Peoples Financial Services (PFIS) 8-K PEOPLES FINANCIAL SERVICES CORP. Reports First Quarter 2022 Earnings

Exhibit 99.1

NEWS RELEASE

TO BUSINESS EDITOR:

PEOPLES FINANCIAL SERVICES CORP. Reports First Quarter 2022 Earnings

Scranton, PA, April 26, 2022/PRNEWSWIRE/ – Peoples Financial Services Corp. (“Peoples”) (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three months ended March 31, 2022. Peoples reported net income of $9.6 million, or $1.33 per diluted share for the three months ended March 31, 2022, a 2.0% increase when compared to $9.5 million, or $1.31 per share for the comparable period of 2021. The increase in earnings over the year ago period is a result of a $1.9 million increase to net interest income due to a $1.1 million increase in interest income coupled with a $0.8 million decrease to interest expense and a decrease to income tax expense of $0.8 million, due in part to a $0.6 million deferred tax adjustment recorded in the prior period. Partially offsetting the increases were a higher provision for loan losses of $0.8 million, higher noninterest expenses of $1.7 million and slightly lower noninterest income of $0.1 million. Strong loan growth resulted in a provision for loan losses of $0.3 million in the current period, as compared to a credit to the loan loss provision of $0.5 million in the year ago period. Higher noninterest expenses were mainly the result of higher salaries and benefits of $1.5 million and higher occupancy and equipment costs of $0.6 million related in part to our market expansion and information technology upgrades.

NOTABLES

● Record quarterly core net income, a non-GAAP measure¹, of $9.6 million or $1.33 per diluted share.

● First quarter dividend of $0.39 per share represents a 5.4% increase from the first quarter of 2021.

● Loan growth for the three months ended March 31, 2022, excluding Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans, was $98.7 million or 17.7% annualized.

● Core return on average assets (“ROAA”), a non-GAAP measure, was 1.17% for the three months ended March 31, 2022 compared to 0.82% for the three months ended December 31, 2021, and 1.32% for the comparable period in 2021.

● Core return on average equity (“ROE”) was 11.82% for the three months ended March 31, 2022 compared to 8.03% for the three months ended December 31, 2021 and 11.98% for the comparable period in 2021.

● Core return on average tangible equity was 14.65% for the three months ended March 31, 2022 compared to 9.92% for the three months ended December 31, 2021 and 14.99% for the comparable period in 2021.

● Tax-equivalent net interest income, a non-GAAP measure, increased $2.0 million or 9.3% to $23.1 million for the three months ended March 31, 2022 compared to $21.1 million for the same period in 2021.

● Nonperforming assets as a percentage of loans and foreclosed assets at March 31, 2022 improved to 0.20% from 0.21% at December 31, 2021, and from 0.38% at March 31, 2021.

● Peoples Security Bank and Trust Company was ranked by S&P Global Market Intelligence as the 29th best performing community bank in 2021 with assets between $3 and $10 billion.  The rankings were released during the three months ended March 31, 2022 and were evaluated based on: pretax return on tangible common equity; efficiency ratio; operating revenue growth; net charge-offs to average loans and leases net of PPP loans; and leverage ratio. 

 INCOME STATEMENT REVIEW

Calculated on a fully taxable equivalent basis (“FTE”), a non-GAAP measure, our net interest margin for the three months ended March 31, 2022 was 2.97%, an increase of 15 basis points when compared to the three months ended December 31, 2021, and a decrease of 18 basis points when compared to 3.15% for the same three month period in 2021.  The increase in net interest margin from the prior three month period was due to an increase in earning assets, utilizing a portion of low-yielding excess cash to fund higher yielding loans and investment purchases, higher PPP

¹ See reconciliation of non-GAAP financial measures on p.15.

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related fees, a benefit from the increase to the federal funds rate, and lower funding costs.  The tax-equivalent yield on interest-earning assets increased 14 basis points to 3.22% during the three months ended March 31, 2022 from 3.08% during the three months ended December 31, 2021, and decreased 33 basis points when compared to 3.55% for the three months ended March 31, 2021.  The decrease in net interest margin and yield from the year ago period was due to lower market rates, the result of the Federal Open Market Committee ("FOMC") cutting the federal funds rate 150 basis points in the first three months of 2020 resulting from the uncertain economic impact of the coronavirus pandemic. The decrease in market rates resulted in lower rates on our existing adjustable rate loans and affected rates on new originations. At the same time, we have experienced lower interest-bearing liability costs due to lower market rates and our ability to reduce deposit costs. Our cost of funds, which represents our average rate paid on total interest-bearing liabilities, decreased 2 basis points to 0.35% for the three months ended March 31, 2022 when compared to 0.37% during the three months ended December 31, 2021, and has decreased 22 basis points when compared to the same three month period in 2021 due to our actions to reduce deposit rates.

