PEOPLES BANCORP INC - Quarter Report: 2023 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, 2023


☐			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	☒	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: 28,485,213 common shares, without par value, at April 28, 2023.

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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 INCOME (LOSS) (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			39


EXECUTIVE SUMMARY			42
RESULTS OF OPERATIONS			44
FINANCIAL CONDITION			57
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			68
ITEM 4. CONTROLS AND PROCEDURES			69
PART II – OTHER INFORMATION			69
ITEM 1. LEGAL PROCEEDINGS			69
ITEM 1A. RISK FACTORS			69
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			70
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			70
ITEM 4. MINE SAFETY DISCLOSURES			70
ITEM 5. OTHER INFORMATION			70
ITEM 6. EXHIBITS			71
SIGNATURES			74

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31, 2023		December 31, 2022

(Dollars in thousands)	(Unaudited)
Assets
Cash and cash equivalents:
Cash and balances due from banks	$	97,101	$	94,679
Interest-bearing deposits in other banks	60,053		59,343
Total cash and cash equivalents	157,154		154,022
Available-for-sale investment securities, at fair value (amortized cost of $1,196,521 at March 31, 2023 and $1,300,719 at December 31, 2022) (a)	1,049,497		1,131,399
Held-to-maturity investment securities, at amortized cost (fair value of $624,436 at March 31, 2023 and $478,509 at December 31, 2022) (a)	694,072		560,212
Other investment securities	52,763		51,609
Total investment securities (a)	1,796,332		1,743,220
Loans and leases, net of deferred fees and costs (b)	4,759,718		4,707,150
Allowance for credit losses	(53,303)		(53,162)
Net loans and leases (c)	4,706,415		4,653,988
Loans held for sale	2,527		2,140
Bank premises and equipment, net of accumulated depreciation	86,567		82,934
Bank owned life insurance	105,999		105,292
Goodwill	292,597		292,397
Other intangible assets	31,965		33,932
Other assets	131,964		139,379
Total assets	$	7,311,520	$	7,207,304
Liabilities
Deposits:
Non-interest-bearing	$	1,555,064	$	1,589,402
Interest-bearing	4,233,463		4,127,539
Total deposits	5,788,527		5,716,941
Short-term borrowings	490,670		500,138
Long-term borrowings	95,629		101,093

Accrued expenses and other liabilities	117,151		103,804
Total liabilities	6,491,977		6,421,976
Stockholders’ equity
Preferred shares, no par value, 50,000 shares authorized, no shares issued at March 31, 2023 and at December 31, 2022	—		—
Common shares, no par value, 50,000,000 shares authorized, 29,868,456 shares issued at March 31, 2023 and 29,857,920 shares issued at December 31, 2022, including at each date shares held in treasury	684,367		686,450
Retained earnings	281,771		265,936
Accumulated other comprehensive loss, net of deferred income taxes	(110,979)		(127,136)
Treasury stock, at cost, 1,457,611 shares at March 31, 2023 and 1,643,461 shares at December 31, 2022	(35,616)		(39,922)
Total stockholders’ equity	819,543		785,328
Total liabilities and stockholders’ equity	$	7,311,520	$	7,207,304

(a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $0 and $241, respectively, at March 31, 2023 and December 31, 2022.

(b) Also referred to throughout this Quarterly Report on Form 10-Q 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)	2023		2022
Interest income:
Interest and fees on loans and leases	$	71,762	$	50,200
Interest and dividends on taxable investment securities	11,003		6,050
Interest on tax-exempt investment securities	996		1,015
Other interest income	388		160
Total interest income	84,149		57,425
Interest expense:
Interest on deposits	5,661		2,053
Interest on short-term borrowings	4,457		338
Interest on long-term borrowings	1,153		724

Total interest expense	11,271		3,115
Net interest income	72,878		54,310
Provision for (recovery of) credit losses	1,853		(6,807)
Net interest income after provision for (recovery of) credit losses	71,025		61,117



Non-interest income:
Electronic banking income	5,443		5,253
Insurance income	5,425		4,731
Trust and investment income	4,084		4,276
Deposit account service charges	3,523		3,426
Lease income	1,077		775
Bank owned life insurance income	707		431
Mortgage banking income	314		436
Net loss on asset disposals and other transactions	(246)		(127)
Net (loss) gain on investment securities	(1,935)		130
Other non-interest income	668		719
Total non-interest income	19,060		20,050
Non-interest expense:
Salaries and employee benefit costs	32,028		27,729
Net occupancy and equipment expense	4,955		5,088
Data processing and software expense	4,562		2,916
Professional fees	2,881		3,672
Amortization of other intangible assets	1,871		1,708
Electronic banking expense	1,491		2,759
Franchise tax expense	1,034		764
Marketing expense	930		995
FDIC insurance expense	801		1,194
Other loan expenses	739		832
Communication expense	613		625
Other non-interest expense	4,574		3,347
Total non-interest expense	56,479		51,629
Income before income taxes	33,606		29,538
Income tax expense	7,046		5,961
Net income	$	26,560	$	23,577


Earnings per common share - basic	$	0.95	$	0.84
Earnings per common share - diluted	$	0.94	$	0.84
Weighted-average number of common shares outstanding - basic	27,891,760		28,006,165
Weighted-average number of common shares outstanding - diluted	28,021,879		28,129,131
Cash dividends declared	$	10,725	$	10,176
Cash dividends declared per common share	$	0.38	$	0.36

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)


	Three Months Ended
	March 31,
(Dollars in thousands)	2023		2022
Net income	$	26,560	$	23,577
Other comprehensive income (loss):
Available-for-sale investment securities:
Gross unrealized holding gain (loss) arising during the period	20,362		(71,637)
Related tax (expense) benefit	(4,647)		16,448
Reclassification adjustment for net loss (gain) included in net income	1,935		(130)
Related tax (expense) benefit	(452)		30


Net effect on other comprehensive income (loss)	17,198		(55,289)
Defined benefit plan:
Net loss arising during the period	—		(14)
Related tax benefit	—		3
Amortization of unrecognized loss and service cost on benefit plans	2		21
Related tax benefit	—		(5)


Net effect on other comprehensive income (loss)	2		5
Cash flow hedges:
Net (loss) gain arising during the period	(1,356)		5,456
Related tax benefit (expense)	313		(1,220)
Net effect on other comprehensive income (loss)	(1,043)		4,236
Total other comprehensive gain (loss), net of tax	16,157		(51,048)
Total comprehensive income (loss)	$	42,717	$	(27,471)

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, 2022	$	686,450	$	265,936	$	(127,136)	$	(39,922)	$	785,328

Net income	—		26,560		—		—		26,560
Other comprehensive gain, net of tax	—		—		16,157		—		16,157


Cash dividends declared	—		(10,725)		—		—		(10,725)

Reissuance of treasury stock for common share awards	(4,685)		—		—		4,685		—


Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors	—		—		—		(920)		(920)

Common shares issued under dividend reinvestment plan	402		—		—		—		402
Common shares issued under compensation plan for Boards of Directors	8		—		—		128		136

Common shares issued under employee stock purchase plan	42		—		—		413		455
Stock-based compensation	2,150		—		—		—		2,150



Balance, March 31, 2023	$	684,367	$	281,771	$	(110,979)	$	(35,616)	$	819,543


					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

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)	2023		2022
Net cash provided by operating activities	$	47,997	$	15,710
Investing activities:
Available-for-sale investment securities:
Purchases	(22,873)		(165,305)
Proceeds from sales	95,362		4,218
Proceeds from principal payments, calls and prepayments	27,922		60,520
Held-to-maturity investment securities:
Purchases	(167,169)		(15,463)
Proceeds from principal payments	33,324		4,512
Other investment securities:
Purchases	(4,792)		(8,208)
Proceeds from sales	3,746		237

Net (increase) decrease in loans held for investment	(52,386)		75,740
Net expenditures for premises and equipment	(2,757)		(2,053)
Proceeds from sales of other real estate owned	107		124


Business acquisitions, net of cash received	(200)		(80,532)
Investment in limited partnership and tax credit funds	(267)		(1,151)
Net cash used in investing activities	(89,983)		(127,361)
Financing activities:
Net (decrease) increase in non-interest-bearing deposits	(34,338)		25,246
Net increase in interest-bearing deposits	105,991		115,255
Net decrease in short-term borrowings	(9,468)		(27,252)
Proceeds from long-term borrowings	2,899		—
Payments on long-term borrowings	(8,450)		(260)


Cash dividends paid	(10,993)		(10,438)

Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock	(920)		(1,230)
Proceeds from issuance of common shares	397		282


Net cash provided by financing activities	45,118		101,603
Net increase (decrease) in cash and cash equivalents	3,132		(10,048)
Cash and cash equivalents at beginning of period	154,022		415,727
Cash and cash equivalents at end of period	$	157,154	$	405,679

Supplemental cash flow information:
Interest paid	$	9,675	$	2,656
Income taxes paid	105		—
Supplemental noncash disclosures:
Transfers from total loans to other real estate owned	—		36
Noncash recognition of new leases	336		726

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, 2022 ("Peoples' 2022 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’ 2022 Form 10-K, as updated by the information contained in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (this "Form 10-Q"). Management has evaluated all significant events and transactions that occurred after March 31, 2023 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, 2022, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2022 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’ 2022 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.

Accounting Standards Update ("ASU") 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This guidance was further updated by ASU 2021-01. This update was effective as of March 12, 2020 through December 31, 2022. The FASB further updated the guidance with ASU 2022-06, which deferred the sunset date of ASC Topic 848, Reference Rate Reform (Topic 848) from December 31, 2022 to December 31, 2024. ASU 2020-04 was early adopted by Peoples as of September 30, 2021, and did not have a significant impact on Peoples' Consolidated Financial Statements, but is expected to reduce the accounting burden of assessing contracts impacted by reference rate reform. Peoples established a working group, consisting of key stakeholders from throughout the company, to monitor developments relating to LIBOR changes and to guide the transition. This team has worked to successfully ensure that technology systems are prepared for the transition, loan documents that reference LIBOR-based rates have been appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders have been apprised of the transition. Based on the transition progress to date, Peoples ceased originating LIBOR-based products and began originating SOFR-indexed products. Peoples will continue to transition all remaining LIBOR-based products to SOFR-indexed products. Peoples will also continue to evaluate the transition process and align its trajectory with regulatory guidelines regarding the cessation of LIBOR as well as monitor new developments for transitioning to alternative reference rates, if necessary and as needed.

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. This ASU also updates the requirements related to accounting for credit losses under Accounting Standards Codification ("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.

Effective January 1, 2023, Peoples adopted the amendments within ASU 2022-02, using the prospective transition method. The adoption of this guidance did not have a material impact on Peoples' consolidated financial statements.

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Pursuant to the guidance in ASU 2022-02, when a loan is restructured, Peoples continues to measure the allowance for credit losses on the loan using a discounted cash flow approach that utilizes a prepayment-adjusted discount rate based on the loan’s restructured terms. Under the TDR accounting model, Peoples modeled a 12-month extension of the contractual terms for TDRs that were to mature within the next 12 months. As Peoples has elected a prospective transition, the extension on a loan that was previously restructured and accounted for as a TDR will continue to be measured as it had been historically in Peoples' allowance for credit losses until the loan is paid off, sold, liquidated, or subsequently restructured. Refer to "Note 4 Loans and Leases" for additional information.

Note 2 Fair Value of Assets and Liabilities

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

Depending on the nature of the asset or the liability, Peoples uses various valuation methodologies and assumptions to estimate fair value. The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 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, 2023						December 31, 2022
(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	$	58,438	$	—	$	—	$	152,422	$	—	$	—
U.S. government sponsored agencies	—		98,311		—		—		88,115		—
States and political subdivisions	—		224,996		—		—		225,882		—
Residential mortgage-backed securities	—		605,270		—		—		604,653		—
Commercial mortgage-backed securities	—		52,153		—		—		50,049		—
Bank-issued trust preferred securities	—		10,329		—		—		10,278		—

Total available-for-sale securities	$	58,438	$	991,059	$	—	$	152,422	$	978,977	$	—
Equity investment securities (a)	168		199		—		147		199		—
Derivative assets (b)	—		27,339		—		—		34,123		—
Liabilities:
Derivative liabilities (c)	$	—	$	23,100	$	—	$	—	$	28,529	$	—

(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.

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

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, 2023 and December 31, 2022.


	Non-Recurring Fair Value Measurements at Reporting Date
	March 31, 2023				December 31, 2022
(Dollars in thousands)	Level 2		Level 3		Level 2		Level 3

Assets:
Collateral dependent loans	$	—	$	8,860	$	—	$	10,354
Loans held for sale (a)	$	1,251	$	—	$	1,254	$	—
Other real estate owned	$	—	$	—	$	—	$	55

(a) Loans held for sale are presented gross of a valuation allowance of $99 and $105 at March 31, 2023 and at December 31, 2022, respectively.

Collateral Dependent Loans: Loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty, are considered collateral dependent. Peoples utilizes outside third-party appraisal services to value the underlying collateral, which Peoples then uses to report the loans at their fair value (Level 3).

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

Other Real Estate Owned ("OREO"):, 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, 2023				December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:
Cash and cash equivalents	1	$	157,154	$	157,154	$	154,022	$	154,022




Held-to-maturity investment securities:
Obligations of:
U.S. government sponsored agencies	2	194,184		186,446		132,366		123,020
States and political subdivisions (a)	2	145,085		114,192		145,263		108,776
Residential mortgage-backed securities	2	245,294		230,377		176,215		157,998
Commercial mortgage-backed securities	2	105,002		89,919		101,861		85,354
Commercial mortgage-backed securities	3	4,748		3,502		4,748		3,361
Total held-to-maturity securities		694,313		624,436		560,453		478,509


Other investment securities:
Other investment securities at cost:
Federal Home Loan Bank ("FHLB") stock	N/A	27,381		27,381		26,605		26,605
Federal Reserve Bank ("FRB") stock	N/A	21,231		21,231		21,231		21,231
Banker's Bank of Kentucky ("BBKY") stock	N/A	355		355		355		355
Total other investment securities at cost		48,967		48,967		48,191		48,191
Other investment securities at fair value:
Nonqualified deferred compensation (b)	1	2,405		2,405		2,048		2,048
Other investment securities (c)	2	1,024		1,024		1,024		1,024
Total other investment securities		52,396		52,396		51,263		51,263

Loans and leases, net of deferred fees and costs (d)	3	4,759,718		4,522,720		4,707,150		4,516,695
Bank owned life insurance	2	105,999		105,999		105,292		105,292
Liabilities:
Deposits	2	$	5,788,527	$	4,924,296	$	5,716,941	$	4,682,491
Short-term borrowings	2	490,670		496,786		500,138		504,584
Long-term borrowings	2	95,629		96,822		101,093		101,992

(a) Held-to-maturity investment securities are presented gross of an allowance for credit losses of $241 at both March 31, 2023 and December 31, 2022.

(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, 2023

and at December 31, 2022, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

table above and not included in this table.

(d) Loans and leases, net of deferred fees and costs, are presented gross of an allowance for credit losses of $53.3 million and $53.2 million at March 31, 2023 and at December 31, 2022, respectively.

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

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

Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). When observable market data is absent, the independent pricing service estimates prices based on underlying cash flow characteristics and discount rates and compares them to similar securities (Level 3). Management reviews the valuation

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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.

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 considers interest rate, credit and market factors in estimating the fair value of loans and leases (Level 3). Fair values for loans and leases are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans and leases with similar terms, the credit risk associated with the loans and leases and other market factors, including liquidity.

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

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

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

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

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

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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, 2023
Obligations of:
U.S. Treasury and government agencies	$	61,584	$	—	$	(3,146)	$	58,438
U.S. government sponsored agencies	109,927		22		(11,638)		98,311
States and political subdivisions	254,523		32		(29,559)		224,996
Residential mortgage-backed securities	697,452		1,070		(93,252)		605,270
Commercial mortgage-backed securities	62,256		—		(10,103)		52,153
Bank-issued trust preferred securities	10,779		40		(490)		10,329

Total available-for-sale securities	$	1,196,521	$	1,164	$	(148,188)	$	1,049,497
December 31, 2022
Obligations of:
U.S. Treasury and government agencies	$	158,473	$	—	$	(6,051)	$	152,422
U.S. government sponsored agencies	101,753		18		(13,656)		88,115
States and political subdivisions	261,612		12		(35,742)		225,882
Residential mortgage-backed securities	707,025		1,017		(103,389)		604,653
Commercial mortgage-backed securities	61,091		—		(11,042)		50,049
Bank-issued trust preferred securities	10,765		57		(544)		10,278

Total available-for-sale securities	$	1,300,719	$	1,104	$	(170,424)	$	1,131,399

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)	2023		2022
Gross gains realized	$	78	$	146
Gross losses realized	(2,013)		(16)
Net (loss) gain realized	$	(1,935)	$	130

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.

