PEOPLES BANCORP INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 2024 December 31, 2023 (Dollars in thousands) (Unaudited) Assets Cash and cash equivalents: Cash and balances due from banks $ 139,244 $ 111,680 Interest-bearing deposits in other banks 144,463 315,042 Total cash and cash equivalents 283,707 426,722 Available-for-sale investment securities, at fair value (amortized cost of $ 1,189,792 at September 30, 2024 and $ 1,184,288 at December 31, 2023) (a) 1,080,667 1,048,322 Held-to-maturity investment securities, at amortized cost (fair value of $ 636,529 at September 30, 2024 and $ 612,022 at December 31, 2023) (a) 693,637 683,657 Other investment securities 55,691 63,421 Total investment securities (a) 1,829,995 1,795,400 Loans and leases, net of deferred fees and costs (b) 6,271,839 6,159,196 Allowance for credit losses ( 66,639 ) ( 62,011 ) Net loans and leases (c) 6,205,200 6,097,185 Loans held for sale 3,246 1,866 Bank premises and equipment, net of accumulated depreciation 105,202 103,856 Bank owned life insurance 143,065 140,554 Goodwill 362,414 362,169 Other intangible assets 41,508 50,003 Other assets 166,134 179,627 Total assets $ 9,140,471 $ 9,157,382 Liabilities Deposits: Non-interest-bearing $ 1,453,441 $ 1,567,649 Interest-bearing 6,029,716 5,584,648 Total deposits 7,483,157 7,152,297 Short-term borrowings 175,945 601,121 Long-term borrowings 236,824 216,241 Accrued expenses and other liabilities 119,573 134,189 Total liabilities $ 8,015,499 $ 8,103,848 Stockholders’ equity Preferred shares, no par value, 50,000 shares authorized, no shares issued at September 30, 2024 or at December 31, 2023 — — Common shares, no par value, 50,000,000 shares authorized, 36,772,459 shares issued at September 30, 2024 and 36,736,041 shares issued at December 31, 2023, including at each date shares held in treasury 865,326 865,227 Retained earnings 375,396 327,237 Accumulated other comprehensive loss, net of deferred income taxes ( 82,496 ) ( 101,590 ) Treasury stock, at cost, 1,323,075 shares at September 30, 2024 and 1,511,348 shares at December 31, 2023 ( 33,254 ) ( 37,340 ) Total stockholders’ equity $ 1,124,972 $ 1,053,534 Total liabilities and stockholders’ equity $ 9,140,471 $ 9,157,382 (a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $ 0 and $ 236 , respectively, at September 30, 2024, and $ 0 and $ 238 , respectively, at December 31, 2023. (b) Also referred to throughout this Quarterly Report on Form 10-Q as "total loans" and "loans held for investment." (c) Also referred to throughout this Quarterly Report on Form 10-Q as "net loans." See Notes to the Unaudited Condensed Consolidated Financial Statements 3 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands, except per share data) 2024 2023 2024 2023 Interest income: Interest and fees on loans and leases $ 116,547 109,024 $ 339,729 $ 272,634 Interest and dividends on taxable investment securities 15,132 12,635 43,892 36,409 Interest on tax-exempt investment securities 988 1,133 2,985 3,254 Other interest income 953 801 5,377 1,862 Total interest income 133,620 123,593 391,983 314,159 Interest expense: Interest on deposits 37,250 22,482 106,213 42,546 Interest on short-term borrowings 4,050 5,169 13,212 14,940 Interest on long-term borrowings 3,408 2,668 10,393 5,668 Total interest expense 44,708 30,319 129,818 63,154 Net interest income 88,912 93,274 262,165 251,005 Provision for credit losses 6,735 4,053 18,520 13,889 Net interest income after provision for credit losses 82,177 89,221 243,645 237,116 Non-interest income: Electronic banking income 6,359 6,466 18,875 18,375 Trust and investment income 4,882 4,288 14,480 12,786 Deposit account service charges 4,520 4,516 13,082 12,192 Insurance income 4,271 4,250 14,878 13,679 Lease income 1,827 ( 66 ) 4,179 2,730 Bank owned life insurance income 460 1,375 2,997 2,924 Mortgage banking income 1,051 237 1,615 740 Net loss on investment securities ( 74 ) ( 7 ) ( 428 ) ( 2,108 ) Net loss on asset disposals and other transactions ( 795 ) ( 307 ) ( 1,564 ) ( 2,218 ) Other non-interest income 2,293 2,452 6,163 4,179 Total non-interest income 24,794 23,204 74,277 63,279 Non-interest expense: Salaries and employee benefit costs 37,085 36,608 112,542 106,661 Data processing and software expense 6,111 6,288 18,623 15,578 Net occupancy and equipment expense 5,905 5,501 18,330 15,836 Professional fees 2,896 3,456 8,798 13,775 Amortization of other intangible assets 2,786 3,280 8,361 7,951 Electronic banking expense 1,844 1,836 5,566 5,159 Federal Deposit Insurance Corporation ("FDIC") insurance expense 1,241 1,260 3,678 3,525 Other loan expenses 1,178 856 3,290 2,133 Franchise tax expense 917 772 2,558 2,678 Communication expense 814 752 2,349 2,089 Marketing expense 971 1,267 2,708 3,554 Other non-interest expense 4,342 9,820 16,510 19,859 Total non-interest expense 66,090 71,696 203,313 198,798 Income before income taxes 40,881 40,729 114,609 101,597 Income tax expense 9,197 8,847 24,334 22,059 Net income $ 31,684 $ 31,882 $ 90,275 $ 79,538 Earnings per common share - basic $ 0.90 $ 0.91 $ 2.57 $ 2.49 Earnings per common share - diluted $ 0.89 $ 0.90 $ 2.55 $ 2.47 Weighted-average number of common shares outstanding - basic 34,793,704 34,818,346 34,766,281 31,771,061 Weighted-average number of common shares outstanding - diluted 35,199,383 35,061,897 35,106,712 31,977,486 Cash dividends declared $ 14,174 $ 13,793 $ 42,116 $ 37,940 Cash dividends declared per common share $ 0.40 $ 0.39 $ 1.19 $ 1.16 See Notes to the Unaudited Condensed Consolidated Financial Statements 4 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2024 2023 2024 2023 Net income $ 31,684 $ 31,882 $ 90,275 $ 79,538 Other comprehensive (loss) income: Available-for-sale investment securities: Gross unrealized holding gain (loss) arising during the period 37,723 ( 34,330 ) 26,414 ( 26,002 ) Related tax (expense) benefit ( 8,779 ) 7,671 ( 6,203 ) 6,178 Reclassification adjustment for net loss included in net income 74 7 428 2,108 Related tax (expense) benefit ( 18 ) 3 ( 100 ) ( 492 ) Net effect on other comprehensive income (loss) 29,000 ( 26,649 ) 20,539 ( 18,208 ) Defined benefit plan: Net (loss) gain arising during the period — ( 244 ) — ( 244 ) Related tax benefit — 57 — 57 Amortization of unrecognized loss and service cost on benefit plans — — — 9 Related tax benefit (expense) — — — ( 2 ) Reclassification from accumulated other comprehensive income ("AOCI") — 2,424 — 2,424 Related tax benefit (expense) — ( 566 ) — ( 566 ) Net effect on other comprehensive income — 1,671 — 1,678 Cash flow hedges: Net (loss) gain arising during the period ( 1,698 ) 118 ( 1,885 ) ( 165 ) Related tax benefit (expense) 395 ( 16 ) 440 35 Net effect on other comprehensive (loss) income ( 1,303 ) 102 ( 1,445 ) ( 130 ) Total other comprehensive income (loss), net of tax 27,697 ( 24,876 ) 19,094 ( 16,660 ) Total comprehensive income $ 59,381 $ 7,006 $ 109,369 $ 62,878 See Notes to the Unaudited Condensed Consolidated Financial Statements 5 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, June 30, 2024 $ 863,975 $ 357,886 $ ( 110,193 ) $ ( 33,835 ) $ 1,077,833 Net income — 31,684 — — 31,684 Other comprehensive loss, net of tax — — 27,697 — 27,697 Cash dividends declared — ( 14,174 ) — ( 14,174 ) Reissuance of treasury stock for common share awards ( 235 ) — — 235 — Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 170 ) ( 170 ) Common shares issued under dividend reinvestment plan 291 — — — 291 Common shares issued under compensation plan for Boards of Directors 19 — — 96 115 Common shares issued under employee stock purchase plan 82 — — 420 502 Stock-based compensation 1,194 — — — 1,194 Balance, September 30, 2024 $ 865,326 $ 375,396 $ ( 82,496 ) $ ( 33,254 ) $ 1,124,972 Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, December 31, 2023 $ 865,227 $ 327,237 $ ( 101,590 ) $ ( 37,340 ) $ 1,053,534 Net income — 90,275 — — 90,275 Other comprehensive loss, net of tax — — 19,094 — 19,094 Cash dividends declared — ( 42,116 ) — — ( 42,116 ) Reissuance of treasury stock for common share awards ( 6,833 ) — — 6,833 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 342 342 Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 1,221 ) ( 1,221 ) Common shares repurchased under share repurchase program — — — ( 3,000 ) ( 3,000 ) Common shares issued under dividend reinvestment plan 1,165 — — — 1,165 Common shares issued under compensation plan for Boards of Directors 61 — — 315 376 Common shares issued under employee stock purchase plan 176 — — 817 993 Stock-based compensation 5,530 — — — 5,530 Balance, September 30, 2024 $ 865,326 $ 375,396 $ ( 82,496 ) $ ( 33,254 ) $ 1,124,972 6 Table of Contents Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, June 30, 2023 $ 862,960 $ 289,445 $ ( 118,920 ) $ ( 34,578 ) $ 998,907 Net income — 31,882 — — 31,882 Other comprehensive loss, excluding pension termination settlement, net of tax — — ( 26,734 ) — ( 26,734 ) Pension termination settlement, net of tax — — 1,858 — 1,858 Cash dividends declared — ( 13,793 ) — — ( 13,793 ) Reissuance of treasury stock for common share awards ( 314 ) — — 314 — Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 391 ) ( 391 ) Common shares issued under dividend reinvestment plan 284 — — — 284 Common shares issued under compensation plan for Boards of Directors 6 — — 133 139 Common shares issued under employee stock purchase plan — — — ( 7 ) ( 7 ) Stock-based compensation 1,074 — — — 1,074 Balance, September 30, 2023 $ 864,010 $ 307,534 $ ( 143,796 ) $ ( 34,529 ) $ 993,219 Accumulated Other Comprehensive Loss Total Stockholders' Equity Common Shares Retained Earnings Treasury Stock (Dollars in thousands) Balance, December 31, 2022 $ 686,450 $ 265,936 $ ( 127,136 ) $ ( 39,922 ) $ 785,328 Net income — 79,538 — — 79,538 Other comprehensive income, excluding pension settlement, net of tax — — ( 18,518 ) — ( 18,518 ) Pension settlement, net of tax — — 1,858 — 1,858 Cash dividends declared — ( 37,940 ) — — ( 37,940 ) Reissuance of treasury stock for common share awards ( 5,724 ) — — 5,724 — Reissuance of treasury stock for deferred compensation plan for Boards of Directors — — — 115 115 Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors — — — ( 1,445 ) ( 1,445 ) Common shares issued under dividend reinvestment plan 1,036 — — — 1,036 Common shares issued under compensation plan for Boards of Directors 25 — — 385 410 Common shares issued under employee stock purchase plan 61 — — 614 675 Stock-based compensation 4,233 — — — 4,233 Issuance of common shares related to merger with Limestone Bancorp, Inc. 177,929 — — — 177,929 Balance, September 30, 2023 $ 864,010 $ 307,534 $ ( 143,796 ) $ ( 34,529 ) $ 993,219 See Notes to the Unaudited Condensed Consolidated Financial Statements 7 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (Dollars in thousands) 2024 2023 Net cash provided by operating activities $ 103,230 $ 113,085 Investing activities: Available-for-sale investment securities: Purchases ( 203,702 ) ( 33,380 ) Proceeds from sales — 166,919 Proceeds from principal payments, calls and prepayments 196,067 115,963 Held-to-maturity investment securities: Purchases ( 110,406 ) ( 187,487 ) Proceeds from principal payments 100,528 72,396 Other investment securities: Purchases ( 18,824 ) ( 24,768 ) Proceeds from sales 27,071 15,681 Net increase in loans held for investment ( 108,058 ) ( 285,202 ) Net expenditures for premises and equipment ( 6,625 ) ( 10,620 ) Proceeds from sales of other real estate owned 10 129 Business acquisitions, net of cash received ( 245 ) 92,952 Proceeds from bank owned life insurance contracts 486 — Investment in limited partnership and tax credit funds ( 2,919 ) ( 1,699 ) Net cash used in investing activities ( 126,617 ) ( 79,116 ) Financing activities: Net decrease in non-interest-bearing deposits ( 114,208 ) ( 283,034 ) Net increase in interest-bearing deposits 445,012 369,629 Net (decrease) increase in short-term borrowings ( 425,176 ) 25,299 Proceeds from long-term borrowings 45,872 70,085 Payments on long-term borrowings ( 26,217 ) ( 32,515 ) Cash dividends paid ( 41,820 ) ( 37,899 ) Purchase of treasury stock under share repurchase program ( 3,000 ) — Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock ( 1,221 ) ( 1,445 ) Proceeds from issuance of common shares 1,130 998 Net cash (used in) provided by financing activities ( 119,628 ) 111,118 Net (decrease) increase in cash and cash equivalents ( 143,015 ) 145,087 Cash and cash equivalents at beginning of period 426,722 154,022 Cash and cash equivalents at end of period $ 283,707 $ 299,109 Supplemental cash flow information: Interest paid $ 125,979 $ 57,033 Income taxes paid 20,383 29,636 Supplemental noncash disclosures: Transfers from total loans to other real estate owned 235 31 Noncash recognition of new leases 1,130 4,428 See Notes to the Unaudited Condensed Consolidated Financial Statements 8 Table of Contents PEOPLES BANCORP INC. AND SUBSIDIARIES NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 Summary of Significant Accounting Policies Basis of Presentation: The accompanying Unaudited Condensed Consolidated Financial Statements of Peoples Bancorp Inc. and its subsidiaries ("Peoples" refers to Peoples Bancorp Inc. and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.) have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("Peoples' 2023 Form 10-K"). The accounting and reporting policies followed in the presentation of the accompanying Unaudited Condensed Consolidated Financial Statements are consistent with those described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2023 Form 10-K, as updated by the information contained in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 (this "Form 10-Q"). Management has evaluated all significant events and transactions that occurred after September 30, 2024 for potential recognition or disclosure in these Unaudited Condensed Consolidated Financial Statements. In the opinion of management, these Unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary to present fairly such information for the periods and at the dates indicated. Such adjustments are normal and recurring in nature. Intercompany accounts and transactions have been eliminated. The Consolidated Balance Sheet at December 31, 2023, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2023 Form 10-K. The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year, due in part to seasonal variations and unusual or infrequently occurring items. New Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by Peoples as of the required effective dates. Refer to "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2023 Form 10-K. Unless otherwise discussed, management believes the impact of any recently issued standards, including those issued but not yet effective, will not have a material impact on Peoples' financial statements taken as a whole. Note 2 Fair Value of Assets and Liabilities Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or a non-recurring basis in the Unaudited Condensed Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.” Depending on the nature of the asset or the liability, Peoples uses various valuation methodologies and assumptions to estimate fair value. The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K. Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods presented. 9 Table of Contents Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy. Recurring Fair Value Measurements at Reporting Date September 30, 2024 December 31, 2023 (Dollars in thousands) Level 1 Level 2 Level 1 Level 2 Assets: Available-for-sale investment securities: Obligations of: U.S. Treasury and government agencies $ 27,961 $ — $ 30,296 $ — U.S. government sponsored agencies — 174,708 — 118,607 States and political subdivisions — 206,779 — 213,296 Residential mortgage-backed securities — 607,726 — 628,924 Commercial mortgage-backed securities — 57,437 — 51,234 Bank-issued trust preferred securities — 6,056 — 5,965 Total available-for-sale securities $ 27,961 $ 1,052,706 $ 30,296 $ 1,018,026 Equity investment securities (a) 187 241 191 237 Derivative assets (b) — 13,685 — 22,304 Liabilities: Derivative liabilities (c) $ — $ 12,354 $ — $ 19,122 (a) Included in "Other investment securities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements. (b) Included in " Other assets " on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements. (c) Included in " Accrued expenses and other liabilities " on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements. Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, secured overnight funding rate ("SOFR") (or other relevant) yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services or broker in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists. Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from q uoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2). Derivative Assets and Derivative Liabilities : Derivative assets and derivative liabilities are recognized on the Unaudited Consolidated Balance Sheets at their fair value within "Other assets" and "Accrued expenses and other liabilities", respectively. The fair value for derivative financial instruments is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters (Level 2). 10 Table of Contents Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy at September 30, 2024 and December 31, 2023. Non-Recurring Fair Value Measurements at Reporting Date September 30, 2024 December 31, 2023 (Dollars in thousands) Level 2 Level 3 Level 2 Level 3 Assets: Collateral dependent loans $ — $ 10,948 $ — $ 501 Loans held for sale (a) 1,928 — 1,663 — Other real estate owned — — — 7,118 (a) Loans held for sale are presented gross of a valuation allowance of $ 74 and $ 163 at September 30, 2024 and at December 31, 2023, respectively. Collateral Dependent Loans: Loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty, are considered collateral dependent. Peoples utilizes outside third-party appraisal services to value the underlying collateral, which Peoples then uses to report the loans at their fair value (Level 3). Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally one-to-four family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2). Other Real Estate Owned ("OREO"): OREO, included in "Other assets" on the Unaudited Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches, including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available (Level 3). 11 Table of Contents Financial Instruments Not Required to be Measured or Reported at Fair Value The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Unaudited Consolidated Balance Sheets. Fair Value Measurements of Other Financial Instruments (Dollars in thousands) Fair Value Hierarchy Level September 30, 2024 December 31, 2023 Carrying Amount Fair Value Carrying Amount Fair Value Assets: Cash and cash equivalents 1 $ 283,707 $ 283,707 $ 426,722 $ 426,722 Held-to-maturity investment securities: Obligations of: U.S. government sponsored agencies 2 196,642 191,610 188,475 180,825 States and political subdivisions (a) 2 141,918 115,674 144,496 114,288 Residential mortgage-backed securities 2 256,329 243,499 248,559 231,620 Commercial mortgage-backed securities 2 98,984 85,746 102,365 85,289 Total held-to-maturity securities 693,873 636,529 683,895 612,022 Other investment securities: Other investment securities at cost: Federal Home Loan Bank ("FHLB") stock N/A 20,245 20,245 29,949 29,949 Federal Reserve Bank ("FRB") stock N/A 27,114 27,114 26,896 26,896 Total other investment securities at cost 47,359 47,359 56,845 56,845 Other investment securities at fair value: Nonqualified deferred compensation (b) 1 4,729 4,729 3,162 3,162 Other investment securities (c) 2 3,175 3,175 2,985 2,985 Total other investment securities 55,263 55,263 62,992 62,992 Loans and leases, net of deferred fees and costs (d) 3 6,271,839 6,229,349 6,159,196 6,064,999 Bank owned life insurance 2 143,065 143,065 140,554 140,554 Liabilities: Deposits 2 $ 7,483,157 $ 6,811,258 $ 7,152,297 $ 6,319,885 Short-term borrowings 2 175,945 187,869 601,121 619,999 Long-term borrowings 2 236,824 252,873 216,241 222,743 (a) Obligations of states and political subdivisions are presented gross of an allowance for credit losses of $ 236 and $ 238 at September 30, 2024 and December 31, 2023, respectively. (b) Investments in the nonqualified deferred compensation plan consist of mutual funds. (c) "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at September 30, 2024 and at December 31, 2023, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis table above and not included in this table. (d) Loans and leases, net of deferred fees and costs, are presented gross of an allowance for credit losses of $ 66.6 million and $ 62.0 million at September 30, 2024 and at December 31, 2023, respectively. For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These financial instruments include cash and cash equivalents and overnight borrowings. Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments: Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash and cash equivalents balances are a reasonable estimate of fair value (Level 1). Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). When observable market data is absent, the independent pricing service estimates prices based on underlying cash flow characteristics and discount rates and compares them to similar securities (Level 3). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment 12 Table of Contents of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists. Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable securities. Other investment securities at fair value are valued using quoted prices in an active market (Level 1) or quoted prices in less active markets (Level 2). FHLB and FRB stock are both recorded at cost. Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held to maturity. Peoples considers interest rate, credit and market factors in estimating the fair value of loans and leases (Level 3). Fair values for loans and leases are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans and leases with similar terms, the credit risk associated with the loans and leases and other market factors, including liquidity. Bank Owned Life Insurance: Peoples' bank owned life insurance policies are recorded at their cash surrender value (Level 2). