Loans and Leases

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Loans and Leases

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

The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows:

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

Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $15.4 million at March 31, 2023 and December 31, 2022.

Nonaccrual and Past Due Loans

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

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

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

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

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

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

The following table presents the aging of the amortized cost of past due loans:

	Loans Past Due				Current Loans	Total Loans
(Dollars in thousands)	30 - 59 days	60 - 89 days	90 + Days	Total
March 31, 2023

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

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

Pledged Loans

Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, home equity lines of credit and commercial real estate loans under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged eligible commercial and industrial loans to secure borrowings with the FRB. Loans pledged are summarized as follows:

(Dollars in thousands)	March 31, 2023		December 31, 2022
Loans pledged to FHLB	$	918,075	$	783,843
Loans pledged to FRB	332,521		339,005

Credit Quality Indicators

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

“Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.

“Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position.

“Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected.

“Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of each of these loans as an estimated loss is deferred until its more exact status may be determined.

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

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

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

	Term Loans at Amortized Cost by Origination Year														Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans				Total Loans
Construction
Pass	$	4,420	$	101,719	$	87,280	$	23,208	$	3,241	$	9,692	$	—	$	—	$	229,560
Special mention	968		1,600		—		—		—		128		—		—		2,696
Substandard	—		—		—		—		—		40		—		—		40
Total	5,388		103,319		87,280		23,208		3,241		9,860		—		—		232,296
Current period gross charge-offs	—		—		9		—		—		—						9
Commercial real estate, other
Pass	76,569		173,133		219,202		223,034		214,534		458,817		25,537		—		1,390,826
Special mention	—		—		184		1,200		5,128		17,998		50		—		24,560
Substandard	—		—		10,027		2,523		1,580		51,290		216		—		65,636
Doubtful	—		—		—		—		—		40		—		—		40
Total	76,569		173,133		229,413		226,757		221,242		528,145		25,803		—		1,481,062
Current period gross charge-offs	—		—		—		—		—		33						33
Commercial and industrial
Pass	31,958		157,317		135,973		60,760		70,506		124,255		208,303		—		789,072
Special mention	—		8,794		14,375		20,441		2,021		7,579		25,116		—		78,326
Substandard	4		317		10,065		3,217		2,154		3,038		4,744		—		23,539
Doubtful	—		—		—		—		—		202		—		—		202
Total	31,962		166,428		160,413		84,418		74,681		135,074		238,163		—		891,139

	Term Loans at Amortized Cost by Origination Year							Revolving Loans Converted to Term
(Dollars in thousands)	2023	2022	2021	2020	2019	Prior	Revolving Loans		Total Loans
Current period gross charge-offs	—	—	—	—	—	1			1
Premium finance
Pass	79,103	79,160	—	—	—	—	—	—	158,263
Total	79,103	79,160	—	—	—	—	—	—	158,263
Current period gross charge-offs	23	—	—	—	—	—			23
Leases
Pass	68,756	151,048	79,901	29,306	13,233	3,398	—	—	345,642
Special mention	16	1,212	2,087	371	7	21	—	—	3,714
Substandard	127	1,691	2,091	512	410	454	—	—	5,285
Total	68,899	153,951	84,079	30,189	13,650	3,873	—	—	354,641
Current period gross charge-offs	—	108	189	100	58	14			469
Residential real estate
Pass	10,786	77,494	136,027	57,950	42,022	377,777	—	—	702,056
Substandard	—	—	280	146	560	9,488	—	—	10,474
Loss	—	—	—	—	—	72	—	—	72
Total	10,786	77,494	136,307	58,096	42,582	387,337	—	—	712,602
Current period gross charge-offs	—	—	—	—	—	41			41
Home equity lines of credit
Pass	4,830	43,159	34,111	18,852	13,774	58,278	114	635	173,118
Substandard	—	—	72	21	63	1,105	—	—	1,261
Loss	—	—	—	—	—	4	—	—	4
Total	4,830	43,159	34,183	18,873	13,837	59,387	114	635	174,383
Current period gross charge-offs	—	—	—	—	—	19			19
Consumer, indirect
Pass	67,265	293,761	135,301	88,220	31,003	28,840	—	—	644,390
Substandard	—	566	849	590	315	423	—	—	2,743
Loss	—	33	10	1	—	—	—	—	44
Total	67,265	294,360	136,160	88,811	31,318	29,263	—	—	647,177
Current period gross charge-offs	18	471	279	90	21	50			929
Consumer, direct
Pass	11,420	46,431	24,731	12,561	5,345	6,566	—	—	107,054

