Peoples Financial Services Corp. Logo. (PRNewsFoto/Peoples Financial Services Corp.) (PRNewsFoto/PEOPLES FINANCIAL SERVICES CORP_)

Peoples Financial Services Corp. Logo. (PRNewsFoto/Peoples Financial Services Corp.) (PRNewsFoto/PEOPLES FINANCIAL SERVICES CORP_)

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SCRANTON, Pa., July 21, 2021 /PRNewswire/ -- Peoples Financial Services Corp. ("Peoples") (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three months and six months ended June 30, 2021.  Peoples reported net income of $8.5 million, or $1.18 per diluted share for the three months ended June 30, 2021, an increase of 12.6% when compared to $7.6 million, or $1.03 per diluted share for the comparable period of 2020.  The increase in earnings for the three months ended June 30, 2021 is primarily the result of a $1.7 million decrease to the provision for loan losses, partially offset by a $0.2 million decrease to pre-provision net interest income, an increase to noninterest expense of $0.3 million and a higher income tax provision of $0.2 million.

Net income for the six months ended June 30, 2021, totaled $18.0 million or $2.49 per diluted share, a 40.1% increase when compared to $12.9 million or $1.74 per diluted share for the comparable period of 2020.  The increase in earnings in the 2021 six month period is the product of a decrease to our provision for loan losses of $5.7 million, primarily due to an adjustment in the year ago period to the economic qualitative factors included in our allowance for loan losses methodology relating to the impact of COVID-19, an increase to pre-provision net interest income of $1.0 million and a decrease to noninterest expense of $0.7 million.  Partially offsetting the increase were a higher income tax provision of $2.2 million and slightly lower noninterest income of $0.1 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 June 30, totaled $8.5 million and $7.5 million in 2021 and 2020, respectively.  Core net income per share for the three months ended June 30, 2021 was $1.18, a 15.7% increase from $1.02 reported for the same period in 2020.  Core net income in the 2021 second quarter excludes a pre-tax $17 thousand unrealized loss on our equity investment portfolio.  Core net income for 2020 excludes a $39 thousand unrealized gain on our equity investment portfolio.

Core net income for the six months ended June 30, 2021 was $18.0 million or $2.49 per diluted share, a 41.6% increase when compared to $12.7 million or $1.72 per diluted share for the same period of 2020.  Core net income for the current period excludes a pre-tax unrealized gain of $4 thousand on our equity investment portfolio.  Core net income for 2020 was impacted by a pre-tax gain of $267 thousand on the sale of debt securities and a $84 thousand unrealized loss on our equity investment securities portfolio

NOTABLES

  • Record first half earnings of $18.0 million or $2.49 per diluted share.
  • Dividends declared for six months ended June 30, 2021 of $0.74 per share represents a 2.8% increase from the same period in 2020.
  • Return on average assets was 1.14% and 1.23% for the three and six months ended June 30, 2021 compared to 1.13% and 1.00% for the three and six months ended June 30, 2020.
  • Return on average equity was 10.71% and 11.35% for the three and six months ended June 30, 2021 compared to 9.87% and 8.48% for the three and six months ended June 30, 2020.
  • Loan growth during 2021, excluding Paycheck Protection Program ("PPP") loans, totaled $94.1 million, or 4.7%. PPP loan balances at June 30, 2021 total $154.2 million.
  • Assisted our small business customers secure $157.1 million of PPP loan forgiveness during 2021, and also assisted in originating $121.6 million of new funding under the second round of PPP to support the operations of our small business customers.
  • Deposits grew $401.6 million or 18.2% for the twelve months ended June 30, 2020 and grew $61.4 million during the three months ended June 30, 2021.
  • Book value per share improved to $45.11 at June 30, 2021 from $42.55 at June 30, 2020, and from $44.00 at March 31, 2021.
  • Tangible book value per share, a non-GAAP measure, increased 7.3% to $36.21 at June 30, 2021 from $33.74 at June 30, 2020, and increased 3.2% from $35.10 at March 31, 2021.
  • Tax-equivalent net interest income increased $1.0 million or 2.5% to $41.8 million for the six months ended June 30, 2021 compared to $40.8 million for the same period in 2020.
  • Provision for loan losses for the six months ended June 30, 2021 decreased $5.7 million from the comparable six month period in 2020, the product of a $0.4 million release from the allowance for loan losses in the current period and a $5.3 million provision for loan losses in the year ago period.
  • Nonperforming assets as a percentage of loans and foreclosed assets at June 30, 2021 improved to 0.33% from 0.62% at June 30, 2020, and from 0.38% at March 31, 2021.

 INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis ("FTE"), our tax-equivalent net interest margin for the three months ended June 30, 2021 was 2.96%, a decrease of 40 basis points when compared to 3.36% for the same period in 2020.  Our tax equivalent net interest margin for the six months ended June 30, 2021 was 3.05%, a decrease of 38 basis points when compare to 3.43% for the six month period in 2020.  The tax-equivalent yield on interest-earning assets decreased 58 basis points to 3.32% during the three months ended June 30, 2021 from 3.90% during the year ago period.  For the six months ended June 30, 2021, the tax-equivalent yield on interest-earning assets decreased 64 basis points to 3.43% from 4.07% during the corresponding period of 2020.  The decrease in yield is due to lower market rates, a result of the Federal Open Market Committee ("FOMC") cutting the federal funds rate by 150 basis points in the first three months of 2020.  The decrease in market rates resulted in lower rates on our existing adjustable rate loans and affected rates on new originations.  Additionally, higher levels of federal funds sold at historically low rates contributed to the decrease in net interest margin.  At the same time, we experienced lower interest-bearing liability costs due to lower market rates and our actions to reduce deposit rates. This was partially offset however by the additional interest expense on subordinated debt we issued during the second quarter of 2020.  Our cost of funds, which represents our average rate paid on total interest-bearing liabilities, decreased 25 basis points to 0.50% for the three months ended June 30, 2021 when compared to 0.75% during the year ago period.  For the six months ended June 30, 2021 our average rate paid on total interest-bearing liabilities was 0.54% a decrease of 34 basis points when compared to 0.88% for the same period in 2020.

Second Quarter 2021 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income for the three months ended June 30, decreased $0.2 million or 0.9% to $20.6 million in 2021 from $20.8 million in 2020.  The decrease in tax equivalent net interest income was largely due to lower taxable interest on loans of $1.1 million, as historically low market rates resulted in a negative rate variance, as asset yields continue to reprice lower.  Partially offsetting the lower loan interest income was lower interest expense of $0.9 million due to our focus to lower deposit and borrowing costs in the current low market rate environment.  The increase to total average earning assets of $303.3 million partially offset the lower yields. PPP loans averaged $197.1 million in the three-month period ended June 30, 2021 with interest and fees totaling $1.3 million.  The tax-equivalent yield on the loan portfolio decreased to 3.83% for the three months ended June 30, 2021, compared to 4.16% for the comparable period in 2020 due to lower market rates and the lower yield earned on PPP loans which carry a 1.00% interest rate.  Loans, net averaged $2.2 billion for the three months ended June 30, 2021 and 2020.  For the three months ended June 30, the tax-equivalent yield on total investments decreased to 2.13% in 2021 from 2.41% in 2020.  Average investments totaled $343.0 million in 2021 and $303.6 million in 2020.  Average interest-bearing liabilities increased $180.6 million for the three months ended June 30, 2021, compared to the corresponding period last year due to higher customer savings rates and strong organic deposit growth of new customer relationships which resulted in lowering our short-term and long-term borrowings.

For the three months ended June 30, 2021, the provision for loan losses decreased $1.7 million to $0.1 million from $1.8 million in the year ago period which reflected an increase to the asset quality qualitative factors in our allowance for loan losses methodology due to deferments requested on commercial loans and resulting risk rating migration.  The provision for loan losses in the three month period ended June 30, 2021 is the result of growth of non-PPP loans, improved asset quality and reversal of the COVID-related asset quality qualitative adjustment made in the year ago period in our allowance for loan losses methodology.

Noninterest income for the three months ended June 30, 2021 and 2020 was $3.4 million.  Services charges, fees, commissions and other were higher by $0.2 million due to increased debit card interchange revenue and slightly higher service charges on consumer and commercial deposit accounts.  Wealth management revenue increased $0.2 million in the three month period ended June 30, 2021 due to a higher number of transactions.  Revenue generated from our commercial loan interest rate swaps decreased $0.4 million from the year ago period due to a lower number of transactions and a lower valuation adjustment, and mortgage banking revenue declined $0.1 million in the three month period ended June 30, 2021 from lower volumes of mortgages sold into the secondary market.

Noninterest expense increased $0.3 million or 2.2% to $13.5 million for the three months ended June 30, 2021, from $13.2 million for the three months ended June 30, 2020.  Salaries and employee benefits increased $0.2 million or 2.9% due primarily to higher deferred costs, which are recorded as a contra-salary expense, of $0.8 million in the year ago period related to a higher number of PPP loan originations.  Salary expense decreased $0.4 million in the three month period ended June 30, 2021 as employee incentives related to the processing of the PPP loans were paid out during the year ago period and employee benefits expense decreased $0.2 million due to lower payroll taxes and health insurance costs.  Other expenses increased $0.1 million or 3.6% due primarily to higher Pennsylvania shares tax expenses.

