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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, 2021

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-20210930_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: 28,272,537 common shares, without par value, at November 4, 2021.

Table of Contents
Table of Contents


2
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 September 30,
2021		December 31,
2020
(Dollars in thousands)(Unaudited)
Assets  
Cash and cash equivalents:
Cash and balances due from banks$129,842 $60,902 
Interest-bearing deposits in other banks369,840 91,198 
Total cash and cash equivalents499,682 152,100 
Available-for-sale investment securities, at fair value (amortized cost of $1,294,654 at September 30, 2021 and $734,544 at December 31, 2020) (a)
1,297,090 753,013 
Held-to-maturity investment securities, at amortized cost (fair value of $240,000 at September 30, 2021 and $68,082 at December 31, 2020) (a)
243,100 66,458 
Other investment securities34,486 37,560 
Total investment securities (a)1,574,676 857,031 
Loans and leases, net of deferred fees and costs (b)4,491,028 3,402,940 
Allowance for credit losses (77,382)(50,359)
Net loans 4,413,646 3,352,581 
Loans held for sale2,699 4,659 
Bank premises and equipment, net of accumulated depreciation91,210 60,094 
Bank owned life insurance72,920 71,591 
Goodwill267,015 171,260 
Other intangible assets28,400 13,337 
Other assets109,504 78,111 
Total assets$7,059,752 $4,760,764 
Liabilities  
Deposits:
Non-interest-bearing$1,559,993 $997,323 
Interest-bearing4,272,027 2,913,136 
Total deposits5,832,020 3,910,459 
Short-term borrowings184,693 73,261 
Long-term borrowings99,411 110,568 
Accrued expenses and other liabilities 111,746 90,803 
Total liabilities6,227,870 4,185,091 
Stockholders’ equity  
Preferred shares, no par value, 50,000 shares authorized, no shares issued at September 30, 2021 and at December 31, 2020
— — 
Common stock, no par value, 50,000,000 shares authorized, 29,806,435 shares issued at September 30, 2021 and 21,193,402 shares issued at December 31, 2020, including at each date shares held in treasury
685,428 422,536 
Retained earnings 189,508 190,691 
Accumulated other comprehensive (loss) income, net of deferred income taxes(5,888)1,336 
Treasury stock, at cost, 1,599,593 shares at September 30, 2021 and 1,686,046 shares at December 31, 2020
(37,166)(38,890)
Total stockholders’ equity831,882 575,673 
Total liabilities and stockholders’ equity$7,059,752 $4,760,764 
(a)    Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $0 and $236, respectively, at September 30, 2021 and $0 and $60, respectively, at December 31, 2020.
(b)    Also referred to throughout this document as "total loans" and "loans held for investment."



See Notes to the Unaudited Condensed Consolidated Financial Statements

3
Table of Contents
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)2021202020212020
Interest income:
Interest and fees on loans and leases$40,748 $35,580 $115,196 $104,651 
Interest and dividends on taxable investment securities3,755 2,786 9,497 12,310 
Interest on tax-exempt investment securities882 614 2,358 1,903 
Other interest income 82 33 175 317 
Total interest income45,467 39,013 127,226 119,181 
Interest expense:
Interest on deposits2,399 2,669 7,793 10,582 
Interest on short-term borrowings91 742 283 2,355 
Interest on long-term borrowings399 483 1,334 1,629 
Total interest expense2,889 3,894 9,410 14,566 
Net interest income42,578 35,119 117,816 104,615 
Provision for credit losses8,994 4,728 7,333 33,531 
Net interest income after provision for credit losses33,584 30,391 110,483 71,084 
Non-interest income:
Electronic banking income4,326 3,765 12,655 10,568 
Trust and investment income4,158 3,435 12,223 10,013 
Insurance income3,367 3,608 11,923 10,929 
Deposit account service charges2,549 2,266 6,578 6,995 
Mortgage banking income766 2,658 2,726 4,346 
Bank owned life insurance income437 462 1,329 1,514 
Commercial loan swap fees73 68 194 1,267 
Net loss on asset disposals and other transactions(308)(28)(459)(237)
Net (loss) gain on investment securities(166)2 (704)383 
Other non-interest income1,144 534 2,605 1,393 
Total non-interest income16,346 16,770 49,070 47,171 
Non-interest expense:
Salaries and employee benefit costs25,589 19,410 68,276 57,313 
Professional fees6,426 1,720 13,459 5,247 
Net occupancy and equipment expense3,551 3,383 10,167 9,688 
Data processing and software expense2,529 1,838 7,394 5,344 
Electronic banking expense2,037 2,095 6,006 5,839 
Amortization of other intangible assets1,279 857 3,267 2,314 
Marketing expense1,223 456 2,810 1,561 
Franchise tax expense810 882 2,487 2,645 
FDIC insurance premium807 570 1,596 717 
Other loan expenses487 342 1,443 1,255 
Communication expense411 283 1,079 857 
Other non-interest expense12,711 2,479 17,762 7,665 
Total non-interest expense57,860 34,315 135,746 100,445 
(Loss) income before income taxes(7,930)12,846 23,807 17,810 
Income tax (benefit) expense(2,172)2,636 3,999 3,616 
Net (loss) income$(5,758)$10,210 $19,808 $14,194 
(Loss) earnings per common share - basic$(0.28)$0.52 $0.99 $0.70 
(Loss) earnings per common share - diluted$(0.28)$0.51 $0.99 $0.70 
Weighted-average number of common shares outstanding - basic20,640,519 19,504,503 19,751,853 19,862,409 
Weighted-average number of common shares outstanding - diluted20,789,271 19,637,689 19,890,672 19,998,353 
Cash dividends declared$7,093 $6,770 $20,991 $20,622 
Cash dividends declared per common share$0.36 $0.34 $1.07 $1.02 

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
    
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2021202020212020
Net (loss) income $(5,758)$10,210 $19,808 $14,194 
Other comprehensive (loss) income:
Available-for-sale investment securities:
Gross unrealized holding (loss) gain arising during the period(7,685)(2,974)(16,738)15,480 
Related tax benefit (expense)1,592 624 3,493 (3,251)
Reclassification adjustment for net loss (gain) included in net (loss) income166 (2)704 (383)
Related tax (benefit) expense(44)— (157)80 
Net effect on other comprehensive (loss) income(5,971)(2,352)(12,698)11,926 
Defined benefit plan:
Net gain (loss) arising during the period1,818 (533)1,826 (1,054)
  Related tax (expense) benefit(407)113 (408)222 
Amortization of unrecognized gain and service cost on benefit plans20 33 81 97 
Related tax expense(5)(7)(18)(21)
Recognition of gain due to settlement and curtailment143 531 143 1,050 
Related tax expense(32)(112)(32)(221)
Net effect on other comprehensive income 1,537 25 1,592 73 
Cash flow hedges:
Net gain (loss) arising during the period858 803 4,800 (9,661)
  Related tax (expense) benefit(90)(168)(918)2,029 
Net effect on other comprehensive income (loss)768 635 3,882 (7,632)
Total other comprehensive (loss) income, net of tax(3,666)(1,692)(7,224)4,367 
Total comprehensive (loss) income$(9,424)$8,518 $12,584 $18,561 

See Notes to the Unaudited Condensed Consolidated Financial Statements


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PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Accumulated Other Comprehensive 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 — 
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 

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Accumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Common SharesRetained EarningsTreasury Stock
(Dollars in thousands)
Balance, June 30, 2020$421,236 $173,572 $4,634 $(30,265)$569,177 
Net income— 10,210 — — 10,210 
Other comprehensive income, net of tax— — (1,692)— (1,692)
Cash dividends declared— (6,770)— — (6,770)
Reissuance of treasury stock for common share awards(321)— — 321 — 
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors— — — (66)(66)
Common shares repurchased under share repurchase program then in effect— — — (5,000)(5,000)
Common shares issued under dividend reinvestment plan220 — — — 220 
Common shares issued under compensation plan for Boards of Directors(11)— — 63 52 
Common shares issued under employee stock purchase plan(23)— — 134 111 
Stock-based compensation614 — — — 614 
Balance, September 30, 2020$421,715 $177,012 $2,942 $(34,813)$566,856 
Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity
Common SharesRetained EarningsTreasury Stock
(Dollars in thousands)
Balance, December 31, 2019$420,876 $187,149 $(1,425)$(12,207)$594,393 
Net income— 14,194 — — 14,194 
Other comprehensive income, net of tax— — 4,367 — 4,367 
Cash dividends declared— (20,622)— — (20,622)
Reissuance of treasury stock for common share awards(2,583)— — 2,583 — 
Reissuance of treasury stock for deferred compensation plan for Boards of Directors— — — 59 59 
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors— — — (1,052)(1,052)
Common shares repurchased under share repurchase program then in effect— — — (25,000)(25,000)
Common shares issued under dividend reinvestment plan463 — — — 463 
Common shares issued under compensation plan for Boards of Directors9 — — 316 325 
Common shares issued under performance unit awards, net of tax41 — — 138 179 
Common shares issued under employee stock purchase plan(40)— — 350 310 
Stock-based compensation2,949 — — — 2,949 
Impact of adoption of new accounting standard, net of taxes (a)— (3,709)— — (3,709)
Balance, September 30, 2020$421,715 $177,012 $2,942 $(34,813)$566,856 
(a)On January 1, 2020, Peoples adopted ASU 2016-13, which resulted in a reduction to retained earnings of $3.7 million, net of statutory federal corporate income tax.
See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
(Dollars in thousands)20212020
Net cash provided by operating activities$66,722 $55,992 
Investing activities:
Available-for-sale investment securities:
Purchases(715,263)(171,251)
Proceeds from sales480,127 11,582 
Proceeds from principal payments, calls and prepayments227,574 248,021 
Held-to-maturity investment securities:
Purchases(181,331)(8,404)
Proceeds from principal payments3,774 3,834 
Other investment securities:
Purchases(1,221)(5,901)
Proceeds from sales8,552 7,937 
Net decrease (increase) in loans held for investment156,598 (505,161)
Net expenditures for premises and equipment(5,893)(3,702)
Proceeds from sales of other real estate owned153 96 
Proceeds from bank owned life insurance contracts— 109 
Business acquisitions, net of cash received136,119 (94,856)
Investment in limited partnership and tax credit funds(2,900)(13)
Net cash provided by (used in) investing activities106,289 (517,709)
Financing activities:  
Net increase in non-interest-bearing deposits69,557 311,704 
Net increase in interest-bearing deposits95,881 348,779 
Net increase (decrease) in short-term borrowings32,625 (154,914)
Proceeds from long-term borrowings— 50,000 
Payments on long-term borrowings(2,156)(1,857)
Cash dividends paid(20,915)(20,147)
Purchase of treasury stock under share repurchase program— (25,000)
Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock
(1,076)(1,052)
Proceeds from issuance of common shares655 262 
Net cash provided by financing activities174,571 507,775 
Net increase in cash and cash equivalents347,582 46,058 
Cash and cash equivalents at beginning of period152,100 115,193 
Cash and cash equivalents at end of period$499,682 $161,251 
Supplemental cash flow information:
     Interest paid$10,262 $15,179 
     Income taxes paid6,450 7,500 
Supplemental noncash disclosures:
     Transfers from loans to other real estate owned210 163 
Lease right-of-use assets obtained in exchange for lessee operating lease liabilities101 38 
 
 See Notes to the Unaudited Condensed Consolidated Financial Statements


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PEOPLES BANCORP INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Basis of Presentation: The accompanying Unaudited Condensed Consolidated Financial Statements of Peoples Bancorp Inc. and its subsidiaries ("Peoples" refers to Peoples Bancorp Inc. and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.) have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X.  Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020 ("Peoples' 2020 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’ 2020 Form 10-K, as updated by the information contained in this quarterly report on Form 10-Q for the quarterly period ended September 30, 2021 (this "Form 10-Q").  Management has evaluated all significant events and transactions that occurred after September 30, 2021 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, 2020, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2020 Form 10-K. 
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 a lease to be 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, the lease is 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.
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. The initial allowance for credit losses determined on a collective basis is allocated to individual leases. The total of the purchase price and the allowance for credit losses is the initial amortized cost basis of these leases. The variance between the initial amortized cost basis and the fair value of a lease is considered an interest premium or discount, which is amortized or accreted into interest income on a level yield method over the life of the lease.
Leases acquired by Peoples in a business combination that are not considered purchased credit deteriorated are recorded at the fair value and the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the discount or premium to the leases' cost basis and is accreted or amortized to interest income over the leases' remaining life using the level yield method.
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’ 2020 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") 2021-05 - Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments. This ASU addresses stakeholders' concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. This ASU is effective for fiscal years beginning after December 15, 2021, for all entities. Peoples early adopted this ASU as of September 30, 2021. The adoption of this ASU did not have an impact on Peoples' consolidated financial statements.
ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU allows relief where the benchmark interest rate is changed on a loan, lease or hedging relationship between March 12, 2020

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and December 31, 2022. This ASU was early adopted as of September 30, 2021, and is not expected to 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 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending existing guidance. These amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Peoples adopted this ASU as of January 1, 2021. The adoption of this ASU did not have a material effect on Peoples' consolidated financial statements.
Note 2 Fair Value of Assets and Liabilities
Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or a non-recurring basis in the Unaudited Condensed Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.”
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' 2020 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, 2021December 31, 2020
(Dollars in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Assets:   
Available-for-sale investment securities:
Obligations of:   
  U.S. government sponsored agencies$— $78,481 $— $— $5,363 $— 
  States and political subdivisions
— 252,919 — — 114,919 — 
Residential mortgage-backed securities— 898,459 — — 623,218 — 
Commercial mortgage-backed securities— 62,552 — — 4,783 — 
Bank-issued trust preferred securities— 4,679 — — 4,730 — 
Total available-for-sale securities— 1,297,090 — — 753,013 — 
Equity investment securities (a)145 245 — 107 192 — 
Derivative assets (b)— 15,653 — — 27,332 — 
Liabilities:
Derivative liabilities (c)$— $22,904 $— $— $39,395 $— 
(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 reported by Peoples are determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, London Interbank Offered Rate ("LIBOR") yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

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Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from quoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2).
Derivative Assets and Liabilities: The fair value for derivative instruments is determined based on market prices, broker-dealer quotations on similar products, or other related market input parameters (Level 2).
Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis
The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy during the nine months ended September 30, 2021 and December 31, 2020.
 Non-Recurring Fair Value Measurements at Reporting Date
September 30, 2021December 31, 2020
(Dollars in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
Loans held for sale$— $2,751 $— $— $4,733 $— 
Other real estate owned ("OREO")$— $— $11,268 $— $— $134 
Servicing rights (a)(b)$— $— $2,294 $— $— $2,591 
(a) Included in "Other intangible assets" on the Unaudited Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or market value.
(b) Peoples established a valuation allowance on servicing rights of $16 at September 30, 2021 and $161 at December 31, 2020, as the fair value of the servicing rights was less than the carrying value.

Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally 1-4 family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2).
Other Real Estate Owned: OREO, included in "Other assets" on the Unaudited Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO is not re-measured to fair value on a recurring basis. Peoples assesses the carrying value of OREO quarterly for impairment considering market activity and recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach (Level 3). The increase in OREO for the nine months ended September 30, 2021 was due to the OREO acquired in the Premier Financial Bancorp Inc. ("Premier") acquisition.
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, 2021December 31, 2020
Carrying AmountFair ValueCarrying AmountFair Value
Assets:
Cash and cash equivalents1$499,682 $499,682 $152,100 $152,100 
Held-to-maturity investment securities:
   Obligations of:
U.S. government sponsored agencies229,995 29,147 — — 
States and political subdivisions2124,181 122,435 35,139 35,484 
Residential mortgage-backed securities241,035 41,501 25,890 26,742 
Commercial mortgage-backed securities247,889 46,917 5,429 5,856 
        Total held-to-maturity securities243,100 240,000 66,458 68,082 
Other investment securities:
Other investment securities at cost:
Federal Home Loan Bank ("FHLB") stock n/a17,918 17,918 21,718 21,718 
Federal Reserve Bank ("FRB") stockn/a13,311 13,311 13,311 13,311 
Total other investment securities at cost31,229 31,229 35,029 35,029 
Other investment securities at fair value:
Nonqualified deferred compensation (a)22,083 2,083 1,867 1,867 
Other investment securities (b)2784 784 365 365 
Total other investment securities at fair value 2,867 2,867 2,232 2,232 
Total other investment securities (b)34,096 34,096 37,261 37,261 
Loans and leases, net of deferred fees and costs 34,491,028 4,595,800 3,402,940 3,458,732 
Bank owned life insurance 372,920 72,920 71,591 71,591 
Liabilities:
Deposits2$5,832,020 $5,546,935 $3,910,459 $3,773,602 
Short-term borrowings2184,693 186,028 73,261 74,170 
Long-term borrowings299,411 106,497 110,568 117,364 
(a) Nonqualified deferred compensation includes mutual funds as part of the investment.
(b)     "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at September 30, 2021
and at December 31, 2020, 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.

 For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instruments.  These instruments include cash and cash equivalents, demand and other non-maturity deposits, and overnight borrowings.  Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments:
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash and 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, LIBOR 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 service in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.
Other Investment Securities: Other investment securities are measured at their respective redemption values due to restrictions placed on their transferability (Level 2).

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Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held to maturity.  Peoples considered interest rate, credit and market factors in estimating the fair value of loans (Level 3). Fair values for loans are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans with similar terms, the credit risk associated with the loans and other market factors, including liquidity.
Bank Owned Life Insurance: Peoples' bank owned life insurance policies are recorded at their cash surrender value (Level 3). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits.
Deposits: The fair value of fixed maturity certificates of deposit ("CDs") is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities (Level 2).
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 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 assets and liabilities include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair value that 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, 2021    
Obligations of:    
U.S. government sponsored agencies$78,916 $102 $(537)$78,481 
States and political subdivisions252,706 3,220 (3,007)252,919 
Residential mortgage-backed securities894,848 10,453 (6,842)898,459 
Commercial mortgage-backed securities63,568 85 (1,101)62,552 
Bank-issued trust preferred securities4,616 233 (170)4,679 
Total available-for-sale securities$1,294,654 $14,093 $(11,657)$1,297,090 
December 31, 2020    
Obligations of:    
U.S. government sponsored agencies$4,960 $403 $— $5,363 
States and political subdivisions110,401 4,642 (124)114,919 
Residential mortgage-backed securities609,865 15,377 (2,024)623,218 
Commercial mortgage-backed securities4,622 161 — 4,783 
Bank-issued trust preferred securities4,696 192 (158)4,730 
Total available-for-sale securities$734,544 $20,775 $(2,306)$753,013 


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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)2021202020212020
Gross gains realized$150 $2 $786 $386 
Gross losses realized(316)— (1,490)(3)
Net (loss) gain realized$(166)$2 $(704)$383 
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 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, 2021        
Obligations of:
U.S. government sponsored agencies
$49,570 $537 $7 $— $— $— $49,570 $537 
States and political subdivisions128,402 3,007 76 — — — 128,402 3,007 
Residential mortgage-backed securities
466,518 6,079 72 36,160 763 16 502,678 6,842 
Commercial mortgage-backed securities
48,974 1,101 17 — — — 48,974 1,101 
Bank-issued trust preferred securities
— — — 1,830 170 2 1,830 170 
Total$693,464 $10,724 172 $37,990 $933 18 $731,454 $11,657 
December 31, 2020        
Obligations of:
States and political subdivisions$17,651 $124 5 $— $— — $17,651 $124 
Residential mortgage-backed securities
156,659 1,795 45 9,892 229 13 166,551 2,024 
Bank-issued trust preferred securities
494 6 1 1,848 152 2 2,342 158 
Total$174,804 $1,925 51 $11,740 $381 15 $186,544 $2,306 

Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis.  At September 30, 2021, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses. At September 30, 2021, 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, 2021 and December 31, 2020 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 $5.7 million at September 30, 2021 and $2.7 million at December 31, 2020.
At September 30, 2021, 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 two positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Neither of the two 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 investments and the low remaining number of loans underlying these securities.
The unrealized losses with respect to the two bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at September 30, 2021 were attributable to the subordinated nature of the debt.

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The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at September 30, 2021.  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. government sponsored agencies$— $1,996 $66,436 $10,484 $78,916 
States and political subdivisions7,314 28,647 67,074 149,671 252,706 
Residential mortgage-backed securities7 981 56,615 837,245 894,848 
Commercial mortgage-backed securities1,887 — 34,169 27,512 63,568 
Bank-issued trust preferred securities— — 4,616 — 4,616 
Total available-for-sale securities$9,208 $31,624 $228,910 $1,024,912 $1,294,654 
Fair value     
Obligations of:     
U.S. government sponsored agencies$— $2,069 $66,161 $10,251 $78,481 
States and political subdivisions7,375 29,538 68,100 147,906 252,919 
Residential mortgage-backed securities7 1,006 56,712 840,734 898,459 
Commercial mortgage-backed securities1,907 — 33,763 26,882 62,552 
Bank-issued trust preferred securities— — 4,679 — 4,679 
Total available-for-sale securities$9,289 $32,613 $229,415 $1,025,773 $1,297,090 
Total weighted-average yield2.07 %2.56 %1.19 %1.58 %1.54 %
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, 2021    
Obligations of:   
 U.S. government sponsored agencies$29,995 $— $85 $(933)$29,147 
States and political subdivisions124,417 (236)675 (2,421)122,435 
Residential mortgage-backed securities41,035 — 661 (195)41,501 
Commercial mortgage-backed securities47,889 — 236 (1,208)46,917 
Total held-to-maturity securities$243,336 $(236)$1,657 $(4,757)$240,000 
December 31, 2020    
Obligations of:    
States and political subdivisions$35,199 $(60)$510 $(165)$35,484 
Residential mortgage-backed securities25,890 — 852 — 26,742 
Commercial mortgage-backed securities5,429 — 427 — 5,856 
Total held-to-maturity securities$66,518 $(60)$1,789 $(165)$68,082 
There were no gross gains or gross losses realized by Peoples from sales of held-to-maturity securities for any of the three and nine months ended September 30, 2021 and 2020.
Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. The majority of Peoples' held-to-maturity investment securities are obligations of states and political subdivisions with the remaining securities issued by U.S. government sponsored agencies. Peoples analyzed these securities using cumulative default rate averages for investment grade municipal securities. Since December 31, 2020, Peoples has purchased securities and designated them as held-to maturity and, as a result, at September 30, 2021, Peoples recorded $236,000 of allowance for credit losses for held-to-maturity securities, compared to $60,000 at December 31, 2020.




