PEOPLES FINANCIAL SERVICES CORP. Reports Unaudited Fourth Quarter and Year to Date 2023 Earnings

Rhea-AI Summary

Peoples Financial Services Corp. reported a 60.3% decrease in net income for the three months ended December 31, 2023, as well as a 28.1% decrease for the twelve months ended December 31, 2023. The company also announced a strategic combination with FNCB Bancorp, Inc. that is expected to close in the first half of 2024, creating a bank holding company with nearly $5.5 billion in assets.

Positive

• None.

Negative

• Net income decreased by 60.3% for the three months ended December 31, 2023, and by 28.1% for the twelve months ended December 31, 2023.
• Higher deposit costs, a higher provision for credit losses, and higher operating expenses contributed to the decrease in net income.
• The proposed strategic combination with FNCB Bancorp, Inc. may lead to uncertainties and risks for shareholders.
• The company intentionally slowed loan growth and focused on building liquidity due to economic uncertainty.

Insights

Financial Analyst

The reported 60.3% decrease in quarterly net income and the 28.1% decrease in annual net income for Peoples Financial Services Corp. reflect significant pressures on the bank's profitability. This downturn is primarily attributed to increased deposit costs, higher provisions for credit losses and elevated operating expenses, particularly those related to the pending strategic combination with FNCB Bancorp, Inc. The increased deposit costs are likely a function of the rising interest rate environment, necessitating higher interest rates paid on deposits to attract and retain customers.

The strategic combination with FNCB Bancorp, Inc. is projected to create a bank holding company with substantial assets and a strong deposit market share in its region. The expected 59% EPS accretion to Peoples in 2025 and a 51% dividend increase suggest a long-term strategic benefit for shareholders. However, investors should consider the integration risks and the execution of merger synergies which can impact the actual realization of these projections.

Peoples' shift towards building liquidity amidst economic uncertainty, as indicated by the intentional slowdown of loan originations, suggests a cautious approach to asset growth. This conservative stance, while potentially limiting short-term income growth, may position the bank more resiliently against potential future economic downturns.

Market Research Analyst

The net loan growth of 4.4% over the past twelve months, primarily in commercial real estate loans, indicates a focused strategy on a specific lending sector. However, the subsequent decline in net loans during the final quarter suggests a strategic pivot towards liquidity preservation. This is further evidenced by the significant increase in cash and cash equivalents, which represents a substantial 48.5% of total assets.

Investors might view the growth in total deposits, alongside a decrease in core deposits, as a mixed signal. While the overall deposit growth is positive, the decline in core deposits could indicate a shift in deposit composition that may affect funding stability.

The decrease in unrealized losses on available for sale investments is a positive indicator, as it may reflect recovering bond markets or strategic adjustments in the bank's investment portfolio. Nonetheless, the persisting unrealized losses highlight the sensitivity of the bank's investment portfolio to interest rate fluctuations.

Economist

The reported financials provide a snapshot of the bank's response to the macroeconomic environment characterized by rising interest rates. The increased cost of funds and interest-bearing liabilities underscores the impact of the Federal Reserve's monetary policy tightening. As interest rates rise, the cost of interest-bearing deposits has surged, squeezing the net interest margin (NIM) and pressuring earnings.

The decrease in net interest margin from 3.02% to 2.54% year-over-year is a critical indicator of profitability pressures. The NIM compression reflects the challenge of repricing assets and liabilities in a dynamic interest rate environment. It is essential for investors to monitor how the bank manages this balance going forward, as it will be crucial for the bank's ability to generate net interest income in the face of continued economic uncertainty.

SCRANTON, Pa., Jan. 25, 2024 /PRNewswire/ -- Peoples Financial Services Corp. ("Peoples") (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three and twelve months ended December 31, 2023.

Peoples reported net income of $3.6 million, or $0.51 per diluted share for the three months ended December 31, 2023, a 60.3% decrease when compared to $9.1 million, or $1.27 per diluted share for the comparable period of 2022. Quarterly net income included lower net interest income of $4.1 million due to higher deposit costs, a higher provision for credit losses of $3.8 million and higher operating expenses of $0.6 million mainly due to acquisition related expenses related to the previously announced proposed strategic combination as noted below, partially offset by higher noninterest income of $2.0 million.  The year ago period included an after-tax loss of $1.6 million on the sale of available for sale securities.

For the twelve months ended December 31, 2023, net income was $27.4 million, or $3.83 per diluted share, a 28.1% decrease when compared to $38.1 million, or $5.28 per diluted share for the comparable period of 2022. Net interest income for the current period decreased $9.0 million when compared to the twelve months ended December 31, 2022 as higher interest income due to higher yields on earning assets was more than offset by increased funding costs.  Higher operating expenses of $5.1 million, including $1.8 million of acquisition related expenses, and an increased provision for credit losses of $1.0 million were partially offset by a $2.3 million increase in noninterest income. 

Core net income, a non-GAAP measure¹, excludes gains or losses on the sale of investment portfolio securities and acquisition related expenses from the previously announced proposed combination further discussed below, of $826 thousand and $1.8 million incurred during the three and twelve months ended December 31, 2023, respectively.  Core net income totaled $4.3 million or $0.61 per diluted share for the three months ended December 31, 2023 compared to $10.7 million, or $1.49 per share for the comparable period of 2022.  For the twelve months ended December 31, 2023, core net income was $28.8 million and $4.03 per diluted share, compared to $39.7 million and $5.50 per diluted share in the year ago period.

STRATEGIC COMBINATION WITH FNCB BANCORP, INC.

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

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

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

FINANCIAL HIGHLIGHTS

• Net income for the twelve months ended December 31, 2023 was $27.4 million or $3.83 per diluted share.
• Dividends paid during the twelve months ended December 31, 2023 totaled $1.64 per share representing a 3.8% increase from the comparable period in 2022.
• The unrealized loss on the available for sale investments decreased $14.7 million from December 31, 2022 and $19.5 million from September 30, 2023 to $51.5 million at December 31, 2023.
• For the twelve months ended December 31, 2023, net loan growth was $119.8 million or 4.4% and consisted primarily of commercial real estate loans.  For the three months ended December 31, 2023, net loans declined $21.1 million as the Company intentionally slowed new originations and has focused on building liquidity due to economic uncertainty.
• Asset quality remained strong as nonperforming assets as a percentage of total assets at December 31, 2023 was 0.13%, compared to 0.12% at December 31, 2022.
• Total deposits grew $232.4 million to $3.3 billion during 2023; core deposits, defined as excluding brokered deposits, decreased $4.9 million in 2023.  Core deposits decreased $75.4 million during the three months ended December 31, 2023 due in part to seasonal outflows of municipal deposits.
• At December 31, 2023, the Company had $187.4 million in cash and cash equivalents, an increase of $149.5 million from December 31, 2022.  Additional contingent sources of available liquidity total $1.6 billion and include lines of credit at the Federal Reserve Bank and Federal Home Loan Bank of Pittsburgh (FHLB), brokered deposit capacity and unencumbered securities that may be pledged as collateral.  The Company's cash and cash equivalents balance and available liquidity represent 48.5% of total assets and 55.3% of total deposits.
• At December 31, 2023, estimated total insured deposits were approximately $2.4 billion, or 73.1% of total deposits; as compared to approximately $1.9 billion, or 63.1% of total deposits at December 31, 2022.  Included in the uninsured total at December 31, 2023 is $424.5 million of municipal deposits collateralized by letters of credit issued by the FHLB and pledged investment securities, and $0.8 million of affiliate company deposits.  Total insured and collateralized deposits represent 86.0% of total deposits at December 31, 2023.
• Tangible book value increased 11.8% to $39.35 at December 31, 2023 from $35.19 at December 31, 2022.

