PEOPLES FINANCIAL SERVICES CORP. Reports First Quarter 2021 Earnings

SCRANTON, Pa., April 23, 2021 /PRNewswire/ — Peoples Financial Services Corp. («Peoples») (NASDAQ: PFIS), the bank holding company for Peoples…

SCRANTON, Pa., April 23, 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 ended March 31, 2021. Peoples reported net income of $9.5 million, or $1.31 per diluted share for the three months ended March 31, 2021, a 79.5% increase when compared to $5.3 million, or $0.71 per share for the comparable period of 2020. The increase in earnings over the year ago period is a result of a $4.0 million decrease to the provision for loan losses, a $1.2 million increase to pre-provision net interest income from lower interest expense, and a $1.0 million decrease to noninterest expenses, offset by a higher income tax provision of $2.0 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 March 31, totaled $9.5 million and $5.2 million in 2021 and 2020, respectively. Core net income per share for the three months ended March 31, 2021 was $1.31, an 87.1% increase from $0.70 reported for the same period in 2020. Core net income in the current period excludes a pre-tax $21 thousand unrealized gain on our equity investment portfolio. Core net income for the 2020 period excludes a $267 thousand realized gain on the sale of a pool of municipal securities and an unrealized loss of $123 thousand on our equity investment portfolio.

NOTABLES

  • Record quarterly net income of $9.5 million or $1.31 per diluted share.
  • First quarter dividend of $0.37 per share represents a 2.8% increase from the first quarter of 2020.
  • Return on average assets was 1.32% for the three months ended March 31, 2021 compared to 1.13% for the three months ended December 31, 2020, and 0.86% for the comparable period in 2020. Return on average equity was 12.00% for the three months ended March 31, 2021 compared to 10.32% for the three months ended December 31, 2020 and 7.05% for the comparable period in 2020.
  • Paycheck Protection Program («PPP») commercial loans outstanding at March 31, 2021 total $200.8 million, including $100.8 million remaining from round one of the program and $100.0 million originated in 2021 under round two.
  • Loans in deferral at March 31, 2021 totaled $1.3 million or 0.1% of total outstanding loan balances, excluding PPP loans. At December 31, 2020 loans in deferral totaled $6.1 million or 0.3% of total outstanding loans, excluding PPP loans. At June 30, 2020 loans in deferral totaled $330.1 million or 16.7% of total outstanding loan balances, excluding PPP loans.
  • Deposits grew $540.4 million or 26.9% for the twelve months ended March 31, 2021 and grew $113.3 million during the three months ended March 31, 2021.
  • Tax-equivalent net interest income increased $1.2 million or 6.0% to $21.1 million for the three months ended March 31, 2021 compared to $19.9 million for the same period in 2020.
  • Provision for loan losses decreased $4.0 million from the comparable period in 2020, the product of a $0.5 million release from the allowance for loan losses in the current period and a $3.5 million provision for loan losses in the year ago period.
  • Efficiency ratio improved to 50.8% for the three months ended March 31, 2021, compared to 57.9% in the year ago period.

 INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis («FTE»), our tax-equivalent net interest margin for the three months ended March 31, 2021 was 3.15%, an increase of 15 basis points when compared to the three months ended December 31, 2020, and a decrease of 35 basis points when compared to 3.50% for the same three month period in 2020.  The increase in net interest margin from the prior three month period is primarily due to interest and fees on PPP loans and lower deposit costs.  The tax-equivalent yield on interest-earning assets increased 6 basis points to 3.55% during the three months ended March 31, 2021 from 3.49% during the three months ended December 31, 2020, and decreased 70 basis points when compared to 4.25% for the three months ended March 31, 2020.    The decrease in net interest margin and yield from the year ago period is 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. However, we have experienced lower interest-bearing liability costs due to lower market rates, 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 10 basis points to 0.57% for the three months ended March 31, 2021 when compared to 0.67% during the three months ended December 31, 2020, and has decreased 44 basis points when compared to the same three month period in 2020.

