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Peoples Bancorp
PEBO
#5623
Rank
$1.21 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$33.70
Share price
-0.44%
Change (1 day)
27.27%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Peoples Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2022 Q3

Peoples Bancorp - 10-Q quarterly report FY2022 Q3


Text size:
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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 September 30, 2022

OR
  ☐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
pebo-20220930_g1.jpg
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 classTrading Symbol(s)Name of each exchange on which registered
Common Shares, without par valuePEBOThe 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 fileroAccelerated filer☒
Non-accelerated fileroSmaller 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: 28,271,499 common shares, without par value, at November 2, 2022.

Table of Contents
3
ITEM 1.  FINANCIAL STATEMENTS
3
CONSOLIDATED BALANCE SHEETS (Unaudited)
3
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
8
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
44
EXECUTIVE SUMMARY
48
RESULTS OF OPERATIONS
50
FINANCIAL CONDITION
65
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
77
ITEM 4.  CONTROLS AND PROCEDURES
77
77
ITEM 1.  LEGAL PROCEEDINGS
77
ITEM 1A.  RISK FACTORS
78
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
78
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
78
ITEM 4. MINE SAFETY DISCLOSURES
78
ITEM 5.  OTHER INFORMATION
78
ITEM 6.  EXHIBITS
79
81


2
PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 September 30,
2022		December 31,
2021
(Dollars in thousands)(Unaudited)
Assets  
Cash and cash equivalents:
Cash and balances due from banks$93,908 $74,354 
Interest-bearing deposits in other banks51,276 341,373 
Total cash and cash equivalents145,184 415,727 
Available-for-sale investment securities, at fair value (amortized cost of $1,349,800 at September 30, 2022 and $1,283,146 at December 31, 2021) (a)
1,169,844 1,275,493 
Held-to-maturity investment securities, at amortized cost (fair value of $326,457 at September 30, 2022 and $369,955 at December 31, 2021) (a)
407,801 374,129 
Other investment securities39,039 33,987 
Total investment securities (a)1,616,684 1,683,609 
Loans and leases, net of deferred fees and costs (b)4,611,207 4,481,600 
Allowance for credit losses (52,866)(63,967)
Net loans and leases (c)4,558,341 4,417,633 
Loans held for sale2,649 3,791 
Bank premises and equipment, net of accumulated depreciation83,863 89,260 
Bank owned life insurance104,591 73,358 
Goodwill292,397 264,193 
Other intangible assets36,031 26,816 
Other assets166,114 89,134 
Total assets$7,005,854 $7,063,521 
Liabilities  
Deposits:
Non-interest-bearing$1,635,953 $1,641,422 
Interest-bearing4,229,667 4,221,130 
Total deposits5,865,620 5,862,552 
Short-term borrowings133,611 166,482 
Long-term borrowings104,196 99,475 
Accrued expenses and other liabilities 141,916 89,987 
Total liabilities6,245,343 6,218,496 
Stockholders’ equity  
Preferred shares, no par value, 50,000 shares authorized, no shares issued at September 30, 2022 and at December 31, 2021
— — 
Common stock, no par value, 50,000,000 shares authorized, 29,845,795 shares issued at September 30, 2022 and 29,814,401 shares issued at December 31, 2021, including at each date shares held in treasury
685,351 686,282 
Retained earnings 249,833 207,076 
Accumulated other comprehensive loss, net of deferred income taxes(134,923)(11,619)
Treasury stock, at cost, 1,638,574 shares at September 30, 2022 and 1,577,359 shares at December 31, 2021
(39,750)(36,714)
Total stockholders’ equity760,511 845,025 
Total liabilities and stockholders’ equity$7,005,854 $7,063,521 
(a)    Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $0 and $238, respectively, at September 30, 2022 and $0 and $286, respectively, at December 31, 2021.
(b)    Also referred to throughout this Quarterly Report on Form 10-Q as "total loans" and "loans held for investment."
(c)    Also referred to throughout this Quarterly Report on Form 10-Q as "net loans"


See Notes to the Unaudited Condensed Consolidated Financial Statements

3
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands, except per share data)2022202120222021
Interest income:
Interest and fees on loans and leases$61,370 $40,748 $168,334 $115,196 
Interest and dividends on taxable investment securities7,559 3,755 20,576 9,497 
Interest on tax-exempt investment securities1,095 882 3,136 2,358 
Other interest income 847 82 1,306 175 
Total interest income70,871 45,467 193,352 127,226 
Interest expense:
Interest on deposits2,316 2,399 6,383 7,793 
Interest on short-term borrowings393 91 992 283 
Interest on long-term borrowings1,111 399 3,148 1,334 
Total interest expense3,820 2,889 10,523 9,410 
Net interest income67,051 42,578 182,829 117,816 
Provision for (recovery of) credit losses1,776 8,994 (5,811)7,333 
Net interest income after provision for (recovery of) credit losses65,275 33,584 188,640 110,483 
Non-interest income:
Electronic banking income5,261 4,326 15,933 12,655 
Trust and investment income3,954 4,158 12,476 12,223 
Insurance income3,618 3,367 11,995 11,923 
Deposit account service charges3,833 2,549 10,817 6,578 
Bank owned life insurance income694 437 1,922 1,329 
Mortgage banking income328 766 1,116 2,726 
Commercial loan swap fees224 73 662 194 
Net gain (loss) on investment securities21 (166)107 (704)
Net loss on asset disposals and other transactions(35)(308)(314)(459)
Other non-interest income2,468 1,144 5,088 2,605 
Total non-interest income20,366 16,346 59,802 49,070 
Non-interest expense:
Salaries and employee benefit costs28,618 25,589 83,932 68,276 
Net occupancy and equipment expense4,813 3,551 14,669 10,167 
Data processing and software expense3,279 2,529 9,228 7,394 
Professional fees2,832 6,426 8,784 13,459 
Electronic banking expense2,648 2,037 8,134 6,006 
Amortization of other intangible assets2,023 1,279 5,765 3,267 
Marketing expense1,136 1,223 2,991 2,810 
Franchise tax expense1,075 810 2,941 2,487 
FDIC insurance premiums709 807 2,921 1,596 
Communication expense599 411 1,873 1,079 
Other loan expenses511 487 1,788 1,443 
Other non-interest expense4,010 12,711 10,755 17,762 
Total non-interest expense52,253 57,860 153,781 135,746 
Income (loss) before income taxes33,388 (7,930)94,661 23,807 
Income tax expense (benefit)7,410 (2,172)20,218 3,999 
Net income (loss)$25,978 $(5,758)$74,443 $19,808 
Earnings (loss) per common share - basic$0.93 $(0.28)$2.65 $0.99 
Earnings (loss) per common share - diluted$0.92 $(0.28)$2.65 $0.99 
Weighted-average number of common shares outstanding - basic27,865,416 20,640,519 27,929,720 19,751,853 
Weighted-average number of common shares outstanding - diluted27,973,255 20,789,271 28,009,263 19,890,672 
Cash dividends declared$10,753 $7,093 $31,686 $20,991 
Cash dividends declared per common share$0.38 $0.36 $1.12 $1.07 

See Notes to the Unaudited Condensed Consolidated Financial Statements

4
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2022202120222021
Net income (loss)$25,978 $(5,758)$74,443 $19,808 
Other comprehensive (loss) income:
Available-for-sale investment securities:
Gross unrealized holding loss arising during the period(57,911)(7,685)(172,195)(16,738)
Related tax benefit13,484 1,592 40,170 3,493 
Reclassification adjustment for net (gain) loss included in net income(21)166 (107)704 
Related tax benefit (expense)5 (44)25 (157)
Net effect on other comprehensive (loss) income(44,443)(5,971)(132,107)(12,698)
Defined benefit plan:
Net gain arising during the period203 1,818 264 1,826 
  Related tax expense(48)(407)(62)(408)
Amortization of unrecognized gain and service cost on benefit plans23 20 61 81 
Related tax expense(5)(5)(14)(18)
Recognition of gain due to settlement and curtailment139 143 139 143 
Related tax expense(32)(32)(32)(32)
Net effect on other comprehensive (loss) income 280 1,537 356 1,592 
Cash flow hedges:
Net gain arising during the period3,388 858 10,948 4,800 
  Related tax expense(789)(90)(2,501)(918)
Net effect on other comprehensive (loss) income2,599 768 8,447 3,882 
Total other comprehensive loss, net of tax(41,564)(3,666)(123,304)(7,224)
Total comprehensive (loss) income$(15,586)$(9,424)$(48,861)$12,584 

See Notes to the Unaudited Condensed Consolidated Financial Statements


5
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Accumulated Other Comprehensive LossTotal Stockholders' Equity
Common SharesRetained EarningsTreasury Stock
(Dollars in thousands)
Balance, June 30, 2022$684,416 $234,608 $(93,359)$(38,841)$786,824 
Net income— 25,978 — — 25,978 
Other comprehensive loss, net of tax— — (41,564)— (41,564)
Cash dividends declared— (10,753)— (10,753)
Reissuance of treasury stock for common share awards(219)— — 219 — 
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors— — — (235)(235)
Common shares repurchased under share repurchase program then in effect— — — (1,168)(1,168)
Common shares issued under dividend reinvestment plan320 — — — 320 
Common shares issued under compensation plan for Boards of Directors20 — — 106 126 
Common shares issued under employee stock purchase plan34 — — 169 203 
Stock-based compensation780 — — — 780 
Balance, September 30, 2022$685,351 $249,833 $(134,923)$(39,750)$760,511 
Accumulated Other Comprehensive LossTotal Stockholders' Equity
Common SharesRetained EarningsTreasury Stock
(Dollars in thousands)
Balance, December 31, 2021$686,282 $207,076 $(11,619)$(36,714)$845,025 
Net income— 74,443 — — 74,443 
Other comprehensive loss, net of tax— — (123,304)— (123,304)
Cash dividends declared— (31,686)— — (31,686)
Reissuance of treasury stock for common share awards(4,944)— — 4,944 — 
Reissuance of treasury stock for deferred compensation plan for Boards of Directors— — — 78 78 
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors— — — (1,671)(1,671)
Common shares repurchased under share repurchase program then in effect— — — (7,155)(7,155)
Common shares issued under dividend reinvestment plan921 — — — 921 
Common shares issued under compensation plan for Boards of Directors64 — — 314 378 
Common shares issued under employee stock purchase plan95 — — 454 549 
Stock-based compensation2,933 — — — 2,933 
Balance, September 30, 2022$685,351 $249,833 $(134,923)$(39,750)$760,511 

6
Accumulated Other Comprehensive LossTotal Stockholders' Equity
Common SharesRetained EarningsTreasury Stock
(Dollars in thousands)
Balance, June 30, 2021$422,652 $202,359 $(2,222)$(37,284)$585,505 
Net loss— (5,758)— — (5,758)
Other comprehensive loss, net of tax— — (3,666)— (3,666)
Cash dividends declared— (7,093)— — (7,093)
Reissuance of treasury stock for common share awards(51)— — 51 — 
Reissuance of treasury stock for deferred compensation plan for Boards of Directors— — — — — 
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors— — — (78)(78)
Common shares issued under dividend reinvestment plan277 — — — 277 
Common shares issued under compensation plan for Boards of Directors16 — — 44 60 
Common shares issued under employee stock purchase plan37 — — 101 138 
Stock-based compensation598 — — — 598 
Issuance of common shares related to merger with Premier Financial Bancorp , Inc.261,899 — — — 261,899 
Balance, September 30, 2021$685,428 $189,508 $(5,888)$(37,166)$831,882 
Accumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Common SharesRetained EarningsTreasury Stock
(Dollars in thousands)
Balance, December 31, 2020$422,536 $190,691 $1,336 $(38,890)$575,673 
Net income— 19,808 — — 19,808 
Other comprehensive loss, net of tax— — (7,224)— (7,224)
Cash dividends declared— (20,991)— — (20,991)
Reissuance of treasury stock for common share awards(2,223)— — 2,223 — 
Reissuance of treasury stock for deferred compensation plan for Boards of Directors— — — 74 74 
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors— — — (1,076)(1,076)
Common shares issued under dividend reinvestment plan655 — — — 655 
Common shares issued under compensation plan for Boards of Directors81 — — 228 309 
Common shares issued under employee stock purchase plan98 — — 275 373 
Stock-based compensation2,382 — — — 2,382 
Issuance of common shares related to merger with Premier Financial Bancorp , Inc.261,899 — — — 261,899 
Balance, September 30, 2021$685,428 $189,508 $(5,888)$(37,166)$831,882 

See Notes to the Unaudited Condensed Consolidated Financial Statements

7
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
(Dollars in thousands)20222021
Net cash provided by operating activities$102,500 $66,722 
Investing activities:
Available-for-sale investment securities:
Purchases(237,930)(715,263)
Proceeds from sales8,730 480,127 
Proceeds from principal payments, calls and prepayments155,070 227,574 
Held-to-maturity investment securities:
Purchases(51,060)(181,331)
Proceeds from principal payments16,080 3,774 
Other investment securities:
Purchases(11,110)(1,221)
Proceeds from sales5,885 8,552 
Net decrease in loans held for investment36,158 156,598 
Net expenditures for premises and equipment(7,008)(5,893)
Proceeds from sales of other real estate owned572 153 
Purchase of bank owned life insurance(30,000)— 
Proceeds from bank owned life insurance contracts689 — 
Business acquisitions, net of cash received(85,791)136,119 
Investment in limited partnership and tax credit funds(1,857)(2,900)
Net cash (used in) provided by investing activities(201,572)106,289 
Financing activities:  
Net (decrease) increase in non-interest-bearing deposits(5,469)69,557 
Net increase in interest-bearing deposits8,919 95,881 
Net (decrease) increase in short-term borrowings(37,916)32,625 
Proceeds from long-term borrowings19,001 — 
Payments on long-term borrowings(116,354)(2,156)
Cash dividends paid(31,704)(20,915)
Purchase of treasury stock under share repurchase program(7,155)— 
Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock
(1,671)(1,076)
Proceeds from issuance of common shares878 655 
Net cash (used in) provided by financing activities(171,471)174,571 
Net (decrease) increase in cash and cash equivalents(270,543)347,582 
Cash and cash equivalents at beginning of period415,727 152,100 
Cash and cash equivalents at end of period$145,184 $499,682 
Supplemental cash flow information:
     Interest paid$11,006 $10,262 
     Income taxes paid1,947 6,450 
Supplemental noncash disclosures:
     Transfers from total loans to other real estate owned55 210 
Lease right-of-use assets obtained in exchange for lessee operating lease liabilities27 101 
 See Notes to the Unaudited Condensed Consolidated Financial Statements


8
PEOPLES BANCORP INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Basis of Presentation: The accompanying Unaudited Condensed Consolidated Financial Statements of Peoples Bancorp Inc. and its subsidiaries ("Peoples" refers to Peoples Bancorp Inc. and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.) have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X.  Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2021 ("Peoples' 2021 Form 10-K").
The accounting and reporting policies followed in the presentation of the accompanying Unaudited Condensed Consolidated Financial Statements are consistent with those described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2021 Form 10-K, as updated by the information contained in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 (this "Form 10-Q").  Management has evaluated all significant events and transactions that occurred after September 30, 2022 for potential recognition or disclosure in these unaudited condensed consolidated financial statements.  In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly such information for the periods and at the dates indicated.  Such adjustments are normal and recurring in nature.  Intercompany accounts and transactions have been eliminated.  The Consolidated Balance Sheet at December 31, 2021, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2021 Form 10-K. 
The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.  Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year, due in part to seasonal variations and unusual or infrequently occurring items.
New Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by Peoples as of the required effective dates. The following paragraphs related to new pronouncements should be read in conjunction with "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2021 Form 10-K. Unless otherwise discussed, management believes the impact of any recently issued standards, including those issued but not yet effective, will not have a material impact on Peoples' financial statements taken as a whole.
Accounting Standards Update ("ASU") 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 is effective as of March 12, 2020 through December 31, 2022. This ASU was early adopted by Peoples as of September 30, 2021, and does 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.
ASU 2022-01 - Fair Value Hedging - Portfolio Layer Method - Derivatives and Hedging (Topic 815). This ASU clarifies the guidance in the Accounting Standards Codification ("ASC") 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. This ASU expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. For entities that have already adopted ASU 2017-12, as Peoples has, the amendments in ASU 2022-01 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this ASU may also be early adopted, including adoption in any interim period. Peoples is currently evaluating the impact of the amendments in this ASU on Peoples' consolidated financial statements.
ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDRs") and Vintage Disclosures. This ASU eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors and amends the guidance on disclosures to include current-period gross write-offs by year of origination. This ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. For entities that have already adopted ASU 2016-13, as Peoples has, the amendments in ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this ASU may also be early adopted, including adoption in any interim period. Peoples is currently evaluating the impact of the amendments in this ASU on Peoples' consolidated financial statements.

9
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' 2021 Form 10-K.
Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods presented.
Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis
The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy.
 Recurring Fair Value Measurements at Reporting Date
September 30, 2022December 31, 2021
(Dollars in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Assets:   
Available-for-sale investment securities:
Obligations of:   
U.S. Treasury and government agencies
$172,055 $— $— $35,604 $— $— 
 U.S. government sponsored agencies— 80,915 — — 81,739 — 
States and political subdivisions
— 230,022 — — 259,319 — 
Residential mortgage-backed securities— 624,061 — — 828,517 — 
Commercial mortgage-backed securities— 52,504 — — 63,519 — 
Bank-issued trust preferred securities— 10,287 — — 6,795 — 
Total available-for-sale securities$172,055 $997,789 $— $35,604 $1,239,889 $— 
Equity investment securities (a)134 198 — 160 184 — 
Derivative assets (b)— 37,167 — — 12,163 — 
Liabilities:
Derivative liabilities (c)$— $31,234 $— $— $17,183 $— 
(a)    Included in "Other investment securities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements.
(b)    Included in "Other assets" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.
(c)    Included in "Accrued expenses and other liabilities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.
Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, LIBOR (or other relevant) yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.
Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from quoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2).
Derivative Assets and Liabilities: Derivative assets and liabilities are recognized on the Unaudited Consolidated Balance Sheets at their fair value within "Other assets" and "Accrued expenses and other liabilities", respectively. The fair value for derivative financial instruments is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters (Level 2).

10
Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis
The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy at September 30, 2022 and December 31, 2021.
 Non-Recurring Fair Value Measurements at Reporting Date
September 30, 2022December 31, 2021
(Dollars in thousands)Level 2Level 3Level 2Level 3
Assets:
Collateral dependent loans$— $2,706 $— $430 
Loans held for sale (a)$1,302 $— $418 $— 
Other real estate owned ("OREO")$— $— $— $87 
Servicing rights (b)(c)$— $25 $— $22 
(a) Loans held for sale are presented gross of a valuation allowance of $0 and $0 as of September 30, 2022 and December 31, 2021, respectively.
(b) Included in "Other intangible assets" on the Unaudited Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or market value.
(c) Peoples established a valuation allowance on servicing rights of $6 at September 30, 2022 and $12 at December 31, 2021. The fair value of the servicing rights on 10-year fixed rate loans was less than the carrying value.

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, for which Peoples 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 LevelSeptember 30, 2022December 31, 2021
Carrying AmountFair ValueCarrying AmountFair Value
Assets:
Cash and cash equivalents1$145,184 $145,184 $415,727 $415,727 
Held-to-maturity investment securities:
   Obligations of:
U.S. government sponsored agencies259,871 50,908 36,431 35,513 
States and political subdivisions (a)2145,490 107,453 151,688 150,138 
Residential mortgage-backed securities2111,707 93,885 110,708 110,159 
Commercial mortgage-backed securities290,971 74,211 75,588 74,145 
        Total held-to-maturity securities408,039 326,457 374,415 369,955 
Other investment securities:
Other investment securities at cost:
Federal Home Loan Bank ("FHLB") stock N/A14,683 14,683 17,308 17,308 
Federal Reserve Bank ("FRB") stockN/A21,237 21,237 13,311 13,311 
Total other investment securities at cost35,920 35,920 30,619 30,619 
Other investment securities at fair value:
Nonqualified deferred compensation (b)12,008 2,008 2,240 2,240 
Other investment securities (c)2779 779 784 784 
Total other investment securities 38,707 38,707 33,643 33,643 
Loans and leases, net of deferred fees and costs (d)34,611,207 4,359,959 4,481,600 4,510,605 
Bank owned life insurance 2104,591 104,591 73,358 73,358 
Liabilities:
Deposits2$5,865,620 $4,797,388 $5,862,552 $5,546,552 
Short-term borrowings2133,611 135,268 166,482 164,990 
Long-term borrowings2104,196 105,490 99,475 101,664 
(a) Held-to-maturity investment securities are presented gross of an allowance for credit losses of $238 and $286 as of September 30, 2022 and December 31, 2021, respectively.
(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 September 30, 2022
and at December 31, 2021, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis
table above and not included in this table.
(d) Loans and leases, net of deferred fees and costs, are presented gross of an allowance for credit losses of $52.9 million and $64.0 million as of September 30, 2022 and December 31, 2021, respectively.

For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument.  These financial instruments include cash and cash equivalents, and overnight borrowings.  Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments:
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash on hand and balances due from banks is a reasonable estimate of fair value (Level 1).
Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

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Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable securities. Other investment securities at fair value are valued using quoted prices in an active market (Level 1) or quoted prices in less active markets (Level 2).
Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held to maturity.  Peoples 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 above fair values are not intended to represent the aggregate fair value of Peoples.
Note 3 Investment Securities
Available-for-sale
The following table summarizes Peoples' available-for-sale investment securities:

(Dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
September 30, 2022    
Obligations of:    
U.S. Treasury and government agencies$178,824 $— $(6,769)$172,055 
U.S. government sponsored agencies94,517 4 (13,606)80,915 
States and political subdivisions270,761 21 (40,760)230,022 
Residential mortgage-backed securities731,125 1,140 (108,204)624,061 
Commercial mortgage-backed securities63,821 1 (11,318)52,504 
Bank-issued trust preferred securities10,752 49 (514)10,287 
Total available-for-sale securities$1,349,800 $1,215 $(181,171)$1,169,844 
December 31, 2021    
Obligations of:    
U.S. Treasury and government agencies$35,609 $12 $(17)$35,604 
U.S. government sponsored agencies83,019 58 (1,338)81,739 
States and political subdivisions259,508 3,187 (3,376)259,319 
Residential mortgage-backed securities833,328 6,565 (11,376)828,517 
Commercial mortgage-backed securities64,971 42 (1,494)63,519 
Bank-issued trust preferred securities6,711 215 (131)6,795 
Total available-for-sale securities$1,283,146 $10,079 $(17,732)$1,275,493 


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The gross gains and losses realized by Peoples from sales of available-for-sale securities for the periods ended September 30 were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2022202120222021
Gross gains realized$29 $150 $189 $786 
Gross losses realized(8)(316)(82)(1,490)
Net gain (loss) realized$21 $(166)$107 $(704)
The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and recognized as of the trade date.
The following table presents a summary of available-for-sale investment securities that had been in a continuous unrealized loss position:
 Less than 12 Months12 Months or MoreTotal
(Dollars in thousands)
Fair
Value
Unrealized LossNo. of Securities
Fair
Value
Unrealized LossNo. of Securities
Fair
Value
Unrealized Loss
September 30, 2022        
Obligations of:
U.S. Treasury and government agencies
$172,056 $6,769 26 $— $— — $172,056 $6,769 
U.S. government sponsored agencies
15,861 436 16 64,479 13,170 17 80,340 13,606 
States and political subdivisions127,364 14,607 175 94,650 26,153 70 222,014 40,760 
Residential mortgage-backed securities
218,695 25,434 163 393,315 82,770 84 612,010 108,204 
Commercial mortgage-backed securities
6,739 543 4 44,669 10,775 19 51,408 11,318 
Bank-issued trust preferred securities
7,040 460 4 946 54 1 7,986 514 
Total$547,755 $48,249 388 $598,059 $132,922 191 $1,145,814 $181,171 
December 31, 2021        
Obligations of:
U.S. Treasury and government agencies
$16,914 $17 6 $— $— — $16,914 $17 
U.S. government sponsored agencies
72,406 1,192 13 4,854 146 1 77,260 1,338 
States and political subdivisions101,397 2,075 71 30,853 1,301 11 132,250 3,376 
Residential mortgage-backed securities
573,139 9,051 113 51,103 2,325 14 624,242 11,376 
Commercial mortgage-backed securities
60,134 1,494 21 — — — 60,134 1,494 
Bank-issued trust preferred securities
2,991 9 1 878 122 1 3,869 131 
Total$826,981 $13,838 225 $87,688 $3,894 27 $914,669 $17,732 
Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis.  At September 30, 2022, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses. At September 30, 2022, Peoples did not have the intent to sell, nor was it more likely than not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both September 30, 2022 and December 31, 2021 were largely attributable to changes in market interest rates and spreads since the securities were purchased, and were not credit-related losses. Accrued interest receivable is not included in investment securities balances, and is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Interest receivable on investment securities was $7.3 million at September 30, 2022 and $5.5 million at December 31, 2021.
At September 30, 2022, approximately 99% of the mortgage-backed securities with a market value that had been at an unrealized loss position for twelve months or more were issued by U.S. government sponsored agencies. The remaining 1%, or 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 its book value. 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

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investments and the low remaining number of loans underlying these securities. U.S. treasury and government agencies, 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 impaired securities.
The unrealized loss with respect to the one bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at September 30, 2022 was attributable to the subordinated nature of the debt.
The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at September 30, 2022.  The weighted-average yields are based on the amortized cost.  In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.
 
