Peoples Financial Services Corp. Reports Fourth Quarter And Record Full Year 2020 Earnings

SCRANTON, Pa., Feb. 1, 2021 /PRNewswire/ — Peoples Financial Services Corp. («Peoples») (NASDAQ: PFIS), the bank holding company for Peoples Security…

SCRANTON, Pa., Feb. 1, 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 and twelve months ended December 31, 2020. Peoples reported net income of $8.2 million, or $1.13 per diluted share for the three months ended December 31, 2020, a 62.6% increase when compared to $5.0 million, or $0.68 per share for the comparable period of 2019. The increase in earnings over the year ago period is a result of a  $2.9 million decrease to the provision for loan losses, a $0.9 million increase to noninterest income, and a $0.6 million increase to pre-provision net interest income, offset by higher noninterest expenses of $1.1 million and a higher income tax provision of $0.9 million.

Net income for the twelve months ended December 31, 2020, totaled $29.4 million or $4.00 per diluted share, a 14.1% increase when compared to $25.7 million or $3.47 per diluted share for 2019. The increase in earnings in the 2020 twelve month period is the result of higher pre-provision net interest income of $4.3 million due primarily to lower funding costs, higher noninterest income of $1.5 million and lower noninterest expense of $0.7 million, partially offset by a $1.3 million increase to the provision for loan losses and a $1.7 million increase to the income tax provision.

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 December 31, totaled $8.0 million and $4.9 million in 2020 and 2019, respectively.  Core net income per share for the three months ended December 31, 2020 was $1.10, a 61.6% increase from $0.67 reported for the same period in 2019. Core net income in the 2020 fourth quarter excludes a pre-tax $194 thousand gain on the sale of a mortgage-backed security and a $74 thousand realized gain on the sale of an equity investment.  Core net income for 2019 excludes a $126 thousand unrealized gain on our equity investment portfolio.

Core net income for the twelve months ended December 31, 2020 was $28.6 million or $3.90 per diluted share, an 11.8% increase when compared to $25.6 million or $3.46 per diluted share for the same period of 2019. Core net income for the current period excludes a pre-tax gain of $918 thousand on the sale of debt securities and a $6 thousand loss on our equity investment portfolio. 2019 core net income was impacted by a pre-tax gain of $23 thousand on the sale of debt securities and a $132 thousand unrealized gain on our equity investment securities portfolio.

NOTABLES

  • Record full year 2020 net income of $29.4 million or $4.00 per diluted share.

     
  • Loans, net growth of $239.7 million since December 31, 2019, including $189.7 million of Paycheck Protection Program («PPP») commercial loans at December 31, 2020. Excluding PPP loans, loans increased $50.0 million or 2.6% since December 31, 2019.

     
  • Loans in deferral at December 31, 2020 totaled $6.1 million or 0.3% of total outstanding loan balances, excluding PPP loans. At September 30, 2020 loans in deferral totaled $51.0 million or 2.6% of outstanding loans, and at June 30, 2020 loans in deferral totaled $330.1 million or 16.7% of total outstanding loan balances, excluding PPP loans.

     
  • Deposits grew $465.6 million or 23.6% for the twelve months ended December 31, 2020 and grew $80.2 million during the three months ended December 31, 2020.

     
  • Efficiency ratio improved to 56.3% for the twelve months ended December 31, 2020, compared to 59.6% in the year ago period.

     
  • Book value per share improved to $43.92 at December 31, 2020 from $40.47 at December 31, 2019, and from $43.30 at September 30, 2020.

     
  • Tangible book value per share, a non-GAAP measure, increased to $35.00 at December 31, 2020 from $31.68 at December 31, 2019, and increased 1.7% from $34.40 at September 30, 2020.

     
  • The ratio of the allowance for loan losses to total loans was 1.26% and 1.17% at December 31, 2020 and December 31, 2019, respectively. Excluding PPP loans that do not carry an allowance for losses due to a 100% government guarantee, the ratio equaled 1.38% at December 31, 2020.

     
  • Dividends declared for the twelve months ended December 31, 2020 amounted to $1.44 per share, a 5.1% increase from 2019, representing a dividend payout ratio of 36.0%.

     
  • The Company repurchased 181,600 shares, or 2.5% of its shares outstanding, during 2020 under its previously announced share repurchase program.

     
  • Opened a new community banking branch in Doylestown, Bucks County, Pennsylvania during the first quarter of 2020.

INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis («FTE»), our tax-equivalent net interest margin for the three months ended December 31, 2020 was 3.00%, a decrease of 52 basis points when compared to 3.52% for the same period in 2019.  Our tax equivalent net interest margin for the twelve months ended December 31, 2020 was 3.25%, a decrease of 33 basis points when compare to 3.58% for the twelve month period in 2019. The tax-equivalent yield on interest-earning assets decreased 81 basis points to 3.49% during the three months ended December 31, 2020 from 4.30% during the year ago period.  For the twelve months ended December 31, 2020, the tax-equivalent yield on interest-earning assets decreased 59 basis points to 3.82% from 4.41% during the corresponding period of 2019. The decrease in yield is due to lower market rates the result of the Federal Open Market Committee («FOMC») cutting the federal funds rate by 75 basis points during the second half of 2019, and aggressive actions to cut rates 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. At the same time, we 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 39 basis points to 0.67% for the three months ended December 31, 2020 when compared to 1.06% during the year ago period.  For the twelve months ended December 31, 2020 our average rate paid on total interest-bearing liabilities was 0.79% a decrease of 33 basis points when compared to 1.12% for the same period in 2019.

