PEOPLES BANCORP INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples at and for the three months and nine months ended September 30, 2024 and September 30, 2023. This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto. Certain statements in this Form 10-Q, which are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate," "estimate," "may," "feel," "expect," "believe," "plan," "will," "will likely," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," "continue," "remain," and similar expressions. These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, but are not limited to: (1) the effects of interest rate policies, changes in the interest rate environment due to economic conditions and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Federal Reserve Board, including changes in the Federal Funds Target Rate, in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity; (2) the effects of inflationary pressures on borrowers’ liquidity and ability to repay; (3) the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the interest rate policies of the Federal Reserve Board, the completion and successful integration of acquisitions, and the expansion of commercial and consumer lending activities; (4) competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, which can in turn impact Peoples' credit spreads, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals; (5) uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements; (6) the effects of easing restrictions on participants in the financial services industry; (7) current and future local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, supply-demand imbalances affecting local real estate prices, high unemployment rates in the local or regional economies in which Peoples operates and/or the U.S. economy generally, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling, potential or imposed tariffs, uncertainties surrounding the upcoming U.S. Presidential election and potential changes in the U.S. Senate and House of Representatives, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S. and U.S. global trading partners) and the impact these conditions may have on Peoples, Peoples' customers and Peoples' counterparties, and Peoples' assessment of the impact, which may be different than anticipated; (8) Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders; (9) changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties' performance and creditworthiness generally, which may be less favorable than expected in light of recent inflationary pressures and continued elevated interest rates, and may adversely impact the amount of interest income generated; (10) Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral; (11) future credit quality and performance, including expectations regarding future credit losses and the allowance for credit losses; 44 Table of Contents (12) changes in accounting standards, policies, estimates or procedures may adversely affect Peoples' reported financial condition or results of operations; (13) the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model; (14) adverse changes in the conditions and trends in the financial markets, including recent inflationary pressures, which may adversely affect the fair value of securities within Peoples' investment portfolio, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities; (15) the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors; (16) Peoples' ability to receive dividends from Peoples' subsidiaries; (17) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity; (18) the impact of larger or similar-sized financial institutions encountering problems, such as the failure in 2024 of Republic First Bank, and closures in 2023 of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity, including Peoples' continued ability to grow deposits or maintain adequate deposit levels, and may further result in potential increased regulatory requirements, increased reputational risk and potential impacts to macroeconomic conditions; (19) Peoples' ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Peoples' third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss; (20) any misappropriation of the confidential information which Peoples possesses could have an adverse impact on Peoples' business and could result in regulatory actions, litigation and other adverse effects; (21) Peoples' ability to anticipate and respond to technological changes, and Peoples' reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Peoples' primary core banking system provider, which can impact Peoples' ability to respond to customer needs and meet competitive demands; (22) operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Peoples and Peoples' subsidiaries are highly dependent; (23) changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions, legislative or regulatory initiatives, or other factors, which may be different than anticipated; (24) the adequacy of Peoples' internal controls and risk management program in the event of changes in strategic, reputational, market, economic, operational, cybersecurity, compliance, legal, asset/liability repricing, liquidity, credit and interest rate risks associated with Peoples' business; (25) the impact on Peoples' businesses, personnel, facilities, or systems of losses related to acts of fraud, theft, misappropriation or violence; (26) the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters (including severe weather events), pandemics, cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts (including Russia’s war in Ukraine and the ongoing conflicts in the Middle East); (27) the potential deterioration of the U.S. economy due to financial, political or other shocks; (28) the potential influence on the U.S. financial markets and economy from the effects of climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; (29) the impact on Peoples' businesses and operating results of any costs associated with obtaining rights in intellectual property claimed by others and adequately protecting Peoples' intellectual property; (30) risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets; (31) Peoples' ability to integrate the Limestone Merger, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected; 45 Table of Contents (32) the risk that expected revenue synergies and cost savings from the Limestone Merger, may not be fully realized or realized within the expected time frame; (33) changes in laws or regulations imposed by Peoples' regulators impacting Peoples' capital actions, including dividend payments and share repurchases; (34) the vulnerability of Peoples' network and online banking portals, and the systems of parties with whom Peoples contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (35) regulatory and legal matters, including the failure to resolve any outstanding matters on a timely basis and the potential of new regulatory matters, litigation, or other legal actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences; (36) Peoples' business may be adversely affected by increased political and regulatory scrutiny of corporate environmental, social and governance ("ESG") practices; (37) the effect of a fall in stock market prices on Peoples' asset and wealth management business; and (38) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Peoples encourages readers of this Form 10-Q to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance. Peoples undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the filing of this Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC's website at http://www.sec.gov and/or from Peoples' website – www.peoplesbancorp.com under the “Investor Relations” section. All forward-looking statements speak only as of the filing date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements. Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual results may differ materially from these projections. This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements, and Notes to the Audited Consolidated Financial Statements, contained in Peoples’ 2023 Form 10-K, as well as the Unaudited Condensed Consolidated Financial Statements, Notes to the Unaudited Condensed Consolidated Financial Statements, ratios, statistics and discussions contained elsewhere in this Form 10-Q. Business Overview The following discussion and analysis of Peoples’ Unaudited Condensed Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial condition and results of operations. Peoples is a diversified financial services holding company that makes available a complete line of banking, trust and investment, insurance, premium financing and equipment leasing solutions through its subsidiaries. Peoples provides services through traditional offices, automated teller machines ("ATMs"), interactive teller machines ("ITMs"), mobile banking, telephone and internet-based banking. Peoples offers a complete array of insurance products through Peoples Insurance, a subsidiary of Peoples Bank. Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices. Peoples Bank offers insurance premium finance lending nationwide through its Peoples Premium Finance division. Peoples also offers lease financing through its North Star Leasing division and through Vantage, a subsidiary of Peoples Bank. As of September 30, 2024, Peoples had 149 locations, including 130 full-service bank branches in Ohio, Kentucky, West Virginia, Virginia, Washington D.C. and Maryland. Peoples Bank is subject to regulation and examination primarily by the Ohio Division of Financial Institutions (the "ODFI"), the FRB of Cleveland and the FDIC. Peoples Bank must also follow the regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), which regulates consumer financial products and services and certain financial services providers. Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business. Critical Accounting Policies The accounting and reporting policies of Peoples conform to US GAAP. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements describes Peoples' significant accounting policies. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and this MD&A at September 30, 2024, which have been disclosed in 46 Table of Contents Peoples' 2023 Form 10-K and updated in "Note 1 Summary of Significant Accounting Policies" in the Notes to the Unaudited Condensed Consolidated Financial Statements included in this Form 10-Q. This MD&A should be read in conjunction with the policies disclosed in Peoples’ 2023 Form 10-K. Summary of Recent Transactions and Events The following is a summary of recent transactions and events that have impacted or are expected to impact Peoples’ results of operations or financial condition: ◦ For the first nine months of 2024, Peoples incurred $(0.7) million of acquisition-related expenses compared to $15.7 million for the first nine months of 2023. Peoples recorded acquisition-related expenses, primarily related to the Limestone Merger, which included $(0.7) million for the third quarter of 2024 and $4.4 million for the third quarter of 2023. ◦ For the third quarter of 2024, Peoples recorded a provision for credit losses of $6.7 million, compared to a provision for credit losses of $5.7 million for the linked quarter and a provision for credit losses of $4.1 million for the third quarter of 2023. For the first nine months of 2024, Peoples recorded a provision for credit losses of $18.5 million, compared to a provision for credit losses of $13.9 million for 2023. The provision for credit losses for the third quarter of 2024 was mainly a result of net charge-offs. 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 for individually analyzed loans and leases, (iii) economic forecast deterioration and (iv) loan growth. For more information, please refer to the section titled "RESULTS OF OPERATIONS - Provision for Credit Losses" found later in this MD&A. ◦ On October 25, 2022, Peoples announced the Limestone Merger, a transaction valued at $177.9 million. The Limestone Merger closed as of the close of business on April 30, 2023. Peoples acquired Limestone's loan portfolio totaling $1.1 billion, $1.2 billion of deposits, $172.7 million of total investment securities, an aggregate of $99.5 million of short-term and long-term borrowings, and $93.5 million of total cash and cash equivalents. Peoples also recorded goodwill in the amount of $68.8 million and other intangible assets of $27.7 million, which consisted of core deposit intangibles. ◦ To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% beginning on March 16, 2022, and continued to raise rates up to 5.50% on July 27, 2023. This rate remained unchanged until September 2024, at which point the Federal Reserve Board decreased rates by 50 basis points, reducing the rate to 4.75% to 5.00%. The Federal Reserve Board has signaled that future rate reductions continue to be a possibility. The impact of these transactions and events, where material, is discussed in the applicable sections of this MD&A. EXECUTIVE SUMMARY Peoples reported net income of $31.7 million for the third quarter of 2024, representing earnings per diluted common share of $0.89. In comparison, Peoples reported net income of $29.0 million, representing earnings per diluted common share of $0.82, for the second quarter of 2024, and net income of $31.9 million, representing earnings per diluted common share of $0.90, for the third quarter of 2023. For the nine months ended September 30, 2024, Peoples recorded net income of $90.3 million, or $2.55 per diluted common share, compared to $79.5 million, or $2.47 per diluted common share, for the nine months ended September 30, 2023. Non-core items negatively impacted earnings per diluted common share by $0.01 for the third quarter of 2024, $0.02 for the second quarter of 2024, and $0.16 for the third quarter of 2023. Non-core items negatively impacted earnings per diluted share by $0.03 and $0.52 for the nine months ended September 30, 2024 and 2023, respectively. Net interest income was $88.9 million for the third quarter of 2024, and increased $2.3 million when compared to the linked quarter. Net interest margin was 4.27% for the third quarter of 2024, compared to 4.18% for the linked quarter. The increase in net interest income and net interest margin was primarily driven by an increase in accretion income, net of amortization, from