Pennsylvania

PEOPLES FINANCIAL SERVICES CORP. Reports Third Quarter 2021 Earnings

SCRANTON, Pa., Oct. 22, 2021 /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 months and nine months ended September 30, 2021.  Peoples reported net income of $9.1 million, or $1.26 per diluted share for the three months ended September 30, 2021, an increase of 10.5% when compared to $8.3 million, or $1.14 per diluted share for the comparable period of 2020.  The increase in earnings for the three months ended September 30, 2021 is primarily the result of a $2.1 million increase to pre-provision net interest income and a $0.6 million decrease to the provision for loan losses, partially offset by a $1.5 million decrease to noninterest income, primarily from lower interest rate swap revenue, and an increase to noninterest expense of $0.3 million.

Net income for the nine months ended September 30, 2021, totaled $27.1 million or $3.74 per diluted share, a 30.3% increase when compared to $21.2 million or $2.87 per diluted share for the comparable period of 2020.  The increase in earnings in the 2021 nine month period is the product of a decrease to our provision for loan losses of $6.3 million, primarily due to an adjustment in the year ago period to the economic qualitative factors included in our allowance for loan losses methodology relating to the impact of COVID-19, an increase to pre-provision net interest income of $3.1 million and a decrease to noninterest expense of $0.4 million.  Partially offsetting the increase were a higher income tax provision of $2.3 million and a decrease in noninterest income of $1.6 million.

In addition to evaluating its results of operations in accordance with 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 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.

Core net income, which we have defined to exclude gains or losses from our investment securities portfolio, for the three months ended September 30, totaled $9.1 million and $7.9 million in 2021 and 2020, respectively.  Core net income per share for the three months ended September 30, 2021 was $1.26, a 15.6% increase from $1.09 reported for the same period in 2020.  Core net income in the 2021 third quarter excludes a pre-tax $5 thousand unrealized gain on our equity investment portfolio.  Core net income for 2020 excludes a $2 thousand unrealized gain on our equity investment portfolio and a $457 thousand gain on the sale of investment securities.

Core net income for the nine months ended September 30, 2021 was $27.1 million or $3.74 per diluted share, a 33.1% increase when compared to $20.7 million or $2.81 per diluted share for the same period of 2020.  Core net income for the current period excludes a pre-tax unrealized gain of $9 thousand on our equity investment portfolio.  Core net income for 2020 was impacted by a pre-tax gain of $724 thousand on the sale of debt securities and a $82 thousand unrealized loss on our equity investment securities portfolio

NOTABLES

  • Record first nine month earnings of $27.1 million or $3.74 per diluted share.
  • Dividends declared for nine months ended September 30, 2021 of $1.12 per share represents a 3.7% increase from the same period in 2020.
  • Core return on average assets was 1.17% and 1.21% for the three and nine months ended September 30, 2021 compared to 1.16% and 1.05% for the three and nine months ended September 30, 2020.
  • Core return on average equity was 11.01% and 11.23% for the three and nine months ended September 30, 2021 compared to 10.12% and 8.98% for the three and nine months ended September 30, 2020.
  • Loan growth during 2021, excluding Paycheck Protection Program ("PPP") loans, totaled $133.9 million, or 6.7%. PPP loan balances at September 30, 2021 total $83.5 million.
  • Assisted our small business customers secure $227.8 million of PPP loan forgiveness during the first nine months of 2021.
  • Deposits grew $403.8 million or 16.6% for the nine months ended September 30, 2021 and grew $229.2 million or 8.8% during the three months ended September 30, 2021.
  • Book value per share improved to $45.66 at September 30, 2021 from $43.30 at September 30, 2020, a 5.5% increase.
  • Tangible book value per share, a non-GAAP measure, increased 6.8% to $36.75 at September 30, 2021 from $34.40 at September 30, 2020.
  • Tax-equivalent net interest income increased $3.1 million or 5.2% to $64.1 million for the nine months ended September 30, 2021 compared to $61.0 million for the same period in 2020.
  • Provision for loan losses for the nine months ended September 30, 2021 decreased $6.3 million from the comparable nine month period in 2020.
  • Nonperforming assets as a percentage of loans and foreclosed assets at September 30, 2021 improved to 0.28% from 0.52% at September 30, 2020, and from 0.33% at June 30, 2021.
  • Received regulatory approvals to establish de novo branches in Warrendale, Allegheny County, PA to serve the Greater Pittsburgh market and in Piscataway, Middlesex County, NJ to serve the central New Jersey market.
  • Relocated our Binghamton, New York West Side Office due to its growth to a new branch office at 24 Mary Street, Binghamton to better serve our customers and provide an aesthetic addition to the local community.

Visa Class B Common Stock Sale

On October 8, 2021, Peoples' banking subsidiary, Peoples Security Bank and Trust Company (the "Bank"), agreed to sell 44,982 shares of the Class B common stock of Visa Inc. for a purchase price of $12.2 million. The shares had no carrying value on the Bank's balance sheet and, as the Bank had no historical cost basis in the shares, the entire purchase price will be realized as a pretax gain. The transaction will have a positive impact on the Bank's regulatory capital, which will be used for capital management and to support the Company's organic growth.