First Quarter 2022 Results – Comparison to Prior-Year Quarter

Tax-equivalent net interest income for the three months ended March 31, increased $2.0 million or 9.3% to $23.1 million in 2022 from $21.1 million in 2021. The increase in tax equivalent net interest income was due to higher tax-equivalent interest income of $1.2 million coupled with lower interest expense of $0.8 million. The higher interest income was the result of higher volumes of average earning assets, which offset a negative rate variance. Average earning assets were $436.8 million higher in the three month period ended March 31, 2022 when compared to the year ago period. Deposit rate reductions over the past twelve months offset a positive volume variance and resulted in the reduction to interest expense. PPP loans averaged $49.0 million in the three-month period ended March 31, 2022 with interest and net fees totaling approximately $1.0 million compared to average balances of $195.5 million with interest and net fees totaling $2.5 million in the year ago period. The tax-equivalent yield on the loan portfolio decreased to 3.85% for the three months ended March 31, 2022, compared to 4.09% for the comparable period in 2021 due to lower market rates. Excluding PPP loans, the tax-equivalent yield of the loan portfolio was 3.75% and 3.99% at March 31, 2022 and 2021, respectively. Loans, net averaged $2.4 billion for the three months ended March 31, 2022 and $2.2 billion for the comparable period in 2021. For the three months ended March 31, the tax-equivalent yield on total investments decreased to 1.68% in 2022 from 2.15% in 2021. Average investments totaled $633.7 million in 2022 and $332.4 million in 2021. Average interest-bearing liabilities increased $315.5 million for the three months ended March 31, 2022, compared to the corresponding period last year due primarily to deposit growth, offset by lower borrowings. Strong organic growth in non-maturity deposits and growth of public fund deposits permitted us to lower our short-term and long-term borrowings.

For the three months ended March 31, 2022, the provision for loan losses was $0.3 million, the result of $98.7 million growth of non-PPP loans. In the year ago period, the provision for loan losses was a credit of $0.5 million due to improved credit quality and slight decrease of non PPP loans.

Noninterest income for the three months ended March 31, 2022 was $3.4 million, a $0.1 million decrease from $3.5 million for the three months ended March 31, 2021.  Revenue from commercial loan interest rate swap transactions was $0.4 million lower in the current period due to the higher number of transactions and the higher credit value adjustment in the year ago period. Mortgage banking revenue was $0.2 million lower in the current period due to lower volumes of mortgages sold into the secondary market. The increase in service charges, fees and commissions was due in part to the reversal of an accrual of a $0.3 million bank owned life insurance benefit in the year ago period, and a $0.1 million incentive received related to our debit card activity in the current period.

Noninterest expense increased $1.7 million or 13.1% to $14.3 million for the three months ended March 31, 2022, from $12.6 million for the three months ended March 31, 2021. Salaries and employee benefits increased $1.5 million or 22.4% due to the addition of lending teams and credit support staff in our newest expansion markets of Piscataway, New Jersey and Pittsburgh that opened during the fourth quarter of 2021. Additionally, deferred loan origination costs, which are recorded as a contra-salary expense, were $0.7 million higher in the year ago period due to the origination of PPP loans related to round two of the program.  Occupancy and equipment expenses were higher by $0.6 million in the current period due to information technology investments related to mobile/digital banking solutions implemented during the second half of 2021. Other expenses were lower by $0.4 million due primarily to higher gains realized on the sale of other real estate owned of $0.4 million.

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The provision for income tax expense decreased $0.8 million for the three months ended March 31, 2022 compared to the year ago period due to higher levels of tax-exempt income in the current period and a $0.6 million deferred tax adjustment recorded in the prior period.

 BALANCE SHEET REVIEW

At March 31, 2022, total assets, loans and deposits were $3.4 billion, $2.4 billion and $3.0 billion, respectively. Loan growth for the three months ended March 31, 2022, excluding SBA PPP loans, was $98.7 million or 17.7% annualized due to improved loan demand and organic growth in our newest markets. Commercial real estate loans made up the majority of the growth with tax-exempt loans and residential real estate loans also showing increases. During the three months ended March 31, 2022, the SBA forgave PPP loans totaling $30.2 million. Gross SBA PPP loans remaining at March 31, 2022 total $38.7 million. Net deferred SBA PPP fees remaining at March 31, 2022 total $0.7 million and are mostly expected to be earned throughout the remainder of 2022.  Total investments were $631.5 million at March 31, 2022, compared to $588.7 million at December 31, 2021. The increase to the investment portfolio resulted from reinvesting a portion of our low-yielding federal funds balance into higher-yielding U.S. Treasury securities. At March 31, 2022, the available-for-sale investment portfolio had an unrealized loss of $34.4 million compared to an unrealized loss of $1.8 million at December 31, 2021, which was the result of the rapid increase in market rates and the FOMC’s 25 basis point increase to the federal funds rate during March 2022. Our federal funds sold balance decreased $141.2 million to $101.2 million at March 31, 2022 from $242.4 million at December 31, 2021 as a result of funding our loan growth and investment purchases during the quarter. Total deposits increased slightly by $1.5 million from December 31, 2021, as the seasonal outflow of public fund deposits were replaced with consumer and commercial growth. Non-interest bearing deposits increased $22.2 million, or 3.0% and interest-bearing deposits decreased $20.7 million, or 0.9% during the three months ended March 31, 2022.