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The following table presents a summary of held-to-maturity investment securities that had been in a continuous unrealized loss position:
 Less than 12 Months12 Months or MoreTotal
(Dollars in thousands)Fair
Value		Unrealized LossNo. of SecuritiesFair
Value		Unrealized LossNo. of SecuritiesFair
Value		Unrealized Loss
September 30, 2021        
Obligations of:
U.S. government sponsored agencies$25,587 $933 5 — — — $25,587 $933 
States and political subdivisions89,532 2,421 37 — — — 89,532 2,421 
Residential mortgage-backed securities
17,426 195 2 — — — 17,426 195 
Commercial mortgage-backed securities
39,641 1,208 11 — — — 39,641 1,208 
Total$172,186 $4,757 55 $— $— — $172,186 $4,757 
December 31, 2020        
Obligations of:
States and political subdivisions$18,662 $165 5 $— $— — $18,662 $165 
Total$18,662 $165 5 $— $— — $18,662 $165 
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, 2021.  The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 22.3%.  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$— $— $— $29,995 $29,995 
States and political subdivisions— 989 2,511 120,917 124,417 
Residential mortgage-backed securities— 1,939 — 39,096 41,035 
Commercial mortgage-backed securities355 — 8,655 38,879 47,889 
Total held-to-maturity securities$355 $2,928 $11,166 $228,887 $243,336 
Fair value     
Obligations of:     
U.S. government sponsored agencies$— $— $— $29,147 $29,147 
States and political subdivisions— 1,132 2,794 118,509 122,435 
Residential mortgage-backed securities— 2,015 — 39,486 41,501 
Commercial mortgage-backed securities358 — 8,844 37,715 46,917 
Total held-to-maturity securities$358 $3,147 $11,638 $224,857 $240,000 
Total weighted-average yield2.25 %2.29 %2.37 %2.05 %2.07 %
Other Investment Securities
Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB and FRB stock.
The following table summarizes the carrying value of Peoples' other investment securities:
(Dollars in thousands)September 30, 2021December 31, 2020
FHLB stock$17,918 $21,718 
FRB stock13,311 13,311 
Nonqualified deferred compensation2,083 1,867 
Equity investment securities390 299 
Other investment securities784 365 
Total other investment securities$34,486 $37,560 

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During the nine months ended September 30, 2021, Peoples redeemed $7.5 million of FHLB stock as requested by the FHLB. During the three months ended September 30, 2021, Peoples acquired $3.7 million in FHLB stock in the Merger with Premier.
During the three and nine months ended September 30, 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 $18,000 and $91,000, respectively. During the three and nine months ended September 30, 2020, 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 $1,000 and an unrealized loss of $15,000, respectively.
At September 30, 2021, 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, 2021December 31, 2020
Securing public and trust department deposits, and repurchase agreements:
     Available-for-sale$851,966 $547,244 
     Held-to-maturity143,467 28,287 
Securing collateral for cash flow hedge swaps:
     Available-for-sale36,314 — 
Securing additional borrowing capacity at the FHLB and the FRB:
     Available-for-sale7,036 2,175 
     Held-to-maturity556 — 

Note 4 Loans and Leases
Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint. Peoples also originates insurance premium finance loans and leases nationwide through its Peoples Premium Finance and North Star Leasing divisions, respectively. Loans and leases throughout this document are referred to as "total loans" and "loans held for investment".

The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows:
(Dollars in thousands)September 30,
2021		December 31, 2020
Construction$174,784 $106,792 
Commercial real estate, other1,629,116 929,853 
Commercial and industrial858,538 973,645 
Premium finance134,755 114,758 
Leases111,446 — 
Residential real estate768,134 574,007 
Home equity lines of credit161,370 120,913 
Consumer, indirect543,256 503,527 
Consumer, direct108,702 79,094 
Deposit account overdrafts927 351 
Total loans, at amortized cost$4,491,028 $3,402,940 
    
On September 17, 2021, Peoples completed the merger with Premier effective after the close of the business day. Peoples acquired $1.1 billion in loans, of which $285.3 million were considered purchased credit deteriorated loans. See "Note 13

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Acquisitions" for more detail on the merger with Premier. Effective after the close of business on March 31, 2021, Peoples acquired $83.3 million in leases from NS Leasing, LLC (" NSL"), of which $5.2 million were considered purchased credit deteriorated leases. Refer to "Note 13 Acquisitions" for more detail on the acquisition of leases from NSL.
Peoples began participating as a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender during the second quarter of 2020. Peoples originated PPP loans of $159.2 million during the first nine months of 2021 and $488.9 million of PPP loans during the full year of 2020. At September 30, 2021, the PPP loans (including $28.2 million acquired from Premier) had an amortized cost of $135.8 million, and were included in commercial and industrial loan balance. As of September 30, 2021, deferred loan origination fees, net of deferred origination costs, totaled $4.0 million. During the third quarter of 2021, Peoples recorded amortization of net deferred loan origination fees of $3.8 million on PPP loans compared to $1.9 million for the third quarter of 2020. Peoples recorded accretion of net deferred loan origination fees of $11.2 million and $3.8 million, for the nine months ended September 30, 2021 and 2020, respectively. 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 $12.4 million at September 30, 2021 and $10.9 million at December 31, 2020.
Nonaccrual and Past Due Loans
A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due.
The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing were as follows:
September 30, 2021December 31, 2020
(Dollars in thousands)
Nonaccrual (a)
Accruing Loans 90+ Days Past Due
Nonaccrual (a)
Accruing Loans 90+ Days Past Due
Construction$— $— $4 $— 
Commercial real estate, other17,301 1,912 9,111 — 
Commercial and industrial5,356 98 6,192 50 
Premium finance— 368 — 204 
Leases1,411 1,736 — — 
Residential real estate9,735 1,156 8,375 1,975 
Home equity lines of credit976 61 867 82 
Consumer, indirect1,069 — 1,073 39 
Consumer, direct186 32 171 17 
Total loans, at amortized cost$36,034 $5,363 $25,793 $2,367 
(a) There were $0.6 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2021 and $1.3 million at December 31, 2020.
During the first nine months of 2021, nonaccrual loans increased compared to December 31, 2020, primarily due to the non-accrual loans acquired from Premier, which added $13.0 million in nonaccrual loans at the end of the third quarter of 2021. As of September 30, 2021, the short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers, Peoples had made were insignificant. Under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. As such, these modifications made in accordance with the CARES Act were not included in Peoples' nonaccrual or accruing loans 90+ days past due at September 30, 2021. During the third quarter of 2021, accruing loans 90+ days past due increased primarily due to the loans acquired from Premier.
The amount of interest income recognized on loans past due 90 days or more during the three and nine months ended September 30, 2021 was $0.2 million and $0.9 million, respectively.







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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, 2021
Construction$146 $16 $— $162 $174,622 $174,784 
Commercial real estate, other4,513 2,349 14,116 20,978 1,608,138 1,629,116 
Commercial and industrial924 566 5,324 6,814 851,724 858,538 
Premium finance440 281 368 1,089 133,666 134,755 
Leases393 194 1,736 2,323 109,123 111,446 
Residential real estate4,138 2,649 5,353 12,140 755,994 768,134 
Home equity lines of credit487 166 758 1,411 159,959 161,370 
Consumer, indirect2,977 477 346 3,800 539,456 543,256 
Consumer, direct134 224 101 459 108,243 108,702 
Deposit account overdrafts— — — — 927 927 
Total loans, at amortized cost$14,152 $6,922 $28,102 $49,176 $4,441,852 $4,491,028 
December 31, 2020
Construction$— $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 finance928 1,073 204 2,205 112,553 114,758 
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$15,272 $5,774 $20,149 $41,195 $3,361,745 $3,402,940 
Delinquency trends remained stable, as 98.9% of Peoples' loan portfolio was considered “current” at September 30, 2021, compared to 98.8% at December 31, 2020.
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, 2021December 31, 2020
Loans pledged to FHLB$752,382 $740,584 
Loans pledged to FRB135,504 107,340 
Credit Quality Indicators
As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2020 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible credit deterioration. Loan relationships whose aggregate credit exposure to Peoples is equal to or less than $1.0 million are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, including loans acquired from Premier, 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.

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“Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position.
“Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected.
“Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of each of these loans as an estimated loss is deferred until its more exact status may be determined.
“Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category.
Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” 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, 2021:
Term Loans at Amortized Cost by Origination YearRevolving Loans Converted to Term
(Dollars in thousands)20212020201920182017PriorRevolving Loans
Total
Loans
Construction

  Pass$57,422 $73,789 $16,624 $3,289 $1,286 $2,829 $1,755 $4,170 $156,994 
  Special mention290 — 7,185 1,092 3,805 138 — — 12,510 
  Substandard— — 957 79 159 4,085 — — 5,280 
     Total57,712 73,789 24,766 4,460 5,250 7,052 1,755 4,170 174,784 
Commercial real estate, other

  Pass195,110 266,264 240,617 153,836 160,057 427,073 23,815 12,128 1,466,772 
  Special mention159 10,353 8,398 7,077 8,798 33,558 — 51 68,343 
  Substandard— 1,679 6,644 2,299 5,668 76,655 371 41 93,316 
  Doubtful— — — — — 669 — — 669 
  Loss— — — — — 16 — — 16 
     Total195,269 278,296 255,659 163,212 174,523 537,971 24,186 12,220 1,629,116 
Commercial and industrial
  Pass241,877 135,119 90,671 67,107 30,843 102,471 154,178 14,440 822,266 
  Special mention82 1,281 2,327 3,622 164 991 2,702 10 11,169 

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Term Loans at Amortized Cost by Origination YearRevolving Loans Converted to Term
(Dollars in thousands)20212020201920182017PriorRevolving Loans
Total
Loans
  Substandard94 2,858 2,739 875 6,921 3,853 5,690 608 23,030 
  Doubtful— — — — — 1,808 265 187 2,073 
     Total242,053 139,258 95,737 71,604 37,928 109,123 162,835 15,245 858,538 
Premium finance
  Pass131,142 3,613 — — — — — — 134,755 
     Total131,142 3,613 — — — — — — 134,755 
Leases
  Pass56,901 30,875 16,750 4,473 491 26 — — 109,516 
  Special mention99 10 68 17 — — — — 194 
  Substandard123 502 531 572 8 — — — 1,736 
     Total57,123 31,387 17,349 5,062 499 26 — — 111,446 
Residential real estate
  Pass115,657 75,578 55,305 35,693 46,720 422,673 — — 751,626 
  Substandard— — — — — 16,079 — — 16,079 
   Loss— — — — — 429 — — 429 
     Total115,657 75,578 55,305 35,693 46,720 439,181 — — 768,134 
Home equity lines of credit
  Pass25,901 23,840 19,084 17,112 15,625 57,574 2,234 3,164 161,370 
     Total25,901 23,840 19,084 17,112 15,625 57,574 2,234 3,164 161,370 
Consumer, indirect
  Pass195,954 183,489 72,009 53,063 26,499 12,242 — — 543,256 
     Total195,954 183,489 72,009 53,063 26,499 12,242 — — 543,256 
Consumer, direct
  Pass42,124 30,880 15,541 9,863 3,861 6,433 — — 108,702 
     Total42,124 30,880 15,541 9,863 3,861 6,433 — — 108,702 
Deposit account overdrafts927 — — — — — — — 927 
Total loans, at amortized cost$1,063,862 $840,130 $555,450 $360,069 $310,905 $1,169,602 $191,010 $34,799 $4,491,028 
The following table summarizes the risk category of Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at December 31, 2020:
(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 

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(Dollars in thousands)20202019201820172016PriorRevolving LoansRevolving Loans Converted to Term
Total
Loans
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 

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 general 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.

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•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, 2021December 31, 2020
Construction$4,276 $— 
Commercial real estate, other35,820 8,467 
Commercial and industrial11,446 6,333 
Residential real estate1,321 1,670 
Home equity lines of credit393 403 
Total collateral dependent loans$53,256 $16,873 
The increase in collateral dependent loans at September 30, 2021, compared to December 31, 2020, was primarily due to $39.1 million in collateral dependent loans acquired from Premier.
Troubled Debt Restructurings
The following tables summarize the loans that were modified as troubled debt restructurings ("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, 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 
September 30, 2020
Commercial real estate, other3 $2,214 $2,214 $1,112 
Commercial and industrial4 3,657 3,657 3,658 
Residential real estate10 608 608 608 
Home equity lines of credit3 68 68 68 
Consumer, indirect11 126 126 126 
Consumer, direct2 16 16 16 
   Consumer13 142 142 142 
Total33 $6,689 $6,689 $5,588 
(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, 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 
September 30, 2020
Commercial real estate, other5 $2,533 $2,533 $1,430 
Commercial and industrial5 3,803 3,803 3,804 
Residential real estate16 1,237 1,267 1,261 
Home equity lines of credit7 123 123 121 
Consumer, indirect23 235 235 216 
Consumer, direct5 68 68 63 
   Consumer28 303 303 279 
Total61 $7,999 $8,029 $6,895 
(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, borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not in the scope of accounting for TDRs, as defined in ASC 310-40.
The following table presents those loans modified into a TDR during the year that subsequently defaulted (i.e., 90 days or more past due following a modification) during the nine-month periods ended September 30:
September 30, 2021September 30, 2020
(Dollars in thousands)Number of ContractsRecorded Investment (a)Impact on the Allowance for Credit LossesNumber of ContractsRecorded Investment (a)Impact on the Allowance for Credit Losses
Commercial real estate, other— $— — 1 $54 — 
Residential real estate3 113 — — — — 
Total3 $113 $— 1 $54 $— 
(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 borrowers whose loan terms have been modified in a TDR.

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Allowance for Credit Losses
Changes in the allowance for credit losses for the three months ended September 30, 2021 and September 30, 2020 are summarized below:
(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-offsRecoveries
Ending 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.
(Dollars in thousands)Beginning Balance, June 30, 2020Initial 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, 2020
Construction$2,662 $— $— $(148)$— $— $2,514 
Commercial real estate, other19,148 — — (8)(109)4 19,035 
Commercial and industrial10,106 — — 3,139 (146)— 13,099 
Premium finance— — 990 (2)(2)— 986 
Residential real estate6,380 — — (371)(121)100 5,988 
Home equity lines of credit1,755 — — 40 — 2 1,797 
Consumer, indirect12,293 — — 785 (370)64 12,772 
Consumer, direct1,941 — — (78)(15)13 1,861 
Deposit account overdrafts77 — — 154 (202)47 76 
Total$54,362 $— $990 $3,511 $(965)$230 $58,128 
(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, 2021 and September 30, 2020 are summarized below:
(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.

(Dollars in thousands)Beginning Balance,
January 1, 2020 (a)		Initial Allowance for Acquired Purchased Credit Deteriorated AssetsProvision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets Provision for (Recovery of) Credit Losses (b)Charge-offsRecoveries
Ending Balance, September 30, 2020
Construction$600 $51 $— $1,863 $— $— $2,514 
Commercial real estate, other7,193 1,356 — 10,614 (254)126 19,035 
Commercial and industrial4,960 860 — 6,368 (1,098)2,009 13,099 
Premium finance— — 990 (2)(2)— 986 
Residential real estate3,977 383 — 1,626 (255)257 5,988 
Home equity lines of credit1,570 2 — 237 (23)11 1,797 
Consumer, indirect5,389 — — 8,549 (1,427)261 12,772 
Consumer, direct856 34 — 1,062 (128)37 1,861 
Deposit account overdrafts94 — — 360 (534)156 76 
Total$24,639 $2,686 $990 $30,677 $(3,721)$2,857 $58,128 
(a)Peoples adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) on January 1, 2020.
(b)Amount does not include the provision for the allowance for credit losses on unfunded commitments.

During the 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 acquisition of Premier. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier. During the second quarter of 2021, Peoples recorded provision for credit losses to establish the allowance for credit losses of $3.3 million for the acquired non-purchased credit deteriorated leases from NSL along with an increase in allowance for credit loss of $0.5 million related to the purchase credit

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deteriorated leases acquired from NSL. Lastly, economic assumptions and loss drivers used in the CECL model continued to improve in the current year, partially offsetting the increase in allowance driven by the aforementioned acquired loans and leases. The PPP loans originated during 2021 and 2020 are guaranteed by the SBA, and therefore, had no impact on the allowance for credit losses at September 30, 2021 and at December 31, 2020.
At September 30, 2021, Peoples had recorded an allowance for unfunded commitments of $2.4 million, an increase compared to $2.2 million at June 30, 2021, and a decrease compared to $2.9 million at December 31, 2020. The total amount of unfunded commitments had increased compared to June 30, 2021 due to the unfunded commitments associated with the Premier acquisition and decreased compared to December 31, 2020 due to the improved economic forecast conditions. 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, 2021December 31, 2020
Goodwill, beginning of year$171,260 $165,701 
Goodwill recorded from acquisitions95,755 5,559 
Goodwill, end of period$267,015 $171,260 
Peoples Bank entered into the Asset Purchase Agreement, dated March 24, 2021 with NSL. The transaction closed after the close of business on March 31, 2021 and Peoples Bank began operating the acquired business as a division of Peoples Bank on April 1, 2021. On April 1, 2021, Peoples recorded $24.7 million of goodwill related to the acquisition from NSL. On May 4, 2021, Peoples Insurance Agency, LLC ("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. Peoples recorded $46,000 of goodwill from this completed acquisition. On September 17, 2021, Peoples completed the merger with Premier, for which Peoples recorded $71.0 million of goodwill. In 2020, Peoples completed its acquisition of Premium Finance, recording $5.5 million in goodwill. Also, in 2020 Peoples Insurance completed an acquisition of a property and casualty-focused independent insurance agency for which $0.1 million of goodwill was recorded. For additional information on these acquisitions, refer to "Note 13 Acquisitions."
Other Intangible Assets
Other intangible assets were comprised of the following at end of period, September 30, 2021 and end of year, December 31, 2020:
(Dollars in thousands)Core DepositsCustomer RelationshipsTotal
September 30, 2021
Gross intangibles$25,805 $25,096 $50,901 
Accumulated amortization(17,813)(8,256)(26,069)
Total acquisition-related intangibles$7,992 $16,840 $24,832 
Servicing rights2,294 
Indefinite-lived intangibles1,274 
Total other intangibles$28,400 
December 31, 2020
Gross intangibles$22,233 $12,495 $34,728 
Accumulated amortization(17,298)(6,579)(23,877)
Total acquisition-related intangibles$4,935 $5,916 $10,851 
Servicing rights2,486 
Total other intangibles$13,337 
Other intangible assets recorded from the above-mentioned acquisitions year-to-date as of September 30, 2021 were $13.0 million of customer relationship intangible assets related to the NSL and Peoples Insurance acquisitions, and $4.2 million of core deposit intangible assets related to Premier. Refer to "Note 13 Acquisitions" for additional information. Other intangible assets recorded in 2020 included $5.0 million of customer relationship intangible assets from the Premium Finance and Peoples Insurance acquisitions.
The following table details estimated aggregate future amortization of other intangible assets at September 30, 2021:

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(Dollars in thousands)Core DepositsCustomer RelationshipsTotal
2021$574 $934 $1,508 
20221,620 4,014 5,634 
20231,257 3,712 4,969 
20241,058 2,733 3,791 
2025891 1,941 2,832 
Thereafter2,592 3,506 6,098 
Total$7,992 $16,840 $24,832 
The weighted average amortization period of other intangible assets is 8.1 years.
Servicing Rights
The following is an analysis of activity of servicing rights for the periods ended September 30,2021 and December 31, 2020:
(Dollars in thousands)September 30, 2021December 31, 2020
Balance, beginning of year$2,486 $2,742 
Amortization(591)(1,121)
Servicing rights originated415 1,026 
Valuation allowance(16)(161)
Balance, end of period$2,294 $2,486 
Peoples accounts for its servicing rights under the amortization method, recognizing a valuation allowance when amortized cost exceeds fair value. As of September 30, 2021, Peoples has recorded a valuation allowance of $16,000 related to the decrease in the fair value of servicing rights. During 2020, Peoples recorded a valuation allowance of $161,000 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 30,2021 and December 31, 2020:
September 30, 2021December 31, 2020
Minimum MaximumMinimumMaximum
Discount rates8.3 %10.8 %8.3 %10.8 %
Prepayment speeds8.4 %27.2 %12.8 %21.1 %
The fair value of servicing rights was $2.3 million and $2.6 million at September 30, 2021 and December 31, 2020, respectively.

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

(Dollars in thousands)September 30, 2021December 31, 2020
Retail CDs:  
$100 or more$343,324 $220,532 
Less than $100348,356 225,398 
Retail CDs691,680 445,930 
Interest-bearing deposit accounts1,140,639 692,113 
Savings accounts1,016,755 628,190 
Money market deposit accounts637,635 591,373 
Governmental deposit accounts679,305 385,384 
Brokered deposit accounts (a)106,013 170,146 
Total interest-bearing deposits4,272,027 2,913,136 
Non-interest-bearing deposits1,559,993 997,323 
Total deposits$5,832,020 $3,910,459 
(a) At September 30, 2021, brokered deposit accounts included $100.0 million of brokered demand deposits.
At December 31, 2020, brokered deposit accounts included $50.0 million of 90-day brokered CDs and
$110.0 million of brokered demand deposits

Time deposits that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") limit of $250,000 were $134.3 million and $89.0 million at September 30, 2021 and December 31, 2020, respectively. The increase compared to December 31, 2020 was mostly due to the deposits acquired from Premier.
The contractual maturities of retail CDs and brokered CDs and demand deposits for each of the next five years and thereafter are as follows:
(Dollars in thousands)RetailBrokeredTotal
Remaining three months ending December 31, 2021 (a)$142,996 $101,307 $244,303 
Year ending December 31, 2022375,448 4,216 379,664 
Year ending December 31, 202366,339 490 66,829 
Year ending December 31, 202462,021 — 62,021 
Year ending December 31, 202522,021 — 22,021 
Thereafter22,855 — 22,855 
Total CDs$691,680 $106,013 $797,693 
(a) Brokered deposit accounts include $100.0 million of brokered demand deposits.
At September 30, 2021, Peoples had sixteen effective interest rate swaps, with an aggregate notional value of $150.0 million, of which $100.0 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, 2021:
 Common Shares
Treasury
Stock
Shares at December 31, 202021,193,402 1,686,046 
Changes related to stock-based compensation awards:  
Release of restricted common shares— 29,135 
Cancellation of restricted common shares— 7,168 
Grant of restricted common shares— (101,926)
Grant of unrestricted common shares— (5,747)
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock— 5,309 
Disbursed out of treasury stock— (2,983)
Common shares issued under dividend reinvestment plan23,348 — 
Common shares issued under compensation plan for Boards of Directors
— (5,535)
Common shares issued under employee stock purchase plan
— (11,874)
Issuance of common shares related to the merger with Premier Financial Bancorp, Inc.
8,589,685 — 
Shares at September 30, 202129,806,435 1,599,593 
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, replacing the February 27, 2020 share repurchase program which had authorized Peoples to purchase up to an aggregate of $40.0 million of Peoples' outstanding common shares. At September 30, 2021, Peoples had not repurchased any common shares under the share repurchase program authorized on January 28, 2021.
Under Peoples' Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by Peoples' Board of Directors. At September 30, 2021, Peoples had no preferred shares issued or outstanding.
On October 25, 2021, Peoples' Board of Directors declared a quarterly cash dividend of $0.36 per common share, payable on November 22, 2021, to shareholders of record on November 8, 2021. The following table details the cash dividends declared per common share during the four quarters of 2021 and the comparable periods of 2020:
20212020
First quarter$0.35 0.34 
Second quarter0.36 0.34 
Third quarter0.36 0.34 
Fourth quarter$0.36 $0.35 
Total dividends declared$1.43 $1.37 
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, 2021:
(Dollars in thousands)Unrealized Gain on SecuritiesUnrecognized Net Pension and Postretirement CostsUnrealized Loss on Cash Flow HedgeAccumulated Other Comprehensive (Loss) Income
Balance, December 31, 2020$14,592 $(3,872)$(9,384)$1,336 
Reclassification adjustments to net income:
  Realized gain on sale of securities, net of tax547 — — 547 
Realized loss due to settlement and curtailment, net of tax— 111 — 111 
Other comprehensive (loss) income, net of reclassifications and tax
(13,245)1,481 3,882 (7,882)
Balance, September 30, 2021$1,894 $(2,280)$(5,502)$(5,888)
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.
The expected long-term rate of return on plan assets, which was determined as of January 1, 2021, is 7.0%. The following table details the components of the net periodic cost for the plan described above, which is included in salaries and employee benefit costs on the Unaudited Consolidated Statements of Operations:
Pension Benefits
 Three Months EndedNine Months Ended
 September 30,September 30,
(Dollars in thousands)2021202020212020
Interest cost$60 $80 $194 $256 
Expected return on plan assets(143)(187)(492)(577)
Amortization of net loss21 35 84 101 
Settlement of benefit obligation143 531 143 1,050 
Net periodic loss (income)$81 $459 $(71)$830 
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 a settlement charge of $143,000 during the three and nine months ended September 30, 2021 under the noncontributory defined benefit pension plan. Peoples recorded settlement charges of $531,000 and $1.1 million, respectively, during the three and nine months ended September 30, 2020 under the noncontributory defined benefit pension plan.


