| Loans | Loans and Leases 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 and leases nationwide through its Peoples Premium Finance and North Star Leasing divisions, respectively. Loans and leases throughout this document are referred to as "total loans" and "loans held for investment". The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows: (Dollars in thousands) September 30, December 31, 2020 Construction $ 174,784 $ 106,792 Commercial real estate, other 1,629,116 929,853 Commercial and industrial 858,538 973,645 Premium finance 134,755 114,758 Leases 111,446 — Residential real estate 768,134 574,007 Home equity lines of credit 161,370 120,913 Consumer, indirect 543,256 503,527 Consumer, direct 108,702 79,094 Deposit account overdrafts 927 351 Total loans, at amortized cost $ 4,491,028 $ 3,402,940 On September 17, 2021, Peoples completed the merger with Premier effective after the close of the business day. Peoples acquired $1.1 billion in loans, of which $285.3 million were considered purchased credit deteriorated loans. See "Note 13 Acquisitions" for more detail on the merger with Premier. Effective after the close of business on March 31, 2021, Peoples acquired $83.3 million in leases from NS Leasing, LLC (" NSL"), of which $5.2 million were considered purchase d credit d eteriorated leases. Refer to "Note 13 Acquisitions" for more detail on the acquisition of leases from NSL. Peoples began participating as a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender during the second quarter of 2020. Peoples originated PPP loans of $159.2 million during the first nine months of 2021 and $488.9 million of PPP loans during the full year of 2020. At September 30, 2021, the PPP loans (including $28.2 million acquired from Premier) had an amortized cost of $135.8 million, and were included in commercial and industrial loan balance. As of September 30, 2021, deferred loan origination fees, net of deferred origination costs, totaled $4.0 million. During the third quarter of 2021, Peoples recorded amortization of net deferred loan origination fees of $3.8 million on PPP loans compared to $1.9 million for the third quarter of 2020. Peoples recorded accretion of net deferred loan origination fees of $11.2 million and $3.8 million, for the nine months ended September 30, 2021 and 2020, respectively. The remaining net deferred loan origination fees will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in "Net interest income". Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $12.4 million at September 30, 2021 and $10.9 million at December 31, 2020. 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 of loans delinquent for 90 days or more and accruing were as follows: September 30, 2021 December 31, 2020 (Dollars in thousands) Nonaccrual (a) Accruing Loans 90+ Days Past Due Nonaccrual (a) Accruing Loans 90+ Days Past Due Construction $ — $ — $ 4 $ — Commercial real estate, other 17,301 1,912 9,111 — Commercial and industrial 5,356 98 6,192 50 Premium finance — 368 — 204 Leases 1,411 1,736 — — Residential real estate 9,735 1,156 8,375 1,975 Home equity lines of credit 976 61 867 82 Consumer, indirect 1,069 — 1,073 39 Consumer, direct 186 32 171 17 Total loans, at amortized cost $ 36,034 $ 5,363 $ 25,793 $ 2,367 (a) There were $0.6 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2021 and $1.3 million at December 31, 2020. During the first nine months of 2021, nonaccrual loans increased compared to December 31, 2020, primarily due to the non-accrual loans acquired from Premier, which added $13.0 million in nonaccrual loans at the end of the third quarter of 2021. As of September 30, 2021, the short-term modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment for current borrowers, Peoples had made were insignificant. Under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. As such, these modifications made in accordance with the CARES Act were not included in Peoples' nonaccrual or accruing loans 90+ days past due at September 30, 2021. During the third quarter of 2021, accruing loans 90+ days past due increased primarily due to the loans acquired from Premier. The amount of interest income recognized on loans past due 90 days or more during the three and nine months ended September 30, 2021 was $0.2 million and $0.9 million, respectively. The following table presents