PEOPLES FINANCIAL SERVICES CORP. Reports First Quarter 2022 Earnings

36 mins read

SCRANTON, Pa., April 26, 2022 — 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 months ended March 31, 2022. Peoples reported net income of $9.6 million, or $1.33 per diluted share for the three months ended March 31, 2022, a 2.0% increase when compared to $9.5 million, or $1.31 per share for the comparable period of 2021. The increase in earnings over the year ago period is a result of a $1.9 million increase to net interest income due to a $1.1 million increase in interest income coupled with a $0.8 million decrease to interest expense and a decrease to income tax expense of $0.8 million, due in part to a $0.6 million deferred tax adjustment recorded in the prior period. Partially offsetting the increases were a higher provision for loan losses of $0.8 million, higher noninterest expenses of $1.7 million and slightly lower noninterest income of $0.1 million.  Strong loan growth resulted in a provision for loan losses of $0.3 million in the current period, as compared to a credit to the loan loss provision of $0.5 million in the year ago period. Higher noninterest expenses were mainly the result of higher salaries and benefits of $1.5 million and higher occupancy and equipment costs of $0.6 million related in part to our market expansion and information technology upgrades. 

NOTABLES

  • Record quarterly core net income, a non-GAAP measure1, of $9.6 million or $1.33 per diluted share.
  • First quarter dividend of $0.39 per share represents a 5.4% increase from the first quarter of 2021.
  • Loan growth for the three months ended March 31, 2022, excluding Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans, was $98.7 million or 17.7% annualized.
  • Core return on average assets (“ROAA”), a non-GAAP measure, was 1.17% for the three months ended March 31, 2022 compared to 0.82% for the three months ended December 31, 2021, and 1.32% for the comparable period in 2021.
  • Core return on average equity (“ROE”) was 11.82% for the three months ended March 31, 2022 compared to 8.03% for the three months ended December 31, 2021 and 11.98% for the comparable period in 2021.
  • Core return on average tangible equity was 14.65% for the three months ended March 31, 2022 compared to 9.92% for the three months ended December 31, 2021 and 14.99% for the comparable period in 2021.
  • Tax-equivalent net interest income, a non-GAAP measure, increased $2.0 million or 9.3% to $23.1 million for the three months ended March 31, 2022 compared to $21.1 million for the same period in 2021.
  • Nonperforming assets as a percentage of loans and foreclosed assets at March 31, 2022 improved to 0.20% from 0.21% at December 31, 2021, and from 0.38% at March 31, 2021.
  • Peoples Security Bank and Trust Company was ranked by S&P Global Market Intelligence as the 29th best performing community bank in 2021 with assets between $3 and $10 billion. The rankings were released during the three months ended March 31, 2022 and were evaluated based on: pretax return on tangible common equity; efficiency ratio; operating revenue growth; net charge-offs to average loans and leases net of PPP loans; and leverage ratio.

INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis (“FTE”), a non-GAAP measure, our net interest margin for the three months ended March 31, 2022 was 2.97%, an increase of 15 basis points when compared to the three months ended December 31, 2021, and a decrease of 18 basis points when compared to 3.15% for the same three month period in 2021.  The increase in net interest margin from the prior three month period was due to an increase in earning assets, utilizing a portion of low-yielding excess cash to fund higher yielding loans and investment purchases, higher PPP related fees, a benefit from the increase to the federal funds rate, and lower funding costs.  The tax-equivalent yield on interest-earning assets increased 14 basis points to 3.22% during the three months ended March 31, 2022 from 3.08% during the three months ended December 31, 2021, and decreased 33 basis points when compared to 3.55% for the three months ended March 31, 2021.  The decrease in net interest margin and yield from the year ago period was due to lower market rates, the result of the Federal Open Market Committee (“FOMC”) cutting the federal funds rate 150 basis points in the first three months of 2020 resulting from the uncertain economic impact of the coronavirus pandemic. The decrease in market rates resulted in lower rates on our existing adjustable rate loans and affected rates on new originations. At the same time, we have experienced lower interest-bearing liability costs due to lower market rates and our ability to reduce deposit costs. Our cost of funds, which represents our average rate paid on total interest-bearing liabilities, decreased 2 basis points to 0.35% for the three months ended March 31, 2022 when compared to 0.37% during the three months ended December 31, 2021, and has decreased 22 basis points when compared to the same three month period in 2021 due to our actions to reduce deposit rates.

