PEOPLES BANCORP INC 10-K

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements Certain statements made in this Form 10-K, which are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. 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 are intended to identify these forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. Factors that might cause such a difference 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, including the ODFI, the FDIC, the Federal Reserve Board, and the CFPB, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements; (6) the effects of easing restrictions on participants in the financial services industry; (7) current and future local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, supply-demand imbalances affecting local real estate prices, high unemployment rates in the local or regional economies in which Peoples operates and/or the U.S. economy generally, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling, potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S. and U.S. global trading partners), and changes in the federal, state, and local government policy and the impact these conditions may have on Peoples, Peoples’ customers and Peoples’ counterparties, and Peoples’ assessment of the impact, which may be different than anticipated; (8) Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples’ current shareholders; (9) changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties’ performance and creditworthiness generally, which may be less favorable than expected in light of recent inflationary pressures and continued elevated interest rates, and may adversely impact the amount of interest income generated; (10) Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral; (11) future credit quality and performance, including expectations regarding future credit losses and the allowance for credit losses; (12) changes in accounting standards, policies, estimates or procedures may adversely affect Peoples’ reported financial condition or results of operations; (13) the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model; 38 (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, First Republic Bank in California, and Heartland Tri-State Bank in Kansas, which may adversely affect the banking industry and/or Peoples’ business generation and retention, funding and liquidity, including Peoples’ continued ability to grow deposits or maintain adequate deposit levels, and may further result in potential increased regulatory requirements, increase 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) 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; (32) changes in laws or regulations imposed by Peoples’ regulators impacting Peoples’ capital actions, including dividend payments and share repurchases; (33) 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; 39 (34) regulatory and legal matters, including the failure to resolve 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; (35) Peoples’ business may be adversely affected by increased political and regulatory scrutiny of corporate ESG practices; (36) the effect of a fall in stock market prices on the asset and wealth management business; and (37) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples’ reports filed with the SEC, including those risk factors included in the disclosures under the heading “ITEM 1A RISK FACTORS” of this Form 10-K. All forward-looking statements speak only as of the filing date of this Form 10-K 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. Additionally, Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the filing date of this Form 10-K or to reflect the occurrence of unanticipated events except as may be required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC’s website at www.sec.gov and/or through Peoples’ website – www.peoplesbancorp.com under the “Investor Relations” section. The following discussion and analysis of Peoples’ Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial position and results of operations for the periods presented. This discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto, as well as the ratios and statistics, contained elsewhere in this Form 10-K. Summary of Significant Transactions and Events The following is a summary of transactions or events that have impacted or are expected by management to impact Peoples’ results of operations or financial condition: Mergers and Acquisitions ◦ During 2024, Peoples incurred $0.2 million of acquisition-related expenses, compared to $17.0 million for 2023 and $3.0 million for 2022. The acquisition-related expenses in 2024 and 2023 were related to the Limestone Merger. The acquisition-related expenses in 2022 were related to the Vantage acquisition (defined below), the merger with Premier Financial Bancorp, Inc (“Premier Merger”), and the Limestone Merger. ◦ 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. ◦ On April 1, 2022, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency with five locations in eastern Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Elite Agency, Inc. (“Elite”), pursuant to an Asset Purchase Agreement between Peoples Insurance and Elite. Total consideration for this transaction was $4.4 million. Peoples recognized intangibles of $2.1 million, primarily comprised of a customer relationship intangible. ◦ On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing headquartered in Excelsior, Minnesota (the “Vantage acquisition”). Peoples Bank acquired assets comprising Vantage’s lease business, including $154.9 million in leases and certain third-party debt in the amount of $106.9 million. Peoples Bank paid cash consideration of $54.0 million and also repaid approximately $28.9 million in recourse debt on behalf of Vantage. Vantage offers mid-ticket equipment leases, primarily for business essential information technology equipment across a wide array of industries. Upon completion of the Vantage transaction, Vantage became a subsidiary of Peoples Bank. As a subsidiary, Vantage has continued to operate under the name Vantage Financial, which leverages Vantage’s strong brand recognition within the equipment finance industry. Peoples recorded goodwill in the amount of $27.2 million and other intangible assets of $13.2 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction. Other Significant Developments ◦ During 2024, Peoples recorded a provision for credit losses of $24.8 million, compared to a provision for credit losses of $15.2 million for 2023 and a recovery of credit losses of $3.5 million for 2022. The provision for credit losses during 2024 was driven by (i) higher net charge-offs, (ii) an increase in reserves for individually analyzed loans and leases, (iii) economic forecast deterioration and (iv) loan growth. The provision for credit losses during 2023 was primarily driven by (i) the 40 addition of the provision for the loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers. ◦ During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $7.7 million. The pension plan had been closed to new entrants since January 1, 2010. Peoples recorded a settlement charge of $2.4 million in the third quarter of 2023 in relation to the termination of the pension plan. Peoples incurred $185,000 in pension settlement charges in 2022, compared to $143,000 in 2021, due to the aggregate amount of lump-sum distributions to participants in Peoples’ defined benefit pension plan exceeding the threshold for recognizing settlement charges during the period. ◦ On January 28, 2021, Peoples’ Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $30.0 million of Peoples’ outstanding common shares, replacing the February 27, 2020 share repurchase program which had authorized Peoples to purchase up to an aggregate of $40.0 million of Peoples’ outstanding common shares. During 2024, Peoples repurchased 100,905 common shares totaling $3.0 million under the share repurchase program. During 2023, Peoples repurchased 107,219 common shares totaling $3.0 million under the share repurchase program. During 2022, Peoples repurchased 263,183 common shares totaling $7.4 million under the share repurchase program. ◦ On April 3, 2019, Peoples entered into the U.S. Bank Loan Agreement. A Sixth Amendment to the U.S. Bank Loan Agreement, entered into on March 31, 2024, extended the maturity from April 1, 2024 to March 31, 2025. The U.S. Bank Loan Agreement provides Peoples with a revolving line of credit in the maximum aggregate principal amount of $30.0 million that may be used: (i) for working capital purposes; (ii) to finance dividends or other distributions (other than stock dividends and stock splits) on or in respect of Peoples’ capital stock and redemptions, repurchases or other acquisitions of any of Peoples’ capital stock permitted under the U.S. Bank Loan Agreement; and (iii) to finance acquisitions permitted under the U.S. Bank Loan Agreement. ◦ To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% beginning on March 16, 2022, and continued to raise rates up to 5.50% on July 27, 2023. The Federal Reserve Board had kept rates unchanged since July 2023, before beginning to cut rates in September 2024. The impact of these transactions, where material, is discussed in the applicable sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations. 41 Critical Accounting Policies The accounting and reporting policies of Peoples conform to US GAAP and to general practices within the financial services industry. A summary of significant accounting policies is contained in “Note 1 Summary of Significant Accounting Policies.” While all of these policies are important to understanding the Consolidated Financial Statements, certain accounting policies require management to exercise judgment and make estimates or assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. These estimates and assumptions are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates or assumptions. Management has identified four accounting policies as those that, due to the judgments, estimates and assumptions inherent in the policies, are critical to an understanding of Peoples’ Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations. The four accounting policies identified were the allowance for credit losses, business combinations, goodwill and fair value measurements. These four accounting policies are described in further detail below. Allowance for Credit Losses The allowance for credit losses represents Peoples’ estimate of expected credit losses over the expected contractual life of the existing loan portfolio. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is measured on a pool basis, with loans collectively evaluated when similar risk characteristics exist. Peoples evaluated risk characteristics, including but not limited to: internal or third-party credit scores or credit ratings, risk ratings or classifications, financial asset type, collateral type, loan size, effective interest rate, term, geographical location, industry of the borrower, vintage, historical or credit loss patterns, and reasonable and supportable forecast periods. Peoples identified 20 segments for which it believes there are similar risk characteristics and utilized a discounted cash flow methodology in determining an allowance for credit losses for each segment. In estimating credit losses, Peoples uses a loss driver method, which analyzes one or more economic variables to the change in default rate using a regression analysis. Variables that had a strong correlation were selected as economic factors, or variables, for the model. If a single variable was not found to be strongly correlated, additional variables were included. Peoples utilizes U.S. unemployment and Ohio unemployment as economic factors in modeling. In general, Peoples completes a quarterly evaluation based on several qualitative factors to determine if there should be adjustments made to the allowance for credit losses. These factors include economic conditions, collateral, concentrations, troubled assets, Peoples’ loss trends, peer loss trends, delinquency trends, portfolio composition and loan growth, underwriting, and certain other risks. Loans that do not share similar risk characteristics are evaluated on an individual basis. The allowance for credit losses related to these specific loans was based on management’s estimate of potential losses as determined by (1) the present value of expected future cash flows, (2) the fair value of collateral if the loan is determined to be collateral dependent, or (3) the loan’s observable market price. Peoples also completes a quarterly evaluation for unfunded commitments for loans that are not unconditionally cancellable, which includes construction loans, floor plan lines of credit, home equity lines of credit, other credit lines and letters of credit. Peoples performed a study to determine the historical funding rates of unadvanced portions of loans, and applied these funding rates to the unfunded commitments at period end. The loss rates, including qualitative factors, in determining the allowance for credit losses were applied at the segment level to the unfunded commitment amounts to determine the allowance for credit loss liability for unfunded commitments. There can be no assurance that the allowance for credit losses will be adequate to cover all losses, but management believes the allowance for credit losses at December 31, 2024 was adequate to provide for expected losses from existing loans based on information available at that time. While management uses available information to estimate losses, the ultimate collectability of a substantial portion of the loan portfolio, and the need for future additions to the allowance, will be based on changes in economic conditions and other relevant factors. As such, adverse changes in economic conditions could reduce currently estimated cash flows for both commercial and consumer borrowers, which would likely cause Peoples to experience increases in problem assets, delinquencies and losses on loans in the future. To demonstrate the sensitivity to key economic parameters used in the measurement of the allowance for credit losses at December 31, 2024, management calculated the difference between the modeled allowance for credit losses at December 31, 2024, compared to one based on an adverse scenario. The adverse scenario reflected increases of 100 basis points in both U.S. and Ohio unemployment. Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in the allowance for credit losses of approximately $6.9 million at December 31, 2024. 