PEOPLES FINANCIAL SERVICES CORP. Reports Fourth Quarter and Record Full Year 2021 Earnings

SCRANTON, Pa., Jan. 31, 2022 /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 twelve months ended December 31, 2021.  Peoples reported net income of $16.4 million, or $2.28 per diluted share for the three months ended December 31, 2021, an increase of $8.2 million when compared to $8.2 million, or $1.13 per diluted share for the comparable period of 2020.  The increase in earnings for the three months ended December 31, 2021 is due to the previously disclosed sale of our Visa Class B shares during the current period and resulting after-tax gain of $9.6 million.  Pre-provision net interest income increased $1.8 million during the current three month period when compared to the year ago period.  The strong loan growth in the current period resulted in a higher provision for loan losses of $0.7 million when compared to the year ago period.  Noninterest expense increased $1.2 million in the three months ended December 31, 2021 in part to our growth and market expansion and the income tax provision increased $2.2 million due to a higher level of taxable income.

Net income for the twelve months ended December 31, 2021, totaled $43.5 million or $6.02 per diluted share, a 50.5% increase when compared to $29.4 million or $4.00 per diluted share for the comparable period of 2020.  The increase in earnings for 2021 is the product of the aforementioned $9.6 after-tax gain on the sale of our Visa Class B shares, a decrease to our provision for loan losses of $5.6 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, and an increase to pre-provision net interest income of $4.8 million.  Partially offsetting the increase were a higher income tax provision of $4.6 million and an increase in noninterest expense of $0.7 million.

In addition to evaluating its results of operations in accordance with U.S. generally accepted accounting principles (“GAAP”), Peoples routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders’ equity and core net income ratios.  The reported results included in this release contain items, which Peoples considers non-core, namely the gain on the sale of the Visa Class B shares and 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 the gain on the sale of the Visa Class B shares and gains or losses from our investment securities portfolio, for the three months ended December 31, totaled $6.8 million and $8.0 million in 2021 and 2020, respectively. Core net income per share for the three months ended December 31, 2021 was $0.95, a 13.6% decrease from $1.10 reported for the same period in 2020. The decrease in core net income in the current three month period is the product of an increase to the provision for loan losses of $0.7 million due primarily to strong loan growth in the current period, lower noninterest income of $1.3 million when excluding the current period $9.6 after-tax gain on the sale of the Visa Class B shares and investment gains of $0.3 million in the year ago period, and an increase of $1.2 million to noninterest expense in the current period. Pre-provision net interest income increased $1.8 million in the three months ended December 31, 2021 when compared to the year ago period to partially offset the negative variances.

Core net income for the twelve months ended December 31, 2021 was $33.9 million or $4.69 per diluted share, a 20.3% increase when compared to $28.6 million or $3.90 per diluted share for the same period of 2020. The increase in core net income for the current period is due to an increase to pre-provision net interest income of $4.8 million and a lower provision for loan losses of $5.6 million in the current period, partially offset by lower noninterest income of $2.2 million in the current twelve month period when excluding the after-tax gain of $9.6 million from the sale of Visa Class B shares and $0.9 million of investment gains during the year ago period, and higher noninterest expense of $0.7 million in the twelve months ended December 31, 2021.

NOTABLES

  • Record full year 2021 reported and core earnings of $43.5 million or $6.02 per diluted share, and $33.9 million or $4.69 per diluted share, respectively.
  • Dividends declared for twelve months ended December 31, 2021 of $1.50 per share represents a 4.2% increase from the same period in 2020.
  • Core return on average equity, a non-GAAP measure, was 10.40% for the twelve months ended December 31, 2021 compared to 9.25% for the twelve months ended December 31, 2020.
  • Loan growth for the three months ended December 31, 2021, excluding Small Business Administration (“SBA”)  Paycheck Protection Program (“PPP”) loans, was $138.1 million or 25.8% annualized; full year 2021 loan growth, excluding SBA PPP loans, totaled $272.0 million, or 13.7%.  PPP loan balances at December 31, 2021 totaled $68.9 million.
  • Deposits grew $122.5 million or 17.1% annualized for the three months ended December 31, 2021 and increased $526.3 million or 21.6% during the twelve months ended December 31, 2021.  Deposit balances increased due to organic growth throughout all our markets, inflows of municipal deposits and additional deposits by our commercial and retail customers in excess of historic levels
  • Total asset growth for the three months ended December 31, 2021 was $136.5 million or 16.7% annualized; total asset growth for full year 2021 was $486.2 million or 16.9%.
  • Book value per share improved to $47.44 at December 31, 2021 from $43.92 at December 31, 2020, a 8.0% increase.
  • Tangible book value per share, a non-GAAP measure, increased 10.1% to $38.54 at December 31, 2021 from $35.00 at December 31, 2020.
  • Pre-provision tax-equivalent net interest income increased $5.0 million or 6.2% to $86.1 million for the twelve months ended December 31, 2021 compared to $81.1 million for the same period in 2020.
  • Nonperforming assets as a percentage of loans and foreclosed assets at December 31, 2021 improved to 0.21% from 0.28% at September 30, 2021, and from 0.48% at December 31, 2020.
  • Opened de novo branches in Warrendale, Allegheny County, PA to serve the Greater Pittsburgh market and in Piscataway, Middlesex County, NJ to serve the central New Jersey market.

