PR Newswire | Apr 23, 2021 12:10PM EDT

04/23 11:09 CDT

PEOPLES FINANCIAL SERVICES CORP. Reports First Quarter 2021 Earnings SCRANTON, Pa., April 23, 2021

SCRANTON, Pa., April 23, 2021 /PRNewswire/ -- Peoples Financial Services Corp. ("Peoples") (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three months ended March 31, 2021. Peoples reported net income of $9.5 million, or $1.31 per diluted share for the three months ended March 31, 2021, a 79.5% increase when compared to $5.3 million, or $0.71 per share for the comparable period of 2020. The increase in earnings over the year ago period is a result of a $4.0 million decrease to the provision for loan losses, a $1.2 million increase to pre-provision net interest income from lower interest expense, and a $1.0 million decrease to noninterest expenses, offset by a higher income tax provision of $2.0 million.

In addition to evaluating its results of operations in accordance with GAAP, Peoples routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders' equity and core net income ratios. The reported results included in this release contain items, which Peoples considers non-core, namely gains and losses incurred within the investment securities portfolio. Peoples believes the reported non-GAAP financial measures provide information useful to investors in understanding its operating performance and trends. Where non-GAAP disclosures are used in this press release, a reconciliation to the comparable GAAP measure is provided in the accompanying tables. The non-GAAP financial measures Peoples uses may differ from the non-GAAP financial measures of other financial institutions.

Core net income, which we have defined to exclude gains or losses from our investment securities portfolio, for the three months ended March 31, totaled $9.5 million and $5.2 million in 2021 and 2020, respectively. Core net income per share for the three months ended March 31, 2021 was $1.31, an 87.1% increase from $0.70 reported for the same period in 2020. Core net income in the current period excludes a pre-tax $21 thousand unrealized gain on our equity investment portfolio. Core net income for the 2020 period excludes a $267 thousand realized gain on the sale of a pool of municipal securities and an unrealized loss of $123 thousand on our equity investment portfolio.

NOTABLES

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

INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis ("FTE"), our tax-equivalent net interest margin for the three months ended March 31, 2021 was 3.15%, an increase of 15 basis points when compared to the three months ended December 31, 2020, and a decrease of 35 basis points when compared to 3.50% for the same three month period in 2020. The increase in net interest margin from the prior three month period is primarily due to interest and fees on PPP loans and lower deposit costs. The tax-equivalent yield on interest-earning assets increased 6 basis points to 3.55% during the three months ended March 31, 2021 from 3.49% during the three months ended December 31, 2020, and decreased 70 basis points when compared to 4.25% for the three months ended March 31, 2020. The decrease in net interest margin and yield from the year ago period is due to lower market rates, the result of the Federal Open Market Committee ("FOMC") cutting the federal funds rate 150 basis points in the first three months of 2020 resulting from the uncertain economic impact of the coronavirus pandemic. The decrease in market rates resulted in lower rates on our existing adjustable rate loans and affected rates on new originations. However, we have experienced lower interest-bearing liability costs due to lower market rates, partially offset, however, by the additional interest expense on subordinated debt we issued during the second quarter of 2020. Our cost of funds, which represents our average rate paid on total interest-bearing liabilities, decreased 10 basis points to 0.57% for the three months ended March 31, 2021 when compared to 0.67% during the three months ended December 31, 2020, and has decreased 44 basis points when compared to the same three month period in 2020.

First Quarter 2021 Results - Comparison to Prior-Year Quarter

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

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

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

Noninterest expense decreased $1.0 million or 7.5% to $12.6 million for the three months ended March 31, 2021, from $13.6 million for the three months ended March 31, 2020. Salaries and employee benefits decreased $1.3 million or 16.4% as higher salaries were more than offset by lower benefits expenses and deferred costs on loan originations which are recorded as a contra-salary expense. Occupancy and equipment expenses were higher by $0.2 million due to information technology investments related to mobile/digital banking solutions in the current period. Other expenses were higher by $0.1 million due primarily to an increase in FDIC insurance assessments in the current period primarily attributed to the receipt of a credit in the year ago period related to the Deposit Insurance Fund's (DIF) minimum reserve ratio assessment.

