Peoples Bancorp (PEBO) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Provides unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, cash flows, and related detailed notes CONSOLIDATED BALANCE SHEETS (Unaudited) The consolidated balance sheets provide a snapshot of the company's financial position at June 30, 2025, compared to December 31, 2024, detailing assets, liabilities, and stockholders' equity | Metric (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Total assets | $9,540,608 | $9,254,240 | | Total liabilities | $8,387,258 | $8,142,650 | | Total stockholders' equity | $1,153,350 | $1,111,590 | - Total assets increased by $286.37 million (3.1%) from December 31, 2024, to June 30, 2025, driven by increases in loans and leases and investment securities[10] - Total liabilities increased by $244.61 million (3.0%) over the same period, primarily due to higher short-term borrowings[10] CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) The consolidated statements of operations present the company's financial performance for the three and six months ended June 30, 2025, compared to the same periods in 2024, highlighting key revenue and expense items | Metric (Dollars in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $126,407 | $130,770 | $250,949 | $258,363 | | Total interest expense | $38,830 | $44,157 | $78,117 | $85,110 | | Net interest income | $87,577 | $86,613 | $172,832 | $173,253 | | Provision for credit losses | $16,642 | $5,683 | $26,832 | $11,785 | | Total non-interest income | $26,880 | $23,704 | $53,979 | $49,483 | | Total non-interest expense | $70,362 | $68,758 | $141,149 | $137,223 | | Net income | $21,212 | $29,007 | $45,548 | $58,591 | | Earnings per common share - basic | $0.60 | $0.83 | $1.29 | $1.67 | | Earnings per common share - diluted | $0.59 | $0.82 | $1.28 | $1.66 | - Net income for Q2 2025 decreased by $7.795 million (26.9%) YoY, and diluted EPS decreased by $0.23 (28.0%) YoY[13] - The provision for credit losses significantly increased by $10.959 million (192.8%) YoY for Q2 2025, and by $15.047 million (127.7%) for the six months ended June 30, 2025[13] CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) This statement details the components of comprehensive income, including net income and other comprehensive income (loss) from available-for-sale investment securities and cash flow hedges | Metric (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $21,212 | $29,007 | $45,548 | $58,591 | | Total other comprehensive income (loss), net of tax | $5,419 | $(1,253) | $20,113 | $(8,603) | | Total comprehensive income | $26,631 | $27,754 | $65,661 | $49,988 | - Total other comprehensive income (loss) significantly improved, moving from a loss of $1.253 million in Q2 2024 to a gain of $5.419 million in Q2 2025, primarily due to gross unrealized holding gains on available-for-sale investment securities[14] CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) This section outlines the changes in stockholders' equity for the three and six months ended June 30, 2025, and 2024, detailing impacts from net income, other comprehensive income, dividends, and various stock transactions | Metric (Dollars in thousands) | Balance, December 31, 2024 | Net Income (6M 2025) | Other Comprehensive Income (6M 2025) | Cash Dividends Declared (6M 2025) | Balance, June 30, 2025 | | :---------------------------- | :------------------------- | :------------------- | :----------------------------------- | :-------------------------------- | :--------------------- | | Common Shares | $866,844 | — | — | — | $868,493 | | Retained Earnings | $388,109 | $45,548 | — | $(28,843) | $406,252 | | Accumulated Other Comprehensive Loss | $(110,385) | — | $20,113 | — | $(90,272) | | Treasury Stock | $(32,978) | — | — | — | $(31,123) | | Total Stockholders' Equity | $1,111,590 | $45,548 | $20,113 | $(28,843) | $1,153,350 | - Total stockholders' equity increased by $41.76 million (3.76%) from December 31, 2024, to June 30, 2025, primarily due to net income and a decrease in accumulated other comprehensive loss, partially offset by cash dividends[16] - Cash dividends declared for the six months ended June 30, 2025, totaled $28.843 million, an increase from $27.942 million in the same period of 2024[16][19] CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, compared to the same period in 2024 | Metric (Dollars in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $84,984 | $69,123 | | Net cash used in investing activities | $(330,964) | $(273,382) | | Net cash provided by financing activities | $214,391 | $13,408 | | Net decrease in cash and cash equivalents | $(31,589) | $(190,851) | | Cash and cash equivalents at end of period | $186,075 | $235,871 | - Net cash provided by operating activities increased by $15.861 million (22.9%) for the six months ended June 30, 2025, compared to the prior year[20] - Net cash provided by financing activities significantly increased by $200.983 million, primarily due to a net increase in short-term borrowings[20][251] NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS These notes provide detailed disclosures and explanations for the unaudited condensed consolidated financial statements, covering significant accounting policies, fair value measurements, investment