INCOME STATEMENT REVIEW 

• Calculated on a fully taxable equivalent basis, a non-GAAP measure¹, our net interest margin for the three months ended December 31, 2023 was 2.30%, a decrease of 14 basis points when compared to the 2.44% for the three months ended September 30, 2023, and 67 basis points when compared to 2.97% for the same three month period in 2022. The decrease in net interest margin from the prior three month period and year ago period was due to higher funding costs offsetting the increased yield and balance of earning assets.
• The tax-equivalent yield on interest-earning assets increased 9 basis points to 4.49% during the three months ended December 31, 2023 from 4.40% during the three months ended September 30, 2023, and increased 65 basis points when compared to 3.84% for the three months ended December 31, 2022.
• Our cost of funds, which represents our average rate paid on total interest-bearing liabilities, increased 25 basis points to 2.86% for the three months ended December 31, 2023 when compared to 2.61% during the three months ended September 30, 2023 and increased 166 basis points compared to 1.20% in the prior year period. We continued to increase interest rates paid on deposits during the quarter to attract new deposits, retain current balances and maintain liquidity.
• Our cost of interest-bearing deposits increased 27 basis points during the current three month period to 2.80% from 2.53% in the prior three month period ended September 30, 2023, and increased 172 basis points compared to 1.08% for the three months ended December 31, 2022.
• Our cost of total deposits for the three months ended December 31, 2023 increased 25 basis points to 2.25% from 2.00% during the three months ended September 30, 2023, and increased 144 basis points compared to 0.81% for the three months ended December 31, 2022.

Fourth Quarter 2023 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income, a non-GAAP measure², for the three months ended December 31, decreased $4.2 million or 16.7% to $20.7 million in 2023 from $24.9 million in 2022. The decrease in tax-equivalent net interest income was due to an $8.4 million increase in tax-equivalent interest income that was offset by a $12.6 million increase in interest expense.

The higher interest income was the result of an increase in yield and average balance of earning assets.  Average earning assets were $262.1 million higher in the three month period ended December 31, 2023 when compared to the year ago period.  The tax-equivalent yield on the loan portfolio was 4.93% and 4.35% for the three months ended December 31, 2023 and 2022, respectively.  This increase was due to the higher rates on adjustable and floating rate loans, and new loan originations.  Loans, net, averaged $2.9 billion for the three months ended December 31, 2023 and $2.7 billion for the comparable period in 2022. For the three months ended December 31, the tax-equivalent yield on total investments increased to 1.78% in 2023 from 1.68% in 2022. Average investments totaled $537.8 million in the three months ended December 31, 2023 and $640.0 million in the three months ended December 31, 2022.

The increased interest expense in the three months ended December 31, 2023 was due primarily to higher rates on consumer, business and municipal deposits driven by the higher interest rate environment.  The Company's total cost of deposits increased during the three months ended December 31, 2023 compared to the year ago period by 144 basis points to 2.25%, and the cost of interest-bearing deposits increased 172 basis points to 2.80% from 1.08% in the previous year three month period. Short-term borrowings averaged $24.1 million in the current period at an average cost of 5.43% compared to $49.4 million in short-term borrowings at an average cost of 4.20% in the prior period.

Average interest-bearing liabilities increased $358.0 million for the three months ended December 31, 2023, compared to the corresponding period last year due primarily to an increase in non-maturity and brokered certificate of deposits.  Average noninterest-bearing deposits decreased $107.7 million or 14.2% from the prior period, due in part to a shift to interest-bearing accounts, and represented 19.7% of total average deposits in the current period as compared to 24.8% in the year ago period.

For the three months ended December 31, 2023, $1.7 million was recorded to the provision for credit losses compared to a credit to the provision of $2.1 million in the year ago period.  The current period provision was due to charge-offs during the quarter offset by a lower calculated allowance for credit losses.  The lower calculated allowance was the result of a decline in model loss rates due to improved economic forecast and credit quality along with lower qualitative adjustments related to a decline in loan balances. The year ago period included a credit to the provision for credit losses of $2.1 million based on our previous allowance for credit losses methodology and then current conditions.

Noninterest income for the three months ended December 31, 2023 was $3.2 million, a $2.0 million increase from the prior year's quarter.  However, when excluding the prior year's period loss of $2.0 million on the sale of $45.5 million on available for sale U.S. Treasury securities, noninterest income was $3.2 million.

Noninterest expense increased $0.6 million or 3.8% to $17.6 million for the three months ended December 31, 2023, from $17.0 million for the three months ended December 31, 2022. Acquisition related expenses, including legal and consulting and advisory fees, totaled $0.8 million. Salaries and employee benefits decreased $0.2 million or 2.7% due primarily to lower salaries, partially offset by lower deferred loan origination costs and higher employee benefit costs.  Occupancy and equipment expenses were lower by $0.6 million in the current period due to lower information technology (IT) expense partially offset by higher facilities costs. Other expenses increased $0.7 million due primarily to higher FDIC assessment and loan account processing fees, partially offset by lower Pennsylvania shares taxes.

The provision for income tax expense was $0.6 million for the three months ended December 31, 2023 and $1.7 million for the three months ended December 31, 2022, a decrease of $1.1 million due to lower taxable income.

2023 vs. 2022 Full Year Results

Our net interest margin, a non-GAAP measure¹, for the twelve months ended December 31, 2023 was 2.54%, a decrease of 48 basis points over the prior year's period of 3.02%. Tax-equivalent net interest income, a non-GAAP measure³, for the twelve months ended December 31, 2023 decreased $9.0 million, or 9.2%, to $88.7 million in 2023 from $97.7 million in 2022.  The decrease in net interest income was the result of higher loan interest income due to increased volume and rates on new loans and those that are repricing, offset by the higher cost of deposit funding. Average investments decreased $89.3 million compared to December 31, 2022, as the Company engaged in investment sales during the first three months of 2023 to, in part, fund loan growth and repay short-term borrowings. The yield on earning assets was 4.34% for the twelve months of 2023 compared to 3.50% for the twelve month period ended December 31, 2022.  The cost of interest-bearing liabilities during the twelve month period ended December 31, 2023 increased 174 basis points to 2.42% from 0.68% for the twelve months ended December 31, 2022 as the cost of all deposit products and short-term borrowing costs increased.  Furthermore, the Company, as part of its strategy to improve on-balance sheet liquidity, added $259.0 million of brokered certificate of deposits at an average cost of 5.16% during 2023.  

For the twelve months ended December 31, 2023, a $566 thousand provision for credit losses was recorded compared to a credit of $449 thousand in the prior year period. The year to date provision was due to net charge-offs during the year offset by a lower calculated allowance for credit losses.  The lower calculated allowance was the result of a slight decline in model loss rates due primarily to credit quality and portfolio runoff along with lower qualitative adjustments related to a decline in loan balances.

Noninterest income was $14.1 million for the twelve months ended December 31, 2023 and $11.8 million for the comparable period ended December 31, 2022.  During the period, service charges, fees and commissions increased $0.7 million, due in part to a $0.4 million increase in consumer and commercial deposit service charges and increased dividends on FHLB stock.  Merchant services income decreased $0.3 million during the twelve months ended December 31, 2023 compared to the prior year on lower transaction volume incentives.  Interest rate swap revenue decreased $0.2 million on lower origination volume and market value adjustments.

Noninterest expense for the twelve months ended December 31, 2023, was $67.8 million, an increase of $5.1 million from $62.7 million for the twelve months ended December 31, 2022.  The increase was due primarily to $1.7 million in higher salaries and benefits expense due to lower deferred loan origination costs, which are recorded as a contra-salary expense, of $0.9 million due to lower loan origination volume compared to the year ago period and higher benefits expense of $1.0 million, including increases in health insurance costs and profit-sharing expenses.  Occupancy and equipment expenses were higher by $0.7 million in the current period due to higher technology costs related to increased account and transaction volumes and increased facility expenses.  The year ago period included $0.5 million of gains from the sale of other real estate owned, which is included in noninterest expense.  Acquisition related expenses totaled $1.8 million for the twelve months ended December 31, 2023 with no comparable amount during the same period of 2022.  Other expenses including professional fees, loan account processing fees, Pennsylvania shares tax and FDIC assessments accounted for an increase of $0.8 million.

