PEOPLES BANCORP INC (Form: 10-Q, Received: 07/25/2013 17:00:10)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 0-16772



PEOPLES BANCORP INC.
(Exact name of Registrant as specified in its charter)
Ohio		31-0987416
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
138 Putnam Street, P. O. Box 738, Marietta, Ohio		45750
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code:		(740) 373-3155
	Not Applicable
	(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer x	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 10,804,591 common shares, without par value, at July 24, 2013 .

Table of Contents



Table of Contents

PART I – FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
CONSOLIDATED BALANCE SHEETS (Unaudited)	3
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)	4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)	5
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)	5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	6
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION	20
SELECTED FINANCIAL DATA	20
EXECUTIVE SUMMARY	24
RESULTS OF OPERATIONS	25
FINANCIAL CONDITION	33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4. CONTROLS AND PROCEDURES	43
PART II – OTHER INFORMATION	45
ITEM 1. LEGAL PROCEEDINGS	45
ITEM 1A. RISK FACTORS	45
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	45
ITEM 4. MINE SAFETY DISLCOSURES	45
ITEM 5. OTHER INFORMATION	45
ITEM 6. EXHIBITS	46
SIGNATURES	47
EXHIBIT INDEX	48

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PART I

ITEM 1. FINANCIAL STATEMENTS

PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)



	June 30, 2013			December 31, 2012
(Dollars in thousands)
Assets
Cash and cash equivalents:
Cash and due from banks	$	32,486		$	47,256
Interest-bearing deposits in other banks	5,271			15,286
Total cash and cash equivalents	37,757			62,542
Available-for-sale investment securities, at fair value (amortized cost of $606,441 at June 30, 2013 and $628,584 at December 31, 2012)	600,328			639,185
Held-to-maturity investment securities, at amortized cost (fair value of $46,610 at June 30, 2013 and $47,124 at December 31, 2012)	48,098			45,275
Other investment securities, at cost	24,822			24,625
Total investment securities	673,248			709,085
Loans, net of deferred fees and costs	1,030,229			985,172
Allowance for loan losses	(17,113		)	(17,811		)
Net loans	1,013,116			967,361
Loans held for sale	4,953			6,546
Bank premises and equipment, net	28,544			27,013
Bank owned life insurance	44,660			51,229
Goodwill	65,786			64,881
Other intangible assets	5,822			3,644
Other assets	25,955			25,749
Total assets	$	1,899,841		$	1,918,050
Liabilities
Deposits:
Non-interest-bearing	$	325,125		$	317,071
Interest-bearing	1,110,653			1,175,232
Total deposits	1,435,778			1,492,303
Short-term borrowings	92,521			47,769
Long-term borrowings	125,714			128,823
Accrued expenses and other liabilities	26,681			27,427
Total liabilities	1,680,694			1,696,322
Stockholders’ Equity
Preferred stock, no par value, 50,000 shares authorized, no shares issued at June 30, 2013 and December 31, 2012	—			—
Common stock, no par value, 24,000,000 shares authorized, 11,183,245 shares issued at June 30, 2013 and 11,155,648 shares issued at December 31, 2012, including shares in treasury	167,964			167,039
Retained earnings	76,294			69,158
Accumulated other comprehensive (loss) income, net of deferred income taxes	(10,148		)	654
Treasury stock, at cost, 600,084 shares at June 30, 2013 and 607,688 shares at December 31, 2012	(14,963		)	(15,123		)
Total stockholders’ equity	219,147			221,728
Total liabilities and stockholders’ equity	$	1,899,841		$	1,918,050

See Notes to the Unaudited Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands, except per share data)	2013			2012			2013			2012
Interest Income:
Interest and fees on loans	$	11,533		$	12,043		$	22,987		$	23,803
Interest and dividends on taxable investment securities	4,159			4,939			8,374			10,446
Interest on tax-exempt investment securities	394			355			773			696
Other interest income	25			4			43			8
Total interest income	16,111			17,341			32,177			34,953
Interest Expense:
Interest on deposits	1,798			2,289			3,737			4,836
Interest on short-term borrowings	22			19			35			38
Interest on long-term borrowings	1,136			929			2,275			2,048
Interest on junior subordinated debentures held by subsidiary trust	—			492			—			987
Total interest expense	2,956			3,729			6,047			7,909
Net interest income	13,155			13,612			26,130			27,044
Recovery of loan losses	(1,462		)	(1,120		)	(2,527		)	(3,257		)
Net interest income after recovery of loan losses	14,617			14,732			28,657			30,301
Other Income:
Insurance income	3,220			2,438			6,098			5,389
Deposit account service charges	2,045			2,230			4,102			4,467
Trust and investment income	1,772			1,449			3,474			2,945
Electronic banking income	1,561			1,464			2,980			2,952
Mortgage banking income	365			682			1,083			1,231
Net gain on investment securities	26			—			444			3,163
Net loss on asset disposals and other transactions	(6		)	(43		)	(11		)	(3,105		)
Other non-interest income	253			235			551			596
Total other income	9,236			8,455			18,721			17,638
Other Expenses:
Salaries and employee benefit costs	8,934			8,415			17,651			16,660
Net occupancy and equipment	1,626			1,503			3,484			2,935
Professional fees	1,002			1,204			1,896			2,017
Electronic banking expense	885			870			1,725			1,564
Marketing expense	562			481			1,012			956
Data processing and software	488			485			949			972
Franchise tax	413			414			826			826
Communication expense	361			288			664			636
FDIC insurance	250			223			530			532
Foreclosed real estate and other loan expenses	223			255			440			476
Amortization of other intangible assets	164			109			353			216
Other non-interest expense	1,514			1,439			3,077			2,912
Total other expenses	16,422			15,686			32,607			30,702
Income before income taxes	7,431			7,501			14,771			17,237
Income tax expense	2,510			2,471			4,828			5,550
Net income	$	4,921		$	5,030		$	9,943		$	11,687
Earnings per share - basic	$	0.46		$	0.47		$	0.93		$	1.10
Earnings per share - diluted	$	0.46		$	0.47		$	0.93		$	1.10
Weighted-average number of shares outstanding - basic	10,576,643			10,524,429			10,566,508			10,518,909
Weighted-average number of shares outstanding - diluted	10,597,033			10,524,429			10,584,383			10,518,929
Cash dividends declared	$	1,512		$	1,175		$	2,807		$	2,347
Cash dividends declared per share	$	0.14		$	0.11		$	0.26		$	0.22

See Notes to the Unaudited Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2013			2012			2013			2012
Net income	$	4,921		$	5,030		$	9,943		$	11,687
Other comprehensive (loss) income:
Available-for-sale investment securities:
Gross unrealized holding (loss) gain arising in the period	(16,727		)	2,638			(16,270		)	1,575
Related tax benefit (expense)	5,854			(923		)	5,694			(551		)
Less: reclassification adjustment for net gain included in net income	26			—			444			3,163
Related tax expense	(9		)	—			(155		)	(1,107		)
Net effect on other comprehensive (loss) income	(10,890		)	1,715			(10,865		)	(1,032		)
Defined benefit plans:
Net loss arising during the period	—			(355		)	—			(355		)
Related tax benefit	—			124			—			124
Amortization of unrecognized loss and service cost on benefit plans	52			41			97			79
Related tax expense	(18		)	(14		)	(34		)	(27		)
Recognition of loss due to settlement and curtailment	—			353			—			353
Related tax expense	—			(124		)	—			(124		)
Net effect on other comprehensive (loss) income	34			25			63			50
Total other comprehensive (loss) income, net of tax	(10,856		)	1,740			(10,802		)	(982		)
Total comprehensive (loss) income	$	(5,935	)	$	6,770		$	(859	)	$	10,705

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)



							Accumulated Other						Total
	Common			Retained			Comprehensive			Treasury			Stockholders'
(Dollars in thousands)	Stock			Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2012	$	167,039		$	69,158		$	654		$	(15,123	)	$	221,728
Net income				9,943									9,943
Other comprehensive loss, net of tax							(10,802		)				(10,802		)
Common stock cash dividends declared				(2,807		)							(2,807		)
Tax benefit from exercise of stock options	55												55
Reissuance of treasury stock for deferred compensation plan										142			142
Purchase of treasury stock										(86		)	(86		)
Common shares issued under dividend reinvestment plan	207												207
Common shares issued under Board of Directors' compensation plan	(20		)							104			84
Stock-based compensation expense	683												683
Balance, June 30, 2013	$	167,964		$	76,294		$	(10,148	)	$	(14,963	)	$	219,147

See Notes to the Unaudited Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	Six Months Ended
	June 30,
(Dollars in thousands)	2013			2012
Net cash provided by operating activities	$	20,343		$	17,593
Investing activities:
Available-for-sale investment securities:
Purchases	(162,360		)	(135,031		)
Proceeds from sales	120,974			63,650
Proceeds from principal payments, calls and prepayments	57,501			70,516
Held-to-maturity investment securities:
Purchases	(3,231		)	(23,241		)
Proceeds from principal payments	230			2,278
Net increase in loans	(42,855		)	(17,467		)
Net expenditures for premises and equipment	(2,995		)	(1,146		)
Proceeds from sales of other real estate owned	912			1,387
Proceeds from bank owned life insurance	6,596			—
Business acquisitions, net of cash received	(2,248		)	(125		)
Investment in limited partnership and tax credit funds	(120		)	(187		)
Net cash used in investing activities	(27,596		)	(39,366		)
Financing activities:
Net increase in non-interest-bearing deposits	8,054			32,790
Net (decrease) increase in interest-bearing deposits	(64,583		)	34,380
Net increase (decrease) in short-term borrowings	44,752			(8,296		)
Payments on long-term borrowings	(3,124		)	(38,951		)
Repurchase of preferred shares and common stock warrant	—			(1,201		)
Cash dividends paid on common shares	(2,604		)	(2,171		)
Purchase of treasury stock	(86		)	(48		)
Proceeds from issuance of common shares	4			3
Excess tax benefit from share-based payments	55			—
Net cash (used in) provided by financing activities	(17,532		)	16,506
Net decrease in cash and cash equivalents	(24,785		)	(5,267		)
Cash and cash equivalents at beginning of period	62,542			38,950
Cash and cash equivalents at end of period	$	37,757		$	33,683

See Notes to the Unaudited Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying Unaudited Consolidated Financial Statements of Peoples Bancorp Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (“ 2012 Form 10-K”).

The accounting and reporting policies followed in the presentation of the accompanying Unaudited Consolidated Financial Statements are consistent with those described in Note 1 of the Notes to the Consolidated Financial Statements included in Peoples’ 2012 Form 10-K, as updated by the information contained in this Form 10-Q. Management has evaluated all significant events and transactions that occurred after June 30, 2013 , for potential recognition or disclosure in these consolidated financial statements. In the opinion of management, these consolidated financial statements reflect all adjustments necessary to present fairly such information for the periods and dates indicated. Such adjustments are normal and recurring in nature. All significant intercompany accounts and transactions have been eliminated. The Consolidated Balance Sheet at December 31, 2012 , contained herein has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2012 Form 10-K.

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year, due in part to seasonal variations and unusual or infrequently occurring items.

New Accounting Pronouncements: In February 2013, the Financial Accounting Standards Board issued an accounting standards update with new guidance on the presentation of accumulated other comprehensive income (“AOCI”). This standard was effective for public companies for interim and annual periods beginning after December 15, 2012. The amendment requires an entity to present the reclassification adjustments out of AOCI and into net income for each component reported. These amounts may be disclosed before-tax or after-tax, and must be disclosed in either the income statement or the notes to the financial statements. This update is intended to supplement changes made in 2012 to increase the prominence of items reported in other comprehensive income. Peoples adopted this new guidance on January 1, 2013, as required. As a result of the adoption, the disclosure of AOCI included in Note 5 contains additional information regarding reclassifications out of AOCI and into net income.

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Note 2. Fair Value of Financial Instruments

Available-for-sale securities measured at fair value on a recurring basis comprised the following at June 30, 2013 :



			Fair Value Measurements at Reporting Date Using
(Dollars in thousands)			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2013
Obligations of:
U.S. Treasury and government agencies	$	23	$	—	$	23	$	—
U.S. government sponsored agencies	400		—		400		—
States and political subdivisions	50,579		1,893		48,686		—
Residential mortgage-backed securities	503,574		—		503,574		—
Commercial mortgage-backed securities	33,606		—		33,606		—
Bank-issued trust preferred securities	7,811		—		7,811		—
Equity securities	4,335		4,201		134		—
Total available-for-sale securities	$	600,328	$	6,094	$	594,234	$	—
December 31, 2012
Obligations of:
U.S. Treasury and government agencies	$	26	$	—	$	26	$	—
U.S. government sponsored agencies	516		—		516		—
States and political subdivisions	45,668		681		44,987		—
Residential mortgage-backed securities	514,096		—		514,096		—
Commercial mortgage-backed securities	64,416		—		64,416		—
Bank-issued trust preferred securities	10,357		—		10,357		—
Equity securities	4,106		3,971		135		—
Total available-for-sale securities	$	639,185	$	4,652	$	634,533	$	—

Held-to-maturity securities reported at fair value comprised the following at June 30, 2013 :



			Fair Value at Reporting Date Using
(Dollars in thousands)			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2013
Obligations of:
States and political subdivisions	$	4,059	$	—	$	4,059	$	—
Residential mortgage-backed securities	34,921		—		34,921		—
Commercial mortgage-backed securities	7,630		—		7,630		—
Total held-to-maturity securities	$	46,610	$	—	$	46,610	$	—
December 31, 2012
Obligations of:
States and political subdivisions	$	4,250	$	—	$	4,250	$	—
Residential mortgage-backed securities	34,560		—		34,560		—
Commercial mortgage-backed securities	8,314		—		8,314		—
Total held-to-maturity securities	$	47,124	$	—	$	47,124	$	—

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 inputs) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatilities, LIBOR yield curves, credit spreads and prices from market makers and live trading systems (Level 2).

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Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis included the following:

Impaired Loans: Impaired loans are measured and reported at fair value when the amounts to be received are less than the carrying value of the loans. One of the allowable methods for determining the amount of impairment is estimating fair value using the fair value of the collateral for collateral-dependent loans. Management’s determination of the fair value for these loans uses a market approach representing the estimated net proceeds to be received from the sale of the collateral based on observable market prices or market value provided by independent, licensed or certified appraisers (Level 2 inputs). At June 30, 2013 , impaired loans with an aggregate outstanding principal balance of $ 3.3 million were measured and reported at a fair value of $ 2.7 million . For the three months ended June 30, 2013 , Peoples recognized no losses and for the six months ended June 30, 2013 , Peoples recognized losses of $ 0.6 million , on impaired loans through the allowance for loan losses.

The following table presents the fair values of financial assets and liabilities carried on Peoples’ consolidated balance sheets, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis:



	June 30, 2013				December 31, 2012
(Dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets :
Cash and cash equivalents	$	37,757	$	37,757	$	62,542	$	62,542
Investment securities	673,248		671,760		709,085		710,934
Loans	1,018,069		950,544		973,907		897,132
Financial liabilities:
Deposits	$	1,435,778	$	1,443,797	$	1,492,303	$	1,503,098
Short-term borrowings	92,521		92,521		47,769		47,769
Long-term borrowings	125,714		132,932		128,823		141,691

The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These instruments include cash and cash equivalents, demand and other non-maturity deposits and overnight borrowings. Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments:

Loans: The fair value of portfolio loans assumes sale of the 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 considered interest rate, credit and market factors in estimating the fair value of loans (Level 2 inputs). In the current whole loan market, financial investors are generally requiring a much higher rate of return than the return inherent in loans if held to maturity given the lack of market liquidity. This divergence accounts for the majority of the difference in carrying amount over fair value.

Deposits: The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities (Level 2 inputs).

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

Bank premises and equipment, customer relationships, deposit base, banking center networks, and other information required to compute Peoples’ aggregate fair value are not included in the above information. Accordingly, the above fair values are not intended to represent the aggregate fair value of Peoples.

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Note 3. Investment Securities

Available-for-sale

The following table summarizes Peoples’ available-for-sale investment securities:



(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2013
Obligations of:
U.S. Treasury and government agencies	$	23	$	—	$	—		$	23
U.S. government sponsored agencies	382		18		—			400
States and political subdivisions	49,785		1,838		(1,044		)	50,579
Residential mortgage-backed securities	512,492		6,481		(15,399		)	503,574
Commercial mortgage-backed securities	34,046		203		(643		)	33,606
Bank-issued trust preferred securities	8,500		—		(689		)	7,811
Equity securities	1,213		3,208		(86		)	4,335
Total available-for-sale securities	$	606,441	$	11,748	$	(17,861	)	$	600,328
December 31, 2012
Obligations of:
U.S. Treasury and government agencies	$	26	$	—	$	—		$	26
U.S. government sponsored agencies	486		30		—			516
States and political subdivisions	42,458		3,292		(82		)	45,668
Residential mortgage-backed securities	511,305		12,558		(9,767		)	514,096
Commercial mortgage-backed securities	62,129		2,330		(43		)	64,416
Bank-issued trust preferred securities	10,966		73		(682		)	10,357
Equity securities	1,214		2,977		(85		)	4,106
Total available-for-sale securities	$	628,584	$	21,260	$	(10,659	)	$	639,185

Peoples’ investment in equity securities was comprised entirely of common stocks issued by various unrelated bank holding companies at both June 30, 2013 and December 31, 2012 . At June 30, 2013 , there were no securities of a single issuer, other than U.S. Treasury and government agencies and U.S. government sponsored agencies, that exceeded 10% of stockholders' equity.

The gross gains and gross losses realized by Peoples from sales of available-for-sale securities for the periods ended June 30 were as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2013		2012		2013		2012
Gross gains realized	$	1,267	$	—	$	3,312	$	3,272
Gross losses realized	1,241		—		2,868		109
Net gain realized	$	26	$	—	$	444	$	3,163

The cost of investment securities sold, and any resulting gain or loss, was based on the specific identification method and recognized as of the trade date.

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The following table presents a summary of available-for-sale investment securities that had an unrealized loss:



	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
June 30, 2013
Obligations of:
U.S. Treasury and government agencies	$	—	$	—	—	$	—	$	—	—	$	—	$	—
U.S. government sponsored agencies	—		—		—	—		—		—	—		—
States and political subdivisions	20,244		1,044		30	—		—		—	20,244		1,044
Residential mortgage-backed securities	316,939		12,779		71	22,945		2,620		9	339,884		15,399
Commercial mortgage-backed securities	22,996		579		5	5,103		64		1	28,099		643
Bank-issued trust preferred securities	4,374		113		2	2,421		576		3	6,795		689
Equity securities	—		—		—	90		86		1	90		86
Total	$	364,553	$	14,515	108	$	30,559	$	3,346	14	$	395,112	$	17,861
December 31, 2012
Obligations of:
U.S. Treasury and government agencies	$	—	$	—	—	$	—	$	—	—	$	—	$	—
U.S. government sponsored agencies	—		—		—	—		—		—	—		—
States and political subdivisions	4,558		82		8	—		—		—	4,558		82
Residential mortgage-backed securities	135,250		2,326		28	89,958		7,441		20	225,208		9,767
Commercial mortgage-backed securities	7,681		43		2	—		—		—	7,681		43
Bank-issued trust preferred securities	2,376		18		2	5,434		664		5	7,810		682
Equity securities	—		—		—	91		85		1	91		85
Total	$	149,865	$	2,469	40	$	95,483	$	8,190	26	$	245,348	$	10,659

Management systematically evaluates available-for-sale investment securities for other-than-temporary declines in fair value on a quarterly basis. At June 30, 2013 , management concluded no individual securities were other-than-temporarily impaired since Peoples did not have the intent to sell nor was it more likely than not that Peoples would be required to sell any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both June 30, 2013 and December 31, 2012 , were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At June 30, 2013 , approximately 89% of the mortgage-backed securities that have been at an unrealized loss position for twelve months or more were issued by U.S. government sponsored agencies. The remaining 11% , or five positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Three of the five positions had a fair value less than 90% of their book value, with an aggregate book and fair value of $1.9 million and $1.7 million , respectively. Management has analyzed the underlying credit quality of these securities and concluded the unrealized losses were primarily attributable to the floating rate nature of these investments and the low number of loans remaining in these securities.

Furthermore, the three bank-issued trust preferred securities which were in an unrealized loss position were primarily attributable to the floating nature of those investments, the current interest rate environment and spreads within that sector. The three securities had an aggregate book value of approximately $3.0 million and fair value of $2.4 million at June 30, 2013 .

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The table below presents the amortized cost, fair value and weighted-average yield of available-for-sale securities by contractual maturity at June 30, 2013 . The average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. Rates are calculated on a fully tax-equivalent basis using a 35% federal income tax rate.



(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
U.S. Treasury and government agencies	$	—		$	20		$	3		$	—		$	23
U.S. government sponsored agencies	—			382			—			—			382
States and political subdivisions	467			1,718			17,346			30,254			49,785
Residential mortgage-backed securities	—			3,573			46,468			462,451			512,492
Commercial mortgage-backed securities	—			5,305			23,203			5,538			34,046
Bank-issued trust preferred securities	—			—			—			8,500			8,500
Equity securities													1,213
Total available-for-sale securities	$	467		$	10,998		$	87,020		$	506,743		$	606,441
Fair value
Obligations of:
U.S. Treasury and government agencies	$	—		$	20		$	3		$	—		$	23
U.S. government sponsored agencies	—			400			—			—			400
States and political subdivisions	471			1,828			18,183			30,097			50,579
Residential mortgage-backed securities	—			3,729			45,370			454,475			503,574
Commercial mortgage-backed securities	—			5,507			22,719			5,380			33,606
Bank-issued trust preferred securities	—			—			—			7,811			7,811
Equity securities													4,335
Total available-for-sale securities	$	471		$	11,484		$	86,275		$	497,763		$	600,328
Total average yield	4.73		%	4.05		%	3.01		%	2.70		%	2.79		%

Held-to-Maturity

The following table summarizes Peoples’ held-to-maturity investment securities:



(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2013
Obligations of:
States and political subdivisions	$	3,855	$	216	$	(11	)	$	4,060
Residential mortgage-backed securities	36,361		—		(1,441		)	34,920
Commercial mortgage-backed securities	7,882		25		(277		)	7,630
Total held-to-maturity securities	$	48,098	$	241	$	(1,729	)	$	46,610
December 31, 2012
Obligations of:
States and political subdivisions	$	3,860	$	390	$	—		$	4,250
Residential mortgage-backed securities	33,494		1,107		(41		)	34,560
Commercial mortgage-backed securities	7,921		393		—			8,314
Total held-to-maturity securities	$	45,275	$	1,890	$	(41	)	$	47,124

There were no gross gains or gross losses realized by Peoples from sales of held-to-maturity securities for the three and six months ended June 30, 2013 and 2012 .

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The following table presents a summary of held-to-maturity investment securities that had an unrealized loss:



	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
June 30, 2013
Obligations of:
States and political subdivisions	$	326	$	11	1	$	—	$	—	—	$	326	$	11
Residential mortgage-backed securities	34,920		1,441		8	—		—		—	34,920		1,441
Commercial mortgage-backed securities	6,508		277		1	—		—		—	6,508		277
Total	$	41,754	$	1,729	10	$	—	$	—	—	$	41,754	$	1,729
December 31, 2012
Residential mortgage-backed securities	$	—	$	—	—	$	—	$	—	—	$	—	$	—
Commercial mortgage-backed securities	2,398		41		2	—		—		—	2,398		41
Total	$	2,398	$	41	2	$	—	$	—	—	$	2,398	$	41

The table below presents the amortized cost, fair value and weighted-average yield of held-to-maturity securities by contractual maturity at June 30, 2013 . The average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. Rates are calculated on a fully tax-equivalent basis using a 35% federal income tax rate.



(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
States and political subdivisions	$	—		$	—		$	337		$	3,518		$	3,855
Residential mortgage-backed securities	—			—			536			35,825			36,361
Commercial mortgage-backed securities	—			—			—			7,882			7,882
Total held-to-maturity securities	$	—		$	—		$	873		$	47,225		$	48,098
Fair value
Obligations of:
States and political subdivisions	$	—		$	—		$	326		$	3,734		$	4,060
Residential mortgage-backed securities	—			—			513			34,407			34,920
Commercial mortgage-backed securities	—			—			—			7,630			7,630
Total held-to-maturity securities	$	—		$	—		$	839		$	45,771		$	46,610
Total average yield	—		%	—		%	2.57		%	2.74		%	2.73		%

Pledged Securities

Peoples had pledged available-for-sale investment securities with a carrying value of $ 286.7 million and $ 260.9 million at June 30, 2013 and December 31, 2012 , respectively, to secure public and trust department deposits and repurchase agreements in accordance with federal and state requirements. Additionally, Peoples had pledged held-to-maturity investment securities with a carrying value of $ 21.5 million and $ 45.3 million at June 30, 2013 and December 31, 2012 , respectively, to secure public and trust department deposits and repurchase agreements in accordance with federal and state requirements. Peoples also pledged available-for-sale investment securities with carrying values of $ 19.6 million and $ 50.4 million at June 30, 2013 and December 31, 2012 , respectively, and held-to-maturity securities with a carrying value of $26.6 million at June 30, 2013 to secure additional borrowing capacity at the Federal Home Loan Bank of Cincinnati ("FHLB") and the Federal Reserve Bank of Cleveland ("FRB").

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Note 4. Loans

Peoples' loan portfolio consists of various types of loans originated primarily as a result of lending opportunities within Peoples' primary market areas of central and southeastern Ohio, west central West Virginia, and northeastern Kentucky. The major classifications of loan balances, excluding loans held for sale, were as follows:



(Dollars in thousands)	June 30, 2013		December 31, 2012
Commercial real estate, construction	$	30,770	$	34,265
Commercial real estate, other	389,281		378,073
Commercial real estate	420,051		412,338
Commercial and industrial	184,981		180,131
Residential real estate	252,282		233,841
Home equity lines of credit	52,212		51,053
Consumer	119,029		101,246
Deposit account overdrafts	1,674		6,563
Total loans	$	1,030,229	$	985,172

Peoples has acquired various loans through business combinations for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable that all contractually required payments would not be collected. The carrying amounts of these loans included in the loan balances above are summarized as follows:



(Dollars in thousands)	June 30, 2013		December 31, 2012
Commercial real estate	$	1,890	$	2,145
Commercial and industrial	58		74
Residential real estate	12,084		12,873
Consumer	53		84
Total outstanding balance	$	14,085	$	15,176
Net carrying amount	$	13,607	$	14,700

Peoples has pledged certain loans secured by 1-4 family and multifamily residential mortgages under a blanket collateral agreement to secure borrowings from the FHLB. The amount of such pledged loans totaled $ 216.4 million and $ 202.0 million at June 30, 2013 and December 31, 2012 , respectively. Peoples also had pledged commercial loans to secure borrowings with the FRB. The outstanding balances of these loans totaled $ 158.7 million and $ 123.8 million at June 30, 2013 and December 31, 2012 , respectively.

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 recorded investments in loans on nonaccrual status and accruing loans delinquent for 90 days or more were as follows:



					Accruing Loans
	Nonaccrual Loans				90+ Days Past Due
(Dollars in thousands)	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
Commercial real estate, construction	$	80	$	—	$	—	$	—
Commercial real estate, other	6,801		9,831		36		—
Commercial real estate	6,881		9,831		36		—
Commercial and industrial	297		627		—		181
Residential real estate	3,311		3,136		—		—
Home equity lines of credit	56		24		—		—
Consumer	62		20		—		4
Total	$	10,607	$	13,638	$	36	$	185

The following table presents the aging of the recorded investment in past due loans and leases:



	Loans Past Due								Current		Total
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total		Loans		Loans
June 30, 2013
Commercial real estate, construction	$	—	$	80	$	—	$	80	$	30,690	$	30,770
Commercial real estate, other	328		306		3,870		4,504		384,777		389,281
Commercial real estate	328		386		3,870		4,584		415,467		420,051
Commercial and industrial	134		65		263		462		184,519		184,981
Residential real estate	2,874		278		1,641		4,793		247,489		252,282
Home equity lines of credit	482		—		48		530		51,682		52,212
Consumer	571		95		61		727		118,302		119,029
Deposit account overdrafts	61		—		—		61		1,613		1,674
Total	$	4,450	$	824	$	5,883	$	11,157	$	1,019,072	$	1,030,229
December 31, 2012
Commercial real estate, construction	$	—	$	77	$	—	$	77	$	34,188	$	34,265
Commercial real estate, other	11,382		705		5,144		17,231		360,842		378,073
Commercial real estate	11,382		782		5,144		17,308		395,030		412,338
Commercial and industrial	3,841		116		294		4,251		175,880		180,131
Residential real estate	4,640		1,049		2,019		7,708		226,133		233,841
Home equity lines of credit	274		25		24		323		50,730		51,053
Consumer	926		127		10		1,063		100,183		101,246
Deposit account overdrafts	55		—		—		55		6,508		6,563
Total	$	21,118	$	2,099	$	7,491	$	30,708	$	954,464	$	985,172

Credit Quality Indicators

As discussed in Note 1 of the Notes to the Consolidated Financial Statements included in Peoples' 2012 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. A description of the general characteristics of the risk grades used by Peoples 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 debt if required, for any weakness that may exist.