Visa Class B Common Stock Sale

On October 8, 2021, Peoples’ banking subsidiary, Peoples Security Bank and Trust Company (the “Bank”), agreed to sell 44,982 shares of the Class B common stock of Visa Inc. for a purchase price of $12.2 million. The shares had no carrying value on the Bank’s balance sheet and, as the Bank had no historical cost basis in the shares, the entire purchase is realized as a pretax gain. The transaction had a positive impact on the Bank’s regulatory capital, which is being used for capital management and to support the Company’s organic growth.

The Bank received 73,333 Class B shares of Visa Inc. as part of its membership interest in March 2008, and 28,351 shares were redeemed in connection with Visa’s initial public offering in 2008. The sale of the remaining 44,982 Class B shares settled in October, 2021 and is included in our 2021 fourth-quarter and year-end results as an after-tax gain of $9.6 million.

INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis (“FTE”), our tax-equivalent net interest margin for the three months ended December 31, 2021 was 2.82%, a decrease of 18 basis points when compared to 3.00% for the same period in 2020.  Our tax equivalent net interest margin for the twelve months ended December 31, 2021 was 2.99%, a decrease of 26 basis points when compared to 3.25% for the 2020 twelve month period.  The tax-equivalent yield on interest-earning assets decreased 41 basis points to 3.08% during the three months ended December 31, 2021 from 3.49% during the year ago period.  For the twelve months ended December 31, 2021, the tax-equivalent yield on interest-earning assets decreased 50 basis points to 3.32% from 3.82% 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, strong deposit growth resulted in higher levels of federal funds sold at historically low rates which contributed to a 29 basis point decrease to our current period 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 30 basis points to 0.37% for the three months ended December 31, 2021 when compared to 0.67% during the year ago period.  For the twelve months ended December 31, 2021 our average rate paid on total interest-bearing liabilities was 0.46% a decrease of 33 basis points when compared to 0.79% for the same period in 2020.

Fourth Quarter 2021 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income for the three months ended December 31, increased $1.9 million or 9.4% to $22.0 million in 2021 from $20.1 million in 2020.  The increase in tax equivalent net interest income was largely due to lower deposit costs of $1.0 million due to our focus to decrease deposit rates in the current low market rate environment.  Also contributing to the increase was higher investment income of $0.8 million due to an increase in average balances of $281.4 million due to deploying a portion of our excess liquidity.  Total average earning assets increased $431.3 million or 16.2% from the year ago period resulting from strong deposit growth. PPP loans averaged $73.1 million in the three-month period ended December 31, 2021 with interest and net fees included in net interest income totaling $0.8 million compared to average balances of $211.1 million and interest and net fees totaling $1.7 million included in net interest income in the year ago period.  The tax-equivalent yield on the loan portfolio decreased to 3.78% for the three months ended December 31, 2021, compared to 3.97% for the comparable period in 2020.  Excluding the PPP loans, the tax-equivalent yield of the loan portfolio was 3.76% and 4.06% at December 31, 2021 and 2020, respectively.  Loans, net averaged $2.3 billion for the three months ended December 31, 2021 and $2.2 billion for the comparable period in 2020.  For the three months ended December 31, the tax-equivalent yield on total investments decreased to 1.65% in 2021 from 2.24% in 2020.  Average investments totaled $551.1 million in 2021 and $269.7 million in 2020.  Average interest-bearing liabilities increased $281.4 million for the three months ended December 31, 2021, compared to the corresponding period last year the result of higher non-maturity deposits due to strong organic deposit growth and growth of public fund deposits which resulted in lowering our short-term and long-term borrowings.

For the three months ended December 31, 2021, the provision for loan losses increased $0.7 million to $1.7 million from $1.0 million in the year ago period the result of $138.1 million growth of non-PPP loans and improved asset quality.

Noninterest income, excluding the $12.2 million gain from the sale our Visa Class B shares, for the three months ended December 31, 2021 was $3.1 million, a $1.6 million decrease from $4.7 million for the three months ended December 31, 2020.  The decrease was due in part to a decrease in revenue generated from our commercial loan interest rate swaps of $0.4 million, the result of lower transaction volume due to increased market rates and a $0.6 million bank-owned life insurance (“BOLI”) death benefit accrual in the year ago period which is included in service charges, fees, commissions and other.  During the year ago period gains of $0.2 million were recognized from the sale of investment securities with no comparable gains recorded in the current period.  Mortgage banking revenue decreased $0.4 million in the three month period ended December 31, 2021 from lower volumes of mortgages sold into the secondary market.   

Noninterest expense increased $1.2 million or 8.3% to $15.2 million for the three months ended December 31, 2021, from $14.0 million for the three months ended December 31, 2020.  Salaries and employee benefits expense increased $0.7 million due to a higher yearend bonus accrual and the addition of lending teams and credit support staff in our expansion markets.  Other expenses increased $0.7 million or 24.5% due primarily to higher Pennsylvania shares tax expense, an increase to our FDIC assessment and higher corporate taxes.

