Peoples Financial Services Corp. Reports Earnings - WLOX.com - The News for South Mississippi

Peoples Financial Services Corp. Reports Earnings

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SOURCE Peoples Financial Services Corp.

SCRANTON, Pa., Feb. 12, 2014 /PRNewswire/ -- Peoples Financial Services Corp. ("Peoples") (OTCQB: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three and twelve-month periods ended December 31, 2013.  Peoples, which completed a merger with Penseco Financial Services Corporation ("Penseco") on November 30, 2013, reported net income of $5.1 million, or $1.07 per basic and diluted weighted average share, compared to $10.6 million, or $2.37 per share, reported by Penseco for the twelve months ended December 31, 2012.  Peoples reported a net loss of $2.8 million, $0.50 per share, for the three months ended December 31, 2013, compared to net income of $2.7 million, or $0.61 per share, reported by Penseco for the three months ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20140212/PH63961LOGO )

The merger with Penseco had a significant impact on the results of operations.  The merger of equals between Peoples and Penseco is accounted for as a reverse acquisition of Peoples by Penseco.  As a result of the reverse merger, Peoples is the legal acquirer and Penseco is the accounting acquirer. In a reverse merger the historical financial statements are those of the accounting acquirer. Accordingly, the results for the year ended December 31, 2013, include the operating results of Penseco for the entire year and the operating results of Peoples since November 30, 2013.  All prior period information represents the results of Penseco and, consequently, comparisons may not be particularly meaningful.  The results for the twelve-month period ended December 31, 2013 also include pre-tax merger expenses of approximately $5.1 million.

INCOME STATEMENT REVIEW

Tax-equivalent net interest income for the twelve months ended December 31, 2013, increased $0.9 million, or 2.6%, to $35.4 million from $34.5 million in 2012.  A $0.3 million decrease in tax-equivalent total interest revenue was more than offset by a decrease in total interest expense of $1.2 million. Growth in average interest-earning assets of $56.7 million, offset partially by a 32 basis point decrease in the tax-equivalent yield on interest-earning assets, were the primary factors contributing to the increase in tax-equivalent net interest income. Specifically, the tax-equivalent yield on the loan portfolio decreased 37 basis points to 4.88% in 2013 from 5.25% in 2012 as the low interest rate environment caused loan repayments to be redeployed into loans originated at reduced rates. In addition, average loans increased $53.7 million or 8.4% comparing 2013 and 2012. The tax-equivalent yield on total investments was also impacted by the low interest rate environment decreasing 24 basis points to 3.17% in 2013 from 3.41% in 2012 as cash flows were reinvested into lower yielding bonds. Average total investments decreased $2.1 million or 1.1% in 2013 compared to 2012. Partially offsetting the decrease in yield and aiding the positive effects of the increase in interest-earning assets was a decrease of 22 basis points in the cost of funds, which was the primary factor leading to the decreased interest expense. The tax-equivalent net interest margin for the twelve months ended December 31, 2013 decreased 15 basis points to 3.90% from 4.05% in 2012. The net interest margin for the fourth quarter of 2013 decreased to 3.82%, compared to 3.88% for the prior quarter, and 3.97% for the corresponding quarter of 2012. Tax-equivalent adjustments were calculated using the prevailing federal statutory tax rate of 34.0%.

The provision for loan losses totaled $2.4 million in 2013, compared to $924.0 thousand in 2012. The provision for loan losses was $1.0 million for the fourth quarter of 2013 compared to $147.0 thousand for the corresponding period of 2012. The increase in the loan loss provision in the fourth quarter of 2013 was primarily due to the downgrade and placement of two large loans on nonaccrual status totaling approximately $7.0 million.

Noninterest income totaled $11.8 million in 2013, an increase of $321.0 thousand or 2.8% from $11.4 million in 2012. Increases in service charges, fees and commission and income from fiduciary and wealth management services more than offset decreases in revenues from merchant services and mortgage banking activities. The inclusion of Peoples noninterest income from the date of the merger also impacted 2013 results. For the fourth quarter of 2013, noninterest income increased $41.0 thousand to $2.9 million compared to the fourth quarter of 2012.

