Peoples Financial Services (PFIS) 8-K Financial Statements and Exhibits

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report – April 12, 2012

Commission File Number: 0-23863

PEOPLES FINANCIAL SERVICES CORP.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA	23-2391852
(State of Incorporation)	(IRS Employer Identification No.)
82 FRANKLIN AVE., HALLSTEAD, PA	18822
(Address of Principal Executive Offices)	(Zip Code)
(570) 879-2175
(Registrant’s Telephone Number Including Area Code)
Not Applicable (Former name or former address, if changed since last report) Check the appropriate line below if the Form 8K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 9.01	Financial Statements and Exhibits
	Press Release of Peoples Financial Services Corp., dated April 12, 2012, regarding First Quarter 2012 Earnings.

EXHIBIT INDEX

Exhibit		Page Number in Manually Signed Original
99	Press Release of Peoples Financial Services Corp., dated April 12, 2012, regarding First Quarter 2012 Earnings.	3

2

 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.

	/s/	Alan W. Dakey
Dated: April 12, 2012		By: Alan W. Dakey President/CEO
	/s/	Debra E. Dissinger
Dated: April 12, 2012		By: Debra E. Dissinger Executive Vice President/COO
	/s/	Scott A. Seasock
Dated: April 12, 2012		By: Scott A. Seasock Senior Vice President/CFO

3

EXHIBIT 99

NEWS RELEASE

TO BUSINESS EDITOR:

PEOPLES FINANCIAL SERVICES CORP. REPORTS 35% EARNINGS INCREASE

Hallstead, PA, April 12 – Peoples Financial Services Corp. (OTCBB:PFIS) today reported first quarter 2012 earnings of $2,420 thousand or $0.78 per share, an increase of $621 thousand or 34.5% compared to $1,799 thousand or $0.57 per share for the first quarter of 2011. For the three months ended March 31, return on average assets and return on average stockholders’ equity equaled 1.56% and 16.70% in 2012, compared to 1.30% and 14.84% in 2011.

     “Higher net interest income and noninterest income were the primary factors contributing to the increase in comparable first quarter earnings,” stated Alan W. Dakey, President and Chief Executive Officer. “We experienced strong growth in revenue generated by our Loan Division. Our loan portfolio grew significantly in the commercial and municipal sectors. In 2012, we continue to focus on improving our noninterest revenue sources. With this goal in mind, we began offering cash back rewards for non-pin based customer debit card transactions to improve efficiencies in our payment systems as well as generate increased revenues,” continued Dakey. “We are extremely excited about this new product and believe that it will provide us with the competitive advantage necessary to grow our core deposit base and strengthen our existing deposit relationships,” concluded Dakey.

HIGHLIGHTS

• Earnings per share increased $0.21 comparing 2012 and 2011.

• Noninterest revenue for the first quarter improved 50.4% over the prior year.

• Year-to-year average loan growth approximated 12.5%.

• Deposits grew $7.8 million in the first quarter of 2012.

• Nonperforming assets decreased 19.4% comparing March 31, 2012 and 2011.

INCOME STATEMENT REVIEW

     For the three months ended March 31, tax-equivalent net interest income increased $369 thousand or 6.5% to $6,058 thousand in 2012 from $5,689 thousand in 2011. Due to declining market rates, interest expense decreased $104 thousand or 7.5%. Tax-equivalent interest revenue increased $265 thousand or 3.7%, in addition to the reduction in interest expense. With respect to interest expense, our cost of funds decreased 20 basis points to 1.10% for the first quarter of 2012 from 1.30% for the same quarter of last year. Although we experienced a reduction in the rates paid for the majority of interest-bearing liability categories, the average cost of savings accounts and short-term borrowings had the greatest impact on interest expense. For the three months ended March 31, the cost of savings accounts decreased 21 basis points to 0.65% in 2012 from 0.86% in 2011, while the rate paid for short-term borrowings fell 40 basis points. Partially offsetting the positive effect from the reduction in funding costs was growth in interest-bearing liabilities of $34.8 million. The tax-equivalent yield on earning assets decreased 46 basis points. Almost entirely offsetting the effects of the yield decline was growth in average earning assets of $65.6 million. The tax-equivalent net interest margin for the first quarter declined 26 basis points to 4.10% in 2012 compared to 4.36% in 2011. However, in comparison to the fourth quarter of 2011, our net interest margin was up slightly from 4.09%.