42 Business Combinations Peoples utilizes the acquisition method of accounting for business combinations. As of the acquisition date, Peoples records the acquired company’s net assets at fair value. The determination of fair value as of the acquisition date requires management to consider various factors that involve judgment and estimation, including the application of discount rates, prepayment rates, attrition rates, future estimates of interest rates, as well as many other assumptions. These assumptions can have a material impact on the estimated fair value, and as a result, the goodwill recorded in a business combination. ASC 805 allows for a measurement period of 12 months beyond the acquisition date to finalize the fair value measurement of the acquired company’s net assets as additional information existing as of the acquisition date becomes available. Measurement period adjustments are recorded through goodwill. Based on recent acquisitions, loans and leases acquired through business combinations have comprised the majority of purchase accounting adjustments in arriving at the fair values of acquired assets and liabilities, with the most significant adjustments relating to the creditworthiness of the acquired portfolios. The assumptions and inputs impacting the allowance for credit losses are discussed in the above paragraphs of this section of Management’s Discussion and Analysis. Those same judgments drive the measurement of the credit adjustments of acquired loan and lease portfolios when arriving at fair value. For further information regarding business combination accounting, please refer to “Note 20 Acquisitions.” Goodwill Peoples records goodwill as a result of acquisitions accounted for under the acquisition method of accounting. Under the acquisition method, Peoples is required to allocate the consideration paid for an acquired company to the assets acquired, including identified intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition. Goodwill represents the excess cost over the fair value of net assets acquired and is not amortized but is tested for impairment when indicators of impairment exist, and, in any case, at least annually. For further information regarding the fair values of assets and liabilities recently acquired in business combinations, please refer to “Note 20 Acquisitions.” The value of recorded goodwill is supported by revenue that is driven by the volume of business transacted and Peoples’ ability to provide quality, cost-effective services in a competitive market place. A decline in earnings as a result of a lack of growth or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. Goodwill impairment exists when the carrying value of the reporting unit (as defined by US GAAP) exceeds its fair value and an impairment loss is recognized in earnings in an amount equal to that excess, limited to the total amount of goodwill allocated to the reporting unit. The process of evaluating goodwill for impairment involves highly subjective and complex judgments, estimates and assumptions regarding the fair value of Peoples’ reporting unit and, in some cases, goodwill itself. As a result, changes to these judgments, estimates and assumptions in future periods could result in materially different results. Peoples currently maintains a single reporting unit for goodwill impairment testing. While quoted market prices exist for Peoples’ common shares since they are publicly traded, these market prices do not necessarily reflect the value associated with gaining control of an entity. Thus, management takes into account all appropriate fair value measurements in determining the estimated fair value of the reporting unit. Peoples performs its required annual impairment test as of October 1st each year. Peoples first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, including goodwill. In this evaluation, Peoples assesses relevant events and circumstances, which may include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, events specific to Peoples, significant changes in the reporting unit, or a sustained decrease in stock price. If Peoples determines that it is more-likely-than-not that the fair value of the reporting unit is greater than its carrying amount, then performing the quantitative impairment test is unnecessary. None of the indicators noted above triggered the quantitative test, but management felt it was prudent to perform a quantitative test given the time since Peoples' prior quantitative test. At October 1, 2024, management completed a quantitative assessment of goodwill. This test resulted in management concluding that the fair value of the reporting unit exceeded its carrying value. Peoples is required to perform interim tests for goodwill impairment in subsequent quarters if events occur or circumstances change that indicate potential goodwill impairment exists, such as adverse changes to Peoples’ business or a significant decline in Peoples’ market capitalization. For further information regarding goodwill, refer to “Note 7 Goodwill and Other Intangible Assets.” Fair Value Measurements As a financial services company, the carrying value of certain financial assets and liabilities is impacted by the application of fair value measurements, either directly or indirectly. In certain cases, an asset or liability is measured and reported at fair value on a recurring basis, such as available-for-sale investment securities. In other cases, management must 43 rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-down or whether a valuation reserve should be established. Given the inherent volatility, the use of fair value measurements may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the Consolidated Financial Statements, from period to period. Detailed information regarding fair value measurements can be found in “Note 2 Fair Value of Financial Instruments.” New Accounting Guidance Pending Adoption ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures: The FASB issued ASU 2023-09 on December 14, 2023. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09 applies to all entities subject to income taxes. For public business entities, the new requirements were effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively with early adoption is permitted. Peoples does not expect the update will have a material impact on its consolidated financial statements. EXECUTIVE SUMMARY Net income for the year ended December 31, 2024 was $117.2 million, compared to $113.4 million for 2023 and $101.3 million for 2022, representing earnings per diluted common share of $3.31, $3.44 and $3.60, respectively. The increases in 2024 earnings when compared to 2023 and 2022 were driven by increases in net interest income, partially offset by increases in non-interest expenses. Non-core items, and the related tax effect of each, negatively impacted earnings per diluted common share by $0.07 for 2024 compared to $0.59 for 2023 and $0.11 for 2022. Net interest income increased 3% to $348.7 million for 2024, compared to $339.4 million for 2023, and $253.4 million for 2022. Net interest margin was 4.21% in 2024, compared to 4.55% in 2023 and 3.96% in 2022. The increases in net interest income when compared to 2023 were driven by increases in market interest rates and the full year impact of net interest income from the Limestone Merger. Net interest margin for 2024 decreased 34 basis points when compared to 2023, which was primarily driven by higher borrowings costs, which offset higher earning asset yields. Net interest margin increased during 2023 when compared to 2022 largely due to increases in market interest rates, additional net interest income stemming from the Limestone Merger, and improvements in investment yields. Accretion income, net of amortization expense, from acquisitions totaled $25.2 million for 2024, $25.2 million for 2023, and $11.6 million for 2022, adding 30 basis points, 34 basis points, and 19 basis points, respectively, to the net interest margin. The provision for credit losses for 2024 was $24.8 million, compared to a provision of credit losses of $15.2 million for 2023 and a recovery of credit losses of $3.5 million for 2022. Net charge-offs for 2024 were $23.2 million, compared to $8.5 million for 2023 and $7.3 million for 2022. Net charge-offs as a percent of average total loans were 0.37% for 2024, 0.15% for 2023 and 0.16% for 2022. The provision for credit losses during 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. The provision for credit losses during 2023 compared to the provision for credit losses during 2022 was primarily driven by the addition of the provision for loans acquired in the Limestone Merger. The increase in net-charge-offs as a percent of average total loans was driven by charge-offs on small-ticket leases primarily occurring in the second half of 2024. Total non-interest income, excluding gains and losses, for 2024 increased $9.1 million, or 10%, when compared to 2023. The increase was driven by (i) a $2.6 million increase in lease income, primarily attributable to operating lease income, (ii) a $2.4 million increase in trust and investment income driven by an increase in assets under administration and management, (iii) a $1.4 million increase in insurance income driven by higher contingency income and market increases for premiums, (iv) a $0.9 million increase in deposit account service charge income, and (vi) a $0.7 million increase in mortgage banking income. Total non-interest income for 2023 increased $8.6 million, or 11% when compared to 2022. The increase was driven by growth of $4.1 million in electronic banking income, $2.3 million in insurance income, and $2.1 million in deposit account services charges. Total non-interest expense for 2024 and 2023, was impacted by the Limestone Merger and acquisition-related non-interest expenses, which added $0.2 million and $17.0 million, respectively, across various line-items within non-interest expense. The table below summarizes the amount of acquisition-related expenses for each line item that is a component of non-interest expense. Acquisition-related expenses are considered a non-core non-interest expense by Peoples. This information is used by Peoples to provide information useful to investors in understanding Peoples’ operating performance and trends. 44 (Dollars in thousands) 2024 2023 2022 Non-interest expense: Salaries and employee benefit costs $ 150,041 $ 144,031 112,690 Data processing and software expense 25,221 21,607 14,241 Net occupancy and equipment expense 24,151 21,368 19,516 Professional fees 12,109 17,041 12,094 Amortization of other intangible assets 11,161 11,222 7,763 Electronic banking expense 7,548 7,150 9,231 Marketing expense 3,914 5,017 3,728 FDIC insurance premiums 4,929 4,785 3,702 Franchise tax expense 3,222 3,540 3,487 Other loan expenses 4,147 2,859 2,735 Communication expense 3,145 2,834 2,484 Operating lease expense 3,539 1,687 — Travel and entertainment expense 2,656 2,401 1,400 Other non-interest expense 18,033 20,945 14,076 Total non-interest expense 273,816 266,487 207,147 Acquisition-related non-interest expense: Salaries and employee benefit costs 16 5,827 29 Data processing and software expense (252) 1,850 410 Net occupancy and equipment expense 36 109 50 Professional fees 38 6,062 2,407 Electronic banking expense (100) 115 (92) Marketing expense 11 81 51 Other loan expenses — 2 (4) Communication expense — 1 2 Travel and entertainment expense 84 326 — Other non-interest expense 336 2,597 163 Total acquisition-related non-interest expense 169 16,970 3,016 Non-interest expense excluding acquisition-related expense: Salaries and employee benefit costs 150,025 138,204 112,661 Data processing and software expense 25,473 19,757 13,831 Net occupancy and equipment expense 24,115 21,259 19,466 Professional fees 12,071 10,979 9,687 Amortization of other intangible assets 11,161 11,222 7,763 Electronic banking expense 7,648 7,035 9,323 Marketing expense 3,903 4,936 3,677 FDIC insurance premiums 4,929 4,785 3,702 Franchise tax expense 3,222 3,540 3,487 Other loan expenses 4,147 2,857 2,739 Communication expense 3,145 2,833 2,482 Operating lease expense 3,539 1,687 — Travel and entertainment expense 2,572 2,075 1,400 Other non-interest expense 17,697 18,348 13,913 Total non-interest expense excluding acquisition-related expense $ 273,647 $ 249,517 $ 204,131 Total non-interest expense was $273.8 million for 2024, an increase of $7.3 million, or 3%, compared to 2023. Excluding acquisition-related expenses, non-interest expenses increased $24.1 million, or 10%, due to increases in all non-interest expense line items except for marketing expense, franchise tax expense and amortization of other intangible assets, which decreased $1.0 million, $0.3 million, and $0.1 million, respectively, when compared to 2023. The increases were primarily driven by recent growth, including 45 through acquisitions. Total non-interest expense was $266.5 million for 2023, an increase of $59.3 million compared to 2022. The growth was driven by increases of (i) $31.3 million in salaries and employee benefit costs, (ii) $7.4 million in data processing and software expenses, (iii) $4.9 million in professional fees, and (iv) $3.5 million in intangible asset amortization. These increases were primarily attributable to the Limestone Merger, as well as organic growth. Peoples’ efficiency ratio, which is calculated as total non-interest expense less amortization of other intangible assets divided by fully tax-equivalent (“FTE”) net interest income, plus total non-interest income, excluding all gains and losses, was 58.0% for 2024, compared to 58.7% for 2023 and 59.6% for 2022. The efficiency ratio improved when compared to prior periods due to increased revenue. The efficiency ratio, when adjusted for non-core items, was 57.9% for 2024, 54.4% for 2023 and 58.6% for 2022. The increase in the efficiency ratio, adjusted for non-core items, for 2024 compared to 2023 was driven by higher non-interest expense. The efficiency ratio and the efficiency ratio, adjusted for non-core items for 2023 improved when compared to 2022, due to higher net interest income driven by the Limestone Merger, increases in market interest rates, and higher non-interest income. Income tax expense totaled $32.3 million for 2024, compared to $31.8 million for 2023 and $27.3 million for 2022. The effective tax rate for 2024 was 21.6%, 21.9% for 2023 and 21.3% for 2022. The increased expense for 2024 compared to 2023 and 2022 was driven by higher pre-tax income. Peoples’ effective tax rate has increased primarily due to apportionment in additional states due to recent acquisitions, but was lower in 2024 due to a one-time benefit relating to a prior year amended return. Total assets increased 1% to $9.25 billion at December 31, 2024, compared to $9.16 billion at year-end 2023. The increase was primarily due to increases of $198.8 million in loans and leases and $123.1 million in investment securities, partially offset by a decrease of $209.1 million in cash and cash equivalents. The increase in loans and leases compared to December 31, 2023 was driven by growth of $162.7 million and $66.3 million in the commercial and industrial and premium finance segments, respectively, which was partially offset by a reduction of $40.9 million in commercial real estate. The decrease in cash and cash equivalents is primarily related to investing activity and the purchase of both available-for-sale and held-to-maturity securities, partially offset by cash provided by operating activities. The increase in investment securities from at December 31, 2023 was driven by purchases of longer duration, higher yielding held-to-maturity investment securities. Management underwent investment portfolio restructurings during 2023 to increase portfolio yield and reduce Peoples’ sensitivity to falling intermediate and long-term interest rates. The allowance for credit losses increased to $63.3 million, or 1.00% of total loans, net of deferred fees and costs, compared to $62.0 million and 1.01%, respectively, at December 31, 2023. The increase in the allowance balance at December 31, 2024 when compared to at December 31, 2023 was driven by an increase in reserves for individually analyzed loans and leases, as well as loan growth. The decrease in the ratio of the allowance for credit losses to total loans was due to loan growth. Total liabilities were $8.14 billion at December 31, 2024, an increase of $38.8 million since December 31, 2023, primarily due to an increase of $487.3 million in total deposits which was driven primarily by promotional offerings on retail CDs, partially offset by a decrease in $435.2 million in total borrowings due to the payoff of the BTFP and lower FHLB overnight borrowings. Total demand deposit accounts comprised 34% and 38% of total deposits at December 31, 2024, and at December 31, 2023, respectively. Total stockholders’ equity was $1.11 billion at December 31, 2024, an increase of $58.1 million, or 6%, from December 31, 2023 due to net income of $117.2 million for the full year of 2024, partially offset by an increase in other comprehensive loss of $8.8 million and dividends paid of $56.3 million. The increase in other comprehensive loss was the result of changes in the market value of available-for-sale investment securities, which were primarily driven by changes in market interest rates. Peoples continued to exceed the capital required by the Federal Reserve Board to be deemed “well capitalized.” Peoples’ tier 1 capital ratio was 12.39% at December 31, 2024, versus 12.37% at December 31, 2023, while the total capital ratio was 13.58% at December 31, 2024, versus 13.17% at December 31, 2023. The common equity tier 1 risk-based capital ratio was 11.95% at December 31, 2024 compared to 11.56% at December 31, 2023. Compared to at December 31, 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. Peoples’ book value and tangible book value per share were $31.26 and $19.94, respectively, at December 31, 2024, compared to $29.83 and $18.16, respectively, at December 31, 2023. Additional information regarding capital requirements can be found in “Note 17 Regulatory Matters.” 