株探米国株
日本語 英語
エドガーで原本を確認する
0001056943false00010569432023-10-302023-10-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report: October 30, 2023

(Date of earliest event reported)

PEOPLES FINANCIAL SERVICES CORP.

(Exact name of registrant as specified in its charter)

001-36388

(Commission

File Number)

 

PA

23-2391852

(State or other jurisdiction

of incorporation)

(IRS Employer of

Identification No.)

150 North Washington Avenue, Scranton, Pennsylvania 18503-1848

(Address of principal executive offices) (Zip Code)

(570) 346-7741

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common stock, $2.00 par value

PFIS

The Nasdaq Stock Market

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 

Emerging growth company ☐

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 Item 2.02 Results of Operations and Financial Condition.

On October 30, 2023, Peoples Financial Services Corp. issued a press release announcing unaudited results of operations for the three and nine month periods ended September 30, 2023 and financial condition at September 30, 2023. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d)

Exhibits

The following exhibits are filed with this Form 8-K:

 

Exhibit
No. 

Description 

99.1

Press release dated October 30, 2023 announcing results of operations and financial condition.

2

EXHIBIT INDEX

 

Exhibit
No. 

Description 

99.1

Press release dated October 30, 2023 announcing results of operations and financial condition.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

3

SIGNATURE

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 hereunto duly authorized.

 

PEOPLES FINANCIAL SERVICES CORP.

By:

/s/ Craig W. Best

Craig W. Best

Chief Executive Officer

(Principal Executive Officer)

By:

/s/ John R. Anderson

John R. Anderson III

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Date: October 30, 2023

4

EX-99.1 2 pfis-20231030xex99d1.htm EX-99.1

Exhibit 99.1

NEWS RELEASE

TO BUSINESS EDITOR:

PEOPLES FINANCIAL SERVICES CORP. Reports Unaudited Third Quarter 2023 Earnings

Scranton, PA, October 30, 2023/PRNEWSWIRE/ – Peoples Financial Services Corp. (“Peoples”) (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three and nine months ended September 30, 2023.

Peoples reported net income of $6.7 million, or $0.95 per diluted share for the three months ended September 30, 2023, a 32.3% decrease when compared to $10.0 million, or $1.38 per share for the comparable period of 2022. Quarterly net income included lower net interest income of $3.7 million due to higher deposit costs, and higher operating expenses of $1.1 million mainly due to acquisition related expenses as noted below, partially offset by a lower provision for credit losses of $0.6 million and higher noninterest income of $0.4 million.

For the nine months ended September 30, 2023, net income was $23.8 million, or $3.31 per diluted share, a 17.5% decrease when compared to $29.0 million, or $4.01 per diluted share for the comparable period of 2022. Net interest income for the current period decreased $4.9 million when compared to the nine months ended September 30, 2022 as higher interest income due to increased rates was more than offset by increased funding costs. Higher operating expenses of $4.5 million were partially offset by a $2.8 million decrease to the provision for credit losses and a $0.3 million increase in noninterest income.

Core net income, a non-GAAP measure1, excludes acquisition related expenses from the previously announced combination further discussed below, of $869 thousand and $990 thousand incurred during the three and nine months ended September 30, 2023, respectively. Core net income totaled $7.5 million or $1.05 per diluted share for the three months ended September 30, 2023 compared to $10.0 million, or $1.38 per share for the comparable period of 2022. For the nine months ended September 30, 2023, core net income was $24.5 million and $3.42 per diluted share, compared to $29.0 million and $4.01 per diluted share in the year ago period.

STRATEGIC COMBINATION WITH FNCB BANCORP, INC.

On September 27, 2023, Peoples announced it had entered into a definitive agreement to strategically combine with FNCB Bancorp, Inc., the parent company of FNCB Bank (“FNCB”). The transaction is expected to close in the first half of 2024, subject to satisfaction of customary closing conditions, including regulatory approvals and shareholder approval from both Peoples and FNCB shareholders. Highlights of the proposed transaction include:

Strategic merger that creates a bank holding company with nearly $5.5 billion in assets.

#2 ranked deposit market share in the Scranton-Wilkes Barre metro statistical area and #5 ranked Pennsylvania-headquartered community bank under $20 billion in total assets.
The proposed transaction is projected to deliver estimated 59% EPS accretion to Peoples in 2025, inclusive of all merger synergies, and a 51% dividend increase to Peoples shareholders.

FINANCIAL HIGHLIGHTS

Net income for the nine months ended September 30, 2023 was $23.8 million or $3.31 per diluted share.

Dividends paid during the nine months ended September 30, 2023 totaled $1.23 per share representing a 4.2% increase from the comparable period in 2022.

Net loan growth for the three and nine months ended September 30, 2023 was $27.7 million and $140.9 million and consisted primarily of commercial real estate loans.

1 See reconciliation of non-GAAP financial measures on pp.18-20

1


Total deposits grew $318.5 million to $3.4 billion during the first nine months of 2023 with core deposits, excluding brokered deposits, increasing $70.5 million or 2.3% during the same period. Core deposits increased $135.6 million during the three months ended September 30, 2023 due in part to seasonal inflows of municipal deposits.

At September 30, 2023, the Company had $254.5 million in cash and cash equivalents, an increase of $216.7 million from December 31, 2022. Additional contingent sources of available liquidity total $1.6 billion and include lines of credit at the Federal Reserve Bank and Federal Home Loan Bank of Pittsburgh (FHLB), brokered deposit capacity and unencumbered securities that may be pledged as collateral. The Company’s cash and cash equivalents balance and available liquidity represent 48.5% of total assets and 55.1% of total deposits.
At September 30, 2023, total estimated insured deposits, were approximately $2.4 billion, or 71.6% of total deposits; as compared to approximately $1.9 billion, or 63.1% of total deposits at December 31, 2022. Included in the uninsured total at September 30, 2023 is $475.7 million of municipal deposits collateralized by letters of credit issued by the FHLB and pledged investment securities, and $0.2 million of affiliate company deposits. Total insured and collateralized deposits represent 85.7% and 77.9% of total deposits at September 30, 2023 and December 31, 2022, respectively.
89,558 shares were repurchased during the three months ended September 30, 2023 at an average price per share of $43.95 and retired under the Company’s common stock repurchase plan, which was terminated during the quarter.
Tangible book value increased 5.3% to $37.07 at September 30, 2023 from $35.19 at December 31, 2022.
Asset quality remained strong as nonperforming assets as a percentage of total assets at September 30, 2023 was 0.10%, compared to 0.12% and 0.12% at December 31, 2022 and September 30, 2022.

  INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis, a non-GAAP measure1, our net interest margin for the three months ended September 30, 2023 was 2.44%, a decrease of 17 basis points when compared to the 2.61% for the three months ended June 30, 2023 and 64 basis points when compared to 3.08% for the same three month period in 2022. The decrease in net interest margin from the prior three month period and year ago period was due to higher funding costs offsetting the increased yield and balance of earning assets.
The tax-equivalent yield on interest-earning assets increased 9 basis points to 4.40% during the three months ended September 30, 2023 from 4.31% during the three months ended June 30, 2023, and increased 81 basis points when compared to 3.59% for the three months ended September 30, 2022.
Our cost of funds, which represents our average rate paid on total interest-bearing liabilities, increased 32 basis points to 2.61% for the three months ended September 30, 2023 when compared to 2.29% during the three months ended June 30, 2023 and increased 189 basis points compared to 0.72% in the prior year period. We continued to increase interest rates paid on deposits during the quarter to attract new deposits, retain current balances and maintain liquidity.
Our cost of interest-bearing deposits increased 32 basis points during the current three month period to 2.53% from 2.21% in the prior three month period ended June 30, 2023, and increased 194 basis points compared to 0.59% for the three months ended September 30, 2022.
Our cost of total deposits for the three months ended September 30, 2023 increased 28 basis points to 2.00% from 1.72% during the three months ended June 30, 2023, and increased 156 basis points compared to 0.44% for the three months ended September 30, 2022.

Third Quarter 2023 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income, a non-GAAP measure1, for the three months ended September 30, decreased $3.7 million or 14.5% to $21.8 million in 2023 from $25.5 million in 2022. The decrease in tax equivalent net interest income was due to higher tax-equivalent interest income of $9.5 million less elevated interest expense of $13.2 million.