First Quarter 2022 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income for the three months ended March 31, increased $2.0 million or 9.3% to $23.1 million in 2022 from $21.1 million in 2021. The increase in tax equivalent net interest income was due to higher tax-equivalent interest income of $1.2 million coupled with lower interest expense of $0.8 million.  The higher interest income was the result of higher volumes of average earning assets, which offset a negative rate variance.  Average earning assets were $436.8 million higher in the three month period ended March 31, 2022 when compared to the year ago period.  Deposit rate reductions over the past twelve months offset a positive volume variance and resulted in the reduction to interest expense.  PPP loans averaged $49.0 million in the three-month period ended March 31, 2022 with interest and net fees totaling approximately $1.0 million compared to average balances of $195.5 million with interest and net fees totaling $2.5 million in the year ago period. The tax-equivalent yield on the loan portfolio decreased to 3.85% for the three months ended March 31, 2022, compared to 4.09% for the comparable period in 2021 due to lower market rates. Excluding PPP loans, the tax-equivalent yield of the loan portfolio was 3.75% and 3.99% at March 31, 2022 and 2021, respectively.  Loans, net averaged $2.4 billion for the three months ended March 31, 2022 and $2.2 billion for the comparable period in 2021. For the three months ended March 31, the tax-equivalent yield on total investments decreased to 1.68% in 2022 from 2.15% in 2021. Average investments totaled $633.7 million in 2022 and $332.4 million in 2021. Average interest-bearing liabilities increased $315.5 million for the three months ended March 31, 2022, compared to the corresponding period last year due primarily to deposit growth, offset by lower borrowings. Strong organic growth in non-maturity deposits and growth of public fund deposits permitted us to lower our short-term and long-term borrowings.

For the three months ended March 31, 2022, the provision for loan losses was $0.3 million, the result of $98.7 million growth of non-PPP loans.  In the year ago period, the provision for loan losses was a credit of $0.5 million due to improved credit quality and slight decrease of non PPP loans.

Noninterest income for the three months ended March 31, 2022 was $3.4 million, a $0.1 million decrease from $3.5 million for the three months ended March 31, 2021.  Revenue from commercial loan interest rate swap transactions was $0.4 million lower in the current period due to the higher number of transactions and the higher credit value adjustment in the year ago period.  Mortgage banking revenue was $0.2 million lower in the current period due to lower volumes of mortgages sold into the secondary market.  The increase in service charges, fees and commissions was due in part to the reversal of an accrual of a $0.3 million bank owned life insurance benefit in the year ago period, and a $0.1 million incentive received related to our debit card activity in the current period.

Noninterest expense increased $1.7 million or 13.1% to $14.3 million for the three months ended March 31, 2022, from $12.6 million for the three months ended March 31, 2021. Salaries and employee benefits increased $1.5 million or 22.4% due to the addition of lending teams and credit support staff in our newest expansion markets of Piscataway, New Jersey and Pittsburgh that opened during the fourth quarter of 2021.  Additionally, deferred loan origination costs, which are recorded as a contra-salary expense, were $0.7 million higher in the year ago period due to the origination of PPP loans related to round two of the program.  Occupancy and equipment expenses were higher by $0.6 million in the current period due to information technology investments related to mobile/digital banking solutions implemented during the second half of 2021. Other expenses were lower by $0.4 million due primarily to higher gains realized on the sale of other real estate owned of $0.4 million.


The provision for income tax expense decreased $0.8 million for the three months ended March 31, 2022 compared to the year ago period due to higher levels of tax-exempt income in the current period and a $0.6 million deferred tax adjustment recorded in the prior period.

BALANCE SHEET REVIEW

At March 31, 2022, total assets, loans and deposits were $3.4 billion, $2.4 billion and $3.0 billion, respectively. Loan growth for the three months ended March 31, 2022, excluding SBA PPP loans, was $98.7 million or 17.7% annualized due to improved loan demand and organic growth in our newest markets.  Commercial real estate loans made up the majority of the growth with tax-exempt loans and residential real estate loans also showing increases.  During the three months ended March 31, 2022, the SBA forgave PPP loans totaling $30.2 million.  Gross SBA PPP loans remaining at March 31, 2022 total $38.7 million.  Net deferred SBA PPP fees remaining at March 31, 2022 total $0.7 million and are mostly expected to be earned throughout the remainder of 2022.  Total investments were $631.5 million at March 31, 2022, compared to $588.7 million at December 31, 2021.  The increase to the investment portfolio resulted from reinvesting a portion of our low-yielding federal funds balance into higher-yielding U.S. Treasury securities.  At March 31, 2022, the available-for-sale investment portfolio had an unrealized loss of $34.4 million compared to an unrealized loss of $1.8 million at December 31, 2021, which was the result of the rapid increase in market rates and the FOMC’s 25 basis point increase to the federal funds rate during March 2022.  Our federal funds sold balance decreased $141.2 million to $101.2 million at March 31, 2022 from $242.4 million at December 31, 2021 as a result of funding our loan growth and investment purchases during the quarter.  Total deposits increased slightly by $1.5 million from December 31, 2021, as the seasonal outflow of public fund deposits were replaced with consumer and commercial growth.  Non-interest bearing deposits increased $22.2 million, or 3.0% and interest-bearing deposits decreased $20.7 million, or 0.9% during the three months ended March 31, 2022.

