According to your screenshot, you are trying to customize the workflow (Inheritance process model). This is only available for VSTS by now, not able with on-premise TFS.
It's not able to change the state order, it's listed in the order you add them within the States page
What you can't customize
You can't change the order of states (states are listed in the order
you add them within the States page, and they're listed
alphabetically within the drop down list of a work item form)
Source Link
Since you could not reorder the state, to achieve your requirement. You could only use this workaround:
- Delete "Pending Review";
- Re-add Pending Review and then Pending Review should in sequence under Peer Review.
- The board will also update in the same sequence.