The Bank received 73,333 Class B shares of Visa Inc. as part of its membership interest in March 2008, and 28,351 shares were redeemed in connection with Visa's initial public offering in 2008. The sale of the remaining 44,982 Class B shares is expected to settle in October, 2021 and be included in our 2021 fourth-quarter and year-end results as an after-tax gain of $9.6 million. The gain on the sale of the Class B shares is not indicative of the expected results of consolidated operations for those periods.

INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis ("FTE"), our tax-equivalent net interest margin for the three months ended September 30, 2021 was 3.07%, a decrease of 12 basis points when compared to 3.19% for the same period in 2020.  Our tax equivalent net interest margin for the nine months ended September 30, 2021 was 3.06%, a decrease of 29 basis points when compared to 3.35% for the nine month period in 2020.  The tax-equivalent yield on interest-earning assets decreased 36 basis points to 3.37% during the three months ended September 30, 2021 from 3.73% during the year ago period.  For the nine months ended September 30, 2021, the tax-equivalent yield on interest-earning assets decreased 55 basis points to 3.41% from 3.96% during the corresponding period of 2020.  The decrease in yield is due to lower market rates, a result of the Federal Open Market Committee ("FOMC") cutting the federal funds rate by 150 basis points in the first three months of 2020.  The decrease in market rates resulted in lower rates on our existing adjustable rate loans and affected rates on new originations.  Additionally, higher levels of federal funds sold at historically low rates contributed to the decrease in net interest margin.  At the same time, we experienced lower interest-bearing liability costs due to lower market rates and our actions to reduce deposit rates. This was partially offset however by the additional interest expense on subordinated debt we issued during the second quarter of 2020.  Our cost of funds, which represents our average rate paid on total interest-bearing liabilities, decreased 34 basis points to 0.42% for the three months ended September 30, 2021 when compared to 0.76% during the year ago period.  For the nine months ended September 30, 2021 our average rate paid on total interest-bearing liabilities was 0.50% a decrease of 34 basis points when compared to 0.84% for the same period in 2020.

Third Quarter 2021 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income for the three months ended September 30, increased $2.1 million or 10.6% to $22.4 million in 2021 from $20.3 million in 2020.  The increase in tax equivalent net interest income was largely due to lower deposit costs of $1.1 million due to our focus to decrease deposit rates in the current low market rate environment.  Also contributing to the increase was higher loan income of $0.6 million from a higher rate variance due to Small Business Administration ("SBA") accelerated forgiveness of PPP loans in the current quarter which offset the lower rates on the non-PPP loan portfolio, and higher investment and federal funds sold income due to a higher volume variance.  Total average earning assets increased $365.8 million or 14.5% from the year ago period due primarily from an increase of $265.6 million in federal funds sold balances resulting from strong deposit growth. PPP loans averaged $122.3 million in the three-month period ended September 30, 2021 with interest and net fees totaling $2.5 million compared to average balances of $216.9 million and interest and fees totaling $1.2 million in the prior period.  The tax-equivalent yield on the loan portfolio increased to 4.06% for the three months ended September 30, 2021, compared to 4.02% for the comparable period in 2020 due to $70.8 million of SBA PPP loan forgiveness and the resulting acceleration of the remaining unamortized net fees realized into income.  Excluding the PPP loans, the tax-equivalent yield of the loan portfolio was 3.83% and 4.21% at September 30, 2021 and 2020, respectively.  Loans, net averaged $2.2 billion for the three months ended September 30, 2021 and 2020.  For the three months ended September 30, the tax-equivalent yield on total investments decreased to 2.02% in 2021 from 2.30% in 2020.  Average investments totaled $365.5 million in 2021 and $281.5 million in 2020.  Average interest-bearing liabilities increased $249.5 million for the three months ended September 30, 2021, compared to the corresponding period last year the result of higher non-maturity deposits due to strong organic deposit growth and growth of public fund deposits which resulted in lowering our short-term and long-term borrowings.

For the three months ended September 30, 2021, the provision for loan losses decreased $0.6 million to $0.4 million from $1.0 million in the year ago period which reflected an increase to the asset quality qualitative factors in our allowance for loan losses methodology due to deferments requested on commercial loans and resulting risk rating migration.  The provision for loan losses in the three month period ended September 30, 2021 is the result of growth of non-PPP loans and improved asset quality.

Noninterest income for the three months ended September 30, 2021 decreased to $3.4 million, a $1.5 million decrease from $4.9 million for the three months ended September 30, 2020.  The decrease was primarily due to a decrease in revenue generated from our commercial loan interest rate swaps of $1.1 million due to lower transaction volume due to increased market rates.  During the year ago period gains of $0.5 million were recognized from the sale of investment securities with no comparable gains recorded in the current period.  Mortgage banking revenue decreased $0.2 million in the three month period ended September 30, 2021 from lower volumes of mortgages sold into the secondary market.  Services charges, fees, commissions and other were higher in the current period by $0.1 million due to increased debit card interchange revenue and slightly higher service charges on consumer and commercial deposit accounts.  Wealth management revenue increased $0.1 million in the three month period ended September 30, 2021 due to an increase to the number of transactions. 