(Dollars in thousands)Within 1 Year1 to 5 Years5 to 10 YearsOver 10 YearsTotal
Amortized cost     
Obligations of:     
U.S. Treasury and government agencies$50,639 $128,185 $— $— $178,824 
U.S. government sponsored agencies4,542 29,812 51,880 8,283 94,517 
States and political subdivisions27,288 46,871 76,138 120,464 270,761 
Residential mortgage-backed securities23 1,657 60,007 669,438 731,125 
Commercial mortgage-backed securities3,509 901 34,262 25,149 63,821 
Bank-issued trust preferred securities— 4,252 6,500 — 10,752 
Total available-for-sale securities$86,001 $211,678 $228,787 $823,334 $1,349,800 
Fair value     
Obligations of:     
U.S. Treasury and government agencies$49,673 $122,382 $— $— $172,055 
U.S. government sponsored agencies4,499 27,373 42,907 6,136 80,915 
States and political subdivisions27,100 44,620 64,592 93,710 230,022 
Residential mortgage-backed securities23 1,599 53,896 568,543 624,061 
Commercial mortgage-backed securities3,501 857 28,362 19,784 52,504 
Bank-issued trust preferred securities— 4,284 6,003 — 10,287 
Total available-for-sale securities$84,796 $201,115 $195,760 $688,173 $1,169,844 
Total weighted-average yield2.52 %2.78 %2.29 %1.81 %2.09 %
Held-to-maturity
The following table summarizes Peoples’ held-to-maturity investment securities:
(Dollars in thousands)Amortized CostAllowance for Credit Losses Gross Unrealized GainsGross Unrealized LossesFair Value
September 30, 2022    
Obligations of:   
 U.S. government sponsored agencies$59,871 $— $— $(8,963)$50,908 
States and political subdivisions145,490 (238)170 (37,969)107,453 
Residential mortgage-backed securities111,707 — — (17,822)93,885 
Commercial mortgage-backed securities90,971 — — (16,760)74,211 
Total held-to-maturity securities$408,039 $(238)$170 $(81,514)$326,457 
December 31, 2021    
Obligations of:    
U.S. government sponsored agencies$36,431 $— $86 $(1,004)$35,513 
States and political subdivisions151,688 (286)1,006 (2,270)150,138 
Residential mortgage-backed securities110,708 — 370 (919)110,159 
Commercial mortgage-backed securities75,588 — 182 (1,625)74,145 
Total held-to-maturity securities$374,415 $(286)$1,644 $(5,818)$369,955 
There were no sales of held-to-maturity securities for either of the nine months ended September 30, 2022 or 2021.
Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. The majority of Peoples' held-to-maturity investment securities are obligations of states and political subdivisions with the remaining securities issued by U.S. government sponsored agencies. Peoples analyzed these securities using cumulative default rate averages for

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municipal securities. Peoples recorded $238,000 and $286,000 of allowance for credit losses for held-to-maturity securities as of September 30, 2022, and December 31, 2021, respectively.
The following table presents a summary of held-to-maturity investment securities that had been in a continuous unrealized loss position:
 Less than 12 Months12 Months or MoreTotal
(Dollars in thousands)Fair
Value		Unrealized LossNo. of SecuritiesFair
Value		Unrealized LossNo. of SecuritiesFair
Value		Unrealized Loss
September 30, 2022        
Obligations of:
U.S. government sponsored agencies$31,574 $2,172 12 19,333 6,791 4 $50,907 $8,963 
States and political subdivisions61,133 20,820 45 42,935 17,149 22 104,068 37,969 
Residential mortgage-backed securities
44,505 6,159 15 49,380 11,663 12 93,885 17,822 
Commercial mortgage-backed securities
34,496 6,386 18 34,968 10,374 12 69,464 16,760 
Total$171,708 $35,537 90 $146,616 $45,977 50 $318,324 $81,514 
December 31, 2021        
Obligations of:
U.S. government sponsored agencies$17,328 $504 6 14,635 500 2 $31,963 $1,004 
States and political subdivisions61,954 1,041 34 27,328 1,229 6 89,282 2,270 
Residential mortgage-backed securities
88,937 919 17 — — — 88,937 919 
Commercial mortgage-backed securities
67,338 1,625 21 — — — 67,338 1,625 
Total$235,557 $4,089 78 $41,963 $1,729 8 $277,520 $5,818 
The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at September 30, 2022.  The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 23.3% and 22.3% for the periods ending September 30, 2022 and December 31, 2021, respectively.  In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.
(Dollars in thousands)Within 1 Year1 to 5 Years5 to 10 YearsOver 10 YearsTotal
Amortized cost     
Obligations of:     
U.S. government sponsored agencies$— $19,144 $11,172 $29,555 $59,871 
States and political subdivisions— 5,209 9,235 131,046 145,490 
Residential mortgage-backed securities— 1,176 — 110,531 111,707 
Commercial mortgage-backed securities— 12,172 21,312 57,487 90,971 
Total held-to-maturity securities$— $37,701 $41,719 $328,619 $408,039 
Fair value     
Obligations of:     
U.S. government sponsored agencies$— $18,288 $10,622 $21,998 $50,908 
States and political subdivisions— 4,812 7,638 95,003 107,453 
Residential mortgage-backed securities— 1,152 — 92,733 93,885 
Commercial mortgage-backed securities— 11,954 17,841 44,416 74,211 
Total held-to-maturity securities$— $36,206 $36,101 $254,150 $326,457 
Total weighted-average yield— %2.70 %2.58 %1.97 %2.10 %
Other Investment Securities
Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB stock and FRB stock.

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The following table summarizes the carrying value of Peoples' other investment securities:
(Dollars in thousands)September 30, 2022December 31, 2021
FHLB stock$14,683 $17,308 
FRB stock21,237 13,311 
Nonqualified deferred compensation2,008 2,240 
Equity investment securities332 344 
Other investment securities779 784 
Total other investment securities$39,039 $33,987 
During the nine months ended September 30, 2022, Peoples purchased $7.9 million of FRB stock as requested by the FRB as a result of the merger with Premier Financial Bancorp, Inc. ("Premier") on September 17, 2021.
During the three months ended September 30, 2022 and 2021, Peoples recorded the change in the fair value of equity investment securities held during the period, in "Other non-interest income", resulting in an unrealized gain of $6,000 and $18,000, respectively. For the nine months ended September 30, 2022 and 2021, Peoples recognized a loss of $12,000 and a gain of $91,000, respectively, for the change in fair value of equity securities in "Other non-interest income".
At September 30, 2022, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity.
Pledged Securities
Peoples has pledged available-for-sale investment securities and held-to-maturity investment securities to secure public and trust department deposits, and repurchase agreements in accordance with federal and state requirements.  Peoples has also pledged available-for-sale investment securities to secure additional borrowing capacity at the FHLB and the FRB as well as to derivative counterparties as collateral on unrealized interest rate swaps.
The following table summarizes the carrying value of Peoples' pledged securities:
 Carrying Amount
(Dollars in thousands)September 30, 2022December 31, 2021
Securing public and trust department deposits, and repurchase agreements:
     Available-for-sale$891,050 $795,496 
     Held-to-maturity285,207 160,643 
Securing collateral for cash flow hedge swaps:
     Available-for-sale— 18,208 
     Held-to-maturity— 9,936 
Securing additional borrowing capacity at the FHLB and the FRB:
     Available-for-sale4,223 6,504 
     Held-to-maturity1,284 549 
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 division and its Vantage Financial, LLC ("Vantage") subsidiary. Loans and leases throughout this document 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)September 30,
2022		December 31, 2021
Construction$215,621 $210,232 
Commercial real estate, other1,423,479 1,550,081 
Commercial and industrial877,472 891,392 
Premium finance167,682 136,136 
Leases312,847 122,508 
Residential real estate733,361 771,718 
Home equity lines of credit174,525 163,593 
Consumer, indirect592,309 530,532 
Consumer, direct113,314 104,652 
Deposit account overdrafts597 756 
Total loans, at amortized cost$4,611,207 $4,481,600 
On March 7, 2022, Peoples completed the acquisition of Vantage, which included $154.9 million of leases. During the first nine months of 2022, Peoples experienced elevated levels of payoffs and amortization of previously-acquired loans, which partially offset organic loan growth.
Peoples is a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender. At September 30, 2022, the PPP loans had an amortized cost of $3.7 million, and were included in the commercial and industrial loan balances. As of September 30, 2022, deferred loan origination fees, net of deferred origination costs, totaled $61,000 for PPP loans. During the third quarter of 2022, Peoples recorded amortization of net deferred loan origination fees of $0.4 million on PPP loans compared to $3.8 million for the third quarter of 2021. The remaining net deferred loan origination fees will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in "Net interest income".
Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $13.1 million at September 30, 2022 and $12.0 million at December 31, 2021.
Nonaccrual and Past Due Loans
A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due.
The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing was as follows:
September 30, 2022December 31, 2021
(Dollars in thousands)
Nonaccrual (a)
Accruing Loans 90+ Days Past Due
Nonaccrual (a)
Accruing Loans 90+ Days Past Due
Construction$2 $— $6 $90 
Commercial real estate, other11,916 1,472 17,067 689 
Commercial and industrial2,385 266 3,572 1,139 
Premium finance— 308 — 865 
Leases2,094 4,654 1,581 — 
Residential real estate8,728 1,499 9,647 805 
Home equity lines of credit921 23 1,039 50 
Consumer, indirect1,627 195 1,574 — 
Consumer, direct158 7 279 85 
Total loans, at amortized cost$27,831 $8,424 $34,765 $3,723 
(a) There were $2.0 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2022 and $2.6 million at December 31, 2021.

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During the first nine months of 2022, nonaccrual loans declined compared to December 31, 2021, which was primarily due to the payoff of one commercial relationship, coupled with other smaller reductions. The increase in accruing loans 90+ days past due, compared to December 31, 2021, was the result of the additional leases acquired in the Vantage acquisition, the majority of which related to in-process renewals. As of September 30, 2022, the short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers Peoples had made were insignificant. Under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), borrowers are considered current if they are less than 30 days past due on their contractual payments at the time a modification program is implemented. As such, these modifications made in accordance with the CARES Act were not included in Peoples' nonaccrual or accruing loans 90+ days past due at September 30, 2022.
The amount of interest income recognized on loans past due 90 days or more during the nine months ended September 30, 2022 was $1.1 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 days60 - 89 days90 + DaysTotal
September 30, 2022
Construction$334 $25 $— $359 $215,262 $215,621 
Commercial real estate, other2,710 878 11,668 15,256 1,408,223 1,423,479 
Commercial and industrial1,742 870 2,630 5,242 872,230 877,472 
Premium finance312 287 308 907 166,775 167,682 
Leases786 2,972 6,749 10,507 302,340 312,847 
Residential real estate3,413 1,814 5,723 10,950 722,411 733,361 
Home equity lines of credit1,640 102 513 2,255 172,270 174,525 
Consumer, indirect3,912 744 628 5,284 587,025 592,309 
Consumer, direct395 54 83 532 112,782 113,314 
Deposit account overdrafts— — — — 597 597 
Total loans, at amortized cost$15,244 $7,746 $28,302 $51,292 $4,559,915 $4,611,207 
December 31, 2021
Construction$658 $— $90 $748 $209,484 $210,232 
Commercial real estate, other2,891 1,600 12,561 17,052 1,533,029 1,550,081 
Commercial and industrial1,132 1,278 3,595 6,005 885,387 891,392 
Premium finance751 266 865 1,882 134,254 136,136 
Leases426 247 1,581 2,254 120,254 122,508 
Residential real estate8,276 2,241 5,188 15,705 756,013 771,718 
Home equity lines of credit1,137 619 625 2,381 161,212 163,593 
Consumer, indirect4,220 895 615 5,730 524,802 530,532 
Consumer, direct457 135 200 792 103,860 104,652 
Deposit account overdrafts— — — — 756 756 
Total loans, at amortized cost$19,948 $7,281 $25,320 $52,549 $4,429,051 $4,481,600 
Delinquency trends remained stable, as 98.9% of Peoples' loan portfolio was considered “current” at September 30, 2022, compared to 98.8% at December 31, 2021.
Pledged Loans
Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, home equity lines of credit and commercial real estate loans under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged eligible commercial and industrial loans to secure borrowings with the FRB. Loans pledged are summarized as follows:
(Dollars in thousands)September 30, 2022December 31, 2021
Loans pledged to FHLB$793,115 $769,863 
Loans pledged to FRB405,652 294,728 
Credit Quality Indicators
As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2021 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk

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grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible credit deterioration. Loan relationships whose aggregate credit exposure to Peoples is equal to or less than $1.0 million are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, including loans and leases acquired from Vantage and Premier, is as follows:
“Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.
“Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position.
“Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected.
“Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of each of these loans as an estimated loss is deferred until its more exact status may be determined.
“Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category.
Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” or “loss” consistent with the regulatory definitions and requirements of these classes. Leases are categorized as "special mention", "substandard", or "loss" based upon delinquency status and the prospect of collecting the remaining net investment balance owed under the lease. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as “pass" for disclosure purposes.
The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at September 30, 2022:

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Term Loans at Amortized Cost by Origination YearRevolving Loans Converted to Term
(Dollars in thousands)20222021202020192018PriorRevolving Loans
Total
Loans
Construction

  Pass$50,403 $109,791 $30,078 $18,033 $427 $3,251 $2,222 $81 $214,205 
  Special mention— — — — — 825 — — 825 
  Substandard— — 136 — 69 386 — — 591 
     Total50,403 109,791 30,214 18,033 496 4,462 2,222 81 215,621 
Commercial real estate, other

  Pass124,239 227,395 230,082 206,722 114,512 395,451 21,768 6,337 1,320,169 
  Special mention— 195 1,225 5,514 3,198 36,761 93 — 46,986 
  Substandard120 9,059 2,342 1,908 1,025 41,356 341 — 56,151 
  Doubtful— — — — — 173 — — 173 
     Total124,359 236,649 233,649 214,144 118,735 473,741 22,202 6,337 1,423,479 
Commercial and industrial
  Pass116,058 173,932 86,010 77,871 44,821 99,146 224,418 2,529 822,256 
  Special mention— 28 11,098 985 274 4,987 3,333 25 20,705 
  Substandard59 9,453 2,627 2,975 2,920 4,563 11,702 142 34,299 
  Doubtful— — — — — 212 — — 212 
     Total116,117 183,413 99,735 81,831 48,015 108,908 239,453 2,696 877,472 
Premium finance
Pass162,713 4,969 — — — — — — 167,682 
     Total162,713 4,969 — — — — — — 167,682 
Leases
  Pass139,715 98,250 40,078 19,569 4,440 1,513 — 303,565 
  Special mention1,639 3,776 73 24 78 — 5,590 
  Substandard575 1,693 537 424 463 — 3,692 
     Total141,929 103,719 40,688 20,017 4,981 1,513 — — 312,847 
Residential real estate
  Pass65,666 140,597 62,306 44,469 29,790 375,024 — — 717,852 
  Substandard— — — — — 15,355 — — 15,355 
   Loss— — — — — 154 — — 154 
     Total65,666 140,597 62,306 44,469 29,790 390,533 — — 733,361 
Home equity lines of credit
  Pass29,784 36,483 21,432 15,451 14,072 56,586 340 2,191 174,148 
  Substandard— — — — — 377 — — 377 
     Total29,784 36,483 21,432 15,451 14,072 56,963 340 2,191 174,525 
Consumer, indirect
  Pass229,831 165,711 112,435 41,315 27,327 15,690 — — 592,309 
     Total229,831 165,711 112,435 41,315 27,327 15,690 — — 592,309 
Consumer, direct
  Pass45,117 32,606 17,426 7,874 4,738 5,553 — — 113,314 
     Total45,117 32,606 17,426 7,874 4,738 5,553 — — 113,314 
Deposit account overdrafts597 — — — — — — — 597 
Total loans, at amortized cost$966,516 $1,013,938 $617,885 $443,134 $248,154 $1,057,363 $264,217 $11,305 $4,611,207 

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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, 2021:
Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)20212020201920182017PriorRevolving LoansRevolving Loans Converted to Term
Total
Loans
Construction

  Pass$85,276 $78,026 $29,514 $3,498 $1,233 $2,982 $2,411 $6,948 $202,940 
  Special mention290 — — 735 3,850 137 — — 5,012 
  Substandard— — 947 77 153 1,103 — — 2,280 
     Total85,566 78,026 30,461 4,310 5,236 4,222 2,411 6,948 210,232 
Commercial real estate, other

  Pass253,259 259,113 217,938 143,094 143,975 392,212 21,320 11,940 1,430,911 
  Special mention157 2,716 7,875 3,839 6,292 31,626 — 49 52,505 
  Substandard— 1,675 824 691 3,124 59,415 371 37 66,100 
  Doubtful— — — — — 542 — — 542 
  Loss— — — — — 23 — — 23 
     Total253,416 263,504 226,637 147,624 153,391 483,818 21,691 12,026 1,550,081 
Commercial and industrial
  Pass299,117 105,646 84,144 56,361 22,182 100,030 174,848 15,888 842,328 
  Special mention82 11,745 2,559 2,179 132 5,445 7,563 9 29,705 
  Substandard465 2,059 2,691 812 4,995 3,342 3,085 367 17,449 
  Doubtful— — — — — 1,648 262 100 1,910 
     Total299,664 119,450 89,394 59,352 27,309 110,465 185,758 16,364 891,392 
Premium finance
  Pass135,896 240 — — — — — — 136,136 
Total135,896 240 — — — — — — 136,136 
Leases
Pass78,048 25,954 13,368 2,972 337 — — — 120,679 
Special mention34 29 22 159 4 — — — 248 
Substandard196 438 462 479 6 — — — 1,581 
Total78,278 26,421 13,852 3,610 347 — — — 122,508 
Residential real estate
  Pass141,845 74,169 53,434 33,690 44,377 407,541 — — 755,056 
  Substandard— — — — — 16,302 — — 16,302 
   Loss— — — — — 360 — — 360 
     Total141,845 74,169 53,434 33,690 44,377 424,203 — — 771,718 
Home equity lines of credit
  Pass35,898 23,276 18,035 16,124 14,991 53,302 1,967 3,287 163,593 
     Total35,898 23,276 18,035 16,124 14,991 53,302 1,967 3,287 163,593 
Consumer, indirect
  Pass226,287 163,830 63,353 45,672 21,754 9,636 — — 530,532 
     Total226,287 163,830 63,353 45,672 21,754 9,636 — — 530,532 
Consumer, direct
  Pass47,308 26,792 13,293 8,411 3,218 5,630 — — 104,652 
     Total47,308 26,792 13,293 8,411 3,218 5,630 — — 104,652 
Deposit account overdrafts756 — — — — — — — 756 
Total loans, at amortized cost$1,304,914 $775,708 $508,459 $318,793 $270,623 $1,091,276 $211,827 $38,625 $4,481,600 

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Collateral Dependent Loans
Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:
• Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development, and other commercial and industrial real estate in process of construction.
•Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.
•Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property.
•Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.
•Home equity lines of credit are generally secured by second mortgages on residential real estate property.
•Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.
•Leases are secured by commercial equipment and other essential business assets.
•Premium finance loans are secured by the unearned portion of the insurance premium being financed.
The following table details Peoples' amortized cost of collateral dependent loans:
(Dollars in thousands)September 30, 2022December 31, 2021
Construction$340 $1,291 
Commercial real estate, other9,380 37,220 
Commercial and industrial2,590 8,340 
Residential real estate2,196 2,877 
Home equity lines of credit379 391 
Total collateral dependent loans$14,885 $50,119 
The decrease in collateral dependent loans at September 30, 2022, compared to December 31, 2021, was primarily due to three large commercial relationships that were no longer considered collateral dependent at September 30, 2022.


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Troubled Debt Restructurings
The following tables summarize the loans that were modified as TDRs during the three and nine months ended September 30:
Three Months Ended
Recorded Investment (a)
(Dollars in thousands)Number of ContractsPre-ModificationPost-ModificationRemaining Recorded Investment
September 30, 2022
Commercial and industrial1 $20 $20 $19 
Residential real estate7 323 361 354 
Home equity lines of credit2 119 119 119 
Consumer, indirect6 79 79 79 
Consumer, direct3 20 20 20 
   Consumer9 99 99 99 
Total19 $561 $599 $591 
September 30, 2021
Construction1 $6 $6 $6 
Commercial real estate, other2 14 14 14 
Commercial and industrial3 327 327 327 
Leases2 182 184 178 
Residential real estate46 1,952 1,956 1,955 
Home equity lines of credit5 55 55 55 
Consumer, indirect9 95 95 95 
Consumer, direct3 9 9 9 
   Consumer12 104 104 104 
Total71 $2,640 $2,646 $2,639 
(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.

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Nine Months Ended
Recorded Investment (a)
(Dollars in thousands)Number of ContractsPre-ModificationPost-ModificationRemaining Recorded Investment
September 30, 2022
Commercial real estate, other3 $282 $282 $276 
Commercial and industrial6 1,309 1,313 801 
Residential real estate30 1,478 1,562 1,536 
Home equity lines of credit5 251 251 247 
Consumer, indirect19 237 237 237 
Consumer, direct6 63 63 63 
   Consumer25 300 300 300 
Total69 $3,620 $3,708 $3,160 
September 30, 2021
Construction2 $350 $350 $350 
Commercial real estate, other3 37 37 37 
Commercial and industrial3 327 327 327 
Leases5 340 348 334 
Residential real estate54 2,367 2,376 2,366 
Home equity lines of credit9 315 315 307 
Consumer, indirect16 200 200 192 
Consumer, direct8 48 48 45 
   Consumer24 248 248 237 
Total100 $3,984 $4,001 $3,958 
(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.
Peoples had five loans totaling $202,000 that were modified as TDRs during the past twelve months that subsequently defaulted (i.e., 90 days or more past due following a modification during the year).
Peoples had no commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR.
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' 2021 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.

