| Loans and Leases | Loans and LeasesPeoples' 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 division and its Vantage Financial, LLC ("Vantage") subsidiary. 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, 2021 Construction $ 215,621 $ 210,232 Commercial real estate, other 1,423,479 1,550,081 Commercial and industrial 877,472 891,392 Premium finance 167,682 136,136 Leases 312,847 122,508 Residential real estate 733,361 771,718 Home equity lines of credit 174,525 163,593 Consumer, indirect 592,309 530,532 Consumer, direct 113,314 104,652 Deposit account overdrafts 597 756 Total loans, at amortized cost $ 4,611,207 $ 4,481,600 On March 7, 2022, Peoples completed the acquisition of Vantage, which included $154.9 million of leases. During the first nine months of 2022, Peoples experienced elevated levels of payoffs and amortization of previously-acquired loans, which partially offset organic loan growth. Peoples is a Small Business Administration ("SBA") Paycheck Protection Program ("PPP") lender. At September 30, 2022, the PPP loans had an amortized cost of $3.7 million, and were included in the commercial and industrial loan balances. As of September 30, 2022, deferred loan origination fees, net of deferred origination costs, totaled $61,000 for PPP loans. During the third quarter of 2022, Peoples recorded amortization of net deferred loan origination fees of $0.4 million on PPP loans compared to $3.8 million for the third quarter of 2021. 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 $13.1 million at September 30, 2022 and $12.0 million at December 31, 2021. 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 was as follows: September 30, 2022 December 31, 2021 (Dollars in thousands) Nonaccrual (a) Accruing Loans 90+ Days Past Due Nonaccrual (a) Accruing Loans 90+ Days Past Due Construction $ 2 $ — $ 6 $ 90 Commercial real estate, other 11,916 1,472 17,067 689 Commercial and industrial 2,385 266 3,572 1,139 Premium finance — 308 — 865 Leases 2,094 4,654 1,581 — Residential real estate 8,728 1,499 9,647 805 Home equity lines of credit 921 23 1,039 50 Consumer, indirect 1,627 195 1,574 — Consumer, direct 158 7 279 85 Total loans, at amortized cost $ 27,831 $ 8,424 $ 34,765 $ 3,723 (a) There were $2.0 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2022 and $2.6 million at December 31, 2021. During the first nine months of 2022, nonaccrual loans declined compared to December 31, 2021, which was primarily due to the payoff of one commercial relationship, coupled with other smaller reductions. The increase in accruing loans 90+ days past due, compared to December 31, 2021, was the result of the additional leases acquired in the Vantage acquisition, the majority of which related to in-process renewals. As of September 30, 2022, 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 are considered current if they 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, 2022. The amount of interest income recognized on loans past due 90 days or more during the nine months ended September 30, 2022 was $1.1 million. 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, 2022 Construction $ 334 $ 25 $ — $ 359 $ 215,262 $ 215,621 Commercial real estate, other 2,710 878 11,668 15,256 1,408,223 1,423,479 Commercial and industrial 1,742 870 2,630 5,242 872,230 877,472 Premium finance 312 287 308 907 166,775 167,682 Leases 786 2,972 6,749 10,507 302,340 312,847 Residential real estate 3,413 1,814 5,723 10,950 722,411 733,361 Home equity lines of credit 1,640 102 513 2,255 172,270 174,525 Consumer, indirect 3,912 744 628 5,284 587,025 592,309 Consumer, direct 395 54 83 532 112,782 113,314 Deposit account