PEOPLES BANCORP INC

RESULTS OF OPERATIONS

Net Interest Income

Net interest income, the amount by which interest income exceeds interest expense, remains Peoples' largest source of revenue. The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve’s monetary policy, the level and degree of pricing competition for loans and deposits in Peoples’ markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities.

Net interest margin, which is calculated by dividing fully tax-equivalent ("FTE") net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of interest-earning assets and interest-bearing liabilities. FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a federal statutory corporate income tax rate of 21% for all periods presented.

The following table details the calculation of FTE net interest income:

The following tables detail Peoples’ average balance sheets for the periods presented:

(a)Average balances are based on carrying value.

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

(c)Average balances include nonaccrual and impaired loans. Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented.

(d)Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.

(e)Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered CDs for the periods presented in which interest payments on FHLB advances or brokered CDs were being hedged.

(f)Included in other long-term borrowings are trust preferred securities and floating rate junior subordinated deferrable interest debentures.

The following table provides an analysis of the changes in FTE net interest income:

(a)The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each.

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

Net interest income was $93.8 million for the third quarter of 2026 and increased $1.1 million when compared to the linked quarter. Net interest margin was 4.31% for the third quarter of 2026, compared to 4.23% for the linked quarter. The increase in net interest income was driven by higher loan income, while the increase in net interest margin was driven by higher investment and loan yields.

Net interest income for the third quarter of 2026 increased $2.5 million, or 3%, compared to the third quarter of 2025. Net interest margin increased 15 basis points when compared to the third 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 third quarter of 2025.

For the first nine months of 2026, net interest income increased $12.8 million compared to the first nine months of 2025, while net interest margin increased 8 basis points to 4.23%. The increases in net interest income and net interest margin were driven by lower deposit costs compared to the first nine months of 2025.

Accretion income, net of amortization expense, was $1.0 million for the third quarter of 2026, $1.1 million for the linked quarter and $1.7 million for the third quarter of 2025, which added 4 basis points, 5 basis points and 8 basis points, respectively, to net interest margin. The decrease in accretion income for the third quarter of 2026 when compared to the linked quarter and the third quarter of 2025 was driven by less accretion income recognized from the Limestone Merger. Accretion income, net of amortization expense, was $3.4 million and $7.8 million for the first nine months of 2026 and 2025, respectively. Accretion income added 5 basis points and 12 basis points to net interest margin for the first nine months of 2026 and 2025, respectively. The decrease in accretion income for the first nine months of 2026 compared to the same period in 2025 was due to less accretion income recognized from the Limestone Merger.

Additional information regarding changes in the Unaudited Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this MD&A. Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this MD&A under the caption "FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity."

Provision for Credit Losses

The following table details Peoples’ provision for credit losses:

The provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates. The provision for credit losses for the third quarter of 2026 was primarily driven by net charge-offs, partially offset by a decrease in reserves for individually analyzed loans and leases and updates to the prepayment, curtailment, and funding rates. The provision for credit losses for the linked quarter was primarily driven by net charge-offs and an increase in reserves for individually analyzed loans and leases, partially offset by a reduction of balances within loan segments with higher loss rates. The provision for credit losses for the third quarter of 2025 was primarily driven by (i) net charge-offs, (ii) loan growth, and (iii) a slight deterioration in the economic forecasts used within the CECL model, partially offset by reductions in reserves for individually analyzed loans and leases.

For the first nine months of 2026, the provision for credit losses was primarily driven by net charge-offs and a deterioration of macroeconomic conditions used within the CECL model, partially offset by updates to prepayment, curtailment, and funding rates, and a reduction in balances of loans within higher loss rate segments. For the same period of 2025, the provision for credit losses 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) deterioration in the economic forecasts used within the CECL model, and (v) loan growth.

Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this MD&A under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.”

Net Gain (Loss) Included in Total Non-Interest Income

Net gain (loss) includes net gains and losses on investment securities, asset disposals and other transactions, which are recognized in total non-interest income. The following table details Peoples’ net losses for the periods presented:

The net loss on investment securities for the third and second quarters of 2026 was driven by the sale of $58.5 million and $135.2 million available-for-sale investment securities, respectively, as Peoples continues to manage its balance sheet under $10 billion in assets ahead of the Citizens merger. The net loss on investment securities for the third quarter of 2025 was driven by the sale of lower-yielding available-for-sale investment securities. The net loss on other assets for all periods presented was driven by losses recorded on repossessed assets.