First Quarter 2021 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income for the three months ended March 31, increased $1.2 million or 6.0% to $21.1 million in 2021 from $19.9 million in 2020. The increase in tax equivalent net interest income was largely due to lower interest expense of $1.6 million, as continued focus has been on lowering deposit and borrowing costs in the current and expected low market rate environment. Partially offsetting the lower interest expense, was lower interest income of $0.4 due to a negative rate variance, as asset yields continued to reprice lower. The increase to total average earning assets of $426.7 million partially offset the lower yields. PPP loans averaged $195.5 million in the three-month period ended March 31, 2021 with interest and net fees totaling approximately $2.5 million. The tax-equivalent yield on the loan portfolio decreased to 4.09% for the three months ended March 31, 2021, compared to 4.55% for the comparable period in 2020 due to lower market rates. Loans, net averaged $2.2 billion for the three months ended March 31, 2021 and $2.0 billion for the comparable period in 2020. For the three months ended March 31, the tax-equivalent yield on total investments decreased to 2.15% in 2021 from 2.48% in 2020. Average investments totaled $332.4 million in 2021 and $316.2 million in 2020. Average interest-bearing liabilities increased $232.8 million for the three months ended March 31, 2021, compared to the corresponding period last year due primarily to deposit growth from higher customer savings rates, strong organic deposit growth of new customer relationships and the federal governments’ stimulus funding.

For the three months ended March 31, 2021, the provision for loan losses was negative $0.5 million, due to improved credit quality and a slight decrease in non-PPP loan balances, and was $4.0 million less than the provision for loan losses in the year ago period, which reflected an adjustment of qualitative factors in our allowance for loan losses methodology due to the onset of the coronavirus pandemic and its uncertain economic impact.

Noninterest income for the three months ended March 31, 2021 and 2020 was $3.5 million.  Mortgage banking revenue was $0.2 million higher in the current period due to increased refinance activity from low market rates which resulted in a higher volume of loans sold into the secondary market.  Revenue from commercial loan interest rate swap transactions was $0.3 million higher in the current period due to a higher credit valuation adjustment.  Service charges, fees, commissions and other are lower in the current period by $0.4 million due to lower service charges on consumer and commercial deposit accounts and an accrual adjustment to a bank owned life insurance benefit.  The year ago period included a net gain of $0.1 million from a sale of a pool of municipal securities, offset by an unrealized loss related to our equity portfolio.

Noninterest expense decreased $1.0 million or 7.5% to $12.6 million for the three months ended March 31, 2021, from $13.6 million for the three months ended March 31, 2020. Salaries and employee benefits decreased $1.3 million or 16.4% as higher salaries were more than offset by lower benefits expenses and deferred costs on loan originations which are recorded as a contra-salary expense.  Occupancy and equipment expenses were higher by $0.2 million due to information technology investments related to mobile/digital banking solutions in the current period. Other expenses were higher by $0.1 million due primarily to an increase in FDIC insurance assessments in the current period primarily 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 $2.0 million for the three months ended March 31, 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 March 31, 2021, total assets, loans and deposits were $3.0 billion, $2.2 billion and $2.5 billion, respectively. Loans balances increased slightly from December 31, 2020 as loan demand, exclusive of PPP loans, was soft to begin the year. The slight growth in loans was primarily due to a net increase in PPP loans resulting from our participation in the second round of the Small Business Administration («SBA») administered PPP, and to a lesser extent in commercial real estate loans.  During the first quarter of 2021, we funded an additional 885 loans totaling $100.0 million under the SBA’s second PPP loan program.   Total deposits increased $113.3 million or 4.6% from December 31, 2020 due to organic growth of customer relationships throughout all our markets, PPP loan proceeds retained coupled with additional deposits by our commercial borrowers and federal government stimulus payments. Non-interest bearing deposits increased $38.8 million or 6.2% and interest-bearing deposits increased $74.5 million or 4.1% during the three months ended March 31, 2021. Total investments were $341.1 million at March 31, 2021, including $333.8 million securities classified as available-for-sale and $7.2 million classified as held-to-maturity.

Stockholders’ equity equaled $317.3 million or $44.00 per share at March 31, 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 $35.10 per share at March 31, 2021, from $35.00 per share at December 31, 2020. Dividends declared for the three months ended March 31, 2021 amounted to $0.37 per share, a 2.8% increase from the 2020 period, representing a dividend payout ratio of 28.2%.

