EX-99.1 2 d807674dex991.htm EX-99.1

EX-99.1

Exhibit 99.1

NEWS RELEASE

TO BUSINESS EDITOR:

PEOPLES FINANCIAL SERVICES CORP. Reports Third Quarter 2014 Earnings

Scranton, PA, October 21/PRNEWSWIRE/ – Peoples Financial Services Corp. (“Peoples”) (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three and nine months ended September 30, 2014. Peoples, which completed a merger with Penseco Financial Services Corporation (“Penseco”) on November 30, 2013, reported net income of $5.2 million, or $0.70 per basic and diluted weighted average share for the third quarter of 2014, compared to $2.5 million, or $0.56 per share, for the comparable period of 2013. The results for the three months ended September 30, 2014, include pre-tax acquisition related expenses of $109 thousand and net gains on sale of investment securities of $701 thousand.

Core net income for the three months ended September 30, 2014 was $4.9 million, an increase of 25.0% from $3.9 million for the previous quarter and 86.0% from $2.6 million for the same period in 2013. Core net income per share for the three months ended September 30, 2014 was $0.65, compared to $0.51 for the previous quarter and $0.58 for the same period in 2013.

Net income for the nine months ended September 30, 2014, totaled $13.3 million or $1.76 per share compared to $7.9 million or $1.76 per share for the same period last year. Pre-tax merger related expenses recognized in the first nine months of 2014 were $1.7 million. Year to date net gains on sale of investment securities totaled $861 thousand.

Core net income for the nine months ended September 30, 2014 was $13.8 million, up 74.7% from $7.9 million for the same period in 2013. Core net income per share for the nine months ended September 30, 2014 was $1.83, an increase from $1.77 for the same period in 2013.

The merger between Peoples and Penseco was accounted for as a reverse acquisition of Peoples by Penseco. As a result of the reverse merger, Peoples was the legal acquirer and Penseco was the accounting acquirer. In a reverse merger the historical financial statements are those of the accounting acquirer. Earnings per share amounts in periods prior to the merger are based on restated shares outstanding.

In addition to evaluating its results of operations in accordance with accounting principles generally accepted in the United States of America (“GAAP”), Peoples routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders’ equity and core net income ratios. The third quarter and nine months ended September 30, reported results for 2014 and 2013 contained items which Peoples considers non-core, namely net gains on sales of investment securities available-for-sale and one-time acquisition related expenses. 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.

THIRD QUARTER NOTABLES

• Nonperforming assets decreased to $13.1 million at the end of the third quarter of 2014 from $15.9 million at the end of the second quarter 2014 and $19.5 million at year end 2013.

• At the end of the third quarter of 2014, deposits grew $46.1 million or 4.5% on an annualized basis from December 31, 2013.

• Tangible book value per share improved $1.11 to $23.43 at the end of the third quarter of 2014 compared to $22.32 at year end 2013.

• Core net income per share increased to $0.65 in the third quarter of 2014 versus $0.58 for the same period in 2013.

• For the third quarter of 2014, return on average assets and core return on average assets were 1.20% and 1.11%, respectively.

• Operating efficiency improved to 56.79% in the third quarter of 2014 from 67.91% for the previous quarter and 67.89% for the same quarter last year.

INCOME STATEMENT REVIEW

The tax-equivalent net interest margin for the quarter and nine months ended September 30, were 3.84% and 3.88% in 2014, respectively, compared to 3.88% and 3.94% in 2013, respectively. Loan accretion included in loan interest income for the nine months ended September 30, 2014 related to loans acquired in the fourth quarter of 2013 was $1.9 million, resulting in an increase in the tax-equivalent net interest margin of 16 basis points. For the third quarter of 2014, loan accretion included in loan interest income related to loans acquired was $469.9 thousand, increasing the tax-equivalent net interest margin from 3.72% to 3.84%.