Net Income Full Year Results

Tax-equivalent net interest income for the twelve months ended December 31, increased $5.0 million or 6.2% to $86.1 million in 2021 from $81.1 million in 2020.  The increase in tax equivalent net interest income was largely due to lower interest bearing deposit costs of $4.4 million, as deposit rates were lowered in the historically low market rate environment, and lower borrowing costs of $0.5 million due to lower average balances.  Total average earning assets increased $382.0 million and offset the negative rate variances. PPP loans averaged $147.0 million in the twelve month period ended December 31, 2021 with interest and fees included in net interest income totaling $7.1 million.  The tax-equivalent yield on the loan portfolio decreased to 3.94% for the twelve months ended December 31, 2021, compared to 4.16% for the comparable period in 2020 due to lower market rates. PPP loan balances yielded 4.82% in the current twelve month period compared to 2.55% in the year ago period.  The higher yield is the result of SBA PPP loan forgiveness totaling $244.3 million in the current period and resulting acceleration of the remaining unamortized net loan origination fees to interest income.  The loan yield excluding PPP loans was 3.88% in the current period compared to 4.29% in the year ago period.  Loans, net averaged $2.2 billion for the twelve months ended December 31, 2021 and $2.1 billion for the twelve months ended December 31, 2020, respectively. For the twelve months ended December 31, the tax-equivalent yield on total investments decreased to 1.94% in 2021 from 2.36% in 2020.  Average investments totaled $398.5 million in 2021 and $292.7 million in 2020.  Average interest-bearing deposits increased $322.9 million for the twelve months ended December 31, 2021, compared to the corresponding period last year due to strong organic deposit growth of new customer relationships and increased public funds.  Total average non-interest bearing deposits increased $129.1 million for the twelve months ended December 31, 2021, compared to the comparable period last year which resulted in lowering our higher cost short-term and long-term borrowings.

The provision for loan losses for the twelve months ended December 31, 2021 was $1.8 million, a decrease of $5.6 million from the $7.4 million provision for the comparable period of 2020.  The lower provision in the twelve month period ended December 31, 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 twelve months ended December 31, 2021 was $25.6 million compared with $16.6 million for the year ago period, an increase of $9.0 million.  Excluding the sale of the Visa Class B shares, noninterest income decreased $3.2 million or 19.0% due in part to lower revenue generated from commercial loan interest rate swap transactions of $1.6 million as the number of transactions decreased due to unfavorable market rates. Mortgage banking revenue decreased $0.6 million in the current period from lower volumes of mortgages sold into the secondary market.  The year ago period included a net gain of $0.9 million from the sale of available-for-sale securities.  Service charges, fees, commissions and other are lower in the twelve month period ended December 31, 2021 by $0.6 million due to a bank owned life insurance benefit of $0.6 million accrued in the year ago period and a lower Federal Home Loan Bank dividend, partially offset by an increase to our debit card interchange revenue.  Wealth management revenue increased $0.3 million in the twelve month period ended December 31, 2021 due to a higher number of transactions and commissions while fees on fiduciary activities increased $0.1 million due primarily to market appreciation.

Noninterest expense increased $0.7 million or 1.3% to $55.6 million for the twelve months ended December 31, 2021, from $54.9 million for the twelve months ended December 31, 2020.  Salaries and employee benefits decreased $0.4 million or 1.3% due to higher deferred costs from an increase in total loan originations which are recorded as a contra-salary expense and lower benefit costs.  Occupancy and equipment expenses were in-line with the year ago period. Other expenses were higher by $1.2 million due primarily to higher Pennsylvania shares tax expense, an increase in FDIC insurance assessments and higher corporate taxes in the twelve month period ended December 31, 2021.

The provision for income tax expense increased $4.6 million for the twelve months ended December 31, 2021 compared to the year ago period due to higher levels of book taxable income and a $0.6 million deferred tax adjustment related to prior periods.

BALANCE SHEET REVIEW

At December 31, 2021, total assets, loans and deposits were $3.4 billion, $2.3 billion and $3.0 billion, respectively. Loan growth, excluding SBA PPP loans, since September 30, 2021 was $138.1 million or 25.8% annualized due to improved loan demand and organic growth in our new markets. Loan balances, excluding SBA PPP loans, increased $272.0 million or 13.7% from December 31, 2020 as loan demand improved as the economy recovers from COVID-19.    Commercial real estate and tax-exempt loans made up the majority of growth.  During 2021, $244.3 million of PPP loans were forgiven by the SBA.  Gross SBA PPP loans remaining at December 31, 2021 total $68.8 million.  Net deferred SBA PPP fees remaining at December 31, 2021 total $1.7 million and are mostly expected to be earned during 2022. Total investments were $588.7 million at December 31, 2021, compared to $494.4 million at September 30, 2021 and $303.3 million at December 31, 2020.  The increase to the investment portfolio results from investing a portion of our low-yielding federal funds balance into higher-yielding U.S. Treasury bonds and mortgage-backed securities.  Federal funds sold balance at December 31, 2021 was $242.4 million, a decrease of $77.1 million from September 30, 2021 the result of funding our loan growth and investment purchases during the quarter.  Federal funds sold balances increased $59.4 million during 2021 primarily due to strong deposit growth.

Total deposits increased $122.5 million or 17.1% annualized from September 30, 2021 due to organic growth of customer relationships throughout all our markets and seasonal inflows of municipal deposits.  Deposit balances increased $526.3 million or 21.6% to $3.0 billion from $2.5 billion at December 31, 2020 due to organic growth of customer relationships throughout all our markets, inflows of municipal deposits and additional deposits by our commercial and retail customers in excess of historic levels. Non-interest bearing deposits increased $115.3 million or 18.5% and interest-bearing deposits increased $411.0 million or 22.6% during the twelve months ended December 31, 2021.