The provision for income taxes for the twelve months ended December 31, 2023 decreased $2.2 million and the effective tax rate was 15.8% as compared to 16.0% in the prior period. 

BALANCE SHEET REVIEW

At December 31, 2023, total assets, loans and deposits were $3.7 billion, $2.8 billion and $3.3 billion, respectively. During the twelve month period, investment sales, deposit growth and FHLB term borrowings were utilized to fund loan growth and repay short-term borrowings.

Loan growth for the twelve months ended December 31, 2023 was $119.8 million or 4.4%.  Total loans declined $21.1 million during the three months ended December 31, 2023, following slowed growth during the three months ended September 30, 2023 and June 30, 2023, totaling $27.7 million and $25.2 million, respectively, when compared to loan growth of $88.0 million during the first three months of 2023.  The Company has intentionally slowed loan growth and has focused on building liquidity due to economic uncertainty.  Commercial real estate loans made up the majority of the growth with residential real estate loans also increasing.

Total investments were $483.9 million at December 31, 2023, compared to $569.0 million at December 31, 2022.  At December 31, 2023, the available for sale securities totaled $398.9 million and the held to maturity securities totaled $84.9 million. The unrealized loss on the available for sale securities decreased $14.7 million from December 31, 2022 to $51.5 million at December 31, 2023.  The unrealized losses on the held to maturity portfolio totaled $13.2 million and $14.6 million at December 31, 2023 and December 31, 2022, respectively.  During the three month period ended March 31, 2023, $65.6 million in U.S. Treasury, tax-exempt municipals and mortgage-backed securities were sold at a net gain of $81 thousand.  The proceeds were used to pay-down higher cost short-term borrowings. 

Total deposits increased $232.4 million during the twelve months ending December 31, 2023.  Noninterest-bearing deposits decreased $128.1 million and interest-bearing deposits increased $360.5 million during the twelve months ended December 31, 2023.  The increase in deposits was due to a $237.4 million net increase in brokered deposits, $129.3 million in commercial deposits and a $9.0 million increase in municipal deposits, partially offset by $143.3 million in reduced retail deposits.  The Company added $259.0 million of longer-term callable brokered CDs during the first six months of 2023 to improve its on-balance sheet liquidity position and mitigate risk of higher rates.  The Company has the option to call the CDs.  During the three months ended December 31, 2023, deposits declined $86.0 million due in part to seasonal outflows of municipal deposits and commercial and retail depositors drawing down their noninterest-bearing balances.

The deposit base consisted of 41.4% retail accounts, 33.4% commercial accounts, 17.2% municipal relationships and 8.0% brokered deposits at December 31, 2023. At December 31, 2023, total estimated uninsured deposits, were $883.5 million, or approximately 26.9% of total deposits as compared to $1.1 billion, or 36.9% of total deposits at December 31, 2022.  Included in the uninsured total at December 31, 2023 is $424.5 million of municipal deposits collateralized by letters of credit issued by the FHLB and pledged investment securities, and $0.8 million of affiliate company deposits.  As an additional resource to our uninsured depositors, we offer all depositors access to IntraFi's CDARS and ICS programs which allows deposit customers to obtain full FDIC deposit insurance while maintaining their relationship with our Bank.

During the twelve months ended December 31, 2023, the Company utilized a portion of its available line at the FHLB and increased its long-term debt $25.0 million due to favorable pricing on the borrowings versus alternative funding sources.  There were no new long-term borrowings in the most recent three month period ended December 31, 2023.

In addition to deposit gathering and our current long term borrowings, we have additional sources of liquidity available such as cash and cash equivalents, overnight borrowings from the FHLB, the Federal Reserve's Discount Window and Borrower-in-Custody program, correspondent bank lines of credit, brokered deposit capacity and unencumbered securities.  At December 31, 2023, the Company had $187.4 million in cash and cash equivalents, an increase of $149.5 million from December 31, 2022.  Also, we have $191.0 million in collateral availability with the Federal Reserve's Bank Term Funding Program (BTFP) and an additional $177.9 million of borrowing capacity based on the par value of unencumbered securities available as collateral under this line which may be used if needed. At December 31, 2023, we had $1.6 billion in available additional liquidity representing 43.4% of total assets, 49.6% of total deposits and 184.0% of uninsured deposits.  For additional information on our deposit portfolio and additional sources of liquidity, see the tables on page 17.

The Company maintained its well capitalized position at December 31, 2023.  Stockholders' equity equaled $340.4 million or $48.35 per share at December 31, 2023, and $315.4 million or $44.06 per share at December 31, 2022. The increase in stockholders' equity from December 31, 2022 is primarily attributable to net income and a decrease to accumulated other comprehensive loss ("AOCI") resulting from a decrease in the unrealized loss on available for sale securities.  The net after tax unrealized loss on available for sale securities included in AOCI at December 31, 2023 and December 31, 2022 was $40.3 million and $52.0 million, respectively. 

Tangible stockholders' equity, a non-GAAP measure⁴, increased to $39.35 per share at December 31, 2023, from $35.19 per share at December 31, 2022.  Dividends declared for the twelve months ended December 31, 2023 amounted to $1.64 per share, a 3.8% increase from the 2022 period, representing a dividend payout ratio of 42.8% of net income.  During the twelve months ended December 31, 2023, 131,686 shares were purchased and retired under the Company's common stock repurchase plan at an average price per share of $44.29. 

ASSET QUALITY REVIEW 

Asset quality metrics remained strong.  Nonperforming assets were $4.9 million or 0.17% of loans, net and foreclosed assets at December 31, 2023, compared to $4.1 million or 0.15% of loans, net and foreclosed assets at December 31, 2022.  As a percentage of total assets, nonperforming assets totaled 0.13% at December 31, 2023 compared to 0.12% at December 31, 2022.  Nonaccrual loans increased due primarily to placing a collateral dependent commercial real estate loan on nonaccrual as the primary source of repayment is in doubt and there is limited secondary sources due to bankruptcy.  At December 31, 2023, the Company had no foreclosed properties.

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

During the twelve month period ended December 31, 2023, a $0.6 million provision for credit losses and net charge-offs of $2.9 million were recorded. The allowance for credit losses equaled $21.9 million or 0.77% of loans, net at December 31, 2023 compared to $27.5 million or 1.01% of loans, net, at December 31, 2022.  Loans charged-off, net of recoveries, for the twelve months ended December 31, 2023 were $2.9 million or 0.10% of average loans, compared to $462 thousand or 0.02% of average loans for the comparable period last year.  Net charge-offs during the three months ended December 31, 2023 were $2.8 million due primarily to the partial charge-off of a commercial real estate loan as the market value declined significantly as a result of the impending vacancy of the property by its single "anchor" tenant.

About Peoples:

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

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

SOURCE: Peoples Financial Services Corp.
/Contact:	MEDIA/INVESTORS, Marie L. Luciani, Investor Relations Officer, 570.346.7741 or marie.luciani@psbt.com
Co:	Peoples Financial Services Corp.
St:	Pennsylvania
In:	Fin

 

Safe Harbor Forward-Looking Statements:

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

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

In addition to these risks, acquisitions and business combinations, including the Company's proposed strategic combination with FNCB, present additional risks.  Acquisitions and business combinations and, specifically, the pending strategic combination involving the merger of FNCB with and into Peoples (the "Merger") may be substantially more expensive to complete than originally anticipated, and the anticipated benefits may be significantly harder-or take longer-to achieve than expected.  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.  Additional factors that could cause actual results to differ materially include the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between Peoples and FNCB; the outcome of any legal proceedings that may be instituted against Peoples or FNCB; the possibility that the proposed strategic combination will not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated (and the risk that required regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction).

