Loans

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

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, 2021		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 purchased credit deteriorated 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, January 1, 2020 (a)		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.