The provision for income tax expense increased $2.0 million for the three months ended March 31, 2021 compared to the year ago period due to higher levels of book taxable income and a $0.6 million deferred tax adjustment related to prior periods.

BALANCE SHEET REVIEW

At March 31, 2021, total assets, loans and deposits were $3.0 billion, $2.2 billion and $2.5 billion, respectively. Loans balances increased slightly from December 31, 2020 as loan demand, exclusive of PPP loans, was soft to begin the year. The slight growth in loans was primarily due to a net increase in PPP loans resulting from our participation in the second round of the Small Business Administration ("SBA") administered PPP, and to a lesser extent in commercial real estate loans. During the first quarter of 2021, we funded an additional 885 loans totaling $100.0 million under the SBA's second PPP loan program. Total deposits increased $113.3 million or 4.6% from December 31, 2020 due to organic growth of customer relationships throughout all our markets, PPP loan proceeds retained coupled with additional deposits by our commercial borrowers and federal government stimulus payments. Non-interest bearing deposits increased $38.8 million or 6.2% and interest-bearing deposits increased $74.5 million or 4.1% during the three months ended March 31, 2021. Total investments were $341.1 million at March 31, 2021, including $333.8 million securities classified as available-for-sale and $7.2 million classified as held-to-maturity.

Stockholders' equity equaled $317.3 million or $44.00 per share at March 31, 2021, and $316.9 million or $43.92 per share at December 31, 2020. The increase in stockholders' equity from December 31, 2020 is attributable to net income, partially offset by a decrease to accumulated other comprehensive income ("AOCI") resulting from a decrease to the unrealized gain on investment securities and dividends paid to shareholders. Tangible stockholders' equity improved to $35.10 per share at March 31, 2021, from $35.00 per share at December 31, 2020. Dividends declared for the three months ended March 31, 2021 amounted to $0.37 per share, a 2.8% increase from the 2020 period, representing a dividend payout ratio of 28.2%.

ASSET QUALITY REVIEW

Nonperforming assets were $8.4 million or 0.38% of loans, net and foreclosed assets at March 31, 2021, compared to $10.5 million or 0.48% of loans, net and foreclosed assets at December 31, 2020. The decrease in non-performing assets from the previous quarter was primarily due to the payoff of a non-accrual commercial loan and the sale of a foreclosed property. The Company's allowance for loan losses decreased $0.6 million or 2.1% in the first quarter of 2021, due to a $0.5 million release from the allowance for loan losses in the current period resulting from improved credit quality and a slight decrease in non-PPP loan balances. The allowance for loan losses at March 31, 2021 continued to reflect the provisions added during 2020 from our adjustment of qualitative factors in our allowance for loan losses methodology, due to economic decline and expectation of increased credit losses from COVID-19's adverse impact on economic and business operating conditions. The allowance for loan losses equaled $26.8 million or 1.23% of loans, net at March 31, 2021 compared to $27.3 million or 1.26% of loans, net, at December 31, 2020. Excluding PPP loans which do not carry an allowance for losses due to a 100% government guarantee, the ratio equaled 1.35% at March 31, 2021. Loans charged-off, net of recoveries, for the three months ended March 31, 2021, equaled $0.1 million or 0.01% of average loans, compared to $0.5 million or 0.10% of average loans for the comparable period last year.

Impact of COVID-19

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

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

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

About Peoples:

Peoples Financial Services Corp. is the parent company of Peoples Security Bank and Trust Company, a community bank serving Bucks, Lackawanna, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Schuylkill, Susquehanna, and Wyoming Counties in Pennsylvania and Broome County in New York through 26 offices. Each office, interdependent with the community, offers a comprehensive array of financial products and services to individuals, businesses, not-for-profit organizations and government entities. Peoples' business philosophy includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures and consistently applied credit policies.

