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非應稅市政債券成員2023-12-310001056943美國通用會計準則：重複發生的公允價值測量成員us-gaap:由美國政府贊助企業發行的抵押貸款支持證券2023-12-310001056943美國通用會計準則：重複發生的公允價值測量成員us-gaap:股權證券成員2023-12-310001056943美國通用會計準則：重複發生的公允價值測量成員美國會計準則：企業債務證券成員2023-12-310001056943美國通用會計準則：重複發生的公允價值測量成員pfis：抵押貸款支持的美國政府機構成員2023-12-310001056943美國通用會計準則：重複發生的公允價值測量成員pfis：利率互換其他資產成員2023-12-310001056943us-gaap:二級公允價值輸入成員美國通用會計準則：重複發生的公允價值測量成員2023-12-310001056943美國通用會計準則：公允價值輸入第一級會員美國通用會計準則：重複發生的公允價值測量成員2023-12-310001056943美國通用會計準則：重複發生的公允價值測量成員2023-12-310001056943us-gaap:核心存款成員2024-01-012024-09-300001056943us-gaap：額外實收資本成員2024-07-012024-09-300001056943us-gaap：額外實收資本成員2024-04-012024-06-3000010569432024-04-012024-06-300001056943us-gaap：額外實收資本成員2024-01-012024-03-3100010569432024-01-012024-03-310001056943us-gaap：額外實收資本成員2023-07-012023-09-300001056943us-gaap：額外實收資本成員2023-04-012023-06-3000010569432023-04-012023-06-300001056943us-gaap：額外實收資本成員2023-01-012023-03-3100010569432023-01-012023-03-310001056943pfis：其他借款會員2024-01-012024-09-300001056943pfis：聯邦住房貸款銀行隔夜貸款會員2024-01-012024-09-300001056943pfis：銀行期限融資計劃會員2024-01-012024-09-300001056943美元指數:聯邦住房貸款銀行融資成員2023-01-012023-12-310001056943pfis：其他借款會員2023-01-012023-12-310001056943pfis：其他借款會員2024-09-300001056943pfis：銀行期限融資計劃會員2024-09-300001056943pfis：其他借款成員2023-12-310001056943pfis：Fncb Bancorp Inc成員2024-06-300001056943srt : 加權平均會員pfis：其他房地產所有成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入清算費用成員2024-09-300001056943srt : 加權平均會員pfis：貸款個別評估信用損失會員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入清算費用會員2024-09-300001056943srt : 最低會員pfis：其他房地產會員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入清算費用成員2024-09-300001056943srt : 最低會員pfis：逐筆評估信貸損失的貸款成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入清算費用成員2024-09-300001056943srt : Maximum Memberpfis：其他持有房地產成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：衡量輸入清算開支成員2024-09-300001056943srt : Maximum Memberpfis：單獨評估信貸損失成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：衡量輸入清算開支成員2024-09-300001056943srt : 加權平均會員PFIS：根據信用損失成員單獨評估貸款US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員PFIS：衡量輸入清算費用成員2023-12-310001056943srt : 最低會員PFIS：根據信用損失成員單獨評估貸款US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入清算費用成員2023-12-310001056943srt : Maximum Memberpfis：逐筆評估信貸損失貸款成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入清算費用成員2023-12-310001056943srt : 加權平均會員pfis: 其他房地產擁有會員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis: 評估調整輸入評估調整會員2024-09-300001056943srt : 加權平均會員pfis: 逐筆評估信貸損失會員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入評估調整成員2024-09-300001056943srt : 最低會員pfis：其他房地產所有成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入評估調整成員2024-09-300001056943srt : 最低會員pfis：對單獨評估信貸損失的貸款成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入評估調整成員2024-09-300001056943srt : Maximum Memberpfis：其他所擁有的房地產成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入評估調整成員2024-09-300001056943srt : Maximum Memberpfis：貸款按信用損失分別評估會員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入評估調整會員2024-09-300001056943srt : 加權平均會員pfis：貸款按信用損失分別評估會員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：計量輸入評估調整成員2023-12-310001056943srt : 最低會員pfis：單獨評估的貸款用於信貸損失成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：計量輸入評估調整成員2023-12-310001056943srt : Maximum Memberpfis：貸款單獨評估信用損失成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員pfis：測量輸入評估調整成員2023-12-310001056943pfis：零售帳戶存款成員2024-09-300001056943pfis：市政關係存款成員2024-09-300001056943pfis：商業帳戶存款成員2024-09-300001056943pfis：經紀存款成員2024-09-300001056943us-gaap:核心存款成員2024-09-300001056943pfis：其他房地產所有成員US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員2024-09-300001056943pfis：利率產品成員美元指數:現金流套期會員us-gaap:利息收入成員2023-01-012023-09-300001056943美元指數:現金流套期會員2023-01-012023-09-300001056943pfis：Fncb會員2024-09-300001056943pfis：市場不活躍會員2024-09-300001056943us-gaap:美國政府支持企業債券成員2024-09-300001056943pfis：長期固定利率5.18%到期2027年10月會員2024-09-300001056943pfis：長期固定利率4.78%到期2026年3月會員2024-09-300001056943pfis：長期固定利率4.60%到期2024年12月會員2024-09-300001056943pfis：長期固定利率4.45%到期2028年3月會員2024-09-300001056943pfis：長期固定利率4.40%到期2025年12月會員2024-09-300001056943pfis:長期固定利率4.40%到期日期2027年8月會員2024-09-300001056943pfis:長期固定利率4.36%到期日期2025年12月會員2024-09-300001056943pfis:長期固定利率4.16%到期日期2027年6月會員2024-09-300001056943pfis:長期固定利率4.08%到期日期2026年5月會員2024-09-300001056943pfis:長期4.37固定利率債務到期日期2025年3月會員2024-09-300001056943pfis:長期4.20固定利率債務到期日期2026年3月會員2024-09-300001056943pfis:長期4.37固定利率債務到期日期2025年3月會員2023-12-310001056943pfis:長期4.20固定利率債務到期日期2026年3月會員2023-12-310001056943US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員2024-09-300001056943美元指數:非經常性公允價值衡量會員2024-09-300001056943US-GAAP: 三級公允價值輸入成員美元指數:非經常性公允價值衡量會員2023-12-310001056943美元指數:非經常性公允價值衡量會員2023-12-310001056943pfis : Fixed Rate Loans Memberus-gaap:公允價值套期成員美元指數：指定爲對沖工具成員2024-09-300001056943us-gaap:消費者投資組合細分成員2024-01-012024-09-300001056943美國通用會計準則：商業房地產投資組合分部成員2024-01-012024-09-300001056943us-gaap:CommercialPortfolioSegmentMember2024-01-012024-09-300001056943pfis：設備融資投資組合段成員2024-01-012024-09-300001056943us-gaap:消費者投資組合細分成員2023-01-012023-12-310001056943美國通用會計準則：商業房地產投資組合分部成員2023-01-012023-12-310001056943pfis：Fncb成員us-gaap:因信用惡化而獲得的金融資產成員2024-07-012024-07-010001056943pfis：Fncb會員pfis：使用信用惡化獲得的金融資產，無利息累積會員2024-07-012024-07-010001056943pfis：Fncb會員pfis：使用信用惡化獲得的金融資產，利息累積會員2024-07-012024-07-010001056943us-gaap:CommercialPortfolioSegmentMember2023-01-012023-12-3100010569432023-01-012023-12-310001056943us-gaap:住宅投資組合段成員2024-09-300001056943us-gaap:消費者投資組合細分成員2024-09-300001056943美國通用會計準則：商業房地產投資組合分部成員2024-09-300001056943us-gaap:CommercialPortfolioSegmentMember2024-09-300001056943Municipal Portfolio Segment成員2024-09-300001056943Equipment Financing Portfolio Segment成員2024-09-300001056943us-gaap:住宅投資組合段成員2023-12-310001056943us-gaap:消費者投資組合細分成員2023-12-310001056943美國通用會計準則：商業房地產投資組合分部成員2023-12-310001056943us-gaap:CommercialPortfolioSegmentMember2023-12-310001056943pfis：市政投資組合分部成員2023-12-310001056943us-gaap：關聯方成員2024-01-012024-09-300001056943us-gaap：關聯方成員2023-01-012023-12-3100010569432023-07-012023-09-300001056943us-gaap:利率掉期成員us-gaap:公允價值套期成員美元指數：指定爲對沖工具成員2024-09-300001056943us-gaap:AssetPledgedAsCollateralMember美國會計準則：存款成員2024-09-300001056943pfis：非FDIC成員保險存款2024-09-300001056943pfis：非FDIC成員保險存款2023-12-310001056943美國通用會計準則：養老金計劃定義利益成員2024-07-012024-09-300001056943美國通用會計準則：養老金計劃定義利益成員2024-01-012024-09-300001056943美國通用會計準則：養老金計劃定義利益成員2023-07-012023-09-300001056943美國通用會計準則：養老金計劃定義利益成員2023-01-012023-09-300001056943us-gaap:由美國政府贊助企業發行的抵押貸款支持證券2024-09-300001056943pfis：美國政府支持企業債券，免稅成員2024-09-300001056943美元指數：抵押貸款支持的美國政府機構會員2024-09-300001056943us-gaap:由美國政府贊助企業發行的抵押貸款支持證券2023-12-310001056943美元指數：美國政府贊助企業債務證券非稅收會員2023-12-310001056943美元指數：抵押貸款支持的美國政府機構會員2023-12-310001056943美元指數：2030年到期的次級票據會員2020-06-012020-06-010001056943srt : 最低會員美元指數：2030年到期的次級票據會員2020-06-012020-06-010001056943美元指數：FNCB Bancorp Inc會員pfis：信託優先證券成員2024-07-010001056943pfis：Fncb Bancorp Inc成員pfis：信託優先證券成員2024-07-012024-07-0100010569432023-09-300001056943pfis：Fncb成員us-gaap:財務資產已購且無信用惡化成員2024-07-010001056943pfis：Fncb成員2024-07-010001056943pfis：Fncb Bancorp Inc成員2024-09-300001056943pfis：Fncb Bancorp Inc成員us-gaap:核心存款成員2024-06-300001056943pfis：Fncb Bancorp Inc 成員pfis：财富管理成員2024-06-300001056943pfis：Fncb Bancorp Inc 成員2024-06-300001056943pfis：Fncb 成員2024-07-012024-07-010001056943pfis：Fncb Bancorp Inc 成員2024-07-012024-07-010001056943pfis：Fncb Bancorp Inc 成員2024-07-010001056943pfis：Performance Shares Restricted Stock 成員pfis：2023年計劃成員2024-01-012024-09-3000010569432024-09-3000010569432023-12-3100010569432023-01-012023-09-300001056943us-gaap:二級公允價值輸入成員2024-09-300001056943us-gaap: 估計的公平價值公允價值披露成員2024-09-300001056943us-gaap: 帳面報告金額公允價值披露成員2024-09-300001056943us-gaap:二級公允價值輸入成員2023-12-310001056943us-gaap: 估計的公平價值公允價值披露成員2023-12-310001056943us-gaap: 帳面報告金額公允價值披露成員2023-12-3100010569432024-07-012024-09-3000010569432024-11-0100010569432024-01-012024-09-30xbrli:股份iso4217:美元指數xbrli：純形pfis:項目安防-半導體pfis:貸款pfis:辦公室iso4217:美元指數xbrli:股份

目錄

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美國

證券交易委員會

華盛頓特區20549

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​

表格 10-Q

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​

☒

根據1934年證券交易法第13或15(d)條的季度報告

截至2022年10月2日季度結束 2024年9月30日

或

☐

根據1934年證券交易法第13或15(d)條的過渡報告

在過渡期間從

001-36388

(申報檔案編號)

​

​

人民金融服務corp.

(正式註冊人的確切名稱，如章程所規定)

​

​

賓夕法尼亞

23-2391852

(現況

公司註冊)

編號)

身分證號碼)

北華盛頓大道150號, 斯克蘭頓, 賓夕法尼亞州

18503

(總部辦公地址)

（郵遞區號）

​

(570) 346-7741

(登記人電話號碼，包括區號)

​

根據法案第12(b)條規定註冊的證券：

​

​

​

​

​

每個等級的標題：

    

交易符號

    

Yes

普通股，面值2.00美元

​

PFIS

​

Nasdaq股票市場

​

請在覈選記號區域表明：（1）本登記申請人在過去12個月（或申請人需要提交此項申報的較短期間）內已提交證券交易所法案第13條或第15(d)條要求提交的所有報告，且（2）本申請人在過去90日內已遵守上述提交要求。Yes  ☒沒有☐

請勾選是否公司已根據Regulation S-t第405條規定，在過去12個月內（或公司要求提交此類文件的較短期間內）按時提交每個互動數據文件。Yes  ☒沒有☐

請勾選相應的選項，表明公司是否屬於大型快速申報人、快速申報人、非快速申報人、小型報告公司或新興成長型公司。請參見交易所法案第1202條中“大型快速申報人”、“快速申報人”、“小型報告公司”和“新興成長型公司”的定義。

​

大型加速文件提交者

☐

加速檔案提交者

☒

非加速歸檔人

☐

較小報告公司

☐

新興成長型企業

☐

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​

​

I作爲一家新興成長公司，請通過勾選表示註冊人是否選擇不使用交易法第13(a)節所規定的新或修訂的財務會計標準所提供的延長期限。 ☐

請用勾號標明註冊人是否爲《交易法》規則120億2定義的空殼公司。    是☐沒有☒

僅適用於公司發行人：

請指明截至最近可行日期，註冊人普通股的流通股數： 9,994,647 截至2024年11月1日。

​

​

​

目錄

人民金融服務corp。

表格10-Q

​

截至2024年9月30日的季度

​

​

​

​

​

​

​

內容

​

​

​

頁碼。

​

​

​

​

​

第一部分。

​

基本報表:

​

3

​

​

​

​

​

項目 1.

​

基本報表

​

3

​

​

​

​

​

​

​

截至2024年9月30日（未經審計）和2023年12月31日（未經審計）的合併資產負債表

​

3

​

​

​

​

​

​

​

截止2024年和2023年9月30日的三個月和九個月的合併損益表及全面收益表（未經審計）

​

4

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​

​

​

​

​

​

截至2024年和2023年3月31日、6月30日和9月30日的三個月股東權益變動彙總報表（未經審計）

​

5

​

​

​

​

​

​

​

截至2024年和2023年9月30日的九個月綜合現金流量表（未經審核）

​

6

​

​

​

​

​

​

​

附註股東權益基本報表（未經審核）

​

8

​

​

​

​

​

項目 2。

​

管理層對財務狀況和業績的討論與分析

​

51

​

​

​

​

​

項目3。

​

市場風險的定量和定性披露。

​

71

​

​

​

​

​

項目4。

​

內部控制及程序

​

73

​

​

​

​

​

第二部分

​

其他資訊

​

​

​

​

​

​

​

項目 1。

​

法律訴訟

​

73

​

​

​

​

​

項目1A。

​

風險因素

​

73

​

​

​

​

​

項目2。

​

股票權益的未註冊銷售和資金用途

​

73

​

​

​

​

​

項目3。

​

優先證券違約情況

​

73

​

​

​

​

​

項目4。

​

礦業安全披露

​

74

​

​

​

​

​

項目5。

​

其他資訊

​

74

​

​

​

​

​

第6項。

​

展品

​

74

​

​

​

​

​

​

​

簽名

​

76

​

​

​

2

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Peoples Financial Services Corp.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

September 30, 2024

    

December 31, 2023

Assets:

​

​

​

​

​

​

Cash and cash equivalents

​

​

​

​

​

​

Cash and due from banks

​

$

97,090

​

$

33,524

Interest-bearing deposits in other banks

​

​

10,286

​

​

9,141

Federal funds sold

​

 

178,093

​

 

144,700

Total cash and cash equivalents

​

​

285,469

​

​

187,365

​

​

​

​

​

 

​

Investment securities:

​

​

​

​

​

​

Available for sale: Amortized cost of $601,270 and $450,454, respectively, net of allowance for credit losses of $0 at September 30, 2024 and December 31, 2023

​

 

562,486

​

 

398,927

Held to maturity: Fair value of $69,034 and $71,698, respectively, net of allowance for credit losses of $0 at September 30, 2024 and December 31, 2023

​

 

79,861

​

 

84,851

Equity investments carried at fair value

​

​

3,921

​

​

98

Total investment securities

​

 

646,268

​

 

483,876

Loans

​

 

4,069,683

​

 

2,849,897

Less: allowance for credit losses

​

 

39,341

​

 

21,895

Net loans

​

 

4,030,342

​

 

2,828,002

Loans held for sale

​

​

803

​

​

250

Goodwill

​

 

76,958

​

 

63,370

Premises and equipment, net

​

 

75,877

​

 

61,276

Bank owned life insurance

​

​

87,401

​

​

49,397

Deferred tax assets

​

​

33,078

​

​

13,770

Accrued interest receivable

​

 

17,979

​

 

12,734

Intangible assets, net

​

 

35,907

​

 

​

Other assets

​

 

70,056

​

 

42,249

Total assets

​

$

5,360,138

​

$

3,742,289

​

​

​

​

​

​

​

Liabilities:

​

​

​

​

​

​

Deposits:

​

​

​

​

​

​

Noninterest-bearing

​

$

717,565

​

$

644,683

Interest-bearing

​

 

3,920,299

​

 

2,634,354

Total deposits

​

 

4,637,864

​

 

3,279,037

Short-term borrowings

​

 

37,346

​

 

17,590

Long-term debt

​

 

111,489

​

 

25,000

Subordinated debt

​

​

33,000

​

​

33,000

Junior subordinated debt

​

​

8,015

​

​

​

Accrued interest payable

​

 

6,829

​

 

5,765

Other liabilities

​

 

50,544

​

 

41,475

Total liabilities

​

 

4,885,087

​

 

3,401,867

​

​

​

​

​

​

​

Stockholders’ equity:

​

​

​

​

​

​

Common stock, par value $2.00, authorized 25,000,000 shares, issued and outstanding 9,994,648, shares at September 30, 2024 and 7,040,852 shares at December 31, 2023

​

 

19,993

​

 

14,093

Capital surplus

​

 

250,578

​

 

122,130

Retained earnings

​

 

239,021

​

 

248,550

Accumulated other comprehensive loss

​

 

(34,541)

​

 

(44,351)

Total stockholders’ equity

​

 

475,051

​

 

340,422

Total liabilities and stockholders’ equity

​

$

5,360,138

​

$

3,742,289

​

See notes to unaudited consolidated financial statements

​

3

Table of Contents

Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

September 30, 

    

2024

    

2023

    

2024

​

2023

Interest income:

​

​

​

​

​

​

​

​

​

​

​

​

Interest and fees on loans:

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

$

59,412

​

$

33,095

​

$

127,859

​

$

95,283

Tax-exempt

​

 

2,299

​

 

1,411

​

​

5,116

​

​

4,205

Interest and dividends on investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

4,739

​

 

1,920

​

​

8,561

​

​

5,973

Tax-exempt

​

 

411

​

 

375

​

​

1,153

​

​

1,210

Dividends

​

 

55

​

 

​

​

​

59

​

​

4

Interest on interest-bearing deposits in other banks

​

 

150

​

 

91

​

​

385

​

​

190

Interest on federal funds sold

​

 

1,218

​

 

1,873

​

​

2,524

​

​

2,914

Total interest income

​

 

68,284

​

 

38,765

​

​

145,657

​

​

109,779

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest expense:

​

​

​

​

​

​

​

​

​

​

​

​

Interest on deposits

​

 

26,398

​

 

16,481

​

​

63,216

​

​

39,805

Interest on short-term borrowings

​

 

550

​

 

291

​

​

1,444

​

​

1,590

Interest on long-term debt

​

 

1,389

​

 

273

​

​

1,929

​

​

569

Interest on subordinated debt

​

​

443

​

​

443

​

​

1,330

​

​

1,330

Interest on junior subordinated debt

​

​

260

​

​

​

​

​

260

​

​

​

Total interest expense

​

 

29,040

​

 

17,488

​

​

68,179

​

​

43,294

Net interest income

​

 

39,244

​

 

21,277

​

​

77,478

​

​

66,485

Provision for (credit to) credit losses

​

 

14,458

​

 

(166)

​

​

15,762

​

​

(1,103)

Net interest income after provision for (credit to) credit losses

​

 

24,786

​

 

21,443

​

​

61,716

​

​

67,588

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest income:

​

​

​

​

​

​

​

​

​

​

​

​

Service charges, fees, commissions and other

​

 

3,384

​

 

1,900

​

​

7,304

​

​

5,847

Merchant services income

​

 

223

​

 

170

​

​

598

​

​

542

Commission and fees on fiduciary activities

​

 

649

​

 

606

​

​

1,717

​

​

1,691

Wealth management income

​

 

708

​

 

393

​

​

1,486

​

​

1,177

Mortgage banking income

​

 

84

​

 

87

​

​

263

​

​

295

Increase in cash surrender value of life insurance

​

 

551

​

 

270

​

​

1,116

​

​

790

Interest rate swap (loss) gain

​

​

(53)

​

​

266

​

​

25

​

​

512

Net gains (losses) on equity investment securities

​

​

175

​

 

​

​

​

155

​

​

(17)

Net gains on sale of investment securities available for sale

​

 

1

​

 

​

​

​

1

​

​

81

Total noninterest income

​

 

5,722

​

 

3,692

​

​

12,665

​

​

10,918

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest expense:

​

​

​

​

​

​

​

​

​

​

​

​

Salaries and employee benefits expense

​

 

13,170

​

 

8,784

​

​

30,459

​

​

26,346

Net occupancy and equipment expense

​

 

6,436

​

 

4,298

​

​

15,745

​

​

12,678

Acquisition related expenses

​

 

9,653

​

 

869

​

​

11,210

​

​

990

Amortization of intangible assets

​

 

1,665

​

 

29

​

​

1,665

​

​

86

Net gains on sale of other real estate owned

​

 

​

​

​

(18)

​

​

​

​

​

(18)

Professional fees and outside services

​

​

1,017

​

​

687

​

​

2,482

​

​

1,960

FDIC insurance and assessments

​

​

809

​

​

508

​

​

1,907

​

​

1,565

Donations

​

​

512

​

​

389

​

​

1,354

​

​

1,254

Other expenses

​

 

2,240

​

 

1,508

​

​

6,906

​

​

5,361

Total noninterest expense

​

 

35,502

​

 

17,054

​

​

71,728

​

​

50,222

(Loss) income before income taxes

​

 

(4,994)

​

 

8,081

​

​

2,653

​

​

28,284

(Benefit) provision for income tax expense

​

 

(657)

​

 

1,335

​

​

242

​

​

4,534

Net (loss) income

​

 

(4,337)

​

 

6,746

​

​

2,411

​

​

23,750

​

​

​

​

​

​

​

​

​

​

​

​

​

Other comprehensive income (loss):

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized gain (loss) on investment securities available for sale

​

 

15,167

​

 

(10,378)

​

​

12,744

​

​

(4,690)

Reclassification adjustment for net gain on sales included in net income

​

 

(1)

​

 

​

​

​

(1)

​

​

(81)

Change in derivative fair value

​

​

(1,424)

​

​

747

​

​

(185)

​

​

826

Other comprehensive income (loss)

​

 

13,742

​

​

(9,631)

​

​

12,558

​

​

(3,945)

Income tax expense (benefit) related to other comprehensive income (loss)

​

 

3,008

​

 

(2,074)

​

​

2,748

​

​

(851)

Other comprehensive income (loss), net of income tax expense (benefit)

​

 

10,734

​

 

(7,557)

​

​

9,810

​

​

(3,094)

Comprehensive income (loss)

​

$

6,397

​

$

(811)

​

$

12,221

​

$

20,656

​

​

​

​

​

​

​

​

​

​

​

​

​

Per share data:

​

​

​

​

​

​

​

​

​

​

​

​

Net (loss) income:

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

$

(0.43)

​

$

0.95

​

$

0.30

​

$

3.33

Diluted

​

$

(0.43)

​

$

0.95

​

$

0.30

​

$

3.31

Weighted average common shares outstanding:

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

 

9,987,627

​

 

7,088,745

​

 

8,039,734

​

 

7,130,506

Diluted

​

 

10,044,449

​

 

7,120,685

​

 

8,094,036

​

 

7,165,570

Dividends declared

​

$

0.62

​

$

0.41

​

$

1.44

​

$

1.23

​

See notes to unaudited consolidated financial statements

4

Table of Contents

​

​

Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

Accumulated

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

Common

​

Capital

​

Retained

​

Comprehensive

​

​

​

​

    

Stock  

    

Surplus  

    

Earnings  

    

Loss

    

Total

Balance, January 1, 2024

​

$

14,093

​

$

122,130

​

$

248,550

​

$

(44,351)

​

$

340,422

Net income

​

​

​

​

​

​

​

 

3,466

​

​

​

​

​

3,466

Other comprehensive loss, net of tax

​

​

​

​

​

​

​

​

​

​

​

(1,064)

​

​

(1,064)

Cash dividends declared: $0.41 per common share

​

​

​

​

​

​

​

 

(2,893)

​

​

​

​

​

(2,893)

Stock compensation, including tax effects and expenses

​

​

​

​

​

61

​

​

​

​

​

​

​

​

61

Restricted stock issued: 14,434 shares

​

​

29

​

​

(29)

​

​

​

​

​

​

​

​

​

Balance, March 31, 2024

​

$

14,122

​

$

122,162

​

$

249,123

​

$

(45,415)

​

$

339,992

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

​

​

​

​

​

​

3,282

​

​

​

​

​

3,282

Other comprehensive income, net of tax

​

​

​

​

​

​

​

​

​

​

​

140

​

​

140

Cash dividends declared: $0.41 per share

​

​

​

​

​

​

​

​

(2,894)

​

​

​

​

​

(2,894)

Stock compensation, including tax effects and expenses

​

​

​

​

​

287

​

​

​

​

​

​

​

​

287

Balance, June 30, 2024

​

$

14,122

​

$

122,449

​

$

249,511

​

$

(45,275)

​

$

340,807

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net loss

​

​

​

​

​

​

​

​

(4,337)

​

​

​

​

​

(4,337)

Other comprehensive income, net of tax

​

​

​

​

​

​

​

​

​

​

​

10,734

​

​

10,734

Acquisition of FNCB Bancorp, Inc. 2,935,456 shares, $45.54 per share (1)

​

​

5,871

​

​

127,810

​

​

​

​

​

​

​

​

133,681

Cash dividends declared: $0.62 per share

​

​

​

​

​

​

​

​

(6,153)

​

​

​

​

​

(6,153)

Stock compensation, including tax effects and expenses

​

​

​

​

​

319

​

​

​

​

​

​

​

​

319

Balance, September 30, 2024

​

$

19,993

​

$

250,578

​

$

239,021

​

$

(34,541)

​

$

475,051

(1) Refer to Note 2 - Business Combination for additional detail.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

Accumulated

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

Common

​

Capital

​

Retained

​

Comprehensive

​

​

​

​

    

Stock  

    

Surplus  

    

Earnings  

    

Loss

    

Total

Balance, January 1, 2023

​

$

14,321

​

$

126,850

​

$

230,515

​

$

(56,336)

​

$

315,350

Cumulative impact of adoption of ASC 326, net of tax

​

​

​

​

​

​

​

​

2,364

​

​

​

​

​

2,364

Net income

​

​

​

​

​

​

​

 

7,579

​

​

​

​

​

7,579

Other comprehensive income, net of tax

​

​

​

​

​

​

​

​

​

​

 

6,894

​

​

6,894

Cash dividends declared: $0.41 per common share

​

​

​

​

​

​

​

 

(2,936)

​

​

​

​

​

(2,936)

Stock compensation, including tax effects and expenses

​

​

​

​

 

209

​

​

​

​

​

​

​

​

209

Restricted stock issued: 17,640 shares.