     For the three months ended March 31, 2012, the provision for loan losses totaled $645 thousand, an increase of $224 thousand compared to $421 thousand for the same three months of 2011.

     Noninterest revenue for the first quarter rose $414 thousand or 50.4% to $1,236 thousand in 2012 from $822 thousand in 2011. Increases in deposit-related service charges resulted in a $34 thousand or 4.8% rise in service charges, fees and commissions in 2012. In addition, we experienced a $26 thousand or 54.2% increase in mortgage banking income. Additionally, gains realized from investment security sales totaled $284 for the first quarter of 2012 compared to $10 for the same period in 2011.

     For the three months ended March 31, noninterest expense decreased $81 thousand or 2.4% to $3,314 thousand in 2012 from $3,395 thousand in 2011. The decrease resulted primarily from a $479 thousand or 37.6% decrease in other expenses offset by a $284 thousand or 19.6% increase in salaries and employee benefits expense. Additional staffing factored into the higher employee-related costs. Changes in occupancy and equipment expense amounted to an increase of $114 thousand or 16.9% as recovery efforts continue from flood damage incurred in September 2011. The decrease in other expenses was primarily attributable to the receipt of insurance proceeds from flood related damages.

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BALANCE SHEET REVIEW

     Total assets equaled $631.7 million at March 31, 2012, an increase of $61.4 million compared to $570.3 million at March 31, 2011. Strong loan demand resulted in an increase of $51.4 million or 12.6% in loans, net of unearned income, to $459.2 million at the close of the first quarter of 2012 from $407.8 million one year earlier. There were no federal funds sold as of the end of the first quarter of 2012 compared to $15.8 million at the same point in 2011 as funds were shifted into the investment portfolio. Investment securities available-for-sale amounted to $132.9 million at March 31, 2012, and $107.1 million at March 31, 2011. Despite strong competition for deposits within our market area, total deposits increased $48.6 million comparing the first quarters of 2012 and 2011. Short-term borrowings outstanding at the end of the first quarter were $45.4 million in 2012 and $35.3 million in 2011.

     Stockholders’ equity equaled $61.2 million or $19.61 per share at March 31, 2012, and $52.5 million or $16.70 per share at March 31, 2011. Included in stockholders’ equity was accumulated other comprehensive income related entirely to net unrealized holding gains on available-for-sale investment securities of $3,442 thousand at the end of the first quarter of 2012, compared to an accumulated other comprehensive loss of $59 thousand at the end of the same period of 2011. Dividends declared for the first quarter were $0.21 per share in 2012 and $0.20 per share in 2011.

     Nonperforming assets equaled $9.9 million or 2.14% of loans, net of unearned income and foreclosed assets at March 31, 2012, compared to $12.2 million or 2.97% one year earlier. The improvement in asset quality resulted from a decrease in nonaccrual loans and foreclosed assets, partially offset by an increase in accruing loans past due 90 days or more. The provision for loan losses increased 53.2% comparing the first quarters of 2012 and 2011 corresponding with the increase in the volume of loans in 2012. In addition, loans charged off, net of recoveries, for the first quarter equaled 0.36% of average loans outstanding for the three months ended March 31, 2012 and 0.17% for the same period in 2011. The allowance for loan losses equaled $5.6 million or 1.22% of loans, net of unearned income, at March 31, 2012, compared to $4.4 million or 1.07% at March 31, 2011.