Total Non-Interest Income, Excluding Net Gains and Losses

Total non-interest income, excluding net gains and losses, comprised 25% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the third quarter of 2026, 24% for the linked quarter, and 23% for the third quarter of 2025. For both the first nine months of 2026 and 2025, total non-interest income, excluding net gains and losses, totaled 24% of Peoples' total revenues.

For the third quarter of 2026, e-banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses. Peoples' e-banking services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to customers. The following table details Peoples' e-banking income:

Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers. The amount of e-banking income is largely dependent on the timing and volume of customer activity.

The following table details Peoples' insurance income:

Peoples' insurance income for the third quarter of 2026 decreased slightly when compared to the linked quarter. Insurance income for the third quarter and first nine months of 2026 decreased when compared to the same periods of 2025 due to lower performance-based commissions.

Peoples' trust and investment income, which includes fiduciary income, brokerage income, and employee benefit fees, continued to be based primarily upon the value of assets under administration and management, with additional income generated from transaction commissions, cross-selling of products and additional retirement plan services business. The following table details Peoples’ trust and investment income:

Fiduciary income in the third quarter of 2026 remained relatively flat when compared to the linked quarter and increased when compared to the third quarter of 2025, which was driven by an increase in assets under administration and management. Trust and investment income increased $2.0 million for the first nine months of 2026 when compared to the same period of 2025, due to higher brokerage and fiduciary income, primarily reflecting the increase in assets under management.

The following table details Peoples' assets under administration and management:

Assets under administration and management at September 30, 2026 remained relatively flat when compared to at June 30, 2026. The increase in assets under administration and management at September 30, 2026 when compared to at September 30, 2025 was primarily due to growth, as Peoples added new accounts and the underlying market values of assets under management grew, and market fluctuations.

Deposit account service charges are based on the recovery of costs associated with services provided. The following table details Peoples' deposit account service charges:

The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity. Management periodically evaluates its cost recovery fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples' markets by competitors. Deposit account service charges increased for the third quarter of 2026 compared to both the linked quarter and third quarter of 2025. For the first nine months of 2026, total deposit account service charges increased by $1.1 million from the same period of 2025, driven by timing of customer activity.

The following table details the other items included within Peoples' total non-interest income:

Lease income is primarily comprised of (i) operating lease income, (ii) gains on the early termination of leases, net of any associated purchase accounting adjustments, (iii) month-to-month lease payments beyond maturity of the net investment in the lease, net of any associated purchase accounting adjustment, (iv) fees received for referrals, (v) gains and losses recognized on the sales of residual assets, net of any purchase accounting impact, and (vi) syndication income. Lease income for the third quarter of 2026 increased compared to the linked quarter due to an increase in gains on terminated leases. The increase when compared to the third quarter of 2025 was driven by increases in operating lease income and gains on terminated leases. Lease income increased $3.9 million for the first nine months of 2026 when compared to the same period of 2025 due to an increase in operating lease income.

BOLI income for the third quarter of 2026 increased when compared to the linked quarter and to the prior year quarter and was driven by a death benefit recorded in the third quarter of 2026. BOLI income increased for the first nine months of 2026 when compared to the same period of 2025 primarily due to changes in the cash surrender value of the underlying policies.

Other non-interest income increased for the three months ended September 30, 2026 when compared to the linked quarter and when compared to the third quarter of 2025. For the first nine months of 2026, other non-interest income decreased by $0.9 million from the same period of 2025, primarily due to a decrease in swap fee income which is driven by customer demand.

Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained. As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage banking income for the third quarter of 2026 remained flat when compared to the linked quarter and increased when compared to the third quarter of 2025 and was primarily driven by the increased volume in loans sold. Mortgage banking income increased for the first nine months of 2026 when compared to the same period of 2025 due to higher production.

In the third quarter of 2026, Peoples sold $13.3 million in loans into the secondary market with servicing retained and $2.9 million in loans with servicing released, compared to $15.1 million and $6.6 million, respectively, in the second quarter of 2026, and $4.5 million and $3.8 million, respectively, in the third quarter of 2025. For the first nine months of 2026, Peoples sold $34.2 million in loans into the secondary market with servicing retained, and $13.1 million with servicing released, compared to $5.0 million and $18.8 million, respectively, for the same period of 2025.

Non-Interest Expense

Salaries and employee benefit costs remain Peoples' largest non-interest expense, accounting for over one-half of total non-interest expense. The following table details Peoples' salaries and employee benefit costs:

Base salaries and wages for the third quarter of 2026 and the first nine months of 2026 increased compared to the same periods in 2025, primarily driven by annual merit increases.

Sales-based and incentive compensation increased for the third quarter of 2026 compared to both the linked quarter and the third quarter of 2025 and was driven by an increase in corporate incentives. Sales-based and incentive compensation increased for the first nine months of 2026 when compared to same period in 2025, due to an increase in corporate incentives and retail sales incentives.

