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Loans and Leases | 9 Months Ended
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Sep. 30, 2023
Receivables [Abstract] |
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 ("NSL") division and its Vantage Financial, LLC ("Vantage") subsidiary. Throughout this Form 10-Q, loans and leases 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, 2023 | December 31, 2022
Construction | $ | 374,016 |  | $ | 246,941 |
Commercial real estate, other | 2,189,984 |  | 1,423,518 |
Commercial and industrial | 1,128,809 |  | 892,634 |
Premium finance | 189,251 |  | 159,197 |
Leases | 402,635 |  | 345,131 |
Residential real estate | 791,965 |  | 723,360 |
Home equity lines of credit | 203,940 |  | 177,858 |
Consumer, indirect | 668,371 |  | 629,426 |
Consumer, direct | 134,562 |  | 108,363 |
Deposit account overdrafts | 857 |  | 722 |
Total loans, at amortized cost | $ | 6,084,390 |  | $ | 4,707,150 |
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 $22.2 million at September 30, 2023 and $15.4 million at December 31, 2022. Nonaccrual and Past Due Loans A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due. The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing was as follows:
| September 30, 2023 |  | December 31, 2022
(Dollars in thousands) | Nonaccrual (a) | Accruing Loans 90+ Days Past Due |  | Nonaccrual (a) | Accruing Loans 90+ Days Past Due
Construction | $ | — |  | $ | — |  |  | $ | 12 |  | $ | — |
Commercial real estate, other | 3,661 |  | 487 |  |  | 12,121 |  | 167 |
Commercial and industrial | 3,116 |  | 67 |  |  | 3,462 |  | 130 |
Premium finance | — |  | 1,581 |  |  | — |  | 504 |
Leases | 7,929 |  | 6,007 |  |  | 3,178 |  | 3,041 |
Residential real estate | 8,454 |  | 736 |  |  | 9,496 |  | 917 |
Home equity lines of credit | 1,026 |  | 177 |  |  | 820 |  | 58 |
Consumer, indirect | 1,904 |  | 47 |  |  | 2,176 |  | — |
Consumer, direct | 97 |  | 15 |  |  | 208 |  | 25 |
Total loans, at amortized cost | $ | 26,187 |  | $ | 9,117 |  |  | $ | 31,473 |  | $ | 4,842 |
(a) There were $0.5 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2023 and $1.4 million of nonaccrual loans for which there was no allowance for credit losses at December 31, 2022. During the first nine months of 2023, nonaccrual loans declined compared to at December 31, 2022, which was primarily due to three large relationships totaling $8.0 million of commercial real estate loans which were paid off in the third quarter. This was partially offset by an increase in nonaccrual leases during the first nine months of 2023. The increase in accruing loans 90+ days past due at September 30, 2023 when compared to at December 31, 2022, was primarily due to increases of approximately $3.0 million and $1.1 million in leases and premium finance loans, respectively. The amount of interest income recognized on accruing loans 90+ days past due during the nine months ended September 30, 2023 was $0.9 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, 2023 |  |  |  |  |  |
Construction | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 374,016 |  | $ | 374,016 |
Commercial real estate, other | 1,059 |  | 322 |  | 2,970 |  | 4,351 |  | 2,185,633 |  | 2,189,984 |
Commercial and industrial | 733 |  | 2,513 |  | 3,171 |  | 6,417 |  | 1,122,392 |  | 1,128,809 |
Premium finance | 781 |  | 686 |  | 1,581 |  | 3,048 |  | 186,203 |  | 189,251 |
Leases | 4,057 |  | 9,036 |  | 13,937 |  | 27,030 |  | 375,605 |  | 402,635 |