Tax-equivalent net interest income for the nine months ended September 30, increased $20.2 million to $45.2 million in 2014 from $25.0 million in 2013. The increase in tax equivalent net interest income was primarily due to the growth in average earning assets from the merger offset partially by a 6 basis point decrease in the tax-equivalent net interest margin. The tax-equivalent yield on the loan portfolio decreased to 4.91% for the nine months ended September 30, 2014 compared to 4.93% for the comparable period in 2013. Loans, net averaged $1.2 billion in 2014 compared to $641.0 million in 2013. For the nine months ended September 30, 2014, the tax-equivalent yield on total investments decreased to 2.70% in 2014 from 3.26% in 2013. Average investments totaled $331.2 million in 2014 and $172.8 million in 2013. Average interest-bearing liabilities increased to $1.2 billion for the nine months ended September 30, 2014, compared to $629.3 million for the corresponding period last year. The cost of funds declined to 0.58% in the nine months ended September 30, 2014 from 0.63% for the same period of 2013.

The provision for loan losses totaled $2.7 million for the nine months ended September 30, 2014, compared to $1.3 million for the same period last year. The increase in the provision for loan losses in 2014 was due to the application of our allowance for loan losses methodology, which was primarily influenced by reporting a higher level of nonperforming assets as a percentage of loans and foreclosed assets and a greater net charge-off ratio compared to the prior year period. For the quarter ended September 30, the provision for loan losses was $0.7 million in 2014 and $0.5 million in 2013.

For the nine months ended September 30, noninterest income totaled $11.7 million in 2014, an increase of $2.7 million from $9.0 million in 2013. Increases in service charges, fees and commissions and income from fiduciary activities, wealth management services, mortgage banking activities and life insurance investment income more than offset a decrease in revenues from merchant services. In addition, net gains on sale of investment securities were $861 thousand in 2014 and $158 thousand in 2013. For the three months ended September 30, noninterest income totaled $4.4 million in 2014 and $3.0 million in 2013.

Noninterest expense for the nine months ended September 30, 2014, increased $13.3 million or 62.4% to $34.6 million, from $21.3 million for the nine months ended September 30, 2013. The recognition of merger related expense of $1.7 million along with the inclusion of the Peoples operations in 2014 were the primary causes for this increase. For the third quarter, noninterest expense amounted to $11.1 million in 2014 and $7.4 million in 2013.

BALANCE SHEET REVIEW

Total assets, loans and deposits totaled $1.7 billion, $1.2 billion and $1.4 billion, respectively, at September 30, 2014. Loans, net was unchanged comparing the end of the third quarter 2014 to year-end 2013, while total deposits grew $46.1 million or 4.5% on an annualized basis through nine months of 2014. Noninterest-bearing deposits grew $22.3 million or 10.7% on an annualized basis while interest-bearing deposits increased $23.8 million or 2.9% on an annualized basis in 2014. Total investments were $366.1 million at September 30, 2014, including $350.8 million securities classified as available-for-sale and $15.3 million classified as held-to-maturity.

Stockholders’ equity equaled $246.1 million or $32.60 per share at September 30, 2014, and $238.8 million or $31.62 per share at December 31, 2013. Total tangible stockholders’ equity improved to $176.9 million or $23.43 per share at September 30, 2014, compared to $168.6 million or $22.32 per share at year-end 2013. Dividends declared for the nine months ended September 30, 2014 amounted to $0.93 per share representing a dividend payout ratio of 52.8%.

ASSET QUALITY REVIEW

Nonperforming assets were $13.1 million or 1.11% of loans, net and foreclosed assets at September 30, 2014, an improvement from $15.9 million or 1.35% at June 30, 2014, and $19.5 million or 1.65% at December 31, 2013. The allowance for loan losses equaled $10.2 million or 0.86% of loans, net compared to $8.7 million or 0.74% of loans, net, at December 31, 2013. The decrease in the allowance for loan losses as a percentage of loans, net, from 1.20% at September 30, 2013 to 0.86% at September 30, 2014, is primarily a function of acquisition accounting, whereby the historical loan portfolio of Peoples was recorded at its estimated fair value, including a discount to reflect credit risk, and the Peoples historical allowance for loan losses was eliminated. Loans charged-off, net of recoveries, for the nine months ended September 30, 2014, equaled $1.2 million or 0.14% of average loans, compared to $404.0 thousand or 0.08% of average loans for the nine months ended September 30, 2013.