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits. Deposits: The fair value of fixed-maturity certificates of deposit ("CDs") is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities. Demand and other non-fixed-maturity deposits are estimated using a discounted cash flow calculation based on maturity, attrition and re-pricing assumptions (Level 2). Short-term Borrowings: The fair value of short-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2). Long-term Borrowings: The fair value of long-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2). Certain financial assets and financial liabilities that are not required to be measured or reported at fair value can be subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and financial liabilities include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair value, which are not included in the above information. Accordingly, the fair values described above are not intended to represent the aggregate fair value of Peoples. 13 Table of Contents Note 3 Investment Securities Available-for-sale The following table summarizes Peoples' available-for-sale investment securities: (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value September 30, 2024 Obligations of: U.S. Treasury and government agencies $ 28,202 $ 361 $ ( 602 ) $ 27,961 U.S. government sponsored agencies 181,198 1,632 ( 8,122 ) 174,708 States and political subdivisions 229,119 353 ( 22,693 ) 206,779 Residential mortgage-backed securities 679,575 2,319 ( 74,168 ) 607,726 Commercial mortgage-backed securities 65,198 16 ( 7,777 ) 57,437 Bank-issued trust preferred securities 6,500 3 ( 447 ) 6,056 Total available-for-sale securities $ 1,189,792 $ 4,684 $ ( 113,809 ) $ 1,080,667 December 31, 2023 Obligations of: U.S. Treasury and government agencies $ 30,999 $ 292 $ ( 995 ) $ 30,296 U.S. government sponsored agencies 128,500 639 ( 10,532 ) 118,607 States and political subdivisions 239,906 485 ( 27,095 ) 213,296 Residential mortgage-backed securities 717,772 1,819 ( 90,667 ) 628,924 Commercial mortgage-backed securities 60,611 5 ( 9,382 ) 51,234 Bank-issued trust preferred securities 6,500 — ( 535 ) 5,965 Total available-for-sale securities $ 1,184,288 $ 3,240 $ ( 139,206 ) $ 1,048,322 The gross gains and losses realized by Peoples from sales or prepayments of available-for-sale securities for the periods ended September 30 were as follows: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2024 2023 2024 2023 Gross gains realized $ 347 $ 1,101 $ 347 $ 1,191 Gross losses realized 421 1,108 775 3,299 Net (loss) gain realized $ ( 74 ) $ ( 7 ) $ ( 428 ) $ ( 2,108 ) The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and recognized as of the trade date. 14 Table of Contents The following table presents a summary of available-for-sale investment securities that have been in a continuous unrealized loss position for the periods identified: Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss September 30, 2024 Obligations of: U.S. Treasury and government agencies $ 1,456 $ 7 6 $ 13,408 $ 595 11 $ 14,864 $ 602 U.S. government sponsored agencies 32,550 376 12 72,534 7,746 13 105,084 8,122 States and political subdivisions 9,831 125 30 167,599 22,568 134 177,430 22,693 Residential mortgage-backed securities 4,941 108 3 517,339 74,060 256 522,280 74,168 Commercial mortgage-backed securities — — — 49,447 7,777 25 49,447 7,777 Bank-issued trust preferred securities 1,991 9 1 3,562 438 2 5,553 447 Total $ 50,769 $ 625 52 $ 823,889 $ 113,184 441 $ 874,658 $ 113,809 December 31, 2023 Obligations of: U.S. Treasury and government agencies $ 8,568 $ 83 22 $ 11,631 $ 912 5 $ 20,199 $ 995 U.S. government sponsored agencies 14,439 35 4 74,211 10,497 15 88,650 10,532 States and political subdivisions 18,268 136 32 167,346 26,959 138 185,614 27,095 Residential mortgage-backed securities 58,671 1,150 66 529,895 89,517 238 588,566 90,667 Commercial mortgage-backed securities 6,000 112 7 44,656 9,270 21 50,656 9,382 Bank-issued trust preferred securities 1,984 16 1 3,981 519 3 5,965 535 Total $ 107,930 $ 1,532 132 $ 831,720 $ 137,674 420 $ 939,650 $ 139,206 Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis. At September 30, 2024, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses. At September 30, 2024, Peoples did not have the intent to sell, nor was it more likely than not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both September 30, 2024 and December 31, 2023 were attributable to changes in market interest rates and spreads since the securities were purchased, and were not credit-related losses. The unrealized loss with respect to the two bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at September 30, 2024 was attributable to the subordinated nature of the trust preferred securities. 15 Table of Contents The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at September 30, 2024. The weighted-average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. (Dollars in thousands) Within 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total Amortized cost Obligations of: U.S. Treasury and government agencies $ 1,291 $ 14,282 $ 6,931 $ 5,698 $ 28,202 U.S. government sponsored agencies — 67,074 26,709 87,415 181,198 States and political subdivisions 5,463 44,854 68,790 110,012 229,119 Residential mortgage-backed securities 26 5,458 51,746 622,345 679,575 Commercial mortgage-backed securities — 12,016 26,667 26,515 65,198 Bank-issued trust preferred securities 2,000 1,500 3,000 — 6,500 Total available-for-sale securities $ 8,780 $ 145,184 $ 183,843 $ 851,985 $ 1,189,792 Fair value Obligations of: U.S. Treasury and government agencies $ 1,284 $ 13,699 $ 7,154 $ 5,824 $ 27,961 U.S. government sponsored agencies — 63,296 24,609 86,803 174,708 States and political subdivisions 5,447 42,803 60,401 98,128 206,779 Residential mortgage-backed securities 26 5,338 48,393 553,969 607,726 Commercial mortgage-backed securities — 11,231 23,379 22,827 57,437 Bank-issued trust preferred securities 1,991 1,455 2,610 — 6,056 Total available-for-sale securities $ 8,748 $ 137,822 $ 166,546 $ 767,551 $ 1,080,667 Total weighted-average yield 3.13 % 2.66 % 2.45 % 3.05 % 2.91 % Held-to-maturity The following table summarizes Peoples’ held-to-maturity investment securities: (Dollars in thousands) Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value September 30, 2024 Obligations of: U.S. government sponsored agencies $ 196,642 $ — $ 1,234 $ ( 6,266 ) $ 191,610 States and political subdivisions 141,918 ( 236 ) 158 ( 26,166 ) 115,674 Residential mortgage-backed securities 256,329 — 2,558 ( 15,388 ) 243,499 Commercial mortgage-backed securities 98,984 — 148 ( 13,386 ) 85,746 Total held-to-maturity investment securities $ 693,873 $ ( 236 ) $ 4,098 $ ( 61,206 ) $ 636,529 December 31, 2023 Obligations of: U.S. government sponsored agencies $ 188,475 $ — $ 489 $ ( 8,139 ) $ 180,825 States and political subdivisions 144,496 ( 238 ) 134 ( 30,104 ) 114,288 Residential mortgage-backed securities 248,559 — 1,643 ( 18,582 ) 231,620 Commercial mortgage-backed securities 102,365 — — ( 17,076 ) 85,289 Total held-to-maturity investment securities $ 683,895 $ ( 238 ) $ 2,266 $ ( 73,901 ) $ 612,022 There were no sales of held-to-maturity investment securities during the periods ended September 30, 2024 or December 31, 2023. Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. Peoples has determined that the loss given default for U.S. government sponsored agencies investment securities is zero , due to the fact that it is unlikely the ultimate guarantor (the U.S. government) would not perform on its implicit guarantee in the event of default. The remaining securities are included in the calculation of the allowance for credit losses for held-to-maturity investment securities. Peoples reported $ 0.2 million of allowance for credit losses for held-to-maturity securities at both September 30, 2024, and December 31, 2023. 16 Table of Contents The following table presents a summary of held-to-maturity investment securities that had been in a continuous unrealized loss position for the periods identified: Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss No. of Securities Fair Value Unrealized Loss September 30, 2024 Obligations of: U.S. government sponsored agencies $ — $ — — 46,022 6,266 13 $ 46,022 $ 6,266 States and political subdivisions — — — 112,398 26,166 66 112,398 26,166 Residential mortgage-backed securities 11,264 96 1 139,351 15,292 43 150,615 15,388 Commercial mortgage-backed securities 3,171 946 3 73,565 12,440 29 76,736 13,386 Total $ 14,435 $ 1,042 4 $ 371,336 $ 60,164 151 $ 385,771 $ 61,206 December 31, 2023 Obligations of: U.S. government sponsored agencies $ 64,487 $ 356 14 $ 86,071 $ 7,783 18 $ 150,558 $ 8,139 States and political subdivisions — — — 111,040 30,104 67 111,040 30,104 Residential mortgage-backed securities 44,379 1,105 14 117,654 17,477 34 162,033 18,582 Commercial mortgage-backed securities 13,919 1,845 6 71,370 15,231 31 85,289 17,076 Total $ 122,785 $ 3,306 34 $ 386,135 $ 70,595 150 $ 508,920 $ 73,901 The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity investment securities by contractual maturity at September 30, 2024. The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 23.3 % at September 30, 2024. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. (Dollars in thousands) Within 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total Amortized cost Obligations of: U.S. government sponsored agencies $ 8,000 $ 10,625 $ 44,182 $ 133,835 $ 196,642 States and political subdivisions — 8,323 15,960 117,635 141,918 Residential mortgage-backed securities — 273 4,027 252,029 256,329 Commercial mortgage-backed securities — 12,975 34,189 51,820 98,984 Total held-to-maturity investment securities $ 8,000 $ 32,196 $ 98,358 $ 555,319 $ 693,873 Fair value Obligations of: U.S. government sponsored agencies $ 7,989 $ 10,347 $ 44,226 $ 129,048 $ 191,610 States and political subdivisions — 8,144 13,782 93,748 115,674 Residential mortgage-backed securities — 270 3,627 239,602 243,499 Commercial mortgage-backed securities — 12,101 30,385 43,260 85,746 Total held-to-maturity investment securities $ 7,989 $ 30,862 $ 92,020 $ 505,658 $ 636,529 Total weighted-average yield 3.98 % 2.94 % 3.74 % 3.72 % 3.69 % 17 Table of Contents Other Investment Securities Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB stock and of FRB stock. The following table summarizes the carrying value of Peoples' other investment securities: (Dollars in thousands) September 30, 2024 December 31, 2023 FHLB stock $ 20,245 $ 29,949 FRB stock 27,114 26,896 Nonqualified deferred compensation 4,729 3,162 Equity investment securities 2,734 2,545 Other investment securities 869 869 Total other investment securities $ 55,691 $ 63,421 During the nine months ended September 30, 2024, Peoples redeemed $ 26.9 million of FHLB stock in order to be in compliance with the requirements of the FHLB. Peoples purchased $ 17.2 million of additional FHLB stock during the nine months ended September 30, 2024, as a result of the FHLB's capital requirements on FHLB advances. For the three months ended September 30, 2024 and 2023, Peoples recorded the change in the fair value of equity investment securities held during the period in "Other non-interest income", resulting in an unrealized gain of $ 12,000 and an unrealized loss of $ 58,000 , respectively. For the nine months ended September 30, 2024 and 2023, Peoples recognized an unrealized gain of $ 81,000 and an unrealized loss of $ 175,000 , respectively, for the change in fair value of equity investment securities in "Other non-interest income". At September 30, 2024, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity at September 30, 2024. Pledged Securities Peoples has pledged available-for-sale investment securities and held-to-maturity investment securities to secure public and trust department deposits, and repurchase agreements in accordance with federal and state requirements. Peoples has also pledged available-for-sale investment securities to secure additional borrowing capacity at the FHLB and the FRB. The following table summarizes the carrying amount of Peoples' pledged securities: Carrying Amount (Dollars in thousands) September 30, 2024 December 31, 2023 Securing public and trust department deposits, and repurchase agreements: Available-for-sale $ 542,071 $ 713,033 Held-to-maturity 553,726 559,142 Securing additional borrowing capacity at the FHLB and the FRB: Available-for-sale 119,453 85,899 Held-to-maturity 63,768 39,607 Accrued Interest Accrued interest receivable is not included in investment securities balances, and is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Interest receivable on investment securities was $ 10.2 million at September 30, 2024 and $ 9.5 million at December 31, 2023. Note 4 Loans and Leases Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint. Peoples also originates insurance premium finance loans nationwide through its Peoples Premium Finance division, and originates leases nationwide through its North Star Leasing ("NSL") division and its Vantage Financial, LLC ("Vantage") subsidiary. 