“Watch” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned” classification. Loans in this 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 the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the asset 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 of the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that Peoples will sustain some loss if the deficiencies 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, its classification as an estimate 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 the 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 loan losses are taken in 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. 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 Peoples' loan portfolio based upon the most recent analysis performed:



	Pass Rated		Watch		Substandard		Doubtful		Not		Total
(Dollars in thousands)	(Grades 1 - 4)		(Grade 5)		(Grade 6)		(Grade 7)		Rated		Loans
June 30, 2013
Commercial real estate, construction	$	26,531	$	—	$	71	$	—	$	4,168	$	30,770
Commercial real estate, other	354,212		12,290		22,350		—		429		389,281
Commercial real estate	380,743		12,290		22,421		—		4,597		420,051
Commercial and industrial	165,285		3,914		15,782		—		—		184,981
Residential real estate	22,814		1,740		7,481		1		220,246		252,282
Home equity lines of credit	948		—		1,086		—		50,178		52,212
Consumer	66		—		35		—		118,928		119,029
Deposit account overdrafts	—		—		—		—		1,674		1,674
Total	$	569,856	$	17,944	$	46,805	$	1	$	395,623	$	1,030,229
December 31, 2012
Commercial real estate, construction	$	29,738	$	—	$	1,095	$	—	$	3,432	$	34,265
Commercial real estate, other	328,435		18,940		29,573		—		1,125		378,073
Commercial real estate	358,173		18,940		30,668		—		4,557		412,338
Commercial and industrial	150,180		21,566		7,054		—		1,331		180,131
Residential real estate	22,392		1,768		7,597		10		202,074		233,841
Home equity lines of credit	1,051		—		1,094		—		48,908		51,053
Consumer	66		—		47		—		101,133		101,246
Deposit account overdrafts	—		—		—		—		6,563		6,563
Total	$	531,862	$	42,274	$	46,460	$	10	$	364,566	$	985,172

Impaired Loans

The following tables summarize loans classified as impaired:



	Unpaid		Recorded Investment				Total				Average		Interest
	Principal		With		Without		Recorded		Related		Recorded		Income
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment		Recognized
June 30, 2013
Commercial real estate, construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate, other	14,483		3,379		3,398		6,777		1,180		7,609		—
Commercial real estate	14,483		$	3,379	$	3,398	$	6,777	$	1,180	$	7,609	$	—
Commercial and industrial	270		266		—		266		266		254		—
Residential real estate	3,758		229		2,975		3,204		95		2,372		64
Home equity lines of credit	348		—		348		348		—		296		8
Consumer	245		—		245		245		—		167		10
Total	$	19,104	$	3,874	$	6,966	$	10,840	$	1,541	$	10,698	$	82
December 31, 2012
Commercial real estate, construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate, other	19,023		2,785		7,053		9,838		1,262		11,048		—
Commercial real estate	19,023		$	2,785	$	7,053	$	9,838	$	1,262	$	11,048	$	—
Commercial and industrial	696		182		437		619		36		518		—
Residential real estate	3,943		418		3,063		3,481		123		2,014		149
Home equity lines of credit	349		—		349		349		—		140		17
Consumer	114		—		114		114		—		49		14
Total	$	24,125	$	3,385	$	11,016	$	14,401	$	1,421	$	13,769	$	180

At June 30, 2013 , Peoples' impaired loans shown in the table above included loans that were classified as troubled debt restructurings.

In assessing whether or not a borrower is experiencing financial difficulties, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy and (iv) the debtor's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification.

Peoples considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by Peoples include the debtor's ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to the unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by Peoples generally include one or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt, (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (iii) a temporary period of interest-only payments, and (iv) a reduction in the contractual payment amount for either a short period or the remaining term of the loan.

During 2013, in accordance with regulatory guidance regarding borrowers who were in Chapter 7 bankruptcy, Peoples identified $560,000 of loans that were TDRs. The regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged and the borrower has not reaffirmed the debt, regardless of the delinquency status of the loan. The filing of bankruptcy by the borrower is evidence of financial difficulty and the discharge of the obligation by the bankruptcy court is deemed to be a concession granted to the borrower. As of June 30, 2013 , a total of $540,000 of these loans were accruing since Peoples expects to collect all principal and interest payments.

The following table summarizes the loans that were modified as a TDR during the three and six months ended June 30, 2013 and 2012 .



		Three Months Ended							Six Months Ended
		Recorded Investment (1)							Recorded Investment (1)
	Number of Contracts	Pre-Modification		Post-Modification		At June 30, 2013		Number of Contracts	Pre-Modification		Post-Modification		At June 30, 2013
Residential real estate	4	$	174	$	174	$	174	10	$	343	$	343	$	343
Home equity lines of credit	1	$	30	$	30	$	30	2	$	53	$	53	$	53
Consumer	12	$	109	$	109	$	109	22	$	164	$	164	$	164

		Three Months Ended							Six Months Ended
		Recorded Investment (1)							Recorded Investment (1)
	Number of Contracts	Pre-Modification		Post-Modification		At June 30, 2012		Number of Contracts	Pre-Modification		Post-Modification		At June 30, 2012
Commercial real estate, other	3	$	1,291	$	1,291	$	1,261	3	$	1,291	$	1,291	$	1,261
Residential real estate	1	$	50	$	50	$	49	1	$	50	$	50	$	49


(1)	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.

The following table presents those loans for the six months ended June 30, 2013 that were modified as a TDR during the last twelve months that subsequently defaulted (i.e., 90 days or more past due following a modification). There were no such loans during the six months ended June 30, 2012 .



	June 30, 2013
	Number of Contracts	Recorded Investment (1)		Impact on the Allowance for Loan Losses
Commercial real estate, other	1	$	251	$	—
Residential Real Estate	2	70		—
Home equity lines of credit	1	24		—
Total	4	$	345	$	—


(1)	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 additional commitments to lend additional funds to the related debtors whose terms have been modified in a TDR.

Allowance for Loan Losses

Changes in the allowance for loan losses in the periods ended June 30 , were as follows:



(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Home Equity Lines of Credit			Consumer			Deposit Account Overdrafts			Total
Balance, January 1, 2013	$	14,215		$	1,733		$	801		$	479		$	438		$	145		$	17,811
Charge-offs	(783		)	(11		)	(222		)	(2		)	(344		)	(245		)	(1,607		)
Recoveries	2,806			21			261			13			236			99			3,436
Net recoveries (charge-offs)	2,023			10			39			11			(108		)	(146		)	1,829
Recovery of loan losses	(3,670		)	445			165			—			410			123			(2,527		)
Balance, June 30, 2013	$	12,568		$	2,188		$	1,005		$	490		$	740		$	122		$	17,113

Period-end amount allocated to:
Loans individually evaluated for impairment	$	1,180		$	266		$	95		$	—		$	—		$	—		$	1,541
Loans collectively evaluated for impairment	11,388			1,922			910			490			740			122			15,572
Ending balance	$	12,568		$	2,188		$	1,005		$	490		$	740		$	122		$	17,113

Balance, January 1, 2012	$	18,947		$	2,434		$	1,119		$	541		$	449		$	227		$	23,717
Charge-offs	(2,846		)	(33		)	(561		)	(77		)	(345		)	(254		)	(4,116		)
Recoveries	2,411			148			532			14			352			124			3,581
Net (charge-offs) recoveries	(435		)	115			(29		)	(63		)	7			(130		)	(535		)
Recovery of loan losses	(2,300		)	(1,025		)	—			—			—			68			(3,257		)
Balance, June 30, 2012	$	16,212		$	1,524		$	1,090		$	478		$	456		$	165		$	19,925

Period-end amount allocated to:
Loans individually evaluated for impairment	$	973		$	22		$	289		$	—		$	—		$	—		$	1,284
Loans collectively evaluated for impairment	15,239			1,502			801			478			456			165			18,641
Ending balance	$	16,212		$	1,524		$	1,090		$	478		$	456		$	165		$	19,925

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Note 5. Stockholders’ Equity

The following table details the progression in shares of Peoples’ common and treasury stock during the period presented:



	Common Stock	Treasury Stock
Shares at December 31, 2012	11,155,648	607,688
Changes related to stock-based compensation awards:
Release of restricted common shares	17,666	3,429
Changes related to deferred compensation plan:
Purchase of treasury stock		712
Reissuance of treasury stock		(7,703	)
Common shares issued under dividend reinvestment plan	9,931
Common shares issued under Board of Directors' compensation plan	—	(4,042	)
Shares at June 30, 2013	11,183,245	600,084

Under its Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by the Board of Directors. At June 30, 2013 , Peoples had no preferred shares issued or outstanding.

Accumulated Other Comprehensive Income (Loss)

The following details the change in the components of Peoples’ accumulated other comprehensive income (loss) for the six months ended June 30, 2013 :



(Dollars in thousands)	Unrealized Gain on Securities			Unrecognized Net Pension and Postretirement Costs			Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2012	$	6,892		$	(6,238	)	$	654
Reclassification adjustments to net income:
Realized gain on sale of securities, net of tax	(289		)	—			(289		)
Other comprehensive (loss) income, net of reclassifications and tax	(10,576		)	63			(10,513		)
Balance, June 30, 2013	$	(3,973	)	$	(6,175	)	$	(10,148	)

Note 6. Employee Benefit Plans

Peoples sponsors a noncontributory defined benefit pension plan that covers substantially all employees hired before January 1, 2010. The plan provides retirement benefits based on an employee’s years of service and compensation. For employees hired before January 1, 2003, the amount of postretirement benefit is based on the employee’s average monthly compensation pay over the highest five consecutive years out of the employee’s last ten years with Peoples while an eligible employee. For employees hired on or after January 1, 2003, the amount of postretirement benefit is based on 2% of the employee’s annual compensation plus accrued interest. Effective January 1, 2010, the pension plan was closed to new entrants. Effective March 1, 2011, the accrual of pension plan benefits for all participants was frozen. Peoples recognized this freeze as a curtailment as of December 31, 2010 and March 1, 2011, under the terms of the pension plan. Peoples also provides post-retirement health and life insurance benefits to former employees and directors. Only those individuals who retired before January 27, 2012 were eligible for life insurance benefits. All retirees are eligible for health benefits; however, Peoples only pays 100% of the cost for those individuals who retired before January 1, 1993. For all others, the retiree is responsible for most, if not all, of the cost of health benefits. Peoples’ policy is to fund the cost of the benefits as they arise.

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The following tables detail the components of the net periodic cost for the plans:



	Pension Benefits
	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2013			2012			2013			2012
Interest cost	$	133		$	152		$	266		$	304
Expected return on plan assets	(165		)	(196		)	(330		)	(392		)
Amortization of net loss	51			40			103			79
Settlement of benefit obligation	—			353			—			353
Net periodic cost	$	19		$	349		$	39		$	344



	Postretirement Benefits
	Three Months Ended					Six Months Ended
	June 30,					June 30,
(Dollars in thousands)	2013			2012		2013			2012
Interest cost	$	1		$	3	$	3		$	5
Amortization of net (loss) gain	(4		)	1		(4		)	(1		)
Net periodic cost	$	(3	)	$	4	$	(1	)	$	4

Note 7. Stock-Based Compensation

Under the Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan (the “2006 Equity Plan”), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted stock awards, stock appreciation rights and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 1,081,260 . The maximum number of shares that can be issued for incentive stock options is 800,000 shares. Prior to 2007, Peoples granted nonqualified and incentive stock options to employees and nonqualified stock options to non-employee directors under the 2006 Equity Plan and predecessor plans. Since February 2007, Peoples has granted a combination of restricted common shares and stock appreciation rights (“SARs”) to be settled in common shares to employees and restricted common shares to non-employee directors subject to the terms and conditions prescribed by the 2006 Equity Plan. In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares.

Stock Options

Under the provisions of the 2006 Equity Plan and predecessor stock option plans, the exercise price per share of any stock option granted may not be less than the grant date fair market value of the underlying common shares. All stock options granted to both employees and non-employee directors expire ten years from the date of grant. The most recent stock option grants to employees and non-employee directors occurred in 2006. The stock options granted to employees vested three years after the grant date, while the stock options granted to non-employee directors vested six months after the grant date.

The following summarizes the changes to Peoples' stock options for the period ended June 30, 2013 :



	Number of Common Shares Subject to Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1	101,594	$	26.09
Expired	38,990	23.09
Outstanding at June 30	62,604	$	27.95	1.8 years	$	—
Exercisable at June 30	62,604	$	27.95	1.8 years	$	—

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The following table summarizes Peoples’ stock options outstanding at June 30, 2013 :



			Options Outstanding & Exercisable
Range of Exercise Prices			Common Shares Subject to Options Outstanding	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price
$23.59	to	$25.94	2,792	1.1 years	25.41
$26.01	to	$27.74	22,644	1.3 years	27.05
$28.25	to	$28.26	17,632	2.5 years	28.25
$28.57	to	$30.00	19,536	1.9 years	29.10
Total			62,604	1.8 years	$	27.95

Stock Appreciation Rights

SARs granted to employees have an exercise price equal to the fair market value of Peoples’ common shares on the date of grant and will be settled using common shares of Peoples. Additionally, the SARs granted vested three years after the grant date and expire ten years from the date of grant. The most recent grant of SARs occurred in 2008. The following summarizes the changes to Peoples' SARs for the period ended June 30, 2013 :



	Number of Common Shares Subject to SARs	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1	22,849	$	25.85
Forfeited	1,557	25.99
Outstanding at June 30	21,292	$	25.96	4.2 years	$	—
Exercisable at June 30	21,292	$	25.96	4.2 years	$	—

The following table summarizes Peoples’ SARs outstanding at June 30, 2013 :



Exercise Price	Number of Common Shares Subject to SARs Outstanding & Exercisable	Weighted- Average Remaining Contractual Life
$23.26	2,000	4.1 years
$23.77	10,582	4.6 years
$29.25	8,710	3.6 years
Total	21,292	4.2 years

Restricted Shares

Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on common shares awarded to non-employee directors expire after six months , while the restrictions on common shares awarded to employees expire after periods ranging from one to three years . In the first quarter of 2013, Peoples granted restricted common shares to non-employee directors with a six month time-based vesting period. Also during the first quarter of 2013, Peoples granted restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse one to three years after the grant date provided that Peoples has net income greater than zero and maintains a well-capitalized status by regulatory standards.

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The following summarizes the changes to Peoples’ restricted common shares for the period ended June 30, 2013 :



	Time-Based Vesting			Performance-Based Vesting
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1	78,731	$	16.36	17,865	$	16.07
Awarded	5,500	21.67		72,706	21.82
Released	14,512	13.93		3,154	13.14
Forfeited	601	15.87		912	18.75
Outstanding at June 30	69,118	$	17.29	86,505	$	20.98

For the six months ended June 30, 2013 , the total intrinsic value of restricted common shares released was $ 369,000 .

Stock-Based Compensation

Peoples recognized stock-based compensation expense, which is included as a component of Peoples’ salaries and employee benefit costs, based on the estimated fair value of the awards on the grant date. The following summarizes the amount of stock-based compensation expense and related tax benefit recognized:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2013			2012			2013			2012
Total stock-based compensation	$	386		$	259		$	683		$	485
Recognized tax benefit	(135		)	(91		)	(239		)	(170		)
Net expense recognized	$	251		$	168		$	444		$	315

Total unrecognized stock-based compensation expense related to unvested awards was $ 1.4 million at June 30, 2013 , which will be recognized over a weighted-average period of 1.5 years.

Note 8. Earnings Per Share

The calculations of basic and diluted earnings per share were as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except per share data)	2013		2012		2013		2012
Distributed earnings allocated to shareholders	$	1,490	$	1,165	$	2,764	$	2,330
Undistributed earnings allocated to shareholders	3,388		3,826		7,094		9,278
Net earnings allocated to shareholders	$	4,878	$	4,991	$	9,858	$	11,608

Weighted-average shares outstanding	10,576,643		10,524,429		10,566,508		10,518,909
Effect of potentially dilutive shares	20,390		—		17,875		20
Total weighted-average diluted shares outstanding	10,597,033		10,524,429		10,584,383		10,518,929

Earnings per share:
Basic	$	0.46	$	0.47	$	0.93	$	1.10
Diluted	$	0.46	$	0.47	$	0.93	$	1.10

Anti-dilutive common shares excluded from calculation:
Stock options and SARs	86,986		141,776		103,438		157,995

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Note 9. Acquisitions

On January 2, 2013, Peoples Insurance acquired a commercial insurance agency office and related customer accounts in the Pikeville, Kentucky area for total cash consideration of $1.5 million .

On April 5, 2013, Peoples Insurance acquired an insurance agency office and related customer accounts in the Jackson, Ohio area for total cash consideration of $0.7 million , and merged the insurance agency into Peoples' subsidiary Peoples Insurance Agency, LLC. A portion of the consideration is contingent upon revenue metrics being achieved.

On May 15, 2013, Peoples Insurance acquired two insurance agency offices and related customer accounts in the Jackson, Ohio area for total cash consideration of $1.1 million . A portion of the consideration is contingent upon revenue metrics being achieved.

The balances and operations related to these acquisitions are included in Peoples' consolidated financial statements from the date of the acquisition. These acquisitions, individually and collectively, did not materially impact Peoples' financial position, results of operations or cash flows for any period presented.

On July 2, 2013, Peoples announced that it had signed a definitive agreement to acquire Ohio Commerce Bank ("Ohio Commerce") for total cash consideration of $16.5 million . Ohio Commerce operates one full-service office in Beachwood, Ohio, and the agreement calls for Ohio Commerce to merge into Peoples' wholly-owned subsidiary, Peoples Bank, National Association. The transaction, which is subject to regulatory approval and Ohio Commerce shareholder approval, is anticipated to be completed during the fourth quarter of 2013.

The following is a summary of changes in goodwill and intangible assets during the period ended June 30, 2013 :



(Dollars in thousands)	Goodwill		Gross Core Deposit		Gross Customer Relationships
Balance, December 31, 2012	$	64,881	$	8,853	$	7,190
Acquired intangible assets	905		—		2,458
Balance, June 30, 2013	$	65,786	$	8,853	$	9,648



(Dollars in thousands)	Gross Intangible Assets		Accumulated Amortization			Net Intangible Assets
June 30, 2013
Core deposits	$	8,853	$	(8,306	)	$	547
Customer relationships	9,648		(6,519		)	3,129
Total acquired intangible assets	$	18,501	$	(14,825	)	$	3,676
Mortgage servicing rights						2,146
Total other intangible assets						$	5,822

Note 10. Subsequent Events

In July 2013, Peoples began taking steps to surrender bank owned life insurance reported at approximately $43 million , at a cost basis of $36.5 million . This process could take up to six months, and if completed, would result in Peoples incurring a related tax liability.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SELECTED FINANCIAL DATA

The following data should be read in conjunction with the Unaudited Consolidated Financial Statements and the Management’s Discussion and Analysis that follows:



	At or For the Three Months Ended						At or For the Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
SIGNIFICANT RATIOS
Return on average stockholders' equity	8.74		%	9.57		%	8.96		%	11.22		%
Return on average assets	1.03		%	1.11		%	1.05		%	1.30		%
Net interest margin	3.15		%	3.43		%	3.14		%	3.42		%
Efficiency ratio (a)	71.71		%	69.61		%	71.66		%	67.52		%
Pre-provision net revenue to average assets (b)	1.25		%	1.42		%	1.25		%	1.54		%
Average stockholders' equity to average assets	11.82		%	11.60		%	11.70		%	11.55		%
Average loans to average deposits	68.87		%	68.22		%	67.10		%	68.66		%
Dividend payout ratio	30.73		%	23.36		%	28.23		%	20.08		%
ASSET QUALITY RATIOS
Nonperforming loans as a percent of total loans (c)(d)	1.03		%	1.73		%	1.03		%	1.73		%
Nonperforming assets as a percent of total assets (c)(d)	0.57		%	0.97		%	0.57		%	0.97		%
Nonperforming assets as a percent of total loans and other real estate owned (c)(d)	1.04		%	1.85		%	1.04		%	1.85		%
Allowance for loan losses to loans net of unearned interest (d)	1.66		%	2.09		%	1.66		%	2.09		%
Allowance for loan losses to nonperforming loans (c)(d)	160.80		%	119.90		%	160.80		%	119.90		%
Recovery of loan losses to average loans (annualized)	(0.58		)%	(0.47		)%	(0.51		)%	(0.69		)%
Net (recoveries) charge-offs as a percentage of average loans (annualized)	(0.45		)%	0.09		%	(0.37		)%	0.11		%
CAPITAL INFORMATION (d)
Tier 1 common capital ratio	14.17		%	13.92		%	14.17		%	13.92		%
Tier 1 capital ratio	14.17		%	15.93		%	14.17		%	15.93		%
Total risk-based capital ratio	15.54		%	17.27		%	15.54		%	17.27		%
Leverage ratio	9.04		%	10.18		%	9.04		%	10.18		%
Tangible equity to tangible assets (e)	8.07		%	8.45		%	8.07		%	8.45		%
PER SHARE DATA
Earnings per share – Basic	$	0.46		$	0.47		$	0.93		$	1.10
Earnings per share – Diluted	0.46			0.47			0.93			1.10
Cash dividends declared per share	0.14			0.11			0.26			0.22
Book value per share (d)	20.71			20.39			20.71			20.39
Tangible book value per common share (d)(e)	$	13.94		$	14.18		$	13.94		$	14.18
Weighted-average shares outstanding – Basic	10,576,643			10,524,429			10,566,508			10,518,909
Weighted-average shares outstanding – Diluted	10,597,033			10,524,429			10,584,383			10,518,929
Common shares outstanding at end of period	10,583,161			10,526,954			10,583,161			10,526,954


(a)	Non-interest expense (less intangible asset amortization) as a percentage of fully tax-equivalent net interest income plus non-interest income (excluding gains or losses on investment securities and asset disposals).


(b)	These amounts represent non-GAAP financial measures since they exclude the provision for loan losses and all gains and losses included in earnings. Additional information regarding the calculation of these measures can be found later in this section under the caption “Pre-Provision Net Revenue”.


(c)	Nonperforming loans include loans 90 days past due and accruing, renegotiated loans and nonaccrual loans. Nonperforming assets include nonperforming loans and other real estate owned.


(d)	Data presented as of the end of the period indicated.


(e)	These amounts represent non-GAAP financial measures since they exclude the balance sheet impact of intangible assets acquired through acquisitions on both total stockholders’ equity and total assets. Additional information regarding the calculation of these measures can be found later in this discussion under the caption “Capital/Stockholders’ Equity”.

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Forward-Looking Statements

Certain statements in this Form 10-Q which are not historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Words such as “anticipate”, “estimates”, “may”, “feels”, “expects”, “believes”, “plans”, “will”, “would”, “should”, “could” and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. Factors that might cause such a difference include, but are not limited to:


(1)	the success, impact, and timing of Peoples' business strategies, including the successful completion of the Ohio Commerce acquisition, integration of recently completed insurance business acquisitions, expansion of consumer lending activity and rebranding efforts;


(2)	competitive pressures among financial institutions or from non-financial institutions may increase significantly, including product and pricing pressures and Peoples' ability to attract, develop and retain qualified professionals;


(3)	changes in the interest rate environment due to economic conditions and/or the fiscal policies of the U.S. government and Federal Reserve Board, which may adversely impact interest margins;


(4)	changes in prepayment speeds, loan originations and charge-offs, which may be less favorable than expected and adversely impact the amount of interest income generated;


(5)	adverse changes in the economic conditions and/or activities, including impacts from the implementation of the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012, as well as continuing economic uncertainty in the U.S., the European Union, and other areas, which could decrease sales volumes and increase loan delinquencies and defaults;

(6)

legislative or regulatory changes or actions, including in particular the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the regulations promulgated and to be promulgated thereunder, which may subject Peoples, its subsidiaries or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses;


(7)	deterioration in the credit quality of Peoples' loan portfolio, which may adversely impact the provision for loan losses;


(8)	changes in accounting standards, policies, estimates or procedures which may adversely affect Peoples' reported financial condition or results of operations;


(9)	adverse changes in the conditions and trends in the financial markets, which may adversely affect the fair value of securities within Peoples' investment portfolio and interest rate sensitivity of Peoples' consolidated balance sheet;


(10)	Peoples' ability to receive dividends from its subsidiaries;


(11)	Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;


(12)	the impact of larger or similar financial institutions encountering problems, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity;


(13)	the costs and effects of regulatory and legal developments, including the outcome of potential regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations;


(14)	Peoples' ability to secure confidential information through the use of computer systems and telecommunications networks, including those of our third-party vendors and other service providers, may prove inadequate, which could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss;


(15)	the overall adequacy of Peoples' risk management program; and


(16)	other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples’ reports filed with the Securities and Exchange Commission (“SEC”), including those risk factors included in the disclosure under “ITEM 1A. RISK FACTORS” of Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the “ 2012 Form 10-K”).

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All forward-looking statements speak only as of the execution date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements. Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual results may differ materially from these projections. Additionally, Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the filing date for this Form 10-Q or to reflect the occurrence of unanticipated events except as may be required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC’s website at www.sec.gov and/or from Peoples Bancorp Inc.’s website – www.peoplesbancorp.com under the “Investor Relations” section.

This discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements, and notes thereto, contained in Peoples’ 2012 Form 10-K, as well as the Unaudited Consolidated Financial Statements, ratios, statistics and discussions contained elsewhere in this Form 10-Q.

Business Overview

The following discussion and analysis of Peoples’ Unaudited Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial condition and results of operations.

Peoples offers diversified financial products and services through 49 financial service locations and 47 ATMs in southeastern Ohio, west central West Virginia and northeastern Kentucky through its financial service units – Peoples Bank, National Association (“Peoples Bank”) and Peoples Insurance Agency, LLC ("Peoples Insurance"), a subsidiary of Peoples Bank. Peoples Bank is a member of the Federal Reserve System and subject to regulation, supervision and examination by the Office of the Comptroller of the Currency.

Peoples’ products and services include traditional banking products, such as deposit accounts, lending products and trust services. Peoples provides services through traditional offices, ATMs and telephone and internet-based banking. Peoples also offers a complete array of insurance products and makes available custom-tailored fiduciary and wealth management services. Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer.

Critical Accounting Policies

The accounting and reporting policies of Peoples conform to US GAAP and to general practices within the financial services industry. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis at June 30, 2013 , which were unchanged from the policies disclosed in Peoples’ 2012 Form 10-K.

Summary of Recent Transactions and Events

The following is a summary of recent transactions and events that have impacted or are expected to impact Peoples’ results of operations or financial condition:

◦

On July 2, 2013, Peoples announced that Peoples Bank had signed a definitive agreement to acquire Ohio Commerce Bank ("Ohio Commerce"), which operates one full-service office in Beachwood, Ohio. Under the terms of the agreement, Peoples Bank has agreed to pay $13.75 in cash for each share of Ohio Commerce common stock for a total cash consideration of approximately $16.5 million. The transaction, which is subject to regulatory approval and Ohio Commerce shareholder approval, is anticipated to be completed during the fourth quarter of 2013.


◦	In May 2013, Peoples received a $5.2 million principal payout to reduce its bank owned life insurance principal. In July 2013, Peoples began taking steps to surrender bank owned life insurance reported at approximately $43 million, at a cost basis of $36.5 million. This process could take up to six months, and if completed, would result in Peoples incurring a related tax liability.

◦

On January 2, 2013, Peoples Insurance acquired a commercial insurance agency office and related customer accounts in the Pikeville, Kentucky area (the "Pikeville Acquisition"). On April 5, 2013, Peoples Insurance acquired McNelly Insurance and Consulting Agency, LLC and related customer accounts in Jackson, Ohio. On May 15, 2013, Peoples Insurance acquired two additional insurance agency offices and related customer accounts in Jackson, Ohio. These acquisitions help Peoples maintain revenue diversity by continuing to grow the fee-based businesses.

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◦

Peoples periodically has taken actions to reduce interest rate exposure within the investment portfolio and entire balance sheet, which have included the sale of low yielding investment securities and repayment of high-cost borrowings. These actions included the sale of $68.8 million of investment securities, primarily low or volatile yielding residential mortgage-backed securities, during the first quarter of 2013. Some of the proceeds from these investment sales were reinvested in securities during the first quarter with the remaining reinvested early in the second quarter of 2013. In future quarters, Peoples intends to use the cash flow generated from the investment portfolio to fund loan growth.

