Peoples Financial Services Corp. Reports Unaudited Second Quarter and Year to Date 2025 Earnings

DUNMORE, Pa., July 31, 2025 /PRNewswire/ -- Peoples Financial Services Corp. ("Peoples" or the "Company") (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company (the "Bank"), today reported unaudited financial results at and for the three and six months ended June 30, 2025.

Peoples reported net income of $17.0 million, or $1.68 per diluted share for the three months ended June 30, 2025, compared to net income of $15.0 million, or $1.49 per diluted share for the three months ended March 31, 2025.  Return on average assets ("ROAA") and return on average equity ("ROAE") for the three months ended June 30, 2025 was 1.36% and 13.87% on an annualized basis compared to 1.22% and 12.70% for the three months ended March 31, 2025. Net income on a linked-quarter basis, increased primarily due to higher net interest income and a lower provision for credit losses.

For the six months ended June 30, 2025, net income was $32.0 million, or $3.18 per diluted share, compared to $6.7 million, or $0.95 per diluted share for the comparable period of 2024. The increase in net income for the current period of $25.3 million was due primarily to higher net interest income and noninterest income, and a lower provision for credit losses which more than offset an increase in noninterest expenses.  On July 1, 2024, the Company completed its merger with FNCB Bancorp, Inc. ("FNCB," such merger the "FNCB merger").  Higher levels of interest-earning assets, higher transaction volumes and purchase accounting related accretion resulting from the FNCB merger resulted in the increase in net interest income and noninterest income when compared to the prior year period.

Gerard A. Champi, Chief Executive Officer, stated, "One year ago, we merged with FNCB Bancorp, Inc. with the belief that together, we would be stronger.  Today, our performance affirms that belief – our net income, earnings per share, net interest margin, efficiency ratio and asset quality all reflect the strength of our combined organization as we continue to build on the synergies and efficiencies of the FNCB merger."

The Company's financial results for any periods ended prior to July 1, 2024, only reflect Peoples results on a stand-alone basis.  As a result of the FNCB merger, the Company's financial results for the three and six months ended June 30, 2025, may not be directly comparable to prior reported periods.

In addition to evaluating its results of operations in accordance with U.S. generally accepted accounting principles ("GAAP"), Peoples routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders' equity, core net income and pre-provision revenue ratios, and tax-equivalent net interest income and related ratios, among others.  The reported results included in this release contain items, which Peoples considers non-core, namely acquisition related expenses, nonrecurring provisions for non-purchase credit deteriorated ("non-PCD") loans and gain or loss on the sale of securities available for sale.  Peoples believes the reported non-GAAP financial measures provide information useful to investors in understanding its operating performance and trends.  Where non-GAAP disclosures are used in this press release, a reconciliation to the comparable GAAP measure is provided in the accompanying tables.  The non-GAAP financial measures Peoples uses may differ from the non-GAAP financial measures of other financial institutions.

NOTABLES IN THE QUARTER

• Paid a second quarter dividend of $0.6175 per share, representing an increase of 50.6% over the per share dividend for the quarter ended June 30, 2024 and equal to the per share dividend for the quarter ended March 31, 2025.

• Allowance for credit losses to loans was 1.02% at June 30, 2025, compared to 1.03% at March 31, 2025 and 1.05% at December 31, 2024.

• ROAA for the three months ended June 30, 2025 was 13.87% on an annualized basis compared to 12.70% for the three months ended March 31, 2025 and 3.87% for the three months ended June 30, 2024.

• ROAE for the three months ended June 30, 2025 was 1.36% on an annualized basis compared to 1.22% for the three months ended March 31, 2025 and 0.37% for the three months ended June 30, 2024.

• The efficiency ratio¹, a non-GAAP measure, was 53.92% for the three months ended June 30, 2025, compared to 55.77% for the three months ended March 31, 2025 and 75.14% for the three months ended June 30, 2024.

• Book value per common share at June 30, 2025 was $49.44 compared to $48.21 and $48.29 at March 31, 2025 and June 30, 2024, respectively.

• Tangible book value per common share¹, a non-GAAP measure, was $38.75 at June 30, 2025 compared to $37.35 and $39.31 at March 31, 2025 and June 30, 2024, respectively.