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Following the reasonable and supportable period, Peoples' reverts the macroeconomic variables to their long run average over a four quarter reversion period.
Changes in the allowance for credit losses for the three months ended September 30, 2022 and September 30, 2021 are summarized below:
(Dollars in thousands)
Beginning Balance, June 30, 2022
Initial Allowance for Acquired Purchased Credit Deteriorated Assets (a)Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets(Recovery of) Provision for Credit Losses (b)Charge-offsRecoveries
Ending Balance, September 30, 2022
Construction$1,531 $— $— $(67)$— $— $1,464 
Commercial real estate, other18,708 — — (995)(57)39 17,695 
Commercial and industrial8,572 — — 72 (36)3 8,611 
Premium finance311 — — 279 (38)1 553 
Leases7,585 377 — 560 (731)99 7,890 
Residential real estate6,332 — — 264 (168)36 6,464 
Home equity lines of credit1,699 — — (50)(5)— 1,644 
Consumer, indirect6,234 — — 1,207 (600)71 6,912 
Consumer, direct1,321 — — 343 (81)9 1,592 
Deposit account overdrafts53 — — 218 (274)44 41 
Total$52,346 $377 $— $1,831 $(1,990)$302 $52,866 
(a)Includes purchase price adjustments related to acquisitions previously completed but within the 12-month measurement period.
(b)Amount does not include the provision for the allowance for credit losses on unfunded commitments.
(Dollars in thousands)Beginning Balance,
June 30, 2021		Initial Allowance for Acquired Purchased Credit Deteriorated AssetsProvision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets(Recovery of) Provision for Credit Losses (a)Charge-offsRecoveriesEnding Balance, September 30, 2021
Construction$914 $2,127 $638 $(243)$— $— $3,436 
Commercial real estate, other17,233 13,374 5,384 (179)— 4 35,816 
Commercial and industrial8,686 4,286 1,059 (3)(654)4 13,378 
Premium finance998 — — 146 (7)— 1,137 
Leases3,715 — — 1,101 (431)120 4,505 
Residential real estate4,837 2,394 2,645 (312)(44)48 9,568 
Home equity lines of credit1,504 41 674 148 (180)37 2,224 
Consumer, indirect8,841 — — (2,308)(416)43 6,160 
Consumer, direct1,161 112 180 (362)(29)17 1,079 
Deposit account overdrafts53 — — 124 (135)37 79 
Total$47,942 $22,334 $10,580 $(1,888)$(1,896)$310 $77,382 
(a)Amount does not include the provision for the allowance for credit losses on unfunded commitments.
(a)Amount does not include the provision for the allowance for credit losses on unfunded commitments.






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Changes in the allowance for credit losses for the nine months ended September 30, 2022 and September 30, 2021 are summarized below:
(Dollars in thousands)
Beginning Balance, December 31, 2021
Initial Allowance for Acquired Purchased Credit Deteriorated Assets (a)Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets(Recovery of) Provision for Credit Losses (b)Charge-offsRecoveries
Ending Balance, September 30, 2022
Construction$2,999 $— $— $(1,535)$— $— $1,464 
Commercial real estate, other29,147 (451)— (10,908)(357)264 17,695 
Commercial and industrial11,063 (418)— (1,124)(919)9 8,611 
Premium finance379 — — 247 (82)9 553 
Leases4,797 801 — 3,650 (1,697)339 7,890 
Residential real estate7,233 (509)— 200 (524)64 6,464 
Home equity lines of credit2,005 (11)— (333)(46)29 1,644 
Consumer, indirect5,326 (41)— 2,821 (1,434)240 6,912 
Consumer, direct961 — — 877 (277)31 1,592 
Deposit account overdrafts57 — — 772 (938)150 41 
Total$63,967 $(629)$— $(5,333)$(6,274)$1,135 $52,866 
(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.

(Dollars in thousands)Beginning Balance,
December 31, 2020		Initial Allowance for Acquired Purchased Credit Deteriorated AssetsProvision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets(Recovery of) Provision for Credit Losses (a)Charge-offsRecoveries
Ending Balance, September 30, 2021
Construction$1,887 $2,127 $638 $(1,216)$— $— $3,436 
Commercial real estate, other17,536 13,374 5,384 (325)(161)8 35,816 
Commercial and industrial12,763 4,286 1,059 (3,800)(952)22 13,378 
Premium finance1,095 — — 72 (30)— 1,137 
Leases— 493 3,288 1,450 (956)230 4,505 
Residential real estate6,044 2,394 2,645 (1,305)(313)103 9,568 
Home equity lines of credit1,860 41 674 (196)(196)41 2,224 
Consumer, indirect8,030 — — (891)(1,190)211 6,160 
Consumer, direct1,081 112 180 (252)(96)54 1,079 
Deposit account overdrafts63 — — 208 (327)135 79 
Total$50,359 $22,827 $13,868 $(6,255)$(4,221)$804 $77,382 
(a)Amount does not include the provision for the allowance for credit losses on unfunded commitments.s adopted ASU 2016-13 - Financial Instruments
(a)Amount does not include the provision for the allowance for credit losses on unfunded commitments
During the third quarter of 2022, Peoples recorded a provision for credit losses for loans of $1.8 million, driven by a deterioration of macro-economic conditions, partially offset by a reduction in reserves for individually analyzed loans. Leases designated as

27
purchased credit deteriorated ("PCD") acquired from Vantage increased the allowance for credit losses by $377,000. Net charge-offs for the third quarter of 2022 were $1.7 million, and included charge-offs of three leases aggregating $0.6 million.
Peoples had recorded an allowance for unfunded commitments of $2.1 million as of September 30, 2022, a decrease compared to $2.5 million at December 31, 2021. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets. The change in the allowance for unfunded commitments is also reflected in the "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)September 30, 2022December 31, 2021
Goodwill, beginning of year$264,193 $171,260 
Goodwill recorded from acquisitions28,204 92,933 
Goodwill, end of period$292,397 $264,193 
On March 11, 2022, Peoples Insurance Agency, LLC ("Peoples Insurance") entered into an Asset Purchase Agreement with Elite Agency, Inc. ("Elite"), and consummated the acquisition on April 1, 2022. In the second quarter of 2022, Peoples preliminarily recorded $2.3 million of goodwill related to this acquisition. Peoples Bank entered into an Asset Purchase Agreement, dated March 7, 2022 with Vantage, at which point Vantage became a legal subsidiary of Peoples Bank. In the first nine months of 2022, Peoples preliminarily recorded $27.2 million of goodwill related to this acquisition, which was offset partially by adjustments of $1.2 million to the goodwill balance related to the Premier Merger during the measurement period. On April 1, 2021, Peoples recorded $24.7 million of goodwill related to the acquisition of NS Leasing, LLC ("NSL"). On May 4, 2021, Peoples Insurance recorded $46,000 of goodwill from the acquisition of an insurance agency. On September 17, 2021, Peoples completed the merger with Premier, for which Peoples recorded $66.9 million of goodwill. For additional information on these acquisitions, refer to "Note 13 Acquisitions."
Other Intangible Assets
Other intangible assets were comprised of the following at September 30, 2022, and at December 31, 2021:
(Dollars in thousands)Core DepositsCustomer RelationshipsTotal
September 30, 2022
Gross intangibles$26,464 $25,173 $51,637 
Intangibles recorded from acquisitions (a)— 14,067 14,067 
Accumulated amortization(20,286)(13,795)(34,081)
Total acquisition-related intangibles$6,178 $25,445 $31,623 
Servicing rights1,917 
Indefinite-lived intangibles (b)2,491 
Total other intangibles$36,031 
December 31, 2021
Gross intangibles$22,233 $12,495 $34,728 
Intangibles recorded from acquisitions (c)4,233 13,014 17,247 
Accumulated amortization(19,048)(9,603)(28,651)
Total acquisition-related intangibles$7,418 $15,906 $23,324 
Servicing rights2,218 
Indefinite-lived intangibles (d)1,274 
Total other intangibles$26,816 
(a) Customer relationship intangible assets included $1.2 million of non-compete intangible assets related to the Vantage acquisition and
$0.1 million of non-compete intangible assets related to the Elite acquisition.
(b) Included $1.2 million of trade name intangible assets related to the Vantage acquisition and $1.3 million of trade name
intangible assets related to the NSL acquisition.
(c) Customer relationship intangible assets consisted of $0.3 million of non-compete intangible assets related to the NSL acquisition.
(d) Included $1.3 million of trade name intangible assets related to the NSL acquisition.

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Other intangible assets preliminarily recorded for the nine months ended September 30, 2022 included $10.8 million of customer relationship intangible assets, and $1.2 million of non-compete 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.
Other intangible assets recorded in 2021 included $12.7 million of customer relationship intangible assets related to the NSL acquisition, $4.2 million of core deposit intangible assets related to the Premier merger, and $0.3 million of non-compete intangible assets, and $1.3 million of trade name intangible assets, both related to the NSL acquisition. Refer to "Note 13 Acquisitions" for additional information.
The following table details estimated aggregate future amortization of other intangible assets at September 30, 2022:
(Dollars in thousands)Core DepositsCustomer RelationshipsTotal
Remaining three months of 2022$382 $1,617 $1,999 
20231,257 6,269 7,526 
20241,058 5,325 6,383 
2025891 4,255 5,146 
2026731 3,114 3,845 
Thereafter1,859 4,865 6,724 
Total$6,178 $25,445 $31,623 
The weighted average amortization period of other intangible assets is 9.8 years.
Servicing Rights
The following is an analysis of activity of servicing rights for the periods ended September 30, 2022 and December 31, 2021:
(Dollars in thousands)September 30, 2022December 31, 2021
Balance, beginning of year$2,218 $2,486 
Amortization(460)(775)
Servicing rights originated153 519 
Change in valuation allowance6 (12)
Balance, end of period$1,917 $2,218 
Peoples accounts for its servicing rights under the amortization method, recognizing a valuation allowance when amortized cost exceeds fair value. As of September 30, 2022, Peoples recorded a reduction to the valuation allowance of $6,000 related to changes in the fair value of servicing rights. During 2021, Peoples had recorded a valuation allowance of $12,000 related to the decrease in the fair value of servicing rights.
The following is the breakdown of the discount rates and prepayment speeds of servicing rights for the periods ended September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Minimum MaximumMinimumMaximum
Discount rates11.3 %13.8 %8.3 %10.8 %
Prepayment speeds7.7 %20.0 %8.9 %27.1 %
The fair value of servicing rights was $3.5 million and $2.6 million at September 30, 2022 and December 31, 2021, respectively.

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Note 6 Deposits
Peoples’ deposit balances were comprised of the following:

(Dollars in thousands)September 30, 2022December 31, 2021
Retail CDs:  
$100 or more$269,145 $320,574 
Less than $100275,596 323,185 
Retail CDs544,741 643,759 
Interest-bearing deposit accounts1,162,012 1,167,460 
Savings accounts1,077,383 1,036,738 
Money market deposit accounts624,708 651,169 
Governmental deposit accounts734,734 617,259 
Brokered deposit accounts (a)86,089 104,745 
Total interest-bearing deposits4,229,667 4,221,130 
Non-interest-bearing deposits$1,635,953 1,641,422 
Total deposits$5,865,620 $5,862,552 
(a) Brokered deposit accounts include $85.0 million of brokered demand deposits.

Time deposits that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") limit of $250,000 were $116.4 million and $121.3 million at September 30, 2022 and December 31, 2021, respectively.
The contractual maturities of retail CDs, brokered CDs and demand deposits for each of the next five years, including the remainder of 2022, and thereafter are as follows:
(Dollars in thousands)RetailBrokeredTotal
Remaining three months ending December 31, 2022 (a)$114,371 $85,595 $199,966 
Year ending December 31, 2023258,615 494 259,109 
Year ending December 31, 202498,555 — 98,555 
Year ending December 31, 202529,032 — 29,032 
Year ending December 31, 202623,328 — 23,328 
Thereafter20,840 — 20,840 
Total CDs$544,741 $86,089 $630,830 
(a) Brokered deposit accounts include $85.0 million of brokered demand deposits.
At September 30, 2022, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $125.0 million, of which $85.0 million were funded by brokered demand and savings deposits. Brokered demand deposits hedged by interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments."

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Note 7 Stockholders’ Equity
The following table details the progression in Peoples’ common shares and treasury stock during the nine months ended September 30, 2022:
 Common SharesTreasury
Stock
Shares at December 31, 202129,814,401 1,577,359 
Changes related to stock-based compensation awards:  
Release of restricted common shares— 39,445 
Cancellation of restricted common shares— 3,647 
Grant of restricted common shares— (213,065)
Grant of unrestricted common shares— (1,500)
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock— 13,167 
Disbursed out of treasury stock— (3,039)
Common shares repurchased under share repurchase program— 254,519 
Common shares issued under dividend reinvestment plan31,394 — 
Common shares issued under compensation plan for Boards of Directors
— (13,127)
Common shares issued under employee stock purchase plan
— (18,832)
Shares at September 30, 202229,845,795 1,638,574 
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 September 30, 2022, Peoples had repurchased 254,519 common shares totaling $7.2 million under the share repurchase program.
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 September 30, 2022, Peoples had no preferred shares issued or outstanding.
On October 24, 2022, Peoples' Board of Directors declared a quarterly cash dividend of $0.38 per common share, payable on November 21, 2022, to shareholders of record on November 7, 2022. The following table details the cash dividends declared per common share during the four quarters of 2022 and the comparable periods of 2021:
20222021
First quarter$0.36 $0.35 
Second quarter0.38 0.36 
Third quarter0.38 0.36 
Fourth quarter0.38 0.36 
Total dividends declared$1.50 $1.43 
Accumulated Other Comprehensive (Loss) Income
The following table details the change in the components of Peoples’ accumulated other comprehensive (loss) income for the nine months ended September 30, 2022:
(Dollars in thousands)Unrealized Loss on SecuritiesUnrecognized Net Pension and Postretirement CostsUnrealized (Loss) Gain on Cash Flow HedgeAccumulated Other Comprehensive (Loss) Income
Balance, December 31, 2021$(5,946)$(1,881)$(3,792)$(11,619)
Reclassification adjustments to net income:
  Realized gain on sale of securities, net of tax(82)— — (82)
Realized gain due to settlement and curtailment, net of tax— 107 — 107 
Other comprehensive (loss) income, net of reclassifications and tax
(132,025)249 8,447 (123,329)
Balance, September 30, 2022$(138,053)$(1,525)$4,655 $(134,923)

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Note 8 Employee Benefit Plans
Peoples sponsors a noncontributory defined benefit pension plan that covers substantially all employees hired before January 1, 2010.  The plan provides retirement benefits based on an employee’s years of service and compensation.  For employees hired before January 1, 2003, the amount of postretirement benefit is based on the employee’s average monthly compensation over the highest five consecutive years out of the employee’s last ten years with Peoples while an eligible employee.  For employees hired on or after January 1, 2003, the amount of postretirement benefit is based on 2% of the employee’s annual compensation during the years 2003 through 2009, plus accrued interest.  Effective January 1, 2010, the pension plan was closed to new entrants.  Effective March 1, 2011, the accrual of pension plan benefits for all participants was frozen. Peoples recognized this freeze as a curtailment as of December 31, 2010 and March 1, 2011, under the terms of the pension plan. Effective July 1, 2013, a participant in the pension plan who is employed by Peoples may elect to receive or to commence receiving such person's retirement benefits as of the later of such person's normal retirement date or the first day of the month first following the date such person makes an election to receive his or her retirement benefits.
Peoples also provides post-retirement health and life insurance benefits to certain former employees and directors. Only those individuals who retired before January 27, 2012 were eligible for life insurance benefits. As of January 1, 2011, all retirees who desire to participate in the Peoples Bank medical plan do so by electing COBRA, which provides up to 18 months of coverage; retirees over the age of 65 also have the option to pay to participate in a group Medicare supplemental plan. Peoples only pays 100% of the cost of health benefits for those individuals who retired before January 1, 1993. For all others, the retiree is responsible for most, if not all, of the cost of the health benefits. Peoples’ policy is to fund the cost of the benefits as they arise.
The expected long-term rate of return on plan assets, which was determined as of January 1, 2022, is 7.0%. The following table details the components of the net periodic cost for the 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 EndedNine Months Ended
 September 30,September 30,
(Dollars in thousands)2022202120222021
Interest cost$65 $60 $197 $194 
Expected return on plan assets(168)(143)(504)(492)
Amortization of net loss21 21 61 84 
Settlement of benefit obligation139 143 139 143 
Net periodic income (loss)$57 $81 $(107)$(71)
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 recorded settlement charges under the noncontributory defined benefit pension plan of $139,000 during the three and nine months ended September 30, 2022 and $143,000 during the three and nine months ended September 30, 2021.

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Note 9 Earnings Per Common Share
The calculations of basic and diluted earnings (loss) per common share were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands, except per common share data)2022202120222021
Net income (loss) available to common shareholders$25,978 $(5,758)$74,443 $19,808 
Less: Dividends paid on unvested common shares(102)(79)(252)(214)
Add: Undistributed (loss) earnings allocated to unvested common shares(24)21 (65)2 
Net earnings (loss) allocated to common shareholders$25,852 $(5,816)$74,126 $19,596 
Weighted-average common shares outstanding27,865,416 20,640,519 27,929,720 19,751,853 
Effect of potentially dilutive common shares107,839 148,752 79,543 138,819 
Total weighted-average diluted common shares outstanding27,973,255 20,789,271 28,009,263 19,890,672 
Earnings (loss) per common share:
Basic$0.93 $(0.28)$2.65 $0.99 
Diluted$0.92 $(0.28)$2.65 $0.99 
Anti-dilutive common shares excluded from calculation:
Restricted common shares 1,832 — — — 
Note 10 Derivative Financial Instruments
Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivative financial instruments is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows.
Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments
Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions.
Cash Flow Hedges of Interest Rate Risk
Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At September 30, 2022, Peoples had entered into thirteen interest rate swap contracts with an aggregate notional value of $125.0 million. Peoples will pay a fixed rate of interest for up to ten years while receiving a floating rate component of interest equal to the three-month LIBOR rate. The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs and 90-day FHLB Advances, which will continue to be rolled through the life of the swaps. At September 30, 2022, the interest rate swaps were designated as cash flow hedges of $85.0 million in brokered demand deposits, which are expected to be extended every 90 days

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through the maturity dates of the swaps. The remaining $40.0 million of interest rate swaps were designated as cash flow hedges of 90-day FHLB Advances.
For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the 90-day advances or brokered CDs are matched to the reset dates and payment dates on the receipt of the three-month LIBOR floating portion of the swaps to ensure effectiveness of the cash flow hedge. During the three months ended September 30, 2022, and 2021, Peoples had recorded reclassifications of losses to earnings of $0.2 million and $0.8 million, respectively. For the nine months ended September 30, 2022 and 2021, Peoples recorded reclassifications of losses to earnings of $1.3 million and $2.3 million, respectively. During the next twelve months, Peoples estimates that $1.2 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)September 30,
2022		December 31,
2021
Notional amount$125,000 $125,000 
Weighted average pay rates2.26 %2.26 %
Weighted average receive rates4.16 %1.10 %
Weighted average maturity2.8 years3.6 years
Pre-tax unrealized gains (losses) included in AOCI$6,068 $(4,879)
The following table presents net gains recorded in AOCI and in the Unaudited Consolidated Statements of Operations related to the cash flow hedges:
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2022202120222021
Amount of net gains recognized in AOCI, pre-tax$(3,388)$(858)$(10,948)$(4,800)
The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:
September 30,
2022		December 31,
2021
(Dollars in thousands)Notional AmountFair ValueNotional AmountFair Value
Included in "Other assets":
Interest rate swaps related to debt$125,000 $5,934 $— $— 
Included in "Accrued expenses and other liabilities":
Interest rate swaps related to debt$— $— $125,000 $5,020 
Non-Designated Hedges
Peoples maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this program, Peoples originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples Bank effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples Bank. Peoples Bank offsets its exposure in the swap by entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated hedges; therefore, each swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the three and nine months ended September 30, 2022 and as of or for the year ended December 31, 2021.
The following table reflects the non-designated hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:

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September 30,
2022		December 31,
2021
(Dollars in thousands)Notional AmountFair ValueNotional AmountFair Value
Included in "Other assets":
Interest rate swaps related to commercial loans$414,192 $31,234 $419,733 $12,163 
Included in "Accrued expenses and other liabilities":
Interest rate swaps related to commercial loans$414,192 $31,234 $419,733 $12,163 
Pledged Collateral
Peoples pledges or receives collateral for all interest rate swaps. When the fair value of Peoples' interest rate swaps is in a net liability position, Peoples must pledge collateral, and, when the fair value of Peoples' interest rate swaps is in a net asset position, the respective counterparties must pledge collateral. At September 30, 2022 and December 31, 2021, Peoples had no cash pledged, while counterparties had $22.0 million of cash pledged at September 30, 2022 and none pledged at December 31, 2021. Peoples had no pledged investment securities and $28.1 million in pledged investment securities at September 30, 2022 and December 31, 2021, respectively, while the counterparties had pledged $3.2 million at September 30, 2022 and none at December 31, 2021.
Note 11 Stock-Based Compensation
Under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 891,340.  The maximum number of common shares that can be issued for incentive stock options is 500,000 common shares.  Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. Additionally, in 2021, Peoples granted unrestricted common shares to non-employee directors (in addition to their directors' fees paid in common shares). In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available.  If no treasury shares are available, common shares are issued from authorized but unissued common shares.
Restricted Common Shares
 Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors.  In general, the restrictions on the restricted common shares awarded to employees expire after periods ranging from one to five years. Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions. In the first nine months of 2022, Peoples granted an aggregate of 154,645 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date.
The following table summarizes the changes to Peoples’ restricted common shares for the nine months ended September 30, 2022:
Time-Based VestingPerformance-Based Vesting
 Number of Common SharesWeighted-Average Grant Date Fair ValueNumber of Common SharesWeighted-Average Grant Date Fair Value
Outstanding at January 1, 202288,922 $25.44 247,346 $32.19 
Awarded58,420 30.94 154,645 32.21 
Released(12,424)32.37 (100,664)32.20 
Forfeited— — (3,647)32.17 
Outstanding at September 30, 2022134,918 $27.18 297,680 $32.20 
For the nine months ended September 30, 2022, the total intrinsic value for restricted common shares released was $3.7 million compared to $2.6 million for the nine months ended September 30, 2021.
Stock-Based Compensation
Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted and unrestricted common shares, as well as purchases made by participants in the employee stock purchase plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. For

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performance unit awards, Peoples recognizes stock-based compensation over the performance period, based on the portion of the awards that was expected to vest based on the expected level of achievement of the two performance goals. Peoples also has an 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 EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2022202120222021
Employee stock-based compensation expense:
Stock grant expense$780 $597 $2,933 $2,381 
Employee stock purchase plan expense2 21 54 55 
Total employee stock-based compensation expense782 618 $2,987 $2,436 
Non-employee director stock-based compensation expense127 60 $378 $310 
Total stock-based compensation expense909 678 $3,365 $2,746 
Recognized tax benefit(195)(151)(721)(612)
Net stock-based compensation expense$714 $527 $2,644 $2,134 
Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in the nine months ended September 30, 2022 and 2021. The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date. Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $4.8 million at September 30, 2022, which will be recognized over a weighted-average period of 2.1 years.
Note 12 Revenue
The following table details Peoples' revenue from contracts with customers:
 Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2022202120222021
Insurance income:
Commission and fees from sale of insurance policies (a)$3,465 $3,231 $10,323 $9,603 
Fees related to third-party administration services (a)88 76 252 276 
Performance-based commissions (b)65 60 1,420 2,044 
Trust and investment income (a)3,954 4,158 12,476 12,223 
Electronic banking income:
Interchange income (a)4,150 3,280 12,564 9,930 
Promotional and usage income (a)1,111 1,046 3,369 2,725 
Deposit account service charges:
Ongoing maintenance fees for deposit accounts (a)1,353 933 3,971 2,597 
Transaction-based fees (b)2,480 1,616 6,846 3,981 
Commercial loan swap fees (b)224 73 662 194 
Other non-interest income transaction-based fees (b)255 207 826 601 
Total revenue from contracts with customers$17,145 $14,680 $52,709 $44,174 
Timing of revenue recognition:
Services transferred over time$14,121 $12,724 $42,955 $37,354 
Services transferred at a point in time3,024 1,956 9,754 6,820 
Total revenue from contracts with customers$17,145 $14,680 $52,709 $44,174 
(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

