Stock-Based Compensation

Under the Peoples Bancorp Inc. Amended and Restated 2006 Equity Plan (the “2006 Equity Plan”), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted stock awards, stock appreciation rights or any combination thereof covering up to 500,000 common shares to employees and non-employee directors. Prior to 2007, Peoples granted nonqualified and incentive stock options to employees and nonqualified stock options to non-employee directors under the 2006 Equity Plan and predecessor plans. Since February 2007, Peoples has granted a combination of restricted common shares and stock appreciation rights (“SARs”) to be settled in common shares to employees and restricted common shares to non-employee directors subject to the terms and conditions prescribed by the 2006 Equity Plan.

In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares.

Stock Options

Under the provisions of the 2006 Equity Plan and predecessor stock option plans, the exercise price per share of any stock option granted may not be less than the fair market value of the underlying common shares on the date of grant of the stock option. All stock options granted to both employees and non-employee directors expire ten years from the date of grant. The most recent stock options granted to employees and non-employee directors occurred in 2006.

The following table summarizes Peoples’ stock options outstanding at June 30, 2011:



			Options Outstanding & Exercisable
Range of Exercise Prices			Common Shares Subject to Options Outstanding	Weighted- Average Remaining Contractual Life	Weighted-Average Exercise Price
$15.55	to	$21.71	9,876	0.9 years	$	20.08
$21.72	to	$23.58	47,640	1.4 years	22.32
$23.59	to	$25.94	41,343	0.9 years	23.96
$26.01	to	$27.74	41,354	2.8 years	27.08
$28.25	to	$28.26	34,028	3.7 years	28.25
$28.57	to	$30.00	31,410	3.4 years	29.02
Total			205,651	2.3 years	$	25.50

Stock Appreciation Rights

SARs granted to employees have an exercise price equal to the fair market value of Peoples’ common shares on the date of grant and will be settled using common shares of Peoples. Additionally, the SARs granted will vest three years from the grant date and expire ten years from the date of grant.

The following table summarizes Peoples’ SARs outstanding at June 30, 2011:



Exercise Prices		Number of Common Shares Subject to SARs Outstanding & Exercisable	Weighted- Average Remaining Contractual Life
	$23.26	5,000	2.4 years
	$23.77	18,936	6.6 years
	$23.80	1,000	6.4 years
	$29.25	17,506	4.4 years
Total		42,442	5.2 years

Restricted 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 common shares awarded to non-employee directors expire after six months, while the restrictions on common shares awarded to employees expire after three years. In the first quarter of 2011, Peoples granted restricted shares to officers and key employees with both with a two-year time-based vesting period and a two-year performance-based vesting period. For the shares subject to performance-based vesting, the restrictions on these shares will vest after two year upon the achievement of a cumulative diluted earnings per common share of $3.10 for the three-year period ending December 31, 2012.

The following summarizes the changes to Peoples’ restricted common shares for the period ended June 30, 2011:



	Time Vesting			Performance Vesting
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1	7,337	$	19.88	—	$	—
Awarded	37,423	13.33		3,531	13.14
Released	5,337	22.09		—	—
Outstanding at June 30	39,423	$	13.37	3,531	$	13.14

For the six months ended June 30, 2011, the total intrinsic value of restricted common shares released was $72,000.

Stock-Based Compensation

Peoples recognized stock-based compensation expense, which is included as a component of Peoples’ salaries and employee benefits costs, based on the estimated fair value of the awards on the grant date. The following summarizes the amount of stock-based compensation expense and related tax benefit recognized:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2011			2010			2011			2010
Total stock-based compensation	$	63		$	25		$	96		$	51
Recognized tax benefit	(22		)	(9		)	(34		)	(18		)
Net expense recognized	$	41		$	16		$	62		$	33

Total unrecognized stock-based compensation expense related to unvested awards was $336,000 at June 30, 2011, which will be recognized over a weighted-average period of 1.4 yea