Residential real estate | 3,286 |  | 2,924 |  | 4,091 |  | 10,301 |  | 781,664 |  | 791,965 |
Home equity lines of credit | 1,637 |  | 239 |  | 795 |  | 2,671 |  | 201,269 |  | 203,940 |
Consumer, indirect | 5,663 |  | 1,090 |  | 816 |  | 7,569 |  | 660,802 |  | 668,371 |
Consumer, direct | 441 |  | 96 |  | 53 |  | 590 |  | 133,972 |  | 134,562 |
Deposit account overdrafts | — |  | — |  | — |  | — |  | 857 |  | 857 |
Total loans, at amortized cost | $ | 17,657 |  | $ | 16,906 |  | $ | 27,414 |  | $ | 61,977 |  | $ | 6,022,413 |  | $ | 6,084,390 |
December 31, 2022 |  |  |  |  |  |
Construction | $ | 196 |  | $ | 161 |  | $ | 9 |  | $ | 366 |  | $ | 246,575 |  | $ | 246,941 |
Commercial real estate, other | 2,279 |  | 1,051 |  | 10,370 |  | 13,700 |  | 1,409,818 |  | 1,423,518 |
Commercial and industrial | 2,522 |  | 289 |  | 3,449 |  | 6,260 |  | 886,374 |  | 892,634 |
Premium finance | 646 |  | 816 |  | 504 |  | 1,966 |  | 157,231 |  | 159,197 |
Leases | 6,074 |  | 1,921 |  | 6,218 |  | 14,213 |  | 330,918 |  | 345,131 |
Residential real estate | 10,113 |  | 2,128 |  | 5,519 |  | 17,760 |  | 705,600 |  | 723,360 |
Home equity lines of credit | 987 |  | 149 |  | 552 |  | 1,688 |  | 176,170 |  | 177,858 |
Consumer, indirect | 5,866 |  | 1,048 |  | 921 |  | 7,835 |  | 621,591 |  | 629,426 |
Consumer, direct | 703 |  | 70 |  | 108 |  | 881 |  | 107,482 |  | 108,363 |
Deposit account overdrafts | — |  | — |  | — |  | — |  | 722 |  | 722 |
Total loans, at amortized cost | $ | 29,386 |  | $ | 7,633 |  | $ | 27,650 |  | $ | 64,669 |  | $ | 4,642,481 |  | $ | 4,707,150 |
Delinquency trends improved slightly, as 99.0% of Peoples' loan portfolio was considered “current” at September 30, 2023, compared to 98.6% at December 31, 2022. 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, 2023 | December 31, 2022
Loans pledged to FHLB | $ | 1,245,235 |  | $ | 783,843 |
Loans pledged to FRB | 366,754 |  | 339,005 |
Credit Quality Indicators As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 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. Commercial loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible credit deterioration. Commercial leases, as well as loan relationships whose aggregate credit exposure to Peoples is equal to or less than $1.0 million, are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, follows: “Pass” (grades 1 through 4): Loans in this risk category 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," "doubtful" or "loss" based upon the regulatory definition of these classes and consistent with regulatory requirements. 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 being "not rated." 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, 2023:
| Term Loans at Amortized Cost by Origination Year |  | Revolving Loans Converted to Term |
(Dollars in thousands) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans | Total Loans
Construction |  |  |  |  |  |  |  |  |
Pass | $ | 49,218 |  | $ | 166,000 |  | $ | 103,935 |  | $ | 28,902 |  | $ | 8,931 |  | $ | 14,073 |  | $ | — |  | $ | — |  | $ | 371,059 |
Special mention | — |  | — |  | — |  | — |  | — |  | 125 |  | — |  | — |  | 125 |
Substandard | 1,200 |  | 1,598 |  | — |  | — |  | — |  | 34 |  | — |  | — |  | 2,832 |
Total | 50,418 |  | 167,598 |  | 103,935 |  | 28,902 |  | 8,931 |  | 14,232 |  | — |  | — |  | 374,016 |
Current period gross charge-offs | — |  | — |  | 9 |  | — |  | — |  | — |  |  |  | 9 |
Commercial real estate, other |  |  |  |  |  |  |