our acquisitions and higher earning asset yields, which were partially offset by higher borrowings costs. Net interest income for the third quarter of 2024 decreased $4.4 million, or 5%, compared to the third quarter of 2023. The decrease in net interest income compared to the third quarter of 2023 was driven by higher funding costs. Net interest margin for the third quarter of 2024 was 4.27% and decreased 43 basis points compared to 4.70% for the third quarter of 2023, driven primarily by an increase in interest expense on deposits. For the first nine months of 2024, net interest income increased $11.2 million, or 4%, compared to the first nine months of 2023, while net interest margin decreased 36 basis points to 4.24%. The increase in net interest income was driven by increases in market interest rates and an additional four months of income from the Limestone Merger. The decrease in net interest margin for the first nine months of 2024 compared to the first nine months of 2023 was primarily driven by higher borrowing costs, which offset higher earning asset yields. Accretion income, net of amortization expense, from acquisitions was $8.1 million for the third quarter of 2024, $5.8 million for the second quarter of 2024 and $9.5 million for the third quarter of 2023, which added 39 basis points, 28 basis points and 48 basis points, respectively, to net interest margin. The increase in accretion income for the third quarter of 2024 when compared to the linked quarter was driven by higher pay-offs. The decrease in accretion income for the current quarter compared to the third quarter of 2023 47 Table of Contents was a result of the accretion from the Limestone Merger. Accretion income, net of amortization expense, from acquisitions was $20.3 million for the nine months ended September 30, 2024, compared to $15.8 million for the nine months ended September 30, 2023, which added 33 and 29 basis points, respectively, to net interest margin. The increase in accretion income for the first nine months of 2024 compared to the same period in 2023 was due to more accretion from the Limestone Merger. The provision for credit losses was $6.7 million for the third quarter of 2024, compared to a provision for credit losses of $5.7 million for the linked quarter and a provision for credit losses of $4.1 million for the third quarter of 2023. The provision for credit losses for the third quarter of 2024 was mainly a result of net charge-offs. The provision for credit losses for the second quarter of 2024 was driven by (i) higher charge-offs, (ii) an increase of reserves for individually analyzed loans and leases, and (iii) loan growth. The provision for credit losses for the third quarter of 2023 was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans. Net charge-offs for the third quarter of 2024 were $6.1 million, or 0.38% of average total loans annualized, compared to net charge-offs of $4.2 million, or 0.27% of average total loans annualized, for the linked quarter and net charge-offs of $2.3 million, or 0.15% of average total loans annualized, for the third quarter of 2023. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below. The provision for credit losses for the first nine months of 2024 was $18.5 million, compared to $13.9 million for the first nine months of 2023. The provision for credit losses for the first nine months of 2024 was mainly the result of (i) higher net charge-offs, (ii) an increase in reserves for individually analyzed loans and leases and (iii) economic forecast deterioration and (iv) loan growth. The provision for credit losses for the first nine months of 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (iii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and leases and the use of updated loss drivers. Net charge-offs for the first nine months of 2024 were $13.6 million, or 0.29% of average total loans annualized, compared to net charge-offs of $5.1 million, or 0.12% of average total loans annualized, for the first nine months of 2023. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below. Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Operations. The net loss realized during the third quarter of 2024 was $0.9 million, compared to a net loss of $0.8 million for the linked quarter and a net loss of $0.3 million for the third quarter of 2023. The net loss for the third quarter of 2024, the second quarter of 2024, and the third quarter of 2023 was driven primarily by net losses on repossessed assets of $0.5 million, $0.4 million and $0.3 million, respectively. The net loss realized during the first nine months of 2024 was $2.0 million, compared to $4.3 million for the first nine months of 2023. The net loss for the first nine months of 2024 was driven by $1.3 million of net losses on repossessed assets. The net loss for the first nine months of 2023 was primarily driven by a $2.0 million pre-tax net loss on the sale of available-for-sale investment securities and the $1.6 million writedown of an OREO property. During the first nine months of 2024, Peoples sold $96.7 million of it's lower yielding available-for-sale investment securities, with proceeds from the sale used to pay down overnight borrowings. Total non-interest income, excluding net gains and losses, for the third quarter of 2024 increased $1.2 million compared to the linked quarter. The increase in non-interest income, excluding net gains and losses, was primarily impacted by increases of $0.8 million in mortgage banking income and $0.7 million in lease income, partially offset by a decrease of $0.6 million in bank-owned life insurance income ("BOLI"). Compared to the third quarter of 2023, total non-interest income, excluding net gains and losses, increased $2.1 million, primarily due to a $1.9 million increase in lease income, a $0.8 million increase in mortgage banking income, and a $0.6 million increase in trust and investment income, partially offset by a $0.9 million decrease in BOLI income. The increases for the third quarter of 2024, when compared to the third quarter of 2023, were primarily due to gains on early terminations on leases that paid off, higher production in mortgage banking, and an increase in trust and investment income driven by an increase in assets under administration and management. For the first nine months of 2024, total non-interest income, excluding gains and losses, increased $8.7 million, or 13%, compared to the first nine months of 2023. The increase was driven by (i) a $2.0 million increase in other non-interest income, driven by operating lease income, (ii) a $1.7 million increase in trust and investment income driven by increases in assets under administration and management, (iii) a $1.4 million increase in lease income driven by gains on terminated leases, (iv) a $1.2 million increase in insurance income driven by higher contingency income and market increases for premiums, (v) a $0.9 million increase in deposit account service charge income, and (vi) a $0.9 million increase in mortgage banking income. Total non-interest expense decreased $2.7 million, or 4%, for the three months ended September 30, 2024, compared to the linked quarter. The decrease in total non-interest expense was primarily due to decreases of $2.9 million in other non-interest expense, driven by a one-time $1.3 million true-up of corporate expenses recorded in the linked quarter, and a decrease of $0.6 million in data processing and software expense. Compared to the third quarter of 2023, total non-interest expense decreased $5.6 million, or 8%. The decrease in total non-interest expense was primarily due to acquisition-related expenses in the third quarter of 2023. Excluding acquisition-related expenses, non- 48 Table of Contents interest expenses decreased $0.5 million, or 1%, primarily due to a decrease of $2.7 million in other non-interest expense, partially offset by an increase of $1.1 million in data processing and software expense. For the nine months ended September 30, 2024, total non-interest expense increased $4.5 million, or 2%, compared to the first nine months of 2023. Excluding acquisition-related expenses, non-interest expenses increased $21.0 million, or 11%, primarily due to increases of $11.6 million in salaries and employee benefit costs due to additional employees added in the Limestone Merger, $4.4 million and $2.5 million in data processing and software expense and in net occupancy and equipment expense, respectively, due to recent technology projects and growth, including through acquisitions. The table below summarizes the amount of acquisition-related expenses for each line item that is a component of non-interest expense. This information is used by Peoples to provide information useful to investors in understanding Peoples' operating performance and trends. 49 Table of Contents Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, (Dollars in thousands) 2024 2024 2023 2024 2023 Non-interest expense: Salaries and employee benefit costs $ 37,085 $ 36,564 $ 36,608 $ 112,542 $ 106,661 Net occupancy and equipment expense 5,905 6,142 5,501 18,330 15,836 Professional fees 2,896 2,935 3,456 8,798 13,775 Data processing and software expense 6,111 6,743 6,288 18,623 15,578 Amortization of other intangible assets 2,786 2,787 3,280 8,361 7,951 Electronic banking expense 1,844 1,941 1,836 5,566 5,159 Marketing expense 971 681 1,267 2,708 3,554 FDIC insurance premiums 1,241 1,251 1,260 3,678 3,525 Franchise tax expense 917 760 772 2,558 2,678 Communication expense 814 736 752 2,349 2,089 Other loan expenses 1,178 1,036 856 3,290 2,133 Other non-interest expense 4,342 7,182 9,820 16,510 19,859 Total non-interest expense 66,090 68,758 71,696 203,313 198,798 Acquisition-related non-interest expense: Salaries and employee benefit costs — — 562 16 5,708 Net occupancy and equipment expense — — 2 — 31 Professional fees — — 429 (38) 5,532 Data processing and software expense — — 1,289 (18) 1,290 Electronic banking expense — — — (100) 115 Marketing expense — — 38 10 61 Communication expense — — 1 — 1 Other loan expenses — — — — 1 Other non-interest expense (662) — 2,113 (616) 2,955 Total acquisition-related non-interest expense (662) — 4,434 (746) 15,694 Non-interest expense excluding acquisition-related expense: Salaries and employee benefit costs 37,085 36,564 36,046 112,526 100,953 Net occupancy and equipment expense 5,905 6,142 5,499 18,330 15,805 Professional fees 2,896 2,935 3,027 8,836 8,243 Data processing and software expense 6,111 6,743 4,999 18,641 14,288 Amortization of other intangible assets 2,786 2,787 3,280 8,361 7,951 Electronic banking expense 1,844 1,941 1,836 5,666 5,044 Marketing expense 971 681 1,229 2,698 3,493 FDIC insurance premiums 1,241 1,251 1,260 3,678 3,525 Franchise tax expense 917 760 772 2,558 2,678 Communication expense 814 736 751 2,349 2,088 Other loan expenses 1,178 1,036 856 3,290 2,132 Other non-interest expense 5,004 7,182 7,707 17,126 16,904 Total non-interest expense excluding acquisition-related expense $ 66,752 $ 68,758 $ 67,262 $ 204,059 $ 183,104 50 Table of Contents The efficiency ratio for the third quarter of 2024 was 55.1%, compared to 59.2% for the linked quarter, and 58.4% for the third quarter of 2023. The efficiency ratio, adjusted for non-core items, was 55.7% for the third quarter of 2024, compared to 59.2% for the linked quarter and 52.5% for the third quarter of 2023. The efficiency ratio and the adjusted efficiency ratio for non-core items improved compared to the linked quarterly mainly as a result of a reduction in non-interest expense and an increase in net interest income. The efficiency ratio for the first nine months of 2024 was 57.4%, compared to 59.7% for the first nine months of 2023. The efficiency ratio improved compared to the prior year first nine months due to the decrease in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 57.7% for the first nine months of 2024, compared to 54.2% for the first nine months of 2023. Peoples continues to focus on controlling expenses, while recognizing necessary costs in order to continue growing the business. Peoples recorded income tax expense of $9.2 million with an effective tax rate of 22.5% for the third quarter of 2024, compared to income tax expense of $6.9 million with an effective tax rate of 19.1% for the linked quarter, and income tax expense of $8.8 million with an effective tax rate of 21.7% for the third quarter of 2023. The increase in income tax expense for the third quarter of 2024 compared to the linked quarter was driven by a $1.1 million one-time benefit recognized in the second quarter of 2024 related to a prior year amended return and higher pre-tax income. Peoples recorded income tax expense of $24.3 million with an effective tax rate of 21.2% for the first nine months of 2024 and $22.1 million with an effective tax rate of 21.7% for the first nine months of 2023. The increase was driven by higher pre-tax income. At September 30, 2024, total assets were $9.14 billion, compared to $9.23 billion at June 30, 2024, $9.16 billion at December 31, 2023 and $8.94 billion at September 30, 2023. Total assets at September 30, 2024 decreased when compared to at June 30, 2024 primarily due to a decrease in loans and investment securities, partially offset by an increase in cash and cash equivalents. The period-end total loan and lease balances at September 30, 2024 decreased $53.5 million, or 3% annualized, compared to at June 30, 2024. The decrease in the period-end total loan and lease balances was primarily driven by decreases of (i) $20.5 million in construction loans, (ii) $15.5 million in other commercial real estate loans, (iii) $11.8 million in residential real estate loans, and (iv) $7.9 million in commercial and industrial loans, partially offset by an increase of $5.5 million in home equity lines of credit. Total assets at September 30, 2024 decreased compared to December 31, 2023 due to a decrease of $143.0 million in total cash and cash equivalents, partially offset by an increase of $112.6 million in loans and leases. Total assets at September 30, 2024 increased compared to September 30, 2023 due to an increase of $187.4 million in total loans and leases. The period-end loan and lease increased from September 30, 2023 to September 30, 2024 primarily as a result of organic growth in our commercial and industrial, premium finance, and lease portfolios of $121.3 million, $97.7million, and $30.4 million, respectively. Total liabilities were $8.02 billion at September 30, 2024, down from $8.15 billion at June 30, 2024 and $8.10 billion at December 31, 2023, and up from $7.95 billion at September 30, 2023. The decrease in total liabilities when compared to at June 30, 2024 was primarily due to a decrease of $306.8 million in short-term borrowings, partially offset by an increase of $185.4 million in period-end total deposits. The decrease in total liabilities when compared to at December 31, 2023 was primarily due to a decrease of $425.2 million in short-term borrowings, partially offset by an increase of $330.9 million in total period end deposits. The increase in total liabilities when compared to at September 30, 2023 was primarily due to a $445.6 million increase in period in deposits, partially offset by a decrease of $409.5 million in short-term borrowings. The increase in deposits was primarily driven by increases of $685.4 million in retail certificates of deposit, $163.8 million in money market deposit accounts, and $62.5 million in governmental deposit accounts, partially offset by decreases of $122.2 million, $115.6 million, $115.2 million, and $113.0 million in savings accounts, non-interest bearing deposits, interest-bearing demand deposit accounts and brokered certificates of deposit, respectively. The increase in retail certificates of deposits was driven by current promotional offerings. Total stockholders' equity at September 30, 2024 increased by $47.1 million compared to at June 30, 2024, which was primarily due to net income for the third quarter of 2024 of $31.7 million and a decrease of $27.7 million in accumulated other comprehensive loss, partially offset by dividends paid of $14.2 million. Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $83.7 million and $112.7 million at September 30, 2024 and at June 30, 2024, respectively. Total stockholders' equity at September 30, 2024 increased by $71.6 million compared to at December 31, 2023, which was primarily due to net income of $90.3 million for the first nine months of 2024 and a decrease of $19.1 million in accumulated other comprehensive loss, partially offset by dividends paid of $42.1 million. The increase in total stockholders' equity at September 30, 2024 when compared to at September 30, 2023 was impacted by net income of $124.1 million in the last twelve months and a decrease in accumulated other comprehensive loss of $61.3 million, partially offset by dividends paid of $56.2 million. 51 Table of Contents RESULTS OF OPERATIONS Net Interest Income Net interest income, the amount by which interest income exceeds interest expense, remains Peoples' largest source of revenue. The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve’s monetary policy, the level and degree of pricing competition for loans and deposits in Peoples’ markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities. Net interest margin, which is calculated by dividing fully tax-equivalent ("FTE") net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of interest-earning assets and interest-bearing liabilities. FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a federal statutory corporate income tax rate of 21% for the three and nine months ended September 30, 2024, for the three months ended June 30, 2024 and for the three and nine months ended September 30, 2023. The following table details the calculation of FTE net interest income: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Net interest income $ 88,912 $ 86,613 $ 93,274 $ 262,165 $ 251,005 Taxable equivalent adjustment 318 352 391 1,022 1,140 FTE net interest income $ 89,230 $ 86,965 $ 93,665 $ 263,187 $ 252,145 52 Table of Contents The following tables detail Peoples’ average balance sheets for the periods presented: For the Three Months Ended September 30, 2024 June 30, 2024 September 30, 2023 ( Dollars in thousands) Average Balance Income/ Expense Yield/Cost Average Balance Income/ Expense Yield/Cost Average Balance Income/ Expense Yield/Cost Short-term investments $ 57,436 $ 954 6.60 % $ 178,094 $ 2,502 5.65 % $ 62,609 $ 801 5.08 % Investment securities (a)(b): Taxable 1,714,614 15,147 3.53 % 1,684,939 14,886 3.54 % 1,626,342 12,681 3.12 % Nontaxable 183,087 1,250 2.73 % 185,433 1,258 2.71 % 192,906 1,435 2.98 % Total investment securities 1,897,701 16,397 3.46 % 1,870,372 16,144 3.45 % 1,819,248 14,116 3.10 % Loans (b)(c): Construction 330,779 6,654 7.87 % 328,943 6,595 7.93 % 400,396 9,983 9.76 % Commercial real estate, other 2,049,150 37,640 7.19 % 2,074,718 36,420 6.94 % 1,965,927 34,369 6.84 % Commercial and industrial 1,254,709 24,730 7.71 % 1,230,290 23,897 7.68 % 1,128,420 22,561 7.82 % Premium finance 288,841 6,052 8.20 % 260,513 5,746 8.73 % 179,390 3,565 7.78 % Leases 424,549 11,922 10.99 % 419,764 11,982 11.29 % 384,606 11,508 11.71 % Residential real estate (d) 920,703 12,110 5.26 % 925,629 11,460 4.95 % 952,863 11,879 4.99 % Home equity lines of credit 231,760 4,836 8.30 % 225,362 4,612 8.23 % 201,973 4,012 7.88 % Consumer, indirect 681,002 10,372 6.06 % 656,405 9,669 5.92 % 662,462 8,774 5.25 % Consumer, direct 120,941 2,271 7.47 % 119,048 2,095 7.08 % 139,595 2,416 6.87 % Total loans 6,302,434 116,587 7.27 % 6,240,672 112,476 7.16 % 6,015,632 109,067 7.13 % Allowance for credit losses (66,154) (64,745) (60,724) Net loans 6,236,280 116,587 7.35 % 6,175,927 112,476 7.23 % 5,954,908 109,067 7.20 % Total earning assets 8,191,417 133,938 6.44 % 8,224,393 131,122 6.34 % 7,836,765 123,984 6.23 % Goodwill and other intangible assets 405,022 407,864 411,229 Other assets 546,298 548,197 558,415 Total assets $ 9,142,737 $ 9,180,454 $ 8,806,409 Interest-bearing deposits: Savings accounts $ 870,914 $ 227 0.10 % $ 892,465 $ 222 0.10 % $ 1,058,606 $ 447 0.17 % Governmental deposit accounts 824,918 5,960 2.87 % 795,913 5,594 2.83 % 758,409 4,012 2.10 % Interest-bearing demand accounts 1,072,850 591 0.22 % 1,095,553 495 0.18 % 1,198,100 520 0.17 % Money market accounts 854,075 5,609 2.61 % 850,375 5,419 2.56 % 717,765 2,943 1.63 % Retail CDs 1,865,312 20,151 4.30 % 1,743,238 18,423 4.25 % 1,043,579 7,161 2.72 % Brokered CDs (e) 410,035 4,713 4.57 % 482,310 5,506 4.59 % 631,410 7,399 4.65 % Total interest-bearing deposits 5,898,104 37,251 2.51 % 5,859,854 35,659 2.45 % 5,407,869 22,482 1.65 % Borrowed funds: Short-term FHLB advances (e) 135,185 1,870 5.50 % 199,978 2,755 5.54 % 344,978 4,717 5.42 % Repurchase agreements and other 183,567 2,180 4.75 % 207,295 2,223 4.29 % 113,484 452 1.59 % Total short-term borrowings 318,752 4,050 5.07 % 407,273 4,978 4.90 % 458,462 5,169 4.48 % Long-term FHLB advances 132,206 1,329 4.00 % 132,579 1,316 3.99 % 60,486 521 3.42 % Long-term notes payable 48,097 843 7.01 % 48,175 842 6.99 % 39,680 635 6.40 % Other long-term borrowings (f) 54,476 1,235 8.87 % 54,207 1,362 9.93 % 48,068 1,512 12.31 % Total long-term borrowings 234,779 3,407 5.75 % 234,961 3,520 5.98 % 148,234 2,668 7.19 % Total borrowed funds 553,531 7,457 5.36 % 642,234 8,498 5.30 % 606,696 7,837 4.72 % Total interest-bearing liabilities 6,451,635 44,708 2.76 % 6,502,088 44,157 2.73 % 6,014,565 30,319 1.96 % Non-interest-bearing deposits 1,468,498 1,476,870 1,627,231 Other liabilities 122,848 140,042 159,755 Total liabilities 8,042,981 8,119,000 7,801,551 Total stockholders’ equity 1,099,756 1,061,454 1,004,858 Total liabilities and stockholders’ equity $ 9,142,737 $ 9,180,454 $ 8,806,409 Interest rate spread (b) $ 89,230 3.68 % $ 86,965 3.61 % $ 93,665 4.27 % Net interest margin (b) 4.27 % 4.18 % 4.70 % 53 Table of Contents For the Nine Months Ended September 30, 2024 September 30, 2023 ( Dollars in thousands) Average Balance Income/ Expense Yield/Cost Average Balance Income/ Expense Yield/Cost Short-term investments $ 125,720 $ 5,377 5.71 % $ 57,271 $ 1,862 4.35 % Investment securities (a)(b): Taxable 1,685,945 43,997 3.48 % 1,632,594 36,544 2.98 % Nontaxable 181,058 3,778 2.78 % 194,667 4,129 2.83 % Total investment securities 1,867,003 47,775 3.41 % 1,827,261 40,673 2.97 % Loans (b)(c): Construction 333,048 19,652 7.75 % 333,895 20,437 8.07 % Commercial real estate, other 2,066,631 111,302 7.08 % 1,671,019 82,403 6.50 % Commercial and industrial 1,229,491 72,142 7.71 % 1,021,573 56,728 7.32 % Premium finance 253,383 16,362 8.48 % 160,729 8,374 6.87 % Leases 418,084 35,970 11.30 % 362,222 31,426 11.44 % Residential real estate (d) 925,756 34,892 5.03 % 903,622 32,414 4.78 % Home equity lines of credit 224,648 13,745 8.17 % 190,225 10,634 7.47 % Consumer, indirect 664,610 29,322 5.89 % 651,578 23,947 4.91 % Consumer, direct 121,359 6,465 7.12 % 125,826 6,401 6.80 % Total loans 6,237,010 339,852 7.19 % 5,420,689 272,764 6.66 % Allowance for credit losses (64,052) (55,757) Net loans 6,172,958 339,852 7.26 % 5,364,932 272,764 6.73 % Total earning assets 8,165,681 393,004 6.36 % 7,249,464 315,299 5.76 % Goodwill and other intangible assets 407,858 374,924 Other assets 541,510 496,497 Total assets $ 9,115,049 $ 8,120,885 Interest-bearing deposits: Savings accounts $ 889,629 $ 675 0.10 % $ 1,066,783 $ 1,166 0.15 % Governmental deposit accounts 795,019 16,639 2.80 % 696,359 7,408 1.42 % Interest-bearing demand accounts 1,092,407 1,538 0.19 % 1,160,698 1,232 0.14 % Money market accounts 829,825 15,917 2.56 % 661,272 5,774 1.17 % Retail CDs 1,730,818 54,472 4.20 % 817,512 13,120 2.15 % Brokered CDs (e) 486,832 16,972 4.66 % 452,574 13,846 4.09 % Total interest-bearing deposits 5,824,530 106,213 2.44 % 4,855,198 42,546 1.17 % Borrowed funds: Short-term FHLB advances (e) 156,666 6,452 5.50 % 373,304 13,969 5.00 % Repurchase agreements and other 214,760 6,760 4.20 % 104,522 971 1.24 % Total short-term borrowings 371,426 13,212 4.75 % 477,826 14,940 4.18 % Long-term FHLB advances 130,246 3,886 3.99 % 42,870 930 2.90 % Long-term notes payable 48,890 2,547 6.95 % 44,903 1,837 5.45 % Other long-term borrowings (f) 54,207 3,959 9.60 % 38,676 2,901 9.89 % Total long-term borrowings 233,343 10,392 5.91 % 126,449 5,668 5.98 % Total borrowed funds 604,769 23,604 5.20 % 604,275 20,608 4.14 % Total interest-bearing liabilities 6,429,299 129,817 2.70 % 5,459,473 63,154 1.50 % Non-interest-bearing deposits 1,482,318 1,607,411 Other liabilities 131,998 134,003 Total liabilities 8,043,615 7,200,887 Total stockholders’ equity 1,071,434 919,998 Total liabilities and stockholders’ equity $ 9,115,049 $ 8,120,885 Interest rate spread (b) $ 263,187 3.66 % $ 252,145 4.26 % Net interest margin (b) 4.24 % 4.60 % (a) Average balances are based on carrying value. (b) Interest income and yields are presented on a fully tax-equivalent basis, using a 21% statutory federal corporate income tax rate. (c) Average balances include nonaccrual and impaired loans. Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented. (d) Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income. 54 Table of Contents (e) Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered CDs for the periods presented in which FHLB advances and brokered CDs were being utilized. (f) Included in other long-term borrowings are trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures. Peoples' average balances compared to prior year periods have been impacted by recent acquisitions, including the Limestone Merger as of the close of business on April 30, 2023, which added to average loan, deposit and borrowed funds balances. Peoples' deposit balances have increased primarily due to an increase in retail certificates of deposits driven by special promotional rate offerings over the past year. The following table provides an analysis of the changes in FTE net interest income: Three Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2024 Compared to (Dollars in thousands) June 30, 2024 September 30, 2023 September 30, 2023 Increase (decrease) in: Rate Volume Total (a) Rate Volume Total (a) Rate Volume Total (a) INTEREST INCOME: Short-term investments $ 2,809 $ (4,357) $ (1,548) $ 569 $ (416) $ 153 $ 679 $ 2,836 $ 3,515 Investment Securities (b): Taxable (76) 337 261 1,754 713 2,467 6,226 1,228 7,454 Nontaxable 40 (48) (8) (113) (71) (184) (66) (285) (351) Total investment income (36) 289 253 1,641 642 2,283 6,160 943 7,103 Loans (b) : Construction (134) 193 59 (1,752) (1,577) (3,329) (738) (47) (785) Commercial real estate, other 3,530 (2,310) 1,220 1,782 1,488 3,270 7,841 21,058 28,899 Commercial and industrial 131 702 833 (1,996) 4,162 2,166 3,175 12,239 15,414 Premium finance (1,655) 1,961 306 203 2,284 2,487 2,313 5,675 7,988 Leases (801) 741 (60) (3,321) 3,736 415 (593) 5,137 4,544 Residential real estate 1,049 (399) 650 2,134 (1,902) 232 1,671 807 2,478 Home equity lines of credit 52 172 224 219 605 824 1,060 2,051 3,111 Consumer, indirect 265 438 703 1,351 247 1,598 4,885 490 5,375 Consumer, direct 137 39 176 959 (1,104) (145) 380 (316) 64 Total loan income 2,574 1,537 4,111 (421) 7,939 7,518 19,994 47,094 67,088 Total interest income $ 5,347 $ (2,531) $ 2,816 $ 1,789 $ 8,165 $ 9,954 $ 26,833 $ 50,873 $ 77,706 INTEREST EXPENSE: Deposits: Savings accounts $ (3) $ (2) $ (5) $ 579 $ (359) $ 220 $ 654 $ (163) $ 491 Interest-bearing demand accounts (87) (9) (96) (51) (20) (71) (259) (47) (306) Money market accounts (310) 120 (190) (5,406) 2,738 (2,668) (11,603) 1,457 (10,146) Governmental deposit accounts (633) 267 (366) (3,831) 1,883 (1,948) (10,497) 1,266 (9,231) Retail CDs (1,643) (83) (1,726) (24,450) 11,462 (12,988) (37,209) (4,143) (41,352) Brokered CDs 198 595 793 1,041 1,645 2,686 (3,832) 707 (3,125) Total deposit cost (2,478) 888 (1,590) (32,118) 17,349 (14,769) (62,746) (923) (63,669) Borrowed funds: Short-term borrowings 139 788 927 228 891 1,119 1,120 608 1,728 Long-term borrowings 114 (2) 112 (928) 189 (739) (2,182) (2,541) (4,723) Total borrowed funds cost 253 786 1,039 (700) 1,080 380 (1,062) (1,933) (2,995) Total interest expense (2,225) 1,674 (551) (32,818) 18,429 (14,389) (63,808) (2,856) (66,664) FTE net interest income $ 3,122 $ (857) $ 2,265 $ (31,029) $ 26,594 $ (4,435) $ (36,975) $ 48,017 $ 11,042 (a) The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each. (b) Interest income and yields are presented on a fully tax-equivalent basis, using a 21% statutory federal corporate income tax rate. Net interest income was $88.9 million for the third quarter of 2024 and increased $2.3 million when compared to the linked