home equity lines of credit 225,362 4,612 8.23 % 216,743 4,297 7.97 % 191,915 3,656 7.64 % Consumer, indirect 656,405 9,669 5.92 % 656,244 9,281 5.69 % 651,669 7,943 4.89 % Consumer, direct 119,048 2,095 7.08 % 124,091 2,098 6.80 % 123,899 2,247 7.27 % Total loans 6,240,672 112,476 7.16 % 6,167,205 110,790 7.13 % 5,565,795 91,891 6.55 % Allowance for credit losses (64,745) (61,236) (53,427) Net loans 6,175,927 112,476 7.23 % 6,105,969 110,790 7.20 % 5,512,368 91,891 6.62 % Total earning assets 8,224,393 131,122 6.34 % 8,080,949 127,946 6.29 % 7,444,557 106,804 5.70 % Goodwill and other intangible assets 407,864 410,719 387,055 Other assets 548,197 529,983 511,271 Total assets $ 9,180,454 $ 9,021,651 $ 8,342,883 Interest-bearing deposits: Savings accounts $ 892,465 $ 222 0.10 % $ 905,713 $ 226 0.10 % $ 1,095,713 $ 583 0.21 % Governmental deposit accounts 795,913 5,594 2.83 % 763,899 5,085 2.68 % 693,725 2,330 1.35 % Interest-bearing demand accounts 1,095,553 495 0.18 % 1,109,033 452 0.16 % 1,178,614 532 0.18 % Money market accounts 850,375 5,419 2.56 % 784,759 4,888 2.51 % 679,123 2,006 1.18 % Retail CDs 1,743,238 18,423 4.25 % 1,582,426 15,900 4.04 % 825,155 4,209 2.05 % Brokered CDs (e) 482,310 5,506 4.59 % 568,996 6,753 4.77 % 480,640 4,744 3.96 % Total interest-bearing deposits 5,859,854 35,659 2.45 % 5,714,826 33,304 2.34 % 4,952,970 14,404 1.17 % Borrowed funds: Short-term FHLB advances (e) 199,978 2,755 5.54 % 135,072 1,826 5.44 % 387,543 4,938 5.11 % Repurchase agreements and other 207,295 2,223 4.29 % 253,758 2,358 3.72 % 106,018 376 1.42 % Total short-term borrowings 407,273 4,978 4.90 % 388,830 4,184 4.31 % 493,561 5,314 4.32 % Long-term FHLB advances 132,579 1,316 3.99 % 125,931 1,241 3.96 % 33,819 205 2.43 % Long-term notes payable 48,175 842 6.99 % 50,407 862 6.84 % 44,493 548 4.93 % Other long-term borrowings (f) 54,207 1,362 9.93 % 53,936 1,363 10.00 % 53,779 1,094 8.05 % Total long-term borrowings 234,961 3,520 5.98 % 230,274 3,466 6.01 % 132,091 1,847 5.56 % Total borrowed funds 642,234 8,498 5.30 % 619,104 7,650 4.94 % 625,652 7,161 4.58 % Total interest-bearing liabilities 6,502,088 44,157 2.73 % 6,333,930 40,954 2.60 % 5,578,622 21,565 1.55 % Non-interest-bearing deposits 1,476,870 1,501,738 1,637,671 Other liabilities 140,042 133,202 175,152 Total liabilities 8,119,000 7,968,870 7,391,445 Total stockholders’ equity 1,061,454 1,052,781 951,438 Total liabilities and stockholders’ equity $ 9,180,454 $ 9,021,651 $ 8,342,883 Interest rate spread (b) $ 86,965 3.61 % $ 86,992 3.69 % $ 85,239 4.15 % Net interest margin (b) 4.18 % 4.26 % 4.54 % 51 Table of Contents For the Six Months Ended June 30, 2024 June 30, 2023 ( Dollars in thousands) Average Balance Income/ Expense Yield/Cost Average Balance Income/ Expense Yield/Cost Short-term investments $ 160,238 $ 4,424 5.55 % $ 47,008 $ 1,062 4.56 % Investment securities (a)(b): Taxable 1,671,453 28,850 3.45 % 1,635,773 23,863 2.92 % Nontaxable 180,032 2,528 2.81 % 195,562 2,684 2.74 % Total investment securities 1,851,485 31,378 3.39 % 1,831,335 26,547 2.90 % Loans (b)(c): Construction 334,196 12,998 7.69 % 300,270 10,454 6.92 % Commercial real estate, other 2,075,468 73,662 7.02 % 1,538,771 48,034 6.21 % Commercial and industrial 1,216,743 47,412 7.71 % 975,633 34,165 6.96 % Premium finance 235,459 10,310 8.66 % 151,244 4,809 6.32 % Leases 414,817 24,049 11.47 % 350,845 19,919 11.29 % Residential real estate (d) 928,309 22,782 4.91 % 881,514 20,535 4.66 % Home equity lines of credit 221,053 8,909 8.10 % 184,337 6,622 7.24 % Consumer, indirect 656,324 18,950 5.81 % 646,045 15,173 4.74 % Consumer, direct 121,569 4,194 6.94 % 116,377 3,985 6.91 % Total loans 6,203,938 223,266 7.14 % 5,145,036 163,696 6.35 % Allowance for credit losses (62,990) (53,052) Net loans 6,140,948 223,266 7.22 % 5,091,984 163,696 6.41 % Total earning assets 8,152,671 259,068 6.32 % 6,970,327 191,305 5.49 % Goodwill and other intangible assets 409,292 356,470 Other assets 539,089 465,782 Total assets $ 9,101,052 $ 7,792,579 Interest-bearing deposits: Savings accounts $ 899,089 $ 448 0.10 % $ 1,071,174 $ 719 0.14 % Governmental deposit accounts 779,906 10,679 2.75 % 666,683 3,396 1.03 % Interest-bearing demand accounts 1,102,293 947 0.17 % 1,142,648 712 0.13 % Money market accounts 817,567 10,307 2.54 % 632,561 2,831 0.90 % Retail CDs 1,662,832 34,323 4.15 % 702,809 5,959 1.71 % Brokered CDs (e) 525,653 12,259 4.69 % 353,760 6,447 3.68 % Total interest-bearing deposits 5,787,340 68,963 2.40 % 4,569,635 20,064 0.89 % Borrowed funds: Short-term FHLB advances (e) 167,525 4,582 5.50 % 382,677 9,252 4.88 % Repurchase agreements and other 230,527 4,580 3.97 % 99,966 520 1.04 % Total short-term borrowings 398,052 9,162 4.62 % 482,643 9,772 4.08 % Long-term FHLB advances 129,255 2,557 3.98 % 33,916 409 2.43 % Long-term notes payable 49,291 1,704 6.91 % 47,557 1,201 5.05 % Other long-term borrowings (f) 54,071 2,724 9.97 % 33,902 1,390 8.15 % Total long-term borrowings 232,617 6,985 5.99 % 115,375 3,000 5.19 % Total borrowed funds 630,669 16,147 5.12 % 598,018 12,771 4.30 % Total interest-bearing liabilities 6,418,009 85,110 2.66 % 5,167,653 32,836 1.28 % Non-interest-bearing deposits 1,489,304 1,598,985 Other liabilities 136,622 149,075 Total liabilities 8,043,935 6,915,713 Total stockholders’ equity 1,057,117 876,866 Total liabilities and stockholders’ equity $ 9,101,052 $ 7,792,579 Interest rate spread (b) $ 173,958 3.66 % $ 158,469 4.21 % Net interest margin (b) 4.22 % 4.54 % (a) Average balances are based on carrying value. (b) Interest income and yields are presented on a fully tax-equivalent basis, using a 21% statutory federal corporate income tax rate. (c) Average balances include nonaccrual and impaired loans. Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented. (d) Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income. 52 Table of Contents (e) Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered CDs for the periods presented in which FHLB advances and brokered CDs were being utilized. (f) Included in other long-term borrowings are trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures. Peoples' average balances compared to prior periods have been impacted by recent acquisitions, including the Limestone Merger as of the close of business on April 30, 2023, which added to average loan, deposit and borrowed funds balances. Peoples' cash balances have increased primarily due to an increase in interest-bearing deposits in other banks, mostly with the FRB. The increases in market interest rates have increased asset yields and deposit outflows (which have increased borrowings). The following table provides an analysis of the changes in FTE net interest income: Three Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2024 Compared to (Dollars in thousands) March 31, 2024 June 30, 2023 June 30, 2023 Increase (decrease) in: Rate Volume Total (a) Rate Volume Total (a) Rate Volume Total (a) INTEREST INCOME: Short-term investments $ 82 $ 498 $ 580 $ 159 $ 1,669 $ 1,828 $ 242 $ 3,119 $ 3,361 Investment Securities (b): Taxable 692 230 922 1,981 89 2,070 4,455 532 4,987 Nontaxable (333) 321 (12) (62) (104) (166) 157 (313) (156) Total investment income 359 551 910 1,919 (15) 1,904 4,612 219 4,831 Loans (b) : Construction 1,178 (987) 191 2,470 (2,366) 104 1,261 1,283 2,544 Commercial real estate, other (795) (27) (822) 2,350 5,830 8,180 6,987 18,641 25,628 Commercial and industrial (816) 1,198 382 1,267 3,069 4,336 3,994 9,254 13,248 Premium finance 78 1,104 1,182 900 2,187 3,087 2,195 3,306 5,501 Leases (1,333) 1,248 (85) (191) 1,897 1,706 326 3,805 4,131 Residential real estate 500 (362) 138 587 55 642 1,128 1,119 2,247 Home equity lines of credit 141 174 315 293 663 956 854 1,433 2,287 Consumer, indirect 386 2 388 1,669 57 1,726 3,528 249 3,777 Consumer, direct 342 (345) (3) (62) (90) (152) 20 189 209 Total loan income (319) 2,005 1,686 9,283 11,302 20,585 20,293 39,279 59,572 Total interest income $ 122 $ 3,054 $ 3,176 $ 11,361 $ 12,956 $ 24,317 $ 25,147 $ 42,617 $ 67,764 INTEREST EXPENSE: Deposits: Savings accounts $ (1) $ (3) $ (4) $ (268) $ (93) $ (361) $ (167) $ (104) $ (271) Interest-bearing demand accounts 78 (35) 43 13 (50) (37) 308 (73) 235 Money market accounts 115 416 531 2,805 608 3,413 6,435 1,041 7,476 Governmental deposit accounts 292 218 510 2,878 386 3,264 6,615 668 7,283 Retail CDs 852 1,671 2,523 6,993 7,221 14,214 14,495 13,869 28,364 Brokered CDs (249) (998) (1,247) 747 16 763 2,105 3,706 5,811 Total deposit cost 1,087 1,269 2,356 13,168 8,088 21,256 29,791 19,107 48,898 Borrowed funds: Short-term borrowings 696 97 793 3,496 (3,833) (337) 3,716 (4,326) (610) Long-term borrowings 72 (19) 53 704 968 1,672 1,217 2,769 3,986 Total borrowed funds cost 768 78 846 4,200 (2,865) 1,335 4,933 (1,557) 3,376 Total interest expense 1,855 1,347 3,202 17,368 5,223 22,591 34,724 17,550 52,274 FTE net interest income $ (1,733) $ 1,707 $ (26) $ (6,007) $ 7,733 $ 1,726 $ (9,577) $ 25,067 $ 15,490 (a) The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each. (b) Interest income and yields are presented on a fully tax-equivalent basis, using a 21% statutory federal corporate income tax rate. Compared to the linked quarter, net interest income was relatively flat for the second quarter of 2024. Net interest margin was 4.18% for the second quarter of 2024, compared to 4.26% for the linked quarter. The decrease in net interest margin was primarily 53 Table of Contents driven by a decrease in accretion income, net of amortization, from our acquisitions and higher borrowing costs, which offset higher earning asset yields. Net interest income for the second quarter of 2024 grew 2% over the prior year quarter and net interest margin decreased by 36 basis points. The increase in net interest income compared to the second quarter of 2023 was driven by increases in market interest rates, the Limestone Merger, and organic growth. The decrease in net interest margin for the second quarter of 2024 compared to the second quarter of 2023, was driven primarily by an increase in interest expense