	Term Loans at Amortized Cost by Origination Year													Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
Substandard	—		12		35		91		32		167		—	—	337
Loss	—		—		—		—		—		15		—	—	15
Total	11,420		46,443		24,766		12,652		5,377		6,748		—	—	107,406
Current period gross charge-offs	—		40		12		34		10		8				104
Deposit account overdrafts	749		—		—		—		—		—		—	—	749
Current period gross charge-offs	227		—		—		—		—		—				227
Total loans, at amortized cost	356,971		1,137,447		892,601		543,004		405,928		1,159,687		264,080	635	4,759,718
Total current period gross charge-offs	$	268	$	619	$	489	$	224	$	89	$	166			$	1,855

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

	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Construction
Pass	$	82,143	$	110,719	$	27,893	$	20,223	$	656	$	4,061	$	44	$	81	$	245,739
Special mention	—		—		—		—		—		818		—		—		818
Substandard	—		2		—		—		—		382		—		—		384
Total	82,143		110,721		27,893		20,223		656		5,261		44		81		246,941
Commercial real estate, other
Pass	165,282		224,727		227,799		202,877		110,564		369,578		27,300		5,217		1,328,127
Special mention	—		189		1,099		5,519		3,111		29,334		105		—		39,357
Substandard	—		8,327		2,591		1,366		1,296		42,172		216		190		55,968
Doubtful	—		—		—		—		—		66		—		—		66
Total	165,282		233,243		231,489		209,762		114,971		441,150		27,621		5,407		1,423,518
Commercial and industrial
Pass	167,937		142,615		72,573		71,497		40,229		91,853		215,116		3,722		801,820
Special mention	10,248		14,981		11,923		2,711		236		4,877		16,235		—		61,211
Substandard	84		9,801		3,417		2,410		1,459		3,620		8,603		611		29,394
Doubtful	—		—		—		—		—		209		—		—		209
Total	178,269		167,397		87,913		76,618		41,924		100,559		239,954		4,333		892,634
Premium finance
Pass	158,778		419		—		—		—		—		—		—		159,197
Total	158,778		419		—		—		—		—		—		—		159,197
Leases
Pass	191,148		90,738		34,627		15,951		3,269		1,119		—		—		336,852
Special mention	1,741		2,477		140		22		24		—		—		—		4,404
Substandard	546		1,840		571		464		454		—		—		—		3,875
Total	193,435		95,055		35,338		16,437		3,747		1,119		—		—		345,131
Residential real estate

	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Pass	78,313		138,860		58,869		42,840		28,174		364,635		—		—		711,691
Substandard	—		—		137		569		563		10,302		—		—		11,571
Loss	—		—		—		—		—		98		—		—		98
Total	78,313		138,860		59,006		43,409		28,737		375,035		—		—		723,360
Home equity lines of credit
Pass	41,781		35,768		19,863		14,820		13,800		50,291		334		2,096		176,657
Substandard	—		60		—		53		126		958		—		—		1,197
Loss	—		—		—		—		—		4		—		—		4
Total	41,781		35,828		19,863		14,873		13,926		51,253		334		2,096		177,858
Consumer, indirect
Pass	305,814		149,445		100,027		35,988		22,789		12,741		—		—		626,804
Substandard	384		811		659		266		304		193		—		—		2,617
Loss	—		5		—		—		—		—		—		—		5
Total	306,198		150,261		100,686		36,254		23,093		12,934		—		—		629,426
Consumer, direct
Pass	50,889		28,351		14,558		6,333		3,725		3,975		—		—		107,831
Special mention	—		—		—		—		—		—		—		—		—
Substandard	97		63		138		46		21		150		—		—		515
Loss	—		—		—		—		—		17		—		—		17
Total	50,986		28,414		14,696		6,379		3,746		4,142		—		—		108,363
Deposit account overdrafts	722		—		—		—		—		—		—		—		722
Total loans, at amortized cost	$	1,255,907	$	960,198	$	576,884	$	423,955	$	230,800	$	991,453	$	267,953	$	11,917	$	4,707,150

Collateral Dependent Loans

Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

• Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development, and other commercial and industrial real estate in process of construction.

•Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.

•Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property.

•Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.

•Home equity lines of credit are generally secured by second mortgages on residential real estate property.

•Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.

•Leases are secured by commercial equipment and other essential business assets.

•Premium finance loans are secured by the unearned portion of the insurance premium being financed.