Stockholders' equity equaled $320.5 million or $44.64 per share at March 31, 2022, and $340.1 million or $47.44 per share at December 31, 2021. The decrease in stockholders’ equity from December 31, 2021 is primarily attributable to a decrease to accumulated other comprehensive income (“AOCI”) resulting from an increase to the unrealized loss on investment securities and dividends paid to shareholders, partially offset by net income.  Tangible stockholders' equity decreased to $35.76 per share at March 31, 2022, from $38.54 per share at December 31, 2021. Dividends declared for the three months ended March 31, 2022 amounted to $0.39 per share, a 5.4% increase from the 2021 period, representing a dividend payout ratio of 29.3%. During the quarter, 6,714 shares were purchased and retired under the Company’s common stock repurchase plan.

ASSET QUALITY REVIEW

Nonperforming assets were $4.7 million or 0.20% of loans, net and foreclosed assets at March 31, 2022, compared to $5.0 million or 0.21% of loans, net and foreclosed assets at December 31, 2021. As a percentage of total assets, nonperforming assets improved to 0.14% at March 31, 2022 compared to 0.15% at December 31, 2021.  The decrease in non-performing assets from the previous quarter was primarily due to the sale in the current period of our foreclosed properties which totaled $0.5 million at December 31, 2021; at March 31, 2022 we have no foreclosed properties.

The Company's allowance for loan losses remained at $28.4 million as net charge-offs of $0.3 million was offset by a provision for loan losses of $0.3 million.  The allowance for loan losses at March 31, 2022 continued to reflect the provisions added during 2020 from our adjustment of qualitative factors in our allowance for loan losses methodology, due to economic decline and expectation of increased credit losses from COVID-19's adverse impact on economic and business operating conditions. The allowance for loan losses equaled $28.4 million or 1.18% of loans, net at March 31, 2022 compared to $28.4 million or 1.22% of loans, net, at December 31, 2021.   Excluding PPP loans which do not carry an allowance for loan losses due to a 100% government guarantee, the ratio equaled 1.20% at March 31, 2022.  Loans charged-off, net of recoveries, for the three months ended March 31, 2022, equaled $0.3 million or 0.05% of average loans, compared to $0.1 million or 0.01% of average loans for the comparable period last year.

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About Peoples:

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

In addition to evaluating its results of operations in accordance with U.S. generally accepted accounting principles (“GAAP”), Peoples routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders’ equity and core net income ratios. The reported results included in this release contain items, which Peoples considers non-core, namely the gain on the sale of Visa Class B shares and gains and losses incurred within the investment securities portfolio. Peoples believes the reported non-GAAP financial measures provide information useful to investors in understanding its operating performance and trends. Where non-GAAP disclosures are used in this press release, a reconciliation to the comparable GAAP measure is provided in the accompanying tables. The non-GAAP financial measures Peoples uses may differ from the non-GAAP financial measures of other financial institutions.

SOURCE: Peoples Financial Services Corp.
/Contact:	MEDIA/INVESTORS, Marie L. Luciani, Investor Relations Officer, 570.346.7741 or marie.luciani@psbt.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. and Peoples Security Bank and Trust Company (collectively, “Peoples”) that are considered “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “intend” and “potential.” For these statements, Peoples claims the protection of the statutory safe harbors for forward-looking statements.

Peoples cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; the COVID-19 crisis and the governmental responses to the crisis; the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; our ability to identify and address cyber-security risks and other economic, competitive, governmental, regulatory and technological factors affecting Peoples’ operations, pricing, products and services and other factors that may be described in Peoples’ Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

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

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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]

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Summary Data

Peoples Financial Services Corp.