• In June 2025, the Company called and redeemed $33.0 million of its subordinated notes due in June 2030 that repriced to 9.08% and issued $85.0 million in aggregate principal amount of 7.75% fixed-to-floating rate subordinated notes due June 2035 at a price equal to 100% of the principal amount.

INCOME STATEMENT REVIEW

• Net interest margin ("NIM"), calculated on a fully taxable equivalent ("FTE") basis, a non-GAAP measure¹, for the three months ended June 30, 2025 was 3.69%, an increase of 19 basis points compared to 3.50% for the three months ended March 31, 2025. The net accretion impact of purchase accounting marks was $4.0 million and $3.7 million of net interest income in each period, which represented 35 basis points and 32 basis points of NIM for the three months ended June 30, 2025 and March 31, 2025, respectively.

• The tax-equivalent yield on interest-earning assets, a non-GAAP measure¹, increased 18 basis point to 5.68% during the three months ended June 30, 2025 from 5.50% during the three months ended March 31, 2025.

• The cost of funds, which represents the average rate paid on total interest-bearing liabilities, increased 2 basis points to 2.60% for the three months ended June 30, 2025 when compared to 2.58% during the three months ended March 31, 2025.

• The cost of interest-bearing deposits decreased 5 basis points during the three months ended June 30, 2025 to 2.41% from 2.46% in the three months ended March 31, 2025.

• The cost of total deposits, which includes the impact of noninterest-bearing deposits was 1.91% for the three months ended June 30, 2025, a decrease of 5 basis points from 1.96% for the three months ended March 31, 2025.

• The cost of total borrowings for the three months ended June 30, 2025 was 5.68%, an increase of 50 basis points from 5.18% for the three months ended March 31, 2025 due in part to the issuance during the quarter of $85.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due June 2035 at an initial fixed rate through June 2030 of 7.75%.

Second Quarter 2025 Results – Comparison to First Quarter 2025

Net interest income for the three months ended June 30, 2025 increased $2.7 million to $42.2 million from $39.5 million for the three months ended March 31, 2025.  FTE net interest income, a non-GAAP measure¹, for the three months ended June 30, 2025 increased $2.7 million or 6.6% to $42.9 million from $40.2 million for the three months ended March 31, 2025.  The increase in FTE net interest income was due to a $2.9 million increase in tax-equivalent interest income that was partially offset by a $0.2 million increase in interest expense.

Higher interest income resulted from loan and investment cash flow repricing at higher rates, an increase to the volume of interest-earning assets, higher loan accretion from the loans acquired in the FNCB merger, and accelerated investment accretion from corporate bond redemptions. Average loans, net, increased $11.4 million for the three months ended June 30, 2025 compared to the prior three month period ended March 31, 2025.  Average investments totaled $627.3 million in the three months ended June 30, 2025 and $643.0 million in the three months ended March 31, 2025, a decrease of $15.7 million.  Average federal funds sold increased $13.1 million to $39.1 million for the three months ended June 30, 2025 from $26.0 million for the three months ended March 31, 2025.

The increase in interest expense, comparing the three months ended June 30, 2025 and March 31, 2025, was due primarily to an increase in borrowing costs, which were partially offset by lower deposit costs.  The Company's cost of borrowings increased 50 basis points to 5.68% for the three months ended June 30, 2025 compared to 5.18% for the three months ended March 31, 2025. The total cost of deposits decreased 5 basis points to 1.91% during the three months ended June 30, 2025 compared to 1.96% for the prior quarter.  The cost of interest-bearing deposits decreased 5 basis points to 2.41% from 2.46% in the prior quarter.

Average interest-bearing liabilities decreased $22.1 million for the three months ended June 30, 2025, compared to the three months ended March 31, 2025.  Average interest-bearing deposits decreased $63.4 million and represented 79.0% of total average deposits for the three months ended June 30, 2025 as compared to 79.7% for the three months ended March 31, 2025.  Average noninterest-bearing deposits increased $22.2 million and represented 21.0% of total average deposits in the three months ended June 30, 2025 as compared to 20.3% in the three months ended March 31, 2025.  Short-term borrowings averaged $35.6 million for the three month period ended June 30, 2025 at an average cost of 4.62% compared to $20.2 million at an average cost of 4.52% during the three months ended March 31, 2025.  Long-term debt averaged $101.1 million for the three month period ended June 30, 2025 at an average cost of 4.81% compared to $97.8 million at an average cost of 4.88% for the three months ended March 31, 2025. Subordinated debt averaged $55.6 million for the three month period ended June 30, 2025 at an average cost of 7.40% compared to $33.0 million at an average cost of 5.44% for the three months ended March 31, 2025.