Noninterest expense increased $0.3 million or 2.3% to $14.3 million for the three months ended September 30, 2021, from $14.0 million for the three months ended September 30, 2020.  Other expenses increased $0.3 million or 11.5% due primarily to higher Pennsylvania shares tax expense, an increase to our FDIC assessment and an increase to losses on bad checks.

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

Tax-equivalent net interest income for the nine months ended September 30, increased $3.1 million or 5.2% to $64.1 million in 2021 from $61.0 million in 2020.  The increase in tax equivalent net interest income was largely due to lower interest bearing deposit costs of $3.4 million, as deposit rates were lowered in the historically low market rate environment.  Partially offsetting the lower interest-bearing liability costs was a decrease of $0.5 million to our tax equivalent interest income primarily from a $0.8 million decrease in loan interest, as loans continue to reprice lower during the current low market rate environment.  The increase to total average earning assets of $373.5 million partially offset the lower yields. PPP loans averaged $179.0 million in the nine-month period ended September 30, 2021 with interest and fees totaling $6.3 million.  The tax-equivalent yield on the loan portfolio decreased to 4.00% for the nine months ended September 30, 2021, compared to 4.25% for the comparable period in 2020 due to lower market rates. PPP loan balances yielded 4.69% in the current nine month period compared to 2.32% in the year ago period.  The higher yield is the result of SBA PPP loan forgiveness totaling $227.8 million in the current period.  The loan yield excluding PPP loans was 3.93% in the current period compared to 4.37% in the year ago period.  Loans, net averaged $2.2 billion for the nine months ended September 30, 2021 and $2.1 billion for the nine months ended September 30, 2020, respectively. For the nine months ended September 30, the tax-equivalent yield on total investments decreased to 2.09% in 2021 from 2.41% in 2020.  Average investments totaled $347.1 million in 2021 and $299.2 million in 2020.  Average interest-bearing deposits increased $320.1 million for the nine months ended September 30, 2021, compared to the corresponding period last year due to strong organic deposit growth of new customer relationships and increased public funds.  Total average non-interest bearing deposits increased $129.2 million for the nine months ended September 30, 2021, compared to the comparable period last year which resulted in lowering our higher costing short-term and long-term borrowings.

There was no provision for loan losses for the nine months ended September 30, 2021, a decrease of $6.3 million from the $6.3 million provision for the comparable period of 2020.  The lower provision in the nine month period ended September 30, 2021 is due to improved credit quality and the resulting reversal of the COVID-related asset quality qualitative factor adjustment made in the year ago period in our allowance for loan losses methodology.  The higher provision in the year ago period reflects changes made to the qualitative factors related to economic and credit quality declines resulting from the onset of the coronavirus pandemic and its uncertain economic impact.

Noninterest income for the nine months ended September 30, 2021 was $10.4 million compared with $11.9 million for the year ago period, a decrease of $1.5 million or 13.1%.  The year ago period included a net gain of $0.7 million from the sale of available-for-sale securities, offset by a $0.1 unrealized loss related to our equity security.  Service charges, fees, commissions and other are lower in the nine month period ended September 30, 2021 by $0.1 million as an accrual adjustment to a bank owned life insurance benefit, a lower Federal Home Loan Bank dividend and a decrease to service charges on consumer and commercial deposit accounts were partially offset by an increase to our debit card interchange revenue.  Wealth management revenue increased $0.3 million in the nine month period ended September 30, 2021 due to a higher number of transactions and commissions while fees on fiduciary activities increased $0.2 million due primarily to market appreciation. Revenue generated from commercial loan interest rate swap transactions decreased $1.2 million in the nine month period ended September 30, 2021 due to a decrease in the number of transactions resulting from unfavorable market rates.

Noninterest expense decreased $0.4 million or 1.0% to $40.4 million for the nine months ended September 30, 2021, from $40.8 million for the nine months ended September 30, 2020.  Salaries and employee benefits decreased $1.1 million or 4.8% due to higher deferred costs from an increase in total loan originations which are recorded as a contra-salary expense and lower health insurance costs.  Occupancy and equipment expenses were higher by $0.2 million due to information technology investments related to mobile/digital banking solutions in the nine month period ended September 30, 2021. Other expenses were higher by $0.5 million due primarily to higher Pennsylvania shares tax expense and an increase in FDIC insurance assessments in the nine month period ended September 30, 2021 attributed to the receipt of a credit in the year ago period related to the Deposit Insurance Fund's (DIF) minimum reserve ratio assessment.

The provision for income tax expense increased $2.3 million for the nine months ended September 30, 2021 compared to the year ago period due to higher levels of book taxable income and a $0.6 million deferred tax adjustment related to prior periods.

BALANCE SHEET REVIEW

At September 30, 2021, total assets, loans and deposits were $3.2 billion, $2.2 billion and $2.8 billion, respectively. Loan balances increased from December 31, 2020 as loan demand, exclusive of PPP loans, improved as the economy recovers from COVID-19.  Loan growth during the first nine months was $133.9 million when excluding a net decrease of $106.2 million of Small Business Administration ("SBA") PPP loans.  Commercial real estate and tax-exempt loans made up the majority of growth.  During the first nine months of 2021, $227.8 million of PPP loans were forgiven by the SBA.  Total investments were $494.4 million at September 30, 2021, an increase of $191.1 million from $303.3 million at December 31, 2021.  The increase to the investment portfolio results from investing a portion of our low-yielding federal funds balance into higher-yielding earning assets.  Federal funds sold balance at September 30, 2021 was $319.5 million, an increase of $136.5 million during the first nine months of 2020 resulting from strong deposit growth. Total deposits increased $403.8 million or 16.6% from December 31, 2020 due to organic growth of customer relationships throughout all our markets, additional deposits by our commercial customers and seasonal inflows of municipal deposits.  Non-interest bearing deposits increased $90.1 million or 14.5% and interest-bearing deposits increased $313.7 million or 17.3% during the nine months ended September 30, 2021.