The decrease in employee benefits for the third quarter of 2026 compared to the linked quarter and third quarter of 2025 was primarily related to lower medical costs. Employee benefits increased slightly for the first nine months of 2026 when compared to the same period for 2025 due to an adjustment related to prior period nonqualified deferred compensation expense, partially offset by decreased medical costs.

Payroll taxes and other employment costs for the third quarter of 2026 remained relatively flat when compared to the linked quarter and to the third quarter of 2025. For the first nine months of 2026, payroll taxes and other employment costs decreased slightly compared to the same period of 2025 due to lower temporary personnel services and decreased employee relocation expense.

Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years. Peoples estimates forfeitures at the grant date and revises those estimates in the subsequent periods if actual forfeitures differ from previous estimates. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year based upon Peoples achieving certain performance goals during the prior year, and are generally contingent on employment through the vesting period. Stock-based compensation for the third quarter and first nine months of 2026 increased when compared to all prior periods, due to the expense attributable to the forfeiture rate true-up on stock vested coupled with up-front expense on stock grants to certain retirement-eligible employees recognized in the linked quarter.

Deferred personnel costs represent the portion of current period salaries and employee benefit costs considered to be direct loan origination costs. These costs are capitalized and recognized over the life of the loan as a yield adjustment in interest income. As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with the average deferred costs per loan that are updated annually at the beginning of each year. Deferred personnel costs for the third quarter of 2026 increased when compared to the second quarter of 2026 and when compared to the third quarter of 2025. Similarly, deferred personnel costs increased for the first nine months of 2026 when compared to the first nine months of 2025.

Peoples' net occupancy and equipment expense was comprised of the following:

Net occupancy and equipment expense remained relatively flat for the third quarter of 2026 compared to the linked quarter and compared to the third quarter of 2025. Net occupancy and equipment expense for the first nine months of 2026 increased when compared to the same period of the previous year due to an adjustment of property tax accruals resulting from a review of recent assessments.

The following table details the other items included in total non-interest expense:

Data processing and software expenses for the third quarter and the first nine months of 2026 increased compared to the same periods in 2025 due to costs associated with recent ongoing technology projects.

Professional fees for the third quarter of 2026 increased when compared to the linked quarter and the third quarter of 2025 due to higher professional services, driven by acquisition-related expenses. Professional fees increased for the first nine months of 2026 when compared to the same period in 2025 due to increased legal expenses and acquisition-related professional services.

Peoples' e-banking expense is comprised of costs associated with debit and ATM cards and is driven by the timing and volume of customer activity. E-banking expense for the third quarter and the first nine months of 2026 increased when compared to the linked quarter and the same periods in 2025 due to customer activity.

Operating lease expense for the third quarter of 2026 increased when compared to the linked quarter. Operating lease expense increased for the third quarter and the first nine months of 2026 when compared to the same periods in 2025 due to an increased volume of leases.

Amortization of other intangible assets for the third quarter of 2026 remained flat compared to the linked quarter and decreased $0.5 million compared to the prior year quarter due to decreases in amortization on core deposits and customer relationship intangibles. Amortization of other intangible assets decreased for the first nine months of 2026 when compared to 2025 due to decreases in amortization on core deposits and customer relationship intangibles.

Peoples' FDIC insurance premiums for the third quarter of 2026 remained relatively flat when compared to the linked quarter and when compared to the third quarter of 2025. FDIC premiums increased for the first nine months of 2026 when compared to 2025 driven by an increase in average assets.

Other loan expenses during the third quarter of 2026 increased slightly when compared to the linked quarter and decreased compared to the third quarter of 2025. Other loan expenses remained flat for the first nine months of 2026 when compared to 2025.

Peoples is subject to state franchise taxes, which are based largely on Peoples' equity, in the states where Peoples has a physical presence. Franchise tax expense also includes the Ohio Financial Institution Tax ("FIT"), which is a business privilege tax that is imposed on financial institutions organized for profit and doing business in Ohio. The Ohio FIT is based on the total equity capital in proportion to the taxpayer's gross receipts in Ohio as of the most recent year-end. Franchise tax expense for the third quarter of 2026 compared to the prior year quarter remained relatively flat. Franchise tax expense increased for the first nine months of 2026 when compared to 2025 due to a one-time refund from the State of Ohio received in 2025.

Marketing expense for the third quarter of 2026 increased when compared to the linked quarter primarily driven by a vendor incentive received in the second quarter of 2026 and remained flat for the third quarter of 2025. Marketing expense decreased for the first nine months of 2026 when compared to 2025 due to lower advertising expenses.