Stockholders’ equity equaled $340.1 million or $47.44 per share at December 31, 2021, and $316.9 million or $43.92 per share at December 31, 2020.  The increase in stockholders’ equity from December 31, 2020 is attributable to net income, partially offset by a decrease to accumulated other comprehensive income (“AOCI”) resulting from a decrease to the unrealized gain on investment securities and dividends paid to shareholders.  Tangible stockholders’ equity improved to $38.54 per share at December 31, 2021, from $35.00 per share at December 31, 2020.  Dividends declared for the twelve months ended December 31, 2021 amounted to $1.50 per share, a 4.2% increase from the 2020 period, representing a dividend payout ratio of 24.9%.

ASSET QUALITY REVIEW

Nonperforming assets were $5.0 million or 0.21% of loans, net and foreclosed assets at December 31, 2021, compared to $6.1 million or 0.28% of loans, net and foreclosed assets at September 30, 2021, and $10.5 million or 0.48% of loans, net and foreclosed assets at December 31, 2020.  The decrease in non-performing loans since September 30, 2021 is due to the payoff of a troubled debt restructured (“TDR”) credit and receipt from the SBA of the guaranteed portion of an unrelated TDR.  The decrease in non-performing assets from December 31, 2020 was due to improving credit trends, the payoff of two non-accrual commercial loans, reductions to our TDRs and charge-off of a small business line of credit.  The Company’s allowance for loan losses increased $1.7 million or 6.3% during the three months ended December 31, 2021 due primarily to the growth of loans, excluding SBA PPP loans, totaling $138.1 million.  For the twelve months ended December 31, 2021, the allowance increased $1.1 million. The allowance for loan losses at December 31, 2021 continued to reflect the provisions added during 2020 from our adjustment of qualitative factors in our allowance for loan losses methodology, due to economic decline and expectation of increased credit losses from COVID-19’s adverse impact on economic and business operating conditions.  The allowance for loan losses equaled $28.4 million or 1.22% of loans, net at December 31, 2021 compared to $26.7 million or 1.21% at September 30, 2021 and $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 1.26% at December 31, 2021.  Loans charged-off, net of recoveries, for the twelve months ended December 31, 2021, equaled $0.7 million or 0.03% of average loans, compared to $2.7 million or 0.13% of average loans for the comparable period last year.

About Peoples:

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

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 (Unaudited)

(In thousands, except share and per share data)




Dec 31


Sept 30


June 30


Mar 31


Dec 31




2021


2021


2021


2021


2020


Key performance data:

















Share and per share amounts:

















Net income


$

2.28


$

1.26


$

1.18


$

1.31


$

1.13


Core net income (1)


$

0.95


$

1.26


$

1.18


$

1.31


$

1.10


Cash dividends declared


$

0.38


$

0.38


$

0.37


$

0.37


$

0.36


Book value


$

47.44


$

45.66


$

45.11


$

44.00


$

43.92


Tangible book value (1)


$

38.54


$

36.75


$

36.21


$

35.10


$

35.00


Market value:

















High


$

53.06


$

46.92


$

45.38


$

47.34


$

40.40


Low


$

45.64


$

41.91


$

41.10


$

36.02


$

34.47


Closing


$

52.69


$

45.57


$

42.60


$

42.24


$

36.76


Market capitalization


$

377,754


$

327,057


$

306,836


$

304,605


$

265,231


Common shares outstanding



7,169,372



7,177,028



7,202,728



7,211,293



7,215,202


Selected ratios:

















Return on average stockholders’ equity



19.34

%


11.01

%


10.71

%


12.00

%


10.32

%

Core return on average stockholders’ equity (1)



8.03

%


11.01

%


10.72

%


11.98

%


10.05

%

Return on average tangible stockholders’ equity



23.87

%


13.69

%


13.39

%


15.02

%


12.96

%

Core return on average tangible stockholders’ equity (1)



9.92

%


13.68

%


13.41

%


14.99

%


12.62

%

Return on average assets



1.97

%


1.17

%


1.14

%


1.32

%


1.13

%

Core return on average assets (1)



0.82

%


1.17

%


1.14

%


1.32

%


1.10

%

Stockholders’ equity to total assets



10.09

%


10.14

%


10.84

%


10.59

%


10.99

%

Efficiency ratio (2)



59.80

%


54.87

%


55.71

%


50.83

%


56.35

%

Nonperforming assets to loans, net, and foreclosed assets



0.21

%


0.28

%


0.33

%


0.38

%


0.48

%

Net charge-offs to average loans, net



0.01

%


0.08

%


0.03

%


0.01

%


0.05

%

Allowance for loan losses to loans, net



1.22

%


1.21

%


1.20

%


1.23

%


1.26

%

Interest-bearing assets yield (FTE) (3)



3.08

%


3.37

%


3.32

%


3.55

%


3.49

%

Cost of funds



0.37

%


0.42

%


0.50

%


0.57

%


0.67

%

Net interest spread (FTE) (3)



2.71

%


2.95

%


2.81

%


2.98

%


2.81

%

Net interest margin (FTE) (3)



2.82

%


3.07

%


2.96

%


3.15

%


3.00

%



(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 (Unaudited)

(In thousands, except per share data)




Dec 31


Dec 31


Year Ended


2021


2020


Interest income:








Interest and fees on loans:








Taxable


$

82,493


$

83,683


Tax-exempt



3,957



3,736


Interest and dividends on investment securities:








Taxable



5,464



5,334


Tax-exempt



1,731



1,178


Dividends



74



97


Interest on interest-bearing deposits in other banks



8



31


Interest on federal funds sold



330



66


Total interest income



94,057



94,125


Interest expense:








Interest on deposits



7,310



11,739


Interest on short-term borrowings



78



848


Interest on long-term debt



260



702


Interest on subordinated debt



1,774



1,035


Total interest expense



9,422



14,324


Net interest income



84,635



79,801


Provision for loan losses



1,750



7,400


Net interest income after provision for loan losses



82,885



72,401


Noninterest income:








Service charges, fees, commissions and other



6,169



6,809


Merchant services income



879



824


Commissions and fees on fiduciary activities



2,273



2,125


Wealth management income



1,537



1,282


Mortgage banking income



975



1,595


Increase in cash surrender value of life insurance



889



774


Interest rate swap revenue



759



2,321


Net gain (loss) on investment securities



2



(6)


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






918


Net gain on sale of Visa Class B shares



12,153





Total noninterest income



25,636



16,642


Noninterest expense:








Salaries and employee benefits expense



29,736



30,135


Net occupancy and equipment expense



12,848



12,840


Amortization of intangible assets



491



606


Other expenses



12,531



11,287


Total noninterest expense



55,606



54,868


Income before income taxes



52,915



34,175


Provision for income tax expense



9,396



4,821


Net income


$

43,519


$

29,354


Other comprehensive income:








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


$

(11,487)


$

8,779


Reclassification adjustment for gains included in net income






(918)


Change in pension liability



2,109



(1,398)


Change in derivative fair value



(322)



315


Income tax related to other comprehensive income



(2,037)



1,424


Other comprehensive income, net of income taxes



(7,663)



5,354


Comprehensive income


$

35,856


$

34,708


Share and per share amounts:








Net income – basic


$

6.05


$

4.02


Net income – diluted



6.02



4.00


Cash dividends declared


$

1.50


$

1.44


Average common shares outstanding – basic



7,196,359



7,304,956


Average common shares outstanding – diluted



7,231,423



7,337,843


Peoples Financial Services Corp.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Three months ended


2021


2021


2021


2021


2020


Interest income:

















Interest and fees on loans:

















Taxable


$

20,288


$

21,276


$

20,029


$

20,900


$

20,705


Tax-exempt



1,098



1,024



965



870



888


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

















Taxable



1,660



1,285



1,276



1,243



1,111


Tax-exempt



498



432



411



390



304


Dividends



2



24



25



23



26


Interest on interest-bearing deposits in other banks



2



2



2



2



4


Interest on federal funds sold



102



124



55



49



47


Total interest income



23,650



24,167



22,763



23,477



23,085


Interest expense:

















Interest on deposits



1,579



1,698



1,941



2,092



2,614


Interest on short-term borrowings









6



71



91


Interest on long-term debt



35



41



82



103



127


Interest on subordinated debt



444



443



444



443



444


Total interest expense



2,058



2,182



2,473



2,709



3,276


Net interest income



21,592



21,985



20,290



20,768



19,809


Provision (credit) for loan losses



1,750



400



100



(500)



1,050


Net interest income after provision (credit) for loan losses



19,842



21,585



20,190



21,268



18,759


Noninterest income:

















Service charges, fees, commissions and other



1,693



1,667



1,625



1,184



2,187


Merchant services income



120



158



508



93



101


Commissions and fees on fiduciary activities



548



639



553



533



551


Wealth management income



330



432



417



358



392


Mortgage banking income



211



244



208



312



658


Increase in cash surrender value of life insurance



220



225



225



219



202


Interest rate swap revenue (expense)



15



79



(132)



797



374


Net gain (loss) on investment securities



(7)



5



(17)



21



76


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















194


Net gain on sale of Visa Class B shares



12,153














Total noninterest income



15,283



3,449



3,387



3,517



4,735


Noninterest expense:

















Salaries and employee benefits expense



8,087



7,829



7,250



6,570



7,400


Net occupancy and equipment expense



3,384



3,150



3,047



3,267



3,588


Amortization of intangible assets



116



125



125



125



144


Other expenses



3,571



3,187



3,106



2,667



2,869


Total noninterest expense



15,158



14,291



13,528



12,629



14,001


Income before income taxes



19,967



10,743



10,049



12,156



9,493


Income tax expense



3,553



1,647



1,518



2,678



1,308


Net income


$

16,414


$

9,096


$

8,531


$

9,478


$

8,185


Other comprehensive income:

















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


$

(3,078)


$

(3,130)


$

2,470


$

(7,749)


$

(305)


Reclassification adjustment for gains included in net income















(194)


Change in benefit plan liabilities



2,109












(1,398)


Change in derivative fair value



(300)



(128)



(135)



242



(41)


Income tax related to other comprehensive income 



(266)



(684)



490



(1,576)



(407)


Other comprehensive income, net of income taxes



(1,003)



(2,574)



1,845



(5,931)



(1,531)


Comprehensive income


$

15,411


$

6,522


$

10,376


$

3,547


$

6,654


Share and per share amounts:

















Net income – basic


$

2.29


$

1.26


$

1.18


$

1.31


$

1.13


Net income – diluted



2.28



1.26



1.18



1.31



1.13


Cash dividends declared


$

0.38


$

0.38


$

0.37


$

0.37


$

0.36


Average common shares outstanding – basic



7,172,501



7,198,125



7,204,261



7,210,952



7,222,810


Average common shares outstanding – diluted



7,207,565



7,233,189



7,239,325



7,246,016



7,257,874


Peoples Financial Services Corp.

