PEOPLES BANCORP INC

Previous wording

(2)the effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay;

Current wording

(2)the effects of inflationary pressures on borrowers’ liquidity and ability to repay;

Previous wording

(3)the success, impact, and timing of the implementation of Peoples’ business strategies and Peoples’ ability to manage strategic initiatives, including the interest rate policies of the Federal Reserve Board, the completion and successful integration of acquisitions, including the Limestone Merger that closed in April 2023, and the expansion of commercial and consumer lending activities;

Current wording

(3)the success, impact, and timing of the implementation of Peoples’ business strategies and Peoples’ ability to manage strategic initiatives, including the interest rate policies of the Federal Reserve Board, the completion and successful integration of acquisitions, and the expansion of commercial and consumer lending activities;

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(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 FDIC, the Federal Reserve Board, and the CFPB, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements;

Current wording

(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, including the ODFI, the FDIC, the Federal Reserve Board, and the CFPB, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements;

Previous wording

(7)current and future local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, supply-demand imbalances affecting local real estate prices, high unemployment rates in the local or regional economies in which Peoples operates and/or the U.S. economy generally, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling, 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 U.S. global trading partners) and the impact these conditions may have on Peoples, Peoples’ customers and Peoples’ counterparties, and Peoples’ assessment of the impact, which may be different than anticipated;

Current wording

(7)current and future local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, supply-demand imbalances affecting local real estate prices, high unemployment rates in the local or regional economies in which Peoples operates and/or the U.S. economy generally, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling, 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 U.S. global trading partners), and changes in the federal, state, and local government policy and the impact these conditions may have on Peoples, Peoples’ customers and Peoples’ counterparties, and Peoples’ assessment of the impact, which may be different than anticipated;

Previous wording

(18)the impact of larger or similar-sized financial institutions encountering problems, such as the closures in 2023 of Silicon Valley Bank in California, Signature Bank in New York and First Republic Bank in California, which may adversely affect the banking industry and/or Peoples’ business generation and retention, funding and liquidity, including Peoples’ continued ability to grow deposits or maintain adequate deposit levels, and may further result in potential increased regulatory requirements, increased reputational risk and potential impacts to macroeconomic conditions;

Current wording

(18)the impact of larger or similar-sized financial institutions encountering problems, such as the failure in 2024 of Republic First Bank, and closures in 2023 of Silicon Valley Bank in California, Signature Bank in New York, First Republic Bank in California, and Heartland Tri-State Bank in Kansas, which may adversely affect the banking industry and/or Peoples’ business generation and retention, funding and liquidity, including Peoples’ continued ability to grow deposits or maintain adequate deposit levels, and may further result in potential increased regulatory requirements, increase reputational risk and potential impacts to macroeconomic conditions;

Previous wording

(26)the impact on Peoples’ businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics, cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts (including Russia’s war in Ukraine and the recent conflicts involving Israel and Hamas);

Current wording

(26)the impact on Peoples’ businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters including severe weather events, pandemics, cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts (including Russia’s war in Ukraine and the ongoing conflicts in the Middle East);

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(32)the risk that expected revenue synergies and cost savings from the Limestone Merger may not be fully realized or realized within the expected time frame;

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(31)the risk that expected revenue synergies and cost savings from the Limestone Merger may not be fully realized or realized within the expected time frame;

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(33)changes in laws or regulations imposed by Peoples’ regulators impacting Peoples’ capital actions, including dividend payments and share repurchases;

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(32)changes in laws or regulations imposed by Peoples’ regulators impacting Peoples’ capital actions, including dividend payments and share repurchases;

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(34)the vulnerability of Peoples’ network and online banking portals, and the systems of parties with whom Peoples contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches;

Current wording

(33)the vulnerability of Peoples’ network and online banking portals, and the systems of parties with whom Peoples contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches;

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(35)Peoples’ business may be adversely affected by increased political and regulatory scrutiny of corporate environmental, social and governance (“ESG”) practices;

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(35)Peoples’ business may be adversely affected by increased political and regulatory scrutiny of corporate ESG practices;

Previous wording

◦During 2023, Peoples incurred $17.0 million of acquisition-related expenses, compared to $3.0 million for 2022 and $21.4 million for 2021. The acquisition-related expenses in 2023 were primarily related to the Limestone Merger. The acquisition-related expenses in 2022 were related to the Vantage acquisition (as defined below), the Premier Merger (as defined below), and the Limestone Merger, and the acquisition-related expenses during 2021 were primarily related to the NSL acquisition (as defined below) and the Premier Merger.