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

Additional Information regarding the Merger and Where to Find It

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

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

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

Participants in Solicitation

Peoples and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed strategic combination with FNCB under the rules of the SEC. Information regarding Peoples directors and executive officers is available in Peoples' proxy statement for its 2023 Annual Meeting of Shareholders, which was filed with the SEC on April 5, 2023. Other information regarding the participants in the solicitation of proxies in respect of the proposed merger and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the joint proxy statement/prospectus and other relevant materials filed with the SEC. Free copies of these documents may be obtained as described in the preceding paragraph.

 [TABULAR MATERIAL FOLLOWS]

 

Summary Data Peoples Financial Services Corp.  Five Quarter Trend (Unaudited) (In thousands, except share and per share data)
		Dec 31			Sept 30			June 30			Mar 31			Dec 31
		2023			2023			2023			2023			2022
Key performance data:
Share and per share amounts:
Net income		$	0.51		$	0.95		$	1.31		$	1.05		$	1.27
Core net income (1)		$	0.61		$	1.05		$	1.31		$	1.04		$	1.49
Cash dividends declared		$	0.41		$	0.41		$	0.41		$	0.41		$	0.40
Book value		$	48.35		$	46.07		$	46.53		$	45.96		$	44.06
Tangible book value (1)		$	39.35		$	37.07		$	37.64		$	37.09		$	35.19
Market value:
High		$	49.99		$	48.19		$	44.60		$	53.48		$	57.60
Low		$	38.58		$	40.04		$	30.60		$	42.52		$	47.00
Closing		$	48.70		$	40.10		$	43.79		$	43.35		$	51.84
Market capitalization		$	342,889		$	282,338		$	312,241		$	309,985		$	371,072
Common shares outstanding			7,040,852			7,040,852			7,130,409			7,150,757			7,158,017
Selected ratios:
Return on average stockholders' equity			4.40	%		8.05	%		11.42	%		9.43	%		11.79	%
Core return on average stockholders' equity (1)			5.26	%		8.91	%		11.54	%		9.35	%		13.81	%
Return on average tangible stockholders' equity			5.46	%		9.95	%		14.12	%		11.71	%		14.87	%
Core return on average tangible stockholders' equity (1)			6.53	%		11.01	%		14.28	%		11.61	%		17.41	%
Return on average assets			0.38	%		0.72	%		1.04	%		0.86	%		1.04	%
Core return on average assets (1)			0.46	%		0.79	%		1.05	%		0.85	%		1.22	%
Stockholders' equity to total assets			9.10	%		8.48	%		9.01	%		8.93	%		8.87	%
Efficiency ratio (1)(2)			69.94	%		63.50	%		63.51	%		60.61	%		60.07	%
Nonperforming assets to loans, net, and foreclosed assets			0.17	%		0.13	%		0.07	%		0.07	%		0.15	%
Nonperforming assets to total assets			0.13	%		0.10	%		0.06	%		0.05	%		0.12	%
Net charge-offs to average loans, net			0.39	%		0.01	%		0.00	%		0.00	%		0.03	%
Allowance for credit losses to loans, net			0.77	%		0.80	%		0.82	%		0.90	%		1.01	%
Interest-bearing assets yield (FTE) (3)			4.49	%		4.40	%		4.31	%		4.16	%		3.84	%
Cost of funds			2.86	%		2.61	%		2.29	%		1.84	%		1.20	%
Net interest spread (FTE) (3)			1.63	%		1.79	%		2.02	%		2.32	%		2.64	%
Net interest margin (FTE) (3)			2.30	%		2.44	%		2.61	%		2.82	%		2.97	%

 

(1)	See Reconciliation of Non-GAAP financial measures on pages 19-21.
(2)	Total noninterest expense less amortization of intangible assets and acquisition related expenses, divided by tax-equivalent net interest income and noninterest income less net gains (losses) on investment securities available for sale.
(3)	Tax-equivalent adjustments were calculated using the federal statutory tax rate prevailing during the indicated periods of 21%.

 

Peoples Financial Services Corp. Consolidated Statements of Income (Unaudited) (In thousands, except per share data)
		Dec 31			Dec 31
Year ended		2023			2022
Interest income:
Interest and fees on loans:
Taxable		$	129,013		$	95,505
Tax-exempt			5,628			5,084
Interest and dividends on investment securities:
Taxable			7,912			8,234
Tax-exempt			1,582			2,066
Dividends			4			2
Interest on interest-bearing deposits in other banks			335			101
Interest on federal funds sold			5,377			342
Total interest income			149,851			111,334
Interest expense:
Interest on deposits			58,561			12,632
Interest on short-term borrowings			1,920			1,103
Interest on long-term debt			842			76
Interest on subordinated debt			1,774			1,774
Total interest expense			63,097			15,585
Net interest income			86,754			95,749
Provision for (credit to) credit losses			566			(449)
Net interest income after provision for (credit to) credit losses			86,188			96,198
Noninterest income:
Service charges, fees, commissions and other			7,728			7,076
Merchant services income			693			964
Commissions and fees on fiduciary activities			2,219			2,229
Wealth management income			1,576			1,430
Mortgage banking income			390			511
Increase in cash surrender value of life insurance			1,067			1,020
Interest rate swap revenue			390			622
Net losses on equity investment securities			(11)			(31)
Net gains (losses) on sale of investment securities available for sale			81			(1,976)
Total noninterest income			14,133			11,845
Noninterest expense:
Salaries and employee benefits expense			35,285			33,553
Net occupancy and equipment expense			17,146			16,578
Acquisition related expenses			1,816
Amortization of intangible assets			105			363
Net gains on sale of other real estate owned			(18)			(478)
Other expenses			13,486			12,661
Total noninterest expense			67,820			62,677
Income before income taxes			32,501			45,366
Provision for income tax expense			5,121			7,276
Net income		$	27,380		$	38,090
Other comprehensive income (loss):
Unrealized gains (losses) on investment securities available for sale		$	14,804		$	(66,435)
Reclassification adjustment for (gains) losses on available for sale securities included in net income			(81)			1,976
Change in pension liability			1,129			370
Change in derivative fair value			(824)			(728)
Income tax expense (benefit) related to other comprehensive income (loss)			3,043			(13,995)
Other comprehensive income (loss), net of income tax expense (benefit)			11,985			(50,822)
Comprehensive income (loss)		$	39,365		$	(12,732)
Share and per share amounts:
Net income - basic		$	3.85		$	5.31
Net income - diluted			3.83			5.28
Cash dividends declared			1.64			1.58
Average common shares outstanding - basic			7,107,908			7,168,092
Average common shares outstanding - diluted			7,151,471			7,211,643

 

 