Five Quarter Trend (Unaudited)

(In thousands, except share and per share data)

	Mar 31			Dec 31			Sept 30			June 30			Mar 31
	2022			2021			2021			2021			2021
Key performance data:
Share and per share amounts:
Net income	$	1.33		$	2.28		$	1.26		$	1.18		$	1.31
Core net income (1)	$	1.33		$	0.95		$	1.26		$	1.18		$	1.31
Cash dividends declared	$	0.39		$	0.38		$	0.38		$	0.37		$	0.37
Book value	$	44.64		$	47.44		$	45.66		$	45.11		$	44.00
Tangible book value (1)	$	35.76		$	38.54		$	36.75		$	36.21		$	35.10
Market value:
High	$	52.99		$	53.06		$	46.92		$	45.38		$	47.34
Low	$	46.35		$	45.64		$	41.91		$	41.10		$	36.02
Closing	$	50.48		$	52.69		$	45.57		$	42.60		$	42.24
Market capitalization	$	362,398		$	377,754		$	327,057		$	306,836		$	304,605
Common shares outstanding		7,179,037			7,169,372			7,177,028			7,202,728			7,211,293
Selected ratios:
Return on average stockholders’ equity		11.82	%		19.34	%		11.01	%		10.71	%		12.00	%
Core return on average stockholders’ equity (1)		11.82	%		8.03	%		11.01	%		10.72	%		11.98	%
Return on average tangible stockholders’ equity		14.65	%		23.87	%		13.69	%		13.39	%		15.02	%
Core return on average tangible stockholders’ equity (1)		14.65	%		9.92	%		13.68	%		13.41	%		14.99	%
Return on average assets		1.17	%		1.97	%		1.17	%		1.14	%		1.32	%
Core return on average assets (1)		1.17	%		0.82	%		1.17	%		1.14	%		1.32	%
Stockholders’ equity to total assets		9.56	%		10.09	%		10.14	%		10.84	%		10.59	%
Efficiency ratio (1)(2)		53.57	%		59.80	%		54.87	%		55.71	%		50.83	%
Nonperforming assets to loans, net, and foreclosed assets		0.20	%		0.21	%		0.28	%		0.33	%		0.38	%
Nonperforming assets to total assets		0.14	%		0.15	%		0.19	%		0.24	%		0.28	%
Net charge-offs to average loans, net		0.05	%		0.01	%		0.08	%		0.03	%		0.01	%
Allowance for loan losses to loans, net		1.18	%		1.22	%		1.21	%		1.20	%		1.23	%
Interest-bearing assets yield (FTE) (3)		3.22	%		3.08	%		3.37	%		3.32	%		3.55	%
Cost of funds		0.35	%		0.37	%		0.42	%		0.50	%		0.57	%
Net interest spread (FTE) (3)		2.87	%		2.71	%		2.95	%		2.81	%		2.98	%
Net interest margin (FTE) (3)		2.97	%		2.82	%		3.07	%		2.96	%		3.15	%

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

(2) Total noninterest expense less amortization of intangible assets divided by tax-equivalent net interest income and noninterest income less net gains(losses) on investment securities available-for-sale.

(3) Tax-equivalent adjustments were calculated using the federal statutory tax rate prevailing during the indicated periods of 21%.

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Peoples Financial Services Corp.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

	Mar 31		Mar 31
Three months ended	2022		2021
Interest income:
Interest and fees on loans:
Taxable	$	20,853	$	20,900
Tax-exempt		1,161		870
Interest and dividends on investment securities:
Taxable		1,972		1,243
Tax-exempt		510		390
Dividends				23
Interest on interest-bearing deposits in other banks		2		2
Interest on federal funds sold		73		49
Total interest income		24,571		23,477
Interest expense:
Interest on deposits		1,468		2,092
Interest on short-term borrowings				71
Interest on long-term debt		28		103
Interest on subordinated debt		444		443
Total interest expense		1,940		2,709
Net interest income		22,631		20,768
Provision (credit) for loan losses		300		(500)
Net interest income after provision for loan losses		22,331		21,268
Noninterest income:
Service charges, fees, commissions and other		1,621		1,184
Merchant services income		114		93
Commissions and fees on fiduciary activities		555		533
Wealth management income		351		358
Mortgage banking income		144		312
Increase in cash surrender value of life insurance		218		219
Interest rate swap revenue		414		797
Net gain (loss) on investment securities		4		21
Total noninterest income		3,421		3,517
Noninterest expense:
Salaries and employee benefits expense		8,040		6,570
Net occupancy and equipment expense		3,825		3,267
Amortization of intangible assets		96		125
Net (gain) loss on sale of other real estate owned		(458)		(46)
Other expenses		2,786		2,713
Total noninterest expense		14,289		12,629
Income before income taxes		11,463		12,156
Provision for income tax expense		1,833		2,678
Net income	$	9,630	$	9,478
Other comprehensive income:
Unrealized gain (loss) on investment securities available-for-sale	$	(32,612)	$	(7,749)
Change in derivative fair value		(493)		242
Income tax related to other comprehensive income		(6,952)		(1,576)
Other comprehensive income, net of income taxes		(26,153)		(5,931)
Comprehensive income	$	(16,523)	$	3,547
Share and per share amounts:
Net income - basic	$	1.34	$	1.31
Net income - diluted		1.33		1.31
Cash dividends declared	$	0.39	$	0.37
Average common shares outstanding - basic		7,172,455		7,210,952
Average common shares outstanding - diluted		7,216,421		7,246,016