1 See reconciliation of non-GAAP financial measures on pp.18-20

2


The higher interest income was the result of an increase in yield and average balance of earning assets. Average earning assets were $255.6 million higher in the three month period ended September 30, 2023 when compared to the year ago period. The tax-equivalent yield on the loan portfolio was 4.85% and 4.09% for the three months ended September 30, 2023 and 2022, respectively. This increase was due to the higher rates on adjustable and floating rate loans, and new loan originations. Loans, net, averaged $2.9 billion for the three months ended September 30, 2023 and $2.6 billion for the comparable period in 2022. For the three months ended September 30, the tax-equivalent yield on total investments increased to 1.75% in 2023 from 1.67% in 2022. Average investments totaled $542.5 million in the three months ended September 30, 2023 and $656.4 million in the three months ended September 30, 2022.

The increased interest expense in the three months ended September 30, 2023 was due primarily to higher rates on consumer, business and municipal deposits driven by the higher interest rate environment. The Company's total cost of deposits increased during the three months ended September 30, 2023 compared to the year ago period by 156 basis points to 2.00%, and the cost of interest-bearing deposits increased 194 basis points to 2.53% from 0.59% in the previous year three month period. Short-term borrowings averaged $21.8 million in the current period and added $0.3 million of interest expense at an average cost of 5.31% compared to $78.9 million in short-term borrowings and interest expense of $0.5 million in the year ago period at an average cost of 2.30%.

Average interest-bearing liabilities increased $319.3 million for the three months ended September 30, 2023, compared to the corresponding period last year due primarily to an increase in non-maturity and brokered certificate of deposits. Average noninterest-bearing deposits decreased $82.5 million or 10.7% from the prior period and represented 21.0% of total average deposits in the period, due in part to a shift to interest-bearing accounts.

For the three months ended September 30, 2023, a credit of $0.2 million was recorded to the provision for credit losses compared to a provision of $0.5 million in the year ago period. The current period provision credit was due to the impact of various factors such as updated economic assumptions as well as changes in qualitative adjustments, portfolio composition and asset quality. Changes to qualitative factors related to lower loan growth. The year ago period included a provision for credit losses of $0.5 million based on our previous allowance for credit losses methodology and then current conditions.

Noninterest income for the three months ended September 30, 2023 was $3.7 million, a $0.4 million increase from the prior year’s quarter. Higher retail and commercial account service charges and swap related revenue, was partially offset by lower mortgage banking fees.

Noninterest expense increased $1.1 million or 7.0% to $17.1 million for the three months ended September 30, 2023, from $15.9 million for the three months ended September 30, 2022. Acquisition related expenses, including legal and consulting and advisory fees, totaled $0.9 million. Salaries and employee benefits increased $0.3 million or 3.7% due to annual merit increases; new hires; lower deferred loan origination costs; and higher employee benefit costs. Occupancy and equipment expenses were higher by $0.3 million in the current period due to the increase in information technology expenses and higher facilities maintenance costs. Other expenses decreased $0.2 million due primarily to lower Pennsylvania shares taxes, partially offset by higher FDIC assessments and loan account processing fees.

The provision for income tax expense was $1.3 million for the three months ended September 30, 2023 and $2.0 million for the three months ended September 30, 2022, a decrease of $0.7 million due to lower taxable income.

Nine-Month Results – Comparison to Prior Year First Nine Months

Our net interest margin, a non-GAAP measure1, for the nine months ended September 30, 2023 was 2.62%, a decrease of 42 basis points over the prior year’s period of 3.04%. Tax-equivalent net interest income, a non-GAAP measure1, for the nine months ended September 30 decreased $4.8 million, or 6.6%, to $67.9 million in 2023 from $72.7 million in 2022. The decrease in net interest income was the result of higher loan interest income due to increased volume and rates on new loans and those that are repricing, offset by the higher cost of deposit funding. In addition, the 2023 period included $0.2 million in Small Business Administration Paycheck Protection Program (PPP) interest and fees, compared to the $1.7 million in the year ago period. Investments decreased $85.0 million compared to September 30, 2022, as the Company engaged in investment sales during the first three months of 2023 to, in part, fund loan growth and repay short-term borrowings. The yield on earning assets was 4.29% for the first nine months of 2023 compared to 3.39% for the nine month period ended September 30, 2022. The cost of interest bearing liabilities during the nine month period ended September 30, 2023 increased 177 basis points to 2.26% from 0.49% for the nine months ended September 30, 2022 as the cost of all deposit products and short-term borrowing costs increased.

1See reconciliation of non-GAAP financial measures on pp.18-20

3


Furthermore, the Company, as part of its strategy to improve on-balance sheet liquidity, added $259.0 million of brokered certificate of deposits at an average cost of 5.16% during the first nine months of 2023.

For the nine months ended September 30, 2023, a credit to the provision for credit losses of $1.1 million was recorded due to various factors including updated economic assumptions as well as changes in qualitative factors, portfolio composition and improved asset quality.

Noninterest income was $10.9 million for the nine months ended September 30, 2023 and $10.6 million for the comparable period ended September 30, 2022.  During the period, service charges, fees and commissions increased $0.6 million, due in part to a $0.4 million increase in consumer and commercial deposit service charges and increased dividends on FHLB stock. Merchant services income decreased $0.3 million during the nine months ended September 30, 2023 compared to the prior year on lower transaction volume incentives. Interest rate swap revenue decreased $0.2 million on lower origination volume and market value adjustments.

Noninterest expense for the nine months ended September 30, 2023, was $50.2 million, an increase of $4.5 million from $45.7 million for the nine months ended September 30, 2022. The increase was due primarily to $2.0 million in higher salaries and benefits expense due to annual merit increases, expansion market investments and lower deferred loan origination costs, which are recorded as a contra-salary expense, of $0.7 million due to lower loan origination volume compared to the year ago period. Occupancy and equipment expenses were higher by $0.6 million in the current period due to higher technology costs related to increased account and transaction volumes and increased facility expenses. The year ago period included $0.5 million of gains from the sale of other real estate owned, which is included in noninterest expense. Acquisition related expenses totaled $1.0 million. Other expenses including professional fees, loan account processing fees, Pennsylvania shares tax and FDIC assessments accounted for an increase of $0.7 million.

The provision for income taxes for the nine months ended September 30, 2023 decreased $1.1 million and the effective tax rate was 16.0% as compared to 16.2% in the prior period.

BALANCE SHEET REVIEW

At September 30, 2023, total assets, loans and deposits were $3.8 billion, $2.9 billion and $3.4 billion, respectively. During the nine month period, investment sales, deposit growth and FHLB term borrowings were utilized to fund loan growth and repay short-term borrowings.

Loan growth for nine months ended September 30, 2023 was $140.9 million or 6.9% annualized. Growth slowed during the three months ended September 30, 2023 and June 30, 2023, totaling $27.7 million and $25.2 million, respectively, when compared to loan growth of $88.0 million during the first three months of 2023. The Company has intentionally slowed loan growth and has focused on building liquidity due to economic uncertainty. Commercial real estate loans made up the majority of the growth with residential real estate loans also increasing. At September 30, 2023, gross PPP loans remaining totaled $22.0 million and net deferred PPP fees remaining totaled $0.2 million.

Total investments were $468.6 million at September 30, 2023, compared to $569.0 million at December 31, 2022. At September 30, 2023, the available-for-sale securities totaled $382.2 million and the held-to-maturity securities totaled $86.2 million. The unrealized losses on the held-to-maturity portfolio totaled $17.4 million and $14.6 million at September 30, 2023 and December 31, 2022, respectively. During the three month period ended March 31, 2023, $65.6 million in U.S. Treasury, tax-exempt municipals and mortgage-backed securities were sold at a net gain of $81 thousand. The proceeds were used to pay-down higher cost short-term borrowings.

Total deposits increased $318.5 million during the nine months ending September 30, 2023. Noninterest-bearing deposits decreased $81.7 million and interest-bearing deposits increased $400.2 million during the nine months ended September 30, 2023. The increase in deposits was due to a $248.0 million net increase in brokered deposits, $135.3 million in commercial deposits and a $53.7 million increase in municipal deposits, partially offset by $118.4 million in reduced retail deposits. The Company added $259.0 million of longer-term callable brokered CDs during the first six months of 2023 to improve its on-balance sheet liquidity position and mitigate risk of higher rates. The Company has the option to call the CDs after an initial three or six month period.