securities, loans and leases, goodwill and other intangible assets, deposits, stockholders' equity, employee benefit plans, earnings per common share, derivative financial instruments, stock-based compensation, revenue, and leases Note 1 Summary of Significant Accounting Policies This note outlines the basis of presentation for the financial statements, confirming adherence to US GAAP for interim reporting, consistency with prior annual reports, the use of estimates, and the company's single reportable operating segment (community banking) - The financial statements are prepared in accordance with US GAAP for interim financial information and are consistent with policies described in Peoples' 2024 Form 10-K[21][22] - Peoples operates as a single reportable operating segment: community banking, offering a full range of banking, leasing, insurance, investment, and trust solutions[24] - New accounting pronouncements, ASU 2023-09 (Income Tax Disclosures) and ASU 2025-01 (Expense Disaggregation Disclosures), are pending adoption, with ASU 2023-09 effective for annual periods beginning after December 15, 2024, and ASU 2025-01 effective for annual periods beginning after December 15, 2026[25][162][163] Note 2 Fair Value of Assets and Liabilities This note describes the methodologies and hierarchy used to measure and report the fair value of assets and liabilities on both a recurring and non-recurring basis, categorizing them into Level 1, Level 2, and Level 3 based on input observability | Asset/Liability (Dollars in thousands) | June 30, 2025 (Level 1) | June 30, 2025 (Level 2) | December 31, 2024 (Level 1) | December 31, 2024 (Level 2) | | :------------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Total available-for-sale securities | $13,880 | $1,037,617 | $15,196 | $1,068,359 | | Derivative assets | — | $11,452 | — | $18,743 | | Derivative liabilities | — | $10,658 | — | $17,046 | - Available-for-sale investment securities are primarily Level 2, valued using pricing models with observable market data, while U.S. Treasury obligations are Level 1[30][33] - Non-recurring fair value measurements include collateral dependent loans (Level 3), loans held for sale (Level 2), and other real estate owned (Level 3)[38][39][40][41] Note 3 Investment Securities This note provides a detailed breakdown of available-for-sale (AFS) and held-to-maturity (HTM) investment securities, including their amortized cost, fair value, unrealized gains and losses, and credit loss allowances | Metric (Dollars in thousands) | June 30, 2025 (AFS) | December 31, 2024 (AFS) | June 30, 2025 (HTM) | December 31, 2024 (HTM) | | :---------------------------- | :------------------ | :---------------------- | :------------------ | :---------------------- | | Total amortized cost | $1,170,092 | $1,229,382 | $900,256 | $775,037 | | Total fair value | $1,051,497 | $1,083,555 | $831,611 | $692,499 | | Gross unrealized losses | $(120,993) | $(147,410) | $(70,688) | $(82,911) | - Gross unrealized losses on AFS securities decreased by $26.417 million from December 31, 2024, to June 30, 2025, while HTM unrealized losses decreased by $12.223 million[53][59] - Peoples pledged $1.105 billion of investment securities at June 30, 2025, to secure public and trust department deposits, repurchase agreements, and additional borrowing capacity at the FHLB and FRB[66] Note 4 Loans and Leases This note details the composition of Peoples' loan and lease portfolio, including major classifications, nonaccrual and past due loans, credit quality indicators, collateral dependent loans, loan modifications, and the allowance for credit losses (ACL) | Loan Type (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Total loans, at amortized cost | $6,601,589 | $6,358,003 | | Nonaccrual loans | $34,485 | $34,129 | | Loans 90+ days past due and accruing | $6,126 | $8,637 | | Allowance for credit losses | $74,681 | $63,348 | - Total loans increased by $243.586 million (3.83%) from December 31, 2024, to June 30, 2025, with significant growth in commercial real estate and commercial and industrial loans[69] - The allowance for credit losses increased by $11.333 million (17.89%) from December 31, 2024, to June 30, 2025, driven by net charge-offs, increased reserves for individually analyzed loans/leases, and deterioration in economic forecasts[107][110] - Net charge-offs for the six months ended June 30, 2025, were $15.085 million, primarily driven by the North Star Leasing division[107][110] Note 5 Goodwill and Other Intangible Assets This note provides details on goodwill and other intangible assets, including their carrying amounts, accumulated amortization, and estimated future amortization schedules | Metric (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Goodwill | $363,199 | $363,199 | | Total other intangibles | $34,586 | $39,223 | | Accumulated amortization | $(61,634) | $(57,268) | - Other intangible assets decreased by $4.637 million from December 31, 2024, to June 30, 2025, primarily due to amortization[114] - The weighted-average amortization period for other intangible assets is 7.7 years[114] Note 6 Deposits This note details the composition of Peoples' deposit balances, including retail certificates of deposits (CDs), interest-bearing accounts, savings, money