overdrafts — — — — 597 597 Total loans, at amortized cost $ 15,244 $ 7,746 $ 28,302 $ 51,292 $ 4,559,915 $ 4,611,207 December 31, 2021 Construction $ 658 $ — $ 90 $ 748 $ 209,484 $ 210,232 Commercial real estate, other 2,891 1,600 12,561 17,052 1,533,029 1,550,081 Commercial and industrial 1,132 1,278 3,595 6,005 885,387 891,392 Premium finance 751 266 865 1,882 134,254 136,136 Leases 426 247 1,581 2,254 120,254 122,508 Residential real estate 8,276 2,241 5,188 15,705 756,013 771,718 Home equity lines of credit 1,137 619 625 2,381 161,212 163,593 Consumer, indirect 4,220 895 615 5,730 524,802 530,532 Consumer, direct 457 135 200 792 103,860 104,652 Deposit account overdrafts — — — — 756 756 Total loans, at amortized cost $ 19,948 $ 7,281 $ 25,320 $ 52,549 $ 4,429,051 $ 4,481,600 Delinquency trends remained stable, as 98.9% of Peoples' loan portfolio was considered “current” at September 30, 2022, compared to 98.8% at December 31, 2021. 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, 2022 December 31, 2021 Loans pledged to FHLB $ 793,115 $ 769,863 Loans pledged to FRB 405,652 294,728 Credit Quality Indicators As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2021 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 and leases acquired from Vantage and 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, 2022: Term Loans at Amortized Cost by Origination Year Revolving Loans Converted to Term (Dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Total Loans Construction Pass $ 50,403 $ 109,791 $ 30,078 $ 18,033 $ 427 $ 3,251 $ 2,222 $ 81 $ 214,205 Special mention — — — — — 825 — — 825 Substandard — — 136 — 69 386 — — 591 Total 50,403 109,791 30,214 18,033 496 4,462 2,222 81 215,621 Commercial real estate, other Pass 124,239 227,395 230,082 206,722 114,512 395,451 21,768 6,337 1,320,169 Special mention — 195 1,225 5,514 3,198 36,761 93 — 46,986 Substandard 120 9,059 2,342 1,908 1,025 41,356 341 — 56,151 Doubtful — — — — — 173 — — 173 Total 124,359 236,649 233,649 214,144 118,735 473,741 22,202 6,337 1,423,479 Commercial and industrial Pass 116,058 173,932 86,010 77,871 44,821 99,146 224,418 2,529 822,256 Special mention — 28 11,098 985 274 4,987 3,333 25 20,705 Substandard 59 9,453 2,627 2,975 2,920 4,563 11,702 142 34,299 Doubtful — — — — — 212 — — 212 Total 116,117 183,413 99,735 81,831 48,015 108,908 239,453 2,696 877,472 Premium finance Pass 162,713 4,969 — — — — — — 167,682 Total 162,713 4,969 — — — — — — 167,682 Leases Pass 139,715 98,250 40,078 19,569 4,440 1,513 — 303,565 Special mention 1,639 3,776 73 24 78 — 5,590 Substandard 575 1,693 537 424 463 — 3,692 Total 141,929 103,719 40,688 20,017 4,981 1,513 — — 312,847 Residential real estate Pass 65,666 140,597 62,306 44,469 29,790 375,024 — — 717,852 Substandard — — — — — 15,355 — — 15,355 Loss — — — — — 154 — — 154 Total 65,666 140,597 62,306 44,469 29,790 390,533 — — 733,361 Home equity lines of credit Pass 29,784 36,483 21,432 15,451 14,072 56,586 340 2,191 174,148 Substandard — — — — — 377 — — 377 Total 29,784 36,483 21,432 15,451 14,072 56,963 340 2,191 174,525 Consumer, indirect Pass 229,831 165,711 112,435 41,315 27,327 15,690 — — 592,309 Total 229,831 165,711 112,435 41,315 27,327 15,690 — — 592,309 Consumer, direct Pass 45,117 32,606 17,426 7,874 4,738 5,553 — — 113,314 Total 45,117 32,606 17,426 7,874 4,738 5,553 — — 113,314 Deposit account overdrafts 597 — — — — — — — 597 Total loans, at amortized cost $ 966,516 $ 1,013,938 $ 617,885 $ 443,134 $ 248,154 $ 1,057,363 $ 264,217 $ 11,305 $ 4,611,207 The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the then most recent analysis performed at December 31, 2021: Term Loans at Amortized Cost