Current wording

◦During 2024, Peoples incurred $0.2 million of acquisition-related expenses, compared to $17.0 million for 2023 and $3.0 million for 2022. The acquisition-related expenses in 2024 and 2023 were related to the Limestone Merger. The acquisition-related expenses in 2022 were related to the Vantage acquisition (defined below), the merger with Premier Financial Bancorp, Inc (“Premier Merger”), and the Limestone Merger.

Previous wording

◦On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing headquartered in Excelsior, Minnesota (the “Vantage acquisition”). Peoples Bank acquired assets comprising Vantage’s lease business, including $154.9 million in leases and certain third-party debt in the amount of $106.9 million. Peoples Bank paid cash consideration of $54.0 million and also repaid approximately $28.9 million in recourse debt on behalf of Vantage. Vantage offers mid-ticket equipment leases, primarily for business essential information technology equipment across a wide array of industries. Upon completion of the transaction, Vantage became a subsidiary of Peoples Bank. As a subsidiary, Vantage has continued to operate under the name Vantage Financial, which leverages Vantage’s strong brand recognition within the equipment finance industry. Peoples recorded goodwill in the amount of $27.2 million and other intangible assets of $13.2 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.

Current wording

◦On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing headquartered in Excelsior, Minnesota (the “Vantage acquisition”). Peoples Bank acquired assets comprising Vantage’s lease business, including $154.9 million in leases and certain third-party debt in the amount of $106.9 million. Peoples Bank paid cash consideration of $54.0 million and also repaid approximately $28.9 million in recourse debt on behalf of Vantage. Vantage offers mid-ticket equipment leases, primarily for business essential information technology equipment across a wide array of industries. Upon completion of the Vantage transaction, Vantage became a subsidiary of Peoples Bank. As a subsidiary, Vantage has continued to operate under the name Vantage Financial, which leverages Vantage’s strong brand recognition within the equipment finance industry. Peoples recorded goodwill in the amount of $27.2 million and other intangible assets of $13.2 million, which included a customer relationship intangible, a trade-name intangible and non-compete agreements related to this transaction.

Previous wording

◦During 2023, Peoples recorded a provision for credit losses of $15.2 million, compared to a recovery of credit losses of $3.5 million for 2022 and a provision for credit losses of $0.7 million for 2021. The provision for credit losses during 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated (“non-PCD”) loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers. The recovery of credit losses during 2022 was primarily due to the impact of economic forecast improvement in the CECL model, coupled with loan pay-offs during certain periods.

Current wording

◦During 2024, Peoples recorded a provision for credit losses of $24.8 million, compared to a provision for credit losses of $15.2 million for 2023 and a recovery of credit losses of $3.5 million for 2022. The provision for credit losses during 2024 was driven by (i) higher net charge-offs, (ii) an increase in reserves for individually analyzed loans and leases, (iii) economic forecast deterioration and (iv) loan growth. The provision for credit losses during 2023 was primarily driven by (i) the addition of the provision for the loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers.

Previous wording

◦During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $7.7 million. The pension plan had been closed to new entrants since January 1, 2010. Peoples recorded a settlement charge of $2.4 million in the third quarter of 2023 in relation to the termination of the pension plan. Peoples does not anticipate further expenses related to the termination. Peoples incurred $185,000 in pension settlement charges in 2022, compared to $143,000 in 2021, due to the aggregate amount of lump-sum distributions to participants in Peoples’ defined benefit pension plan exceeding the threshold for recognizing settlement charges during the period.

Current wording

◦During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $7.7 million. The pension plan had been closed to new entrants since January 1, 2010. Peoples recorded a settlement charge of $2.4 million in the third quarter of 2023 in relation to the termination of the pension plan. Peoples incurred $185,000 in pension settlement charges in 2022, compared to $143,000 in 2021, due to the aggregate amount of lump-sum distributions to participants in Peoples’ defined benefit pension plan exceeding the threshold for recognizing settlement charges during the period.