18 Table of Contents The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows: (Dollars in thousands) September 30, 2024 December 31, 2023 Construction $ 320,094 $ 364,019 Commercial real estate, other 2,180,491 2,196,957 Commercial and industrial 1,250,152 1,184,986 Premium finance 286,983 203,177 Leases 433,009 414,060 Residential real estate 777,542 791,095 Home equity lines of credit 233,109 208,675 Consumer, indirect 677,056 666,472 Consumer, direct 112,198 128,769 Deposit account overdrafts 1,205 986 Total loans, at amortized cost $ 6,271,839 $ 6,159,196 Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $ 22.9 million at September 30, 2024 and $ 24.5 million at December 31, 2023. Nonaccrual and Past Due Loans A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due. The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing was as follows: September 30, 2024 December 31, 2023 (Dollars in thousands) Nonaccrual (a) Accruing Loans 90+ Days Past Due Nonaccrual (a) Accruing Loans 90+ Days Past Due Commercial real estate, other 4,416 3,838 2,816 78 Commercial and industrial 7,008 413 2,758 316 Premium finance — 7,771 — 1,355 Leases 12,428 12,675 8,436 3,826 Residential real estate 6,658 2,442 7,921 877 Home equity lines of credit 1,461 292 1,022 171 Consumer, indirect 2,726 46 2,412 68 Consumer, direct 110 101 112 25 Total loans, at amortized cost $ 34,807 $ 27,578 $ 25,477 $ 6,716 (a) There were $ 3.8 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2024 and $ 1.2 million of nonaccrual loans for which there was no allowance for credit losses at December 31, 2023. During the first nine months of 2024, nonaccrual loans increased compared to at December 31, 2023, which was primarily due to twelve large leases totaling $ 3.6 million and four commercial real estate loans of approximately $ 1.1 million that went on nonaccrual status during 2024. The increase in accruing loans 90+ days past due at September 30, 2024, when compared to at December 31, 2023, was primarily due to an increase in leases that were 90+ days past due and accruing of $ 8.8 million, which was administrative in nature, an increase in premium finance loans loans of approximately $ 6.4 million, and an increase in commercial real estate loans of approximately $ 3.8 million. The increase in past due premium finance loans carry low credit risk, due to the ability to cancel premiums and recover the majority of the receivable from the insurer. The amount of interest income recognized on accruing loans 90+ days past due during the nine months ended September 30, 2024 was $ 1.3 million. The following table presents the aging of the amortized cost of past due loans: 19 Table of Contents Loans Past Due Current Loans Total Loans (Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total September 30, 2024 Construction $ — $ — $ — $ — $ 320,094 $ 320,094 Commercial real estate, other 1,349 2,437 7,073 10,859 2,169,632 2,180,491 Commercial and industrial 3,818 674 5,159 9,651 1,240,501 1,250,152 Premium finance 2,267 1,192 7,771 11,230 275,753 286,983 Leases 3,417 10,788 24,894 39,099 393,910 433,009 Residential real estate 3,144 3,100 4,915 11,159 766,383 777,542 Home equity lines of credit 1,324 276 1,094 2,694 230,415 233,109 Consumer, indirect 7,405 1,542 1,436 10,383 666,673 677,056 Consumer, direct 619 76 168 863 111,335 112,198 Deposit account overdrafts — — — — 1,205 1,205 Total loans, at amortized cost $ 23,343 $ 20,085 $ 52,510 $ 95,938 $ 6,175,901 $ 6,271,839 December 31, 2023 Construction $ 13 $ 52 $ — $ 65 $ 363,954 $ 364,019 Commercial real estate, other 2,728 4,556 1,572 8,856 2,188,101 2,196,957 Commercial and industrial 1,717 1,491 3,052 6,260 1,178,726 1,184,986 Premium finance 1,288 867 1,355 3,510 199,667 203,177 Leases 12,743 4,932 12,014 29,689 384,371 414,060 Residential real estate 14,021 2,733 4,481 21,235 769,860 791,095 Home equity lines of credit 1,561 691 683 2,935 205,740 208,675 Consumer, indirect 7,488 1,550 1,230 10,268 656,204 666,472 Consumer, direct 536 282 43 861 127,908 128,769 Deposit account overdrafts — — — — 986 986 Total loans, at amortized cost $ 42,095 $ 17,154 $ 24,430 $ 83,679 $ 6,075,517 $ 6,159,196 Delinquency trends decreased slightly, as 98.5 % of Peoples' loan portfolio was considered “current” at September 30, 2024, compared to 98.6 % at December 31, 2023. Pledged Loans Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, home equity lines of credit and commercial real estate loans under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged eligible commercial and industrial loans to secure borrowings with the FRB. Loans pledged are summarized as follows: (Dollars in thousands) September 30, 2024 December 31, 2023 Loans pledged to FHLB $ 1,223,345 $ 1,206,134 Loans pledged to FRB 458,896 419,245 Credit Quality Indicators As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Commercial loans to borrowers with an aggregate unpaid principal balance in excess of $ 1.0 million are reviewed at least on an annual basis for possible credit deterioration. Commercial leases, as well as loan relationships whose aggregate credit exposure to Peoples is equal to or less than $ 1.0 million, are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, follows: “Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk category would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist. 20 Table of Contents “Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position. “Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected. “Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of each of these loans as an estimated loss is deferred until its more exact status may be determined. “Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category. Consumer loans and other smaller-balance loans are evaluated and categorized as "substandard," "doubtful" or "loss" based upon the regulatory definition of these classes and consistent with regulatory requirements. Leases are categorized as "special mention", "substandard", or "loss" based upon delinquency status and the prospect of collecting the remaining net investment balance owed under the lease. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being "not rated." The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at September 30, 2024: Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Construction Pass $ 30,953 $ 137,659 $ 96,715 $ 34,864 $ 3,179 $ 13,887 $ — $ — $ 317,257 Special mention — — — — — 117 — — 117 Substandard — 1,172 1,548 — — — — — 2,720 Total 30,953 138,831 98,263 34,864 3,179 14,004 — — 320,094 Current period gross charge-offs — — — — — — — Commercial real estate, other Pass 81,458 213,204 343,926 372,653 207,222 819,922 40,812 — 2,079,197 Special mention 273 4,197 13,939 1,649 1,312 8,059 291 32 29,720 Substandard 147 2,024 2,720 18,487 9,326 38,233 627 — 71,564 Doubtful — — — — — 10 — — 10 Total 81,878 219,425 360,585 392,789 217,860 866,224 41,730 32 2,180,491 Current period gross charge-offs — — 212 — — — 212 Commercial and industrial Pass 152,272 209,996 139,519 151,660 70,178 183,600 245,498 4,865 1,152,723 Special mention 51 3,591 10,820 5,095 11,569 16,937 19,815 5,500 67,878 Substandard 210 250 4,567 12,962 4,570 1,800 3,061 — 27,420 Doubtful — — 1,968 — — 163 — — 2,131 Total 152,533 213,837 156,874 169,717 86,317 202,500 268,374 10,365 1,250,152 21 Table of Contents Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Current period gross charge-offs — — — 15 78 457 550 Premium Finance Pass 275,918 10,906 159 — — — — — 286,983 Total 275,918 10,906 159 — — — — — 286,983 Current period gross charge-offs 3 110 33 — — — 146 Leases Pass 157,377 141,799 74,242 30,513 6,061 2,426 — — 412,418 Special mention 2,660 1,371 2,555 57 17 3 — — 6,663 Substandard 479 4,516 2,580 1,569 384 380 — — 9,908 Doubtful 686 1,824 722 596 — — — — 3,828 Loss — — — 192 — — — — 192 Total 161,202 149,510 80,099 32,927 6,462 2,809 — — 433,009 Current period gross charge-offs 473 2,560 3,530 731 68 38 7,400 Residential real estate Pass 59,312 68,606 86,717 131,488 53,439 367,695 — — 767,257 Substandard 162 613 264 756 172 8,212 — — 10,179 Loss 10 28 — — — 68 — — 106 Total 59,484 69,247 86,981 132,244 53,611 375,975 — — 777,542 Current period gross charge-offs — — 46 5 — 93 144 Home equity lines of credit Pass 44,119 39,248 38,761 31,113 17,335 60,983 25 1,463 231,584 Substandard — 19 168 46 34 1,250 — — 1,517 Loss — — — — — 8 — — 8 Total 44,119 39,267 38,929 31,159 17,369 62,241 25 1,463 233,109 Current period gross charge-offs — — — — — 11 11 Consumer, indirect Pass 193,608 193,746 165,610 65,132 36,265 19,405 — — 673,766 Substandard 173 755 861 797 327 317 — — 3,230 Loss 9 10 15 14 — 12 — — 60 Total 193,790 194,511 166,486 65,943 36,592 19,734 — — 677,056 Current period gross charge-offs 211 1,730 1,426 598 130 753 4,848 Consumer, direct Pass 37,653 28,873 24,753 11,161 5,007 4,507 — — 111,954 22 Table of Contents Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Substandard — 55 50 21 6 99 — — 231 Loss 10 3 — — — — — — 13 Total 37,663 28,931 24,803 11,182 5,013 4,606 — — 112,198 Current period gross charge-offs 2 96 197 43 11 180 529 Deposit account overdrafts 1,205 — — — — — — — 1,205 Current period gross charge-offs 1,232 — — — — — 1,232 Total loans, at amortized cost 1,038,745 1,064,465 1,013,179 870,825 426,403 1,548,093 310,129 11,860 6,271,839 Total current period gross charge-offs $ 1,921 $ 4,496 $ 5,444 $ 1,392 $ 287 $ 1,532 $ 15,072 The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the then most recent analysis performed at December 31, 2023: Term Loans at Amortized Cost by Origination Year (Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Construction Pass $ 80,273 $ 141,245 $ 85,913 $ 27,169 $ 9,995 $ 12,723 $ — $ — $ 357,318 Special mention — 3,757 — — — 123 — — 3,880 Substandard 1,200 1,590 — — — 31 — — 2,821 Total 81,473 146,592 85,913 27,169 9,995 12,877 — — 364,019 Current period gross charge-offs — — 9 — — — 9 Commercial real estate, other Pass 199,565 327,762 366,752 227,604 262,099 650,265 37,177 