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


	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
March 31, 2023
Obligations of:
U.S. Treasury and government agencies	$	—	$	—	—	$	58,438	$	3,146	18	$	58,438	$	3,146
U.S. government sponsored agencies	24,093		222		18	71,220		11,416		14	95,313		11,638
States and political subdivisions	52,634		355		96	161,939		29,204		117	214,573		29,559
Residential mortgage-backed securities	22,648		486		32	572,090		92,766		212	594,738		93,252
Commercial mortgage-backed securities	1,627		8		1	50,526		10,095		23	52,153		10,103
Bank-issued trust preferred securities	478		22		1	7,533		468		4	8,011		490

Total	$	101,480	$	1,093	148	$	921,746	$	147,095	388	$	1,023,226	$	148,188
December 31, 2022
Obligations of:
U.S. Treasury and government agencies	$	112,730	$	2,772	13	$	39,692	$	3,279	11	$	152,422	$	6,051
U.S. government sponsored agencies	15,166		249		17	66,706		13,407		18	81,872		13,656
States and political subdivisions	60,324		714		114	156,900		35,028		117	217,224		35,742
Residential mortgage-backed securities	104,959		8,087		105	488,452		95,302		139	593,411		103,389
Commercial mortgage-backed securities	1,874		129		2	48,175		10,913		21	50,049		11,042
Bank-issued trust preferred securities	4,400		100		3	3,556		444		2	7,956		544

Total	$	299,453	$	12,051	254	$	803,481	$	158,373	308	$	1,102,934	$	170,424

Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis. At March 31, 2023, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses. At March 31, 2023, 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, 2023 and December 31, 2022 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 $6.7 million at March 31, 2023 and $7.8 million at December 31, 2022.

At March 31, 2023, 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 four positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Of the four positions, three positions had a fair value of less than 90% of their book values. Management analyzed the underlying credit quality of these mortgage-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. Obligations of the U.S. treasury and government agencies, obligations of U.S. government sponsored agencies, and obligations of states and political subdivisions were issued by the U.S. Treasury Department or Federal government-sponsored entities. The decline in fair values was attributable to changes in interest rates and not credit quality. Therefore, management does not consider these to be impaired securities.

The unrealized loss with respect to the four bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at March 31, 2023 was attributable to the subordinated nature of the debt.

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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, 2023. 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	$	12,495		$	49,089		$	—		$	—		$	61,584
U.S. government sponsored agencies	9,309			47,321			45,042			8,255			109,927
States and political subdivisions	25,699			47,241			67,302			114,281			254,523
Residential mortgage-backed securities	1			1,415			56,175			639,861			697,452
Commercial mortgage-backed securities	1,635			7,463			29,862			23,296			62,256
Bank-issued trust preferred securities	—			6,279			4,500			—			10,779

Total available-for-sale securities	$	49,139		$	158,808		$	202,881		$	785,693		$	1,196,521
Fair value
Obligations of:
U.S. Treasury and government agencies	$	12,195		$	46,243		$	—		$	—		$	58,438
U.S. government sponsored agencies	9,154			44,088			38,785			6,284			98,311
States and political subdivisions	25,637			45,497			57,761			96,101			224,996
Residential mortgage-backed securities	1			1,358			51,295			552,616			605,270
Commercial mortgage-backed securities	1,627			6,771			24,990			18,765			52,153
Bank-issued trust preferred securities	—			6,284			4,045			—			10,329

Total available-for-sale securities	$	48,614		$	150,241		$	176,876		$	673,766		$	1,049,497
Total weighted-average yield	2.58		%	2.27		%	1.69		%	1.89		%	1.93		%

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, 2023
Obligations of:
U.S. government sponsored agencies	$	194,184	$	—	$	385	$	(8,123)	$	186,446
States and political subdivisions	145,085		(241)		199		(30,851)		114,192
Residential mortgage-backed securities	245,294		—		1,321		(16,345)		230,377
Commercial mortgage-backed securities	109,750		—		49		(16,378)		93,421
Total held-to-maturity securities	$	694,313	$	(241)	$	1,954	$	(71,697)	$	624,436
December 31, 2022
Obligations of:
U.S. government sponsored agencies	$	132,366	$	—	$	130	$	(9,476)	$	123,020
States and political subdivisions	145,263		(241)		162		(36,408)		108,776
Residential mortgage-backed securities	176,215		—		244		(18,461)		157,998
Commercial mortgage-backed securities	106,609		—		—		(17,894)		88,715
Total held-to-maturity securities	$	560,453	$	(241)	$	536	$	(82,239)	$	478,509

There were no sales of held-to-maturity securities for either of the three months ended March 31, 2023 or 2022.

Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. Peoples has determined that the loss given default for U.S. government sponsored enterprise investment securities is zero, due to the fact that it is unlikely the ultimate guarantor (the U.S. government) would not perform on its implicit guarantee in the event of default. The remaining securities are included in the calculation of the allowance for credit losses for held-to-maturity investment securities. Peoples recorded $241,000 of allowance for credit losses for held-to-maturity securities at both March 31, 2023, and December 31, 2022.

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

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	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, 2023
Obligations of:
U.S. government sponsored agencies	$	81,988	$	413	14	30,303		7,710		9	$	112,291	$	8,123
States and political subdivisions	—		—		—	110,831		30,851		67	110,831		30,851
Residential mortgage-backed securities	67,554		884		20	87,045		15,461		23	154,599		16,345
Commercial mortgage-backed securities	22,008		462		5	65,621		15,916		31	87,629		16,378
Total	$	171,550	$	1,759	39	$	293,800	$	69,938	130	$	465,350	$	71,697
December 31, 2022
Obligations of:
U.S. government sponsored agencies	$	59,905	$	651	17	29,306		8,825		9	$	89,211	$	9,476
States and political subdivisions	3,590		1,072		3	101,863		35,336		64	105,453		36,408
Residential mortgage-backed securities	71,582		2,904		21	72,862		15,557		18	144,444		18,461
Commercial mortgage-backed securities	26,869		650		8	61,846		17,244		29	88,715		17,894
Total	$	161,946	$	5,277	49	$	265,877	$	76,962	120	$	427,823	$	82,239

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, 2023. The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 23.3% and 23.3% for the three months ended March 31, 2023 and December 31, 2022, 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	2,126			$	24,178		$	71,008		$	96,872		$	194,184
States and political subdivisions	—			5,214			9,402			130,469			145,085
Residential mortgage-backed securities	—			890			—			244,404			245,294
Commercial mortgage-backed securities	5,004			6,129			34,744			63,873			109,750
Total held-to-maturity securities	$	7,130		$	36,411		$	115,154		$	535,618		$	694,313
Fair value
Obligations of:
U.S. government sponsored agencies	2,102			$	23,398		$	70,844		$	90,102		$	186,446
States and political subdivisions	—			4,944			8,165			101,083			114,192
Residential mortgage-backed securities	—			866			—			229,511			230,377
Commercial mortgage-backed securities	4,899			5,471			30,996			52,055			93,421
Total held-to-maturity securities	$	7,001		$	34,679		$	110,005		$	472,751		$	624,436
Total weighted-average yield	2.01		%	2.01		%	4.29		%	3.45		%	3.50		%

Other Investment Securities

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

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


(Dollars in thousands)	March 31, 2023		December 31, 2022
FHLB stock	$	27,381	$	26,605
FRB stock	21,231		21,231
Nonqualified deferred compensation	2,405		2,048
Equity investment securities	367		346
Other investment securities	1,379		1,379
Total other investment securities	$	52,763	$	51,609

During the three months ended March 31, 2023, Peoples redeemed $3.7 million of FHLB stock in order to be in compliance with the requirements of the FHLB. Peoples purchased $4.5 million of additional FHLB stock during the three months ended March 31, 2023, as a result of the FHLB's capital requirements on FHLB advances during the first quarter.

During the three months ended March 31, 2023 and 2022, Peoples recognized a gain of $21,000 and a loss of $7,000, respectively, for the change in fair value of equity investment securities in "Other non-interest income".

At March 31, 2023, 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 amount of Peoples' pledged securities:


	Carrying Amount
(Dollars in thousands)	March 31, 2023		December 31, 2022

Securing public and trust department deposits, and repurchase agreements:
Available-for-sale	$	704,074	$	779,244
Held-to-maturity	372,372		312,921



Securing additional borrowing capacity at the FHLB and the FRB:
Available-for-sale	3,949		3,972
Held-to-maturity	145,867		128,870

Note 4 Loans and Leases

Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint. Peoples also originates insurance premium finance loans nationwide through its Peoples Premium Finance division, and originates leases nationwide through its North Star Leasing ("NSL") division and its Vantage Financial, LLC ("Vantage") subsidiary. Throughout this Form 10-Q, loans and leases are referred to as "total loans" and "loans held for investment".

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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, 2023		December 31, 2022
Construction	$	232,296	$	246,941
Commercial real estate, other	1,481,062		1,423,518
Commercial and industrial	891,139		892,634
Premium finance	158,263		159,197
Leases	354,641		345,131
Residential real estate	712,602		723,360
Home equity lines of credit	174,383		177,858
Consumer, indirect	647,177		629,426
Consumer, direct	107,406		108,363
Deposit account overdrafts	749		722
Total loans, at amortized cost	$	4,759,718	$	4,707,150

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 $15.4 million at March 31, 2023 and December 31, 2022.

Nonaccrual and Past Due Loans

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

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


	March 31, 2023				December 31, 2022
(Dollars in thousands)	Nonaccrual (a)		Accruing Loans 90+ Days Past Due		Nonaccrual (a)		Accruing Loans 90+ Days Past Due
Construction	$	1	$	—	$	12	$	—
Commercial real estate, other	11,345		150		12,121		167
Commercial and industrial	3,064		228		3,462		130
Premium finance	—		764		—		504
Leases	3,884		2,491		3,178		3,041
Residential real estate	8,641		238		9,496		917
Home equity lines of credit	793		127		820		58
Consumer, indirect	2,147		13		2,176		—
Consumer, direct	105		3		208		25
Total loans, at amortized cost	$	29,980	$	4,014	$	31,473	$	4,842

(a) There were $3.4 million of nonaccrual loans for which there was no allowance for credit losses at March 31, 2023 and $1.4 million at December 31, 2022.

During the first three months of 2023, nonaccrual loans declined compared to at December 31, 2022, which was primarily due to $0.9 million of residential real estate being loans on nonaccrual status as of December 31, 2022 that were accruing as of March 31, 2023. The decrease in accruing loans 90+ days past due at March 31, 2023 when compared to at December 31, 2022, was primarily due to reductions of $0.7 million and $0.6 million in residential real estate loans and leases, respectively.

The amount of interest income recognized on loans past due 90 days or more and accruing during the three months ended March 31, 2023 was $0.5 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, 2023

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	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
Construction	$	—	$	—	$	1	$	1	$	232,295	$	232,296
Commercial real estate, other	2,382		36		10,475		12,893		1,468,169		1,481,062
Commercial and industrial	641		863		2,928		4,432		886,707		891,139
Premium finance	886		307		764		1,957		156,306		158,263
Leases	7,054		2,908		6,310		16,272		338,369		354,641
Residential real estate	7,921		1,240		4,521		13,682		698,920		712,602
Home equity lines of credit	520		351		594		1,465		172,918		174,383
Consumer, indirect	3,541		769		811		5,121		642,056		647,177
Consumer, direct	402		8		44		454		106,952		107,406
Deposit account overdrafts	—		—		—		—		749		749
Total loans, at amortized cost	$	23,347	$	6,482	$	26,448	$	56,277	$	4,703,441	$	4,759,718
December 31, 2022
Construction	$	196	$	161	$	9	$	366	$	246,575	$	246,941
Commercial real estate, other	2,279		1,051		10,370		13,700		1,409,818		1,423,518
Commercial and industrial	2,522		289		3,449		6,260		886,374		892,634
Premium finance	646		816		504		1,966		157,231		159,197
Leases	6,074		1,921		6,218		14,213		330,918		345,131
Residential real estate	10,113		2,128		5,519		17,760		705,600		723,360
Home equity lines of credit	987		149		552		1,688		176,170		177,858
Consumer, indirect	5,866		1,048		921		7,835		621,591		629,426
Consumer, direct	703		70		108		881		107,482		108,363
Deposit account overdrafts	—		—		—		—		722		722
Total loans, at amortized cost	$	29,386	$	7,633	$	27,650	$	64,669	$	4,642,481	$	4,707,150

Delinquency trends remained stable, as 98.8% of Peoples' loan portfolio was considered “current” at March 31, 2023, compared to 98.6% at December 31, 2022.

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, 2023		December 31, 2022
Loans pledged to FHLB	$	918,075	$	783,843
Loans pledged to FRB	332,521		339,005

Credit Quality Indicators

As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Commercial loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible credit deterioration. Commercial leases, as well as loan relationships whose aggregate credit exposure to Peoples is equal to or less than $1.0 million are reviewed at least on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, follows:

“Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk 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.

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

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

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

The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at March 31, 2023:



	Term Loans at Amortized Cost by Origination Year														Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans				Total Loans
Construction
Pass	$	4,420	$	101,719	$	87,280	$	23,208	$	3,241	$	9,692	$	—	$	—	$	229,560
Special mention	968		1,600		—		—		—		128		—		—		2,696
Substandard	—		—		—		—		—		40		—		—		40


Total	5,388		103,319		87,280		23,208		3,241		9,860		—		—		232,296
Current period gross charge-offs	—		—		9		—		—		—						9
Commercial real estate, other
Pass	76,569		173,133		219,202		223,034		214,534		458,817		25,537		—		1,390,826
Special mention	—		—		184		1,200		5,128		17,998		50		—		24,560
Substandard	—		—		10,027		2,523		1,580		51,290		216		—		65,636
Doubtful	—		—		—		—		—		40		—		—		40

Total	76,569		173,133		229,413		226,757		221,242		528,145		25,803		—		1,481,062
Current period gross charge-offs	—		—		—		—		—		33						33
Commercial and industrial
Pass	31,958		157,317		135,973		60,760		70,506		124,255		208,303		—		789,072
Special mention	—		8,794		14,375		20,441		2,021		7,579		25,116		—		78,326
Substandard	4		317		10,065		3,217		2,154		3,038		4,744		—		23,539
Doubtful	—		—		—		—		—		202		—		—		202

Total	31,962		166,428		160,413		84,418		74,681		135,074		238,163		—		891,139

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	Term Loans at Amortized Cost by Origination Year							Revolving Loans Converted to Term
(Dollars in thousands)	2023	2022	2021	2020	2019	Prior	Revolving Loans		Total Loans
Current period gross charge-offs	—	—	—	—	—	1			1
Premium finance
Pass	79,103	79,160	—	—	—	—	—	—	158,263




Total	79,103	79,160	—	—	—	—	—	—	158,263
Current period gross charge-offs	23	—	—	—	—	—			23
Leases
Pass	68,756	151,048	79,901	29,306	13,233	3,398	—	—	345,642
Special mention	16	1,212	2,087	371	7	21	—	—	3,714
Substandard	127	1,691	2,091	512	410	454	—	—	5,285
Total	68,899	153,951	84,079	30,189	13,650	3,873	—	—	354,641
Current period gross charge-offs	—	108	189	100	58	14			469
Residential real estate
Pass	10,786	77,494	136,027	57,950	42,022	377,777	—	—	702,056

Substandard	—	—	280	146	560	9,488	—	—	10,474

Loss	—	—	—	—	—	72	—	—	72
Total	10,786	77,494	136,307	58,096	42,582	387,337	—	—	712,602
Current period gross charge-offs	—	—	—	—	—	41			41
Home equity lines of credit
Pass	4,830	43,159	34,111	18,852	13,774	58,278	114	635	173,118

Substandard	—	—	72	21	63	1,105	—	—	1,261

Loss	—	—	—	—	—	4	—	—	4
Total	4,830	43,159	34,183	18,873	13,837	59,387	114	635	174,383
Current period gross charge-offs	—	—	—	—	—	19			19
Consumer, indirect
Pass	67,265	293,761	135,301	88,220	31,003	28,840	—	—	644,390

Substandard	—	566	849	590	315	423	—	—	2,743

Loss	—	33	10	1	—	—	—	—	44
Total	67,265	294,360	136,160	88,811	31,318	29,263	—	—	647,177
Current period gross charge-offs	18	471	279	90	21	50			929
Consumer, direct
Pass	11,420	46,431	24,731	12,561	5,345	6,566	—	—	107,054

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	Term Loans at Amortized Cost by Origination Year													Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
Substandard	—		12		35		91		32		167		—	—	337

Loss	—		—		—		—		—		15		—	—	15
Total	11,420		46,443		24,766		12,652		5,377		6,748		—	—	107,406
Current period gross charge-offs	—		40		12		34		10		8				104
Deposit account overdrafts	749		—		—		—		—		—		—	—	749
Current period gross charge-offs	227		—		—		—		—		—				227
Total loans, at amortized cost	356,971		1,137,447		892,601		543,004		405,928		1,159,687		264,080	635	4,759,718
Total current period gross charge-offs	$	268	$	619	$	489	$	224	$	89	$	166			$	1,855

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



	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Construction
Pass	$	82,143	$	110,719	$	27,893	$	20,223	$	656	$	4,061	$	44	$	81	$	245,739
Special mention	—		—		—		—		—		818		—		—		818
Substandard	—		2		—		—		—		382		—		—		384


Total	82,143		110,721		27,893		20,223		656		5,261		44		81		246,941
Commercial real estate, other
Pass	165,282		224,727		227,799		202,877		110,564		369,578		27,300		5,217		1,328,127
Special mention	—		189		1,099		5,519		3,111		29,334		105		—		39,357
Substandard	—		8,327		2,591		1,366		1,296		42,172		216		190		55,968
Doubtful	—		—		—		—		—		66		—		—		66

Total	165,282		233,243		231,489		209,762		114,971		441,150		27,621		5,407		1,423,518
Commercial and industrial
Pass	167,937		142,615		72,573		71,497		40,229		91,853		215,116		3,722		801,820
Special mention	10,248		14,981		11,923		2,711		236		4,877		16,235		—		61,211
Substandard	84		9,801		3,417		2,410		1,459		3,620		8,603		611		29,394
Doubtful	—		—		—		—		—		209		—		—		209

Total	178,269		167,397		87,913		76,618		41,924		100,559		239,954		4,333		892,634
Premium finance
Pass	158,778		419		—		—		—		—		—		—		159,197
Total	158,778		419		—		—		—		—		—		—		159,197
Leases
Pass	191,148		90,738		34,627		15,951		3,269		1,119		—		—		336,852
Special mention	1,741		2,477		140		22		24		—		—		—		4,404
Substandard	546		1,840		571		464		454		—		—		—		3,875
Total	193,435		95,055		35,338		16,437		3,747		1,119		—		—		345,131
Residential real estate

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	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Pass	78,313		138,860		58,869		42,840		28,174		364,635		—		—		711,691

Substandard	—		—		137		569		563		10,302		—		—		11,571

Loss	—		—		—		—		—		98		—		—		98
Total	78,313		138,860		59,006		43,409		28,737		375,035		—		—		723,360
Home equity lines of credit
Pass	41,781		35,768		19,863		14,820		13,800		50,291		334		2,096		176,657

Substandard	—		60		—		53		126		958		—		—		1,197

Loss	—		—		—		—		—		4		—		—		4
Total	41,781		35,828		19,863		14,873		13,926		51,253		334		2,096		177,858
Consumer, indirect
Pass	305,814		149,445		100,027		35,988		22,789		12,741		—		—		626,804

Substandard	384		811		659		266		304		193		—		—		2,617

Loss	—		5		—		—		—		—		—		—		5
Total	306,198		150,261		100,686		36,254		23,093		12,934		—		—		629,426
Consumer, direct
Pass	50,889		28,351		14,558		6,333		3,725		3,975		—		—		107,831
Special mention	—		—		—		—		—		—		—		—		—
Substandard	97		63		138		46		21		150		—		—		515

Loss	—		—		—		—		—		17		—		—		17
Total	50,986		28,414		14,696		6,379		3,746		4,142		—		—		108,363
Deposit account overdrafts	722		—		—		—		—		—		—		—		722
Total loans, at amortized cost	$	1,255,907	$	960,198	$	576,884	$	423,955	$	230,800	$	991,453	$	267,953	$	11,917	$	4,707,150

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.