​

​

35

​

​

(35)

​

​

​

​

​

​

​

​

​

Share retirement: 16,573 shares

​

​

(33)

​

​

(793)

​

​

​

​

​

​

​

​

(826)

Balance, March 31, 2023

​

$

14,323

​

$

126,231

​

$

237,522

​

$

(49,442)

​

$

328,634

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

​

​

​

​

​

 

9,425

​

​

​

​

​

9,425

Other comprehensive loss, net of tax

​

​

​

​

​

​

​

​

​

​

 

(2,431)

​

​

(2,431)

Cash dividends declared: $0.41 per share

​

​

​

​

​

​

​

 

(2,930)

​

​

​

​

​

(2,930)

Stock compensation, including tax effects and expenses

​

​

​

​

 

160

​

​

​

​

​

​

​

​

160

Share retirement: 25,555 shares

​

​

(51)

​

​

(1,020)

​

​

​

​

​

​

​

​

(1,071)

Balance, June 30, 2023

​

$

14,272

​

$

125,371

​

$

244,017

​

$

(51,873)

​

$

331,787

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

​

​

​

​

​

 

6,746

​

​

​

​

​

6,746

Other comprehensive loss, net of income taxes

​

​

​

​

​

​

​

​

​

​

​

(7,557)

​

​

(7,557)

Cash dividends declared: $0.41 per share

​

​

​

​

​

​

​

 

(2,906)

​

​

​

​

​

(2,906)

Stock compensation, including tax effects and expenses

​

​

​

​

​

259

​

​

​

​

​

​

​

​

259

Share retirement: 89,558 shares

​

​

(179)

​

​

(3,760)

​

​

​

​

​

​

​

​

(3,939)

Balance, September 30, 2023

​

$

14,093

​

$

121,870

​

$

247,857

​

$

(59,430)

​

$

324,390

​

​

​

5

目錄

人民金融服務公司。

現金流量表S（未審計）

（除每股數據外，金額單位：千美元）

​

​

​

​

​

​

​

​

截至九月三十日的九個月

    

2024

    

2023

經營活動現金流量：

​

​

​

​

​

​

淨利潤

​

$

2,411

​

$

23,750

調整淨利潤以計入經營活動現金流量:

​

​

​

​

​

​

房地產和設備的折舊

​

 

2,372

​

 

2,051

9,902,139

​

​

805

​

​

454

遞延貸款費用攤銷，淨額

​

 

451

​

​

493

無形資產攤銷

​

 

1,665

​

 

86

低收入住房合夥企業的攤銷

​

​

376

​

​

310

信用損失的準備（貸項）

​

 

15,762

​

 

(1,103)

股權投資證券的未實現（收益）損失

​

​

(155)

​

​

17

出售其他房地產（不動產）的淨收益

​

 

​

​

 

(18)

銷售的貸款起源

​

 

(2,564)

​

​

(3,511)

出售貸款所得收益

​

 

2,012

​

​

3,499

出售貸款的淨（收益）損失

​

 

(1)

​

​

12

投資證券的淨（累積）攤銷

​

 

(197)

​

 

774

可供出售投資證券的淨收益

​

​

(1)

​

​

(81)

(收益) 處置房產和設備的損失

​

 

(1)

​

 

3

人形機器人-軸承現金抵押貸款價值增加

​

 

(1,116)

​

 

(790)

遞延所得稅（收益）費用

​

 

(2,558)

​

 

983

股票補償，包括稅收影響和費用

​

 

667

​

 

628

淨變動：

​

​

​

​

​

​

應計利息應收款

​

 

2,203

​

 

(1,054)

其他資產

​

 

8,788

​

 

(3,581)

應計利息負債

​

 

(902)

​

 

3,874

其他負債

​

 

585

​

 

(2,489)

經營活動產生的淨現金流量

​

 

30,602

​

 

24,307

投資活動現金流量：

​

​

​

​

​

​

可供出售投資證券的銷售收益

​

 

240,861

​

 

67,363

投資證券償還的收益：

​

​

​

​

​

​

可供出售

​

 

27,013

​

 

22,740

持有至到期日

​

 

4,918

​

 

4,845

投資證券的購買：

​

​

​

​

​

​

可供出售

​

 

​

​

 

​

股權證券

​

​

(775)

​

​

​

限售股的淨（購買）贖回

​

 

(4,638)

​

 

3,966

股權證券出售所得

​

​

614

​

​

​

與FNCb Bancorp, Inc.合併中收到的淨現金

​

​

28,811

​

​

​

貸款淨增加

​

 

(24,398)

​

 

(141,422)

購置房地產和設備

​

 

(4,926)

​

 

(5,697)

出售房屋和設備的收益

​

 

153

​

​

14

出售其他房地產的收益

​

 

​

​

 

139

投資活動產生的淨現金流量

​

 

267,633

​

 

(48,052)

融資活動的現金流：

​

​

​

​

​

​

存款的淨（減少）增加

​

 

(68,174)

​

 

318,485

(償還)長期借款所獲得的收益

​

 

(10,136)

​

 

24,445

淨收益(減少)於短期借款

​

 

(109,880)

​

 

(87,910)

普通股的養老

​

 

​

​

​

(5,836)

支付現金分紅派息

​

 

(11,940)

​

 

(8,772)

籌資活動的淨現金流量(使用)/提供的淨現金流量

​

 

(200,130)

​

 

240,412

現金及現金等價物淨增加額

​

 

98,104

​

 

216,667

期初現金及現金等價物餘額

​

 

187,365

​

 

37,868

期末現金及現金等價物

​

$

285,469

​

$

254,535

​

​

6

目錄

人民金融服務公司

現金流量表（未經審計）

(以千美元爲單位，除每股數據外)

​

​

​

​

​

​

​

​

截至9月30日止九個月的財務報表

    

2024

    

2023

補充披露：

​

​

​

​

​

​

期間支付的現金用於：

​

​

​

​

​

​

利息

​

$

67,116

​

$

39,420

所得稅

​

 

1,154

​

 

3,072

非現金項目:

​

​

​

​

​

​

​

​

​

​

​

​

​

固定資產轉移至其他房地產

​

​

1,556

​

​

​

貸款轉讓給其他房地產業

​

​

27

​

​

​

End of period

​

​

542

​

​

3,878

初始確認使用權資產 (1)

​

​

2,819

​

​

3,878

租賃負債的初始確認 (1)

​

​

3,106

​

​

​

移除使用權資產

​

​

​

​

​

785

租賃負債的清除

​

​

​

​

​

820

與FNCB的合併(2)

​

​

​

​

​

​

已取得有形資產

​

​

1,729,872

​

​

​

商譽及其他無形資產

​

​

51,205

​

​

​

負債

​

​

1,676,207

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(1) 作爲FNCb合併的結果而被認可

​

​

​

​

​

​

​

(2) 請查看未經審計的合併基本報表附註

​

​

​

7

目錄

人民金融服務公司。

合併的說明基本報表（未經審計）

(以千美元爲單位，除每股數據外)

​

1. 重要會計政策概述：

​

業務性質

​

人民金融服務公司是一家根據賓夕法尼亞州法律註冊的銀行控股公司，通過其全資直接和間接子公司提供全方位的金融服務，包括人民安防銀行和信託公司（「人民銀行」）和1st 設備融資公司，統稱爲「公司」或「人民」。公司通過 三十九 擁有全方位服務的社區銀行辦公室，位於賓夕法尼亞州的阿勒格尼、巴克斯、拉庫萬納、萊巴嫩、雷霍博斯、盧澤恩、門羅、蒙哥馬利、北安普頓、薩斯奎漢納、韋恩和懷俄明縣，新澤西州的米iddlesex縣以及紐約州的布魯姆縣。

​

做法的基礎

​

公司的伴隨未經審計的合併基本報表已根據美國公認會計原則（「GAAP」）爲臨時財務信息的要求以及10-Q表格的說明和S-X法規第10-01條的規定編制。在管理層的意見中，已包含所有正常的例行調整，以公平地呈現合併財務狀況和各個期間的經營成果。所有重要的公司間餘額和交易在合併中已被消除。先前期間的金額在必要時進行了重新分類，以符合本年度的呈現。這些重新分類對公司的合併經營成果或財務狀況沒有任何影響。公司截至2024年9月30日的三個和九個月的合併經營成果和財務狀況，並不一定能反映未來可能預期的合併運營和財務狀況的結果。

​

按GAAP編制合併基本報表要求管理層進行估計和假設，這會影響合併基本報表日期報告的資產和負債的報告金額，以及報告期內收入和支出的報告金額。特別容易在短期內發生重大變化的重大估計包括信用損失準備金的確定、金融工具的公允價值、商業合併中所獲取的資產和假定負債的公允價值、遞延稅資產的估值以及商譽的減值。實際結果可能與這些估計不同。有關GAAP下所需的額外信息和披露，請參閱公司截至2023年12月31日的10-k年度報告。

​

第四季度分紅聲明，公司董事會宣佈進行第四季度每股分紅

​

在 2024年10月25日每股 $0.6175 。該分紅將於 December 13, 2024 2024年11月29日該分紅與2024年第三季度宣佈的分紅一致，且是 50.6 % 相較於前一年的第四季度有所增加，這在公司與FNCb的合併協議中有所考慮。

​

最近的會計準則

​

不時，會計準則委員會（「FASB」）或其他標準制定機構會發布新的會計公告，公司會在要求的生效日期採用這些公告。以下內容應與公司截至2023年12月31日的10-K年度報告中包含的合併基本報表附註中的第1條重要會計政策摘要一起閱讀。

​

除非另有討論，管理層相信任何最近發佈的標準的影響，包括那些尚未生效的，將不會對公司的合併基本報表產生重大影響。

​

ASU 2024-01，「補償 - 股票補償（主題718） - 利潤利益及類似獎勵的範圍應用」（ASU 2024-01） 闡明一個實體如何確定利潤利益或類似獎勵是否在範圍內

8

目錄

人民金融服務公司

合併附註D 基本報表（未經審計）

(以千美元爲單位，除每股數據外)

​

話題718的條款或者不是基於股份的付款安排，因此在其他指導的範圍內。ASU 2024-01提供了一個具有多種事實模式的示例，並且還修訂了話題718的「範圍」和「範圍例外」部分中的某些語言，以改善其清晰度和可操作性，而不改變指導。實體可以選擇將修訂追溯適用於財務報表中呈現的所有先前期間，或者適用於在採用日期或之後授予或修改的利潤權益和類似獎勵。如果選擇前瞻性應用，實體必須披露會計原則變更的性質和原因。ASU 2024-01自2025年1月1日起生效，包括中期期間，並且預計不會對合並基本報表產生重大影響。

​

ASU 2024-02 "分類改進"（"ASU 2024-02"） 修訂了分類法，移除對各種概念聲明的引用，並影響分類法中的多種話題。修訂適用於所有在受影響會計指導範圍內的報告實體，但在大多數情況下，移除的引用是多餘的，並非理解或應用指導所必需。一般來說，ASU 2024-02 的修訂並不打算對大多數實體造成重大會計變化。ASU 2024-02 自2025年1月1日起生效，預計不會對基本報表產生重大影響。

​

​

2. 業務組合：

​

於2024年7月1日（「收購日期」），公司根據2023年9月27日簽署的最終合併協議和計劃完成了對FNCb Bancorp, Inc.（一家賓夕法尼亞州公司「FNCB」）的收購，參與方爲公司與FNCb。 根據合併協議，在收購日期，FNCb與Peoples合併，Peoples作爲存續公司繼續存在，緊接着合併後，FNCb銀行（一家賓夕法尼亞州特許銀行「FNCb Bank」）與Peoples銀行合併，Peoples銀行作爲存續銀行（統稱爲「合併」）。 合併的主要原因包括：擴展分支網絡和在賓夕法尼亞州東北部佔據市場份額；具有吸引力的低成本資金基礎；強大的文化契合度以及對Peoples和FNCB股東、客戶、員工和服務社區的深切承諾；爲股東創造有意義的價值；提高交易流動性；以及增加People的股東分紅。

​

在合併完成的相關事項中，前FNCb的股東收到了 0.1460 每股FNCb普通股可獲得公司的普通股133.7 該交易對價的總價值約爲$ 2,935,456 金額爲$的公司普通股份，即股，按照其所值進行了購買。該公司是一家營銷和科技解決方案提供商。購買協議還包括對公司和Caesar的其他合同要求，包括在兩年內發行額外的股份，共發行了所有股份，截至2023年10月31日。截至2024年7月31日和2024年4月30日，Caesar的普通股價值未發生觀察到的價格變動，公司將其對Caesar的所有權計量爲成本，金額爲$。45.54 每股的對價爲， 這是2024年6月28日公司普通股的收盤價，即合併完成前的最後一個交易日。總對價中還包括現金，以替代任何碎股，這在成交時有效結算。

​

FNCb的收購被視爲使用收購法進行的業務合併，因此，獲得的資產、承擔的負債和支付的對價在收購日期按估計的公允價值記錄。支付的對價超出所獲得的淨資產公允價值的部分已在公司的合併基本報表中報告爲商譽。$13.6 由於合併而產生的百萬商譽不可攤銷或在稅務上可扣除。商譽的金額代表一個資產，該資產歸因於在業務合併中獲得的其他資產所帶來的未來利益。未來利益在很大程度上包括合併FNCb和Peoples的運營預期帶來的協同效應和規模經濟。Peoples目前沒有爲GAAP提供分段報告，因此商譽將分配給整個運營公司。

​

公司認爲其對獲得的貸款和其他資產的評估是初步的，因爲管理層繼續識別和評估有關這些獲得的資產和承擔的負債的性質的信息，包括擴展信息收集、管理審查程序及任何由於整合活動而可能出現的新信息。因此，當前和遞延稅項記錄的金額也被視爲初步的，因爲公司繼續評估這些其他獲得的資產和其他承擔的負債的賬面與稅基之間的永久和暫時差異的性質和程度。雖然公司相信截至2024年9月30日可獲得的信息爲估計公允價值提供了合理的基礎，但仍有可能出現額外的

9

目錄

人民金融服務公司

合併說明基本報表（未經審計）

(以千美元爲單位，除每股數據外)

​

在測量期間的其餘時間，可能會獲得信息，這些信息可能導致所呈現的公允價值發生變化。

​

公司將繼續保持商譽的計量，以便對某些帳戶的公允價值進行任何附加調整，例如在公司對任何更新信息的最終審查程序中可能產生的貸款。如果認爲有必要，對收購日期後的前十二個月內所收購的資產和假設的負債、可識別的無形資產或其他購置會計調整的公允價值進行任何後續調整將導致商譽調整。

​

由於FNCb的業務整合，無法判斷自收購日期以來FNCb在公司合併運營結果中包含的營業收入或淨利潤，因爲FNCB的結果無法單獨識別。

​

未呈現前一年期間的比較預測基本報表，因爲對這些報表的調整並不能反映如果在2023年1月1日進行收購所發生的情況。特別是，記錄貸款的公允價值、信用損失準備或核心存款無形資產所需的調整將無法進行實際估計。

​

10

目錄

人民金融服務公司

合併附註D 基本報表（未經審計）

(以千美元爲單位，除每股數據外)

​

與收購相關的支付對價，以及截至收購日期所識別的資產的公允價值和承擔的負債，彙總如下表：

​

​

​

​

​

​

​

​

​

​

(千位美元)

​

​

    

​

​

    

​

​

購買價格考慮

​

​

​

​

​

​

​

​

FNCb Bancorp, Inc. 普通股已結算用於股票

​

​

​

​

​

​

​

20,110,771

換股比率

​

​

​

​

​

​

​

0.146

人民金融服務公司發行的分享

​

​

​

​

​

​

​

2,935,456

2024年6月28日人民金融服務公司普通股每股價格

​

​

​

​

​

​

​

45.54

普通股的購買價格考慮

​

​

​

​

​

​

$

133,681

以現金的方式獲得碎股

​

​

​

​

​

​

​

32

總購買價格考慮

​

​

​

​

​

​

$

133,713

​

​

​

​

​

​

​

​

​

​

​

FNCb Bancorp, Inc.
賬面價值
6/30/2024

​

​

公允價值調整

​

​

FNCb Bancorp, Inc.
公允價值
6/30/2024

總購買價格考慮

​

​

​

​

​

​

​

​

​

$

​

​

$

​

​

$

133,713

融資租賃權利使用資產，淨額

​

​

​

​

​

​

​

​

現金及現金等價物

​

28,843

​

​

​

​

​

28,843

投資證券

​

426,107

​

​

(4,180)

​

​

421,927

投資貸款

​

1,267,330

​

​

(71,579)

​

​

1,195,751

信貸損失準備

​

(13,921)

​

​

12,353

​

​

(1,568)

持有的投資，扣除減值準備後淨額

​

1,253,409

​

​

(59,226)

​

​

1,194,183

限制性股票

​

9,934

​

​

​

​

​

9,934

資產和設備淨值

​

13,960

​

​

593

​

​

14,553

應計利息應收款

​

7,448

​

​

​

​

​

7,448

核心存款無形資產

​

​

​

​

36,629

​

​

36,629

财富管理客戶名單無形資產

​

​

​

​

988

​

​

988

遞延所得稅資產

​

14,415

​

​

5,083

​

​

19,498

經營租賃權資產

​

2,821

​

​

263

​

​

3,084

其他資產

​

62,728

​

​

(3,483)

​

​

59,245

已取得的可識別資產總額

​

1,819,665

​

​

(23,333)

​

​

1,796,332

​

​

​

​

​

​

​

​

​

按金

​

1,429,406

​

​

(2,405)

​

​

1,427,001

借款

​

227,135

​

​

(851)

​

​

226,284

信託優先股

​

10,310

​

​

(2,318)

​

​

7,992

應計利息負債

​

1,966

​

​

​

​

​

1,966

經營租賃負債

​

3,082

​

​

​

​

​

3,082

其他負債

​

9,704

​

​

178

​

​

9,882

承擔的總負債

​

1,681,603

​

​

(5,396)

​

​

1,676,207

可辨認淨資產合計

​

$ 138,062

​

​

($ 17,937)

​

​

$ 120,125

商譽

​

​

​

​

​

​

​

$ 13,588

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

以下是關於評估方法的討論，這些方法用於估計在FNCb合併中所獲得的主要資產類別的公允價值及所承擔的負債的公允價值。公司使用了獨立的評估專家來協助確定某些獲得的資產和承擔的負債的公允價值。

11

目錄

人民金融服務公司

合併財務報表注D基本報表（未經審計）

(以千美元爲單位，除每股數據外)

​

現金及現金等價物

​

估計的公允價值被判斷爲接近這些資產的賬面價值。

​

投資證券

​

所有收購的投資均被分類爲可供出售。資產負債表調整的$4.1 百萬反映了與交易後不久出售的某些證券相關的公允價值調整，由實際市場價格確定。附加信息包含在註釋5中。

​

貸款

​

收購的貸款投資組合是使用三級輸入進行估值的，包括使用貼現現金流量法在積累貸款的泳池基礎上應用，以及在個別貸款上應用，涵蓋了市場參與者在估算公允價值時可能使用的假設。在公允價值過程中，積累貸款根據特徵（如貸款類型、期限、抵押品和利率）分組。公司制定了關於信用風險、預期壽命損失、定性因素、抵押品價值、貼現率、預期支付和預期提前還款的假設。在可靠的市場信息不可得時，公司使用自己的假設，努力確定合理的公允價值。具體而言，公司創建了 三 單獨的公允價值調整，市場參與者將用以估算總公允價值調整。 三 公允價值調整使用了：（i）利率貸款公允價值調整；（ii）一般信用公允價值調整；以及（iii）具體信用公允價值調整。

​

爲準備利率公允價值調整，從各種數據來源獲取類似貸款的市場貼現率，以制定市場參與者的假設。一般信用公允價值調整是使用了一個兩部分的一般信用公允價值調整進行計算：（i）預期壽命損失和（ii）定性因素的預估公允價值調整。預期壽命損失是使用收購銀行和賓夕法尼亞州同行銀行的歷史損失進行計算的。與定性因素相關的調整受一般經濟情況以及與機構的核保過程缺乏經驗有關的風險的影響。

​

已收購的貸款分爲三類:購買信用惡化（「PCD」）應計貸款（「PCD 應計貸款」），購買信用惡化未應計貸款（「PCD 未應計貸款」）和非PCD貸款。 PCD貸款被定義爲自起初以來經歷了超過微不足道的信用惡化的貸款或一組貸款。 公司在鑑定信用惡化超過微不足道的各種因素方面進行考慮，包括但不限於不良狀態、拖欠、風險評級和其他指示自起初以來信用質量惡化的定性因素。 在收購日期後，將爲非PCD貸款設立準備金，該準備金將通過信貸損失準備來確認爲費用。 對於PCD貸款，這些貸款在收購日期以其攤銷成本記賬，減去了180萬美元的信貸損失準備金。 PCD貸款上沒有承認信貸損失費用準備金，因爲最初的準備金是通過增加PCD貸款的攤銷成本而設立的。 攤銷成本基礎和信用損失準備金之間的剩餘差額與收購日期分配給貸款的公允價值之間的差異被確認爲一項非信貸相關折價，該折價將在貸款的期限內逐步計入利息收入。

​

下表提供了關於已收購的PCD貸款的公允價值的詳細信息。

​

​

​

​

​

​

​

​

​

​

​

​

​

以千美元爲單位的金額

    

​

未償還本金餘額

    

​

收購時的非信用折扣

    

​

收購時的信貸虧損撥備

    

​

在收購時的PCD貸款公允價值

PCD應計利息

    

$

95,851

    

$

(3,626)

    

$

1,841

    

$

94,066

PCD未應計利息

​

​

10,470

​

​

(2,898)

​

​

​

​

​

7,572

Total PCD loans

​

$

106,321

​

$

(6,524)

​

$

1,841

​

$

101,638

12

目錄

人民金融服務公司

綜合財務報表附註未經審計的財務報表 (UNAUDITED)

(以千美元爲單位，除每股數據外)

​

​

非貨幣貶值貸款的首日預付款準備金爲$14.3 百萬美元通過綜合收入（損失）和綜合收入（損失）報表中的信貸損失準備記錄。在收購日期，從FNCb收購的貸款中，其中有$1.3 十億美元貸款的$1.2 十二月三十一日，經紀投資帳戶的存款（不包括CDARS和ICS雙向帳戶）爲$ 91.5，FNCB貸款組合的%被視爲非PCD貸款。

​

土地和建築

​

房地產的估計公允價值是基於獨立第三方的評估。設備的估計公允價值被確定爲大致等於這些資產的賬面價值。

​

核心存款無形資產

​

公允價值是根據ASC主題820下的收入法確定的。本現值分析計算了每種收購的核心存款類型預期稅後現金流收益與獲得另一種資金來源（經紀存款和FHLb借款）成本的預期存續期內，以長期市場定向稅後收益率貼現的差異。該估值還包括了與預期帳戶減少、利息成本和存款維護成本以及存款手續費收入相關的假設。核心存款無形資產的價值爲 $36.6截至2023年9月30日，公司的合同資產總餘額增加了5.1% 的核心存款。核心存款無形資產以加速方式按照 10年 基於估計經濟效益預計收到的期間進行攤銷。截至2024年9月30日三個月的攤銷費用爲 $1.7 百萬美元。附加信息請參閱附註6。

​

遞延所得稅資產

​

公司記錄了一筆淨遞延所得稅資產，金額爲$19.5 百萬，相關於FNCb的稅收屬性，以及因應用購買會計方法而導致的公允價值調整影響。

​

定期存款

​

通過貼現現金流量法確定了定期存款的預估公允價值。定期存款帳戶的公允價值是通過將單個帳戶數據彙編成相同剩餘到期日的組，與相應計算的加權平均利率進行比較進行確定的。每個到期日組的加權平均利率與類似到期日的市場利率進行比較，然後依據類似條款和剩餘到期日的定期存款所提供的市場利率定價。

​

借款和次級債務

​

通過貼現現金流量法確定了短期借款的預估公允價值以逼近規定價值。次級債券的價值是通過採用包含類似條款、到期日和信用評級的貼現率的貼現現金流量法來進行估值的。

​

13

目錄

人民金融服務公司

合併說明D 基本報表（未經審計）

(以千美元爲單位，除每股數據外)

​

合併相關費用

與收購相關的費用總計爲$9.7 百萬美元和美元11.2 在截至2024年9月30日的三個和九個月期間，金額爲百萬。這些費用在發生時計入支出，並記錄爲合併相關費用，在綜合損益表中體現。下表詳細列出了識別並分類爲收購的合併相關費用。

​

​

​

​

​

​

​

​

​

​

截至三個月

​

截至九個月

​

​

2024年9月30日

​

2024年9月30日

解僱費用

​

$

187

​

$

187

系統終止和整合費用

​

​

8,375

​

​

8,551

財務諮詢費用

​

​

582

​

​

1,173

法律和專業費用

​

​

87

​

​

772

其他與合併相關的費用

​

​

422

​

​

527

總計

​

$

9,653

​

$

11,210

​

​

​

3. 其他綜合收益（損失）：

​

T其他綜合收益（損失）（"OCI"）的元件及其相關稅務影響在合併收益（損失）及綜合收益（損失）報表中報告。合併資產負債表中包含的累計其他綜合損失與可出售投資證券的淨未實現收益和損失、福利計劃調整以及衍生品公允價值的調整有關。

​

在2024年9月30日和2023年12月31日，包含在股東權益中的累計其他綜合損失的元件如下：

​

​

​

​

​

​

​

​

​

(千位美元)

    

​

2024年9月30日

    

​

2023年12月31日

 

可供出售投資證券的淨未實現損失

​

$

(38,784)

​

$

(51,527)

​

所得稅優惠

​

 

(8,482)

​

 

(11,270)

​

扣除所得稅後的淨額

​

 

(30,302)

​

 

(40,257)

​

福利計劃調整

​

 

(4,370)

​

 

(4,370)

​

所得稅優惠

​

 

(956)

​

 

(956)

​

扣除所得稅

​

 

(3,414)

​

 

(3,414)

​

衍生工具調整

​

 

(1,056)

​

 

(871)

​

所得稅優惠

​

 

(231)

​

 

(191)

​

扣除所得稅後

​

 

(825)

​

 

(680)