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

Tax-equivalent net interest income for the six months ended June 30, increased $1.0 million or 2.5% to $41.8 million in 2021 from $40.8 million in 2020.  The increase in tax equivalent net interest income was largely due to lower interest bearing deposit costs of $2.3 million, as progress was made in lowering deposit rates in the historically low market rate environment.  Partially offsetting the lower interest-bearing liability costs was a decrease of $1.4 million to our tax equivalent interest income primarily from a $1.3 million decrease in loan interest, as loans continue to reprice lower during the current low market rate environment.  The increase to total average earning assets of $365.1 million partially offset the lower yields. PPP loans averaged $196.2 million in the six-month period ended June 30, 2021 with interest and fees totaling $3.8 million.  The tax-equivalent yield on the loan portfolio decreased to 3.96% for the six months ended June 30, 2021, compared to 4.34% for the comparable period in 2020 due to lower market rates and the lower yield earned on PPP loans which carry a 1.00% interest rate.  Loans, net averaged $2.2 billion for the six months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, the tax-equivalent yield on total investments decreased to 2.14% in 2021 from 2.44% in 2020.  Average investments totaled $337.7 million in 2021 and $309.9 million in 2020.  Average interest-bearing liabilities increased $212.2 million for the six months ended June 30, 2021, compared to the corresponding period last year due to higher customer savings rates, strong organic deposit growth of new customer relationships, and government stimulus payments.  Total average deposits increased $452.3 million for the six months ended June 30, 2021, compared to the comparable period last year which resulted in lowering our higher costing short-term and long-term borrowings.

The provision for loan losses was negative $0.4 million for the six months ended June 30, 2021, a decrease of $5.7 million from the $5.3 million provision for the comparable period of 2020.  The lower provision in the six month period ended June 30, 2021 is due to improved credit quality and the resulting reversal of the COVID-related asset quality qualitative factor adjustment made in the year ago period in our allowance for loan losses methodology.  The higher provision in the year ago period reflects changes made to the qualitative factors related to economic and credit quality declines resulting from the onset of the coronavirus pandemic and its uncertain economic impact.

Noninterest income for the six months ended June 30, 2021 was $6.9 million compared with $7.0 million for the year ago period, a decrease of $0.1 million or 1.0%.  The year ago period included a net gain of $0.2 million from a sale of a pool of municipal bonds, offset by an unrealized loss related to our equity security.  Service charges, fees, commissions and other are lower in the six month period ended June 30, 2021 by $0.2 million as an accrual adjustment to a bank owned life insurance benefit, a lower Federal Home Loan Bank dividend and a decrease to service charges on consumer and commercial deposit accounts were partially offset by an increase to our debit card interchange revenue.  Wealth management revenue increased $0.2 million in the six month period ended June 30, 2021 due to a higher number of transactions and commissions and fees on fiduciary activities increased $0.1 million due primarily to market appreciation.

Noninterest expense decreased $0.7 million or 2.7% to $26.2 million for the six months ended June 30, 2021, from $26.9 million for the six months ended June 30, 2020.  Salaries and employee benefits decreased $1.1 million or 7.3% due to a lower number of full-time equivalent employees, lower health insurance costs and higher 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 six month period ended June 30, 2021. Other expenses were higher by $0.2 million due primarily to higher Pennsylvania shares tax expense and an increase in FDIC insurance assessments in the six month period ended June 30, 2021 attributed to the receipt of a credit in the year ago period related to the Deposit Insurance Fund's (DIF) minimum reserve ratio assessment.

The provision for income tax expense increased $2.2 million for the six months ended June 30, 2021 compared to the year ago period due to higher levels of book taxable income and a $0.6 million deferred tax adjustment related to prior periods.

 BALANCE SHEET REVIEW

At June 30, 2021, total assets, loans and deposits were $3.0 billion, $2.2 billion and $2.6 billion, respectively. Loans balances increased from December 31, 2020 as loan demand, exclusive of PPP loans, improved during the second quarter.  Loan growth during the first six months was $94.1 million when excluding a net decrease of $35.3 million of Small Business Administration ("SBA") PPP loans.  Commercial real estate and tax-exempt loans made up the majority of growth.  During the first half of 2021, we funded an additional 1,062 loans totaling $121.6 million under the SBA's second PPP loan program.  Total deposits increased $174.7 million or 7.2% from December 31, 2020 due to organic growth of customer relationships throughout all our markets, additional deposits by our commercial and municipal customers and federal government stimulus payments.  Non-interest bearing deposits increased $49.8 million or 8.0% and interest-bearing deposits increased $124.9 million or 6.9% during the six months ended June 30, 2021.  Total investments were $343.7 million at June 30, 2021, including $336.4 million securities classified as available-for-sale and $7.1 million classified as held-to-maturity.

Stockholders' equity equaled $324.9 million or $45.11 per share at June 30, 2021, and $316.9 million or $43.92 per share at December 31, 2020.  The increase in stockholders' equity from December 31, 2020 is attributable to net income, partially offset by a decrease to accumulated other comprehensive income ("AOCI") resulting from a decrease to the unrealized gain on investment securities and dividends paid to shareholders.  Tangible stockholders' equity improved to $36.21 per share at June 30, 2021, from $35.00 per share at December 31, 2020.  Dividends declared for the six months ended June 30, 2021 amounted to $0.74 per share, a 2.8% increase from the 2020 period, representing a dividend payout ratio of 29.7%.