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•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, 2023		December 31, 2022


Commercial real estate, other	7,862			8,362
Commercial and industrial	470			1,456
Residential real estate	528			536



Total collateral dependent loans	$	8,860		$	10,354

The decrease in collateral dependent loans at March 31, 2023, compared to December 31, 2022, was primarily due to two large relationships that were paid in full during the three months ended March 31, 2023.

Modifications for Borrowers Experiencing Financial Difficulty Subsequent to the Adoption of ASU 2022-02

As part of Peoples' loss mitigation activities, Peoples may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. The most common modifications to the contractual terms of a loan to a borrower experiencing financial difficulty include an extension of the maturity date, a reduction in the interest rate for the remaining life of the loan, a temporary period of interest-only payments, and a reduction in the contractual payment amount for either a short period or the remaining term of the loan.

In addition to loan modifications, Peoples also provides other loss mitigation options, such as forbearance and repayment plans, to assist borrowers who experience financial difficulties. In assessing whether or not a borrower is experiencing financial difficulty, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (1) the borrower is currently in payment default on any of the borrower's debt; (2) a payment default is probable in the foreseeable future without the modification; (3) the borrower has declared or is in the process of declaring bankruptcy; and (4) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification.

The following table displays the amortized cost of loans that were restructured during the three months ended March 31, 2023, presented by loan classification.


For the Three Months Ended March 31, 2023
	Payment Delay (Only)
(Dollars in thousands)	Forbearance Plan		Payment Deferral		Term Extension		Forbearance Plan and Term Extension		Total		Percentage of Total by Loan Category(a)(b)
Construction	$	—	$	1,600	$	—	$	—	$	1,600	0.69	%
Commercial real estate	200		—		—		—		200		0.01	%
Commercial and industrial	—		—		9		335		344		0.04	%

Residential real estate	—		—		221		—		221		0.03	%

Consumer, indirect	—		—		28		—		28		—	%


Total	$	200	$	1,600	$	258	$	335	$	2,393	0.05	%

(a) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable.

(b) Each with "--%" not meaningful.

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The following table summarizes the financial impacts of loan modifications and payment deferrals made to loans during the three months ended March 31, 2023, presented by loan classification.


For the Three Months Ended March 31, 2023
	Weighted-Average Term Extension (in months)	Average Amount Capitalized as a Result of a Payment Delay(a)


Commercial and industrial	12	$	—

Residential real estate	210	8,969

Consumer, indirect	2	—


(a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars.

As of March 31, 2023, there were no loans that were modified for borrowers experiencing financial difficulty since the adoption of ASU 2022-02 on January 1, 2023, and subsequently defaulted during the period. For purposes of this disclosure, Peoples defines loans that had a payment default as loans that are 90 days or more past due following a modification through the three months ended March 31, 2023.

The following table displays an aging analysis of loans that were modified on or after January 1, 2023, the date Peoples adopted ASU 2022-02, through March 31, 2023, presented by classification and class of financing receivable.


As of March 31, 2023
(Dollars in thousands)	30-59 Days Delinquent		60-89 Days Delinquent		90+ Days Delinquent		Total Delinquent		Current		Total
Construction	$	—	$	—	$	—	$	—	$	1,600	$	1,600
Commercial real estate	—		—		—		—		200		200
Commercial and industrial	—		—		—		—		344		344

Residential real estate	—		—		—		—		221		221

Consumer, indirect	28		—		—		28		—		28


Total loans modified(a)	$	28	$	—	$	—	$	28	$	2,365	$	2,393

(a) Represents the amortized cost basis as of period end.

Troubled Debt Restructurings Disclosures Prior to the Adoption of ASU 2022-02

Prior to the adoption of ASU 2022-02, Peoples accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. See “Note 1 Summary of Significant Accounting Policies” in Peoples' 2022 Form 10-K for more information on our TDR policy and the COVID-19 relief from TDR accounting and disclosure requirements, and “Note 1, Summary of Significant Accounting Policies” in this report for more information on the adoption of ASU 2022-02.

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The following table summarizes the loans that were modified as TDRs during the three months ended March 31, 2022:


		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
(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.

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, the borrowers that are considered to be 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.

Allowance for Credit Losses

As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 Form 10-K, Peoples' estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In management's estimation of expected credit losses, Peoples uses a one year reasonable and supportable period across all segments. Following the reasonable and supportable period, Peoples reverts the macroeconomic variables to their long run average over a four quarter reversion period.

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Changes in the allowance for credit losses for the three months ended March 31, 2023 and March 31, 2022 are summarized below:


(Dollars in thousands)	Beginning Balance, December 31, 2022		Initial Allowance for Acquired PCD Assets		Provision for (Recovery of) Credit Losses (a)		Charge-offs		Recoveries		Ending Balance, March 31, 2023
Construction	$	1,250	$	—	$	32	$	(9)	$	—	$	1,273
Commercial real estate, other	17,710		—		(1,230)		(33)		27		16,474
Commercial and industrial	8,229		—		79		(1)		—		8,307
Premium finance	344		—		103		(23)		9		433
Leases	8,495		—		1,003		(469)		80		9,109
Residential real estate	6,357		—		159		(41)		29		6,504
Home equity lines of credit	1,693		—		43		(19)		—		1,717
Consumer, indirect	7,448		—		1,183		(929)		79		7,781
Consumer, direct	1,575		—		133		(104)		15		1,619
Deposit account overdrafts	61		—		180		(227)		72		86
Total	$	53,162	$	—	$	1,685	$	(1,855)	$	311	$	53,303

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



(Dollars in thousands)	Beginning Balance, December 31, 2021		Initial Allowance for Acquired PCD Assets (a)		(Recovery of) Provision for Credit Losses (b)		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)Includes purchase price adjustments related to acquisitions previously completed but were within the 12-month measurement period.

(b)Amount does not include the provision for the allowance for credit losses on unfunded commitments.s adopted ASU 2016-13 - Financial Instruments

(c)

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

During the first quarter of 2023, Peoples recorded a provision for credit losses for loans of $1.7 million, largely attributable to a deterioration of macro-economic conditions and an increase in charge-off activity, partially offset by a reduction in reserves for

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individually analyzed loans. Net charge-offs for the first quarter of 2023 were $1.5 million, primarily due to net charge-offs of indirect consumer loans of $0.9 million.

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.

Peoples had recorded an allowance for unfunded commitments of $2.1 million as of March 31, 2023, an increase compared to $2.0 million at December 31, 2022. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets. The change in the allowance for unfunded commitments is also reflected in the "Provision for (recovery of) credit losses" line of the Unaudited Consolidated Statements of Operations.

Note 5 Goodwill and Other Intangible Assets

Goodwill

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


(Dollars in thousands)	March 31, 2023		December 31, 2022
Goodwill, beginning of year	$	292,397	$	264,193
Goodwill recorded from acquisitions	200		28,204
Goodwill, end of period	$	292,597	$	292,397

On January 3, 2023, Peoples acquired a trust and investment business, for which it recognized $200,000 in goodwill.

On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage pursuant to an Equity Purchase Agreement, dated February 16, 2022, at which point Vantage became a legal subsidiary of Peoples Bank. In 2022, Peoples recorded $27.2 million of goodwill related to this acquisition, which was offset partially by an adjustment of $1.3 million to the goodwill balance related to the merger with Premier Financial Bancorp, Inc. (“Premier” and the "Premier Merger").

Other Intangible Assets

Other intangible assets were comprised of the following at March 31, 2023, and at December 31, 2022:


(Dollars in thousands)	Core Deposits		Customer Relationships		Indefinite-Lived Trade Names		Total
March 31, 2023
Gross intangibles	$	26,464	$	39,241	$	2,491	$	68,196

Accumulated amortization	(20,983)		(16,968)		—		(37,951)
Total acquisition-related intangibles	$	5,481	$	22,273	$	2,491	$	30,245
Servicing rights							1,720
Total other intangibles							$	31,965

December 31, 2022
Gross intangibles	$	26,464	$	25,173	$	1,274	$	52,911
Intangibles recorded from acquisitions	—		14,067		1,217		15,284
Accumulated amortization	(20,667)		(15,412)		—		(36,079)
Total acquisition-related intangibles	$	5,797	$	23,828	$	2,491	$	32,116
Servicing rights							1,816
Total other intangibles							$	33,932

Peoples recorded no other intangible assets for the three months ended March 31, 2023.

Other intangible assets recorded from the above-mentioned acquisitions in 2022 were $10.8 million of customer relationship intangible assets, $1.2 million of non-compete intangible assets, and $1.2 million of indefinite-lived trade name intangible assets related to the Vantage acquisition. Peoples also recorded $2.0 million of customer relationship intangible assets and $0.1 million of non-compete intangible assets related to the acquisition of Elite. Refer to "Note 13 Acquisitions" for additional information.

The following table details estimated aggregate future amortization of other intangible assets at March 31, 2023:

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(Dollars in thousands)	Core Deposits		Customer Relationships		Total
Remaining nine months of 2023	$	942	$	4,705	$	5,647
2024	1,058		5,325		6,383
2025	891		4,255		5,146
2026	731		3,114		3,845
2027	572		2,289		2,861
Thereafter	1,287		2,585		3,872
Total	$	5,481	$	22,273	$	27,754

The weighted average amortization period of other intangible assets is 7.2 years.

Note 6 Deposits

Peoples’ deposit balances were comprised of the following:


(Dollars in thousands)	March 31, 2023		December 31, 2022
Retail CDs:
$100 or more	$	331,912	$	263,341
Less than $100	290,179		266,895
Retail CDs	622,091		530,236
Interest-bearing deposit accounts	1,085,169		1,160,182
Savings accounts	1,024,638		1,068,547
Money market deposit accounts	579,106		617,029
Governmental deposit accounts	649,303		625,965

Brokered CDs	273,156		125,580
Total interest-bearing deposits	4,233,463		4,127,539
Non-interest-bearing deposits	$	1,555,064	1,589,402
Total deposits	$	5,788,527	$	5,716,941

Uninsured deposits were $1.7 billion and $1.6 billion at March 31, 2023 and December 31, 2022, respectively. Uninsured amounts are estimated based on the portion of the respective customer account balances that met or exceeded the FDIC limit of $250,000. Peoples pledges investment securities against certain governmental deposit accounts, which covered over $698.9 million of the uninsured deposit balances at March 31, 2023.

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Uninsured time deposits are broken out below by time remaining until maturity.


(Dollars in thousands)	March 31, 2023		December 31, 2022
3 months or less	$	16,476	$	19,282
Over 3 to 6 months	18,190		14,871
Over 6 to 12 months	32,554		14,383
Over 12 months	64,405		52,216
Total	$	131,625	$	100,752

The contractual maturities of CDs for each of the next five years, including the remainder of 2023, and thereafter are as follows:


(Dollars in thousands)	Retail		Brokered		Total
Remaining nine months ending December 31, 2023	$	270,212	$	273,156	$	543,368
Year ending December 31, 2024	271,410		—		271,410
Year ending December 31, 2025	31,984		—		31,984
Year ending December 31, 2026	19,269		—		19,269
Year ending December 31, 2027	26,482		—		26,482
Thereafter	2,734		—		2,734
Total CDs	$	622,091	$	273,156	$	895,247

At March 31, 2023, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $125.0 million, of which $125.0 million were funded by brokered CDs. Brokered CDs used to fund interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments."

Note 7 Stockholders’ Equity

The following table details the progression in Peoples’ common shares and treasury stock during the three months ended March 31, 2023:


	Common Shares	Treasury Stock
Shares at December 31, 2022	29,857,920	1,643,461
Changes related to stock-based compensation awards:

Release of restricted common shares	—	25,977
Cancellation of restricted common shares	—	4,557

Grant of restricted common shares	—	(196,713)
Grant of unrestricted common shares	—	(1,300)
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock	—	4,665
Disbursed out of treasury stock	—	(730)

Common shares issued under dividend reinvestment plan	10,536	—
Common shares issued under compensation plan for Boards of Directors	—	(5,272)

Common shares issued under employee stock purchase plan	—	(17,034)


Shares at March 31, 2023	29,868,456	1,457,611

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, 2023, Peoples had repurchased 263,183 common shares totaling $7.4 million under the share repurchase program. There were no common shares repurchased during the first three months of 2023.

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, 2023, Peoples had no preferred shares issued or outstanding.

On January 23, 2023, Peoples' Board of Directors declared a quarterly cash dividend of $0.38 per common share, payable on February 21, 2023, to shareholders of record on February 6, 2023. On April 24, 2023, Peoples' Board of Directors declared a quarterly cash dividend of $0.39 per common share, payable on May 22, 2023, to shareholders of record on May 8, 2023. The following table details the cash dividends declared per common share during the first two quarters of 2023 and the comparable periods of 2022:


	2023		2022
First quarter	$	0.38	$	0.36
Second quarter	0.39		0.38


Total dividends declared	$	0.77	$	0.74

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, 2023:


(Dollars in thousands)	Unrealized (Loss) Gain on Securities		Unrecognized Net Pension and Postretirement Costs		Unrealized Gain (Loss) on Cash Flow Hedges		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2022	$	(129,896)	$	(1,633)	$	4,393	$	(127,136)
Reclassification adjustments to net income:
Realized loss on sale of securities, net of tax	1,483		—		—		1,483

Other comprehensive income (loss), net of reclassifications and tax	15,715		2		(1,043)		14,674
Balance, March 31, 2023	$	(112,698)	$	(1,631)	$	3,350	$	(110,979)

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.

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The expected long-term rate of return on plan assets, which was determined as of January 1, 2023, is 7.0%. The following table details the components of the net periodic cost for the noncontributory defined benefit pension 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)	2023		2022
Interest cost	$	88	$	66
Expected return on plan assets	(166)		(168)
Amortization of net loss	2		20
Settlement of benefit obligation	—		—
Net periodic loss	$	(76)	$	(82)

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 during the three months ended March 31, 2023 or March 31, 2022 under the noncontributory defined benefit pension plan.

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)	2023		2022
Net income available to common shareholders	$	26,560	$	23,577
Less: Dividends paid on unvested common shares	(102)		(48)
Add: Undistributed loss allocated to unvested common shares	(34)		(21)
Net earnings allocated to common shareholders	$	26,424	$	23,508

Weighted-average common shares outstanding	27,891,760		28,006,165
Effect of potentially dilutive common shares	130,119		122,966
Total weighted-average diluted common shares outstanding	28,021,879		28,129,131

Earnings per common share:
Basic	$	0.95	$	0.84
Diluted	$	0.94	$	0.84
Anti-dilutive common shares excluded from calculation:
Restricted common shares	155,018		—

Note 10 Derivative Financial Instruments

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

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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, 2023, 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, which will continue to be rolled through the life of the swaps. At March 31, 2023 and at December 31, 2022, the interest rate swaps were designated as cash flow hedges of $125.0 million in brokered CDs, which are expected to be extended every 90 days through the maturity dates of the swaps.

For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the brokered CDs are matched to the reset dates and payment dates on the receipt of the three-month LIBOR floating portion of the swaps to ensure effectiveness of the cash flow hedge. During the three months ended March 31, 2023, and 2022, Peoples had recorded reclassifications of gains to earnings of $0.1 million and reclassifications of losses to earnings of $0.6 million, respectively. During the next twelve months, Peoples estimates that $1.3 million of AOCI will be reclassified as a reduction to interest expense.