​

累計其他綜合損失

​

$

(34,541)

​

$

(44,351)

​

​

​

​

4. 每股收益：

​

基本每股收益是可供普通股股東的收入除以期間內流通的加權平均普通股數量。 稀釋每股收益反映瞭如果發行稀釋性潛在普通股，原本會流通的額外普通股數量，以及假設發行所導致的收入任何調整。

14

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

The following table presents the calculation of both basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands, except per share data)

​

2024

​

2023

For the Three Months Ended September 30,

    

Basic  

    

Diluted  

    

Basic  

    

Diluted  

Net (loss) income

    

$

(4,337)

    

$

(4,337)

    

$

6,746

    

$

6,746

Average common shares outstanding

​

 

9,987,627

​

 

10,044,449

​

 

7,088,745

​

 

7,120,685

(Loss) earnings per share

​

$

(0.43)

​

$

(0.43)

​

$

0.95

​

$

0.95

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands, except per share data)

​

2024

​

2023

For the Nine Months Ended September 30,

​

Basic  

​

Diluted  

​

Basic  

    

Diluted  

Net income

    

$

2,411

    

$

2,411

    

$

23,750

    

$

23,750

Average common shares outstanding

​

 

8,039,734

​

 

8,094,036

​

 

7,130,506

​

 

7,165,570

Earnings per share

​

$

0.30

​

$

0.30

​

$

3.33

​

$

3.31

​

​

​

5. Investment securities:

​

The amortized cost and fair value of investment securities aggregated by investment category at September 30, 2024 and December 31, 2023 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

​

​

​

​

Gross

​

Gross

​

​

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

 

(Dollars in thousands)

    

Cost  

    

Gains  

    

Losses  

    

Value  

 

Available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

$

189,190

​

$

​

​

$

8,375

​

$

180,815

​

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

​

​

​

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

85,468

​

​

109

​

​

8,186

​

 

77,391

​

Tax-exempt

​

 

76,570

​

 

67

​

​

8,467

​

 

68,170

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

 

1,451

​

 

30

​

​

​

​

 

1,481

​

U.S. government-sponsored enterprises

​

 

144,244

​

 

1,362

​

 

15,536

​

 

130,070

​

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

 

4,608

​

 

​

​

 

60

​

 

4,548

​

Private collateralized mortgage obligations

​

​

42,624

​

​

635

​

​

12

​

​

43,247

​

Asset backed securities

​

​

24,115

​

​

44

​

​

314

​

​

23,845

​

Corporate debt securities

​

​

32,307

​

​

622

​

​

717

​

​

32,212

​

Negotiable certificates of deposit

​

​

693

​

​

14

​

​

​

​

​

707

​

Total available for sale

​

$

601,270

​

$

2,883

​

$

41,667

​

$

562,486

​

Held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt state and municipals

​

$

11,175

​

$

​

​

$

835

​

$

10,340

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

 

14,151

​

 

​

​

​

2,298

​

 

11,853

​

U.S. government-sponsored enterprises

​

 

54,535

​

 

​

​

​

7,694

​

 

46,841

​

Total held to maturity

​

$

79,861

​

$

​

​

$

10,827

​

$

69,034

​

​

15

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

December 31, 2023

 

​

​

​

​

​

Gross

    

Gross

​

​

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

 

(Dollars in thousands)

    

Cost  

    

Gains  

    

Losses  

    

Value  

 

Available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

$

197,920

​

$

​

​

$

13,863

​

$

184,057

​

U.S. government-sponsored enterprises

​

​

2,539

​

​

​

​

​

387

​

 

2,152

​

State and municipals:

​

 

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

67,831

​

 

​

​

​

10,731

​

 

57,100

​

Tax-exempt

​

 

75,742

​

 

​

​

 

8,618

​

 

67,124

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

 

758

​

 

​

​

 

34

​

 

724

​

U.S. government-sponsored enterprises

​

 

89,935

​

 

​

​

 

17,264

​

 

72,671

​

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

11,729

​

​

​

​

​

360

​

​

11,369

​

Corporate debt securities

​

​

4,000

​

​

​

​

​

270

​

​

3,730

​

Total available for sale

​

$

450,454

​

$

​

​

$

51,527

​

$

398,927

​

Held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt state and municipals

​

$

11,201

​

$

1

​

$

660

​

$

10,542

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

​

15,400

​

 

​

​

​

2,653

​

 

12,747

​

U.S. government-sponsored enterprises

​

 

58,250

​

 

​

​

​

9,841

​

 

48,409

​

Total held to maturity

​

$

84,851

​

$

1

​

$

13,154

​

$

71,698

​

​

The Company did not sell any investments from its legacy securities portfolio during the three and nine months ended September 30, 2024. Immediately after the consummation of the FNCB merger, the Company sold a significant portion of the available for sale investments acquired from FNCB and used the proceeds of $241.3 million to repay short-term borrowings and build on-balance sheet liquidity; there were no gains or losses realized on the sale. During the nine-month period ended September 30, 2023, investment securities, including U.S. Treasury bonds and mortgage-backed securities, with a par value of $65.6 million were sold at a net gain of $81 thousand. The proceeds were used to pay-down higher cost short-term borrowings.

​

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified as available for sale at September 30, 2024, is summarized as follows:

​

​

​

​

​

​

​

​

​

​

Amortized

 

Fair

(Dollars in thousands)

    

Cost

 

Value

Within one year

​

$

74,667

​

$

73,596

After one but within five years

​

 

163,400

​

 

154,865

After five but within ten years

​

 

77,493

​

 

71,741

After ten years

​

 

68,668

​

 

59,093

​

​

 

384,228

​

 

359,295

Mortgage-backed and other amortizing securities

​

 

217,042

​

 

203,191

Total

​

$

601,270

​

$

562,486

​

16

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

 The maturity distribution of the amortized cost and fair value, of debt securities classified as held to maturity at September 30, 2024, is summarized as follows:

​

​

​

​

​

​

​

​

​

​

Amortized

​

Fair

(Dollars in thousands)

    

Cost 

    

Value  

After one but within five years

​

$

1,191

​

$

1,096

After five but within ten years

​

​

9,984

​

​

9,244

​

​

 

11,175

​

 

10,340

Mortgage-backed securities

​

 

68,686

​

 

58,694

Total

​

$

79,861

​

$

69,034

​

Securities with a carrying value of $368.6 million and $322.4 million at September 30, 2024 and December 31, 2023, respectively, were pledged to secure public deposits and certain other deposits as required or permitted by law and pledged to the Discount Window at the Federal Reserve

​

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on a case-by-case basis. At September 30, 2024, there were no significant concentrations of credit risk from any one issuer, with the exception of U.S. government agencies and sponsored enterprises, which exceeded 10.0 percent of stockholders’ equity.

​

The fair value and gross unrealized losses of investment securities with unrealized losses at September 30, 2024 and December 31, 2023, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

Less than
Twelve Months

​

Twelve Months
or Longer

​

Total

​

​

Total #
in a loss

​

​

​

​

Unrealized

​

Total #
in a loss

​

​

​

​

Unrealized

​

Total #
in a loss

​

​

​

​

Unrealized

(Dollars in thousands)

​

Position

​

​

Fair Value

​

Losses

​

Position

​

​

Fair Value

​

Losses

​

Position

​

​

Fair Value

​

Losses

Securities Available for Sale

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

​

​

​

​

​

​

​

​

41

​

$

180,815

​

$

8,375

​

41

​

$

180,815

​

$

8,375

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

​

​

​

​

​

​

​

​

64

​

​

58,033

​

​

8,186

​

64

​

​

58,033

​

​

8,186

Tax-exempt

​

1

​

​

680

​

​

​

​

91

​

​

64,293

​

​

8,467

​

92

​

​

64,973

​

​

8,467

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

​

​

​

​

​

​

​

​

1

​

​

6

​

​

0

​

1

​

​

6

​

​

0

U.S. government-sponsored enterprises

​

1

​

​

3,601

​

​

41

​

31

​

​

73,997

​

​

15,495

​

32

​

​

77,598

​

​

15,536

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

2

​

​

4,548

​

​

60

​

2

​

​

4,548

​

​

60

Private collateralized mortgage obligations

​

9

​

​

7,699

​

​

12

​

​

​

​

​

​

​

​

​

9

​

​

7,699

​

​

12

Asset-backed securities

​

3

​

​

2,818

​

​

11

​

1

​

​

2,024

​

​

303

​

4

​

​

4,842

​

​

314

Corporate debt securities

​

6

​

​

6,034

​

​

315

​

6

​

​

3,599

​

​

402

​

12

​

​

9,633

​

​

717

Total

​

20

​

$

20,832

​

$

379

​

237

​

$

387,315

​

$

41,288

​

257

​

$

408,147

​

$

41,667

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities Held to Maturity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt

​

4

​

$

1,182

​

$

7

​

12

​

$

7,453

​

$

828

​

16

​

$

8,635

​

$

835

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

​

​

​

​

​

​

​

​

4

​

​

11,853

​

​

2,298

​

4

​

​

11,853

​

​

2,298

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

8

​

​

46,841

​

​

7,694

​

8

​

​

46,841

​

​

7,694

Total

​

4

​

$

1,182

​

$

7

​

24

​

$

66,147

​

$

10,820

​

28

​

$

67,329

​

$

10,827

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

17

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

Less than
Twelve Months

​

Twelve Months
or Longer

​

Total

​

​

Total #
in a loss

​

​

​

​

​

Unrealized

​

Total #
in a loss

​

​

​

​

​

Unrealized

​

Total #
in a loss

​

​

​

​

​

Unrealized

(Dollars in thousands)

​

Position

​

​

Fair Value

​

​

Losses

​

Position

​

​

Fair Value

​

​

Losses

​

Position

​

​

Fair Value

​

​

Losses

Securities Available for Sale

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

​

​

​

​

​

​

​

​

43

​

$

184,057

​

$

13,863

​

43

​

$

184,057

​

$

13,863

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

2

​

​

2,152

​

​

387

​

2

​

​

2,152

​

​

387

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

1

​

$

995

​

$

6

​

65

​

​

56,105

​

​

10,725

​

66

​

​

57,100

​

​

10,731

Tax-exempt

​

2

​

​

575

​

​

5

​

93

​

​

66,393

​

​

8,613

​

95

​

​

66,968

​

​

8,618

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

​

​

​

​

​

​

​

​

3

​

​

724

​

​

34

​

3

​

​

724

​

​

34

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

32

​

​

72,671

​

​

17,264

​

32

​

​

72,671

​

​

17,264

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

4

​

​

11,369

​

​

360

​

4

​

​

11,369

​

​

360

Corporate debt securities

​

​

​

​

​

​

​

​

​

6

​

​

3,730

​

​

270

​

6

​

​

3,730

​

​

270

Total

​

3

​

$

1,570

​

$

11

​

248

​

$

397,201

​

$

51,516

​

251

​

$

398,771

​

$

51,527

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities Held to Maturity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt

​

2

​

$

1,438

​

$

36

​

10

​

$

6,209

​

$

624

​

12

​

$

7,647

​

$

660

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

0

​

​

0

​

​

0

​

0

​

​

0

​

​

0

U.S. government agencies

​

​

​

​

​

​

​

​

​

4

​

​

12,747

​

​

2,653

​

4

​

​

12,747

​

​

2,653

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

8

​

​

48,409

​

​

9,841

​

8

​

​

48,409

​

​

9,841

Total

​

2

​

$

1,438

​

$

36

​

22

​

$

67,365

​

$

13,118

​

24

​

$

68,803

​

$

13,154

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Management considered whether a credit loss existed related to the investments in an unrealized loss position by determining (i) whether the decline in fair value is attributable to adverse conditions specifically related to the financial condition of the security issuer or specific conditions in an industry or geographic area; (ii) whether the credit rating of the issuer of the security has been downgraded; (iii) whether dividend or interest payments have been reduced or have not been made and (iv) an adverse change in the remaining expected cash flows from the security such that the Company will not recover the amortized cost of the security. If the decline is judged to be due to factors related to credit, the credit loss should be recorded as an allowance for credit losses (“ACL”) with an offsetting entry to net income. The portion of the loss related to non-credit factors are recorded in OCI.

​

Based on management’s assessment of the factors identified above, it is determined the fair value of all the identified investments being less than the amortized costs is primarily caused by the rapid increase in market rates and not credit quality. All interest payments have been received as scheduled, substantially all debt securities are rated above investment grade and no material downgrades announced. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider the unrealized loss to be credit related, thus no allowance for credit loss expense was recorded at September 30, 2024 or December 31, 2023.

​

Equity Securities

 

Included in equity securities with readily determinable fair values at September 30, 2024 were investments in the common or preferred stock of publicly traded bank holding companies and an investment in a mutual fund comprised of 1-4 family residential mortgage-backed securities collateralized by properties within the Company’s market area. Equity securities with readily determinable fair values are reported at fair value with net unrealized gains and losses recognized in the consolidated statements of income (loss) and comprehensive income (loss).

​

​

​

18

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

The following table presents unrealized and realized gains and losses recognized in net income on equity securities for the three and nine months ended September 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended

​

​

For the nine months ended

(Dollars in thousands)

​

​

September 30, 2024

​

​

September 30, 2023

​

​

September 30, 2024

​

​

September 30, 2023

Net gains (losses) recognized on equity securities

​

$

175

​

​

​

​

$

155

​

$

(17)

Less: net gains realized on equity securities sold

​

​

54

​

​

​

​

​

54

​

​

​

Unrealized gains (losses) on equity securities

​

$

121

​

​

​

​

$

101

​

$

(17)

​

​

Equity Securities without Readily Determinable Fair Values

​

At September 30, 2024 and December 31, 2023, equity securities without readily determinable fair values consisted primarily of Federal Home Loan Bank (“FHLB”) of Pittsburgh stock totaling $7.7 million and $5.2 million, respectively. At September 30, 2024, equity securities without readily determinable fair values also included a $500 thousand investment in a fixed-rate, non-cumulative perpetual preferred stock of a privately-held bank holding company acquired through the merger with FNCB. The preferred stock, which is not traded on any established market, pays quarterly dividends at an annual rate of 8.25%. Equity securities without readily determinable fair values are evaluated for impairment whenever events or circumstances suggest that their carrying value may not be recoverable are included in other assets in the Consolidated Balance Sheets.

​

19

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

6. Goodwill and Other Intangibles:

​

The following table provides information on the significant components of goodwill and other acquired intangible assets at September 30, 2024 and December 31, 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

​

Gross

​

​

​

​

​

Accumulated

​

​

​

​

​

Net

​

​

​

Carrying

​

​

​

​

​

Impairment

​

​

Accumulated

​

​

Carrying

(Dollars in thousands)

    

​

Amount

    

​

Additions

    

​

Charges

    

​

Amortization

    

​

Amount

Goodwill

​

$

63,370

​

$

13,588

​

$

​

​

$

​

​

$

76,958

Total goodwill

​

$

63,370

​

$

13,588

​

$

​

​

$

​

​

$

76,958

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Core deposit intangible

​

$

​

​

$

36,629

​

$

​

​

$

1,665

​

$

34,964

Wealth management customer list intangible

​

​

​

​

​

988

​

​

​

​

​

45

​

​

943

Total intangible assets, net

​

$

​

​

$

37,617

​

$

​

​

$

1,710

​

$

35,907

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

​

Gross

​

​

​

​

​

Accumulated

​

​

​

​

​

Net

​

​

​

Carrying

​

​

​

​

​

Impairment

​

​

Accumulated

​

​

Carrying

(Dollars in thousands)

​

​

Amount

​

​

Additions

​

​

Charges

​

​

Amortization

​

​

Amount

Goodwill

​

$

63,370

​

$

​

​

$

​

​

$

​

​

$

63,370

Total goodwill

​

$

63,370

​

$

​

​

$

​

​

$

​

​

$

63,370

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The aggregate amortization expense was $1.7 million for the three and nine months ended September 30, 2024. There was $29 thousand and $86 thousand of expense for the three and nine months ended September 30, 2023, respectively.

​

20

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

At September 30, 2024, estimated future remaining amortization of the core deposit intangible and wealth management customer list intangible within the years ending December 31, are as follows:

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

    

CDI

Wealth management customer list intangible

​

Total

2024

    

$

1,665

$

45

​

$

1,710

2025

​

 

6,327

 

171

​

 

6,498

2026

​

 

5,661

​

153

​

 

5,814

2027

​

 

4,995

 

135

​

 

5,130

2028

​

 

4,329

 

117

​

 

4,446

Thereafter

​

 

11,987

 

322

​

 

12,309

Total amortizing intangible

​

$

34,964

$

943

​

$

35,907

​

​

7. Loans, net and allowance for credit losses:

​

The major classifications of loans outstanding, net of deferred loan origination fees and costs at September 30, 2024 and December 31, 2023 are summarized as follows. The Company had net deferred loan origination fees of $1.0 million and $0.4 million at September 30, 2024 and December 31, 2023, respectively. Included in total loans at September 30, 2024 were $1.2 billion in loans acquired as part of the acquisition of FNCB effective July 1, 2024.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

    

​

September 30, 2024

    

December 31, 2023

Commercial and Industrial

​

$

699,912

​

$

368,411

Municipal

​

​

190,167

​

​

175,304

Total

​

​

890,079

​

​

543,715

Real estate

​

​

​

​

​

​

Commercial

​

​

2,309,588

​

 

1,863,118

Residential

​

​

550,590

​

 

360,803

Total

​

​

2,860,178

​

​

2,223,921

Consumer

​

​

​

​

​

​

Indirect Auto

​

​

130,380

​

​

75,389

Consumer Other

​

​

15,580

​

 

6,872

Total

​

​

145,960

​

​

82,261

​

​

​

​

​

​

​

Equipment Financing

​

​

173,466

​

​

​

Total

​

$

4,069,683

​

$

2,849,897

​

​

Allowance for Credit Losses

​

The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and held to maturity securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the ACL for loans is considered a critical accounting estimate by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the

21

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

recorded ACL. The ACL related to loans receivable and held to maturity debt securities is reported separately as a contra-asset on the consolidated balance sheets. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the consolidated balance sheets in other liabilities while the provision for credit losses related to unfunded commitments is reported in other noninterest expense in the consolidated statements of income (loss) and comprehensive income (loss).

​

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans, available for sale securities, and held to maturity securities. Accrued interest receivable on loans is reported as a component of accrued interest receivable on the Consolidated Balance Sheets, totaled $15.1 million and $10.6 million at September 30, 2024 and 2023 and is excluded from the estimate of credit losses. Accrued interest receivable on available for sale securities and held to maturity securities, also a component of accrued interest receivable on the Consolidated Balance Sheets, and totaled $2.5 million and $175 thousand, respectively, at September 30, 2024 and is excluded from the estimate of credit losses, as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. At September 30, 2023, accrued interest receivable on available for sale securities and held to maturity securities was $1.6 million and $185 thousand, respectively.

22

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

The following tables present the changes in and period end balance of the allowance for credit losses at September 30, 2024 and 2023. The tables identify the valuation allowances attributable to specifically identified impairments on individually evaluated loans, including those acquired with deteriorated credit quality. The tables include the underlying balance of loans receivable applicable to each category as of those dates.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

​

    

​

​

    

​

​

Real estate

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

    

Commercial

    

Municipal

    

Commercial

    

Residential

    

Consumer

    

Financing

    

Total

 

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning Balance July 1, 2024

​

$

2,171

​

$

711

​

$

15,156

​

$

4,230

​

$

855

​

$

​

​

$

23,123

​

Merger-related adjustments - Non PCD Loans*

​

​

2,259

​

​

502

​

​

4,149

​

​

1,785

​

​

1,470

​

​

4,163

​

​

14,328

​

Merger-related adjustments PCD Loans

​

​

337

​

​

71

​

​

371

​

​

468

​

​

320

​

​

274

​

​

1,841

​

Charge-offs

​

 

(5)

​

​

​

​

​

(26)

​

​

​

​

 

(444)

​

 

(58)

​

 

(533)

​

Recoveries

​

 

10

​

 

​

​

​

70

​

 

4

​

 

310

​

 

58

​

 

452

​

(Credits) provisions

​

 

(162)

​

 

(321)

​

 

2,172

​

 

(1,241)

​

 

(528)

​

 

210

​

 

130

​

Ending balance

​

$

4,610

​

$

963

​

$

21,892

​

$

5,246

​

$

1,983

​

$

4,647

​

$

39,341

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

* See Note 2 - Business Combination and the initial provision for non-PCD loans.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2023

​

​

​

​

​

​

​

​

​

Real estate

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

    

Commercial

    

Municipal

    

Commercial

    

Residential

​

Consumer

​

Financing

​

Total

 

Allowance for loan losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning Balance July 1, 2023

​

$

2,751

​

$

827

​

$

14,961

​

$

3,767

​

$

912

​

$

​

​

$

23,218

​

Charge-offs

​

 

​

​

 

​

​

 

​

​

 

​

​

 

(65)

​

 

​

​

 

(65)

​

Recoveries

​

 

4

​

 

​

​

 

​

​

 

3

​

 

16

​

 

​

​

 

23

​

(Credits) provisions

​

 

(504)

​

 

40

​

 

134

​

 

128

​

 

36

​

 

​

​

 

(166)

​

Ending balance

​

$

2,251

  

$

867

  

$

15,095

​

$

3,898

​

$

899

​

$

​

​

$

23,010

​

23

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

  

September 30, 2024

​

​

  

​

​

​

​

​

​

Real estate  

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

    

Commercial

    

Municipal

    

Commercial  

    

Residential  

    

Consumer  

    

Financing

    

Total

​

Allowance for credit losses:

  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning Balance January 1, 2024

  

$

2,272

​

$

788

​

$

14,153

​

$

3,782

​

$

900

​

​

​

​

$

21,895

​

Merger-related adjustments - Non PCD Loans*

​

​

2,259

​

​

502

​

​

4,149

​

​

1,785

​

​

1,470

​

​

4,163

​

​

14,328

​

Merger-related adjustments PCD Loans

​

​

337

​

​

71

​

​

371

​

​

468

​

​

320

​

​

274

​

​

1,841

​

Charge-offs

  

 

(51)

​

 

​

​

 

(27)

​

​

​

​

 

(640)

​

 

(58)

​

 

(776)

​

Recoveries

  

 

90

​

 

​

​

 

70

​

 

8

​

 

393

​

 

58

​

 

619

​

(Credits) provisions

  

 

(297)

​

​

(398)

​

 

3,176

​

 

(797)

​

 

(460)

​

 

210

​

 

1,434

​

Ending balance

  

$

4,610

  

$

963

  

$

21,892

​

$

5,246

​

$

1,983

​

$

4,647

​

$

39,341

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

* See Note 2 - Business Combination and the initial provision for non-PCD loans.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2023

​

​

​

​

​

​

​

​

​

Real estate  

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

    

Commercial

    

Municipal

    

Commercial  

    

Residential  

​

Consumer  

​

Financing

​

Total

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning Balance January 1, 2023

​

$

4,365

​

$

1,247

​

$

17,915

​

$

3,072

​

$

873

​

$

​

​

$

27,472

​

Impact of adopting ASC 326

​

​

(1,683)

​

​

747

​

​

(3,344)

​

​

967

​

​

30

​

​

​

​

​

(3,283)

​

Beginning Balance January 1, 2023

  

​

2,682

​

​

1,994

​

​

14,571

​

​

4,039

​

​

903

​

​

​

​

​

24,189

​

Charge-offs

​

 

(4)

​

 

​

​

 

​

​

 

​

​

 

(213)

​

 

​

​

 

(217)

​

Recoveries

​

 

9

​

 

​

​

 

1

​

 

22

​

 

109

​

 

​

​

 

141

​

(Credits) provisions

​

 

(436)

​

 

(1,127)

​

 

523

​

 

(163)

​

 

100

​

 

​

​

 

(1,103)

​

Ending balance

​

$

2,251

​

$

867

​

$

15,095

​

$

3,898

​

$

899

​

$

​

​

$

23,010

​

​

24

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

The following table represents the allowance for credit losses by major classification of loan and whether the loans were individually or collectively evaluated and collateral dependent by class of loans at September 30, 2024 and December 31, 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

​

  

​

​

  

​

Real estate

​

​

​

​

Equipment

​

​

​

(Dollars in thousands)

    

Commercial

    

Municipal

    

Commercial

    

Residential

    

Consumer

    

Financing

    

Total

Allowance for credit losses:

​

 

  

​

 

  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

4,610

​

$

963

​

$

21,892

  

$

5,246

​

$

1,983

​

$

4,647

​

$

39,341

Ending balance: individually evaluated

 

 

8

​

 

​

​

​

400

​

​

​

​

​

​

​

​

​

​

 

408

Ending balance: collectively evaluated

 

​

4,602

​

​

963

​

​

21,492

​

​

5,246

​

​

1,983

​

​

4,647

​

​

38,933

Loans receivable:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

699,912

​

$

190,167

​

$

2,309,588

  

$

550,590

​

$

145,960

​

$

173,466

​

$

4,069,683

Individually evaluated - collateral dependent - real estate

​

 

4,180

​

​

​

​

​

11,145

​

​

4,883

​

​

​

​

​

851

​

 

21,059

Individually evaluated - collateral dependent - non-real estate

​

​

7

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

7

Collectively evaluated

​

​

695,725

​

​

190,167

​

​

2,298,443

​

​

545,707

​

​

145,960

​

​

172,615

​

​

4,048,617

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

​

  

​

​

  

​

Real estate

​

​

​

​

Equipment

​

​

​

(Dollars in thousands)

    

Commercial

    

Municipal

    

Commercial

    

Residential

    

Consumer

    

Financing

    

Total

Allowance for loan losses:

​

 

  

​

 

  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

2,272

​

$

788

​

$

14,153

  

$

3,782

​

$

900

​

$

​

​

$

21,895

Ending balance: individually evaluated for impairment

 

 

10

​

 

​

​

​

21

​

​

​

​

​

​

​

​

​

​

 

31

Ending balance: collectively evaluated for impairment

 

​

2,262

​

​

788

​

​

14,132

​

​

3,782

​

​

900

​

​

​

​

​

21,864

Loans receivable:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

368,411

​

$

175,304

​

$

1,863,118

  

$

360,803

​

$

82,261

​

$

​

​

$

2,849,897

Individually evaluated - collateral dependent - real estate

​

 

7

​

​

​

​

​

2,974

​

​

1,749

​

​

​

​

​

​

​

 

4,730

Individually evaluated - collateral dependent - non-real estate

​

​

10

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

10

Collectively evaluated

​

​

368,394

​

​

175,304

​

​

1,860,144

​

​

359,054

​

​

82,261

​

​

​

​

​

2,845,157

​

​

25

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

Nonaccrual Loans

​

The following table presents the Company’s nonaccrual loans, including non-PCD nonaccrual loans, at September 30, 2024 and December 31, 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

​

Total

​

​

Nonaccrual with

​

​

Nonaccrual with

​

​

​

Nonaccrual

​

​

an Allowance for

​

​

no Allowance for

(Dollars in thousands)

    

​

Loans

​

​

Credit Losses

​

​

Credit Losses

Commercial

​

$

4,180

​

$

351

​

$

3,829

Municipal

​

​

​

​

​

​

​

​

​

Real estate:

​

​

​

​

​

​

​

​

​

Commercial

​

 

11,146

​

 

2,620

​

 

8,526

Residential

​

 

4,321

​

 

​

​

 

4,321

Consumer

​

 

451

​

 

​

​

 

451

Equipment Financing

​

​

851

​

​

​

​

​

851

Total

​

$

20,949

​

$

2,971

​

$

17,978

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

​

Total

​

​

Nonaccrual with

​

​

Nonaccrual with

​

​

​

Nonaccrual

​

​

an Allowance for

​

​

no Allowance for

(Dollars in thousands)

    

​

Loans

​

​

Credit Losses

​

​

Credit Losses

Commercial

​

$

10

​

$

10

​

$

​

Municipal

​

​

​

​

​

​

​

​

​

Real estate:

​

​

​

​

​

​

​

​

​

Commercial

​

 

2,974

​

 

1,170

​

 

1,804

Residential

​

 

760

​

 

​

​

 

760

Consumer

​

 

218

​

 

​

​

 

218

Total

​

$

3,962

​

$

1,180

​

$

2,782

​

Interest income recorded on nonaccrual loans was $887 thousand and $11 thousand for the three months ended September 30, 2024 and September 30, 2023, respectively. Interest income recorded on nonaccrual loans was $961 thousand and $426 thousand for the nine months ended September 30, 2024 and September 30, 2023, respectively.