Noninterest expense for the twelve months ended December 31, 2013, increased $8.1 million or 27.8% to $37.2 million, from $29.1 million in 2012. The recognition of merger related expense of $5.1 million along with a net loss of $1.4 million to extinguish a post retirement life insurance liability were the primary contributors to the increase in noninterest expense in 2013. Also contributing to the increase was the inclusion of the Peoples operations from the date of the merger.  For the fourth quarter, noninterest expense totaled $15.8 million in 2013, an increase of $8.7 million from $7.2 million in 2012 due to the aforementioned expenses.

BALANCE SHEET REVIEW

Total assets, loans and deposits totaled $1.7 billion, $1.2 billion and $1.4 billion, respectively, at December 31, 2013. Although loans, net and deposits increased 6.7% and 2.7%, respectively, considering only historical Penseco information, the majority of the total 2013 increases over the 2012 year-end balances were the result of the merger. In accordance with the acquisition accounting for the merger, the historical assets and liabilities of Peoples have been recorded at their respective estimated fair values on the date of the merger.  The estimated fair values are subject to change for up to one year after the date of the merger if information unknown relative to closing date fair values becomes available.

Total investments were $317.0 million at December 31, 2013, including $299.7 million securities classified as available-for sale and $17.3 million classified as held-to-maturity. Total deposits consisted of $298.9 million in noninterest-bearing and $1.1 billion in interest-bearing deposits at December 31, 2013.

Stockholders' equity equaled $238.5 million or $31.58 per share at December 31, 2013, and $132.5 million or $29.65 per share at December 31, 2012. Dividends declared for the 2013 amounted to $1.23 per share, as adjusted for the merger exchange ratio of 1.3636.

Nonperforming assets equaled $16.8 million or 1.42% of loans, net and foreclosed assets at December 31, 2013. The allowance for loan losses equaled $8.7 million or 0.74% of loans, net, at December 31, 2013, compared to $7.0 million or 1.11% at year-end 2012. The decrease in the ratio of the allowance for loan losses as a percentage of loans, net, is primarily a function of acquisition accounting, whereby the historical loan portfolio of Peoples was recorded at its estimated fair value, including a $14.1 million discount to reflect credit risk, and the Peoples historical allowance for loan losses was eliminated. Loans charged-off, net of recoveries, for the twelve months ended December 31, 2013, equaled $660.0 thousand or 0.01% of average loans, compared to $685.0 thousand or 0.11% of average loans in 2012.

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. 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.

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)








Dec 31

Sept 30

June 30

March 31

Dec 31


2013

2013

2013

2013

2012







Key performance data:






Per share data:






Net income (loss)

$ (0.50)

$   0.56

$   0.64

$   0.56

$   0.61

Cash dividends declared

$   0.31

$   0.31

$   0.31

$   0.31

$   0.31

Book value

$ 31.58

$29.91

$29.75

$29.82

$29.65

Tangible book value  (1)

$ 22.24

$23.87

$23.68

$23.74

$23.55

Market value:






High

$39.50

$33.37

$30.43

$27.87

$27.87

Low

$31.53

$29.70

$27.21

$27.13

$26.97

Closing

$38.00

$33.00

$30.43

$27.54

$27.13

Market capitalization

$287,012

$147,828

$135,939

$123,028

$121,197

Common shares outstanding

7,552,944

4,479,624

4,467,261

4,467,261

4,467,261







Selected ratios:












Return on average stockholders' equity

-6.55%

7.39%

8.53%

7.67%

8.07%







Return on average assets

-0.93%

1.08%

1.23%

1.12%

1.16%







Stockholders' equity to total assets

14.13%

14.60%

14.45%

14.33%

14.43%







Efficiency ratio

124.88%

68.40%

63.29%

66.69%

66.46%







Nonperforming assets to loans, net, and foreclosed assets

1.42%

0.52%

0.66%

0.72%

0.54%







Net charge-offs to average loans, net

0.12%

0.13%

0.04%

0.09%

0.10%







Allowance for loan losses to loans, net

0.74%

1.20%

1.18%

1.12%

1.11%







Earning assets yield (FTE)

4.27%

4.33%

4.35%

4.55%

4.54%







Cost of funds

0.60%

0.61%

0.60%

0.67%

0.76%







Net interest spread (FTE)

3.67%

3.72%

3.75%

3.88%

3.78%







Net interest margin (FTE)

3.82%

3.88%

3.90%

4.05%

3.97%







(1) Refer to the reconciliation of Non-GAAP financial measures.

 

Peoples Financial Services Corp.