Fourth Quarter 2020 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income for the three months ended December 31, increased $0.5 million or 2.5% to $20.1 million in 2020 from $19.6 million in 2019. The increase in tax equivalent net interest income was largely due to lower interest expense of $1.1 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 $0.6 due to a negative rate variance, as asset yields continued to reprice lower. The increase to total average earning assets of $454.4 million partially offset the lower yields. PPP loans averaged $211.1 million in the three-month period ended December 31, 2020 with interest and fees totaling $1.7 million. The tax-equivalent yield on the loan portfolio decreased to 3.97% for the three months ended December 31, 2020, compared to 4.62% for the comparable period in 2019 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 December 31, 2020 and $1.9 billion for the comparable period in 2019. For the three months ended December 31, the tax-equivalent yield on total investments decreased to 2.25% in 2020 from 2.42% in 2019. Average investments totaled $269.7 million in 2020 and $298.3 million in 2019. Average interest-bearing liabilities increased $302.5 million for the three months ended December 31, 2020, compared to the corresponding period last year due to higher customer savings rates, strong organic deposit growth of new customer relationships and the issuance of subordinated debt.

For the three months ended December 31, 2020, the provision for loan losses decreased $2.9 million to $1.1 million from $4.0 million in the year ago period which experienced a high level of charge-offs related to commercial loans and specifically to a pool of small business lines of credit.

Noninterest income for the three months ended December 31, 2020 was $4.7 million compared with $3.9 million for the year ago period, an increase of $0.8 million, or 22.3%. The increased noninterest income in the current period was driven by higher mortgage banking revenue of $0.5 million due to increased refinance activity from low market rates which resulted in a higher volume of loans sold into the secondary market, and proceeds of $0.6 million from death benefits on bank owned life insurance (BOLI) policies included in the service charges, fees category.  Partially, offsetting the increases were lower fee income of $0.3 million generated in the current period from commercial loan interest rate swap transactions. 

Noninterest expense increased $0.4 million or 2.6% to $14.0 million for the three months ended December 31, 2020, from $13.6 million for the three months ended December 31, 2019. Salaries and employee benefits decreased $0.3 million or 3.7% due to lower salaries and benefits from fewer full-time equivalent employees. Occupancy and equipment expenses were higher by $0.5 million due to investments in information technology related to computer software and mobile/digital banking solutions in the current period.  FDIC insurance was $0.2 million higher in the current period primarily attributed to the receipt of a credit in 2019 related to the Deposit Insurance Fund’s (DIF) minimum reserve ratio assessment. 

Net Income Full Year Results

Tax-equivalent net interest income for the twelve months ended December 31, increased $3.9 million or 5.1% to $81.1 million in 2020 from $77.2 million in 2019. The increase in tax equivalent net interest income was due to lower interest expense of $3.5 million, resulting from lower funding costs, and higher interest income due primarily to a $257.5 million increase in average loans for the twelve months ended December 31, 2020 when compared to the same period in 2019. PPP loans averaged $148.3 million in the twelve-month period ended December 31, 2020 with interest and fees totaling $4.1 million. The tax-equivalent yield on the loan portfolio decreased to 4.16% for the twelve months ended December 31, 2020, compared to 4.71% for the comparable period in 2019 due to lower market rates and the lower yield earned on PPP loans which carry a 1.00% interest rate. Loans, net averaged $2.1 billion for the twelve months ended December 31, 2020 and $1.9 billion for the comparable period in 2019. For the twelve months ended December 31, the tax-equivalent yield on total investments decreased to 2.36% in 2020 from 2.47% in 2019. Average investments totaled $292.7 million in 2020 and $279.4 million in 2019. Average interest-bearing liabilities increased $204.4 million for the twelve months ended December 31, 2020, compared to the corresponding period last year due to higher customer savings rates, strong organic growth of new customer relationships and the issuance of subordinated debt.

The provision for loan losses totaled $7.4 million for the twelve months ended December 31, 2020 and $6.1 million for the comparable period of 2019.  The increase to the provision for the twelve months ended December 31, 2020, results from the application of our loan losses methodology which includes monitoring of our asset quality and the general economic environment to assure the allowance for loan losses is adequate to cover estimated credit losses in the loan portfolio. Changes made during the first six months of 2020 to the qualitative factors, which related to economic decline resulting from the adverse impact of the COVID-19 crisis, was the primary reason for the higher provision.

Noninterest income for the twelve months ended December 31, 2020 was $16.6 million compared with $15.1 million for the year ago period, an increase of $1.5 million, or 10.1%. The increased noninterest income in the current period was driven by higher mortgage banking revenue of $1.0 million due to increased refinance activity from low market rates which resulted in a higher volume of loans sold into the secondary market, an increase of $0.9 million in net gains on the sale of investment securities, proceeds of $0.6 million from death benefits on BOLI policies, and higher fee income of $0.5 million generated from commercial loan interest rate swap transactions.  Partially, offsetting the increases were lower service charges on consumer and commercial deposit accounts of $0.8 million, and lower wealth management and merchant revenue due to a reduction in volumes related to COVID-19.