Stockholders’ equity equaled $320.5 million or $44.64 per share at March 31, 2022, and $340.1 million or $47.44 per share at December 31, 2021. The decrease in stockholders’ equity from December 31, 2021 is primarily attributable to a decrease to accumulated other comprehensive income (“AOCI”) resulting from an increase to the unrealized loss on investment securities and dividends paid to shareholders, partially offset by net income.  Tangible stockholders’ equity decreased to $35.76 per share at March 31, 2022, from $38.54 per share at December 31, 2021. Dividends declared for the three months ended March 31, 2022 amounted to $0.39 per share, a 5.4% increase from the 2021 period, representing a dividend payout ratio of 29.3%.  During the quarter, 6,714 shares were purchased and retired under the Company’s common stock repurchase plan.

ASSET QUALITY REVIEW

Nonperforming assets were $4.7 million or 0.20% of loans, net and foreclosed assets at March 31, 2022, compared to $5.0 million or 0.21% of loans, net and foreclosed assets at December 31, 2021.  As a percentage of total assets, nonperforming assets improved to 0.14% at March 31, 2022 compared to 0.15% at December 31, 2021.  The decrease in non-performing assets from the previous quarter was primarily due to the sale in the current period of our foreclosed properties which totaled $0.5 million at December 31, 2021; at March 31, 2022 we have no foreclosed properties.

 The Company’s allowance for loan losses remained at $28.4 million as net charge-offs of $0.3 million was offset by a provision for loan losses of $0.3 million.  The allowance for loan losses at March 31, 2022 continued to reflect the provisions added during 2020 from our adjustment of qualitative factors in our allowance for loan losses methodology, due to economic decline and expectation of increased credit losses from COVID-19’s adverse impact on economic and business operating conditions. The allowance for loan losses equaled $28.4 million or 1.18% of loans, net at March 31, 2022 compared to $28.4 million or 1.22% of loans, net, at December 31, 2021.   Excluding PPP loans which do not carry an allowance for loan losses due to a 100% government guarantee, the ratio equaled 1.20% at March 31, 2022.  Loans charged-off, net of recoveries, for the three months ended March 31, 2022, equaled $0.3 million or 0.05% of average loans, compared to $0.1 million or 0.01% of average loans for the comparable period last year.

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 the gain on the sale of Visa Class B shares and gains and losses incurred within the investment securities portfolio.  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.

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 COVID-19 crisis and the governmental responses to the crisis; the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; 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 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 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.  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.

[TABULAR MATERIAL FOLLOWS]

Summary Data

Peoples Financial Services Corp.


Five Quarter Trend (Unaudited)

(In thousands, except share and per share data)





















Mar 31


Dec 31


Sept 30


June 30


Mar 31




2022


2021



2021


2021


2021


Key performance data:

















Share and per share amounts:

















Net income


$

1.33


$


2.28


$

1.26


$

1.18


$

1.31


Core net income (1)


$


1.33


$

0.95


$

1.26


$

1.18


$

1.31



Cash dividends declared


$

0.39


$

0.38


$

0.38


$

0.37



$

0.37


Book value


$

44.64


$

47.44


$

45.66



$

45.11


$

44.00


Tangible book value (1)


$

35.76


$

38.54



$

36.75


$

36.21


$

35.10


Market value:

















High


$


52.99


$

53.06


$

46.92


$

45.38


$

47.34



Low


$

46.35


$

45.64


$

41.91


$

41.10



$

36.02


Closing


$

50.48


$

52.69


$

45.57



$

42.60


$

42.24


Market capitalization


$

362,398


$

377,754



$

327,057


$

306,836


$

304,605


Common shares outstanding



7,179,037



7,169,372




7,177,028



7,202,728



7,211,293


Selected ratios:

















Return on average stockholders’ equity



11.82

%


19.34

%



11.01

%


10.71

%


12.00

%

Core return on average stockholders’ equity (1)



