PEOPLES FINANCIAL SERVICES CORP. Reports Second Quarter 2021 Earnings

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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.

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

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.

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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

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

$ 0.36

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

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

Interest on interest-bearing deposits in other banks

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

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

(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

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

Interest on interest-bearing deposits in other banks

Interest on federal funds sold

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

102

Interest on long-term debt

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

1,800

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

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)

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

144

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

$ 0.36

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

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

Federal funds sold

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

102

Long-term debt

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 %

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 %

0.08 %

0.16 % Federal funds sold

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 %

5.37 %

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

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

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

Long-term debt

3,752

14,264

14,769

20,269

60,938

Subordinated debt

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

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

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

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

172

291

Foreclosed assets

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

134

232

119

Provision for loan losses

100

(500)

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

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

(21)

(270)

(459)

(39)

Add: gain on investment securities tax adjustment

(4)

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

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

(21)

(270)

(459)

(39)

Add: gain on investment securities tax adjustment

(4)

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

(21)

(270)

(459)

(39)

Add: gain on investment securities tax adjustment

(4)

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

(21)

(270)

(459)

(39)

Add: (gain) loss on investment securities tax adjustment

(4)

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

Six Months Ended

2021

2020

Core net income per share:

Net income (GAAP)

$ 18,009

$ 12,857

Adjustments:

Less: Gain on investment securities

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)

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

(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 %

Cision

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SOURCE Peoples Financial Services Corp.

Man enters insanity plea for notorious 2019 Sunnyvale crash

]

SAN JOSE — The man charged with running over a group of pedestrians at a Sunnyvale intersection two years ago has pleaded not guilty by reason of insanity, triggering a court-ordered psychiatric evaluation his attorney says will prove that mental illness and PTSD factored into the collision that injured several people, including a young girl who was in a lengthy coma.

Isaiah Joel Peoples, 36, formally entered the plea last week in a San Jose courtroom and remains in Santa Clara County jail custody without bail.

Peoples was charged in April 2019 with eight counts of attempted murder for each person he hit with his car. He was later charged with hate-crime enhancements on prosecutors’ allegations that he targeted some of the victims because he thought they were Muslim, when they were of Indian descent and Hindu faith.

He did not speak at the July 16 court hearing where the insanity plea was entered before Judge Robert Hawk. Peoples’ attorney, Chuck Smith, told the judge his client understood the ramifications of the plea, namely that if it were to be accepted by the court, Peoples could be in a state hospital for the rest of his life.

Both in court and after the hearing, Smith said he has tried in vain to have Peoples’ mental competence assessed. He had previously argued that Peoples was suffering from mental illness, primarily post-traumatic stress from serving the Army in the mid-2000s, which included a stint in Iraq.

“They might find he has brain damage … This was not an intentional act,” Smith said, referring to the car crash. “Something is wrong with him.”

Deputy District Attorney Carlos Vega, who is prosecuting Peoples, alluded to the high legal standard that has to be met for an insanity plea to hold up, and contended that Peoples clearly falls short of it.

“Mr. Peoples’ actions are definitely irrational, I’ll give you that,” Vega said. “But insanity? The evidence is overwhelming that he’s not, and we plan to prove that in court.”

On April 23, 2019, Peoples allegedly drove his Toyota Corolla into a group of pedestrians and bicyclists in the crosswalk at El Camino Real and Sunnyvale Avenue, then crashed the car into a tree. He was described in multiple witness accounts as saying, “I love you, Jesus,” “Thank you Jesus,” and “Praise Jesus,” or words to that effect, after emerging from the vehicle.

Investigators say Peoples was delivering food to a Bible study group — his father was a nondenominational pastor — before the crash occurred. Smith has objected to the assertion that his client was Islamophobic, saying that Peoples has numerous Muslim relatives, and that in his Army service in Iraq, Peoples helped rebuild Muslim communities.

In the ensuing years, several of the people injured by Peoples have filed civil suits against him, though that litigation is pending, in part because of the ongoing criminal proceedings.

Among the plaintiffs are the Narayan family, which includes a girl who was 13 when she was seriously injured; for a span of several weeks, the girl was placed on life support. The family’s lawsuit, which was filed in April, claims that the girl’s injuries will require lifetime medical care.

Peoples is scheduled to return to court Sept. 3.

Zelensky signs law on indigenous peoples of Ukraine

]

Moscow wanted to state inadmissibility of any war with US, Russian delegation says

The Russian delegation hoped that “the United States does not intend to engage in a conflict with Russia using conventional weapons”

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