Previous wording

◦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. During 2023, Peoples repurchased 107,219 common shares totaling $3.0 million under the share repurchase program. During 2022, Peoples repurchased 263,183 common shares totaling $7.4 million under the share repurchase program. During 2021, Peoples did not repurchase any common shares under the share repurchase program authorized on January 28, 2021. On October 25, 2022, after the announcement of the Limestone Merger, the share repurchase program was paused until the vote to approve the Limestone Merger by shareholders, which occurred on February 23, 2023.

Current wording

◦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. During 2024, Peoples repurchased 100,905 common shares totaling $3.0 million under the share repurchase program. During 2023, Peoples repurchased 107,219 common shares totaling $3.0 million under the share repurchase program. During 2022, Peoples repurchased 263,183 common shares totaling $7.4 million under the share repurchase program.

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◦On April 3, 2019, Peoples entered into the U.S. Bank Loan Agreement. A Fifth Amendment to the U.S. Bank Loan Agreement, entered into on March 31, 2023, extended the maturity from April 1, 2023 to March 31, 2024. The U.S. Bank Loan Agreement provides Peoples with a revolving line of credit in the maximum aggregate principal amount of $30.0 million that may be used: (i) for working capital purposes; (ii) to finance dividends or other distributions (other than stock dividends and stock splits) on or in respect of Peoples’ capital stock and redemptions, repurchases or other acquisitions of any of Peoples’ capital stock permitted under the U.S. Bank Loan Agreement; and (iii) to finance acquisitions permitted under the U.S. Bank Loan Agreement.

Current wording

◦On April 3, 2019, Peoples entered into the U.S. Bank Loan Agreement. A Sixth Amendment to the U.S. Bank Loan Agreement, entered into on March 31, 2024, extended the maturity from April 1, 2024 to March 31, 2025. The U.S. Bank Loan Agreement provides Peoples with a revolving line of credit in the maximum aggregate principal amount of $30.0 million that may be used: (i) for working capital purposes; (ii) to finance dividends or other distributions (other than stock dividends and stock splits) on or in respect of Peoples’ capital stock and redemptions, repurchases or other acquisitions of any of Peoples’ capital stock permitted under the U.S. Bank Loan Agreement; and (iii) to finance acquisitions permitted under the U.S. Bank Loan Agreement.

Previous wording

◦To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% beginning on March 16, 2022, and continued to raise rates up to 5.50% on July 27, 2023. The Federal Reserve Board has kept rates unchanged since July 2023 but has signaled that it expects to begin reducing rates sometime in 2024.

Current wording

◦To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% beginning on March 16, 2022, and continued to raise rates up to 5.50% on July 27, 2023. The Federal Reserve Board had kept rates unchanged since July 2023, before beginning to cut rates in September 2024.

Previous wording

To demonstrate the sensitivity to key economic parameters used in the measurement of the allowance for credit losses at December 31, 2023, management calculated the difference between the modeled allowance for credit losses at December 31, 2023, compared to one based on an adverse scenario. The adverse scenario reflected increases of 100 basis points in both U.S. and Ohio unemployment. Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in the allowance for credit losses of approximately $6.6 million at December 31, 2023.

Current wording

To demonstrate the sensitivity to key economic parameters used in the measurement of the allowance for credit losses at December 31, 2024, management calculated the difference between the modeled allowance for credit losses at December 31, 2024, compared to one based on an adverse scenario. The adverse scenario reflected increases of 100 basis points in both U.S. and Ohio unemployment. Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in the allowance for credit losses of approximately $6.9 million at December 31, 2024.

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At October 1, 2023, management completed a qualitative assessment of goodwill. This test resulted in management concluding it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value.

Current wording

None of the indicators noted above triggered the quantitative test, but management felt it was prudent to perform a quantitative test given the time since Peoples' prior quantitative test. At October 1, 2024, management completed a quantitative assessment of goodwill. This test resulted in management concluding that the fair value of the reporting unit exceeded its carrying value.

Previous wording

ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures: The FASB issued ASU 2023-09 on December 14, 2023. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09 applies to all entities subject to income taxes. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively with early adoption is permitted. Peoples is still evaluating the applicability and materiality of the guidance.

Current wording

ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures: The FASB issued ASU 2023-09 on December 14, 2023. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09 applies to all entities subject to income taxes. For public business entities, the new requirements were effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively with early adoption is permitted. Peoples does not expect the update will have a material impact on its consolidated financial statements.