quarter. Net interest margin was 4.27% for the third quarter of 2024, compared to 4.18% for the linked quarter. The increase in net 55 Table of Contents interest income and net interest margin was primarily driven by an increase in accretion income, net of amortization, from acquisitions and higher borrowing costs, which offset higher earning asset yields. Net interest income for the third quarter of 2024 decreased 5% over the prior year quarter and net interest margin decreased by 43 basis points. The decrease in net interest income compared to the third quarter of 2023 was driven by higher funding costs. The decrease in net interest margin for the third quarter of 2024 compared to the third quarter of 2023, was driven primarily by an increase in interest rates on deposits. For the first nine months of 2024, net interest income increased $11.2 million, or 4%, compared to the first nine months of 2023, while net interest margin decreased 36 basis points to 4.24%. The increase in net interest income was driven by increases in market interest rates and an additional four months of income from the Limestone Merger. The decrease in net interest margin for the first nine months of 2024 compared to the first nine months of 2023 was primarily driven by the full year impact of assets added in the Limestone Merger, which offset higher earning asset yields. Accretion income, net of amortization expense, from acquisitions was $8.1 million for the third quarter of 2024, $5.8 million for the linked quarter and $9.5 million for the third quarter of 2023, which added 39 basis points, 28 basis points and 48 basis points, respectively, to net interest margin. The increase in accretion income for the third quarter of 2024, when compared to the linked quarter was driven by higher payoffs. The decrease in accretion income for the third quarter of 2024 compared to the third quarter of 2023 was a result of lower accretion from the Limestone Merger. For the first nine months of 2024, accretion income totaled $20.3 million and added 33 basis points to net interest margin compared to $15.8 million and 29 basis points for the first nine months of 2023. The increase in accretion income for the first nine months of 2024 compared to the same period in 2023 was due to more accretion from the Limestone Merger. Additional information regarding changes in the Unaudited Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this MD&A. Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this MD&A under the caption "FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity." Provision for Credit Losses The following table details Peoples’ provision for credit losses: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Provision for other credit losses $ 6,279 $ 5,397 $ 3,764 $ 17,510 $ 13,188 Provision for checking account overdraft credit losses 456 286 289 1,010 701 Provision for credit losses $ 6,735 $ 5,683 $ 4,053 $ 18,520 $ 13,889 The provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates. The provision for credit losses for the third quarter of 2024 was mainly a result of net charge-offs. The provision for credit losses for the second quarter of 2024 was driven by (i) higher net charge-offs, (ii) an increase of reserves on individually analyzed loans and leases and (iii) loan growth. The provision for credit losses for the third quarter of 2023 was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment, and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by a release of reserves on individually analyzed loans. For the first nine months of 2024, the provision for credit losses was mainly the result of (i) higher net charge-offs, (ii) an increase of reserves on individually analyzed loans and leases and (iii) economic forecast deterioration and (iv) loan growth. For the first nine months of 2023, the provision for credit losses was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (iii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and leases and the use of updated loss drivers. Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this MD&A under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.” 56 Table of Contents Net Loss Included in Total Non-Interest Income Net loss includes net losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income. The following table details Peoples’ net losses for the periods presented: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Net loss on investment securities $ (74) $ (353) $ (7) $ (428) $ (2,108) Net loss on asset disposals and other transactions: Net loss on other assets (764) (397) (284) (1,470) (557) Net loss on OREO (2) — — (2) (1,623) Net loss on other transactions (29) (31) (23) (92) (38) Net loss on asset disposals and other transactions $ (795) $ (428) $ (307) $ (1,564) $ (2,218) The net loss on investment securities for the third quarter of 2024 was driven by the loss recorded on a contingent call of a security. During the first quarter of 2023, Peoples executed sales of $96.7 million of its lower yielding available-for-sale securities which were used to pay down overnight borrowings. The loss on the sales of the available-for-sale investment securities had a nominal impact on tangible book value as such loss was previously reflected in capital through accumulated other comprehensive loss. The net loss on assets disposals and other transactions for the third quarter of 2024, the second quarter of 2024, and the third quarter of 2023 were driven primarily by net losses on repossessed assets of $0.5 million, $0.4 million and $0.3 million, respectively. Total Non-Interest Income, Excluding Net Gains and Losses Total non-interest income, excluding net gains and losses, comprised 22% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the third quarter of 2024, 22% for the linked quarter, and 20% for the third quarter of 2023. For the first nine months of 2024, total non-interest income, excluding net gains and losses, totaled 23% of total revenues compared to 21% for the first nine months of 2023. For the third quarter of 2024, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses. Peoples' electronic banking ("e-banking") services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to customers. The following table details Peoples' e-banking income: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 E-banking income $ 6,359 $ 6,470 $ 6,466 $ 18,875 $ 18,375 Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers. The amount of e-banking income is largely dependent on the timing and volume of customer activity. E-banking income increased for the first nine months of 2024 compared to the first nine months of 2023 primarily driven by an increase in customer activity. The following table details Peoples' insurance income: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Property and casualty insurance commissions $ 3,584 $ 3,432 $ 3,585 $ 10,601 $ 10,197 Performance-based commissions — 5 40 2,218 1,602 Life and health insurance commissions 687 672 548 2,059 1,647 Other fees and charges — — 77 — 233 Insurance income $ 4,271 $ 4,109 $ 4,250 $ 14,878 $ 13,679 Peoples' insurance income for the third quarter of 2024 remained relatively flat when compared to the linked quarter and the prior year quarter. Insurance income in the first nine months of 2024 increased 9% when compared to the first nine months of 2023 due to higher commissions and additional customers. 57 Table of Contents Peoples' trust and investment income, which includes fiduciary income, brokerage income, and employee benefit fees, continued to be based primarily upon the value of assets under administration and management, with additional income generated from transaction commissions, cross-selling of products and additional retirement plan services business. The following table details Peoples’ trust and investment income: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Fiduciary income $ 2,047 $ 2,212 $ 1,835 $ 6,260 $ 5,686 Brokerage income 2,044 1,989 1,782 5,875 5,076 Employee benefit fees 791 798 671 2,345 2,024 Trust and investment income $ 4,882 $ 4,999 $ 4,288 $ 14,480 $ 12,786 Fiduciary income and brokerage income decreased in the third quarter of 2024 relative to the linked quarter due to market performance. When compared to the third quarter of 2023, fiduciary income and brokerage income increased $0.5 million, which was driven by an increase in assets under administration and management. For the first nine months of 2024, trust and investment income increased when compared to the same period in 2023 due to higher fiduciary and brokerage income, primarily reflecting an increase in assets under management and market volatility. The following table details Peoples' assets under administration and management: September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 (Dollars in thousands) Trust $ 2,124,320 $ 2,071,832 $ 2,061,402 $ 2,021,249 $ 1,900,488 Brokerage $ 1,608,368 $ 1,567,775 $ 1,530,954 $ 1,473,814 1,364,372 Total $ 3,732,688 $ 3,639,607 $ 3,592,356 $ 3,495,063 $ 3,264,860 Quarterly average $ 3,683,334 $ 3,587,952 $ 3,521,188 $ 3,341,868 $ 3,319,655 The increases in assets under administration and management at September 30, 2024 compared to at June 30, 2024 were driven by market value fluctuations. The increases in assets under administration and management at September 30, 2024 when compared to at September 30, 2023 were primarily due to recent growth, through acquisitions, as Peoples added new accounts and the underlying market values of assets under management grew. Deposit account service charges are based on the recovery of costs associated with services provided. The following table details Peoples' deposit account service charges: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Overdraft and non-sufficient funds fees $ 2,455 $ 2,288 $ 2,461 $ 6,998 $ 6,579 Account maintenance fees 1,741 1,716 1,577 5,175 4,661 Other fees and charges 324 335 478 909 952 Deposit account service charges $ 4,520 $ 4,339 $ 4,516 $ 13,082 $ 12,192 The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity. Management periodically evaluates its cost recovery fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples' markets by competitors. Deposit account service charges increased for the third quarter of 2024 compared to the linked quarter due to seasonality of customer activity. Deposit account service charges were flat when comparing the third quarter of 2024 to the third quarter of 2023. Deposit account service charges also increased for the first nine months of 2024 compared to the same period of 2023 due to the Limestone Merger. 58 Table of Contents The following table details the other items included within Peoples' total non-interest income: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Other non-interest income 2,293 2,172 2,452 6,163 4,179 Bank owned life insurance income 460 1,037 1,375 2,997 2,924 Lease income 1,827 1,116 (66) 4,179 2,730 Mortgage banking income 1,051 243 237 1,615 740 Other non-interest income was relatively flat for the three months ended September 30,2024 when compared to the linked quarter and the third quarter of 2023. The increase in other non-interest income for the first nine months of 2024 when compared to the same period of 2023 was driven by increased operating lease income. Bank owned life insurance income for the third quarter of 2024 decreased compared to the linked quarter and the prior year quarter primarily due changes in the cash surrender values of the underlying policies. Bank owned life insurance income for the first nine months of 2024 remained relatively flat when compared to the first nine months of 2023. Lease income is primarily comprised of (i) gains on the early termination of leases, net of any associated purchase accounting adjustments, (ii) month-to-month lease payments in excess of net investment in the lease, net of any associated purchase accounting adjustment, (iii) fees received for referrals, (iv) gains and losses recognized on the sales of residual assets, net of any purchase accounting impact, and (v) syndication income. Lease income for the third quarter of 2024 increased compared to the linked quarter and the third quarter of 2023 due to an increase in gains on terminated leases. Lease income for the first nine months of 2024 compared to the first nine months of 2023 was primarily driven by an increase in gains on early terminations on leases that paid off. Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained. As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage banking income for the third quarter of 2024 increased $0.8 million when compared to each of the prior periods and was primarily driven by higher production. In the third quarter of 2024, Peoples sold $14.9 million in loans into the secondary market with servicing retained and $12.0 million in loans with servicing released, compared to $2.6 million and $11.8 million, respectively, in the second quarter of 2024, and $0.8 million and $9.4 million, respectively, in the third quarter of 2023. For the first nine months of 2024, Peoples sold $17.6 million in loans into the secondary market with servicing retained, and $30.8 million with servicing released, compared to $2.7 million and $22.8 million, respectively, for the first nine months of 2023. Non-Interest Expense Salaries and employee benefit costs remain Peoples' largest non-interest expense, accounting for over one-half of total non-interest expense. The following table details Peoples' salaries and employee benefit costs: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Base salaries and wages $ 24,376 $ 24,437 $ 24,152 $ 73,610 $ 71,891 Sales-based and incentive compensation 6,145 5,404 6,480 16,804 15,927 Employee benefits 4,472 4,862 4,307 13,273 12,044 Payroll taxes and other employment costs 2,162 1,825 1,949 6,821 5,854 Stock-based compensation 1,311 1,385 1,107 5,786 4,339 Deferred personnel costs (1,381) (1,349) (1,387) (3,752) (3,394) Salaries and employee benefit costs $ 37,085 $ 36,564 $ 36,608 $ 112,542 $ 106,661 Full-time equivalent employees: Actual at end of period 1,496 1,489 1,482 1,496 1,482 Average during the period 1,495 1,492 1,494 1,493 1,359 Base salaries and wages for the third quarter of 2024 remained relatively flat compared to the linked quarter and to the third quarter of 2023. Base salaries and wages for the first nine months of 2024 increased compared to the first nine months of 2023 due to the additional expense associated with employees added with the Limestone Merger coupled with annual merit increases. 