189 2,071,224 Special mention 999 12,975 4,850 10,324 7,074 22,186 408 41 58,816 Substandard 287 2,421 5,878 8,679 1,972 47,213 457 — 66,907 Doubtful — — — — — 10 — — 10 Total 200,851 343,158 377,480 246,607 271,145 719,674 38,042 230 2,196,957 Current period gross charge-offs — — — 39 — 575 614 Commercial and industrial Pass 225,894 180,068 212,938 86,934 55,434 132,675 213,714 38 1,107,657 Special mention 540 12,051 533 9,723 4,722 6,336 16,236 8,614 50,141 Substandard 78 6,441 5,104 5,617 1,602 6,278 1,889 779 27,009 Doubtful — — — — — 179 — — 179 Total 226,512 198,560 218,575 102,274 61,758 145,468 231,839 9,431 1,184,986 Current period gross charge-offs — 36 202 25 173 415 851 Premium finance Pass 201,659 1,517 1 — — — — — 203,177 Total 201,659 1,517 1 — — — — — 203,177 Current period gross charge-offs 25 97 — — — — 122 23 Table of Contents Term Loans at Amortized Cost by Origination Year (Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Leases Pass 216,559 114,327 51,307 14,061 4,883 1,501 — — 402,638 Special mention 363 1,529 476 81 1 5 — — 2,455 Substandard 1,937 3,006 2,944 448 321 311 — — 8,967 Total 218,859 118,862 54,727 14,590 5,205 1,817 — — 414,060 Current period gross charge-offs 963 1,328 1,173 233 165 135 3,997 Residential real estate Pass 75,957 91,506 140,157 58,144 45,507 369,552 — — 780,823 Substandard 43 243 585 182 529 8,604 — — 10,186 Loss — — — — — 86 — — 86 Total 76,000 91,749 140,742 58,326 46,036 378,242 — — 791,095 Current period gross charge-offs — — — — — 170 170 Home equity lines of credit Pass 39,706 42,565 33,406 19,838 14,297 57,482 27 1,346 207,321 Substandard 19 — 61 34 123 1,109 — — 1,346 Loss — — — — — 8 — — 8 Total 39,725 42,565 33,467 19,872 14,420 58,599 27 1,346 208,675 Current period gross charge-offs — — — — — 110 110 Consumer, indirect Pass 247,829 225,225 96,698 59,044 18,644 15,977 — — 663,417 Substandard 333 934 789 558 190 206 — — 3,010 Loss 7 34 2 — 2 — — — 45 Total 248,169 226,193 97,489 59,602 18,836 16,183 — — 666,472 Current period gross charge-offs 609 2,091 865 255 63 147 4,030 Consumer, direct Pass 58,445 37,050 17,434 8,282 3,185 4,081 — — 128,477 Substandard 55 79 47 28 30 27 — — 266 Loss — — — — — 26 — — 26 Total 58,500 37,129 17,481 8,310 3,215 4,134 — — 128,769 Current period gross charge-offs 36 154 77 100 14 35 416 Deposit account overdrafts 986 — — — — — — — 986 Current period gross charge-offs 1,161 1,161 Total loans, at amortized cost 1,352,734 1,206,325 1,025,875 536,750 430,610 1,336,994 269,908 11,007 6,159,196 Current period gross charge-offs $ 2,794 $ 3,706 $ 2,326 $ 652 $ 415 $ 1,587 $ 11,480 24 Table of Contents Collateral Dependent Loans Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans: • Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by multi-family complexes, warehouse buildings, industrial buildings, land under development, and other commercial real estate in process of construction. • Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by multifamily complexes, retail facilities, office buildings and complexes, warehouses, industrial buildings, land under development, as well as other commercial real estate. • Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property. • Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage, on residential real estate property. • Home equity lines of credit are generally secured by second mortgages on residential real estate property. • Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral. • Leases are most often secured by commercial equipment and other essential business assets. • Premium finance loans are secured by the unearned portion of the insurance premium being financed. The following table details Peoples' amortized cost of collateral dependent loans: (Dollars in thousands) September 30, 2024 December 31, 2023 Commercial real estate, other $ 1,923 $ — Premium finance 4,034 — Leases 3,805 — Commercial and industrial 1,186 — Residential real estate — 501 Total collateral dependent loans $ 10,948 $ 501 The increase in collateral dependent loans at September 30, 2024, compared to December 31, 2023, was primarily due to the addition of fourteen leases associated with five customer relationships and seven premium finance loans during the three months ended September 30, 2024. Modifications for Borrowers Experiencing Financial Difficulty As part of Peoples' loss mitigation activities, Peoples may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. The most common modifications to the contractual terms of a loan to a borrower experiencing financial difficulty include an extension of the maturity date, a reduction in the interest rate for the remaining life of the loan, a temporary period of interest-only payments, and a reduction in the contractual payment amount for either a short period or the remaining term of the loan. In addition to loan modifications, Peoples also provides other loss mitigation options, such as forbearance and repayment plans, to assist borrowers who experience financial difficulties. In assessing whether or not a borrower is experiencing financial difficulty, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (1) the borrower is currently in payment default on any of the borrower's debt; (2) a payment default is probable in the foreseeable future without the modification; (3) the borrower has declared or is in the process of declaring bankruptcy; and (4) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification. The following tables display the amortized cost of loans that were restructured during the three and nine months ended September 30, 2024 and September 30, 2023, presented by loan classification. 25 Table of Contents Payment Delay (Only) (Dollars in thousands) Payment Deferral Term Extension Total Percentage of Total by Loan Category (a)(b)(c) During the Three Months Ended September 30, 2024 Commercial real estate $ — $ 561 $ 561 0.03 % Commercial and industrial — 9,057 9,057 0.72 % Leasing 14 637 651 0.15 % Residential real estate — 17 17 — % Consumer, indirect 14 1 15 — % Total $ 28 $ 10,273 $ 10,301 0.16 % During the Three Months Ended September 30, 2023 Commercial real estate — 901 901 0.04 % Commercial and industrial — 2,352 2,352 0.21 % Residential real estate — 25 25 — % Home equity lines of credit — 52 52 0.03 % Total $ — $ 3,330 $ 3,330 0.05 % (a) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable. (b) The table presented above excludes loans that were paid off or otherwise no longer included in the loan portfolio as of period end. (c) Each with --% not meaningful Payment Delay (Only) (Dollars in thousands) Forbearance Plan Payment Deferral Term Extension Forbearance Plan and Term Extension Total Percentage of Total by Loan Category (a)(b)(c) During the Nine Months Ended September 30, 2024 Commercial real estate $ — $ — $ 1,122 $ — $ 1,122 0.05 % Commercial and industrial — — 19,148 — 19,148 1.53 % Leasing — 214 637 — 851 0.20 % Residential real estate — — 90 — 90 0.01 % Home equity lines of credit — — 64 — 64 0.03 % Consumer, indirect — 14 8 — 22 — % Total $ — $ 228 $ 21,069 $ — $ 21,297 0.34 % During the Nine Months Ended September 30, 2023 Construction $ — $ 1,598 $ — $ — $ 1,598 0.43 % Commercial real estate 189 — 1,089 — 1,278 0.06 % Commercial and industrial — — 5,130 293 5,423 0.48 % Residential real estate — — 243 — 243 0.03 % Home equity lines of credit — — 203 — 203 0.10 % Total $ 189 $ 1,598 $ 6,665 $ 293 $ 8,745 0.14 % (a) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable. (b) The table presented above excludes loans that were paid off or otherwise no longer included in the loan portfolio as of period end. (c) Each with --% not meaningful 26 Table of Contents The following tables summarize the financial impacts of loan modifications and payment deferrals made to loans during both the three and nine months ended September 30, 2024 and September 30, 2023, presented by loan classification. Weighted-Average Term Extension (in months) Average Amount Capitalized as a Result of a Payment Delay (a) During the Three Months Ended September 30, 2024 Commercial real estate 6 $ — Commercial and industrial 7 — Leasing 12 — Residential real estate 1 — Consumer, indirect 13 — During the Three Months Ended September 30, 2023 Commercial real estate 4 — Commercial and industrial 4 — Residential real estate 240 — Home equity lines of credit 217 — (a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars. Weighted-Average Term Extension (in months) Average Amount Capitalized as a Result of a Payment Delay (a) During the Nine Months Ended September 30, 2024 Commercial real estate 6 $ — Commercial and industrial 7 — Leasing 12 — Residential real estate 1 — Home equity lines of credit 120 — Consumer, indirect 3 — During the Nine Months Ended September 30, 2023 Commercial real estate 6 — Commercial and industrial 5 — Residential real estate 213 8,072 Home equity lines of credit 189 — Consumer, indirect 2 — (a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars. The following tables display the amortized cost of loans that received a completed modification or payment deferral within the previous 12 months and that had a payment default in the periods presented. For purposes of this disclosure, Peoples defines loans that had a payment default as loans that were 90 days or more past due following a modification. 27 Table of Contents Payment Delay as a Result of a Payment Deferral (Only) (a) For the Three Months Ended September 30, 2024 Leasing 26 Total loans that subsequently defaulted $ 26 For the Nine Months Ended September 30, 2024 Commercial real estate 193 Commercial and industrial 28 Leasing 26 Residential real estate 73 Total loans that subsequently defaulted $ 320 For the Three Months Ended September 30, 2023 (b) Commercial and industrial 245 Total loans that subsequently defaulted $ 245 For the Nine Months Ended September 30, 2023 (b) Commercial and industrial 245 Consumer, indirect 11 Total loans that subsequently defaulted $ 256 (a) Represents the sum of amortized cost and gross charge-off as of period end. Excludes loans that liquidated either through foreclosure, deed-in-lieu of foreclosure, or a short sale. (b) Accounting standard was implemented as of January 1, 2023, thus information above reflects loan modifications made on or after that date. The following table displays an aging analysis of loans that were modified during the 12 months prior to September 30, 2024, presented by classification and class of financing receivable. As of September 30, 2024 (Dollars in thousands) 30-59 Days Delinquent 60-89 Days Delinquent 90+ Days Delinquent Total Delinquent Current Total Commercial real estate — — 193 193 2,311 2,504 Commercial and industrial 50 — 28 78 11,363 11,441 Leasing — — 26 26 174 200 Residential real estate — — 34 34 63 97 Home equity lines of credit — — — — 120 120 Consumer, indirect — — — — 7 7 Total loans modified (a) $ 50 $ — $ 281 $ 331 $ 14,038 $ 14,369 (a) Represents the amortized cost basis as of period end. The following table displays an aging analysis of loans that were modified on or after January 1, 2023, the date Peoples adopted ASU 2022-02, through September 30, 2023, presented by classification and class of financing receivable. 