PEOPLES FINANCIAL SERVICES CORP. ANNUAL REPORT
2022
IN MEMORIAM
Gerald "Gerry" R. Pennay
1935-2022
Chairman
2001-2005
Board
1985-2005
Director Emeritus
2005-2013
PEOPL E S FIN A NC I A L SER V IC E S CORP.
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Craig W. Best | Thomas P. Tulaney | William E. Aubrey II |
CHIEF EXECUTIVE OFFICER | PRESIDENT | COO | CHAIRMAN OF THE BOARD |
Dear Shareholders,
Every year presents its own challenges and 2022 was no different. The negative impact of the worldwide pandemic that began in early 2020 had virtually ended by the beginning of 2022. However, government stimulus provided to help businesses and consumers weather the pandemic was now overheating the economy and was driving inflation higher. Government stimulus, along with historically low interest rates, strained supply lines, the reopening of the economy and a tight labor market has caused the Consumer Price Index (CPI) to exceed 6%, well above the Federal Reserves targeted level of 2% or less.
To slow down our overheating economy and bring the CPI back below 2%, the Federal Reserve began increasing the Federal funds target rate in March of 2022. By year end, the Federal Reserve had increased the target rate from 0% to 4.25%. Never before had the Federal Reserve increased rates so much in such a short time period. With rates increasing at a historical pace, our net interest margin came under pressure.
Our employees were once again up to the challenge as the Company reported earnings for 2022 of $38.1 million or $5.28 per diluted share. This did represent a 12.5% decrease from our reported earnings in 2021 of $43.5 million or $6.02 per share. However, earnings in 2021 were significantly impacted by a $12.2 million pre-tax gain from the sale of our Visa Class B shares. Without the gain
38.1
$ | MILLION | on our Visa Class B | |
shares, earnings for | |||
2021 would have | |||
been $33.9 million | |||
EARNINGS FOR 2022 or $4.69 per share.
The improvement in our operating earnings for 2022 was due to our $11.1 million increase in net interest income and a lower loan loss provision of $2.2 million due to improved asset quality metrics.
Fueling our increase in net interest income was a $401 million or 17% increase in loans. Meanwhile, deposit growth was more of a challenge and grew by $83 million or 2.8% as competition for deposits increased when interest rates moved higher. Non-interest income decreased $ 3.8 million from $25.6 million to
$ | MILLION | $11.8 million and was | ||
the sale of the Visa | ||||
primarily due to the | ||||
$12.2 million gain on | ||||
INCREASE IN LOANS | Class B shares in 2021 | |||
401 |
and a $1.9 million loss on the sale of securities in the fourth quarter of 2022.
Non-interest expense increased $7.7 million or 13.9% as we continued to build out our new expansion markets and invested more dollars into our digital and mobile platforms.
Expansion Strategy Continues
Our strong loan growth in 2022 can be attributed to our strategic expansion into new growth markets. In May of 2021 we expanded into Piscataway, New Jersey and in July of 2021 we expanded into the Pittsburgh market area. We continued to build out our expansion markets by hiring an additional retail business development professional in Doylestown, Pennsylvania; two portfolio managers in Piscataway, New Jersey; and a retail business development professional in Warrendale, Pennsylvania. We also completed our new
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PEOPL E S FIN A NC I A L SER V IC E S COR P.
regional office in Doylestown and began construction of our Pittsburgh market headquarters with a completion date targeted for May of 2023.
Our Responsibility to Our Communities
Community banks, like Peoples Security Bank & Trust Company, have a responsibility to support and invest in the communities we operate in. We support economic development in our communities by providing commercial, small business, residential and consumer financing to businesses and individuals throughout our footprint. In 2022, we funded $594 million in
commercial credits; $32 million in small business loans; $54 | million in | ||
$594MILLION | mortgages | and $59 | |
equity and auto loans. | |||
million | in | home |
IN COMMERCIAL CREDITS We also support our
communities through contributions to non-profit organizations, educational institutions and charities. In 2022, Peoples Security Bank & Trust Company contributed $1.4 million to charities and non-profits in our communities. Peoples provided $1.1 million to fund 423 scholarships to students attending schools and educational organizations in our community.
