PEOPLES BANCORP INC - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 000-16772

PEOPLES BANCORP INC.

(Exact name of Registrant as specified in its charter)

Ohio

31-0987416

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

138 Putnam Street,

P.O. Box 738,

Marietta,

Ohio

45750

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(740)

373-3155

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, without par value

PEBO

The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	☒
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 28,345,281 common shares, without par value, at May 5, 2022.

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Table of Contents

PART I – FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
CONSOLIDATED BALANCE SHEETS (Unaudited)			3
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)			4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)			5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)			6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)			7
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			43


EXECUTIVE SUMMARY			47
RESULTS OF OPERATIONS			48
FINANCIAL CONDITION			62
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			74
ITEM 4. CONTROLS AND PROCEDURES			75
PART II – OTHER INFORMATION			75
ITEM 1. LEGAL PROCEEDINGS			75
ITEM 1A. RISK FACTORS			75
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			76
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			76
ITEM 4. MINE SAFETY DISCLOSURES			76
ITEM 5. OTHER INFORMATION			76
ITEM 6. EXHIBITS			77
SIGNATURES			79

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31, 2022		December 31, 2021

(Dollars in thousands)	(Unaudited)
Assets
Cash and cash equivalents:
Cash and balances due from banks	$	114,073	$	74,354
Interest-bearing deposits in other banks	291,606		341,373
Total cash and cash equivalents	405,679		415,727
Available-for-sale investment securities, at fair value (amortized cost of $1,381,259 at March 31, 2022 and $1,283,146 at December 31, 2021) (a)	1,301,839		1,275,493
Held-to-maturity investment securities, at amortized cost (fair value of $347,978 at March 31, 2022 and $369,955 at December 31, 2021) (a)	384,656		374,129
Other investment securities	41,840		33,987
Total investment securities (a)	1,728,335		1,683,609
Loans and leases, net of deferred fees and costs (b)	4,547,153		4,481,600
Allowance for credit losses	(54,768)		(63,967)
Net loans and leases (c)	4,492,385		4,417,633
Loans held for sale	1,460		3,791
Bank premises and equipment, net of accumulated depreciation	89,886		89,260
Bank owned life insurance	73,789		73,358
Goodwill	303,651		264,193
Other intangible assets	38,214		26,816
Other assets	105,862		89,134
Total assets	$	7,239,261	$	7,063,521
Liabilities
Deposits:
Non-interest-bearing	$	1,666,668	$	1,641,422
Interest-bearing	4,336,258		4,221,130
Total deposits	6,002,926		5,862,552
Short-term borrowings	144,275		166,482
Long-term borrowings	201,610		99,475

Accrued expenses and other liabilities	82,110		89,987
Total liabilities	6,430,921		6,218,496
Stockholders’ equity
Preferred shares, no par value, 50,000 shares authorized, no shares issued at March 31, 2022 and at December 31, 2021	—		—
Common stock, no par value, 50,000,000 shares authorized, 29,824,684 shares issued at March 31, 2022 and 29,814,401 shares issued at December 31, 2021, including at each date shares held in treasury	684,243		686,282
Retained earnings	220,477		207,076
Accumulated other comprehensive loss, net of deferred income taxes	(62,667)		(11,619)
Treasury stock, at cost, 1,434,441 shares at March 31, 2022 and 1,577,359 shares at December 31, 2021	(33,713)		(36,714)
Total stockholders’ equity	808,340		845,025
Total liabilities and stockholders’ equity	$	7,239,261	$	7,063,521

(a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $0 and $286, respectively, at March 31, 2022 and $0 and $286, respectively, at December 31, 2021.

(b) Also referred to throughout this document as "total loans" and "loans held for investment."

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended
	March 31,
(Dollars in thousands, except per share data)	2022		2021
Interest income:
Interest and fees on loans and leases	$	50,200	$	35,737
Interest and dividends on taxable investment securities	6,050		2,574
Interest on tax-exempt investment securities	1,015		611
Other interest income	160		40
Total interest income	57,425		38,962
Interest expense:
Interest on deposits	2,053		2,817
Interest on short-term borrowings	338		100
Interest on long-term borrowings	724		467

Total interest expense	3,115		3,384
Net interest income	54,310		35,578
Recovery of credit losses	(6,807)		(4,749)
Net interest income after recovery of credit losses	61,117		40,327



Non-interest income:
Electronic banking income	5,253		3,911
Insurance income	4,731		5,221
Trust and investment income	4,276		3,845
Deposit account service charges	3,426		1,985
Mortgage banking income	436		1,140
Bank owned life insurance income	431		446
Commercial loan swap fees	168		60
Net loss on asset disposals and other transactions	(127)		(27)
Net gain (loss) on investment securities	130		(336)
Other non-interest income	1,326		658
Total non-interest income	20,050		16,903
Non-interest expense:
Salaries and employee benefit costs	27,729		20,759
Net occupancy and equipment expense	5,088		3,327
Professional fees	3,672		3,468
Data processing and software expense	2,916		2,454
Electronic banking expense	2,759		1,894
Amortization of other intangible assets	1,708		620
FDIC insurance premiums	1,194		463
Marketing expense	995		911
Other loan expenses	832		462
Franchise tax expense	764		855
Communication expense	625		282
Other non-interest expense	3,347		2,492
Total non-interest expense	51,629		37,987
Income before income taxes	29,538		19,243
Income tax expense	5,961		3,780
Net income	$	23,577	$	15,463


Earnings per common share - basic	$	0.84	$	0.80
Earnings per common share - diluted	$	0.84	$	0.79
Weighted-average number of common shares outstanding - basic	28,006,165		19,282,665
Weighted-average number of common shares outstanding - diluted	28,129,131		19,436,311
Cash dividends declared	$	10,176	$	6,833
Cash dividends declared per common share	$	0.36	$	0.35

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)


	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Net income	$	23,577	$	15,463
Other comprehensive (loss) income:
Available-for-sale investment securities:
Gross unrealized holding loss arising during the period	(71,637)		(12,578)
Related tax benefit	16,448		2,642
Reclassification adjustment for net (loss) gain included in net income	(130)		336
Related tax benefit (expense)	30		(71)


Net effect on other comprehensive loss	(55,289)		(9,671)
Defined benefit plan:
Net (loss) gain arising during the period	(14)		5
Related tax benefit (expense)	3		(1)
Amortization of unrecognized gain and service cost on benefit plans	21		30
Related tax expense	(5)		(7)


Net effect on other comprehensive income	5		27
Cash flow hedges:
Net gain arising during the period	5,456		4,236
Related tax expense	(1,220)		(890)
Net effect on other comprehensive income	4,236		3,346
Total other comprehensive loss, net of tax	(51,048)		(6,298)
Total comprehensive (loss) income	$	(27,471)	$	9,165

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


					Accumulated Other Comprehensive Loss				Total Stockholders' Equity
	Common Shares		Retained Earnings				Treasury Stock
(Dollars in thousands)
Balance, December 31, 2021	$	686,282	$	207,076	$	(11,619)	$	(36,714)	$	845,025

Net income	—		23,577		—		—		23,577
Other comprehensive loss, net of tax	—		—		(51,048)		—		(51,048)


Cash dividends declared	—		(10,176)		—		—		(10,176)

Reissuance of treasury stock for common share awards	(3,998)		—		—		3,998		—


Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors	—		—		—		(1,230)		(1,230)

Common shares issued under dividend reinvestment plan	305		—		—		—		305
Common shares issued under compensation plan for Boards of Directors	31		—		—		93		124

Common shares issued under employee stock purchase plan	46		—		—		140		186
Stock-based compensation	1,577		—		—		—		1,577



Balance, March 31, 2022	$	684,243	$	220,477	$	(62,667)	$	(33,713)	$	808,340


					Accumulated Other Comprehensive (Loss) Income				Total Stockholders' Equity
	Common Shares		Retained Earnings				Treasury Stock
(Dollars in thousands)
Balance, December 31, 2020	$	422,536	$	190,691	$	1,336	$	(38,890)	$	575,673

Net income	—		15,463		—		—		15,463
Other comprehensive loss, net of tax	—		—		(6,298)		—		(6,298)


Cash dividends declared	—		(6,833)		—		—		(6,833)

Reissuance of treasury stock for common share awards	(1,740)		—		—		1,740		—

Reissuance of treasury stock for deferred compensation plan for Boards of Directors	—		—		—		2		2
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors	—		—		—		(911)		(911)

Common shares issued under dividend reinvestment plan	288		—		—		—		288
Common shares issued under compensation plan for Boards of Directors	53		—		—		141		194

Common shares issued under employee stock purchase plan	35		—		—		82		117
Stock-based compensation	1,198		—		—		—		1,198



Balance, March 31, 2021	$	422,370	$	199,321	$	(4,962)	$	(37,836)	$	578,893

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Net cash provided by operating activities	$	15,710	$	18,322
Investing activities:
Available-for-sale investment securities:
Purchases	(165,305)		(228,162)
Proceeds from sales	4,218		25,015
Proceeds from principal payments, calls and prepayments	60,520		74,377
Held-to-maturity investment securities:
Purchases	(15,463)		(101,177)
Proceeds from principal payments	4,512		1,115
Other investment securities:
Purchases	(8,208)		(282)
Proceeds from sales	237		3,878

Net decrease (increase) in loans held for investment	75,740		(7,749)
Net expenditures for premises and equipment	(2,053)		(311)
Proceeds from sales of other real estate owned	124		—


Business acquisitions, net of cash received	(80,532)		(117,000)
(Investment in) proceeds from limited partnership and tax credit funds	(1,151)		4
Net cash used in investing activities	(127,361)		(350,292)
Financing activities:
Net increase in non-interest-bearing deposits	25,246		208,711
Net increase in interest-bearing deposits	115,255		185,059
Net decrease in short-term borrowings	(27,252)		(5,393)

Payments on long-term borrowings	(260)		(311)


Cash dividends paid	(10,438)		(7,080)

Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock	(1,230)		(911)
Proceeds from issuance of common shares	282		286
Contingent consideration payments made after a business acquisition	—		(116)

Net cash provided by financing activities	101,603		380,245
Net (decrease) increase in cash and cash equivalents	(10,048)		48,275
Cash and cash equivalents at beginning of period	415,727		152,100
Cash and cash equivalents at end of period	$	405,679	$	200,375

Supplemental cash flow information:
Interest paid	$	2,656	$	4,199


Supplemental noncash disclosures:
Transfers from loans to other real estate owned	36		—
Lease right-of-use assets obtained in exchange for lessee operating lease liabilities	726		53

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Summary of Significant Accounting Policies

Basis of Presentation: The accompanying Unaudited Condensed Consolidated Financial Statements of Peoples Bancorp Inc. and its subsidiaries ("Peoples" refers to Peoples Bancorp Inc. and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.) have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2021 ("Peoples' 2021 Form 10-K").

The accounting and reporting policies followed in the presentation of the accompanying Unaudited Condensed Consolidated Financial Statements are consistent with those described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2021 Form 10-K, as updated by the information contained in this quarterly report on Form 10-Q for the quarterly period ended March 31, 2022 (this "Form 10-Q"). Management has evaluated all significant events and transactions that occurred after March 31, 2022 for potential recognition or disclosure in these unaudited condensed consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly such information for the periods and at the dates indicated. Such adjustments are normal and recurring in nature. Intercompany accounts and transactions have been eliminated. The Consolidated Balance Sheet at December 31, 2021, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2021 Form 10-K.

The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year, due in part to seasonal variations and unusual or infrequently occurring items.

New Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by Peoples as of the required effective dates. The following paragraphs related to new pronouncements should be read in conjunction with "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2021 Form 10-K. Unless otherwise discussed, management believes the impact of any recently issued standards, including those issued but not yet effective, will not have a material impact on Peoples' financial statements taken as a whole.

ASU 2022-01 - Fair Value Hedging - Portfolio Layer Method - Derivatives and Hedging (Topic 815). This ASU clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. The update expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. For entities that have already adopted ASU 2017-12, as Peoples has, the amendments in ASU 2022-01 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in the ASU may also be early adopted, including adoption in any interim period. Peoples is currently evaluating the impact of the amendments in the ASU on Peoples' consolidated financial statements.

ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDRs") and Vintage Disclosures. This ASU eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors and amends the guidance on disclosures to include current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. For entities that have already adopted ASU 2016-13, as Peoples has, the amendments in ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in the ASU may also be early adopted, including adoption in any interim period. Peoples is currently evaluating the impact of the amendments in the ASU on Peoples' consolidated financial statements.

Note 2 Fair Value of Assets and Liabilities

Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or a non-recurring basis in the Unaudited Condensed Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.”

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Depending on the nature of the asset or the liability, Peoples uses various valuation methodologies and assumptions to estimate fair value. The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2021 Form 10-K.

Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods presented.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy.


	Recurring Fair Value Measurements at Reporting Date
	March 31, 2022						December 31, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Assets:
Available-for-sale investment securities:
Obligations of:
U.S. Treasury and government agencies	$	167,406	$	—	$	—	$	35,604	$	—	$	—
U.S. government sponsored agencies	—		80,654		—		—		81,739		—
States and political subdivisions	—		231,644		—		—		259,319		—
Residential mortgage-backed securities	—		753,353		—		—		828,517		—
Commercial mortgage-backed securities	—		58,112		—		—		63,519		—
Bank-issued trust preferred securities	—		10,670		—		—		6,795		—

Total available-for-sale securities	$	167,406	$	1,134,433	$	—	$	35,604	$	1,239,889	$	—
Equity investment securities (a)	145		192		—		160		184		—
Derivative assets (b)	—		11,588		—		—		12,163		—
Liabilities:
Derivative liabilities (c)	$	—	$	11,150	$	—	$	—	$	17,183	$	—

(a) Included in "Other investment securities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

(b) Included in "Other assets" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

(c) Included in "Accrued expenses and other liabilities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, LIBOR (or other relevant) yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from quoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2).

Derivative Assets and Liabilities: Derivative assets and liabilities are recognized on the Unaudited Consolidated Balance Sheets at their fair value within other assets, and accrued expenses and other liabilities, respectively. The fair value for derivative financial instruments is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters (Level 2).

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Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy at March 31, 2022 and December 31, 2021.


	Non-Recurring Fair Value Measurements at Reporting Date
	March 31, 2022				December 31, 2021
(Dollars in thousands)	Level 2		Level 3		Level 2		Level 3

Assets:
Collateral Dependent Loans	$	—	$	9,395	$	—	$	430
Loans held for sale (a)	$	1,291	$	—	$	418	$	—
Other real estate owned ("OREO")	$	—	$	35	$	—	$	87
Servicing rights (b)(c)	$	—	$	20	$	—	$	22

(a) Loans held for sale are presented gross of allowance for credit losses of $24 and $0 as of March 31,2022 and December 31,2021, respectively.

(b) Included in "Other intangible assets" on the Unaudited Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or market value.

(c) As of March 31, 2022, Peoples recorded a minimal addition to the valuation allowance related to changes in the fair value of servicing rights. Peoples established a valuation allowance on servicing rights of $12 at March 31, 2022 and December 31, 2021. The fair value of the servicing rights was less than the carrying value on 10 year fixed rate loans.

Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally 1-4 family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2).

Other Real Estate Owned: OREO, included in "Other assets" on the Unaudited Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available (Level 3).

Servicing Rights: Servicing rights are included in "Other intangible assets" on the Unaudited Consolidated Balance Sheets. The fair value of servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates (Level 3). The carrying value of servicing rights is not re-measured to fair value on a recurring basis. Peoples assesses the carrying value of servicing rights quarterly for impairment.

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Financial Instruments Not Required to be Measured or Reported at Fair Value

The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Unaudited Consolidated Balance Sheets.


	Fair Value Measurements of Other Financial Instruments
(Dollars in thousands)	Fair Value Hierarchy Level	March 31, 2022				December 31, 2021
		Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:
Cash and cash equivalents	1	$	405,679	$	405,679	$	415,727	$	415,727




Held-to-maturity investment securities:
Obligations of:
U.S. government sponsored agencies	2	38,486		34,281		36,431		35,513
States and political subdivisions (a)	2	151,503		133,694		151,688		150,138
Residential mortgage-backed securities	2	115,613		108,199		110,708		110,159
Commercial mortgage-backed securities	2	79,340		71,804		75,588		74,145
Total held-to-maturity securities		384,942		347,978		374,415		369,955


Other investment securities:
Other investment securities at cost:
Federal Home Loan Bank ("FHLB") stock	N/A	17,308		17,308		17,308		17,308
Federal Reserve Bank ("FRB") stock	N/A	21,189		21,189		13,311		13,311
Total other investment securities at cost		38,497		38,497		30,619		30,619
Other investment securities at fair value:
Nonqualified deferred compensation (b)	1	2,222		2,222		2,240		2,240
Other investment securities (c)	2	784		784		784		784
Total other investment securities		41,503		41,503		33,643		33,643

Loans and leases, net of deferred fees and costs (d)	3	4,547,153		4,361,994		4,481,600		4,510,605
Bank owned life insurance	2	73,789		73,789		73,358		73,358
Liabilities:
Deposits	2	$	6,002,926	$	5,297,652	$	5,862,552	$	5,546,552
Short-term borrowings	2	144,275		145,091		166,482		164,990
Long-term borrowings	2	201,610		206,652		99,475		101,664

(a) Held-to-maturity investment securities are presented gross of allowance for credit losses of $286 as of March 31, 2022 and December 31, 2021.

(b) Nonqualified deferred compensation includes mutual funds as part of the investment.

(c) "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at March 31, 2022

and at December 31, 2021, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

table above and not included in this table.

(d) Loans and leases, net of deferred fees and cost are presented gross of allowance for credit losses of $54.8 million and $64.0 million, as of March 31, 2022 and December 31, 2021, respectively.

For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These financial instruments include cash and cash equivalents, and overnight borrowings. Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments:

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash on hand and balances due from banks is a reasonable estimate of fair value (Level 1).

Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

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Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable securities. Other investment securities at fair value are valued using quoted prices in an active market (Level 1) or quoted prices in less active markets (Level 2).

Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held-to-maturity. Peoples considered interest rate, credit and market factors in estimating the fair value of loans and leases (Level 3). Fair values for loans and leases are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans and leases with similar terms, the credit risk associated with the loans and leases and other market factors, including liquidity.

Bank Owned Life Insurance: Peoples' bank owned life insurance policies are recorded at their cash surrender value (Level 2). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits.

Deposits: The fair value of fixed-maturity certificates of deposit ("CDs") is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities (Level 2). Demand and other non-fixed-maturity deposits are estimated using a discounted cash flow calculation based on maturity, attrition and re-pricing assumptions.

Short-term Borrowings: The fair value of short-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2).

Long-term Borrowings: The fair value of long-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2).

Certain financial assets and financial liabilities that are not required to be measured or reported at fair value can be subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and liabilities include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair value, which are not included in the above information. Accordingly, the above fair values are not intended to represent the aggregate fair value of Peoples.

Note 3 Investment Securities

Available-for-sale

The following table summarizes Peoples' available-for-sale investment securities:


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022
Obligations of:
U.S. Treasury and government agencies	$	169,331	$	1	$	(1,926)	$	167,406
U.S. government sponsored agencies	87,219		12		(6,577)		80,654
States and political subdivisions	249,884		508		(18,748)		231,644
Residential mortgage-backed securities	800,014		2,192		(48,853)		753,353
Commercial mortgage-backed securities	64,086		1		(5,975)		58,112
Bank-issued trust preferred securities	10,725		170		(225)		10,670

Total available-for-sale securities	$	1,381,259	$	2,884	$	(82,304)	$	1,301,839
December 31, 2021
Obligations of:
U.S. Treasury and government agencies	$	35,609	$	12	$	(17)	$	35,604
U.S. government sponsored agencies	83,019		58		(1,338)		81,739
States and political subdivisions	259,508		3,187		(3,376)		259,319
Residential mortgage-backed securities	833,328		6,565		(11,376)		828,517
Commercial mortgage-backed securities	64,971		42		(1,494)		63,519
Bank-issued trust preferred securities	6,711		215		(131)		6,795

Total available-for-sale securities	$	1,283,146	$	10,079	$	(17,732)	$	1,275,493

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The gross gains and losses realized by Peoples from sales of available-for-sale securities for the periods ended March 31 were as follows:


	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Gross gains realized	$	146	$	339
Gross losses realized	(16)		(675)
Net gain (loss) realized	$	130	$	(336)

The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and recognized as of the trade date.

The following table presents a summary of available-for-sale investment securities that had been in a continuous unrealized loss position:


	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
March 31, 2022
Obligations of:
U.S. Treasury and government agencies	$	107,070	$	1,926	24	$	—	$	—	—	$	107,070	$	1,926
U.S. government sponsored agencies	71,303		5,610		18	7,343		967		2	78,646		6,577
States and political subdivisions	129,520		11,628		102	48,104		7,120		19	177,624		18,748
Residential mortgage-backed securities	632,616		40,240		198	79,024		8,613		20	711,640		48,853
Commercial mortgage-backed securities	39,447		3,665		18	17,882		2,310		6	57,329		5,975
Bank-issued trust preferred securities	4,852		147		2	922		78		1	5,774		225

Total	$	984,808	$	63,216	362	$	153,275	$	19,088	48	$	1,138,083	$	82,304
December 31, 2021
Obligations of:
U.S. Treasury and government agencies	$	16,914	$	17	6	$	—	$	—	—	$	16,914	$	17
U.S. government sponsored agencies	72,406		1,192		13	4,854		146		1	77,260		1,338
States and political subdivisions	101,397		2,075		71	30,853		1,301		11	132,250		3,376
Residential mortgage-backed securities	573,139		9,051		113	51,103		2,325		14	624,242		11,376
Commercial mortgage-backed securities	60,134		1,494		21	—		—		—	60,134		1,494
Bank-issued trust preferred securities	2,991		9		1	878		122		1	3,869		131

Total	$	826,981	$	13,838	225	$	87,688	$	3,894	27	$	914,669	$	17,732

Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis. At March 31, 2022, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses. At March 31, 2022, Peoples did not have the intent to sell, nor was it more likely than not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both March 31, 2022 and December 31, 2021 were largely attributable to changes in market interest rates and spreads since the securities were purchased, and were not credit related losses. Accrued interest receivable is not included in investment securities balances, and is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Interest receivable on investment securities was $7.0 million at March 31, 2022 and $5.5 million at December 31, 2021.