28 Table of Contents As of September 30, 2023 (Dollars in thousands) 30-59 Days Delinquent 60-89 Days Delinquent 90+ Days Delinquent Total Delinquent Current Total Construction $ — $ — $ — $ — $ 1,598 $ 1,598 Commercial real estate — 76 — 76 1,203 1,279 Commercial and industrial — 276 2,042 2,318 3,105 5,423 Residential real estate — — — — 242 242 Home equity lines of credit — — — — 203 203 Total loans modified (a) $ — $ 352 $ 2,042 $ 2,394 $ 6,351 $ 8,745 (a) Represents the amortized cost basis as of period end. Allowance for Credit Losses As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K, Peoples estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In management's estimation of expected credit losses, Peoples uses a one-year reasonable and supportable period across all segments. Following the reasonable and supportable period, Peoples reverts the macroeconomic variables to their long run average over a four-quarter reversion period. Changes in the allowance for credit losses for the three and nine months ended September 30, 2024 and September 30, 2023 are summarized below: (Dollars in thousands) Beginning Balance, June 30, 2024 Initial Allowance for Acquired PCD Assets (Recovery of) Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2024 Construction $ 673 $ — $ 181 $ — $ — $ 854 Commercial real estate, other 19,852 — ( 2,713 ) — 100 17,239 Commercial and industrial 10,943 — 907 ( 259 ) 1 11,592 Premium finance 763 — ( 19 ) ( 37 ) 4 711 Leases 15,218 — 5,449 ( 3,753 ) 56 16,970 Residential real estate 5,939 — 61 — 58 6,058 Home equity lines of credit 1,737 — 69 ( 2 ) — 1,804 Consumer, indirect 8,654 — 1,904 ( 1,820 ) 186 8,924 Consumer, direct 2,332 — 181 ( 162 ) 19 2,370 Deposit account overdrafts 136 — 456 ( 558 ) 83 117 Total $ 66,247 $ — $ 6,476 $ ( 6,591 ) $ 507 $ 66,639 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. 29 Table of Contents (Dollars in thousands) Beginning Balance, June 30, 2023 Initial Allowance for Acquired PCD Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2023 Construction $ 1,496 $ — $ ( 255 ) $ — $ — $ 1,241 Commercial real estate, other 19,731 138 1,569 ( 278 ) 97 21,257 Commercial and industrial 11,028 3 ( 630 ) ( 199 ) 3 10,205 Premium finance 431 — 66 ( 33 ) 12 476 Leases 10,377 — 2,052 ( 905 ) 168 11,692 Residential real estate 6,112 6 156 ( 50 ) 27 6,251 Home equity lines of credit 1,676 5 ( 9 ) ( 32 ) — 1,640 Consumer, indirect 7,610 — 683 ( 926 ) 149 7,516 Consumer, direct 2,642 1 ( 43 ) ( 92 ) 11 2,519 Deposit account overdrafts 108 — 289 ( 319 ) 49 127 Total $ 61,211 $ 153 $ 3,878 $ ( 2,834 ) $ 516 $ 62,924 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. (Dollars in thousands) Beginning Balance, December 31, 2023 Initial Allowance for Acquired PCD Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2024 Construction $ 699 $ — $ 155 $ — $ — $ 854 Commercial real estate, other 20,915 — ( 3,567 ) ( 212 ) 103 17,239 Commercial and industrial 10,490 — 1,634 ( 550 ) 18 11,592 Premium finance 484 — 357 ( 146 ) 16 711 Leases 10,850 — 13,079 ( 7,400 ) 441 16,970 Residential real estate 5,937 — 56 ( 144 ) 209 6,058 Home equity lines of credit 1,588 — 220 ( 11 ) 7 1,804 Consumer, indirect 8,590 — 4,808 ( 4,848 ) 374 8,924 Consumer, direct 2,343 — 513 ( 529 ) 43 2,370 Deposit account overdrafts 115 — 1,010 ( 1,232 ) 224 117 Total $ 62,011 $ — $ 18,265 $ ( 15,072 ) $ 1,435 $ 66,639 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. 30 Table of Contents (Dollars in thousands) Beginning Balance, December 31, 2022 Initial Allowance for Acquired PCD Assets Provision for (Recovery of) Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2023 Construction $ 1,250 $ — $ — $ ( 9 ) $ — $ 1,241 Commercial real estate, other 17,710 418 3,307 ( 318 ) 140 21,257 Commercial and industrial 8,229 379 1,354 ( 211 ) 454 10,205 Premium finance 344 — 187 ( 79 ) 24 476 Leases 8,495 — 4,838 ( 1,978 ) 337 11,692 Residential real estate 6,357 260 ( 341 ) ( 150 ) 125 6,251 Home equity lines of credit 1,693 18 35 ( 106 ) — 1,640 Consumer, indirect 7,448 — 2,507 ( 2,796 ) 357 7,516 Consumer, direct 1,575 86 1,071 ( 274 ) 61 2,519 Deposit account overdrafts 61 — 701 ( 809 ) 174 127 Total $ 53,162 $ 1,161 $ 13,659 $ ( 6,730 ) $ 1,672 $ 62,924 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. During the third quarter of 2024, Peoples recorded a total provision for credit losses of $ 6.5 million, which was a result of higher net charge-offs. Net charge-offs for the third quarter of 2024 were $ 6.1 million, primarily driven by an increase in charge-offs on leases originated by our North Star Leasing division, partially offset by recoveries of other commercial real estate loans.The increase in the allowance for credit losses at September 30, 2024 when compared to at June 30, 2024 and at December 31, 2023 was primarily due to an increase on reserves for individually analyzed loans and leases. During the third quarter of 2023, Peoples recorded a provision for credit losses of $ 3.9 million, which was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment, and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL mode, partially offset by the release of reserves on individually analyzed loans. The allowance for credit losses at September 30, 2023 also included an allowance for loans that were not considered purchased credit deteriorated acquired in the Limestone merger. The provision for credit losses during the first nine months of 2024 was $ 18.3 million, compared to a provision for credit losses of $ 13.7 million for the first nine months of 2023. The provision for credit losses during the first nine months of 2024 was mainly a result of (i) higher net charge-offs, (ii) an increase in reserves on individually analyzed loans and leases, (iii) economic forecast deterioration and (iv) loan growth. The provision for credit losses during the first nine months of 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (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. Peoples had recorded an allowance for unfunded commitments of $ 2.0 million and $ 1.8 million as of September 30, 2024 and December 31, 2023, respectively. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets. The change in the allowance for unfunded commitments is also reflected in the "Provision for (recovery of) credit losses" line of the Unaudited Consolidated Statements of Operations. 31 Table of Contents Note 5 Goodwill and Other Intangible Assets Goodwill The following table details changes in the recorded amount of goodwill: For the Nine Months Ended For the Year Ended (Dollars in thousands) September 30, 2024 December 31, 2023 Goodwill, beginning of period $ 362,169 $ 292,397 Goodwill recorded from acquisitions 245 69,772 Goodwill, end of period $ 362,414 $ 362,169 As of the close of business on April 30, 2023, Peoples completed its acquisition of Limestone Bancorp, Inc. ("Limestone") pursuant to an Agreement and Plan of Merger dated October 24, 2022, at which point Limestone merged with and into Peoples, and immediately thereafter, Limestone Bank, Inc., the subsidiary bank of Limestone, merged with and into Peoples Bank (collectively, the “Limestone Merger”). Peoples recorded $ 68.8 million of Goodwill related to the Limestone Merger. Other Intangible Assets Other intangible assets were comprised of the following at September 30, 2024 , and at December 31, 2023 : (Dollars in thousands) Core Deposits Customer Relationships Indefinite-Lived Trade Names Total September 30, 2024 Gross intangibles $ 54,186 $ 37,920 $ 2,491 $ 94,597 Intangibles recorded from acquisitions — — — — Accumulated amortization ( 30,078 ) ( 24,454 ) — ( 54,532 ) Total acquisition-related intangibles $ 24,108 $ 13,466 $ 2,491 $ 40,065 Servicing rights 1,251 Non-compete agreements 192 Total other intangibles $ 41,508 December 31, 2023 Gross intangibles $ 26,464 $ 37,920 $ 2,491 $ 66,875 Intangibles recorded from acquisitions 27,722 — — 27,722 Accumulated amortization ( 25,670 ) ( 20,680 ) — ( 46,350 ) Total acquisition-related intangibles $ 28,516 $ 17,240 $ 2,491 $ 48,247 Servicing rights 1,385 Non-compete agreements 371 Total other intangibles $ 50,003 32 Table of Contents The following table details estimated aggregate future amortization of other intangible assets at September 30, 2024: (Dollars in thousands) Core Deposits Customer Relationships Non-Compete Agreements Total Remaining three months of 2024 $ 1,466 $ 1,254 $ 64 $ 2,784 2025 4,609 4,038 112 $ 8,759 2026 3,736 2,954 16 $ 6,706 2027 3,043 2,112 — $ 5,155 2028 2,608 1,392 — $ 4,000 Thereafter 8,646 1,716 — $ 10,362 Total $ 24,108 $ 13,466 $ 192 $ 37,766 The weighted average amortization period of other intangible assets is 8.5 years. Note 6 Deposits Peoples’ deposit balances were comprised of the following: (Dollars in thousands) September 30, 2024 December 31, 2023 Retail certificates of deposits ("CDs"): $100 or more $ 1,069,312 $ 815,300 Less than $100 814,827 628,117 Total Retail CDs 1,884,139 1,443,417 Interest-bearing deposit accounts 1,065,912 1,144,357 Savings accounts 864,935 919,244 Money market deposit accounts 894,690 775,488 Governmental deposit accounts 824,136 726,713 Brokered CDs 495,904 575,429 Total interest-bearing deposits 6,029,716 5,584,648 Non-interest-bearing deposits $ 1,453,441 1,567,649 Total deposits $ 7,483,157 $ 7,152,297 Uninsured deposits were $ 2.0 billion at September 30, 2024 and at December 31, 2023 . Uninsured deposit amounts are estimated based on the portion of the respective customer account balances that exceeded the FDIC limit of $250,000. Peoples pledges investment securities against certain governmental deposit accounts, which covered over $ 714.1 million and $ 788.7 million of the uninsured deposit balances at September 30, 2024 and December 31,2023, respectively . Uninsured time deposits are broken out below by time remaining until maturity. (Dollars in thousands) September 30, 2024 December 31, 2023 3 months or less $ 167,259 $ 58,708 Over 3 to 6 months 158,541 99,928 Over 6 to 12 months 82,378 131,263 Over 12 months 15,910 37,180 Total $ 424,088 $ 327,079 33 Table of Contents The contractual maturities of CDs for each of the next five years, including the remainder of 2024, and thereafter are as follows: (Dollars in thousands) Retail Brokered Total Remaining three months ending December 31, 2024 $ 682,696 $ 484,406 $ 1,167,102 Year ending December 31, 2025 1,144,366 10,298 1,154,664 Year ending December 31, 2026 22,456 227 22,683 Year ending December 31, 2027 23,719 973 24,692 Year ending December 31, 2028 6,862 — 6,862 Thereafter 4,040 — 4,040 Total CDs $ 1,884,139 $ 495,904 $ 2,380,043 At September 30, 2024, Peoples had nine effective interest rate swaps, with an aggregate notional value of $ 85.0 million, all of which were funded by brokered CDs. Brokered CDs used to fund interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments." Note 7 Stockholders’ Equity The following table details the progression in Peoples’ common shares and treasury stock during the nine months ended September 30, 2024: Common Shares Treasury Stock Shares at December 31, 2023 36,736,041 1,511,348 Changes related to stock-based compensation awards: Release of restricted common shares — 29,921 Cancellation of restricted common shares — 25,223 Grant of restricted common shares — ( 296,970 ) Grant of unrestricted common shares — ( 1,200 ) Purchase of treasury stock — 12,004 Disbursed out of treasury stock — ( 12,833 ) Common shares repurchased under share repurchase program — 100,905 Common shares issued under dividend reinvestment plan 36,418 — Common shares issued under compensation plan for Boards of Directors — ( 12,580 ) Common shares issued under employee stock purchase plan — ( 32,743 ) Shares at September 30, 2024 36,772,459 1,323,075 On January 28, 2021, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $ 30.0 million of Peoples' outstanding common shares. As of September 30, 2024, Peoples had repurchased an aggregate of 471,307 common shares totaling $ 13.4 million under the share repurchase program. There were 100,905 common shares totaling $ 3.0 million repurchased during the first nine months of 2024, none of which were purchases in the third quarter of 2024. Under Peoples' Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as designated by Peoples' Board of Directors. At September 30, 2024, Peoples had no preferred shares issued or outstanding. On October 21, 2024, Peoples' Board of Directors declared a quarterly cash dividend of $ 0.40 per common share, payable on November 18, 2024, to shareholders of record on November 4, 2024. The following table details the cash dividends declared per common share during the four quarters of 2024 and the comparable periods of 2023: 2024 2023 First quarter $ 0.39 $ 0.38 Second quarter 0.40 0.39 Third quarter 0.40 0.39 Fourth quarter 0.40 0.39 Total dividends declared $ 1.59 $ 1.55 Accumulated Other Comprehensive (Loss) Income The following table details the change in the components of Peoples’ accumulated other comprehensive (loss) income during the nine months ended September 30, 2024: (Dollars in thousands) Unrealized (Loss) Gain on Securities Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive (Loss) Income Balance, December 31, 2023 $ ( 104,222 ) $ 2,632 $ ( 101,590 ) Reclassification adjustments to net income: Realized loss on securities, net of tax 328 — 328 Other comprehensive (loss) income, net of reclassifications and tax 20,211 ( 1,445 ) 18,766 Balance, September 30, 2024 $ ( 83,683 ) $ 1,187 $ ( 82,496 ) Note 8 Employee Benefit Plans Peoples sponsored a noncontributory defined benefit pension plan that covered substantially all employees hired before January 1, 2010. The plan provided retirement benefits based on an employee’s years of service and compensation. For employees hired before January 1, 2003, the amount of post-retirement benefit was based on the employee’s average monthly compensation over the highest five consecutive years out of the employee’s last 10 years with Peoples while an eligible employee. For employees hired on or after January 1, 2003, the amount of post-retirement benefit was based on 2 % of the employee’s annual compensation during the years 2003 through 2009, plus accrued interest. During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $ 7.7 million. The pension plan had been closed to new entrants since January 1, 2010. Peoples recorded a settlement charge of $ 2.4 million in the third quarter of 2023 in relation to the termination of the pension plan. Peoples does not anticipate further expenses related to the termination. Retirement Savings Plan Peoples also maintains a retirement savings plan, or 401(k) plan, which covers substantially all employees. The plan provides participants with the opportunity to save for retirement on a tax-deferred basis. Since January 1, 2021, Peoples matches 100 % of participants’ contributions up to 6 % of the participants’ compensation. Matching contributions made by Peoples totaled $ 4.5 million during the nine months ended September 30, 2024 and $ 4.1 million for the nine months ended September 30, 2023 . 34 Table of Contents Note 9 Earnings Per Common Share The calculations of basic and diluted earnings per common share were as follows: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands, except per common share data) 2024 2023 2024 2023 Net income available to common shareholders $ 31,684 $ 31,882 $ 90,275 $ 79,538 Less: Dividends paid on unvested common shares 216 143 576 388 Less: Undistributed income allocated to unvested common shares 63 79 183 190 Net earnings allocated to common shareholders $ 31,405 $ 31,660 $ 89,516 $ 78,960 Weighted-average common shares outstanding 34,793,704 34,818,346 34,766,281 31,771,061 Effect of potentially dilutive common shares 405,679 243,551 340,431 206,425 Total weighted-average diluted common shares outstanding 35,199,383 35,061,897 35,106,712 31,977,486 Earnings per common share: Basic $ 0.90 $ 0.91 $ 2.57 $ 2.49 Diluted $ 0.89 $ 0.90 $ 2.55 $ 2.47 Anti-dilutive common shares excluded from calculation: Restricted common shares 5,393 3,046 5,393 10,547 Note 10 Derivative Financial Instruments Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivative financial instruments is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows. Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions. Cash Flow Hedges of Interest Rate Risk Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At September 30, 2024, Peoples had entered into 9 interest rate swap contracts with an aggregate notional value of $ 85.0 million. Peoples will pay a fixed rate of interest for up to four years while receiving a floating rate component of interest equal to term SOFR. The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs, which will continue to be rolled through the life of the interest rate swaps. At both September 30, 2024 and at December 31, 2023, the interest rate swaps were designated as cash flow hedges of $ 85.0 million and $ 105.0 million, respectively, in brokered CDs, which are expected to be extended every 90 days through the maturity dates of the interest rate swaps. 35 Table of Contents For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the brokered CDs are matched to the reset dates and payment dates on the receipt of the term SOFR rate (or the three-month LIBOR floating portion prior to June 30, 2023) of the swaps to ensure effectiveness of the cash flow hedge. For the nine months ended September 30, 2024, and 2023, Peoples recorded reclassifications of losses to earnings of $ 2.4 million and $ 2.3 million, respectively. During the next 12 months, Peoples estimates that $ 1.4 million of AOCI will be reclassified as an addition to interest expense. The following table summarizes information about the interest rate swaps designated as cash flow hedges: (Dollars in thousands) September 30, 2024 December 31, 2023 Notional amount $ 85,000 $ 105,000 Weighted average pay rates 2.34 % 2.22 % Weighted average receive rates 4.27 % 4.63 % Weighted average maturity 1.6 years 2.0 years Pre-tax changes in fair value included in AOCI $ 1,550 $ 3,434 The following table presents changes in fair value recorded in AOCI and in the Consolidated Statements of Operations related to the cash flow hedges: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2024 2023 2024 2023 Amount of losses (gains) recorded in AOCI, pre-tax $ 1,698 $ ( 118 ) $ 1,885 $ 165 The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value: September 30, 2024 December 31, 2023 (Dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value Included in "Other assets": Interest rate swaps related to debt $ 85,000 $ 1,448 $ 105,000 $ 3,314 36 Table of Contents Non-Designated Hedges Peoples Bank maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this program, Peoples Bank originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples Bank on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples Bank effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples Bank. Peoples Bank offsets its exposure in the interest rate swap by entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated hedges; therefore, each interest rate swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the three and nine months ended September 30, 2024 and at or for the year ended December 31, 2023. The following table reflects the non-designated hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value: September 30, 2024 December 31, 2023 (Dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value Included in "Other assets": Interest rate swaps related to commercial loans $ 398,473 $ 12,236 $ 416,106 $ 18,990 Included in "Accrued expenses and other liabilities": Interest rate swaps related to commercial loans $ 398,473 $ 12,354 $ 416,106 $ 19,122 Pledged Collateral Peoples Bank pledges or receives collateral for all interest rate swaps. When the fair value of Peoples Bank interest rate swaps is in a net liability position, Peoples Bank must pledge collateral, and, when the fair value of Peoples Bank interest rate swaps is in a net asset position, the respective counterparties must pledge collateral. At September 30, 2024 and at December 31, 2023, Peoples Bank had no cash pledged, while counterparties had $ 6.6 million of cash pledged at September 30, 2024 and $ 12.8 million of cash pledged at December 31, 2023. Peoples Bank had no pledged investment securities at September 30, 2024 or at December 31, 2023, while the counterparties had pledged investment securities in the amounts of $ 2.0 million at September 30, 2024 and $ 2.2 million at December 31, 2023. Note 11 Stock-Based Compensation Under the Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 1,493,297 . The maximum number of common shares that can be issued for incentive stock options is 750,000 . Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares. Restricted Common Shares Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on the restricted common shares awarded to officers and key employees expire after periods ranging from one to five years . Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions. In the first nine months of 2024, Peoples granted an aggregate of 283,712 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date. The following table summarizes the changes to Peoples’ restricted common shares for the nine months ended September 30, 2024: 37 Table of Contents Time-Based Vesting Performance-Based Vesting Number of Common Shares Weighted-Average Grant Date Fair Value Number of Common Shares Weighted-Average Grant Date Fair Value Outstanding at January 1, 2024 142,419 $ 28.78 403,970 $ 31.21 Awarded 21,258 29.76 283,712 27.92 Released ( 19,526 ) 31.65 ( 72,550 ) 31.48 Forfeited ( 9,779 ) 29.65 ( 23,444 ) 29.51 Outstanding at September 30, 2024 134,372 $ 28.46 591,688 $ 29.67 For the nine months ended September 30, 2024, the intrinsic value for restricted common shares released was $ 2.6 million compared to $ 3.0 million for the nine months ended September 30, 2023. Stock-Based Compensation Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted and unrestricted common shares, as well as purchases made by participants in the employee stock purchase plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years . Peoples also has an employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of 15 %. The following table summarizes the amount of stock-based compensation expense and related tax benefit recognized for each period: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2024 2023 2024 2023 Employee stock-based compensation expense: Stock grant expense $ 1,335 $ 1,074 $ 5,638 $ 4,233 Employee stock purchase plan expense ( 24 ) 33 115 106 Total employee stock-based compensation expense 1,311 1,107 $ 5,753 $ 4,339 Non-employee director stock-based compensation expense 115 139 $ 376 $ 410 Total stock-based compensation expense 1,426 1,246 $ 6,129 $ 4,749 Recognized tax benefit ( 332 ) ( 291 ) ( 1,428 ) ( 1,109 ) Net stock-based compensation expense $ 1,094 $ 955 $ 4,701 $ 3,640 The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date. Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $ 7.2 million at September 30, 2024, which will be recognized over a weighted-average period of 2.0 years. 38 Table of Contents Note 12 Revenue The following table details Peoples' revenue from contracts with customers: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2024 2023 2024 2023 Insurance income: Commission and fees from sale of insurance policies (a) $ 4,271 $ 4,210 $ 12,660 $ 12,077 Performance-based commissions (b) — 40 2,218 1,602 Trust and investment income: Fiduciary income (a) 2,838 2,506 8,605 7,710 Brokerage income (a) 2,044 1,782 5,875 5,076 Electronic banking income: Interchange income (a) 4,981 5,124 14,864 14,341 Promotional and usage income (a) 1,378 1,342 4,011 4,034 Deposit account service charges: Ongoing maintenance fees for deposit accounts (a) 1,741 1,577 5,175 4,661 Transaction-based fees (b) 2,779 2,939 7,907 7,531 Commercial loan swap fees (b) 163 475 274 593 Other non-interest income transaction-based fees (b) 243 391 1,336 1,199 Total revenue from contracts with customers $ 20,438 $ 20,386 $ 62,925 $ 58,824 Timing of revenue recognition: Services transferred over time $ 17,253 $ 16,541 $ 51,190 $ 47,899 Services transferred at a point in time 3,185 3,845 11,735 10,925 Total revenue from contracts with customers $ 20,438 $ 20,386 $ 62,925 $ 58,824 (a) Services transferred over time. (b) Services transferred at a point in time. Peoples records contract assets for income that has been recognized over a period of time for fulfillment of performance obligations, but has not yet been received related to electronic banking income and certain insurance income. This income typically relates to bonuses for which Peoples is eligible, but will not receive until a certain time in the future. Peoples records contract liabilities for payments received for commission income related to the sale of insurance policies, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled, which is over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled related to electronic banking income. The following table details the changes in Peoples' contract assets and contract liabilities for the nine-month period ended September 30, 2024: Contract Assets Contract Liabilities (Dollars in thousands) Balance, January 1, 2024 $ 753 $ 5,776 Additional income receivable 132 — Additional deferred income — — Receipt of income previously receivable ( 40 ) — Recognition of income previously deferred — ( 241 ) Balance, September 30, 2024 $ 845 $ 5,535 39 Table of Contents Note 13 Acquisitions Limestone Bancorp, Inc. As of the close of business on April 30, 2023, Peoples completed the Limestone Merger. In connection with the Limestone Merger, Limestone Bank, Inc., which operated 20 branches in Kentucky, merged into Peoples Bank. As consideration in the Limestone Merger, Limestone shareholders were paid 0.90 common shares of Peoples for each full share of Limestone that was owned at the merger date, resulting in the issuance of 6,827,668 common shares by Peoples, or aggregate consideration of $ 177.9 million. Peoples accounted for this transaction as a business combination under the acquisition method. Peoples recorded $( 0.7 ) million in other non-interest expenses related to the Limestone Merger for both the three and nine months ended September 30, 2024. For the third quarter of 2023, Peoples had $ 4.4 million of acquisition-related non-interest expense which consisted of $ 2.1 million in other non-interest expense, $ 1.3 million in data processing and software expense, $ 0.6 million in salaries and employee benefit costs, and $ 0.4 million in professional fees. For the nine months ended September 30, 2023, Peoples had $ 15.7 million of acquisition-related non-interest expense which consisted of $ 5.7 million in salaries and employee benefit costs, $ 5.5 million in professional fees, $ 3.0 million in other non-interest expense, $ 1.3 million in data processing and software expense, and $ 0.2 million in various other non-interest expense line items . The following table provides the purchase price calculation as of the date of the Limestone Merger, and the assets acquired and liabilities assumed at their estimated fair values. (Dollars in thousands) Fair Value Total purchase price $ 177,931 Assets Cash and balances due from banks 6,422 Interest-bearing deposits in other banks 87,115 Total cash and cash equivalents 93,537 Available-for-sale investment securities, at fair value 166,944 Other investment securities 5,716 Total investment securities 172,660 Loans 1,077,929 Allowance for credit losses (on PCD loans) ( 2,051 ) Net loans 1,075,878 Bank premises and equipment, net of accumulated depreciation 17,690 Bank owned life insurance 31,343 Other intangible assets 27,722 Other assets 36,874 Total assets 1,455,704 Liabilities Deposits: Non-interest-bearing 262,727 Interest-bearing 971,457 Total deposits 1,234,184 Short-term borrowings 60,000 Long-term borrowings 39,453 Accrued expenses and other liabilities 12,967 Total liabilities 1,346,604 Net assets 109,100 Goodwill $ 68,831 The goodwill recorded in connection with the Limestone Merger is related to expected synergies to be gained from the combination of Limestone with Peoples' operations. The employees retained from the Limestone Merger and the geographic locations 40 Table of Contents of Limestone should allow Peoples to continue to grow the loan and deposit portfolios while also increasing Peoples' ability to penetrate the new markets, which should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill. Peoples recorded a core deposit asset in other intangible assets related to the Limestone Merger. Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes loans as to which Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" (or "PCD") loans. Acquired PCD loans are reported net of the unamortized fair value adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The following table details the fair value adjustment for acquired PCD loans as of the acquisition date: (Dollars in thousands) Par Value Allowance for Credit Losses Non-Credit (Discount) Premium Fair Value PCD loans Commercial real estate, other 30,907 ( 1,340 ) ( 2,160 ) 27,407 Commercial and industrial 16,466 ( 379 ) ( 610 ) 15,477 Residential real estate 6,328 ( 228 ) ( 770 ) 5,330 Home equity lines of credit 774 ( 18 ) 11 767 Consumer 1,029 ( 86 ) 78 1,021 Fair value $ 55,504 $ ( 2,051 ) $ ( 3,451 ) $ 50,002 Note 14 Leases Peoples has elected certain practical expedients, in accordance with ASC 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842. Lessor Arrangements Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment in the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, a lease is typically charged down to the net realizable value, with the remaining balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses. Peoples originates sales-type leases through its North Star Leasing division, as these leases are typically structured as dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment, or as equipment finance agreements. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. Peoples also originates leases through its Vantage subsidiary, which are classified as either sales-type, direct financing leases, or operating leases based primarily on whether they include a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate to information technology, restaurant, manufacturing, healthcare, and other equipment. Finance leases include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Lease income noted in the table below includes (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases." 41 Table of Contents The table below details Peoples' lease income: Three Months Ended Nine Months Ended (Dollars in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Interest and fees on leases (a) $ 11,922 $ 11,508 $ 35,970 $ 31,426 Lease income (loss) 1,827 ( 66 ) 4,179 2,730 Other non-interest income (b) 1,242 — 3,079 — Total lease income $ 14,991 $ 11,442 $ 43,228 $ 34,156 (a) Included in "Interest and fees on loans and leases" in the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements. (b) Included in "Other non-interest income" is operating lease income. The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred fees and costs" on the Unaudited Consolidated Balance Sheets: (Dollars in thousands) September 30, 2024 December 31, 2023 Lease payments receivable, at amortized cost $ 484,926 $ 463,742 Estimated residual values 33,758 33,448 Initial direct costs 7,719 7,114 Deferred revenue ( 93,394 ) ( 90,244 ) Net investment in leases 433,009 414,060 Allowance for credit losses - leases ( 16,970 ) ( 10,850 ) Net investment in leases, after allowance for credit losses $ 416,039 $ 403,210 The following table summarizes the contractual maturities of leases: (Dollars in thousands) Balance Remaining three months ending December 31, 2024 $ 49,872 Year ending December 31, 2025 117,662 Year ending December 31, 2026 100,690 Year ending December 31, 2027 94,030 Year ending December 31, 2028 68,937 Thereafter 53,735 Lease payments receivable, at amortized cost $ 484,926 Lessee Arrangements Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years . Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability. At September 30, 2024, Peoples did not have any leases that met the criteria for finance leases. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement or the remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets are presented net of any lease incentives. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have an ROU asset or lease liability. The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations: 42 Table of Contents Three Months Ended Nine Months Ended (Dollars in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Operating lease expense $ 723 $ 474 $ 2,191 $ 2,262 Short-term lease expense 290 84 923 174 Variable lease expense 42 — 47 — Total lease expense $ 1,055 $ 558 $ 3,161 $ 2,436 Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease. The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown: (Dollars in thousands) September 30, 2024 December 31, 2023 ROU assets: Other assets $ 10,629 $ 11,689 Lease liabilities: Accrued expenses and other liabilities $ 11,185 $ 12,080 Other information: Weighted-average remaining lease term 9.1 years 9.5 years Weighted-average discount rate 4.10 % 3.34 % Additions for ROU assets obtained during the year $ 1,130 $ 4,428 During both the three months ended September 30, 2024 and 2023, Peoples paid cash of $ 0.7 million and $ 0.8 million, respectively, for operating leases. During the nine months ended September 30, 2024 and 2023, Peoples paid cash of $ 2.2 million and $ 2.2 million, respectively, for operating leases. The following table summarizes the maturity of remaining lease liabilities: (Dollars in thousands) Balance Remaining three months ending December 31, 2024 $ 726 Year ending December 31, 2025 2,315 Year ending December 31, 2026 2,027 Year ending December 31, 2027 1,816 Year ending December 31, 2028 1,338 Thereafter 5,402 Total undiscounted lease payments $ 13,624 Imputed interest $ ( 2,439 ) Total lease liabilities $ 11,185 43 Table of Contents