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Loans
 12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Loans Loans
Peoples' loan portfolio consists of various types of loans originated primarily as a result of lending opportunities within Peoples' primary market areas of northeastern, central, southwestern and southeastern Ohio, central and eastern Kentucky and west central West Virginia. Peoples also originates insurance premium finance loans nationwide through its premium finance division. Acquired loans consist of loans purchased 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).
The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows at December 31:
(Dollars in thousands)20202019
Construction$106,792 $88,518 
Commercial real estate, other929,853 833,238 
Commercial and industrial973,645 662,993 
Premium finance114,758 — 
Residential real estate574,007 661,476 
Home equity lines of credit120,913 132,704 
Consumer, indirect503,527 417,185 
Consumer, direct79,094 76,533 
Deposit account overdrafts351 878 
Total loans, at amortized cost$3,402,940 $2,873,525 
Commercial and industrial loan balances grew significantly compared to December 31, 2019. Peoples began participating as a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender during the second quarter of 2020, and
originated $488.9 million of PPP loans during 2020. At December 31, 2020, the PPP loans had an amortized cost of $366.9 million, and were included in commercial and industrial loan balances. Peoples recorded deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which totaled $7.9 million at December 31, 2020. During 2020, Peoples recorded accretion of net deferred loan origination fees of $7.5 million on PPP loans. The remaining net deferred loan origination fees will be accreted 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 Consolidated Balance Sheets, with no recorded allowance for credit losses as Peoples elected the practical expedient not to measure allowance for credit losses for accrued interest receivables. Interest receivable on loans was $10.9 million at December 31, 2020 and $9.1 million at December 31, 2019.
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 loans delinquent for 90 days or more and accruing were as follows at December 31:
20202019
(Dollars in thousands)
Nonaccrual (a)(b)
Accruing Loans 90+ Days Past Due
Nonaccrual (a)
Accruing Loans 90+ Days Past Due (b)
Construction$4 $— $411 $— 
Commercial real estate, other9,111 — 6,801 907 
Commercial and industrial6,192 50 2,155 155 
Premium finance— 589 — — 
Residential real estate8,375 1,975 6,361 2,677 
Home equity lines of credit867 82 1,165 108 
Consumer, indirect1,073 39 840 — 
Consumer, direct171 17 48 85 
Total loans, at amortized cost$25,793 $2,752 $17,781 $3,932 
(a)There were $1.3 million of nonaccrual loans for which there was no allowance for credit losses as of December 31, 2020 and $3.1 million of such loans at December 31, 2019.
(b) The new accounting for purchased credit deteriorated loans under ASU 2016-13 resulted in the movement of $3.9 million of loans from the 90+ days past due and accruing category to the nonaccrual category as of January 1, 2020. At December 31, 2019, these loans were presented as 90+ days past due and accruing.
As of December 31, 2020, Peoples had made short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers, which were insignificant. Under the CARES Act and interagency guidance, borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. As such, these modifications made under the CARES Act are not included in Peoples' nonaccrual or accruing loans 90+ days past due as of December 31, 2020.
The new accounting for purchased credit deteriorated loans under ASU 2016-13 resulted in the movement of $3.9 million of loans from the 90+ days past due and accruing category to the nonaccrual category as of January 1, 2020. As of December 31, 2019, these loans were presented as 90+ days past due and accruing. Although they were not accruing contractual interest income, they were accreting income from the discount that was recognized due to acquisition accounting. The additional increase in nonaccrual loans at December 31, 2020, compared to December 31, 2019, was due to two commercial relationships aggregating $3.2 million and several smaller commercial relationships being placed on nonaccrual. The amount of interest income recognized on nonaccrual loans during 2020 was $1.6 million.