◦

On December 19, 2012, Peoples repaid the entire $30.9 million aggregate outstanding principal amount of its Series A and Series B Junior Subordinated Debentures and the proceeds were used by PEBO Capital Trust I to redeem 22,975 Series B 8.62% Capital Securities having an aggregate liquidation amount of $23.0 million, held by institutional investors as well as 928 outstanding Common Securities and 7,025 Series B 8.62% Capital Securities, having an aggregate liquidation amount of $8.0 million, held by Peoples (the "Trust Preferred Redemption"). This transaction resulted in Peoples incurring a pre-tax loss of $1.0 million for the redemption premium and unamortized issuance costs. Peoples funded $24.0 million of the repayment with a term note from an unaffiliated financial institution at a significantly lower interest rate, and the balance with cash on hand. As a result of the Trust Preferred Redemption, Peoples will realize an annual interest expense savings of $1.1 million beginning in 2013. Through the first six months of 2013, as a result of the Trust Preferred Redemption, Peoples realized interest expense savings of approximately $0.5 million.


◦	On September 17, 2012, Peoples introduced its new brand as part of a company-wide brand revitalization. The brand is Peoples' promise, which is a guarantee of satisfaction and quality. Peoples will continue to incur costs throughout 2013 associated with the brand revitalization, including marketing due to advertisement, and depreciation for the revitalization of its branch network.

◦

Since the second quarter of 2011, Peoples has experienced generally improving trends in several asset quality metrics, after a three-year trend of higher credit losses and nonperforming assets than Peoples' long-term historical levels. Additionally, the amount of criticized loans has decreased due in part to Peoples upgrading the loan quality ratings of various commercial loans. These conditions have resulted in recoveries of or lower provisions for loan losses.

◦

Peoples' net interest income and margin are impacted by changes in market interest rates based upon actions taken by the Federal Reserve Board either directly or through its Open Market Committee. These actions include changing its target Federal Funds Rate (the interest rate at which banks lend money to each other), Discount Rate (the interest rate charged to banks for money borrowed from the Federal Reserve Bank) and longer-term market interest rates (primarily U.S. Treasury securities). Longer-term market interest rates also are affected by the demand for U.S. Treasury securities. The resulting changes in the yield curve slope have a direct impact on reinvestment rates for Peoples' earning assets.


◦	The Federal Reserve Board has maintained its target Federal Funds Rate at a historically low level of 0% to 0.25% since December 2008 and has maintained the Discount Rate at 0.75% since December 2010. The Federal Reserve Board continues to indicate there is the potential for these short-term rates to remain unchanged until certain inflation and unemployment rates are achieved.

◦

Since late 2008, the Federal Reserve Board has taken various actions to lower longer-term market interest rates as a means of stimulating the economy – a policy commonly referred to as “quantitative easing”. These actions have included the buying and selling of mortgage-backed and other debt securities through its open market operations. As a result, the slope of the U.S. Treasury yield curve has fluctuated significantly. Substantial flattening occurred in late 2008, in mid-2010 and since early third quarter of 2011, while moderate steepening occurred in the second half of 2009, late 2010 and mid 2013.

The impact of these transactions and events, where material, is discussed in the applicable sections of this Management’s Discussion and Analysis.

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EXECUTIVE SUMMARY

Net income for the three months ended June 30, 2013 was $4.9 million , or $0.46 per diluted share, compared to $5.0 million and $0.47 a year ago. On a year-to-date basis, net income was $9.9 million through June 30, 2013 , compared to $11.7 million a year ago, representing earnings per diluted common share of $0.93 and $1.10 , respectively. The decrease in earnings compared to the first six months of 2012 was largely attributable to higher non-interest expenses and a lower recovery of loan loss in 2013 than experienced in 2012.

Peoples had a recovery of loan losses of $1.5 million and $2.5 million for the three and six months ended through June 30, 2013 , respectively, as several asset quality metrics maintained favorable trends. In comparison, Peoples recorded recovery of loan losses of $1.1 million and $3.3 million for the three and six months ended June 30, 2012 , respectively.

Net interest income was $13.2 million in the second quarter of 2013 , compared to $13.0 million for the linked quarter and $13.6 million for the second quarter of 2012 . The slight improvement over the linked quarter occurred as a result of the investment strategy enacted late in the first quarter and higher average loan balances. On a year-to-date basis, net interest income of $26.1 million was down 3% from $27.0 million in 2012 . The decrease from prior year, for both the quarter and year-to-date, was a result of declining asset yields due to the reinvestment of funds at lower interest rates.

Non-interest income, which excludes gains and losses on investment securities, asset disposals and other transactions, for the second quarter of 2013 was up 2% compared to the linked quarter, 8% compared to the prior year quarter, and 4% on a year-to-date basis. These increases were largely due to acquisitions completed during the last year within Peoples' insurance and investment businesses. The growth was partially offset by lower mortgage banking income and service charges on deposit accounts.

Total non-interest expense was $16.4 million for the quarter ended June 30, 2013 , consistent with the linked quarter, an increase of 5% over the prior year, and 6% higher on a year-to-date basis. The increase over the prior year was due in part to the acquisitions completed, and costs associated with strategic investments to add new talent and re-brand the company. Salaries and benefits increased 6% compared to prior year for the quarter and year-to-date. Net occupancy and equipment was up 8% compared to the prior year quarter and 19% on a year-to-date basis.

At June 30, 2013 , total assets were $ 1.90 billion versus $1.92 billion at year-end 2012 , with the decrease due mostly to the lower market value of the available-for-sale investment portfolio. Total investment securities decreased 5% to $673.2 million at June 30, 2013 , compared to $709.1 million at year-end. Gross loan balances grew $45.1 million during the first half of 2013 . The allowance for loan losses was $17.1 million , or 1.66% of gross loans, compared to $17.8 million and 1.81% at December 31, 2012 .

Total liabilities were $ 1.68 billion at June 30, 2013 , down $15.6 million since December 31, 2012 . Retail deposit balances experienced a $51.3 million decline compared to year-end 2012 . Non-interest-bearing deposits increased $8.1 million, partially offsetting the decline in interest-bearing deposits, and comprised 23.5% of total retail deposits at June 30, 2013 versus 22.1% at year-end 2012 . A portion of the decline in retail interest-bearing deposits was attributable to a reduction in money market balances maintained by Peoples' trust department. Since late 2008, Peoples' trust department has maintained larger than historical amounts of funds in money market deposit accounts as the ultra-low rate environment limited short-term investment options. At June 30, 2013 , total borrowed funds were $ 218.2 million , up $41.6 million compared to year-end due to higher short-term borrowings that were used to fund loan growth.

At June 30, 2013 , total stockholders' equity was $ 219.1 million , down $2.6 million since December 31, 2012 . During 2013, the market value of Peoples' available-for-sale investment portfolio declined $10.9 million, while earnings exceeded dividends declared by $7.1 million. Regulatory capital ratios remained significantly higher than "well capitalized" minimums. Peoples' Tier 1 Common Capital ratio remained stable at 14.17% at June 30, 2013 , versus 14.06% at December 31, 2012 , while the Total Risk-Based Capital ratio was 15.54% versus 15.43% at December 31, 2012 . In addition, Peoples' tangible equity to tangible asset ratio was 8.07% and tangible book value per common share was $13.94 at June 30, 2013 , versus 8.28% and $14.52 at December 31, 2012 , respectively.

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RESULTS OF OPERATIONS

Net Interest Income

Net interest income, the amount by which interest income exceeds interest expense, remains Peoples’ largest source of revenue. The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve Board’s monetary policy, the level and degree of pricing competition for both loans and deposits in Peoples’ markets, and the amount and composition of Peoples’ earning assets and interest-bearing liabilities.

The following tables detail Peoples’ average balance sheets for the periods presented:

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	For the Three Months Ended
	June 30, 2013							March 31, 2013							June 30, 2012
( Dollars in thousands)	Average Balance			Income/ Expense		Yield/Cost		Average Balance			Income/ Expense		Yield/Cost		Average Balance			Income/ Expense		Yield/Cost
Short-term investments	$	11,399		$	25	0.88	%	$	39,099		$	18	0.20	%	$	9,336		$	4	0.19	%
Investment Securities (1):
Taxable	657,644			4,202		2.56	%	657,319			4,262		2.59	%	638,538			4,984		3.09	%
Nontaxable (2)	50,978			607		4.76	%	48,213			583		4.84	%	39,000			546		5.61	%
Total investment securities	708,622			4,809		2.71	%	705,532			4,845		2.75	%	677,538			5,530		3.27	%
Loans (3):
Commercial	611,631			6,785		4.45	%	606,836			6,701		4.48	%	623,492			7,571		4.88	%
Real estate (4)	280,889			3,263		4.65	%	271,128			3,359		4.96	%	244,131			3,101		5.03	%
Consumer	116,995			1,528		5.24	%	107,092			1,435		5.58	%	91,976			1,400		6.12	%
Total loans	1,009,515			11,576		4.61	%	985,056			11,495		4.73	%	959,599			12,072		5.05	%
Less: Allowance for loan losses	(17,866		)					(18,783		)					(21,650		)
Net loans	991,649			11,576		4.68	%	966,273			11,495		4.81	%	937,949			12,072		5.17	%
Total earning assets	1,711,670			16,410		3.85	%	1,710,904			16,358		3.86	%	1,624,823			17,606		4.35	%
Intangible assets	71,081							69,988							64,737
Other assets	128,237							133,827							133,991
Total assets	$	1,910,988						$	1,914,719						$	1,823,551
Deposits:
Savings accounts	$	199,065		$	27	0.05	%	$	190,769		$	25	0.05	%	$	158,408		$	23	0.06	%
Governmental deposit accounts	147,824			168		0.46	%	145,714			202		0.56	%	155,888			251		0.65	%
Interest-bearing demand accounts	124,199			25		0.08	%	126,763			25		0.08	%	111,627			37		0.13	%
Money market accounts	266,602			93		0.14	%	288,161			96		0.14	%	250,080			111		0.18	%
Brokered deposits	51,952			468		3.61	%	54,134			476		3.57	%	53,843			487		3.64	%
Retail certificates of deposit	350,141			1,017		1.17	%	381,650			1,115		1.18	%	407,413			1,380		1.36	%
Total interest-bearing deposits	1,139,783			1,798		0.63	%	1,187,191			1,939		0.66	%	1,137,259			2,289		0.81	%
Borrowed Funds:
Short-term FHLB advances	35,462			9		0.10	%	2,000			1		0.20	%	16,000			5		0.12	%
Retail repurchase agreements	33,340			13		0.16	%	31,975			12		0.15	%	36,172			14		0.15	%
Total short-term borrowings	68,802			22		0.13	%	33,975			13		0.15	%	52,172			19		0.14	%
Long-term FHLB advances	64,237			543		3.39	%	64,538			541		3.40	%	66,531			562		3.40	%
Wholesale repurchase agreements	40,000			367		3.67	%	40,000			363		3.63	%	40,000			367		3.63	%
Other borrowings	22,690			226		3.94	%	23,883			235		3.94	%	22,614			492		8.60	%
Total long-term borrowings	126,927			1,136		3.58	%	128,421			1,139		3.57	%	129,145			1,421		4.38	%
Total borrowed funds	195,729			1,158		2.36	%	162,396			1,152		2.86	%	181,317			1,440		3.16	%
Total interest-bearing liabilities	1,335,512			2,956		0.89	%	1,349,587			3,091		0.93	%	1,318,576			3,729		1.14	%
Non-interest-bearing deposits	326,020							319,994							269,316
Other liabilities	23,568							23,381							24,191
Total liabilities	1,685,100							1,692,962							1,612,083
Total stockholders’ equity	225,888							221,757							211,468
Total liabilities and
stockholders’ equity	$	1,910,988						$	1,914,719						$	1,823,551
Interest rate spread				$	13,454	2.96	%				$	13,267	2.93	%				$	13,877	3.21	%
Net interest margin						3.15	%						3.12	%						3.43	%


(1)	Average balances are based on carrying value.


(2)	Interest income and yields are presented on a fully tax-equivalent basis using a 35% federal statutory tax rate.


(3)	Average balances include nonaccrual and impaired loans. Interest income includes interest earned on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented.


(4)	Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.

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	For the Six Months Ended
	June 30, 2013							June 30, 2012
( Dollars in thousands)	Average Balance			Income/ Expense		Yield/Cost		Average Balance			Income/ Expense		Yield/Cost
Short-term investments	$	25,172		$	44	0.35	%	$	7,808		$	8	0.21	%
Investment Securities (1):
Taxable	657,482			8,463		2.57	%	642,693			10,537		3.28	%
Nontaxable (2)	49,602			1,189		4.79	%	37,528			1,071		5.71	%
Total investment securities	707,084			9,652		2.73	%	680,221			11,608		3.41	%
Loans (3):
Commercial	609,247			13,486		4.46	%	618,105			14,795		4.81	%
Real estate (4)	276,036			6,622		4.80	%	244,051			6,241		5.14	%
Consumer	112,071			2,963		5.46	%	90,759			2,825		6.26	%
Total loans	997,354			23,071		4.67	%	952,915			23,861		5.03	%
Less: Allowance for loan losses	(18,322		)					(23,039		)
Net loans	979,032			23,071		4.74	%	929,876			23,861		5.15	%
Total earning assets	1,711,288			32,767		3.85	%	1,617,905			35,477		4.40	%
Intangible assets	70,538							64,581
Other assets	130,794							132,348
Total assets	$	1,912,620						$	1,814,834
Deposits:
Savings accounts	$	194,940		$	51	0.05	%	$	152,520		$	44	0.06	%
Governmental deposit accounts	146,775			370		0.51	%	149,725			488		0.66	%
Interest-bearing demand accounts	125,474			50		0.08	%	109,975			71		0.13	%
Money market accounts	277,322			189		0.14	%	255,674			236		0.19	%
Brokered deposits	53,037			944		3.59	%	57,643			1,014		3.54	%
Retail certificates of deposit	365,808			2,132		1.18	%	403,929			2,983		1.49	%
Total interest-bearing deposits	1,163,356			3,736		0.65	%	1,129,466			4,836		0.86	%
Borrowed Funds:
Short-term FHLB advances	18,823			10		0.11	%	15,634			8		0.11	%
Retail repurchase agreements	32,661			25		0.15	%	39,207			30		0.15	%
Total short-term borrowings	51,484			35		0.14	%	54,841			38		0.14	%
Long-term FHLB advances	64,387			1,084		3.40	%	70,055			1,180		3.39	%
Wholesale repurchase agreements	40,000			729		3.65	%	48,462			868		3.54	%
Other borrowings	23,283			461		3.94	%	22,609			987		8.63	%
Total long-term borrowings	127,670			2,274		3.57	%	141,126			3,035		4.28	%
Total borrowed funds	179,154			2,309		2.58	%	195,967			3,073		3.12	%
Total interest-bearing liabilities	1,342,510			6,045		0.91	%	1,325,433			7,909		1.20	%
Non-interest-bearing deposits	323,024							258,401
Other liabilities	23,252							21,458
Total liabilities	1,688,786							1,605,292
Total stockholders’ equity	223,834							209,542
Total liabilities and
stockholders’ equity	$	1,912,620						$	1,814,834
Interest rate spread				$	26,722	2.94	%				$	27,568	3.20	%
Net interest margin						3.14	%						3.42	%


(1)	Average balances are based on carrying value.


(2)	Interest income and yields are presented on a fully tax-equivalent basis using a 35% federal statutory tax rate.


(3)	Average balances include nonaccrual and impaired loans. Interest income includes interest earned on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented.


(4)	Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.

Table of Contents

Net interest margin, which is calculated by dividing fully tax-equivalent (“FTE”) net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of earning assets and interest-bearing liabilities. FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions to the pre-tax equivalent of taxable income using a 35% federal statutory tax rate. The following table details the calculation of FTE net interest income:



	Three Months Ended						Six Months Ended
	June 30, 2013		March 31, 2013		June 30, 2012		June 30,
(Dollars in thousands)	June 30, 2013		March 31, 2013		June 30, 2012		2013		2012
Net interest income, as reported	$	13,155	$	12,975	$	13,612	$	26,130	$	27,044
Taxable equivalent adjustments	299		292		265		592		524
Fully tax-equivalent net interest income	$	13,454	$	13,267	$	13,877	$	26,722	$	27,568

The following table provides an analysis of the changes in FTE net interest income:



																			Six Months Ended
																			June 30, 2013
	Three Months Ended June 30, 2013 Compared to																		Compared to
(Dollars in thousands)	March 31, 2013									June 30, 2012									June 30, 2012
Increase (decrease) in:	Rate			Volume			Total ⁽¹⁾			Rate			Volume			Total ⁽¹⁾			Rate			Volume			Total ⁽¹⁾
INTEREST INCOME:
Short-term investments	$	96		$	(89	)	$	7		$	20		$	1		$	21		$	8		$	28		$	36
Investment Securities: ⁽²⁾
Taxable	(74		)	14			(60		)	(1,673		)	891			(782		)	(2,749		)	675			(2,074		)
Nontaxable	(55		)	79			24			(423		)	484			61			(419		)	537			118
Total investment income	(129		)	93			(36		)	(2,096		)	1,375			(721		)	(3,168		)	1,212			(1,956		)
Loans :
Commercial	(155		)	239			84			(647		)	(139		)	(786		)	(1,094		)	(215		)	(1,309		)
Real estate	(682		)	586			(96		)	(1,186		)	1,348			162			(984		)	1,365			381
Consumer	(440		)	533			93			(1,017		)	1,145			128			(895		)	1,033			138
Total loan income	(1,277		)	1,358			81			(2,850		)	2,354			(496		)	(2,973		)	2,183			(790		)
Total interest income	(1,310		)	1,362			52			(4,926		)	3,730			(1,196		)	(6,133		)	3,423			(2,710		)
INTEREST EXPENSE:
Deposits:
Savings accounts	1			1			2			(9		)	13			4			(10		)	17			7
Government deposit accounts	(698		)	589			(109		)	(835		)	677			(158		)	(949		)	650			(299		)
Interest-bearing demand accounts	138			5			143			116			15			131			268			31			299
Money market accounts	(29		)	(42		)	(71		)	(45		)	(41		)	(86		)	(98		)	(88		)	(186		)
Brokered certificates of deposit	36			(44		)	(8		)	(3		)	(16		)	(19		)	40			(110		)	(70		)
Retail certificates of deposit	(17		)	(81		)	(98		)	(184		)	(179		)	(363		)	(586		)	(265		)	(851		)
Total deposit cost	(569		)	428			(141		)	(960		)	469			(491		)	(1,335		)	235			(1,100		)
Borrowed funds:
Short-term borrowings	(3		)	12			9			(3		)	6			3			(1		)	(2		)	(3		)
Long-term borrowings	7			(10		)	(3		)	(279		)	(6		)	(285		)	(536		)	(225		)	(761		)
Total borrowed funds cost	4			2			6			(282		)	—			(282		)	(537		)	(227		)	(764		)
Total interest expense	(565		)	430			(135		)	(1,242		)	469			(773		)	(1,872		)	8			(1,864		)
Net interest income	$	(745	)	$	932		$	187		$	(3,684	)	$	3,261		$	(423	)	$	(4,261	)	$	3,415		$	(846	)

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(1)	The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the

relationship of the dollar amounts of the changes in each.


(2)	Presented on a fully tax-equivalent basis.

Net interest income for the second quarter of 2013 was 3% lower than the prior year second quarter and 1% higher than the linked quarter. The investment strategy enacted late in the first quarter of 2013 and loan growth during the second quarter provided stability to Peoples' net interest income and net interest margin. The yield on investment securities declined modestly in the first quarter of 2013, as the impact of slightly higher reinvestment rates was offset by the continued high levels of principal prepayments within mortgage-backed securities. During the second quarter of 2013, the average monthly principal cash flow received by Peoples from its investment portfolio was approximately $8.7 million, compared to a monthly average of approximately $12.4 million during the same period in 2012. The cash flow received from the investment portfolio in the second quarter of 2013 had an average yield of 2.61% and was reinvested in securities with a yield in the range of 2.50% to 3.00%.

Peoples' funding costs benefited from the strategy of replacing higher-cost funding with low-cost deposits. During the second quarter of 2013. Peoples realized a decrease of 23 basis points in total funding costs compared to the prior year, due largely to the Trust Preferred Redemption during the fourth quarter of 2012. Peoples expects to realize an annual interest expense savings of $1.1 million in 2013 attributable to the Trust Preferred Redemption. Peoples remains diligent in minimizing the impact of margin compression on net interest income, with earning asset growth to be the key driver. During the third quarter of 2013, management expects to receive positive benefits from the recent steepening of the yield curve,

Detailed information regarding changes in the Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this discussion. Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this discussion under the caption “Interest Rate Sensitivity and Liquidity”.

(Recovery of) Provision for Loan Losses

The following table details Peoples’ recovery of, or provision for, loan losses:



	Three Months Ended									Six Months Ended
	June 30, 2013			March 31, 2013			June 30, 2012			June 30,
(Dollars in thousands)	June 30, 2013			March 31, 2013			June 30, 2012			2013			2012
Provision for (recovery of) checking account overdrafts	$	138		$	(15	)	$	80		$	123		$	68
Recovery of other loan losses	(1,600		)	(1,050		)	(1,200		)	(2,650		)	(3,325		)
Net recovery of loan losses	$	(1,462	)	$	(1,065	)	$	(1,120	)	$	(2,527	)	$	(3,257	)
As a percentage of average gross loans (a)	(0.58		)%	(0.44		)%	(0.47		)%	(0.51		)%	(0.69		)%
(a) Presented on an annualized basis

The recovery of, or provision for, loan losses recorded represents the amount needed to maintain the adequacy of the allowance for loan losses based on management’s formal quarterly analysis of the loan portfolio and procedural methodology that estimates the amount of probable credit losses. This process considers various factors that affect losses, such as changes in Peoples’ loan quality, historical loss experience and current economic conditions. The recovery of loan losses recorded during 2013 was driven mostly by recoveries on commercial real estate loans that had previously incurred charge-offs. During 2013, recoveries on loans exceeded charge-offs by $1.1 million for the second quarter and $1.8 million on a year-to-date basis. Peoples also experienced continued improving trends in various credit quality metrics, including historical loss trends and the level of criticized loans.

Additional information regarding changes in the allowance for loan losses and loan credit quality can be found later in this discussion under the caption “Allowance for Loan Losses”.

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Net Other (Losses) Gains

The following table details the other gains and losses recognized by Peoples:



	Three Months Ended									Six Months Ended
	June 30, 2013			March 31, 2013			June 30, 2012			June 30,
(Dollars in thousands)	June 30, 2013			March 31, 2013			June 30, 2012			2013			2012
Net gain (loss) on OREO	$	81		$	(5	)	$	(48	)	$	76		$	8
Loss on debt extinguishment	—			—			—			—			(3,111		)
Net (loss) gain on bank premises and equipment	(87		)	—			5			(87		)	(2		)
Net other losses	$	(6	)	$	(5	)	$	(43	)	$	(11	)	$	(3,105	)

The net gain on OREO for the second quarter of 2013 was the result of the sale of two commercial properties. The net loss on bank premises and equipment for the second quarter of 2012 was due to the write-downs of $89,000 related to closed office locations that are available for sale. The net loss on OREO for the second quarter of 2012 was due mostly to write-downs on commercial properties whose fair value had declined. The loss on debt extinguishment for the six months of 2012 was a result of the prepayment of $35.0 million of wholesale borrowings.

Non-Interest Income

Insurance income comprised the largest portion of second quarter 2013 non-interest income. The following table details Peoples’ insurance income:



	Three Months Ended						Six Months Ended
	June 30, 2013		March 31, 2013		June 30, 2012		June 30,
(Dollars in thousands)	June 30, 2013		March 31, 2013		June 30, 2012		2013		2012
Property and casualty insurance commissions	$	2,705	$	2,171	$	2,145	$	4,876	$	3,968
Performance-based commissions	81		504		63		585		982
Life and health insurance commissions	309		146		133		455		260
Credit life and A&H insurance commissions	34		23		40		57		63
Other fees and charges	91		34		57		125		116
Total insurance income	$	3,220	$	2,878	$	2,438	$	6,098	$	5,389

The growth in Peoples' property and casualty insurance commission income compared to the prior year benefited from the Pikeville Acquisition. The increase over the linked quarter in property and casualty insurance commission income was a result of a high retention rate for existing insurance customers and higher premiums within the industry. Life and health insurance commissions increased over prior periods due to acquisitions completed during 2013. The bulk of performance-based commissions typically are recorded annually in the first quarter and are based on a combination of factors, such as loss experience of insurance policies sold, production volumes, and overall financial performance of the individual insurance carriers. The decrease in 2013 in performance-based commissions was largely attributable to a major storm that hit the region in June 2012.

Deposit account service charges continued to comprise a sizable portion of Peoples' non-interest income. The following table details Peoples’ deposit account service charges:



	Three Months Ended						Six Months Ended
	June 30, 2013		March 31, 2013		June 30, 2012		June 30,
(Dollars in thousands)	June 30, 2013		March 31, 2013		June 30, 2012		2013		2012
Overdraft and non-sufficient funds fees	$	1,732	$	1,605	$	1,894	$	3,337	$	3,634
Account maintenance fees	311		290		315		601		636
Other fees and charges	2		162		21		164		197
Total deposit account service charges	$	2,045	$	2,057	$	2,230	$	4,102	$	4,467

The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity. Peoples typically experiences a lower volume of overdraft and

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non-sufficient funds fees annually in the first quarter attributable to customers receiving income tax refunds, while volumes generally increase in the fourth quarter in connection with the holiday shopping season.

Peoples' fiduciary and brokerage revenues continue to be based primarily upon the value of assets under management, with additional income generated from transaction commissions. The following tables detail Peoples’ trust and investment income and related assets under management:



	Three Months Ended						Six Months Ended
	June 30, 2013		March 31, 2013		June 30, 2012		June 30,
(Dollars in thousands)	June 30, 2013		March 31, 2013		June 30, 2012		2013		2012
Fiduciary	$	1,293	$	1,189	$	1,137	$	2,482	$	2,206
Brokerage	479		513		312		992		739
Total trust and investment income	$	1,772	$	1,702	$	1,449	$	3,474	$	2,945



	June 30, 2013		March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
(Dollars in thousands)	June 30, 2013		March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
Trust assets under management	$	939,292	$	927,675	$	888,134	$	874,293	$	847,962
Brokerage assets under management	433,651		433,217		404,320		398,875		309,852
Total managed assets	$	1,372,943	$	1,360,892	$	1,292,454	$	1,273,168	$	1,157,814
Quarterly average	$	1,373,135	$	1,332,353	$	1,277,452	$	1,203,285	$	1,138,261

Over the last several quarters, Peoples has continued to attract new managed funds, due in part to the addition of experienced financial advisors in previously underserved market areas. In addition, Peoples had added new business related to the retirement plans for which it manages the assets and provides services. The U.S. financial markets experienced a general increase in market value during the first six months of 2013, which also contributed to the increase in managed assets. Peoples also added approximately $80 million in brokerage assets during the third quarter of 2012 and $20 million in the second quarter of 2012 due to acquisitions completed during the quarters.

Mortgage banking income was down compared to the linked quarter, the prior year quarter and on a year-to-date basis. The fluctuations correspond with changes in refinancing activity, which are driven by mortgage interest rates available in the secondary market and customers' preference for long-term, fixed rate loans. In addition, Peoples retained a larger percentage of the loans originated during 2013 than in 2012. In the second quarter of 2013, Peoples sold approximately $14 million of loans to the secondary market compared to $32 million in the linked quarter and $55 million for the second quarter of 2012.

Non-Interest Expense

Salaries and employee benefit costs remain Peoples’ largest non-interest expense, accounting for more than half of total non-interest expense. The following table details Peoples’ salaries and employee benefit costs:



	Three Months Ended									Six Months Ended
	June 30, 2013			March 31, 2013			June 30, 2012			June 30, 2013
(Dollars in thousands)										2013			2012
Base salaries and wages	$	5,866		$	5,632		$	5,261		$	11,498		$	10,409
Sales-based and incentive compensation	1,874			1,525			1,527			3,399			2,872
Employee benefits	771			982			1,306			1,753			2,539
Stock-based compensation	386			297			259			683			485
Deferred personnel costs	(589		)	(494		)	(463		)	(1,083		)	(898		)
Payroll taxes and other employment costs	626			775			525			1,401			1,253
Total salaries and employee benefit costs	$	8,934		$	8,717		$	8,415		$	17,651		$	16,660
Full-time equivalent employees:
Actual at end of period	545			517			494			545			494
Average during the period	531			509			498			521			503

For the three and six months ended June 30, 2013 , base salaries and wages were higher than prior periods due to the strategic initiative of adding new talent, which caused part of the increase in full-time equivalent employees. The

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acquisitions completed during the last twelve months also contributed to the increase in full-time equivalent employees. Sales-based and incentive compensation was impacted by higher sales production within insurance and wealth management activities, as well as a higher expense accrual associated with corporate incentive plans, which are tied in part to Peoples' performance. Compared to the prior periods, employee benefit costs have benefited from lower employee medical benefit plan expenses, which are tied to claims activity, and lower pension costs due to the timing of pension settlement charges. In the second quarter of 2012, Peoples recorded a pension settlement charge of $353,000 with no charge recorded in the second quarter of 2013. Given the nature, it is inherently difficult to estimate the amount or exact timing of pension settlement charges. Management expects pension settlement charges in third quarter of 2013 based on year-to-date distributions. The amount is projected to be in the range of $350,000 and $400,000.