46 RESULTS OF OPERATIONS Net Interest Income Peoples earns interest income on investments, loans and leases, and incurs interest expense on interest-bearing deposits and borrowed funds. Net interest income, the amount by which interest income exceeds interest expense, remains Peoples’ largest source of revenue and was 77% of total revenue during 2024. The amount of net interest income earned by Peoples is affected by various factors, including changes in market interest rates due primarily to the Federal Reserve Board’s monetary policy, the level and degree of pricing competition for both loans and deposits in Peoples’ markets, and the amount and composition of Peoples’ earning assets and interest-bearing liabilities. Peoples monitors net interest income performance and manages its balance sheet composition through regular ALCO meetings. The asset-liability management process employed by the ALCO is intended to mitigate the impact of future interest rate changes on Peoples’ net interest income and earnings. However, the frequency and/or magnitude of changes in market interest rates are difficult to predict, and may have a greater impact on net interest income than management is able to mitigate through the asset-liability management process. As part of the analysis of net interest income, management converts tax-exempt income earned on obligations of states and political subdivisions to the pre-tax equivalent of taxable income using a federal statutory corporate income tax rate of 21% for all periods presented. Management believes the resulting FTE net interest income allows for a more meaningful comparison of tax-exempt income and yields to their taxable equivalents. Net interest margin, which is calculated by dividing 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 earning assets and interest-bearing liabilities. The following table details the calculation of FTE net interest income for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Net interest income $ 348,701 $ 339,374 $ 253,442 Taxable equivalent adjustments 1,308 1,503 1,459 FTE net interest income $ 350,009 $ 340,877 $ 254,901 47 The following table details Peoples’ average balance sheets, with corresponding income/expense and yield/cost, for the years ended December 31: 2024 2023 2022 ( Dollars in thousands) Average Balance Income/ Expense Yield/Cost Average Balance Income/Expense Yield/Cost Average Balance Income/ Expense Yield/Cost Short-term investments (a) $ 125,112 $ 6,810 5.44 % $ 57,464 $ 2,763 4.81 % $ 178,781 $ 1,710 0.96 % Investment securities (b)(c): Taxable 1,696,965 59,113 3.48 % 1,621,852 49,463 3.05 % 1,481,368 29,086 1.96 % Nontaxable 180,913 5,016 2.77 % 190,479 5,475 2.87 % 199,279 5,287 2.65 % Total investment securities 1,877,878 64,129 3.42 % 1,812,331 54,938 3.03 % 1,680,647 34,373 2.05 % Loans (c)(d): Construction 330,989 25,791 7.66 % 347,317 27,833 7.90 % 223,197 10,732 4.74 % Commercial real estate, other 2,058,450 146,077 6.98 % 1,757,676 120,479 6.76 % 1,327,064 65,405 4.86 % Commercial and industrial 1,237,068 95,609 7.60 % 1,052,647 79,449 7.44 % 875,754 41,335 4.66 % Premium finance 259,374 22,134 8.39 % 168,077 12,155 7.13 % 150,135 6,789 4.46 % Leases 416,728 47,498 11.21 % 371,809 42,931 11.39 % 271,349 34,720 12.62 % Residential real estate (e) 921,725 47,017 5.10 % 913,069 43,647 4.78 % 881,136 37,851 4.30 % Home equity lines of credit 227,046 18,414 8.11 % 194,415 14,722 7.57 % 170,567 8,300 4.87 % Consumer, indirect 666,083 39,912 5.99 % 656,736 33,263 5.06 % 563,887 23,029 4.08 % Consumer, direct 120,607 8,694 7.21 % 128,707 8,726 6.78 % 111,148 6,769 6.09 % Total loans 6,238,070 451,146 7.14 % 5,590,453 383,205 6.79 % 4,574,237 234,930 5.09 % Allowance for credit losses (64,491) (57,391) (55,233) Net loans 6,173,579 451,146 7.22 % 5,533,062 383,205 6.86 % 4,519,004 234,930 5.15 % Total earning assets 8,176,569 522,085 6.32 % 7,402,857 440,906 5.90 % 6,378,432 271,013 4.21 % Goodwill and other intangible assets 406,619 384,172 322,639 Other assets 539,655 511,748 393,636 Total assets $ 9,122,843 $ 8,298,777 $ 7,094,707 Interest-bearing deposits: Savings accounts $ 882,748 $ 885 0.10 % $ 1,034,713 $ 1,394 0.13 % $ 1,069,097 $ 356 0.03 % Government deposit accounts 799,195 21,872 2.74 % 709,887 12,252 1.73 % 701,587 2,172 0.31 % Interest-bearing demand accounts 1,089,688 2,118 0.19 % 1,156,953 1,605 0.14 % 1,165,106 583 0.05 % Money market accounts 845,547 21,434 2.53 % 684,015 9,986 1.46 % 632,364 1,015 0.16 % Retail certificates of deposit 1,774,419 74,509 4.20 % 948,310 25,198 2.66 % 580,660 2,978 0.51 % Brokered deposits (f) 492,390 21,295 4.32 % 483,483 21,712 4.49 % 88,234 2,067 2.34 % Total interest-bearing deposits 5,883,987 142,113 2.42 % 5,017,361 72,147 1.44 % 4,237,048 9,171 0.22 % Borrowed funds: Short-term FHLB advances (f) 121,739 6,675 5.48 % 353,532 18,058 5.11 % 83,356 2,386 2.86 % Repurchase agreements and other 179,567 8,870 5.36 % 107,935 1,664 1.54 % 113,434 275 0.24 % Total short-term borrowings 301,306 15,545 5.16 % 461,467 19,722 4.27 % 196,790 2,661 1.35 % Long-term FHLB advances 130,674 5,213 3.99 % 54,457 1,779 3.27 % 53,102 984 1.85 % Long-term notes payable 49,456 3,446 6.97 % 45,038 2,560 5.43 % 56,865 2,562 4.51 % Other borrowings 54,342 5,759 10.42 % 44,121 3,821 8.97 % 13,718 734 5.27 % Total long-term borrowings 234,472 14,418 6.11 % 143,616 8,160 5.68 % 123,685 4,280 3.46 % Total borrowed funds 535,778 29,963 5.57 % 605,083 27,882 4.59 % 320,475 6,941 2.15 % Total interest-bearing liabilities 6,419,765 172,076 2.68 % 5,622,444 100,029 1.78 % 4,557,523 16,112 0.35 % Non-interest-bearing deposits 1,491,019 1,598,009 1,637,690 Other liabilities 128,267 137,527 101,510 Total liabilities 8,039,051 7,357,980 6,296,723 Stockholders’ equity 1,083,792 940,797 797,984 Total liabilities and stockholders’ equity $ 9,122,843 $ 8,298,777 $ 7,094,707 Interest rate spread (b) $ 350,009 3.64 % $ 340,877 4.12 % $ 254,901 3.86 % Net interest margin (b) 4.21 % 4.55 % 3.96 % (a) Balances are primarily composed of interest bearing demand deposits at the FRB and FHLB. (b) Average balances are based on carrying value. (c) Interest income and yields are presented on a fully tax-equivalent basis, using a federal statutory corporate income tax rate of 21% for all periods presented. 48 (d) Average balances include nonaccrual, impaired loans, and loans held for sale. 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. (e) Loans held for sale are included in the average loan balances listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income. (f) 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 deposits for the periods presented in which FHLB advances and brokered deposits were being utilized. Peoples’ average balances compared to prior periods have been impacted by recent acquisitions, which included: (i) the Limestone Merger as of the close of business on April 30, 2023, which added to average short-term investments, average total investment securities, and average loans, deposit and borrowed funds balances and (ii) the acquisition of Vantage on March 7, 2022, which added to average lease and borrowed funds balances. Peoples’ cash balances have decreased primarily due to a decrease in interest-bearing deposits in other banks, mostly with the FRB. The increases in market interest rates have increased asset yields and increased borrowing costs. The following table provides an analysis of the changes in FTE net interest income: (Dollars in thousands) Changes from 2023 to 2024 Changes from 2022 to 2023 Increase (decrease) in: Rate Volume Total (a) Rate Volume Total (a) INTEREST INCOME: Short-term investments $ 328 $ 3,718 $ 4,046 $ 2,900 $ (1,847) $ 1,053 Investment securities (b): Taxable 7,280 2,371 9,651 17,396 2,981 20,377 Nontaxable (190) (269) (459) 430 (242) 188 Total investment income 7,090 2,102 9,192 17,826 2,739 20,565 Loans (b) : Construction (800) (1,242) (2,042) 9,323 7,778 17,101 Commercial real estate, other 4,083 21,515 25,598 30,089 24,985 55,074 Commercial and industrial 1,744 14,416 16,160 28,493 9,621 38,114 Premium finance 2,450 7,529 9,979 4,474 892 5,366 Leases (646) 5,213 4,567 (3,577) 11,788 8,211 Residential real estate 2,953 417 3,370 4,387 1,409 5,796 Home equity lines of credit 1,098 2,594 3,692 5,132 1,290 6,422 Consumer, indirect 6,170 479 6,649 6,071 4,163 10,234 Consumer, direct 534 (567) (33) 818 1,139 1,957 Total loan income 17,586 50,354 67,940 85,210 63,065 148,275 Total interest income 25,004 56,174 81,178 105,936 63,957 169,893 INTEREST EXPENSE: Deposits: Savings accounts 584 (75) 509 1,049 (11) 1,038 Government deposit accounts (10,457) 836 (9,621) 10,054 26 10,080 Interest-bearing demand accounts (448) (65) (513) 1,026 (4) 1,022 Money market accounts (12,239) 791 (11,448) 8,881 90 8,971 Retail certificates of deposit (37,267) (12,044) (49,311) 19,297 2,923 22,220 Brokered deposit 122 82 204 3,338 16,307 19,645 Total deposit cost (59,705) (10,475) (70,180) 43,645 19,331 62,976 Borrowed funds: Short-term borrowings 1,209 3,181 4,390 4,455 12,606 17,061 Long-term borrowings (3,590) (2,666) (6,256) 2,806 1,074 3,880 Total borrowed funds cost (2,381) 515 (1,866) 7,261 13,680 20,941 Total interest expense (62,086) (9,960) (72,046) 50,906 33,011 83,917 Net interest income $ (37,082) $ 46,214 $ 9,132 $ 55,030 $ 30,946 $ 85,976 49 (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 changes in each. (b) Interest income and yields are presented on a fully tax-equivalent basis, using a federal statutory corporate income tax rate of 21% for all periods presented. FTE net interest income increased $9.1 million, or 3%, for 2024 when compared to 2023, and net interest margin decreased 34 basis points to 4.21%. 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 2024 compared to 2023 was primarily driven by higher borrowings costs, which offset higher earning asset yields. Accretion income, net of amortization expense, from acquisitions was $25.2 million for 2024 and 2023, which added 30 and 34 basis points to net interest margin for 2024 and 2023, respectively. During 2023, FTE net interest income increased $85.9 million, or 34%, when compared to 2022, and net interest margin increased 59 basis points to 4.55%. The increase in net interest income was driven by increase in market interest rates, additional net interest income from the Limestone Merger, and improved investment yields. Accretion income, net of amortization expense, from acquisitions was $25.2 million for 2023, which added 34 basis points to net interest margin for 2023 and was primarily driven by the Limestone Merger. Detailed information regarding changes in the Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this discussion. 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 discussion under the caption “Interest Rate Sensitivity and Liquidity.” Provision for Credit Losses The following table details Peoples’ provision for credit losses recognized for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Provision for (Recovery of) other credit losses $ 23,524 $ 14,236 $ (4,560) Provision for checking account overdrafts 1,263 938 1,050 Provision for (Recovery of) credit losses $ 24,787 $ 15,174 $ (3,510) As a percent of average total loans 0.40 % 0.27 % (0.08) % The provision for credit losses represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s formal quarterly analysis of the loan portfolio and procedural methodology that estimates the amount of probable credit losses. The CECL methodology utilized by Peoples relies on economic forecasts, as well as other key assumptions including prepayments, probability of default and loss given default. For 2024, the increase in the provision for credit losses compared to 2023 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. During 2023, the provision for credit losses was driven by (i) the addition of the provision for the loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers. During 2022, the recovery of credit losses was driven by improvements in economic forecasts, coupled with loan pay-offs. Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this discussion under the caption “Allowance for Credit Losses.” Net Losses Included in Total Non-Interest Income Net losses include and losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income. The following table details the net losses for the years ended December 31 recognized by Peoples: (Dollars in thousands) 2024 2023 2022 Net loss on investment securities $ (416) $ (3,700) $ (61) Net loss on asset disposals and other transactions: Net loss on other assets $ (1,928) $ (1,143) $ (326) Net loss on OREO (1,230) (1,623) (139) Net loss on other transactions (152) (71) (151) Net loss on asset disposals and other transactions $ (3,310) $ (2,837) $ (616) 50 For 2024, Peoples’ net loss on investment securities was primarily due to the loss recorded on a contingent call of a security in the second quarter of 2024. During the first quarter of 2023, Peoples executed sales of $96.7 million of lower yielding available-for-sale investment securities for a pre-tax loss of $2.0 million. Proceeds from sales were used to pay down overnight borrowings. During the fourth quarter of 2023, Peoples executed the sales of an additional $36.5 million of lower yielding available-for-sale investment securities for a pre-tax loss of $1.7 million. Proceeds from the sales were used to purchase higher yielding agency investment securities. The loss on the sales of these available-for-sale investment securities had a nominal impact on tangible book value as such loss was previously reflected in capital through accumulated other comprehensive loss. The realized losses recognized in 2023 due to the first quarter transactions were earned back within the 2023 fiscal year, and the realized losses recognized due to the fourth quarter transactions were earned back by December 31, 2024. Peoples’ net loss on asset disposals and other transactions during 2024 was primarily driven by $1.8 million of net losses on repossessed assets and a $1.2 million write-down of an OREO property. During 2023, Peoples’ net loss on asset disposals was primarily driven by a $1.6 million write-down of an OREO property and net losses on repossessed assets. During 2022, net losses on asset disposals and other transactions were primarily driven by losses on repossessed assets. Total Non-Interest Income Excluding Net Gains and Losses Peoples generates total non-interest income excluding net gains and losses from four primary sources: electronic banking income (“e-banking”); trust and investment income; insurance income; and deposit account service charges. Peoples continues to focus on revenue growth from non-interest income sources in order to maintain a diversified revenue stream through greater reliance on total non-interest income excluding net gains and losses. Total non-interest income excluding net gains and losses accounted for 22.8% of Peoples’ total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) in 2024, compared to 21.7% in 2023 and 23.9% in 2022. The increase in Peoples’ total non-interest income excluding net gains and losses, as a percent of total revenue during 2024 compared to 2023, was largely due to the growth in lease income, primarily attributable to operating lease income, and growth in trust and investment income, and insurance income. E-banking income comprised the largest portion of Peoples’ total non-interest income excluding net gains and losses, for 2024. The following table shows Peoples’ e-banking income for the years ended December 31: (Dollars in thousands) 2024 2023 2022 E-banking income $ 25,142 $ 25,210 $ 21,094 Peoples’ 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 clients. Revenue is derived largely from ATM and debit cards, as other services are mainly provided at no charge to the customers. The amount of e-banking income is largely dependent on the timing and volume of customer activity. For 2024, e-banking income was relatively flat when compared to 2023. For 2023 compared to 2022, e-banking income increased 20%, primarily due to additional customers from the Limestone Merger as well as organic growth. In 2024, Peoples’ customers used their debit cards to complete $2.0 billion of transactions, up from $1.9 billion in 2023 and $1.7 billion in 2022. Peoples’ fiduciary and brokerage revenues continue to be based primarily upon the value of assets under administration and management. The following table details Peoples’ trust and investment income for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Fiduciary $ 8,355 $ 7,537 $ 7,508 Brokerage 8,017 6,865 6,343 Employee benefit plan fees 3,141 2,758 2,540 Trust and investment income $ 19,513 $ 17,160 $ 16,391 For 2024, trust and investment income increased primarily