ANNUAL REPORT
WORKING TOGETHER. BUILDING SUCCESS.
PEOPLES BANCORP INC.
Peoples Bancorp Inc. (“Peoples,” Nasdaq: PEBO) is a diversified financial services holding company that makes
available a complete line of banking, trust and investment, insurance, premium finance, and equipment leasing
solutions through its subsidiaries.
Peoples is a member of the Russell 3000 index of U.S. publicly-traded companies. Peoples offers services
through Peoples Bank (which includes the divisions of Peoples Investment Services, Peoples Premium Finance
and North Star Leasing), Peoples Insurance Agency, LLC., and Vantage Financial, LLC.
PEOPLES BANK has been headquartered in Marietta, Ohio since 1902. Peoples had $9.2 billion
in total assets as of December 31, 2023, and 133 full-service bank branches in Ohio, Kentucky,
West Virginia, Virginia, Washington D.C. and Maryland. Our vision is to be the Best Community
Bank in America. We are proud to be recognized by Newsweek as one of America’s Best Banks 2024.
PEOPLES BANK LOCATIONS
NOT PICTURED:
PEOPLES PREMIUM FINANCE (LEE’S SUMMIT, MO)
NORTH STAR LEASING (BURLINGTON, VT)
VANTAGE FINANCIAL (EXCELSIOR, MN)
CLEVELAND
OH
COLUMBUS
MARIETTA
CHARLESTON
HUNTINGTON
CINCINNATI
LOUISVILLE
LEXINGTON
KY
CURRENT PEBO FOOTPRINT
COUNTIES WHERE PEBO HAS TOP 3 MARKET SHARE*
COUNTIES WHERE PEBO HAS OVER $100 MILLION OF
DEPOSITS AND IS NOT IN TOP 3 MARKET SHARE*
* According to FDIC annual summary
of deposits as of June 2023.
MD
WV
DC
RICHMOND
VA
A MESSAGE FROM THE
PRESIDENT AND CEO
Dear Shareholders,
2023 was the most challenging year in banking since the
Great Recession. Rapid interest rate increases caught many
banks by surprise. In March, mismanagement of their liquidity
and investment portfolios led several large banks to fail. As an
industry, total bank earnings decreased in 2023 compared to
2022. Against this backdrop, Peoples posted a record year of
earnings. We reported annual net income of $113 million. Our
total assets grew from $7.2 billion at year-end 2022 to $9.2 billion
at year-end 2023. Our net interest margin was 4.56% for 2023.
Our performance was a testament to the efforts of our 1,500 plus
associates to do whatever it takes to serve our clients.
Our biggest accomplishment of 2023 was closing and converting
our acquisition of Limestone Bancorp, Inc. (“Limestone”).
This added 19 Kentucky branches to our network and increased
our Kentucky deposits to $1.8 billion. Additionally, in 2023, we
began implementing a new Customer Relationship Management
software from Salesforce. We expect that this tool will enhance
our ability to execute for years to come by making it easier for
us to connect with and serve our clients.
From a leadership perspective, we welcomed three new board
members in 2023. As I mentioned in last year’s CEO letter,
Carol Schneeberger joined in January 2023. She spent 40 years
working at Peoples Bank before retiring in 2021. I wouldn’t have
achieved as much success here at Peoples without her advice
and guidance.
In February 2023, Dwight Smith joined our Board of Directors.
Dwight is the founder and former President and CEO of an
information and technology consulting company in Columbus,
Ohio. He also has extensive experience serving on public and
private companies and non-profit boards of directors. His
knowledge and experience will be of great value to the Board
of Directors as Peoples continues to grow.
In May 2023, the former Chairman of the Board of Directors
of Limestone, Glenn Hogan, joined the Board of Directors. Glenn’s
extensive experience in commercial real estate development
and his in-depth knowledge of the Kentucky markets served by
Peoples will be of tremendous value going forward.
Tyler Wilcox, Senior Executive Vice President,
Chief Operating Officer, Susan Rector, Chairman
and Chuck Sulerzyski, President & CEO
OUR VISION
Our vision is to be
THE BEST COMMUNITY BANK IN AMERICA.
EMPLOYEE
PROMISE CIRCLE
CLIENTS FIRST
INTEGRITY ALWAYS
RESPECT FOR ALL
COMMITMENT TO COMMUNITY
LEAD THE WAY
EXCELLENCE IN EVERYTHING
1
We did have a member of our Board of Directors retire in 2023. George Broughton, who served as a director for
33 years, retired from the board in April 2023. I want to thank George for the leadership he provided for Peoples
during his time, as well as the entire Broughton family. George’s father, Carl L. Broughton, served on the Board of
Directors for Peoples Bank from 1947 to 1989 and on Board of Directors Peoples Bancorp Inc. from 1980 to 1996.
We also had two long-standing members of the Board of Directors announce their plans to retire in 2024.
Tara Abraham and Jim Huggins plan to retire from the Board of Directors when their current terms end on
April 25, 2024. Both have served on the Board of Directors since 2012. I would like to thank Tara and Jim for
their dedicated service and valuable contributions to the success of Peoples during their time as directors.
We added two new executive officers in August 2023. Hugh Donlon succeeded Tyler Wilcox as Executive Vice
President, Community Banking. Hugh has a broad background in commercial banking, credit administration, retail
banking, wealth management and business banking. Matt Macia joined Peoples as Executive Vice President, Chief
Risk Officer. Matt brings significant experience in enterprise risk management to Peoples. I am confident that they
will help Peoples prepare to cross the $10 billion asset size threshold and remain well managed for the future.
In July of 2023, I announced my retirement effective March 31, 2024, and the Board of Directors promoted Tyler
Wilcox to Chief Operating Officer and elected him as Peoples’ next President and CEO upon my retirement. Tyler
is a 15-year veteran of Peoples. For the past few years, he has successfully run all of our businesses as Executive
Vice President, Community Banking. His prior experiences include serving as Regional President, President of
Peoples Insurance Agency and Director of Human Resources. He started his career at Peoples as a staff attorney.
More important to me than Tyler’s career journey is his partnership with other members of the executive team
in creating a unique and strong culture at Peoples. The award-winning culture is characterized by a constant
focus on individual and organizational improvement. Coaching is a way of life at Peoples. All associates receive
regular feedback that reinforces their best efforts and provides a pathway for even better performance.
All associates are encouraged to express their views on how we can improve. We have a high standard of
collaboration and teamwork. Associates who distract from our focus on being the Best Community Bank in
America are encouraged to leave. Across the organization, our consistent focus on day-to-day execution and
staff development has led to better performance. Our return on assets of 1.37% for 2023 placed us among the
top-performing banks in the country. The culture is the special sauce that will keep Peoples’ performance high
in all market conditions. Tyler is the perfect choice to further enhance and grow the culture. I am confident
Peoples will thrive under his leadership.
At Peoples, we have immortalized the words of our former CEO Bob Evans, ”Leave the Woodpile Higher Than
You Found It.” I depart with immense pride as to where Peoples is today versus where I found it in 2011. I owe so
much to the leaders and teammates across the organization. Their performance has driven our strong results.
Looking at our stock performance as of year-end 2023, there were several key highlights:
o Over the past 13 years, Peoples beat the KBW Nasdaq Bank Index by over 4% on an annualized basis.
o For the last three years, Peoples beat the S&P 500 index by 3.4% and the KBW Nasdaq Bank Index by
10.4%, annualized.
In 2023, Peoples beat the KBW Nasdaq Index by 27%.
o
More important than these results are the distinctive characteristics that make Peoples a differentiated,
high-performing community bank.
2
9
8
With apologies to David Letterman, I’d like to share my
TOP 10 REASONS why Peoples has been and will continue
to be a great choice for investors.
2017
2016
2015
CASH DIVIDENDS
(Paid on Common Shares1)
10
We are the epitome of a community bank.
• We make meaningful investments of time and
$3.4
money to help make our communities stronger.
$3.3
$3.6
• We provide capital to individuals and businesses,
which promotes economic growth and employment.
• As a result, we are a trusted partner and have deep
and meaningful relationships with our clients.
2015
2016
2017
TOTAL ASSETS
Our employees are our most valuable asset.
($ Billions)
• For the last three years, we are proud to have been
recognized as one of American Bankers’ Best Banks
to Work For.
• We have a distinctive culture characterized by a passion
for constant individual and organizational improvement,
frequent coaching and an attention to performance
2.0%
at a corporate and individual level.
1.5%
We have a diverse set of businesses.
• In addition to traditional banking, we have meaningful
1.0%
earnings contributions from insurance, investments,
0.5%
leasing and premium finance businesses.
• As a result, we are better protected than the average
0.0%
community bank should any one sector of the economy
2019
2020
2021
2022
2023
7
suffer stress.
CASH DIVIDENDS
(Paid on Common Shares)
Credit discipline is a key to our success.
• Our loan portfolio is comprised of five buckets from
6.0%
largest to smallest: consumer, investment real estate,
commercial and industrial, owner-occupied real estate
4.5%
and specialty finance.
3.0%
• We have averaged 20 basis points of net charge-offs over
the last 13 years and 13 basis points over the last eight years.
1.5%
• We have a disciplined underwriting and portfolio
$0.90
$0.69
$0.60
management process that makes us confident we will have a
0.0%
better-than industry risk-adjusted margin over all credit cycles.
2020
2018
2019
TOTAL ASSETS
2015
($ Billions)
6
As demonstrated during the historic rate increases
of 2022 and 2023, we have a quality deposit base.
• While the Federal Reserve has increased interest rates
by 5.25%, our cost of deposits has increased 2.2% since
CASH DIVIDENDS
(Paid on Common Shares1)
$3.6
2016
2017
December of 2021 and has meaningfully outperformed
$3.4
the industry averages.
$3.3
2019
2020
2021
TOTAL REVENUE
(in Millions)
$9.2
$7.1
$7.2
$4.4
$4.8
2019
2020
2021
2022
2023
TOTAL ASSETS - (in Billions)
1.61%
1.47%
1.43%
1.19%
0.83%
2019
2020
2021
2022
2023
RETURN ON AVERAGE ASSETS
(Adjusted for non-core items)
0
8%
6%
4%
2%
0%
2.0%
1.5%
1.0%
0.5%
0.0%
18.0%
13.5%
2.0%
9.0%
1.5%
$1.32 $1.37
$1.43 $1.50
$1.55
4.5%
1.0%
0.0%
0.5%
2018
2019
2020
0.0%
NET CHARGE OFF
(as a Percent of Average Total Loans)
2022
2023
2020
2019
2021
CASH DIVIDENDS
(Paid on Common Shares)
6.0%
4.5%
3
5
4
We have a core competency in acquisitions.
• We have done deals in banking, insurance, investments
and specialty finance.
• We quickly assimilate new associates and have them
learn and strengthen our culture.
• We hit our financial targets for the deals that we do.
1.10%
1.10%
0.94%
0.94%
We strive to provide an extraordinary client experience.
• We are proud to be recognized by Newsweek as a Best
0.35%
Regional Bank.
• There are only ten banks in the country to be
recognized by both Newsweek and American Banker
2015
0.35%
2017
2016
2015
2016
for Best Banks to Work For.
RETURN ON ASSETS
RETURN ON ASSETS
2017
3
2
1
75.50%
75.50%
We manage capital with a focus on long-term returns.
75.50%
75.50%
• We believe in a meaningful and growing dividend.
• We maintain healthy capital levels and use stock buybacks
when prudent.
62.20%
62.20%
62.20%
62.20%
65.13%65.13%
65.13%65.13%
20162016
20162016
20152015
20172017
20172017
Our Board of Directors and management decision-making
is guided by what is best for our shareholders in a
20152015
three-to-five-year time frame.
• We do not chase the flavor of the day.
• We do not worry about short-term results when we
know long-term, risk-adjusted returns will be improved.
EFFICIENCY RATIO
EFFICIENCY RATIO
Our management team is a mix of professionals
from larger institutions and home-grown talent.
• As I pass the baton, we have a great mix of young leaders
like Tyler Wilcox and Katie Bailey, as well as a cadre of very
experienced executives from larger institutions and talent
grown from within our organization.
I am fully confident that Tyler and the management team will
build on our strengths and further improve our performance and
results. Thank you for your interest and investment in Peoples.
All the best,
Chuck Sulerzyski, President and CEO
Chuck Sulerzyski, President and CEO
3.69%
3.24% 3.40%
4.56%
3.97%
%
5.00%
%
3.75%
%
2.50%
%
1.25%
%
0.00%
2019
2020
2021
2020
2019
NET INTEREST MARGIN
NET INTEREST MARGIN
2022
2021
2022
2023
2023
75.00%
75.00%
64.7% 63.9%
73.6%
59.6% 58.7%
2019
2019
2020
2021
2020
2022
EFFICIENCY RATIO
EFFICIENCY RATIO
2021
2022
2023
2023
56.25%
56.25%
37.50%
37.50%
18.75%
18.75%
0.00%
0.00%
4
AWARDS AND RECOGNITION
2023 is the 3rd year in a row Peoples Bank has received
the American Banker Best Banks to Work For award
2023 is the 2nd year in a row Peoples Bank
has received Top Workplaces USA award
COMMUNITY AWARDS
2023
W INNER
2 0 2 3
B es t
B es t
t h e T r
i
o f
o f
- S t a t e
5
BESTIN THE VALLEYS PEOPLES BANCORP INC. AND
PEOPLES BANK DIRECTORS
TARA M. ABRAHAM
Chairman and Co-CEO
Accel, Inc.
S. CRAIG BEAM
Owner
Thorobeam Farm, LLC
DAVID F. DIERKER
Banking Executive (Retired)
SunTrust Banks, Inc.
W. GLENN HOGAN
Chief Executive Officer
Hogan Real Estate
JAMES S. HUGGINS
Attorney-At-Law
Theisen Brock, LPA
BROOKE W. JAMES
Partner
WMSALL Farms
SUSAN D. RECTOR
Chairman, Peoples Bancorp Inc.
and Peoples Bank
Attorney-At-Law
Peterson Conners LLP
KEVIN R. REEVES
Head, US Power Markets,
Gas & Low Carbon Energy
BP
CAROL A. SCHNEEBERGER
Banking Executive (Retired)
Peoples Bank
FRANCES A. SKINNER
Partner and Co-founder
AUM Partners, LLC
DWIGHT E. SMITH
Former CEO
Sophisticated Systems, Inc.
CHUCK SULERZYSKI
President and Chief Executive Officer
Peoples Bancorp Inc. and Peoples Bank
MICHAEL N. VITTORIO
Banking Executive (Retired)
The First National Bank of Long Island
6
6PEOPLES BANCORP INC. AND PEOPLES BANK DIRECTORSTARA M. ABRAHAMChairman and Co-CEOAccel, Inc.S. CRAIG BEAMOwnerThorobeam Farm, LLCDAVID F. DIERKERBanking Executive (Retired)SunTrust Banks, Inc.W. GLENN HOGANChief Executive OfficerHogan Real EstateJAMES S. HUGGINSAttorney-At-LawTheisen Brock, LPABROOKE W. JAMESPartnerWMSALL FarmsSUSAN D. RECTOR Chairman, Peoples Bancorp Inc. and Peoples BankAttorney-At-LawPeterson Conners LLP KEVIN R. REEVESHead, US Power Markets,Gas & Low Carbon EnergyBPCAROL A. SCHNEEBERGERBanking Executive (Retired)Peoples Bank FRANCES A. SKINNER Partner and Co-founderAUM Partners, LLCDWIGHT E. SMITHFormer CEOSophisticated Systems, Inc.CHUCK SULERZYSKIPresident and Chief Executive OfficerPeoples Bancorp Inc. and Peoples BankMICHAEL N. VITTORIOBanking Executive (Retired)The First National Bank of Long Island
MATTHEW M. EDGELL
Executive Vice President
Chief of Staff
DOUGLAS V. WYATT
Executive Vice President
Chief Commercial Banking Officer
M. RYAN KIRKHAM
Executive Vice President
General Counsel and Corporate Secretary
MATTHEW J. MACIA
Executive Vice President
Chief Risk Officer
JASON A. SILCOTT
Senior Vice President
Controller
AMY M. AUCH
Assistant Corporate Secretary
ANNE P. GILLILAND
Assistant Corporate Secretary
OFFICERS AND DIRECTORS
EMERITUS
Peoples Bancorp Inc. Officers
CHUCK SULERZYSKI
President and Chief Executive Officer
TYLER J. WILCOX
Senior Executive Vice President
Chief Operating Officer
KATHRYN M. BAILEY
Executive Vice President
Chief Financial Officer and Treasurer
HUGH J. DONLON
Executive Vice President
Community Banking
MARK J. AUGENSTEIN
Executive Vice President
Operations
JASON M. EAKLE
Executive Vice President
Chief Credit Officer
Peoples Bank Director Emeritus
HAROLD D. LAUGHLIN
Peoples Bancorp Inc. Directors Emeritus
DAVE M. ARCHER
DAVID L. MEAD
CARL L. BAKER, JR.
FRED R. PRICE
GEORGE W. BROUGHTON
ROBERT W. PRICE
WILFORD D. DIMIT
T. PAT SAUBER
RICHARD FERGUSON
THOMAS J. WOLF
BRENDA F. JONES, M.D.
7
7OFFICERS AND DIRECTORS EMERITUSPeoples Bancorp Inc. OfficersCHUCK SULERZYSKIPresident and Chief Executive OfficerTYLER J. WILCOXSenior Executive Vice PresidentChief Operating Officer KATHRYN M. BAILEYExecutive Vice PresidentChief Financial Officer and Treasurer HUGH J. DONLONExecutive Vice PresidentCommunity BankingMARK J. AUGENSTEINExecutive Vice PresidentOperationsJASON M. EAKLEExecutive Vice PresidentChief Credit Officer MATTHEW M. EDGELLExecutive Vice PresidentChief of Staff DOUGLAS V. WYATTExecutive Vice PresidentChief Commercial Banking Officer M. RYAN KIRKHAMExecutive Vice PresidentGeneral Counsel and Corporate SecretaryMATTHEW J. MACIAExecutive Vice PresidentChief Risk Officer JASON A. SILCOTTSenior Vice President ControllerPeoples Bancorp Inc. Directors EmeritusDAVE M. ARCHER CARL L. BAKER, JR. GEORGE W. BROUGHTON WILFORD D. DIMIT RICHARD FERGUSON BRENDA F. JONES, M.D. Peoples Bank Director Emeritus HAROLD D. LAUGHLIN DAVID L. MEAD FRED R. PRICE ROBERT W. PRICE T. PAT SAUBER THOMAS J. WOLFAMY M. AUCHAssistant Corporate SecretaryANNE P. GILLILANDAssistant Corporate SecretaryCATHY M. LAWRENCEAssistant Corporate Secretary
OUR COMMUNITIES
AND OUR ACTIVE
INVOLVEMENT ARE
VITAL TO OUR SUCCESS.
8
$504,021
AMOUNT RAISED IN ASSOCIATE
DONATIONS TO LOCAL FOOD BANKS
& PANTRIES SINCE APRIL 2020
$7.1 MILLION
GRANTS AND SCHOLARSHIPS AWARDED
BY PEOPLES BANK FOUNDATION SINCE
ITS INCEPTION IN 2003.
9
$3.3 MILLION
SINCE 2019
10
#PositivelyPEBO
11
THIS PAGE INTENTIONALLY
LEFT BLANK
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
For the transition period from ____ to ____
Commission File Number: 000-16772
PEOPLES BANCORP INC.
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization)
31-0987416
(I.R.S. Employer Identification No.)
138 Putnam Street, P.O. Box 738,
Marietta, Ohio
(Address of principal executive offices)
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
45750-0738
(Zip Code)
(740) 373-3155
Title of each class
Common shares, without par value
Trading Symbol(s) Name of each exchange on which registered
PEBO
The Nasdaq Stock Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes x
No
o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes x No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
x
o
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report . ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day
of the registrant’s most recently completed second fiscal quarter:
As of June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market
value of the registrant’s common shares (the only common equity of the registrant) held by non-affiliates was $888,915,000 based
upon the closing price as reported on the Nasdaq Global Select Market®. For this purpose, executive officers and directors of the
registrant are considered affiliates.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date:
35,493,152 common shares, without par value, at February 27, 2024.
Document Incorporated by Reference:
Portions of Registrant’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 25, 2024 (the
“2024 Annual Meeting of Shareholders”), are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I
ITEM 1
Business
ITEM 1A
Risk Factors
ITEM 1B
ITEM 1C
ITEM 2
ITEM 3
ITEM 4
PART II
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures (not applicable)
ITEM 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
ITEM 6
ITEM 7
Equity Securities
[RESERVED]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A
Quantitative and Qualitative Disclosures About Market Risk
ITEM 8
ITEM 9
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
ITEM 9A
Controls and Procedures
ITEM 9B
ITEM 9C
PART III
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14
PART IV
ITEM 15
ITEM 16
SIGNATURES
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections (not applicable)
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary (not applicable)
4
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33
33
35
35
35
36
38
38
79
79
79
79
80
80
143
143
144
145
145
146
146
153
3
As used in this Annual Report on Form 10-K (this “Form 10-K”), “Peoples” refers to Peoples Bancorp Inc. and its consolidated
subsidiaries collectively, except where the context indicates the reference relates solely to the registrant, Peoples Bancorp Inc. Unless
otherwise indicated, all note references contained in this Form 10-K refer to the Notes to the Consolidated Financial Statements
included immediately following “ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS” of this Form 10-K.
PART I
ITEM 1 BUSINESS
The disclosures set forth in this Item are qualified by “ITEM 1A RISK FACTORS” and the section captioned “Forward-Looking
Statements” in “ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS” of this Form 10-K and other cautionary statements set forth elsewhere in this Form 10-K.
Corporate Overview
Peoples Bancorp Inc. is a financial holding company, which was organized in 1980. Peoples operates principally through its
wholly-owned subsidiary, Peoples Bank, an Ohio state-chartered bank that was first chartered in 1902. Peoples’ other wholly-owned
subsidiary is Peoples Investment Company (“PIC”). Peoples also holds all of the common securities of NB&T Statutory Trust III,
FNB Capital Trust One, Ascencia Statutory Trust I, and Porter Statutory Trusts II-IV. Peoples Bank’s operating subsidiaries include
Peoples Insurance Agency, LLC (“Peoples Insurance”) and Vantage Financial, LLC (“Vantage”), a nationwide provider of equipment
financing.
Business Overview
Peoples makes available a complete line of commercial and consumer banking, trust and investment, insurance, premium
financing solutions, equipment leases and equipment financing agreements through its financial subsidiaries – Peoples Bank, Peoples
Insurance and Vantage. These products and services include the following:
◦
various demand deposit accounts, savings accounts, money market accounts, certificates of deposit and governmental
deposits;
commercial loans, residential real estate loans, home equity lines of credit, consumer loans and overdraft services;
insurance premium financing;
commercial equipment leasing;
technology equipment leasing;
debit and automated teller machine (“ATM”) cards;
credit cards for individuals and businesses;
◦
◦
◦
◦
◦
◦
◦ merchant credit card transaction processing services;
◦
person-to-person payment processing via Zelle®;
◦ mobile banking features including check deposit, alert notifications, Apple Pay® and Samsung Pay®;
◦
◦
◦ money orders and cashier’s checks;
◦
◦
◦
◦
◦
◦
a full range of life, health, and property and casualty insurance products;
third-party insurance administration services;
brokerage services;
custom-tailored fiduciary and trust services;
asset management and administration services; and
employee benefit, retirement, and health care plan administration services.
interactive teller machines (“ITMs”);
safe deposit rental facilities;
Peoples’ financial products and services are primarily offered through its financial service offices, ATMs, and ITMs in Ohio,
West Virginia, Kentucky, Virginia, Washington, D.C. and Maryland, as well as through online resources that are web-based and
mobile-based. Peoples’ premium financing and commercial and technology equipment leasing services are offered nationwide.
Brokerage services are offered exclusively through an unaffiliated registered broker-dealer located at Peoples Bank’s offices. Indirect
consumer lending activities are provided through approved dealerships. Peoples Bank’s credit card and merchant processing services
are provided through joint marketing arrangements with third parties.
Peoples’ business activities are currently limited to one reporting unit and reportable operating segment, which is community
banking. For a discussion of Peoples’ financial performance for the fiscal year ended December 31, 2023, see Peoples’ Consolidated
Financial Statements and Notes to the Consolidated Financial Statements.
Peoples has a history of expanding its business, including its customer base and primary market area, through a combination of
organic growth and targeted acquisitions. The organic growth may include opening de novo banking and loan production offices
(“LPOs”) located in or near Peoples’ existing market area. Acquisitions have consisted of traditional banking offices and LPOs, both
individually and as part of entire financial institutions, insurance agencies, financial advisory books of business, insurance premium
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financing and equipment leasing services. The primary objectives of Peoples’ expansion efforts include: (1) providing opportunities to
integrate non-traditional products and services, such as insurance, investment administration and management, insurance premium
financing and commercial equipment leasing options, along with the traditional banking products offered to Peoples’ clients; (2)
increasing market share in existing markets; (3) expanding Peoples’ core financial service businesses of banking, insurance,
investment and investment management, insurance premium financing and commercial equipment leasing services; and (4) improving
operating efficiency by directing resources toward offices and markets with the greatest earnings opportunities.
Recent Corporate Developments
On October 25, 2022, Peoples announced the signing of a definitive Agreement and Plan of Merger providing for Peoples’
acquisition, in an all-stock merger, of Limestone Bancorp Inc. (“Limestone”), a bank holding company headquartered in Louisville,
Kentucky, and the parent company of Limestone Bank. Under the terms of the Agreement and Plan of Merger, Limestone merged
with and into Peoples, and Limestone Bank merged with and into Peoples’ wholly-owned subsidiary, Peoples Bank (collectively, the
“Limestone Merger”). The Limestone Merger closed as of the close of business on April 30, 2023. As consideration, Limestone
shareholders were paid 0.90 common shares of Peoples for each full share of Limestone that was owned at the merger date, resulting
in the issuance of 6,827,668 common shares by Peoples, or aggregate consideration of $177.9 million. Peoples recorded goodwill in
the amount of $68.8 million and core deposit other intangible assets in the amount of $27.7 million related to this transaction.
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. Peoples repurchased
an aggregate of 107,219 of its common shares totaling $3.0 million during 2023 and an aggregate of 263,183 of its common shares
totaling $7.4 million during 2022, but did not repurchase any common shares during 2021, under the share repurchase program
authorized on January 28, 2021.
Primary Market Area and Customers
Peoples considers its primary market area to be those counties with a physical branch presence and their contiguous counties. This
includes Ohio, West Virginia, Kentucky, Virginia, Washington, D.C. and Maryland. Peoples currently operates 70 offices in Ohio, 28
offices in West Virginia, 46 offices in Kentucky, two offices in Virginia, three offices in Washington D.C., one office in Maryland, an
insurance premium finance lending office in Missouri, and an equipment leasing office in Vermont. Peoples’ market area consists of
rural, small urban and metropolitan markets in which Peoples serves a diverse group of industries and consumers. Principal industries
served in Peoples’ primary market area include manufacturing, distribution, commercial real estate, health care, education, municipal,
agricultural, automotive, wholesale and retail trade, franchise, and service-related industries. This broad-based economic area provides
diversity, which helps prevent Peoples’ revenue and earnings from being largely dependent upon any single industry segment.
Lending Activities
Peoples Bank originates various types of loans, including commercial loans (comprised of commercial and industrial loans,
commercial real estate loans, and construction loans), premium finance loans, residential real estate loans, home equity lines of credit,
consumer loans (comprised of both indirect and direct loans) and overdraft services. Peoples Bank’s lending activities are focused
principally on lending opportunities within its primary market area, except for its premium finance lending and equipment leasing
businesses, which originate loans and leases nationwide. However, Peoples Bank may occasionally originate loans outside its primary
market area. In general, Peoples Bank retains the majority of the loans and leases it originates; however, certain longer-term fixed-rate
mortgage loan originations, primarily one-to-four family residential mortgages, and portions of select commercial real estate loans and
commercial and industrial loans are sold into the secondary market or to other financial institutions.
Peoples Bank’s loans consist of credit extensions to consumers and other borrowers spread over a broad range of industrial
classifications. At December 31, 2023, Peoples Bank had no concentration of loans to borrowers engaged in the same or similar
industries that exceeded 10% of total loans (also referred to as “loans, net of deferred fees and costs”), nor did Peoples Bank have any
loans outstanding to non-United States (“U.S.”) entities.
Commercial Lending
Commercial loans include commercial and industrial loans, commercial real estate loans, construction loans, and commercial
credit card loans. Commercial loans represented the largest portion of Peoples Bank’s total loan portfolio, comprising
approximately 60.8% and 54.4% of total loans at December 31, 2023, and at December 31, 2022, respectively. Commercial
lending inherently carries a significant risk of loss since commercial loan relationships generally involve larger loan balances than
other loan classes.
Commercial loan terms include amortization schedules and interest rates commensurate with the purpose of each loan, the
identified source of repayment, and the risk involved. The majority of Peoples Bank’s commercial loans carry variable interest
rates equal to an underlying index rate plus a margin. However, Peoples Bank also originates commercial loans with fixed interest
rates for periods generally ranging from three to ten years. At December 31, 2023, the commercial loan portfolio consisted of
59.6% in variable interest rate loans and 40.4% in fixed interest rate loans. In determining whether to grant a commercial loan,
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Peoples Bank primarily reviews a schedule of cash flows to evaluate whether the borrower’s anticipated future cash flows will be
adequate to service both interest and principal due.
Peoples Bank also originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap
with Peoples Bank on terms that match the terms of the loan. By entering into the interest rate swap with the customer, the
customer synthetically fixes the rate on the variable rate loan. Peoples Bank offsets its exposure in each such swap by entering
into an offsetting interest rate swap with an unaffiliated financial institution. These interest rate swaps do not qualify as designated
hedges; therefore, each swap is accounted for as a standalone derivative instrument.
Peoples Bank evaluates all commercial loan relationships whose aggregate credit exposure is greater than $1.0 million on an
annual basis for possible credit deterioration. This internal loan review process provides Peoples Bank with opportunities to
identify potential problem loans and take proactive actions to assure repayment of the loan or minimize Peoples Bank’s risk of
loss, such as reviewing the relationship more frequently based upon the loan quality rating and aggregate outstanding exposure.
Upon detection of the reduced ability of a borrower to meet cash flow obligations, the loan is reviewed for possible downgrade in
the loan quality rating or placement on nonaccrual status. Peoples Bank also completes evaluation procedures for a selection of
larger loan relationships on a quarterly basis. Loan relationships whose aggregate credit exposure to Peoples Bank is equal to or
less than $1.0 million are reviewed on an event-driven basis. Triggers for review include a borrower's request to renew a maturing
loan or line of credit, actual knowledge of adverse events affecting the borrower’s business, receipt of financial statements
indicating deteriorating credit quality, or other similar events.
Commercial and Industrial Loans
Commercial and industrial loans are loans to operating companies for purposes of financing working capital needs, fixed
asset purchases, acquisitions of other businesses, and other business activities. Typically, these loans are secured with business
assets and, in some cases, owner-occupied real estate and are personally guaranteed by the owners of the operating companies.
The primary source of repayment of this type of loan is generally cash flows generated from operations of the business, which can
be susceptible to adverse changes in economic conditions of the general economy as a whole or within a specific industry. At
December 31, 2023, commercial and industrial loans comprised 19.2% of Peoples Bank’s total loan portfolio, compared to 19.0%
at December 31, 2022.
Commercial Real Estate Loans
Peoples Bank’s portfolio of commercial real estate loans comprised 35.7% of total loans at December 31, 2023, and 30.2% at
December 31, 2022. Peoples Bank originates commercial real estate loans for both owner-occupied commercial real estate and
non-owner-occupied investment commercial real estate. Generally, the real estate securing these loans is stabilized and typically
the loans are personally guaranteed by the owners of the borrowing entities. Normally, owner-occupied commercial real estate
loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties
occupied by operating companies. The source of repayment for this type of loan is typically cash flow from the operating
company occupying the real estate. Investment commercial real estate generally includes multifamily complexes, office buildings
and complexes, retail facilities, land under development, and industrial properties, as well as other commercial or industrial real
estate. Typically, the primary source of repayment of this type of loan is rental income generated from leasing activities.
Construction Loans
Peoples Bank originates construction loans to provide temporary financing during the construction phase for commercial and
residential properties. Peoples Bank’s construction lending is focused primarily on commercial and residential projects of select
real estate developers. These projects include the construction of apartment, office, retail, industrial complexes, and other
commercial and residential projects. The underwriting criteria for construction loans are generally the same as for non-
construction loans. Construction loans comprised 5.9% of Peoples Bank’s total loan portfolio at December 31, 2023 and 5.2% at
December 31, 2022.
Construction financing is generally considered to involve higher credit risk than other types of loans since Peoples Bank is
dependent largely upon the accuracy of the initial estimate of the property’s value at the completion of construction and the
estimated cost (including interest) of construction. If the estimated construction cost proves to be inaccurate, Peoples Bank may
be required to advance funds beyond the amount originally committed to enable completion of the project. If the estimate of a
property’s value upon completion proves inaccurate, Peoples Bank may be confronted, at or prior to the maturity of the loan, with
a property having a value insufficient to ensure full repayment, should the borrower default. In the event a default on a
construction loan occurs and foreclosure follows, Peoples Bank must take control of the project and attempt to either arrange for
completion of construction or sell the collateral of the unfinished project. In certain cases, such as real estate development
projects, repayment of construction loans occurs as a result of subsequent sale of the developed real estate. Additional risk exists
in these cases as the developer may lack funds to repay the loan if the property is not sold upon completion.
To mitigate the risk of construction lending, Peoples Bank requires periodic site inspections, typically completed by an
independent third party, to ensure appropriate completion of the project prior to any disbursements. Construction loans are
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structured to provide sufficient time to complete construction, giving consideration to weather or other variables that influence
completion time. Peoples Bank typically requires the term of its construction loans to be less than three years.
Insurance Premium Finance Loans
Based in Lee Summit, Missouri, the Peoples Premium Finance originates insurance premium finance loans through
independent insurance agency partners nationwide and provide funding for the purchase by borrowers of property and casualty
insurance policies from the insurance agency partners. Peoples Bank’s portfolio of insurance premium finance loans comprised
3.3% of total loans at December 31, 2023, and 3.4% at December 31, 2022, with the original portfolio having been acquired
during 2020.The loans are secured by the refundable, unearned premiums with respect to the underlying insurance policies. These
loans require a 10% to 20% down payment followed by no less than nine consecutive, equal monthly payments of principal plus
interest. This type of lending is relatively low risk, as the loan amount is generally less than the refundable, unearned premiums of
the underlying insurance policy. If the loan becomes delinquent, the underlying insurance policy is cancelled, and the unearned
premiums are refunded directly to Peoples Bank.
Commercial Equipment Leases and Equipment Financing Agreements
Peoples Bank originates leases and equipment financing agreements through its North Star Leasing division and through its
wholly-owned subsidiary Vantage. Peoples Bank’s portfolio of leases comprised 6.7% of total loans at December 31, 2023, and
7.3% at December 31, 2022.
Based in Burlington, Vermont, the North Star Leasing division underwrites, originates and services equipment leases and
equipment financing agreements primarily to small businesses throughout the U.S. Based in Excelsior, Minnesota, Vantage
underwrites, originates and services primarily technology equipment leases to medium and large businesses throughout the U.S.
Both North Star Leasing’s and Vantage’s leases transfer substantially all of the benefits and much of the risks of equipment
ownership to the lessee. The present value of future lease payments and the estimated residual value are recorded as leases on
Peoples’ Consolidated Balance Sheet. For the majority of the leases, revenue is recognized as a constant percentage return on the
lease’s carrying value. Lease origination costs are deferred and amortized as an adjustment of the related lease’s yield.
Residential Real Estate Loans
Peoples Bank’s portfolio of residential real estate loans comprised 12.9% of total loans at December 31, 2023, and 15.4% at
December 31, 2022. The residential real estate loans originated by Peoples Bank may either be retained in its loan portfolio, or
sold into the secondary market with servicing either retained by Peoples Bank or sold with the loan. Peoples Bank also had $1.9
million of residential real estate loans held for sale and was servicing $356.8 million of loans, consisting primarily of one-to-four
family residential mortgages, which had previously been sold into the secondary market, in each case, at December 31, 2023.
Peoples Bank also originates and retains jumbo residential mortgage loans for primary and secondary residences, which are
nonconforming loans that have higher loan amounts than those acceptable for sale to the government-sponsored enterprises to
which Peoples Bank typically sells residential mortgage loans.
Peoples Bank originates both fixed rate and variable rate residential real estate loans. From time to time, Peoples Bank sells
its longer-term fixed rate real estate loans into the secondary market; however, Peoples Bank may retain certain fixed rate real
estate loans. Peoples bank also offers fixed rate home equity installment loans with five-year to 20-year terms.
Peoples Bank typically requires residential real estate loan amounts to be no more than 80% of the purchase price or the
appraised value of the real estate securing the loan, whichever is lower, unless private mortgage insurance is obtained by the
borrower for the percentage exceeding 80%. In limited circumstances, Peoples Bank may lend up to 100% of the appraised value
of the real estate, although such lending currently is limited to loans that qualify under established federally-backed rural housing
programs or through a designated low-to-moderate income loan program. Numerous risk factors attributable to real estate lending
are considered during underwriting for the purposes of establishing an interest rate commensurate with the inherent risks of the
loan.
Residential real estate loans are typically secured by first mortgages with evidence of title in favor of Peoples Bank in the
form of an attorney’s opinion of title or a title insurance policy. Peoples Bank requires insurance, with Peoples Bank named as the
mortgagee and loss payee. Peoples Bank requires evidence of insurance at the time of the loan closing. Additionally, Peoples
Bank has a blanket insurance policy to cover loans secured by real estate with outstanding balances of less than $1.0 million that
do not include an insurance escrow account. For loans secured by real estate with outstanding balances over $1.0 million or those
that include an insurance escrow account, Peoples Bank force-places an insurance policy to cover the residential real estate loan
when the borrower fails to maintain adequate insurance. Licensed appraisals are required for all residential real estate loans, and
are completed by an independent third party. A compliance officer assigned to the line of business is responsible for working with
the management team to identify, implement and test regulatory compliance controls.
Home Equity Lines of Credit
Peoples Bank originates home equity lines of credit that provide consumers with greater flexibility in financing personal
expenditures. At December 31, 2023, outstanding home equity lines of credit comprised 3.4% of Peoples Bank’s total loans,
compared to 3.8% at December 31, 2022. Peoples Bank currently offers home equity lines of credit with a prime-based variable
rate for the entire 10-year term, with interest-only payments and a balloon payment at maturity. At December 31, 2023, Peoples
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Bank’s home equity loan portfolio consisted of 99.3% in variable interest rate loans and 0.7% in fixed interest rate loans. At
December 31, 2023, 24.1% of the total home equity loan portfolio was represented by convertible rate home equity lines of credit,
with total outstanding principal balances and available credit amounts of $50.4 million and $63.2 million, respectively, and a
weighted-average remaining maturity of 7.5 years. The average original loan amount under these convertible rate home equity
lines of credit was $50,000 at December 31, 2023.
Home equity lines of credit are generally made as second mortgages by Peoples Bank. The maximum amount of a home
equity line of credit is generally limited to 80% of the appraised value of the property less the balance of the first mortgage.
Peoples Bank may lend up to 90% of the appraised value of the property (less the balance of the first mortgage) at higher interest
rates that are commensurate with the additional risk being assumed in these situations. The home equity lines of credit are written
with 10-year terms and are subject to a new underwriting review upon request for renewal.
Consumer Lending
Peoples Bank’s consumer lending activities include consumer indirect loans, consumer credit card loans, and consumer direct
loans, which primarily involve loans secured by automobiles, motorcycles, recreational vehicles and other personal property, as
well as unsecured loans and personal lines of credit. Consumer loans generally involve more risk as to collectability than real
estate mortgage loans because of the type and nature of the collateral or, in certain instances, the absence of collateral. As a result,
consumer lending collections are dependent upon the borrower’s continued financial stability, and are at more risk from adverse
changes in personal circumstances. In addition, application of various state and federal laws, including bankruptcy and insolvency
laws, could limit the amount that may be recovered under these loans. Credit approval for consumer loans typically requires
demonstration of sufficiency of income to repay principal and interest due, stability of employment, an established credit record
and sufficient collateral for secured loans. It is the policy of Peoples Bank to review its consumer loan portfolio monthly and to
charge-off loans that do not meet its ongoing standards, while strictly adhering to all laws and regulations governing consumer
lending. A compliance officer assigned to the line of business is responsible for working with the management team to identify,
implement and test regulatory compliance controls.
Consumer Indirect Loans
Peoples Bank originates consumer indirect loans through select dealerships, which generally include loans secured by
automobiles, motorcycles and recreational vehicles. At December 31, 2023, consumer indirect loans comprised 10.8% of Peoples
Bank’s total loan portfolio, compared to 13.4% at December 31, 2022.
Consumer indirect loans are originated at the point of sale, or dealership, and are subject to the same pricing structure and
underwriting process as consumer loans originated through the retail branch channel. Consumer indirect lending offers Peoples
Bank the opportunity to access additional customers outside of its primary office locations. Peoples Bank offers consumer indirect
lending for new and pre-owned vehicles through approved franchise or independent dealerships. These dealerships undergo an
approval process whereby Peoples Bank reviews the dealership licensing and industry experience, evaluates customer experience
with the dealership, and completes an inspection of the inventory, showroom, and general facilities. On an ongoing basis, the
dealerships are monitored based on production volume, application approval rates, portfolio default rates, and adherence to loan
pricing guidelines.
Consumer Direct Loans
Peoples Bank originates consumer direct loans primarily through its office locations. Consumer direct loans generally include
loans secured by automobiles, motorcycles, recreational vehicles and other personal property; unsecured loans; and personal lines
of credit. Consumer direct loans differ from consumer indirect loans as they include expanded products, such as unsecured loans,
or loans secured by stock or deposits. Consumer direct loans comprised 2.1% of Peoples Bank’s total loan portfolio at
December 31, 2023, compared to 2.3% at December 31, 2022.
Overdraft Services
Peoples Bank grants overdraft services to qualified customers, which provides overdraft protection to deposit customers, both
individual and business, by establishing an overdraft amount. After a 60-day waiting period to verify account activity, each new
checking account usually receives an overdraft amount of $400, $700 or $1,000 based on the type of account and other
parameters, such as previous charge-off history or credit loss. Customers also have the ability to opt out of the overdraft services
offered by Peoples. Once established, customers are permitted to overdraw their checking account at Peoples Bank's discretion, up
to their overdraft limit, with each item being charged Peoples Bank’s regular overdraft fee, with a maximum of five charges per
day when the customer’s account is overdrawn more than $5. Customers repay the overdraft with their next deposit. Peoples’
overdraft services are designed to allow Peoples Bank to fill the void between traditional overdraft protection, such as a line of
credit, and non-bank “check cashing services.” Under federal banking regulations, Peoples Bank is required to obtain the consent
of its customers in order to apply Peoples’ overdraft services to ATM and one-time debit card transactions. While the overdraft
services generate fee income, these fees may be offset by additions to the provision for credit losses necessary to ensure the
maintenance of an appropriate allowance for credit losses against overdrafts deemed uncollectable. This allowance, along with net
charge-offs, was included in determining Peoples Bank’s allowance for credit losses. At December 31, 2023, the unfunded
commitment related to overdraft services was $82.3 million.
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Investment Activities
At December 31, 2023, investment securities comprised 19.6% of Peoples’ total assets, compared to 24.2% at December 31,
2022. The majority of Peoples’ investment activities are conducted through Peoples Bank, although Peoples and its non-banking
subsidiary, PIC, also may engage in investment activities from time to time. Investment activity by Peoples Bank is subject to
certain regulatory guidelines and limitations on the types of securities eligible for purchase. As a result, the investment securities
owned by Peoples Bank at December 31, 2023 included obligations of agencies and corporations of the U.S. government,
including mortgage-backed securities, obligations of U.S. government sponsored agencies, bank eligible obligations of states and
political subdivisions in the U.S., and bank eligible corporate obligations, including private-label mortgage-backed securities.
Peoples Bank also invests in tax credit funds. The investments owned by PIC consist of tax credit funds, municipal obligations,
privately issued mortgage-backed securities, and subordinated debt issued by a non-related banking entity.
Peoples Bank’s investment activities are governed internally by a policy approved by the Board of Directors of Peoples Bank,
which is administered by Peoples Bank’s Asset-Liability Management Committee (“ALCO”). The primary purpose of Peoples
Bank’s investment portfolio is to: (1) employ excess funds not needed to support loan demand; (2) provide a source of liquid
assets to accommodate unanticipated deposit and loan fluctuations, and overall liquidity needs; (3) provide eligible securities to
secure public and trust funds; and (4) earn the maximum overall return commensurate with Peoples Bank’s risk appetite and
liquidity needs. Investment strategies to achieve these objectives are reviewed by the ALCO. In its evaluation of investment
strategies, the ALCO considers various factors, including the interest rate environment, balance sheet mix, actual and anticipated
loan demand, funding opportunities and Peoples Bank’s overall interest rate sensitivity. The ALCO also has much broader
responsibilities, which are discussed in the “Interest Rate Sensitivity and Liquidity” section of “ITEM 7 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Form 10-K.
Funding Sources
Peoples’ primary sources of funds for lending and investing activities are interest-bearing and non-interest-bearing deposits.
Cash flows from both the loan and investment portfolios, which include scheduled payments, as well as prepayments, calls and
maturities, also provide a relatively stable source of funds. Peoples also utilizes a variety of short-term borrowings and long-term
borrowings to fund asset growth and satisfy liquidity needs. Peoples also hedges 90-day brokered deposits with interest rate swaps
as part of its funding strategy. The swaps pay a fixed rate of interest while receiving variable interest based on the three-month
Secured Overnight Financing Rate (“SOFR”), which offsets the rate on the brokered deposits. Peoples’ funding sources are
managed through Peoples’ asset-liability management process and monitored by the ALCO, which is discussed further in the
“Interest Rate Sensitivity and Liquidity” section of “ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Form 10-K.
The following is a brief description of the various sources of funds utilized by Peoples:
Deposits
Peoples Bank obtains deposits principally from individuals and businesses within its primary market area by offering a broad
selection of deposit products to clients. Deposit products for individuals have account terms that vary with respect to the
minimum balance required, the time the funds must remain on deposit, and service charge schedules. Interest rates paid on
specific deposit types are determined based on (1) the interest rates offered by competitors, (2) the anticipated amount and timing
of funding needs, (3) the availability and cost of alternative sources of funding, and (4) the anticipated future economic conditions
and interest rates. Business deposits, which include deposits from traditional commercial businesses as well as governmental
entities, are obtained through an offering of multiple deposit account types as well as cash management solutions. Depending on
the need of the entity, these deposits could be either interest-bearing or non-interest-bearing. The ability of Peoples Bank to offer
competitive cash management solutions to its customers, enables it to obtain valuable operating account funds as well as non-
operating account funds. Retail and business deposits are attractive sources of funding because of their stability and cost, relative
to wholesale funding alternatives, in addition to providing opportunities for Peoples to build long-term client relationships through
the cross-selling of its other products and services.
Peoples Bank also offers its customers the ability to receive multi-million dollar federal deposit insurance coverage for
certificates of deposit (“CDs”) through the Certificate of Deposit Account Registry Service (“CDARS”) program and money
market deposit accounts through the Insured Cash Sweep (“ICS”) services network. Under these programs, funds from large
customer deposits are placed into accounts issued by other members of the CDARS program or ICS network in increments below
the federal deposit insurance limits to ensure both principal and interest remain eligible for insurance. Peoples Bank also
purchases certain “one-way buy” CDARS deposits, and overnight ICS network deposits which are utilized as a wholesale funding
source, and these deposits are classified as brokered deposits in “Note 8 Deposits.”
Peoples Bank occasionally obtains deposits from clients outside its primary market area, generally in the form of CDs, and
has the ability, if determined to be appropriate, to obtain deposits from deposit brokers. These deposits are used to supplement
Peoples Bank’s deposits to fund loans originated to customers located outside Peoples Bank’s primary market area, as well as
provide diversity in funding sources as they do not require Peoples Bank to secure the funds with collateral, unlike most other
borrowed funds. Additionally, in recent years, Peoples has issued brokered deposits to fund fixed-rate interest rate swaps.
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Additional information regarding the amounts and composition of Peoples Bank’s deposits can be found in the “Deposits”
section of “ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS” of this Form 10-K and in “Note 8 Deposits.”
Borrowed Funds
Peoples obtains funds through a variety of short-term borrowings and long-term borrowings, which typically include
advances from the Federal Home Loan Bank of Cincinnati (the “FHLB”) and repurchase agreements. Peoples also has the ability
to obtain funds, if determined to be appropriate, through federal funds purchased and advances from the Federal Reserve Discount
Window. Peoples also utilizes the Bank Term Funding Program (“BTFP”) which was created by the Federal Reserve Bank to
support American businesses and households by making additional funding available to eligible depository institutions to help
assure banks have the ability to meet the needs of all their depositors. The BTFP offers loans of up to one year in length. In
addition, Peoples has the ability to obtain funds from unrelated financial institutions in the form of term loans or revolving lines of
credit. Short-term borrowings are used generally to manage Peoples’ daily liquidity needs since they typically may be repaid, in
whole or part, at any time without a penalty. In recent years, Peoples has utilized interest rate swaps to obtain short-term
borrowings at long-term fixed rates, effectively replacing maturing long-term borrowings. Long-term borrowings provide cost-
effective options for funding asset growth and satisfying capital needs, due to the variety of pricing and maturity options
available.
Additional information regarding the amounts and composition of Peoples’ borrowed funds can be found in the “Borrowed
Funds” section of “ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS” of this Form 10-K and in “Note 9 Short-Term Borrowings” and “Note 10 Long-Term
Borrowings.”
Competition
Peoples experiences intense competition within its primary market area due to the presence of several national, regional and local
financial institutions and other service providers, including finance companies, financial technology companies (“fintechs”), insurance
agencies and mutual fund providers. Competition within the financial services and insurance industries continues to increase as a
result of mergers between, and expansion of, financial services and insurance providers within and outside of Peoples’ primary market
area. In addition, the deregulation of the financial services industry (see the discussion of the Gramm-Leach-Bliley Act of 1999 in the
section of this item captioned “Supervision and Regulation – Bank Holding Company Regulation”) has allowed securities firms and
insurance companies that have elected to become financial holding companies to acquire commercial banks and other financial
institutions, which can create additional competitive pressure. In addition, fintechs are also providing nontraditional, but increasingly
strong, competition for our borrowers, depositors, and other customers.
Peoples primarily competes based on client service, convenience and responsiveness to customer needs, product characteristics,
interest rates on loans, insurance premium financing, leases and deposits, and the availability and pricing of fiduciary, employee
benefit plan, brokerage and insurance services. However, some competitors may have greater resources, including additional
technology offerings and higher lending limits than Peoples, which may adversely affect Peoples’ ability to compete. Peoples’
business strategy includes the use of a “needs-based” sales and service approach to serve customers and is intended to promote
customers’ continued use of multiple financial products and services. Peoples continues to emphasize the integration of traditional
commercial banking products with non-traditional financial products, such as insurance and investment products. In addition, Peoples
continuously works to improve its online and mobile capabilities to ensure customers are able to use its products and services utilizing
many channels.
Historically, Peoples has focused on providing its full range of products and services in smaller metropolitan markets and certain
major metropolitan areas. Management believes Peoples has developed a level of expertise in serving the financial service needs of all
communities. Peoples’ primary market area has expanded into larger metropolitan areas, such as central, southwestern and
northeastern Ohio along with Kentucky, eastern Virginia, southern Maryland, Minnesota, West Virginia, and Washington, D.C.
Peoples also competes nationally when providing insurance premium financing and commercial equipment leases and equipment
financing arrangements. These larger areas typically contain entrenched service providers with existing customer bases much larger
than Peoples’ current position. As a result, Peoples may be forced to compete more aggressively in order to grow its market share in
these areas, which could reduce current and future profit potential derived from such markets.
Human Capital Resources
At December 31, 2023, Peoples had 1,478 full-time equivalent employees, compared to 1,267 at December 31, 2022. Peoples
makes it a priority to provide a first class workplace for its employees, focusing on providing quality benefits, recognizing and
rewarding performance, cultivating diversity, promoting a culture of learning and coaching in every direction. Peoples offers paid time
off, medical, dental and vision insurance, along with wellness programs, a 401(k) program, an employee stock purchase program,
programs to assist with education-related costs, reward and recognition programs, as well as other various programs and benefits.
Peoples has also implemented a $15 minimum wage throughout the organization and all associates were at or above this threshold as
of January 2023. Peoples Bank has been recognized by Newsweek as one of America’s Best Banks in 2023, and Peoples Bank has
been recognized as a “Best Bank to Work For” by American Banker in each of 2021, 2022 and 2023.
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Peoples strives to be an inclusive and diverse workplace, free of harassment, and encourages employees to voice their opinions.
Peoples works to attract and retain top quality talent, and in doing so, promotes a learning environment where positive constructive
feedback can be given at any level of the organization. Employees are encouraged to communicate their thoughts, whether it is with a
co-worker, management or the Human Resources Department. Peoples also provides an anonymous ethics hotline for employees to
report any issues that they may feel uncomfortable reporting to management. Peoples maintains many reward programs for employees
and management to recognize contributions by individuals and teams within the organization. Peoples provides internal training
throughout the organization, as well as opportunities to attend external and online training events. Managers complete quarterly
performance reviews with employees, and semi-annual employee satisfaction pulse surveys are completed. Peoples tracks and
monitors employee turnover and executes exit interviews to better understand why employees choose to leave the organization.
Peoples maintains a high level of commitment to its communities, which is shown both through employees volunteering and with
donations made to many organizations within the Peoples footprint.
Intellectual Property and Proprietary Rights
Peoples has registered the service marks “Peoples Bank (with logo),” “Peoples Bancorp,” “Peoples Bank,” Peoples in motion logo
consisting of three arched ribbons, “Working Together. Building Success.”, “Peoples Insurance (with logo)”, “Peoples Investment
Services”, “Peoples Premium Finance”, “North Star Leasing” and “peoplesbancorp.com” with the U.S. Patent and Trademark Office
(the “USPTO”). Peoples has submitted applications to the USPTO to register “Vantage Financial” and “vidTeller” as trademarks, but
has yet to receive final approval. Additionally, Peoples is the owner of “tradeIT”, a registered service mark of Vantage. These service
marks currently have expiration dates ranging from 2024 to 2031.
Peoples may renew the registrations of service marks with the USPTO generally for additional five-year to 10-year periods
indefinitely, provided it continues to use the service marks and files appropriate maintenance and renewal documentation with the
USPTO at the times required by the federal trademark laws and regulations. Peoples intends to continue to use its registered service
marks and to timely renew the registration of each of them.
Peoples has proprietary interests in the Internet domain names “pebo.com”, “peoplespf.com”, “northstarleasing.com”,
“vantagefncl.com” and “peoplesbancorp.com.” Internet domain names in the U.S. and in foreign countries are regulated, but the laws
and regulations governing the Internet are continually evolving.
Supervision and Regulation
Peoples and its subsidiaries are subject to extensive supervision and regulation by federal and state agencies. The regulation of
financial holding companies and their subsidiaries is intended primarily for the protection of consumers, depositors, borrowers, the
Deposit Insurance Fund (the “DIF”) of the Federal Deposit Insurance Corporation (the “FDIC”) and the banking system as a whole,
and not for the protection of shareholders. Applicable laws and regulations restrict permissible activities and investments, and require
actions to protect loan, deposit, brokerage, fiduciary and other customers, as well as the DIF. Such laws and regulations may also
restrict Peoples’ ability to repurchase its common shares or to receive dividends from Peoples Bank, and may impose capital adequacy
and liquidity requirements. The following is a summary of the regulatory agencies, statutes and related regulations that have, or could
have, a material impact on Peoples’ business. This discussion is qualified in its entirety by reference to such regulations and statutes.
Financial Holding Company
Peoples is a legal entity separate and distinct from its subsidiaries and affiliated companies. As a financial holding company,
Peoples is subject to regulation under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and to inspection,
examination and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).
The Federal Reserve Board has extensive enforcement authority over financial holding companies. In general, the Federal
Reserve Board may initiate enforcement actions for violations of laws and regulations and unsafe or unsound practices. The
Federal Reserve Board may assess civil money penalties, issue cease and desist or removal orders, and require that a financial
holding company divest subsidiaries, including subsidiary banks. Peoples is routinely required to file reports and other
information with the Federal Reserve Board regarding Peoples’ business operations and those of its subsidiaries.
Subsidiary Bank
Peoples Bank is subject to regulation and examination primarily by the Ohio Division of Financial Institutions (the “ODFI”)
and the Federal Reserve Bank of Cleveland (the “FRB”). Peoples Bank must also follow the regulations promulgated by the
Consumer Financial Protection Bureau (the “CFPB”), which regulates consumer financial products and services and certain
financial services providers.
Various requirements and restrictions under the laws of the U.S, and the states of Ohio, Kentucky, West Virginia, Virginia,
Washington, D.C., Maryland, Vermont and Missouri affect the operations of Peoples Bank, including requirements to maintain
reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged
thereon, restrictions relating to investments and other activities, limitations on credit exposure to correspondent banks, limitations
on activities based on capital and surplus, limitations on transactions between Peoples Bank and Peoples, limitations on the
payment of dividends, and limitations on branching. Consumer laws and regulations that are designed to prevent unfair, deceptive
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and abusive acts and practices and that ensure that consumers have access to fair, transparent and competitive markets for
consumer financial products and services also affect the services provided by Peoples Bank.
Non-Banking Subsidiaries
Peoples’ non-banking subsidiaries are also subject to regulation by the Federal Reserve Board and other applicable federal
and state agencies. Peoples Insurance, as a licensed insurance agency, is subject to regulation by the Ohio Department of
Insurance and the state insurance regulatory agencies of the other states where it conducts business.
Other Regulatory Agencies
Securities and Exchange Commission (“SEC”) and the Nasdaq Global Select Market® (“Nasdaq”)
Peoples is also under the jurisdiction of the SEC and certain state securities commissions for matters relating to the offering
and sale of its securities. Peoples is subject to the registration, disclosure, reporting and regulatory requirements of the Securities
Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
regulations promulgated under each of the Securities Act and the Exchange Act, as administered by the SEC. Peoples’ common
shares are listed with Nasdaq under the symbol “PEBO” and Peoples is subject to the rules for Nasdaq listed companies.