Consolidated Statements of Income

(In thousands, except per share data)




Twelve Months Ended

Dec 31

Dec 31


2013

2012

Interest income:



Interest and fees on loans:



Taxable

$31,102

$30,852

Tax-exempt

1,674

1,687

Interest and dividends on investment securities available-for-sale:



Taxable

1,793

2,282

Tax-exempt

2,625

2,660

Dividends

88

63

Interest on interest-bearing balances in other banks

86

47

Interest on federal funds sold

2


Total interest income

37,370

37,591




Interest expense:



Interest on deposits

2,876

3,424

Interest on short-term borrowings

34

38

Interest on long-term debt

1,259

1,900

Total interest expense

4,169

5,362

Net interest income

33,201

32,229

Provision for loan losses

2,361

924

Net interest income after provision for loan losses

30,840

31,305




Noninterest income:



Service charges, fees, commissions

5,199

4,293

Merchant services income

3,936

4,290

Commissions and fees on fiduciary activities

1,735

1,481

Wealth management income

505

264

Mortgage banking income

224

796

Net gains on sale of investment securities available-for-sale

163

317

Total noninterest income

11,762

11,441




Noninterest expense:



Salaries and employee benefits expense

16,378

14,121

Net occupancy and equipment expense

3,929

2,946

Merchant services expense

2,490

2,742

Amortization of intangible assets

326

267

Acquisition related expenses

5,057


Other expenses

9,000

9,023

Total noninterest expense

37,180

29,099

Income before income taxes

5,422

13,647

Income tax expense

353

3,058

Net income

$  5,069

$10,589




Other comprehensive income (loss):



Unrealized gains (losses) on investment securities available-for-sale

$(3,883)

$1,223

Reclassification adjustment for gains included in net income

(163)

(317)

Change in pension liability

4,027

(924)

Income tax benefit related to other comprehensive loss

(6)

(6)

Other comprehensive loss, net of income taxes

(13)

(12)

Comprehensive income

$  5,056

$10,577




Per share data:



Net income

$1.07

$2.37

Cash dividends declared

$1.23

$1.23

Average common shares outstanding

4,733,059

4,467,261




Peoples Financial Services Corp.

Consolidated Statements of Income

(In thousands, except per share data)







Three months ended

Dec 31

Sept 30

June 30

March 31

Dec 31


2013

2013

2013

2013

2012







Interest income:






Interest and fees on loans:






Taxable

$9,283

$7,213

$7,229

$7,377

$7,621

Tax-exempt

464

396

404

410

393

Interest and dividends on investment securities available-for-sale:






Taxable

554

386

414

439

484

Tax-exempt

698

658

646

623

633

Dividends

31

22

16

19

20

Interest on interest-bearing balances with banks

18

18

28

22

20

Interest on federal funds sold

2





Total interest income

11,050

8,693

8,737

8,890

9,171







Interest expense:






Interest on deposits

908

647

650

671

767

Interest on short-term borrowings

17

6

6

5

11

Interest on long-term debt

298

299

305

357

434

Total interest expense

1,223

952

961

1,033

1,212

Net interest income

9,827

7,741

7,776

7,857

7,959

Provision for loan losses

1,036

525

500

300

147

Net interest income after provision for loan losses

8,791

7,216

7,276

7,557

7,812







Noninterest income:






Service charges, fees, commissions

1,315

1,157

1,612

1,115

1,086

Merchant services income

813

1,174

918

1,031

835

Commissions and fees on fiduciary activities

454

487

403

391

369

Wealth management income

185

130

100

90

63

Mortgage banking income

80

46


98

260

Net gains on sale of investment securities available-for-sale

5

33

24

101

198

Total noninterest income

2,852

3,027

3,057

2,826

2,811







Noninterest expense:






Salaries and employee benefits expense

5,963

3,340

3,492

3,583

3,504

Net occupancy and equipment expense

1,742

685

701

801

716

Merchant services expense

543

740

582

625

549

Amortization of intangible assets

151

55

56

64

64

Acquisition related expenses

4,832

220

5



Other expenses

2,603

2,325

2,020

2,052

2,325

Total noninterest expense

15,834

7,365

6,856

7,125

7,158

Income (loss) before income taxes

(4,191)

2,878

3,477

3,258

3,465

Income tax expense (benefit)

(1,409)

392

633

737

757

Net income (loss)

$(2,782)