Other non-interest expense for the third quarter of 2026 decreased when compared to the linked quarter primarily due to lower check and ACH fraud. Other non-interest expense increased slightly for the third quarter of 2026 when compared to the same period in 2025 due to higher postage expense. For the first nine of 2026 other non-interest expense decreased compared to the first nine months of 2025 due to lower check printing expense, due to a new vendor contract, and decreased ACH and check fraud.

Income Tax Expense

Peoples recorded income tax expense of $8.8 million with an effective tax rate of 21.2% for the third quarter of 2026, compared to income tax expense of $7.7 million with an effective tax rate of 21.6% for the linked quarter and income tax expense of $8.5 million with an effective tax rate of 22.4% for the third quarter of 2025. The increase in income tax expense when compared to the linked quarter was driven by higher pretax income and a $0.5 million benefit relating to a tax credit recorded in the second quarter of 2026. The increase in income tax expense when compared to the third quarter of 2025 was driven by higher pre-tax income. Peoples recorded income tax expense of $24.8 million and $21.8 million, through the first nine months of 2026 and 2025, respectively. The increase for the first nine months of 2026 compared to 2025 was driven by higher pre-tax income.

Additional information regarding income taxes can be found in "Note 13 Income Taxes" of the Notes to the Consolidated Financial Statements included in Peoples' 2025 Form 10-K.

Pre-Provision Net Revenue (Non-US GAAP)

Pre-provision net revenue ("PPNR") has become a key financial measure used by state and federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus total non-interest income, excluding all gains and losses, minus total non-interest expense. As a result, PPNR represents the earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital. This measure represents a Non-US GAAP financial measure since it excludes the provision for (recovery of) credit losses and all gains and losses included in earnings.

The increase in the PPNR for the third quarter and the first nine months of 2026 compared to all prior periods was driven by an increase in net interest income due to a reduction in deposit costs.

Core Non-Interest Expense (Non-US GAAP)

Core non-interest expense is a financial measure used to evaluate Peoples' recurring expense stream. This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses. The following table provides a reconciliation of this Non-US GAAP measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:

Efficiency Ratio (Non-US GAAP)

The efficiency ratio is a key financial measure used to monitor performance. The efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of FTE net interest income plus total non-interest income excluding net gains and losses. This measure is Non-US GAAP since it excludes amortization of other intangible assets and all gains and losses included in earnings, and uses FTE net interest income.

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

The efficiency ratio for the third quarter of 2026 was 58.5%, compared to 58.3% for the linked quarter and 57.1% for the third quarter of 2025. The efficiency ratio increased slightly compared to the linked quarter mainly as the result of higher non-interest expense. The efficiency ratio for the first nine months of 2026 was 58.5%, compared to 59.0% for the same period of 2025. The efficiency ratio improved compared to the same period of 2025 due to higher revenue. The efficiency ratio adjusted for non-core items improved for the third quarter of 2026 compared to the linked quarter due to increased net interest income. The efficiency ratio adjusted for non-core items for the first nine months of 2026 improved compared to the first nine months of 2025 due to higher revenue. Peoples continues to focus on controlling expenses, while recognizing necessary costs in order to continue growing the business.

Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)

In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance. The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses and acquisition-related expenses.

(a) Based on a 21% statutory federal corporate income tax rate.

The return on average assets for the third quarter of 2026 increased when compared to the linked quarter due to higher annualized net income. The increase in the return on average assets and return on average assets adjusted for non-core items for the third quarter of 2026, compared to the third quarter of 2025, was attributable to an increase in annualized net income driven by a decrease in net loss on investment securities and an increase in average assets. The increase in return on average assets and return on average assets adjusted for non-core items for the first nine months of 2026 when compared to the same period of 2025 was due to an increase in annualized net income largely driven by a decrease in the provision for credit losses.

Return on Average Tangible Equity Ratio (Non-US GAAP)

The return on average tangible equity ratio is a key financial measure used to monitor performance. This ratio is calculated as annualized net income (less the after-tax impact of amortization of other intangible assets) divided by average tangible equity. This measure is Non-US GAAP since it excludes amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity.

(a) Based on a 21% statutory federal corporate income tax rate.

The return on total average stockholders' equity and return on average tangible equity ratios for the third quarter of 2026 increased when compared to the linked quarter due to an increase in annualized net income. The increases in the return on total average stockholders' equity and return on average tangible equity ratios for the third quarter and the first nine months of 2026 compared to the same periods of 2025 were driven by higher annualized net income driven by a decrease in provision for credit losses.