For the three months ended June 30, 2025, $0.2 million was credited to the provision for credit losses compared to an expense of $0.2 million in the prior quarter.  The provision for the second quarter of 2025 declined from the previous quarter due mainly to the Bank reporting net recoveries for the quarter and a reduction in specific reserves on individually evaluated loans associated with a reduction in nonperforming loans.  This was offset by an increase in pooled loan reserves for the Company's equipment financing loans, resulting from the model loss rate increasing due to changes in loan delinquencies, charge-offs and risk rating migration along with an increase in qualitative factor reserve requirements.

Noninterest income was $6.2 million and $6.3 million for the three months ended June 30, 2025 and March 31, 2025, respectively.  Quarterly changes in noninterest income included increased merchant servicing income, higher swap origination revenue, net gains on equity investments and recovery of a pre-merger loss.  The prior quarter included a $0.7 million gain on the sale of the Company's former corporate headquarters in Scranton, PA.

Noninterest expense increased $0.9 million to $28.3 million for the three months ended June 30, 2025, from $27.4 million for the three months ended March 31, 2025. Salaries and employee benefits were $0.3 million higher due to the accrual of year-end cash incentives, offset in part by lower payroll taxes and retirement benefits expenses.  Net occupancy and equipment expense decreased $0.3 million from the prior quarter which included seasonal snow removal and higher utility expenses.  Other expenses increased $1.1 million to $5.5 million for the second quarter of 2025 from $4.4 million for the prior quarter, which included a $0.4 million increase in account processing expenses, $0.3 million increase in legal and professional fees expense and $0.2 million expense for the reserve on off balance sheet commitments.

Income tax expense was $3.5 million for the three months ended June 30, 2025, compared to $3.2 million for the three months ended March 31, 2025.  The effective tax rate was 17.0% and 17.8% for the three months ended June 30, 2025 and March 31, 2025, respectively.  The quarter's lower tax rate was due to the impact of tax-exempt income and bank owned life insurance (BOLI) income, combined with an increase in low income housing tax credits.

Six-Month Results – Comparison to Prior Year First Six Months

Net interest income for the six months ended June 30, 2025 increased $43.5 million to $81.7 million from $38.2 million for the six months ended June 30, 2024. FTE net interest income, a non-GAAP measure¹, for the six months ended June 30, 2025 increased $44.0 million to $83.2 million from $39.2 million for the six months ended June 30, 2024.

Tax-equivalent interest income, a non-GAAP measure¹, increased $50.9 million to $129.2 million due to higher levels of interest-earning assets such as loans and investments and an additional $8.5 million from accretion of purchase accounting marks on loans. Average loans increased $1.1 billion and average investments increased $103.4 million comparing the six months ended  June 30, 2025 and 2024, primarily due to assets the Company acquired in the FNCB merger.  The tax-equivalent yield on interest-earning assets was 5.59% for the first six months of 2025 compared to 4.57% for the six months ended June 30, 2024.  Loan yields increased 92 basis points to 5.99% while investment yields increased 132 basis point to 3.12% for the six months ended June 30, 2025.

The cost of interest-bearing liabilities during the six-month period ended June 30, 2025 decreased 40 basis points to 2.59% from 2.99% for the six months ended June 30, 2024 as the cost of interest-bearing deposit products and short-term borrowing costs decreased. Partially offsetting these declines were increases to long-term borrowings, subordinated debt and junior subordinated debt. On June 6, 2025, the Company issued $85 million in aggregate principal amount of 7.75% fixed-to-floating rate subordinated notes due June 2035 and subsequently on June 30 redeemed all $33 million of its June 2020 issuance of subordinated debt that repriced at 9.08% on June 1, 2025.

For the six months ended June 30, 2025, a credit to the provision for credit losses of $39 thousand was recorded compared to a prior year provision of $1.3 million. The decrease was due to a reduction in specific reserves on individually evaluated loans associated with a reduction in nonperforming loans along with a decline in the overall model loss rate due primarily to a significant reduction on balances of existing loans in various segments offset somewhat by an overall increase in qualitative factors due mainly to changing loan balances.