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


(Dollars in thousands)	March 31, 2023			December 31, 2022
Notional amount	$	125,000		$	125,000
Weighted average pay rates	2.26		%	2.26		%
Weighted average receive rates	4.31		%	4.44		%
Weighted average maturity	2.3 years			2.6 years
Pre-tax changes in fair value included in AOCI	$	4,370		$	5,727

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The following table presents changes in fair value recorded in AOCI and in the Consolidated Statements of Operations related to the cash flow hedges for three months ended March 31, 2023, and 2022:


	Three Months Ended
	March 31,
(Dollars in thousands)	2023		2022
Amount of (losses) gains recorded in AOCI, pre-tax	$	(1,356)	$	5,456

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


	March 31, 2023				December 31, 2022
(Dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in "Other assets":
Interest rate swaps related to debt	$	125,000	$	4,239	$	125,000	$	5,594

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, 2023 and as of or for the year ended December 31, 2022.

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


	March 31, 2023				December 31, 2022
(Dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in "Other assets":
Interest rate swaps related to commercial loans	$	381,196	$	23,100	$	390,126	$	28,529

Included in "Accrued expenses and other liabilities":
Interest rate swaps related to commercial loans	$	381,196	$	23,100	$	390,126	$	28,529

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, 2023 and December 31, 2022, Peoples had no cash pledged, while counterparties had $16.7 million of cash pledged at March 31, 2023 and $20.9 million of cash pledged at December 31, 2022. Peoples had no pledged investment securities at March 31, 2023 or at December 31, 2022, while the counterparties had pledged investment securities in the amounts of $2.4 million at March 31, 2023 and $2.5 million at December 31, 2022.

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. 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.

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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 2023, Peoples granted an aggregate of 188,372 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, 2023:


	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
Oustanding at January 1, 2023	138,522	$	27.25	295,875	$	32.20
Awarded	8,341	28.70		188,372	30.30
Released	(5,316)	31.35		(70,458)	32.91
Forfeited	—	—		(4,557)	31.46
Outstanding at March 31, 2023	141,547	$	27.18	409,232	$	31.21

For the three months ended March 31, 2023, the total intrinsic value for restricted common shares released was $2.3 million compared to $3.3 million for the three months ended March 31, 2022.

Stock-Based Compensation

Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted and unrestricted common shares, as well as purchases made by participants in the employee stock purchase plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. Peoples also has an employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of 15%. The following table summarizes the amount of stock-based compensation expense and related tax benefit recognized for each period:


	Three Months Ended
	March 31,
(Dollars in thousands)	2023		2022
Employee stock-based compensation expense:
Stock grant expense	$	2,150	$	1,577
Employee stock purchase plan expense	39		28

Total employee stock-based compensation expense	2,189		1,605
Non-employee director stock-based compensation expense	136		124
Total stock-based compensation expense	2,325		1,729
Recognized tax benefit	(543)		(396)
Net stock-based compensation expense	$	1,782	$	1,333

The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date. Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $7.0 million at March 31, 2023, which will be recognized over a weighted-average period of 2.2 years.

Note 12 Revenue

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


	Three Months Ended
	March 31,
(Dollars in thousands)		2023		2022
Insurance income:
Commission and fees from sale of insurance policies (a)		$	3,816	$	3,313
Fees related to third-party administration services (a)		82		72

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	Three Months Ended
	March 31,
(Dollars in thousands)		2023		2022
Performance-based commissions (b)		1,527		1,346
Trust and investment income:
Fiduciary income (a)		2,457		1,965
Brokerage income (a)		1,627		2,311
Electronic banking income:
Interchange income (a)		4,181		4,113
Promotional and usage income (a)		1,262		1,140
Deposit account service charges:
Ongoing maintenance fees for deposit accounts (a)		1,461		1,311
Transaction-based fees (b)		2,062		2,115
Commercial loan swap fees (b)		—		168
Other non-interest income transaction-based fees (b)		430		257
Total revenue from contracts with customers		$	18,905	$	18,111
Timing of revenue recognition:
Services transferred over time		$	14,886	$	14,225
Services transferred at a point in time		4,019		3,886
Total revenue from contracts with customers		$	18,905	$	18,111

(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, 2023:


	Contract Assets		Contract Liabilities
(Dollars in thousands)
Balance, January 1, 2023	$	1,294	$	5,634
Additional income receivable	50		—


Recognition of income previously deferred	—		(70)
Balance, March 31, 2023	$	1,344	$	5,564

Note 13 Acquisitions

Vantage Financial, LLC

On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing headquartered in Excelsior, Minnesota. Peoples Bank acquired assets comprising Vantage's lease business, including $154.9 million in leases and certain third-party debt in the amount of $106.9 million. 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.

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Peoples recorded acquisition-related expenses during the three months ended March 31, 2023 and 2022 of $45,000 and $0.8 million, respectively, in professional fees related to the Vantage acquisition.

The following table provides the purchase price calculation as of the date of the acquisition of Vantage, and the assets acquired and liabilities assumed at their estimated fair values.


(Dollars in thousands)	Fair Value







Total purchase price	$	82,893


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







Leases	155,726







Allowance for credit losses (on purchased credit deteriorated leases)	(801)
Net leases	154,925



Bank premises and equipment	116
Other intangible assets	13,207
Other assets	1,506

Total assets	$	171,198
Liabilities
Borrowings	$	106,919





Accrued expenses and other liabilities	8,550
Total liabilities	$	115,469
Net assets	$	55,729
Goodwill	$	27,164

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. Peoples recorded other intangible assets, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.

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



(Dollars in thousands)	Par Value		Allowance for Credit Losses		Non-Credit Premium		Fair Value
Purchased credit deteriorated leases



Leases	$	3,412	$	(801)	$	1,120	$	3,731




Fair value	$	3,412	$	(801)	$	1,120	$	3,731

Note 14 Leases

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

Lessor Arrangements

Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment 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

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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 first quarter of 2022. The leases acquired from NSL were determined to be sales-type leases, as the premise for these 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, health care, manufacturing, office, restaurant, information technology and other equipment. These leases include an estimated residual value, which is 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, 2023		March 31, 2022
Interest and fees on leases (a)		$	9,643	$	6,102
Other non-interest income		1,077		775
Total lease income		$	10,720	$	6,877

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

of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to

the Unaudited Condensed Consolidated Financial Statements.

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


(Dollars in thousands)	March 31, 2023		December 31, 2022
Lease payments receivable, at amortized cost	$	381,549	$	367,681
Estimated residual values	36,078		35,045
Initial direct costs	4,623		4,233
Deferred revenue	(67,609)		(61,828)
Net investment in leases	354,641		345,131
Allowance for credit losses - leases	(9,109)		(8,495)
Net investment in leases, after allowance for credit losses	$	345,532	$	336,636

The following table summarizes the contractual maturities of leases:


(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2023	$	68,772
Year ending December 31, 2024	87,814
Year ending December 31, 2025	98,604
Year ending December 31, 2026	64,769
Year ending December 31, 2027	42,481
Thereafter	19,109
Lease payments receivable, at amortized cost	$	381,549

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, 2023, 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

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make lease payments arising from the lease. Operating lease ROU assets and lease 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, 2023		March 31, 2022
Operating lease expense		695		603
Short-term lease expense		95		168
Total lease expense		$	790	$	771

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.

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, 2023			December 31, 2022
ROU assets:
Other assets	$	7,181		$	6,825
Lease liabilities:
Accrued expenses and other liabilities	$	7,880		$	7,551
Other information:
Weighted-average remaining lease term	8.5 years			8.8 years
Weighted-average discount rate	2.67		%	2.70		%

During the three months ended March 31, 2023 and 2022, Peoples paid cash of $0.7 million and $0.6 million, respectively, for operating leases.

The following table summarizes the maturity of remaining lease liabilities:


(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2023	$	2,008
Year ending December 31, 2024	1,650
Year ending December 31, 2025	1,088
Year ending December 31, 2026	905
Year ending December 31, 2027	747
Thereafter	3,007
Total undiscounted lease payments	$	9,405
Imputed interest	$	(1,525)
Total lease liabilities	$	7,880

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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, 2023 and March 31, 2022. This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto.

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

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

(1)the magnitude and continued duration of the recovery from the COVID-19 pandemic and its ongoing impact on the global economy and financial market conditions and Peoples’ businesses, results of operations and financial conditions;

(2)ongoing increasing interest rate policies, changes in the interest rate environment due to economic conditions and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Federal Reserve Board, including changes in the Federal Funds Target Rate, in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;

(3)the effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay;

(4)the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the ongoing increasing interest rate policies of the Federal Reserve Board, the completion and successful integration of planned acquisitions, including the recently-completed acquisition of Vantage and the pending Limestone Merger, and the expansion of commercial and consumer lending activities;

(5)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;

(6)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;

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

(8)local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, ineffective management of the U.S. federal budget or debt, potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S. and U.S. global trading partners) and the impact these conditions may have on Peoples, Peoples' customers and Peoples' counterparties, and Peoples' assessment of the impact, which may be different than anticipated;

(9)Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;

(10)changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties' performance and creditworthiness generally, which may be less favorable than expected in light of recent inflationary pressures and adversely impact the amount of interest income generated;

(11)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;

(12)future credit quality and performance, including expectations regarding future credit losses and the allowance for credit losses;

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(13)changes in accounting standards, policies, estimates or procedures may adversely affect Peoples' reported financial condition or results of operations;

(14)the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model;

(15)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;

(16)adverse changes in the conditions and trends in the financial markets, including recent inflationary pressures, which may adversely affect the fair value of securities within Peoples' investment portfolio, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities;

(17)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;

(18)Peoples' ability to receive dividends from Peoples' subsidiaries;

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

(20)the impact of larger or similar-sized financial institutions encountering problems, such as the recent closures of Silicon Valley Bank in California and Signature Bank in New York, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity, including potential increased regulatory requirements and costs, increased reputational risk and potential impacts to macroeconomic conditions;

(21)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;

(22)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;

(23)operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Peoples and Peoples' subsidiaries are highly dependent;

(24)changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions, legislative or regulatory initiatives, or other factors, which may be different than anticipated;

(25)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;

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

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

(28)the potential further deterioration of the U.S. economy due to financial, political or other shocks;

(29)the potential influence on the U.S. financial markets and economy from the effects of climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs;

(30)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;

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

(32)Peoples' ability to integrate the pending Limestone Merger, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(33)the risk that expected revenue synergies and cost savings from the pending Limestone Merger, may not be fully realized or realized within the expected time frame;

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

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

(36)Peoples' continued ability to grow deposits or maintain adequate deposit levels in light of the recent bank failures; and

(37)other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' 2022 Form 10-K, and under the heading "ITEM 1A. RISK FACTORS" in Part II of this Form 10-Q. Peoples encourages readers of this Form 10-Q to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance. Peoples undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the filing of this Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC's website at http://www.sec.gov and/or from Peoples' website – www.peoplesbancorp.com under the “Investor Relations” section.

All forward-looking statements speak only as of the filing date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements. Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual results may differ materially from these projections.

This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements, and Notes thereto, contained in Peoples’ 2022 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 offers a complete array of insurance products through Peoples Insurance, a subsidiary of Peoples Bank. Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices. Peoples Bank offers insurance premium finance lending nationwide through its Peoples Premium Finance division. Peoples also offers lease financing through its North Star Leasing division and through Vantage, a subsidiary of Peoples Bank. As of March 31, 2023, Peoples had 130 locations, including 113 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 FRB of Cleveland and the FDIC. Peoples Bank must also follow the regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB") which regulates consumer financial products and services and certain financial services providers. Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business.

Critical Accounting Policies

The accounting and reporting policies of Peoples conform to US GAAP. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements describes Peoples' significant accounting policies. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and MD&A at March 31, 2023, which have been disclosed in Peoples' 2022 Form 10-K and updated in "Note 1 Summary of Significant Accounting Policies" in this Form 10-Q. This MD&A should be read in conjunction with the policies disclosed in Peoples’ 2022 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 October 25, 2022, Peoples announced the Limestone Merger, a transaction valued at approximately $208.2 million at the time of the announcement. The Limestone Merger closed on April 30, 2023. As of March 31, 2023, Peoples had recognized $1.0 million in acquisition-related expenses associated with this pending transaction.

◦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

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maintained by Elite, pursuant to an Asset Purchase Agreement between Peoples Insurance and Elite. Total consideration for this transaction was $4.4 million. Peoples recognized intangibles of $2.1 million, primarily comprised of a customer relationship intangible.

◦On March 7, 2022, Peoples completed its acquisition of Vantage pursuant to an Equity 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 $154.9 million in leases and certain third-party debt in the amount of $106.9 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 goodwill in the amount of $27.2 million and other intangible assets of $13.2 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.

◦During the first quarter of 2023, Peoples recorded a provision for credit losses of $1.9 million, compared to a provision for credit losses of $2.3 million in the linked quarter and a recovery of credit losses of $6.8 million in the first quarter of 2022. The provision for credit losses in the first quarter of 2023 was largely attributable to a deterioration of macro-economic conditions and an increase in charge-off activity, partially offset by a reduction in reserves for individually analyzed loans. For more information, please refer to the section titled "RESULTS OF OPERATIONS - Provision for (Recovery of) Credit Losses" found later in this discussion.

◦During the first quarter of 2023, Peoples incurred $0.6 million of acquisition-related expenses, compared to $0.7 million in the fourth quarter of 2022 and $1.4 million in the first quarter of 2022. The acquisition-related expenses in 2023 were primarily related to the Limestone Merger, while the acquisition-related expenses in 2022 were primarily related to the Vantage acquisition.

◦To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% on March 16, 2022, to 0.75% to 1.00% on May 4, 2022, to 1.50% to 1.75% on June 15, 2022, to 2.25% to 2.50% on July 27, 2022, to 3.00% to 3.25% on September 21, 2022, to 3.75% to 4.00% on November 2, 2022, to 4.25% to 4.50% on December 14, 2022, to 4.50% to 4.75% on February 1, 2023, to 4.75% to 5.00% on March 23, 2023, 5.00% to 5.25% on May 3, 2023 and has stated it may continue to raise rates throughout 2023.

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

EXECUTIVE SUMMARY

Peoples reported net income of $26.6 million for the first quarter of 2023, representing earnings per diluted common share of $0.94. In comparison, Peoples reported earnings per diluted common share of $0.95 for the fourth quarter of 2022, and of $0.84 for the first quarter of 2022. 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 $0.05 for the first quarter of 2023, $0.03 for the fourth quarter of 2022, and $0.04 for the first quarter of 2022.

Net interest income was $72.9 million for the first quarter of 2023, an increase of $2.3 million, or 3%, compared to the linked quarter. Net interest margin was 4.53% for the first quarter of 2023, compared to 4.44% for the linked quarter. The increases in net interest income and net interest margin were driven by 50 basis points of improvement in loan yields due to recent increases in market interest rates and a shift in the composition of the loan portfolio into higher-yielding leases, and 41 basis points of improvement in investment yields when compared to the linked quarter due to purchases of investment securities with higher interest rates and sales of lower-yielding investment securities. Net interest income for the first quarter of 2023 increased $18.6 million, or 34%, compared to the first quarter of 2022. Net interest margin increased 112 basis points compared to 3.41% for the first quarter of 2022. The increase in net interest income compared to the first quarter of 2022 was driven by increases in market interest rates and a full quarter of income from the Vantage acquisition.

Accretion income, net of amortization expense, from acquisitions was $2.0 million for the first quarter of 2023, $2.2 million for the fourth quarter of 2022 and $2.7 million for the first quarter of 2022, which added 13 basis points, 14 basis points and 17 basis points, respectively, to net interest margin. The decreases in accretion income for the first quarter of 2023 when compared to the linked quarter and the first quarter of 2022 were driven by less loan accretion due to lower pay-offs and less accretion from the merger with Premier Financial Bancorp, Inc. ("Premier") and the Vantage acquisition.

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The provision for credit losses was $1.9 million for the first quarter of 2023, compared to a provision for credit losses of $2.3 million for the linked quarter and a recovery of credit losses of $6.8 million for the first quarter of 2022. The provisions for credit losses in the first quarter of 2023 and the linked quarter were largely attributable to a deterioration of macro-economic conditions and an increase in charge-off activity, partially offset by a reduction in reserves for individually analyzed loans. The recovery of credit losses in the first quarter of 2022 was attributable to an improvement in economic factors and loss drivers within the current expected credit loss ("CECL") model. Net charge-offs for the first quarter of 2023 were $1.5 million, or 0.13% of average total loans annualized, compared to net charge-offs of $2.1 million, or 0.18% of average total loans annualized, for the linked quarter and net charge-offs of $1.9 million, or 0.17% of average total loans annualized, for the first quarter of 2022. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below.

Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Operations. The net loss realized during the first quarter of 2023 was $2.2 million, compared to a net loss of $0.5 million for the linked quarter, and a net gain of $3,000 for the first quarter of 2022. During the first quarter of 2023, Peoples executed the sale of $96.7 million of its lower yielding available-for-sale securities for a pre-tax net loss of $2.0 million. Proceeds from the sale were used to pay down overnight borrowings. The realized losses recognized due to these transactions are projected to be earned back within the 2023 fiscal year. The net loss for the linked quarter was primarily due to net losses on repossessed assets and net losses on sales of investment securities.

Total non-interest income, excluding net gains and losses, for the first quarter of 2023 increased $1.7 million compared to the linked quarter. The increase in non-interest income, excluding net gains and losses, was due to a $1.7 million increase in insurance income due to seasonal performance-based commissions being earned in the first quarter of each year. Compared to the first quarter of 2022, non-interest income, excluding net gains and losses, increased $1.2 million, primarily due to a $0.7 million increase in insurance income which was attributable to an increase in property and casualty insurance commissions.