Peoples’ net occupancy and equipment expense was comprised of the following:



	Three Months Ended						Six Months Ended
	June 30, 2013		March 31, 2013		June 30, 2012		June 30,
(Dollars in thousands)	June 30, 2013		March 31, 2013		June 30, 2012		2013		2012
Depreciation	$	590	$	767	$	510	$	1,357	$	1,006
Repairs and maintenance costs	460		446		434		907		747
Net rent expense	200		221		227		421		467
Property taxes, utilities and other costs	376		424		332		799		715
Total net occupancy and equipment expense	$	1,626	$	1,858	$	1,503	$	3,484	$	2,935

Depreciation expense increased over the prior year periods due to strategic investments made during 2012, including the new Vienna, West Virginia office and the new signage resulting from the introduction of the new brand.

Professional fees were $202,000 lower compared to the second quarter of 2012 due largely to the non-recurrence of consulting costs incurred associated with acquisition opportunities.

Marketing expense, which includes advertising, donation and other public relations costs, increased $112,000 compared to the linked quarter. The variance was largely the result of a contribution made in the second quarter of 2013 to Peoples Bancorp Foundation Inc., a private foundation established by Peoples in 2004 to make charitable contributions to organizations within Peoples' primary market area. Future contributions to Peoples Bancorp Foundation Inc. will be evaluated on a quarterly basis, with the amount of any contribution determined based largely on the level of need within the communities Peoples serves.

Management expects Peoples' total non-interest expenses to be approximately $16.7 million for the third quarter of 2013, without any new acquisition-related costs. The Ohio Commerce acquisition is expected to add $400,000 to $500,000 to Peoples' operating expenses beginning in the fourth quarter of 2013. One-time costs associated with this acquisition also are estimated to be $1.0 million. Peoples' efficiency ratio, calculated as non-interest expense less amortization of other intangible assets divided by FTE net interest income plus non-interest income, was 71.71% for the second quarter of 2013, up slightly from the linked quarter of 71.61% and the prior year of 69.61% . Management continues to target an efficiency ratio in the range of 68% to 70% for 2013.

Income Tax Expense

For the six months ended June 30, 2013 , Peoples recorded income tax expense of $ 4.8 million , for an effective tax rate of 32.7% . This effective tax rate represents management's current estimate of the rate for the entire year. In comparison, Peoples recorded income tax expense of $5.6 million for the same period in 2012 , for an effective tax rate of 32.2%.

Pre-Provision Net Revenue

Pre-provision net revenue ("PPNR") has become a key financial measure used by federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus non-interest income minus non-interest expense and therefore excludes the provision for loan losses and all gains and losses included in earnings. As a result, PPNR represents the earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital.

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The following table provides a reconciliation of this non-GAAP financial measure to the amounts reported in Peoples' consolidated financial statements for the periods presented:



	Three Months Ended									Six Months Ended
	June 30, 2013			March 31, 2013			June 30, 2012			June 30,
(Dollars in thousands)										2013			2012

Pre-Provision Net Revenue:
Income before income taxes	$	7,431		$	7,340		$	7,501		$	14,771		$	17,237
Add: loss on debt extinguishment	—			—			—			—			3,111
Add: loss on loans held-for-sale and OREO	—			5			48			—			—
Add: loss on other assets	89			—			—			89			2
Less: recovery of loan losses	1,462			1,065			1,120			2,527			3,257
Less: gain on loans held-for-sale and OREO	81			—			—			76			8
Less: net gain on securities transactions	26			418			—			444			3,163
Less: gain on other assets	2			—			5			2			—
Pre-provision net revenue	$	5,949		$	5,862		$	6,424		$	11,811		$	13,922

Pre-provision net revenue	$	5,949		$	5,862		$	6,424		$	11,811		$	13,922
Total average assets	1,910,988			1,914,719			1,823,551			1,912,620			1,814,834

Pre-provision net revenue to total average assets (a)	1.25		%	1.24		%	1.42		%	1.25		%	1.54		%
(a) Presented on an annualized basis

PPNR decreased compared to the prior year periods due mostly to the increase in total expenses over the prior year. The decrease in net interest income also contributed to the decrease.

FINANCIAL CONDITION

Cash and Cash Equivalents

At June 30, 2013 , Peoples' interest-bearing deposits in other banks were down compared to both the linked quarter-end and prior year-end. These decreases were largely the result of $0.3 million of excess cash reserves being maintained at the Federal Reserve Bank, compared to $92.1 million at March 31, 2013 and $11.6 million at December 31, 2012 . The higher balance at March 31, 2013 was due to the timing of the investment sales late in the first quarter of 2013. The amount of excess cash reserves maintained is dependent upon Peoples' daily liquidity position, which is driven primarily by changes in deposit and loan balances.

Through six months of 2013 , Peoples' total cash and cash equivalents decreased $24.8 million , as cash used in Peoples' investing and financing activities exceeded the $20.3 million of cash generated by operating activities. Investing activities used $27.6 million of cash to fund the $42.9 million net loan growth, while proceeds from sales and principal payments of investment securities exceeded purchases by $12.8 million. Within Peoples' financing activities, the decrease in deposits of $56.5 million caused increased borrowed funds of $41.6 million.

In comparison, through six months of 2012, Peoples' total cash and cash equivalents decreased $5.3 million, as cash used in Peoples' investing activities exceeded the $17.6 million of cash generated by operating activities and $16.5 million of cash generated by financing activities. Investing activities used $39.4 million of cash to fund the $17.5 million net loan growth, while purchases of investment securities exceeded the proceeds from sales and principal payments by $21.8 million. Within Peoples' financing activities, deposit growth generated $67.2 million of cash which was used primarily to reduce borrowed funds by $47.2 million and to repurchase the warrant held by the U.S Treasury.

Further information regarding the management of Peoples' liquidity position can be found later in this discussion under “Interest Rate Sensitivity and Liquidity.”

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Investment Securities

The following table provides information regarding Peoples’ investment portfolio:



(Dollars in thousands)	June 30, 2013			March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
Available-for-sale securities, at fair value:
Obligations of:
U.S. Treasury and government agencies	$	23		$	25	$	26	$	28	$	30
U.S. government sponsored agencies	400			459		516		575		648
States and political subdivisions	50,579			47,165		45,668		42,154		39,351
Residential mortgage-backed securities	503,574			495,135		514,096		472,439		525,391
Commercial mortgage-backed securities	33,606			48,072		64,416		61,345		42,410
Bank-issued trust preferred securities	7,811			7,879		10,357		10,105		12,744
Equity securities	4,335			3,910		4,106		2,714		3,412
Total fair value	$	600,328		$	602,645	$	639,185	$	589,360	$	623,986
Total amortized cost	$	606,441		$	592,005	$	628,584	$	579,722	$	614,131
Net unrealized (loss) gain	$	(6,113	)	$	10,640	$	10,601	$	9,638	$	9,855

Held-to-maturity securities, at amortized cost:
Obligations of:
States and political subdivisions	$	3,855		$	3,857	$	3,860	$	3,862	$	3,864
Residential mortgage-backed securities	36,361			36,547		33,494		20,770		25,344
Commercial mortgage-backed securities	7,882			7,903		7,921		7,940		7,964
Total amortized cost	$	48,098		$	48,307	$	45,275	$	32,572	$	37,172

Total investment portfolio:
Amortized cost	$	654,539		$	640,312	$	673,859	$	612,294	$	651,303
Carrying value	$	648,426		$	650,952	$	684,460	$	621,932	$	661,158

The 5% decrease in the investment portfolio since year-end was due to the timing of the sales and subsequent reinvestment of the first quarter repositioning of the investment portfolio. In 2013 and throughout 2012, Peoples continued to designate additional securities as "held-to-maturity" at the time of their purchase, for which management has made the determination Peoples would hold these securities until maturity and concluded Peoples had the ability to do so.

Peoples' investment in residential and commercial mortgage-backed securities largely consists of securities either guaranteed by the U.S. government or issued by U.S. government sponsored agencies, such as Fannie Mae and Freddie Mac. The remaining portion of Peoples' mortgage-backed securities consists of securities issued by other entities, including other financial institutions, which are not guaranteed by the U.S. government. The amount of these “non-agency” securities included in the residential and commercial mortgage-backed securities totals above was as follows:



(Dollars in thousands)	June 30, 2013		March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
Residential	$	30,065	$	32,748	$	37,267	$	40,827	$	46,161
Commercial	—		—		—		—		997
Total fair value	$	30,065	$	32,748	$	37,267	$	40,827	$	47,158
Total amortized cost	$	28,820	$	31,915	$	36,395	$	38,681	$	45,512
Net unrealized gain	$	1,245	$	833	$	872	$	2,146	$	1,646

Management continues to reinvest the principal runoff from the non-agency securities into U.S agency investments, which accounted for the decline experienced in the second quarter of 2013 and prior quarters. At June 30, 2013 , Peoples' non-agency portfolio consisted entirely of first lien residential and commercial mortgages, with nearly all of the underlying loans in these securities originated prior to 2004 and possessing fixed interest rates. Management continues to monitor the non-agency portfolio closely for leading indicators of increasing stress and will continue to be proactive in taking actions to mitigate such risk when necessary.

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Loans

The following table provides information regarding outstanding loan balances:



(Dollars in thousands)	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
Gross portfolio loans:
Commercial real estate, construction	$	30,770		$	24,108		$	34,265		$	50,804		$	43,775
Commercial real estate, other	389,281			381,331			378,073			379,561			394,323
Commercial real estate	420,051			405,439			412,338			430,365			438,098
Commercial and industrial	184,981			174,982			180,131			172,068			161,893
Residential real estate	252,282			237,193			233,841			233,501			212,813
Home equity lines of credit	52,212			50,555			51,053			51,137			48,414
Consumer	119,029			108,353			101,246			100,116			92,334
Deposit account overdrafts	1,674			3,996			6,563			1,580			1,726
Total portfolio loans	$	1,030,229		$	980,518		$	985,172		$	988,767		$	955,278
Percent of loans to total loans:
Commercial real estate, construction	3.0		%	2.4		%	3.5		%	5.1		%	4.6		%
Commercial real estate, other	37.8		%	38.9		%	38.4		%	38.4		%	41.2		%
Commercial real estate	40.8		%	41.3		%	41.9		%	43.5		%	45.8		%
Commercial and industrial	17.9		%	17.8		%	18.3		%	17.4		%	16.9		%
Residential real estate	24.5		%	24.2		%	23.7		%	23.6		%	22.3		%
Home equity lines of credit	5.1		%	5.2		%	5.2		%	5.2		%	5.1		%
Consumer	11.5		%	11.1		%	10.3		%	10.1		%	9.7		%
Deposit account overdrafts	0.2		%	0.4		%	0.6		%	0.2		%	0.2		%
Total percentage	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Residential real estate loans being serviced for others	$	338,854		$	343,769		$	330,721		$	307,052		$	296,025

The increase in construction loans was largely due to advances on loans with current relationships. The growth in commercial real estate loans during the second quarter of 2013 occurred as a result of lending opportunities within Peoples' primary market area. During the first two quarters of 2013, Peoples retained a larger percentage of residential mortgage loans originated than in prior quarters which caused the increase in residential real estate loans over the prior periods. Consumer loan balances, which consist mostly of loans to finance automobile purchases, continued to increase in 2013 due largely to Peoples placing greater emphasis on its consumer lending activity in recent quarters.

Loan Concentration

Peoples categorizes its commercial loans according to standard industry classifications and monitors for concentrations in a single industry or multiple industries that could be impacted by changes in economic conditions in a similar manner. Peoples' commercial lending activities continue to be spread over a diverse range of businesses from all sectors of the economy, with no single industry comprising over 10% of Peoples' total loan portfolio.

Loans secured by commercial real estate, including commercial construction loans, continue to comprise the largest portion of Peoples' loan portfolio.

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The following table provides information regarding the largest concentrations of commercial real estate loans within the loan portfolio at June 30, 2013 :



(Dollars in thousands)	Outstanding Balance		Loan Commitments		Total Exposure		% of Total
Commercial real estate, other:
Lodging and lodging related	$	60,267	$	25	$	60,292	15.1	%
Apartment complexes	53,197		828		54,025		13.5	%
Office buildings and complexes:
Owner occupied	9,638		142		9,780		2.5	%
Non-owner occupied	24,200		238		24,438		6.1	%
Total office buildings and complexes	33,838		380		34,218		8.6	%
Light industrial facilities:
Owner occupied	25,229		1,674		26,903		6.7	%
Non-owner occupied	8,185		—		8,185		2.1	%
Total light industrial facilities	33,414		1,674		35,088		8.8	%
Retail facilities:
Owner occupied	10,483		248		10,731		2.7	%
Non-owner occupied	18,523		417		18,940		4.7	%
Total retail facilities	29,006		665		29,671		7.4	%
Assisted living facilities and nursing homes	22,290		288		22,578		5.7	%
Mixed commercial use facilities:
Owner occupied	12,568		502		13,070		3.3	%
Non-owner occupied	14,701		17		14,718		3.7	%
Total mixed commercial use facilities	27,269		519		27,788		7.0	%
Day care facilities:
Owner occupied	12,643		—		12,643		3.2	%
Non-owner occupied	4,518		—		4,518		1.1	%
Total day care facilities	17,161		—		17,161		4.3	%
Health care facilities:
Owner occupied	7,220		9		7,229		1.8	%
Non-owner occupied	16,852		—		16,852		4.2	%
Total health care facilities	24,072		9		24,081		6.0	%
Restaurant facilities:
Owner occupied	10,120		118		10,238		2.6	%
Non-owner occupied	1,899		—		1,899		0.5	%
Total restaurant facilities	12,019		118		12,137		3.1	%
Other	76,748		5,174		81,922		20.5	%
Total commercial real estate, other	$	389,281	$	9,680	$	398,961	100.0	%



(Dollars in thousands)	Outstanding Balance		Loan Commitments		Total Exposure		% of Total
Commercial real estate, construction:
Assisted living facilities and nursing homes	$	5,607	$	6,386	$	11,993	21.4	%
Residential property	1,290		1,058		2,348		4.2	%
Apartment complexes	11,639		17,013		28,652		51.1	%
Restaurant facilities	3,801		—		3,801		6.8	%
Mixed commercial use facilities - non-owner occupied	2,918		27		2,945		5.3	%
Other	5,515		783		6,298		11.2	%
Total commercial real estate, construction	$	30,770	$	25,267	$	56,037	100.0	%

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Peoples' commercial lending activities continue to focus on lending opportunities inside its primary and secondary market areas within Ohio, West Virginia and Kentucky. In all other states, the aggregate outstanding balances of commercial loans in each state were less than $4.0 million at both June 30, 2013 and December 31, 2012 .

Allowance for Loan Losses

The amount of the allowance for loan losses at the end of each period represents management's estimate of expected losses from existing loans based upon its formal quarterly analysis of the loan portfolio. While this process involves allocations being made to specific loans and pools of loans, the entire allowance is available for all losses incurred within the loan portfolio. The following details management's allocation of the allowance for loan losses:



(Dollars in thousands)	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
Commercial real estate	$	12,568		$	13,973		$	14,215		$	14,973		$	16,212
Commercial and industrial	2,188			1,750			1,733			1,667			1,524
Residential real estate	1,005			783			801			837			1,090
Home equity lines of credit	490			485			479			470			478
Consumer	740			383			438			480			456
Deposit account overdrafts	122			65			145			180			165
Total allowance for loan losses	$	17,113		$	17,439		$	17,811		$	18,607		$	19,925
As a percentage of total loans	1.66		%	1.78		%	1.81		%	1.88		%	2.09		%

The significant allocations to commercial loans reflect the higher credit risk associated with this type of lending and the size of this loan category in relationship to the entire loan portfolio. In the second quarter of 2013, the allowance for loan losses continued to be reduced as a result of sustained improvement in several credit quality metrics. Specifically, Peoples has experienced a steady decrease in criticized loans, which are those classified as watch, substandard or doubtful, due to principal paydowns and improvements in borrowers' financial conditions. Total criticized loans decreased $24.0 million or 27% since year-end 2012, reflecting $9.3 million in principal paydowns. Peoples upgraded $15.6 million in loans during 2013 based upon the financial condition of the borrowers. Net charge-offs also remained at or below Peoples' long-term historical rate for the ninth consecutive quarter. Both of these factors had a direct impact on the estimated loss rates used to determine the appropriate allocations for commercial loans.

The allowance allocated to the residential real estate and consumer loan categories is based upon Peoples' allowance methodology for homogeneous pools of loans. The fluctuations in these allocations have been directionally consistent with the changes in loan quality, loss experience and loan balances in these categories.

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The following table summarizes Peoples’ net recoveries and charge-offs:



	Three Months Ended
(Dollars in thousands)	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
Gross charge-offs:
Commercial real estate, construction	$	—		$	—		$	—		$	—		$	—
Commercial real estate, other	217			566			2,034			266			889
Commercial real estate	217			566			2,034			266			889
Commercial and industrial	11			—			1			—			33
Residential real estate	88			134			201			329			354
Home equity lines of credit	—			2			—			17			6
Consumer	185			159			144			83			131
Deposit account overdrafts	115			130			157			163			132
Total gross charge-offs	616			991			2,537			858			1,545
Recoveries:
Commercial real estate, construction	—			—			—			—			—
Commercial real estate, other	1,432			1,374			1,861			127			805
Commercial real estate	1,432			1,374			1,861			127			805
Commercial and industrial	4			17			67			143			100
Residential real estate	145			116			165			76			228
Home equity lines of credit	5			8			9			9			7
Consumer	132			104			102			107			164
Deposit account overdrafts	34			65			40			34			37
Total recoveries	1,752			1,684			2,244			496			1,341
Net (recoveries) charge-offs:
Commercial real estate, construction	—			—			—			—			—
Commercial real estate, other	(1,215		)	(808		)	173			139			84
Commercial real estate	(1,215		)	(808		)	173			139			84
Commercial and industrial	7			(17		)	(66		)	(143		)	(67		)
Residential real estate	(57		)	18			36			253			126
Home equity lines of credit	(5		)	(6		)	(9		)	8			(1		)
Consumer	53			55			42			(24		)	(33		)
Deposit account overdrafts	81			65			117			129			95
Total net (recoveries) charge-offs	$	(1,136	)	$	(693	)	$	293		$	362		$	204
Ratio of net (recoveries) charge-offs to average loans (annualized):
Commercial real estate, construction	—		%	—		%	—		%	—		%	—		%
Commercial real estate, other	(0.48		)%	(0.33		)%	0.07		%	0.06		%	0.04		%
Commercial real estate	(0.48		)%	(0.33		)%	0.07		%	0.06		%	0.04		%
Commercial and industrial	—		%	(0.01		)%	(0.03		)%	(0.06		)%	(0.03		)%
Residential real estate	(0.02		)%	0.01		%	0.01		%	0.11		%	0.05		%
Home equity lines of credit	—		%	—		%	—		%	—		%	—		%
Consumer	0.03		%	0.02		%	0.02		%	(0.01		)%	(0.01		)%
Deposit account overdrafts	0.02		%	0.02		%	0.05		%	0.05		%	0.04		%
Total	(0.45		)%	(0.29		)%	0.12		%	0.15		%	0.09		%

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The following table details Peoples’ nonperforming assets:



(Dollars in thousands)	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
Loans 90+ days past due and accruing:
Commercial real estate	$	36		$	—		$	—		$	—		$	37
Commercial and industrial	—			—			181			27			—
Residential real estate	—			—			—			—			—
Consumer	—			3			4			—			14
Total	36			3			185			27			51
Nonaccrual loans:
Commercial real estate, construction	80			—			—			—			—
Commercial real estate	4,922			5,739			7,259			9,846			9,720
Commercial and industrial	297			327			627			408			474
Residential real estate	3,136			3,166			2,786			2,884			3,693
Home equity	32			78			24			15			215
Consumer	62			9			20			10			—
Total	8,529			9,319			10,716			13,163			14,102
Troubled debt restructurings:
Commercial real estate	1,879			2,208			2,572			1,891			2,416
Commercial and industrial	—			—			—			8			—
Residential real estate	175			276			350			419			49
Home equity	24			—			—			—			—
Total	2,078			2,484			2,922			2,318			2,465
Total nonperforming loans (NPLs)	10,643			11,806			13,823			15,508			16,618
Other real estate owned (OREO)
Commercial	—			815			815			815			815
Residential	120			—			21			358			325
Total	120			815			836			1,173			1,140
Total nonperforming assets (NPAs)	$	10,763		$	12,621		$	14,659		$	16,681		$	17,758
NPLs as a percent of total loans	1.03		%	1.20		%	1.39		%	1.55		%	1.73		%
NPAs as a percent of total assets	0.57		%	0.65		%	0.76		%	0.89		%	0.97		%
NPAs as a percent of gross loans and OREO	1.04		%	1.28		%	1.48		%	1.66		%	1.85		%
Allowance for loan losses as a percent of NPLs	160.80		%	147.71		%	128.86		%	119.98		%	119.90		%

The decrease in nonperforming assets during the second quarter of 2013 was due largely to two commercial real estate loans being paid-off, each was approximately $0.3 million, and the sale of two OREO properties. During the first quarter of 2013, the decrease was due to two commercial real estate loans, with one borrower, paid-off. The relationship had an aggregate outstanding principal balance of $1.4 million at December 31, 2012. The reduction contributed to the decrease in total criticized loans, which were down 27% at June 30, 2013 versus year-end 2012 .

The majority of Peoples' nonaccrual commercial real estate loans continues to consist of non-owner occupied commercial properties and real estate development projects. In general, management believes repayment of these loans is dependent on the sale of the underlying collateral. As such, the carrying values of these loans are ultimately supported by management's estimate of the net proceeds Peoples would receive upon the sale of the collateral. These estimates are based in part on market values provided by independent, licensed or certified appraisers periodically, but no less frequently than annually. Given the sustained weakness in commercial real estate values, management continues to monitor changes in real estate values from quarter-to-quarter and updates its estimates as needed based on observable changes in market prices and/or updated appraisals for similar properties.

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Deposits

The following table details Peoples’ deposit balances:



(Dollars in thousands)	June 30, 2013		March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
Interest-bearing deposits:
Retail certificates of deposit	$	349,511	$	353,894	$	392,313	$	413,837	$	411,401
Money market deposit accounts	238,554		288,538		288,404		251,735		246,657
Governmental deposit accounts	146,817		167,441		130,630		157,802		158,832
Savings accounts	199,503		200,549		183,499		172,715		161,664
Interest-bearing demand accounts	125,875		124,969		124,787		112,854		112,476
Total retail interest-bearing deposits	1,060,260		1,135,391		1,119,633		1,108,943		1,091,030
Brokered certificates of deposits	50,393		52,648		55,599		55,168		54,639
Total interest-bearing deposits	1,110,653		1,188,039		1,175,232		1,164,111		1,145,669
Non-interest-bearing deposits	325,125		340,887		317,071		288,376		272,627
Total deposits	$	1,435,778	$	1,528,926	$	1,492,303	$	1,452,487	$	1,418,296

During 2013, Peoples maintained its deposit strategy of growing low-cost core deposits, such as checking and savings accounts, and reducing its reliance on higher-cost, non-core deposits, such as certificates of deposit (“CDs”) and brokered deposits. This strategy has included more selective pricing of long-term CDs, governmental deposits and similar non-core deposits, as well as non-renewal of maturing brokered deposits. These actions accounted for much of the changes in deposit balances over the last several quarters. The decrease in money market deposit accounts was also due to a reduction in balances from Peoples' trust department. Since late 2008, Peoples' trust department has maintained larger than historical amounts of funds in money market deposit accounts as the ultra-low rate environment limited short-term investment options. The decrease in governmental deposit accounts during the second quarter was due to normal seasonal declines, as the balances typically increase annually during the first quarter. The decrease in non-interest-bearing deposits was the result of a commercial customer maintaining an abnormally high balance as of March 31, 2013.

Borrowed Funds

The following table details Peoples’ short-term and long-term borrowings:



(Dollars in thousands)	June 30, 2013		March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
Short-term borrowings:
FHLB advances	$	59,000	$	—	$	15,000	$	—	$	7,500
Retail repurchase agreements	33,521		32,395		32,769		37,651		35,847
Total short-term borrowings	92,521		32,395		47,769		37,651		43,347
Long-term borrowings:
FHLB advances	64,180		64,348		64,904		66,270		66,471
National market repurchase agreements	40,000		40,000		40,000		40,000		40,000
Other long-term borrowings	21,534		22,726		23,919		—		—
Total long-term borrowings	125,714		127,074		128,823		106,270		106,471
Subordinated debentures held by subsidiary trust	—		—		—		22,627		22,618
Total borrowed funds	$	218,235	$	159,469	$	176,592	$	166,548	$	172,436

Any short-term FHLB advances would consist of overnight borrowings by Peoples being maintained in connection with the management of Peoples' daily liquidity position.

As disclosed in Peoples' 2012 Form 10-K, Peoples entered into a loan agreement on December 18, 2012, and is subject to certain covenants. At June 30, 2013 , Peoples was in compliance with the applicable material covenants imposed by this agreement.

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Capital/Stockholders’ Equity

During the second quarter of 2013 , Peoples' total stockholders' equity benefited from earnings exceeding dividends declared, which was more than offset by the decline in the market value of available-for-sale investment securities. At June 30, 2013 , capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under banking regulations. These higher capital levels reflect Peoples' desire to maintain strong capital positions to provide greater flexibility to grow the company.

The following table details Peoples' actual risk-based capital levels and corresponding ratios:



(Dollars in thousands)	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
Capital Amounts:
Tier 1 common	$	166,576		$	164,329		$	160,604		$	157,520		$	156,565
Tier 1	166,576			164,329			160,604			180,147			179,183
Total (Tier 1 and Tier 2)	182,706			179,569			176,224			195,083			194,307
Net risk-weighted assets	$	1,175,647		$	1,118,644		$	1,141,938		$	1,136,532		$	1,124,982
Capital Ratios:
Tier 1 common	14.17		%	14.69		%	14.06		%	13.86		%	13.92		%
Tier 1	14.17		%	14.69		%	14.06		%	15.85		%	15.93		%
Total (Tier 1 and Tier 2)	15.54		%	16.05		%	15.43		%	17.16		%	17.27		%
Leverage ratio	9.04		%	8.90		%	8.83		%	10.13		%	10.18		%

In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity. Such ratios represent non-GAAP financial information since their calculation removes the impact of intangible assets acquired through acquisitions on the Consolidated Balance Sheets. Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance, financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples. Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in value should there be deterioration in the overall franchise value. As a result, tangible equity represents a conservative measure of the capacity for a company to incur losses but remain solvent.

The following table reconciles the calculation of these non-GAAP financial measures to amounts reported in Peoples' Consolidated Financial Statements:



(Dollars in thousands)	June 30, 2013		March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
Tangible Equity:
Total stockholders' equity, as reported	$	219,147	$	226,079	$	221,728	$	218,835	$	214,623
Less: goodwill and other intangible assets	71,608		69,977		68,525		68,422		65,383
Tangible equity	$	147,539	$	156,102	$	153,203	$	150,413	$	149,240

Tangible Assets:
Total assets, as reported	$	1,899,841	$	1,938,722	$	1,918,050	$	1,866,510	$	1,831,359
Less: goodwill and other intangible assets	71,608		69,977		68,525		68,422		65,383
Tangible assets	$	1,828,233	$	1,868,745	$	1,849,525	$	1,798,088	$	1,765,976

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(Dollars in thousands)	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
Tangible Book Value per Common Share:
Tangible equity	$	147,539		$	156,102		$	153,203		$	150,413		$	149,240
Common shares outstanding	10,583,161			10,568,147			10,547,960			10,534,445			10,526,954

Tangible book value per common share	$	13.94		$	14.77		$	14.52		$	14.28		$	14.18

Tangible Equity to Tangible Assets Ratio:
Tangible equity	$	147,539		$	156,102		$	153,203		$	150,413		$	149,240
Tangible assets	$	1,828,233		$	1,868,745		$	1,849,525		$	1,798,088		$	1,765,976

Tangible equity to tangible assets	8.07		%	8.35		%	8.28		%	8.37		%	8.45		%

The decrease in tangible equity, which was the main contributor to the decrease in tangible book value and tangible equity to tangible assets ratio, was due to the decline in the market value of Peoples' available-for-sale investment portfolio.

