Peoples Financial Services Q3 profit rises to $19.1M

A $20.265 million third-quarter other comprehensive loss accompanied higher net income; the fourth-quarter dividend is $0.6250 per share.

Available on EDGAR 11/06/2026 - 04:07 PM EST Accepted by SEC EDGAR 11/06/2026 - 04:06 PM EST Learn about SEC filing dates

Rhea-AI Filing Summary

Peoples Financial Services Corp. (PFIS) reported third-quarter 2026 net income of $19.131 million, compared with $15.246 million a year earlier; diluted earnings per share were $1.90 versus $1.51. Net interest income was $47.287 million, compared with $41.183 million. At September 30, 2026, loans totaled $4,363.480 million and deposits totaled $4,672.137 million.

Comprehensive loss was $1.134 million for the quarter, compared with comprehensive income of $21.058 million in 2025; other comprehensive loss was $20.265 million, primarily reflecting unrealized losses on available-for-sale securities. The company completed the $900 thousand purchase of its Exeter branch facility on October 29, 2026, obtaining ownership of the property and terminating the related operating lease. It expects to derecognize the related right-of-use asset and lease liability of approximately $130 thousand in the fourth quarter. The board declared a $0.6250 per-share fourth-quarter dividend, payable December 15, 2026, to shareholders of record November 30, 2026, equal to the third-quarter per-share dividend.

1 point · 0 major

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0 major · 1 point

How the balance works

Positive

• Moderate pointThird-quarter net income reached $19.131 million, versus $15.246 million a year earlier.

Negative

• Moderate pointThird-quarter comprehensive results were a $1.134 million loss, versus income of $21.058 million.

Filing Explained

The 10-Q reports that Peoples completed a partial sale of available-for-sale mortgage-backed securities during the nine months ended September 30, receiving $32.4 million on securities with $31.9 million amortized cost and recognizing a $510,000 gain.

Key Figures

Net income: $19.131 million Diluted earnings per share: $1.90 per share Net interest income: $47.287 million +5 more

8 metrics

Net income $19.131 million Three months ended September 30, 2026; $15.246 million in 2025

Diluted earnings per share $1.90 per share Three months ended September 30, 2026; $1.51 per share in 2025

Net interest income $47.287 million Three months ended September 30, 2026; $41.183 million in 2025

Loans $4,363.480 million Balance at September 30, 2026

Deposits $4,672.137 million Balance at September 30, 2026

Comprehensive loss -$1.134 million Three months ended September 30, 2026; comprehensive income of $21.058 million in 2025

Fourth-quarter dividend $0.6250 per share Declared October 23, 2026; payable December 15, 2026 to shareholders of record November 30, 2026

Exeter branch purchase price $900 thousand Purchase completed October 29, 2026

Key Terms

Allowance for credit losses, available for sale, held to maturity, Nonaccrual loans, +1 more

5 terms

Allowance for credit losses financial

"The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses"

Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.

available for sale financial

"investment securities available for sale"

Available for sale describes investments, usually bonds or stocks, that a company intends to keep but may sell before they mature; they are reported at current market value on the balance sheet while any unrealized profit or loss is kept separate from regular earnings. For investors, this matters because changes in market value affect a company’s reported net worth and can become realized gains or losses when sold, similar to how the changing resale value of a collectible affects your net wealth even before you sell it.

held to maturity financial

"debt securities classified as held to maturity"

A "held to maturity" classification applies to debt securities a company intends and is able to keep until they are fully repaid. Think of it like putting a bond in a locked safe until the issuer returns your money; the company does not mark the holding to daily market swings, so reported income and balance-sheet values are steadier. For investors, it signals predictable future interest receipts and reduced volatility in reported results, but also less liquidity if cash is needed before maturity.

Nonaccrual loans financial

"The following table presents the Company’s nonaccrual loans"

Nonaccrual loans are loans a lender has stopped counting toward interest income because the borrower is overdue or unlikely to pay; the lender only records cash payments received and may set aside extra funds to cover potential losses. For investors, a rising number or amount of nonaccrual loans signals weaker credit quality, lower future interest revenue and larger potential write-downs — similar to pausing expected subscription income when many customers stop paying.

Accumulated other comprehensive loss financial

"The accumulated other comprehensive loss (“AOCL”) included in the consolidated balance sheets"

Accumulated other comprehensive loss is the running negative total of certain gains and losses that companies record outside their regular profit-and-loss statement, such as changes in the value of some investments, pension adjustments, or currency translation effects. It matters to investors because it reduces shareholders’ equity and reveals economic swings that haven’t affected reported net income yet — like a side ledger showing pending ups and downs that could influence future cash flow or balance-sheet strength.

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were PFIS's third-quarter 2026 earnings?

PFIS reported net income of $19.131 million for the three months ended September 30, 2026, compared with $15.246 million in 2025. Diluted earnings per share were $1.90, versus $1.51, and net interest income was $47.287 million, versus $41.183 million.

When is PFIS's fourth-quarter dividend payable?

PFIS declared a fourth-quarter 2026 dividend of $0.6250 per share on October 23, 2026. It is payable December 15, 2026, to shareholders of record November 30, 2026, and equals the per-share dividend declared for the third quarter.

How much did PFIS pay for its Exeter branch facility?

PFIS completed the purchase of its Exeter branch facility for $900 thousand on October 29, 2026. The property had previously been occupied under an operating lease, which the purchase terminated. The company expects to derecognize approximately $130 thousand in related right-of-use asset and lease liability in the fourth quarter.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

​

​

Form 10-Q

​

​

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended September 30, 2026

or

☐ Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

for the transition period from

001-36388

(Commission File Number)

​

​

PEOPLES FINANCIAL SERVICES CORP.

(Exact name of registrant as specified in its charter)

​

​

Pennsylvania	23-2391852
(State of incorporation)	(IRS Employer ID Number)
30 E D Preate Drive, Moosic PA	18507
(Address of principal executive offices)	(Zip code)

​

(570) 346-7741

(Registrant’s telephone number, including area code)

​

Securities registered pursuant to Section 12(b) of the Act:

​	​	​	​	​
Title of each class:	​ ​ ​	Trading Symbol	​ ​ ​	Name of each exchange on which registered:
Common stock, $2.00 par value	​	PFIS	​	The Nasdaq Stock Market

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

​

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐	​	​

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.    Yes  ☐    No  ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date: 10,012,216 at October 31, 2026.

​

​

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Table of Contents

PEOPLES FINANCIAL SERVICES CORP.