Total non-interest expense increased $3.1 million, or 6%, for the three months ended March 31, 2023, compared to the linked quarter. The increase in total non-interest expense for the first quarter of 2023 was attributable to an increase in salaries and employee benefit costs. The increase in salaries and employee benefit costs was due to anticipated additional expenses typically recognized in the first quarter of each year. These expenses included annual merit increases, stock-based compensation expenses attributable to retirement-eligible employees, and employer health savings account ("HSA") contributions. Compared to the first quarter of 2022, total non-interest expense increased $4.9 million, or 9%, primarily due to increases in (i) salaries and employee benefit costs, (ii) data processing and software expense and (iii) other non-interest expense. The increases were due to growth, including through acquisitions. Partially offsetting these increases were decreases in electronic banking expense and professional fees.

The efficiency ratio for the first quarter of 2023 was 57.8%, compared to 56.7% for the linked quarter, and 66.8% for the first quarter of 2022. The increase in the efficiency ratio compared to the linked quarter was primarily due to the increases in non-interest expenses, which were partially offset by higher net interest income due to increases in the market interest rates. The decrease in the efficiency ratio compared to the prior year quarter was primarily due to a decrease in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 57.2% for the first quarter of 2023, compared to 55.9% for the linked quarter and 64.8% for the first quarter of 2022. 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 HSA contributions 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.

Peoples recorded income tax expense of $7.0 million with an effective tax rate of 21.0% for the first quarter of 2023, compared to income tax expense of $7.1 million with an effective tax rate of 21.0% for the linked quarter, and income tax expense of $6.0 million with an effective tax rate of 20.2% for the first quarter of 2022. The increase in income tax expense for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by higher income before income taxes.

At March 31, 2023, total assets were $7.31 billion, compared to $7.21 billion at December 31, 2022 and $7.24 billion at March 31, 2022. The $104.2 million increase in total assets compared to at December 31, 2022 was primarily due to increases in held-to-maturity investment securities and loans and leases, net of deferred fees and costs, partially offset by a decrease in available-for-sale investment securities. Management underwent an initiative during the first quarter of 2023 to sell lower yielding available-for-sale investment securities whose proceeds were used to pay down higher cost funding. Separately, the increase in the period-end loan and lease balances was primarily driven by increases of (i) $57.5 million in other commercial real estate loans, (ii) $17.8 million in indirect consumer loans and (iii) $9.5 million in leases, partially offset by a reductions of $14.6 million in construction loans and $10.8 million in residential real estate loans. The $72.3 million increase in total assets compared to at March 31, 2022 was largely attributable to increases in loans and leases as well as the aforementioned net increase in investment securities, partially offset by decreases in interest-bearing deposits at other banks. The increase in the period-end loan and lease balances when compared to at March 31, 2022 was primarily driven by increases of $122.4 million in indirect consumer loans and $87.6 million in leases, partially offset by a reduction of $43.8 million in residential real estate loans.

Total liabilities were $6.49 billion at March 31, 2023, up from $6.42 billion at December 31, 2022 and $6.43 billion at March 31, 2022. The increase in total liabilities compared to at December 31, 2022 was attributable to an increase in total deposits and long-term

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borrowings. The increase in total deposits when compared to at December 31, 2022 was primarily driven by an increase of $147.6 million in brokered certificates of deposits, which are primarily used as a source of funding. Excluding the increase in brokered certificates of deposits, total deposits at March 31, 2023 decreased $76.0 million when compared to at December 31, 2022, primarily due to reductions of (i) $75.0 million in interest-bearing deposit accounts (ii) $43.9 million in savings accounts, (iii) $37.9 million in money market deposit accounts, and (iv) $34.3 million in non-interest bearing deposit accounts, partially offset by an increase of $91.9 million in retail certificates of deposit. The increase in total liabilities compared to at March 31, 2022 was primarily due to an increase in short-term borrowings, partially offset decreases in total deposits and long-term borrowings. Deposits decreased primarily due to reductions in non-interest-bearing deposits, interest-bearing demand deposit accounts, governmental deposit accounts, and money market deposit accounts of $111.6 million, $94.0 million, $85.5 million and $77.2 million, respectively, partially offset by an increase of $185.8 million in brokered certificates of deposits.

Total stockholders' equity at March 31, 2023 increased by $34.2 million compared to at December 31, 2022, which reflected net income for the quarter of $26.6 million and a decrease in accumulated other comprehensive loss of $16.2 million, partially offset by dividends paid of $10.7 million. The change in accumulated other comprehensive loss was the result of the changes in the market value of available-for-sale investment securities during the period. Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $112.7 million and $129.9 million at March 31, 2023 and at December 31, 2022, respectively. Total stockholders' equity at March 31, 2023 increased by $11.2 million compared to at March 31, 2022, which was primarily due to net income of $104.3 million in the last twelve months partially offset by an increase in accumulated other comprehensive loss of $48.3 million. The increase in accumulated other comprehensive loss was the result of an increase of $51.5 million in unrealized losses related to the available-for-sale investment securities portfolio from March 31, 2022 to March 31, 2023.

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 corporate income tax rate of 23.3% for each of the three months ended March 31, 2023 and December 31, 2022, and a 22.9% blended corporate income tax rate for the three months ended March 31, 2022.

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


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)
Net interest income	$	72,878	$	70,613	$	54,310
Taxable equivalent adjustment	399		412		391
Fully tax-equivalent net interest income	$	73,277	$	71,025	$	54,701

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


	For the Three Months Ended
	March 31, 2023						December 31, 2022						March 31, 2022
(Dollars in thousands)	Average Balance		Income/ Expense		Yield/Cost		Average Balance		Income/ Expense		Yield/Cost		Average Balance		Income/ Expense		Yield/Cost
Short-term investments	$	35,223	$	388	4.47	%	$	44,421	$	404	3.61	%	$	332,098	$	160	0.20	%

Investment securities (a)(b):
Taxable	1,597,688		11,049		2.77	%	1,459,879		8,376		2.29	%	1,465,998		6,096		1.66	%
Nontaxable	190,566		1,298		2.72	%	192,863		1,365		2.83	%	204,381		1,316		2.58	%
Total investment securities	1,788,254		12,347		2.76	%	1,652,742		9,741		2.35	%	1,670,379		7,412		1.78	%
Loans (b)(c):
Construction	239,492		3,963		6.62	%	234,233		3,596		6.01	%	225,676		2,155		3.82	%
Commercial real estate, other	1,333,062		19,794		5.94	%	1,293,500		18,431		5.58	%	1,362,434		14,782		4.34	%
Commercial and industrial	877,391		14,610		6.66	%	885,111		13,455		5.95	%	888,598		8,023		3.61	%
Premium finance	147,895		2,150		5.81	%	161,382		1,898		4.60	%	132,758		1,164		3.51	%
Leases	342,583		9,643		11.26	%	325,113		8,448		10.17	%	162,277		6,102		15.04	%
Residential real estate (d)	839,822		9,717		4.63	%	853,354		9,321		4.37	%	913,730		9,766		4.28	%
Home equity lines of credit	176,327		2,966		6.82	%	177,778		2,723		6.08	%	163,339		1,612		4.00	%
Consumer, indirect	640,359		7,231		4.58	%	612,696		6,834		4.43	%	523,770		5,045		3.91	%
Consumer, direct	108,488		1,739		6.50	%	113,045		1,763		6.19	%	106,298		1,595		6.09	%
Total loans	4,705,419		71,813		6.12	%	4,656,212		66,469		5.62	%	4,478,880		50,244		4.50	%
Allowance for credit losses	(52,669)						(52,253)						(61,947)
Net loans	4,652,750		71,813		6.19	%	4,603,959		66,469		5.68	%	4,416,933		50,244		4.56	%
Total earning assets	6,476,227		84,548		5.23	%	6,301,122		76,614		4.79	%	6,419,410		57,816		3.61	%
Goodwill and other intangible assets	325,545						327,377						304,124
Other assets	420,692						438,694						344,282
Total assets	$	7,222,464					$	7,067,193					$	7,067,816
Interest-bearing deposits:
Savings accounts	$	1,044,392	$	136	0.05	%	$	1,069,646	$	138	0.05	%	$	1,050,813	$	34	0.01	%
Governmental deposit accounts	637,959		1,066		0.68	%	688,815		710		0.41	%	670,419		447		0.27	%
Interest-bearing demand accounts	1,103,966		180		0.07	%	1,152,709		186		0.06	%	1,171,266		92		0.03	%
Money market accounts	583,574		825		0.57	%	615,460		522		0.34	%	650,272		97		0.06	%
Retail certificates of deposit	576,645		1,750		1.23	%	534,145		717		0.53	%	626,978		871		0.56	%
Brokered deposits (e)	224,325		1,704		3.08	%	87,934		515		2.32	%	91,531		512		2.27	%
Total interest-bearing deposits	4,170,861		5,661		0.55	%	4,148,709		2,788		0.27	%	4,261,279		2,053		0.20	%
Borrowed funds:
Short-term FHLB advances (e)	377,578		4,314		4.63	%	181,946		1,570		3.42	%	55,000		313		2.31	%
Repurchase agreements and other	93,848		143		0.61	%	96,242		99		0.41	%	99,346		25		0.10	%
Total short-term borrowings	471,426		4,457		3.83	%	278,188		1,669		2.38	%	154,346		338		0.89	%
Long-term FHLB advances	34,015		204		2.43	%	34,297		210		2.43	%	85,653		306		1.45	%

Long-term notes payable	50,656		653		5.16	%	53,528		661		4.94	%	29,780		298		4.02	%
Trust Preferred	13,806		296		8.58	%	13,771		261		7.42	%	13,665		120		3.51	%
Total long-term borrowings	98,477		1,153		4.69	%	101,596		1,132		4.45	%	129,098		724		2.26	%
Total borrowed funds	569,903		5,610		3.98	%	379,784		2,801		2.93	%	283,444		1,062		1.51	%
Total interest-bearing liabilities	4,740,764		11,271		0.96	%	4,528,493		5,589		0.49	%	4,544,723		3,115		0.28	%
Non-interest-bearing deposits	1,556,636						1,639,580						1,606,665
Other liabilities	123,599						130,470						81,676
Total liabilities	6,420,999						6,298,543						6,233,064


Total stockholders’ equity	801,465						768,650						834,752
Total liabilities and stockholders’ equity	$	7,222,464					$	7,067,193					$	7,067,816
Interest rate spread (b)			$	73,277	4.27	%			$	71,025	4.30	%			$	54,701	3.33	%
Net interest margin (b)					4.53	%					4.44	%					3.41	%

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(a)Average balances are based on carrying value.

(b)Interest income and yields are presented on a fully tax-equivalent basis, using a 23.3% blended corporate income tax rate for each of the three months ended March 31, 2023 and December 31, 2022, and a 22.9% blended corporate income tax rate for the three months ended March 31, 2022.

(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, including Vantage on March 7, 2022, which added to average lease and borrowed funds balances. Peoples has begun to reduce cash balances after previously maintaining high cash balances in recent prior periods due to an influx of deposits.

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




	Three Months Ended March 31, 2023 Compared to
(Dollars in thousands)	December 31, 2022						March 31, 2022
Increase (decrease) in:	Rate		Volume		Total (a)		Rate		Volume		Total (a)
INTEREST INCOME:
Short-term investments	$	350	$	(366)	$	(16)	$	1,337	$	(1,109)	$	228

Investment Securities (b):
Taxable	1,837		836		2,673		4,363		590		4,953
Nontaxable	(42)		(25)		(67)		320		(338)		(18)
Total investment income	1,795		811		2,606		4,683		252		4,935
Loans (b):
Construction	300		67		367		1,669		139		1,808
Commercial real estate, other	927		436		1,363		7,144		(2,132)		5,012
Commercial and industrial	1,925		(770)		1,155		7,288		(701)		6,587
Premium finance	1,134		(882)		252		840		146		986
Leases	795		400		1,195		(9,374)		12,915		3,541
Residential real estate	1,245		(849)		396		3,167		(3,216)		(49)
Home equity lines of credit	393		(150)		243		1,217		137		1,354
Consumer, indirect	173		224		397		954		1,232		2,186
Consumer, direct	301		(325)		(24)		111		33		144
Total loan income	7,193		(1,849)		5,344		13,016		8,553		21,569
Total interest income	$	9,338	$	(1,404)	$	7,934	$	19,036	$	7,696	$	26,732
INTEREST EXPENSE:
Deposits:
Savings accounts	$	14	$	(16)	$	(2)	$	104	$	(2)	$	102
Governmental deposit accounts	694		(338)		356		770		(151)		619
Interest-bearing demand accounts	24		(30)		(6)		124		(36)		88
Money market accounts	482		(179)		303		798		(70)		728
Retail certificates of deposit	974		59		1,033		1,355		(476)		879
Brokered deposits	206		983		1,189		236		956		1,192
Total deposit cost	2,394		479		2,873		3,387		221		3,608
Borrowed funds:
Short-term borrowings	738		2,050		2,788		715		3,404		4,119
Long-term borrowings	217		(196)		21		1,047		(618)		429
Total borrowed funds cost	955		1,854		2,809		1,762		2,786		4,548
Total interest expense	3,349		2,333		5,682		5,149		3,007		8,156
Fully tax-equivalent net interest income	$	5,989	$	(3,737)	$	2,252	$	13,887	$	4,689	$	18,576

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(a)The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each.

(b)Interest income and yields are presented on a fully tax-equivalent basis using a 23.3% blended corporate income tax rate for each of the three months ended March 31, 2023 and December 31, 2022, and a 22.9% blended corporate income tax rate for the three months ended March 31, 2022.

Compared to the linked quarter, net interest income increased 3% and net interest margin expanded by 9 basis points. Both increases were primarily driven by 50 basis points of improvement in loan yields due to recent increases in market interest rates and a shift in the composition of the loan portfolio into higher-yielding leases, which resulted in 41 basis points of improvement in investment yields when compared to the linked quarter due to purchases of investment securities with higher interest rates and sales of lower-yielding investment securities. Borrowing costs increased 105 basis points as a result of increase in short-term borrowings due to utilizing overnight FHLB advances and brokered certificates of deposits in recent quarters.

Net interest income grew 34% over the prior year quarter and net interest margin increased by 112 basis points. The increase in net interest income compared to the first quarter of 2022 was driven by increases in market interest rates and a full quarter of income from the Vantage acquisition. Compared to the prior year quarter, loan yields grew 162 basis points due to the rising interest rate environment and both acquisitive and organic growth, while borrowing costs increased 247 basis points as a result of increase in short-term borrowings due to the utilization of FHLB overnight advances mentioned above.

Peoples recognized interest income on deferred loan fees/costs associated with PPP loans of $1.2 million during the first quarter of 2022 along with $154,000 of interest earned on PPP loans. The interest income recognized on PPP loans added 5 basis points to net interest margin for the first quarter of 2022. The deferred loan fees/costs associated with PPP loans and interest earned on PPP loans were minimal for the first quarter of 2023 and the linked quarter.

Accretion income, net of amortization expense, from acquisitions was $2.0 million for the first quarter of 2023, $2.2 million for the linked quarter and $2.7 million for the first quarter of 2022, which added 13 basis points, 14 basis points and 17 basis points, respectively, to net interest margin. The decreases in accretion income for the first quarter of 2023 when compared to the linked quarter and the first quarter of 2022 were driven by less loan accretion due to lower pay-offs and less accretion from the merger with Premier and the Vantage acquisition.

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

Provision for (Recovery of) Credit Losses

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


	Three Months Ended
	March 31, 2023			December 31, 2022			March 31, 2022
(Dollars in thousands)
Provision for (recovery of) other credit losses	$	1,673		$	2,023		$	(7,006)
Provision for checking account overdraft credit losses	180			278			199
Provision for (recovery of) credit losses	$	1,853		$	2,301		$	(6,807)
As a percentage of average total loans (a)	0.16		%	0.20		%	(0.62)		%
(a) Presented on an annualized basis.

The provision for (recovery of) credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates. The provisions for credit losses in the first quarter of 2023 and the linked quarter were largely attributable to a deterioration of macro-economic conditions and an increase in charge-off activity, partially offset by a reduction in reserves for individually analyzed loans.

During the first quarter of 2022, Peoples recorded a recovery of credit losses of $6.8 million due to an improvement in the economic forecast, along with payoffs of several loans during the quarter, which were partially offset by $0.4 million for the establishment of an allowance for credit losses for the non-purchased credit deteriorated leases from the Vantage acquisition.

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.”

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

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


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)
Net (loss) gain on investment securities	$	(1,935)	$	(168)	$	130

Net loss on asset disposals and other transactions:
Net loss on other assets	$	(229)	$	(278)	$	(22)
Net loss on OREO	(10)		—		(1)

Net loss on other transactions	(7)		(23)		(104)
Net loss on asset disposals and other transactions	$	(246)	$	(301)	$	(127)

The net loss on investment securities in the first quarter of 2023 due to a $2.0 million pre-tax net loss on the sale of the available-for-sale investment securities. During the first quarter of 2023, Peoples executed the sale of $96.7 million of its lower yielding available-for-sale securities which were used to pay down overnight borrowings. The loss on the sale of the securities had a nominal impact on tangible book value as such loss was previously reflected in capital through accumulated other comprehensive loss. The realized losses recognized due to these transactions are projected to be earned back within the 2023 fiscal year.

The net loss on asset disposals and other transactions decreased slightly in the first quarter of 2023 when compared to the linked quarter and increased when compared to the prior year quarter. The net loss for the first quarter of 2023 was primarily due to net losses on furniture and fixture disposals. The net loss for the linked quarter was primarily due to net losses on other assets, which was mainly due to net losses on repossessed assets.