ASSET QUALITY REVIEW

Nonperforming assets were $7.3 million or 0.33% of loans, net and foreclosed assets at June 30, 2021, compared to $10.5 million or 0.48% of loans, net and foreclosed assets at December 31, 2020.  The decrease in non-performing assets from year end was primarily due to the payoff of a non-accrual commercial loan and the sale of several foreclosed properties.  The Company's allowance for loan losses decreased $0.6 million or 2.2% during the first six months of 2021, due to a $0.4 million release from the allowance for loan losses in the current period resulting from improved credit quality.  The allowance for loan losses at June 30, 2021 continued to reflect the provisions added during 2020 from our adjustment of qualitative factors in our allowance for loan losses methodology, due to economic decline and expectation of increased credit losses from COVID-19's adverse impact on economic and business operating conditions.  The allowance for loan losses equaled $26.7 million or 1.20% of loans, net at June 30, 2021 compared to $27.3 million or 1.26% of loans, net, at December 31, 2020.  Excluding PPP loans which do not carry an allowance for losses due to a 100% government guarantee, the ratio equaled 1.28% at June 30, 2021.  Loans charged-off, net of recoveries, for the six months ended June 30, 2021, equaled $0.2 million or 0.02% of average loans, compared to $1.0 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 continue to follow the recommendations of our state governments as to conducting business and continue to maintain safety protocols. Currently all our offices have returned to pre-pandemic operating hours with full lobby access.

From a lending perspective, loan growth, excluding our PPP loan transactions, improved during the second quarter as economic activity began to improve in our markets.  The PPP loans approved and funded during 2020 totaling $217.5 million had outstanding balances at December 31, 2020 of $189.6 million and have remaining balances of $32.6 million at June 30, 2021.  Our lending team and credit professionals have assisted our small business customers to secure $157.1 million of loan forgiveness from the SBA.  During 2021, we originated $121.6 of new loans under the second round of PPP to support our small business customers still impacted by COVID-19.  We expect the majority of PPP loans to be forgiven during the remaining months of 2021.

From a credit risk perspective, the Company implemented a customer payment deferral program to assist both consumer and business borrowers that may have experienced financial hardship due to COVID-19 related challenges, and 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 June 30, 2021, all commercial and consumer loans, with the exception of six consumer loans, have come off of deferral as borrowers have begun to make their regular payments.

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)







































June 30



Mar 31



Dec 31



Sept 30



June 30







2021



2021



2020



2020



2020



Key performance data:

































Share and per share amounts:

































Net income



$

1.18



$

1.31



$

1.13



$

1.14



$

1.03



Core net income (1)



$

1.18



$

1.31



$

1.10



$

1.09



$

1.02



Cash dividends declared



$

0.37



$

0.37



$

0.36



$

0.36



$

0.36



Book value



$

45.11



$

44.00



$

43.92



$

43.30



$

42.55



Tangible book value (1)



$

36.21



$

35.10



$

35.00



$

34.40



$

33.74



Market value:

































High



$

45.38



$

47.34



$

40.40



$

39.38



$

39.40



Low



$

41.10



$

36.02



$

34.47



$

32.51



$

30.24



Closing



$

42.60



$

42.24



$

36.76



$

34.76



$

38.19



Market capitalization



$

306,836



$

304,605



$

265,231



$

251,743



$

280,042



Common shares outstanding





7,202,728





7,211,293





7,215,202





7,242,326





7,332,856



Selected ratios:

































Return on average stockholders' equity





10.71

%



12.00

%



10.32

%



10.58

%



9.87

%

Core return on average stockholders' equity (1)





10.72

%



11.98

%



10.05

%



10.12

%



9.83

%

Return on average tangible stockholders' equity





13.39

%



15.02

%



12.96

%



13.34

%



12.49

%

Core return on average tangible stockholders' equity (1)





13.41

%



14.99

%



12.62

%



12.76

%



12.44

%

Return on average assets





1.14

%



1.32

%



1.13

%



1.21

%



1.13

%

Core return on average assets (1)





1.14

%



1.32

%



1.10

%



1.16

%



1.12

%

Stockholders' equity to total assets





10.84

%



10.59

%



10.99

%



11.18

%



11.56

%

Efficiency ratio (2)





55.71

%



50.83

%



56.35

%



55.94

%



54.10

%

Nonperforming assets to loans, net, and foreclosed assets





0.33

%



0.38

%



0.48

%



0.52

%



0.62

%

Net charge-offs to average loans, net





0.03

%



0.01

%



0.05

%



0.26

%



0.10

%

Allowance for loan losses to loans, net





1.20

%



1.23

%



1.26

%



1.21

%



1.24

%

Interest-bearing assets yield (FTE) (3)





3.32

%



3.55

%



3.49

%



3.73

%



3.90

%

Cost of funds





0.50

%



0.57

%



0.67

%



0.76

%



0.75

%

Net interest spread (FTE) (3)





2.81

%



2.99

%



2.81

%



2.97

%



3.15

%

Net interest margin (FTE) (3)





2.96

%



3.15

%



3.00

%



3.19

%



3.36

%





(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)























June 30



June 30



Six Months Ended



2021



2020



Interest income:















Interest and fees on loans:















Taxable



$

40,929



$

42,077



Tax-exempt





1,835





1,972



Interest and dividends on investment securities:















Taxable





2,519





2,973



Tax-exempt





801





594



Dividends





48





48



Interest on interest-bearing deposits in other banks





4





30



Interest on federal funds sold





104









Total interest income





46,240





47,694



Interest expense:















Interest on deposits





4,033





6,367



Interest on short-term borrowings





77





675



Interest on long-term debt





185





436



Interest on subordinated debt





887





148



Total interest expense





5,182





7,626



Net interest income





41,058





40,068



Provision for loan losses





(400)





5,300



Net interest income after provision for loan losses





41,458





34,768



Noninterest income:















Service charges, fees, commissions and other





2,809





3,038



Merchant services income





601





586



Commissions and fees on fiduciary activities





1,086





999



Wealth management income





775





618



Mortgage banking income





520





449



Increase in cash surrender value of life insurance





444





380



Interest rate swap revenue





665





719



Net gain (loss) on investment securities





4





(84)



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











267



Total noninterest income





6,904





6,972



Noninterest expense:















Salaries and employee benefits expense





13,820





14,904



Net occupancy and equipment expense





6,314





6,121



Amortization of intangible assets





250





308



Other expenses





5,773





5,560



Total noninterest expense





26,157





26,893



Income before income taxes





22,205





14,847



Provision for income tax expense





4,196





1,990



Net income



$

18,009



$

12,857



Other comprehensive income:















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



$

(5,279)



$

9,723



Reclassification adjustment for gains included in net income











(267)



Change in derivative fair value





106





493



Income tax related to other comprehensive income





(1,087)





2,090



Other comprehensive income, net of income taxes





(4,086)





7,859



Comprehensive income



$

13,923



$

20,716



Share and per share amounts:















Net income - basic



$

2.50



$

1.75



Net income - diluted





2.49





1.74



Cash dividends declared



$

0.74



$

0.72



Average common shares outstanding - basic





7,207,588





7,360,517



Average common shares outstanding - diluted





7,242,652





7,391,202



 

Peoples Financial Services Corp.

Consolidated Statements of Income

(In thousands, except per share data)









































June 30



Mar 31



Dec 31



Sept 30



June 30



Three months ended



2021



2021



2020



2020



2020



Interest income:

































Interest and fees on loans:

































Taxable



$

20,029



$

20,900



$

20,705



$

20,901



$

21,160



Tax-exempt





965





870





888





876





941



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

































Taxable





1,276





1,243





1,111





1,250





1,420



Tax-exempt





411





390





304





280





295



Dividends





25





23





26





23





25



Interest on interest-bearing deposits in other banks





2





2





4





4





5



Interest on federal funds sold





55





49





47





12





6



Total interest income





22,763





23,477





23,085





23,346





23,852



Interest expense:

































Interest on deposits





1,941





2,092





2,614





2,758





2,864



Interest on short-term borrowings





6





71





91





82





102



Interest on long-term debt





82





103





127





139





231



Interest on subordinated debt





444





443





444





443





148



Total interest expense





2,473





2,709





3,276





3,422





3,345



Net interest income





20,290





20,768





19,809





19,924





20,507



Provision for loan losses





100





(500)





1,050





1,050





1,800



Net interest income after provision for loan losses





20,190





21,268





18,759





18,874





18,707



Noninterest income:

































Service charges, fees, commissions and other





1,625





1,184





2,187





1,584





1,433



Merchant services income





508





93





101





137





472



Commissions and fees on fiduciary activities





553





533





551





575





493



Wealth management income





417





358





392





272





231



Mortgage banking income





208





312





658





488





312



Increase in cash surrender value of life insurance





225





219





202





192





193



Interest rate swap revenue





(132)





797





374





1,228





249



Net gain (loss) on investment securities





(17)





21





76





2





39



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

















194





457









Total noninterest income





3,387





3,517





4,735





4,935





3,422



Noninterest expense:

































Salaries and employee benefits expense





7,250





6,570





7,400





7,831





7,048



Net occupancy and equipment expense





3,047





3,267





3,588





3,131





3,042



Amortization of intangible assets





125





125





144





154





154



Other expenses





3,106





2,667





2,869





2,858





2,998



Total noninterest expense





13,528





12,629





14,001





13,974





13,242



Income before income taxes





10,049





12,156





9,493





9,835





8,887



Income tax expense





1,518





2,678





1,308





1,523





1,311



Net income



$

8,531



$

9,478



$

8,185



$

8,312



$

7,576



Other comprehensive income:

































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



$

2,470



$

(7,749)



$

(305)



$

(639)



$

2,094



Reclassification adjustment for gains included in net income

















(194)





(457)









Change in benefit plan liabilities

















(1,398)















Change in derivative fair value





(135)





242





(41)





(137)





(543)



Income tax related to other comprehensive income 





490





(1,576)





(407)





(260)





326



Other comprehensive income, net of income taxes





1,845





(5,931)





(1,531)





(973)





1,225



Comprehensive income



$

10,376



$

3,547



$

6,654



$

7,339



$

8,801



Share and per share amounts:

































Net income - basic



$

1.18



$

1.31



$

1.13



$

1.14



$

1.03



Net income - diluted





1.18





1.31





1.13





1.14





1.03



Cash dividends declared



$

0.37



$

0.37



$

0.36



$

0.36



$

0.36



Average common shares outstanding - basic





7,204,261





7,210,952





7,222,810





7,277,189





7,341,636



Average common shares outstanding - diluted





7,239,325





7,246,016





7,257,874





7,312,253





7,376,700



 

Peoples Financial Services Corp.