FORM 10-Q

​

For the Quarter Ended September 30, 2026

​

​

​	​	​	​	​
Contents	​	​	​	Page No.
​	​	​	​	​
PART I.	​	FINANCIAL INFORMATION:	​	3
​	​	​	​	​
Item 1.	​	Financial Statements (Unaudited)	​	3
​	​	​	​	​
​	​	Consolidated Balance Sheets at September 30, 2026 and December 31, 2025	​	3
​	​	​	​	​
​	​	Consolidated Statements of Income and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2026 and 2025	​	4
​	​	​	​	​
​	​	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2026 and 2025	​	5
​	​	​	​	​
​	​	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025	​	6
​	​	​	​	​
​	​	Notes to Consolidated Financial Statements	​	8
​	​	​	​	​
Item 2.	​	Management’s Discussion and Analysis of Financial Condition and Results of Operations	​	52
​	​	​	​	​
Item 3.	​	Quantitative and Qualitative Disclosures About Market Risk	​	72
​	​	​	​	​
Item 4.	​	Controls and Procedures	​	74
​	​	​	​	​
PART II	​	OTHER INFORMATION	​	​
​	​	​	​	​
Item 1.	​	Legal Proceedings	​	74
​	​	​	​	​
Item 1A.	​	Risk Factors	​	74
​	​	​	​	​
Item 2.	​	Unregistered Sales of Equity Securities and Use of Proceeds	​	74
​	​	​	​	​
Item 3.	​	Defaults upon Senior Securities	​	75
​	​	​	​	​
Item 4.	​	Mine Safety Disclosures	​	75
​	​	​	​	​
Item 5.	​	Other Information	​	75
​	​	​	​	​
Item 6.	​	Exhibits	​	75
​	​	​	​	​
​	​	Signatures	​	76

​

​

​

2

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Peoples Financial Services Corp.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

(Unaudited)

​

​	​	​	​	​	​	​
​	​	​		​	​	​
​	​ ​ ​	September 30, 2026		​ ​ ​	December 31, 2025
Assets:	​	​	​	​	​	​
Cash and cash equivalents	​	​	​	​	​	​
Cash and due from banks	​	$	76,557	​	$	58,420
Interest-bearing deposits in other banks	​	​	228,404	​	​	210,564
Total cash and cash equivalents	​	​	304,961	​	​	268,984
​	​	​	​	​		​
Investment securities:	​	​	​	​	​	​
Available for sale: Amortized cost of $497,442 and $541,707, respectively, net of allowance for credit losses of $0 at September 30, 2026 and December 31, 2025	​		440,827	​		512,563
Held to maturity: Fair value of $54,948 and $62,798 respectively, net of allowance for credit losses of $0 at September 30, 2026 and December 31, 2025	​	​	66,739	​	​	72,047
Equity investments carried at fair value	​		2,592	​		2,598
Total investment securities	​		510,158	​		587,208
Loans	​		4,363,480	​		4,066,896
Less: allowance for credit losses	​		40,780	​		39,007
Net loans	​		4,322,700	​		4,027,889
Loans held for sale	​	​	1,412	​	​	805
Goodwill	​		75,986	​		75,986
Premises and equipment, net	​		88,635	​		78,496
Bank owned life insurance	​	​	83,644	​	​	88,645
Deferred tax assets	​	​	30,589	​	​	26,555
Accrued interest receivable	​		18,316	​		17,633
Intangible assets, net	​		23,254	​		27,700
Other assets	​		99,655	​		70,677
Total assets	​	$	5,559,310	​	$	5,270,578
​	​	​	​	​	​	​
Liabilities:	​	​	​	​	​	​
Deposits:	​	​	​	​	​	​
Noninterest-bearing	​	$	971,070	​	$	954,485
Interest-bearing	​		3,701,067	​		3,479,584
Total deposits	​		4,672,137	​		4,434,069
Short-term borrowings	​		19,720	​		32,721
Long-term debt	​		160,139	​		134,352
Subordinated debt	​	​	83,494	​	​	83,187
Junior subordinated debt	​	​	8,223	​	​	8,140
Accrued interest payable	​		8,619	​		6,792
Other liabilities	​		77,678	​		51,470
Total liabilities	​		5,030,010	​		4,750,731
​	​	​	​	​	​	​
Stockholders’ equity:	​	​	​	​	​	​
Common Stock, par value $2.00, authorized 25,000,000 shares, issued and outstanding at September 30, 2026, 10,012,216 shares and 9,994,595 shares at December 31, 2025	​		20,057	​		20,015
Capital surplus	​		251,720	​		251,023
Retained earnings	​		303,436	​		273,500
Accumulated other comprehensive loss	​		(45,913)	​		(24,691)
Total stockholders’ equity	​		529,300	​		519,847
Total liabilities and stockholders’ equity	​	$	5,559,310	​	$	5,270,578

​

See notes to unaudited consolidated financial statements.

​

3

Table of Contents

Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS) INCOME

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

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​

​

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​

Three Months Ended

​

Nine Months Ended

September 30,

​ ​ ​

2026

​ ​ ​

2025

​ ​ ​

2026

​

2025

Interest income:

​

​

​

​

​

​

​

​

​

​

​

​

Interest and fees on loans:

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

$

62,663

​

$

57,621

​

$

178,462

​

$

170,292

Tax-exempt

​

2,345

​

2,151

​

​

6,568

​

​

6,698

Interest and dividends on investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

3,497

​

4,335

​

​

11,458

​

​

13,073

Tax-exempt

​

1,301

​

537

​

​

3,695

​

​

1,332

Dividends

​

342

​

47

​

​

906

​

​

128

Interest on interest-bearing deposits in other banks

​

1,308

​

473

​

​

2,823

​

​

1,402

Total interest income

​

71,456

​

65,164

​

​

203,912

​

​

192,925

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest expense:

​

​

​

​

​

​

​

​

​

​

​

​

Interest on deposits

​

20,461

​

20,194

​

​

56,788

​

​

61,344

Interest on short-term borrowings

​

149

​

341

​

​

1,057

​

​

976

Interest on long-term debt

​

1,633

​

1,509

​

​

4,537

​

​

3,897

Interest on subordinated debt

​

​

1,749

​

​

1,748

​

​

5,248

​

​

3,217

Interest on junior subordinated debt

​

​

177

​

​

189

​

​

524

​

​

563

Total interest expense

​

24,169

​

23,981

​

​

68,154

​

​

69,997

Net interest income

​

47,287

​

41,183

​

​

135,758

​

​

122,928

(Benefit) provision for credit losses

​

(1,148)

​

(838)

​

​

3,344

​

​

(877)

Net interest income after (benefit) provision for credit losses

​

48,435

​

42,021

​

​

132,414

​

​

123,805

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest income:

​

​

​

​

​

​

​

​

​

​

​

​

Service charges, fees, commissions and other

​

3,190

​

3,386

​

​

9,758

​

​

10,454

Merchant services income

​

217

​

321

​

​

886

​

​

1,136

Commission and fees on fiduciary activities

​

644

​

607

​

​

1,783

​

​

1,707

Wealth management income

​

875

​

950

​

​

2,274

​

​

2,219

Mortgage banking income

​

213

​

148

​

​

756

​

​

387

Increase in cash surrender value of life insurance

​

525

​

543

​

​

1,522

​

​

1,604

Interest rate swap gain

​

​

170

​

​

182

​

​

1,017

​

​

389

Net (losses) gains on equity investment securities

​

​

(155)

​

(21)

​

​

334

​

​

43

Net gains on sale of investment securities available for sale

​

​

​

​

​

​

510

​

​

​

Net (losses) gains on sale of fixed assets

​

​

​

​

​

(615)

​

​

271

​

​

65

Total noninterest income

​

5,679

​

5,501

​

​

19,111

​

​

18,004

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest expense:

​

​

​

​

​

​

​

​

​

​

​

​

Salaries and employee benefits expense

​

15,616

​

14,128

​

​

45,220

​

​

41,370

Net occupancy and equipment expense

​

7,672

​

7,221

​

​

22,685

​

​

20,115

Acquisition related expenses

​

​

​

16

​

​

​

​

​

236

Amortization of intangible assets

​

1,349

​

1,515

​

​

4,384

​

​

4,882

Professional fees and outside services

​

​

1,451

​

​

935

​

​

3,605

​

​

3,114

FDIC insurance and assessments

​

​

744

​

​

607

​

​

2,209

​

​

2,605

Advertising and corporate business development

​

​

1,659

​

​

1,106

​

​

4,412

​

​

3,040

Other expenses

​

3,213

​

3,150

​

​

9,662

​

​

8,931

Total noninterest expense

​

31,704

​

28,678

​

​

92,177

​

​

84,293

Income before income taxes

​

22,410

​

18,844

​

​

59,348

​

​

57,516

Income tax expense

​

3,279

​

3,598

​

​

10,665

​

​

10,305

Net income

​

19,131

​

15,246

​

​

48,683

​

​

47,211

​

​

​

​

​

​

​

​

​

​

​

​

​

Other comprehensive (loss) income:

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized (losses) gains on investment securities available for sale

​

(26,009)

​

7,415

​

​

(26,961)

​

​

14,846

Reclassification adjustment for net gains on available for sale securities included in net income

​

​

​

​

​

​

(510)

​

​

​

Change in derivative fair value

​

​

53

​

​

18

​

​

289

​

​

(114)

Other comprehensive (loss) income before income tax (benefit) expense

​

(25,956)

​

​

7,433

​

​

(27,182)

​

​

14,732

Income tax (benefit) expense related to other comprehensive (loss) income

​

(5,691)

​

1,621

​

​

(5,960)

​

​

3,213

Other comprehensive (loss) income, net of income tax (benefit) expense

​

(20,265)

​

5,812

​

​

(21,222)

​

​

11,519

Comprehensive (loss) income

​

$

(1,134)

​

$

21,058

​

$

27,461

​

$

58,730

​

​

​

​

​

​

​

​

​

​

​

​

​

Per share data:

​

​

​

​

​

​

​

​

​

​

​

​

Net income:

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

$

1.91

​

$

1.53

​

$

4.86

​

$

4.72

Diluted

​

$

1.90

​

$

1.51

​

$

4.85

​

$

4.69

Dividends declared

​

$

0.6250

​

$

0.6175

​

$

1.8750

​

$

1.8525

Weighted average common shares outstanding:

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

​

10,011,287

​

​

9,994,629

​

​

10,008,270

​

​

9,994,175

Diluted

​

10,050,247

​

10,086,915

​

10,042,560

​

10,070,947

​

See notes to unaudited consolidated financial statements.

4

Table of Contents

​

​

Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

Accumulated

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

​

Number of

​

Common

​

Capital

​

Retained

​

Comprehensive

​

​

​

​

​

​

Shares

​ ​ ​

Stock

​ ​ ​

Surplus

​ ​ ​

Earnings

​ ​ ​

Loss

​ ​ ​

Total

Balance, January 1, 2026

​

​

9,994,595

​

$

20,015

​

$

251,023

​

$

273,500

​

$

(24,691)

​

$

519,847

Net income

​

​

​

​

​

​

​

​

​

​

14,747

​

​

​

​

​

14,747

Other comprehensive loss, net of tax

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(2,917)

​

​

(2,917)

Cash dividends declared: $0.6250 per common share

​

​

​

​

​

​

​

​

​

​

(6,246)

​

​

​

​

​

(6,246)

Stock compensation

​

​

​

​

​

​

​

​

219

​

​

​

​

​

​

​

​

219

Restricted stock issued

​

​

22,454

​

​

45

​

​

180

​

​

​

​

​

​

​

​

225

Shares withheld to satisfy taxes on restricted stock

​

​

(6,561)

​

​

(13)

​

​

(357)

​

​

​

​

​

​

​

​

(370)

Balance, March 31, 2026

​

​

10,010,488

​

$

20,047

​

$

251,065

​

$

282,001

​

$

(27,608)

​

$

525,505

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

​

​

​

​

​

​

​

​

​

14,805

​

​

​

​

​

14,805

Other comprehensive income, net of tax

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1,960

​

​

1,960

Cash dividends declared: $0.6250 per common share

​

​

​

​

​

​

​

​

​

​

​

(6,250)

​

​

​

​

​

(6,250)

Stock compensation

​

​

​

​

​

​

​

​

211

​

​

​

​

​

​

​

​

211

Restricted stock issued

​

​

465

​

​

8

​

​

(8)

​

​

​

​

​

​

​

​

​

Shares withheld to satisfy taxes on restricted stock

​

​

(586)

​

​

(2)

​

​

(44)

​

​

​

​

​

​

​

​

(46)

Balance, June 30, 2026

​

​

10,010,367

​

$

20,053

​

$

251,224

​

$

290,556

​

$

(25,648)

​

$

536,185

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

​

​

​

​

​

​

​

​

​

19,131

​

​

​

​

​

19,131

Other comprehensive loss, net of tax

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(20,265)

​

​

(20,265)

Cash dividends declared: $0.6250 per common share

​

​

​

​

​

​

​

​

​

​

​

(6,251)

​

​

​

​

​

(6,251)

Stock compensation

​

​

​

​

​

​

​

​

584

​

​

​

​

​

​

​

​

584

Restricted stock issued

​

​

3,223

​

​

6

​

​

(6)

​

​

​

​

​

​

​

​

​

Shares withheld to satisfy taxes on restricted stock

​

​

(1,209)

​

​

(2)

​

​

(82)

​

​

​

​

​

​

​

​

(84)

Restricted stock forfeited

​

​

(165)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, September 30, 2026

​

​

10,012,216

​

$

20,057

​

$

251,720

​

$

303,436

​

$

(45,913)

​

$

529,300

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

Accumulated

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

​

Number of

​

Common

​

Capital

​

Retained

​

Comprehensive

​

​

​

​

​

​

Shares

​ ​ ​

Stock

​ ​ ​

Surplus

​ ​ ​

Earnings

​ ​ ​

Loss

​ ​ ​

Total

Balance, January 1, 2025

​

​

9,990,724

​

$

19,995

​

$

250,695

​

$

238,955

​

$

(40,695)

​

$

468,950

Net income

​

​

​

​

​

​

​

​

​

​

15,009

​

​

​

​

​

15,009

Other comprehensive income, net of tax

​

​

​

​

​

​

​

​

​

​

​

​

​

4,241

​

​

4,241

Cash dividends declared: $0.6175 per share

​

​

​

​

​

​

​

​

​

​

(6,158)

​

​

​

​

​

(6,158)

Stock compensation

​

​

​

​

​

10

​

(211)

​

​

​

​

​

​

​

​

(201)