Peoples Financial Services Corp. is the parent company of Peoples Security Bank and Trust Company, a community bank serving Lackawanna, Luzerne, Monroe, Susquehanna, Wayne and Wyoming Counties in Pennsylvania and Broome County in New York through 26 offices. Each office, interdependent with the community, offers a comprehensive array of financial products and services to individuals, businesses, not-for-profit organizations and government entities. Peoples’ business philosophy includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures and consistently applied credit policies.

SOURCE: Peoples Financial Services Corp.

/Contact:    MEDIA/INVESTORS, Marie L. Luciani, Investor Relations Officer, 570.346.7741 or m.luciani@pennsecurity.com

Co:    Peoples Financial Services Corp.

St:     Pennsylvania

In:     Fin

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., Peoples Security Bank and Trust Company, and its subsidiaries (collectively, “Peoples”) that are considered “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “intend” and “potential.” For these statements, Peoples claims the protection of the statutory safe harbors for forward-looking statements.

Peoples cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting Peoples’ operations, pricing, products and services and other factors that may be described in Peoples’ Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

In addition to these risks, acquisitions and business combinations, such as Peoples recent merger with Penseco Financial Services Corporation, present risks other than those presented by the nature of the business acquired. Acquisitions and business combinations may be substantially more expensive to complete than originally anticipated, and the anticipated benefits may be significantly harder-or take longer-to achieve than expected. As regulated financial institutions, our pursuit of attractive acquisition and business combination opportunities could be negatively impacted by regulatory delays or other regulatory issues. Regulatory and/or legal issues related to the pre- acquisition operations of an acquired or combined business may cause reputational harm to Peoples following the acquisition or combination, and integration of the acquired or combined business with ours may result in additional future costs arising as a result of those issues.

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

[TABULAR MATERIAL FOLLOWS]

Summary Data

Peoples Financial Services Corp.

Five Quarter Trend

(In thousands, except per share data)

		Sept 30 2014				June 30 2014				Mar 31 2014				Dec 31 2013				Sept 30 2013
Key performance data:
Per share data:
Net income (loss)		$	0.70			$	0.44			$	0.62			$	(0.39	)		$	0.56
Core net income (1)		$	0.65			$	0.51			$	0.67			$	0.14			$	0.58
Cash dividends declared		$	0.31			$	0.31			$	0.31			$	0.31			$	0.31
Book value		$	32.60			$	32.35			$	32.13			$	31.62			$	29.91
Tangible book value (1)		$	23.43			$	23.14			$	22.88			$	22.32			$	23.87
Market value:
High		$	52.52			$	53.05			$	42.26			$	39.50			$	33.37
Low		$	45.99			$	42.50			$	37.85			$	31.53			$	29.70
Closing		$	45.99			$	51.39			$	41.62			$	38.00			$	33.00
Market capitalization		$	347,149			$	387,910			$	314,163			$	287,012			$	147,828
Common shares outstanding			7,548,358				7,548,358				7,548,358				7,552,944				4,479,624
Selected ratios:
Return on average stockholders’ equity			8.49	%			5.60	%			8.01	%			(5.00	)%			7.37	%
Core return on average stockholders’ equity (1)			7.87	%			6.52	%			8.68	%			1.78	%			7.74	%
Return on average tangible stockholders’ equity (1)			12.34	%			8.42	%			11.88	%			(6.69	)%			9.38	%
Core return on average tangible stockholders’ equity (1)			10.98	%			9.21	%			12.30	%			2.50	%			9.70	%
Return on average assets			1.20	%			0.78	%			1.12	%			(0.71	)%			1.07	%
Core return on average assets (1)			1.11	%			0.91	%			1.22	%			0.25	%			1.13	%
Stockholders’ equity to total assets			14.27	%			14.10	%			14.12	%			14.14	%			14.60	%
Efficiency ratio (2)			56.79	%			67.91	%			59.79	%			117.51	%			67.89	%
Nonperforming assets to loans, net, and foreclosed assets			1.11	%			1.35	%			1.30	%			1.65	%			0.57	%
Net charge-offs to average loans, net			0.04	%			0.15	%			0.22	%			0.12	%			0.13	%
Allowance for loan losses to loans, net			0.86	%			0.82	%			0.75	%			0.74	%			1.20	%
Earning assets yield (FTE) (3)			4.25	%			4.17	%			4.53	%			4.27	%			4.33	%
Cost of funds			0.56	%			0.59	%			0.59	%			0.60	%			0.61	%
Net interest spread (FTE) (3)			3.69	%			3.58	%			3.94	%			3.67	%			3.72	%
Net interest margin (FTE) (3)			3.84	%			3.73	%			4.09	%			3.82	%			3.88	%