ASSET QUALITY REVIEW

Nonperforming assets were $8.4 million or 0.38% of loans, net and foreclosed assets at March 31, 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 the previous quarter was primarily due to the payoff of a non-accrual commercial loan and the sale of a foreclosed property.  The Company’s allowance for loan losses decreased $0.6 million or 2.1% in the first quarter of 2021, due to a $0.5 million release from the allowance for loan losses in the current period resulting from improved credit quality and a slight decrease in non-PPP loan balances.  The allowance for loan losses at March 31, 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 $26.8 million or 1.23% of loans, net at March 31, 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 1.35% at March 31, 2021.  Loans charged-off, net of recoveries, for the three months ended March 31, 2021, equaled $0.1 million or 0.01% of average loans, compared to $0.5 million or 0.10% of average loans for the comparable period last year.

Impact of COVID-19

Operationally, as COVID-19 events unfold, our continued priority is the health and safety of our customers and employees. We recently worked with local government and health professionals and have had opportunities to offer our eligible employees and their family members appointments to receive the COVID-19 vaccine.  We continue to follow the recommendations of our state governments as to conducting business and have maintained safety protocols. Currently all our offices have returned to pre-pandemic operating hours with limited lobby access.

From a lending perspective, organic loan growth, with the exception of PPP loans, was soft as we began 2021, however, loan activity improved at the end of the quarter.  We participated in the Coronavirus Aid, Relief and Economic Security Act («CARES Act»), PPP, a $350 billion specialized low-interest loan program funded by the U.S. Treasury Department and administered by the SBA.  During 2020, we had approved 1,450 PPP loans totaling $217.5 million. Substantially all of the loans were made to existing customers, funded under the two year PPP loan program, and the loan proceeds initially were deposited with our institution.  PPP loan forgiveness commenced during the fourth quarter of 2020 and we continue to process loan forgiveness applications.  At March 31, 2021, we have 468 loans totaling $100.8 million remaining compared to 1,304 loans totaling $189.7 million at December 31, 2020. We expect the majority of the remaining $100.8 million to be forgiven during 2021. During the first quarter of 2021, we funded an additional 885 loans totaling $100.0 million under the SBA’s second PPP loan program.   The application process for the second PPP loan program ends May 31, 2021. 

From a credit risk perspective, we took actions to identify and assess our COVID-19 related credit exposures based on asset class and borrower type. From the onset of the crisis, we worked to proactively monitor our loan portfolio by contacting many of our borrowers to evaluate the impact of the pandemic on them, their businesses and the underlying collateral for our loans. The Company implemented a customer payment deferral program to assist both consumer and business borrowers that may be experiencing financial hardship due to COVID-19 related challenges.  At the start of the pandemic, the Company granted payment deferral requests for up to six months to a total of 481 commercial loans with outstanding loan balances of $306.9 million and to 505 consumer loans with outstanding balances of $23.3 million. At March 31, 2021, the majority of loans are no longer in deferral as borrowers have begun to make their regular payments. Outstanding loan balances remaining in deferral at March 31, 2021 totaled $1.3 million, a decrease of $4.8 million from the $6.1 million at December 31, 2020, and a decrease of $328.8 million from the $330.1 million in deferral at June 30, 2020. As a percentage of total loan balances, excluding PPP loans, loans in deferral represented less than 0.1% of loans outstanding at March 31, 2021 compared to 0.3% of loans outstanding at December 31, 2020, and 16.7% of loans outstanding at June 30, 2020. At March 31, 2021, commercial loan balances remaining in deferral total $1.0 million while consumer loans total $0.3 million. Loan deferrals and modifications have been executed consistent with the guidelines of the CARES Act. Pursuant to the CARES Act, loan deferrals are not included in our nonperforming loans disclosed above. Loans in deferral status will continue to accrue interest during the deferral period unless otherwise classified as nonperforming.

About Peoples:

Peoples Financial Services Corp. is the parent company of Peoples Security Bank and Trust Company, a community bank serving Bucks, Lackawanna, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Schuylkill, Susquehanna, and Wyoming Counties in Pennsylvania and Broome County in New York through 26 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)

 




















Mar 31


Dec 31


Sept 30


June 30


Mar 31




2021


2020


2020


2020


2020


Key performance data:

















Share and per share amounts:

















Net income


$

1.31


$

1.13


$

1.14


$

1.03


$

0.71


Core net income (1)


$

1.31


$

1.10


$

1.09


$

1.03


$

0.70


Cash dividends declared


$

0.37


$

0.36


$

0.36


$

0.36


$

0.36


Book value


$

44.00


$

43.92


$

43.30


$

42.55


$

41.68


Tangible book value (1)


$

35.10


$

35.00


$

34.40


$

33.74


$

32.86


Market value:

