Restricted stock issued

​

​

8,212

​

​

16

​

​

169

​

​

​

​

​

​

​

​

185

Shares withheld to satisfy taxes on restricted stock

​

​

(3,453)

​

​

(7)

​

​

(165)

​

​

​

​

​

​

​

​

(172)

Balance, March 31, 2025

​

​

9,995,483

​

$

20,014

​

$

250,488

​

$

247,806

​

$

(36,454)

​

$

481,854

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

​

​

​

​

​

​

​

​

16,956

​

​

​

​

​

16,956

Other comprehensive income, net of tax

​

​

​

​

​

​

​

​

​

​

​

​

​

1,466

​

​

1,466

Cash dividends declared: $0.6175 per share

​

​

​

​

​

​

​

​

​

​

(6,161)

​

​

​

​

​

(6,161)

Stock compensation, including tax effects and expenses

​

​

​

​

​

2

​

(4)

​

​

​

​

​

​

​

​

(2)

Restricted stock issued

​

​

​

​

​

1

​

​

22

​

​

​

​

​

​

​

​

23

Shares withheld to satisfy taxes on restricted stock

​

​

(787)

​

​

(2)

​

​

(38)

​

​

​

​

​

​

​

​

(40)

Balance, June 30, 2025

​

​

9,994,696

​

$

20,015

​

$

250,468

​

$

258,601

​

$

(34,988)

​

$

494,096

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

​

​

​

​

​

​

​

​

15,246

​

​

​

​

​

15,246

Other comprehensive income, net of tax

​

​

​

​

​

​

​

​

​

​

​

​

​

​

5,812

​

​

5,812

Cash dividends declared: $0.6175 per share

​

​

​

​

​

​

​

​

​

​

(6,161)

​

​

​

​

​

(6,161)

Stock compensation, including tax effects and expenses

​

​

​

​

​

​

​

​

267

​

​

​

​

​

​

​

​

267

Restricted stock issued

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Shares withheld to satisfy taxes on restricted stock

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Restricted stock forfeited

​

​

(101)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, September 30, 2025

​

​

9,994,595

​

$

20,015

​

$

250,735

​

$

267,686

​

$

(29,176)

​

$

509,260

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

See notes to unaudited consolidated financial statements.

​

​

​

​

5

Table of Contents

Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share data)

(Unaudited)

​

​	​	​	​	​	​	​
For the Nine Months Ended September 30,	​ ​ ​	2026		​ ​ ​	2025
Cash flows from operating activities:	​	​	​	​	​	​
Net income	​	$	48,683	​	$	47,211
Adjustments to reconcile net income to net cash provided by operating activities:	​	​	​	​	​	​
Depreciation of premises and equipment	​		2,774	​		2,433
Amortization of right-of-use lease asset	​	​	572	​	​	615
Amortization of net deferred loan fees	​		(369)	​	​	(393)
Amortization of debt issuance costs	​	​	307	​	​	134
Amortization of CDI and other intangibles	​		4,446	​		4,958
Amortization expense related to acquired borrowings	​		154	​		348
Accretion income related to acquired loans	​	​	(9,546)	​	​	(12,177)
Amortization expense related to acquired deposits	​	​	155	​	​	620
Amortization of low-income housing partnerships	​	​	2,798	​	​	1,204
Provision (benefit) for credit losses	​		3,344	​		(877)
Net unrealized gain on equity investments	​	​	(230)	​	​	(43)
Net (gain) loss on sale of other real estate owned	​		(3)	​		5
Net gain on sale of equity securities	​	​	(104)	​	​	​
Valuation allowance on other real estate	​		120	​		​
Loans originated for sale	​		(11,555)	​	​	(5,683)
Proceeds from sale of loans originated for sale	​		11,160	​	​	4,890
Net gain on sale of loans originated for sale	​		(212)	​	​	(23)
Net accretion of investment securities	​		(2,224)	​		(2,587)
Net gain on sale of investment securities available for sale	​	​	(510)	​	​	​
Net gain on sale of premises and equipment	​		(271)	​		(65)
Increase in cash surrender value of life insurance	​		(1,522)	​		(1,604)
Gain from bank owned life insurance settlement	​	​	(280)	​	​	(118)
Deferred income tax expense	​		1,926	​		2,449
Stock compensation, including tax effects and expenses	​		1,239	​		60
Net change in:	​	​	​	​	​	​
Accrued interest receivable	​		(683)	​		(1,363)
Other assets	​		(32,349)	​		4,586
Accrued interest payable	​		1,827	​		2,473
Other liabilities	​		17,354	​		(8,871)
Net cash provided by operating activities	​		37,001	​		38,182
Cash flows from investing activities:	​	​	​	​	​	​
Proceeds from sales of investment securities available for sale	​		32,404	​		​
Proceeds from sales of equity investments	​	​	340	​	​	​
Proceeds from repayments of investment securities:	​	​	​	​	​	​
Available for sale	​		58,182	​		87,880
Held to maturity	​		5,236	​		4,819
Purchases of investment securities:	​	​	​	​	​	​
Available for sale	​		(43,515)	​		(78,560)
Net purchase of restricted equity securities	​		(147)	​		(3,297)
Purchase of equity securities without readily determinable fair value	​	​	(238)	​	​	(282)
Net increase in loans	​		(288,240)	​		(12,889)
Purchases of premises and equipment	​		(4,804)	​		(8,078)
Proceeds from the sale of premises and equipment	​		733	​	​	3,722
Proceeds from bank owned life insurance	​	​	6,790	​	​	968
Proceeds from sale of other real estate owned	​		854	​		22
Net cash used in investing activities	​		(232,405)	​		(5,695)
Cash flows from financing activities:	​	​	​	​	​	​
Net increase (decrease) in deposits	​		237,913	​		(118,441)
Proceeds from long-term debt	​	​	63,095	​	​	49,105
Repayment of long-term debt	​		(37,379)	​		(10,986)
Net proceeds from short-term borrowings	​	​	(13,001)	​	​	60,410
Proceeds from the issuance of subordinated debt, net of issuance costs	​	​	​	​	​	82,977
Repayment of subordinated debt	​	​	​	​	​	(33,000)
Cash paid for shares withheld for taxes on compensation	​		(500)	​	​	​
Cash dividends paid	​		(18,747)	​		(18,480)
Net cash provided by financing activities	​		231,381	​		11,585
Net increase in cash and cash equivalents	​		35,977	​		44,072
Cash and cash equivalents at beginning of period	​		268,984	​		135,851
Cash and cash equivalents at end of period	​	$	304,961	​	$	179,923

​

6

Table of Contents

​	​	​	​	​	​	​
For the Nine Months Ended September 30,	​ ​ ​	2026		​ ​ ​	2025
Supplemental disclosures:	​	​	​	​	​	​
Cash paid during the period for:	​	​	​	​	​	​
Interest	​	$	66,327	​	$	67,524
Income taxes	​		4,463	​		6,428
Federal income tax credit	​	​	10,913	​	​	​
Noncash items:	​	​	​	​	​	​
Transfers of fixed assets to other real estate	​	​	​	​	​	433
Transfers of loans to other real estate	​	​	​	​	​	1,541
Origination of mortgage servicing rights	​	​	151	​	​	58
Initial recognition of right-of-use assets	​	​	9,143	​	​	2,786
Initial recognition of lease liability	​	​	9,143	​	​	2,786

​

See notes to unaudited consolidated financial statements.