Previous wording

Net income for the year ended December 31, 2023 was $113.4 million, compared to $101.3 million for 2022 and $47.6 million for 2021, representing earnings per diluted common share of $3.44, $3.60 and $2.15, respectively. The increases in 2023 earnings when compared to 2022 and 2021 were driven by increases in net interest income, partially offset by increases in non-interest expenses. Non-core items, and the related tax effect of each, negatively impacted earnings per diluted common share by $0.59 for 2023 compared to $0.11 for 2022 and $0.85 for 2021.

Current wording

Net income for the year ended December 31, 2024 was $117.2 million, compared to $113.4 million for 2023 and $101.3 million for 2022, representing earnings per diluted common share of $3.31, $3.44 and $3.60, respectively. The increases in 2024 earnings when compared to 2023 and 2022 were driven by increases in net interest income, partially offset by increases in non-interest expenses. Non-core items, and the related tax effect of each, negatively impacted earnings per diluted common share by $0.07 for 2024 compared to $0.59 for 2023 and $0.11 for 2022.

Previous wording

Net interest income increased 34% to $339.4 million for 2023, compared to $253.4 million for 2022, and $172.6 million for 2021. Net interest margin was 4.56% in 2023, compared to 3.97% in 2022 and 3.40% in 2021. The increases in net interest income and net interest margin when compared to 2022 were driven by increases in market interest rates, the additional net interest income from the Limestone Merger, and improvement in investment yields. Partially offsetting these benefits was an increase in interest expense resulting from a shift in the composition of funding sources combined with an increase in market interest rates for deposits and other funding sources. Net interest margin increased during 2022 when compared to 2021 largely due to (i) the Premier Merger and the Vantage acquisition, (ii) organic growth and (iii) increases in market interest rates. Net interest margin in 2021 was impacted by PPP loan forgiveness and lower funding costs due to customers’ maintaining higher cash balances, as well as a higher volume of loans due to the Premier Merger and and insurance premium finance acquisition coupled with higher-yielding leases acquired from NSL and organic loan growth. Accretion income, net of amortization expense, from acquisitions totaled $25.3 million for 2023, $11.6 million for 2022, and $3.2 million for 2021, adding 34 basis points, 19 basis points, and 7 basis points, respectively, to the net interest margin.

Current wording

Net interest income increased 3% to $348.7 million for 2024, compared to $339.4 million for 2023, and $253.4 million for 2022. Net interest margin was 4.21% in 2024, compared to 4.55% in 2023 and 3.96% in 2022. The increases in net interest income when compared to 2023 were driven by increases in market interest rates and the full year impact of net interest income from the Limestone Merger. Net interest margin for 2024 decreased 34 basis points when compared to 2023, which was primarily driven by higher borrowings costs, which offset higher earning asset yields. Net interest margin increased during 2023 when compared to 2022 largely due to increases in market interest rates, additional net interest income stemming from the Limestone Merger, and improvements in investment yields. Accretion income, net of amortization expense, from acquisitions totaled $25.2 million for 2024, $25.2 million for 2023, and $11.6 million for 2022, adding 30 basis points, 34 basis points, and 19 basis points, respectively, to the net interest margin.

Previous wording

$4.7 million for 2021. Net charge-offs as a percent of average total loans were 0.15% for 2023, 0.16% for 2022 and 0.13% for 2021. The provision for credit losses during 2023 was driven by (i) the addition of the provision for the non-PCD loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers. The recovery of credit losses during 2022 compared to the provision for credit losses during 2021 was driven by improvements in economic forecasts, coupled with loan pay-offs and sales during certain periods.

Current wording

The provision for credit losses for 2024 was $24.8 million, compared to a provision of credit losses of $15.2 million for 2023 and a recovery of credit losses of $3.5 million for 2022. Net charge-offs for 2024 were $23.2 million, compared to $8.5 million for 2023 and $7.3 million for 2022. Net charge-offs as a percent of average total loans were 0.37% for 2024, 0.15% for 2023 and 0.16% for 2022. The provision for credit losses during 2024 was mainly a result of (i) higher net charge-offs, (ii) an increase in reserves for individually analyzed loans and leases, (iii) economic forecast deterioration and (iv) loan growth. The provision for credit losses during 2023 compared to the provision for credit losses during 2022 was primarily driven by the addition of the provision for loans acquired in the Limestone Merger. The increase in net-charge-offs as a percent of average total loans was driven by charge-offs on small-ticket leases primarily occurring in the second half of 2024.