Federal Home Loan Bank (“FHLB”)
Peoples Bank is a member of the FHLB, which provides credit to its members in the form of advances. As a member of the
FHLB, Peoples Bank must maintain an investment in the capital stock of the FHLB in a specified amount. Upon the origination or
renewal of a loan or an advance, the FHLB is required by law to obtain and maintain a security interest in certain types of
collateral. The FHLB is required to establish standards of community investment or service that its members must maintain for
continued access to long-term advances from the FHLB. The standards take into account a member’s performance under the
Community Reinvestment Act of 1977, as amended (the “CRA”), and the member’s record of lending to first-time homebuyers.
Federal Deposit Insurance Corporation (“FDIC”)
The FDIC is an independent federal agency which insures the deposits, up to prescribed statutory limits, of federally-insured
banks and savings associations, and safeguards the safety and soundness of the financial institution industry. Peoples Bank’s
deposits are insured up to applicable limits by the DIF of the FDIC and Peoples Bank is subject to deposit insurance assessments
to maintain the DIF. The general insurance limit is $250,000 per separately insured depositor. This insurance is backed by the full
faith and credit of the U.S. government.
As insurer, the FDIC is authorized to conduct examinations of and to require routine reporting by insured institutions,
including Peoples Bank, to prohibit any insured institution from engaging in any activity the FDIC determines by regulation or
order to pose a threat to the DIF, and to take enforcement actions against insured institutions. The FDIC may terminate insurance
of deposits of any insured institution if the FDIC finds that the insured institution has engaged in unsafe or unsound practices, is
in an unsafe or unsound condition, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or
any other regulatory agency.
Insured depository institutions are required to remit quarterly deposit insurance premiums to the FDIC, which are used to
fund the DIF. Insurance premiums for each insured depository institution are determined based upon the institution’s capital level
and supervisory rating provided to the FDIC by the institution’s primary federal regulator and other information the FDIC
determines to be relevant to the risk posed to the DIF by the insured depository institution. The assessment rate determined by
considering such information is then applied to the amount of the insured depository institution’s average assets minus average
tangible equity to determine the insured depository institution’s insurance premium. An increase in the assessment rate could have
a material adverse effect on the earnings of the affected insured depository institution, depending on the amount of the increase.
The FDIC assesses a quarterly deposit insurance premium on each insured depository institution based on perceived risk
characteristics of the insured institution to the DIF, with institutions deemed less risky paying lower rates. Currently, assessments
for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from
statistical models estimating the probability of failure within three years. The FDIC may increase or decrease the range of
assessments uniformly, except that no adjustments can deviate more than two basis points from the base assessment without
notice and comment rule making. The FDIC may also impose special assessments in emergency situations. The FDIC has
established 2.0% as the designated reserve ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured
deposits. In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35% by September 30,
2020, the deadline imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended (the
“Dodd-Frank Act”). The Dodd-Frank Act required the FDIC to offset the effect on insured institutions with assets of less than $10
billion of the increase in statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%. Although the FDIC’s
rules reduced assessment ratio on all banks, they imposed a surcharge on banks with assets of $10 billion or more to be paid until
the DRR reached 1.35%. At September 30, 2018, the DRR met the statutory minimum of 1.35%. As a result, the previous
surcharge imposed on banks with assets of $10 billion or more was lifted. In addition, preliminary assessment credits were
determined by the FDIC for banks with assets of less than $10 billion, which had previously contributed to the increase of the
DRR to 1.35%. On June 30, 2019, the DRR reached 1.40%, and the FDIC applied credits for banks with assets of less than $10
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billion. On June 30, 2020, the DRR fell below the statutory minimum to 1.30%. This resulted in the FDIC adopting a restoration
plan designed to restore the DRR to 1.35% within eight years, by September 30, 2028. As part of this restoration plan, all
scheduled assessment rates for all insured institutions were maintained.
In the semiannual update for the Restoration Plan in June 2022, the FDIC projected that the reserve ratio was at risk of not
reaching the statutory minimum of 1.35% by September 30, 2028, the statutory deadline to restore the reserve ratio. Based on this
update, the FDIC Board approved an Amended Restoration Plan, and concurrently proposed an increase in initial base deposit
insurance assessment rate schedules uniformly by two basis points (from three basis points to five basis points), applicable to all
insured depository institutions. In October 2022, the FDIC Board finalized the increase with an effective date of January 1, 2023,
applicable to the first quarterly assessment period of 2023 (i.e., January 1 through March 31, 2023). The revised assessment rate
schedules are intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum level of 1.35%
percent by September 30, 2028. In the FDIC’s most recent semiannual update for the Amended Restoration Plan in November
2023, the FDIC noted that increased loss provisions associated with the failures of Silicon Valley Bank, Signature Bank and First
Republic Bank in 2023 that reduced the DIF balance, coupled with strong growth in insured deposits, resulted in the reserve ratio
declining 15 basis points from 1.25% as of December 31, 2022 to 1.10% as of June 30, 2023. Despite the decline in the reserve
ratio, the FDIC staff projected that the reserve ratio remains on track to reach the statutory minimum of 1.35% ahead of the
deadline of September 30, 2028. As a result, the FDIC staff recommended no changes to the Amended Restoration Plan and all
scheduled assessment rates were maintained.
On November 16, 2023, the FDIC adopted a final rule implementing a special assessment to recover the loss to the DIF
arising from the protection of uninsured depositors following the failures of Silicon Valley Bank and Signature Bank. The
assessment base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits reported for
the quarter ended December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits. The FDIC will
collect the special assessment at an annual rate of approximately 13.4 basis points, over eight quarterly assessment periods,
beginning with the first quarter of 2024. Because Peoples Bank’s uninsured deposits were less than $5 billion for the quarter
ended December 31, 2022, Peoples Bank will not be subject to this special assessment.
Bank Holding Company Regulation
In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks, and other
activities that the Federal Reserve Board determines to be so closely related to banking as to be a proper incident thereto. As a
result of the Gramm-Leach-Bliley Act of 1999 – also known as the Financial Services Modernization Act of 1999 – which
amended the BHC Act, bank holding companies that are financial holding companies may engage in any activity, or acquire and
retain the shares of a company engaged in any activity, that is either (1) financial in nature or incidental to such financial activity
(as determined by the Federal Reserve Board in consultation with the Secretary of the Treasury), or (2) complementary to a
financial activity, and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial
system generally. Activities that are financial in nature include securities underwriting and dealing, insurance underwriting and
making merchant banking investments. In 2002, Peoples elected, and received approval from the Federal Reserve Board, to
become a financial holding company.
In order for a financial holding company to commence any new activity permitted by the BHC Act, or to acquire a company
engaged in any new activity permitted by the BHC Act, the financial holding company must be “well managed” and “well
capitalized,” and each insured depository institution subsidiary of the financial holding company must be well capitalized under
the prompt corrective action provisions, be well managed and have received a rating of at least “satisfactory” in its most recent
examination under the CRA. The CRA is more fully discussed in the section captioned “Community Reinvestment Act” included
later in this Item. In addition, financial holding companies, such as Peoples, are permitted to acquire companies engaged in
activities that are financial in nature and in activities that are incidental and complementary to financial activities without prior
Federal Reserve Board approval.
The BHC Act and other federal and state statutes regulate acquisitions of commercial banks. The BHC Act requires the prior
approval of the Federal Reserve Board for the direct or indirect acquisition of more than 5% of the voting shares of a commercial
bank or its parent holding company. Under the federal Bank Merger Act, as amended, the prior approval of the Federal Reserve
Board is required for a state-chartered, Federal Reserve Bank member bank to merge with another bank or purchase the assets or
assume the deposits of another bank. In reviewing an application seeking approval of a merger or acquisition transaction, the bank
regulatory authorities consider, among other factors, the competitive effect and public benefits of the transaction, the capital
position of the combined organization, the applicant’s performance record under the CRA and fair housing laws, and the
effectiveness of the subject organizations in combating money laundering activities.
A financial holding company is required by law and Federal Reserve Board policy to act as a source of financial strength to
each subsidiary bank and to commit resources to support each subsidiary bank. The Federal Reserve Board may require a
financial holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the
payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or
unsound practice.
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Federal Reserve System
The Federal Reserve Board requires all depository institutions to maintain reserves at specified levels against their transaction
accounts, primarily checking accounts. In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement
ratios to 0% effective on March 26, 2020, to support lending to households and businesses. The reserve requirement ratio
remained at 0% as of December 31, 2023.
Transactions with Affiliates, Directors, Executive Officers and Shareholders
Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board Regulation W generally:
•
•
•
limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an
amount equal to 10.0% of the bank’s capital stock and surplus;
limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates to an amount
equal to 20.0% of the bank’s capital stock and surplus; and
require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as
those provided to a non-affiliate.
An affiliate of a bank is any company or entity that controls, is controlled by, or is under common control with the bank. The
term “covered transaction” includes the making of loans to the affiliate, the purchase of assets from the affiliate, the issuance of a
guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate and other similar types of transactions.
A bank’s authority to extend credit to executive officers, directors and greater than 10.0% shareholders, as well as entities
such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated under the
Federal Reserve Act by the Federal Reserve Board. Among other things, these loans must be made on terms (including interest
rates charged and collateral required) substantially similar to those offered to unaffiliated individuals, or be made as part of a
benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of
repayment. In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and
specified approval procedures must be followed in making loans which exceed specified amounts.
The Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and Initiatives Related to COVID-19
In response to the novel COVID-19 pandemic (“COVID-19”), the CARES Act was signed into law on March 27, 2020, to
provide national emergency economic relief measures. Many of the CARES Act’s programs are dependent upon the direct
involvement of U.S. financial institutions, such as Peoples and Peoples Bank, and have been implemented through rules and
guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve Board
and other federal banking agencies, including those with direct supervisory jurisdiction over Peoples and Peoples Bank.
Section 1102 of the CARES Act amended the loan program of the SBA, in which Peoples Bank participates, to create a
guaranteed, unsecured loan program, the Paycheck Protection Program (“PPP”), to fund operational costs of eligible businesses,
organizations and self-employed persons during COVID-19. These loans are eligible to be forgiven if certain conditions are
satisfied and are fully guaranteed by the SBA. In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which,
among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. After previously being extended by
Congress, the application deadline for PPP loans expired on May 31, 2021. No collateral or personal guarantees were required for
PPP loans. In addition, neither the government nor lenders have been permitted to charge the recipients of PPP loans any fees. On
December 27, 2020, the President signed into law the Consolidated Appropriates Act, 2021, which included the Economic Aid to
Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “HHSB Act”). Among other things, the HHSB Act renewed the
PPP, allocating $284.5 billion for both new first-time PPP loans under the existing PPP and the expansion of existing PPP loans
for certain qualified, existing PPP borrowers. The PPP program ended May 31, 2021 and no new loans can be originated under
that program.
On September 29, 2020, the federal bank regulatory agencies issued a final rule that neutralizes the regulatory capital and
liquidity coverage ratio effects of participating in certain COVID-19 liquidity facilities due to the fact there is no credit or market
risk in association with exposures pledged to such facilities. As a result, the final rule supports the flow of credit to households
and businesses affected by COVID-19.
On December 2, 2020, the federal bank regulatory agencies issued an interim final rule that provides temporary relief for
specified community banking organizations related to certain regulations and reporting requirements as a result, in large part, of
their growth in size from the response to COVID-19. Community banking organizations are subject to different rules and
requirements based on their risk profile and asset size. Due to their involvement in federal COVID-19 response programs (such as
the PPP) and other lending that supported the U.S. economy, many community banking organizations experienced rapid and
unexpected increases in their sizes, which were generally expected to be temporary. The temporary increase in size could have
subjected community banking organizations to new regulations or reporting requirements. However community banking
organizations with assets approaching the $10 billion threshold and that would otherwise have become subject to additional
regulatory requirements upon crossing such threshold, including requirements related to capital adequacy standards, debit card
interchange fees and routing, and management official interlocks, had until January 1, 2022 to either reduce their size or to
prepare for new regulatory and reporting standards.
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Capital Adequacy and Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act of 1991, as amended (“FDICIA”), identifies five capital
categories for insured depository institutions and requires the applicable regulatory agencies to implement systems for “prompt
corrective action” for insured depository institutions that do not meet minimum capital requirements within such categories. The
regulatory agencies, including the Federal Reserve Board, the FDIC, the ODFI, and the Office of the Comptroller of the Currency
(the “OCC”), have adopted substantially similar regulatory capital guidelines and regulations consistent with the requirements of
FDICIA, and have established a system of prompt corrective action to resolve certain problems of undercapitalized institutions.
This system is based on five capital level categories for insured depository institutions: “well capitalized,” “adequately
capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”
The regulatory agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital level.
For example, the banking agencies must appoint a receiver or conservator for a bank within 90 days after the bank becomes
“critically undercapitalized” unless the bank’s primary regulator determines, with the concurrence of the FDIC, that other action
would better achieve regulatory purposes. Banking operations otherwise may be significantly affected depending on a bank’s
capital category. For example, a bank that is not “well capitalized” generally is prohibited from accepting brokered deposits and
offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized
bank must guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.
The Federal Reserve Board has adopted risk-based capital guidelines for financial holding companies and other bank holding
companies, as well as state member banks. The guidelines provide a systematic analytical framework which makes regulatory
capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures
expressly into account in evaluating capital adequacy, and minimizes disincentives to holding liquid, low-risk assets. Capital
levels, as measured by these standards, are also used to categorize financial institutions for purposes of certain prompt corrective
action regulatory provisions.
The Basel III Capital Rules include: (a) a minimum common equity tier 1 capital ratio of 4.5%; (b) a minimum tier 1 risk-
based capital ratio of 6.0%; (c) a minimum total risk-based capital ratio of 8.0%; and (d) a minimum tier 1 leverage ratio of 4.0%.
Common equity for the common equity tier 1 capital ratio generally consists of common stock (plus related surplus), retained
earnings, accumulated other comprehensive income/loss (“AOCI” for income, “AOCL” for loss) (unless an institution elects to
exclude such income from regulatory capital), and limited amounts of minority interests in the form of common stock, subject to
applicable regulatory adjustments and deductions.
Tier 1 capital generally consists of common equity as defined for the common equity tier 1 capital ratio, plus certain non-
cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have
been grandfathered (but which are not otherwise permitted), and limited amounts of minority interests in the form of additional
tier 1 capital instruments, less certain deductions.
Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated
debt meeting certain conditions plus limited amounts of the allowance for credit losses, subject to specified eligibility criteria, less
applicable deductions.
The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets,
mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking
organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain
levels).
Under the guidelines, capital is compared to the relative risk included in the balance sheet. To derive the risk included in the
balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the
relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends and share
repurchases, and certain discretionary bonus payments to executive officers if the banking organization does not hold a capital
conservation buffer of greater than 2.5% composed of common equity tier 1 capital above its minimum risk-based capital
requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than
2.5% at the beginning of the quarter.
In October 2021, effective in November 2021, the FDIC issued a final rule to incorporate the Community Bank Leverage
Ratio rule into the Real Estate Lending Standards. This rule calculates the ratio of loans in excess of the supervisory loan-to-value
limits (“LTV Limits”) using Tier 1 capital plus the appropriate allowance for credit losses in the denominator. This rule was
adopted to allow a consistent approach for calculating the ratio of loans in excess of the supervisory LTV Limits at all FDIC
supervised institutions, and to avoid any regulatory burden that could arise if an FDIC supervised institution subsequently decides
to switch between different capital frameworks.
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In December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss
allowances under the current expected credit loss (“CECL”) model (accounting standard). The rule revises the federal banking
agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in
regulatory capital and to provide banking organizations the option to phase in over three years the day-one adverse effects on
regulatory capital that may result from the adoption of the CECL model. During 2020, regulatory agencies issued guidance
allowing additional phase-in periods for the impact of the CECL model for regulatory capital purposes. This additional phase-in
period includes a 25% deferment of the impact on regulatory capital of the estimated increase in the allowance for credit losses
related to the CECL model, which is applied during the first two years of application. For the first two years of the phase-in
period, 100% of the transition adjustment due to the implementation of the CECL model is excluded for regulatory capital
purposes, along with 25% of the increase in the allowance for credit losses compared to the January 1, 2020 allowance for credit
losses. In year three of the phase-in, 75% of the transition adjustment, and the cumulative 25% increase in the allowance for credit
losses compared to January 1, 2020, are excluded from regulatory capital, while 50% and 25% of these amounts are excluded in
years four and five, respectively, under this phase-in period. Additional information on the impact of Peoples’ adoption of the
CECL methodology can be found under the “FINANCIAL CONDITION - Allowance for Credit Losses” section of “ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of
this Form 10-K.
In order to be “well capitalized,” a bank must have a common equity tier 1 capital ratio of at least 6.5%, a tier 1 risk-based
capital ratio of at least 8.0%, a total risk-based capital of at least 10.0%, and a tier 1 leverage ratio of at least 5.0%, and the bank
must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a
specific capital level for any capital measures. Peoples’ management believes that Peoples Bank meets the ratio requirements to
be deemed “well capitalized” according to the guidelines described above. Additional information regarding Peoples’ regulatory
matters can be found in “Note 17 Regulatory Matters.”
Safety and Soundness Regulations
In accordance with the Federal Deposit Insurance Act (the “FDIA”), the federal bank regulatory agencies adopted safety and
soundness guidelines establishing general standards relating to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, compensation, fees and
benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify, monitor, and
manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and
unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director or principal shareholder. In addition, regulations adopted by the
federal bank regulatory agencies authorize the agencies to require that an institution that has been given notice that it is not
satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, the institution fails
to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the agency
must issue an order directing corrective actions and may issue an order directing other actions of the types to which an
undercapitalized institution is subject under the “prompt corrective action” provisions of the FDIA. If the institution fails to
comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money
penalties.
Community Reinvestment Act
The CRA requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and
sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas
by, among other things, providing credit or other financial assistance to low-income and moderate-income individuals and
communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings that must
be publicly disclosed. Peoples Bank received an overall rating of “Outstanding” pursuant to its most recent CRA rating assigned
by the Federal Reserve Board.
On October 24, 2023, the federal banking agencies, including the Federal Reserve Board, issued a final rule designed to
strengthen and modernize the regulations implementing the CRA. The changes are designed to encourage banks to expand access
to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry,
including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations, and
tailor CRA evaluations and data collection to bank size and type. The applicability date for the majority of the changes to the
CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. Peoples cannot predict
the impact the changes to the CRA will have on its operations at this time.
Dividend Restrictions
Current banking regulations impose restrictions on Peoples Bank’s ability to pay dividends to Peoples. These restrictions
include a limit on the amount of dividends that may be paid in a given year without prior approval of the Federal Reserve Board
and a prohibition on paying dividends that would cause Peoples Bank’s total capital to be less than the required minimum levels
under the capital requirements imposed by the Federal Reserve Board and the amount of the capital conservation buffer. Ohio law
also limits the amount of dividends that may be paid in any given year without prior approval of the Ohio Superintendent of
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Financial Institutions. Peoples Bank may not declare or pay a dividend if the total of all dividends declared during the calendar
year, including the proposed dividend, exceeds the sum of Peoples Bank’s net income during the current calendar year and the
retained net income of the prior two calendar years, unless the dividend has been approved by the ODFI and the Federal Reserve
Board. Peoples Bank’s regulators may prohibit the payment of dividends at any time if the regulators determine the dividends
represent unsafe and/or unsound banking practices, or reduce Peoples Bank’s total capital below adequate levels. For further
discussion regarding regulatory restrictions on dividends, refer to “Note 17 Regulatory Matters.”
Peoples’ ability to pay dividends to its shareholders may also be restricted. Current Federal Reserve Board policy requires a
financial holding company to act as a source of financial strength to each of its banking subsidiaries. Under this policy, the
Federal Reserve Board may require Peoples to commit resources or contribute additional capital to Peoples Bank, which could
restrict the amount of cash available for dividends.
The Federal Reserve Board has also issued a policy statement with regard to the payment of cash dividends by financial
holding companies and other bank holding companies. The policy statement provides that, as a matter of prudent banking, a
financial holding company or bank holding company should not maintain a rate of cash dividends unless its net income available
to common shareholders over the past year has been sufficient to fully fund the dividends, and the prospective rate of earnings
retention appears to be consistent with the financial holding company’s or bank holding company’s capital needs, asset quality
and overall financial condition. Accordingly, a financial holding company or bank holding company should not pay cash
dividends that exceed its net income or that can only be funded in ways that weaken the financial holding company’s or bank
holding company’s financial health, such as by borrowing.
Peoples also has entered into certain agreements that place restrictions on dividends. Specifically, Peoples Bank is prohibited
from paying dividends in an amount greater than permitted by law without requiring prior Federal Reserve Board or other
regulatory approval. In addition, if Peoples were to elect to defer payments of interest on the junior subordinated debt securities
held by NB&T Statutory Trust III, FNB Capital Trust One, Ascencia Statutory Trust I or Porter Statutory Trusts II-IV or an event
of default were to occur under the indenture governing those junior subordinated debt securities, Peoples will be prohibited from
declaring or paying any dividends on Peoples’ common shares. Even where the declaration or payment of a dividend would not
otherwise be restricted under applicable laws, Peoples or Peoples Bank may decide to limit the payment of dividends in order to
retain earnings for corporate use.
Customer Privacy and Other Consumer Protections
Peoples Bank is subject to regulations limiting the ability of financial institutions to disclose non-public information about
consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some
circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated party. Peoples Bank is
also subject to numerous federal and state laws aimed at protecting consumers, including the Home Mortgage Disclosure Act, the
Real Estate Settlement Procedures Act, the Fair Housing Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the
Bank Secrecy Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Fair Credit Reporting Act and the authority
granted to banking regulators under the Federal Trade Commission Act with respect to unfair or deceptive acts or practices
(“UDAP”).
The CFPB issued its final small dollar loan rule related to payday, vehicle title and certain high cost installment loans (the
“Final Small Dollar Rule”) on July 22, 2020, which became fully effective on October 20, 2020. The Final Small Dollar Rule
rescinds the Mandatory Underwriting Provisions of the 2017 Payday Rule after re-evaluating the legal and evidentiary bases for
these provisions and finding them to be insufficient. The Final Small Dollar Rule does not rescind or alter the Payments
Provisions of the 2017 Payday Rule. Specifically, in the Final Small Dollar Rule, the CFPB revoked provisions that: (i) provide
that it is an unfair and abusive practice for a lender to make a covered short-term or longer term balloon-payment loan, including
payday and vehicle title loans, without reasonably determining that consumers have the ability to repay those loans according to
their terms; (ii) prescribe mandatory underwriting requirements for making the ability-to-repay determination; (iii) exempt certain
loans from the mandatory underwriting requirements; and (iv) establish related definitions, reporting, and recordkeeping
requirements. However, due to continuing appellate litigation regarding the constitutionality of the CPFB’s funding structure,
which stems, in part, from legal challenges to the Final Small Dollar Rule, the effective date for nationwide compliance with the
Final Small Dollar Rule remains uncertain at this time.
The federal bank regulatory agencies also issued interagency guidance on May 20, 2020, to encourage banks, savings
associations, and credit unions to offer responsible small-dollar loans to customers for consumer and small business purposes.
Office of Foreign Assets Control Regulation
The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade
sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries,
nationals and others. OFAC publishes lists of specially designated targets and countries. Peoples is responsible for, among other
things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial
transactions with them and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could
have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to
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approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval
is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to
be violating these obligations.
Anti-Money Laundering Act
The Anti-Money Laundering Act of 2020 (the “AMLA”), which amends the Bank Secrecy Act of 1970 (the “BSA”), was
enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-
money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial
institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; and
expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA
violations and instituting BSA whistleblower initiatives and protections.
USA Patriot Act
The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001, as amended (the “USA Patriot Act”), and related regulations, among other things, require financial institutions to
establish programs specifying procedures for obtaining identifying information from customers seeking to establish new accounts
and establishing enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity.
Peoples Bank has established policies and procedures that Peoples believes comply with the requirements of the USA Patriot Act.
Monetary Policy
The Federal Reserve Board regulates money, credit conditions and interest rates in order to influence general economic
conditions primarily through open market operations in U.S. government securities, changes in the discount rate on bank
borrowings, and changes in the reserve requirements against deposits of depository institutions. These policies and regulations
significantly affect the overall growth and distribution of loans, investments and deposits, as well as interest rates charged on
loans and paid on deposits.
The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of financial
institutions in the past and are expected to continue to have significant effects in the future. In light of the changing conditions in
the U.S. economy, including with respect to inflation and the failure of the federal government to raise the federal debt ceiling, the
money markets and the activities of monetary and fiscal authorities, Peoples can make no definitive predictions as to future
changes in interest rates, credit availability or deposit levels.
Executive and Incentive Compensation
The Dodd-Frank Act requires that the federal banking agencies, including the Federal Reserve Board, issue a rule related to
incentive-based compensation. No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of
this Form 10-K, been adopted, but a proposed rule was published in 2016 that expanded upon a prior proposed rule published in
2011. The proposed rule is intended to: (i) prohibit incentive-based payment arrangements that the banking agencies determine
could encourage certain financial institutions to take inappropriate risks by providing excessive compensation or that could lead to
material financial loss; (ii) require the board of directors of those financial institutions to take certain oversight actions related to
incentive-based compensation; and (iii) require those financial institutions to disclose information concerning incentive-based
compensation arrangements to the appropriate federal regulator. Although a final rule has not been issued, Peoples and Peoples
Bank have undertaken efforts to ensure that their incentive compensation plans do not encourage inappropriate risks, consistent
with the principles identified above.
In June 2010, the Federal Reserve Board, the OCC and the FDIC issued comprehensive final guidance on incentive
compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the
safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that
have the ability to materially affect the risk profile of an organization, either individually, or as a part of a group, is based upon the
key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not
encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective
internal controls and risk management and (iii) be supported by strong corporate governance, including active and effective
oversight by the organization’s board of directors. These three principles are incorporated into the proposed joint compensation
regulations under the Dodd-Frank Act, described above.
The Federal Reserve Board reviews, as part of its regular, risk-focused examination process, the incentive compensation
arrangements of banking organizations, such as Peoples Bank, that are not “large, complex banking organizations.” These reviews
are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive
compensation arrangements. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the
organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking
organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk
to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the
deficiencies.
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Public company compensation committee members must meet heightened independence requirements and consider the
independence of compensation consultants, legal counsel and other advisors to the compensation committee. A compensation
committee must have the authority to hire advisors, and the public company must fund the reasonable compensation of such
advisors.
SEC regulations require public companies such as Peoples to provide various disclosures about executive compensation in
annual reports and proxy statements, and to present to their shareholders a non-binding vote on the approval of executive
compensation.
Following the adoption of additional listing requirements in 2023 to comply with the Dodd-Frank Act and rules adopted by
the SEC in October 2022, public companies are now required to adopt and implement “clawback” policies for incentive
compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was
paid on the basis of erroneous financial information necessitating an accounting restatement due to material noncompliance with
financial reporting requirements. This clawback policy is intended to apply to compensation paid within the three completed fiscal
years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives (including
former executives) who received incentive awards. Peoples has implemented a clawback policy and it is posted under the
“Corporate Overview – Governance Documents” tab of the “Investor Relations” page of Peoples’ Internet website at
www.peoplesbancorp.com.
Cybersecurity
In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that
financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their
risk management processes also address the risk posed by compromised customer credentials, including security measures to
reliably authenticate customers accessing Internet-based services of the financial institution. The other statement indicates that a
financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid
recovery, resumption and maintenance of the financial institution’s operations after a cybersecurity attack involving destructive
malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business
operations and address rebuilding network capabilities and restoring data if the financial institution or its critical service providers
fall victim to this type of cybersecurity attack. If Peoples Bank fails to observe the regulatory guidance, it could be subject to
various regulatory sanctions, including financial penalties.
In November 2021, the federal bank regulatory agencies issued a final rule, that became effective in May 2022, requiring
banking organizations that experience a computer-security incident to notify certain entities. A computer-security incident occurs
when actual or potential harm to the confidentiality, integrity or availability of information or the information system occurs, or
there is a violation or imminent threat of a violation to banking security policies and procedures. The affected bank must notify its
respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank
determine a computer-security incident that rises to the level of a notification incident has occurred. These notifications are
intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they
manifest into larger incidents. This rule also requires bank service providers to notify their bank organization customers of a
computer-security incident that has occurred, or is reasonably likely to cause, a material service disruption or degradation for four
or more hours.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and
providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also
recently implemented or modified their data breach notification and data privacy requirements. Peoples expects this trend of state-
level activity in those areas to continue, and continues to monitor developments in the states in which Peoples’ customers are
located.
Furthermore, once final rules are adopted, the Cyber Incident Reporting for Critical Infrastructure Act, enacted in March
2022, will require certain covered entities to report a covered incident to the U.S. Department of Homeland Security’s
Cybersecurity & Infrastructure Security Agency (“CISA”) within 72 hours after a covered entity reasonably believes an incident
has occurred. Separate reporting to CISA will also be required within 24 hours if a ransom payment is made as a result of a
ransomware attack.
On July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity
incidents in a Current Report on Form 8-K and detailed information regarding their cybersecurity risk management, strategy, and
governance on an annual basis in its Annual Reports on Form 10-K. Companies are required to report on Form 8-K any
cybersecurity incident they determine to be material within four business days of making that determination. See “ITEM 1C
CYBERSECURITY” of this Form 10-K. These SEC rules, and any other regulatory guidance, are in addition to notification and
disclosure requirements under state and federal banking law and regulations.
In the ordinary course of business, Peoples relies on electronic communications and information systems to conduct its
operations and to store sensitive data. Peoples employs an in-depth, layered, defensive approach that leverages people, processes,
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and encryption and multi-factor authentication technology to manage and maintain cybersecurity controls. Peoples employs a
variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report
on any suspected advanced persistent threats. Notwithstanding the strength of Peoples’ defensive measures, the threat from
cybersecurity attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in
defensive measures. While to date, Peoples has not detected a significant compromise, significant data loss or any material
financial losses related to cybersecurity attacks, Peoples’ systems and those of its customers and third-party service providers are
under constant threat and it is possible that Peoples could experience a significant event in the future. Risks and exposures related
to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and
sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-
based products and services by Peoples and Peoples’ customers. See “ITEM 1A RISK FACTORS” for a further discussion of
risks related to cybersecurity.
Volcker Rule
In December 2013, five federal agencies adopted a final regulation implementing the Volcker Rule provision of the Dodd-
Frank Act (the “Volcker Rule”). The Volcker Rule placed limits on the trading activity of insured depository institutions and
entities affiliated with depository institutions, subject to certain exceptions. Such trading activity included the purchase or sale as
principal of a security, derivative, commodity future, option or similar instrument in order to benefit from short-term price
movements or to realize short-term profits. The Volcker Rule exempted trading in specified U.S. government, agency, state and/or
municipal obligations. The Volcker Rule also excepted (i) trading conducted in certain capacities; (ii) trading to satisfy a debt
previously contracted; (iii) trading under certain repurchase and securities lending agreements; and (iv) trading in connection with
risk-mitigating hedging activities.
In addition, the Volcker Rule prohibited a banking entity from having an ownership interest in, or substantial relationships
with, a hedge fund or private equity fund, also known as “covered funds”, subject to a number of exceptions.
In July 2019, the federal bank regulatory agencies that adopted the Volcker Rule adopted a final rule to exempt certain
community banks, including Peoples Bank, from the Volcker Rule, consistent with the Economic Growth, Regulatory Relief, and
Consumer Protection Act. Under the final rule, community banks with $10 billion or less in total consolidated assets and total
trading assets and liabilities of 5.0% or less of total consolidated assets were excluded from the restrictions of the Volcker Rule.
On June 25, 2020, the federal bank regulatory agencies also finalized a rule modifying the Volcker Rule’s prohibition on banking
entities investing in or sponsoring covered funds. Such rule permits certain banking entities to offer financial services and engage
in other activities that do not raise concerns that the Volcker Rule was originally intended to address.
To the extent that Peoples Bank engages in any of the trading activities or has any ownership interest in or relationship with
any of the types of funds regulated by the Volcker Rule, Peoples Bank believes that its activities and relationships comply with
such rule, as amended.
Effect of Environmental Regulation
Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings or competitive
position of Peoples and Peoples’ subsidiaries. Peoples believes the nature of the operations of Peoples’ subsidiaries has little, if
any, environmental impact. As a result, Peoples anticipates no material capital expenditures for environmental control facilities
for Peoples’ current fiscal year or for the foreseeable future.
Peoples believes its primary exposure to environmental risk is through the lending activities of Peoples Bank. Peoples limits
its exposure to environmental risk by lending to a diverse range of consumer and commercial customers. In cases where
management believes environmental risk potentially exists, Peoples Bank mitigates its environmental risk exposure by requiring
environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels
posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject
property and adjacent sites. In addition, environmental assessments are typically required prior to any foreclosure activity
involving non-residential real estate collateral.
Future Legislation
Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced
by the U.S. Congress. For example, as a result of the COVID-19 pandemic, the U.S. Congress enacted the CARES Act and other
legislation during 2020 that provided significant funding for PPP loans for businesses and fiscal stimulus funding for individuals,
as well as updates related to reporting for troubled debt restructurings and other various changes. Additionally, there were
sweeping reforms in the Dodd-Frank Act adopted in 2010, and the rollback of the Dodd-Frank Act that began in 2018. Many of
the regulations mentioned above were adopted or amended pursuant to the guidance issued. Such legislation may continue to
change banking statutes and regulations, and the operating environment of Peoples and its subsidiaries in substantial and
unpredictable ways, and such legislation could significantly increase or decrease costs of doing business, limit or expand
permissible activities, and/or affect the competitive balance among financial institutions. The enactment of the Dodd-Frank Act,
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the subsequent rollback and the continuing implementation of final rules and regulations thereunder, makes the nature and extent
of future legislative and regulatory changes affecting financial institutions unpredictable.
Website Access to Peoples’ SEC Filings
Peoples maintains an Internet website at www.peoplesbancorp.com (this uniform resource locator, or URL, is an inactive textual
reference only and is not intended to incorporate Peoples’ Internet website into this Form 10-K). Peoples makes available free of
charge on or through its website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as Peoples’ definitive
proxy statement filed pursuant to Section 14 of the Exchange Act, as soon as reasonably practicable after Peoples electronically files
each such report, amendment or proxy statement with, or furnishes it to, the SEC.
ITEM 1A RISK FACTORS
The following are certain risks that management believes are specific to Peoples’ business. This should not be viewed as an all-
inclusive list of risks or presenting the risk factors listed in any particular order. Additional risks that are not presently known or that
Peoples presently deems to be immaterial could also have a material adverse impact on Peoples’ business, financial condition or
results of operations.
Economic, Political, Environmental and Market Risks
• Changes in economic and political conditions could adversely affect Peoples’ earnings and capital through declines in
deposits, quality of investment securities, loan demand, the ability of Peoples’ borrowers to repay loans and the value of
the collateral securing Peoples’ loans.
Peoples’ success depends, in part, on local and national economic and political conditions, as well as governmental fiscal and
monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, an
increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling, slowing gross
domestic product, tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars, and other factors
beyond Peoples’ control may adversely affect Peoples Bank’s deposit levels and composition, the quality of investment securities
available for purchase, the demand for loans, the ability of Peoples Bank’s borrowers to repay their loans, and the value of the
collateral securing the loans Peoples Bank makes. Disruptions in U.S. and global financial markets and changes in oil production
in the Middle East also affect the economy and stock prices in the U.S., which can affect Peoples’ earnings and capital, as well as
the ability of Peoples Bank’s customers to repay loans.
The local economies of the majority of Peoples’ market areas historically have been less robust than the economy of the
nation as a whole and typically are not subject to the same extent of fluctuations as the national economy. In general, a favorable
business environment and economic conditions are characterized by, among other factors, economic growth, efficient capital
markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or
uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or
business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest
rates; high unemployment; volatility in pricing and availability of natural resources; natural disasters; or a combination of these or
other factors.
The continued impact on economic conditions caused by rising inflation and changes in market interest rates could have an
adverse effect on Peoples’ asset quality, deposit levels and loan demand, and, therefore, Peoples’ financial condition and results of
operations. Because a significant amount of Peoples Bank’s loans are secured by either commercial or residential real estate,
decreases in real estate values could adversely affect the value of property used as collateral and Peoples Bank’s ability to sell the
collateral upon foreclosure.
• Changes in interest rates may adversely affect Peoples’ profitability.
Peoples’ earnings and cash flows are dependent to a significant degree on net interest income, which is the amount by which
interest income exceeds interest expense. Interest rates are highly sensitive to many factors that are beyond Peoples’ control,
including general economic conditions and the policies of various governmental and regulatory agencies and, in particular, the
Federal Reserve Board. Changes in monetary policy, including changes in interest rates, not only could influence the interest
Peoples receives on loans and securities, and the amount of interest Peoples pays on deposits and borrowings, but such changes
could also affect (1) Peoples’ ability to originate loans and obtain deposits, (2) the fair value of Peoples’ financial assets and
liabilities, and (3) the average duration of Peoples’ mortgage-backed securities portfolio. If the interest rates paid on deposits and
borrowings increase at a faster rate than the interest rates received on loans and other investments, Peoples’ net interest income
and, therefore, earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on
loans and other investments fall more quickly than the interest rates paid on deposits and borrowings.
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Changes in interest rates may also negatively affect the ability of Peoples’ borrowers to repay their loans, particularly as
interest rates rise and adjustable-rate loans become more expensive.
Peoples' management uses various measures to monitor interest rate risk and believes it has implemented effective asset and
liability management strategies to reduce the potential effects of changes in interest rates on Peoples’ results of operations.
Peoples’ management also periodically adjusts the mix of assets and liabilities to manage interest rate risk. However, any
substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on Peoples’ financial
condition and results of operations.
Peoples’ net interest income, lending activities, deposits and profitability could be negatively affected by continued rising
interest rates. A prolonged period of extremely volatile and unstable market conditions has the potential to increase Peoples’
funding costs and negatively affect market risk mitigation strategies. Higher revenue volatility from changes in interest rates and
spreads to benchmark indices could cause a loss of future net interest income and a decrease in the fair market values of Peoples’
assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of Peoples’ assets and
liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material
adverse effect on Peoples’ net income, results of operations and financial condition. Peoples cannot predict the nature or timing of
future changes in monetary policies or the precise effects that they may have on Peoples’ activities and financial results.
See the sections captioned “Net Interest Income” and “Interest Rate Sensitivity and Liquidity” in “ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of
this Form 10-K for further discussion related to Peoples’ interest rate risk.
• Changes in market rates and economic conditions could cause the interest rate swaps Peoples Bank has entered into to
become ineffective.
The accounting treatment of the interest rate swaps entered into by Peoples as part of Peoples’ interest rate management
strategy may change if the hedging relationship is not as effective as currently anticipated. These interest rate swaps are
designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for fixed
payments from Peoples. At December 31, 2023, Peoples had eleven effective interest rate swaps, with an aggregate notional value
of $105.0 million, which were designated as cash flow hedges of brokered deposits, and which are expected to be extended every
90 days through the maturity dates of the swaps.
Although Peoples expects that the hedging relationships described above will be highly effective, such relationships could
prove ineffective. At December 31, 2023, the termination value of derivative financial instruments in a net liability position was
$19.1 million, which included accrued interest but excluded any adjustment for nonperformance risk. At December 31, 2023,
Peoples had no collateral posted with its derivative counterparties and the derivative financial counterparties had $12.8 million of
cash pledged and $2.2 million of investment securities pledge. If Peoples had breached any of the provisions of the derivative
financial instruments at December 31, 2023, Peoples could have been required to settle its obligations under the derivative
financial agreements at the termination value.
• Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a
material adverse effect on Peoples’ results of operations and financial condition.
The macroeconomic environment in the U.S. is susceptible to global events and volatility in financial markets. In addition,
trade negotiations between the U.S. and other nations remain uncertain and could adversely impact economic and market
conditions for Peoples and its clients and counterparties. Instability in global economic conditions and geopolitical matters, as
well as volatility in financial markets, could have a material adverse effect on the Peoples’ results of operations and financial
condition.
For example, on February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the
region have occurred and remains likely to continue. In addition, the October 7, 2023 attack by Hamas in Israel has resulted in
prolonged conflict and disruption in the Middle East. Although the length, impact and outcome of the ongoing war in Ukraine and
the conflict in the Middle East are highly unpredictable, these conflicts have resulted, and could continue to result, in significant
market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in
financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences, as
well as increases in cyberattacks and espionage. The extent and duration of the military action, sanctions and resulting market
disruptions could be significant and could potentially have substantial impact on the global economy and Peoples’ business for an
unknown period of time.
• Inflation may have an adverse impact on Peoples’ business and on its customers.
Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government
securities with interest rates below current market interest rates. The U.S. Treasury Department, FDIC and Federal Reserve Board
have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government
securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments. However,
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widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may
exceed the capacity of such program. There is no guarantee that the U.S. Treasury Department, FDIC and Federal Reserve Board
will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they
would do so in a timely fashion. In addition, inflation generally increases the cost of goods and services Peoples uses in its
business operations, such as electricity and other utilities, which increases non-interest expenses. Furthermore, Peoples’ customers
are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have
a negative impact on their ability to repay their loans.
Any of the above-mentioned factors could affect Peoples’ business, financial condition and operating results. Any such
disruptions may also magnify the impact of other risks described in this Form 10-K.
Business Operations Risks
• Peoples is exposed to operational risk.
Similar to any large organization, Peoples is exposed to many types of operational risk, including those discussed in more
detail elsewhere in this Item, such as reputational risk, cybersecurity risk, legal and compliance risk, the risk of fraud or theft by
employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors
or those resulting from faulty or disabled computer or telecommunications systems.
Peoples may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its
control, which may include, for example, computer viruses, cyber-attacks, spikes in transaction volume and/or customer activity,
electrical or telecommunications outages, or natural disasters. Peoples could be adversely affected by operating systems
disruptions if new or upgraded business management systems are defective, not installed properly or not properly integrated into
existing operating systems. Although Peoples has programs in place related to business continuity, disaster recovery and
information security to maintain the confidentiality, integrity and availability of its operating systems, business applications and
customer information, such disruptions may give rise to interruptions in service to customers, loss of data privacy and loss or
liability to Peoples.
Any failure or interruption in Peoples’ operating or information systems, or any security or data breach, could cause
reputational damage, jeopardize the confidentiality of customer information, result in a loss of customer business, subject Peoples
to regulatory intervention or expose Peoples to civil litigation and financial loss or liability, any of which could have a material
adverse effect on Peoples.
Negative public opinion can result from Peoples’ actual or alleged conduct in any number of activities, including lending
practices, corporate governance, acquisitions, social media and other marketing activities, and the implementation of
environmental, social, and governance practices, and from actions taken by governmental regulators and community organizations
in response to any of the foregoing. Negative public opinion could adversely affect Peoples’ ability to attract and keep customers,
could expose Peoples to potential litigation or regulatory action, and could have a material adverse effect on the price of Peoples’
common shares or result in heightened volatility.
Given the volume of transactions Peoples processes, certain errors may be repeated or compounded before they are
discovered and successfully rectified. Peoples’ necessary dependence upon automated systems to record and process its
transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those
systems will result in losses that are difficult to detect, which may give rise to disruption of service to customers and to financial
loss or liability. Peoples is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations
(or will be subject to the same risk of fraud or operational errors by their respective employees as Peoples is) or that Peoples’ (or
its vendors’) consumer compliance business continuity, and data security systems will prove to be inadequate.
Any future restrictions on the access of Peoples’ workforce to its facilities could limit Peoples’ ability to meet customer
service expectations and have a material adverse effect on operations. Peoples relies on business processes and branch activity
that largely depend on people and technology, including access to information technology systems as well as information,
applications, payment systems and other services provided by third parties.
• Failures or material breaches in security of Peoples’ systems and telecommunications networks, or those of a third-party
service provider, may have a material adverse effect on Peoples’ results of operations and financial condition and the price
of Peoples’ common shares.
Peoples collects, processes and stores sensitive consumer data by utilizing computer systems and telecommunications
networks operated by both Peoples and third-party service providers. Peoples’ dependence upon automated systems to record and
process Peoples’ transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those
systems, or attacks by third parties will result in losses and may be difficult to detect. Peoples has security and backup and
recovery systems in place, as well as a business continuity plan, designed to ensure the computer systems will not become
inoperable, to the extent possible. Peoples also routinely reviews documentation of such controls and backups related to third-
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party service providers. Peoples’ inability to use or access these information systems at critical points in time could unfavorably
impact the timeliness and efficiency of Peoples’ business operations.
Information security risks have increased due to the sophistication and activities of organized crime, hackers, terrorists and
other external parties and the use of online, telephone, and mobile banking channels by clients. In recent years, several banks have
experienced denial of service attacks in which individuals or organizations flood the bank’s website with extraordinarily high
volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions. Other businesses have
been victims of ransomware attacks in which the business becomes unable to access the business’ own information and is
presented with a demand to pay a ransom in order to once again have access to the business’ information. Peoples could be
adversely affected if one of its employees or a third-party service provider causes a significant operational break-down or failure,
either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates Peoples’ operations or
systems. Peoples may not be able to prevent employee or third-party errors or misconduct, and the precautions Peoples takes to
detect this type of activity might prove ineffective. Peoples is further exposed to the risk that the third-party service providers may
be unable to fulfill their contractual obligations (or will be subject to the same risks as Peoples is). These disruptions may interfere
with service to Peoples’ customers, cause additional regulatory scrutiny and result in a financial loss or liability.
Any compromise to Peoples’ information security could impair Peoples’ reputation and deter Peoples’ clients from using
Peoples’ banking services. Information security breaches can also disrupt the operation of information systems on which Peoples
and its customers depend, adversely affecting business operations. Such events can result in costly remediation measures and
litigation or governmental investigation and responding to security breaches can place unanticipated demands on the time and
attention of management. Peoples relies on security systems to provide the protection and authentication necessary to secure
transmission of data against damage by theft, fire, power loss, telecommunications failure or similar catastrophic event, as well as
from security breaches, ransomware, denial of service attacks, viruses, worms, and other disruptive problems caused by hackers.
Computer break-ins, phishing and other disruptions of customer or vendor systems could also jeopardize the security of
information stored in and transmitted through Peoples’ computer systems and network infrastructure.
Peoples’ associates also confront the risk of being compromised by emails sent by perpetrators posing as company executives
or vendors in order to dupe Peoples’ personnel into sending large sums of money to accounts controlled by the perpetrators.
Peoples requires all employees to complete annual information security awareness training to increase their awareness of these
risks and to engage them in Peoples’ mitigation efforts. If these precautions are not sufficient to protect Peoples’ systems from
data breaches or compromises, Peoples’ reputation and business could be adversely affected.
In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals
pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. Although Peoples has
policies and procedures in place to verify the authenticity of its customers, Peoples cannot ensure that such policies and
procedures will prevent all fraudulent transfers.
Peoples depends on the services of a variety of third-party vendors to meet data processing and communication needs, and
Peoples has contracted with third parties to run their proprietary software on Peoples’ behalf. While Peoples performs reviews of
security controls instituted by the vendor in accordance with industry standards and institutes Peoples’ own internal security
controls, Peoples relies on continued maintenance of the controls by the outside party to safeguard customer data.
Additionally, Peoples issues debit cards which are susceptible to compromise at the point of sale via the physical terminal
through which transactions are processed and by other means of hacking. The security and integrity of these transactions are
dependent upon the retailers’ vigilance and willingness to invest in technology and upgrades. Issuing debit cards to Peoples’
clients exposes Peoples to potential losses which, in the event of a data breach at one or more major retailers may adversely affect
Peoples’ business, financial condition, and results of operations.
Peoples is also at risk of the impact of natural disasters, terrorism and international hostilities on Peoples’ systems or from the
effects of outages or other failures involving power or communications systems operated by others.
Peoples has implemented security controls to prevent unauthorized access to its computer systems, and Peoples requires that
its third-party service providers maintain similar controls. However, Peoples’ management cannot be certain that these measures
will be successful. A security breach of the computer systems and loss of confidential information, such as customer account
numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business. Peoples could also
lose revenue if competitors gain access to confidential information about Peoples’ business operations and use such confidential
information to compete with Peoples. While Peoples maintains specific “cyber” insurance coverage, which would apply in the
event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber
threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under Peoples’
cyber insurance coverage.
Further, Peoples may be affected by data breaches at retailers and other third parties who participate in data interchanges with
Peoples and its customers that involve the theft of customer credit and debit card data, which may include the theft of Peoples’
consumer and business debit card PIN numbers and commercial card information used to make purchases at such retailers and
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other third parties. Such data breaches could result in Peoples incurring significant expenses to reissue debit cards and cover
losses, which could result in a material adverse effect on Peoples’ operations.
All of the types of cybersecurity incidents discussed above could result in damage to Peoples’ reputation, loss of customer
business, increased costs of incentives to customers or business partners in order to maintain their relationships, litigation,
increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity
(such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and
engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of Peoples’
common shares, all of which could result in financial loss and material adverse effects on Peoples’ results of operations and
financial condition.
• Noncompliance with the BSA and other anti-money laundering statutes and regulations could cause Peoples to incur a
material financial loss.
The BSA and the USA Patriot Act contain anti-money laundering and financial transparency provisions intended to detect
and prevent the use of the U.S. financial system for money laundering and terrorist financing activities. The BSA, as amended by
the USA Patriot Act and the AMLA, requires depository institutions and their holding companies to undertake activities including
maintaining an anti-money laundering program, verifying the identity of clients, monitoring for and reporting suspicious
transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by
regulatory authorities and law enforcement agencies. The Financial Crimes Enforcement Network (also known as FinCEN), a unit
of the U.S. Department of the Treasury that administers the BSA, is authorized to impose significant civil money penalties for
violations of those requirements and has recently engaged in coordinated enforcement efforts with the federal bank regulatory
agencies, as well as the U.S. Department of Justice, the U.S. Drug Enforcement Administration, and the U.S. Internal Revenue
Service. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money
laundering laws, which includes a codified risk-based approach to anti-money laundering compliance for financial institutions;
requires the development of standards for evaluating technology and internal processes for BSA compliance; and expands
enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and
instituting BSA whistleblower incentives and protections.
There is also increased scrutiny of compliance with the rules enforced by OFAC. If Peoples’ policies, procedures, and
systems are deemed deficient, or if the policies, procedures, and systems of the financial institutions that Peoples has already
acquired or may acquire in the future are deficient, Peoples may be subject to liability, including fines and regulatory actions such
as restrictions on Peoples’ ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain
planned business activities, including acquisition plans, which could negatively impact Peoples’ business, financial condition, and
results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing
could also have serious reputational consequences for Peoples.
For a more complete discussion of the BSA, the USA Patriot Act and the AMLA as well as OFAC, see the section captioned
“Supervision and Regulation” in “ITEM 1 BUSINESS” of this Form 10-K.
• Peoples’ business could be adversely affected through events impacting third parties who perform significant operational
services on behalf of Peoples.
The third parties performing operational services for Peoples are subject to risks similar to those faced by Peoples relating to
cybersecurity, breakdowns or failures of their own systems, or misconduct of their employees. Like many other community bank
organizations, Peoples relies, in significant part, on a single vendor for the systems which allow Peoples to provide banking
services to Peoples’ customers, with the systems being maintained on Peoples’ behalf by this single vendor.
One or more of the third parties utilized by Peoples may experience a cybersecurity event or operational disruption and, if
any such event or disruption does occur, it may not be adequately addressed, either operationally or financially, by such third
party. Certain of these third parties may have limited indemnification obligations to Peoples in the event of a cybersecurity event
or operational disruption, or may not have the financial capacity to satisfy their indemnification obligations.
Financial or operational difficulties of a third-party provider could also impair Peoples’ operations if those difficulties
interfere with such third party’s ability to serve Peoples. If a critical third-party provider is unable to meet the needs of Peoples in
a timely manner, or if the services or products provided by such third party are terminated or otherwise delayed, and if Peoples is
not able to develop alternative sources for these services and products quickly and in a cost-effective manner, Peoples’ business
could be materially adversely affected.
Additionally, regulatory guidance adopted by federal and state bank regulators addressing how banks select, engage and
manage their third-party relationships, could affect the circumstances and conditions under which Peoples works with third parties
and the cost of managing such relationships.
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• Peoples’ failure to be in compliance with any material provision or covenant of its debt instruments could have a material
adverse effect on Peoples’ liquidity and operations.
Peoples has a Loan Agreement (the “U.S. Bank Loan Agreement”) with U.S. Bank National Association that provides
Peoples with a revolving line of credit. 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 imposes operating and financial
covenants on Peoples. These restrictions may affect Peoples’ operations and may limit the ability to take advantage of potential
business opportunities as they arise. Peoples’ ability to comply with the covenants contained in the U.S. Bank Loan Agreement
may be affected by events beyond Peoples’ control, including deteriorating economic conditions, and these events could require
Peoples to seek waivers or amendments of such covenants, or alternative sources of financing. Peoples’ ability to obtain such
waivers, amendments or alternative financing, may be on terms unfavorable to Peoples.
A breach of any of the covenants or restrictions contained in any of the existing or future financing agreements, including
financial covenants, could result in an event of default under the agreements. Such a default could allow the lenders under the
financing agreements, if the agreements so provide, to discontinue lending, to accelerate the related debt, and/or to declare all
borrowings outstanding thereunder to be due and payable. In addition, the lenders could terminate any commitments they have to
provide Peoples with further funds. If any of these events occur, Peoples may not have sufficient funds available to pay in full the
total amount of obligations that become due as a result of any such acceleration, or Peoples may not be able to find additional or
alternative financing to refinance any such accelerated obligations. Even if additional or alternative financing is obtained, it may
be on terms that are unfavorable to Peoples.
• Peoples’ exposure to credit risk could adversely affect Peoples’ earnings and financial condition.
There are certain risks inherent in making loans. These risks include interest rate changes over the time period in which loans
are to be repaid, risks resulting from changes in the economy, risks that Peoples will have inaccurate or incomplete information
about borrowers, risks that borrowers will become unable to repay loans, and, in the case of loans secured by collateral, risks
resulting from uncertainties about the future value of the collateral.
Commercial loans comprise a significant portion of Peoples’ loan portfolio. Commercial loans generally are viewed as
having a higher degree of credit risk than residential real estate or consumer loans because commercial loans usually involve
larger loan balances to a single borrower and are more susceptible to a risk of default during an economic downturn. Since
Peoples’ loan portfolio contains a significant number of commercial loans, the deterioration of one or a few of these loans could
cause a significant increase in nonperforming loans, and ultimately could have a material adverse effect on Peoples’ earnings and
financial condition. Peoples may also have credit exposures concentrated in a particular industry, resulting in a risk of a material
adverse effect on earnings or financial condition, if there is an event adversely affecting such industry.
Peoples’ risks of timely loan repayment and the value of collateral supporting the loans are affected by the strength of the
business of Peoples’ commercial borrowers and the financial circumstances of Peoples’ consumer borrowers. Economic
conditions, including high inflation and elevated interest rates, and political climate could cause business shutdowns and
slowdowns, limitations on commercial activity and financial transactions, labor shortages, supply chain interruptions, increased
unemployment and commercial property vacancy rates, reduced profitability and ability for property owners to make mortgage,
auto and other consumer loan payments, overall economic and financial market instability, which may affect individuals,
households and business differently, and decreased consumer confidence generally, all of which may cause Peoples’ customers to
be unable to make scheduled loan payments.
Additional information regarding Peoples’ credit exposure concentration at December 31, 2023 can be found in the section
captioned “Loan Concentration” in “ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS” of this Form 10-K.
• Peoples’ allowance for credit losses may be insufficient to absorb the expected, lifetime losses in its loan portfolio.
Peoples maintains an allowance for credit losses that is believed to be a reasonable estimate of the expected losses based on
management’s quarterly analysis of its loan portfolio. The determination of the allowance for credit losses requires management
to make various assumptions and judgments about the collectability of Peoples’ loans, including the creditworthiness of its
borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. Additional information
regarding Peoples’ allowance for credit losses methodology and the sensitivity of the estimates can be found in the discussion of
“Critical Accounting Policies” included in “ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS” of this Form 10-K.
Peoples’ estimation of future credit losses is susceptible to changes in economic, operating and other conditions, including
changes in regulations and interest rates, which may be beyond Peoples’ control, and the losses may exceed current estimates.
Peoples cannot be assured of the amount or timing of losses, nor whether the allowance for credit losses will be adequate in the
future.
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If Peoples’ assumptions prove to be incorrect, Peoples’ allowance for credit losses may not be sufficient to cover the expected
losses from its loan portfolio, resulting in the need for additions to the allowance for credit losses which could have a material
adverse impact on Peoples’ financial condition and results of operations. In addition, bank regulators periodically review Peoples’
allowance for credit losses as part of their examination process and may require management to increase the allowance or
recognize further loan charge-offs based on judgments different than those of management.
On June 16, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
2016-13 “Financial Instruments – Credit Losses”, which replaced the incurred loss model with the CECL model, an expected loss
model, and Peoples adopted this guidance in 2020. Under the CECL model, Peoples is required to use historical information,
current conditions and reasonable and supportable forecasts to estimate the expected credit losses. If the methodologies and
assumptions used by Peoples in the CECL model prove to be incorrect, or inadequate, the allowance for credit losses may not be
sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse
impact on Peoples’ financial condition and results of operations. Additionally, the time horizon over which Peoples is required to
estimate future credit losses expanded under CECL, which could result in increased volatility in future provisions for credit
losses. Peoples may also experience a higher or more volatile provision for credit losses due to higher levels of nonperforming
loans and net charge-offs if commercial and consumer customers are unable to make scheduled loan payments.
• Peoples’ accounting estimates and risk management processes rely on analytical and forecasting models.
