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PF

PEOPLES FINANCIAL SERVICES CORP. (PFIS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a return to profitability: net income of $6.1M ($0.61 diluted EPS) versus a Q3 net loss of $4.3M, driven by sharply lower provision for credit losses and reduced acquisition-related costs, partially offset by modestly lower net interest income .
  • Net interest margin (FTE) held essentially flat at 3.25% (down 1 bp q/q), as the September and Q4 Fed cuts lowered asset yields; deposit pricing actions reduced cost of funds by 16 bps q/q to 2.88% .
  • Integration of the FNCB merger progressed: core system integration completed; branch network realigned; ACL to loans increased to 1.05% (from 0.97% in Q3) amid higher net charge-offs in equipment finance and CRE .
  • Liquidity remained robust with $135.9M cash/cash equivalents and $2.4B contingent sources; insured deposits ~68.7%, with insured+collateralized at ~79.7% .
  • Street consensus estimates via S&P Global were unavailable; therefore, beat/miss vs estimates cannot be assessed (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • “Completed our core operating system integration to achieve highest efficiency” and “Realigned our branch network to achieve maximum coverage with minimum redundancy,” underpinning merger execution and operating discipline .
  • Cost of funds decreased 16 bps q/q to 2.88%, and total deposit cost fell 13 bps to 2.20%, reflecting pricing actions amid rate cuts; noninterest expense declined q/q as acquisition-related costs fell .
  • Liquidity profile strong: $135.9M cash/cash equivalents and $2.4B contingent liquidity; insured deposits ~68.7% and insured+collateralized ~79.7% provide deposit stability .

What Went Wrong

  • Asset yields declined 12 bps q/q (to 5.51%) following Fed rate cuts; net interest income fell $0.7M q/q to $38.5M; core PPNR declined versus Q3 .
  • Provision for credit losses remained elevated at $3.4M in Q4 (vs $0.2M excluding the non-PCD day-one in Q3), driven by higher net charge-offs, notably in equipment finance and CRE portfolios .
  • Nonperforming assets increased to $23.0M (0.58% of loans+foreclosed assets) vs. $21.5M in Q3 and $4.9M in Q4 2023, with a portion from acquired FNCB loans (including PCD) .

Financial Results

MetricQ4 2023Q1 2024Q2 2024Q3 2024Q4 2024
Diluted EPS ($)$0.51 $0.49 $0.46 ($0.43) $0.61
Net Interest Income ($M)$20.269 $19.318 $18.916 $39.244 $38.511
Noninterest Income ($M)$3.215 $3.402 $3.541 $5.722 $5.671
Provision for Credit Losses ($M)$1.669 $0.708 $0.596 $14.458 $3.369
Net Interest Margin (FTE, %)2.30% 2.29% 2.29% 3.26% 3.25%
Cost of Funds (%)2.86% 2.96% 3.01% 3.04% 2.88%

Loan portfolio breakdown (period-end):

Loan Category ($M)Sept 30, 2024Dec 31, 2024
Commercial (Taxable)$616.369 $556.630
Commercial (Non-taxable)$273.710 $279.390
CRE$2,309.588 $2,294.113
Residential$550.590 $551.851
Consumer (Indirect Auto)$130.380 $119.704
Consumer Other$15.580 $12.697
Equipment Financing$173.466 $179.120
Total Loans$4,069.683 $3,993.505

Key KPIs and balance sheet:

KPIQ2 2024Q3 2024Q4 2024
Total Assets ($B)$3.616 $5.360 $5.092
Total Deposits ($B)$3.065 $4.638 $4.408
Cash & Equivalents ($M)$50.0 $285.5 $135.9
NPA / Loans+FA (%)0.25% 0.53% 0.58%
ACL / Loans (%)0.81% 0.97% 1.05%
ROA (%)0.37% (0.33)% 0.47%
ROE (%)3.87% (3.58)% 5.07%
Insured Deposits (%)75.7% 66.2% 68.7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ4 2024$0.41 (Q4 2023 dividend) $0.6175 Raised (+50.6%)
Formal revenue/margin/tax guidanceQ4/FY 2024Not providedNot providedMaintained (no formal guidance)

Earnings Call Themes & Trends

Note: No Q4 2024 earnings call transcript was available; themes synthesized from press releases.