Previous wording

Total non-interest expense for the year ended December 31, 2023, was impacted by the Limestone Merger and acquisition-related non-interest expenses, which added $17.0 million across various line-items within non-interest expense. The table below summarizes the amount of acquisition-related expenses for each line item that is a component of non-interest expense. Acquisition-related expenses are considered a non-core non-interest expense by Peoples. This information is used by Peoples to provide information useful to investors in understanding Peoples’ operating performance and trends.

Current wording

Total non-interest expense for 2024 and 2023, was impacted by the Limestone Merger and acquisition-related non-interest expenses, which added $0.2 million and $17.0 million, respectively, across various line-items within non-interest expense. The table below summarizes the amount of acquisition-related expenses for each line item that is a component of non-interest expense. Acquisition-related expenses are considered a non-core non-interest expense by Peoples. This information is used by Peoples to provide information useful to investors in understanding Peoples’ operating performance and trends.

Previous wording

Total non-interest expense was $266.5 million for 2023, an increase of $59.3 million, or 29%, compared to 2022. Excluding acquisition-related expenses, non-interest expenses increased $45.4 million, or 22%, due to increases in all non-interest expense line items except for electronic banking expense, which decreased $2.3 million when compared to 2022. The increases were primarily driven by non-interest expenses, excluding acquisition-related expenses, attributable to the Limestone Merger, as well as organic growth. The increase in other non-interest expense was also driven by the previously discussed pension plan settlement charges and a $1.7 million increase in operating lease depreciation expenses. Electronic banking expense decreased when compared to 2022 due to reduced costs for Peoples’ online banking platform and a reclassification of those costs relative to the prior period to data processing and software expense. Total non-interest expense was $207.1 million for 2022, an increase of $23.4 million compared to 2021. The growth was driven by increases of (i) $18.1 million in salaries and employee benefit costs, (ii) $4.6 million in net occupancy and equipment expense, (iii) $3.7 million in data processing and software expenses, and (iv) $3.0 million in intangible asset amortization.

Current wording

Total non-interest expense was $273.8 million for 2024, an increase of $7.3 million, or 3%, compared to 2023. Excluding acquisition-related expenses, non-interest expenses increased $24.1 million, or 10%, due to increases in all non-interest expense line items except for marketing expense, franchise tax expense and amortization of other intangible assets, which decreased $1.0 million, $0.3 million, and $0.1 million, respectively, when compared to 2023. The increases were primarily driven by recent growth, including through acquisitions. Total non-interest expense was $266.5 million for 2023, an increase of $59.3 million compared to 2022. The growth was driven by increases of (i) $31.3 million in salaries and employee benefit costs, (ii) $7.4 million in data processing and software expenses, (iii) $4.9 million in professional fees, and (iv) $3.5 million in intangible asset amortization. These increases were primarily attributable to the Limestone Merger, as well as organic growth.

Previous wording

Peoples’ efficiency ratio, which is 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, was 58.7% for 2023, compared to 59.6% for 2022 and 73.6% for 2021. The efficiency ratio was elevated during 2021 primarily due to the non-core expenses discussed above. The efficiency ratio, when adjusted for non-core items, was 54.4% for 2023, 58.6% for 2022 and 63.5% for 2021.

Current wording

Peoples’ efficiency ratio, which is 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, was 58.0% for 2024, compared to 58.7% for 2023 and 59.6% for 2022. The efficiency ratio improved when compared to prior periods due to increased revenue. The efficiency ratio, when adjusted for non-core items, was 57.9% for 2024, 54.4% for 2023 and 58.6% for 2022. The increase in the efficiency ratio, adjusted for non-core items, for 2024 compared to 2023 was driven by higher non-interest expense. The efficiency ratio and the efficiency ratio, adjusted for non-core items for 2023 improved when compared to 2022, due to higher net interest income driven by the Limestone Merger, increases in market interest rates, and higher non-interest income.

Previous wording

Income tax expense totaled $31.8 million for 2023, compared to $27.3 million for 2022 and $9.4 million for 2021. The effective tax rate for 2023 was 21.9%, 21.3% for 2022 and 16.5%% for 2021. The increases for 2023 compared to 2022, and for 2022 compared to 2021, were driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states due to recent acquisitions.