During the first three months of 2022, Peoples sold several investment securities, resulting in 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 loans acquired in the merger with Premier that were subsequently sold.

Total Non-Interest Income, Excluding Net Gains and Losses

Total non-interest income, excluding net gains and losses, comprised 23% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the first quarter of 2023, compared to 22% for the linked quarter and 27% for the prior year quarter. The increase in this ratio compared to the linked quarter was due to an increase in insurance income due to seasonal performance-based commissions being earned in the first quarter of each year. The decline in this ratio compared to the prior year quarter was primarily due to higher net interest income associated with a full quarter of income from the acquisition of Vantage coupled with the increases in the market interest rates.

For the first quarter of 2023, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses. Peoples' electronic banking ("e-banking") services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to customers. The following table details Peoples' e-banking income:


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)


E-banking income	$	5,443	$	5,161	$	5,253

Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers. The amount of e-banking income is largely dependent on the timing and volume of customer activity. E-banking income increased compared to each of the linked quarter and the prior year quarter primarily due to more customer activity.

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The following table details Peoples' insurance income:


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)


Property and casualty insurance commissions	$	3,252	$	3,127	$	2,862


Performance-based commissions	1,527		4		1,346
Life and health insurance commissions	564		511		452
Other fees and charges	82		90		71
Insurance income	$	5,425	$	3,732	$	4,731

During the first quarter of 2023, Peoples' insurance income grew 45% when compared to the linked quarter. This increase in insurance income was due to seasonal performance-based commissions being earned, which are annual in nature and typically occur in the first quarter of each year. Compared to the first quarter of 2022, insurance income increased 15% and was driven by higher performance-based property and casualty insurance commissions.

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


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)
Fiduciary income	$	1,805	$	1,792	$	1,965
Brokerage income	1,627		1,485		1,649
Employee benefit fees	652		638		662
Trust and investment income	$	4,084	$	3,915	$	4,276

Fiduciary income and brokerage income increased slightly in the current quarter relative to the linked quarter, due to an increase in assets under administration and management. When compared to the first quarter of 2022, trust and investment income declined due to less fiduciary income, primarily due to market volatility.

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


	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
(Dollars in thousands)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022

Trust	$	1,803,887	$	1,764,639	$	1,682,334	$	1,731,454	$	1,927,828
Brokerage	1,318,300		1,211,868		1,127,831		1,068,261		1,152,530
Total	$	3,122,187	$	2,976,507	$	2,810,165	$	2,799,715	$	3,080,358
Quarterly average	$	3,076,285	$	2,965,985	$	2,844,181	$	2,927,405	$	3,106,021

The increases in assets under administration and management at March 31, 2023, compared to at December 31, 2022 and March 31, 2022 were driven by market value fluctuations and a $30 million increase in brokerage assets due to an acquisition of an independent financial advisor in January of 2023.

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, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)
Overdraft and non-sufficient funds fees	$	1,842	$	2,170	$	1,902
Account maintenance fees	1,461		1,352		1,311
Other fees and charges	220		244		213
Deposit account service charges	$	3,523	$	3,766	$	3,426

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

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for the current quarter compared to the linked quarter due to a decline in overdraft and non-sufficient funds fees. Deposit account service charges increased slightly for the current quarter compared to the prior year quarter due to increased maintenance fee rates.

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


	Three Months Ended
	March 31, 2023	December 31, 2022	March 31, 2022
(Dollars in thousands)

Lease income	1,077	1,336	775
Bank owned life insurance income	707	702	431
Mortgage banking income	314	281	436
Other non-interest income	668	611	719

Lease income is primarily comprised of (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. The first quarter of 2023 decrease in lease income when compared to the linked quarter was due to seasonal fluctuations in syndication income, as the fourth quarter of each year typically has a higher volume of originations. The first quarter of 2023 increase in lease income when compared to the first quarter of 2022 was due to a full quarter of income from the Vantage acquisition in 2023 versus only a month of income in 2022.

Bank owned life insurance income for the current quarter was relatively flat compared to the linked quarter and increased when compared to the same 2022 period. The first quarter of 2023 increase in bank owned life insurance income when compared to the first quarter of 2022 was due to an additional $30.0 million of investments in bank owned life insurance policies during the second quarter of 2022.

Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained. As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage banking income for the current quarter was relatively flat when compared to the linked quarter. Mortgage banking income declined for the current year quarter compared to the prior year quarter due to the increased market interest rate environment in recent quarters and a lower volume of new loan originations.

In the first quarter of 2023, Peoples sold $0.8 million in loans to the secondary market with servicing retained and $7.4 million in loans with servicing released, compared to $2.5 million and $9.5 million, respectively, in the fourth quarter of 2022, and $7.2 million and $7.9 million, respectively, in the first quarter of 2022.

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, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)
Base salaries and wages	$	20,332	$	19,747	$	17,676
Employee benefits	4,115		3,372		3,621
Sales-based and incentive compensation	3,945		5,284		3,636
Payroll taxes and other employment costs	2,370		1,591		2,091
Stock-based compensation	2,189		832		1,605
Deferred personnel costs	(923)		(2,068)		(900)
Salaries and employee benefit costs	$	32,028	$	28,758	$	27,729
Full-time equivalent employees:
Actual at end of period	1,286		1,267		1,245
Average during the period	1,283		1,261		1,215

Base salaries and wages for the current quarter increased compared to linked quarter primarily due to annual merit increases. The current quarter increase compared to the prior year quarter was primarily driven by a rise in annual merit increases as well as a full quarter of expenses related to the additional salaries associated with the acquisition of Vantage.

The increases in employee benefits for the current quarter compared to the linked quarter, was primarily due to annual contributions to employee health savings accounts that occur primarily in the first quarter of each year. The increase in employee

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benefits for the current quarter compared to the first quarter of 2022 was due to higher medical costs reflecting a full quarter of expenses in 2023 for the Vantage employees versus a month of expenses in the first quarter of 2022.

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

Payroll taxes and other employment costs increased compared to the prior quarter and the first quarter of 2022 and were primarily related to higher base salaries and wages. Also impacting the increase in payroll taxes and other employment costs when compared to the linked quarter were seasonal expenses recognized in the first quarter of each year.

Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years. An adjustment is made at the vesting date to reverse expense relating to forfeitures for performance awards, and at the date of forfeiture to reverse expense for non-vested restricted awards. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year and are based upon Peoples achieving certain performance goals during the prior year and are generally contingent on employment through the vesting period. Stock-based compensation for the first three months of 2023 increased when compared to the first three months of 2022 due to additional employees, including the ones added in the acquisition of Vantage.

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 for the current quarter compared to the linked quarter was primarily due to a prior period adjustment of costs to originate leases.

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


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)
Depreciation	$	1,790	$	1,700	$	1,823
Repairs and maintenance costs	1,261		1,364		1,378
Property taxes, utilities and other costs	1,157		1,014		1,202
Net rent expense	747		769		685
Net occupancy and equipment expense	$	4,955	$	4,847	$	5,088

The first quarter of 2023 net occupancy and equipment expense increased slightly when compared to the linked quarter due to increases in depreciation and property taxes, utilities and other costs, partially offset by reductions in repairs and maintenance costs and net rent expense. When compared to the first quarter of 2022, net occupancy and equipment expense decreased due to less depreciation, repairs and maintenance costs and property taxes, utilities and other costs due to having less geographic locations as of the first quarter of 2023.

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


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)
Data processing and software expense	$	4,562	$	5,013	$	2,916
Professional fees	2,881		3,310		3,672
Amortization of other intangible assets	1,871		1,998		1,708
E-banking expense	1,491		1,097		2,759
Franchise tax expense	1,034		546		764
Marketing expense	930		737		995
FDIC insurance premiums	801		781		1,194
Other loan expenses	739		947		832
Communication expense	613		611		625
Other non-interest expense	4,574		4,721		3,347

Data processing and software expense increased when compared to the first quarter of 2022, driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization.

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Professional fees decreased for the current quarter compared to the comparative periods due to less acquisition-related expenses being reported when compared to those periods.

Amortization of other intangible assets for the current quarter decreased when compared to the linked quarter due to decreased amortization of intangible assets recognized as a result of recent acquisitions. Amortization of other intangible assets for the current quarter increased when compared to the first quarter of 2022 due to amortization of intangible assets recognized in the Vantage acquisition.

Peoples' e-banking expense is comprised of costs associated with debit and ATM cards, as well as Internet and mobile banking costs. E-banking expense increased during the current quarter compared to the linked quarter, and is correlated to e-banking income, which also increased from the linked quarter primarily due to more customer activity. E-banking expense decreased for the first quarter of 2023 when compared to the first quarter of 2022 due to a decline in customer activity compared to last year.

Peoples is subject to state franchise taxes, which are based largely on Peoples' equity, in the states where Peoples has a physical presence. Franchise tax expense also includes the Ohio Financial Institution Tax ("FIT"), which is a business privilege tax that is imposed on financial institutions organized for profit and doing business in Ohio. The Ohio FIT is based on the total equity capital in proportion to the taxpayer's gross receipts in Ohio as of the most recent year-end. The increase versus the linked quarter was driven by a refund received in the linked quarter. The increase from the first quarter of 2022 was driven by recent growth through acquisitions and organic means.

Marketing expense increased for the first quarter of 2023 when compared to the linked quarter primarily due to higher media advertising expenses and donations compared to the prior period.

Peoples' FDIC insurance premiums decreased for the current quarter compared to the first quarter of 2022 due to an adjustment in the first quarter of 2022 relating to prior acquisitions.

Other loan expenses during the first three months of 2023 decreased when compared to the linked quarter primarily due to lower indirect lending volume and decreased collection expense.

Other non-interest expense increased during the current quarter when compared to the first quarter of 2022 due to an increase in acquisition-related expenses related to the Limestone Merger.

Income Tax Expense

Peoples recorded income tax expense of $7.0 million with an effective tax rate of 21.0% for the first quarter of 2023, compared to income tax expense of $7.1 million with an effective tax rate of 21.0% for the linked quarter and income tax expense of $6.0 million with an effective tax rate of 20.2% for the first quarter of 2022. Income tax expense for the first quarter of 2023, compared to the linked quarter, was relatively flat due to similar income before income taxes. The increase in income tax expense for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by a higher income before income taxes.

Additional information regarding income taxes can be found in "Note 13. Income Taxes" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 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, 2023			December 31, 2022			March 31, 2022
(Dollars in thousands)
Pre-provision net revenue:
Income before income taxes	$	33,606		$	33,980		$	29,538
Add: provision for credit losses	1,853			2,301			—

Add: loss on OREO	10			—			1
Add: loss on investment securities	1,935			168			—
Add: loss on other assets	229			278			22
Add: loss on other transactions	7			23			104

Less: recovery of credit losses	—			—			6,807
Less: gain on investment securities	—			—			130


Pre-provision net revenue	$	37,640		$	36,750		$	22,728

Total average assets	$7,222,464			$7,067,193			$7,067,816
Pre-provision net revenue to total average assets (annualized)	2.11		%	2.06		%	1.30		%
Weighted-average common shares outstanding - diluted	28,021,879			27,981,656			28,129,131
Pre-provision net revenue per common share - diluted	$	1.34		$	1.31		$	0.81

The increase in the PPNR for the first quarter of 2023 compared to the first quarter of 2022 was driven by increased net interest income reflecting the positive impact of recent increases in market interest rates as well as a provision for credit losses in the first quarter of 2023 compared to the recovery of credit losses in the first quarter of 2022.

Core Non-Interest Expense (Non-US GAAP)

Core non-interest expense is a financial measure used to evaluate Peoples' recurring expense stream. This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses, pension settlement charges and COVID-19-related expenses.

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


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
(Dollars in thousands)

Core non-interest expense:
Total non-interest expense	$	56,479	$	53,366	$	51,629

Less: acquisition-related expenses	551		702		1,373
Less: pension settlement charges	—		46		—


Less: COVID-19-related expenses	—		2		94


Core non-interest expense	$	55,928	$	52,616	$	50,162

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, 2023			December 31, 2022			March 31, 2022
(Dollars in thousands)

Efficiency ratio:
Total non-interest expense	$	56,479		$	53,366		$	51,629
Less: amortization of other intangible assets	1,871			1,998			1,708
Adjusted total non-interest expense	54,608			51,368			49,921

Total non-interest income	19,060			19,034			20,050

Less: net (loss) gain on investment securities	(1,935)			(168)			130
Less: net loss on asset disposals and other transactions	(246)			(302)			(127)
Total non-interest income excluding net gains and losses	21,241			19,504			20,047

Net interest income	72,878			70,613			54,310
Add: fully tax-equivalent adjustment (a)	399			412			391
Net interest income on a fully tax-equivalent basis	73,277			71,025			54,701
Adjusted revenue	$	94,518		$	90,529		$	74,748
Efficiency ratio	57.78		%	56.74		%	66.79		%

Efficiency ratio adjusted for non-core items:
Core non-interest expense	$	55,928		$	52,616		$	50,162
Less: amortization of other intangible assets	1,871			1,998			1,708
Adjusted core non-interest expense	54,057			50,618			48,454
Non-interest income excluding net gains and losses	21,241			19,504			20,047
Net interest income on a fully tax-equivalent basis	73,277			71,025			54,701
Adjusted revenue	$	94,518		$	90,529		$	74,748
Efficiency ratio adjusted for non-core items	57.19		%	55.91		%	64.82		%

(a) Tax effect is calculated using a 23.3% blended corporate income tax rate for each of the three months ended March 31, 2023 and December 31, 2022, and a 22.9% blended corporate income tax rate for the three months ended March 31, 2022.

The efficiency ratio and the efficiency ratio adjusted for non-core items for the first quarter of 2023 increased when compared to the linked quarter, primarily due to the increases in non-interest expenses due to seasonal first quarter expenses partially offset by higher net interest income driven by increases in the market interest rates. The improvements in the efficiency ratio and the efficiency ratio adjusted for non-core items compared to the prior year quarter were driven by higher net interest income due to increases in market interest rates over the last twelve months.

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, pension settlement charges and COVID-19-related expenses.

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	Three Months Ended
	March 31, 2023			December 31, 2022			March 31, 2022
(Dollars in thousands)

Annualized net income adjusted for non-core items:
Net income	$	26,560		$	26,849		$	23,577

Add: net loss on investment securities	1,935			168			—
Less: tax effect of net loss on investment securities (a)	406			35			—
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	246			302			127
Less: tax effect of net loss on asset disposals and other transactions (a)	52			63			27



Add: acquisition-related expenses	551			702			1,373
Less: tax effect of acquisition-related expenses (a)	116			147			288
Add: pension settlement charges	—			46			—
Less: tax effect of pension settlement charges (a)	—			10			—


Add: COVID-19-related expenses	—			2			94
Less: tax effect of COVID-19-related expenses (a)	—			—			20










Net income adjusted for non-core items (after tax)	$	28,718		27,814			24,733
Days in the period	90			92			90
Days in the year	365			365			365
Annualized net income	$	107,716		$	106,520		$	95,618
Annualized net income adjusted for non-core items (after tax)	$	116,467		$	110,349		$	100,306
Return on average assets:
Annualized net income	$	107,716		$	106,520		$	95,618
Total average assets	7,222,464			7,067,193			7,067,816
Return on average assets	1.49		%	1.51		%	1.35		%
Return on average assets adjusted for non-core items:
Annualized net income adjusted for non-core items (after tax)	$	116,467		$	110,349		$	100,306
Total average assets	7,222,464			7,067,193			7,067,816
Return on average assets adjusted for non-core items (after tax)	1.61		%	1.56		%	1.42		%

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

The return on average assets for the current quarter decreased slightly when compared to the linked quarter, due to an increase in average assets. The increase in the return on average assets for the first quarter of 2023, compared to the first quarter of 2022, was attributable to higher net interest income and non-interest income, which were driven by the increases in market interest rates.

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

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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, 2023			December 31, 2022			March 31, 2022
(Dollars in thousands)
Annualized net income excluding amortization of other intangible assets:
Net income	$	26,560		$	26,849		$	23,577
Add: amortization of other intangible assets	1,871			1,998			1,708
Less: tax effect of amortization of other intangible assets (a)	393			420			359
Net income excluding amortization of other intangible assets	$	28,038		$	28,427		$	24,926
Days in the period	90			92			90
Days in the year	365			365			365
Annualized net income	$	107,716		$	106,520		$	95,618
Annualized net income excluding amortization of other intangible assets	$	113,710		$	112,781		$	101,089
Average tangible equity:
Total average stockholders' equity	$	801,465		$	768,650		$	834,752
Less: average goodwill and other intangible assets	325,545			327,377			304,124
Average tangible equity	$	475,920		$	441,273		$	530,628
Return on total average stockholders' equity ratio:
Annualized net income	$	107,716		$	106,520		$	95,618
Total average stockholders' equity	$	801,465		$	768,650		$	834,752
Return on total average stockholders' equity	13.44		%	13.86		%	11.45		%
Return on average tangible equity ratio:
Annualized net income excluding amortization of other intangible assets	$	113,710		$	112,781		$	101,089
Average tangible equity	$	475,920		$	441,273		$	530,628
Return on average tangible equity	23.89		%	25.56		%	19.05		%

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

The return on total average stockholders' equity and average tangible equity ratios were lower in the current quarter relative to the linked quarter, due to issuance of treasury stock for employee stock awards in the first quarter as well as decreases in accumulated other comprehensive losses on available-for-sale investment securities, partially offset by an increase in total net interest income driven by the recent increases in market interest rates. The return on total average stockholders' equity and average tangible equity ratios were higher in the current quarter when compared to the same 2022 period due to greater accumulated other comprehensive losses on available-for-sale investment securities in 2023, which reduced average tangible equity.