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Peoples Financial Services Corp.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

	Mar 31		Dec 31		Sept 30		June 30		Mar 31
Three months ended	2022		2021		2021		2021		2021
Interest income:
Interest and fees on loans:
Taxable	$	20,853	$	20,288	$	21,276	$	20,029	$	20,900
Tax-exempt		1,161		1,098		1,024		965		870
Interest and dividends on investment securities available-for-sale:
Taxable		1,972		1,660		1,285		1,276		1,243
Tax-exempt		510		498		432		411		390
Dividends				2		24		25		23
Interest on interest-bearing deposits in other banks		2		2		2		2		2
Interest on federal funds sold		73		102		124		55		49
Total interest income		24,571		23,650		24,167		22,763		23,477
Interest expense:
Interest on deposits		1,468		1,579		1,698		1,941		2,092
Interest on short-term borrowings								6		71
Interest on long-term debt		28		35		41		82		103
Interest on subordinated debt		444		444		443		444		443
Total interest expense		1,940		2,058		2,182		2,473		2,709
Net interest income		22,631		21,592		21,985		20,290		20,768
Provision (credit) for loan losses		300		1,750		400		100		(500)
Net interest income after provision (credit) for loan losses		22,331		19,842		21,585		20,190		21,268
Noninterest income:
Service charges, fees, commissions and other		1,621		1,693		1,667		1,625		1,184
Merchant services income		114		120		158		508		93
Commissions and fees on fiduciary activities		555		548		639		553		533
Wealth management income		351		330		432		417		358
Mortgage banking income		144		211		244		208		312
Increase in cash surrender value of life insurance		218		220		225		225		219
Interest rate swap revenue (expense)		414		15		79		(132)		797
Net gain (loss) on investment securities		4		(7)		5		(17)		21
Net gain on sale of Visa Class B shares				12,153
Total noninterest income		3,421		15,283		3,449		3,387		3,517
Noninterest expense:
Salaries and employee benefits expense		8,040		8,087		7,829		7,250		6,570
Net occupancy and equipment expense		3,825		3,384		3,150		3,047		3,267
Amortization of intangible assets		96		116		125		125		125
Net (gain) loss on sale of other real estate owned		(458)		(15)		(97)		(29)		(46)
Other expenses		2,786		3,198		3,140		3,065		2,713
Total noninterest expense		14,289		14,770		14,147		13,458		12,629
Income before income taxes		11,463		20,355		10,887		10,119		12,156
Income tax expense		1,833		3,941		1,791		1,588		2,678
Net income	$	9,630	$	16,414	$	9,096	$	8,531	$	9,478
Other comprehensive income:
Unrealized gain (loss) on investment securities available-for-sale	$	(32,612)	$	(3,078)	$	(3,130)	$	2,470	$	(7,749)
Reclassification adjustment for gains included in net income
Change in benefit plan liabilities		-		2,109
Change in derivative fair value		(493)		(300)		(128)		(135)		242
Income tax related to other comprehensive income		(6,952)		(266)		(684)		490		(1,576)
Other comprehensive income, net of income taxes		(26,153)		(1,003)		(2,574)		1,845		(5,931)
Comprehensive income	$	(16,523)	$	15,411	$	6,522	$	10,376	$	3,547
Share and per share amounts:
Net income - basic	$	1.34	$	2.29	$	1.26	$	1.18	$	1.31
Net income - diluted		1.33		2.28		1.26		1.18		1.31
Cash dividends declared	$	0.39	$	0.38	$	0.38	$	0.37	$	0.37
Average common shares outstanding - basic		7,172,455		7,172,501		7,198,125		7,204,261		7,210,952
Average common shares outstanding - diluted		7,216,421		7,207,565		7,233,189		7,239,325		7,246,016

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Peoples Financial Services Corp.