Interest Rate Sensitivity and Liquidity

While Peoples is exposed to various business risks, the risks relating to interest rate sensitivity and liquidity are major risks that can materially impact future results of operations and financial condition due to their complexity and dynamic nature. The objective of Peoples' asset/liability management (“ALM”) function is to measure and manage these risks in order to optimize net interest income within the constraints of prudent capital adequacy, liquidity and safety. This objective requires Peoples to focus on interest rate risk exposure and adequate liquidity through its management of the mix of assets and liabilities, their related cash flows and the rates earned and paid on those assets and liabilities. Ultimately, the ALM function is intended to guide management in the acquisition and disposition of earning assets and selection of appropriate funding sources.

Interest Rate Risk

Interest rate risk (“IRR”) is one of the most significant risks arising in the normal course of business of financial services companies like Peoples. IRR is the potential for economic loss due to future interest rate changes that can impact both the earnings stream as well as market values of financial assets and liabilities. Peoples' exposure to IRR is due primarily to differences in the maturity or repricing of earning assets and interest-bearing liabilities. In addition, other factors, such as prepayments of loans and investment securities or early withdrawal of deposits, can expose Peoples to IRR and increase interest costs or reduce revenue streams.

Peoples has assigned overall management of IRR to its Asset-Liability Committee (the “ALCO”), which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level and amount of IRR. The methods used by the ALCO to assess IRR remain unchanged from those disclosed in Peoples' 2012 Form 10-K.

The following table shows the estimated changes in net interest income and the economic value of equity based upon a standard, parallel shock analysis (dollars in thousands):



Increase in Interest Rate	Estimated Increase in Net Interest Income								Estimated (Decrease) Increase in Economic Value of Equity
(in Basis Points)	June 30, 2013				December 31, 2012				June 30, 2013					December 31, 2012
300	$	3,741	7.2	%	$	9,688	19.6	%	$	(60,243	)	(24.6	)%	$	(20,348	)	(8.5	)%
200	3,890		7.5	%	8,627		17.5	%	(39,619		)	(16.2	)%	(3,888		)	(1.6	)%
100	2,997		5.8	%	6,311		12.8	%	(17,609		)	(7.2	)%	7,344			3.1	%

At June 30, 2013 , Peoples' Consolidated Balance Sheets remained positioned for a rising interest rate environment, as illustrated by the potential increase in net interest income shown in the above table. The benefit of the actions taken late in the first quarter of 2013 within the investment portfolio to reduce interest rate exposure were fully reflected in the analysis above. While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in Peoples' Consolidated Balance Sheets, interest rates typically move in a non-parallel manner, with differences in the timing, direction and magnitude of changes in short-term and long-term interest rates. Thus, any benefit that could occur as a result of the Federal Reserve Board increasing short-term interest rates in future quarters could be offset by an inverse movement in long-term interest rates.

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Liquidity

In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity. The methods used by the ALCO to monitor and evaluate the adequacy of Peoples' liquidity position remain unchanged from those disclosed in Peoples' 2012 Form 10-K.

At June 30, 2013 , Peoples had liquid assets of $234.6 million, which represented 11.6% of total assets and unfunded commitments. This amount exceeded the minimal level of $40.5 million, or 2% of total loans and unfunded commitments, currently required under Peoples' liquidity policy. Peoples also had an additional $45.5 million of unpledged securities not included in the measurement of liquid assets.

Management believes the current balance of cash and cash equivalents and anticipated cash flows from the investment portfolio, along with the availability of other funding sources, will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments.

Off-Balance Sheet Activities and Contractual Obligations

Peoples routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Consolidated Financial Statements. These activities are part of Peoples' normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in low-income housing tax credit investments. Traditional off-balance sheet credit-related financial instruments continue to represent the most significant off-balance sheet exposure.

The following table details the total contractual amount of loan commitments and standby letters of credit:



(Dollars in thousands)	June 30, 2013		March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012
Home equity lines of credit	$	43,956	$	44,124	$	43,818	$	43,719	$	42,043
Unadvanced construction loans	25,646		19,092		11,839		14,261		17,578
Other loan commitments	138,783		127,665		113,868		142,269		112,604
Loan commitments	208,385		190,881		169,525		200,249		172,225

Standby letters of credit	$	35,845	$	34,771	$	35,373	$	36,218	$	40,330

Management does not anticipate Peoples’ current off-balance sheet activities will have a material impact on its future results of operations and financial condition based on historical experience and recent trends.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this Item 3 is provided under the caption “Interest Rate Sensitivity and Liquidity” under “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION” in this Form 10-Q, and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Peoples’ management, with the participation of Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer, has evaluated the effectiveness of Peoples’ disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2013 . Based upon that evaluation, Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer have concluded that:

(a)

information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be accumulated and communicated to Peoples’ management, including its President and Chief Executive Officer and its Executive Vice President, Chief Financial Officer and Treasurer, as appropriate to allow timely decisions regarding required disclosure;


(b)	information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

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(c)	Peoples’ disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes in Peoples’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Peoples’ fiscal quarter ended June 30, 2013 , that have materially affected, or are reasonably likely to materially affect, Peoples’ internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of their respective businesses or operations, Peoples or one of its subsidiaries may be named as a plaintiff, a defendant, or a party to a legal proceeding or any of their respective properties may be subject to various pending and threatened legal proceedings and various actual and potential claims. In view of the inherent difficulty of predicting the outcome of such matters, Peoples cannot state what the eventual outcome of any such matters will be; however, based on current knowledge and after consultation with legal counsel, management believes these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of Peoples.

ITEM 1A. RISK FACTORS

There have been no material changes from those risk factors previously disclosed in “ITEM 1A. RISK FACTORS” of Part I of Peoples’ 2012 Form 10-K. Those risk factors are not the only risks Peoples faces. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect Peoples’ business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table details repurchases by Peoples and purchases by “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, of Peoples’ common shares during the three months ended June 30, 2013 :



Period	(a) Total Number of Common Shares Purchased		(b) Average Price Paid per Share			(c) Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs ⁽¹⁾	(d) Maximum Number of Common Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
April 1 - 30, 2013	—	⁽²⁾	$	—	⁽²⁾	—	—
May 1 - 31, 2013	—	⁽²⁾	$	—	⁽²⁾	—	—
June 1 - 30, 2013	—		$	—		—	—
Total	—		$	—		—	—


(1)	Peoples’ Board of Directors has not authorized any stock repurchase plans or programs for 2013.


(2)	Information reflects solely common shares purchased in open market transactions by Peoples Bank under the Rabbi Trust Agreement establishing a rabbi trust holding assets to provide funds for the payment of the benefits under the Peoples Bancorp Inc. Second Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Item 5.02(e) Compensation Arrangements for Certain Officers

On July 25, 2013, the Board of Directors of Peoples approved the Peoples Bancorp Inc. Nonqualified Deferred Compensation Plan (the “Plan”). Participation in the Plan is limited to a select group of management and highly compensated employees designated by the Compensation Committee of the Peoples Board of Directors, including the executive officers of Peoples. The following summary and description of the Plan is qualified in its entirety by reference to the Plan, a copy of which is filed with this Quarterly Report on Form 10-Q as Exhibit 10.4.

Deferrals of Compensation. Pursuant to the terms of the Plan, participants may elect to defer base salary, annual bonus and other compensation such as commissions, excluding equity awards. After the applicable deadline, a deferral election is

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irrevocable for that Plan year unless otherwise permitted under the Plan. Generally, a participant must submit a deferral election by December 31 of the year before the services are to be performed. The deferred compensation, if any, is credited to a bookkeeping account maintained on behalf of the participant. The participant is fully vested in the bookkeeping account which will be credited with earnings and losses based on the performance of the investment selections made by the participant for the account. The Compensation Committee will determine the deemed investments which participants may direct that their bookkeeping accounts be credited with.

Company Contributions. Peoples or one of its affiliates, as applicable, may make discretionary contributions to participants' bookkeeping accounts in such amount that would have been made pursuant to the Peoples Bancorp Inc. Retirement Savings Plan (the “Qualified Plan”) as matching contributions if all amounts elected to be deferred under the Plan had been deferred under the Qualified Plan. Any such contributions will be credited to the participants' bookkeeping accounts and will vest in accordance with the vesting schedule under the Qualified Plan, provided that the amounts will become fully vested in the event of a participant's retirement or death and will be forfeited if a participant is terminated for cause.

Distributions. The amount reflected in a participant's bookkeeping account will be distributed on the January 1 immediately following the participant's termination of employment in a single lump sum payment; provided, however, that, at the time a participant makes an initial deferral election under the Plan, the participant may elect to receive distribution of the participant's account in up to ten substantially equal annual installments beginning on the January 1 immediately following the participant's termination and on each January 1 thereafter. If a participant dies before distribution of the amount reflected in the participant's bookkeeping account or complete distribution of the participant's account, then the participant's account will be distributed to the participant's beneficiary within 90 days after the participant's death.

Plan Funding. The Plan is an unfunded, unsecured promise by Peoples to pay the amounts credited to participants' bookkeeping accounts under the Plan at a later date. Participants have only the rights of general unsecured creditors of Peoples and do not have any interest in or right to any specific asset of Peoples.

Administration . The Plan is administered by the Compensation Committee who will serve as the administrator of the Plan without additional compensation. The Compensation Committee may interpret the Plan, determine all questions arising in the administration, interpretation and application of the Plan, employ actuaries, accountants, legal counsel and other individuals in connection with the administration of the Plan, request any information that it deems necessary to determine the solvency of Peoples or any affiliate, and take all other necessary and proper actions to fulfill the Compensation Committee's duties under the Plan.

Plan Amendment and Termination. Peoples may amend, modify, suspend or terminate the Plan at any time without any participant's consent unless it would retroactively reduce the amount credited to a participant's bookkeeping account.

ITEM 6. EXHIBITS

The exhibits required to be filed or furnished with this Form 10-Q are attached hereto or incorporated herein by reference. For a list of such exhibits, see “Exhibit Index” beginning at page 53.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			PEOPLES BANCORP INC.

Date:	July 25, 2013	By: /s/	CHARLES W. SULERZYSKI
			Charles W. Sulerzyski
			President and Chief Executive Officer


Date:	July 25, 2013	By: /s/	EDWARD G. SLOANE
			Edward G. Sloane
			Executive Vice President,
			Chief Financial Officer and Treasurer

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EXHIBIT INDEX

PEOPLES BANCORP INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

Exhibit Number	Description	Exhibit Location

3.1(a)	Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on May 3, 1993)	Incorporated herein by reference to Exhibit 3(a) to the Registration Statement on Form 8-B of Peoples Bancorp Inc. (“Peoples”) filed July 20, 1993 (File No. 0-16772)

3.1(b)	Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 22, 1994)	Incorporated herein by reference to Exhibit 3(a)(2) to Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 0-16772) (“Peoples’ 1997 Form 10-K”)

3.1(c)	Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 9, 1996)	Incorporated herein by reference to Exhibit 3(a)(3) to Peoples’ 1997 Form 10-K

3.1(d)	Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 23, 2003)	Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (File No. 0-16772) (“Peoples’ March 31, 2003 Form 10-Q”)

3.1(e)	Certificate of Amendment by Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on January 22, 2009)	Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on January 23, 2009 (File No. 0-16772)

3.1(f)	Certificate of Amendment by Directors to Articles filed with the Secretary of State of the State of Ohio on January 28, 2009, evidencing adoption of amendments by the Board of Directors of Peoples Bancorp Inc. to Article FOURTH of Amended Articles of Incorporation to establish express terms of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value, of Peoples Bancorp Inc.	Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on February 2, 2009 (File No. 0-16772)

3.1(g)	Amended Articles of Incorporation of Peoples Bancorp Inc. (reflecting amendments through January 28, 2009) [For SEC reporting compliance purposes only – not filed with Ohio Secretary of State]	Incorporated herein by reference to Exhibit 3.1(g) to Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 0-16772)

3.2(a)	Code of Regulations of Peoples Bancorp Inc.	Incorporated herein by reference to Exhibit 3(b) to Peoples’ Registration Statement on Form 8-B filed July 20, 1993 (File No. 0-16772)

3.2(b)	Certified Resolutions Regarding Adoption of Amendments to Sections 1.03, 1.04, 1.05, 1.06, 1.08, 1.10, 2.03(C), 2.07, 2.08, 2.10 and 6.02 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 10, 2003	Incorporated herein by reference to Exhibit 3(c) to Peoples’ March 31, 2003 Form 10-Q

3.2(c)	Certificate regarding adoption of amendments to Sections 3.01, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08 and 3.11 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 8, 2004	Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (File No. 0-16772)

3.2(d)	Certificate regarding adoption of amendments to Sections 2.06, 2.07, 3.01 and 3.04 of Peoples Bancorp Inc.’s Code of Regulations by the shareholders on April 13, 2006	Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on April 14, 2006 (File No. 0-16772)

3.2(e)	Certificate regarding adoption of an amendment to Section 2.01 of Peoples Bancorp Inc.’s Code of Regulations by the shareholders on April 22, 2010	Incorporated herein by reference to Exhibit 3.2(e) to Peoples’ Quarterly Report on Form 10-Q/A (Amendment No. 1) for the quarterly period ended June 30, 2010 (File No. 0-16772) ("Peoples' June 30, 2010 Form 10-Q/A")

Table of Contents



EXHIBIT INDEX

PEOPLES BANCORP INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

Exhibit Number	Description	Exhibit Location
3.2(f)	Code of Regulations of Peoples Bancorp Inc. (reflecting amendments through April 22, 2010) [For SEC reporting compliance purposes only]	Incorporated herein by reference to Exhibit 3.2(f) to Peoples’ June 30, 2010 Form 10-Q/A

10.1	Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan (approved by shareholders on April 25, 2013)	Incorporated herein by reference to Exhibit 10.1 to Peoples' Current Report on Form 8-K dated and filed on April 26, 2013 (File No. 0-16772)

10.2	Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan Time-Based Restricted Stock Award Agreement (for Executives) to be used for grants on and after June 27, 2013	Filed herewith

10.3	Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan Time-Based Restricted Stock Award Agreement (for Non-Employee Directors) to be used for grants on and after June 27, 2013	Filed herewith

10.4	Peoples Bancorp Inc. Nonqualified Deferred Compensation Plan (adopted effective July 25, 2013)	Filed herewith

10.5	Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan Performance-Based Restricted Stock Award Agreement (for Executives) to be used for grants on and after July 25, 2013	Filed herewith

31.1	Rule 13a-14(a)/15d-14(a) Certifications [President and Chief Executive Officer]	Filed herewith

31.2	Rule 13a-14(a)/15d-14(a) Certifications [Executive Vice President, Chief Financial Officer and Treasurer]	Filed herewith

32	Section 1350 Certifications	Furnished herewith

101.INS	XBRL Instance Document	Submitted electronically herewith #

101.SCH	XBRL Taxonomy Extension Schema Document	Submitted electronically herewith #

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Submitted electronically herewith #

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Submitted electronically herewith #

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Submitted electronically herewith #

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically herewith #

# Attached as Exhibit 101 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 of Peoples Bancorp Inc. are the following documents formatted in XBRL (eXtensive Business Reporting Language): (i) Consolidated Balance Sheets (unaudited) at June 30, 2013 and December 31, 2012; (ii) Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2013 and 2012; (iii) Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2013 and 2012; (iv) Consolidated Statement of Stockholders' Equity (unaudited) for the six months ended June 30, 2013; (v) Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2013 and 2012; and (vi) Notes to the Unaudited Consolidated Financial Statements.

EXHIBIT 10.1

PEOPLES BANCORP INC.

Second Amended and Restated

2006 Equity Plan

The Peoples Bancorp Inc. 2006 Equity Plan was adopted on the 9th day of February, 2006, by the Board and approved by the shareholders of the Company on April 13, 2006. Section 12.1 of the Peoples Bancorp Inc. 2006 Equity Plan was amended by the Board on June 8, 2006. Section 5.7(b) of the Peoples Bancorp Inc. 2006 Equity Plan was amended by the Board on February 8, 2007. The Peoples Bancorp Inc. 2006 Equity Plan was amended and restated effective December 11, 2008. The Amended and Restated Peoples Bancorp Inc. 2006 Equity Plan is hereby further amended and restated, subject to approval by the shareholders of the Company.

ARTICLE I

PURPOSE AND EFFECTIVE DATE

1.1 PURPOSE. The purpose of the Plan is to provide financial incentives for selected Employees, Advisors and Non-Employee Directors, thereby promoting the long-term growth and financial success of the Company by: (a) attracting and retaining Employees, Advisors and Non-Employee Directors of outstanding ability; (b) strengthening the Company's capability to develop, maintain and direct a competent management team; (c) providing an effective means for selected Employees, Advisors and Non-Employee Directors to acquire and maintain ownership of Company Stock; (d) motivating Employees to achieve long-range Performance Goals and objectives; and (e) providing incentive compensation opportunities competitive with peer financial institution holding companies.

1.2 EFFECTIVE DATE AND EXPIRATION OF PLAN. The Peoples Bancorp Inc. 2006 Equity Plan originally became effective on April 13, 2006. The Amended and Restated Peoples Bancorp Inc. 2006 Equity Plan became effective on December 11, 2008. This Second Amended and Restated Peoples Bancorp Inc. 2006 Equity Plan will become effective upon the approval hereof by the shareholders of the Company. Unless earlier terminated by the Board pursuant to Section 12.2, the Plan shall terminate on the tenth anniversary of the Second Restatement Effective Date. No Award shall be made pursuant to the Plan after this termination date, but Awards made prior to this termination date may extend beyond that date. Notwithstanding the foregoing, no Incentive Stock Options may be granted after February 28, 2023.

ARTICLE II

DEFINITIONS

The following words and phrases, as used in the Plan, shall have the meanings set forth in this Article II. When applying these definitions and any other word, term or phrase used in the Plan, the form of any word, term or phrase will include any and all of its other forms.

2.1 ADVISOR means any advisor who renders bona fide services to the Company and/or one or more of the Subsidiaries as an advisory or marketing board member and who is neither an Employee nor a director of the Company or any Subsidiary; provided that the services rendered are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities.

2.2 AWARD means, individually or collectively, any Option, SAR, Restricted Stock, Restricted Performance Stock, unrestricted Company Stock or Performance Unit Award.

2.3 AWARD AGREEMENT means the written agreement between the Company and each Participant that describes the terms and conditions of each Award. If there is a conflict between the terms of the Plan and the Award Agreement, the terms of the Plan will govern.

2.4 BOARD means the Board of Directors of the Company.

2.5 CAUSE with respect to any Participant, means: (a) gross negligence or gross neglect of duties; or (b) commission of a felony or of a gross misdemeanor involving moral turpitude in connection with the Participant's employment or service, as the case may be, with the Company or any of its Subsidiaries; or (c) fraud, disloyalty, dishonesty or willful violation of any law, rule or regulation or any significant Company policy committed in connection with the Participant's employment or provision of services, as the case may be; or (d) issuance of an order for removal of the Participant by any agency which regulates the activities of the Company or any of its Subsidiaries.

Any determination of “Cause” under the Plan shall be made by the Committee in its sole discretion.

2.6 COMPANY means Peoples Bancorp Inc., an Ohio corporation.

2.7 COMPANY DIRECTOR means a non-employee member of the Board.

2.8 COMPANY STOCK means the Company's common shares, without par value per share.

2.9 CODE means the Internal Revenue Code of 1986, as amended or superseded after the Effective Date, and any applicable rulings or regulations issued thereunder.

2.10 COMMITTEE means the Compensation Committee of the Board or a subcommittee thereof.

2.11 DISABILITY means: (a) with respect to an Incentive Stock Option, “disabled” within the meaning of Section 22(e)(3) of the Code; (b) with respect to any Award subject to Section 409A of the Code, “disabled” as defined under Section 409A of the Code; and (c) with respect to any Award not described in subsections (a) and (b) of this Section 2.11, a long-term disability as defined by the Company's or applicable Subsidiary's group disability insurance plan, or any successor plan that is applicable to such Participant at the time of his or her Termination.

2.12 EFFECTIVE DATE means April 13, 2006, the date on which the Peoples Bancorp Inc. 2006 Equity Plan was originally approved by the shareholders of the Company.

2.13 EMPLOYEE means any person who, on any applicable date, is a common law employee of the Company or of any Subsidiary. A worker who is classified as other than a common law employee but who is subsequently reclassified as a common law employee of the Company or of any Subsidiary for any reason and on any basis will be treated as a common law employee only from the date that reclassification occurs and will not retroactively be reclassified as an Employee for any purpose of the Plan.

2.14 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.

2.15 EXERCISE PRICE means the amount, if any, that a Participant must pay to exercise an Award (other than an Option).

2.16 FAIR MARKET VALUE means, as of any specified date, an amount equal to the reported closing price on the specified date of a share of Company Stock on NASDAQ or any other established stock exchange or quotation system on which the Company Stock is then listed or traded or, if no shares of Company Stock have been traded on such date, the closing price of a share of Company Stock on NASDAQ or such other established stock exchange or quotation system as reported on the first day prior thereto on which shares of Company Stock were so traded. If the preceding sentence does not apply, Fair Market Value shall be determined: (a) with respect to Nonqualified Stock Options and SARs, by the Committee through the reasonable application of a reasonable valuation method, taking into account all information material to the value of the Company, that satisfies the requirements of Treasury Regulation § 1.409A-1(b)(5); and (b) with respect to any other Awards, in good faith by the Committee using other reasonable means.

2.17 FISCAL YEAR means the fiscal year of the Company, which is the period beginning January 1 and ending on December 31.

2.18 GOOD REASON means (a) if the Participant has entered into a “Change in Control Agreement” with the Company, the definition of good reason in the Participant's Change in Control Agreement with the Company, and (b) if no such agreement exists, without the Participant's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events:

(i) The assignment to the Participant of any material duties or responsibilities inconsistent with the Participant's position(s), or a change in the Participant's reporting responsibilities, title(s), or office(s), or any

removal of the Participant from or any failure to re-elect the Participant to any of such position(s), except in connection with the Participant's Termination for Cause, Disability, Retirement, or as a result of the Participant's death;

(ii) A reduction by the Company or any of its Subsidiaries in the Participant's base salary;

(iii) The taking of any action by the Company or any of its Subsidiaries which would adversely affect the Participant's participation in or materially reduce the Participant's benefits under any benefit plans, or the failure by the Company or its Subsidiaries, as applicable, to provide the Participant with the number of paid vacation days to which the Participant is then entitled on the basis of years of service with the Company and its Subsidiaries in accordance with the Company's normal vacation policy in effect on the Second Restatement Effective Date; or

(iv) The Company or one of its Subsidiaries directing the Participant to be reassigned to an office location fifty (50) miles or more from the current office location of the Participant except for required travel on Company or Subsidiary business to an extent substantially consistent with the Participant's present business travel obligations or, in the event the Participant consents to any relocation, the failure by the Company or one of its Subsidiaries, as applicable, to pay (or reimburse the Participant) for all reasonable moving expenses incurred by the Participant relating to a change of the Participant's principal residence in connection with such relocation and to indemnify the Participant against any loss realized on the sale of the Participant's principal residence in connection with any such change of residence.

2.19 INCENTIVE STOCK OPTION means an option within the meaning of Section 422 of the Code.

2.20 NON-EMPLOYEE DIRECTOR means either a Company Director or a Subsidiary Director.

2.21 NONQUALIFIED STOCK OPTION means an option granted under the Plan other than an Incentive Stock Option.

2.22 OPTION means either a Nonqualified Stock Option or an Incentive Stock Option, in each case to purchase Company Stock.

2.23 OPTION PRICE means the price at which Company Stock may be purchased under an Option.

2.24 PARTICIPANT means an Employee, an Advisor or a Non-Employee Director to whom an Award has been made under the Plan.

2.25 PERFORMANCE GOALS means goals established by the Committee pursuant to Section 4.5.

2.26 PERFORMANCE PERIOD means a period of time over which performance is measured.

2.27 PERFORMANCE UNIT means the unit of measure determined under Article IX by which is expressed the value of a Performance Unit Award.

2.28 PERFORMANCE UNIT AWARD means an Award granted under Article IX.

2.29 PERSONAL REPRESENTATIVE means the person or persons who, upon the death, Disability, or incompetency of a Participant, shall have acquired, by will or by the laws of descent and distribution or by other legal proceedings, the right to exercise an Option or an SAR or the right to any Restricted Stock Award or any Performance Unit Award theretofore granted or made to such Participant.

2.30 PLAN means the Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan.

2.31 PREDECESSOR PLANS means the Peoples Bancorp Inc. 2002 Stock Option Plan, as amended, the Peoples Bancorp Inc. 1998 Stock Option Plan, the Peoples Bancorp Inc. 1995 Stock Option Plan and the Amended and Restated Peoples Bancorp Inc. 1993 Stock Option Plan.

2.32 RESTRICTED PERFORMANCE STOCK means Company Stock subject to Performance Goals.

2.33 RESTRICTED STOCK means Company Stock subject to the terms and conditions provided in Article VI and includes

Restricted Performance Stock.

2.34 RESTRICTED STOCK AWARD means an Award granted under Article VI.

2.35 RESTRICTION PERIOD means a period of time determined under Section 6.2 during which Restricted Stock is subject to the terms and conditions provided in Section 6.3.

2.36 RETIREMENT means a Termination by a Participant other than due to death or Disability on or after attaining 65 years of age and with at least 10 years of service with the Company or any Subsidiary.

2.37 SAR means a stock appreciation right granted under Section 5.7.

2.38 SECOND RESTATEMENT EFFECTIVE DATE means the date the Plan is approved by the Company's shareholders.

2.39 SHAREHOLDERS mean the shareholders of the Company.

2.40 SUBSIDIARY means any corporation or other entity that is under common control with the Company, as determined under Sections 414(b) and (c) of the Code, but modified as permitted by Section 409A of the Code.

2.41 SUBSIDIARY DIRECTOR means a non-employee member of the board of directors of a Subsidiary who is not also a Company Director.

2.42 TERMINATION means a “separation from service” as defined under Section 409A of the Code.

ARTICLE III

ADMINISTRATION

3.1 COMMITTEE TO ADMINISTER. The Plan shall be administered by the Committee, in accordance with its Charter, as amended from time to time by the Board; provided, however, that the Board has the authority to grant Awards to Company Directors.

3.2 POWERS OF COMMITTEE .

(a) The Committee and the Board shall have full power and authority to interpret and administer the Plan and to establish and amend rules and regulations for its administration. Any action or decision by the Board or the Committee shall be final, binding and conclusive with respect to the interpretation of the Plan and any Award made under it.

(b) Subject to the provisions of the Plan, the Committee or the Board, as the case may be, shall have authority, in its discretion, to determine those Employees, Advisors and Non-Employee Directors who shall receive an Award; the time or times when any such Award shall be made; the vesting schedule, if any, for the Award; and the type of Award to be granted, the number of shares of Company Stock to be subject to each Option, each SAR, and each Restricted Stock Award, the value of each Performance Unit and all other terms and conditions of any Award.

(c) The Committee or the Board, as the case may be, shall determine and set forth in an Award Agreement the terms of each Award, including such terms, restrictions, and provisions as shall be necessary to cause certain Options to qualify as Incentive Stock Options. The Committee or the Board, as the case may be, may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement, in such manner and to the extent the Committee or the Board, as appropriate, shall determine in order to carry out the purposes of the Plan. The Committee or the Board, as the case may be, may, in its discretion, accelerate (i) the date on which an Option or an SAR may be exercised, (ii) the date of termination of the restrictions applicable to a Restricted Stock Award, or (iii) the end of a Performance Period under a Performance Unit Award, if the Committee or the Board, as appropriate, determines that to do so will be in the best interests of the Company and the Participants in the Plan. Notwithstanding the foregoing, the Committee shall not exercise any discretion with respect to an Award that is intended to qualify as performance-based compensation under Section 162(m) of the Code that would cause the Employee to whom the Award was made to receive more than would otherwise have been paid or receivable under the Performance Goals in respect of the Award established pursuant to Section 162(m) of the Code.

ARTICLE IV

AWARDS

4.1 AWARDS . Awards under the Plan shall consist of Incentive Stock Options, Nonqualified Stock Options, SARs, Restricted Stock, Restricted Performance Stock, unrestricted Company Stock and Performance Units. All Awards shall be subject to the terms and conditions of the Plan and to such other terms and conditions consistent with the Plan as the Committee or the Board, as the case may be, deems appropriate. Awards under a particular Article or Section of the Plan need not be uniform and Awards under two or more Articles or Sections may be combined in one Award Agreement. Any combination of Awards may be granted at one time and on more than one occasion to the same Employee, Advisor or Non-Employee Director. Awards of Performance Units and Restricted Performance Stock shall be earned solely upon attainment of Performance Goals and the Committee shall have no discretion to increase the amounts to be received or paid under such Awards.

4.2 ELIGIBILITY FOR AWARDS. An Award may be made to any Employee or Advisor selected by the Committee. In making this selection and in determining the form and amount of the Award, the Committee may give consideration to the functions and responsibilities of the respective Employee and/or Advisor, his or her present and potential contributions to the success of the Company or any of its Subsidiaries, the value of his or her services to the Company or any of its Subsidiaries, and such other factors deemed relevant by the Committee. Non-Employee Directors are eligible to receive Awards pursuant to Article VII.