4


The deposit base consisted of 41.0% retail accounts, 32.8% commercial accounts, 18.1% municipal relationships and 8.1% brokered deposits at September 30, 2023. At September 30, 2023, total estimated uninsured deposits, were $955.9 million, or approximately 28.4% of total deposits as compared to $1.1 billion, or 36.9% of total deposits at December 31, 2022. Included in the uninsured total at September 30, 2023 is $475.7 million of municipal deposits collateralized by letters of credit issued by the FHLB and pledged investment securities, and $0.2 million of affiliate company deposits. As an additional resource to our uninsured depositors, we offer all depositors access to IntraFi's CDARS and ICS programs which allows deposit customers to obtain full FDIC deposit insurance while maintaining their relationship with our Bank.

During the nine months ended September 30, 2023, the Company utilized a portion of its available line at the FHLB and increased its long-term debt $25.0 million due to favorable pricing on the borrowings versus alternative funding sources.

In addition to deposit gathering and our current long term borrowings, we have additional sources of liquidity available such as cash and cash equivalents, overnight borrowings from the FHLB, the Federal Reserve’s Discount Window and Borrower-in-Custody program, correspondent bank lines of credit, brokered deposit capacity and unencumbered securities. At September 30, 2023, the Company had $254.5 million in cash and cash equivalents, an increase of $216.7 million from December 31, 2022. Although we do not plan to access the Federal Reserve's Bank Term Funding Program (BTFP), we have $4.0 million in collateral availability and an additional $371.4 million of borrowing capacity based on the par value of unencumbered securities available as collateral under this line. At September 30, 2023, we had $1.6 billion in available additional liquidity representing 41.8% of total assets, 47.5% of total deposits and 167.3% of uninsured deposits. For additional information on our deposit portfolio and additional sources of liquidity, see the tables on page 16.

The Company maintained its well capitalized position at September 30, 2023. Stockholders' equity equaled $324.4 million or $46.07 per share at September 30, 2023, and $315.4 million or $44.06 per share at December 31, 2022. The increase in stockholders’ equity from December 31, 2022 is primarily attributable to net income offset in part by an increase to accumulated other comprehensive loss (“AOCI”) resulting from an increase in the unrealized loss on available for sale securities. The net after tax unrealized loss on available for sale securities included in AOCI at September 30, 2023 and December 31, 2022 was $55.7 million and $52.0 million, respectively.

Tangible stockholders' equity, a non-GAAP measure1, increased to $37.07 per share at September 30, 2023, from $35.19 per share at December 31, 2022. Dividends declared for the nine months ended September 30, 2023 amounted to $1.23 per share, a 4.2% increase from the 2022 period, representing a dividend payout ratio of 37.2% of net income. During the nine months ended September 30, 2023, 131,686 shares were purchased and retired under the Company’s common stock repurchase plan at an average price per share of $44.29.

ASSET QUALITY REVIEW

Asset quality metrics remained strong and continued to improve. Nonperforming assets were $3.8 million or 0.13% of loans, net and foreclosed assets at September 30, 2023, compared to $4.1 million or 0.15% of loans, net and foreclosed assets at December 31, 2022. As a percentage of total assets, nonperforming assets improved to 0.10% at September 30, 2023 compared to 0.12% at December 31, 2022.  The decrease in nonperforming assets was due to the reclassification of accruing troubled debt restructurings due to the January 1, 2023 change in accounting guidance noted below, reduced levels of loans 90 days or more past due and still accruing and collection activities. At September 30, 2023, the Company had no foreclosed properties.

Effective January 1, 2023, the Company transitioned to ASU 2016-13 Financial Instruments – Credit Losses (Topic 326), commonly referred to as Current Expected Credit Losses (CECL). As a result of the transition to CECL, the allowance for credit losses was reduced $3.3 million to $24.2 million effective January 1, 2023 and the reserve for unfunded commitments was increased $270 thousand to $450 thousand. The cumulative adjustment, net of tax, was recorded as an adjustment to retained earnings effective January 1, 2023.

During the nine month period ended September 30, 2023, a $1.1 million credit to loan losses and net charge-offs of $76 thousand were recorded. The allowance for credit losses equaled $23.0 million or 0.80% of loans, net at September 30, 2023 compared to $27.5 million or 1.01% of loans, net, at December 31, 2022. Loans charged-off, net of recoveries, for the nine months ended September 30, 2023 were minimal at $76 thousand, compared to $261 thousand or 0.02% of average loans for the comparable period last year.

1See reconciliation of non-GAAP financial measures on pp.18-20

5


About Peoples:

Peoples Financial Services Corp. is the parent company of Peoples Security Bank and Trust Company, a community bank serving Allegheny, Bucks, Lackawanna, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Schuylkill, Susquehanna, and Wyoming Counties in Pennsylvania, Middlesex County in New Jersey and Broome County in New York through 28 offices. Each office, interdependent with the community, offers a comprehensive array of financial products and services to individuals, businesses, not-for-profit organizations and government entities. Peoples’ business philosophy includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures and consistently applied credit policies.

In addition to evaluating its results of operations in accordance with U.S. generally accepted accounting principles (“GAAP”), Peoples routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders’ equity and core net income ratios. The reported results included in this release contain items, which Peoples considers non-core, namely acquisition related expenses and gain or loss on the sale of securities available for sale. Peoples believes the reported non-GAAP financial measures provide information useful to investors in understanding its operating performance and trends. Where non-GAAP disclosures are used in this press release, a reconciliation to the comparable GAAP measure is provided in the accompanying tables. The non-GAAP financial measures Peoples uses may differ from the non-GAAP financial measures of other financial institutions.

SOURCE: Peoples Financial Services Corp.

/Contact: 

MEDIA/INVESTORS, Marie L. Luciani, Investor Relations Officer, 570.346.7741 or marie.luciani@psbt.com

Co:

Peoples Financial Services Corp.

St:

Pennsylvania

In:

Fin

Safe Harbor Forward-Looking Statements:

We make statements in this press release, and we may from time to time make other statements regarding our outlook or expectations for future financial or operating results and/or other matters regarding or affecting Peoples Financial Services Corp. and Peoples Security Bank and Trust Company (collectively, “Peoples”) that are considered “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “intend” and “potential.” For these statements, Peoples claims the protection of the statutory safe harbors for forward-looking statements.

Peoples cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine and the developing conflict in Israel; credit risk associated with our lending activities; changes in interest rates, loan demand, deposit flows, real estate values and competition; changes in customer behaviors, including consumer spending, borrowing and savings habits; changes in accounting principles, policies, and guidelines including our adoption of Current Expected Credit Losses (CECL) methodology, and any potential volatility in the Company’s operating results due to application of the CECL methodology; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; our ability to identify and address cyber-security risks and other economic, competitive, governmental, regulatory and technological factors affecting Peoples’ operations, pricing, products and services; adverse developments in the financial industry generally, such as recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior and other factors that may be described in Peoples’ Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

In addition to these risks, acquisitions and business combinations present risks other than those presented by the nature of the business acquired. Acquisitions and business combinations and, specifically, the pending strategic combination involving the merger of FNCB with and into Peoples (the “Merger”) may be substantially more expensive to complete than originally anticipated, and the anticipated benefits may be significantly harder-or take longer-to achieve than expected.

6


As regulated financial institutions, our pursuit of attractive acquisition and business combination opportunities could be negatively impacted by regulatory delays or other regulatory issues. Regulatory and/or legal issues related to the pre-acquisition operations of an acquired or combined business may cause reputational harm to Peoples following the acquisition or combination, and integration of the acquired or combined business with ours may result in additional future costs arising as a result of those issues.

The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, Peoples assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Additional Information regarding the Merger and Where to Find It

In connection with the proposed Merger, Peoples will file a registration statement on Form S-4 with the SEC. The registration statement will include a joint proxy statement of Peoples and FNCB, which also constitutes a prospectus of Peoples, that will be sent to shareholders of Peoples and shareholders of FNCB seeking certain approvals related to the proposed transaction.

The information contained in this release does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. INVESTORS AND SHAREHOLDERS OF PEOPLES AND FNCB AND THEIR RESPECTIVE AFFILIATES ARE URGED TO READ, WHEN AVAILABLE, THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS TO BE INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PEOPLES, FNCB AND THE PROPOSED TRANSACTION.