The processes Peoples uses to estimate its expected credit losses and to measure the fair value of financial instruments, as
well as the processes used to estimate the effects of changing interest rates and other market measures on Peoples’ financial
condition and results of operations, depend upon the use of analytical and, in some cases, forecasting models. These models
reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if
these assumptions are accurate, the model may prove to be inadequate or inaccurate because of other flaws in their design or their
implementation. If the model Peoples uses for interest rate risk and asset-liability management is inadequate, Peoples may incur
increased or unexpected losses upon changes in market interest rates or other market measures. If the model used by Peoples for
determining its expected credit losses is inadequate, the allowance for credit losses may not be sufficient to support future charge-
offs. If the model used by Peoples to measure the fair value of financial instruments is inadequate, the fair value of such financial
instruments may fluctuate unexpectedly or may not accurately reflect what Peoples could realize upon sale or settlement of such
financial instruments. Any such failure in Peoples’ analytical or forecasting models could have a material adverse effect on
Peoples’ business, financial condition and results of operations.
• Peoples and Peoples Bank may elect or be compelled to seek additional capital in the future, but such capital may not be
available when needed.
Peoples and Peoples Bank are required by federal and state regulatory authorities to maintain adequate levels of capital to
support their operations. Federal bank regulators have adopted extensive changes to their capital requirements, including raising
required amounts and eliminating the inclusion of certain instruments from the calculation of capital. If Peoples Bank experiences
significant losses, additional capital may be needed. In addition, Peoples and Peoples Bank may elect to raise additional capital to
support the businesses or to finance acquisitions, if any, or for other unanticipated reasons. The ability to raise additional capital,
if needed, will depend on financial performance, conditions in the capital markets, economic conditions and a number of other
factors, many of which are outside of Peoples’ control. Therefore, there can be no assurance that additional capital will be
available or that additional capital will be available on acceptable terms. The inability to raise additional capital may have a
material adverse effect on Peoples’ financial condition, results of operations or potential acquisitions.
• Peoples and Peoples Bank operate in a highly regulated industry, and the laws and regulations that govern Peoples’
operations, corporate governance, executive compensation, financial accounting and financial reporting, including
changes in, or failure to comply with, such laws and regulations may adversely affect Peoples.
The banking industry is highly regulated. Peoples is subject to supervision, regulation and examination by various federal and
state regulators, including the Federal Reserve Board, the SEC, the CFPB, the FDIC, Financial Industry Regulatory Authority,
Inc. (also known as FINRA), and various state regulatory agencies. The statutory and regulatory framework that governs Peoples
is generally designed to protect depositors and customers, the DIF, the U.S. banking and financial system, and financial markets
as a whole and not to protect Peoples’ shareholders. These laws and regulations, among other matters, prescribe minimum capital
requirements, restrict the ability of Peoples Bank to guarantee Peoples’ debt, and impose limitations on Peoples Bank’s business
activities (including foreclosure and collection practices), limit the dividends or distributions that Peoples Bank can pay, and
impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to
earnings or reductions in capital than would otherwise be required under U.S. generally accepted accounting principles (“US
GAAP”). Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose
additional compliance costs. Both the scope of the laws and regulations, and the intensity of the supervision to which Peoples is
subject, have increased in recent years in response to the perceived state of the financial services industry, as well as other factors
such as technological and market changes. Such regulation and supervision may increase Peoples’ costs and limit its ability to
pursue business opportunities. Further, Peoples’ failure to comply with these laws and regulations, even if the failure was
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inadvertent or reflects a difference in interpretation, could subject Peoples to restrictions on business activities, fines, and other
penalties, any of which could adversely affect the results of operations, the capital base, and the price of Peoples’ common shares.
Further, any new laws, rules, or regulations could make compliance more difficult or expensive or otherwise adversely affect
Peoples’ business and financial condition.
• Peoples may not be able to adapt to technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new
technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to
better serve customers while reducing costs. Peoples’ future success depends, in part, upon its ability to address customer needs
by using technology to provide products and services that will satisfy customer demands, as well as to create additional
efficiencies in its operations. This could include the development, implementation, and adaptation of digital or cryptocurrency,
blockchain, and other “fintech” technology. Peoples may not be able to effectively implement new technology-driven products
and services or be successful in marketing these products and services to Peoples’ customers. Failure to successfully keep pace
with technological changes affecting the financial services industry could negatively affect Peoples’ growth, revenue and net
income.
• Peoples may not be able to attract and retain key employees.
Peoples’ success depends, in large part, on its ability to attract, retain, motivate and develop key employees. Competition for
key employees is ongoing and Peoples may not be able to attract, retain or hire the key employees who are wanted or needed,
which may also negatively impact Peoples’ ability to execute identified business strategies. Many of Peoples’ offices are located
in rural areas, resulting in the possible need for Peoples to offer higher compensation equal to or greater than what is offered in
metropolitan areas to attract or retain key employees, which may adversely affect salaries and employee benefit costs.
Various restrictions on the compensation which may be paid to certain executive officers were imposed under the Dodd-
Frank Act and other legislation and regulations. In addition, Peoples’ incentive compensation structure is subject to review by
regulators, who may identify deficiencies in the structure or issue additional guidance on Peoples’ compensation practices,
causing Peoples to make changes that may affect its ability to offer competitive compensation to these individuals or that place
Peoples at a disadvantage to non-financial service competitors. Peoples’ ability to attract and retain talented employees may be
affected by these restrictions, or any new executive compensation limits or regulations.
• Peoples’ ability to pay dividends is limited, and Peoples may not be in the position to pay dividends in the future.
Although Peoples has paid dividends on its common shares in the past, Peoples may, at the discretion of Peoples’ Board of
Directors, reduce or eliminate dividends in the future, for any reason, including a determination to use funds for other purposes, or
due to regulatory constraints. Peoples is a separate and distinct legal entity from Peoples’ subsidiaries. Peoples receives nearly all
of its liquidity from dividends from Peoples Bank, which are limited by federal and state banking laws and regulations. These
dividends also serve as the primary source of funds to pay dividends on Peoples’ common shares. The inability of Peoples Bank
to pay sufficient dividends to Peoples could have a material, adverse effect on its business. Further discussion of Peoples’ ability
to pay dividends can be found under the caption “Supervision and Regulation – Dividend Restrictions” in “ITEM 1 BUSINESS”
of this Form 10-K and “Note 17 Regulatory Matters.”
• Peoples depends upon the accuracy and completeness of information about customers and counterparties.
In deciding whether to extend credit or enter into other transactions with customers and counterparties, Peoples may rely on
information provided by customers and counterparties, including financial statements and other financial information. Peoples
may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and,
with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to a
business, Peoples Bank may assume that the customer’s audited financial statements conform with US GAAP and present fairly,
in all material respects, the financial condition, results of operations and cash flows of the customer. Peoples Bank may also rely
on the audit report covering those financial statements. Peoples’ financial condition, results of operations and cash flows could be
negatively impacted to the extent that Peoples Bank relies on financial statements that do not comply with US GAAP or on
financial statements and other financial information that are materially misleading.
• Peoples Bank may be required to repurchase loans it has sold or to indemnify loan purchasers under the terms of the sale
agreements, which could adversely affect Peoples’ liquidity, results of operations and financial condition.
When Peoples Bank sells a mortgage loan, it may agree to repurchase or substitute a mortgage loan if Peoples Bank is later
found to have breached any representation or warranty Peoples Bank made about the loan or if the borrower is later found to have
committed fraud in connection with the origination of the loan. While Peoples Bank has underwriting policies and procedures
designed to avoid breaches of representations and warranties and borrower fraud, there can be no assurance that a breach or fraud
will not occur. Required repurchases, substitutions or indemnifications could have an adverse effect on Peoples’ liquidity, results
of operations and financial condition.
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• Peoples and its subsidiaries are subject to examinations and challenges by tax authorities.
In the normal course of business, Peoples and its subsidiaries are routinely subject to examinations and challenges from
federal and state tax authorities regarding positions taken regarding their respective tax returns. State tax authorities have become
increasingly aggressive in challenging tax positions taken by financial institutions, especially those positions relating to tax
compliance and calculation of taxes subject to apportionment. Any challenge or examination by a tax authority may result in
adjustments to the timing or amount of taxable net worth or taxable income, or deductions or the allocation of income among tax
jurisdictions.
Management believes it has taken appropriate positions with respect to all tax returns and does not anticipate that any
examination would have a material impact on Peoples’ Consolidated Financial Statements. However, the outcome of any such
examination and the ultimate resolution of any resulting assessments are inherently difficult to predict. Thus, no assurance can be
given that Peoples’ tax liability for any tax year open to examination will be as reflected in Peoples’ current and historical
Consolidated Financial Statements.
• Peoples could experience an unexpected inability to obtain needed liquidity which could adversely affect its business,
profitability, and viability as a going concern.
Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial
institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of
interest rate market opportunities and is essential to a financial institution’s business. The ability of a financial institution to meet
its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets, and its access to
alternative sources of funds. The bank failures in 2023 exemplify the potential serious results of the unexpected inability of
insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such
requests can accelerate once uninsured depositors lose confidence in an institution’s ability to satisfy its obligations to depositors.
Peoples seeks to ensure its funding needs are met by maintaining a level of liquidity through asset and liability management. If
Peoples becomes unable to obtain funds when needed, it could have a material adverse effect on Peoples’ business, financial
condition, and results of operations.
Legislative, Regulatory and Tax Change Risks
• Legislative or regulatory changes or actions could adversely impact Peoples or the businesses in which it is engaged.
The financial services industry is heavily regulated under both federal and state law. Peoples is subject to regulation and
supervision by the Federal Reserve Board, and Peoples Bank is subject to regulation and supervision by the ODFI, the Federal
Reserve Board, and the FDIC, and the regulations of the CFPB. These regulations are primarily intended to protect depositors and
the DIF, not Peoples’ shareholders. Peoples’ non-bank subsidiaries are also subject to the supervision of the Federal Reserve
Board, in addition to other regulatory and self-regulatory agencies, including the SEC, and state securities and insurance
regulators.
Regulations affecting banks and financial services businesses are undergoing continuous change, and Peoples’ management
cannot predict the effect of those changes. While such changes are generally intended to lessen the regulatory burden on financial
institutions, the impact of any changes to laws and regulations or other actions by regulatory agencies could adversely affect
Peoples’ business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement
activities, including the imposition of restrictions on the operation of an institution, the classification of assets held by an
institution, the appropriateness of an institution’s allowance for credit losses and the ability to complete acquisitions. Additionally,
actions by regulatory agencies or significant litigation against Peoples could cause Peoples to devote significant time and
resources to defending its business and may lead to penalties that materially affect Peoples and its shareholders. Even the
reduction of regulatory restrictions could have an adverse effect on Peoples and its shareholders if such lessening of restrictions
increases competition within the financial services industry or Peoples’ market area.
Further information about government regulation of Peoples’ business can be found under the caption “Supervision and
Regulation” in “ITEM 1 BUSINESS” of this Form 10-K.
• Changes in accounting standards, policies, estimates or procedures may impact Peoples’ reported financial condition or
results of operations.
The entities responsible for setting accounting standards, including the FASB, the SEC and other regulatory bodies,
periodically change the financial accounting and reporting standards that govern the preparation of Peoples’ Consolidated
Financial Statements. The pace of change continues to accelerate and changes in accounting standards can be difficult to predict
and can materially impact how Peoples records and reports its financial condition and results of operations. In some cases,
Peoples could be required to apply a new or revised guidance retroactively, resulting in the restatement of prior period financial
statements.
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The preparation of consolidated financial statements in conformity with US GAAP requires management to make significant
estimates that affect the financial statements. Due to the inherent nature of these estimates, actual results may vary materially from
management’s estimates. Additional information regarding Peoples’ critical accounting policies and the sensitivity of estimates
can be found in the section captioned “Critical Accounting Policies” in “ITEM 7 MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and “Note 1 Summary of Significant
Accounting Policies” of this Form 10-K.
• Regulatory capital standards may have an adverse effect on its profitability, lending, and ability to pay dividends.
Peoples is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types
of capital that Peoples must maintain. From time to time, regulators implement changes to these regulatory capital adequacy
guidelines. If Peoples fail to meet these minimum capital guidelines and/or other regulatory requirements, its financial condition
would be materially and adversely affected. The Basel III capital framework requires Peoples to maintain significantly more
capital as a result of higher required capital levels and more demanding regulatory capital risk weightings and calculations.
Satisfying capital requirements may require Peoples to limit its banking operations, retain net income or reduce dividends to
improve regulatory capital levels, which could negatively affect its business, financial condition and results of operations.
• Increases in FDIC insurance premiums may have a material adverse effect on Peoples’ earnings.
Peoples Bank has limited ability to control the amount of premiums it is required to pay for FDIC insurance. The DIF is
funded by fees assessed on insured depository institutions, such as Peoples Bank. If the costs of future bank failures increase,
deposit insurance premiums may also increase. Increases in FDIC insurance premiums may have a material adverse effect on
Peoples’ results of operations and ability to continue to pay dividends on its common shares at the current rate or at all.
On November 16, 2023, the FDIC Board adopted a final rule implementing a special assessment to recover the loss to the
DIF arising from the protection of uninsured depositors following the failures of Silicon Valley Bank and Signature Bank. The
assessment base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits reported for
the quarter ended December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits. The FDIC will
collect the special assessment at an annual rate of approximately 13.4 basis points, over eight quarterly assessment periods,
beginning with the first quarter of 2024. Because Peoples Bank’s uninsured deposits were less than $5 billion for the quarter
ended December 31, 2022, Peoples Bank will not be subject to this special assessment. However, there can be no assurance that
assessments may not be changed in the future and/or that additional special assessments may not be imposed in the future by the
FDIC, either in response to additional bank failures or otherwise, that could increase the amount of premiums required to be paid
to the FDIC by Peoples Bank. Federal deposit insurance is described in more detail in the section captioned “Supervision and
Regulation” in “ITEM 1 BUSINESS” of this Form 10-K.
Strategic Risks
• Peoples’ ability to complete acquisitions and integrate completed acquisitions may be unsuccessful or more difficult, time-
consuming or costly than expected, which could have an adverse effect on Peoples’ business, earnings and financial
condition.
Peoples actively evaluates opportunities to acquire other businesses. However, Peoples may not have the opportunity to make
suitable acquisitions on favorable terms in the future, which could negatively impact the growth of its business. Peoples expects
that other banking and financial companies, many of which have significantly greater resources, will compete to acquire
compatible businesses. This competition could increase prices for acquisitions that Peoples would likely pursue, and its
competitors may have greater resources to pay such acquisition prices. In addition, acquisitions of regulated businesses, such as
banks, are subject to various regulatory approvals. If Peoples fails to receive the appropriate regulatory approvals, it will not be
able to consummate an acquisition that it believes is in its best interest.
Peoples may not be able to integrate new acquisitions without encountering difficulties, including the loss of key employees
and customers, the disruption of ongoing businesses or possible inconsistencies in standards, controls, procedures and policies.
Peoples may not be able to fully achieve the strategic objectives and operating efficiencies anticipated in the acquisitions it
completes. Future acquisitions may also result in other unforeseen difficulties, including in the integration of the combined
companies. Further, benefits such as enhanced earnings anticipated from the acquisitions may not develop and future results of the
combined companies may be materially below those estimated. In addition, Peoples may issue equity securities in connection with
acquisitions, which could dilute the economic and voting interests of Peoples’ shareholders. Recent changes in the stock price of
financial institutions could impact the valuation of potential target companies and, therefore, Peoples’ ability to compete for
acquisitions.
30
• Changes in retail distribution strategies and consumer behavior may adversely impact Peoples’ investments in its financial
service office premises and equipment and other assets, and may lead to increased expenditures to change its retail
distribution channel.
Peoples has significant investments in financial service office premises and equipment for its financial service office network,
including 20 financial service offices, consisting of LPOs and limited service locations, as well as its retail work force and other
financial service office banking assets. Advances in technology such as e-commerce, telephone, internet and mobile banking, and
in-branch self-service technologies including ATMs, ITMs, and other equipment, as well as changing customer preferences for
these other methods of accessing Peoples’ products and services, could affect the value of Peoples’ financial service office
network or other retail distribution assets and may cause Peoples to change its retail distribution strategy, close and/or sell certain
financial service offices and restructure or reduce its remaining financial service offices and work force. Further advances in
technology and/or changes in customer preferences including those related to social media, digital or cryptocurrency, blockchain
and other “fintech” technologies could result in additional changes in Peoples’ retail distribution strategy and/or financial service
office network. These actions could lead to losses on these assets or could adversely impact the carrying value of other long-lived
assets and may lead to increased expenditures to renovate and reconfigure remaining financial service offices or to otherwise
reform Peoples’ retail distribution channel.
• Anti-takeover provisions may delay or prevent an acquisition or change in control by a third party.
Provisions in the Ohio General Corporation Law, Peoples’ Amended Articles of Incorporation and Peoples’ Code of
Regulations, including a supermajority vote requirement for significant corporate changes, could discourage potential takeover
attempts and make attempts by shareholders to remove Peoples’ Board of Directors and management more difficult. These
provisions may also have the effect of delaying or preventing a transaction or change in control that might be in the best interests
of Peoples’ shareholders.
General Risks
• Adverse changes in the financial markets may adversely impact Peoples’ results of operations.
While Peoples generally invests in securities issued by U.S. government agencies and sponsored entities and domestic state
and local governments with limited credit risk, certain investment securities held by Peoples possess higher credit risk since they
represent beneficial interests in structured investments collateralized by residential mortgages, debt obligations and other similar
asset-backed assets. Even securities issued by governmental agencies and sponsored entities may entail risk depending on political
and economic changes. Regardless of the level of credit risk, all investment securities are subject to changes in market value due
to changing interest rates, implied credit spreads and credit ratings.
• Peoples is subject to environmental liability risk associated with lending activities.
A significant portion of Peoples’ loan portfolio is secured by real property. During the ordinary course of business, Peoples
forecloses on and takes title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances
could be found on these properties. If hazardous or toxic substances are found, Peoples may be liable for remediation costs, as
well as for personal injury and property damage. Environmental laws and evolving regulation may require Peoples to incur
substantial expenses and may materially reduce the affected property’s value or limit Peoples’ ability to use or sell the affected
property. In addition, future laws and regulations or more stringent interpretations or enforcement policies with respect to existing
laws or regulations may increase Peoples’ exposure to environmental liability. Environmental reviews of real property before
initiating foreclosure actions may not be sufficient to detect all potential environmental hazards. The remediation costs and any
other financial liabilities associated with an environmental hazard could have a material adverse effect on Peoples’ business,
financial condition and results of operations.
• The value of Peoples’ goodwill and other intangible assets may decline in the future.
A significant decline in expected future cash flows, a significant adverse change in the business climate, slower growth rates
or a significant and sustained decline in the price of Peoples’ common shares may necessitate taking charges in the future related
to the impairment of goodwill and other intangible assets. If Peoples were to conclude that a future write-down of goodwill and
other intangible assets is necessary, the appropriate charge will be recorded, which could have a material adverse effect on
Peoples’ business, financial condition and results of operations.
• Peoples is at risk of increased losses from fraud.
Criminals are committing fraud at an increasing rate and are using more sophisticated techniques. In some cases, these
individuals are part of larger criminal rings, which allow them to be more effective. Such fraudulent activity has taken many
forms, ranging from wire fraud, debit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering
and phishing attacks to obtain personal information, or impersonation of clients through the use of falsified or stolen credentials.
Additionally, an individual or business entity may properly identify itself, yet seek to establish a business relationship for the
purpose of perpetrating fraud. An emerging type of fraud even involves the creation of synthetic identification in which fraudsters
31
“create” individuals for the purpose of perpetrating fraud. In addition to fraud committed directly against Peoples, Peoples may
suffer losses as a result of fraudulent activity committed against third parties. Increased deployment of technologies, such as chip
card technology, defray and reduce certain aspects of fraud; however, criminals are turning to other sources to steal personally
identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate consumers and
thereby commit fraud.
• Peoples may not be able to remain competitive.
Peoples experiences significant competition in originating loans, obtaining deposits, and maintaining and growing insurance
and trust customers, principally from other commercial banks, savings associations, credit unions, trust and brokerage companies,
insurance agencies, fintechs and online service providers. Several of Peoples’ competitors have greater resources, larger branch
systems and wider arrays of banking and non-banking services. This competition could reduce Peoples’ net income by decreasing
the number and size of loans that Peoples originates and the interest rates it can charge on these loans. Moreover, technology and
other changes are allowing businesses and individuals to utilize alternative methods to complete financial transactions that
historically have involved banks. For example, consumers can now maintain funds that have historically been held as bank
deposits in brokerage accounts, mutual funds, or high yield savings accounts with online banks. Consumers can also complete
transactions such as paying bills and/or transferring funds directly without the assistance of banks. Digital or cryptocurrencies,
blockchain, and other “fintech” technologies are designed to enhance transactional security and have the potential to disrupt the
financial industry, change the way banks do business, and reduce the need for banks as financial deposit-keepers and
intermediaries. The process of eliminating the use of banks to complete financial transactions could result in the loss of fee
income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue
streams and lower cost deposits as a source of funding could have a material adverse effect on Peoples’ financial condition and
results of operations. If Peoples is unable to compete effectively, Peoples will lose market share, which could reduce income
generated from deposits, loans and other products. For a more complete discussion of Peoples’ competitive environment, see the
section captioned “Competition” in “ITEM 1 BUSINESS” of this Form 10-K.
• Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect
to Peoples’ environmental, social and governance practices may impose additional costs on Peoples or expose Peoples to
new or additional risks.
Financial institutions are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to
their environmental, social, and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds, and
influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and
safety, diversity, labor conditions, and human rights. Increased ESG-related compliance costs for Peoples as well as among its
suppliers, vendors and various other parties within its supply chain could result in increases to its overall operational costs. Failure
to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact
its reputation, ability to do business with certain partners, access to capital, and the price of its common shares. New government
regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting,
diligence, and disclosure.
• Climate change, severe weather, natural disasters, acts of war or terrorism, the emergence of a pandemic and other
adverse external events could significantly impact Peoples’ business.
Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or
terrorism, pandemics or concern about a possible pandemic, and other adverse external events could have a significant impact on
Peoples’ ability to conduct business or upon third parties who perform operational services for Peoples or its customers. Such
events could affect the stability of Peoples’ deposit base, impair the ability of borrowers to repay outstanding loans, impair the
value of collateral securing loans, cause significant property damage, disrupt the infrastructure that supports Peoples’ business and
the communities Peoples is located in, negatively impact financial markets and interest rates, result in lost revenue or cause
Peoples to incur additional expenses.
• Peoples or one of its subsidiaries may be a defendant from time to time in a variety of litigation and other actions, which
could have a material adverse effect on Peoples’ financial condition, results of operations and cash flows.
Peoples and its subsidiaries may be involved from time to time in a variety of litigation arising out of each entity’s respective
business. The risk of litigation increases in times of increased troubled loan collection activity. Peoples’ insurance may not cover
all claims that may be asserted against Peoples and its subsidiaries, and any claims asserted against them, regardless of merit or
eventual outcome, may harm their respective reputations. Should the ultimate judgments or settlements in any litigation exceed
the applicable insurance coverage, they could have a material adverse effect on Peoples’ financial condition, results of operations
and cash flows. In addition, Peoples or one of its subsidiaries may not be able to obtain appropriate types or levels of insurance in
the future or to obtain adequate replacement policies with acceptable terms.
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• The impact of larger or similar-sized financial institutions encountering problems may adversely affect Peoples’ business,
earnings and financial condition.
Many financial institutions and their related operations are closely intertwined, and the soundness of such financial
institutions may, to some degree, be interdependent. As a result, concerns about, or a default or threatened default by, one
financial institution could lead to significant market-wide liquidity and credit problems and/or losses or defaults by other financial
institutions. This “systemic risk” may adversely affect Peoples’ business.
Peoples is exposed to the risk that when a peer financial institution experiences financial difficulties, there could be an
adverse impact on the regional banking industry and the business environment in which Peoples operates. The bank failures of
Silicon Valley Bank in California, Signature Bank in New York, First Republic Bank in California, and Heartland Tri-State Bank
in Kansas during 2023 caused a degree of panic and uncertainty in the investor community and among bank customers generally.
While Peoples does not believe that the circumstances of these four banks’ failures are indicators of broader issues with the
banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory
requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the banking
industry, including Peoples. Peoples will continue to monitor the ongoing events concerning these four banks as well as any
future potential bank failures and volatility within the banking industry generally, together with any responsive measures taken by
the banking regulators to mitigate or manage potential turmoil in the banking industry.
Additionally, Peoples’ investment portfolio continues to include a limited amount of investments in individual bank-issued
trust preferred securities. Under current market conditions, the fair value of these security types is based predominately on the
present value of cash flows expected to be received in the future. Significant defaults by other financial institutions could
adversely affect conditions within the financial services industry, thereby causing investors to require higher rates of return for
these investments. These factors could cause Peoples to recognize impairment losses on its investment in bank-issued trust
preferred securities in future periods.
• Economic and other conditions may cause volatility in the price of Peoples’ common shares.
The price of Peoples’ common shares can fluctuate widely in response to a variety of factors, including: actual or anticipated
variations in the Peoples’ quarterly operating results; recommendations by securities analysts; significant acquisitions or business
combinations; strategic partnerships, joint ventures or capital commitments; operating and stock price performance of other
companies that investors deem comparable to Peoples; new technology used or services offered by Peoples’ competitors; news
reports relating to trends, concerns and other issues in the banking and financial services industry; and changes in government
regulations. General market fluctuations, industry factors and general economic and political conditions and external events,
including terrorist attacks, increased inflation, economic slowdowns or recessions, interest rate changes, credit loss trends or
currency fluctuations, could also cause the price of Peoples’ common shares to decrease, regardless of Peoples’ operating results.
• Changes in tax laws could adversely affect Peoples’ performance.
Peoples is subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise,
withholding and ad valorem taxes. Changes to tax laws could have a material adverse effect on Peoples’ results of operations, fair
values of net deferred tax assets and obligations of states and political subdivisions held in Peoples’ investment securities
portfolio. In addition, Peoples’ customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by
Peoples’ customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their
demand for loans and deposit products. In addition, such negative effects on Peoples’ customers could result in defaults on the
loans made by Peoples Bank and decrease the value of mortgage-backed securities in which Peoples has invested.
ITEM 1B UNRESOLVED STAFF COMMENTS
None.
ITEM 1C CYBERSECURITY
Risk Management and Strategy
Peoples has a comprehensive Enterprise Risk Management program (“ERM Program”), which includes policies and processes for
assessing, identifying and managing material risks from cybersecurity threats to Peoples and its customers. Peoples’ information
security policy and procedures are reviewed and assessed on an annual basis and as needed throughout the year by the Risk Committee
of the Board. Peoples assesses itself against the Federal Financial Institutions Examination Council’s (“FFIEC”) Cybersecurity
Assessment Tool (“CAT”) on a quarterly basis. Additional assessment of Peoples’ cybersecurity capabilities is performed by
consultants, and regulators annually. Identified risks resulting from these assessments are documented, rated and mitigated by Peoples
Bank’s Chief Information Security Officer (“CISO”), with oversight by the Risk Committee.
Peoples also has a third-party risk management program pursuant to which Peoples performs annual reviews of third-party
vendors as to their cybersecurity and business continuity capabilities to ensure they meet the stated requirements and the risk appetite
of Peoples as documented in Peoples’ information security policy. Vendors not meeting Peoples’ risk requirements are notified of
33
necessary improvements and, if the vendors cannot mitigate the identified risks, Peoples looks to identify alternative vendors.
Documentation of performance of the third-party risk assessments is retained and acknowledged by appropriate Risk and Information
Security employees of Peoples.
Roles and Responsibilities
Peoples’ Board of Directors provides oversight of risks from cybersecurity threats primarily through the Risk Committee of the
Board. The Risk Committee is comprised of all of the independent directors of the Board, along with Peoples’ Chief Executive Officer
(“CEO”), and is responsible for oversight of Peoples’ risk management policies, programs and processes. The Risk Committee is
organized and conducts its business pursuant to a written charter adopted by the Board. At least annually, the Risk Committee reviews
and reassesses the adequacy of its charter and recommends any proposed changes to the full Board as necessary to reflect changes in
regulatory requirements, authoritative guidance and evolving practices. The Risk Committee provides a report to the entire Board at
each meeting of the Board of Directors regarding the overall risk condition of the firm and whether Peoples risk remain within its
stated risk appetite.
Peoples’ Chief Risk Officer (“CRO”) reports to the Risk Committee and the Chief Operating Officer and has primary
responsibility for the design and implementation of the ERM Program. The ERM Program establishes Peoples’ risk appetite, monitors
key risk and performance indicators, identifies key risks within the firm, designs and executes specific risk initiatives and monitors
risk mitigation efforts and control processes. The CRO updates the Risk Committee quarterly on the overall risk condition of Peoples
inclusive of any cybersecurity issues or threats.
Peoples Bank also has an executive governance structure which includes the Capital and Risk Management Committee
(“CRMC”). The CRMC, which is comprised of individuals representing each of the functional areas of Peoples and its subsidiaries,
meets monthly and is responsible for the review of risk issues faced by Peoples, including material risks from cybersecurity threats.
Summaries of the topics and discussions at CRMC meetings are provided to the Risk Committee along with an overview and
recommendations regarding key risks and mitigating actions.
The CISO has primary responsibility for assessing and responding to material risks from cybersecurity threats. The current CISO
is an experienced Information Security and Information Technology officer with 21 years of experience in Information Security and
Information Technology and a master’s degree in business administration. The CISO is also a Certified Information Systems Security
Professional (“CISSP”), which is an industry recognized certification that recognizes cybersecurity professionals with the knowledge,
skills and abilities to lead an organization’s information security program. On a quarterly basis, the CISO updates the Risk Committee
on the state of cybersecurity and potential risks to Peoples’ to be considered by the Risk Committee.
Assessment and Response to Cybersecurity Threats
Peoples employs an in-depth, layered, defensive approach that leverages people, processes, and encryption and multi-factor
authentication technology to manage and mitigate cybersecurity threats. Peoples employs a variety of preventative and detective tools
to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.
Peoples and the CISO leverage several technologies and a third-party Managed Security Service Provider to monitor and respond to
cybersecurity threats. In the event that the CISO assesses a material risk from a potential cybersecurity threat, the CISO immediately
notifies and works with Peoples’ Crisis Management Team, which includes Peoples’ General Counsel, to appropriately respond and
mitigate the threat. If necessary, third-party resources will be engaged, with the support of Peoples’ cyber insurance provider, to
mitigate the cybersecurity threat, perform forensic activities and distribute appropriate notifications to impacted parties and/or
regulators. In the event a material cybersecurity incident occurs that requires notification to the Board of Directors, the General
Counsel and CEO will coordinate notifications to the Board of Directors and provide updates to the Board of Directors as needed.
While Peoples has implemented security controls and processes to mitigate against cybersecurity threats, Peoples cannot be
certain that these measures will be successful. The threat from cybersecurity attacks is severe, attacks are sophisticated and increasing
in volume, and attackers respond rapidly to changes in defensive measures. While to date, Peoples has not detected a significant
compromise, significant data loss or any material financial losses related to cybersecurity attacks, Peoples’ systems and those of its
customers and third-party service providers are under constant threat and it is possible that Peoples could experience a significant
event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to
the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking
and other technology-based products and services by Peoples and Peoples' customers. Any breach, compromise or disruption of its
information security or systems as a result of a cybersecurity incident or threat could result in damage to Peoples’ reputation, loss of
customer business, increased costs of incentives to customers or business partners in order to maintain their relationships, litigation,
increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity
(such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and
engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of Peoples’ common
shares, all of which could result in financial loss and material adverse effects on Peoples’ results of operations and financial condition.
34
ITEM 2 PROPERTIES
Peoples’ sole banking subsidiary, Peoples Bank, generally owns its offices, related facilities and unimproved real property. At
December 31, 2023, Peoples Bank operated 67 offices in Ohio, 42 offices in Kentucky, 27 offices in West Virginia, three offices in
Washington D.C, two offices in Virginia., one office in Maryland, an insurance premium finance lending office in Missouri, and an
equipment leasing office in Vermont. Of these 144 offices, 34 are leased and the rest are owned by Peoples Bank.
Peoples Bank’s subsidiary, Peoples Insurance, rents office space in various Peoples Bank offices, and also leases office space
from third parties in Inez and Pikeville, Kentucky. Peoples Bank’s subsidiary, Vantage, rents office space in Excelsior, Minnesota,
Cherry Hill, New Jersey, Holmdel, New Jersey, Austin, Texas, Grafton, Wisconsin, and Guilford, Connecticut.
Rent expense on the leased properties totaled $3.3 million in both 2023 and 2022, which excludes intercompany rent expense. The
following properties have a lease term expiring on or before June 2024:
Location
Athens - State Street
Guilford (Vantage)
Lancaster Fair Ave
North Canton LPO
Worthington LPO
Address
Lease Expiration Date
801 East State Street, Athens, Ohio
June 2024 (a)
87 Whitfeld St, Guilford, Connecticut
March 2024 (b)
2211 West Fair Avenue, Lancaster, Ohio April 2024 (a)
125 S. Main Street, North Canton, Ohio
250 E. Wilson Bridge Rd., Suite 230,
Worthington, Ohio
June 2024 (b)
March 2024 (a)
(a) Current lease agreement has no remaining extensions available.
(b) Current lease agreement has one one-year extension remaining.
Peoples considers its offices and related facilities to be suitable and adequate for the present needs of Peoples and its subsidiaries.
Peoples evaluates on a continuing basis the suitability and adequacy of its offices and related facilities, and has opened, relocated,
remodeled or closed them as appropriate to maintain efficient and attractive premises.
Additional information concerning the property and equipment owned or leased by Peoples and its subsidiaries is incorporated
herein by reference from “Note 5 Bank Premises and Equipment.”
ITEM 3 LEGAL PROCEEDINGS
Peoples or one of its subsidiaries from time to time is engaged in various litigation matters including the defense of claims of
improper loan or deposit practices or lending violations. In addition, in the ordinary course of their respective businesses or operations,
Peoples or one of its subsidiaries may be named as a plaintiff, a defendant, or a party to a legal proceeding or any of their respective
properties may be subject to various pending and threatened legal proceedings and various actual and potential claims. In view of the
inherent difficulty of predicting the outcome of such matters, Peoples cannot state what the eventual outcome of any such matters will
be; however, based on management’s current knowledge and after consultation with legal counsel, Peoples’ management believes that
damages, if any, and other amounts related to pending legal proceedings will not have a material adverse effect on the consolidated
financial position, results of operations or liquidity of Peoples.
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Peoples’ common shares are traded on The Nasdaq Global Select Market® under the symbol PEBO. At December 31, 2023,
Peoples had 4,391 shareholders of record.
Peoples currently plans to continue to pay quarterly cash dividends comparable to those paid historically, subject to certain
regulatory restrictions described in “Note 17 Regulatory Matters,” as well as in the section captioned “Supervision and Regulation –
Dividend Restrictions” of “ITEM 1 BUSINESS” of this Form 10-K.
Issuer Purchases of Equity Securities
The following table details repurchases by Peoples and purchases by “affiliated purchasers” as defined in Rule 10b-18(a)(3) under
the Exchange Act of Peoples’ common shares during the three months ended December 31, 2023:
(a)
Total
Number of
Common
Shares
Purchased
(b)
Average Price
Paid per
Common Share
(c)
Total Number of
Common Shares
Purchased as Part
of Publicly
Announced Plans or
Programs (1)
(d)
Maximum
Number (or
Approximate Dollar
Value) of Common
Shares that May Yet Be
Purchased Under the
Plans or Programs (1)
51,127 (1)(2)(3) $
66,804 (1)
$
1,150 (2)
$
$
26.86 (1)(2)(3)
28.34 (1)
29.51 (2)
27.72
40,415 $
66,804 $
— $
107,219 $
21,505,159
19,611,667
19,611,667
19,611,667
Period
October 1 – 31, 2023
November 1 – 30, 2023
December 1 – 31, 2023
Total
119,081
(1) On January 29, 2021, Peoples announced that 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 its outstanding common shares, replacing the February 27, 2020 share repurchase program which terminated
on January 28, 2021. There were 40,415 and 66,804 common shares repurchased under the share repurchase program during October and November 2023,
respectively.
Information includes 2,335 and 1,150 common shares purchased in open market transactions during October and December 2023, respectively, by Peoples
Bank under the Rabbi Trust Agreement. The Rabbi Trust Agreement establishes a rabbi trust that holds assets to provide funds for the payment of the
benefits under the Peoples Bancorp Inc. Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries.
Information reported includes an aggregate of 8,377 common shares withheld to satisfy income taxes associated with restricted common shares which were
granted under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan and vested during October 2023.
(3)
(2)
36
Performance Graph
The following Performance Graph and related information shall not be deemed to be “soliciting material” or to be “filed” with
the SEC, nor shall such information be deemed to be incorporated by reference into any future filing under the Securities Act or the
Exchange Act, except to the extent that Peoples specifically incorporates the Performance Graph by reference into such filing.
The following line graph compares the five-year cumulative total shareholder return of Peoples’ common shares, based on an
initial investment of $100 on December 31, 2018, and assuming reinvestment of dividends, against two indices. The first is the Russell
2000 Index, which is a leading benchmark for small cap domestic stocks and is comprised of the stocks ranked 1,001 to 2,000 in order
of descending market capitalization in the Russell 3000 Index. The second is the KBW Nasdaq Bank Index, which is designed to track
the performance of the leading banks and thrifts that are publicly-traded in the U.S. The KBW Nasdaq Bank Index includes 24
banking stocks representing the large U.S. national money centers, regional banks and thrift institutions.
Peoples Bancorp Inc.
Russell 2000 Index
KBW Nasdaq Bank Index
2018
2019
At December 31,
2021
2020
2022
2023
99.23 $ 121.89 $ 113.79 $ 143.71
$ 100.00 $ 119.94 $
$ 100.00 $ 125.49 $ 150.50 $ 172.75 $ 137.40 $ 160.60
$ 100.00 $ 136.12 $ 122.09 $ 168.90 $ 132.76 $ 131.58
37
COMPARISON OF FIVE-YEAR TOTAL SHAREHOLDER RETURN AMONGPEOPLES BANCORP INC., RUSSELL 2000 INDEX, AND KBW NASDAQ BANK INDEX Peoples Bancorp Inc.Russell 2000 IndexKBW Nasdaq Bank Index201820192020202120222023$80.00$100.00$120.00$140.00$160.00$180.00
ITEM 6 [RESERVED]
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements
Certain statements made in this Form 10-K, which are not historical fact, are forward-looking statements within the meaning of
Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Words
such as “anticipate,” “estimate,” “may,” “feel,” “expect,” “believe,” “plan,” “will,” “will likely,” “would,” “should,” “could,”
“project,” “goal,” “target,” “potential,” “seek,” “intend,” “continue,” “remain,” and similar expressions are intended to identify these
forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ materially. Factors that might cause such a difference include, but are not
limited to:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
the effects of interest rate policies, changes in the interest rate environment due to economic conditions and/or the
fiscal and monetary policy measures undertaken by the U.S. government and the Federal Reserve Board, including
changes in the Federal Funds Target Rate, in response to such economic conditions, which may adversely impact
interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;
the effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay;
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;
competitive pressures among financial institutions, or from non-financial institutions, which may increase
significantly, including product and pricing pressures, which can in turn impact Peoples’ credit spreads, changes to
third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention
pressures, and Peoples’ ability to attract, develop and retain qualified professionals;
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;
the effects of easing restrictions on participants in the financial services industry;
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;
Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic
dilution to Peoples’ current shareholders;
changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and
customer and other counterparties’ performance and creditworthiness generally, which may be less favorable than
expected in light of recent inflationary pressures and continued elevated interest rates, and may adversely impact the
amount of interest income generated;
(10) Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or
industry of borrowers or collateral;
(11)
(12)
(13)
future credit quality and performance, including expectations regarding future credit losses and the allowance for
credit losses;
changes in accounting standards, policies, estimates or procedures may adversely affect Peoples’ reported financial
condition or results of operations;
the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes,
including under the CECL model;
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(14)
adverse changes in the conditions and trends in the financial markets, including recent inflationary pressures, which
may adversely affect the fair value of securities within Peoples’ investment portfolio, the interest rate sensitivity of
Peoples’ consolidated balance sheet, and the income generated by Peoples’ trust and investment activities;
(15)
the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value
of mortgage loans, or other factors;
(16) Peoples’ ability to receive dividends from Peoples’ subsidiaries;
(17) Peoples’ ability to maintain required capital levels and adequate sources of funding and liquidity;
(18)
the impact of larger or similar-sized financial institutions encountering problems, 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;
(19) Peoples’ ability to secure confidential information and deliver products and services through the use of computer
systems and telecommunications networks, including those of Peoples’ third-party vendors and other service
providers, which may prove inadequate, and could adversely affect customer confidence in Peoples and/or result in
Peoples incurring a financial loss;
(20)
any misappropriation of the confidential information which Peoples possesses could have an adverse impact on
Peoples’ business and could result in regulatory actions, litigation and other adverse effects;
(21) Peoples’ ability to anticipate and respond to technological changes, and Peoples’ reliance on, and the potential failure
of, a number of third-party vendors to perform as expected, including Peoples’ primary core banking system provider,
which can impact Peoples' ability to respond to customer needs and meet competitive demands;
(22)
(23)
(24)
(25)
(26)
operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry
changes in information technology systems on which Peoples and Peoples’ subsidiaries are highly dependent;
changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies,
consumer preferences and behavior, changes in business and economic conditions, legislative or regulatory initiatives,
or other factors, which may be different than anticipated;
the adequacy of Peoples’ internal controls and risk management program in the event of changes in strategic,
reputational, market, economic, operational, cybersecurity, compliance, legal, asset/liability repricing, liquidity, credit
and interest rate risks associated with Peoples’ business;
the impact on Peoples’ businesses, personnel, facilities or systems of losses related to acts of fraud, theft,
misappropriation or violence;
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);
(27)
the potential deterioration of the U.S. economy due to financial, political or other shocks;
(28)
(29)
(30)
the potential influence on the U.S. financial markets and economy from the effects of climate change, including any
enhanced regulatory, compliance, credit and reputational risks and costs;
the impact on Peoples’ businesses and operating results of any costs associated with obtaining rights in intellectual
property claimed by others and adequately protecting Peoples’ intellectual property;
risks and uncertainties associated with Peoples’ entry into new geographic markets and risks resulting from Peoples’
inexperience in these new geographic markets;
(31) Peoples’ ability to integrate the Limestone Merger, which may be unsuccessful, or may be more difficult, time-
consuming or costly than expected;
(32)
(33)
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;
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;
(35) Peoples’ business may be adversely affected by increased political and regulatory scrutiny of corporate environmental,
social and governance (“ESG”) practices;
(36)
the effect of a fall in stock market prices on the asset and wealth management business; and
(37)
other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples’ reports filed with
the SEC, including those risk factors included in the disclosures under the heading “ITEM 1A RISK FACTORS” of
this Form 10-K.
All forward-looking statements speak only as of the filing date of this Form 10-K and are expressly qualified in their entirety by
the cautionary statements. Although management believes the expectations in these forward-looking statements are based on
reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual
results may differ materially from these projections. Additionally, Peoples undertakes no obligation to update these forward-looking
statements to reflect events or circumstances after the filing date of this Form 10-K or to reflect the occurrence of unanticipated events
except as may be required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the
SEC’s website at www.sec.gov and/or through Peoples’ website – www.peoplesbancorp.com under the “Investor Relations” section.
The following discussion and analysis of Peoples’ Consolidated Financial Statements is presented to provide insight into
management’s assessment of the financial position and results of operations for the periods presented. This discussion and analysis
should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto, as well as the ratios and statistics,
contained elsewhere in this Form 10-K.
Summary of Significant Transactions and Events
The following is a summary of transactions or events that have impacted or are expected by management to impact Peoples’
results of operations or financial condition:
Mergers and Acquisitions
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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.
On October 25, 2022, Peoples announced the Limestone Merger, a transaction valued at $177.9 million. The Limestone
Merger closed as of the close of business on April 30, 2023. Peoples acquired Limestone’s loan portfolio totaling $1.1 billion,
$1.2 billion of deposits, $172.7 million of total investment securities, an aggregate of $99.5 million of short-term and long-
term borrowings, and $93.5 million of total cash and cash equivalents. Peoples also recorded goodwill in the amount of $68.8
million and other intangible assets of $27.7 million, which consisted of core deposit intangibles.
On April 1, 2022, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency with five
locations in eastern Kentucky and certain rights to related customer accounts, which were previously developed and
maintained by Elite Agency, Inc. (“Elite”), pursuant to an Asset Purchase Agreement between Peoples Insurance and Elite.
Total consideration for this transaction was $4.4 million. Peoples recognized intangibles of $2.1 million, primarily comprised
of a customer relationship intangible.
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.
On September 17, 2021, Peoples completed its merger with Premier Financial Bancorp, Inc. (“Premier”), in which Peoples
acquired, in an all-stock merger, Premier, a bank holding company headquartered in Huntington, West Virginia, and the
parent company of Premier Bank, Inc. (“Premier Bank”) and Citizens Deposit Bank and Trust, Inc. (“Citizens”). Under the
terms and conditions of the definitive Agreement and Plan of Merger dated March 26, 2021, Premier merged with and into
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Peoples and Premier’s wholly-owned subsidiaries, Premier Bank and Citizens, subsequently merged into Peoples’ wholly-
owned subsidiary, Peoples Bank, in a transaction resulting in the issuance of 8,589,685 common shares valued at $261.9
million (the “Premier Merger”). At the close of business on September 17, 2021, the financial services offices of each of
Premier Bank and Citizens became branches of Peoples Bank. Peoples acquired $1.2 billion in loans and $1.8 billion in
deposits and recorded $66.9 million in goodwill and $4.2 million in other intangible assets in connection with the Premier
Merger.
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On May 4, 2021, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency located in
Pikeville, Kentucky and certain rights to related customer accounts, which were previously developed and maintained by
Justice & Stamper Insurance Agency, Inc. Total consideration for this transaction was $325,000, less any adjustments
pursuant to adverse claims incurred or sustained by or imposed by Peoples Insurance. Peoples recorded customer relationship
intangible assets of $230,000 and goodwill of $46,000 related to this transaction.
On March 31, 2021, Peoples completed its acquisition of NS Leasing, LLC (“NSL”) pursuant to an Asset Purchase
Agreement, dated March 24, 2021, in which Peoples Bank acquired the equipment finance and leasing business of NSL (the
“NSL acquisition”). The transaction closed after the end of business on March 31, 2021 and Peoples Bank began operating
the acquired business as North Star Leasing, a division of Peoples Bank, on April 1, 2021. Peoples Bank acquired assets
comprising NSL’s equipment finance business, including $83.3 million in leases and satisfied, on behalf of NSL, certain
third-party debt in the amount of $69.1 million. Peoples Bank paid total consideration of $116.5 million, plus an earn-out
payment to NSL of $3.0 million. Based in Burlington, Vermont, the North Star Leasing division underwrites, originates and
services equipment leases and equipment financing agreements to businesses throughout the United States. Peoples recorded
goodwill in the amount of $24.7 million and other intangible assets of $14.0 million, which included a customer relationship
intangible, a trade-name intangible and non-compete agreements related to this transaction.
Other Significant Developments
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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.
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.
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.
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.
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.
The impact of these transactions, where material, is discussed in the applicable sections of this Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
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Critical Accounting Policies
The accounting and reporting policies of Peoples conform to US GAAP and to general practices within the financial services
industry. A summary of significant accounting policies is contained in “Note 1 Summary of Significant Accounting Policies.” While
all of these policies are important to understanding the Consolidated Financial Statements, certain accounting policies require
management to exercise judgment and make estimates or assumptions that affect the amounts reported in the Consolidated Financial
Statements and accompanying Notes. These estimates and assumptions are based on information available as of the date of the
Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect
different estimates or assumptions.
Management has identified four accounting policies as those that, due to the judgments, estimates and assumptions inherent in the
policies, are critical to an understanding of Peoples’ Consolidated Financial Statements and Management’s Discussion and Analysis of
Financial Condition and Results of Operations. The four accounting policies identified were the allowance for credit losses, business
combinations, goodwill and fair value measurements. These four accounting policies are described in further detail below.
Allowance for Credit Losses
The allowance for credit losses represents Peoples’ estimate of expected credit losses over the expected contractual life
of the existing loan portfolio. The allowance for credit losses is estimated by management using relevant available
information, from both internal and external sources, relating to past events, current conditions, and reasonable and
supportable forecasts. The allowance for credit losses is measured on a pool basis, with loans collectively evaluated when
similar risk characteristics exist. Peoples evaluated risk characteristics, including but not limited to: internal or third-party
credit scores or credit ratings, risk ratings or classifications, financial asset type, collateral type, loan size, effective interest
rate, term, geographical location, industry of the borrower, vintage, historical or credit loss patterns, and reasonable and
supportable forecast periods. Peoples identified 20 segments for which it believes there are similar risk characteristics and
utilized a discounted cash flow methodology in determining an allowance for credit losses for each segment.
In estimating credit losses, Peoples uses a loss driver method, which analyzes one or more economic variables to the
change in default rate using a regression analysis. Variables that had a strong correlation were selected as economic factors,
or variables, for the model. If a single variable was not found to be strongly correlated, additional variables were included.
Peoples utilizes U.S. unemployment and Ohio unemployment as economic factors in modeling.
In general, Peoples completes a quarterly evaluation based on several qualitative factors to determine if there should be
adjustments made to the allowance for credit losses. These factors include economic conditions, collateral, concentrations,
troubled assets, Peoples’ loss trends, peer loss trends, delinquency trends, portfolio composition and loan growth,
underwriting, and certain other risks.
Loans that do not share similar risk characteristics are evaluated on an individual basis. The allowance for credit losses
related to these specific loans was based on management’s estimate of potential losses as determined by (1) the present value
of expected future cash flows, (2) the fair value of collateral if the loan is determined to be collateral dependent, or (3) the
loan’s observable market price.
Peoples also completes a quarterly evaluation for unfunded commitments for loans that are not unconditionally
cancellable, which includes construction loans, floor plan lines of credit, home equity lines of credit, other credit lines and
letters of credit. Peoples performed a study to determine the historical funding rates of unadvanced portions of loans, and
applied these funding rates to the unfunded commitments at period end. The loss rates, including qualitative factors, in
determining the allowance for credit losses were applied at the segment level to the unfunded commitment amounts to
determine the allowance for credit loss liability for unfunded commitments.
There can be no assurance that the allowance for credit losses will be adequate to cover all losses, but management
believes the allowance for credit losses at December 31, 2023 was adequate to provide for expected losses from existing
loans based on information available at that time. While management uses available information to estimate losses, the
ultimate collectability of a substantial portion of the loan portfolio, and the need for future additions to the allowance, will be
based on changes in economic conditions and other relevant factors. As such, adverse changes in economic conditions could
reduce currently estimated cash flows for both commercial and consumer borrowers, which would likely cause Peoples to
experience increases in problem assets, delinquencies and losses on loans in the future.
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.
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Business Combinations
Peoples utilizes the acquisition method of accounting for business combinations. As of the acquisition date, Peoples
records the acquired company’s net assets at fair value. The determination of fair value as of the acquisition date requires
management to consider various factors that involve judgment and estimation, including the application of discount rates,
prepayment rates, attrition rates, future estimates of interest rates, as well as many other assumptions. These assumptions can
have a material impact on the estimated fair value, and as a result, the goodwill recorded in a business combination. ASC
805 allows for a measurement period of 12 months beyond the acquisition date to finalize the fair value measurement of the
acquired company’s net assets as additional information existing as of the acquisition date becomes available. Measurement
period adjustments are recorded through goodwill.
Based on recent acquisitions, loans and leases acquired through business combinations have comprised the majority of
purchase accounting adjustments in arriving at the fair values of acquired assets and liabilities, with the most significant
adjustments relating to the creditworthiness of the acquired portfolios. The assumptions and inputs impacting the allowance
for credit losses are discussed in the above paragraphs of this section of Management’s Discussion and Analysis. Those same
judgments drive the measurement of the credit adjustments of acquired loan and lease portfolios when arriving at fair value.
For further information regarding business combination accounting, please refer to “Note 20 Acquisitions.”
Goodwill
Peoples records goodwill as a result of acquisitions accounted for under the acquisition method of accounting. Under the
acquisition method, Peoples is required to allocate the consideration paid for an acquired company to the assets acquired,
including identified intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition.
Goodwill represents the excess cost over the fair value of net assets acquired and is not amortized but is tested for impairment
when indicators of impairment exist, and, in any case, at least annually. For further information regarding the fair values of
assets and liabilities recently acquired in business combinations, please refer to “Note 20 Acquisitions.”
The value of recorded goodwill is supported by revenue that is driven by the volume of business transacted and Peoples’
ability to provide quality, cost-effective services in a competitive market place. A decline in earnings as a result of a lack of
growth or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could
adversely impact earnings in future periods. Goodwill impairment exists when the carrying value of the reporting unit (as
defined by US GAAP) exceeds its fair value and an impairment loss is recognized in earnings in an amount equal to that
excess, limited to the total amount of goodwill allocated to the reporting unit.
The process of evaluating goodwill for impairment involves highly subjective and complex judgments, estimates and
assumptions regarding the fair value of Peoples’ reporting unit and, in some cases, goodwill itself. As a result, changes to
these judgments, estimates and assumptions in future periods could result in materially different results.
Peoples currently maintains a single reporting unit for goodwill impairment testing. While quoted market prices exist for
Peoples’ common shares since they are publicly traded, these market prices do not necessarily reflect the value associated
with gaining control of an entity. Thus, management takes into account all appropriate fair value measurements in
determining the estimated fair value of the reporting unit.
Peoples performs its required annual impairment test as of October 1st each year. Peoples first assesses qualitative
factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount,
including goodwill. In this evaluation, Peoples assesses relevant events and circumstances, which may include
macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, events specific to
Peoples, significant changes in the reporting unit, or a sustained decrease in stock price. If Peoples determines that it is more-
likely-than-not that the fair value of the reporting unit is greater than its carrying amount, then performing the quantitative
impairment test is unnecessary.
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.
Peoples is required to perform interim tests for goodwill impairment in subsequent quarters if events occur or
circumstances change that indicate potential goodwill impairment exists, such as adverse changes to Peoples’ business or a
significant decline in Peoples’ market capitalization. For further information regarding goodwill, refer to “Note 7 Goodwill
and Other Intangible Assets.”
Fair Value Measurements
As a financial services company, the carrying value of certain financial assets and liabilities is impacted by the
application of fair value measurements, either directly or indirectly. In certain cases, an asset or liability is measured and
reported at fair value on a recurring basis, such as available-for-sale investment securities. In other cases, management must
rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-
down or whether a valuation reserve should be established. Given the inherent volatility, the use of fair value measurements
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may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the Consolidated
Financial Statements, from period to period.
Detailed information regarding fair value measurements can be found in “Note 2 Fair Value of Financial Instruments.”
New Accounting Guidance Pending Adoption
Accounting Standards Update (“ASU”) 2023-06 - Disclosure Improvements: Codification Amendments in
Response to the SEC’s Disclosure Update and Simplification Initiative: The ASU was issued in response to the SEC’s
August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant,
duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S. GAAP requirements with
those of the SEC and to facilitate the application of U.S. GAAP for all entities. ASU 2023-06 applies to all reporting entities
within the scope of the amended subtopics. The effective dates for each amendment will be the date on which the SEC’s
removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, prospectively, with
early adoption prohibited. Peoples will adopt such requirements when they become effective and the guidance is not expected
to materially impact Peoples’ consolidated financial statements.
ASU 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures: The FASB
issued ASU 2023-07 on November 27, 2023. The amendments “improve reportable segment disclosure requirements,
primarily through enhanced disclosures about significant segment expenses.” In addition, the amendments enhance interim
disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss,
provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure
requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance”
and assess “potential future cash flows.”
The ASU applies to all public entities that are required to report segment information in accordance with ASC 280. The
enhanced segment disclosure requirements apply “retrospectively to all prior periods presented in the financial statements.”
The significant segment expense and other segment item amounts “disclosed in prior periods shall be based on the significant
segment expense categories identified and disclosed in the period of adoption.” The amendments in ASU 2023-07 are
effective for all public entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years
beginning after December 15, 2024, with early adoption permitted. Peoples will adopt the expanded disclosure requirements
beginning with its Annual Report on Form 10-K for the fiscal year ending December 31, 2024, and the guidance is not
expected to materially impact Peoples’ consolidated financial statements.
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.
EXECUTIVE SUMMARY
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.
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.
The provision for credit losses for 2023 was $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. Net charge-offs for 2023 were $8.5 million, compared to $7.3 million for 2022 and
44
$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.
Total non-interest income for 2023 increased $8.6 million, or 11%, when compared to 2022. The increase was driven by (i) a $4.1
million increase in electronic banking income, (ii) a $2.3 million increase in insurance income primarily due to growth in the property
and casualty insurance line, (iii) a $2.1 million increase in deposit account service charges, (iv) a $1.5 million increase in bank owned
life insurance income, and (v) a $2.7 million increase in other non-interest income. Insurance income increased due to new business
and market increases for premiums. The increase in other non-interest income was due to an increase in operating lease income, which
was partially offset by operating lease expense recognized in other non-interest expense. The other increases for the full year of 2023,
when compared to the full year of 2022, were primarily due to the additional customers brought in from the Limestone Merger.
Partially offsetting the increases was a $3.6 million increase in net losses on investment securities, primarily driven by a $3.6 million
pre-tax ($2.9 million after-tax) net loss on the sales of available-for-sale investment securities during the first and fourth quarters of
2023, and a $2.2 million increase in net losses on assets disposals and other transactions, mostly due to a $1.6 million write-down of
an other real estate owned (“OREO”) property during the second quarter of 2023. Total non-interest income for 2022 increased $10.0
million, or 14% when compared to 2021. The increase was driven by growth of $4.4 million in deposit account service charges and
$3.1 million in electronic banking income, primarily attributable to customers added in the Premier Merger. Also contributing to the
growth was a $3.0 million increase in lease income due to the Vantage acquisition. Partially offsetting the impact of these 2022
increases when compared to 2021 was a $2.0 million decline in mortgage banking income due to the increased market interest rate
environment in 2022 resulting in a lower volume of new loan originations.
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.