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performance obligations are fulfilled, which is over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled related to electronic banking income.
The following table details the changes in Peoples' contract assets and contract liabilities for the nine-month period ended September 30, 2022:
 Contract AssetsContract Liabilities
(Dollars in thousands)
Balance, January 1, 2022$743 $4,811 
     Additional income receivable159 — 
     Additional deferred income— 487 
     Recognition of income previously deferred— (95)
Balance, September 30, 2022$902 $5,203 

Note 13 Acquisitions
Elite Agency, Inc
On April 1, 2022, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency with five locations in eastern Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Elite, pursuant to an Asset Purchase Agreement between Peoples Insurance and Elite. Total consideration for this transaction was $3.8 million. Peoples recognized preliminary intangibles of $2.1 million, primarily comprised of a customer relationship intangible.
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.
Peoples recorded acquisition-related expenses during the three and nine months ended September 30, 2022 of $120,000 and $1.6 million related to the Vantage acquisition, respectively. For the nine months ended September 30, 2022, the Vantage acquisition-related expenses included $1.3 million in professional fees.
The following table provides the preliminary purchase price calculation as of the date of the acquisition of Vantage, and the assets acquired and liabilities assumed at their estimated fair values, and the amounts are subject to adjustment for up to one year after March 7, 2022. Valuations subject to change include leases, other intangible assets and borrowings.
(Dollars in thousands)Fair Value
Total purchase price$82,893 
Net assets at fair value
Assets
Cash and due from banks$1,444 
Leases155,726 
Allowance for credit losses (on PCD leases)(801)
Net Leases154,925 
Bank premises and equipment116 
Other intangible assets13,207 
Other assets1,506 

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(Dollars in thousands)Fair Value
    Total assets$171,198 
Liabilities
Borrowings$106,919 
Accrued expenses and other liabilities8,550 
Total liabilities$115,469 
Net assets$55,729 
Goodwill$27,164 
The goodwill recorded in connection with the Vantage acquisition is related to expected synergies to be gained from the combination of Vantage with Peoples' operations. The employees retained from the Vantage acquisition should allow Peoples to continue to grow the lease portfolio, along with Peoples' resources, and should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill.
The estimated fair values presented in the above table reflect additional information that was obtained during the three months ended September 30, 2022, which resulted in changes to certain fair value estimates made as of the date of acquisition. Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously recorded results have changed. The below table reflects the changes in the estimated fair value as they impact goodwill at September 30, 2022:
(Dollars in thousands)Change in fair value
Net assets
Leases$(2,215)
Allowance for credit losses (on PCD leases)(377)
Net leases$(2,592)
Change in total assets$(2,592)
Borrowings(170)
Change in total liabilities$(170)
Change in net assets$(2,422)
Change in goodwill$2,422 
The following table details the fair value adjustment for acquired purchased credit deteriorated leases as of the acquisition date:
(Dollars in thousands)Par ValueAllowance for Credit LossesNon-Credit PremiumFair Value
Purchased credit deteriorated leases
Leases$3,412 $(801)$1,120 $3,731 
Fair value$3,412 $(801)$1,120 $3,731 

Premier Financial Bancorp, Inc.
On September 17, 2021, Peoples completed its merger with Premier. Premier merged into Peoples, and Premier’s wholly-owned subsidiaries, Premier Bank, Inc., and Citizens Deposit Bank and Trust, Inc., which combined operated 48 branches in Kentucky, Maryland, Ohio, Virginia, West Virginia and Washington, D.C., merged into Peoples’ wholly-owned subsidiary, Peoples Bank. As consideration, Premier shareholders were paid 0.58 common shares of Peoples for each full share of Premier that was owned at the acquisition date, resulting in the issuance of 8,589,685 common shares by Peoples, or $261.9 million in total consideration. Peoples accounted for this transaction as a business combination under the acquisition method. Peoples completed the merger in an effort to diversify and expand its franchise, and further enhance its size and scale. Peoples believes the growth potential, and attractive market areas will benefit its future financial performance.
Peoples recorded acquisition-related expenses related to the Premier merger during the three and nine months ended September 30, 2022 of $18,000 and $445,000.
The following table provides the purchase price calculation as of the date of the merger with Premier, and the assets acquired and liabilities assumed at their estimated fair values.

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(Dollars in thousands)Unpaid Principal BalanceFair Value
Premier common shares14,811,200 
Number of common shares of Peoples issued for each common share of Premier0.58 
Price per Peoples common share, based at closing date$30.49 
Common share consideration261,899 
Cash paid in lieu of fractional common shares25 
Total consideration$261,924 
Net assets at fair value
Assets
Cash and due from banks$248,360 
Interest-bearing deposits in other banks1,025 
Total cash and cash equivalents249,385 
Available-for-sale investment securities551,953 
Other investment securities4,159 
Total investment securities556,112 
Loans and leases:
  Construction97,262 96,025 
  Commercial real estate, other544,950 534,869 
  Commercial and industrial132,293 131,979 
  Residential real estate332,269 331,544 
  Home equity lines of credit46,969 45,910 
  Consumer20,961 21,513 
Total loans and leases1,174,704 1,161,840 
Allowance for credit losses (on PCD loans)(15,513)
Net loans and leases1,146,327
Bank premises and equipment30,098 
Other intangible assets4,233 
OREO11,081 
Other assets26,982 
    Total assets$2,024,218 
Liabilities
Deposits:
Non-interest-bearing$733,157 
Interest-bearing1,018,387 
Total deposits1,751,544 
Short-term borrowings63,807 
Long-term borrowings6,070 
Accrued expenses and other liabilities7,813 
Total liabilities1,829,234 
Net assets194,984 
Goodwill$66,940 
Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes loans that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" loans. Acquired purchased credit deteriorated loans are reported net of the unamortized fair value adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The following table details the fair value adjustment for acquired purchased credit deteriorated loans as of the acquisition date:

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(Dollars in thousands)Par ValueAllowance for Credit LossesNon-Credit (Discount) PremiumFair Value
Purchased credit deteriorated loans
Construction$20,143 $(2,005)$(214)$17,924 
Commercial real estate, other97,193 (9,053)(2,123)86,017 
Commercial and industrial9,948 (3,630)113 6,431 
Residential real estate18,349 (696)(251)17,402 
Home equity lines of credit1,291 (55)(72)1,164 
Consumer929 (74)37 892 
Fair value$147,853 $(15,513)$(2,510)$129,830 
NS Leasing, LLC
Peoples Bank entered into an Asset Purchase Agreement, dated March 24, 2021 with NS Leasing, LLC, which is headquartered in Burlington, Vermont, and does business as “North Star Leasing”. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as a division of Peoples Bank on April 1, 2021. Peoples Bank acquired assets comprising NSL’s equipment finance business and assumed from NSL certain specified liabilities for total cash consideration of $116.5 million, plus a potential earnout payment to NSL of up to $3.1 million. Peoples Bank acquired $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million. NSL underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded goodwill in the amount of $24.7 million and other intangibles of $14.0 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction. Peoples also recorded and paid an earn-out provision of approximately $3.0 million. Peoples accounted for this transaction as a business combination under the acquisition method.
The recorded goodwill associated with the NSL acquisition is related to expected synergies and operational efficiencies to be gained from the combination of NSL with Peoples' operations. The employees retained from the NSL acquisition should allow Peoples to continue to grow the lease portfolio, along with Peoples' resources, and should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill.
The following table provides the purchase price calculation as of the date of acquisition for NSL and the assets acquired and liabilities assumed at their recorded fair values.
(Dollars in thousands)
Total purchase price (a)$118,846 
Net assets at fair value
Assets
Cash and due from banks$216 
Net loans and leases82,833 
Bank premises and equipment, net of accumulated depreciation470 
Other intangible assets14,009 
Other assets1,225 
    Total assets$98,753 
Liabilities
Accrued expenses and other liabilities$4,627 
Total liabilities$4,627 
Net assets$94,126 
Goodwill$24,720 
(a) Includes preliminary contingent consideration related to the bonus earn-out provision of $2.3 million. Peoples recorded an additional $0.7 million in non-interest expense related to an update to the estimated earn-out provision.

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Leases acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes leases that Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" leases. These leases are recorded at the purchase price, and an allowance for credit losses is determined using the same methodology as for other leases. Acquired purchased credit deteriorated leases are reported net of the unamortized fair value adjustment.
The following table details the fair value adjustment for acquired purchased credit deteriorated leases as of the acquisition date:
(Dollars in thousands)NSL
Purchased credit deteriorated leases
Par value$5,248 
Allowance for credit losses(493)
Non-credit premium85 
Fair value$4,840 
Peoples recorded acquisition-related expenses related to the NSL acquisition during the first nine months of 2022 of $90,000.
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 consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842.
Lessor Arrangements
Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses.
Peoples began originating leases with the acquisition of leases from NSL in the second quarter of 2021, and expanded its lease portfolio with the acquisition of Vantage in the first quarter of 2022. The leases acquired from NSL were determined to be sales-type leases, as the premise for the leases is dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. Originated leases continue to be classified as sales-type leases. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. The leases acquired from Vantage were determined to be either sales-type or direct financing leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases consist of automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. These leases include estimated residual value, which are assessed for impairment as part of the allowance for credit losses. Other non-interest income noted in the table below includes gain on the early termination of leases, syndicated leases, and other fees. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases."
The table below details Peoples' lease income:
 Three Months EndedNine Months Ended
(Dollars in thousands)September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Interest and fees on leases (a)$9,628 $4,810 $26,271 $9,025 
Other non-interest income1,725 471 2,931 716 
Total lease income$11,353 $5,281 $29,202 $9,741 
(a)Included in "Interest and fees on loans and leases" on the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.


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The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred costs" on the Unaudited Consolidated Balance Sheets:
(Dollars in thousands)September 30, 2022
Lease payments receivable, at amortized cost$331,572 
Estimated residual values34,566 
Initial direct costs3,084 
Deferred revenue(56,375)
Net investment in leases312,847 
Allowance for credit losses - leases(7,890)
Net investment in leases, after allowance for credit losses$304,957 
The following table summarizes the contractual maturities of leases:
(Dollars in thousands)Balance
Remaining three months ending December 31, 2022$19,853 
Year ending December 31, 202376,972 
Year ending December 31, 202477,615 
Year ending December 31, 202577,524 
Year ending December 31, 202648,855 
Thereafter30,753 
Lease payments receivable, at amortized cost$331,572 
Lessee Arrangements
Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years. Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability.  At September 30, 2022, Peoples did not have any leases that met the criteria for finance leases. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement or remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have a ROU asset or lease liability.
The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:
 Three Months EndedNine Months Ended
(Dollars in thousands)September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Operating lease expense$630 $358 1,893 1,038 
Short-term lease expense208 72 555 244 
Total lease expense$838 $430 $2,448 $1,282 
Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date.

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The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown:
(Dollars in thousands)September 30, 2022December 31, 2021
ROU assets:
Other assets$7,975 $7,911 
Lease liabilities:
     Accrued expenses and other liabilities$8,257 $8,674 
Other information:
     Weighted-average remaining lease term9.0 years9.5 years
     Weighted-average discount rate2.72 %2.36 %
During the three months ended September 30, 2022 and 2021, Peoples paid cash of $0.7 million and $345,000, respectively, for operating leases. During the nine months ended September 30, 2022 and 2021, Peoples paid cash of $1.9 million and $1.0 million, respectively, for operating leases.
The following table summarizes the maturity of remaining lease liabilities:
(Dollars in thousands)Balance
Remaining three months ending December 31, 2022$834 
Year ending December 31, 20232,066 
Year ending December 31, 20241,291 
Year ending December 31, 2025833 
Year ending December 31, 2026674 
Thereafter3,554 
Total undiscounted lease payments$9,252 
Imputed interest$(995)
Total lease liabilities$8,257 
Note 15 Subsequent Events
The Company has evaluated all events occurring after September 30, 2022 through November 3, 2022, the date the interim unaudited financial statements for the period ending September 30, 2022 were available to be issued, to determine whether any event required either recognition or disclosure in the financial statements.
Merger Agreement
On October 25, 2022 Peoples announced the signing of a definitive agreement and plan of merger (the "Merger Agreement") pursuant to which Peoples will acquire, in an all-stock merger, Limestone Bancorp, Inc. ("Limestone"), a bank holding company headquartered in Louisville, Kentucky, and the parent company of Limestone Bank, Inc. (“Limestone Bank”). Under the terms of the Merger Agreement, Limestone will merge with and into Peoples (the “Limestone Merger”), and Limestone Bank will subsequently merge with and into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction valued at approximately $208.2 million. As of September 30, 2022, Limestone had, on a consolidated basis, $1.5 billion in total assets, which included $1.1 billion in total net loans, as well as $1.2 billion in total deposits.
According to the terms of the Merger Agreement, which has been unanimously approved by the Boards of Directors of both companies, shareholders of Limestone will receive 0.90 common shares of Peoples for each share of Limestone common stock, and the Merger is expected to qualify as a tax-free reorganization for Limestone shareholders.
The Merger is expected to close during the second quarter of 2023, subject to the satisfaction of customary closing conditions, including regulatory approvals and the approval of the shareholders of Peoples and of Limestone.

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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 nine months ended September 30, 2022 and September 30, 2021. This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto.
Certain statements in this Form 10-Q, which are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate," "estimate," "may," "feel," "expect," "believe," "plan," "will," "will likely," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," "continue," "remain," and similar expressions.
These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, but are not limited to:
(1)the ever-changing effects of the global COVID-19 pandemic - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants or mutations thereof - on economies (local, national and international), supply chains and financial markets, on the labor market, including the potential for a sustained reduction in labor force participation, and on Peoples' customers (including potential changes to their bank preferences and behaviors), counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, which could adversely impact sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;
(2)changes in the interest rate environment due to economic conditions related to the COVID-19 pandemic or other factors and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;
(3)the 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 completion and successful integration of planned acquisitions, including the recently-completed Premier Merger, the recently-completed acquisition of Vantage and the pending Limestone Merger, and the expansion of commercial and consumer lending activities, in light of the potential impact of the COVID-19 pandemic on customers' operations and financial condition;
(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, including in particular the rules and regulations promulgated and to be promulgated under the CARES Act, and the follow-up legislation enacted as the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;
(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 potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S. and its global trading partners) and the impact these conditions may have on Peoples, its customers and its counterparties, and Peoples' assessment of the impact, which may be different than anticipated;
(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 the COVID-19 pandemic and recent inflationary pressures and adversely impact the amount of interest income generated;

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(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;
(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 the impacts of the COVID-19 pandemic and 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 its 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, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity;
(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 its 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 (including as a result of the COVID-19 pandemic), legislative or regulatory initiatives (including those in response to the COVID-19 pandemic), or other factors, which may be different than anticipated;
(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 (including COVID-19), 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;
(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 NSL and Vantage acquisitions, the Premier Merger, and 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 Premier Merger or the pending Limestone Merger, may not be fully realized or realized within the expected time frame;
(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; 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' 2021 Form 10-K, under the heading "ITEM 1A. RISK FACTORS" in Part II of Peoples' Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, and under the head "ITEM 1A. RISK FACTORS" in Part II of this Form 10-Q. Peoples encourages readers of this Form

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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’ 2021 Form 10-K, as well as the Unaudited Condensed Consolidated Financial Statements, Notes to the Unaudited Condensed Consolidated Financial Statements, ratios, statistics and discussions contained elsewhere in this Form 10-Q.
Business Overview
The following discussion and analysis of Peoples’ Unaudited Condensed Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial condition and results of operations.
Peoples is a diversified financial services holding company that makes available a complete line of banking, trust and investment, insurance, premium financing and equipment leasing solutions through its subsidiaries.  Peoples provides services through traditional offices, ATMs, mobile banking and telephone and internet-based banking.  Peoples offers a complete array of insurance products through Peoples Insurance, a subsidiary of Peoples Bank. Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices.   Peoples Bank offers insurance premium finance lending nationwide through its Peoples Premium Finance division. Peoples also offers lease financing through its North Star Leasing division and through Vantage, a subsidiary of Peoples Bank. As of September 30, 2022, 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 September 30, 2022, which have been disclosed in Peoples' 2021 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’ 2021 Form 10-K.
Summary of Recent Transactions and Events
The following is a summary of recent transactions and events that have impacted or are expected to impact Peoples’ results of operations or financial condition:
◦On October 25, 2022, Peoples announced the signing of a definitive agreement and plan of merger pursuant to which Peoples will acquire, in an all-stock merger, Limestone, a bank holding company headquartered in Louisville, Kentucky, and the parent company of Limestone Bank. Under the terms of the agreement and plan of merger, Limestone will merge with and into Peoples, and Limestone Bank will subsequently merge with and into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction valued at approximately $208.2 million.
◦On April 1, 2022, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency with five locations in eastern Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Elite, pursuant to an Asset Purchase Agreement between Peoples Insurance and Elite. Total consideration for this transaction was $3.8 million. Peoples recognized preliminary 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 $107.1 million. Peoples paid total consideration of $82.9 million. Based in Excelsior, Minnesota, Vantage offers mid-ticket equipment leases

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primarily for business essential information technology equipment across a wide array of industries. Peoples recorded preliminary goodwill in the amount of $27.2 million and preliminary other intangible assets of $13.2 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.
◦On September 17, 2021, Peoples completed its merger with Premier, in which Peoples acquired, in an all-stock merger, a bank holding company headquartered in Huntington, West Virginia, and the parent company of Premier Bank, Inc. (“Premier Bank”) and Citizens Deposit Bank and Trust, Inc. (“Citizens”). Under the terms and subject to the conditions of the definitive Agreement and Plan of Merger dated March 26, 2021 ("Merger Agreement"), Premier merged with and into Peoples (the “Premier Merger”), and Premier Bank and Citizens subsequently merged with and into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction valued at $261.9 million. At the close of business on September 17, 2021, the financial services offices of each of Premier Bank and Citizens became branches of Peoples Bank. Peoples acquired $1.2 billion in loans and $1.8 billion in deposits and recorded goodwill of $66.9 million and other intangible assets of $4.2 million in connection with the Premier Merger as of September 17, 2021.
◦On May 4, 2021, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc., pursuant to an Asset Purchase Agreement between Peoples Insurance and Justice & Stamper Insurance Agency, Inc. Total consideration for this transaction was $325,000, with $162,500 paid at closing and the second installment in the amount of $162,500 paid on the first anniversary of the closing date. Peoples recorded customer relationship intangible assets of $230,000 and goodwill of $46,000 related to this transaction.
◦On March 31, 2021, Peoples completed its acquisition of NSL pursuant to an Asset Purchase Agreement, dated March 24, 2021 in which Peoples Bank acquired the equipment finance and leasing business of NSL. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as North Star Leasing, a division of Peoples Bank, on April 1, 2021. Peoples Bank acquired assets comprising NSL's equipment finance business, including $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million. Peoples Bank paid total consideration of $116.6 million, plus an earn-out payment to NSL of up to $3.0 million. Based in Burlington, Vermont, the North Star Leasing division underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded goodwill in the amount of $24.7 million and other intangibles of $14.0 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.
◦Peoples began originating loans during the second quarter of 2020, and continued to originate loans during the first five months of 2021 under the loan guarantee program created under the CARES Act, called the Paycheck Protection Program ("PPP"). These loans were targeted to provide small businesses with financial support to cover payroll and certain other specified types of expenses for a specified period of time. Loans made under the PPP are fully guaranteed by the Small Business Administration ("SBA"). As of September 30, 2022, Peoples had $3.7 million aggregate principal amount in PPP loans outstanding (including $1.7 million acquired in the Premier Merger), which were included in commercial and industrial loan balances, compared to $15.2 million (including $5.6 million acquired in the Premier Merger) at June 30, 2022. Peoples recognized interest income of $0.4 million for deferred loan fees/costs and $22,000 of interest income on PPP loans during the third quarter of 2022, compared to $0.6 million and $79,000, respectively, for the second quarter of 2022, and $3.1 million and $0.4 million, respectively, for the third quarter of 2021. During the first nine months of 2022, Peoples recognized interest income of $2.1 million for deferred loan fee/cost accretion and $0.3 million of interest income on PPP loans, compared to $11.2 million for deferred loan/ fee costs accretion and $2.0 million of interest income during the first nine months of 2021.
◦During the third quarter of 2022, Peoples recorded a provision for credit losses of $1.8 million, compared to a recovery of credit losses of $0.8 million in the linked quarter and a provision for credit losses of $9.0 million in the third quarter of 2021. For the first nine months of 2022, Peoples recorded a recovery of credit losses of $5.8 million compared to a provision for credit losses of $7.3 million for 2021. The release of credit losses for the first three quarters of 2022 was driven by improvements in economic forecasts, coupled with loan payoffs and sales during certain periods. For more information, please refer to the section titled "RESULTS OF OPERATIONS - Provision for (Recovery of) Credit Losses" found later in this discussion.
◦During the third quarter of 2022, Peoples incurred $0.3 million of acquisition-related expenses, compared to $0.6 million in the second quarter of 2022 and $16.2 million in the third quarter of 2021. For the first nine months of 2022, Peoples incurred $2.3 million of acquisition-related expenses compared to $20.5 million for 2021. The acquisition-related expenses in 2022 were primarily related to the Vantage acquisition, while the 2021 expenses were primarily related to the NSL acquisition and the Premier Merger.
◦In an effort to stimulate an economy that was being adversely impacted by the impacts of the COVID-19 pandemic, the Federal Reserve Board lowered the benchmark Federal Funds Target Rate in two separate actions in the first quarter of 2020 to a range of 0% - 0.25% as of March 31, 2020 and maintained this rate until March 16, 2022. The Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% on March 16, 2022, 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, and has stated it anticipates continuing to raise rates throughout 2022.