Stockholders' equity equaled $327.7 million or $45.66 per share at September 30, 2021, and $316.9 million or $43.92 per share at December 31, 2020.  The increase in stockholders' equity from December 31, 2020 is attributable to net income, partially offset by a decrease to accumulated other comprehensive income ("AOCI") resulting from a decrease to the unrealized gain on investment securities and dividends paid to shareholders.  Tangible stockholders' equity improved to $36.75 per share at September 30, 2021, from $35.00 per share at December 31, 2020.  Dividends declared for the nine months ended September 30, 2021 amounted to $1.12 per share, a 3.7% increase from the 2020 period, representing a dividend payout ratio of 29.9%.

ASSET QUALITY REVIEW

Nonperforming assets were $6.1 million or 0.28% of loans, net and foreclosed assets at September 30, 2021, compared to $10.5 million or 0.48% of loans, net and foreclosed assets at December 31, 2020.  The decrease in non-performing assets from year end was due to improving credit trends, the payoff of two non-accrual commercial loans and charge-off of a small business line of credit.  The Company's allowance for loan losses decreased $0.7 million or 2.4% during the first nine months of 2021.  The allowance for loan losses at September 30, 2021 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 $26.7 million or 1.21% of loans, net at September 30, 2021 compared to $27.3 million or 1.26% of loans, net, at December 31, 2020.  Excluding PPP loans which do not carry an allowance for losses due to a 100% government guarantee, the ratio equaled 1.26% at September 30, 2021.  Loans charged-off, net of recoveries, for the nine months ended September 30, 2021, equaled $0.7 million or 0.04% of average loans, compared to $2.4 million or 0.16% 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.

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; 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
(In thousands, except share and per share data)





































Sept 30


June 30


Mar 31


Dec 31


Sept 30




2021


2021


2021


2020


2020


Key performance data:

















Share and per share amounts:

















Net income


$

1.26


$

1.18


$

1.31


$

1.13


$

1.14


Core net income (1)


$

1.26


$

1.18


$

1.31


$

1.10


$

1.09


Cash dividends declared


$

0.38


$

0.37


$

0.37


$

0.36


$

0.36


Book value


$

45.66


$

45.11


$

44.00


$

43.92


$

43.30


Tangible book value (1)


$

36.75


$

36.21


$

35.10


$

35.00


$

34.40


Market value:

















High


$

46.92


$

45.38


$

47.34


$

40.40


$

39.38


Low


$

41.91


$

41.10


$

36.02


$

34.47


$

32.51


Closing


$

45.57


$

42.60


$

42.24


$

36.76


$

34.76


Market capitalization


$

327,057


$

306,836


$

304,605


$

265,231


$

251,743


Common shares outstanding



7,177,028



7,202,728



7,211,293



7,215,202



7,242,326


Selected ratios:

















Return on average stockholders' equity



11.01

%


10.71

%


12.00

%


10.32

%


10.58

%

Core return on average stockholders' equity (1)



11.01

%


10.72

%


11.98

%


10.05

%


10.12

%

Return on average tangible stockholders' equity



13.69

%


13.39

%


15.02

%


12.96

%


13.34

%

Core return on average tangible stockholders' equity (1)



13.68

%


13.41

%


14.99

%


12.62

%


12.76

%

Return on average assets



1.17

%


1.14

%


1.32

%


1.13

%


1.21

%

Core return on average assets (1)



1.17

%


1.14

%


1.32

%


1.10

%


1.16

%

Stockholders' equity to total assets



10.14

%


10.84

%


10.59

%


10.99

%


11.18

%

Efficiency ratio (2)



54.87

%


55.71

%


50.83

%


56.35

%


55.94

%

Nonperforming assets to loans, net, and foreclosed assets



0.28

%


0.33

%


0.38

%


0.48

%


0.52

%

Net charge-offs to average loans, net



0.08

%


0.03

%


0.01

%


0.05

%


0.26

%

Allowance for loan losses to loans, net



1.21

%


1.20

%


1.23

%


1.26

%


1.21

%

Interest-bearing assets yield (FTE) (3)



3.37

%


3.32

%


3.55

%


3.49

%


3.73

%

Cost of funds



0.42

%


0.50

%


0.57

%


0.67

%


0.76

%

Net interest spread (FTE) (3)



2.95

%


2.81

%


2.99

%


2.81

%


2.97

%

Net interest margin (FTE) (3)



3.07

%


2.96

%


3.15

%


3.00

%


3.19

%



(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
(In thousands, except per share data)



















Sept 30


Sept 30


Nine Months Ended


2021


2020


Interest income:








Interest and fees on loans:








Taxable


$

62,205


$

62,978


Tax-exempt



2,859



2,848


Interest and dividends on investment securities:








Taxable



3,804



4,223


Tax-exempt



1,233



874


Dividends



72



71


Interest on interest-bearing deposits in other banks



6



27


Interest on federal funds sold



228



19


Total interest income



70,407



71,040


Interest expense:








Interest on deposits



5,731



9,125


Interest on short-term borrowings



78



757


Interest on long-term debt



225



575


Interest on subordinated debt



1,330



591


Total interest expense



7,364



11,048


Net interest income



63,043



59,992


Provision for loan losses






6,350


Net interest income after provision for loan losses



63,043



53,642


Noninterest income:








Service charges, fees, commissions and other



4,476



4,622


Merchant services income



759



723


Commissions and fees on fiduciary activities



1,725



1,574


Wealth management income



1,207



890


Mortgage banking income



764



937


Increase in cash surrender value of life insurance



669



572


Interest rate swap revenue



744



1,947


Net gain (loss) on investment securities



9



(82)


Net gain on sale of investment securities available-for-sale






724


Total noninterest income



10,353



11,907


Noninterest expense:








Salaries and employee benefits expense



21,649



22,735


Net occupancy and equipment expense



9,464



9,252


Amortization of intangible assets



375



462


Other expenses



8,960



8,418


Total noninterest expense



40,448



40,867


Income before income taxes



32,948



24,682


Provision for income tax expense



5,843



3,513


Net income


$

27,105


$

21,169


Other comprehensive income:








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


$

(8,409)


$

9,084


Reclassification adjustment for gains included in net income






(724)


Change in derivative fair value



(22)



356


Income tax related to other comprehensive income



(1,771)



1,830


Other comprehensive income, net of income taxes



(6,660)



6,886


Comprehensive income


$

20,445


$

28,055


Share and per share amounts:








Net income - basic


$

3.76


$

2.89


Net income - diluted



3.74



2.87


Cash dividends declared


$

1.12


$

1.08


Average common shares outstanding - basic



7,204,399



7,332,539


Average common shares outstanding - diluted



7,239,463



7,364,693


 

Peoples Financial Services Corp.
Consolidated Statements of Income
(In thousands, except per share data)





































Sept 30


June 30


Mar 31


Dec 31


Sept 30


Three months ended


2021


2021


2021


2020


2020


Interest income:

















Interest and fees on loans:

















Taxable


$

21,276


$

20,029


$

20,900


$

20,705


$

20,901


Tax-exempt



1,024



965



870



888



876


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

















Taxable



1,285



1,276



1,243



1,111



1,250


Tax-exempt



432



411



390



304



280


Dividends



24



25



23



26



23


Interest on interest-bearing deposits in other banks



2



2



2



4



4


Interest on federal funds sold



124



55



49



47



12


Total interest income



24,167



22,763



23,477



23,085



23,346


Interest expense:

















Interest on deposits



1,698



1,941



2,092



2,614



2,758


Interest on short-term borrowings






6



71



91



82


Interest on long-term debt



41



82



103



127



139


Interest on subordinated debt



443



444



443



444



443


Total interest expense



2,182



2,473



2,709



3,276



3,422


Net interest income



21,985



20,290



20,768



19,809



19,924


Provision (credit) for loan losses



400



100



(500)



1,050



1,050


Net interest income after provision (credit) for loan losses



21,585



20,190



21,268



18,759



18,874


Noninterest income:

















Service charges, fees, commissions and other



1,667



1,625



1,184



2,187



1,584


Merchant services income



158



508



93



101



137


Commissions and fees on fiduciary activities



639



553



533



551



575


Wealth management income



432



417



358



392



272


Mortgage banking income



244



208



312



658



488


Increase in cash surrender value of life insurance



225



225



219



202



192


Interest rate swap revenue (expense)



79



(132)



797



374



1,228


Net gain (loss) on investment securities



5



(17)



21



76



2


Net gain on sale of investment securities available-for-sale












194



457


Total noninterest income



3,449



3,387



3,517



4,735



4,935


Noninterest expense:

















Salaries and employee benefits expense



7,829



7,250



6,570



7,400



7,831


Net occupancy and equipment expense



3,150



3,047



3,267



3,588



3,131


Amortization of intangible assets



125



125



125



144



154


Other expenses



3,187



3,106



2,667



2,869



2,858


Total noninterest expense



14,291



13,528



12,629



14,001



13,974


Income before income taxes



10,743



10,049



12,156



9,493



9,835


Income tax expense



1,647



1,518



2,678



1,308



1,523


Net income


$

9,096


$

8,531


$

9,478


$

8,185


$

8,312


Other comprehensive income:

















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


$

(3,130)


$

2,470


$

(7,749)


$

(305)


$

(639)


Reclassification adjustment for gains included in net income












(194)



(457)


Change in benefit plan liabilities












(1,398)





Change in derivative fair value



(128)



(135)



242



(41)



(137)


Income tax related to other comprehensive income 



(684)



490



(1,576)



(407)



(260)


Other comprehensive income, net of income taxes



(2,574)



1,845



(5,931)



(1,531)



(973)