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Note 9 Earnings Per Common Share
The calculations of basic and diluted (loss) earnings per common share were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands, except per common share data)2021202020212020
Net (loss) income available to common shareholders$(5,758)$10,210 $19,808 $14,194 
Less: Dividends paid on unvested shares(79)(96)(214)(274)
Add: Undistributed earnings (loss) allocated to unvested shares21 (2)2 4 
Net (loss) earnings allocated to common shareholders$(5,816)$10,112 $19,596 $13,924 
Weighted-average common shares outstanding20,640,519 19,504,503 19,751,853 19,862,409 
Effect of potentially dilutive common shares148,752 133,186 138,819 135,944 
Total weighted-average diluted common shares outstanding20,789,271 19,637,689 19,890,672 19,998,353 
(Loss) earnings per common share:
Basic$(0.28)$0.52 $0.99 $0.70 
Diluted$(0.28)$0.51 $0.99 $0.70 
Anti-dilutive common shares excluded from calculation:
Restricted shares — 69,459 — 67,759 
Note 10 Derivative Financial Instruments
Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivatives is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows.
Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments
Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions.
Cash Flow Hedges of Interest Rate Risk
Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At September 30, 2021, Peoples had entered into sixteen interest rate swap contracts with an aggregate notional value of $150.0 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 brokered demand deposits, which will continue to be rolled through the life of the swaps. At September 30, 2021, the interest rate swaps were designated as cash flow hedges of $100.0 million in brokered demand deposits, which are expected to be extended every 90 days through the maturity dates of the swaps. The remaining $50.0 million of interest rate swaps were designated as cash flow hedges of 90-day FHLB Advances.

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For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the 90-day advances or brokered CDs are matched to the reset dates and payment dates on the receipt of the three-month LIBOR floating portion of the swaps to ensure effectiveness of the cash flow hedge. During the three and nine months ended September 30, 2021, Peoples had reclassifications of losses to earnings of $766,000 and $2.3 million, respectively. During the three and nine months ended September 30, 2020, Peoples had reclassifications of losses to earnings of $732,000 and $1.2 million, respectively. During the next twelve months, Peoples estimates that minimal interest expense will be reclassified.
The following table summarizes information about the interest rate swaps designated as cash flow hedges:
(Dollars in thousands)September 30,
2021		December 31,
2020
Notional amount$150,000 $160,000 
Weighted average pay rates2.13 %2.18 %
Weighted average receive rates0.76 %0.38 %
Weighted average maturity3.8 years4.4 years
Pre-tax unrealized losses included in AOCI$(7,143)$(11,879)
The following table presents net gains or losses recorded in AOCI and in the Unaudited Consolidated Statements of Operations related to the cash flow hedges:
Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2021202020212020
Amount of (gain) loss recognized in AOCI, pre-tax$(858)$(803)$(4,800)$9,661 
The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:
September 30,
2021		December 31,
2020
(Dollars in thousands)Notional AmountFair ValueNotional AmountFair Value
Included in "Accrued expenses and other liabilities":
Interest rate swaps related to debt$150,000 $7,252 $160,000 $12,063 
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, 2021 and at or for the year ended December 31, 2020.
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,
2021		December 31,
2020
(Dollars in thousands)Notional AmountFair ValueNotional AmountFair Value
Included in "Other assets":
Interest rate swaps related to commercial loans$403,208 $15,653 $415,044 $27,332 
Included in "Accrued expenses and other liabilities":
Interest rate swaps related to commercial loans$403,208 $15,653 $415,044 $27,332 
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, 2021 and December 31, 2020, Peoples had zero and $41.0 million, respectively, of cash pledged, while the counterparties had no amount of cash pledged at either date. Cash pledged was included in "Interest-bearing deposits in other banks" on the Audited Consolidated Balance Sheet as of December 31, 2020. Peoples had pledged $36.3 million and zero in investment securities at September 30, 2021 and December 31, 2020, respectively.

Note 11 Stock-Based Compensation
Under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 891,340.  The maximum number of common shares that can be issued for incentive stock options is 500,000 common shares.  Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. Additionally, in 2020 and 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 2021, Peoples granted an aggregate of 76,819 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, 2021:
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 167,758 $23.71 250,992 $33.36 
Awarded25,107 32.58 76,819 31.48 
Released(9,127)35.63 (73,611)35.43 
Forfeited(500)34.75 (6,668)32.42 
Outstanding at September 3083,238 $25.01 247,532 $32.19 
For the nine months ended September 30, 2021, the total intrinsic value for restricted common shares released was $2.6 million compared to $2.0 million for the nine months ended September 30, 2020.
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 and performance unit awards, 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

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the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. For performance unit awards, Peoples recognizes stock-based compensation over the performance period, based on the portion of the awards that was expected to vest based on the expected level of achievement of the two performance goals. Peoples also has an 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)2021202020212020
Employee stock-based compensation expense:
Stock grant expense$597 $615 $2,381 $2,950 
Employee stock purchase plan expense21 17 $55 $47 
Performance unit benefit— — $— $(12)
Total employee stock-based compensation expense618 632 $2,436 $2,985 
Non-employee director stock-based compensation expense60 53 $310 $288 
Total stock-based compensation expense678 685 $2,746 $3,273 
Recognized tax benefit(151)(144)(612)(687)
Net stock-based compensation expense$527 $541 $2,134 $2,586 
Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in the nine months ended September 30, 2021 and 2020. 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 $3.0 million at September 30, 2021, which will be recognized over a weighted-average period of 1.9 years. On April 1, 2020, an aggregate of 18,952 unrestricted common shares were granted as a one-time special award to employees under the level of Vice President, with a related stock-based compensation expense of $396,000 being recognized.
In addition to the portion of directors' fees paid in common shares, non-employee director stock-based compensation expense included $135,000 during the first nine months of 2021, and $120,000 during the first nine months of 2020, reflecting separate grants of unrestricted common shares aggregating 4,347 and 3,680 common shares, respectively.

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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)2021202020212020
Insurance income:
Commission and fees from sale of insurance policies (a)$3,231 $3,493 $9,603 $9,117 
Fees related to third-party administration services (a)76 107 276 375 
Performance-based commissions (b)60 9 2,044 1,437 
Trust and investment income (a)4,158 3,435 12,223 10,013 
Electronic banking income:
Interchange income (a)3,280 3,011 9,930 8,255 
Promotional and usage income (a)1,046 755 2,725 2,313 
Deposit account service charges:
Ongoing maintenance fees for deposit accounts (a)933 848 2,597 2,677 
Transactional-based fees (b)1,616 1,418 3,981 4,318 
Commercial loan swap fees (b)73 68 194 1,267 
Other non-interest income transactional-based fees (b)207 94 601 624 
Total revenue from contracts with customers$14,680 $13,238 $44,174 $40,396 
Timing of revenue recognition:
Services transferred over time$12,724 $11,649 $37,354 $32,750 
Services transferred at a point in time1,956 1,589 6,820 7,646 
Total revenue from contracts with customers$14,680 $13,238 $44,174 $40,396 
(a) Services transferred over time.
(b) Services transferred at a point in time.
Peoples records contract assets for income that has been recognized over a period of time for fulfillment of performance obligations, but has not yet been received related to electronic banking income and certain insurance income. This income typically relates to bonuses for which Peoples is eligible, but will not receive until a certain time in the future. Peoples records contract liabilities for payments received for commission income related to the sale of insurance policies, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled, which is over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled related to electronic banking income.
The following table details the changes in Peoples' contract assets and contract liabilities for the nine-month period ended September 30, 2021:
 Contract AssetsContract Liabilities
(Dollars in thousands)
Balance, January 1, 2021$1,247 $5,224 
     Additional income receivable144 — 
     Receipt of income previously receivable(701)— 
     Recognition of income previously deferred— (488)
Balance, September 30, 2021$690 $4,736 


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Note 13 Acquisitions
Premier Financial Bancorp, Inc.
On September 17, 2021, Peoples completed its merger with Premier. Premier merged into Peoples, and Premier’s wholly-owned subsidiaries, Premier Bank, Inc., and Citizens Deposit Bank and Trust, Inc., which combined operate 48 branches in Kentucky, Maryland, Ohio, Virginia, West Virginia and Washington, D.C., merged into Peoples’ wholly-owned subsidiary, Peoples Bank. As consideration, Premier shareholders were paid 0.58 common shares of Peoples for each full share of Premier that was owned at the acquisition date, resulting in the issuance of 8,589,685 common shares by Peoples, or $261.9 million. Peoples accounted for this transaction as a business combination under the acquisition method. Peoples completed the merger in an effort to diversify and expand its franchise, and further enhance its size and scale. Peoples believes the growth potential, and attractive market areas will benefit its future financial performance.
Peoples recorded acquisition-related expenses related to the Premier merger which included $9.8 million in other non-interest expense; $4.2 million in professional fees; $3.7 million in salaries and employee benefit costs; $181,000 in marketing expense; and $83,000 in data processing and software expense.
Peoples recorded the estimate of fair value based on initial valuations available at September 17, 2021. Due to the timing of the transaction closing date and this Form 10-Q, these estimated fair values are considered preliminary as of September 30, 2021, and are subject to adjustment for up to one year after September 17, 2021. Valuations subject to change include, but are not limited to, loans, bank premises, customer deposit intangibles (included in other intangible assets), certain deposits, trust preferred securities, deferred tax assets and liabilities, and certain other assets and other liabilities.
The following table provides the preliminary purchase price calculation as of the date of the Merger with Premier, and the assets acquired and liabilities assumed at their estimated fair values.
(Dollars in thousands)Unpaid Principal 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$251,763 
Interest-bearing deposits in other banks1,025 
Total cash and cash equivalents252,788 
Available-for-sale investment securities563,294 
Other investment securities4,159 
Total investment securities567,453 
Loans:
  Construction97,262 93,819 
  Commercial real estate, other544,950 517,315 
  Commercial and industrial132,293 127,880 
  Residential real estate332,269 327,508 
  Home equity lines of credit46,969 45,841 
  Consumer21,083 21,527 
Total loans1,174,826 1,133,890 
Bank premises and equipment33,835 
Other intangible assets4,233 
OREO11,101 
Other assets19,671 
    Total assets$2,022,971 

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(Dollars in thousands)Unpaid Principal BalanceFair Value
Liabilities
Deposits:
Non-interest-bearing$735,236 
Interest-bearing1,020,887 
Total deposits1,756,123 
Short-term borrowings63,807 
Long-term borrowings6,070 
Accrued expenses and other liabilities6,036 
Total liabilities1,832,036 
Net assets190,935 
Goodwill$70,989 
The recorded goodwill associated with the Premier merger is related to expected synergies and operational efficiencies to be gained from the combination of Premier with Peoples' operations. None of the goodwill associated with the Premier merger is expected to be deductible for tax purposes. The geographic locations of Premier will allow Peoples to continue to grow the loan and deposit portfolios, while also increasing Peoples' ability to penetrate the new markets with wealth management and insurance services, which should benefit Peoples in future periods. Additional information regarding other intangibles recognized in the acquisition can be found in "Note 5 Goodwill and Other Intangible Assets."
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash and due from banks is a reasonable estimate of fair value.
Investment Securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.
Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan, related collateral, classification status, fixed or variable interest rate, term, amortization status and current discount rates. Loans were grouped together according to similar characteristics when applying various valuation techniques. The discount rates used for loans are based on current market rates at the acquisition date for new originations for comparable loans and include adjustments for liquidity. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows.
Bank Premises and Equipment: The fair values of premises were based on a market approach, with third-party appraisals and broker opinions of value for land, office and branch space.
OREO: The fair values of OREO were based on a market approach, with third-party appraisals and broker opinions of value for land and buildings.
Customer Deposit Intangible: The customer deposit intangible represents the low cost of funding acquired core deposits provide relative to a marginal cost of funds. The fair value was estimated based on a discounted cash flow methodology that gave consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The customer deposit intangible is being amortized over 10 years based upon the period over which estimated economic benefits are estimated to be received.
Deposits: The fair values used for the demand and savings deposits equal the amount payable on demand at the acquisition date. The fair values for time deposits were estimated using a discounted cash flow calculation that applies interest rates being offered at the acquisition date to the contractual interest rates on such time deposits.
Borrowings: Short-term borrowings consist of overnight repurchase agreements and rates, and given their short-term nature book value approximated fair value. The fair values of long-term borrowings are estimated using discounted cash flow analyses, based on incremental borrowing rates at acquisition date for similar types of instruments.
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

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value adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The following table details the fair value adjustment for acquired purchased credit deteriorated loans as of the acquisition date:
(Dollars in thousands)Par ValueAllowance for Credit LossesNon-Credit (Discount) PremiumFair Value
Purchased credit deteriorated loans
Construction$23,232 $(2,127)$(219)$20,886 
Commercial real estate, other176,122 (13,374)(8,022)154,726 
Commercial and industrial26,341 (4,286)281 22,336 
Residential real estate56,005 (2,394)(2,166)51,445 
Home equity lines of credit2,014 (41)(68)1,905 
Consumer1,614 (112)63 1,565 
Fair value$285,328 $(22,334)$(10,131)$252,863 
Peoples' operating results for the three-month and nine-month periods ended September 30, 2021 include the operating results of the acquired assets and assumed liabilities of Premier subsequent to the acquisition on September 17, 2021. Due to the conversion of Premier systems during the third quarter of 2021, as well as other streamlining and integration of the operating activities into those of Peoples, historical reporting for the former Premier operations is impracticable and the disclosures of revenue from the assets acquired and income before income taxes is impracticable for the period subsequent to the acquisition. The following table presents unaudited pro forma information as if the acquisition of Premier had occurred on January 1, 2020. The pro forma adjustments include any changes in interest income due to the accretion of discounts, or amortization of premiums, associated with the fair value adjustments to acquired loans, interest-bearing deposits, long-term borrowings, trust preferred securities and customer deposit intangibles that would have resulted had the assets and liabilities been acquired as of January 1, 2020. The pro forma information excludes Peoples' acquisition-related expenses, which primarily included, but were not limited to, salaries and employee benefit costs, severance costs, professional fees, marketing expenses and deconversion costs. Those acquisition-related expenses totaled $16.2 million and $18.1 million for the quarter and year-to-date, respectively. The pro forma information also excludes a provision of credit losses of $11.0 million recorded 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 acquired loans. The pro forma information does not necessarily reflect the results of operations that would have occurred had Peoples acquired Premier on January 1, 2020. Additionally, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts.
Unaudited Pro Forma For
Three Months EndedNine Months Ended
(Dollars in thousands)September 30,
2021		September 30,
2020		September 30,
2021		September 30,
2020
Net interest income$59,248 $52,646 $168,644 $156,285 
Non-interest income19,071 18,967 57,061 53,507 
Net income17,492 16,151 56,862 31,529 
Pikeville, Kentucky Insurance Agency
On May 4, 2021, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc. Total consideration for this transaction was $325,000. Peoples accounted for this transaction as a business combination under the acquisition method.
NS Leasing, LLC
Peoples Bank entered into an Asset Purchase Agreement, dated March 24, 2021 with NS Leasing, LLC, which is headquartered in Burlington, Vermont, and does business as “North Star Leasing”. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as a division of Peoples Bank on April 1, 2021. Peoples Bank acquired assets comprising NSL’s equipment finance business and assumed from NSL certain specified liabilities for total cash consideration of $116.5 million, plus a potential earnout payment to NSL of up to $3.1 million. Peoples Bank acquired $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million. NSL underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded preliminary goodwill in the amount of $24.7 million and preliminary other intangibles of $14.0 million, which included a customer relationship intangible, trade-name intangible and non-compete agreements related to this transaction. Peoples recorded an additional $0.4 million in non-interest expense during the third quarter of 2021 related to an update to the estimated earn-out provision of $2.7 million. As of

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September 30, 2021, leases had grown to $111.4 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 bonus earn-out provision recorded by Peoples related to the NSL acquisition was determined based on a weighting of probability of outcomes, at present value. Peoples predominately weighted the outcomes of the factors at around a 100% payout expectation of the base earn-out, which is $2.7 million in total. Adjusting weighting into the bonus expectation in the third quarter resulted in an additional $625,000 of potential payout. Peoples anticipates that NSL will meet the minimums for the base earn-out payment, and will likely meet the targets set at acquisition for a 100% payout of the base earn-out.
The following table provides the preliminary purchase price calculation as of the date of acquisition for NSL and the assets acquired and liabilities assumed at their estimated fair values.
(Dollars in thousands)
Total purchase price (a)$118,846 
Net assets at fair value
Assets
Cash and due from banks$216 
Net 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 $0.4 million in non-interest expense related to an update to the estimated earn-out provision.
The estimated fair values presented in the above table reflect additional information that was obtained during the three months ended September 30, 2021, which resulted in changes to certain fair value estimates made as of the date of acquisition. Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously recorded results have changed. The below table reflects the changes in the estimated fair value as they impact goodwill at September 30, 2021:
(Dollars in thousands)Change in fair value
Net assets
Other intangible assets$(474)
Other assets(380)
Accrued expenses and other liabilities380 
Change in goodwill$(474)
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:

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(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 third quarter of 2021, which included $13,000 in professional fees. For the first nine months of 2021, Peoples recorded acquisition-related expenses related to the NSL acquisition which included $2.1 million in professional fees; $209,000 in other non-interest expense; $3,000 in salaries and employee benefit costs; $3,000 in data processing and software expense; $2,000 in net occupancy and equipment expense; and $2,000 in marketing expense.
Note 14 Leases
Peoples has elected certain practical expedients, in accordance with Accounting Standards Codification 842 - Leases ("ASC 842"). 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. The leases acquired 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. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases consist of automotive, construction, healthcare, manufacturing, office, restaurant, and other equipment. These sales-type 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. 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' sales-type 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, 2021September 30, 2021
Interest and fees on leases (a)$4,810 9,025 
Other non-interest income471 716 
Total lease income$5,281 $9,741 
(a)Included in "Interest and fees on loans" on the Unaudited Consolidated Statements of Operations.
For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed
Consolidated Financial Statements.



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The following table summarizes the net investments in sales-type leases, which are included in "Loans and leases, net of deferred costs" on the Unaudited Consolidated Balance Sheets:
(Dollars in thousands)September 30, 2021
Lease payments receivable, at amortized cost$139,445 
Estimated residual values120 
Initial direct costs802 
Deferred revenue(28,921)
Total leases, at amortized cost111,446 
Allowance for credit losses - leases(4,505)
Net investment in sales-type leases$106,941 
The following table summarizes the contractual maturities of leases:
(Dollars in thousands)Balance
Remaining three months ending December 31, 2021$13,980 
Year ending December 31, 202246,706 
Year ending December 31, 202336,524 
Year ending December 31, 202424,093 
Year ending December 31, 202513,605 
Thereafter4,537 
Lease payments receivable, at amortized cost$139,445 
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, 2021, 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, 2021September 30, 2020September 30, 2021September 30, 2020
Operating lease expense$358 $334 1,038 995 
Short-term lease expense72 71 244 231 
Total lease expense$430 $405 $1,282 $1,226 
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:
(Dollars in thousands)September 30, 2021December 31, 2020
ROU assets:
Other assets$8,732 $6,522 
Lease liabilities:
     Accrued expenses and other liabilities$9,040 $6,776 
Other information:
     Weighted-average remaining lease term9.5 years12.4 years
     Weighted-average discount rate2.39 %3.14 %
During the three and nine months ended September 30, 2021, Peoples paid cash of $345,000 and $1,005,000, respectively, for operating leases. During the three and nine months ended September 30, 2020, Peoples paid cash of $320,000 and $960,000, respectively, for operating leases.
The following table summarizes the maturity of remaining lease liabilities:
(Dollars in thousands)Balance
Remaining three months ending December 31, 2021$728 
Year ending December 31, 20222,270 
Year ending December 31, 20231,612 
Year ending December 31, 2024954 
Year ending December 31, 2025765 
Thereafter4,396 
Total undiscounted lease payments$10,725 
Imputed interest$(1,685)
Total lease liabilities$9,040 


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

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples for the three and nine months ended September 30, 2021 and September 30, 2020. This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto.
SELECTED FINANCIAL DATA
The following data should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the MD&A that follows:
 At or For the Three Months EndedAt or For the Nine Months Ended
 September 30,September 30,
 (Dollars in thousands, expect per share data)2021202020212020
Operating Data (a)
Total interest income$45,467 $39,013 $127,226 $119,181 
Total interest expense2,889 3,894 9,410 14,566 
Net interest income42,578 35,119 117,816 104,615 
Provision for credit losses 8,994 4,728 7,333 33,531 
Net (loss) gain on investment securities(166)2 (704)383 
Net loss on asset disposals and other transactions(308)(28)(459)(237)
Total non-interest income excluding net gains and losses (b)16,820 16,796 50,233 47,025 
Total non-interest expense57,860 34,315 135,746 100,445 
Net (loss) income (c)(5,758)10,210 19,808 14,194 
Balance Sheet Data (a)
Total investment securities $1,574,676 $928,560 $1,574,676 $928,560 
Loans and leases, net of deferred fees and costs ("total loans")4,491,028 3,472,085 4,491,028 3,472,085 
Allowance for credit losses 77,382 58,128 77,382 58,128 
Goodwill and other intangible assets295,415 185,397 295,415 185,397 
Total assets7,059,752 4,911,807 7,059,752 4,911,807 
Non-interest-bearing deposits1,559,993 982,912 1,559,993 982,912 
Brokered deposits106,013 260,753 106,013 260,753 
Other interest-bearing deposits4,166,014 2,697,905 4,166,014 2,697,905 
Short-term borrowings184,693 182,063 184,693 182,063 
Junior subordinated debentures held by subsidiary trust12,928 7,571 12,928 7,571 
Other long-term borrowings86,483 103,815 86,483 103,815 
Total stockholders' equity831,882 566,856 831,882 566,856 
Tangible assets (d)6,764,337 4,726,410 6,764,337 4,726,410 
Tangible equity (d)536,467 381,459 536,467 381,459 
Per Common Share Data (a)
(Loss) earnings per common share – basic$(0.28)$0.52 $0.99 $0.70 
(Loss) earnings per common share – diluted(0.28)0.51 0.99 0.70 
Cash dividends declared per common share0.36 0.34 1.07 1.02 
Book value per common share (e)29.43 28.74 29.43 28.74 
Tangible book value per common share (d)(e)$18.98 $19.34 $18.98 $19.34 
Weighted-average number of common shares outstanding – basic20,640,519 19,504,503 19,751,853 19,862,409 
Weighted-average number of common shares outstanding – diluted20,789,271 19,637,689 19,890,672 19,998,353 
Common shares outstanding at end of period (e)28,265,791 19,721,783 28,265,791 19,721,783 
Closing share price at end of period (e)$31.61 $19.09 $31.61 $19.09 