Peoples Financial Services Corp. Consolidated Statements of Income (Unaudited) (In thousands, except per share data)
		Dec 31			Sept 30			June 30			Mar 31			Dec 31
Three months ended		2023			2023			2023			2023			2022
Interest income:
Interest and fees on loans:
Taxable		$	33,730		$	33,095		$	32,139		$	30,049		$	27,515
Tax-exempt			1,423			1,411			1,405			1,389			1,367
Interest and dividends on investment securities:
Taxable			1,939			1,920			1,929			2,124			2,058
Tax-exempt			372			375			378			457			520
Dividends									2			2
Interest on interest-bearing deposits in other banks			145			91			85			14			40
Interest on federal funds sold			2,463			1,873			798			243			141
Total interest income			40,072			38,765			36,736			34,278			31,641
Interest expense:
Interest on deposits			18,756			16,481			13,714			9,610			6,251
Interest on short-term borrowings			330			291			213			1,086			524
Interest on long-term debt			273			273			269			27			9
Interest on subordinated debt			444			443			444			443			444
Total interest expense			19,803			17,488			14,640			11,166			7,228
Net interest income			20,269			21,277			22,096			23,112			24,413
Provision for (credit to) credit losses			1,669			(166)			(2,201)			1,264			(2,149)
Net interest income after provision for (credit to) credit losses			18,600			21,443			24,297			21,848			26,562
Noninterest income:
Service charges, fees, commissions and other			1,881			1,900			1,982			1,965			1,909
Merchant services income			151			170			254			118			131
Commissions and fees on fiduciary activities			528			606			528			557			532
Wealth management income			399			393			386			398			366
Mortgage banking income			95			87			105			103			104
Increase in cash surrender value of life insurance			277			270			262			258			289
Interest rate swap revenue			(122)			266			23			223			(135)
Net gains (losses) on investment equity securities			6						12			(29)			6
Net gains (losses) on sale of investment securities available for sale												81			(1,976)
Total noninterest income			3,215			3,692			3,552			3,674			1,226
Noninterest expense:
Salaries and employee benefits expense			8,939			8,784			8,482			9,080			9,188
Net occupancy and equipment expense			4,468			4,298			4,277			4,103			5,045
Acquisition related expenses			826			869			121
Amortization of intangible assets			19			29			28			29			74
Net gains on sale of other real estate						(18)
Other expenses			3,346			3,092			3,706			3,342			2,653
Total noninterest expense			17,598			17,054			16,614			16,554			16,960
Income before income taxes			4,217			8,081			11,235			8,968			10,828
Income tax expense			587			1,335			1,810			1,389			1,689
Net income		$	3,630		$	6,746		$	9,425		$	7,579		$	9,139
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available for sale		$	19,494		$	(10,378)		$	(5,148)		$	10,836		$	6,356
Reclassification adjustment for (gains) losses on available for sale securities included in net income												(81)			1,976
Change in benefit plan liabilities			1,129												370
Change in derivative fair value			(1,650)			747			2,049			(1,970)			12
Income tax expense (benefit) related to other comprehensive income (loss)			3,894			(2,074)			(668)			1,891			1,447
Other comprehensive income  (loss), net of income tax expense (benefit)			15,079			(7,557)			(2,431)			6,894			7,267
Comprehensive income (loss)		$	18,709		$	(811)		$	6,994		$	14,473		$	16,406
Share and per share amounts:
Net income - basic		$	0.52		$	0.95		$	1.32		$	1.06		$	1.28
Net income - diluted			0.51			0.95			1.31			1.05			1.27
Cash dividends declared			0.41			0.41			0.41			0.41			0.40
Average common shares outstanding - basic			7,040,852			7,088,745			7,145,975			7,157,553			7,158,329
Average common shares outstanding - diluted			7,091,015			7,120,685			7,177,915			7,198,970			7,201,785

 

 

Peoples Financial Services Corp. Net Interest Margin (Unaudited) (In thousands, fully taxable equivalent basis)
		Three Months Ended
		December 31, 2023									December 31, 2022
		Average			Interest Income/			Yield/			Average			Interest Income/			Yield/
		Balance			Expense			Rate			Balance			Expense			Rate
Assets:
Earning assets:
Loans:
Taxable		$	2,632,865		$	33,730		5.08	%		$	2,441,358		$	27,515		4.47	%
Tax-exempt			227,800			1,801		3.14				223,293			1,730		3.08
Total loans			2,860,665			35,531		4.93				2,664,651			29,245		4.35
Investments:
Taxable			450,533			1,939		1.71				528,826			2,058		1.54
Tax-exempt			87,297			471		2.14				111,206			658		2.35
Total investments			537,830			2,410		1.78				640,032			2,716		1.68
Interest-bearing deposits			10,432			145		5.51				4,649			40		3.41
Federal funds sold			176,983			2,463		5.52				14,477			141		3.86
Total earning assets			3,585,910			40,549		4.49	%			3,323,809			32,142		3.84	%
Less: allowance for credit losses			23,386									29,754
Other assets			211,864									198,907
Total assets		$	3,774,388		$	40,549					$	3,492,962		$	32,142
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Money market accounts		$	775,661		$	7,227		3.70	%		$	682,721		$	2,908		1.69	%
Interest-bearing demand and NOW accounts			814,695			4,925		2.40				794,032			2,244		1.12
Savings accounts			438,544			267		0.24				530,829			180		0.13
Time deposits less than $100			415,806			4,364		4.16				125,315			333		1.05
Time deposits $100 or more			216,450			1,973		3.62				169,077			586		1.38
Total interest-bearing deposits			2,661,156			18,756		2.80				2,301,974			6,251		1.08
Short-term borrowings			24,103			330		5.43				49,444			524		4.20
Long-term debt			25,000			273		4.33				814			9		4.87
Subordinated debt			33,000			444		5.34				33,000			444		5.33
Total borrowings			82,103			1,047		5.06				83,258			977		4.66
Total interest-bearing liabilities			2,743,259			19,803		2.86				2,385,232			7,228		1.20
Noninterest-bearing deposits			651,182									758,889
Other liabilities			52,760									41,436
Stockholders' equity			327,187									307,405
Total liabilities and stockholders' equity		$	3,774,388								$	3,492,962
Net interest income/spread					$	20,746		1.63	%					$	24,914		2.64	%
Net interest margin								2.30	%								2.97	%
Tax-equivalent adjustments:
Loans					$	378								$	363
Investments						99									138
Total adjustments					$	477								$	501

 

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

 

 

Peoples Financial Services Corp. Net Interest Margin (Unaudited) (In thousands, fully taxable equivalent basis)
		For the Twelve Months Ended
		December 31, 2023								December 31, 2022
		Average			Interest Income/			Yield/		Average			Interest Income/			Yield/
		Balance			Expense			Rate		Balance			Expense			Rate
Assets:
Earning assets:
Loans:
Taxable		$	2,605,927		$	129,013		4.95	%	$	2,306,455		$	95,505		4.14	%
Tax-exempt			225,839			7,124		3.15			216,195			6,436		2.98
Total loans			2,831,766			136,137		4.81			2,522,650			101,941		4.04
Investments:
Taxable			468,403			7,916		1.69			537,566			8,236		1.53
Tax-exempt			90,897			2,003		2.20			111,083			2,615		2.35
Total investments			559,300			9,919		1.77			648,649			10,851		1.67
Interest-bearing deposits			6,373			335		5.26			8,536			101		1.17
Federal funds sold			98,535			5,377		5.46			53,056			342		0.65
Total earning assets			3,495,974			151,768		4.34	%		3,232,891			113,235		3.50	%
Less: allowance for credit losses			24,377								29,298
Other assets			211,618								210,392
Total assets		$	3,683,215		$	151,768				$	3,413,985		$	113,235
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Money market accounts		$	714,940		$	22,686		3.17	%	$	624,528		$	4,967		0.80	%
Interest-bearing demand and NOW accounts			779,977			15,586		2.00			791,653			4,493		0.57
Savings accounts			474,028			994		0.21			520,770			496		0.10
Time deposits less than $100			349,990			13,344		3.81			127,801			1,299		1.02
Time deposits $100 or more			200,743			5,951		2.96			162,998			1,377		0.84
Total interest-bearing deposits			2,519,678			58,561		2.32			2,227,750			12,632		0.57
Short-term borrowings			38,331			1,920		5.01			42,680			1,103		2.58
Long-term debt			19,448			842		4.33			1,634			76		4.65
Subordinated debt			33,000			1,774		5.38			33,000			1,774		5.38
Total borrowings			90,779			4,536		5.00			77,314			2,953		3.82
Total interest-bearing liabilities			2,610,457			63,097		2.42			2,305,064			15,585		0.68
Noninterest-bearing deposits			698,749								753,399
Other liabilities			44,786								34,517
Stockholders' equity			329,223								321,005
Total liabilities and stockholders' equity		$	3,683,215							$	3,413,985
Net interest income/spread					$	88,671		1.92	%				$	97,650		2.82	%
Net interest margin								2.54	%							3.02	%
Tax-equivalent adjustments:
Loans					$	1,496							$	1,352
Investments						421								549
Total adjustments					$	1,917							$	1,901