Peoples Financial Services Corporation is the parent company of Peoples Neighborhood Bank (the “Bank”), an independent community bank serving Lackawanna, Wyoming and Susquehanna Counties in Pennsylvania and Broome County in New York through eleven 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. In addition, customers can take advantage of PNB Online Banking services by accessing the Company's website at http://www.peoplesnatbank.com. Peoples Wealth Management, a division of the Bank’s subsidiary Peoples Advisors LLC, provides investment advisory services to the general public. The Company's 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.

5

Summary Data
Peoples Financial Services Corp.
Five Quarter Trend
(In thousands, except per share data)
	March 31			Dec 31			Sept 30			June 30			March 31
	2012			2011			2011			2011			2011
Key performance data:
Per share data:
Net income	$	0.78		$	0.57		$	0.60		$	0.75		$	0.57
Cash dividends declared	$	0.21		$	0.20		$	0.20		$	0.20		$	0.20
Book value	$	19.61		$	19.11		$	18.86		$	17.90		$	16.70
Tangible book value	$	19.41		$	18.89		$	18.59		$	17.62		$	16.39
Market value:
High	$	29.00		$	28.25		$	28.25		$	27.50		$	28.00
Low	$	27.50		$	27.05		$	26.90		$	25.50		$	26.31
Closing	$	28.00		$	28.25		$	27.55		$	27.05		$	26.31
Market capitalization	$	87,327		$	88,108		$	86,205		$	85,036		$	82,700
Common shares outstanding		3,118,806			3,118,856			3,129,056			3,143,656			3,143,281
Selected ratios:
Return on average stockholders' equity		16.70	%		12.54	%		13.62	%		18.56	%		14.84	%
Return on average assets		1.56	%		1.17	%		1.24	%		1.63	%		1.30	%
Stockholders' equity to total assets		9.68	%		9.59	%		9.72	%		9.59	%		9.20	%
Efficiency ratio		48.08	%		60.61	%		58.09	%		50.98	%		55.82	%
Nonperforming assets to loans, net, and foreclosed assets		2.14	%		2.39	%		2.45	%		2.45	%		2.97	%
Net charge-offs to average loans, net		0.36	%		0.06	%		0.28	%		0.01	%		0.17	%
Allowance for loan losses to loans, net		1.22	%		1.20	%		1.20	%		1.21	%		1.07	%
Earning assets yield (FTE)		4.97	%		5.00	%		5.08	%		5.27	%		5.43	%
Cost of funds		1.10	%		1.14	%		1.27	%		1.31	%		1.30	%
Net interest spread (FTE)		3.87	%		3.86	%		3.81	%		3.96	%		4.13	%
Net interest margin (FTE)		4.10	%		4.09	%		4.07	%		4.20	%		4.36	%

6

Peoples Financial Services Corp.
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended	March 31			March 31
	2012			2011
Interest income:
Interest and fees on loans:
Taxable	$	5,515		$	5,136
Tax-exempt		419			357
Interest and dividends on investment securities available-for-sale:
Taxable		636			666
Tax-exempt		359			475
Dividends		7			9
Interest on interest-bearing balances with banks		4			2
Interest on federal funds sold					2
Total interest income		6,940			6,647
Interest expense:
Interest on deposits		1,048			1,044
Interest on short-term borrowings		62			86
Interest on long-term debt		173			257
Total interest expense		1,283			1,387
Net interest income		5,657			5,260
Provision for loan losses		645			421
Net interest income after provision for loan losses		5,012			4,839
Noninterest income:
Service charges, fees, commissions and others		743			709
Wealth management income		143			139
Mortgage banking income		74			48
Net gains on sale of investment securities available-for-sale		284			10
Other than temporary investment securities impairment					(84	)
Net losses on sale of other real estate		(8	)
Total noninterest income		1,236			822
Noninterest expense:
Salaries and employee benefits expense		1,730			1,446
Net occupancy and equipment expense		790			676
Other expenses		794			1,273
Total noninterest expense		3,314			3,395
Income before income taxes		2,934			2,266
Provision for income tax expense		514			467
Net income	$	2,420		$	1,799
Other comprehensive income (loss):
Unrealized holding gains (losses) on investment securities available-for-sale	$	(23	)	$	1,100
Reclassification adjustment for gains included in net income		(284	)		(10	)
Reclassification adjustment for other than temporary impairment charges					84
Income tax expense (benefit) related to other comprehensive income		(104	)		399
Other comprehensive income (loss), net of income taxes		(203	)		775
Comprehensive income	$	2,217		$	2,574
Per share data:
Net income	$	0.78		$	0.57
Cash dividends declared	$	0.21		$	0.20
Average common shares outstanding		3,118,109			3,142,137