High


$

47.34


$

40.40


$

39.38


$

39.40


$

50.10


Low


$

36.02


$

34.47


$

32.51


$

30.24


$

35.60


Closing


$

42.24


$

36.76


$

34.76


$

38.19


$

39.74


Market capitalization


$

304,605


$

265,231


$

251,743


$

280,042


$

291,820


Common shares outstanding



7,211,293



7,215,202



7,242,326



7,332,856



7,343,240


Selected ratios:

















Return on average stockholders’ equity



12.00

%


10.32

%


10.58

%


9.87

%


7.05

%

Core return on average stockholders’

equity (1)



11.98

%


10.05

%


10.12

%


9.83

%


6.90

%

Return on average tangible

stockholders’ equity



15.02

%


12.96

%


13.34

%


12.49

%


8.99

%

Core return on average tangible

stockholders’ equity (1)



14.99

%


12.62

%


12.76

%


12.44

%


8.79

%

Return on average assets



1.32

%


1.13

%


1.21

%


1.13

%


0.86

%

Core return on average assets (1)



1.32

%


1.10

%


1.16

%


1.12

%


0.84

%

Stockholders’ equity to total assets



10.59

%


10.99

%


11.18

%


11.56

%


12.03

%

Efficiency ratio (2)



50.83

%


56.35

%


55.94

%


54.01

%


57.88

%

Nonperforming assets to loans, net, and

foreclosed assets



0.38

%


0.48

%


0.52

%


0.62

%


0.60

%

Net charge-offs to average loans, net



0.01

%


0.05

%


0.26

%


0.10

%


0.10

%

Allowance for loan losses to loans, net



1.23

%


1.26

%


1.21

%


1.24

%


1.27

%

Interest-bearing assets yield (FTE) (3)



3.55

%


3.49

%


3.73

%


3.90

%


4.25

%

Cost of funds



0.57

%


0.67

%


0.76

%


0.75

%


1.01

%

Net interest spread (FTE) (3)



2.99

%


2.81

%


2.97

%


3.15

%


3.24

%

Net interest margin (FTE) (3)



3.15

%


3.00

%


3.19

%


3.36

%


3.50

%



(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)

 







Mar 31


Mar 31


Three Months Ended


2021


2020


Interest income:








Interest and fees on loans:








Taxable


$

20,900


$

20,917


Tax-exempt



870



1,031


Interest and dividends on investment securities:








Taxable



1,243



1,548


Tax-exempt



390



299


Dividends



23



23


Interest on interest-bearing deposits in other banks



2



24


Interest on federal funds sold



49





Total interest income



23,477



23,842


Interest expense:








Interest on deposits



2,092



3,503


Interest on short-term borrowings



71



573


Interest on long-term debt



103



205


Interest on subordinated debt



443





Total interest expense



2,709



4,281


Net interest income



20,768



19,561


Provision for loan losses



(500)



3,500


Net interest income after provision for loan losses



21,268



16,061


Noninterest income:








Service charges, fees, commissions and other



1,184



1,605


Merchant services income



93



114


Commissions and fees on fiduciary activities



533



506


Wealth management income



358



387


Mortgage banking income



312



137


Increase in cash surrender value of life insurance



219



187


Interest rate swap revenue



797



470


Net gain (loss) on investment securities



21



(123)


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






267


Total noninterest income



3,517



3,550


Noninterest expense:








Salaries and employee benefits expense



6,570



7,856


Net occupancy and equipment expense



3,267



3,079


Amortization of intangible assets



125



154


Other expenses



2,667



2,562


Total noninterest expense



12,629



13,651


Income before income taxes



12,156



5,960


Provision for income tax expense



2,678



679


Net income


$

9,478


$

5,281


Other comprehensive income:








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


$

(7,749)


$

7,629


Reclassification adjustment for gains included in net income






(267)


Change in derivative fair value



242



1,036


Income tax related to other comprehensive income



(1,576)



1,765


Other comprehensive income, net of income taxes



(5,931)



6,633


Comprehensive income


$

3,547


$

11,914


Share and per share amounts:








Net income – basic


$

1.31


$

0.72


Net income – diluted



1.31



0.71


Cash dividends declared


$

0.37


$

0.36


Average common shares outstanding – basic



7,210,952



7,379,438


Average common shares outstanding – diluted



7,246,016



7,405,703


 

 

Peoples Financial Services Corp.