Investors and shareholders will be able to obtain a free copy of the registration statement, including the joint proxy statement/prospectus as well as other relevant documents filed with the SEC containing information about Peoples and FNCB without charge, at the SEC s website www.sec.gov. Copies of documents filed with the SEC by Peoples will be made available free of charge in the "Investor Relations" section of Peoples' website, www.psbt.com under the heading "SEC Filings." Copies of documents filed with the SEC by FNCB will be made available free of charge in the "About FNCB" section of FNCB's website,www.fncb.com.

[TABULAR MATERIAL FOLLOWS]

7


Summary Data

Peoples Financial Services Corp.

Five Quarter Trend (Unaudited)

(In thousands, except share and per share data)

  

Sept 30

  

June 30

  

Mar 31

  

Dec 31

  

Sept 30

 

2023

2023

2023

2022

2022

 

Key performance data:

Share and per share amounts:

Net income

$

0.95

$

1.31

$

1.05

$

1.27

$

1.38

Core net income (1)

$

1.05

$

1.31

$

1.04

$

1.49

$

1.38

Cash dividends declared

$

0.41

$

0.41

$

0.41

$

0.40

$

0.40

Book value

$

46.07

$

46.53

$

45.96

$

44.06

$

42.14

Tangible book value (1)

$

37.07

$

37.64

$

37.09

$

35.19

$

33.26

Market value:

High

$

48.19

$

44.60

$

53.48

$

57.60

$

56.09

Low

$

40.04

$

30.60

$

42.52

$

47.00

$

46.84

Closing

$

40.10

$

43.79

$

43.35

$

51.84

$

46.84

Market capitalization

$

282,338

$

312,241

$

309,985

$

371,072

$

335,503

Common shares outstanding

 

7,040,852

 

7,130,409

 

7,150,757

 

7,158,017

 

7,162,750

Selected ratios:

Return on average stockholders’ equity

 

8.05

%  

 

11.42

%  

 

9.43

%  

 

11.79

%  

 

12.69

%  

Core return on average stockholders’ equity (1)

 

8.91

%  

 

11.54

%  

 

9.35

%  

 

13.81

%  

 

12.69

%  

Return on average tangible stockholders’ equity

 

9.95

%  

 

14.12

%  

 

11.71

%  

 

14.87

%  

 

15.94

%  

Core return on average tangible stockholders’ equity (1)

 

11.01

%  

 

14.28

%  

 

11.61

%  

 

17.41

%  

 

15.94

%  

Return on average assets

 

0.72

%  

 

1.04

%  

 

0.86

%

 

1.04

%

 

1.14

%

Core return on average assets (1)

 

0.79

%  

 

1.05

%  

 

0.85

%  

 

1.22

%  

 

1.14

%  

Stockholders’ equity to total assets

 

8.48

%  

 

9.01

%  

 

8.93

%  

 

8.87

%  

 

8.58

%  

Efficiency ratio (1)(2)

 

63.50

%  

 

63.51

%  

 

60.61

%  

 

60.07

%  

 

54.95

%  

Nonperforming assets to loans, net, and foreclosed assets

 

0.13

%  

 

0.07

%  

 

0.07

%  

 

0.15

%  

 

0.16

%  

Nonperforming assets to total assets

0.10

%

0.06

%

0.05

%

0.12

%

0.12

%

Net charge-offs to average loans, net

 

0.01

%  

 

0.00

%  

 

0.00

%  

 

0.03

%  

 

0.00

%  

Allowance for credit losses to loans, net

 

0.80

%  

 

0.82

%  

 

0.90

%  

 

1.01

%  

 

1.14

%  

Interest-bearing assets yield (FTE) (3)

 

4.40

%  

 

4.31

%  

 

4.16

%  

 

3.84

%  

 

3.59

%  

Cost of funds

 

2.61

%  

 

2.29

%  

 

1.84

%  

 

1.20

%  

 

0.72

%  

Net interest spread (FTE) (3)

 

1.79

%  

 

2.02

%  

 

2.32

%  

 

2.64

%  

 

2.87

%  

Net interest margin (FTE) (3)

 

2.44

%  

 

2.61

%  

 

2.82

%  

 

2.97

%  

 

3.08

%  

(1) See Reconciliation of Non-GAAP financial measures on pages 18-20.
(2) Total noninterest expense less amortization of intangible assets and acquisition related expenses, divided by tax-equivalent net interest income and noninterest income less net gains (losses) on investment securities available for sale.
(3) Tax-equivalent adjustments were calculated using the federal statutory tax rate prevailing during the indicated periods of 21%.

8


Peoples Financial Services Corp.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

    

Sept 30

    

Sept 30

 

Nine months ended

2023

2022

 

Interest income:

Interest and fees on loans:

Taxable

$

95,283

$

67,990

Tax-exempt

 

4,205

 

3,717

Interest and dividends on investment securities:

Taxable

 

5,973

 

6,176

Tax-exempt

 

1,210

 

1,546

Dividends

 

4

 

2

Interest on interest-bearing deposits in other banks

 

190

 

61

Interest on federal funds sold

 

2,914

 

201

Total interest income

 

109,779

 

79,693

Interest expense:

Interest on deposits

 

39,805

 

6,381

Interest on short-term borrowings

 

1,590

 

579

Interest on long-term debt

 

569

 

67

Interest on subordinated debt

1,330

1,330

Total interest expense

 

43,294

 

8,357

Net interest income

 

66,485

 

71,336

(Credit to) provision for credit losses

 

(1,103)

 

1,700

Net interest income after (credit to) provision for credit losses

 

67,588

 

69,636

Noninterest income:

Service charges, fees, commissions and other

 

5,847

 

5,167

Merchant services income

 

542

 

833

Commissions and fees on fiduciary activities

 

1,691

 

1,697

Wealth management income

 

1,177

 

1,064

Mortgage banking income

 

295

 

407

Increase in cash surrender value of life insurance

 

790

 

731

Interest rate swap revenue

512

757

Net (losses) on equity investment securities

 

(17)

 

(37)

Net gains on sale of investment securities available for sale

81

Total noninterest income

 

10,918

 

10,619

Noninterest expense:

Salaries and employee benefits expense

 

26,346

 

24,365

Net occupancy and equipment expense

 

12,678

 

12,061

Acquisition related expenses

990

 

Amortization of intangible assets

 

86

 

289

Net gains on sale of other real estate owned

(18)

(478)

Other expenses

 

10,140

 

9,480

Total noninterest expense

 

50,222

 

45,717

Income before income taxes

 

28,284

 

34,538

Provision for income tax expense

 

4,534

 

5,587

Net income

$

23,750

$

28,951

Other comprehensive loss:

Unrealized losses on investment securities available for sale

$

(4,690)

$

(72,791)

Reclassification adjustment for (gains) on available for sale securities included in net income

 

(81)

 

Change in derivative fair value

826

(740)

Income tax benefit related to other comprehensive (loss)

 

(851)

 

(15,442)

Other comprehensive loss, net of income tax benefit

 

(3,094)

 

(58,089)

Comprehensive income (loss)

$

20,656

$

(29,138)

Share and per share amounts:

Net income - basic

$

3.33

$

4.04

Net income - diluted

3.31

4.01

Cash dividends declared

1.23

1.18

Average common shares outstanding - basic

 

7,130,506

 

7,171,382

Average common shares outstanding - diluted

7,165,570

7,214,966

9


Peoples Financial Services Corp.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

    

Sept 30

    

June 30

    

Mar 31

    

Dec 31

    

Sept 30

 

Three months ended

2023

2023

2023

2022

2022

 

Interest income:

Interest and fees on loans:

Taxable

$

33,095

$

32,139

$

30,049

$

27,515

$

25,128

Tax-exempt

 

1,411

 

1,405

 

1,389

 

1,367

 

1,338

Interest and dividends on investment securities:

Taxable

 

1,920

 

1,929

 

2,124

 

2,058

 

2,096

Tax-exempt

 

375

 

378

 

457

 

520

 

521

Dividends

 

 

2

 

2

 

 

Interest on interest-bearing deposits in other banks

 

91

 

85

 

14

 

40

 

41

Interest on federal funds sold

 

1,873

 

798

 

243

 

141

 

106

Total interest income

 

38,765

36,736

34,278

 

31,641

 

29,230

Interest expense:

Interest on deposits

 

16,481

 

13,714

 

9,610

 

6,251

 

3,316

Interest on short-term borrowings

 

291

 

213

 

1,086

 

524

 

457

Interest on long-term debt

 

273

 

269

 

27

 

9

 

16

Interest on subordinated debt

443

444

443

444

443

Total interest expense

 

17,488

 

14,640

 

11,166

 

