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Fair Value of Assets and Liabilities

3 Months Ended

Mar. 31, 2025

Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or a non-recurring basis in the Unaudited Condensed Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.”

Depending on the nature of the asset or the liability, Peoples uses various valuation methodologies and assumptions to estimate fair value. The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2024 Form 10-K.

Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or

liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods presented.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy.


	Recurring Fair Value Measurements at Reporting Date
	March 31, 2025				December 31, 2024
(Dollars in thousands)	Level 1		Level 2			Level 1		Level 2

Assets:
Available-for-sale investment securities:
Obligations of:
U.S. Treasury and government agencies	$	14,343	$	—		$	15,196	$	—
U.S. government sponsored agencies	—		213,063			—		209,083
States and political subdivisions	—		195,505			—		196,301
Residential mortgage-backed securities	—		593,979			—		601,802
Commercial mortgage-backed securities	—		52,636			—		55,065
Bank-issued trust preferred securities	—		4,148			—		6,108

Total available-for-sale securities	$	14,343	$	1,059,331		$	15,196	$	1,068,359
Equity investment securities (a)	188		245			197		244
Nonqualified deferred compensation (a) (b)	5,164		—			4,898		—
Derivative assets (c)	—		14,092			—		18,743
Liabilities:
Derivative liabilities (d)	$	—	$	12,965		$	—	$	17,046

(a) Included in "Other investment securities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

(b) Investments in the nonqualified deferred compensation plan consist of mutual funds.

(c) Included in "Other assets" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

(d) Included in "Accrued expenses and other liabilities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, secured overnight funding rate ("SOFR") (or other relevant) yield curves, credit spreads and prices from market makers and live trading systems (Level 2). Management reviews the valuation methodology and quality controls utilized by the pricing services or broker in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from quoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2).

Nonqualified deferred compensation: The underlying assets relating to the nonqualified deferred compensation plan are included in a trust and primarily consist of cash and exchange traded mutual funds, which values are based on market prices (Level 1).

Derivative Assets and Derivative Liabilities: The fair value for derivative financial instruments is determined based on third-party models, which leverages current market interest rates, broker-dealer quotations on similar products, or other related input parameters (Level 2).

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy at March 31, 2025 and December 31, 2024.


	Non-Recurring Fair Value Measurements at Reporting Date
	March 31, 2025				December 31, 2024
(Dollars in thousands)	Level 2		Level 3		Level 2		Level 3

Assets:
Collateral dependent loans	$	—	$	3,676	$	—	$	4,375
Loans held for sale (a)	924		—		1,499		—
Other real estate owned	—		—		—		5,891

(a) Loans held for sale are presented gross of a valuation allowance of $64 and $166 at March 31, 2025 and at December 31, 2024, respectively.

Collateral Dependent Loans: Loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty, are considered collateral dependent. Peoples utilizes outside third-party appraisal services to value the underlying collateral, which Peoples then uses to report the loans at their fair value (Level 3).

Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally one-to-four family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2).

Other Real Estate Owned ("OREO"): OREO, included in "Other assets" on the Unaudited Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches, including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available (Level 3).

Financial Instruments Not Required to be Measured or Reported at Fair Value

The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Unaudited Consolidated Balance Sheets.


	Fair Value Measurements of Other Financial Instruments
(Dollars in thousands)	Fair Value Hierarchy Level	March 31, 2025				December 31, 2024
		Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:
Cash and cash equivalents	1	$	186,978	186,978		$	217,664	$	217,664




Held-to-maturity investment securities:
Obligations of:
U.S. government sponsored agencies	2	222,698		215,377		233,302		223,294
States and political subdivisions (a)	2	142,513		112,471		142,691		110,848
Residential mortgage-backed securities	2	290,023		271,796		300,290		276,278
Commercial mortgage-backed securities	2	98,469		83,671		98,754		82,079

Total held-to-maturity securities		753,703		683,315		775,037		692,499


Other investment securities:
Other investment securities at cost:
Federal Home Loan Bank ("FHLB") stock	N/A	14,797		14,797		24,606		24,606
Federal Reserve Bank ("FRB") stock	N/A	27,114		27,114		27,114		27,114
Other investment securities (b)	N/A	3,814		3,814		3,073		3,073

Total other investment securities at cost		45,725		45,725		54,793		54,793





Loans and leases, net of deferred fees and costs (c)	3	6,428,526		6,346,657		6,358,003		6,240,751
Bank owned life insurance	2	144,843		144,843		143,710		143,710
Liabilities:
Deposits	2	$	7,734,749	$	6,891,785	$	7,590,205	$	6,713,360
Short-term borrowings	2	19,228		19,227		193,474		192,964
Long-term borrowings	2	237,000		258,355		238,073		258,195

(a) Obligations of states and political subdivisions are presented gross of an allowance for credit losses of $237 at both March 31, 2025 and December 31, 2024.

(b) "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at March 31, 2025

and at December 31, 2024, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

table above and not included in this table.

(c) Loans and leases, net of deferred fees and costs, are presented gross of an allowance for credit losses of $65.2 million and $63.3 million at March 31, 2025 and at December 31, 2024, respectively.

For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These financial instruments include cash and cash equivalents and overnight borrowings. Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments:

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of 90 days or less. The carrying amount for cash and cash equivalents balances are a reasonable estimate of fair value (Level 1).

Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). When observable market data is absent, the independent pricing service estimates prices based on underlying cash flow characteristics and discount rates and compares them to similar securities (Level 3). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable securities. FHLB and FRB stock are both recorded at cost.

Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held to maturity. Peoples considers interest rate, credit and market factors in estimating the fair value of loans and leases (Level 3). Fair values for loans and leases are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans and leases with similar terms, the credit risk associated with the loans and leases and other market factors, including liquidity.

Bank Owned Life Insurance: Peoples' bank owned life insurance policies are recorded at their cash surrender value (Level 2). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits.

Deposits: The fair value of fixed-maturity certificates of deposit ("CDs") is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities. Demand and other non-fixed-maturity deposits are estimated using a discounted cash flow calculation based on maturity, attrition and re-pricing assumptions (Level 2).

Short-term Borrowings: The fair value of short-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2).

Long-term Borrowings: The fair value of long-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2).

Certain financial assets and financial liabilities that are not required to be measured or reported at fair value can be subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and financial liabilities include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair value, which are not included in the above information. Accordingly, the fair values described above are not intended to represent the aggregate fair value of Peoples.