Consolidated Statements of Income

(In thousands, except per share data)

 






















Mar 31


Dec 31


Sept 30


June 30


Mar 31


Three months ended


2021


2020


2020


2020


2020


Interest income:

















Interest and fees on loans:

















Taxable


$

20,900


$

20,705


$

20,901


$

21,160


$

20,917


Tax-exempt



870



888



876



941



1,031


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

















Taxable



1,243



1,111



1,250



1,420



1,548


Tax-exempt



390



304



280



295



299


Dividends



23



26



23



25



23


Interest on interest-bearing deposits in other banks



2



4



4



5



24


Interest on federal funds sold



49



47



12



6





Total interest income



23,477



23,085



23,346



23,852



23,842


Interest expense:

















Interest on deposits



2,092



2,614



2,758



2,864



3,503


Interest on short-term borrowings



71



91



82



102



573


Interest on long-term debt



103



127



139



231



205


Interest on subordinated debt



443



444



443



148





Total interest expense



2,709



3,276



3,422



3,345



4,281


Net interest income



20,768



19,809



19,924



20,507



19,561


Provision for loan losses



(500)



1,050



1,050



1,800



3,500


Net interest income after provision for loan losses



21,268



18,759



18,874



18,707



16,061


Noninterest income:

















Service charges, fees, commissions and other



1,184



2,187



1,584



1,433



1,605


Merchant services income



93



101



137



472



114


Commissions and fees on fiduciary activities



533



551



575



493



506


Wealth management income



358



392



272



231



387


Mortgage banking income



312



658



488



312



137


Increase in cash surrender value of life insurance



219



202



192



193



187


Interest rate swap revenue



797



374



1,228



249



470


Net gain (loss) on investment securities



21



76



2



39



(123)


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






194



457






267


Total noninterest income



3,517



4,735



4,935



3,422



3,550


Noninterest expense:

















Salaries and employee benefits expense



6,570



7,400



7,831



7,048



7,856


Net occupancy and equipment expense



3,267



3,588



3,131



3,042



3,079


Amortization of intangible assets



125



144



154



154



154


Other expenses



2,667



2,869



2,858



2,998



2,562


Total noninterest expense



12,629



14,001



13,974



13,242



13,651


Income before income taxes



12,156



9,493



9,835



8,887



5,960


Income tax expense



2,678



1,308



1,523



1,311



679


Net income


$

9,478


$

8,185


$

8,312


$

7,576


$

5,281


Other comprehensive income:

















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


$

(7,749)


$

(305)


$

(639)


$

2,094


$

7,629


Reclassification adjustment for gains included in net income






(194)



(457)






(267)


Change in benefit plan liabilities






(1,398)











Change in derivative fair value



242



(41)



(137)



(543)



1,036


Income tax related to other comprehensive income 



(1,576)



(407)



(260)



326



1,765


Other comprehensive income, net of income taxes



(5,931)



(1,531)



(973)



1,225



6,633


Comprehensive income


$

3,547


$

6,654


$

7,339


$

8,801


$

11,914


Share and per share amounts:

















Net income – basic


$

1.31


$

1.13


$

1.14


$

1.03


$

0.72


Net income – diluted



1.31



1.13



1.14



1.03



0.71


Cash dividends declared


$

0.37


$

0.36


$

0.36


$

0.36


$

0.36


Average common shares outstanding – basic



7,210,952



7,222,810



7,277,189



7,341,636



7,379,438


Average common shares outstanding – diluted



7,246,016



7,257,874



7,312,253



7,376,700



7,405,703


 

 

Peoples Financial Services Corp.

Details of Net Interest and Net Interest Margin

(In thousands, fully taxable equivalent basis)

 




















Mar 31


Dec 31


Sept 30


June 30


Mar 31


Three months ended


2021


2020


2020


2020


2020


Net interest income:

















Interest income

















Loans, net:

















Taxable


$

20,900


$

20,705


$

20,901


$

21,160


$

20,917


Tax-exempt



1,101



1,124



1,109



1,191



1,305


Total loans, net



22,001



21,829



22,010



22,351



22,222


Investments:

















Taxable



1,266



1,137



1,273



1,445



1,571


Tax-exempt



494



385



354



374



378


Total investments



1,760



1,522



1,627



1,819



1,949


Interest on interest-bearing balances in other banks



2



4



4



5



24


Federal funds sold



49



47



12



6





Total interest income



23,812



23,402



23,653



24,181



24,195


Interest expense:

