the aging of the amortized cost of past due loans: Loans Past Due Current Loans Total Loans (Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total September 30, 2021 Construction $ 146 $ 16 $ — $ 162 $ 174,622 $ 174,784 Commercial real estate, other 4,513 2,349 14,116 20,978 1,608,138 1,629,116 Commercial and industrial 924 566 5,324 6,814 851,724 858,538 Premium finance 440 281 368 1,089 133,666 134,755 Leases 393 194 1,736 2,323 109,123 111,446 Residential real estate 4,138 2,649 5,353 12,140 755,994 768,134 Home equity lines of credit 487 166 758 1,411 159,959 161,370 Consumer, indirect 2,977 477 346 3,800 539,456 543,256 Consumer, direct 134 224 101 459 108,243 108,702 Deposit account overdrafts — — — — 927 927 Total loans, at amortized cost $ 14,152 $ 6,922 $ 28,102 $ 49,176 $ 4,441,852 $ 4,491,028 December 31, 2020 Construction $ — $ 344 $ 4 $ 348 $ 106,444 $ 106,792 Commercial real estate, other 1,943 283 8,643 10,869 918,984 929,853 Commercial and industrial 567 552 4,535 5,654 967,991 973,645 Premium finance 928 1,073 204 2,205 112,553 114,758 Residential real estate 6,739 2,688 5,512 14,939 559,068 574,007 Home equity lines of credit 309 58 780 1,147 119,766 120,913 Consumer, indirect 4,362 733 348 5,443 498,084 503,527 Consumer, direct 424 43 123 590 78,504 79,094 Deposit account overdrafts — — — — 351 351 Total loans, at amortized cost $ 15,272 $ 5,774 $ 20,149 $ 41,195 $ 3,361,745 $ 3,402,940 Delinquency trends remained stable, as 98.9% of Peoples' loan portfolio was considered “current” at September 30, 2021, compared to 98.8% at December 31, 2020. Pledged Loans Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, home equity lines of credit and commercial real estate loans under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged eligible commercial and industrial loans to secure borrowings with the FRB. Loans pledged are summarized as follows: (Dollars in thousands) September 30, 2021 December 31, 2020 Loans pledged to FHLB $ 752,382 $ 740,584 Loans pledged to FRB 135,504 107,340 Credit Quality Indicators As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2020 Form 10-K, 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. 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. 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, including loans acquired from Premier, is as follows: “Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist. “Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” 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 a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position. “Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or 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 weaknesses are not corrected. “Doubtful” (grade 7): Loans in this risk grade 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 each of these loans as an estimated loss is deferred until its more exact status may be determined. “Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a 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 during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category. Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” or “loss” consistent with the regulatory definitions and requirements of these classes. Leases are categorized as "special mention", "substandard", or "loss" based upon delinquency status and the prospect of collecting the remaining net investment balance owed under the lease. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as “pass" for disclosure purposes. The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at September 30, 2021: Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Total Loans Construction Pass $ 57,422 $ 73,789 $ 16,624 $ 3,289 $ 1,286 $ 2,829 $ 1,755 $ 4,170 $ 156,994 Special mention 290 — 7,185 1,092 3,805 138 — — 12,510 Substandard — — 957 79 159 4,085 — — 5,280 Total 57,712 73,789 24,766 4,460 5,250 7,052 1,755 4,170 174,784 Commercial real estate, other Pass 195,110 266,264 240,617 153,836 160,057 427,073 23,815 12,128 1,466,772 Special mention 159 10,353 8,398 7,077 8,798 33,558 — 51 68,343 Substandard — 1,679 6,644 2,299 5,668 76,655 371 41 93,316 Doubtful — — — — — 669 — — 669 Loss — — — — — 16 — — 16 Total 195,269 278,296 255,659 163,212 174,523 537,971 24,186 12,220 1,629,116 Commercial and industrial Pass 241,877 135,119 90,671 67,107 30,843 102,471 154,178 