Pass | 159,774 |  | 296,172 |  | 377,054 |  | 238,765 |  | 273,896 |  | 705,640 |  | 32,428 |  | 194 |  | 2,083,729 |
Special mention | 1,000 |  | 7,374 |  | 1,950 |  | 4,303 |  | 5,178 |  | 17,863 |  | 947 |  | 45 |  | 38,615 |
Substandard | 315 |  | 1,430 |  | 7,268 |  | 10,669 |  | 2,404 |  | 44,954 |  | 590 |  | — |  | 67,630 |
Doubtful | — |  | — |  | — |  | — |  | — |  | 10 |  | — |  | — |  | 10 |
Total | 161,089 |  | 304,976 |  | 386,272 |  | 253,737 |  | 281,478 |  | 768,467 |  | 33,965 |  | 239 |  | 2,189,984 |
Current period gross charge-offs | — |  | — |  | — |  | 39 |  | — |  | 279 |  |  |  | 318 |
Commercial and industrial |  |  |  |  |  |  |  |
Pass | 129,859 |  | 188,569 |  | 221,410 |  | 88,762 |  | 68,408 |  | 132,029 |  | 222,517 |  | 56 |  | 1,051,554 |
Special mention | 788 |  | 12,298 |  | 68 |  | 9,439 |  | 2,051 |  | 8,132 |  | 13,842 |  | 7,500 |  | 46,618 |
Substandard | 34 |  | 6,477 |  | 5,286 |  | 5,764 |  | 1,723 |  | 6,976 |  | 4,193 |  | 142 |  | 30,453 |
Doubtful | — |  | — |  | — |  | — |  | — |  | 184 |  | — |  | — |  | 184 |
Total | 130,681 |  | 207,344 |  | 226,764 |  | 103,965 |  | 72,182 |  | 147,321 |  | 240,552 |  | 7,698 |  | 1,128,809 |
| Term Loans at Amortized Cost by Origination Year |  | Revolving Loans Converted to Term |
(Dollars in thousands) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans | Total Loans
Current period gross charge-offs | — |  | — |  | — |  | 13 |  | — |  | 198 |  |  |  | 211 |
Premium finance |  |  |  |  |  |  |  |  |
Pass | 181,786 |  | 7,462 |  | 3 |  | — |  | — |  | — |  | — |  | — |  | 189,251 |
Total | 181,786 |  | 7,462 |  | 3 |  | — |  | — |  | — |  | — |  | — |  | 189,251 |
Current period gross charge-offs | 2 |  | 76 |  | 1 |  | — |  | — |  | — |  |  |  | 79 |
Leases |  |  |  |  |  |  |  |  |
Pass | 176,044 |  | 126,255 |  | 59,878 |  | 19,171 |  | 7,122 |  | 1,786 |  |  | — |  | 390,256 |
Special mention | 420 |  | 1,251 |  | 1,384 |  | 76 |  | 25 |  | 11 |  |  |  | 3,167 |
Substandard | 1,410 |  | 3,461 |  | 3,116 |  | 483 |  | 322 |  | 420 |  |  |  | 9,212 |
Total | 177,874 |  | 130,967 |  | 64,378 |  | 19,730 |  | 7,469 |  | 2,217 |  | — |  | — |  | 402,635 |
Current period gross charge-offs | 90 |  | 625 |  | 850 |  | 218 |  | 165 |  | 30 |  |  |  | 1,978 |
Residential real estate |  |  |  |  |  |  |  |
Pass | 54,423 |  | 93,514 |  | 143,794 |  | 59,432 |  | 48,436 |  | 381,826 |  | — |  | — |  | 781,425 |
Special mention | — |  | — |  | — |  | — |  | — |  | 111 |  | — |  | — |  | 111 |
Substandard | — |  | 244 |  | 336 |  | 141 |  | 612 |  | 9,044 |  | — |  | — |  | 10,377 |
Loss | — |  | — |  | — |  | — |  | — |  | 52 |  | — |  | — |  | 52 |
Total | 54,423 |  | 93,758 |  | 144,130 |  | 59,573 |  | 49,048 |  | 391,033 |  | — |  | — |  | 791,965 |
Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | 150 |  |  |  | 150 |
Home equity lines of credit |  |  |  |  |  |  |  |
Pass | 29,743 |  | 43,501 |  | 33,323 |  | 20,296 |  | 14,878 |  | 60,657 |  | 80 |  | 1,292 |  | 202,478 |
Substandard | 81 |  | 40 |  | 87 |  | 21 |  | 91 |  | 1,130 |  | — |  | — |  | 1,450 |
Loss | — |  | — |  | — |  | — |  | — |  | 12 |  | — |  | — |  | 12 |
Total | 29,824 |  | 43,541 |  | 33,410 |  | 20,317 |  | 14,969 |  | 61,799 |  | 80 |  | 1,292 |  | 203,940 |
Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | 106 |  |  |  | 106 |
Consumer, indirect |  |  |  |  |  |  |  |
Pass | 202,590 |  | 246,044 |  | 108,067 |  | 67,475 |  | 22,157 |  | 19,331 |  | — |  | — |  | 665,664 |