4.3 SHARES AVAILABLE UNDER THE PLAN.

(a) The Company Stock to be offered under the Plan pursuant to Options, SARs, Performance Unit Awards, Restricted Performance Stock, Restricted Stock and unrestricted Company Stock Awards must be (i) Company Stock previously issued and outstanding and reacquired by the Company or (ii) authorized but unissued Company Stock not reserved for any other purpose. Subject to adjustment under Section 12.1, the number of shares of Company Stock that may be issued under the Plan (the “Section 4.3 Limit”) will be such number of common shares as shall result in an aggregate of 800,000 common shares being available for future grants of Awards on and after the Second Restatement Effective Date. Based on the number of common shares available for future grants of Awards as of February 28, 2013, the aggregate number of common shares available for issuance under the Plan (including common shares subject to outstanding Awards (199,231 common shares) and common shares previously issued in satisfaction of Awards (82,333 common shares)) would be 1,081,564 common shares.

(b) The maximum number of shares of Company Stock that may be issued subject to Incentive Stock Options is 800,000 subject to adjustment under Section 12.1. The Section 4.3 Limit shall not have counted against it: (i) the number of shares of Company Stock subject to an Option or any other Award which is equal to the number of shares of Company Stock tendered by a Participant to the Company in payment of the Option Price of such Option or the Exercise Price of such other Award, as applicable; (ii) shares of Company Stock subject to an Award granted on or after the Second Restatement Effective Date which Award for any reason thereafter terminates by expiration, forfeiture, cancellation or otherwise without having been exercised or paid; (iii) shares of Company Stock withheld from any Award to satisfy a Participant's tax withholding obligations or, if applicable, to pay the Option Price of an Option or the Exercise Price of any other Award; (iv) if an SAR is settled in whole or in part by the issuance of shares of Company Stock, the number of shares of Company Stock which represents the difference between (A) the number of shares of Company Stock which remain subject to such SAR on the date of such settlement and (B) the number of shares of Company Stock actually issued upon settlement of such SAR; or (v) the number of shares of Company Stock subject to an Option which is equal to the number of shares of Common Stock acquired by the Company on the open market using the cash proceeds received by the Company from the exercise of such Option; provided, however, that such number of shares of Company Stock shall in no event be greater than the number which is determined by dividing (A) the amount of cash proceeds received by the Company from the Participant upon the exercise of such Option by (B) the Fair Market Value of a share of the Company Stock on the date of exercise of such Option.

4.4 LIMITATION ON AWARDS. The maximum aggregate dollar value of, and the maximum number of shares of Company Stock subject to, Restricted Stock and Performance Units awarded to any Employee or Advisor with respect to a Performance Period or Restriction Period may not exceed $500,000 and 500,000 shares of Company Stock for each Fiscal Year included in such Performance Period or Restriction Period.

The maximum number of shares of Common Stock for which Options or SARs may be granted to any Participant in any one Fiscal Year shall not exceed 500,000 subject to adjustment under Section 12.1.

4.5 GENERAL PERFORMANCE GOALS.

(a) Performance Goals relating to the payment or vesting of an Award that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code will be comprised of one or more of the following performance criteria as the Committee may deem appropriate:


•	Earnings per share (actual or targeted growth);


•	Net income after capital costs;


•	Net income (before or after taxes);


•	Return measures (including, but not limited to, return on average assets, risk-adjusted return on capital, return on average equity, pre-provision net revenue, or return on tangible common equity);


•	Efficiency ratio;


•	Full-time equivalency control;


•	Stock price (including, but not limited to, growth measures, share price appreciation, or total shareholder return);


•	Non-interest income compared to net interest income ratio;


•	Expense targets (including, but not limited to, reduction in or maintenance of non-interest expense;


•	Operating efficiency;


•	Economic value added or EVA(R);


•	Credit quality measures;


•	Customer satisfaction measures;


•	Loan growth;


•	Deposit growth;


•	Net interest margin;


•	Fee income;


•	Operating expense;


•	Balance sheet measures including assets, loans, charge-offs, loan loss reserves, non-performing assets, deposits, asset quality levels, and investments;


•	Balance sheet management;


•	Interest income;


•	Investment management;


•	Maintenance or improvement of net interest income;


•	Market capitalization;


•	Market share;


•	Non-interest income growth;


•	Productivity ratios;


•	Revenues;


•	Risk management measures including interest-sensitivity gap levels, regulatory compliance, satisfactory internal or external audits, and financial ratings; and


•	Tangible common equity.

(b) For any Awards not intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee may establish Performance Goals based on the performance criteria listed in Section 4.5(a) or other performance criteria as it deems appropriate.

(c) Any of the performance criteria listed in Section 4.5(a) may be applied solely with reference to the Company and/or any Subsidiary or relatively between the Company and/or any Subsidiary and one or more unrelated entities. In addition, different performance criteria may be applied to individual Participants or to groups of Participants and, as specified by the Committee, may be based on results achieved (i) separately by the Company or any Subsidiary, (ii) any combination of the Company and the Subsidiaries or (iii) any combination of business units or divisions of the Company and the Subsidiaries.

(d) With respect to each Performance Period, the Committee shall establish the Performance Goals in writing no later than the earlier of (i) 90 days after the beginning of the Performance Period or (ii) expiration of 25 percent of the Performance Period.

(e) Except as otherwise provided in the Plan or the Award Agreement, as of the end of each Performance Period, the Committee shall certify in writing the extent to which a Participant has or has not met the Participant's Performance Goal(s). To the extent consistent with Section 162(m) of the Code, Performance Goals may be calculated without regard to extraordinary items or adjusted, as the Committee deems equitable, in recognition of unusual or non-recurring events affecting the Company and/or its Subsidiaries or changes in applicable tax laws or accounting principles.

(f) To the extent permitted under Section 162(m) of the Code, if applicable, the Committee shall make (i) appropriate adjustments to performance criteria to reflect the effect on any performance criteria of any stock dividend or stock split affecting Company Stock, recapitalization, merger, consolidation, combination, spin-off, distribution of assets to Shareholders, exchange of shares or similar corporate change and (ii) similar adjustments to any portion of performance criteria that is not based on Company Stock but which is affected by an event having an effect similar to those just described.

ARTICLE V

OPTIONS AND STOCK APPRECIATION RIGHTS

5.1 AWARD OF OPTIONS. The Committee may, from time to time, and on such terms and conditions as the Committee may prescribe, award: (a) Incentive Stock Options, subject to Section 5.5, to any eligible Employee of the Company (or any subsidiary or parent corporation within the meaning of Sections 424(e) and 424(f) of the Code); and (b) Nonqualified Stock Options to any Employee or Advisor.

5.2 PERIOD OF OPTION.

(a) An Option granted under the Plan shall be exercisable only in accordance with the vesting schedule approved by the Committee. The Committee may in its discretion prescribe additional conditions, restrictions or terms on the vesting of an Option, including the full or partial attainment of Performance Goals pursuant to Section 4.5. After the Option vests, the Option may be exercised at any time during the term of the Option, in whole or in installments, as specified in the related Award Agreement. Subject to Article X and except as provided in Section 5.5, the term of each Option shall not be more than ten years from the date of grant.

(b) Except as provided in Article X or as otherwise provided by the Committee, a Participant may not exercise an Option unless such Participant is then, and continually (except for sick leave, military service, or other approved leave of absence) after the grant of the Option has been, an Employee or Advisor.

5.3 AWARD AGREEMENT. Each Option shall be evidenced by an Award Agreement. The Award Agreement shall specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.

5.4 OPTION PRICE, EXERCISE AND PAYMENT.

(a) Except as provided in Section 5.5, the Option Price with respect to Company Stock subject to each Option shall be determined by the Committee but shall be a price not less than 100 percent of the Fair Market Value of Company Stock at the date such Option is granted.

(b) Vested Options may be exercised from time to time by giving written notice to the Chief Financial Officer of the Company or the Secretary of the Committee, or his or her designee, specifying the number of shares of Company Stock to be purchased. The notice of exercise shall be accompanied by payment in full of the Option Price in cash or the Option Price may be paid in whole or in part through the transfer to the Company of shares of Company Stock in accordance with procedures established by the Committee from time to time. In addition, in accordance with the rules and procedures established by the Committee for this purpose, an Option may also be exercised through a cashless exercise procedure involving a broker or dealer,

that affords a Participant the opportunity to sell immediately some or all of the shares of Company Stock underlying the exercised portion of the Option in order to generate sufficient cash to pay the Option Price and/or to satisfy withholding tax obligations related to the Option.

(c) In the event such Option Price is paid, in whole or in part, with shares of Company Stock, the portion of the Option Price so paid shall be equal to the value, as of the date of exercise of the Option, of such shares. The value of such shares shall be equal to the number of such shares multiplied by the Fair Market Value of such shares on the trading day coincident with the date of exercise of such Option (or the immediately preceding trading day if the date of exercise is not a trading day). The Company shall not issue or transfer Company Stock upon exercise of an Option until the Option Price is fully paid.

5.5 LIMITATIONS ON INCENTIVE STOCK OPTIONS. Each provision of the Plan and each Award Agreement relating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in Section 422 of the Code, and any provisions of the Award Agreement that cannot be so construed shall be disregarded. No Incentive Stock Option may be granted to any Employee who, at the time of such grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company (or any subsidiary or parent corporation within the meaning of Sections 424(e) and 424(f) of the Code) unless: (a) the Option Price for such Incentive Stock Option is at least 110 percent of the Fair Market Value of a share of Company Stock on the date the Incentive Stock Option is granted; and (b) such Incentive Stock Option may not be exercised more than five years after it is granted. Notwithstanding anything in the Plan to the contrary, to the extent required by the Code, the exercise of Incentive Stock Options granted under the Plan shall be subject to the $100,000 calendar year limit as set forth in Section 422 of the Code; provided that, to the extent any grant exceeds such $100,000 calendar year limit, the portion of such granted Option in excess of such limit shall be deemed a Nonqualified Stock Option in accordance with Section 422 of the Code.

5.6 RIGHTS AND PRIVILEGES. A Participant shall have no rights as a Shareholder with respect to any shares of Company Stock covered by an Option until the issuance of such shares to the Participant.

5.7 AWARD OF SARs.

(a) The Committee may, from time to time, and on such terms and conditions as the Committee may prescribe, award SARs to any Employee and/or Advisor.

(b) An SAR shall represent the right to receive payment of an amount equal to: (i) the amount by which the Fair Market Value of one share of Company Stock on the date of exercise of the SAR exceeds the Exercise Price; multiplied by (ii) the number of shares of Company Stock covered by the SAR. Payment of the amount to which a Participant is entitled upon the exercise of an SAR shall be made in cash, Company Stock, or partly in cash and partly in Company Stock at the discretion of the Committee. The shares shall be valued at their Fair Market Value on the date of exercise.

(d) The Committee may prescribe conditions and limitations on the exercise of any SAR. SARs may be exercised only when the Fair Market Value of a share of Company Stock exceeds the Exercise Price. The Exercise Price under each SAR shall be determined by the Committee but shall be a price not less than 100 percent of the Fair Market Value of Company Stock at the date such SAR is granted.

(e) An SAR shall be exercisable only by written notice to the Chief Financial Officer of the Company or the Secretary of the Committee, or his or her designee.

(f) Subject to Article X, the term of each SAR shall not be more than ten years from the date of grant.

To the extent not previously exercised, all SARs shall automatically be exercised on the last trading day prior to their expiration, so long as the Fair Market Value of a share of Company Stock exceeds the Exercise Price, unless prior to such day the holder of an SAR instructs the Chief Financial Officer of the Company or the Secretary of the Committee otherwise in writing.

(g) Subject to Article X, each SAR shall expire on a date determined by the Committee at the time of grant.

5.8 REPRICING. Except for adjustments made pursuant to Section 12.1 or Section 12.2 of the Plan, in no event may the Board or the Committee, without obtaining shareholder approval: (a) amend the terms of an outstanding Award to reduce the Option Price of an outstanding Option or the Exercise Price of an outstanding SAR; (b) cancel an outstanding Option or SAR in

exchange for Options or SARs with an Option Price or Exercise Price, as applicable, that is less than the Option Price or Exercise Price of the original Option or SAR; or (c) cancel an outstanding Option or SAR with an Option Price or Exercise Price, as applicable, which is above the current Fair Market Value of the Company Stock in exchange for cash or other securities.

ARTICLE VI

RESTRICTED STOCK

6.1 AWARD OF RESTRICTED STOCK. The Committee may make a Restricted Stock Award to any Employee and/or Advisor, subject to this Article VI and to such other terms and conditions as the Committee may prescribe.

6.2 RESTRICTION PERIOD. At the time of making a Restricted Stock Award, the Committee shall establish the Restriction Period applicable to such Award. The Committee may establish different Restriction Periods from time to time and each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee. Restriction Periods, when established for a Restricted Stock Award, shall not be changed except as permitted by Section 6.3.

6.3 OTHER TERMS AND CONDITIONS. Company Stock, when awarded pursuant to a Restricted Stock Award, will be represented in a book entry account in the name of the Participant who receives the Restricted Stock Award. The Participant shall be entitled to receive dividends during the Restriction Period and shall have the right to vote such Restricted Stock and shall have all other Shareholder rights, with the exception that; (i) unless otherwise provided by the Committee, in the case of Restricted Performance Stock, dividends which would otherwise be received during the Restriction Period shall be accrued and paid to the Participant in the same proportion and at the same time as the underlying Restricted Performance Stock vests, if at all; (ii) unless otherwise provided by the Committee, if any dividends are paid in shares of Company Stock, those shares will be subject to the same restrictions as the shares of Restricted Stock with respect to which they were issued; (iii) the Participant will not be entitled to delivery of any stock certificate evidencing the Company Stock underlying the Restricted Stock Award during the Restriction Period; (iv) the Company will retain custody of the Restricted Stock during the Restriction Period; and (v) a breach of a restriction or a breach of the terms and conditions established by the Committee pursuant to the Restricted Stock Award will cause a forfeiture of the Restricted Stock Award. The Committee may, in addition, prescribe additional restrictions, terms, or conditions upon or to the Restricted Stock Award including the attainment of Performance Goals in accordance with and as contemplated by Section 4.5.

6.4 RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock Award shall be evidenced by an Award Agreement.

6.5 PAYMENT FOR RESTRICTED STOCK. Restricted Stock Awards may be made by the Committee under which the Participant shall not be required to make any payment for the Company Stock or, in the alternative, under which the Participant, as a condition to the Restricted Stock Award, shall pay all (or any lesser amount than all) of the Fair Market Value of the Company Stock, determined as of the date the Restricted Stock Award is made. If the latter, such purchase price shall be paid in cash as provided in the Award Agreement.

ARTICLE VII

AWARDS FOR NON-EMPLOYEE DIRECTORS

7.1 AWARDS TO NON-EMPLOYEE DIRECTORS. The Board shall determine all Awards to Company Directors and the Committee shall determine all Awards to Subsidiary Directors. The Board or the Committee, as the case may be, retains the discretionary authority to make Awards to Non-Employee Directors and any type of Award (other than Incentive Stock Options) may be granted to Non-Employee Directors under the Plan. All such Awards shall be subject to the terms and conditions of the Plan and to such other terms and conditions consistent with the Plan as the Board or the Committee, as the case may be, deems appropriate.

7.2 NO RIGHT TO CONTINUANCE AS A DIRECTOR. None of the actions of the Company in establishing the Plan, the actions taken by the Company, the Board, or the Committee under the Plan, or the granting of any Award under the Plan shall be deemed (i) to create any obligation on the part of the Board or the board of directors of the applicable Subsidiary to nominate any Non-Employee Director for reelection or (ii) to be evidence of any agreement or understanding, express or implied, that the Non-Employee Director has a right to continue as a Non-Employee Director for any period of time or at any particular rate of compensation.

ARTICLE VIII

UNRESTRICTED COMPANY STOCK AWARDS FOR EMPLOYEES AND/OR ADVISORS

8.1 The Committee may make awards of unrestricted Company Stock to Employees and/or Advisors on such terms and conditions as the Committee may prescribe.

ARTICLE IX

AWARD OF PERFORMANCE UNITS

9.1 AWARD OF PERFORMANCE UNITS. The Committee may award Performance Units to any Employee and/or Advisor. Each Performance Unit shall represent the right of a Participant to receive an amount equal to the value of the Performance Unit, determined in the manner established by the Committee at the time of Award.

9.2 PERFORMANCE PERIOD. At the time of each Performance Unit Award, the Committee shall establish, with respect to each such Award, a Performance Period during which performance shall be measured. There may be more than one Performance Unit Award in existence at any one time, and Performance Periods may differ.

9.3 PERFORMANCE GOALS. Performance Units shall be awarded to a Participant and earned contingent upon the attainment of Performance Goals in accordance with and as contemplated by Section 4.5.

9.4 PERFORMANCE UNIT VALUE. Each Performance Unit shall have a maximum dollar value established by the Committee at the time of the Award. Performance Units earned will be determined by the Committee in respect of a Performance Period in relation to the degree of attainment of Performance Goals. The measure of a Performance Unit may, in the discretion of the Committee, be equal to the Fair Market Value of one share of Company Stock.

9.5 AWARD CRITERIA. In determining the number of Performance Units to be granted to any Participant, the Committee shall take into account the Participant's responsibility level, performance, potential, cash compensation level, other incentive awards, and such other considerations as it deems appropriate.

9.6 PAYMENT.

(a) Following the end of the applicable Performance Period, a Participant holding Performance Units will be entitled to receive payment of an amount, not exceeding the maximum value of the Performance Units, based on the achievement of the Performance Goals for such Performance Period, as determined by the Committee.

(b) Awards may be paid in cash or Company Stock, or any combination thereof, as determined by the Committee. Payment shall be made in a lump sum or in installments at the discretion of the Committee and shall be subject to such other terms and conditions as shall be determined by the Committee.

9.7 PERFORMANCE UNIT AWARD AGREEMENTS. Each Performance Unit Award shall be evidenced by an Award Agreement.

ARTICLE X

GENERAL TERMINATION PROVISIONS

10.1 TERMINATION. Subject to Article XI and unless otherwise specified in the applicable Award Agreement, the following provisions will govern the treatment of a Participant's outstanding Awards following a Participant's Termination.

(a) Unless otherwise provided by the Committee, if the Participant's Termination is due to Disability or Retirement, all of the Participant's outstanding Options, SARs or Restricted Stock shall become fully vested and, if applicable, exercisable at the time and under the conditions, including attainment of the Performance Goals, as such Options, SARs and Restricted Stock would otherwise vest and become exercisable pursuant to the terms of the Award Agreement; and any Options or SARs that become exercisable pursuant to this Section 10.1(a) may be exercised by the Participant at any time before the earlier of (i) one year after the date such Option or SAR became vested, or (ii) the expiration date of the Award; provided, however, that an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Code in respect of the exercise of such Option. Upon the Participant's Termination for any reason other than

death, Disability or Retirement, any Awards that are not vested and/or exercisable on the date of such Termination will immediately terminate and be of no further force and effect.

(b) If the Participant Terminates for any reason other than (i) death, (ii) Disability, (iii) Retirement or (iv) for Cause, such Participant's outstanding SARs or Options may be exercised at any time within three months after such Termination, to the extent of the number of shares of Company Stock covered by such Options or SARs which are exercisable (and have not yet been exercised) at the date of such Termination; except that an Option or SAR shall not be exercisable on any date beyond the expiration date of such Option or SAR.

(c) Upon a Termination for Cause, any Options and any SARs held by the Participant (whether or not then exercisable) shall expire and any rights thereunder shall terminate immediately. Any non-vested Restricted Stock Awards of such Participant shall immediately be forfeited and any rights thereunder shall terminate.

(d) Unless otherwise provided by the Committee, upon a Termination due to the Participant's death, all Options, SARs and Restricted Stock not subject to Performance Goals shall immediately vest and, if applicable, become exercisable; a portion of the Options, SARs and Restricted Stock subject to Performance Goals, determined by multiplying the number of shares subject to such Options, SARs and Restricted Stock by a fraction, the numerator of which is the number of whole months elapsed during the Performance Period prior to the Participant's death, and the denominator of which is the number of months in the Performance Period, shall immediately vest; and any SARs and any Options that are then, or become, exercisable may be exercised by the Participant's Personal Representative at any time before the earlier of (i) one year after the Participant's death, or (ii) the expiration date of the Award.

(e) Upon a Termination due to the Participant's Disability or Retirement, any SARs and any Options that are exercisable at the time of the Participant's Termination may be exercised by the Participant at any time before the earlier of (i) one year after the date of such Termination or (ii) the expiration date of the Award; provided, however, that an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Code in respect of the exercise of such Option.

(f) If a Participant who Terminates due to Retirement dies prior to exercising all of his or her outstanding Options and SARs, then such Options and such SARs may be exercised by the Participant's Personal Representative at any time before the earlier of (i) one year after the Participant's death or (ii) the expiration date of the Award; provided, however, that, an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Code in respect of the exercise of such Option.

(g) Subject to Article XI, a Performance Unit Award shall terminate for all purposes if the Participant Terminates at any time during the applicable Performance Period, except as may otherwise be determined by the Committee. Subject to Article XI, in the event that a Participant holding a Performance Unit Terminates following the end of the applicable Performance Period but prior to full payment according to the terms of the Performance Unit Award, the Performance Unit Award shall terminate except when the Termination is due to death, Disability or Retirement or as may otherwise be determined by the Committee.

ARTICLE XI

CHANGE IN CONTROL OF THE COMPANY

11.1 CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan to the contrary, the provisions of this Article XI shall govern and supersede any inconsistent terms or provisions of the Plan.

11.2 DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, Change in Control shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A of the Code.

11.3 EFFECT OF CHANGE IN CONTROL ON CERTAIN AWARDS.

(a) If the Company is not the surviving corporation following a Change in Control, and the surviving corporation following such Change in Control or the acquiring corporation (such surviving corporation or acquiring corporation is hereinafter referred to as the “Acquiror”) does not assume the outstanding Options, SARs, Restricted Stock, Restricted Performance Stock or Performance Units or does not substitute equivalent equity awards relating to the securities of such Acquiror or its affiliates for such outstanding Awards, then all outstanding Options and SARs shall become immediately and fully exercisable and all Restricted Stock Awards (other than Restricted Performance Stock Awards) shall become fully vested and all restrictions will immediately

lapse. In the case of Restricted Performance Stock and Performance Units, the target payout opportunities under all outstanding Awards of Restricted Performance Stock and Performance Units shall be deemed to have been fully earned based on the target level of performance being attained as of the effective date of the Change in Control. In addition, the Board or its designee may, in its sole discretion, provide for a cash payment to be made to each Participant for the outstanding Restricted Stock, Restricted Performance Stock or Performance Units upon the consummation of the Change in Control, determined on the basis of the Fair Market Value that would be received in such Change in Control by the holders of the Company's securities relating to such Awards. Notwithstanding the foregoing, any Option intended to be an Incentive Stock Option under Section 422 of the Code shall be adjusted in a manner to preserve such status.

(b) If the Company is the surviving corporation following a Change in Control, or the Acquiror assumes the outstanding Options, SARs, Restricted Stock, Restricted Performance Stock or Performance Units or substitutes equivalent equity awards relating to the securities of such Acquiror or its affiliates for such outstanding Awards, then all such outstanding Awards or such substitutes therefor shall remain outstanding and be governed by their respective terms and the provisions of the Plan.

(c) If (i) a Participant is Terminated by the Company without Cause or the Participant Terminates for Good Reason within twenty-four (24) months following a Change in Control, and (ii) the Company is the surviving corporation following such Change in Control, or the Acquiror has assumed the outstanding Options, SARs, Restricted Stock, Restricted Performance Stock or Performance Units or substituted equivalent equity awards relating to the securities of such Acquiror or its affiliates for such outstanding Awards, then all outstanding Options and SARs or substituted equivalent equity awards shall become immediately and fully exercisable and all outstanding Restricted Stock Awards (other than Restricted Performance Stock Awards ) shall become fully vested and all restrictions will immediately lapse. In the case of Restricted Performance Stock and Performance Units, the target payout opportunities under all outstanding Awards of Restricted Performance Stock and Performance Units shall be deemed to have been fully earned based on the target level of performance being attained.

(d) If (i) the employment of a Participant with the Company and its Subsidiaries is terminated for Cause within twenty-four (24) months following a Change in Control and (ii) the Company is the surviving corporation following such Change in Control, or the Acquiror has assumed the outstanding Options, SARs, Restricted Stock, Restricted Performance Stock, or Performance Units or substituted equivalent equity awards relating to the securities of such Acquiror or its affiliates for such Awards, then all outstanding Options and SARs held by such Participant shall expire, and any non-vested outstanding Restricted Stock, Restricted Performance Stock or Performance Units shall be forfeited, and any and all rights under all such outstanding Awards shall terminate immediately.

(e) Outstanding Options or SARs as to which vesting is accelerated in accordance with Section 11.3, may be exercised by the Participant following Termination subject to the provisions of Article X; provided, however, that a Participant whose Options or SARs become exercisable in accordance with Section 11.3(c) may exercise such Options or SARs at any time within one year after such Termination, except that an Option or SAR shall not be exercisable in any event on any date beyond the expiration date of such Option or SAR.

In the event of a Participant's death after such Termination, the exercisability of Options and SARs shall be treated in the same manner as that provided for Termination due to Retirement in Section 10.1(f).

11.4 AMENDMENT OR TERMINATION. This Article XI shall not be amended or terminated at any time if any such amendment or termination would adversely affect the rights of any Participant under the Plan.

ARTICLE XII

MISCELLANEOUS PROVISIONS

12.1 ADJUSTMENTS UPON CHANGES IN STOCK. In case of any reorganization, recapitalization, reclassification, stock split, stock dividend, distribution, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Company, appropriate adjustments shall be made by the Committee or the Board, as the case may be, (or if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares and the Option Price per share subject to outstanding Options, the number and kind of shares and the Exercise Price per share subject to outstanding SARs, or the number and kind of shares which may be issued under outstanding Restricted Stock Awards or pursuant to unrestricted Company Stock Awards. Appropriate adjustments shall also be made by the Committee or the Board, as the case may be, in the terms of any Awards under the Plan, subject to Article XI, to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis. Any such adjustments made by the Committee or the Board pursuant to this Section 12.1 shall be conclusive and binding for all purposes under the Plan. Any adjustments made pursuant to this Section 12.1 shall be made consistent

with the requirements of Sections 409A of the Code, to the extent applicable.

12.2 AMENDMENT, SUSPENSION, AND TERMINATION OF PLAN.

(a) The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that any Awards thereunder shall conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no such amendment shall, without Shareholder approval, (i) except as provided in Section 12.1, increase the number of shares of Company Stock which may be issued under the Plan, (ii) expand the types of awards available to Participants under the Plan, (iii) materially expand the class of employees and/or advisors eligible to participate in the Plan, (iv) materially change the method of determining the Option Price of Options or the Exercise Price of SARs; (v) delete or limit the provision in Section 5.8 prohibiting the repricing of Options and SARs; (vi) extend the termination date of the Plan or (vii) be made to the extent that Shareholder approval is required to satisfy any applicable laws or regulations or the rules or standards of any securities exchange, market or other quotation system on or through which the Company Stock is listed or traded. No such amendment, suspension, or termination shall materially adversely alter or impair any outstanding Options, SARs, shares of Restricted Stock, or Performance Units without the consent of the Participant affected thereby.

(b) The Committee may amend or modify any outstanding Options, SARs, Restricted Stock Awards, or Performance Unit Awards in any manner to the extent that the Committee would have had the authority under the Plan initially to award such Options, SARs, Restricted Stock Awards, or Performance Unit Awards as so modified or amended, including without limitation, to change the date or dates as of which such Options or SARs may be exercised, to remove the restrictions on shares of Restricted Stock, or to modify the manner in which Performance Units are determined and paid. Notwithstanding the foregoing, any amendment or modification of any Award shall be made in accordance with the requirements of Section 409A of the Code, to the extent applicable.

(c) Notwithstanding the other provisions of this Section 12.2, the Plan and any Award Agreements may be amended without any additional consideration to affected Participants to the extent necessary to comply with, or avoid penalties under, Section 409A of the Code, even if those amendments reduce, restrict or eliminate rights granted prior to such amendments.

12.3 NONUNIFORM DETERMINATIONS. The Committee's (or, if applicable, the Board's) determinations under the Plan, including without limitation, (a) the determination of the Employees, Advisors and Non-Employee Directors to receive Awards, (b) the form, amount, and timing of any Awards, (c) the terms and provisions of any Awards and (d) the Award Agreements evidencing the same, need not be uniform and may be made by it selectively among Employees, Advisors and/or Non-Employee Directors who receive, or who are eligible to receive, Awards under the Plan, whether or not such Employees, Advisors and/or Non-Employee Directors are similarly situated.