​

​

7

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

1. Summary of significant accounting policies:

​

Nature of operations

​

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 (the “Bank”) and 1^st Equipment Finance, Inc., collectively, the “Company” or “Peoples”. The Company services its retail and commercial customers through forty community banking offices located within Allegheny, Bucks, Lackawanna, Lancaster, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna, Wayne and Wyoming Counties of Pennsylvania, Middlesex County of New Jersey, and Broome County of New York.

​

Basis of presentation

​

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and Article 10-01 of Regulation S-X and accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the consolidated financial position and results of operations for the periods presented have been included. All significant intercompany balances and transactions have been eliminated in consolidation. Prior period amounts are reclassified when necessary to conform to the current year’s presentation. These reclassifications did not have any effect on the consolidated operating results or financial position of the Company.

​

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates that are particularly susceptible to material change in the near term relate to the determination of the allowance for credit losses and impairment of goodwill. Actual results could differ from those estimates.

​

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 10-K”).

​

Subsequent events

​

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2026, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the issuance date of these consolidated financial statements.

​

On October 23, 2026, the Company’s board of directors declared a dividend of $0.6250 per share for the fourth quarter of 2026. The dividend is payable on December 15, 2026 to shareholders of record as of November 30, 2026. The per share dividend is equal to the per share dividend declared for the third quarter of 2026.

​

On October 29, 2026, the Company completed the purchase of its Exeter branch facility, which had previously been occupied under an operating lease arrangement. The acquisition resulted in the Company obtaining ownership of the property and terminating the ongoing lease obligation associated with the facility. The purchase price was $900

8

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

thousand. The Company expects to derecognize the related right-of-use asset and lease liability of approximately $130 thousand in the fourth quarter of 2026.

​

Recent accounting standards

​

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the required effective dates. The following should be read in conjunction with Note 1 entitled “Summary of significant accounting policies” of the Notes to the Consolidated Financial Statements included in the 2025 10-K.

​

ASU 2026-02, “Environmental Credits and Environmental Credit Obligations (Topic 818)” is intended to address the lack of specific U.S. GAAP guidance on environmental credits and environmental credit obligations. ASU 2026-02 aims to improve recognition, measurement, presentation and disclosure of these items and enhance comparability and decision-useful information for investors. The ASU requires entities to clearly present environmental credits and credit obligations in financial statements, distinguishing between compliance and noncompliance credits, providing disclosures that improve understandability and comparability. ASU 2026-02 is effective for public business entities for annual periods beginning after December 15, 2027, including interim periods, and permits early adoption at the start of any annual period. ASU 2026-02 will be effective on January 1, 2028, for the Company and is not expected to have a material impact on the Company’s consolidated financial statements.

​

ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements” is intended to improve the navigability and clarity of interim reporting requirements under Topic 270. ASU 2025-11 clarifies when Topic 270 applies, adds a comprehensive list of required interim disclosures, and introduces a disclosure principle requiring entities to disclose events occurring after the most recent annual period that have a material impact on the entity. The ASU does not expand or reduce overall interim disclosure requirements but instead compiles and organizes them to improve consistency and comparability. The guidance also clarifies form-and-content expectations for interim financial statements, including the use of condensed statements, and aligns GAAP with prior SEC requirements regarding material events. The amendments are effective for interim reporting periods beginning after December 15, 2027, for public business entities and one year later for all other entities. Early adoption is permitted, with prospective or retrospective application available. ASU 2025-11 will be effective for the interim period beginning January 1, 2028, for the Company’s quarterly financial statements on Form 10-Q and is not expected to have a material impact on the Company’s consolidated financial statements.

​

ASU 2025-08 “Financial Instruments – Credit Losses (Topic 326): Purchased Loans” (“ASU 2025-08”) expands the use of the gross-up approach in ASC 326, Credit Losses, to “purchased seasoned loans,” which the guidance defines as loans, excluding purchased financial assets with credit deterioration, credit card receivables, debt securities, and trade receivables, that are (1) acquired in a business combination or (2) obtained through a transfer that is not a business combination or initially recognized through the consolidation of a variable interest entity, if certain seasoning criteria are met. This approach was previously only applied to purchased financial assets with credit deterioration. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Entities are required to apply the guidance prospectively. Early adoption is permitted. The Company will adopt the change on January 1, 2027. Because the guidance is applied prospectively to loans acquired on or after the date of adoption, adoption is not expected to have a material impact on the Company’s consolidated financial statements; the effect in future periods will depend on the volume of any loans acquired after adoption.

​

ASU 2025-01 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date” (“ASU 2025-01”) clarifies the effective date of Accounting Standards Update 2024-03 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”) to stipulate that ASU 2024-03 is effective for

9

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 will be effective for the Company beginning January 1, 2027, for the Company’s annual financial statements on Form 10-K and January 1, 2028, for the Company’s quarterly financial statements on Form 10-Q and is not expected to have a material impact on the Company’s consolidated financial statements but is expected to result in additional disclosures and potential changes to line items on the consolidated statements of income and comprehensive (loss) income.

​

​

2. Accumulated other comprehensive loss:

​

The components of other comprehensive (loss) income and their related tax effects are reported in the consolidated statements of income and comprehensive (loss) income. The accumulated other comprehensive loss (“AOCL”) included in the consolidated balance sheets relates to net unrealized gains and losses on investment securities available for sale, benefit plan adjustments and adjustments to derivative fair values.

​

The components of AOCL included in stockholders’ equity at September 30, 2026 and December 31, 2025 are as follows:

​

​	​	​	​	​	​	​
(Dollars in thousands)	​ ​ ​	​	September 30, 2026	​ ​ ​	​	December 31, 2025
Net unrealized loss on investment securities available for sale	​	$	(56,615)	​	$	(29,144)
Income tax benefit	​		(12,413)	​		(6,390)
Net of income taxes	​		(44,202)	​		(22,754)
Benefit plan adjustments	​		(2,178)	​		(2,178)
Income tax benefit	​		(478)	​		(478)
Net of income taxes	​		(1,700)	​		(1,700)
Derivative adjustments	​		(14)	​		(303)
Income tax benefit	​		(3)	​		(66)
Net of income taxes	​		(11)	​		(237)
Accumulated other comprehensive loss	​	$	(45,913)	​	$	(24,691)

​

Other comprehensive (loss) income and related tax effects for the three and nine months ended September 30, 2026 and September 30, 2025 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

For the Nine Months Ended

​

​

September 30,

​

​

September 30,

(Dollars in thousands)

​ ​ ​

2026

​ ​ ​

2025

​

​

2026

​

2025

Unrealized (loss) gain on investment securities available for sale

​

$

(26,009)

​

$

7,415

​

​

$

(26,961)

​

$

14,846

Net (gain) on the sale of investment securities available for sale (1)

​

​

​

​

​

​

​

​

​

(510)

​

​

​

Other comprehensive (loss) income on available-for-sale debt securities

​

​

(26,009)

​

​

7,415

​

​

​

(27,471)

​

​

14,846

Net change in derivatives

​

​

53

​

​

18

​

​

​

289

​

​

(114)

Other comprehensive (loss) income before taxes

​

​

(25,956)

​

​

7,433

​

​

​

(27,182)

​

​

14,732

Income tax (benefit) expense

​

​

(5,691)

​

​

1,621

​

​

​

(5,960)

​

​

3,213

Other comprehensive (loss) income

​

$

(20,265)

​

$

5,812

​

​

$

(21,222)

​

$

11,519

​

(1) Represents amounts reclassified out of accumulated other comprehensive loss and included in net gains on the sale of investment securities available for sale on the consolidated statements of income and comprehensive (loss) income.