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FINANCIAL CONDITION

Cash and Cash Equivalents

At March 31, 2023, Peoples' interest-bearing deposits in other banks had increased $0.7 million from December 31, 2022. The total cash and cash equivalents balance included $53.7 million of excess cash reserves being maintained at the FRB of Cleveland at March 31, 2023, compared to $33.1 million at December 31, 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 2023, Peoples' total cash and cash equivalents increased $3.1 million as Peoples had $48.0 million of cash provided by operating activities and $45.1 million of cash provided by financing activities, substantially offset by $90.0 million of cash used in investing activities. Peoples' cash used in investing activities reflected net cash outflows from held-to-maturity investment securities of $133.8 million and cash outflows from a $52.4 million net increase in loans held for investment, partially offset by net cash inflows from available-for-sale investment securities of $100.4 million. The cash provided by financing activities was largely driven by a $106.0 million net increase in interest-bearing deposits, partially offset by net cash outflows of $34.3 million, $11.0 million and $9.5 million from a net decrease in non-interest-bearing deposits, cash dividends paid, and payments on long-term borrowings, respectively. Peoples paid $82.9 million in cash for the Vantage acquisition during the first quarter of 2022.

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, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Available-for-sale securities, at fair value:
Obligations of:
U.S. Treasury and government agencies	1.54	%	$	58,438	$	152,422	$	172,055	$	175,255	$	167,406
U.S. government sponsored agencies	2.10	%	98,311		88,115		80,915		82,465		80,654
States and political subdivisions	2.19	%	224,996		225,882		230,022		249,402		231,644
Residential mortgage-backed securities	1.83	%	605,270		604,653		624,061		691,735		753,353
Commercial mortgage-backed securities	1.58	%	52,153		50,049		52,504		58,301		58,112
Bank-issued trust preferred securities	5.38	%	10,329		10,278		10,287		10,440		10,670



Total fair value			$	1,049,497	$	1,131,399	$	1,169,844	$	1,267,598	$	1,301,839
Total amortized cost			$	1,196,521	$	1,300,719	$	1,349,800	$	1,389,621	$	1,381,259
Net unrealized loss			$	(147,024)	$	(169,320)	$	(179,956)	$	(122,023)	$	(79,420)
Held-to-maturity securities, at amortized cost:
Obligations of:
U.S. government sponsored agencies	4.61	%	$	194,184	$	132,366	$	59,871	$	50,990	$	38,486
States and political subdivisions (a)	2.23	%	144,844		$	145,022	145,252		151,034		151,217
Residential mortgage-backed securities	3.83	%	245,294		176,215		111,707		112,095		115,613
Commercial mortgage-backed securities	2.49	%	109,750		106,609		90,971		86,601		79,340
Total amortized cost			$	694,072	$	560,212	$	407,801	$	400,720	$	384,656
Other investment securities			$	52,763	$	51,609	$	39,039	$	41,655	$	41,840
Total investment securities:
Amortized cost			$	1,943,356	$	1,912,540	$	1,796,640	$	1,831,996	$	1,807,755
Carrying value			$	1,796,332	$	1,743,220	$	1,616,684	$	1,709,973	$	1,728,335

(a)Amortized cost is presented net of the allowance for credit losses of $241 at March 31, 2023, $241 at December 31, 2022 and $286 at March 31, 2022.

For the first quarter of 2023, total investment securities increased compared to the prior quarter, largely due to investments made in held-to-maturity residential mortgage-backed securities and obligations of U.S. government sponsored agencies, in an effort to improve investment yields and reduce risk, partially offset by the reduction in available-for-sale securities. During the first quarter of 2023, Peoples executed the sale of $96.7 million of its lower yielding available-for-sale securities for an after-tax loss of $1.6 million. Proceeds from the sale were used to pay down overnight borrowings. The realized losses recognized due to these transactions are projected to be earned back within the 2023 fiscal year.

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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, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Originated loans:
Construction	$	222,915		$	212,869		$	175,388		$	144,062		$	171,934
Commercial real estate, other	995,176			919,531			891,576			899,774			854,721
Commercial real estate	1,218,091			1,132,400			1,066,964			1,043,836			1,026,655
Commercial and industrial	840,194			835,178			814,593			777,050			791,307
Premium finance	158,263			159,197			167,682			152,237			145,813
Leases	251,711			226,438			178,083			149,894			97,168
Residential real estate	386,964			384,262			381,104			373,010			364,989
Home equity lines of credit	132,531			132,093			124,524			115,935			107,414
Consumer, indirect	647,177			629,426			592,309			563,088			524,778
Consumer, direct	99,299			98,706			99,282			95,371			87,994
Consumer	746,476			728,132			691,591			658,459			612,772
Deposit account overdrafts	749			722			597			851			699
Total originated loans	$	3,734,979		$	3,598,422		$	3,425,138		$	3,271,272		$	3,146,817
Acquired loans (a):
Construction	$	9,381		$	34,072		$	40,233		$	58,526		$	66,371
Commercial real estate, other	485,886			503,987			531,903			560,249			602,511
Commercial real estate	495,267			538,059			572,136			618,775			668,882
Commercial and industrial	50,945			57,456			62,879			81,402			95,844
Premium finance	—			—			—			—			—
Leases	102,930			118,693			134,764			164,628			169,900
Residential real estate	325,638			339,098			352,257			369,995			391,440
Home equity lines of credit	41,852			45,765			50,001			53,400			54,874
Consumer, indirect	—			—			—			—			—
Consumer, direct	8,107			9,657			14,032			16,433			19,396
Consumer	8,107			9,657			14,032			16,433			19,396
Total acquired loans	$	1,024,739		$	1,108,728		$	1,186,069		$	1,304,633		$	1,400,336
Total loans	$	4,759,718		$	4,707,150		$	4,611,207		$	4,575,905		$	4,547,153



Percent of loans to total loans:
Construction	4.9		%	5.2		%	4.7		%	4.4		%	5.2		%
Commercial real estate, other	31.1		%	30.2		%	30.9		%	32.0		%	32.1		%
Commercial real estate	36.0		%	35.4		%	35.6		%	36.4		%	37.3		%
Commercial and industrial	18.7		%	19.0		%	19.0		%	18.8		%	19.5		%
Premium finance	3.3		%	3.4		%	3.6		%	3.3		%	3.2		%
Leases	7.4		%	7.3		%	6.8		%	6.9		%	5.9		%
Residential real estate	15.0		%	15.4		%	15.9		%	16.2		%	16.6		%
Home equity lines of credit	3.7		%	3.8		%	3.8		%	3.7		%	3.6		%
Consumer, indirect	13.6		%	13.4		%	12.8		%	12.3		%	11.5		%
Consumer, direct	2.3		%	2.3		%	2.5		%	2.4		%	2.4		%
Consumer	15.9		%	15.7		%	15.3		%	14.7		%	13.9		%

Total percentage	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%
Residential real estate loans being serviced for others	$	384,005		$	392,364		$	400,736		$	410,007		$	420,024

(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, 2023 increased $52.6 million, or 4% annualized, compared to at December 31, 2022. The increase in the period-end loan and lease balances was primarily driven by increases of (i) $57.5 million in other commercial real estate loans, (ii) $17.8 million in indirect consumer loans and (iii) $9.5 million in leases, partially offset by a reductions of $14.6 million in construction loans and $10.8 million in residential real estate loans. The increase of $212.6 million in the period-end loan

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and lease balances when compared to March 31, 2022 was primarily driven by increases of $122.4 million in indirect consumer loans and $87.6 million in leases, partially offset by a reduction of $43.8 million in residential real estate loans. The increases in the period-end loan and lease balances when compared to the prior periods was due to growth. The reduction in the period-end residential real estate loans balance when compared to all comparative prior periods was due to a lower inventory of homes for sale.

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, 2023:


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



































Construction:
Apartment complexes	$	120,995	$	179,179	$	300,174	64.1	%
Mixed-use facilities	19,478		4,787		24,265		5.2	%
Assisted living facilities and nursing homes	16,385		5,226		21,611		4.6	%
Land only	21,690		8,081		29,771		6.4	%
Office buildings and complexes	12,301		4,158		16,459		3.5	%

Industrial	6,734		4,047		10,781		2.3	%







Other (a)	34,713		30,391		65,104		13.9	%
Total construction	$	232,296	$	235,869	$	468,165	100.0	%

(a) All other total exposures by industry are less than 2% of the Total Exposure.

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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	$	61,296	$	1,943	$	63,239	4.0	%
Non-owner occupied	90,954		3,846		94,800		6.1	%
Total office buildings and complexes	152,250		5,789		158,039		10.1	%
Retail facilities:
Owner occupied	39,551		1,480		41,031		2.6	%
Non-owner occupied	144,979		4,008		148,987		9.5	%
Total retail facilities	184,530		5,488		190,018		12.1	%
Mixed-use facilities:
Owner occupied	44,518		550		45,068		2.9	%
Non-owner occupied	60,932		1,323		62,255		4.0	%
Total mixed-use facilities	105,450		1,873		107,323		6.9	%
Apartment complexes	112,419		37,757		150,176		9.6	%
Light industrial facilities:
Owner occupied	92,338		2,726		95,064		6.1	%
Non-owner occupied	47,983		3,055		51,038		3.2	%
Total light industrial facilities	140,321		5,781		146,102		9.3	%
Assisted living facilities and nursing homes	62,701		5,151		67,852		4.3	%
Warehouse facilities:
Owner occupied	36,307		1,285		37,592		2.3	%
Non-owner occupied	27,590		241		27,831		1.8	%
Total warehouse facilities	63,897		1,526		65,423		4.1	%
Lodging and lodging related:
Owner occupied	28,859		661		29,520		1.9	%
Non-owner occupied	79,821		1		79,822		5.1	%
Total lodging and lodging related	108,680		662		109,342		7.0	%
Education services:
Owner occupied	18,148		—		18,148		1.2	%
Non-owner occupied	31,734		5,523		37,257		2.4	%
Total education services	49,882		5,523		55,405		3.6	%
Healthcare facilities:
Owner occupied	21,855		300		22,155		1.4	%
Non-owner occupied	9,518		—		9,518		0.6	%
Total healthcare facilities	31,373		300		31,673		2.0	%
Restaurant/bar facilities:
Owner occupied	28,715		9		28,724		1.8	%
Non-owner occupied	10,464		248		10,712		0.7	%
Total restaurant/bar facilities	39,179		257		39,436		2.5	%
Land only
Owner occupied	6,143		339		6,482		0.4	%
Non-owner occupied	32,257		—		32,257		2.1	%
Total land only	38,400		339		38,739		2.5	%








Other (a)	430,380		15,645		446,025		28.5	%
Total commercial real estate, other	$	1,481,062	$	85,752	$	1,566,814	100.0	%

(a) All other total exposures by industry are less than 2% of the Total Exposure.

Peoples' commercial lending activities continue to focus on lending opportunities within Ohio, Kentucky, West Virginia, Virginia, Washington, D.C. and Maryland. 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, 2023 and December 31, 2022. The repayment of premium finance loans is secured by the underlying insurance policy prepaid premium, and therefore, has no geographical impact from a repayment perspective. The repayment of leases is secured by the underlying equipment collateral and not real estate, which mitigates geographic risk.

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Small Business Administration Paycheck Protection Program ("PPP")

In March 2020, the Coronavirus Aid, Relief, and Economic Security ("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 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 table details Peoples' PPP loan balances and related income:


(Dollars in thousands)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
PPP aggregate outstanding principal balances	$	2,184	$	2,458	$	3,789	$	15,582	$	42,871
PPP net deferred loan origination fees	25		27		61		421		995
Accretion of net deferred loan origination fees	2		34		360		574		1,215

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, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Construction	$	1,273		$	1,250		$	1,464		$	1,531		$	2,731
Commercial real estate, other	16,474			17,710			17,695			18,708			21,055
Commercial and industrial	8,307			8,229			8,611			8,572			10,114
Premium finance	433			344			553			311			345
Leases	9,109			8,495			7,890			7,585			5,875

Residential real estate	6,504			6,357			6,464			6,332			6,495
Home equity lines of credit	1,717			1,693			1,644			1,699			1,894
Consumer, indirect	7,781			7,448			6,912			6,234			5,172
Consumer, direct	1,619			1,575			1,592			1,321			1,036

Deposit account overdrafts	86			61			41			53			51
Allowance for credit losses	$	53,303		$	53,162		$	52,866		$	52,346		$	54,768
As a percent of total loans	1.12		%	1.13		%	1.15		%	1.14		%	1.20		%

The reduction in the allowance for credit losses at March 31, 2023 compared to March 31, 2022 was driven by decreases in the allowances for individually analyzed loans, offset by loan growth and deterioration in the economic forecast.

Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2022 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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


	Three Months Ended
(Dollars in thousands)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Gross charge-offs:
Construction	$	9	$	16	$	—	$	—	$	—
Commercial real estate, other	$	33	132		57		22		278
Commercial and industrial	1		24		36		420		463
Premium finance	23		42		38		30		14

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	Three Months Ended
(Dollars in thousands)	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Leases	469			888			731			493			473
Residential real estate	41			144			168			47			309
Home equity lines of credit	19			42			5			25			16
Consumer, indirect	929			799			600			449			385
Consumer, direct	104			86			81			60			136
Consumer	1,033			885			681			509			521
Deposit account overdrafts	227			308			274			405			259
Total gross charge-offs	$	1,855		$	2,481		$	1,990		$	1,951		$	2,333
Recoveries:

Commercial real estate, other	$	27		33			$	39		$	176		$	49
Commercial and industrial	—			40			3			2			4
Premium finance	9			4			1			8			—
Leases	80			81			99			64			176
Residential real estate	29			20			36			14			14
Home equity lines of credit	—			16			—			—			29
Consumer, indirect	79			88			71			83			86
Consumer, direct	15			16			9			11			11
Consumer	94			104			80			94			97
Deposit account overdrafts	72			50			44			52			54
Total recoveries	$	311		$	348		$	302		$	410		$	423
Net charge-offs (recoveries):
Construction	$	9		$	16		$	—		$	—		$	—
Commercial real estate, other	6			99			18			(154)			229
Commercial and industrial	1			(16)			33			418			459
Premium finance	14			38			37			22			14
Leases	389			807			632			429			297
Residential real estate	12			124			132			33			295
Home equity lines of credit	19			26			5			25			(13)
Consumer, indirect	850			711			529			366			299
Consumer, direct	89			70			72			49			125
Consumer	939			781			601			415			424
Deposit account overdrafts	155			258			230			353			205
Total net charge-offs	$	1,544		$	2,133		$	1,688		$	1,541		$	1,910
Ratio of net charge-offs to average total loans (annualized):
Construction	—		%	—		%	—		%	—		%	—		%
Commercial real estate, other	—		%	0.01		%	—		%	(0.01)		%	0.02		%
Commercial and industrial	—		%	—		%	—		%	0.04		%	0.03		%
Premium finance	—		%	—		%	—		%	—		%	—		%
Leases	0.04		%	0.07		%	0.06		%	0.04		%	0.03		%
Residential real estate	—		%	0.01		%	0.01		%	—		%	0.03		%
Home equity lines of credit	—		%	—		%	—		%	—		%	—		%
Consumer, indirect	0.07		%	0.06		%	0.05		%	0.03		%	0.03		%
Consumer, direct	0.01		%	0.01		%	0.01		%	0.01		%	0.01		%
Consumer	0.08		%	0.07		%	0.06		%	0.04		%	0.04		%
Deposit account overdrafts	0.01		%	0.02		%	0.02		%	0.03		%	0.02		%
Total	0.13		%	0.18		%	0.15		%	0.14		%	0.17		%

Each with "--%" not meaningful.

Net charge-offs during the first quarter of 2023 were 0.13% of average total loans on an annualized basis. The decrease for the current quarter when compared to the linked quarter was driven by a decrease in charge-offs on leases, residential real estate loans and deposit account overdrafts, partially offset by an increase in charge-offs on indirect consumer loans. The decrease in net charge-offs during the current quarter versus the prior year quarter was primarily attributable to decreases in net charge-offs in (i) commercial and

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industrial loans, (ii) residential real estate loans, and (iii) other commercial real estate loans, partially offset by an increase in net charge-offs in indirect consumer loans.