Current wording

Income tax expense totaled $32.3 million for 2024, compared to $31.8 million for 2023 and $27.3 million for 2022. The effective tax rate for 2024 was 21.6%, 21.9% for 2023 and 21.3% for 2022. The increased expense for 2024 compared to 2023 and 2022 was driven by higher pre-tax income. Peoples’ effective tax rate has increased primarily due to apportionment in additional states due to recent acquisitions, but was lower in 2024 due to a one-time benefit relating to a prior year amended return.

Previous wording

Total assets increased 27% to $9.16 billion at December 31, 2023, compared to $7.21 billion at year-end 2022. The increase was primarily due to $1.46 billion of assets, primarily loans, acquired in the Limestone Merger. Excluding the loans acquired in the Limestone Merger, the period-end loan and lease balance increased $472.2 million, or 10%, driven by increases of $203.6 million, $78.2 million, $68.9 million, $44.0 million, $37.9 million, and $37.0 million in other commercial real estate loans, commercial and industrial loans, leases, premium finance loans, construction loans, and indirect consumer loans, respectively. The increase in total assets from at December 31, 2022 was also impacted by purchases of held-to-maturity investment securities and sales of lower-yielding available-for-sale investment securities. Management underwent investment portfolio restructurings during 2023 to increase portfolio yield and reduce Peoples’ sensitivity to falling intermediate and long-term interest rates. The allowance for credit losses increased to $62.0 million or 1.01% of total loans, net of deferred fees and costs, compared to $53.2 million and 1.13%, respectively, at December 31, 2022. The increase in the allowance balance at December 31, 2023 when compared to at December 31, 2022 was driven by (i) the addition of the provision for the non-PCD loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers. The decrease in the ratio of the allowance for credit losses to total loans was due to the items noted above, primarily the release of reserves on individually analyzed loans.

Current wording

Total assets increased 1% to $9.25 billion at December 31, 2024, compared to $9.16 billion at year-end 2023. The increase was primarily due to increases of $198.8 million in loans and leases and $123.1 million in investment securities, partially offset by a decrease of $209.1 million in cash and cash equivalents. The increase in loans and leases compared to December 31, 2023 was driven by growth of $162.7 million and $66.3 million in the commercial and industrial and premium finance segments, respectively, which was partially offset by a reduction of $40.9 million in commercial real estate. The decrease in cash and cash equivalents is primarily related to investing activity and the purchase of both available-for-sale and held-to-maturity securities, partially offset by cash provided by operating activities. The increase in investment securities from at December 31, 2023 was driven by purchases of longer duration, higher yielding held-to-maturity investment securities. Management underwent investment portfolio restructurings during 2023 to increase portfolio yield and reduce Peoples’ sensitivity to falling intermediate and long-term interest rates. The allowance for credit losses increased to $63.3 million, or 1.00% of total loans, net of deferred fees and costs, compared to $62.0 million and 1.01%, respectively, at December 31, 2023. The increase in the allowance balance at December 31, 2024 when compared to at December 31, 2023 was driven by an increase in reserves for individually analyzed loans and leases, as well as loan growth. The decrease in the ratio of the allowance for credit losses to total loans was due to loan growth.

Previous wording

Total stockholders’ equity was $1.05 billion at December 31, 2023, an increase of $268.2 million, or 34%, from December 31, 2022 due to (i) the issuance of 6.8 million common shares (valued at $177.9 million) in the Limestone Merger, (ii) net income of $113.4 million for the full year of 2023, and (iii) a decrease in other comprehensive loss of $25.5 million, partially offset by dividends paid of $52.1 million and share repurchases of $3.0 million. The decrease in other comprehensive loss was the result of changes in the market value of available-for-sale investment securities, which were primarily driven by changes in market interest rates.

Current wording

Total stockholders’ equity was $1.11 billion at December 31, 2024, an increase of $58.1 million, or 6%, from December 31, 2023 due to net income of $117.2 million for the full year of 2024, partially offset by an increase in other comprehensive loss of $8.8 million and dividends paid of $56.3 million. The increase in other comprehensive loss was the result of changes in the market value of available-for-sale investment securities, which were primarily driven by changes in market interest rates.