14,440 822,266 Special mention 82 1,281 2,327 3,622 164 991 2,702 10 11,169 Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Total Loans Substandard 94 2,858 2,739 875 6,921 3,853 5,690 608 23,030 Doubtful — — — — — 1,808 265 187 2,073 Total 242,053 139,258 95,737 71,604 37,928 109,123 162,835 15,245 858,538 Premium finance Pass 131,142 3,613 — — — — — — 134,755 Total 131,142 3,613 — — — — — — 134,755 Leases Pass 56,901 30,875 16,750 4,473 491 26 — — 109,516 Special mention 99 10 68 17 — — — — 194 Substandard 123 502 531 572 8 — — — 1,736 Total 57,123 31,387 17,349 5,062 499 26 — — 111,446 Residential real estate Pass 115,657 75,578 55,305 35,693 46,720 422,673 — — 751,626 Substandard — — — — — 16,079 — — 16,079 Loss — — — — — 429 — — 429 Total 115,657 75,578 55,305 35,693 46,720 439,181 — — 768,134 Home equity lines of credit Pass 25,901 23,840 19,084 17,112 15,625 57,574 2,234 3,164 161,370 Total 25,901 23,840 19,084 17,112 15,625 57,574 2,234 3,164 161,370 Consumer, indirect Pass 195,954 183,489 72,009 53,063 26,499 12,242 — — 543,256 Total 195,954 183,489 72,009 53,063 26,499 12,242 — — 543,256 Consumer, direct Pass 42,124 30,880 15,541 9,863 3,861 6,433 — — 108,702 Total 42,124 30,880 15,541 9,863 3,861 6,433 — — 108,702 Deposit account overdrafts 927 — — — — — — — 927 Total loans, at amortized cost $ 1,063,862 $ 840,130 $ 555,450 $ 360,069 $ 310,905 $ 1,169,602 $ 191,010 $ 34,799 $ 4,491,028 The following table summarizes the risk category of Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at December 31, 2020: (Dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Construction Pass $ 27,670 $ 56,361 $ 554 $ 15,089 $ 824 $ 1,194 $ 3,199 $ 2,003 $ 104,891 Special mention — — 496 — — 143 — — 639 Substandard — — — 186 — 1,076 — — 1,262 Total 27,670 56,361 1,050 15,275 824 2,413 3,199 2,003 106,792 Commercial real estate, other Pass 116,441 125,373 99,522 94,465 99,668 215,385 109,160 9,748 860,014 Special mention 297 5,806 999 5,296 5,125 12,932 3,967 60 34,422 Substandard — 1,191 677 1,709 1,663 27,066 3,033 110 35,339 Doubtful — — — — — 78 — — 78 Total 116,738 132,370 101,198 101,470 106,456 255,461 116,160 9,918 929,853 (Dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Commercial and industrial Pass 409,237 97,362 67,284 38,450 45,026 77,009 199,597 30,680 933,965 Special mention 1,034 366 2,018 287 1,453 1,452 12,429 526 19,039 Substandard 2,226 3,569 2,873 2,167 318 4,163 3,436 1,083 18,752 Doubtful — — — — 1,698 191 — 187 1,889 Total 412,497 101,297 72,175 40,904 48,495 82,815 215,462 32,476 973,645 Premium finance Pass 114,758 — — — — — — — 114,758 Total 114,758 — — — — — — — 114,758 Residential real estate Pass 47,147 40,223 24,235 29,142 43,105 309,795 65,168 305 558,815 Substandard — — — — — 15,048 — — 15,048 Loss — — — — — 144 — — 144 Total 47,147 40,223 24,235 29,142 43,105 324,987 65,168 305 574,007 Home equity lines of credit Pass 16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913 Total 16,469 13,513 12,548 12,382 11,869 40,626 13,506 4,091 120,913 Consumer, indirect Pass 210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527 Total 210,014 92,696 71,807 39,608 17,156 11,563 60,683 — 503,527 Consumer, direct Pass 31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094 Total 31,689 15,923 11,085 4,531 2,529 4,193 9,144 — 79,094 Deposit account overdrafts 351 — — — — — — — 351 Total loans, at amortized cost $ 977,333 $ 452,383 $ 294,098 $ 243,312 $ 230,434 $ 722,058 $ 483,322 $ 48,793 $ 3,402,940 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 general 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. • 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: (Dollars in thousands) September 30, 2021 December 31, 2020 Construction $ 4,276 $ — Commercial real estate, other 35,820 8,467 Commercial and industrial 11,446 6,333 Residential real estate 1,321 1,670 Home equity lines of credit 393 403 Total collateral dependent loans $ 53,256 $ 16,873 The increase in collateral dependent loans at September 30, 2021, compared to December 31, 2020, was primarily due to $39.1 million in collateral dependent loans acquired from Premier. Troubled Debt Restructurings The following tables summarize the loans that were modified as troubled debt restructurings ("TDRs") during the three and nine months ended September 30: Three Months Ended Recorded Investment (a) (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment September 30, 2021 Construction 1 $ 6 $ 6 $ 6 Commercial real estate, other 2 14 14 14 Commercial and industrial 3 327 327 327 Leases 2 182 184 178 Residential real estate 46 1,952 1,956 1,955 Home equity lines of credit 5 55 55 55 Consumer, indirect 9 95 95 95 Consumer, direct 3 9 9 9 Consumer 12 104 104 104 Total 71 $ 2,640 $ 2,646 $ 2,639 September 30, 2020 Commercial real estate, other 3 $ 2,214 $ 2,214 $ 1,112 Commercial and industrial 4 3,657 3,657 3,658 Residential real estate 10 608 608 608 Home equity lines of credit 3 68 68 68 Consumer, indirect 11 126 126 126 Consumer, direct 2 16 16 16 Consumer 13 142 142 142 Total 33 $ 6,689 $ 6,689 $ 5,588 (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. Nine Months Ended Recorded Investment (a) (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment September 30, 2021 Construction 2 $ 350 $ 350 $ 350 Commercial real estate, other 3 37 37 37 Commercial and industrial 3 327 327 327 Leases 5 340 348 334 Residential real estate 54 2,367 2,376 2,366 Home equity lines of credit 9 315 315 307 Consumer, indirect 16 200 200 192 Consumer, direct 8 48 48 45 Consumer 24 248 248 237 Total 100 $ 3,984 $ 4,001 $ 3,958 September 30, 2020 Commercial real estate, other 5 $ 2,533 $ 2,533 $ 1,430 Commercial and industrial 5 3,803 3,803 3,804 Residential real estate 16 1,237 1,267 1,261 Home equity lines of credit 7 123 123 121 Consumer, indirect 23 235 235 216 Consumer, direct 5 68 68 63 Consumer 28 303 303 279 Total 61 $ 7,999 $ 8,029 $ 6,895 (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. On March 22, 2020, federal and state government banking regulators issued a joint statement, with which the FASB concurred as to the approach, regarding accounting for loan modifications for borrowers affected by COVID-19. In this guidance, short-term modifications, made on a good faith basis in response to COVID-19, to borrowers who were current prior to any relief, are not considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment which are insignificant. Under the guidance, borrowers that are considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In addition, modification or deferral programs mandated by the U.S. federal government or any state government related to COVID-19 are not in the scope of accounting for TDRs, as defined in ASC 310-40. 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 nine-month periods ended September 30: September 30, 2021 September 30, 2020 (Dollars in thousands) Number of Contracts Recorded Investment (a) Impact on the Allowance for Credit Losses Number of Contracts Recorded Investment (a) Impact on the Allowance for Credit Losses Commercial real estate, other — $ — — 1 $ 54 — Residential real estate 3 113 — — — — Total 3 $ 113 $ — 1 $ 54 $ — (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. Peoples had no commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR. Allowance for Credit Losses Changes in the allowance for credit losses for the three months ended September 30, 2021 and September 30, 2020 are summarized below: (Dollars in thousands) Beginning Balance, June 30, 2021 Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets (Recovery of) Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2021 Construction $ 914 $ 2,127 $ 638 $ (243) $ — $ — $ 3,436 Commercial real estate, other 17,233 13,374 5,384 (179) — 4 35,816 Commercial and industrial 8,686 4,286 1,059 (3) (654) 4 13,378 Premium finance 998 — — 146 (7) — 1,137 Leases 3,715 — — 1,101 (431) 120 4,505 Residential real estate 4,837 2,394 2,645 (312) (44) 48 9,568 Home equity lines of credit 1,504 41 674 148 (180) 37 2,224 Consumer, indirect 8,841 — — (2,308) (416) 43 6,160 Consumer, direct 1,161 112 180 (362) (29) 17 1,079 Deposit account overdrafts 53 — — 124 (135) 37 79 Total $ 47,942 $ 22,334 $ 10,580 $ (1,888) $ (1,896) $ 310 $ 77,382 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. (Dollars in thousands) Beginning Balance, June 30, 2020 Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets (Recovery of) Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2020 Construction $ 2,662 $ — $ — $ (148) $ — $ — $ 2,514 Commercial real estate, other 19,148 — — (8) (109) 4 19,035 Commercial and industrial 10,106 — — 3,139 (146) — 13,099 Premium finance — — 990 (2) (2) — 986 Residential