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What changed in PEOPLES FINANCIAL SERVICES CORP.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PEOPLES FINANCIAL SERVICES CORP.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+549 added−607 removedSource: 10-K (2025-03-28) vs 10-K (2024-03-15)

Top changes in PEOPLES FINANCIAL SERVICES CORP.'s 2024 10-K

549 paragraphs added · 607 removed · 401 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

109 edited+33 added−30 removed126 unchanged
Biggest changeIf the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired. ​ ​ -8- Table of Contents The following table provides the various loan sectors in our commercial real estate portfolio at December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ (Amounts in thousands, except percents) ​ ​ ​ ​ ​ ​ ​ Commercial Real Estate Loans by Segment ​ Outstanding ​ Outstanding Multifamily (5+ Units) ​ $ 433,239 ​ ​ 23.3 % Office ​ ​ 221,593 ​ ​ 11.9 ​ Industrial / Warehouse ​ ​ 181,185 ​ ​ 9.7 ​ Retail – Unanchored ​ ​ 172,131 ​ ​ 9.2 ​ 1-4 Family Residential – Rental Property ​ ​ 143,045 ​ ​ 7.7 ​ Retail – Anchored ​ ​ 130,836 ​ ​ 7.0 ​ Medical Office Building ​ ​ 73,429 ​ ​ 3.9 ​ Other ​ ​ 66,157 ​ ​ 3.6 ​ Gas Station / Convenience Store ​ ​ 64,695 ​ ​ 3.5 ​ Unassigned ​ ​ 45,669 ​ ​ 2.5 ​ School / Campus Real Estate ​ ​ 44,111 ​ ​ 2.4 ​ Hospitality (Hotel / Motel) ​ ​ 37,853 ​ ​ 2.0 ​ Healthcare ​ ​ 35,554 ​ ​ 1.9 ​ Student Housing ​ ​ 35,665 ​ ​ 1.9 ​ Restaurant / Bar ​ ​ 29,213 ​ ​ 1.6 ​ Recreational ​ ​ 23,808 ​ ​ 1.3 ​ Land – Unimproved ​ ​ 21,494 ​ ​ 1.2 ​ Self-storage / Mini-warehouse ​ ​ 24,646 ​ ​ 1.3 ​ Land Acquisition & Development - Residential ​ ​ 22,767 ​ ​ 1.2 ​ Land Acquisition & Development - Commercial ​ ​ 15,349 ​ ​ 0.8 ​ Farmland ​ ​ 11,600 ​ ​ 0.6 ​ Dealership ​ ​ 11,146 ​ ​ 0.6 ​ 1-4 Family Residential Construction (Owner-Occupied) ​ ​ 10,276 ​ ​ 0.6 ​ Mobile Home Park ​ ​ 5,731 ​ ​ 0.3 ​ 1-4 Family Residential (For Sale Construction) ​ ​ 1,515 ​ ​ 0.1 ​ Parking Lot ​ ​ 411 ​ ​ 0.0 ​ Grand Total ​ $ 1,863,118 ​ ​ 100.0 % Commercial Loans .
Biggest changeIf the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired. ​ -7- Table of Contents The following table provides the various loan sectors in our commercial real estate portfolio at December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ (Amounts in thousands, except percents) ​ ​ ​ ​ ​ ​ ​ Commercial Real Estate Loans by Segment ​ Outstanding ​ Outstanding Multifamily (5+ Units) ​ $ 505,832 ​ ​ 22.3 % Office ​ ​ 276,400 ​ ​ 12.0 ​ Industrial / Warehouse ​ ​ 252,839 ​ ​ 11.0 ​ Retail – Unanchored ​ ​ 232,650 ​ ​ 10.1 ​ 1-4 Family Residential – Rental Property ​ ​ 166,147 ​ ​ 7.2 ​ Retail – Anchored ​ ​ 130,098 ​ ​ 5.7 ​ Unassigned ​ ​ 118,069 ​ ​ 5.1 ​ Other ​ ​ 96,504 ​ ​ 4.2 ​ Medical Office Building ​ ​ 67,684 ​ ​ 3.0 ​ Hospitality (Hotel / Motel) ​ ​ 66,786 ​ ​ 2.9 ​ Recreational ​ ​ 63,227 ​ ​ 2.8 ​ Gas Station / Convenience Store ​ ​ 48,456 ​ ​ 2.1 ​ Restaurant / Bar ​ ​ 42,284 ​ ​ 1.8 ​ Healthcare ​ ​ 38,343 ​ ​ 1.7 ​ Land – Unimproved ​ ​ 35,533 ​ ​ 1.5 ​ School / Campus Real Estate ​ ​ 30,053 ​ ​ 1.3 ​ Self-storage / Mini-warehouse ​ ​ 26,339 ​ ​ 1.1 ​ Student Housing ​ ​ 23,230 ​ ​ 1.0 ​ All other commercial real estate asset classes ​ ​ 73,639 ​ ​ 3.2 ​ Grand Total ​ $ 2,294,113 ​ ​ 100.0 % Commercial Loans .
Our retail lending products include the following types of loans, among others: residential real estate; automobiles; manufactured housing; personal and home equity. Our commercial lending products include the following types of loans, among others: commercial real estate; working capital; equipment and other commercial needs; construction; Small Business Administration (“SBA”); and agricultural and mineral rights.
Our commercial lending products include the following types of loans, among others: commercial real estate; working capital; equipment and other commercial needs; construction; Small Business Administration (“SBA”); and agricultural and mineral rights. Our retail lending products include the following types of loans, among others: residential real estate; automobiles; manufactured housing; personal and home equity.
In addition, future changes in regulations or practices could further reduce the amount of capital recognized for purposes of capital adequacy. Such a change could affect the ability of Peoples Bank to grow and could restrict the amount of profits, if any, available for the payment of dividends to Peoples.
In addition, future changes in regulations or practices could further reduce the amount of capital recognized for purposes of capital adequacy. Such a change could affect the ability of the Bank to grow and could restrict the amount of profits, if any, available for the payment of dividends to Peoples.
Inflation Reduction Act On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law. The IRA introduces a 15% corporate alternative minimum tax (“AMT”) based primarily on consolidated adjusted GAAP net income with a minimum threshold of $1 billion. The corporate AMT provisions are effective for taxable years beginning after December 31, 2022.
Inflation Reduction Act On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law. The IRA introduces a 15 percent corporate alternative minimum tax (“AMT”) based primarily on consolidated adjusted GAAP net income with a minimum threshold of $1 billion. The corporate AMT provisions are effective for taxable years beginning after December 31, 2022.
Other laws tie the maximum amount that may be loaned to any one customer and its related interests to our capital levels. Other laws restrict or prohibit transactions between Peoples Bank and its affiliates. Limitations on Dividends and Other Payments Our ability to pay dividends is largely dependent upon the receipt of dividends from Peoples Bank.
Other laws tie the maximum amount that may be loaned to any one customer and its related interests to our capital levels. Other laws restrict or prohibit transactions between the Bank and its affiliates. Limitations on Dividends and Other Payments Our ability to pay dividends is largely dependent upon the receipt of dividends from the Bank.
In addition, all federal and state banking regulators continue to increase focus on cybersecurity programs and risks as part of regular supervisory exams. On November 18, 2021, the federal banking regulators issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system.
In addition, all federal and state banking regulators continue to increase focus on cybersecurity programs and risks as part of regular supervisory exams. On November 18, 2021, the federal banking regulators issued a final rule to improve the sharing of information about cybersecurity incidents that may affect the U.S. banking system.
Issuers with less than $10 billion in assets, like Peoples Bank, are exempt from debit card interchange fee standards. Consumer Financial Protection Bureau. Dodd-Frank created the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws.
Issuers with less than $10 billion in assets, like the Bank, are exempt from debit card interchange fee standards. Consumer Financial Protection Bureau. Dodd-Frank created the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws.
In addition, to be a qualified mortgage, the points and fees paid by a consumer cannot exceed 3% of the total loan amount. Loans which meet these criteria will be considered qualified mortgages, and as a result generally protect lenders from fines or litigation in the event of foreclosure.
In addition, to be a qualified mortgage, the points and fees paid by a consumer cannot exceed 3 percent of the total loan amount. Loans which meet these criteria will be considered qualified mortgages, and as a result generally protect lenders from fines or litigation in the event of foreclosure.
We generate interest income from our loan and securities portfolios. Other income is generated primarily from merchant transaction fees, trust and wealth management fees, fees generated from commercial loan interest rate swap transactions and service charges on deposit accounts. Our primary costs are interest paid on deposits and borrowings and general operating expenses.
We generate interest income from our loan and securities portfolios. Other income is generated primarily from merchant transaction fees and interchange income, trust and wealth management fees, fees generated from commercial loan interest rate swap transactions and service charges on deposit accounts. Our primary costs are interest paid on deposits and borrowings and general operating expenses.
As the primary federal regulator of Peoples Bank, the FDIC, in conjunction with the Department of Banking, is responsible for its supervision. When dealing with capital requirements, those regulatory bodies have the flexibility to impose supervisory agreements on institutions that fail to comply with regulatory requirements.
As the primary federal regulator of the Bank, the FDIC, in conjunction with the Department of Banking, is responsible for its supervision. When dealing with capital requirements, those regulatory bodies have the flexibility to impose supervisory agreements on institutions that fail to comply with regulatory requirements.
The regulators measure risk-adjusted assets, which include off-balance-sheet items, against both total qualifying capital, Common Equity Tier 1 capital, and Tier 1 capital. -19- Table of Contents ● “Common Equity Tier 1 Capital” includes common equity and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions, and retained earnings. ● “Tier 1,” or core capital, includes common equity, non-cumulative preferred stock and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions. ● “Tier 2,” or supplementary capital, includes, among other things, limited life preferred stock, hybrid capital instruments, mandatory convertible securities, qualifying subordinated debt, and the allowance for credit losses, subject to certain limitations and less restricted deductions.
The regulators measure risk-adjusted assets, which include off-balance-sheet items, against both total qualifying capital, Common Equity Tier 1 capital, and Tier 1 capital. -18- Table of Contents ● “Common Equity Tier 1 Capital” includes common equity and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions, and retained earnings. ● “Tier 1,” or core capital, includes common equity, non-cumulative preferred stock and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions. ● “Tier 2,” or supplementary capital, includes, among other things, limited life preferred stock, hybrid capital instruments, mandatory convertible securities, qualifying subordinated debt, and the allowance for credit losses, subject to certain limitations and less restricted deductions.
Both federal and state laws impose restrictions on our ability and the ability of Peoples Bank to pay dividends. Under such restrictions, Peoples Bank may only declare and pay dividends out of accumulated net earnings, including accumulated net earnings acquired as a result of a merger within seven years.
Both federal and state laws impose restrictions on our ability and the ability of the Bank to pay dividends. Under such restrictions, the Bank may only declare and pay dividends out of accumulated net earnings, including accumulated net earnings acquired as a result of a merger within seven years.
To further supplement our borrowing capacity, we also maintain a borrower-in-custody of collateral arrangement at the Federal Reserve that enables us to pledge certain loans, not being used as collateral at the FHLB-Pgh, as collateral for borrowings at the Federal Reserve.
To further supplement our borrowing capacity, we also maintain a borrower-in-custody of collateral arrangement at the Federal Reserve that enables us to pledge certain loans, not being used as collateral at the FHLB, as collateral for borrowings at the Federal Reserve.
Mortgage servicing assets (“MSAs”) and certain deferred tax assets (“DTAs”) are subject to stricter limitations than those applicable to other assets under the capital rules. -20- Table of Contents Failure to meet applicable capital guidelines could subject a banking organization to a variety of enforcement actions including: ​ ● limitations on its ability to pay dividends; or ● the issuance by the applicable regulatory authority of a capital directive to increase capital, and in the case of depository institutions, the termination of deposit insurance by the FDIC, as well as to the measures described under FDICIA as applicable to undercapitalized institutions.
Mortgage servicing assets (“MSAs”) and certain deferred tax assets (“DTAs”) are subject to stricter limitations than those applicable to other assets under the capital rules. -19- Table of Contents Failure to meet applicable capital guidelines could subject a banking organization to a variety of enforcement actions including: ​ ● limitations on its ability to pay dividends; or ● the issuance by the applicable regulatory authority of a capital directive to increase capital, and in the case of depository institutions, the termination of deposit insurance by the FDIC, as well as to the measures described under FDICIA as applicable to undercapitalized institutions.
In addition to the FHLB, we have borrowing facilities with the Federal Reserve Bank and correspondent banks. Peoples Bank is a member of the FHLB of Pittsburgh. The FHLB functions as a central bank providing credit for Peoples Bank and other member financial institutions.
In addition to the FHLB, we have borrowing facilities with the Federal Reserve Bank and correspondent banks. The Bank is a member of the FHLB of Pittsburgh. The FHLB functions as a central bank providing credit for the Bank and other member financial institutions.
To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual consolidated financial statements on commercial real estate loans and rent rolls where applicable.
To monitor cash flows on income properties, we generally require borrowers and loan guarantors, if any, to provide annual consolidated financial statements on commercial real estate loans and rent rolls where applicable.
Further, Peoples Bank may not declare or pay any dividends unless Peoples Bank’s surplus would not be reduced by the payment of the dividend below 100 percent of our capital stock.
Further, the Bank may not declare or pay any dividends unless the Bank’s surplus would not be reduced by the payment of the dividend below 100 percent of our capital stock.
In the ordinary course of our business, our operations and earnings are not materially affected by seasonal changes or by compliance with federal, state or local environmental laws or regulations. -6- Table of Contents Lending Activities We provide a full range of retail and commercial lending products designed to meet the borrowing needs of consumers and small- and medium-sized businesses in our market areas.
In the ordinary course of our business, our operations and earnings are not materially affected by seasonal changes or by compliance with federal, state or local environmental laws or regulations. -5- Table of Contents Lending Activities We provide a full range of commercial and retail lending products designed to meet the borrowing needs of small- and medium-sized businesses and consumers in our market areas.
We offer automobile loans with loan-to-value ratios of up to 100 percent or more of the purchase price of the vehicle depending upon the credit history of the borrower and other factors. -10- Table of Contents Consumer loans secured by savings accounts and certificates of deposit held by us are offered based upon the deposit rates plus a margin with terms up to five years.
We offer automobile loans with loan-to-value ratios of up to 100 percent or more of the purchase price of the vehicle depending upon the credit history of the borrower and other factors. -9- Table of Contents Consumer loans secured by savings accounts and certificates of deposit held by us are offered based upon the deposit rates plus a margin with terms up to five years.
These regulations and restrictions may limit our ability to obtain funds from Peoples Bank for our cash needs, including funds for the payment of dividends, interest and operating expenses.
These regulations and restrictions may limit our ability to obtain funds from the Bank for our cash needs, including funds for the payment of dividends, interest and operating expenses.
Before establishing new branch offices, Peoples Bank must meet certain minimum capital stock and surplus requirements and must obtain state approval from the Department of Banking.
Before establishing new branch offices, the Bank must meet certain minimum capital stock and surplus requirements and must obtain state approval from the Department of Banking.
The CRA regulations establish performance-based standards for use in examining for compliance. Peoples Bank had its last CRA compliance examination in 2023 and received a “satisfactory” rating.
The CRA regulations establish performance-based standards for use in examining for compliance. The Bank had its last CRA compliance examination in 2023 and received a “satisfactory” rating.
We originate a variety of commercial real estate loans generally for terms up to 25 years and payments based on an amortization schedule of up to 25 years. These loans are typically based on either the Federal Home Loan Bank borrowing rate or our own pricing criteria and adjust every three, five, seven or ten years.
We originate a variety of commercial real estate loans generally for terms up to 25 years and repayments based on an amortization schedule of up to 25 years. These loans are typically based on either the Federal Home Loan Bank borrowing rate or our own pricing criteria and adjust every three, five, seven or ten years.
Assessments for institutions such as Peoples Bank (assets of less than $10 billion), are based on initial assessment rates that are adjusted by combining supervisory ratings with financial ratios to determine a total assessment rate. For most institutions, assessment rates are based on weighted-average supervisory ratings of banking operation components and six financial ratios.
Assessments for institutions such as the Bank (assets of less than $10 billion), are based on initial assessment rates that are adjusted by combining supervisory ratings with financial ratios to determine a total assessment rate. For most institutions, assessment rates are based on weighted-average supervisory ratings of banking operation components and six financial ratios.
When making commercial business loans, we consider the consolidated financial statements of the borrower and any guarantors, the borrower’s payment history of both corporate and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business and guarantor, the viability of the industry in which the customer operates and the value of the collateral.