​

The Company segments loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are individually analyzed for credit risk by classifying them within the Company’s internal risk rating system. The Company’s risk rating classifications are defined as follows:

​

●Pass- A loan to borrowers with acceptable credit quality and risk that is not adversely classified as Substandard, Doubtful, Loss nor designated as Special Mention.
●Special Mention- A loan that has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special Mention loans are not adversely classified since they do not expose the Company to sufficient risk to warrant adverse classification
●Substandard- A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Peoples Bank will sustain some loss if the deficiencies are not corrected.

26

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

●Doubtful – A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
●Loss- A loan classified as Loss is considered uncollectible and of such little value that its continuance as bankable loan is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

​

The following table presents the amortized cost of loans and gross charge-offs by year of origination and by major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at September 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of September 30, 2024

​

(Dollars in thousands)

    

​

2024

    

​

2023

    

​

2022

    

​

2021

    

​

2020

    

​

Prior

    

​

Revolving Loans Amortized Cost Basis

    

​

Revolving Loans Converted to Term

    

​

Total

​

Commercial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

54,824

​

$

85,532

​

$

80,128

​

$

90,107

​

$

40,718

​

$

107,295

​

$

219,160

​

$

7

​

$

677,771

​

Special Mention

​

 

1,352

​

​

1,136

​

​

701

​

​

458

​

​

2,449

​

​

1,464

​

​

1,806

​

​

​

​

 

9,366

​

Substandard

​

 

-

​

​

1,010

​

​

2,352

​

​

442

​

​

1,178

​

​

687

​

​

7,106

​

​

​

​

​

12,775

​

Total Commercial

​

 

56,176

​

 

87,678

​

 

83,181

​

 

91,007

​

 

44,345

​

 

109,446

​

 

228,072

​

 

7

​

 

699,912

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

5,249

​

​

6,180

​

​

51,520

​

​

100,817

​

​

10,347

​

​

15,999

​

​

55

​

​

​

​

 

190,167

​

Special Mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

Substandard

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

Total Municipal

​

​

5,249

​

 

6,180

​

 

51,520

​

 

100,817

​

 

10,347

​

 

15,999

​

 

55

​

 

​

​

 

190,167

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

136,530

​

​

188,333

​

​

660,675

​

​

536,817

​

​

163,176

​

​

563,148

​

​

6,553

​

​

137

​

 

2,255,369

​

Special Mention

​

​

​

​

​

2,342

​

​

950

​

​

3,708

​

​

1,351

​

​

25,304

​

​

99

​

​

​

​

 

33,754

​

Substandard

​

​

​

​

​

501

​

​

5,686

​

​

6,054

​

​

155

​

​

8,069

​

​

​

​

​

​

​

 

20,465

​

Total Commercial real estate

​

​

136,530

​

​

191,176

​

​

667,311

​

​

546,579

​

​

164,682

​

​

596,521

​

​

6,652

​

​

137

​

​

2,309,588

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

23,736

​

​

34,797

​

​

78,746

​

​

125,726

​

​

52,640

​

​

111,597

​

​

121,174

​

​

308

​

 

548,724

​

Special Mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

Substandard

​

​

​

​

​

4

​

​

60

​

​

186

​

​

301

​

​

1,311

​

​

4

​

​

​

​

 

1,866

​

Total Residential real estate

​

​

23,736

​

 

34,801

​

 

78,806

​

 

125,912

​

 

52,941

​

 

112,908

​

 

121,178

​

 

308

​

 

550,590

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

25,689

​

​

41,912

​

​

44,430

​

​

21,337

​

​

5,009

​

​

6,303

​

​

1,034

​

​

​

​

 

145,714

​

Special Mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

Substandard

​

​

​

​

​

102

​

​

20

​

​

66

​

​

51

​

​

5

​

​

2

​

​

​

​

 

246

​

Total Consumer

​

 

25,689

​

 

42,014

​

 

44,450

​

 

21,403

​

 

5,060

​

 

6,308

​

 

1,036

​

 

​

​

 

145,960

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Equipment Financing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

50,596

​

​

72,636

​

​

46,005

​

​

2,443

​

​

​

​

​

​

​

​

​

​

​

​

​

​

171,680

​

Special Mention

​

​

​

​

​

710

​

​

417

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1,127

​

Substandard

​

​

​

​

​

659

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

659

​

Total Equipment Financing

​

​

50,596

​

​

74,005

​

​

46,422

​

​

2,443

​

​

​

​

​

​

​

​

​

​

​

​

​

​

173,466

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Loans

​

$

297,976

​

$

435,854

​

$

971,690

​

$

888,161

​

$

277,375

​

$

841,182

​

$

356,993

​

$

452

​

$

4,069,683

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross charge-offs

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

$

​

​

$

41

​

$

​

​

$

2

​

$

​

​

$

8

​

$

​

​

$

​

​

$

51

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

27

​

​

​

​

​

​

​

​

27

​

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

90

​

​

143

​

​

186

​

​

125

​

​

22

​

​

74

​

​

​

​

​

​

​

​

640

​

Equipment Financing

​

​

​

​

​

58

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

58

​

Total Gross charge-offs

​

$

90

​

$

242

​

$

186

​

$

127

​

$

22

​

$

109

​

$

​

​

$

​

​

$

776

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

27

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

​

​

​

​

As of December 31, 2023

(Dollars in thousands)

    

​

2023

    

​

2022

    

​

2021

    

​

2020

    

​

2019

    

​

Prior

    

​

Revolving Loans Amortized Cost Basis

    

​

Revolving Loans Converted to Term

    

​

Total

Commercial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

9,856

​

$

38,172

​

$

28,127

​

$

29,966

​

$

44,551

​

$

82,190

​

$

131,536

​

$

650

​

$

365,048

Special Mention

​

 

​

​

​

876

​

​

182

​

​

​

​

​

​

​

​

49

​

​

832

​

​

​

​

 

1,939

Substandard

​

 

15

​

​

19

​

​

42

​

​

​

​

​

33

​

​

534

​

​

781

​

​

​

​

​

1,424

Total Commercial

​

 

9,871

​

 

39,067

​

 

28,351

​

 

29,966

​

 

44,584

​

 

82,773

​

 

133,149

​

 

650

​

 

368,411

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

1,888

​

​

48,095

​

​

94,791

​

​

10,804

​

​

16

​

​

19,652

​

​

58

​

​

​

​

 

175,304

Special Mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

Substandard

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

Total Municipal

​

​

1,888

​

 

48,095

​

 

94,791

​

 

10,804

​

 

16

​

 

19,652

​

 

58

​

 

​

​

 

175,304

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

156,277

​

​

553,754

​

​

491,506

​

​

143,068

​

​

153,426

​

​

351,142

​

​

​

​

​

117

​

 

1,849,290

Special Mention

​

​

​

​

​

1,299

​

​

​

​

​

​

​

​

360

​

​

2,761

​

​

​

​

​

​

​

 

4,420

Substandard

​

​

169

​

​

1,338

​

​

1,520

​

​

160

​

​

697

​

​

5,524

​

​

​

​

​

​

​

 

9,408

Total Commercial real estate

​

​

156,446

​

​

556,391

​

​

493,026

​

​

143,228

​

​

154,483

​

​

359,427

​

​

​

​

​

117

​

​

1,863,118

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

17,385

​

​

52,093

​

​

65,280

​

​

27,118

​

​

16,652

​

​

84,652

​

​

83,507

​

​

13,490

​

 

360,177

Special Mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

Substandard

​

​

4

​

​

​

​

​

​

​

​

329

​

​

​

​

​

288

​

​

5

​

​

​

​

 

626

Total Residential real estate

​

​

17,389

​

 

52,093

​

 

65,280

​

 

27,447

​

 

16,652

​

 

84,940

​

 

83,512

​

 

13,490

​

 

360,803

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

27,053

​

​

30,307

​

​

12,460

​

​

5,441

​

​

3,107

​

​

2,981

​

​

694

​

​

​

​

 

82,043

Special Mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

Substandard

​

​

​

​

​

58

​

​

79

​

​

31

​

​

30

​

​

20

​

​

​

​

​

​

​

 

218

Total Consumer

​

 

27,053

​

 

30,365

​

 

12,539

​

 

5,472

​

 

3,137

​

 

3,001

​

 

694

​

 

​

​

 

82,261

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Loans

​

$

212,647

​

$

726,011

​

$

693,987

​

$

216,917

​

$

218,872

​

$

549,793

​

$

217,413

​

$

14,257

​

$

2,849,897

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross charge-offs

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

$

​

​

$

​

​

$

​

​

$

21

​

$

​

​

$

33

​

$

4

​

$

​

​

$

58

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2,598

​

​

​

​

​

​

​

​

2,598

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

95

​

​

101

​

​

69

​

​

49

​

​

55

​

​

​

​

​

​

​

​

369

Total Gross charge-offs

​

$

​

​

$

95

​

$

101

​

$

90

​

$

49

​

$

2,686

​

$

4

​

$

​

​

$

3,025

​

28

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

The major classifications of loans by past due status are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

September 30, 2024

 

​

    

​

​

    

​

​

    

Greater

    

​

​

    

​

​

    

​

​

    

Loans > 90

 

​

​

30-59 Days

​

60-89 Days

​

than 90

​

Total Past

​

​

​

​

​

​

​

Days and

 

(Dollars in thousands)

​

Past Due  

​

Past Due  

​

Days  

​

Due  

​

Current  

​

Total Loans  

​

Accruing  

 

Commercial

​

$

762

​

$

173

​

$

841

​

$

1,776

​

$

698,136

​

$

699,912

​

$

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

190,167

​

​

190,167

​

​

​

​

Real estate:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

 

2,226

​

​

206

​

 

8,799

​

 

11,231

​

 

2,298,357

​

 

2,309,588

​

​

​

​

Residential

​

 

1,153

​

​

1,136

​

​

4,056

​

 

6,345

​

 

544,245

​

 

550,590

​

​

558

​

Consumer

​

 

1,759

​

​

687

​

 

166

​

 

2,612

​

 

143,348

​

 

145,960

​

 

11

​

Equipment Financing

​

​

821

​

​

544

​

​

​

​

​

1,365

​

​

172,101

​

​

173,466

​

​

​

​

Total

​

$

6,721

​

$

2,746

​

$

13,862

​

$

23,329

​

$

4,046,354

​

$

4,069,683

​

$

569

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

December 31, 2023

 

​

    

​

​

    

​

​

    

Greater

    

​

​

    

​

​

    

​

​

    

Loans > 90

 

​

​

30-59 Days

​

60-89 Days

​

than 90

​

Total Past

​

​

​

​

​

​

​

Days and

 

(Dollars in thousands)

​

Past Due  

​

Past Due  

​

Days  

​

Due  

​

Current  

​

Total Loans  

​

Accruing  

 

Commercial

​

$

53

​

$

155

​

$

10

​

$

218

​

$

368,193

​

$

368,411

​

$

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

175,304

​

​

175,304

​

​

​

​

Real estate:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

 

152

​

​

5

​

 

279

​

 

436

​

 

1,862,682

​

 

1,863,118

​

​

​

​

Residential

​

 

1,456

​

 

50

​

 

1,610

​

 

3,116

​

 

357,687

​

 

360,803

​

​

986

​

Consumer

​

 

1,069

​

 

285

​

 

85

​

 

1,439

​

 

80,822

​

 

82,261

​

 

​

​

Total

​

$

2,730

​

$

495

​

$

1,984

​

$

5,209

​

$

2,844,688

​

$

2,849,897

​

$

986

​

​

29

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

Allowance for Credit Losses on Off Balance Sheet Commitments

​

The following table presents the activity in the ACL on off balance sheet commitments, which include commitments to extend credit, unused portions of lines of credit and standby letters of credit, for the three and nine months ended September 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended

​

(Dollars in thousands)

​

​

September 30, 2024

​

​

September 30, 2023

​

Beginning balance

​

$

334

​

$

93

​

Merger related adjustments

​

​

1,179

​

​

​

​

Credit to credit losses recorded in noninterest expense

​

​

(784)

​

​

(12)

​

Total allowance for credit losses on off balance sheet commitments

​

$

729

​

$

81

​

​

​

​

​

​

​

​

​

​

​

​

For the nine months ended

​

(Dollars in thousands)

​

​

September 30, 2024

​

​

September 30, 2023

​

Beginning balance

​

$

43

​

$

179

​

Impact of adopting Topic 326

​

​

​

​

​

270

​

Merger related adjustments

​

​

1,179

​

​

​

​

Credit to credit losses recorded in noninterest expense

​

​

(493)

​

​

(368)

​

Total allowance for credit losses on off balance sheet commitments

​

$

729

​

$

81

​

​

​

The contractual amounts of off-balance sheet commitments at September 30, 2024 and 2023 are as follows:

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

    

2024

    

2023

 

Commitments to extend credit

​

$

160,389

​

$

203,183

​

Unused portions of lines of credit

​

 

569,195

​

 

370,792

​

Standby letters of credit

​

 

61,943

​

 

62,181

​

​

​

$

791,527

​

$

636,156

​

​

 Modifications to Borrowers Experiencing Financial Difficulty

​

ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) eliminated the accounting guidance for troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In accordance with the new guidance, the Company no longer evaluates loans with modifications made to borrowers experiencing financial difficulty individually for impairment, nor establishes a related specific reserve for such loans, but rather these loans are included in their respective portfolio segment and evaluated collectively for impairment to establish an ACL.

 

There were no modifications made to borrowers experiencing financial difficulty during the three months ended September 30, 2024. There was one modification made to a commercial and industrial loan with a borrower experiencing financial difficulty during the nine months ended September 30, 2024 which involved the deferral of the principal payment and the extension of the loan’s maturity date three months to September 16, 2024.  The loan had an outstanding principal balance of $370 thousand at June 30, 2024. There were no loans made to borrowers that were modified during the three and nine months ended September 30, 2023.

​

During the three and nine months ended September 30, 2024 and September 30, 2023, there were no defaults on loan modifications made to borrowers experiencing financial difficulty.

​

30

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

8. Other assets:

​

The components of other assets at September 30, 2024 and December 31, 2023 are summarized as follows:

​

​

​

​

​

​

​

​

(Dollars in thousands)

    

​

September 30, 2024

    

​

December 31, 2023

Other real estate owned

​

$

1,152

​

$

​

Mortgage servicing rights

​

 

832

​

 

870

Prepaid shares tax

​

 

1,489

​

 

949

Prepaid pension

​

 

4,144

​

 

3,764

Prepaid expenses

​

​

7,704

​

​

4,840

Restricted equity securities (FHLB and other)

​

​

9,829

​

​

5,180

Investment in low income housing partnership

​

 

15,779

​

 

5,015

Interest rate swaps(1)

​

​

17,338

​

​

19,278

Other assets

​

​

11,789

​

​

2,353

Total

​

$

70,056

​

$

42,249

(1) Interest rate swaps balance represents the fair value of the commercial loan back-to-back swaps.

​

​

​

​

9. Fair value estimates:

​

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosure under GAAP. Fair value estimates are calculated without attempting to estimate the value of anticipated future business and the value of certain assets and liabilities that are not considered financial. Accordingly, such assets and liabilities are excluded from disclosure requirements.

​

 

In accordance with FASB ASC 820, “Fair Value Measurements and Disclosures,” fair value is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets. In many cases, these values cannot be realized in immediate settlement of the instrument.

​

Current fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction that is not a forced liquidation or distressed sale between participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

​

In accordance with GAAP, the Company groups its assets and liabilities generally measured at fair value into three levels based on market information or other fair value estimates in which the assets and liabilities are traded or valued and the reliability of the assumptions used to determine fair value. These levels include:

​

●Level 1: Unadjusted quoted prices of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

31

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

●Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
●Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value estimate.

​

At September 30, 2024, the Company owned 35 corporate debt securities with an aggregate amortized cost and fair value of $32.3 million and $32.2 million, respectively. At September 30, 2024, the market for three corporate debt securities was not active based on transaction criteria for similar instruments. Both the aggregate amortized cost and fair value for these three securities was $4.3 million at September 30, 2024.  The Company obtained valuations for these securities from a third-party service provider that prepared the valuations using a market approach that involves identifying a population of transactions for similar instruments and incorporating an evaluation to capture credit risk associated with these bonds. Management takes measures to validate the service providers’ analysis and is actively involved in the valuation process, including reviewing the population and evaluation of credit risk. Management believes this approach to be a conservative approach as it takes into consideration securities that have longer maturities or longer call dates, issuers with smaller asset sizes, and securities with smaller issue amounts. These factors are typically considered to be factors that would add credit spread to a bond, thus resulting in a higher required yield. Management believes the valuation results from this market approach to be consistent with pricing and data for similar deals at September 30, 2024. The Company considers the inputs used in the market approach to be unobservable Level 3 inputs because, while inputs are based on actual transactions, the relative number of transactions in the population is small and subjective assumptions are used in considering factors considered to incorporate credit spreads into the price determination. Management will continue to monitor the market for these securities to assess the market activity and the availability of observable inputs and will continue to apply these controls and procedures to the valuations received from People's third-party service provider. During the periods ended September 30, 2024 there were no transfers into Level 3 other than those Level 3 assets acquired in the FNCB merger. During the year ended December 31, 2023 there were no transfers in or out of Level 3.

​

The following methods and assumptions were used by the Company to calculate fair values and related carrying amounts of financial instruments:

​

Investment securities: The fair values of U.S. Treasury securities and marketable equity securities are based on quoted market prices from active exchange markets. The fair values of debt securities are based on pricing from a matrix pricing model.

 

​

Interest rate swaps and options:  The Company’s interest rate swaps and options are reported at fair value utilizing Level 2 inputs. Values of these instruments are obtained through an independent pricing source utilizing information which may include market observed quotations for interest rate, forward rates, rate volatility, and volatility surface. Derivative contracts create exposure to interest rate movements as well as risks from the potential of non-performance of the counterparty.

​

​

32

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

Assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurement Using

 

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

 

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

 

(Dollars in thousands)

​

​

​

Identical Assets

​

Inputs

​

Inputs

 

September 30, 2024

    

Amount

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

U.S. Treasury securities

    

$

180,815

    

$

180,815

    

$

​

    

$

​

​

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

​

​

​

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

77,391

​

​

​

​

 

77,391

​

​

​

​

Tax-exempt

​

 

68,170

​

​

​

​

 

68,170

​

​

​

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

 

1,481

​

​

​

​

 

1,481

​

​

​

​

U.S. government-sponsored enterprises

​

 

130,070

​

​

​

​

 

130,070

​

​

​

​

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

 

4,548

​

​

​

​

 

4,548

​

​

​

​

Private collateralized mortgage obligations

​

 

43,247

​

​

​

​

 

43,247

​

​

​

​

Asset backed securities

​

​

23,845

​

​

​

​

 

23,845

​

​

​

​

Corporate debt securities

​

​

32,212

​

​

​

​

​

27,867

​

​

4,345

​

Negotiable certificates of deposit

​

​

707

​

​

​

​

​

707

​

​

​

​

Common equity securities

​

​

3,921

​

​

3,921

​

​

​

​

​

​

​

Total investment securities

​

$

566,407

​

$

184,736

​

$

377,326

​

$

4,345

​

Interest rate swap-other assets

​

$

17,338

​

​

​

​

$

17,338

​

​

​

​

Interest rate swap-other liabilities

​

$

(15,864)

​

​

​

​

$

(15,864)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurement Using 

 

​

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

 

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

 

(Dollars in thousands)

​

​

​

Identical Assets

​

Inputs

​

Inputs

 

December 31, 2023

    

Amount

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

U.S. Treasury securities

    

$

184,057

    

$

184,057

    

$

​

    

$

​

​

U.S. government-sponsored enterprises

​

​

2,152

​

​

​

​

​

2,152

​

​

​

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

57,100

​

​

​

​

 

57,100

​

​

​

​

Tax-exempt

​

 

67,124

​

​

​

​

 

67,124

​

​

​

​

Mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

 

724

​

​

​

​

 

724

​

​

​

​

U.S. government-sponsored enterprises

​

 

84,040

​

​

​

​

 

84,040

​

​

​

​

Corporate debt securities

​

​

3,730

​

​

​

​

​

3,730

​

​

​

​

Common equity securities

​

 

98

​

​

98

​

​

​

​

​

​

​

Total investment securities

​

$

399,025

​

$

184,155

​

$

214,870

​

$

​

​

Interest rate swap-other assets

​

$

19,278

​

​

​

​

$

19,278

​

​

​

​

Interest rate swap-other liabilities

​

$

(18,808)

​

​

​

​

$

(18,808)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

33

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

Assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2024 and December 31, 2023 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurement Using

 

​

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

 

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

 

(Dollars in thousands)

​

​

​

Identical Assets

​

Inputs

​

Inputs

 

September 30, 2024

    

Amount 

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Loans individually evaluated for credit loss

    

$

21,066

    

$

​

    

$

​

    

$

21,066

​

Other real estate owned

​

$

1,152

​

​

​

​

​

​

​

$

1,152

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurement Using 

 

​

​

​

​

​

Quoted Prices in

​

Significant Other

​

Significant

 

​

​

​

​

Active Markets for

​

Observable

​

Unobservable

 

(Dollars in thousands)

​

​

​

Identical Assets

​

Inputs

​

Inputs

 

December 31, 2023

    

Amount 

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Loans individually evaluated for credit loss

    

$

4,740

    

$

​

    

$

​

    

$

4,740

​

​

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative Information about Level 3 Fair Value Measurements 

 

(Dollars in thousands, except percents)

​

Fair Value

​

​

​

​

​

Range

 

September 30, 2024

    

Estimate 

    

Valuation Techniques 

    

Unobservable Input 

    

(Weighted Average) 

 

Loans individually evaluated for credit loss

    

$

21,066

    

Appraisal of collateral

    

Appraisal adjustments

    

7.1% to 94.0%  (40.0)%

​

​

​

​

​

​

​

 

Liquidation expenses

 

3.0% to 6.0% (5.8)%

​

Other real estate owned

​

$

1,152

 

Appraisal of collateral

 

Appraisal adjustments

 

1.0% to 1.0% (1.0)%

​

​

​

​

​

​

​

 

Liquidation expenses

 

3.0% to 6.0% (4.5)%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative Information about Level 3 Fair Value Measurements 

 

(Dollars in thousands, except percents)

​

Fair Value

​

​

​

​

​

Range

 

December 31, 2023

    

Estimate 

    

Valuation Techniques 

    

Unobservable Input 

    

(Weighted Average) 

 

Loans individually evaluated for credit loss

    

$

4,740

    

Appraisal of collateral

    

Appraisal adjustments

    

22.8% to 82.4%  (63.6)%

​

​

​

​

​

​

​

 

Liquidation expenses

 

3.0% to 6.0% (5.2)%

​

​

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

​

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

​

34

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

The carrying and fair values of the Company’s financial instruments at September 30, 2024 and December 31, 2023 and their placement within the fair value hierarchy are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

Fair Value Hierarchy 

 

​

​

​

​

​

​

​

​

Quoted

   

​

​

   

​

​

 

​

​

​

​

​

​

​

​

Prices in

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

Active

​

Significant

​

​

​

 

​

​

​

​

​

​

​

​

Markets for

​

Other

​

Significant

 

​

​

​

​

​

​

​

​

Identical

​

Observable

​

Unobservable

 

(Dollars in thousands)

​

Carrying

​

Fair

​

Assets

​

Inputs

​

Inputs

 

September 30, 2024

    

Value 

    

Value 

    

(Level 1) 

    

(Level 2) 

    

(Level 3) 

 

Financial assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

​

$

285,469

​

$

285,469

​

$

285,469

​

$

​

​

$

​

​

Investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available for sale

​

 

562,486

​

 

562,486

​

​

180,815

​

​

377,326

​

​

4,345

​

Common equity securities

​

​

3,921

​

​

3,921

​

​

3,921

​

​

​

​

​

​

​

Held to maturity

​

 

79,861

​

 

69,034

​

​

​

​

 

69,034

​

​

​

​

Loans held for sale

​

 

803

​

 

803

​

​

​

​

 

803

​

​

​

​

Net loans

​

 

4,030,342

​

 

3,949,667

​

​

​

​

​

​

​

​

3,949,667

​

Accrued interest receivable

​

 

17,979

​

 

17,979

​

​

​

​

 

17,979

​

​

​

​

Mortgage servicing rights

​

 

832

​

 

1,669

​

​

​

​

 

1,669

​

​

​

​

Restricted equity securities (FHLB and other)

​

​

9,829

​

 

9,829

​

​

​

​

 

9,829

​

​

​

​

Other assets - interest rate swaps

​

 

17,338

​

 

17,338

​

​

​

​

 

17,338

​

​

​

​

Total

​

$

5,008,860

​

$

4,918,195

​

​

​

​

​

​

​

​

​

​

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

$

4,637,864

​

$

4,639,273

​

$

​

​

$

4,639,273

​

$

​

​

Short-term borrowings

​

​

37,346

​

​

37,346

​

​

​

​

​

37,346

​

​

​

​

Long-term debt

​

 

111,489

​

 

112,680

​

​

​

​

 

112,680

​

​

​

​

Subordinated debt

​

 

33,000

​

 

32,232

​

​

​

​

 

32,232

​

​

​

​

Junior subordinated debt

​

​

8,015

​

​

8,471

​

​

​

​

​

8,471

​

​

​

​

Accrued interest payable

​

​

6,829

​

 

6,829

​

​

​

​

​

6,829

​

​

​

​

Other liabilities - interest rate swaps

​

 

15,864

​

 

15,864

​

​

​

​

​

15,864

​

​

​

​

Total

​

$

4,850,407

​

$

4,852,695

​

​

​

​

​

​

​

​

​

​

​

​

35

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

Fair Value Hierarchy 

 

​

​

​

​

​

​

​

​

Quoted

    

​

​

    

​

​

 

​

​

​

​

​

​

​

​

Prices in

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

Active

​

Significant

​

​

​

 

​

​

​

​

​

​

​

​

Markets for

​

Other

​

Significant

 

​

​

​

​

​

​

​

​

Identical

​

Observable

​

Unobservable

 

(Dollars in thousands)

​

Carrying

​

Fair

​

Assets

​

Inputs

​

Inputs

 

December 31, 2023

    

Value 

    

Value 

    

(Level 1) 

    

(Level 2) 

    

(Level 3) 

 

Financial assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

​

$

187,365

​

$

187,365

​

$

187,365

​

$

​

​

$

​

​

Investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available for sale

​

 

398,927

​

 

398,927

​

​

184,057

​

​

214,870

​

​

​

​

Common equity securities

​

​

98

​

​

98

​

​

98

​

​

​

​

​

​

​

Held to maturity

​

 

84,851

​

 

71,698

​

​

​

​

 

71,698

​

​

​

​

Loans held for sale

​

 

250

​

 

250

​

​

​

​

 

​

​

​

​

​

Net loans

​

 

2,828,002

​

 

2,593,151

​

​

​

​

​

​

​

​

2,593,151

​

Accrued interest receivable

​

 

12,734

​

 

12,734

​

​

​

​

 

12,734

​

​

​

​

Mortgage servicing rights

​

 

870

​

 

1,745

​

​

​

​

 

1,745

​

​

​

​

Restricted equity securities (FHLB and other)

​

 

5,180

​

 

5,180

​

​

​

​

 

5,180

​

​

​

​

Other assets - interest rate swaps

​

​

19,278

​

​

19,278

​

​

​

​

​

19,278

​

​

​

​

Total

​

$

3,537,555

​

$

3,290,426

​

​

​

​

​

​

​

​

​

​

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

$

3,279,037

​

$

3,274,774

​

$

​

​

$

3,274,774

​

$

​

​

Short-term borrowings

​

 

17,590

​

 

17,590

​

​

​

​

 

17,590

​

​

​

​

Long-term debt

​

 

25,000

​

 

24,924

​

​

​

​

 

24,924

​

​

​

​

Subordinated debt

​

​

33,000

​

​

45,504

​

​

​

​

​

45,504

​

​

​

​

Accrued interest payable

​

 

5,765

​

 

5,765

​

​

​

​

​

5,765

​

​

​

​

Other liabilities - interest rate swaps

​

​

18,808

​

​

18,808

​

​

​

​

​

18,808

​

​

​

​

Total

​

$

3,379,200

​

$

3,387,365

​

​

​

​

​

​

​

​

​

​

​

​

10. Employee benefit plans:

​

The Company provides an Employee Stock Ownership Plan (“ESOP”) and a Retirement Profit Sharing Plan. The Company also maintains Supplemental Executive Retirement Plans (“SERPs”) and an Employees’ Pension Plan, which is currently frozen.