At March 31, 2022, approximately 99% of the mortgage-backed securities with a market value that had been at an unrealized loss position for twelve months or more were issued by U.S. government sponsored agencies. The remaining 1%, or three positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. All three positions had a fair value of less than 90% of its book value. Management analyzed the underlying credit quality of these mortgage-

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backed securities and concluded the unrealized losses were primarily attributable to the floating rate nature of these investments and the low remaining number of loans underlying these securities.

The unrealized loss with respect to the one bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at March 31, 2022 were attributable to the subordinated nature of the debt.

The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at March 31, 2022. The weighted-average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.


(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
U.S. Treasury and government agencies	$	—		$	169,331		$	—		$	—		$	169,331
U.S. government sponsored agencies	2,404			9,704			66,801			8,310			87,219
States and political subdivisions	4,827			33,985			69,174			141,898			249,884
Residential mortgage-backed securities	45			3,113			63,424			733,432			800,014
Commercial mortgage-backed securities	1,043			916			36,333			25,794			64,086
Bank-issued trust preferred securities	—			4,225			6,500			—			10,725

Total available-for-sale securities	$	8,319		$	221,274		$	242,232		$	909,434		$	1,381,259
Fair value
Obligations of:
U.S. Treasury and government agencies	$	—		$	167,406		$	—		$	—		$	167,406
U.S. government sponsored agencies	2,407			9,386			61,518			7,343			80,654
States and political subdivisions	4,841			33,447			65,666			127,690			231,644
Residential mortgage-backed securities	45			3,084			60,633			689,591			753,353
Commercial mortgage-backed securities	1,043			893			33,214			22,962			58,112
Bank-issued trust preferred securities	—			4,388			6,282			—			10,670

Total available-for-sale securities	$	8,336		$	218,604		$	227,313		$	847,586		$	1,301,839
Total weighted-average yield	2.07		%	1.91		%	1.52		%	1.75		%	1.74		%

Held-to-maturity

The following table summarizes Peoples’ held-to-maturity investment securities:


(Dollars in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022
Obligations of:
U.S. government sponsored agencies	$	38,486	$	—	$	—	$	(4,205)	$	34,281
States and political subdivisions	151,503		(286)		228		(17,751)		133,694
Residential mortgage-backed securities	115,613		—		13		(7,427)		108,199
Commercial mortgage-backed securities	79,340		—		10		(7,546)		71,804
Total held-to-maturity securities	$	384,942	$	(286)	$	251	$	(36,929)	$	347,978
December 31, 2021
Obligations of:
U.S. government sponsored agencies	$	36,431	$	—	$	86	$	(1,004)	$	35,513
States and political subdivisions	151,688		(286)		1,006		(2,270)		150,138
Residential mortgage-backed securities	110,708		—		370		(919)		110,159
Commercial mortgage-backed securities	75,588		—		182		(1,625)		74,145
Total held-to-maturity securities	$	374,415	$	(286)	$	1,644	$	(5,818)	$	369,955

There were no sales of held-to-maturity securities for either of the three months ended March 31, 2022 or 2021.

Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. The majority of Peoples' held-to-maturity investment securities are obligations of states and political subdivisions with the remaining securities issued by U.S. government sponsored agencies. Peoples analyzed these securities using cumulative default rate averages for investment grade municipal securities. Peoples recorded $286,000 of allowance for credit losses for held-to-maturity securities at each of March 31, 2022, and December 31, 2021.

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The following table presents a summary of held-to-maturity investment securities that had been in a continuous unrealized loss position:


	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
March 31, 2022
Obligations of:
U.S. government sponsored agencies	$	11,406	$	757	4	22,875		3,448		5	$	34,281	$	4,205
States and political subdivisions	100,780		12,979		62	29,521		4,772		9	130,301		17,751
Residential mortgage-backed securities	104,302		7,427		22	—		—		—	104,302		7,427
Commercial mortgage-backed securities	58,933		6,128		25	6,976		1,418		1	65,909		7,546
Total	$	275,421	$	27,291	113	$	59,372	$	9,638	15	$	334,793	$	36,929
December 31, 2021
Obligations of:
U.S. government sponsored agencies	$	17,328	$	504	6	14,635		500		2	$	31,963	$	1,004
States and political subdivisions	61,954		1,041		34	27,328		1,229		6	89,282		2,270
Residential mortgage-backed securities	88,937		919		17	—		—		—	88,937		919
Commercial mortgage-backed securities	67,338		1,625		21	—		—		—	67,338		1,625
Total	$	235,557	$	4,089	78	$	41,963	$	1,729	8	$	277,520	$	5,818

The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at March 31, 2022. The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 22.9% and 22.3% for the periods ending March 31, 2022 and December 31, 2021, respectively. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.


(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
U.S. government sponsored agencies	$	—		$	6,537		$	2,173		$	29,776		$	38,486
States and political subdivisions	—			5,204			6,104			140,195			151,503
Residential mortgage-backed securities	—			1,550			—			114,063			115,613
Commercial mortgage-backed securities	342			3,138			20,504			55,356			79,340
Total held-to-maturity securities	$	342		$	16,429		$	28,781		$	339,390		$	384,942
Fair value
Obligations of:
U.S. government sponsored agencies	$	—		$	6,194		$	2,026		$	26,061		$	34,281
States and political subdivisions	—			5,158			5,589			122,947			133,694
Residential mortgage-backed securities	—			1,561			—			106,638			108,199
Commercial mortgage-backed securities	342			3,147			19,035			49,280			71,804
Total held-to-maturity securities	$	342		$	16,060		$	26,650		$	304,926		$	347,978
Total weighted-average yield	2.16		%	1.80		%	1.87		%	2.02		%	2.00		%

Other Investment Securities

Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB and FRB stock.

The following table summarizes the carrying value of Peoples' other investment securities:

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(Dollars in thousands)	March 31, 2022		December 31, 2021
FHLB stock	$	17,308	$	17,308
FRB stock	21,189		13,311
Nonqualified deferred compensation	2,222		2,240
Equity investment securities	337		344
Other investment securities	784		784
Total other investment securities	$	41,840	$	33,987

During the three months ended March 31, 2022, Peoples purchased $7.9 million of FRB stock as requested by the FRB as a result of the Premier acquisition.

During the three months ended March 31, 2022 and 2021, Peoples recorded the change in the fair value of equity investment securities held during the period, in "Other non-interest income", resulting in an unrealized loss of $7,000 and an unrealized gain of $31,000.

At March 31, 2022, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity.

Pledged Securities

Peoples has pledged available-for-sale investment securities and held-to-maturity investment securities to secure public and trust department deposits, and repurchase agreements in accordance with federal and state requirements. Peoples has also pledged available-for-sale investment securities to secure additional borrowing capacity at the FHLB and the FRB as well as to derivative counterparties as collateral on unrealized interest rate swaps.

The following table summarizes the carrying value of Peoples' pledged securities:


	Carrying Amount
(Dollars in thousands)	March 31, 2022		December 31, 2021

Securing public and trust department deposits, and repurchase agreements:
Available-for-sale	$	835,391	$	795,496
Held-to-maturity	275,525		160,643
Securing collateral for cash flow hedge swaps:
Available-for-sale	5,711		18,208
Held-to-maturity	—		9,936
Securing additional borrowing capacity at the FHLB and the FRB:
Available-for-sale	5,686		6,504
Held-to-maturity	543		549

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Note 4 Loans and Leases

Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint. Peoples also originates insurance premium finance loans and leases nationwide through its Peoples Premium Finance and North Star Leasing divisions, and Vantage Financial, LLC ("Vantage") subsidiary, respectively. Loans and leases throughout this document are referred to as "total loans" and "loans held for investment".

The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows:


(Dollars in thousands)	March 31, 2022		December 31, 2021
Construction	$	238,305	$	210,232
Commercial real estate, other	1,457,232		1,550,081
Commercial and industrial	887,151		891,392
Premium finance	145,813		136,136
Leases	267,068		122,508
Residential real estate	756,429		771,718
Home equity lines of credit	162,288		163,593
Consumer, indirect	524,778		530,532
Consumer, direct	107,390		104,652
Deposit account overdrafts	699		756
Total loans, at amortized cost	$	4,547,153	$	4,481,600

On March 7, 2022, Peoples completed the acquisition of Vantage, which included $140.3 million of leases. During the first quarter of 2022, Peoples experienced elevated levels of payoffs and amortization of previously-acquired loans, which partially offset loan growth.

Peoples is a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender. At March 31, 2022, the PPP loans had an amortized cost of $41.9 million, and were included in the commercial and industrial loan balances. As of March 31, 2022, deferred loan origination fees, net of deferred origination costs, totaled $1.0 million for PPP loans. During the first quarter of 2022, Peoples recorded amortization of net deferred loan origination fees of $1.2 million on PPP loans compared to $4.7 million for the first quarter of 2021. The remaining net deferred loan origination fees will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in "Net interest income".

Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $11.2 million at March 31, 2022 and $12.0 million at December 31, 2021.

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Nonaccrual and Past Due Loans

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due.

The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing were as follows:


	March 31, 2022				December 31, 2021
(Dollars in thousands)	Nonaccrual (a)		Accruing Loans 90+ Days Past Due		Nonaccrual (a)		Accruing Loans 90+ Days Past Due
Construction	$	6	$	—	$	6	$	90
Commercial real estate, other	14,942		603		17,067		689
Commercial and industrial	3,393		53		3,572		1,139
Premium finance	—		613		—		865
Leases	1,731		3,921		1,581		—
Residential real estate	9,135		677		9,647		805
Home equity lines of credit	937		75		1,039		50
Consumer, indirect	1,628		17		1,574		—
Consumer, direct	231		—		279		85
Total loans, at amortized cost	$	32,003	$	5,959	$	34,765	$	3,723

(a) There were $3.0 million of nonaccrual loans for which there was no allowance for credit losses at March 31, 2022 and $2.6 million at December 31, 2021.

During the first three months of 2022, nonaccrual loans declined compared to December 31, 2021, which was due to the payoff of one commercial relationship, coupled with other smaller reductions. The increase in accruing loans 90+ days past due, compared to December 31, 2021, was the result of the additional leases acquired from Vantage, the majority of which related to in-process renewals. As of March 31, 2022, the short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers, Peoples had made were insignificant. Under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. As such, these modifications made in accordance with the CARES Act were not included in Peoples' nonaccrual or accruing loans 90+ days past due at March 31, 2022.

The amount of interest income recognized on loans past due 90 days or more during the three months ended March 31, 2022 was $0.3 million.

The following table presents the aging of the amortized cost of past due loans:


	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
March 31, 2022
Construction	$	—	$	50	$	—	$	50	$	238,255	$	238,305
Commercial real estate, other	1,348		402		11,607		13,357		1,443,875		1,457,232
Commercial and industrial	2,195		344		2,528		5,067		882,084		887,151
Premium finance	488		396		613		1,497		144,316		145,813
Leases	691		2,097		4,318		7,106		259,962		267,068
Residential real estate	7,594		1,408		4,827		13,829		742,600		756,429
Home equity lines of credit	1,305		178		576		2,059		160,229		162,288
Consumer, indirect	3,432		648		537		4,617		520,161		524,778
Consumer, direct	243		27		110		380		107,010		107,390
Deposit account overdrafts	—		—		—		—		699		699
Total loans, at amortized cost	$	17,296	$	5,550	$	25,116	$	47,962	$	4,499,191	$	4,547,153

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	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
December 31, 2021
Construction	$	658	$	—	$	90	$	748	$	209,484	$	210,232
Commercial real estate, other	2,891		1,600		12,561		17,052		1,533,029		1,550,081
Commercial and industrial	1,132		1,278		3,595		6,005		885,387		891,392
Premium finance	751		266		865		1,882		134,254		136,136
Leases	426		247		1,581		2,254		120,254		122,508
Residential real estate	8,276		2,241		5,188		15,705		756,013		771,718
Home equity lines of credit	1,137		619		625		2,381		161,212		163,593
Consumer, indirect	4,220		895		615		5,730		524,802		530,532
Consumer, direct	457		135		200		792		103,860		104,652
Deposit account overdrafts	—		—		—		—		756		756
Total loans, at amortized cost	$	19,948	$	7,281	$	25,320	$	52,549	$	4,429,051	$	4,481,600

Delinquency trends remained stable, as 98.9% of Peoples' loan portfolio was considered “current” at March 31, 2022, compared to 98.8% at December 31, 2021.

Pledged Loans

Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, home equity lines of credit and commercial real estate loans under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged eligible commercial and industrial loans to secure borrowings with the FRB. Loans pledged are summarized as follows:


(Dollars in thousands)	March 31, 2022		December 31, 2021
Loans pledged to FHLB	$	778,724	$	769,863
Loans pledged to FRB	354,788		294,728

Credit Quality Indicators

As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2021 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible credit deterioration. Loan relationships whose aggregate credit exposure to Peoples is equal to or less than $1.0 million are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, including loans acquired from Premier Financial Bancorp, Inc. ("Premier"), is as follows:

“Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.

“Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position.

“Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected.

“Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain

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important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of each of these loans as an estimated loss is deferred until its more exact status may be determined.

“Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category.

Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” or “loss” consistent with the regulatory definitions and requirements of these classes. Leases are categorized as "special mention", "substandard", or "loss" based upon delinquency status and the prospect of collecting the remaining net investment balance owed under the lease. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as “pass" for disclosure purposes.

The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at March 31, 2022:



	Term Loans at Amortized Cost by Origination Year														Revolving Loans Converted to Term
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans				Total Loans
Construction
Pass	$	10,938	$	103,230	$	82,437	$	28,828	$	1,505	$	3,778	$	2,230	$	8,303	$	232,946
Special mention	—		290		—		—		735		2,088		—		—		3,113
Substandard	—		—		—		936		74		1,236		—		—		2,246


Total	10,938		103,520		82,437		29,764		2,314		7,102		2,230		8,303		238,305
Commercial real estate, other
Pass	41,514		233,605		237,601		211,205		123,682		474,266		22,142		5,788		1,344,015
Special mention	—		369		2,990		7,204		3,803		29,427		—		47		43,793
Substandard	—		685		1,790		1,548		692		64,160		363		34		69,238
Doubtful	—		—		—		—		—		170		—		—		170
Loss	—		—		—		—		—		16		—		—		16
Total	41,514		234,659		242,381		219,957		128,177		568,039		22,505		5,869		1,457,232
Commercial and industrial
Pass	42,086		244,652		102,825		83,851		51,733		123,134		185,861		14,262		834,142
Special mention	—		80		11,521		2,765		2,135		5,348		11,783		8		33,632
Substandard	50		452		1,757		2,357		1,303		8,431		3,646		354		17,996
Doubtful	—		—		—		—		—		1,120		261		100		1,381

Total	42,136		245,184		116,103		88,973		55,171		138,033		201,551		14,724		887,151
Premium finance
Pass	78,071		67,706		—		36		—		—		—		—		145,813




Total	78,071		67,706		—		36		—		—		—		—		145,813
Leases
Pass	37,400		120,040		57,017		31,453		8,625		2,978				—		257,513
Special mention	29		5,084		143		191		92		—						5,539
Substandard	249		2,154		475		597		536		5						4,016
Total	37,678		127,278		57,635		32,241		9,253		2,983		—		—		267,068

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	Term Loans at Amortized Cost by Origination Year														Revolving Loans Converted to Term
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans				Total Loans
Residential real estate
Pass	25,271		143,964		67,907		48,501		32,489		421,537		—		—		739,669

Substandard	—		—		—		—		—		16,569		—		—		16,569

Loss	—		—		—		—		—		191		—		—		191
Total	25,271		143,964		67,907		48,501		32,489		438,297		—		—		756,429
Home equity lines of credit
Pass	7,216		36,184		21,568		17,212		15,275		63,211		1,622		3,705		162,288




Total	7,216		36,184		21,568		17,212		15,275		63,211		1,622		3,705		162,288
Consumer, indirect
Pass	54,119		206,803		144,551		55,214		39,004		25,087		—		—		524,778




Total	54,119		206,803		144,551		55,214		39,004		25,087		—		—		524,778
Consumer, direct
Pass	16,378		42,203		23,228		11,259		6,952		7,370		—		—		107,390




Total	16,378		42,203		23,228		11,259		6,952		7,370		—		—		107,390
Deposit account overdrafts	699		—		—		—		—		—		—		—		699
Total loans, at amortized cost	$	314,020	$	1,207,501	$	755,810	$	503,157	$	288,635	$	1,250,122	$	227,908	$	32,601	$	4,547,153

The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at December 31, 2021:



	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Construction
Pass	$	85,276	$	78,026	$	29,514	$	3,498	$	1,233	$	2,982	$	2,411	$	6,948	$	202,940
Special mention	290		—		—		735		3,850		137		—		—		5,012
Substandard	—		—		947		77		153		1,103		—		—		2,280


Total	85,566		78,026		30,461		4,310		5,236		4,222		2,411		6,948		210,232
Commercial real estate, other
Pass	253,259		259,113		217,938		143,094		143,975		392,212		21,320		11,940		1,430,911
Special mention	157		2,716		7,875		3,839		6,292		31,626		—		49		52,505
Substandard	—		1,675		824		691		3,124		59,415		371		37		66,100
Doubtful	—		—		—		—		—		542		—		—		542
Loss	—		—		—		—		—		23		—		—		23
Total	253,416		263,504		226,637		147,624		153,391		483,818		21,691		12,026		1,550,081
Commercial and industrial
Pass	299,117		105,646		84,144		56,361		22,182		100,030		174,848		15,888		842,328
Special mention	82		11,745		2,559		2,179		132		5,445		7,563		9		29,705
Substandard	465		2,059		2,691		812		4,995		3,342		3,085		367		17,449
Doubtful	—		—		—		—		—		1,648		262		100		1,910

Total	299,664		119,450		89,394		59,352		27,309		110,465		185,758		16,364		891,392
Premium finance
Pass	135,896		240		—		—		—		—		—		—		136,136
Total	135,896		240		—		—		—		—		—		—		136,136

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	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Leases
Pass	78,048		25,954		13,368		2,972		337		—				—		120,679
Special mention	34		29		22		159		4		—						248
Substandard	196		438		462		479		6		—						1,581
Total	78,278		26,421		13,852		3,610		347		—		—		—		122,508
Residential real estate
Pass	141,845		74,169		53,434		33,690		44,377		407,541		—		—		755,056

Substandard	—		—		—		—		—		16,302		—		—		16,302

Loss	—		—		—		—		—		360		—		—		360
Total	141,845		74,169		53,434		33,690		44,377		424,203		—		—		771,718
Home equity lines of credit
Pass	35,898		23,276		18,035		16,124		14,991		53,302		1,967		3,287		163,593




Total	35,898		23,276		18,035		16,124		14,991		53,302		1,967		3,287		163,593
Consumer, indirect
Pass	226,287		163,830		63,353		45,672		21,754		9,636		—		—		530,532




Total	226,287		163,830		63,353		45,672		21,754		9,636		—		—		530,532
Consumer, direct
Pass	47,308		26,792		13,293		8,411		3,218		5,630		—		—		104,652




Total	47,308		26,792		13,293		8,411		3,218		5,630		—		—		104,652
Deposit account overdrafts	756		—		—		—		—		—		—		—		756
Total loans, at amortized cost	$	1,304,914	$	775,708	$	508,459	$	318,793	$	270,623	$	1,091,276	$	211,827	$	38,625	$	4,481,600

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Collateral Dependent Loans

Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

• Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development, and other commercial and industrial real estate in process of construction.

•Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.

•Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property.

•Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.

•Home equity lines of credit are generally secured by second mortgages on residential real estate property.

•Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.

•Leases are secured by commercial equipment and other essential business assets.

•Premium finance loans are secured by the unearned portion of the insurance premium being financed.

The following table details Peoples' amortized cost of collateral dependent loans:


(Dollars in thousands)	March 31, 2022		December 31, 2021

Construction	$	1,279		$	1,291
Commercial real estate, other	12,333			37,220
Commercial and industrial	3,139			8,340
Residential real estate	2,007			2,877
Home equity lines of credit	388			391


Total collateral dependent loans	$	19,146		$	50,119

The decrease in collateral dependent loans at March 31, 2022, compared to December 31, 2021, was primarily due to three large commercial relationships that were no longer considered collateral dependent at March 31, 2022.

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Troubled Debt Restructurings

The following tables summarize the loans that were modified as TDRs during the three months ended March 31:


		Three Months Ended
		Recorded Investment (a)
(Dollars in thousands)	Number of Contracts	Pre-Modification		Post-Modification		Remaining Recorded Investment
March 31, 2022
Construction	1	$	344	$	344	$	343
Commercial real estate, other	1	102		102		102
Commercial and industrial	1	4		4		4

Residential real estate	10	493		502		501
Home equity lines of credit	1	22		22		21
Consumer, indirect	10	106		106		105
Consumer, direct	2	14		14		14
Consumer	12	120		120		119
Total	26	$	1,085	$	1,094	$	1,090

March 31, 2021
Construction	1	$	344	$	344	$	344



Residential real estate	3	170		174		172
Home equity lines of credit	1	46		46		46
Consumer, indirect	4	78		78		78
Consumer, direct	3	18		18		18
Consumer	7	96		96		96
Total	12	$	656	$	660	$	658
(a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Three Months Ended

On March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19. In this guidance, short-term modifications, made on a good faith basis in response to COVID-19, to borrowers who were current prior to any relief, are not considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment which are insignificant. Under the guidance, borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not in the scope of accounting for TDRs, as defined in ASC 310-40.

Peoples did not have any loans that were modified as a TDR during the first three months ended March 31, 2022 or March 31, 2021 that subsequently defaulted (i.e., 90 days or more past due following a modification during the year).

Peoples had no commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR.