on deposits. For the first six months of 2024, net interest income increased $15.5 million, or 10%, compared to the first six months of 2023, while net interest margin decreased 32 basis points to 4.22%. The increase in net interest income was driven by increases in market interest rates and an additional four months of income from the Limestone Merger. The decrease in net interest margin for the first six months of 2024 compared to the first six months of 2023 was primarily driven by higher borrowing costs, which offset higher earning asset yields. Accretion income, net of amortization expense, from acquisitions was $5.8 million for the second quarter of 2024, $6.5 million for the linked quarter and $4.5 million for the second quarter of 2023, which added 28 basis points, 32 basis points and 23 basis points, respectively, to net interest margin. The decrease in accretion income for the second quarter of 2024, when compared to the linked quarter was driven by lower loan pay-offs. The increase in accretion income for the second quarter of 2024 compared to the second quarter of 2023 was a result of accretion from the Limestone Merger. For the first half of 2023, accretion income totaled $12.3 million and added 30 basis points to net interest margin compared to $6.5 million and 18 basis points for the first half of 2023. The increase in accretion income for the first six months of 2024 compared to the same period in 2023 was due to more accretion in 2024 from the Limestone Merger. Additional information regarding changes in the Unaudited Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this MD&A. Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this MD&A under the caption "FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity." Provision for Credit Losses The following table details Peoples’ provision for credit losses: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Provision for other credit losses $ 5,397 $ 5,834 $ 7,751 $ 11,231 $ 9,424 Provision for checking account overdraft credit losses 286 268 232 554 412 Provision for credit losses $ 5,683 $ 6,102 $ 7,983 $ 11,785 $ 9,836 The provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates. The provision for credit losses for the second quarter of 2024 was a result of (i) higher net-charge offs, (ii) an increase in reserves for individually analyzed loans and leases, and (iii) loan growth. The provision for credit losses for the second quarter of 2023 was due to a provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, partially offset by the release of reserves on individually analyzed loans and improvements in macro-economic conditions. For the first half of 2024, the provision for credit losses was mainly the result of (i) higher net charge-offs, (ii) an increase of reserves on individually analyzed loans and leases and (iii) loan growth. For the first six months of 2023, the provision for credit losses was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (iii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and leases and the use of updated loss drivers. Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this MD&A under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.” 54 Table of Contents Net Loss Included in Total Non-Interest Income Net loss includes net losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income. The following table details Peoples’ net losses for the periods presented: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Net loss on investment securities $ (353) $ (1) $ (166) $ (354) $ (2,101) Net loss on asset disposals and other transactions: Net loss on other assets (397) (309) (44) (706) (273) Net loss on OREO — — (1,613) — (1,623) Net loss on other transactions (31) (32) (8) (63) (15) Net loss on asset disposals and other transactions $ (428) $ (341) $ (1,665) $ (769) $ (1,911) The net loss on investment securities for the second quarter of 2024 was driven by the loss recorded on a contingent call of a security. During the first quarter of 2023, Peoples executed sales of $96.7 million of its lower yielding available-for-sale securities which were used to pay down overnight borrowings. The loss on the sales of the available-for-sale investment securities had a nominal impact on tangible book value as such loss was previously reflected in capital through accumulated other comprehensive loss. The net loss for the second quarter of 2024 was driven primarily by $0.4 million of net losses on repossessed assets. The net loss on asset disposals and other transactions for the first quarter of 2024 was due to $0.3 million of net losses on repossessed assets. During the second quarter of 2023, Peoples recognized a $1.6 million write-down of an OREO property due to the potential sale of the property. Total Non-Interest Income, Excluding Net Gains and Losses Total non-interest income, excluding net gains and losses, comprised 22% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the second quarter of 2024, 23% for the linked quarter, and 21% for the second quarter of 2023. For the first six months of 2024, total non-interest income, excluding net gains and losses, totaled 23% of total revenues compared to 22% for the first six months of 2023. For the second quarter of 2024, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses. Peoples' electronic banking ("e-banking") services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to customers. The following table details Peoples' e-banking income: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 E-banking income $ 6,470 $ 6,046 $ 6,466 $ 12,516 $ 11,909 Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers. The amount of e-banking income is largely dependent on the timing and volume of customer activity. E-banking income increased for the second quarter of 2024 compared to the linked quarter primarily driven by an increase in customer activity. The following table details Peoples' insurance income: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Property and casualty insurance commissions $ 3,432 $ 3,585 $ 3,360 $ 7,017 $ 6,612 Performance-based commissions 5 2,213 35 2,218 1,562 Life and health insurance commissions 672 700 609 1,372 1,255 Insurance income $ 4,109 $ 6,498 $ 4,004 $ 10,607 $ 9,429 Peoples' insurance income for the second quarter of 2024 decreased $2.4 million when compared to the linked quarter. The decrease in insurance income was due to seasonal performance-based commissions, which are annual in nature and typically occur in the first quarter of each year. Insurance income for the second quarter of 2024 increased $0.1 million when compared to the second quarter of 2023, primarily due to new business and market increases for premiums. Insurance income in the first half of 2024 increased 12% when compared to the first half of 2023 due to higher commissions and additional customers. 55 Table of Contents Peoples' fiduciary income and brokerage income continued to be based primarily upon the value of assets under administration and management, with additional income generated from transaction commissions, cross-selling of products and additional retirement plan services business. The following table details Peoples’ trust and investment income: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Fiduciary income $ 2,212 $ 2,001 $ 2,046 $ 4,213 $ 3,851 Brokerage income 1,989 1,842 1,667 3,831 3,294 Employee benefit fees 798 756 701 1,554 1,353 Trust and investment income $ 4,999 $ 4,599 $ 4,414 $ 9,598 $ 8,498 Fiduciary income and brokerage income increased in the second quarter of 2024 relative to the linked quarter due to market performance. When compared to the second quarter of 2023, fiduciary income and brokerage income increased, which was driven by an increase in assets under administration and management. For the first half of 2024, trust and investment income increased when compared to the same period in 2023 due to higher fiduciary and brokerage income, primarily reflecting market volatility. The following table details Peoples' assets under administration and management: June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 (Dollars in thousands) Trust $ 2,071,832 $ 2,061,402 $ 2,021,249 $ 1,900,488 $ 1,931,789 Brokerage $ 1,567,775 $ 1,530,954 $ 1,473,814 1,364,372 1,379,309 Total $ 3,639,607 $ 3,592,356 $ 3,495,063 $ 3,264,860 $ 3,311,098 Quarterly average $ 3,587,952 $ 3,521,188 $ 3,341,868 $ 3,319,655 $ 3,205,186 The increases in assets under administration and management at June 30, 2024 compared to at March 31, 2024 were driven by market value fluctuations. The increases in assets under administration and management at June 30, 2024 when compared to at June 30, 2023 were primarily due to recent growth, through acquisitions, as Peoples added new accounts and the underlying market values of assets under management grew. Deposit account service charges are based on the recovery of costs associated with services provided. The following table details Peoples' deposit account service charges: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Overdraft and non-sufficient funds fees $ 2,288 $ 2,255 $ 2,276 $ 4,543 $ 4,118 Account maintenance fees 1,716 1,718 1,623 3,434 3,084 Other fees and charges 335 250 254 585 474 Deposit account service charges $ 4,339 $ 4,223 $ 4,153 $ 8,562 $ 7,676 The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity. Management periodically evaluates its cost recovery fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples' markets by competitors. Deposit account service charges increased for the second quarter of 2024 compared to the linked quarter due to seasonality of customer activity. Deposit account service charges increased when comparing the second quarter of 2024 to the second quarter of 2023 due to the Limestone Merger. Deposit account service charges also increased for the first six months of 2024 compared to the same period of 2023 due to the Limestone Merger. The following table details the other items included within Peoples' total non-interest