​

For the three and nine months ended September 30, salaries and employee benefits expense includes approximately $607 thousand and $1.3 million in 2024 and $426 thousand and $1.3 million in 2023 relating to the employee benefit plans.

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

Pension Benefits

Three Months Ended September 30,

​

2024

​

2023

Net periodic pension benefit:

    

​

​

    

​

​

Interest cost

​

$

158

​

$

164

Expected return on plan assets

​

 

(320)

​

 

(293)

Amortization of unrecognized net loss

​

 

49

​

 

50

Net periodic pension benefit

​

$

(113)

​

$

(79)

36

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

Pension Benefits

Nine Months Ended September 30,

​

2024

​

2023

Net periodic pension benefit:

    

​

​

    

​

​

Interest cost

​

$

475

​

$

492

Expected return on plan assets

​

 

(961)

​

 

(878)

Amortization of unrecognized net loss

​

 

146

​

 

149

Net periodic pension benefit:

​

​

(340)

​

​

(237)

​

In May 2017, the Company’s stockholders approved the 2017 equity incentive plan (“2017 Plan”). In May 2023, the Company’s stockholders approved the 2023 equity incentive plan (“2023 Plan”). Under the 2017 Plan and 2023 Plan the compensation committee of the Company’s board of directors has the authority to, among other things:

 

●Select the persons to be granted awards under the Plan.
●Determine the type, size and term of awards.
●Determine whether such performance objectives and conditions have been met.
●Accelerate the vesting or exercisability of an award.

​

Persons eligible to receive awards under the 2017 Plan and 2023 Plan include directors, officers, employees, consultants and other service providers of the Company and its subsidiaries.

​

On July 1, 2024, as a result of the FNCB merger, the Company assumed the outstanding and unvested restricted stock awards granted under the FNCB 2023 Equity Incentive Plan. These awards will be expensed over the remaining life of 57 months.

 

As of September 30, 2024, 66,298 shares of the Company’s common stock were available for grants as awards pursuant to the 2023 Plan. While the 2017 Plan will remain in effect in accordance with its terms to govern outstanding awards under that plan, the Company intends to make future grants under the 2023 Plan.   If any awards outstanding under the 2017 Plan or 2023 Plan are forfeited by the holder or canceled by the Company, the underlying shares would be available for regrant to others under the 2023 Plan.

​

The 2017 Plan and 2023 Plan authorize grants of stock options, stock appreciation rights, cash awards, performance awards, restricted stock and restricted stock units.

 

For the nine months ended September 30, 2024, the Company granted 23,243 performance based restricted stock units and 8,895 time based restricted stock awards, under the 2023 Plan. For the nine months ended September 30, 2023, the Company granted 18,222 performance based restricted stock units and 5,206 time based restricted stock awards, under the 2023 Plan.

 

The non-performance restricted stock grants made in 2024, 2023 and 2022 vest equally over three years. The performance-based restricted stock units vest over three fiscal years and include conditions based on the Company’s three year cumulative diluted earnings per share and three-year average return on tangible common that determines the number of restricted stock units that may vest.

 

The Company expenses the fair value of all-share based compensation over the requisite service period commencing at grant date.  The fair value of restricted stock is expensed on a straight-line basis. Compensation is recognized over the vesting period and adjusted based on the performance criteria.  The Company classifies share-based compensation for employees within “salaries and employee benefits expense” on the consolidated statements of income (loss) and comprehensive income.

37

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

 

The Company recognized net compensation costs of $203 thousand and $603 thousand for the three and nine months ended September 30, 2024 for awards granted under the 2023 Plan and recognized compensation expense of $84 thousand and $251 thousand for the three and nine months ended September 30, 2024 for the awards granted under the 2017 Plan. During the three months ended September 30, 2024, $33 thousand was recognized as a result of the awards assumed in the FNCB merger. As of September 30, 2024, the Company had $2.1 million of unrecognized compensation expense associated with restricted stock and restricted stock unit awards.  The remaining cost is expected to be recognized over a weighted average vesting period of under 2.6 years.

​

11. Derivatives and hedging activities

​

Risk Management Objective of Using Derivatives

​

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s existing credit derivatives result from participations of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities.

​

Cash Flow Hedges of Interest Rate Risk

​

The Company’s objectives in using interest rate derivatives are to add stability to interest income/expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and floors as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up-front premium. Such derivatives have been used to hedge the variable cash flows associated with existing variable-rate assets and issuances of debt.

​

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive (loss) income, (“AOCI”) and subsequently reclassified into interest expense/income in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense/income as interest payments are made/received on the Company’s variable-rate debt/assets. During the next twelve months, the Company estimates that no amount will be reclassified as a reduction to interest income. 

​

Fair Value Hedges of Interest Rate Risk

​

The Company is exposed to changes in the fair value of certain of its fixed-rate pools of assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate, the Secured Overnight Financing Rate (“SOFR”). Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.

​

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

​

38

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

As of September 30, 2024, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustment for fair value hedges:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Line Item in the Consolidated Statement of Financial Position in Which the Hedged Item is Included

​

​

Amortized Amount of the Hedged Assets/(Liabilities)

​

​

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)

(Dollars in thousands)

​

​

September 30, 2024

​

​

December 31, 2023

​

​

September 30, 2024

​

​

December 31, 2023

AFS Securities (1)

​

$

162,038

​

$

143,573

​

$

1,056

​

$

871

Fixed Rate Loans (2)

​

​

50,484

​

​

50,462

​

​

484

​

​

462

Total

​

$

212,522

​

$

194,035

​

$

1,540

​

$

1,333

(1)These amounts include the amortized cost basis of closed portfolios of fixed rate assets used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2024, the amortized cost basis of the closed portfolios used in these hedging relationships was $162.0 million. The amounts of the designated hedged items were $100.0 million.

​

(2)Fixed Rate Loan Assets. These amounts include the carrying value of fixed rate loan assets used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2024, the principal value of the hedged item was $50.0 million.

​

Non-designated Hedges

​

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. As of September 30, 2024, the Company had 140 interest rate swaps with an aggregate notional amount of $314.1 million related to this program.

​

The Company’s existing credit derivatives result from participations in or out of interest rate swaps provided by or to external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans.

​

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of September 30, 2024 and December 31, 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Values of Derivative Instruments

​

​

​

Derivative Assets

​

​

Derivative Liabilities

​

​

​

As of September 30, 2024

​

As of December 31, 2023 (1)

​

As of September 30, 2024

​

As of December 31, 2023

(Dollars in thousands)

​

​

Notional Amount

​

Balance Sheet Location

​

​

Fair Value

​

Balance Sheet Location

​

​

Fair Value

​

​

Notional Amount

​

Balance Sheet Location

​

​

Fair Value

​

Balance Sheet Location

​

​

Fair Value

Derivatives designated as hedging instruments

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate Products

​

$

​

​

Other Assets

​

$

​

​

Other Assets

​

$

​

​

$

150,000

​

Other Liabilities

​

$

1,510

​

Other Liabilities

​

$

1,270

Total derivatives designated as hedging instruments

​

​

​

​

​

​

$

​

​

​

​

$

​

​

​

​

​

​

​

$

1,510

​

​

​

$

1,270

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives not designated as hedging instruments

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate Products

​

$

289,313

​

Other Assets

​

$

17,845

​

Other Assets

​

$

19,833

​

$

289,313

​

Other Liabilities

​

$

17,546

​

Other Liabilities

​

$

19,364

Other Contracts

​

​

24,795

​

Other Assets

​

​

2

​

Other Assets

​

​

3

​

​

7,250

​

Other Liabilities

​

​

​

​

Other Liabilities

​

​

​

Total derivatives not designated as hedging instruments

​

​

​

​

​

​

$

17,847

​

​

​

$

19,836

​

​

​

​

​

​

$

17,546

​

​

​

$

19,364

(1) The notional asset amount of interest rate swaps at December 31, 2023 was $230.3 million and $8.4 million for risk participation agreements.

Amounts include accrued interest.

39

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive (Loss) Income

​

The table below presents the effect of fair value and cash flow hedge accounting on accumulated other comprehensive (loss) income as of September 30, 2024 and September 30, 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)
Three months ended September 30, 2024

​

​

Amount of (Loss) Recognized in OCI on Derivative

​

​

Amount of (Loss) Recognized in OCI Included Component

​

​

Amount of (Loss) Recognized in OCI Excluded Component

​

Location of Gain or (Loss) Recognized from Accumulated Other Comprehensive Income into Income

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income

​

​

Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income Included Component

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income Excluded Component

Derivatives in Cash Flow Hedging Relationships 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate Products

​

$

​

​

$

​

​

$

​

​

Interest Income

​

$

​

​

$

​

​

$

​

Total

​

$

​

​

$

​

​

$

​

​

​

​

$

​

​

$

​

​

$

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)
Three months ended September 30, 2023

​

​

Amount of (Loss) Recognized in OCI on Derivative

​

​

Amount of (Loss) Recognized in OCI Included Component

​

​

Amount of (Loss) Recognized in OCI Excluded Component

​

Location of Gain or (Loss) Recognized from Accumulated Other Comprehensive Income into Income

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income Included Component

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income Excluded Component

Derivatives in Cash Flow Hedging Relationships 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate Products

​

$

​

​

$

​

​

$

​

​

Interest Income

​

$

(16)

​

$

​

​

$

(16)

Total

​

$

​

​

$

​

​

$

​

​

​

​

$

(16)

​

$

​

​

$

(16)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)
Nine months ended September 30, 2024

​

​

Amount of (Loss) Recognized in OCI on Derivative

​

​

Amount of (Loss) Recognized in OCI Included Component

​

​

Amount of (Loss) Recognized in OCI Excluded Component

​

Location of Gain or (Loss) Recognized from Accumulated Other Comprehensive Income into Income

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income Included Component

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income Excluded Component

Derivatives in Cash Flow Hedging Relationships 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate Products

​

$

​

​

$

​

​

$

​

​

Interest Income

​

$

​

​

$

​

​

$

​

Total

​

$

​

​

$

​

​

$

​

​

​

​

$

​

​

$

​

​

$

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)
Nine months ended September 30, 2023

​

​

Amount of (Loss) Recognized in OCI on Derivative

​

​

Amount of (Loss) Recognized in OCI Included Component

​

​

Amount of (Loss) Recognized in OCI Excluded Component

​

Location of Gain or (Loss) Recognized from Accumulated Other Comprehensive Income into Income

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income Included Component

​

​

Amount of (Loss) Reclassified from Accumulated OCI into Income Excluded Component

Derivatives in Cash Flow Hedging Relationships 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate Products

​

$

(1)

​

$

​

​

$

(1)

​

Interest Income

​

$

(48)

​

$

​

​

$

(48)

Total

​

$

(1)

​

$

​

​

$

(1)

​

​

​

$

(48)

​

$

​

​

$

(48)

​

*Amounts disclosed are gross and not net of taxes.

​

40

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

​

The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of income (loss) and comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023.

​

​

​

​

​

​

​

​

​

​

Location and Amount of Gain or (Loss)

​

​

Recognized in Income on Fair Value and

​

​

Cash Flow Hedging Relationships

​

​

For the three months ended September 30,

​

​

​

2024

​

​

2023

(Dollars in thousands)

  

  

Interest Income

  

  

Interest Income

​

​

​

​

​

​

​

Total amounts of income and expense line items presented in the statements of income and comprehensive

​

​

​

​

​

​

income (loss) in which the effects of fair value or cash flow hedges are recorded.

​

$

586

​

$

188

​

​

​

​

​

​

​

The effects of fair value and cash flow hedging:

​

​

​

​

​

​

Gain or (loss) on fair value hedging relationships

​

​

​

​

​

​

Interest contracts

​

​

​

​

​

​

Hedged items

​

​

2,010

​

​

(731)

Derivatives designated as hedging instruments

​

​

(1,424)

​

​

935

Derivatives designated as hedging instruments

​

​

​

​

​

​

Gain or (loss) on cash flow hedging relationships

​

​

​

​

​

​

Interest contracts

​

​

​

​

​

​

Amount of (loss) gain reclassified from AOCI into income

​

​

​

​

​

(16)

Amount of gain reclassified from AOCI into income - Included Component

​

​

​

​

​

​

Amount of (loss) reclassified from AOCI into income - Excluded Component

​

$

​

​

$

(16)

​

​

​

​

​

​

​

​

​

​

Location and Amount of Gain or (Loss)

​

​

Recognized in Income on Fair Value and

​

​

Cash Flow Hedging Relationships

​

​

For the nine months ended September 30,

​

​

​

2024

​

​

2023

(Dollars in thousands)

  

  

Interest Income

  

  

Interest Income

​

​

​

​

​

​

​

Total amounts of income and expense line items presented in the statements of income and comprehensive

​

​

​

​

​

​

income (loss) in which the effects of fair value or cash flow hedges are recorded.

​

$

21

​

$

318

​

​

​

​

​

​

​

The effects of fair value and cash flow hedging:

​

​

​

​

​

​

Gain or (loss) on fair value hedging relationships

​

​

​

​

​

​

Interest contracts

​

​

​

​

​

​

Hedged items

​

​

206

​

​

(779)

Derivatives designated as hedging instruments

​

​

(185)

​

​

1,145

Gain or (loss) on cash flow hedging relationships

​

​

​

​

​

​

Interest contracts

​

​

​

​

​

​

Amount of (loss) gain reclassified from AOCI into income

​

​

​

​

​

(48)

Amount of gain reclassified from AOCI into income - Included Component

​

​

​

​

​

​

Amount of (loss) reclassified from AOCI into income - Excluded Component

​

$

​

​

$

(48)

​

41

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

Effect of Derivative Instruments Not Designated as Hedging Instruments on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of income (loss) and comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of Gain or (Loss)

​

Amount of Gain or (Loss)

 

Amount of Gain

​

Amount of Gain or (Loss)

​

​

​

​

 Recognized in

​

 Recognized in

 

Recognized in

​

Recognized in

​

​

Location of Gain or (Loss)

​

Income on Derivative

​

Income on Derivative

 

Income on Derivative

​

Income on Derivative

​

​

Recognized in Income

​

Three Months Ended

​

Nine Months Ended

 

Three Months Ended

​

Nine Months Ended

(Dollars in thousands)

    

on Derivative

    

September 30, 2024

    

September 30, 2024

 

September 30, 2023

    

September 30, 2023

Derivatives Not Designated as Hedging Instruments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate Products

 

Other income / (expense)

​

$

(120)

​

$

(170)

​

$

194

​

$

56

Other Contracts

​

Other income / (expense)

​

​

​

​

​

​

​

​

1

​

​

31

Total

 

  

​

$

(120)

​

$

(170)

​

$

195

​

$

87

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fee Income

​

Fee income

​

$

67

​

$

195

​

$

​

​

$

457

​

42

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

Offsetting Derivatives

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of September 30, 2024 and December 31, 2023. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Consolidated Balance Sheets.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of September 30, 2024

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Assets

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

  

Assets

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

17,845

​

$

​

​

$

17,845

​

$

​

​

$

12,410

​

$

5,435

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Liabilities

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of September 30, 2024

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Liabilities

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

​

Liabilities

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted*

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

19,057

​

$

​

​

$

19,057

​

$

19,057

​

$

​

​

$

​

*Cash collateral of $3.320MM was paid in September 2024, but not presented as an offset above.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of December 31, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Assets

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

​

Assets

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

19,833

​

$

​

​

$

19,833

​

$

​

​

$

17,590

​

$

2,243

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Liabilities

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of December 31, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Liabilities

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

​

Liabilities

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

20,633

​

$

​

​

$

20,633

​

$

20,633

​

$

​

​

$

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Credit-risk-related Contingent Features

The Company has agreements with certain of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

As of September 30, 2024, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $3.3 million. As of December 31, 2023, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $2.7 million. The Company has minimum

43

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $3.3 million against its obligations under these agreements at September 30, 2024. Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the agreement. The cash collateral is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above. If the Company had breached any of these provisions it could have been required to settle its obligations under the agreements at the termination value.

​

12. Deposits

​

The major components of interest-bearing and noninterest-bearing deposits at September 30, 2024 and December 31, 2023 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

    

​

September 30, 2024

    

​

December 31, 2023

Interest-bearing deposits:

​

​

​

​

​

​

Money market accounts

​

$

1,018,575

​

$

782,243

NOW accounts

​

 

1,439,382

​

 

796,426

Savings accounts

​

 

509,412

​

 

429,011

Time deposits less than $250

​

 

824,791

​

 

505,409

Time deposits $250 or more

​

 

128,139

​

 

121,265

Total interest-bearing deposits

​

 

3,920,299

​

 

2,634,354

Noninterest-bearing deposits

​

 

717,565

​

 

644,683

Total deposits

​

$

4,637,864

​

$

3,279,037

​

The FNCB merger added $1.3 billion of retail deposits and $140.6 million of brokered deposits. The combined deposit base consisted of 38.6% retail accounts, 33.3% commercial accounts, 19.7% municipal relationships and 8.4% brokered deposits at September 30, 2024. At September 30, 2024, total estimated uninsured deposits, were approximately $1.6 billion, or approximately 33.8% of total deposits; as compared to approximately $883.5 million, or 26.9% of total deposits at December 31, 2023. Included in the uninsured total at September 30, 2024 is $372.5 million of municipal deposits collateralized by letters of credit issued by the FHLB and pledged investment securities, and $2.6 million of affiliate company deposits. We also offer customers access to IntraFi's CDARS and ICS programs through which their deposits may be allocated to separate FDIC-insured institutions, while they are able to maintain their relationship with our bank.

​

The scheduled maturities of time deposits are summarized below, through September 30 of each year:

​

​

​

​

​

​

(Dollars in thousands)

    

​

​

​

2025

    

$

645,140

​

2026

​

 

121,549

​

2027

​

 

70,920

​

2028

​

 

104,268

​

2029

​

 

6,240

​

Thereafter

​

 

4,813

​

​

​

$

952,930

​

​

​

​

13. Borrowings

​

Short-term borrowings consist of FHLB overnight borrowings or advances with stated original terms of less than twelve months, Bank Term Funding Program (“BTFP”) advances and other borrowings related to collateral held from derivative counterparties. Short-term borrowings at September 30, 2024 included $24.9 million in BTFP funding,

44

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

acquired at fair value, which the Company assumed in the FNCB merger. The Federal Reserve Bank established the BTFP through the Discount Window to provide additional funding to eligible depository institutions during a period of stress. The BTFP is collateralized by high-quality securities valued at par including U.S. Treasury securities, U.S. government agency debt and mortgage-backed securities and other qualifying securities. Also included in short-term borrowings at September 30, 2024 was cash collateral pledged by derivative counterparties to offset interest rate exposure, which totaled $12.4 million at September 30, 2024 and $17.6 million at December 31, 2023.

​

The table below outlines short-term borrowings at and for the nine months ended September 30, 2024 and at and for the year ended December 31, 2023:   

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At and for the nine months ended September 30, 2024

​

​

​

​

​

​

​

​

​

​

​

Weighted

​

Weighted

 

​

​

​

​

​

​

​

​

Maximum

​

Average

​

Average

 

​

​

Ending

​

Average

​

Month-End

​

Rate for

​

Rate at End

 

(Dollars in thousands, except percents)

    

Balance 

    

Balance 

    

Balance 

    

the Year

    

of the Period

 

FHLB advances - Overnight

    

$

​

    

$

8,993

    

$

83,900

    

5.53

%  

​

%

Federal Reserve Bank - BTFP

​

​

24,936

​

​

8,270

​

​

24,936

​

4.83

​

4.76

​

Other borrowings

​

​

12,410

​

​

19,086

​

​

25,050

 

5.40

​

4.83

​

Total short-term borrowings

​

$

37,346

​

$

36,349

​

$

133,886

 

5.31

%  

4.78

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At and for the year ended December 31, 2023

 

​

​

​

​

​

​

​

​

​

​

​

Weighted

​

Weighted

 

​

​

​

​

​

​

​

​

Maximum

​

Average

​

Average

 

​

​

Ending

​

Average

​

Month-End

​

Rate for

​

Rate at End

 

(Dollars in thousands, except percents)

    

Balance

    

Balance

    

Balance

    

the Year

    

of the Year

 

Other borrowings

    

$

17,590

    

$

19,160

    

$

28,470

    

5.54

%  

5.35

%

FHLB advances

​

​

​

​

​

19,171

​

​

158,000

 

4.48

​

​

​

Total short-term borrowings

​

$

17,590

​

$

38,331

​

$

186,470

 

5.01

%  

5.35

%

​

The Company has an agreement with the FHLB which allows for borrowings up to its maximum borrowing capacity based on a percentage of qualifying collateral assets. At September 30, 2024, the maximum borrowing capacity was $1.4 billion of which $112.1 million was outstanding in borrowings and $364.5 million was used to issue standby letters of credit to collateralize public fund deposits. At December 31, 2023, the maximum borrowing capacity was $1.2 billion of which $25.0 million was outstanding in long-term debt and $345.4 million was used to issue standby letters of credit to collateralize public fund deposits.

​

Advances with the FHLB are secured under terms of a blanket collateral agreement by a pledge of FHLB stock and certain other qualifying collateral, such as investments and mortgage-backed securities and mortgage loans. Interest accrues daily on the FHLB advances based on rates of the FHLB discount notes. The overnight borrowing rate resets each day.

​

In addition to borrowings from FHLB and correspondent bank lines of credit, we have availability through the Federal Reserve Bank’s Discount Window of $544.8 million at September 30, 2024. The FRB’s borrower-in-custody program allows depository institutions to pledge loans as collateral for Discount Window advances while retaining possession of the loan documentation. At September 30, 2024, $539.5 million in loans were pledged as collateral for the borrower-in-custody program and provided $409.8 million in borrowing capacity. At September 30, 2024, securities with a current par value of $142.8 million were pledged at the Discount Window resulting in borrowing capacity of $135.0 million. An additional $25.0 million in securities were pledged at the BTFP at September 30, 2024.

​

At December 31, 2023, $365.8 million in loans were pledged as collateral for the borrower-in-custody program and provided $246.1 million in borrowing capacity. At December 31, 2023, $191.0 million in securities were pledged to the BTFP and $11 thousand was pledged to the Discount Window. The BTFP allowed depository institutions to borrow up to the par value of eligible securities pledged at the FRB. The BTFP expired on March 11, 2024 and the Company transferred the eligible securities pledged to the Federal Reserve Discount Window.

45

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

Long-term debt consisting of advances from the FHLB at September 30, 2024 and December 31, 2023 is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Rate 

​

    

​

​

    

​

​

 

(Dollars in thousands, except percents)

    

Fixed 

​

​

​

September 30, 2024

​

​

December 31, 2023

 

December 2024

​

4.60

​

​

​

12,650

​

​

​

​

March 2025

​

4.37

​

​

​

10,000

​

​

10,000

​

December 2025

​

4.40

​

​

​

9,567

​

​

​

​

December 2025

​

4.36

​

​

​

20,000

​

​

​

​

March 2026

​

4.78

​

​

​

4,292

​

​

​

​

March 2026

​

4.20

​

​

​

15,000

​

​

15,000

​

May 2026

​

4.08

​

​

​

5,000

​

​

​

​

June 2027

​

4.16

​

​

​

5,224

​

​

​

​

August 2027

​

4.40

​

​

​

6,461

​

​

​

​

October 2027

​

5.18

​

​

​

9,107

​

​

​

​

March 2028

​

4.45

%  

​

​

14,188

​

​

​

​

​

​

​

​

​

$

111,489

​

$

25,000

​

​

Maturities of long-term debt, by contractual maturity, for the remainder of 2024 and subsequent years are as follows:

​

​

​

​

​

​

(Dollars in thousands)

​

​

​

​

2024

​

$

12,650

​

2025

​

 

39,567

​

2026

​

​

24,292

​

2027

​

 

20,792

​

2028

​

​

14,188

​

Thereafter

​

​

​

​

​

​

$

111,489

​

​

The advances from the FHLB totaling $111.5 million are not convertible and have a fixed rate.