due to increases in fiduciary and brokerage income, primarily reflecting an increase in assets under management and market performance. For 2023, trust and investment increased compared to 51 2022 due to increases in brokerage income, as Peoples added new accounts and the underlying market values of assets under administration and management grew, and employee benefit plan fees. The following table details Peoples’ assets under administration and management at December 31: (Dollars in thousands) 2024 2023 2022 Trust $ 2,061,267 $ 2,021,249 $ 1,764,639 Brokerage 1,614,189 1,473,814 1,211,868 Total $ 3,675,456 $ 3,495,063 $ 2,976,507 Annual average $ 3,617,882 $ 3,236,449 $ 2,965,985 The increase in total assets under administration and management at December 31, 2024, compared to December 31, 2023, was primarily due to market value increases in 2024. During 2023, Peoples’ assets under administration and management increased primarily driven by market performance, new account activity, and an acquisition of an independent financial advisor in January of 2023 which increased brokerage assets by $30 million. The following table details Peoples’ insurance income for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Property and casualty insurance commissions $ 14,423 $ 13,852 $ 11,986 Performance-based commissions 2,218 1,634 1,424 Life and health insurance commissions 2,760 2,530 2,317 Insurance income $ 19,401 $ 18,016 $ 15,727 Insurance income for 2024 increased compared to 2023, primarily driven by higher commissions and market increases for premiums. Peoples Insurance increased its clientele throughout 2024, which drove the increases in commissions. Insurance income for 2023 increased compared to 2022, primarily due to increases in (i) property and casualty insurance commissions, (ii) performance-based commissions and (iii) life and health insurance commissions. Deposit account service charges are based on the costs associated with services provided by Peoples. The following table details deposit account service charges for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Overdraft and non-sufficient funds fees $ 9,412 $ 9,016 $ 8,324 Account maintenance fees 6,939 6,425 5,323 Other fees and charges 1,233 1,241 936 Deposit account service charges $ 17,584 $ 16,682 $ 14,583 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 these fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples’ markets by competitors. Deposit account service charges in 2024 increased compared to 2023 due to an increase in customer activity. Deposit account service charges in 2023 increased compared to 2022 due to increased customers added in conjunction with the Limestone Merger, as well as organic growth. The following table details the other items included within Peoples’ total non-interest income for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Lease income $ 10,408 $ 7,844 $ 4,267 Bank owned life insurance income 4,216 4,151 2,624 Mortgage banking income 1,788 1,078 1,397 Other non-interest income 5,040 3,809 3,430 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, (iii) fees received for referrals, (iv) gains and losses recognized on the sales of residual assets, (v) syndication income, and (vi) operating leases. The increase in lease income for 2024 when compared to 2023 was driven primarily by an increase in operating lease income from Vantage. The 2023 increase in lease income when compared to 2022 was due month-to-month lease income from Vantage. Bank owned life insurance income (“BOLI”) for 2024 remained flat when compared to 2023. BOLI income for 2023 increased when compared to 2022 due to a $0.4 million death benefit related to the cash surrender value of the underlying policy in the fourth 52 quarter of 2023, and additional income from policies acquired in the Limestone Merger. Peoples purchased no additional BOLI policies during 2023 or 2024. Mortgage banking income is comprised mostly of net gains from the origination and sale of long-term, fixed-rate real estate loans in the secondary market, as well as servicing income for sold loans. 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 increased for 2024 when compared to 2023 primarily driven by higher production. Mortgage banking income declined for 2023 when compared to 2022 due to lower volumes of new loan originations as a result of the rising market interest rate environment. In 2024, Peoples sold approximately $24.1 million of loans to the secondary market with servicing retained and sold approximately $40.7 million in loans with servicing released, compared to approximately $2.7 million and $30.7 million, respectively, in 2023. Peoples sold $18.5 million of loans to the secondary market with servicing retained and $31.1 million of loans with servicing released during 2022. The volume of sales has a direct impact on the amount of mortgage banking income. For 2024, other non-interest income increased when compared to 2023 due primarily to increased swap fee income which is driven by customer demand. Other non-interest income increased during 2023, compared to 2022, primarily due to swap fee income and other operating income. Total Non-Interest Expense Salaries and employee benefit costs remain Peoples’ largest non-interest expense, accounting for over half of total non-interest expense. The following table details Peoples’ salaries and employee benefit costs for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Base salaries and wages $ 98,743 $ 95,604 $ 74,593 Sales-based and incentive compensation 22,445 23,085 18,732 Employee benefit costs 17,956 16,249 13,654 Employee stock-based compensation 6,973 5,476 3,819 Deferred personnel costs (4,978) (4,517) (4,975) Payroll taxes and other employment costs 8,902 8,134 6,867 Salaries and employee benefit costs $ 150,041 $ 144,031 $ 112,690 Full-time equivalent employees: Actual at end of the period 1,479 1,478 1,267 Average during the period 1,491 1,411 1,245 Base salaries and wages increased for 2024 compared to 2023, driven by an additional four months of salary expense associated with employees added from the Limestone Merger, coupled with annual merit increases. Base salaries and wages increased in 2023 compared to 2022, driven by the additional salaries associated with the Limestone Merger, including $5.8 million in acquisition-related salary and employee benefit expenses related to the Limestone Merger in 2023. Base salaries and wages were impacted by merit increases, as well as movement towards a $15 per hour minimum wage throughout Peoples’ organization. The $15 per hour minimum was phased in and fully implemented by January of 2023. The decrease in sales-based and incentive compensation for 2024 compared to 2023 was primarily due to the overall company performance measures used in calculating incentive awards. Sales-based and incentive compensation increased in 2023 compared to 2022, due primarily to the overall company performance measures used in calculating incentive awards and $1.3 million in Vantage-related sales-based and incentive compensation. Peoples’ sales-based and incentive compensation plans are designed to grow core earnings while managing risk, while not encouraging unnecessary and excessive risk-taking that could threaten the value of Peoples. The sales-based and incentive compensation plans are designed to reward employees for appropriate behaviors and include provisions addressing inappropriate practices with respect to Peoples and its customers, including clawbacks for executives. The increase in employee benefit costs for 2024 compared to 2023 was due to increased medical and 401(k) costs reflecting a full year of expenses in 2024 for the additional employees added in the Limestone Merger. Employee benefit costs in 2023 increased compared to 2022 due to higher medical and 401(k) costs from additional employees added in the Limestone Merger. Employee stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years, with an adjustment made at the vesting date to reverse expense for forfeited awards. The majority of Peoples’ stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter and based upon Peoples achieving certain performance goals during the prior year. During the years presented in the table above, Peoples granted restricted common shares to officers and key employees with performance-based vesting periods and time-based vesting periods, generally with a three-year cliff vesting. Employee stock-based compensation for 2024 increased when compared to 2023 due to additional employees primarily as a result of the full year impact from the Limestone Merger. Employee stock-based compensation increased for 2023 compared to 2022 due to additional employees primarily as a result of the Limestone Merger, as well as a full year with Vantage employees. 53 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 in 2024 increased compared to 2023, primarily due to an increase in business loan origination volume. Lower deferred personnel costs in 2023 compared to 2022 were primarily due to an decrease in loan origination volume. Additional information regarding Peoples’ loan activity can be found later in this discussion under the caption “Loans” within “FINANCIAL CONDITION.” For 2024, payroll taxes and other employment costs increased compared to 2023, primarily due to the employees added from the Limestone Merger coupled with annual merit increases. Payroll taxes and other employee costs increased during 2023 compared to 2022, primarily due to the employees added from the Limestone Merger. Peoples’ net occupancy and equipment expense for the years ended December 31 was comprised of the following: (Dollars in thousands) 2024 2023 2022 Depreciation expense $ 8,587 $ 7,724 $ 7,015 Repairs and maintenance costs 6,923 6,037 5,323 Net rent expense 4,177 2,780 2,974 Property taxes, utilities and other costs 4,464 4,827 4,204 Net occupancy and equipment expense $ 24,151 $ 21,368 $ 19,516 For 2024, net occupancy and equipment expense increased when compared to 2023 due to the full year impact of the Limestone Merger and a prior period one-time benefit to rent expense in 2023. Net occupancy and equipment expense grew during 2023 when compared to 2022 due to the additional locations and equipment added in the Limestone Merger. The following table details the other items included within Peoples’ total non-interest expense for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Data processing and software expense $ 25,221 $ 21,607 $ 14,241 Professional fees 12,109 17,041 12,094 Amortization of other intangible assets 11,161 11,222 7,763 E-banking expense 7,548 7,150 9,231 FDIC insurance expense 4,929 4,785 3,702 Other loan expenses 4,147 2,859 2,735 Marketing expense 3,914 5,017 3,728 Franchise tax expense 3,222 3,540 3,487 Communication expense 3,145 2,834 2,484 Operating lease expense 3,539 1,687 — Travel and entertainment expense 2,656 2,401 1,400 Other non-interest expense $ 18,033 $ 20,945 $ 14,076 Data processing and software expense includes software support, maintenance and depreciation expense. Data processing and software expense for 2024 increased relative to 2023, driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples’ organization as a result of the Limestone Merger. During 2023, data processing and software expense grew when compared to 2022 was driven by (i) software upgrades, (ii) implementation of new systems, (iii) growth from the Limestone Merger, and (iv) $1.9 million in acquisition-related expenses related to the Limestone Merger. Professional fees decreased for 2024 when compared to 2023, primarily driven by a $6.0 million decrease in acquisition-related expenses, due to expenses related to the Limestone Merger in 2023. Professional fees during 2023 increased when compared 2022, primarily driven by a $3.7 million increase in acquisition-related expenses, due to increased expenses related to the Limestone Merger in 2023. Amortization of other intangible assets remained relatively flat for 2024 when compared to 2023. During 2023, amortization of other intangible assets increased when compared to 2022 due to the increased intangible assets recognized as a result of the Limestone Merger. Peoples’ e-banking expense is comprised of costs associated with debit and ATM cards, as well as Internet and mobile banking costs. E-banking expense increased for 2024 when compared to 2023 due to increased processing fees. E-banking expense decreased for 2023 when compared to 2022 due to decreased costs for Peoples’ online banking platform. 54 Marketing expense, which includes advertising, donations, marketing campaigns, and other public relations costs, for 2024 decreased when compared to 2023, primarily driven by decreased advertising expense. Marketing expense increased for 2023 compared to 2022, which was driven by increased marketing related to the Limestone Merger, an increase in donations, and a full year of expenses from Vantage. FDIC insurance premiums for 2024 increased when compared to 2023 due to organic growth. FDIC insurance expense increased during 2023 compared to 2022 due to organic and acquisitive growth, in addition to an increase in rates assessed by the FDIC. The FDIC quarterly assessment rate is applied to average total assets less average tangible equity, and is based on the leverage ratio, net income before taxes, nonperforming loans as a percent of total assets, OREO, loan mix and asset growth. Additional information regarding Peoples’ FDIC insurance assessments may be found in “ITEM 1 BUSINESS” of this Form 10-K in the section captioned “Supervision and Regulation.” Peoples is subject to state franchise taxes, which are based largely on Peoples’ equity at year-end, 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. Franchise tax expense decreased for 2024 when compared to 2023 primarily driven by the Ohio FIT, which decreased due to lower apportionment in the state. The Ohio FIT is based on the total equity capital in proportion to the taxpayer’s gross receipts in Ohio. Franchise tax expense was relatively flat in 2023 compared to 2022. Other loan expenses during 2024 increased when compared to 2023 primarily due to increases in collection and underwriting costs. Other loans expenses increased in 2023 compared to 2022, primarily due to Limestone-related expenses and increases in business loan expenses and credit bureau expenses. Communications expense increased during 2024 when compared to 2023 and increased during 2023 when compared to 2022, in each case due to upgraded networking to certain branches (including new branches acquired in acquisitions and mergers) and increased costs compared to the prior period among certain vendors that provide communication services. Other non-interest expense for 2024 decreased when compared to 2023 due to higher acquisition costs and pension expense in the prior year of $2.5 million and $2.1 million, respectively, both of which were partially offset by an increase in miscellaneous expenses of $1.9 million, which was primarily attributable to one-time corporate expenses. Other non-interest expense increased for 2023 when compared to 2022, primarily due to $2.8 million in additional acquisition-related expenses related to the Limestone Merger and a $2.4 million settlement charge in relation to the termination of the pension plan. Income Tax Expense A key driver for the amount of income tax expense or benefit recognized by Peoples each year is the amount of pre-tax income. In addition to the expense recognized, Peoples receives tax benefits from tax-exempt investments and loans, BOLI income, common share awards that settled or vested during the year, and investments in tax credit funds, which reduce Peoples’ effective tax rate. A reconciliation of Peoples’ recorded income tax expense/benefit and effective tax rate to the statutory tax rate can be found in “Note 13 Income Taxes.” For the full year of 2024, income tax expense totaled $32.3 million, compared to $31.8 million in 2023, and $27.3 million in 2022, and the effective tax rate for 2024 was 21.6%, compared to 21.9% for 2023, and 21.3% for 2022. Income tax was positively impacted by a $1.1 million one-time benefit recognized in 2024 related to a prior year amended return. Income tax expense increased during 2023 when compared to 2022, which was driven by higher pre-tax income. Peoples also recorded a tax benefit of $48,000 in 2024, $128,000 in 2023, and $5,000 in 2022 related to common share awards that settled or vested during the year, with the substantial majority recorded in the first quarter of each year. 