11.82

%



8.03

%


11.01

%


10.72

%


11.98

%

Return on average tangible stockholders’ equity




14.65

%


23.87

%


13.69

%


13.39

%


15.02


%

Core return on average tangible stockholders’ equity (1)



14.65

%


9.92

%


13.68

%


13.41


%


14.99

%

Return on average assets



1.17

%


1.97

%


1.17


%


1.14

%


1.32

%

Core return on average assets (1)



1.17

%


0.82


%


1.17

%


1.14

%


1.32

%

Stockholders’ equity to total assets



9.56


%


10.09

%


10.14

%


10.84

%


10.59

%


Efficiency ratio (1)(2)



53.57

%


59.80

%


54.87

%


55.71

%



50.83

%

Nonperforming assets to loans, net, and foreclosed assets



0.20

%


0.21

%


0.28

%



0.33

%


0.38

%

Nonperforming assets to total assets



0.14

%


0.15

%



0.19

%


0.24

%


0.28

%

Net charge-offs to average loans, net



0.05

%



0.01

%


0.08

%


0.03

%


0.01

%

Allowance for loan losses to loans, net




1.18

%


1.22

%


1.21

%


1.20

%


1.23


%

Interest-bearing assets yield (FTE) (3)



3.22

%


3.08

%


3.37

%


3.32


%


3.55

%

Cost of funds



0.35

%


0.37

%


0.42


%


0.50

%


0.57

%

Net interest spread (FTE) (3)



2.87

%


2.71


%


2.95

%


2.81

%


2.98

%

Net interest margin (FTE) (3)



2.97


%


2.82

%


3.07

%


2.96

%


3.15

%




(1)

See Reconciliation of Non-GAAP financial measures.

(2)

Total noninterest expense less amortization of intangible assets 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%.

Peoples Financial Services Corp.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)













Mar 31


Mar 31


Three months ended


2022


2021


Interest income:








Interest and fees on loans:








Taxable


$


20,853


$

20,900


Tax-exempt



1,161



870


Interest and dividends on investment securities:








Taxable



1,972




1,243


Tax-exempt



510



390


Dividends






23


Interest on interest-bearing deposits in other banks



2



2



Interest on federal funds sold



73



49


Total interest income



24,571



23,477


Interest expense:








Interest on deposits



1,468




2,092


Interest on short-term borrowings






71


Interest on long-term debt



28



103


Interest on subordinated debt



444



443



Total interest expense



1,940



2,709


Net interest income



22,631



20,768


Provision (credit) for loan losses



300



(500)



Net interest income after provision for loan losses



22,331



21,268


Noninterest income:








Service charges, fees, commissions and other



1,621



1,184


Merchant services income



114




93


Commissions and fees on fiduciary activities



555



533


Wealth management income



351



358


Mortgage banking income



144




312


Increase in cash surrender value of life insurance



218



219


Interest rate swap revenue



414



797


Net gain (loss) on investment securities



4




21


Total noninterest income



3,421



3,517


Noninterest expense:








Salaries and employee benefits expense



8,040



6,570


Net occupancy and equipment expense




3,825



3,267


Amortization of intangible assets



96



125


Net (gain) loss on sale of other real estate owned



(458)



(46)


Other expenses




2,786



2,713


Total noninterest expense



14,289



12,629


Income before income taxes



11,463



12,156


Provision for income tax expense




1,833



2,678


Net income


$

9,630


$

9,478


Other comprehensive income:








Unrealized gain (loss) on investment securities available-for-sale



$

(32,612)


$

(7,749)


Change in derivative fair value



(493)



242


Income tax related to other comprehensive income



(6,952)




(1,576)


Other comprehensive income, net of income taxes



(26,153)



(5,931)


Comprehensive income


$

(16,523)


$

3,547



Share and per share amounts:








Net income – basic


$

1.34


$

1.31


Net income – diluted



1.33



1.31



Cash dividends declared


$

0.39


$

0.37


Average common shares outstanding – basic



7,172,455



7,210,952


Average common shares outstanding – diluted




7,216,421



7,246,016


Peoples Financial Services Corp.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)





















Mar 31


Dec 31


Sept 30


June 30



Mar 31


Three months ended


2022


2021


2021


2021


2021


Interest income:

















Interest and fees on loans:


















Taxable


$

20,853


$

20,288


$

21,276


$

20,029



$

20,900


Tax-exempt



1,161



1,098



1,024



965



870


Interest and dividends on investment securities available-for-sale:


