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Allowance for Credit Losses

Changes in the allowance for credit losses for the three months ended March 31, 2022 and March 31, 2021 are summarized below:


(Dollars in thousands)	Beginning Balance, December 31, 2021		Initial Allowance for Acquired Purchased Credit Deteriorated Assets		(Recovery of) Provision for Credit Losses (a)		Charge-offs		Recoveries		Ending Balance, March 31, 2022
Construction	$	2,999	$	—	$	(268)	$	—	$	—	$	2,731
Commercial real estate, other	29,147		(217)		(7,646)		(278)		49		21,055
Commercial and industrial	11,063		(165)		(325)		(463)		4		10,114
Premium finance	379		—		(20)		(14)		—		345
Leases	4,797		132		1,243		(473)		176		5,875
Residential real estate	7,233		(521)		78		(309)		14		6,495
Home equity lines of credit	2,005		(11)		(113)		(16)		29		1,894
Consumer, indirect	5,326		(41)		186		(385)		86		5,172
Consumer, direct	961		—		200		(136)		11		1,036
Deposit account overdrafts	57		—		199		(259)		54		51
Total	$	63,967	$	(823)	$	(6,466)	$	(2,333)	$	423	$	54,768

(a)Amount does not include the provision for the allowance for credit losses on unfunded commitments.


(Dollars in thousands)	Beginning Balance, December 31, 2020		(Recovery of) Provision for Credit Losses (a)		Charge-offs		Recoveries		Ending Balance, March 31, 2021
Construction	$	1,887	$	(1,058)	$	—	$	—	$	829
Commercial real estate, other	17,536		455		(157)		—		17,834
Commercial and industrial	12,763		(2,362)		(293)		—		10,108
Premium finance	1,095		81		(16)		—		1,160

Residential real estate	6,044		(991)		(133)		15		4,935
Home equity lines of credit	1,860		(358)		(12)		4		1,494
Consumer, indirect	8,030		(108)		(505)		105		7,522
Consumer, direct	1,081		(101)		(36)		26		970
Deposit account overdrafts	63		31		(103)		54		45
Total	$	50,359	$	(4,411)	$	(1,255)	$	204	$	44,897

(a)Amount does not include the provision for the allowance for credit losses on unfunded commitments.

(Dollars in thousands)

(a)Amount does not include the provision for the allowance for credit losses on unfunded commitments.

(Dollars in thousands)

(a)Peoples adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) on January 1, 2020.

(b)Amount does not include the provision for the allowance for credit losses on unfunded commitments.

During the first quarter of 2022, Peoples recorded a recovery of credit losses of $6.8 million driven by a continued improvement in economic factors and changes in loss drivers used in the CECL model. Leases designated as purchased-credit deteriorated ("PCD") acquired from Vantage increased the allowance for credit losses by $132,000. Net charge-offs for the first quarter of 2022 were $1.9 million, and included charge-offs of two commercial and industrial loans aggregating $0.7 million.

At March 31, 2022, Peoples had recorded an allowance for unfunded commitments of $2.2 million, a decrease compared to $2.5 million at December 31, 2021. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets. The change in the allowance for unfunded commitments is also reflected in the "Recovery of credit losses" line of the Unaudited Consolidated Statements of Operations.

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Note 5 Goodwill and Other Intangible Assets

Goodwill

The following table details changes in the recorded amount of goodwill:


(Dollars in thousands)	March 31, 2022		December 31, 2021
Goodwill, beginning of year	$	264,193	$	171,260
Goodwill recorded from acquisitions	39,458		92,933
Goodwill, end of period	$	303,651	$	264,193

Peoples Bank entered into an Asset Purchase Agreement, dated March 7, 2022 with Vantage, at which point Vantage became a legal subsidiary of Peoples Bank. In the current quarter, Peoples preliminarily recorded $40.4 million of goodwill related to this acquisition, which was offset by adjustments to Premier's goodwill balance during the measurement period. On April 1, 2021, Peoples recorded $24.7 million of goodwill related to the acquisition of NS Leasing, LLC ("NSL"). On May 4, 2021, Peoples Insurance recorded $46,000 of goodwill from the acquisition of an insurance agency. On September 17, 2021, Peoples completed the merger with Premier, for which Peoples preliminarily recorded $67.2 million of goodwill. For additional information on these acquisitions, refer to "Note 13 Acquisitions."

Other Intangible Assets

Other intangible assets were comprised of the following at end of period, March 31, 2022, and end of year, December 31, 2021:


(Dollars in thousands)	Core Deposits		Customer Relationships		Total
March 31, 2022
Gross intangibles	$	26,467	$	25,174	$	51,641
Intangibles recorded from acquisitions (a)	—		11,990		11,990
Accumulated amortization	(19,464)		(10,561)		(30,025)
Total acquisition-related intangibles	$	7,003	$	26,603	$	33,606
Servicing rights					2,117
Indefinite-lived intangibles (b)					2,491
Total other intangibles					$	38,214

December 31, 2021
Gross intangibles	$	22,233	$	12,495	$	34,728
Intangibles recorded from acquisitions (c)	4,233		13,014		17,247
Accumulated amortization	(19,048)		(9,603)		(28,651)
Total acquisition-related intangibles	$	7,418	$	15,906	$	23,324
Servicing rights					2,218
Indefinite-lived intangibles (d)					1,274
Total other intangibles					$	26,816

(a) Customer Relationship intangible assets included $1.2 million of non-compete intangible assets related to the Vantage acquisition.

(b) Included $1.2 million of trade name intangible assets related to the Vantage acquisition and $1.3 million of trade name

intangible assets related to the NSL acquisition.

(c) Customer Relationship intangible assets consisted of $0.3 million of non-compete intangible assets related to the NSL acquisition.

(d) Included $1.3 million of trade name intangible assets related to the NSL acquisition.

Other intangible assets preliminarily recorded for the three months ended March 31, 2022 included $10.8 million of customer relationship intangible assets, $1.2 million of trade name intangible assets, and $1.2 million of non-compete intangible assets related to the Vantage acquisition.

Other intangible assets recorded in 2021 included $12.7 million of customer relationship intangible assets related to the NSL acquisition, $4.2 million of core deposit intangible assets related to the Premier merger, and $0.3 million of non-compete intangible assets, and $1.3 million of trade name intangible assets, both related to the NSL acquisition. Refer to "Note 13 Acquisitions" for additional information.

The following table details estimated aggregate future amortization of other intangible assets at March 31, 2022:

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(Dollars in thousands)	Core Deposits		Customer Relationships		Total
2022	$	1,204	$	4,558	$	5,762
2023	1,257		5,888		7,145
2024	1,058		5,014		6,072
2025	891		3,944		4,835
2026	731		2,803		3,534
Thereafter	1,862		4,396		6,258
Total	$	7,003	$	26,603	$	33,606

The weighted average amortization period of other intangible assets is 9.8 years.

Servicing Rights

The following is an analysis of activity of servicing rights for the periods ended March 31, 2022 and December 31, 2021:


(Dollars in thousands)	March 31, 2022		December 31, 2021
Balance, beginning of year	$	2,218	$	2,486
Amortization	(167)		(775)
Servicing rights originated	66		519

Valuation allowance	—		(12)
Balance, end of period	$	2,117	$	2,218

Peoples accounts for its servicing rights under the amortization method, recognizing a valuation allowance when amortized cost exceeds fair value. As of March 31, 2022, Peoples recorded a minimal addition to the valuation allowance related to changes in the fair value of servicing rights. During 2021, Peoples recorded a valuation allowance of $12,000 related to the decrease in the fair value of servicing rights.

The following is the breakdown of the discount rates and prepayment speeds of servicing rights for the periods ended March 31, 2022 and December 31, 2021:


	March 31, 2022				December 31, 2021
	Minimum		Maximum		Minimum		Maximum
Discount rates	8.5	%	11.0	%	8.3	%	10.8	%
Prepayment speeds	12.6	%	22.7	%	8.9	%	27.1	%

The fair value of servicing rights was $3.0 million and $2.6 million at March 31, 2022 and December 31, 2021, respectively.

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Note 6 Deposits

Peoples’ deposit balances were comprised of the following:


(Dollars in thousands)	March 31, 2022		December 31, 2021
Retail CDs:
$100 or more	$	305,357	$	320,574
Less than $100	307,579		323,185
Retail CDs	612,936		643,759
Interest-bearing deposit accounts	1,179,199		1,167,460
Savings accounts	1,065,678		1,036,738
Money market deposit accounts	656,266		651,169
Governmental deposit accounts	734,784		617,259

Brokered deposit accounts (a)	87,395		104,745
Total interest-bearing deposits	4,336,258		4,221,130
Non-interest-bearing deposits	1,666,668		1,641,422
Total deposits	$	6,002,926	$	5,862,552

Time deposits that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") limit of $250,000 were $118.1 million and $121.3 million at March 31, 2022 and December 31, 2021, respectively.

The contractual maturities of retail CDs, brokered CDs and demand deposits for each of the next five years and thereafter are as follows:


(Dollars in thousands)	Retail		Brokered		Total
Remaining nine months ending December 31, 2022 (a)	$	366,748	$	86,901	$	453,649
Year ending December 31, 2023	121,358		494		121,852
Year ending December 31, 2024	69,069		—		69,069
Year ending December 31, 2025	25,252		—		25,252
Year ending December 31, 2026	26,079		—		26,079
Thereafter	4,430		—		4,430
Total CDs	$	612,936	$	87,395	$	700,331

(a) Brokered deposit accounts include $85.0 million of brokered demand deposits.

At March 31, 2022, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $125.0 million, of which $85.0 million were funded by brokered demand and savings deposits. Brokered demand deposits hedged by interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments."

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Note 7 Stockholders’ Equity

The following table details the progression in Peoples’ common shares and treasury stock during the three months ended March 31, 2022:


	Common Shares	Treasury Stock
Shares at December 31, 2021	29,814,401	1,577,359
Changes related to stock-based compensation awards:

Release of restricted common shares	—	35,474
Cancellation of restricted common shares	—	1,377

Grant of restricted common shares	—	(171,499)
Grant of unrestricted common shares	—	(700)
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock	—	2,203


Common shares issued under dividend reinvestment plan	10,283	—
Common shares issued under compensation plan for Boards of Directors	—	(3,964)

Common shares issued under employee stock purchase plan	—	(5,809)


Shares at March 31, 2022	29,824,684	1,434,441

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. At March 31, 2022, Peoples had not repurchased any common shares under the share repurchase program authorized on January 28, 2021.

Under Peoples' Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by Peoples' Board of Directors. At March 31, 2022, Peoples had no preferred shares issued or outstanding.

On April 25, 2022, Peoples' Board of Directors declared a quarterly cash dividend of $0.38 per common share, payable on May 23, 2022, to shareholders of record on May 9, 2022. The following table details the cash dividends declared per common share during the two quarters of 2022 and the comparable periods of 2021:


	2022		2021
First quarter	$	0.36	$	0.35
Second quarter	0.38		0.36


Total dividends declared	$	0.74	$	0.71

Accumulated Other Comprehensive (Loss) Income

The following table details the change in the components of Peoples’ accumulated other comprehensive (loss) income for the three months ended March 31, 2022:


(Dollars in thousands)	Unrealized Loss on Securities		Unrecognized Net Pension and Postretirement Costs		Unrealized (Loss) Gain on Cash Flow Hedge		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2021	$	(5,946)	$	(1,881)	$	(3,792)	$	(11,619)
Reclassification adjustments to net income:
Realized gain on sale of securities, net of tax	(100)		—		—		(100)

Other comprehensive (loss) income, net of reclassifications and tax	(55,189)		5		4,236		(50,948)
Balance, March 31, 2022	$	(61,235)	$	(1,876)	$	444	$	(62,667)

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Note 8 Employee Benefit Plans

Peoples sponsors a noncontributory defined benefit pension plan that covers substantially all employees hired before January 1, 2010. The plan provides retirement benefits based on an employee’s years of service and compensation. For employees hired before January 1, 2003, the amount of postretirement benefit is based on the employee’s average monthly compensation over the highest five consecutive years out of the employee’s last ten years with Peoples while an eligible employee. For employees hired on or after January 1, 2003, the amount of postretirement benefit is based on 2% of the employee’s annual compensation during the years 2003 through 2009, plus accrued interest. Effective January 1, 2010, the pension plan was closed to new entrants. Effective March 1, 2011, the accrual of pension plan benefits for all participants was frozen. Peoples recognized this freeze as a curtailment as of December 31, 2010 and March 1, 2011, under the terms of the pension plan. Effective July 1, 2013, a participant in the pension plan who is employed by Peoples may elect to receive or to commence receiving such person's retirement benefits as of the later of such person's normal retirement date or the first day of the month first following the date such person makes an election to receive his or her retirement benefits.

Peoples also provides post-retirement health and life insurance benefits to certain former employees and directors. Only those individuals who retired before January 27, 2012 were eligible for life insurance benefits. As of January 1, 2011, all retirees who desire to participate in the Peoples Bank medical plan do so by electing COBRA, which provides up to 18 months of coverage; retirees over the age of 65 also have the option to pay to participate in a group Medicare supplemental plan. Peoples only pays 100% of the cost of health benefits for those individuals who retired before January 1, 1993. For all others, the retiree is responsible for most, if not all, of the cost of the health benefits. Peoples’ policy is to fund the cost of the benefits as they arise.

The expected long-term rate of return on plan assets, which was determined as of January 1, 2022, is 7.0%. The following table details the components of the net periodic cost for the plan described above, which is included in salaries and employee benefit costs on the Unaudited Consolidated Statements of Operations:


	Pension Benefits
	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Interest cost	$	66	$	67
Expected return on plan assets	(168)		(174)
Amortization of net loss	20		31
Settlement of benefit obligation	—		—
Net periodic income	$	(82)	$	(76)

Under US GAAP, Peoples is required to recognize a settlement gain or loss when the aggregate amount of lump-sum distributions to participants equals or exceeds the sum of the service and interest cost components of the net periodic pension cost. The amount of settlement gain or loss recognized is the pro rata amount of the unrealized gain or loss existing immediately prior to the settlement. In general, both the projected benefit obligation and the fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss.

Peoples did not record a settlement charge for the three months ended March 31, 2022 or March 31, 2021 under the noncontributory defined benefit pension plan.

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Note 9 Earnings Per Common Share

The calculations of basic and diluted earnings per common share were as follows:


	Three Months Ended
	March 31,
(Dollars in thousands, except per common share data)	2022		2021
Net income available to common shareholders	$	23,577	$	15,463
Less: Dividends paid on unvested common shares	(48)		(54)
Add: Undistributed loss allocated to unvested common shares	(21)		(15)
Net earnings allocated to common shareholders	$	23,508	$	15,394

Weighted-average common shares outstanding	28,006,165		19,282,665
Effect of potentially dilutive common shares	122,966		153,646
Total weighted-average diluted common shares outstanding	28,129,131		19,436,311

Earnings per common share:
Basic	$	0.84	$	0.80
Diluted	$	0.84	$	0.79
Anti-dilutive common shares excluded from calculation:
Restricted common shares	—		—

Note 10 Derivative Financial Instruments

Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivatives is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows.

Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments

Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions.

Cash Flow Hedges of Interest Rate Risk

Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At March 31, 2022, Peoples had entered into thirteen interest rate swap contracts with an aggregate notional value of $125.0 million. Peoples will pay a fixed rate of interest for up to ten years while receiving a floating rate component of interest equal to the three-month LIBOR rate. The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs and 90-day FHLB Advances, which will continue to be rolled through the life of the swaps. At March 31, 2022, the interest rate swaps were designated as cash flow hedges of $85.0 million in brokered demand deposits, which are expected to be extended every 90 days through the maturity dates of the swaps. The remaining $40.0 million of interest rate swaps were designated as cash flow hedges of 90-day FHLB Advances.

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For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the 90-day advances or brokered CDs are matched to the reset dates and payment dates on the receipt of the three-month LIBOR floating portion of the swaps to ensure effectiveness of the cash flow hedge. During the three months ended March 31, 2022, and March 31, 2021, Peoples had reclassifications of losses to earnings of $0.6 million and $0.8 million, respectively. During the next twelve months, based on interest rates, yield curves, and notional amounts, Peoples estimates that approximately $1.0 million of AOCI will be reclassified to interest expense.

The following table summarizes information about the interest rate swaps designated as cash flow hedges:


(Dollars in thousands)	March 31, 2022			December 31, 2021
Notional amount	$	125,000		$	125,000
Weighted average pay rates	2.26		%	2.26		%
Weighted average receive rates	2.35		%	1.1		%
Weighted average maturity	3.3 years			3.6 years
Pre-tax unrealized gain (losses) included in AOCI	$	577		$	(4,879)

The following table presents net gains recorded in AOCI and in the Unaudited Consolidated Statements of Operations related to the cash flow hedges:


	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Amount of gains recognized in AOCI, pre-tax	$	5,456	$	4,236

The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:


	March 31, 2022				December 31, 2021
(Dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in "Other assets":
Interest rate swaps related to debt	$	75,000	$	1,319	$	—	$	—

Included in "Accrued expenses and other liabilities":
Interest rate swaps related to debt	$	50,000	$	881	$	125,000	$	5,020

Non-Designated Hedges

Peoples maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this program, Peoples originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples Bank effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples Bank. Peoples Bank offsets its exposure in the swap by entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated hedges; therefore, each swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the three months ended March 31, 2022 and as of or for the year ended December 31, 2021.

The following table reflects the non-designated hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:

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	March 31, 2022				December 31, 2021
(Dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in "Other assets":
Interest rate swaps related to commercial loans	$	422,015	$	10,269	$	419,733	$	12,163

Included in "Accrued expenses and other liabilities":
Interest rate swaps related to commercial loans	$	422,015	$	10,269	$	419,733	$	12,163

Pledged Collateral

Peoples pledges or receives collateral for all interest rate swaps. When the fair value of Peoples' interest rate swaps is in a net liability position, Peoples must pledge collateral, and, when the fair value of Peoples' interest rate swaps is in a net asset position, the respective counterparties must pledge collateral. At March 31, 2022 and December 31, 2021, Peoples had zero cash pledged, while the counterparties had no amount of cash pledged at either date. Peoples had pledged $5.7 million and $28.1 million in investment securities at March 31, 2022 and December 31, 2021, respectively.

Note 11 Stock-Based Compensation

Under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 891,340. The maximum number of common shares that can be issued for incentive stock options is 500,000 common shares. Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. Additionally, in 2021, Peoples granted unrestricted common shares to non-employee directors (in addition to their directors' fees paid in common shares). In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares.

Restricted Common Shares

Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on the restricted common shares awarded to employees expire after periods ranging from one to five years. Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions. In the first three months of 2022, Peoples granted an aggregate of 154,645 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date.

The following table summarizes the changes to Peoples’ restricted common shares for the three months ended March 31, 2022:


	Time-Based Vesting			Performance-Based Vesting
	Number of Common Shares	Weighted-Average Grant Date Fair Value		Number of Common Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2022	88,922	$	25.44	247,346	$	32.19
Awarded	16,854	31.44		154,645	32.21
Released	—	—		(100,091)	32.20
Forfeited	—	—		(1,377)	32.28
Outstanding at March 31, 2022	105,776	$	26.39	300,523	$	32.19

For the three months ended March 31, 2022, the total intrinsic value for restricted common shares released was $3.3 million compared to $2.4 million for the three months ended March 31, 2021.

Stock-Based Compensation

Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted and unrestricted common shares, as well as purchases made by participants in the employee stock purchase plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. For performance unit awards, Peoples recognizes stock-based compensation over the performance period, based on the portion of the awards that was expected to vest based on the expected level of achievement of the two performance goals. Peoples also has an

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employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of 15%. The following table summarizes the amount of stock-based compensation expense and related tax benefit recognized for each period:


	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Employee stock-based compensation expense:
Stock grant expense	$	1,577	$	1,198
Employee stock purchase plan expense	28		17

Total employee stock-based compensation expense	1,605		1,215
Non-employee director stock-based compensation expense	124		195
Total stock-based compensation expense	1,729		1,410
Recognized tax benefit	(396)		(296)
Net stock-based compensation expense	$	1,333	$	1,114

Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in the three months ended March 31, 2022 and 2021. The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date. Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $5.3 million at March 31, 2022, which will be recognized over a weighted-average period of 2.3 years.

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Note 12 Revenue

The following table details Peoples' revenue from contracts with customers:


	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Insurance income:
Commission and fees from sale of insurance policies (a)	$	3,313	$	3,177
Fees related to third-party administration services (a)	72		94
Performance-based commissions (b)	1,346		1,950
Trust and investment income (a)	4,276		3,845
Electronic banking income:
Interchange income (a)	4,113		3,046
Promotional and usage income (a)	1,140		865
Deposit account service charges:
Ongoing maintenance fees for deposit accounts (a)	1,311		810
Transactional-based fees (b)	2,115		1,175
Commercial loan swap fees (b)	168		60
Other non-interest income transactional-based fees (b)	257		144
Total revenue from contracts with customers	$	18,111	$	15,166
Timing of revenue recognition:
Services transferred over time	$	14,225	$	11,837
Services transferred at a point in time	3,886		3,329
Total revenue from contracts with customers	$	18,111	$	15,166

(a) Services transferred over time.

(b) Services transferred at a point in time.

Peoples records contract assets for income that has been recognized over a period of time for fulfillment of performance obligations, but has not yet been received related to electronic banking income and certain insurance income. This income typically relates to bonuses for which Peoples is eligible, but will not receive until a certain time in the future. Peoples records contract liabilities for payments received for commission income related to the sale of insurance policies, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled, which is over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled related to electronic banking income.

The following table details the changes in Peoples' contract assets and contract liabilities for the three-month period ended March 31, 2022:


	Contract Assets		Contract Liabilities
(Dollars in thousands)
Balance, January 1, 2022	$	743	$	4,811
Additional income receivable	74		—


Recognition of income previously deferred	—		(349)
Balance, March 31, 2022	$	817	$	4,462

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Note 13 Acquisitions

Vantage Financial, LLC

On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage Financial, LLC (“Vantage”), a nationwide provider of equipment financing headquartered in Excelsior, Minnesota. Peoples Bank acquired assets comprising Vantage's lease business, including $140.2 million in leases and certain third-party debt in the amount of $107.4 million. Under the terms of the agreement, Peoples Bank paid cash consideration of $54.0 million, and also repaid $28.9 million in recourse debt on behalf of Vantage, for total consideration of $82.9 million. Vantage offers mid-ticket equipment leases, primarily for business essential information technology equipment across a wide-array of industries.