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. PPNR excludes income tax 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. PPNR represents a non-US GAAP financial measure since it excludes the provision for credit losses and all gains and losses included in earnings. 55 The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of income before income taxes reported in Peoples’ Consolidated Financial Statements for the periods presented: (Dollars in thousands) 2024 2023 2022 Pre-Provision Net Revenue: Income before income taxes $ 149,464 $ 145,126 $ 128,641 Add: provision for credit losses 24,787 15,174 — Add: net loss on OREO 1,230 1,623 138 Add: net loss on investment securities 416 3,700 61 Add: net loss on other assets 1,928 1,143 326 Add: net loss on other transactions 152 71 151 Less: recovery of credit losses — — 3,510 Pre-provision net revenue $ 177,977 $ 166,837 $ 125,807 PPNR increased in 2024 when compared to 2023 mostly due to increased net interest income and increased non-interest income driven by higher rates and the additional four months of income from the Limestone Merger. During 2023, PPNR grew when compared to 2022 mostly due to (i) the impact of the Limestone Merger in improving net interest income, (ii) increases in market interest rates, and (iii) higher non-interest income. 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 a non-US GAAP financial measure since it excludes the impact of all COVID-19-related expenses, pension settlement charges, and acquisition-related expenses. The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total non-interest expense reported in Peoples’ Consolidated Financial Statements for the years presented: (Dollars in thousands) 2024 2023 2022 Core non-interest expense: Total non-interest expense $ 273,816 $ 266,487 $ 207,147 Less: COVID-19-related expenses — — 134 Less: pension settlement charges — 2,424 185 Less: acquisition-related expenses 169 16,970 3,016 Add: COVID-19 Employee Retention Credit — 548 — Core non-interest expense $ 273,647 $ 247,641 $ 203,812 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 financial measure is non-US GAAP since it excludes amortization of other intangible assets and all gains and/or 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 of total non-interest income and total non-interest expense reported in Peoples’ Consolidated Financial Statements for the years presented: 56 (Dollars in thousands) 2024 2023 2022 Efficiency ratio: Total non-interest expense $ 273,816 $ 266,487 $ 207,147 Less: amortization of other intangible assets 11,161 11,222 7,763 Adjusted total non-interest expense 262,655 255,265 199,384 Total non-interest income 99,366 87,413 78,836 Less: net loss on investment securities (416) (3,700) (61) Less: net (loss) gain on asset disposals and other transactions (3,310) (2,837) (616) Total non-interest income excluding net gains and losses 103,092 93,950 79,513 Net interest income 348,701 339,374 253,442 Add: fully-tax-equivalent adjustment (a) 1,308 1,703 1,644 Net interest income on a fully-tax equivalent basis 350,009 341,077 255,086 Adjusted revenue $ 453,101 $ 435,027 $ 334,599 Efficiency ratio 57.97 % 58.68 % 59.59 % Efficiency ratio adjusted for non-core items: Core non-interest expense $ 273,647 $ 247,641 $ 203,812 Less: amortization of other intangible assets 11,161 11,222 7,763 Adjusted core non-interest expense 262,486 236,419 196,049 Core non-interest income excluding net gains and losses 103,092 93,950 79,513 Net interest income on a fully-tax-equivalent basis 350,009 341,077 255,086 Adjusted core revenue $ 453,101 $ 435,027 $ 334,599 Efficiency ratio adjusted for non-core items 57.93 % 54.35 % 58.59 % (a) Based on 21% statutory federal corporate income tax rate. The efficiency ratio for 2024 improved when compared to 2023 due to increased revenue. The increase in the efficiency ratio, adjusted for non-core items for 2024 when compared to 2023 was due to higher non-interest expense. The efficiency ratio and the efficiency ratio adjusted for non-core items for 2023 improved when compared to 2022, due to higher net interest income driven by the Limestone Merger, increases in market interest rates, and higher non-interest income. Managing expenses has been a major focus over recent years; however, during this time Peoples has continued to make meaningful investments in its infrastructure and systems. Peoples was primarily impacted in 2024 by the competition for deposits impacting funding costs; whereas, 2023 and 2022 net interest income was positively impacted by rising market interest rate environment. Return on Average Assets Adjusted for Non-Core Items (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 ratio adjusted for non-core items represents a non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, and pension settlement charges included in net income. 57 The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of net income reported in Peoples’ Consolidated Financial Statements for the years presented: (Dollars in thousands) 2024 2023 2022 Net income adjusted for non-core items: Net income $ 117,205 $ 113,363 $ 101,292 Add: net loss on investment securities 416 3,700 61 Less: tax effect of net loss on investment securities (a) 87 777 13 Add: net loss on asset disposals and other transactions 3,310 2,837 616 Less: tax effect of net loss on asset disposals and other transactions (a) 695 596 129 Add: acquisition-related expenses 169 16,970 3,016 Less: tax effect of acquisition-related expenses (a) 35 3,564 633 Add: pension settlement charges — 2,424 185 Less: tax effect of pension settlement charges (a) — 509 39 Add: COVID-19-related expenses — — 134 Less: tax effect of COVID-19-related expenses (a) — — 28 Net income adjusted for non-core items (after tax) $ 120,283 $ 133,848 $ 104,462 Return on average assets: Net income $ 117,205 $ 113,363 $ 101,292 Total average assets 9,122,843 8,298,777 7,094,707 Return on average assets 1.28 % 1.37 % 1.43 % Return on average assets adjusted for non-core items: Net income adjusted for non-core items $ 120,283 $ 133,848 $ 104,462 Total average assets 9,122,843 8,298,777 7,094,707 Return on average assets adjusted for non-core items 1.32 % 1.61 % 1.47 % (a) Based on a 21% statutory federal corporate income tax rate. The decrease in the return on average assets for 2024 compared to 2023 was primarily driven by the assets acquired in the Limestone Merger. The decrease in return on average assets adjusted for non-core items for 2024 compared to 2023 was primarily driven by higher non-interest expense, and the assets acquired in the Limestone Merger. The decrease in the return on average assets for 2023 compared to 2022 was attributable to a greater impact from non-core items, primarily due to (i) an increase in net acquisition-related expenses as a result of the Limestone Merger, (ii) higher net losses on investment securities and asset disposals and other transactions, and (iii) pension settlement charges of $2.4 million in relation to the termination of the pension plan. 58 Return on Average Tangible Equity (non-US GAAP) The return on average tangible equity ratio is a key financial measure used to monitor performance. The return on tangible equity is calculated as net income (less after-tax impact of amortization of other intangible assets) divided by tangible equity. This measure is non-US GAAP since it excludes amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders’ equity. The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total average stockholders’ equity and the return on average stockholders’ equity ratios reported in Peoples’ Consolidated Financial Statements for the years presented: (Dollars in thousands) 2024 2023 2022 Net income excluding amortization of other intangible assets: Net income $ 117,205 $ 113,363 $ 101,292 Add: amortization of other intangible assets 11,161 11,222 7,763 Less: tax effect of amortization of other intangible assets (a) 2,344 2,357 1,630 Net income excluding amortization of other intangible assets 126,022 122,228 107,425 Average tangible equity: Total average stockholders’ equity $ 1,083,792 $ 940,797 $ 797,984 Less: average goodwill and other intangible assets 406,619 384,172 322,639 Average tangible equity $ 677,173 $ 556,625 $ 475,345 Return on average stockholders’ equity ratio: Net income $ 117,205 $ 113,363 $ 101,292 Average stockholders’ equity $ 1,083,792 $ 940,797 $ 797,984 Return on average stockholders’ equity 10.81 % 12.05 % 12.69 % Return on average tangible equity ratio: Net income excluding amortization of other intangible assets $ 126,022 $ 122,228 $ 107,425 Average tangible equity $ 677,173 $ 556,625 $ 475,345 Return on average tangible equity 18.61 % 21.96 % 22.60 % (a) Based on a 21% statutory federal corporate income tax rate. The return on total average stockholders’ equity and average tangible equity ratios decreased in 2024 when compared to 2023, due to higher average stockholders’ equity driven by the full year impact of the Limestone Merger. Return on total average stockholders’ equity and average tangible equity ratios were lower in 2023 relative to 2022 due to (i) the issuance of 6.8 million common shares as consideration in the Limestone Merger, (ii) an increase in acquisition-related expenses, and (iii) an increase in the provision for credit losses due to the initial provision for the non-purchase credit deteriorated (“PCD”) loans acquired from Limestone, partially offset by an increase in total net interest income driven by the recent increases in market interest rates and additional net interest income resulting from the Limestone Merger. At the same time, average tangible equity for 2023 was negatively impacted by the Limestone Merger, for which Peoples recorded additional goodwill and other intangible assets. FINANCIAL CONDITION Cash and Cash Equivalents Peoples considers cash and cash equivalents to consist of federal funds sold, cash and balances due from banks, interest-bearing balances in other institutions and other short-term investments that are readily liquid. The amount of cash and cash equivalents fluctuates on a daily basis due to customer activity and Peoples’ liquidity needs. At December 31, 2024, excess cash reserves at the FRB were $104.7 million, 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 deposits, loan balances and unpledged securities. In 2024, Peoples’ total cash and cash equivalents decreased $209.1 million, due to cash used in investing activities of $344.3 million and financing activities of $7.9 million, which were partially offset by cash provided by operating activities of $143.2 million. Peoples’ investing activities reflected a net increase of $199.2 million in loans held for investment and $584.8 million in purchases of available-for-sale investment securities and held-to-maturity investment securities, which were partially offset by $446.6 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment securities. Financing activities included a net increase of $437.7 million in deposits, a decrease of $457.0 million in short-term borrowings, a net increase of $20.6 million in long-term borrowings, as well as $55.8 million of cash dividends paid. 59 In 2023, Peoples’ total cash and cash equivalents increased $272.7 million, due to cash provided by financing activities of $262.0 million and cash provided by operating activities of $143.6 million, partially offset by cash used in investing activities of $132.9 million. Peoples’ investing activities reflected a net increase of $356.1 million in loans held for investment and $282.8 million in purchases of available-for-sale investment securities and held-to-maturity investment securities, which were more than offset by $434.1 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment securities. Financing activities included a net increase of $201.4 million in deposits, an increase of $41.0 million in short-term borrowings, a net increase of $74.9 million in long-term borrowings, as well as $51.8 million of cash dividends paid. 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 at December 31: (Dollars in thousands) Weighted average yield 2024 2023 2022 Available-for-sale securities, at fair value: Obligations of: U.S. Treasury and government agencies 6.27 % $ 15,196 $ 30,296 $ 152,422 U.S. government sponsored agencies 3.45 % 209,083 118,607 88,115 States and political subdivisions 2.57 % 196,301 213,296 225,882 Residential mortgage-backed securities 2.48 % 601,802 628,924 604,653 Commercial mortgage-backed securities 2.09 % 55,065 51,234 50,049 Bank-issued trust preferred securities 4.42 % 6,108 5,965 10,278 Total fair value $ 1,083,555 $ 1,048,322 $ 1,131,399 Total amortized cost $ 1,229,382 $ 1,184,288 $ 1,300,719 Net unrealized loss $ (145,827) $ (135,966) $ (169,320) Held-to-maturity securities, at amortized cost: Obligations of: U.S. government sponsored agencies 4.83 % $ 233,302 $ 188,475 $ 132,366 States and political subdivisions (a) 2.24 % 142,691 144,258 145,022 Residential mortgage-backed securities 4.21 % 300,290 248,559 176,215 Commercial mortgage-backed securities 2.50 % 98,754 102,365 106,609 Total amortized cost $ 775,037 $ 683,657 $ 560,212 Other investment securities $ 60,132 $ 63,421 $ 51,609 Total investment securities: Amortized cost $ 2,064,551 $ 1,931,366 $ 1,912,540 Carrying value $ 1,918,724 $ 1,795,400 $ 1,743,220 (a) A mortized cost is presented net of the allowance for credit losses of $237 at December 31, 2024, $238 at December 31, 2023 and $241 at December 31, 2022. At December 31, 2024, Peoples’ investment securities represented approximately 20.7% of total assets, compared to 19.6% at December 31, 2023. For 2024, total investment securities increased compared to the prior year, largely due to purchases of higher yielding, longer duration securities designated as held-to-maturity. During 2023, total investment securities increased compared to the prior year, largely due to purchases of held-to-maturity securities, partially offset by available-for-sale securities sold, both of which were part of portfolio restructurings throughout 2023. During the first quarter of 2023, Peoples executed the sales of $96.7 million of its lower yielding available-for-sale investment securities for an after-tax loss of $1.6 million. Proceeds from the sales were used to pay down overnight borrowings. During the fourth quarter of 2023, Peoples executed the sales of an additional $36.5 million of its 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. Peoples designates certain securities as “held-to-maturity” at the time of their purchase if management determines Peoples would have the intent and ability to hold the purchased securities until maturity. The unrealized gain or loss related to held-to-maturity investment securities does not directly impact total stockholders’ equity, in contrast to the impact from the available-for-sale investment securities portfolio. Additional information regarding Peoples’ investment portfolio can be found in “Note 3 Investment Securities.” 