7

Peoples Financial Services Corp.
Consolidated Statements of Income
(In thousands, except per share data)
Three months ended	March 31			Dec 31			Sept 30			June 30			March 31
	2012			2011			2011			2011			2011
Interest income:
Interest and fees on loans:
Taxable	$	5,515		$	5,585		$	5,505		$	5,413		$	5,136
Tax-exempt		419			328			331			346			357
Interest and dividends on investment securities available-for-sale:
Taxable		636			672			639			633			666
Tax-exempt		359			377			397			411			475
Dividends		7			7			9			8			9
Interest on interest-bearing balances with banks		4			4			3			3			2
Interest on federal funds sold					8			13			11			2
Total interest income		6,940			6,981			6,897			6,825			6,647
Interest expense:
Interest on deposits		1,048			1,079			1,168			1,132			1,044
Interest on short-term borrowings		62			72			76			76			86
Interest on long-term debt		173			178			208			263			257
Total interest expense		1,283			1,329			1,452			1,471			1,387
Net interest income		5,657			5,652			5,445			5,354			5,260
Provision for loan losses		645			300			269			804			421
Net interest income after provision for loan losses		5,012			5,352			5,176			4,550			4,839
Noninterest income:
Service charges, fees, commissions and others		743			799			736			711			709
Wealth management income		143			140			142			236			139
Mortgage banking income		74			168			32			98			48
Net gains on sale of investment securities available-for-sale		284			(12	)		25			2			10
Other than temporary investment securities impairment								(3	)					(84	)
Net gains (losses) on sale of other real estate		(8	)		(2	)		90			1,583
Total noninterest income		1,236			1,093			1,022			2,630			822
Noninterest expense:
Salaries and employee benefits expense		1,730			1,713			1,648			1,628			1,446
Net occupancy and equipment expense		790			766			738			699			676
Other expenses		794			1,609			1,371			1,743			1,273
Total noninterest expense		3,314			4,088			3,757			4,070			3,395
Income before income taxes		2,934			2,357			2,441			3,110			2,266
Provision for income tax expense		514			557			582			751			467
Net income	$	2,420		$	1,800		$	1,859		$	2,359		$	1,799
Other comprehensive income (loss):
Unrealized holding gains (losses) on investment securities available-for-sale	$	(23	)	$	(466	)	$	2,908		$	3,183		$	1,100
Reclassification adjustment for losses (gains) included in net income		(284	)		12			(25	)		(2	)		(10	)
Reclassification adjustment for other than temporary impairment charges								3						84
Income tax expense  (benefit) related to other comprehensive income		(104	)		(154	)		981			1,082			399
Other comprehensive income (loss), net of income taxes		(203	)		(300	)		1,905			2,099			775
Comprehensive income	$	2,217		$	1,500		$	3,764		$	4,458		$	2,574
Per share data:
Net income	$	0.78		$	0.57		$	0.60		$	0.75		$	0.57
Cash dividends declared	$	0.21		$	0.20		$	0.20		$	0.20		$	0.20
Average common shares outstanding		3,118,109			3,123,569			3,134,591			3,146,584			3,142,137