Comprehensive income


$

6,522


$

10,376


$

3,547


$

6,654


$

7,339


Share and per share amounts:

















Net income - basic


$

1.26


$

1.18


$

1.31


$

1.13


$

1.14


Net income - diluted



1.26



1.18



1.31



1.13



1.14


Cash dividends declared


$

0.38


$

0.37


$

0.37


$

0.36


$

0.36


Average common shares outstanding - basic



7,198,125



7,204,261



7,210,952



7,222,810



7,277,189


Average common shares outstanding - diluted



7,233,189



7,239,325



7,246,016



7,257,874



7,312,253


 

Peoples Financial Services Corp.
Details of Net Interest and Net Interest Margin
(In thousands, fully taxable equivalent basis)





































Sept 30


June 30


Mar 31


Dec 31


Sept 30


Three months ended


2021


2021


2021


2020


2020


Net interest income:

















Interest income

















Loans, net:

















Taxable


$

21,276


$

20,029


$

20,900


$

20,705


$

20,901


Tax-exempt



1,296



1,222



1,101



1,124



1,109


Total loans, net



22,572



21,251



22,001



21,829



22,010


Investments:

















Taxable



1,310



1,301



1,266



1,137



1,273


Tax-exempt



547



520



494



385



354


Total investments



1,857



1,821



1,760



1,522



1,627


Interest on interest-bearing balances in other banks



2



2



2



4



4


Federal funds sold



124



55



49



47



12


Total interest income



24,555



23,129



23,812



23,402



23,653


Interest expense:

















Deposits



1,698



1,941



2,092



2,614



2,758


Short-term borrowings






6



71



91



82


Long-term debt



41



82



103



127



139


Subordinated debt



443



444



443



444



443


Total interest expense



2,182



2,473



2,709



3,276



3,422


Net interest income


$

22,373


$

20,656


$

21,103


$

20,126


$

20,231


Loans, net:

















Taxable



4.15

%


3.87

%


4.13

%


3.98

%


4.04

%

Tax-exempt



3.04

%


3.30

%


3.56

%


3.80

%


3.70

%

Total loans, net



4.06

%


3.83

%


4.09

%


3.97

%


4.02

%

Investments:

















Taxable



1.85

%


1.97

%


1.97

%


2.03

%


2.09

%

Tax-exempt



2.56

%


2.66

%


2.78

%


3.30

%


3.56

%

Total investments



2.02

%


2.13

%


2.15

%


2.25

%


2.30

%

Interest-bearing balances with banks



0.07

%


0.08

%


0.06

%


0.06

%


0.08

%

Federal funds sold



0.16

%


0.10

%


0.10

%


0.10

%


0.11

%

Total interest-bearing assets



3.37

%


3.32

%


3.55

%


3.49

%


3.73

%

Interest expense:

















Deposits



0.34

%


0.41

%


0.46

%


0.57

%


0.65

%

Short-term borrowings






0.33

%


0.57

%


0.72

%


0.65

%

Long-term debt



4.68

%


2.98

%


2.88

%


2.70

%


2.59

%

Subordinated debt



5.37

%


5.38

%


5.38

%


5.38

%


5.37

%

Total interest-bearing liabilities



0.42

%


0.50

%


0.57

%


0.67

%


0.76

%

Net interest spread



2.95

%


2.81

%


2.98

%


2.81

%


2.97

%

Net interest margin



3.07

%


2.96

%


3.15

%


3.00

%


3.19

%

 

Peoples Financial Services Corp.
Consolidated Balance Sheets
(In thousands)





































Sept 30


June 30


Mar 31


Dec 31


Sept 30


At period end


2021


2021


2021


2020


2020


Assets:

















Cash and due from banks


$

33,662


$

41,789


$

30,786


$

29,287


$

42,940


Interest-bearing balances in other banks



7,425



10,262



8,432



15,905



20,972


Federal funds sold



319,500



196,000



264,100



183,000



102,300


Investment securities:

















Available-for-sale



461,372



336,449



333,753



295,911



247,404


Equity investments carried at fair value



147



142



159



138



341


Held-to-maturity



32,848



7,104



7,166



7,225



7,297


Loans held for sale



997



1,545



458



837



2,161


Loans, net



2,205,661



2,236,826



2,179,534



2,177,982



2,188,463


Less: allowance for loan losses



26,693



26,739



26,783



27,344



26,584


Net loans



2,178,968



2,210,087



2,152,751



2,150,638



2,161,879


Premises and equipment, net



50,682



46,305



46,777



47,045



47,926


Accrued interest receivable



8,280



7,844



8,206



8,255



8,595


Goodwill



63,370



63,370



63,370



63,370



63,370


Other intangible assets, net



584



710



835



960



1,104


Bank owned life insurance



42,734



42,750



42,530



42,316



37,099


Other assets



32,956



33,379



36,146



38,915



62,274


Total assets


$

3,233,525


$

2,997,736


$

2,995,469


$

2,883,802


$

2,805,662


Liabilities:

















Deposits:

