Details of Net Interest and Net Interest Margin (Unaudited)

(In thousands, fully taxable equivalent basis)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Three months ended


2021


2021


2021


2021


2020


Net interest income:

















Interest income

















Loans, net:

















Taxable


$

20,288


$

21,276


$

20,029


$

20,900


$

20,705


Tax-exempt



1,390



1,296



1,222



1,101



1,124


Total loans, net



21,678



22,572



21,251



22,001



21,829


Investments:

















Taxable



1,662



1,310



1,301



1,266



1,137


Tax-exempt



630



547



520



494



385


Total investments



2,292



1,857



1,821



1,760



1,522


Interest on interest-bearing balances in other banks



2



2



2



2



4


Federal funds sold



102



124



55



49



47


Total interest income



24,074



24,555



23,129



23,812



23,402


Interest expense:

















Deposits



1,579



1,698



1,941



2,092



2,614


Short-term borrowings









6



71



91


Long-term debt



35



41



82



103



127


Subordinated debt



444



443



444



443



444


Total interest expense



2,058



2,182



2,473



2,709



3,276


Net interest income


$

22,016


$

22,373


$

20,656


$

21,103


$

20,126


Loans, net:

















Taxable



3.85

%


4.15

%


3.87

%


4.13

%


3.98

%

Tax-exempt



2.97

%


3.04

%


3.30

%


3.56

%


3.80

%

Total loans, net



3.78

%


4.06

%


3.83

%


4.09

%


3.97

%

Investments:

















Taxable



1.48

%


1.85

%


1.97

%


1.97

%


2.03

%

Tax-exempt



2.38

%


2.56

%


2.66

%


2.78

%


3.30

%

Total investments



1.65

%


2.02

%


2.13

%


2.15

%


2.25

%

Interest-bearing balances with banks



0.09

%


0.07

%


0.08

%


0.06

%


0.06

%

Federal funds sold



0.15

%


0.16

%


0.10

%


0.10

%


0.10

%

Total interest-bearing assets



3.08

%


3.37

%


3.32

%


3.55

%


3.49

%

Interest expense:

















Deposits



0.29

%


0.34

%


0.41

%


0.46

%


0.57

%

Short-term borrowings









0.33

%


0.57

%


0.72

%

Long-term debt



4.68

%


4.68

%


2.98

%


2.88

%


2.70

%

Subordinated debt



5.38

%


5.37

%


5.38

%


5.38

%


5.38

%

Total interest-bearing liabilities



0.37

%


0.42

%


0.50

%


0.57

%


0.67

%

Net interest spread



2.71

%


2.95

%


2.81

%


2.98

%


2.81

%

Net interest margin



2.82

%


3.07

%


2.96

%


3.15

%


3.00

%

Peoples Financial Services Corp.

Consolidated Balance Sheets (Unaudited)

(In thousands)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


At period end


2021


2021


2021


2021


2020


Assets:

















Cash and due from banks


$

30,415


$

33,662


$

41,789


$

30,786


$

29,287


Interest-bearing balances in other banks



7,093



7,425



10,262



8,432



15,905


Federal funds sold



242,425



319,500



196,000



264,100



183,000


Investment securities:

















Available-for-sale



517,321



461,372



336,449



333,753



295,911


Equity investments carried at fair value



140



147



142



159



138


Held-to-maturity



71,214



32,848



7,104



7,166



7,225


Loans held for sale



408



997



1,545



458



837


Loans, net



2,329,173



2,205,661



2,236,826



2,179,534



2,177,982


Less: allowance for loan losses



28,383



26,693



26,739



26,783



27,344


Net loans



2,300,790



2,178,968



2,210,087



2,152,751



2,150,638


Premises and equipment, net



51,502



50,682



46,305



46,777



47,045


Accrued interest receivable



8,529



8,280



7,844



8,206



8,255


Goodwill



63,370



63,370



63,370



63,370



63,370


Other intangible assets, net



468



584



710



835



960


Bank owned life insurance



42,754



42,734



42,750



42,530



42,316


Other assets



33,566



32,956



33,379



36,146



38,915


Total assets


$

3,369,994


$

3,233,525


$

2,997,736


$

2,995,469


$

2,883,802


Liabilities:

















Deposits:

















Noninterest-bearing


$

737,756


$

712,601


$

672,274


$

661,262


$

622,475


Interest-bearing



2,225,641



2,128,318



1,939,492



1,889,154



1,814,638


Total deposits



2,963,397



2,840,919



2,611,766



2,550,416



2,437,113


Short-term borrowings












51,980



50,000


Long-term debt



2,711



3,235



3,752



14,264



14,769


Subordinated debt



33,000



33,000



33,000



33,000



33,000


Accrued interest payable



408



872



469



1,120



736


Other liabilities



30,351



27,767



23,858



27,358



31,307


Total liabilities



3,029,867



2,905,793



2,672,845



2,678,138



2,566,925


Stockholders’ equity:

















Common stock



14,341



14,356



14,407



14,423



14,414


Capital surplus



127,549



127,826



128,719



128,854



129,291


Retained earnings



203,750



190,061



183,702



177,836



171,023


Accumulated other comprehensive gain (loss)



(5,514)



(4,511)



(1,937)



(3,782)



2,149


Total stockholders’ equity



340,126



327,732



324,891



317,331



316,877


Total liabilities and stockholders’ equity


$

3,369,994


$

3,233,525


$

2,997,736


$

2,995,469


$

2,883,802


Peoples Financial Services Corp.