8

Peoples Financial Services Corp.
Details of Net Interest and Net Interest Margin
(In thousands, fully taxable equivalent basis)
Three months ended	March 31			Dec 31			Sept 30			June 30			March 31
	2012			2011			2011			2011			2011
Net interest income:
Interest income
Loans, net:
Taxable	$	5,515		$	5,585		$	5,505		$	5,413		$	5,136
Tax-exempt		635			497			502			524			541
Total loans, net		6,150			6,082			6,007			5,937			5,677
Investments:
Taxable		643			679			648			641			675
Tax-exempt		544			571			601			623			720
Total investments		1,187			1,250			1,249			1,264			1,395
Interest-bearing balances with banks		4			4			3			3			2
Federal funds sold					8			13			11			2
Total interest income		7,341			7,344			7,271			7,215			7,076
Interest expense:
Deposits		1,048			1,079			1,168			1,132			1,044
Short-term borrowings		62			72			76			76			86
Long-term debt		173			178			208			263			257
Total interest expense		1,283			1,329			1,452			1,471			1,387
Net interest income	$	6,058		$	6,015		$	5,819		$	5,744		$	5,689
Loans, net:
Taxable		5.39	%		5.51	%		5.59	%		5.71	%		5.70	%
Tax-exempt		5.96	%		5.83	%		5.74	%		5.73	%		5.77	%
Total loans, net		5.45	%		5.53	%		5.61	%		5.71	%		5.70	%
Investments:
Taxable		2.53	%		2.71	%		3.20	%		3.75	%		3.87	%
Tax-exempt		5.98	%		5.93	%		5.94	%		6.03	%		6.15	%
Total investments		3.44	%		3.61	%		4.12	%		4.61	%		4.78	%
Interest-bearing balances with banks		1.50	%		1.28	%		0.86	%		0.88	%		1.14	%
Federal funds sold					0.40	%		0.25	%		0.22	%		0.13	%
Total earning assets		4.97	%		5.00	%		5.08	%		5.27	%		5.43	%
Interest expense:
Deposits		1.05	%		1.07	%		1.17	%		1.17	%		1.15	%
Short-term borrowings		0.51	%		0.68	%		0.81	%		0.89	%		0.91	%
Long-term debt		3.69	%		3.69	%		3.79	%		3.92	%		3.83	%
Total interest-bearing liabilities		1.10	%		1.14	%		1.27	%		1.31	%		1.30	%
Net interest spread		3.87	%		3.86	%		3.81	%		3.96	%		4.13	%
Net interest margin		4.10	%		4.09	%		4.07	%		4.20	%		4.36	%

9

Peoples Financial Services Corp.
Consolidated Balance Sheets
(In thousands, except per share data)
	March 31		Dec 31		Sept 30		June 30		March 31
At period end	2012		2011		2011		2011		2011
Assets:
Cash and due from banks	$	8,563	$	9,488	$	9,787	$	12,736	$	9,661
Interest-bearing balances with banks		1,075		1,071		1,007		1,007		1,110
Federal funds sold						17,174		9,357		15,791
Investment securities available-for-sale		132,882		139,899		128,956		114,096		107,091
Loans held for sale		2,724		569		1,206		92		517
Loans, net		459,223		445,103		427,249		426,655		407,842
Less: allowance for loan losses		5,589		5,349		5,119		5,153		4,356
Net loans		453,634		439,754		422,130		421,502		403,486
Premises and equipment, net		8,235		7,916		8,039		8,171		8,361
Accrued interest receivable		3,472		3,448		3,240		3,272		3,020
Other assets		21,164		19,259		15,616		16,347		21,291
Total assets	$	631,749	$	621,404	$	607,155	$	586,580	$	570,328
Liabilities:
Deposits:
Noninterest-bearing	$	97,353	$	92,985	$	84,572	$	78,216	$	76,958
Interest-bearing		404,779		401,298		401,588		392,353		376,614
Total deposits		502,132		494,283		486,160		470,569		453,572
Short-term borrowings		45,375		43,791		38,892		36,352		35,293
Long-term debt		18,731		18,927		21,620		21,862		27,100
Accrued interest payable		244		284		282		307		398
Other liabilities		4,106		4,506		1,178		1,220		1,471
Total liabilities		570,588		561,791		548,132		530,310		517,834
Stockholders' equity:
Common stock, par value $2.00 authorized
12,500,000, shares issued 3,341,251;		6,683		6,683		6,683		6,683		6,683
Capital surplus		3,147		3,141		3,141		3,122		3,122
Retained earnings		53,108		51,342		50,173		48,938		47,219
Accumulated other comprehensive income (loss)		3,442		3,645		3,945		2,040		(59	)
Less: Treasury stock, at cost, shares held 222,445; 222,395;		5,219		5,198		4,919		4,513		4,471
212,195; 197,595; 197,970
Total stockholders' equity		61,161		59,613		59,023		56,270		52,494
Total liabilities and stockholders' equity	$	631,749	$	621,404	$	607,155	$	586,580	$	570,328