Safe Harbor Forward-Looking Statements:

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

Peoples cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; the COVID-19 crisis and the governmental responses to the crisis; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; our ability to identify and address cyber-security risks and other economic, competitive, governmental, regulatory and technological factors affecting Peoples' operations, pricing, products and services and other factors that may be described in Peoples' Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

In addition to these risks, acquisitions and business combinations, present risks other than those presented by the nature of the business acquired. Acquisitions and business combinations may be substantially more expensive to complete than originally anticipated, and the anticipated benefits may be significantly harder-or take longer-to achieve than expected. As regulated financial institutions, our pursuit of attractive acquisition and business combination opportunities could be negatively impacted by regulatory delays or other regulatory issues. Regulatory and/or legal issues related to the pre-acquisition operations of an acquired or combined business may cause reputational harm to Peoples following the acquisition or combination, and integration of the acquired or combined business with ours may result in additional future costs arising as a result of those issues.

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

[TABULAR MATERIAL FOLLOWS]



Summary Data

Peoples Financial Services Corp.

Five Quarter Trend

(In thousands, except share and per share data)



Mar 31 Dec 31 Sept 30 June 30 Mar 31

2021 2020 2020 2020 2020

Key performance data:

Share and per share amounts:

Net income $ 1.31 $ 1.13 $ 1.14 $ 1.03 $ 0.71

Core net income (1) $ 1.31 $ 1.10 $ 1.09 $ 1.03 $ 0.70

Cash dividends declared $ 0.37 $ 0.36 $ 0.36 $ 0.36 $ 0.36

Book value $ 44.00 $ 43.92 $ 43.30 $ 42.55 $ 41.68

Tangible book value (1) $ 35.10 $ 35.00 $ 34.40 $ 33.74 $ 32.86

Market value:

High $ 47.34 $ 40.40 $ 39.38 $ 39.40 $ 50.10

Low $ 36.02 $ 34.47 $ 32.51 $ 30.24 $ 35.60

Closing $ 42.24 $ 36.76 $ 34.76 $ 38.19 $ 39.74

Market capitalization $ 304,605 $ 265,231 $ 251,743 $ 280,042 $ 291,820

Common shares outstanding 7,211,293 7,215,202 7,242,326 7,332,856 7,343,240

Selected ratios:

Return on average stockholders' equity 12.00 % 10.32 % 10.58 % 9.87 % 7.05 %

Core return on average stockholders' 11.98 % 10.05 % 10.12 % 9.83 % 6.90 %equity (1)

Return on average tangible 15.02 % 12.96 % 13.34 % 12.49 % 8.99 %stockholders' equity

Core return on average tangible 14.99 % 12.62 % 12.76 % 12.44 % 8.79 %stockholders' equity (1)

Return on average assets 1.32 % 1.13 % 1.21 % 1.13 % 0.86 %

Core return on average assets (1) 1.32 % 1.10 % 1.16 % 1.12 % 0.84 %

Stockholders' equity to total assets 10.59 % 10.99 % 11.18 % 11.56 % 12.03 %

Efficiency ratio (2) 50.83 % 56.35 % 55.94 % 54.01 % 57.88 %

Nonperforming assets to loans, net, and 0.38 % 0.48 % 0.52 % 0.62 % 0.60 %foreclosed assets

Net charge-offs to average loans, net 0.01 % 0.05 % 0.26 % 0.10 % 0.10 %

Allowance for loan losses to loans, net 1.23 % 1.26 % 1.21 % 1.24 % 1.27 %

Interest-bearing assets yield (FTE) (3) 3.55 % 3.49 % 3.73 % 3.90 % 4.25 %

Cost of funds 0.57 % 0.67 % 0.76 % 0.75 % 1.01 %

Net interest spread (FTE) (3) 2.99 % 2.81 % 2.97 % 3.15 % 3.24 %

Net interest margin (FTE) (3) 3.15 % 3.00 % 3.19 % 3.36 % 3.50 %

(1) See Reconciliation of Non-GAAP financial measures.