7,228

 

4,232

Net interest income

 

21,277

 

22,096

 

23,112

 

24,413

 

24,998

(Credit to) provision for credit losses

 

(166)

 

(2,201)

 

1,264

 

(2,149)

 

450

Net interest income after (credit to) provision for credit losses

 

21,443

24,297

21,848

 

26,562

 

24,548

Noninterest income:

Service charges, fees, commissions and other

 

1,900

 

1,982

 

1,965

 

1,909

 

1,714

Merchant services income

 

170

 

254

 

118

 

131

 

157

Commissions and fees on fiduciary activities

 

606

 

528

 

557

 

532

 

591

Wealth management income

 

393

 

386

 

398

 

366

 

339

Mortgage banking income

 

87

 

105

 

103

 

104

 

135

Increase in cash surrender value of life insurance

 

270

 

262

 

258

 

289

 

269

Interest rate swap revenue

266

23

223

(135)

130

Net gains (losses) on investment equity securities

12

(29)

6

(18)

Net gains (losses) on sale of investment securities available for sale

81

(1,976)

Total noninterest income

 

3,692

3,552

3,674

 

1,226

 

3,317

Noninterest expense:

Salaries and employee benefits expense

 

8,784

 

8,482

 

9,080

 

9,188

 

8,474

Net occupancy and equipment expense

 

4,298

 

4,277

 

4,103

 

5,045

 

4,025

Acquisition related expenses

869

121

Amortization of intangible assets

 

29

 

28

 

29

 

74

 

96

Net gains on sale of other real estate

(18)

Other expenses

 

3,092

 

3,706

 

3,342

 

2,653

 

3,340

Total noninterest expense

 

17,054

 

16,614

 

16,554

 

16,960

 

15,935

Income before income taxes

 

8,081

 

11,235

 

8,968

 

10,828

 

11,930

Income tax expense

 

1,335

 

1,810

 

1,389

 

1,689

 

1,962

Net income

$

6,746

$

9,425

$

7,579

$

9,139

$

9,968

Other comprehensive (loss) income:

Unrealized (loss) gain on investment securities available for sale

$

(10,378)

$

(5,148)

$

10,836

$

6,356

$

(21,510)

Reclassification adjustment for (gains) losses on available for sale securities included in net income

(81)

1,976

Change in benefit plan liabilities

370

Change in derivative fair value

747

2,049

(1,970)

12

(46)

Income tax (benefit) expense related to other comprehensive (loss) income

 

(2,074)

 

(668)

 

1,891

 

1,447

 

(4,527)

Other comprehensive (loss) income, net of income tax (benefit) expense

 

(7,557)

 

(2,431)

 

6,894

 

7,267

 

(17,029)

Comprehensive (loss) income

$

(811)

$

6,994

$

14,473

$

16,406

$

(7,061)

Share and per share amounts:

Net income - basic

$

0.95

$

1.32

$

1.06

$

1.28

$

1.39

Net income - diluted

0.95

1.31

1.05

1.27

1.38

Cash dividends declared

0.41

0.41

0.41

0.40

0.40

Average common shares outstanding - basic

 

7,088,745

 

7,145,975

 

7,157,553

 

7,158,329

 

7,169,809

Average common shares outstanding - diluted

 

7,120,685

 

7,177,915

 

7,198,970

 

7,201,785

 

7,213,147

10


Peoples Financial Services Corp.

Net Interest Margin (Unaudited)

(In thousands, fully taxable equivalent basis)

Three Months Ended

September 30, 2023

September 30, 2022

Average

Interest Income/

Yield/

Average

Interest Income/

Yield/

    

Balance  

    

Expense

    

Rate  

    

Balance  

    

Expense

    

Rate  

Assets:

Earning assets:

Loans:

Taxable

$

2,627,700

$

33,095

5.00

%

$

2,377,803

$

25,128

4.19

%

Tax-exempt

226,628

1,786

3.13

225,637

1,694

2.98

Total loans

2,854,328

34,881

4.85

2,603,440

26,822

4.09

Investments:

Taxable

454,727

1,920

1.68

544,782

2,096

1.53

Tax-exempt

87,731

475

2.15

111,578

659

2.34

Total investments

542,458

2,395

1.75

656,360

2,755

1.67

Interest-bearing deposits

6,893

91

5.24

9,180

41

1.77

Federal funds sold

134,583

1,873

5.52

13,665

106

3.08

Total earning assets

3,538,262

39,240

4.40

%

3,282,645

29,724

3.59

%

Less: allowance for credit losses

23,691

29,863

Other assets

215,472

210,724

Total assets

$

3,730,043

$

39,240

$

3,463,506

$

29,724

Liabilities and Stockholders’ Equity:

Interest-bearing liabilities:

Money market accounts

$

697,387

$

5,945

3.38

%

$

630,165

$

1,228

0.77

%

Interest-bearing demand and NOW accounts

800,978

4,335

2.15

770,582

1,184

0.61

Savings accounts

462,468

272

0.23

527,244

123

0.09

Time deposits less than $100

412,705

4,234

4.07

132,599

358

1.07

Time deposits $100 or more

208,153

1,695

3.23

168,239

423

1.00

Total interest-bearing deposits

2,581,691

16,481

2.53

2,228,829

3,316

0.59

Short-term borrowings

21,759

291

5.31

78,922

457

2.30

Long-term debt

25,000

273

4.33

1,369

16

4.64

Subordinated debt

33,000

443

5.33

33,000

443

5.33

Total borrowings

79,759

1,007

5.01

113,291

916

3.21

Total interest-bearing liabilities

2,661,450

17,488

2.61

2,342,120

4,232

0.72

Noninterest-bearing deposits

688,301

770,833

Other liabilities

47,788

38,840

Stockholders’ equity

332,504

311,713

Total liabilities and stockholders’ equity

$

3,730,043

$

3,463,506

Net interest income/spread

$

21,752

1.79

%

$

25,492

2.87

%

Net interest margin

2.44

%

3.08

%

Tax-equivalent adjustments:

Loans

$

375

$

356

Investments

100

138

Total adjustments

$

475

$

494

The average balances of assets and liabilities, corresponding interest income and expense and resulting average yields or rates paid are summarized as follows. Averages for earning assets include nonaccrual loans. Investment averages include available for sale securities at amortized cost. Income on investment securities and loans is adjusted to a tax equivalent basis using the prevailing federal statutory tax rate of 21%. 

11


Peoples Financial Services Corp.

Net Interest Margin (Unaudited)

(In thousands, fully taxable equivalent basis)

For the Nine Months Ended

 

September 30, 2023

 

September 30, 2022

 

Average

Interest Income/

Yield/

 

Average

Interest Income/

Yield/

 

    

Balance  

    

Expense

    

Rate  

    

Balance  

    

Expense

    

Rate  

    

Assets:

    

    

    

    

    

Earning assets:

Loans:

Taxable

$

2,596,848

$

95,283

4.91

%  

$

2,260,993

$

67,990

4.02

%  

Tax-exempt

 

225,178

5,323

3.16

213,803

4,705

2.94

Total loans

2,822,026

100,606

4.77

2,474,796

72,695

3.93

Investments:

Taxable

 

474,425

5,977

1.68

540,512

6,178

1.53

Tax-exempt

 

92,111

1,532

2.22

111,041

1,957

2.36

Total investments

566,536

7,509

1.77

651,553

8,135

1.67

Interest-bearing deposits

 

5,004

190

5.08

9,846

61

0.83

Federal funds sold

72,098

2,914

5.40

66,057

201

0.41

Total earning assets

 

3,465,664

111,219

4.29

%  

3,202,252

81,092

3.39

%  

Less: allowance for credit losses

 

24,711

29,144

Other assets

 

211,537

216,960

Total assets

$

3,652,490

$

111,219

$

3,390,068

$

81,092

Liabilities and Stockholders’ Equity:

Interest-bearing liabilities:

Money market accounts

$

694,478

$

15,459

2.98

%  

$

604,918

$

2,061

0.46

%  

Interest bearing demand and NOW accounts

 

768,277

10,661

1.86

790,852

2,248

0.38

Savings accounts

 

485,985

727

0.20

517,381

316

0.08

Time deposits less than $100

 

327,810

8,980

3.66

128,639

965

1.00

Time deposits $100 or more

 

195,450

3,978

2.72

160,949

791

0.66

Total interest-bearing deposits

2,472,000

39,805

2.15

2,202,739

6,381

0.39

Short-term borrowings

 

43,125

1,590

4.93

40,401

579

1.92

Long-term debt

 

17,576

569

4.33

1,911

67

4.69

Subordinated debt

33,000

1,330

5.39

33,000

1,330

5.39

Total borrowings

93,701

3,489

4.98

75,312

1,976

3.51

Total interest-bearing liabilities

 

2,565,701

43,294

2.26

 

2,278,051

8,357

0.49

Noninterest-bearing deposits

 

714,779

 

751,549

Other liabilities

 

42,101

 

35,947

Stockholders’ equity

 

329,909

 

324,521

Total liabilities and stockholders’ equity

$

3,652,490

$

3,390,068

Net interest income/spread

$

67,925

2.03

%  

$

72,735

2.90

%  

Net interest margin

2.62

%  

3.04

%  

Tax-equivalent adjustments:

Loans

$

1,118

$

988

Investments

322

411

Total adjustments

$

1,440

$

1,399

The average balances of assets and liabilities, corresponding interest income and expense and resulting average yields or rates paid are summarized as follows. Averages for earning assets include nonaccrual loans. Investment averages include available for sale securities at amortized cost. Income on investment securities and loans is adjusted to a tax equivalent basis using the prevailing federal statutory tax rate of 21%. 