real estate 6,380 — — (371) (121) 100 5,988 Home equity lines of credit 1,755 — — 40 — 2 1,797 Consumer, indirect 12,293 — — 785 (370) 64 12,772 Consumer, direct 1,941 — — (78) (15) 13 1,861 Deposit account overdrafts 77 — — 154 (202) 47 76 Total $ 54,362 $ — $ 990 $ 3,511 $ (965) $ 230 $ 58,128 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. Changes in the allowance for credit losses for the nine months ended September 30, 2021 and September 30, 2020 are summarized below: (Dollars in thousands) Beginning Balance, December 31, 2020 Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets (Recovery of) Provision for Credit Losses (a) Charge-offs Recoveries Ending Balance, September 30, 2021 Construction $ 1,887 $ 2,127 $ 638 $ (1,216) $ — $ — $ 3,436 Commercial real estate, other 17,536 13,374 5,384 (325) (161) 8 35,816 Commercial and industrial 12,763 4,286 1,059 (3,800) (952) 22 13,378 Premium finance 1,095 — — 72 (30) — 1,137 Leases — 493 3,288 1,450 (956) 230 4,505 Residential real estate 6,044 2,394 2,645 (1,305) (313) 103 9,568 Home equity lines of credit 1,860 41 674 (196) (196) 41 2,224 Consumer, indirect 8,030 — — (891) (1,190) 211 6,160 Consumer, direct 1,081 112 180 (252) (96) 54 1,079 Deposit account overdrafts 63 — — 208 (327) 135 79 Total $ 50,359 $ 22,827 $ 13,868 $ (6,255) $ (4,221) $ 804 $ 77,382 (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments. (Dollars in thousands) Beginning Balance, Initial Allowance for Acquired Purchased Credit Deteriorated Assets Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets Provision for (Recovery of) Credit Losses (b) Charge-offs Recoveries Ending Balance, September 30, 2020 Construction $ 600 $ 51 $ — $ 1,863 $ — $ — $ 2,514 Commercial real estate, other 7,193 1,356 — 10,614 (254) 126 19,035 Commercial and industrial 4,960 860 — 6,368 (1,098) 2,009 13,099 Premium finance — — 990 (2) (2) — 986 Residential real estate 3,977 383 — 1,626 (255) 257 5,988 Home equity lines of credit 1,570 2 — 237 (23) 11 1,797 Consumer, indirect 5,389 — — 8,549 (1,427) 261 12,772 Consumer, direct 856 34 — 1,062 (128) 37 1,861 Deposit account overdrafts 94 — — 360 (534) 156 76 Total $ 24,639 $ 2,686 $ 990 $ 30,677 $ (3,721) $ 2,857 $ 58,128 (a) Peoples adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) on January 1, 2020. (b) Amount does not include the provision for the allowance for credit losses on unfunded commitments. During the third quarter of 2021, Peoples recorded a provision for credit losses of $11.0 million in order to establish an allowance for credit losses for non-purchase credit deteriorated loans of $10.6 million, and a liability for unfunded commitments of $0.4 million, both relating to the acquisition of Premier. Peoples also recorded a $22.3 million increase in the allowance for credit losses during the third quarter of 2021 related to the purchase credit deteriorated loans acquired from Premier. During the second quarter of 2021, Peoples recorded provision for credit losses to establish the allowance for credit losses of $3.3 million for the acquired non-purchased credit deteriorated leases from NSL along with an increase in allowance for credit loss of $0.5 million related to the purchase credit deteriorated leases acquired from NSL. Lastly, economic assumptions and loss drivers used in the CECL model continued to improve in the current year, partially offsetting the increase in allowance driven by the aforementioned acquired loans and leases. The PPP loans originated during 2021 and 2020 are guaranteed by the SBA, and therefore, had no impact on the allowance for credit losses at September 30, 2021 and at December 31, 2020. At September 30, 2021, Peoples had recorded an allowance for unfunded commitments of $2.4 million, an increase compared to $2.2 million at June 30, 2021, and a decrease compared to $2.9 million at December 31, 2020. The total amount of unfunded commitments had increased compared to June 30, 2021 due to the unfunded commitments associated with the Premier acquisition and decreased compared to December 31, 2020 due to the improved economic forecast conditions. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets. The change in the allowance for unfunded commitments is also reflected in the "Provision for (recovery of) credit losses" line of the Unaudited Consolidated Statements of Operations. |