income: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Other non-interest income 2,172 1,698 1,059 3,870 1,727 Bank owned life insurance income 1,037 1,500 842 2,537 1,549 Lease income 1,116 1,236 1,719 2,352 2,796 Mortgage banking income 243 321 189 564 503 56 Table of Contents The increase in other non-interest income when comparing the three months ended June 30, 2024 to the linked quarter and the prior year quarter was primarily due to an increase in operating lease income. The increase in other non-interest income for the first six months of 2024 when compared to the same period of 2023 was driven by increased operating lease income. Bank owned life insurance income for the second quarter of 2024 decreased compared to the linked quarter primarily due to a $0.5 million death benefit recorded in the first quarter of 2024. Bank owned life insurance income for the second quarter and the first six months of 2024 increased when compared to the second quarter and first six months of 2023, due to the additional insurance policies acquired in the Limestone Merger and the aforementioned death benefit. Lease income is primarily comprised of (i) gains on the early termination of leases, net of any associated purchase accounting adjustments, (ii) month-to-month lease payments in excess of net investment in the lease, net of any associated purchase accounting adjustment, (iii) fees received for referrals, (iv) gains and losses recognized on the sales of residual assets and (v) syndication income. Lease income for the second quarter of 2024 decreased compared to the second quarter of 2023 due to a decrease in gains on terminated leases and lower syndication income. Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained. As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage banking income for the second quarter of 2024 was relatively flat when compared to each of the prior periods. In the second quarter of 2024, Peoples sold $2.6 million in loans into the secondary market with servicing retained and $11.8 million in loans with servicing released, compared to $0.2 million and $6.9 million, respectively, in the first quarter of 2024, and $1.1 million and $6.1 million, respectively, in the second quarter of 2023. For the first six months of 2024, Peoples sold $2.7 million in loans into the secondary market with servicing retained, and $18.8 million with servicing released, compared to $1.9 million and $13.5 million, respectively, for the first six months of 2023. Non-Interest Expense Salaries and employee benefit costs remain Peoples' largest non-interest expense, accounting for over one-half of total non-interest expense. The following table details Peoples' salaries and employee benefit costs: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Base salaries and wages $ 24,437 $ 24,797 $ 27,407 $ 49,234 $ 47,739 Sales-based and incentive compensation 5,404 5,254 5,502 10,658 9,447 Employee benefits 4,862 3,938 3,622 8,800 7,737 Payroll taxes and other employment costs 1,825 2,836 1,535 4,661 3,905 Stock-based compensation 1,385 3,090 1,043 4,475 3,232 Deferred personnel costs (1,349) (1,022) (1,084) (2,371) (2,007) Salaries and employee benefit costs $ 36,564 $ 38,893 $ 38,025 $ 75,457 $ 70,053 Full-time equivalent employees: Actual at end of period 1,489 1,498 1,500 1,489 1,500 Average during the period 1,492 1,492 1,393 1,491 1,305 Base salaries and wages for the second quarter of 2024 remained relatively flat compared to the linked quarter. The current quarter decrease compared to the second quarter of 2023 was primarily due to the decrease of acquisition-related expenses. Base salaries and wages for the first six months of 2024 increased compared to the first six months of 2023 due to the additional expense associated with employees added with the Limestone Merger coupled with annual merit increases. Sales-based incentive compensation for the first six months of 2024 compared to the first six months of 2023 increased primarily due to additional employees added with the Limestone Merger. The increase in employee benefits for the second quarter of 2024 compared to the linked quarter and the second quarter of 2023 was primarily due to increased medical costs. The increase for the first six months of 2024 compared to the first six months of 2023 was primarily due to higher medical costs reflecting a full six months of expenses in 2024 for the additional employees added with the Limestone Merger. Payroll taxes and other employment costs for the second quarter of 2024 decreased compared to the linked quarter due to seasonal expenses recognized in the first quarter of each year. Also impacting the increase in payroll taxes and other employment costs when compared to the second quarter of 2023 were the additional employees added in the Limestone Merger. The increase for the first six 57 Table of Contents months of 2024 compared to the first six months of 2023 was driven by the additional employees added in the Limestone Merger coupled with annual merit increases. Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years. An adjustment is made at the vesting date to reverse expense relating to forfeitures for performance awards, and at the date of forfeiture to reverse expense for non-vested restricted common share awards. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year based upon Peoples achieving certain performance goals during the prior year, and are generally contingent on employment through the vesting period. Stock-based compensation for the second quarter of 2024 decreased when compared to the first quarter of 2024 due to seasonal expenses recognized in the first quarter of each year. Deferred personnel costs represent the portion of current period salaries and employee benefit costs considered to be direct loan origination costs. These costs are capitalized and recognized over the life of the loan as a yield adjustment in interest income. As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with the average deferred costs per loan that are updated annually at the beginning of each year. Deferred personnel costs for the second quarter of 2024 increased when compared to both the first quarter of 2024 and the second quarter of 2023 due to an increase in loan origination volume. Peoples' net occupancy and equipment expense was comprised of the following: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Depreciation $ 2,170 $ 2,170 $ 1,876 $ 4,340 $ 3,666 Repairs and maintenance costs 1,607 1,821 1,334 3,428 2,595 Property taxes, utilities and other costs 1,152 1,293 1,182 2,445 2,339 Net rent expense 1,213 999 988 2,212 1,735 Net occupancy and equipment expense $ 6,142 $ 6,283 $ 5,380 $ 12,425 $ 10,335 The second quarter of 2024 net occupancy and equipment expense was relatively flat when compared to the linked quarter. The second quarter and the first six months of 2024 net occupancy and equipment expense increased when compared to the same periods of 2023 due to additional net occupancy and equipment expense from the Limestone Merger. The following table details the other items included in total non-interest expense: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Data processing and software expense $ 6,743 $ 5,769 $ 4,728 $ 12,512 $ 9,290 Professional fees 2,935 2,967 7,438 5,902 10,319 Amortization of other intangible assets 2,787 2,788 2,800 5,575 4,671 E-banking expense 1,941 1,781 1,832 3,722 3,323 FDIC insurance premiums 1,251 1,186 1,464 2,437 2,265 Other loan expenses 1,036 1,076 538 2,112 1,277 Franchise tax expense 760 881 872 1,641 1,906 Communication expense 736 799 724 1,535 1,337 Marketing expense 681 1,056 1,357 1,737 2,287 Other non-interest expense 7,182 4,986 5,465 12,168 10,039 Data processing and software expenses for the second quarter of 2024 increased compared to the linked quarter due to higher expenses attributable to recent technology projects. The increase for the second quarter and the first six months of 2024 when compared to the same periods in 2023 was driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization as a result of the Limestone Merger. Professional fees for the second quarter of 2024 were flat when compared to the linked quarter. Professional fees for the second quarter and first six months of 2024 compared to the same periods in 2023 decreased due to less acquisition-related expenses. 58 Table of Contents Amortization of other intangible assets for the second quarter of 2024 was flat compared to the linked quarter and the prior year quarter. Amortization of other intangible assets for the first six months of 2024 increased when compared to the same period of 2023 due to amortization of intangible assets recognized in the Limestone Merger. Peoples' e-banking expense is comprised of costs associated with debit and ATM cards. The increase in electronic banking income compared to the linked quarter and the first quarter of 2023 was due to an increase in customer activity. E-banking expense increased for the first six months of 2024 when compared to the first six months of 2023 due to additional customers brought in from the Limestone Merger. Peoples' FDIC insurance premiums for the second quarter of 2024 were relatively flat when compared to the linked quarter and the first quarter of 2023. FDIC insurance premiums for the first six months of 2024 increased when compared to the first six months of 2023 due to organic and acquisitive growth and an increase in rates assessed by the FDIC. Other loan expenses during the second quarter of 2024 were relatively flat when compared to the linked quarter. Other loan expenses increased for the second quarter and the first six months of 2024 when compared to the same periods of 2023 primarily due to increases in miscellaneous loan and collection expenses as a result of increased insurance costs associated with consumer indirect loans. Marketing expense for the second quarter of 2024 decreased when compared to the linked quarter due to lower advertising expense. Marketing expense for the second quarter and the first six months of 2024 decreased