Substandard | 169 |  | 704 |  | 803 |  | 510 |  | 211 |  | 235 |  | — |  | — |  | 2,632 |
Loss | 16 |  | 39 |  | 9 |  | 11 |  | — |  | — |  | — |  | — |  | 75 |
Total | 202,775 |  | 246,787 |  | 108,879 |  | 67,996 |  | 22,368 |  | 19,566 |  | — |  | — |  | 668,371 |
Current period gross charge-offs | 251 |  | 1,488 |  | 665 |  | 207 |  | 59 |  | 126 |  |  |  | 2,796 |
Consumer, direct |  |  |  |  |  |  |  |
Pass | 54,619 |  | 41,130 |  | 20,085 |  | 9,714 |  | 3,854 |  | 4,850 |  | — |  | — |  | 134,252 |
| Term Loans at Amortized Cost by Origination Year |  | Revolving Loans Converted to Term |
(Dollars in thousands) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans | Total Loans
Substandard | — |  | 30 |  | 84 |  | 45 |  | 24 |  | 114 |  | — |  | — |  | 297 |
Loss | — |  | — |  | — |  | — |  | — |  | 13 |  | — |  | — |  | 13 |
Total | 54,619 |  | 41,160 |  | 20,169 |  | 9,759 |  | 3,878 |  | 4,977 |  | — |  | — |  | 134,562 |
Current period gross charge-offs | 18 |  | 99 |  | 32 |  | 84 |  | 14 |  | 27 |  |  |  | 274 |
Deposit account overdrafts | 857 |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | 857 |
Current period gross charge-offs | 809 |  | — |  | — |  | — |  | — |  | — |  |  |  | 809 |
Total loans, at amortized cost | 1,044,346 |  | 1,243,593 |  | 1,087,940 |  | 563,979 |  | 460,323 |  | 1,409,612 |  | 274,597 |  | 9,229 |  | 6,084,390 |
Total current period gross charge-offs | $ | 1,170 |  | $ | 2,288 |  | $ | 1,557 |  | $ | 561 |  | $ | 238 |  | $ | 916 |  |  |  | $ | 6,730 |
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, 2022:
| Term Loans at Amortized Cost by Origination Year |  |  |
(Dollars in thousands) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Revolving Loans | Revolving Loans Converted to Term | Total Loans
Construction |  |  |  |  |  |  |  |  |
Pass | $ | 82,143 |  | $ | 110,719 |  | $ | 27,893 |  | $ | 20,223 |  | $ | 656 |  | $ | 4,061 |  | $ | 44 |  | $ | 81 |  | $ | 245,739 |
Special mention | — |  | — |  | — |  | — |  | — |  | 818 |  | — |  | — |  | 818 |
Substandard | — |  | 2 |  | — |  | — |  | — |  | 382 |  | — |  | — |  | 384 |
Total | 82,143 |  | 110,721 |  | 27,893 |  | 20,223 |  | 656 |  | 5,261 |  | 44 |  | 81 |  | 246,941 |
Commercial real estate, other |  |  |  |  |  |  |  |
Pass | 165,282 |  | 224,727 |  | 227,799 |  | 202,877 |  | 110,564 |  | 369,578 |  | 27,300 |  | 5,217 |  | 1,328,127 |
Special mention | — |  | 189 |  | 1,099 |  | 5,519 |  | 3,111 |  | 29,334 |  | 105 |  | — |  | 39,357 |
Substandard | — |  | 8,327 |  | 2,591 |  | 1,366 |  | 1,296 |  | 42,172 |  | 216 |  | 190 |  | 55,968 |
Doubtful | — |  | — |  | — |  | — |  | — |  | 66 |  | — |  | — |  | 66 |
Total | 165,282 |  | 233,243 |  | 231,489 |  | 209,762 |  | 114,971 |  | 441,150 |  | 27,621 |  | 5,407 |  | 1,423,518 |
Commercial and industrial |  |  |  |  |  |  |  |
Pass | 167,937 |  | 142,615 |  | 72,573 |  | 71,497 |  | 40,229 |  | 91,853 |  | 215,116 |  | 3,722 |  | 801,820 |
Special mention | 10,248 |  | 14,981 |  | 11,923 |  | 2,711 |  | 236 |  | 4,877 |  | 16,235 |  | — |  | 61,211 |
Substandard | 84 |  | 9,801 |  | 3,417 |  | 2,410 |  | 1,459 |  | 3,620 |  | 8,603 |  | 611 |  | 29,394 |
Doubtful | — |  | — |  | — |  | — |  | — |  | 209 |  | — |  | — |  | 209 |
Total | 178,269 |  | 167,397 |  | 87,913 |  | 76,618 |  | 41,924 |  | 100,559 |  | 239,954 |  | 4,333 |  | 892,634 |
Premium finance |  |  |  |  |  |  |  |  |
Pass | 158,778 |  | 419 |  | — |  | — |  | — |  | — |  | — |  | — |  | 159,197 |