Taxable



1,972



1,660



1,285



1,276



1,243


Tax-exempt



510



498




432



411



390


Dividends






2



24



25



23


Interest on interest-bearing deposits in other banks




2



2



2



2



2


Interest on federal funds sold



73



102



124




55



49


Total interest income



24,571



23,650



24,167



22,763



23,477


Interest expense:


















Interest on deposits



1,468



1,579



1,698



1,941



2,092


Interest on short-term borrowings












6



71



Interest on long-term debt



28



35



41



82



103


Interest on subordinated debt



444



444




443



444



443


Total interest expense



1,940



2,058



2,182



2,473



2,709



Net interest income



22,631



21,592



21,985



20,290



20,768


Provision (credit) for loan losses



300



1,750




400



100



(500)


Net interest income after provision (credit) for loan losses



22,331



19,842



21,585



20,190



21,268



Noninterest income:

















Service charges, fees, commissions and other



1,621



1,693



1,667



1,625



1,184


Merchant services income



114




120



158



508



93


Commissions and fees on fiduciary activities



555



548



639



553




533


Wealth management income



351



330



432



417



358


Mortgage banking income



144




211



244



208



312


Increase in cash surrender value of life insurance



218



220



225



225




219


Interest rate swap revenue (expense)



414



15



79



(132)



797


Net gain (loss) on investment securities



4




(7)



5



(17)



21


Net gain on sale of Visa Class B shares






12,153











Total noninterest income



3,421



15,283




3,449



3,387



3,517


Noninterest expense:

















Salaries and employee benefits expense



8,040



8,087



7,829



7,250




6,570


Net occupancy and equipment expense



3,825



3,384



3,150



3,047



3,267


Amortization of intangible assets



96




116



125



125



125


Net (gain) loss on sale of other real estate owned



(458)



(15)



(97)



(29)




(46)


Other expenses



2,786



3,198



3,140



3,065



2,713


Total noninterest expense



14,289




14,770



14,147



13,458



12,629


Income before income taxes



11,463



20,355



10,887



10,119




12,156


Income tax expense



1,833



3,941



1,791



1,588



2,678


Net income


$


9,630


$

16,414


$

9,096


$

8,531


$

9,478



Other comprehensive income:

















Unrealized gain (loss) on investment securities available-for-sale


$

(32,612)


$

(3,078)


$

(3,130)


$


2,470


$

(7,749)


Reclassification adjustment for gains included in net income

















Change in benefit plan liabilities





2,109











Change in derivative fair value



(493)




(300)



(128)



(135)



242


Income tax related to other comprehensive income 



(6,952)



(266)



(684)



490




(1,576)


Other comprehensive income, net of income taxes



(26,153)



(1,003)



(2,574)



1,845



(5,931)


Comprehensive income


$


(16,523)


$

15,411


$

6,522


$

10,376


$

3,547



Share and per share amounts:

















Net income – basic


$

1.34


$

2.29


$

1.26


$


1.18


$

1.31


Net income – diluted



1.33



2.28



1.26



1.18



1.31



Cash dividends declared


$

0.39


$

0.38


$

0.38


$

0.37



$

0.37


Average common shares outstanding – basic



7,172,455



7,172,501



7,198,125



7,204,261



7,210,952


Average common shares outstanding – diluted




7,216,421



7,207,565



7,233,189



7,239,325



7,246,016


Peoples Financial Services Corp.

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

(In thousands, fully taxable equivalent basis)





















Mar 31



Dec 31


Sept 30


June 30


Mar 31


Three months ended


2022


2021


2021


2021



2021


Net interest income:

















Interest income

















Loans, net:

















Taxable


$

20,853


$

20,288



$

21,276


$

20,029


$

20,900


Tax-exempt



1,470



1,390




1,296



1,222



1,101


Total loans, net



22,323



21,678



22,572



21,251



22,001



Investments:

















Taxable



1,972



1,662



1,310



1,301



1,266


Tax-exempt



646




630



547



520



494


Total investments



2,618



2,292



1,857



1,821




1,760


Interest on interest-bearing balances in other
banks



2



2



2



2



2


Federal funds sold



73




102



124



55



49


Total interest income



25,016



24,074



24,555



23,129




23,812


Interest expense:

















Deposits



1,468



1,579



1,698



1,941



2,092


Short-term borrowings













6



71


Long-term debt



28



35



41



82



103


Subordinated debt




444



444



443



444



443


Total interest expense



1,940



2,058



2,182




2,473



2,709


Net interest income


$

23,076


$

22,016


$

22,373



$

20,656


$

21,103


Loans, net:

