Details of Net Interest Income and Net Interest Margin (Unaudited)

(In thousands, fully taxable equivalent basis)

	Mar 31			Dec 31			Sept 30			June 30			Mar 31
Three months ended	2022			2021			2021			2021			2021
Net interest income:
Interest income
Loans, net:
Taxable	$	20,853		$	20,288		$	21,276		$	20,029		$	20,900
Tax-exempt		1,470			1,390			1,296			1,222			1,101
Total loans, net		22,323			21,678			22,572			21,251			22,001
Investments:
Taxable		1,972			1,662			1,310			1,301			1,266
Tax-exempt		646			630			547			520			494
Total investments		2,618			2,292			1,857			1,821			1,760
Interest on interest-bearing balances in other banks		2			2			2			2			2
Federal funds sold		73			102			124			55			49
Total interest income		25,016			24,074			24,555			23,129			23,812
Interest expense:
Deposits		1,468			1,579			1,698			1,941			2,092
Short-term borrowings											6			71
Long-term debt		28			35			41			82			103
Subordinated debt		444			444			443			444			443
Total interest expense		1,940			2,058			2,182			2,473			2,709
Net interest income	$	23,076		$	22,016		$	22,373		$	20,656		$	21,103
Loans, net:
Taxable		3.94	%		3.85	%		4.15	%		3.87	%		4.13	%
Tax-exempt		2.93	%		2.97	%		3.04	%		3.30	%		3.56	%
Total loans, net		3.85	%		3.78	%		4.06	%		3.83	%		4.09	%
Investments:
Taxable		1.53	%		1.48	%		1.85	%		1.97	%		1.97	%
Tax-exempt		2.37	%		2.38	%		2.56	%		2.66	%		2.78	%
Total investments		1.68	%		1.65	%		2.02	%		2.13	%		2.15	%
Interest-bearing balances with banks		0.14	%		0.09	%		0.07	%		0.08	%		0.06	%
Federal funds sold		0.18	%		0.15	%		0.16	%		0.10	%		0.10	%
Total interest-bearing assets		3.22	%		3.08	%		3.37	%		3.32	%		3.55	%
Interest expense:
Deposits		0.27	%		0.29	%		0.34	%		0.41	%		0.46	%
Short-term borrowings											0.33	%		0.57	%
Long-term debt		4.59	%		4.68	%		4.68	%		2.98	%		2.88	%
Subordinated debt		5.38	%		5.38	%		5.37	%		5.38	%		5.38	%
Total interest-bearing liabilities		0.35	%		0.37	%		0.42	%		0.50	%		0.57	%
Net interest spread		2.87	%		2.71	%		2.95	%		2.81	%		2.98	%
Net interest margin		2.97	%		2.82	%		3.07	%		2.96	%		3.15	%

9

Peoples Financial Services Corp.

Consolidated Balance Sheets (Unaudited)

(In thousands)

	Mar 31		Dec 31		Sept 30		June 30		Mar 31
At period end	2022		2021		2021		2021		2021
Assets:
Cash and due from banks	$	35,863	$	30,415	$	33,662	$	41,789	$	30,786
Interest-bearing balances in other banks		4,440		7,093		7,425		10,262		8,432
Federal funds sold		101,200		242,425		319,500		196,000		264,100
Investment securities:
Available-for-sale		535,482		517,321		461,372		336,449		333,753
Equity investments carried at fair value		144		140		147		142		159
Held-to-maturity		95,829		71,213		32,848		7,104		7,166
Loans held for sale		161		408		997		1,545		458
Loans, net		2,397,681		2,329,173		2,205,661		2,236,826		2,179,534
Less: allowance for loan losses		28,407		28,383		26,693		26,739		26,783
Net loans		2,369,274		2,300,790		2,178,968		2,210,087		2,152,751
Premises and equipment, net		51,977		51,502		50,682		46,305		46,777
Accrued interest receivable		9,221		8,528		8,280		7,844		8,206
Goodwill		63,370		63,370		63,370		63,370		63,370
Other intangible assets, net		372		468		584		710		835
Bank owned life insurance		43,828		42,754		42,734		42,750		42,530
Other assets		41,640		33,056		32,956		33,379		36,146
Total assets	$	3,352,801	$	3,369,483	$	3,233,525	$	2,997,736	$	2,995,469
Liabilities:
Deposits:
Noninterest-bearing	$	759,986	$	737,756	$	712,601	$	672,274	$	661,262
Interest-bearing		2,204,878		2,225,641		2,128,318		1,939,492		1,889,154
Total deposits		2,964,864		2,963,397		2,840,919		2,611,766		2,550,416
Short-term borrowings										51,980
Long-term debt		2,182		2,711		3,235		3,752		14,264
Subordinated debt		33,000		33,000		33,000		33,000		33,000
Accrued interest payable		844		408		872		469		1,120
Other liabilities		31,450		29,841		27,767		23,858		27,358
Total liabilities		3,032,340		3,029,357		2,905,793		2,672,845		2,678,138
Stockholders’ equity:
Common stock		14,352		14,341		14,356		14,407		14,423
Capital surplus		127,192		127,549		127,826		128,719		128,854
Retained earnings		210,584		203,750		190,061		183,702		177,836
Accumulated other comprehensive gain (loss)		(31,667)		(5,514)		(4,511)		(1,937)		(3,782)
Total stockholders’ equity		320,461		340,126		327,732		324,891		317,331
Total liabilities and stockholders’ equity	$	3,352,801	$	3,369,483	$	3,233,525	$	2,997,736	$	2,995,469

10

Peoples Financial Services Corp.