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Interest rate environmentQ2: NIM pressure from higher funding costs; asset yields modestly up . Q3: NIM up to 3.26% aided by purchase accounting accretion; strong earning asset growth post-merger .NIM stable at 3.25%; asset yields down 12 bps post Fed cuts; deposit costs reduced .Neutral to slight headwind on yields; improving funding costs .
Merger integration (FNCB)Q2: Merger announced (effective 7/1); expected scale benefits . Q3: Integration underway; accretion benefits; higher expenses .Core system integration complete; branch realignment; lower M&A costs q/q .Improving execution, expense normalization .
Liquidity & depositsQ2: $1.6B contingent liquidity; insured deposits 75.7% . Q3: $2.2B available; insured 66.2%; callable brokered CDs .$2.4B contingent liquidity; insured 68.7%; called $100.7M high-cost brokered CDs .Strong, actively managed funding mix .
Asset qualityQ2: NPA 0.20%; ACL 0.81% . Q3: NPA 0.53%; ACL 0.97%; non-PCD day-one provision .NPA 0.58%; ACL 1.05%; higher charge-offs in equipment finance/CRE .Slight deterioration from mix/merger, but provision responsive .
Operating efficiencyQ2: Efficiency ratio 74.49% . Q3: Improved to 53.14% with scale and accretion .63.03% in Q4 (non-GAAP definition) .Normalizing post-merger; still above ideal .

Management Commentary

  • “Completed our core operating system integration to achieve highest efficiency.”
  • “Realigned our branch network to achieve maximum coverage with minimum redundancy.”
  • “Allowance for credit losses to loans, net increased to 1.05% at December 31, 2024…” reflecting higher net charge-offs in equipment financing and CRE .
  • “The cost of total deposits for the three months ended December 31, 2024 was 2.20%, a decrease of 13 basis points from 2.33% for the three months ended September 30, 2024.”
  • Liquidity context: “Additional contingent sources of available liquidity totaled $2.4 billion… cash and cash equivalents balance and available liquidity represented 50.2% of total assets and 58.0% of total deposits.”

Q&A Highlights

  • No Q4 2024 earnings call transcript or Q&A session was available; no analyst Q&A highlights to report [Search attempted; none found].

Estimates Context

  • Wall Street consensus EPS/revenue estimates (S&P Global/Capital IQ) were unavailable due to data access limits; as a result, comparisons to consensus (beats/misses) cannot be provided at this time. Estimates unavailable via S&P Global.

Key Takeaways for Investors

  • Profitability rebound: Q4 EPS of $0.61 and positive ROA/ROE reflect normalization after Q3’s merger-related provisioning spike; near-term cadence depends on asset yields vs deposit repricing in a lower-rate backdrop .
  • Funding cost tailwinds emerging: deposit and overall funding costs declined sequentially; continued repricing and callable brokered CD actions should support NIM resiliency despite rate cuts .
  • Integration milestones achieved: core conversion and branch optimization done; expect opex normalization as M&A costs fade, though efficiency ratio remains a focus area to improve from 63% .
  • Credit watch points: elevated Q4 provision and higher net charge-offs in equipment finance/CRE warrant monitoring; stronger ACL coverage (1.05%) provides cushion .
  • Balance sheet scale/LIQ: assets ~$5.1B, deposits ~$4.4B, robust contingent liquidity ($2.4B) and high insured/ collateralized deposit coverage mitigate funding risk .
  • Dividend signal: Q4 2024 dividend raised 50.6% y/y to $0.6175/share—credible capital return signal post-merger; sustainability hinges on earnings trajectory and credit costs .
  • Near-term trading lens: absent Street estimates, catalysts center on NIM trajectory, opex normalization, and credit trends; completion of integration and liquidity strength are positives for sentiment .