When making commercial business loans, we consider the financial statements of the borrower and any guarantors, the borrower’s payment history of both business and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business and guarantor, the viability of the industry in which the customer operates and the value of the collateral.
As a member, Peoples Bank is required to own capital stock in the FHLB of Pittsburgh and is authorized to apply for borrowings on the security of certain of its real estate loans, provided certain standards related to creditworthiness have been met.
As a member, the Bank is required to own capital stock in the FHLB and is authorized to apply for borrowings on the security of certain of its real estate loans, provided certain standards related to creditworthiness have been met.
Pennsylvania law requires that each year Peoples Bank set aside as surplus a sum equal to not less than 10 percent of its net earnings if surplus does not equal at least 100 percent of our capital stock.
Pennsylvania law requires that each year the Bank set aside as surplus a sum equal to not less than 10 percent of its net earnings if surplus does not equal at least 100 percent of our capital stock.
The rule requires a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a cyber-incident has occurred.
The rule requires a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a cybersecurity incident has occurred.
Other lending products include one-to-four family residential mortgages, home equity loans, consumer and auto loans. We fund our loans, primarily, by offering deposits to individuals; commercial business customers; municipalities, school districts and other non-profit organizations. Our deposit products include certificates of deposit, money market accounts, savings accounts and various demand deposit accounts.
Other lending products include retail products such as one-to-four family residential mortgages, home equity loans, consumer and auto loans. We fund our loans, primarily, by offering deposits to individuals; commercial business customers; municipalities, school districts and other non-profit organizations. Our deposit products include certificates of deposit, money market accounts, savings accounts and various demand deposit accounts.
The maximum amount that we may lend to one borrower and the borrower’s related entities generally is limited, by regulation, to 15 percent of the capital accounts of Peoples Bank. Capital accounts include the -11- Table of Contents aggregate of capital, surplus, undivided profits, capital securities and reserve for credit losses.
The maximum amount that we may lend to one borrower and the borrower’s related entities generally is limited, by regulation, to 15 percent of the capital accounts of the Bank. Capital accounts include the -10- Table of Contents aggregate of capital, surplus, undivided profits, capital securities and reserve for credit losses.
In reaching a decision on whether to make a commercial real estate loan, we -7- Table of Contents consider and review a cash flow analysis of the borrower and guarantor, when applicable, and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property.
In reaching a decision on whether to make a commercial real estate loan, we consider and review a cash flow analysis of the borrower and guarantor, when applicable, and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property.
Additionally, Dodd-Frank directed the federal banking regulators to promulgate rules prohibiting excessive compensation paid to executives of depository institutions and their holding companies with assets of $1.0 billion or more, regardless of whether the company is publicly traded.
Additionally, Dodd-Frank directed the -21- Table of Contents federal banking regulators to promulgate rules prohibiting excessive compensation paid to executives of depository institutions and their holding companies with assets of $1.0 billion or more, regardless of whether the company is publicly traded.
The first alternative requires the mortgage lender to consider, at a minimum, the following eight underwriting factors when making the credit decision: ● current or reasonably expected income or assets; ● current employment status; ● the monthly payment on the covered transaction; ● the monthly payment on any simultaneous loan; ● the monthly payment for mortgage-related obligations; ● current debt obligations, alimony, and child support; ● the monthly debt-to-income ratio or residual income; and ● credit history.
The first alternative requires the mortgage lender to consider, at a minimum, the following eight underwriting factors when making the credit decision: ● current or reasonably expected income or assets; -22- Table of Contents ● current employment status; ● the monthly payment on the covered transaction; ● the monthly payment on any simultaneous loan; ● the monthly payment for mortgage-related obligations; ● current debt obligations, alimony, and child support; ● the monthly debt-to-income ratio or residual income; and ● credit history.
Through this relationship, our clients have access to a wide array of financial and wealth management strategies, including services such as professional money management, -14- Table of Contents retirement and education planning, and investment products including stocks, bonds, mutual funds, annuities and insurance products.
Through this relationship, our clients have access to a wide array of financial and wealth management strategies, including services such as professional money management, retirement and education planning, and investment products including stocks, bonds, mutual funds, annuities and insurance products.
For additional information about our lending activities see Item 7 – Management’s Discussion and Analysis of Financial Condition, Management’s Discussion and Analysis 2023 versus 2022, Loan Portfolio, in this Annual Report on Form 10-K. Commercial Real Estate Loans . Commercial loans secured by real estate with adjustable and fixed rates, comprise 65.4 percent of our loan portfolio.
For additional information about our lending activities see Item 7 – Management’s Discussion and Analysis of Financial Condition, Management’s Discussion and Analysis 2024 versus 2023, Loan Portfolio, in this Annual Report on Form 10-K. Commercial Real Estate Loans . Commercial loans secured by real estate with adjustable and fixed rates comprise 57.4 percent of our loan portfolio.
An environmental report is obtained when the possibility exists that hazardous materials may exist or have existed on the site, or the site may be or have been impacted by adjoining properties that handled hazardous materials. Our multi-family commercial real estate loans are secured by projects that include five or more nonowner-occupied residential units.
An environmental report is obtained when there is a known possibility that hazardous materials may exist or have existed on the site, or the site may be or have been impacted by adjoining properties that handled hazardous materials. Our multi-family commercial real estate loans are secured by projects that include five or more nonowner-occupied residential units.
As of December 31, 2023, Peoples Bank has not elected to use the community bank leverage ratio framework. Interest Rate Risk Regulatory agencies include, in their evaluations of a bank’s capital adequacy, an assessment of the bank’s interest rate risk exposure.
As of December 31, 2024, the Bank has not elected to use the community bank leverage ratio framework. Interest Rate Risk Regulatory agencies include, in their evaluations of a bank’s capital adequacy, an assessment of the bank’s interest rate risk exposure.
Our internet website and the information contained therein are not incorporated into this Form 10-K. In addition, copies of our annual report will be made available, free of charge, upon written request. ​ -25- Table of Contents
Our internet website and the information contained therein are not incorporated into this Form 10-K. In addition, copies of our annual report will be made available, free of charge, upon written request.
Seasonality Generally, our operations are not seasonal in nature. Supervision and Regulation We are extensively regulated under federal and state laws. Generally, these laws and regulations are intended to protect consumers, not shareholders. The following is a summary description of certain provisions of law that affect the regulation of bank holding companies and banks.
Seasonality Generally, our operations are not seasonal in nature. Supervision and Regulation We are extensively regulated under federal and state laws. Generally, these laws and regulations are intended to protect the Bank’s customers and depositors, not shareholders. The following is a summary description of certain provisions of law that affect the regulation of bank holding companies and banks.
However, an institution may be deemed by the regulators to be in a capitalization category that is lower than is indicated by its actual capital -18- Table of Contents position if, among other things, it receives an unsatisfactory examination rating with respect to asset quality, management, earnings or liquidity.
However, an institution may be deemed by the regulators to be in a capitalization category that is lower than is indicated by its actual capital position if, among other things, it receives an unsatisfactory examination rating with respect to asset quality, management, earnings or liquidity.
The federal banking agencies expect financial institutions to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack.
The federal banking agencies expect financial institutions to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cybersecurity incident.
We also offer ATM access, credit cards, active investment accounts, trust department services and other various lending, depository and related financial services. Our primary deposit products are savings and demand deposit accounts and certificates of deposit.
We also offer ATM access, debit and credit cards, online banking, active investment accounts, trust department services and other various lending, depository and related financial services. Our primary deposit products are savings and demand deposit accounts and certificates of deposit.
We have occasionally used policy approved brokers to generate deposits to supplement our deposit base. Borrowings Borrowings may be used to supplement our supply of lendable funds and to meet deposit withdrawal requirements. Borrowings from the FHLB of Pittsburgh typically are collateralized by a portion of our real estate loans.
We have occasionally used policy approved brokers to generate wholesale deposits to supplement our deposit base. -12- Table of Contents Borrowings Borrowings may be used to supplement our supply of lendable funds and to meet deposit withdrawal requirements. Borrowings from the FHLB of Pittsburgh typically are collateralized by a portion of our real estate loans.
Dodd-Frank permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations. -23- Table of Contents Ability to Repay and Qualified Mortgage Rule.
Dodd-Frank permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations. Ability to Repay and Qualified Mortgage Rule.
We rely primarily on marketing, product innovation, technology, service and long-standing relationships with customers to attract and retain these deposits. Other deposit -13- Table of Contents related services include: remote deposit capture; automatic clearing house transactions; cash management services; automated teller machines; point of sale transactions; safe deposit boxes; night depository services; direct deposit, and official check services.
We rely primarily on marketing, product innovation, technology, service and long-standing relationships with customers to attract and retain these deposits. Other deposit related services include: remote deposit capture; automatic clearing house transactions; cash management services; automated teller machines; point of sale transactions; safe deposit boxes; night depository services; direct deposit, online banking and official check services.
Commercial business loans to professionals, sole proprietorships and small businesses in our market area comprise 19.1 percent of our loan portfolio. We offer term loans for capital improvements, equipment acquisition and long-term working capital. These loans are typically priced at short term fixed rates or variable rates based on the prime rate.
Commercial business loans to professionals, sole proprietorships, small businesses and municipalities in our market area comprise 20.9 percent of our loan portfolio. We offer term loans for capital improvements, equipment acquisition and long-term working capital. These loans are typically priced at short term fixed rates or variable rates based on the prime rate.
We offer a variety of consumer loans, which represent 2.9 percent of our loan portfolio, including lines of credit, automobile loans and loans secured by savings accounts and certificates of deposit. We also offer unsecured loans.
We offer a variety of consumer loans, which represent 3.3 percent of our loan portfolio, including lines of credit, automobile loans and loans secured by savings accounts and certificates of deposit. We also offer unsecured loans.
Federal Home Loan Bank of Pittsburgh (“FHLB-Pgh”) Peoples Bank is a member of the FHLB-Pgh, which is one of 11 regional FHLBs that provide funding to their members for making housing loans as well as for affordable housing and community development loans. Each FHLB serves as a reserve, or central bank, for the members within its assigned region.
Federal Home Loan Bank of Pittsburgh (“FHLB”) The Bank is a member of the Pittsburgh FHLB, which is one of 11 regional FHLBs that provide funding to their members for making housing loans as well as for affordable housing and community development loans. Each FHLB serves as a reserve, or central bank, for the members within its assigned region.
Experienced lenders have been recruited to manage these new markets. The Marcellus Shale formation located in the heart of our legacy market area has provided economic benefits to the communities served and as a result to us. Natural gas producers have invested billions of dollars in Pennsylvania in lease and land acquisition, new well drilling, infrastructure development and community partnerships.
The Marcellus Shale formation located in the heart of our legacy market area has provided economic benefits to the communities served and as a result to us. Natural gas producers have invested billions of dollars in Pennsylvania in lease and land acquisition, new well drilling, infrastructure development and community partnerships.
Under these regulations, a depository institution is classified in one of the following capital categories: ● “well capitalized”; ● “adequately capitalized”; ● “under capitalized”; ● “significantly undercapitalized”; and ● “critically undercapitalized”. Peoples Bank was “well capitalized” based on its actual capital position at December 31, 2023.
Under these regulations, a depository institution is classified in one of the following capital categories: ● “well capitalized”; ● “adequately capitalized”; ● “under capitalized”; ● “significantly undercapitalized”; and ● “critically undercapitalized”. -17- Table of Contents The Bank was “well capitalized” based on its actual capital position at December 31, 2024.
Additionally, with certain exceptions, any person or entity proposing to acquire control through direct or indirect ownership of 25 percent or more -15- Table of Contents of our voting securities is required to give 60 days’ written notice of the acquisition to the FRB, which may prohibit the transaction, and to publish notice to the public.
Additionally, with certain exceptions, any person or entity proposing to acquire control through direct or indirect ownership of 25 percent or more of our voting securities is required to give 60 days’ written notice of the acquisition to the FRB, which may prohibit the transaction, and to publish notice to the public. -14- Table of Contents The Bank is regulated by the Department of Banking and the FDIC.
Commercial real estate loans for the acquisition and development of land are typically based upon the prime rate.
Commercial real estate loans for the acquisition and development of land are typically based upon the prime rate and secured overnight funding rate (“SOFR”).
Our trust and investment services include investment management, IRA trustee services, estate administration, living trusts, trustee under will, guardianships, life insurance trusts, custodial services / IRA custodial services, corporate trusts, and pension and profit sharing plans. At December 31, 2023, Peoples Bank had $463.8 million in trust assets under management.
Our trust and investment services include investment management, IRA trustee services, estate administration, living trusts, trustee under will, guardianships, life insurance trusts, custodial services / IRA custodial services, corporate trusts, and pension and profit sharing plans. At December 31, 2024, the Bank had $460.4 million in trust assets under management.
As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value. -9- Table of Contents One-to-Four Family Residential Loans .
As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value. ​ Commercial Equipment Financing.
Residential real estate loans comprise 12.7 percent of our loan portfolio. We offer two types of residential mortgage loans: fixed-rate loans, with terms of up to 30 years, and adjustable-rate loans, with interest rates and payments that adjust annually after an initial fixed period of one, three, five, ten or fifteen years.
We offer two types of residential mortgage loans: fixed-rate loans, with terms of up to 30 years, and adjustable-rate loans, with interest rates and payments that adjust annually after an initial fixed period of one, three, five, ten or fifteen years.
The terms offered on a loan vary depending primarily on the type of loan and credit-worthiness of the borrower. Payment risk is a function of the economic climate in which our lending activities are conducted. Economic downturns in the economy generally or in a particular sector could cause cash flow problems for customers and make loan payments more difficult.
Payment risk is a function of the economic climate in which our lending activities are conducted. Economic downturns in the economy generally or in a particular sector could cause cash flow problems for customers and make loan payments more difficult.
Peoples Bank is regulated by the Pennsylvania Department of Banking and the FDIC. The Department of Banking may prohibit an institution over which it has supervisory authority from engaging in activities or investments that the agency believes constitute unsafe or unsound banking practices.
The Department of Banking may prohibit an institution over which it has supervisory authority from engaging in activities or investments that the agency believes constitute unsafe or unsound banking practices.
This is in addition to those restrictions set forth in federal law. Under Pennsylvania law, a bank holding company that desires to acquire a bank or bank holding company that has its principal place of business in Pennsylvania must obtain permission from the Department of Banking.
Under Pennsylvania law, a bank holding company that desires to acquire a bank or bank holding company that has its principal place of business in Pennsylvania must obtain permission from the Department of Banking.
Item 1. Busines s. General Peoples Financial Services Corp., a bank holding company incorporated under the laws of Pennsylvania, provides a full range of financial services through its wholly-owned subsidiary, Peoples Security Bank and Trust Company.
Item 1. Busines s. General Peoples Financial Services Corp., a bank holding company incorporated under the laws of Pennsylvania, provides a full range of financial services through its wholly-owned direct and indirect subsidiaries, including Peoples Security Bank and Trust Company and 1 st Equipment Finance, Inc.
Peoples Bank's FDIC assessment expense increased $0.8 million due to the 2 basis point increase in the assessment rate in 2023. -22- Table of Contents To recover the loss to the FDIC’s Deposit Insurance Fund arising from certain bank failures that occurred in 2023, the FDIC approved a one-time annual special assessment rate of approximately 13.4 basis points to be paid over eight quarterly assessment periods.
To recover the loss to the FDIC’s Deposit Insurance Fund arising from certain bank failures that occurred in 2023, the FDIC approved a one-time annual special assessment rate of approximately 13.4 basis points to be paid over eight quarterly assessment periods.
Moreover, certain amendments to the Bank Holding Company Act of 1956 provide that, to further competition, a bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property of any kind, or furnishing of any service. -17- Table of Contents Pennsylvania Law As a Pennsylvania incorporated bank holding company, Peoples is subject to various restrictions on its activities as set forth in Pennsylvania law.
Moreover, certain amendments to the Bank Holding Company Act of 1956 provide that, to -16- Table of Contents further competition, a bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property of any kind, or furnishing of any service.
On March 31, 2022, the FDIC published a Request for Information seeking information and comments regarding the regulatory framework that applies to merger transactions involving one or more insured depository institutions. The comment period for the FDIC’s Request for Information closed on May 31, 2022.
In March 2022, the FDIC proposed a Request for Information, seeking information and comments regarding the regulatory framework that applies to merger transactions involving one or more insured depository institutions.
Past history has demonstrated that new legislation or change to existing laws or regulations usually results in greater compliance burden and therefore generally increases the cost of doing business. Availability of Securities Filings We maintain an Internet website at www.psbt.com.