59 Table of Contents Sales-based incentive compensation increased for the third quarter of 2024 compared to the linked quarter due to an increase of $0.4 million of Vantage-related incentive compensation. Sales-based incentive compensation for the first nine months of 2024 compared to the first nine months of 2023 increased primarily due to additional employees added with the Limestone Merger. The decrease in employee benefits for the third quarter of 2024 compared to the linked quarter and the increase over the third quarter of 2023 was primarily due to medical costs. The increase for the first nine months of 2024 compared to the first nine months of 2023 was primarily due to higher medical costs reflecting a full nine months of expenses in 2024 for the additional employees added with the Limestone Merger. Payroll taxes and other employment costs for the third quarter of 2024 increased compared to the linked quarter due to a refund received in the second quarter of 2024 due to change in tax rate in the first quarter of 2024. The increase for the first nine months of 2024 compared to the first nine months of 2023 was driven by the additional employees added in the Limestone Merger coupled with annual merit increases. Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years. An adjustment is made at the vesting date to reverse expense relating to forfeitures for performance awards, and at the date of forfeiture to reverse expense for non-vested restricted common share awards. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year based upon Peoples achieving certain performance goals during the prior year, and are generally contingent on employment through the vesting period. Stock-based compensation for the first nine months of 2024 increased when compared to the first nine months of 2023 due to the additional employees added in the Limestone Merger. Deferred personnel costs represent the portion of current period salaries and employee benefit costs considered to be direct loan origination costs. These costs are capitalized and recognized over the life of the loan as a yield adjustment in interest income. As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with the average deferred costs per loan that are updated annually at the beginning of each year. Deferred personnel costs for the third quarter of 2024 remained flat when compared to both the second quarter of 2024 and the third quarter of 2023. Peoples' net occupancy and equipment expense was comprised of the following: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Depreciation $ 2,101 $ 2,170 $ 2,018 $ 6,442 $ 5,684 Repairs and maintenance costs 1,609 1,607 1,846 5,038 4,441 Property taxes, utilities and other costs 1,181 1,152 1,158 3,625 3,497 Net rent expense 1,014 1,213 479 3,225 2,214 Net occupancy and equipment expense $ 5,905 $ 6,142 $ 5,501 $ 18,330 $ 15,836 Net rent expense for the third quarter and first nine months of 2024 compared to the same periods of 2023 increased due to a prior period one time benefit to rent expense recognized in the third quarter of 2023. The third quarter and the first nine months of 2024 net occupancy and equipment expense increased when compared to the same periods of 2023 due to additional net occupancy and equipment expense from the Limestone Merger. 60 Table of Contents The following table details the other items included in total non-interest expense: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Data processing and software expense $ 6,111 $ 6,743 $ 6,288 $ 18,623 $ 15,578 Professional fees 2,896 2,935 3,456 8,798 13,775 Amortization of other intangible assets 2,786 2,787 3,280 8,361 7,951 E-banking expense 1,844 1,941 1,836 5,566 5,159 FDIC insurance premiums 1,241 1,251 1,260 3,678 3,525 Other loan expenses 1,178 1,036 856 3,290 2,133 Franchise tax expense 917 760 772 2,558 2,678 Communication expense 814 736 752 2,349 2,089 Marketing expense 971 681 1,267 2,708 3,554 Other non-interest expense 4,342 7,182 9,820 16,510 19,859 Data processing and software expenses for the third quarter of 2024 decreased compared to the linked quarter due to lower costs associated with recent technology projects. The increase for the first nine months of 2024 when compared to the same period in 2023 was driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization as a result of the Limestone Merger. Professional fees for the third quarter of 2024 were flat when compared to the linked quarter. Professional fees for the third quarter and first nine months of 2024 compared to the same periods in 2023 decreased due to less acquisition-related expenses. Amortization of other intangible assets for the third quarter of 2024 was flat compared to the linked quarter and decreased $0.6 million compared to the prior year quarter due to decreases in amortization on core deposits and customer relationship intangibles. Amortization of other intangible assets for the first nine months of 2024 increased when compared to the same period of 2023 due to amortization of intangible assets recognized in the Limestone Merger. Peoples' e-banking expense is comprised of costs associated with debit and ATM cards. E-banking expense compared to the linked quarter and the third quarter of 2023 remained relatively flat. E-banking expense increased for the first nine months of 2024 when compared to the first nine months of 2023 due to additional customers brought in from the Limestone Merger. Peoples' FDIC insurance premiums for the third quarter of 2024 were relatively flat when compared to the linked quarter and the third quarter of 2023. FDIC insurance premiums for the first nine months of 2024 increased when compared to the first nine months of 2023 due to organic and acquisitive growth and an increase in rates assessed by the FDIC. Other loan expenses during the third quarter of 2024 were relatively flat when compared to the linked quarter. Other loan expenses increased for the third quarter and the first nine months of 2024 when compared to the same periods of 2023 primarily due to increases in miscellaneous loan and collection expenses as a result of increased insurance costs associated with consumer indirect loans. Marketing expense for the third quarter of 2024 increased when compared to the linked quarter due to higher advertising expense and donations. Marketing expense for the third quarter and the first nine months of 2024 decreased when compared to the same periods of 2023 due to lower acquisition-related expenses. Peoples is subject to state franchise taxes, which are based largely on Peoples' equity, in the states where Peoples has a physical presence. Franchise tax expense also includes the Ohio Financial Institution Tax ("FIT"), which is a business privilege tax that is imposed on financial institutions organized for profit and doing business in Ohio. The Ohio FIT is based on the total equity capital in proportion to the taxpayer's gross receipts in Ohio as of the most recent year-end. The increase in franchise tax expense for the third quarter of 2024 when compared to the third quarter of 2023 was due to higher equity driven by the Limestone Merger. Other non-interest expense for the third quarter of 2024 decreased when compared to the linked quarter primarily due to a one-time prior period true-up of corporate expenses recognized in the second quarter of 2024. Other non-interest expense for the third quarter and first nine months of 2024 compared to the same periods of 2023 decreased due to a less acquisition-related expenses. 61 Table of Contents Income Tax Expense Peoples recorded income tax expense of $9.2 million with an effective tax rate of 22.5% for the third quarter of 2024, compared to income tax expense of $6.9 million with an effective tax rate of 19.1% for the linked quarter and income tax expense of $8.8 million with an effective tax rate of 21.7% for the third quarter of 2023. The increase in income tax expense when compared to the linked quarter was driven by a $1.1 million one-time benefit recognized in the second quarter of 2024 related to a prior year amended return and higher pre-tax income. The increase in income tax expense when compared to the third quarter of 2023 was primarily due to higher pre-tax income. Peoples recorded income tax expense of $24.3 million with an effective tax rate of 21.2% in the first nine months of 2024 and $22.1 million with an effective tax rate of 21.7% in the first nine months of 2023. The increase was driven by higher pre-tax income. Additional information regarding income taxes can be found in "Note 13. Income Taxes" of the Notes to the Consolidated Financial Statements included in Peoples' 2023 Form 10-K. Pre-Provision Net Revenue (Non-US GAAP) Pre-provision net revenue ("PPNR") has become a key financial measure used by state and federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus total non-interest income, excluding all gains and losses, minus total non-interest expense. As a result, PPNR represents the earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital. This measure represents a Non-US GAAP financial measure since it excludes the provision for (recovery of) credit losses and all gains and losses included in earnings. The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Pre-provision net revenue: Income before income taxes $ 40,881 $ 35,876 $ 40,729 $ 114,609 $ 101,597 Add: provision for credit losses 6,735 5,683 4,053 18,520 13,889 Add: loss on OREO 2 — 1 2 1,623 Add: loss on investment securities 74 353 7 428 2,108 Add: loss on other assets 764 397 283 1,470 557 Add: loss on other transactions 28 31 23 92 38 Pre-provision net revenue $ 48,484 $ 42,340 $ 45,096 $ 135,121 $ 119,812 The increase in the PPNR for the third quarter of 2024 compared to the linked quarter was driven by increased non-interest income and higher accretion income. The increase in PPNR for the third quarter of 2024 when compared to the third quarter of 2023 was due to increased net interest income driven by higher rates. The increase in PPNR for the first nine months of 2024 compared to the first nine months of 2023 was driven by increased non-interest income and increased net interest income driven by higher rates. Core Non-Interest Expense (Non-US GAAP) Core non-interest expense is a financial measure used to evaluate Peoples' recurring expense stream. This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses, pension settlement charges, and the COVID-19 employee retention credit. The following table provides a reconciliation of this Non-US GAAP measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Core non-interest expense: Total non-interest expense $ 66,090 $ 68,758 $ 71,696 $ 203,313 $ 198,798 Less: acquisition-related expenses (662) — 4,434 (746) 15,694 Less: pension settlement charges — — 2,424 — 2,424 Add: COVID-19 Employee Retention Credit — — — — 548 Core non-interest expense $ 66,752 $ 68,758 $ 64,838 $ 204,059 $ 181,228 62 Table of Contents Efficiency Ratio (Non-US GAAP) The efficiency ratio is a key financial measure used to monitor performance. The efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of FTE net interest income plus total non-interest income excluding net gains and losses. This measure is Non-US GAAP since it excludes amortization of other intangible assets and all gains and losses included in earnings, and uses FTE net interest income. The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Efficiency ratio: Total non-interest expense $ 66,090 $ 68,758 $ 71,696 $ 203,313 $ 198,798 Less: amortization of other intangible assets 2,786 2,787 3,280 8,361 7,951 Adjusted total non-interest expense 63,304 65,971 68,416 194,952 190,847 Total non-interest income 24,794 23,704 23,204 74,277 63,279 Less: net loss on investment securities (74) (353) (7) (428) (2,108) Less: net loss on asset disposals and other transactions (795) (428) (307) (1,564) (2,218) Total non-interest income excluding net losses 25,663 24,485 23,518 76,269 67,605 Net interest income 88,912 86,613 93,274 262,165 251,005 Add: FTE adjustment (a) 318 352 391 1,022 1,140 Net interest income on an FTE basis 89,230 86,965 93,665 263,187 252,145 Adjusted revenue $ 114,893 $ 111,450 $ 117,183 $ 339,456 $ 319,750 Efficiency ratio 55.10 % 59.19 % 58.38 % 57.43 % 59.69 % Efficiency ratio adjusted for non-core items: Core non-interest expense $ 66,752 $ 68,758 $ 64,838 $ 204,059 $ 181,228 Less: amortization of other intangible assets 2,786 2,787 3,280 8,361 7,951 Adjusted core non-interest expense 63,966 65,971 61,558 195,698 173,277 Non-interest income excluding net losses 25,663 24,485 23,518 76,269 67,605 Net interest income on an FTE basis 89,230 86,965 93,665 263,187 252,145 Adjusted revenue $ 114,893 $ 111,450 $ 117,183 $ 339,456 $ 319,750 Efficiency ratio adjusted for non-core items 55.67 % 59.19 % 52.53 % 57.65 % 54.19 % (a) Interest income and yields are presented on a fully tax-equivalent basis, using a 21% statutory federal corporate income tax rate. The efficiency ratio and the adjusted for non-core items efficiency ratio improved compared to the linked quarter improved mainly as the result of a reduction in non-interest expense and increase in net interest income. The efficiency ratio improved compared to the prior year first nine months due to the decrease in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 57.7% for the first nine months of 2024, compared to 54.2% for the first nine months of 2023. The increase in the efficiency ratio, adjusted for non-core items, for the first nine months of 2024 compared to the first nine months of 2023 was due to higher non-interest expense. Peoples continues to focus on controlling expenses, while recognizing necessary costs in order to continue growing the business. Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP) In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance. The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses and acquisition-related expenses. 