The following tables present the aging of the recorded investment in past due loans at December 31:
Loans Past DueCurrentTotal
(Dollars in thousands)
30 – 59 days
60 – 89 days
90 + DaysTotal
2020
Construction$— $344 $4 $348 $106,444 $106,792 
Commercial real estate, other1,943 283 8,643 10,869 918,984 929,853 
Commercial and industrial567 552 4,535 5,654 967,991 973,645 
Premium finance385 1,021 589 1,995 112,763 114,758 
Residential real estate6,739 2,688 5,512 14,939 559,068 574,007 
Home equity lines of credit309 58 780 1,147 119,766 120,913 
Consumer, indirect4,362 733 348 5,443 498,084 503,527 
Consumer, direct424 43 123 590 78,504 79,094 
Deposit account overdrafts— — — — 351 351 
Total loans, at amortized cost$14,729 $5,722 $20,534 $40,985 $3,361,955 $3,402,940 
2019
Construction$5 $— $411 $416 $88,102 $88,518 
Commercial real estate, other376 337 7,501 8,214 825,024 833,238 
Commercial and industrial2,780 312 1,244 4,336 658,657 662,993 
Residential real estate10,538 2,918 5,872 19,328 642,148 661,476 
Home equity lines of credit642 510 1,033 2,185 130,519 132,704 
Consumer, indirect3,574 714 370 4,658 412,527 417,185 
Consumer, direct619 117 112 848 75,685 76,533 
Deposit account overdrafts— — — — 878 878 
Total loans, at amortized cost$18,534 $4,908 $16,543 $39,985 $2,833,540 $2,873,525 
The increase in loans 90+ days past due, compared to December 31, 2019, was mostly due to a $1.5 million commercial relationship. Delinquency trends remained stable as 98.8% of Peoples' portfolio was considered "current" at December 31, 2020, compared to 98.6% at December 31, 2019.
Pledged Loans
Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, and home equity lines of credit under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged commercial loans to secure borrowings with the FRB. Loans pledged are summarized as follows at December 31:
(Dollars in thousands)20202019
Loans pledged to FHLB$740,584 $458,227 
Loans pledged to FRB107,340 172,693 
During 2020, Peoples pledged additional collateral to the FHLB and FRB to secure potential funding needs in light of the COVID-19 pandemic, as well as to fund the PPP loan originations that occurred during the year.
Related Party Loans
In the normal course of its business, Peoples Bank has granted loans to certain directors and officers of Peoples, including their affiliates, families and entities in which they are principal owners. At December 31, 2020, no related party loan was past due 90 or more days, a TDR or on nonaccrual status. Activity in related party loans is presented in the table below. Other changes primarily consist of changes in related party status, and the addition and exit of directors during the year, as applicable.
(Dollars in thousands) 
Balance, December 31, 2019$15,380 
New loans and disbursements3,932 
Repayments(5,053)
Other changes(1,128)
Balance, December 31, 2020$13,131 
Credit Quality Indicators
As discussed in "Note 1 Summary of Significant Accounting Policies," Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible credit deterioration. Loan relationships whose aggregate credit exposure to Peoples is equal to or less than $1.0 million are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples is as follows:
"Pass" (grades 1 through 4): Loans in this risk category are to borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk category would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loans if required, for any weakness that may exist.
"Special Mention" (grade 5): Loans in this risk category are the equivalent of the regulatory "Other Assets Especially Mentioned" classification. 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 the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loans or in Peoples' credit position.
"Substandard" (grade 6): Loans in this risk category are inadequately protected by the borrower's current financial condition and payment capability, or by 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 deficiencies are not corrected.
"Doubtful" (grade 7): Loans in this risk category 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 these loans as an estimated loss is deferred until their more exact status may be determined.
"Loss" (grade 8): Loans in this risk category are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean each such 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 in the period in which the loan becomes uncollectable. Consequently, Peoples typically does not maintain a recorded investment in loans within this risk category.
Consumer loans and other smaller-balance loans are evaluated and categorized as "substandard," "doubtful" or "loss" based upon the regulatory definition of these classes and consistent with regulatory requirements. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being "not rated."