Total | 158,778 |  | 419 |  | — |  | — |  | — |  | — |  | — |  | — |  | 159,197 |
Leases |  |  |  |  |  |  |  |  |
Pass | 191,148 |  | 90,738 |  | 34,627 |  | 15,951 |  | 3,269 |  | 1,119 |  | — |  | — |  | 336,852 |
Special mention | 1,741 |  | 2,477 |  | 140 |  | 22 |  | 24 |  | — |  | — |  | — |  | 4,404 |
Substandard | 546 |  | 1,840 |  | 571 |  | 464 |  | 454 |  | — |  | — |  | — |  | 3,875 |
Total | 193,435 |  | 95,055 |  | 35,338 |  | 16,437 |  | 3,747 |  | 1,119 |  | — |  | — |  | 345,131 |
Residential real estate |  |  |  |  |  |  |  |
| Term Loans at Amortized Cost by Origination Year |  |  |
(Dollars in thousands) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Revolving Loans | Revolving Loans Converted to Term | Total Loans
Pass | 78,313 |  | 138,860 |  | 58,869 |  | 42,840 |  | 28,174 |  | 364,635 |  | — |  | — |  | 711,691 |
Substandard | — |  | — |  | 137 |  | 569 |  | 563 |  | 10,302 |  | — |  | — |  | 11,571 |
Loss | — |  | — |  | — |  | — |  | — |  | 98 |  | — |  | — |  | 98 |
Total | 78,313 |  | 138,860 |  | 59,006 |  | 43,409 |  | 28,737 |  | 375,035 |  | — |  | — |  | 723,360 |
Home equity lines of credit |  |  |  |  |  |  |  |
Pass | 41,781 |  | 35,768 |  | 19,863 |  | 14,820 |  | 13,800 |  | 50,291 |  | 334 |  | 2,096 |  | 176,657 |
Substandard | — |  | 60 |  | — |  | 53 |  | 126 |  | 958 |  | — |  | — |  | 1,197 |
Loss | — |  | — |  | — |  | — |  | — |  | 4 |  | — |  | — |  | 4 |
Total | 41,781 |  | 35,828 |  | 19,863 |  | 14,873 |  | 13,926 |  | 51,253 |  | 334 |  | 2,096 |  | 177,858 |
Consumer, indirect |  |  |  |  |  |  |  |  |
Pass | 305,814 |  | 149,445 |  | 100,027 |  | 35,988 |  | 22,789 |  | 12,741 |  | — |  | — |  | 626,804 |
Substandard | 384 |  | 811 |  | 659 |  | 266 |  | 304 |  | 193 |  | — |  | — |  | 2,617 |
Loss | — |  | 5 |  | — |  | — |  | — |  | — |  | — |  | — |  | 5 |
Total | 306,198 |  | 150,261 |  | 100,686 |  | 36,254 |  | 23,093 |  | 12,934 |  | — |  | — |  | 629,426 |
Consumer, direct |  |  |  |  |  |  |  |  |
Pass | 50,889 |  | 28,351 |  | 14,558 |  | 6,333 |  | 3,725 |  | 3,975 |  | — |  | — |  | 107,831 |
Substandard | 97 |  | 63 |  | 138 |  | 46 |  | 21 |  | 150 |  | — |  | — |  | 515 |
Loss | — |  | — |  | — |  | — |  | — |  | 17 |  | — |  | — |  | 17 |
Total | 50,986 |  | 28,414 |  | 14,696 |  | 6,379 |  | 3,746 |  | 4,142 |  | — |  | — |  | 108,363 |
Deposit account overdrafts | 722 |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | 722 |
Total loans, at amortized cost | $ | 1,255,907 |  | $ | 960,198 |  | $ | 576,884 |  | $ | 423,955 |  | $ | 230,800 |  | $ | 991,453 |  | $ | 267,953 |  | $ | 11,917 |  | $ | 4,707,150 |
Collateral Dependent Loans Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans: •Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development, and other commercial and industrial real estate in process of construction. •Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate. •Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property. •Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage, on residential real estate property. •Home equity lines of credit are generally secured by second mortgages on residential real estate property. •Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral. •Leases are secured by commercial equipment and other essential business assets. •Premium finance loans are secured by the unearned portion of the insurance premium being financed. The following table details Peoples' amortized cost of collateral dependent loans:
(Dollars in thousands) | September 30, 2023 |  | December 31, 2022
Commercial real estate, other | — |  |  |  | 8,362 |  |
Commercial and industrial | — |  |  |  | 1,456 |  |
Residential real estate | 508 |  |  |  | 536 |  |
Total collateral dependent loans | $ | 508 |  |  |  | $ | 10,354 |  |
The decrease in collateral dependent loans at September 30, 2023, compared to December 31, 2022, was primarily due to three large-relationships that were paid in full during the nine months ended September 30, 2023. Modifications for Borrowers Experiencing Financial Difficulty Subsequent to the Adoption of ASU 2022-02 As part of Peoples' loss mitigation activities, Peoples may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. The most common modifications to the contractual terms of a loan to a borrower experiencing financial difficulty include an extension of the maturity date, a reduction in the interest rate for the remaining life of the loan, a temporary period of interest-only payments, and a reduction in the contractual payment amount for either a short period or the remaining term of the loan. In addition to loan modifications, Peoples also provides other loss mitigation options, such as forbearance and repayment plans, to assist borrowers who experience financial difficulties. In assessing whether or not a borrower is experiencing financial difficulty, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (1) the borrower is currently in payment default on any of the borrower's debt; (2) a payment default is probable in the foreseeable future without the modification; (3) the borrower has declared or is in the process of declaring bankruptcy; and (4) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification. The following tables display the amortized cost of loans that were restructured during the three months and the nine months ended September 30, 2023, presented by loan classification.
During the Three Months Ended September 30, 2023
(Dollars in thousands) |  |  |  | Term Extension |  |  |  | Total | Percentage of Total by Loan Category(a)(b)
Commercial real estate |  |  |  | $ | 901 |  |  |  |  | $ | 901 |  | 0.04 | %
Commercial and industrial |  |  |  | 2,352 |  |  |  |  | 2,352 |  | 0.21 | %
Residential real estate |  |  |  | 25 |  |  |  |  | 25 |  | — | %
Home equity lines of credit |  |  |  | 52 |  |  |  |  | 52 |  | 0.03 | %
Total |  |  |  | $ | 3,330 |  |  |  |  | $ | 3,330 |  | 0.05 | %
During the Nine Months Ended September 30, 2023
| Payment Delay (Only) |  | Forbearance Plan and Term Extension |  |  |  | Percentage of Total by Loan Category(a)
(Dollars in thousands) | Forbearance Plan | Payment Deferral |  | Term Extension |  |  | Total
Construction | $ | — |  | $ | 1,598 |  |  | $ | — |  | $ | — |  |  |  | $ | 1,598 |  | 0.43 | %
Commercial real estate | 189 |  | — |  |  | 1,089 |  | — |  |  |  | 1,278 |  | 0.06 | %
Commercial and industrial | — |  | — |  |  | 5,130 |  | 293 |  |  |  | 5,423 |  | 0.48 | %
Residential real estate | — |  | — |  |  | 243 |  | — |  |  |  | 243 |  | 0.03 | %
Home equity lines of credit | — |  | — |  |  | 203 |  | — |  |  |  | 203 |  | 0.10 | %
Total | $ | 189 |  | $ | 1,598 |  |  | $ | 6,665 |  | $ | 293 |  |  |  | $ | 8,745 |  | 0.14 | %
(a) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable. The following tables summarize the financial impacts of loan modifications and payment deferrals made to loans during the three months and the nine months ended September 30, 2023, presented by loan classification.