Details of Net Interest and Net Interest Margin

(In thousands, fully taxable equivalent basis)









































June 30



Mar 31



Dec 31



Sept 30



June 30



Three months ended



2021



2021



2020



2020



2020



Net interest income:

































Interest income

































Loans, net:

































Taxable



$

20,029



$

20,900



$

20,705



$

20,901



$

21,160



Tax-exempt





1,222





1,101





1,124





1,109





1,191



Total loans, net





21,251





22,001





21,829





22,010





22,351



Investments:

































Taxable





1,301





1,266





1,137





1,273





1,445



Tax-exempt





520





494





385





354





374



Total investments





1,821





1,760





1,522





1,627





1,819



Interest on interest-bearing balances in other banks





2





2





4





4





5



Federal funds sold





55





49





47





12





6



Total interest income





23,129





23,812





23,402





23,653





24,181



Interest expense:

































Deposits





1,941





2,092





2,614





2,758





2,864



Short-term borrowings





6





71





91





82





102



Long-term debt





82





103





127





139





231



Subordinated debt





444





443





444





443





148



Total interest expense





2,473





2,709





3,276





3,422





3,345



Net interest income



$

20,656



$

21,103



$

20,126



$

20,231



$

20,836



Loans, net:

































Taxable





3.87

%



4.13

%



3.98

%



4.04

%



4.19

%

Tax-exempt





3.30

%



3.56

%



3.80

%



3.70

%



3.75

%

Total loans, net





3.83

%



4.09

%



3.97

%



4.02

%



4.16

%

Investments:

































Taxable





1.97

%



1.97

%



2.03

%



2.09

%



2.24

%

Tax-exempt





2.66

%



2.78

%



3.30

%



3.56

%



3.46

%

Total investments





2.13

%



2.15

%



2.25

%



2.30

%



2.41

%

Interest-bearing balances with banks





0.08

%



0.06

%



0.06

%



0.08

%



0.16

%

Federal funds sold





0.10

%



0.10

%



0.10

%



0.11

%



0.14

%

Total interest-bearing assets





3.32

%



3.55

%



3.49

%



3.73

%



3.90

%

Interest expense:

































Deposits





0.41

%



0.46

%



0.57

%



0.65

%



0.72

%

Short-term borrowings





0.33

%



0.57

%



0.72

%



0.65

%



0.44

%

Long-term debt





2.98

%



2.88

%



2.70

%



2.59

%



1.13

%

Subordinated debt





5.38

%



5.38

%



5.38

%



5.37

%



5.38

%

Total interest-bearing liabilities





0.50

%



0.57

%



0.67

%



0.76

%



0.75

%

Net interest spread





2.81

%



2.98

%



2.81

%



2.97

%



3.15

%

Net interest margin





2.96

%



3.15

%



3.00

%



3.19

%



3.36

%

 

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)









































June 30



Mar 31



Dec 31



Sept 30



June 30



At period end



2021



2021



2020



2020



2020



Assets:

































Cash and due from banks



$

41,789



$

30,786



$

29,287



$

42,940



$

27,146



Interest-bearing balances in other banks





10,262





8,432





15,905





20,972





14,788



Federal funds sold





196,000





264,100





183,000





102,300





10,000



Investment securities:

































Available-for-sale





336,449





333,753





295,911





247,404





287,709



Equity investments carried at fair value





142





159





138





341





338



Held-to-maturity





7,104





7,166





7,225





7,297





7,401



Loans held for sale





1,545





458





837





2,161





1,939



Loans, net





2,236,826





2,179,534





2,177,982





2,188,463





2,181,909



Less: allowance for loan losses





26,739





26,783





27,344





26,584





26,957



Net loans





2,210,087





2,152,751





2,150,638





2,161,879





2,154,952



Premises and equipment, net





46,305





46,777





47,045





47,926





48,378



Accrued interest receivable





7,844





8,206





8,255





8,595





8,368



Goodwill





63,370





63,370





63,370





63,370





63,370



Other intangible assets, net





710





835





960





1,104





1,257



Bank owned life insurance





42,750





42,530





42,316





37,099





35,412



Other assets





33,379





36,146





38,915





62,274





39,366



Total assets



$

2,997,736



$

2,995,469



$

2,883,802



$

2,805,662



$

2,700,424



Liabilities:

































Deposits:

































Noninterest-bearing



$

672,274



$

661,262



$

622,475



$

579,196



$

575,206



Interest-bearing





1,939,492





1,889,154





1,814,638





1,777,688





1,634,918



Total deposits





2,611,766





2,550,416





2,437,113





2,356,884





2,210,124



Short-term borrowings











51,980





50,000





50,000





50,000



Long-term debt





3,752





14,264





14,769





20,269





60,938



Subordinated debt





33,000





33,000





33,000





33,000





33,000



Accrued interest payable





469





1,120





736





1,289





872



Other liabilities





23,858





27,358





31,307





30,597





33,446



Total liabilities





2,672,845





2,678,138





2,566,925





2,492,039





2,388,380



Stockholders' equity:

