Total noninterest expense less amortization of intangible assets divided by(2) tax-equivalent net interest income and noninterest income less net gains (losses) on investment securities available-for-sale.

(3) Tax-equivalent adjustments were calculated using the federal statutory tax rate prevailing during the indicated periods of 21%.

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



Mar 31 Mar 31

Three Months Ended 2021 2020

Interest income:

Interest and fees on loans:

Taxable $20,900 $20,917

Tax-exempt 870 1,031

Interest and dividends on investment securities:

Taxable 1,243 1,548

Tax-exempt 390 299

Dividends 23 23

Interest on interest-bearing deposits in other banks 2 24

Interest on federal funds sold 49

Total interest income 23,477 23,842

Interest expense:

Interest on deposits 2,092 3,503

Interest on short-term borrowings 71 573

Interest on long-term debt 103 205

Interest on subordinated debt 443

Total interest expense 2,709 4,281

Net interest income 20,768 19,561

Provision for loan losses (500) 3,500

Net interest income after provision for loan losses 21,268 16,061

Noninterest income:

Service charges, fees, commissions and other 1,184 1,605

Merchant services income 93 114

Commissions and fees on fiduciary activities 533 506

Wealth management income 358 387

Mortgage banking income 312 137

Increase in cash surrender value of life insurance 219 187

Interest rate swap revenue 797 470

Net gain (loss) on investment securities 21 (123)

Net gain on sale of investment securities available-for-sale 267

Total noninterest income 3,517 3,550

Noninterest expense:

Salaries and employee benefits expense 6,570 7,856

Net occupancy and equipment expense 3,267 3,079

Amortization of intangible assets 125 154

Other expenses 2,667 2,562

Total noninterest expense 12,629 13,651

Income before income taxes 12,156 5,960

Provision for income tax expense 2,678 679

Net income $9,478 $5,281

Other comprehensive income:

Unrealized gain (loss) on investment securities available-for-sale$(7,749) $7,629

Reclassification adjustment for gains included in net income (267)

Change in derivative fair value 242 1,036

Income tax related to other comprehensive income (1,576) 1,765

Other comprehensive income, net of income taxes (5,931) 6,633

Comprehensive income $3,547 $11,914

Share and per share amounts:

Net income - basic $1.31 $0.72

Net income - diluted 1.31 0.71

Cash dividends declared $0.37 $0.36

Average common shares outstanding - basic 7,210,952 7,379,438

Average common shares outstanding - diluted 7,246,016 7,405,703

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



Mar 31 Dec 31 Sept 30 June 30 Mar 31

Three months ended 2021 2020 2020 2020 2020

Interest income:

Interest and fees on loans:

Taxable $20,900 $20,705 $20,901 $21,160 $20,917

Tax-exempt 870 888 876 941 1,031

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

Taxable 1,243 1,111 1,250 1,420 1,548

Tax-exempt 390 304 280 295 299

Dividends 23 26 23 25 23

Interest on interest-bearing deposits in other banks 2 4 4 5 24

Interest on federal funds sold 49 47 12 6

Total interest income 23,477 23,085 23,346 23,852 23,842

Interest expense:

Interest on deposits 2,092 2,614 2,758 2,864 3,503

Interest on short-term borrowings 71 91 82 102 573

Interest on long-term debt 103 127 139 231 205

Interest on subordinated debt 443 444 443 148

Total interest expense 2,709 3,276 3,422 3,345 4,281

Net interest income 20,768 19,809 19,924 20,507 19,561

Provision for loan losses (500) 1,050 1,050 1,800 3,500

Net interest income after provision for loan losses 21,268 18,759 18,874 18,707 16,061

Noninterest income:

Service charges, fees, commissions and other 1,184 2,187 1,584 1,433 1,605

Merchant services income 93 101 137 472 114

Commissions and fees on fiduciary activities 533 551 575 493 506

Wealth management income 358 392 272 231 387

Mortgage banking income 312 658 488 312 137

Increase in cash surrender value of life insurance 219 202 192 193 187

Interest rate swap revenue 797 374 1,228 249 470

Net gain (loss) on investment securities 21 76 2 39 (123)

Net gain on sale of investment securities available-for-sale 194 457 267

Total noninterest income 3,517 4,735 4,935 3,422 3,550

Noninterest expense:

Salaries and employee benefits expense 6,570 7,400 7,831 7,048 7,856

Net occupancy and equipment expense 3,267 3,588 3,131 3,042 3,079

Amortization of intangible assets 125 144 154 154 154

Other expenses 2,667 2,869 2,858 2,998 2,562

Total noninterest expense 12,629 14,001 13,974 13,242 13,651

Income before income taxes 12,156 9,493 9,835 8,887 5,960

Income tax expense 2,678 1,308 1,523 1,311 679

Net income $9,478 $8,185 $8,312 $7,576 $5,281

Other comprehensive income:

Unrealized gain (loss) on investment securities available-for-sale $(7,749) $(305) $(639) $2,094 $7,629

Reclassification adjustment for gains included in net income (194) (457) (267)

Change in benefit plan liabilities (1,398)

Change in derivative fair value 242 (41) (137) (543) 1,036

Income tax related to other comprehensive income (1,576) (407) (260) 326 1,765

Other comprehensive income, net of income taxes (5,931) (1,531) (973) 1,225 6,633

Comprehensive income $3,547 $6,654 $7,339 $8,801 $11,914

Share and per share amounts:

Net income - basic $1.31 $1.13 $1.14 $1.03 $0.72

Net income - diluted 1.31 1.13 1.14 1.03 0.71

Cash dividends declared $0.37 $0.36 $0.36 $0.36 $0.36

Average common shares outstanding - basic 7,210,952 7,222,810 7,277,189 7,341,636 7,379,438

Average common shares outstanding - diluted 7,246,016 7,257,874 7,312,253 7,376,700 7,405,703

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



Mar 31 Dec 31 Sept 30 June 30 Mar 31

Three months ended 2021 2020 2020 2020 2020

Net interest income:

Interest income

Loans, net:

Taxable $20,900 $20,705 $20,901 $21,160 $20,917

Tax-exempt 1,101 1,124 1,109 1,191 1,305

Total loans, net 22,001 21,829 22,010 22,351 22,222

Investments:

Taxable 1,266 1,137 1,273 1,445 1,571

Tax-exempt 494 385 354 374 378

Total investments 1,760 1,522 1,627 1,819 1,949

Interest on interest-bearing balances in other banks 2 4 4 5 24

Federal funds sold 49 47 12 6

Total interest income 23,812 23,402 23,653 24,181 24,195

Interest expense:

Deposits 2,092 2,614 2,758 2,864 3,503

Short-term borrowings 71 91 82 102 573

Long-term debt 103 127 139 231 205

Subordinated debt 443 444 443 148

Total interest expense 2,709 3,276 3,422 3,345 4,281

Net interest income $21,103 $20,126 $20,231 $20,836 $19,914

Loans, net:

Taxable 4.13 % 3.98 % 4.04 % 4.19 % 4.60 %

Tax-exempt 3.56 % 3.80 % 3.70 % 3.75 % 3.88 %

Total loans, net 4.09 % 3.97 % 4.02 % 4.16 % 4.55 %

Investments:

Taxable 1.97 % 2.03 % 2.09 % 2.24 % 2.36 %

Tax-exempt 2.78 % 3.30 % 3.56 % 3.46 % 3.10 %

Total investments 2.15 % 2.25 % 2.30 % 2.41 % 2.48 %

Interest-bearing balances with banks 0.06 % 0.06 % 0.08 % 0.16 % 1.17 %

Federal funds sold 0.10 % 0.10 % 0.11 % 0.14 %

Total interest-bearing assets 3.55 % 3.49 % 3.73 % 3.90 % 4.25 %

Interest expense:

Deposits 0.46 % 0.57 % 0.65 % 0.72 % 0.92 %

Short-term borrowings 0.57 % 0.72 % 0.65 % 0.44 % 1.62 %

Long-term debt 2.88 % 2.70 % 2.59 % 1.13 % 2.54 %

Subordinated debt 5.38 % 5.38 % 5.37 % 5.38 %

Total interest-bearing liabilities 0.57 % 0.67 % 0.76 % 0.75 % 1.01 %

Net interest spread 2.98 % 2.81 % 2.97 % 3.15 % 3.24 %

Net interest margin 3.15 % 3.00 % 3.19 % 3.36 % 3.50 %

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



Mar 31 Dec 31 Sept 30 June 30 Mar 31

At period end 2021 2020 2020 2020 2020

Assets:

Cash and due from banks $30,786 $29,287 $42,940 $27,146 $22,181

Interest-bearing balances in other banks 8,432 15,905 20,972 14,788 13,146

Federal funds sold 264,100 183,000 102,300 10,000

Investment securities:

Available-for-sale 333,753 295,911 247,404 287,709 302,884

Equity investments carried at fair value 159 138 341 338 299

Held-to-maturity 7,166 7,225 7,297 7,401 7,520

Loans held for sale 458 837 2,161 1,939 270

Loans, net 2,179,534 2,177,982 2,188,463 2,181,909 2,023,155

Less: allowance for loan losses 26,783 27,344 26,584 26,957 25,686

Net loans 2,152,751 2,150,638 2,161,879 2,154,952 1,997,469

Premises and equipment, net 46,777 47,045 47,926 48,378 48,619

Accrued interest receivable 8,206 8,255 8,595 8,368 7,283

Goodwill 63,370 63,370 63,370 63,370 63,370

Other intangible assets, net 835 960 1,104 1,257 1,411

Bank owned life insurance 42,530 42,316 37,099 35,412 35,224

Other assets 36,146 38,915 62,274 39,366 44,096

Total assets $2,995,469$2,883,802$2,805,662$2,700,424$2,543,772

Liabilities:

Deposits:

Noninterest-bearing $661,262 $622,475 $579,196 $575,206 $467,315

Interest-bearing 1,889,154 1,814,638 1,777,688 1,634,918 1,542,680

Total deposits 2,550,416 2,437,113 2,356,884 2,210,124 2,009,995

Short-term borrowings 51,980 50,000 50,000 50,000 164,150

Long-term debt 14,264 14,769 20,269 60,938 32,250

Subordinated debt 33,000 33,000 33,000 33,000

Accrued interest payable 1,120 736 1,289 872 1,336

Other liabilities 27,358 31,307 30,597 33,446 29,978

Total liabilities 2,678,138 2,566,925 2,492,039 2,388,380 2,237,709

Stockholders' equity:

Common stock 14,423 14,414 14,468 14,649 14,670

Capital surplus 128,854 129,291 130,038 133,002 133,159

Retained earnings 177,836 171,023 165,437 159,739 154,806

Accumulated other comprehensive gain (loss) (3,782) 2,149 3,680 4,654 3,428

Total stockholders' equity 317,331 316,877 313,623 312,044 306,063

Total liabilities and stockholders' equity $2,995,469$2,883,802$2,805,662$2,700,424$2,543,772

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



Mar 31 Dec 31 Sept 30 June 30 Mar 31

Average quarterly balances 2021 2020 2020 2020 2020

Assets:

Loans, net:

Taxable $2,054,120$2,068,600$2,059,357$2,032,852$1,830,455

Tax-exempt 125,352 117,650 119,202 127,624 135,260

Total loans, net 2,179,472 2,186,250 2,178,559 2,160,476 1,965,715

Investments:

Taxable 260,238 223,333 241,904 260,160 267,179

Tax-exempt 72,177 46,361 39,591 43,466 49,046

Total investments 332,415 269,694 281,495 303,626 316,225

Interest-bearing balances with banks 13,260 26,232 20,250 12,595 8,263

Federal funds sold 191,720 185,874 45,439 17,480

Total interest-bearing assets 2,716,867 2,668,050 2,525,743 2,494,177 2,290,203

Other assets 197,178 204,348 199,433 210,017 193,507

Total assets $2,914,045$2,872,398$2,725,176$2,704,194$2,483,710

Liabilities and stockholders' equity:

Deposits:

Interest-bearing $1,833,661$1,829,248$1,690,440$1,605,841$1,524,265

Noninterest-bearing 634,806 596,880 587,448 574,194 462,508

Total deposits 2,468,467 2,426,128 2,277,888 2,180,035 1,986,773

Short-term borrowings 50,470 50,000 50,038 93,447 142,121

Long-term debt 14,509 18,699 21,354 82,117 32,477

Subordinated debt 33,000 33,000 33,000 11,074

Other liabilities 23,371 28,946 30,454 28,798 21,096

Total liabilities 2,589,817 2,556,773 2,412,734 2,395,471 2,182,467

Stockholders' equity 320,228 315,625 312,442 308,723 301,243

Total liabilities and stockholders' equity$2,910,045$2,872,398$2,725,176$2,704,194$2,483,710

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



Mar 31 Dec 31 Sept 30 June 30 Mar 31

2021 2020 2020 2020 2020

At quarter end

Nonperforming assets:

Nonaccrual/restructured loans $8,073 $9,799 $10,692$12,214$10,760

Accruing loans past due 90 days or more 172 71 52 291 423

Foreclosed assets 131 632 649 964 903

Total nonperforming assets $8,376 $10,502$11,393$13,469$12,086



Three months ended

Allowance for loan losses:

Beginning balance $27,344$26,584$26,957$25,686$22,677

Charge-offs 195 522 1,542 617 798

Recoveries 134 232 119 88 307

Provision for loan losses (500) 1,050 1,050 1,800 3,500

Ending balance $26,783$27,344$26,584$26,957$25,686

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



Mar 31 Dec 31 Sept 30 June 30 Mar 31

Three months ended 2021 2020 2020 2020 2020

Core net income per share:

Net income GAAP $9,478 $8,185 $8,312 $7,576 $5,281

Adjustments:

Less: gain on investment securities (21) (270) (459) (39) (144)

Add: gain on investment securities tax adjustment 4 57 96 8 30

Net income Core $9,461 $7,972 $7,949 $7,545 $5,167

Average common shares outstanding - basic 7,210,952 7,222,810 7,277,189 7,341,636 7,379,438

Core net income per share $1.31 $1.10 $1.09 $1.03 $0.70

Tangible book value:

Total stockholders' equity $317,331 $316,877 $313,623 $312,044 $306,063

Less: Goodwill 63,370 63,370 63,370 63,370 63,370

Less: Other intangible assets, net 835 960 1,104 1,257 1,411

Total tangible stockholders' equity $253,126 $252,547 $249,149 $247,417 $241,282

Common shares outstanding 7,211,293 7,215,202 7,242,326 7,332,856 7,343,240

Tangible book value per share $35.10 $35.00 $34.40 $33.74 $32.86

Core return on average stockholders' equity:

Net income GAAP $9,478 $8,185 $8,312 $7,576 $5,281

Adjustments:

Less: gain on investment securities (21) (270) (459) (39) (144)

Add: gain on investment securities tax adjustment 4 57 96 8 30

Net income Core $9,461 $7,972 $7,949 $7,545 $5,167

Average stockholders' equity $320,228 $315,625 $312,442 $308,723 $301,243

Core return on average stockholders' equity 11.98 % 10.05 % 10.12 % 9.83 % 6.90 %