The following tables summarize the risk category of Peoples' loan portfolio based upon the most recent analysis performed at December 31:
(Dollars in thousands)20202019201820172016PriorRevolving LoansRevolving Loans Converted to Term
Total
Loans
Construction

  Pass$27,670 $56,361 $554 $15,089 $824 $1,194 $3,199 $2,003 $104,891 
  Special mention— — 496 — — 143 — — 639 
  Substandard— — — 186 — 1,076 — — 1,262 
     Total27,670 56,361 1,050 15,275 824 2,413 3,199 2,003 106,792 
Commercial real estate, other

  Pass116,441 125,373 99,522 94,465 99,668 215,385 109,160 9,748 860,014 
  Special mention297 5,806 999 5,296 5,125 12,932 3,967 60 34,422 
  Substandard— 1,191 677 1,709 1,663 27,066 3,033 110 35,339 
  Doubtful— — — — — 78 — — 78 
     Total116,738 132,370 101,198 101,470 106,456 255,461 116,160 9,918 929,853 
Commercial and industrial
  Pass409,237 97,362 67,284 38,450 45,026 77,009 199,597 30,680 933,965 
  Special mention1,034 366 2,018 287 1,453 1,452 12,429 526 19,039 
  Substandard2,226 3,569 2,873 2,167 318 4,163 3,436 1,083 18,752 
  Doubtful— — — — 1,698 191 — 187 1,889 
     Total412,497 101,297 72,175 40,904 48,495 82,815 215,462 32,476 973,645 
Premium finance
  Pass114,758 — — — — — — — 114,758 
Total114,758 — — — — — — — 114,758 
Residential real estate
  Pass47,147 40,223 24,235 29,142 43,105 309,795 65,168 305 558,815 
  Substandard— — — — — 15,048 — — 15,048 
   Loss— — — — — 144 — — 144 
     Total47,147 40,223 24,235 29,142 43,105 324,987 65,168 305 574,007 
Home equity lines of credit
  Pass16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913 
     Total16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913 
Consumer, indirect
  Pass210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527 
     Total210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527 
Consumer, direct
  Pass31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094 
     Total31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094 
Deposit account overdrafts351 — — — — — — — 351 
Total loans, at amortized cost$977,333 $452,383 $294,098 $243,312 $230,434 $722,058 $483,322 $48,793 $3,402,940 
During 2020, Peoples downgraded several relationships due to the COVID-19 pandemic. The COVID-related downgrades contributed to increases of $29.8 million of additional criticized loans and $9.4 million of additional classified loans compared to balances at December 31, 2019. At December 31, 2020, Peoples had a total of $1.5 million of loans secured by residential real estate mortgages that were in the process of foreclosure.

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:
•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.
•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.
The following table details Peoples' amortized cost of collateral dependent loans at December 31:
(Dollars in thousands)20202019
Commercial real estate, other$8,467 $6,818 
Commercial and industrial6,333 1,962 
Residential real estate1,670 1,847 
Home equity lines of credit403 681 
Consumer, indirect— 713 
Consumer, direct— 94 
Total collateral dependent loans$16,873 $12,115 
The increase in collateral dependent commercial and industrial loans at December 31, 2020 compared to December 31, 2019 was mostly due to two commercial relationship that became collateral dependent, coupled with some smaller relationships. In addition, the increase in collateral dependent consumer loans was driven by a change in the policy threshold for evaluation of individually impaired loans, which was previously $100,000 and on January 1, 2020 was changed to $250,000, thereby reducing the amount of loans considered collateral dependent which were no longer above the threshold.

The following table summarizes the loans that were modified as TDRs during the years ended December 31, 2020 and 2019.