​

​

10

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

3. Earnings per share:

​

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.

​

The following table presents the calculation of both basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2026, and 2025:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended September 30,

​

​

2026

​

2025

(Dollars in thousands, except per share data)

​ ​ ​

Basic

​ ​ ​

Diluted

​ ​ ​

Basic

​ ​ ​

Diluted

Net income

​ ​ ​

$

19,131

​ ​ ​

$

19,131

​ ​ ​

$

15,246

​ ​ ​

$

15,246

Average common shares outstanding

​

10,011,287

​

10,050,247

​

9,994,629

​

10,086,915

Earnings per share

​

$

1.91

​

$

1.90

​

$

1.53

​

$

1.51

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Nine Months Ended September 30,

​

​

2026

​

2025

(Dollars in thousands, except per share data)

​

Basic

​

Diluted

​

Basic

​ ​ ​

Diluted

Net income

​ ​ ​

$

48,683

​ ​ ​

$

48,683

​ ​ ​

$

47,211

​ ​ ​

$

47,211

Average common shares outstanding

​

10,008,270

​

10,042,560

​

9,994,175

​

10,070,947

Earnings per share

​

$

4.86

​

$

4.85

​

$

4.72

​

$

4.69

​

11

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

4. Investment securities:

​

The amortized cost and fair value of investment securities aggregated by investment category at September 30, 2026 and December 31, 2025 are summarized below. There was no allowance for credit losses (“ACL”) recorded for available for sale or held to maturity debt securities at September 30, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2026

​

​

​

​

​

​

Gross

​

Gross

​

​

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

(Dollars in thousands)

​ ​ ​

Cost

​ ​ ​

Gains

​ ​ ​

Losses

​ ​ ​

Value

Available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

$

19,111

​

$

​

​

$

1,219

​

$

17,892

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

63,904

​

​

​

​

​

9,635

​

54,269

​

Tax-exempt

​

161,810

​

​

​

​

22,036

​

139,774

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

20,035

​

​

​

​

1,707

​

18,328

​

U.S. government-sponsored enterprises

​

153,002

​

17

​

21,387

​

131,632

​

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

1,675

​

​

​

22

​

1,653

​

Private collateralized mortgage obligations

​

​

45,658

​

​

310

​

​

947

​

​

45,021

​

Asset backed securities

​

​

14,138

​

​

33

​

​

373

​

​

13,798

​

Corporate debt securities

​

​

18,109

​

​

496

​

​

145

​

​

18,460

​

Negotiable certificates of deposit

​

​

​

​

​

​

​

​

​

​

​

​

​

Total available for sale

​

$

497,442

​

$

856

​

$

57,471

​

$

440,827

​

Held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt state and municipals

​

$

10,416

​

$

​

​

$

1,178

​

$

9,238

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

11,304

​

​

​

​

2,368

​

8,936

​

U.S. government-sponsored enterprises

​

45,019

​

​

​

​

8,245

​

36,774

​

Total held to maturity

​

$

66,739

​

$

​

​

$

11,791

​

$

54,948

​

​

12

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

December 31, 2025

​

​

​

​

​

Gross

​ ​ ​

Gross

​

​

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

(Dollars in thousands)

​ ​ ​

Cost

​ ​ ​

Gains

​ ​ ​

Losses

​ ​ ​

Value

Available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

$

32,125

​

$

​

​

$

1,127

​

$

30,998

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

68,618

​

22

​

​

7,018

​

61,622

​

Tax-exempt

​

132,586

​

429

​

7,898

​

125,117

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

42,801

​

145

​

247

​

42,699

​

U.S. government-sponsored enterprises

​

174,223

​

962

​

15,105

​

160,080

​

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

1,789

​

​

​

​

​

19

​

​

1,770

​

Private collateralized mortgage obligations

​

​

48,007

​

​

766

​

​

289

​

​

48,484

​

Asset backed securities

​

​

16,544

​

​

23

​

​

300

​

​

16,267

​

Corporate debt securities

​

​

24,287

​

​

829

​

​

322

​

​

24,794

​

Negotiable certificates of deposit

​

​

727

​

​

5

​

​

​

​

​

732

​

Total available for sale

​

$

541,707

​

$

3,181

​

$

32,325

​

$

512,563

​

Held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt state and municipals

​

$

10,812

​

$

4

​

$

620

​

$

10,196

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

​

12,291

​

​

​

​

1,977

​

10,314

​

U.S. government-sponsored enterprises

​

48,944

​

​

​

​

6,656

​

42,288

​

Total held to maturity

​

$

72,047

​

$

4

​

$

9,253

​

$

62,798

​

​

The Company did not sell any investments from its securities portfolio during the quarter ended September 30, 2026. During the nine-month period ended September 30, 2026, the Company completed a partial repositioning of its investment security portfolio. The Company sold a portion of its available-for-sale residential mortgage-backed securities with an amortized cost of $31.9 million. Proceeds received on the securities sold totaled $32.4 million. The Company realized gross gains of $510 thousand, which are included in noninterest income in the consolidated statements of income and comprehensive (loss) income for the nine months ended September 30, 2026. There were no gross losses realized upon the sales.

​

There were no available-for-sale securities sold during the three and nine months ended September 30, 2025.

​

The following table summarizes the maturity distribution of the amortized cost and fair value, which is the net carrying amount, of the debt securities classified as available for sale at September 30, 2026. Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

​

13

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​	​	​	​	​	​	​
​	​	Amortized			Fair
(Dollars in thousands)	​ ​ ​	Cost			Value
Within one year	​	$	3,122	​	$	3,082
After one but within five years	​		63,101	​		58,918
After five but within ten years	​		67,632	​		56,932
After ten years	​		129,079	​		111,463
​	​		262,934	​		230,395
Mortgage-backed and other amortizing securities	​		234,508	​		210,432
Total	​	$	497,442	​	$	440,827

​

 The maturity distribution of the amortized cost and fair value of debt securities classified as held to maturity at September 30, 2026, is summarized as follows:

​

​	​	​	​	​	​	​
​	​	Amortized		​	Fair
(Dollars in thousands)	​ ​ ​	Cost		​ ​ ​	Value
After one but within five years	​	$	6,680	​	$	5,997
After five but within ten years	​	​	3,736	​	​	3,241
​	​		10,416	​		9,238
Mortgage-backed securities	​		56,323	​		45,710
Total	​	$	66,739	​	$	54,948

​

Securities with a carrying value of $359.1 million and $381.8 million at September 30, 2026 and December 31, 2025, respectively, were pledged to secure public deposits and certain other deposits as required or permitted by law and pledged to the Discount Window at the Federal Reserve.