During the Three Months Ended September 30, 2023
|  | Weighted-Average Term Extension (in months) | Average Amount Capitalized as a Result of a Payment Delay(a)
Commercial real estate |  | 4 | $ | — |
Commercial and industrial |  | 4 | — |
Residential real estate |  | 240 | — |
Home equity lines of credit |  | 217 | — |
During the Nine Months Ended September 30, 2023
|  | Weighted-Average Term Extension (in months) | Average Amount Capitalized as a Result of a Payment Delay(a)
Commercial real estate |  | 6 | $ | — |
Commercial and industrial |  | 5 | — |
Residential real estate |  | 213 | 8,072 |
Home equity lines of credit |  | 189 | — |
Consumer, indirect |  | 2 | — |
(a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars.
The following table displays the amortized cost of loans that received a completed modification or payment deferral on or after January 1, 2023, the date Peoples adopted ASU 2022-02, through September 30, 2023, and that defaulted in the period presented. For purposes of this disclosure, Peoples defines loans that had a payment default as loans that were 90 days or more past due following a modification through September 30, 2023.
For the Nine Months Ended September 30, 2023
| Payment Delay as a Result of a Payment Deferral (Only) |  |  | Total
Commercial and industrial | $ | 245 |  |  |  | $ | 245 |
Consumer, indirect | $ | 11 |  |  |  | $ | 11 |
Total loans that subsequently defaulted | $ | 256 |  |  |  | $ | 256 |
(1) Represents the sum of amortized cost and gross charge-off as of period end. Excludes loans that liquidated either through foreclosure, deed-in-lieu of foreclosure, or a short sale.
The following table displays an aging analysis of loans that were modified on or after January 1, 2023, the date Peoples adopted ASU 2022-02, through September 30, 2023, presented by classification and class of financing receivable.
As of September 30, 2023
(Dollars in thousands) | 30-59 Days Delinquent | 60-89 Days Delinquent | 90+ Days Delinquent | Total Delinquent | Current | Total
Construction | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 1,598 |  | $ | 1,598 |
Commercial real estate | — |  | 76 |  | — |  | 76 |  | 1,203 |  | 1,279 |
Commercial and industrial | — |  | 276 |  | 2,042 |  | 2,318 |  | 3,105 |  | 5,423 |
Residential real estate | — |  | — |  | — |  | — |  | 242 |  | 242 |
Home equity lines of credit | — |  | — |  | — |  | — |  | 203 |  | 203 |
Total loans modified(a) | $ | — |  | $ | 352 |  | $ | 2,042 |  | $ | 2,394 |  | $ | 6,351 |  | $ | 8,745 |
(a) Represents the amortized cost basis as of period end.
Troubled Debt Restructurings Disclosures Prior to the Adoption of ASU 2022-02 Prior to the adoption of ASU 2022-02, Peoples accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. See “Note 1 Summary of Significant Accounting Policies” in Peoples' 2022 Form 10-K for more information on our TDR policy, and “Note 1, Summary of Significant Accounting Policies” in this Form 10-Q for more information on the adoption of ASU 2022-02. The following table summarizes the loans that were modified as TDRs during the three months and the nine months ended September 30, 2022:
|  | 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 |
(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 |
(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.