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 At or For the Three Months EndedAt or For the Nine Months Ended
 September 30,September 30,
 (Dollars in thousands, expect per share data)2021202020212020
Significant Ratios (a)  
Return on average stockholders' equity (f)(3.64)%7.16 %4.44 %3.28 %
Return on average tangible equity (f)(g)(4.76)%11.36 %7.82 %5.38 %
Return on average assets (f)(0.42)%0.83 %0.51 %0.40 %
Return on average assets adjusted for non-core items (f)(h)0.66 %0.91 %1.02 %0.47 %
Average stockholders' equity to average assets11.47 %11.56 %11.48 %12.29 %
Average total loans to average deposits77.17 %87.44 %79.48 %86.15 %
Net interest margin (f)(i)3.50 %3.14 %3.41 %3.27 %
Efficiency ratio (j) 94.70 %64.12 %78.38 %64.37 %
Efficiency ratio adjusted for non-core items (k)63.93 %61.81 %64.32 %62.44 %
Pre-provision net revenue to total average assets (l)0.11 %1.43 %0.83 %1.45 %
Dividend payout ratio (m)(n)NM66.31 %NM145.29 %
Total loans to deposits (e)77.05 %88.04 %77.05 %88.04 %
Total investment securities as percentage of total assets (e)22.30 %18.90 %22.30 %18.90 %
Asset Quality Ratios (a)  
Nonperforming loans as a percent of total loans (e)(o)0.92 %0.84 %0.92 %0.84 %
Nonperforming assets as a percent of total assets (e)(o)0.75 %0.60 %0.75 %0.60 %
Nonperforming assets as a percent of total loans and OREO (e)(o)1.17 %0.85 %1.17 %0.85 %
Criticized loans as a percent of total loans (e)(p)5.23 %3.55 %5.23 %3.55 %
Classified loans as a percent of total loans (e)(q)3.18 %2.19 %3.18 %2.19 %
Allowance for credit losses as a percent of total loans (e)1.72 %1.67 %1.72 %1.67 %
Allowance for credit losses as a percent of nonperforming loans (e)(o)186.93 %198.72 %186.93 %198.72 %
Provision for credit losses as a percent of average total loans1.01 %0.55 %0.28 %1.40 %
Net charge-offs as a percentage of average total loans 0.18 %0.08 %0.13 %0.04 %
Capital Information (a)(e)  
Common equity tier 1 capital ratio (r)12.30 %12.83 %12.30 %12.83 %
Tier 1 risk-based capital ratio12.58 %13.07 %12.58 %13.07 %
Total risk-based capital ratio (tier 1 and tier 2)13.83 %14.33 %13.83 %14.33 %
Tier 1 leverage ratio11.20 %8.62 %11.20 %8.62 %
Common equity tier 1 capital$567,172 $398.553 $567,172 $398.553 
Tier 1 capital580,100 406,124 580,100 406,124 
Total capital (tier 1 and tier 2)637,802 445,101 637,802 445,101 
Total risk-weighted assets$4,611,321 $3,106,817 $4,611,321 $3,106,817 
Total stockholders' equity to total assets11.78 %11.54 %11.78 %11.54 %
Tangible equity to tangible assets (d)7.93 %8.07 %7.93 %8.07 %
(a)Reflects the impact of the acquisitions of Premium Finance on July 1, 2020, NSL beginning April 1, 2021, and of Premier beginning September 17, 2021.
(b)Total non-interest income excluding net gains and losses, is a Non-US GAAP financial measure since it excludes all gains and/or losses included in earnings. Additional information regarding the calculation of total non-interest income excluding net gains and losses can be found under the caption "Efficiency Ratio (Non-US GAAP)."
(c)Net loss for the for the third quarter of 2021 included non-core non-interest expense totaling $18.4 million. Net income for the first nine months of 2021 included non-core non-interest expense totaling $23.8 million. Net income for the third quarter of 2020 and for the first nine months of 2020, included non-core non-interest expenses of $1.2 million and $3.0 million, respectively. Additional information regarding the non-core non-interest expense can be found under the caption "Core Non-Interest Expense (Non-US GAAP)."
(d)These amounts represent Non-US GAAP financial measures since they exclude the balance sheet impact of goodwill and other intangible assets acquired through acquisitions on total stockholders’ equity and total assets.  Additional information regarding the calculation of these Non-US GAAP financial measures can be found under the caption “Capital/Stockholders’ Equity.”
(e)Data presented as of the end of the period indicated.
(f)Ratios are presented on an annualized basis.
(g)Return on average tangible equity ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of amortization of other intangible assets from earnings and it excludes the balance sheet impact of goodwill and other intangible assets acquired through acquisitions on total stockholders’ equity. Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption “Return on Average Tangible Equity Ratio (Non-US GAAP).”
(h)Return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, contract negotiation expenses, COVID-19-related expenses, a Peoples Bank Foundation, Inc. contribution, pension settlement

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charges and severance expenses included in earnings. Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption "Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)."
(i)Information presented on a fully tax-equivalent basis, using a blended federal and state corporate income tax rate of 22.3% for 2021 and a statutory federal rate of 21% for 2020.
(j)The efficiency ratio is defined 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 all gains and losses). This amount represents a Non-US GAAP financial measure since it excludes amortization of other intangible assets, and all gains and losses included in earnings, and uses fully tax-equivalent net interest income. Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption “Efficiency Ratio (Non-US GAAP).”
(k)The efficiency ratio adjusted for non-core items is defined as core non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus core non-interest income excluding all gains and losses. This amount represents a Non-US GAAP financial measure since it excludes the impact of all gains and losses, acquisition-related expenses, contract negotiation expenses, COVID-19-related expenses, a Peoples Bank Foundation, Inc. contribution, pension settlement charges and severance expenses included in earnings, and uses FTE net interest income. Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption "Efficiency Ratio (Non-US GAAP).”
(l)Pre-provision net revenue is defined as net interest income plus total non-interest income (excluding all gains and losses) minus total non-interest expense. 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. This measure is a key metric used by federal bank regulatory agencies in their evaluation of capital adequacy for financial institutions. Additional information regarding the calculation of this Non-US GAAP financial measure can be found under the caption “Pre-Provision Net Revenue (Non-US GAAP).”
(m)The dividend payout ratio is calculated based on dividends declared during the period divided by net income, where applicable, for the period.
(n)NM = not meaningful.
(o)Nonperforming loans include loans 90+ days past due and accruing, renegotiated loans and nonaccrual loans. Nonperforming assets include nonperforming loans and other real estate owned.
(p)Includes loans categorized as special mention, substandard and doubtful.
(q)Includes loans categorized as substandard and doubtful.
(r)Peoples' capital conservation buffer was 5.83% at September 30, 2021 and 6.33% at September 30, 2020, compared to 2.50% for the fully phased-in capital conservation buffer required at January 1, 2019.
Forward-Looking Statements
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," and similar expressions.
These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These factors include, but are not limited to:
(1)the ever-changing effects of the COVID-19 pandemic - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants thereof - on economies (local, national and international), supply chains and markets, on the labor market, including the potential for a sustained reduction in labor force participation, and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including public health actions directed toward the containment of the COVID-19 pandemic (such as quarantines, shut downs and other restrictions on travel and commercial, social and other activities), the availability and effectiveness of vaccines, and the implementation of fiscal stimulus packages, which could adversely impact sales volumes, add volatility to the global stock markets, and increase loan delinquencies and defaults;
(2)changes in the interest rate environment due to economic conditions related to the COVID-19 pandemic or other factors and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;
(3)the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the completion and successful integration of planned acquisitions, including the recently-completed merger with Premier and the recently-completed acquisition of NSL, and the expansion of commercial and consumer lending activities, in light of the continuing impact of the COVID-19 pandemic on customers' operations and financial condition;
(4)competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, which can in turn impact Peoples' credit spreads, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals;
(5)uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the Federal Deposit Insurance Corporation, the Federal Reserve Board and the Consumer Financial Protection Bureau, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses, including in particular

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the rules and regulations promulgated and to be promulgated under the CARES Act, and the follow-up legislation enacted as the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Basel III regulatory capital reform;
(6)the effects of easing restrictions on participants in the financial services industry;
(7)local, regional, national and international economic conditions (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S. and its global trading partners) and the impact these conditions may have on Peoples, its customers and its counterparties, and Peoples' assessment of the impact, which may be different than anticipated;
(8)Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;
(9)changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties' performance and creditworthiness generally, which may be less favorable than expected in light of the COVID-19 pandemic and adversely impact the amount of interest income generated;
(10)Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;
(11)changes in accounting standards, policies, estimates or procedures may adversely affect Peoples' reported financial condition or results of operations;
(12)the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model;
(13)the discontinuation of the LIBOR and other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;
(14)adverse changes in the conditions and trends in the financial markets, including the impacts of the COVID-19 pandemic and the related responses by governmental and nongovernmental authorities to the pandemic, which may adversely affect the fair value of securities within Peoples' investment portfolio, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities;
(15)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;
(16)Peoples' ability to receive dividends from its subsidiaries;
(17)Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;
(18)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;
(19)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;
(20)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;
(21)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;
(22)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;
(23)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;
(24)the impact on Peoples' businesses, personnel, facilities, or systems, of losses related to acts of fraud, theft, misappropriation or violence;
(25)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;
(26)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;
(27)risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets;
(28)Peoples' ability to integrate the NSL acquisition and the merger of Premier into Peoples, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

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(29)the risk that expected revenue synergies and cost savings from the merger of Peoples and Premier may not be fully realized or realized within the expected time frame;
(30)Peoples' continued ability to grow deposits;
(31)the impact of future governmental and regulatory actions upon Peoples' participation in and execution of government programs related to the COVID-19 pandemic;
(32)uncertainty regarding the impact of changes to the U.S. presidential administration and Congress on the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates and the response to and management of the COVID-19 pandemic, infrastructure spending and social programs; and,
(33)other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
All forward-looking statements speak only as of the filing date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements.  Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual results may differ materially from these projections.  Additionally, Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the filing date of this Form 10-Q or to reflect the occurrence of unanticipated events except as may be required by applicable legal requirements.  Copies of documents filed with the SEC are available free of charge at the SEC’s website at www.sec.gov and/or from Peoples' website – www.peoplesbancorp.com under the “Investor Relations” section.
This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements, and Notes thereto, contained in Peoples’ 2020 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 banking products, such as deposit accounts, lending products and trust services.  Peoples provides services through traditional offices, ATMs, mobile banking and telephone and internet-based banking.  Peoples also offers a complete array of insurance products, commercial leasing and premium financing solutions, and makes available custom-tailored fiduciary, employee benefit plan and asset management services.  Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices.   Peoples Bank also offers insurance premium finance lending nationwide through its Peoples Premium Finance division and, since April 1, 2021, offers lease financing through its North Star Leasing division. As of September 30, 2021, Peoples has 135 locations, including 119 full-service bank branches in Ohio, West Virginia, Kentucky, Virginia, Washington D.C. and Maryland. Peoples Bank is subject to regulation and examination primarily by the Ohio Division of Financial Institutions (the "ODFI"), the Federal Reserve Bank ("FRB") of Cleveland and the Federal Deposit Insurance Corporation (the "FDIC"). Peoples Bank must also follow the regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB") which regulates consumer financial products and services and certain financial services providers. Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business.
Critical Accounting Policies
The accounting and reporting policies of Peoples conform to US GAAP.  The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could materially differ from those estimates.  Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements describes Peoples' significant account policies. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and MD&A at September 30, 2021, which are discussed in Peoples’ 2020 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 September 17, 2021, Peoples completed its merger with Premier Financial Bancorp, Inc. (“Premier”), in which Peoples acquired, in an all-stock merger, Premier, a bank holding company headquartered in Huntington, West Virginia, and the parent company of Premier Bank, Inc. (“Premier Bank”) and Citizens Deposit Bank and Trust, Inc. (“Citizens”). Under the terms and subject to the conditions of the definitive Agreement and Plan of Merger dated March 26, 2021 ("Merger Agreement"), Premier merged with and into Peoples (the “Merger”), and Premier Bank and Citizens subsequently merged with and into Peoples’ wholly-owned subsidiary, Peoples Bank, in a transaction valued at $261.9 million. At the close of business on September 17, 2021, the financial services offices of each of Premier Bank and Citizens became branches of

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Peoples Bank. Peoples acquired $1.1 billion in loans and $1.8 billion in deposits. Peoples preliminarily recorded $71.0 million in goodwill and $4.2 million in other intangible assets in connection with the Merger.
◦On May 4, 2021, Peoples Insurance Agency, LLC ("Peoples Insurance") acquired substantially all of the assets and rights of an insurance agency located in Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Justice & Stamper Insurance Agency, Inc., pursuant to an Asset Purchase Agreement between Peoples Insurance and Justice & Stamper Insurance Agency, Inc. Total consideration for this transaction was $325,000, with $162,500 paid at closing and the second installment in the amount of $162,500 to be paid on the first anniversary of the closing date, less any adjustments pursuant to adverse claims incurred or sustained by or imposed by Peoples Insurance. Peoples recorded preliminary customer relationship intangible assets of $230,000 and preliminary goodwill of $46,000, related to this transaction.
◦On March 31, 2021, Peoples completed its acquisition of NS Leasing, LLC ("NSL") pursuant to an Asset Purchase Agreement, dated March 24, 2021 in which Peoples Bank acquired the equipment finance and leasing business of NSL. The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating the acquired business as North Star Leasing, a division of Peoples Bank on April 1, 2021. Peoples Bank acquired assets comprising NSL's equipment finance business, including $83.3 million in leases and satisfied, on behalf of NSL, certain third-party debt in the amount of $69.1 million. Peoples Bank paid total consideration of $116.6 million, plus a potential earn-out payment to NSL of up to $3.1 million. Based in Burlington, Vermont, the North Star Leasing division underwrites, originates and services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded preliminary goodwill in the amount of $24.7 million and preliminary other intangibles of $14.0 million, which included customer relationship intangible, trade-name intangible and non-compete agreements related to this transaction. Peoples recorded an additional $0.4 million in non-interest expense during the third quarter of 2021 related to an update to the estimated earn-out provision of $2.7 million. As of September 30, 2021, equipment leases had grown to $111.4 million.
◦Peoples began originating loans during the second quarter of 2020 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"). Additional information can be found later in this discussion under the caption “FINANCIAL CONDITION - COVID-19 Loan Impacts." As of September 30, 2021, Peoples had $135.8 million aggregate principal amount in PPP loans outstanding (including $28.2 million acquired in the merger with Premier), which were included in commercial and industrial loan balances, compared to $187.6 million at June 30, 2021 and $366.9 million at December 31, 2020. Peoples recognized interest income of $3.1 million for deferred loan fees/cost accretion and $0.4 million of interest income on PPP loans during the third quarter of 2021, compared to $3.4 million and $0.7 million, respectively, for the second quarter of 2021 and $1.9 million and $1.2 million, respectively, for the third quarter of 2020. During the first nine months of 2021, Peoples recognized interest income of $11.2 million for deferred loan fees/cost accretion and $2.0 million of interest income on PPP loans compared to $3.8 million for deferred loan fees/costs accretion and $2.1 million of interest income during the first nine months of 2020.
◦Peoples provided relief solutions to consumer and commercial borrowers, including forbearance and modifications, during the COVID-19 pandemic. Additional information can be found later in this discussion under the caption “FINANCIAL CONDITION - COVID-19 Loan Impacts."
◦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. This program replaced the share repurchase program authorizing Peoples to purchase up to an aggregate of $40 million of Peoples' outstanding common shares, which Peoples' Board of Directors had authorized on February 27, 2020 and which was terminated on January 28, 2021. There were no common share repurchases during the first nine months of 2021, under the existing share repurchase program. On February 27, 2020, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $40.0 million of Peoples' outstanding common shares. This program had replaced the share repurchase program authorizing Peoples to purchase up to an aggregate of $20.0 million of Peoples' outstanding common shares, which Peoples' Board of Directors had approved on November 3, 2015 and which was terminated on February 27, 2020. During the third quarter of 2020, Peoples repurchased 235,684 of Peoples' common shares through Peoples' then-effective common share repurchase program for a total of $5.0 million. For the first nine months of 2020, Peoples repurchased 1,119,752 in common shares for a total of $25.0 million.
◦During the third quarter of 2021, Peoples recorded a provision for credit losses of $9.0 million, compared to a provision for credit losses of $3.1 million in the linked quarter and a provision for credit losses of $4.7 million in the third quarter of 2020. 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 acquisition of Premier. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier. The change in the amount of the provision for credit losses compared to the third quarter of 2020 was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to

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COVID-19, coupled with the day-one allowances for credit losses required in connection with the acquisitions of loans from Premier in the third quarter of 2021.
◦For the third quarter of 2021, Peoples recorded $181,000 of expenses related to the COVID-19 pandemic, compared to $210,000 for the second quarter of 2021 and $148,000 for the third quarter of 2020. These expenses were primarily related to providing Peoples' employees meals in support of local businesses and assisting employees with childcare and elder care needs, as well as taking extra precautions in cleaning facilities.
◦During the third quarter of 2021, Peoples incurred $16.2 million of acquisition-related expenses, compared to $2.4 million in the second quarter of 2021 and $335,000 in the third quarter of 2020. Acquisition-related expenses for the nine months ended September 30, 2021 were $20.5 million, compared to $412,000 for the same period last year. The acquisition-related expenses in 2021 were primarily related to the NSL acquisition and the Premier acquisition. The acquisition-related expenses in 2020 were primarily related to the Triumph Premium Finance acquisition.
◦Peoples incurred $0.1 million in pension settlement charges for the third quarter of 2021 compared to $0.5 million for the third quarter of 2020, due to the aggregate amount of lump-sum distributions to participants in Peoples' defined benefit pension plan exceeding the threshold for recognizing such charges during the relevant period. Peoples recorded $0.1 million of pension settlement charges for the nine months ended September 30, 2021 and $1.1 million for the nine months ended September 30, 2020.
◦Effective July 1, 2020, Peoples completed the business combination under which Peoples Bank acquired the operations and assets of Triumph Premium Finance (referred to as "Premium Finance acquisition"), a division of TBK Bank, SSB. Based in Kansas City, Missouri, the division operating as Peoples Premium Finance continues to provide insurance premium financing loans for commercial customers to purchase property and casualty insurance products through its growing network of independent insurance agency partners nationwide. Peoples Bank acquired $84.7 million in loans, at the acquisition date, after fair value adjustments. Peoples also recorded $4.3 million of other intangible assets and $5.5 million of goodwill related to the acquisition. As of September 30, 2021, Peoples premium finance loans had grown to $134.8 million.
◦In an effort to stimulate an economy that was being adversely impacted by the impacts of the COVID-19 pandemic, the Federal Reserve first lowered the benchmark Federal Funds Target Rate by 50 basis points on March 3, 2020, then lowered the target rate another 100 basis points at the next FOMC meeting on March 15, 2020. The Federal Funds Target Rate range was 0% - 0.25% as of March 31, 2020 and maintained this rate as of September 30, 2021.
The impact of these transactions and events, where material, is discussed in the applicable sections of this MD&A.
EXECUTIVE SUMMARY
Peoples recorded a net loss of $5.8 million for the third quarter of 2021, or $0.28 per diluted common share, compared to net income of $10.1 million, or $0.51 per diluted common share, for the second quarter of 2021, and net income of $10.2 million, or $0.51 per diluted share, for the third quarter of 2020. Non-core items, and the related tax effect of each, in net (loss) income included acquisition-related expenses, contract negotiation expenses, COVID-19-related expenses, a contribution to Peoples Bank Foundation, Inc., pension settlement charges, severance expenses, and gains and losses on investment securities, asset disposals and other transactions. Non-core items negatively impacted earnings per diluted common share by $0.71 for the third quarter of 2021, $0.10 for the second quarter of 2021, and by $0.05 for the third quarter of 2020. Net income in the third quarter of 2021 was largely affected by the acquisition of Premier.
For the first nine months of 2021, net income was $19.8 million, or $0.99 per diluted common share, compared to net income of $14.2 million, or $0.70 per diluted common share, for the nine months ended September 30, 2020. The increase in earnings was impacted primarily by the change in provision for credit losses in 2021 as compared to 2020. Non-core items negatively impacted earnings per diluted common share by $0.98 and $0.12 for the nine months ended September 30, 2021 and 2020, respectively.
Net interest income was $42.6 million for the third quarter of 2021, up 7% compared to $39.7 million for the second quarter of 2021, and an increase of 21% compared to $35.1 million for the third quarter of 2020. Net interest margin was 3.50% for the third quarter of 2021, compared to 3.45% for the second quarter of 2021, and 3.14% for the third quarter of 2020. Compared to the linked quarter and third quarter of 2020, net interest income and margin were improved due to the growth in leases and premium finance loans, coupled with the partial period impact of the Premier acquisition and lower cost of funds. Net interest income and margin both have been negatively impacted by the excess liquidity environment present in the financial services sector since the beginning of the COVID-19 pandemic by way of increased low yielding cash reserves. Net interest income and net interest margin continue to be impacted by the low interest rate environment caused by COVID-19 that continued throughout the third quarter of 2021. For the first nine months of 2021, net interest income increased $13.2 million, or 13%, compared to the first nine months of 2020, while net interest margin increased 14 basis points to 3.41%. The change in net interest income was the result of lower funding costs due to a shift from higher cost overnight FHLB advances to lower cost brokered deposits, as well as a higher volume of loans and leases due to the Premier, NSL and Premium Finance acquisitions.