Taxable



3.94

%


3.85


%


4.15

%


3.87

%


4.13

%

Tax-exempt



2.93


%


2.97

%


3.04

%


3.30

%


3.56

%


Total loans, net



3.85

%


3.78

%


4.06

%


3.83

%



4.09

%

Investments:

















Taxable



1.53

%


1.48

%


1.85


%


1.97

%


1.97

%

Tax-exempt



2.37

%


2.38


%


2.56

%


2.66

%


2.78

%

Total investments



1.68


%


1.65

%


2.02

%


2.13

%


2.15

%


Interest-bearing balances with banks



0.14

%


0.09

%


0.07

%


0.08

%



0.06

%

Federal funds sold



0.18

%


0.15

%


0.16

%



0.10

%


0.10

%

Total interest-bearing assets



3.22

%


3.08

%



3.37

%


3.32

%


3.55

%

Interest expense:

















Deposits



0.27


%


0.29

%


0.34

%


0.41

%


0.46

%


Short-term borrowings












0.33

%


0.57

%

Long-term debt



4.59

%


4.68


%


4.68

%


2.98

%


2.88

%

Subordinated debt



5.38


%


5.38

%


5.37

%


5.38

%


5.38

%


Total interest-bearing liabilities



0.35

%


0.37

%


0.42

%


0.50

%



0.57

%

Net interest spread



2.87

%


2.71

%


2.95

%



2.81

%


2.98

%

Net interest margin



2.97

%


2.82

%



3.07

%


2.96

%


3.15

%

Peoples Financial Services Corp.

Consolidated Balance Sheets (Unaudited)

(In thousands)






















Mar 31


Dec 31


Sept 30


June 30


Mar 31


At period end


2022


2021


2021



2021


2021


Assets:

















Cash and due from banks


$

35,863


$

30,415


$


33,662


$

41,789


$

30,786


Interest-bearing balances in other banks



4,440



7,093



7,425




10,262



8,432


Federal funds sold



101,200



242,425



319,500



196,000



264,100


Investment securities:


















Available-for-sale



535,482



517,321



461,372



336,449



333,753


Equity investments carried at fair value



144



140




147



142



159


Held-to-maturity



95,829



71,213



32,848



7,104



7,166



Loans held for sale



161



408



997



1,545



458


Loans, net



2,397,681



2,329,173




2,205,661



2,236,826



2,179,534


Less: allowance for loan losses



28,407



28,383



26,693



26,739



26,783



Net loans



2,369,274



2,300,790



2,178,968



2,210,087



2,152,751


Premises and equipment, net



51,977



51,502




50,682



46,305



46,777


Accrued interest receivable



9,221



8,528



8,280



7,844



8,206



Goodwill



63,370



63,370



63,370



63,370



63,370


Other intangible assets, net



372



468




584



710



835


Bank owned life insurance



43,828



42,754



42,734



42,750



42,530



Other assets



41,640



33,056



32,956



33,379



36,146


Total assets


$

3,352,801



$

3,369,483


$

3,233,525


$

2,997,736


$

2,995,469


Liabilities:


















Deposits:

















Noninterest-bearing


$

759,986


$

737,756


$

712,601


$


672,274


$

661,262


Interest-bearing



2,204,878



2,225,641



2,128,318



1,939,492



1,889,154



Total deposits



2,964,864



2,963,397



2,840,919



2,611,766



2,550,416


Short-term borrowings















51,980


Long-term debt




2,182



2,711



3,235



3,752



14,264


Subordinated debt



33,000



33,000



33,000




33,000



33,000


Accrued interest payable



844



408



872



469



1,120


Other liabilities




31,450



29,841



27,767



23,858



27,358


Total liabilities



3,032,340



3,029,357



2,905,793




2,672,845



2,678,138


Stockholders’ equity:

















Common stock



14,352



14,341



14,356



14,407



14,423



Capital surplus



127,192



127,549



127,826



128,719



128,854


Retained earnings



210,584



203,750




190,061



183,702



177,836


Accumulated other comprehensive gain (loss)



(31,667)



(5,514)



(4,511)



(1,937)



(3,782)



Total stockholders’ equity



320,461



340,126



327,732



324,891



317,331


Total liabilities and stockholders’ equity


$

3,352,801



$

3,369,483


$

3,233,525


$

2,997,736


$

2,995,469


Peoples Financial Services Corp.