Common stock





14,407





14,423





14,414





14,468





14,649



Capital surplus





128,719





128,854





129,291





130,038





133,002



Retained earnings





183,702





177,836





171,023





165,437





159,739



Accumulated other comprehensive gain (loss)





(1,937)





(3,782)





2,149





3,680





4,654



Total stockholders' equity





324,891





317,331





316,877





313,623





312,044



Total liabilities and stockholders' equity



$

2,997,736



$

2,995,469



$

2,883,802



$

2,805,662



$

2,700,424



 

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)









































June 30



Mar 31



Dec 31



Sept 30



June 30



Average quarterly balances



2021



2021



2020



2020



2020



Assets:

































Loans, net:

































Taxable



$

2,075,808



$

2,054,120



$

2,068,600



$

2,059,357



$

2,032,852



Tax-exempt





148,747





125,352





117,650





119,202





127,624



Total loans, net





2,224,555





2,179,472





2,186,250





2,178,559





2,160,476



Investments:

































Taxable





264,490





260,238





223,333





241,904





260,160



Tax-exempt





78,521





72,177





46,361





39,591





43,466



Total investments





343,011





332,415





269,694





281,495





303,626



Interest-bearing balances with banks





9,653





13,260





26,232





20,250





12,595



Federal funds sold





220,247





191,720





185,874





45,439





17,480



Total interest-bearing assets





2,797,466





2,716,867





2,668,050





2,525,743





2,494,177



Other assets





199,082





197,178





204,348





199,433





210,017



Total assets



$

2,996,548



$

2,914,045



$

2,872,398



$

2,725,176



$

2,704,194



Liabilities and stockholders' equity:

































Deposits:

































Interest-bearing



$

1,921,754



$

1,833,661



$

1,829,248



$

1,690,440



$

1,605,841



Noninterest-bearing





680,431





634,806





596,880





587,448





574,194



Total deposits





2,602,185





2,468,467





2,426,128





2,277,888





2,180,035



Short-term borrowings





7,300





50,470





50,000





50,038





93,447



Long-term debt





11,025





14,509





18,699





21,354





82,117



Subordinated debt





33,000





33,000





33,000





33,000





11,074



Other liabilities





23,420





23,371





28,946





30,454





28,798



Total liabilities





2,676,930





2,589,817





2,556,773





2,412,734





2,395,471



Stockholders' equity





319,618





320,228





315,625





312,442





308,723



Total liabilities and stockholders' equity



$

2,996,548



$

2,910,045



$

2,872,398



$

2,725,176



$

2,704,194



 

Peoples Financial Services Corp.

Asset Quality Data

(In thousands)









































June 30



Mar 31



Dec 31



Sept 30



June 30







2021



2021



2020



2020



2020



At quarter end

































Nonperforming assets:

































Nonaccrual/restructured loans



$

7,216



$

8,073



$

9,799



$

10,692



$

12,214



Accruing loans past due 90 days or more





49





172





71





52





291



Foreclosed assets





29





131





632





649





964



Total nonperforming assets



$

7,294



$

8,376



$

10,502



$

11,393



$

13,469





































Three months ended

































Allowance for loan losses:

































Beginning balance



$

26,783



$

27,344



$

26,584



$

26,957



$

25,686



Charge-offs





190





195





522





1,542





617



Recoveries





46





134





232





119





88



Provision for loan losses





100





(500)





1,050





1,050





1,800



Ending balance



$

26,739



$

26,783



$

27,344



$

26,584



$

26,957



 

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except share and per share data)









































June 30



Mar 31



Dec 31



Sept 30



June 30



Three months ended



2021



2021



2020



2020



2020



Core net income per share:

































Net income GAAP



$

8,531



$

9,478



$

8,185



$

8,312



$

7,576



Adjustments:

































Less: gain on investment securities





17





(21)





(270)





(459)





(39)



Add: gain on investment securities tax adjustment





(4)





4





57





96





8



Net income Core



$

8,544



$

9,461



$

7,972



$

7,949



$

7,545



Average common shares outstanding - diluted





7,239,325





7,246,016





7,257,874





7,312,253





7,376,700



Core net income per share



$

1.18



$

1.31



$

1.10



$

1.09



$

1.02



Tangible book value:

































Total stockholders' equity



$

324,891



$

317,331



$

316,877



$

313,623



$

312,044



Less: Goodwill





63,370





63,370





63,370





63,370





63,370



Less: Other intangible assets, net





710





835





960





1,104





1,257



Total tangible stockholders' equity



$

260,811



$

253,126



$

252,547



$

249,149



$

247,417



Common shares outstanding





7,202,728





7,211,293





7,215,202





7,242,326





7,332,856



Tangible book value per share



$

36.21



$

35.10



$

35.00



$

34.40



$

33.74



Core return on average stockholders' equity:

