Noninterest expense for the twelve months ended December 31, 2020 was $54.8 million, a $0.8 million or 1.4% decrease from $55.6 million during the year ago period.  The decrease was due to lower salaries and employee benefits in the current period of $1.2 million or 3.9% due to an increase to deferred loan origination cost benefit of $1.6 million related to the origination of PPP loans during the three months ended June 30, 2020, and lower other expenses of $0.3 million related to lower advertising expenses and bank travel and entertainment expenses due to COVID-19.  Partially offsetting the decreases, were increases to occupancy and equipment expenses of $0.9 million from investments in information technology related to computer software and mobile/digital banking solutions. 

BALANCE SHEET REVIEW

At December 31, 2020, total assets, loans and deposits were $2.9 billion, $2.2 billion and $2.4 billion, respectively. Loans, net increased $239.8 million from December 31, 2019. The growth in loans was primarily in commercial and industrial loans resulting from our participation in the SBA’s administered PPP, and to a lesser extent in commercial real estate loans. Since the establishment of the PPP during the second quarter of 2020 we originated $217.5 million in PPP loans, the majority of which were to existing customers and had initial terms of twenty-four months. Customers have started applying for forgiveness of these loans to the SBA, and through December 31, 2020, $27.8 million has been approved and forgiven. We expect a significant decline in these loan balances during the first six months of 2021 as our commercial customers are expected to continue to apply for and receive full or partial forgiveness of their loans under the PPP program. Total deposits increased $465.6 million or 23.6% from December 31, 2019 due to organic growth of customer relationships throughout all our markets, higher customer savings rates, and PPP loan proceeds retained coupled with additional deposits by our commercial borrowers. Non-interest bearing deposits increased $159.2 million or 34.4% and interest-bearing deposits increased $306.4 million or 20.3% during the twelve months ended December 31, 2020. Total investments were $303.3 million at December 31, 2020, including $296.0 million securities classified as available-for-sale and $7.2 million classified as held-to-maturity.

During June 2020, we issued $33.0 million aggregate principal amount of subordinated notes due 2030 (the «2020 Notes»), to accredited investors in a private placement.  The 2020 Notes are intended to be treated as Tier 2 capital for regulatory capital purposes.  The 2020 Notes bear interest at a rate of 5.375% per year for the first five years and then will float based on a benchmark rate, provided that the interest rate applicable to the outstanding principal balance during the period the 2020 Notes are floating will at no time be less than 4.75%. 

Stockholders’ equity equaled $316.9 million or $43.92 per share at December 31, 2020, and $299.0 million or $40.47 per share at December 31, 2019. Tangible stockholders’ equity improved to $35.00 per share at December 31, 2020, from $31.68 per share at December 31, 2019. Dividends declared for the twelve months ended December 31, 2020 amounted to $1.44 per share, a 5.1% increase from 2019, representing a dividend payout ratio of 36.0%.

ASSET QUALITY REVIEW

Nonperforming assets were $10.5 million or 0.48% of loans, net and foreclosed assets at December 31, 2020, compared to $10.5 million or 0.54% of loans, net and foreclosed assets at December 31, 2019, and $11.4 million or 0.52% of loans, net and foreclosed assets at September 30, 2020. The decrease in non-performing assets from the linked quarter was mainly due to the partial charge-off of a non-accrual commercial loan which was paid-off in January 2021, and payments received on other non-performing loans.  Our allowance for loan losses increased $4.7 million or 20.6% in 2020, due largely to the adjustment during the first six months of 2020 of qualitative factors in our allowance for loan losses methodology, which reflected economic decline due to COVID-19’s adverse impact on economic and business operating conditions. The allowance for loan losses equaled $27.3 million or 1.26% of loans, net at December 31, 2020 compared to $22.7 million or 1.17% of loans, net, at December 31, 2019. Excluding PPP loans that do not carry an allowance for losses due to a 100% government guarantee, the ratio equaled 1.38% at December 31, 2020. Loans charged-off, net of recoveries, for the twelve months ended December 31, 2020, equaled $2.7 million or 0.13% of average loans, compared to $4.8 million or 0.26% of average loans for the comparable period last year.  The decrease in charge-offs was due to higher commercial loan charge-offs, including $2.3 million of small business lines of credit originated in our Greater Delaware Valley market, in the year ago period.

Impact of COVID-19

Operationally, as COVID-19 events unfold, our continued priority is the health and safety of our customers and employees.  Our management team continues to modify and enhance strategies and protocols intended to protect our workforce and customers, maintain services for customers, assure the functional continuity of our operating systems, controls and processes, and mitigate financial risks posed by changing market conditions. We have followed the recommendations of our state governments as to conducting business and have maintained safety protocols.  Currently we have found it necessary to temporarily limit our branch locations to drive-up services, with lobby access available by appointment only.