What is ESG
In 2022, Peoples Security Bank & Trust Company established our first formal ESG statement which outlines how we meet our commitment to our communities. ESG stands for Environmental, Social and Governance. Communities apply these non-financial factors to determine if a company is operating as a strong corporate citizen. Investors are increasingly analyzing these non-financial factors as part of their analysis process to identify material risks and growth opportunities. ESG metrics are not commonly part of mandatory f inancial
reporting, though companies are increasingly making disclosures in their annual report or in a standard sustainability report. We have included our first formal ESG statement in this year's annual report. Numerous institutions, such as the Sustainability Accounting Standard Board (SASB), the Global Report Initiative (GRI), the Task Force on Climate-Related Financial Disclosures (TCFD) and S&P ESG are working to form standards and define materiality to facilitate the incorporation of these factors into the investment process.
In Conclusion
Sadly 2022 also saw us lose our former Chairman, Gerald "Gerry" Pennay. Gerry was Chairman of Peoples Neighborhood Bank from 2001 to 2005 and a board member since 1985. Our board and employees send our condolences to the Pennay family. We have included a memoriam in this year's annual report.
We also want to remind our investors of our dividend reinvestment program. Use your dividends to purchase additional shares of our Company without paying broker fees.
In closing, we would like to thank our employees for their hard work and dedication throughout the last year and thank our shareholders for their investment and support in our Company.
William E. Aubrey II | Craig W. Best | Thomas P. Tulaney |
Chairman of the Board | Chief Executive Officer | President & COO |
JOIN
US
VIRTUAL ANNUAL MEETING
Saturday, May 13, 2023 at 9:00am | www.virtualshareholdermeeting.com/PFIS2023
PEOPL E S FIN A NC I A L SER V IC E S COR P.
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FINANCIAL HIGHLIGHTS
2022
Peoples Financial Services Corp. | Consolidated Selected Financial Data
(Dollars in thousands, except per share data)
Year Ended December 31
Financial highlights:
Interest income Interest expense
Net interest income (Credit) provision for loan losses
Net interest income after the (credit) provision for loan losses Noninterest income
Noninterest expense Income before income taxes
Provision for income tax expense Net income
Condensed statements of financial position:
Investment securities
Net loans
Total assets
Total deposits
Total borrowings
Stockholders' equity
Total liabilities and stockholders' equity
Per share data:
Net income - basic
Net income - diluted
Cash dividends declared
Stockholders' equity
Cash dividends as a percentage of net income
Average common shares outstanding - basic
Average common shares outstanding - diluted
Selected ratios (based on average balances):
Net income as a percentage of total assets
Net income as a percentage of stockholders' equity Stockholders' equity as a percentage of total assets Net interest income as a percentage of earning assets Loans, net, as a percentage of deposits