(1) See Reconciliation of Non-GAAP financial measures.

(2) Total noninterest expense less amortization of intangible assets divided by net interest income and noninterest income.

(3) Tax-equivalent adjustments were calculated using the prevailing federal statutory tax rate.

Peoples Financial Services Corp.

Consolidated Statements of Income

(In thousands, except per share data)

Nine Months Ended		Sept 30 2014				Sept 30 2013
Interest income:
Interest and fees on loans:
Taxable		$	41,035			$	21,819
Tax-exempt			1,607				1,210
Interest and dividends on investment securities:
Taxable			2,877				1,239
Tax-exempt			2,462				1,927
Dividends			32				57
Interest on interest-bearing deposits in other banks			29				68
Interest on federal funds sold			64
Total interest income			48,106				26,320
Interest expense:
Interest on deposits			4,125				1,968
Interest on short-term borrowings			67				17
Interest on long-term debt			864				961
Total interest expense			5,056				2,946
Net interest income			43,050				23,374
Provision for loan losses			2,724				1,325
Net interest income after provision for loan losses			40,326				22,049
Noninterest income:
Service charges, fees, commissions			4,815				3,426
Merchant services income			2,784				3,123
Commissions and fees on fiduciary activities			1,690				1,281
Wealth management income			569				320
Mortgage banking income			434				246
Life insurance investment income			565				356
Net gains on sale of investment securities available-for-sale			861				158
Total noninterest income			11,718				8,910
Noninterest expense:
Salaries and employee benefits expense			14,883				10,415
Net occupancy and equipment expense			6,080				2,187
Merchant services expense			1,722				1,947
Amortization of intangible assets			1,010				175
Acquisition related expenses			1,725				225
Other expenses			9,190				6,397
Total noninterest expense			34,610				21,346
Income before income taxes			17,434				9,613
Provision for income tax expense			4,169				1,762
Net income		$	13,265			$	7,851
Other comprehensive income (loss):
Unrealized gains (losses) on investment securities available-for-sale		$	2,811			$	(3,240	)
Reclassification adjustment for gains included in net income			(861	)			(158	)
Change in unfunded pension liability
Income tax expense (benefit) related to other comprehensive income			682				(1,155	)
Other comprehensive income (loss), net of income taxes			1,268				(2,243	)
Comprehensive income		$	14,533			$	5,608
Per share data:
Net income		$	1.76			$	1.76
Cash dividends declared		$	0.93			$	0.93
Average common shares outstanding			7,548,983				4,469,480

Peoples Financial Services Corp.