Deposits



2,092



2,614



2,758



2,864



3,503


Short-term borrowings



71



91



82



102



573


Long-term debt



103



127



139



231



205


Subordinated debt



443



444



443



148





Total interest expense



2,709



3,276



3,422



3,345



4,281


Net interest income


$

21,103


$

20,126


$

20,231


$

20,836


$

19,914


Loans, net:

















Taxable



4.13

%


3.98

%


4.04

%


4.19

%


4.60

%

Tax-exempt



3.56

%


3.80

%


3.70

%


3.75

%


3.88

%

Total loans, net



4.09

%


3.97

%


4.02

%


4.16

%


4.55

%

Investments:

















Taxable



1.97

%


2.03

%


2.09

%


2.24

%


2.36

%

Tax-exempt



2.78

%


3.30

%


3.56

%


3.46

%


3.10

%

Total investments



2.15

%


2.25

%


2.30

%


2.41

%


2.48

%

Interest-bearing balances with banks



0.06

%


0.06

%


0.08

%


0.16

%


1.17

%

Federal funds sold



0.10

%


0.10

%


0.11

%


0.14

%




Total interest-bearing assets



3.55

%


3.49

%


3.73

%


3.90

%


4.25

%

Interest expense:

















Deposits



0.46

%


0.57

%


0.65

%


0.72

%


0.92

%

Short-term borrowings



0.57

%


0.72

%


0.65

%


0.44

%


1.62

%

Long-term debt



2.88

%


2.70

%


2.59

%


1.13

%


2.54

%

Subordinated debt



5.38

%


5.38

%


5.37

%


5.38

%




Total interest-bearing liabilities



0.57

%


0.67

%


0.76

%


0.75

%


1.01

%

Net interest spread



2.98

%


2.81

%


2.97

%


3.15

%


3.24

%

Net interest margin



3.15

%


3.00

%


3.19

%


3.36

%


3.50

%

 

 

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)

 





















Mar 31


Dec 31


Sept 30


June 30


Mar 31


At period end


2021


2020


2020


2020


2020


Assets:

















Cash and due from banks


$

30,786


$

29,287


$

42,940


$

27,146


$

22,181


Interest-bearing balances in other banks



8,432



15,905



20,972



14,788



13,146


Federal funds sold



264,100



183,000



102,300



10,000





Investment securities:

















Available-for-sale



333,753



295,911



247,404



287,709



302,884


Equity investments carried at fair value



159



138



341



338



299


Held-to-maturity



7,166



7,225



7,297



7,401



7,520


Loans held for sale



458



837



2,161



1,939



270


Loans, net



2,179,534



2,177,982



2,188,463



2,181,909



2,023,155


Less: allowance for loan losses



26,783



27,344



26,584



26,957



25,686


Net loans



2,152,751



2,150,638



2,161,879



2,154,952



1,997,469


Premises and equipment, net



46,777



47,045



47,926



48,378



48,619


Accrued interest receivable



8,206



8,255



8,595



8,368



7,283


Goodwill



63,370



63,370



63,370



63,370



63,370


Other intangible assets, net



835



960



1,104



1,257



1,411


Bank owned life insurance



42,530



42,316



37,099



35,412



35,224


Other assets



36,146



38,915



62,274



39,366



44,096


Total assets


$

2,995,469


$

2,883,802


$

2,805,662


$

2,700,424


$

2,543,772


Liabilities:

















Deposits:

















Noninterest-bearing


$

661,262


$

622,475


$

579,196


$

575,206


$

467,315


Interest-bearing



1,889,154



1,814,638



1,777,688



1,634,918



1,542,680


Total deposits



2,550,416



2,437,113



2,356,884



2,210,124



2,009,995


Short-term borrowings



51,980



50,000



50,000



50,000



164,150


Long-term debt



14,264



14,769



20,269



60,938



32,250


Subordinated debt



33,000



33,000



33,000



33,000





Accrued interest payable



1,120



736



1,289



872



1,336


Other liabilities



27,358



31,307



30,597



33,446



29,978


Total liabilities



2,678,138



2,566,925



2,492,039



2,388,380



2,237,709


Stockholders’ equity:

















Common stock



14,423



14,414



14,468



14,649



14,670


Capital surplus



128,854



129,291



130,038



133,002



133,159


Retained earnings



177,836



171,023



165,437



159,739



154,806


Accumulated other comprehensive gain (loss)