when compared to the same periods of 2023 due to lower acquisition-related expenses. Peoples is subject to state franchise taxes, which are based largely on Peoples' equity, in the states where Peoples has a physical presence. Franchise tax expense also includes the Ohio Financial Institution Tax ("FIT"), which is a business privilege tax that is imposed on financial institutions organized for profit and doing business in Ohio. The Ohio FIT is based on the total equity capital in proportion to the taxpayer's gross receipts in Ohio as of the most recent year-end. The decrease in franchise tax expense for the second quarter of 2024 when compared to the second quarter of 2023 was driven by a lower apportionment in Ohio. Other non-interest expense for the second quarter of 2024 increased when compared to the linked quarter and the second quarter of 2023 due to a one-time prior period true-up of corporate expenses. Income Tax Expense Peoples recorded income tax expense of $6.9 million with an effective tax rate of 19.1% for the second quarter of 2024, compared to income tax expense of $8.3 million with an effective tax rate of 21.8% for the linked quarter and income tax expense of $6.2 million with an effective tax rate of 22.6% for the second quarter of 2023. The decrease in income tax expense when compared to the prior quarter was driven by a $1.1 million one-time benefit related to a prior year amended return. The increase in income tax expense when compared to the second quarter of 2023 was primarily due to higher pre-tax income. Peoples recorded income tax expense of $15.1 million with an effective tax rate of 20.5% in the first six months of 2024 and $13.2 million with an effective tax rate of 21.7% in the first six months of 2023. The increase was driven by higher pre-tax income. Additional information regarding income taxes can be found in "Note 13. Income Taxes" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K. Pre-Provision Net Revenue (Non-US GAAP) Pre-provision net revenue ("PPNR") has become a key financial measure used by state and federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus total non-interest income, excluding all gains and losses, minus total non-interest expense. As a result, PPNR represents the earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital. This measure represents a Non-US GAAP financial measure since it excludes the provision for (recovery of) credit losses and all gains and losses included in earnings. 59 Table of Contents The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Pre-provision net revenue: Income before income taxes $ 35,876 $ 37,852 $ 27,262 $ 73,728 $ 60,868 Add: provision for credit losses 5,683 6,102 7,983 11,785 9,836 Add: loss on OREO — — 1,612 — 1,622 Add: loss on investment securities 353 1 166 354 2,101 Add: loss on other assets 397 309 45 706 274 Add: loss on other transactions 31 32 8 63 15 Pre-provision net revenue $ 42,340 $ 44,296 $ 37,076 $ 86,636 $ 74,716 Total average assets $9,180,454 $9,021,651 $8,342,883 $9,101,052 $7,792,579 Pre-provision net revenue to total average assets (annualized) 1.85 % 1.97 % 1.78 % 1.91 % 1.93 % Weighted-average common shares outstanding - diluted 35,117,648 35,051,810 32,649,976 35,071,550 30,314,504 Pre-provision net revenue per common share - diluted $ 1.20 $ 1.26 $ 1.13 $ 2.45 $ 2.45 The decrease in the PPNR for the second quarter of 2024 compared to the linked quarter was driven by decreased non-interest income and lower accretion income. The increase in PPNR for the second quarter of 2024 when compared to the second quarter of 2023 was due to increased net interest income reflecting the positive impact of the additional net interest income from Limestone customers after the Limestone Merger. Core Non-Interest Expense (Non-US GAAP) Core non-interest expense is a financial measure used to evaluate Peoples' recurring expense stream. This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses. The following table provides a reconciliation of this Non-US GAAP measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Core non-interest expense: Total non-interest expense $ 68,758 $ 68,465 $ 70,623 $ 137,223 $ 127,102 Less: acquisition-related expenses — (84) 10,709 (84) 11,260 Add: COVID-19 Employee Retention Credit — — 548 — 548 Core non-interest expense $ 68,758 $ 68,549 $ 60,462 $ 137,307 $ 116,390 Efficiency Ratio (Non-US GAAP) The efficiency ratio is a key financial measure used to monitor performance. The efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of FTE net interest income plus total non-interest income excluding net gains and losses. This measure is Non-US GAAP since it excludes amortization of other intangible assets and all gains and losses included in earnings, and uses FTE net interest income. 60 Table of Contents The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Efficiency ratio: Total non-interest expense $ 68,758 $ 68,465 $ 70,623 $ 137,223 $ 127,102 Less: amortization of other intangible assets 2,787 2,788 2,800 5,575 4,671 Adjusted total non-interest expense 65,971 65,677 67,823 131,648 122,431 Total non-interest income 23,704 25,779 21,015 49,483 40,075 Less: net loss on investment securities (353) (1) (166) (354) (2,101) Less: net loss on asset disposals and other transactions (428) (341) (1,665) (769) (1,911) Total non-interest income excluding net losses 24,485 26,121 22,846 50,606 44,087 Net interest income 86,613 86,640 84,853 173,253 157,731 Add: FTE adjustment (a) 352 352 386 705 738 Net interest income on an FTE basis 86,965 86,992 85,239 173,958 158,469 Adjusted revenue $ 111,450 $ 113,113 $ 108,085 $ 224,564 $ 202,556 Efficiency ratio 59.19 % 58.06 % 62.75 % 58.62 % 60.44 % Efficiency ratio adjusted for non-core items: Core non-interest expense $ 68,758 $ 68,549 $ 60,462 $ 137,307 $ 116,390 Less: amortization of other intangible assets 2,787 2,788 2,800 5,575 4,671 Adjusted core non-interest expense 65,971 65,761 57,662 131,732 111,719 Non-interest income excluding net losses 24,485 26,121 22,846 50,606 44,087 Net interest income on an FTE basis 86,965 86,992 85,239 173,958 158,469 Adjusted revenue $ 111,450 $ 113,113 $ 108,085 $ 224,564 $ 202,556 Efficiency ratio adjusted for non-core items 59.19 % 58.14 % 53.35 % 58.66 % 55.15 % (a) Interest income and yields are presented on a fully tax-equivalent basis, using a 21% statutory federal corporate income tax rate. The efficiency ratio for the second quarter of 2024 when compared to the linked quarter was higher as the result of a reduction in fee-based income and improved compared to prior year quarter due to the decrease in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, increased compared to the linked quarter mainly as a result of a reduction in non-interest income. The efficiency ratio for the first six months of 2024 improved compared to the prior year first six months due to the decrease in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, increased for the first six months of 2024 when compared to the first six months of 2023, primarily due to increased non-interest expense. Peoples continues to focus on controlling expenses, while recognizing necessary costs in order to continue growing the business. Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP) In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance. The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses and acquisition-related expenses. 61 Table of Contents The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Annualized net income adjusted for non-core items: Net income $ 29,007 $ 29,584 $ 21,096 $ 58,591 $ 47,656 Add: net loss on investment securities 353 1 166 354 2,101 Less: tax effect of net loss on investment securities (a) 74 — 35 74 441 Add: net loss on asset disposals and other transactions 428 341 1,665 769 1,911 Less: tax effect of net loss on asset disposals and other transactions (a) 90 72 349 161 401 Add: acquisition-related expenses — (84) 10,709 (84) 11,260 Less: tax effect of acquisition-related expenses (a) — (18) 2,249 (18) 2,365 Less: COVID-19 Employee Retention Credit — — 548 — 548 Add: tax effect of COVID-19 Employee Retention Credit (a) — — 115 — 115 Net income adjusted for non-core items (after tax) $ 29,624 $ 29,788 $ 30,570 $ 59,413 $ 59,288 Days in the period 91 91 91 182 181 Days in the year 366 366 365 366 365 Annualized net income $ 116,666 $ 118,986 $ 84,616 $ 117,826 $ 96,102 Annualized net income adjusted for non-core items (after tax) $ 119,147 $ 119,807 $ 122,616 $ 119,479 $ 119,559 Return on average assets: Annualized net income $ 116,666 $ 118,986 $ 84,616 $ 117,826 $ 96,102 Total average assets 9,180,454 9,021,651 8,342,883 9,101,052 7,792,579 Return on average assets 1.27 % 1.32 % 1.01 % 1.29 % 1.23 % Return on average assets adjusted for non-core items: Annualized net income adjusted for non-core items (after tax) $ 119,147 $ 119,807 $ 122,616 $ 119,479 $ 119,559 Total average assets 9,180,454 9,021,651 8,342,883 9,101,052 7,792,579 Return on average assets adjusted for non-core items (after tax) 1.30 % 1.33 % 1.47 % 1.31 % 1.53 % (a) Based on a 21% statutory federal corporate income tax rate. The return on average assets and the return on average assets adjusted for non-core items for the second quarter of 2024 decreased when compared to the linked quarter, due to a decrease in annualized net income resulting from lower non-interest income and by an increase in average assets. The decrease in the return on average assets adjusted for non-core items for the second quarter of 2024, compared to the second quarter of 2023, was attributable to an increase in annualized net income primarily due to an increase in net interest income, partially offset by the assets acquired in the Limestone Merger and an increase in expenses. The decrease in return on average assets adjusted for non-core items for the first six months of 2024 when compared to the first six months of 2023, was primarily driven by an increase in annualized net income, partially offset with assets acquired in the Limestone Merger. Return on Average Tangible Equity Ratio (Non-US GAAP) The return on average tangible equity ratio is a key financial measure used to monitor performance. This ratio is calculated as annualized net income (less the after-tax impact of amortization of other intangible assets) divided by average tangible equity. This 62 Table of Contents measure is Non-US GAAP since it excludes amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity. Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, (Dollars in thousands) 2024 2023 Annualized net income excluding amortization of other intangible assets: Net income $ 29,007 $ 29,584 $ 21,096 $ 58,591 $ 47,656 Add: amortization of other intangible assets 2,787 2,788 2,800 5,575 4,671 Less: tax effect of amortization of other intangible assets (a) 585 585 588 1,171 981 Net income excluding amortization of other intangible assets $ 31,209 $ 31,787 $ 23,308 $ 62,995 $ 51,346 Days in the period 91 91 91 182 181 Days in the year 366 366 365 366 365 Annualized net income $ 116,666 $ 118,986 $ 84,616 $ 117,826 $ 96,102 Annualized net income excluding amortization of other intangible assets $ 125,522 $ 127,847 $ 93,488 $ 126,682 $ 103,543 Average tangible equity: Total average stockholders' equity $ 1,061,454 $ 1,052,781 $ 951,438 $ 1,057,117 $ 876,866 Less: average goodwill and other intangible assets 407,864 410,719 387,055 409,292 356,470 Average tangible equity $ 653,590 $ 642,062 $ 564,383 $ 647,825 $ 520,396 Return on total average stockholders' equity ratio: Annualized net income $ 116,666 $ 118,986 $ 84,616 $ 117,826 $ 96,102 Total average stockholders' equity $ 1,061,454 $ 1,052,781 $ 951,438 $ 1,057,117 $ 876,866 Return on total average stockholders' equity 10.99 % 11.30 % 8.89 % 11.15 % 10.96 % Return on average tangible equity ratio: Annualized net income excluding amortization of other intangible assets $ 125,522 $ 127,847 $ 93,488 $ 126,682 $ 103,543 Average tangible equity $ 653,590 $ 642,062 $ 564,383 $ 647,825 $ 520,396 Return on average tangible equity 19.21 % 19.91 % 16.56 % 19.55 % 19.90 % (a) Based on a 21% statutory federal corporate income tax rate. The return on total average stockholders' equity and average tangible equity ratios decreased when compared to the linked quarter due to a decrease in annualized net income mainly attributable to a decrease in non-interest income. The increases in the return on total average stockholders' equity and average tangible equity ratios in the second quarter of 2024 when compared to the same period of 2023 were due to an increase in total net interest income driven by the 2023 increases in market interest rates and additional net interest income from Limestone following the Limestone Merger. 63 Table of Contents FINANCIAL CONDITION Cash and Cash Equivalents At June 30, 2024, Peoples' interest-bearing deposits in other banks had decreased $199.2 million from December 31, 2023. The total cash and cash equivalents balance included $109.7 million of excess cash reserves being maintained at the FRB of Cleveland at June 30, 2024, compared to $309.8 million at December 31, 2023. The amount of excess cash reserves maintained is dependent upon Peoples' daily liquidity position, which is driven primarily by changes in deposit and loan balances. Through the first six months of 2024, Peoples' total cash and cash equivalents decreased $190.9 million, which reflected cash outflows of $273.4 million of cash used in investing activities, partially offset by cash inflows of $69.1 million of cash provided by operating activities and $13.4 million of cash provided by financing activities. Peoples' use of cash in investing activities reflected a $164.5 million net increase in loans held for investment and a net cash outflow from available-for-sale investment securities of $83.4 million. The cash provided by financing activities was largely driven by a $240.4 million net increase in interest-bearing deposits, mostly offset by a net decrease in short-term borrowings of $118.4 million and a net decrease in non-interest bearing deposits of $95.0 million. Further information regarding the management of Peoples' liquidity position can be found later in this discussion under “Interest Rate Sensitivity and Liquidity.” Investment Securities The following table provides information regarding Peoples’ investment portfolio: (Dollars in thousands) Weighted Average Yield June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Available-for-sale securities, at fair value: Obligations of: U.S. Treasury and government agencies 4.19 % $ 28,343 $ 28,773 $ 30,296 $ 42,466 $ 75,255 U.S. government sponsored agencies 4.37 % 230,916 200,460 118,607 103,932 98,324 States and political subdivisions 2.54 % 202,804 208,750 213,296 220,460 248,271 Residential mortgage-backed securities 2.33 % 601,002 621,691 628,924 593,104 635,487 Commercial mortgage-backed securities 1.87 % 50,035 50,791 51,234 50,840 52,830 Bank-issued trust preferred securities 4.51 % 6,039 6,001 5,965 7,779 23,272 Total fair value $ 1,119,139 $ 1,116,466 $ 1,048,322 $ 1,018,581 $ 1,133,439 Total amortized cost $ 1,266,060 $ 1,262,319 $ 1,184,288 $ 1,211,794 $ 1,292,331 Net unrealized loss $ (146,921) $ (145,853) $ (135,966) $ (193,213) $ (158,892) Held-to-maturity securities, at amortized cost: Obligations of: U.S. government sponsored agencies 4.99 % $ 212,023 $ 188,423 $ 188,475 $ 174,699 $ 176,027 States and political subdivisions (a) 2.23 % 144,134 144,315 144,258 144,490 144,668 Residential mortgage-backed securities 3.88 % 246,283 246,579 248,559 248,627 243,807 Commercial mortgage-backed securities 2.46 % 99,782 100,427 102,365 107,593 109,423 Total amortized cost $ 702,222 $ 679,744 $ 683,657 $ 675,409 $ 673,925 Other investment securities $ 62,742 $ 62,939 $ 63,421 $ 66,332 $ 63,579 Total investment securities: Amortized cost $ 2,031,024 $ 2,005,002 $ 1,931,366 $ 1,953,535 $ 2,029,835 Carrying value $ 1,884,103 $ 1,859,149 $ 1,795,400 $ 1,760,322 $ 1,870,943 (a) Amortized cost is presented net of the allowance for credit losses of $238 at June 30, 2024 and at March 31, 2024, and $241 at June 30, 2023. For the second quarter of 2024, total investment securities increased compared to all prior periods due to higher yielding, longer duration securities booked to held-to-maturity. During the fourth quarter of 2023, Peoples executed the sales of $36.5 million of lower yielding available-for-sale investment securities for an after-tax loss of $1.3 million. Proceeds from the sales were used to purchase higher yielding agency investment securities. The realized losses recognized due to the fourth quarter of 2023 sales are expected to be earned back within 14 months of the transaction dates. 64 Table of Contents Additional information regarding Peoples' investment portfolio can be found in "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements. Loans and Leases The following table provides information regarding outstanding loan balances: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Originated loans and leases: Construction $ 291,240 $ 262,209 $ 279,335 $ 289,657 $ 297,051 Commercial real estate, other 1,240,069 1,263,577 1,209,204 1,161,064 1,035,473 Commercial real estate 1,531,309 1,525,786 1,488,539 1,450,721 1,332,524 Commercial and industrial 1,032,753 972,191 938,659 860,407 873,386 Premium finance 293,349 238,962 203,177 189,251 162,357 Leases 390,160 373,626 357,217 328,365 287,948 Residential real estate 441,293 420,518 418,570 405,917 396,667 Home equity lines of credit 172,766 164,019 148,155 140,787 132,222 Consumer, indirect 675,054 650,228 666,472 668,371 654,371 Consumer, direct 100,836 99,022 112,292 114,160 101,786 Consumer 775,890 749,250 778,764 782,531 756,157 Deposit account overdrafts 1,067 1,306 986 857 830 Total originated loans and leases $ 4,638,587 $ 4,445,658 $ 4,334,067 $ 4,158,836 $ 3,942,091 Acquired loans and leases (a): Construction $ 49,361 $ 52,478 $ 84,684 $ 84,359 $ 121,690 Commercial real estate, other 955,910 980,203 987,753 1,028,920 1,036,041 Commercial real estate 1,005,271 1,032,681 1,072,437 1,113,279 1,157,731 Commercial and industrial 225,310 242,424 246,327 268,402 286,924 Leases 40,491 49,068 56,843 74,270 89,843 Residential real estate 348,051 361,370 372,525 386,048 394,775 Home equity lines of credit 54,842 57,060 60,520 63,153 66,999 Consumer, direct 12,819 14,566 16,477 20,402 36,233 Total acquired loans and leases $ 1,686,784 $ 1,757,169 $ 1,825,129 $ 1,925,554 $ 2,032,505 Total loans and leases $ 6,325,371 $ 6,202,827 $ 6,159,196 $ 6,084,390 $ 5,974,596 Percent of loans and leases to total loans and leases: Construction 5.4 % 5.1 % 5.9 % 6.1 % 7.0 % Commercial real estate, other 34.7 % 36.2 % 35.7 % 36.0 % 34.8 % Commercial real estate 40.1 % 41.3 % 41.6 % 42.1 % 41.8 % Commercial and industrial 19.9 % 19.6 % 19.2 % 18.6 % 19.4 % Premium finance 4.6 % 3.8 % 3.3 % 3.1 % 2.7 % Leases 6.8 % 6.8 % 6.7 % 6.6 % 6.3 % Residential real estate 12.5 % 12.6 % 12.9 % 13.0 % 13.2 % Home equity lines of credit 3.6 % 3.6 % 3.4 % 3.4 % 3.3 % Consumer, indirect 10.7 % 10.5 % 10.8 % 11.0 % 11.0 % Consumer, direct 1.8 % 1.8 % 2.1 % 2.2 % 2.3 % Consumer 12.5 % 12.3 % 12.9 % 13.2 % 13.3 % Total percentage 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Residential real estate loans being serviced for others $ 341,298 $ 348,937 $ 356,784 $ 366,996 $ 375,882 (a) Includes all loans acquired, and related loan discount recorded as part of acquisition accounting, in 2012 or thereafter. Loans that were acquired and subsequently re-underwritten are reported as originated upon execution of such credit actions (for example, renewals and increases in lines of credit). The period-end total loan and lease balances at June 30, 2024 increased $122.5 million, or 8% annualized, compared to at March 31, 2024. The increase in the period-end loan and lease balance at June 30, 2024 compared to March 31, 2024 was primarily driven by increases of (i) $54.4 million in premium finance loans, (ii) $43.4 million in commercial and industrial loans, (iii) $25.9 million in construction loans, (iv) and $24.8 million in indirect consumer loans. These were partially offset by a decrease of $47.8 million in other commercial real estate loans. The increase in the period-end loan and lease balances at June 30, 2024 compared to at June 30, 2023 was primarily driven by loan growth. 