From a lending perspective, organic loan growth, with the exception of PPP loans, slowed during 2020 as we focused on managing our existing portfolio. We have participated in the Coronavirus Aid, Relief and Economic Security Act («CARES Act»), Paycheck Protection Program, a $350 billion specialized low-interest loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration. The PPP provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover employee compensation-related business operating costs. Our loan officers guided our commercial customers through the application process and now are guiding them through the forgiveness process. 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. At origination, loan fee income totaled $7.0 million and is being earned primarily over the 24-month duration of the loans as a part of the loan yield. PPP loan forgiveness commenced during the fourth quarter of 2020 with $27.8 million being received.  We expect the majority of the remaining $189.7 million to be forgiven during 2021.  At December 31, 2020, $4.0 million of fees remain to be earned in future periods and may be accelerated based on the timing of forgiveness of PPP loans by the SBA.  In addition, the Company is participating in the 2021 second round of PPP lending and has received approval by the SBA on 273 applications totaling $46.2 million.  The loans are expected to close during January and February. 

From a credit risk perspective, we have taken 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. For borrowers who received a loan payment deferral we are working with the borrowers to evaluate the potential for further deterioration of credit quality at the end of the deferral period. We evaluated our commercial loan and commercial real estate loan portfolios to identify those loans in industries that are most at risk or where other information indicates the borrower may be significantly impacted by the effects of COVID-19. 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 December 31, 2020, 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 December 31, 2020 totaled $6.1 million, a decrease of $324.0 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 0.6% of loans outstanding at December 31, 2020 compared to 16.7% of loans outstanding at June 30, 2020.  At December 31, 2020, commercial loan balances remaining in deferral total $5.8 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.

Our Asset Liability Management Committee meets to review our capital adequacy and liquidity contingency funding plan due to the high degree of uncertainty around the magnitude and duration of the economic impact of the COVID-19 pandemic. The Company’s capital planning and capital management activities, coupled with its historically strong earnings performance and prudent dividend practices, have allowed us to build strong capital reserves. Because of the uncertain economic impact of COVID-19, however, during the second quarter of 2020 the Company issued $33.0 million aggregate principal amount 5.375% fixed-to-floating rate subordinated notes due June 2030.  The notes are intended to qualify as Tier 2 capital for regulatory purposes. At December 31, 2020, all of the Company’s regulatory capital ratios exceeded all well-capitalized thresholds.

Additionally, the Company’s liquidity position remains strong. At December 31, 2020, the Company’s cash and due from banks balances, which include federal funds sold, were $228.2 million and we maintained $156.6 million of availability at the Federal Reserve Bank’s discount window.  We may also utilize the Federal Reserve’s Paycheck Protection Program Liquidity Facility («PPPLF») by pledging the PPP loans as collateral; at December 31, 2020, $189.7 million would be available to borrow for a term equal to the maturity date of the loans pledged.  The Company also maintains an available-for-sale investment securities portfolio, comprised primarily of highly liquid U.S.Treasury and U.S. agency securities, highly-rated municipal securities and U.S. agency-backed mortgage backed securities. This portfolio serves as a ready source of liquidity and capital. At December 31, 2020, the Company’s available-for-sale investment securities portfolio totaled $296.0 million, $233.4 million of which was unencumbered. Net unrealized gains on the portfolio were $9.7 million. The Bank’s unused borrowing capacity at the Federal Home Loan Bank of Pittsburgh at December 31, 2020 was $523.6 million.

The COVID-19 crisis is expected to continue to impact the Company’s financial results, as well as demand for its products and services during 2021 and potentially beyond. The short and long-term implications of the COVID-19 crisis, and related monetary and fiscal stimulus measures, on our future revenues, earnings results, allowance for loan losses, capital reserves, and liquidity are uncertain at this time.

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 unfolding 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)




Dec 31


Sept 30


June 30


Mar 31


Dec 31




2020


2020


2020


2020


2019


Key performance data:

















Share and per share amounts:

















Net income


$

1.13


$

1.14


$

1.03


$

0.72


$

0.68


Core net income (1)


$

1.10


$

1.09


$

1.03


$

0.70


$

0.67


Cash dividends declared


$

0.36


$

0.36


$

0.36


$

0.36


$

0.35


Book value


$

43.92


$

43.30


$

42.55


$

41.68


$

40.47


Tangible book value (1)


$

35.00


$

34.40


$

33.74


$

32.86


$

31.68


Market value:

















High


$

40.40


$

39.38


$

39.40


$

50.10


$

53.43


Low


$

34.47


$

32.51


$

30.24


$

35.60


$

44.46


Closing


$

36.76


$

34.76


$

38.19


$

39.74


$

50.35


Market capitalization


$

265,231


$

251,743


$

280,042


$

291,820


$

372,010


Common shares outstanding



7,215,202



7,242,326



7,332,856



7,343,240



7,388,480


Selected ratios:

















Return on average stockholders’ equity



10.32

%


10.58

%


9.87

%


7.05

%


6.69

%

Core return on average stockholders’ equity (1)



10.05

%


10.12

%


9.83

%


6.90

%


6.55

%

Return on average tangible stockholders’ equity



12.96

%


13.34

%


12.49

%


8.99

%


8.55

%

Core return on average tangible stockholders’ equity (1)



12.62

%


12.76

%


12.44

%


8.79

%


8.38

%

Return on average assets



1.13

%


1.21

%


1.13

%


0.86

%


0.83

%

Core return on average assets (1)