45
2023
2022
2021
(Dollars in thousands)
Non-interest expense:
Salaries and employee benefit costs
Data processing and software expense
Net occupancy and equipment expense
Professional fees
Amortization of other intangible assets
Electronic banking expense
Marketing expense
FDIC insurance premiums
Franchise tax expense
Other loan expenses
Communication expense
Other non-interest expense
Total non-interest expense
Acquisition-related non-interest expense:
Salaries and employee benefit costs
Data processing and software expense
Net occupancy and equipment expense
Professional fees
Electronic banking expense
Marketing expense
Other loan expenses
Communication expense
Other non-interest expense
Total acquisition-related non-interest expense
Non-interest expense excluding acquisition-related expense:
Salaries and employee benefit costs
Data processing and software expense
Net occupancy and equipment expense
Professional fees
Amortization of other intangible assets
Electronic banking expense
Marketing expense
FDIC insurance premiums
Franchise tax expense
Other loan expenses
Communication expense
Other non-interest expense
$
144,031 $
112,690
21,607
21,368
17,041
11,222
7,150
5,017
4,785
3,540
2,859
2,834
25,033
266,487
5,827
1,850
109
6,062
115
81
2
1
2,923
16,970
138,204
19,757
21,259
10,979
11,222
7,035
4,936
4,785
3,540
2,857
2,833
22,110
14,241
19,516
12,094
7,763
9,231
3,728
3,702
3,487
2,735
2,484
15,476
207,147
29
410
50
2,407
(92)
51
(4)
2
163
3,016
112,661
13,831
19,466
9,687
7,763
9,323
3,677
3,702
3,487
2,739
2,482
15,313
94,612
10,542
14,918
15,783
4,775
8,885
3,658
1,976
3,357
2,001
1,657
21,573
183,737
3,818
65
212
7,144
—
241
3
54
9,886
21,423
90,794
10,477
14,706
8,639
4,775
8,885
3,417
1,976
3,357
1,998
1,603
11,687
162,314
Total non-interest expense excluding acquisition-related expense $
249,517 $
204,131 $
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.
46
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.
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.
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.
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.
Total liabilities were $8.10 billion at December 31, 2023, an increase of $1.68 billion since at December 31, 2022, primarily due
to $1.35 billion of liabilities, primarily deposits, acquired in the Limestone Merger. Excluding Limestone deposit balances, total
deposits at December 31, 2023 increased $615.3 million, or 11%, compared to at December 31, 2022, primarily due to increases of
$785.6 million in retail certificates of deposit and $449.8 million in brokered certificates of deposit, partially offset by decreases of
$226.8 million, $223.3 million, and $193.7 million, in non-interest bearing deposits, savings accounts, and interest-bearing demand
deposit accounts, respectively. Total demand deposit accounts comprised 38% and 48% of total deposits at December 31, 2023, and at
December 31, 2022, respectively.
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.
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.”
47
RESULTS OF OPERATIONS
Net Interest Income
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.
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.
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.
The following table details the calculation of FTE net interest income for the years ended December 31:
2023
2022
2021
$ 339,374 $ 253,442 $ 172,553
1,703
1,349
$ 341,077 $ 255,086 $ 173,902
1,644
(Dollars in thousands)
Net interest income
Taxable equivalent adjustments
FTE net interest income
48
The following table details Peoples’ average balance sheets, with corresponding income/expense and yield/cost, for the years
ended December 31:
(Dollars in thousands)
Short-term investments (a)
Investment securities (b)(c):
Taxable
Nontaxable
Total investment securities
Loans (c)(d):
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate (e)
Home equity lines of credit
Consumer, indirect
Consumer, direct
Total loans
Allowance for credit losses
Net loans
Total earning assets
Goodwill and other intangible assets
Other assets
Total assets
Interest-bearing deposits:
Savings accounts
Government deposit accounts
Interest-bearing demand accounts
Money market accounts
Retail certificates of deposit
Brokered deposits (f)
Total interest-bearing deposits
Borrowed funds:
Short-term FHLB advances (f)
Repurchase agreements and other
Total short-term borrowings
Long-term FHLB advances
Long-term notes payable
Other borrowings
Total long-term borrowings
Total borrowed funds
Total interest-bearing liabilities
Non-interest-bearing deposits
Other liabilities
Total liabilities
Stockholders’ equity
2023
2022
2021
Average
Balance
Income/
Expense
57,464 $ 2,763
$
Yield/
Cost
4.81 % $ 178,781 $
Average
Balance
Income/
Expense
1,710
Yield/
Cost
0.96 % $ 219,849 $
Average
Balance
Income/
Expense
313
Yield/
Cost
0.14 %
1,621,852 49,469
5,643
1,812,331 55,112
190,479
3.05 % 1,481,368
2.96 %
199,279
3.04 % 1,680,647
29,091
5,444
34,535
1.96 % 1,042,419
2.73 %
163,095
2.05 % 1,205,514
15,219
4,326
19,545
1.46 %
2.65 %
1.62 %
347,317 27,833
1,757,676 120,479
1,052,647 79,475
168,077 12,155
371,809 42,931
913,069 43,647
194,415 14,722
656,736 33,263
8,726
128,707
5,590,453 383,231
(57,391)
5,533,062 383,231
7,402,857 441,106
3.84 %
5,130
131,834
4.74 %
10,732
223,197
7.90 %
3.93 %
42,308
4.86 % 1,061,323
65,405
6.76 % 1,327,064
4.23 %
37,321
870,682
4.66 %
41,358
875,754
7.45 %
4.90 %
5,872
118,242
4.46 %
6,789
150,135
7.13 %
13,572 17.98 %
74,442
34,720 12.62 %
271,349
11.39 %
4.24 %
29,686
700,691
4.30 %
37,851
881,136
4.78 %
4.06 %
5,410
133,340
4.87 %
8,300
170,567
7.57 %
4.05 %
21,480
529,994
4.08 %
23,029
563,887
5.06 %
6.21 %
6.09 %
6.78 %
5,501
88,611
6,769
111,148
5.09 % 3,709,159 166,280
6.79 % 4,574,237 234,953
4.44 %
(56,038)
(55,233)
5.15 % 3,653,121 166,280
6.86 % 4,519,004 234,953
4.22 % 5,078,484 186,138
5.91 % 6,378,432 271,198
4.51 %
3.64 %
384,172
511,748
$ 8,298,777
322,639
393,636
$ 7,094,707
234,667
359,443
$ 5,672,594
$ 1,034,713 $ 1,394
709,887 12,252
1,605
1,156,953
684,015
9,986
948,310 25,198
483,483 21,712
5,017,361 72,147
0.13 % $ 1,069,097 $
1.73 %
701,587
0.14 % 1,165,106
632,364
1.46 %
580,660
2.66 %
4.49 %
88,234
1.44 % 4,237,048
356
2,172
583
1,015
2,978
2,067
9,171
0.03 % $ 772,726 $
529,955
0.31 %
848,526
0.05 %
575,237
0.16 %
497,181
0.51 %
2.34 %
150,716
0.22 % 3,374,341
112
2,035
303
390
3,952
3,130
9,922
0.01 %
0.38 %
0.04 %
0.07 %
0.79 %
2.08 %
0.29 %
353,532 18,058
5.11 %
83,356
2,386
2.86 %
30,289
475
1.57 %
110,025
1,664
463,557 19,722
1,779
54,457
2,560
45,038
42,031
3,821
8,160
141,526
605,083 27,882
5,622,444 100,029
1,598,009
137,527
7,357,980
940,797
113,434
1.54 %
196,790
4.27 %
53,102
3.27 %
56,865
5.43 %
13,718
8.97 %
123,685
5.68 %
4.59 %
320,475
1.78 % 4,557,523
275
2,661
984
2,562
734
4,280
6,941
16,112
70,674
0.24 %
100,963
1.35 %
94,050
1.85 %
—
4.51 %
9,364
5.27 %
103,414
3.46 %
2.15 %
204,377
0.35 % 3,578,718
66
541
1,413
—
360
1,773
2,314
12,236
0.09 %
0.54 %
1.50 %
— %
3.79 %
1.71 %
1.13 %
0.34 %
1,637,690
101,510
6,296,723
797,984
$ 7,094,707
1,347,702
89,541
5,015,961
656,633
$ 5,672,594
Total liabilities and stockholders’
equity
$ 8,298,777
Interest rate spread (b)
Net interest margin (b)
$ 341,077
4.13 %
4.56 %
$ 255,086
3.87 %
3.97 %
$ 173,902
3.30 %
3.40 %
(a) Balances are primarily composed of interest bearing demand deposits at the FRB and FHLB.
(b) Average balances are based on carrying value.
49
(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.
(d) Average balances include nonaccrual, impaired loans, and loans held for sale. 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.
(e) Loans held for sale are included in the average loan balances listed. Related interest income on loans originated for sale prior to the loan being sold is included in
loan interest income.
(f) Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense
on brokered deposits for the periods presented in which FHLB advances and brokered deposits were being utilized.
Peoples’ 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.
50
The following table provides an analysis of the changes in FTE net interest income:
(Dollars in thousands)
Increase (decrease) in:
INTEREST INCOME:
Short-term investments
Investment securities (b):
Taxable
Nontaxable
Changes from 2022 to 2023
Volume
Rate
Total (a)
Changes from 2021 to 2022
Volume
Rate
Total (a)
$
2,900 $
(1,847) $
1,053 $
1,461 $
(64) $
1,397
17,396
2,982
20,378
6,436
7,436
13,872
466
(267)
199
186
932
1,118
Total investment income
17,862
2,715
20,577
6,622
8,368
14,990
Loans (b):
Construction
9,323
7,778
17,101
1,421
4,181
5,602
Commercial real estate, other
30,089
24,985
55,074
11,216
11,881
23,097
Commercial and industrial
28,502
9,615
38,117
3,818
219
4,037
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Total loan income
4,474
892
(3,577)
11,788
4,387
5,132
6,071
1,409
1,290
5,366
8,211
5,796
6,422
4,163
10,234
818
1,139
1,957
(550)
1,467
917
(5,031)
26,179
21,148
419
1,204
166
(137)
7,746
1,686
1,383
1,405
8,165
2,890
1,549
1,268
85,219
63,059 148,278
12,526
56,147
68,673
Total interest income
105,981
63,927 169,908
20,609
64,451
85,060
INTEREST EXPENSE:
Deposits:
Savings accounts
Government deposit accounts
Interest-bearing demand accounts
Money market accounts
1,049
10,054
1,026
8,881
(11)
1,038
26
(4)
90
10,080
1,022
8,971
187
(442)
145
582
Retail certificates of deposit
19,297
2,923
22,220
(1,562)
57
579
135
43
588
244
137
280
625
(974)
3,338
16,307
19,645
362
(1,425)
(1,063)
43,645
19,331
62,976
(728)
(23)
(751)
Brokered deposit
Total deposit cost
Borrowed funds:
Short-term borrowings
Long-term borrowings
Total borrowed funds cost
7,261
13,680
20,941
Total interest expense
50,906
33,011
83,917
4,455
12,606
17,061
2,806
1,074
3,880
761
373
1,134
406
1,359
2,134
3,493
3,470
2,120
2,507
4,627
3,876
Net interest income
$ 55,075 $ 30,916 $ 85,991 $ 20,203 $ 60,981 $ 81,184
(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 changes in each.
(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.
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.
During 2022, net interest income increased $80.9 million, or 47%, when compared to 2021. The increase in net interest
income was driven by (i) the Premier Merger and the Vantage acquisition, (ii) core growth and (iii) increases in market interest
rates. Net interest margin increased 57 basis points to 3.97% compared to 2021. Accretion income, net of amortization expense,
51
from acquisitions was $11.6 million for 2022, which added 19 basis points to net interest margin for 2022. Accretion income for
2022 was a result of the Premier Merger and the acquisitions of Vantage and NSL.
Additional interest income in 2023 from prepayment fees and interest recovered on nonaccrual loans was $0.7 million,
compared to $0.6 million in 2022 and $0.8 million in 2021.
Detailed information regarding changes in the Consolidated Balance Sheets can be found under appropriate captions of the
“FINANCIAL CONDITION” section of this discussion. 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 discussion under the
caption “Interest Rate Sensitivity and Liquidity.”
Provision for Credit Losses
The following table details Peoples’ provision for credit losses recognized for the years ended December 31:
(Dollars in thousands)
Provision for (Recovery of) other credit losses
Provision for checking account overdrafts
Provision for (Recovery of) credit losses
As a percent of average total loans
2023
$ 14,236
938
$ 15,174
0.27 %
$
$
2022
(4,560) $
1,050
(3,510) $
(0.08) %
2021
339
392
731
0.02 %
The provision for credit losses represents the amount needed to maintain the appropriate level of the allowance for credit losses
based on management’s formal quarterly analysis of the loan portfolio and procedural methodology that estimates the amount of
probable credit losses. The CECL methodology utilized by Peoples relies on economic forecasts, as well as other key assumptions
including prepayments, probability of default and loss given default.
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.
During 2022, the recovery of credit losses was driven by improvements in economic forecasts, coupled with loan pay-offs during
certain periods of 2022.
During 2021, the provision for credit losses was impacted by improvements in economic factors and loss drivers, partially offset
by the provision for credit losses required to establish the allowance for credit losses for acquired non-PCD loans and leases during
2021.
Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this
discussion under the caption “Allowance for Credit Losses.”
Net (Losses) Gains Included in Total Non-Interest Income
Net (losses) gains include gains and losses on investment securities, asset disposals and other transactions, which are recognized
in total non-interest income.
The following table details the net (losses) gains for the years ended December 31 recognized by Peoples:
(Dollars in thousands)
Net loss on investment securities
2023
2022
2021
$
(3,700) $
(61) $
(862)
Net (loss) gain on asset disposals and other transactions:
Net loss on other assets
Net (loss) gain on OREO
Net (loss) gain on other transactions
Net (loss) gain on asset disposals and other transactions
$
$
(1,143) $
(1,623)
(71)
(2,837) $
(326) $
(139)
(151)
(616) $
(460)
56
897
493
For 2023, Peoples’ net loss on investment securities was primarily due to the $3.7 million pre-tax net loss on the sales of
available-for-sale investment securities in the first and fourth quarters of 2023. During the first quarter of 2023, Peoples executed sales
of $96.7 million of lower yielding available-for-sale investment securities for a pre-tax loss of $2.0 million. Proceeds from sales were
used to pay down overnight borrowings. During the fourth quarter of 2023, Peoples executed the sales of an additional $36.5 million
of lower yielding available-for-sale investment securities for a pre-tax loss of $1.7 million. Proceeds from the sales were used to
purchase higher yielding agency investment securities.
The loss on the sales of these available-for-sale investment securities had a nominal impact on tangible book value as such loss
was previously reflected in capital through accumulated other comprehensive loss. The realized losses recognized due to the first
52
quarter transactions were earned back within the 2023 fiscal year, and the realized losses recognized due to the fourth quarter
transactions are expected to be earned back within 14 months.
Peoples’ net loss on asset disposals and other transactions during 2023 was primarily driven by a $1.6 million write-down of an
OREO property during the second quarter of 2023, and net losses on repossessed assets.
During 2022, Peoples’ net loss on asset disposals and other transactions was primarily due to net losses on other assets, which was
mainly due to net losses on repossessed assets.
During 2021, net gains on other transactions were driven by the sale of $59.8 million of predominantly purchased credit
deteriorated (“PCD”) loans acquired in the Premier Merger ($52.9 million of which were criticized or classified) primarily in the
hospitality industry. Peoples recognized a gain of $0.9 million related to the discount recorded on those PCD loans when they were
acquired from Premier.
Total Non-Interest Income Excluding Net Gains and Losses
Peoples generates total non-interest income excluding net gains and losses from four primary sources: electronic banking income
(“e-banking”); trust and investment income; insurance income; and deposit account service charges. Peoples continues to focus on
revenue growth from non-interest income sources in order to maintain a diversified revenue stream through greater reliance on total
non-interest income excluding net gains and losses. Total non-interest income excluding net gains and losses accounted for 21.7% of
Peoples’ total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) in 2023,
compared to 23.9% in 2022 and 28.6% in 2021.
The decline in Peoples’ total non-interest income excluding net gains and losses, as a percent of total revenue during 2023
compared to 2022, was largely due to the growth in net interest income of 34% outpacing the growth in non-interest income excluding
gains and losses of 18% during 2023. The growth in net interest income was primarily driven by the Limestone Merger and rate
increases.
E-banking income comprised the largest portion of Peoples’ total non-interest income excluding net gains and losses, for 2023.
The following table shows Peoples’ e-banking income for the years ended December 31:
(Dollars in thousands)
E-banking income
2023
2022
2021
$
25,210 $
21,094 $
18,010
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 clients. Revenue is
derived largely from ATM and debit cards, as other services are mainly provided at no charge to the customers. The amount of e-
banking income is largely dependent on the timing and volume of customer activity. For 2023 compared to 2022, e-banking income
grew 20%, primarily due to additional customers from the Limestone Merger as well as organic growth. For 2022 compared to 2021,
e-banking income increased 17%, primarily from a full year’s impact of the acquired Premier accounts in addition to increased
customer activity. In 2023, Peoples’ customers used their debit cards to complete $1.9 billion of transactions, up from $1.7 billion in
2022 and $1.4 billion in 2021.
Peoples’ fiduciary and brokerage revenues continue to be based primarily upon the value of assets under administration and
management. The following table details Peoples’ trust and investment income for the years ended December 31:
(Dollars in thousands)
Fiduciary
Brokerage
Employee benefit plan fees
Trust and investment income
2023
2022
2021
$
7,537 $
7,508 $
7,930
6,865
2,758
17,160 $
6,343
2,540
16,391 $
5,966
2,560
16,456
$
For 2023, trust and investment income increased primarily due to increases in brokerage income, as Peoples added new accounts
and the underlying market values of assets under administration and management grew, and employee benefit plan fees. For 2022,
53
trust and investment was relatively flat compared to 2021, as the increase in brokerage income was offset by the decrease in fiduciary
income.
The following table details Peoples’ assets under administration and management at December 31:
(Dollars in thousands)
Trust
Brokerage
Total
Annual average
2023
2022
2021
$ 2,021,249 $ 1,764,639 $ 2,009,871
1,473,814 1,211,868 1,183,927
$ 3,495,063 $ 2,976,507 $ 3,193,798
$ 3,236,449 $ 2,965,985 $ 3,053,807
The increase in total assets under administration and management at December 31, 2023, compared to December 31, 2022, was
primarily due to market value increases in 2023, new account activity and an acquisition of an independent financial advisor in
January of 2023 which increased brokerage assets by $30 million. During 2022, Peoples’ assets under administration and management
declined, driven by a decrease in market values throughout 2022 due to the economic downturn.
The following table details Peoples’ insurance income for the years ended December 31:
(Dollars in thousands)
2023
2022
2021
Property and casualty insurance commissions
$
13,852 $
11,986 $
11,192
Performance-based commissions
Life and health insurance commissions
Other fees and charges
Insurance income
1,634
1,424
2,229
301
18,016 $
1,975
342
15,727 $
2,044
1,627
389
15,252
$
Insurance income for 2023 increased compared to 2022, primarily driven by the increases in (i) property and casualty insurance
commissions, (ii) performance-based commissions and (iii) life and health insurance commissions, which were slightly offset by the
decrease in other fees and charges. Peoples Insurance increased its clientele throughout 2023, which drove the increases in
commissions. Insurance income for 2022 was relatively flat when compared to 2021, as the increases in property and casualty
insurance commissions and life and health insurance commissions were substantially offset by the decrease in performance-based
commissions.
Deposit account service charges are based on the costs associated with services provided by Peoples. The following table details
deposit account service charges for the years ended December 31:
(Dollars in thousands)
2023
2022
2021
Overdraft and non-sufficient funds fees
$
9,016 $
8,324 $
Account maintenance fees
Other fees and charges
Deposit account service charges
6,425
5,323
1,241
16,682 $
936
14,583 $
$
5,528
3,808
807
10,143
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 these fees to ensure they are reasonable based on
operational costs and similar to fees charged in Peoples’ markets by competitors. Deposit account service charges in 2023 increased
compared to 2022 due to the additional customers associated with the Limestone Merger, as well as organic growth. Deposit account
service charges in 2022 increased compared to 2021 due to increased customer activity compared to the very low levels of early 2021,
which had been impacted by fiscal stimulus payments and PPP loan proceeds provided to customers, along with changed customer
spending habits due to the COVID-19 pandemic. Also contributing to the increases in 2022 when compared to 2021 were the
additional customers associated with the Premier Merger, as 2022 had a full year of the benefit from the additional Premier accounts,
whereas 2021 only had three and a half months of the benefit. Deposit account service charges were positively impacted during 2021
by the Premier Merger and associated additional accounts.
54
The following table details the other items included within Peoples’ total non-interest income for the years ended December 31:
(Dollars in thousands)
Lease income
Bank owned life insurance income
Mortgage banking income
Other non-interest income
2023
2022
2021
$
5,552 $
4,267 $
4,151
1,078
2,624
1,397
$
6,101 $
3,430 $
1,293
1,767
3,439
2,894
Lease income is primarily comprised of (i) gains on the early termination of leases, net of any associated purchase accounting
adjustments, (ii) month-to-month lease payments in excess of net investment in the lease, (iii) fees received for referrals, (iv) gains and
losses recognized on the sales of residual assets, and (v) syndication income. The increase in lease income for 2023 when compared to
2022 was driven primarily by an increase in month-to-month lease income from Vantage. The 2022 increase in lease income when
compared to 2021 was due to the Vantage acquisition. In 2021, Peoples acquired NSL which first introduced lease income as a
component of non-interest income.
Bank owned life insurance income (“BOLI”) for 2023 increased when compared to 2022 due to a $0.4 million death benefit
related to the cash surrender value of the underlying policy in the fourth quarter of 2023, and additional income from policies acquired
in the Limestone Merger. BOLI income for 2022 increased when compared to 2021 due to a $248,000 death benefit related to the cash
surrender value of the underlying policy in the third quarter of 2022 and $30.0 million of additional investments in policies. Peoples
purchased no additional BOLI policies during 2023 or 2021.
Mortgage banking income is comprised mostly of net gains from the origination and sale of long-term, fixed-rate real estate loans
in the secondary market, as well as servicing income for sold loans. As a result, the amount of income recognized by Peoples is largely
dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage
banking income declined for 2023 when compared to 2022 and declined for 2022 when compared to 2021 due to lower volumes of
new loan originations as a result of the rising market interest rate environment. In 2023, Peoples sold approximately $2.7 million of
loans to the secondary market with servicing retained and sold approximately $30.7 million in loans with servicing released, compared
to approximately $18.5 million and $31.1 million, respectively, in 2022. Peoples sold $57.6 million of loans to the secondary market
with servicing retained and $37.4 million of loans with servicing released during 2021. The volume of sales has a direct impact on the
amount of mortgage banking income.
For 2023, other non-interest income increased when compared to 2022 due primarily to increased operating lease income. Other
non-interest income increased during 2022, primarily due to increased other operating income. Other non-interest income during 2021
was impacted by a decline in the fair value of equity securities during 2021.
Total Non-Interest Expense
Salaries and employee benefit costs remain Peoples’ largest non-interest expense, accounting for over half of total non-interest
expense. The following table details Peoples’ salaries and employee benefit costs for the years ended December 31:
(Dollars in thousands)
2023
2022
2021
Base salaries and wages
Sales-based and incentive compensation
Employee benefit costs
Employee stock-based compensation
Deferred personnel costs
Payroll taxes and other employment costs
Salaries and employee benefit costs
Full-time equivalent employees:
Actual at end of the period
Average during the period
$
95,604 $
23,085
16,249
5,476
(4,517)
74,593 $
18,732
13,654
3,819
(4,975)
8,134
144,031 $
6,867
112,690 $
$
60,622
16,668
11,091
3,515
(3,695)
6,411
94,612
1,478
1,411
1,267
1,245
1,188
1,003
Base salaries and wages increased for 2023 compared to 2022, driven by the additional salaries associated with the Limestone
Merger, including $5.8 million in acquisition-related salary and employee benefit expenses related to the Limestone Merger in 2023.
Base salaries and wages increased in 2022 compared to 2021, driven by the additional salaries associated with the acquisition of
Vantage, and the Premier Merger. Base salaries and wages in 2021 were impacted by the Premier Merger and the NSL acquisition.
During 2021, Peoples incurred $3.8 million of one-time expenses associated with acquisitions. Base salaries and wages were impacted
by merit increases, as well as movement towards a $15 per hour minimum wage throughout Peoples’ organization. The $15 per hour
minimum was phased in and fully implemented by January of 2023.
55
The increase in sales-based and incentive compensation for 2023 compared to 2022 was primarily due to the overall company
performance measures used in calculating incentive awards and $1.3 million in Vantage-related sales-based and incentive
compensation. Sales-based and incentive compensation increased in 2022 compared to 2021, largely due to sales incentives earned by
Vantage employees. Peoples’ sales-based and incentive compensation plans are designed to grow core earnings while managing risk,
while not encouraging unnecessary and excessive risk-taking that could threaten the value of Peoples. The sales-based and incentive
compensation plans are designed to reward employees for appropriate behaviors and include provisions addressing inappropriate
practices with respect to Peoples and its customers, including clawbacks for executives.
The increase in employee benefit costs for 2023 compared to 2022 was due to increased medical and 401(k) costs with the
addition of the Limestone employees. Employee benefit costs in 2022 increased compared to 2021 due to higher medical and 401(k)
costs with the addition of the Premier and Vantage employees.
Employee stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate
vesting to vesting at the end of three years, and an adjustment is made at the vesting date to reverse expense for non-vested awards.
The majority of Peoples’ stock-based compensation is attributable to annual equity-based incentive awards to employees, which are
awarded in the first quarter and based upon Peoples achieving certain performance goals during the prior year. During the years
presented in the table above, Peoples granted restricted common shares to officers and key employees with performance-based vesting
periods and time-based vesting periods, generally with a three-year cliff vesting. Employee stock-based compensation for 2023
increased when compared to 2022 due to additional employees primarily as a result of the Limestone Merger, as well as a full year
with Vantage employees. Employee stock-based compensation increased for 2022 compared to 2021 due to employees added in the
acquisition of Vantage and the Premier Merger.
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 in 2023 decreased
compared to 2022, primarily due to a decrease in business loan origination volume. Higher deferred personnel costs in 2022 compared
to 2021 was primarily due to an increase in loan origination volume. Additional information regarding Peoples’ loan activity can be
found later in this discussion under the caption “Loans” within “FINANCIAL CONDITION.”
For 2023, payroll taxes and other employment costs increased compared to 2022, primarily due to the employees added from the
Limestone Merger. Payroll taxes and other employee costs increased during 2022 compared to 2021, primarily due to recent mergers
and acquisitions.
Peoples’ net occupancy and equipment expense for the years ended December 31 was comprised of the following:
(Dollars in thousands)
Depreciation expense
Repairs and maintenance costs
Net rent expense
Property taxes, utilities and other costs
Net occupancy and equipment expense
$
2023
2022
2021
$
7,724 $
7,015 $
6,037
2,780
5,323
2,974
4,827
21,368 $
4,204
19,516 $
6,143
3,972
1,723
3,080
14,918
For 2023, net occupancy and equipment expense increased when compared to 2022 due to the additional locations and equipment
from the Limestone Merger. Net occupancy and equipment expense grew during 2022 when compared to 2021 due to the additional
locations and equipment from recent mergers and acquisitions.
The following table details the other items included within Peoples’ total non-interest expense for the years ended December 31:
56
(Dollars in thousands)
2023
2022
2021
Data processing and software expense
$
21,607 $
14,241 $
Professional fees
Amortization of other intangible assets
E-banking expense
Marketing expense
FDIC insurance expense
Franchise tax expense
Other loan expenses
Communication expense
Other non-interest expense
17,041
11,222
7,150
5,017
4,785
3,540
2,859
2,834
12,094
7,763
9,231
3,728
3,702
3,487
2,735
2,484
10,542
15,783
4,775
8,885
3,658
1,976
3,357
2,001
1,657
$
25,033 $
15,476 $
21,573
Data processing and software expense includes software support, maintenance and depreciation expense. Data processing and
software expense for 2023 increased relative to 2022, driven by (i) software upgrades, (ii) implementation of new systems, (iii) growth
from the Limestone Merger, and (iv) $1.9 million in acquisition-related expenses related to the Limestone Merger. During 2022, data
processing and software expense grew when compared to 2021 due to software upgrades and implementation of new systems, coupled
with the increased size of Peoples’ organization.
Professional fees increased for 2023 when compared to 2022, primarily driven by a $3.7 million increase in acquisition-related
expenses, due to increased expenses related to the Limestone Merger in 2023. Professional fees during 2022 decreased when
compared 2021, primarily driven by acquisition-related expenses related to the Premier Merger which had been realized in 2021.
Amortization of other intangible assets increased for 2023 when compared to 2022 due to the increased intangible assets
recognized as a result of the Limestone Merger. During 2022, amortization of other intangible assets increased when compared to
2021 due to the increased intangible assets recognized as a result of the recent mergers and acquisitions.
Peoples’ e-banking expense is comprised of costs associated with debit and ATM cards, as well as Internet and mobile banking
costs. E-banking expense decreased for 2023 when compared to 2022 due to decreased costs for Peoples’ online banking platform. E-
banking expense increased for 2022 when compared to 2021 due to both core growth, and growth through mergers and acquisitions.
Marketing expense, which includes advertising, donations, marketing campaigns, and other public relations costs, for 2023
increased when compared to 2022, primarily driven by increased marketing related to the Limestone Merger, an increase in donations,
and a full year of expenses from Vantage. Marketing expense was relatively flat for 2022, compared to 2021.
FDIC insurance premiums for 2023 increased when compared to 2022 due to organic and acquisitive growth, in addition to an
increase in rates assessed by the FDIC. FDIC insurance expense increased during 2022 compared to 2021 due to organic and
acquisitive growth. The FDIC quarterly assessment rate is applied to average total assets less average tangible equity, and is based on
the leverage ratio, net income before taxes, nonperforming loans as a percent of total assets, OREO, loan mix and asset growth.
Additional information regarding Peoples’ FDIC insurance assessments may be found in “ITEM 1 BUSINESS” of this Form 10-K in
the section captioned “Supervision and Regulation.”
Peoples is subject to state franchise taxes, which are based largely on Peoples’ equity at year-end, in the states where Peoples has
a physical presence. Franchise tax expense for 2023 when compared to 2022 was relatively flat. Franchise tax expense increased
during 2022 versus 2021, driven by recent growth through acquisitions and organic means. 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.
Other loan expenses during 2023 increased when compared to 2022 primarily due to Limestone-related expenses and increases in
business loan expenses and credit bureau expenses. During 2022, other loan expenses increased primarily due to higher indirect
lending volume and increased collection expense driven by the Premier Merger.
Communications expense increased during 2023 when compared to 2022 and increased during 2022 when compared to 2021, in
each case due to upgraded networking to certain branches (including new branches acquired in acquisitions and mergers) and
increased costs compared to the prior period among certain vendors that provide communication services.
Other non-interest expense for 2023 increased when compared to 2022 primarily due to $2.8 million in additional acquisition-
related expenses related to the Limestone Merger, a $2.4 million settlement charge in relation to the termination of the pension plan
and $1.7 million in operating lease expense. Other non-interest expense decreased for 2022 when compared to 2021, which was
primarily due to less acquisition-related expenses.
Income Tax Expense
57
A key driver for the amount of income tax expense or benefit recognized by Peoples each year is the amount of pre-tax income. In
addition to the expense recognized, Peoples receives tax benefits from tax-exempt investments and loans, BOLI income, common
share awards that settled or vested during the year, and investments in tax credit funds, which reduce Peoples’ effective tax rate. A
reconciliation of Peoples’ recorded income tax expense/benefit and effective tax rate to the statutory tax rate can be found in “Note 13
Income Taxes.”
For the full year of 2023, income tax expense totaled $31.8 million, compared to $27.3 million in 2022, and $9.4 million in 2021,
and the effective tax rate for 2023 was 21.9%, compared to 21.3% for 2022, and 16.5% for 2021. The 2023 increase in income tax
expense when compared to 2022 was driven by higher pre-tax income. Income tax expense increased during 2022 when compared to
2021, which was driven by higher pre-tax income and a higher effective tax rate primarily due to apportionment in additional states
due to recent acquisitions. Income tax expense for 2021 was impacted by an income tax benefit related to an adjustment from the prior
period of $1.1 million.
Peoples also recorded a tax benefit of $128,000 in 2023, a tax benefit of $5,000 in 2022, and a tax expense of $74,000 in 2021
related to common share awards that settled or vested during the year, with the substantial majority recorded in the first quarter of each
year.
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. PPNR excludes income tax expense. As a result, PPNR represents the
earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital.
This ratio represents a non-US GAAP financial measure since it excludes the provision for credit losses and all gains and losses
included in earnings.
The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of income before income
taxes reported in Peoples’ Consolidated Financial Statements for the periods presented:
(Dollars in thousands)
Pre-Provision Net Revenue:
Income before income taxes
Add: provision for credit losses
Add: net loss on OREO
Add: net loss on investment securities
Add: net loss on other assets
Add: net loss on other transactions
Less: recovery of credit losses
Less: net gain on OREO
Less: net gain on other transactions
Pre-provision net revenue
2023
2022
2021
$ 145,126
$ 128,641
$
56,970
15,174
1,623
3,700
1,143
71
—
—
—
$ 166,837
—
138
61
326
151
3,510
—
—
$ 125,807
731
—
862
252
—
—
56
897
57,862
$
Total average assets
$ 8,298,777
$ 7,094,707
$ 5,672,594
Pre-provision net revenue to total average assets
2.01 %
1.77 %
1.02 %
Weighted-average common shares outstanding - diluted
32,760,808
27,999,602
21,959,883
Pre-provision net revenue per common share - diluted
$
5.06
$
4.48
$
2.63
PPNR grew in 2023 when compared to 2022 mostly due to (i) the impact of the Limestone Merger in improving net interest
income, (ii) increases in market interest rates, and (iii) higher non-interest income. During 2022, PPNR grew when compared to 2021
mostly due to (i) the impact of the Premier Merger and the Vantage and NSL acquisitions in improving net interest income, (ii) the
increases in market interest rates, (iii) higher non-interest income, and (iv) lower acquisition-related expenses.
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 a non-US
GAAP financial measure since it excludes the impact of all COVID-19-related expenses, severance expenses, pension settlement
charges, acquisition-related expenses, a Peoples Bank Foundation, Inc. contribution, and contract negotiation non-recurring expenses.
58
The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total non-interest expense
reported in Peoples’ Consolidated Financial Statements for the years presented:
(Dollars in thousands)
Core non-interest expense:
Total non-interest expense
Less: COVID-19-related expenses
Less: severance expenses
Less: pension settlement charges
Less: acquisition-related expenses
Less: Peoples Bank Foundation, Inc. contribution
Less: contract negotiation expenses
Add: COVID-19 Employee Retention Credit
2023
2022
2021
$ 266,487 $ 207,147 $ 183,737
—
—
2,424
134
—
185
1,248
79
143
16,970
3,016
21,423
—
—
548
—
—
—
500
1,248
—
Core non-interest expense
$ 247,641 $ 203,812 $ 159,096
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 financial measure is non-US GAAP since it excludes amortization of other intangible assets and
all gains and/or losses included in earnings, and uses FTE net interest income.
The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total non-interest income
and total non-interest expense reported in Peoples’ Consolidated Financial Statements for the years presented:
(Dollars in thousands)
Efficiency ratio:
Total non-interest expense
Less: amortization of other intangible assets
Adjusted total non-interest expense
Total non-interest income
Less: net loss on investment securities
Less: net (loss) gain on asset disposals and other transactions
Total non-interest income excluding net gains and losses
Net interest income
Add: fully-tax-equivalent adjustment (a)
Net interest income on a fully-tax equivalent basis
Adjusted revenue
Efficiency ratio
Efficiency ratio adjusted for non-core items:
Core non-interest expense
Less: amortization of other intangible assets
Adjusted core non-interest expense
2023
2022
2021
$ 266,487
11,222
$ 207,147
7,763
$ 183,737
4,775
255,265
199,384
178,962
87,413
(3,700)
(2,837)
93,950
78,836
68,885
(61)
(616)
(862)
493
79,513
69,254
339,374
253,442
172,553
1,703
341,077
1,644
255,086
1,349
173,902
$ 435,027
$ 334,599
$ 243,156
58.68 %
59.59 %
73.60 %
$ 247,641
$ 203,812
$ 159,096
11,222
7,763
4,775
236,419
196,049
154,321
Core non-interest income excluding net gains and losses
93,950
79,513
69,254
Net interest income on a fully-tax-equivalent basis
341,077
255,086
173,902
Adjusted core revenue
$ 435,027
$ 334,599
$ 243,156
Efficiency ratio adjusted for non-core items
54.35 %
58.59 %
63.47 %
(a) Based on 21% statutory federal corporate income tax rate.
59
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. The efficiency
ratio and the efficiency ratio adjusted for non-core items for 2022 improved when compared to 2021, due to higher net interest income
driven by increases in market interest rates.
Managing expenses has been a major focus over recent years; however, during this time Peoples has continued to make
meaningful investments in its infrastructure and systems. Peoples was positively impacted in 2023 and 2022 by the rising market
interest rate environment and the related increase to net interest income; whereas, 2021 net interest income was negatively impacted
by a lower market interest rate environment.
Return on Average Assets Adjusted for Non-Core Items (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 ratio adjusted for non-core items represents a non-US GAAP financial measure since it
excludes the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, severance expenses,
COVID-19-related expenses, Peoples Bank Foundation, Inc. contributions and contract negotiation non-recurring expenses included in
net income.
The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of net income reported in
Peoples’ Consolidated Financial Statements for the years presented:
(Dollars in thousands)
Net income adjusted for non-core items:
Net income
Add: net loss on investment securities
Less: tax effect of net loss on investment securities (a)
Add: net loss on asset disposals and other transactions
Less: tax effect of net loss on asset disposals and other transactions (a)
Less: net gain on asset disposals and other transactions (a)
Add: tax effect of net gain on asset disposals and other transactions (a)
Add: acquisition-related expenses
Less: tax effect of acquisition-related expenses (a)
Add: severance expenses
Less: tax effect of severance expenses (a)
Add: pension settlement charges
Less: tax effect of pension settlement charges (a)
Add: COVID-19-related expenses
Less: tax effect of COVID-19-related expenses (a)
Add: Peoples Bank Foundation, Inc. contribution
Less: tax effect of Peoples Bank Foundation, Inc. contribution
Add: contract negotiation expenses
Less: tax effect of contract negotiation expenses
2023
2022
2021
$ 113,363
$ 101,292
$ 47,555
3,700
777
2,837
596
—
—
16,970
3,564
—
—
2,424
509
—
—
—
—
—
—
61
13
616
129
—
—
862
181
—
—
493
104
3,016
633
21,423
4,499
—
—
185
39
134
28
—
—
—
—
79
17
143
30
1,248
262
500
105
1,248
262
Net income adjusted for non-core items (after tax)
$ 133,848
$ 104,462
$ 67,313
Return on average assets:
Net income
Total average assets
Return on average assets
Return on average assets adjusted for non-core items:
Net income adjusted for non-core items
Total average assets
$ 113,363
8,298,777
$ 101,292
7,094,707
$ 47,555
5,672,594
1.37 %
1.43 %
0.84 %
$ 133,848
8,298,777
$ 104,462
7,094,707
$ 67,313
5,672,594
Return on average assets adjusted for non-core items
1.61 %
1.47 %
1.19 %
(a) Based on a 21% statutory federal corporate income tax rate.
The decrease in the return on average assets for 2023 compared to 2022 was attributable to a greater impact from non-core items,
primarily due to (i) an increase in net acquisition-related expenses as a result of the Limestone Merger, (ii) higher net losses on
60
investment securities and asset disposals and other transactions, and (iii) pension settlement charges of $2.4 million in relation to the
termination of the pension plan. Return on average assets adjusted for non-core items for 2023 increased when compared to 2022 due
to higher net interest income and non-interest income, which were driven by the Limestone Merger, and increases in market interest
rates. The increase in the return on average assets for 2022 compared to 2021 was attributable to higher net interest income and non-
interest income, which were driven by the recent acquisitions and mergers and increases in market interest rates.
Return on Average Tangible Equity (non-US GAAP)
The return on average tangible equity ratio is a key financial measure used to monitor performance. The return on tangible equity
is calculated as net income (less after-tax impact of amortization of other intangible assets) divided by 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.
The following table provides a reconciliation of this non-US GAAP financial measure to the amounts of total average
stockholders’ equity and the return on average stockholders’ equity ratios reported in Peoples’ Consolidated Financial Statements for
the years presented:
(Dollars in thousands)
Net income excluding amortization of other intangible assets:
2023
2022
2021
Net income
Add: amortization of other intangible assets
Less: tax effect of amortization of other intangible assets (a)
Net income excluding amortization of other intangible assets
Average tangible equity:
$ 113,363
$ 101,292
$ 47,555
11,222
2,357
7,763
1,630
122,228
107,425
4,775
1,003
51,327
Total average stockholders’ equity
$ 940,797
$ 797,984
$ 656,633
Less: average goodwill and other intangible assets
384,172
322,639
234,667
Average tangible equity
Return on average stockholders’ equity ratio:
Net income
Average stockholders’ equity
Return on average stockholders’ equity
Return on average tangible equity ratio:
$ 556,625
$ 475,345
$ 421,966
$ 113,363
$ 101,292
$ 47,555
$ 940,797
$ 797,984
$ 656,633
12.05 %
12.69 %
7.24 %
Net income excluding amortization of other intangible assets
$ 122,228
$ 107,425
$ 51,327
Average tangible equity
Return on average tangible equity
(a) Based on a 21% statutory federal corporate income tax rate.
$ 556,625
$ 475,345
$ 421,966
21.96 %
22.60 %
12.16 %
The return on total average stockholders’ equity and average tangible equity ratios were lower in 2023 relative to 2022, due to (i)
the issuance of 6.8 million common shares as consideration in the Limestone Merger, (ii) an increase in acquisition-related expenses,
and (iii) an increase in the provision for credit losses due to the initial provision for the non-PCD loans acquired from Limestone,
partially offset by an increase in total net interest income driven by the recent increases in market interest rates and additional net
interest income from Limestone following the Limestone Merger. At the same time, average tangible equity for 2023 was negatively
impacted by the Limestone Merger, for which Peoples recorded additional goodwill and other intangible assets. Return on total
average stockholders’ equity and average tangible equity ratios were higher in 2022 relative to 2021, due to higher total net interest
income driven by the recent increases in market interest rates and loans and leases added in the Premier Merger and the acquisitions of
Vantage and NSL, coupled with higher non-interest income. At the same time, average tangible equity for 2022 was negatively
impacted by the Vantage acquisition, for which People did not issue any equity, and recorded additional goodwill and other intangible
assets.
FINANCIAL CONDITION
Cash and Cash Equivalents
Peoples considers cash and cash equivalents to consist of federal funds sold, cash and balances due from banks, interest-bearing
balances in other institutions and other short-term investments that are readily liquid. The amount of cash and cash equivalents
fluctuates on a daily basis due to customer activity and Peoples’ liquidity needs. At December 31, 2023, excess cash reserves at the
FRB were $309.8 million, compared to $33.1 million at December 31, 2022. The amount of excess cash reserves maintained is
dependent upon Peoples’ daily liquidity position, which is driven primarily by changes in deposit and loan balances.
61
In 2023, Peoples’ total cash and cash equivalents increased $272.7 million, due to cash provided by financing activities of $262.0
million and cash provided by operating activities of $143.6 million, partially offset by cash used in investing activities of $132.9
million. Peoples’ investing activities reflected a net increase of $356.1 million in loans held for investment and $282.8 million in
purchases of available-for-sale investment securities and held-to-maturity investment securities, which were more than offset by
$434.1 million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity
investment securities. Financing activities included a $201.4 million net increase in deposits, an increase of $41.0 million in short-term
borrowings, a net increase of $74.9 million in long-term borrowings, as well as $51.8 million of cash dividends paid.
In 2022, Peoples’ total cash and cash equivalents decreased $261.7 million, due to cash used in investing activities of $414.2
million, partially offset by cash provided by operating activities and financing activities of $119.8 million and $32.7 million,
respectively. Peoples’ investing activities reflected a net decrease of $58.1 million in loans held for investment and $452.9 million in
purchases of available-for-sale investment securities and held-to-maturity investment securities, which were primarily offset by $237.8
million in net proceeds from sales, principal payments, calls and prepayments on available-for-sale and held-to-maturity investment
securities. Financing activities included a $145.1 million net decrease in deposits and an increase of $328.6 million in short-term
borrowings, as well as $42.4 million of cash dividends paid.
Further information regarding the management of Peoples’ liquidity position can be found later in this discussion under “Interest
Rate Sensitivity and Liquidity.”
Investment Securities
The following table provides information regarding Peoples’ investment portfolio at December 31:
(Dollars in thousands)
Available-for-sale securities, at fair value:
Obligations of:
U.S. Treasury and government agencies
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Bank-issued trust preferred securities
Total fair value
Total amortized cost
Net unrealized loss
Held-to-maturity securities, at amortized cost:
Obligations of:
U.S. government sponsored agencies
States and political subdivisions (a)
Residential mortgage-backed securities
Commercial mortgage-backed securities
Total amortized cost
Other investment securities
Total investment securities:
Weighted
average yield
2023
2022
2021
3.30 % $
2.97 %
2.74 %
2.44 %
1.86 %
3.70 %
152,422 $
88,115
225,882
604,653
50,049
10,278
30,296 $
118,607
213,296
628,924
51,234
5,965
35,604
81,739
259,319
828,517
63,519
6,795
$ 1,048,322 $ 1,131,399 $ 1,275,493
$ 1,184,288 $ 1,300,719 $ 1,283,146
(7,653)
$
(135,966) $
(169,320) $
5.29 % $
2.94 %
3.44 %
2.22 %
$
188,475 $
144,258
248,559
102,365
683,657 $
132,366 $
145,022
176,215
106,609
560,212 $
36,431
151,402
110,708
75,588
374,129
$
63,421 $
51,609 $
33,987
Amortized cost
Carrying value
$ 1,931,366 $ 1,912,540 $ 1,691,262
$ 1,795,400 $ 1,743,220 $ 1,683,609
Amortized cost is presented net of the allowance for credit losses of $238 at December 31, 2023, $241 at December 31, 2022 and $286 at December 31,
(a)
2021.
At December 31, 2023, Peoples’ investment securities represented approximately 19.6% of total assets, compared to 24.2% at
December 31, 2022. For 2023, total investment securities increased compared to the prior year, largely due to purchases of held-to-
maturity securities, partially offset by available-for-sale securities sold, both of which were part of portfolio restructurings throughout
2023. During the first quarter of 2023, Peoples executed the sales of $96.7 million of its lower yielding available-for-sale investment
securities for an after-tax loss of $1.6 million. Proceeds from the sales were used to pay down overnight borrowings. During the fourth
quarter of 2023, Peoples executed the sales of an additional $36.5 million of its lower yielding available-for-sale investment securities
for an after-tax loss of $1.3 million. Proceeds from the sales were used to purchase higher yielding agency investment securities.
During 2022, total investment securities increased compared to the prior year, largely due to investments made in held-to-maturity
securities, in an effort to deploy cash, improve investment yields and reduce risk, partially offset by the reduction in market value of
62
available-for-sale securities driven by the increases in market interest rates during 2022. During 2021, Peoples acquired, in the Premier
Merger, investment securities totaling $552.0 million and subsequently sold $395.2 million of available-for-sale securities. During
2021, Peoples acquired from Premier, and made investments into, tax-exempt securities, which are included in obligations of state and
political subdivisions. The investments into these securities were made in an effort to reduce exposure to amortizing investment
securities, while also maintaining an appropriate level of risk-adjusted yield.
Peoples designates certain securities as “held-to-maturity” at the time of their purchase if management determines Peoples would
have the intent and ability to hold the purchased securities until maturity. The unrealized gain or loss related to held-to-maturity
investment securities does not directly impact total stockholders’ equity, in contrast to the impact from the available-for-sale
investment securities portfolio.
Additional information regarding Peoples’ investment portfolio can be found in “Note 3 Investment Securities.”
Loans
The following table provides information regarding outstanding loan balances at or for the year ended December 31:
(Dollars in thousands)
Originated loans:
Construction
Commercial real estate, other
Commercial real estate
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Deposit account overdrafts
Total originated loans
Acquired loans:
Construction
Commercial real estate, other
Commercial real estate
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, direct
Total acquired loans (a)
Total loans
Average total loans
Average allowance for credit losses
2023
2022
2021
$ 279,335
$ 212,869
$ 137,437
1,209,204
919,531
861,610
1,488,539
1,132,400
999,047
938,659
835,178
779,064
203,177
159,197
136,121
357,217
226,438
69,169
418,570
384,262
350,595
148,155
132,093
104,176
666,472
629,426
530,532
112,292
98,706
81,330
778,764
728,132
611,862
986
$ 4,334,067
722
$ 3,598,422
756
$ 3,050,790
$ 84,684
$ 34,072
$ 72,795
987,753
503,987
688,471
1,072,437
246,327
538,059
57,456
761,266
112,328
—
—
15
56,843
372,525
118,693
339,098
53,339
421,123
60,520
45,765
59,417
16,477
$ 1,825,129
$ 6,159,196
5,590,453
9,657
$ 1,108,728
$ 4,707,150
4,574,237
23,322
$ 1,430,810
$ 4,481,600
3,709,159
(57,391)
(55,233)
(56,038)
Average loans, net of average allowance for credit losses
$ 5,533,062
$ 4,519,004
$ 3,653,121
63
(Dollars in thousands)
Percent of loans to total loans:
Construction
Commercial real estate, other
Commercial real estate
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Deposit account overdrafts (b)
Total percentage
2023
2022
2021
5.9 %
35.7 %
41.6 %
19.2 %
3.3 %
6.7 %
12.9 %
3.4 %
10.8 %
2.1 %
12.9 %
5.2 %
30.2 %
35.4 %
19.0 %
3.4 %
7.3 %
15.4 %
3.8 %
13.4 %
2.3 %
15.7 %
4.7 %
34.7 %
39.4 %
19.9 %
3.0 %
2.7 %
17.2 %
3.7 %
11.8 %
2.3 %
14.1 %
NM
100.0 %
NM
100.0 %
NM
100.0 %
Residential real estate loans being serviced for others
$ 356,784
$ 392,364
$ 430,597
(a)
Includes all loans acquired, and related loan discount recorded as part of acquisition accounting, in 2012 and thereafter. Loans that were acquired
and subsequently re-underwritten are reported as originated upon execution of such credit actions (for example, renewals, and increase in lines of
credit).
(b) NM=not meaningful.
As of December 31, 2023, total loans increased $1.5 billion, compared to at December 31, 2022, primarily due to 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 in other commercial real estate loans, $78.2 million in commercial and industrial loans,
$68.9 million in leases, $44.0 million in premium finance loans, $37.9 million in construction loans, and $37.0 million in indirect
consumer loans, respectively.
As of December 31, 2022, total loans increased 5%, compared to at December 31, 2021. The increase in 2022 total loan and lease
balances was primarily driven by $89.4 million in leases acquired from Vantage remaining at December 31, 2022 and increases of (i)
$98.9 million in indirect consumer loans, (ii) $36.7 million in construction loans and (iii) $23.1 million in premium finance loans,
partially offset by reductions of $126.6 million in other commercial real estate loans and $48.4 million in residential real estate loans.
64
The following table details the maturities of Peoples’ loan portfolio at December 31, 2023:
(Dollars in thousands)
Construction:
Fixed
Variable
Total
Commercial real estate, other:
Fixed
Variable
Total
Commercial and industrial:
Fixed
Variable
Total
Premium finance:
Fixed
Leases:
Fixed
Residential real estate:
Fixed
Variable
Total
Home equity lines of credit:
Fixed
Variable
Total
Consumer, indirect:
Fixed
Consumer, direct:
Fixed
Variable
Total
Loan Concentration
Due in One
Year or Less
Due in One
to Five Years
Due in Five
to Fifteen
Years
Due After
Fifteen
Years
Total
% of Total
$
5,488 $
129,176
134,664
28,100 $
166,590
194,690
10,154 $
18,311
28,465
3,677 $
2,523
6,200
47,419
316,600
364,019
68,743
127,363
196,106
188,236
223,166
411,402
474,639
406,304
880,943
167,872
165,969
333,841
400,452
462,898
863,350
117,718
310,129
427,847
48,870
207,688
256,558
992,704
1,204,253
2,196,957
391
11,505
11,896
474,217
710,769
1,184,986
13.0 %
87.0 %
100.0 %
45.2 %
54.8 %
100.0 %
40.0 %
60.0 %
100.0 %
203,177
—
—
—
203,177
100.0 %
89,117
309,810
15,133
—
414,060
100.0 %
51,407
8,182
59,589
37
7,159
7,196
19,200
153,777
311,203
7,288
72,733
167,305
26,488
226,510
478,508
231
1,397
31,239
159,186
31,470
160,583
207
9,219
9,426
535,587
255,508
791,095
1,872
206,803
208,675
67.7 %
32.3 %
100.0 %
0.9 %
99.1 %
100.0 %
4,416
333,965
328,091
—
666,472
100.0 %
20,566
66,082
35,652
1,477
2,941
1,876
22,043
69,023
37,528
72
103
175
122,372
6,397
95.0 %
5.0 %
128,769
100.0 %
Peoples categorizes its commercial loans according to standard industry classifications and monitors for concentrations in a single
industry or multiple industries that could be impacted by changes in economic conditions in a similar manner. Peoples’ commercial
lending activities continue to be spread over a diverse range of businesses from all sectors of the economy, with no single industry
comprising over 10% of Peoples’ total loan portfolio.
Loans secured by commercial real estate, including commercial construction loans, continue to comprise the largest portion of
Peoples’ loan portfolio.
The following table provides information regarding the largest concentrations of commercial real estate loans within the loan
portfolio at December 31, 2023:
65
(Dollars in thousands)
Construction:
Apartment complexes
Land development
Land only
Retail
Lodging and lodging related
Industrial
Student housing
Other (a)
Construction
Commercial real estate, other:
Apartment complexes
Retail facilities:
Owner occupied
Non-owner occupied
Total retail
Light industrial facilities:
Owner occupied
Non-owner occupied
Total light industrial facilities
Office buildings and complexes:
Owner occupied
Non-owner occupied
Total office buildings and complexes
Lodging and lodging related:
Owner occupied
Non-owner occupied
Total lodging and lodging related
Assisted living facilities and nursing homes
Warehouse facilities:
Owner occupied
Non-owner occupied
Total warehouse facilities
Restaurant/bar facilities:
Owner occupied
Non-owner occupied
Total restaurant/bar facilities
Healthcare:
Owner occupied
Non-owner occupied
Total healthcare facilities
Education services:
Owner occupied
Non-owner occupied
Total education services
Mixed commercial use facilities:
Owner occupied
Non-owner occupied
Total mixed commercial use facilities
Other (a)
Commercial real estate, other
Outstanding
Balance
Available
Loan
Commitments
Total
Exposure
% of Total
Exposure
$
$
202,217 $
40,508
31,538
23,643
3,677
10,108
7,022
45,306
364,019 $
228,038 $
17,150
2,808
5,012
16,456
7,002
7,978
48,998
333,442 $
430,255
57,658
34,346
28,655
20,133
17,110
15,000
94,304
697,461
61.7 %
8.3 %
4.9 %
4.1 %
2.9 %
2.5 %
2.2 %
13.4 %
100.0 %
307,060
4,565
311,625
13.7 %
59,082
220,188
279,270
143,460
97,386
240,846
85,004
135,423
220,427
25,524
136,854
162,378
130,907
47,818
44,041
91,859
42,142
35,954
78,096
23,643
25,668
49,311
16,519
29,983
46,502
1,525
897
2,422
2,721
5,496
8,217
3,616
7,011
10,627
1,902
1
1,903
6,412
679
494
1,173
89
—
89
221
769
990
—
4,000
4,000
60,607
221,085
281,692
146,181
102,882
249,063
88,620
142,434
231,054
27,426
136,855
164,281
137,319
48,497
44,535
93,032
42,231
35,954
78,185
23,864
26,437
50,301
16,519
33,983
50,502
2.7 %
9.7 %
12.4 %
6.4 %
4.5 %
10.9 %
3.9 %
6.3 %
10.2 %
1.2 %
6.0 %
7.2 %
6.0 %
2.1 %
2.0 %
4.1 %
1.9 %
1.6 %
3.5 %
1.1 %
1.2 %
2.3 %
0.7 %
1.5 %
2.2 %
22,655
24,090
46,745
543,556
$ 2,196,957 $
23,882
1,227
25,726
1,636
49,608
2,863
31,032
574,588
74,293 $ 2,271,250
1.1 %
1.1 %
2.2 %
25.3 %
100.0 %
(a) All other total exposures by industry are less than 2% of the Total Exposure.
66
Peoples’ commercial lending activities continue to focus on lending opportunities inside its primary and secondary market areas
within Ohio, Kentucky, West Virginia, Virginia, Washington, D.C. and Maryland. In all other states, the aggregate outstanding
balances of commercial loans in each state were less than 4% of total loans at both December 31, 2023 and December 31, 2022.
Additional information regarding Peoples’ loan portfolio can be found in “Note 4 Loans and Leases.”
Allowance for Credit Losses
The amount of the allowance for credit losses at the end of each period represents management’s estimate of expected credit
losses from existing loans based upon its formal quarterly analysis of the loan portfolio described in the “Critical Accounting Policies”
section of this discussion. While this process involves making allocations to specific loans and pools of loans, the entire allowance is
available for all losses incurred within the loan portfolio.
The following details management’s allocation of the allowance for credit losses at December 31:
(Dollars in thousands)
Construction
Commercial real estate
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Deposit account overdrafts
Allowance for credit losses
As a percent of total loans
2023
2022
2021
$
699
$
1,250
$
2,999
20,915
10,490
484
10,850
5,937
1,588
8,590
2,343
115
62,011
$
17,710
8,229
344
8,495
6,357
1,693
7,448
1,575
61
53,162
$
29,147
11,063
379
4,797
7,233
2,005
5,326
961
57
63,967
1.01 %
1.13 %
1.43 %
$
The increase in the allowance balance at December 31, 2023 when compared to at December 31, 2022 was driven by (i) the
additional allowance related to the loans acquired in the Limestone Merger, (ii) loan growth and (iii) an increase in charge-offs,
partially offset by a release of the reserves on individually analyzed loans and the use of updated loss drivers.