market, governmental, and brokered CDs, along with information on uninsured deposits and contractual maturities | Deposit Type (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Total deposits | $7,637,208 | $7,590,205 | | Non-interest-bearing | $1,530,824 | $1,507,661 | | Interest-bearing | $6,106,384 | $6,082,544 | | Uninsured deposits | $2,000,000 | $2,000,000 | - Total deposits increased by $47.003 million (0.62%) from December 31, 2024, to June 30, 2025, driven by retail CDs and non-interest-bearing deposits, partially offset by decreases in brokered CDs[115][269][270] - Uninsured deposits remained at $2.0 billion at both June 30, 2025, and December 31, 2024[116] Note 7 Stockholders' Equity This note details the changes in common shares and treasury stock, the share repurchase program, cash dividends declared, and the components of accumulated other comprehensive loss | Metric | Shares at December 31, 2024 | Shares at June 30, 2025 | | :---------------------------------- | :-------------------------- | :---------------------- | | Common Shares | 36,782,601 | 36,808,227 | | Treasury Stock | 1,311,175 | 1,219,408 | - Peoples repurchased 17,166 common shares totaling $0.5 million under its share repurchase program during Q2 2025[120] - A quarterly cash dividend of $0.41 per common share was declared on July 21, 2025, for Q3 2025, an increase from $0.40 in Q3 2024[122] Note 8 Employee Benefit Plans This note provides information on Peoples' retirement savings plan (401(k)) and the company's matching contributions | Metric (Dollars in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :----------------------------- | :----------------------------- | | Matching contributions | $3,000 | $3,100 | - Peoples matches 100% of participants' contributions up to 6% of their compensation[125] Note 9 Earnings Per Common Share This note details the calculation of basic and diluted earnings per common share for the three and six months ended June 30, 2025, and 2024 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common shareholders | $21,212 | $29,007 | $45,548 | $58,591 | | Earnings per common share - basic | $0.60 | $0.83 | $1.29 | $1.67 | | Earnings per common share - diluted | $0.59 | $0.82 | $1.28 | $1.66 | | Weighted-average number of common shares outstanding - diluted | 35,331,707 | 35,117,648 | 35,299,418 | 35,071,550 | - Diluted EPS decreased from $0.82 in Q2 2024 to $0.59 in Q2 2025, and from $1.66 to $1.28 for the six months ended June 30, 2025[126] Note 10 Derivative Financial Instruments This note describes Peoples' use of interest rate swap agreements for asset/liability management, including cash flow hedges to manage interest rate risk and non-designated hedges for commercial loan customers | Metric (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Notional amount (Cash Flow Hedges) | $55,000 | $75,000 | | Weighted average pay rates (Cash Flow Hedges) | 2.60 % | 2.45 % | | Weighted average receive rates (Cash Flow Hedges) | 4.02 % | 4.49 % | | Notional amount (Non-Designated Hedges) | $542,787 | $453,367 | - The notional amount of cash flow hedges decreased from $75.0 million at December 31, 2024, to $55.0 million at June 30, 2025[131] - Peoples estimates $0.9 million of accumulated other comprehensive income (AOCI) will be reclassified as an addition to interest expense in the next 12 months[130] Note 11 Stock-Based Compensation This note details the company's stock-based compensation plans, including restricted common shares (time-based and performance-based vesting) and the employee stock purchase plan, along with the associated expenses and tax benefits | Metric (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $1,573 | $1,474 | $4,164 | $4,703 | | Recognized tax benefit | $(367) | $(344) | $(971) | $(1,096) | | Net stock-based compensation expense | $1,206 | $1,130 | $3,193 | $3,607 | - Total stock-based compensation expense for the six months ended June 30, 2025, decreased by $0.539 million (11.5%) compared to the same period in 2024[139] - Unrecognized stock-based compensation expense related to unvested restricted common share awards was $7.6 million at June 30, 2025, to be recognized over a weighted-average period of 2.0 years[139] Note 12 Revenue This note details Peoples' revenue from contracts with customers, categorizing it by source (insurance, trust and investment, electronic banking, deposit account service charges, commercial loan swap fees, other non-interest income) and timing of recognition | Revenue Source (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Insurance income | $4,549 | $4,109 | $10,603 | $10,607 | | Trust and investment income | $5,281 | $4,999 | $10,342 | $9,598 | | Electronic banking income | $6,272 | $6,470 | $12,157 | $12,516 | | Deposit account service charges | $4,059 | $4,339 | $8,074 | $8,562 | | Commercial loan swap fees | $734 | $59 | $1,271 | $111 | | Total revenue from contracts with customers | $21,268 | $20,565 | $43,235 | $42,487 | - Total revenue from contracts with customers increased by $0.703 million (3.42%) for Q2 2025 YoY, and by $0.748 million (1.76%) for the six months ended June 30, 2025 YoY[140] - Commercial loan swap fees saw a significant increase, from $59 thousand in Q2 2024 to $734 thousand in Q2 2025, and from $111 thousand