Consolidated Balance Sheets (Unaudited)

(In thousands)

	Mar 31		Dec 31		Sept 30		June 30		Mar 31
Average quarterly balances	2022		2021		2021		2021		2021
Assets:
Loans, net:
Taxable	$	2,148,251	$	2,088,935	$	2,033,752	$	2,075,808	$	2,054,120
Tax-exempt		203,645		185,471		169,273		148,747		125,352
Total loans, net		2,351,896		2,274,406		2,203,025		2,224,555		2,179,472
Investments:
Taxable		523,301		446,096		280,767		264,490		260,238
Tax-exempt		110,394		105,044		84,701		78,521		72,177
Total investments		633,695		551,140		365,468		343,011		332,415
Interest-bearing balances with banks		5,888		9,739		12,004		9,653		13,260
Federal funds sold		162,218		264,068		311,015		220,247		191,720
Total interest-bearing assets		3,153,697		3,099,353		2,891,512		2,797,466		2,716,867
Other assets		187,864		202,123		202,456		199,082		197,178
Total assets	$	3,341,561	$	3,301,476	$	3,093,968	$	2,996,548	$	2,914,045
Liabilities and stockholders’ equity:
Deposits:
Interest-bearing	$	2,211,629	$	2,176,429	$	2,007,868	$	1,921,754	$	1,833,661
Noninterest-bearing		734,348		725,414		696,331		680,431		634,806
Total deposits		2,945,977		2,901,843		2,704,199		2,602,185		2,468,467
Short-term borrowings								7,300		50,470
Long-term debt		2,474		2,959		3,475		11,025		14,509
Subordinated debt		33,000		33,000		33,000		33,000		33,000
Other liabilities		29,816		26,924		25,635		23,420		27,371
Total liabilities		3,011,267		2,964,726		2,766,309		2,676,930		2,593,817
Stockholders’ equity		330,294		336,750		327,659		319,618		320,228
Total liabilities and stockholders’ equity	$	3,341,561	$	3,301,476	$	3,093,968	$	2,996,548	$	2,914,045

11

Peoples Financial Services Corp.

Asset Quality Data (Unaudited)

(In thousands)

	Mar 31		Dec 31		Sept 30		June 30		Mar 31
At quarter end	2022		2021		2021		2021		2021
Nonperforming assets:
Nonaccrual/restructured loans	$	4,573	$	4,461	$	5,559	$	7,216	$	8,073
Accruing loans past due 90 days or more		103		13		78		49		172
Foreclosed assets				487		487		29		131
Total nonperforming assets	$	4,676	$	4,961	$	6,124	$	7,294	$	8,376
Three months ended
Allowance for loan losses:
Beginning balance	$	28,383	$	26,693	$	26,739	$	26,783	$	27,344
Charge-offs		355		105		466		190		195
Recoveries		79		45		20		46		134
Provision for loan losses		300		1,750		400		100		(500)
Ending balance	$	28,407	$	28,383	$	26,693	$	26,739	$	26,783

12

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)