​

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on a case-by-case basis. At September 30, 2026, there were no significant concentrations of credit risk from any one issuer, with the exception of U.S. government agencies and sponsored enterprises, which exceeded 10.0 percent of stockholders’ equity.

​

The fair value and gross unrealized losses of investment securities with unrealized losses at September 30, 2026 and December 31, 2025, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized as follows:

14

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2026

​

​

Less than Twelve Months

​

Twelve Months or Longer

​

Total

​

​

Total # in a Loss

​

​

​

​

Unrealized

​

Total # in a Loss

​

​

​

​

Unrealized

​

Total # in a Loss

​

​

​

​

Unrealized

(Dollars in thousands)

​

Position

​

​

Fair Value

​

Losses

​

Position

​

​

Fair Value

​

Losses

​

Position

​

​

Fair Value

​

Losses

Securities available for sale

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

​

​

​

​

​

​

​

​

5

​

$

17,892

​

$

1,219

​

5

​

$

17,892

​

$

1,219

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

1

​

​

564

​

​

35

​

61

​

​

53,705

​

​

9,600

​

62

​

​

54,269

​

​

9,635

Tax-exempt

​

109

​

$

85,528

​

$

9,854

​

82

​

​

54,116

​

​

12,182

​

191

​

​

139,644

​

​

22,036

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

5

​

​

18,328

​

​

1,707

​

​

​

​

​

​

​

​

​

5

​

​

18,328

​

​

1,707

U.S. government-sponsored enterprises

​

39

​

​

67,028

​

​

3,145

​

28

​

​

55,429

​

​

18,242

​

67

​

​

122,457

​

​

21,387

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

1

​

​

1,653

​

​

22

​

1

​

​

1,653

​

​

22

Other

​

28

​

​

24,965

​

​

544

​

11

​

​

13,157

​

​

403

​

39

​

​

38,122

​

​

947

Asset-backed securities

​

3

​

​

6,517

​

​

15

​

2

​

​

1,577

​

​

358

​

5

​

​

8,094

​

​

373

Corporate debt securities

​

5

​

​

3,695

​

​

55

​

1

​

​

910

​

​

90

​

6

​

​

4,605

​

​

145

Total

​

190

​

$

206,625

​

$

15,355

​

191

​

$

198,439

​

$

42,116

​

381

​

$

405,064

​

$

57,471

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities Held to Maturity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt state and municipals

​

5

​

$

3,421

​

$

259

​

10

​

$

5,817

​

$

919

​

15

​

$

9,238

​

$

1,178

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

​

​

​

​

​

​

​

​

3

​

​

8,936

​

​

2,368

​

3

​

​

8,936

​

​

2,368

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

8

​

​

36,774

​

​

8,245

​

8

​

​

36,774

​

​

8,245

Total

​

5

​

$

3,421

​

$

259

​

21

​

$

51,527

​

$

11,532

​

26

​

$

54,948

​

$

11,791

​

15

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

Less than Twelve Months

​

Twelve Months or Longer

​

Total

​

​

Total # in a Loss

​

​

​

​

​

Unrealized

​

Total # in a Loss

​

​

​

​

​

Unrealized

​

Total # in a Loss

​

​

​

​

​

Unrealized

(Dollars in thousands)

​

Position

​

​

Fair Value

​

​

Losses

​

Position

​

​

Fair Value

​

​

Losses

​

Position

​

​

Fair Value

​

​

Losses

Securities available for sale

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasury securities

​

​

​

​

​

​

​

​

​

8

​

$

30,998

​

$

1,127

​

8

​

$

30,998

​

$

1,127

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

​

​

​

​

​

​

​

​

64

​

​

59,002

​

​

7,018

​

64

​

​

59,002

​

​

7,018

Tax-exempt

​

37

​

$

35,137

​

$

519

​

87

​

​

63,245

​

​

7,379

​

124

​

​

98,382

​

​

7,898

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

6

​

​

28,689

​

​

247

​

​

​

​

​

​

​

​

​

6

​

​

28,689

​

​

247

U.S. government-sponsored enterprises

​

3

​

​

8,989

​

​

60

​

34

​

​

71,288

​

​

15,045

​

37

​

​

80,277

​

​

15,105

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

1

​

​

1,770

​

​

19

​

1

​

​

1,770

​

​

19

Private collateralized mortgage obligations

​

8

​

​

14,534

​

​

96

​

11

​

​

8,000

​

​

193

​

19

​

​

22,534

​

​

289

Asset-backed securities

​

3

​

​

4,884

​

​

12

​

2

​

​

1,888

​

​

288

​

5

​

​

6,772

​

​

300

Corporate debt securities

​

2

​

​

1,491

​

​

9

​

8

​

​

7,451

​

​

313

​

10

​

​

8,942

​

​

322

Total

​

59

​

$

93,724

​

$

943

​

215

​

$

243,642

​

$

31,382

​

274

​

$

337,366

​

$

32,325

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities held to maturity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt state and municipals

​

​

​

​

​

​

​

​

​

11

​

$

6,641

​

$

620

​

11

​

$

6,641

​

$

620

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

​

​

​

​

​

​

​

​

3

​

​

10,314

​

​

1,977

​

3

​

​

10,314

​

​

1,977

U.S. government-sponsored enterprises

​

​

​

​

​

​

​

​

​

8

​

​

42,288

​

​

6,656

​

8

​

​

42,288

​

​

6,656

Total

​

​

​

​

​

​

​

​

​

22

​

$

59,243

​

$

9,253

​

22

​

$

59,243

​

$

9,253

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Management considered whether a credit loss existed related to the investments in an unrealized loss position by determining (i) whether the decline in fair value is attributable to adverse conditions specifically related to the financial condition of the security issuer or specific conditions in an industry or geographic area; (ii) whether the credit rating of the issuer of the security has been downgraded; (iii) whether dividend or interest payments have been reduced or have not been made and (iv) an adverse change in the remaining expected cash flows from the security such that the Company will not recover the amortized cost of the security. If the decline is judged to be due to factors related to credit, the credit loss should be recorded as an ACL with an offsetting entry to net income. The portion of the loss related to non-credit factors are recorded in AOCL.

​

Based on an assessment of the factors identified above, management determined the fair value of all the identified investments being less than the amortized costs is primarily caused by the changes in market rates and not credit quality. All interest payments have been received as scheduled, substantially all debt securities are rated above investment grade, and no material downgrades have been announced. Because the Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company does not consider the unrealized loss to be credit related, thus no allowance for credit loss expense was recorded at September 30, 2026 or December 31, 2025.

​

Equity Securities

Included in equity securities with readily determinable fair values at September 30, 2026, were investments in the common stock of publicly traded bank holding companies and an investment in a mutual fund comprised of 1-4 family residential mortgage-backed securities collateralized by properties within the Company’s market area. Equity securities with readily determinable fair values are reported at fair value with net unrealized gains and losses recognized in the consolidated statements of income and comprehensive (loss) income.