60 Loans The following table provides information regarding outstanding loan balances at or for the year ended December 31: (Dollars in thousands) 2024 2023 2022 Originated loans: Construction $ 271,975 $ 279,335 $ 212,869 Commercial real estate, other 1,310,127 1,209,204 919,531 Commercial real estate 1,582,102 1,488,539 1,132,400 Commercial and industrial 1,162,777 938,659 835,178 Premium finance 269,435 203,177 159,197 Leases 382,074 357,217 226,438 Residential real estate 448,884 418,570 384,262 Home equity lines of credit 182,831 148,155 132,093 Consumer, indirect 669,857 666,472 629,426 Consumer, direct 101,062 112,292 98,706 Consumer 770,919 778,764 728,132 Deposit account overdrafts 1,253 986 722 Total originated loans $ 4,800,275 $ 4,334,067 $ 3,598,422 Acquired loans: Construction $ 56,413 $ 84,684 $ 34,072 Commercial real estate, other 845,886 987,753 503,987 Commercial real estate 902,299 1,072,437 538,059 Commercial and industrial 184,868 246,327 57,456 Leases 24,524 56,843 118,693 Residential real estate 386,217 372,525 339,098 Home equity lines of credit 49,830 60,520 45,765 Consumer, direct 9,990 16,477 9,657 Total acquired loans (a) $ 1,557,728 $ 1,825,129 $ 1,108,728 Total loans $ 6,358,003 $ 6,159,196 $ 4,707,150 Average total loans 6,238,070 5,590,453 4,574,237 Average allowance for credit losses (64,491) (57,391) (55,233) Average loans, net of average allowance for credit losses $ 6,173,579 $ 5,533,062 $ 4,519,004 Percent of loans to total loans: Construction 5.2 % 5.9 % 5.2 % Commercial real estate, other 33.9 % 35.7 % 30.2 % Commercial real estate 39.1 % 41.6 % 35.4 % Commercial and industrial 21.2 % 19.2 % 19.0 % Premium finance 4.2 % 3.3 % 3.4 % Leases 6.4 % 6.7 % 7.3 % Residential real estate 13.2 % 12.9 % 15.4 % Home equity lines of credit 3.7 % 3.4 % 3.8 % Consumer, indirect 10.5 % 10.8 % 13.4 % Consumer, direct 1.7 % 2.1 % 2.3 % Consumer 12.2 % 12.9 % 15.7 % Deposit account overdrafts (b) NM NM NM 61 (Dollars in thousands) 2024 2023 2022 Total percentage 100.0 % 100.0 % 100.0 % Residential real estate loans being serviced for others $ 346,189 $ 356,784 $ 392,364 (a) Includes all loans acquired, and related loan discount recorded as part of acquisition accounting, in 2012 and thereafter. Loans that were acquired and subsequently re-underwritten are reported as originated upon execution of such credit actions (for example, renewals, and increase in lines of credit). (b) NM represents “not meaningful.” As of December 31, 2024, total loans increased $198.8 million, compared to at December 31, 2023, due to organic growth in our commercial and industrial and premium finance portfolios which increased by $162.7 million and $66.3 million, respectively, and were partially offset by a decrease in commercial real estate loans of $40.9 million. As of December 31, 2023, total loans increased $1.5 billion, compared to at December 31, 2022, primarily due to the Limestone Merger. Excluding the loans acquired in the Limestone Merger, the period-end loan and lease balance increased $472.2 million, or 10%, driven by increases of $203.6 million in other commercial real estate loans, $78.2 million in commercial and industrial loans, $68.9 million in leases, $44.0 million in premium finance loans, $37.9 million in construction loans, and $37.0 million in indirect consumer loans, respectively. The following table details the maturities of Peoples’ loan portfolio at December 31, 2024: (Dollars in thousands) Due in One Year or Less Due in One to Five Years Due in Five to Fifteen Years Due After Fifteen Years Total % of Total Construction: Fixed $ 501 $ 45,689 $ 2,479 $ — $ 48,669 14.8 % Variable 109,208 132,288 34,032 4,191 279,719 85.2 % Total 109,709 177,977 36,511 4,191 328,388 100.0 % Commercial real estate, other: Fixed 62,449 488,238 350,590 49,542 950,819 44.1 % Variable 230,639 372,925 449,830 151,800 1,205,194 55.9 % Total 293,088 861,163 800,420 201,342 2,156,013 100.0 % Commercial and industrial: Fixed 218,277 180,409 90,564 384 489,634 36.3 % Variable 244,763 196,933 404,569 11,746 858,011 63.7 % Total 463,040 377,342 495,133 12,130 1,347,645 100.0 % Premium finance: Fixed 269,435 — — — 269,435 100.0 % Leases: Fixed 64,242 330,184 12,172 — 406,598 100.0 % Residential real estate: Fixed 107,007 16,464 138,165 325,673 587,309 70.3 % Variable 6,490 7,620 66,075 167,607 247,792 29.7 % Total 113,497 24,084 204,240 493,280 835,101 100.0 % Home equity lines of credit: Fixed 49 95 1,629 297 2,070 0.9 % Variable 4,934 34,952 185,257 5,448 230,591 99.1 % Total 4,983 35,047 186,886 5,745 232,661 100.0 % Consumer, indirect: Fixed 4,695 381,380 283,782 — 669,857 100.0 % Consumer, direct: Fixed 8,020 60,529 32,740 121 101,410 91.3 % Variable 3,778 4,254 1,511 99 9,642 8.7 % Total 11,798 64,783 34,251 220 111,052 100.0 % 62 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, continue to comprise the largest portion of Peoples’ loan portfolio. 63 The following table provides information regarding the largest concentrations of commercial real estate loans within the loan portfolio at December 31, 2024: (Dollars in thousands) Outstanding Balance Available Loan Commitments Total Exposure % of Total Exposure Construction: Apartment complexes $ 188,036 $ 223,982 $ 412,018 60.8 % Land development 36,214 15,458 51,672 7.6 % Residential property 30,573 19,693 50,266 7.4 % Land only 7,881 26,626 34,507 5.1 % Lodging and lodging related 10,313 13,916 24,229 3.6 % Assisted living facilities and nursing homes 6,567 16,972 23,539 3.5 % Warehouse facilities 331 16,315 16,646 2.5 % Student housing 14,288 712 15,000 2.2 % Other (a) 34,185 15,198 49,383 7.3 % Construction $ 328,388 $ 348,872 $ 677,260 100.0 % Commercial real estate, other: Apartment complexes 365,215 2,352 367,567 16.5 % Retail facilities: Owner occupied 41,225 1,385 42,610 1.9 % Non-owner occupied 207,119 500 207,619 9.3 % Total retail 248,344 1,885 250,229 11.2 % Light industrial facilities: Owner occupied 138,279 7,290 145,569 6.5 % Non-owner occupied 112,458 3,317 115,775 5.2 % Total light industrial facilities 250,737 10,607 261,344 11.7 % Office buildings and complexes: Owner occupied 75,417 2,454 77,871 3.5 % Non-owner occupied 118,030 2,954 120,984 5.4 % Total office buildings and complexes 193,447 5,408 198,855 8.9 % Lodging and lodging related: Owner occupied 30,407 — 30,407 1.4 % Non-owner occupied 121,443 1 121,444 5.5 % Total lodging and lodging related 151,850 1 151,851 6.9 % Assisted living facilities and nursing homes 119,687 855 120,542 5.4 % Warehouse facilities: Owner occupied 38,643 521 39,164 1.7 % Non-owner occupied 35,312 216 35,528 1.6 % Total warehouse facilities 73,955 737 74,692 3.3 % Restaurant/bar facilities: Owner occupied 39,737 — 39,737 1.8 % Non-owner occupied 31,057 — 31,057 1.4 % Total restaurant/bar facilities 70,794 — 70,794 3.2 % Healthcare: Owner occupied 40,109 127 40,236 1.8 % Non-owner occupied 15,241 583 15,824 0.7 % Total healthcare facilities 55,350 710 56,060 2.5 % Mixed commercial use facilities: Owner occupied 43,598 1,837 45,435 2.0 % Non-owner occupied 27,323 1,541 28,864 1.3 % Total mixed commercial use facilities 70,921 3,378 74,299 3.3 % Other (a) 555,713 45,093 600,806 27.1 % Commercial real estate, other $ 2,156,013 $ 71,026 $ 2,227,039 100.0 % (a) All other total exposures by industry are less than 2% of the Total Exposure. 64 Peoples’ commercial lending activities continue to focus on lending opportunities inside its primary and secondary market areas within Ohio, Kentucky, West Virginia, Virginia, Washington, D.C. and Maryland. In all other states, the aggregate outstanding balances of commercial loans in each state were less than 4% of total loans at both December 31, 2024 and December 31, 2023. Additional information regarding Peoples’ loan portfolio can be found in “Note 4 Loans and Leases, and Allowance for Credit Losses.” Allowance for Credit Losses The amount of the allowance for credit losses at the end of each period represents management’s estimate of expected credit losses from existing loans based upon its formal quarterly analysis of the loan portfolio described in the “Critical Accounting Policies” section of this discussion. While this process involves making allocations to specific loans and pools of loans, the entire allowance is available for all losses incurred within the loan portfolio. The following details management’s allocation of the allowance for credit losses at December 31: (Dollars in thousands) 2024 2023 2022 Construction $ 878 $ 699 $ 1,250 Commercial real estate 16,256 20,915 17,710 Commercial and industrial 13,283 10,490 8,229 Premium finance 662 484 344 Leases 12,893 10,850 8,495 Residential real estate 6,491 5,937 6,357 Home equity lines of credit 1,792 1,588 1,693 Consumer, indirect 8,576 8,590 7,448 Consumer, direct 2,396 2,343 1,575 Deposit account overdrafts 121 115 61 Allowance for credit losses $ 63,348 $ 62,011 $ 53,162 As a percent of total loans 1.00 % 1.01 % 1.13 % The increase in the allowance balance at December 31, 2024 when compared to at December 31, 2023 was driven by an increase in reserves for individually analyzed loans and leases, as well as loan growth. The increase in the allowance balance at December 31, 2023 when compared to at December 31, 2022 was driven by (i) the additional allowance related to the loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers. Additional information regarding Peoples’ allowance for credit losses can be found in “Note 1 Summary of Significant Accounting Policies” and “Note 4 Loans and Leases, and Allowance for Credit Losses.” The following table summarizes the changes in the allowance for credit losses for the years ended December 31: (Dollars in thousands) 2024 2023 2022 Allowance for credit losses, January 1 $ 62,011 $ 53,162 $ 63,967 Gross charge-offs: Construction — 9 16 Commercial real estate, other 431 614 489 Commercial and industrial 668 851 943 Premium finance 209 122 124 Leases 15,106 3,997 2,585 Residential real estate 288 170 668 Home equity lines of credit 11 110 88 Consumer, indirect 6,179 4,030 2,233 Consumer, direct 678 416 363 Consumer 6,857 4,446 2,596 Deposit account overdrafts 1,542 1,161 1,246 Total gross charge-offs 25,112 11,480 8,755 Recoveries: Commercial real estate, other 127 965 297 Commercial and industrial 58 552 49 65 Premium finance 28 24 13 Leases 528 362 420 Residential real estate 254 192 84 Home equity lines of credit 7 1 45 Consumer, indirect 552 487 328 Consumer, direct 50 73 47 Consumer 602 560 375 Deposit account overdrafts 285 277 200 Total recoveries 1,889 2,933 1,483 Net charge-offs (recoveries): Construction — 9 16 Commercial real estate, other 304 (351) 192 Commercial and industrial 610 299 894 Premium finance 181 98 111 Leases 14,578 3,635 2,165 Residential real estate 34 (22) 584 Home equity lines of credit 4 109 43 Consumer, indirect 5,627 3,543 1,905 Consumer, direct 628 343 316 Consumer 6,255 3,886 2,221 Deposit account overdrafts 1,257 884 1,046 Total net charge-offs $ 23,223 $ 8,547 $ 7,272 Provision for (recovery of) credit losses, December 31 (a) 24,560 15,345 (2,904) Initial allowance for PCD assets $ — $ 2,051 $ (629) Allowance for credit losses, December 31 $ 63,348 $ 62,011 $ 53,162 Net charge-offs (recoveries) as a percent of average total loans: Construction — % — % — % Commercial real estate, other 0.01 % (0.01) % 0.01 % Commercial and industrial 0.01 % 0.01 % 0.02 % Premium finance — % — % — % Leases 0.23 % 0.06 % 0.05 % Residential real estate — % — % 0.01 % Home equity lines of credit — % — % — % Consumer, indirect 0.09 % 0.06 % 0.04 % Consumer, direct 0.01 % 0.01 % 0.01 % Consumer 0.10 % 0.07 % 0.05 % Deposit account overdrafts 0.02 % 0.02 % 0.02 % Total 0.37 % 0.15 % 0.16 % (a) Amount does not include the provision for unfunded commitment liability. Net charge-offs as a percent of average total loans for 2024 increased to 0.37% compared to 0.15% at 2023. The increase over all periods presented was due to an increase in charge-offs on small-ticket leases that occurred during the second half of 2024. During 2023, net charge-offs as a percent of average total loans decreased to 0.15%, compared to 0.16% for 2022. The decrease was due to (i) an increase in average loan balances, primarily driven by the loans acquired in the Limestone Merger, (ii) decreases in net charge-offs of residential real estate loan balances and commercial and industrial loan balances, and (iii) net recoveries in 2023 compared to net charge-offs in 2022 of other commercial real estate loan balances, mostly offset by increases in net charge-offs related to total consumer loan balances and lease balances. 66 The following table details Peoples’ nonperforming assets at December 31: (Dollars in thousands) 2024 2023 2022 Loans 90+ days past due and accruing: Commercial real estate, other 227 78 167 Commercial and industrial 78 316 130 Premium finance 4,947 1,355 504 Leases 803 3,826 3,041 Residential real estate 2,166 877 917 Home equity lines of credit 213 171 58 Consumer, indirect 159 68 — Consumer, direct 44 25 25 Consumer 203 93 25 Total loans 90+ days past due and accruing 8,637 6,716 4,842 Nonaccrual loans: Construction — — 12 Commercial real estate, other 7,136 2,816 12,121 Commercial and industrial 6,809 2,758 3,462 Leases 8,850 8,436 3,178 Residential real estate 7,329 7,921 9,496 Home equity lines of credit 1,498 1,022 820 Consumer, indirect 2,374 2,412 2,176 Consumer, direct 133 112 208 Consumer 2,507 2,524 2,384 Total nonaccrual loans 34,129 25,477 31,473 Total nonperforming loans (“NPLs”) 42,766 32,193 36,315 OREO: Commercial 5,891 7,118 8,730 Residential 279 56 165 Total OREO 6,170 7,174 8,895 Total nonperforming assets (“NPAs”) $ 48,936 $ 39,367 $ 45,210 Criticized loans (a) $ 241,302 $ 235,239 $ 191,355 Classified loans (b) 128,815 120,027 89,604 Asset Quality Ratios: Nonaccrual loans as a percent of total loans (c) 0.54 % 0.41 % 0.67 % NPLs as a percent of total loans (c)(d) 0.67 % 0.52 % 0.77 % NPAs as a percent of total assets (c)(d) 0.53 % 0.43 % 0.63 % NPAs as a percent of total loans and OREO (c)(d) 0.77 % 0.64 % 0.96 % Allowance for credit losses as a percent of nonaccrual loans (c) 185.61 % 245.79 % 168.91 % Allowance for credit losses as a percent of NPLs (c)(d) 148.13 % 194.38 % 146.39 % Criticized loans as a percent of total loans (a)(c) 3.80 % 3.82 % 4.07 % Classified loans as a percent of total loans (b)(c) 2.03 % 1.95 % 1.90 % (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 year indicated. (d) Nonperforming loans include loans 90+ days past due and accruing, troubled debt restructured loans and nonaccrual loans. Nonperforming assets include nonperforming loans and OREO. Peoples’ NPAs increased to 0.53% of total assets at December 31, 2024, compared to 0.43% of total assets at December 31, 2023. This was driven by an increase in nonaccrual balances for commercial real estate and commercial and industrial loans, partially offset by a decrease in commercial OREO. Loans 90+ days past due and accruing at December 31, 2024 increased compared to at December 31, 2023, driven by higher administrative delinquencies on premium finance loans. Past due premium finance loans carry low credit risk, due to the ability to cancel premiums and recover the majority of the receivable from the insurer. During 2024, both criticized and classified loans increased when compared to 2023, primarily due to loan downgrades. Nonperforming assets decreased to 0.43% of total assets at December 31, 2023 compared to 0.63% of total assets at December 31, 2022. Loans 90+ days past due and accruing at December 31, 2023 increased compared to at December 31, 2022, primarily due to the 67 loans acquired in the Limestone Merger and an increase in leases and premium finance loans 90+ days past due and accruing. During 2023, both criticized and classified loans increased when compared to 2022, primarily due to criticized and classified loans acquired in the Limestone Merger. The majority of Peoples’ nonaccrual commercial real estate loans consists of owner occupied commercial properties. In general, management believes repayment of these loans is dependent on the sale of the underlying collateral. As such, the carrying values of these loans are ultimately supported by management’s estimate of the net proceeds Peoples would receive upon the sale of the collateral. These estimates are based in part on market values provided by independent, licensed or certified appraisers periodically, but no less frequently than annually. Given the volatility in commercial real estate values, management continues to monitor changes in real estate values from quarter-to-quarter and updates its estimates as needed based on observable changes in market prices and/or updated appraisals for similar properties. Peoples discontinues the accrual of interest on a loan when conditions cause management to believe collection of all or any portion of the loan’s contractual interest is doubtful. Such conditions may include the borrower being 90 days or more past due on any contractual payments or the availability of updated information regarding the borrower’s financial condition and repayment ability. All unpaid accrued interest deemed uncollectable is reversed, which would reduce Peoples’ net interest income. Interest received on nonaccrual loans is included in income only if principal recovery is reasonably assured. Interest income on loans classified as nonaccrual and renegotiated at each year-end that would have been recorded under the original terms of the loans was $1.9 million for 2024, $0.8 million for 2023 and $1.7 million for 2022. No portion of these amounts were recorded during 2024, 2023 or 2022. Overall, management believes the allowance for credit losses was appropriate at December 31, 2024, based on all significant information currently available. Still, there can be no assurance that the allowance for credit losses will be adequate to cover future losses in Peoples’ loan portfolio. Additional information