	Mar 31			Dec 31			Sept 30			June 30			Mar 31
Three months ended	2022			2021			2021			2021			2021
Core net income per share:
Net income GAAP	$	9,630		$	16,414		$	9,096		$	8,531		$	9,478
Adjustments:
Less: Gain on sale of Visa Class B shares					12,153
Less: gain (loss) on equity securities		(4)			7			(5)			17			(21)
Add: gain (loss) on equity securities tax adjustment		1			(1)			1			(4)			4
Add: Gain on sale of Visa Class B shares tax adjustment					2,552
Net income Core	$	9,627		$	6,819		$	9,092		$	8,544		$	9,461
Average common shares outstanding - diluted		7,216,421			7,207,565			7,233,189			7,239,325			7,246,016
Core net income per share	$	1.33		$	0.95		$	1.26		$	1.18		$	1.31
Tangible book value:
Total stockholders’ equity	$	320,461		$	340,126		$	327,732		$	324,891		$	317,331
Less: Goodwill		63,370			63,370			63,370			63,370			63,370
Less: Other intangible assets, net		372			468			584			710			835
Total tangible stockholders’ equity	$	256,719		$	276,289		$	263,778		$	260,811		$	253,126
Common shares outstanding		7,179,037			7,169,372			7,177,028			7,202,728			7,211,293
Tangible book value per share	$	35.76		$	38.54		$	36.75		$	36.21		$	35.10
Core return on average stockholders’ equity:
Net income GAAP	$	9,630		$	16,414		$	9,096		$	8,531		$	9,478
Adjustments:
Less: Gain on sale of Visa Class B shares					12,153
Less: gain (loss) on equity securities		(4)			7			(5)			17			(21)
Add: gain (loss) on equity securities tax adjustment		1			(1)			1			(4)			4
Add: Gain on sale of Visa Class B shares tax adjustment					2,552
Net income Core	$	9,627		$	6,819		$	9,092		$	8,544		$	9,461
Average stockholders’ equity	$	330,294		$	336,750		$	327,659		$	319,618		$	320,228
Core return on average stockholders’ equity		11.82	%		8.03	%		11.01	%		10.72	%		11.98	%
Return on average tangible equity:
Net income GAAP	$	9,630		$	16,414		$	9,096		$	8,531		$	9,478
Average stockholders’ equity	$	330,294		$	336,750		$	327,659		$	319,618		$	320,228
Less: average intangibles		63,790			63,896			64,017			64,143			64,268
Average tangible stockholders’ equity	$	266,504		$	272,854		$	263,642		$	255,475		$	255,960
Return on average tangible stockholders’ equity		14.65	%		23.87	%		13.69	%		13.39	%		15.02	%
Core return on average tangible stockholders’ equity:
Net income GAAP	$	9,630		$	16,414		$	9,096		$	8,531		$	9,478
Adjustments:
Less: Gain on sale of Visa Class B shares					12,153
Less: gain (loss) on equity securities		(4)			7			(5)			17			(21)
Add: gain (loss) on equity securities tax adjustment		1			(1)			1			(4)			4
Add: Gain on sale of Visa Class B shares tax adjustment					2,552
Net income Core	$	9,627		$	6,819		$	9,092		$	8,544		$	9,461
Average stockholders’ equity	$	330,294		$	336,750		$	327,659		$	319,618		$	320,228
Less: average intangibles		63,790			63,896			64,017			64,143			64,268
Average tangible stockholders’ equity	$	266,504		$	272,854		$	263,642		$	225,475		$	255,960
Core return on average tangible stockholders’ equity		14.65	%		9.92	%		13.68	%		13.41	%		14.99	%
Core return on average assets:
Net income GAAP	$	9,630		$	16,414		$	9,096		$	8,531		$	9,478
Adjustments:
Less: Gain on sale of Visa Class B shares					12,153
Less: gain (loss) on equity securities		(4)			7			(5)			17			(21)
Add: gain (loss) on equity securities tax adjustment		1			(1)			1			(4)			4
Add: Gain on sale of Visa Class B shares tax adjustment					2,552
Net income Core	$	9,627		$	6,819		$	9,092		$	8,544		$	9,461
Average assets	$	3,341,561		$	3,301,476		$	3,093,968		$	2,996,548		$	2,914,045
Core return on average assets		1.17	%		0.82	%		1.17	%		1.14	%		1.32	%

13

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)

	Mar 31		Mar 31
Three months ended	2022		2021
Core net income per share:
Net income (GAAP)	$	9,630	$	9,478
Adjustments:
Less: Gain (loss) on equity securities		4		(21)
Add: Gain (loss) on equity securities line tax adjustment		1		4
Net income Core	$	9,627	$	9,461
Average basic common shares outstanding		7,172,455		7,210,952
Average diluted common shares outstanding		7,216,421		7,246,016
Core net income per share - basic	$	1.34	$	1.31
Core net income per share - diluted	$	1.33	$	1.31

14

Peoples Financial Services Corp.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)

The following table reconciles the non-GAAP financial measures of FTE net interest income for the three ended March 31, 2022 and 2021:

Three months ended March 31	2022		2021
Interest income (GAAP)	$	24,571	$	23,477
Adjustment to FTE		445		335
Interest income adjusted to FTE (non-GAAP)		25,016		23,812
Interest expense		1,940		2,709
Net interest income adjusted to FTE (non-GAAP)	$	23,076	$	21,103

The efficiency ratio is noninterest expenses, less amortization of intangible assets, as a percentage of FTE net interest income plus noninterest income less gains on equity securities and gains on sale of assets. The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP for the three months ended March 31, 2022 and 2021:

Three months ended March 31	2022			2021
Efficiency ratio (non-GAAP):
Noninterest expense (GAAP)	$	14,289		$	12,629
Less: amortization of intangible assets expense		96			125
Noninterest expense adjusted for amortization of assets expense (non-GAAP)		14,193			12,504
Net interest income (GAAP)		22,631			20,768
Plus: taxable equivalent adjustment		445			335
Noninterest income (GAAP)		3,421			3,517
Less: net gains on equity securities		4			21
Net interest income (FTE) plus noninterest income (non-GAAP)	$	26,493		$	24,599
Efficiency ratio (non-GAAP)		53.57	%		50.83	%

15