Past history has demonstrated that new legislation or change to existing laws or regulations usually results in greater compliance burden and therefore generally increases the cost of doing business.
With the continued acceptance of internet/digital banking by our customers and consumers generally, competition for deposits has increased from institutions operating outside of our market area.
In our market area, we expect continued competition from these financial institutions in the foreseeable future. With the continued acceptance of internet/digital banking including online account opening by our customers and consumers generally, competition for deposits has increased from institutions operating outside of our market area.
At December 31, 2023, our regulatory limit on loans to one borrower was $56.3 million.
At December 31, 2024, our regulatory limit on loans to one borrower was $70.8 million.
Peoples Bank is currently evaluating the impact of the modified CRA regulations, but does not anticipate any resulting material impact to its operations or compliance objectives. -21- Table of Contents USA Patriot Act of 2001 (the “Patriot Act”) and Anti-Money Laundering The Patriot Act contains anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.
USA Patriot Act of 2001 (the “Patriot Act”) and Anti-Money Laundering The Patriot Act contains anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.
At December 31, 2023, our maximum borrowing capacity with the FHLB-Pgh was $1.2 billion of which $25.0 million was outstanding in borrowings and $345.4 million outstanding in the form of irrevocable standby letters of credit.
At December 31, 2024, our maximum borrowing capacity with the FHLB was $1.7 billion of which $99.1 million was outstanding in borrowings and $487.8 million outstanding in the form of irrevocable standby letters of credit.
As a result, repayment of such loans may be subject to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy.
Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy.
We have a third party marketing agreement with a broker-dealer that allows us to offer a full range of securities, brokerage services and annuity sales to our customers. Our investor services division is located in our headquarters building and the services are offered throughout the branch system.
We have a third party marketing agreement with a broker-dealer that allows us to offer a full range of securities, brokerage services and annuity sales to our customers.
Because the special assessment is made as of assets reported at December 31, 2022, the Bank will not be required to pay the special assessment should the pending merger with FNCB Bank close and cause the bank to exceed this asset threshold. Corporate Governance.
Because the special assessment is made as of assets reported at December 31, 2022, the Bank will not be required to pay the special assessment. Corporate Governance.
The assessment base for the special assessments would be equal to an institution’s estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion from estimated uninsured deposits.
The assessment base for the special assessments would be equal to an institution’s estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion from estimated uninsured deposits. Consistent with the FDIC’s requirements for the special assessment, no insured depository institution with total assets under $5 billion is required to pay the special assessment.
This market has a greater population than the legacy markets served, with Bethlehem being the second largest city within Lehigh County. In 2015, the Company entered the King of Prussia market, which includes parts of Bucks and Montgomery counties of Pennsylvania and suburban Philadelphia, with the establishment of a loan production office and a team of experienced lenders.
In 2015, the Company entered the King of Prussia market, which includes parts of Bucks and Montgomery counties of Pennsylvania and suburban Philadelphia, with the establishment of a loan production office and a team of experienced lenders.
The ACL, as a percentage of loans, net of unearned income, was 0.77 percent at the end of 2023, 1.01 percent at the end of 2022, respectively. The coverage ratio, the ACL as a percentage of nonperforming loans, is an industry ratio used to test the ability of the ACL account to absorb potential losses arising from nonperforming loans.
The coverage ratio, the ACL as a percentage of nonperforming loans, is an industry ratio used to test the ability of the ACL account to absorb potential losses arising from nonperforming loans. The coverage ratio was 182.0 percent at December 31, 2024 and 442.6 percent at December 31, 2023.
Asset Quality ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, except percents) ​ ​ December 31, 2023 ​ ​ December 31, 2022 ​ Nonaccrual loans ​ $ 3,962 ​ $ 2,035 ​ Troubled debt restructured loans (including nonaccrual TDR) (1) ​ ​ ​ ​ ​ 1,351 ​ Accruing loans past due 90 days or more: ​ ​ 986 ​ ​ 748 ​ Total nonperforming loans ​ ​ 4,948 ​ ​ 4,134 ​ Foreclosed assets ​ ​ ​ ​ ​ ​ ​ Total nonperforming assets ​ $ 4,948 ​ $ 4,134 ​ Loans modified in a TDR: ​ ​ ​ ​ ​ ​ ​ Performing TDR loans ​ $ ​ ​ $ 1,351 ​ Total TDR loans ​ $ ​ ​ $ 1,351 ​ Total loans held for investment ​ $ 2,849,897 ​ $ 2,730,116 ​ Allowance for credit losses ​ 21,895 ​ 27,472 ​ Allowance for credit losses as a percentage of loans held for investment ​ ​ 0.77 % ​ 1.01 % Allowance for credit losses as a percentage of nonaccrual loans ​ ​ 552.62 % 1349.98 % Nonaccrual loans as a percentage of loans held for investment ​ ​ 0.14 % ​ 0.07 % Nonperforming loans as a percentage of loans, net ​ 0.17 % 0.15 % Nonperforming assets as a percentage of total assets ​ 0.13 % 0.12 % (1) At December 31, 2023 there were no TDRS as a result of ASU 2022-02 ​ ​ ​ ​ ​ ​ ​ Allowance for Credit Losses Effective January 1, 2023 the Company adopted ASU 2016-13 “ Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ” (ASC 326) using the modified retrospective approach.
Asset Quality ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, except percents) ​ ​ December 31, 2024 ​ ​ December 31, 2023 ​ Nonaccrual loans ​ $ 22,499 ​ $ 3,962 ​ Accruing loans past due 90 days or more: ​ ​ 458 ​ ​ 986 ​ Total nonperforming loans ​ ​ 22,957 ​ ​ 4,948 ​ Foreclosed assets ​ ​ 27 ​ ​ ​ ​ Total nonperforming assets ​ $ 22,984 ​ $ 4,948 ​ Total loans held for investment ​ $ 3,993,505 ​ $ 2,849,897 ​ Allowance for credit losses ​ 41,776 ​ 21,895 ​ Allowance for credit losses as a percentage of loans held for investment ​ ​ 1.05 % ​ 0.77 % Allowance for credit losses as a percentage of nonaccrual loans ​ ​ 185.68 % 552.62 % Nonaccrual loans as a percentage of loans held for investment ​ ​ 0.56 % ​ 0.14 % Nonperforming loans as a percentage of loans, net ​ 0.58 % 0.17 % Nonperforming assets as a percentage of total assets ​ 0.45 % 0.13 % Allowance for Credit Losses Effective January 1, 2023 the Company adopted ASU 2016-13 “ Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ” (ASC 326) using the modified retrospective approach.
Department of the Treasury, is responsible for helping to ensure that domestic entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law.
Department of the Treasury, is responsible for helping to ensure that domestic entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. Holding Company Capital Requirements.
A bank holding company is required to act as a source of financial strength to its subsidiary banks and to make capital injections into a troubled subsidiary bank, and the FRB may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank when required.
Further, subject to certain exceptions, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services. -15- Table of Contents A bank holding company is required to act as a source of financial strength to its subsidiary banks and to make capital injections into a troubled subsidiary bank, and the FRB may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank when required.
The terms of each multi-family residential and commercial real estate loan are negotiated on a case-by-case basis. We generally originate multi-family commercial and commercial real estate loans in amounts up to 75% of the appraised value of the property collateralizing the loan. At December 31, 2023, commercial real estate loans totaled $1.86 billion, or 65.4% of gross loans.
We generally originate multi-family commercial and commercial real estate loans in amounts up to 75 percent of the appraised value of the property collateralizing the loan. At December 31, 2024, commercial real estate loans totaled $2.3 billion, or 57.4 percent of gross loans.
Commercial real estate loans for developed real estate and for real estate acquisition and development are originated generally with loan-to-value ratios up to 75 percent, while loans for the acquisition of land are originated with a maximum loan to value ratio of 65 percent.
Commercial real estate loans for developed real estate and for real estate acquisition and development are originated generally with loan-to-value ratios up to 75 percent, while loans for the acquisition of land are originated with a maximum loan to value ratio of 65 percent. -6- Table of Contents Loans secured by commercial real estate generally have larger balances and involve a greater degree of risk than one-to-four family residential mortgage loans.
Additionally, this Executive Order could influence the federal bank regulatory agencies’ expectations and supervisory oversight for banking acquisitions. Certain Transactions by Insured Banks with their Affiliates There are statutory restrictions related to the extent bank holding companies and their non-bank subsidiaries may borrow, obtain credit from or otherwise engage in “covered transactions” with their insured depository institution (i.e., banking) subsidiaries.
Certain Transactions by Insured Banks with their Affiliates There are statutory restrictions related to the extent bank holding companies and their non-bank subsidiaries may borrow, obtain credit from or otherwise engage in “covered transactions” with their insured depository institution (i.e., banking) subsidiaries. In general, an “affiliate” of a bank includes the bank’s parent holding company and any subsidiary thereof.
Such cross guarantee liabilities generally are superior in priority to the obligation of the depository institutions to its shareholders due solely to their status as shareholders and obligations to other affiliates.
Such cross guarantee liabilities generally are superior in priority to the obligation of the depository institutions to its shareholders due solely to their status as shareholders and obligations to other affiliates. The federal regulatory framework applicable to bank mergers has recently received significant attention and been the subject of numerous proposals to update or revise such framework.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePeoples also has an obligation to submit its merger-related proposals to a vote by its shareholders, including if Peoples receives an unsolicited proposal that Peoples’ Board of Directors believes is superior to the merger, unless the Merger Agreement is terminated by Peoples under certain conditions described in the Merger Agreement. -28- Table of Contents Combining Peoples and FNCB may be more difficult, costly or time-consuming than expected, and Peoples and FNCB may fail to realize the anticipated benefits of the mergers.
Biggest changeRisks Related to Peoples ’ Merger with FNCB Combining Peoples and FNCB may be more difficult, costly or time-consuming than expected, and Peoples and FNCB may fail to realize the anticipated benefits of the merger.
As a state-chartered bank, Peoples Bank is subject to regulatory restrictions on the payment and amounts of dividends under the Pennsylvania Banking Code. Further, Peoples Bank’s ability to pay dividends is also subject to its profitability, financial condition, capital expenditures and other cash flow requirements. There is no assurance that Peoples Bank will be able to pay dividends.
As a state-chartered bank, the Bank is subject to regulatory restrictions on the payment and amounts of dividends under the Pennsylvania Banking Code. Further, the Bank’s ability to pay dividends is also subject to its profitability, financial condition, capital expenditures and other cash flow requirements. There is no assurance that the Bank will be able to pay dividends.
Risks Related to Government Regulation We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations. We are subject to extensive regulation, supervision and examination by certain state and federal agencies including the FDIC, the Federal Reserve Board and the Pennsylvania Department of Banking.
Risks Related to Government Regulation We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations. We are subject to extensive regulation, supervision and examination by certain state and federal agencies including the FDIC, the Federal Reserve Board and the Department of Banking.
We depend on dividends, distributions and other payments from Peoples Bank to fund dividend payments to our shareholders, if any, and to fund all payments on obligations of our holding company. Peoples Bank is subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from Peoples Bank to us.
We depend on dividends, distributions and other payments from The Bank to fund dividend payments to our shareholders, if any, and to fund all payments on obligations of our holding company. The Bank is subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from the Bank to us.
An increase in nonperforming loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses, and an increase in loan charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.
An increase in nonperforming loans could result in a net loss of earnings from these loans, an increase in the provision for credit losses, and an increase in loan charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.
These conditions include short-term and long-term interest rates, inflation, unemployment levels, consumer confidence and spending, fluctuations in both debt and equity capital markets, and the strength of the economy in the United States generally and, in particular, the Company’s market area.
These conditions include short-term and long-term interest rates, inflation, unemployment levels, consumer confidence and spending, fluctuations in both debt and equity capital markets, recession and the strength of the economy in the United States generally and, in particular, the Company’s market area.
If our controls are not effective, it could have a material adverse effect on our financial condition, results of operations, and market for our common stock, and could subject us to regulatory scrutiny. We are exposed to environmental liabilities with respect to real estate. We currently operate 28 branch offices, and own additional real estate.
If our controls are not effective, it could have a material adverse effect on our financial condition, results of operations, and market for our common stock, and could subject us to regulatory scrutiny. We are exposed to environmental liabilities with respect to real estate. We currently operate 39 branch offices, and own additional real estate.
Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require us to increase our ACL. Increases in nonperforming loans have a significant impact on our ACL. Our ACL may not be adequate to absorb actual loan losses.
Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require us to increase our ACL. Increases in nonperforming loans have a significant impact on our ACL. Our ACL may not be adequate to absorb actual credit losses.
In addition to our internal processes for determining loss allowances, bank regulatory agencies periodically review our ACL and may require us to increase the provision for credit losses, to recognize further loan charge-offs, or to take other actions, based on judgments that differ from those of our management.
In addition to our internal processes for determining our ACL, bank regulatory agencies periodically review our ACL and may require us to increase the provision for credit losses, to recognize further loan charge-offs, or to take other actions, based on judgments that differ from those of our management.
If conditions in our regional real estate markets decline, we could experience increased delinquencies and credit losses, particularly with respect to real estate construction and land acquisition and development loans and one-to-four family residential mortgage loans. Moreover, if the economy slows, the negative impact to our market areas could result in higher delinquencies and credit losses.
If conditions in our regional real estate markets decline, we could experience increased delinquencies and credit losses, particularly with respect to real estate construction and land acquisition and development loans and one-to-four family residential mortgage loans. Moreover, if the economy slows, the negative impact to our market area could result in higher delinquencies and credit losses.
Our technologies, systems, and networks (including such third-party information technology platforms on which our business depends) and our customers’ devices have been subject to, and are likely to continue to be the target of, cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized use, loss or destruction of our or our customers’ or third parties’ confidential information, or otherwise disrupt our or our customers’ or other third parties’ business operations.
Our technologies, systems, and networks (including such third-party information technology platforms on which our business depends) and our customers’ devices have been subject to, and are likely to continue to be the target of, cybersecurity threats, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized use, loss or destruction of our or our customers’ or third parties’ confidential information, or otherwise disrupt our or our customers’ or other third parties’ business operations.
Holders of our common stock are entitled to receive dividends if and when declared from time to time by our Board of Directors in its sole discretion out of funds legally available for that purpose. Business Risks The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.
Holders of our common stock are entitled to receive dividends if and when declared from time to time by our Board of Directors in its sole discretion out of funds legally available for that purpose. Risks Related to Operations The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.
Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on us and our operations. There also are several federal and state statutes which regulate the obligation and liabilities of financial institutions pertaining to environmental issues.
Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may -34- Table of Contents have a material impact on us and our operations. There also are several federal and state statutes which regulate the obligation and liabilities of financial institutions pertaining to environmental issues.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions, increased insurance cost and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental -36- Table of Contents investigations or actions, litigation, fines, sanctions, increased insurance cost and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.
Many of the institutions with which we compete have substantially greater resources and lending limits and may -26- Table of Contents offer certain services that we do not or cannot provide. Our profitability depends upon our ability to successfully compete in our market area. The soundness of other financial services institutions may adversely affect our credit risk.
Many of the institutions with which we compete have substantially greater resources and lending limits and may offer certain services that we do not or cannot provide. Our profitability depends upon our ability to successfully compete in our market area. The soundness of other financial services institutions may adversely affect our credit risk.
In addition, a significant portion of our loan portfolio is secured by real property. In the course of our business, we may foreclose, accept deeds in lieu of foreclosure, or otherwise acquire real estate, and in doing so could become subject to environmental liabilities with respect to these properties.
In addition, a significant portion of our loan portfolio is secured by real property. In the course of our business, we may foreclose, accept deeds in lieu of foreclosure, -30- Table of Contents or otherwise acquire real estate, and in doing so could become subject to environmental liabilities with respect to these properties.
In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against large financial institutions, particularly denial of service attacks, that are designed to disrupt key business services, such as customer-facing web sites.
In addition to cybersecurity incidents or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against large financial institutions, particularly denial of service attacks, that are designed to disrupt key business services, such as customer-facing web sites.
In addition, if a third party provider fails to provide the services we require, fails to meet contractual requirements, such as compliance with applicable laws and regulations, or suffers a cyber-attack or other security breach, our business could suffer economic and reputational harm that could have a material adverse effect on our business, financial condition or results of operations.
In addition, if a third party provider fails to provide the services we require, fails to meet contractual requirements, such as compliance with applicable laws and regulations, or suffers a cybersecurity incident or other security breach, our business could suffer economic and reputational harm that could have a material adverse effect on our business, financial condition or results of operations.
Provisions for credit losses will result in a decrease in net income and capital, and may have a material adverse effect on our financial condition, and results of operations and cash flows. -32- Table of Contents Risks related to liquidity Liquidity is essential to our business.