47
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 $26.0 million for the third quarter of 2022, representing earnings per diluted common share of $0.92. In comparison, Peoples recognized earnings per diluted common share of $0.88 for the second quarter of 2022, and a loss per diluted common share of $0.28 for the third quarter of 2021. Peoples recorded net income of $74.4 million, or $2.65 per diluted common share for the nine months ended September 30, 2022, compared to $19.8 million, or $0.99 per diluted common share, for the nine months ended September 30, 2021. Non-core items, and the related tax effect of each, in net income primarily included acquisition-related and COVID-related expenses. Non-core items negatively impacted earnings per diluted common share by $0.01 for the third quarter of 2022, $0.02 for the second quarter of 2022, and $0.71 for the third quarter of 2021. Non-core items negatively impacted earnings per diluted share by $0.07 and $0.98 for the nine months ended September 30, 2022 and 2021, respectively.
Net interest income was $67.1 million for the third quarter of 2022, an increase of $5.6 million, or 9%, compared to the linked quarter. Net interest margin was 4.17% for the third quarter of 2022, compared to 3.84% for the linked quarter. The increase in net interest income and net interest margin reflects the recent increases in market interest rates, which expanded loan yields and investment yields by 33 basis points and 18 basis points, respectively, when compared to the linked quarter. Net interest income for the third quarter of 2022 increased $24.5 million, or 57%, compared to the third quarter of 2021. Net interest margin increased 67 basis points compared to 3.50% for the third quarter of 2021. For the first nine months of 2022, net interest income increased $65.0 million, or 55%, compared to the first nine months of 2021, while net interest margin increased 40 basis points to 3.81%. The increases in net interest income compared to the third quarter and the first nine months of 2021 were driven by the (i) the Premier Merger and Vantage acquisition, (ii) organic growth and (iii) increases in market interest rates.
Accretion income, net of amortization expense, from acquisitions was $2.8 million for the third quarter of 2022, $3.9 million for the second quarter of 2022 and $1.0 million for the third quarter of 2021, which added 16 basis points, 25 basis points and 8 basis points, respectively, to net interest margin. The decrease in accretion income when compared to the linked quarter was driven by less loan accretion due to lower payoffs and less accretion from the Premier Merger. The increase in accretion income for the current quarter compared to the third quarter of 2021 was a result of the acquisition of Vantage and a full quarter of accretion from the Premier Merger. Accretion income, net of amortization expense, from acquisitions was $9.4 million for the nine months ended September 30, 2022, compared to $2.2 million for the nine months ended September 30, 2021, which added 20 and 6 basis points, respectively, to net interest margin. The increase in accretion income for the first nine months of 2022 compared to 2021 was a result of the Premier Merger and the acquisitions of NSL and Vantage.
The provision for credit losses was $1.8 million for the third quarter of 2022, compared to a recovery of credit losses of $0.8 million for the linked quarter and a provision for credit losses of $9.0 million for the third quarter of 2021. The provision for credit losses in the third quarter of 2022 was largely attributable to a deterioration of macro-economic conditions, partially offset by a reduction in reserves for individually analyzed loans. Net charge-offs for the third quarter of 2022 were $1.7 million, or 0.15% of average total loans annualized, compared to net charge-offs of $1.5 million, or 0.14% of average total loans annualized, for the linked quarter and net charge-offs of $1.6 million, or 0.18% of average total loans annualized, for the third quarter of 2021. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below.
The recovery of credit losses during the first nine months of 2022 was $5.8 million, compared to a provision for credit losses of $7.3 million for the first nine months of 2021. Net charge-offs for the first nine months of 2022 were $5.1 million, or 0.15% of average total loans annualized, compared to net charge-offs of $3.4 million, or 0.13% annualized, for the first nine months of 2021. The recovery of credit losses during the first nine months of 2022 was driven by improvements in economic forecasts, coupled with loan payoffs and sales during certain periods. The provision for credit losses during the first nine months of 2021 was due to recording a provision for credit losses for the Premier Merger of $11.0 million in order to establish an allowance for credit losses for non-purchase credit deteriorated loans of $10.6 million, and a liability for unfunded commitments of $0.4 million in the third quarter of 2021. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier.
Total non-interest income, excluding net gains and losses, for the third quarter of 2022 increased $0.8 million compared to the linked quarter. The increase in non-interest income, excluding net gains and losses, was primarily impacted by an increase in other non-interest income due to a $1.3 million increase in lease income. Also impacting the third quarter increase was an increase of $0.3 million in deposit account service charges primarily due to customer activity. Partially offsetting these increases in non-interest income, excluding net gains and losses, were declines of $0.3 million, $0.2 million, and $103,000 in trust and investment income, electronic banking income, and bank owned life insurance income, respectively. The decrease in trust and investment income was primarily due to lower market values of trust and investment assets managed. The decrease in electronic banking income was due to less customer activity than in the linked quarter. The lower bank owned life insurance income was primarily driven by $0.2 million recognized on a one-time death benefit during the linked quarter. Compared to the third quarter of 2021, non-interest income, excluding net gains and losses, increased $3.6 million. Lease income, deposit account service charges, and electronic banking income increased $1.7 million, $1.3 million, and $0.9 million, respectively. The increases in deposit account service charges and electronic banking income were primarily attributable to the acquired Premier accounts as well as increased customer activity in recent periods.

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For the first nine months of 2022, total non-interest income, excluding gains and losses, increased $9.8 million, or 19%, compared to the first nine months of 2021. The increase was driven by growth of $4.2 million, or 64%, in service charges on deposit accounts, and $3.3 million, or 26%, in electronic banking income, primarily attributable to customers added in the Premier Merger. Also contributing to the growth was a $2.9 million increase in lease income. Partially offsetting the 2022 increase when compared to the same 2021 period was a $1.6 million decline in mortgage banking income due to the increased market interest rate environment in the first nine months of 2022 and a lower volume of new loan originations.
Total non-interest expense increased $2.4 million, or 5%, for the three months ended September 30, 2022, compared to the linked quarter. The increase in total non-interest expense for the third quarter of 2022 was attributable to increases in (i) salaries and employee benefit costs, (ii) professional fees, (iii) marketing expense and (iv) data processing and software expense. Partially offsetting the increase in non-interest expenses was a decrease in electronic banking expense. The increases in non-interest expenses were primarily driven by growth as well as sales incentives and minimum wage increases at Premier in regards to salaries and employee benefit costs. Total non-interest expense in the third and second quarters of 2022 also contained non-core expenses, including acquisition-related expenses of $0.3 million and $0.6 million, respectively. Compared to the third quarter of 2021, total non-interest expense decreased $5.6 million, or 10%, primarily due to decreases in acquisition-related expenses and professional fees, due to the Premier Merger, which totaled $16.2 million for the third quarter of 2021. Partially offsetting these decreases in non-interest expense were increases in (i) salaries and employee benefit costs, (ii) net occupancy and equipment expense, (iii) data processing and software expense, (iv) amortization of other intangible assets, and (v) electronic banking expense. The increases were due to the recent growth, including through mergers and acquisitions.
For the nine months ended September 30, 2022, total non-interest expense increased $18.0 million, or 13%, compared to the first nine months of 2021. The variance was driven by increases of (i) $15.7 million in salaries and employee benefit costs, (ii) $4.5 million in net occupancy and equipment expense, (iii) $2.5 million in intangible asset amortization, (iv) $2.1 million in electronic banking expense, (v) $1.8 million in data processing and software expenses, and (vi) $1.3 million in FDIC insurance premiums. These increases were primarily due to growth over the last year, driven by mergers and acquisitions. Partially offsetting the increase in non-interest expense was a decrease in acquisition-related expenses.
The efficiency ratio for the third quarter of 2022 was 57.2%, compared to 58.8% for the linked quarter, and 94.7% for the third quarter of 2021. The change in the efficiency ratio compared to the linked quarter was primarily due to the increases in market interest rates coupled with decreases in acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 56.6% for the third quarter of 2022, compared to 58.0% for the linked quarter and 63.9% for the third quarter of 2021. The change in the efficiency ratio, adjusted for non-core items, was primarily due to the increases in interest rates coupled with decreases in acquisition-related expenses.
The efficiency ratio the nine months ended September 30, 2022 was 60.7%, compared to 78.4% for the nine months ended September 30, 2021. The efficiency ratio, adjusted for non-core items, was 59.6% for the first nine months of 2022, compared to 64.3% for the same period of 2021. The changes in the efficiency ratios were primarily due to the increases in interest income due to higher market interest rates as well as decreases in acquisition-related expenses. 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 $7.4 million with an effective tax rate of 22.2% for the third quarter of 2022, compared to income tax expense of $6.8 million with an effective tax rate of 21.6% for the linked quarter and income tax benefit of $2.2 million with an effective tax rate of 27.4% for the third quarter of 2021. The increase in income tax expense for the third quarter of 2022, compared to the linked quarter, was due to higher pre-tax income. The increase in income tax expense for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, was driven by net income in the third quarter of 2022 versus a net loss in the same period of 2021.
Peoples recorded income tax expense of $20.2 million with an effective tax rate of 21.4% in the first nine months of 2022 and $4.0 million with an effective tax rate of 16.8% in the first nine months of 2021. The increase was driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states due to recent acquisitions.
At September 30, 2022, total assets were $7.01 billion, compared to $7.28 billion at June 30, 2022 and $7.06 billion at December 31, 2021 and at September 30, 2021. The 4% decline in total assets compared to June 30, 2022 was primarily due to decreases in interest-bearing deposits at other banks and available-for-sale investment securities, partially offset by an increase in other assets due to increases in the deferred tax asset and derivative assets and loan and lease balances. The increase in the loan and lease balances when compared to June 30, 2022 was primarily driven by increases of (i) $29.2 million in consumer indirect loans, (ii) $19.0 million in commercial and industrial loans, (iii) $15.4 million in premium finance loans and (iv) $13.0 million in construction loans, partially offset by a reduction in other commercial real estate loans of $36.5 million. The 1% decline in total assets compared to December 31, 2021 was largely attributable to decreases in interest-bearing deposits at other banks and available-for-sale investment securities, partially offset by an increase in leases due primarily to the acquired Vantage leases.
Total liabilities were $6.25 billion at September 30, 2022, down from $6.49 billion at June 30, 2022 and up from $6.22 billion at December 31, 2021 and $6.23 billion at September 30, 2021. The decrease in total liabilities compared to June 30, 2022 was attributable to decreases in short-term borrowings and total deposits. The decline in total deposits when compared to June 30, 2022 was primarily driven by reductions of (i) $39.5 million in retail certificates of deposits, (ii) $20.5 million in money market deposit

49
accounts, and (iii) $16.5 million in non-interest bearing checking accounts. The increase in total liabilities compared to December 31, 2021 was primarily due to increases in accrued expenses and other liabilities, partially offset by decreases in deposits. Total deposits are declining due to customers returning to pre-COVID-19 pandemic balances. In the 2021 periods presented, deposits were higher due to customers maintaining larger balances, as a result of PPP loan proceeds, fiscal stimulus payments and changes in customer spending habits in light of the COVID-19 pandemic.
Total stockholders' equity at September 30, 2022 decreased by $26.3 million compared to June 30, 2022, which reflected an other comprehensive loss of $41.6 million, dividends paid of $10.8 million, and share repurchases of $1.2 million, partially offset by net income for the quarter of $26.0 million. Total stockholders' equity at September 30, 2022 decreased by $84.5 million compared to December 31, 2021, which was due to (i) an other comprehensive loss of $123.3 million, (ii) dividends paid of $31.7 million and (iii) share repurchases of $7.1 million, partially offset by net income of $74.4 million for the first nine months of 2022. The other comprehensive loss in all periods of 2022 was the result of changes in the market value of available-for-sale investment securities, which were driven by changes in market interest rates.
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 21.4% for September 30, 2022, a 23.3% blended corporate income tax rate for June 30, 2022, and 22.3% blended corporate income tax rate for September 30, 2021.
The following table details the calculation of FTE net interest income:
 Three Months EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Net interest income$67,051 $61,468 $42,578 $182,829 $117,816 
Taxable equivalent adjustment387 414 351 1,116 970 
Fully tax-equivalent net interest income$67,438 $61,882 $42,929 $183,945 $118,786 

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The following tables detail Peoples’ average balance sheets for the periods presented:
 For the Three Months Ended
 September 30, 2022June 30, 2022September 30, 2021
(Dollars in thousands)
Average BalanceIncome/ ExpenseYield/CostAverage BalanceIncome/ ExpenseYield/CostAverage BalanceIncome/ ExpenseYield/Cost
Short-term investments $159,522 $847 2.11 %$182,456 $299 0.66 %$199,007 $82 0.16 %
Investment securities (a)(b):   
Taxable1,483,984 7,604 2.05 %1,515,647 7,014 1.85 %979,278 3,799 1.55 %
Nontaxable201,150 1,405 2.79 %193,112 1,344 2.78 %173,459 1,136 2.62 %
Total investment securities1,685,134 9,009 2.13 %1,708,759 8,358 1.96 %1,152,737 4,935 1.71 %
Loans (b)(c):   
Construction222,966 2,765 4.85 %209,822 2,216 4.18 %125,178 1,196 3.74 %
Commercial real estate, other1,300,173 16,593 4.99 %1,353,201 15,599 4.56 %993,259 9,507 3.75 %
Commercial and industrial865,436 11,140 5.04 %864,023 8,715 3.99 %789,555 8,933 4.43 %
Premium finance162,057 1,949 4.71 %143,898 1,778 4.89 %122,828 1,542 4.91 %
Leases307,459 9,628 12.25 %288,360 10,541 14.46 %97,068 4,810 19.39 %
Residential real estate (d)869,444 9,439 4.34 %888,809 9,326 4.20 %652,184 6,648 4.08 %
Home equity lines of credit173,032 2,217 5.08 %167,935 1,748 4.17 %126,888 1,271 3.97 %
Consumer, indirect576,826 5,907 4.06 %541,135 5,243 3.89 %541,329 5,509 4.04 %
Consumer, direct113,609 1,764 6.16 %111,541 1,647 5.92 %86,935 1,385 6.32 %
Total loans4,591,002 61,402 5.26 %4,568,724 56,813 4.94 %3,535,224 40,801 4.55 %
Allowance for credit losses (52,719)(54,148)(51,610)
Net loans4,538,283 61,402 5.33 %4,514,576 56,813 5.00 %3,483,614 40,801 4.61 %
Total earning assets6,382,939 71,258 4.40 %6,405,791 65,470 4.06 %4,835,358 45,818 3.74 %
Goodwill and other intangible assets329,482  329,243 232,361 
Other assets411,687  386,629 407,428 
    Total assets
$7,124,108  $7,121,663 $5,475,147 
Interest-bearing deposits:   
Savings accounts$1,079,580 $139 0.05 %$1,076,028 $45 0.02 %$737,771 $23 0.01 %
Governmental deposit accounts
741,836 543 0.29 %704,632 471 0.27 %542,855 458 0.33 %
Interest-bearing demand accounts
1,158,970 190 0.07 %1,177,751 115 0.04 %795,565 74 0.04 %
Money market accounts623,144 292 0.19 %641,066 104 0.07 %533,497 67 0.05 %
Retail certificates of deposit560,532 644 0.46 %602,225 747 0.50 %457,073 951 0.83 %
Brokered deposits (e)86,524 508 2.33 %87,006 532 2.45 %155,779 826 2.10 %
Total interest-bearing deposits
4,250,586 2,316 0.22 %4,288,708 2,014 0.19 %3,222,540 2,399 0.30 %
Borrowed funds:   
Short-term FHLB advances (e)41,696 266 2.53 %53,846 237 1.77 %17,174 78 1.80 %
Repurchase agreements and other161,069 127 0.32 %96,589 24 0.10 %63,226 13 0.08 %
Total short-term borrowings202,765 393 0.77 %150,435 261 0.70 %80,400 91 0.45 %
Long-term FHLB advances34,727 212 2.42 %58,498 257 1.76 %86,561 316 1.45 %
Other borrowings77,155 899 4.56 %94,097 1,056 4.44 %8,470 83 3.92 %
Total long-term borrowings111,882 1,111 3.97 %152,595 1,313 3.44 %95,031 399 1.67 %
  Total borrowed funds314,647 1,504 1.91 %303,030 1,574 2.08 %175,431 490 1.11 %
      Total interest-bearing liabilities
4,565,233 3,820 0.33 %4,591,738 3,588 0.31 %3,397,971 2,889 0.34 %
Non-interest-bearing deposits1,655,888   1,648,067 1,358,652 
Other liabilities105,128   90,457 90,741 
Total liabilities6,326,249   6,330,262 4,847,364 
Total stockholders’ equity797,859   791,401 627,783 
Total liabilities and stockholders’ equity$7,124,108   $7,121,663 $5,475,147 
Interest rate spread (b) $67,438 4.07 %$61,882 3.75 %$42,929 3.40 %
Net interest margin (b)4.17 %  3.84 %  3.50 %



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 For the Nine Months Ended
 September 30, 2022September 30, 2021
(Dollars in thousands)
Average BalanceIncome/ ExpenseYield/CostAverage BalanceIncome/ ExpenseYield/Cost
Short-term investments$224,060 $1,306 0.78 %$175,755 $175 0.13 %
Investment securities (a)(b):   
Taxable 1,488,609 20,712 1.86 %899,531 9,636 1.43 %
Nontaxable199,515 3,991 2.67 %149,636 3,035 2.70 %
Total investment securities1,688,124 24,703 1.95 %1,049,167 12,671 1.61 %
Loans (b)(c):   
Construction219,478 7,136 4.29 %108,859 3,169 3.84 %
Commercial real estate, other1,338,375 46,974 4.63 %930,150 26,938 3.82 %
Commercial and industrial872,601 27,878 4.21 %872,421 28,773 4.35 %
Premium finance146,345 4,891 4.41 %112,925 4,137 4.83 %
Leases 253,231 26,271 13.68 %61,551 9,025 19.34 %
Residential real estate (d)890,499 28,531 4.27 %624,993 19,749 4.21 %
Home equity lines of credit168,137 5,577 4.43 %122,720 3,638 3.96 %
Consumer, indirect547,438 16,195 3.96 %526,900 16,025 4.07 %
Consumer, direct110,509 5,006 6.06 %82,151 3,896 6.34 %
Total loans4,546,613 168,459 4.91 %3,442,670 115,350 4.44 %
Allowance for credit losses
(56,237)(49,483)
Net loans4,490,376 168,459 4.97 %3,393,187 115,350 4.50 %
Total earning assets6,402,560 194,468 4.03 %4,618,109 128,196 3.68 %
Goodwill and other intangible assets321,043  213,232 
Other assets380,376  360,842 
    Total assets
$7,103,979  $5,192,183 
Interest-bearing deposits:   
Savings accounts$1,068,912 $218 0.03 %$688,782 $79 0.02 %
Governmental deposit accounts
705,891 1,462 0.28 %490,170 1,602 0.44 %
Interest-bearing demand accounts
1,169,284 397 0.05 %743,562 205 0.04 %
Money market accounts638,061 492 0.10 %554,194 294 0.07 %
Retail certificates of deposit
596,335 2,262 0.51 %440,454 3,054 0.93 %
Brokered deposits (e)88,336 1,552 2.35 %166,000 2,559 2.06 %
Total interest-bearing deposits
4,266,819 6,383 0.20 %3,083,162 7,793 0.34 %
Borrowed funds:   
Short-term FHLB advances (e)50,132 816 2.18 %18,773 246 1.75 %
Repurchase agreements and other119,228 176 0.20 %55,100 37 0.09 %
Total short-term borrowings169,360 992 0.78 %73,873 283 0.51 %
Long-term FHLB advances59,440 775 1.74 %96,765 1,099 1.52 %
Repurchase agreement and other borrowings71,689 2,373 4.37 %7,926 235 3.95 %
Total long-term borrowings131,129 3,148 3.20 %104,691 1,334 1.70 %
  Total borrowed funds300,489 4,140 1.83 %178,564 1,617 1.21 %
      Total interest-bearing liabilities
4,567,308 10,523 0.31 %3,261,726 9,410 0.39 %
Non-interest-bearing deposits1,637,053   1,248,330 
Other liabilities91,749   86,209 
Total liabilities6,296,110   4,596,265 
Total stockholders’ equity807,869   595,918 
Total liabilities and stockholders’ equity$7,103,979   $5,192,183 
Interest rate spread (b) $183,945 3.72 %$118,786 3.29 %
Net interest margin (b)3.81 %3.41 %
(a)Average balances are based on carrying value.
(b)Interest income and yields are presented on a fully tax-equivalent basis, using a 21.4% blended corporate income tax rate for September 30, 2022, a 23.3% blended corporate income tax rate for June 30, 2022, and a 22.3% blended corporate income tax rate for September 30, 2021.
(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.

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(e)Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered deposits for the periods presented in which FHLB advances and brokered deposits were being utilized.
Peoples' average balances compared to prior periods have been impacted by recent acquisitions, which included: Vantage on March 7, 2022, which added to average lease and borrowed funds balances, and Premier on September 17, 2021, which added to average short-term investments, average total investment securities, average total loans and average total deposits. Peoples has began to reduce cash balances after previously maintaining high cash balances in recent prior periods due to an influx of deposits, coupled with PPP proceeds.
The following table provides an analysis of the changes in FTE net interest income:
Three Months Ended September 30, 2022 Compared to
Nine Months Ended September 30, 2022 Compared to
(Dollars in thousands)June 30, 2022September 30, 2021September 30, 2021
Increase (decrease) in:RateVolume
Total (a)
RateVolume
Total (a)
RateVolume
Total (a)
INTEREST INCOME:
Short-term investments $871 $(323)$548 $873 $(108)$765 $1,058 $73 $1,131 
Investment Securities (b):
Taxable1,473 (883)590 1,454 2,351 3,805 3,592 7,484 11,076 
Nontaxable12 49 61 79 190 269 (14)970 956 
Total investment income1,485 (834)651 1,533 2,541 4,074 3,578 8,454 12,032 
Loans (b):
   
Construction396 153 549 433 1,136 1,569 409 3,558 3,967 
Commercial real estate, other4,128 (3,134)994 3,679 3,407 7,086 6,524 13,512 20,036 
Commercial and industrial2,413 12 2,425 1,300 907 2,207 (904)9 (895)
Premium finance(366)537 171 (396)803 407 (566)1,320 754 
Leases(4,488)3,575 (913)(11,144)15,962 4,818 (4,884)22,130 17,246 
Residential real estate1,068 (955)113 456 2,335 2,791 279 8,503 8,782 
Home equity lines of credit412 57 469 411 535 946 471 1,468 1,939 
Consumer, indirect271 393 664 36 362 398 (618)788 170 
Consumer, direct80 37 117 (229)608 379 (315)1,425 1,110 
Total loan income3,914 675 4,589 (5,454)26,055 20,601 396 52,713 53,109 
Total interest income$6,270 $(482)$5,788 $(3,048)$28,488 $25,440 $5,032 $61,240 $66,272 
INTEREST EXPENSE:   
Deposits:   
Savings accounts$94 $— $94 $101 $15 $116 $81 $58 $139 
Governmental deposit accounts44 28 72 (331)416 85 (920)780 (140)
Interest-bearing demand accounts86 (11)75 73 43 116 55 137 192 
Money market accounts209 (21)188 212 13 225 149 49 198 
Retail certificates of deposit(56)(47)(103)(1,339)1,032 (307)(2,067)1,275 (792)
Brokered deposits(22)(2)(24)505 (823)(318)505 (1,512)(1,007)
Total deposit cost355 (53)302 (779)696 (83)(2,197)787 (1,410)
Borrowed funds:   
Short-term borrowings380 (248)132 111 191 302 143 566 709 
Long-term borrowings495 (697)(202)756 (44)712 254 1,560 1,814 
Total borrowed funds cost875 (945)(70)867 147 1,014 397 2,126 2,523 
Total interest expense1,230 (998)232 88 843 931 (1,800)2,913 1,113 
Fully tax-equivalent net interest income $5,040 $516 $5,556 $(3,136)$27,645 $24,509 $6,832 $58,327 $65,159 
(a)The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each.
(b)Interest income and yields are presented on a fully tax-equivalent basis using a 21.4% blended corporate income tax rate for September 30, 2022, a 23.3% blended corporate income tax rate for June 30, 2022, and a 22.3% blended corporate income tax rate for September 30, 2021.
Compared to the linked quarter, net interest income increased 9% and net interest margin expanded by 33 basis points. Both increases were primarily driven by 32 basis points of improvement in loan yields and 17 basis points of improvement in investment yields due to the recent increases in market interest rates. Both deposit costs and borrowing costs remained stable.