The decline in the allowance balance at December 31, 2022 when compared to at December 31, 2021 was driven by decreases in
the allowances for individually analyzed loans, as well as changes in qualitative factors period-over-period and the use of updated
prepayment speeds. Those decreases were partially offset by loan growth and deterioration in the economic forecast. Peoples recorded
$0.8 million of provision for credit losses to establish the allowance for credit losses for non-PCD leases acquired from Vantage. The
allowance for credit losses as a percent of total loans at December 31, 2022 decreased compared to at December 31, 2021, which was
mostly due to the composition of Peoples’ loan and lease portfolio as well as the aforementioned reduction in the allowance for credit
losses.
Additional information regarding Peoples’ allowance for credit losses can be found in “Note 1 Summary of Significant
Accounting Policies” and “Note 4 Loans and Leases.”
The following table summarizes the changes in the allowance for credit losses for the years ended December 31:
67
(Dollars in thousands)
Allowance for credit losses, January 1
Gross charge-offs:
2023
53,162
2022
63,967
2021
50,359
$
$
$
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Deposit account overdrafts
Total gross charge-offs
Recoveries:
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Deposit account overdrafts
Total recoveries
Net charge-offs (recoveries):
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Deposit account overdrafts
Total net charge-offs
Provision for (recovery of) credit losses, December 31 (a)
Initial allowance for PCD assets
Allowance for credit losses, December 31
$
$
$
Net charge-offs (recoveries) as a percent of average total loans:
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Deposit account overdrafts
Total
68
9
614
851
122
3,997
170
110
4,030
416
4,446
1,161
11,480
965
552
24
362
192
1
487
73
560
277
2,933
9
(351)
299
98
3,635
(22)
109
3,543
343
3,886
884
8,547
15,345
2,051
62,011
— %
(0.01) %
0.01 %
— %
0.06 %
— %
— %
0.06 %
0.01 %
0.07 %
0.02 %
0.15 %
$
$
$
16
489
943
124
2,585
668
88
2,233
363
2,596
1,246
8,755
297
49
13
420
84
45
328
47
375
200
1,483
16
192
894
111
2,165
584
43
1,905
316
2,221
1,046
7,272
(2,904)
(629)
53,162
— %
0.01 %
0.02 %
— %
0.05 %
0.01 %
— %
0.04 %
0.01 %
0.05 %
0.02 %
0.16 %
—
387
1,057
45
1,434
385
197
1,756
152
1,908
575
5,988
204
26
—
339
143
41
253
112
365
177
1,295
—
183
1,031
45
1,095
242
156
1,503
40
1,543
398
4,693
731
17,570
63,967
— %
— %
0.03 %
— %
0.03 %
0.01 %
— %
0.05 %
— %
0.05 %
0.01 %
0.13 %
$
$
$
(a) Amount does not include the provision for unfunded commitment liability.
Net charge-offs as a percent of average total loans for 2023 decreased to 0.15% compared to 0.16% at 2022. The decrease was
due to (i) an increase in average loan balances, primarily driven by the loans acquired in the Limestone Merger, (ii) decreases in net
charge-offs of residential real estate loan balances and commercial and industrial loan balances, and (iii) net recoveries in 2023
compared to net charge-offs in 2022 of other commercial real estate loan balances, mostly offset by increases in net charge-offs related
to total consumer loan balances and lease balances.
During 2022, net charge-offs as a percent of average total loans increased to 0.16%, compared to 0.13% for 2021. The increase
was due to increases in net charge-offs related to (i) lease balances, (ii) total consumer loan balances, and (iii) deposit account
overdraft balances.
69
The following table details Peoples’ nonperforming assets at December 31:
(Dollars in thousands)
Loans 90+ days past due and accruing:
2023
2022
2021
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Total loans 90+ days past due and accruing
Nonaccrual loans:
Construction
Commercial real estate, other
Commercial and industrial
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Total nonaccrual loans
Total nonperforming loans (“NPLs”)
OREO:
Commercial
Residential
Total OREO
Total nonperforming assets (“NPAs”)
Criticized loans (a)
Classified loans (b)
Asset Quality Ratios:
Nonaccrual loans as a percent of total loans (c)
NPLs as a percent of total loans (c)(d)
NPAs as a percent of total assets (c)(d)
NPAs as a percent of total loans and OREO (c)(d)
Allowance for credit losses as a percent of nonaccrual loans (c)
$
—
78
316
1,355
3,826
877
171
68
25
93
6,716
—
2,816
2,758
8,436
7,921
1,022
2,412
112
2,524
25,477
32,193
$
—
167
130
504
3,041
917
58
—
25
25
4,842
12
12,121
3,462
3,178
9,496
820
2,176
208
2,384
31,473
36,315
7,118
56
7,174
39,367
$
$ 235,239
120,027
8,730
165
8,895
$ 45,210
$ 191,355
89,604
$
90
689
1,139
865
—
805
50
—
85
85
3,723
6
17,067
3,572
1,581
9,647
1,039
1,574
279
1,853
34,765
38,488
9,105
391
9,496
$ 47,984
$ 194,016
106,547
0.41 %
0.52 %
0.43 %
0.64 %
0.67 %
0.77 %
0.63 %
0.96 %
0.78 %
0.86 %
0.68 %
1.07 %
245.79 %
168.91 % 184.00 %
Allowance for credit losses as a percent of NPLs (c)(d)
194.38 %
146.39 % 166.20 %
Criticized loans as a percent of total loans (a)(c)
Classified loans as a percent of total loans (b)(c)
3.82 %
1.95 %
4.07 %
1.90 %
4.33 %
2.38 %
(a) Includes loans categorized as special mention, substandard or doubtful.
(b) Includes loans categorized as substandard or doubtful.
(c) Data presented as of the end of the year indicated.
(d) Nonperforming loans include loans 90+ days past due and accruing, troubled debt restructured loans and nonaccrual loans. Nonperforming assets
include nonperforming loans and OREO.
Peoples’ NPAs decreased to 0.43% of total assets at December 31, 2023, compared to 0.63% of total assets at December 31, 2022.
Loans 90+ days past due and accruing increased compared to at December 31, 2022, primarily due to the loans acquired in the
Limestone Merger and an increase in leases and premium finance loans 90+ days past due and accruing. During 2023, both criticized
and classified loans increased when compared to 2022, primarily due to criticized and classified loans acquired in the Limestone
Merger.
Nonperforming assets decreased to 0.63% of total assets at December 31, 2022 compared to 0.68% of total assets at December 31,
2021. Loans 90+ days past due and accruing increased compared to at December 31, 2021, mostly due to the leases acquired in the
70
Vantage acquisition. During 2022, both criticized and classified loans declined when compared to 2021. The decrease at December 31,
2022 in the amount of criticized loans when compared to at December 31, 2021 was largely due to a reduction in the criticized loans
acquired in the Premier Merger. The decrease in classified loans when compared to December 31, 2021 was largely attributable to
pay-offs and upgrades of classified loans acquired in the Premier Merger.
The majority of Peoples’ nonaccrual commercial real estate loans consists primarily of owner occupied commercial properties. In
general, management believes repayment of these loans is dependent on the sale of the underlying collateral. As such, the carrying
values of these loans are ultimately supported by management’s estimate of the net proceeds Peoples would receive upon the sale of
the collateral. These estimates are based in part on market values provided by independent, licensed or certified appraisers
periodically, but no less frequently than annually. Given the volatility in commercial real estate values, management continues to
monitor changes in real estate values from quarter-to-quarter and updates its estimates as needed based on observable changes in
market prices and/or updated appraisals for similar properties.
Peoples discontinues the accrual of interest on a loan when conditions cause management to believe collection of all or any
portion of the loan’s contractual interest is doubtful. Such conditions may include the borrower being 90 days or more past due on any
contractual payments or the availability of updated information regarding the borrower’s financial condition and repayment ability. All
unpaid accrued interest deemed uncollectable is reversed, which would reduce Peoples’ net interest income. Interest received on
nonaccrual loans is included in income only if principal recovery is reasonably assured. Interest income on loans classified as
nonaccrual and renegotiated at each year-end that would have been recorded under the original terms of the loans was $0.8 million for
2023, $1.7 million for 2022 and $1.3 million for 2021. No portion of these amounts was recorded during 2023, 2022 or 2021.
Overall, management believes the allowance for credit losses was appropriate at December 31, 2023, based on all significant
information currently available. Still, there can be no assurance that the allowance for credit losses will be adequate to cover future
losses in Peoples’ loan portfolio.
Additional information regarding Peoples’ allowance for credit losses can be found in “Note 4 Loans and Leases.”
Deposits
The following table details Peoples’ deposit balances at December 31:
(Dollars in thousands)
Non-interest-bearing deposits (a)
Interest-bearing deposits:
Interest-bearing demand accounts (a)
Savings accounts
Retail CDs
Money market deposit accounts
Governmental deposit accounts
Brokered deposits
Total interest-bearing deposits
2023
1,567,649 $
2022
1,589,402 $
2021
1,641,422
$
1,144,357
919,244
1,443,417
775,488
726,713
575,429
5,584,648
7,152,297 $
1,160,182
1,068,547
530,236
617,029
625,965
125,580
4,127,539
5,716,941 $
1,167,460
1,036,738
643,759
651,169
617,259
104,745
4,221,130
5,862,552
Total deposits
$
(a) The sum of amounts presented are considered total demand deposits.
The increase in total deposits between December 31, 2023 and December 31, 2022 was primarily due to deposits acquired in the
Limestone Merger. Excluding Limestone deposit balances, total deposits at December 31, 2023 increased $615.3 million, or 11%,
compared to at December 31, 2022, primarily due to increases of $785.6 million in retail certificates of deposit (“CDs”) and $449.8
million in brokered deposits, partially offset by decreases of $226.8 million, $223.3 million, and $193.7 million, in non-interest
bearing deposits, savings accounts, and interest-bearing demand deposit accounts, respectively. Total demand deposits comprised 38%
and 48% of total deposits at December 31, 2023 and December 31, 2022, respectively.
The decrease in total deposits between December 31, 2022 and December 31, 2021 was due to decreases in both interest-bearing
and non-interest-bearing deposits. The variance was driven by decreases of (i) $113.5 million in retail CDs, (ii) $52.0 million in total
non-interest-bearing deposit accounts and (iii) $34.1 million in money market deposit accounts, partially offset by increases of $31.8
million in savings account deposits and $20.8 million in brokered deposits. Total demand deposits comprised 48% of total deposits at
each of December 31, 2022 and December 31, 2021.
As part of its funding strategy, Peoples hedges 90-day brokered deposits with interest rate swaps. The swaps pay a fixed rate of
interest while receiving three-month SOFR, which offsets the rate on the brokered deposits. As of December 31, 2023, Peoples had
eleven effective interest rate swaps, with an aggregate notional value of $105.0 million, which were designated as cash flow hedges of
brokered deposits, and are expected to be extended every 90 days through the maturity dates of the swaps. Peoples continually
evaluates the overall balance sheet position given the interest rate environment.
71
Peoples’ governmental deposit accounts represent savings and interest-bearing transaction accounts from state and local
governmental entities. These funds are subject to periodic fluctuations based on the timing of tax collections and subsequent
expenditures or disbursements. Peoples normally experiences an increase in balances annually during the first and third quarters,
corresponding with tax collections, with declines normally in the second and fourth quarters of each year, corresponding with
expenditures by the governmental entities. Peoples continues to emphasize growth of low-cost deposits that do not require Peoples to
pledge assets as collateral, which is required in the case of governmental deposit accounts.
The maturities of retail CDs with total balances of $100,000 or more at December 31 were as follows:
(Dollars in thousands)
3 months or less
Over 3 to 6 months
Over 6 to 12 months
Over 12 months
Total
2023
2022
2021
$ 135,806 $
239,057
353,433
86,489
71,374
74,529
83,094
90,864
$ 814,785 $ 262,816 $ 319,861
54,471 $
39,031
58,342
110,972
Additional information regarding Peoples’ deposits can be found in “Note 8 Deposits.”
Borrowed Funds
The following table details Peoples’ short-term and long-term borrowings at December 31:
(Dollars in thousands)
Short-term borrowings:
2023
2022
2021
FHLB overnight borrowings
$
369,000 $
400,000 $
FHLB 90-day advances
Current portion of long-term FHLB advances
Repurchase agreements
Bank Term Funding Program (“BTFP”)
Total short-term borrowings
Long-term borrowings:
FHLB advances
Vantage non-recourse debt
Other long-term borrowings
Total long-term borrowings
Total borrowed funds
—
—
—
—
—
40,000
15,000
99,121
100,138
111,482
133,000
—
—
601,121
500,138
166,482
112,865
49,572
53,804
34,158
53,147
13,788
216,241
817,362 $
101,093
601,231 $
$
85,825
—
13,650
99,475
265,957
Total borrowed funds, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit
balances. Other long-term borrowings include trust preferred securities held for investments and floating rate junior subordinated
deferrable interest debentures. Peoples continually evaluates its overall balance sheet position given the interest rate environment and
liquidity needs. Total borrowed funds increased at December 31, 2023 compared to at December 31, 2022 due to the addition of
$133.0 million of BTFP borrowings at December 31, 2023, an increase in FHLB long-term advances, and an increase in other long-
term borrowings assumed in the Limestone Merger. Peoples’ borrowed funds increased at December 31, 2022 compared to at
December 31, 2021 due to FHLB overnight borrowings of $400.0 million at December 31, 2022.
On April 3, 2019, Peoples entered into the U.S. Bank Loan Agreement with U.S. Bank National Association, the term of which
has been extended to March 31, 2024 through an amendment in March 2023. The U.S. Bank Loan Agreement provides Peoples with a
revolving line of credit in the maximum aggregate principal amount of $30.0 million.
Additional information regarding Peoples’ borrowed funds can be found in “Note 9 Short-Term Borrowings” and “Note 10 Long-
Term Borrowings.”
Capital/Stockholders’ Equity
Peoples’ total stockholders’ equity at December 31, 2023 increased 34% when compared to at December 31, 2022, which was due
to (i) 6.8 million common shares (valued at $177.9 million) issued in the Limestone Merger, (ii) net income of $113.4 million for
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 fair market value of available-
for-sale investment securities, which were driven by changes in market interest rates. At December 31, 2023, capital levels for both
72
Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered “well capitalized” under
banking regulations. These higher capital levels reflect Peoples’ desire to maintain a strong capital position.
During 2022, total stockholders’ equity decreased 7% when compared to 2021 due to (i) an other comprehensive loss of $115.5
million, (ii) dividends paid of $42.4 million and (iii) common share repurchases of $7.4 million, partially offset by net income of
$101.3 million for 2022. The other comprehensive loss was the result of changes in the market value of available-for-sale investment
securities, which were driven by changes in market interest rates.
On January 1, 2020, Peoples recorded a one-time transition adjustment to reduce retained earnings by $3.7 million. This
adjustment reflected the increase in the allowance for credit losses for loans (excluding the gross up of loan balances related to the
establishment of an allowance for credit losses for PCD loans, the allowance for credit losses for held-to-maturity investment
securities and the addition of an unfunded commitment liability, net of statutory federal corporate income taxes. Peoples elected to
utilize the five-year phase-in period for the transition adjustment due to the implementation of ASU 2016-13. This phase-in period also
includes a 25% deferment of the impact on regulatory capital of the estimated increase in the allowance for credit losses related to the
CECL model, which was applied during the first two years of application. For the first two years of the phase-in period, 100% of the
transition adjustment due to ASU 2016-13 was excluded for regulatory capital purposes, along with 25% of the increase in the
allowance for credit losses compared to the January 1, 2020 allowance for credit losses. In year three of the phase-in (i.e., 2023), 75%
of the transition adjustment, and the cumulative 25% increase in the allowance for credit losses compared to January 1, 2020, were
excluded from regulatory capital, while 50% and 25% of these amounts will be excluded in years four and five, respectively, under
this phase-in period.
Under the risk-based capital rules, in order to avoid limitations on dividends, equity repurchases and compensation, Peoples must
exceed the three minimum required ratios by at least a capital conservation buffer of 2.50%. These three minimum required ratios are
the common equity tier 1 capital ratio, tier 1 risk-based capital ratio and total risk-based capital ratio. Peoples had a capital
conservation buffer of 5.38% at December 31, 2023, 5.06% at December 31, 2022 and 6.06% at December 31, 2021. As such, Peoples
exceeded the minimum ratios, including the capital conservation buffer, at December 31, 2023.
The following table details Peoples’ actual risk-based capital levels and corresponding ratios at December 31:
(Dollars in thousands)
Capital Amounts:
Common equity tier 1
Tier 1
Total (tier 1 and tier 2)
Net risk-weighted assets
Capital Ratios:
Common equity tier 1
Tier 1
Total (tier 1 and tier 2)
Tier 1 leverage ratio
2023
2022
2021
$
766,691
820,495
873,225
$ 6,524,577
$
604,566
618,354
662,421
$ 5,071,240
$
577,565
591,215
648,948
$ 4,614,259
11.75 %
12.58 %
13.38 %
9.57 %
11.92 %
12.19 %
13.06 %
8.92 %
12.52 %
12.81 %
14.06 %
8.67 %
In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples’
total stockholders’ equity. Such financial measures represent non-US GAAP financial information since they exclude the impact of
goodwill and other intangible assets acquired through acquisitions on the Consolidated Balance Sheets. Peoples’ management believes
this information is useful to investors since it facilitates the comparison of Peoples’ operating performance, financial condition and
trends to peers, especially those without a level of intangible assets similar to that of Peoples. Further, intangible assets generally are
difficult to convert into cash, especially during a financial crisis, and could decrease substantially in value should there be
deterioration in the overall franchise value. As a result, tangible equity represents a conservative measure of the capacity for Peoples to
incur losses but remain solvent.
73
The following table reconciles the calculation of the identified non-US GAAP financial measures to amounts reported in Peoples’
Consolidated Financial Statements at December 31:
(Dollars in thousands)
Tangible equity:
Total stockholders’ equity
Less: goodwill and other intangible assets
Tangible equity
Tangible assets:
Total assets
Less: goodwill and other intangible assets
Tangible assets
Tangible book value per common share:
Tangible equity
Common shares outstanding
2023
2022
2021
$ 1,053,534
412,172
$ 641,362
$ 785,328
326,329
$ 458,999
$ 845,025
291,009
$ 554,016
$ 9,157,382
412,172
$ 8,745,210
$ 7,207,304
326,329
$ 6,880,975
$ 7,063,521
291,009
$ 6,772,512
$ 641,362
35,314,745
$ 458,999
28,287,837
$ 554,016
28,297,771
Tangible book value per common share
$
18.16
$
16.23
$
19.58
Tangible equity to tangible assets ratio:
Tangible equity
Tangible assets
$ 641,362
$ 8,745,210
$ 458,999
$ 6,880,975
$ 554,016
$ 6,772,512
Tangible equity to tangible assets
7.33 %
6.67 %
8.18 %
The increase in tangible book value per common share at December 31, 2023 from at December 31, 2022 was due to tangible
equity increasing as a result of common shares issued throughout 2023, including shares issued due to the Limestone Merger, a
decrease in other comprehensive losses recognized on available-for-sale investment securities, which was driven by changes in market
interest rates, and net income for 2023.
The decline in tangible book value per common share at December 31, 2022 from December 31, 2021 was due to tangible equity
declining as a result of other comprehensive losses recognized on available-for-sale investment securities, which were driven by
changes in market interest rates.
Future Outlook
Peoples improved its performance for the second consecutive year during 2023, recording record annual net income despite the
challenges that were presented to the banking industry due to the bank failures in 2023. In 2024, Peoples expects net interest income to
benefit from the full year impact of the Limestone Merger, but to also be impacted by the projected market interest rate reductions in
2024.
For 2024, Peoples expects net interest margin to be between 4.10% and 4.30% for the full year, which is based on between 75 to
150 basis points of reductions in the Federal Funds effective rate. These projections will vary depending on the timing and magnitude
of the anticipated rate cuts and the level of competition for deposits.
Peoples projects growth in total non-interest income, excluding net gains and losses, to be in the high single-digits to low double-
digits in 2024 compared to 2023. Total non-interest expenses, excluding acquisition-related expenses, are expected to be between $67
million and $69 million for the second, third and fourth quarters of 2024, with the first quarter of 2024 being higher due to annual
expenses typically recognized during the first quarter of each year. The efficiency ratio is projected to be between 55% and 60% for
2024.
Peoples will continue to place importance on loan growth. Peoples anticipates that the annual loan growth for 2024, compared to
2023, will be between 6% and 8%. With the anticipated loan growth and return of net charge-offs to pre-pandemic levels, there is an
expectation of an increase in the provision for credit losses during 2024 with a charge-off rate of approximately 20 basis points. The
balance sheet mix of Peoples will be continually evaluated in an effort to mitigate exposure risk during 2024.
Total deposit balances are expected to grow by approximately 2% in 2024. Peoples expects continued growth despite increased
competition in its markets plus additional upward pressure on rates paid. Throughout 2023, deposits balances increased primarily due
to the Limestone Merger, as well as promotional efforts throughout the second half of the year.
74
Management believes Peoples is in position to maintain strong asset quality metrics and continued growth into 2024. Peoples
came through 2023 with positive financial results despite the challenging economic environment and believes it will continue this
trend into 2024.
For more information regarding risks and uncertainties that could impact the projections described above, please refer to “ITEM
1A RISK FACTORS” of this Form 10-K.
Interest Rate Sensitivity and Liquidity
While Peoples is exposed to various business risks, the risks relating to interest rate sensitivity and liquidity are major risks that
can materially impact future results of operations and financial condition due to their complexity and dynamic nature. The objective of
Peoples' asset-liability management function is to measure and manage these risks in order to optimize net interest income within the
constraints of prudent capital adequacy, liquidity and safety. This objective requires Peoples to focus on interest rate risk exposure and
adequate liquidity through its management of the mix of assets and liabilities, their related cash flows and the rates earned and paid on
those assets and liabilities. Ultimately, the asset-liability management function is intended to guide management in the acquisition and
disposition of earning assets and selection of appropriate funding sources.
Interest Rate Risk
Interest rate risk (“IRR”) is one of the most significant risks arising in the normal course of business of financial services
companies like Peoples. IRR is the potential for economic loss due to future interest rate changes that can impact the earnings
stream, as well as market values, of financial assets and financial liabilities. Peoples’ exposure to IRR is due primarily to
differences in the maturity or repricing of earning assets and interest-bearing liabilities. In addition, other factors, such as
prepayments of loans and investment securities, or early withdrawal of deposits, can affect Peoples’ exposure to IRR and increase
interest costs or reduce revenue streams.
Peoples has assigned overall management of IRR to the ALCO, which has established an IRR management policy that sets
minimum requirements and guidelines for monitoring and managing the level of IRR. The objective of Peoples’ IRR management
policy is to assist the ALCO in its evaluation of the impact of changing interest rate conditions on earnings and the economic
value of equity, as well as assist with the implementation of strategies intended to reduce Peoples’ IRR. The management of IRR
involves either maintaining or changing the level of risk exposure by changing the repricing and maturity characteristics of the
cash flows for specific assets or liabilities. Additional oversight of Peoples’ IRR is provided by the Board of Directors of Peoples
Bank, which reviews and approves Peoples’ IRR management policy at least annually.
The ALCO uses various methods to assess and monitor the current level of Peoples’ IRR and the impact of potential
strategies or other changes. However, the ALCO predominantly relies on simulation modeling in its overall management of IRR
since it is a dynamic measure. Simulation modeling also estimates the impact of potential changes in interest rates and balance
sheet structures on future earnings and projected economic value of equity. The methods used by ALCO to assess IRR remain
largely unchanged from those disclosed for the year ended December 31, 2022.
The modeling process starts with a base case simulation using the current balance sheet and current interest rates held
constant for the next twenty-four months. Alternate scenarios are prepared which simulate the impact of increasing and decreasing
market interest rates, assuming parallel yield curve shifts. Comparisons produced from the simulation data, showing the changes
in net interest income from the base interest rate scenario, illustrate the risks associated with the current balance sheet structure.
Additional simulations, when deemed appropriate or necessary, are prepared using different interest rate scenarios from those
used with the base case simulation and/or possible changes in balance sheet composition. The additional simulations include non-
parallel shifts in interest rates whereby the direction and/or magnitude of changes in short-term interest rates is different from the
changes applied to longer-term interest rates. Comparisons showing the net interest income and economic value of equity
variances from the base case are provided to the ALCO for review and discussion.
The ALCO has established limits on changes in the twelve-month net interest income forecast and the economic value of
equity from the base case. The ALCO may establish risk tolerances for other parallel and non-parallel rate movements, as deemed
necessary. The following table details the current policy limits used to manage the level of Peoples’ IRR:
Immediate and
Sustained Shift in
Interest Rates
+ / - 100 basis points
+ / - 200 basis points
+ / - 300 basis points
Net Interest
Income
-5%
-10%
-15%
Economic
Value of
Equity
-10%
-15%
-20%
The following table shows the estimated changes in net interest income and the economic value of equity based upon a
standard, parallel shock analysis with balances held constant (dollars in thousands):
75
Increase
(Decrease) in
Interest Rates
(in Basis Points) December 31, 2023
Estimated Increase (Decrease) in
Net Interest Income
Estimated (Decrease) Increase in
Economic Value of Equity
300
200
100
(100)
(200)
(300)
15,063
10,282
5,468
December 31, 2022
December 31, 2023
4.6 %
13,000
4.4 % (157,625)
(9.4) %
December 31, 2022
(5.4) %
(82,959)
3.1 %
1.7 %
8,716
4,380
3.0 % (107,620)
(6.4) %
(55,809)
(3.6) %
1.5 %
(53,585)
(3.2) %
(28,157)
(1.8) %
(7,427)
(2.3) %
(11,404)
(3.9) %
31,722
1.9 %
(21,124)
(1.4) %
(15,446)
(4.7) %
(27,659)
(9.4) %
46,537
2.8 %
(80,484)
(5.2) %
(16,822)
(5.1) %
(43,728) (14.8) %
47,198
2.8 % (152,152)
(9.8) %
This table uses a standard, parallel shock analysis for assessing the IRR to net interest income and the economic value of
equity. A parallel shock assumes all points on the yield curve (one year, two year, three year, etc.) are directionally changed by
the same degree. Management regularly assesses the impact of both increasing and decreasing interest rates. The table above
shows the impact of upward and downward parallel shocks of 100, 200 and 300 basis points.
Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the
rate at which non-maturity deposits will reprice given a move in short-term interest rates. These assumptions are monitored
closely by Peoples and are reviewed at least semi-annually. At December 31, 2023, the actual deposit betas experienced by
Peoples in the repricing of non-maturity deposits were lower than those used in Peoples’ interest rate risk modeling.
While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in the balance sheet, interest rates
typically move in a nonparallel manner with differences in the timing, direction and magnitude of changes in short-term and long-
term interest rates. Thus, any impact that might occur as a result of the Federal Reserve Board increasing short-term interest rates
in the future could be offset by an inverse movement in long-term rates, and vice versa. For this reason, Peoples considers other
interest rate scenarios in addition to analyzing the impact of parallel yield curve shifts. These include various flattening and
steepening scenarios in which short-term and long-term rates move in different directions with varying magnitude. Peoples
believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above.
Given the shape of market yield curves at December 31, 2023, consideration of the bear steepener and bear flattener scenarios
provide insights which were not captured by parallel shifts.
The bear steepener scenario highlights the risk to net interest income and the economic value of equity when short-term rates
remain constant while long-term rates rise. In such a scenario, Peoples’ variable rate asset yields along with deposit and short-
term borrowing costs, which are correlated with short-term rates, remain constant, while long-term asset yields and long-term
borrowing costs, which are more correlated with long-term rates, rise. Increased asset yields would not be offset by increases in
deposit or funding costs, resulting in an increased amount of net interest income and higher net interest margin. At December 31,
2023, the bear steepener scenario resulted in an increase in net interest income of 0.90% and a decrease in economic value of
equity of 1.00%.
The bear flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates
rise while long-term rates remain constant. In such a scenario, Peoples’ variable rate asset yields along with deposit and short-
term borrowing costs, which are correlated with short-term rates, increase, while long-term asset yields and long-term borrowing
costs, which are more correlated with long-term rates, remain constant. Increased deposit and funding costs would be more than
offset by increased variable rate asset yields; resulting in an increased amount of net interest income and higher net interest
margin. At December 31, 2023, the bear flattener scenario resulted in an increase in net interest income of 2.00%% and an
increase in economic value of equity of 0.50%
During 2023, Peoples’ Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the
potential impact on net interest income, while in 2024, Peoples is positioned to see slight declines in net interest income in a
projected falling interest rate environment. The table above illustrates this point as net interest income increases in the rising rate
scenarios and decreases in the falling rate scenarios.
Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are
designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples
making fixed payments. As of December 31, 2023, Peoples had eleven interest rate swap contracts, with an aggregate notional
value of $105.0 million. Additional information regarding Peoples’ interest rate swaps can be found in “Note 15 Derivative
Financial Instruments.”
An asset/liability model used to produce the analysis above requires assumptions to be made such as prepayment rates on
interest-earning assets and repricing impact on non-maturity deposits. These business assumptions are based on business plans,
economic and market trends, and available industry data. Management believes that its methodology for developing such
assumptions is reasonable; however, there can be no assurance that modeled results will be achieved or are indicative of future
76
results. The asset/liability model along with key modeling assumptions are subjected to a third-party review annually for
effectiveness and regulatory compliance.
Liquidity
In addition to IRR management, another major objective of the ALCO is to ensure sufficient levels of liquidity are
maintained. The ALCO defines liquidity as the ability to meet anticipated and unanticipated operating cash needs, loan demand
and deposit withdrawals without incurring a sustained negative impact on profitability.
A primary source of liquidity for Peoples is deposits. Liquidity is also provided by cash generated from earning assets such as
loans and investment securities. Peoples also uses various wholesale funding sources to supplement funding from customer
deposits. These external sources provide Peoples with the ability to obtain large quantities of funds in a relatively short time
period in the event of sudden unanticipated cash needs. However, an over-utilization of external funding sources can expose
Peoples to greater liquidity risk, as these external sources may not be accessible during times of market stress. Additionally,
Peoples may be exposed to the risk associated with providing excess collateral to external funding providers, commonly referred
to as counterparty risk. As a result, the ALCO’s liquidity management policy sets limits on the net liquidity position and the
concentration of non-core funding sources, which includes wholesale funding and brokered deposits.
In addition to external sources of funding, Peoples considers certain types of deposits to be less stable or “volatile funding.”
These deposits include special money market products, large CDs and public funds. Peoples has established volatility factors for
these various deposit products, and the liquidity management policy establishes a limit on the total level of volatile funding.
Additionally, Peoples measures the maturities of external sources of funding for periods of one month, three months, six months
and twelve months, and has established policy limits for the amounts maturing in each of these periods. The purpose of these
limits is to minimize exposure to what is commonly termed rollover risk.
An additional strategy used by Peoples in the management of liquidity risk is maintaining a targeted level of liquid assets.
Management defines liquid assets as unencumbered cash (including cash on deposit at the FRB), and the market value of
unpledged U.S. government and agency securities. Excluded from this definition are pledged securities, non-government
securities, non-agency securities, municipal securities and loans. Management has established a minimum level of liquid assets in
the liquidity management policy, which is expressed as a percentage of total loans and unfunded loan commitments. At
December 31, 2023, Peoples maintained liquid assets of $457.1 million, representing 4.5% of total assets plus unfunded loan
commitments. Peoples has also established a policy limit around the level of liquefiable assets expressed as a percentage of total
loans and unfunded loan commitments. Liquefiable assets are defined as liquid assets plus the market value of unpledged
securities not included in the liquid asset measurement. At December 31, 2023, Peoples maintained liquefiable assets of $616.6
million, representing 6.0% of total assets plus unfunded loan commitments.
An essential element in the management of liquidity risk is a forecast of the sources and uses of anticipated cash flows. On a
monthly basis, Peoples forecasts sources and uses of cash for the next twelve months. To assist in the management of liquidity,
management has established a liquidity coverage ratio, which is defined as the total sources of cash divided by the total uses of
cash. A ratio of greater than 1.0 times indicates that forecasted sources of cash are adequate to fund forecasted uses of cash. The
liquidity management policy establishes a minimum limit of 1.0 times. At December 31, 2023, Peoples had a ratio of 3.36 times,
which was within policy limits. Peoples also forecasts secondary or contingent sources of cash, and this includes external sources
of funding and liquid assets. These sources of cash would be required if and when the forecasted liquidity coverage ratio dropped
below the policy limit of 1.0 times. An additional liquidity measurement used by management includes the total forecasted
sources of cash and the contingent sources of cash divided by the forecasted uses of cash. Management has established a
minimum ratio of 3.0 times for this liquidity management policy limit. At December 31, 2023, Peoples had a ratio of 3.85 times,
which was within policy limits.
Peoples maintains multiple contingent sources of liquidity including secured wholesale funding lines and unsecured brokered
deposit networks. Peoples’ primary sources of secured wholesale funding are the FHLB of Cincinnati and the FRB. As of
December 31, 2023, Peoples had unused collateral-based borrowing capacities of $322.2 million and $318.7 million, respectively,
available with the FHLB of Cincinnati and the FRB. Together, these unused borrowing capacities represent 6.3% of total assets
and unfunded loan commitments. Additionally, Peoples had $150.9 million of unpledged loan collateral eligible to secure
additional borrowing capacity with the FRB as of December 31, 2023.
Disruptions in the sources and uses of cash can occur which can drastically alter the actual cash flows and negatively impact
Peoples’ ability to access internal and external sources of cash. Such disruptions might occur due to increased withdrawals of
deposits, increases in the funding required for loan commitments, a decrease in the ability to access external funding sources and
other factors that would increase the need for funding and limit Peoples’ ability to access needed funds. As a result, Peoples
maintains a liquidity contingency funding plan (“LCFP”) that considers various degrees of disruptions and develops action plans
around these scenarios.
Peoples’ LCFP identifies scenarios where funding disruptions might occur and creates scenarios of varying degrees of
severity. The disruptions considered include an increase in funding of unfunded loan commitments, unanticipated withdrawals of
77
deposits, decreases in the renewal of maturing CDs, and reductions in cash earnings. Additionally, the LCFP creates stress
scenarios where access to external funding sources, or contingency funding, is suddenly limited, which includes a significant
increase in the margin requirements where securities or loans are pledged, limited access to funding from other banks and limited
access to funding from the FHLB of Cincinnati and the FRB. Peoples’ LCFP scenarios include a base scenario, a mild stress
scenario, a moderate stress scenario and a severe stress scenario. Each of these is defined as to the related severity and action
plans are developed around each.
Liquidity management also requires the monitoring of risk indicators that may alert the ALCO to a developing liquidity
situation or crisis. Early detection of stress scenarios allows Peoples to take actions to help mitigate the impact to Peoples Bank’s
business operations. The LCFP contains various indicators, termed key risk indicators (“KRIs”), that are monitored on a monthly
basis, at a minimum. The KRIs include both internal and external indicators and include loan delinquency levels, criticized and
classified loan levels, the ratios of non-performing loans to loans and to total assets, the total loan to total deposit ratio, the level
of net non-core funding dependence, the level of contingency funding sources, the liquidity coverage ratio, changes in regulatory
capital levels, forecasted operating loss and negative media concerning Peoples, irrational competitor pricing that persists, and an
increase in rates for external funding sources. The LCFP establishes levels that define each of these KRIs under base, mild,
moderate and severe scenarios.
The LCFP is reviewed and updated at least on an annual basis by the ALCO and Peoples Bank’s Board of Directors.
Additionally, testing of the LCFP is required on an annual basis. Various stress scenarios and the related actions are simulated
according to the LCFP. The results are reviewed and discussed and changes or revisions are made to the LCFP accordingly.
Additionally, the LCFP is subjected to a third-party review annually for effectiveness and regulatory compliance.
Starting at March 31, 2020, there was an increase in deposit balances due to the influx of funds from fiscal stimulus, the PPP
and other government actions that persisted throughout 2021. During 2022, deposit balances declined due to customers returning
to pre-COVID-19 pandemic balances as well as rising market interest rates due to high levels of inflation. During 2023, the
Federal Reserve continued a historically aggressive rate-hiking campaign, leading to higher interest rates. As a result, competition
for deposits increased. Peoples responded to the increased competition by offering various CD special rates to retain current
clients and attract new clients.
Overall, management believes the current balance of cash and cash equivalents, anticipated investment portfolio cash flows
and the availability of other funding sources will allow Peoples to meet anticipated cash obligations, as well as special needs and
off-balance sheet commitments.
Off-Balance Sheet Activities and Contractual Obligations
Peoples routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part
in the Consolidated Financial Statements. These activities are part of Peoples’ normal course of business and include traditional off-
balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in
low-income housing tax credit investments.
The following is a summary of Peoples’ significant off-balance sheet activities and contractual obligations. Detailed information
regarding these activities and obligations can be found in the Notes to the Consolidated Financial Statements.
Activity or Obligation
Off-balance sheet credit-related financial instruments
Operating lease obligations
Long-term borrowing obligations
Note
16
6
10
Traditional off-balance sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of
credit. These activities are necessary to meet the financing needs of customers and could require Peoples to make cash payments to
third parties in the event certain specified future events occur. The contractual amounts represent the extent of Peoples’ exposure in
these off-balance sheet activities. However, since certain off-balance sheet commitments, particularly standby letters of credit, are
expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements.
Peoples continues to lease certain facilities and equipment under noncancellable operating leases with terms providing for fixed
monthly payments over periods generally ranging from two to 25 years. Several of Peoples’ leased facilities are inside retail shopping
centers or office buildings and, as a result, are not available for purchase. Management believes these leased facilities increase
Peoples’ visibility within its markets and afford sales associates additional access to current and potential clients.
For certain acquisitions, often those involving insurance businesses and wealth management books of business, a portion of the
consideration is contingent upon revenue metrics being achieved. US GAAP requires that the amounts be recorded upon acquisition
based on the best estimate of the future amounts to be paid at the time of acquisition. Any subsequent adjustment to the estimate is
recorded in net income. Based on the acquisitions completed to date, management does not expect contingent consideration to have a
material impact on Peoples’ future performance.
78
Management does not anticipate that Peoples’ current off-balance sheet activities will have a material impact on its future results
of operations and financial condition based on historical experience and recent trends.
Effects of Inflation on Financial Statements
Substantially all of Peoples’ assets relate to banking and are monetary in nature. As a result, inflation does not impact Peoples to
the same degree as companies in capital-intensive industries in a replacement cost environment. During a period of rising prices, a net
monetary asset position results in a loss in purchasing power and conversely a net monetary liability position results in an increase in
purchasing power. The opposite would be true during a period of decreasing prices. In the banking industry, monetary assets typically
exceed monetary liabilities.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to the section captioned “Interest Rate Sensitivity and Liquidity” under “ITEM 7 MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Form 10-K, which is incorporated herein by
reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and accompanying notes, and the report of independent registered public accounting firm,
are set forth immediately following “ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS” of this Form 10-K.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
No response required.
ITEM 9A CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Peoples’ management, with the supervision and participation of Peoples’ President and Chief Executive Officer and Peoples’
Executive Vice President, Chief Financial Officer and Treasurer, has evaluated the effectiveness of Peoples’ disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2023. Based upon that evaluation, Peoples’
President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer have concluded
that:
(a)
information required to be disclosed by Peoples in this Form 10-K and other reports Peoples files or submits under the
Exchange Act would be accumulated and communicated to Peoples’ management, including its President and Chief
Executive Officer and its Executive Vice President, Chief Financial Officer and Treasurer, as appropriate to allow timely
decisions regarding required disclosure;
(b) information required to be disclosed by Peoples in this Form 10-K and other reports Peoples files or submits under the
Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms; and
(c) Peoples’ disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.
Management’s Annual Report on Internal Control Over Financial Reporting
The “Report of Management’s Assessment of Internal Control Over Financial Reporting” required by Item 308(a) of SEC
Regulation S-K is included on page 79 of this Form 10-K.
Attestation Report of Independent Registered Public Accounting Firm
The “Report of Independent Registered Public Accounting Firm” required by Item 308(b) of SEC Regulation S-K is included on
page 81 of this Form 10-K.
Ernst & Young LLP (U.S. PCAOB Auditor Firm I.D.: 42), the independent registered public accounting firm that audited
Peoples’ consolidated financial statements included in this Form 10-K, has issued an attestation report on the effectiveness of Peoples’
internal control over financial reporting as of December 31, 2023. The report, which expresses the opinion that Peoples’ management
has maintained effective internal control over financial reporting as of December 31, 2023, is included in the “Report of Independent
Registered Public Accounting Firm.”
Changes in Internal Control Over Financial Reporting
There were no changes in Peoples’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that occurred during the fiscal quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially
affect, Peoples’ internal control over financial reporting.
79
ITEM 9B OTHER INFORMATION
(a) None.
(b) During the three months ended December 31, 2023, no director of Peoples and no officer of Peoples (as defined in Rule
16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading
arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
80
Report of Management’s Assessment of Internal Control Over Financial Reporting
Peoples’ management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Peoples’ internal control over financial
reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation,
integrity, and fair presentation of Peoples’ Consolidated Financial Statements for external purposes in accordance with United States
generally accepted accounting principles.
With the supervision and participation of Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President,
Chief Financial Officer and Treasurer, Peoples’ management evaluated the effectiveness of Peoples’ internal control over financial
reporting as of December 31, 2023, using the Internal Control-Integrated Framework set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework). Based on the results of its evaluation, Peoples’ management has
concluded that Peoples’ internal control over financial reporting was effective at a reasonable assurance level as of December 31,
2023.
No matter how well designed, internal control over financial reporting may not prevent or detect all misstatements. Projection of the
evaluation of effectiveness to future periods is subject to risks, including but not limited to (a) controls may become inadequate due to
changes in conditions; (b) a deterioration may occur in the degree of compliance with policies or procedures; and (c) the possibility of
control circumvention or override occurring, any of which may lead to misstatements due to undetected error or fraud. Effective
internal control over financial reporting can provide only a reasonable assurance with respect to financial statement preparation and
financial reporting.
Peoples’ management assessed the effectiveness of Peoples’ internal control over financial reporting as of December 31, 2023, and,
based on this assessment, has concluded Peoples’ internal control over financial reporting was effective at a reasonable assurance level
as of that date.
Peoples’ independent registered public accounting firm, Ernst & Young LLP has audited the Consolidated Financial Statements
included in this Annual Report on Form 10-K and has issued an audit report on Peoples’ internal control over financial reporting.
By: /s/ CHARLES W. SULERZYSKI
Charles W. Sulerzyski
President and Chief Executive Officer
By: /s/ KATIE BAILEY
Katie Bailey
Executive Vice President,
Chief Financial Officer and Treasurer
February 28, 2024
81
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Peoples Bancorp Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Peoples Bancorp Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Peoples Bancorp Inc. and subsidiaries (the Company) maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, and the related consolidated
statements of income, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended
December 31, 2023, and the related notes and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Report of Management’s Assessment of
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Charleston, West Virginia
February 28, 2024
82
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Peoples Bancorp Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Peoples Bancorp Inc. and subsidiaries (the Company) as of
December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the
"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework), and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not,
by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
Description of
the Matter
Accounting for the Allowance for Credit Losses
As discussed in Note 1 and Note 4 of the financial statements, management estimates the allowance for credit
losses (ACL) based on information about past events, including historical experience, current conditions and
reasonable and supportable forecasts that affect the collectability of the reported amount. The ACL is made up
of both a quantitative modeled component as well as a qualitative component. The methodology for
determining the quantitative component includes (1) a pooled component for loans that exhibit similar risk
characteristics and (2) a specific component for those loans that do not exhibit similar risk characteristics. For
loans exhibiting similar risk characteristics, the Company uses a loss driver method, which analyzes one or
more economic variables to the change in default rate using a regression analysis, and a discounted cash flow
methodology in determining an ACL for each loan segment. Management applies judgment in determining
the extent of qualitative factors used in the qualitative component to adjust the loss rates for loan segments to
reflect the impact these factors may have on expected losses in the loan portfolio. These include economic
conditions, collateral, concentrations, troubled assets, Peoples' loss trends, peer loss trends, delinquency
trends, portfolio composition and loan growth, underwriting, and certain other risks. The Company’s loan and
lease portfolio totaled $6.16 billion as of December 31, 2023, and the associated ACL was $62.0 million.
Auditing management’s estimate of the ACL involves a high degree of subjectivity due to the judgment
required in assessing whether the economic forecast used is reasonable and supportable. Management’s
determination of the economic forecast used in calculating the modelled ACL is highly judgmental and has a
significant effect on the ACL.
83
How We
Addressed
the Matter in
Our Audit
Description of the
Matter
How We
Addressed
the Matter in
Our Audit
We obtained an understanding of the Company’s processes for establishing the ACL through the year ended
December 31, 2023. We evaluated the design and tested the operating effectiveness of the Company’s
controls over the ACL process, which included, among others, management’s review and approval controls
designed to assess and challenge whether the economic forecast used is reasonable and supportable.
To test whether the economic forecast utilized by the Company in calculating the ACL was reasonable and
supportable, our audit procedures included, among others, the following: 1) We obtained corroborative
information, including employment statistics, economic reports and alternative economic forecasts, and
considered any contrary evidence; 2) We evaluated the reliability of the external information source used by
the Company in determining the economic forecast; 3) We verified the economic variables from the external
information source were accurately input into the Company’s model used in estimating the ACL; 4) We
compared the total ACL to the Company’s historical losses, considering changes in the current economic
environment to evaluate whether the ACL appropriately reflected losses expected in the portfolio; and 5) We
evaluated whether the total ACL appropriately reflected losses expected in the loan portfolio by comparing to
peer bank data.
Fair Value of Acquired Loans Recognized as Part of the Merger with Limestone Bancorp, Inc.
As described in Note 20 to the consolidated financial statements, the Company acquired Limestone Bancorp,
Inc. (Limestone) on April 30, 2023. The transaction has been accounted for as a business combination and
accordingly, the assets acquired and liabilities assumed from Limestone were recorded at fair value as of the
merger date. The fair value of loans acquired from Limestone was approximately $1.08 billion as of April 30,
2023. As disclosed by the Company, the fair value of acquired loans is based on a discounted cash flow
methodology that considers credit loss and prepayment expectations, market interest rates and other market
factors, such as liquidity.
Auditing the Company’s estimate of the fair value of acquired loans was complex due to the significant
judgment required by management in developing the market interest rates used in the discounted cash flow
methodology. This required a high degree of auditor judgment and effort in performing procedures and
evaluating audit evidence obtained related to the significant judgments made by management and required the
use of professionals with specialized skill and knowledge.
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s
process for estimating the acquired loans fair value, including management’s controls over: 1) establishing
market interest rates used in the discounted cash flow methodology; and 2) completeness and accuracy of key
inputs and assumptions used in the discounted cash flow methodology, including loan data.
To test the estimated fair value of acquired loans, our audit procedures included, among others, involving
valuation specialists to assist us in testing management’s methodology and significant assumptions used in
measuring the fair value of the acquired loan portfolio. We involved our specialists to develop, on a sample
basis, independent expectations for market interest rates and compared management’s assumptions to the
independently developed ranges based on third party market data. Additionally, we tested, on a sample basis,
completeness and accuracy of the underlying loan data provided by management that was used in the
discounted cash flow model. Lastly, on a sample basis, we performed independent comparative calculations of
the fair value adjustment to the acquired loans. We searched for and evaluated information that corroborates
or contradicts management’s selected assumptions, including current external economic information and
historical Company-specific information.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1995.
Charleston, West Virginia
February 28, 2024
84
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Assets
Cash and cash equivalents:
Cash and due from banks
Interest-bearing deposits in other banks
Total cash and cash equivalents
Available-for-sale investment securities, at fair value (amortized cost of
$1,184,288 at December 31, 2023 and $1,300,719 at December 31, 2022) (a)
Held-to-maturity investment securities, at amortized cost (fair value of $612,022
at December 31, 2023 and $478,509 at December 31, 2022) (a)
Other investment securities
Total investment securities (a)
Loans and leases, net of deferred fees and costs (b)
Allowance for credit losses
Net loans and leases
Loans held for sale
Bank premises and equipment, net of accumulated depreciation
Bank owned life insurance
Goodwill
Other intangible assets
Other assets
Total assets
Liabilities
Deposits:
Non-interest-bearing
Interest-bearing
Total deposits
Short-term borrowings
Long-term borrowings
Accrued expenses and other liabilities
Total liabilities
Stockholders’ Equity
Preferred shares, no par value, 50,000 shares authorized and no shares issued at
December 31, 2023 and December 31, 2022
Common shares, no par value, 50,000,000 shares authorized, 36,736,041 shares
issued at December 31, 2023 and 29,857,920 shares issued at December 31,
2022, including shares held in treasury
Retained earnings
Accumulated other comprehensive loss, net of deferred income taxes
Treasury stock, at cost, 1,511,348 common shares at December 31, 2023 and
1,643,461 common shares at December 31, 2022
December 31,
2023
2022
$
111,680 $
315,042
426,722
94,679
59,343
154,022
1,048,322
1,131,399
683,657
560,212
$
$
63,421
1,795,400
6,159,196
(62,011)
6,097,185
1,866
103,856
140,554
362,169
50,003
179,627
9,157,382 $
51,609
1,743,220
4,707,150
(53,162)
4,653,988
2,140
82,934
105,292
292,397
33,932
139,379
7,207,304
1,567,649 $
5,584,648
7,152,297
601,121
216,241
134,189
8,103,848
1,589,402
4,127,539
5,716,941
500,138
101,093
103,804
6,421,976
—
—
865,227
686,450
327,237
(101,590)
265,936
(127,136)
(37,340)
(39,922)
Total stockholders’ equity
Total liabilities and stockholders’ equity
1,053,534
9,157,382 $
785,328
7,207,304
$
(a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $0 and $238,
respectively, at December 31, 2023 and $0 and $241, respectively, at December 31, 2022.
(b) Also referred to throughout this Form 10-K as “total loans” and “loans held for investment.”
See Notes to the Consolidated Financial Statements
85
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Interest income:
Interest and fees on loans
Interest and dividends on taxable investment securities
Interest on tax-exempt investment securities
Other interest income
Total interest income
Interest expense:
Interest on deposits
Interest on short-term borrowings
Interest on long-term borrowings
Total interest expense
Net interest income
Provision for (recovery of) credit losses (a)
Net interest income after provision for (recovery of) credit losses
Non-interest income:
Electronic banking income
Trust and investment income
Insurance income
Deposit account service charges
Lease income
Bank owned life insurance income
Mortgage banking income
Net (loss) gain on asset disposals and other transactions
Net loss on investment securities
Other non-interest income (b)
Total non-interest income
2023
2022
2021
$
383,032 $
49,282
4,326
2,763
439,403
234,765 $
28,903
4,176
1,710
269,554
72,147
19,722
8,160
100,029
339,374
15,174
324,200
25,210
17,160
18,016
16,682
5,552
4,151
1,078
(2,837)
(3,700)
6,101
87,413
9,171
2,661
4,280
16,112
253,442
(3,510)
256,952
21,094
16,391
15,727
14,583
4,267
2,624
1,397
(616)
(61)
3,430
78,836
166,081
15,033
3,362
313
184,789
9,922
541
1,773
12,236
172,553
731
171,822
18,010
16,456
15,252
10,143
1,293
1,767
3,439
493
(862)
2,894
68,885
Non-interest expense:
Salaries and employee benefit costs
Net occupancy and equipment expense
Data processing and software expense
Professional fees
Amortization of other intangible assets
Electronic banking expense
Marketing expense
FDIC insurance expense
Franchise tax expense
Other loan expenses
Communication expense
Other non-interest expense
Total non-interest expense
Income before income taxes
Income tax expense
Net income
144,031
21,368
21,607
17,041
11,222
7,150
5,017
4,785
3,540
2,859
2,834
25,033
266,487
145,126
31,763
113,363 $
3.46 $
3.44 $
94,612
14,918
10,542
15,783
4,775
8,885
3,658
1,976
3,357
2,001
1,657
21,573
183,737
56,970
9,415
47,555
$
2.17
$
$
2.15
32,533,086 27,908,022 21,816,511
32,760,808 27,999,602 21,959,883
112,690
19,516
14,241
12,094
7,763
9,231
3,728
3,702
3,487
2,735
2,484
15,476
207,147
128,641
27,349
101,292 $
3.61 $
3.60 $
Earnings per common share – basic
Earnings per common share – diluted
Weighted-average number of common shares outstanding – basic
Weighted-average number of common shares outstanding – diluted
(a) The provision for credit losses includes changes related to the allowance for credit losses on loans, held-to-maturity investment securities, and the unfunded commitment
liability.
(b) Includes realized and unrealized losses on equity investment securities recorded in other non-interest income of $141 for the year ended December 31, 2023, and realized and
unrealized gains of $2 and $111 for the years ended December 31, 2022 and December 31, 2021, respectively.
See Notes to the Consolidated Financial Statements
86
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
Net income
Other comprehensive income (loss):
Available-for-sale investment securities:
Gross unrealized holding gain (loss) arising in the period
Related tax (expense) benefit
Reclassification adjustment for net loss included in net income
Related tax expense
Net effect on other comprehensive income (loss)
Defined benefit plans:
Net (loss) gain arising during the period
Related tax benefit (expense)
Amortization of unrecognized loss on service benefit plans
Related tax benefit
Realized loss due to settlement and curtailment
Related tax benefit
Net effect on other comprehensive income
Cash flow hedges:
Net (losses) gains arising during the period
Related tax benefit (expense)
Net effect on other comprehensive (loss) income
Total other comprehensive income (loss), net of tax
Total comprehensive income (loss)
2023
2022
2021
$ 113,363 $ 101,292 $
47,555
29,655
(161,730)
(26,985)
(6,817)
37,733
5,777
3,700
(864)
61
(14)
862
(192)
25,674
(123,950)
(20,538)
(303)
71
9
(2)
2,424
(566)
1,633
76
(18)
63
(15)
185
(43)
248
2,318
(518)
103
(23)
143
(32)
1,991
(2,293)
10,606
532
(1,761)
(2,421)
8,185
6,999
(1,407)
5,592
25,546
$ 138,909 $
(115,517)
(14,225) $
(12,955)
34,600
See Notes to the Consolidated Financial Statements
87
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)
Balance, December 31, 2020
Net income
Other comprehensive loss, net of tax
Cash dividends declared
Reissuance of treasury stock for common share awards
Reissuance of treasury stock for deferred compensation plan for
Boards of Directors
Repurchase of treasury stock in connection with employee
incentive program and compensation plan for Boards of
Directors
Common shares issued under dividend reinvestment plan
Common shares issued under compensation plan for Boards of
Directors
Stock-based compensation
Common shares issued under employee stock purchase plan
Issuance of common shares related to the Premier Merger
Balance, December 31, 2021
Net income
Other comprehensive loss, net of tax
Cash dividends declared
Reissuance of treasury stock for common share awards
Reissuance of treasury stock for deferred compensation plan for
Boards of Directors
Repurchase of treasury stock in connection with employee
incentive program and compensation plan for Boards of
Directors
Common shares repurchased under share repurchase program
Common shares issued under dividend reinvestment plan
Common shares issued under compensation plan for Boards of
Directors
Stock-based compensation
Common shares issued under employee stock purchase plan
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’
Equity
$ 422,536 $ 190,691 $
1,336 $
(38,890) $
575,673
—
—
47,555
—
—
(12,955)
—
(31,170)
(2,740)
—
—
—
—
—
—
—
—
—
2,740
74
47,555
(12,955)
(31,170)
—
74
—
—
—
(1,306)
(1,306)
910
98
3,436
143
261,899
—
—
—
—
—
—
—
—
—
—
—
276
—
392
—
$ 686,282 $ 207,076 $
(11,619) $
(36,714) $
— 101,292
—
—
—
(115,517)
—
(42,432)
(4,989)
—
—
—
—
—
—
—
—
—
4,989
78
910
374
3,436
535
261,899
845,025
101,292
(115,517)
(42,432)
—
78
—
—
—
(1,745)
(1,745)
—
1,272
83
3,707
95
—
—
—
—
—
—
—
—
—
—
(7,407)
—
423
—
454
(7,407)
1,272
506
3,707
549
Balance, December 31, 2022
$ 686,450 $ 265,936 $
(127,136) $
(39,922) $
785,328
88
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)
(Dollars in thousands)
Net income
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’
Equity
$
— $ 113,363 $
— $
— $
113,363
Other comprehensive income excluding pension termination
settlement, net of tax
Pension termination settlement, net of tax
Cash dividends declared
—
—
—
(52,062)
Reissuance of treasury stock for common share awards
(5,944)
—
23,688
1,858
—
—
—
—
5,944
Reissuance of treasury stock for deferred compensation plan for
Boards of Directors
Repurchase of treasury stock in connection with employee
incentive program and compensation plan for Boards of
Directors
Common shares repurchased under share repurchase program
Common shares issued under dividend reinvestment plan
Common shares issued under compensation plan for Boards of
Directors
Common shares issued under employee stock purchase plan
Stock-based compensation
Issuance of common shares related to merger with Limestone
Bancorp, Inc.