​

46

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

14. Subordinated debt

​

On June 1, 2020, the Company sold $33.0 million aggregate principal amount of Subordinated Notes due 2030 (the “2020 Notes”) to accredited investors. The 2020 Notes qualify 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 float based on a benchmark rate (as defined), 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 the 4.75%.  Interest is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2020, for the first five years after issuance and will be payable quarterly in arrears thereafter on March 1, June 1, September 1, and December 1. The 2020 Notes will mature on June 1, 2030 and are redeemable in whole or in part, without premium or penalty, at any time on or after June 1, 2025 and prior to June 1, 2030. Additionally, if all or any portion of the 2020 Notes cease to be deemed Tier 2 Capital, the Company may redeem, in whole and not in part, at any time upon giving not less than ten days’ notice, an amount equal to one hundred percent (100%) of the principal amount outstanding plus accrued but unpaid interest to but excluding the date fixed for redemption. Holders of the 2020 Notes may not accelerate the maturity of the 2020 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar proceeding by or against the Company or Peoples Bank.

​

On July 1, 2024, the Company assumed $10.3 million of floating rate junior subordinated deferrable interest debentures due December 15, 2023 (“Debentures”) as a result of the FNCB merger at a fair market value of $8.0 million. The Debentures are held by First National Community Statutory Trust I, a Delaware statutory trust (the “Trust”). The Debentures and corresponding trust preferred securities (the “Trust Securities”) have a variable interest rate which resets quarterly to 3-month CME Term SOFR plus a spread adjustment of 0.26161% and a margin of 1.67%. The Debentures are unsecured and rank subordinate and junior in right to all indebtedness, liabilities and obligations of the Company. The Debentures represent the sole assets of the Trust. Interest on the Trust Securities is deferrable until a period of twenty consecutive quarters has elapsed. The Trust Securities may be prepaid beginning December 15, 2011. The Company’s investment in the Trust is reflected on a deconsolidated basis. The Debentures totaling $8.0 million, have been reflected in borrowed funds in the consolidated balance sheets under the caption “Junior Subordinated Debentures” and interest expense on the Debentures is in its consolidated statements of income (loss) and comprehensive income (loss).

​

15. Related party transactions

​

In conducting its business, Peoples has engaged in, and intends to continue to engage in, banking and financial transactions with directors, executive officers and their related parties. Balances at September 30, 2024 include those acquired due to the FNCB merger.

​

Peoples Bank has granted loans, letters of credit and lines of credit to directors, executive officers and their related parties. The following table summarizes the changes in the total amounts of such outstanding loans, advances under lines of credit, net of any participations sold, as well as repayments during the three months ended September 30, 2024 and 2023. Additions during the three months ended September 30, 2024 include loans and advances acquired in the FNCB merger.

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

​

​

​

​

​

Three Months Ended September 30,

    

​

2024

    

​

2023

Balance, beginning of period

​

$

99,491

​

$

2,818

Additions, new loans and advances

​

​

32,337

​

​

29

Repayments

​

​

(8,203)

​

​

(875)

Balance, end of period

​

$

123,625

​

$

1,972

​

At September 30, 2024 and December 31, 2023, there were no loans to directors, executive officers and their related parties that were not performing in accordance with the original terms of the loan agreements.

​

47

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

Deposits from directors, executive officers and their related parties held by Peoples Bank at September 30, 2024 and December 31, 2023 were $131.9 million and $7.8 million, respectively.

​

16. Regulatory matters

​

The Company’s ability to pay dividends to its shareholders is largely dependent on Peoples Bank’s ability to pay dividends to the Company. Regulations with respect to the banking industry limit the amount of dividends that may be paid without prior approval of Peoples Bank’s regulatory agency.

​

The Company and the Peoples Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Peoples Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Peoples Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and Peoples Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Management believes, as of September 30, 2024 and December 31, 2023, that the Company and Peoples Bank met all applicable capital adequacy requirements.

​

Current quantitative measures established by regulation to ensure capital adequacy require Peoples Bank to maintain minimum amounts and ratios (set forth in the tables below) of Total capital, Tier I capital, and Tier I common equity (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). The following tables present summary information regarding Peoples Bank’s risk-based capital and related ratios at September 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

Required To

​

​

    

​

​

​

​

​

    

​

​

    

Required For

​

    

Be Well

​

​

​

​

​

​

​

​

​

Minimum

​

​

Capital

​

​

Capitalized

​

​

​

​

​

​

​

​

​

Required For

​

​

Adequacy

​

​

Under Prompt

​

​

​

​

​

​

​

​

​

Capital

​

​

Purposes with

​

​

Corrective

​

​

​

​

​

​

​

​

​

Adequacy

​

​

Conservation

​

​

Action

​

​

​

Peoples Bank

​

Purposes

​

​

Buffer

​

​

Regulations

​

(Dollars in thousands)

    

​

Amount

    

Ratio

​

    

Ratio

​

    

Ratio

​

    

Ratio

​

September 30, 2024

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total capital ( to risk-weighted assets)

​

$

467,588

​

11.68

%

​

8.00

%

​

10.50

%

​

10.00

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tier I capital ( to risk-weighted assets)

​

​

427,518

​

10.68

​

​

6.00

​

​

8.50

​

​

8.00

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tier I common equity ( to risk-weighted assets)

​

​

427,518

​

10.68

​

​

4.50

​

​

7.00

​

​

6.50

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tier I capital ( to average assets)

​

​

427,518

​

8.23

​

​

4.00

​

​

4.00

​

​

5.00

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total risk-weighted assets

​

​

4,002,166

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total average assets

​

​

5,306,258

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

48

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

Required To

​

​

​

​

​

​

​

​

​

​

​

​

Required For

​

​

Be Well

​

​

​

​

​

​

​

​

​

Minimum

​

​

Capital

​

​

Capitalized

​

​

​

​

​

​

​

​

​

Required For

​

​

Adequacy

​

​

Under Prompt

​

​

​

​

​

​

​

​

​

Capital

​

​

Purposes with

​

​

Corrective

​

​

​

​

​

​

​

​

​

Adequacy

​

​

Conservation

​

​

Action

​

​

​

Peoples Bank

​

Purposes

​

​

Buffer

​

​

Regulations

​

(Dollars in thousands)

    

​

Amount

    

Ratio

​

    

Ratio

​

    

Ratio

​

    

Ratio

​

December 31, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total capital ( to risk-weighted assets)

​

$

375,268

​

14.12

%

​

8.00

%

​

10.50

%

​

10.00

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tier I capital ( to risk-weighted assets)

​

​

353,330

​

13.30

​

​

6.00

​

​

8.50

​

​

8.00

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tier I common equity ( to risk-weighted assets)

​

​

353,330

​

13.30

​

​

4.50

​

​

7.00

​

​

6.50

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tier I capital ( to average assets)

​

​

353,330

​

9.34

​

​

4.00

​

​

4.00

​

​

5.00

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total risk-weighted assets

​

​

2,656,901

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total average assets

​

​

3,845,219

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

49

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

17. Subsequent events

​

On October 25, 2024, the Board of Directors approved a resolution to sell the building at 150 North Washington Avenue, Scranton PA, in which the Company’s current corporate headquarters are located, and to enter into a commercial lease agreement with the buyer to occupy certain pre-defined floors.

​

​

50

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

​

The following discussion and analysis should be read in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report, and with our audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our Annual Report on Form 10-K for the year ended December 31, 2023.

​

Cautionary Note Regarding Forward-Looking Statements:

​

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties. These statements are based on assumptions and may describe future plans, strategies and expectations of Peoples Financial Services Corp. and its subsidiaries that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond our control). These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. All statements in this report, other than statements of historical facts, are forward-looking statements.

​

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Important factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to: macroeconomic trends; the effects of any recession in the United States; the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine and the conflict in Israel; risks associated with business combinations, including, the possibility that we may be unable to achieve expected synergies and operating efficiencies of the FNCB merger within the expected timeframes or at all; the possibility that we may be unable to successfully integrate operations of FNCB , or that the integration may be more difficult, time consuming or costly than expected; the FNCB merger may divert management's attention from ongoing business operations and opportunities; effects of the FNCB merger on our ability to retain customers and retain and hire key personnel and maintain relationships with our vendors, and on our operating results and business generally; changes in interest rates; economic conditions, particularly in our market area; legislative and regulatory changes and the ability to comply with the significant laws and regulations governing the banking and financial services business; monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of Treasury and the Federal Reserve System; adverse developments in the financial industry generally, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior; credit risk associated with lending activities and changes in the quality and composition of our loan and investment portfolios; demand for loan and other products; deposit flows; competition; changes in the values of real estate and other collateral securing the loan portfolio, particularly in our market area; changes in relevant accounting principles and guidelines; inability of third party service providers to perform; and our ability to prevent, detect and respond to cyberattacks. Additional factors that may affect our results are discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, in Part II, Item 1A of this report and in reports we file with the Securities and Exchange Commission from time to time.

​

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, we do not undertake, and specifically disclaim any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

​

​

​

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Business Overview:

​

On the Acquisition Date, the Company completed the acquisition of FNCB in accordance with the Merger Agreement, by and among the Company and FNCB. Pursuant to the Merger Agreement, on the Acquisition Date, FNCB merged with and into Peoples, with Peoples continuing as the surviving corporation, and immediately following the merger, FNCB Bank merged with and into Peoples Bank, with Peoples Bank as the surviving bank. The primary reasons for the merger included: expansion of the branch network and commanding market share positions in northeastern Pennsylvania; attractive low-cost funding base; strong cultural alignment and a deep commitment to shareholders, customers, employees, and communities served by Peoples and FNCB; meaningful value creation to shareholders; increased trading liquidity; and increased dividends for People’s shareholders.

​

In connection with the completion of the merger, former FNCB shareholders received 0.1460 shares of the Company’s common stock per share of FNCB common stock. The value of the total transaction consideration was approximately $133.7 million. The consideration included the issuance of 2,935,456 shares of the Company’s common stock, valued at $45.54 per share, which was the closing price of the Company’s common stock on June 28, 2024, the last trading day prior to the consummation of the merger. Also included in the total consideration was cash in lieu of any fractional shares, which was effectively settled upon closing.

​

The acquisition of FNCB was accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid are recorded at estimated fair values on the Acquisition Date. The excess consideration paid over the fair value of the net assets acquired has been reported as goodwill in the Company’s consolidated statements of financial condition. The $13.6 million of goodwill created from the merger is not amortizable or deductible for tax purposes. The amount of goodwill represents an asset attributed to the future benefits arising from other assets acquired in a business combination. Future benefits consist largely of the synergies and economies of scale expected from combining the operations of FNCB and Peoples. Peoples does not currently provide segment reporting for GAAP, therefore the goodwill will be assigned to the whole operating company. The Company will continue to keep the measurement of goodwill open for any additional adjustments to the fair value of certain accounts, for example loans, that may arise during the Company’s final review procedures of any updated information. If considered necessary, any subsequent adjustments to the fair value of assets acquired and liabilities assumed, identifiable intangible assets, or other purchase accounting adjustments will result in adjustments to goodwill within the first twelve months following the Acquisition Date.

​

Critical Accounting Policies:

​

Disclosure of our significant accounting policies is included in Note 1 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated herein by reference. Some of these policies are particularly sensitive requiring significant judgments, estimates and assumptions.

​

​

Business Combinations:

​

Assets acquired and liabilities assumed in business combinations are measured at fair value as of the Acquisition Date. In many cases, determining the fair value of the assets acquired and liabilities assumed requires the Company to estimate the timing and amount of cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Goodwill and Other Intangible Assets:

​

The Company has goodwill with a net carrying value of $77.0 million and $63.4 million at September 30, 2024 and December 31, 2023, respectively. The Company's policy is to test goodwill for impairment annually on December 31 or on an interim basis if an event triggering impairment may have occurred. If a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. At September 30, 2024, we performed a qualitative evaluation, which involves determining whether any events occurred or circumstances changed that would more likely than not reduce the Company's fair value below its carrying value. We noted no such matters. There is no assurance that changes in events or circumstances in the future will not result in impairment.

​

Core deposit intangibles are amortized on an accelerated basis using an estimated life of ten years. The core deposit intangibles are evaluated annually for impairment in accordance with GAAP. An impairment loss will be recognized if the carrying amount of the intangible asset is not fully recoverable and exceeds fair value. The carrying amount of the intangible asset is not considered fully recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.

​

We believe that the fair values of our intangible assets were in excess of their carrying amounts and therefore there was no impairment of intangible assets at September 30, 2024.

​

​

Review of Financial Position:

​

Total assets increased $1.6 billion or 57.8% annualized from December 31, 2023, to $5.4 billion at September 30, 2024. The increase in assets during the nine months was primarily due to the merger with FNCB. FNCB contributed, after fair value purchase accounting adjustments, approximately $1.8 billion in total assets, $1.2 billion in loans, and $1.4 billion in deposits at July 1, 2024. Total loans increased $1.2 billion since December 31, 2023 and totaled $4.1 billion at September 30, 2024. Investments increased $162.4 million. Federal funds sold balances increased $33.4 million to $178.1 million at September 30, 2024 compared to a balance of $144.7 million at December 31, 2023.

​

Deposits increased $1.4 billion to $4.6 billion at September 30, 2024 from $3.3 billion at December 31, 2023. Interest-bearing deposits increased $1.3 billion to $3.9 billion compared to $2.6 billion at December 31, 2023. Noninterest-bearing deposits increased $72.9 million to $717.6 million from $644.7 million as of December 31, 2023.

​

Total short-term borrowings at September 30, 2024 were $37.3 million, an increase of $19.8 million from $17.6 million at December 31, 2023. Long term debt increased $86.5 million to $111.5 million from $25.0 million at December 31, 2023 and subordinated debentures increased $8.0 million to $41.0 million from $33.0 million at December 31, 2023. Total stockholders’ equity increased $134.6 million from $340.4 million at year-end 2023 to $475.1 million at September 30, 2024 due to the merger with FNCB as well as a decrease to accumulated other comprehensive loss resulting from a reduction in the unrealized loss on available for sale investment securities, partially offset by dividends.

​

The unrealized losses on the held to maturity portfolio totaled $10.8 million and $13.2 million at September 30, 2024 and December 31, 2023, respectively. For the nine months ended September 30, 2024, total assets averaged $4.2 billion, and increased $539.2 million from the same period of 2023.

​

Investment Portfolio:

​

The majority of the investment portfolio is classified as available for sale, which allows for greater flexibility in using the investment portfolio for liquidity purposes by allowing securities to be sold when market opportunities occur. Investment securities available for sale totaled $562.5 million at September 30, 2024, an increase of $163.6 million, or 41.0% from $398.9 million at December 31, 2023. The increase was primarily due to the addition of $177.9 million to

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

the portfolio as a result of the merger with FNCB, as well as an increase in fair value due to market value adjustments, partially offset by maturities and principal payments.

​

Investment securities held to maturity, which consisted of 86.0% of mortgage-backed securities issued or guaranteed by U.S. Government agency and U.S. Government-sponsored entities, totaled $79.9 million at September 30, 2024, a decrease of $5.0 million, or 5.0% from $84.9 million at December 31, 2023. The decrease was primarily due to principal payments. Held to maturity securities had a market value of $69.0 million at September 30, 2024 compared to $71.7 million at December 31, 2023.

​

As a result of the merger with FNCB, the Company added $3.8 million in equity investments, consisting primarily of publicly traded bank holding companies, which are carried at fair value. Equity investments totaled $3.9 million at September 30,2024 compared to $98 thousand at December 31,2023.

​

For the nine months ended September 30, 2024, the investment portfolio averaged $588.7 million, an increase of $22.2 million or 3.9% compared to $566.5 million for the same period last year. Average tax-exempt municipal bonds have decreased $4.5 million or 4.9% to $87.6 million for the nine months ended September 30, 2024 from $92.1 million during the comparable period of 2023, and taxable investments have increased $26.7 million, or 5.6% to $501.1 million from an average of $474.4 million for the nine months ended September 30, 2023. The fully tax equivalent (“FTE”) yield on the investment portfolio, a non-GAAP measure, increased 56 basis points to 2.33% for the nine months ended September 30, 2024, from 1.77% for the comparable period of 2023 due to the additional investments from the FNCB merger which were accounted for at fair value based on current market rates.

​

Securities available for sale are carried at fair value, with unrealized gains or losses net of deferred income taxes reported in the Accumulated Other Comprehensive Loss component of stockholders’ equity. We reported net unrealized losses, included as a separate component of stockholders’ equity of $30.3 million net of a deferred income tax benefit of $8.5 million at September 30, 2024, and net unrealized losses of $40.3 million, net of deferred income tax benefit of $11.3 million, at December 31, 2023.

Our Asset/Liability Committee (“ALCO”) reviews the performance and risk elements of the investment portfolio quarterly. Through active balance sheet management and analysis of the securities portfolio, we endeavor to maintain sufficient liquidity to satisfy depositor requirements and meet the credit needs of our customers.

Loan Portfolio:

​

Total loans increased $1.2 billion or 57.2% annualized since December 31, 2023 and totaled $4.1 billion at September 30, 2024. The loan growth in each of our loan categories was due primarily to increases in our overall portfolio resulting from the merger with FNCB, along with organic increases in our commercial and industrial loan portfolio.

​

Commercial and industrial loans increased $346.4 million to $890.1 million at September 30, 2024 compared to $543.7 million at December 31, 2023.

​

Commercial real estate loans increased $446.5 million to $2.3 billion at September 30, 2024 compared to $1.9 billion at December 31, 2023.

​

Consumer loans increased $63.7 million to $146.0 million at September 30, 2024 compared to $82.3 million at December 31, 2023.

​

Residential real estate loans increased $189.8 million to $550.6 million at September 30, 2024 compared to $360.8 million at December 31, 2023.

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

The Company also added an equipment financing portfolio as a result of the FNCB merger. The portfolio totaled $173.5 million at September 30, 2024.

​

For the nine months ended September 30, 2024, total loans averaged $3.3 billion, an increase of $443.3 million or 15.7% compared to $2.8 billion for the same period of 2023. The FTE yield on the entire loan portfolio was 5.50% for the nine months ended September 30, 2024, a 73 basis point increase from the comparable period last year. The increase in yield was primarily due to the effective interest rates on the loans acquired in the FNCB merger.

​

In addition to the risks inherent in our loan portfolio, in the normal course of business, we are also a party to financial instruments with off-balance sheet risk to meet the financing needs of our customers. These instruments include legally binding commitments to extend credit, unused portions of lines of credit and commercial letters of credit made under the same underwriting standards as on-balance sheet instruments, and may involve, to varying degrees, elements of credit risk and interest rate risk (“IRR”) in excess of the amount recognized in the consolidated financial statements.

​

Unused commitments at September 30, 2024, totaled $791.5 million, consisting of $729.6 million in unfunded commitments of existing loan facilities and $61.9 million in standby letters of credit. Due to fixed maturity dates, specified conditions within these instruments, and the ultimate needs of our customers, many will expire without being drawn upon. We believe that amounts actually drawn upon can be funded in the normal course of operations and, therefore, do not represent a significant liquidity risk to us. In comparison, unused commitments at December 31, 2023 totaled $587.6 million, consisting of $525.4 million in unfunded commitments of existing loans and $62.2 million in standby letters of credit.

​

Asset Quality:

​

Distribution of nonperforming assets

​

​

​

​

​

​

​

​

​

(Dollars in thousands, except percents)

​

​

September 30, 2024

​

​

December 31, 2023

​

Nonaccrual loans

​

$

20,949

​

$

3,962

​

Accruing loans past due 90 days or more:

​

​

569

​

​

986

​

Total nonperforming loans

​

​

21,518

​

​

4,948

​

Foreclosed assets

​

​

27

​

​

​

​

Total nonperforming assets

​

$

21,545

​

$

4,948

​

Total loans held for investment

​

$

4,069,683

​

$

2,849,897

​

Allowance for credit losses

​

 

39,341

​

 

21,895

​

Allowance for credit losses as a percentage of loans held for investment

​

​

0.97

%  

​

0.77

%  

Allowance for credit losses as a percentage of nonaccrual loans

​

​

187.79

%  

 

552.62

%  

Nonaccrual loans as a percentage of loans held for investment

​

​

0.51

%  

​

0.14

%  

Nonperforming loans as a percentage of loans, net

​

 

0.53

%  

 

0.17

%  

Nonperforming assets as a percentage of total assets

​

 

0.40

%  

 

0.13

%  

​

Nonperforming assets increased by $16.6 million during the first nine months of 2024 and included $7.6 million of loans acquired from the FNCB merger. Nonperforming assets totaled $21.5 million or 0.40% of total assets at September 30, 2024, an increase from $4.9 million or 0.13% of total assets at December 31, 2023.

​

Loans on nonaccrual status increased $17.0 million to $20.9 million at September 30, 2024 from $4.0 million at December 31, 2023. Nonaccrual loans acquired in the FNCB merger equaled $7.6 million at September 30, 2024 and included a $4.1 million relationship with a non-profit that has ceased operations. Nonaccrual loans increased due to placing a $2.6 million collateral dependent real estate loan on nonaccrual as the primary source of repayment is in doubt and there are limited secondary sources of repayment. Potential loss is mitigated as the loan carries a 70 percent guarantee of a government agency for a significant amount of the outstanding balance. In addition, a $1.7 million

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Peoples Financial Services Corp.

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(Dollars in thousands, except per share data)

​

commercial relationship was placed on non-accrual in the current period due to the business closing, and a $3.6 million real estate relationship was also placed on nonaccrual due to ownership concerns. There was one foreclosed property at September 30, 2024 in the amount of $27 thousand. There were no foreclosed properties at December 31, 2023.

​

Generally we pursue a goal of maintaining a high loan-to-deposit ratio in order to drive profitability. However, this objective is superseded by our goal of maintaining strong asset quality. We continued our efforts to maintain sound underwriting standards for both commercial and consumer credit.

The allowance for credit losses equaled $39.3 million or 0.97% of loans, net at September 30, 2024 compared to $21.9 million or 0.77% of loans, net, at December 31, 2023. The increase was due primarily to the establishment of an allowance for non-PCD loans of $14.3 million subsequent to the FNCB merger. Loans charged-off, net of recoveries, for the nine months ended September 30, 2024, equaled $158 thousand and less than 0.01% of average loans, compared to $76 thousand and less than 0.01% of average loans for the comparable period last year.

Deposits:

​

We attract the majority of our deposits from within our market area through the offering of various deposit instruments including demand deposit accounts, NOW accounts, money market deposit accounts, savings accounts, and time deposits, including certificates of deposit and IRAs.

​

For the nine months ended September 30, 2024, total deposits increased $1.3 billion or 55.4% annualized to $4.6 billion from $3.3 billion at December 31, 2023.  Noninterest-bearing deposits increased $72.9 million, or 15.1% annualized and interest-bearing deposits increased $1.3 billion, or 65.2% annualized during the nine months ended September 30, 2024. The increase in deposits was primarily due to the deposits assumed in the FNCB merger.

​

Interest-bearing checking, NOW, and money market accounts increased $879.3 million to $2.5 billion at September 30, 2024 from $1.6 billion at December 31, 2023. Savings accounts increased $80.4 million to $509.4 million as of September 30, 2024 from $429.0 million at December 31, 2023. Time deposits less than $250 thousand increased $319.4 million to $824.8 million at September 30, 2024, from $505.4 million at December 31, 2023.  Time deposits $250 thousand or more increased $6.9 million to $128.1 million at September 30, 2024 from $121.3 million at year end 2023. The increases were primarily the result of the merger with FNCB, together with seasonal inflows.

​

The deposit base consisted of 38.6% retail accounts, 33.3% commercial accounts, 19.7% municipal relationships and 8.4% brokered deposits at September 30, 2024. At September 30, 2024, total estimated uninsured deposits were approximately $1.6 billion, or 33.8% of total deposits; as compared to approximately $883.5 million, or 26.9% of total deposits at December 31, 2023. Included in the uninsured total at September 30, 2024 is $372.5 million of municipal deposits collateralized by letters of credit issued by the FHLB and pledged investment securities, and $2.6 million of affiliate company deposits. We also offer customers access to IntraFi's CDARS and ICS programs through which their deposits may be allocated separate FDIC-insured institutions, while they are able to maintain their relationship with our bank.

​

For the nine months ended September 30, interest-bearing deposits averaged $3.0 billion in 2024 compared to $2.5 billion in 2023, an increase of $495.2 million or 20.0%. The cost of interest-bearing deposits was 2.85% in 2024 compared to 2.15% for the same period last year. The overall cost of interest bearing liabilities, including the cost of borrowed funds was 2.94% for the nine months ended September 30, 2024 and 2.26% for the same period in 2023. The higher costs are due primarily to increases in interest rates paid in order to attract and retain current balances.   

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Borrowings:

​

Peoples Bank utilizes borrowings as a secondary source of liquidity for its asset/liability management. Advances are available from the FHLB provided certain standards related to credit worthiness have been met. Repurchase and term agreements are also available from the FHLB. In addition, Peoples Bank may borrow from the Federal Reserve utilizing the Discount Window.

​

Overall, total borrowings were $189.9 million at September 30, 2024, which included short-term borrowings, long-term debt, other borrowings and subordinated debt, compared to $75.6 million at December 31, 2023, an increase of $114.3 million.  At September 30, 2024, other borrowings, which include cash collateral pledged by derivative counterparties to offset interest rate exposure, totaled $12.4 million compared to $17.6 million at December 31, 2023. Lower market interest rates resulted in reduced exposure, and in a decrease to pledged cash collateral.  Short term, long term and subordinated debt all include increases primarily due to the FNCB merger. Long-term debt was $111.5 million at September 30, 2024 compared with $25.0 million at year end 2023. Long term debt is comprised of $25.0 million from the Federal Reserve’s BTFP program, and the remaining with the Federal Home Loan Bank of Pittsburgh. Junior subordinated debt, which was acquired as part of the FNCB merger, totaled $8.0 million at September 30, 2024. Subordinated debt outstanding was unchanged at $33.0 million at September 30, 2024 and December 31, 2023.

​

Market Risk Sensitivity:

​

Market risk is the risk to our earnings or financial position resulting from adverse changes in market rates or prices, such as interest rates, foreign exchange rates or equity prices. Our exposure to market risk is primarily IRR associated with our lending, investing and deposit-gathering activities. During the normal course of business, we are not exposed to foreign exchange risk or commodity price risk. Our exposure to IRR can be explained as the potential for change in our reported earnings and/or the market value of our net worth. Variations in interest rates affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. Interest rate changes also affect the underlying economic value of our assets, liabilities and off-balance sheet items. These changes arise because the present value of future cash flows, and often the cash flows themselves, change with interest rates. The effects of the changes in these present values reflect the change in our underlying economic value and provide a basis for the expected change in future earnings related to interest rates. IRR is inherent in the role of banks as financial intermediaries. However, a bank with a high degree of IRR may experience lower earnings, impaired liquidity and capital positions, and most likely, a greater risk of insolvency. Therefore, banks must carefully evaluate IRR to promote safety and soundness in their activities.