 

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

 

 

Peoples Financial Services Corp. Details of Net Interest Income and Net Interest Margin (Unaudited) (In thousands, fully taxable equivalent basis)
		Dec 31			Sept 30			June 30			Mar 31			Dec 31
Three months ended		2023			2023			2023			2023			2022
Net interest income:
Interest income:
Loans, net:
Taxable		$	33,730		$	33,095		$	32,139		$	30,049		$	27,515
Tax-exempt			1,801			1,786			1,780			1,757			1,730
Total loans, net			35,531			34,881			33,919			31,806			29,245
Investments:
Taxable			1,939			1,920			1,931			2,126			2,058
Tax-exempt			471			475			481			576			658
Total investments			2,410			2,395			2,412			2,702			2,716
Interest on interest-bearing balances in other banks			145			91			85			14			40
Federal funds sold			2,463			1,873			798			243			141
Total interest income			40,549			39,240			37,214			34,765			32,142
Interest expense:
Deposits			18,756			16,481			13,714			9,610			6,251
Short-term borrowings			330			291			213			1,086			524
Long-term debt			273			273			269			27			9
Subordinated debt			444			443			444			443			444
Total interest expense			19,803			17,488			14,640			11,166			7,228
Net interest income		$	20,746		$	21,752		$	22,574		$	23,599		$	24,914
Loans, net:
Taxable			5.08	%		5.00	%		4.93	%		4.79	%		4.47	%
Tax-exempt			3.14	%		3.13	%		3.17	%		3.18	%		3.08	%
Total loans, net			4.93	%		4.85	%		4.79	%		4.66	%		4.35	%
Investments:
Taxable			1.71	%		1.68	%		1.65	%		1.73	%		1.54	%
Tax-exempt			2.14	%		2.15	%		2.18	%		2.33	%		2.35	%
Total investments			1.78	%		1.75	%		1.73	%		1.83	%		1.68	%
Interest-bearing balances with banks			5.51	%		5.24	%		5.04	%		4.66	%		3.41	%
Federal funds sold			5.52	%		5.52	%		5.24	%		5.09	%		3.86	%
Total interest-earning assets			4.49	%		4.40	%		4.31	%		4.16	%		3.84	%
Interest expense:
Deposits			2.80	%		2.53	%		2.21	%		1.67	%		1.08	%
Short-term borrowings			5.43	%		5.31	%		5.07	%		4.81	%		4.20	%
Long-term debt			4.33	%		4.33	%		4.32	%		4.41	%		4.87	%
Subordinated debt			5.34	%		5.33	%		5.40	%		5.44	%		5.33	%
Total interest-bearing liabilities			2.86	%		2.61	%		2.29	%		1.84	%		1.20	%
Net interest spread			1.63	%		1.79	%		2.02	%		2.32	%		2.64	%
Net interest margin			2.30	%		2.44	%		2.61	%		2.82	%		2.97	%

 

 

Peoples Financial Services Corp. Consolidated Balance Sheets (Unaudited) (In thousands)
		Dec 31			Sept 30			June 30			Mar 31			Dec 31
At period end		2023			2023			2023			2023			2022
Assets:
Cash and due from banks		$	33,524		$	39,285		$	37,774		$	31,354		$	37,675
Interest-bearing balances in other banks			9,141			9,550			5,814			7,129			193
Federal funds sold			144,700			205,700			93,100			102,100
Investment securities:
Available for sale			398,927			382,227			395,826			418,125			477,703
Equity investments carried at fair value			98			92			92			81			110
Held to maturity			84,851			86,246			88,211			89,705			91,179
Total investments			483,876			468,565			484,129			507,911			568,992
Loans held for sale			250
Loans			2,849,897			2,870,969			2,843,238			2,818,043			2,730,116
Less: allowance for credit losses			21,895			23,010			23,218			25,444			27,472
Net loans			2,828,002			2,847,959			2,820,020			2,792,599			2,702,644
Goodwill			63,370			63,370			63,370			63,370			63,370
Premises and equipment, net			61,276			61,936			57,712			56,561			55,667
Bank owned life insurance			49,397			49,123			48,857			48,598			48,344
Deferred tax assets			13,770			17,956			16,258			16,015			18,739
Accrued interest receivable			12,734			12,769			11,406			11,678			11,715
Other intangible assets, net						19			48			77			105
Other assets			42,249			49,567			43,287			41,079			46,071
Total assets		$	3,742,289		$	3,825,799		$	3,681,775		$	3,678,471		$	3,553,515
Liabilities:
Deposits:
Noninterest-bearing		$	644,683		$	691,071		$	713,375		$	746,089		$	772,765
Interest-bearing			2,634,354			2,674,012			2,516,106			2,489,878			2,273,833
Total deposits			3,279,037			3,365,083			3,229,481			3,235,967			3,046,598
Short-term borrowings			17,590			27,020			19,530			17,280			114,930
Long-term debt			25,000			25,000			25,000			25,000			555
Subordinated debt			33,000			33,000			33,000			33,000			33,000
Accrued interest payable			5,765			4,777			4,701			2,304			903
Other liabilities			41,475			46,529			38,276			36,286			42,179
Total liabilities			3,401,867			3,501,409			3,349,988			3,349,837			3,238,165
Stockholders' equity:
Common stock			14,093			14,093			14,272			14,323			14,321
Capital surplus			122,130			121,870			125,371			126,231			126,850
Retained earnings			248,550			247,857			244,017			237,522			230,515
Accumulated other comprehensive loss			(44,351)			(59,430)			(51,873)			(49,442)			(56,336)
Total stockholders' equity			340,422			324,390			331,787			328,634			315,350
Total liabilities and stockholders' equity		$	3,742,289		$	3,825,799		$	3,681,775		$	3,678,471		$	3,553,515

 

 

Peoples Financial Services Corp. Loan and Asset Quality Data (Unaudited) (In thousands)
At period end		December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022
Commercial
Taxable		$	317,245		$	351,545		$	384,091		$	375,033		$	377,215
Non-taxable			226,470			229,635			225,796			224,343			222,043
Total			543,715			581,180			609,887			599,376			599,258
Real estate
Commercial real estate			1,863,118			1,846,350			1,794,355			1,782,911			1,709,827
Residential			360,803			357,647			348,911			342,459			330,728
Total			2,223,921			2,203,997			2,143,266			2,125,370			2,040,555
Consumer
Indirect Auto			75,389			78,953			83,348			86,587			76,491
Consumer Other			6,872			6,839			6,737			6,710			13,812
Total			82,261			85,792			90,085			93,297			90,303
Total		$	2,849,897		$	2,870,969		$	2,843,238		$	2,818,043		$	2,730,116

 

 

		Dec 31			Sept 30			June 30			Mar 31			Dec 31
At quarter end		2023			2023			2023			2023			2022
Nonperforming assets:
Nonaccrual/restructured loans		$	3,961		$	3,060		$	1,900		$	1,798		$	3,386
Accruing loans past due 90 days or more			986			700			181			59			748
Foreclosed assets
Total nonperforming assets		$	4,947		$	3,760		$	2,081		$	1,857		$	4,134