$2,486

$2,844

$2,521

$2,708







Other comprehensive income (loss):






Unrealized losses on investment securities available-for-sale

$    (643)

$    (20)

$(2,744)

$ (476)

$ (408)

Reclassification adjustment for gains included in net income

(5)

(33)

(24)

(101)

(198)

Change in pension liability

4,027




(924)

Income tax expense (benefit) related to other comprehensive income

1,149

(18)

(941)

(196)

(520)

Other comprehensive income (loss), net of income taxes

2,230

(35)

(1,827)

(381)

(1,010)

Comprehensive income (loss)

$   (552)

$2,451

$  1,017

$2,140

$1,698







Per share data:






Net income (loss)

$(0.50)

$0.56

$0.64

$0.56

$0.61

Cash dividends declared

$0.31

$0.31

$0.31

$0.31

$0.31

Average common shares outstanding

5,515,199

4,473,846

4,467,261

4,467,261

4,467,261

 


Peoples Financial Services Corp.

Details of Net Interest and Net Interest Margin

(In thousands, fully taxable equivalent basis)







Three months ended

Dec 31

Sept 30

June 30

March 31

Dec 31


2013

2013

2013

2013

2012







Net interest income:






Interest income






Loans, net:






Taxable

$  9,283

$  7,213

$  7,229

$  7,377

$  7,621

Tax-exempt

703

600

612

621

595

Total loans, net

9,986

7,813

7,841

7,998

8,216

Investments:






Taxable

585

408

430

458

504

Tax-exempt

1,058

997

979

944

959

Total investments

1,643

1,405

1,409

1,402

1,463

    Interest-bearing balances in other banks

18

18

28

22

20

    Federal funds sold

2





Total interest income

11,649

9,236

9,278

9,422

9,699

Interest expense:






Deposits

908

647

650

671

767

   Short-term borrowings

17

6

6

5

11

   Long-term debt

298

299

305

357

434

Total interest expense

1,223

952

961

1,033

1,212

Net interest income

$10,426

$  8,284

$  8,317

$  8,389

$  8,487







Loans, net:






Taxable

4.63%

4.60%

4.75%

4.99%

5.02%

Tax-exempt

7.28%

8.11%

7.91%

8.18%

7.95%

Total loans, net

4.75%

4.76%

4.91%

5.14%

5.16%

Investments:






Taxable

1.59%

1.51%

1.55%

1.61%

1.60%

Tax-exempt

5.58%

6.34%

6.30%

6.36%

6.32%

Total investments

2.95%

3.28%

3.26%

3.24%

3.13%

    Interest-bearing balances with banks

0.29%

0.28%

0.27%

0.26%

0.26%

    Federal funds sold

0.22%





Total earning assets

4.27%

4.33%

4.35%

4.55%

4.54%

Interest expense:






Deposits

0.48%

0.44%

0.44%

0.47%

0.53%

   Short-term borrowings

0.42%

0.26%

0.28%

0.29%

0.34%

   Long-term debt

3.34%

3.36%

3.40%

3.46%

3.60%

Total interest-bearing liabilities

0.60%

0.61%

0.60%

0.67%

0.76%

Net interest spread

3.67%

3.72%

3.75%

3.88%

3.78%

Net interest margin

3.82%

3.88%

3.90%

4.05%

3.97%

 

Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)








Dec 31

Sept 30

June 30

March 31

Dec 31

At period end

2013

2013

2013

2013

2012







Assets:






Cash and due from banks

$     30,004

$    14,306

$    14,199

$    10,321

$    15,581

Interest-bearing balances with banks

11,846

14,016

22,561

42,945

32,263

Federal funds sold

9,460





Investment securities:






Available-for-sale

299,715

148,921

152,511

157,047

161,391

Held-to-maturity

17,295

18,079

19,707

15,201

15,902

Total investments

317,010

167,000

172,218

172,248

177,293

Loans held for sale

1,757





Loans, net

1,176,617

655,946

642,353

636,283

623,530

Less: allowance for loan losses

8,651

7,871

7,552

7,110

6,950

Net loans

1,167,966

648,075

634,801

629,173

616,580

Premises and equipment, net

25,882

14,823

14,960

14,984

15,137

Accrued interest receivable

5,866

2,641

3,004

2,844

2,862

Goodwill

63,746

26,398

26,398

26,398

26,398

Other intangible assets, net

6,835

663

719

774

838

Other assets

47,988

29,575

30,809

30,101

31,090

Total assets

$1,688,360

$  917,497

$  919,669

$  929,788

$  918,042













Liabilities:






Deposits:






Noninterest-bearing

$  298,920

$  153,552

$  146,583

$  144,128

$  151,121

Interest-bearing

1,080,587

574,748

586,551

597,209

570,827

Total deposits

1,379,507

728,300

733,134

741,337

721,948

Short-term borrowings

22,052

10,144

8,188

8,011

8,019

Long-term debt

36,743

34,971

35,633

36,287

45,397

Accrued interest payable

723

502

466

544

716

Other liabilities

10,800

9,607

9,363

10,384

9,516

Total liabilities

1,449,825

783,524

786,784

796,563

785,596



















Stockholders' equity:






Common stock

15,614

33

33

33

33

Capital surplus

146,109

48,956

48,938

48,920

48,905

Retained earnings

83,356

87,517

86,412

84,943

83,798

Accumulated other comprehensive loss

(303)

(2,533)

(2,498)

(671)

(290)

Less: Treasury stock, at cost

6,241





Total stockholders' equity

238,535

133,973

132,885

133,225

132,446

      Total liabilities and stockholders' equity

$1,688,360

$  917,497

$  919,669

$  929,788

$  918,042

 

Reconciliation of  Non-GAAP financial measures:






Total stockholders' equity

238,535

133,973

132,885

133,225

132,446

Less: Goodwill

63,746

26,398

26,398

26,398

26,398

Less: Other intangible assets, net

6,835

663

719

774

838

Total tangible stockholders' equity

167,954

106,912

105,768

106,053

105,210




Peoples Financial Services Corp.

Consolidated Balance Sheets

(In thousands)








Dec 31

Sept 30

June 30

March 31

Dec 31

Average quarterly balances

2013

2013

2013

2013

2012







Assets:






Loans, net:






Taxable

$  795,142

$  621,461

$  610,100

$  600,032

$  602,514

Tax-exempt

38,318

29,347

31,052

30,790

29,698

Total loans, net

833,460

650,808

641,152

630,822

632,212

Investments:






Taxable

145,577

107,486

110,973

115,130

125,331

Tax-exempt

75,220

62,422

62,304

60,216

60,221

Total investments

220,797

169,908

173,277

175,346

185,552

    Interest-bearing balances with banks

24,986

25,629

41,604

34,414

30,551

    Federal funds sold

3,579





Total earning assets

1,082,822

846,345

856,033

840,582

848,315

Other assets

101,813

72,529

76,839

77,371

81,112

Total assets

$1,184,635

$  918,874

$  932,872

$  917,953

$  929,427







Liabilities and stockholders' equity:






Deposits:






Interest-bearing

$  756,868

$  579,189

$  594,471

$  576,464

$  575,110

Noninterest-bearing

193,586

150,486

145,757

144,993

145,000

Total deposits

950,454

729,675

740,228

721,457

720,110

Short-term borrowings

16,059

9,091

8,490

6,943

12,979

Long-term debt

35,450

35,331

35,985

41,835

47,770

Other liabilities

13,574

10,960

14,061

14,020

15,381

Total liabilities

1,015,537

785,057

798,764

784,255

796,240

Stockholders' equity

169,098

133,817

134,108

133,698

133,187

Total liabilities and stockholders' equity

$1,184,635

$  918,874

$  932,872

$  917,953

$  929,427

 

Peoples Financial Services Corp.

Asset Quality Data

(In thousands)








Dec 31

Sept 30

June 30

March 31

Dec 31

At quarter end

2013

2013

2013

2013

2012







Nonperforming assets:






Nonaccrual/restructured loans

$14,653

$2,688

$2,593

$2,943

$2,280

Accruing loans past due 90 days or more

1,455

636

702

939

457

Foreclosed assets

648

94

949

713

656

Total nonperforming assets

$16,756

$3,418

$4,244

$4,595

$3,393







Three months ended












Allowance for loan losses:






Beginning balance

$7,871

$7,552

$7,110

$6,950

$6,966

Charge-offs

301

216

102

222

231

Recoveries

45

10

44

82

68

Provision for loan losses

1,036

525

500

300

147

Ending balance

$8,651

$7,871

$7,552

$7,110

$6,950

 

 

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