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' 2022 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 and the nine months ended September 30, 2023 and September 30, 2022 are summarized below:
(Dollars in thousands) | Beginning Balance, June 30, 2023 | Initial Allowance for Acquired PCD Assets (a) |  | (Recovery of) Provision for Credit Losses (b) | Charge-offs | Recoveries | Ending Balance, September 30, 2023
Construction | $ | 1,496 |  | — |  |  | (255) |  | — |  | — |  | 1,241 |
Commercial real estate, other | 19,731 |  | 138 |  |  | 1,569 |  | (278) |  | 97 |  | 21,257 |
Commercial and industrial | 11,028 |  | 3 |  |  | (630) |  | (199) |  | 3 |  | 10,205 |
Premium finance | 431 |  | — |  |  | 66 |  | (33) |  | 12 |  | 476 |
Leases | 10,377 |  | — |  |  | 2,052 |  | (905) |  | 168 |  | 11,692 |
Residential real estate | 6,112 |  | 6 |  |  | 156 |  | (50) |  | 27 |  | 6,251 |
Home equity lines of credit | 1,676 |  | 5 |  |  | (9) |  | (32) |  | — |  | 1,640 |
Consumer, indirect | 7,610 |  | — |  |  | 683 |  | (926) |  | 149 |  | 7,516 |
Consumer, direct | 2,642 |  | 1 |  |  | (43) |  | (92) |  | 11 |  | 2,519 |
Deposit account overdrafts | 108 |  | — |  |  | 289 |  | (319) |  | 49 |  | 127 |
Total | $ | 61,211 |  | $ | 153 |  |  | $ | 3,878 |  | $ | (2,834) |  | $ | 516 |  | $ | 62,924 |
(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, June 30, 2022 | Initial Allowance for Acquired PCD Assets (a) |  | (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 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, December 31, 2022 | Initial Allowance for Acquired PCD Assets (a) |  | Provision for (Recovery of) Credit Losses (b) | Charge-offs | Recoveries | Ending Balance, September 30, 2023 |  |  |
Construction | $ | 1,250 |  | $ | — |  |  | $ | — |  | $ | (9) |  | $ | — |  | $ | 1,241 |  |  |  |
Commercial real estate, other | 17,710 |  | 418 |  |  | 3,307 |  | (318) |  | 140 |  | 21,257 |  |  |  |
Commercial and industrial | 8,229 |  | 379 |  |  | 1,354 |  | (211) |  | 454 |  | 10,205 |  |  |  |
Premium finance | 344 |  | — |  |  | 187 |  | (79) |  | 24 |  | 476 |  |  |  |
Leases | 8,495 |  | — |  |  | 4,838 |  | (1,978) |  | 337 |  | 11,692 |  |  |  |
Residential real estate | 6,357 |  | 260 |  |  | (341) |  | (150) |  | 125 |  | 6,251 |  |  |  |
Home equity lines of credit | 1,693 |  | 18 |  |  | 35 |  | (106) |  | — |  | 1,640 |  |  |  |
Consumer, indirect | 7,448 |  | — |  |  | 2,507 |  | (2,796) |  | 357 |  | 7,516 |  |  |  |
Consumer, direct | 1,575 |  | 86 |  |  | 1,071 |  | (274) |  | 61 |  | 2,519 |  |  |  |
Deposit account overdrafts | 61 |  | — |  |  | 701 |  | (809) |  | 174 |  | 127 |  |  |  |
Total | $ | 53,162 |  | $ | 1,161 |  |  | $ | 13,659 |  | $ | (6,730) |  | $ | 1,672 |  | $ | 62,924 |  |  |  |
(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, December 31, 2021 | Initial Allowance for Acquired PCD Assets (a) |  | (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. During the third quarter of 2023, Peoples recorded a total provision for credit losses of $4.1 million, which was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans. The increase in the allowance for credit losses at September 30, 2023 when compared to prior periods was driven by the establishment of an allowance for credit losses for loans acquired in the Limestone Merger that were not considered purchased credit deteriorated ("PCD"). During the third quarter of 2022, Peoples recorded a provision for credit losses of $1.8 million driven by a deterioration of macro-economic conditions, partially offset by a release of reserves on individually analyzed loans. Leases designated as 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 $2.2 million and $2.0 million as of September 30, 2023 and December 31, 2022, respectively. 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.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//310-10/tableOfContent + Details
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