Balance, December 31, 2023
See Notes to the Consolidated Financial Statements
23,688
1,858
(52,062)
—
115
(1,769)
(3,030)
1,324
548
905
5,337
—
—
—
115
—
—
1,324
62
69
5,337
177,929
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,769)
(3,030)
—
486
836
—
—
177,929
$ 865,227 $ 327,237 $
(101,590) $
(37,340) $
1,053,534
89
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2023
2022
2021
$
113,363 $
101,292 $
47,555
Depreciation, amortization and accretion, net
Provision for (recovery of) credit losses
Bank owned life insurance income
Net loss on investment securities
Fair value adjustment on equity investment securities
Loans originated for sale
Proceeds from sales of loans
Net gains on sales of loans
Deferred income tax (benefit) expense
Increase (decrease) in accrued expenses
(Increase) decrease in interest receivable
Increase in other assets
Increase (decrease) in interest payable
Increase in operating lease assets
Change in lease right-of-use assets and lease liabilities
Stock-based compensation
Other, net
Net cash provided by operating activities
Investing activities:
Available-for-sale investment securities:
Purchases
Proceeds from sales
Proceeds from principal payments, calls and prepayments
Held-to-maturity investment securities:
Purchases
Proceeds from principal payments
Other investment securities:
Purchases
Proceeds from sales
Net (increase) decrease in loans held for investment
Net expenditures for premises and equipment
Proceeds from sales of other real estate owned
Investment in bank owned life insurance
Proceeds from bank owned life insurance
Business acquisitions, net of cash received
Investment in limited partnership and tax credit funds
Net cash used in investing activities
Financing activities:
Net (decrease) increase in non-interest-bearing deposits
Net increase (decrease) in interest-bearing deposits
Net increase in short-term borrowings
Proceeds from long-term borrowings
Payments on long-term borrowings
Cash dividends paid
Repurchase of treasury stock under share repurchase program
Purchase of treasury stock in connection with employee incentive program and
compensation plan for Boards of Directors to be held as treasury stock
Proceeds from issuance of common shares
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
90
3,668
15,174
(4,151)
3,700
141
(33,196)
34,041
(659)
(238)
13,194
(6,443)
962
6,621
(13,817)
(335)
6,025
5,593
143,643
17,319
(3,510)
(2,624)
61
(2)
(48,081)
50,442
(994)
18,566
(4,692)
(5,836)
1,629
(420)
—
(38)
4,325
(7,598)
119,839
24,643
731
(1,767)
862
(111)
(94,154)
157,349
(2,994)
2,874
2,433
1,435
2,874
(282)
—
509
3,890
10,573
156,420
(75,351)
198,893
151,047
(246,155)
28,663
190,143
(852,542)
544,096
297,693
(207,428)
84,116
(206,768)
19,033
(316,346)
7,333
(27,206)
21,281
(356,075)
(13,458)
129
—
227
92,594
(1,699)
(132,930)
(284,480)
485,921
40,983
115,108
(40,165)
(51,845)
(3,030)
(23,632)
5,784
(58,142)
(6,753)
572
(30,000)
689
(85,791)
(1,857)
(414,214)
(52,020)
(93,082)
328,611
24,804
(125,345)
(42,372)
(7,407)
(1,415)
9,299
113,467
(6,685)
2,073
—
—
132,719
(4,125)
(74,433)
150,986
49,774
14,414
—
(2,132)
(31,002)
—
(1,769)
1,264
261,987
272,700
154,022
426,722 $
(1,306)
(1,745)
906
1,226
181,640
32,670
263,627
(261,705)
152,100
415,727
154,022 $ 415,727
$
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
Supplemental cash flow information:
Interest paid
Income taxes paid
Supplemental noncash disclosures:
Transfers from loans to other real estate owned
Noncash recognition of new leases
2023
2022
2021
$
$
90,367 $ 16,270 $ 13,391
6,693
29,866
4,131
31 $
110 $
298
4,428
880
2,482
See Notes to the Consolidated Financial Statements
91
PEOPLES BANCORP INC. AND SUBSIDIARIES
TABLE OF CONTENTS TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Note 2. Fair Value of Financial Instruments
Note 3. Investment Securities
Note 4. Loans and Leases
Note 5. Bank Premises and Equipment
Note 6. Leases
Note 7. Goodwill and Other Intangible Assets
Note 8. Deposits
Note 9. Short-Term Borrowings
Note 10. Long-Term Borrowings
Note 11. Stockholders’ Equity
Note 12. Employee Benefit Plans
Note 13. Income Taxes
Note 14. Earnings Per Common Share
Note 15. Derivative Financial Instruments
Note 16. Off-Balance Sheet Risk
Note 17. Regulatory Matters
Note 18. Stock-Based Compensation
Note 19. Revenue
Note 20. Acquisitions
Note 21. Parent Company Only Financial Information
93
100
104
108
119
119
122
124
125
126
128
130
130
132
132
134
134
136
137
137
141
92
PEOPLES BANCORP INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Peoples Bancorp Inc. is a financial holding company that offers a full range of financial services and products primarily offered
through its 152 financial service offices and ATMs, including 133 full-service branches in Ohio, Kentucky, West Virginia,
Washington, D.C., Virginia, and Maryland as of December 31, 2023, as well as through online resources that are web-based and
mobile-based. Peoples’ insurance, premium financing and equipment leasing services are offered nationwide. Brokerage services are
offered exclusively through an unaffiliated registered broker-dealer located at Peoples Bank’s offices. Indirect consumer lending
activities are provided through approved dealerships. Peoples Bank’s credit card and merchant processing services are provided
through joint marketing arrangements with third parties.
Note 1 Summary of Significant Accounting Policies
The accounting and reporting policies of Peoples Bancorp Inc. and subsidiaries (“Peoples” refers to Peoples Bancorp Inc. and its
consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.)
conform to U.S. generally accepted accounting principles (“US GAAP”) and to general practices within the banking industry. The
preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed in the preparation of the financial statements:
Business Combinations: Business combinations are accounted for using the acquisition method of accounting. Under this
accounting method, the acquired company’s net assets are recorded at fair value on the date of acquisition, and the results of
operations of the acquired company are combined with those of Peoples from the acquisition date forward. Costs related to the
acquisition are expensed as incurred. The purchase price paid over the fair value of the net assets acquired, including intangible
assets with finite lives, is recorded as goodwill.
Consolidation: Peoples’ Consolidated Financial Statements include subsidiaries in which Peoples has a controlling financial
interest, principally defined as owning a voting interest of greater than 50%.
The Consolidated Financial Statements include the accounts of Peoples and its consolidated subsidiaries, Peoples Bank
(along with its wholly-owned subsidiaries, Peoples Insurance Agency, LLC (“Peoples Insurance”) and Vantage Financial, LLC
(“Vantage”)), Peoples Investment Company, NB&T Statutory Trust III, FNB Capital Trust One, Ascencia Statutory Trust I, and
Porter Statutory Trusts II-IV, for which Peoples holds all of the common securities. All intercompany accounts and transactions
have been eliminated.
Fair Value Measurements: The measurement of fair value under US GAAP uses a hierarchy intended to maximize the use of
observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair
value of assets and liabilities as follows:
Level 1: Quoted prices in active exchange markets for identical assets or liabilities; also includes certain U.S. Treasury and
other U.S. government and agency securities actively traded in over-the-counter markets.
Level 2: Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less
active markets, or other observable inputs that can be corroborated by observable market data; also includes derivative
financial instruments whose value is determined using a pricing model with observable market inputs or can be derived
principally from, or corroborated by, observable market data. This category generally includes certain U.S. government and
agency securities, corporate debt securities, derivative instruments, and residential mortgage loans held for sale.
Level 3: Unobservable inputs supported by little or no market activity for financial instruments whose value is determined
using pricing models, discounted cash flow methodologies, or similar techniques, as well as financial instruments for which
the determination of fair value requires significant management judgment or estimation; also includes observable inputs for
single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain private
equity investments, retained interests from securitization, and certain collateralized debt obligations.
Operating Segments: Peoples’ business activities are currently confined to one reportable operating segment, which is
community banking. As a community banking entity, Peoples offers its customers a full range of products including a complete
line of banking, leasing, insurance, investment and trust solutions.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing
deposits in other banks, federal funds sold and other short-term investments with original maturities of 90 days or less. Peoples
had no restricted funds at December 31, 2023 or at December 31, 2022 held in interest-bearing deposits in other banks, which
were being used as collateral and not available for withdrawal.
Investment Securities: Investment securities are recorded initially at cost, which includes premiums and discounts if purchased at
other than par or face value. Peoples amortizes premiums and accretes discounts as an adjustment to interest income on a level
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yield basis. The cost of investment securities sold, excluding equity investment securities, and any resulting gain or loss, is based
on the specific identification method and recognized as of the trade date. The cost of equity investment securities is based on the
weighted-average method.
Peoples determines the appropriate classification of investment securities at the time of purchase. Held-to-maturity securities
are those securities that Peoples has the positive intent and ability to hold to maturity and are recorded at amortized cost.
Available-for-sale securities are those securities that would be available to be sold in the future in response to Peoples’ liquidity
needs, changes in market interest rates, and asset-liability management strategies, among other considerations. Available-for-sale
securities are reported at fair value, with unrealized gains and losses reported in total stockholders’ equity as a separate
component of accumulated other comprehensive loss (“AOCL”), net of applicable deferred income taxes.
Certain restricted equity investment securities that do not have readily determinable fair values and for which Peoples does
not exercise significant influence, are carried at cost. These cost method securities are reported in “Other investment securities”
on the Consolidated Balance Sheets and consist primarily of shares of the Federal Home Loan Bank of Cincinnati (the “FHLB”)
and the Federal Reserve Bank of Cleveland (the “FRB”).
Peoples evaluates available-for-sale investment securities on a quarterly basis to determine how much, if any, allowance for
credit losses is required. Peoples reviews available-for-sale investment securities at an unrealized loss position, with potential
exposure to a credit event (which excludes U.S. government and U.S. government sponsored agency securities) to determine if the
unrealized loss was credit-related. An allowance for credit losses is recorded to the extent that the unrealized loss was credit-
related and likely to be permanent.
Peoples evaluates held-to-maturity investment securities on a quarterly basis in determining an allowance for credit losses.
Peoples has determined that the loss given default for U.S. government sponsored enterprise investment securities is zero, due to
the fact that it is unlikely the ultimate guarantor (the U.S. government) would not perform on its implicit guarantee in the event of
default. The remaining securities are included in the calculation of the allowance for credit losses for held-to-maturity investment
securities.
Loans and Leases: Loans originated by Peoples that Peoples has the positive intent and ability to hold for the foreseeable future
or to maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, purchase premiums
and discounts, charge-offs and an allowance for credit losses. Leases originated by Peoples are reported at the net investment of
the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Throughout this Form 10-K, loans and leases
are referred to as “total loans” and “loans held for investment.” The foreseeable future is based upon current market conditions
and business strategies, as well as balance sheet management and liquidity. As the conditions change, so may management’s view
of the foreseeable future.
Peoples considers loans and leases past due if any required principal and interest payments have not been received as of the
date such payments were required to be made under the terms of the loan or lease agreement. Upon detection of the reduced
ability of a borrower or lessee to meet cash flow obligations, consumer and residential real estate loans and leases are typically
charged down to the net realizable value, with the residual balance placed on nonaccrual status. Loans and leases deemed to be
uncollectable are charged against the allowance for credit losses, while recoveries of previously charged off amounts are credited
to the allowance for credit losses.
Loans and leases acquired in a business combination that have evidence of more than insignificant credit deterioration, which
includes loans and leases that Peoples believes it is probable that Peoples will be unable to collect all contractually required
payments, are considered PCD loans or leases. These loans are recorded at the purchase price, and an allowance for credit losses
is determined using the same methodology as for other loans or leases. The initial allowance for credit losses determined on a
collective basis is allocated to individual loans or leases. The total of the purchase price and allowance for credit losses is the net
amount expected to be collected for PCD loans or leases. The variance between the initial amortized cost basis and the par value
of the loan is considered an interest premium or discount, which is amortized or accreted into interest income on a level yield
method over the life of the loan. The variance between the initial amortized cost basis and the fair value of a lease is considered an
interest premium or discount, which is amortized or accreted into interest income on a level yield method over the life of the
lease.
Loans and leases acquired in a business combination that are not considered PCD are recorded at fair value and the difference
between the acquisition date fair value and the contractual amounts due at the acquisition date represents the discount or premium
to each loan’s or lease’s cost basis and is accreted or amortized to interest income over the loan’s or lease’s remaining life using
the level yield method. At the acquisition date, Peoples records provision for credit losses to establish the allowance for credit
losses for these acquired loans and leases.
Loans Held for Sale: Loans originated by Peoples and intended to be sold in the secondary market, generally one-to-four family
residential loans, are carried at the lower of cost or estimated fair value determined on an aggregate basis. Gains and losses on
sales of loans held for sale are included in mortgage banking income.
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Loans originated by Peoples with the intent to be held in the portfolio are subsequently transferred to held for sale when a
decision is made to sell these loans. At the time of a loan’s transfer to the held for sale classification, the loan is recorded at the
lower of cost or its fair value. Any reduction in the loan’s fair value is reflected as a write-down of the recorded investment
resulting in a new cost basis, with a corresponding charge against the allowance for credit losses. If the fair value of a loan
classified as held for sale in subsequent periods is less than its cost basis, the carrying value of the loan is adjusted accordingly,
with the corresponding loss recognized in income.
Allowance for Credit Losses: The allowance for credit losses includes both the allowance for credit losses for loans and leases
and the allowance for credit losses on lending-related commitments. The allowance for credit losses is a valuation reserve
established through the provision for credit losses charged against income. The allowance for credit losses is estimated by
management using relevant available information, from both internal and external sources, relating to past events, current
conditions, and reasonable and supportable forecasts.
The allowance for credit losses is measured on a pool basis, with loans collectively evaluated when similar risk
characteristics exist. Peoples evaluated risk characteristics, including but not limited to: internal or third-party credit scores or
credit ratings, risk ratings or classifications, financial asset type, collateral type, size, effective interest rate, term, geographical
location, industry of the borrower, vintage, historical or credit loss patterns and reasonable and supportable forecast periods.
Peoples identified 20 segments for which it believes there are similar risk characteristics and utilized a discounted cash flow
methodology in determining an allowance for credit losses for each segment.
In management’s estimation of expected credit losses, Peoples’ uses a one year reasonable and supportable period across all
segments. In estimating credit losses, Peoples uses a loss driver method, which analyzes one or more economic variables to the
change in default rate using a regression analysis. Variables that had a strong correlation were selected as economic factors, or
variables, for the model. If a single variable was not found to be strongly correlated, additional variables were included. Peoples
utilizes the U.S. unemployment and Ohio unemployment as economic factors in modeling.
Probabilities of default are used in the loss driver model and are analyzed on a quarterly basis to assess reasonableness.
Peoples measured loss given default at the segment level due to statistical considerations using historical information. Peoples
also utilized peer data due to somewhat volatile loss history in certain segments to normalize default curves, which provided more
meaningful results.
Peoples modeled amortizing loans with a prepayment rate annualized to one year. The prepayment rates were calculated
using Peoples’ historical data, at the segment level. Peoples models extensions of contractual terms in the following situations:
when a loan is 60 days or more past due, when a partial charge-off has occurred, if the loan is in nonaccrual status, or if the loan is
grade 5 or higher. When any of these criteria are met and the loan matures within the next 12 months, the loan will be modeled to
extend for an additional 12 months.
In general, Peoples completes a quarterly evaluation based on several qualitative factors to determine if there should be
adjustments made to the allowance for credit losses. These factors include economic conditions, collateral, concentrations,
troubled assets, Peoples’ loss trends, peer loss trends, delinquency trends, portfolio composition and loan growth, underwriting,
and certain other risks.
The allowance for credit losses related to specific loans was based on management’s estimate of potential losses on impaired
loans as determined by (1) the present value of expected future cash flows, (2) the fair value of collateral if the loan is determined
to be collateral dependent, or (3) the loan’s observable market price.
Peoples categorizes loans involving commercial borrowers into risk categories based upon an established grading matrix.
This system is used to manage the risk within Peoples’ commercial lending activities, evaluate changes in the overall credit
quality of the loan portfolio and evaluate the appropriateness of the allowance for credit losses. Loan grades are assigned at the
time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant.
Commercial loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an
annual basis for possible credit deterioration. Commercial leases, as well as loan relationships whose aggregate credit exposure to
Peoples is equal to or less than $1.0 million, are reviewed at least on an event driven basis. Triggers for review include knowledge
of adverse events affecting the borrower’s business, receipt of financial statements indicating deteriorating credit quality or other
similar events. Adversely classified loans are reviewed on a quarterly basis.
The primary factors considered when assigning a risk grade to a loan include (1) reliability and sustainability of the primary
source of repayment, (2) past, present and projected financial condition of the borrower, and (3) current economic and industry
conditions. Other factors that could influence the risk grade assigned include the type and quality of collateral and the strength of
any guarantors. The primary source of repayment for commercial real estate loans and commercial and industrial loans is
normally the operating cash flow of the business available to repay debt. Management’s analysis of operating cash flow for
commercial real estate loans secured by non-owner occupied properties takes into account factors such as rent rolls and vacancy
statistics. Management’s analysis of operating cash flow for commercial real estate loans secured by owner occupied properties
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and all commercial and industrial loans considers the profitability, liquidity and leverage of the business. The evaluation of
construction loans includes consideration of the borrower’s ability to complete construction within the established budget.
The primary factors considered when classifying residential real estate loans, home equity lines of credit and consumer loans
include the loan’s past due status and any declaration of bankruptcy by the borrower(s). The classification of residential real estate
loans and home equity lines of credit also takes into consideration the current value of the underlying collateral.
Peoples has elected the practical expedient not to measure allowance for credit losses for accrued interest receivables and
reverses accrued interest on nonperforming loans against interest income in a timely manner.
Unfunded Commitments: Peoples also completes a quarterly evaluation for unfunded commitments for loans that are not
unconditionally cancellable, which includes construction loans, floor plan lines of credit, home equity lines of credit, other credit
lines and letters of credit. Peoples performed a study to determine the historical funding rates of unadvanced portions of loans,
and applied these funding rates to the unfunded commitments at period end. The loss rates, including qualitative factors, in
determining the allowance for credit losses were applied at the segment level to the unfunded commitment amount to determine
the allowance for credit loss liability for unfunded commitments.
Nonaccrual Loans: Peoples discontinues the accrual of interest on a loan when conditions cause management to believe
collection of all or any portion of the loan’s contractual interest is doubtful. Such conditions may include the borrower being 90
days or more past due on any contractual payments, or current information regarding the borrower’s financial condition and
repayment ability. All unpaid accrued interest deemed uncollectable is reversed, which reduces Peoples’ net interest income.
Interest received on nonaccrual loans is included in income only if principal recovery is reasonably assured.
Bank Premises and Equipment: Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is
computed on the straight-line method over the estimated useful lives of the related assets owned. Major improvements to leased
facilities are capitalized and included in bank premises at cost less accumulated depreciation, which is calculated on the straight-
line method over the lesser of the remaining term for the leased facility or the estimated economic life of the improvement.
Goodwill and Other Intangible Assets: Goodwill represents the excess of the cost of an acquisition or business combination over
the fair value of the net assets acquired in the acquisition or business combination. Goodwill is not amortized but is tested for
impairment when indicators of impairment exist, or at least annually on October 1.
Peoples’ other intangible assets include customer relationship intangible assets, core deposit intangible assets, indefinite-lived
trade name and servicing rights representing the net present value of future economic benefits to be earned from acquired
customer relationships with definite useful lives. These intangible assets are amortized on an accelerated basis over their
estimated lives ranging from 7 to 10 years.
Servicing Rights: Servicing rights represent the right to service loans sold to third-party investors. Loans that are sold are
primarily mortgage loans, but also include small business and agricultural loans. Servicing rights are recognized separately as a
servicing asset whenever Peoples undertakes an obligation to service financial assets. Servicing rights are reported in other
intangible assets on the Consolidated Balance Sheets. Serviced loans that have been completely sold are not included on the
Consolidated Balance Sheets. Loan servicing income included in mortgage banking income includes servicing fees received from
the third-party investors and certain charges collected from the borrowers.
Peoples initially records servicing rights at fair value at the time of the sale of the loans to the third-party investor. Peoples
follows the amortization method for the subsequent measurement of each class of separately recognized servicing assets and
liabilities. Under the amortization method, Peoples amortizes the value of servicing assets or liabilities utilizing a straight-line
basis approach over the period of estimated net servicing income or net servicing loss, and assesses servicing assets or liabilities
for impairment or increased obligation based on the fair value at each reporting date. The fair value of the servicing rights is
determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing
portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates.
Derivatives: Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result
in the receipt or payment of future known or expected cash amounts, the value of which is determined by interest rates. Peoples’
derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples’ known or expected
cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has
interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are
not used to manage interest rate risk in Peoples’ assets or liabilities. Peoples manages a matched book with respect to customer-
related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions. Amounts
reported in AOCL related to derivatives are reclassified to interest income or expense as interest payments are made or received
on Peoples’ variable-rate assets or liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the
changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transaction. If
the derivative financial instruments designated as cash flow hedges are deemed effective, changes in the fair value of each
derivative financial instrument are reported in AOCL (outside of earnings), net of tax, and subsequently reclassified to earnings
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when the hedged transaction affects earnings. If the derivative financial instruments designated as cash flow hedges are deemed
ineffective, changes in the fair value of the derivative financial instrument are recognized directly in earnings.
Interest Rate Lock Commitments: Peoples enters into interest rate lock commitments with borrowers and best efforts
commitments with investors on mortgage loans originated for sale into the secondary markets to manage the inherent interest rate
and pricing risk associated with selling loans. An interest rate lock commitment generally terminates once the loan is funded, the
lock period expires or the borrower decides not to contract for the loan. A best efforts commitment generally terminates once the
loan is sold, the commitment period expires or the borrower decides not to contract for the loan. These commitments are
considered derivatives. The valuation of such commitments considers the servicing release premium, but does not consider other
expected cash flows related to the servicing of the future loan. Management determined these derivatives did not have a material
effect on Peoples’ financial position, results of operations or cash flows at December 31, 2023.
Investments in Affordable Housing Limited Partnerships: Investments in affordable housing consist of investments in limited
partnerships that operate qualified affordable housing projects or that invest in other limited partnerships formed to operate
affordable housing projects. These investments are considered variable interest entities for which Peoples is not the primary
beneficiary. Peoples generally utilizes the proportional amortization method to account for these investments with the tax credits,
net of the amortization of the investment, reflected in the Consolidated Statements of Income as a reduction in income tax
expense. The unamortized amount of the investments is recorded in “Other assets” and totaled $13.1 million and $15.1 million at
December 31, 2023 and 2022, respectively.
Other Real Estate Owned (“OREO”): OREO, included in “Other assets” on the Consolidated Balance Sheets, is comprised
primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in
satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. Peoples had
OREO totaling $7.2 million at December 31, 2023 and $8.9 million at December 31, 2022.
Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”): Peoples enters into Repurchase Agreements
with customers and other financial services companies, which are considered financings. As such, these obligations are recorded
as a liability on the Consolidated Balance Sheets and disclosed in “Note 9 Short-Term Borrowings” and “Note 10 Long-Term
Borrowings,” as appropriate. Securities pledged as collateral under Repurchase Agreements are included in investment securities
on the Consolidated Balance Sheets and are disclosed in “Note 3 Investment Securities.” The fair value of the collateral pledged
to a third party is continually monitored and additional collateral is pledged or returned, as deemed appropriate.
Interest Income Recognition: Interest income on loans and investment securities is recognized by methods that result in level
rates of return on principal amounts outstanding. This includes yield adjustments resulting from the amortization of premiums on
investment securities, loan costs and premiums, and accretion of discounts on investment securities, loan fees and discounts.
Loans that have been placed on nonaccrual, and are subsequently returned to accruing status, recognize interest income similar to
other accruing loans once they return to accruing status. Prior accrued interest that was reversed when the loan was placed on
nonaccrual is recognized when received, after all of the principal of the loan outstanding has been paid. Since mortgage-backed
securities comprise a sizable portion of Peoples’ investment portfolio, a significant increase in principal payments on those
securities can impact interest income due to the corresponding acceleration of premium amortization or discount accretion.
Revenue Recognition: Peoples recognizes revenues as they are earned based on contractual terms, or as services are provided
and collectability is reasonably assured. Peoples’ principal source of revenue is interest income, which is recognized on an accrual
basis primarily according to the terms in written contracts, such as loan agreements or securities contracts.
Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of
cumulative revenue will not occur, once the uncertainty is resolved. Peoples’ contracts with customers are short-term in nature,
and were recognized under the following revenue streams:
Electronic Banking Income: Electronic banking income consists of two revenue streams related to interchange income, and
promotional and usage income.
Peoples recognizes interchange income over time, on a monthly basis, which is based on the transactional volume of debit
card and credit card activity completed by its customers during the month in which income is recognized. Peoples is obligated,
based on its contracts with third parties, to meet certain volumes of debit card and credit card activities, which are performed by
Peoples’ customers, over a certain period of time. Interchange income is variable as it is based on the transaction volume of debit
card activity completed by Peoples’ customers. Peoples estimates the variable consideration based upon the “most likely amount”
method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due for all PIN
transactions from the vendor within one month of the completed customer debit card and credit card activity, while all other
interchange transaction fees are earned and recorded on a daily basis. Peoples has elected to apply a practical expedient of right to
invoice when recognizing interchange income, as Peoples has fulfilled the required performance obligations, the vendor has
consumed the service, and Peoples has a right to the related income.
Peoples also recognizes promotional and usage income over time, on a monthly basis, which is related to branding of debit
cards and promotion or use of certain services provided by third-party vendors. Peoples is obligated to brand its debit cards in a
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certain manner, and promote and use services provided by third-party vendors. Promotional and usage income is variable as it is
based on certain metrics achieved for promotion and usage of services provided by the third-party vendors. Peoples estimates the
variable consideration based upon the “most likely amount” method, and does not expect or anticipate a significant reversal of
revenue in future periods. Payment is due from the third-party vendors within 45 days of the monthly fulfillment of Peoples’
performance obligation. Peoples has elected to apply a practical expedient of right to invoice when recognizing promotional and
usage income, as Peoples has fulfilled the required performance obligations, the vendor has consumed the service, and Peoples
has a right to the related income.
Trust and Investment Income: Trust and investment income consists of revenue from fiduciary and brokerage activities, which
includes fees for services such as asset management, record keeping, retirement services and estate management, and investment
commissions and fees related to the sale of investments. Trust and investment income is recognized over time, which reflects the
duration of the contract period for which services have been provided. Trust and investment income is variable as it is based on
the value of assets under administration and management, and specific transactions. Peoples estimates the variable consideration
based upon the “most likely amount” method, and does not expect or anticipate a significant reversal of revenue in future periods.
Payment is due from the customer when billed, which is typically a monthly or quarterly billing for services rendered in the most
recent period, for which the performance obligation has been satisfied. Peoples has elected to apply a practical expedient of right
to invoice when recognizing trust and investment income, as Peoples has fulfilled the performance obligation, the customer has
consumed the service, and Peoples has a right to the related income. Peoples has also elected to apply a practical expedient related
to capitalizable costs, which are the commissions paid to financial advisors, and will expense these commissions paid to financial
advisors as incurred, as these costs are related to the trust and investment income and would have been amortized within one year
or less if they had been capitalized, the same period over which the income was earned.
Insurance Income: Insurance income generally consists of commissions and fees from the sale of insurance policies, fees related
to third-party administration services and performance-based commissions from insurance companies.
Peoples recognizes commission income from the sale of insurance policies when it acts as an agent between the insurance
carrier and policyholder, arranging for the insurance carrier to provide policies to policyholders, and acts on behalf of the
insurance carrier by providing customer service to the policyholders during the respective policy periods. Commission income is
recognized over time, using the output method of time elapsed, which corresponds with the underlying insurance policy period,
during which Peoples is obligated to perform under contract with the insurance carrier. Commission income is variable, as it is
comprised of a certain percentage of the underlying policy premium. Peoples estimates the variable consideration based upon the
“most likely amount” method, and does not expect or anticipate a significant reversal of revenue in future periods, based upon
historical experience. Payment is due from the insurance carrier for commission income once the insurance policy has been sold.
Peoples has elected to apply a practical expedient related to capitalizable costs, which are the commissions paid to insurance
producers, and will expense these commissions paid to insurance producers as incurred, as these costs are related to the
commission income and would have been amortized within one year or less if they had been capitalized, the same period over
which the commission income was earned.
Fees related to third-party administration services performed are recognized over time, during the period in which services
have been provided, and are recognized monthly in the month the services were performed.
Performance-based commissions from insurance companies are recognized at a point in time, when received, and no
contingencies remain.
Deposit Account Service Charges: Deposit account service charges consist of two revenue streams related to ongoing
maintenance fees for deposit accounts and transactional-based fees.
Ongoing maintenance fees are recognized on a monthly basis, generally with the monthly period beginning on the day of the
month on which the account was opened. Ongoing maintenance fee income is variable as these fees can be reduced if a customer
meets certain qualifying metrics. Peoples estimates the variable consideration based upon the “most likely amount” method, and
does not expect or anticipate a significant reversal of revenue in future periods. For accounts that are assessed maintenance fees
through the account analysis process, payment is due from the customer within one month after the monthly period in which the
account activity occurred. For all other accounts, monthly maintenance fees are assessed to the account on the last day of the
monthly period. Peoples has elected to apply a practical expedient of right to invoice when recognizing ongoing maintenance fees
for deposit accounts, as Peoples has fulfilled the required performance obligations, the customer has consumed the service, and
Peoples has a right to the related income.
Transactional-based fees are recognized at a point in time, which is at the completion of the relevant transaction. Peoples is
obligated to perform certain transactions as requested by its consumer and business deposit account customers, which are outside
of the normal maintenance requirements. Transactional-based fee income is variable as these fees are directly related to a service
request from the customer. Peoples estimates the variable consideration based upon the “most likely amount” method, and does
not expect or anticipate a significant reversal of revenue in future periods. Payment is due from the customer at the time of
completion of the requested transaction. Overdraft fees are considered transactional-based fees and accounted for as described
herein.
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Lease income: Peoples acquired its original lease portfolio in the NSL and Vantage acquisitions. Lease income presented in
“Non-interest income” consists of gains or losses, including residual asset gains and losses, on (i) the termination of leases, (ii)
syndicated leases, and (iii) other fees. Gains on the early termination of leases are recognized at a point in time, which is at the
completion of the relevant transaction. Gains on syndicated leases and other fees are recognized over time on a monthly basis.
Other Non-Interest Income: Other non-interest income includes certain revenues that are transactional-based, such as wire
transfer fees, money order fees and other ancillary fees or services. These transactional-based fees are recognized as income at a
point in time, at the completion of the relevant transaction. Transactional-based fee income is variable as these fees are directly
related to a service request from the customer. Peoples estimates the variable consideration based upon the “most likely amount”
method, and does not expect or anticipate a significant reversal of revenue in future periods. Payment is due from the customer at
the time of completion of the requested transaction.
Operating lease income is another component of other non-interest income. Income on operating leases is recognized on a
straight-line basis. Depreciation expense related to operating leases is recognized on a straight-line basis in “other non-interest
expense.” Peoples began originated operating leases in 2023.
Also included in other non-interest income are commercial loan swap fees, which consist of income related to transactions in
which Peoples Bank originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap
with Peoples Bank on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples
Bank effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples Bank. Peoples Bank
offsets its exposure in the swap by entering into an offsetting interest rate swap with an unaffiliated financial institution.
Commercial loan swap fees are recognized at a point in time, when the transaction has been completed, and there is no recourse or
further performance obligation required of Peoples Bank. Commercial loan swap fees are variable as these fees are a certain
percentage of the total swap fee collected on a completed transaction. Peoples Bank estimates the variable consideration based
upon the “most likely amount” method, and does not expect or anticipate a significant reversal of revenue in future periods.
Payment is due from the customer at the time of completion of the requested transaction.
Stock-Based Compensation: Stock-based compensation for restricted common share awards is measured at the fair value of these
awards on their grant date. Stock-based compensation is recognized over the restriction period for restricted common share
awards. Only the expense for the portion of the awards expected to vest is recognized. For service-based awards, stock-based
compensation for awards granted to employees who are eligible for retirement is recognized on the date the employee is first
eligible to retire.
Advertising Costs: Advertising costs are expensed as incurred.
Income Taxes: Peoples and its subsidiaries file a consolidated federal income tax return. Deferred income tax assets and liabilities
reflect the temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated
Financial Statements at the blended federal and state corporate income tax rate. A valuation allowance, if needed, reduces
deferred tax assets to the expected amount most likely to be realized. Realization of deferred tax assets is dependent upon the
generation of a sufficient level of future taxable income and recoverable taxes paid in prior years.
A tax position is initially recognized in the financial statements when it is more-likely-than-not the position will be sustained
upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax
benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge
of the position and all relevant facts. Penalties and interest incurred under the applicable tax law are classified as income tax
expense. The amounts of Peoples’ uncertain income tax positions and unrecognized benefits are disclosed in “Note 13 Income
Taxes.”
Earnings per Share (“EPS”): Basic EPS and diluted EPS are calculated using the two-class method since Peoples has issued
share-based payment awards that are considered participating securities because they entitle holders the rights to dividends during
the vesting term. The two-class method is an earnings allocation formula that determines net income per share for each class of
common stock and participating security according to dividends declared and participation rights in undistributed earnings. Basic
EPS is computed by dividing net earnings allocated to common shareholders by the weighted-average number of common shares
outstanding. Diluted EPS is computed by dividing net earnings allocated to common shareholders by the weighted-average
number of common shares outstanding adjusted to include the effect of potentially dilutive common shares. Potentially dilutive
common shares include non-vested restricted common shares using the treasury stock method.
Recent Adoptions of New Accounting Guidance: From time to time, new accounting pronouncements are issued by the FASB or
other standard setting bodies that are adopted by Peoples as of the required effective dates. Unless otherwise discussed,
management believes the impact of any recently issued standards, including those issued but not yet effective, will not have a
material impact on Peoples’ Consolidated Financial Statements taken as a whole.
ASU 2020-04 - Reference Rate Reform (Topic 848): This guidance provides optional expedients and exceptions for
applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria
are met. This guidance was further updated by ASU 2021-01. This update was effective from March 12, 2020 through December
99
31, 2022. The FASB further updated the guidance with ASU 2022-06, which deferred the sunset date of ASC Topic 848,
Reference Rate Reform (Topic 848) from December 31, 2022 to December 31, 2024. ASU 2020-04 was early adopted by Peoples
as of September 30, 2021, which reduced the accounting burden of assessing contracts impacted by reference rate reform. Peoples
established a working group, consisting of key stakeholders from throughout the company, to monitor developments relating to
LIBOR changes and to guide the transition. This team has worked to successfully ensure that technology systems are prepared for
the transition, loan documents that reference LIBOR-based rates have been appropriately amended to reference other methods of
interest rate determinations and internal and external stakeholders have been apprised of the transition. Peoples ceased originating
LIBOR-based products after December 31, 2021 and began originating SOFR-indexed products. Any LIBOR-based products
originated prior to December 31, 2021, but maturing after June 30, 2023, were amended to reference SOFR-indexed rates as of
July 1, 2023. The transition did not have a material impact on Peoples’ Consolidated Financial Statements.
ASU 2022-01 - Derivatives and Hedging (Topic 815): This guidance allows entities to apply the same portfolio hedging
method to both prepayable and non-prepayable financial assets. It also allows multiple hedged layers to be designated for a single
closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. If a breach is
anticipated, an entity is required to partially or fully de-designate a hedged layer or layers until a breach is no longer anticipated.
There are additional requirements and enhanced disclosures related to basis adjustments. The guidance should be applied on a
prospective, retrospective or modified retrospective basis depending on the amendment. This guidance was adopted by Peoples
effective January 1, 2023 and the transition did not have a material impact on Peoples’ Consolidated Financial Statements.
ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326): This ASU eliminates the accounting guidance on
TDRs for creditors and amends the guidance on disclosures to include current-period gross charge-offs by year of origination.
This ASU also updates the requirements related to accounting for credit losses under Accounting Standards Codification (“ASC”)
326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing
financial difficulty. For entities that have already adopted ASU 2016-13, as Peoples has, the amendments in ASU 2022-02 are
effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
Effective January 1, 2023, Peoples adopted the amendments within ASU 2022-02, using the prospective transition method.
The adoption of this guidance did not have a material impact on Peoples’ Consolidated Financial Statements.
Pursuant to the guidance in ASU 2022-02, when a loan is restructured, Peoples continues to measure the allowance for credit
losses on the loan using a discounted cash flow approach that utilizes a prepayment-adjusted discount rate based on the loan’s
restructured terms. Under the TDR accounting model, Peoples modeled a 12-month extension of the contractual terms for TDRs
that were to mature within the next 12 months. As Peoples has elected a prospective transition, the extension on a loan that was
previously restructured and accounted for as a TDR will continue to be measured as it had been historically in Peoples’ allowance
for credit losses until the loan is paid off, sold, liquidated or subsequently restructured. Refer to “Note 4 Loans and Leases” for
additional information.
Note 2 Fair Value of Financial Instruments
Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most
advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value
accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or
a non-recurring basis in the Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled
“Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities
Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.”
Depending on the nature of the asset or liability, Peoples uses various valuation methodologies and assumptions to estimate fair
value. The measurement of fair value under US GAAP uses a hierarchy, which is described in “Note 1 Summary of Significant
Accounting Policies.”
Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to
measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other
circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or
liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods
presented in the Consolidated Financial Statements.
100
Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis
The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a
recurring basis on the Consolidated Balance Sheets by level in the fair value hierarchy. At December 31, 2023 and December 31,
2022, there were no assets and liabilities measured on a recurring basis that were considered Level 3 measurements.
(Dollars in thousands)
Assets:
Available-for-sale investment securities:
Obligations of:
U.S. Treasury and government agencies
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Bank-issued trust preferred securities
Total available-for-sale securities
Equity investment securities (a)
Derivative assets (b)
Liabilities:
Derivative liabilities (c)
Recurring Fair Value Measurements at Reporting Date
December 31, 2023
December 31, 2022
Level 1
Level 2
Level 1
Level 2
$
$
30,296 $
—
—
—
—
—
30,296
191
—
—
118,607
213,296
628,924
51,234
5,965
1,018,026
237
22,304
152,422 $
—
—
—
—
—
152,422
147
—
—
88,115
225,882
604,653
50,049
10,278
978,977
199
34,123
$
— $
19,122
$
— $
28,529
(a) Included in “Other investment securities” on the Consolidated Balance Sheets. For additional information, see “Note 3 Investment Securities.”
(b) Included in “Other assets” on the Consolidated Balance Sheets. For additional information, see “Note 15 Derivative Financial Instruments.”
(c) Included in “Accrued expenses and other liabilities” on the Consolidated Balance Sheets. For additional information, see “Note 15 Derivative Financial
Instruments.”
Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and
represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a
market approach that considers observable market data, such as interest rate volatility, SOFR (or other relevant) yield curves,
credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology
and quality controls utilized by the pricing services in management’s overall assessment of the reasonableness of the fair values
provided, and challenges prices when management believes a material discrepancy in pricing exists.
Equity Investment Securities: The fair values of Peoples’ equity investment securities are obtained from quoted prices in active
exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2).
Derivative Assets and Liabilities: Derivative assets and liabilities are recognized on the Consolidated Balance Sheets at their fair
value within “Other assets” and “Accrued expenses and other liabilities,” respectively. The fair value for derivative financial
instruments is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters
(Level 2).
Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis
The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair
value on a non-recurring basis on the Consolidated Balance Sheets by level in the fair value hierarchy. At December 31, 2023 and
December 31, 2022, there were no assets and liabilities measured on a non-recurring basis that were considered Level 1
measurements.
(Dollars in thousands)
Collateral dependent loans
Loans held for sale (a)
Other real estate owned (“OREO”)
Non-Recurring Fair Value Measurements at Reporting Date
December 31, 2023
December 31, 2022
Level 2
Level 3
Level 2
Level 3
$
— $
501
$
1,663
—
—
7,118
— $
1,254
—
10,354
—
55
(a) Loans held for sale are presented gross of a valuation allowance of $163 and $105 at December 31, 2023 and December 31, 2022, respectively.
Collateral Dependent Loans: Loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is
experiencing financial difficulty, are considered collateral dependent. Peoples utilizes outside third-party appraisal services to
value the underlying collateral, for which Peoples uses to report the loans at their fair value (Level 3).
101
Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally one-to-four family residential
loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market
prices of similar instruments in arriving at the fair value (Level 2).
Other Real Estate Owned: OREO, included in “Other assets” on the Consolidated Balance Sheets, is comprised primarily of
commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a
loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO
is not re-measured to fair value on a recurring basis, but is based on recent real estate appraisals and is updated at least annually.
These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach
and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for
differences between the comparable sales and income data available (Level 3).
Servicing Rights: Servicing rights are included in “Other intangible assets” on the Consolidated Balance Sheets. The fair value of
servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash
flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates
(Level 3). The carrying value of servicing rights is not re-measured to fair value on a recurring basis. Peoples assesses the
carrying value of servicing rights quarterly for impairment.
Financial Instruments Not Required to be Measured and Reported at Fair Value
The following table provides the carrying amount for each class of assets and liabilities, and the fair value for certain financial
instruments that are not required to be measured or reported at fair value on the Consolidated Balance Sheets.
(Dollars in thousands)
Assets:
Cash and cash equivalents
Held-to-maturity investment securities:
Obligations of:
U.S. government sponsored agencies
States and political subdivisions (a)
Residential mortgage-backed securities
Commercial mortgage-backed securities
Commercial mortgage-backed securities
Total held-to-maturity securities
Other investment securities:
Other investment securities at cost:
Federal Home Loan Bank (“FHLB”) stock
Federal Reserve Bank (“FRB”) stock
Total other investment securities at cost
Other investment securities at fair value:
Nonqualified deferred compensation (b)
Other investment securities (c)
Total other investment securities at fair value
Loans and leases, net of deferred fees and costs (d)
1
2
2
2
2
3
N/A
N/A
1
2
Fair Value Measurements of Other Financial Instruments
December 31, 2022
December 31, 2023
Fair Value
Hierarchy
Level
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$ 426,722 $ 426,722 $ 154,022 $ 154,022
188,475
144,496
248,559
102,365
—
683,895
180,825
114,288
231,620
85,289
—
612,022
132,366
145,263
176,215
101,861
4,748
560,453
123,020
108,776
157,998
85,354
3,361
478,509
29,949
26,896
56,845
3,162
2,985
62,992
29,949
26,896
56,845
3,162
2,985
62,992
26,605
21,231
47,836
26,605
21,231
47,836
2,048
2,048
1,379
51,263
1,379
51,263
4,707,150 4,516,695
105,292
105,292
3
2
6,159,196 6,064,999
140,554
140,554
Bank owned life insurance
Financial liabilities:
Deposits
Short-term borrowings
Long-term borrowings
(a) Held-to-maturity investment securities are presented gross of an allowance for credit losses of $238 and $241, at December 31, 2023 and at December 31,
$ 7,152,297 $ 6,319,885 $ 5,716,941 $ 4,682,491
504,584
101,992
601,121
216,241
500,138
101,093
619,999
222,743
2
2
2
2022, respectively.
(b) Nonqualified deferred compensation includes underlying investments in mutual funds.
(c) “Other investment securities,” as reported on the Consolidated Balance Sheets, also included equity investment securities at December 31, 2023
and at December 31, 2022, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis
table above and not included in this table.
(d) Loans and leases, net of deferred fees and cost are presented gross of an allowance for credit losses of $62.0 million and $53.2 million, as of December 31,
2023 and December 31, 2022, respectively.
102
Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments:
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-
bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of 90 days or
less. The carrying amount for cash on hand and balances due from banks is a reasonable estimate of fair value (Level 1).
Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service
and represent fair values determined by pricing models using a market approach that considers observable market data, such
as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level
2). When observable market data is absent, the independent pricing service estimates prices based on underlying cash flow
characteristics and discount rates and compare to similar securities (Level 3). Management reviews the valuation
methodology and quality controls utilized by the pricing services in management’s overall assessment of the reasonableness
of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.
Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable
securities. Other investment securities at fair value are valued using quoted prices in an active market (Level 1) or quoted
prices in less active markets (Level 2).
Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the
underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes
were held to maturity. Peoples considered interest rate, credit and market factors in estimating the fair value of loans and
leases (Level 3). Fair values for loans and leases are estimated using a discounted cash flow methodology. The discount rates
take into account interest rates currently being offered to customers for loans and leases with similar terms, the credit risk
associated with the loans and leases and other market factors, including liquidity.
Bank Owned Life Insurance: Peoples’ bank owned life insurance policies are recorded at their cash surrender value (Level
2). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from
death benefits.
Deposits: The fair value of fixed-maturity CDs is estimated using a discounted cash flow calculation based on current rates
offered for deposits of similar remaining maturities (Level 2). Demand and other non-fixed-maturity deposits are estimated
using a discounted cash flow calculation based on maturity, attrition and re-pricing assumptions.
Short-term Borrowings: The fair value of short-term borrowings is estimated using a discounted cash flow analysis based on
rates currently available to Peoples for borrowings with similar terms (Level 2).
Long-term Borrowings: The fair value of long-term borrowings is estimated using a discounted cash flow analysis based on
rates currently available to Peoples for borrowings with similar terms (Level 2).
Certain financial assets and financial liabilities that are not required to be measured or reported at fair value can be subject to fair
value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and liabilities
include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair
value, which are not included in the above information. Accordingly, the above fair values are not intended to represent the aggregate
fair value of Peoples.
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Note 3 Investment Securities
Available-for-sale
The following table summarizes Peoples’ available-for-sale investment securities at December 31:
(Dollars in thousands)
2023
Obligations of:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
U.S. Treasury and government agencies
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Bank-issued trust preferred securities
Total available-for-sale securities
$
30,999 $
128,500
239,906
717,772
60,611
6,500
$ 1,184,288 $
2022
Obligations of:
292 $
639
485
1,819
5
—
30,296
118,607
213,296
628,924
51,234
5,965
3,240 $ (139,206) $ 1,048,322
(995) $
(10,532)
(27,095)
(90,667)
(9,382)
(535)
U.S. Treasury and government agencies
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Bank-issued trust preferred securities
Total available-for-sale securities
$ 158,473 $
101,753
261,612
707,025
61,091
10,765
$ 1,300,719 $
— $
18
12
1,017
—
57
(6,051) $ 152,422
88,115
(13,656)
225,882
(35,742)
604,653
(103,389)
50,049
(11,042)
10,278
(544)
1,104 $ (170,424) $ 1,131,399
The unrealized losses related to residential mortgage-backed securities at December 31, 2023 and 2022 were attributable to
changes in market interest rates and spreads since the securities were purchased.
The gross gains and gross losses realized by Peoples from sales of available-for-sale securities for the years ended December 31
were as follows:
(Dollars in thousands)
Gross gains realized
Gross losses realized
Net loss realized
2023
2022
2021
$
$
1,550 $
5,250
(3,700) $
314 $
375
(61) $
1,184
2,046
(862)
The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and
recognized as of the trade date.
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The following table presents a summary of available-for-sale investment securities that had an unrealized loss at December 31:
(Dollars in thousands)
2023
Obligations of:
U.S. Treasury and government
agencies
Less than 12 Months
Unrealized
Loss
No. of
Securities
Fair
Value
12 Months or More
Unrealized
Loss
No. of
Securities
Fair
Value
Total
Fair
Value
Unrealized
Loss
$ 8,568 $
83
22 $ 11,631 $
912
5 $
20,199 $
995
U.S. government sponsored
agencies
14,439
States and political subdivisions 18,268
35
136
4
74,211
10,497
32
167,346
26,959
58,671
1,150
66
529,895
89,517
6,000
112
7
44,656
9,270
1,984
16
1
3,981
519
$ 107,930 $
1,532
132 $ 831,720 $ 137,674
420 $
939,650 $ 139,206
$ 112,730 $
2,772
13 $ 39,692 $
3,279
11 $
152,422 $
6,051
U.S. government sponsored
agencies
15,166
States and political subdivisions 60,324
249
714
17
66,706
13,407
114
156,900
35,028
104,959
8,087
105
488,452
95,302
1,874
129
2
48,175
10,913
4,400
100
3
3,556
444
15
138
238
21
3
88,650
10,532
185,614
27,095
588,566
90,667
50,656
9,382
5,965
535
18
117
139
21
2
81,872
13,656
217,224
35,742
593,411
103,389
50,049
11,042
7,956
544
Residential mortgage-backed
securities
Commercial mortgage-backed
securities
Bank-issued trust preferred
securities
Total
2022
Obligations of:
U.S. Treasury and government
agencies
Residential mortgage-backed
securities
Commercial mortgage-backed
securities
Bank-issued trust preferred
securities
Total
$ 299,453 $
12,051
254 $ 803,481 $ 158,373
308 $ 1,102,934 $ 170,424
Management evaluates available-for-sale investment securities for an allowance of credit losses on a quarterly basis. At
December 31, 2023, management concluded that no individual securities at an unrealized loss position required an allowance for credit
losses. At December 31, 2023, Peoples did not have the intent to sell, nor was it more-likely-than-not that Peoples would be required
to sell, any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both December 31, 2023 and
2022 were largely attributable to changes in market interest rates and spreads since the securities were purchased. Accrued interest
receivable is not included in the investment securities balances, and is presented in the “Other assets” line of the Consolidated Balance
Sheets, with no recorded allowance for credit losses. Interest receivable on investment securities was $8.8 million at December 31,
2023 and $7.8 million at December 31, 2022.
The unrealized losses with respect to the three bank-issued trust preferred securities that had been in an unrealized loss position
for twelve months or more at December 31, 2023 were primarily attributable to the subordinated nature of the debt.
The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by
contractual maturity at December 31, 2023. The weighted-average yields are based on the amortized cost and are computed on a fully
taxable-equivalent basis using a blended federal and state corporate income tax rate of 23.3%. In some cases, the issuers may have the
right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.
105
(Dollars in thousands)
Amortized cost
Obligations of:
U.S. Treasury and government agencies
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Bank-issued trust preferred securities
Total available-for-sale securities
Fair value
Obligations of:
U.S. Treasury and government agencies
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Bank-issued trust preferred securities
Total available-for-sale securities
Total weighted-average yield
Within 1
Year
1 to 5
Years
5 to 10
Years
Over 10
Years
Total
$ 1,283
2,499
11,042
3
—
—
$ 14,827
$ 1,275
2,486
10,990
3
—
—
$ 14,754
$ 15,302
59,086
46,054
3,690
12,502
3,000
$ 139,634
$ 14,354
54,898
43,535
3,570
11,370
2,920
$ 130,647
$ 8,403
34,849
59,932
61,069
27,191
3,500
$ 194,944
$ 8,493
30,426
51,294
56,084
23,061
3,045
$ 172,403
$ 6,011
32,066
122,878
653,010
20,918
—
$ 834,883
$ 6,174
30,797
107,477
569,267
16,803
—
$ 730,518
$
30,999
128,500
239,906
717,772
60,611
6,500
$ 1,184,288
$
30,296
118,607
213,296
628,924
51,234
5,965
$ 1,048,322
2.30 %
2.58 %
2.42 %
2.59 %
2.56 %
Held-to-Maturity
The following table summarizes Peoples’ held-to-maturity investment securities at December 31:
(Dollars in thousands)
2023
Obligations of:
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Total held-to-maturity securities
2022
Obligations of:
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Total held-to-maturity securities
Amortized
Cost
Allowance
for Credit
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$ 188,475 $
144,496
248,559
102,365
$ 683,895 $
$ 132,366 $
145,263
176,215
106,609
$ 560,453 $
— $
(238)
—
—
(238) $
— $
(241)
—
—
(241) $
489 $
134
1,643
—
2,266 $
(8,139) $ 180,825
114,288
(30,104)
231,620
(18,582)
(17,076)
85,289
(73,901) $ 612,022
130 $
162
244
—
536 $
(9,476) $ 123,020
108,776
(36,408)
157,998
(18,461)
(17,894)
88,715
(82,239) $ 478,509
There were no sales of held-to-maturity securities during the years ended December 31, 2023 and December 31, 2022.
Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. The majority
of Peoples’ held-to-maturity investment securities are residential mortgage-backed securities. Peoples analyzed these securities using
cumulative default rate averages for investment grade municipal securities.
106
The following table presents a summary of held-to-maturity investment securities that had an unrealized loss at December 31:
(Dollars in thousands)
2023
Obligations of:
U.S. government sponsored
agencies
States and political subdivisions
Residential mortgage-backed
securities
Commercial mortgage-backed
securities
Total
2022
Obligations of:
U.S. government sponsored
agencies
Less than 12 Months
Unrealized
Loss
No. of
Securities
Fair
Value
12 Months or More
Unrealized
Loss
No. of
Securities
Fair
Value
Total
Fair
Value
Unrealized
Loss
$ 64,487 $
356
14 $ 86,071 $
7,783
18 $ 150,558 $
8,139
—
—
—
111,040
30,104
67
111,040
30,104
44,379
1,105
14
117,654
17,477
34
162,033
18,582
13,919
1,845
6
71,370
15,231
31
85,289
17,076
$ 122,785 $
3,306
34 $ 386,135 $
70,595
150 $ 508,920 $
73,901
$ 59,905 $
651
17 $ 29,306 $
8,825
9 $ 89,211 $
9,476
States and political subdivisions
3,590
1,072
3
101,863
35,336
64
105,453
36,408
Residential mortgage-backed
securities
Commercial mortgage-backed
securities
Total
71,582
2,904
21
72,862
15,557
18
144,444
18,461
26,869
650
8
61,846
17,244
29
88,715
17,894
$ 161,946 $
5,277
49 $ 265,877 $
76,962
120 $ 427,823 $
82,239
The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by
contractual maturity at December 31, 2023. The weighted-average yields are based on the amortized cost and are computed on a fully
taxable-equivalent basis using a blended federal and state corporate income tax rate of 23.3%. In some cases, the issuers may have the
right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.
(Dollars in thousands)
Amortized cost
Obligations of:
Within 1
Year
1 to 5
Years
5 to 10
Years
Over 10
Years
Total
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Total held-to-maturity securities
$ 8,000
—
—
1,546
$ 9,546
$ 13,152
6,421
540
9,419
$ 29,532
$ 67,043
11,434
4,347
40,495
$ 123,319
$ 100,280
126,641
243,672
50,905
$ 521,498
$ 188,475
144,496
248,559
102,365
$ 683,895
Fair value
Obligations of:
U.S. government sponsored agencies
States and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Total held-to-maturity securities
Total weighted-average yield
$ 7,931
—
—
1,528
$ 9,459
$ 12,640
6,343
528
8,058
$ 27,569
$ 66,717
9,875
3,818
34,752
$ 115,162
$ 93,537
98,070
227,274
40,951
$ 459,832
$ 180,825
114,288
231,620
85,289
$ 612,022
3.81 %
2.87 %
3.98 %
3.55 %
3.60 %
Other Investment Securities
Peoples’ “Other investment securities” on the Consolidated Balance Sheets consist largely of shares of FHLB and FRB stock, and
other equity investment securities.
107
The following table summarizes the carrying value of Peoples’ Other investment securities at December 31:
(Dollars in thousands)
FHLB stock
FRB stock
Nonqualified deferred compensation
Equity investment securities
Other investment securities
Total other investment securities
$
$
2023
2022
29,949 $
26,896
3,162
429
2,985
63,421 $
26,605
21,231
2,048
346
1,379
51,609
Peoples redeemed $21.2 million and $2.6 million of FHLB stock in 2023 and 2022, respectively, in order to be in compliance
with the requirements of the FHLB. Peoples purchased $18.9 million and $11.9 million of additional FHLB stock during 2023 and
2022, respectively, as a result of the FHLB’s capital requirements on FHLB advances during the year. During the year ended
December 31, 2023, Peoples purchased $5.7 million of FRB stock as a result of capital requirements. During the year ended
December 31, 2022, Peoples purchased $7.9 million of FRB stock as requested by the FRB as a result of the Premier Merger on
September 17, 2021.
During 2023, Peoples recorded the change in the fair value of equity investment securities held at December 31, 2023 in “Other
non-interest income,” resulting in an unrealized loss of $141,000. During 2022, Peoples recorded the change in the fair value of equity
investment securities held at December 31, 2022 in “Other non-interest income,” resulting in unrealized gain of $2,000.
At December 31, 2023, Peoples’ investment in equity investment securities was comprised largely of common stocks issued by
various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of
Peoples’ stockholders’ equity.
Pledged Securities
At December 31, 2023 and 2022, Peoples had pledged available-for-sale investment securities and held-to-maturity investment
securities to secure public and trust department deposits, and Repurchase Agreements in accordance with federal and state
requirements. Peoples also pledged available-for-sale investment securities and held-to-maturity investment securities to secure
additional borrowing capacity at the FHLB and the FRB.
The following table summarizes the carrying value of Peoples’ pledged investment securities as of December 31:
(Dollars in thousands)
Securing public and trust department deposits, and Repurchase
Agreements:
Available-for-sale
Held-to-maturity
Securing additional borrowing capacity at the FHLB and the FRB:
Available-for-sale
Held-to-maturity
Note 4 Loans and Leases
Carrying Amount
2023
2022
$
713,033 $
559,142
85,899
39,607
779,244
312,921
3,972
128,870
Peoples’ loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within
Peoples’ footprint. Peoples also originates insurance premium finance loans nationwide through its Peoples Premium Finance division,
and originates leases nationwide through its North Star Leasing (“NSL”) division and its Vantage subsidiary. Throughout this Form
10-K, loans and leases are referred to as “total loans” and “loans held for investment.”
108
The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as
follows at December 31:
(Dollars in thousands)
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Deposit account overdrafts
Total loans, at amortized cost
2023
2022
$
$
364,019 $
2,196,957
1,184,986
203,177
414,060
791,095
208,675
666,472
128,769
986
6,159,196 $
246,941
1,423,518
892,634
159,197
345,131
723,360
177,858
629,426
108,363
722
4,707,150
Net deferred loan origination costs were $21.7 million and $20.5 million at December 31, 2023 and 2022, respectively.
Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Consolidated
Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $24.5 million at December 31,
2023 and $15.4 million at December 31, 2022.
Nonaccrual and Past Due Loans
A loan is considered past due if any required principal and interest payments have not been received as of the date such payments
were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or
not such loan is considered past due.
The amortized cost of loans on nonaccrual status and loans delinquent for 90 days or more and accruing were as follows at
December 31:
2023
2022
(Dollars in thousands)
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Nonaccrual (a)
$
— $
Accruing
Loans 90+
Days Past Due
Nonaccrual (a)
Accruing Loans 90+
Days Past Due
— $
12 $
2,816
2,758
—
8,436
7,921
1,022
2,412
78
316
1,355
3,826
877
171
68
12,121
3,462
—
3,178
9,496
820
2,176
208
31,473 $
—
167
130
504
3,041
917
58
—
25
4,842
Consumer, direct
Total loans, at amortized cost
$
112
25,477 $
25
6,716 $
(a) There were $1.2 million of nonaccrual loans for which there was no allowance for credit losses at December 31, 2023 and $1.4 million of such loans at
December 31, 2022.
The amount of interest income recognized on loans past due 90 days or more during 2023 and 2022 was $0.8 million and $1.7
million, respectively.