Provisions for credit losses will result in a decrease in net income and capital, and may have a material adverse effect on our financial condition, and results of operations and cash flows. Risks Related to Liquidity Liquidity is essential to our business.
In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting -34- Table of Contents from environmental contamination emanating from the property.
In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
In certain cases, we could be required to apply a new or revised guidance retroactively or apply existing guidance differently (also retroactively) which may result in our restating prior period financial statements for material amounts. We may be subject to more stringent capital requirements in the future, which may adversely affect our net income and future growth.
In certain cases, we could be required to apply a new or revised guidance retroactively or apply existing guidance differently (also retroactively) which may result in our restating prior period financial statements for material amounts. -35- Table of Contents We may be subject to more stringent capital requirements in the future, which may adversely affect our net income and future growth.
As of December 31, 2023, our available for sale securities had an unrealized loss, net of taxes, of approximately $40.3 million. The fair value of our available for sale securities is subject to interest rate change, which would not affect recorded earnings, but would increase or decrease comprehensive income (loss) and stockholders’ equity.
As of December 31, 2024, our available for sale securities had an unrealized loss, net of taxes, of approximately $38.3 million. The fair value of our available for sale securities is subject to interest rate change, which would not affect recorded earnings, but would increase or decrease comprehensive income (loss) and stockholders’ equity.
Deterioration in economic conditions in this market area, particularly in the industries on which this geographic area depend, or a general decline in economic conditions may adversely affect the quality of our loan portfolio (including the level of nonperforming assets, charge offs -31- Table of Contents and provision for loan losses) and demand for our products and services, and, accordingly, our results of operations.
Deterioration in economic conditions in this market area, particularly in the industries on which this geographic area depend, or a general decline in economic conditions may adversely affect the quality of our loan portfolio (including the level of nonperforming assets, charge offs and provision for credit losses) and demand for our products and services, and, accordingly, our results of operations.
The amount and timing of any impairment recognized will depend on the severity and duration of the decline in fair value of our investment securities and our estimation of the anticipated recovery period. Changes in the value of goodwill and intangible assets could reduce our earnings.
The amount and timing of any impairment recognized will depend on the severity and duration of the decline in fair value of our investment securities and our estimation of the anticipated recovery period. -29- Table of Contents Changes in the value of goodwill and intangible assets could reduce our earnings.
The success of the mergers will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of Peoples and FNCB.
The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of Peoples and FNCB.
Additionally, as technology in the financial services industry changes and evolves, keeping pace becomes increasingly complex and expensive for us. There can be no assurance that we will be able to effectively implement new technology-driven products and services, which could reduce our ability to compete effectively.
Additionally, as technology in the financial services industry changes and evolves, keeping pace becomes increasingly complex and expensive for us. -32- Table of Contents There can be no assurance that we will be able to effectively implement new technology-driven products and services, which could reduce our ability to compete effectively.
Demand for the Company’s services is influenced by general economic and consumer trends beyond the Company’s control, including events such as global pandemics and geopolitical conflicts There can be no assurance that our business and corresponding financial performance will not be adversely affected by general economic or consumer trends or events, including pandemics, public health crises, weather catastrophes, acts of terrorism, war, and political instability.
Demand for the Company’s services is influenced by general economic and consumer trends beyond the Company’s control. There can be no assurance that our business and corresponding financial performance will not be adversely affected by general economic or consumer trends or events, including pandemics, public health crises, weather catastrophes, acts of terrorism, war, and political instability.
Banking regulators have been giving and continue to give commercial real estate lending greater scrutiny, and banks with larger commercial real estate loan portfolios are expected by their regulators to implement improved underwriting, internal controls, risk management policies and portfolio stress-testing practices to manage risks associated with commercial real estate lending.
Banking regulators give commercial real estate lending greater scrutiny, and banks with larger commercial real estate loan portfolios are expected by their regulators to implement improved underwriting, internal controls, risk management policies and portfolio stress-testing practices to manage risks associated with commercial real estate lending.
A failure in or breach of our operational or information security systems, or those of a third-party service provider, as a result of cyber-attacks or information security breaches or otherwise could have a material adverse effect on our business, damage our reputation, increase our costs and/or cause significant losses.
A failure in or breach of our operational or information security systems, or those of a third-party service provider, as a result of cybersecurity incidents or information security breaches or otherwise could have a material adverse effect on our business, damage our reputation, increase our costs and/or cause significant losses.
A failure in or a breach of our information systems or infrastructure, including as a result of cyber-attacks, could disrupt our business, damage our reputation, and could have a material adverse effect on our business, financial condition and results of operations.
A failure in or a breach of our information systems or infrastructure, including as a result of cybersecurity incidents, could disrupt our business, damage our reputation, and could have a material adverse effect on our business, financial condition and results of operations.
As information security risks and cyber threats continue to evolve, we may be required to expend -36- Table of Contents substantial resources to further enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.
As information security risks and cyber threats continue to evolve, we may be required to expend substantial resources to further enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.
Our ACL was approximately $21.9 million on December 31, 2023. Our Company’s business is primarily concentrated in the Eastern Pennsylvania market area which exposes us to a risk of loss associated with the region.
Our ACL was approximately $41.8 million on December 31, 2024. Our Company’s business is primarily concentrated in the Eastern Pennsylvania market area which exposes us to a risk of loss associated with the region.
Commercial real estate loans totaled $1.87 billion at December 31, 2023 or 65.4 percent of our loan portfolio. The commercial real estate market poses risks of loss to us because of the concentration of commercial real estate loans in our loan portfolio, and the lack of diversity in risk associated with such a concentration.
Commercial real estate loans totaled $2.3 billion at December 31, 2024 or 57.4 percent of our loan portfolio. The commercial real estate market poses risks of loss to us because of the concentration of commercial real estate loans in our loan portfolio, and the lack of diversity in risk associated with such a concentration.
We attempt to maintain an ACL, established through a provision for credit losses accounted for as an expense, which is adequate to absorb losses inherent in our loan portfolio. If our ACL is inadequate, it may have a material adverse effect on our financial condition and results of operations.
We attempt to maintain an ACL which is adequate to absorb losses inherent in our loan portfolio. If our ACL is inadequate, it may have a material adverse effect on our financial condition and results of operations.
Our ability to pay dividends on or repurchase shares of our stock depends upon our receipt of dividends from Peoples Bank. Additionally, our ability to pay dividends is limited by Pennsylvania corporate law and by federal banking regulations.
Risks Related to Our Common Stock Our ability to pay dividends or repurchase shares is subject to limitations. Our ability to pay dividends on or repurchase shares of our stock depends upon our receipt of dividends from the Bank. Additionally, our ability to pay dividends is limited by Pennsylvania corporate law and by federal banking regulations.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; global pandemics, natural disasters or acts of terrorism or outbreak of domestic or international hostilities; or a combination of these or other factors.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; trade policies and tariffs; disruptions in global supply chains; political instability; high unemployment and limited labor pools; global pandemics, including responses thereto; natural disasters; acts of terrorism or outbreak of domestic or international hostilities; or a combination of these or other factors.
Despite our efforts, we do and will experience loan and lease losses, and our financial condition and results of operations will be adversely affected. Our loans which were between 30 and 89 days delinquent on December 31, 2023 totaled $3.2 million. Our nonperforming assets were approximately $5.0 million on December 31, 2023.
Despite our efforts, we do and will experience loan and lease losses, and our financial condition and results of operations will be adversely affected. Our loans which were -26- Table of Contents between 30 and 89 days delinquent on December 31, 2024 totaled $14.1 million. Our nonperforming assets were approximately $23.0 million on December 31, 2024.
We make commercial and industrial, construction, and commercial real estate loans, which present greater risks than other types of loans. As of December 31, 2023, approximately 84.5 percent of our loan portfolio consisted of commercial and industrial, construction, and commercial real estate loans.
We make commercial and industrial, construction, commercial real estate and equipment financing loans, which present greater risks than other types of loans. As of December 31, 2024, approximately 82.9 percent of our loan portfolio consisted of commercial and industrial, construction, commercial real estate and equipment financing loans.
Rapid and unexpected volatility in interest rates creates additional uncertainty and potential for adverse financial effects. There can be no assurance that the Company will not be materially adversely affected by future changes in interest rates.
Rapid and unexpected volatility in interest rates creates additional uncertainty and potential for adverse financial effects. There can be no assurance that the Company will not be materially adversely affected by future changes in interest rates. Changes in interest rates could affect our investment values and impact comprehensive income and stockholders’ equity.
From time to time, the Financial Accounting Standards Board (“FASB”) and the SEC change their guidance governing the form and content of our external financial statements.
We are subject to changes in accounting policies or accounting standards. From time to time, the Financial Accounting Standards Board (“FASB”) and the SEC change their guidance governing the form and content of our external financial statements.
These securities are carried at fair value on our consolidated balance sheets. Unrealized gains or losses on these securities, that is, the difference between the fair value and the amortized cost of these securities, are reflected in stockholders’ equity, net of deferred taxes.
At December 31, 2024, we had approximately $526.3 million of securities available for sale. These securities are carried at fair value on our consolidated balance sheets. Unrealized gains or losses on these securities, that is, the difference between the fair value and the amortized cost of these securities, are reflected in stockholders’ equity, net of deferred taxes.
Moreover, these provisions could diminish the opportunities for shareholders to participate in certain tender offers, including tender offers at prices above the then-current market value of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts or speculation.
Moreover, these provisions could diminish the opportunities for shareholders to participate in certain tender offers, including tender offers at prices above the then-current market value of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts or speculation. -37- Table of Contents In addition, anti-takeover provisions in Pennsylvania law could make it more difficult for a third party to acquire control of us.
The surviving corporation’s future success will depend, in part, upon its ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. In connection with the merger, Peoples will assume FNCB’s outstanding indebtedness.
Our future success will depend, in part, upon our ability to manage the expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.
Additional losses or regulatory requirements related to our commercial real estate loan concentration could materially adversely affect our business, financial condition and results of operations.
Additional losses or regulatory requirements related to our commercial real estate loan concentration could materially adversely affect our business, financial condition and results of operations. At December 31, 2024 our portfolio included $179.1 million of equipment financing loans.
Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. -39- Table of Contents Moreover, legislators and regulators in the United States are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities.
Moreover, legislators and regulators in the United States are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities.
We rely on other financial services institutions through trading, clearing, counterparty, and other relationships. We maintain limits and monitor concentration levels of our counterparties as specified in our internal policies. Our reliance on other financial services institutions exposes us to credit risk in the event of default by these institutions or counterparties.
We rely on other financial services institutions through trading, clearing, counterparty, and other relationships. Our reliance on other financial services institutions exposes us to credit risk in the event of default by these institutions or counterparties. These losses could adversely affect our results of operations and financial condition.
Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as global pandemics or natural disasters) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.
A significant and sustained decline in the company’s common stock price from changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as global pandemics or natural disasters) may necessitate taking charges in the future and could result in an impairment charge at a future date.
Our ACL may not be adequate to absorb actual loan losses, and we may be required to make further provisions for credit losses and charge off additional loans in the future, which could materially and adversely affect our business.
The resale market for equipment may be limited, reducing our ability to mitigate losses in the event of default or at the end of lease term. -27- Table of Contents Our ACL may not be adequate to absorb actual credit losses, and we may be required to make further provisions for credit losses and charge off additional loans in the future, which could materially and adversely affect our business.
These provisions of our articles of incorporation and bylaws could discourage potential -37- Table of Contents acquisition proposals and could delay or prevent a change in control, even though a majority of our shareholders may consider such proposals desirable.
These provisions of our articles of incorporation and bylaws could discourage potential acquisition proposals and could delay or prevent a change in control, even though a majority of our shareholders may consider such proposals desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of our Board of Directors.
Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations while also driving up interest rates, further complicating borrowing and lending activities.
Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations while also driving up interest rates, further complicating borrowing and lending activities. Consumers may increasingly decide not to use banks to complete their financial transactions, which could have a material adverse impact on our financial condition and operations.
At December 31, 2023, $360.8 million or 12.7 percent, of our loan portfolio consisted of residential mortgage loans and $1.9 billion or 65.4 percent, of our loan portfolio consisted of commercial real estate loans. In addition, $543.7 million or 19.1 percent of our loan portfolio consisted of taxable and non-taxable commercial loans.
At December 31, 2024, $551.9 million or 13.8 percent, of our loan portfolio consisted of residential mortgage loans and $2.3 billion or 57.4 percent, of our loan portfolio consisted of commercial real estate loans. In addition, $836.0 million or 20.9 percent of our loan portfolio consisted of taxable and non-taxable commercial loans.
An inability to realize the full extent of the anticipated benefits of the mergers and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the surviving corporation following the completion of the mergers, which may adversely affect the value of the common stock of the surviving corporation following the completion of the mergers.
An inability to realize the full extent of the anticipated benefits of the merger could have an adverse effect upon our revenues, levels of expenses and operating results, which may adversely affect the value of our common stock.
In addition, anti-takeover provisions in Pennsylvania law could make it more difficult for a third party to acquire control of us. These provisions could adversely affect the market price of our common stock and could reduce the amount that shareholders might receive if we are sold.
These provisions could adversely affect the market price of our common stock and could reduce the amount that shareholders might receive if we are sold. For example, Pennsylvania law may restrict a third party’s ability to obtain control of Peoples and may prevent shareholders from receiving a premium for their shares of our common stock.
Any possible acquisition will be subject to regulatory approval, and there can be no assurance that we will be able to obtain such approval in a timely manner or at all.
We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further our business strategy. Any possible acquisition will be subject to regulatory approval, and there can be no assurance that we will be able to obtain such approval in a timely manner or at all.
At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates.
Interest rate increases often result in larger payment requirements for our borrowers, which increase the potential for default. At the same time, the marketability of collateral securing a loan may be adversely affected by any reduced demand resulting from higher interest rates.
Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially adversely affect our business, financial condition and/or operating results. Risks Relating to the Economy and Market Area Negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially adversely affect our business, financial condition and/or operating results. Risks Related to Interest Rates Changes in interest rates could adversely impact our financial condition and results of operations.
As of December 31, 2023, approximately 14.0% of our deposits were uninsured and uncollateralized. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations. Our holding company is dependent for liquidity on payments from Peoples Bank, which payments are subject to restrictions.
As of December 31, 2024, approximately 20.3 percent of our deposits were uninsured and uncollateralized. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations. In connection with the merger, Peoples assume d FNCB’s outstanding indebtedness.
Increases in interest rates and economic conditions affecting consumer demand for housing can have a material impact on the volume of mortgage originations and refinancing, adversely affecting the profitability of the mortgage banking business.
Following a period of rate hikes in 2022 and 2023 aimed at curbing inflation, the FOMC began lowering rates in 2024, with the Federal Funds target rate ranging from 5.25% to 5.50% at year-end 2023, compared to a range of 4.25% to 4.50% at year end 2024. -25- Table of Contents Increases in interest rates and economic conditions affecting consumer demand for housing can have a material impact on the volume of mortgage originations and refinancing, adversely affecting the profitability of the mortgage banking business.
In addition, our reputation could be damaged which could result in loss of customers, greater difficulty in attracting new customers, or an adverse effect on the value of our common stock. Risks Related to Our Common Stock Our ability to pay dividends or repurchase shares is subject to limitations.
In addition, our reputation could be damaged which could result in loss of customers, greater difficulty in attracting new customers, or an adverse effect on the value of our common stock. -33- Table of Contents Risks Relating to the Economy and Market Area Changes in U.S. or regional economic conditions could have an adverse effect on the Company’s business, financial condition and results of operations.
Changes in U.S. or regional economic conditions could have an adverse effect on the Company’s business, financial condition and results of operations. The Company’s business activities and earnings are affected by general business conditions in the United States and in the market areas the Company operates.
The Company’s business activities and earnings are affected by general business conditions in the United States and in the market area in which the Company operates.
Our failure to pay dividends could have a material adverse effect on the market price of our common stock. Risks Related to Potential Future Transactions Acquisitions by us, including the proposed merger with FNCB, or any future proposal, would or could dilute existing shareholders’ ownership of Peoples and may cause us to become more susceptible to adverse economic events.
There can be no assurances that we will be successful in fully realizing the expected operating efficiencies or revenue enhancements of the merger. Risks Related to Potential Future Transactions Acquisitions by us, would or could dilute existing shareholders’ ownership of Peoples and may cause us to become more susceptible to adverse economic events.