Consolidated Balance Sheets (Unaudited)

(In thousands)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Average quarterly balances


2021


2021


2021


2021


2020


Assets:

















Loans, net:

















Taxable


$

2,088,935


$

2,033,752


$

2,075,808


$

2,054,120


$

2,068,600


Tax-exempt



185,471



169,273



148,747



125,352



117,650


Total loans, net



2,274,406



2,203,025



2,224,555



2,179,472



2,186,250


Investments:

















Taxable



446,096



280,767



264,490



260,238



223,333


Tax-exempt



105,044



84,701



78,521



72,177



46,361


Total investments



551,140



365,468



343,011



332,415



269,694


Interest-bearing balances with banks



9,739



12,004



9,653



13,260



26,232


Federal funds sold



264,068



311,015



220,247



191,720



185,874


Total interest-bearing assets



3,099,353



2,891,512



2,797,466



2,716,867



2,668,050


Other assets



202,123



202,456



199,082



197,178



204,348


Total assets


$

3,301,476


$

3,093,968


$

2,996,548


$

2,914,045


$

2,872,398


Liabilities and stockholders’ equity:

















Deposits:

















Interest-bearing


$

2,176,429


$

2,007,868


$

1,921,754


$

1,833,661


$

1,829,248


Noninterest-bearing



725,414



696,331



680,431



634,806



596,880


Total deposits



2,901,843



2,704,199



2,602,185



2,468,467



2,426,128


Short-term borrowings









7,300



50,470



50,000


Long-term debt



2,959



3,475



11,025



14,509



18,699


Subordinated debt



33,000



33,000



33,000



33,000



33,000


Other liabilities



26,924



25,635



23,420



27,371



28,946


Total liabilities



2,964,726



2,766,309



2,676,930



2,593,817



2,556,773


Stockholders’ equity



336,750



327,659



319,618



320,228



315,625


Total liabilities and stockholders’ equity


$

3,301,476


$

3,093,968


$

2,996,548


$

2,914,045


$

2,872,398


Peoples Financial Services Corp.

Asset Quality Data (Unaudited)

(In thousands)




Dec 31


Sept 30


June 30


Mar 31


Dec 31




2021


2021


2021


2021


2020


At quarter end

















Nonperforming assets:

















Nonaccrual/restructured loans


$

4,461


$

5,559


$

7,216


$

8,073


$

9,799


Accruing loans past due 90 days or more



13



78



49



172



71


Foreclosed assets



487



487



29



131



632


Total nonperforming assets


$

4,961


$

6,124


$

7,294


$

8,376


$

10,502



















Three months ended

















Allowance for loan losses:

















Beginning balance


$

26,693


$

26,739


$

26,783


$

27,344


$

26,584


Charge-offs



105



466



190



195



522


Recoveries



45



20



46



134



232


Provision for loan losses



1,750



400



100



(500)



1,050


Ending balance


$

28,383


$

26,693


$

26,739


$

26,783


$

27,344


Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)




Dec 31


Sept 30


June 30


Mar 31


Dec 31


Three months ended


2021


2021


2021


2021


2020


Core net income per share:

















Net income GAAP


$

16,414


$

9,096


$

8,531


$

9,478


$

8,185


Adjustments:

















Less: Gain on sale of Visa Class B shares



12,153














Less: gain (loss) on equity securities



7



(5)



17



(21)



(270)


Add: gain (loss) on equity securities tax adjustment



(1)



1



(4)



4



57


Add: Gain on sale of Visa Class B shares tax adjustment



2,552














Net income Core


$

6,819


$

9,092


$

8,544


$

9,461


$

7,972


Average common shares outstanding – diluted



7,207,565



7,233,189



7,239,325



7,246,016



7,257,874


Core net income per share


$

0.95


$

1.26


$

1.18


$

1.31


$

1.10


Tangible book value:

















Total stockholders’ equity


$

340,126


$

327,732


$

324,891


$

317,331


$

316,877


Less: Goodwill



63,370



63,370



63,370



63,370



63,370


Less: Other intangible assets, net



468



584



710



835



960


Total tangible stockholders’ equity


$

276,289


$

263,778


$

260,811


$

253,126


$

252,547


Common shares outstanding



7,169,371



7,177,028



7,202,728



7,211,293



7,215,202


Tangible book value per share


$

38.54


$

36.75


$

36.21


$

35.10


$

35.00


Core return on average stockholders’ equity:

















Net income GAAP


$

16,414


$

9,096


$

8,531


$

9,478


$

8,185


Adjustments:

















Less: Gain on sale of Visa Class B shares



12,153














Less: gain (loss) on equity securities



7



(5)



17



(21)



(270)


Add: gain (loss) on equity securities tax adjustment



(1)



1



(4)