109
The following tables present the aging of the recorded investment in past due loans at December 31:
(Dollars in thousands)
2023
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Deposit account overdrafts
Total loans, at amortized cost
2022
Construction
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Deposit account overdrafts
Total loans, at amortized cost
Loans Past Due
30 – 59 days 60 – 89 days
90 + Days
Total
Current
Total
$
$
$
$
13 $
2,728
1,717
1,288
12,743
14,021
1,561
7,488
536
—
42,095 $
196 $
2,279
2,522
646
6,074
10,113
987
5,866
703
—
29,386 $
52 $
4,556
1,491
867
4,932
2,733
691
1,550
282
—
17,154 $
161 $
1,051
289
816
1,921
2,128
149
1,048
70
—
7,633 $
— $
1,572
3,052
1,355
12,014
4,481
683
1,230
43
—
24,430 $
9 $
10,370
3,449
504
6,218
5,519
552
921
108
—
27,650 $
65 $
8,856
6,260
3,510
29,689
21,235
2,935
10,268
861
—
364,019
2,196,957
1,184,986
203,177
414,060
791,095
208,675
666,472
128,769
986
83,679 $ 6,075,517 $ 6,159,196
363,954 $
2,188,101
1,178,726
199,667
384,371
769,860
205,740
656,204
127,908
986
366 $
13,700
6,260
1,966
14,213
17,760
1,688
7,835
881
—
246,941
1,423,518
892,634
159,197
345,131
723,360
177,858
629,426
108,363
722
64,669 $ 4,642,481 $ 4,707,150
246,575 $
1,409,818
886,374
157,231
330,918
705,600
176,170
621,591
107,482
722
Delinquency trends remained stable as 98.6% of Peoples’ portfolio was considered “current” both at December 31, 2023, and at
December 31, 2022.
Pledged Loans
Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, commercial real estate
and home equity lines of credit under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged
commercial loans to secure borrowings with the FRB. Loans pledged at December 31 are summarized in the following table:
(Dollars in thousands)
Loans pledged to FHLB
Loans pledged to FRB
2023
2022
$
1,206,134 $
419,245
783,843
339,005
Related Party Loans
In the normal course of its business, Peoples Bank has granted loans to certain directors and officers of Peoples, including their
affiliates, families and entities in which they are principal owners. At December 31, 2023, no related party loan was past due 90 or
more days or on nonaccrual status. Activity in related party loans is presented in the table below. Other changes primarily consist of
changes in related party status, and the addition and exit of directors during the year, as applicable.
110
(Dollars in thousands)
Balance, December 31, 2022
Acquired loans
New loans and disbursements
Repayments
No longer related party (a)
$
27,372
18,892
466
(215)
(26,696)
Other changes
347
20,166
Balance, December 31, 2023
(a) Two directors exited the company and therefore were no longer
considered related parties.
$
Quality Indicators
As discussed in “Note 1 Summary of Significant Accounting Policies,” Peoples categorizes the majority of its loans into risk
categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or
lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Commercial loans to
borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible
credit deterioration. Commercial leases, as well as loan relationships whose aggregate credit exposure to Peoples is equal to or less
than $1.0 million are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the
borrower’s business, receipt of financial statements indicating deteriorating credit quality, or other similar events. Adversely classified
loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples follows:
“Pass” (grades 1 through 4): Loans in this risk category are to borrowers of acceptable-to-strong credit quality and risk who
have the apparent ability to satisfy their loan obligations. Loans in this risk category would possess sufficient mitigating
factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loans if required, for any
weakness that may exist.
“Special Mention” (grade 5): Loans in this risk category are the equivalent of the regulatory “Other Assets Especially
Mentioned” classification. Loans in this risk category possess some credit deficiency or potential weakness, which requires a
high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/
or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable
deterioration of the repayment prospects for the loans or in Peoples’ credit position.
“Substandard”(grade 6): Loans in this risk category are inadequately protected by the borrower’s current financial condition
and payment capability, or by the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses
that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain
some loss if the deficiencies are not corrected.
“Doubtful” (grade 7): Loans in this risk category have all the weaknesses inherent in those classified as substandard, with
the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing
facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain
important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of
these loans as an estimated loss is deferred until their more exact status may be determined.
“Loss” (grade 8): Loans in this risk category are considered to be non-collectible and of such little value that their
continuance as bankable assets is not warranted. This does not mean each such loan has absolutely no recovery value, but
rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the
future. Charge-offs against the allowance for credit losses are taken in the period in which the loan becomes uncollectable.
Consequently, Peoples typically does not maintain a recorded investment in loans within this risk category.
Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” “doubtful” or “loss” based upon
the regulatory definition of these classes and consistent with regulatory requirements. All other loans not evaluated individually, nor
meeting the regulatory conditions to be categorized as described above, would be considered as being “not rated.”
The following tables summarize the risk category of Peoples’ loan portfolio based upon the then most recent analysis performed
at December 31, 2023:
111
Term Loans at Amortized Cost by Origination Year
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Converted
to Term
Total
Loans
Revolving
Loans
$ 80,273 $ 141,245 $ 85,913 $ 27,169
9,995 $ 12,723 $
— $
— $ 357,318
—
3,757
1,200
1,590
—
—
—
—
—
—
123
31
81,473 146,592
85,913
27,169
9,995
12,877
—
—
—
—
—
—
3,880
2,821
364,019
—
—
9
—
—
—
9
(Dollars in
thousands)
Construction
Pass
Special mention
Substandard
Total
Current period gross
charge-offs
Commercial real
estate, other
Pass
199,565 327,762 366,752 227,604 262,099 650,265
37,177
189 2,071,224
Special mention
999
12,975
4,850
10,324
7,074
22,186
287
2,421
5,878
8,679
1,972
47,213
—
—
—
—
—
10
408
457
—
41
—
—
58,816
66,907
10
200,851 343,158 377,480 246,607 271,145 719,674
38,042
230 2,196,957
—
—
—
39
—
575
614
Pass
225,894 180,068 212,938
86,934
55,434 132,675 213,714
38 1,107,657
Special mention
540
12,051
533
9,723
4,722
6,336
16,236
8,614
50,141
27,009
179
78
—
6,441
5,104
5,617
1,602
6,278
1,889
—
—
—
—
179
—
779
—
226,512 198,560 218,575 102,274
61,758 145,468 231,839
9,431 1,184,986
—
36
202
25
173
415
851
201,659
1,517
201,659
1,517
1
1
—
—
—
—
—
—
—
—
—
—
203,177
203,177
25
97
—
—
—
—
122
216,559 114,327
51,307
14,061
4,883
1,501
—
402,638
363
1,529
476
1,937
3,006
2,944
81
448
1
321
5
311
2,455
8,967
218,859 118,862
54,727
14,590
5,205
1,817
—
—
414,060
963
1,328
1,173
233
165
135
75,957
91,506 140,157
58,144
45,507 369,552
43
—
243
—
585
—
182
—
529
8,604
—
86
76,000
91,749 140,742
58,326
46,036 378,242
—
—
—
—
—
—
—
—
—
—
—
—
—
170
3,997
780,823
10,186
86
791,095
170
112
Substandard
Doubtful
Total
Current period gross
charge-offs
Commercial and
industrial
Substandard
Doubtful
Total
Current period gross
charge-offs
Premium finance
Pass
Total
Current period gross
charge-offs
Leases
Pass
Special mention
Substandard
Total
Current period gross
charge-offs
Residential real
estate
Pass
Substandard
Loss
Total
Current period gross
charge-offs
Home equity lines of
credit
Pass
Substandard
Loss
Total
Current period gross
charge-offs
Consumer, indirect
Pass
Substandard
Loss
Total
Current period gross
charge-offs
Consumer, direct
Pass
Substandard
Loss
Total
Current period gross
charge-offs
Deposit account
overdrafts
Current period gross
charge-offs
Total loans, at
amortized cost
39,706
42,565
33,406
19,838
14,297
57,482
19
—
—
—
61
—
34
—
123
1,109
—
8
39,725
42,565
33,467
19,872
14,420
58,599
—
—
—
—
—
110
247,829 225,225
96,698
59,044
18,644
15,977
333
7
934
34
789
2
558
—
190
2
206
—
248,169 226,193
97,489
59,602
18,836
16,183
609
2,091
865
255
63
147
58,445
37,050
17,434
8,282
3,185
4,081
55
—
79
—
47
—
28
—
30
—
27
26
58,500
37,129
17,481
8,310
3,215
4,134
36
154
77
100
14
35
27
—
—
27
—
—
—
—
—
—
—
—
1,346
207,321
—
—
1,346
8
1,346
208,675
—
—
—
—
—
—
—
—
110
663,417
3,010
45
666,472
4,030
128,477
266
26
128,769
416
986
1,161
986
—
—
—
—
—
—
—
1,161
$ 1,352,734 $ 1,206,325 $ 1,025,875 $ 536,750 $ 430,610 $ 1,336,994 $ 269,908 $
11,007 $ 6,159,196
The following tables summarize the risk category of Peoples’ loan portfolio based upon the then most recent analysis performed
at December 31, 2022:
113
Substandard
Doubtful
Total
Premium finance
Pass
Total
Leases
Pass
Substandard
Total
(Dollars in
thousands)
Construction
Pass
Special mention
Substandard
Term Loans at Amortized Cost by Origination Year
2022
2021
2020
2019
2018
Prior
Revolving
Loans
Converted
to Term
Total
Loans
Revolving
Loans
$ 82,143 $ 110,719 $ 27,893 $ 20,223 $
656 $
4,061 $
44 $
81 $ 245,739
—
—
—
2
—
—
—
—
—
—
818
382
Total
82,143 110,721
27,893
20,223
656
5,261
Commercial real estate, other
—
—
44
—
—
81
818
384
246,941
Pass
165,282 224,727 227,799 202,877 110,564 369,578
27,300
5,217 1,328,127
Special mention
Substandard
Doubtful
—
—
—
189
8,327
—
1,099
2,591
—
5,519
1,366
—
3,111
1,296
—
29,334
42,172
66
105
216
—
—
190
—
39,357
55,968
66
Total
165,282 233,243 231,489 209,762 114,971 441,150
27,621
5,407 1,423,518
Commercial and industrial
Pass
167,937 142,615
72,573
71,497
40,229
91,853 215,116
3,722
801,820
Special mention
10,248
14,981
11,923
2,711
236
4,877
16,235
84
—
9,801
3,417
2,410
1,459
3,620
8,603
—
—
—
—
209
—
178,269 167,397
87,913
76,618
41,924 100,559 239,954
4,333
892,634
—
611
—
61,211
29,394
209
158,778
158,778
419
419
—
—
—
—
—
—
—
—
191,148
90,738
34,627
15,951
3,269
1,119
Special mention
1,741
2,477
546
1,840
140
571
22
464
24
454
—
—
193,435
95,055
35,338
16,437
3,747
1,119
Residential real estate
Pass
Substandard
Loss
Total
78,313 138,860
58,869
42,840
28,174 364,635
—
—
—
—
78,313 138,860
137
—
59,006
569
—
43,409
563
—
10,302
98
28,737 375,035
Home equity lines of credit
—
—
—
—
—
—
—
—
—
—
—
—
159,197
159,197
—
—
—
—
—
—
—
—
336,852
4,404
3,875
345,131
711,691
11,571
98
723,360
Pass
Substandard
Loss
Total
Consumer, indirect
Pass
Substandard
Loss
Total
Consumer, direct
Pass
Substandard
41,781
35,768
19,863
14,820
13,800
50,291
334
2,096
176,657
—
—
60
—
—
—
53
—
126
—
958
4
—
—
—
—
1,197
4
41,781
35,828
19,863
14,873
13,926
51,253
334
2,096
177,858
305,814 149,445 100,027
35,988
22,789
12,741
384
—
811
5
659
—
266
—
304
—
193
—
306,198 150,261 100,686
36,254
23,093
12,934
50,889
28,351
14,558
6,333
3,725
3,975
97
63
138
46
21
150
—
—
—
—
—
—
—
—
—
—
626,804
2,617
5
629,426
—
—
107,831
515
114
Loss
Total
Deposit account
overdrafts
Total loans, at
amortized cost
—
—
—
—
—
17
50,986
28,414
14,696
6,379
3,746
4,142
722
—
—
—
—
—
—
—
—
—
—
—
17
108,363
722
$ 1,255,907 $ 960,198 $ 576,884 $ 423,955 $ 230,800 $ 991,453 $ 267,953 $
11,917 $ 4,707,150
Collateral Dependent Loans
Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is
experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail
about the types of collateral that secure collateral dependent loans:
• Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real
estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities,
and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial
construction loans are generally secured by office buildings and complexes, multi-family complexes, land under
development, and other commercial and industrial real estate in process of construction.
• Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied
investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings,
warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-
owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities,
multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.
• Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial
property.
• Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second
mortgage, on residential real estate property.
• Home equity lines of credit are generally secured by second mortgages on residential real estate property.
• Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some
consumer loans are unsecured and have no underlying collateral.
• Leases are secured by commercial equipment and other essential business assets.
• Premium finance loans are secured by the unearned portion of the insurance premium being financed.
The following table details Peoples’ amortized cost of collateral dependent loans as of December 31:
(Dollars in thousands)
Commercial real estate, other
Commercial and industrial
Residential real estate
Total collateral dependent loans
2023
2022
—
—
501
501
$
$
8,362
1,456
536
10,354
$
$
The decrease in collateral dependent loans at December 31, 2023 compared to at December 31, 2022, was primarily due to three
large-relationships that were paid in full during the year.
Modifications for Borrowers Experiencing Financial Difficulty Subsequent to the Adoption of ASU 2022-02
As part of Peoples’ loss mitigation activities, Peoples may agree to modify the contractual terms of a loan to a borrower
experiencing financial difficulty. The most common modifications to the contractual terms of a loan to a borrower experiencing
financial difficulty include an extension of the maturity date, a reduction in the interest rate for the remaining life of the loan, a
temporary period of interest-only payments, and a reduction in the contractual payment amount for either a short period or the
remaining term of the loan.
In addition to loan modifications, Peoples also provides other loss mitigation options, such as forbearance and repayment plans, to
assist borrowers who experience financial difficulties. In assessing whether or not a borrower is experiencing financial difficulty,
Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is
not limited to, whether (1) the borrower is currently in payment default on any of the borrower’s debt; (2) a payment default is
probable in the foreseeable future without the modification; (3) the borrower has declared or is in the process of declaring bankruptcy;
115
and (4) the borrower’s projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan
without a modification.
The following table displays the amortized cost of loans that were restructured during the twelve months ended December 31,
2023, presented by loan classification.
During the Twelve Months Ended December 31, 2023(a)
Payment Delay (Only)
(Dollars in thousands)
Forbearance
Plan
Payment
Deferral
Trial
Modification
and
Repayment
Plans
Forbearance
Plan and
Term
Extension
Term
Extension
Total
Percentage
of Total by
Loan
Category(b)
Construction
$
— $
1,590 $
Commercial real estate
Commercial and industrial
Residential real estate
Home equity lines of credit
Total
$
184
—
—
—
184 $
—
—
—
—
1,590 $
— $
—
—
—
—
— $
52 $
2,160
4,110
91
209
6,622 $
— $
—
981
—
—
981 $
1,642
2,344
5,091
91
209
9,377
0.45 %
0.11 %
0.43 %
0.01 %
0.10 %
0.15 %
(a) The table presented above excludes loans that were paid off or otherwise no longer included in the loan portfolio as of period end.
(b) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable.
The following table summarizes the financial impacts of loan modifications and payment deferrals made to loans during the
twelve months ended December 31, 2023, presented by loan classification.
During the Twelve Months Ended December 31, 2023
(Dollars in thousands)
Construction
Commercial real estate
Commercial and industrial
Residential real estate
Home equity lines of credit
Consumer, indirect
Weighted-
Average Term
Extension
(in months)
Average Amount
Capitalized as a
Result of a
Payment Delay(a)
—
5 $
7
5
213
187
2 $
—
—
8,076
—
—
(a) Represents the average amount of delinquency-related amounts that were capitalized as part of
the loan balance. Amounts are in whole dollars.
The following table displays the amortized cost of loans that received a completed modification or payment deferral on or after
January 1, 2023, the date Peoples adopted ASU 2022-02, through December 31, 2023, and that defaulted in the period presented. For
purposes of this disclosure, Peoples defines loans that had a payment default as loans that were 90 days or more past due following a
modification through December 31, 2023.
For the Twelve Months Ended December 31, 2023
(Dollars in thousands)
Commercial and industrial
Consumer, indirect
Total loans that subsequently defaulted $
Term Extension
Total
$
148 $
11
159 $
148
11
159
(1) Represents the sum of amortized cost and gross charge-off as of period end. Excludes loans that
liquidated either through foreclosure, deed-in-lieu of foreclosure, or a short sale.
116
The following table displays an aging analysis of loans that were modified on or after January 1, 2023, the date Peoples adopted
ASU 2022-02, through December 31, 2023, presented by classification and class of financing receivable.
As of December 31, 2023(a)
(Dollars in thousands)
Construction
Commercial real estate
Commercial and industrial
Residential real estate
Home equity lines of credit
Total loans modified(b)
30-59 Days
Delinquent
60-89 Days
Delinquent
90+ Days
Delinquent
Total
Delinquent
Current
Total
$
$
— $
—
—
—
—
— $
52 $
—
750
—
—
802 $
— $
—
148
—
—
148 $
52 $
—
898
—
—
950 $
1,590 $
2,344
4,193
91
209
8,427 $
1,642
2,344
5,091
91
209
9,377
(a) The table presented above excludes loans that were paid off or otherwise no longer included in the loan portfolio as of period end.
(b) Represents the amortized cost basis as of period end.
Troubled Debt Restructurings Disclosures Prior to the Adoption of ASU 2022-02
Prior to the adoption of ASU 2022-02, Peoples accounted for a modification to the contractual terms of a loan that resulted in
granting a concession to a borrower experiencing financial difficulties as a TDR. See “Note 1 Summary of Significant Accounting
Policies” in Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for more information on our TDR
policy, and “Note 1, Summary of Significant Accounting Policies” in this Form 10-K for more information on the adoption of ASU
2022-02.
The following table summarizes the loans that were modified as TDRs during the year ended December 31, 2022.
(Dollars in thousands)
2022
Construction
Commercial real estate, other
Commercial and industrial
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Consumer
Recorded Investment (a)
Number
of
Contracts
Pre-
Modification
Post-
Modification
Remaining
Recorded
Investment
— $
— $
— $
8
9
34
8
23
9
32
1,191
1,513
1,741
321
286
102
388
1,191
1,517
1,825
321
285
103
388
—
1,179
971
1,789
313
285
103
388
91 $
Total
(a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid
down, charged-off or foreclosed upon by period end are not reported.
5,242 $
5,154 $
4,640
The following table presents those loans modified into a TDR during the year that subsequently defaulted (i.e., 90 days or more
past due following a modification during the year).
117
(Dollars in thousands)
2022
Number
of
Contracts
Recorded
Investment
(a)
Impact on the
Allowance for
Credit Losses
Commercial real estate, other
1 $
65 $
Commercial and Industrial
Residential real estate
Consumer, indirect
Consumer, direct
Home equity lines of credit
1
2
1
1
—
43
64
7
2
—
—
—
—
—
—
—
—
Total
(a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in
a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.
181 $
6 $
Peoples had no commitments to lend additional funds to the related borrowers whose loan terms have been modified in a TDR.
Allowance for Credit Losses
As discussed in “Note 1 Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements
included in this Form 10-K, Peoples estimates the allowance for credit losses using relevant available information, from both internal
and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In management’s estimation
of expected credit losses, Peoples uses a one-year reasonable and supportable period across all segments. Following the reasonable and
supportable period, Peoples reverts the macroeconomic variables to their long run average over a four-quarter reversion period.
Changes in the allowance for credit losses for 2023 are summarized below:
(Dollars in thousands)
Beginning
Balance,
January 1, 2023
Initial Allowance
for Acquired
PCD Assets (a)
(Recovery of)
Provision for
Credit Losses
(b)
Charge-offs Recoveries
Ending Balance,
December 31,
2023
Construction
$
Commercial real estate, other
1,250 $
17,710
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
Deposit account overdrafts
Total
$
8,229
344
8,495
6,357
1,693
7,448
1,575
61
53,162 $
— $
(542) $
(9) $
— $
1,340
379
—
—
228
18
—
86
—
2,051 $
1,514
2,181
238
(614)
(851)
(122)
5,990
(3,997)
(670)
(14)
4,685
1,025
938
15,345 $
(170)
(110)
(4,030)
(416)
(1,161)
(11,480) $
965
552
24
362
192
1
487
73
277
2,933 $
699
20,915
10,490
484
10,850
5,937
1,588
8,590
2,343
115
62,011
(a) Includes purchase price adjustments related to acquisitions previously completed but were within the 12-month measurement period.
(b) Amount does not include the provision for unfunded commitment liability.
118
Changes in the allowance for credit losses for 2022 are summarized below:
(Dollars in thousands)
Beginning
Balance,
January 1, 2022
Initial Allowance
for Acquired
PCD Assets
(Recovery of)
Provision for
Credit Losses
(a)
Charge-offs Recoveries
Ending Balance,
December 31,
2022
Construction
$
Commercial real estate, other
Commercial and industrial
Premium finance
Leases
Residential real estate
Home equity lines of credit
Consumer, indirect
Consumer, direct
2,999 $
29,147
11,063
379
4,797
7,233
2,005
5,326
961
— $
(1,733) $
(16) $
— $
(451)
(418)
—
801
(509)
(11)
(41)
—
(10,794)
(1,522)
76
(489)
(943)
(124)
5,062
(2,585)
217
(258)
(668)
(88)
4,068
(2,233)
930
(363)
297
49
13
420
84
45
328
47
Deposit account overdrafts
Total
$
57
63,967 $
—
(629) $
1,050
(2,904) $
(1,246)
(8,755) $
200
1,483 $
(a) Amount does not include the provision for unfunded commitment liability.
1,250
17,710
8,229
344
8,495
6,357
1,693
7,448
1,575
61
53,162
During 2023, the increase in the allowance balance when compared to 2022 was driven by (i) the addition of the $8.1 million
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 Limestone Merger added $2.1 million
in allowance for credit losses at the acquisition date for PCD loans as part of the acquisition accounting. During 2022, the allowance
established for PCD loans from the Premier Merger was adjusted, decreasing the allowance by $1.4 million, and the Vantage
acquisition added $0.8 million in allowance for credit loss at the acquisition date for PCD loans as part of the acquisition accounting.
The allowance for credit losses as a percent of total loans declined from 1.13% to 1.01% from December 31, 2022 to December 31,
2023.
At December 31, 2023, Peoples had recorded an unfunded commitment liability of $1.8 million, a decrease compared to the $2.0
million that was recorded at December 31, 2022. The allowance for unfunded commitments (also referred to as “unfunded
commitment liability”) is presented in the “Accrued expenses and other liabilities” line of the Consolidated Balance Sheets. For 2023,
Peoples recorded a recovery of credit losses on unfunded commitments of $0.2 million, compared to a recovery for credit losses on
unfunded commitments of $0.6 million for 2022. The change in the allowance for unfunded commitments is reflected in the
“Provision for credit losses” line of the Consolidated Statements of Income.
Note 5 Bank Premises and Equipment
The major categories of bank premises and equipment, net of accumulated depreciation, at December 31 were as follows:
(Dollars in thousands)
Land
Building and premises
Furniture, fixtures and equipment
Total bank premises and equipment
Accumulated depreciation
Net book value
2023
2022
$
23,680 $
120,587
42,360
186,627
18,746
101,478
37,913
158,137
(82,771)
103,856 $
(75,203)
82,934
$
Peoples depreciates its building and premises, and furniture, fixtures and equipment over estimated useful lives generally ranging
from five to forty to years and two to ten years, respectively. Depreciation expense was $7.7 million in 2023 and $7.0 million in 2022.
Note 6 Leases
Lessor Arrangements
Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or
payoff, are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples
considers leases past due if any required payments have not been received as of the date such payments were required to be made
under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are
119
typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be
uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to
the allowance for credit losses.
Peoples began originating leases with the acquisition of leases from NSL and increased its portfolio with the acquisition of
Vantage. The leases acquired from NSL were determined to be sales-type leases, as the premise for the leases is dollar buy-out,
whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. The leases acquired from Vantage were
determined to be sales-type leases, as the payment structure and term triggered that accounting treatment, whereby either (i) the lease
is structured as a fair market value buyout, whereby the lessee has the option to purchase the leased equipment at its fair market value
at maturity of the lease, or (ii) the lessee purchases the leased equipment for one dollar at maturity of the lease. Originated leases are
primarily classified as sales-type leases, and to a lesser extent, operating leases. These leases do not typically contain residual value
guarantees; however, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. As a lessor, Peoples
originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate
to automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. These leases
include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Operating leases are
leases that do not meet the criteria of a sales-type lease or a finance lease. When Peoples originates an operating lease, it records an
operating lease asset recognized in “Other assets” which is depreciated over its useful life.
Lease income noted in the table below includes (i) gains on the early termination of leases, net of any associated purchase
accounting adjustments, (ii) month-to-month lease payments in excess of net investment in the lease, (iii) fees received for referrals,
(iv) gains and losses recognized on the sales of residual assets, and (v) syndication income. Income on operating leases is recognized
on a straight-line basis in “Other non-interest income” and depreciation expense is recognized on a straight-line basis in “Other non-
interest expense.” Additional information regarding Peoples’ sales-type leases can be found in “Note 4 Loans and Leases.”
The table below details Peoples’ lease income for the years ended December 31, 2023 and 2022:
(Dollars in thousands)
Interest and fees on leases (a)
Lease income
Other non-interest income
Total lease income
2023
2022
42,931 $
5,552
2,308
50,791 $
34,720
4,267
—
38,987
$
$
(a)
Included in “Interest and fees on loans” on the Consolidated Statements of Income. For additional information, see “Note 4 Loans and Leases.”
The following table summarizes the net investments in sales-type leases, which are included in “Loans and leases, net of deferred
costs” on the Consolidated Balance Sheets at December 31:
2023
2022
$
463,742 $
(Dollars in thousands)
Lease payments receivable, at amortized cost
Estimated residual values
Initial direct costs
Deferred revenue
Total leases, at amortized cost
Allowance for credit losses - leases
Net investment in sales-type leases
$
The following table summarizes the contractual maturities of leases:
(Dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
367,681
35,045
4,233
(61,828)
345,131
(8,495)
336,636
33,448
7,114
(90,244)
414,060
(10,850)
403,210 $
Balance
$
110,893
108,346
94,672
74,997
56,111
18,723
463,742
Lease payments receivable, at amortized cost
$
120
Lessee Arrangements
Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly
payments over periods generally ranging from two to 25 years. Certain leases may include options to extend or terminate the lease.
Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the
lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in
the calculation of the lease liability. At December 31, 2023, Peoples did not have any finance leases or any significant lessor
agreements. Right of Use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent
an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the
commencement or remeasurement date of a lease based on the present value of lease payments over the remaining lease term.
Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating
lease ROU assets exclude lease incentives and nonlease components. Short-term leases of certain facilities and equipment, with lease
terms of 12 months or less, are recognized on a straight-line basis over the lease term. Peoples does not record ROU assets or lease
liabilities for such leases.
The table below details Peoples’ lease expense, which is included in “Net occupancy and equipment expense” in the Consolidated
Statements of Income for the years ended December 31:
(Dollars in thousands)
Operating lease expense
Short-term lease expense
Total lease expense
2023
2022
$
$
3,030 $
268
3,298 $
2,568
745
3,313
Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease
agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term
of the lease and the interest rate environment at the lease commencement or remeasurement date.
The following table details the ROU asset, the lease liability and other information related to Peoples’ operating leases on the
Consolidated Balance Sheet at December 31:
(Dollars in thousands)
ROU asset:
Other assets
Lease liability:
Accrued expenses and other liabilities
Other information:
Weighted-average remaining lease term
Weighted-average discount rate
Cash paid during the year for operating leases
Additions for ROU assets obtained during the year
2023
2022
$
$
$
$
11,689
$
12,080
$
9.5 years
3.34 %
2,990
4,428
$
$
6,825
7,551
8.8 years
2.70 %
2,560
880
The following table summarizes the future lease payments of operating leases:
(Dollars in thousands)
Payments
2024
2025
2026
2027
2028
Thereafter
Total undiscounted lease payments
Imputed interest
Total lease liability
$
$
$
2,588
2,020
1,750
1,599
1,218
5,413
14,588
(2,508)
12,080
121
Note 7 Goodwill and Other Intangible Assets
Goodwill
The following table details changes in the recorded amount of goodwill for the years ended December 31:
(Dollars in thousands)
Goodwill, beginning of year
Goodwill recorded from acquisitions
Goodwill, end of year
2023
2022
$
$
292,397 $
69,772
362,169 $
264,193
28,204
292,397
Peoples performed a qualitative assessment of goodwill as of October 1, 2023, and management does not believe it is more likely
than not that the fair value of Peoples’ reporting unit is less than its carrying amount.
As of the close of business on April 30, 2023, Peoples completed its merger with Limestone Bancorp, Inc. (“Limestone”) pursuant
to an Agreement and Plan of Merger dated October 24, 2022, at which point Limestone merged with and into Peoples, and
immediately thereafter, Limestone Bank, Inc., the subsidiary bank of Limestone, merged with and into Peoples Bank (collectively, the
“Limestone Merger”). Peoples has recorded preliminary goodwill from the Limestone Merger totaling $68.8 million as of
December 31, 2023.
On January 3, 2023, Peoples acquired a trust and investment business, for which Peoples has recorded $0.6 million in goodwill as
of December 31, 2023. On October 10, 2023, Peoples purchased the assets of an insurance business, for which $0.4 million in
goodwill has been recorded as of December 31, 2023.
On March 11, 2022, Peoples Insurance entered into an Asset Purchase Agreement with Elite Agency, Inc. (“Elite”), and
consummated the acquisition on April 1, 2022. In 2022, Peoples recorded $2.3 million of goodwill related to this acquisition. On
March 7, 2022, Peoples Bank entered into an Asset Purchase Agreement with Vantage, at which point Vantage became a legal
subsidiary of Peoples Bank. In 2022, Peoples recorded $27.2 million of goodwill related to this acquisition. During 2022, Peoples
also recorded a $1.3 million reduction of the goodwill recognized in the Premier Merger due to changes in the fair value of loans
acquired from Premier.
Other intangible assets
Other intangible assets were comprised of the following at December 31:
(Dollars in thousands)
Core Deposits
Customer
Relationships
Indefinite-Lived
Trade Names
Total
2023
Gross intangibles
$
26,464 $
37,920 $
Intangibles recorded from acquisitions
Accumulated amortization
Total acquisition-related intangibles
$
27,722
(25,670)
28,516 $
—
(20,680)
17,240 $
Servicing rights
Non-compete agreements (a)
Total other intangibles
2022
$
Gross intangibles
Intangibles recorded from acquisitions (b)
Accumulated amortization
Total acquisition-related intangibles
$
Servicing rights
Total other intangibles
26,464 $
—
(20,667)
5,797 $
25,173 $
14,067
(15,412)
23,828 $
2,491 $
—
—
2,491 $
$
1,274 $
1,217
—
2,491 $
$
66,875
27,722
(46,350)
48,247
1,385
371
50,003
52,911
15,284
(36,079)
32,116
1,816
33,932
(a) Non-compete agreements were recognized due to acquisitions.
(b) Peoples included in customer relationship intangibles intangible assets related to a non-compete agreements in the amount of $1.3 million at December 31,
2022.
Peoples performed other intangible assets impairment testing as of October 1, 2023 and concluded there was no impairment in the
recorded value of other intangible assets as of October 1, 2023. During the annual impairment test, Peoples assessed qualitative
factors, including relevant events and circumstances, to determine that it was more-likely-than-not that the fair value of other
intangible assets exceeded the carrying value.
122
Other intangible assets recorded from the above-mentioned acquisitions in 2023 consisted of $27.7 million of core deposit
intangibles related to the Limestone Merger.
Other intangible assets recorded from the above-mentioned acquisitions in 2022 were $10.8 million of customer relationship
intangible assets, $1.2 million of non-compete intangible assets, and $1.2 million of indefinite-lived trade name intangible assets
related to the Vantage acquisition. Peoples also recorded $2.0 million of customer relationship intangible assets and $0.1 million of
non-compete intangible assets related to the acquisition of Elite.
The following table details estimated aggregate future amortization of other intangible assets at December 31, 2023:
(Dollars in thousands)
2024
Core
Deposits
Customer
Relationships (a)
Total
$
5,875 $
5,310 $
11,185
2025
2026
2027
2028
Thereafter
Total
4,609
3,736
3,043
2,608
4,221
3,081
2,256
1,549
8,645
28,516 $
$
1,194
17,611 $
8,830
6,817
5,299
4,157
9,839
46,127
(a) Peoples includes in customer relationship intangibles intangible assets related to a non-
compete agreements.
The weighted average amortization period of other intangibles is 9.2 years.
The following is an analysis of activity of servicing rights for the years ended December 31:
(Dollars in thousands)
Balance, beginning of year
Amortization
Servicing rights originated
Change in valuation allowance
Balance, end of year
2023
2022
2021
$
$
1,816 $
(457)
27
(1)
1,385 $
2,218 $
(594)
180
12
1,816 $
2,486
(936)
519
149
2,218
The following is the breakdown of the discount rates and prepayment speeds of servicing rights for the years ended December 31:
2023
2022
Minimum
Maximum
Minimum
Maximum
Discount rates
Prepayment speeds
13.5 %
7.7 %
16.0 %
16.1 %
12.5 %
6.5 %
15.0 %
23.8 %
The fair value of servicing rights was $3.2 million at December 31, 2023 and $3.4 million at December 31, 2022.
123
Note 8 Deposits
Peoples’ deposit balances were comprised of the following at December 31:
(Dollars in thousands)
Retail CDs:
$100 or more
Less than $100
Total retail CDs
Interest-bearing deposit accounts
Savings accounts
Money market deposit accounts
Governmental deposit accounts
Brokered deposit accounts
2023
2022
$
815,300 $
263,341
628,117
1,443,417
266,895
530,236
1,144,357
1,160,182
919,244
1,068,547
775,488
726,713
575,429
617,029
625,965
125,580
Total interest-bearing deposits
5,584,648
4,127,539
Non-interest-bearing deposits
Total deposits
1,567,649
1,589,402
$ 7,152,297 $ 5,716,941
Uninsured deposits were $2.0 billion and $1.6 billion at December 31, 2023 and 2022, respectively. Uninsured amounts are
estimated based on the portion of the respective customer account balances that exceeded the FDIC limit of $250,000. Peoples pledges
investment securities against certain governmental deposit accounts, which covered over $788.7 million of the uninsured deposit
balances at December 31, 2023.
Uninsured time deposits are broken out below by time remaining until maturity.
(Dollars in thousands)
3 months or less
Over 3 to 6 months
Over 6 to 12 months
Over 12 months
Total
2023
2022
$
58,708 $
99,928
131,263
37,180
19,282
14,871
14,383
52,216
$ 327,079 $ 100,752
The contractual maturities of CDs for each of the next five years and thereafter are as follows:
(Dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
Total CDs
Retail
Brokered
Total
$ 1,278,306 $
113,820
575,429 $ 1,853,735
113,820
—
18,033
25,033
8,176
—
—
—
18,033
25,033
8,176
49
$ 1,443,417 $
—
49
575,429 $ 2,018,846
Deposits from related parties were $14.2 million and $8.5 million at December 31, 2023 and 2022, respectively.
At December 31, 2023, Peoples had eleven effective interest rate swaps, with an aggregate notional value of $105.0 million, of
which $105.0 million were funded by brokered deposits. Brokered deposits used to fund interest rate swaps are expected to be
extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples’ interest rate swaps can be
found in “Note 15 Derivative Financial Instruments.”
124
Note 9 Short-Term Borrowings
Peoples utilizes various short-term borrowings as sources of funds, which are summarized as follows at December 31:
(Dollars in thousands)
2023
Ending balance
Average balance
Highest month-end balance
Interest expense
Weighted-average interest rate:
End of year
During the year
2022
Ending balance
Average balance
Highest month-end balance
Interest expense
Weighted-average interest rate:
End of year
During the year
2021
Ending balance
Average balance
Highest month-end balance
Interest expense
Weighted-average interest rate:
End of year
During the year
Retail
Repurchase
Agreements
FHLB
Advances
Other
Total
$ 99,121
102,530
125,937
1,349
$
$ 369,000
353,532
484,000
$ 18,058
$ 133,000
7,495
133,000
315
$
$ 601,121
463,557
585,439
$ 19,722
1.54 %
1.32 %
5.41 %
5.11 %
4.85 %
4.93 %
4.65 %
4.25 %
$ 100,138
113,434
286,442
274
$
$ 400,000
83,356
400,000
2,387
$
0.40 %
0.24 %
4.36 %
2.86 %
$ 111,482
70,674
119,693
66
$
$ 55,000
30,289
65,017
475
$
$
$
$
$
—
—
—
—
$ 500,138
196,790
500,138
2,661
$
— %
— %
3.57 %
1.35 %
—
—
—
—
$ 166,482
100,963
184,693
541
$
0.09 %
0.09 %
0.74 %
1.57 %
— %
— %
0.31 %
0.54 %
Peoples’ retail Repurchase Agreements consist of overnight agreements with Peoples’ commercial customers and serve as a cash
management tool.
The FHLB advances consist of overnight borrowings, 90-day advances used to fund interest rate swaps, other advances with an
original maturity of one year or less, and the current portion of long-term advances due in less than one year. These advances, along
with the long-term advances disclosed in “Note 10 Long-Term Borrowings,” are collateralized by residential mortgage loans and
investment securities. Peoples’ borrowing capacity with the FHLB is based on the amount of collateral pledged and the amount of
FHLB common stock owned. Peoples’ FHLB advances of $60.0 million and $55.0 million matured in 2023 and 2022, respectively.
Other short-term borrowings consisted primarily of federal funds purchased and advances from the Federal Reserve Discount
Window, as well as a Bank Term Funding Program (“BTFP”) loan. Federal funds purchased are short-term borrowings from
correspondent banks that typically mature within one to 90 days. Interest on federal funds purchased is set daily by the correspondent
bank based on prevailing market rates. The Federal Reserve Discount Window provides credit facilities to financial institutions, which
are designed to ensure adequate liquidity by providing a source of short-term funds. Federal Reserve Discount Window advances are
typically overnight and must be secured by collateral acceptable to the FRB. At December 31, 2023, Peoples had available Federal
Reserve Discount Window credit of $320.7 million. Peoples also has a $133.0 million loan under the BTFP. Loans with the BTFP
have a term of up to one year. As of the date of Peoples’ borrowing, the interest rate for term advances was the one-year overnight
index swap rate plus 10 basis points. On January 24, 2024, the Federal Reserve Board announced that it will cease making new loans
under the BTFP on March 11, 2024 and that the rate on a borrowing may not be lower than the Interest on Reserve Balances (“IORB”)
rate in effect on the day the advance is made; the rate will be fixed for the term of the advance on the day the advance is made.
As of April 3, 2019, Peoples entered into a loan agreement (the “U.S. Bank Loan Agreement”) with U.S. Bank National
Association. The U.S. Bank Loan Agreement initially had an one-year term, which has subsequently been renewed, most recently as
of March 31, 2023 for an additional year, and currently 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
125
(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.
The U.S. Bank Loan Agreement is unsecured, and contains certain negative and financial covenants. The financial covenants are
applicable to Peoples and its subsidiaries, and are usual and customary for comparable transactions.
As of December 31, 2023, Peoples was in compliance with the applicable covenants imposed by the U.S. Bank Loan Agreement,
as amended by the Fifth Amendment to the U.S. Bank Loan Agreement. The U.S. Bank Loan Agreement matures on March 31, 2024.
Peoples is in the process of renewing this facility and expects that it will be renewed prior to its expiration.
Note 10 Long-Term Borrowings
Long-term borrowings consisted of the following at December 31:
(Dollars in thousands)
2023
2022
Weighted-
Average
Rate
Weighted-
Average
Rate
Balance
Balance
FHLB putable, non-amortizing, fixed rate advances
$
110,000
3.98 % $
30,000
FHLB amortizing, fixed rate advances
Vantage non-recourse borrowings
Other long-term borrowings
Long-term borrowings (a)
2,865
49,572
53,804
216,241
$
1.81 %
4,158
6.26 %
53,147
9.67 %
13,788
$ 101,093
2.51 %
1.79 %
4.75 %
8.66 %
(a) The weighted-average interest rate on total long-term borrowings at December 31, 2023 and December 31, 2022 was 5.89% and 4.50%, respectively.
Peoples continually evaluates its overall balance sheet position given the interest rate environment. During 2023, Peoples
borrowed four additional FHLB long-term borrowings, three non-callable advances for $60.0 million, $10.0 million, $10.0 million
with fixed interest rates of 4.40%, 4.30%, and 4.11%, respectively, and one callable $10.0 million advance with a fixed interest rate of
4.59%. During 2022, Peoples did not borrow any additional long-term advances from the FHLB. At December 31, 2023, outstanding
long-term FHLB non-amortizing advances, which have interest rates ranging from 2.17% to 4.59%, mature between 2026 and 2028.
Outstanding long-term FHLB amortizing, fixed rate advances, which have interest rates ranging from 1.25% to 3.83%, mature
between 2026 and 2031.
The FHLB putable, non-amortizing, fixed rate advances have maturities ranging from three to four years that may be repaid prior
to maturity, subject to the payment of termination fees. The FHLB has the option, at its sole discretion, to terminate each advance after
the initial fixed rate period of three months, requiring full repayment of the advance by Peoples, prior to the stated maturity. If an
advance is terminated prior to maturity, the FHLB will offer Peoples replacement funding at the then-prevailing rate on an advance
product then offered by the FHLB, subject to normal FHLB credit and collateral requirements. These advances require monthly
interest payments, with no repayment of principal until the earlier of either an option to terminate being exercised by the FHLB or the
stated maturity.
The FHLB amortizing, fixed rate advances have a fixed rate for the term of each advance, with maturities ranging from three to
nine years. These advances require monthly principal and interest payments, with some having a constant prepayment rate requiring an
additional principal payment annually. These advances are not eligible for optional prepayment prior to maturity. Long-term FHLB
advances are collateralized by assets owned by Peoples.
Non-recourse borrowings are used by Vantage to fund leases. Certain non-recourse borrowings acquired from Vantage were paid
off subsequent to the acquisition. The Vantage non-recourse borrowings have interest rates ranging from 2.69% to 11.25% with
various maturities, the latest being in 2030. Payments received from customers on non-recourse leases are used to fund repayment of
these borrowings. In the event of default, the non-recourse borrowing is forgiven.
Other long-term borrowings include trust preferred securities held for investments and floating rate junior subordinated deferrable
interest debentures assumed from three prior acquisitions. On March 6, 2015, Peoples completed its acquisition of NB&T Financial
Group, Inc., which included a trust preferred security due in 2037 with a $9.0 million par value and a $6.6 million fair value at
acquisition. As of December 31, 2023, this trust preferred security had a carrying value of $8.0 million with an interest rate of 10.06%,
inclusive of the impact of fair value adjustments. On September 17, 2021, Peoples completed the Premier Merger, which included a
trust preferred security due in 2034 with a $6.2 million par value and a $6.1 million fair value at acquisition. As of December 31,
2023, this trust preferred security had a carrying value of $5.9 million and an interest rate of 9.07%, inclusive of the impact of fair
value adjustments. On April 30, 2023, Peoples completed the Limestone Merger, which included four trust preferred securities and
junior subordinated debentures. The details of the securities at the time of the Limestone Merger, their current carry values, and
current interest rates are included in the table below, inclusive of the impact of fair value adjustments. These trust preferred securities
126
and junior subordinated debentures are considered tier 1 capital (with certain limitations applicable) under current regulatory
guidelines.
(Dollars in thousands)
April 30, 2023
December 31, 2023
Description
Maturity
Year
Par Value
Fair Value
Carrying
Value
Interest Rate
Ascencia Statutory Trust I
Porter Statutory Trust II
Porter Statutory Trust III
Porter Statutory Trust IV
Floating rate junior subordinated deferrable
interest debentures
Total
2034
2034
2034
2037
2029
3,000
5,000
3,000
10,000
25,000
46,000
2,430
4,050
2,410
6,886
23,677
39,453
2,487
4,145
2,468
7,124
23,913
40,137
12.99 %
13.00 %
13.04 %
14.19 %
7.08 %
At December 31, 2023, the aggregate minimum annual retirements of long-term borrowings in future periods were as follows:
(Dollars in thousands)
Balance
$
2024
2025
2026
2027
2028
Thereafter
Total long-term borrowings
$
12,332
7,377
38,015
7,569
86,589
64,359
216,241
127
Note 11 Stockholders’ Equity
The following table details the activity in Peoples’ common stock and treasury stock during the years ended December 31:
Shares at December 31, 2020
Changes related to stock-based compensation awards:
Grant of restricted common shares
Release of restricted common shares
Cancellation of restricted common shares
Grant of unrestricted common shares
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock
Disbursed out of treasury stock
Common shares issued under dividend reinvestment plan
Common shares issued under compensation plan for Boards of Directors
Common shares issued under employee stock purchase plan
Issuance of common shares related to the Premier Merger
Shares at December 31, 2021
Changes related to stock-based compensation awards:
Grant of restricted common shares
Release of restricted common shares
Cancellation of restricted common shares
Grant of unrestricted common shares
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock
Disbursed out of treasury stock
Common shares repurchased under repurchase program
Common shares issued under dividend reinvestment plan
Common shares issued under compensation plan for Boards of Directors
Common shares issued under employee stock purchase plan
Shares at December 31, 2022
Changes related to stock-based compensation awards:
Grant of restricted common shares
Release of restricted common shares
Cancellation of restricted common shares
Grant of unrestricted common shares
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock
Disbursed out of treasury stock
Common shares repurchased under repurchase program
Common shares issued under dividend reinvestment plan
Common shares issued under compensation plan for Boards of Directors
Common shares issued under employee stock purchase plan
Issuance of common shares related to the Limestone Merger
Shares at December 31, 2023
Common
Stock
21,193,402
Treasury
Stock
1,686,046
—
—
—
—
—
—
31,314
—
—
8,589,685
29,814,401
—
—
—
—
—
—
—
43,519
—
—
29,857,920
—
—
—
—
—
—
50,453
—
—
6,827,668
36,736,041
(109,385)
34,732
8,129
(21,587)
7,089
(2,983)
—
(7,589)
(17,093)
—
1,577,359
(216,669)
39,445
5,452
(1,500)
15,688
(3,039)
263,183
—
(17,626)
(18,832)
1,643,461
(259,648)
43,087
16,778
(1,900)
21,042
(4,368)
107,219
—
(19,931)
(34,392)
—
1,511,348
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. Peoples purchased an aggregate of 107,219 and 263,183 of
Peoples’ outstanding common shares totaling $3.0 million and $7.4 million during 2023 and 2022, respectively. Peoples did not
repurchase any common shares during 2021 under the share repurchase program authorized on January 28, 2021.
128
Under its Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series,
having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by Peoples’
Board of Directors. At December 31, 2023 and 2022, Peoples had no preferred shares issued or outstanding.
The following table details the cash dividends declared per common share for the year ended December 31:
2023
2022
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
0.38 $
0.39
0.39
0.39
Total dividends declared
$
1.55 $
0.36
0.38
0.38
0.38
1.50
Accumulated Other Comprehensive Income (Loss)
The following details the change in the components of Peoples’ accumulated other comprehensive income (loss) for the years
ended December 31:
Unrealized
Gain
(Loss) on
Securities
$
14,592 $
Unrecognized
Net Pension
and
Postretirement
Costs
Unrealized
(Loss)
Gain on
Cash Flow
Hedge
(3,872) $
(9,384) $
Accumulated
Other
Comprehensive
Income (Loss)
1,336
670
—
—
111
—
—
(Dollars in thousands)
Balance, December 31, 2020
Reclassification adjustments to net income:
Realized loss on sale of securities, net of tax
Realized loss due to settlement and curtailment, net of tax
670
111
(13,736)
(11,619)
47
142
Other comprehensive (loss) income, net of reclassifications and tax
Balance, December 31, 2021
(21,208)
(5,946) $
$
1,880
(1,881) $
5,592
(3,792) $
Reclassification adjustments to net income:
Realized loss on sale of securities, net of tax
Realized loss due to settlement and curtailment, net of tax
47
—
—
142
—
—
Other comprehensive (loss) income, net of reclassifications and tax
Balance, December 31, 2022
(123,997)
$ (129,896) $
106
(1,633) $
8,185
4,393 $
(115,706)
(127,136)
Reclassification adjustments to net income:
Realized loss on sale of securities, net of tax
2,836
—
—
Realized loss due to settlement and curtailment, net of tax
Other comprehensive income (loss), net of reclassifications and tax
Balance, December 31, 2023
—
22,838
$ (104,222) $
1,858
(225)
— $
—
(1,761)
2,632 $
2,836
1,858
20,852
(101,590)
129
Note 12 Employee Benefit Plans
Peoples sponsored a noncontributory defined benefit pension plan that covered substantially all employees hired before January 1,
2010. The plan provides retirement benefits based on an employee’s years of service and compensation. For employees hired before
January 1, 2003, the amount of postretirement benefit is based on the employee’s average monthly compensation over the highest five
consecutive years out of the employee’s last ten years with Peoples while an eligible employee. For employees hired on or after
January 1, 2003, the amount of postretirement benefit is based on 2% of the employee’s annual compensation during the years 2003
through 2009 plus accrued interest. 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.
Retirement Savings Plan
Peoples also maintains a retirement savings plan, or 401(k) plan, which covers substantially all employees. The plan provides
participants with the opportunity to save for retirement on a tax-deferred basis. As of January 1, 2021, Peoples matches 100% of
participants’ contributions up to 6% of the participants’ compensation. Matching contributions made by Peoples totaled $5.4 million in
2023, $4.4 million in 2022 and $3.5 million in 2021.
Note 13 Income Taxes
The reported income tax expense and effective tax rate in the Consolidated Statements of Income differ from the amounts
computed by applying the statutory federal corporate income tax rate as follows for the years ended December 31:
(Dollars in thousands)
Income tax computed at statutory federal
corporate income tax rate
Differences in rate resulting from:
State taxes, net of federal benefit
Investment securities impairment
Nondeductible acquisition costs
Common share awards
Bank owned life insurance
Investments in tax credit funds
Captive insurance benefit
Tax-exempt interest income
Fixed asset depreciation
Other, net
Income tax expense
2023
2022
2021
Amount
Rate
Amount
Rate
Amount
Rate
$ 30,476
21.0 % $ 27,015
21.0 % $ 11,954
21.0 %
3,053
2.1 %
2,277
1.8 %
— %
431
0.3 %
—
168
0.1 %
(99)
(0.1) %
42
12
— %
— %
119
—
269
74
0.2 %
— %
0.5 %
0.1 %
(872)
(0.6) %
(551)
(0.4) %
(371)
(0.6) %
(352)
(0.2) %
(629)
(0.5) %
(381)
(0.7) %
(330)
(0.2) %
(421)
(0.3) %
(435)
(0.8) %
(555)
(0.4) %
(921)
(0.7) %
(835)
(1.5) %
—
274
$ 31,763
—
— %
0.2 %
94
21.9 % $ 27,349
— %
0.1 %
21.3 % $
(1,142)
163
9,415
(2.0) %
0.3 %
16.5 %
Peoples’ reported income tax expense consisted of the following for the years ended December 31:
(Dollars in thousands)
Current income tax expense
Deferred income tax (benefit) expense
Income tax expense
2023
2022
2021
$
$
32,001 $
(238)
31,763 $
8,783 $
18,566
27,349 $
6,541
2,874
9,415
130
The significant components of Peoples’ deferred tax assets and deferred tax liabilities consisted of the following at December 31:
(Dollars in thousands)
Deferred tax assets:
Available-for-sale securities
Allowance for credit losses
Nonaccrual loan interest income
Accrued employee benefits
Lease obligation
Net operating loss carryforward
Purchase accounting adjustments
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Equipment leases
Deferred loan income
Purchase accounting adjustments
Bank premises and equipment
Lease right-of-use assets
Derivative instruments
Other
Total deferred tax liabilities
Net deferred tax asset
2023
2022
31,774 $
14,902
2,753
7,344
2,822
11,367
1,920
1,622
74,504 $
158 $
74,346 $
11,286 $
3,117
—
5,116
2,731
774
3,951
26,975 $
47,371 $
39,425
12,827
4,366
3,391
1,757
158
—
899
62,823
158
62,665
16,316
5,512
4,431
3,206
1,588
1,302
2,259
34,614
28,051
$
$
$
$
$
$
$
At December 31, 2023, Peoples had approximately $52 million of federal net operating loss carryforwards and $208,000 of
federal tax credit carryforwards, the annual utilization of which are subject to limitation under IRC sections 382 and 383, respectively.
Peoples has recorded a deferred tax asset only for the portion of these net operating loss and tax credit carryforwards it is able to, and
expects to, utilize under these limitations. At December 31, 2023, Peoples had approximately $9.5 million of state net operating loss
carryforwards, the annual utilization of which are subject to limitation under applicable state tax law. Peoples expects to fully utilize
$7.3 million of these state net operating loss carryforwards. However, $2.2 million of state net operating loss carryforwards are
unlikely to be utilized, resulting in a valuation allowance against the net tax benefit of approximately $158,000.
The federal income tax benefit from sales of investment securities was $777,000 in 2023, $13,000 in 2022, and $181,000 in 2021.
Income tax benefits are recognized in the Consolidated Financial Statements for a tax position only if it is considered “more-
likely-than-not” of being sustained in an audit, based solely on the technical merits of the income tax position. If the recognition
criteria are met, the amount of income tax benefits to be recognized are measured based on the largest income tax benefit that is more
than 50 percent likely to be realized on ultimate resolution of the tax position. The following table provides a reconciliation of
uncertain tax positions at December 31:
(Dollars in thousands)
Uncertain tax positions, beginning of year
Gross increase based on tax positions related to current year
Gross decrease due to the statute of limitations
Uncertain tax positions, end of year
2023
2022
$
$
89 $
527
(89)
527 $
106
39
(56)
89
Peoples is subject to U.S. federal income tax, as well as to tax in various state income tax jurisdictions. Peoples’ income tax
returns are subject to review and examination by federal and state taxing authorities. Peoples is currently open to audit under the
applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2020 through 2022. The years
open to examination by state taxing authorities vary by jurisdiction.
131
Note 14 Earnings Per Common Share
The calculations of basic and diluted earnings per common share for the years ended December 31 were as follows:
(Dollars in thousands, except per common share data)
2023
2022
2021
Net income available to common shareholders
$ 113,363 $ 101,292 $
47,555
Less: Dividends paid on unvested common shares
Less: Undistributed loss allocated to unvested common shares
531
269
354
96
295
26
Net earnings allocated to common shareholders
$ 112,563 $ 100,842 $
47,234
Weighted-average common shares outstanding
32,533,086 27,908,022 21,816,511
Effect of potentially dilutive common shares
227,722
91,580
143,372
Total weighted-average diluted common shares outstanding
32,760,808 27,999,602 21,959,883
Earnings per common share:
Basic
Diluted
$
$
3.46 $
3.44 $
3.61 $
3.60 $
2.17
2.15
Anti-dilutive common shares excluded from calculation:
Restricted common shares
9,123
—
275
Note 15 Derivative Financial Instruments
Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk
position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged
is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of
derivative financial instruments is included in “Other assets” and “Accrued expenses and other liabilities” in the Consolidated Balance
Sheets and in the net other adjustments to reconcile net income to “Net cash provided by operating activities” in the Consolidated
Statements of Cash Flows.
Derivative Financial Instruments and Hedging Activities – Risk Management Objective of Using Derivative Financial
Instruments
Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally
manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples
manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of
its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically,
Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or
payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial
instruments are used to manage differences in the amount, timing and duration of Peoples’ known or expected cash receipts and its
known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative
financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest
rate risk in Peoples’ assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial
instruments in order to minimize its net risk exposure resulting from such transactions.
Cash Flow Hedges of Interest Rate Risk
Peoples’ objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and
to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part
of its interest rate risk management strategy. These interest rate swaps were designated as cash flow hedges and involve the receipt of
variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At December 31, 2023, Peoples had
entered into eleven interest rate swaps with an aggregate notional value of $105.0 million. Peoples will pay a fixed rate of interest for
up to ten years while receiving a floating rate component of interest equal to the three-month SOFR rate. The interest received on the
floating rate component is intended to offset the interest paid on rolling three-month brokered deposits which will continue to be rolled
through the life of the swaps. At December 31, 2023, the interest rate swaps were designated as cash flow hedges of $105.0 million in
brokered deposits, which are expected to be extended every 90 days through the maturity dates of the swaps.
For derivative financial instruments designated as cash flow hedges and assessed as effective, the changes in the fair value of each
derivative financial instrument is reported in AOCL (outside of earnings), net of tax, and are reclassified to interest expense as interest
payments are made or received on Peoples’ variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by
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comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated
hedged transaction. The reset dates and the payment dates on the 90-day advances or brokered deposits are matched to the reset dates
and payment dates on the receipt of the three-month SOFR floating portion of the swaps to ensure effectiveness of the cash flow
hedge. During the years ended December 31, 2023 and December 31, 2022, Peoples had reclassifications of changes in fair value to
interest expense of $0.3 million and $0.8 million, respectively.
The following table summarizes information about the interest rate swaps designated as cash flow hedges at December 31:
(Dollars in thousands)
Notional amount
Weighted average pay rates
Weighted average receive rates
Weighted average maturity
Pre-tax changes in fair value included in AOCL
2023
$
105,000
$
2.22 %
4.63 %
2.0 years
3,434
2022
125,000
2.26 %
4.44 %
2.6 years
5,727
The following table presents changes in fair value recorded in AOCL and in the Consolidated Statements of Income related to the
cash flow hedges for the years ended December 31:
(Dollars in thousands)
2023
2022
Amount of income recognized in AOCL, pre-tax
$
(2,293) $
10,606
The following table reflects the cash flow hedges, which were included in the Consolidated Balance Sheets at fair value, at
December 31:
(Dollars in thousands)
Included in “Other assets”:
Interest rate swaps related to debt
Total included in “Other assets”
Non-Designated Hedges
2023
2022
Notional
Amount
Fair Value
Notional
Amount
Fair Value
$
$
105,000 $
105,000 $
3,314 $
3,314 $
125,000 $
125,000 $
5,594
5,594
Peoples maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this
program, Peoples originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with
Peoples on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples effectively
provides the customer with a fixed rate loan while creating a variable rate asset for Peoples. Peoples offsets its exposure in the swap by
entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated
hedges; therefore, each swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a
material impact on Peoples’ results of operation or financial condition for the years ended December 31, 2023 and 2022.