by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Revolving Loans Converted to Term Total Loans Construction Pass $ 85,276 $ 78,026 $ 29,514 $ 3,498 $ 1,233 $ 2,982 $ 2,411 $ 6,948 $ 202,940 Special mention 290 — — 735 3,850 137 — — 5,012 Substandard — — 947 77 153 1,103 — — 2,280 Total 85,566 78,026 30,461 4,310 5,236 4,222 2,411 6,948 210,232 Commercial real estate, other Pass 253,259 259,113 217,938 143,094 143,975 392,212 21,320 11,940 1,430,911 Special mention 157 2,716 7,875 3,839 6,292 31,626 — 49 52,505 Substandard — 1,675 824 691 3,124 59,415 371 37 66,100 Doubtful — — — — — 542 — — 542 Loss — — — — — 23 — — 23 Total 253,416 263,504 226,637 147,624 153,391 483,818 21,691 12,026 1,550,081 Commercial and industrial Pass 299,117 105,646 84,144 56,361 22,182 100,030 174,848 15,888 842,328 Special mention 82 11,745 2,559 2,179 132 5,445 7,563 9 29,705 Substandard 465 2,059 2,691 812 4,995 3,342 3,085 367 17,449 Doubtful — — — — — 1,648 262 100 1,910 Total 299,664 119,450 89,394 59,352 27,309 110,465 185,758 16,364 891,392 Premium finance Pass 135,896 240 — — — — — — 136,136 Total 135,896 240 — — — — — — 136,136 Leases Pass 78,048 25,954 13,368 2,972 337 — — — 120,679 Special mention 34 29 22 159 4 — — — 248 Substandard 196 438 462 479 6 — — — 1,581 Total 78,278 26,421 13,852 3,610 347 — — — 122,508 Residential real estate Pass 141,845 74,169 53,434 33,690 44,377 407,541 — — 755,056 Substandard — — — — — 16,302 — — 16,302 Loss — — — — — 360 — — 360 Total 141,845 74,169 53,434 33,690 44,377 424,203 — — 771,718 Home equity lines of credit Pass 35,898 23,276 18,035 16,124 14,991 53,302 1,967 3,287 163,593 Total 35,898 23,276 18,035 16,124 14,991 53,302 1,967 3,287 163,593 Consumer, indirect Pass 226,287 163,830 63,353 45,672 21,754 9,636 — — 530,532 Total 226,287 163,830 63,353 45,672 21,754 9,636 — — 530,532 Consumer, direct Pass 47,308 26,792 13,293 8,411 3,218 5,630 — — 104,652 Total 47,308 26,792 13,293 8,411 3,218 5,630 — — 104,652 Deposit account overdrafts 756 — — — — — — — 756 Total loans, at amortized cost $ 1,304,914 $ 775,708 $ 508,459 $ 318,793 $ 270,623 $ 1,091,276 $ 211,827 $ 38,625 $ 4,481,600 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. • 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, 2022 December 31, 2021 Construction $ 340 $ 1,291 Commercial real estate, other 9,380 37,220 Commercial and industrial 2,590 8,340 Residential real estate 2,196 2,877 Home equity lines of credit 379 391 Total collateral dependent loans $ 14,885 $ 50,119 The decrease in collateral dependent loans at September 30, 2022, compared to December 31, 2021, was primarily due to three large commercial relationships that were no longer considered collateral dependent at September 30, 2022. Troubled Debt Restructurings The following tables summarize the loans that were modified as 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, 2022 Commercial and industrial 1 $ 20 $ 20 $ 19 Residential real estate 7 323 361 354 Home equity lines of credit 2 119 119 119 Consumer, indirect 6 79 79 79 Consumer, direct 3 20 20 20 Consumer 9 99 99 99 Total 19 $ 561 $ 599 $ 591 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 (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, 2022 Commercial real estate, other 3 $ 282 $ 282 $ 276 Commercial and industrial 6 1,309 1,313 801 Residential real estate 30 1,478 1,562 1,536 Home equity lines of credit 5 251 251 247 Consumer, indirect 19 237 237 237 Consumer, direct 6 63 63 63 Consumer 25 300 300 300 Total 69 $ 3,620 $ 3,708 $ 3,160 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 (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, the borrowers that are