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Accretion income, net of amortization expense, from acquisitions was $1.0 million for the third quarter of 2021, $0.8 million for the second quarter of 2021, and $0.5 million for the third quarter of 2020, which added 8 basis points, 7 basis points, and 5 basis points, respectively, to net interest margin. Accretion income, net of amortization expense, from acquisitions was $2.2 million for the nine months ended September 30, 2021, compared to $2.6 million for the nine months ended September 30, 2020, which added 6 and 8 basis points, respectively, to net interest margin.
During the third quarter of 2021, Peoples recorded a provision for credit losses of $9.0 million, compared to a provision for credit losses of $3.1 million for the second quarter of 2021 and a provision for credit losses of $4.7 million for the third quarter of 2020. Net charge-offs for the third quarter of 2021 were $1.6 million, or 0.18% of average total loans annualized, compared to net charge-offs of $0.8 million, or 0.09% of average total loans annualized, for the linked quarter and net charge-offs of $0.7 million, or 0.08% of average total loans annualized, for the third quarter of 2020. Net charge-offs for the third quarter of 2021 included one commercial and industrial loan aggregating $0.5 million. Net charge-offs for the second quarter of 2021 included $0.4 million in leases. 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 acquisition of Premier. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier. Compared to the third quarter of 2020, the change in the provision for credit losses was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, offset by the day-one allowances for credit losses required in connection with the acquisitions of Premier in the third quarter of 2021 and NSL in the second quarter of 2021.
The provision for credit losses during the first nine months of 2021 was $7.3 million, compared to a provision for credit losses of $33.5 million for the first nine months of 2020. Net charge-offs for the first nine months of 2021 were $3.4 million, or 0.13% of average total loans annualized, compared to net charge-offs of $0.9 million, or 0.04% annualized, for the first nine months of 2020. The change in the provision for credit losses compared to the first nine months of 2020 was primarily due to improved economic factors and updated loss drivers and their impact on assumptions used in the CECL model throughout the first nine months of 2021.
For the third quarter of 2021, total non-interest income increased $0.5 million, or 3%, compared to the second quarter of 2021 and decreased $0.4 million, or 3%, from the third quarter of 2020. The rise in non-interest income compared to the linked quarter was the result of an increase in overdraft fees included in deposit account service charges of $0.5 million and a $0.2 million increase in income recognized on leases related to the early termination of leases and other fees, offset partially by declines in trust and investment income, electronic banking income and mortgage banking income. Net losses of $0.5 million realized during the third quarter of 2021 were driven primarily by losses on the disposal of fixed assets acquired from Premier and the sales of securities during the third quarter of 2021, compared to net losses of $0.3 million for the linked quarter, and net gains of $26,000 for the third quarter of 2020.
For the nine months ended September 30, 2021, total non-interest income increased $1.9 million compared to the nine months ended September 30, 2020. The increase was driven by higher trust and investment income, associated with new accounts and increased market values of assets under administration and management, coupled with higher electronic banking income and $716,000 of non-interest income contributed by the leasing business.
Total non-interest expense increased $18.0 million, or 45%, for the third quarter of 2021 compared to the second quarter of 2021, and $23.5 million, or 69%, compared to the third quarter of 2020. The increase in total non-interest expense for the third quarter of 2021 compared to the linked quarter was primarily due to the recognition of $16.5 million of acquisition-related expenses due to the closing of the Premier acquisition during the quarter. Total non-interest expense in the third quarter of 2021 also contained other non-core expenses such as a one-time expense related to contract renewal negotiations of Peoples Bank's core banking systems of $1.9 million, and $0.2 million in COVID-19-related expenses. During the second quarter of 2021, non-core expenses included acquisition-related expenses of $2.4 million and $0.2 million in COVID-19-related expenses. For the third quarter of 2020, non-core expenses included $531,000 of pension settlement charges, $335,000 of acquisition-related expenses, $192,000 of severance expenses and $148,000 of COVID-19-related expenses. Compared to the third quarter of 2020, the increase in total non-interest expense was primarily due to an increase in acquisition-related expenses of $16.2 million, an increase in salaries and employee benefit costs of $6.2 million and an increase in amortization of intangible assets of $0.4 million. The increases in salaries and employee benefit costs and amortization of intangible assets were primarily the result of the acquisitions of Premier and NSL.
For the first nine months of 2021, total non-interest expense increased $35.3 million compared to the same period last year. The variance was driven primarily by increases of $20.5 million in acquisition-related expenses. The remainder of the increase was largely due to a $7.2 million rise in salaries and employee benefit costs, which was driven by the added ongoing costs of the recent acquisitions, along with higher sales and incentive compensation from increased production, growth in medical insurance and 401(k) costs, while data processing and software costs also increased $2.1 million. These changes were partially offset by decreases in pension settlement charges and COVID-19-related expenses. Similar to the quarterly comparisons, the acquisitions of Premier, NSL and Premium Finance increased salaries and employee benefit costs, as well as amortization of intangible assets.
Peoples' efficiency ratio, calculated as total non-interest expense less amortization of other intangible assets divided by fully tax-equivalent ("FTE") net interest income, plus total non-interest income, excluding all gains and losses, for the third quarter of 2021 was 94.7%, compared to 68.6% for the second quarter of 2021, and 64.1% for the third quarter of 2020. The change in the efficiency ratio compared to the linked quarter was primarily due to the acquisition-related expenses mentioned above. The efficiency ratio, when adjusted for non-core items, was 63.9% for the third quarter of 2021, compared to 64.0% for the second quarter of 2021 and 61.8% for the third quarter of 2020. The efficiency ratio for the nine months ended September 30, 2021 was 78.4% compared to 64.4% for the nine months ended September 30, 2020. When adjusted for non-core items, the efficiency ratio was 64.3% for the first nine months of

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2021 compared to 62.4% for the first nine months of 2020. Peoples continues to focus on controlling expenses, while recognizing some necessary costs in order to continue growing the business.
Peoples recorded an income tax benefit of $2.2 million for the third quarter of 2021, compared to income tax expense of $2.4 million for the linked quarter and $2.6 million for the third quarter of 2020. The income tax benefit for the third quarter of 2021, compared to the income tax expense for the linked quarter, was due to the net loss recognized in the third quarter of 2021. The increase in income tax expense for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was due to higher pre-tax income.
At September 30, 2021, total assets were $7.06 billion, compared to $5.07 billion at June 30, 2021 and $4.76 billion at December 31, 2020. Total assets grew 39% compared to June 30, 2021, and was largely attributable to the Premier acquisition, which added $1.1 billion in loans, $563.3 million in investment securities, and the recognition of goodwill on the transaction of $71.0 million. The 48% increase compared to December 31, 2020 was also driven by the Premier acquisition, along with the $83.3 million of leases acquired from NSL, subsequent growth in leases of $28.1 million, and organic loan growth of $88.2 million, offset partially by $474.2 million in forgiveness received on PPP loans during the nine months ended September 30, 2021. The allowance for credit losses at September 30, 2021 increased to $77.4 million, or 1.72% of total loans, compared to $50.4 million and 1.48%, respectively, at December 31, 2020. Total assets increased $2.0 billion, or 39%, compared to the linked quarter. The increase was a result of the Premier acquisition.
Total liabilities were $6.23 billion at September 30, 2021, up from $4.48 billion at June 30, 2021 and $4.19 billion at December 31, 2020. The increase in total liabilities compared to June 30, 2021 was primarily due to deposits acquired from Premier of $1.8 billion, as well as retail repurchase agreements of $63.8 million. Also contributing to the increase compared to December 31, 2020 was higher total deposits associated with customers maintaining higher balances due primarily to economic stimulus payments provided by the government, as well as changes in customer buying habits.
At September 30, 2021, total stockholders' equity was $831.9 million, an increase of $256.2 million compared to December 31, 2020. The increase in total stockholders' equity was driven by common shares issued for the acquisition of Premier and net income for the first nine months of 2021, offset by $21.0 million in dividends paid to shareholders and the change in accumulated other comprehensive income to an accumulated other comprehensive loss of $7.2 million.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, the amount by which interest income exceeds interest expense, remains Peoples' largest source of revenue.  The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve’s monetary policy, the level and degree of pricing competition for loans and deposits in Peoples’ markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities. 
Net interest margin, which is calculated by dividing FTE net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of interest-earning assets and interest-bearing liabilities.  FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a blended federal and state corporate income tax rate of 22.3% for 2021 and a statutory federal corporate income tax rate of 21% for 2020.  
The following table details the calculation of FTE net interest income:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Net interest income$42,578 $39,660 $35,119 $117,816 $104,615 
Taxable equivalent adjustment351 324 262 970 803 
Fully tax-equivalent net interest income$42,929 $39,984 $35,381 $118,786 $105,418 


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The following tables detail Peoples’ average balance sheets for the periods presented:
 For the Three Months Ended
 September 30, 2021June 30, 2021September 30, 2020
(Dollars in thousands)
Average BalanceIncome/ ExpenseYield/CostAverage BalanceIncome/ ExpenseYield/CostAverage BalanceIncome/ ExpenseYield/Cost
Short-term investments $199,007 $82 0.16 %$180,730 $53 0.12 %$97,430 $33 0.13 %
Investment securities (a)(b):     
Taxable979,278 3,799 1.55 %883,948 3,217 1.45 %851,092 2,832 1.33 %
Nontaxable173,459 1,136 2.62 %168,015 1,095 2.61 %101,403 778 3.07 %
Total investment securities1,152,737 4,935 1.71 %1,051,963 4,312 1.64 %952,495 3,610 1.52 %
Loans (b)(c):      
Construction125,178 1,196 3.74 %87,075 979 4.45 %105,488 1,179 4.37 %
Commercial real estate, other993,259 9,507 3.75 %916,604 8,829 3.81 %857,830 8,854 4.04 %
Commercial and industrial789,555 8,933 4.43 %887,756 9,241 4.12 %1,047,105 8,145 3.04 %
Premium finance122,828 1,542 4.91 %108,387 1,298 4.74 %92,533 1,871 7.91 %
Leases97,068 4,810 19.39 %86,519 4,215 19.27 %— — — %
Residential real estate (d)652,184 6,648 4.08 %607,691 6,429 4.23 %661,694 7,870 4.76 %
Home equity lines of credit126,888 1,271 3.97 %119,354 1,180 3.97 %125,351 1,278 4.06 %
Consumer, indirect541,329 5,509 4.04 %529,180 5,313 4.03 %477,962 5,103 4.25 %
Consumer, direct86,935 1,385 6.32 %80,409 1,272 6.35 %82,139 1,332 6.45 %
Total loans3,535,224 40,801 4.55 %3,422,975 38,756 4.50 %3,450,102 35,632 4.08 %
Allowance for credit losses (51,610)(46,967)(56,519)
Net loans3,483,614 40,801 4.61 %3,376,008 38,756 4.56 %3,393,583 35,632 4.14 %
Total earning assets4,835,358 45,818 3.74 %4,608,701 43,121 3.72 %4,443,508 39,275 3.49 %
Goodwill and other intangible assets232,361  222,553 185,816  
Other assets407,428  351,892 277,290  
    Total assets
$5,475,147  $5,183,146 $4,906,614 
Interest-bearing deposits:      
Savings accounts$737,771 $23 0.01 %$680,825 $21 0.01 %$589,100 $34 0.02 %
Governmental deposit accounts
542,855 458 0.33 %496,906 551 0.44 %398,653 511 0.51 %
Interest-bearing demand accounts
795,565 74 0.04 %733,913 66 0.04 %671,987 66 0.04 %
Money market accounts533,497 67 0.05 %564,593 94 0.07 %589,078 216 0.15 %
Retail certificates of deposit (e)457,073 951 0.83 %424,279 980 0.93 %467,431 1,524 1.30 %
Brokered deposits (e)155,779 826 2.10 %167,109 865 2.08 %258,875 318 0.49 %
Total interest-bearing deposits
3,222,540 2,399 0.30 %3,067,625 2,577 0.34 %2,975,124 2,669 0.36 %
Borrowed funds:      
Short-term FHLB advances 17,174 78 1.80 %19,176 81 1.69 %137,174 732 2.12 %
Repurchase agreements and other63,226 13 0.08 %50,852 11 0.09 %43,184 10 0.09 %
Total short-term borrowings80,400 91 0.45 %70,028 92 0.53 %180,358 742 1.64 %
Long-term FHLB advances86,561 316 1.45 %101,161 392 1.55 %103,906 402 1.54 %
Other borrowings8,470 83 3.92 %7,669 76 3.96 %7,551 81 4.29 %
Total long-term borrowings95,031 399 1.67 %108,830 468 1.72 %111,457 483 1.73 %
  Total borrowed funds175,431 490 1.11 %178,858 560 1.26 %291,815 1,225 1.67 %
      Total interest-bearing liabilities
3,397,971 2,889 0.34 %3,246,483 3,137 0.39 %3,266,939 3,894 0.47 %
Non-interest-bearing deposits1,358,652   1,272,623 970,353  
Other liabilities90,741   82,209 102,267   
Total liabilities4,847,364   4,601,315 4,339,559   
Total stockholders’ equity627,783   581,831 567,055   
Total liabilities and stockholders’ equity$5,475,147   $5,183,146 $4,906,614   
Interest rate spread (b) $42,929 3.40 %$39,984 3.33 % $35,381 3.02 %
Net interest margin (b)3.50 %  3.45 %  3.14 %



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 For the Nine Months Ended
 September 30, 2021September 30, 2020
(Dollars in thousands)
Average BalanceIncome/ ExpenseYield/CostAverage BalanceIncome/ ExpenseYield/Cost
Short-term investments$175,755 $175 0.13 %$111,852 $317 0.38 %
Investment securities (a)(b):   
Taxable 899,531 9,636 1.43 %894,008 12,448 1.86 %
Nontaxable149,636 3,035 2.70 %103,827 2,409 3.09 %
Total investment securities1,049,167 12,671 1.61 %997,835 14,857 1.99 %
Loans (b)(c):   
Construction108,859 3,169 3.84 %108,426 3,656 4.43 %
Commercial real estate, other930,150 26,938 3.82 %848,202 27,784 4.30 %
Commercial and industrial872,421 28,773 4.35 %892,483 24,411 3.59 %
Premium finance112,925 4,137 4.83 %31,069 1,871 7.91 %
Leases 61,551 9,025 19.34 %— — — %
Residential real estate (d)624,993 19,749 4.21 %669,852 24,498 4.88 %
Home equity lines of credit122,720 3,638 3.96 %128,540 4,546 4.72 %
Consumer, indirect526,900 16,025 4.07 %438,784 14,066 4.28 %
Consumer, direct82,151 3,896 6.34 %78,904 3,978 6.73 %
Total loans3,442,670 115,350 4.44 %3,196,260 104,810 4.34 %
Allowance for credit losses
(49,483)(44,323)
Net loans3,393,187 115,350 4.50 %3,151,937 104,810 4.40 %
Total earning assets4,618,109 128,196 3.68 %4,261,624 119,984 3.73 %
Goodwill and other intangible assets213,232  180,291 
Other assets360,842  264,238 
    Total assets
$5,192,183  $4,706,153 
Interest-bearing deposits:   
Savings accounts$688,782 $79 0.02 %$558,514 $140 0.03 %
Governmental deposit accounts
490,170 1,602 0.44 %366,139 1,671 0.61 %
Interest-bearing demand accounts
743,562 205 0.04 %652,198 385 0.08 %
Money market accounts554,194 294 0.07 %547,291 1,271 0.31 %
Retail certificates of deposit (e)
440,454 3,054 0.93 %479,185 5,453 1.52 %
Brokered deposits (e)166,000 2,559 2.06 %214,516 1,662 1.03 %
Total interest-bearing deposits
3,083,162 7,793 0.34 %2,817,843 10,582 0.50 %
Borrowed funds:   
Short-term FHLB advances18,773 246 1.75 %160,287 2,285 1.90 %
Repurchase agreements and other55,100 37 0.09 %45,613 70 0.26 %
Total short-term borrowings73,873 283 0.51 %205,900 2,355 1.54 %
Long-term FHLB advances96,765 1,099 1.52 %109,536 1,341 1.64 %
Repurchase agreement and other borrowings7,926 235 3.95 %9,148 288 5.40 %
Total long-term borrowings104,691 1,334 1.70 %118,684 1,629 1.93 %
  Total borrowed funds178,564 1,617 1.21 %324,584 3,984 1.64 %
      Total interest-bearing liabilities
3,261,726 9,410 0.39 %3,142,427 14,566 0.62 %
Non-interest-bearing deposits1,248,330   892,301 
Other liabilities86,209   92,986 
Total liabilities4,596,265   4,127,714 
Stockholders’ equity595,918   578,439 
Total liabilities and stockholders’ equity$5,192,183   $4,706,153 
Interest rate spread (b) $118,786 3.29 %$105,418 3.11 %
Net interest margin (b)3.41 %3.27 %
(a)Average balances are based on carrying value.
(b)Interest income and yields are presented on a fully tax-equivalent basis, a blended federal and state corporate income tax rate of 22.3% for 2021 and a statutory federal corporate income tax rate of 21% for 2020.
(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 completed the acquisition of Premier on September 17, 2021, which impacted average total loan and deposit balances for the partial period in which the balances were included for the third quarter of 2021. Compared to the third quarter of 2020, average total loans grew mostly due to the leases acquired. Compared to the third quarter of 2020, average total deposit balances grew significantly due to the influx of funds from the PPP loan proceeds, changed customer spending habits and federal stimulus provided to customers.
In addition, average total loan balances for the first nine months of 2021 were higher than the prior year period due to the lease, Premium Finance and Premier balances acquired, coupled with the PPP loans originated since the start of the pandemic and loan growth. The average total deposit balances compared to 2020 grew considerably due to the influx of funds from the PPP loan proceeds, changed customer spending habits and federal stimulus provided to customers, while the Premier acquired balances had a minimal impact on the period.
The following table provides an analysis of the changes in FTE net interest income:
Three Months Ended September 30, 2021 Compared to
Nine Months Ended September 30, 2021 Compared to
(Dollars in thousands)June 30, 2021September 30, 2020September 30, 2020
Increase (decrease) in:RateVolume
Total (a)
RateVolume
Total (a)
RateVolume
Total (a)
INTEREST INCOME:
Short-term investments $22 $7 $29 $9 $41 $50 $(314)$172 $(142)
Investment Securities (b):
Taxable224 358 582 506 461 967 (2,939)127 (2,812)
Nontaxable4 37 41 (695)1,053 358 (489)1,115 626 
Total investment income228 395 623 (189)1,514 1,325 (3,428)1,242 (2,186)
Loans (b):
   
Construction(848)1,065 217 (746)763 17 (510)23 (487)
Commercial real estate, other(883)1,561 678 (3,242)3,895 653 (4,252)3,406 (846)
Commercial and industrial3,146 (3,454)(308)10,684 (9,896)788 5,242 (880)4,362 
Premium finance52 192 244 (2,749)2,420 (329)(1,379)3,645 2,266 
Leases28 567 595 — 4,810 4,810 — 9,025 9,025 
Residential real estate(1,179)1,398 219 (1,110)(112)(1,222)(3,182)(1,567)(4,749)
Home equity lines of credit3 88 91 (84)77 (7)(709)(199)(908)
Consumer, indirect20 176 196 (1,347)1,753 406 (1,121)3,080 1,959 
Consumer, direct(33)146 113 (176)229 53 (320)238 (82)
Total loan income306 1,739 2,045 1,230 3,939 5,169 (6,231)16,771 10,540 
Total interest income$556 $2,141 $2,697 $1,050 $5,494 $6,544 $(9,973)$18,185 $8,212 
INTEREST EXPENSE:   
Deposits:   
Savings accounts$— $2 $2 $(51)$40 $(11)$(104)$43 $(61)
Governmental deposit accounts(365)272 (93)(742)689 (53)(720)651 (69)
Interest-bearing demand accounts2 6 8 (21)29 8 (257)77 (180)
Money market accounts(22)(5)(27)(131)(17)(148)(1,002)48 (954)
Retail certificates of deposit(372)343 (29)(540)(33)(573)(1,987)(412)(2,399)
Brokered deposits71 (110)(39)1,351 (844)507 1,548 (674)874 
Total deposit cost(686)508 (178)(134)(136)(270)(2,522)(267)(2,789)
Borrowed funds:   
Short-term borrowings22 (23)(1)(102)(549)(651)(221)(1,851)(2,072)
Long-term borrowings(30)(39)(69)(55)(29)(84)(109)(186)(295)
Total borrowed funds cost(8)(62)(70)(157)(578)(735)(330)(2,037)(2,367)
Total interest expense(694)446 (248)(291)(714)(1,005)(2,852)(2,304)(5,156)
Fully tax-equivalent net interest income $1,250 $1,695 $2,945 $1,341 $6,208 $7,549 $(7,121)$20,489 $13,368 

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(a)The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each.
(b)Interest income and yields are presented on a fully tax-equivalent basis a blended federal and state corporate income tax rate of 22.3% for 2021 and a statutory federal corporate income tax rate of 21% for 2020.
Net interest income grew 7% compared to the linked quarter, benefiting from the Premier acquisition, growth in leases and Premium Finance balances, and the overall growth in interest-earning assets, coupled with lower deposit costs. Net interest income and net interest margin both have been negatively impacted by the excess liquidity environment present in the financial services sector since the beginning of the COVID-19 pandemic by way of increased low yielding cash reserves. Peoples recognized interest income on deferred loan fees/costs of $3.1 million and $3.4 million during the third and second quarters of 2021, respectively, along with $0.4 million and $0.7 million of interest earned on PPP loans during the third and second quarters of 2021, respectively. Net interest margin grew five basis points to 3.50% for the third quarter of 2021 compared to 3.45% for the linked quarter. The increase in net interest margin was driven by the PPP income, which benefited net interest margin by 18 basis points for the third quarter of 2021 compared to 15 basis points for the second quarter of 2021, while excess liquidity resulted in inflated cash balances which reduced net interest margin by 13 basis points compared to 12 basis points for the linked quarter.
Compared to the third quarter of 2020, net interest income increased 21%, which was due to the acquired leases, premium finance loans and additional PPP income from the deferred loan fees recognized, as well as controlled funding costs. Net interest margin expanded 36 basis points compared to 3.14% for the third quarter of 2020. The lease portfolio added $4.8 million to net interest income, and 28 basis points to net interest margin, for the third quarter of 2021. In late March of 2020, the Federal Reserve lowered the Federal Funds effective target range 150 basis points to 0.00% to 0.25%. The majority of Peoples' variable rate loan portfolio is tied to LIBOR or a prime rate, which continued to be lower than historical levels.
For the first nine months of 2021, net interest income grew 13%, and was driven by the addition of the lease and premium finance portfolios, along with PPP income, coupled with lower funding costs. Compared to the first nine months of 2020, net interest margin grew by 14 basis points and was driven by the 20 basis point addition of the leasing portfolio, while the PPP income contributed 20 basis points during 2021 compared to 6 basis points for 2020.
Accretion income, net of amortization expense, from acquisitions was $1.0 million for the third quarter of 2021, $0.8 million for the linked quarter and $0.5 million for the third quarter of 2020, which added 8 basis points, 7 basis points and 5 basis points, respectively, to net interest margin. For the first nine months of 2021, accretion income, net of amortization expense, from acquisitions totaled $2.2 million, and added 6 basis points to net interest margin, compared to $2.6 million, and 8 basis points for 2020.
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 Credit Losses
The following table details Peoples’ provision for credit losses:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Provision for other credit losses$8,870 $3,035 $4,574 $7,125 $33,171 
Provision for checking account overdraft credit losses124 53 154 208 360 
Provision for credit losses$8,994 $3,088 $4,728 $7,333 $33,531 
As a percentage of average total loans (a)1.01 %0.36 %0.55 %0.28 %1.40 %
(a) Presented on an annualized basis.
The provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates. 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 acquisition of Premier. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier. 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. Compared to the third quarter of 2020, the change in the provision for credit losses was primarily due to the impact of economic assumptions used in the CECL model and Peoples' own credit portfolio developments related to COVID-19, coupled with the day-one allowance for credit losses required in connection with the acquisitions of Premier in the third quarter of 2021 and NSL in the second quarter of 2021.