12


Peoples Financial Services Corp.

Details of Net Interest Income and Net Interest Margin (Unaudited)

(In thousands, fully taxable equivalent basis)

    

Sept 30

    

June 30

    

Mar 31

    

Dec 31

    

Sept 30

 

Three months ended

2023

2023

2023

2022

2022

 

Net interest income:

Interest income:

Loans, net:

Taxable

$

33,095

$

32,139

$

30,049

$

27,515

$

25,128

Tax-exempt

 

1,786

 

1,780

 

1,757

 

1,730

 

1,694

Total loans, net

 

34,881

33,919

31,806

 

29,245

 

26,822

Investments:

Taxable

 

1,920

 

1,931

 

2,126

 

2,058

 

2,096

Tax-exempt

 

475

 

481

 

576

 

658

 

659

Total investments

 

2,395

 

2,412

 

2,702

 

2,716

 

2,755

Interest on interest-bearing balances in other banks

 

91

 

85

 

14

 

40

 

41

Federal funds sold

 

1,873

 

798

 

243

 

141

 

106

Total interest income

 

39,240

37,214

34,765

 

32,142

 

29,724

Interest expense:

Deposits

 

16,481

 

13,714

 

9,610

 

6,251

 

3,316

Short-term borrowings

 

291

 

213

 

1,086

 

524

 

457

Long-term debt

 

273

 

269

 

27

 

9

 

16

Subordinated debt

443

444

443

444

443

Total interest expense

 

17,488

 

14,640

 

11,166

 

7,228

 

4,232

Net interest income

$

21,752

$

22,574

$

23,599

$

24,914

$

25,492

Loans, net:

Taxable

 

5.00

%  

 

4.93

%  

 

4.79

%  

 

4.47

%  

 

4.19

%

Tax-exempt

 

3.13

%  

 

3.17

%  

 

3.18

%  

 

3.08

%  

 

2.98

%

Total loans, net

 

4.85

%  

 

4.79

%  

 

4.66

%  

 

4.35

%  

 

4.09

%

Investments:

Taxable

 

1.68

%  

 

1.65

%  

 

1.73

%  

 

1.54

%  

 

1.53

%

Tax-exempt

 

2.15

%  

 

2.18

%  

 

2.33

%  

 

2.35

%  

 

2.34

%

Total investments

 

1.75

%  

 

1.73

%  

 

1.83

%  

 

1.68

%  

 

1.67

%

Interest-bearing balances with banks

 

5.24

%  

 

5.04

%  

 

4.66

%  

 

3.41

%  

 

1.77

%

Federal funds sold

 

5.52

%  

 

5.24

%  

 

5.09

%  

 

3.86

%  

 

3.08

%

Total interest-earning assets

 

4.40

%  

 

4.31

%  

 

4.16

%  

 

3.84

%  

 

3.59

%

Interest expense:

Deposits

 

2.53

%  

 

2.21

%  

 

1.67

%  

 

1.08

%  

 

0.59

%

Short-term borrowings

 

5.31

%  

 

5.07

%  

 

4.81

%  

 

4.20

%  

 

2.30

%

Long-term debt

 

4.33

%  

 

4.32

%  

 

4.41

%  

 

4.87

%  

 

4.64

%

Subordinated debt

5.33

%  

5.40

%  

5.44

%  

5.33

%  

5.33

%

Total interest-bearing liabilities

 

2.61

%  

 

2.29

%  

 

1.84

%  

 

1.20

%  

 

0.72

%

Net interest spread

 

1.79

%  

 

2.02

%  

 

2.32

%  

 

2.64

%  

 

2.87

%

Net interest margin

 

2.44

%  

 

2.61

%  

 

2.82

%  

 

2.97

%  

 

3.08

%

13


Peoples Financial Services Corp.

Consolidated Balance Sheets (Unaudited)

(In thousands)

    

Sept 30

    

June 30

    

Mar 31

    

Dec 31

    

Sept 30

 

At period end

2023

2023

2023

2022

2022

 

Assets:

Cash and due from banks

$

39,285

$

37,774

$

31,354

$

37,675

$

35,000

Interest-bearing balances in other banks

 

9,550

 

5,814

 

7,129

 

193

 

8,410

Federal funds sold

205,700

93,100

102,100

69,600

Investment securities:

Available for sale

 

382,227

 

395,826

 

418,125

 

477,703

 

477,590

Equity investments carried at fair value

 

92

 

92

 

81

 

110

 

103

Held to maturity

 

86,246

 

88,211

 

89,705

 

91,179

 

92,771

Total investments

 

468,565

 

484,129

 

507,911

 

568,992

 

570,464

Loans held for sale

 

 

 

 

 

653

Loans

 

2,870,969

 

2,843,238

 

2,818,043

 

2,730,116

 

2,623,706

Less: allowance for credit losses

 

23,010

 

23,218

 

25,444

 

27,472

 

29,822

Net loans

 

2,847,959

 

2,820,020

 

2,792,599

 

2,702,644

 

2,593,884

Goodwill

 

63,370

 

63,370

 

63,370

 

63,370

 

63,370

Premises and equipment, net

 

61,936

 

57,712

 

56,561

 

55,667

 

54,394

Bank owned life insurance

49,123

48,857

48,598

48,344

48,235

Deferred tax assets

17,956

16,258

16,015

18,739

20,796

Accrued interest receivable

 

12,769

 

11,406

 

11,678

 

11,715

 

10,082

Other intangible assets, net

 

19

 

48

 

77

 

105

 

179

Other assets

 

49,567

 

43,287

 

41,079

 

46,071

 

41,739

Total assets

$

3,825,799

$

3,681,775

$

3,678,471

$

3,553,515

$

3,516,806

Liabilities:

Deposits:

Noninterest-bearing

$

691,071

$

713,375

$

746,089

$

772,765

$

769,935

Interest-bearing

 

2,674,012

 

2,516,106

 

2,489,878

 

2,273,833

 

2,354,205

Total deposits

 

3,365,083

 

3,229,481

 

3,235,967

 

3,046,598

 

3,124,140

Short-term borrowings

 

27,020

 

19,530

 

17,280

 

114,930

 

14,700

Long-term debt

 

25,000

 

25,000

 

25,000

 

555

 

1,104

Subordinated debt

33,000

33,000

33,000

33,000

33,000

Accrued interest payable

 

4,777

 

4,701

 

2,304

 

903

 

1,129

Other liabilities

 

46,529

 

38,276

 

36,286

 

42,179

 

40,923

Total liabilities

 

3,501,409

3,349,988

3,349,837

 

3,238,165

 

3,214,996

Stockholders’ equity:

Common stock

 

14,093

 

14,272

 

14,323

 

14,321

 

14,330

Capital surplus

 

121,870

 

125,371

 

126,231

 

126,850

 

126,845

Retained earnings

 

247,857

 

244,017

 

237,522

 

230,515

 

224,238

Accumulated other comprehensive loss

 

(59,430)

 

(51,873)

 

(49,442)

 

(56,336)

 

(63,603)

Total stockholders’ equity

 

324,390

 

331,787

 

328,634

 

315,350

 

301,810

Total liabilities and stockholders’ equity

$

3,825,799

$

3,681,775

$

3,678,471

$

3,553,515

$

3,516,806

14


Peoples Financial Services Corp.