Previous wording

Peoples continued to exceed the capital required by the Federal Reserve Board to be deemed “well capitalized.” Peoples’ tier 1 capital ratio was 12.58% at December 31, 2023, versus 12.19% at December 31, 2022, while the total capital ratio was 13.38% at December 31, 2023, versus 13.06% at December 31, 2022. The common equity tier 1 risk-based capital ratio was 11.75% at December 31, 2023 compared to 11.92% at December 31, 2022. Compared to at December 31, 2022, the tier 1 risk-based capital and the total risk-based capital ratios improved due to higher net income, partially offset by the impact of the Limestone Merger and dividends paid. The common equity tier 1 risk-based capital ratio at December 31, 2023 decreased compared to at December 31, 2022 due to the common shares issued in the Limestone Merger. Peoples’ book value and tangible book value per share were $29.83 and $18.16, respectively, at December 31, 2023, compared to $27.76 and $16.23, respectively, at December 31, 2022. Additional information regarding capital requirements can be found in “Note 17 Regulatory Matters.”

Current wording

Peoples continued to exceed the capital required by the Federal Reserve Board to be deemed “well capitalized.” Peoples’ tier 1 capital ratio was 12.39% at December 31, 2024, versus 12.37% at December 31, 2023, while the total capital ratio was 13.58% at December 31, 2024, versus 13.17% at December 31, 2023. The common equity tier 1 risk-based capital ratio was 11.95% at December 31, 2024 compared to 11.56% at December 31, 2023. Compared to at December 31, 2023, the tier 1 risk-based capital and the total risk-based capital ratios improved due to higher net income, partially offset by dividends paid. Peoples’ book value and tangible book value per share were $31.26 and $19.94, respectively, at December 31, 2024, compared to $29.83 and $18.16, respectively, at December 31, 2023. Additional information regarding capital requirements can be found in “Note 17 Regulatory Matters.”

Previous wording

Peoples earns interest income on investments, loans and leases, and incurs interest expense on interest-bearing deposits and borrowed funds. Net interest income, the amount by which interest income exceeds interest expense, remains Peoples’ largest source of revenue and was 80% of total revenue during 2023. The amount of net interest income earned by Peoples is affected by various factors, including changes in market interest rates due to the Federal Reserve Board’s monetary policy, the level and degree of pricing competition for both loans and deposits in Peoples’ markets, and the amount and composition of Peoples’ earning assets and interest-bearing liabilities.

Current wording

Peoples earns interest income on investments, loans and leases, and incurs interest expense on interest-bearing deposits and borrowed funds. Net interest income, the amount by which interest income exceeds interest expense, remains Peoples’ largest source of revenue and was 77% of total revenue during 2024. The amount of net interest income earned by Peoples is affected by various factors, including changes in market interest rates due primarily to the Federal Reserve Board’s monetary policy, the level and degree of pricing competition for both loans and deposits in Peoples’ markets, and the amount and composition of Peoples’ earning assets and interest-bearing liabilities.

Previous wording

Peoples monitors net interest income performance and manages its balance sheet composition through regular ALCO meetings. The asset-liability management process employed by the ALCO is intended to mitigate the impact of future interest rate changes on Peoples’ net interest income and earnings. However, the frequency and/or magnitude of changes in market interest rates are difficult to predict, and may have a greater impact on net interest income than adjustments management is able to make.

Current wording

Peoples monitors net interest income performance and manages its balance sheet composition through regular ALCO meetings. The asset-liability management process employed by the ALCO is intended to mitigate the impact of future interest rate changes on Peoples’ net interest income and earnings. However, the frequency and/or magnitude of changes in market interest rates are difficult to predict, and may have a greater impact on net interest income than management is able to mitigate through the asset-liability management process.

Previous wording

As part of the analysis of net interest income, management converts tax-exempt income earned on obligations of states and political subdivisions to the pre-tax equivalent of taxable income using a blended federal and state corporate income tax rate of 23.3% for 2023 and 2022, and 22.3% for 2021. Management believes the resulting FTE net interest income allows for a more meaningful comparison of tax-exempt income and yields to their taxable equivalents. 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 earning assets and interest-bearing liabilities.

Current wording

As part of the analysis of net interest income, management converts tax-exempt income earned on obligations of states and political subdivisions to the pre-tax equivalent of taxable income using a federal statutory corporate income tax rate of 21% for all periods presented. Management believes the resulting FTE net interest income allows for a more meaningful comparison of tax-exempt income and yields to their taxable equivalents. 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 earning assets and interest-bearing liabilities.