​

The FOMC has begun decreasing the federal funds rate in part due to lower inflation.  Since September 2024, the FOMC has decreased the federal funds target rate by 75 basis points. Due to these factors, IRR and effectively managing it are very important to both bank management and regulators. Bank regulations require us to develop and maintain an IRR management program, overseen by our board of directors and senior management, that involves a comprehensive risk management process in order to effectively identify, measure, monitor and control risk. Should bank regulatory agencies identify a material weakness in our risk management process or high exposure relative to our capital, bank regulatory agencies may take action to remedy these shortcomings. Moreover, the level of IRR exposure and the quality of our risk management process is a determining factor when evaluating capital adequacy.

​

The ALCO, comprised of members of our board of directors, senior management and other appropriate officers, oversees our IRR management program. Specifically, ALCO analyzes economic data and market interest rate trends, as well as competitive pressures, and utilizes computerized modeling techniques to reveal potential exposure to IRR. This allows us to monitor and attempt to control the influence these factors may have on our rate-sensitive assets (“RSA”) and rate-sensitive liabilities (“RSL”), and overall operating results and financial position. One such technique utilizes a static gap model that considers repricing frequencies of RSA and RSL in order to monitor IRR. Gap analysis attempts to measure our interest rate exposure by calculating the net amount of RSA and RSL that reprice within specific time

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

intervals. A positive gap occurs when the amount of RSA repricing in a specific period is greater than the amount of RSL repricing within that same time frame and is indicated by an RSA/RSL ratio greater than 1.0. A negative gap occurs when the amount of RSL repricing is greater than the amount of RSA and is indicated by an RSA/RSL ratio of less than 1.0. A positive gap implies that earnings will be impacted favorably if interest rates rise and adversely if interest rates fall during the period. A negative gap tends to indicate that earnings will be affected inversely to interest rate changes.

​

Our cumulative one-year RSA/RSL ratio equaled 1.14% at September 30, 2024, an increase from 0.73% at December 31, 2023. As previously mentioned, a positive gap indicates that if interest rates increase, our earnings would likely be favorably impacted. The overall focus of ALCO is to maintain a well-balanced interest rate risk position in order to safeguard future earnings. The current position at September 30, 2024, indicates that the amount of RSA repricing within one year would exceed that of RSL, thereby causing net interest income to increase as market rates increase. However, these forward-looking statements are qualified in the aforementioned section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Management’s Discussion and Analysis.

​

Static gap analysis, although a standard measuring tool, does not fully illustrate the impact of interest rate changes on future earnings. First, market rate changes normally do not equally or simultaneously affect all categories of assets and liabilities. Second, assets and liabilities that can contractually reprice within the same period may not do so at the same time or to the same magnitude. Third, the interest rate sensitivity analysis presents a one-day position. Variations occur daily as we adjust our rate sensitivity throughout the year. Finally, assumptions must be made in constructing such an analysis.

​

As the static gap report fails to address the dynamic changes in the balance sheet composition or prevailing interest rates, we utilize a simulation model to enhance our asset/liability management. This model is used to create pro forma net interest income scenarios under various interest rate shocks. Simulation model results at September 30, 2024, produced results similar to those indicated by the one-year static gap position. In addition, parallel and instantaneous shifts in interest rates under various interest rate shocks resulted in changes in net interest income that were well within ALCO policy limits during the first year of simulation. We will continue to monitor our IRR throughout 2024 and endeavor to employ deposit and loan pricing strategies and direct the reinvestment of loan and investment repayments in order to manage our IRR position.

​

Financial institutions are affected differently by inflation than commercial and industrial companies that have significant investments in fixed assets and inventories. Most of our assets are monetary in nature and change correspondingly with variations in the inflation rate. It is difficult to precisely measure the impact inflation has on us, however we believe that our exposure to inflation can be mitigated through asset/liability management.

Liquidity:

​

Liquidity management is essential to our continuing operations and enables us to meet financial obligations as they come due, as well as to take advantage of new business opportunities as they arise. Financial obligations include, but are not limited to, the following:

​

●Funding new and existing loan commitments;

​

●Payment of deposits on demand or at their contractual maturity;

​

●Repayment of borrowings as they mature;

​

●Payment of lease obligations; and

​

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(Dollars in thousands, except per share data)

​

●Payment of operating expenses.

​

These obligations are managed daily, thus enabling us to effectively monitor fluctuations in our liquidity position and to adapt that position according to market influences and balance sheet trends. Future liquidity needs are forecasted and strategies are developed to ensure adequate liquidity at all times.

​

Historically, core deposits have been the primary source of liquidity because of their stability and lower cost, in general, than other types of funding. Providing additional sources of funds are loan and investment payments and prepayments and the ability to sell both available for sale securities and mortgage loans held for sale.

​

Our ALCO generally meets quarterly, and most recently met in September to review our IRR profile, capital adequacy and liquidity. At September 30, 2024, the Company’s cash and due from banks balances were $97.1 million. Our maximum borrowing capacity with the FHLB as of September 30, 2024 was $1.4 billion, of which $477.6 million was outstanding in the form of borrowings and irrevocable standby letters of credit, and the remaining $968.7 is available. Additionally, the Company maintains $569.8 million of availability at the Federal Reserve Bank’s Discount Window, through the pledging of securities and through a borrower-in-custody of collateral arrangement, which enables us to pledge certain loans not being used as collateral elsewhere. Of this amount, $25.0 million was outstanding in borrowings associated with the Bank Term Funding Program. Additional sources of credit with corresponding banks total $18.0 million, none of which is currently utilized. The Company also maintains an available for sale investment securities portfolio, comprised primarily of highly liquid U.S. Treasury securities, highly-rated municipal securities and U.S. agency-backed mortgage backed securities. This portfolio serves as an additional source of liquidity and capital. At September 30, 2024, the Company’s available for sale investment securities portfolio totaled $562.5 million, $298.5 million of which were unencumbered. We believe our liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis.

​

We employ a number of analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to determine the extent of our reliance on noncore funds to fund our investments and loans maturing after September 30, 2024. Our noncore funds at September 30, 2024, were comprised of time deposits in denominations of $100 thousand or more, brokered deposits and other borrowings. These funds are not considered to be a strong source of liquidity because they are very interest rate sensitive and are considered to be highly volatile. At September 30, 2024, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was 11.8%, while our net short-term noncore funding dependence ratio, noncore funds maturing within one-year, less short-term investments to long-term assets equaled 1.9%. Comparatively, our overall noncore dependence ratio at year-end 2023 was 12.1% and our net short-term noncore funding dependence ratio was 4.7%, indicating that our reliance on noncore funds has decreased overall as a result of increases to our longer term assets such as loans and investments and an increase in our federal funds balances, primarily due to in part to the FNCB merger.

​

The Consolidated Statements of Cash Flows present the changes in cash and cash equivalents from operating, investing and financing activities. Cash and cash equivalents, consisting of cash on hand, cash items in the process of collection, deposit balances with other banks and federal funds sold, increased $98.1 million during the nine months ended September 30, 2024. Cash and cash equivalents increased $216.7 million for the same period last year. For the nine months ended September 30, 2024, net cash outflows of $200.1 million, from financing activities, were offset by $267.6 million received in investing activities and $30.6 million received in operating activities. For the same period of 2023, net cash inflows of $24.3 million from operating activities and $240.4 million from financing activities were partially offset by net cash outflows of $48.1 million from investing activities.

​

Operating activities received net cash of $30.6 million for the nine months ended September 30, 2024, and provided $24.3 million for the corresponding nine months of 2023. Net income, adjusted for the effects of gains and losses along with noncash transactions such as depreciation and the provision for credit losses, is the primary source of funds from operations.

59

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

​

Investing activities primarily include transactions related to the FNCB merger, lending activities, and investment portfolio. Investing activities provided net cash of $267.6 million for the nine months ended September 30, 2024, compared to using net cash of $48.1 million for the same period of 2023. Proceeds from the sale of a portion of the investments acquired in the FNCB merger was the primary factor causing the net inflow, as well as $28.8 million in cash received in the FNCB merger.

​

Financing activities used net cash of $200.1 million for the nine months ended September 30, 2024, and provided net cash of $240.4 million for the corresponding nine months of 2023. In 2024, deposit outflows, and payments of borrowings were the largest source of the net cash outflow. The year ago period included new long-term borrowings and the addition of brokered deposits to build our cash position. While a portion of the outflow is seasonal, we continue to seek deposits from new markets and customers as well as existing customers, including municipalities and school districts.

​

We believe that our future liquidity needs will be satisfied through maintaining an adequate level of cash and cash equivalents, by maintaining readily available access to traditional funding sources, and through proceeds received from the investment and loan portfolios. We believe that our current sources of funds will enable us to meet all cash obligations as they come due.

​

Capital:

​

Stockholders’ equity totaled $475.1 million or $47.53 per share at September 30, 2024, compared to $340.4 million or $48.35 per share at December 31, 2023. Stockholders’ equity increased during the nine month period ended September 30, 2024 primarily due to the FNCB merger, earnings, and a decrease in other comprehensive loss due to changes in market values of available for sale securities, offset by a dividend payout of $11.9 million.

​

Dividends declared equaled $1.44 per share for the nine months ended September 30, 2024 and $1.23 per share for the same period of 2023. The Company has paid cash dividends since its formation as a bank holding company in 1986. The Company’s board of directors declared on October 25, 2024 a fourth quarter dividend of $0.6175 per share payable on December 13, 2024 to shareholders of record as of November 29, 2024. The increase to the quarterly cash dividend, which began in the third quarter of 2024, was contemplated as part of the Merger Agreement between the Company and FNCB. It is the present intention of the Company’s board of directors to continue this dividend payment policy.  Further dividends, however, must necessarily depend upon earnings, financial condition, appropriate legal restrictions and other factors relevant at the time the board of directors considers payment of dividends.

​

Current rules, which implemented the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act, call for the following capital requirements: (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5%; (ii) a minimum ratio of tier 1 capital to risk-weighted assets of 6%; (iii) a minimum ratio of total capital to risk-weighted assets of 8%; and (iv) a minimum leverage ratio of 4%. In addition, the final rules establish a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets applicable to all banking organizations. If a banking organization fails to hold capital above the minimum capital ratios and the capital conservation buffer, it will be subject to certain restrictions on capital distributions and discretionary bonus payments. 

​

The adequacy of capital is reviewed on an ongoing basis with reference to the size, composition and quality of resources and regulatory guidelines. We seek to maintain a level of capital sufficient to support existing assets and anticipated asset growth, maintain favorable access to capital markets, and preserve high quality credit ratings. At September 30, 2024, Peoples Bank’s Tier 1 capital to total average assets was 8.23% as compared to 9.34% at December 31, 2023. Peoples Bank’s Tier 1 capital to risk weighted asset ratio was 10.68% and the total capital to risk weighted asset ratio was 11.68% at September 30, 2024. These ratios were 13.30% and 14.12% at December 31, 2023. Peoples Bank’s common equity Tier 1 to risk weighted asset ratio was 10.68% at September 30, 2024 compared to 13.30% at December

60

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

31, 2023. Peoples Bank met all capital adequacy requirements and was deemed to be well-capitalized under regulatory standards at September 30, 2024.

​

Review of Financial Performance:

​

The Company’s financial results for any periods ended prior to July 1, 2024 reflect Peoples results only on a

stand alone basis, prior to the merger with FNCB. As a result of this factor and the below listed adjustments related to the FNCB merger, the Company’s financial results for the third quarter of 2024 may not be directly comparable to prior reported periods. The following schedule highlights specific merger related activity for the three and nine months ended September 30, 2024:

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 2024

​

September 30, 2024

Severance expenses

​

$

187

​

$

187

System termination and integration fees

​

​

8,375

​

​

8,551

Financial advisory fees

​

​

582

​

​

1,173

Legal and professional fees

​

​

87

​

​

772

Other merger related expenses

​

​

422

​

​

527

Total

​

$

9,653

​

$

11,210

​

Peoples reported a net loss of $4.3 million or ($0.43) per diluted share for the three months ended September 30, 2024, a decline of $11.1 million when compared to net income of $6.7 million or $0.95 per share for the comparable period of 2023. Quarterly net income included higher net interest income of $18.0 million due primarily to increases in the volume of earning assets due to the FNCB merger and the $3.7 million net accretion impact of purchase accounting marks on loans, deposits and borrowings acquired and assumed in the FNCB merger. The higher net interest income increased the net interest margin to 3.26% in the current period. Noninterest income was $5.7 million, up from $3.6 million in the year ago period. Noninterest expenses increased by $18.4 million, which included merger related expenses of $9.7 million, and higher overall expenses due to the FNCB merger. Provision for income tax decreased by $2.0 million on lower earnings.

​

Peoples reported net income of $2.4 million, or $0.30 per diluted share for the nine months ended September 30, 2024, a decrease of 89.9% when compared to $23.8 million, or $3.31 per diluted share for the comparable period of 2023. The decrease in earnings in the nine months ended September 30, 2024 is a result of a higher provision for credit loss of $16.9 million which included a $14.3 million provision for non-PCD loans acquired in the FNCB merger, higher merger related expenses of $10.2 million and higher overall expenses due to the FNCB merger, partially offset by higher net interest income of $11.0 million and higher noninterest income of $1.7 million primarily due to the FNCB merger.

​

Return on average assets (“ROA”) measures our net income in relation to total assets. Our annualized ROA was (0.33)% for the third quarter of 2024 compared to 0.72% for the same period of 2023. Return on average equity (“ROE”) indicates how effectively we can generate net income on the capital invested by stockholders. Our annualized ROE was (3.58)% for the third quarter of 2024 compared to 8.05% for the comparable period in 2023. The declines in our annualized ROA and ROE were due primarily to a lower level of net income resulting from non-recurring charges related to the FNCB merger.

​

61

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Non-GAAP Financial Measures:

​

The following are non-GAAP financial measures which provide useful insight to the reader of the consolidated financial statements but should be supplemental to GAAP used to prepare Peoples’ consolidated financial statements and should not be read in isolation or relied upon as a substitute for GAAP measures. In addition, Peoples’ non-GAAP measures may not be comparable to non-GAAP measures of other companies. The tax rate used to calculate the fully-taxable equivalent (FTE) adjustment was 21% for 2024 and 2023.

The following table reconciles the non-GAAP financial measures of FTE net interest income for the three and nine months ended September 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

​

​

​

​

​

​

​

​

Three Months Ended September 30,

    

2024

    

​

2023

    

​

Interest income (GAAP)

​

$

68,284

​

​

$

38,765

​

​

Adjustment to FTE

​

 

720

​

​

 

475

​

​

Interest income adjusted to FTE (non-GAAP)

​

 

69,004

​

​

 

39,240

​

​

Interest expense

​

 

29,040

​

​

 

17,488

​

​

Net interest income adjusted to FTE (non-GAAP)

​

$

39,964

​

​

$

21,752

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

​

​

​

​

​

​

​

​

Nine Months Ended September 30,

    

2024

    

​

2023

​

​

Interest income (GAAP)

​

$

145,657

​

​

$

109,779

​

​

Adjustment to FTE

​

 

1,666

​

​

 

1,440

​

​

Interest income adjusted to FTE (non-GAAP)

​

 

147,323

​

​

 

111,219

​

​

Interest expense

​

 

68,179

​

​

 

43,294

​

​

Net interest income adjusted to FTE (non-GAAP)

​

$

79,144

​

​

$

67,925

​

​

The efficiency ratio is noninterest expenses, less amortization of intangible assets and acquisition related expenses, as a percentage of FTE net interest income plus noninterest income less gains on equity securities and gains on sale of assets. Management monitors the efficiency ratio to determine how well it is managing its operating expenses; a lower efficiency ratio is generally preferable as it indicates the Company is spending less to generate income. The Company is continuing to pursue opportunities to reduce expenses as a percentage of operating revenues.

​

62

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP for the three and nine months ended September 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands, except percents)

​

​

​

​

​

​

​

​

​

Three Months Ended September 30,

    

2024

    

​

2023

    

​

Efficiency ratio (non-GAAP):

​

​

​

​

​

​

​

​

​

Noninterest expense (GAAP)

​

$

35,502

​

​

$

17,054

​

​

Less: amortization of intangible assets expense

​

 

1,665

​

​

 

29

​

​

Less: acquisition related expenses

​

​

9,653

​

​

​

869

​

​

Noninterest expense adjusted (non-GAAP)

​

​

24,184

​

​

​

16,156

​

​

​

​

​

​

​

​

​

​

​

​

Net interest income (GAAP)

​

​

39,244

​

​

​

21,277

​

​

Plus: taxable equivalent adjustment

​

​

720

​

​

​

475

​

​

Noninterest income (GAAP)

​

​

5,722

​

​

​

3,692

​

​

Less: net gains on equity securities

​

​

175

​

​

​

​

​

​

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

​

$

45,511

​

​

$

25,444

​

​

​

​

​

​

​

​

​

​

​

​

Efficiency ratio (non-GAAP)

​

​

53.1

%

​

​

63.5

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands, except percents)

​

​

​

​

​

​

​

​

​

Nine Months Ended September 30,

    

2024

    

​

2023

    

​

Efficiency ratio (non-GAAP):

​

​

​

​

​

​

​

​

​

Noninterest expense (GAAP)

​

$

71,728

​

​

$

50,222

​

​

Less: amortization of intangible assets expense

​

 

1,665

​

​

 

86

​

​

Less: acquisition related expenses

​

​

11,210

​

​

​

990

​

​

Noninterest expense adjusted (non-GAAP)

​

​

58,853

​

​

​

49,146

​

​

​

​

​

​

​

​

​

​

​

​

Net interest income (GAAP)

​

​

77,478

​

​

​

66,485

​

​

Plus: taxable equivalent adjustment

​

​

1,666

​

​

​

1,440

​

​

Noninterest income (GAAP)

​

​

12,665

​

​

​

10,918

​

​

Less: net gains (losses) on equity securities

​

​

155

​

​

​

(17)

​

​

Less: gains on sale of available for sale securities

​

​

1

​

​

​

81

​

​

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

​

$

91,653

​

​

$

78,779

​

​

Efficiency ratio (non-GAAP)

​

​

64.2

%

​

​

62.4

%

​

​

63

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Net Interest Income:

​

Net interest income is the fundamental source of earnings for commercial banks. Fluctuations in the level of net interest income can have the greatest impact on net profits. Net interest income is defined as the difference between interest revenue, interest and fees earned on interest-earning assets, and interest expense, the cost of interest-bearing liabilities supporting those assets. The primary sources of earning assets are loans and investment securities, while interest-bearing deposits, short-term and long-term borrowings, and subordinated debt comprise interest-bearing liabilities. Net interest income is impacted by:

​

●Variations in the volume, rate and composition of earning assets and interest-bearing liabilities;

​

●Changes in general market rates; and

​

●The level of nonperforming assets.

​

Changes in net interest income are measured by the net interest spread and net interest margin. Net interest spread, the difference between the average yield earned on earning assets and the average rate incurred on interest-bearing liabilities, illustrates the effects changing interest rates have on profitability. Net interest margin, net interest income as a percentage of earning assets, is a more comprehensive ratio, as it reflects not only the spread, but also the change in the composition of interest-earning assets and interest-bearing liabilities. Tax-exempt loans and investments carry pre-tax yields lower than their taxable counterparts. Therefore, in order to make the analysis of net interest income more comparable, tax-exempt income and yields are reported herein on a FTE basis, as FTE net interest income using the prevailing federal statutory tax rate of 21.0% in 2024 and 2023.

​

For the three and nine months ended September 30, 2024, the average balances include $1.2 billion in loans, $177.0 million of investments, $1.4 billion in deposits, $226.3 million in borrowings, and $8.0 million in junior subordinated debt acquired in the FNCB merger. For the three months ended September 30, FTE net interest income, a non-GAAP measure, increased $18.2 million to $40.0 million in 2024 from $21.8 million in 2023. The net interest spread increased to 2.74% for the three months ended September 30, 2024 from 1.79% for the three months ended September 30, 2023 as the earning asset yield increased 123 basis points while the average rate paid on interest-bearing liabilities increased 28 basis points. The FTE net interest margin increased to 3.26% for the third quarter of 2024 from 2.44% for the comparable period of 2023. The increase in tax-equivalent net interest margin from the year ago period was primarily from a higher volume of earning assets and the net accretion impact of purchase accounting marks on loans, deposits and borrowings acquired and assumed in the FNCB merger, which totaled $3.7 million of net interest income, and represented 30 basis points of tax-equivalent net interest margin.

​

For the three months ended September 30, FTE interest income on earning assets, a non-GAAP measure, increased $29.8 million to $69.0 million in 2024 as compared to $39.2 million in 2023. The overall yield on earning assets, on a FTE basis, increased 123 basis points for the three months ended September 30, 2024 to 5.63% as compared to 4.40% for the three months ended September 30, 2023. The increase to FTE interest income is due to the increase in rates for newly acquired assets, and an increase in our earning asset base, including those acquired from the FNCB merger and rising rate indices. The overall yield earned on investments increased 127 basis points in the third quarter of 2024 to 3.02% from 1.75% for the third quarter of 2023 primarily as a result of a restructured portfolio mix and acquiring the investment portfolio at fair value based on current market rates. Average investment balances were $158.1 million higher when comparing the current and year ago quarter. The yield on loans increased 124 basis points in the third quarter of 2024 to 6.09% from 4.85% for the third quarter of 2023 as a result of loans acquired in the FNCB merger, new loans originated at higher portfolio rates, floating and adjustable loans repricing higher, and the net accretion of the loan marks from the impact of purchase accounting which benefited the yield by 46 basis points. Average loan balances were $1.2 billion higher when compared to the same quarter in 2023. Average federal funds sold decreased $42.4 million to $92.1 million for the three months ended September 30, 2024 and yielded 5.26%, as compared to $134.6 million and a yield of 5.52% in the year ago period. We expect asset yields to stabilize as floating rate assets repricing downward

64

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

from the FOMC action to cut rates 50 basis points in September will be offset by new loan originations booked at higher portfolio rates and lower yielding adjustable rate assets repricing higher than current stated rates.

​

Total interest expense increased $11.5 million to $29.0 million for the three months ended September 30, 2024 from $17.5 million for the three months ended September 30, 2023. The total cost of funds increased 28 basis points for the three months ended September 30, 2024 to 2.89% as compared to 2.61% in the year ago period. The increase in costs was due to an increase to the average balance of higher priced brokered certificate of deposits, higher rates paid on both interest-bearing deposits and short term borrowings, combined with higher average balances in the current period. The impact of amortizing the marks due to purchase accounting on the time deposits, borrowings and junior subordinated debt added 10 basis points to the funding costs. Average rates paid on deposits increased as the result of higher market rates and local competition for deposits. We expect increased competition for funding to continue to impact costs during the remaining months of 2024.

​

Net interest income changes due to rate and volume for the nine months ended September 30

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2024 vs 2023

​

​

​

Increase (decrease)

​

​

​

attributable to  

​

(Dollars in thousands)

​

Total  

​

Rate  

​

Volume  

​

Interest income:

    

​

​

    

​

​

    

​

​

    

Loans:

​

​

​

​

​

​

​

​

​

​

Taxable

​

$

32,576

​

$

15,476

​

$

17,100

​

Tax-exempt

​

 

1,153

​

​

720

​

​

433

​

Investments:

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

2,643

​

​

2,287

​

​

356

​

Tax-exempt

​

 

(73)

​

​

(3)

​

​

(70)

​

Interest-bearing deposits

​

 

195

​

​

12

​

​

183

​

Federal funds sold

​

 

(390)

​

​

45

​

​

(435)

​

Total interest income

​

 

36,104

​

 

18,537

​

 

17,567

​

Interest expense:

​

​

​

​

​

​

​

​

​

​

Money market accounts

​

​

6,657

​

​

4,252

​

​

2,405

​

NOW accounts

​

 

5,464

​

​

2,203

​

​

3,261

​

Savings accounts

​

 

3,248

​

​

3,341

​

​

(93)

​

Time deposits less than $100

​

 

8,798

​

​

3,917

​

​

4,881

​

Time deposits $100 or more

​

 

(756)

​

​

(2,543)

​

​

1,787

​

Short-term borrowings

​

 

(144)

​

​

169

​

​

(313)

​

Long-term debt

​

 

1,359

​

​

60

​

​

1,299

​

Subordinated debt

​

​

​

​

​

​

​

​

​

​

Junior subordinated debt

​

​

260

​

​

​

​

​

260

​

Total interest expense

​

 

24,886

​

 

11,399

​

 

13,487

​

FTE net interest income changes (Non-GAAP)

​

$

11,218

​

$

7,138

​

$

4,080

​

​

FTE net interest income, a non-GAAP measure, was $79.1 million in the nine months ended September 30, 2024 and $67.9 million in the comparable period last year. There was both a positive volume and rate variance. The growth in average interest-bearing assets exceeded that of the growth in earning liabilities, and resulted in higher FTE net interest income, a non-GAAP measure, of $4.1 million. A rate variance resulted in an increase in net interest income of $7.1 million.

​

Average earning assets increased $459.5 million to $3.9 billion for the nine months ended September 30, 2024 and accounted for a $17.6 million increase in interest income. Average taxable loans increased $426.1 million, which caused interest income to increase $17.1 million. Average tax-exempt loans increased $17.1 million which caused interest

65

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

income to increase $0.4 million. Average taxable investments increased $26.7 million comparing 2024 and 2023, which resulted in increased interest income of $0.4 million while average tax-exempt investments decreased $4.5 million, which resulted in a decrease to interest income of $70 thousand. Average interest bearing deposits with banks increased $4.5 million which resulted in an increase of $0.2 million to interest income. Average federal funds sold decreased $10.5 million for the nine months ended September 30, 2024 which resulted in a decrease of $0.4 million to interest income.

​

Average interest-bearing liabilities rose $527.7 million to $3.1 billion for the nine months ended September 30, 2024 from $2.6 billion for the nine months ended September 30, 2023 resulting in a net increase in interest expense of $13.5 million. Interest-bearing deposit accounts, including money market, NOW and savings accounts increased $271.5 million which resulted in a total increase in interest expense of $5.6 million. In addition, large denomination time deposits averaged $76.3 million more in the current period and caused interest expense to increase $1.8 million. An increase of $147.4 million in average time deposits less than $100 thousand which included higher priced callable brokered CDs, resulted in an increase to interest expense of $4.9 million. Short-term borrowings averaged $6.8 million lower and decreased interest expense $0.3 million while long-term borrowing increased $36.6 million and resulted in an increase to interest expense of $1.3 million.

​

For the nine months ended September 30, 2024, a favorable rate variance occurred, as the FTE yield on earning assets increased 72 basis points while there was a 68 basis point increase in the cost of funds. As a result, FTE net interest income increased $7.1 million comparing the nine months ended September 30, 2024 and 2023. The FTE yield on earning assets was 5.01% in the 2024 period compared to 4.29% in 2023 resulting in an increase in interest income of $18.5 million. The yield on the taxable investment portfolio increased 62 basis points to 2.30% during the nine months ended September 30, 2024 from 1.68% in the year ago period, resulting in an increase of $2.3 million in interest income. The yield on the tax exempt investment portfolio remained flat at 2.22% during the nine months ended September 30, 2024 and in the year ago period. The FTE yield on the loan portfolio increased 73 basis points to 5.50% in 2024 from 4.77% in 2023 and resulted in an increase to interest income of $16.2 million.