Recorded Investment (a)
(Dollars in thousands)Number of ContractsPre-ModificationPost-ModificationRemaining Recorded Investment
2020
Commercial real estate, other5 $2,294 $2,294 $2,217 
Commercial and industrial6 3,820 3,820 3,736 
Residential real estate16 1,388 1,423 1,406 
Home equity lines of credit7 123 123 116 
Consumer, indirect27 349 349 313 
Consumer , direct7 99 99 89 
Consumer34 448 448 402 
Total68 $8,073 $8,108 $7,877 
2019
Originated loans:
Commercial and industrial2 $38 $38 $32 
Residential real estate3 437 440 431 
Home equity lines of credit4 139 139 136 
Consumer, indirect17 260 260 234 
Consumer, direct3 52 52 45 
   Consumer20 312 312 279 
Total29 $926 $929 $878 
Acquired loans:
Construction3 $101 $76 $76 
Commercial and industrial5 1,557 1,557 1,464 
Residential real estate38 2,069 2,069 1,967 
Home equity lines of credit8 172 173 164 
Consumer, direct10 124 124 114 
Total64 $4,023 $3,999 $3,785 
(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.

The following table presents those loans modified into a TDR during 2020 that subsequently defaulted (i.e., 90 days or more past due following a modification during 2020). There were no loans modified into a TDR during the year that subsequently defaulted in 2019.
2020
(Dollars in thousands)Number of Contracts
Recorded Investment (a)
Impact on the Allowance for Credit Losses
Commercial real estate, other1 54 — 
Consumer, indirect1 15 — 
Total2 $69 $— 
(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.
Peoples had no commitments to lend additional funds to the related borrowers whose loan terms have been modified in a TDR.
Allowance for Credit Losses
Changes in the allowance for credit losses for the period ended December 31, 2020 are summarized below:
(Dollars in thousands)Beginning Balance,
January 1, 2020		Initial Allowance for Purchased Credit Deteriorated AssetsProvision for Credit Losses (a)Charge-offsRecoveries
Ending Balance, December 31, 2020
Construction$600 $51 $1,236 $— $— $1,887 
Commercial real estate, other7,193 1,356 9,315 (528)200 17,536 
Commercial and industrial4,960 860 5,987 (1,565)2,521 12,763 
Premium finance— — 1,098 (3)— 1,095 
Residential real estate3,977 383 1,735 (353)302 6,044 
Home equity lines of credit1,570 2 379 (103)12 1,860 
Consumer, indirect5,389 — 4,262 (1,923)302 8,030 
Consumer, direct856 34 329 (187)49 1,081 
Deposit account overdrafts94 — 456 (673)186 63 
Total$24,639 $2,686 $24,797 $(5,335)$3,572 $50,359 
(a)Amount does not include the provision for unfunded commitment liability.
The significant increase in the allowance for credit losses as of December 31, 2020 compared to January 1, 2020 was mostly due to the COVID-19 pandemic, and the resulting impact on economic forecasts utilized in the CECL model. Peoples calculates its allowance for credit losses using a discounted cash flow model, and incorporates economic forecasts, including U.S. unemployment, Ohio unemployment, Ohio Gross Domestic Product, and the Ohio Case Shiller Home Price Indices as economic factors. The economic forecast used in the December 31, 2020 calculation of the allowance for credit losses included higher unemployment rates and lower Ohio Gross Domestic Product than those at January 1, 2020, which drove much of the increase in the allowance for credit losses at December 31, 2020. In addition, Peoples recorded an increase of $5.8 million in allowance for credit losses on January 1, 2020 related to the implementation of ASU 2016-13.
During 2020, Peoples recognized a recovery of $2.5 million on a commercial and industrial loan that was previously charged-off.
As of December 31, 2020, Peoples had recorded an unfunded commitment liability of $2.9 million, an increase compared to the $1.5 million that was recorded on January 1, 2020. The unfunded commitment liability is presented in the “Accrued expenses and other liabilities” line of the Consolidated Balance Sheets.