to $1.271 million for the six months ended June 30, 2025[140] Note 13 Leases This note details Peoples' lessor and lessee arrangements, including the classification of leases (sales-type and operating), lease income, net investment in leases, right-of-use (ROU) assets, and lease liabilities | Metric (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Net investment in leases | $400,052 | $406,598 | | Allowance for credit losses - leases | $(19,633) | $(12,893) | | Operating lease ROU assets | $10,404 | $10,419 | | Operating lease liabilities | $10,968 | $10,968 | - Net investment in leases decreased by $6.546 million (1.61%) from December 31, 2024, to June 30, 2025[147] - Lease income for the three months ended June 30, 2025, was $14.498 million, an increase from $14.150 million in the prior year, driven by gains on early terminated Vantage leases and operating lease income[146][211] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Peoples' financial condition and results of operations for the three and six months ended June 30, 2025, compared to prior periods, including an executive summary, detailed analysis of results of operations, and financial condition EXECUTIVE SUMMARY The executive summary provides a high-level overview of Peoples' financial performance for Q2 2025 and the first six months of 2025, highlighting net income, EPS, net interest income, provision for credit losses, non-interest income and expense, efficiency ratio, and balance sheet changes | Metric (Dollars in millions, except per share data) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------------------------- | :------ | :------ | :------ | :------ | :------ | | Net income | $21.2 | $24.3 | $29.0 | $45.5 | $58.6 | | Diluted EPS | $0.59 | $0.68 | $0.82 | $1.28 | $1.66 | | Net interest income | $87.6 | $85.3 | $86.6 | $172.8 | $173.3 | | Net interest margin | 4.15% | 4.12% | 4.18% | 4.14% | 4.22% | | Provision for credit losses | $16.6 | $10.2 | $5.7 | $26.8 | $11.8 | | Total assets (period-end) | $9,540 | $9,250 | $9,230 | $9,540 | $9,230 | | Total liabilities (period-end) | $8,390 | $8,110 | $8,150 | $8,390 | $8,150 | | Total stockholders' equity (period-end) | $1,153 | $1,138 | $1,078 | $1,153 | $1,078 | - Net income for Q2 2025 decreased by $7.8 million YoY, and diluted EPS decreased by $0.23 YoY, primarily due to a significant increase in the provision for credit losses[166][169] - Net interest income for Q2 2025 increased by $1.0 million (1%) YoY, driven by higher loan balances, while net interest margin decreased by 3 basis points to 4.15%[167] - Total assets increased to $9.54 billion at June 30, 2025, up from $9.25 billion at December 31, 2024, primarily due to increases in period-end loan and lease balances[181] RESULTS OF OPERATIONS This section provides a detailed analysis of Peoples' income statement components, including net interest income, provision for credit losses, non-interest income, non-interest expense, income tax expense, and non-GAAP financial measures Net Interest Income Net interest income, Peoples' largest revenue source, is analyzed based on market interest rates, competition, and the composition of earning assets and interest-bearing liabilities, with the net interest margin presented on a fully tax-equivalent (FTE) basis | Metric (Dollars in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Net interest income | $87,577 | $85,255 | $86,613 | $172,832 | $173,253 | | FTE net interest income | $87,857 | $85,538 | $86,965 | $173,395 | $173,958 | | Net interest margin | 4.15% | 4.12% | 4.18% | 4.14% | 4.22% | | Accretion income (net of amortization) | $2,600 | $3,500 | $5,800 | $6,100 | $12,300 | - Net interest income for Q2 2025 increased by $2.3 million QoQ and $1.0 million YoY, primarily driven by lower deposit and borrowing costs[194][196] - Accretion income, net of amortization expense, decreased significantly from $5.8 million in Q2 2024 to $2.6 million in Q2 2025, impacting loan yields and net interest margin[198] Provision for Credit Losses This section details the provision for credit losses, explaining the factors contributing to its changes, including net charge-offs, reserves for individually-analyzed loans and leases, North Star Leasing division reserves, CECL model updates, economic forecasts, and loan growth | Metric (Dollars in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Provision for credit losses | $16,642 | $10,190 | $5,683 | $26,832 | $11,785 | - The provision for credit losses for Q2 2025 was $16.6 million, a substantial increase from $5.7 million in Q2 2024, driven by net charge-offs, increased reserves for individually-analyzed loans and leases, and deterioration in economic forecasts[199] - For the first six months of 2025, the provision for credit losses was $26.8 million, compared to $11.8 million for the same period in 2024, reflecting similar drivers[200] Net Gain (Loss) Included in Total Non-Interest Income This section reports the net gains and losses from investment securities, asset disposals, and other transactions, which are components of total non-interest income | Metric (Dollars in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Net (loss) gain on investment securities | $0 | $(2) | $(353) | $(2) | $(354) | | Net loss on asset disposals and other