Consolidated Statements of Income

(In thousands, except per share data)

Three months ended		Sept 30 2014				June 30 2014				March 31 2014				Dec 31 2013				Sept 30 2013
Interest income:
Interest and fees on loans:
Taxable		$	13,876			$	13,159			$	14,000			$	9,283			$	7,213
Tax-exempt			465				507				635				464				396
Interest and dividends on investment securities available-for-sale:
Taxable			1,007				942				928				554				386
Tax-exempt			816				817				829				698				658
Dividends			2				14				16				31				22
Interest on interest-bearing deposits in other banks			10				9				10				18				18
Interest on federal funds sold			16				34				14				2
Total interest income			16,192				15,482				16,432				11,050				8,693
Interest expense:
Interest on deposits			1,354				1,414				1,357				908				647
Interest on short-term borrowings			9				24				34				17				6
Interest on long-term debt			279				289				296				298				299
Total interest expense			1,642				1,727				1,687				1,223				952
Net interest income			14,550				13,755				14,745				9,827				7,741
Provision for loan losses			666				1,201				857				1,036				525
Net interest income after provision for loan losses			13,884				12,554				13,888				8,791				7,216
Noninterest income:
Service charges, fees, commissions			1,634				1,557				1,624				666				1,006
Merchant services income			1,002				888				894				813				1,174
Commissions and fees on fiduciary activities			575				548				567				454				487
Wealth management income			217				165				187				185				130
Mortgage banking income			142				193				99				117				80
Life insurance investment income			109				267				189				612				117
Net gains on sale of investment securities available-for-sale			701				160								5				33
Total noninterest income			4,380				3,778				3,560				2,852				3,027
Noninterest expense:
Salaries and employee benefits expense			4,754				4,961				5,168				5,568				3,340
Net occupancy and equipment expense			2,020				2,327				1,733				1,801				685
Merchant services expense			662				495				565				543				740
Amortization of intangible assets			334				333				343				151				55
Acquisition related expenses			109				1,008				608				4,384				220
Other expenses			3,205				3,115				2,870				2,603				2,325
Total noninterest expense			11,084				12,239				11,287				15,050				7,365
Income (loss) before income taxes			7,180				4,093				6,161				(3,407	)			2,878
Income tax expense (benefit)			1,944				762				1,463				(1,277	)			392
Net income (loss)		$	5,236			$	3,331			$	4,698			$	(2,130	)		$	2,486
Other comprehensive income (loss):
Unrealized gains (losses) on investment securities available-for-sale		$	(825	)		$	1,242			$	2,394			$	(642	)		$	(20	)
Reclassification adjustment for gains included in net income			(701	)			(160	)							(5	)			(33	)
Change in pension liability															3,642
Income tax expense (benefit) related to other comprehensive income (loss)			(534	)			378				838				1,160				(18	)
Other comprehensive income (loss), net of income taxes			(992	)			704				1,556				1,835				(35	)
Comprehensive income (loss)		$	4,244			$	4,035			$	6,254			$	(295	)		$	2,451
Per share data:
Net income (loss)		$	0.70			$	0.44			$	0.62			$	(0.39	)		$	0.56
Cash dividends declared		$	0.31			$	0.31			$	0.31			$	0.31			$	0.31
Average common shares outstanding			7,548,358				7,548,358				7,550,253				5,515,199				4,473,846

Peoples Financial Services Corp.

Details of Net Interest and Net Interest Margin

(In thousands, fully taxable equivalent basis)