(3,782)



2,149



3,680



4,654



3,428


Total stockholders’ equity



317,331



316,877



313,623



312,044



306,063


Total liabilities and stockholders’ equity


$

2,995,469


$

2,883,802


$

2,805,662


$

2,700,424


$

2,543,772


 

 

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)

 




















Mar 31


Dec 31


Sept 30


June 30


Mar 31


Average quarterly balances


2021


2020


2020


2020


2020


Assets:

















Loans, net:

















Taxable


$

2,054,120


$

2,068,600


$

2,059,357


$

2,032,852


$

1,830,455


Tax-exempt



125,352



117,650



119,202



127,624



135,260


Total loans, net



2,179,472



2,186,250



2,178,559



2,160,476



1,965,715


Investments:

















Taxable



260,238



223,333



241,904



260,160



267,179


Tax-exempt



72,177



46,361



39,591



43,466



49,046


Total investments



332,415



269,694



281,495



303,626



316,225


Interest-bearing balances with banks



13,260



26,232



20,250



12,595



8,263


Federal funds sold



191,720



185,874



45,439



17,480





Total interest-bearing assets



2,716,867



2,668,050



2,525,743



2,494,177



2,290,203


Other assets



197,178



204,348



199,433



210,017



193,507


Total assets


$

2,914,045


$

2,872,398


$

2,725,176


$

2,704,194


$

2,483,710


Liabilities and stockholders’ equity:

















Deposits:

















Interest-bearing


$

1,833,661


$

1,829,248


$

1,690,440


$

1,605,841


$

1,524,265


Noninterest-bearing



634,806



596,880



587,448



574,194



462,508


Total deposits



2,468,467



2,426,128



2,277,888



2,180,035



1,986,773


Short-term borrowings



50,470



50,000



50,038



93,447



142,121


Long-term debt



14,509



18,699



21,354



82,117



32,477


Subordinated debt



33,000



33,000



33,000



11,074





Other liabilities



23,371



28,946



30,454



28,798



21,096


Total liabilities



2,589,817



2,556,773



2,412,734



2,395,471



2,182,467


Stockholders’ equity



320,228



315,625



312,442



308,723



301,243


Total liabilities and stockholders’ equity


$

2,910,045


$

2,872,398


$

2,725,176


$

2,704,194


$

2,483,710


 

 

Peoples Financial Services Corp.

Asset Quality Data

(In thousands)

 
























Mar 31


Dec 31


Sept 30


June 30


Mar 31




2021


2020


2020


2020


2020


At quarter end

















Nonperforming assets:

















Nonaccrual/restructured loans


$

8,073


$

9,799


$

10,692


$

12,214


$

10,760


Accruing loans past due 90 days or more



172



71



52



291



423


Foreclosed assets



131



632



649



964



903


Total nonperforming assets


$

8,376


$

10,502


$

11,393


$

13,469


$

12,086



















Three months ended

















Allowance for loan losses:

















Beginning balance


$

27,344


$

26,584


$

26,957


$

25,686


$

22,677


Charge-offs



195



522



1,542



617



798


Recoveries



134



232



119



88



307


Provision for loan losses



(500)



1,050



1,050



1,800



3,500


Ending balance


$

26,783


$

27,344


$

26,584


$

26,957


$

25,686


 

 

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except share and per share data)

 























Mar 31


Dec 31


Sept 30


June 30


Mar 31


Three months ended


2021


2020


2020


2020


2020


Core net income per share:

















Net income GAAP


$

9,478


$

8,185


$

8,312


$

7,576


$

5,281


Adjustments:

















Less: gain on investment securities



(21)



(270)



(459)



(39)



(144)


Add: gain on investment securities tax adjustment



4



57



96



8



30


Net income Core


$

9,461


$

7,972


$

7,949


$

7,545


$

5,167


Average common shares outstanding – basic



7,210,952



7,222,810



7,277,189



7,341,636



7,379,438


Core net income per share


$

1.31


$

1.10


$

1.09


$

1.03


$

0.70


Tangible book value:

















Total stockholders’ equity


$

317,331


$

316,877


$

313,623


$

312,044


$

306,063


Less: Goodwill



63,370



63,370



63,370



63,370



63,370


Less: Other intangible assets, net



835



960



1,104



1,257



1,411


Total tangible stockholders’ equity


$

253,126


$

252,547


$

249,149


$

247,417


$

241,282


Common shares outstanding



7,211,293



7,215,202



7,242,326



7,332,856



7,343,240


Tangible book value per share


$

35.10


$

35.00


$

34.40


$

33.74


$

32.86


Core return on average stockholders’ equity:

