63 Table of Contents The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented: Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Annualized net income adjusted for non-core items: Net income $ 31,684 $ 29,007 $ 31,882 $ 90,275 $ 79,538 Add: net loss on investment securities 74 353 7 428 2,108 Less: tax effect of net loss on investment securities (a) 16 74 2 90 443 Add: net loss on asset disposals and other transactions 795 428 307 1,564 2,218 Less: tax effect of net loss on asset disposals and other transactions (a) 167 90 65 328 466 Add: acquisition-related expenses (662) — 4,434 (746) 15,694 Less: tax effect of acquisition-related expenses (a) (139) — 931 (157) 3,296 Add: pension settlement charges — — 2,424 — 2,424 Less: tax effect of pension settlement charges (a) — — 509 — 509 Less: COVID-19 Employee Retention Credit — — — — 548 Add: tax effect of COVID-19 Employee Retention Credit (a) — — — — 115 Net income adjusted for non-core items (after tax) $ 31,847 $ 29,624 $ 37,547 $ 91,260 $ 96,835 Days in the period 92 91 92 274 273 Days in the year 366 366 365 366 365 Annualized net income $ 126,047 $ 116,666 $ 126,488 $ 120,586 $ 106,342 Annualized net income adjusted for non-core items (after tax) $ 126,696 $ 119,147 $ 148,964 $ 121,902 $ 129,468 Return on average assets: Annualized net income $ 126,047 $ 116,666 $ 126,488 $ 120,586 $ 106,342 Total average assets 9,142,737 9,180,454 8,806,409 9,115,049 8,120,885 Return on average assets 1.38 % 1.27 % 1.44 % 1.32 % 1.31 % Return on average assets adjusted for non-core items: Annualized net income adjusted for non-core items (after tax) $ 126,696 $ 119,147 $ 148,964 $ 121,902 $ 129,468 Total average assets 9,142,737 9,180,454 8,806,409 9,115,049 8,120,885 Return on average assets adjusted for non-core items (after tax) 1.39 % 1.30 % 1.69 % 1.34 % 1.59 % (a) Based on a 21% statutory federal corporate income tax rate. The return on average assets and the return on average assets adjusted for non-core items for the third quarter of 2024 increased when compared to the linked quarter, due to an increase in annualized net income resulting from higher non-interest income and a decrease in average assets. The decrease in the return on average assets adjusted for non-core items for the third quarter of 2024, compared to the third quarter of 2023, was attributable to the assets acquired in the Limestone Merger. The decrease in return on average assets adjusted for non-core items for the first nine months of 2024 when compared to the first nine months of 2023, was primarily driven by the assets acquired in the Limestone Merger. Return on Average Tangible Equity Ratio (Non-US GAAP) The return on average tangible equity ratio is a key financial measure used to monitor performance. This ratio is calculated as annualized net income (less the after-tax impact of amortization of other intangible assets) divided by average tangible equity. This 64 Table of Contents measure is Non-US GAAP since it excludes amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity. Three Months Ended Nine Months Ended September 30, 2024 June 30, 2024 September 30, 2023 September 30, (Dollars in thousands) 2024 2023 Annualized net income excluding amortization of other intangible assets: Net income $ 31,684 $ 29,007 $ 31,882 $ 90,275 $ 79,538 Add: amortization of other intangible assets 2,786 2,787 3,280 8,361 7,951 Less: tax effect of amortization of other intangible assets (a) 585 585 689 1,756 1,670 Net income excluding amortization of other intangible assets $ 33,885 $ 31,209 $ 34,473 $ 96,880 $ 85,819 Days in the period 92 91 92 274 273 Days in the year 366 366 365 366 365 Annualized net income $ 126,047 $ 116,666 $ 126,488 $ 120,586 $ 106,342 Annualized net income excluding amortization of other intangible assets $ 134,803 $ 125,522 $ 136,768 $ 129,409 $ 114,740 Average tangible equity: Total average stockholders' equity $ 1,099,756 $ 1,061,454 $ 1,004,858 $ 1,071,434 $ 919,998 Less: average goodwill and other intangible assets 405,022 407,864 411,229 407,858 374,924 Average tangible equity $ 694,734 $ 653,590 $ 593,629 $ 663,576 $ 545,074 Return on total average stockholders' equity ratio: Annualized net income $ 126,047 $ 116,666 $ 126,488 $ 120,586 $ 106,342 Total average stockholders' equity $ 1,099,756 $ 1,061,454 $ 1,004,858 $ 1,071,434 $ 919,998 Return on total average stockholders' equity 11.46 % 10.99 % 12.59 % 11.25 % 11.56 % Return on average tangible equity ratio: Annualized net income excluding amortization of other intangible assets $ 134,803 $ 125,522 $ 136,768 $ 129,409 $ 114,740 Average tangible equity $ 694,734 $ 653,590 $ 593,629 $ 663,576 $ 545,074 Return on average tangible equity 19.40 % 19.21 % 23.04 % 19.50 % 21.05 % (a) Based on a 21% statutory federal corporate income tax rate. The return on total average stockholders' equity and average tangible equity ratios increased when compared to the linked quarter due to an increase in annualized net income mainly attributable to an increase in net interest income. The decreases in the return on total average stockholders' equity and average tangible equity ratios for the third quarter and first nine months of 2024 compared to the same periods of 2023 were driven by higher average stockholders' equity. 65 Table of Contents FINANCIAL CONDITION Cash and Cash Equivalents At September 30, 2024, Peoples' interest-bearing deposits in other banks had decreased $170.6 million from December 31, 2023. The total cash and cash equivalents balance included $137.6 million of excess cash reserves being maintained at the FRB of Cleveland at September 30, 2024, compared to $309.8 million at December 31, 2023. The amount of excess cash reserves maintained is dependent upon Peoples' daily liquidity position, which is driven primarily by changes in deposit and loan balances. Through the first nine months of 2024, Peoples' total cash and cash equivalents decreased $143.0 million, which reflected cash outflows of $126.6 million for investing activities and $119.6 million for financing activities, partially offset by cash inflows of $103.2 million from operating activities. Peoples' use of cash in investing activities reflected a $108.1 million net increase in loans held for investment and a net cash outflow from held-to-maturity investment securities of $9.9 million. The cash provided by financing activities was largely driven by a $445.0 million net increase in interest-bearing deposits, mostly offset by a net decrease in short-term borrowings of $425.2 million and a net decrease in non-interest bearing deposits of $114.2 million. Further information regarding the management of Peoples' liquidity position can be found later in this discussion under “Interest Rate Sensitivity and Liquidity.” Investment Securities The following table provides information regarding Peoples’ investment portfolio: (Dollars in thousands) Weighted Average Yield September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Available-for-sale securities, at fair value: Obligations of: U.S. Treasury and government agencies 3.70 % $ 27,961 $ 28,343 $ 28,773 $ 30,296 $ 42,466 U.S. government sponsored agencies 3.40 % 174,708 230,916 200,460 118,607 103,932 States and political subdivisions 3.14 % 206,779 202,804 208,750 213,296 220,460 Residential mortgage-backed securities 2.72 % 607,726 601,002 621,691 628,924 593,104 Commercial mortgage-backed securities 2.26 % 57,437 50,035 50,791 51,234 50,840 Bank-issued trust preferred securities 3.95 % 6,056 6,039 6,001 5,965 7,779 Total fair value $ 1,080,667 $ 1,119,139 $ 1,116,466 $ 1,048,322 $ 1,018,581 Total amortized cost $ 1,189,792 $ 1,266,060 $ 1,262,319 $ 1,184,288 $ 1,211,794 Net unrealized loss $ (109,125) $ (146,921) $ (145,853) $ (135,966) $ (193,213) Held-to-maturity securities, at amortized cost: Obligations of: U.S. government sponsored agencies 4.90 % $ 196,642 $ 212,023 $ 188,423 $ 188,475 $ 174,699 States and political subdivisions (a) 2.97 % 141,918 144,134 144,315 144,258 144,490 Residential mortgage-backed securities 3.54 % 256,329 246,283 246,579 248,559 248,627 Commercial mortgage-backed securities 2.73 % 98,984 99,782 100,427 102,365 107,593 Total amortized cost $ 693,873 $ 702,222 $ 679,744 $ 683,657 $ 675,409 Other investment securities $ 55,691 $ 62,742 $ 62,939 $ 63,421 $ 66,332 Total investment securities: Amortized cost $ 1,939,356 $ 2,031,024 $ 2,005,002 $ 1,931,366 $ 1,953,535 Carrying value $ 1,830,231 $ 1,884,103 $ 1,859,149 $ 1,795,400 $ 1,760,322 (a) Amortized cost is presented net of the allowance for credit losses of $236 at September 30, 2024 and $238 at both June 30, 2024 and September 30, 2023. For the third quarter of 2024, total investment securities decreased compared to prior periods due to maturities and calls on securities during the quarter. During the fourth quarter of 2023, Peoples executed the sales of $36.5 million of lower yielding available-for-sale investment securities for an after-tax loss of $1.3 million. Proceeds from the sales were used to purchase higher yielding agency investment securities. The realized losses recognized due to the fourth quarter of 2023 sales are expected to be earned back within 14 months of the transaction dates. Additional information regarding Peoples' investment portfolio can be found in "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements. 66 Table of Contents Loans and Leases The following table provides information regarding outstanding loan balances: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Originated loans and leases: Construction $ 265,073 $ 291,240 $ 262,209 $ 279,335 $ 289,657 Commercial real estate, other 1,283,903 1,240,069 1,263,577 1,209,204 1,161,064 Commercial real estate 1,548,976 1,531,309 1,525,786 1,488,539 1,450,721 Commercial and industrial 1,047,001 1,032,753 972,191 938,659 860,407 Premium finance 286,983 293,349 238,962 203,177 189,251 Leases 401,573 390,160 373,626 357,217 328,365 Residential real estate 441,730 441,293 420,518 418,570 405,917 Home equity lines of credit 180,737 172,766 164,019 148,155 140,787 Consumer, indirect 677,056 675,054 650,228 666,472 668,371 Consumer, direct 101,026 100,836 99,022 112,292 114,160 Consumer 778,082 775,890 749,250 778,764 782,531 Deposit account overdrafts 1,205 1,067 1,306 986 857 Total originated loans and leases $ 4,686,287 $ 4,638,587 $ 4,445,658 $ 4,334,067 $ 4,158,836 Acquired loans and leases (a): Construction $ 55,021 $ 49,361 $ 52,478 $ 84,684 $ 84,359 Commercial real estate, other 896,588 955,910 980,203 987,753 1,028,920 Commercial real estate 951,609 1,005,271 1,032,681 1,072,437 1,113,279 Commercial and industrial 203,151 225,310 242,424 246,327 268,402 Leases 31,436 40,491 49,068 56,843 74,270 Residential real estate 335,812 348,051 361,370 372,525 386,048 Home equity lines of credit 52,372 54,842 57,060 60,520 63,153 Consumer, direct 11,172 12,819 14,566 16,477 20,402 Total acquired loans and leases $ 1,585,552 $ 1,686,784 $ 1,757,169 $ 1,825,129 $ 1,925,554 Total loans and leases $ 6,271,839 $ 6,325,371 $ 6,202,827 $ 6,159,196 $ 6,084,390 Percent of loans and leases to total loans and leases: Construction 5.1 % 5.4 % 5.1 % 5.9 % 6.1 % Commercial real estate, other 34.8 % 34.7 % 36.2 % 35.7 % 36.0 % Commercial real estate 39.9 % 40.1 % 41.3 % 41.6 % 42.1 % Commercial and industrial 19.9 % 19.9 % 19.6 % 19.2 % 18.6 % Premium finance 4.6 % 4.6 % 3.8 % 3.3 % 3.1 % Leases 6.9 % 6.8 % 6.8 % 6.7 % 6.6 % Residential real estate 12.4 % 12.5 % 12.6 % 12.9 % 13.0 % Home equity lines of credit 3.7 % 3.6 % 3.6 % 3.4 % 3.4 % Consumer, indirect 10.8 % 10.7 % 10.5 % 10.8 % 11.0 % Consumer, direct 1.8 % 1.8 % 1.8 % 2.1 % 2.2 % Consumer 12.6 % 12.5 % 12.3 % 12.9 % 13.2 % Total percentage 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Residential real estate loans being serviced for others $ 347,719 $ 341,298 $ 348,937 $ 356,784 $ 366,996 (a) Includes all loans acquired, and related loan discount recorded as part of acquisition accounting, in 2012 or thereafter. Loans that were acquired and subsequently re-underwritten are reported as originated upon execution of such credit actions (for example, renewals and increases in lines of credit). The period-end total loan and lease balances at September 30, 2024 decreased $53.5 million, or 3% annualized, compared to at June 30, 2024. The decrease in the period-end loan and lease balance at September 30, 2024 compared to June 30, 2024 was primarily driven by decreases of (i) $20.5 million in construction loans, (ii) $15.5 million in other commercial real estate loans (iii) $11.8 million of residential real estate loans, (iv) and $7.9 million in commercial and industrial loans. The increase in the period-end loan and lease balances at September 30, 2024 compared to at September 30, 2023 was primarily driven by loan growth for commercial and industrial and premium finance loans. 67 Table of Contents Loan Concentration Peoples categorizes its commercial loans according to standard industry classifications and monitors for concentrations in a single industry or multiple industries that could be impacted by changes in economic conditions in a similar manner. Peoples' commercial lending activities continue to be spread over a diverse range of businesses from all sectors of the economy, with no single industry comprising over 10% of Peoples' total loan portfolio. Loans secured by commercial real estate, including commercial construction loans, continued to comprise the largest portion of Peoples' loan portfolio at September 30, 2024. The following tables provide information regarding the largest concentrations of commercial construction loans and other commercial real estate loans within the loan portfolio at September 30, 2024: (Dollars in thousands) Outstanding Balance Loan Commitments Total Exposure % of Total Construction: Apartment complexes $ 193,984 $ 268,700 $ 462,684 67.4 % Residential property 26,869 21,619 48,488 7.0 % Land development 32,080 10,966 43,046 6.3 % Land only 15,246 17,267 32,513 4.7 % Assisted living facilities and nursing homes 7,461 21,105 28,566 4.2 % Lodging and lodging related 6,614 9,654 16,268 2.4 % Student housing 13,380 1,620 15,000 2.2 % Other (a) 24,460 15,170 39,630 5.8 % Total construction $ 320,094 $ 366,101 $ 686,195 100.0 % (a) All other total exposures by industry are less than 2% of the Total Exposure. 