The following table reflects the non-designated hedges, which were included in the Consolidated Balance Sheets at fair value, at
December 31:
(Dollars in thousands)
Included in “Other assets”:
2023
2022
Notional
Amount
Fair Value
Notional
Amount
Fair Value
Interest rate swaps related to commercial loans
$
416,106 $
18,990 $
390,126 $
Total included in “Other assets”
416,106
18,990
390,126
Included in “Accrued expenses and other liabilities”:
Interest rate swaps related to commercial loans
$
416,106
19,122 $
390,126 $
Total included in “Accrued expenses and other liabilities”
416,106
19,122
390,126
28,529
28,529
28,529
28,529
Pledged Collateral
Peoples pledges or receives collateral for all interest swaps. When the fair value of Peoples’ interest rate swaps are in a net
liability position, Peoples must pledge collateral, and, when the fair value of Peoples’ interest rate swaps are in a net asset position, the
respective counterparties must pledge collateral. At each of December 31, 2023 and December 31, 2022, Peoples had no cash pledged
while the counterparties had pledged $12.8 million at December 31, 2023 and $20.9 million at December 31, 2022. At December 31,
133
2023 and December 31, 2022, Peoples had no investment securities pledged, while counterparties had $2.2 million of investment
securities pledged at December 31, 2023 and $2.5 million pledged at December 31, 2022.
Note 16 Off-Balance Sheet Risk
Loan Commitments and Standby Letters of Credit
Loan commitments are made to accommodate the financial needs of Peoples’ customers. Standby letters of credit are instruments
issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank’s customer in
the nonperformance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused.
Peoples’ exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments
and standby letters of credit is represented by the contractual amount of those instruments. Peoples uses the same underwriting
standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral
obtained is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable;
inventory; property, plant, and equipment; and income-producing commercial properties.
The total amounts of loan commitments and standby letters of credit at December 31 were:
(Dollars in thousands)
2023
2022
Home equity lines of credit
$
244,367 $
Unadvanced construction loans
Other loan commitments
Loan commitments
349,850
769,759
197,995
270,229
730,015
1,363,976
1,198,239
Standby letters of credit
$
14,318 $
15,451
Note 17 Regulatory Matters
The following is a summary of certain regulatory matters affecting Peoples and its subsidiaries:
Federal Reserve Board Requirements
Peoples Bank is required to maintain a minimum level of reserves, consisting of cash on hand and non-interest-bearing balances
with the FRB, based on the amount of total deposits. Average required reserve balances were $0 and $0 in 2023 and 2022,
respectively.
Limits on Dividends
The primary source of funds for the dividends paid by Peoples is dividends received from Peoples Bank. The payment of
dividends by Peoples Bank is subject to various banking regulations. The most restrictive provision requires regulatory approval if
dividends declared in any calendar year exceed the total net profits of that year plus the retained net profits of the preceding two years.
At December 31, 2023, Peoples Bank had approximately $153.2 million of net profits available for distribution to Peoples as
dividends without regulatory approval.
Capital Requirements
Peoples and Peoples Bank are subject to various regulatory capital guidelines administered by the banking regulatory agencies.
Under capital adequacy requirements and the regulatory framework for prompt corrective action, Peoples and Peoples Bank must meet
specific capital guidelines that involve quantitative measures of each entity’s assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. Peoples’ and Peoples Bank’s capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors. Failure to meet future minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could
have a material effect on Peoples’ financial results.
Quantitative measures established by regulation to ensure capital adequacy, and in effect at December 31, 2023, required Peoples
and Peoples Bank to maintain minimum amounts and ratios of common equity tier 1 capital, tier 1 capital and total capital (each as
defined in the applicable regulations) to risk-weighted assets (as defined), and of tier I capital (as defined) to average assets (as
defined). Peoples and Peoples Bank met all capital adequacy requirements at December 31, 2023.
At December 31, 2023, the most recent notification from the banking regulatory agencies categorized Peoples Bank as well
capitalized under the regulatory framework for prompt corrective action applicable to Peoples Bank. Peoples maintained the capital
required by the Federal Reserve Board to be deemed well capitalized and remain a financial holding company. To be categorized as
well capitalized, Peoples and Peoples Bank must maintain minimum common equity tier 1, tier 1 risk-based, total risk-based and tier I
leverage ratios as set forth in the table below. There are no conditions or events since this notification that management believes have
changed Peoples’ or Peoples Bank’s category.
134
Peoples’ and Peoples Bank’s actual capital amounts and ratios at December 31 are also presented in the following table:
2023
2022
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
PEOPLES
Common Equity Tier 1 (a)
Actual
For capital adequacy
To be well capitalized
Tier 1 (b)
Actual
For capital adequacy
To be well capitalized
Total Capital (c)
Actual
For capital adequacy
To be well capitalized
Tier 1 Leverage (d)
Actual
For capital adequacy
To be well capitalized
$
766,692
11.56 % $
604,566
298,393
431,011
4.50 %
6.50 %
228,206
329,631
$
820,496
12.37 % $
618,354
397,857
530,476
6.00 %
8.00 %
304,274
405,699
$
873,226
13.17 % $
662,421
530,476
663,095
8.00 %
10.00 %
405,699
507,124
$
820,496
9.48 % $
618,354
346,112
432,640
4.00 %
5.00 %
277,302
346,628
Capital Conservation Buffer
$
342,750
5.17 % $
256,722
Fully phased in
Net Risk-Weighted Assets
PEOPLES BANK
Common Equity Tier 1 (a)
Actual
For capital adequacy
To be well capitalized
Tier 1 (b)
Actual
For capital adequacy
To be well capitalized
Total Capital (c)
Actual
For capital adequacy
To be well capitalized
Tier 1 Leverage (d)
Actual
For capital adequacy
To be well capitalized
165,774
2.50 %
126,781
$
6,630,945
$
5,071,240
$
783,790
11.85 % $
593,609
297,638
429,921
4.50 %
6.50 %
227,843
329,107
$
783,790
11.85 % $
593,609
396,850
529,134
6.00 %
8.00 %
303,791
405,055
$
836,520
12.65 % $
637,676
529,134
661,417
8.00 %
10.00 %
405,055
506,318
$
783,790
9.12 % $
593,609
343,613
429,517
4.00 %
5.00 %
276,712
345,890
Capital Conservation Buffer
$
307,386
4.65 % $
232,621
Fully phased in
Net Risk-Weighted Assets
165,354
2.50 %
126,580
$
6,614,172
$
5,063,183
(a) Ratio represents common equity tier 1 capital to net risk-weighted assets
(b) Ratio represents tier 1 capital to net risk-weighted assets
(c) Ratio represents total capital to net risk-weighted assets
(d) Ratio represents tier 1 capital to average assets
135
11.92 %
4.50 %
6.50 %
12.19 %
6.00 %
8.00 %
13.06 %
8.00 %
10.00 %
8.92 %
4.00 %
5.00 %
5.06 %
2.50 %
11.72 %
4.50 %
6.50 %
11.72 %
6.00 %
8.00 %
12.59 %
8.00 %
10.00 %
8.58 %
4.00 %
5.00 %
4.59 %
2.50 %
Note 18 Stock-Based Compensation
Under the Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity Plan (the “2006 Equity Plan”), Peoples may grant,
among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights,
performance units and unrestricted common share awards to employees and non-employee directors. The total number of common
shares available under the 2006 Equity Plan is 1,493,297. The maximum number of common shares that can be issued for incentive
stock options is 750,000 common shares. Since February 2009, Peoples has granted restricted common shares to employees, and
periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. In general, common
shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are
available, common shares are issued from authorized but unissued common shares.
Restricted Common Shares
Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee
directors. In general, the restrictions on the restricted common shares awarded to employees expire after periods ranging from one to
five years. Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions.
In 2023, Peoples granted an aggregate of 188,372 restricted common shares subject to performance-based vesting to officers and key
employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to
vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each
of the three fiscal years preceding the vesting date. During 2023, Peoples granted, to certain key employees, an aggregate of 71,276
restricted common shares subject to time-based vesting, the majority of which will vest three years after the grant date.
The following summarizes the changes to Peoples’ outstanding restricted common shares for the year ended December 31, 2023:
Time-Based Vesting
Number of
Common
Shares
Weighted-
Average
Grant Date
Fair Value
Performance-Based Vesting
Weighted-
Average
Grant Date
Fair Value
Number of
Common
Shares
Outstanding at January 1
Awarded
Released
Forfeited
Outstanding at December 31
138,522 $
71,276
(60,420)
(6,959)
142,419 $
27.25
26.40
22.26
30.52
28.78
295,565 $
188,372
(70,458)
(9,509)
403,970 $
32.20
30.30
32.91
31.11
31.21
The total intrinsic value of restricted common shares released was $3.7 million, $3.7 million and $2.6 million in 2023, 2022 and
2021, respectively.
Stock-Based Compensation
Peoples recognizes stock-based compensation expense, which is included as a component of Peoples’ salaries and employee
benefit costs, for restricted common shares, as well as purchases made by participants in the employee stock purchase plan. For
restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to
vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. Peoples also
has an employee stock purchase plan whereby employees can purchase Peoples’ common shares at a discount of up to 15%. The
following summarizes the amount of stock-based compensation and related tax benefit recognized for the years ended December 31:
(Dollars in thousands)
Employee stock-based compensation expense:
Restricted common share grant expense
Employee stock purchase plan expense
Total employee stock-based compensation expense
2023
2022
2021
$
5,337 $
3,707 $
3,436
140
112
79
5,477
3,819
3,515
Non-employee director stock-based compensation expense
548
506
Total stock-based compensation expense
Recognized tax benefit
Net expense recognized
6,025
4,325
(1,402)
4,623 $
(1,007)
3,318 $
$
375
3,890
(867)
3,023
Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in 2023, 2022 and
2021. The fair value of restricted common share awards on the grant date is the market price of Peoples’ common shares. Total
unrecognized stock-based compensation related to unvested restricted common share awards was $5.3 million at December 31, 2023,
which will be recognized over a weighted-average period of 2.0 years. In 2021, the Board of Directors granted 4,347 unrestricted
common shares to non-employee directors, with related stock-based compensation of $135,000.
136
Note 19 Revenue
The following table details Peoples’ revenue from contracts with customers for the year ended December 31:
(Dollars in thousands)
Insurance income:
Commission and fees from sale of insurance policies (a)
$
Fees related to third-party administration services (a)
Performance-based commissions (b)
Trust and investment income:
Fiduciary income (a)
Brokerage income (a)
Electronic banking income:
Interchange income (a)
Promotional and usage income (a)
Deposit account service charges:
Ongoing maintenance fees for deposit accounts (a)
Transactional-based fees (b)
Commercial loan swap fees (b)
Other non-interest income transactional-based fees (b)
Total
Timing of revenue recognition:
Services transferred over time
Services transferred at a point in time
Total
(a) Services transferred over time.
(b) Services transferred at a point in time.
$
$
$
2023
2022
16,081 $
301
1,634
10,295
6,865
19,380
5,830
6,425
10,257
782
1,650
79,500 $
65,177 $
14,323
79,500 $
13,960
343
1,424
10,048
6,343
16,674
4,420
5,323
9,260
662
1,499
69,956
57,111
12,845
69,956
Peoples records contract assets for income that has been recognized over a period of time for the fulfillment of performance
obligations, but has not yet been received, related to electronic banking income. This income typically relates to bonuses for which
Peoples is eligible, but will not receive until a certain time in the future. Peoples records contract liabilities for payments received for
commission income related to the sale of insurance policies, for which the performance obligations have not yet been fulfilled. The
contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled, which is
over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for
which income is recognized during the period in which the performance obligations are fulfilled. The following table details the
changes in Peoples’ contract assets and contract liabilities for the year ended December 31, 2023:
(Dollars in thousands)
Balance, January 1, 2023
Additional income receivable
Additional deferred income
Receipt of income previously receivable
Recognition of income previously deferred
Balance, December 31, 2023
Contract Assets Contract Liabilities
$
$
1,294 $
209
—
(750)
—
753 $
5,634
—
411
—
(269)
5,776
For more information on Peoples’ revenue recognition policies, see “Note 1 Summary of Significant Accounting Policies.”
Note 20 Acquisitions
Limestone Bancorp, Inc.
As of the close of business on April 30, 2023, Peoples completed the Limestone Merger. In connection with the Limestone
Merger, Limestone Bank, Inc., which operated 20 branches in Kentucky, merged into Peoples Bank. As consideration in the
Limestone Merger, Limestone shareholders were paid 0.90 common shares of Peoples for each full share of Limestone that was
137
owned at the merger date, resulting in the issuance of 6,827,668 common shares by Peoples, or aggregate consideration of
$177.9 million. Peoples accounted for this transaction as a business combination under the acquisition method.
Peoples recorded acquisition-related expenses related to the Limestone Merger, which included $16.9 million in non-interest
expense for the year ended December 31, 2023. During 2023, acquisition-related non-interest expenses consisted of $6.0 million in
professional fees, $5.9 million in salaries and employee benefit costs, $2.9 million in other non-interest expense, $1.8 million in data
processing and software expense, and $0.3 million in various other non-interest expense line items. The other non-interest expenses
were primarily due to $1.8 million of early contract termination fees on Limestone contracts driven by the system conversions, which
took place in the third quarter of 2023.
The following table provides the purchase price calculation as of the date of the Limestone Merger, and the assets acquired and
liabilities assumed at their estimated fair values. The estimated fair values below are subject to adjustment for up to one year after
April 30, 2023, which include, but are not limited to, loans, including the designation of PCD loans, deferred tax assets and liabilities,
and certain other assets and other liabilities.
(Dollars in thousands)
Total purchase price
Assets
Cash and balances due from banks
Interest-bearing deposits in other banks
Total cash and cash equivalents
Available-for-sale investment securities, at fair value
Other investment securities
Total investment securities
Loans and leases
Allowance for credit losses (on PCD loans)
Net loans
Bank premises and equipment, net of accumulated depreciation
Bank owned life insurance
Other intangible assets
Other assets
Total assets
Liabilities
Deposits:
Non-interest-bearing
Interest-bearing
Total deposits
Short-term borrowings
Long-term borrowings
Accrued expenses and other liabilities
Total liabilities
Net assets
Goodwill
Fair Value
$
177,931
6,422
87,115
93,537
166,944
5,716
172,660
1,077,929
(2,051)
1,075,878
17,690
31,343
27,722
36,874
1,455,704
262,727
971,457
1,234,184
60,000
39,453
12,967
1,346,604
109,100
$
68,831
The goodwill recorded in connection with the Limestone Merger is related to expected synergies to be gained from the
combination of Limestone with Peoples’ operations. The employees retained from the Limestone Merger and the geographic locations
of Limestone should allow Peoples to continue to grow its loan and deposit portfolios while also increasing Peoples’ ability to
penetrate the new markets, which should benefit Peoples in future periods. During Peoples’ evaluation of intangible assets, it was
determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill. Peoples
recorded a core deposit intangible asset in other intangible assets related to the Limestone Merger.
138
The estimated fair values presented in the above table reflect additional information that was obtained during the three months
ended December 31, 2023, which resulted in changes to certain fair value estimates made as of the date of the Limestone Merger.
Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously
recorded results have changed. The below table reflects the changes in the estimated fair value as they impact goodwill at
December 31, 2023:
(Dollars in thousands)
Loans
Allowance for credit losses (on PCD loans)
Net loans
Other assets
Total assets
Liabilities
Long-term borrowings
Total liabilities
Net assets
Goodwill
Fair Value
(2,051)
(890)
(2,941)
1,949
(992)
5,709
5,709
(6,701)
6,701
$
Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which
includes loans as to which Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are
considered “purchased credit deteriorated” (or “PCD”) loans. Acquired PCD loans are reported net of the unamortized fair value
adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit
marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The
following table details the fair value adjustment for acquired PCD loans as of the acquisition date:
(Dollars in thousands)
PCD loans
Commercial real estate, other
Commercial and industrial
Residential real estate
Home equity lines of credit
Consumer
Fair value
Par Value
Allowance for
Credit Losses
Non-Credit
(Discount)
Premium
Fair Value
$
30,907 $
(1,340) $
(2,160) $
16,466
6,328
774
1,029
(379)
(228)
(18)
(86)
(610)
(770)
11
78
$
55,504 $
(2,051) $
(3,451) $
27,407
15,477
5,330
767
1,021
50,002
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Peoples’ operating results for the twelve months ended December 31, 2023 include the operating results of the acquired assets and
assumed liabilities of Limestone subsequent to the Limestone Merger. Due to the timing of the acquisition closing and the conversion
of Limestone systems, as well as other streamlining and integration of the operating activities into those of Peoples, historical
reporting for the former Limestone operations is impracticable and the separate disclosures of revenue from the assets acquired and
income before income taxes is impracticable for the periods subsequent to the acquisition. The following table presents unaudited pro
forma information as if the Limestone Merger had occurred on January 1, 2022. The pro forma adjustments include any changes in
interest income due to the accretion of discounts, or amortization of premiums, associated with the fair value adjustments to acquired
loans, interest-bearing deposits, long-term borrowings and customer deposit intangibles that would have resulted had the assets and
liabilities been acquired as of January 1, 2022. The pro forma information excludes Peoples’ acquisition-related expenses as described
above as well as a provision of credit losses of $8.1 million recorded to establish an allowance for credit losses for non-PCD loans
relating to the acquired loans. The pro forma information reflects the adoption of the current expected credit loss (“CECL”) accounting
standard by Limestone as of January 1, 2023. The pro forma information does not necessarily reflect the results of operations that
would have occurred had Peoples acquired Limestone on January 1, 2022. Additionally, cost savings and other business synergies
related to the acquisition are not reflected in the pro forma amounts.
(Dollars in thousands)
Net interest income
Non-interest income
Net income
Elite Agency, Inc
Unaudited Pro Forma For
Twelve months ended
December 31, 2023 December 31, 2022
$
351,164 $
87,890
130,153
317,226
87,713
127,023
On April 1, 2022, Peoples Insurance acquired substantially all of the assets and rights of an insurance agency with five locations
in eastern Kentucky and certain rights to related customer accounts, which were previously developed and maintained by Elite,
pursuant to an Asset Purchase Agreement between Peoples Insurance and Elite. Total consideration for this transaction was
$4.4 million. Peoples recognized intangibles of $2.1 million, primarily comprised of a customer relationship intangible.
Vantage Financial, LLC
On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing
headquartered in Excelsior, Minnesota. 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. Under the terms of the agreement, Peoples Bank paid cash
consideration of $54.0 million, and also repaid $28.9 million in recourse debt on behalf of Vantage, for total consideration of
$82.9 million. Vantage offers mid-ticket equipment leases, primarily for business essential information technology equipment across a
wide-array of industries.
Peoples recorded acquisition-related expenses during 2023 of $46,000 related to the Vantage acquisition, which consisted of
professional fees. Peoples recorded acquisition-related expenses during 2022 of $1.6 million related to the Vantage acquisition, which
included $1.3 million in professional fees.
The following table provides the purchase price calculation as of the date of the acquisition of Vantage, and the assets acquired
and liabilities assumed at their estimated fair values.
(Dollars in thousands)
Total purchase price
Net assets at fair value
Assets
Cash and due from banks
Leases
Allowance for credit losses (on PCD leases)
Net leases
Bank premises and equipment
Other intangible assets
Other assets
140
Fair Value
$
82,893
$
1,444
155,726
(801)
154,925
116
13,207
1,506
(Dollars in thousands)
Total assets
Liabilities
Borrowings
Accrued expenses and other liabilities
Total liabilities
Net assets
Goodwill
Fair Value
$
171,198
$
106,919
8,550
115,469
55,729
27,164
$
$
$
The goodwill recorded in connection with the Vantage acquisition is related to expected synergies to be gained from the
combination of Vantage with Peoples’ operations. The employees retained from the Vantage acquisition should allow Peoples to
continue to grow the lease portfolio, along with Peoples’ resources, and should benefit Peoples in future periods. During Peoples’
evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and
was included in goodwill. Peoples recorded other intangible assets, which included a customer relationship intangible, a trade-name
intangible and non-compete agreements related to this transaction.
The following table details the fair value adjustment for acquired PCD leases as of the acquisition date:
(Dollars in thousands)
PCD leases
Leases
Fair value
Par Value
Allowance for
Credit Losses
Non-Credit
Premium
Fair Value
$
$
3,412 $
3,412 $
(801) $
(801) $
1,120 $
1,120 $
3,731
3,731
Note 21 Parent Company Only Financial Information
Condensed Balance Sheets
(Dollars in thousands)
Assets:
Cash and due from other banks
Interest-bearing deposits in subsidiary bank
Due from subsidiary bank
Other investment securities
Investments in subsidiaries:
Bank
Non-bank
Other assets
Total assets
Liabilities:
Accrued expenses and other liabilities
Dividends payable
Mandatorily redeemable capital securities of subsidiary trusts and junior subordinated
debentures
Total liabilities
Total stockholders’ equity
Total liabilities and stockholders’ equity
141
December 31,
2023
2022
$
50 $
50
17,099
14,961
771
237
1,353
234
1,072,238
774,294
17,606
12,084
$ 1,120,085 $
11,944
2,877
805,713
$
3,342 $
938
62,271
66,551
1,053,534
$ 1,120,085 $
3,336
781
16,268
20,385
785,328
805,713
Condensed Statements of Income
(Dollars in thousands)
Income:
Dividends from subsidiary bank
Dividends from non-bank subsidiary
Interest and other income
Total income
Expense:
Trust preferred securities expense
Intercompany management fees
Other expense
Total expense
Income before federal income taxes and equity in undistributed earnings of
subsidiaries
Applicable income tax expense
Equity in undistributed earnings of subsidiaries
Net income
Statements of Cash Flows
(Dollars in thousands)
Operating activities
Net income
Adjustments to reconcile net income to cash provided by operations:
Depreciation, amortization and accretion, net
Equity in undistributed earnings of subsidiaries
Gain on investment securities
Other, net
Net cash provided by operating activities
Investing activities
Net proceeds from sales and maturities of investment securities
Investment in subsidiaries
Decrease in receivable from subsidiary
Business combinations, net of cash received
Other, net
Net cash used in investing activities
Financing activities
Purchase of treasury stock
Proceeds from issuance of common shares
Cash dividends paid
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
Supplemental cash flow information:
Interest paid
142
Year Ended December 31,
2023
2022
2021
$
48,000 $
52,000 $
29,000
200
11
1,860
39
1,750
73
48,211
53,899
30,823
1,147
1,873
11,011
14,031
34,180
(3,296)
744
1,379
6,539
8,662
45,237
(1,979)
75,887
113,363 $
54,076
101,292 $
$
367
1,303
5,675
7,345
23,478
(1,295)
22,782
47,555
Year Ended December 31,
2023
2022
2021
$
113,363 $
101,292 $
47,555
—
138
6,224
(75,887)
(54,076)
(22,782)
—
(6,757)
30,719
—
5,008
52,362
—
3,930
34,927
—
—
10
(39,414)
(13,084)
(16,282)
40,086
27,763
(1,636)
26,799
12,279
(1,239)
(262)
(2,306)
(4,799)
1,264
(9,152)
1,226
(51,845)
(42,371)
(55,380)
(50,297)
2,138
(241)
15,011
15,252
17,149 $
15,011 $
16,344
(710)
(1,998)
(2,636)
(1,306)
906
(31,002)
(31,402)
889
14,363
15,252
676 $
663 $
331
$
$
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information concerning (a) directors of Peoples Bancorp Inc. (“Peoples”), (b) the procedures by which shareholders of
Peoples may recommend nominees to Peoples’ Board of Directors, (c) the Audit Committee of Peoples' Board of Directors and (d) the
Board of Directors’ determination that Peoples has an “audit committee financial expert” serving on its Audit Committee required by
Items 401, 407(c)(3), 407(d)(4) and 407(d)(5) of SEC Regulation S-K will be included in the sections captioned “PROPOSAL
NUMBER 1: ELECTION OF DIRECTORS,” “THE BOARD AND COMMITTEES OF THE BOARD” and “CORPORATE
GOVERNANCE AND BOARD MATTERS - Nominating Procedures” of the definitive Proxy Statement of Peoples Bancorp Inc.
relating to the Annual Meeting of Shareholders to be held on April 25, 2024 (“Peoples’ Definitive Proxy Statement”), which sections
are incorporated herein by reference. The procedures by which shareholders of Peoples may recommend nominees to Peoples’ Board
of Directors have not changed materially from those described in Peoples’ definitive Proxy Statement for the 2023 Annual Meeting of
Shareholders held on April 27, 2023.
The information regarding Peoples’ executive officers required by Item 401 of SEC Regulation S-K will be included in the
section captioned “EXECUTIVE OFFICERS” of Peoples’ Definitive Proxy Statement, which section is incorporated herein by
reference.
The information required by Item 405 of SEC Regulation S-K regarding beneficial ownership reporting compliance under Section
16(a) of the Securities Exchange Act of 1934, as amended, is incorporated by reference from the text to be included under the caption
“DELINQUENT SECTION 16(a) REPORTS” of Peoples’ Definitive Proxy Statement, to the extent that disclosure of information is
required.
The Board of Directors of Peoples has adopted charters for each of the Audit Committee, the Compensation Committee, the
Executive Committee, the Governance and Nominating Committee, and the Risk Committee.
In accordance with the requirements of Rule 5610 of the Nasdaq Stock Market Corporate Governance Requirements, the Board of
Directors of Peoples has adopted a Code of Ethics covering the directors, officers and employees of Peoples and Peoples’ subsidiaries,
including, without limitation, the principal executive officer, the principal financial officer, the principal accounting officer and the
controller of Peoples. Peoples intends to disclose the following events, if they occur, in a Current Report on Form 8-K and on the
“Investor Relations” page of Peoples’ Internet website at www.peoplesbancorp.com within four business days following their
occurrence:
(A) the date and nature of any amendment to a provision of Peoples’ Code of Ethics that
(a) applies to the principal executive officer, principal financial officer, principal accounting officer or controller of
Peoples, or persons performing similar functions,
(b) relates to any element of the code of ethics definition set forth in Item 406(b) of SEC Regulation S-K, and
(c)
is not a technical, administrative or other non-substantive amendment; and
(B) a description (including the nature of the waiver, the name of the person to whom the waiver was granted and the date of the
waiver) of any waiver, including an implicit waiver, from a provision of the Code of Ethics granted to the principal executive
officer, principal financial officer, principal accounting officer or controller of Peoples, or persons performing similar
functions, that relates to one or more of the elements of the code of ethics definition set forth in Item 406(b) of SEC
Regulation S-K.
In addition, in accordance with the rules of the Nasdaq Stock Market, Peoples will disclose any waivers from the provisions of the
Code of Ethics granted to a director or an executive officer of Peoples in a Current Report on Form 8-K within four business days
following their occurrence.
Each of the Code of Ethics, the Audit Committee Charter, the Compensation Committee Charter, the Executive Committee
Charter, the Governance and Nominating Committee Charter and the Risk Committee Charter is posted under the “Corporate
Overview – Governance Documents” tab of the “Investor Relations” page of Peoples’ Internet website. Interested persons may also
obtain copies of the Code of Ethics without charge by writing to Peoples Bancorp Inc., Attention: Corporate Secretary, 138 Putnam
Street, P.O. Box 738, Marietta, Ohio 45750-0738.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this Item 11 will be included in the sections captioned “COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION,” “EXECUTIVE COMPENSATION: COMPENSATION DISCUSSION AND
ANALYSIS,” “SUMMARY COMPENSATION TABLE FOR 2023,” “GRANTS OF PLAN-BASED AWARDS FOR 2023,”
“OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2023,” “OPTION EXERCISES AND STOCK VESTED FOR
2023,” “PENSION BENEFITS FOR 2023,” “NON-QUALIFIED DEFERRED COMPENSATION FOR 2023,” “OTHER
143
POTENTIAL POST-EMPLOYMENT PAYMENTS,” “DIRECTOR COMPENSATION” and “COMPENSATION COMMITTEE
REPORT” of Peoples’ Definitive Proxy Statement, which sections are incorporated herein by reference.
144
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 regarding the security ownership of certain beneficial owners and management will be
included in the section captioned “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” of
Peoples’ Definitive Proxy Statement, which section is incorporated herein by reference.
Equity Compensation Plan Information
The table below provides information as of December 31, 2023, with respect to compensation plans under which common shares
of Peoples are authorized for issuance to directors, officers or employees in exchange for consideration in the form of goods or
services. These compensation plans include:
(i)
the Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity Plan, as successor to the Peoples Bancorp Inc.
Third Amended and Restated 2006 Equity Plan (the “2006 Equity Plan”);
(ii) the Peoples Bancorp Inc. Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp
Inc. and Subsidiaries (the “Directors’ Deferred Compensation Plan”); and
(iii) the Peoples Bancorp Inc. Employee Stock Purchase Plan (the “ESPP”).
All of these compensation plans were approved by the shareholders of Peoples.
(a)
Number of
common shares
to be issued
upon exercise
of outstanding
options,
warrants and
rights
(b)
Weighted-
average
exercise price
of outstanding
options,
warrants and
rights
(c)
Number of common
shares remaining
available for future
issuance under equity
compensation plans
(excluding common
shares reflected in
column (a))
603,496
603,496
(1) $
$
—
—
(2)
841,674
841,674
Plan Category
Equity compensation plans
approved by shareholders
Total
(1) Includes an aggregate of 546,389 restricted common shares subject to time-based or performance-based vesting restrictions
granted under the 2006 Equity Plan, and 57,107 common shares allocated to participants’ bookkeeping accounts under the
Directors’ Deferred Compensation Plan.
(2) Includes 697,190 common shares remaining available for future grants under the 2006 Equity Plan at December 31, 2023, as
well as 144,484 common shares remaining available for issuance and delivery under the ESPP. No amount is included for
potential future allocations to participants’ bookkeeping accounts under the Directors’ Deferred Compensation Plan since the
terms of the Directors’ Deferred Compensation Plan do not provide for a specified limit on the number of common shares
which may be allocated to participants’ bookkeeping accounts.
Additional information regarding Peoples’ stock-based compensation plans can be found in “Note 18 Stock-Based
Compensation.”
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 will be included in the sections captioned “TRANSACTIONS WITH RELATED
PERSONS,” “PROPOSAL NUMBER 1: ELECTION OF DIRECTORS,” “THE BOARD AND COMMITTEES OF THE BOARD,”
“CORPORATE GOVERNANCE AND BOARD MATTERS - Independence of Directors,” and “COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION” of Peoples’ Definitive Proxy Statement, which sections are incorporated herein
by reference.
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 will be included in the section captioned “INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM” of Peoples’ Definitive Proxy Statement, which section is incorporated herein by reference.
145
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(1) Financial Statements:
The following reports of the independent registered public accounting firm and consolidated financial statements of Peoples
Bancorp Inc. and subsidiaries are filed as required by “ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA” and set forth immediately following “ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT
PREVENT INSPECTIONS” of this Form 10-K:
Report of Independent Registered Public Accounting Firm (Ernst & Young LLP) on Effectiveness of Internal
Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm (Ernst & Young LLP) on Consolidated Financial
Statements
Consolidated Balance Sheets at December 31, 2023 and 2022
Consolidated Statements of Income for each of the fiscal years in the three-year period ended December 31, 2023
Consolidated Statements of Comprehensive (Loss) Income for each of the fiscal years in the three-year period
ended December 31, 2023
Consolidated Statements of Stockholders’ Equity for each of the fiscal years in the three-year period ended
December 31, 2023
Consolidated Statements of Cash Flows for each of the fiscal years in the three-year period ended December 31,
2023
Notes to the Consolidated Financial Statements
Peoples Bancorp Inc. Parent Company Only Financial Information is included in Note 21 of the Notes to the
Consolidated Financial Statements
Page
81
83
85
86
87
88
90
93
141
(a)(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
(a)(3) Exhibits
The documents listed in the Index to Exhibits that immediately precedes the signature page of this Form 10-K, are filed/
furnished with this Form 10-K as exhibits or incorporated into this Form 10-K by reference as noted. Each management
contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K is identified as such in the
list below.
(b) Exhibits
The documents listed in the Index to Exhibits that immediately precedes the signature page of this Form 10-K are filed/
furnished with this Form 10-K as exhibits or incorporated into this Form 10-K by reference as noted.
(c) Financial Statement Schedules
None.
ITEM 16 FORM 10-K SUMMARY
Not applicable.
146
3.1(c)
3.1(d)
Exhibit
Number
Description
Exhibit Location
INDEX TO EXHIBITS
2.1
Agreement and Plan of Merger, dated as of March 26, 2021, between
Peoples Bancorp Inc. and Premier Financial Bancorp, Inc.+
2.2
Agreement and Plan of Merger, dated as of October 24, 2022,
between Peoples Bancorp Inc. and Limestone Bancorp, Inc. +
3.1(a)
Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed
with the Ohio Secretary of State on May 3, 1993) P
3.1(b)
Certificate of Amendment to the Amended Articles of Incorporation
of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on
April 22, 1994)
Included as Annex A to the preliminary joint
proxy statement/prospectus which forms a part of
the Registration Statement of Peoples Bancorp Inc.
on Form S-4/A filed on June 1, 2021 (Registration
No. 333-256040)
Included as Annex A to the preliminary joint
proxy statement/prospectus which forms a part of
the Registration Statement of Peoples Bancorp Inc.
on Form S-4/A filed on January 6, 2023
(Registration No. 333-268728)
Incorporated herein by reference to Exhibit 3(a) to
the Registration Statement of Peoples Bancorp Inc.
on Form 8-B filed on July 20, 1993 (File No.
0-16772)
Incorporated herein by reference to Exhibit 3.1(b)
to the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended
September 30, 2017 (File No. 0-16772) (“Peoples’
September 30, 2017 Form 10-Q”)
Certificate of Amendment to the Amended Articles of Incorporation
of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on
April 9, 1996)
Incorporated herein by reference to Exhibit 3.1(c)
to Peoples’ September 30, 2017 Form 10-Q
Certificate of Amendment to the Amended Articles of Incorporation
of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on
April 23, 2003)
3.1(e)
Certificate of Amendment by Shareholders to the Amended Articles
of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio
Secretary of State on January 22, 2009)
3.1(f)
Certificate of Amendment by Directors to Articles filed with the Ohio
Secretary of State on January 28, 2009, evidencing adoption of
amendments by the Board of Directors of Peoples Bancorp Inc. to
Article FOURTH of the Amended Articles of Incorporation to
establish express terms of Fixed Rate Cumulative Perpetual Preferred
Shares, Series A, each without par value, of Peoples Bancorp Inc.
3.1(g)
Certificate of Amendment by the Shareholders to the Amended
Articles of Incorporation of Peoples Bancorp Inc. (as filed with the
Ohio Secretary of State on July 28, 2021)
3.1(h)
Amended Articles of Incorporation of Peoples Bancorp Inc.
(representing the Amended Articles of Incorporation in compiled
form incorporating all amendments) [For purposes of SEC reporting
compliance only - not filed with Ohio Secretary of State]
3.2(a)
Code of Regulations of Peoples Bancorp Inc.P
Incorporated herein by reference to Exhibit 3(a) to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended March
31, 2003 (File No. 0-16772) (“Peoples’ March 31,
2003 Form 10-Q”)
Incorporated herein by reference to Exhibit 3.1 to
the Current Report of Peoples Bancorp Inc. on
Form 8-K dated and filed on January 23, 2009
(File No. 0-16772)
Incorporated herein by reference to Exhibit 3.1 to
the Current Report of Peoples Bancorp Inc. on
Form 8-K dated and filed on February 2, 2009
(File No. 0-16772)
Incorporated herein by reference to Exhibit 3.1(g)
to the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended June
30, 2021 (File No. 0-16772) (“Peoples’ June 30,
2021 Form 10-Q”)
Incorporated herein by reference to Exhibit 3.1(h)
to Peoples’ June 30, 2021 Form 10-Q
Incorporated herein by reference to Exhibit 3(b) to
the Registration Statement of Peoples Bancorp Inc.
on Form 8-B filed July 20, 1993 (File No.
0-16772)
+Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. A copy of any omitted schedules or
exhibits will be furnished supplementally by Peoples Bancorp Inc. to the SEC on a confidential basis upon request.
PPeoples Bancorp Inc. filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in
electronic format.
147
Exhibit
Number
Description
Exhibit Location
3.2(b)
Certified Resolutions Regarding Adoption of Amendments to
Incorporated herein by reference to Exhibit 3(c) to
Sections 1.03, 1.04, 1.05, 1.06, 1.08, 1.10, 2.03(C), 2.07, 2.08, 2.10
and 6.02 of the Code of Regulations of Peoples Bancorp Inc. by
shareholders on April 10, 2003
Peoples’ March 31, 2003 Form 10-Q
3.2(c)
Certificate regarding adoption of amendments to Sections 3.01, 3.03,
3.04, 3.05, 3.06, 3.07, 3.08 and 3.11 of the Code of Regulations of
Peoples Bancorp Inc. by shareholders on April 8, 2004
3.2(d)
Certificate regarding adoption of amendments to Sections 2.06, 2.07,
3.01 and 3.04 of Peoples Bancorp Inc.’s Code of Regulations by the
shareholders on April 13, 2006
3.2(e)
Certificate regarding adoption of an amendment to Section 2.01 of
Peoples Bancorp Inc.'s Code of Regulations by the shareholders on
April 22, 2010
Certificate regarding Adoption of Amendment to Division (D) of
Section 2.02 of Code of Regulations of Peoples Bancorp Inc. by the
Shareholders at the Annual Meeting of Shareholders on April 26,
2018
Code of Regulations of Peoples Bancorp Inc. (This document
represents the Code of Regulations of Peoples Bancorp Inc. in
compiled form incorporating all amendments.)
Incorporated herein by reference to Exhibit 3(a) to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended March
31, 2004 (File No. 0-16772)
Incorporated herein by reference to Exhibit 3.1 to
the Current Report of Peoples Bancorp Inc. on
Form 8-K dated and filed on April 14, 2006 (File
No. 0-16772)
Incorporated herein by reference to Exhibit 3.2(e)
to the Quarterly Report on Form 10-Q/A
(Amendment No. 1) of Peoples Bancorp Inc. for
the quarterly period ended June 30, 2010 (File No.
0-16772)
Incorporated herein by reference to Exhibit 3.1 to
the Current Report of Peoples Bancorp Inc. on
Form 8-K dated and filed on June 28, 2018 (File
No. 0-16772) (“Peoples’ June 28, 2018 Form 8-
K”)
Incorporated herein by reference to Exhibit 3.2 to
Peoples’ June 28, 2018 Form 8-K
Agreement to furnish instruments and agreements defining rights of
holders of long-term debt
Filed herewith
Indenture, dated as of June 25, 2007, between NB&T Financial
Group, Inc., as issuer, and Wilmington Trust Company, as trustee,
relating to Fixed/Floating Rate Junior Subordinated Debt Securities
due 2037
First Supplemental Indenture, dated June 5, 2015, and made to be
effective as of 6:00 p.m., Eastern Standard Time, on March 6, 2015,
between Wilmington Trust Company, as trustee, and Peoples
Bancorp Inc., as successor to NB&T Financial Group, Inc.
Amended and Restated Declaration of Trust of NB&T Statutory Trust
III, dated and effective as of June 25, 2007
NOTE: Pursuant to the First Supplemental Indenture, dated June 5,
2015, and made to be effective as of 6:00 p.m., Eastern Standard
Time, on March 6, 2015, between Wilmington Trust Company, as
trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc. succeeded to
and was substituted for NB&T Financial Group, Inc. as “Sponsor”
Notice of Removal of Administrators and Appointment of
Replacements, dated June 5, 2015, delivered to Wilmington Trust
Company by the Successor Administrators named therein and
Peoples Bancorp Inc.
Incorporated herein by reference to Exhibit 4.1(a)
to the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended June
30, 2015 (File No. 0-16772) (“Peoples’ June 30,
2015 Form 10-Q”)
Incorporated herein by reference to Exhibit 4.1(b)
to Peoples’ June 30, 2015 Form 10-Q
Incorporated herein by reference to Exhibit 4.2(a)
to Peoples’ June 30, 2015 Form 10-Q
Incorporated herein by reference to Exhibit 4.2(b)
to Peoples’ June 30, 2015 Form 10-Q
Notice of Removal of Administrator and Appointment of
Replacement, dated February 11, 2021, delivered to Wilmington
Trust Company by the Continuing Administrators and the Successor
Administrator named therein and Peoples Bancorp Inc.
Incorporated herein by reference to Exhibit 4.3(c)
to the Annual Report on Form 10-K of Peoples
Bancorp Inc. for the fiscal year ended December
31, 2020 (File No. 0-16772)
148
3.2(f)
3.2(g)
4.1
4.2(a)
4.2(b)
4.3(a)
4.3(b)
4.3(c)
Exhibit
Number
4.4
Description
Exhibit Location
Guarantee Agreement, dated as of June 25, 2007, between NB&T
Financial Group, Inc. and Wilmington Trust Company, as guarantee
trustee, relating to the Capital Securities (as defined therein)
NOTE: Pursuant to the First Supplemental Indenture, dated June 5,
2015, and made to be effective as of 6:00 p.m., Eastern Standard
Time, on March 6, 2015, between Wilmington Trust Company, as
trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc. succeeded to
and was substituted for NB&T Financial Group, Inc. as “Guarantor”
Incorporated herein by reference to Exhibit 4.3 to
Peoples’ June 30, 2015 Form 10-Q
4.5(a)
Indenture, dated as of February 26, 2004, between First National
Bankshares Corporation, as Issuer, and Wilmington Trust Company,
as Trustee, relating to Floating Rate Junior Subordinated Debt
Securities Due 2034
Incorporated herein by reference to Exhibit 4.1(a)
to the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended
September 30, 2021 (File No. 0-16772) (“Peoples’
September 30, 2021 Form 10-Q”)
4.5(b)
First Supplemental Indenture, dated as of January 15, 2016, between
Wilmington Trust Company, as Trustee, and Premier Financial
Bancorp, Inc., as successor to First National Bankshares Corporation
Incorporated herein by reference to Exhibit 4.1(b)
to Peoples’ September 30, 2021 Form 10-Q
4.5(c)
Second Supplemental Indenture, dated as of September 17, 2021,
between Wilmington Trust Company, as Trustee, and Peoples
Bancorp Inc., as successor to Premier Financial Bancorp, Inc.
Incorporated herein by reference to Exhibit 4.1 (c)
to Peoples’ September 30, 2021 Form 10-Q
4.6
4.7
4.8
Amended and Restated Declaration of Trust of FNB Capital Trust
One, dated as of February 26, 2004
NOTE: Pursuant to the First Supplemental Indenture, dated as of
January 15, 2016, between Wilmington Trust Company, as Trustee,
and Premier Bancorp, Inc., Premier Bancorp, Inc., succeeded to and
was substituted for First National Bankshares Corporation as
“Sponsor” and pursuant to the Second Supplemental Indenture, dated
as of September 17, 2021, between Wilmington Trust Company, as
Trustee, and Peoples Bancorp Inc., Peoples Bancorp Inc., succeeded
and was substituted for Premier Financial Bancorp, Inc. as “Sponsor”
Incorporated herein by reference to Exhibit 4.2 to
Peoples’ September 30, 2021 Form 10-Q
Notice of Removal of Administrators and Appointment of
Replacements, dated September 17, 2021, delivered to Wilmington
Trust Company by the Successor Administrators named therein and
Peoples Bancorp Inc.
Incorporated herein by reference to Exhibit 4.3 to
Peoples’ September 30, 2021 Form 10-Q
Incorporated herein by reference to Exhibit 4.4 to
Peoples’ September 30, 2021 Form 10-Q
Guarantee Agreement, dated as of February 26, 2004, between First
National Bankshares Corporation, as Guarantor, and Wilmington
Trust Company, as Guarantee Trustee, related to the Capital
Securities (as defined therein)
NOTE: Pursuant to the First Supplemental Indenture, dated as of
January 15, 2016, between Wilmington Trust Company, as Trustee,
and Premier Financial Bancorp, Inc., Premier Financial Bancorp, Inc.
succeeded to and was substituted for First National Bankshares
Corporation as “Guarantor” and pursuant to the Second Supplemental
Indenture, dated as of September 17, 2021, between Wilmington
Trust Company, as Trustee, and Peoples Bancorp Inc., Peoples
Bancorp Inc. succeeded and was substituted for Premier Financial
Bancorp, Inc. as “Guarantor”
4.9
Description of Common Shares of Peoples Bancorp Inc.
10.1(a)
Peoples Bancorp Inc. Third Amended and Restated Deferred
Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries (Amended and Restated Effective June 26, 2014)*
*Management Compensation Plan or Agreement
Incorporated herein by reference to Exhibit 4.2 to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended June
30, 2023 (File No. 0-16772) (“Peoples’ June 30,
2023 Form 10-Q”)
Incorporated herein by reference to Exhibit 10.1(a)
to the Annual Report on Form 10-K of Peoples
Bancorp Inc. for the fiscal year ended December
31, 2015 (File No. 0-16772)
149
Exhibit
Number
10.1(b)
Description
Exhibit Location
Rabbi Trust Agreement, made January 6, 1998, between Peoples
Bancorp Inc. and The Peoples Banking and Trust Company
(predecessor to Peoples Bank, National Association and now known
as Peoples Bank following conversion to state-chartered bank) as
Trustee*
Incorporated herein by reference to Exhibit 10.1(c)
to the Annual Report on Form 10-K of Peoples
Bancorp Inc. for the fiscal year ended December
31, 2007 (File No. 0-16772)
10.1(c)
Rabbi Trust Agreement, entered into effective on September 1, 2022,
between Peoples Bancorp Inc. and Reliance Trust Company, a state
chartered trust company, as Trustee*
Incorporated herein by reference to Exhibit 10.1(c)
to the Annual Report on Form 10-K of Peoples
Bancorp Inc. for the fiscal year ended December
31, 2022 (File No. 0-16772) (“Peoples’ 2022 Form
10-K”)
10.2
10.3
10.4
10.5
10.6
Summary of Peoples Bancorp Inc. Annual Incentive Program for
Executive Officers and other employees of Peoples Bancorp Inc.
[Effective beginning with the fiscal year beginning January 1, 2021
and ending with the fiscal year ended December 31, 2022]*
Incorporated herein by reference to Exhibit 10.4 to
the Annual Report on Form 10-K of Peoples
Bancorp Inc. for the fiscal year ended December
31, 2020 (File No. 0-16772)
Summary of Peoples Bancorp Inc. Annual Incentive Program for
Executive Officers and other employees of Peoples Bancorp Inc.
[Effective beginning with the fiscal year beginning January 1, 2023]*
Incorporated herein by reference to Exhibit 10.4 to
Peoples’ 2022 Form 10-K
Summary of Peoples Bancorp Inc. Annual Incentive Program for
Executive Officers and other employees of Peoples Bancorp Inc.
[Effective beginning with the fiscal year beginning January 1, 2024]*
Filed herewith
Summary of Perquisites for Executive Officers of Peoples Bancorp
Inc.*
Filed herewith
Summary of Base Salaries for Executive Officers of Peoples Bancorp
Inc.*
Filed herewith
10.7
Summary of Compensation for Directors of Peoples Bancorp Inc.*
Filed herewith
10.8
10.9
10.10
Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity
Plan (approved by the shareholders of Peoples Bancorp Inc. on April
27, 2023; successor to the Peoples Bancorp Inc. Third Amended and
Restated 2006 Equity Plan, the Peoples Bancorp Inc. Second
Amended and Restated 2006 Equity Plan, the Peoples Bancorp Inc.
Amended and Restated 2006 Equity Plan and the Peoples Bancorp
Inc. 2006 Equity Plan)*
Incorporated herein by reference to Exhibit 99.1 to
Peoples’ Current Report on Form 8-K dated and
filed on May 2, 2023 (File No. 0-16772)
Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan
Time-Based Restricted Stock Award Agreement (for Executives)
used and to be used to evidence awards of time-based restricted stock
granted to executives of Peoples Bancorp Inc. on and after July 31,
2018 and prior to April 27, 2023*
Incorporated herein by reference to Exhibit 10.1 to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended
September 30, 2018 (File No. 0-16772) (“Peoples’
September 30, 2018 Form 10-Q”)
Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan
Performance-Based Restricted Stock Award Agreement (for
Executives) used and to be used to evidence awards of performance-
based restricted stock granted to executives of Peoples Bancorp Inc.
on and after July 31, 2018 and prior to April 27, 2023*
Incorporated herein by reference to Exhibit 10.2 to
Peoples’ September 30, 2018 Form 10-Q
10.11(a)
Peoples Bancorp Inc. Amended and Restated Nonqualified Deferred
Compensation Plan (adopted effective July 11, 2019)*
Incorporated herein by reference to Exhibit 10.3 to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended June
30, 2019 (File No. 0-16772)
10.11(b)
First Amendment to Peoples Bancorp Inc. Amended and Restated
Nonqualified Deferred Compensation Plan (effective as of May 17,
2021)*
Incorporated herein by reference to Exhibit
10.11(b) to Peoples’ 2022 Form 10-K
10.11(c)
Second Amendment to Peoples Bancorp Inc. Amended and Restated
Nonqualified Deferred Compensation Plan (effective as of September
1, 2022)*
Incorporated herein by reference to Exhibit
10.11(c) to Peoples’ 2022 Form 10-K
*Management Compensation Plan or Agreement
150
Exhibit
Number
10.12
10.15
10.16
Description
Exhibit Location
Peoples Bancorp Inc. Amended and Restated Change in Control
Agreement between Peoples Bancorp Inc. and Charles W. Sulerzyski
(adopted April 4, 2011)*
10.13
Peoples Bancorp Inc. Employee Stock Purchase Plan*
10.14
Form of Peoples Bancorp Inc. Change in Control Agreement to be
adopted by Peoples Bancorp Inc. and individuals who are first elected
as executive officers of Peoples Bancorp Inc. after March 24, 2016*
Incorporated herein by reference to Exhibit 10.2 to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended June
30, 2011 (File No. 0-16772)
Incorporated herein by reference to Exhibit 10.1 to
the Current Report of Peoples Bancorp Inc. on
Form 8-K dated and filed on April 28, 2014 (File
No. 0-16772)
Incorporated herein by reference to Exhibit 10.3 to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended March
31, 2016 (File No. 0-16772)
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Douglas Wyatt (adopted May 2, 2016)*
Incorporated herein by reference to Exhibit 10.1 to
Peoples’ March 31, 2017 Form 10-Q
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Ryan Kirkham (adopted January 1, 2019)*
10.17
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Jason M. Eakle (adopted April 1, 2020)*
10.18
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Kathryn M. Bailey (adopted October 1, 2020)*
Incorporated herein by reference to Exhibit 10.24
to the Annual Report on Form 10-K of Peoples
Bancorp Inc. for the fiscal year ended December
31, 2019 (File No. 0-16772)
Incorporated herein by reference to Exhibit 10.3 to
the Quarterly Report on Form 10-Q of Peoples
Bancorp Inc. for the quarterly period ended June
30, 2020 (File No. 0-16772)
Incorporated herein by reference to Exhibit 10.1 to
the Quarterly Report on Form-10-Q of Peoples
Bancorp Inc. for the quarterly period ended
September 30, 2020 (File No. 0-16772) (“Peoples
September 30, 2020 Form 10-Q”)
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Mark J. Augenstein (adopted October 1, 2020)*
Incorporated herein by reference to Exhibit 10.2 to
Peoples’ September 30, 2020 Form 10-Q
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Tyler Wilcox (adopted October 1, 2020)*
Incorporated herein by reference to Exhibit 10.3 to
Peoples’ September 30, 2020 Form 10-Q
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Matthew Macia (adopted August 21, 2023)*
Incorporated herein by reference to Exhibit 10.1 to
Peoples’ September 30, 2023 Form 10-Q
Peoples Bancorp Inc. Change in Control Agreement between Peoples
Bancorp Inc. and Hugh Donlon (adopted September 9, 2023)*
Incorporated herein by reference to Exhibit 10.2 to
Peoples’ September 30, 2023 Form 10-Q
Form of Peoples Bancorp Inc. Fourth Amended and Restated 2006
Equity Plan Performance-Based Restricted Stock Award Agreement
used and to be used to evidence grants of performance-based
restricted common shares to executive officers of Peoples Bancorp
Inc. after April 27, 2023*
Form of Peoples Bancorp Inc. Fourth Amended and Restated 2006
Equity Plan Time-Based Restricted Stock Award Agreement used to
evidence grants of time-based restricted common shares to executive
officers of Peoples Bancorp Inc. after April 27, 2023 and prior to July
26, 2023*
Form of Peoples Bancorp Inc. Fourth Amended and Restated 2006
Equity Plan Time-Based Restricted Stock Award Agreement used
and to be used to evidence grants of time-based restricted common
shares to executive officers of Peoples Bancorp Inc. after July 26,
2023*
Form of Peoples Bancorp Inc. Fourth Amended and Restated 2006
Equity Plan Time-Based Restricted Stock Award Agreement used
and to be used to evidence grants of time-based restricted common
shares to executive officers of Peoples Bancorp Inc. after October 23,
2023*
Incorporated herein by reference to Exhibit 10.2 to
Peoples’ June 30, 2023 Form 10-Q
Incorporated herein by reference to Exhibit 10.3 to
Peoples’ June 30, 2023 Form 10-Q
Incorporated herein by reference to Exhibit 10.4 to
Peoples’ June 30, 2023 Form 10-Q
Incorporated herein by reference to Exhibit 10.3 to
Peoples’ September 30, 2023 Form 10-Q
*Management Compensation Plan or Agreement
151
Exhibit
Number
21
23
24
Description
Exhibit Location
Subsidiaries of Peoples Bancorp Inc.
Consent of Independent Registered Public Accounting Firm – Ernst
& Young LLP
Filed herewith
Filed herewith
Powers of Attorney of Directors and Executive Officers of Peoples
Bancorp Inc.
Filed herewith
31.1
Rule 13a-14(a)/15d-14(a) Certifications [President and Chief
Filed herewith
Executive Officer]
31.2
Rule 13a-14(a)/15d-14(a) Certifications [Executive Vice President,
Filed herewith
Chief Financial Officer and Treasurer]
32
Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of
the United States Code [President and Chief Executive Officer; and
Executive Vice President, Chief Financial Officer and Treasurer]
Furnished herewith
97
Clawback Policy
Filed herewith
101.INS
Inline XBRL Instance Document ##
Submitted electronically herewith #
101.SCH Inline XBRL Taxonomy Extension Schema Document
Submitted electronically herewith #
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
Submitted electronically herewith #
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
Submitted electronically herewith #
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Submitted electronically herewith #
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
Submitted electronically herewith #
104
Cover Page Interactive Data File (formatted as Inline XBRL with
applicable taxonomy extension information contained in Exhibits
101)
Submitted electronically herewith
# Attached as Exhibit 101 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 of Peoples Bancorp Inc. are
the following documents formatted in Inline XBRL (eXtensive Business Reporting Language): (i) Consolidated Balance Sheets at
December 31, 2023 and December 31, 2022; (ii) Consolidated Statements of Income for the years ended December 31, 2023, 2022 and
2021; (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021; (iv)
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021; (v) Consolidated Statements
of Cash Flows for the years ended December 31, 2023, 2022 and 2021; and (vi) Notes to the Consolidated Financial Statements.
## The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL
document.
152
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 28, 2024
PEOPLES BANCORP INC.
By: /s/ CHARLES W. SULERZYSKI
Charles W. Sulerzyski
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures
Title
/s/ CHARLES W. SULERZYSKI
Charles W. Sulerzyski
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ KATIE BAILEY
Katie Bailey
/s/ TARA M. ABRAHAM*
Tara M. Abraham
/s/ S. CRAIG BEAM*
S. Craig Beam
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
Director
Director
/s/ DAVID F. DIERKER*
Director
David F. Dierker
/s/ GLENN HOGAN*
Glenn Hogan
/s/ JAMES S. HUGGINS*
James S. Huggins
Director
Director
/s/ BROOKE W. JAMES*
Director
Brooke W. James
/s/ SUSAN D. RECTOR*
Susan D. Rector
/s/ KEVIN R. REEVES*
Kevin R. Reeves
Chairman of the Board and Director
Director
/s/ CAROL A. SCHNEEBERGER*
Director
Carol A. Schneeberger
/s/ FRANCES A. SKINNER*
Director
Frances A. Skinner
/s/ DWIGHT SMITH*
Dwight Smith
Director
/s/ MICHAEL N. VITTORIO*
Director
Michael N. Vittorio
Date
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
2/28/2024
* The undersigned, by signing his name hereto, does hereby sign this Annual Report on Form 10-K on behalf of each of the
directors of the Registrant identified above pursuant to Powers of Attorney executed by the directors of the Registrant identified
above, which Powers of Attorney are filed with this Annual Report on Form 10-K in Exhibit 24.
By:
/s/ CHARLES W. SULERZYSKI
Charles W. Sulerzyski
President and Chief Executive Officer
Attorney-in-Fact
153
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LEFT BLANK
OUR HISTORY
Peoples Bank started as a community
bank in Marietta, Ohio, on February 6, 1902.
STOCKHOLDER
INFORMATION
Stock Listing
NASDAQ Symbol: PEBO
NASDAQ Global Select Market,
CUSIP 709789101
Corporate Offices
Peoples Headquarters:
138 Putnam Street, PO Box 738
Marietta, OH 45750-0738
Investor Relations: 740.374.6136
peoplesbancorp.com
Stock Transfer Agent, Registrar
EQ Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120
800.468.9716 • shareowneronline.com
General Shareholder Inquiries
Peoples Bancorp Inc.
Attn: Investor Relations
138 Putnam Street, PO Box 738
Marietta, OH 45750-0738
Peoples Bancorp® is a federally registered service mark of Peoples
Bancorp Inc. The three arched ribbons logo is a federally registered
service mark of Peoples Bank. Peoples Bank (w/logo)® is a federally
registered service mark of Peoples Bank.
138 PUTNAM STREET I PO BOX 738 I MARIETTA, OH 45750 I 800.374.6123
peoplesbancorp.com