1.10

%


1.16

%


1.12

%


0.84

%


0.81

%

Stockholders’ equity to total assets



10.99

%


11.18

%


11.56

%


12.03

%


12.08

%

Efficiency ratio (2)



56.35

%


55.94

%


54.01

%


57.88

%


57.63

%

Nonperforming assets to loans, net, and foreclosed assets



0.48

%


0.52

%


0.62

%


0.60

%


0.54

%

Net charge-offs to average loans, net



0.05

%


0.26

%


0.10

%


0.10

%


0.78

%

Allowance for loan losses to loans, net



1.26

%


1.21

%


1.24

%


1.27

%


1.17

%

Interest-bearing assets yield (FTE) (3)



3.49

%


3.73

%


3.90

%


4.25

%


4.30

%

Cost of funds



0.67

%


0.76

%


0.75

%


1.01

%


1.06

%

Net interest spread (FTE) (3)



2.81

%


2.97

%


3.15

%


3.24

%


3.24

%

Net interest margin (FTE) (3)



3.00

%


3.19

%


3.36

%


3.50

%


3.52

%



(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)








Dec 31


Dec 31


Year Ended


2020


2019


Interest income:








Interest and fees on loans:








Taxable


$

83,683


$

82,488


Tax-exempt



3,736



4,309


Interest and dividends on investment securities:








Taxable



5,334



4,435


Tax-exempt



1,178



1,878


Dividends



97



84


Interest on interest-bearing deposits in other banks



31



65


Interest on federal funds sold



66



122


Total interest income



94,125



93,381


Interest expense:








Interest on deposits



11,739



14,995


Interest on short-term borrowings



848



1,642


Interest on long-term debt



702



1,231


Interest on subordinated debt



1,035





Total interest expense



14,324



17,868


Net interest income



79,801



75,513


Provision for loan losses



7,400



6,100


Net interest income after provision for loan losses



72,401



69,413


Noninterest income:








Service charges, fees, commissions



6,809



7,236


Merchant services income



824



973


Commissions and fees on fiduciary activities



2,125



2,087


Wealth management income



1,282



1,524


Mortgage banking income



1,595



600


Bank owned life insurance income



774



755


Interest rate swap revenue



2,321



1,790


Net gain (loss) on investment securities



(6)



132


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



918



23


Total noninterest income



16,642



15,120


Noninterest expense:








Salaries and employee benefits expense



30,135



31,374


Net occupancy and equipment expense



12,840



11,911


Amortization of intangible assets



606



730


Other expenses



11,287



11,627


Total noninterest expense



54,868



55,642


Income before income taxes



34,175



28,891


Provision for income tax expense



4,821



3,155


Net income


$

29,354


$

25,736


Other comprehensive income:








Unrealized gain on investment securities available-for-sale


$

8,779


$

5,109


Reclassification adjustment for gains included in net income



(918)



(23)


Change in pension liability



(1,398)



639


Change in derivative fair value



315



441


Income tax related to other comprehensive income



1,424



1,295


Other comprehensive income, net of income taxes



5,354



4,871


Comprehensive income


$

34,708


$

30,607


Share and per share amounts:








Net income – basic


$

4.02


$

3.48


Net income – diluted



4.00



3.47


Cash dividends declared


$

1.44


$

1.37


Average common shares outstanding – basic



7,304,956



7,395,429


Average common shares outstanding – diluted



7,337,843



7,412,369


 

Peoples Financial Services Corp.

Consolidated Statements of Income

(In thousands, except per share data)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Three months ended


2020


2020


2020


2020


2019


Interest income:

















Interest and fees on loans:

















Taxable


$

20,705


$

20,901


$

21,160


$

20,917


$

20,804


Tax-exempt



888



876



941



1,031



1,035


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

















Taxable



1,111



1,250



1,420



1,548



1,308


Tax-exempt



304



280



295



299



385


Dividends



26



23



25



23



24


Interest on interest-bearing deposits in other banks



4



4



5



24



15


Interest on federal funds sold



47



12



6






45


Total interest income



23,085



23,346



23,852



23,842



23,616


Interest expense:

















Interest on deposits



2,614



2,758



2,864



3,503



3,905


Interest on short-term borrowings



91



82



102



573



151


Interest on long-term debt



127



139



231



205



308


Interest on subordinated debt



444



443



148








Total interest expense



3,276



3,422



3,345



4,281



4,364


Net interest income



19,809



19,924



20,507



19,561



19,252


Provision for loan losses



1,050



1,050



1,800



3,500



4,000


Net interest income after provision for loan losses



18,759



18,874



18,707



16,061



15,252


Noninterest income:

















Service charges, fees, commissions



2,187



1,584



1,433



1,605



1,730


Merchant services income



101



137



472



114



136


Commissions and fees on fiduciary activities



551



575



493



506



519


Wealth management income



392



272



231



387



382


Mortgage banking income



658



488



312



137



143


Bank owned life insurance income



202



192



193



187



188


Interest rate swap revenue



374



1,228



249



470



646


Net gain (loss) on investment securities



76



2



39



(123)



126


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



194



457






267





Total noninterest income



4,735



4,935



3,422



3,550



3,870


Noninterest expense:

