Peoples recorded acquisition-related expenses related to the Vantage acquisition, which included $0.8 million in professional fees.

The following table provides the preliminary purchase price calculation as of the date of the acquisition of Vantage, and the assets acquired and liabilities assumed at their estimated fair values. Peoples recorded the estimates of fair value based on initial valuations available at March 7, 2022. Due to the timing of the transaction closing date and the filing date for this Form 10-Q, these estimated fair values were considered preliminary as of March 31, 2022, and are subject to adjustment for up to one year after March 7, 2022. Valuations subject to change include leases, other intangible assets and borrowings.


(Dollars in thousands)	Fair Value







Total Purchase Price	$	82,893


Net assets at fair value
Assets
Cash and due from banks	$	1,444







Leases	140,346







Allowance for credit losses	(132)
Net leases	140,214



Bank premises and equipment	1,926
Other intangible assets	13,207
Other assets	1,603

Total assets	$	158,394
Liabilities
Borrowings	$	107,409





Accrued expenses and other liabilities	$	8,479
Total liabilities	$	115,888
Net assets	$	42,506
Goodwill	$	40,387

The goodwill recorded in connection with the Vantage acquisition is related to expected synergies to be gained from the combination of Vantage with Peoples' operations. The employees retained from the Vantage acquisition should allow Peoples to continue to grow the lease portfolio, along with Peoples' resources, and should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill.

Premier Financial Bancorp, Inc.

On September 17, 2021, Peoples completed its merger with Premier. Premier merged into Peoples, and Premier’s wholly-owned subsidiaries, Premier Bank, Inc., and Citizens Deposit Bank and Trust, Inc., which combined operate 48 branches in Kentucky, Maryland, Ohio, Virginia, West Virginia and Washington, D.C., merged into Peoples’ wholly-owned subsidiary, Peoples Bank. As consideration, Premier shareholders were paid 0.58 common shares of Peoples for each full share of Premier that was owned at the acquisition date, resulting in the issuance of 8,589,685 common shares by Peoples, or $261.9 million. Peoples accounted for this transaction as a business combination under the acquisition method. Peoples completed the merger in an effort to diversify and expand its franchise, and further enhance its size and scale. Peoples believes the growth potential, and attractive market areas will benefit its future financial performance.

Peoples recorded acquisition-related expenses related to the Premier merger during the first quarter of 2022 of $137,000.

Peoples recorded the estimate of fair value based on initial valuations available at September 17, 2021, and has revised fair values of the acquired assets and liabilities in the periods since based on subsequent information obtained where those facts and

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circumstances existed as of the acquisition date. The estimates of fair value are subject to adjustment for up to one year after September 17, 2021. Valuations subject to change include loans and deferred tax assets and liabilities.

The following table provides the preliminary purchase price calculation as of the date of the merger with Premier, and the assets acquired and liabilities assumed at their estimated fair values.


(Dollars in thousands)	Unpaid Principal Balance	Fair Value




Premier common shares		14,811,200
Number of common shares of Peoples issued for each common share of Premier		0.58
Price per Peoples common share, based at closing date		$	30.49
Common share consideration		261,899
Cash paid in lieu of fractional common shares		25
Total consideration		$	261,924
Net assets at fair value
Assets
Cash and due from banks		$	248,360
Interest-bearing deposits in other banks		1,025
Total cash and cash equivalents		249,385
Available-for-sale investment securities		551,953

Other investment securities		4,159
Total investment securities		556,112

Loans:
Construction	97,262	96,025
Commercial real estate, other	544,950	534,850
Commercial and industrial	132,293	132,083

Residential real estate	332,269	331,552
Home equity lines of credit	46,969	45,910

Consumer	20,961	21,513
Total loans	1,174,704	1,161,933


Allowance for credit losses (on PCD loans)		(15,988)
Net loans		1,145,945
Bank premises and equipment		30,098
Other intangible assets		4,233
OREO		11,081
Other assets		27,067
Total assets		$	2,023,921
Liabilities
Deposits:
Non-interest-bearing		$	733,157
Interest-bearing		1,018,387
Total deposits		1,751,544
Short-term borrowings		63,807
Long-term borrowings		6,070
Accrued expenses and other liabilities		7,813
Total liabilities		1,829,234
Net assets		194,687
Goodwill		$	67,237

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The estimated fair values presented in the above table reflect additional information that was obtained during the three months ended March 31, 2022, which resulted in changes to certain fair value estimates made as of the date of acquisition. Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously recorded results have changed. The below table reflects the changes in the estimated fair value as they impact goodwill at March 31, 2022:


(Dollars in thousands)	Change in fair value
Net assets


Net loans	$	(1,198)


Other assets	268

Change in goodwill	$	(930)

Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes loans that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" loans. Acquired purchased credit deteriorated loans are reported net of the unamortized fair value adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The following table details the fair value adjustment for acquired purchased credit deteriorated loans as of the acquisition date:



(Dollars in thousands)	Par Value		Allowance for Credit Losses		Non-Credit (Discount) Premium		Fair Value
Purchased credit deteriorated loans
Construction	$	20,143	$	(2,005)	$	(214)	$	17,924
Commercial real estate, other	97,991		(9,286)		(2,112)		86,593
Commercial and industrial	11,285		(3,883)		210		7,612

Residential real estate	18,001		(685)		(250)		17,066
Home equity lines of credit	1,291		(55)		(72)		1,164

Consumer	929		(74)		37		892
Fair value	$	149,640	$	(15,988)	$	(2,401)	$	131,251

Pikeville, Kentucky Insurance Agency

On May 4, 2021, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc. Total consideration for this transaction was $325,000. Peoples accounted for this transaction as a business combination under the acquisition method.

NS Leasing, LLC

Peoples Bank entered into an Asset Purchase Agreement, dated March 24, 2021 with NS Leasing, LLC, which is headquartered in Burlington, Vermont, and does business as “North Star Leasing”. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as a division of Peoples Bank on April 1, 2021. Peoples Bank acquired assets comprising NSL’s equipment finance business and assumed from NSL certain specified liabilities for total cash consideration of $116.5 million, plus a potential earnout payment to NSL of up to $3.1 million. Peoples Bank acquired $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million. NSL underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded goodwill in the amount of $24.7 million and other intangibles of $14.0 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction. Peoples also recorded and paid an earn-out provision of approximately $3.0 million. As of March 31, 2022, leases had grown to $136.6 million. Peoples accounted for this transaction as a business combination under the acquisition method.

The recorded goodwill associated with the NSL acquisition is related to expected synergies and operational efficiencies to be gained from the combination of NSL with Peoples' operations. The employees retained from the NSL acquisition should allow Peoples to continue to grow the lease portfolio, along with Peoples' resources, and should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill.

The following table provides the purchase price calculation as of the date of acquisition for NSL and the assets acquired and liabilities assumed at their recorded fair values.

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(Dollars in thousands)
Total purchase price (a)	$	118,846







Net assets at fair value
Assets
Cash and due from banks	$	216









Net leases	82,833
Bank premises and equipment, net of accumulated depreciation	470
Other intangible assets	14,009
Other assets	1,225
Total assets	$	98,753
Liabilities





Accrued expenses and other liabilities	$	4,627
Total liabilities	$	4,627
Net assets	$	94,126
Goodwill	$	24,720

(a) Includes preliminary contingent consideration related to the bonus earn-out provision of $2.3 million. Peoples recorded an additional $0.7 million in non-interest expense related to an update to the estimated earn-out provision.

Leases acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes leases that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" leases. These leases are recorded at the purchase price, and an allowance for credit losses is determined using the same methodology as for other leases. Acquired purchased credit deteriorated leases are reported net of the unamortized fair value adjustment.

The following table details the fair value adjustment for acquired purchased credit deteriorated leases as of the acquisition date:


(Dollars in thousands)	NSL
Purchased credit deteriorated leases
Par value	$	5,248
Allowance for credit losses	(493)
Non-credit premium	85
Fair value	$	4,840

Peoples recorded acquisition-related expenses related to the NSL acquisition during the first quarter of 2022, which included $89,000 in professional fees.

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Note 14 Leases

Peoples has elected certain practical expedients, in accordance with Accounting Standards Codification 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842.

Lessor Arrangements

Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses.

Peoples began originating leases with the acquisition of leases from NSL in the second quarter of 2021, and expanded its lease portfolio with the acquisition of Vantage in the current quarter. The leases acquired from NSL were determined to be sales-type leases, as the premise for the leases is dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. Originated leases continue to be classified as sales-type leases. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. The leases acquired from Vantage were determined to be either sales-type or direct financing leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases consist of automotive, construction, healthcare, manufacturing, office, restaurant, information technology and other equipment. These leases include estimated residual value, which are assessed for impairment as part of the allowance for credit losses. Other non-interest income noted in the table below includes gain on the early termination of leases, syndicated leases, and other fees. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases."

The table below details Peoples' lease income:


	Three Months Ended
(Dollars in thousands)	March 31, 2022
Interest and fees on leases (a)	$	6,102
Other non-interest income	775
Total lease income	$	6,877

(a)Included in "Interest and fees on loans and leases" on the Unaudited Consolidated Statements of Operations.

For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed

Consolidated Financial Statements.

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The following table summarizes the net investments in leases, which are included in "Loans and leases, net of deferred costs" on the Unaudited Consolidated Balance Sheets:


(Dollars in thousands)	March 31, 2022
Lease payments receivable, at amortized cost	$	290,903
Estimated residual values	21,018
Initial direct costs	1,728
Deferred revenue	(46,581)
Total leases, at amortized cost	267,068
Allowance for credit losses - leases	(5,875)
Net investment in leases	$	261,193

The following table summarizes the contractual maturities of leases:


(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2022	$	56,604
Year ending December 31, 2023	68,183
Year ending December 31, 2024	71,616
Year ending December 31, 2025	53,443
Year ending December 31, 2026	30,780
Thereafter	10,277
Lease payments receivable, at amortized cost	$	290,903

Lessee Arrangements

Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years. Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability. At March 31, 2022, Peoples did not have any leases that met the criteria for finance leases. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement or remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have a ROU asset or lease liability.

The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:


	Three Months Ended
(Dollars in thousands)	March 31, 2022		March 31, 2021
Operating lease expense	$	603	$	330
Short-term lease expense	168		72
Total lease expense	$	771	$	402

Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date.

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The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown:


(Dollars in thousands)	March 31, 2022			December 31, 2021
ROU assets:
Other assets	$	7,606		$	7,911
Lease liabilities:
Accrued expenses and other liabilities	$	8,363		$	8,674
Other information:
Weighted-average remaining lease term	8.5 years			9.5 years
Weighted-average discount rate	2.15		%	2.36		%

During the three months ended March 31, 2022 and March 31, 2021, Peoples paid cash of $590,000 and $320,000, respectively, for operating leases.

The following table summarizes the maturity of remaining lease liabilities:


(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2022	$	2,090
Year ending December 31, 2023	1,985
Year ending December 31, 2024	1,184
Year ending December 31, 2025	723
Year ending December 31, 2026	553
Thereafter	3,376
Total undiscounted lease payments	$	9,911
Imputed interest	$	(1,548)
Total lease liabilities	$	8,363

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples for the three months ended March 31, 2022 and March 31, 2021. This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto.

Certain statements in this Form 10-Q, which are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate," "estimate," "may," "feel," "expect," "believe," "plan," "will," "will likely," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," "continue," "remain," and similar expressions.

These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These factors include, but are not limited to:

(1)the ever-changing effects of the global COVID-19 pandemic - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants thereof - on economies (local, national and international), supply chains and markets, on the labor market, including the potential for a sustained reduction in labor force participation, and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including public health actions directed toward the containment of the COVID-19 pandemic (such as quarantines, shut downs and other restrictions on travel and commercial, social and other activities), the availability, effectiveness and acceptance of vaccines, and the implementation of fiscal stimulus packages, which could adversely impact sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;

(2)changes in the interest rate environment due to economic conditions related to the COVID-19 pandemic or other factors and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") 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;

(3)the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the completion and successful integration of planned acquisitions, including the recently-completed merger with Premier and the recently-completed acquisitions of NSL and Vantage, and the expansion of commercial and consumer lending activities, in light of the continuing impact of the COVID-19 pandemic on customers' operations and financial condition;

(4)competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, which can in turn impact Peoples' credit spreads, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals;

(5)uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the Federal Deposit Insurance Corporation, the Federal Reserve Board and the Consumer Financial Protection Bureau, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses, including in particular the rules and regulations promulgated and to be promulgated under the CARES Act, and the follow-up legislation enacted as the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;

(6)the effects of easing restrictions on participants in the financial services industry;

(7)local, regional, national and international economic conditions (including the impact of 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 its global trading partners) and the impact these conditions may have on Peoples, its customers and its 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;

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(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 the COVID-19 pandemic and 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;

(14)the replacement of the London Interbank Offered Rate ("LIBOR") with other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;

(15)adverse changes in the conditions and trends in the financial markets, including the impacts of the COVID-19 pandemic and the related responses by governmental and nongovernmental authorities to the pandemic, 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;

(16)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;

(17)Peoples' ability to receive dividends from its subsidiaries;

(18)Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;

(19)the impact of larger or similar-sized financial institutions encountering problems, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity;

(20)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;

(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 its 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 (including as a result of the COVID-19 pandemic), legislative or regulatory initiatives (including those in response to the COVID-19 pandemic), or other factors, which may be different than anticipated;

(24)the adequacy of Peoples' internal controls and risk management program in the event of changes in strategic, reputational, market, economic, operational, cybersecurity, compliance, legal, asset/liability repricing, liquidity, credit and interest rate risks associated with Peoples' business;

(25)the impact on Peoples' businesses, personnel, facilities, or systems, of losses related to acts of fraud, theft, misappropriation or violence;

(26)the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics (including COVID-19), cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts;

(27)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;

(28)risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets;

(29)Peoples' ability to integrate the NSL and Vantage acquisitions, and the merger of Premier into Peoples, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(30)the risk that expected revenue synergies and cost savings from the merger of Peoples and Premier may not be fully realized or realized within the expected time frame;

(31)changes in laws or regulations imposed by Peoples' regulators impacting Peoples' capital actions, including dividend payments and share repurchases;

(32)the effect of a fall in stock market prices on the asset and wealth management business;

(33)Peoples' continued ability to grow deposits;

(34)the impact of future governmental and regulatory actions upon Peoples' participation in and execution of government programs related to the COVID-19 pandemic;

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(35)uncertainty regarding the impact of the current U.S. presidential administration and Congress on the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates and the response to and management of the COVID-19 pandemic, infrastructure spending and social programs; and,

(36)other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Peoples encourages readers of this Form 10-Q to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance. Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC's website at http://www.sec.gov and/or from Peoples' website.

All forward-looking statements speak only as of the filing date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements. Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual results may differ materially from these projections. Additionally, Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the filing date of this Form 10-Q 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 from Peoples' website – www.peoplesbancorp.com under the “Investor Relations” section.

This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements, and Notes thereto, contained in Peoples’ 2021 Form 10-K, as well as the Unaudited Condensed Consolidated Financial Statements, Notes to the Unaudited Condensed Consolidated Financial Statements, ratios, statistics and discussions contained elsewhere in this Form 10-Q.

Business Overview

The following discussion and analysis of Peoples’ Unaudited Condensed Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial condition and results of operations.

Peoples is a diversified financial services holding company that makes available a complete line of banking, trust and investment, insurance, premium financing and equipment leasing solutions through its subsidiaries. Peoples provides services through traditional offices, ATMs, mobile banking and telephone and internet-based banking. Peoples Insurance Agency, LLC ("Peoples Insurance") also offers a complete array of insurance products, commercial leasing and premium financing solutions, and makes available custom-tailored fiduciary, employee benefit plan and asset management services. Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices. Peoples Bank offers insurance premium finance lending nationwide through its Peoples Premium Finance division, and lease financing through its North Star Leasing division since April 1, 2021, and as of March 7, 2022 through Vantage, a subsidiary of Peoples Bank. As of March 31, 2022, Peoples has 136 locations, including 119 full-service bank branches in Ohio, West Virginia, Kentucky, Virginia, Washington D.C. and Maryland. Peoples Bank is subject to regulation and examination primarily by the Ohio Division of Financial Institutions (the "ODFI"), the Federal Reserve Bank ("FRB") of Cleveland and the Federal Deposit Insurance Corporation (the "FDIC"). Peoples Bank must also follow the regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB") which regulates consumer financial products and services and certain financial services providers. Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business.

Critical Accounting Policies

The accounting and reporting policies of Peoples conform to US GAAP. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements describes Peoples' significant account policies. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and MD&A at March 31, 2022, which have been updated in "Note 1 Summary of Significant Accounting Policies" in this Form 10-Q, and should be read in conjunction with the policies disclosed in Peoples’ 2021 Form 10-K.

Summary of Recent Transactions and Events

The following is a summary of recent transactions and events that have impacted or are expected to impact Peoples’ results of operations or financial condition:

◦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 $3.8 million.

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◦On March 7, 2022, Peoples completed its acquisition of Vantage pursuant to an Asset Purchase Agreement, dated February 16, 2022, in which Peoples Bank purchased 100% of the equity of Vantage. Peoples Bank acquired assets comprising Vantage's lease business, including $140.2 million in leases and certain third-party debt in the amount of $107.4 million. Peoples paid total consideration of $82.9 million. Based in Excelsior, Minnesota, Vantage offers mid-ticket equipment leases primarily for business essential information technology equipment across a wide-array of industries. Peoples recorded preliminary goodwill in the amount of $40.4 million and preliminary 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. .

◦On September 17, 2021, Peoples completed its merger with Premier, in which Peoples acquired, in an all-stock merger, a bank holding company headquartered in Huntington, West Virginia, and the parent company of Premier Bank, Inc. (“Premier Bank”) and Citizens Deposit Bank and Trust, Inc. (“Citizens”). Under the terms and subject to the conditions of the definitive Agreement and Plan of Merger dated March 26, 2021 ("Merger Agreement"), Premier merged with and into Peoples (the “Merger”), and Premier Bank and Citizens subsequently merged with and into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction valued at $261.9 million. At the close of business on September 17, 2021, the financial services offices of each of Premier Bank and Citizens became branches of Peoples Bank. Peoples acquired $1.2 billion in loans, $1.8 billion in deposits and recorded preliminary goodwill of $67.2 million and other intangible assets of $4.2 million in connection with the Merger on September 17, 2021.

◦On May 4, 2021, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc., pursuant to an Asset Purchase Agreement between Peoples Insurance and Justice & Stamper Insurance Agency, Inc. Total consideration for this transaction was $325,000, with $162,500 paid at closing and the second installment in the amount of $162,500 to be paid on the first anniversary of the closing date, less any adjustments pursuant to adverse claims incurred or sustained by or imposed by Peoples Insurance. Peoples recorded customer relationship intangible assets of $230,000 and goodwill of $46,000, related to this transaction.

◦On March 31, 2021, Peoples completed its acquisition of NS Leasing, LLC ("NSL") pursuant to an Asset Purchase Agreement, dated March 24, 2021 in which Peoples Bank acquired the equipment finance and leasing business of NSL. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as North Star Leasing, a division of Peoples Bank on April 1, 2021. Peoples Bank acquired assets comprising NSL's equipment finance business, including $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million. Peoples Bank paid total consideration of $116.6 million, plus a potential earn-out payment to NSL of up to $3.1 million. Based in Burlington, Vermont, the North Star Leasing division underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded goodwill in the amount of $24.7 million and other intangibles of $14.0 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.

◦Peoples began originating loans during the second quarter of 2020, and continued to originate loans during the first five months of 2021 under the loan guarantee program created under the CARES Act, called the Paycheck Protection Program ("PPP"). These loans were targeted to provide small businesses with financial support to cover payroll and certain other specified types of expenses for a specified period of time. Loans made under the PPP are fully guaranteed by the Small Business Administration ("SBA"). As of March 31, 2022, Peoples had $41.9 million aggregate principal amount in PPP loans outstanding (including $15.0 million acquired in the merger with Premier), which were included in commercial and industrial loan balances, compared to $87.1 million (including $23.4 million acquired in the merger with Premier) at December 31, 2021. Peoples recognized interest income of $1.2 million for deferred loan fees/costs and $154,000 of interest income on PPP loans during the first quarter of 2022, compared to $1.8 million and $282,000, respectively, for the fourth quarter of 2021, and $4.7 million and $0.9 million, respectively, for the first quarter of 2021.

◦During the first quarter of 2022, Peoples recorded a recovery of credit losses of $6.8 million, compared to $6.6 million in the linked quarter and $4.7 million in the first quarter of 2021. The release of credit losses for these periods was driven by improvements in economic forecasts, coupled with loan payoffs and sales during certain periods. For more information, please refer to the section titled "RESULTS OF OPERATIONS - (Recovery of) Provision for Credit Losses" found later in this discussion.

◦During the first quarter of 2022, Peoples incurred $1.4 million of acquisition-related expenses, compared to $0.9 million in the fourth quarter of 2021 and $1.9 million in the first quarter of 2021. The acquisition-related expenses in 2022 were primarily related to the Vantage acquisition, while the 2021 expenses were primarily related to the NSL acquisition and the Premier merger.

◦In an effort to stimulate an economy that was being adversely impacted by the impacts of the COVID-19 pandemic, the Federal Reserve Board first lowered the benchmark Federal Funds Target Rate by 50 basis points on March 3, 2020, then lowered the target rate another 100 basis points at the next FOMC meeting on March 15, 2020. The Federal Funds Target Rate range was 0% - 0.25% as of March 31, 2020 and maintained this rate until March 16, 2022. The Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% on March 16, 2022, and has stated it anticipates continuing to raise rates throughout 2022.

The impact of these transactions and events, where material, is discussed in the applicable sections of this MD&A.

