PEOPLES BANCORP INC

Peoples reported net income of $28.0 million for the second quarter of 2026, representing earnings per diluted common share of $0.78. In comparison, Peoples reported net income of $29.0 million, representing earnings per diluted common share of $0.81, for the first quarter of 2026, and net income of $21.2 million, representing earnings per diluted common share of $0.59, for the second quarter of 2025. Non-core items, which includes one-time losses and expenses, negatively impacted earnings per diluted common share by $0.18 for the second quarter of 2026, $0.01 for the first quarter of 2026, and $0.01 for the second quarter of 2025. For the six months ended June 30, 2026, Peoples recorded net income of $57.0 million, or $1.59 per diluted common share, compared to $45.5 million, or $1.28 per diluted common share, for the six months ended June 30, 2025.

Net interest income was $92.7 million for the second quarter of 2026, and increased $2.3 million, or 3%, when compared to the linked quarter. Net interest margin was 4.23% for the second quarter of 2026, compared to 4.16% for the linked quarter. The increase in net interest income and net interest margin was primarily driven by a reduction in deposit costs compared to the linked quarter. Net interest income for the second quarter of 2026 increased $5.2 million, or 6%, compared to the second quarter of 2025. Net interest margin for the second quarter of 2026 increased 8 basis points compared to 4.15% for the second quarter of 2025. The increases in net interest income and net interest margin were primarily driven by lower deposit and borrowing costs compared to the second quarter of 2025. For the first six months of 2026, net interest income increased $10.3 million compared to the same period of 2025, while net interest margin increased 6 basis points to 4.20%. The increases in net interest income and net interest margin were driven by lower deposit costs and increased interest income compared to the first half of 2025.

Accretion income, net of amortization expense, was $1.1 million for the second quarter of 2026, $1.3 million for the first quarter of 2026 and $2.6 million for the second quarter of 2025, which added 5 basis points, 6 basis points and 12 basis points, respectively, to net interest margin. The decrease in accretion income for the second quarter of 2026 when compared to the linked quarter and the second quarter of 2025 was driven by lower unamortized loan purchase discount balance in 2026 associated with the Limestone Bancorp Inc. merger (the "Limestone Merger"), coupled with fewer related loan payoffs during the second quarter of 2026. Accretion income, net of amortization expense, was $2.4 million and $6.1 million for the first six months of 2026 and 2025, respectively. Accretion income added 6 basis points and 15 basis points to net interest margin for the first six months of 2026 and 2025, respectively. The decrease in accretion income for the first six months of 2026 compared to the same period in 2025 was due to lower unamortized loan purchase discount balance in 2026 from the Limestone Merger.

The provision for credit losses was $4.7 million for the second quarter of 2026, compared to a provision for credit losses of $9.7 million for the linked quarter and a provision for credit losses of $16.6 million for the second quarter of 2025. The provision for credit losses for the second quarter of 2026 was primarily driven by net charge-offs and an increase in individually-analyzed loans, partially offset by a reduction in balances of loan segments with higher loss rates. The provision for credit losses for the linked quarter was primarily driven by net charge-offs and a deterioration in the economic forecasts used within the CECL model. Net charge-offs for the second quarter of 2026 were $5.2 million, or 0.31% of average total loans annualized, compared to net charge-offs of $6.6 million, or 0.40% of average total loans annualized, for the linked quarter and net charge-offs of $7.0 million, or 0.43% of average total loans annualized, for the second quarter of 2025. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below.

The provision for credit losses for the first six months of 2026 was $14.4 million, compared to a provision for credit losses of $26.8 million for the first six months of 2025. The provision for credit losses during the first six months of 2026 was mainly a result of net charge-offs, a deterioration in the macro-economic conditions used within the CECL model, and an increase in individually-analyzed loans. The provision for credit losses for the first six months of 2025 was mainly a result of (i) net charge-offs, (ii) an increase in reserves for individually-analyzed loans and leases, (iii) an increase in reserves for leases originated by our North Star Leasing division, (iv) a periodic refresh in loss drivers utilized within the CECL model, (v) deterioration in the economic forecasts used within the CECL model, and (vi) loan growth. Net charge-offs for the first six months of 2026 were $11.8 million, or 0.35% of average total loans and leases annualized, compared to net charge-offs of $15.1 million, or 0.48% annualized, for the first six months of 2025. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below.

Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Operations. The net loss realized during the second quarter of 2026 was $8.6 million, compared to a net loss of $0.4 million for the linked quarter and a net loss of $0.3 million for the second quarter of 2025. The net loss for the second quarter of 2026 was driven by the sale of $135.2 million of available-for-sale securities at a net loss of $8.2 million as Peoples manages its balance sheet under $10 billion in assets ahead of the pending Citizens merger. The net losses for the first quarter of 2026 and for the second quarter of 2025 were due to losses on repossessed assets. For the six months ended June 30, 2026, the total net loss was $9.0 million, compared to $0.6 million for the same period in 2025. The net loss for the first six months of 2026 was primarily driven by the aforementioned investment portfolio restructure in the second quarter. The net loss recognized in the first six months of 2025 was primarily driven by $0.6 million of net losses on repossessed assets.

Total non-interest income, excluding net gains and losses, for the second quarter of 2026 increased $0.3 million compared to the linked quarter. The increase in non-interest income, excluding net gains and losses, was primarily impacted by increases of $0.6 million in electronic banking income, driven by debit card interchange, $0.4 million in lease income, driven by an increase in month-to-month income, $0.4 million in trust and investment income, and $0.2 million in mortgage banking income. Partially offsetting those increases was a decrease of $1.2 million in insurance income due to performance-based commissions recognized in the first quarter of each year. Compared to the second quarter of 2025, total non-interest income, excluding net gains and losses, increased $1.8 million, due to increases of $0.8 million in lease income, driven by higher operating lease income, $0.7 million in trust and investment income, driven by an increase in assets under administration and management, $0.4 million in deposit account services charges, and $0.4 million in mortgage banking income, partially offset by a decrease of $0.6 million in other non-interest income, driven by lower swap fee income.

For the first six months of 2026, total non-interest income, excluding gains and losses, increased $3.0 million, or 6%, compared to the first six months of 2025. The increase was primarily due to increases of $1.9 million in lease income, driven by operating lease income, $1.2 million in trust and investment income, driven by an increase in assets under administration and management, and $0.7 million in deposit account service charges, partially offset by a decrease of $0.8 million in other non-interest income, driven by lower swap fee income.

Total non-interest expense increased $1.1 million for the three months ended June 30, 2026, compared to the linked quarter. The increase was primarily due to increases of $1.3 million in professional fees, driven by higher legal expenses and professional services and $0.3 million in data processing and software expense, which were partially offset with a decrease of $0.5 million in net occupancy and equipment expense, driven by lower utility costs.

Compared to the second quarter of 2025, total non-interest expense increased $2.4 million, or 3%. The increase in total non-interest expense was primarily driven by increases of $1.1 million in salaries and benefit costs due to higher sales levels and overall company performance measures used in calculating incentive awards, $0.7 million in operating lease expense, $0.5 million in data processing and software expense due to costs associated with recent technology projects, and $0.4 million in professional fees, partially offset by a decrease of $0.5 million in amortization of other intangible assets, driven by decreases in amortization on core deposits and customer relationship intangibles.

For the six months ended June 30, 2026, total non-interest expense increased $3.2 million, or 2%, compared to the first six months of 2025. This increase was primarily driven by increases of $1.6 million in operating lease expense, $1.1 million in salaries and employee benefit costs due to annual merit increases and an increase in sales incentives, $1.0 million in data processing and software expenses, driven by recent technology projects, and $0.7 million in net occupancy and equipment expense, partially offset by a decrease of $1.0 million in amortization of other intangible assets, due to decreases in amortization on core deposits and customer relationship intangibles.

The efficiency ratio for the second quarter of 2026 was 58.3%, compared to 58.6% for the linked quarter and 59.3% for the second quarter of 2025. The efficiency ratio improved slightly compared to the linked quarter mainly as the result of higher net interest income, driven by a reduction in deposit costs. The efficiency ratio for the first six months of 2026 was 58.4%, compared to 60.0% for the first six months of 2025. The efficiency ratio improved compared to the prior year first six months due to higher revenue. The efficiency ratio adjusted for non-core items was 57.9% for the second quarter of 2026, compared to 58.6% for the linked quarter.