Loan and Asset Quality Data (Unaudited)

(In thousands)

At period end

    

September 30, 2023

    

June 30, 2023

    

March 31, 2023

    

December 31, 2022

    

September 30, 2022

Commercial

Taxable

$

351,545

$

384,091

$

375,033

$

377,215

$

371,164

Non-taxable

229,635

225,796

224,343

222,043

224,764

Total

581,180

609,887

599,376

599,258

595,928

Real estate

Commercial real estate

1,846,350

 

1,794,355

 

1,782,911

 

1,709,827

 

1,620,116

Residential

357,647

 

348,911

 

342,459

 

330,728

 

326,223

Total

2,203,997

2,143,266

2,125,370

2,040,555

1,946,339

Consumer

Indirect Auto

78,953

83,348

86,587

76,491

70,006

Consumer Other

6,839

 

6,737

 

6,710

 

13,812

 

11,433

Total

85,792

90,085

93,297

90,303

81,439

Total

$

2,870,969

$

2,843,238

$

2,818,043

$

2,730,116

$

2,623,706

    

Sept 30

    

June 30

    

Mar 31

    

Dec 31

    

Sept 30

 

At quarter end

2023

2023

2023

2022

2022

 

Nonperforming assets:

Nonaccrual/restructured loans

$

3,060

$

1,900

$

1,798

$

3,386

$

3,938

Accruing loans past due 90 days or more

 

700

 

181

 

59

 

748

 

280

Foreclosed assets

 

 

 

 

 

Total nonperforming assets

$

3,760

$

2,081

$

1,857

$

4,134

$

4,218

Sept 30

    

June 30

    

Mar 31

    

Dec 31

    

Sept 30

Three months ended

2023

2023

2023

2022

2022

Allowance for credit losses:

Beginning balance

$

23,218

$

25,444

$

27,472

$

29,822

$

29,374

ASU 2016-13 Transition Adjustment

(3,283)

Adjusted beginning balance

23,218

25,444

24,189

29,822

29,374

Charge-offs

 

65

 

77

 

75

 

233

 

101

Recoveries

 

23

 

52

 

66

 

32

 

99

(Credit to) provision for credit losses

 

(166)

 

(2,201)

 

1,264

 

(2,149)

 

450

Ending balance

$

23,010

$

23,218

$

25,444

$

27,472

$

29,822

15


Peoples Financial Services Corp.

Deposit and Liquidity Detail (Unaudited)

(In thousands)

At period end

    

September 30, 2023

    

June 30, 2023

    

March 31, 2023

    

December 31, 2022

    

September 30, 2022

Interest-bearing deposits:

Money market accounts

$

767,868

$

670,669

$

775,511

$

685,323

$

706,947

Interest bearing demand and NOW accounts

 

825,066

760,690

 

698,888

 

772,712

 

813,743

Savings accounts

 

447,684

470,340

 

500,709

 

523,931

 

530,124

Time deposits less than $250

 

512,646

504,672

 

400,327

 

199,136

 

224,517

Time deposits $250 or more

 

120,748

109,735

 

114,443

 

92,731

 

78,874

Total interest-bearing deposits

 

2,674,012

2,516,106

 

2,489,878

 

2,273,833

 

2,354,205

Noninterest-bearing deposits

 

691,071

713,375

 

746,089

 

772,765

 

769,935

Total deposits

$

3,365,083

$

3,229,481

$

3,235,967

$

3,046,598

$

3,124,140

    

September 30, 2023

At period end

Amount

    

Percent of Total

Number of accounts

Average Balance

Deposit Detail:

Retail

$

1,383,211

41.0

%

70,835

$

20

Commercial

 

1,102,473

32.8

13,288

 

83

Municipal

 

607,785

18.1

1,811

 

336

Brokered

 

271,614

8.1

28

 

9,701

Total Deposits

$

3,365,083

100.0

85,962

$

39

Uninsured

955,942

28.4

%

Insured

2,409,141

71.6

    

December 31, 2022

At period end

Amount

    

Percent of Total

Number of accounts

Average Balance

Deposit Detail:

Retail

$

1,501,641

49.3

%

71,039

$

21

Commercial

967,244

31.7

11,891

81

Municipal

554,099

18.2

1,623

341

Brokered

23,614

0.8

30

787

Total Deposits

$

3,046,598

100.00

84,583

$

36

Uninsured

1,125,252

36.9

%

Insured

1,921,346

63.1

    

    

Total Available

At September 30, 2023

Total Available

Outstanding

for Future Liquidity

FHLB advances

$

1,234,264

$

405,951

$

828,313

Federal Reserve - Discount Window

266,519

266,519

Correspondent bank lines of credit

 

18,000

 

 

18,000

Federal Reserve - Bank Term Funding Program

4,000

4,000

Other sources of liquidity:

Brokered deposits

382,580

271,614

110,966

Unencumbered securities

371,444

371,444

Total sources of liquidity

$

2,276,807

$

677,565

$

1,599,242

16


Peoples Financial Services Corp.

Consolidated Balance Sheets (Unaudited)

(In thousands)

    

Sept 30

    

June 30

    

Mar 31

    

Dec 31

    

Sept 30

 

Average quarterly balances

2023

2023

2023

2022

2022

 

Assets:

Loans, net:

Taxable

$

2,627,700

$

2,615,881

$

2,546,068

$

2,441,358

$

2,377,803

Tax-exempt

 

226,628

 

224,960

 

223,917

 

223,293

 

225,637

Total loans, net

 

2,854,328

2,840,841

2,769,985

 

2,664,651

 

2,603,440

Investments:

Taxable

 

454,727

 

469,712

 

499,327

 

528,826

 

544,782

Tax-exempt

 

87,731

 

88,371

 

100,368

 

111,206

 

111,578

Total investments

 

542,458

 

558,083

 

599,695

 

640,032

 

656,360

Interest-bearing balances with banks

 

6,893

 

6,839

 

1,218

 

4,649

 

9,180

Federal funds sold

 

134,583

 

61,093

 

19,353

 

14,477

 

13,665

Total interest-earning assets

 

3,538,262

 

3,466,856

 

3,390,251

 

3,323,809

 

3,282,645

Other assets

 

191,781

 

184,020

 

184,594

 

169,153

 

180,861

Total assets

$

3,730,043

$

3,650,876

$

3,574,845

$

3,492,962

$

3,463,506

Liabilities and stockholders’ equity:

Deposits:

Interest-bearing

$

2,581,691

$

2,493,680

$

2,337,951

$

2,301,974

$

2,228,829

Noninterest-bearing

 

688,301

 

711,729

 

744,931

 

758,889

 

770,833

Total deposits

 

3,269,992

 

3,205,409

 

3,082,882

 

3,060,863

 

2,999,662

Short-term borrowings

 

21,759

 

16,854

 

91,530

 

49,444

 

78,922

Long-term debt

 

25,000

 

25,000

 

2,482

 

814

 

1,369

Subordinated debt

33,000

33,000

33,000

33,000

33,000

Other liabilities

 

47,788

 

39,494

 

38,917

 

41,436

 

38,840

Total liabilities

 

3,397,539

3,319,757

3,248,811

 

3,185,557

 

3,151,793

Stockholders’ equity

 

332,504

 

331,119

 

326,034

 

307,405

 

311,713

Total liabilities and stockholders’ equity

$

3,730,043

$

3,650,876

$

3,574,845

$

3,492,962

$

3,463,506

17


Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)

    

Sept 30

    

June 30

Mar 31

    

Dec 31

    

Sept 30

 

Three months ended

2023

2023

2023

2022

2022

 

Core net income per share:

Net income GAAP

$

6,746

$

9,425

$

7,579

$

9,139

$

9,968

Adjustments:

Less: Gain (loss) on sale of available for sale securities

81

(1,976)

Add: Gain (loss) on sale of available for sale securities tax adjustment

17

(415)

Add: Acquisition related expenses

869

121

Less: Acquisition related expenses tax adjustment

144

19

Core net income

$

7,471

$

9,527

$

7,515

$

10,700

$

9,968

Average common shares outstanding - diluted

 

7,120,685

 

7,177,915

 

7,198,970

 

7,201,785

 

7,213,147

Core net income per share

$

1.05

$

1.33

$

1.04

$

1.49

$

1.38

Tangible book value:

Total stockholders’ equity

$

324,390

$

331,787

$

328,634

$

315,350

$

301,810

Less: Goodwill

 

63,370

 

63,370

 

63,370

 

63,370

 

63,370

Less: Other intangible assets, net

 

19

 

48

 

77

 

105

 

179

Total tangible stockholders’ equity

$

261,001

$

268,369

$

265,187

$

251,875

$

238,261

Common shares outstanding

 

7,040,851

 

7,130,409

 

7,150,757

 

7,158,017

 

7,162,750

Tangible book value per share

$

37.07

$

37.64

$

37.09

$

35.19

$

33.26

Core return on average stockholders’ equity:

Net income GAAP

$

6,746

$

9,425

$

7,579

$

9,139

$

9,968

Adjustments:

Less: Gain (loss) on sale of available for sale securities

81

(1,976)

Add: Gain (loss) on sale of available for sale securities tax adjustment

17

(415)

Add: Acquisition related expenses

869

121

Less: Acquisition related expenses tax adjustment

144

19

Core net income

$

7,471

$

9,527

$

7,515

$

10,700

$

9,968

Average stockholders’ equity

$

332,504

$

331,119

$

326,034

$

307,405

$

311,713

Core return on average stockholders’ equity

 

8.91

%  

 

11.54

%  

 

9.35

%  

 

13.81

%  

 

12.69

%

Return on average tangible equity:

Net income GAAP

$

6,746

$

9,425

$

7,579

$

9,139

$

9,968

Average stockholders’ equity

$

332,504

$

331,119

$

326,034

$

307,405

$

311,713

Less: average intangibles

 

63,404

 

63,433

 

63,461

 

63,512

 

63,549

Average tangible stockholders’ equity

$

269,101

$

267,686

$

262,573

$

243,893

$

248,164

Return on average tangible stockholders’ equity

 

9.95

%  

 

14.12

%  

 

11.71

%  

 

14.87

%  

 

15.94

%

Core return on average tangible stockholders’ equity:

Net income GAAP

$

6,746

$

9,425

$

7,579

$

9,139

$

9,968

Adjustments:

Less: Gain (loss) on sale of available for sale securities

81

(1,976)

Add: Gain (loss) on sale of available for sale securities tax adjustment

17

(415)

Add: Acquisition related expenses

869

121

Less: Acquisition related expenses tax adjustment

144

19

Core net income

$

7,471

$

9,527

$

7,515

$

10,700

$

9,968

Average stockholders’ equity

$

332,504

$

331,119

$

326,034

$

307,405

$

311,713

Less: average intangibles

 

63,404

63,433

63,461

 

63,512

 

63,549

Average tangible stockholders’ equity

$

269,101

$

267,686

$

262,573

$

243,893

$

248,164

Core return on average tangible stockholders’ equity

 

11.01

%  

 

14.28

%  

 

11.61

%  

 

17.41

%  

 

15.94

%

Core return on average assets:

Net income GAAP

$

6,746

$

9,425

$

7,579

$

9,139

$

9,968

Adjustments:

Less: Gain (loss) on sale of available for sale securities

81

(1,976)

Add: Gain (loss) on sale of available for sale securities tax adjustment

17

(415)

Add: Acquisition related expenses

869

121

Less: Acquisition related expenses tax adjustment

144

19

Core net income

$

7,471

$

9,527

$

7,515

$

10,700

$

9,968

Average assets

$

3,730,043

$

3,650,876

$

3,574,845

$

3,492,962

$

3,463,506

Core return on average assets

 

0.79

%  

 

1.05

%  

 

0.85

%  

 

1.22

%  

 

1.14

%

18


Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)

    

Sept 30

    

Sept 30

 

Nine months ended

2023

2022

 

Core net income per share:

Net income GAAP

$

23,750

$

28,951

Adjustments:

Less: Gain on sale of available for sale securities

 

81

 

Add: Gain on sale of available for sale securities tax adjustment

17

 

Add: Acquisition related expenses

990

Less: Acquisition related expenses tax adjustment

163

Core net income

$

24,513

$

28,951

Average common shares outstanding - diluted

7,165,570

7,214,966

Core net income per share

$

3.42

$

4.01

Core return on average stockholders’ equity:

Net income GAAP

$

23,750

$

28,951

Adjustments:

Less: Gain on sale of available for sale securities

81

Add: Gain on sale of available for sale securities tax adjustment

17

Add: Acquisition related expenses

990

Less: Acquisition related expenses tax adjustment

163

Core net income

$

24,513

$

28,951

Average stockholders’ equity

329,909

324,521

Core return on average stockholders’ equity

9.93

%

11.93

%

Return on average tangible equity:

Net income GAAP

$

23,750

$

28,951

Average stockholders’ equity

329,909

324,521

Less: average intangibles

63,432

63,694

Average tangible stockholders’ equity

$

266,477

$

260,827

Return on average tangible stockholders’ equity

11.92

%

14.84

%

Core return on average tangible stockholders’ equity:

Net income GAAP

$

23,750

$

28,951

Adjustments:

Less: Gain on sale of available for sale securities

81

Add: Gain on sale of available for sale securities tax adjustment

17

Add: Acquisition related expenses

990

Less: Acquisition related expenses tax adjustment

163

Core net income

$

24,513

$

28,951

Average stockholders’ equity

329,909

324,521

Less: average intangibles

63,432

63,694

Average tangible stockholders’ equity

$

266,477

$

260,827

Core return on average tangible stockholders’ equity

12.30

%

14.84

%

Core return on average assets:

Net income GAAP

$

23,750

$

28,951

Adjustments:

Less: Gain on sale of available for sale securities

81

Add: Gain on sale of available for sale securities tax adjustment

17

Add: Acquisition related expenses

990

Less: Acquisition related expenses tax adjustment

163

Core net income

$

24,513

$

28,951

Average assets

3,652,490

3,390,068

Core return on average assets

0.90

%

1.14

%

19


Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)

The following tables reconcile the non-GAAP financial measures of FTE net interest income for the three and nine months ended September 30, 2023 and 2022:

Three months ended September 30

    

2023

    

2022

    

Interest income (GAAP)

$

38,765

$

29,230

Adjustment to FTE

 

475

 

494

Interest income adjusted to FTE (non-GAAP)

 

39,240

 

29,724

Interest expense

 

17,488

 

4,232

Net interest income adjusted to FTE (non-GAAP)

$

21,752

$

25,492

Nine months ended September 30

    

2023

    

2022

Interest income (GAAP)

$

109,779

$

79,693

Adjustment to FTE

 

1,440

 

1,399

Interest income adjusted to FTE (non-GAAP)

 

111,219

 

81,092

Interest expense

 

43,294

 

8,357

Net interest income adjusted to FTE (non-GAAP)

$

67,925

$

72,735

The efficiency ratio is noninterest expenses, less amortization of intangible assets and acquisition related costs, as a percentage of FTE net interest income plus noninterest income. The following tables reconcile the non-GAAP financial measures of the efficiency ratio to GAAP for the three and nine months ended September 30, 2023 and 2022:

Three months ended September 30

    

2023

    

2022

    

Efficiency ratio (non-GAAP):

Noninterest expense (GAAP)

$

17,054

$

15,935

Less: Amortization of intangible assets expense

 

29

 

96

Less: Acquisition related expenses

869

Noninterest expense (non-GAAP)

16,156

15,839

Net interest income (GAAP)

21,277

24,998

Plus: Taxable equivalent adjustment

475

494

Noninterest income (GAAP)

3,692

3,317

Less: Net gains (losses) on equity securities

(18)

Net interest income (FTE) plus noninterest income (non-GAAP)

$

25,444

$

28,827

Efficiency ratio (non-GAAP)

63.50

%

54.95

%

Nine months ended September 30

    

2023

    

2022

    

Efficiency ratio (non-GAAP):

Noninterest expense (GAAP)

$

50,222

$

45,717

Less: Amortization of intangible assets expense

 

86

 

289

Less: Acquisition related expenses

990

Noninterest expense (non-GAAP)

49,146

45,428

Net interest income (GAAP)

66,485

71,336

Plus: Taxable equivalent adjustment

1,440

1,399

Noninterest income (GAAP)

10,918

10,619

Less: Net losses on equity securities

(17)

(37)

Less: Gains on sale of available for sale securities

81

Net interest income (FTE) plus noninterest income (non-GAAP)

$

78,779

$

83,391

Efficiency ratio (non-GAAP)

62.38

%

54.48

%

20