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EXECUTIVE SUMMARY

Peoples reported net income of $23.6 million for the first quarter of 2022, representing income per diluted common share of $0.84. In comparison, Peoples recognized earnings per diluted common share of $0.98 for the fourth quarter of 2021, and earnings per diluted common share of $0.79 for the first quarter of 2021. Non-core items, and the related tax effect of each, in net income primarily included acquisition-related expenses. Non-core items negatively impacted earnings per diluted common share by $0.04 for the first quarter of 2022, $0.02 for the fourth quarter of 2021, and $0.13 for the first quarter of 2021.

Net interest income was $54.3 million for the first quarter of 2022, a decrease of $0.4 million, or 1%, compared to the linked quarter. Net interest margin was 3.41% for the first quarter of 2022, compared to 3.37% for the linked quarter. The decrease in net interest income was driven primarily by higher funding costs resulting from the Vantage acquisition, partially offset by accretion income recognized on the commercial real estate portfolio. Net interest income and net interest margin both continue to be impacted by the excess liquidity environment present in the financial services sector since the beginning of the COVID-19 pandemic by way of increased low yielding cash reserves. The impact of the recent increase in the Federal Reserve benchmark interest rate was not meaningful for the current quarter given the proximity of its timing to quarter-end. Net interest income for the first quarter of 2022 increased $18.7 million, or 53%, compared to the first quarter of 2021. Net interest margin increased 15 basis points compared to 3.26% for the first quarter of 2021. The increase in net interest income compared to the first quarter of 2021 was driven by lower funding costs, which were primarily attributable to deposits acquired from Premier.

Accretion income, net of amortization expense, from acquisitions was $2.7 million for the first quarter of 2022, $1.0 million for the fourth quarter of 2021 and $0.4 million for the first quarter of 2021, which added 17 basis points, 6 basis points and 4 basis points, respectively, to net interest margin. Accretion income for the current quarter was driven by payoffs on several large commercial loans.

The recovery of credit losses was $6.8 million for the first quarter of 2022, compared to $6.6 million for the linked quarter and $4.7 million for the first quarter of 2021. The changes in the recovery of credit losses compared to the linked quarter and prior year quarter were primarily due to continued improvement in economic factors and changes in loss drivers used in the CECL model. Net charge-offs for the first quarter of 2022 were $1.9 million, or 0.17% of average total loans annualized, compared to net charge-offs of $1.3 million, or 0.11% of average total loans annualized, for the linked quarter and net charge-offs of $1.1 million, or 0.13% of average total loans annualized, for the first quarter of 2021. Net charge-offs for the first quarter of 2022 included two commercial and industrial loans aggregating $0.7 million. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below.

Total non-interest income, excluding net gains and losses, for the first quarter of 2022 was up $1.0 million compared to the linked quarter. The increase in non-interest income, excluding net gains and losses, was the result of higher insurance income, which included annual performance-based insurance commissions of $1.3 million that are recognized in the first quarter of each year, offset partially by a decline in mortgage banking income. Compared to the first quarter of 2021, non-interest income, excluding net gains and losses, increased $2.8 million. Deposit account service charges increased $1.4 million and electronic banking income increased $1.3 million. The increase in deposit account service charges was primarily attributable to overdraft and NSF fees driven higher by a larger customer base following the merger with Premier. Electronic banking income increased in the first quarter of 2022 due to an increase in interchange income earned from customers' debit card usage, driven partially by customers added in the Premier merger.

Total non-interest expense was up $3.6 million, or 8%, for the three months ended March 31, 2022, compared to the linked quarter. The increase in total non-interest expense for the first quarter of 2022 was attributable to increases in salaries and employee benefit costs, professional fees and FDIC insurance premiums. The increase in salaries and employee benefit costs was driven by merit increases, employer contributions to health savings accounts, stock-based compensation expense and higher payroll taxes, which are generally higher in the first quarter. Total non-interest expense in the first quarter of 2022 also contained non-core expenses, including acquisition-related expenses of $1.4 million. During the fourth quarter of 2021, non-core expenses included acquisition-related expenses of $0.9 million. Compared to the first quarter of 2021, total non-interest expense increased $13.6 million, or 36%, primarily due to an increase in salaries and employee benefit costs of $7.0 million, an increase in net occupancy and equipment costs of $1.8 million, an increase in amortization of intangible assets of $1.1 million, and an increase in the FDIC insurance premiums of $1.0 million. Those increases were primarily the result of the acquisitions of Premier and NSL. During the first quarter of 2021, non-core expenses included acquisition-related expenses of $1.9 million and a contribution to the Peoples Bank Foundation, Inc. of $0.5 million.

The efficiency ratio for the first quarter of 2022 was 66.8%, compared to 62.7% for the linked quarter, and 70.4% for the first quarter of 2021. The change in the efficiency ratio compared to the linked quarter was primarily due to the increases in salaries and employee benefit costs, professional fees and the FDIC insurance premiums mentioned above. The efficiency ratio, adjusted for non-core items, was 64.8% for the first quarter of 2022, compared to 61.5% for the linked quarter and 65.2% for the first quarter of 2021. The efficiency ratio is typically higher in the first quarter of the year driven by the aforementioned salaries and employee benefit costs, and specifically by higher payroll taxes, employer contributions to health savings accounts and stock-based compensation expenses for certain employees. Peoples continues to focus on controlling expenses, while recognizing some necessary costs in order to continue growing the business.

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Peoples recorded income tax expense of $6.0 million for the first quarter of 2022, compared to income tax expense of $5.4 million for the linked quarter and $3.8 million for the first quarter of 2021. The increase in income tax expense for the first quarter of 2022, compared to the linked quarter, was due to an increase in Peoples' effective tax rate. The increase for the three months ended March 31, 2022, compared to the three months ended March 30, 2021, was largely driven by higher pre-tax income.

At March 31, 2022, total assets were $7.24 billion, compared to $7.06 billion at December 31, 2021 and $5.14 billion at March 31, 2021. The growth in total assets of 2% compared to December 31, 2021 was largely attributable to the Vantage acquisition, which added $140.2 million in leases as of the acquisition date. The 41% increase compared to March 31, 2021 was driven primarily by $1.1 billion of loans and $0.6 billion of investment securities added in the Premier merger as of the merger date, along with leases acquired from North Star and Vantage totaling $223.2 million, both as of the acquisition date. The allowance for credit losses at March 31, 2022 decreased to $54.8 million, or 1.20% of total loans, compared to $64.0 million and 1.43%, respectively, at December 31, 2021, and $44.9 million and 1.32%, respectively, at March 31, 2021.

Total liabilities were $6.43 billion at March 31, 2022, up from $6.22 billion at December 31, 2021 and $4.56 billion at March 31, 2021. The increase in total liabilities compared to December 31, 2021 was primarily due to seasonal growth in governmental deposits of $117.5 million, and $107.4 million of long-term borrowings assumed from Vantage. Also contributing to the increase compared to March 31, 2021 was $1.75 billion in deposits acquired from Premier.

At March 31, 2022, total stockholders' equity was $808.3 million, a decrease of $36.7 million compared to December 31, 2021. The decrease in total stockholders' equity reflected an other comprehensive loss of $51.0 million and dividends paid during the quarter of $10.2 million, partially offset by net income for the quarter of $23.3 million. Total stockholders' equity at March 31, 2022 increased $229.2 million, or 40%, compared to March 31, 2021, which was mainly due to common shares issued for the acquisition of Premier and $55.7 million in net income during the prior twelve-month period, offset by an increase in accumulated other comprehensive loss of $57.7 million and dividends paid of $34.5 million.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income, the amount by which interest income exceeds interest expense, remains Peoples' largest source of revenue. The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve’s monetary policy, the level and degree of pricing competition for loans and deposits in Peoples’ markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities.

Net interest margin, which is calculated by dividing FTE net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of interest-earning assets and interest-bearing liabilities. FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a blended federal and state corporate income tax rate of 22.9%.

The following table details the calculation of FTE net interest income:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)
Net interest income	$	54,310	$	54,737	$	35,578
Taxable equivalent adjustment	391		379		257
Fully tax-equivalent net interest income	$	54,701	$	55,116	$	35,835

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The following tables detail Peoples’ average balance sheets for the periods presented:


	For the Three Months Ended
	March 31, 2022						December 31, 2021						March 31, 2021
(Dollars in thousands)	Average Balance		Income/ Expense		Yield/Cost		Average Balance		Income/ Expense		Yield/Cost		Average Balance		Income/ Expense		Yield/Cost
Short-term investments	$	332,098	$	160	0.20	%	$	350,692	$	138	0.16	%	$	146,957	$	40	0.11	%

Investment securities (a)(b):
Taxable	1,465,998		6,096		1.66	%	1,466,423		5,583		1.52	%	833,769		2,620		1.26	%
Nontaxable	204,381		1,316		2.58	%	203,034		1,291		2.54	%	106,698		773		2.90	%
Total investment securities	1,670,379		7,412		1.78	%	1,669,457		6,874		1.65	%	940,467		3,393		1.44	%
Loans (b)(c):
Construction	225,676		2,155		3.82	%	200,009		1,961		3.84	%	114,204		994		3.48	%
Commercial real estate, other	1,362,434		14,782		4.34	%	1,450,566		15,370		4.15	%	879,335		8,602		3.91	%
Commercial and industrial	888,598		8,023		3.61	%	865,519		8,548		3.86	%	941,625		10,592		4.50	%
Premium finance	132,758		1,164		3.51	%	134,023		1,735		5.07	%	107,390		1,297		4.83	%
Leases	162,277		6,102		15.04	%	112,694		4,547		15.79	%	—		—		—	%
Residential real estate (d)	913,730		9,766		4.28	%	925,316		9,937		4.30	%	614,692		6,672		4.34	%
Home equity lines of credit	163,339		1,612		4.00	%	164,851		1,772		4.26	%	121,864		1,187		3.95	%
Consumer, indirect	523,770		5,045		3.91	%	539,176		5,455		4.01	%	509,845		5,203		4.14	%
Consumer, direct	106,298		1,595		6.09	%	107,780		1,605		5.91	%	79,022		1,239		6.36	%
Total loans	4,478,880		50,244		4.50	%	4,499,934		50,930		4.46	%	3,367,977		35,786		4.26	%
Allowance for credit losses	(61,947)						(75,488)						(49,854)
Net loans	4,416,933		50,244		4.56	%	4,424,446		50,930		4.53	%	3,318,123		35,786		4.33	%
Total earning assets	6,419,410		57,816		3.61	%	6,444,595		57,942		3.55	%	4,405,547		39,219		3.57	%
Goodwill and other intangible assets	304,124						298,276						184,253
Other assets	344,282						356,004						322,276
Total assets	$	7,067,816					$	7,098,875					$	4,912,076
Interest-bearing deposits:
Savings accounts	$	1,050,813	$	34	0.01	%	$	1,021,821	$	33	0.01	%	$	646,750	$	35	0.02	%
Governmental deposit accounts	670,419		447		0.27	%	648,013		433		0.27	%	429,503		594		0.56	%
Interest-bearing demand accounts	1,171,266		92		0.03	%	1,159,995		98		0.03	%	700,160		65		0.04	%
Money market accounts	650,272		97		0.06	%	637,681		96		0.06	%	564,836		132		0.09	%
Retail certificates of deposit (e)	626,978		871		0.56	%	665,513		898		0.54	%	439,819		1,123		1.04	%
Brokered deposits (e)	91,531		512		2.27	%	105,364		571		2.15	%	175,326		868		2.01	%
Total interest-bearing deposits	4,261,279		2,053		0.20	%	4,238,387		2,129		0.20	%	2,956,394		2,817		0.39	%
Borrowed funds:
Short-term FHLB advances	55,000		313		2.31	%	64,461		228		1.40	%	20,000		88		1.78	%
Repurchase agreements and other	99,346		25		0.10	%	116,887		30		0.10	%	51,089		12		0.09	%
Total short-term borrowings	154,346		338		0.89	%	181,348		258		0.56	%	71,089		100		0.57	%
Long-term FHLB advances	85,653		306		1.45	%	85,991		314		1.45	%	102,753		390		1.54	%

Other borrowings	43,445		418		3.85	%	13,631		125		3.59	%	7,631		77		4.04	%
Total long-term borrowings	129,098		724		2.26	%	99,622		439		1.75	%	110,384		467		1.71	%
Total borrowed funds	283,444		1,062		1.51	%	280,970		697		0.99	%	181,473		567		1.26	%
Total interest-bearing liabilities	4,544,723		3,115		0.28	%	4,519,357		2,826		0.25	%	3,137,867		3,384		0.44	%
Non-interest-bearing deposits	1,606,665						1,642,577						1,110,993
Other liabilities	81,676						100,144						85,628
Total liabilities	6,233,064						6,262,078						4,334,488


Total stockholders’ equity	834,752						836,797						577,588
Total liabilities and stockholders’ equity	$	7,067,816					$	7,098,875					$	4,912,076
Interest rate spread (b)			$	54,701	3.33	%			$	55,116	3.30	%			$	35,835	3.13	%
Net interest margin (b)					3.41	%					3.37	%					3.26	%

(a)Average balances are based on carrying value.

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(b)Interest income and yields are presented on a fully tax-equivalent basis, a blended federal and state corporate income tax rate of 22.9%.

(c)Average balances include nonaccrual and impaired loans. Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented.

(d)Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.

(e)Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered 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) Vantage on March 7, 2022, which added to average lease and borrowed funds balances; (ii) Premier on September 17, 2021, which added to average short-term investments, average total investment securities, average total loans and average total deposits; and (iii) NSL on April 1, 2021, which added to average lease balances. Peoples has maintained high cash balances in recent periods due to an influx of deposits, coupled with PPP proceeds.

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The following table provides an analysis of the changes in FTE net interest income:




	Three Months Ended March 31, 2022 Compared to
(Dollars in thousands)	December 31, 2021						March 31, 2021
Increase (decrease) in:	Rate		Volume		Total (a)		Rate		Volume		Total (a)
INTEREST INCOME:
Short-term investments	$	60	$	(38)	$	22	$	43	$	77	$	120

Investment Securities (b):
Taxable	521		(8)		513		1,042		2,434		3,476
Nontaxable	15		10		25		(555)		1,098		543
Total investment income	536		2		538		487		3,532		4,019
Loans (b):
Construction	(59)		253		194		105		1,056		1,161
Commercial real estate, other	2,918		(3,506)		(588)		1,024		5,156		6,180
Commercial and industrial	(1,641)		1,116		(525)		(1,999)		(570)		(2,569)
Premium finance	(554)		(17)		(571)		(1,388)		1,255		(133)
Leases	(1,369)		2,924		1,555		—		6,102		6,102
Residential real estate	(47)		(124)		(171)		(699)		3,793		3,094
Home equity lines of credit	(139)		(21)		(160)		16		409		425
Consumer, indirect	(198)		(212)		(410)		(882)		724		(158)
Consumer, direct	114		(124)		(10)		(345)		701		356
Total loan income	(975)		289		(686)		(4,168)		18,626		14,458
Total interest income	$	(379)	$	253	$	(126)	$	(3,638)	$	22,235	$	18,597
INTEREST EXPENSE:
Deposits:
Savings accounts	$	(2)	$	3	$	1	$	(70)	$	69	$	(1)
Governmental deposit accounts	5		9		14		(1,368)		1,221		(147)
Interest-bearing demand accounts	(12)		6		(6)		(62)		89		27
Money market accounts	—		1		1		(139)		104		(35)
Retail certificates of deposit	183		(210)		(27)		(2,135)		1,883		(252)
Brokered deposits	158		(217)		(59)		643		(999)		(356)
Total deposit cost	332		(408)		(76)		(3,131)		2,367		(764)
Borrowed funds:
Short-term borrowings	289		(209)		80		33		205		238
Long-term borrowings	7		278		285		(46)		303		257
Total borrowed funds cost	296		69		365		(13)		508		495
Total interest expense	628		(339)		289		(3,144)		2,875		(269)
Fully tax-equivalent net interest income	$	(1,007)	$	592	$	(415)	$	(494)	$	19,360	$	18,866

(a)The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the

relationship of the dollar amounts of the change in each.

(b)Interest income and yields are presented on a fully tax-equivalent basis a blended federal and state corporate income tax rate of 22.9%.

Net interest income declined by 1% compared to the linked quarter, and was driven lower by higher funding costs, which were due to the borrowings associated with the Vantage acquisition, which were partially offset by accretion income recognized on the commercial real estate loan portfolio. Net interest margin increased 4 basis points for the first quarter of 2022, compared to the fourth quarter of 2021, and was driven by higher investment securities and loan yields, which were tempered by increased funding costs. Net interest income and net interest margin both have been negatively impacted by the excess liquidity environment present in the financial services sector since the beginning of the COVID-19 pandemic by way of increased low yielding cash reserves. Peoples recognized interest income on deferred loan fees/costs of $1.2 million, $1.8 million and $4.7 million during the first quarter of 2022 and the fourth and first quarters of 2021, respectively, along with $154,000, $282,000, and $0.8 million of interest earned on PPP loans, respectively. The recent increase in the Federal Reserve benchmark interest rate did not have a meaningful impact during the first quarter of 2021, given the proximity of its timing to quarter-end.

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Compared to the first quarter of 2021, net interest income increased 53%, and was driven by the Vantage and NSL acquisitions, and the Premier merger coupled with organic growth. Net interest margin expanded by 15 basis points and was primarily due to the leasing portfolio, which added 24 basis points to net interest margin, coupled with lower funding costs.

Accretion income, net of amortization expense, from acquisitions was $2.7 million for the first quarter of 2022, $1.0 million for the linked quarter and $0.4 million for the first quarter of 2021, which added 17 basis points, 6 basis points and 4 basis points, respectively, to net interest margin. PPP income added $1.4 million for the first quarter of 2022, $2.1 million for the linked quarter and $5.6 million for the first quarter of 2021, which added 5 basis points, 6 basis points and 28 basis points, respectively, to net interest margin.

Additional information regarding changes in the Unaudited Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this MD&A. Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this MD&A under the caption "FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity."

Recovery of Credit Losses

The following table details Peoples’ (recovery of) provision for credit losses:


	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
(Dollars in thousands)
Recovery of other credit losses	$	(7,006)		$	(6,786)		$	(4,780)
Provision for checking account overdraft credit losses	199			184			31
Recovery of credit losses	$	(6,807)		$	(6,602)		$	(4,749)
As a percentage of average total loans (a)	(0.62)		%	(0.58)		%	(0.57)		%
(a) Presented on an annualized basis.

The (recovery of) provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates. For the first quarter of 2022, the recovery of credit losses was related to an improvement in the economic forecast, along with payoffs of several loans during the quarter, which were partially offset by $387,000 for the establishment of an allowance for credit losses for the non-purchased credit deteriorated leases from the Vantage acquisition.

The recovery of credit losses during the fourth quarter of 2021 was a result of the sale of acquired Premier loans, which reduced the required allowance for credit losses, coupled with improvements in the economic forecast. The recovery of credit losses during the first quarter of 2021 was also driven by improvements in the economic forecast compared to the prior period.

Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this MD&A under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.”

Net Gain (Loss) Included in Total Non-Interest Income

Net gain (loss) includes gains and losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income. The following table details Peoples’ net losses and gains for the periods presented:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)
Net gain (loss) on investment securities	$	130	$	(158)	$	(336)

Net (loss) gain on asset disposals and other transactions:
Net loss on other assets	$	(22)	$	(31)	$	(27)
Net (loss) gain on OREO	(1)		80		—

Net (loss) gain on other transactions	(104)		903		—
Net (loss) gain on asset disposals and other transactions	$	(127)	$	952	$	(27)

For the first three months of 2022, Peoples sold several investment securities, resulting a net gain on investment securities, which was offset by a net loss on other transactions primarily driven by an adjustment to the gain on sale of loans recognized in the fourth quarter of 2022, and was driven by changes to the acquisition-date fair value of Premier loans acquired that were subsequently sold.

During the first and fourth quarters of 2021, Peoples recognized net losses on investment securities in order to reinvest proceeds into higher yielding investment securities. During the fourth quarter of 2021, the net gain on other transactions was driven by the sale of $59.8 million of predominantly purchased credit deteriorated loans acquired in the Premier merger ($52.9 million of which were

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criticized or classified) primarily in the hospitality industry. Peoples recognized a gain of $897,000 related to the discount recorded on those loans when they were acquired from Premier.

Total Non-Interest Income, Excluding Net Gains and Losses

Total non-interest income, excluding net gains and losses, comprised 27% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the three months ended March 31, 2022, compared to 26% for the linked quarter and 33% for the first quarter of 2021. The decline in this ratio compared to the first quarter of 2021 was driven by the recent merger with Premier and acquisition of NSL, which increased net interest income.

For the first quarter of 2022, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses. Peoples' electronic banking ("e-banking") services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to clients. The following table details Peoples' e-banking income:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)


E-banking income	$	5,253	$	5,355	$	3,911

Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers. The amount of e-banking income is largely dependent on the timing and volume of customer activity. E-banking income declined slightly from the linked quarter, driven by a seasonal decrease typically experienced in the first quarter compared to the fourth quarter; however, it grew 34% compared to the first quarter of 2021. This increase was driven by the addition of the Premier customers during the third quarter of 2021, coupled with increased usage of debit cards by customers.

The following table details Peoples' insurance income:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)


Property and casualty insurance commissions	$	2,862	$	2,836	$	2,755


Performance-based commissions	1,346		—		1,950
Life and health insurance commissions	452		379		421
Other fees and charges	72		114		95
Insurance income	$	4,732	$	3,329	$	5,221

During the first quarter of 2022, Peoples' insurance income grew 42%. This increase was mostly due to the recognition of $1.3 million of performance-based insurance commissions, which are annual in nature and typically occur in the first quarter of each year. Compared to the first quarter of 2021, insurance income declined 9% and was driven by lower performance-based commissions, which are unpredictable, and are related to how much loss is incurred within underlying policies and the overall performance of the insurance carriers.

Peoples' fiduciary income and brokerage income continued to be based primarily upon the value of assets under administration and management, with additional income generated from transaction commissions, cross-selling of products and additional retirement plan services business. The following tables detail Peoples’ trust and investment income and related assets under administration and management:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)
Fiduciary income	$	1,965	$	1,989	$	1,902
Brokerage income	1,649		1,559		1,337
Employee benefit fees	662		686		606
Trust and investment income	$	4,276	$	4,234	$	3,845

Fiduciary income and brokerage income are mostly driven by the values of assets under administration and management, which were relatively stable compared to the linked quarter. An improvement in the values of assets under administration and management, coupled with new accounts added, contributed to the growth in trust and investment income compared to the first quarter of 2021.