Peoples’ existing debt, together with any future incurrence of additional indebtedness, and the assumption of FNCB’s outstanding indebtedness, could have important consequences for the surviving corporation’s creditors and the surviving corporation’s shareholders, potentially restricting or limiting Peoples capital and liquidity, There can be no assurances that the surviving corporation will be successful or that it will realize the expected operating efficiencies, revenue enhancement or other benefits currently anticipated from the mergers.
Peoples’ existing debt, together with any future incurrence of additional indebtedness, and the assumption of FNCB’s outstanding indebtedness, could have important consequences for our creditors and shareholders, potentially restricting or limiting our capital and liquidity. We rely substantially on deposits obtained from customers in our target markets to provide liquidity and support growth.
Our ability to make opportunistic acquisitions is subject to significant risks, including the risk that regulators will not provide the requisite approvals. We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further our business strategy.
Pennsylvania law also provides that our shareholders are not entitled by statute to propose amendments to our articles of incorporation. Our ability to make opportunistic acquisitions is subject to significant risks, including the risk that regulators will not provide the requisite approvals.
Removed
Negative developments affecting the banking industry in 2023, high profile bank failures and resulting media coverage and fallout, eroded consumer confidence in the safety and soundness of the banking system and generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
Added
In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. Until recently, we were in a rising interest rate environment. However, in 2024 the FOMC’s interest rate policy shifted as inflationary pressure began to ease and economic growth moderated.
Removed
As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
Added
Our equipment finance activities through our wholly-owned subsidiary, 1 st Equipment Finance, Inc., expose us to a range of risks, including credit, operational, and collateral and/or residual value risks. Credit risk arises from the potential inability of borrowers to meet their payment obligations, which can be influenced by economic conditions, industry-specific downturns, or borrower-specific financial difficulties.
Removed
While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.
Added
Operational risks include the potential for errors in documentation, underwriting, or asset/collateral management processes, which could affect our ability to enforce contracts or recover equipment. Collateral and/or residual value risks stem from fluctuations in the value of financed equipment.
Removed
These losses could adversely affect our results of operations and financial condition. Risks Related to Peoples ’ Pending Merger with FNCB Because the market price of Peoples common stock will fluctuate, the value of the merger consideration to be issued by Peoples may change.
Added
Our business strategies are based on access to funding from local customer deposits.
Removed
On September 27, 2023, Peoples announced the Merger Agreement with FNCB, pursuant to which FNCB will merge with and into Peoples, with Peoples as the surviving entity.
Added
Deposit levels may be affected by a number of factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments and general economic conditions that affect savings levels and the amount of liquidity in the -28- Table of Contents economy, including government stimulus efforts in response to economic crises.
Removed
Under the terms of the Merger Agreement, each share of FNCB common stock (other than certain shares held by FNCB or Peoples), will be converted into the right to receive 0.1460 shares of common stock of Peoples.
Added
If our deposit levels fall, we could lose a relatively low cost source of funding and our interest expense would likely increase as we obtain alternative funding to replace lost deposits.
Removed
The closing price of Peoples common stock on the date that the merger is completed may vary from the closing price of Peoples common stock on the date Peoples and FNCB announced the signing of the Merger Agreement and the date of the special meetings of Peoples and FNCB’s shareholders regarding the merger.
Added
If local customer deposits are not sufficient to fund our normal operations and growth, or if we lose a significant portion of our local customer deposits or a significant deposit relationship, we will look to outside sources, such as borrowings from the FHLB, which is a secured funding source, and our liquidity and/or profitability could be adversely impacted.
Removed
Because the merger consideration is determined by a fixed exchange ratio, Peoples will not know or be able to calculate the value of the shares of common stock it will issue to FNCB shareholders upon completion of the merger.
Added
Our ability to access borrowings from the FHLB will be dependent upon whether and the extent to which we can provide collateral to secure FHLB borrowings. We may also look to federal funds purchased and brokered deposits, although the use of brokered deposits may be limited or discouraged by our banking regulators.
Removed
Any change in the market price of Peoples common stock prior to completion of the merger may affect the value of the merger consideration. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in the companies’ respective businesses, operations and prospects, and regulatory considerations, among other things.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeEducation and Awareness Peoples Security Bank and Trust Company employees are required to complete training on customer information protection at least annually. They receive monthly training and testing on phishing emails and other timely information security topics. They are also required to abide by the Bank’s Code of Business Conduct and Ethics Policy.
Biggest changeThey receive monthly training and testing on phishing emails and other timely information security topics. They are also required to abide by the Bank’s Code of Business Conduct and Ethics Policy. Annual review and acknowledgement of the employee’s information security responsibilities are required. Information security tips are provided on the Bank’s website for all customers to review.
Item 1C. Cybersecurity. Cybersecurity Risk Management and Strategy The current threat environment from phishing emails to cyber-attacks has created an urgent need for increased awareness on cyber and information security. Peoples and Peoples Bank take a risk-based approach to managing these threats.
Item 1C. Cybersecurity. Cybersecurity Risk Management and Strategy The current threat environment from phishing emails to cyber-attacks has created an urgent need for increased awareness on cyber and information security. Peoples and the Bank take a risk-based approach to managing these threats.
The Information Security Officer has over 20 years in the financial services industry with the last 14 years as a Risk Analyst and then Information Security Officer. The Company’s Information Security department measures and reports on the quality of information and cyber risk management across all functions.
The Information Security Officer has over 20 years in the financial services industry with the last 14 years as a Risk Analyst and then Information Security. The Company’s Information Security department measures and reports on the quality of information and cyber risk management across all functions.
However, the sophistication of cyber threats continues to increase, and the Company’s cybersecurity risk management and strategy may be insufficient or may not be successful in protecting against all cyber incidents.
However, the sophistication of cybersecurity threats continues to increase, and the Company’s cybersecurity risk management and strategy may be insufficient or may not be successful in protecting against all cybersecurity incidents.
Compliance with these best practices along with federal and state regulatory requirements are examined annually by the Pennsylvania Department of Banking, the FDIC and we regularly engage other third-party external auditors and consultants to assess our compliance. Our cyber defense strategy includes continuous monitoring, integrated risk assessment, identification of vulnerabilities and human risk factors, and employee awareness.
Compliance with these best practices along with federal and state regulatory requirements are examined annually by the Department of Banking and the FDIC and we regularly engage third-party external auditors and consultants to assess our compliance. Our cyber defense strategy includes continuous monitoring, integrated risk assessment, identification of vulnerabilities and human risk factors, and employee awareness.
Accordingly, no matter how well designed or implemented the Company’s controls are, it will not be able to anticipate all cyber security breaches, and it may not be able to implement effective preventive measures against such security breaches in a timely manner.
Accordingly, no matter how well designed or implemented the Company’s controls are, it will not be able to anticipate all cybersecurity breaches, and it may not be able to implement effective preventive measures against such security breaches in a timely manner.
We provide additional information security advantages to our customers using our online banking systems and encourage the Bank’s digitally active business customers to take advantage of the cyber and phishing training provided free of charge by the Bank.
We provide additional information security advantages to our customers using our online banking systems and encourage the Bank’s digitally active business customers to take advantage of the cybersecurity and phishing training provided free of charge by the Bank.
For more information on how cybersecurity risk may materially affect the Company’s business strategy, results of operations or financial condition, please refer to Item 1A Risk Factors. Cybersecurity Governance Board of Director Oversight Our Board of Directors has ultimate oversight of cybersecurity risk.
For more information on how cybersecurity risk may materially affect the Company’s business strategy, results of operations or financial condition, please refer to Item 1A Risk Factors. -39- Table of Contents Cybersecurity Governance Board of Director Oversight Our Board of Directors has ultimate oversight of cybersecurity risk.
Information security risk is reported by both the Information Security and Enterprise Risk departments through monthly management metric reporting working groups and multiple layers of quarterly risk -41- Table of Contents committees to achieve an appropriate flow of information risk reporting to the Board.
Information security risk is reported by both the Information Security and Enterprise Risk departments through monthly management metric reporting working groups and multiple layers of quarterly risk committees to achieve an appropriate flow of information risk reporting to the Board.
Cyber exercises with other financial services companies and government agencies help prepare the Bank for cyber-attacks. Incident response scenarios and business continuity exercises test the organizations preparedness for disaster events.
Cybersecurity exercises with other financial services companies and government agencies help prepare the Bank for cybersecurity threats and incidents. Incident response scenarios and business continuity exercises test the organizations preparedness for disaster events.
Additionally, awareness and training on cybersecurity topics is provided to the whole Board on an annual basis. Management’s Role The CIO along with the Information Security Officer is responsible for implementing and maintaining the Company’s cybersecurity risk management program.
Additionally, awareness and training on cybersecurity topics is provided to the whole Board on an annual basis. Management’s Role The CRO and the CIO along with the Information Security Officer are responsible for implementing and maintaining the Company's cybersecurity risk management program. The Information Security Department is led by the Information Security Officer, who reports directly to the CRO.
The Information Security department is led by the Information Security Officer, who reports directly to the CIO and the Board of Directors with dotted-line reporting to the CRO. The Company’s CIO has over 30 years of experience in technology and cybersecurity which includes 24 years in the financial services industry.
The Chief Risk Officer and the Chief Information Officer report directly to the Board IT Committee and the Board. The Company’s CIO has over 30 years of experience in technology and cybersecurity, which includes 24 years in the financial services industry.
The organization also utilizes several national and global third party advisors to ensure the appropriateness of the Bank’s security posture, effective operation of the cyber security discipline and proper assessment of risk. -40- Table of Contents Third-Party Risk Management The Bank has an established third party information security risk management program that reviews and assesses third parties prior to engagement and throughout the third party relationship.
The organization also utilizes several national and global third party advisors to ensure the appropriateness of the Bank’s security posture, effective operation of the cybersecurity discipline and proper assessment of risk.
This program requires periodic risk assessments to be conducted throughout the term of the engagement. Third parties and their employees are required to adhere to information security standards and best practices. The Bank includes in its contracts with third parties that third parties maintain confidentiality, security provisions and business continuity practices.
Third parties and their employees are required to adhere to information security standards and best practices. The Bank includes in its contracts with third parties that third parties maintain confidentiality, security provisions and business continuity practices. Education and Awareness Peoples Security Bank and Trust Company employees are required to complete training on customer information protection at least annually.
Removed
Annual review and acknowledgement of the employee’s information security responsibilities are required. Information security tips are provided on the Bank’s website for all customers to review.
Added
Third-Party Risk Management The Bank has an established third party information security risk management program that reviews and assesses third parties prior to engagement and throughout the third party relationship. This program requires periodic risk assessments to be conducted throughout the term of the engagement.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Propertie s. Our corporate headquarters is located at 150 N. Washington Avenue, Scranton, Pennsylvania, which houses our finance and planning, trust, commercial lending, human resources and investor services divisions, as well as our executive offices. Our operations division is located at 82 Franklin Avenue, Hallstead, Pennsylvania.
Biggest changeItem 2. Propertie s. Our corporate headquarters is located at 102 East Drinker Street, Dunmore, Pennsylvania, which houses executive offices, human resources and investor services divisions. Our operations division is located at 82 Franklin Avenue, Hallstead, Pennsylvania.
We operate 28 full-service community banking offices located within the Allegheny, Bucks, Lackawanna, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna and Wyoming Counties of Pennsylvania, Middlesex County of New Jersey and Broome County of New York. Nine offices are leased and the balance are owned by Peoples Bank. We lease several remote ATM locations throughout our market area.
We operate 39 full-service community banking offices located within the Allegheny, Bucks, Lackawanna, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna and Wyoming Counties of Pennsylvania, Middlesex County of New Jersey and Broome County of New York. Sixteen offices are leased and the balance are owned by the Bank. We lease several remote ATM locations throughout our market area.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 3. Legal Proceeding s. There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, as to which we are a party or of which any of our property is subject. Item 4. Mine Safety Disclosure s. Not applicable. Part I I
Added
Item 3. Legal Proceeding s. Neither the Company nor any of its property is subject to any material legal proceedings. Management, after consultation with legal counsel, does not anticipate that the ultimate liability, if any, arising out of pending and threatened lawsuits will have a material effect on the operating results or financial position of the Company. Item 4.
Added
Mine Safety Disclosure s. Not applicable. -40- Table of Contents Part I I

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor information on dividend restrictions on the Company and Peoples Bank, refer to Part I, Item 1 “Supervision and Regulation – Limitations on Dividends and Other Payments” to this report and refer to the consolidated financial statements and notes to these statements filed at Item 8 to this report and incorporated in their entirety by reference under this Item 5. -42- Table of Contents In accordance with the Merger Agreement, after the effective time of the Merger, Peoples intends to pay a quarterly cash dividend in an amount no less than $0.6175 per share, provided sufficient fund are legally available and Peoples and Peoples Bank each will remain “well-capitalized” under applicable laws, unless the Board of Directors determines otherwise upon the approval of at least 75 percent of the directors.
Biggest changeFor information on dividend restrictions on the Company and the Bank, refer to Part I, Item 1 “Supervision and Regulation – Limitations on Dividends and Other Payments” to this report and refer to the consolidated financial statements and notes to these statements filed at Item 8 to this report and incorporated in their entirety by reference under this Item 5.
During the quarter ended December 31, 2023, we did not issue or sell any shares of our Common Stock or other equity securities pursuant to unregistered transactions in reliance upon an exemption from the registration requirements of the Securities Act.
During the quarter ended December 31, 2024, we did not issue or sell any shares of our Common Stock or other equity securities pursuant to unregistered transactions in reliance upon an exemption from the registration requirements of the Securities Act.
BMI Banks Index. The cumulative total return on the stock or the index equals the total increase in value since December 31, 2018, assuming reinvestment of all dividends paid into the stock or the index.
BMI Banks Index. The cumulative total return on the stock or the index equals the total increase in value since December 31, 2019, assuming reinvestment of all dividends paid into the stock or the index.
The graph and table were prepared assuming that $100 was invested on December 31, 2018, in the common stock and the securities included in the indexes.
The graph and table were prepared assuming that $100 was invested on December 31, 2019, in the common stock and the securities included in the indexes.
As a result, there were no repurchases of our common stock during the three months ended December 31, 2023. ​ -43- Table of Contents The following graph and table show the cumulative total return on the common stock of the Company over the last five years, compared with the cumulative total return of a broad stock market index (the Russell 2000 Index or “Russell 2000”), and the S&P U.S.
There were no repurchases of our common stock during the three months ended December 31, 2024. -41- Table of Contents The following graph and table show the cumulative total return on the common stock of the Company over the last five years, compared with the cumulative total return of a broad stock market index (the Russell 2000 Index or “Russell 2000”), and the S&P U.S.
Item 5. Market for Registrant’s Common Equit y, Related Stockholder Matters and Issuer Purchases of Equity Securities. As of February 29, 2024 there were approximately 5,608 holders of our common stock, $2.00 par value, including individual participants in security position listings.
Item 5. Market for Registrant’s Common Equit y, Related Stockholder Matters and Issuer Purchases of Equity Securities. As of March 3, 2025 there were approximately 7,782 holders of our common stock, $2.00 par value, including individual participants in security position listings.
BMI Banks Index 100.00 137.36 119.83 162.92 135.13 147.41 ​ Source: S&P Global Market Intelligence © 2024 ​ The stock performance graph and related table set forth above shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act. ​ -44- Table of Contents Item 6.
BMI Banks Index 100.00 87.24 118.61 98.38 107.32 143.68 ​ Source: S&P Global Market Intelligence © 2025 ​ The stock performance graph and related table set forth above shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act. ​ -42- Table of Contents Item 6.
The Board declared on January 25, 2024 a first quarter dividend of $0.41 per share payable March 15, 2024.
The Board declared on January 31, 2025 a first quarter dividend of $0.6175 per share payable March 14, 2025.
Comparison of Five-Year Cumulative Total Returns Performance Graph of PEOPLES FINANCIAL SERVICES CORP ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index ​ 12/31/2018 ​ 12/31/2019 ​ 12/31/2020 ​ 12/31/2021 ​ 12/31/2022 ​ 12/31/2023 Peoples Financial Services Corp. 100.00 117.82 89.19 132.17 134.12 130.74 ​ Russell 2000 Index 100.00 125.53 150.58 172.90 137.56 160.85 ​ S&P U.S.
Comparison of Five-Year Cumulative Total Returns Performance Graph of PEOPLES FINANCIAL SERVICES CORP ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index ​ 12/31/2019 ​ 12/31/2020 ​ 12/31/2021 ​ 12/31/2022 ​ 12/31/2023 ​ 12/31/2024 Peoples Financial Services Corp. 100.00 75.70 112.19 113.83 110.97 121.93 ​ Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 ​ S&P U.S.