regarding Peoples’ allowance for credit losses can be found in “Note 4 Loans and Leases, and Allowance for Credit Losses.” Deposits The following table details Peoples’ deposit balances at December 31: (Dollars in thousands) 2024 2023 2022 Non-interest-bearing deposits (a) $ 1,507,661 $ 1,567,649 $ 1,589,402 Interest-bearing deposits: Interest-bearing demand accounts (a) 1,085,158 1,144,357 1,160,182 Savings accounts 866,959 919,244 1,068,547 Retail CDs 1,921,415 1,443,417 530,236 Money market deposit accounts 878,254 775,488 617,029 Governmental deposit accounts 775,782 726,713 625,965 Brokered deposits 554,976 526,053 125,580 Total interest-bearing deposits 6,082,544 5,535,272 4,127,539 Total deposits $ 7,590,205 $ 7,102,921 $ 5,716,941 (a) The sum of amounts presented are considered total demand deposits. The increase in total deposits between December 31, 2024 and December 31, 2023 was primarily driven by special promotional rates over the past year on retail CDs. Total demand deposits comprised 34% and 38% of total deposits at December 31, 2024 and at December 31, 2023, respectively. The increase in total deposits between December 31, 2023 and December 31, 2022 was primarily due to deposits acquired in the Limestone Merger. Excluding Limestone deposit balances, total deposits at December 31, 2023 increased $565.9 million, or 10%, compared to at December 31, 2022, primarily due to increases of $785.6 million in retail CDs and $351.1 million in brokered deposits, partially offset by decreases of $226.8 million, $223.3 million, and $193.7 million, in non-interest bearing deposits, savings accounts, and interest-bearing demand deposit accounts, respectively. Total demand deposits comprised 38% and 48% of total deposits at December 31, 2023 and December 31, 2022, respectively. As part of its funding strategy, Peoples hedges 90-day brokered deposits with interest rate swaps. The swaps pay a fixed rate of interest while receiving three-month SOFR, which offsets the rate on the brokered deposits. As of December 31, 2024, Peoples had eight effective interest rate swaps, with an aggregate notional value of $75.0 million, which were designated as cash flow hedges of brokered deposits, and are expected to be extended every 90 days through the maturity dates of the swaps. Peoples continually evaluates the overall balance sheet position given the interest rate environment. Peoples’ governmental deposit accounts represent savings and interest-bearing transaction accounts from state and local governmental entities. These funds are subject to periodic fluctuations based on the timing of tax collections and subsequent expenditures or disbursements. Peoples normally experiences an increase in balances annually during the first and third quarters, 68 corresponding with tax collections, with declines normally in the second and fourth quarters of each year, corresponding with expenditures by the governmental entities. Peoples continues to emphasize growth of low-cost deposits, while continuing to migrate these customers to ICS network deposits that do not require Peoples to pledge assets as collateral. The maturities of retail CDs with total balances of $100,000 or more at December 31 were as follows: (Dollars in thousands) 2024 2023 2022 3 months or less $ 454,711 $ 135,806 $ 54,471 Over 3 to 6 months 334,579 239,057 39,031 Over 6 to 12 months 239,110 353,433 58,342 Over 12 months 30,431 86,489 110,972 Total $ 1,058,831 $ 814,785 $ 262,816 Additional information regarding Peoples’ deposits can be found in “Note 8 Deposits.” Borrowed Funds The following table details Peoples’ short-term and long-term borrowings at December 31: (Dollars in thousands) 2024 2023 2022 Short-term borrowings: FHLB overnight borrowings $ 175,000 $ 369,000 $ 400,000 Repurchase agreements 18,367 99,121 100,138 Bank Term Funding Program (“BTFP”) — 133,000 — Other short-term borrowings 107 49,376 — Total short-term borrowings 193,474 650,497 500,138 Long-term borrowings: FHLB advances 131,868 112,865 34,158 Vantage non-recourse debt 51,330 49,572 53,147 Other long-term borrowings 54,875 53,804 13,788 Total long-term borrowings 238,073 216,241 101,093 Total borrowed funds $ 431,547 $ 866,738 $ 601,231 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 subordinated deferrable interest debentures. Peoples continually evaluates its overall balance sheet position given the interest rate environment and liquidity needs. Total borrowed funds decreased at December 31, 2024 compared to at December 31, 2023 due to lower FHLB overnight borrowings and the payoff of the BTFP borrowing as of December 31, 2024. Peoples’ borrowed funds increased at December 31, 2023 compared to at December 31, 2022 due to the addition of $133.0 million of BTFP borrowings at December 31, 2023, an increase in FHLB long-term advances, and an increase in other long-term borrowings assumed in the Limestone Merger. On April 3, 2019, Peoples entered into the U.S. Bank Loan Agreement with U.S. Bank National Association, the term of which has been extended to March 31, 2025 through an amendment in March 2024. The U.S. Bank Loan Agreement provides Peoples with a revolving line of credit in the maximum aggregate principal amount of $30.0 million. Additional information regarding Peoples’ borrowed funds can be found in “Note 9 Short-Term Borrowings” and “Note 10 Long-Term Borrowings.” Capital/Stockholders’ Equity Peoples’ total stockholders’ equity at December 31, 2024 increased $58.1 million, or 6%, when compared to at December 31, 2023, which was due to net income of $117.2 million for 2024, partially offset by an increase in other comprehensive loss of $8.8 million and dividends paid of $56.3 million. The increase in other comprehensive loss was the result of changes in the fair market value of available-for-sale investment securities, which were driven by changes in market interest rates. At December 31, 2024, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered “well capitalized” under banking regulations. These higher capital levels reflect Peoples’ desire to maintain a strong capital position. During 2023, total stockholders’ equity increased 34% when compared to 2022 due to (i) 6.8 million common shares (valued at $177.9 million) issued in the Limestone Merger, (ii) net income of $113.4 million for 2023, and (iii) a decrease in other comprehensive loss of $25.5 million, partially offset by dividends paid of $52.1 million and share repurchases of $3.0 million. The 69 decrease in other comprehensive loss was the result of changes in the fair market value of available-for-sale investment securities, which were driven by changes in market interest rates. On January 1, 2020, Peoples recorded a one-time transition adjustment to reduce retained earnings by $3.7 million. This adjustment reflected the increase in the allowance for credit losses for loans (excluding the gross up of loan balances related to the establishment of an allowance for credit losses for PCD loans, the allowance for credit losses for held-to-maturity investment securities and the addition of an unfunded commitment liability, net of statutory federal corporate income taxes). Peoples elected to utilize the five-year phase-in period for the transition adjustment due to the implementation of ASU 2016-13. This phase-in period also includes a 25% deferment of the impact on regulatory capital of the estimated increase in the allowance for credit losses related to the CECL model, which was applied during the first two years of application. For the first two years of the phase-in period, 100% of the transition adjustment due to ASU 2016-13 was excluded for regulatory capital purposes, along with 25% of the increase in the allowance for credit losses compared to the January 1, 2020 allowance for credit losses. In year three of the phase-in (i.e., 2022), 75% of the transition adjustment, and the cumulative 25% increase in the allowance for credit losses compared to January 1, 2020, were excluded from regulatory capital, while 50% and 25% of these amounts were excluded in years four and five, respectively, under this phase-in period. Under the risk-based capital rules, in order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least a capital conservation buffer of 2.50%. These three minimum required ratios are the common equity tier 1 capital ratio, tier 1 risk-based capital ratio and total risk-based capital ratio. Peoples had a capital conservation buffer of 5.58% at December 31, 2024, 5.17% at December 31, 2023 and 5.06% at December 31, 2022. As such, Peoples exceeded the minimum ratios, including the capital conservation buffer, at December 31, 2024. The following table details Peoples’ actual risk-based capital levels and corresponding ratios at December 31: (Dollars in thousands) 2024 2023 2022 Capital Amounts: Common equity tier 1 $ 833,128 $ 766,692 $ 604,644 Tier 1 863,974 820,496 618,432 Total (tier 1 and tier 2) 946,724 873,226 662,499 Net risk-weighted assets $ 6,971,490 $ 6,630,945 $ 5,071,240 Capital Ratios: Common equity tier 1 11.95 % 11.56 % 11.92 % Tier 1 12.39 % 12.37 % 12.19 % Total (tier 1 and tier 2) 13.58 % 13.17 % 13.06 % Tier 1 leverage ratio 9.73 % 9.48 % 8.96 % In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples’ total stockholders’ equity. Such financial measures represent non-US GAAP financial information since they exclude the impact of goodwill and other intangible assets acquired through acquisitions on the Consolidated Balance Sheets. Peoples’ 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 level of intangible assets similar to that of Peoples. Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in value should there be deterioration in the overall franchise value. As a result, tangible equity represents a conservative measure of the capacity for Peoples to incur losses but remain solvent. 70 The following table reconciles the calculation of the identified non-US GAAP financial measures to amounts reported in Peoples’ Consolidated Financial Statements at December 31: (Dollars in thousands) 2024 2023 2022 Tangible equity: Total stockholders’ equity $ 1,111,590 $ 1,053,534 $ 785,328 Less: goodwill and other intangible assets 402,422 412,172 326,329 Tangible equity $ 709,168 $ 641,362 $ 458,999 Tangible assets: Total assets $ 9,254,247 $ 9,157,382 $ 7,207,304 Less: goodwill and other intangible assets 402,422 412,172 326,329 Tangible assets $ 8,851,825 $ 8,745,210 $ 6,880,975 Tangible book value per common share: Tangible equity $ 709,168 $ 641,362 $ 458,999 Common shares outstanding 35,563,590 35,314,745 28,287,837 Tangible book value per common share $ 19.94 $ 18.16 $ 16.23 Tangible equity to tangible assets ratio: Tangible equity $ 709,168 $ 641,362 $ 458,999 Tangible assets $ 8,851,825 $ 8,745,210 $ 6,880,975 Tangible equity to tangible assets 8.01 % 7.33 % 6.67 % Tangible book value per common share increased to $19.94 at December 31, 2024 from $18.16 at December 31, 2023 and was primarily due to net income over the last twelve months. The increase in tangible book value per common share at December 31, 2023 from at December 31, 2022 was due to tangible equity increasing as a result of common shares issued throughout 2023, including shares issued due to the Limestone Merger, a decrease in other comprehensive losses recognized on available-for-sale investment securities, which was driven by changes in market interest rates, and net income for 2023. Future Outlook Peoples improved its performance for the third consecutive year during 2024, recording record annual net income despite the challenges that were presented to the banking industry due to the bank failures in 2023. In 2025, Peoples expects to generate positive operating leverage for the year, compared to 2024. For 2025, Peoples expects net interest margin to be between 4.00% and 4.20% for the full year, which is assuming another 50 basis point reduction by the Federal Reserve, spread over the first nine months of 2025. These projections will vary depending on the timing and magnitude of the anticipated rate cuts and the level of competition for deposits. Peoples projects growth in total non-interest income, excluding net gains and losses, to be in the mid-to-high single-digits in 2025 compared to 2024. Total non-interest expenses are expected to be between $69 million and $71 million for the second, third and fourth quarters of 2025, with the first quarter of 2025 being higher due to annual expenses typically recognized during the first quarter of each year. The efficiency ratio is projected to be between 55% and 60% for 2025. Peoples will continue to place importance on loan growth. Peoples anticipates that the annual loan growth for 2025 will be between 4% and 6%. Provision for credit losses is expected to be at a similar quarterly run rate compared to 2024, with a modest reduction in our net charge-off rate compared to 2024. The balance sheet mix of Peoples will be continually evaluated in an effort to mitigate exposure risk during 2025. Total deposit balances are expected to grow by approximately 1% in 2025. Peoples expects continued growth despite increased competition in its markets plus additional upward pressure on rates paid. Throughout 2024, deposits balances increased primarily due to special promotional offerings on retail CDs throughout the year. Management believes Peoples is in position to maintain strong asset quality metrics and continued growth into 2025. Peoples came through 2024 with positive financial results despite the challenging economic environment and believes it will continue this trend into 2025. For more information regarding risks and uncertainties that could impact the projections described above, please refer to “ITEM 1A RISK FACTORS” of this Form 10-K. 71 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 increase interest costs or reduce revenue streams. Peoples has assigned overall management of IRR to the ALCO, which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level of IRR. The objective of Peoples’ IRR management policy is to assist the ALCO in its evaluation of the impact of changing interest rate conditions on earnings and the economic value of equity, as well as assist with the implementation of strategies intended to reduce Peoples’ IRR. The management of IRR involves either maintaining or changing the level of risk exposure by changing the repricing and maturity characteristics of the cash flows for specific assets or liabilities. Additional oversight of Peoples’ IRR is provided by the Board of Directors of Peoples Bank, which reviews and approves Peoples’ IRR management policy at least annually. The ALCO uses various methods to assess and monitor the current level of Peoples’ IRR and the impact of potential strategies or other changes. However, the ALCO predominantly relies on simulation modeling in its overall management of IRR since it is a dynamic measure. Simulation modeling also estimates the impact of potential changes in interest rates and balance sheet structures on future earnings and projected economic value of equity. The methods used by ALCO to assess IRR remain largely unchanged from those disclosed for the year ended December 31, 2023. The modeling process starts with a base case simulation using the current balance sheet and current interest rates held constant for the next twenty-four months. Alternate scenarios are prepared which simulate the impact of increasing and decreasing market interest rates, assuming parallel yield curve shifts. Comparisons produced from the simulation data, showing the changes in net interest income from the base interest rate scenario, illustrate the risks associated with the current balance sheet structure. Additional simulations, when deemed appropriate or necessary, are prepared using different interest rate scenarios from those used with the base case simulation and/or possible changes in balance sheet composition. The additional simulations include non-parallel shifts in interest rates whereby the direction and/or magnitude of changes in short-term interest rates is different from the changes applied to longer-term interest rates. Comparisons showing the net interest income and economic value of equity variances from the base case are provided to the ALCO for review and discussion. The ALCO has established limits on changes in the twelve-month net interest income forecast and the economic value of equity from the base case. The ALCO may establish risk tolerances for other parallel and non-parallel rate movements, as deemed necessary. The following table details the current policy limits used to manage the level of Peoples’ IRR: Immediate and Sustained Shift in Interest Rates Net Interest Income Economic Value of Equity + / - 100 basis points -5% -10% + / - 200 basis points -10% -15% + / - 300 basis points -15% -20% 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): 72 Increase (Decrease) in Interest Rates Estimated Increase (Decrease) in Net Interest Income Estimated (Decrease) Increase in Economic Value of Equity (in Basis Points) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 300 10,471 3.0 % 15,063 4.6 % (127,697) (7.2) % (157,625) (9.4) % 200 7,090 2.0 % 10,282 3.1 % (88,238) (5.0) % (107,620) (6.4) % 100 3,678 1.0 % 5,468 1.7 % (45,430) (2.6) % (53,585) (3.2) % (100) (9,700) (2.7) % (7,427) (2.3) % 12,016 0.7 % 31,722 1.9 % (200) (19,818) (5.6) % (15,446) (4.7) % (3,009) (0.2) % 46,537 2.8 % (300) (19,964) (5.6) % (16,822) (5.1) % (25,823) (1.5) % 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. These assumptions are monitored closely by Peoples and are reviewed at least semi-annually. At December 31, 2024, the actual deposit betas experienced by Peoples in the repricing of non-maturity deposits were lower than those used in Peoples’ interest rate risk modeling. 