​

The yield on interest bearing deposits increased 70 basis points to 2.85% from 2.15% in the year ago period resulting in an increase in interest expense of $11.2 million. The yield on long term borrowings increased 43 basis points to 4.67% from 4.33% in the year ago period but had a negligible effect to interest expense. The yield on short term borrowings increased 38 basis points to 5.31% from 4.93% in the year ago period and resulted in an increase to interest expense of $0.2 million.

​

The average balances of assets and liabilities, corresponding interest income and expense and resulting average yields or rates paid are summarized as follows. Averages for earning assets include nonaccrual loans. Investment averages include available for sale securities at amortized cost. Income on investment securities and loans is adjusted to a FTE basis using the prevailing federal statutory tax rate of 21%.

66

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three months ended

​

​

​

September 30, 2024

​

September 30, 2023

​

​

​

Average

​

Interest Income/

​

Yield/

​

Average

​

Interest Income/

​

Yield/

​

​

    

Balance  

    

Expense

    

Rate  

    

Balance  

    

Expense

    

Rate  

​

Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Earning assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

$

3,790,138

​

$

59,411

​

6.24

%

$

2,627,700

​

$

33,095

​

5.00

%

Tax-exempt

​

​

278,496

​

​

2,910

​

4.16

​

​

226,628

​

​

1,786

​

3.13

​

Total loans

​

​

4,068,634

​

​

62,321

​

6.09

​

​

2,854,328

​

​

34,881

​

4.85

​

Investments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

​

611,032

​

​

4,793

​

3.12

​

​

454,727

​

​

1,920

​

1.68

​

Tax-exempt

​

​

89,532

​

​

520

​

2.31

​

​

87,731

​

​

475

​

2.15

​

Total investments

​

​

700,564

​

​

5,313

​

3.02

​

​

542,458

​

​

2,395

​

1.75

​

Interest-bearing deposits

​

​

10,820

​

​

151

​

5.55

​

​

6,893

​

​

91

​

5.24

​

Federal funds sold

​

​

92,171

​

​

1,218

​

5.26

​

​

134,583

​

​

1,873

​

5.52

​

Total earning assets

​

​

4,872,189

​

​

69,003

​

5.63

%

​

3,538,262

​

​

39,240

​

4.40

%

Less: allowance for credit losses

​

​

37,535

​

​

​

​

​

​

​

23,691

​

​

​

​

​

​

Other assets

​

​

456,540

​

​

​

​

​

​

​

215,472

​

​

​

​

​

​

Total assets

​

$

5,291,194

​

$

69,003

​

​

​

$

3,730,043

​

$

39,240

​

​

​

Liabilities and Stockholders’ Equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Money market accounts

​

$

906,842

​

$

8,231

​

3.61

%

$

697,387

​

$

5,945

​

3.38

%

Interest-bearing demand and NOW accounts

​

​

1,414,228

​

​

6,888

​

1.94

​

​

800,978

​

​

4,335

​

2.15

​

Savings accounts

​

​

518,038

​

​

3,420

​

2.63

​

​

462,468

​

​

272

​

0.23

​

Time deposits less than $100

​

​

687,511

​

​

4,637

​

2.68

​

​

412,705

​

​

4,234

​

4.07

​

Time deposits $100 or more

​

​

275,786

​

​

3,222

​

4.65

​

​

208,153

​

​

1,695

​

3.23

​

Total interest-bearing deposits

​

​

3,802,405

​

​

26,398

​

2.76

​

​

2,581,691

​

​

16,481

​

2.53

​

Short-term borrowings

​

​

43,895

​

​

550

​

4.98

​

​

21,759

​

​

291

​

5.31

​

Long-term debt

​

​

111,804

​

​

1,389

​

4.94

​

​

25,000

​

​

273

​

4.33

​

Subordinated debt

​

​

33,000

​

​

443

​

5.34

​

​

33,000

​

​

443

​

5.33

​

Junior subordinated debt

​

​

8,000

​

​

260

​

12.93

​

​

​

​

​

​

​

​

​

Total borrowings

​

​

196,699

​

​

2,642

​

5.34

​

​

79,759

​

​

1,007

​

5.01

​

Total interest-bearing liabilities

​

​

3,999,104

​

​

29,040

​

2.89

​

​

2,661,450

​

​

17,488

​

2.61

​

Noninterest-bearing deposits

​

​

713,776

​

​

​

​

​

​

​

688,301

​

​

​

​

​

​

Other liabilities

​

​

96,177

​

​

​

​

​

​

​

47,788

​

​

​

​

​

​

Stockholders’ equity

​

​

482,137

​

​

​

​

​

​

​

332,504

​

​

​

​

​

​

Total liabilities and stockholders’ equity

​

$

5,291,194

​

​

​

​

​

​

$

3,730,043

​

​

​

​

​

​

Net interest income/spread

​

​

​

​

$

39,963

​

2.74

%

​

​

​

$

21,752

​

1.79

%

Net interest margin

​

​

​

​

​

​

​

3.26

%

​

​

​

​

​

​

2.44

%

Tax-equivalent adjustments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

$

611

​

​

​

​

​

​

$

375

​

​

​

Investments

​

​

​

​

​

109

​

​

​

​

​

​

​

100

​

​

​

Total adjustments

​

​

​

​

$

720

​

​

​

​

​

​

$

475

​

​

​

​

​

​

67

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Nine months ended

 

​

​

September 30, 2024

 

September 30, 2023

 

​

​

Average

​

Interest Income/

​

Yield/

 

Average

​

Interest Income/

​

Yield/

 

(Dollars in thousands, except percents)

    

Balance  

    

Expense

    

Rate  

    

Balance  

    

Expense

    

Rate  

    

Assets:

    

​

​

    

​

​

    

​

​

​

​

    

​

​

    

​

​

Earning assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

$

3,022,988

​

$

127,859

 

5.65

%  

$

2,596,848

​

$

95,283

 

4.91

%  

Tax-exempt

​

 

242,293

​

​

6,476

 

3.57

​

​

225,178

​

​

5,323

 

3.16

​

Total loans

​

​

3,265,281

​

​

134,335

​

5.50

​

​

2,822,026

​

​

100,606

​

4.77

​

Investments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

501,100

​

​

8,620

 

2.30

​

​

474,425

​

​

5,977

 

1.68

​

Tax-exempt

​

 

87,612

​

​

1,459

 

2.22

​

​

92,111

​

​

1,532

 

2.22

​

Total investments

​

​

588,712

​

​

10,079

 

2.29

​

​

566,536

​

​

7,509

 

1.77

​

Interest-bearing deposits

​

 

9,541

​

​

385

 

5.39

​

​

5,004

​

​

190

 

5.08

​

Federal funds sold

​

​

61,635

​

​

2,524

 

5.47

​

​

72,098

​

​

2,914

 

5.40

​

Total interest-earning assets

​

 

3,925,169

​

 

147,323

 

5.01

%  

 

3,465,664

​

 

111,219

 

4.29

%  

Less: allowance for credit losses

​

 

27,660

​

​

​

​

​

​

 

24,711

​

​

​

​

​

​

Other assets

​

 

294,186

​

​

​

​

​

​

 

211,537

​

​

​

​

​

​

Total assets

​

$

4,191,695

​

$

147,323

​

​

​

$

3,652,490

​

$

111,219

​

​

​

Liabilities and Stockholders’ Equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Money market accounts

​

$

792,391

​

$

22,116

 

3.73

%  

$

694,478

​

$

15,459

 

2.98

%  

Interest-bearing demand and NOW accounts

​

 

977,722

​

​

16,125

 

2.20

​

​

768,277

​

​

10,661

 

1.86

​

Savings accounts

​

 

450,161

​

​

3,975

 

1.18

​

​

485,985

​

​

727

 

0.20

​

Time deposits less than $100

​

 

475,194

​

​

17,778

 

5.00

​

​

327,810

​

​

8,980

 

3.66

​

Time deposits $100 or more

​

 

271,765

​

​

3,222

 

1.58

​

​

195,450

​

​

3,978

 

2.72

​

Total interest-bearing deposits

​

​

2,967,233

​

​

63,216

 

2.85

​

​

2,472,000

​

​

39,805

 

2.15

​

Short-term borrowings

​

 

36,349

​

​

1,446

 

5.31

​

​

43,125

​

​

1,590

 

4.93

​

Long-term debt

​

 

54,147

​

​

1,928

 

4.76

​

​

17,576

​

​

569

 

4.33

​

Subordinated debt

​

​

33,000

​

​

1,330

 

5.38

​

​

33,000

​

​

1,330

 

5.39

​

Junior subordinated debt

​

​

2,692

​

​

260

 

12.90

​

​

​

​

​

​

​

​

​

Total borrowings

​

​

126,188

​

​

4,964

 

5.25

​

​

93,701

​

​

3,489

 

4.98

​

Total interest-bearing liabilities

​

 

3,093,421

​

​

68,180

 

2.94

%

​

2,565,701

​

$

43,294

 

2.26

%

Noninterest-bearing deposits

​

 

650,446

​

​

​

​

​

​

 

714,779

​

​

​

​

​

​

Other liabilities

​

 

59,622

​

​

​

​

​

​

 

42,101

​

​

​

​

​

​

Stockholders’ equity

​

 

388,206

​

​

​

​

​

​

 

329,909

​

​

​

​

​

​

Total liabilities and stockholders’ equity

​

$

4,191,695

​

​

​

​

​

​

$

3,652,490

​

​

​

​

​

​

Net interest income/spread

​

​

​

​

$

79,143

 

2.07

%  

​

​

​

$

67,925

 

2.03

%  

Net interest margin (Non-GAAP)

​

​

​

​

​

​

 

2.69

%  

​

​

​

​

​

 

2.62

%  

Tax-equivalent adjustments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

$

1,360

​

​

​

​

​

​

$

1,118

​

​

​

Investments

​

​

​

​

 

306

​

​

​

​

​

​

 

322

​

​

​

Total adjustments

​

​

​

​

$

1,666

​

​

​

​

​

​

$

1,440

​

​

​

​

​

68

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Provision for Credit Losses:

​

Effective January 1, 2023 the Company transitioned to ASU 2016-13 Financial Instruments - Credit Losses (Topic 326), commonly referred to as CECL. Based on our most current evaluation, we believe that the allowance is adequate to absorb any known and inherent losses in the portfolio as of September 30, 2024.

​

For the three months ended September 30, 2024, $14.5 million was recorded to the provision for credit losses compared to a credit of $0.2 million in the year ago period. The current period provision included a non-recurring provision of $14.3 million for FNCB non-PCD loans. Excluding the impact of the FNCB merger, the provision for credit losses for the three months ended September 30, 2024 was $0.2 million.

​

For the nine months ended September 30, 2024, a provision for credit losses of $15.8 million was recorded and included a $14.3 million initial provision for non-PCD loans acquired in the FNCB merger. The provision in the prior nine month period included a credit of $0.9 million which was attributed to various factors, including updated economic assumptions as well as changes in qualitative factors, portfolio composition and asset quality.

​

Noninterest Income:

​

Noninterest income for the three months ended September 30, 2024 and 2023 was $5.7 million and $3.7 million, respectively. The increase was primarily due to the FNCB merger and consisted of higher levels of service charges, fees, commissions and other income, wealth management fees and increased cash surrender value of life insurance. These increases were partially offset by lower interest rate swap revenue due to reduced origination volume.

​

Noninterest income was $12.7 million for the nine months ended September 30, 2024 and $10.9 million for the comparable period ended September 30, 2023. Services charges and fees increased $1.5 million, wealth management income increased $0.3 million and gains on equity securities increased $0.2 million while interest rate swap revenue decreased $0.5 million on lower loan origination volume and market value adjustments.

​

Noninterest Expenses:

​

In general, noninterest expense is categorized into three main groups: employee-related expenses, occupancy and equipment expenses, and other expenses. However, included in the current period are acquisition related expenses incurred in connection with our merger with FNCB. Employee-related expenses are costs associated with providing salaries, including payroll taxes and benefits, to our employees. Occupancy and equipment expenses, the costs related to the maintenance of facilities and equipment, include depreciation, general maintenance and repairs, real estate taxes, rental expense offset by any rental income, and utility costs. Other expenses include general operating expenses such as advertising, contractual services, insurance, including FDIC assessment, provision for unfunded commitments, other taxes and supplies. Several of these costs and expenses are variable while the remainder are fixed. We utilize budgets and other related strategies in an effort to control the variable expenses.

​

Noninterest expense increased $18.4 million to $35.5 million for the three months ended September 30, 2024, from $17.1 million for the same period a year ago. Acquisition related expenses, such as legal and consulting, and core system de-conversion fees and advisory fees totaled $9.7 million. Salaries and employee benefits were $4.4 million higher due to the addition of 195 full time equivalent employees. Occupancy and equipment expenses increased $2.1 million in the three months ended September 30, 2024 due to higher information technology (IT) expense and higher facilities costs from inflationary price pressure and the additional branches acquired in the FNCB merger.

​

Noninterest expense for the nine months ended September 30, 2024 was $71.7 million, an increase of $21.5 million or 42.8% from $50.2 million for the nine months ended September 30, 2023. The increase was due primarily to higher acquisition related expenses, and higher expenses due to additional full time equivalent employees and facilities due to

69

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

the FNCB merger. Salaries and employee benefits expenses increased $4.1 million compared to the year ago period due to additional employees related to the merger. Occupancy and equipment expenses were higher by $3.1 million in the nine months ended September 30, 2024 due to increased technology costs related to system integration and increased account and transaction volumes, and higher facilities costs. Acquisition related expenses totaled $11.2 million compared to $1.0 million a year ago.

​

Income Taxes:

We recorded an income tax benefit of $0.7 million or 13.2% of pre-tax loss, and a $1.3 million provision, or 16.5% of pre-tax income for the three ended September 30, 2024 and September 30, 2023 respectively. For the nine months ended September 30, 2024 we recorded a provision of $0.2 million, or 9.1% of pretax income compared to $4.5 million, or 16.1% of pretax income for the nine month period ended September 30, 2023. Lower income tax expense was due to lower pre-tax income for the three and nine months ended September 30, 2024.

​

​

​

70

Table of Contents

Peoples Financial Services Corp.

​

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk to our earnings and/or financial position resulting from adverse changes in market rates or prices, such as interest rates, foreign exchange rates or equity prices. Our exposure to market risk is primarily interest rate risk (“IRR”), which arises from our lending, investing and deposit gathering activities. Our market risk sensitive instruments consist of derivative and non-derivative financial instruments, none of which are entered into for trading purposes. During the normal course of business, we are not exposed to foreign exchange risk or commodity price risk. Our exposure to IRR can be explained as the potential for change in reported earnings and/or the market value of net worth. Variations in interest rates affect the underlying economic value of assets, liabilities and off-balance sheet items. These changes arise because the present value of future cash flows, and often the cash flows themselves, change with interest rates. The effects of the changes in these present values reflect the change in our underlying economic value, and provide a basis for the expected change in future earnings related to interest rates. Interest rate changes affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. IRR is inherent in the role of banks as financial intermediaries.

A bank with a high degree of IRR may experience lower earnings, impaired liquidity and capital positions, and most likely, a greater risk of insolvency. Therefore, banks must carefully evaluate IRR to promote safety and soundness in their activities. Interest rate risk is the risk of loss to future earnings due to changes in interest rates. The Asset Liability Management Committee (“ALCO”) is responsible for establishing policy guidelines on liquidity and acceptable exposure to interest rate risk. Generally quarterly, ALCO reports on the status of liquidity and interest rate risk matters to the Company’s board of directors. The objective of the ALCO is to manage assets and funding sources to produce results that are consistent with the Company’s liquidity, capital adequacy, growth, risk and profitability goals and are within policy limits.

The Company utilizes the pricing and structure of loans and deposits, the size and duration of the investment securities portfolio, the size and duration of the wholesale funding portfolio, and off-balance sheet interest rate contracts to manage interest rate risk. The off-balance sheet interest rate contracts may include interest rate swaps, caps and floors. These interest rate contracts involve, to varying degrees, credit risk and interest rate risk. Credit risk is the possibility that a loss may occur if a counterparty to a transaction fails to perform according to terms of the contract. The notional amount of the interest rate contracts is the amount upon which interest and other payments are based. The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. See Note 13 to the Audited Consolidated Financial Statements contained in Part II, Item 8 of our Annual Report on Form 10-K for the period ended December 31, 2023 and Note 11 to the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report for additional information.

The ALCO uses income simulation to measure interest rate risk inherent in the Company’s on-balance sheet and off-balance sheet financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 24-month horizon and a 60-month horizon. The simulations assume that the size and general composition of the Company’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from low-cost time deposits to higher cost time deposits in selected interest rate scenarios. Additionally, the simulations take into account the specific repricing, maturity, call options, and prepayment characteristics of differing financial instruments that may vary under different interest rate scenarios. The characteristics of financial instrument classes are reviewed typically quarterly by the ALCO to ensure their accuracy and consistency.

The ALCO reviews simulation results to determine whether the Company’s exposure to a decline in net interest income remains within established tolerance levels over the simulation horizons and to develop appropriate strategies to manage this exposure. As of September 30, 2024 and December 31, 2023, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Company. All changes are measured in comparison to the projected net interest income that would result from an “unchanged” rate scenario where both interest rates and the composition of the Company’s balance sheet remain stable for a 24-month and 60-month period. In addition to measuring the change in net interest income as compared to an unchanged interest rate scenario, the ALCO also measures the trend of both net interest income and net interest margin over a 24-month and 60-month horizon to ensure the stability and adequacy of this source of earnings in different interest rate scenarios.

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Model results at September 30, 2024 indicated a higher starting level of net interest income (“NII”) compared to the July 31, 2024 model which included the larger earning asset base from the FNCB merger.  The current model results include the positive impact of purchase accounting resulting from the net accretion of the fair value marks.

​

Our interest rate risk position exhibits a relatively well-matched position to both rising and falling interest rate environments in the first twelve months of the simulation while a sustained falling rate and parallel downward shifting yield curve presents the greatest potential risk to NII over the long-term horizon.  A steeper yield curve mitigates a portion of the exposure to falling rates.  After the first eighteen months of the model simulation, the benefit to NII increases in a rising rate environment as a result of the higher assumed replacement rates on assets repricing while funding costs stabilize.  This position at September 30, 2024 is similar to our July, 31, 2024 model results.

The ALCO regularly reviews a wide variety of interest rate shift scenario results to evaluate interest rate risk exposure, including scenarios showing the effect of steepening or flattening changes in the yield curve as well as parallel changes in interest rates of up to 400 basis points. Because income simulations assume that the Company’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts.

The FOMC has begun decreasing the federal funds rate in part due to lower inflation.  Since September 2024, the FOMC has decreased the federal funds target rate by 75 basis points which has resulted in our floating rate loans repricing lower and negatively impacting NII.  Management commenced reducing deposit rates prior to the FOMC actions and expects to continue to reduce rates to mitigate the impact on interest income from the asset side of the balance sheet.  Management expects cash flow from the investment portfolio to reprice higher than current portfolio rates, adjustable rate loans to reprice higher than current portfolio rates and new loan originations be added at higher than current portfolio rates to mitigate the lower interest from the floating rate loans.  If we are unable to reduce our deposit costs as expected or we experience an outflow of deposits due to lower rates which could result in a shift to higher costing funding sources, expected levels of NII will be reduced.

The projected impacts of instantaneous changes in interest rates on our net interest income and economic value of equity at September 30, 2024, based on our simulation model, as compared to our ALCO policy limits are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

 

​

​

% Change in  

 

Changes in Interest Rates (basis points)

​

Net Interest Income 

​

Economic Value of Equity 

 

​

    

Metric 

    

Policy 

    

Metric 

    

Policy 

 

+400

    

(3.0)

​

(20.0)

​

26.1

​

(40.0)

​

+300

 

(2.3)

​

(20.0)

​

21.5

​

(30.0)

​

+200

 

(1.7)

​

(10.0)

​

15.7

​

(20.0)

​

+100

 

(0.1)

​

(10.0)

​

9.1

​

(10.0)

​

Static

​

​

​

​

​

​

​

​

​

-100

 

1.1

​

(10.0)

​

(13.1)

​

(10.0)

​

-200

 

0.8

​

(10.0)

​

(32.3)

​

(20.0)

​

-300

 

0.7

​

(20.0)

​

(55.4)

​

(30.0)

​

-400

 

0.8

​

(20.0)

​

(90.6)

​

(40.0)

​

​

Our simulation model creates pro forma net interest income scenarios under various interest rate shocks. Given instantaneous and parallel shifts in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending September 30, 2024, would decrease 0.1% from model results using current interest rates. Additional disclosures about market risk are included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, and in Part I, Item 2 of this quarterly report, in each case under the heading “Market Risk Sensitivity,” and are incorporated into this Item 3 by reference.

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Item 4. Controls and Procedures.

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(a) Evaluation of disclosure controls and procedures.

​

At September 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that the disclosure controls and procedures, at September 30, 2024, were effective to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosure.

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(b) Changes in internal control.

Effective on July 1, 2024, Peoples completed its merger with FNCB. During the third quarter of 2024, management commenced an evaluation of the design and operating effectiveness of internal controls over financial reporting related to the FNCB acquired business. The evaluation of changes to processes, technology systems, and other components of internal control over financial reporting related to the FNCB acquired business is ongoing. Except for the changes made in connection with the merger, there were no changes in the Company’s internal control over financial reporting in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the fiscal quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

​

​

PART II—OTHER INFORMATION

​

Item 1. Legal Proceedings.

The nature of the Company’s business generates a certain amount of litigation involving matters arising out of the ordinary course of business. In the opinion of management, there were no legal proceedings that had or might have a material effect on the consolidated results of operations, liquidity, or the financial position of the Company during the nine-months ended September 30, 2024 and through the date of this quarterly report on Form 10-Q.

​

Item 1A. Risk Factors.

Our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Form 10-K) describes market, credit, and business operations risk factors that could affect our business, results of operations or financial condition. There have been no material changes from the risk factors as previously disclosed in our 2023 Form 10-K.

​

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter ended September 30, 2024, we did not issue or sell any shares of our Common Stock or other equity securities pursuant to unregistered transactions in reliance upon an exemption from the registration requirements of the Securities Act.

There were no repurchases of our common stock during the three months ended September 30, 2024.

​

​

​

Item 3. Defaults upon Senior Securities.

None.

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Item 4. Mine Safety Disclosures.

Not applicable.

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Item 5. Other Information.

During the fiscal quarter ended September 30, 2024, none of the Company’s directors or officers informed management of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

​

Item 6. Exhibits.

​

Item Number

​

​

Description

​

​

​

​

​

​

​

​

​

2.1

​

​

Agreement and Plan of Merger, dated as of September 27, 2023, by and between Peoples Financial Services Corp. and FNCB Bancorp, Inc.* (incorporated by reference to Exhibit 2.1 to Peoples Financial Services Corp.’s Current Report on Form 8-K filed on September 27, 2023)

​

​

​

​

3.1*

​

​

Peoples Financial Services Corp. Second Amended and Restated Bylaws, as amended

​

​

​

​

4.1

​

​

Certain instruments relating to long-term debt of the registrant and its consolidated subsidiaries not being registered have been omitted in accordance with Item 601(b)(4)(iii) and (v) of Regulation S-K. The registrant will furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

​

​

​

​

10.1†

​

​

Employment Agreement, dated as of July 26, 2024 by and among Peoples Security Bank and Trust Company, Peoples Financial Services Corp. and Gerard A. Champi (incorporated by reference to Exhibit 10.1 of Peoples’ Current Report on Form 8-K filed with the SEC on July 29, 2024).

​

​

​

​

10.2†

​

​

Employment Agreement between First National Community Bancorp, Inc., First National Community Bank and James M. Bone, Jr. (incorporated by reference to Exhibit 10.18 to FNCB’s Current Report on Form 8-K on October 2, 2015 (SEC File No. 000-53869))

​

​

​

​

10.3†

​

​

Amendment to Employment Agreement, dated September 27, 2023 by and among FNCB Bancorp, Inc., FNCB Bank and James M. Bone, Jr.(incorporated by reference to Exhibit 10.1 to FNCB’s Current Report on Form 8-K on September 27, 2023 (SEC File No. 001-38408))

​

​

​

​

10.4†

​

​

FNCB Bancorp, Inc. 2023 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to FNCB’s Registration Statement on Form S-8 on June 23, 2023 (SEC File No. 333-272878))

​

​

​

​

10.5†

​

​

Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 4.2 to FNCB’s Registration Statement on Form S-8 on January 24, 2014 (SEC File No. 333-193545))

​

​

​

​

10.6†

​

​

Peoples Security Bank and Trust Company (formerly First National Community Bank) Supplemental Executive Retirement Plan, as amended (incorporated by reference to Exhibit 10-8 to FNCB’s Form 10-K for the year ended December 31, 2022, as filed on March 10, 2023 (SEC File No. 001-38408))

​

​

​

​

10.7*†

​

​

Third Amendment to the Peoples Security Bank and Trust Company (formerly FNCB Bank) Supplemental Executive Retirement Plan dated June 26, 2024

​

​

​

​

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10.8†

​

​

Executive Incentive Plan (incorporated by reference to Exhibit 10.14 to FNCB’s Form 10-K for the year ended December 31, 2012, as filed on March 28, 2013 (SEC File No. 001-38408))

​

​

​

​

31.1

​

​

CEO Certification Pursuant to Rule 13a-14 (a) /15d-14 (a)

​

​

​

​

31.2

​

​

CFO Certification Pursuant to Rule 13a-14 (a) /15d-14 (a).

​

​

​

​

32

​

​

CEO and CFO Certifications Pursuant to Section 1350.

​

​

​

​

101

​

​

The following materials from Peoples Financial Services Corp. Quarterly Report on Form 10-Q for the period ended September 30, 2024, formatted in inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (Loss) and Comprehensive (Loss) Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements

​

​

​

​

104

​

​

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

​

​

​

​

​

​

​

*The schedules and exhibits have been omitted pursuant to Item 601(b) (2) of Regulation S-K. Peoples Financial Services Corp. agrees to furnish a copy of such schedules and exhibits, or any section thereof, to the SEC upon request

​

*Filed herewith

†Management contract, compensatory plan or arrangement

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SIGNATURES

​

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto, duly authorized.

​

​

Peoples Financial Services Corp.

​

(Registrant)

​

​

Date: November 14, 2024

/s/ Craig W. Best

​

Craig W. Best

​

Chief Executive Officer

​

(Principal Executive Officer)

​

​

Date: November 14, 2024

/s/ John R. Anderson, III

​

John R. Anderson, III

​

Executive Vice President and Chief Financial Officer

​

(Principal Financial Officer and Principal Accounting Officer)

​

​

​

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