Removed
On January 29, 2021, our Board of Directors authorized a common stock repurchase plan whereby we are authorized to repurchase up to 343,400 shares of our outstanding common stock through open market purchases. On September 27, 2023, we terminated the repurchase plan as a result of the announced proposed merger with FNCB.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

204 edited+65 added−108 removed123 unchanged
Biggest changeIncome on tax-free investment securities and loans is adjusted to a tax-equivalent basis, a non-GAAP measure, using the prevailing federal statutory tax rate of 21.0 percent in 2023, 2022 and 2021. -66- Table of Contents Summary of net interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, 2023 December 31, 2022 ​ ​ Average ​ Interest Income/ ​ Yield/ Average ​ Interest Income/ ​ Yield/ (Dollars in thousands, except percents) Balance Expense Rate Balance Expense Rate Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ $ 2,605,927 ​ $ 129,013 4.95 % $ 2,306,455 ​ $ 95,505 4.14 % Tax-exempt ​ 225,839 ​ ​ 7,124 3.15 ​ ​ 216,195 ​ ​ 6,436 2.98 ​ Total loans ​ ​ 2,831,766 ​ ​ 136,137 ​ 4.81 ​ ​ 2,522,650 ​ ​ 101,941 ​ 4.04 ​ Investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 468,403 ​ ​ 7,916 1.69 ​ ​ 537,566 ​ ​ 8,236 1.53 ​ Tax-exempt ​ 90,897 ​ ​ 2,003 2.20 ​ ​ 111,083 ​ ​ 2,615 2.35 ​ Total investments ​ ​ 559,300 ​ ​ 9,919 1.77 ​ ​ 648,649 ​ ​ 10,851 1.67 ​ Interest-bearing deposits ​ 6,373 ​ ​ 335 5.26 ​ ​ 8,536 ​ ​ 101 1.17 ​ Federal funds sold ​ ​ 98,535 ​ ​ 5,377 5.46 ​ ​ 53,056 ​ ​ 342 0.65 ​ Total interest-earning assets ​ 3,495,974 ​ 151,768 4.34 % 3,232,891 ​ 113,235 3.50 % Less: allowance for credit losses ​ 24,377 ​ ​ ​ ​ ​ ​ 29,298 ​ ​ ​ ​ ​ ​ Other assets ​ 211,618 ​ ​ ​ ​ ​ ​ 210,392 ​ ​ ​ ​ ​ ​ Total assets ​ $ 3,683,215 ​ $ 151,768 ​ ​ ​ $ 3,413,985 ​ $ 113,235 ​ ​ ​ Liabilities and Stockholders’ Equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market accounts ​ $ 714,940 ​ $ 22,686 3.17 % $ 624,528 ​ $ 4,967 0.80 % Interest-bearing demand and NOW accounts ​ 779,977 ​ ​ 15,586 2.00 ​ ​ 791,653 ​ ​ 4,493 0.57 ​ Savings accounts ​ 474,028 ​ ​ 994 0.21 ​ ​ 520,770 ​ ​ 496 0.10 ​ Time deposits less than $100 ​ 349,990 ​ ​ 13,344 3.81 ​ ​ 127,801 ​ ​ 1,299 1.02 ​ Time deposits $100 or more ​ 200,743 ​ ​ 5,951 2.96 ​ ​ 162,998 ​ ​ 1,377 0.84 ​ Total interest-bearing deposits ​ ​ 2,519,678 ​ ​ 58,561 2.32 ​ ​ 2,227,750 ​ ​ 12,632 0.57 ​ Short-term borrowings ​ 38,331 ​ ​ 1,920 5.01 ​ ​ 42,680 ​ ​ 1,103 2.58 ​ Long-term debt ​ 19,448 ​ ​ 842 4.33 ​ ​ 1,634 ​ ​ 76 4.65 ​ Subordinated debt ​ ​ 33,000 ​ ​ 1,774 5.38 ​ ​ 33,000 ​ ​ 1,774 5.38 ​ Total borrowings ​ ​ 90,779 ​ ​ 4,536 5.00 ​ ​ 77,314 ​ ​ 2,953 3.82 ​ Total interest-bearing liabilities ​ 2,610,457 ​ $ 63,097 2.42 % ​ 2,305,064 ​ $ 15,585 0.68 % Noninterest-bearing deposits ​ 698,749 ​ ​ ​ ​ ​ ​ 753,399 ​ ​ ​ ​ ​ ​ Other liabilities ​ 44,786 ​ ​ ​ ​ ​ ​ 34,517 ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ 329,223 ​ ​ ​ ​ ​ ​ 321,005 ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 3,683,215 ​ ​ ​ ​ ​ ​ $ 3,413,985 ​ ​ ​ ​ ​ ​ Net interest income/spread ​ ​ ​ ​ $ 88,671 1.92 % ​ ​ ​ $ 97,650 2.82 % Net interest margin (Non-GAAP) ​ ​ ​ ​ ​ ​ 2.54 % ​ ​ ​ ​ ​ 3.02 % Tax-equivalent adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ ​ ​ ​ $ 1,496 ​ ​ ​ ​ ​ ​ $ 1,352 ​ ​ ​ Investments ​ ​ ​ ​ 421 ​ ​ ​ ​ ​ ​ 549 ​ ​ ​ Total adjustments ​ ​ ​ ​ $ 1,917 ​ ​ ​ ​ ​ ​ $ 1,901 ​ ​ ​ ​ Note: Average balances were calculated using average daily balances.
Biggest changeThe decrease in 2023 is primarily due to lower origination fees. ​ -66- Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ Interest Income/ ​ Interest ​ ​ (Dollars in thousands, except percents) ​ Balance ​ Expense ​ Rate ​ ​ Assets: ​ ​ ​ ​ ​ ​ Earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ $ 2,306,455 ​ $ 95,505 4.14 % ​ Tax-exempt ​ 216,195 ​ 6,436 2.98 ​ ​ Total loans ​ ​ 2,522,650 ​ ​ 101,941 ​ 4.04 ​ ​ Investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 537,566 ​ 8,236 1.53 ​ ​ Tax-exempt ​ 111,083 ​ 2,615 2.35 ​ ​ Total investments ​ ​ 648,649 ​ ​ 10,851 ​ 1.67 ​ ​ Interest-bearing deposits ​ 8,536 ​ 101 1.17 ​ ​ Federal funds sold ​ 53,056 ​ 342 0.65 ​ ​ Total interest-earning assets ​ 3,232,891 ​ ​ 113,235 3.50 % ​ Less: allowance for loan losses ​ 29,298 ​ ​ ​ ​ ​ ​ ​ Other assets ​ 210,392 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 3,413,985 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders’ Equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market accounts ​ $ 624,528 ​ $ 4,967 0.80 % ​ Interest-bearing demand and NOW accounts ​ 791,653 ​ 4,493 0.57 ​ ​ Savings accounts ​ 520,770 ​ 496 0.10 ​ ​ Time deposits less than $100 ​ 127,801 ​ 1,299 1.02 ​ ​ Time deposits $100 or more ​ 162,998 ​ 1,377 0.84 ​ ​ Total interest-bearing deposits ​ ​ 2,227,750 ​ ​ 12,632 ​ 0.57 ​ ​ Short-term borrowings ​ 42,680 ​ 1,103 2.58 ​ ​ Long-term debt ​ 1,634 ​ 76 4.65 ​ ​ Subordinated debt ​ ​ 33,000 ​ ​ 1,774 ​ 5.38 ​ ​ Total borrowings ​ 77,314 ​ 2,953 3.82 ​ ​ Total interest-bearing liabilities ​ ​ 2,305,064 ​ ​ 15,585 ​ 0.68 % ​ Noninterest-bearing deposits ​ 753,399 ​ ​ ​ ​ ​ ​ ​ Other liabilities ​ 34,517 ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ 321,005 ​ ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 3,413,985 ​ ​ ​ ​ ​ ​ ​ Net interest income/spread ​ ​ ​ ​ $ 97,650 2.82 % ​ Net interest margin (Non-GAAP) ​ ​ ​ ​ ​ ​ 3.02 % ​ Tax-equivalent adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ ​ ​ ​ $ 1,352 ​ ​ ​ ​ Investments ​ ​ ​ ​ 549 ​ ​ ​ ​ Total adjustments ​ ​ ​ ​ $ 1,901 ​ ​ ​ ​ Provision for Credit Losses: The ACL increased $19.9 million to $41.8 million at December 31, 2024, from $21.9 million at the end of 2023.
We employ a number of analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to illustrate our reliance on noncore funds to fund our investments and loans maturing after 2023.
Liquidity: We employ a number of analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to illustrate our reliance on noncore funds to fund our investments and loans maturing after 2023.
A positive gap occurs when the amount of RSA repricing in a specific period is greater than the amount of RSL repricing within that same time frame and is indicated by a RSA/RSL ratio greater than 1.0.
A positive gap occurs when the amount of RSA repricing in a specific period is greater than the amount of RSL repricing within that same time frame and is indicated by a RSA/RSL ratio greater than 1.0.
A negative gap occurs when the amount of RSL repricing is greater than the amount of RSA and is indicated by a RSA/RSL ratio less than 1.0. A positive gap implies that earnings will be impacted favorably if interest rates rise and adversely if interest rates fall during the period.
A negative gap occurs when the amount of RSL repricing is greater than the amount of RSA and is indicated by a RSA/RSL ratio less than 1.0. A positive gap implies that earnings will be impacted favorably if interest rates rise and adversely if interest rates fall during the period.
Noninterest expense was $67.8 million for the year ended December 31, 2023 compared to $62.7 million for the year ended December 31, 2022. Our productivity is measured by the operating efficiency ratio, a non-GAAP measure, defined as noninterest expense less amortization of intangible assets and acquisition related expenses divided by the total of tax-equivalent net interest income and noninterest income.
Noninterest expense was $67.8 million for the year ended December 31, 2023 compared to $62.7 million for the year ended December 31, 2022. Our productivity is measured by the efficiency ratio, a non-GAAP measure, defined as noninterest expense less amortization of intangible assets and acquisition related expenses divided by the total of tax-equivalent net interest income and noninterest income.
There are no conditions or events since this notification that we believe have changed Peoples Bank’s category. For a further discussion of these risk-based capital standards and supervisory actions for noncompliance, refer to the note entitled, “Regulatory matters,” in the Notes to Consolidated Financial Statements to this Annual Report.
There are no conditions or events since this notification that we believe have changed the Bank’s category. For a further discussion of these risk-based capital standards and supervisory actions for noncompliance, refer to the note entitled, “Regulatory matters,” in the Notes to Consolidated Financial Statements to this Annual Report.
Capital Adequacy: Bank regulatory agencies consider capital to be a significant factor in ensuring the safety of a depositor’s accounts. These agencies have adopted minimum capital adequacy requirements that include mandatory and discretionary supervisory actions for noncompliance. Our and Peoples Bank’s risk-based capital ratios are strong and have consistently exceeded the minimum regulatory capital ratios required for adequately capitalized institutions.
Capital Adequacy: Bank regulatory agencies consider capital to be a significant factor in ensuring the safety of a depositor’s accounts. These agencies have adopted minimum capital adequacy requirements that include mandatory and discretionary supervisory actions for noncompliance. Our and the Bank’s risk-based capital ratios are strong and have consistently exceeded the minimum regulatory capital ratios required for adequately capitalized institutions.
During the twelve months ended December 31, 2023, we purchased $259.0 million of brokered certificate of deposits at a weighted average all-in cost of 5.16% and a weighted average original term of 3.6 years. The majority of the brokered CDs, $249.2 million, were purchased with a call feature.
During the twelve months ended December 31, 2023, we purchased $259.0 million of brokered certificate of deposits at a weighted average all-in cost of 5.16 percent and a weighted average original term of 3.6 years. The majority of the brokered CDs, $249.2 million, were purchased with a call feature.
The decrease in noninterest-bearing deposits contributes to the overall cost of funds and the pressure on our net interest margin from the increase in short-term market rates. With regard to interest-bearing deposits, interest-bearing transaction accounts, which include money market accounts and NOW accounts, and savings accounts, increased $25.7 million in 2023.
The decrease in noninterest-bearing deposits contributes to the overall cost of funds and the pressure on our net interest margin from the increase in short-term market rates. With regard to interest-bearing deposits, interest-bearing transaction accounts, which include money market accounts and interest-bearing demand and NOW accounts, and savings accounts, increased $25.7 million in 2023.
Peoples Bank reported Tier 1 capital, Total capital and Leverage ratios of 13.30 percent, 14.12 percent and 9.34 percent at December 31, 2023, and 12.27 percent, 13.26 percent and 9.69 percent at December 31, 2022. Based on the most recent notification from the FDIC, Peoples Bank was categorized as well capitalized at December 31, 2023.
The Bank reported Tier 1 capital, Total capital and Leverage ratios of 13.30 percent, 14.12 percent and 9.34 percent at December 31, 2023, and 12.27 percent, 13.26 percent and 9.69 percent at December 31, 2022. Based on the most recent notification from the FDIC, the Bank was categorized as well capitalized at December 31, 2023.
Average interest-bearing liabilities grew $305.4 million to $2.6 billion in 2023 from $2.3 billion in 2022 resulting in a net increase in interest expense of $6.4 million. In addition, interest-bearing transaction accounts, including money market, NOW and savings accounts grew $32.0 million, which in aggregate caused a $0.7 million increase in interest expense.
Average interest-bearing liabilities grew $305.4 million to $2.6 billion in 2023 from $2.3 billion in 2022 resulting in a net increase in interest expense of $6.4 million. In addition, interest-bearing transaction accounts, including money market, interest-bearing demand and NOW and savings accounts grew $32.0 million, which in aggregate caused a $0.7 million increase in interest expense.
To further supplement our borrowing capacity, we also maintain a borrower-in-custody of collateral arrangement at the Federal Reserve that enables us to pledge certain loans, not being used as collateral at the FHLB-Pgh, as collateral for borrowings at the Federal Reserve.
To further supplement our borrowing capacity, we also maintain a borrower-in-custody of collateral arrangement at the Federal Reserve that enables us to pledge certain loans, not being used as collateral at the FHLB, as collateral for borrowings at the Federal Reserve.
ALCO will continue to focus efforts on strategies in 2024 to improve asset yields and control funding costs to mitigate expected net interest income compression in an attempt to maintain a positive gap position between RSA and RSL. However, these forward-looking statements are qualified in the aforementioned section entitled “Forward-Looking Discussion” in this Management’s Discussion and Analysis.
ALCO will continue to focus efforts on strategies in 2025 to improve asset yields and control funding costs to mitigate expected net interest income compression in an attempt to maintain a positive gap position between RSA and RSL. However, these forward-looking statements are qualified in the aforementioned section entitled “Forward-Looking Discussion” in this Management’s Discussion and Analysis.
A negative gap tends to indicate that earnings will be affected inversely to interest rate changes. -57- Table of Contents Our interest rate sensitivity gap position, illustrating RSA and RSL at their related carrying values, is summarized as follows. The distributions in the table are based on a combination of maturities, call provisions, repricing frequencies and prepayment patterns.
A negative gap tends to indicate that earnings will be affected inversely to interest rate changes. Our interest rate sensitivity gap position, illustrating RSA and RSL at their related carrying values, is summarized as follows. The distributions in the table are based on a combination of maturities, call provisions, repricing frequencies and prepayment patterns.
The maturity distribution based on the carrying value and weighted-average, tax-equivalent yield of the investment debt security portfolio at December 31, 2023, is summarized as follows. The weighted-average yield, based on amortized cost, has been computed for tax-exempt state and municipals on a tax-equivalent basis using the prevailing federal statutory tax rate of 21.0 percent.
The maturity distribution based on the carrying value and weighted-average, tax-equivalent yield of the investment debt security portfolio at December 31, 2024, is summarized as follows. The weighted-average yield, based on amortized cost, has been computed for tax-exempt state and municipals on a tax-equivalent basis using the prevailing federal statutory tax rate of 21.0 percent.
Loans past due ninety days and accruing increased $0.2 million and include eight residential mortgages. For a further discussion of assets classified as nonperforming assets and potential problem loans, refer to Note 3, “Loans, net and the allowance for credit losses,” in the Notes to Consolidated Financial Statements to this Annual Report.
Loans past due ninety days and accruing increased $0.2 million and include eight residential mortgages. For a further discussion of assets classified as nonperforming assets and potential problem loans, refer to Note 4, “Loans, net and the allowance for credit losses,” in the Notes to Consolidated Financial Statements to this Annual Report.