12.4 GENERAL RESTRICTION. Each Award under the Plan shall be subject to the condition that, if at any time the Committee shall determine that (a) the listing, registration, or qualification of the shares of Company Stock subject or related thereto upon NASDAQ or any other established stock exchange, market or quotation system or under any state or federal law, (b) the consent or approval of any government or regulatory body, or (c) an agreement by the Participant with respect thereto, is necessary, then such Award shall not become exercisable in whole or in part unless such listing, registration, qualification, consent, approval, or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

12.5 NO RIGHT TO EMPLOYMENT. None of the actions of the Company in establishing or maintaining the Plan, the actions taken by the Company, the Board or the Committee under the Plan, or the granting of any Award under the Plan shall be deemed (a) to create any obligation on the part of the Company or any Subsidiary to retain any person in the employ of, or continue the provision of services by any person to, the Company or any Subsidiary, or (b) to be evidence of any agreement or understanding, express or implied, that the person has a right to continue as an employee, or advisor for any period of time or at any particular rate of compensation.

12.6 GOVERNING LAW. The provisions of the Plan shall take precedence over any conflicting provision contained in an Award Agreement. All matters relating to the Plan or to Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of Ohio without regard to the principles of conflict of laws.

12.7 TRUST ARRANGEMENT. All benefits under the Plan represent an unsecured promise to pay by the Company. The Plan shall be unfunded and the benefits hereunder shall be paid only from the general assets of the Company resulting in the Participants having no greater rights than the Company's general creditors; provided, however, nothing herein shall prevent or prohibit the Company from establishing a trust or other arrangement for the purpose of providing for the payment of the benefits payable under the Plan.

12.8 INDEMNIFICATION OF BOARD AND COMMITTEE. Indemnification of the members of the Board and/or the members of the Committee shall be in accordance with the Code of Regulations of the Company as amended by the Shareholders from time to time.

12.9 NO IMPACT ON BENEFITS. Awards are not compensation for purposes of calculating a Participant's rights under any employee benefit plan that does not specifically require the inclusion of Awards in calculating benefits.

12.10 BENEFICIARY DESIGNATION. Each Participant may name a beneficiary or beneficiaries to receive or exercise any vested Award that is unpaid or unexercised at the Participant's death. Unless otherwise provided in the beneficiary designation, each designation will revoke all prior designations made by the same Participant, must be made on a form prescribed by the Committee and will be effective only when filed in writing with the Committee. If a Participant has not made an effective beneficiary designation, the deceased Participant's beneficiary will be the Participant's surviving spouse or, if none, the deceased Participant's estate. The identity of a Participant's designated beneficiary will be based only on the information included in the latest beneficiary designation form completed by the Participant and will not be inferred from any other evidence.

12.11 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state and local taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event arising as a result of an Award granted hereunder, a Participant may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares of Company Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

12.12 SECTION 409A OF THE CODE. It is intended that the Plan comply with, or be exempt from, Section 409A of the Code, as the case may be, and the Plan will be interpreted, administered and operated consistent with this intent. Nothing herein shall be construed as an entitlement to or guarantee of any particular tax treatment to any Participant. None of the Company, any Subsidiary, the Board or the Committee shall have any liability to any person in the event the Plan fails to comply with the requirements of Section 409A of the Code at any time.

The Company may accelerate the time or schedule of a distribution to a Participant at any time the Plan fails to meet the requirements of Section 409A of the Code and the regulations promulgated thereunder. Such payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Section 409A of the Code.

12.13 CLAWBACK. Notwithstanding any other provisions in the Plan, any Award which is subject to recovery under any law, governmental regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, governmental regulation or stock exchange listing requirement (or any policy adopted by the Company whether or not such adoption was pursuant to any such law, governmental regulation or stock exchange listing requirement).

EXHIBIT 10.2

Peoples Bancorp Inc.

SECOND Amended and Restated

2006 Equity Plan

Time-Based Restricted Stock Award Agreement

(for Executives)

This Time-Based Restricted Stock Award Agreement (this “Agreement”) is made effective as of __________ (the “Grant Date”) by and between Peoples Bancorp Inc. (the “Company”) and ________ (the “Participant”). Capitalized terms not defined in this Agreement shall have the meanings given to them in the Plan (as defined below).

Section 1 Grant of Restricted Stock

The Company hereby grants to the Participant an award of ____ (_____) shares of restricted Company Stock (the “Restricted Stock”), subject to the terms and conditions described in the Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan (the “Plan”) and this Agreement.

Section 2 Restrictions on Vesting and Transfer


(i)	[___] shares on the six-month anniversary of the Grant Date;

(ii) [___] shares on the twelve-month anniversary of the Grant Date;

(i) [___] shares on the twenty-four-month anniversary of the Grant Date; and

(ii) [___] shares on the thirty-six-month anniversary of the Grant Date.

(B) Transfer Restrictions . Until the Restricted Stock vests as described herein, the Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated. Except as otherwise provided herein, Restricted Stock that vests as described in Section 2(A), less any shares of Company Stock withheld for the payment of taxes, shall be or become transferable as follows:

(i) Fifty percent (50%) of the vested Restricted Stock shall be immediately transferable; and

(ii) Fifty percent (50%) of the Restricted Stock shall become transferable upon the Participant's Termination.

(i) Death . If the Participant dies, all unvested Restricted Stock shall become fully vested and transferable on the date of death.

(ii) Disability or Retirement . If the Participant Terminates due to Disability or Retirement, all unvested Restricted Stock shall become vested and transferable in accordance with the vesting schedule set forth in Section 2(A).

(iii) Terminations for Cause or Any Reason Other than Death, Disability or Retirement . If the Participant is Terminated for Cause or Terminates for any reason other than due to death, Disability or Retirement, all unvested Restricted Stock shall be immediately forfeited on the Termination date.

(D) Delivery of Shares . As soon as reasonably practicable after the Restricted Stock vests, the Company shall deliver to the Participant a stock certificate for, or other appropriate documentation evidencing, the number of shares of Company Stock with respect to which the restrictions have lapsed.

Section 3 Rights of the Participant Before Vesting

Before the Restricted Stock vests, the Participant (A) may exercise full voting rights associated with the shares of Company Stock underlying the Restricted Stock and (B) shall be entitled to receive all dividends paid with respect to the shares of Company Stock underlying the Restricted Stock; provided, however, that any dividends paid in shares of Company Stock shall be subject to the same restrictions as the shares of Restricted Stock granted under this Agreement.

Section 4 Covenants

(A) Non-Solicitation . The Participant acknowledges and understands that the Participant's contacts with customers or potential customers of the Company and its Subsidiaries is due, at least in part, to the support and assistance provided by the Company during the term of the Participant's employment, and therefore, that soliciting, diverting or appropriating such persons would unfairly harm the Company and its Subsidiaries. As a result, the Participant agrees that, during the term of the Participant's employment and for a period of one (1) year thereafter, the Participant shall not, directly or indirectly:

(a) Contact any customer or prospective customer of the Company or any of its Subsidiaries, on the Participant's behalf or on behalf of any other person or entity, of whom the Participant had knowledge, actual or imputed, or with whom the Participant had contact in whatever form during the Participant's employment with the Company or any of its Subsidiaries for the purpose of soliciting the business of such person or inducing such person to acquire from any person or entity other than the Company or any of its Subsidiaries any product or service that currently is provided or under development by the Company or any of its Subsidiaries; or

(ii) Attempt to solicit, or assist anyone in attempting to solicit, any employee of the Company or any of its Subsidiaries to terminate the employee's employment with the Company or any of its Subsidiaries.

(B) Non-Disclosure of Confidential Information . The Participant acknowledges and understands that during the course of the Participant's employment with the Company and/or its Subsidiaries, the Participant shall have access to Confidential Information (as defined below) that is maintained as confidential by the Company and its Subsidiaries, is highly valuable and proprietary to the Company and its Subsidiaries, and the disclosure of which to third parties, or the unauthorized access, acquisition, use, or attempted access, acquisition or use, of which would cause the Company and its Subsidiaries serious and unfair competitive disadvantage and harm. As a result, the Participant

agrees that, during the Participant's employment with the Company or any of its Subsidiaries, and at all times thereafter, regardless of the reason for the Termination of such employment:

(i) The Participant shall not disclose to any third parties any Confidential Information or use such Confidential Information for any purpose other than to carry out the Participant's employment responsibilities for the Company or one of its Subsidiaries;

(ii) The Participant shall treat such Confidential Information as confidential, as required by law and this Agreement;

(iii) The Participant shall only access, acquire, use, or attempt to access, acquire or use Confidential Information in performing the Participant's duties for the Company or one of its Subsidiaries, and for no other reason; and

(iv) Immediately upon Termination of the Participant's employment for any reason, to return to the Company all Confidential Information in the Participant's possession or control, as well as any Copies (as defined below) made of such Confidential Information and any other material, including handwritten notes, made or derived from such Confidential Information;

(v) For purposes of this Agreement:

(I) “Confidential Information” means all trade secrets and/or proprietary information in whatever form (whether communicated orally or in documentary or other tangible form) belonging to the Company or one of its Subsidiaries that has not been published or disseminated or otherwise become a matter of public knowledge other than as a result of the Participant's acts or omissions, including without limitation: business plans, financial or accounting information, rates, insurance payment and reimbursement information, research and development information, marketing or sales information, customer lists, lists of potential customers, contact information for any customer or potential customer, processes, computer programs, systems and software (including, without limitation, documentation and related source and object codes), customer renewal and expiration information, associate information, on-site program and support materials, training programs and associated materials, pricing lists, contracts, forms, methods, procedures and analyses and any other information that the Company or one of its Subsidiaries takes measures to prevent, in the ordinary course of business, from being available to persons other than those selected by the Company or one of its Subsidiaries.

(II) “Copies” includes all Confidential Information stored or maintained in electronic format or on electronic or magnetic media of any sort, including, without limitation, computer servers, PDAs, cell phones, I-Pods, smart cards, Blackberries, hard drives, zip drives, floppy disks, CD-ROMs, DVDs, and magnetic tapes.

(i) The covenants described in this Section 4 are reasonably necessary to protect the goodwill, trade secrets, and other legitimate business interests of the Company and its Subsidiaries and that such restraints shall not cause the Participant any undue hardship.

(ii) Any breach of the covenants contained in this Section 4 would cause the Company or one of its Subsidiaries immediate and irreparable harm for which injunctive relief would be necessary

and proper, and the Participant consents to the issuance of a temporary restraining order and a preliminary injunction upon good faith presentment by the Company or one of its Subsidiaries of allegations demonstrating such breach without the necessity of proving damages or posting a bond therefor; provided, however, that nothing contained herein shall be construed to prohibit the Company or one of its Subsidiaries from pursuing all other legal remedies at its disposal including but not limited to monetary damages.

(iii) The covenants of this Section 4 are essential to this Agreement. They shall be construed as independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Participant may have against the Company or one of its Subsidiaries, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company or one of its Subsidiaries of these covenants.

(iv) If the scope of any restriction contained in this Section 4 is too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and the Participant hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.

Section 5 Restricted Stock Subject to Plan; Plan as Controlling

By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. All terms and conditions of the Plan applicable to the Restricted Stock which are not set forth in this Agreement shall be deemed incorporated herein by reference. In the event any term or condition of this Agreement is inconsistent or conflicts with the terms and conditions of the Plan, the Plan shall be deemed controlling.

Section 6 Listing, Registration and Qualification

If the Committee determines that (A) the listing, registration or qualification of the shares of Company Stock underlying the Restricted Stock upon NASDAQ or any other established stock exchange, market or quotation system or under any state or federal law; (B) the consent or approval of any governmental or regulatory body; or (C) an agreement by the Participant with respect thereto, is necessary or desirable as a condition to the issuance of the shares of Company Stock underlying the Restricted Stock, the shares of Company Stock may not be issued unless and until such listing, registration, qualification, consent, approval, or agreement has been effected or obtained, free of any conditions which are not acceptable to the Committee.

If any shares of Company Stock subject to the Restricted Stock are issued upon the vesting thereof to a person who, at the time of such vesting or thereafter, is an affiliate of the Company for purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or are issued in reliance upon exemptions under the securities laws of any state, then upon such issuance:

(i) Unless permitted by the Plan, such shares of Company Stock shall not be transferable by the holder thereof, and neither the Company nor its transfer agent or registrar, if any, shall be required to register or otherwise to give effect to any transfer thereof and may prevent any such transfer, unless the Company shall have received an opinion from its counsel to the effect that any such transfer would not violate the Securities Act or the applicable laws of any state; and

(ii) The Company may cause any stock certificate which may evidence any of such shares of Company Stock to bear a legend reflecting the applicable restrictions on the transfer thereof.

Section 7 Tax Withholding

The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, the minimum statutory amount to satisfy federal, state and local taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event arising as a result of the Restricted Stock, the Participant may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares of Company Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

Section 8 Miscellaneous

(A) No Guarantee of Continued Employment . The grant of Restricted Stock under this Agreement shall not: (A) confer upon the Participant any right to continue in the employ of the Company or any of its Subsidiaries; (B) limit in any way the right of the Company or any of its Subsidiaries to Terminate the Participant; or (C) be evidence of any agreement or understanding express or implied, that the Participant has a right to continue as an employee for any period of time or at any particular rate of compensation.

(B) Beneficiary Designation . The Participant may name a beneficiary or beneficiaries to receive any shares of Company Stock underlying the Restricted Stock due to the Participant upon the Participant's death. Unless otherwise provided in the beneficiary designation, each designation made shall revoke all prior designations made by the Participant, must be made on a form prescribed by the Committee and shall be effective only when filed in writing with the Committee. If the Participant has not made an effective beneficiary designation, the deceased Participant's beneficiary shall be the Participant's surviving spouse or, if there is no surviving spouse, the deceased Participant's estate. The identity of a Participant's designated beneficiary shall be based only on the information included in the latest beneficiary designation form completed by the Participant and shall not be inferred from any other evidence.

(C) Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio without regard to the principles of conflict of laws.

(D) Rights and Remedies Cumulative . All rights and remedies of the Company and of the Participant enumerated in this Agreement shall be cumulative and, except as expressly provided otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently.

(E) Captions . The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are no way to be construed as a part of this Agreement.

(F) Notices and Payments . All payments required or permitted to be made under the provisions of this Agreement, and all notices and communications required or permitted to be given or delivered under this Agreement to the Company or to the Participant, which notices or communications must be in writing, shall be deemed to have been given if delivered by hand, or mailed by first-class mail (postage prepaid), and addressed as follows:

If to the Company, to:

Peoples Bancorp Inc.

Attn.: Compensation Committee

138 Putnam Street

P. O. Box 738

Marietta, Ohio 45750-0738

If to the Participant, to the last address on file for the Participant with the Company.

The Company or the Participant may, by notice given to the other in accordance with this Agreement, designate a different address for making payments required or permitted to be made, and for the giving of notices or other communications, to the party designating such new address. Any payment, notice or other communication required or permitted to be made or given in accordance with this Agreement shall be deemed to have been made or given upon receipt thereof by the addressee.

(G) Severability . If any provision of this Agreement, or the application of any provision hereof to any person or any circumstance, shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this Agreement or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this Agreement that if any provision of this Agreement is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable.

(H) Number and Gender . When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require.

(I) Entire Agreement . This Agreement constitutes the entire agreement between the Company and the Participant in respect of the Restricted Stock granted hereunder, and supersedes all prior and contemporaneous agreements or understandings between the parties hereto in connection with the Restricted Stock granted hereunder. Subject to Section 12.2(b) of the Plan, no change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon either party hereto unless contained in a writing signed by the party to be charged. Notwithstanding the foregoing or anything in this Agreement to the contrary, this Agreement may be amended without any additional consideration to the Participant to the extent necessary to comply with, or avoid penalties under, Section 409A of the Code even if any such amendment reduces, restricts or eliminates rights granted prior to such amendment.

(J) Signature in Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed, or caused this Agreement to be executed, to be effective as of the Grant Date.



Company: PEOPLES BANCORP INC., an Ohio corporation		Participant:

Tyler J. Wilcox		[Name]
Senior Vice President and
Secretary to the Compensation Committee
		Street Address

		City, State, and Zip Code
Date:		Date:

EXHIBIT 10.3

Peoples Bancorp Inc.

SECOND Amended and Restated

2006 Equity Plan

Time-Based Restricted Stock Award Agreement

(for Non-Employee Directors)

Section 1 Grant of Restricted Stock

Section 2 Restrictions on Vesting and Transfer

(A) Vesting . Subject to the Participant's continued service as a Non-Employee Director, and the provisions of the Plan (including Article XI thereof) and this Agreement, [___] shares of Restricted Stock shall vest on the sixth-month anniversary of the Grant Date.

(B) Transfer Restrictions . Except as provided in Section 2(C), the Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until such Restricted Stock vests as described in Section 2(A).

(i) Death . If the Participant dies, all unvested Restricted Stock shall become fully vested and transferable on the date of death.

(ii) Disability or Retirement . If the Participant Terminates due to Disability or Retirement, all unvested Restricted Stock shall become fully vested and transferable in accordance with the vesting schedule set forth in Section 2(A).

Section 3 Rights of the Participant Before Vesting

Section 4 Restricted Stock Subject to Plan; Plan as Controlling

Section 5 Listing, Registration and Qualification

(ii) The Company may cause any stock certificate which may evidence any such shares of Company Stock to bear a legend reflecting the applicable restrictions on the transfer thereof.

Section 6 Miscellaneous

(A) No Guarantee of Continued Service . The grant of Restricted Stock under this Agreement shall not: (A) create any obligation on the part of the Board or the Board of Directors of the applicable Subsidiary of the Company to nominate the Participant for re-election; or (B) be evidence of any agreement or understanding express or implied, that the Participant has a right to continue as a Non-Employee Director for any period of time or at any particular rate of compensation.

by the Committee and shall be effective only when filed in writing with the Committee. If the Participant has not made an effective beneficiary designation, the deceased Participant's beneficiary shall be the Participant's surviving spouse or, if there is no surviving spouse, the deceased Participant's estate. The identity of a Participant's designated beneficiary shall be based only on the information included in the latest beneficiary designation form completed by the Participant and shall not be inferred from any other evidence.

(C) Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio without regard to the principles of conflict of laws.

If to the Company, to:

Peoples Bancorp Inc.

Attn.: Compensation Committee

138 Putnam Street

P. O. Box 738

Marietta, Ohio 45750-0738

If to the Participant, to the last address for the Participant on file with the Company.

(H) Number and Gender . When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require.

IN WITNESS WHEREOF, the parties hereto have executed, or caused this Agreement to be executed, to be effective as of the Grant Date.



Company: PEOPLES BANCORP INC., an Ohio corporation		Participant:

Tyler J. Wilcox		[Name]
Senior Vice President and
Secretary to the Compensation Committee
		Street Address

		City, State, and Zip Code
Date:		Date:

EXHIBIT 10.4

Peoples Bancorp Inc.

NONQUALIFIED DEFERRED COMPENSATION PLAN

1.00 Purpose

As of the Effective Date, the Company adopts this Plan for the purpose of providing deferred compensation to a select group of management and highly compensated employees. This Plan is an unfunded arrangement and is intended to be exempt from the participation, vesting, funding and fiduciary requirements set forth in Title I of ERISA.

2.00 Definitions

Whenever used in this Plan, the following terms have the meanings given to them in this Article 2.00, unless another meaning is expressly provided elsewhere in this Plan. Also, the form of any term will include all of its other forms.


2.01	Account: The bookkeeping account established for each Participant under Section 6.01 of this Plan.


2.02	Affiliate: Any entity that, along with the Company, would be considered a single employer under Code §§414(b) and 414(c).

2.03

Beneficiary: The person or persons designated by a Participant to receive any portion of such Participant's benefit under the Qualified Plan that is unpaid at the time of the Participant's death. If a Participant has not made an effective designation of a Beneficiary or Beneficiaries, the Participant's Beneficiary will be his or her surviving spouse or, if there is no surviving spouse, the Participant's estate.


2.04	Board: The Board of Directors of the Company.

2.05

Cause: With respect to any Participant, “cause” as defined in any employment (or similar) agreement then in effect between the Participant and the Company or any of its Affiliates or, if not defined therein, the occurrence of any of the following: (a) gross negligence or gross neglect of duties; (b) commission of a felony or of a gross misdemeanor involving moral turpitude in connection with the Participant's employment with the Company or any of its Affiliates; (c) fraud, disloyalty, dishonesty or willful violation of any law, rule or regulation or any significant policy of the Company or any of its Affiliates committed in connection with the Participant's employment; or (d) issuance of an order for removal of the Participant by any agency which regulates the activities of the Company or any of its Affiliates. Any determination of “Cause” under this Plan shall be made by the Committee in its sole discretion.


2.06	Code: The Internal Revenue Code of 1986, as amended.


2.07	Committee: The Compensation Committee of the Board or a subcommittee thereof appointed by the Board to administer this Plan pursuant to Article 10.00.


2.08	Company: Peoples Bancorp Inc. and its successors.


2.09	Compensation: A Participant's “Compensation” as defined under the Qualified Plan calculated without regard to the compensation limit under Code §401(a)(17); provided, however, that for the 2013 Plan Year, Compensation shall exclude all equity awards.


2.10	Deferral Election Form: The form each Eligible Employee and Participant, as the case may be, must complete to defer Compensation under this Plan.


2.11	Disability: A Participant shall be considered disabled if:


a.	the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or


b.	the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participant's employer; or


c.	the Participant is determined to be totally disabled by the Social Security Administration or the Railroad Retirement Board.


2.12	Discretionary Contribution: A contribution made by the Company or any of its Affiliates that is credited to a Participant's Account in accordance with the terms of Section 4.03 of this Plan.


2.13	Distribution Election Form: The form each Eligible Employee and Participant, as the case may be, must complete to designate the form of distribution of his or her Plan Benefit or may complete to change a prior designation as to the form of distribution of his or her Plan Benefit.


2.14	Effective Date: July 25, 2013.

2.15

Eligible Employee: Each person employed by the Company or any of its Affiliates who (a) is a highly compensated employee or a member of a select group of management (both within the meaning of Title I of ERISA) of the Company or any of its Affiliates, as determined by the Committee in its sole discretion, and (b) is designated as an Eligible Employee by the Committee. The designation of an employee as an Eligible Employee for any particular Plan Year shall not confer upon such employee any right to be designated as an Eligible Employee for any future Plan Year.


2.16	ERISA: The Employee Retirement Income Security Act of 1974, as amended.


2.17	Participant: An Eligible Employee who becomes a participant in this Plan as described in Article 3.00.


2.18	Plan: The Peoples Bancorp Inc. Nonqualified Deferred Compensation Plan, as amended from time to time.


2.19	Plan Benefit: The vested portion of a Participant's Account as of any Valuation Date.


2.20	Plan Year: Each calendar year or portion thereof during which this Plan is in effect.


2.21	Qualified Plan: The Peoples Bancorp Inc. Retirement Savings Plan, as amended from time to time.


2.22	Retirement: A Termination by a Participant, other than due to death or Disability, on or after attaining 65 years of age and completing at least 10 years of service with the Company and its Affiliates.


2.23	Statutory Limits: The compensation limit under Code §401(a)(17), the limit on maximum annual additions under Code §415(c), and the limit on elective deferrals under Code §402(g).


2.24	Termination: A “separation from service” within the meaning of Code §409A and Treasury Regulation §1.409A-1(h).

2.25

Unforeseeable Emergency: A severe financial hardship to a Participant within the meaning of Code §409A resulting from: (a) an illness or accident of the Participant or the Participant's spouse, Beneficiary or dependent (as defined in Code §152, without regard to Code §§152(b)(1), (b)(2) and (d)(1)(B)); (b) loss of the Participant's property due to casualty; or (c) other similar or extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.


2.26	Valuation Date: The last day of each calendar month or any other date or dates fixed by the Committee for the valuation and adjustment of an Account.

3.00 Participation


3.01	Commencement of Participation. Subject to Section 3.02 of this Plan, each Eligible Employee shall become a Participant on the date on which the Eligible Employee executes and submits an effective Deferral Election Form.


3.02	Loss of Eligible Employee Status. A Participant who is no longer an Eligible Employee shall not be permitted to submit a Deferral Election Form and shall no longer be eligible for Discretionary Contributions. All deferrals then in effect for such Participant shall cease as of the earlier to occur of (a) the Participant's Termination, or (b) the end of the Plan Year in which the Participant is

determined to no longer be an Eligible Employee. Amounts credited to the Account of a Participant who is no longer an Eligible Employee shall continue to be administered in accordance with the terms and conditions of this Plan and shall be distributed as provided in Article 7.00.

4.00 Deferrals and Contributions


4.01	Deferrals.


(a)	Deferral Elections - In General.

(i)

A Participant may elect to defer Compensation under this Plan by submitting a signed Deferral Election Form to the Committee within the deadlines imposed by this Plan and set forth in Section 4.01(b). Any deferral election made by a Participant for a Plan Year shall be irrevocable after the expiration of the applicable deadline described in Section 4.01(b); provided, however, that a cessation of deferrals shall be allowed if the Participant suffers an Unforeseeable Emergency, becomes Disabled, or to the extent permitted by Treasury Regulation §1.409A-3(j)(4)(viii).

(ii)

Amounts deferred under this Plan shall not be made available to the Participant, except as provided in Article 7.00, and shall reduce the Compensation payable to the Participant in the year of the deferral in accordance with the provisions of the applicable Deferral Election Form; provided, however, that all such amounts shall be subject to the rights of the general creditors of the Company and its Affiliates as provided in Article 12.00 of this Plan.


(b)	Timing of Deferral Elections. A deferral election under this Plan shall be effective only if it is made in a timely manner as follows:


(i)	In General . Except as permitted under subsections (ii) and (iii) of this Section 4.01(b), a Deferral Election Form must be submitted to the Committee by the last day of the Plan Year preceding the Plan Year in which services giving rise to the Compensation to be deferred are to be performed.

(ii)

First Year of Eligibility . Notwithstanding the foregoing, if and to the extent permitted by the Committee, during the first Plan Year in which an Eligible Employee is eligible to participate in this Plan, the Eligible Employee may submit a Deferral Election Form to the Committee no later than thirty (30) days after the date on which the Eligible Employee becomes so eligible, with respect to Compensation to be earned for services performed after such election is made; provided, however, that this subsection (ii) shall not apply if, at such time, the Eligible Employee also is eligible to participate in any other arrangement that, along with this Plan, is treated as a single nonqualified deferred compensation plan under Code §409A and the Treasury Regulations promulgated thereunder.

(iii)

Performance-Based Compensation . Notwithstanding the foregoing and to the extent permitted by the Committee, a Deferral Election Form with respect to any performance-based compensation (within the meaning of Code §409A) may be submitted by an Eligible Employee or a Participant, as the case may be, by the date that is not later than six months before the end of the performance period with respect to which the performance-based compensation is based; provided that in no event may an election to defer be made after such performance-based compensation has become readily ascertainable.


(c)	Additional Requirements for Deferral Elections. Deferrals made pursuant to a Deferral Election Form must be made in whole percentages and subject to such other limitations as the Committee may impose from time to time in its sole discretion.

4.02

Discretionary Contributions. The Company or one of its Affiliates, as applicable, may make Discretionary Contributions to the Account of a Participant in such amount that would have been made pursuant to the Qualified Plan as matching contributions had all amounts elected to be deferred under this Plan pursuant to Section 4.01 been deferred under the Qualified Plan and as if the Statutory Limits did not exist. Such Discretionary Contributions shall be credited to the Accounts of Participants during the first calendar quarter following the last day of the Plan Year with respect to which the related Compensation was deferred.

4.03 Crediting of Deferrals and Discretionary Contributions.


(a)	Deferrals . Deferrals of Compensation, if any, shall be credited to a Participant's Account as soon as administratively practicable following each payroll period.


(b)	Discretionary Contributions . Any Discretionary Contribution shall be credited to a Participant's Account on the date of such Discretionary Contribution.

5.00 Vesting


5.01	Deferrals of Compensation. A Participant shall be one hundred percent (100%) vested in the portion of his or her Account attributable to deferrals of Compensation under Section 4.01 of this Plan and any deemed earnings or losses on the investment of such deferrals.


5.02	Discretionary Contributions. Except as otherwise provided in Section 5.03 of this Plan, a Participant shall have a vested right to the portion of his or her Account attributable to any Discretionary Contribution and any deemed earnings and losses on the investment of such Discretionary Contribution in accordance with the vesting schedule under the Qualified Plan.


5.03	Accelerated Vesting Upon Occurrence of Certain Events. Notwithstanding the foregoing, a Participant shall become fully vested in all amounts credited to his or her Account upon the Participant's Retirement or, if earlier, death.


5.04	Amounts Not Vested. Any amounts credited to a Participant's Account that are not vested upon his or her Termination shall be forfeited.