Consolidated Balance Sheets (Unaudited)

(In thousands)





















Mar 31


Dec 31


Sept 30


June 30


Mar 31


Average quarterly balances


2022



2021


2021


2021


2021


Assets:

















Loans, net:

















Taxable


$

2,148,251



$

2,088,935


$

2,033,752


$

2,075,808


$

2,054,120


Tax-exempt




203,645



185,471



169,273



148,747



125,352


Total loans, net



2,351,896



2,274,406



2,203,025




2,224,555



2,179,472


Investments:

















Taxable



523,301



446,096



280,767



264,490



260,238



Tax-exempt



110,394



105,044



84,701



78,521



72,177


Total investments



633,695



551,140




365,468



343,011



332,415


Interest-bearing balances with banks



5,888



9,739



12,004



9,653



13,260



Federal funds sold



162,218



264,068



311,015



220,247



191,720


Total interest-bearing assets



3,153,697



3,099,353




2,891,512



2,797,466



2,716,867


Other assets



187,864



202,123



202,456



199,082



197,178



Total assets


$

3,341,561


$

3,301,476


$

3,093,968


$

2,996,548



$

2,914,045


Liabilities and stockholders’ equity:

















Deposits:

















Interest-bearing


$

2,211,629


$

2,176,429



$

2,007,868


$

1,921,754


$

1,833,661


Noninterest-bearing



734,348



725,414




696,331



680,431



634,806


Total deposits



2,945,977



2,901,843



2,704,199



2,602,185



2,468,467



Short-term borrowings












7,300



50,470


Long-term debt



2,474



2,959



3,475



11,025



14,509



Subordinated debt



33,000



33,000



33,000



33,000



33,000


Other liabilities



29,816



26,924




25,635



23,420



27,371


Total liabilities



3,011,267



2,964,726



2,766,309



2,676,930



2,593,817



Stockholders’ equity



330,294



336,750



327,659



319,618



320,228


Total liabilities and stockholders’
equity


$

3,341,561



$

3,301,476


$

3,093,968


$

2,996,548


$

2,914,045


Peoples Financial Services Corp.


Asset Quality Data (Unaudited)

(In thousands)





















Mar 31


Dec 31


Sept 30


June 30


Mar 31


At quarter end


2022



2021


2021


2021


2021


Nonperforming assets:

















Nonaccrual/restructured loans


$

4,573


$


4,461


$

5,559


$

7,216


$

8,073


Accruing loans past due 90 days or more



103




13



78



49



172


Foreclosed assets






487



487



29



131



Total nonperforming assets


$

4,676


$

4,961


$

6,124


$

7,294



$

8,376



















Three months ended

















Allowance for loan losses:

















Beginning balance


$

28,383


$

26,693



$

26,739


$

26,783


$

27,344


Charge-offs



355



105




466



190



195


Recoveries



79



45



20



46



134



Provision for loan losses



300



1,750



400



100



(500)


Ending balance


$

28,407



$

28,383


$

26,693


$

26,739


$

26,783


Peoples Financial Services Corp.


Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)





















Mar 31


Dec 31


Sept 30


June 30


Mar 31


Three months ended


2022



2021


2021


2021


2021


Core net income per share:

















Net income GAAP


$

9,630


$


16,414


$

9,096


$

8,531


$

9,478


Adjustments:

















Less: Gain on sale of Visa Class B shares







12,153











Less: gain (loss) on equity securities



(4)



7



(5)



17



(21)


Add: gain (loss) on equity securities tax adjustment



1




(1)



1



(4)



4


Add: Gain on sale of Visa Class B shares tax adjustment






2,552











Net income Core


$

9,627



$

6,819


$

9,092


$

8,544


$

9,461


Average common shares outstanding – diluted




7,216,421



7,207,565



7,233,189



7,239,325



7,246,016


Core net income per share


$

1.33


$


0.95


$

1.26


$

1.18


$

1.31


Tangible book value:

















Total stockholders’ equity



$

320,461


$

340,126


$

327,732


$

324,891


$


317,331


Less: Goodwill



63,370



63,370



63,370



63,370



63,370


Less: Other intangible assets, net



372




468



584



710



835


Total tangible stockholders’ equity


$

256,719


$

276,289



$

263,778


$

260,811


$

253,126


Common shares outstanding



7,179,037



7,169,372




7,177,028



7,202,728



7,211,293


Tangible book value per share


$

35.76


$

38.54


$


36.75


$

36.21


$

35.10


Core return on average stockholders’ equity:

















Net income GAAP


$

9,630



$

16,414


$

9,096


$

8,531


$

9,478


Adjustments:


















Less: Gain on sale of Visa Class B shares






12,153











Less: gain (loss) on equity securities



(4)



7



(5)



17



(21)


Add: gain (loss) on equity securities tax adjustment




1



(1)



1



(4)