 

			Dec 31			Sept 30			June 30			Mar 31			Dec 31
Three months ended			2023			2023			2023			2023			2022
Allowance for credit losses:
Beginning balance		$	23,010		$	23,218		$	25,444		$	27,472		$	29,822
ASU 2016-13 Transition Adjustment												(3,283)
Adjusted beginning balance			23,010			23,218			25,444			24,189			29,822
Charge-offs			2,808			65			77			75			233
Recoveries			24			23			52			66			32
Provision for (credit to) credit losses			1,669			(166)			(2,201)			1,264			(2,149)
Ending balance		$	21,895		$	23,010		$	23,218		$	25,444		$	27,472

 

 

Peoples Financial Services Corp. Deposit and Liquidity Detail (Unaudited) (In thousands)
At period end		December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022
Interest-bearing deposits:
Money market accounts		$	782,243		$	767,868		$	670,669		$	775,511		$	685,323
Interest-bearing demand and NOW accounts			796,426			825,066			760,690			698,888			772,712
Savings accounts			429,011			447,684			470,340			500,709			523,931
Time deposits less than $250			505,409			512,646			504,672			400,327			199,136
Time deposits $250 or more			121,265			120,748			109,735			114,443			92,731
Total interest-bearing deposits			2,634,354			2,674,012			2,516,106			2,489,878			2,273,833
Noninterest-bearing deposits			644,683			691,071			713,375			746,089			772,765
Total deposits		$	3,279,037		$	3,365,083		$	3,229,481		$	3,235,967		$	3,046,598

 

 

			December 31, 2023
At period end			Amount		Percent of Total			Number of accounts		Average Balance
Deposit Detail:
Retail		$	1,358,371		41.4	%		70,334	$	19
Commercial			1,096,547		33.4			13,433		82
Municipal			563,124		17.2			1,856		303
Brokered			260,995		8.0			24		10,875
Total Deposits		$	3,279,037		100.0			85,647	$	38
Uninsured			883,530		26.9	%
Insured			2,395,507		73.1
			December 31, 2022
At period end			Amount		Percent of Total			Number of accounts		Average Balance
Deposit Detail:
Retail		$	1,501,641		49.3	%		71,039	$	21
Commercial			967,244		31.7			11,891		81
Municipal			554,099		18.2			1,623		341
Brokered			23,614		0.8			30		787
Total Deposits		$	3,046,598		100.00			84,583	$	36
Uninsured			1,125,252		36.9	%
Insured			1,921,346		63.1

 

								Total Available
At December 31, 2023			Total Available			Outstanding			for Future Liquidity
FHLB advances		$	1,238,839		$	370,454		$	868,385
Federal Reserve - Discount Window			257,361						257,361
Correspondent bank lines of credit			18,000						18,000
Federal Reserve - Bank Term Funding Program			191,000						191,000
Other sources of liquidity:
Brokered deposits			374,229			260,995			113,234
Unencumbered securities			177,936						177,936
Total sources of liquidity		$	2,257,365		$	631,449		$	1,625,917

 

 

Peoples Financial Services Corp. Consolidated Balance Sheets (Unaudited) (In thousands)
		Dec 31			Sept 30			June 30			Mar 31			Dec 31
Average quarterly balances		2023			2023			2023			2023			2022
Assets:
Loans, net:
Taxable		$	2,632,865		$	2,627,700		$	2,615,881		$	2,546,068		$	2,441,358
Tax-exempt			227,800			226,628			224,960			223,917			223,293
Total loans, net			2,860,665			2,854,328			2,840,841			2,769,985			2,664,651
Investments:
Taxable			450,533			454,727			469,712			499,327			528,826
Tax-exempt			87,297			87,731			88,371			100,368			111,206
Total investments			537,830			542,458			558,083			599,695			640,032
Interest-bearing balances with banks			10,432			6,893			6,839			1,218			4,649
Federal funds sold			176,983			134,583			61,093			19,353			14,477
Total interest-earning assets			3,585,910			3,538,262			3,466,856			3,390,251			3,323,809
Other assets			188,478			191,781			184,020			184,594			169,153
Total assets		$	3,774,388		$	3,730,043		$	3,650,876		$	3,574,845		$	3,492,962
Liabilities and stockholders' equity:
Deposits:
Interest-bearing		$	2,661,156		$	2,581,691		$	2,493,680		$	2,337,951		$	2,301,974
Noninterest-bearing			651,182			688,301			711,729			744,931			758,889
Total deposits			3,312,338			3,269,992			3,205,409			3,082,882			3,060,863
Short-term borrowings			24,103			21,759			16,854			91,530			49,444
Long-term debt			25,000			25,000			25,000			2,482			814
Subordinated debt			33,000			33,000			33,000			33,000			33,000
Other liabilities			52,760			47,788			39,494			38,917			41,436
Total liabilities			3,447,201			3,397,539			3,319,757			3,248,811			3,185,557
Stockholders' equity			327,187			332,504			331,119			326,034			307,405
Total liabilities and stockholders' equity		$	3,774,388		$	3,730,043		$	3,650,876		$	3,574,845		$	3,492,962

 

 

Peoples Financial Services Corp. Reconciliation of Non-GAAP Financial Measures (Unaudited) (In thousands, except share and per share data)
		Dec 31			Sept 30			June 30			Mar 31			Dec 31
Three months ended		2023			2023			2023			2023			2022
Core net income per share:
Net income GAAP		$	3,630		$	6,746		$	9,425		$	7,579		$	9,139
Adjustments:
Less: Gain (loss) on sale of available for sale securities												81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment												17			(415)
Add: Acquisition related expenses			826			869			121
Less: Acquisition related expenses tax adjustment			115			144			19
Core net income		$	4,341		$	7,471		$	9,527		$	7,515		$	10,700
Average common shares outstanding - diluted			7,091,015			7,120,685			7,177,915			7,198,970			7,201,785
Core net income per share		$	0.61		$	1.05		$	1.33		$	1.04		$	1.49
Tangible book value:
Total stockholders' equity		$	340,422		$	324,390		$	331,787		$	328,634		$	315,350
Less: Goodwill			63,370			63,370			63,370			63,370			63,370
Less: Other intangible assets, net						19			48			77			105
Total tangible stockholders' equity		$	277,052		$	261,001		$	268,369		$	265,187		$	251,875
Common shares outstanding			7,040,851			7,040,851			7,130,409			7,150,757			7,158,017
Tangible book value per share		$	39.35		$	37.07		$	37.64		$	37.09		$	35.19
Core return on average stockholders' equity:
Net income GAAP		$	3,630		$	6,746		$	9,425		$	7,579		$	9,139
Adjustments:
Less: Gain (loss) on sale of available for sale securities						—			—			81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment						—			—			17			(415)
Add: Acquisition related expenses			826			869			121
Less: Acquisition related expenses tax adjustment			115			144			19
Core net income		$	4,341		$	7,471		$	9,527		$	7,515		$	10,700
Average stockholders' equity		$	327,187		$	332,504		$	331,119		$	326,034		$	307,405
Core return on average stockholders' equity			5.26	%		8.91	%		11.54	%		9.35	%		13.81	%
Return on average tangible equity:
Net income GAAP		$	3,630		$	6,746		$	9,425		$	7,579		$	9,139
Average stockholders' equity		$	327,187		$	332,504		$	331,119		$	326,034		$	307,405
Less: average intangibles			63,380			63,404			63,433			63,461			63,512
Average tangible stockholders' equity		$	263,808		$	269,100		$	267,686		$	262,573		$	243,893
Return on average tangible stockholders' equity			5.46	%		9.95	%		14.12	%		11.71	%		14.87	%
Core return on average tangible stockholders' equity:
Net income GAAP		$	3,630		$	6,746		$	9,425		$	7,579		$	9,139
Adjustments:
Less: Gain (loss) on sale of available for sale securities												81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment												17			(415)
Add: Acquisition related expenses			826			869			121
Less: Acquisition related expenses tax adjustment			115			144			19
Core net income		$	4,341		$	7,471		$	9,527		$	7,515		$	10,700
Average stockholders' equity		$	327,187		$	332,504		$	331,119		$	326,034		$	307,405
Less: average intangibles			63,380			63,404			63,433			63,461			63,512
Average tangible stockholders' equity		$	263,808		$	269,100		$	267,686		$	262,573		$	243,893
Core return on average tangible stockholders' equity			6.53	%		11.01	%		14.28	%		11.61	%		17.41	%
Core return on average assets:
Net income GAAP		$	3,630		$	6,746		$	9,425		$	7,579		$	9,139
Adjustments:
Less: Gain (loss) on sale of available for sale securities												81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment												17			(415)
Add: Acquisition related expenses			826			869			121
Less: Acquisition related expenses tax adjustment			115			144			19
Core net income		$	4,341		$	7,471		$	9,527		$	7,515		$	10,700
Average assets		$	3,774,388		$	3,730,043		$	3,650,876		$	3,574,845		$	3,492,962
Core return on average assets			0.46	%		0.79	%		1.05	%		0.85	%		1.22	%