Peoples recorded income tax expense of $7.7 million with an effective tax rate of 21.6% for the second quarter of 2026, compared to income tax expense of $8.3 million with an effective tax rate of 22.3% for the linked quarter, and income tax expense of $6.2 million with an effective tax rate of 22.7% for the second quarter of 2025. The decreases in income tax expense and the effective tax rate when compared to the linked quarter were impacted by a $0.5 million benefit relating to tax credit purchased in the second quarter of 2026. Peoples' income tax expense for the first six months of 2026 was $16.0 million with an effective tax rate of 22.0%, compared to $13.3 million with an effective tax rate of 22.6% for the same period of 2025. The increase in income tax expense when compared to June 30, 2025, was driven by higher pretax income. The decrease in the effective tax rate when compared to June 30, 2025, was driven by the $0.5 million benefit relating to tax credits purchased in the second quarter of 2026.

Total assets were $9.54 billion as of June 30, 2026, $9.65 billion at March 31, 2026, $9.65 billion at December 31, 2025, and $9.54 billion at June 30, 2025. Total assets at June 30, 2026 decreased when compared to at March 31, 2026 primarily due to a decrease of $144.0 million in total investment securities, partially offset by an increase of $51.4 million in period end total loans and leases, compared to at March 31, 2026. Total assets at June 30, 2026 decreased compared to at December 31, 2025 due to a decrease of $158.4 million in total investment securities, partially offset by an increase of $62.2 million in total loans and leases. Total assets at June 30, 2026 decreased slightly compared to at June 30, 2025 due to decreases of $201.6 million in total investment securities and $6.4 million in total cash and cash equivalents, partially offset by an increase of $216.6 million in total loans and leases. The decrease in investment securities to all prior periods was driven by the sale of $135.2 million in available-for-sale securities as part of a portfolio restructure in advance of the pending Citizens Merger.

Total liabilities were $8.30 billion at June 30, 2026, down from $8.43 billion at March 31, 2026, $8.44 billion at December 31, 2025, and $8.39 billion at June 30, 2025. The decrease in total liabilities when compared to at March 31, 2026 was primarily due to a decrease of $192.1 million in period-end total deposits, partially offset by an increase of $82.8 million in short-term borrowings. Total liabilities decreased compared to at December 31, 2025 due to a decrease of $153.9 million in period end deposits. The decrease was driven by decreases in brokered deposits and retail certificate of deposits, partially offset by increases in money market deposit accounts and non-interest bearing deposits. The decrease in total liabilities when compared to at June 30, 2025 was primarily due to decreases of $180.8 million and $76.1 million in period-end deposits and long-term borrowings, respectively, partially offset by an increase of $191.8 million in short-term borrowings. The decrease in total deposits was primarily driven by a decrease of $217.2 million in brokered deposits and $129.3 million in retail certificates of deposit, partially offset by increases of $67.9 million in money market deposit accounts, $63.0 million in non-interest bearing deposits, $36.0 million in interest-bearing demand accounts, and $25.6 million in savings accounts.

Total stockholders' equity at June 30, 2026 increased $20.5 million compared to at March 31, 2026, which was primarily due to net income for the quarter of $28.0 million and a decrease of $5.2 million in accumulated other comprehensive loss, partially offset by dividends paid of $15.1 million. Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $71.2 million and $76.4 million at June 30, 2026 and at March 31, 2026, respectively. Total stockholders' equity at June 30, 2026 increased $29.9 million, or 2%, compared to at December 31, 2025, which was due to net income of $57.0 million in the first six months of 2026, partially offset by dividends paid of $29.8 million. Total stockholders' equity at June 30, 2026 increased by $83.2 million compared to at June 30, 2025 and was impacted by net income of $118.2 million in the last twelve months and a decrease in accumulated other comprehensive loss of $19.4 million, partially offset by dividends paid of $59.0 million.