6.00 Accounts

6.01

Establishment of Accounts. The Committee shall establish and maintain an Account for each Participant. Each Participant's Account shall be credited with, to the extent applicable, any deferrals of Compensation and Discretionary Contributions, and the Participant's allocable share of any deemed earnings or losses on the foregoing. Each Participant's Account shall be reduced by any distributions made from such Account plus, subject to Article 8.00 of this Plan and to the extent permitted by applicable law, any federal, state and local tax withholding as may be required by law.


6.02	Establishment of Subaccounts. Within each Participant's Account, separate subaccounts shall be maintained to the extent necessary for the administration of the Plan.


6.03	Earnings or Losses on Accounts.

(a)

The Company shall invest the Account on behalf of the Participant or credit the Account with earnings or interest as though such Account were invested in such investments and under such criteria as the Committee may determine in its sole discretion. The Company may also permit the Participant to direct the investment or deemed investment of the Account in such investments as the Company may make available for this purpose from time to time or as the Participant may select. The Company assumes no responsibility or liability with respect to any loss or expense that may arise, result or be incurred from any investment or deemed investment of the Account. Any costs or expenses incurred by the Company in the investment or deemed investment of the Account shall be debited against the Account. The Account shall

be credited with earnings or debited for losses, as the case may be, based on its investment or deemed investment pursuant to Section 6.03(b).


(b)	As of each Valuation Date, each Participant's Account will be credited with earnings and charged with losses equal to the amount by which the Account would have been credited or charged since the prior Valuation Date had the Participant's Account been invested as described in Section 6.03(a) of this Plan.

(c)

Notwithstanding the foregoing, neither the Company nor any of its Affiliates shall have any obligation to invest any funds in accordance with the investment or deemed investment described in this Section 6.03. Participants' Accounts shall merely be bookkeeping entries on the books of the Company and its Affiliates, as applicable, and no Participant or Beneficiary shall obtain any property right or interest in any investment or any other particular assets of the Company or any of its Affiliates.

7.00 Distribution of Plan Benefits


7.01	Distributions Upon Termination (Other than Death).

(a)

Except as otherwise provided in this Section 7.01 and subject to the requirements of Section 409A of the Code, a Participant may elect to have distribution of his or her Plan Benefit paid in up to ten (10) substantially equal annual installments beginning on the January 1 immediately following the Participant's Termination and on each January 1 thereafter by submitting a valid Distribution Election Form in accordance with Section 7.01(b). If no election is made, the Participant's Plan Benefit shall be distributed in a single lump sum on the January 1st immediately following the Participant's Termination.

(b)

An election to receive annual installments under this Section 7.01 must be made on a signed Distribution Election Form that is submitted to the Committee no later than thirty (30) days after the date on which the Participant first becomes eligible to participate in this Plan, with respect to any deferral of Compensation or Discretionary Contribution made or credited for services performed after such election is made. For purposes of the preceding sentence, an Eligible Employee shall be first eligible to participate in this Plan only if the Eligible Employee is not eligible to participate in any other arrangement that, along with this Plan, is treated as a single nonqualified deferred compensation plan under Code §409A and the Treasury Regulations promulgated thereunder.


(i)	The election described in this Section 7.01(b) shall be subject to the terms and conditions specified in this Plan and in the Distribution Election Form and, except as provided in Section 7.01(b)(ii) of this Plan, shall be irrevocable once made.

(ii)

A Participant may elect to change the form of distribution (based on the alternatives described in Section 7.01(a) of this Plan) by submitting a new Distribution Election Form to the Committee; provided, however, that: (A) such change may not take effect until at least twelve (12) months after the date on which such election is made; (B) the payment with respect to which such change is made must be deferred (other than a distribution upon death) for a period of not less than five (5) years from the date such payment would otherwise have been paid (or, in the case of installment payments, from the date the first amount was scheduled to be paid); and (C) such change must be made not less than twelve (12) months before the date the payment is scheduled to be paid (or, in the case of installment payments, from the date the first amount was scheduled to be paid).


(iii)	Once a Participant's Plan Benefit is or begins to be distributed, no further changes to the distribution of such Plan Benefit shall be permitted. For purposes of this

Section 7.01, if the right to any payments would constitute the right to a “series of installment payments” within the meaning of Code §409A, then such payments shall be treated as a single payment within the meaning of Code §409A.

(c)

Notwithstanding any provision in the Plan to the contrary, the Committee, in its sole discretion, may require a lump sum distribution of a Participant's Plan Benefit if: (a) the distribution results in the termination and liquidation of the entirety of the Participant's interest under this Plan and all agreements, methods, programs or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Code §409A; and (b) the aggregate distribution under the arrangements is not greater than $15,000.

(d)

Notwithstanding any provision in this Plan to the contrary, any Plan Benefit payable to a Participant who is a “specified employee” (as defined in Code §409A) of the Company or any of its Affiliates upon the Participant's Termination shall not be (or begin to be) distributed until six months after the date on which the Participant Terminates (or, if earlier, the date on which the Participant dies). The first payment to be made shall include the cumulative amount, if any, of any amounts that would otherwise have been paid in accordance with the Participant's Distribution Election Form but for the fact that such amounts could not be paid during such postponement period.


7.02	Distributions Upon Death.


(a)	Notwithstanding anything in this Plan to the contrary, if a Participant dies before his or her Plan Benefit has begun to be distributed or has been fully distributed, the Plan Benefit will be distributed to the Participant's Beneficiary in a lump sum within ninety (90) days after the date of the Participant's death.


(b)	If a Participant dies after the Participant's Termination and after his or her Plan Benefit has been fully distributed, no additional benefit will be due to such Participant or his or her Beneficiary under this Plan.


7.03	Termination for Cause. Notwithstanding anything in this Plan to the contrary, if a Participant is Terminated by the Company for Cause, all Discretionary Contributions and any deemed earnings on the foregoing credited to the Participant's Account (whether or not vested) shall be forfeited as of the date of such Termination.

7.04

Unforeseeable Emergency. A Participant may request a distribution of his or her Plan Benefit upon the occurrence of an Unforeseeable Emergency. As a condition of receiving a distribution under this Section 7.04, the Participant must file a signed, written application with the Committee specifying the nature of the Unforeseeable Emergency, the amount needed to address the Unforeseeable Emergency and supplying any other information that the Committee, in its discretion, may need to ensure the conditions specified in this Section 7.04 are satisfied. The Committee shall, in its sole discretion, determine whether an Unforeseeable Emergency exists. If the Committee determines that an Unforeseeable Emergency exists, the Company or one of its Affiliates, as applicable, shall distribute an amount to the Participant that shall not be greater than the amount reasonably necessary, in the Committee's determination, to satisfy the emergency need (which may include the amount necessary to pay any federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the distribution) or, if less, the value of the Participant's Plan Benefit as of the Valuation Date immediately preceding the distribution date. A distribution on account of an Unforeseeable Emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, or by liquidation of the Participant's assets, to the extent that the liquidation of such assets would not cause a severe financial hardship.


7.05	Full Discharge. Once the Participant's Plan Benefit has been fully distributed, none of the Company, its Affiliates, the Board, the Committee, their delegates or this Plan will have any further liability under this Plan to the Participant or the Participant's Beneficiary.

8.00 Tax Withholding

The Company or any of its Affiliates, as applicable, shall withhold from other amounts owed to a Participant or require the Participant to remit to the Company or the Affiliate, as applicable, an amount sufficient to satisfy federal, state and local tax withholding requirements with respect to any Plan Benefit or the vesting, payment or cancellation of any Plan Benefit.

9.00 Claims Procedure


9.01	Filing Claims. Any Participant or Beneficiary (a “claimant”) who believes that he or she is entitled to an unpaid Plan Benefit may file a written notification of his or her claim with the Committee.


9.02	Notification to Claimant. If the claim is wholly or partially denied, the Committee will, within a reasonable period of time, and in any event within ninety (90) days of the receipt of such claim, provide the claimant with written notice of the denial setting forth in a manner calculated to be understood by the claimant:


(a)	The specific reason or reasons for which the claim was denied;


(b)	Specific reference to pertinent Plan provisions, rules, procedures or protocols upon which the Committee relied to deny the claim;


(c)	A description of any additional material or information that the claimant may file to perfect the claim and an explanation of why this material or information is necessary; and


(d)	An explanation of this Plan's claims review procedure and the time limits applicable to such procedure and a statement of the claimant's right to bring a civil action under ERISA §502(a) following an adverse determination upon review.

If special circumstances require the extension of the time period described above, the claimant will be notified before the end of the initial period of the circumstances requiring the extension and the date by which the Committee expects to reach a decision. Any extension for deciding a claim will not be for more than an additional ninety (90) day period.


9.03	Review Procedure. If a claim has been wholly or partially denied, the affected claimant, or his or her authorized representative may:


(a)	Request that the Committee reconsider its initial denial by filing a written appeal within sixty (60) days after receiving written notice that all or part of the initial claim was denied;


(b)	Review pertinent documents and other material upon which the Committee relied when denying the initial claim; and


(c)	Submit a written description of the reasons for which the claimant disagrees with the Committee's initial adverse decision.

An appeal of an initial denial of benefits and all supporting material must be made in writing within the time periods described above and directed to the Committee. The Committee is solely responsible for reviewing all benefit claims and appeals and taking all appropriate steps to implement its decision.

The Committee's decision on review will be sent to the claimant in writing and will include:


(i)	Specific reason or reasons for the decision;


(ii)	Specific references to pertinent Plan provisions upon which the decision was based;


(iii)	The claimant's ability to review and receive copies of all documents relating to the claimant's claim for benefits, free of charge;


(iv)	An explanation of any voluntary review procedures describing the steps to be taken by a claimant who wishes to submit the claimant's claims for review and the time limits applicable to such procedures; and


(v)	A statement of the claimant's right to bring a civil action under ERISA §502(a).

The Committee will consider all information submitted by the claimant, regardless of whether the information was part of the original claim. The Committee's decision on review will be made not later than sixty (60) days after the Committee's receipt of the request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered as soon as possible, but not later than one hundred twenty (120) days after the Committee's receipt of the request for review. This notice to the claimant will indicate the special circumstances requiring the extension and the date by which the Committee expects to render a decision and will be provided to the claimant prior to the expiration of the initial sixty (60) day period.

To the extent permitted by law, the decision of the Committee (if no review is properly requested) or the decision of the review official on review, as the case may be, will be final and binding on all parties. No legal action for benefits under this Plan may be brought unless and until the claimant has exhausted his or her remedies under this Article 9.00.

10.00 Administration


10.01	Administration .

(a)

The Committee is expressly empowered to interpret this Plan, determine all questions arising in the administration, interpretation and application of this Plan; employ actuaries, accountants, counsel and other persons the Committee deems necessary in connection with the administration of this Plan, request any information from the Company or any of its Affiliates the Committee deems necessary to determine whether the Company or any Affiliate would be considered insolvent or subject to a proceeding in bankruptcy, and take all other necessary and proper actions to fulfill its duties under this Plan.


(b)	The Committee shall not be liable for any actions by it hereunder, unless due to its own negligence, willful misconduct or lack of good faith.

(c)

The Committee (and any delegate under Section 10.01(d) of this Plan) shall be indemnified and saved harmless by the Company from and against all personal liability to which the Committee (and such delegate) may be subject by reason of any act done or omitted to be done in its official capacity as administrator in good faith in the administration of this Plan, including all expenses reasonably incurred in its defense in the event the Company fails to provide such defense upon the request of the Committee (or such delegate).


(d)	In exercising its authority under this Plan, the Committee may allocate all or any part of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by the Committee. Any such allocation or delegation may be revoked at any time.


10.02	Compensation and Expenses.


(a)	The Committee and any delegate under Section 10.01(d) of this Plan will serve without compensation for services provided to this Plan. The Company and, if applicable, its Affiliates, will furnish the Committee and any delegate under Section 10.01(d) of this Plan with all clerical or other assistance necessary to perform their respective duties.


(b)	The Company and its Affiliates will pay all expenses of administering this Plan.


10.03	Effect of Committee Action.


(a)	All actions taken and all determinations made by the Committee in good faith will be final and binding upon all Participants, Beneficiaries, the Company and its Affiliates and any other

person interested in this Plan. To the extent the Committee has been granted discretionary authority under this Plan, its prior exercise of this authority will not obligate the Committee to exercise its authority in a like fashion thereafter.

(b)

This Plan will be interpreted by the Committee in accordance with its terms and their intended meaning. The construction and interpretation of the provisions of this Plan are vested with the Committee, in its absolute discretion, including, without limitation, the determination of benefits and eligibility. All decisions, determinations and interpretations will be final, conclusive and binding upon all persons having an interest in this Plan.

11.00 Amendments and Termination

The Committee may, at any time, in its sole discretion, amend, modify, or suspend this Plan, in whole or in part, except that no such amendment, modification, or suspension shall have any retroactive effect to reduce any amounts allocated to a Participant's Account without the Participant's consent. The Board may, at any time, in its sole discretion terminate this Plan, in whole or in part, except that no such termination shall have any retroactive effect to reduce any amounts allocated to a Participant's Account without the Participant's consent. In the event that this Plan is terminated, the distribution of the amounts credited to a Participant's Account shall not be accelerated but shall be paid at such time and in such manner as determined under the terms of this Plan immediately prior to termination as if this Plan had not been terminated; provided, however, that the Company, in its sole discretion, may distribute a Participant's Plan Benefit in accordance with Treasury Regulation §1.409A-3(j)(4)(ix).

12.00 Prohibition Against Funding

This Plan is an unfunded, unsecured promise by the Company and its Affiliates to pay only those Plan Benefits that are accrued by Participants under the terms of this Plan. Neither the Company nor any of its Affiliates shall be required to segregate any assets into a fund established exclusively to pay Plan Benefits. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. The Participants and their Beneficiaries have only the rights of general unsecured creditors and do not have any interest in or right to any specific asset of the Company or any of its Affiliates. The Company or one of its Affiliates, as applicable, shall be designated the owner and beneficiary of any investment acquired in connection with obligations under this Plan.

13. Miscellaneous

13.01

No Contract. The adoption and maintenance of this Plan shall not be deemed to constitute a contract of employment or otherwise between the Company or any of its Affiliates and any employee or Participant or other person, or to be consideration for, or an inducement or condition of, any employment. Nothing contained herein shall be deemed to give any employee or Participant or other person the right to be retained in the service of the Company or any of its Affiliates or to interfere with the right of the Company or any of its Affiliates (which right is expressly reserved) to discharge, with or without Cause, any employee or Participant or other person at any time without any liability for any claim either against this Plan (except to the extent provided herein) or against the Company or any of its Affiliates.

13.02

No Alienation. The right of a Participant or any other person to receive Plan Benefits may not be assigned, transferred, pledged or encumbered except as provided in the Participant's designation of a Beneficiary, by will or by applicable laws of descent and distribution. Any attempt to assign, transfer, pledge or encumber a Plan Benefit will be null and void and of no legal effect. Any action taken (or attempted to be taken) contrary to the provisions of this Section 13.02 will be null and void and of no effect whatsoever; the Company, its Affiliates and the Committee may disregard such action (or attempted action) and will not in any manner be bound by it; and they, and each of them, will suffer no liability by doing so. If any Participant or other person acts (or attempts to take any action) contrary to this Section 13.02, the Company, its Affiliates and the Committee will be reimbursed and

indemnified on demand out of the interest of such Participant in this Plan for any loss, cost or expense incurred as a result of disregarding or acting in disregard of that action (or attempted action).


13.03	Governing Law. This Plan, and applicable forms associated with this Plan, will be governed by and construed in accordance with the laws of the United States and, to the extent applicable, the laws of the State of Ohio, excluding any conflicts of laws principles.


13.04	Headings. Headings and subheadings in this Plan document are inserted for convenience of reference only. They constitute no part of this Plan.


13.05	Illegal or Invalid Provision. If any provision of this Plan is held to be illegal or invalid for any reason, this Plan will be construed and enforced as if the offending provision had not been included in this Plan. However, that determination will not affect the legality or validity of the remaining parts of this Plan.


13.06	Coordination with Other Plans. A Participant's or his or her Beneficiary's rights to any Plan Benefits will be determined solely by reference to the terms of this Plan document and will be unaffected by any other document or agreement between the Participant or the Beneficiary and the Company or any of its Affiliates.

13.07

Code §409A. Although the Company makes no guarantee with respect to the treatment of payment or benefits under this Plan, this Plan is intended to comply with the requirements of Code §409A and the Treasury Regulations promulgated thereunder, and the Company will interpret, apply and administer this Plan in accordance with this intent. The Company may accelerate the time or schedule of a distribution to a Participant or the Participant's Beneficiary at any time this Plan fails to meet the requirements of Code §409A. Such payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code §409A. Notwithstanding the foregoing, none of the Company, its Affiliates, the Board or the Committee or their delegates shall have any liability to a Participant for failure to comply with the requirements of Code §409A.

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer, effective as of the Effective Date.



			PEOPLES BANCORP INC.

Date:	July 25, 2013	By: /s/	CAROL SCHNEEBERGER
			Carol Schneeberger
			Executive Vice President, Chief Administrative Officer

EXHIBIT 10.5

Peoples Bancorp Inc.

SECOND Amended and Restated

2006 Equity Plan

Performance-Based Restricted Stock Award Agreement

(for Executives)

This Performance-Based Restricted Stock Award Agreement (this “Agreement”) is made effective as of __________ (the “Grant Date”) by and between Peoples Bancorp Inc. (the “Company”) and ________ (the “Participant”). Capitalized terms not defined in this Agreement shall have the meanings given to them in the Plan (as defined below).

Section 1 Grant of Restricted Performance Stock

The Company hereby grants to the Participant an award of ____ (_____) shares of restricted Company Stock (the “Restricted Performance Stock”), subject to the terms and conditions described in the Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan (the “Plan”) and this Agreement.

Section 2 Restrictions on Vesting and Transfer

(A) Vesting . Subject to the Participant's continued employment with the Company or one of its Subsidiaries, and the provisions of the Plan (including Article XI thereof) and this Agreement, the Restricted Performance Stock shall vest as follows provided that the Company achieves the annual Performance Goals detailed below (with each such annual period to which Performance Goals are applicable constituting a “Performance Period”):

(i) _____ shares of Restricted Performance Stock on the first anniversary of the Grant Date

(ii) _____ shares of Restricted Performance Stock on the second anniversary of the Grant Date

(iii) _____ shares of Restricted Performance Stock on the third anniversary of the Grant Date

Annual Performance Goals


•	The Company has net income greater than zero.


•	The Company maintains a “well-capitalized” status as determined in accordance with applicable regulatory standards.

The annual Performance Goals must be achieved with respect to each annual Performance Period in order for the above-described pro-rata portion of the shares of Restricted Performance Stock granted to the Participant pursuant to this Agreement to vest with respect to such annual Performance Period. If the Performance Goals are not achieved in respect of a given annual Performance Period, the pro-rata portion of the shares of Restricted Performance Stock granted to the Participant pursuant to this Agreement and subject to such Performance Goals for such annual Performance Period, shall be forfeited.

(B) Transfer Restrictions . Until the Restricted Performance Stock vests as described herein, the Restricted Performance Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated. Except as otherwise provided herein, Restricted Performance Stock that vests as described in

Section 2(A), less any shares of Company Stock withheld for the payment of taxes, shall be or become transferable as follows:

(i) Fifty percent (50%) of the vested Restricted Performance Stock shall be immediately transferable; and

(ii) Fifty percent (50%) of the Restricted Performance Stock shall become transferable upon the Participant's Termination.

(i) Death . If the Participant dies during a Performance Period, a portion of the Restricted Performance Stock, determined by multiplying the number of shares of Company Stock subject to the Restricted Performance Stock by a fraction, the numerator of which is the number of whole months elapsed during the Performance Period prior to the Participant's death, and the denominator of which is the number of months in the Performance Period, shall become fully vested and transferable on the date of death. The remaining unvested portion of the Restricted Performance Stock shall be forfeited immediately on the date of death.

(ii) Disability or Retirement . If the Participant Terminates due to Disability or Retirement during the Performance Period, the Restricted Performance Stock shall become vested and transferable at the time and subject to the conditions specified in Section 2(A).

(iii) Terminations for Cause or Any Reason Other than Death, Disability or Retirement . If the Participant is Terminated for Cause or Terminates for any reason other than due to death, Disability or Retirement during the Performance Period, all unvested Restricted Performance Stock shall be forfeited immediately on the Termination date.

(D) Delivery of Shares . As soon as reasonably practicable after the Restricted Performance Stock becomes transferable, the Company shall deliver to the Participant a stock certificate for, or other appropriate documentation evidencing, the number of shares of Company Stock with respect to which the restrictions on transferability have lapsed.

Section 3 Rights of the Participant Before Vesting

Before the Restricted Performance Stock vests, (A) the Participant may exercise full voting rights associated with the shares of Company Stock underlying the Restricted Performance Stock, and (B) dividends which would otherwise be received during the Restriction Period shall be accrued and paid to the Participant in the same proportion and at the same time as the underlying Restricted Performance Stock vests, if at all, and any dividends paid in shares of Company Stock shall be subject to the same restrictions as the shares of Restricted Performance Stock granted under this Agreement.

Section 4 Covenants

(A) Non-Solicitation . The Participant acknowledges and understands that the Participant's contacts with customers or potential customers of the Company and its Subsidiaries are due, at least in part, to the support and assistance provided by the Company during the term of the Participant's employment, and therefore, that soliciting, diverting or appropriating such persons would unfairly harm the Company and its Subsidiaries. As a result, the Participant agrees that, during the term of

the Participant's employment and for a period of one (1) year thereafter, the Participant shall not, directly or indirectly:

(ii) The Participant shall treat such Confidential Information as confidential, as required by law and this Agreement;

(iii) The Participant shall only access, acquire, use, or attempt to access, acquire, or use, Confidential Information for use in performing the Participant's duties for the Company or one of its Subsidiaries, and for no other reason; and

(v) For purposes of this Agreement:

(I) "Confidential Information" means all trade secrets and proprietary information in whatever form (whether communicated orally or in documentary or other tangible form) belonging to the Company or any of its Subsidiaries that has not been published or disseminated or otherwise become a matter of public knowledge other than as a result of the Participant's acts or omissions, including without limitation: business plans, financial or accounting information, rates, insurance payment and reimbursement information, research and development information, marketing or sales information, customer lists, lists of potential

customers, contact information for any customer or potential customer, processes, computer programs, systems and software (including, without limitation, documentation and related source and object codes), customer renewal and expiration information, associate information, on-site program and support materials, training programs and associated materials, pricing lists, contracts, forms, methods, procedures and analyses and any other information that the Company or one of its Subsidiaries takes measures to prevent, in the ordinary course of business, from being available to persons other than those selected by the Company or one of its Subsidiaries.

(II) "Copies" includes all Confidential Information stored or maintained in electronic format or on electronic or magnetic media of any sort, including, without limitation, computer servers, PDAs, cell phones, I-Pods, smart cards, Blackberries, hard drives, zip drives, floppy disks, CD-ROMs, DVDs, and magnetic tapes.

(ii) Any breach of the covenants contained in this Section 4 would cause the Company or one of its Subsidiaries immediate and irreparable harm for which injunctive relief would be necessary and proper, and the Participant consents to the issuance of a temporary restraining order and a preliminary injunction upon good faith presentment by the Company or one of its Subsidiaries of allegations demonstrating such breach without the necessity of proving damages or posting a bond therefor; provided, however, that nothing contained herein shall be construed to prohibit the Company or any of its Subsidiaries from pursuing all other legal remedies at its disposal including but not limited to monetary damages.

(iii) The covenants of this Section 4 are essential to this Agreement. They shall be construed as independent of any other provision in this Agreement, and the existence of any claim or cause of action which the Participant may have against the Company or any of its Subsidiaries, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company or one of its Subsidiaries of these covenants.

Section 5 Restricted Performance Stock Subject to Plan; Plan as Controlling

By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. All terms and conditions of the Plan applicable to the Restricted Performance Stock which are not set forth in this Agreement shall be deemed incorporated herein by reference. In the event any term or condition of this Agreement is inconsistent or conflicts with the terms and conditions of the Plan, the Plan shall be deemed controlling.

Section 6 Listing, Registration and Qualification

If the Committee determines that (A) the listing, registration or qualification of the shares of Company Stock underlying the Restricted Performance Stock upon NASDAQ or any other established stock exchange, market or quotation system or under any state or federal law; (B) the consent or approval of any governmental or regulatory body; or (C) an agreement by the Participant with respect thereto, is necessary or desirable as a condition to the issuance of the shares of Company Stock underlying the Restricted Performance Stock, the shares of Company Stock may not be issued unless and until such listing, registration, qualification, consent, approval, or agreement has been effected or obtained, free of any conditions which are not acceptable to the Committee.

If any shares of Company Stock subject to the Restricted Performance Stock are issued upon the vesting thereof to a person who, at the time of such vesting or thereafter, is an affiliate of the Company for purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or are issued in reliance upon exemptions under the securities laws of any state, then upon such issuance:

(ii) The Company may cause any stock certificate which may evidence any of such shares of Company Stock to bear a legend reflecting the applicable restrictions on the transfer thereof.

Section 7 Tax Withholding

The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, the minimum statutory amount to satisfy federal, state and local taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event arising as a result of the Restricted Performance Stock, the Participant may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares of Company Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

Section 8 Miscellaneous

(A) No Guarantee of Continued Employment . The grant of Restricted Performance Stock under this Agreement shall not: (A) confer upon the Participant any right to continue in the employ of the Company or any of its Subsidiaries; (B) limit in any way the right of the Company or any Subsidiary to Terminate the Participant; or (C) be evidence of any agreement or understanding, express or implied, that the Participant has a right to continue as an employee for any period of time or at any particular rate of compensation.

(B) Beneficiary Designation . The Participant may name a beneficiary or beneficiaries to receive any shares of Company Stock underlying the Restricted Performance Stock due to the Participant upon the Participant's death. Unless otherwise provided in the beneficiary designation, each designation made shall revoke all prior designations made by the Participant, must be made on

a form prescribed by the Committee and shall be effective only when filed in writing with the Committee. If the Participant has not made an effective beneficiary designation, the deceased Participant's beneficiary shall be the Participant's surviving spouse or, if there is no surviving spouse, the deceased Participant's estate. The identity of a Participant's designated beneficiary shall be based only on the information included in the latest beneficiary designation form completed by the Participant and shall not be inferred from any other evidence.

(C) Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio without regard to the principles of conflict of laws.

(E) Captions . The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are in no way to be construed as a part of this Agreement.

If to the Company, to:

Peoples Bancorp Inc.

Attn.: Compensation Committee

138 Putnam Street

P. O. Box 738

Marietta, Ohio 45750-0738

If to the Participant, to the last address on file for the Participant with the Company.

(H) Number and Gender . When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require.

(I) Entire Agreement . This Agreement constitutes the entire agreement between the Company and the Participant in respect of the Restricted Performance Stock granted hereunder, and supersedes all prior and contemporaneous agreements or understandings between the parties hereto in connection with the Restricted Performance Stock granted hereunder. Subject to Section 12.2(b) of the Plan, no change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon either party hereto unless contained in a writing signed by the party to be charged. Notwithstanding the foregoing or anything in this Agreement to the contrary, this Agreement may be amended without any additional consideration to the Participant to the extent necessary to comply with, or avoid penalties under, Section 409A of the Code even if any such amendment reduces, restricts or eliminates rights granted prior to such amendment.

[remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed, or caused this Agreement to be executed, to be effective as of the Grant Date.



Company: PEOPLES BANCORP INC., an Ohio corporation		Participant:

Tyler J. Wilcox		[Name]
Senior Vice President and
Secretary to the Compensation Committee
		Street Address

		City, State, and Zip Code
Date:		Date:

EXHIBIT 31.1

CERTIFICATIONS

I, Charles W. Sulerzyski, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 , of Peoples Bancorp Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.




Date:	July 25, 2013	By:/s/	CHARLES W. SULERZYSKI
			Charles W. Sulerzyski
			President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, Edward G. Sloane, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 , of Peoples Bancorp Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.




Date:	July 25, 2013	By:/s/	EDWARD G. SLOANE
			Edward G. Sloane
			Executive Vice President,
			Chief Financial Officer and Treasurer

EXHIBIT 32

CERTIFICATION PURSUANT TO SECTION 1350

OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE*

In connection with the Quarterly Report of Peoples Bancorp Inc. (“Peoples Bancorp”) on Form 10-Q for the quarterly period ended June 30, 2013 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles W. Sulerzyski, President and Chief Executive Officer of Peoples Bancorp, and I, Edward G. Sloane, Executive Vice President, Chief Financial Officer and Treasurer of Peoples Bancorp, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of Peoples Bancorp and its subsidiaries.




Date:	July 25, 2013	By:/s/	CHARLES W. SULERZYSKI
			Charles W. Sulerzyski
			President and Chief Executive Officer




Date:	July 25, 2013	By:/s/	EDWARD G. SLOANE
			Edward G. Sloane
			Executive Vice President,
			Chief Financial Officer and Treasurer

* This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.