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Net interest income grew 57% over the prior year quarter and net interest margin increased 67 basis points. The recent acquisitions have positively impacted net interest income, coupled with organic growth and an increase in market interest rates. Compared to the prior year quarter, loan yields grew 71 basis points due to the rising interest rate environment and both acquisitive and organic growth, while borrowing costs increased 80 basis points as a result of the non-recourse debt assumed in the acquisition of Vantage.
For the first nine months of 2022, net interest income and net interest margin grew 55% and 40 basis points, respectively, compared to 2021. During that same time, loan yields increased 47 basis points, which was partially offset by higher borrowing costs. Net interest income has been positively impacted by (i) the Premier Merger and Vantage acquisition, (ii) core growth and (iii) increases in market interest rates.
Peoples recognized interest income on deferred loan fees/costs associated with PPP loans of $0.4 million, $0.6 million and $3.1 million during the third and second quarters of 2022 and the third quarter of 2021, respectively, along with $22,000, $79,000 and $0.4 million of interest earned on PPP loans, during the respective periods. For the first nine months of 2022, interest income recognized on deferred loan fees/costs related to PPP loans was $2.2 million, and interest earned was $0.3 million, compared to $11.2 million and $2.0 million, respectively, for the nine months of 2021. The interest income recognized on PPP loans added 1 basis point, 2 basis points and 18 basis points to net interest margin for the third and second quarters of 2022 and the third quarter of 2021, respectively, while adding 3 basis points and 20 basis points to net interest margin for the first nine months of 2022 and 2021, respectively.
Accretion income, net of amortization expense, from acquisitions was $2.8 million for the third quarter of 2022, $3.9 million for the linked quarter and $1.0 million for the third quarter of 2021, which added 16 basis points, 25 basis points and 8 basis points, respectively, to net interest margin. The decrease in accretion income when compared to the linked quarter was driven by less loan accretion due to lower payoffs and less accretion from the Premier Merger. The increase in accretion income for the current quarter compared to the third quarter of 2021 was a result of the acquisition of Vantage and a full quarter of accretion from the Premier Merger. For the first nine months of 2022, accretion income totaled $9.4 million and added 20 basis points to net interest margin compared to $2.2 million and 6 basis points for the first nine months of 2021, with the increase from the prior year due to the acquired loans and leases from the Premier Merger and 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 EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Provision for (recovery of) other credit losses$1,558 $(1,135)$8,870 $(6,583)$7,125 
Provision for checking account overdraft credit losses218 355 124 772 208 
Provision for (recovery of) credit losses$1,776 $(780)$8,994 $(5,811)$7,333 
As a percentage of average total loans (a)0.15 %(0.07)%1.01 %(0.17)%0.28 %
(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. For the third quarter of 2022, the provision for credit losses was primarily attributable to a deterioration of macro-economic conditions, partially offset by a reduction in reserves for individually analyzed loans.
For the second quarter of 2022, the recovery of credit losses was driven by the reduction in allowance for individually analyzed loans, as well as changes in loss drivers used in the CECL model.
During the third quarter of 2021, Peoples recorded a provision for credit losses of $11.0 million in order to establish an allowance for credit losses for non-purchase credit deteriorated loans of $10.6 million, and a liability for unfunded commitments of $0.4 million, both relating to the Premier Merger. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier. Excluding the day-one allowance for credit losses related to loans acquired from Premier, the release of allowance for credit losses was based on changes in economic factors and loss drivers used in the CECL model.
For the first nine months of 2022, the recovery of credit losses was primarily due to the impact of economic assumptions used in the CECL model. For the first nine months of 2021, the provision of credit losses was due to the day-one allowance for credit losses for the Premier Merger described above.
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 EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Net gain (loss) on investment securities$21 $(44)$(166)$107 $(704)
Net loss on asset disposals and other transactions:
Net gain (loss) on other assets$94 $(119)$(270)$(47)$(429)
Net loss on OREO(105)(33)(32)(138)(24)
Net loss on other transactions (24)— (6)(129)(6)
Net loss on asset disposals and other transactions$(35)$(152)$(308)$(314)$(459)
The net loss on asset disposals and other transactions decreased in the third quarter relative to the linked and prior year quarters. The net loss for the linked quarter was attributable to a $119,000 loss recorded on repossessed assets coupled with a $44,000 loss on the sale of investment securities in order to reinvest into higher-yielding investment securities.
The net loss for the third quarter of 2021 was driven primarily by net losses on the disposal of fixed assets acquired in the Premier Merger and the sale of investment securities during the third quarter of 2021. During the third quarter of 2021, Peoples sold a portion of its available-for-sale investment securities and reinvested the proceeds into higher-yielding investment securities.
For the first nine months of 2021, a net loss on investment securities was recorded due to the sale of investment securities in order to reinvest proceeds into higher-yielding investment securities. During the second quarter of 2021, net loss on other assets was due to a market value write-down of $208,000 related to a closed office that was held for sale. The first nine months of 2021 included a net loss on other assets related to the write-down of a closed office in the second quarter of 2021 and the disposal of fixed assets acquired in the Premier Merger.
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 third quarter of 2022, compared to 24% for the linked quarter and 28% for the prior year quarter. For the first nine months of 2022, total non-interest income, excluding net gains and losses, totaled 25% of total revenues compared to 30% for the same period of 2021. The declines in this ratio compared to the prior periods were primarily due to higher net interest income associated with the recent acquisition of Vantage and the Premier Merger, coupled with the increase in the market interest rate environment.
For the third quarter of 2022, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses. Peoples' electronic banking ("e-banking") services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to clients. The following table details Peoples' e-banking income:
 Three Months EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
E-banking income$5,261 $5,419 $4,326 $15,933 $12,655 
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 decreased compared to the linked quarter primarily due to less customer activity. For the current quarter compared to the prior year quarter and the first nine months of 2022 compared to the first nine months of 2021, e-banking income grew 22% and 26%, respectively, from the impact of the acquired Premier accounts in addition to increased customer activity in recent periods.

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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 EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Fiduciary income$1,752 $1,999 $1,944 $5,716 $5,941 
Brokerage income1,578 1,631 1,577 4,858 4,408 
Employee benefit fees624 616 637 1,902 1,874 
Trust and investment income$3,954 $4,246 $4,158 $12,476 $12,223 
Fiduciary income and brokerage income decreased in the current quarter relative to the linked quarter, due to a decrease in assets under administration and management. For the first nine months of 2022, new accounts drove the growth in trust and investment income when compared to the same period of 2021.
The following table details Peoples' assets under administration and management:
September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2022		September 30,
2021
(Dollars in thousands)
Trust$1,682,334 $1,731,454 $1,927,828 $2,009,871 $1,937,123 
Brokerage
1,127,831 1,068,261 1,152,530 1,183,927 1,133,668 
Total
$2,810,165 $2,799,715 $3,080,358 $3,193,798 $3,070,791 
Quarterly average$2,844,181 $2,927,405 $3,106,021 $3,126,398 $3,077,554 
The declines in assets under administration and management at September 30, 2022, compared to June 30, 2022 and December 31, 2021, were driven by a decrease in market values over the first nine months of 2022 due to the recent economic downturn.
The following table details Peoples' insurance income:
 Three Months EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Property and casualty insurance commissions
$2,958 $3,039 $2,836 $8,859 $8,356 
Performance-based commissions
64 10 59 1,420 2,044 
Life and health insurance commissions
508 506 396 1,464 1,248 
Other fees and charges
88 92 76 252 275 
Insurance income$3,618 $3,647 $3,367 $11,995 $11,923 
Insurance income for the current quarter grew by $0.3 million compared to the third quarter of 2021 due to additional customers.
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 EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Overdraft and non-sufficient funds fees$2,233 $2,019 $1,420 $6,154 $3,429 
Account maintenance fees1,353 1,306 934 3,971 2,598 
Other fees and charges247 233 195 692 551 
Deposit account service charges$3,833 $3,558 $2,549 $10,817 $6,578 
The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity. Management periodically evaluates its cost recovery fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples' markets by competitors. Deposit account service charges increased for the current quarter compared to the linked quarter, and the prior year quarter and for the first nine months of 2022 compared to the first nine months of 2021 due to increased customer activity in recent quarters, compared to the very low levels of early 2021, which had been impacted by fiscal stimulus payments and PPP loan proceeds provided to customers, along with changed customer spending habits due to the COVID-19 pandemic. Also contributing to the increases in the current quarter compared to the prior year quarter and

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the first nine months of 2022 compared to the first nine months of 2021 were the additional customers associated with the Premier Merger.
The following table details the other items included within Peoples' total non-interest income:
 Three Months EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Bank owned life insurance income694 797 437 1,922 1,329 
Mortgage banking income328 352 766 1,116 2,726 
Commercial loan swap fees224 270 73 662 194 
Other non-interest income2,468 1,294 1,144 5,088 2,605 
Bank owned life insurance income for the current quarter was down compared to the linked quarter primarily due to a $248,000 death benefit related to the cash surrender value of the underlying policy in the linked quarter. Partially offsetting the decline, was the fact that Peoples invested an additional $30.0 million in bank owned life insurance policies during the second quarter of 2022. For the first nine months of 2022, the increased bank owned life insurance income when compared to the same period of 2021 was due to the aforementioned death benefit proceeds and additional investment in policies.
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 mostly flat when compared to the linked quarter. Mortgage banking income declined for the current year quarter compared to the prior year quarter and for the first nine months of 2022 compared to the first nine months of 2021 due to the increased market interest rate environment in recent quarters and a lower volume of new loan originations.
In the third quarter of 2022, Peoples sold $4.4 million in loans to the secondary market with servicing retained and $7.6 million in loans with servicing released, compared to $4.6 million and $6.1 million, respectively, for the second quarter of 2022, and $11.0 million and $10.3 million, respectively, for the third quarter of 2021. For the first nine months of 2022, Peoples sold $16.1 million in loans to the secondary market with servicing retained, and $21.6 million with servicing released, compared to $44.0 million and $27.7 million, respectively, for the first nine months of 2021 .
Commercial loan swap fees are largely dependent on timing, interest rates, and the volume of customer activity. During the third quarter of 2022, commercial loan swap fees decreased slightly for the current quarter as a result of several new commercial loan swaps in the linked period. The commercial loan swap fees increased in the current quarter when compared to third quarter of 2021 and for the first nine months of 2022 compared to the first nine months of 2021 primarily due to the recent increases in market interest rates and increased activity.
Other non-interest income for the current quarter increased primarily due to $1.3 million and $1.7 million increases in lease income when compared to the linked quarter and the prior year quarter, respectively, and for the first nine months of 2022 compared to the first nine months of 2021 due to an increase of $2.9 million in lease income.

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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 EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Base salaries and wages$18,762 $18,408 $17,493 $54,846 $43,746 
Sales-based and incentive compensation4,899 4,913 4,013 13,448 12,034 
Employee benefits3,340 3,321 2,619 10,282 8,338 
Payroll taxes and other employment costs1,796 1,389 1,635 5,276 4,471 
Stock-based compensation782 600 618 2,987 2,437 
Deferred personnel costs(961)(1,046)(789)(2,907)(2,750)
Salaries and employee benefit costs$28,618 $27,585 $25,589 $83,932 $68,276 
Full-time equivalent employees:  
Actual at end of period1,244 1,261 1,181 1,244 1,181 
Average during the period1,253 1,255 990 1,106 942 
Base salaries and wages for the current quarter increased compared to the prior year quarter and for the first nine months of 2022 compared to the first nine months of 2021, driven by the additional salaries associated with the acquisition of Vantage, and the Premier Merger.
The increases in sales-based and incentive compensation for the current quarter compared to the linked quarter and third quarter of 2021, and for the first nine months of 2022 compared to the first nine months of 2021 were primarily due to sales incentives earned by Vantage employees.
The increases in employee benefits for the current quarter compared to the third quarter of 2021 and the first nine months of 2021 were due to higher medical costs with the addition of the Premier and Vantage employees.
Payroll taxes and other employment costs increased compared to the second quarter of 2022 and the third quarter of 2021, and for the first nine months of 2022 compared to the first nine months of 2021, in each case primarily driven by recent mergers and acquisitions.
Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years, adjusted for an estimate of the portion of awards that will be forfeited. At the vesting date, an adjustment is made to increase or reverse expense for the amount of actual forfeitures compared to the estimate. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year and are based upon Peoples achieving certain performance goals during the prior year. Stock-based compensation for the first nine months of 2022 increased when compared to the first nine months of 2021 due to employees added in the acquisition of Vantage and the Premier Merger.
Deferred personnel costs represent the portion of current period salaries and employee benefit costs considered to be direct loan origination costs.  These costs are capitalized and recognized over the life of the loan as a yield adjustment in interest income.  As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with the average deferred costs per loan that are updated annually at the beginning of each year. The decrease in deferred personnel costs for the current quarter compared to the linked quarter was primarily due to a decrease in loan origination volume.

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Peoples' net occupancy and equipment expense was comprised of the following:
 Three Months EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Depreciation$1,722 $1,770 $1,365 $5,315 $4,134 
Repairs and maintenance costs1,333 1,245 1,017 3,959 2,863 
Property taxes, utilities and other costs994 997 798 3,190 2,077 
Net rent expense764 756 371 2,205 1,093 
Net occupancy and equipment expense$4,813 $4,768 $3,551 $14,669 $10,167 
For the third quarter and first nine months of 2022, net occupancy and equipment expense increased when compared to the third quarter and the first nine months of 2021, respectively, due to the additional locations and equipment from recent mergers and acquisitions.
The following table details the other items included in total non-interest expense:
 Three Months EndedNine Months Ended
 September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Data processing and software expense3,279 3,033 2,529 9,228 7,394 
Professional fees$2,832 $2,280 $6,426 $8,784 $13,459 
E-banking expense2,648 2,727 2,037 8,134 6,006 
Amortization of other intangible assets2,023 2,034 1,279 5,765 3,267 
Marketing expense1,136 860 1,223 2,991 2,810 
Franchise tax expense1,075 1,102 810 2,941 2,487 
FDIC insurance premiums709 1,018 807 2,921 1,596 
Communication expense599 649 411 1,873 1,079 
Other loan expenses511 445 487 1,788 1,443 
Other non-interest expense4,010 3,398 12,711 10,755 17,762 
Professional fees increased for the current quarter compared to the linked quarter primarily due to increased fees to third parties to assist with process improvements to support the operational teams, partially offset by lower acquisition-related expenses. Professional fees decreased for the third quarter of 2022 when compared to the third quarter of 2021 and for first nine months of 2022 when compared to the first nine months of 2021, primarily driven by acquisition-related expenses related to the Premier Merger which had been realized in 2021.
Data processing and software expense increased relative to prior year periods, driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization.
E-banking expense decreased during the current quarter compared to the linked quarter, and is correlated to e-banking income, which also decreased from the linked quarter primarily due to less customer activity. E-banking expense increased for the third quarter of 2022 when compared to the third quarter of 2021 and for the first nine months of 2022 when compared to the first nine months of 2021 due to growth, both organic and through mergers and acquisitions.
Amortization of other intangible assets for the current quarter increased when compared to the third quarter of 2021 and during the first nine months of 2022 when compared to the first nine months of 2021, due to the increased intangible assets recognized as a result of the recent mergers and acquisitions.
Peoples' FDIC insurance premiums decreased for the current quarter compared to the linked quarter due to an adjustment related to the most recent FDIC invoice. FDIC insurance premiums for the first nine months of 2022 increased compared to the first nine months of 2021 due to organic and acquisitive growth.
Marketing expense increased during the current quarter compared to the linked quarter due to increased advertising and donations. The decrease during the current quarter when compared to the third quarter of 2021 was due to additional advertising campaigns relating to the addition of Premier locations in the third quarter of 2021.
Other loan expenses during the first nine months of 2022 increased when compared to the first nine months of 2021 primarily due to higher indirect lending volume and increased collection expense driven by the Premier Merger.

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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 increases versus the 2021 comparative periods were driven by recent growth through acquisitions and organic means.
Communications expense increased during the first nine months of 2022 when compared to the first nine months of 2021 due to upgraded networking to certain branches (including new branches acquired from Premier coupled with the addition of the NSL and Vantage locations acquired) and increased costs compared to the prior period among certain vendors that provide communication services.
Other non-interest expense increased during the current quarter when compared to the linked quarter due to increased insurance expenses. Other non-interest expense for the third quarter of 2022 and the first nine months of 2022 decreased when compared to their respective 2021 periods primarily due to less acquisition-related expenses.
Income Tax Expense
Peoples recorded income tax expense of $7.4 million with an effective tax rate of 22.2% for the third quarter of 2022, compared to income tax expense of $6.8 million with an effective tax rate of 21.6% for the linked quarter and income tax benefit of $2.2 million with an effective tax rate of 27.4% for the third quarter of 2021. The increase in income tax expense for the third quarter of 2022, compared to income tax expense for the linked quarter, was due to an increase in Peoples' pre-tax income. The increase in income tax expense for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, was driven by net income in the third quarter of 2022 versus a net loss in the same period of 2021.
Peoples recorded income tax expense of $20.2 million with an effective tax rate of 21.4% in the first nine months of 2022 and income tax expense of $4.0 million with an effective tax rate of 16.8% in the first nine months of 2021. The increase was driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states due to recent acquisitions.
Additional information regarding income taxes can be found in "Note 13 Income Taxes" of the Notes to the Consolidated Financial Statements included in Peoples' 2021 Form 10-K.
Pre-Provision Net Revenue (Non-US GAAP)
Pre-provision net revenue ("PPNR") has become a key financial measure used by state and federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus total non-interest income, excluding all gains and losses, minus total non-interest expense. As a result, PPNR represents the earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital. This ratio represents a Non-US GAAP financial measure since it excludes the provision for (recovery of) credit losses and all gains and losses included in earnings.

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The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:    
Three Months EndedNine Months Ended
September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Pre-provision net revenue:
Income (loss) before income taxes$33,388 $31,735 $(7,930)$94,661 $23,807 
Add: provision for credit losses 1,776 — 8,994 1,776 7,333 
Add: loss on OREO105 32 32 138 32 
Add: loss on investment securities — 44 316 44 1,490 
Add: loss on other assets— 120 363 142 687 
Add: loss on other transactions24 — 6 128 6 
Less: gain on OREO— — — — 8 
Less: recovery of credit losses— 780 — 7,587 — 
Less: gain on investment securities21 — 150 151 786 
Less: gain on other assets94 — 93 94 258 
Pre-provision net revenue$35,178 $31,151 $1,538 $89,057 $32,303 
Total average assets$7,124,108$7,121,663$5,475,147$7,103,979$5,192,183
Pre-provision net revenue to total average assets (annualized)1.96 %1.75 %0.11 %1.68 %0.83 %
Weighted-average common shares outstanding - diluted27,973,25528,061,73620,789,27128,009,26319,890,672
Pre-provision net revenue per common share - diluted$1.25 $1.11 $0.07 $3.17 $1.61 
The increase PPNR in the third quarter of 2022 compared to the linked quarter was driven by increased net interest income reflecting the positive impact of recent increases in market interest rates. PPNR grew in the third quarter of 2022 and the first nine months of 2022 when compared to the third quarter of 2021 and the first nine months of 2021, respectively, mostly due to the impact of the Premier Merger and the Vantage and NSL acquisitions in improving net interest income, the recent increases in market interest rates, higher non-interest income, and lower acquisition-related expenses.
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, severance expenses, COVID-19-related expenses, a Peoples Bank Foundation, Inc. contribution and contract negotiation 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 EndedNine Months Ended
September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Core non-interest expense:
Total non-interest expense$52,253 $49,899 $57,860 $153,781 $135,746 
Less: acquisition-related expenses339 602 16,209 2,314 20,520 
Less: pension settlement charges139 — 143 139 143 
Less: severance expenses— — — — 63 
Less: COVID-19-related expenses9 29 181 132 683 
Less: Peoples Bank Foundation, Inc. contribution— — — — 500 
Less: contract negotiation expenses— — 1,851 — 1,851 
Core non-interest expense$51,766 $49,268 $39,476 $151,196 $111,986 

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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.
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 EndedNine Months Ended
September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Efficiency ratio:
Total non-interest expense$52,253 $49,899 $57,860 $153,781 $135,746 
Less: amortization of other intangible assets2,023 2,034 1,279 5,765 3,267 
Adjusted total non-interest expense50,230 47,865 56,581 148,016 132,479 
Total non-interest income20,366 19,386 16,346 59,802 49,070 
Less: net gain (loss) on investment securities21 (44)(166)107 (704)
Less: net loss on asset disposals and other transactions(35)(152)(308)(314)(459)
Total non-interest income excluding net gains and losses20,380 19,582 16,820 60,009 50,233 
Net interest income67,051 61,468 42,578 182,829 117,816 
Add: fully tax-equivalent adjustment (a)387 414 351 1,116 970 
Net interest income on a fully tax-equivalent basis67,438 61,882 42,929 183,945 118,786 
Adjusted revenue$87,818 $81,464 $59,749 $243,954 $169,019 
Efficiency ratio57.20 %58.76 %94.70 %60.67 %78.38 %
Efficiency ratio adjusted for non-core items:
Core non-interest expense$51,766 $49,268 $39,476 $151,196 $111,986 
Less: amortization of other intangible assets2,023 2,034 1,279 5,765 3,267 
Adjusted core non-interest expense49,743 47,234 38,197 145,431 108,719 
Non-interest income excluding net gains and losses20,380 19,582 16,820 60,009 50,233 
Net interest income on a fully tax-equivalent basis67,438 61,882 42,929 183,945 118,786 
Adjusted revenue$87,818 $81,464 $59,749 $243,954 $169,019 
Efficiency ratio adjusted for non-core items56.64 %57.98 %63.93 %59.61 %64.32 %
(a) Tax effect is calculated using a 21.4% blended corporate income tax rate for September 30, 2022, 23.3% blended corporate income tax rate for June 30, 2022, and 22.3% blended corporate income tax rate for September 30, 2021.
The efficiency ratio and the efficiency ratio adjusted for non-core items for the third quarter of 2022 improved when compared to the linked quarter, due to higher net interest income driven by increases in market interest rates. Additionally, for the third quarter of 2022 and the first nine months of 2022 compared to the third quarter of 2021 and the first nine months of 2021, respectively, the efficiency ratio and adjusted efficiency ratio both improved due to improvements in net interest income from the recent acquisitions, coupled with higher non-interest income, outpacing increases in total non-interest expense.
Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)
In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance. The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses, COVID-19-related expenses, a Peoples Bank Foundation, Inc. contribution and contract negotiation expenses.