The following table details Peoples' assets under administration and management:

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	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
(Dollars in thousands)	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021

Trust	$	1,927,828	$	2,009.871	$	1,937.123	$	1,963,884	$	1,916,892
Brokerage	1,152,530		1,183.927		1,133.668		1,119,247		1,071,126
Total	$	3,080,358	$	3,193.798	$	3,070,791	$	3,083,131	$	2,988,018
Quarterly average	$	3,106,021	$	3,126.398	$	3,077.554	$	3,051,027	$	2,927,458

The slight decline in assets under administration and management at March 31, 2022, compared to year-end, was driven by a decrease in market values during the first quarter of 2022 as the market became more volatile. The improvement compared to March 31, 2021 was mostly due to new accounts added, as well as a recovery in market values from earlier in the COVID-19 pandemic.

Deposit account service charges are based on the recovery of costs associated with services provided. The following table details Peoples' deposit account service charges:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)
Overdraft and non-sufficient funds fees	$	1,902	$	2,099	$	997
Account maintenance fees	1,311		1,210		810
Other fees and charges	213		256		178
Deposit account service charges	$	3,426	$	3,565	$	1,985

The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity. Management periodically evaluates its cost recovery fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples' markets by competitors. Deposit account service charges decreased 4% compared to the linked quarter, as increases in account maintenance fees were more than offset by reductions in overdraft and non-sufficient funds fees. Compared to the first quarter of 2021, deposit account service charges increased 73%, resulting from the additional customers associated with the Premier acquisition, coupled with increased customer activity in recent quarters, compared to the very low levels of early 2021 associated with fiscal stimulus payments and PPP loan proceeds provided to customers, along with changed customer spending habits due to the COVID-19 pandemic.

The following table details the other items included within Peoples' total non-interest income:


	Three Months Ended
	March 31, 2022	December 31, 2021	March 31, 2021
(Dollars in thousands)

Mortgage banking income	436	713	1,140
Bank owned life insurance income	431	438	446
Commercial loan swap fees	168	349	60
Other non-interest income	1,326	1,039	658

Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained. As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage banking income declined during the first quarter of 2022, compared to the linked quarter and the first quarter of 2021, as refinancing activity slowed and there was a lower volume of new loan originations due to the lack of inventory of homes for sale.

In the first quarter of 2022, Peoples sold $7.2 million in loans to the secondary market with servicing retained and $7.9 million in loans with servicing released compared to $13.7 million and $9.7 million, respectively, for the fourth quarter of 2021, and $17.2 million and $9.6 million, respectively, for the first quarter of 2021.

Bank owned life insurance income was relatively flat for the first quarter of 2022, fourth quarter of 2021 and first quarter of 2021, as there had been no changes to the underlying assets compared to prior periods.

Commercial loan swap fees are largely dependent on timing, interest rates, and the volume of customer activity. Commercial loan swap fees declined compared to the fourth quarter of 2021, mainly due to one large swap entered into during the fourth quarter of 2021. Commercial loan swap fees were higher during the first quarter of 2022, compared to the first quarter of 2021, and was the result of increased volume of customer activity.

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Other non-interest income increased 28% compared to the linked quarter, and was driven by higher fee income associated with the leasing division, which grew $198,000. Compared to the first quarter of 2021, other non-interest income doubled, and was related to $775,000 of fee income from the leasing division.

Non-Interest Expense

Salaries and employee benefit costs remain Peoples' largest non-interest expense, accounting for over one-half of total non-interest expense. The following table details Peoples' salaries and employee benefit costs:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)
Base salaries and wages	$	17,676	$	16,876	$	12,765
Sales-based and incentive compensation	3,636		4,634		3,428
Employee benefits	3,621		2,753		2,898
Payroll taxes and other employment costs	2,091		1,940		1,493
Stock-based compensation	1,605		1,078		1,215
Deferred personnel costs	(900)		(945)		(1,040)
Salaries and employee benefit costs	$	27,729	$	26,337	$	20,759
Full-time equivalent employees:
Actual at end of period	1,245		1,188		887
Average during the period	1,215		1,185		891

Base salaries and wages increased 5% compared to the linked quarter and increased 38% compared to the first quarter of 2021. The increase for the first quarter of 2022 compared to the linked quarter was driven by the annual merit increases. The key driver of the increase compared to the first quarter of 2021was the additional salaries associated with Premier and NSL.

The decrease in sales-based and incentive compensation for the first quarter of 2022 compared to the linked quarter was primarily due to overall company performance measures used in calculating incentive awards.

The increase in employee benefits for first quarter of 2022, compared to the linked quarter, was primarily due to annual contributions to employee health benefit accounts which resulted in expense of $620,000. These contributions occur primary in the first quarter of each year. The increase in employee benefits compared to the first quarter of 2021 was due to higher medical costs with the addition of the Premier and NSL employees.

The increase in payroll taxes and other employment costs compared to the first quarter of 2021, was primarily related to higher base salaries and wages, coupled with the additional associates of Premier and NSL.

Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years, adjusted for an estimate of the portion of awards that will be forfeited. At the vesting date, an adjustment is made to increase or reverse expense for the amount of actual forfeitures compared to the estimate. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year and are based upon Peoples achieving certain performance goals during the prior year. Stock-based compensation for the first quarter of 2022 increased $528,000 compared to the linked quarter, which included expense related to stock grants of retirement eligible individuals and the annual vesting of prior stock grants.

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. The decrease in deferred personnel costs compared to the first quarter of 2021 was primarily due to a reduction in loan origination volume as Peoples originated PPP loans during the first quarter of 2021.

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Peoples' net occupancy and equipment expense was comprised of the following:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)
Depreciation	$	1,823	$	2,009	$	1,371
Repairs and maintenance costs	1,378		1,108		943
Net rent expense	685		630		340
Property taxes, utilities and other costs	1,202		1,004		673
Net occupancy and equipment expense	$	5,088	$	4,751	$	3,327

Depreciation on capitalized assets declined compared to the linked quarter as a result of certain capitalized assets and improvements reaching the end of their depreciable lives. For the first quarter of 2022, compared to the fourth quarter of 2021, repairs and maintenance costs grew as Peoples' experienced increased costs across its footprint, which was partially due to higher snow removal costs. Compared to the first quarter of 2021, net occupancy and equipment expense increased 53% and was driven by the additional geographic locations from recent acquisitions.

The following table details the other items included in total non-interest expense:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)
Professional fees	$	3,672	$	2,324	$	3,468
Data processing and software expense	2,916		3,148		2,454
E-banking expense	2,759		2,879		1,894
Amortization of other intangible assets	1,708		1,508		620
FDIC insurance premiums	1,194		380		463
Marketing expense	995		848		911
Other loan expenses	832		558		462
Franchise tax expense	764		870		855
Communication expense	625		578		282
Other non-interest expense	3,347		3,811		2,492

Professional fees increased $1.3 million from the linked quarter primarily due to higher exam and audit fees, coupled with investment banking fees and other acquisition-related expenses related to the purchase of Vantage. Peoples also recorded a benefit of $603,000 for a true-up of expense related to contact negotiations during the fourth quarter of 2021. Professional fees included acquisition-related expenses of $1.0 million for the first quarter of 2022, $917,000 for the fourth quarter of 2021, and $1.9 million for the first quarter of 2021.

Data processing and software expense declined 7% compared to the linked quarter, and was up 19% compared to the first quarter of 2021. The decline compared to the linked quarter was related to a negotiated reduction in costs from Peoples' core provider. The increase compared to the first quarter of 2021 was due to software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization.

E-banking expense declined compared to the linked quarter, and is directly correlated to e-banking income, which experienced a seasonal decline compared to the fourth quarter of 2021. Compared to the first quarter of 2021, e-banking expense grew 46%, as customer activity increased and there was a higher number of accounts related to the Premier merger.

Amortization of other intangible assets is associated with acquisition-related activity, and grew 13% compared to the linked quarter, as Peoples completed the Vantage acquisition. Compared to the first quarter of 2021, amortization of other intangible assets increased $1.1 million as Peoples merged with Premier, and acquired NSL and Vantage on April 1, 2021, September 17, 2021 and March 7, 2022, respectively.

Peoples' FDIC insurance premiums increased compared to the linked quarter and first quarter of 2021, as Peoples recorded the increased premiums after the acquisition of Premier. Peoples also recorded an adjustment to FDIC insurance premiums during the first quarter of 2022 related to the fourth quarter of 2021, based on an invoice received during the first quarter of 2022.

Marketing expense grew 17% compared to the linked quarter and 9% compared to the first quarter of 2021. The increase was mainly due to higher media advertising expenses and donations compared to prior periods, which are seasonally higher in the first quarter.

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Other loan expenses increased $274,000 compared to the linked quarter and were driven by higher commercial loan expenses. Compared to the first quarter of 2021, other loan expenses grew $370,000 and were mostly related to higher residential real estate loan expenses.

Peoples is subject to state franchise taxes, which are based largely on Peoples' equity, in the states where Peoples has a physical presence. Franchise tax expense also includes the Ohio Financial Institution Tax ("FIT"), which is a business privilege tax that is imposed on financial institutions organized for profit and doing business in Ohio. The Ohio FIT is based on the total equity capital in proportion to the taxpayer's gross receipts in Ohio as of the most recent year-end.

Communications expense increased 8% compared to the linked quarter and was up $343,000 compared to the first quarter of 2021. The increase compared to the linked quarter was due to a credit received from a communications provider during the fourth quarter of 2021. The growth compared to the first quarter of 2021 was due to upgraded networking to certain branches (including new branches acquired from Premier coupled with the addition of the NSL location acquired) and increased costs compared to the prior periods among certain vendors that provide communication services.

Other non-interest expense declined 12% compared to the linked quarter and was impacted by lower travel and entertainment expense, coupled with lower postage costs. Compared to the first quarter of 2021, other non-interest expense grew 34% as Peoples recognized higher ongoing costs after its recent acquisitions, mostly due to increased postage, travel and entertainment, insurance and supplies expense.

Income Tax Expense

Peoples recorded an income tax expense of $6.0 million for the first quarter of 2022, compared to income tax expense of $5.4 million for the linked quarter and income tax expense of $3.8 million for the first quarter of 2021. The increase in income tax expense for the first quarter of 2022, compared to the linked quarter, was due to an increase in Peoples' effective tax rate. The increase in income tax expense for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, was largely driven by higher pre-tax income.

Additional information regarding income taxes can be found in "Note 13 Income Taxes" of the Notes to the Condensed Consolidated Financial Statements included in Peoples' 2021 Form 10-K.

Pre-Provision Net Revenue (Non-US GAAP)

Pre-provision net revenue ("PPNR") has become a key financial measure used by state and federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus total non-interest income, excluding all gains and losses, minus total non-interest expense. As a result, PPNR represents the earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital. This ratio represents a Non-US GAAP financial measure since it excludes the provision for (recovery of) credit losses and all gains and losses included in earnings.

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The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:


	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
(Dollars in thousands)
Pre-provision net revenue:
Income before income taxes	$	29,538		$	33,163		$	19,243


Add: loss on OREO	1			—			—
Add: loss on investment securities	—			158			336
Add: loss on other assets	22			31			27
Add: loss on other transactions	104			—			—
Less: gain on OREO	—			80			—
Less: recovery of credit losses	6,807			6,602			4,749
Less: gain on investment securities	130			—			—
Less: gain on other transactions	—			903			—

Pre-provision net revenue	$	22,728		$	25,767		$	14,857


Total average assets	$7,067,816			$7,098,875			$4,912,076
Pre-provision net revenue to total average assets (annualized)	1.30		%	1.44		%	1.23		%

Weighted-average common shares outstanding - diluted	28,129,131			28,114,980			19,436,311
Pre-provision net revenue per common share - diluted	$	0.81		$	0.92		$	0.76

The decline in PPNR compared to the linked quarter was driven by increased total non-interest expense from higher salaries and employee benefit costs, professional fees and FDIC insurance premiums. The PPNR grew compared to the first quarter of 2021 and was mostly due to the impact of the Premier merger and Vantage and NSL acquisitions improving net interest income, coupled with 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 Non-US GAAP since it excludes the impact of all acquisition-related expenses, contract negotiation benefits, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc. contribution.

The following table provides a reconciliation of this Non-US GAAP measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
(Dollars in thousands)

Core non-interest expense:
Total non-interest expense	$	51,629	$	47,991	$	37,987

Less: acquisition-related expenses	1,373		903		1,911

Less: severance expenses	—		16		49

Less: COVID-19-related expenses	94		565		292
Less: Peoples Bank Foundation, Inc. contribution	—		—		500
Add: contract negotiation benefits	—		603		—
Core non-interest expense	$	50,162	$	47,110	$	35,235

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 fully tax-equivalent net interest income plus total non-interest income excluding net gains and losses. This measure is Non-US GAAP since it excludes amortization of other intangible assets and all gains and losses included in earnings, and uses fully tax-equivalent net interest income.

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	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
(Dollars in thousands)

Efficiency ratio:
Total non-interest expense	$	51,629		$	47,991		$	37,987
Less: amortization of other intangible assets	1,708			1,508			620
Adjusted total non-interest expense	49,921			46,483			37,367

Total non-interest income	20,050			19,815			16,903

Less: net gain (loss) on investment securities	130			(158)			(336)
Less: net (loss) gain on asset disposals and other transactions	(127)			952			(27)
Total non-interest income excluding net gains and losses	20,047			19,021			17,266

Net interest income	54,310			54,737			35,578
Add: fully tax-equivalent adjustment (a)	391			379			257
Net interest income on a fully tax-equivalent basis	54,701			55,116			35,835
Adjusted revenue	$	74,748		$	74,137		$	53,101
Efficiency ratio	66.79		%	62.70		%	70.37		%

Efficiency ratio adjusted for non-core items:
Core non-interest expense	$	50,162		$	47,110		$	35,235
Less: amortization of other intangible assets	1,708			1,508			620
Adjusted core non-interest expense	48,454			45,602			34,615
Core non-interest income excluding net gains and losses	20,047			19,021			17,266
Net interest income on a fully tax-equivalent basis	54,701			55,116			35,835
Adjusted revenue	$	74,748		$	74,137		$	53,101
Efficiency ratio adjusted for non-core items	64.82		%	61.51		%	65.19		%

(a) Based on a tax rate of 22.9% for period ending March, 31, 2022, 22.3% for period ending December 31, 2021, and 21.0% for period ending March 31, 2021.

The efficiency ratio for the first quarter of 2022 increased compared to the linked quarter, as growth in salaries and employee benefit costs, professional fees and FDIC insurance premiums resulted in higher total non-interest expense. The efficiency ratio, adjusted for non-core items, also grew and was attributable to the items previously mentioned. Additionally, compared to the first quarter of 2021, the efficiency ratio and adjusted efficiency ratio, both declined due to improvements in net interest income from the recent acquisitions, coupled with higher non-interest income, outpacing increases in total non-interest expense.

Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)

In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance. The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, contract negotiation benefits, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc. contribution.

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	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
(Dollars in thousands)

Annualized net income adjusted for non-core items:
Net income	$	23,577		$	27,747		$	15,463

Add: net loss on investment securities	—			158			336
Less: tax effect of net loss on investment securities (a)	—			33			71
Less: net gain on investment securities	130			—			—
Add: tax effect of net gain on investment securities (a)	27			—			—
Add: net loss on asset disposals and other transactions	127			—			27
Less: tax effect of net loss on asset disposals and other transactions (a)	27			—			6
Less: net gain on asset disposals and other transactions	—			953			—
Add: tax effect of net loss on asset disposals and other transactions (a)	—			200			—

Add: acquisition-related expenses	1,373			903			1,911
Less: tax effect of acquisition-related expenses (a)	288			190			401


Add: severance expenses	—			16			49
Less: tax effect of severance expenses (a)	—			3			10
Add: COVID-19-related expenses	94			565			292
Less: tax effect of COVID-19-related expenses (a)	20			119			61
Add: Peoples Bank Foundation, Inc. contribution	—			—			500
Less: tax effect of Peoples Bank Foundation, Inc. contribution (a)	—			—			105




Less: refund of contract negotiation benefits	—			603			—
Add: tax effect of refund of contract negotiation fees (a)	—			127			—
Net income adjusted for non-core items (after tax)	$	24,733		$	27,815		$	17,924
Days in the period	90			92			90
Days in the year	365			365			365
Annualized net income	$	95,618		$	110,083		$	62,711
Annualized net income adjusted for non-core items (after tax)	$	100,306		$	110,353		$	72,692
Return on average assets:
Annualized net income	$	95,618		$	110,083		$	62,711
Total average assets	7,067,816			7,098,875			4,912,076
Return on average assets	1.35		%	1.55		%	1.28		%
Return on average assets adjusted for non-core items:
Annualized net income adjusted for non-core items (after tax)	$	100,306		$	110,353		$	72,692
Total average assets	7,067,816			7,098,875			4,912,076
Return on average assets adjusted for non-core items	1.42		%	1.55		%	1.48		%

(a) Based on a 21% statutory federal corporate income tax rate.

The return on average assets declined compared to the linked quarter, and was primarily due to higher total non-interest expense from increased salaries and employee benefit costs, professional fees and FDIC insurance premiums. The increase in return on

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average assets for the first quarter of 2022, compared to the first quarter of 2021, was attributable to higher net interest income and non-interest income, which were driven by the recent acquisitions. At the same time, the decline in return on average assets, adjusted for non-core items, was due to the improvement in annualized net income, adjusted for non-core items, not outpacing the higher average total assets.

Return on Average Tangible Equity Ratio (Non-US GAAP)

The return on average tangible equity ratio is a key financial measure used to monitor performance. This ratio is calculated as annualized net income (less the after-tax impact of amortization of other intangible assets) divided by average tangible equity. This measure is Non-US GAAP since it excludes amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity.


	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
(Dollars in thousands)
Annualized net income excluding amortization of other intangible assets:
Net income	$	23,577		$	27,747		$	15,463
Add: amortization of other intangible assets	1,708			1,508			620
Less: tax effect of amortization of other intangible assets (a)	359			317			130
Net income excluding amortization of other intangible assets	$	24,926		$	28,938		$	15,953
Days in the period	90			92			90
Days in the year	365			365			365
Annualized net income	$	95,618		$	110,083		$	62,711
Annualized net income excluding amortization of other intangible assets	$	101,089		$	114,808		$	64,698
Average tangible equity:
Total average stockholders' equity	$	834,752		$	836,797		$	577,588
Less: average goodwill and other intangible assets	304,124			298,276			184,253
Average tangible equity	$	530,628		$	538,521		$	393,335
Return on average stockholders' equity ratio:
Annualized net income	$	95,618		$	110,083		$	62,711
Average stockholders' equity	$	834,752		$	836,797		$	577,588
Return on average stockholders' equity	11.45		%	13.16		%	10.86		%
Return on average tangible equity ratio:
Annualized net income excluding amortization of other intangible assets	$	101,089		$	114,808		$	64,698
Average tangible equity	$	530,628		$	538,521		$	393,335
Return on average tangible equity	19.05		%	21.32		%	16.45		%

(a) Based on a 21% statutory federal corporate income tax rate.

The return on average stockholders' equity and average tangible equity ratios were negatively impacted by higher total non-interest expense during the first quarter of 2022, compared to the linked quarter. Total non-interest expense is seasonally higher during the first quarter of each year due to annual stock grants resulting in increased stock-based compensation, health saving account employer contributions and payroll taxes. At the same time, the average tangible equity was negatively impacted by the Vantage acquisition, for which People did not issue any equity, and recorded additional goodwill and other intangible assets. Additionally, average tangible equity declined compared to the fourth quarter of 2021 due to a higher accumulated other comprehensive loss during the first quarter of 2022 as a result of the impact of the interest rate environment on the available-for-sale investment securities portfolio. Compared to the first quarter of 2021, the return on average stockholders' equity and average tangible equity ratios were positively impacted by the recent acquisitions, and the related increase in net interest income, coupled with higher non-interest income.

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FINANCIAL CONDITION

Cash and Cash Equivalents

At March 31, 2022, Peoples' interest-bearing deposits in other banks decreased $49.8 million from December 31, 2021. The total cash and cash equivalents balance included $268.7 million of excess cash reserves being maintained at the FRB of Cleveland at March 31, 2022, compared to $318.1 million at December 31, 2021. Peoples paid $82.9 million for the Vantage acquisition during the first quarter of 2022. The amount of excess cash reserves maintained is dependent upon Peoples' daily liquidity position, which is driven primarily by changes in deposit and loan balances.

Through the first three months of 2022, Peoples' total cash and cash equivalents decreased $10.0 million as Peoples had net cash used in investing activities of $127.4 million, which more than offset cash provided by financing activities of $101.6 million and by operating activities of $15.7 million. Peoples' investing activities reflected purchases of available-for-sale investment securities totaling $165.3 million, cash outflows for business combinations of $80.5 million, net of decreases in loans held for investment of $75.7 million and proceeds from principal payments, calls and prepayments of available-for-sale investment securities of $60.5 million. The cash provided by financing activities was largely driven by increases in interest-bearing deposits of $115.3 million, which was driven by higher governmental deposits, which are seasonal in nature.

Further information regarding the management of Peoples' liquidity position can be found later in this discussion under “Interest Rate Sensitivity and Liquidity.”