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 decreasing short-term interest rates in the future could be offset by an inverse movement in long-term 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 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 December 31, 2024, consideration of the bull steepener and bear steepener scenarios provide insights which were not captured by parallel shifts. 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-long term borrowing costs, which are correlated with long-term rates remain constant. Decreased deposit and funding costs increase net interest income over a longer horizon; resulting in an increased amount of net income and net interest margin over a 24-month period. At December 31, 2024, the bull steepener scenario resulted in a decline in net interest income of 0.73%, as the impact of recent term funding mitigates the impact of lower short-term rates over a 12-month horizon, and an increase in economic value of equity of 1.90%. The bear steepener scenario highlights the risk to net interest income and the economic value of equity when short-term rates remain constant while long-term 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 December 31, 2024, the bear steepener scenario resulted in an increase in net interest income of 0.79% and an increase in economic value of equity of 5.60% During 2024, Peoples’ was positioned to benefit from rising interest rates in terms of the potential impact on net interest income. The table above illustrates this point as net interest income increases in the rising rate scenarios and decreases in the falling rate scenarios. 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 December 31, 2024, Peoples had eight interest rate swap contracts, with an aggregate notional value of $75.0 million. Additional information regarding Peoples’ interest rate swaps can be found in “Note 15 Derivative Financial Instruments.” An asset/liability model used to produce the analysis above requires assumptions to be made such as prepayment rates on interest-earning assets and repricing impact on non-maturity deposits. These business assumptions are based on business plans, economic and market trends, and available industry data. Management believes that its methodology for developing such assumptions is reasonable; however, there can be no assurance that modeled results will be achieved or are indicative of future results. The asset/liability model along with key modeling assumptions are subjected to a third-party review annually for effectiveness and regulatory compliance. 73 Liquidity In addition to IRR management, another major objective of the ALCO is to ensure sufficient levels of liquidity are maintained. The ALCO defines liquidity as the ability to meet anticipated and unanticipated operating cash needs, loan demand and deposit withdrawals without incurring a sustained negative impact on profitability. A primary source of liquidity for Peoples is deposits. Liquidity is also provided by cash generated from earning assets such as loans and investment securities. Peoples also uses various wholesale funding sources to supplement funding from customer deposits. These external sources provide Peoples with the ability to obtain large quantities of funds in a relatively short time period in the event of sudden unanticipated cash needs. However, an over-utilization of external funding sources can expose Peoples to greater liquidity risk, as these external sources may not be accessible during times of market stress. Additionally, Peoples may be exposed to the risk associated with providing excess collateral to external funding providers, commonly referred to as counterparty risk. As a result, the ALCO’s liquidity management policy sets limits on the net liquidity position and the concentration of non-core funding sources, which includes wholesale funding and brokered deposits. In addition to external sources of funding, Peoples considers certain types of deposits to be less stable or “volatile funding.” These deposits include special money market products, large CDs and public funds. Peoples has established volatility factors for these various deposit products, and the liquidity management policy establishes a limit on the total level of volatile funding. Additionally, Peoples measures the maturities of external sources of funding for periods of one month, three months, six months and twelve months, and has established policy limits for the amounts maturing in each of these periods. The purpose of these limits is to minimize exposure to what is commonly termed rollover risk. An additional strategy used by Peoples in the management of liquidity risk is maintaining a targeted level of liquid assets. Management defines liquid assets as unencumbered cash (including cash on deposit at the FRB), and the market value of unpledged U.S. government and agency securities. Excluded from this definition are pledged securities, non-government securities, non-agency securities, municipal securities and loans. Management has established a minimum level of liquid assets in the liquidity management policy, which is expressed as a percentage of total loans and unfunded loan commitments. At December 31, 2024, Peoples maintained liquid assets of $696.9 million, representing 6.6% of total assets plus unfunded loan commitments. Peoples has also established a policy limit around the level of liquefiable assets expressed as a percentage of total loans and unfunded loan commitments. Liquefiable assets are defined as liquid assets plus the market value of unpledged securities not included in the liquid asset measurement. At December 31, 2024, Peoples maintained liquefiable assets of $857.1 million, representing 8.1% of total assets plus unfunded loan commitments. An essential element in the management of liquidity risk is a forecast of the sources and uses of anticipated cash flows. On a monthly basis, Peoples forecasts sources and uses of cash for the next twelve months. To assist in the management of liquidity, management has established a liquidity coverage ratio, which is defined as the total sources of cash divided by the total uses of cash. A ratio of greater than 1.0 times indicates that forecasted sources of cash are adequate to fund forecasted uses of cash. The liquidity management policy establishes a minimum limit of 1.0 times. At December 31, 2024, Peoples had a ratio of 8.69 times, which was within policy limits. Peoples also forecasts secondary or contingent sources of cash, and this includes external sources of funding and liquid assets. These sources of cash would be required if and when the forecasted liquidity coverage ratio dropped below the policy limit of 1.0 times. An additional liquidity measurement used by management includes the total forecasted sources of cash and the contingent sources of cash divided by the forecasted uses of cash. Management has established a minimum ratio of 3.0 times for this liquidity management policy limit. At December 31, 2024, Peoples had a ratio of 10.14 times, which was within policy limits. Peoples maintains multiple contingent sources of liquidity including secured wholesale funding lines and unsecured brokered deposit networks. Peoples’ primary sources of secured wholesale funding are the FHLB of Cincinnati and the FRB. As of December 31, 2024, Peoples had unused collateral-based borrowing capacities of $388.6 million and $416.9 million, respectively, available with the FHLB of Cincinnati and the FRB. Together, these unused borrowing capacities represent 7.6% of total assets and unfunded loan commitments. Additionally, Peoples had $230.0 million of unpledged loan collateral eligible to secure additional borrowing capacity with the FRB as of December 31, 2024. Disruptions in the sources and uses of cash can occur which can drastically alter the actual cash flows and negatively impact Peoples’ ability to access internal and external sources of cash. Such disruptions might occur due to increased withdrawals of deposits, increases in the funding required for loan commitments, a decrease in the ability to access external funding sources and other factors that would increase the need for funding and limit Peoples’ ability to access needed funds. As a result, Peoples maintains a liquidity contingency funding plan (“LCFP”) that considers various degrees of disruptions and develops action plans around these scenarios. Peoples’ LCFP identifies scenarios where funding disruptions might occur and creates scenarios of varying degrees of severity. The disruptions considered include an increase in funding of unfunded loan commitments, unanticipated withdrawals of deposits, decreases in the renewal of maturing CDs, and reductions in cash earnings. Additionally, the LCFP creates stress scenarios where access to external funding sources, or contingency funding, is suddenly limited, which includes a significant increase in the margin requirements where securities or loans are pledged, limited access to funding from other banks and limited 74 access to funding from the FHLB of Cincinnati and the FRB. Peoples’ LCFP scenarios include a base scenario, a mild stress scenario, a moderate stress scenario and a severe stress scenario. Each of these is defined as to the related severity and action plans are developed around each. Liquidity management also requires the monitoring of risk indicators that may alert the ALCO to a developing liquidity situation or crisis. Early detection of stress scenarios allows Peoples to take actions to help mitigate the impact to Peoples Bank’s business operations. The LCFP contains various indicators, termed key risk indicators (“KRIs”), that are monitored on a monthly basis, at a minimum. The KRIs include both internal and external indicators and include loan delinquency levels, criticized and classified loan levels, the ratios of non-performing loans to loans and to total assets, the total loan to total deposit ratio, the level of net non-core funding dependence, the level of contingency funding sources, the liquidity coverage ratio, changes in regulatory capital levels, forecasted operating loss, negative media concerning Peoples, irrational competitor pricing that persists, and an increase in rates for external funding sources. The LCFP establishes levels that define each of these KRIs under base, mild, moderate and severe scenarios. The LCFP is reviewed and updated at least on an annual basis by the ALCO and Peoples Bank’s Board of Directors. Additionally, testing of the LCFP is required on an annual basis. Various stress scenarios and the related actions are simulated according to the LCFP. The results are reviewed and discussed and changes or revisions are made to the LCFP accordingly. Additionally, the LCFP is subjected to a third-party review annually for effectiveness and regulatory compliance. Starting at March 31, 2020, there was an increase in deposit balances due to the influx of funds from fiscal stimulus, the PPP and other government actions that persisted throughout 2021. During 2022, deposit balances declined due to customers returning to pre-COVID-19 pandemic balances as well as rising market interest rates due to high levels of inflation. During 2023, the Federal Reserve continued a historically aggressive rate-hiking campaign, leading to higher interest rates and higher competition for deposits. As inflationary pressures cooled during 2024, the Federal Reserve began to lower rates starting the second half of the calendar year. Peoples continued to offer various CD special rates to retain current clients and attract new clients. Overall, management believes the current balance of cash and cash equivalents, anticipated investment portfolio cash flows and the 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 Peoples routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Consolidated Financial Statements. These activities are part of Peoples’ normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts, operating lease obligations, and commitments to make additional capital contributions in low-income housing tax credit investments. The following is a summary of Peoples’ significant off-balance sheet activities and contractual obligations. Detailed information regarding these activities and obligations can be found in the Notes to the Consolidated Financial Statements. Activity or Obligation Note Off-balance sheet credit-related financial instruments 16 Interest rate contracts 15 Operating lease obligations 6 Long-term borrowing obligations 10 Traditional off-balance sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of credit. These activities are necessary to meet the financing needs of customers and could require Peoples to make cash payments to third parties in the event certain specified future events occur. The contractual amounts represent the extent of Peoples’ exposure in these off-balance sheet activities. However, since certain off-balance sheet commitments, particularly standby letters of credit, are expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements. Peoples continues to lease certain facilities and equipment under noncancellable operating leases with terms providing for fixed monthly payments over periods generally ranging from two to 25 years. Several of Peoples’ leased facilities are inside retail shopping centers or office buildings and, as a result, are not available for purchase. Management believes these leased facilities increase Peoples’ visibility within its markets and afford sales associates additional access to current and potential clients. For certain acquisitions, often those involving insurance businesses and wealth management books of business, a portion of the consideration is contingent upon revenue metrics being achieved. US GAAP requires that the amounts be recorded upon acquisition based on the best estimate of the future amounts to be paid at the time of acquisition. Any subsequent adjustment to the estimate is recorded in net income. Based on the acquisitions completed to date, management does not expect contingent consideration to have a material impact on Peoples’ future performance. Management does not anticipate that Peoples’ current off-balance sheet activities will have a material impact on its future results of operations and financial condition based on historical experience and recent trends. 75 Effects of Inflation on Financial Statements Substantially all of Peoples’ assets relate to banking and are monetary in nature. As a result, inflation does not impact Peoples to the same degree as companies in capital-intensive industries in a replacement cost environment. During a period of rising prices, a net monetary asset position results in a loss in purchasing power and conversely a net monetary liability position results in an increase in purchasing power. The opposite would be true during a period of decreasing prices. In the banking industry, monetary assets typically exceed monetary liabilities. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Refer to the section captioned “Interest Rate Sensitivity and Liquidity” under “ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Form 10-K, which is incorporated herein by reference.