Noninterest-bearing


$

712,601


$

672,274


$

661,262


$

622,475


$

579,196


Interest-bearing



2,128,318



1,939,492



1,889,154



1,814,638



1,777,688


Total deposits



2,840,919



2,611,766



2,550,416



2,437,113



2,356,884


Short-term borrowings









51,980



50,000



50,000


Long-term debt



3,235



3,752



14,264



14,769



20,269


Subordinated debt



33,000



33,000



33,000



33,000



33,000


Accrued interest payable



872



469



1,120



736



1,289


Other liabilities



27,767



23,858



27,358



31,307



30,597


Total liabilities



2,905,793



2,672,845



2,678,138



2,566,925



2,492,039


Stockholders' equity:

















Common stock



14,356



14,407



14,423



14,414



14,468


Capital surplus



127,826



128,719



128,854



129,291



130,038


Retained earnings



190,061



183,702



177,836



171,023



165,437


Accumulated other comprehensive gain (loss)



(4,511)



(1,937)



(3,782)



2,149



3,680


Total stockholders' equity



327,732



324,891



317,331



316,877



313,623


Total liabilities and stockholders' equity


$

3,233,525


$

2,997,736


$

2,995,469


$

2,883,802


$

2,805,662


 

Peoples Financial Services Corp.
Consolidated Balance Sheets
(In thousands)





































Sept 30


June 30


Mar 31


Dec 31


Sept 30


Average quarterly balances


2021


2021


2021


2020


2020


Assets:

















Loans, net:

















Taxable


$

2,033,752


$

2,075,808


$

2,054,120


$

2,068,600


$

2,059,357


Tax-exempt



169,273



148,747



125,352



117,650



119,202


Total loans, net



2,203,025



2,224,555



2,179,472



2,186,250



2,178,559


Investments:

















Taxable



280,767



264,490



260,238



223,333



241,904


Tax-exempt



84,701



78,521



72,177



46,361



39,591


Total investments



365,468



343,011



332,415



269,694



281,495


Interest-bearing balances with banks



12,004



9,653



13,260



26,232



20,250


Federal funds sold



311,015



220,247



191,720



185,874



45,439


Total interest-bearing assets



2,891,512



2,797,466



2,716,867



2,668,050



2,525,743


Other assets



202,456



199,082



197,178



204,348



199,433


Total assets


$

3,093,968


$

2,996,548


$

2,914,045


$

2,872,398


$

2,725,176


Liabilities and stockholders' equity:

















Deposits:

















Interest-bearing


$

2,007,868


$

1,921,754


$

1,833,661


$

1,829,248


$

1,690,440


Noninterest-bearing



696,331



680,431



634,806



596,880



587,448


Total deposits



2,704,199



2,602,185



2,468,467



2,426,128



2,277,888


Short-term borrowings






7,300



50,470



50,000



50,038


Long-term debt



3,475



11,025



14,509



18,699



21,354


Subordinated debt



33,000



33,000



33,000



33,000



33,000


Other liabilities



25,635



23,420



27,371



28,946



30,454


Total liabilities



2,766,309



2,676,930



2,593,817



2,556,773



2,412,734


Stockholders' equity



327,659



319,618



320,228



315,625



312,442


Total liabilities and stockholders' equity


$

3,093,968


$

2,996,548


$

2,914,045


$

2,872,398


$

2,725,176


 

Peoples Financial Services Corp.
Asset Quality Data
(In thousands)





































Sept 30


June 30


Mar 31


Dec 31


Sept 30




2021


2021


2021


2020


2020


At quarter end

















Nonperforming assets:

















Nonaccrual/restructured loans


$

5,559


$

7,216


$

8,073


$

9,799


$

10,692


Accruing loans past due 90 days or more



78



49



172



71



52


Foreclosed assets



487



29



131



632



649


Total nonperforming assets


$

6,124


$

7,294


$

8,376


$

10,502


$

11,393



















Three months ended

















Allowance for loan losses:

















Beginning balance


$

26,739


$

26,783


$

27,344


$

26,584


$

26,957


Charge-offs



466



190



195



522



1,542


Recoveries



20



46



134



232



119


Provision for loan losses



400



100



(500)



1,050



1,050


Ending balance


$

26,693


$

26,739


$

26,783


$

27,344


$

26,584


 

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





































Sept 30


June 30


Mar 31


Dec 31


Sept 30


Three months ended


2021


2021


2021


2020


2020


Core net income per share:

















Net income GAAP


$

9,096


$

8,531


$

9,478


$

8,185


$

8,312


Adjustments:

















Less: (gain) loss on investment securities



(5)



17



(21)



(270)



(459)


Add: (gain) loss on investment securities tax adjustment



1



(4)



4



57



96


Net income Core


$

9,092


$

8,544


$

9,461


$

7,972


$

7,949


Average common shares outstanding - diluted



7,233,189



7,239,325



7,246,016



7,257,874



7,312,253


Core net income per share


$

1.26


$

1.18


$

1.31


$

1.10


$

1.09


Tangible book value:

















Total stockholders' equity


$

327,732


$

324,891


$

317,331


$

316,877


$

313,623


Less: Goodwill



63,370



63,370



63,370



63,370



63,370


Less: Other intangible assets, net



584



710



835



960



1,104


Total tangible stockholders' equity


$

263,778


$

260,811


$

253,126


$

252,547


$

249,149


Common shares outstanding



7,177,028



7,202,728



7,211,293



7,215,202



7,242,326


Tangible book value per share


$

36.75


$

36.21


$

35.10


$

35.00


$

34.40


Core return on average stockholders' equity:

