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Compared to the first nine months of 2020, the provision for credit losses declined significantly, as the economic forecasts utilized within the CECL model experienced notable recovery compared to those utilized during 2020, which had been impacted by the onset of the COVID-19 pandemic.
Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this MD&A under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.”
Net (Loss) Gain Included in Total Non-Interest Income
Net (loss) gain include gains and losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income. The following table details Peoples’ net losses for the periods presented:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Net (loss) gain on investment securities$(166)$(202)$2 $(704)$383 
Net (loss) gain on asset disposals and other transactions:
Net loss on other assets$(270)$(132)$(43)$(429)$(258)
Net (loss) gain on OREO(32)8 15 (24)(1)
Net (loss) gain on other transactions (6)— — (6)22 
Net loss on asset disposals and other transactions$(308)$(124)$(28)$(459)$(237)
Net losses for the third quarter of 2021 were driven primarily by losses on the disposal of fixed assets acquired from Premier 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 investments.
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 from Premier. The first nine months of 2020 included a net gain on investment securities that was recorded in connection with sales of investment securities. For the first nine months of 2020, net loss on other assets was driven by losses on repossessed assets.
Total Non-Interest Income, Excluding Net Gains and Losses
Total non-interest income, excluding net gains and losses, accounted for 28% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the three months ended September 30, 2021 compared to 29% for the linked quarter and 32% for the third quarter of 2020. The recent decline in this ratio was driven by an increase in net interest income due to the acquisition of leases acquired from NSL.
For the third quarter of 2021, 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,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
E-banking income$4,326 $4,418 $3,765 $12,655 $10,568 
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. The decreases in e-banking income compared to each of the linked quarter and the prior year quarter were driven by the increased usage of debit cards by customers, resulting from the COVID-19 pandemic. The increased usage has continued through the first nine months of 2021, resulting in higher e-banking income compared to the same period in 2020.
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

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plan services business. The following tables detail Peoples’ trust and investment income and related assets under administration and management:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Fiduciary income$1,944 $2,095 $1,710 $5,941 $5,112 
Brokerage income1,577 1,494 1,165 4,408 3,324 
Employee benefit fees637 631 560 1,874 1,577 
Trust and investment income$4,158 $4,220 $3,435 $12,223 $10,013 
Fiduciary income and brokerage income are mostly driven by the values of assets under administration and management, which have increased in recent periods as the market values of existing accounts have been positively impacted and grown, coupled with new accounts added compared to prior periods. Employee benefit fees continue to increase compared to prior periods as Peoples focuses on growing the number of employee benefit plans it manages.
The following table details Peoples' assets under administration and management:
September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
(Dollars in thousands)
Trust$1,937,123 $1,963,884 $1,916,892 $1,885,324 $1,609,270 
Brokerage
1,133,668 1,119,247 1,071,126 1,009,521 921,688 
Total
$3,070,791 $3,083,131 $2,988,018 $2,894,845 $2,530,958 
Quarterly average$3,105,476 $3,051,027 $2,927,458 $2,663.485 $2,510,978 
The slight decline in assets under administration and management at September 30, 2021, compared to each prior period end, was largely driven by the decrease in market values late in the third quarter of 2021, while the quarterly average increased compared to prior quarters.
The following table details Peoples' insurance income:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Property and casualty insurance commissions
$2,836 $2,765 $2,528 $8,356 $7,624 
Life and health insurance commissions
396 430 965 1,248 1,494 
Performance-based commissions
59 35 8 2,044 1,437 
Other fees and charges
76 105 107 275 374 
Insurance income$3,367 $3,335 $3,608 $11,923 $10,929 
For the third quarter of 2021, insurance income was relatively flat compared to the linked quarter. Compared to the third quarter of 2020, insurance income declined 7%, driven by decreases in life and health insurance commissions, offset partially by an increase in property and casualty insurance commissions. For the first nine months of 2021, insurance income increased $1.0 million, or 9%. This increase was driven by higher property and casualty, and performance-based commissions. Annually Peoples receives performance-based income commissions that are related to how much loss is incurred by underlying policies and the overall performance of the insurance carriers. The insurance income compared to prior periods was positively impacted by the addition of new customers.

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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,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Overdraft and non-sufficient funds fees$1,420 $1,012 $1,216 $3,429 $3,741 
Account maintenance fees934 854 848 2,598 2,677 
Other fees and charges195 178 202 551 577 
Deposit account service charges$2,549 $2,044 $2,266 $6,578 $6,995 
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 for the third quarter of 2021 grew compared to the linked quarter and the third quarter of 2020 due largely to an increase in volume of overdraft and non-sufficient fees charged due to customer activity. Deposit account service charges were negatively impacted during the second quarter of 2021 and the third quarter of 2020, mostly due to fiscal stimulus payments and PPP loan proceeds provided to customers, along with changed customer spending habits due to the COVID-19 pandemic. For the first nine months of 2021, compared to the same period of 2020, deposit account service charges declined and were impacted by the COVID-19 pandemic items already mentioned.
The following table details the other items included within Peoples' total non-interest income:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Mortgage banking income766 820 2,658 2,726 4,346 
Bank owned life insurance income437 446 462 1,329 1,514 
Commercial loan swap fees73 61 68 194 1,267 
Other non-interest income1,144 803 534 2,605 1,393 
Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained. As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage banking income declined during the third quarter of 2021, compared to the linked quarter and the prior year quarter as refinancing activity slowed and a lower volume of new loan originations due to the lack of inventory of homes for sale. Compared to the first nine months of 2020, mortgage banking income declined 37%, because of lower origination volume caused by a lower inventory of homes for sale and less refinancing activity because of an increase in interest rates above historically low levels experienced as a result of the COVID-19 pandemic.
In the third quarter of 2021, Peoples recognized a gain of $0.4 million on the sale of $11.0 million in loans to the secondary market with servicing retained and $0.2 million on the sale of $10.3 million in loans with servicing released. In the second quarter of 2021, Peoples recognized a gain of $0.6 million on the sale of $15.8 million in loans with servicing retained and $185,000 on the sale of $7.8 million in loans with servicing released. In the third quarter of 2020 Peoples recognized a gain of $1.6 million on the sale of $35.2 million in loans sold servicing retained and a gain of $1.0 million on $68.2 million in loans sold servicing released. For the first nine months of 2021, Peoples recognized a gain of $1.8 million on the sale of $44.0 million in loans to the secondary market with servicing retained and a gain of $0.6 million on the sale of $27.7 million in loans with servicing released. For the first nine months of 2020, Peoples recognized a gain of $2.5 million on the sale of $78.6 million in loans sold servicing retained and a gain of $1.8 million on the sale of $124.2 million in loans sold servicing released. The volume of sales has a direct impact on the amount of mortgage banking income.
Bank owned life insurance income was down compared to the linked quarter and the third quarter of 2020. For the first nine months of 2021, bank owned life insurance declined 12%, primarily due to a $109,000 tax-free death benefit recognized during the first quarter of 2020.
Commercial loan swap fees are largely dependent on timing, interest rates, and the volume of customer activity. Commercial loan swap fees were up slightly compared to the linked quarter and the third quarter of 2020. Compared to the first nine months of 2020, commercial loan swap fees declined due to a lower volume of transactions during 2021 compared to the high volume of transactions entered into during the first nine months of 2020.
Other non-interest income increased compared to the linked quarter and the third quarter of 2020 and was driven by other fee income of $0.5 million recognized on leases related to the early termination of leases and other fees in the third quarter of 2021

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compared to $0.2 million recognized in the second quarter of 2021. There was no income related to the early termination of leases in the third quarter of 2020, as NSL was not acquired until the second quarter of 2021. For the nine months ended September 30, 2021, other non-interest income was higher due to the recognition of $0.6 million related to fees received for the early termination of leases and lease syndications.
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,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Base salaries and wages$17,493 $13,488 $13,019 $43,746 $38,489 
Sales-based and incentive compensation4,013 4,593 3,493 12,034 9,320 
Employee benefits2,619 2,821 1,930 8,338 6,471 
Payroll taxes and other employment costs1,635 1,343 1,148 4,471 3,584 
Stock-based compensation618 604 632 2,437 2,985 
Deferred personnel costs(789)(921)(812)(2,750)(3,536)
Salaries and employee benefit costs$25,589 $21,928 $19,410 $68,276 $57,313 
Full-time equivalent employees:  
Actual at end of period1,181 925 886 1,181 886 
Average during the period990 914 890 942 893 
Base salaries and wages increased 30% compared to the linked quarter and increased 34% compared to the third quarter of 2020. The increase for the third quarter of 2021 compared to prior periods was primarily due to the acquisition of Premier, which included $3.4 million in acquisition-related severance expense. For the first nine months of 2021, base salaries and wages increased 14% compared to the first nine months of 2020 as a result of the acquisition-related severance expense for Premier and additional salaries associated with NSL and a full nine months of Premium Finance.
The decrease in sales-based and incentive compensation for the third quarter of 2021 compared to the linked quarter was primarily due to lower incentive compensation related to insurance and mortgage banking. For the first nine months of 2021 compared to the same period in 2020, the increase was driven by the overall company performance relative to measures used in calculating incentive awards and higher sales-based compensation from insurance and trust and investments.
The increase in employee benefits for first nine months of 2021, compared to first nine months of 2020, was due to an increase to the employer 401(k) match made during 2021, as well as higher medical costs with the addition of the Premier and NSL employees. During the second quarter of 2021, Peoples increased the matching contribution to participant's 401(k) accounts, retroactive to January 1, 2021. This true-up was completed in the second quarter of 2021 and drove the increase in employee benefits for the third quarter of 2021 compared to the third quarter of 2020.
The increase in payroll taxes and other employment costs, compared to linked quarter, was primarily due to the taxes associated with the acquisition-related severance expense recognized in the third quarter of 2021. The increase in payroll taxes and other employment costs for the three and nine months ended September 30, 2021, compared to the same periods in 2020, was primarily related to higher base salaries and wages, coupled with the additional associates of Premier and NSL.
Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years, adjusted for an estimate of the portion of awards that will be forfeited. At the vesting date, an adjustment is made to increase or reverse expense for the amount of actual forfeitures compared to the estimate. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year and are based upon Peoples achieving certain performance goals during the prior year. Stock-based compensation for the first nine months of 2021 decreased compared to the first nine months of 2020 due to an additional $396,000 of unrestricted grants of common share awards to associates at the level of Assistant Vice President or below granted in the second quarter of 2020.
Deferred personnel costs represent the portion of current period salaries and employee benefit costs considered to be direct loan origination costs.  These costs are capitalized and recognized over the life of the loan as a yield adjustment in interest income.  As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with the average deferred costs per loan that are updated annually at the beginning of each year. The decrease in deferred personnel costs compared to the linked quarter was due to a reduction loan origination volume. The decrease in deferred personnel costs in the first

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nine months of 2021 compared to first nine months of 2020 was driven by the recognition of $921,000 in deferred personnel costs during the second quarter of 2020 related to the origination of PPP loans.
Peoples' net occupancy and equipment expense was comprised of the following:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Depreciation$1,365 $1,398 $1,507 $4,134 $4,519 
Repairs and maintenance costs1,017 903 767 2,863 2,225 
Net rent expense371 382 340 1,093 960 
Property taxes, utilities and other costs798 606 769 2,077 1,984 
Net occupancy and equipment expense$3,551 $3,289 $3,383 $10,167 $9,688 
Depreciation on capitalized assets has declined during the second and third quarters of 2021, compared to both the third quarter of 2020, and the first nine months of 2020 as a result of certain capitalized assets and improvements reaching the end of their depreciable lives. In addition, Peoples recognized higher building maintenance costs during the first nine months of 2021, compared to 2020 due to various projects including painting, window replacements, drive-thru enhancements and parking lot sealing. Property taxes, utilities and other costs also increased during the nine months ended September 30, 2021, compared to the first nine months of 2020 as a result of an increase in other costs, primarily driven by low-cost furniture and fixtures not capitalized, offset by a reduction in utilities and property taxes.
Net occupancy and equipment expense increased 5% compared to the first nine months of 2020 mainly due to increased expenses associated with maintaining the Premium Finance location for a full period, the acquisition from NSL in second quarter of 2021 and the partial period impact of the merger with Premier in the third quarter of 2021.
The following table details the other items included in total non-interest expense:
 Three Months EndedNine Months Ended
 September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Professional fees$6,426 $3,565 $1,720 $13,459 $5,247 
Data processing and software expense2,529 2,411 1,838 7,394 5,344 
E-banking expense2,037 2,075 2,095 6,006 5,839 
Amortization of other intangible assets1,279 1,368 857 3,267 2,314 
Marketing expense1,223 676 456 2,810 1,561 
Franchise tax expense810 822 882 2,487 2,645 
FDIC insurance premiums807 326 570 1,596 717 
Other loan expenses487 494 342 1,443 1,255 
Communication expense411 386 283 1,079 857 
Other non-interest expense12,711 2,559 2,479 17,762 7,665 
Professional fees increased $2.9 million from the linked quarter and $4.7 million from the third quarter of 2020 primarily due to investment banking fees and other acquisition-related expenses, which were related to the purchase of NSL and the merger with Premier. Professional fees included acquisition-related expenses of $2.4 million for the third quarter of 2021, $1.8 million for the second quarter of 2021, and $319,000 for the third quarter of 2020. For the first nine months of 2021, professional fees nearly doubled compared to the prior year, and included $6.2 million of acquisition-related expenses for 2021, compared to $363,000 for 2020.
The change in data processing and software expense compared to prior periods was driven by systems and software upgrades, annual contractual increases and overall growth, which included: the implementation of enhanced functionalities for Peoples' core banking system, including making certain mobile banking tools available to customers; software upgrades; and additional network capacity and security features in the latter part of 2020 and first quarter of 2021.
E-banking expense was down slightly compared to the linked quarter, and is directly correlated to e-banking income, with the decrease due to lower costs associated with ATM processing expenses.
Peoples' amortization of other intangible assets is driven by acquisition-related activity. Amortization of other intangible assets for the third quarter of 2021 was down $89,000 compared to the second quarter of 2021 due to adjustments to the fair value of intangible assets acquired from NSL, and the related changes to intangible amortization post-acquisition. Amortization of other intangible assets increased $422,000 compared to the third quarter of 2020 as a result of the NSL acquisition effective after the close of business on March 31, 2021.

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Marketing expense increased compared to the second quarter of 2021 due primarily to additional advertising campaigns relating to the addition of Premier locations. Additionally, in giving back to the community, Peoples' contributions increased during the third quarter of 2021 and included a donation to each of Marietta College and the Ohio Valley Museum of Discovery.
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.
Peoples' FDIC insurance premiums increased compared to the linked quarter, due to a decline in the leverage ratio which was impacted by the NSL acquisition in the second quarter, and decreased compared to December 31, 2020. Compared to the first nine months of 2020, the FDIC insurance premiums grew as a result of credits used by Peoples during the first two quarters of 2020 to offset its FDIC insurance premium. The FDIC insurance credits were related to the level of the Federal Deposit Insurance Fund ("DIF") that had continued to be above the target threshold for banks with total consolidated assets of less than $10 billion to recognize credits. Peoples utilized the remaining credits that had been issued to it in the second quarter of 2020.
Other loan expenses decreased slightly compared to the linked quarter due to lower expenses associated with business loans. Compared to the third quarter of 2020, other loan expenses increased mostly due to higher expenses associated with real estate loans and home equity lines of credit. Other loan expenses for the nine months ended September 30, 2021 increased $188,000 compared to the nine months ended September 30, 2020 due to increased loan origination activity.
Compared to the linked quarter, third quarter of 2020, and first nine months of 2020, communications expense grew as a result of upgraded networking to certain branches (including new branches acquired from Premier coupled with the addition of the NSL and Premium Finance locations acquired) and increased costs compared to the prior periods among certain vendors that provide communication services.
Other non-interest expense increased $10.2 million compared to the third quarter of 2020, and was mostly due to $9.6 million in acquisition-related expenses recognized during the third quarter of 2021.
Income Tax Expense
Peoples recorded an income tax benefit of $2.2 million for the third quarter of 2021, compared to income tax expense of $2.4 million for the linked quarter and income tax expense of $2.6 million for the third quarter of 2020. The income tax benefit during the third quarter of 2021, and the income tax expense recognized during the linked quarter and the third quarter of 2020 was heavily related to the amount of pre-tax income recognized during each period. Pretax income was impacted by acquisition-related expenses associated with the Premier acquisition during the third quarter of 2021. Peoples recorded income tax expense of $4.0 million for the nine months ended September 30, 2021, compared to $3.6 million for the nine months ended September 30, 2020. Pretax income for the nine months ended September 30, 2021 was largely impacted by acquisition-related expenses, contract negotiation expenses and other non-core expenses.
Additional information regarding income taxes can be found in "Note 12 Income Taxes" of the Notes to the Condensed Consolidated Financial Statements included in Peoples' 2020 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,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Pre-provision net revenue:
(Loss) income before income taxes$(7,930)$12,494 $12,846 $23,807 $17,810 
Add: provision for credit losses 8,994 3,088 4,728 7,333 33,531 
Add: loss on OREO32 — — 32 17 
Add: loss on investment securities 316 499 — 1,490 2 
Add: loss on other assets363 238 115 687 258 
Add: loss on other transactions6 — — 6 — 
Less: gain on OREO— 8 15 8 16 
Less: gain on investment securities150 297 2 786 385 
Less: gain on other assets93 106 72 258 22 
Pre-provision net revenue$1,538 $15,908 $17,600 $32,303 $51,195 
Total average assets$5,475,147$5,183,146$4,906,614$5,192,183$4,706,153 
Pre-provision net revenue to total average assets (annualized)0.11 %1.23 %1.43 %0.83 %1.45 %
Weighted-average common shares outstanding - diluted20,789,27119,461,93419,637,68919,890,67219,998,353
Pre-provision net revenue per common share - diluted$0.07 $0.81 $0.90 $1.61 $2.55 
The decrease in PPNR compared to the linked quarter and the third quarter of 2020 was mostly due to higher non-core acquisition-related expenses recognized during the third quarter of 2021.
Core Non-Interest Expense (Non-US GAAP)
Core non-interest expense is a financial measure used to evaluate Peoples' recurring expense stream. This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses, contract negotiation expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc. contribution.
The following table provides a reconciliation of this Non-US GAAP measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:
Three Months EndedNine Months Ended
September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Core non-interest expense:
Total non-interest expense$57,860 $39,899 $34,315 $135,746 100,445 
Less: acquisition-related expenses16,209 2,400 335 20,520 412 
Less: pension settlement charges143 — 531 143 1,050 
Less: severance expenses— 14 192 63 284 
Less: COVID-19-related expenses181 210 148 683 1,206 
Less: Peoples Bank Foundation, Inc. contribution— — — 500 — 
Less: contract negotiation expenses1,851 — — 1,851 — 
Core non-interest expense$39,476 $37,275 $33,109 $111,986 $97,493 
Efficiency Ratio (Non-US GAAP)
The efficiency ratio is a key financial measure used to monitor performance. The efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of fully tax-equivalent net interest income plus total non-interest income excluding net gains and losses. This measure is Non-US GAAP since it excludes amortization of other intangible assets and all gains and losses included in earnings, and uses fully tax-equivalent net interest income.

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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,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Efficiency ratio:
Total non-interest expense$57,860 $39,899 $34,315 $135,746 $100,445 
Less: amortization of other intangible assets1,279 1,368 857 3,267 2,314 
Adjusted total non-interest expense$56,581 $38,531 $33,458 $132,479 $98,131 
Total non-interest income$16,346 $15,821 $16,770 $49,070 $47,171 
Less: net gain on investment securities— — 2 — 383 
Add: net loss on investment securities(166)(202)— (704)— 
Add: net loss on asset disposals and other transactions(308)(124)(28)(459)(237)
Total non-interest income excluding net gains and losses$16,820 $16,147 $16,796 $50,233 $47,025 
Net interest income$42,578 $39,660 $35,119 $117,816 $104,615 
Add: fully tax-equivalent adjustment (a)351 324 262 970 803 
Net interest income on a fully tax-equivalent basis$42,929 $39,984 $35,381 $118,786 $105,418 
Adjusted revenue$59,749 $56,131 $52,177 $169,019 $152,443 
Efficiency ratio94.70 %68.64 %64.12 %78.38 %64.37 %
Efficiency ratio adjusted for non-core items:
Core non-interest expense$39,476 $37,275 $33,109 $111,986 $97,493 
Less: amortization of other intangible assets1,279 1,368 857 3,267 2,314 
Adjusted core non-interest expense$38,197 $35,907 $32,252 $108,719 $95,179 
Core non-interest income excluding net gains and losses$16,820 $16,147 $16,796 $50,233 $47,025 
Net interest income on a fully tax-equivalent basis42,929 39,984 35,381 118,786 105,418 
Adjusted revenue$59,749 $56,131 $52,177 $169,019 $152,443 
Efficiency ratio adjusted for non-core items63.93 %63.97 %61.81 %64.32 %62.44 %
(a) Based on a 21% statutory federal corporate income tax rate.
The efficiency ratio for the third quarter of 2021 was 94.7%, compared to 68.6% for the linked quarter, and 64.1% for the third quarter of 2020. The change in the efficiency ratio compared to the linked quarter was primarily due to the acquisition-related expenses. The efficiency ratio, adjusted for non-core items, was 63.9% for the third quarter of 2021, compared to 64.0% for the linked quarter and 61.8% for the third quarter of 2020. Impacting the adjusted ratios were higher salaries and employee benefits due to the Premier and NSL acquisitions along with higher advertising expenses and increased repair and maintenance expenses.
For the first nine months of 2021, the efficiency ratio grew due to higher total non-interest expense associated with the acquisition-related expenses mentioned above, operating expenses associated with the NSL and Premium Finance acquired divisions, a reduction in deferred loan costs from the PPP loans, and increased sales and incentive-based compensation from higher production.
Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)
In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance. The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, contract negotiation expenses, pension settlement charges, severance expenses, COVID-19-related expenses and a Peoples Bank Foundation, Inc. contribution.

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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,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Annualized net (loss) income adjusted for non-core items:
Net (loss) income
$(5,758)$10,103 $10,210 $19,808 $14,194 
Add: net loss on investment securities
166 202 — 704 — 
Less: tax effect of net loss on investment securities (a)
35 42 — 148 — 
Less: net gain on investment securities
— — 2 — 383 
Add: tax effect of net gain on investment securities (a)
— — — — 80 
Add: net loss on asset disposals and other transactions
308 124 28 459 237 
Less: tax effect of net loss on asset disposals and other transactions (a)
65 26 6 96 50 
Add: acquisition-related expenses
16,209 2,400 335 20,520 412 
Less: tax effect of acquisition-related expenses (a)
3,404 504 70 4,309 87 
Add: pension settlement charges
143 — 531 143 1,050 
Less: tax effect of pension settlement charges (a)
30 — 112 30 221 
Add: severance expenses— 14 192 63 284 
Less: tax effect of severance expenses (a)— 3 40 13 60 
Add: COVID-19-related expenses181 210 148 683 1,206 
Less: tax effect of COVID-19-related expenses (a)38 44 31 143 253 
Add: Peoples Bank Foundation, Inc. contribution
— — — 500 — 
Less: tax effect of Peoples Bank Foundation, Inc. contribution (a)
— — — 105 — 
Add: contract negotiation fees
1,851 — — 1,851 — 
Less: tax effect of contract negotiation fees
389 — — 389 — 
Net income adjusted for non-core items (after tax)
$9,139 $12,434 $11,183 $39,498 $16,409 
Days in the period92 91 92 273 274 
Days in the year365 365 366 365 366 
Annualized net (loss) income
$(22,844)$40,523 $40,618 $26,483 $18,960 
Annualized net income adjusted for non-core items (after tax)
$36,258 $49,873 $44,489 $52,809 $21,919 
Return on average assets:
Annualized net (loss) income
$(22,844)$40,523 $40,618 $26,483 $18,960 
Total average assets5,475,147 5,183,146 4,906,614 5,192,183 4,706,153 
Return on average assets
(0.42)%0.78 %0.83 %0.51 %0.40 %
Return on average assets adjusted for non-core items:
Annualized net income adjusted for non-core items (after tax)
$36,258 $49,873 $44,489 $52,809 $21,919 
Total average assets
5,475,147 5,183,146 4,906,614 5,192,183 4,706,153 
Return on average assets adjusted for non-core items
0.66 %0.96 %0.91 %1.02 %0.47 %
(a) Based on a 21% statutory federal corporate income tax rate.
The return on average assets declined during the third quarter of 2021, compared to the linked quarter and the third quarter of 2020. The decrease was driven by the provision for credit losses recognized in the third quarter due to the Premier acquisition and higher total non-interest expense recognized during the third quarter of 2021, which was mostly due to acquisition-related expenses. The return on average assets adjusted for non-core items declined compared to the linked quarter due to the higher salaries and

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incentive compensation. The return on average assets and the return on average assets adjusted for non-core items both grew compared to the first nine months of 2020. The increases were mostly due to the previously mentioned higher provision for credit losses recorded during the first nine months of 2020. For additional information related to the changes in the provision for (recovery of) credit losses, refer to the sections in this discussion titled “Provision for (Recovery of) Credit Losses" and "Allowance for Credit Losses.”
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,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in thousands)20212020
Annualized net income excluding amortization of other intangible assets:
Net (loss) income
$(5,758)$10,103 $10,210 $19,808 $14,194 
Add: amortization of other intangible assets
1,279 1,368 857 3,267 2,314 
Less: tax effect of amortization of other intangible assets (a)
269 287 180 686 486 
Net income excluding amortization of other intangible assets
$(4,748)$11,184 $10,887 $22,389 $16,022 
Days in the period
92 91 92 273 274 
Days in the year
365 365 366 365 366 
Annualized net (loss) income
$(22,844)$40,523 $40,618 $26,483 $18,960 
Annualized net (loss) income excluding amortization of other intangible assets
$(18,837)$44,859 $43,311 $29,934 $21,402 
Average tangible equity:
Total average stockholders' equity
$627,783 $581,831 $567,055 $595,918 $578,439 
Less: average goodwill and other intangible assets
232,361 222,553 185,816 213,232 180,291 
Average tangible equity
$395,422 $359,278 $381,239 $382,686 $398,148 
Return on average stockholders' equity ratio:
Annualized net income
$(22,844)$40,523 $40,618 $26,483 $18,960 
Average stockholders' equity
$627,783 $581,831 $567,055 $595,918 $578,439 
Return on average stockholders' equity
(3.64)%6.96 %7.16 %4.44 %3.28 %
Return on average tangible equity ratio:
Annualized net income excluding amortization of other intangible assets
$(18,837)$44,859 $43,311 $29,934 $21,402 
Average tangible equity
$395,422 $359,278 $381,239 $382,686 $398,148 
Return on average tangible equity
(4.76)%12.49 %11.36 %7.82 %5.38 %
(a) Based on a 21% statutory federal corporate income tax rate.
The return on average stockholders' equity and average tangible equity ratios were impacted by the provision for (recovery of) credit losses during each of the respective periods, as well as non-core items recognized during the periods. Intangible assets grew at September 30, 2021, compared to June 30, 2021, as Peoples recorded the intangibles and goodwill associated with the Premier acquisition, which increased average tangible equity. Additionally, during the first nine months of 2020, Peoples recorded high amounts of provision for credit losses, which negatively impacted net income, as a result of the COVID-19 pandemic.
For additional information related to changes in the provision for (recovery of) credit losses, refer to the sections in this discussion titled “Provision for (Recovery of) Credit Losses" and "Allowance for Credit Losses.”