The following table details Peoples' amortized cost of collateral dependent loans:

(Dollars in thousands)	March 31, 2023		December 31, 2022
Commercial real estate, other	7,862		8,362
Commercial and industrial	470		1,456
Residential real estate	528		536
Total collateral dependent loans	$	8,860	$	10,354

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

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

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

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

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

For the Three Months Ended March 31, 2023
	Payment Delay (Only)
(Dollars in thousands)	Forbearance Plan		Payment Deferral		Term Extension		Forbearance Plan and Term Extension		Total		Percentage of Total by Loan Category(a)(b)
Construction	$	—	$	1,600	$	—	$	—	$	1,600	0.69	%
Commercial real estate	200		—		—		—		200		0.01	%
Commercial and industrial	—		—		9		335		344		0.04	%
Residential real estate	—		—		221		—		221		0.03	%
Consumer, indirect	—		—		28		—		28		—	%
Total	$	200	$	1,600	$	258	$	335	$	2,393	0.05	%

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

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

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

For the Three Months Ended March 31, 2023
	Weighted-Average Term Extension (in months)	Average Amount Capitalized as a Result of a Payment Delay(a)
Commercial and industrial	12	$	—
Residential real estate	210	8,969
Consumer, indirect	2	—
(a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars.

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

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

As of March 31, 2023
(Dollars in thousands)	30-59 Days Delinquent		60-89 Days Delinquent		90+ Days Delinquent		Total Delinquent		Current		Total
Construction	$	—	$	—	$	—	$	—	$	1,600	$	1,600
Commercial real estate	—		—		—		—		200		200
Commercial and industrial	—		—		—		—		344		344
Residential real estate	—		—		—		—		221		221
Consumer, indirect	28		—		—		28		—		28
Total loans modified(a)	$	28	$	—	$	—	$	28	$	2,365	$	2,393
(a) Represents the amortized cost basis as of period end.

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

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

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

		Three Months Ended
		Recorded Investment (a)
(Dollars in thousands)	Number of Contracts	Pre-Modification		Post-Modification		Remaining Recorded Investment
March 31, 2022
Construction	1	$	344	$	344	$	343
Commercial real estate, other	1	102		102		102
Commercial and industrial	1	4		4		4
Residential real estate	10	493		502		501
Home equity lines of credit	1	22		22		21
Consumer, indirect	10	106		106		105
Consumer, direct	2	14		14		14
Consumer	12	120		120		119
Total	26	$	1,085	$	1,094	$	1,090
(a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

On March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19. In this guidance, short-term modifications, made on a good faith basis in response to COVID-19, to borrowers who were current prior to any relief, are not considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment which are insignificant. Under the guidance, the borrowers that are considered to be current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not in the scope of accounting for TDRs, as defined in ASC 310-40.

Allowance for Credit Losses

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

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

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

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

(Dollars in thousands)	Beginning Balance, December 31, 2021		Initial Allowance for Acquired PCD Assets (a)		(Recovery of) Provision for Credit Losses (b)		Charge-offs		Recoveries		Ending Balance, March 31, 2022
Construction	$	2,999	$	—	$	(268)	$	—	$	—	$	2,731
Commercial real estate, other	29,147		(217)		(7,646)		(278)		49		21,055
Commercial and industrial	11,063		(165)		(325)		(463)		4		10,114
Premium finance	379		—		(20)		(14)		—		345
Leases	4,797		132		1,243		(473)		176		5,875
Residential real estate	7,233		(521)		78		(309)		14		6,495
Home equity lines of credit	2,005		(11)		(113)		(16)		29		1,894
Consumer, indirect	5,326		(41)		186		(385)		86		5,172
Consumer, direct	961		—		200		(136)		11		1,036
Deposit account overdrafts	57		—		199		(259)		54		51
Total	$	63,967	$	(823)	$	(6,466)	$	(2,333)	$	423	$	54,768

(a)Includes purchase price adjustments related to acquisitions previously completed but were within the 12-month measurement period.

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

(c)

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

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

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

During the first quarter of 2022, Peoples recorded a recovery of credit losses of $6.8 million driven by a continued improvement in economic factors and changes in loss drivers used in the CECL model. Leases designated as purchased-credit deteriorated ("PCD") acquired from Vantage increased the allowance for credit losses by $132,000. Net charge-offs for the first quarter of 2022 were $1.9 million, and included charge-offs of two commercial and industrial loans aggregating $0.7 million.

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