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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 EndedNine Months Ended
September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Annualized net income (loss) adjusted for non-core items:
Net income (loss)
$25,978 $24,888 $(5,758)$74,443 $19,808 
Add: net loss on investment securities
— 44 166 — 704 
Less: tax effect of net loss on investment securities (a)
— 9 35 — 148 
Less: net gain on investment securities
21 — — 107 — 
Add: tax effect of net gain on investment securities (a)
4 — — 22 — 
Add: net loss on asset disposals and other transactions
35 152 308 314 459 
Less: tax effect of net loss on asset disposals and other transactions (a)
7 32 65 66 96 
Add: acquisition-related expenses
339 602 16,209 2,314 20,520 
Less: tax effect of acquisition-related expenses (a)
71 126 3,404 486 4,309 
Add: pension settlement charges
139 — 143 139 143 
Less: tax effect of pension settlement charges (a)
29 — 30 29 30 
Add: severance expenses— — — — 63 
Less: tax effect of severance expenses (a)— — — — 13 
Add: COVID-19-related expenses9 29 181 132 683 
Less: tax effect of COVID-19-related expenses (a)2 6 38 28 143 
Add: Peoples Bank Foundation, Inc. contribution
— — — — 500 
Less: tax effect of Peoples Bank Foundation, Inc. contribution (a)
— — — — 105 
Add: contract negotiation expenses— — 1,851 — 1,851 
Less: tax effect of contract negotiation expenses (a)— — 389 — 389 
Net income adjusted for non-core items (after tax)
$26,374 25,542 9,139 76,648 39,498 
Days in the period92 91 92 273 273 
Days in the year365 365 365 365 365 
Annualized net income (loss)
$103,065 $99,825 $(22,844)$99,530 $26,483 
Annualized net income adjusted for non-core items (after tax)
$104,636 $102,449 $36,258 $102,478 $52,809 
Return on average assets:
Annualized net income (loss)
$103,065 $99,825 $(22,844)$99,530 $26,483 
Total average assets7,124,108 7,121,663 5,475,147 7,103,979 5,192,183 
Return on average assets
1.45 %1.40 %(0.42)%1.40 %0.51 %
Return on average assets adjusted for non-core items:
Annualized net income adjusted for non-core items (after tax)
$104,636 $102,449 $36,258 $102,478 $52,809 
Total average assets
7,124,108 7,121,663 5,475,147 7,103,979 5,192,183 
Return on average assets adjusted for non-core items
1.47 %1.44 %0.66 %1.44 %1.02 %
(a) Based on a 21% statutory federal corporate income tax rate.
The return on average assets for the current quarter improved when compared to the linked quarter, due to higher net interest income driven by increases in market interest rates. The increases in the return on average assets for the third quarter of 2022, compared to the third quarter of 2021 and for the first nine months of 2022 compared to the first nine months of 2021, were

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attributable to higher net interest income and non-interest income, which were driven by the recent acquisitions and 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 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 EndedNine Months Ended
September 30,
2022		June 30,
2022		September 30,
2021		September 30,
(Dollars in thousands)20222021
Annualized net income (loss) excluding amortization of other intangible assets:
Net income (loss)
$25,978 $24,888 $(5,758)$74,443 $19,808 
Add: amortization of other intangible assets
2,023 2,034 1,279 5,765 3,267 
Less: tax effect of amortization of other intangible assets (a)
425 427 269 1,211 686 
Net income (loss) excluding amortization of other intangible assets
$27,576 $26,495 $(4,748)$78,997 $22,389 
Days in the period
92 91 92 273 273 
Days in the year
365 365 365 365 365 
Annualized net income (loss)
$103,065 $99,825 $(22,844)$99,530 $26,483 
Annualized net income (loss) excluding amortization of other intangible assets
$109,405 $106,271 $(18,837)$105,619 $29,934 
Average tangible equity:
Total average stockholders' equity
$797,859 $791,401 $627,783 $807,869 $595,918 
Less: average goodwill and other intangible assets
329,482 329,243 232,361 321,043 213,232 
Average tangible equity
$468,377 $462,158 $395,422 $486,826 $382,686 
Return on total average stockholders' equity ratio:
Annualized net income
$103,065 $99,825 $(22,844)$99,530 $26,483 
Total average stockholders' equity
$797,859 $791,401 $627,783 $807,869 $595,918 
Return on total average stockholders' equity
12.92 %12.61 %(3.64)%12.32 %4.44 %
Return on average tangible equity ratio:
Annualized net income (loss) excluding amortization of other intangible assets
$109,405 $106,271 $(18,837)$105,619 $29,934 
Average tangible equity
$468,377 $462,158 $395,422 $486,826 $382,686 
Return on average tangible equity
23.36 %22.99 %(4.76)%21.70 %7.82 %
(a) Based on a 21% statutory federal corporate income tax rate.
The return on total average stockholders' equity and average tangible equity ratios were higher in the current quarter and the first nine months of 2022 relative to all prior periods, due to higher total net interest income driven by the recent increases in market interest rates and loans and leases added in the Premier Merger and acquisitions of Vantage and NSL, coupled with higher non-interest income. At the same time, the average tangible equity was negatively impacted by the Vantage acquisition, for which People did not issue any equity, and recorded additional goodwill and other intangible assets.


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FINANCIAL CONDITION
Cash and Cash Equivalents
At September 30, 2022, Peoples' interest-bearing deposits in other banks had decreased $290.1 million from December 31, 2021. Peoples paid $82.9 million in cash for the Vantage acquisition during the first quarter of 2022. The total cash and cash equivalents balance included $36.0 million of excess cash reserves being maintained at the FRB of Cleveland at September 30, 2022, compared to $318.1 million at December 31, 2021. The amount of excess cash reserves maintained is dependent upon Peoples' daily liquidity position, which is driven primarily by changes in deposit and loan balances.
Through the first nine months of 2022, Peoples' total cash and cash equivalents decreased $270.5 million as Peoples had $201.6 million and $171.5 million of cash used in investing activities and financing activities, respectively, partially offset by cash provided by operating activities of $102.5 million. Peoples' cash used in investing activities reflected (i) cash outflows for business combinations of $85.8 million, (ii) net cash outflows from available-for-sale investment securities of $74.1 million, (iii) net cash outflows from held-to-maturity investment securities of $35.0 million, and (iv) purchases of bank owned life insurance of $30.0 million, partially offset by cash inflows from a $36.2 million net decrease in loans held for investment. The cash used in financing activities was largely driven by cash outflows from (i) payments on long-term borrowings of $116.4 million, (ii) a net decrease in short-term borrowings of $37.9 million and (iii) cash dividends paid of $31.7 million, partially offset by cash inflows from proceeds on long-term borrowings of $19.0 million.
Further information regarding the management of Peoples' liquidity position can be found later in this discussion under “Interest Rate Sensitivity and Liquidity.”
Investment Securities
The following table provides information regarding Peoples’ investment portfolio:
(Dollars in thousands)Weighted Average YieldSeptember 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Available-for-sale securities, at fair value:    
Obligations of:     
U.S. Treasury and government agencies
2.79 %$172,055 $175,255 $167,406 $35,604 $— 
U.S. government sponsored agencies1.47 %80,915 82,465 80,654 81,739 78,481 
States and political subdivisions2.74 %230,022 249,402 231,644 259,319 252,919 
Residential mortgage-backed securities1.77 %624,061 691,735 753,353 828,517 898,459 
Commercial mortgage-backed securities1.79 %52,504 58,301 58,112 63,519 62,552 
Bank-issued trust preferred securities3.29 %10,287 10,440 10,670 6,795 4,679 
Total fair value$1,169,844 $1,267,598 $1,301,839 $1,275,493 $1,297,090 
Total amortized cost$1,349,800 $1,389,621 $1,381,259 $1,283,146 $1,294,654 
Net unrealized (loss) gain $(179,956)$(122,023)$(79,420)$(7,653)$2,436 
Held-to-maturity securities, at amortized cost:
Obligations of:
U.S. government sponsored agencies2.12 %$59,871 $50,990 $38,486 $36,431 $29,995 
States and political subdivisions (a)2.34 %145,252 151,034 151,217 151,402 124,181 
Residential mortgage-backed securities1.84 %111,707 112,095 115,613 110,708 41,035 
Commercial mortgage-backed securities2.02 %90,971 86,601 79,340 75,588 47,889 
Total amortized cost$407,801 $400,720 $384,656 $374,129 $243,100 
Other investment securities$39,039 $41,655 $41,840 $33,987 $34,486 
Total investment securities:
Amortized cost$1,796,640 $1,831,996 $1,807,755 $1,691,262 $1,572,240 
Carrying value$1,616,684 $1,709,973 $1,728,335 $1,683,609 $1,574,676 
(a)Amortized cost is presented net of the allowance for credit losses of $238 at September 30, 2022, $286 at December 31, 2021 and $236 at September 30, 2021.
For the first quarter of 2022, total investment securities increased compared to the prior quarter, largely due to investments made in U.S. Treasury and government agencies' obligations, in an effort to deploy cash, improve investment yields and reduce risk, partially offset by the reduction in market value of available-for-sale securities driven by the recent increases in market interest rates.

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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)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Originated loans:
     
Construction
$175,388 $144,062 $171,934 $137,437 $108,334 
Commercial real estate, other
891,576 899,774 854,721 861,610 838,333 
     Commercial real estate
1,066,964 1,043,836 1,026,655 999,047 946,667 
Commercial and industrial
814,593 777,050 791,307 779,064 715,169 
Premium finance167,682 152,237 145,813 136,121 134,755 
Leases178,083 149,894 97,168 69,169 49,464 
Residential real estate
381,104 373,010 364,989 350,595 334,838 
Home equity lines of credit
124,524 115,935 107,414 104,176 98,806 
Consumer, indirect
592,309 563,088 524,778 530,532 543,243 
Consumer, direct
99,282 95,371 87,994 81,330 80,746 
    Consumer
691,591 658,459 612,772 611,862 623,989 
Deposit account overdrafts
597 851 699 756 927 
Total originated loans
$3,425,138 $3,271,272 $3,146,817 $3,050,790 $2,904,615 
Acquired loans (a):
Construction
$40,233 $58,526 $66,371 $72,795 $66,450 
Commercial real estate, other
531,903 560,249 602,511 688,471 790,783 
     Commercial real estate
572,136 618,775 668,882 761,266 857,233 
Commercial and industrial
62,879 81,402 95,844 112,328 143,369 
Premium finance— — — 15 — 
Leases134,764 164,628 169,900 53,339 61,982 
Residential real estate
352,257 369,995 391,440 421,123 433,296 
Home equity lines of credit
50,001 53,400 54,874 59,417 62,564 
Consumer, indirect
— — — — 13 
Consumer, direct
14,032 16,433 19,396 23,322 27,956 
    Consumer
14,032 16,433 19,396 23,322 27,969 
Total acquired loans
$1,186,069 $1,304,633 $1,400,336 $1,430,810 $1,586,413 
Total loans
$4,611,207 $4,575,905 $4,547,153 $4,481,600 $4,491,028 
Percent of loans to total loans:
 
Construction
4.7 %4.4 %5.2 %4.7 %3.9 %
Commercial real estate, other
30.9 %32.0 %32.1 %34.7 %36.3 %
     Commercial real estate
35.6 %36.4 %37.3 %39.4 %40.2 %
Commercial and industrial
19.0 %18.8 %19.5 %19.9 %19.1 %
Premium finance3.6 %3.3 %3.2 %3.0 %3.0 %
Leases6.8 %6.9 %5.9 %2.7 %2.5 %
Residential real estate
15.9 %16.2 %16.6 %17.2 %17.1 %
Home equity lines of credit
3.8 %3.7 %3.6 %3.7 %3.6 %
Consumer, indirect
12.8 %12.3 %11.5 %11.8 %12.1 %
Consumer, direct
2.5 %2.4 %2.4 %2.3 %2.4 %
    Consumer
15.3 %14.7 %13.9 %14.1 %14.5 %
Total percentage
100.0 %100.0 %100.0 %100.0 %100.0 %
Residential real estate loans being serviced for others
$400,736 $410,007 $420,024 $430,597 $441,085 
(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 September 30, 2022 increased $35.3 million compared to June 30, 2022. The increase in the period-end loan and lease balances was primarily driven by increases of (i) $29.2 million in consumer indirect loans, (ii) $19.0 million in commercial and industrial loans, (iii) $15.4 million in premium finance loans and (iv) $13.0 million in construction loans, partially offset by a reduction in other commercial real estate loans of $36.5 million. The acquired loan decrease was driven by pay-offs of

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commercial real estate and commercial and industrial loans acquired in the Premier Merger. The increase of $129.6 million in the period-end loan and lease balances when compared to December 31, 2021 was primarily driven by $154.9 million of leases acquired from Vantage and an increase of $61.8 million in indirect consumer loans, partially offset by a reduction of $126.6 million in other commercial real estate loans. The increase of $120.2 million in the period-end loan and lease balances when compared to September 30, 2021 was driven by increases of (i) $201.4 million in leases, primarily due to the leases acquired from Vantage and growth from the North Star Leasing division, (ii) $49.1 million in indirect consumer loans and (iii) $40.8 million in construction loans, partially offset by a reduction of $205.6 million in other commercial real estate loans.
Loan Concentration
Peoples categorizes its commercial loans according to standard industry classifications and monitors for concentrations in a single industry or multiple industries that could be impacted by changes in economic conditions in a similar manner. Peoples' commercial lending activities continue to be spread over a diverse range of businesses from all sectors of the economy, with no single industry comprising over 10% of Peoples' total loan portfolio.
Loans secured by commercial real estate, including commercial construction loans, continued to comprise the largest portion of Peoples' loan portfolio. The following tables provide information regarding the largest concentrations of commercial construction loans and commercial real estate loans within the loan portfolio at September 30, 2022:
(Dollars in thousands)Outstanding BalanceLoan CommitmentsTotal Exposure% of Total
Construction:    
Apartment complexes$84,808 $116,756 $201,564 41.9 %
Mixed-use facilities29,776 13,881 43,657 9.1 %
Assisted living facilities and nursing homes21,364 12,449 33,813 7.0 %
Land only12,644 16,864 29,508 6.1 %
Office buildings and complexes10,728 8,546 19,274 4.0 %
Industrial7,553 5,525 13,078 2.7 %
Education Services7,355 2,826 10,181 2.1 %
Other (a)41,393 88,760 130,153 27.1 %
Total construction$215,621 $265,607 $481,228 100.0 %
(a) All other total exposures by industry are less than 2% of the Total Exposure.

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(Dollars in thousands)Outstanding BalanceLoan CommitmentsTotal Exposure% of Total
Commercial real estate, other:    
Office buildings and complexes:  
Owner occupied$74,674 $2,508 $77,182 5.2 %
Non-owner occupied81,492 3,973 85,465 5.8 %
Total office buildings and complexes156,166 6,481 162,647 11.0 %
Retail facilities:
Owner occupied42,985 730 43,715 3.0 %
Non-owner occupied126,910 2,126 129,036 8.8 %
Total retail facilities169,895 2,856 172,751 11.8 %
Mixed-use facilities:
Owner occupied57,598 232 57,830 3.9 %
Non-owner occupied57,577 761 58,338 4.0 %
Total mixed-use facilities115,175 993 116,168 7.9 %
Apartment complexes91,766 2,257 94,023 6.4 %
Light industrial facilities: 
Owner occupied103,689 1,730 105,419 7.2 %
Non-owner occupied38,917 3,261 42,178 2.8 %
Total light industrial facilities142,606 4,991 147,597 10.0 %
Assisted living facilities and nursing homes53,757 250 54,007 3.7 %
Warehouse facilities:
Owner occupied35,924 1,852 37,776 2.5 %
Non-owner occupied28,561 211 28,772 2.0 %
Total warehouse facilities64,485 2,063 66,548 4.5 %
Lodging and lodging related:
Owner occupied14,298 1,690 15,988 1.1 %
Non-owner occupied88,942 430 89,372 6.0 %
Total lodging and lodging related103,240 2,120 105,360 7.1 %
Education services:
Owner occupied17,465 98 17,563 1.2 %
Non-owner occupied21,952 4,000 25,952 1.8 %
Total education services39,417 4,098 43,515 3.0 %
Healthcare facilities:
Owner occupied23,670 559 24,229 1.6 %
Non-owner occupied10,269 — 10,269 0.7 %
Total healthcare facilities33,939 559 34,498 2.3 %
Restaurant/bar facilities:
Owner occupied21,943 50 21,993 1.5 %
Non-owner occupied11,007 298 11,305 0.8 %
Total restaurant/bar facilities32,950 348 33,298 2.3 %
Other (a)420,083 22,117 442,200 30.0 %
Total commercial real estate, other$1,423,479 $49,133 $1,472,612 100.0 %
(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 September 30, 2022 and December 31, 2021. The repayment of premium finance loans are secured by the underlying insurance policy prepaid premium, and therefore, have no geographical impact from a repayment perspective. The repayment of leases is secured by the underlying equipment collateral and not real estate, which mitigates geographic risk.
Small Business Administration Paycheck Protection Program
In March 2020, the CARES Act created the PPP targeted to provide small businesses with support to cover payroll and certain other specified expenses. Loans made under the PPP are fully guaranteed by the SBA. The PPP loans also afford borrowers forgiveness up to the principal amount of the PPP covered loan, plus accrued interest, if the loan proceeds are used to retain workers and maintain payroll and/or to make certain mortgage interest, lease and utility payments, and certain other criteria are satisfied. The

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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 millions)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
PPP aggregate outstanding principal balances$3.8 $15.2 $42.9 $89.3 $139.8 
PPP net deferred loan origination fees0.1 0.4 1.0 2.2 4.0 
Accretion of net deferred loan origination fees0.4 0.6 1.2 1.8 3.1 
Allowance for Credit Losses
The amount of the allowance for credit losses at the end of each period represents management's estimate of expected losses from existing loans based upon its quarterly analysis of the loan portfolio. While this process involves allocations being made to specific loans and pools of loans, the entire allowance is available for all losses expected within the loan portfolio.
The following details management's allocation of the allowance for credit losses:
(Dollars in thousands)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Construction$1,464 $1,531 $2,731 $2,999 $3,436 
Commercial real estate, other17,695 18,708 21,055 29,147 35,816 
Commercial and industrial8,611 8,572 10,114 11,063 13,378 
Premium finance553 311 345 379 1,137 
Leases7,890 7,585 5,875 4,797 4,505 
Residential real estate6,464 6,332 6,495 7,233 9,568 
Home equity lines of credit1,644 1,699 1,894 2,005 2,224 
Consumer, indirect6,912 6,234 5,172 5,326 6,160 
Consumer, direct1,592 1,321 1,036 961 1,079 
Deposit account overdrafts41 53 51 57 79 
Allowance for credit losses$52,866 $52,346 $54,768 $63,967 $77,382 
As a percent of total loans1.15 %1.14 %1.20 %1.43 %1.72 %
The increase in the allowance for credit losses at September 30, 2022 compared to June 30, 2022, was largely attributable to the deterioration of macro-economic conditions, partially offset by a reduction in reserves for individually analyzed loans. The reduction in the allowance for credit losses at September 30, 2022 compared to December 31, 2021 was due to improvements in economic forecasts and loss drivers, along with reductions in loan balances from acquired loans due to pay-offs during the quarter. Peoples recorded $0.8 million of provision for credit losses to establish the allowance for credit losses for non-purchase credit deteriorated leases acquired from Vantage.
The higher allowance for credit losses at September 30, 2021 when compared to all other comparative periods was related to the provision for credit losses recorded in the amount of $11.0 million in order to establish an allowance for credit losses for non-purchased credit deteriorated loans of $10.6 million, and a liability for unfunded commitments of $0.4 million, both relating to the Premier Merger. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchased credit deteriorated loans acquired from Premier.
Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2021 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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The following table summarizes Peoples’ net charge-offs and recoveries:
Three Months Ended
(Dollars in thousands)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Gross charge-offs:  
Commercial real estate, other$57 $22 $278 $226 $— 
Commercial and industrial36 420 463 105 654 
Premium finance38 30 14 15 7 
Leases731 493 473 478 431 
Residential real estate168 47 309 72 44 
Home equity lines of credit5 25 16 1 180 
Consumer, indirect600 449 385 566 416 
Consumer, direct81 60 136 56 29 
    Consumer681 509 521 622 445 
Deposit account overdrafts274 405 259 248 135 
Total gross charge-offs$1,990 $1,951 $2,333 $1,767 $1,896 
Recoveries: 
Commercial real estate, other$39 $176 $49 $196 $4 
Commercial and industrial3 2 4 4 4 
Premium finance1 8 — — — 
Leases99 64 176 109 120 
Residential real estate36 14 14 40 48 
Home equity lines of credit— — 29 — 37 
Consumer, indirect71 83 86 42 43 
Consumer, direct9 11 11 58 17 
    Consumer80 94 97 100 60 
Deposit account overdrafts44 52 54 42 37 
Total recoveries$302 $410 $423 $491 $310 
Net charge-offs (recoveries): 
Commercial real estate, other$18 $(154)$229 $30 $(4)
Commercial and industrial33 418 459 101 650 
Premium finance37 22 14 15 7 
Leases632 429 297 369 311 
Residential real estate132 33 295 32 (4)
Home equity lines of credit5 25 (13)1 143 
Consumer, indirect529 366 299 524 373 
Consumer, direct72 49 125 (2)12 
    Consumer601 415 424 522 385 
Deposit account overdrafts230 353 205 206 98 
Total net charge-offs $1,688 $1,541 $1,910 $1,276 $1,586 
Ratio of net charge-offs to average total loans (annualized):
Commercial real estate, other— %(0.01)%0.02 %— %— %
Commercial and industrial— %0.04 %0.03 %0.01 %0.08 %
Leases0.06 %0.04 %0.03 %0.03 %0.03 %
Residential real estate0.01 %— %0.03 %— %— %
Home equity lines of credit— %— %— %— %0.02 %
Consumer, indirect0.05 %0.03 %0.03 %0.05 %0.04 %
Consumer, direct0.01 %0.01 %0.01 %— %— %
    Consumer0.06 %0.04 %0.04 %0.05 %0.04 %
Deposit account overdrafts0.02 %0.03 %0.02 %0.02 %0.01 %
Total0.15 %0.14 %0.17 %0.11 %0.18 %
Each with "--%" not meaningful.
Net charge-offs during the third quarter of 2022 were 0.15% of average total loans on an annualized basis. Peoples has anticipated an increase in the net charge-offs to average total loans, as recent periods have been below historical levels. The increase for the current quarter when compared to the linked quarter was driven by higher charge-offs on leases, consumer loans, and other

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commercial real estate loans, substantially offset by less charge-offs on commercial and industrial loans and deposit account overdrafts. The decrease in net charge-offs during the current quarter versus the prior year quarter was primarily attributable to one commercial and industrial loan charge-off of $500,000 during the third quarter of 2021.
The following table details Peoples’ nonperforming assets: 
(Dollars in thousands)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Loans 90+ days past due and accruing:     
Construction$— $— $— $90 $— 
Commercial real estate, other1,472 330 603 689 1,912 
Commercial and industrial266 89 53 1,139 98 
Premium finance308 304 613 865 368 
Leases4,654 5,722 3,921 — 1,736 
Residential real estate1,499 1,687 677 805 1,156 
Home equity lines of credit23 89 75 50 61 
Consumer, indirect195 15 17 — — 
Consumer, direct7 — — 85 32 
   Consumer202 15 17 85 32 
Total loans 90+ days past due and accruing$8,424 $8,236 $5,959 $3,723 $5,363 
Nonaccrual loans: 
Construction$2 $5 $6 $6 $— 
Commercial real estate, other9,513 11,795 14,745 16,849 17,207 
Commercial and industrial2,055 1,748 2,394 2,505 4,133 
Leases2,094 1,573 1,731 1,581 1,411 
Residential real estate7,113 7,463 7,459 8,016 8,046 
Home equity lines of credit615 567 604 687 661 
Consumer, indirect1,455 1,351 1,408 1,302 850 
Consumer, direct158 166 231 273 177 
   Consumer1,613 1,517 1,639 1,575 1,027 
Total nonaccrual loans$23,005 $24,668 $28,578 $31,219 $32,485 
Nonaccrual troubled debt restructurings ("TDRs"):
Commercial real estate, other$2,403 $2,458 $197 $218 $94 
Commercial and industrial330 101 999 1,067 1,223 
Residential real estate1,615 1,731 1,676 1,631 1,689 
Home equity lines of credit306 323 333 352 315 
Consumer, indirect172 207 220 272 219 
Consumer, direct— — — 6 9 
   Consumer172 207 220 278 228 
Total nonaccrual TDRs$4,826 $4,820 $3,425 $3,546 $3,549 
Total nonperforming loans ("NPLs")$36,255 $37,724 $37,962 $38,488 $41,397 
OREO: 
Commercial$8,730 $9,065 $9,106 $9,105 $10,804 
Residential110 145 301 391 464 
Total OREO$8,840 $9,210 $9,407 $9,496 $11,268 
Total nonperforming assets ("NPAs")$45,095 $46,934 $47,369 $47,984 $52,665 
Criticized loans (a)$164,775 $181,395 $190,315 $194,016 $234,845 
Classified loans (b)94,848 115,483 109,530 106,547 142,628 