Salaries and employee benefits expense



7,400



7,831



7,048



7,856



7,686


Net occupancy and equipment expense



3,588



3,131



3,042



3,079



3,104


Amortization of intangible assets



144



154



154



154



173


Other expenses



2,869



2,858



2,998



2,562



2,681


Total noninterest expense



14,001



13,974



13,242



13,651



13,644


Income before income taxes



9,493



9,835



8,887



5,960



5,478


Income tax expense



1,308



1,523



1,311



679



446


Net income


$

8,185


$

8,312


$

7,576


$

5,281


$

5,032


Other comprehensive income:

















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


$

(305)


$

(639)


$

2,094


$

7,629


$

(102)


Reclassification adjustment for gains included in net income



(194)



(457)






(267)





Change in pension liability



(1,398)












639


Change in derivative fair value



(41)



(137)



(543)



1,036



(218)


Income tax related to other comprehensive income 



(407)



(260)



326



1,765



67


Other comprehensive income, net of income taxes



(1,531)



(973)



1,225



6,633



252


Comprehensive income


$

6,654


$

7,339


$

8,801


$

11,914


$

5,284


Share and per share amounts:

















Net income – basic


$

1.13


$

1.14


$

1.03


$

0.72


$

0.68


Net income – diluted



1.13



1.14



1.03



0.71



0.68


Cash dividends declared


$

0.36


$

0.36


$

0.36


$

0.36


$

0.35


Average common shares outstanding – basic



7,222,810



7,277,189



7,341,636



7,379,438



7,388,488


Average common shares outstanding – diluted



7,257,874



7,312,253



7,376,700



7,405,703



7,410,899


 

Peoples Financial Services Corp.

Details of Net Interest and Net Interest Margin

(In thousands, fully taxable equivalent basis)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Three months ended


2020


2020


2020


2020


2019


Net interest income:

















Interest income

















Loans, net:

















Taxable


$

20,705


$

20,901


$

21,160


$

20,917


$

20,804


Tax-exempt



1,124



1,109



1,191



1,305



1,311


Total loans, net



21,829



22,010



22,351



22,222



22,115


Investments:

















Taxable



1,137



1,273



1,445



1,571



1,332


Tax-exempt



385



354



374



378



487


Total investments



1,522



1,627



1,819



1,949



1,819


Interest on interest-bearing balances in other banks



4



4



5



24



15


Federal funds sold



47



12



6






45


Total interest income



23,402



23,653



24,181



24,195



23,994


Interest expense:

















Deposits



2,614



2,758



2,864



3,503



3,905


Short-term borrowings



91



82



102



573



151


Long-term debt



127



139



231



205



308


Subordinated debt



444



443



148








Total interest expense



3,276



3,422



3,345



4,281



4,364


Net interest income


$

20,126


$

20,231


$

20,836


$

19,914


$

19,630


Loans, net:

















Taxable



3.98

%


4.04

%


4.19

%


4.60

%


4.67

%

Tax-exempt



3.80

%


3.70

%


3.75

%


3.88

%


3.88

%

Total loans, net



3.97

%


4.02

%


4.16

%


4.55

%


4.62

%

Investments:

















Taxable



2.03

%


2.09

%


2.24

%


2.36

%


2.29

%

Tax-exempt



3.30

%


3.56

%


3.46

%


3.10

%


2.88

%

Total investments



2.25

%


2.30

%


2.41

%


2.48

%


2.42

%

Interest-bearing balances with banks



0.06

%


0.08

%


0.16

%


1.17

%


1.12

%

Federal funds sold



0.10

%


0.11

%


0.14

%





1.85

%

Total interest-bearing assets



3.49

%


3.73

%


3.90

%


4.25

%


4.30

%

Interest expense:

















Deposits



0.57

%


0.65

%


0.72

%


0.92

%


1.00

%

Short-term borrowings



0.72

%


0.65

%


0.44

%


1.62

%


2.00

%

Long-term debt



2.70

%


2.59

%


1.13

%


2.54

%


2.52

%

Subordinated debt



5.38

%


5.37

%


5.38

%







Total interest-bearing liabilities



0.67

%


0.76

%


0.75

%


1.01

%


1.06

%

Net interest spread



2.81

%


2.97

%


3.15

%


3.24

%


3.24

%

Net interest margin



3.00

%


3.19

%


3.36

%


3.50

%


3.52

%

 

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


At period end


2020


2020


2020


2020


2019


Assets:

















Cash and due from banks


$

29,287


$

42,940


$

27,146


$

22,181


$

26,943


Interest-bearing balances in other banks



15,905



20,972



14,788



13,146



4,210


Federal funds sold



183,000



102,300



10,000








Investment securities:

















Available-for-sale



295,911



247,404



287,709



302,884



330,478


Equity investments carried at fair value



138



341



338



299



423


Held-to-maturity



7,225



7,297



7,401



7,520



7,656


Loans held for sale



837



2,161



1,939



270



986


Loans, net



2,177,982



2,188,463



2,181,909



2,023,155



1,938,240


Less: allowance for loan losses



27,344



26,584



26,957



25,686



22,677


Net loans



2,150,638



2,161,879



2,154,952



1,997,469



1,915,563


Premises and equipment, net



47,045



47,926



48,378



48,619



47,932


Accrued interest receivable



8,255



8,595



8,368



7,283



6,981


Goodwill



63,370



63,370



63,370



63,370



63,370


Other intangible assets, net



960



1,104



1,257



1,411



1,565


Other assets



81,231



99,373



74,778



79,320



69,220


Total assets


$

2,883,802


$

2,805,662


$

2,700,424


$

2,543,772


$

2,475,327


Liabilities:

