Investment Securities

The following table provides information regarding Peoples’ investment portfolio:


(Dollars in thousands)	Weighted Average Yield		March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Available-for-sale securities, at fair value:
Obligations of:
U.S. Treasury and government agencies	1.86	%	$	167,406	$	35,604	$	—	$	—	$	—
U.S. government sponsored agencies	0.14	%	80,654		81,739		78,481		14,235		18,471
States and political subdivisions	2.20	%	231,644		259,319		252,919		223,853		218,484
Residential mortgage-backed securities	1.62	%	753,353		828,517		898,459		579,152		596,181
Commercial mortgage-backed securities	1.39	%	58,112		63,519		62,552		27,631		27,481
Bank-issued trust preferred securities	1.51	%	10,670		6,795		4,679		4,766		4,730



Total fair value			$	1,301,839	$	1,275,493	$	1,297,090	$	849,637	$	865,347
Total amortized cost			$	1,381,259	$	1,283,146	$	1,294,654	$	839,682	$	859,120
Net unrealized (loss) gain			$	(79,420)	$	(7,653)	$	2,436	$	9,955	$	6,227
Held-to-maturity securities, at amortized cost:
Obligations of:
U.S. government sponsored agencies	1.64	%	$	38,486	$	36,431	$	29,995	$	30,103	$	30,211
States and political subdivisions (a)	2.24	%	151,217		151,402		124,181		102,224		92,436
Residential mortgage-backed securities	1.87	%	115,613		110,708		41,035		24,067		24,878
Commercial mortgage-backed securities	1.76	%	79,340		75,588		47,889		23,830		18,705
Total amortized cost			$	384,656	$	374,129	$	243,100	$	180,224	$	166,230
Other investment securities			$	41,840	$	33,987	$	34,486	$	32,584	$	34,026
Total investment securities:
Amortized cost			$	1,807,755	$	1,691,262	$	1,572,240	$	1,052,490	$	1,059,376
Carrying value			$	1,728,335	$	1,683,609	$	1,574,676	$	1,062,445	$	1,065,603

(a)Amortized cost is presented net of the allowance for credit losses of $286 at March 31, 2022 and December 31, 2021; $236 at September 30, 2021; $201 at June 30, 2021 and $182 at March 31, 2021.

For the first quarter of 2022, total investment securities increased, and was largely due to investments made in U.S. Treasury and government agencies' obligations late in the quarter, in an effort to deploy cash, improve investment yields and reduce risk. At the same time, unrealized losses on the available-for-sale investment securities portfolio were driven by the increased interest rate environment, and was deemed temporary in nature. During the third quarter of 2021, Peoples acquired investment securities in the Premier acquisition, driving the increase compared to June 30, 2021.

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Additional information regarding Peoples' investment portfolio can be found in "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Loans

The following table provides information regarding outstanding loan balances:


(Dollars in thousands)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Originated loans:
Construction	$	171,934		$	137,437		$	108,334		$	97,424		$	75,189
Commercial real estate, other	854,721			861,610			838,333			836,613			832,399
Commercial real estate	1,026,655			999,047			946,667			934,037			907,588
Commercial and industrial	791,307			779,064			715,169			778,122			935,150
Premium finance	145,813			136,121			134,755			117,039			109,129
Leases	97,168			69,169			49,464			24,217			—
Residential real estate	364,989			350,595			334,838			324,321			306,440
Home equity lines of credit	107,414			104,176			98,806			95,376			92,540
Consumer, indirect	524,778			530,532			543,243			537,926			519,749
Consumer, direct	87,994			81,330			80,746			78,736			75,998
Consumer	612,772			611,862			623,989			616,662			595,747
Deposit account overdrafts	699			756			927			498			298
Total originated loans	$	3,146,817		$	3,050,790		$	2,904,615		$	2,890,272		$	2,946,892
Acquired loans (a):
Construction	$	66,371		$	72,795		$	66,450		$	3,175		$	3,510
Commercial real estate, other	602,511			688,471			790,783			111,647			132,850
Commercial real estate	668,882			761,266			857,233			114,822			136,360
Commercial and industrial	95,844			112,328			143,369			27,629			29,611
Premium finance	—			15			—			49			1,461
Leases	169,900			53,339			61,982			71,426			—
Residential real estate	391,440			421,123			433,296			242,276			267,260
Home equity lines of credit	54,874			59,417			62,564			23,025			24,886
Consumer, indirect	—			—			13			—			—
Consumer, direct	19,396			23,322			27,956			2,700			3,206
Consumer	19,396			23,322			27,969			2,700			3,206
Total acquired loans	$	1,400,336		$	1,430,810		$	1,586,413		$	481,927		$	462,784
Total loans	$	4,547,153		$	4,481,600		$	4,491,028		$	3,372,199		$	3,409,676



Percent of loans to total loans:
Construction	5.2		%	4.7		%	3.9		%	3.0		%	2.3		%
Commercial real estate, other	32.1		%	34.7		%	36.3		%	28.1		%	28.3		%
Commercial real estate	37.3		%	39.4		%	40.2		%	31.1		%	30.6		%
Commercial and industrial	19.5		%	19.9		%	19.1		%	23.9		%	28.3		%
Premium finance	3.2		%	3.0		%	3.0		%	3.5		%	3.2		%
Leases	5.9		%	2.7		%	2.5		%	2.8		%	—		%
Residential real estate	16.6		%	17.2		%	17.1		%	16.8		%	16.8		%
Home equity lines of credit	3.6		%	3.7		%	3.6		%	3.5		%	3.5		%
Consumer, indirect	11.5		%	11.8		%	12.1		%	16.0		%	15.3		%
Consumer, direct	2.4		%	2.3		%	2.4		%	2.4		%	2.3		%
Consumer	13.9		%	14.1		%	14.5		%	18.4		%	17.6		%

Total percentage	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%
Residential real estate loans being serviced for others	$	420,024		$	430,597		$	441,085		$	454,399		$	469,788

(a) Includes all loans acquired, and related loan discount recorded as part of acquisition accounting, in 2012 or thereafter. Loans that were acquired and subsequently re-underwritten are reported as originated upon execution of such credit actions (for example, renewals and increases in lines of credit).

Period-end total loan balances at March 31, 2022 increased $65.6 million compared to December 31, 2021, and was driven by leases acquired from Vantage, coupled with originated growth, and was partially offset by payoffs of previously-acquired loans and PPP loan forgiveness. The originated loan growth was mostly in construction loans, which grew $34.5 million, commercial and industrial balances, which were up $12.2 million, and premium finance loans, which increased $9.7 million.

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The increase in loans at September 30, 2021, compared to June 30, 2021, was primarily due to the Premier acquisition, which added $1.1 billion in loans.

Loan Concentration

Peoples categorizes its commercial loans according to standard industry classifications and monitors for concentrations in a single industry or multiple industries that could be impacted by changes in economic conditions in a similar manner. Peoples' commercial lending activities continue to be spread over a diverse range of businesses from all sectors of the economy, with no single industry comprising over 10% of Peoples' total loan portfolio.

Loans secured by commercial real estate, including commercial construction loans, continued to comprise the largest portion of Peoples' loan portfolio. The following tables provide information regarding the largest concentrations of commercial construction loans and commercial real estate loans within the loan portfolio at March 31, 2022:


(Dollars in thousands)	Outstanding Balance		Loan Commitments		Total Exposure		% of Total



































Construction:
Apartment complexes	$	84,783	$	103,538	$	188,321	43.0	%
Mixed-use facilities	34,822		26,481		61,303		14.0	%
Assisted living facilities and nursing homes	23,464		21,050		44,514		10.2	%
Land only	22,415		6,157		28,572		6.5	%
Office buildings and complexes	8,587		13,013		21,600		4.9	%
Storage facility	5,742		644		6,386		1.5	%
Lodging and lodging related	12,596		1,472		14,068		3.2	%
Retail	9,167		2,709		11,876		2.7	%
Residential property	7,863		9,791		17,654		4.0	%











Other (a)	28,866		14,508		43,374		10.0	%
Total construction	$	238,305	$	199,363	$	437,668	100.0	%

(a) All other outstanding balances are less than 2% of the total loan portfolio.

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(Dollars in thousands)	Outstanding Balance		Loan Commitments		Total Exposure		% of Total
Commercial real estate, other:
Office buildings and complexes:
Owner occupied	$	77,603	$	3,492	$	81,095	5.4	%
Non-owner occupied	94,634		4,822		99,456		6.6	%
Total office buildings and complexes	172,237		8,314		180,551		12.0	%
Retail facilities:
Owner occupied	55,513		1,965		57,478		3.8	%
Non-owner occupied	134,230		1,736		135,966		9.0	%
Total retail facilities	189,743		3,701		193,444		12.8	%
Mixed-use facilities:
Owner occupied	53,673		424		54,097		3.6	%
Non-owner occupied	58,716		4,000		62,716		4.2	%
Total mixed-use facilities	112,389		4,424		116,813		7.8	%
Apartment complexes	93,246		3,508		96,754		6.4	%
Light industrial facilities:
Owner occupied	91,329		1,891		93,220		6.2	%
Non-owner occupied	38,666		633		39,299		2.6	%
Total light industrial facilities	129,995		2,524		132,519		8.8	%
Assisted living facilities and nursing homes	81,349		750		82,099		5.4	%
Warehouse facilities:
Owner occupied	40,271		2,790		43,061		2.9	%
Non-owner occupied	40,176		74		40,250		2.7	%
Total warehouse facilities	80,447		2,864		83,311		5.6	%
Lodging and lodging related:
Owner occupied	13,941		—		13,941		0.9	%
Non-owner occupied	85,713		150		85,863		5.7	%
Total lodging and lodging related	99,654		150		99,804		6.6	%
Education services:
Owner occupied	16,896		98		16,994		1.1	%
Non-owner occupied	22,508		4,000		26,508		1.8	%
Total education services	39,404		4,098		43,502		2.9	%
Healthcare facilities:
Owner occupied	26,085		422		26,507		1.8	%
Non-owner occupied	11,482		—		11,482		0.8	%
Total healthcare facilities	37,567		422		37,989		2.6	%
Restaurant/bar facilities:
Owner occupied	24,482		—		24,482		1.6	%
Non-owner occupied	12,908		—		12,908		0.9	%
Total restaurant/bar facilities	37,390		—		37,390		2.5	%











Agriculture	30,792		1,536		32,328		2.1	%
Other (a)	353,019		17,558		370,577		24.5	%
Total commercial real estate, other	$	1,457,232	$	49,849	$	1,507,081	100.0	%

(a) All other outstanding balances are less than 2% of the total loan portfolio.

Peoples' commercial lending activities continue to focus on lending opportunities 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 March 31, 2022 and December 31, 2021. The repayment of premium finance loans are secured by the underlying insurance policy prepaid premium, and therefore, have no geographical impact from a repayment perspective. The repayment of leases are secured by the underlying equipment collateral and not real estate, which mitigates geographic risk.

Small Business Administration Paycheck Protection Program

In March 2020, the CARES Act created the PPP targeted to provide small businesses with support to cover payroll and certain other specified expenses. Loans made under the PPP are fully guaranteed by the SBA. The PPP loans also afford borrowers forgiveness up to the principal amount of the PPP covered loan, plus accrued interest, if the loan proceeds are used to retain workers

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and maintain payroll and/or to make certain mortgage interest, lease and utility payments, and certain other criteria are satisfied. The SBA will reimburse PPP lenders for any amount of a PPP covered loan that is forgiven, and PPP lenders will not be held liable for any representations made by PPP borrowers in connection with their requests for loan forgiveness.

Peoples is a PPP participating lender, and the PPP loans originated are included in commercial and industrial loans. Peoples also recorded deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in net interest income. The following tables detail Peoples' PPP loans and related income:


(Dollars in millions)	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
PPP aggregate outstanding principal balances	$	42.9	$	89.3	$	139.8	$	194.7	$	349.9
PPP net deferred loan origination fees	1.0		2.2		4.0		7.1		9.3
Accretion of net deferred loan origination fees	1.2		1.8		3.1		3.4		4.7

Allowance for Credit Losses

The amount of the allowance for credit losses at the end of each period represents management's estimate of expected losses from existing loans based upon its quarterly analysis of the loan portfolio. While this process involves allocations being made to specific loans and pools of loans, the entire allowance is available for all losses expected within the loan portfolio.

The following details management's allocation of the allowance for credit losses:


(Dollars in thousands)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Commercial real estate	$	23,786		$	32,146		$	39,252		$	18,147		$	18,663
Commercial and industrial	10,114			11,063			13,378			8,686			10,108
Premium finance	345			379			1,137			998			1,160
Leases	5,875			4,797			4,505			3,715			—

Residential real estate	6,495			7,233			9,568			4,837			4,935
Home equity lines of credit	1,894			2,005			2,224			1,504			1,494
Consumer, indirect	5,172			5,326			6,160			8,841			7,522
Consumer, direct	1,036			961			1,079			1,161			970

Deposit account overdrafts	51			57			79			53			45
Allowance for credit losses	$	54,768		$	63,967		$	77,382		$	47,942		$	44,897
As a percent of total loans	1.20		%	1.43		%	1.72		%	1.42		%	1.32		%

At March 31, 2022, the reduction in the allowance for credit losses compared to December 31, 2021 was due to improvements in economic forecasts and loss drivers, along with reductions in loan balances from acquired loan from payoffs during the quarter. Peoples recorded $387,000 of provision for credit losses during the first quarter of 2022 to establish the allowance for credit losses for non-purchased credit deteriorated leases acquired from Vantage.

The increase in the allowance for credit losses at September 30, 2021, compared to June 30, 2021, was related to the provision for credit losses recorded of $11.0 million in order to establish an allowance for credit losses for non-purchase credit deteriorated loans of $10.6 million, and a liability for unfunded commitments of $0.4 million, both relating to the acquisition of Premier. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier.

Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2021 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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The following table summarizes Peoples’ net charge-offs and recoveries:


	Three Months Ended
(Dollars in thousands)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Gross charge-offs:

Commercial real estate, other	$	278		$	226		$	—		$	4		$	157

Commercial and industrial	463			105			654			5			293
Premium finance	14			15			7			7			16
Leases	473			478			431			525			—
Residential real estate	309			72			44			136			133
Home equity lines of credit	16			1			180			4			12
Consumer, indirect	385			566			416			269			505
Consumer, direct	136			56			29			31			36
Consumer	521			622			445			300			541
Deposit account overdrafts	259			248			135			89			103
Total gross charge-offs	$	2,333		$	1,767		$	1,896		$	1,070		$	1,255
Recoveries:

Commercial real estate, other	$	49		$	196		$	4		$	4		$	—

Commercial and industrial	4			4			4			18			—
Premium finance	—			—			—			—			—
Leases	176			109			120			110			—
Residential real estate	14			40			48			40			15
Home equity lines of credit	29			—			37			—			4
Consumer, indirect	86			42			43			63			105
Consumer, direct	11			58			17			11			26
Consumer	97			100			60			74			131
Deposit account overdrafts	54			42			37			44			54
Total recoveries	$	423		$	491		$	310		$	290		$	204
Net charge-offs (recoveries):

Commercial real estate, other	$	229		$	30		$	(4)		$	—		$	157

Commercial and industrial	459			101			650			(13)			293
Premium finance	14			15			7			7			16
Leases	297			369			311			415			—
Residential real estate	295			32			(4)			96			118
Home equity lines of credit	(13)			1			143			4			8
Consumer, indirect	299			524			373			206			400
Consumer, direct	125			(2)			12			20			10
Consumer	424			522			385			226			410
Deposit account overdrafts	205			206			98			45			49
Total net charge-offs	$	1,910		$	1,276		$	1,586		$	780		$	1,051
Ratio of net charge-offs to average total loans (annualized):

Commercial real estate, other	0.02		%	—		%	—		%	—		%	0.02		%

Commercial and industrial	0.03		%	0.01		%	0.08		%	—		%	0.04		%

Leases	0.03		%	0.03		%	0.03		%	0.05		%	—		%
Residential real estate	0.03		%	—		%	—		%	0.01		%	0.01		%
Home equity lines of credit	—		%	—		%	0.02		%	—		%	—		%
Consumer, indirect	0.03		%	0.05		%	0.04		%	0.02		%	0.05		%
Consumer, direct	0.01		%	—		%	—		%	—		%	—		%
Consumer	0.04		%	0.05		%	0.04		%	0.02		%	0.05		%
Deposit account overdrafts	0.02		%	0.02		%	0.01		%	0.01		%	0.01		%
Total	0.17		%	0.11		%	0.18		%	0.09		%	0.13		%

Each with "--%" not meaningful.

Net charge-offs during the first quarter of 2022 were 0.17% of average total loans on an annualized basis. Peoples has anticipated an increase in the net charge-offs to average total loans, as recent periods have been below historical levels. Higher residential real estate gross charge-offs contributed to the increase, coupled with lower recoveries experienced on commercial real estate loans.

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The following table details Peoples’ nonperforming assets:


(Dollars in thousands)	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Loans 90+ days past due and accruing:
Construction	$	—	$	90	$	—	$	—	$	—
Commercial real estate, other	603		689		1,912		1,361		55
Commercial and industrial	53		1,139		98		161		—
Premium finance	613		865		368		216		109
Leases	3,921		—		1,736		1,522		—
Residential real estate	677		805		1,156		342		662
Home equity lines of credit	75		50		61		60		180
Consumer, indirect	17		—		—		39		24
Consumer, direct	—		85		32		40		14
Consumer	17		85		32		79		38
Total loans 90+ days past due and accruing	$	5,959	$	3,723	$	5,363	$	3,741	$	1,044
Nonaccrual loans:
Construction	$	6	$	6	$	—	$	4	$	4
Commercial real estate, other	14,745		16,849		17,207		7,965		8,084
Commercial and industrial	2,394		2,505		4,133		3,938		4,067
Leases	1,731		1,581		1,411		—		—
Residential real estate	7,459		8,016		8,046		5,811		6,182
Home equity lines of credit	604		687		661		572		624
Consumer, indirect	1,408		1,302		850		704		825
Consumer, direct	231		273		177		100		146
Consumer	1,639		1,575		1,027		804		971
Total nonaccrual loans	$	28,578	$	31,219	$	32,485	$	19,094	$	19,932
Nonaccrual troubled debt restructurings ("TDRs"):

Commercial real estate, other	$	197	$	218	$	94	99		$	337
Commercial and industrial	999		1,067		1,223		1,774		2,034
Residential real estate	1,676		1,631		1,689		1,784		2,064
Home equity lines of credit	333		352		315		129		156
Consumer, indirect	220		272		219		193		206
Consumer, direct	—		6		9		6		15
Consumer	220		278		228		199		221
Total nonaccrual TDRs	$	3,425	$	3,546	$	3,549	$	3,985	$	4,812
Total nonperforming loans ("NPLs")	$	37,962	$	38,488	$	41,397	$	26,820	$	25,788
OREO:
Commercial	$	9,106	$	9,105	$	10,804	$	—	$	—
Residential	301		391		464		239		134
Total OREO	$	9,407	$	9,496	$	11,268	$	239	$	134
Total nonperforming assets ("NPAs")	$	47,369	$	47,984	$	52,665	$	27,059	$	25,922
Criticized loans (a)	$	190,315	$	194,016	$	234,845	$	113,802	$	116,424
Classified loans (b)	109,530		106,547		142,628		69,166		76,095

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(Dollars in thousands)	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Asset Quality Ratios (c):
Nonaccrual loans as a percent of total loans (d)	0.70	%	0.78	%	0.80	%	0.68	%	0.73	%
NPLs as a percent of total loans (d)	0.83	%	0.86	%	0.92	%	0.79	%	0.76	%
NPAs as a percent of total assets (d)	0.65	%	0.68	%	0.75	%	0.53	%	0.50	%
NPAs as a percent of total loans and OREO(d)	1.04	%	1.07	%	1.17	%	0.80	%	0.76	%
Allowance for credit losses as a percent of nonaccrual loans (d)	171.13	%	184.00	%	214.75	%	207.73	%	181.45	%
Allowance for credit losses as a percent of NPLs (d)	144.27	%	166.20	%	186.93	%	178.75	%	174.10	%
Criticized loans as a percent of total loans (a)	4.19	%	4.33	%	5.23	%	3.37	%	3.41	%
Classified loans as a percent of total loans (b)	2.41	%	2.38	%	3.18	%	2.05	%	2.23	%

(a) Includes loans categorized as special mention, substandard or doubtful.

(b) Includes loans categorized as substandard or doubtful.

(d) Nonperforming loans include loans 90+ days past due and accruing, TDRs and nonaccrual loans. Nonperforming assets include nonperforming loans and OREO.

Compared to December 31, 2021, Peoples' nonperforming assets declined to 0.65%, from 0.68%, with the reduction being driven by decreases in nonaccrual loans, which were partially due to a $1.5 million payoff of one commercial relationship. Loans 90+ days past due and accruing increased compared to December 31, 2021, mostly due to the Vantage acquisition. During the first quarter of 2022, criticized loans, which are those categorized as special mention, substandard or doubtful, declined $3.7 million, while classified loans, which are those categorized as substandard or doubtful, grew $3.0 million.

During the third quarter of 2021, nonperforming assets, criticized and classified loans increased due to the Premier merger.

On March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19. In this guidance, short-term modifications, made on a good faith basis in response to COVID-19, to borrowers who were current prior to any relief, are not considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment which are insignificant. Under the guidance, borrowers that are considered to be current are those that were less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not TDRs within the scope of ASC 310-40.

On August 3, 2020, federal and state banking regulators issued a joint statement, encouraging financial institutions to consider prudent accommodation options to mitigate losses for the borrower and financial institution beyond the initial accommodation period. In this guidance, institutions should also provide consumers with available options for repaying missed payments at the end of their accommodation to avoid delinquencies, as well as options for changes to terms to support sustainable and affordable payments for the long term. These considerations should also include prudent risk management practices at the financial institution based on the credit risk of the borrower. Peoples is actively working with its customers to address any further accommodation needs while carefully evaluating the associated credit risk of the borrowers.

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Deposits

The following table details Peoples’ deposit balances:


(Dollars in thousands)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Non-interest-bearing deposits (a)	$	1,666,668		$	1,641,422		$	1,559,993		$	1,181,045		$	1,206,034
Interest-bearing deposits:
Interest-bearing demand accounts (a)	1,179,199			1,167,460			1,140,639			732,478			722,470
Savings accounts	1,065,678			1,036,738			1,016,755			689,086			676,345
Retail certificates of deposit ("CDs")	612,936			643,759			691,680			417,466			433,214
Money market deposit accounts	656,266			651,169			637,635			547,412			586,099
Governmental deposit accounts	734,784			617,259			679,305			498,390			511,937
Brokered deposits	87,395			104,745			106,013			166,746			168,130
Total interest-bearing deposits	4,336,258			4,221,130			4,272,027			3,051,578			3,098,195
Total deposits	$	6,002,926		$	5,862,552		$	5,832,020		$	4,232,623		$	4,304,229
Demand deposits as a percent of total deposits	47		%	48		%	46		%	45		%	45		%

(a)The sum of amounts presented is considered total demand deposits.