 

 

Peoples Financial Services Corp. Reconciliation of Non-GAAP Financial Measures (Unaudited) (In thousands, except share and per share data)
		Dec 31			Dec 31
Twelve months ended		2023			2022
Core net income per share:
Net income GAAP		$	27,380		$	38,090
Adjustments:
Less: Gain (loss) on sale of available for sale securities			81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment			17			(415)
Add: Acquisition related expenses			1,816
Less: Acquisition related expenses tax adjustment			278
Core net income		$	28,854		$	39,651
Average common shares outstanding - diluted			7,151,471			7,211,643
Core net income per share		$	4.03		$	5.50
Core return on average stockholders' equity:
Net income GAAP		$	27,380		$	38,090
Adjustments:
Less: Gain (loss) on sale of available for sale securities			81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment			17			(415)
Add: Acquisition related expenses			1,816
Less: Acquisition related expenses tax adjustment			278
Core net income		$	28,854		$	39,651
Average stockholders' equity			329,223			321,005
Core return on average stockholders' equity			8.76	%		12.35	%
Return on average tangible equity:
Net income GAAP		$	27,380		$	38,090
Average stockholders' equity			329,223			321,005
Less: average intangibles			63,406			63,694
Average tangible stockholders' equity		$	265,817		$	257,311
Return on average tangible stockholders' equity			10.30	%		14.80	%
Core return on average tangible stockholders' equity:
Net income GAAP		$	27,380		$	38,090
Adjustments:
Less: Gain (loss) on sale of available for sale securities			81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment			17			(415)
Add: Acquisition related expenses			1,816
Less: Acquisition related expenses tax adjustment			278
Core net income		$	28,854		$	39,651
Average stockholders' equity			329,223			321,005
Less: average intangibles			63,406			63,694
Average tangible stockholders' equity		$	265,817		$	257,311
Core return on average tangible stockholders' equity			10.85	%		15.41	%
Core return on average assets:
Net income GAAP		$	27,380		$	38,090
Adjustments:
Less: Gain (loss) on sale of available for sale securities			81			(1,976)
Add: Gain (loss) on sale of available for sale securities tax adjustment			17			(415)
Add: Acquisition related expenses			1,816
Less: Acquisition related expenses tax adjustment			278
Core net income		$	28,854		$	39,651
Average assets			3,683,215			3,413,985
Core return on average assets			0.78	%		1.16	%

 

 

Peoples Financial Services Corp. Reconciliation of Non-GAAP Financial Measures (Unaudited) (In thousands, except share and per share data)
The following tables reconcile the non-GAAP financial measures of FTE net interest income for the three and twelve months ended December 31, 2023 and 2022:
Three months ended December 31		2023			2022
Interest income (GAAP)		$	40,072		$	31,641
Adjustment to FTE			477			501
Interest income adjusted to FTE (non-GAAP)			40,549			32,142
Interest expense			19,803			7,228
Net interest income adjusted to FTE (non-GAAP)		$	20,746		$	24,914
Twelve months ended December 31		2023			2022
Interest income (GAAP)		$	149,851		$	111,334
Adjustment to FTE			1,917			1,901
Interest income adjusted to FTE (non-GAAP)			151,768			113,235
Interest expense			63,097			15,585
Net interest income adjusted to FTE (non-GAAP)		$	88,671		$	97,650
The efficiency ratio is noninterest expenses, less amortization of intangible assets and acquisition related costs, as a percentage of FTE net interest income plus noninterest income. The following tables reconcile the non-GAAP financial measures of the efficiency ratio to GAAP for the three and twelve months ended December 31, 2023 and 2022:
Three months ended December 31		2023			2022
Efficiency ratio (non-GAAP):
Noninterest expense (GAAP)		$	17,598		$	16,960
Less: Amortization of intangible assets expense			19			74
Less: Acquisition related expenses			826
Noninterest expense (non-GAAP)			16,753			16,886
Net interest income (GAAP)			20,269			24,413
Plus: Taxable equivalent adjustment			477			501
Noninterest income (GAAP)			3,215			1,226
Less: Net gains (losses) on equity securities			6			6
Less: Gain (loss) on sale of available for sale securities						(1,976)
Net interest income (FTE) plus noninterest income (non-GAAP)		$	23,955		$	28,110
Efficiency ratio (non-GAAP)			69.94	%		60.07	%
Twelve months ended December 31		2023			2022
Efficiency ratio (non-GAAP):
Noninterest expense (GAAP)		$	67,820		$	62,677
Less: Amortization of intangible assets expense			105			363
Less: Acquisition related expenses			1,816
Noninterest expense  (non-GAAP)			65,899			62,314
Net interest income (GAAP)			86,754			95,749
Plus: Taxable equivalent adjustment			1,917			1,901
Noninterest income (GAAP)			14,133			11,845
Less: Net losses on equity securities			(11)			(31)
Less: Gains (loss) on sale of available for sale securities			81			(1,976)
Net interest income (FTE) plus noninterest income (non-GAAP)		$	102,734		$	111,502
Efficiency ratio (non-GAAP)			64.15	%		55.89	%

 

¹ See reconciliation of non-GAAP financial measures on pg.19-21
² See reconciliation of non-GAAP financial measures on pg.19-21
³ See reconciliation of non-GAAP financial measures on pg.19-21
⁴ See reconciliation of non-GAAP financial measures on pg.19-21

 

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SOURCE Peoples Financial Services Corp.

FAQ

What is the net income reported for the three months ended December 31, 2023?

The net income reported for the three months ended December 31, 2023, was $3.6 million, a 60.3% decrease from the comparable period of 2022.

What is the strategic combination announced by Peoples Financial Services Corp.?

Peoples Financial Services Corp. announced a strategic combination with FNCB Bancorp, Inc., expected to close in the first half of 2024.

What is the expected impact of the strategic combination on Peoples Financial Services Corp.?

The proposed strategic combination is projected to deliver estimated 59% earnings per share (EPS) accretion to Peoples in 2025, inclusive of all merger synergies, and a 51% dividend increase to Peoples shareholders.

What was the total assets, loans, and deposits at December 31, 2023?

At December 31, 2023, total assets, loans, and deposits were $3.7 billion, $2.8 billion, and $3.3 billion, respectively.

What was the change in net interest income for the twelve months ended December 31, 2023?

Net interest income for the twelve months ended December 31, 2023, decreased $9.0 million, or 9.2%, to $88.7 million from $97.7 million in 2022.