10

Peoples Financial Services Corp.
Consolidated Balance Sheets
(In thousands, except per share data)
	March 31		Dec 31		Sept 30		June 30		March 31
Average quarterly balances	2012		2011		2011		2011		2011
Assets:
Loans, net:
Taxable	$	411,306	$	402,315	$	390,478	$	380,528	$	365,573
Tax-exempt		42,852		33,812		34,711		36,685		38,008
Total loans, net		454,158		436,127		425,189		417,213		403,581
Investments:
Taxable		102,375		99,252		80,221		68,614		70,781
Tax-exempt		36,608		38,217		40,105		41,434		47,488
Total investments		138,983		137,469		120,326		110,048		118,269
Interest-bearing balances with banks		1,074		1,236		1,386		1,364		714
Federal funds sold				8,010		20,693		20,504		6,028
Total earning assets		594,215		582,842		567,594		549,129		528,592
Other assets		27,943		27,950		28,378		32,970		32,316
Total assets	$	622,158	$	610,792	$	595,972	$	582,099	$	560,908
Liabilities and stockholders' equity:
Deposits:
Interest-bearing	$	399,755	$	400,678	$	395,354	$	387,655	$	366,632
Noninterest-bearing		92,492		87,573		83,458		78,959		74,742
Total deposits		492,247		488,251		478,812		466,614		441,374
Short-term borrowings		48,582		42,290		37,231		34,373		38,532
Long-term debt		18,837		19,140		21,749		26,935		27,227
Other liabilities		4,223		4,176		4,014		3,192		4,613
Total liabilities		563,889		553,857		541,806		531,114		511,746
Stockholders' equity		58,269		56,935		54,166		50,985		49,162
Total liabilities and stockholders' equity	$	622,158	$	610,792	$	595,972	$	582,099	$	560,908

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Peoples Financial Services Corp.
Asset Quality Data
(In thousands)
	March 31		Dec 31		Sept 30		June 30		March 31
At quarter end	2012		2011		2011		2011		2011
Nonperforming assets:
Nonaccrual/restructured loans	$	7,473	$	9,597	$	9,651	$	10,002	$	8,437
Accruing loans past due 90 days or more		691		660		429		443		542
Foreclosed assets		1,692		399		399				3,246
Total nonperforming assets	$	9,856	$	10,656	$	10,479	$	10,445	$	12,225
Three months ended
Allowance for loan losses:
Beginning balance	$	5,349	$	5,119	$	5,153	$	4,356	$	4,100
Charge-offs		421		83		317		23		176
Recoveries		16		13		14		16		11
Provision for loan losses		645		300		269		804		421
Ending balance	$	5,589	$	5,349	$	5,119	$	5,153	$	4,356
SOURCE Peoples Financial Services Corp.
/Contact: MEDIA/INVESTORS, Scott A. Seasock, 570.879.2175 or scotts@peoplesnatbank.com
Co: Peoples Financial Services Corp.
St:   Pennsylvania
In:   Fin
Except for the historical information contained, herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties in the banking industry and overall economy. Such risks and uncertainties are detailed in the Company's Securities and Exchange Commission reports, including the Annual Report on Form 10-K and quarterly reports on Form 10-Q.

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