At March 31, 2022, period-end deposits increased $140.4 million, or 2%, compared to December 31, 2021, and increased $1.7 billion, or 39%, compared to March 31, 2021. The increase compared to December 31, 2021, was driven by seasonal growth in governmental deposits of $117.5 million, an increase in non-interest bearing checking deposits of $30.8 million, and an increase in savings deposits of $28.9 million, offset partially by decreases in retail and brokered certificates of deposits. The increase in total deposits at September 30, 2021, compared to June 30, 2021, was driven by deposits acquired from Premier. Total deposits in all periods presented were higher due to customers maintaining larger balances, as a result of PPP loan proceeds, fiscal stimulus payments and changes in customer spending habits in light of the COVID-19 pandemic. In prior quarterly periods in the table above, Peoples experienced increases in most low-cost deposit categories.

Peoples reduced its reliance on brokered deposits in each quarterly period, beginning after June 30, 2020. This decline was largely due to the increase in deposit balances from customers, which allowed Peoples to reduce its position in the higher-cost brokered CDs during each period. 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 LIBOR, which offsets the rate on the brokered deposits. As of March 31, 2022, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $125.0 million, of which $85.0 million were designated as cash flow hedges of overnight brokered deposits, which are expected to be extended every 90 days through the maturity dates of the swaps. The remaining $40.0 million of interest rate swaps hedged 90-day FHLB advances, which are also 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.

Borrowed Funds

The following table details Peoples’ short-term and long-term borrowings:


(Dollars in thousands)	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Short-term borrowings:

FHLB 90-day advances	$	40,000	$	40,000	$	50,000	$	—	$	—
Current portion of long-term FHLB advances	15,000		15,000		15,000		15,000		20,000
Retail repurchase agreements	89,275		111,482		119,693		51,496		47,868

Total short-term borrowings	$	144,275	$	166,482	$	184,693	$	66,496	$	67,868
Long-term borrowings:
FHLB advances	$	85,564	$	85,825	$	86,483	$	87,393	$	102,645


Vantage non-recourse debt	102,364		—		—		—		—
Junior subordinated debt securities	13,682		13,650		12,928		7,688		7,650
Total long-term borrowings	$	201,610	$	99,475	$	99,411	$	95,081	$	110,295
Total borrowed funds	$	345,885	$	265,957	$	284,104	$	161,577	$	178,163

Borrowed funds, in total, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances. Borrowed funds increased compared to December 31, 2021, driven by non-recourse debt assumed in the Vantage acquisition partially offset by a decline in retail repurchase agreements of $22.2 million. The increase in total borrowed funds at

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September 30, 2021, compared to June 30, 2021, was primarily due to the addition of $63.8 million retail repurchase agreements from Premier.

Capital/Stockholders’ Equity

At March 31, 2022, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations. These higher capital levels reflect Peoples' desire to maintain a strong capital position. In order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer of 2.50%, which applies to the common equity tier 1 ("CET1") ratio, the tier 1 capital ratio and the total risk-based capital ratio. At March 31, 2022, Peoples had a capital conservation buffer of 4.78%.

The following table details Peoples' risk-based capital levels and corresponding ratios:


(Dollars in thousands)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Capital Amounts:
Common Equity Tier 1	$	547,215		$	577,565		$	567,172		$	383,502		$	418,089
Tier 1	560,897			591,215			580,100			391,190			425,739
Total (Tier 1 and Tier 2)	607,493			648,948			637,802			431,424			463,872
Net risk-weighted assets	$	4,752,428		$	4,614,258		$	4,611,321		$	3,382,736		$	3,365,637
Capital Ratios:
Common Equity Tier 1	11.51		%	12.52		%	12.30		%	11.34		%	12.42		%
Tier 1	11.80		%	12.81		%	12.58		%	11.56		%	12.65		%
Total (Tier 1 and Tier 2)	12.78		%	14.06		%	13.83		%	12.75		%	13.78		%
Tier 1 leverage ratio	8.29		%	8.67		%	11.20		%	7.87		%	9.00		%

Peoples' regulatory capital and related ratio levels declined during the first quarter of 2022. The ratios were negatively impacted by the cash acquisition of Vantage, for which Peoples recorded goodwill and intangible assets, which impact was partially offset by net income exceeding dividends declared during the period. Peoples believes this reduction in regulatory capital and ratios is temporary, and will be recovered in future periods. As of September 30, 2021, regulatory capital ratios increased compared to June 30, 2021 due to the Premier acquisition, which included an equity issuance of $261.9 million. At June 30, 2021, regulatory capital ratios declined compared to March 31, 2021, which was the result of the NSL acquisition, for which Peoples paid cash and recorded goodwill and intangible assets.

In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity. Such ratios represent Non-US GAAP financial measures since their calculation removes the impact of goodwill and other intangible assets acquired through acquisitions on amounts reported in the Unaudited Consolidated Balance Sheets. Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance, financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples. Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in 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.

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The following table reconciles the calculation of these Non-US GAAP financial measures to amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements:


(Dollars in thousands)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Tangible equity:
Total stockholders' equity	$	808,340		$	845,025		$	831,882		$	585,505		$	578,893
Less: goodwill and other intangible assets	341,865			291,009			295,415			221,576			184,007
Tangible equity	$	466,475		$	554,016		$	536,467		$	363,929		$	394,886






Tangible assets:
Total assets	$	7,239,261		$	7,063,521		$	7,059,752		$	5,067,634		$	5,143,052
Less: goodwill and other intangible assets	341,865			291,009			295,415			221,576			184,007
Tangible assets	$	6,897,396		$	6,772,512		$	6,764,337		$	4,846,058		$	4,959,045

Tangible book value per common share:
Tangible equity	$	466,475		$	554,016		$	536,467		$	363,929		$	394,886
Common shares outstanding	28,453,175			28,297,771			28,265,791			19,660,877			19,629,633

Tangible book value per common share	$	16.39		$	19.58		$	18.98		$	18.51		$	20.12

Tangible equity to tangible assets ratio:
Tangible equity	$	466,475		$	554,016		$	536,467		$	363,929		$	394,886
Tangible assets	$	6,897,396		$	6,772,512		$	6,764,337		$	4,846,058		$	4,959,045

Tangible equity to tangible assets	6.76		%	8.18		%	7.93		%	7.51		%	7.96		%

Tangible book value per common share declined to $16.39 at March 31, 2022, compared to $19.58 at December 31, 2021. The change in tangible book value per common share was due to tangible equity declining as the Vantage acquisition included no issuance of equity, coupled with the addition of goodwill and other intangible assets. Also contributing to the decline compared to December 31, 2021, was a $51.0 million reduction in accumulated other comprehensive loss. The increase in tangible equity to tangible assets at September 30, 2021, was attributable to the Premier acquisition, and related equity issued. The decline in tangible equity to tangible assets at June 30, 2021, compared to March 31, 2021, was due to the NSL acquisition.

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 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 its Asset-Liability Committee (the “ALCO”), which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level of IRR. The methods used by the ALCO to assess IRR remain largely unchanged from those disclosed in Peoples' 2021 Form 10-K.

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The following table shows the estimated changes in net interest income and the economic value of equity based upon a standard, parallel shock analysis with balances held constant (dollars in thousands):


Increase (Decrease) in Interest Rate	Estimated Increase (Decrease) in Net Interest Income								Estimated Decrease in Economic Value of Equity
(in Basis Points)	March 31, 2022				December 31, 2021				March 31, 2022				December 31, 2021
300	$	24,211	10.5	%	$	24,903	11.7	%	$	(30,884)	(2.4)	%	$	(24,232)	(2.0)	%
200	15,448		6.7	%	16,312		7.7	%	(25,145)		(1.9)	%	(16,541)		(1.3)	%
100	7,094		3.1	%	7,899		7.1	%	(15,656)		(1.2)	%	(5,308)		(0.4)	%
(100)	(8,348)		(3.6)	%	(8,615)		(4.1)	%	(41,873)		(3.2)	%	(91,568)		(7.4)	%

Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities. These and other modeling assumptions are monitored closely by Peoples on an ongoing basis.

With respect to investment prepayment speeds, the assumptions used are the results of a third-party prepayment model which projects the rate at which the underlying mortgages will prepay. These prepayment speeds affect the amount forecasted for cash flow reinvestment, premium amortization, and discount accretion assumed in interest rate risk modeling results. This prepayment activity is generally the result of refinancing activity and tends to increase as longer term interest rates decline, and decrease as interest rates increase. The assumptions in the interest rate risk model could be incorrect, leading to either a lesser or greater impact on net interest income or asset duration.

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 benefit that might occur as a result of the Federal Reserve increasing 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 March 31, 2022, consideration of the bear steepener and bull flattener scenarios provides insights which were not captured by parallel shifts. These scenarios were evaluated as the current environment suggests these may be possible outcomes for the trajectory of interest rates.

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 rates, remain constant, while asset yields, which are correlated with long-term rates, rise. Increased asset yields would not be offset by increases in deposit or funding costs; resulting in an increased amount of net interest income and higher net interest margin. At March 31, 2022, the bear steepener scenario resulted in an increase in both net interest income and the economic value of equity of 0.2% and 2.9%, respectively.

The bull flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates remain constant while long-term rates fall. In such a scenario, Peoples’ deposit and borrowing costs, which are correlated with short-term rates, remain constant while asset yields, which are correlated with long-term rates, fall. Asset yields driven lower by increased investment securities premium amortization would not be offset by reductions in deposit or funding costs; resulting in a decreased amount of net interest income and lower net interest margin. At March 31, 2022, the bull flattener scenario resulted in a decrease in net interest income and an increase in the economic value of equity of -0.1% and 0.8%, respectively. Peoples was within the policy limitations for this alternative scenario as of March 31, 2022, which sets the maximum allowable downside exposure as 5.0% of net interest income and 10.0% of economic value of equity.

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 March 31, 2022, Peoples had entered into thirteen interest rate swap contracts with an aggregate notional value of $125.0 million. Additional information regarding Peoples’ interest rate swaps can be found in “Note 10 Derivative Financial Instruments” of the Notes to the Unaudited Condensed Consolidated Financial Statements.

At March 31, 2022, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income. The table above illustrates this point as changes to net interest income increase in the rising rate scenarios. While the heavy concentration of floating rate loans remains the largest contributor to the level of asset sensitivity, the decrease in economic value of equity asset sensitivity, as measured, from December 31, 2021 was largely attributable to increased effective duration in the investment securities portfolio.

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Liquidity

In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity. The methods used by the ALCO to monitor and evaluate the adequacy of Peoples Bank's liquidity position remain unchanged from those disclosed in Peoples' 2021 Form 10-K.

At March 31, 2022, Peoples Bank had liquid assets of $582.5 million, which represented 7.3% of total assets and unfunded loan commitments. Peoples also had an additional $238.4 million of unpledged investment securities not included in the measurement of liquid assets.

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.

Since March 31, 2020, there has been an increase in deposit balances due to the influx of funds from the government fiscal stimulus, the PPP and other government actions. Peoples anticipates that these deposit balances will decline over time as the funds are used for intended business purposes; however, this deposit outflow should be partially offset as the associated PPP loans are forgiven and loan reimbursement funds are received. At the same time, we have experienced a decrease in the utilization rate for commercial lines of credit. This decrease is related to the receipt of PPP loan proceeds and other increased cash flows to certain companies. Peoples expects the commercial line of credit utilization percentage to revert back to more historical averages as time progresses. The utilization percentage for consumer line of credit products has been relatively steady.

Off-Balance Sheet Activities and Contractual Obligations

In the normal course of business, Peoples is a party to financial instruments with off-balance sheet risk necessary to meet the financing needs of Peoples' customers. These financial instruments include commitments to extend credit and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract amounts of these instruments express the extent of involvement Peoples has in these financial instruments.

Loan Commitments and Standby Letters of Credit

Loan commitments are made to accommodate the financial needs of Peoples' customers. Standby letters of credit are instruments issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank's customer in the performance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused. Peoples Bank's exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Peoples Bank uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.

Peoples Bank routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Unaudited Condensed Consolidated Financial Statements. These activities are part of Peoples Bank's normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in low-income housing tax credit investments. Traditional off-balance sheet credit-related financial instruments continue to represent the most significant off-balance sheet exposure.

The following table details the total contractual amount of loan commitments and standby letters of credit:


(Dollars in thousands)	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Home equity lines of credit	$	184,616	$	177,262	$	177,963	$	134,516	$	124,027
Unadvanced construction loans	203,719		227,135		271,483		207,403		190,715
Other loan commitments	616,696		577,170		646,374		542,429		555,102
Loan commitments	$	1,005,031	$	981,567	$	1,095,820	$	884,348	$	869,844
Standby letters of credit	$	12,729	$	12,805	$	12,358	$	10,252	$	10,295

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this Item 3 is provided under the caption “Interest Rate Sensitivity and Liquidity” under “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in this Quarterly Report on Form 10-Q, and is incorporated herein by reference.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Peoples' management, with the participation of Peoples' President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer, has evaluated the effectiveness of Peoples’ disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2022. Based upon that evaluation, Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer have concluded that:

(a)information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be accumulated and communicated to Peoples’ management, including its President and Chief Executive Officer and its Executive Vice President, Chief Financial Officer and Treasurer, as appropriate to allow timely decisions regarding required disclosure;

(b)information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(c)as previously disclosed within "ITEM 9A. CONTROLS AND PROCEDURES" of Peoples' 2021 Form 10-K, Peoples did not design effective controls supporting acquired purchased credit deteriorated loan accounting and the related allowance for credit losses aggregated to a material weakness in internal control over financial reporting; and

(d)as part of Peoples' efforts to remediate the material weakness described above, new controls and procedures have been designed and are in process of being implemented. Therefore, Peoples' President and Chief Executive Officer, and its Executive Vice President, Chief Financial Officer and Treasurer concluded that, as of March 31, 2022, Peoples' disclosure controls and procedures were not effective. Despite the foregoing, Management has concluded the financial statements fairly present in all material respects, Peoples' financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with US GAAP.

Changes in Internal Control Over Financial Reporting

The remediation activities described above, and discussed in further detail in "ITEM 9A. CONTROLS AND PROCEDURES" of Peoples' 2021 Form 10-K, are changes in Peoples' internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Peoples' fiscal quarter ended March 31, 2022. These changes may materially affect, or are reasonably likely to materially affect, Peoples’ internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of their respective businesses or operations, Peoples or one of its subsidiaries may be named as a plaintiff, a defendant, or a party to a legal proceeding or any of their respective properties may be subject to various pending and threatened legal proceedings and various actual and potential claims. In view of the inherent difficulty of predicting the outcome of such matters, Peoples cannot state what the eventual outcome of any such matters will be. However, based on management's current knowledge and after consultation with legal counsel, management believes these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of Peoples.

ITEM 1A. RISK FACTORS

The disclosure below supplements the risk factors previously disclosed under “ITEM 1A. RISK FACTORS” of Part I of Peoples’ 2021 Form 10-K. Those risk factors are not the only risks Peoples faces. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect Peoples’ business, financial condition and/or operating results.

On February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing war in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and Peoples' business for an unknown period of time. Any of the above-mentioned factors could affect Peoples' business, financial condition and operating results. Any such

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disruptions may also magnify the impact of other risks described in this Quarterly Report on Form 10-Q and Peoples' 2021 Form 10-K for the year ended December 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table details repurchases by Peoples and purchases by “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, of Peoples’ common shares during the three months ended March 31, 2022:


Period	Total Number of Common Shares Purchased		Average Price Paid per Common Share			Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1 – 31, 2022	650	(3)	$	32.91	(3)	—	$	30,000,000
February 1 – 28, 2022	35,474	(2)	$	32.63	(2)	—	$	30,000,000
March 1 – 31, 2022	735	(3)	$	32.75	(3)	—	$	30,000,000
Total	36,859		$	32.64		—	$	30,000,000

(1)On January 29, 2021, Peoples announced that on January 28, 2021, Peoples' Board of Directors authorized a share repurchase program authorizing Peoples to purchase up to an aggregate of $30 million of Peoples' outstanding common shares. There were no common shares repurchased under the share repurchase program during the three months ended March 31, 2022.

(2)Information reported includes an aggregate of 35,474 common shares withheld to satisfy income taxes associated with restricted common shares which were granted under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan and vested during February 2022.

(3)Information reported includes 650 common shares and 735 common shares purchased in open market transactions during January 2022 and March 2022, by Peoples Bank under the Rabbi Trust Agreement. The Rabbi Trust Agreement establishes a rabbi trust that holds assets to provide funds for the payment of the benefits under the Peoples Bancorp Inc. Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS

Exhibit
Number

Description

Exhibit Location

2.1

Agreement and Plan of Merger, dated as of March 26, 2021, by and between Peoples Bancorp Inc. and Premier Financial Bancorp, Inc.+

Incorporated herein by reference to Exhibit 2.1 to the Current Report of Peoples Bancorp Inc. ("Peoples") on Form 8-K dated and filed on March 31, 2021 (File No. 0-16772)

3.1(a)

Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on May 3, 1993) P

Incorporated herein by reference to Exhibit 3(a) to Peoples' Registration Statement on Form 8-B filed on July 20, 1993 (File No. 0-16772)

3.1(b)

Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 22, 1994)

Incorporated herein by reference to Exhibit 3.1(b) to Peoples' Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (File No. 0-16772) ("Peoples' September 30, 2017 Form 10-Q")

3.1(c)

Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 9, 1996)

Incorporated herein by reference to Exhibit 3.1(c) to Peoples' September 30, 2017 Form 10-Q

3.1(d)

Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 23, 2003)

Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (File No. 0-16772) (“Peoples’ March 31, 2003 Form 10-Q”)

3.1(e)

Certificate of Amendment by Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on January 22, 2009)

Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on January 23, 2009 (File No. 0-16772)

3.1(f)

Certificate of Amendment by Directors to Articles filed with the Ohio Secretary of State on January 28, 2009, evidencing adoption of amendments by the Board of Directors of Peoples Bancorp Inc. to Article FOURTH of the Amended Articles of Incorporation to establish express terms of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value, of Peoples Bancorp Inc.

Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on February 2, 2009 (File No. 0-16772)

3.1(g)

Certificate of Amendment by the Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on July 28, 2021)

Incorporated herein by reference to Exhibit 3.1(g) to Peoples' Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 (File No. 0-16772) ("Peoples' June 30, 2021 Form 10-Q")

3.1(h)

Amended Articles of Incorporation of Peoples Bancorp Inc. (representing the Amended Articles of Incorporation in compiled form incorporating all amendments through the date of this Quarterly Report on Form 10-Q) [For purposes of SEC reporting compliance only--not filed with Ohio Secretary of State]

Incorporated herein by reference to Exhibit 3.1(h) to Peoples' June 30, 2021 Form 10-Q

3.2(a)

Code of Regulations of Peoples Bancorp Inc. P

Incorporated herein by reference to Exhibit 3(b) to Peoples’ Registration Statement on Form 8-B filed on July 20, 1993 (File No. 0-16772)

3.2(b)

Certified Resolutions Regarding Adoption of Amendments to Sections 1.03, 1.04, 1.05, 1.06, 1.08, 1.10, 2.03(C), 2.07, 2.08, 2.10 and 6.02 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 10, 2003

Incorporated herein by reference to Exhibit 3(c) to Peoples’ March 31, 2003 Form 10-Q

3.2(c)

Certificate regarding adoption of amendments to Sections 3.01, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08 and 3.11 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 8, 2004

Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (File No. 0-16772)

+Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. A copy of any omitted schedules or exhibits will be furnished supplementally by Peoples Bancorp Inc. to the SEC on a confidential basis upon request.

PPeoples Bancorp Inc. filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format.

Table of Contents

Exhibit
Number

Description

Exhibit Location

3.2(d)

Certificate regarding adoption of amendments to Sections 2.06, 2.07, 3.01 and 3.04 of Peoples Bancorp Inc.’s Code of Regulations by the shareholders on April 13, 2006

Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on April 14, 2006 (File No. 0-16772)

3.2(e)

Certificate regarding adoption of an amendment to Section 2.01 of Peoples Bancorp Inc.’s Code of Regulations by the shareholders on April 22, 2010

Incorporated herein by reference to Exhibit 3.2(e) to Peoples’ Quarterly Report on Form 10-Q/A (Amendment No. 1) for the quarterly period ended June 30, 2010 (File No. 0-16772)

3.2(f)

Certificate regarding Adoption of Amendment to Division (D) of Section 2.02 of the Code of Regulations of Peoples Bancorp Inc. by the Shareholders at the Annual Meeting of Shareholders on April 26, 2018

Incorporated herein by reference to Exhibit 3.1 to Peoples' Current Report on Form 8-K dated and filed on June 28, 2018 (File No. 0-16772) ("Peoples' June 28, 2018 Form 8-K")

3.2(g)

Code of Regulations of Peoples Bancorp Inc. (This document represents the Code of Regulations of Peoples Bancorp Inc. in compiled form incorporating all amendments.)

Incorporated herein by reference to Exhibit 3.2 to Peoples' June 28, 2018 Form 8-K

10.1

Summary of perquisites for Executive Officers of Peoples Bancorp Inc.

Incorporated herein b reference to Exhibit 10.5 to Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (File No. 0-16772) ("Peoples' 2021 Form 10-K")

10.2

Summary of Base Salaries for Executive Officers of Peoples Bancorp Inc.

Filed herewith

10.3

Summary of Compensation for Directors of Peoples Bancorp Inc.

Incorporated herein b reference to Exhibit 10.7 to Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (File No. 0-16772) ("Peoples' 2021 Form 10-K")

31.1

Rule 13a-14(a)/15d-14(a) Certifications [President and Chief Executive Officer]

Filed herewith

31.2

Rule 13a-14(a)/15d-14(a) Certifications [Executive Vice President, Chief Financial Officer and Treasurer]

Filed herewith

Section 1350 Certifications

Furnished herewith

101.INS

Inline XBRL Instance Document ##