Net income GAAP


$

9,096


$

8,531


$

9,478


$

8,185


$

8,312


Adjustments:

















Less: (gain) loss on investment securities



(5)



17



(21)



(270)



(459)


Add: (gain) loss on investment securities tax adjustment



1



(4)



4



57



96


Net income Core


$

9,092


$

8,544


$

9,461


$

7,972


$

7,949


Average stockholders' equity


$

327,659


$

319,618


$

320,228


$

315,625


$

312,442


Core return on average stockholders' equity



11.01

%


10.72

%


11.98

%


10.05

%


10.12

%

Return on average tangible equity:

















Net income GAAP


$

9,096


$

8,531


$

9,478


$

8,185


$

8,312


Average stockholders' equity


$

327,659


$

319,618


$

320,228


$

315,625


$

312,442


Less: average intangibles



64,017



64,143



64,268



64,402



64,551


Average tangible stockholders' equity


$

263,642


$

255,475


$

255,960


$

251,223


$

247,891


Return on average tangible stockholders' equity



13.69

%


13.39

%


15.02

%


12.96

%


13.34

%

Core return on average tangible stockholders' equity:

















Net income GAAP


$

9,096


$

8,531


$

9,478


$

8,185


$

8,312


Adjustments:

















Less: (gain) loss on investment securities



(5)



17



(21)



(270)



(459)


Add: (gain) loss on investment securities tax adjustment



1



(4)



4



57



96


Net income Core


$

9,092


$

8,544


$

9,461


$

7,972


$

7,949


Average stockholders' equity


$

327,659


$

319,618


$

320,228


$

315,625


$

312,442


Less: average intangibles



64,017



64,143



64,268



64,402



64,551


Average tangible stockholders' equity


$

263,642


$

225,475


$

255,960


$

251,223


$

247,891


Core return on average tangible stockholders' equity



13.68

%


13.41

%


14.99

%


12.62

%


12.76

%

Core return on average assets:

















Net income GAAP


$

9,096


$

8,531


$

9,478


$

8,185


$

8,312


Adjustments:

















Less: (gain) loss on investment securities



(5)



17



(21)



(270)



(459)


Add: (gain) loss on investment securities tax adjustment



1



(4)



4



57



96


Net income Core


$

9,092


$

8,544


$

9,461


$

7,972


$

7,949


Average assets


$

3,093,968


$

2,996,548


$

2,914,045


$

2,872,398


$

2,725,176


Core return on average assets



1.17

%


1.14

%


1.32

%


1.10

%


1.16

%


 

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



















Sept 30


Sept 30


Nine Months Ended


2021


2020


Core net income per share:








Net income (GAAP)


$

27,105


$

21,169


Adjustments:








Less: Gain on investment securities






724


Less: Gain (loss) on equity securities



9



(82)


Add: Gain on investment securities tax adjustment






152


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



2



(17)


Net income Core


$

27,098


$

20,662


Average basic common shares outstanding



7,204,399



7,332,539


Average diluted common shares outstanding



7,239,463



7,364,693


Core net income per share - basic


$

3.76


$

2.82


Core net income per share - diluted


$

3.74


$

2.81


 

Peoples Financial Services Corp.
Reconciliation of Non-GAAP Financial Measures
(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 and nine months ended September 30, 2021 and 2020:










Three months ended September 30


2021


2020


Interest income (GAAP)


$

24,167


$

23,346


Adjustment to FTE



388



307


Interest income adjusted to FTE (non-GAAP)



24,555



23,653


Interest expense



2,182



3,422


Net interest income adjusted to FTE (non-GAAP)


$

22,373


$

20,231










Nine months ended September 30


2021


2020


Interest income (GAAP)


$

70,407


$

71,040


Adjustment to FTE



1,089



989


Interest income adjusted to FTE (non-GAAP)



71,496



72,029


Interest expense



7,364



11,048


Net interest income adjusted to FTE (non-GAAP)


$

64,132


$

60,981




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 and nine months ended September 30, 2021 and 2020:

















Three months ended September 30


2021


2020


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

14,291


$

13,974


Less: amortization of intangible assets expense



125



154


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



14,166



13,820










Net interest income (GAAP)



21,985



19,924


Plus: taxable equivalent adjustment



388



307


Noninterest income (GAAP)



3,449



4,935


Less: net gains on equity securities



5



2


Less: net gains on sale of securities






457


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


$

25,817


$

24,707










Efficiency ratio (non-GAAP)



54.87

%


55.94

%









Nine months ended September 30


2021


2020


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

40,448


$

40,867


Less: amortization of intangible assets expense



375



462


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



40,073



40,405










Net interest income (GAAP)



63,043



59,992


Plus: taxable equivalent adjustment



1,089



989


Noninterest income (GAAP)



10,353



11,907


Less: net gains (losses) on equity securities



9



(82)


Less: net gains on sale of investment securities






724


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


$

74,476


$

72,246










Efficiency ratio (non-GAAP)



53.81

%


55.93

%

 

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/peoples-financial-services-corp-reports-third-quarter-2021-earnings-301406773.html

SOURCE Peoples Financial Services Corp.