We will continue to monitor our IRR position in 2024 and anticipate employing deposit and loan pricing strategies and directing the reinvestment of loan and investment payments and prepayments in order to maintain our target IRR position. Financial institutions are affected differently by inflation than commercial and industrial companies that have significant investments in fixed assets and inventories.
We will continue to monitor our IRR position in 2025 and anticipate employing deposit and loan pricing strategies and directing the reinvestment of loan and investment payments and prepayments in order to maintain our target IRR position. Financial institutions are affected differently by inflation than commercial and industrial companies that have significant investments in fixed assets and inventories.
At December 31, 2023, our noncore funds consisted of time deposits in denominations of $100 thousand or more, brokered deposits, short-term borrowings, and long-term and subordinated debt. Large denomination time deposits are particularly not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly volatile.
At December 31, 2024, our noncore funds consisted of time deposits in denominations of $100 thousand or more, brokered deposits, short-term borrowings, and long-term and subordinated debt. Large denomination time deposits are particularly not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly volatile.
For a discussion of our policy regarding nonperforming assets and the recognition of interest income on impaired loans, refer to the notes entitled, “Summary of significant accounting policies — Nonperforming assets,” and “Loans, net and allowance for loan losses” in the Notes to Consolidated Financial Statements to this Annual Report which are incorporated in this item by reference.
For a discussion of our policy regarding nonperforming assets and the recognition of interest income on impaired loans, refer to the notes entitled, “Summary of significant accounting policies — Nonperforming assets,” and “Loans, net and allowance for credit losses” in the Notes to Consolidated Financial Statements to this Annual Report which are incorporated in this item by reference.
For example, the conservative nature of our Asset/Liability Management Policy assigns personal NOW accounts to the “Due after three months but within twelve months” repricing interval. In reality, these accounts may reprice less frequently and in different magnitudes than changes in general market interest rate levels.
For example, the conservative nature of our Asset/Liability Management Policy assigns personal interest-bearing demand and NOW accounts to the “Due after three months but within twelve months” repricing interval. In reality, these accounts may reprice less frequently and in different magnitudes than changes in general market interest rate levels.
Net income, adjusted for the effects of noncash expenses such as depreciation, amortization and accretion of tangible and intangible assets and investment securities, and the provision for loan losses, is the primary source of funds from operations. Net cash provided by financing activities equaled $142.0 million in 2023. Net cash provided by financing activities was $183.4 million in 2022.
Net income, adjusted for the effects of noncash expenses such as depreciation, amortization and accretion of tangible and intangible assets and investment securities, and the provision for credit losses, is the primary source of funds from operations. Net cash provided by financing activities equaled $142.0 million in 2023. Net cash provided by financing activities was $183.4 million in 2022.
For a discussion of our policy regarding nonperforming assets and the recognition of interest income on impaired loans, refer to the notes entitled, “Summary of significant accounting policies — Nonperforming assets,” and “Loans, net and allowance for loan losses” in the Notes to Consolidated Financial Statements to this Annual Report which are incorporated in this item by reference.
For a discussion of our policy regarding nonperforming assets and the recognition of interest income on impaired loans, refer to the notes entitled, “Summary of significant accounting policies — Nonperforming assets,” and “Loans, net and allowance for credit losses” in the Notes to Consolidated Financial Statements to this Annual Report which are incorporated in this item by reference.
At December 31, 2023, we completed a qualitative goodwill impairment test to determine if it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the Company is less than its carrying value, including goodwill, as described by the GAAP methodology.
At December 31, 2024, we completed a qualitative goodwill impairment test to determine if it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the Company is less than its carrying value, including goodwill, as described by the GAAP methodology.
We believe our risk management practices with regard to IRR were suitable and adequate given the level of IRR exposure at December 31, 2023. The Asset/Liability Committee (“ALCO”), comprised of members of our bank’s Board of Directors, senior management and other appropriate officers, oversees our IRR management program.
We believe our risk management practices with regard to IRR were suitable and adequate given the level of IRR exposure at December 31, 2024. The Asset/Liability Committee (“ALCO”), comprised of members of our bank’s Board of Directors, senior management and other appropriate officers, oversees our IRR management program.
Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as global -45- Table of Contents pandemics or natural disasters) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.
Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as global pandemics or natural disasters) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.
The change in our cumulative one-year ratio from the previous year-end resulted from a $201.7 million or 20.0 percent increase in RSA partially offset by a $191.1 million or 12.9 percent increase in RSL maturing or repricing within one year. The increase in RSA resulted primarily from a $144.7 million increase in federal funds sold.
The change in our cumulative one-year ratio from the previous year-end resulted from a $20.7 million or 20.0 percent increase in RSA offset by a $191.1 million or 12.9 percent increase in RSL maturing or repricing within one year. The increase in RSA resulted primarily from a $144.7 million increase in federal funds sold.
Given instantaneous and parallel shifts in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending December 31, 2024, would decrease 0.8 percent from model results using current interest rates.
Given instantaneous and parallel shifts in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending December 31, 2024, would decrease 0.2 percent from model results using current interest rates.
Based on this analysis, we concluded it is more likely than not that the fair value of the Company, as of December 31, 2023, is higher than its carrying value, and, therefore, goodwill is not considered impaired and no further testing is required.
Based on this analysis, we concluded it is more likely than not that the fair value of the Company, as of December 31, 2024, is higher than its carrying value, and, therefore, goodwill is not considered impaired and no further testing is required.
With the tax-equivalent yield on the investment -65- Table of Contents portfolio increasing 10 basis points to 1.77 percent in 2023 from 1.67 percent in 2022, interest income increased $0.6 million.
With the tax-equivalent yield on the investment -75- Table of Contents portfolio increasing 10 basis points to 1.77 percent in 2023 from 1.67 percent in 2022, interest income increased $0.6 million.
Long term borrowings provided a net inflow of $25.0 million in 2023, and none in 2022. Inflows in 2023 were also partially offset by a $0.6 million net decrease due to payments made to our long-term debt as well as cash dividends paid of $11.7 -60- Table of Contents million and the retirement of common stock of $5.9 million.
Long term borrowings provided a net inflow of $25.0 million in 2023, and none in 2022. Inflows in 2023 were also partially offset by a $0.6 million net decrease due to payments made to our long-term debt as well as cash dividends paid of $11.7 million and the retirement of common stock of $5.9 million.
We provide deposit and loan products and other financial services to individual and corporate customers in our current market area. There are no significant concentrations of credit risk from any individual counterparty or groups of counterparties, except for geographic concentrations in our market area. -50- Table of Contents Credit risk is the principal risk associated with these instruments.
We provide deposit and loan products and other financial services to individual and corporate customers in our current market area. There are no significant concentrations of credit risk from any individual counterparty or groups of counterparties, except for geographic concentrations in our market area. Credit risk is the principal risk associated with these instruments.
In addition, Peoples’ non-GAAP measures may not be comparable to non-GAAP measures of other companies. The tax rate used to calculate the FTE adjustment was 21 percent for 2023, 2022, and 2021.
In addition, Peoples’ non-GAAP measures may not be comparable to non-GAAP measures of other companies. The tax rate used to calculate the FTE adjustment was 21 percent for 2024, 2023, and 2022.
The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. See Note 13 to the Audited Consolidated Financial Statements for additional information.
The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. See Note 16 to the Audited Consolidated Financial Statements for additional information.
As of December 31, 2023 and December 31, 2022, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Company.
As of December 31, 2024 and December 31, 2023, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Company.
Due to these factors, IRR and effectively managing it are very important to both bank management and regulators. Bank regulations require us to develop and maintain an IRR management program, overseen by our Board of Directors and senior management that involves a comprehensive risk management process in order to effectively identify, measure, monitor and control risk.
IRR and effectively managing it are very important to both bank management and regulators. Bank regulations require us to develop and maintain an IRR management program, overseen by our Board of Directors and senior management that involves a comprehensive risk management process in order to effectively identify, measure, monitor and control risk.
At December 31, 2022, we had cumulative one-year RSA/RSL of 0.69, a positive gap. As previously mentioned, a positive gap indicates that if interest rates increase, our earnings would likely be favorably impacted. The overall focus of ALCO is to maintain a well-balanced IRR position in order to safeguard future earnings during varying volatile interest rate environments.
At December 31, 2023, we had cumulative one-year RSA/RSL of 0.73, a positive gap. As previously mentioned, a positive gap indicates that if interest rates increase, our earnings would likely be favorably impacted. The overall focus of ALCO is to maintain a well-balanced IRR position in order to safeguard future earnings during varying volatile interest rate environments.
Loans averaged $2.8 billion in 2023, compared to $2.5 billion in 2022. Taxable loans averaged $2.6 billion, while tax-exempt loans averaged $0.2 billion in 2023. The loan portfolio continues to play the prominent role in our earning asset mix. As a percentage of earning assets, average loans equaled 81.0 percent in 2023, an increase from 78.0 percent in 2022.
Taxable loans averaged $2.6 billion, while tax-exempt loans averaged $0.2 billion in 2023. The loan portfolio continues to play the prominent role in our earning asset mix. As a percentage of earning assets, average loans equaled 81.0 percent in 2023, an increase from 78.0 percent in 2022.
Investment securities averaged $559.3 million and equaled 16.0 percent of average earning assets in 2023, compared to $648.6 million and 20.1 percent of average earning assets in 2022. The tax-equivalent yield on the investment portfolio -48- Table of Contents increased 10 basis points to 1.77 percent in 2023 from 1.67 percent in 2022.
Investment securities averaged $559.3 million and equaled 16.0 percent of average earning assets in 2023, compared to $648.6 million and 20.1 percent of average earning assets in 2022. The tax-equivalent yield on the investment portfolio increased 10 basis points to 1.77 percent in 2023 from 1.67 percent in 2022.
Item 7. Management’s Discussion and Analysi s of Financial Condition and Results of Operations. Management’s Discussion and Analysis 2023 versus 2022 Management’s Discussion and Analysis appearing on the following pages should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis 2022 versus 2021 contained in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysi s of Financial Condition and Results of Operations. Management’s Discussion and Analysis 2024 versus 2023 Management’s Discussion and Analysis appearing on the following pages should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis 2024 versus 2023 contained in this Annual Report on Form 10-K.
We rely on dividends received from our subsidiary, Peoples Bank, for payment of dividends to stockholders. Peoples Bank’s ability to pay dividends is subject to federal and state regulations.
We rely on dividends received from our subsidiary, the Bank, for payment of dividends to stockholders. The Bank’s ability to pay dividends is subject to federal and state regulations.
The primary sources of earning assets are loans and investment securities, while interest-bearing deposits and borrowings comprise interest-bearing liabilities. Net interest income is impacted by: ● Variations in the volume, rate and composition of earning assets and interest-bearing liabilities; ● Changes in general market interest rates; and -63- Table of Contents ● The level of nonperforming assets.
The primary sources of earning assets are loans and investment securities, while interest-bearing deposits and borrowings comprise interest-bearing liabilities. Net interest income is impacted by: ● Variations in the volume, rate and composition of earning assets and interest-bearing liabilities; ● Changes in general market interest rates; and ● The level of nonperforming assets.
At year end, brokered deposits totaled $261.0 million and represented 8 percent of total deposits. Furthermore, the Company has a brokered deposit to total asset policy limit of 10 percent, and at December 31, 2023 the percentage was 7.0 percent.
At year end, brokered deposits totaled $261.0 million and represented 8 percent of total deposits. Furthermore, in 2023, the Company had a brokered deposit to total asset policy limit of 10 percent, and at December 31, 2023, the percentage was 7.0 percent.
Our Board of Directors intends to continue paying cash dividends in the future and has declared a cash dividend in the first quarter of 2024 of $0.41 per share. Our ability to declare and pay dividends in the future is based on our operating results, financial and economic conditions, capital and growth objectives, dividend restrictions and other relevant factors.
Our Board of Directors intends to continue paying cash dividends in the future and has declared a cash dividend in the first quarter of 2025 of $0.6175 per share. Our ability to declare and pay dividends in the future is based on our operating results, financial and economic conditions, capital and growth objectives, dividend restrictions and other relevant factors.
We believe our liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis. We maintain a contingency funding plan to address liquidity in the event of a funding crisis.
We believe our liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis. -58- Table of Contents We maintain a contingency funding plan to address liquidity in the event of a funding crisis.
Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After one but ​ After five but ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, ​ Within one year ​ within five years ​ within ten years ​ After ten years ​ Total except percents) ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield U.S.
Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. -46- Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After one but ​ After five but ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, ​ Within one year ​ within five years ​ within ten years ​ After ten years ​ Total except percents) ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield ​ Amount ​ Yield U.S.
There were no impairment charges recognized for the year ended December 31, 2023 and no other-than-temporary impairments recognized for the years ended December 31, 2022 and 2021. For additional information related to impairment charges refer to Note 2 entitled “Investment securities” in the Notes to Consolidated Financial Statements to this Annual Report.
There were no impairment charges recognized for the years ended December 31, 2024 and December 31, 2023, and no other-than-temporary impairments recognized for the year ended December 31, 2022. For additional information related to impairment charges refer to Note 3 entitled “Investment securities” in the Notes to Consolidated Financial Statements to this Annual Report.
Given instantaneous and parallel shifts in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending December 31, 2023, would decrease 0.8 percent from model results using current interest rates.
Given instantaneous and parallel shifts in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending December 31, 2025, would decrease 0.2 percent from model results using current interest rates.
At December 31, 2022, our noncore funds consisted of time deposits in denominations of $100 thousand or more, short-term borrowings, and long-term and subordinated debt. Large denomination time deposits are particularly not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly volatile.
At December 31, 2023, our noncore funds consisted of time deposits in denominations of $100 thousand or more, short-term borrowings, and long-term and subordinated debt. Large denomination time deposits are particularly not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly -73- Table of Contents volatile.
As a result, we have created a funding program that ensures the -59- Table of Contents availability of various alternative wholesale funding sources that can be used whenever appropriate.
As a result, we have created a funding program that ensures the availability of various alternative wholesale funding sources that can be used whenever appropriate.
Occupancy and equipment expense increased $0.6 million or 3.4 percent to $17.1 million in 2023 from $16.6 million in 2022, due to higher technology costs related to increased account and transaction volumes, and increased facility expenses. Acquisition related expenses totaled $1.8 million in 2023. There were no comparable expenses in 2022 and 2021.
Occupancy and equipment expense increased $0.6 million or 3.4 percent to $17.1 million in 2023 from $16.6 million in 2022, due to higher technology costs related to increased account and transaction volumes, and increased facility expenses. Acquisition related expenses totaled $1.8 million in 2023.
Loans charged-off, net of recoveries equaled $2.9 million or 0.10 percent of average loans in 2023, compared to $0.5 million or 0.02 percent of average loans in 2022. Investment Portfolio: Primarily, our investment portfolio provides a source of liquidity needed to meet expected loan demand and generates a reasonable return in order to increase our profitability.
Loans charged-off, net of recoveries equaled $1.1 million or 0.03 percent of average loans in 2024, compared to $2.9 million or 0.10 percent of average loans in 2023. Investment Portfolio: Primarily, our investment portfolio provides a source of liquidity needed to meet expected loan demand and generates a reasonable return in order to increase our profitability.
Other expenses include general operating expenses such as marketing, other taxes, stationery and supplies, contractual services, insurance, including FDIC assessment and loan collection costs. During 2023, we incurred expenses related to our proposed strategic combination with FNCB Bancorp, Inc., such as legal and consulting costs. Some of our noninterest costs and expenses are variable while the remainder is fixed.
Other expenses include general operating expenses such as marketing, other taxes, stationery and supplies, contractual services, insurance, including FDIC assessment and loan collection costs. During 2024 and 2023, we incurred non-recurring expenses related to our merger with FNCB Bancorp, Inc., such as legal and consulting costs. Some of our noninterest costs and expenses are variable while the remainder is fixed.
The yield on the loan portfolio may increase as repayments on loans are replaced with new originations at current market rates and floating and adjustable rate loans continue to reprice upward.
The yield on the loan portfolio may decrease as repayments on loans are replaced with new originations at current market rates and floating and adjustable-rate loans continue to reprice downward.
Nonperforming assets equaled $4.9 million or 0.13 percent of total assets at December 31, 2023 compared to $4.1 million or 0.12 percent at December 31, 2022. The ACL equaled $21.9 million or 0.77 percent of loans, net, at December 31, 2023, compared to $27.5 million or 1.01 percent at year-end 2022.
Nonperforming assets equaled $4.9 million or 0.13 percent of total assets at December 31, 2023 compared to $4.1 million or 0.12 percent at December 31, 2022. The allowance for credit losses equaled $21.9 million or 0.77 percent of loans, net, at December 31, 2023, compared to $27.5 million or 1.01 percent at year-end 2022.