Three months ended		Sept 30 2014				June 30 2014				March 31 2014				Dec 31 2013				Sept 30 2013
Net interest income:
Interest income
Loans, net:
Taxable		$	13,876			$	13,159			$	14,000			$	9,283			$	7,213
Tax-exempt			715				779				978				703				600
Total loans, net			14,591				13,938				14,978				9,986				7,813
Investments:
Taxable			1,009				956				944				585				408
Tax-exempt			1,256				1,258				1,274				1,058				997
Total investments			2,265				2,214				2,218				1,643				1,405
Interest on interest-bearing balances in other banks			10				9				10				18				18
Federal funds sold			16				34				14				2
Total interest income			16,882				16,195				17,220				11,649				9,236
Interest expense:
Deposits			1,354				1,414				1,357				908				647
Short-term borrowings			9				24				34				17				6
Long-term debt			279				289				296				298				299
Total interest expense			1,642				1,727				1,687				1,223				952
Net interest income		$	15,240			$	14,468			$	15,533			$	10,426			$	8,284
Loans, net:
Taxable			4.88	%			4.69	%			5.18	%			4.72	%			4.77	%
Tax-exempt			5.05	%			4.94	%			4.69	%			5.23	%			4.63	%
Total loans, net			4.89	%			4.71	%			5.14	%			4.76	%			4.76	%
Investments:
Taxable			1.57	%			1.72	%			1.77	%			1.59	%			1.51	%
Tax-exempt			5.10	%			5.15	%			4.99	%			5.58	%			6.34	%
Total investments			2.55	%			2.77	%			2.81	%			2.95	%			3.28	%
Interest-bearing balances with banks			0.68	%			0.83	%			0.55	%			0.28	%			0.28	%
Federal funds sold			0.19	%			0.31	%			0.18	%			0.22	%
Total earning assets			4.25	%			4.17	%			4.53	%			4.27	%			4.33	%
Interest expense:
Deposits			0.48	%			0.51	%			0.50	%			0.48	%			0.44	%
Short-term borrowings			0.42	%			0.51	%			0.65	%			0.42	%			0.26	%
Long-term debt			3.21	%			3.27	%			3.30	%			3.33	%			3.36	%
Total interest-bearing liabilities			0.56	%			0.59	%			0.59	%			0.60	%			0.61	%
Net interest spread			3.69	%			3.58	%			3.94	%			3.67	%			3.72	%
Net interest margin			3.84	%			3.73	%			4.09	%			3.82	%			3.88	%

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands, except per share data)

At period end		Sept 30 2014				June 30 2014				March 31 2014				Dec 31 2013				Sept 30 2013
Assets:
Cash and due from banks		$	21,179			$	51,416			$	26,204			$	30,004			$	14,306
Interest-bearing balances in other banks			6,932				10,592				7,168				11,846				14,016
Federal funds sold			6,100				15,400				45,840				9,460
Investment securities:
Available-for-sale			350,825				312,323				302,226				299,715				148,921
Held-to-maturity			15,264				15,915				16,607				17,295				18,079
Total investments			366,089				328,238				318,833				317,010				167,000
Loans held for sale			2,961				2,757				1,816				1,757
Loans, net			1,179,942				1,179,847				1,177,122				1,176,617				655,946
Less: allowance for loan losses			10,171				9,622				8,859				8,651				7,871
Net loans			1,169,771				1,170,225				1,168,263				1,167,966				648,075
Premises and equipment, net			25,692				25,670				25,579				26,119				14,823
Accrued interest receivable			5,381				5,576				5,366				5,866				2,641
Goodwill			63,370				63,370				63,370				63,370				26,398
Other intangible assets, net			5,826				6,159				6,492				6,835				663
Other assets			51,477				51,703				49,330				47,988				29,575
Total assets		$	1,724,778			$	1,731,106			$	1,718,261			$	1,688,221			$	917,497
Liabilities:
Deposits:
Noninterest-bearing		$	302,279			$	295,922			$	282,060			$	279,942			$	153,552
Interest-bearing			1,123,349				1,126,880				1,122,006				1,099,565				574,748
Total deposits			1,425,628				1,422,802				1,404,066				1,379,507				728,300
Short-term borrowings			6,514				14,088				22,539				22,052				10,144
Long-term debt			34,020				34,925				35,838				36,743				34,971
Accrued interest payable			597				580				610				723				502
Other liabilities			11,950				14,546				12,643				10,404				9,607
Total liabilities			1,478,709				1,486,941				1,475,696				1,449,429				783,524
Stockholders’ equity:
Common stock			15,097				15,097				15,607				15,614				8,935
Capital surplus			140,150				140,150				146,035				146,109				40,054
Retained earnings			90,252				87,356				86,365				84,008				87,517
Accumulated other comprehensive income (loss)			570				1,562				858				(698	)			(2,533	)
Less: Treasury stock, at cost											6,300				6,241
Total stockholders’ equity			246,069				244,165				242,565				238,792				133,973
Total liabilities and stockholders’ equity		$	1,724,778			$	1,731,106			$	1,718,261			$	1,688,221			$	917,497