68 Table of Contents (Dollars in thousands) Outstanding Balance Loan Commitments Total Exposure % of Total Commercial real estate, other: Apartment complexes $ 359,371 $ 3,289 $ 362,660 16.2 % Retail facilities: Owner occupied $ 42,988 $ 1,527 $ 44,515 2.0 % Non-owner occupied 213,449 517 213,966 9.5 % Total retail facilities $ 256,437 $ 2,044 $ 258,481 11.5 % Light industrial facilities: Owner occupied $ 144,577 $ 6,574 $ 151,151 6.7 % Non-owner occupied 95,207 3,429 98,636 4.4 % Total light industrial facilities $ 239,784 $ 10,003 $ 249,787 11.1 % Office buildings and complexes: Owner occupied $ 76,328 $ 2,434 $ 78,762 3.5 % Non-owner occupied 122,198 5,253 127,451 5.7 % Total office buildings and complexes $ 198,526 $ 7,687 $ 206,213 9.2 % Lodging and lodging related: Owner occupied $ 29,808 $ — $ 29,808 1.3 % Non-owner occupied 122,803 1 122,804 5.5 % Total lodging and lodging related $ 152,611 $ 1 $ 152,612 6.8 % Assisted living facilities and nursing homes $ 131,865 $ 1,107 $ 132,972 6.0 % Warehouse facilities: Owner occupied $ 40,287 $ 398 $ 40,685 1.8 % Non-owner occupied 35,937 219 36,156 1.6 % Total warehouse facilities $ 76,224 $ 617 $ 76,841 3.4 % Restaurant/bar facilities: Owner occupied $ 38,185 $ — $ 38,185 1.7 % Non-owner occupied 32,407 — 32,407 1.4 % Total restaurant/bar facilities $ 70,592 $ — $ 70,592 3.1 % Mixed-use facilities: Owner occupied $ 37,060 $ 1,171 $ 38,231 1.7 % Non-owner occupied 27,448 1,523 28,971 1.3 % Total mixed-use facilities $ 64,508 $ 2,694 $ 67,202 3.0 % Healthcare facilities: Owner occupied $ 39,810 $ 198 $ 40,008 1.8 % Non-owner occupied 15,495 783 16,278 0.7 % Total healthcare facilities $ 55,305 $ 981 $ 56,286 2.5 % Other (a) 575,268 32,782 608,050 27.2 % Total commercial real estate, other $ 2,180,491 $ 61,205 $ 2,241,696 100.0 % (a) All other total exposures by industry are less than 2% of the Total Exposure. Peoples' commercial lending activities continue to focus on lending opportunities within Ohio, Kentucky, West Virginia, Virginia, Washington, D.C. and Maryland. For all other states, the aggregate outstanding balances of commercial loans in each state were less than 3% of total loans at September 30, 2024 and December 31, 2023. The repayment of premium finance loans is secured by the underlying insurance policy prepaid premium, and therefore, has no geographical impact from a repayment perspective. The repayment of leases is secured by the underlying equipment collateral and not real estate, which mitigates geographic risk. 69 Table of Contents Allowance for Credit Losses The amount of the allowance for credit losses at the end of each period represents management's estimate of expected losses from existing loans based upon its quarterly analysis of the loan portfolio. While this process involves allocations being made to specific loans and pools of loans, the entire allowance is available for all losses expected within the loan portfolio. The following details management's allocation of the allowance for credit losses: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Construction $ 854 $ 673 $ 701 $ 699 $ 1,241 Commercial real estate, other 17,239 19,852 21,788 20,915 21,257 Commercial and industrial 11,592 10,943 10,581 10,490 10,205 Premium finance 711 763 607 484 476 Leases 16,970 15,218 12,889 10,850 11,692 Residential real estate 6,058 5,939 5,866 5,937 6,251 Home equity lines of credit 1,804 1,737 1,689 1,588 1,640 Consumer, indirect 8,924 8,654 8,301 8,590 7,516 Consumer, direct 2,370 2,332 2,279 2,343 2,519 Deposit account overdrafts 117 136 121 115 127 Allowance for credit losses $ 66,639 $ 66,247 $ 64,822 $ 62,011 $ 62,924 As a percent of total loans 1.06 % 1.05 % 1.05 % 1.01 % 1.03 % The increase in the allowance for credit losses at September 30, 2024 compared to June 30, 2024 was primarily due to an increase in reserves for individually analyzed loans and leases. The increase in the allowance balance at September 30, 2024 when compared to September 30, 2023 was driven by increase in reserves for individually analyzed loans and leases and loan growth. Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2023 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements in this Form 10-Q. 70 Table of Contents The following table summarizes Peoples’ net charge-offs and recoveries: Three Months Ended (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Gross charge-offs: Commercial real estate, other — — 212 296 278 Commercial and industrial 259 56 235 640 199 Premium finance 37 55 54 43 33 Leases 3,753 2,377 1,270 2,019 905 Residential real estate — 64 80 20 50 Home equity lines of credit 2 9 — 4 32 Consumer, indirect 1,820 1,567 1,461 1,234 926 Consumer, direct 162 141 226 142 92 Consumer 1,982 1,708 1,687 1,376 1,018 Deposit account overdrafts 558 338 336 352 319 Total gross charge-offs $ 6,591 $ 4,607 $ 3,874 $ 4,750 $ 2,834 Recoveries: Commercial real estate, other $ 100 $ (80) $ 83 $ 825 $ 97 Commercial and industrial 1 10 7 98 3 Premium finance 4 4 8 — 12 Leases 56 173 212 25 168 Residential real estate 58 68 83 67 27 Home equity lines of credit — — 7 1 — Consumer, indirect 186 117 71 130 149 Consumer, direct 19 15 9 12 11 Consumer 205 132 80 142 160 Deposit account overdrafts 83 67 74 103 49 Total recoveries $ 507 $ 374 $ 554 $ 1,261 $ 516 Net charge-offs (recoveries): Construction $ — $ — $ — $ — $ — Commercial real estate, other (100) 80 129 (529) 181 Commercial and industrial 258 46 228 542 196 Premium finance 33 51 46 43 21 Leases 3,697 2,204 1,058 1,994 737 Residential real estate (58) (4) (3) (47) 23 Home equity lines of credit 2 9 (7) 3 32 Consumer, indirect 1,634 1,450 1,390 1,104 777 Consumer, direct 143 126 217 130 81 Consumer 1,777 1,576 1,607 1,234 858 Deposit account overdrafts 475 271 262 249 270 Total net charge-offs $ 6,084 $ 4,233 $ 3,320 $ 3,489 $ 2,318 Ratio of net charge-offs (recoveries) to average total loans (annualized): Construction — % — % — % — % — % Commercial real estate, other (0.01) % 0.01 % 0.01 % (0.03) % 0.01 % Commercial and industrial 0.02 % — % 0.02 % 0.03 % 0.01 % Premium finance — % — % — % — % — % Leases 0.23 % 0.14 % 0.07 % 0.13 % 0.05 % Residential real estate — % — % — % — % — % Home equity lines of credit — % — % — % — % — % Consumer, indirect 0.10 % 0.09 % 0.09 % 0.07 % 0.05 % Consumer, direct 0.01 % 0.01 % 0.01 % 0.01 % 0.01 % Consumer 0.11 % 0.10 % 0.10 % 0.08 % 0.06 % Deposit account overdrafts 0.03 % 0.02 % 0.02 % 0.02 % 0.02 % Total 0.38 % 0.27 % 0.22 % 0.23 % 0.15 % 71 Table of Contents Each with "--%" not meaningful. Total net charge-offs during the third quarter of 2024 were $6.1 million, or 0.38% of average total loans on an annualized basis, compared to $4.2 million, or 0.27% of average total loans on an annualized basis, during the linked quarter and $2.3 million, or 0.15% of average total loans on an annualized basis, during the third quarter of 2023. The increase for the third quarter of 2024 when compared to the linked quarter was driven by an increase in net charge-offs on leases originated by our North Star Leasing division. The increase in net charge-offs during the third quarter of 2024 versus the prior year third quarter was primarily attributable to an increase in charge-offs on leases originated by our North Star Leasing division and indirect consumer loans. 72 Table of Contents The following table details Peoples’ nonperforming assets: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Loans 90+ days past due and accruing: Commercial real estate, other $ 3,838 $ 106 $ 231 $ 78 $ 487 Commercial and industrial 413 208 10 316 67 Premium finance 7,771 2,546 2,208 1,355 1,581 Leases 12,675 3,193 4,070 3,826 6,007 Residential real estate 2,442 1,209 780 877 736 Home equity lines of credit 292 230 181 171 177 Consumer, indirect 46 67 134 68 47 Consumer, direct 101 33 48 25 15 Consumer 147 100 182 93 62 Total loans 90+ days past due and accruing $ 27,578 $ 7,592 $ 7,662 $ 6,716 $ 9,117 Nonaccrual loans: Commercial real estate, other 4,416 4,833 3,773 2,816 3,661 Commercial and industrial 7,008 6,030 6,205 2,758 3,116 Leases 12,428 11,849 10,136 8,436 7,929 Residential real estate 6,658 7,078 7,450 7,921 8,454 Home equity lines of credit 1,461 1,454 1,134 1,022 1,026 Consumer, indirect 2,726 2,261 2,506 2,412 1,904 Consumer, direct 110 164 157 112 97 Consumer 2,836 2,425 2,663 2,524 2,001 Total nonaccrual loans $ 34,807 $ 33,669 $ 31,361 $ 25,477 $ 26,187 Total nonperforming loans ("NPLs") $ 62,385 $ 41,261 $ 39,023 $ 32,193 $ 35,304 OREO: Commercial $ 7,118 $ 7,118 $ 7,118 $ 7,118 $ 7,118 Residential 279 291 120 56 56 Total OREO $ 7,397 $ 7,409 $ 7,238 $ 7,174 $ 7,174 Total nonperforming assets ("NPAs") $ 69,782 $ 48,670 $ 46,261 $ 39,367 $ 42,478 Criticized loans (a) $ 237,627 $ 239,943 $ 256,565 $ 235,239 $ 213,156 Classified loans (b) $ 133,241 $ 120,180 $ 147,518 $ 120,027 $ 124,836 Asset Quality Ratios (c): Nonaccrual loans as a percent of total loans 0.55 % 0.53 % 0.51 % 0.41 % 0.43 % NPLs as a percent of total loans (d) 0.99 % 0.65 % 0.63 % 0.52 % 0.58 % NPAs as a percent of total assets (d) 0.76 % 0.53 % 0.50 % 0.43 % 0.48 % NPAs as a percent of total loans and OREO (d) 1.11 % 0.77 % 0.74 % 0.64 % 0.70 % Allowance for credit losses as a percent of nonaccrual loans 191.45 % 196.76 % 206.70 % 245.79 % 240.29 % Allowance for credit losses as a percent of NPLs (d) 106.82 % 160.56 % 166.11 % 194.38 % 178.23 % Criticized loans as a percent of total loans (a) 3.79 % 3.79 % 4.14 % 3.82 % 3.50 % Classified loans as a percent of total loans (b) 2.12 % 1.90 % 2.38 % 1.95 % 2.05 % (a) Includes loans categorized as special mention, substandard or doubtful. (b) Includes loans categorized as substandard or doubtful. (c) Data presented as of the end of the period indicated. (d) NPLs include loans 90+ days past due and accruing and nonaccrual loans. NPAs include nonperforming loans and OREO. 73 Table of Contents Compared to at June 30, 2024, Peoples' NPAs increased from 0.53% of total assets to 0.76% at September 30, 2024. Total loans 90+ days past due and accruing and nonaccrual loans in total increased at September 30, 2024 compared to at June 30, 2024 due primarily to increases in nonperforming leases. Total loans 90+ days past due increased from $7.6 million at June 30,2024 to $27.6 million at September 30, 2024, and were impacted by increases in leases, premium finance loans, and other commercial real estate loans. The increase in loans 90+ days past due is driven by higher administrative delinquencies on Vantage leases and premium finance loans. During the third quarter of 2024, criticized loans decreased $2.3 million, while classified loans increased $13.1 million when compared to at June 30, 2024. The decrease in the amounts of criticized loans compared to at June 30, 2024 was primarily driven by paydowns and upgrades of the risk rating. The increase in the amount of classified loans compared to at June 30, 2024 was primarily due to downgrades in the risk rating from newly reported loans. The increase in NPAs compared to at December 31, 2023, was primarily driven by increases of nonaccrual leases originated by our North Star Leasing division, commercial and industrial loans, and other commercial real estate loans. The increase in NPAs compared to at September 30, 2023, was impacted by the increase in nonaccrual leases originated by our North Star Leasing division and an increase in loans past due and accruing. Deposits The following table details Peoples’ deposit balances: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Non-interest-bearing deposits (a) $ 1,453,441 $ 1,472,697 $ 1,468,363 $ 1,567,649 $ 1,569,095 Interest-bearing deposits: Interest-bearing demand accounts (a) 1,065,912 1,083,512 1,107,712 1,144,357 1,181,079 Savings accounts 864,935 880,542 901,493 919,244 987,170 Retail CDs 1,884,139 1,812,874 1,680,413 1,443,417 1,198,733 Money market deposit accounts 894,690 869,159 859,961 775,488 730,902 Governmental deposit accounts 824,136 766,337 825,170 726,713 761,625 Brokered CDs 495,904 412,653 483,444 575,429 608,914 Total interest-bearing deposits 6,029,716 5,825,077 5,858,193 5,584,648 5,468,423 Total deposits $ 7,483,157 $ 7,297,774 $ 7,326,556 $ 7,152,297 $ 7,037,518 Demand deposits as a percent of total deposits 34 % 35 % 35 % 38 % 39 % (a) The sum of amounts presented is considered total demand deposits. At September 30, 2024, period-end total deposits increased $185.4 million, or 3%, compared to at June 30, 2024, primarily driven by increases of (i) $83.3 million in brokered certificates of deposit, (ii) $71.3 million in retail certificates of deposit, and (iii) $57.8 million in governmental deposit accounts, partially offset by a decrease of $19.3 million in non-interest bearing deposits. The increase in retail certificates of deposits was due to current specials being offered, while the increase in governmental deposit accounts was due to the seasonality of those balances. The increase in brokered deposits was due to the lower-cost of funding available compared to Federal Home Loan Bank ("FHLB") advances. At September 30, 2024, period-end total deposits increased $445.6 million, or 6%, compared to at September 30, 2023. The increase was primarily driven by increases of $685.4 million in retail certificates of deposit, $163.8 million in money market deposit accounts, and $62.5 million in governmental deposit accounts, offset by decreases of $122.2 million, $115.7 million, $115.2 million, and $113.0 million in savings accounts, non-interest bearing deposits, interest-bearing demand deposit accounts and brokered certificates of deposit, respectively. The increase in retail certificates of deposits was driven by current promotions being offered. Given the rate environment, there has been a mix shift in the deposit portfolio over the last twelve months. As part of its funding strategy, Peoples hedges 90-day brokered CDs with interest rate swaps. The interest rate swaps pay a fixed rate of interest while receiving a floating rate component of interest tied to term SOFR, which offsets the rate on the brokered CDs. As of September 30, 2024, Peoples had 9 effective interest rate swaps, with an aggregate notional value of $85.0 million, which were designated as cash flow hedges. Peoples continually evaluates the overall balance sheet position given the interest rate environment. 