65 Table of Contents Loan Concentration Peoples categorizes its commercial loans according to standard industry classifications and monitors for concentrations in a single industry or multiple industries that could be impacted by changes in economic conditions in a similar manner. Peoples' commercial lending activities continue to be spread over a diverse range of businesses from all sectors of the economy, with no single industry comprising over 10% of Peoples' total loan portfolio. Loans secured by commercial real estate, including commercial construction loans, continued to comprise the largest portion of Peoples' loan portfolio. The following tables provide information regarding the largest concentrations of commercial construction loans and other commercial real estate loans within the loan portfolio at June 30, 2024: (Dollars in thousands) Outstanding Balance Loan Commitments Total Exposure % of Total Construction: Apartment complexes $ 226,170 $ 249,829 $ 475,999 68.3 % Residential property 23,670 28,738 52,408 7.5 % Land development 30,933 11,572 42,505 6.1 % Land only 23,980 12,612 36,592 5.3 % Assisted living facilities and nursing homes 3,269 17,812 21,081 3.0 % Lodging and lodging related — 16,270 16,270 2.3 % Student housing 12,597 2,403 15,000 2.2 % Other (a) 19,982 17,143 37,125 5.3 % Total construction $ 340,601 $ 356,379 $ 696,980 100.0 % (a) All other total exposures by industry are less than 2% of the Total Exposure. 66 Table of Contents (Dollars in thousands) Outstanding Balance Loan Commitments Total Exposure % of Total Commercial real estate, other: Apartment complexes $ 319,373 $ 1,854 $ 321,227 14.2 % Retail facilities: Owner occupied $ 50,296 $ 1,644 $ 51,940 2.3 % Non-owner occupied 237,202 803 238,005 10.5 % Total retail facilities $ 287,498 $ 2,447 $ 289,945 12.8 % Light industrial facilities: Owner occupied $ 143,432 $ 6,539 $ 149,971 6.6 % Non-owner occupied 100,506 4,107 104,613 4.6 % Total light industrial facilities $ 243,938 $ 10,646 $ 254,584 11.2 % Office buildings and complexes: Owner occupied $ 82,169 $ 2,905 $ 85,074 3.8 % Non-owner occupied 124,533 7,746 132,279 5.8 % Total office buildings and complexes $ 206,702 $ 10,651 $ 217,353 9.6 % Lodging and lodging related: Owner occupied $ 30,028 $ — $ 30,028 1.3 % Non-owner occupied 123,999 1 124,000 5.5 % Total lodging and lodging related $ 154,027 $ 1 $ 154,028 6.8 % Assisted living facilities and nursing homes $ 139,949 $ 1,381 $ 141,330 6.2 % Warehouse facilities: Owner occupied $ 40,823 $ 617 $ 41,440 1.8 % Non-owner occupied 37,340 121 37,461 1.7 % Total warehouse facilities $ 78,163 $ 738 $ 78,901 3.5 % Restaurant/bar facilities: Owner occupied $ 40,611 $ 247 $ 40,858 1.8 % Non-owner occupied 35,212 — 35,212 1.6 % Total restaurant/bar facilities $ 75,823 $ 247 $ 76,070 3.4 % Mixed-use facilities: Owner occupied $ 37,535 $ 1,164 $ 38,699 1.7 % Non-owner occupied 28,071 1,652 29,723 1.3 % Total mixed-use facilities $ 65,606 $ 2,816 $ 68,422 3.0 % Education services: Owner occupied $ 15,390 $ — $ 15,390 0.7 % Non-owner occupied 29,512 4,000 33,512 1.5 % Total education services $ 44,902 $ 4,000 $ 48,902 2.2 % Other (a) 579,998 33,939 613,937 27.1 % Total commercial real estate, other $ 2,195,979 $ 68,720 $ 2,264,699 100.0 % (a) All other total exposures by industry are less than 2% of the Total Exposure. Peoples' commercial lending activities continue to focus on lending opportunities within Ohio, Kentucky, West Virginia, Virginia, Washington, D.C. and Maryland. For all other states, the aggregate outstanding balances of commercial loans in each state were less than 3% of total loans at June 30, 2024 and December 31, 2023. The repayment of premium finance loans is secured by the underlying insurance policy prepaid premium, and therefore, has no geographical impact from a repayment perspective. The repayment of leases is secured by the underlying equipment collateral and not real estate, which mitigates geographic risk. 67 Table of Contents Allowance for Credit Losses The amount of the allowance for credit losses at the end of each period represents management's estimate of expected losses from existing loans based upon its quarterly analysis of the loan portfolio. While this process involves allocations being made to specific loans and pools of loans, the entire allowance is available for all losses expected within the loan portfolio. The following details management's allocation of the allowance for credit losses: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Construction $ 673 $ 701 $ 699 $ 1,241 $ 1,496 Commercial real estate, other 19,852 21,788 20,915 21,257 19,731 Commercial and industrial 10,943 10,581 10,490 10,205 11,028 Premium finance 763 607 484 476 431 Leases 15,218 12,889 10,850 11,692 10,377 Residential real estate 5,939 5,866 5,937 6,251 6,112 Home equity lines of credit 1,737 1,689 1,588 1,640 1,676 Consumer, indirect 8,654 8,301 8,590 7,516 7,610 Consumer, direct 2,332 2,279 2,343 2,519 2,642 Deposit account overdrafts 136 121 115 127 108 Allowance for credit losses $ 66,247 $ 64,822 $ 62,011 $ 62,924 $ 61,211 As a percent of total loans 1.05 % 1.05 % 1.01 % 1.03 % 1.02 % The increase in the allowance for credit losses at June 30, 2024 compared to March 31, 2024 was primarily due to an increase of reserves on individually analyzed loans and leases. The increase in the allowance balance at June 30, 2024 when compared to June 30, 2023 was driven by loan growth and a deterioration in macro-economic conditions used within the CECL model, partially offset by a release of reserves on individually analyzed loans and leases. Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2023 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements in this Form 10-Q. The following table summarizes Peoples’ net charge-offs and recoveries: Three Months Ended (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Gross charge-offs: Construction $ — $ — $ — $ — $ — Commercial real estate, other — 212 296 278 7 Commercial and industrial 56 235 640 199 11 Premium finance 55 54 43 33 23 Leases 2,377 1,270 2,019 905 604 Residential real estate 64 80 20 50 59 Home equity lines of credit 9 — 4 32 55 Consumer, indirect 1,567 1,461 1,234 926 941 Consumer, direct 141 226 142 92 78 Consumer 1,708 1,687 1,376 1,018 1,019 Deposit account overdrafts 338 336 352 319 263 Total gross charge-offs $ 4,607 $ 3,874 $ 4,750 $ 2,834 $ 2,041 Recoveries: Commercial real estate, other $ (80) $ 83 $ 825 $ 97 $ 16 Commercial and industrial 10 7 98 3 451 Premium finance 4 8 — 12 3 Leases 173 212 25 168 89 Residential real estate 68 83 67 27 69 Home equity lines of credit — 7 1 — — Consumer, indirect 117 71 130 149 129 Consumer, direct 15 9 12 11 35 Consumer 132 80 142 160 164 68 Table of Contents Three Months Ended (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Deposit account overdrafts 67 74 103 49 53 Total recoveries $ 374 $ 554 $ 1,261 $ 516 $ 845 Net charge-offs (recoveries): Construction $ — $ — $ — $ — $ — Commercial real estate, other 80 129 (529) 181 (9) Commercial and industrial 46 228 542 196 (440) Premium finance 51 46 43 21 20 Leases 2,204 1,058 1,994 737 515 Residential real estate (4) (3) (47) 23 (10) Home equity lines of credit 9 (7) 3 32 55 Consumer, indirect 1,450 1,390 1,104 777 812 Consumer, direct 126 217 130 81 43 Consumer 1,576 1,607 1,234 858 855 Deposit account overdrafts 271 262 249 270 210 Total net charge-offs $ 4,233 $ 3,320 $ 3,489 $ 2,318 $ 1,196 Ratio of net charge-offs (recoveries) to average total loans (annualized): Construction — % — % — % — % — % Commercial real estate, other 0.01 % 0.01 % (0.03) % 0.01 % — % Commercial and industrial — % 0.02 % 0.03 % 0.01 % (0.03) % Premium finance — % — % — % — % — % Leases 0.14 % 0.07 % 0.13 % 0.05 % 0.04 % Residential real estate — % — % — % — % — % Home equity lines of credit — % — % — % — % — % Consumer, indirect 0.09 % 0.09 % 0.07 % 0.05 % 0.06 % Consumer, direct 0.01 % 0.01 % 0.01 % 0.01 % — % Consumer 0.10 % 0.10 % 0.08 % 0.06 % 0.06 % Deposit account overdrafts 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Total 0.27 % 0.22 % 0.23 % 0.15 % 0.09 % Each with "--%" not meaningful. Total net charge-offs during the second quarter of 2024 were $4.2 million, or 0.27% of average total loans on an annualized basis, compared to $3.3 million, or 0.22% of average total loans on an annualized basis, during the linked quarter and $1.2 million, or 0.09% of average total loans on an annualized basis, during the second quarter of 2023. The increase for the second quarter of 2024 when compared to the linked quarter was driven by an increase in net charge-offs on leases originated by our North Star Leasing business. The increase in net charge-offs during the second quarter of 2024 versus the prior year second quarter was primarily attributable to an increase in charge-offs on (i) leases originated by our North Star Leasing business, (ii) indirect consumer loans, and (iii) commercial and industrial loans. 