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FINANCIAL CONDITION
Cash and Cash Equivalents
At September 30, 2021, Peoples' interest-bearing deposits in other banks had increased $278.6 million from December 31, 2020. The total cash and cash equivalents balance included $321.0 million of excess cash reserves being maintained at the FRB of Cleveland at September 30, 2021, compared to $25.1 million at December 31, 2020. Peoples also acquired $252.8 million in cash and cash equivalents from Premier. 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, coupled with increased liquidity needs due to the COVID-19 pandemic.
Through the first nine months of 2021, Peoples' total cash and cash equivalents increased $347.6 million as Peoples had net cash provided by investing activities of $106.3 million, financing activities of $174.6 million and operating activities of $66.7 million. Peoples' investing activities reflected a net decrease of $156.6 million in loans and an aggregate of $896.6 million in purchases of available-for-sale and held-to-maturity investment securities, which were partially offset by an aggregate of $711.5 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment securities. Financing activities included a $165.4 million net increase in deposits and an increase of $32.6 million in short-term borrowings, as well as no purchases of treasury stock under the share repurchase program and $20.9 million of cash dividends paid.
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)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Available-for-sale securities, at fair value:    
Obligations of:     
U.S. government sponsored agencies$78,481 $14,235 $18,471 $5,363 $5,383 
States and political subdivisions252,919 223,853 218,484 114,919 104,126 
Residential mortgage-backed securities898,459 579,152 596,181 623,218 726,992 
Commercial mortgage-backed securities62,552 27,631 27,481 4,783 10,568 
Bank-issued trust preferred securities4,679 4,766 4,730 4,730 4,633 
Total fair value$1,297,090 $849,637 $865,347 $753,013 $851,702 
Total amortized cost$1,294,654 $839,682 $859,120 $734,544 $829,899 
Net unrealized gain $2,436 $9,955 $6,227 $18,469 $21,803 
Held-to-maturity securities, at amortized cost:
Obligations of:
U.S. government sponsored agencies$29,995 $30,103 $30,211 $— $— 
States and political subdivisions (a)124,181 102,224 92,436 35,139 3,539 
Residential mortgage-backed securities41,035 24,067 24,878 25,890 26,926 
Commercial mortgage-backed securities47,889 23,830 18,705 5,429 5,678 
Total amortized cost$243,100 $180,224 $166,230 $66,458 $36,143 
Other investment securities$34,486 $32,584 $34,026 $37,560 $40,715 
Total investment securities:
Amortized cost$1,572,240 $1,052,490 $1,059,376 $838,562 $906,757 
Carrying value$1,574,676 $1,062,445 $1,065,603 $857,031 $928,560 
(a)Amortized cost is presented net of the allowance for credit losses of $236 at September 30, 2021; $201 at June 30, 2021; $182 at March 31, 2021; $60 at December 31, 2020 and $6 at September 30, 2020.
During the third quarter of 2021, Peoples acquired, in the Premier acquisition, investment securities totaling $563.3 million. Peoples sold $400.6 million of available-for-sale investment securities and reinvested $358.7 million of the proceeds into higher-yielding investments. The increase compared to December 31, 2020 was driven by the Premier acquisition and an increase in available-for-sale commercial-mortgage backed securities that were purchased during the first nine months of 2021, coupled with purchases of available for sale and held-to-maturity obligations of state and political subdivisions, which were purchased in an effort to reduce the impact of premium amortization on the securities that were sold. At December 31, 2020, the investment security portfolio decreased compared to prior periods, as Peoples had worked to execute the strategy to sell securities that had high premium

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amortization, and reinvest into investment securities; however, not all proceeds from those sales had been reinvested by December 31, 2020.
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,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Originated loans:
     
Construction
$108,334 $97,424 $75,189 $103,169 $103,948 
Commercial real estate, other
838,333 836,613 832,399 780,324 752,480 
     Commercial real estate
946,667 934,037 907,588 883,493 856,428 
Commercial and industrial
715,169 778,122 935,150 943,024 1,029,613 
Premium finance134,755 117,039 109,129 100,571 60,908 
Leases49,464 24,217 — — — 
Residential real estate
334,838 324,321 306,440 281,623 284,645 
Home equity lines of credit
98,806 95,376 92,540 93,296 91,701 
Consumer, indirect
543,243 537,926 519,749 503,526 491,663 
Consumer, direct
80,746 78,736 75,998 75,591 75,106 
    Consumer
623,989 616,662 595,747 579,117 566,769 
Deposit account overdrafts
927 498 298 351 519 
Total originated loans
$2,904,615 $2,890,272 $2,946,892 $2,881,475 $2,890,583 
Acquired loans (a):
Construction
$66,450 $3,175 $3,510 $3,623 $4,103 
Commercial real estate, other
790,783 111,647 132,850 149,529 160,759 
     Commercial real estate
857,233 114,822 136,360 153,152 164,862 
Commercial and industrial
143,369 27,629 29,611 30,621 34,396 
Premium finance— 49 1,461 14,187 43,217 
Leases61,982 71,426 — — — 
Residential real estate
433,296 242,276 267,260 292,384 304,804 
Home equity lines of credit
62,564 23,025 24,886 27,617 30,234 
Consumer, indirect
13 — — 1 36 
Consumer, direct
27,956 2,700 3,206 3,503 3,953 
    Consumer
27,969 2,700 3,206 3,504 3,989 
Total acquired loans
$1,586,413 $481,927 $462,784 $521,465 $581,502 
Total loans
$4,491,028 $3,372,199 $3,409,676 $3,402,940 $3,472,085 
Percent of loans to total loans:
 
Construction
3.9 %3.0 %2.3 %3.1 %3.1 %
Commercial real estate, other
36.3 %28.1 %28.3 %27.3 %26.3 %
     Commercial real estate
40.2 %31.1 %30.6 %30.4 %29.4 %
Commercial and industrial
19.1 %23.9 %28.3 %28.6 %30.6 %
Premium finance3.0 %3.5 %3.2 %3.4 %3.0 %
Leases2.5 %2.8 %— %— %— %
Residential real estate
17.1 %16.8 %16.8 %16.9 %17.0 %
Home equity lines of credit
3.6 %3.5 %3.5 %3.6 %3.5 %
Consumer, indirect
12.1 %16.0 %15.3 %14.8 %14.2 %
Consumer, direct
2.4 %2.4 %2.3 %2.3 %2.3 %
    Consumer
14.5 %18.4 %17.6 %17.1 %16.5 %
Total percentage
100.0 %100.0 %100.0 %100.0 %100.0 %
Residential real estate loans being serviced for others
$441,085 $454,399 $469,788 $485,972 $490,170 
(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).

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Period-end total loan balances at September 30, 2021 increased $1.1 billion compared to June 30, 2021. The increase compared to June 30, 2021 was mostly driven by $1.1 billion in loans acquired from Premier, coupled with organic growth in premium finance loans of $17.7 million, growth in leases of $15.8 million, and organic loan growth of $14.3 million, offset partially by $132.2 million in forgiveness received on PPP loans during the quarter. Excluding the PPP loan balances, Peoples' total originated loans grew by 6% annualized compared to June 30, 2021.
The decrease in commercial and industrial loan balances at June 30, 2021 compared to March 31, 2021 was mostly driven by $186.4 million in forgiveness proceeds received on PPP loans during the second quarter. This decrease was partially offset by $95.6 million in leases acquired from NSL, coupled with growth in in commercial real estate and consumer indirect loans.
The decline in construction loan balances of $28.0 million at March 31, 2021, compared to December 31, 2020, was mainly due to construction projects being completed and construction loans then converting to permanent financing.
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, 2021:
(Dollars in thousands)Outstanding BalanceLoan CommitmentsTotal Exposure% of Total
Construction:    
Apartment complexes$76,292 $135,048 $211,340 47.7 %
Mixed-use facilities14,641 43,992 58,633 13.2 %
Assisted living facilities and nursing homes15,804 30,708 46,512 10.5 %
Land only25,959 12,968 38,927 8.8 %
Office buildings and complexes3,523 15,969 19,492 4.4 %
Storage facility8,966 5,291 14,257 3.2 %
Lodging and lodging related7,784 6,091 13,875 3.1 %
Retail5,408 6,470 11,878 2.7 %
Residential property4,529 4,932 9,461 2.1 %
Other (a)11,878 7,118 18,996 4.3 %
Total construction$174,784 $268,587 $443,371 100.0 %
(a) All other outstanding balances are less than 2% of the total loan portfolio.

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(Dollars in thousands)Outstanding BalanceLoan CommitmentsTotal Exposure% of Total
Commercial real estate, other:    
Office buildings and complexes:  
Owner occupied$78,614 $3,199 $81,813 4.9 %
Non-owner occupied93,863 3,795 97,658 5.8 %
Total office buildings and complexes172,477 6,994 179,471 10.7 %
Retail facilities:
Owner occupied55,417 1,752 57,169 3.4 %
Non-owner occupied128,759 471 129,230 7.7 %
Total retail facilities184,176 2,223 186,399 11.1 %
Mixed-use facilities:
Owner occupied55,549 1,582 57,131 3.4 %
Non-owner occupied63,214 458 63,672 3.8 %
Total mixed-use facilities118,763 2,040 120,803 7.2 %
Apartment complexes98,159 1,468 99,627 5.9 %
Light industrial facilities: 
Owner occupied79,414 1,531 80,945 4.8 %
Non-owner occupied34,473 757 35,230 2.1 %
Total light industrial facilities113,887 2,288 116,175 6.9 %
Assisted living facilities and nursing homes81,539 750 82,289 4.9 %
Warehouse facilities:
Owner occupied38,685 1,400 40,085 2.4 %
Non-owner occupied38,614 27 38,641 2.3 %
Total warehouse facilities77,299 1,427 78,726 4.7 %
Lodging and lodging related:
Owner occupied15,131 210 15,341 0.9 %
Non-owner occupied119,043 150 119,193 7.1 %
Total lodging and lodging related134,174 360 134,534 8.0 %
Education services:
Owner occupied15,615 98 15,713 0.9 %
Non-owner occupied22,460 4,000 26,460 1.6 %
Total education services38,075 4,098 42,173 2.5 %
Restaurant/bar facilities:
Owner occupied22,361 — 22,361 1.3 %
Non-owner occupied14,644 — 14,644 0.9 %
Total restaurant/bar facilities37,005 — 37,005 2.2 %
Agriculture32,865 1,976 34,841 2.1 %
Other (a)540,697 26,225 566,922 33.8 %
Total commercial real estate, other$1,629,116 $49,849 $1,678,965 100.0 %
(a) All other outstanding balances are less than 2% of the total loan portfolio.
Peoples' commercial lending activities continue to focus on lending opportunities inside its primary and secondary market areas 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 either September 30, 2021 or December 31, 2020. The repayment of premium finance loans are secured by the underlying insurance policy, and therefore, have no geographical impact from a repayment perspective. The repayment of leases are secured by the underlying equipment collateral and not real estate, which mitigates geographic risk.
COVID-19 Loan Impacts
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

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are satisfied. The SBA will reimburse PPP lenders for any amount of a PPP covered loan that is forgiven, and PPP lenders will not be held liable for any representations made by PPP borrowers in connection with their requests for loan forgiveness.
Peoples is a PPP participating lender, and the PPP loans originated (including $28.2 million acquired in the merger with Premier) are included in commercial and industrial loans. Peoples also recorded deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in net interest income. The following tables detail Peoples' PPP loans and related income:
(Dollars in millions)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
PPP aggregate outstanding principal balances$139.8 $194.7 $349.9 $374.8 $472.0 
PPP net deferred loan origination fees4.0 7.1 9.3 7.9 11.6 
Three Months EndedNine Months Ended
September 30,
2021		June 30,
2021		September 30,
2020		September 30,
(Dollars in millions)20212020
Amortization of net deferred loan origination fees$3.1 $3.4 $1.9 $11.2 $3.8 
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,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Commercial real estate$39,252 $18,147 $18,663 $19,423 $21,549 
Commercial and industrial13,378 8,686 10,108 12,763 13,099 
Premium finance1,137 998 1,160 1,095 986 
Leases4,505 3,715 — — — 
     Total commercial58,272 31,546 29,931 33,281 35,634 
Residential real estate9,568 4,837 4,935 6,044 5,988 
Home equity lines of credit2,224 1,504 1,494 1,860 1,797 
Consumer, indirect6,160 8,841 7,522 8,030 12,772 
Consumer, direct1,079 1,161 970 1,081 1,861 
    Consumer7,239 10,002 8,492 9,111 14,633 
Deposit account overdrafts79 53 45 63 76 
Allowance for credit losses$77,382 $47,942 $44,897 $50,359 $58,128 
As a percent of total loans1.72 %1.42 %1.32 %1.48 %1.67 %
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 acquisition of Premier. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier. The increases at September 30, 2021 compared to prior periods are due to the Premier and NSL acquisitions.
During the second quarter, Peoples increased its allowance for credit losses due to the establishment of an allowance for credit losses on the leases acquired from NSL. Peoples recorded $3.3 million in provision for credit losses during the second quarter of 2021 in order to establish the allowance for credit losses for the acquired leases and $493,000 to establish the allowance for credit losses on leases identified as purchase credit deteriorated at the acquisition date and added an additional $427,000 in allowance for credit losses on growth in leases during the second quarter of 2021. The decreases in the allowance for credit losses for March 31, 2021 compared to December 31, 2020, and from December 31, 2020 compared to September 30, 2020, were due to developments related to COVID-19 and the resulting positive impact on the economic assumptions used in estimating the allowance for credit losses under the CECL model.
During much of 2020, Peoples increased its allowance for credit losses based on CECL model results, which incorporated economic forecasts that included the impact of COVID-19 on certain economic factors. These forecasts included higher unemployment rates nationally and in Ohio, and lower Ohio Gross Domestic Product, which are the key assumptions within the CECL

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model, compared to prior periods. During the third quarter of 2020, Peoples also recorded allowance for credit losses associated with the loans acquired from Triumph Premium Finance on July 1, 2020, which had included $84.7 million in loans at the acquisition date.
Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2020 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.
The following table summarizes Peoples’ net charge-offs and recoveries:
Three Months Ended
(Dollars in thousands)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Gross charge-offs:  
Commercial real estate, other$— $4 $157 $274 $109 
Commercial and industrial654 5 293 465 146 
Premium finance7 7 16 1 2 
Leases431 525 — — — 
Residential real estate44 136 133 98 121 
Home equity lines of credit180 4 12 80 — 
Consumer, indirect416 269 505 498 370 
Consumer, direct29 31 36 59 15 
    Consumer445 300 541 557 385 
Deposit account overdrafts135 89 103 139 202 
Total gross charge-offs$1,896 $1,070 $1,255 $1,614 $965 
Recoveries: 
Commercial real estate, other$4 $4 $— $74 $4 
Commercial and industrial4 18 — 512 — 
Premium finance— — — — — 
Leases120 110 — — — 
Residential real estate48 40 15 45 100 
Home equity lines of credit37 — 4 1 2 
Consumer, indirect43 63 105 41 64 
Consumer, direct17 11 26 12 13 
    Consumer60 74 131 53 77 
Deposit account overdrafts37 44 54 30 47 
Total recoveries$310 $290 $204 $715 $230 
Net charge-offs (recoveries):  
Commercial real estate, other$(4)$— $157 $200 $105 
Commercial and industrial650 (13)293 (47)146 
Premium finance7 7 16 1 2 
Leases311 415 — — — 
Residential real estate(4)96 118 53 21 
Home equity lines of credit143 4 8 79 (2)
Consumer, indirect373 206 400 457 306 
Consumer, direct12 20 10 47 2 
    Consumer385 226 410 504 308 
Deposit account overdrafts98 45 49 109 155 
Total net charge-offs $1,586 $780 $1,051 $899 $735 

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Three Months Ended
(Dollars in thousands)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Ratio of net charge-offs to average total loans (annualized):
Commercial real estate, other— %— %0.02 %0.02 %0.01 %
Commercial and industrial0.08 %— %0.04 %(0.01)%0.02 %
Leases0.03 %0.05 %— %— %— %
Residential real estate— %0.01 %0.01 %0.01 %— %
Home equity lines of credit0.02 %— %— %— %— %
Consumer, indirect0.04 %0.02 %0.05 %0.05 %0.03 %
Consumer, direct— %— %— %0.01 %— %
    Consumer0.04 %0.02 %0.05 %0.06 %0.03 %
Deposit account overdrafts0.01 %0.01 %0.01 %0.02 %0.02 %
Total0.18 %0.09 %0.13 %0.10 %0.08 %
Each with "--%" not meaningful.
Net charge-offs during the third quarter of 2021 were 0.18% of average total loans on an annualized basis. Although, gross charge-offs in many loan categories declined compared to the linked quarter, the primary factor in the increase of total gross charge-offs was one commercial and industrial loan charge-off of $500,000 during the quarter. Peoples recognized a $450,000 charge-off on a commercial and industrial loan relationship, while also recording a $508,000 recovery on a previously charged-off commercial and industrial loan relationship during the fourth quarter of 2020. During the second quarter of 2020, Peoples recorded a $750,000 recovery on a commercial loan relationship that had been previously charged-off.
The following table details Peoples’ nonperforming assets: 
(Dollars in thousands)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Loans 90+ days past due and accruing:     
Commercial real estate, other$1,912 $1,361 $55 $— $80 
Commercial and industrial98 161 — 50 74 
Premium finance368 216 109 205 — 
Leases1,736 1,522 — — — 
Residential real estate1,156 342 662 1,975 2,548 
Home equity lines of credit61 60 180 82 27 
Consumer, indirect— 39 24 39 86 
Consumer, direct32 40 14 17 — 
   Consumer32 79 38 56 86 
Total loans 90+ days past due and accruing$5,363 $3,741 $1,044 $2,368 $2,815 
Nonaccrual loans: 
Construction$— $4 $4 $4 $4 
Commercial real estate, other17,207 7,965 8,084 8,744 8,762 
   Commercial real estate17,207 7,969 8,088 8,748 8,766 
Commercial and industrial4,133 3,938 4,067 4,017 4,067 
Leases1,411 — — — — 
Residential real estate8,046 5,811 6,182 6,080 6,027 
Home equity lines of credit661 572 624 708 754 
Consumer, indirect850 704 825 883 801 
Consumer, direct177 100 146 160 148 
   Consumer1,027 804 971 1,043 949 
Total nonaccrual loans$32,485 $19,094 $19,932 $20,596 $20,563 
Nonaccrual troubled debt restructurings ("TDRs"):
Commercial real estate, other$94 $99 $337 367 $772 

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(Dollars in thousands)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Commercial and industrial1,223 1,774 2,034 2,175 2,250 
Residential real estate1,689 1,784 2,064 2,295 2,481 
Home equity lines of credit315 129 156 159 165 
Consumer, indirect219 193 206 190 160 
Consumer, direct9 6 15 11 45 
   Consumer228 199 221 201 205 
Total nonaccrual TDRs$3,549 $3,985 $4,812 $5,197 $5,873 
Total nonperforming loans ("NPLs")$41,397 $26,820 $25,788 $28,161 $29,251 
OREO: 
Commercial$10,804 $— $— $— $145 
Residential$464 $239 $134 $134 $148 
Total OREO$11,268 $239 $134 $134 $293 
Total nonperforming assets ("NPAs")$52,665 $27,059 $25,922 $28,295 $29,544 
Criticized loans (a)$234,845 $113,802 $116,424 $126,619 $123,219 
Classified loans (b)142,628 69,166 76,095 72,518 76,009 
Asset Quality Ratios (c):
NPLs as a percent of total loans (d)0.92 %0.79 %0.76 %0.82 %0.84 %
NPAs as a percent of total assets (d)0.75 %0.53 %0.50 %0.59 %0.60 %
NPAs as a percent of total loans and OREO(d)1.17 %0.80 %0.76 %0.84 %0.85 %
Allowance for credit losses as a percent of NPLs (d)186.93 %178.75 %174.10 %180.14 %198.72 %
Criticized loans as a percent of total loans (a)5.23 %3.37 %3.41 %3.72 %3.55 %
Classified loans as a percent of total loans (b)3.18 %2.05 %2.23 %2.13 %2.19 %
(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 include loans 90+ days past due and accruing, TDRs and nonaccrual loans. Nonperforming assets include nonperforming loans and OREO.