Deposits:

















Noninterest-bearing


$

622,475


$

579,196


$

575,206


$

467,315


$

463,238


Interest-bearing



1,814,638



1,777,688



1,634,918



1,542,680



1,508,251


Total deposits



2,437,113



2,356,884



2,210,124



2,009,995



1,971,489


Short-term borrowings



50,000



50,000



50,000



164,150



152,150


Long-term debt



14,769



20,269



60,938



32,250



32,733


Subordinated debt



33,000



33,000



33,000








Accrued interest payable



736



1,289



872



1,336



1,277


Other liabilities



31,307



30,597



33,446



29,978



18,668


Total liabilities



2,566,925



2,492,039



2,388,380



2,237,709



2,176,317


Stockholders’ equity:

















Common stock



14,414



14,468



14,649



14,670



14,777


Capital surplus



129,291



130,038



133,002



133,159



135,251


Retained earnings



171,023



165,437



159,739



154,806



152,187


Accumulated other comprehensive gain (loss)



2,149



3,680



4,654



3,428



(3,205)


Total stockholders’ equity



316,877



313,623



312,044



306,063



299,010


Total liabilities and stockholders’ equity


$

2,883,802


$

2,805,662


$

2,700,424


$

2,543,772


$

2,475,327


 

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Average quarterly balances


2020


2020


2020


2020


2019


Assets:

















Loans, net:

















Taxable


$

2,068,600


$

2,059,357


$

2,032,852


$

1,830,455


$

1,766,373


Tax-exempt



117,650



119,202



127,624



135,260



134,040


Total loans, net



2,186,250



2,178,559



2,160,476



1,965,715



1,900,413


Investments:

















Taxable



223,333



241,904



260,160



267,179



231,079


Tax-exempt



46,361



39,591



43,466



49,046



67,208


Total investments



269,694



281,495



303,626



316,225



298,287


Interest-bearing balances with banks



26,232



20,250



12,595



8,263



5,317


Federal funds sold



185,874



45,439



17,480






9,629


Total interest-bearing assets



2,668,050



2,525,743



2,494,177



2,290,203



2,213,646


Other assets



204,348



199,433



210,017



193,507



192,121


Total assets


$

2,872,398


$

2,725,176


$

2,704,194


$

2,483,710


$

2,405,767


Liabilities and stockholders’ equity:

















Deposits:

















Interest-bearing


$

1,829,248


$

1,690,440


$

1,605,841


$

1,524,265


$

1,549,978


Noninterest-bearing



596,880



587,448



574,194



462,508



459,248


Total deposits



2,426,128



2,277,888



2,180,035



1,986,773



2,009,226


Short-term borrowings



50,000



50,038



93,447



142,121



30,018


Long-term debt



18,699



21,354



82,117



32,477



48,468


Subordinated debt



33,000



33,000



11,074








Other liabilities



28,946



30,454



28,798



21,096



19,452


Total liabilities



2,556,773



2,412,734



2,395,471



2,182,467



2,107,164


Stockholders’ equity



315,625



312,442



308,723



301,243



298,603


Total liabilities and stockholders’ equity


$

2,872,398


$

2,725,176


$

2,704,194


$

2,483,710


$

2,405,767


 

Peoples Financial Services Corp.

Asset Quality Data

(In thousands)




Dec 31


Sept 30


June 30


Mar 31


Dec 31




2020


2020


2020


2020


2019


At quarter end

















Nonperforming assets:

















Nonaccrual/restructured loans


$

9,799


$

10,692


$

12,214


$

10,760


$

9,699


Accruing loans past due 90 days or more



71



52



291



423



378


Foreclosed assets



632



649



964



903



450


Total nonperforming assets


$

10,502


$

11,393


$

13,469


$

12,086


$

10,527



















Three months ended

















Allowance for loan losses:

















Beginning balance


$

26,584


$

26,957


$

25,686


$

22,677


$

22,392


Charge-offs



522



1,542



617



798



3,809


Recoveries



232



119



88



307



94


Provision for loan losses



1,050



1,050



1,800



3,500



4,000


Ending balance


$

27,344


$

26,584


$

26,957


$

25,686


$

22,677


 

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except share and per share data)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Three months ended


2020


2020


2020


2020


2019


Core net income per share:

















Net income GAAP


$

8,185


$

8,312


$

7,576


$

5,281


$

5,032


Adjustments:

















Less: gain on investment securities



(270)



(459)



(39)



(144)



(126)


Add: gain on investment securities tax adjustment



57



96



8



30



26


Net income Core


$

7,972


$

7,949


$

7,545


$

5,167


$

4,932


Average common shares outstanding – basic



7,222,810



7,277,189



7,341,636



7,379,438



7,388,488


Core net income per share


$

1.10


$

1.09


$

1.03


$

0.70


$

0.67


Tangible book value:

