4


Add: Gain on sale of Visa Class B shares tax adjustment






2,552











Net income Core


$


9,627


$

6,819


$

9,092


$

8,544


$

9,461



Average stockholders’ equity


$

330,294


$

336,750


$

327,659


$

319,618



$

320,228


Core return on average stockholders’ equity



11.82

%


8.03

%


11.01

%



10.72

%


11.98

%

Return on average tangible equity:

















Net income GAAP


$

9,630


$


16,414


$

9,096


$

8,531


$

9,478


Average stockholders’ equity


$


330,294


$

336,750


$

327,659


$

319,618


$

320,228



Less: average intangibles



63,790



63,896



64,017



64,143



64,268


Average tangible stockholders’ equity


$

266,504



$

272,854


$

263,642


$

255,475


$

255,960


Return on average tangible stockholders’ equity




14.65

%


23.87

%


13.69

%


13.39

%


15.02


%

Core return on average tangible stockholders’ equity:

















Net income GAAP


$

9,630


$

16,414


$

9,096



$

8,531


$

9,478


Adjustments:

















Less: Gain on sale of Visa Class B shares






12,153











Less: gain (loss) on equity securities



(4)




7



(5)



17



(21)


Add: gain (loss) on equity securities tax adjustment



1



(1)



1



(4)




4


Add: Gain on sale of Visa Class B shares tax adjustment






2,552











Net income Core


$

9,627


$

6,819


$


9,092


$

8,544


$

9,461


Average stockholders’ equity


$

330,294


$


336,750


$

327,659


$

319,618


$

320,228


Less: average intangibles



63,790




63,896



64,017



64,143



64,268


Average tangible stockholders’ equity


$

266,504


$

272,854



$

263,642


$

225,475


$

255,960


Core return on average tangible stockholders’ equity



14.65

%



9.92

%


13.68

%


13.41

%


14.99

%

Core return on average assets:


















Net income GAAP


$

9,630


$

16,414


$

9,096


$

8,531



$

9,478


Adjustments:

















Less: Gain on sale of Visa Class B shares






12,153











Less: gain (loss) on equity securities



(4)



7



(5)




17



(21)


Add: gain (loss) on equity securities tax adjustment



1



(1)



1



(4)



4


Add: Gain on sale of Visa Class B shares tax adjustment







2,552











Net income Core


$

9,627


$

6,819


$

9,092


$


8,544


$

9,461


Average assets


$

3,341,561


$

3,301,476


$


3,093,968


$

2,996,548


$

2,914,045


Core return on average assets



1.17

%


0.82


%


1.17

%


1.14

%


1.32

%

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)


(In thousands, except share and per share data)












Mar 31


Mar 31


Three months ended


2022


2021


Core net income per share:








Net income (GAAP)


$


9,630


$

9,478


Adjustments:








Less: Gain (loss) on equity securities



4



(21)


Add: Gain (loss) on equity securities line tax adjustment



1




4


Net income Core


$

9,627


$

9,461


Average basic common shares outstanding



7,172,455



7,210,952



Average diluted common shares outstanding



7,216,421



7,246,016


Core net income per share – basic


$

1.34


$

1.31


Core net income per share – diluted



$

1.33


$

1.31


Peoples Financial Services Corp.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(In thousands, except share and per share data)

The following table reconciles the non-GAAP financial measures of FTE net interest income for the three ended March 31, 2022 and 2021:









Three months ended March 31


2022


2021



Interest income (GAAP)


$

24,571


$

23,477


Adjustment to FTE



445



335


Interest income adjusted to FTE (non-GAAP)




25,016



23,812


Interest expense



1,940



2,709


Net interest income adjusted to FTE (non-GAAP)


$

23,076


$


21,103










The efficiency ratio is noninterest expenses, less amortization of intangible assets, as a percentage of FTE net interest income plus noninterest income less gains on equity securities and gains on sale of assets. The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP for the three months ended March 31, 2022 and 2021:









Three months ended March 31


2022


2021


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

14,289



$

12,629


Less: amortization of intangible assets expense



96



125


Noninterest expense adjusted for amortization of assets expense (non-GAAP)



14,193



12,504










Net interest income (GAAP)




22,631



20,768


Plus: taxable equivalent adjustment



445



335


Noninterest income (GAAP)



3,421



3,517


Less: net gains on equity securities




4



21


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


$

26,493


$

24,599










Efficiency ratio (non-GAAP)



53.57


%


50.83

%









1 See reconciliation of non-GAAP financial measures on p.15.

SOURCE Peoples Financial Services Corp.