4



57


Add: Gain on sale of Visa Class B shares tax adjustment



2,552














Net income Core


$

6,819


$

9,092


$

8,544


$

9,461


$

7,972


Average stockholders’ equity


$

336,750


$

327,659


$

319,618


$

320,228


$

315,625


Core return on average stockholders’ equity



8.03

%


11.01

%


10.72

%


11.98

%


10.05

%

Return on average tangible equity:

















Net income GAAP


$

16,414


$

9,096


$

8,531


$

9,478


$

8,185


Average stockholders’ equity


$

336,750


$

327,659


$

319,618


$

320,228


$

315,625


Less: average intangibles



63,896



64,017



64,143



64,268



64,402


Average tangible stockholders’ equity


$

272,854


$

263,642


$

255,475


$

255,960


$

251,223


Return on average tangible stockholders’ equity



23.87

%


13.69

%


13.39

%


15.02

%


12.96

%

Core return on average tangible stockholders’ equity:

















Net income GAAP


$

16,414


$

9,096


$

8,531


$

9,478


$

8,185


Adjustments:

















Less: Gain on sale of Visa Class B shares



12,153














Less: gain (loss) on equity securities



7



(5)



17



(21)



(270)


Add: gain (loss) on equity securities tax adjustment



(1)



1



(4)



4



57


Add: Gain on sale of Visa Class B shares tax adjustment



2,552














Net income Core


$

6,819


$

9,092


$

8,544


$

9,461


$

7,972


Average stockholders’ equity


$

336,750


$

327,659


$

319,618


$

320,228


$

315,625


Less: average intangibles



63,896



64,017



64,143



64,268



64,402


Average tangible stockholders’ equity


$

272,854


$

263,642


$

225,475


$

255,960


$

251,223


Core return on average tangible stockholders’ equity



9.92

%


13.68

%


13.41

%


14.99

%


12.62

%

Core return on average assets:

















Net income GAAP


$

16,414


$

9,096


$

8,531


$

9,478


$

8,185


Adjustments:

















Less: Gain on sale of Visa Class B shares



12,153














Less: gain (loss) on equity securities



7



(5)



17



(21)



(270)


Add: gain (loss) on equity securities tax adjustment



(1)



1



(4)



4



57


Add: Gain on sale of Visa Class B shares tax adjustment



2,552














Net income Core


$

6,819


$

9,092


$

8,544


$

9,461


$

7,972


Average assets


$

3,301,476


$

3,093,968


$

2,996,548


$

2,914,045


$

2,872,398


Core return on average assets



0.82

%


1.17

%


1.14

%


1.32

%


1.10

%

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)




Dec 31


Dec 31


Year Ended


2021


2020


Core net income per share:








Net income (GAAP)


$

43,519


$

29,354


Adjustments:








Less: Gain on investment securities






918


Less: Gain (loss) on equity securities



2



(6)


Less: Gain on sale of Visa Class B shares



12,153





Add: Gain on investment securities tax adjustment






193


Add: Gain (loss) on equity securities line tax adjustment



1



(1)


Add: Gain on sale of Visa Class B shares tax adjustment



2,552





Net income Core


$

33,917


$

28,634


Average basic common shares outstanding



7,196,359



7,304,956


Average diluted common shares outstanding



7,231,423



7,337,843


Core net income per share – basic


$

4.71


$

3.92


Core net income per share – diluted


$

4.69


$

3.90


Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(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, 2021 and 2020:


Three months ended December 31


2021


2020


Interest income (GAAP)


$

23,650


$

23,085


Adjustment to FTE



424



317


Interest income adjusted to FTE (non-GAAP)



24,074



23,402


Interest expense



2,058



3,276


Net interest income adjusted to FTE (non-GAAP)


$

22,016


$

20,126










Twelve months ended December 31


2021


2020


Interest income (GAAP)


$

94,057


$

94,125


Adjustment to FTE



1,512



1,306


Interest income adjusted to FTE (non-GAAP)



95,569



95,431


Interest expense



9,422



14,324


Net interest income adjusted to FTE (non-GAAP)


$

86,147


$

81,107



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, 2021 and 2020:


Three months ended December 31


2021


2020


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

15,158


$

14,001


Less: amortization of intangible assets expense



116



144


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



15,042



13,857










Net interest income (GAAP)



21,592



19,809


Plus: taxable equivalent adjustment



424



317


Noninterest income (GAAP)



15,283



4,735


Less: net gains on equity securities



(7)



76


Less: net gains on sale of securities






194


Less: Gain on sale of Visa Class B shares



12,153





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


$

25,153


$

24,591










Efficiency ratio (non-GAAP)



59.80

%


56.35

%









Twelve months ended December 31


2021


2020


Efficiency ratio (non-GAAP):








Noninterest expense (GAAP)


$

55,606


$

54,868


Less: amortization of intangible assets expense



491



606


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



55,115



54,262










Net interest income (GAAP)



84,635



79,801


Plus: taxable equivalent adjustment



1,512



1,306


Noninterest income (GAAP)



25,636



16,642


Less: net gains (losses) on equity securities



2



(6)


Less: net gains on sale of investment securities






918


Less: Gain on sale of Visa Class B shares



12,153





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


$

99,628


$

96,837










Efficiency ratio (non-GAAP)



55.32

%


56.03

%

SOURCE Peoples Financial Services Corp.

Source link