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands except per share data)

Average quarterly balances		Sept 30 2014				June 30 2014				March 31 2014				Dec 31 2013				Sept 30 2013
Assets:
Loans, net:
Taxable		$	1,127,888			$	1,124,273			$	1,096,793			$	779,687			$	599,417
Tax-exempt			56,214				63,295				84,688				53,381				51,391
Total loans, net			1,184,102				1,187,568				1,181,481				833,068				650,808
Investments:
Taxable			254,556				223,220				216,173				145,677				107,486
Tax-exempt			97,822				97,879				103,625				75,215				62,422
Total investments			352,378				321,099				319,798				220,892				169,908
Interest-bearing balances with banks			5,875				4,342				7,327				25,156				25,629
Federal funds sold			34,227				44,553				32,444				3,579
Total earning assets			1,576,582				1,557,562				1,541,050				1,082,695				846,345
Other assets			152,821				150,877				154,020				101,902				72,529
Total assets		$	1,729,403			$	1,708,439			$	1,695,070			$	1,184,597			$	918,874
Liabilities and stockholders’ equity:
Deposits:
Interest-bearing		$	1,126,915			$	1,118,108			$	1,109,085			$	756,833			$	579,189
Noninterest-bearing			303,441				288,015				274,584				193,481				150,486
Total deposits			1,430,356				1,406,123				1,383,669				950,314				729,675
Short-term borrowings			8,511				18,759				21,351				16,019				9,091
Long-term debt			34,510				35,419				36,330				35,542				35,331
Other liabilities			11,330				9,381				15,767				13,624				10,960
Total liabilities			1,484,707				1,469,682				1,457,117				1,015,499				785,057
Stockholders’ equity			244,696				238,757				237,953				169,098				133,817
Total liabilities and stockholders’ equity		$	1,729,403			$	1,708,439			$	1,695,070			$	1,184,597			$	918,874

Peoples Financial Services Corp.

Asset Quality Data

(In thousands)

At quarter end		Sept 30 2014				June 30 2014				March 31 2014				Dec 31 2013				Sept 30 2013
Nonperforming assets:
Nonaccrual/restructured loans		$	11,324			$	13,616			$	12,922			$	17,353			$	3,032
Accruing loans past due 90 days or more			955				1,693				1,663				1,455				636
Foreclosed assets			840				626				678				648				94
Total nonperforming assets		$	13,119			$	15,935			$	15,263			$	19,456			$	3,762
Three months ended
Allowance for loan losses:
Beginning balance		$	9,622			$	8,859			$	8,651			$	7,871			$	7,552
Charge-offs			177				790				683				301				216
Recoveries			60				352				34				45				10
Provision for loan losses			666				1,201				857				1,036				525
Ending balance		$	10,171			$	9,622			$	8,859			$	8,651			$	7,871

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except per share data)