Total stockholders’ equity


$

316,877


$

313,623


$

312,044


$

306,063


$

299,010


Less: Goodwill



63,370



63,370



63,370



63,370



63,370


Less: Other intangible assets, net



960



1,104



1,257



1,411



1,565


Total tangible stockholders’ equity


$

252,547


$

249,149


$

247,417


$

241,282


$

234,075


Common shares outstanding



7,215,202



7,242,326



7,332,856



7,343,240



7,388,480


Tangible book value per share


$

35.00


$

34.40


$

33.74


$

32.86


$

31.68


Core return on average stockholders’ equity:

















Net income GAAP


$

8,185


$

8,312


$

7,576


$

5,281


$

5,032


Adjustments:

















Less: gain on investment securities



(270)



(459)



(39)



(144)



(126)


Add: gain on investment securities tax adjustment



57



96



8



30



26


Net income Core


$

7,972


$

7,949


$

7,545


$

5,167


$

4,932


Average stockholders’ equity


$

315,625


$

312,442


$

308,723


$

301,243


$

298,603


Core return on average stockholders’ equity



10.05

%


10.12

%


9.83

%


6.90

%


6.55

%

Return on average tangible equity:

















Net income GAAP


$

8,185


$

8,312


$

7,576


$

5,281


$

5,032


Average stockholders’ equity


$

315,625


$

312,442


$

308,723


$

301,243


$

298,603


Less: average intangibles



64,402



64,551



64,704



64,879



65,022


Average tangible stockholders’ equity


$

251,223


$

247,891


$

244,019


$

236,364


$

233,581


Return on average tangible stockholders’ equity



12.96

%


13.34

%


12.49

%


8.99

%


8.55

%

Core return on average tangible stockholders’ equity:

















Net income GAAP


$

8,185


$

8,312


$

7,576


$

5,281


$

5,032


Adjustments:

















Less: gain on investment securities



(270)



(459)



(39)



(144)



(126)


Add: gain on investment securities tax adjustment



57



96



8



30



26


Net income Core


$

7,972


$

7,949


$

7,545


$

5,167


$

4,932


Average stockholders’ equity


$

315,625


$

312,442


$

308,723


$

301,243


$

298,603


Less: average intangibles



64,402



64,551



64,704



64,879



65,022


Average tangible stockholders’ equity


$

251,223


$

247,891


$

244,019


$

236,364


$

233,581


Core return on average tangible stockholders’ equity



12.62

%


12.76

%


12.44

%


8.79

%


8.38

%

Core return on average assets:

















Net income GAAP


$

8,185


$

8,312


$

7,576


$

5,281


$

5,032


Adjustments:

















Less: (gain) loss on investment securities



(270)



(459)



(39)



(144)



(126)


Add: (gain) loss on investment securities tax adjustment



57



96



8



30



26


Net income Core


$

7,972


$

7,949


$

7,545


$

5,167


$

4,932


Average assets


$

2,872,398


$

2,725,176


$

2,704,194


$

2,483,710


$

2,405,767


Core return on average assets



1.10

%


1.16

%


1.12

%


0.84

%


0.81

%


 

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except share and per share data)




Dec 31


Dec 31


Year Ended


2020


2019


Core net income per share:








Net income (GAAP)


$

29,354


$

25,736


Adjustments:








Less: Gain on investment securities



(912)



(155)


Add: Gain on investment securities tax adjustment



192



33


Net income Core


$

28,634


$

25,614


Average basic common shares outstanding



7,304,956



7,395,429


Average diluted common shares outstanding



7,337,843



7,412,369


Core net income per share – basic


$

3.92


$

3.46


Core net income per share – diluted


$

3.90


$

3.46


 

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 December 31


2020


2019


Interest income (GAAP)


$

23,085


$

23,616


Adjustment to FTE



317



377


Interest income adjusted to FTE (non-GAAP)



23,402



23,993


Interest expense



3,276



4,364


Net interest income adjusted to FTE (non-GAAP)


$

20,126


$

19,629










Twelve months ended December 31


2020


2019


Interest income (GAAP)


$

94,125


$

93,381


Adjustment to FTE



1,306



1,644


Interest income adjusted to FTE (non-GAAP)



95,431



95,025


Interest expense



14,324



17,868


Net interest income adjusted to FTE (non-GAAP)


$

81,107


$

77,157



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 December 31


2020


2019


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

14,001


$

13,644


Less: amortization of intangible assets expense



144



173


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



13,857



13,471










Net interest income (GAAP)



19,809



19,252


Plus: taxable equivalent adjustment



317



377


Noninterest income (GAAP)



4,735



3,870


Less: net gains on equity securities



76



126


Less: net gains on sale of securities



194





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


$

24,591


$

23,373










Efficiency ratio (non-GAAP)



56.35

%


57.63

%









Twelve months ended December 31


2020


2019


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

54,868


$

55,642


Less: amortization of intangible assets expense



606



730


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



54,262



54,912










Net interest income (GAAP)



79,801



75,513


Plus: taxable equivalent adjustment



1,306



1,644


Noninterest income (GAAP)



16,642



15,120


Less: net gains (losses) on equity securities



(6)



132


Less: net gains on sale of investment securities



918



23


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


$

96,837


$

92,122










Efficiency ratio (non-GAAP)



56.03

%


59.61

%

 

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SOURCE Peoples Financial Services Corp.