transactions | $(280) | $(361) | $(428) | $(641) | $(769) | | Total net loss | $(280) | $(363) | $(781) | $(643) | $(1,123) | - Net loss on asset disposals and other transactions for Q2 2025 was $0.28 million, primarily driven by losses on repossessed assets[202] - The total net loss for the six months ended June 30, 2025, was $0.643 million, an improvement from $1.123 million in the same period of 2024[173][202] Total Non-Interest Income, Excluding Net Gains and Losses This section analyzes the various components of non-interest income, excluding net gains and losses, such as electronic banking income, insurance income, trust and investment income, deposit account service charges, lease income, other non-interest income, and mortgage banking income | Income Type (Dollars in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--------------------------------- | :------ | :------ | :------ | :------ | :------ | | Electronic banking income | $6,272 | $5,885 | $6,470 | $12,157 | $12,516 | | Insurance income | $4,549 | $6,054 | $4,109 | $10,603 | $10,607 | | Trust and investment income | $5,281 | $5,061 | $4,999 | $10,342 | $9,598 | | Deposit account service charges | $4,059 | $4,015 | $4,339 | $8,074 | $8,562 | | Lease income | $4,189 | $3,446 | $2,147 | $7,635 | $4,163 | | Other non-interest income | $1,478 | $1,472 | $1,141 | $2,950 | $2,059 | | Mortgage banking income | $220 | $396 | $243 | $616 | $564 | - Total non-interest income, excluding net gains and losses, increased by $2.7 million YoY for Q2 2025, primarily due to a $2.0 million increase in lease income and a $0.4 million increase in insurance income[174] - Lease income for Q2 2025 increased significantly YoY, from $2.147 million to $4.189 million, driven by gains on early terminated Vantage leases and operating lease income[211] - Trust and investment income increased by $0.7 million for the first half of 2025 YoY, reflecting growth in assets under administration and management[175][207] Non-Interest Expense This section provides a detailed analysis of Peoples' non-interest expenses, including salaries and employee benefits, net occupancy and equipment, data processing and software, professional fees, amortization of other intangible assets, and other operational costs | Expense Type (Dollars in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------------- | :------ | :------ | :------ | :------ | :------ | | Salaries and employee benefit costs | $38,893 | $39,821 | $36,564 | $78,714 | $75,457 | | Data processing and software expense | $7,356 | $7,005 | $6,743 | $14,361 | $12,512 | | Net occupancy and equipment expense | $5,690 | $5,612 | $6,142 | $11,302 | $12,425 | | Professional fees | $3,610 | $3,087 | $2,935 | $6,697 | $5,902 | | Amortization of other intangible assets | $2,211 | $2,213 | $2,787 | $4,424 | $5,575 | | Total non-interest expense | $70,362 | $70,787 | $68,758 | $141,149 | $137,223 | - Total non-interest expense for Q2 2025 decreased by $0.4 million QoQ but increased by $1.6 million (2%) YoY, driven by higher salaries and employee benefits, professional fees, and data processing costs[176][177] - Salaries and employee benefit costs increased by $2.3 million YoY for Q2 2025, primarily due to higher sales-based incentives, medical costs, and payroll taxes[177] - Amortization of other intangible assets decreased by $0.6 million YoY for Q2 2025 and $1.2 million for the first half of 2025, due to decreases in amortization on core deposits and customer relationship intangibles[177][226] Income Tax Expense This section details Peoples' income tax expense and effective tax rates for the reported periods, explaining the drivers of changes | Metric (Dollars in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Income tax expense | $6,241 | $7,041 | $6,869 | $13,282 | $15,137 | | Effective tax rate | 22.7% | 22.4% | 19.1% | 22.6% | 20.5% | - Income tax expense for Q2 2025 decreased by $0.8 million QoQ due to lower pre-tax income, but the effective tax rate increased to 22.7% from 19.1% in Q2 2024, as the prior year included a one-time benefit[13][180][235] Pre-Provision Net Revenue (Non-US GAAP) This section defines Pre-Provision Net Revenue (PPNR) as a non-GAAP financial measure, provides its reconciliation, and discusses its trends as an indicator of earnings capacity | Metric (Dollars in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Pre-provision net revenue | $44,375 | $41,930 | $42,340 | $86,305 | $86,630 | - PPNR for Q2 2025 increased by $2.445 million QoQ and $2.035 million YoY, driven by higher net interest income due to lower deposit and borrowing costs[238] - PPNR for the first half of 2025 decreased slightly YoY, primarily due to lower accretion income, partially offset by lower funding costs[238] Efficiency Ratio (Non-US GAAP) This section defines the efficiency ratio as a non-GAAP financial measure, provides its reconciliation, and analyzes its trend as a key performance indicator | Metric | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Efficiency ratio | 59.25% | 60.68% | 59.19% | 59.96% | 58.62% | - The efficiency ratio improved to 59.25% in Q2 2025 from 60.68% in Q1 2025, mainly due to higher net interest income and lower non-interest expenses[179][241] - For the first six months of 2025, the efficiency ratio increased