Net income GAAP



$

8,531



$

9,478



$

8,185



$

8,312



$

7,576



Adjustments:

































Less: gain on investment securities





17





(21)





(270)





(459)





(39)



Add: gain on investment securities tax adjustment





(4)





4





57





96





8



Net income Core



$

8,544



$

9,461



$

7,972



$

7,949



$

7,545



Average stockholders' equity



$

319,618



$

320,228



$

315,625



$

312,442



$

308,723



Core return on average stockholders' equity





10.72

%



11.98

%



10.05

%



10.12

%



9.83

%

Return on average tangible equity:

































Net income GAAP



$

8,531



$

9,478



$

8,185



$

8,312



$

7,576



Average stockholders' equity



$

319,618



$

320,228



$

315,625



$

312,442



$

308,723



Less: average intangibles





64,143





64,268





64,402





64,551





64,704



Average tangible stockholders' equity



$

255,475



$

255,960



$

251,223



$

247,891



$

244,019



Return on average tangible stockholders' equity





13.39

%



15.02

%



12.96

%



13.34

%



12.49

%

Core return on average tangible stockholders' equity:

































Net income GAAP



$

8,531



$

9,478



$

8,185



$

8,312



$

7,576



Adjustments:

































Less: gain on investment securities





17





(21)





(270)





(459)





(39)



Add: gain on investment securities tax adjustment





(4)





4





57





96





8



Net income Core



$

8,544



$

9,461



$

7,972



$

7,949



$

7,545



Average stockholders' equity



$

319,618



$

320,228



$

315,625



$

312,442



$

308,723



Less: average intangibles





64,143





64,268





64,402





64,551





64,704



Average tangible stockholders' equity



$

255,475



$

255,960



$

251,223



$

247,891



$

244,019



Core return on average tangible stockholders' equity





13.41

%



14.99

%



12.62

%



12.76

%



12.44

%

Core return on average assets:

































Net income GAAP



$

8,531



$

9,478



$

8,185



$

8,312



$

7,576



Adjustments:

































Less: (gain) loss on investment securities





17





(21)





(270)





(459)





(39)



Add: (gain) loss on investment securities tax adjustment





(4)





4





57





96





8



Net income Core



$

8,544



$

9,461



$

7,972



$

7,949



$

7,545



Average assets



$

2,996,548



$

2,914,045



$

2,872,398



$

2,725,176



$

2,704,194



Core return on average assets





1.14

%



1.32

%



1.10

%



1.16

%



1.12

%

 

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except share and per share data)























June 30



June 30



Six Months Ended



2021



2020



Core net income per share:















Net income (GAAP)



$

18,009



$

12,857



Adjustments:















Less: Gain on investment securities





4





183



Add: Gain on investment securities tax adjustment





(1)





(38)



Net income Core



$

18,006



$

12,712



Average basic common shares outstanding





7,207,588





7,360,517



Average diluted common shares outstanding





7,242,652





7,391,202



Core net income per share - basic



$

2.50



$

1.73



Core net income per share - diluted



$

2.49



$

1.72



 

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 six months ended June 30, 2021 and 2020:



















Three months ended June 30



2021



2020



Interest income (GAAP)



$

22,763



$

23,852



Adjustment to FTE





366





329



Interest income adjusted to FTE (non-GAAP)





23,129





24,181



Interest expense





2,473





3,345



Net interest income adjusted to FTE (non-GAAP)



$

20,656



$

20,836



















Six months ended June 30



2021



2020



Interest income (GAAP)



$

46,240



$

47,694



Adjustment to FTE





701





682



Interest income adjusted to FTE (non-GAAP)





46,941





48,376



Interest expense





5,182





7,626



Net interest income adjusted to FTE (non-GAAP)



$

41,759



$

40,750





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 six months ended June 30, 2021 and 2020:



Three months ended June 30



2021



2020



Efficiency ratio (non-GAAP):















Noninterest expense (GAAP)



$

13,528



$

13,242



Less: amortization of intangible assets expense





125





154



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





13,403





13,088



















Net interest income (GAAP)





20,290





20,507



Plus: taxable equivalent adjustment





366





329



Noninterest income (GAAP)





3,387





3,422



Less: net gains (loss) on equity securities





(17)





39



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



$

24,060



$

24,219



















Efficiency ratio (non-GAAP)





55.71

%



54.10

%

















Six months ended June 30



2021



2020



Efficiency ratio (non-GAAP):















Noninterest expense (GAAP)



$

26,157



$

26,893



Less: amortization of intangible assets expense





250





308



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





25,907





26,585



















Net interest income (GAAP)





41,058





40,068



Plus: taxable equivalent adjustment





701





682



Noninterest income (GAAP)





6,904





6,972



Less: net gains (losses) on equity securities





4





(84)



Less: net gains on sale of investment securities











267



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



$

48,659



$

47,539



















Efficiency ratio (non-GAAP)





53.24

%



55.90

%

 

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SOURCE Peoples Financial Services Corp.

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