Three months ended		Sept 30 2014				June 30 2014				Mar 31 2014				Dec 31 2013				Sept 30 2013
Core net income (loss) per share:
Net income (loss) GAAP		$	5,236			$	3,331			$	4,698			$	(2,130	)		$	2,486
Adjustments:
Less: Gains on sale of investment securities, net of tax			456				104								3				22
Add: Acquisition related expenses, net of tax			71				655				395				2,893				145
Net income (loss) Core		$	4,851			$	3,882			$	5,093			$	760			$	2,609
Average common shares outstanding			7,548,358				7,548,358				7,550,253				5,515,199				4,473,846
Core net income (loss) per share		$	0.65			$	0.51			$	0.67			$	0.14			$	0.58
Tangible book value:
Total stockholders’ equity		$	246,069			$	244,165			$	242,565			$	238,792			$	133,973
Less: Goodwill			63,370				63,370				63,370				63,370				26,398
Less: Other intangible assets, net			5,826				6,159				6,492				6,835				663
Total tangible stockholders’ equity		$	176,873			$	174,636			$	172,703			$	168,587			$	106,912
Common shares outstanding			7,548,358				7,548,358				7,548,358				7,552,944				4,479,624
Tangible book value per share		$	23.43			$	23.14			$	22.88			$	22.32			$	23.87
Core return on average stockholders’ equity:
Net income (loss) GAAP		$	5,236			$	3,331			$	4,698			$	(2,130	)		$	2,486
Adjustments:
Less: Gains on sale of investment securities, net of tax			456				104								3				22
Add: Acquisition related expenses, net of tax			71				655				395				2,893				145
Net income (loss) Core		$	4,851			$	3,882			$	5,093			$	760			$	2,609
Average stockholders’ equity		$	244,696			$	238,757			$	237,953			$	169,098			$	133,817
Core return on average stockholders’ equity			7.87	%			6.52	%			8.68	%			1.78	%			7.74	%
Return on average tangible equity:
Net income (loss) GAAP		$	5,236			$	3,331			$	4,698			$	(2,130	)		$	2,486
Amortization of intangibles, net of tax			217				216				223				100				36
Adjusted net income (loss)		$	5,453			$	3,547			$	4,921			$	(2,030	)		$	2,522
Average stockholders’ equity		$	244,696			$	238,757			$	237,953			$	169,098			$	133,817
Less: average intangibles			69,363				69,696				70,034				48,633				27,089
Average tangible stockholders’ equity		$	175,333			$	169,061			$	167,919			$	120,465			$	106,728
Return on average tangible stockholders’ equity			12.34	%			8.42	%			11.88	%			(6.69	)%			9.38	%
Core return on average tangible stockholders’ equity:
Net income (loss) GAAP		$	5,236			$	3,331			$	4,698			$	(2,130	)		$	2,486
Adjustments:
Less: Gains on sale of investment securities, net of tax			456				104								3				22
Add: Acquisition related expenses, net of tax			71				655				395				2,893				145
Net income (loss) Core		$	4,851			$	3,882			$	5,093			$	760			$	2,609
Average stockholders’ equity		$	244,696			$	238,757			$	237,953			$	169,098			$	133,817
Less: average intangibles			69,363				69,696				70,034				48,633				27,089
Average tangible stockholders’ equity		$	175,333			$	169,061			$	167,919			$	120,465			$	106,728
Core return on average tangible stockholders’ equity			10.98	%			9.21	%			12.30	%			2.50	%			9.70	%

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except per share data)

Three months ended		Sept 30 2014				June 30 2014				Mar 31 2014				Dec 31 2013				Sept 30 2013
Core return on average assets:
Net income (loss) GAAP		$	5,236			$	3,331			$	4,698			$	(2,130	)		$	2,486
Adjustments:
Less: Gains on sale of investment securities, net of tax			456				104								3				22
Add: Acquisition related expenses, net of tax			71				655				395				2,893				145
Net income (loss) Core		$	4,851			$	3,882			$	5,093			$	760			$	2,609
Average assets		$	1,729,403			$	1,708,439			$	1,695,070			$	1,184,597			$	918,874
Core return on average assets			1.11	%			0.91	%			1.22	%			0.25	%			1.13	%

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures

(In thousands, except per share data)

Nine months ended		Sept 30 2014				Sept 30 2013
Core net income (loss) per share:
Net income (loss) GAAP		$	13,265			$	7,851
Adjustments:
Less: Gains on sale of investment securities, net of tax			560				104
Add: Acquisition related expenses, net of tax			1,121				149
Net income (loss) Core		$	13,826			$	7,896
Average common shares outstanding			7,548,983				4,469,480
Core net income (loss) per share		$	1.83			$	1.77