to 59.96% from 58.62% in the prior year, due to increased non-interest expense and lower net interest income[179][241] Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP) This section defines and reconciles the non-GAAP measure of return on average assets adjusted for non-core items, providing insights into core operating performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Return on average assets | 0.92% | 1.07% | 1.27% | 0.99% | 1.29% | | Return on average assets adjusted for non-core items | 0.93% | 1.09% | 1.30% | 1.00% | 1.31% | - Both return on average assets and the adjusted ratio decreased in Q2 2025 compared to Q1 2025 and Q2 2024, primarily due to lower annualized net income and an increase in average assets[244] Return on Average Tangible Equity Ratio (Non-US GAAP) This section defines and reconciles the non-GAAP measure of return on average tangible equity, which excludes the impact of goodwill and other intangible assets, offering a conservative view of capital adequacy and performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------ | | Return on total average stockholders' equity | 7.42% | 8.79% | 10.99% | 8.09% | 11.15% | | Return on average tangible equity | 12.31% | 14.66% | 19.21% | 13.46% | 19.55% | - Both return on total average stockholders' equity and average tangible equity ratios decreased in Q2 2025 compared to prior periods, driven by lower net income[248] FINANCIAL CONDITION This section provides an in-depth analysis of Peoples' balance sheet, covering cash and cash equivalents, investment securities, loans and leases, allowance for credit losses, deposits, borrowed funds, capital/stockholders' equity, interest rate sensitivity, liquidity, and off-balance sheet activities Cash and Cash Equivalents This section discusses the changes in Peoples' cash and cash equivalents, including interest-bearing deposits and excess cash reserves, and how these are influenced by daily liquidity positions and cash flow activities | Metric (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Total cash and cash equivalents | $186,075 | $217,664 | | Interest-bearing deposits in other banks | $63,970 | $108,940 | | Excess cash reserves at FRB of Cleveland | $60,000 | $104,700 | - Total cash and cash equivalents decreased by $31.589 million for the first six months of 2025, reflecting cash outflows from investing activities partially offset by inflows from financing and operating activities[20][251] - Excess cash reserves maintained at the FRB of Cleveland decreased from $104.7 million at December 31, 2024, to $60.0 million at June 30, 2025[250] Investment Securities This section provides an overview of Peoples' investment portfolio, detailing available-for-sale (AFS) and held-to-maturity (HTM) securities, their fair values, amortized costs, and weighted average yields | Metric (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Total AFS securities (fair value) | $1,051,497 | $1,083,555 | | Total HTM securities (amortized cost) | $900,256 | $775,037 | | Total investment securities (carrying value) | $2,019,291 | $1,918,724 | - Total investment securities (carrying value) increased by $100.567 million (5.24%) from December 31, 2024, to June 30, 2025, primarily due to purchases of higher-yielding, longer-duration securities booked to held-to-maturity[252][253] - The net unrealized loss on AFS securities improved from $(145.827) million at December 31, 2024, to $(118.595) million at June 30, 2025[252] Loans and Leases This section details the composition and growth of Peoples' loan and lease portfolio, distinguishing between originated and acquired loans, and analyzes loan concentrations by industry and geography | Loan Type (Dollars in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------- | :------------ | :------------- | :------------ | | Total loans and leases | $6,601,589 | $6,428,526 | $6,325,371 | | Commercial real estate | $2,248,214 | $2,156,013 | $2,074,718 | | Commercial and industrial | $1,407,382 | $1,347,645 | $1,230,290 | | Leases | $400,052 | $406,598 | $419,764 | | Residential real estate | $877,968 | $835,101 | $815,311 | - Total loans and leases increased by $173.063 million (11% annualized) from March 31, 2025, to June 30, 2025, driven by commercial and industrial loans, residential real estate loans, and construction loans[255] - Commercial real estate loans (including construction) comprised 39.2% of the total loan portfolio at June 30, 2025, with apartment complexes being the largest concentration (18.4% of commercial real estate, other)[254][257][259] Allowance for Credit Losses This section details the allowance for credit losses (ACL), its allocation across loan categories, and the factors influencing its changes, also presenting net charge-offs and nonperforming assets (NPAs) and related asset quality ratios | Metric (Dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :---------------------------- | :------------ | :------------- | :---------------- | :------------ | | Allowance for credit losses | $74,681 | $65,232 | $63,348 | $66,247 | | ACL as a percent of total loans | 1.13% | 1.01% | 1.00% | 1.05% | | Total net charge-offs (Q2) | $6,964 | $8,121 | $9,586 | $4,233 | | Total nonperforming loans (NPLs) | $40,611 | $39,835 | $42,766 | $41,261 | | Total