69 Table of Contents The following table details Peoples’ nonperforming assets: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Loans 90+ days past due and accruing: Commercial real estate, other $ 106 $ 231 $ 78 $ 487 $ 15 Commercial and industrial 208 10 316 67 — Premium finance 2,546 2,208 1,355 1,581 987 Leases 3,193 4,070 3,826 6,007 3,847 Residential real estate 1,209 780 877 736 856 Home equity lines of credit 230 181 171 177 148 Consumer, indirect 67 134 68 47 40 Consumer, direct 33 48 25 15 31 Consumer 100 182 93 62 71 Total loans 90+ days past due and accruing $ 7,592 $ 7,662 $ 6,716 $ 9,117 $ 5,924 Nonaccrual loans: Commercial real estate, other 4,833 3,773 2,816 3,661 8,987 Commercial and industrial 6,030 6,205 2,758 3,116 3,438 Leases 11,849 10,136 8,436 7,929 4,800 Residential real estate 7,078 7,450 7,921 8,454 8,393 Home equity lines of credit 1,454 1,134 1,022 1,026 841 Consumer, indirect 2,261 2,506 2,412 1,904 1,982 Consumer, direct 164 157 112 97 355 Consumer 2,425 2,663 2,524 2,001 2,337 Total nonaccrual loans $ 33,669 $ 31,361 $ 25,477 $ 26,187 $ 28,796 Total nonperforming loans ("NPLs") $ 41,261 $ 39,023 $ 32,193 $ 35,304 $ 34,720 OREO: Commercial $ 7,118 $ 7,118 $ 7,118 $ 7,118 $ 7,118 Residential 291 120 56 56 48 Total OREO $ 7,409 $ 7,238 $ 7,174 $ 7,174 $ 7,166 Total nonperforming assets ("NPAs") $ 48,670 $ 46,261 $ 39,367 $ 42,478 $ 41,886 Criticized loans (a) $ 239,943 $ 256,565 $ 235,239 $ 213,156 $ 219,885 Classified loans (b) $ 120,180 $ 147,518 $ 120,027 $ 124,836 $ 110,972 Asset Quality Ratios (c): Nonaccrual loans as a percent of total loans 0.53 % 0.51 % 0.41 % 0.43 % 0.48 % NPLs as a percent of total loans (d) 0.65 % 0.63 % 0.52 % 0.58 % 0.58 % NPAs as a percent of total assets (d) 0.53 % 0.50 % 0.43 % 0.48 % 0.48 % NPAs as a percent of total loans and OREO (d) 0.77 % 0.74 % 0.64 % 0.70 % 0.70 % Allowance for credit losses as a percent of nonaccrual loans 196.76 % 206.70 % 245.79 % 240.29 % 212.57 % Allowance for credit losses as a percent of NPLs (d) 160.56 % 166.11 % 194.38 % 178.23 % 176.30 % Criticized loans as a percent of total loans (a) 3.79 % 4.14 % 3.82 % 3.50 % 3.68 % Classified loans as a percent of total loans (b) 1.90 % 2.38 % 1.95 % 2.05 % 1.86 % (a) Includes loans categorized as special mention, substandard or doubtful. (b) Includes loans categorized as substandard or doubtful. (c) Data presented as of the end of the period indicated. (d) NPLs include loans 90+ days past due and accruing and nonaccrual loans. NPAs include nonperforming loans and OREO. 70 Table of Contents Compared to at March 31, 2024, Peoples' NPAs increased from 0.50% of total assets to 0.53% at June 30, 2024. Total loans 90+ days past due and accruing decreased at June 30, 2024 compared to at March 31, 2024, mostly due to decreases in nonperforming leases. Total nonaccrual loans increased at June 30, 2024 compared to at March 31, 2024, mostly due to increases in nonaccrual leases and other commercial real estate. During the second quarter of 2024, criticized loans decreased $16.6 million, while classified loans decreased $27.3 million when compared to at March 31, 2024. The decrease in the amounts of criticized loans compared to at March 31, 2024 was primarily driven by by loan upgrades and several large criticized loan pay-offs. The decrease in the amount of classified loans compared to at March 31, 2024 was primarily by loan upgrades and classified loan pay-offs. The increase in NPAs compared to at December 31, 2023, was primarily driven by increases of nonaccrual leases originated by our North Star Leasing business, commercial and industrial loans, and other commercial real estate loans. The increase in NPAs compared to at June 30, 2023, was impacted by the increase of nonaccrual leases originated by our North Star Leasing business and an increase in loans past due and accruing. Deposits The following table details Peoples’ deposit balances: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Non-interest-bearing deposits (a) $ 1,472,697 $ 1,468,363 $ 1,567,649 $ 1,569,095 $ 1,682,634 Interest-bearing deposits: Interest-bearing demand accounts (a) 1,083,512 1,107,712 1,144,357 1,181,079 1,225,646 Savings accounts 880,542 901,493 919,244 987,170 1,116,622 Retail CDs 1,812,874 1,680,413 1,443,417 1,198,733 950,783 Money market deposit accounts 869,159 859,961 775,488 730,902 718,633 Governmental deposit accounts 766,337 825,170 726,713 761,625 705,596 Brokered CDs 412,653 483,444 575,429 608,914 559,955 Total interest-bearing deposits 5,825,077 5,858,193 5,584,648 5,468,423 5,277,235 Total deposits $ 7,297,774 $ 7,326,556 $ 7,152,297 $ 7,037,518 $ 6,959,869 Demand deposits as a percent of total deposits 35 % 35 % 38 % 39 % 42 % (a) The sum of amounts presented is considered total demand deposits. At June 30, 2024, period-end total deposits decreased $28.8 million compared to at March 31, 2024, primarily driven by decreases of (i) $70.8 million in brokered CDs, (ii) $58.8 million in governmental deposits, and (iii) $24.2 million in interest-bearing demand deposit accounts, partially offset by an increase of $132.5 million in retail CDs. The increase in retail CDs was due to current specials being offered, while the decrease in governmental deposit accounts was due to the seasonality of those balances, which are typically higher in the first quarter. At June 30, 2024, period-end total deposits increased $337.9 million, or 5%, compared to at June 30, 2023. The increase was primarily driven by increases of $862.1 million in retail CDs, $150.5 million in money market deposit accounts, and $60.7 million in governmental deposit accounts, offset by decreases of $236.1 million, $209.9 million, $147.3 million, and $142.1 million in savings accounts, non-interest bearing deposits, brokered CDs, and interest-bearing demand deposit accounts, respectively. The increase in retail CDs was driven by current promotions being offered. As part of its funding strategy, Peoples hedges 90-day brokered CDs with interest rate swaps. The interest rate swaps pay a fixed rate of interest while receiving a floating rate component of interest tied to term SOFR, which offsets the rate on the brokered CDs. As of June 30, 2024, Peoples had 9 effective interest rate swaps, with an aggregate notional value of $85.0 million, which were designated as cash flow hedges of overnight brokered CDs and are expected to be extended every 90 days through the maturity dates of the interest rate swaps. Peoples continually evaluates the overall balance sheet position given the interest rate environment. 71 Table of Contents Borrowed Funds The following table details Peoples’ short-term borrowings and long-term borrowings: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Short-term borrowings: FHLB Overnight borrowings $ 295,000 $ 260,192 $ 369,000 $ 484,000 $ 444,000 Retail repurchase agreements 24,733 90,304 99,121 101,437 125,935 Bank Term Funding Program ("BTFP") 163,000 163,000 133,000 — — Total short-term borrowings $ 482,733 $ 513,496 $ 601,121 $ 585,437 $ 569,935 Long-term borrowings: FHLB advances $ 132,524 $ 132,683 $ 112,865 $ 83,247 $ 33,755 Vantage non-recourse debt 47,393 49,529 49,572 41,783 41,963 Other long-term borrowings 54,340 54,071 53,804 48,282 47,861 Total long-term borrowings $ 234,257 $ 236,283 $ 216,241 $ 173,312 $ 123,579 Total borrowed funds $ 716,990 $ 749,779 $ 817,362 $ 758,749 $ 693,514 Total borrowed funds, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances. Other long-term borrowings include trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures. Total borrowed funds at June 30, 2024 decreased compared to at March 31, 2024, primarily due to lower retail repurchase agreements. Total long-term borrowings at June 30, 2024 increased when compared to at June 30, 2023 due to an increase in FHLB long term advances. Capital/Stockholders’ Equity At June 30, 2024, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations. These higher capital levels reflect Peoples' desire to maintain a strong capital position. In order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer of 2.50%, which applies to the common equity tier 1 ("CET1") ratio, the tier 1 capital ratio and the total risk-based capital ratio. At June 30, 2024, Peoples had a capital conservation buffer of 5.66%. The following table details Peoples' risk-based capital levels and corresponding ratios: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Capital Amounts: Common Equity Tier 1 $ 799,710 $ 780,017 $ 766,691 $ 752,728 $ 728,892 Tier 1 854,050 834,089 820,495 801,010 776,753 Total (Tier 1 and Tier 2) 916,073 894,662 873,225 855,054 828,910 Net risk-weighted assets $ 6,802,528 $ 6,674,114 $ 6,524,577 $ 6,505,779 $ 6,417,511 Capital Ratios: Common Equity Tier 1 11.76 % 11.69 % 11.75 % 11.57 % 11.36 % Tier 1 12.55 % 12.50 % 12.58 % 12.31 % 12.10 % Total (Tier 1 and Tier 2) 13.47 % 13.40 % 13.38 % 13.14 % 12.92 % Tier 1 leverage ratio 9.65 % 9.43 % 9.57 % 9.34 % 9.64 % Peoples' risk-based capital ratios at June 30, 2024 increased when compared to March 31, 2024, due to net income during the quarter, partially offset by dividends paid. Compared to at June 30, 2023, the tier 1 risk-based capital and the total risk-based capital ratios improved due to higher net income, partially offset by the impact of the Limestone Merger and dividends paid. The common equity tier 1 risk-based capital ratio at June 30, 2024 also increased compared to at June 30, 2023 due to higher net income. In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity. Such ratios represent Non-US GAAP financial measures since their calculation removes the impact of goodwill and other intangible assets acquired through acquisitions on amounts reported in the Unaudited Consolidated Balance Sheets. Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance, financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples. Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in 72 Table of Contents value should there be deterioration in the overall franchise value. As a result, tangible equity represents a conservative measure of the capacity for Peoples to incur losses but remain solvent. The following table reconciles the calculation of these Non-US GAAP financial measures to amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Tangible equity: Total stockholders' equity $ 1,077,833 $ 1,062,002 $ 1,053,534 $ 993,219 $ 998,907 Less: goodwill and other intangible assets 406,417 409,285 412,172 408,494 413,172 Tangible equity $ 671,416 $ 652,717 $ 641,362 $ 584,725 $ 585,735 Tangible assets: Total assets $ 9,226,461 $ 9,270,774 $ 9,157,382 $ 8,942,534 $ 8,786,635 Less: goodwill and other intangible assets 406,417 409,285 412,172 408,494 413,172 Tangible assets $ 8,820,044 $ 8,861,489 $ 8,745,210 $ 8,534,040 $ 8,373,463 Tangible book value per common share: Tangible equity $ 671,416 $ 652,717 $ 641,362 $ 584,725 $ 585,735 Common shares outstanding 35,498,977 35,486,234 35,314,745 35,395,990 35,374,916 Tangible book value per common share $ 18.91 $ 18.39 $ 18.16 $ 16.52 $ 16.56 Tangible equity to tangible assets ratio: Tangible equity $ 671,416 $ 652,717 $ 641,362 $ 584,725 $ 585,735 Tangible assets $ 8,820,044 $ 8,861,489 $ 8,745,210 $ 8,534,040 $ 8,373,463 Tangible equity to tangible assets 7.61 % 7.37 % 7.33 % 6.85 % 7.00 % Tangible book value per common share increased to $18.91 at June 30, 2024 compared to $18.39 at March 31, 2024. The change in tangible book value per common share was due to tangible equity increasing during the second quarter of 2024 primarily due to net income over the last three months. Tangible book value per common share at June 30, 2024 increased compared to at June 30, 2023 primarily due to net income over the last twelve months. Interest Rate Sensitivity and Liquidity While Peoples is exposed to various business risks, the risks relating to interest rate sensitivity and liquidity are major risks that can materially impact future results of operations and financial condition due to their complexity and dynamic nature. The objective of Peoples' asset-liability management function is to measure and manage these risks in order to optimize net interest income within the constraints of prudent capital adequacy, liquidity and safety. This objective requires Peoples to focus on interest rate risk exposure and adequate liquidity through its management of the mix of assets and liabilities, their related cash flows and the rates earned and paid on those assets and liabilities. Ultimately, the asset-liability management function is intended to guide management in the acquisition and disposition of earning assets and selection of appropriate funding sources. Interest Rate Risk Interest rate risk ("IRR") is one of the most significant risks arising in the normal course of business of financial services companies like Peoples. IRR is the potential for economic loss due to future interest rate changes that can impact the earnings stream, as well as market values, of financial assets and financial liabilities. Peoples' exposure to IRR is due primarily to differences in the maturity or repricing of earning assets and interest-bearing liabilities. In addition, other factors, such as prepayments of loans and investment securities, or early withdrawal of deposits, can affect Peoples' exposure to IRR and impact interest costs or revenue streams. Peoples has assigned overall management of IRR to its Asset-Liability Committee (the “ALCO”), which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level of IRR, including the review of assumptions used in modeling IRR. 73 Table of Contents The following table shows the estimated changes in net interest income and the economic value of equity based upon a standard, parallel shock analysis with balances held constant (dollars in thousands): Increase (Decrease) in Interest Rate Estimated Increase (Decrease) in Net Interest Income Estimated (Decrease) Increase in Economic Value of Equity (in Basis Points) June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023 300 $ 5,530 1.6 % $ 15,063 4.6 % $ (154,437) (9.0) % $ (157,625) (9.4) % 200 3,884 1.1 % 10,282 3.1 % (101,233) (5.9) % (107,620) (6.4) % 100 2,147 0.6 % 5,468 1.7 % (47,291) (2.7) % (53,585) (3.2) % (100) (6,639) (1.9) % (7,427) (2.3) % 23,298 1.4 % 31,722 1.9 % (200) (14,963) (4.4) % (15,446) (4.7) % 23,311 1.4 % 46,537 2.8 % (300) (16,646) (4.9) % (16,822) (5.1) % 7,287 0.4 % 47,198 2.8 % This table uses a standard, parallel shock analysis for assessing the IRR to net interest income and the economic value of equity. A parallel shock assumes all points on the yield curve (one year, two year, three year, etc.) are directionally changed by the same degree. Management regularly assesses the impact of both increasing and decreasing interest rates. The table above shows the impact of upward and downward parallel shocks of 100, 200 and 300 basis points. Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities. These and other modeling assumptions are monitored closely by Peoples on an ongoing basis. While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in the balance sheet, interest rates typically move in a nonparallel manner with differences in the timing, direction and magnitude of changes in short-term and long-term interest rates. Thus, any impact that might occur as a result of the Federal Reserve Board increasing short-term interest rates in the future could be offset by an inverse movement in long-term interest rates, and vice versa. For this reason, Peoples considers other interest rate scenarios in addition to analyzing the impact of parallel yield curve shifts. These include various flattening and steepening scenarios in which short-term and long-term interest rates move in different directions with varying magnitude. Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above. Given the shape of market yield curves at June 30, 2024, consideration of the bear steepener and bear flattener scenarios provide insights which were not captured by parallel shifts. The bear steepener scenario highlights the risk to net interest income and economic value of equity when short-term interest rates remain constant while long-term interest rates rise. In such a scenario, Peoples' deposit and borrowing costs, which are generally correlated with short-term interest rates, remain constant, while asset yields, which are correlated with long-term interest rates, rise. At June 30, 2024, the bear steepener scenario produced an increase in net interest income of 0.8% and an increase in the economic value of equity of 5.6%. The bear flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates rise while long-term rates remain constant. In such a scenario, Peoples' variable rate asset yields along with deposit and short-term borrowing costs, which are correlated with short-term rates, increase, while long-term asset yields and long-term borrowing costs, which are more correlated with long-term rates, remain constant. Increased deposit and funding costs would be more than offset by increased variable rate asset yields; resulting in an increased amount of net interest income and a higher net interest margin. At June 30, 2024, the bear flattener scenario produced an increase of 1.0% to net interest income and a decline in the economic value of equity of 1.8%. Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. As of June 30, 2024, Peoples had entered into 9 interest rate swap contracts with an aggregate notional value of $85.0 million. Additional information regarding Peoples’ interest rate swaps can be found in “Note 10 Derivative Financial Instruments” of the Notes to the Unaudited Condensed Consolidated Financial Statements. At June 30, 2024, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income. The table above illustrates this point as changes to net interest income increase in the rising interest rate scenarios. Liquidity In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity. In light of the bank failures in 2023, Peoples revisited the model assumptions, and determined the methods used by the ALCO to monitor 74 Table of Contents and evaluate the adequacy of Peoples Bank's liquidity position remain appropriate and are largely unchanged from those disclosed in Peoples' 2023 Form 10-K. At June 30, 2024, Peoples Bank had liquid assets of $408.8 million, which represented 4.0% of total assets and unfunded loan commitments. Peoples also had an additional $156.7 million of unpledged investment securities not included in the measurement of liquid assets. Management believes the current mix of short-term liquidity sources, loan and security portfolio cash flows, and availability of other funding sources will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments. Off-Balance Sheet Activities and Contractual Obligations In the normal course of business, Peoples is a party to financial instruments with off-balance sheet risk necessary to meet the financing needs of Peoples' customers. These financial instruments include commitments to extend credit and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract amounts of these instruments express the extent of involvement Peoples has in these financial instruments. Loan Commitments and Standby Letters of Credit Loan commitments are made to accommodate the financial needs of Peoples' customers. Standby letters of credit are instruments issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank's customer in the performance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused. Peoples Bank's exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Peoples Bank uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. Peoples Bank routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Unaudited Condensed Consolidated Financial Statements. These activities are part of Peoples Bank's normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in low-income housing tax credit investments. Traditional off-balance sheet credit-related financial instruments continue to represent the most significant off-balance sheet exposure. The following table details the total contractual amount of loan commitments and standby letters of credit: (Dollars in thousands) June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 Home equity lines of credit $ 247,757 $ 246,035 $ 244,367 $ 245,764 $ 208,805 Unadvanced construction loans 371,322 349,850 349,850 351,473 293,662 Other loan commitments 759,121 714,513 769,759 768,788 597,285 Loan commitments $ 1,378,200 $ 1,310,398 $ 1,363,976 $ 1,366,025 $ 1,099,752 Standby letters of credit $ 22,395 $ 13,131 $ 14,318 $ 15,452 $ 14,760 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for by this Item 3 is provided under the caption “Interest Rate Sensitivity and Liquidity” under “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in this Form 10-Q, and is incorporated herein by reference.