Noninterest income was $12.5 million for the six months ended June 30, 2025 and $6.9 million for the comparable period ended June 30, 2024.  These increases were attributable to the increased size and scale of the Company following the merger. During the period, service charges and fees increased $3.2 million, a $0.7 million gain on the sale of fixed assets due to the sale of the Company's former corporate headquarters located in Scranton, PA was recorded, wealth management income increased $0.5 million, BOLI cash surrender value increased $0.5 million and merchant services income increased $0.4 million.

Noninterest expense for the six months ended June 30, 2025 was $55.6 million, an increase of $19.4 million from $36.2 million for the six months ended June 30, 2024. Almost all noninterest expense line items increased as a result of the FNCB merger and the expanded operations of the newly combined Company. Salaries and employee benefits expenses increased $10.0 million compared to the year ago period due to the addition of 195 full time equivalent employees from the FNCB merger.  Occupancy and equipment expenses were higher by $3.6 million in the current period due to increased technology costs related to system integration and increased account and transaction volumes, and higher facilities costs. Amortization of intangible assets totaled $3.4 million for the six months ended June 30, 2025.  There was no amortization expense recorded for the comparable period of 2024.

The provision for income taxes for the six months ended June 30, 2025 totaled $6.7 million and the effective tax rate was 17.3% as compared to $0.9 million and 11.80% in the prior period.

BALANCE SHEET REVIEW

At June 30, 2025, total assets, loans, and deposits were $5.1 billion, $4.0 billion, and $4.3 billion, respectively.

Total loans increased $4.0 million during the first six months to $4.0 billion at June 30, 2025.  Increases in commercial loans, residential real estate loans and equipment financing loans, were partially offset by reductions in commercial real estate, indirect auto, and other consumer loans.

Total investments were $582.8 million at June 30, 2025, compared to $606.9 million at December 31, 2024.  At June 30, 2025, the available for sale securities totaled $505.2 million and the held to maturity securities totaled $75.1 million.  The unrealized loss on the available for sale securities decreased $7.5 million from $49.0 million at December 31, 2024, to $41.5 million at June 30, 2025.  The unrealized losses on the held to maturity portfolio totaled $10.9 million and $13.0 million at June 30, 2025, and December 31, 2024, respectively.

Total deposits decreased $120.2 million to $4.3 billion at June 30, 2025, due primarily to seasonal outflows of non-maturity deposits and reductions in brokered CDs.  Noninterest-bearing deposits decreased $35.9 million to $899.6 million at June 30, 2025 from $935.5 million at December 31, 2025 and interest-bearing deposits decreased $84.3 million to $3.4 billion at June 30, 2025. Additionally, the Company had $198.0 million and $256.4 million of longer-term brokered CDs at June 30, 2025, and December 31, 2024, respectively. During the six months ended June 30, 2025 $119.0 million in higher rate brokered CDs were called and replaced with lower cost brokered CDs.

The Company's deposit base consisted of 42.0% retail accounts, 37.2% commercial accounts, 16.2% municipal relationships and 4.6% brokered deposits at June 30, 2025.  At June 30, 2025, total estimated uninsured deposits were $1.3 billion, or approximately 30.7% of total deposits.  Included in the uninsured total at June 30, 2025, were $513.6 million of municipal deposits collateralized by letters of credit issued by the FHLB and pledged investment securities, and $2.0 million of affiliate company deposits.

In addition to deposit gathering and current long-term debt, the Company has additional sources of liquidity available such as cash and cash equivalents, overnight borrowings from the FHLB, the Federal Reserve's Discount Window, correspondent bank lines of credit, brokered deposit capacity and unencumbered securities.  At June 30, 2025, available borrowing capacity totaled $1.1 billion at the FHLB and $426.8 million at the Federal Reserve's Discount Window.  At June 30, 2025, the Company had $175.7 million in cash and cash equivalents, an increase of $39.8 million from $135.9 million at December 31, 2024.  For additional information on the deposit portfolio and additional sources of liquidity, see the tables on page 15.