Previous wording

(c) Interest income and yields are presented on a fully tax-equivalent basis, using a blended federal and state corporate income tax rate of 23.3% for 2023 and 2022, and 22.3% for 2021.

Current wording

(c) Interest income and yields are presented on a fully tax-equivalent basis, using a federal statutory corporate income tax rate of 21% for all periods presented.

Previous wording

Peoples’ average balances compared to prior periods have been impacted by recent acquisitions, which included: (i) the Limestone Merger as of the close of business on April 30, 2023, which added to average short-term investments, average total investment securities, and average loan, deposit and borrowed funds balances, (ii) the acquisition of Vantage on March 7, 2022, which added to average lease and borrowed funds balances, and (iii) the Premier Merger on September 17, 2021, which added to average short-term investments, average total investment securities, average total loans and average total deposits. Additionally, Peoples completed the NSL acquisition on April 1, 2021 which also added to average lease balances. Peoples’ cash balances have increased primarily due to an increase in interest-bearing deposits in other banks, mostly with the FRB. The increases in market interest rates have increased asset yields and increased borrowing costs.

Current wording

Peoples’ average balances compared to prior periods have been impacted by recent acquisitions, which included: (i) the Limestone Merger as of the close of business on April 30, 2023, which added to average short-term investments, average total investment securities, and average loans, deposit and borrowed funds balances and (ii) the acquisition of Vantage on March 7, 2022, which added to average lease and borrowed funds balances. Peoples’ cash balances have decreased primarily due to a decrease in interest-bearing deposits in other banks, mostly with the FRB. The increases in market interest rates have increased asset yields and increased borrowing costs.

Previous wording

(b)Interest income and yields are presented on a fully tax-equivalent basis, using a blended federal and state corporate income tax rate of 23.3% for 2023 and 2022, and 22.3% for 2021.

Current wording

(b)Interest income and yields are presented on a fully tax-equivalent basis, using a federal statutory corporate income tax rate of 21% for all periods presented.

Previous wording

Net interest income increased $85.9 million, or 34%, for 2023 when compared to 2022, and net interest margin increased 59 basis points to 4.56%. The increase in net interest income was driven by increases in market interest rates, the additional net interest income from the Limestone Merger, and improvement in investment yields. Accretion income, net of amortization expense, from acquisitions was $25.3 million for 2023, which added 34 basis points to net interest margin for 2023. Accretion income for 2023 was primarily the result of the Limestone Merger, the Premier Merger, and the acquisitions of Vantage and NSL.

Current wording

During 2023, FTE net interest income increased $85.9 million, or 34%, when compared to 2022, and net interest margin increased 59 basis points to 4.55%. The increase in net interest income was driven by increase in market interest rates, additional net interest income from the Limestone Merger, and improved investment yields. Accretion income, net of amortization expense, from acquisitions was $25.2 million for 2023, which added 34 basis points to net interest margin for 2023 and was primarily driven by the Limestone Merger.

Previous wording

For 2023, the provision for credit losses compared to a recovery of credit losses for 2022 was driven by (i) the addition of the provision for the non-PCD loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs, partially offset by a release of reserves on individually analyzed loans and the use of updated loss drivers.

Current wording

For 2024, the increase in the provision for credit losses compared to 2023 was mainly a result of (i) higher net charge-offs, (ii) an increase in reserves for individually analyzed loans and leases, (iii) economic forecast deterioration and (iv) loan growth.

Previous wording

During 2022, the recovery of credit losses was driven by improvements in economic forecasts, coupled with loan pay-offs during certain periods of 2022.

Current wording

During 2022, the recovery of credit losses was driven by improvements in economic forecasts, coupled with loan pay-offs.

Previous wording

These increases were primarily due to growth over the last year, driven by mergers and acquisitions. Partially offsetting the impact of these increases on non-interest expense in 2022 was a decrease in acquisition-related expenses due to the amount of expenses incurred in connection with the Premier Merger in 2021. Included in total non-interest expense during 2023 were certain non-core expenses which included acquisition-related expenses of $17.0 million compared to $3.0 million in 2022. Non-core expenses for 2021 included acquisition-related expenses of $21.4 million (detailed in the table above), COVID-19-related expenses of $1.2 million, contract negotiation expenses of $1.2 million and a Peoples Bank Foundation, Inc. contribution of $0.5 million.

Current wording

Net Losses Included in Total Non-Interest Income