Return on average tangible equity:

Net income GAAP $9,478 $8,185 $8,312 $7,576 $5,281

Average stockholders' equity $320,228 $315,625 $312,442 $308,723 $301,243

Less: average intangibles 64,268 64,402 64,551 64,704 64,879

Average tangible stockholders' equity $255,960 $251,223 $247,891 $244,019 $236,364

Return on average tangible stockholders' equity 15.02 % 12.96 % 13.34 % 12.49 % 8.99 %

Core return on average tangible stockholders' equity:

Net income GAAP $9,478 $8,185 $8,312 $7,576 $5,281

Adjustments:

Less: gain on investment securities (21) (270) (459) (39) (144)

Add: gain on investment securities tax adjustment 4 57 96 8 30

Net income Core $9,461 $7,972 $7,949 $7,545 $5,167

Average stockholders' equity $320,228 $315,625 $312,442 $308,723 $301,243

Less: average intangibles 64,268 64,402 64,551 64,704 64,879

Average tangible stockholders' equity $255,960 $251,223 $247,891 $244,019 $236,364

Core return on average tangible stockholders' equity 14.99 % 12.62 % 12.76 % 12.44 % 8.79 %

Core return on average assets:

Net income GAAP $9,478 $8,185 $8,312 $7,576 $5,281

Adjustments:

Less: (gain) loss on investment securities (21) (270) (459) (39) (144)

Add: (gain) loss on investment securities tax adjustment 4 57 96 8 30

Net income Core $9,461 $7,972 $7,949 $7,545 $5,167

Average assets $2,914,045 $2,872,398 $2,725,176 $2,704,194 $2,483,710

Core return on average assets 1.32 % 1.10 % 1.16 % 1.12 % 0.84 %

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



Mar 31 Mar 31

Three Months Ended 2021 2020

Core net income per share:

Net income (GAAP) $9,478 $5,281

Adjustments:

Less: Gain on investment securities (21) (144)

Add: Gain on investment securities tax adjustment 4 30

Net income Core $9,461 $5,167

Average basic common shares outstanding 7,210,952 7,379,438

Average diluted common shares outstanding 7,246,016 7,405,703

Core net income per share - basic $1.31 $0.70

Core net income per share - diluted $1.31 $0.70

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



The following table reconciles the non-GAAP financial measures of FTE net interest income for the three and twelve months ended December 31, 2020 and 2019:



Three months ended March 31 2021 2020

Interest income (GAAP) $23,477 $23,842

Adjustment to FTE 335 353

Interest income adjusted to FTE (non-GAAP) 23,812 24,195

Interest expense 2,709 4,281

Net interest income adjusted to FTE (non-GAAP) $21,103 $19,914



The efficiency ratio is noninterest expenses, less amortization of intangible assets, as a percentage of FTE net interest income plus noninterest income less gains on equity securities and gains on sale of assets. The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP for the three and twelve months ended December 31, 2020 and 2019:





Three months ended March 31 2021 2020

Efficiency ratio (non-GAAP):

Noninterest expense (GAAP) $12,629 $13,651

Less: amortization of intangible assets expense 125 154

Noninterest expense adjusted for amortization of assets expense (non-GAAP) 12,504 13,497



Net interest income (GAAP) 20,768 19,561

Plus: taxable equivalent adjustment 335 353

Noninterest income (GAAP) 3,517 3,550

Less: net gains (loss) on equity securities 21 (123)

Less: net gains on sale of securities 267

Net interest income (FTE) plus noninterest income (non-GAAP) $24,599 $23,320



Efficiency ratio (non-GAAP) 50.83 % 57.88 %



View original content to download multimedia: http://www.prnewswire.com/news-releases/peoples-financial-services-corp-reports-first-quarter-2021-earnings-301276060.html

SOURCE Peoples Financial Services Corp.