The following table details Peoples’ nonperforming assets:


(Dollars in thousands)	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Loans 90+ days past due and accruing:

Commercial real estate, other	150			167			1,472			330			603
Commercial and industrial	228			130			266			89			53
Premium finance	764			504			308			304			613
Leases	2,491			3,041			4,654			5,722			3,921
Residential real estate	238			917			1,499			1,687			677
Home equity lines of credit	127			58			23			89			75
Consumer, indirect	13			—			195			15			17
Consumer, direct	3			25			7			—			—
Consumer	16			25			202			15			17
Total loans 90+ days past due and accruing	$	4,014		$	4,842		$	8,424		$	8,236		$	5,959
Nonaccrual loans:
Construction	$	1		$	12		$	2		$	5		$	6
Commercial real estate, other	11,345			12,121			11,916			14,253			14,942
Commercial and industrial	3,064			3,462			2,385			1,849			3,393
Leases	3,884			3,178			2,094			1,573			1,731
Residential real estate	8,641			9,496			8,728			9,194			9,135
Home equity lines of credit	793			820			921			890			937
Consumer, indirect	2,147			2,176			1,627			1,558			1,628
Consumer, direct	105			208			158			166			231
Consumer	2,252			2,384			1,785			1,724			1,859
Total nonaccrual loans	$	29,980		$	31,473		$	27,831		$	29,488		$	32,003










Total nonperforming loans ("NPLs")	$	33,994		$	36,315		$	36,255		$	37,724		$	37,962
OREO:
Commercial	$	8,730		$	8,730		$	8,730		$	9,065		$	9,106
Residential	48			165			110			145			301
Total OREO	$	8,778		$	8,895		$	8,840		$	9,210		$	9,407
Total nonperforming assets ("NPAs")	$	42,772		$	45,210		$	45,095		$	46,934		$	47,369
Criticized loans (a)	$	198,812		$	191,355		$	164,775		$	181,395		$	190,315
Classified loans (b)	93,168			89,604			94,848			115,483			109,530
Asset Quality Ratios (c):
Nonaccrual loans as a percent of total loans (d)	0.63		%	0.67		%	0.60		%	0.64		%	0.70		%
NPLs as a percent of total loans (d)	0.71		%	0.77		%	0.79		%	0.82		%	0.83		%
NPAs as a percent of total assets (d)	0.58		%	0.63		%	0.64		%	0.64		%	0.65		%
NPAs as a percent of total loans and OREO (d)	0.90		%	0.96		%	0.98		%	1.02		%	1.04		%
Allowance for credit losses as a percent of nonaccrual loans	177.80		%	168.91		%	189.95		%	177.52		%	171.13		%
Allowance for credit losses as a percent of NPLs (d)	156.80		%	146.39		%	145.82		%	138.76		%	144.27		%
Criticized loans as a percent of total loans (a)	4.18		%	4.07		%	3.57		%	3.96		%	4.19		%
Classified loans as a percent of total loans (b)	1.96		%	1.90		%	2.06		%	2.52		%	2.41		%

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

(b) Includes loans categorized as substandard or doubtful.

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(d) NPLs include loans 90+ days past due and accruing and nonaccrual loans. NPLs in periods prior to March 31, 2023 also include TDRs. NPAs include nonperforming loans and OREO.

Compared to December 31, 2022, Peoples' NPAs decreased from 0.63% to 0.58% of total assets. Loans 90+ days past due and accruing decreased compared to at December 31, 2022, mostly due to declines in residential real estate loans and leases that were 90+ days past due, partially offset by an increase in premium finance loans that that were 90+ days past due. During the first quarter of 2023, criticized loans increased $7.5 million, while classified loans increased $3.6 million when compared to at December 31, 2022. The increase in the amount of criticized loans compared to at December 31, 2022 was primarily related to downgrades of three commercial and industrial relationships. The increase in classified loans compared to the linked quarter was driven by the downgrade of one commercial and industrial relationship.

Deposits

The following table details Peoples’ deposit balances:


(Dollars in thousands)	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Non-interest-bearing deposits (a)	$	1,555,064		$	1,589,402		$	1,635,953		$	1,661,865		$	1,666,668
Interest-bearing deposits:
Interest-bearing demand accounts (a)	1,085,169			1,160,182			1,162,012			1,143,010			1,179,199
Savings accounts	1,024,638			1,068,547			1,077,383			1,080,053			1,065,678
Retail certificates of deposit ("CDs")	622,091			530,236			544,741			584,259			612,936
Money market deposit accounts	579,106			617,029			624,708			645,242			656,266
Governmental deposit accounts	649,303			625,965			734,734			728,057			734,784
Brokered CDs	273,156			125,580			86,089			86,739			87,395
Total interest-bearing deposits	4,233,463			4,127,539			4,229,667			4,267,360			4,336,258
Total deposits	$	5,788,527		$	5,716,941		$	5,865,620		$	5,929,225		$	6,002,926
Demand deposits as a percent of total deposits	46		%	48		%	48		%	47		%	47		%

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

At March 31, 2023, period-end deposits increased $71.6 million, or 1%, compared to at December 31, 2022. The increase when compared to at December 31, 2022 was primarily driven by an increase of $147.6 million in brokered certificates of deposits, which are primarily used as a source of funding. Excluding the increase in brokered certificates of deposits, total deposits at March 31, 2023 decreased $76.0 million, or 1%, when compared to at December 31, 2022 due to reductions of (i) $75.0 million in interest-bearing deposit accounts, (ii) $43.9 million in savings accounts, (iii) $37.9 million in money market deposit accounts, and (iv) $34.3 million in non-interest bearing deposit accounts, partially offset by an increase of $91.9 million in retail certificates of deposit.

Period-end deposit balances decreased $214.4 million, or 4%, compared to at March 31, 2022. Deposits decreased primarily due to reductions in non-interest-bearing deposits, interest-bearing deposit accounts, governmental deposit accounts, and money market deposit accounts of $111.6 million, $94.0 million, $85.5 million and $77.2 million, respectively, partially offset by an increase of $185.8 million in brokered certificates of deposits.

As part of its funding strategy, Peoples hedges 90-day brokered CDs with interest rate swaps. The swaps pay a fixed rate of interest while receiving three-month LIBOR, which offsets the rate on the brokered CDs. As of March 31, 2023, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $125.0 million, which were designated as cash flow hedges of overnight brokered CDs and are expected to be extended every 90 days through the maturity dates of the swaps. Peoples continually evaluates the overall balance sheet position given the interest rate environment.

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Borrowed Funds

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


(Dollars in thousands)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Short-term borrowings:
Overnight borrowings	$	390,000	$	400,000	$	(5,000)	$	—	$	—
FHLB 90-day advances	—		—		40,000		40,000		40,000
Current portion of long-term FHLB advances	—		—		—		—		15,000
Retail repurchase agreements	100,670		100,138		98,611		286,442		89,275

Total short-term borrowings	$	490,670	$	500,138	$	133,611	$	326,442	$	144,275
Long-term borrowings:
FHLB advances	$	33,941	$	34,158	$	34,662	$	35,348	$	85,564


Vantage non-recourse debt	47,864		53,147		55,781		74,622		102,364
Junior subordinated debt securities	13,824		13,788		13,753		13,717		13,682
Total long-term borrowings	$	95,629	$	101,093	$	104,196	$	123,687	$	201,610
Total borrowed funds	$	586,299	$	601,231	$	237,807	$	450,129	$	345,885

Borrowed funds, in total, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances. Total borrowed funds decreased compared to at December 31, 2022, due to lower overnight borrowings. Total short-term borrowings at March 31, 2023 increased when compared to at March 31, 2022 due to outstanding FHLB overnight borrowings of $390.0 million at March 31, 2023, while there were no FHLB overnight borrowings at March 31, 2022.

Capital/Stockholders’ Equity

At March 31, 2023, 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, 2023, Peoples had a capital conservation buffer of 5.35%.

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


(Dollars in thousands)	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Capital Amounts:
Common Equity Tier 1	$	624,292		$	604,566		$	584,880		$	564,708		$	547,215
Tier 1	638,116			618,354			598,633			578,425			560,897
Total (Tier 1 and Tier 2)	682,477			662,421			643,189			622,516			607,493
Net risk-weighted assets	$	5,110.318		$	5,071,240		$	4,955,627		$	4,857,818		$	4,752,428
Capital Ratios:
Common Equity Tier 1	12.22		%	11.92		%	11.80		%	11.62		%	11.51		%
Tier 1	12.49		%	12.19		%	12.08		%	11.91		%	11.80		%
Total (Tier 1 and Tier 2)	13.35		%	13.06		%	12.98		%	12.81		%	12.78		%
Tier 1 leverage ratio	9.02		%	8.92		%	8.64		%	8.38		%	8.29		%

Peoples' regulatory capital and related ratio levels improved during the first quarter of 2023 when compared to at December 31, 2022 and at March 31, 2022 due to net income during the first quarter of 2023, partially offset by dividends paid. The ratios were negatively impacted at March 31, 2022 by the cash acquisition of Vantage, in connection with which Peoples recorded goodwill and intangible assets. The impact of the Vantage acquisition on Peoples' regularity capital and related ratios levels at March 31, 2022, was partially offset by net income exceeding dividends declared during the period ended March 31, 2022.

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,

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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.

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, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Tangible equity:
Total stockholders' equity	$	819,543		$	785,328		$	760,511		$	786,824		$	808,340
Less: goodwill and other intangible assets	324,562			326,329			328,428			328,132			341,865
Tangible equity	$	494,981		$	458,999		$	432,083		$	458,692		$	466,475






Tangible assets:
Total assets	$	7,311,520		$	7,207,304		$	7,005,854		$	7,278,292		$	7,239,261
Less: goodwill and other intangible assets	324,562			326,329			328,428			328,132			341,865
Tangible assets	$	6,986,958		$	6,880,975		$	6,677,426		$	6,950,160		$	6,897,396

Tangible book value per common share:
Tangible equity	$	494,981		$	458,999		$	432,083		$	458,692		$	466,475
Common shares outstanding	28,488,158			28,287,837			28,278,078			28,290,115			28,453,175

Tangible book value per common share	$	17.37		$	16.23		$	15.28		$	16.21		$	16.39

Tangible equity to tangible assets ratio:
Tangible equity	$	494,981		$	458,999		$	432,083		$	458,692		$	466,475
Tangible assets	$	6,986,958		$	6,880,975		$	6,677,426		$	6,950,160		$	6,897,396

Tangible equity to tangible assets	7.08		%	6.67		%	6.47		%	6.60		%	6.76		%

Tangible book value per common share increased to $17.37 at March 31, 2023, compared to $16.23 at December 31, 2022. The change in tangible book value per common share was due to tangible equity increasing during the first quarter of 2023 as a result of a decrease in other comprehensive losses recognized on available-for-sale investment securities, which the decrease was driven by sales during the quarter. Tangible book value per common share increased compared to at March 31, 2022 primarily due to net income over the last twelve months, partially offset by an increase in accumulated other comprehensive loss.

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' 2022 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, 2023				December 31, 2022				March 31, 2023				December 31, 2022
300	$	10,891	3.7	%	$	13,000	4.4	%	$	(110,529)	(7.5)	%	$	(82,959)	(5.4)	%
200	7,534		2.6	%	8,716		3.0	%	(72,312)		(4.9)	%	(55,809)		(3.6)	%
100	4,161		1.4	%	4,380		1.5	%	(35,824)		(2.4)	%	(28,157)		(1.8)	%
(100)	(8,608)		(2.9)	%	(11,404)		(3.9)	%	6,268		0.4	%	(21,124)		(1.4)	%
(200)	(23,095)		(7.8)	%	(27,659)		(9.4)	%	(35,500)		(2.4)	%	(80,484)		(5.2)	%
(300)	(38,575)		(13.1)	%	(43,728)		(14.8)	%	(105,742)		(7.1)	%	(152,152)		(9.8)	%

This table uses a standard, parallel shock analysis for assessing the IRR to net interest income and the economic value of equity. A parallel shock assumes all points on the yield curve (one year, two year, three year, etc.) are directionally changed by the same degree. Management regularly assesses the impact of both increasing and decreasing interest rates. The table above shows the impact of upward and downward parallel shocks of 100, 200 and 300 basis points.

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

While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in the balance sheet, interest rates typically move in a nonparallel manner with differences in the timing, direction and magnitude of changes in short-term and long-term interest rates. Thus, any impact that might occur as a result of the Federal Reserve Board increasing short-term interest rates in the future could be offset by an inverse movement in long-term interest rates, and vice versa. For this reason, Peoples considers other interest rate scenarios in addition to analyzing the impact of parallel yield curve shifts. These include various flattening and steepening scenarios in which short-term and long-term interest rates move in different directions with varying magnitude. Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above. Given the shape of market yield curves at March 31, 2023, consideration of the bear steepener and bear flattener scenarios provide insights which were not captured by parallel shifts.

The bear steepener scenario highlights the risk to net interest income and economic value of equity when short-term interest rates remain constant while long-term interest rates rise. In such a scenario, Peoples' deposit and borrowing costs, which are generally correlated with short-term interest rates, remain constant, while asset yields, which are correlated with long-term interest rates, rise. At March 31, 2023, the bear steepener scenario produced an increase in net interest income of 0.1% and a decline in the economic value of equity of 1.4%.

The bear flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates rise while long-term rates remain constant. In such a scenario, Peoples' variable rate asset yields along with deposit and short-term borrowing costs, which are correlated with short-term rates, increase, while long-term asset yields and long-term borrowing costs, which are more correlated with long-term rates, remain constant. Increased deposit and funding costs would be more than offset by increased variable rate asset yields; resulting in an increased amount of net interest income and a higher net interest margin. At March 31, 2023, the bear flattener scenario produced no change to net interest income and a decline in the economic value of equity of 0.8%.

As of March 31, 2023, the yield curve was inverted. A notable non-parallel shift scenario would be a continued increase in short-term interest rates relative to long-term interest rates in which the yield curve would further invert. As of March 31, 2023, this inversion scenario would have resulted in no change to net interest income and a decrease in the economic value of equity of (0.8)%. Peoples was within its policy limitations for this alternative scenario as of March 31, 2023, which set the maximum allowable downside exposure as 5.0% of net interest income and 10.0% of the 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, 2023, 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, 2023, 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

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increase in the rising interest 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, 2022 was largely attributable to increased effective duration within the investment securities portfolio.

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' 2022 Form 10-K.

At March 31, 2023, Peoples Bank had liquid assets of $318.0 million, which represented 3.9% of total assets and unfunded loan commitments. Peoples also had an additional $231.4 million of unpledged investment securities not included in the measurement of liquid assets.

Management believes the current mix of short-term liquidity sources, loan and security portfolio cash flows, and availability of other funding sources will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments.

Off-Balance Sheet Activities and Contractual Obligations

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

Loan Commitments and Standby Letters of Credit

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

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

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


(Dollars in thousands)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Home equity lines of credit	$	201,692	$	197,995	$	194,685	$	188,803	$	184,616
Unadvanced construction loans	241,225		270,229		320,825		237,129		203,719
Other loan commitments	717,149		730,015		653,384		566,624		616,696
Loan commitments	$	1,160,066	$	1,198,239	$	1,168,894	$	992,556	$	1,005,031
Standby letters of credit	$	15,046	$	15,451	$	15,096	$	15,977	$	12,729

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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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, 2023. 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)Peoples’ disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no 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, 2023, that have materially affected, or are reasonably likely to materially affect, Peoples’ internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Peoples or one of its subsidiaries from time to time is engaged in various litigation matters including the defense of claims of improper loan or deposit practices or lending violations. In addition, 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, Peoples' management believes that damages, if any, and other amounts related to pending legal 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’ 2022 Form 10-K. These 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. In the first quarter of 2023, we identified the following additional risk factor:

General Risks

•The impact of larger or similar-sized financial institutions encountering problems may adversely affect Peoples' business, earnings and financial condition.

Peoples is exposed to the risk that when a peer financial institution experiences financial difficulties, there could be an adverse impact on the regional banking industry and the business environment in which Peoples operates. The recent bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California during the first and second quarters of 2023 have caused a degree of panic and uncertainty in the investor community and among bank customers generally. While Peoples does not believe that the circumstances of these three banks' failures are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the banking industry, including Peoples. Peoples will continue to monitor the ongoing events concerning these three banks as well as any future potential bank failures and volatility within the banking industry generally, together with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the banking industry.

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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 Exchange Act of Peoples’ common shares during the three months ended March 31, 2023:


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 (3)	Maximum Number (or Approximate Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs (3)
January 1 – 31, 2023	2,077	(2)	$	28.38	(2)	—	$	22,606,290
February 1 – 28, 2023	24,350	(3)	$	30.27	(3)	—	$	22,606,290
March 1 – 31, 2023	2,579	(2)(3)	$	30.43	(2)(3)	—	$	22,606,290
Total	29,006		$	30.15		—	$	22,606,290

(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, 2023.

(2)Information reported includes 2,077 common shares and 952 common shares purchased in open market transactions during January 2023 and March 2023, respectively, 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.

(3)Information reported includes 24,350 common shares and 1,627 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 2023 and March 2023, respectively.

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.+

Included as Annex A to the preliminary joint proxy statement/prospectus which forms a part of the Registration Statement of Peoples Bancorp Inc. ("Peoples") on Form S-4/A filed on June 1, 2021 (Registration No. 333-256040)

2.2

Agreement and Plan of Merger, dated as of October 24, 2022, by and between Peoples Bancorp Inc. and Limestone Bancorp, Inc.+

Included as Annex A to the preliminary joint proxy statement/prospectus which forms a part of the Registration Statement of Peoples on Form S-4/A filed on January 6, 2023 (Registration No. 333-268728)

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

+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, or the staff of 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(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)

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 Peoples Bancorp Inc. Annual Incentive Plan for Executive Officers and other employees of Peoples Bancorp Inc. [Effective beginning with the fiscal year beginning January 1, 2023

Incorporated herein by reference to Exhibit 10.4 to Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No. 0-16772) ("Peoples' 2022 Form 10-K")

10.2

Summary of Perquisites for Executive Officers of Peoples Bancorp Inc.

Incorporated herein by reference to Exhibit 10.5 to Peoples' 2022 Form 10-K

10.3

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

Filed herewith

10.4

Summary of Compensation for Directors of Peoples Bancorp Inc.

Incorporated herein by reference to Exhibit 10.7 to Peoples' 2022 Form 10-K

10.5

First Amendment to the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (adopted and approved by the Board of Directors of Peoples Bancorp Inc. on January 26, 2023)

Incorporated herein by reference to Exhibit 10.8(b) to Peoples' 2022 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 ##