considered to be 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. Peoples had five loans totaling $202,000 that were modified as TDRs during the past twelve months that subsequently defaulted (i.e., 90 days or more past due following a modification during the year). Peoples had no commitments to lend additional funds to 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 Peoples' 2021 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 the three months ended September 30, 2022 and September 30, 2021 are summarized below: (Dollars in thousands) Beginning Balance, June 30, 2022 Initial Allowance for Acquired Purchased Credit Deteriorated Assets (a) Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets (Recovery of) Provision for Credit Losses (b) Charge-offs Recoveries Ending Balance, September 30, 2022 Construction $ 1,531 $ — $ — $ (67) $ — $ — $ 1,464 Commercial real estate, other 18,708 — — (995) (57) 39 17,695 Commercial and industrial 8,572 — — 72 (36) 3 8,611 Premium finance 311 — — 279 (38) 1 553 Leases 7,585 377 — 560 (731) 99 7,890 Residential real estate 6,332 — — 264 (168) 36 6,464 Home equity lines of credit 1,699 — — (50) (5) — 1,644 Consumer, indirect 6,234 — — 1,207 (600) 71 6,912 Consumer, direct 1,321 — — 343 (81) 9 1,592 Deposit account overdrafts 53 — — 218 (274) 44 41 Total $ 52,346 $ 377 $ — $ 1,831 $ (1,990) $ 302 $ 52,866 (a) Includes purchase price adjustments related to acquisitions previously completed but within the 12-month measurement period. (b) 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 (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. (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, 2022 and September 30, 2021 are summarized below: (Dollars in thousands) Beginning Balance, December 31, 2021 Initial Allowance for Acquired Purchased Credit Deteriorated Assets (a) Provision for Credit Losses for Acquired Non-Purchased Credit Deteriorated Assets (Recovery of) Provision for Credit Losses (b) Charge-offs Recoveries Ending Balance, September 30, 2022 Construction $ 2,999 $ — $ — $ (1,535) $ — $ — $ 1,464 Commercial real estate, other 29,147 (451) — (10,908) (357) 264 17,695 Commercial and industrial 11,063 (418) — (1,124) (919) 9 8,611 Premium finance 379 — — 247 (82) 9 553 Leases 4,797 801 — 3,650 (1,697) 339 7,890 Residential real estate 7,233 (509) — 200 (524) 64 6,464 Home equity lines of credit 2,005 (11) — (333) (46) 29 1,644 Consumer, indirect 5,326 (41) — 2,821 (1,434) 240 6,912 Consumer, direct 961 — — 877 (277) 31 1,592 Deposit account overdrafts 57 — — 772 (938) 150 41 Total $ 63,967 $ (629) $ — $ (5,333) $ (6,274) $ 1,135 $ 52,866 (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 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 (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. s adopted ASU 2016-13 - Financial Instruments (a) Amount does not include the provision for the allowance for credit losses on unfunded commitments During the third quarter of 2022, Peoples recorded a provision for credit losses for loans of $1.8 million, driven by a deterioration of macro-economic conditions, partially offset by a reduction in reserves for individually analyzed loans. Leases designated as purchased credit deteriorated ("PCD") acquired from Vantage increased the allowance for credit losses by $377,000. Net charge-offs for the third quarter of 2022 were $1.7 million, and included charge-offs of three leases aggregating $0.6 million. Peoples had recorded an allowance for unfunded commitments of $2.1 million as of September 30, 2022, a decrease compared to $2.5 million at December 31, 2021. 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. |