A negative gap tends to indicate that earnings will be affected inversely to interest rate changes. At December 31, 2022, we had cumulative one-year RSA/RSL ratio of 0.69, a positive gap. At December 31, 2021, we had cumulative one-year RSA/RSL of 1.16, a positive gap.
A negative gap tends to indicate that earnings will be affected inversely to interest rate changes. At December 31, 2023, we had cumulative one-year RSA/RSL ratio of 0.73, a positive gap. At December 31, 2022, we had cumulative one-year RSA/RSL of 0.69, a positive gap.
For additional information, see Note 1 “Immaterial Prior Period Adjustment.” The ACL decreased $5.6 million to $21.9 million at December 31, 2023, from $27.5 million at the end of 2022. In addition to the transition adjustment of $3.3 million, a net provision for credit losses of $0.6 million was recorded.
For additional information, see Note 1 “Allowance for Credit Losses”. The ACL decreased $5.6 million to $21.9 million at December 31, 2023, from $27.5 million at the end of 2022. In addition to the transition adjustment of $3.3 million, a net provision for credit losses of $0.6 million was recorded.
With respect to the $191.1 million increase in RSL maturing or repricing within a twelve month time horizon, non-maturity deposits increased $156.1 million due to customers seeking liquid accounts and saving at a higher percentage, while time deposits increased $134.7 million.
With respect to the $191.1 million increase in RSL maturing or repricing within a twelve month time horizon, non-maturity deposits increased $156.1 million due to customers seeking liquid accounts and saving at a higher percentage, while time deposits increased $134.7 million. Short-term borrowings decreased $97.3 million.
The projected impact of instantaneous changes in interest rates on our net interest income and economic value of equity at December 31, 2023, based on our simulation model, is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ % Change in Changes in Interest Rates (basis points) ​ Net Interest Income ​ Economic Value of Equity ​ Metric Policy Metric Policy +400 (2.9) ​ (20.0) ​ 26.1 ​ (40.0) ​ +300 (2.5) ​ (20.0) ​ 20.3 ​ (30.0) ​ +200 (2.2) ​ (10.0) ​ 12.9 ​ (20.0) ​ +100 (0.8) ​ (10.0) ​ 8.5 ​ (10.0) ​ Static ​ ​ ​ ​ ​ ​ ​ ​ ​ -100 2.8 ​ (10.0) ​ (12.6) ​ (10.0) ​ -200 3.5 ​ (10.0) ​ (33.9) ​ (20.0) ​ -300 3.7 ​ (20.0) ​ (63.4) ​ (30.0) ​ -400 2.6 ​ (20.0) ​ (111.3) ​ (40.0) ​ Our simulation model creates pro forma net interest income scenarios under various interest rate shocks.
The projected impact of instantaneous changes in interest rates on our net interest income and economic value of equity at December 31, 2024, based on our simulation model, is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ % Change in Changes in Interest Rates (basis points) ​ Net Interest Income ​ Economic Value of Equity ​ Metric Policy Metric Policy +400 (1.2) ​ (20.0) ​ 4.4 ​ (40.0) ​ +300 (0.9) ​ (20.0) ​ 3.7 ​ (30.0) ​ +200 (0.7) ​ (10.0) ​ 2.6 ​ (20.0) ​ +100 (0.2) ​ (10.0) ​ 1.9 ​ (10.0) ​ Static ​ ​ ​ ​ ​ ​ ​ ​ ​ -100 0.2 ​ (10.0) ​ (3.6) ​ (10.0) ​ -200 (0.5) ​ (10.0) ​ (9.3) ​ (20.0) ​ -300 (0.7) ​ (20.0) ​ (17.1) ​ (30.0) ​ -400 (0.3) ​ (20.0) ​ (29.1) ​ (40.0) ​ Our simulation model creates pro forma net interest income scenarios under various interest rate shocks.
In an attempt to limit IRR and improve liquidity, we continually examine the maturity distribution and interest rate sensitivity of the loan portfolio. Fixed-rate loans represented 51.4 percent of the loan portfolio at December 31, 2023, compared to floating or adjustable-rate loans at 48.6 percent.
In an attempt to limit IRR and improve liquidity, we continually examine the maturity distribution and interest rate sensitivity of the loan portfolio. Fixed-rate loans represented 50.6 percent of the loan portfolio at December 31, 2024, compared to floating or adjustable-rate loans at 49.4 percent.
Loans on nonaccrual status, excluding troubled debt restructured nonaccrual loans, increased $0.8 million due primarily to placing a collateral dependent commercial real estate loan on nonaccrual as the primary source of repayment is in doubt and there is limited secondary sources due to bankruptcy. At December 31, 2023 and 2022, there were no foreclosed properties.
Loans on nonaccrual status, excluding modified loans for borrowers experiencing difficulty, increased $0.8 million due primarily to placing a collateral dependent commercial real estate loan on nonaccrual as the primary source of repayment is in doubt and there is limited secondary sources due to bankruptcy. At December 31, 2023 and 2022, there were no foreclosed properties.
Interest income on loans includes fees of $0.4 million in 2023, $1.9 million in 2022 and $6.0 million in 2021.
Interest income on loans includes fees of $0.9 million in 2024, $0.4 million in 2023 and $1.9 million in 2022.
Among other specific objectives, this comprehensive plan: (i) attempts to ensure that we and Peoples Bank remain well capitalized under the regulatory framework for prompt corrective action; (ii) evaluates our capital adequacy exposure through a comprehensive risk assessment; (iii) incorporates periodic stress testing in accordance with the Federal Reserve Board’s Supervisory Capital Assessment Program (“SCAP”); (iv) establishes event triggers and action plans to ensure capital adequacy; and (v) identifies realistic and readily available alternative sources for augmenting capital if higher capital levels are required.
Among other specific objectives, this comprehensive plan: (i) attempts to ensure that we and the Bank remain well capitalized under the regulatory framework for prompt corrective action; (ii) evaluates our capital adequacy exposure through a comprehensive risk assessment; (iii) incorporates periodic stress testing in accordance with the Federal Reserve Board’s Supervisory Capital Assessment Program (“SCAP”); (iv) establishes event triggers and action plans to ensure capital adequacy; and (v) identifies realistic and readily available alternative sources for augmenting capital if higher capital levels are required. -60- Table of Contents Bank regulatory agencies consider capital to be a significant factor in ensuring the safety of a depositor’s accounts.
There was a positive volume variance that was offset by a negative rate variance. The growth in average interest-earning assets exceeded that of interest-bearing liabilities, and resulted in additional tax-equivalent net interest income, a non-GAAP measure, of $6.2 million. A rate variance resulted in a decrease in net interest income of $15.2 million as liabilities repriced quicker than assets.
The growth in average interest-earning assets exceeded that of interest-bearing liabilities, and resulted in additional tax-equivalent net interest income, a non-GAAP measure, of $6.2 million. A rate variance resulted in a decrease in net interest income of $15.2 million as liabilities repriced quicker than assets.
Any impairment losses arising from such testing are reported in the income statement in the current period as a separate line item within operations. Goodwill totaled $63.4 million at December 31, 2023.
Any impairment losses arising from such testing are reported in the income statement in the current period as a separate line item within operations. Goodwill totaled $76.0 million at December 31, 2024.
Identified alternative funding sources include: ● FHLB-Pgh liquidity contingency line of credit; ● Federal Reserve discount window and Bank Term Funding Program; ● Internet certificates of deposit; ● Brokered deposits; ● Institutional Deposit Corporation deposits; ● Repurchase agreements; and ● Federal funds purchased.
Identified alternative funding sources include: ● FHLB Pittsburgh liquidity contingency line of credit; ● Federal Reserve discount window; ● Internet certificates of deposit; ● Brokered deposits; ● Institutional Deposit Corporation deposits; ● Repurchase agreements; ● Correspondent bank lines of credit and ● Federal funds purchased.
Cash and cash equivalents consist of cash on hand, cash items in the process of collection, noninterest-bearing and interest-bearing deposits with other banks and federal funds sold. Cash and cash equivalents decreased $242.1 million for the year ended December 31, 2022, primarily due to loan growth outpacing deposit growth.
Cash and cash equivalents consist of cash on hand, cash items in the process of collection, noninterest-bearing and interest-bearing deposits with other banks and federal funds sold. Cash and cash equivalents decreased $51.5 million for the year ended December 31, 2024, primarily due to loan growth outpacing deposit growth and the repayment of borrowings.
At December 31, 2022, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was 9.6 percent. Our net short-term noncore funding dependence ratio, noncore funds maturing within one year, less short-term investments to long-term assets equaled 8.5 percent.
At December 31, 2024, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was 12.7 percent. Our net short-term noncore funding dependence ratio, noncore funds maturing within one year, less short-term investments to long-term assets equaled 6.6 percent.
At December 31, 2023 and 2022, the Company had $0.9 billion and $1.1 billion in uninsured deposits in excess of the FDIC insurance limit of $250,000. At December 31, 2023 and 2022, the Company had $121.3 million and $92.7 million, respectively, in time deposits in excess of $250,000 maturing as disclosed in the table below.
At December 31, 2024 and 2023, the Company had $1.4 billion and $0.9 billion in uninsured deposits in excess of the FDIC insurance limit of $250,000. -54- Table of Contents At December 31, 2024 and 2023, the Company had $184.0 million and $121.3 million, respectively, in time deposits in excess of $250,000 maturing as disclosed in the table below.
Short-term borrowings decreased $97.3 million. -58- Table of Contents Static gap analysis, although a credible measuring tool, does not fully illustrate the impact of interest rate changes on future earnings. First, market rate changes normally do not equally or simultaneously affect all categories of assets and liabilities.
Long-term borrowings increased $40.9 million. -57- Table of Contents Static gap analysis, although a credible measuring tool, does not fully illustrate the impact of interest rate changes on future earnings. First, market rate changes normally do not equally or simultaneously affect all categories of assets and liabilities.
Deposits: Our deposit base is the primary source of funds to support our operations. We offer a variety of deposit products to meet the needs of our individual and commercial customers. Total deposits grew $232.4 million or 7.6 percent to $3.3 billion at the end of 2023.
We offer a variety of deposit products to meet the needs of our individual, commercial and municipal customers. Total deposits grew $232.4 million or 7.6 percent to $3.3 billion at the end of 2023.
We declared dividends of $1.64 per share in 2023, $1.58 per share in 2022, and $1.50 per share in 2021. The dividend payout ratio, dividends declared as a percent of net income, equaled 42.8 percent in 2023, 29.9 percent in 2022 and 24.9 percent in 2021.
We declared dividends of $2.06 per share in 2024, $1.64 per share in 2023, and $1.58 per share in 2022. The dividend payout ratio, dividends declared as a percent of net income, equaled 208.1 percent in 2024, 42.8 percent in 2023 and 29.9 percent in 2022.
The average life of the investment portfolio decreased to 6.1 years at December 31, 2023 from 7.0 years at year end 2022, while the effective duration of the investment portfolio decreased to 4.4 years at December 31, 2023 from 4.8 years at December 31, 2022.
The average life of the investment portfolio decreased to 5.6 years at December 31, 2024 from 6.1 years at year end 2023, while the effective duration of the investment portfolio increased to 4.8 years at December 31, 2024 from 4.4 years at December 31, 2023.
By utilizing these credits, we reduced our income tax expense by $755 thousand in 2023 and $911 thousand in 2022.
By utilizing these credits, we reduced our income tax expense by $631 thousand in 2024 and $755 thousand in 2023.
Management cannot ensure that charge-offs in future periods will not exceed the ACL or that additional increases in the ACL will not be required, resulting in an adverse impact on operating results. The ACL decreased $5.6 million to $21.9 million at December 31, 2023, from $27.5 million at the end of 2022.
Management cannot ensure that charge-offs in future periods will not exceed the ACL or that additional increases in the ACL will not be required, resulting in an adverse impact on operating results. The ACL increased $19.9 million to $41.8 million at December 31, 2024, from $21.9 million at the end of 2023.
At December 31, 2023, the pooled component of the ACL consisted of $5.2 million in quantitative and $16.6 million in qualitative components as compared to $1.3 million and $26.1 million, respectively at December 31, 2022. Goodwill is evaluated at least annually for impairment or more frequently if conditions indicate potential impairment exist.
At December 31, 2024, the pooled portion of the ACL consisted of $15.5 million in quantitative and $25.3 million in qualitative components as compared to $5.2 million and $16.6 million, respectively at December 31, 2023. -43- Table of Contents Goodwill Goodwill is evaluated at least annually for impairment or more frequently if conditions indicate potential impairment exist.
The higher salary expense in 2023 was due primarily to lower deferred loan origination costs, which are recorded as a contra-salary expense, of $0.9 million. Benefits saw increases of $1.0 million in health insurance costs and profit-sharing expenses.
Salaries and payroll taxes increased $0.9 million or 3.0 percent and employee benefits expense increased $0.9 million or 20.4 percent. The higher salary expense in 2023 was due primarily to lower deferred loan origination costs, which are recorded as a contra-salary expense, of $0.9 million. Benefits saw increases of $1.0 million in health insurance costs and profit-sharing expenses.
The following table reconciles the non-GAAP financial measures of FTE net interest income for the years ended 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended December 31, 2023 ​ 2022 ​ ​ 2021 Interest income (GAAP) ​ $ 149,851 ​ ​ $ 111,334 ​ ​ $ 94,057 Adjustment to FTE ​ 1,917 ​ ​ 1,901 ​ ​ ​ 1,512 Interest income adjusted to FTE (non-GAAP) ​ 151,768 ​ ​ 113,235 ​ ​ ​ 95,569 Interest expense ​ 63,097 ​ ​ 15,585 ​ ​ ​ 9,422 Net interest income adjusted to FTE (non-GAAP) ​ $ 88,671 ​ ​ $ 97,650 ​ ​ $ 86,147 The efficiency ratio is noninterest expenses, less amortization of intangible assets and acquisition related expenses, as a percentage of FTE net interest income plus noninterest income less gains and/or losses on debt security sales and gains on sale of assets.
The following table reconciles the non-GAAP financial measures of FTE net interest income for the years ended 2024, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended December 31 2024 ​ 2023 ​ ​ 2022 Interest income (GAAP) ​ $ 211,460 ​ ​ $ 149,851 ​ ​ $ 111,334 Adjustment to FTE ​ 2,367 ​ ​ 1,917 ​ ​ ​ 1,901 Interest income adjusted to FTE (non-GAAP) ​ 213,827 ​ ​ 151,768 ​ ​ ​ 113,235 Interest expense ​ 95,471 ​ ​ 63,097 ​ ​ ​ 15,585 Net interest income adjusted to FTE (non-GAAP) ​ $ 118,356 ​ ​ $ 88,671 ​ ​ $ 97,650 -62- Table of Contents The non-GAAP efficiency ratio is noninterest expenses, less amortization of intangible assets and acquisition related expenses, as a percentage of FTE net interest income plus noninterest income less gains and/or losses on debt security sales and gains on sale of assets.
We reported net unrealized holding losses, included as a separate component of stockholders’ equity of $40.3 million, net of income taxes of $11.3 million, at December 31, 2023, and an unrealized holding loss of $52.0 million, net of income taxes of $14.3 million, at December 31, 2022.
We reported net unrealized holding losses, included as a separate component of stockholders’ equity of $38.3 million, net of income taxes of $10.7 million, at December 31, 2024, and an unrealized holding loss of $40.3 million, net of income taxes of $11.3 million, at December 31, 2023.
Our Total capital ratio was 14.16 percent and 12.13 percent at December 31, 2023 and 2022, respectively. Our and Peoples Bank’s common equity Tier I capital to risk-weighted assets ratios were 12.10 percent and 13.30 percent at December 31, 2023 and 11.13 percent and 12.27 percent at December 31, 2022.
Our and the Bank’s common equity Tier I capital to risk-weighted assets ratios were 12.10 percent and 13.30 percent at December 31, 2023 and 11.13 percent and 12.27 percent at December 31, 2022.
Average noninterest-bearing deposits decreased $54.7 million, while average interest-bearing accounts grew $291.9 million. Average interest-bearing transaction deposits, including money market and NOW, and savings accounts, increased $32.0 million while average total time deposits increased $259.9 million when comparing 2023 and 2022. -55- Table of Contents Our cost of interest-bearing deposits increased to 2.32 percent in 2023.
Average interest-bearing transaction deposits, including money market and interest-bearing demand and NOW, and savings accounts, increased $32.0 million while average total time deposits increased $259.9 million when comparing 2023 and 2022. Our cost of interest-bearing deposits increased to 2.32 percent in 2023.

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