Net income GAAP


$

9,478


$

8,185


$

8,312


$

7,576


$

5,281


Adjustments:

















Less: gain on investment securities



(21)



(270)



(459)



(39)



(144)


Add: gain on investment securities tax adjustment



4



57



96



8



30


Net income Core


$

9,461


$

7,972


$

7,949


$

7,545


$

5,167


Average stockholders’ equity


$

320,228


$

315,625


$

312,442


$

308,723


$

301,243


Core return on average stockholders’ equity



11.98

%


10.05

%


10.12

%


9.83

%


6.90

%

Return on average tangible equity:

















Net income GAAP


$

9,478


$

8,185


$

8,312


$

7,576


$

5,281


Average stockholders’ equity


$

320,228


$

315,625


$

312,442


$

308,723


$

301,243


Less: average intangibles



64,268



64,402



64,551



64,704



64,879


Average tangible stockholders’ equity


$

255,960


$

251,223


$

247,891


$

244,019


$

236,364


Return on average tangible stockholders’ equity



15.02

%


12.96

%


13.34

%


12.49

%


8.99

%

Core return on average tangible stockholders’ equity:

















Net income GAAP


$

9,478


$

8,185


$

8,312


$

7,576


$

5,281


Adjustments:

















Less: gain on investment securities



(21)



(270)



(459)



(39)



(144)


Add: gain on investment securities tax adjustment



4



57



96



8



30


Net income Core


$

9,461


$

7,972


$

7,949


$

7,545


$

5,167


Average stockholders’ equity


$

320,228


$

315,625


$

312,442


$

308,723


$

301,243


Less: average intangibles



64,268



64,402



64,551



64,704



64,879


Average tangible stockholders’ equity


$

255,960


$

251,223


$

247,891


$

244,019


$

236,364


Core return on average tangible stockholders’ equity



14.99

%


12.62

%


12.76

%


12.44

%


8.79

%

Core return on average assets:

















Net income GAAP


$

9,478


$

8,185


$

8,312


$

7,576


$

5,281


Adjustments:

















Less: (gain) loss on investment securities



(21)



(270)



(459)



(39)



(144)


Add: (gain) loss on investment securities tax adjustment



4



57



96



8



30


Net income Core


$

9,461


$

7,972


$

7,949


$

7,545


$

5,167


Average assets


$

2,914,045


$

2,872,398


$

2,725,176


$

2,704,194


$

2,483,710


Core return on average assets



1.32

%


1.10

%


1.16

%


1.12

%


0.84

%


 

 

 

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except share and per share data)

 











Mar 31


Mar 31


Three Months Ended


2021


2020


Core net income per share:








Net income (GAAP)


$

9,478


$

5,281


Adjustments:








Less: Gain on investment securities



(21)



(144)


Add: Gain on investment securities tax adjustment



4



30


Net income Core


$

9,461


$

5,167


Average basic common shares outstanding



7,210,952



7,379,438


Average diluted common shares outstanding



7,246,016



7,405,703


Core net income per share – basic


$

1.31


$

0.70


Core net income per share – diluted


$

1.31


$

0.70


 

 

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 twelve

months ended December 31, 2020 and 2019:









Three months ended March 31


2021


2020


Interest income (GAAP)


$

23,477


$

23,842


Adjustment to FTE



335



353


Interest income adjusted to FTE (non-GAAP)



23,812



24,195


Interest expense



2,709



4,281


Net interest income adjusted to FTE (non-GAAP)


$

21,103


$

19,914










 

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 twelve months ended December 31,

2020 and 2019:










Three months ended March 31


2021


2020


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

12,629


$

13,651


Less: amortization of intangible assets expense



125



154


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



12,504



13,497










Net interest income (GAAP)



20,768



19,561


Plus: taxable equivalent adjustment



335



353


Noninterest income (GAAP)



3,517



3,550


Less: net gains (loss) on equity securities



21



(123)


Less: net gains on sale of securities






267


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


$

24,599


$

23,320










Efficiency ratio (non-GAAP)



50.83

%


57.88

%









 

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SOURCE Peoples Financial Services Corp.