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(Dollars in thousands)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Asset Quality Ratios (c):
Nonaccrual loans as a percent of total loans (d)0.60 %0.64 %0.70 %0.78 %0.80 %
NPLs as a percent of total loans (d)0.79 %0.82 %0.83 %0.86 %0.92 %
NPAs as a percent of total assets (d)0.64 %0.64 %0.65 %0.68 %0.75 %
NPAs as a percent of total loans and OREO (d)0.98 %1.02 %1.04 %1.07 %1.17 %
Allowance for credit losses as a percent of nonaccrual loans189.95 %177.52 %171.13 %184.00 %214.75 %
Allowance for credit losses as a percent of NPLs (d)145.82 %138.76 %144.27 %166.20 %186.93 %
Criticized loans as a percent of total loans (a)3.57 %3.96 %4.19 %4.33 %5.23 %
Classified loans as a percent of total loans (b)2.06 %2.52 %2.41 %2.38 %3.18 %
(a)    Includes loans categorized as special mention, substandard or doubtful.
(b)    Includes loans categorized as substandard or doubtful.
(c)    Data presented as of the end of the period indicated.
(d)    Nonperforming loans ("NPL") include loans 90+ days past due and accruing, TDRs and nonaccrual loans. Nonperforming assets ("NPA") include nonperforming loans and OREO.
Compared to June 30, 2022, Peoples' NPAs remained at 0.64% of total assets. Loans 90+ days past due and accruing increased compared to December 31, 2021, mostly due to the Vantage acquisition. During the third quarter of 2022, criticized loans declined $16.6 million, while classified loans declined $20.6 million when compared to the linked quarter. The third quarter of 2021 was impacted by NPAs, criticized loans and classified loans acquired in the Premier Merger.
On March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19. In this guidance, short-term modifications, made on a good faith basis in response to COVID-19, to borrowers who were current prior to any relief, are not considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment which are insignificant. Under the guidance, borrowers that are considered to be current are those that were less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not TDRs within the scope of ASC 310-40.
On August 3, 2020, federal and state banking regulators issued a joint statement, encouraging financial institutions to consider prudent accommodation options to mitigate losses for the borrower and financial institution beyond the initial accommodation period. In this guidance, institutions should also provide consumers with available options for repaying missed payments at the end of their accommodation to avoid delinquencies, as well as options for changes to terms to support sustainable and affordable payments for the long term. These considerations should also include prudent risk management practices at the financial institution based on the credit risk of the borrower. Peoples is actively working with its customers to address any further accommodation needs while carefully evaluating the associated credit risk of the borrowers.
Deposits
The following table details Peoples’ deposit balances:
(Dollars in thousands)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Non-interest-bearing deposits (a)$1,635,953 $1,661,865 $1,666,668 $1,641,422 $1,559,993 
Interest-bearing deposits: 
Interest-bearing demand accounts (a)1,162,012 1,143,010 1,179,199 1,167,460 1,140,639 
Savings accounts1,077,383 1,080,053 1,065,678 1,036,738 1,016,755 
Retail certificates of deposit ("CDs") 544,741 584,259 612,936 643,759 691,680 
Money market deposit accounts624,708 645,242 656,266 651,169 637,635 
Governmental deposit accounts734,734 728,057 734,784 617,259 679,305 
Brokered deposits86,089 86,739 87,395 104,745 106,013 
Total interest-bearing deposits4,229,667 4,267,360 4,336,258 4,221,130 4,272,027 
  Total deposits$5,865,620 $5,929,225 $6,002,926 $5,862,552 $5,832,020 
Demand deposits as a percent of total deposits48 %47 %47 %48 %46 %
(a)The sum of amounts presented is considered total demand deposits.

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At September 30, 2022, period-end deposits decreased $63.6 million, or 1%, compared to June 30, 2022, and increased $33.6 million, or 1%, compared to September 30, 2021. The decrease when compared to the linked period was primarily driven by a reduction of (i) $39.5 million in retail certificates of deposits, (ii) $20.5 million in money market deposits, and (iii) $25.9 million in non-interest bearing checking accounts. Total deposits in periods presented through March 31, 2022, were higher due to customers maintaining larger balances, as a result of PPP loan proceeds, fiscal stimulus payments and changes in customer spending habits in light of the COVID-19 pandemic. In quarterly periods prior to June 30, 2022, Peoples experienced increases in most low-cost deposit categories.
As part of its funding strategy, Peoples hedges 90-day brokered deposits with interest rate swaps. The swaps pay a fixed rate of interest while receiving three-month LIBOR, which offsets the rate on the brokered deposits. As of September 30, 2022, Peoples had thirteen effective interest rate swaps, with an aggregate notional value of $125.0 million, of which $85.0 million were designated as cash flow hedges of overnight brokered deposits, which are expected to be extended every 90 days through the maturity dates of the swaps. The remaining $40.0 million of interest rate swaps hedged 90-day FHLB advances, which are also expected to be extended every 90 days through the maturity dates of the swaps. Peoples continually evaluates the overall balance sheet position given the interest rate environment.
Borrowed Funds
The following table details Peoples’ short-term and long-term borrowings:
(Dollars in thousands)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Short-term borrowings:
     
FHLB 90-day advances
$40,000 $40,000 $40,000 $40,000 $50,000 
Current portion of long-term FHLB advances
— — 15,000 15,000 15,000 
Retail repurchase agreements
98,611 286,442 89,275 111,482 119,693 
Total short-term borrowings
$133,611 $326,442 $144,275 $166,482 $184,693 
Long-term borrowings:
 
FHLB advances
$34,662 $35,348 $85,564 $85,825 $86,483 
Vantage non-recourse debt
55,781 74,622 102,364 — — 
Junior subordinated debt securities
13,753 13,717 13,682 13,650 12,928 
Total long-term borrowings
$104,196 $123,687 $201,610 $99,475 $99,411 
Total borrowed funds
$237,807 $450,129 $345,885 $265,957 $284,104 
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 June 30, 2022, due to a large individual customer deposit during the period ended June 30, 2022, thereby increasing retail repurchase agreements at June 30, 2022.
Capital/Stockholders’ Equity
At September 30, 2022, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations. These higher capital levels reflect Peoples' desire to maintain a strong capital position. In order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer of 2.50%, which applies to the common equity tier 1 ("CET1") ratio, the tier 1 capital ratio and the total risk-based capital ratio. At September 30, 2022, Peoples had a capital conservation buffer of 4.98%.

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The following table details Peoples' risk-based capital levels and corresponding ratios:
(Dollars in thousands)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Capital Amounts:     
Common Equity Tier 1$584,880 $564,708 $547,215 $577,565 $567,172 
Tier 1598,633 578,425 560,897 591,215 580,100 
Total (Tier 1 and Tier 2)643,189 622,516 607,493 648,948 637,802 
Net risk-weighted assets$4,955,627 $4,857,818 $4,752,428 $4,614,258 $4,611,321 
Capital Ratios:
Common Equity Tier 111.80 %11.62 %11.51 %12.52 %12.30 %
Tier 112.08 %11.91 %11.80 %12.81 %12.58 %
Total (Tier 1 and Tier 2)12.98 %12.81 %12.78 %14.06 %13.83 %
Tier 1 leverage ratio8.64 %8.38 %8.29 %8.67 %11.20 %
Peoples' regulatory capital and related ratio levels improved during the third quarter of 2022 when compared to the linked quarter driven by higher net interest income. The ratios were negatively impacted at March 31, 2022 by the cash acquisition of Vantage, for which Peoples recorded goodwill and intangible assets. The impact of the Vantage acquisition 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, 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)September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Tangible equity:     
Total stockholders' equity
$760,511 $786,824 $808,340 $845,025 $831,882 
Less: goodwill and other intangible assets
328,428 328,132 341,865 291,009 295,415 
Tangible equity
$432,083 $458,692 $466,475 $554,016 $536,467 
Tangible assets:
 
Total assets
$7,005,854 $7,278,292 $7,239,261 $7,063,521 $7,059,752 
Less: goodwill and other intangible assets
328,428 328,132 341,865 291,009 295,415 
Tangible assets
$6,677,426 $6,950,160 $6,897,396 $6,772,512 $6,764,337 
Tangible book value per common share:    
Tangible equity
$432,083 $458,692 $466,475 $554,016 $536,467 
Common shares outstanding
28,278,078 28,290,115 28,453,175 28,297,771 28,265,791 
Tangible book value per common share
$15.28 $16.21 $16.39 $19.58 $18.98 
Tangible equity to tangible assets ratio:
Tangible equity
$432,083 $458,692 $466,475 $554,016 $536,467 
Tangible assets
$6,677,426 $6,950,160 $6,897,396 $6,772,512 $6,764,337 
Tangible equity to tangible assets
6.47 %6.60 %6.76 %8.18 %7.93 %
Tangible book value per common share declined to $15.28 at September 30, 2022, compared to $16.21 at June 30, 2022. The change in tangible book value per common share was due to tangible equity declining during the three months ended September 30, 2022 as a result of other comprehensive losses recognized on available-for-sale investment securities, which were driven by changes in market interest rates. Also contributing to the declines in tangible book value per common share when compared to December 31, 2021 and September 30, 2021, were $123.3 million and $129.0 million increases in accumulated other comprehensive losses,

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respectively. The other comprehensive losses were the result of the changes in the market value of available-for-sale investment securities, which were driven by changes in market interest rates.
Interest Rate Sensitivity and Liquidity
While Peoples is exposed to various business risks, the risks relating to interest rate sensitivity and liquidity are major risks that can materially impact future results of operations and financial condition due to their complexity and dynamic nature. The objective of Peoples' asset-liability management function is to measure and manage these risks in order to optimize net interest income within the constraints of prudent capital adequacy, liquidity and safety. This objective requires Peoples to focus on interest rate risk exposure and adequate liquidity through its management of the mix of assets and liabilities, their related cash flows and the rates earned and paid on those assets and liabilities. Ultimately, the asset-liability management function is intended to guide management in the acquisition and disposition of earning assets and selection of appropriate funding sources.
Interest Rate Risk
Interest rate risk ("IRR") is one of the most significant risks arising in the normal course of business of financial services companies like Peoples. IRR is the potential for economic loss due to future interest rate changes that can impact the earnings stream, as well as market values, of financial assets and liabilities. Peoples' exposure to IRR is due primarily to differences in the maturity or repricing of earning assets and interest-bearing liabilities. In addition, other factors, such as prepayments of loans and investment securities, or early withdrawal of deposits, can affect Peoples' exposure to IRR and increase interest costs or reduce revenue streams.
Peoples has assigned overall management of IRR to its Asset-Liability Committee (the “ALCO”), which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level of IRR. The methods used by the ALCO to assess IRR remain largely unchanged from those disclosed in Peoples' 2021 Form 10-K.
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)September 30, 2022December 31, 2021September 30, 2022December 31, 2021
300$21,345 7.6 %$24,903 11.7 %$(37,180)(2.5)%$(24,232)(2.0)%
20014,165 5.0 %16,312 7.7 %(25,394)(1.7)%(16,541)(1.3)%
1007,036 2.5 %7,899 3.7 %(13,399)(0.9)%(5,308)(0.4)%
(100)(14,926)(5.3)%(8,615)(4.1)%(46,191)(3.1)%(91,568)(7.4)%
Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities. These and other modeling assumptions are monitored closely by Peoples on an ongoing basis.
With respect to investment prepayment speeds, the assumptions used are the results of a third-party prepayment model which projects the rate at which the underlying mortgages will prepay. These prepayment speeds affect the amounts forecasted for cash flow reinvestment, premium amortization, and discount accretion in interest rate risk modeling results. This prepayment activity is generally the result of refinancing activity and tends to increase as longer-term interest rates decline, and decrease as interest rates increase. The assumptions in the interest rate risk model could be incorrect, leading to either a lesser or greater impact on net interest income or asset duration.
While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in the balance sheet, interest rates typically move in a nonparallel manner with differences in the timing, direction and magnitude of changes in short-term and long-term interest rates. Thus, any benefit that might occur as a result of the Federal Reserve increasing short-term interest rates in the future could be offset by an inverse movement in long-term interest rates, and vice versa. For this reason, Peoples considers other interest rate scenarios in addition to analyzing the impact of parallel yield curve shifts. These include various flattening and steepening scenarios in which short-term and long-term interest rates move in different directions with varying magnitude. Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above. Given the shape of market yield curves at September 30, 2022, consideration of the bear steepener or inversion scenarios provide insights which are not captured by parallel shifts.
The bear steepener scenario highlights the risk to net interest income and economic value of equity when short-term interest rates remain constant while long-term interest rates rise. In such a scenario, Peoples' deposit and borrowing costs, which are generally correlated with short-term interest rates, remain constant, while asset yields, which are correlated with long-term interest rates, rise. At September 30, 2022 the bear steepener scenario produced no change to net interest income and increased the economic value of equity by 3.4%.

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As of September 30, 2022, the yield curve was relatively flat with some inversion. 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 September 30, 2022 this inversion scenario would have resulted in an increase in net interest income and decrease the economic value of equity of 1.1% and (1.9)%, respectively. Peoples was within its policy limitations for this alternative scenario as of September 30, 2022, 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 September 30, 2022, Peoples had entered into thirteen interest rate swap contracts with an aggregate notional value of $125.0 million. Additional information regarding Peoples’ interest rate swaps can be found in “Note 10 Derivative Financial Instruments” of the Notes to the Unaudited Condensed Consolidated Financial Statements.
At September 30, 2022, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income. The table above illustrates this point as changes to net interest income increase in the rising rate scenarios. While the heavy concentration of floating rate loans remains the largest contributor to the level of asset sensitivity, the decrease in economic value of equity asset sensitivity, as measured, from December 31, 2021 was largely attributable to increased effective duration in the investment securities portfolio.
Liquidity
In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity. The methods used by the ALCO to monitor and evaluate the adequacy of Peoples Bank's liquidity position remain unchanged from those disclosed in Peoples' 2021 Form 10-K.
At September 30, 2022, Peoples Bank had liquid assets of $171.2 million, which represented 2.2% of total assets and unfunded loan commitments. Peoples also had an additional $231.0 million of unpledged investment securities not included in the measurement of liquid assets.
Management believes the current mix of short-term liquidity sources, loan and security portfolio cash flows, and availability of other funding sources will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments.
Off-Balance Sheet Activities and Contractual Obligations
In the normal course of business, Peoples is a party to financial instruments with off-balance sheet risk necessary to meet the financing needs of Peoples' customers. These financial instruments include commitments to extend credit and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract amounts of these instruments express the extent of involvement Peoples has in these financial instruments.
Loan Commitments and Standby Letters of Credit
Loan commitments are made to accommodate the financial needs of Peoples' customers. Standby letters of credit are instruments issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank's customer in the performance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused. Peoples Bank's exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Peoples Bank uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.
Peoples Bank routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Unaudited Condensed Consolidated Financial Statements. These activities are part of Peoples Bank's normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in low-income housing tax credit investments. Traditional off-balance sheet credit-related financial instruments continue to represent the most significant off-balance sheet exposure.

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The following table details the total contractual amount of loan commitments and standby letters of credit:
 (Dollars in thousands)
September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Home equity lines of credit$194,685 $188,803 $184,616 $177,262 $177,963 
Unadvanced construction loans320,825 237,129 203,719 227,135 271,483 
Other loan commitments653,384 566,624 616,696 577,170 646,374 
Loan commitments$1,168,894 $992,556 $1,005,031 $981,567 $1,095,820 
Standby letters of credit$15,096 $15,977 $12,729 $12,805 $12,358 
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.

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 September 30, 2022.  Based upon that evaluation, Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer have concluded that:
(a)information required to be disclosed by Peoples in this 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 Form 10-Q and other reports Peoples files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
(c)as previously disclosed within "ITEM 9A. CONTROLS AND PROCEDURES" of Peoples' 2021 Form 10-K, Peoples did not design effective controls supporting acquired purchased credit deteriorated loan accounting and the related allowance for credit losses aggregated to a material weakness in internal control over financial reporting; and
(d)as part of Peoples' efforts to remediate the material weakness described above, new controls and procedures have been designed and are in process of being implemented. Therefore, Peoples' President and Chief Executive Officer, and its Executive Vice President, Chief Financial Officer and Treasurer concluded that, as of September 30, 2022, Peoples' disclosure controls and procedures were not effective. Despite the foregoing, Peoples' management has concluded the financial statements fairly present in all material respects, Peoples' financial position, results of operations and cash flows as of the dates, and for the periods presented in this Form 10-Q, in conformity with US GAAP.
 Changes in Internal Control Over Financial Reporting
The remediation activities described above, and discussed in further detail in "ITEM 9A. CONTROLS AND PROCEDURES" of Peoples' 2021 Form 10-K and under "ITEM 1A. RISK FACTORS" in Part II of Peoples' Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, are changes in Peoples' internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Peoples' fiscal quarter ended September 30, 2022. These changes may materially affect, or are reasonably likely to materially affect, Peoples’ internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of their respective businesses or operations, Peoples or one of its subsidiaries may be named as a plaintiff, a defendant, or a party to a legal proceeding or any of their respective properties may be subject to various pending and threatened legal proceedings and various actual and potential claims.  In view of the inherent difficulty of predicting the outcome of such matters, Peoples cannot state what the eventual outcome of any such matters will be. However, based on management's current knowledge and

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after consultation with legal counsel, management believes these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of Peoples.
ITEM 1A. RISK FACTORS
The disclosure below supplements the risk factors previously disclosed under “ITEM 1A. RISK FACTORS” of Part I of Peoples’ 2021 Form 10-K.  Those risk factors are not the only risks Peoples faces.  Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect Peoples’ business, financial condition and/or operating results. In the third quarter of 2022, we identified the following additional risk factor:
Economic, Political, Environmental and Market Risks
•Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on the Company's results of operations and financial condition.
Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on the Peoples' results of operations and financial condition. The macroeconomic environment in the United States is susceptible to global events and volatility in financial markets. For example, global demand for products continues to exceed supply during the economic recovery from the COVID-19 pandemic, creading significant inflationary pressures which, in turn, may adversly impact consumer and business confidence and regional and global economic conditions, as well as Peoples' financial condition and results of operations. In addition, trade negotiations between the U.S. and other nations remain uncertain and could adversely impact economic and market conditions for Peoples and its clients and counterparties.
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 September 30, 2022:
Period
Total Number of Common Shares Purchased		 
Average Price Paid per Common Share		 
 
Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs (1)

Maximum
Number (or Approximate Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1 – 31, 20221,800 (1)$27.53 (1)— $24,023,642 
August 1 – 31, 20222,609 (1)(2)$30.40 (1)(2)— $24,023,642 
September 1 – 30, 202242,297 (1)(3)$28.95 (1)(3)40,299 $22,857,421 
Total46,706  $28.97  40,299 $22,857,421 
(1)Information reported includes 1,800 common shares, 1,174 common shares and 1,998 common shares purchased in open market transactions during July 2022, August 2022, and September 2022, 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.
(2)Information reported includes 1,435 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 August 2022.
(3)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 40,299 common shares repurchased under the share repurchase program during September 2022.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER INFORMATION
None

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Table of Contents

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 with a filing date of 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.+
Incorporated herein by reference to Exhibit 2.1 to Peoples' Current Report on Form 8-K dated and filed on October 28, 2022 (File No. 000-16772)
3.1(a) 
Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on May 3, 1993) P
 Incorporated herein by reference to Exhibit 3(a) to Peoples' Registration Statement on Form 8-B filed on July 20, 1993 (File No. 0-16772)
     
3.1(b)
 Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 22, 1994) Incorporated herein by reference to Exhibit 3.1(b) to Peoples' Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (File No. 0-16772) ("Peoples' September 30, 2017 Form 10-Q")
     
3.1(c)
 Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 9, 1996) Incorporated herein by reference to Exhibit 3.1(c) to Peoples' September 30, 2017 Form 10-Q
     
3.1(d)
 Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 23, 2003) Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (File No. 0-16772) (“Peoples’ March 31, 2003 Form 10-Q”)
     
3.1(e)
 Certificate of Amendment by Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on January 22, 2009) Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on January 23, 2009 (File No. 0-16772)
     
3.1(f)
 Certificate of Amendment by Directors to Articles filed with the Ohio Secretary of State on January 28, 2009, evidencing adoption of amendments by the Board of Directors of Peoples Bancorp Inc. to Article FOURTH of the Amended Articles of Incorporation to establish express terms of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value, of Peoples Bancorp Inc. Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on February 2, 2009 (File No. 0-16772)
     
3.1(g)
 Certificate of Amendment by the Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on July 28, 2021) Incorporated herein by reference to Exhibit 3.1(g) to Peoples' Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 (File No. 0-16772) ("Peoples' June 30, 2021 Form 10-Q")
3.1(h)
Amended Articles of Incorporation of Peoples Bancorp Inc. (representing the Amended Articles of Incorporation in compiled form incorporating all amendments through the date of this Quarterly Report on Form 10-Q) [For purposes of SEC reporting compliance only--not filed with Ohio Secretary of State]

 
Incorporated herein by reference to Exhibit 3.1(h) to Peoples' June 30, 2021 Form 10-Q
3.2(a) 
Code of Regulations of Peoples Bancorp Inc. P
 Incorporated herein by reference to Exhibit 3(b) to Peoples’ Registration Statement on Form 8-B filed on July 20, 1993 (File No. 0-16772)
     
3.2(b)
 Certified Resolutions Regarding Adoption of Amendments to Sections 1.03, 1.04, 1.05, 1.06, 1.08, 1.10, 2.03(C), 2.07, 2.08, 2.10 and 6.02 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 10, 2003 Incorporated herein by reference to Exhibit 3(c) to Peoples’ March 31, 2003 Form 10-Q
3.2(c)
 Certificate regarding adoption of amendments to Sections 3.01, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08 and 3.11 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 8, 2004 Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (File No. 0-16772)
 +Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. A copy of any omitted schedules or exhibits will be furnished supplementally by Peoples Bancorp Inc. to the SEC, or the staff of the SEC, on a confidential basis upon request.

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Table of Contents
Exhibit
Number		 
 
Description
 
 
Exhibit Location
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.

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, 2018Incorporated 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
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
     
32
 Section 1350 Certifications Furnished herewith
101.INSInline XBRL Instance Document ##Submitted electronically herewith #
101.SCHInline XBRL Taxonomy Extension Schema DocumentSubmitted electronically herewith #
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentSubmitted electronically herewith #
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentSubmitted electronically herewith #
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentSubmitted electronically herewith #
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentSubmitted electronically herewith #
104Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)Submitted electronically herewith
# Attached as Exhibit 101 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 of Peoples Bancorp Inc. are the following documents formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at September 30, 2022 (Unaudited) and December 31, 2021; (ii) Consolidated Statements of Operations (Unaudited) for the three months and nine months ended September 30, 2022 and 2021; (iii) Consolidated Statements of Comprehensive (Loss) Income (Unaudited) for the three months and nine months ended September 30, 2022 and 2021; (iv) Consolidated Statements of Stockholders' Equity (Unaudited) for the three months and nine months ended September 30, 2022 and 2021; (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2022 and 2021; and (vi) Notes to the Unaudited Condensed Consolidated Financial Statements.
## The instance document does not appear in the interactive data file because its XBRL tags are imbedded within the Inline XBRL document.

80
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  PEOPLES BANCORP INC.
   
Date:November 3, 2022By: /s/CHARLES W. SULERZYSKI
  Charles W. Sulerzyski
  President and Chief Executive Officer
Date:November 3, 2022By: /s/KATIE BAILEY
  Katie Bailey
  Executive Vice President,
  Chief Financial Officer and Treasurer


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