74 Table of Contents Borrowed Funds The following table details Peoples’ short-term borrowings and long-term borrowings: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Short-term borrowings: FHLB Overnight borrowings $ — $ 295,000 $ 260,192 $ 369,000 $ 484,000 Retail repurchase agreements 12,945 24,733 90,304 99,121 101,437 Bank Term Funding Program ("BTFP") 163,000 163,000 163,000 133,000 — Total short-term borrowings $ 175,945 $ 482,733 $ 513,496 $ 601,121 $ 585,437 Long-term borrowings: FHLB advances $ 132,157 $ 132,524 $ 132,683 $ 112,865 $ 83,247 Vantage non-recourse debt 50,059 47,393 49,529 49,572 41,783 Other long-term borrowings 54,608 54,340 54,071 53,804 48,282 Total long-term borrowings $ 236,824 $ 234,257 $ 236,283 $ 216,241 $ 173,312 Total borrowed funds $ 412,769 $ 716,990 $ 749,779 $ 817,362 $ 758,749 Total borrowed funds, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances. Other long-term borrowings include trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures. Total borrowed funds at September 30, 2024 decreased compared to at June 30, 2024 and at September 30, 2023, primarily due to lower FHLB overnight borrowings. Capital/Stockholders’ Equity At September 30, 2024, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations. These higher capital levels reflect Peoples' desire to maintain a strong capital position. In order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer of 2.50%, which applies to the common equity tier 1 ("CET1") ratio, the tier 1 capital ratio and the total risk-based capital ratio. At September 30, 2024, Peoples had a capital conservation buffer of 5.49%. The following table details Peoples' risk-based capital levels and corresponding ratios: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Capital Amounts: Common Equity Tier 1 $ 821,192 $ 799,710 $ 780,017 $ 766,691 $ 752,728 Tier 1 875,800 854,050 834,089 820,495 801,010 Total (Tier 1 and Tier 2) 938,474 916,073 894,662 873,225 855,054 Net risk-weighted assets $ 6,958,225 $ 6,814,149 $ 6,674,114 $ 6,524,577 $ 6,505,779 Capital Ratios: Common Equity Tier 1 11.80 % 11.74 % 11.69 % 11.75 % 11.57 % Tier 1 12.59 % 12.53 % 12.50 % 12.58 % 12.31 % Total (Tier 1 and Tier 2) 13.49 % 13.44 % 13.40 % 13.38 % 13.14 % Tier 1 leverage ratio 9.86 % 9.56 % 9.43 % 9.57 % 9.34 % Peoples' risk-based capital ratios at September 30, 2024 increased when compared to June 30, 2024, due to net income during the quarter, partially offset by dividends paid. Compared to at September 30, 2023, the tier 1 risk-based capital and the total risk-based capital ratios improved due to higher net income, partially offset by dividends paid. The common equity tier 1 risk-based capital ratio at September 30, 2024 also increased compared to at September 30, 2023 due to higher net income. In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity. Such ratios represent Non-US GAAP financial measures since their calculation removes the impact of goodwill and other intangible assets acquired through acquisitions on amounts reported in the Unaudited Consolidated Balance Sheets. Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance, financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples. Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in 75 Table of Contents value should there be deterioration in the overall franchise value. As a result, tangible equity represents a conservative measure of the capacity for Peoples to incur losses but remain solvent. The following table reconciles the calculation of these Non-US GAAP financial measures to amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Tangible equity: Total stockholders' equity $ 1,124,972 $ 1,077,833 $ 1,062,002 $ 1,053,534 $ 993,219 Less: goodwill and other intangible assets 403,922 406,417 409,285 412,172 408,494 Tangible equity $ 721,050 $ 671,416 $ 652,717 $ 641,362 $ 584,725 Tangible assets: Total assets $ 9,140,471 $ 9,226,461 $ 9,270,774 $ 9,157,382 $ 8,942,534 Less: goodwill and other intangible assets 403,922 406,417 409,285 412,172 408,494 Tangible assets $ 8,736,549 $ 8,820,044 $ 8,861,489 $ 8,745,210 $ 8,534,040 Tangible book value per common share: Tangible equity $ 721,050 $ 671,416 $ 652,717 $ 641,362 $ 584,725 Common shares outstanding 35,538,607 35,498,977 35,486,234 35,314,745 35,395,990 Tangible book value per common share $ 20.29 $ 18.91 $ 18.39 $ 18.16 $ 16.52 Tangible equity to tangible assets ratio: Tangible equity $ 721,050 $ 671,416 $ 652,717 $ 641,362 $ 584,725 Tangible assets $ 8,736,549 $ 8,820,044 $ 8,861,489 $ 8,745,210 $ 8,534,040 Tangible equity to tangible assets 8.25 % 7.61 % 7.37 % 7.33 % 6.85 % Tangible book value per common share increased to $20.29 at September 30, 2024 compared to $18.91 at June 30, 2024. The change in tangible book value per common share was due to tangible equity increasing during the third quarter of 2024 primarily due to net income and a decrease in accumulated other comprehensive loss over the last three months. Tangible book value per common share at September 30, 2024 increased compared to at September 30, 2023 primarily due to net income over the last twelve months. Interest Rate Sensitivity and Liquidity While Peoples is exposed to various business risks, the risks relating to interest rate sensitivity and liquidity are major risks that can materially impact future results of operations and financial condition due to their complexity and dynamic nature. The objective of Peoples' asset-liability management function is to measure and manage these risks in order to optimize net interest income within the constraints of prudent capital adequacy, liquidity and safety. This objective requires Peoples to focus on interest rate risk exposure and adequate liquidity through its management of the mix of assets and liabilities, their related cash flows and the rates earned and paid on those assets and liabilities. Ultimately, the asset-liability management function is intended to guide management in the acquisition and disposition of earning assets and selection of appropriate funding sources. Interest Rate Risk Interest rate risk ("IRR") is one of the most significant risks arising in the normal course of business of financial services companies like Peoples. IRR is the potential for economic loss due to future interest rate changes that can impact the earnings stream, as well as market values, of financial assets and financial liabilities. Peoples' exposure to IRR is due primarily to differences in the maturity or repricing of earning assets and interest-bearing liabilities. In addition, other factors, such as prepayments of loans and investment securities, or early withdrawal of deposits, can affect Peoples' exposure to IRR and impact interest costs or revenue streams. Peoples has assigned overall management of IRR to its Asset-Liability Committee (the “ALCO”), which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level of IRR, including the review of assumptions used in modeling IRR. 76 Table of Contents The following table shows the estimated changes in net interest income and the economic value of equity based upon a standard, parallel shock analysis with balances held constant (dollars in thousands): Increase (Decrease) in Interest Rate Estimated Increase (Decrease) in Net Interest Income Estimated (Decrease) Increase in Economic Value of Equity (in Basis Points) September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023 300 $ 24,025 7.2 % $ 15,063 4.6 % $ (53,947) (3.2) % $ (157,625) (9.4) % 200 16,598 5.0 % 10,282 3.1 % (32,181) (1.9) % (107,620) (6.4) % 100 8,502 2.5 % 5,468 1.7 % (14,874) (0.9) % (53,585) (3.2) % (100) (9,491) (2.8) % (7,427) (2.3) % (6,260) (0.4) % 31,722 1.9 % (200) (16,509) (4.9) % (15,446) (4.7) % (37,417) (2.2) % 46,537 2.8 % (300) (12,492) (3.7) % (16,822) (5.1) % (98,666) (5.9) % 47,198 2.8 % This table uses a standard, parallel shock analysis for assessing the IRR to net interest income and the economic value of equity. A parallel shock assumes all points on the yield curve (one year, two year, three year, etc.) are directionally changed by the same degree. Management regularly assesses the impact of both increasing and decreasing interest rates. The table above shows the impact of upward and downward parallel shocks of 100, 200 and 300 basis points. Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities. These and other modeling assumptions are monitored closely by Peoples on an ongoing basis. While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in the balance sheet, interest rates typically move in a nonparallel manner with differences in the timing, direction and magnitude of changes in short-term and long-term interest rates. Thus, any impact that might occur as a result of the Federal Reserve Board increasing short-term interest rates in the future could be offset by an inverse movement in long-term interest rates, and vice versa. For this reason, Peoples considers other interest rate scenarios in addition to analyzing the impact of parallel yield curve shifts. These include various flattening and steepening scenarios in which short-term and long-term interest rates move in different directions with varying magnitude. Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above. Given the shape of market yield curves at September 30, 2024, consideration of the bear steepener and bull steepener scenarios provide insights which were not captured by parallel shifts. The bear steepener scenario highlights the risk to net interest income and economic value of equity when short-term interest rates remain constant while long-term interest rates rise. In such a scenario, Peoples' deposit and borrowing costs, which are generally correlated with short-term interest rates, remain constant, while asset yields, which are correlated with long-term interest rates, rise. At September 30, 2024, the bear steepener scenario produced an increase in net interest income of 0.8% and an increase in the economic value of equity of 5.6%. The bull steepener scenario highlights the risk to net interest income and the economic value of equity when short-term rates fall faster than long-term rates. In such a scenario, Peoples' deposit and short-term borrowing costs, which are correlated with short-term rates, decrease, while long-term asset yields and long-term borrowing costs, which are more correlated with long-term rates, remain constant. Decreased deposit and funding costs would be more than offset by increased variable rate asset yields over a longer horizon; resulting in an increased amount of net interest income and net interest margin over a 24-month period. At September 30, 2024, the bull steepener scenario produced a decline of 0.4% to net interest income, as the impact of recent term funding mitigates the impact of lower short-term rates over a 12-month horizon, and an increase in the economic value of equity of 2.8%. Over a 24-month horizon, the bull steepener scenario produced an increase of 1.0% to net interest income. Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. As of September 30, 2024, Peoples had entered into 9 interest rate swap contracts with an aggregate notional value of $85.0 million. Additional information regarding Peoples’ interest rate swaps can be found in “Note 10 Derivative Financial Instruments” of the Notes to the Unaudited Condensed Consolidated Financial Statements. At September 30, 2024, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates, while also mitigating the impact to net interest income decreasing rate scenarios. The table above illustrates this point as changes to net interest income increase in the rising interest rate scenarios. Liquidity In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity. In light of the bank failures in 2023, Peoples revisited the model assumptions, and determined the methods used by the ALCO to monitor 77 Table of Contents and evaluate the adequacy of Peoples Bank's liquidity position remain appropriate and are largely unchanged from those disclosed in Peoples' 2023 Form 10-K. At September 30, 2024, Peoples Bank had liquid assets of $444.5 million, which represented 4.3% of total assets and unfunded loan commitments. Peoples also had an additional $167.0 million of unpledged investment securities not included in the measurement of liquid assets. Management believes the current mix of short-term liquidity sources, loan and security portfolio cash flows, and availability of other funding sources will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments. Off-Balance Sheet Activities and Contractual Obligations In the normal course of business, Peoples is a party to financial instruments with off-balance sheet risk necessary to meet the financing needs of Peoples' customers. These financial instruments include commitments to extend credit and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract amounts of these instruments express the extent of involvement Peoples has in these financial instruments. Loan Commitments and Standby Letters of Credit Loan commitments are made to accommodate the financial needs of Peoples' customers. Standby letters of credit are instruments issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank's customer in the performance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused. Peoples Bank's exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Peoples Bank uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. Peoples Bank routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Unaudited Condensed Consolidated Financial Statements. These activities are part of Peoples Bank's normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in low-income housing tax credit investments. Traditional off-balance sheet credit-related financial instruments continue to represent the most significant off-balance sheet exposure. The following table details the total contractual amount of loan commitments and standby letters of credit: (Dollars in thousands) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Home equity lines of credit $ 248,400 $ 247,757 $ 246,035 $ 244,367 $ 245,764 Unadvanced construction loans 376,595 371,322 349,850 349,850 351,473 Other loan commitments 815,199 759,121 714,513 769,759 768,788 Loan commitments $ 1,440,194 $ 1,378,200 $ 1,310,398 $ 1,363,976 $ 1,366,025 Standby letters of credit $ 9,917 $ 10,507 $ 13,131 $ 14,318 $ 15,452 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for by this Item 3 is provided under the caption “FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity” under “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in this Form 10-Q, and is incorporated herein by reference.