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During the third quarter of 2021, nonperforming assets increased $25.6 million, or 95%, compared to June 30, 2021. The increase in nonperforming assets compared to the prior quarter was primarily attributable to nonperforming loans and other real estate owned acquired from Premier. The nonperforming loans as a percent of total loans and nonperforming assets as a percent of total assets ratios both increased compared to June 30, 2021, due to the acquired nonperforming loans. The increase in nonperforming assets of $1.1 million at June 30, 2021, compared to March 31, 2021, was primarily due to acquisition of NSL. Nonperforming assets declined $2.3 million at March 31, 2021, compared to December 31, 2020, and was mostly due to several small relationships in both loans 90+ days past due and accruing and nonaccrual loans.
Criticized loans, which are those categorized as special mention, substandard or doubtful, increased $121.0 million, or 106%, compared to June 30, 2021 and increased $111.6 million, or 91%, compared to September 30, 2020. The increase in the amount of criticized loans compared to June 30, 2021 was the result of criticized loans acquired from Premier, offset by the pay-off of six commercial and industrial loans with an aggregate principal balance of $12.3 million and several smaller loans. Criticized loans declined $2.6 million at June 30, 2021, which was primarily due to the payoff of several smaller commercial loans.
Classified loans, which are those categorized as substandard or doubtful, increased by $73.5 million, or 106%, compared to June 30, 2021, and were up $66.6 million, or 88%, compared to September 30, 2020. The increase was driven by loans acquired from Premier.
On March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19. In this guidance, short-term modifications, made on a good faith basis in response to COVID-19, to borrowers who were current prior to any relief, are not considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment which are insignificant. Under the guidance, borrowers that are considered to be current are those that were less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not TDRs within the scope of ASC 310-40.
On August 3, 2020, federal and state banking regulators issued a joint statement, encouraging financial institutions to consider prudent accommodation options to mitigate losses for the borrower and financial institution beyond the initial accommodation period. In this guidance, institutions should also provide consumers with available options for repaying missed payments at the end of their accommodation to avoid delinquencies, as well as options for changes to terms to support sustainable and affordable payments for the long term. These considerations should also include prudent risk management practices at the financial institution based on the credit risk of the borrower. Peoples is actively working with its customers to address any further accommodation needs while carefully evaluating the associated credit risk of the borrowers.


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Deposits
The following table details Peoples’ deposit balances:
(Dollars in thousands)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Non-interest-bearing deposits (a)$1,559,993 $1,181,045 $1,206,034 $997,323 $982,912 
Interest-bearing deposits: 
Interest-bearing demand accounts (a)1,140,639 732,478 722,470 692,113 666,134 
Savings accounts1,016,755 689,086 676,345 628,190 589,625 
Retail certificates of deposit ("CDs") 691,680 417,466 433,214 445,930 461,216 
Money market deposit accounts637,635 547,412 586,099 591,373 581,398 
Governmental deposit accounts679,305 498,390 511,937 385,384 409,967 
Brokered deposits106,013 166,746 168,130 170,146 260,753 
Total interest-bearing deposits4,272,027 3,051,578 3,098,195 2,913,136 2,969,093 
  Total deposits$5,832,020 $4,232,623 $4,304,229 $3,910,459 $3,952,005 
Demand deposits as a percent of total deposits46 %45 %45 %43 %42 %
(a)The sum of amounts presented is considered total demand deposits.
At September 30, 2021, period-end deposits increased $1.6 billion, or 38%, compared to June 30, 2021, and increased $1.9 billion, or 48%, compared to September 30, 2020. The increase in total deposits compared to June 30, 2021 was driven primarily by $1.8 billion in deposits acquired in the merger with Premier including $392.2 million in non-interest bearing deposits, $652.9 million in interest-bearing demand accounts, $327.0 million in savings accounts, $285.4 million in retail CDs, $155.6 million in money market accounts and $11.1 million in brokered deposits. The decrease in total deposits at June 30, 2021 compared to March 31, 2021 was related to declines in money market deposits, non-interest bearing deposits, and retail CDs. At March 31, 2021, compared to December 31, 2020, Peoples experienced a significant increase in governmental deposit accounts, which was mostly due to seasonal fluctuation within these accounts.
Total deposits in all periods presented were higher due to customers maintaining larger balances, as a result of PPP loan proceeds, fiscal stimulus payments and changes in customer spending habits in light of the COVID-19 pandemic. In prior quarterly periods in the table above, Peoples experienced increases in most low-cost deposit categories.
Peoples reduced its reliance on brokered deposits in each quarterly period, beginning after June 30, 2020. This decline was largely due to the increase in deposit balances from customers, which allowed Peoples to reduce its position in the higher-cost brokered CDs during each period. As part of its funding strategy, Peoples hedges 90-day brokered deposits with interest rate swaps. The swaps pay a fixed rate of interest while receiving three-month LIBOR, which offsets the rate on the brokered deposits. As of September 30, 2021, Peoples had sixteen effective interest rate swaps, with an aggregate notional value of $150.0 million, of which $100.0 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 $50.0 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,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Short-term borrowings:
     
FHLB 90-day advances
$50,000 $— $— $— $110,000 
Current portion of long-term FHLB advances
15,000 15,000 20,000 20,000 25,000 
Retail repurchase agreements
119,693 51,496 47,868 53,261 47,063 
Total short-term borrowings
$184,693 $66,496 $67,868 $73,261 $182,063 
Long-term borrowings:
 
FHLB advances
$86,483 $87,393 $102,645 $102,957 $103,815 
Junior subordinated debt securities
12,928 7,688 7,650 7,611 7,571 
Total long-term borrowings
$99,411 $95,081 $110,295 $110,568 $111,386 
Total borrowed funds
$284,104 $161,577 $178,163 $183,829 $293,449 
Borrowed funds, in total, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances. Total borrowed funds increased 76% compared to June 30, 2021, primarily due to the addition of $63.8 million retail

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repurchase agreements from Premier. The decline in borrowed funds at September 30, 2021, compared to September 30, 2020 was mostly due to swap funding being moved to brokered deposits rather than the use of rolling 90-day advances to fund liquidity needs, which was partially offset by the acquired retail repurchase agreements from Premier during the third quarter of 2021.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities increased $23.8 million, or 27%, compared to June 30, 2021 and increased $12.2 million compared to September 30, 2020. The increase compared to the end of the second quarter of 2021 was the result of an increase in interest payable and other liabilities offset by with changes related to the fair value of swap derivatives at September 30, 2021. The increase compared to the end of the third quarter of 2020 was also the result of an increase in accrued interest payable offset by a decrease in the fair value of swap derivatives . 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.
Capital/Stockholders’ Equity
At September 30, 2021, 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, 2021, Peoples had a capital conservation buffer of 5.83%.
The following table details Peoples' risk-based capital levels and corresponding ratios:
(Dollars in thousands)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Capital Amounts:     
Common Equity Tier 1$567,172 $383,502 $418,089 $409,400 $398,553 
Tier 1580,100 391,190 425,739 417,011 406,124 
Total (Tier 1 and Tier 2)637,802 431,424 463,872 456,384 445,101 
Net risk-weighted assets$4,611,321 $3,382,736 $3,365,637 $3,146,767 $3,106,817 
Capital Ratios:
Common Equity Tier 112.30 %11.34 %12.42 %13.01 %12.83 %
Tier 112.58 %11.56 %12.65 %13.25 %13.07 %
Total (Tier 1 and Tier 2)13.83 %12.75 %13.78 %14.50 %14.33 %
Tier 1 leverage ratio11.20 %7.87 %9.00 %8.97 %8.62 %
During the third quarter of 2021, Peoples' reported a net loss of $5.8 million and declared dividends of $7.1 million. However, regulatory capital levels increased due to the merger with Premier. Net risk-weighted assets grew compared to June 30, 2021 mostly due to the merger with Premier, along with growth in premium finance loans and growth in leases during the quarter. The NSL acquisition negatively impacted the regulatory capital ratios at March 31, 2021, as the purchase price was included in net risk-weighted assets and there was no capital issued in connection with the NSL acquisition.
In 2020, Peoples repurchased common shares during each quarter of the year, which reduced regulatory capital levels. Peoples also completed the Premium Finance acquisition on July 1, 2020, which impacted regulatory capital levels due to the recognition of goodwill and intangibles associated with the acquisition. Peoples did not repurchase any common shares in the first nine months of 2021.
In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity. Such ratios represent Non-US GAAP financial measures since their calculation removes the impact of goodwill and other intangible assets acquired through acquisitions on amounts reported in the Unaudited Consolidated Balance Sheets. Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance, financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples. Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in value should there be deterioration in the overall franchise value. As a result, tangible equity represents a conservative measure of the capacity for Peoples to incur losses but remain solvent.

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The following table reconciles the calculation of these Non-US GAAP financial measures to amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements:
(Dollars in thousands)September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Tangible equity:     
Total stockholders' equity
$831,882 $585,505 $578,893 $575,673 $566,856 
Less: goodwill and other intangible assets
295,415 221,576 184,007 184,597 185,397 
Tangible equity
$536,467 $363,929 $394,886 $391,076 $381,459 
Tangible assets:
 
Total assets
$7,059,752 $5,067,634 $5,143,052 $4,760,764 $4,911,807 
Less: goodwill and other intangible assets
295,415 221,576 184,007 184,597 185,397 
Tangible assets
$6,764,337 $4,846,058 $4,959,045 $4,576,167 $4,726,410 
Tangible book value per common share:    
Tangible equity
$536,467 $363,929 $394,886 $391,076 $381,459 
Common shares outstanding
28,265,791 19,660,877 19,629,633 19,563,979 19,721,783 
Tangible book value per common share
$18.98 $18.51 $20.12 $19.99 $19.34 
Tangible equity to tangible assets ratio:
Tangible equity
$536,467 $363,929 $394,886 $391,076 $381,459 
Tangible assets
$6,764,337 $4,846,058 $4,959,045 $4,576,167 $4,726,410 
Tangible equity to tangible assets
7.93 %7.51 %7.96 %8.55 %8.07 %
Tangible book value per common share increased to $18.98 at September 30, 2021, compared to $18.51 at June 30, 2021. The change in tangible book value per common share was due to tangible equity increasing at a higher rate than shares outstanding during the third quarter of 2021. The increase in tangible book value per common share at December 31, 2020, compared to September 30, 2020, was the result of higher stockholders' equity as net income exceeded dividends declared during the period, as well as a reduction in common shares outstanding as Peoples actively repurchased common shares.
The tangible equity to tangible assets ratio increased at September 30, 2021 compared to June 30, 2021. This increase was driven by higher tangible assets related to the merger with Premier which provided for increases in loans, investment securities, cash and cash equivalents, and other assets, coupled with the intangible assets recorded during the third quarter of 2021 associated with the merger with Premier and the NSL acquisition. The decline in the tangible equity to tangible assets ratio at March 31, 2021 compared to December 31, 2020, was largely due to an increase in other assets that was driven by the NSL acquisition, for which the purchase price was paid and recorded on March 31, 2021. The higher tangible equity to tangible assets ratio at December 31, 2020, compared to September 30, 2020, was attributable to higher tangible equity, while tangible assets declined due to reductions in investment securities and total loans.
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' 2020 Form 10-K.

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The following table shows the estimated changes in net interest income and the economic value of equity based upon a standard, parallel shock analysis with balances held constant (dollars in thousands):
 
Increase (Decrease) in Interest Rate
Estimated Increase (Decrease) in
Net Interest Income
Estimated Increase (Decrease) in Economic Value of Equity
(in Basis Points)September 30, 2021December 31, 2020September 30, 2021December 31, 2020
300$26,191 12.5 %$22,034 17.3 %$12,475 1.0 %$117,235 15.7 %
20017,360 8.3 %15,899 12.5 %11,544 0.9 %95,189 12.7 %
1008,646 4.1 %8,981 7.1 %10,550 0.8 %60,384 8.1 %
(100)(9,792)(4.7)%(7,030)(5.5)%(120,471)(9.6)%(116,205)(15.5)%
Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities. These and other modeling assumptions are monitored closely by Peoples on an ongoing basis.
With respect to investment prepayment speeds, the assumptions used are the results of a third-party prepayment model which projects the rate at which the underlying mortgages will prepay. These prepayment speeds affect the amount forecasted for cash flow reinvestment, premium amortization, and discount accretion assumed in interest rate risk modeling results. This prepayment activity is generally the result of refinancing activity and tends to increase as longer term interest rates decline, much like the current environment. The assumptions in the interest rate risk model could be incorrect, leading to either a lesser or greater impact on net interest income or asset duration.
While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in the balance sheet, interest rates typically move in a nonparallel manner with differences in the timing, direction and magnitude of changes in short-term and long-term interest rates. Thus, any benefit that might occur as a result of the Federal Reserve increasing short-term interest rates in the future could be offset by an inverse movement in long-term rates, and vice versa. For this reason, Peoples considers other interest rate scenarios in addition to analyzing the impact of parallel yield curve shifts. These include various flattening and steepening scenarios in which short-term and long-term rates move in different directions with varying magnitude. Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above. Given the shape of market yield curves at September 30, 2021, consideration of the bear steepener and bull flattener scenarios provides insights which were not captured by parallel shifts. These scenarios were evaluated as the current environment suggests these may be possible outcomes for the trajectory of interest rates.
The bear steepener scenario highlights the risk to net interest income and the economic value of equity when short-term rates remain constant while long-term rates rise. In such a scenario, Peoples' deposit and borrowing costs, which are correlated with short-term rates, remain constant, while asset yields, which are correlated with long-term rates, rise. Increased asset yields would not be offset by increases in deposit or funding costs; resulting in an increased amount of net interest income and higher net interest margin. At September 30, 2021, the bear steepener scenario resulted in an increase in both net interest income and the economic value of equity of 0.8% and 5.5%, respectively.
The bull flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates remain constant while long-term rates fall. In such a scenario, Peoples’ deposit and borrowing costs, which are correlated with short-term rates, remain constant while asset yields, which are correlated with long-term rates, fall. Asset yields driven lower by increased investment securities premium amortization would not be offset by reductions in deposit or funding costs; resulting in a decreased amount of net interest income and lower net interest margin. At September 30, 2021, the bull flattener scenario resulted in a decrease in both net interest income and the economic value of equity of -0.5% and -0.9%, respectively. Peoples was within the policy limitations for this alternative scenario as of September 30, 2021, which sets the maximum allowable downside exposure as 5.0% of net interest income and 10.0% of economic value of equity.
Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. As of September 30, 2021, Peoples had entered into sixteen interest rate swap contracts with an aggregate notional value of $150.0 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, 2021, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income and the economic value of equity. 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, 2020 was largely attributable to increased effective duration in the investment securities portfolio.

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Liquidity
In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity. The methods used by the ALCO to monitor and evaluate the adequacy of Peoples Bank's liquidity position remain unchanged from those disclosed in Peoples' 2020 Form 10-K.
At September 30, 2021, Peoples Bank had liquid assets of $607.8 million, which represented 7.7% of total assets and unfunded loan commitments. Peoples also had an additional $246.5 million of unpledged investment securities not included in the measurement of liquid assets.
Management believes the current balance of cash and cash equivalents, anticipated investment portfolio cash flows and the availability of other funding sources, will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments.
Since March 31, 2020, there has been an increase in deposit balances due to the influx of funds from the government fiscal stimulus, the PPP and other government actions. Peoples anticipates that these deposit balances will decline over time as the funds are used for intended business purposes; however, this deposit outflow should be partially offset as the associated PPP loans are forgiven and loan reimbursement funds are received. At the same time, we have experienced a decrease in the utilization rate for commercial lines of credit. This decrease is related to the receipt of PPP loan proceeds and other increased cash flows to certain companies. Peoples expects the commercial line of credit utilization percentage to revert back to more historical averages as time progresses. The utilization percentage for consumer line of credit products has been relatively steady.
Off-Balance Sheet Activities and Contractual Obligations
In the normal course of business, Peoples is a party to financial instruments with off-balance sheet risk necessary to meet the financing needs of Peoples' customers. These financial instruments include commitments to extend credit and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract amounts of these instruments express the extent of involvement Peoples has in these financial instruments.
Loan Commitments and Standby Letters of Credit
Loan commitments are made to accommodate the financial needs of Peoples' customers. Standby letters of credit are instruments issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank's customer in the performance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused. Peoples Bank's exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Peoples Bank uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.
Peoples Bank routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Unaudited Condensed Consolidated Financial Statements. These activities are part of Peoples Bank's normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in low-income housing tax credit investments. Traditional off-balance sheet credit-related financial instruments continue to represent the most significant off-balance sheet exposure.
The following table details the total contractual amount of loan commitments and standby letters of credit:
 (Dollars in thousands)
September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020		September 30,
2020
Home equity lines of credit$177,963 $134,516 $124,027 $117,792 $113,185 
Unadvanced construction loans271,483 207,403 190,715 141,009 123,338 
Other loan commitments646,374 542,429 555,102 535,250 498,472 
Loan commitments$1,095,820 $884,348 $869,844 $794,051 $734,995 
Standby letters of credit$12,358 $10,252 $10,295 $14,342 $13,177 
The increase in loan commitments at September 30, 2021 was primarily the result of the Premier acquisition. Management does not anticipate that Peoples Bank’s current off-balance sheet activities will have a material impact on its future results of operations and financial condition based on historical experience and recent trends.


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

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, 2021.  Based upon that evaluation, Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer have concluded that:
(a)information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be accumulated and communicated to Peoples’ management, including its President and Chief Executive Officer and its Executive Vice President, Chief Financial Officer and Treasurer, as appropriate to allow timely decisions regarding required disclosure;
(b)information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
(c)Peoples’ disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.
 Changes in Internal Control Over Financial Reporting
There were no changes in Peoples' internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Peoples' fiscal quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, Peoples’ internal control over financial reporting.

PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of their respective businesses or operations, Peoples or one of its subsidiaries may be named as a plaintiff, a defendant, or a party to a legal proceeding or any of their respective properties may be subject to various pending and threatened legal proceedings and various actual and potential claims.  In view of the inherent difficulty of predicting the outcome of such matters, Peoples cannot state what the eventual outcome of any such matters will be. However, based on management's current knowledge and after consultation with legal counsel, management believes these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of Peoples.

ITEM 1A. RISK FACTORS
The disclosure below supplements the risk factors previously disclosed under “ITEM 1A. RISK FACTORS” of Part I of Peoples’ 2020 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.
Changes in the federal, state, or local tax laws may negatively impact our financial performance. On October 28, 2021, President Biden unveiled his revised infrastructure plan, which removed a proposal to implement an increase in the federal corporate income tax rate, but would implement a stock buyback tax as part of a package of tax reforms to help fund the spending proposals in the plan. The revised Biden plan is in the early stages of the legislative process. If adopted as proposed, the stock buyback tax could adversely affect Peoples' determination to repurchase common shares in future periods.


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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table details repurchases by Peoples and purchases by “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, of Peoples’ common shares during the three months ended September 30, 2021:
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, 2021— 

$— 

— $30,000,000 
August 1 – 31, 20211,363 (2)$29.07 (2)— $30,000,000 
September 1 – 30, 2021700 (3)$31.22 (3)— $30,000,000 
Total2,063  $29.80  — $30,000,000 
(1)On January 29, 2021, Peoples announced that on January 28, 2021, Peoples' Board of Directors authorized a share repurchase program authorizing Peoples to purchase up to an aggregate of $30 million of Peoples' outstanding common shares. There were no common shares repurchased under the share repurchase program during the three months ended September 30, 2021.
(2)Information reported includes an aggregate of 1,363 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 2021.
(3)Information reported includes 700 common shares purchased in open market transactions during September 2021 by Peoples Bank under the Rabbi Trust Agreement. The Rabbi Trust Agreement establishes a rabbi trust that holds assets to provide funds for the payment of the benefits under the Peoples Bancorp Inc. Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER INFORMATION
None



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ITEM 6. EXHIBITS
Exhibit
Number		 
 
Description
 
 
Exhibit Location
Agreement and Plan of Merger, dated as of March 26, 2021, by and between Peoples Bancorp Inc. and Premier Financial Bancorp, Inc.+
Incorporated herein by reference to Exhibit 2.1 to the Current Report of Peoples Bancorp Inc. ("Peoples") on Form 8-K dated and filed on March 31, 2021 (File No. 0-16772)
3.1(a) 
Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on May 3, 1993) P
 Incorporated herein by reference to Exhibit 3(a) to Peoples' Registration Statement on Form 8-B filed on July 20, 1993 (File No. 0-16772)
     
 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")
     
 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
     
 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”)
     
 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)
     
 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)
     
 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")
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)
     
 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
 Certificate regarding adoption of amendments to Sections 3.01, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08 and 3.11 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 8, 2004 Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (File No. 0-16772)
 +Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. A copy of any omitted schedules or exhibits will be furnished supplementally by Peoples Bancorp Inc. to the SEC on a confidential basis upon request.
PPeoples Bancorp Inc. filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format.


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Exhibit
Number		 
 
Description
 
 
Exhibit Location
 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)
 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)
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")
 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
Indenture, dated February 26, 2004, between First National Bankshares Corporation, as issuer, and Wilmington Trust Company, as trustee, related to Floating Rate Junior Subordinated Debt Securities due 2034
Filed herewith
First Supplemental Indenture, dated January 15, 2016, between Wilmington Trust Company, as trustee, and Premier Financial Bancorp, Inc., as successor to First National Bankshares Corporation
Filed herewith
Second Supplemental Indenture, dated September 17, 2021, between Wilmington Trust Company, as trustee, and Peoples Bancorp Inc., as successor to Premier Financial Bancorp, Inc.
Filed herewith
Amended and Restated Declaration of Trust of FNB Capital Trust One, dated as of February 26, 2004; NOTE: Pursuant to the First Supplemental Indenture, dated January 15, 2016, between Wilmington Trust Company, as trustee, and Premier Financial Bancorp, Inc., Premier Financial Bancorp, Inc. succeeded to and was substituted for First National Bankshares Corporation as "Sponsor" and pursuant to the Second Supplemental Indenture, dated September 17, 2021, between Wilmington Trust Company, as trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc. succeeded and was substituted for Premier Financial Bancorp, Inc. as "Sponsor"
Filed herewith
Notice of Removal of Administrators and Appointment of Replacements, dated September 17, 2021, delivered to Wilmington Trust Company by the Successor Administrators named therein and Peoples Bancorp Inc.
Filed herewith
Guarantee Agreement, dated February 26, 2004, between First National Bankshares Corporation, as guarantor, and Wilmington Trust Company, as guarantee trustee, related to the Capital Securities (as defined therein); NOTE: Pursuant to the First Supplemental Indenture, dated January 15, 2016, between Wilmington Trust Company, as trustee, and Premier Financial Bancorp, Inc., Premier Financial Bancorp, Inc. succeeded to and was substituted for First National Bankshares Corporation as "Guarantor" and pursuant to the Second Supplemental Indenture, dated September 17, 2021, between Wilmington Trust Company, as trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc. succeeded and was substituted for Premier Financial Bancorp, Inc. as "Guarantor"
Filed herewith
 Rule 13a-14(a)/15d-14(a) Certifications [President and Chief Executive Officer] Filed herewith

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Exhibit
Number		 
 
Description
 
 
Exhibit Location
     
 Rule 13a-14(a)/15d-14(a) Certifications [Executive Vice President, Chief Financial Officer and Treasurer] Filed herewith
     
 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, 2021 of Peoples Bancorp Inc. are the following documents formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at September 30, 2021 (Unaudited) and December 31, 2020; (ii) Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2021 and 2020; (iii) Consolidated Statements of Comprehensive (Loss) Income (Unaudited) for the three and nine months ended September 30, 2021 and 2020; (iv) Consolidated Statements of Stockholders' Equity (Unaudited) for the nine months ended September 30, 2021 and 2020; (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2021 and 2020; 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.

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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 5, 2021By: /s/CHARLES W. SULERZYSKI
  Charles W. Sulerzyski
  President and Chief Executive Officer
Date:November 5, 2021By: /s/KATIE BAILEY
  Katie Bailey
  Executive Vice President,
  Chief Financial Officer and Treasurer


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