The Company maintained its well capitalized position at June 30, 2025.  Stockholders' equity equaled $494.1 million or $49.44 per share at June 30, 2025, compared to $469.0 million or $46.94 per share at December 31, 2024.  The increase in stockholders' equity from December 31, 2024, is primarily attributable to net income less dividends to shareholders and a $5.7 million decrease to accumulated other comprehensive loss ("AOCL") resulting from a reduction in the unrealized loss on available for sale securities.  The net after tax unrealized loss on available for sale securities included in AOCL at June 30, 2025, and December 31, 2024, was $32.5 million and $38.3 million, respectively.

Tangible book value1, a non-GAAP measure, increased to $38.75 per share at June 30, 2025, from $35.88 per share at December 31, 2024.  Dividends declared for the six months ended June 30, 2025 amounted to $1.235 per share.

ASSET QUALITY REVIEW

Nonperforming assets, which include nonperforming loans, loans past due 90 days or more and still accruing, and foreclosed assets, were $17.4 million or 0.44% of loans, net, and foreclosed assets at June 30, 2025, compared to $23.0 million or 0.58% of loans, net, and foreclosed assets at December 31, 2024.  As a percentage of total assets, nonperforming assets were 0.34% at June 30, 2025, compared to 0.45% at December 31, 2024.  At June 30, 2025, the Company had no foreclosed property compared to one foreclosed property recorded at $27 thousand at December 31, 2024.

During the six months ended June 30, 2025, net charge-offs totaled $0.8 million and the credit to the provision for credit losses was $39 thousand.  During the three months ended June 30, 2025, net recoveries were $0.1 million and the credit to the provision for credit losses was $0.2 million.  The allowance for credit losses equaled $40.9 million or 1.02% of loans, net, at June 30, 2025, compared to $41.8 million or 1.05% of loans, net, at December 31, 2024.

About Peoples:

Peoples Financial Services Corp. is the bank holding company of Peoples Security Bank and Trust Company, an independent community bank serving its retail and commercial customers through 39 full-service community banking offices located within Allegheny, Bucks, Lackawanna, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna, Wayne and Wyoming Counties in Pennsylvania, Middlesex County in New Jersey and Broome County in New York.  Each office, interdependent with the community, offers a comprehensive array of financial products and services to individuals, businesses, not-for-profit organizations, and government entities.  Peoples' business philosophy includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, and local and timely decision making.  For more information visit psbt.com.

Safe Harbor Forward-Looking Statements:

We make statements in this press release, and we may from time to time make other statements regarding our outlook or expectations for future financial or operating results and/or other matters regarding or affecting Peoples Financial Services Corp. and its subsidiaries (collectively, "Peoples") and other statements that are not historical facts that are considered "forward-looking statements" as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." For these statements, Peoples claims the protection of the statutory safe harbors for forward-looking statements.

Peoples cautions you that undue reliance should not be placed on forward-looking statements and that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: macroeconomic trends, including interest rates and inflation and their effect on our investment values; the effects of any recession in the United States; the impact on financial markets from geopolitical conflict, including from wars, military conflict or trade policies, including tariffs, retaliatory tariffs, tariff counter-measures, or the threat of such actions; impairment charges relating to our investment portfolio; credit risks in connection with our lending activities; the economic health of our market area; our exposure to commercial and industrial, construction, commercial real estate, and equipment finance loans; our ability to maintain an adequate allowance for credit losses; access to liquidity; the strength of our customer deposit levels; unrealized losses; reliance on our subsidiaries; accounting procedures, policies and requirements; changes in the value of goodwill; future pension plan costs; our ability to retain key personnel; the strength of our disclosure controls and procedures; environmental liabilities; reliance on third-party vendors and service providers; competition from non-bank entities; the development and us of AI in business processes, services, and products; our ability to prevent, detect and respond to cybersecurity threats and incidents; a failure of information technology, whether due to a breach, cybersecurity incident, or ability to keep pace with growth and developments; our ability to comply with privacy and data protection requirements; changes in U.S. or regional economic conditions; our ability to compete effectively in our industry; the soundness of other financial institutions; adverse changes (or the threat of such changes) in laws and regulations; fiscal and monetary policies of the federal government and its agencies; a failure to meet minimum capital requirements; our ability to realize the anticipated benefits of the FNCB merger; future acquisitions or a change in control; and other factors that may be described in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

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

[TABULAR MATERIAL FOLLOWS] 

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 tax-equivalent basis using the prevailing federal statutory tax rate of 21%.

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 tax-equivalent basis using the prevailing federal statutory tax rate of 21%.