nonperforming assets (NPAs) | $46,624 | $45,815 | $48,936 | $48,670 | | NPAs as a percent of total assets | 0.49% | 0.50% | 0.53% | 0.53% | - The ACL increased by $9.449 million (14.49%) from March 31, 2025, to June 30, 2025, driven by increased reserves for individually-analyzed loans/leases, North Star Leasing, CECL model updates, economic forecasts, and loan growth[261] - Total net charge-offs for Q2 2025 were $6.964 million, a decrease from $8.121 million in Q1 2025, but higher than $4.233 million in Q2 2024, primarily due to the lease portfolio[265] - NPAs decreased from 0.50% of total assets at March 31, 2025, to 0.49% at June 30, 2025, and decreased compared to June 30, 2024, primarily due to reductions in leases 90+ days past due and commercial OREO[267] Deposits This section details the composition and trends of Peoples' deposit balances, including non-interest-bearing and various interest-bearing categories, and discusses the strategic shifts in funding sources | Deposit Type (Dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :---------------------------------- | :------------ | :------------- | :---------------- | :------------ | | Total deposits | $7,637,208 | $7,734,749 | $7,590,205 | $7,297,774 | | Non-interest-bearing deposits | $1,530,824 | $1,526,285 | $1,507,661 | $1,472,697 | | Interest-bearing deposits | $6,106,384 | $6,208,464 | $6,082,544 | $5,825,077 | | Retail CDs | $2,005,322 | $1,965,978 | $1,921,415 | $1,812,874 | | Brokered CDs | $442,788 | $458,957 | $554,982 | $412,653 | - Total deposits decreased by $97.541 million (1.26%) from March 31, 2025, to June 30, 2025, driven by decreases in governmental, money market, interest-bearing demand, and brokered deposits, partially offset by an increase in retail CDs[269] - Compared to June 30, 2024, period-end deposit balances increased by $339.434 million (4.65%), primarily due to increases in retail CDs, money market deposits, and non-interest-bearing deposits[270] Borrowed Funds This section provides details on Peoples' short-term and long-term borrowings, outlining their composition and trends, which are influenced by loan growth and deposit changes | Borrowing Type (Dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :------------ | | Total short-term borrowings | $396,860 | $19,228 | $193,474 | $482,733 | | Total long-term borrowings | $232,391 | $237,000 | $238,073 | $234,257 | | Total borrowed funds | $629,251 | $256,228 | $431,547 | $716,990 | - Total borrowed funds increased significantly from $256.228 million at March 31, 2025, to $629.251 million at June 30, 2025, primarily due to higher FHLB overnight borrowings[273] - Total borrowed funds decreased compared to June 30, 2024, mainly due to the payoff of the Bank Term Funding Program, partially offset by an increase in FHLB overnight borrowings[273] Capital/Stockholders' Equity This section details Peoples' regulatory risk-based capital levels and non-GAAP tangible capital measures, emphasizing the company's strong capital position relative to regulatory requirements | Capital Ratio | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :---------------------------- | :------------ | :------------- | :---------------- | :------------ | | Common Equity Tier 1 | 11.95% | 12.10% | 11.95% | 11.74% | | Tier 1 | 12.39% | 12.54% | 12.39% | 12.18% | | Total (Tier 1 and Tier 2) | 13.71% | 13.75% | 13.58% | 13.44% | | Tier 1 leverage ratio | 9.83% | 9.80% | 9.73% | 9.29% | | Tangible book value per common share | $21.18 | $20.68 | $19.94 | $18.91 | | Tangible equity to tangible assets ratio | 8.26% | 8.34% | 8.01% | 7.61% | - Peoples' capital levels remained substantially higher than the minimum amounts needed to be considered 'well capitalized' institutions, with a capital conservation buffer of 5.71% at June 30, 2025[274] - Risk-based capital ratios decreased slightly from March 31, 2025, to June 30, 2025, due to an increase in assets driven by loan growth[275] - Tangible book value per common share increased to $21.18 at June 30, 2025, from $18.91 at June 30, 2024, primarily due to net income over the last twelve months and a decrease in accumulated other comprehensive loss[277] Interest Rate Sensitivity and Liquidity This section discusses Peoples' management of interest rate risk (IRR) and liquidity, including the use of parallel shock analysis and nonparallel scenarios to estimate impacts on net interest income and economic value of equity, as well as the company's liquid assets | Interest Rate Shock (in Basis Points) | Estimated Increase (Decrease) in Net Interest Income (June 30, 2025) | Estimated (Decrease) Increase in Economic Value of Equity (June 30, 2025) | | :------------------------------------ | :------------------------------------------------------------------- | :------------------------------------------------------------------------ | | +300 | $33,082 (9.0%) | $(173,191) (-8.9%) | | +200 | $24,398 (6.7%) | $(86,948) (-4.5%) | | +100 | $15,288 (4.2%) | $(19,500) (-1.0%) | | -100 | $(14,011) (-3.8%) | $(33,717) (-1.7%) | | -200 | $(26,603) (-7.3%) | $(112,648) (-5.8%) | | -300 | $(19,703) (-5.4%) | $(241,704) (-12.4%) | - At June 30, 2025, Peoples' balance sheet was positioned to benefit from rising interest rates, with estimated net interest income increasing by 9.0% in a +300 basis point parallel shock[281][287] - The bear steepener scenario (short-term rates constant, long-term rates rise) produced an estimated increase of 1.4% in net interest income and 3.1% in economic value of equity at June 30, 2025[284] - At June 30, 2025, Peoples Bank had liquid assets of $735.9 million, representing 6.7% of total assets and unfunded loan commitments, plus an additional $142.7 million of unpledged investment securities[289] Off-Balance Sheet Activities and Contractual Obligations This section describes Peoples' off-balance sheet activities, primarily focusing on loan commitments and standby letters of credit, which represent elements of credit risk not fully recognized on the balance sheet | Off-Balance Sheet Item (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------- | :------------ | :---------------- | | Loan commitments | $1,422,011 | $1,384,044 | | Standby letters of credit | $6,774 | $8,398 | - Loan commitments increased by $37.967 million (2.74%) from December 31, 2024, to June 30, 2025[294] - Standby letters of credit decreased from $8.398 million at December 31, 2024, to $6.774 million at June 30, 2025[294] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This item refers to the discussion on 'Interest Rate Sensitivity and Liquidity' within the Management's Discussion and Analysis (MD&A) section for disclosures about market risk - Market risk disclosures are incorporated by reference from the 'FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity' section of the MD&A[295] ITEM 4. CONTROLS AND PROCEDURES This section confirms the evaluation of the effectiveness of Peoples' disclosure controls and procedures and reports on any changes in internal control over financial reporting - Management concluded that Peoples' disclosure controls and procedures were effective as of June 30, 2025[296][305] - There were no material changes in Peoples' internal control over financial reporting during the fiscal quarter ended June 30, 2025[297] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section addresses various litigation matters involving Peoples or its subsidiaries, stating management's belief that these proceedings will not have a material adverse effect on the company's financial position, results of operations, or liquidity - Peoples is engaged in various litigation matters, including claims of improper loan or deposit practices[299] - Management believes that damages 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[299] ITEM 1A. RISK FACTORS This section states that there have been no material changes to the risk factors previously disclosed in Peoples' 2024 Form 10-K - No material changes have occurred from the risk factors previously disclosed in 'ITEM 1A. RISK FACTORS' of Peoples' 2024 Form 10-K[300] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details common share repurchases under the company's share repurchase program and other equity security transactions, including purchases by Peoples Bank under a Rabbi Trust Agreement and shares withheld for income taxes | Period | Total Number of Common Shares Purchased | Average Price Paid per Common Share | Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs | | :----------------- | :------------------------------------ | :---------------------------------- | :------------------------------------------------------------------------ | | April 1 – 30, 2025 | 27,181 | $27.62 | 17,116 | | May 1 – 31, 2025 | — | — | — | | June 1 – 30, 2025 | 1,937 | $29.48 | — | | Total | 29,118 | $27.75 | 17,116 | - Peoples repurchased 17,166 common shares under its $30.0 million share repurchase program during Q2 2025[301] - Other share transactions included purchases by Peoples Bank under a Rabbi Trust Agreement and shares withheld to satisfy income taxes associated with restricted common shares[302][303] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item states that there were no defaults upon senior securities during the reporting period - None[304] ITEM 4. MINE SAFETY DISCLOSURES This item states that mine safety disclosures are not applicable to Peoples Bancorp Inc - Not applicable[307] ITEM 5. OTHER INFORMATION This section discloses activity related to Rule 10b5-1 trading arrangements by directors or officers | Action | Rule 10b5-1* | Date | Total Common Shares to be Sold | Expiration Date | | :----- | :----------- | :--- | :----------------------------- | :-------------- | | Adopt | X | 6/5/2025 | 12,000 | 9/8/2025 | - Director Carol A. Schneeberger adopted a Rule 10b5-1 trading arrangement on June 5, 2025, to sell 12,000 common shares by September 8, 2025[308] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Form 10-Q, including merger agreements, articles of incorporation, certifications, and XBRL documents - Exhibits include the Agreement and Plan of Merger, Amended Articles of Incorporation, Code of Regulations, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Inline XBRL documents[310][311] SIGNATURES This section contains the authorized signatures for the Form 10-Q, confirming its submission on behalf of Peoples Bancorp Inc - The report is signed by Tyler Wilcox, President and Chief Executive Officer, and Katie Bailey, Executive Vice President, Chief Financial Officer and Treasurer, on July 31, 2025[316]