Selected ratios (based on period end balances): Allowance for loan losses as a percentage of loans, net Nonperforming loans as a percentage of loans, net
2022 | 2021 | 2020 | 2019 | 2018 | |||||
$ | 111,334 | $ | 94,057 | $ | 94,125 | $ | 93,381 | $ | 84,661 |
15,585 | 9,422 | 14,324 | 17,868 | 13,322 | |||||
95,749 | 84,635 | 79,801 | 75,513 | 71,339 | |||||
(449) | 1,750 | 7,400 | 6,100 | 4,200 | |||||
96,198 | 82,885 | 72,401 | 69,413 | 67,139 | |||||
11,845 | 25,636 | 16,642 | 15,120 | 13,659 | |||||
62,677 | 55,004 | 54,868 | 55,642 | 52,487 | |||||
45,366 | 53,517 | 34,175 | 28,891 | 28,311 | |||||
7,276 | 9,998 | 4,821 | 3,155 | 3,391 | |||||
$ | 38,090 | $ | 43,519 | $ | 29,354 | $ | 25,736 | $ | 24,920 |
$ | 568,992 | $ | 588,674 | $ | 303,274 | $ | 338,557 | $ | 278,334 |
2,702,644 | 2,300,790 | 2,150,638 | 1,915,563 | 1,801,887 | |||||
3,553,515 | 3,369,483 | 2,883,802 | 2,475,327 | 2,288,993 | |||||
$ | 3,046,598 | $ | 2,963,397 | $ | 2,437,113 | $ | 1,971,489 | $ | 1,875,022 |
148,485 | 35,711 | 97,769 | 184,883 | 124,406 | |||||
315,350 | 340,126 | 316,877 | 299,010 | 278,614 | |||||
$ | 3,553,515 | $ | 3,369,483 | $ | 2,883,802 | $ | 2,475,327 | $ | 2,288,993 |
$ | 5.31 | $ | 6.05 | $ | 4.02 | $ | 3.48 | $ | 3.37 |
5.28 | 6.02 | 4.00 | 3.47 | 3.37 | |||||
$ | 1.58 | $ | 1.50 | $ | 1.44 | $ | 1.37 | $ | 1.31 |
44.06 | 47.44 | 43.92 | 40.47 | 37.66 | |||||
29.73% | 24.93% | 35.83% | 39.37% | 38.87% | |||||
7,168,092 | 7,196,160 | 7,304,956 | 7,395,429 | 7,397,797 | |||||
7,211,643 | 7,235,303 | 7,337,843 | 7,412,369 | 7,402,900 | |||||
1.12% | 1.41% | 1.09% | 1.10% | 1.12% | |||||
11.87 | 13.34 | 9.48 | 8.87 | 9.21 | |||||
9.40 | 10.60 | 11.48 | 12.37 | 12.14 | |||||
3.02 | 2.99 | 3.25 | 3.58 | 3.59 | |||||
89.61% | 78.60% | 95.70% | 96.83% | 99.55% | |||||
1.01 | 1.22 | 1.26 | 1.17 | 1.17 | |||||
0.15% | 0.19% | 0.45% | 0.52% | 0.53% |
Note: Average balances were calculated using average daily balances. Average balances for loans include nonaccrual loans. Tax-equivalent adjustments were calculated using the prevailing statutory tax rate of 21.0 percent.
45,000 | |||||
40,000 | |||||
35,000 | |||||
30,000 | |||||
25,000 | |||||
20,000 | |||||
0 | 2022 | 2021 | 2020 | 2019 | 2018 |
NET INCOME
100,000 | |||||
95,000 | |||||
90,000 | |||||
85,000 | |||||
80,000 | |||||
75,000 | |||||
70,000 | |||||
0 | 2022 | 2021 | 2020 | 2019 | 2018 |
NET INTEREST INCOME
2,900,000 | |||||
2,700,000 | |||||
2,500,000 | |||||
2,300,000 | |||||
2,100,000 | |||||
1,900,000 | |||||
1,700,000 | |||||
0 | 2022 | 2021 | 2020 | 2019 | 2018 |
NET LOANS
3,500,000 | |||||
3,000,000 | |||||
2,500,000 | |||||
2,000,000 | |||||
1,500,000 | |||||
1,000,000 | |||||
0 | 2022 | 2021 | 2020 | 2019 | 2018 |
TOTAL DEPOSIT
4,000,000 | |||||
3,500,000 | |||||
3,000,000 | |||||
2,500,000 | |||||
2,000,000 | |||||
0 | 2022 | 2021 | 2020 | 2019 | 2018 |
TOTAL ASSETS
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PEOPL E S FIN A NC I A L SER V IC E S COR P.
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Peoples Financial Services Corp. published this content on 03 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 April 2023 13:13:11 UTC.