16

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The following table presents unrealized and realized gains and losses recognized in net income on equity securities for the three and nine months ended September 30, 2026, and 2025:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended

​

​

For the nine months ended

​

​

​

September 30,

​

​

September 30,

(Dollars in thousands)

​

​

2026

​

​

2025

​

​

2026

​

​

2025

Net (losses) gains recognized on equity securities

​

$

(155)

​

$

(21)

​

$

334

​

$

43

Less: net gains realized on equity securities sold

​

​

​

​

​

​

​

​

104

​

​

​

Unrealized (losses) gains on equity securities

​

$

(155)

​

$

(21)

​

$

230

​

$

43

​

​

Equity Securities without Readily Determinable Fair Values

​

At September 30, 2026 and December 31, 2025, equity securities without readily determinable fair values consisted primarily of Federal Home Loan Bank (“FHLB”) of Pittsburgh stock totaling $12.6 million and $12.5 million, respectively. Equity securities without readily determinable fair values also included an equity interest in a FinTech company, an investment in a FinTech fund and an equity interest in an insurance agency. Equity securities without readily determinable fair values are included in other assets in the consolidated balance sheets. The Company evaluates equity securities without readily determinable fair values for impairment quarterly, or more frequently should events or circumstances indicate that their respective carrying values may not be recoverable. Based on the evaluations, management concluded that the equity securities without readily determinable fair values were not impaired at September 30, 2026 and December 31, 2025. There were no adjustments for impairment related to these securities during the nine months ended September 30, 2025.

​

​

5. Loans, net and allowance for credit losses:

​

The major classifications of loans outstanding, net of deferred loan origination fees and costs, unearned income and net unaccreted discounts on acquired loans, at September 30, 2026, and December 31, 2025 are summarized as follows. The Company had net deferred loan origination costs of $2.2 million and $1.9 million at September 30, 2026, and December 31, 2025, respectively. Unearned income was $1.3 million at September 30, 2026, and $1.5 million at December 31, 2025. The balance of net unaccreted discounts on acquired loans was $33.2 million and $42.7 million at September 30, 2026, and December 31, 2025, respectively.

17

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​	​	​	​	​	​	​
(Dollars in thousands)	​ ​ ​	September 30, 2026		​ ​ ​	December 31, 2025
Commercial and industrial	​	$	729,735	​	$	667,948
Municipal	​	​	205,792	​	​	202,303
Real estate	​	​	​	​	​	​
Commercial	​	​	2,512,967	​		2,314,110
Residential	​	​	658,698	​		602,309
Total	​	​	3,171,665	​	​	2,916,419
Consumer	​	​	​	​	​	​
Indirect auto	​	​	81,023	​	​	93,742
Consumer other	​	​	16,172	​		17,496
Total	​	​	97,195	​	​	111,238
Equipment financing	​	​	159,093	​	​	168,988
Total	​	$	4,363,480	​	$	4,066,896

​

Allowance for Credit Losses

​

The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and held to maturity securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the ACL for loans is considered a critical accounting estimate by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL related to loans receivable and held to maturity debt securities is reported separately as a contra-asset on the consolidated balance sheets. The expected credit loss for off balance sheet commitments, including commitments to extend credit, unused portions of lines of credit and standby letters of credit, is reported on the consolidated balance sheets in other liabilities. The provision for credit losses related to unfunded commitments is reported in other noninterest expense in the consolidated statements of income and comprehensive (loss) income.

​

The Company excludes accrued interest receivable from the amortized cost basis of loans, available for sale securities, and held to maturity securities. Accrued interest receivable on loans, which is reported as a component of accrued interest receivable on the consolidated balance sheets, totaled $15.5 million and $14.7 million at September 30, 2026, and December 31, 2025, respectively. Accrued interest receivable is excluded from the estimate of credit losses as the Company has a policy to reverse accrued interest when a loan is placed on nonaccrual status. Accrued interest receivable on available for sale securities and held to maturity securities, also a component of accrued interest receivable on the consolidated balance sheets, totaled $2.8 million and $3.0 million, respectively, at September 30, 2026, and December 31, 2025 and is excluded from the estimate of credit losses, as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner.

​

For a further discussion of our methodology related to the ACL, refer to Note 1 entitled, “Summary of significant accounting policies,” in the Notes to Consolidated Financial Statements included in the 2025 10-K.

​

18

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The following tables present the changes in and period end balance of the allowance for credit losses at and for the three and nine months ended September 30, 2026 and 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2026

​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

Real Estate

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

​ ​ ​

Commercial

​ ​ ​

Municipal

​ ​ ​

Commercial

​ ​ ​

Residential

​ ​ ​

Consumer

​ ​ ​

Financing

​ ​ ​

Total

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning balance July 1, 2026

​

$

6,999

​

$

1,203

​

$

25,361

​

$

4,602

​

$

1,583

​

$

2,563

​

$

42,311

​

Charge-offs

​

(35)

​

​

​

​

​

​

​

​

​

​

(405)

​

(101)

​

(541)

​

Recoveries

​

3

​

​

​

​

​

​

9

​

119

​

27

​

158

​

Provisions (credits)

​

238

​

313

​

(765)

​

(420)

​

39

​

(553)

​

(1,148)

​

Ending balance

​

$

7,205

​

$

1,516

​

$

24,596

​

$

4,191

​

$

1,336

​

$

1,936

​

$

40,780

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2025

​

​

​

​

​

​

​

​

​

Real Estate

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

​ ​ ​

Commercial

​ ​ ​

Municipal

​ ​ ​

Commercial

​ ​ ​

Residential

​

Consumer

​

Financing

​

Total

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning balance July 1, 2025

​

$

6,223

​

$

1,446

​

$

20,620

​

$

5,006

​

$

2,181

​

$

5,414

​

$

40,890

​

Charge-offs

​

​

​

​

​

(95)

​

​

​

(151)

​

(243)

​

(489)

​

Recoveries

​

12

​

​

​

116

​

20

​

109

​

23

​

280

​

Provisions (credits)

​

(487)

​

(43)

​

569

​

(285)

​

(346)

​

(246)

​

(838)

​

Ending balance

​

$

5,748

​

$

1,403

​

$

21,210

​

$

4,741

​

$

1,793

​

$

4,948

​

$

39,843

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2026

​

​

​

​

​

​

​

​

​

Real Estate

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

​ ​ ​

Commercial

​ ​ ​

Municipal

​ ​ ​

Commercial

​ ​ ​

Residential

​ ​ ​

Consumer

​ ​ ​

Financing

​ ​ ​

Total

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning balance January 1, 2026

​

$

6,036

​

$

1,413

​

$

19,998

​

$

4,963

​

$

1,759

​

$

4,838

​

$

39,007

​

Charge-offs

​

(191)

​

​

​

​

​

(166)

​

​

​

​

​

(1,310)

​

​

(547)

​

​

(2,214)

​

Recoveries

​

30

​

​

​

​

​

3

​

​

19

​

​

376

​

​

215

​

​

643

​

Provisions (credits)

​

1,330

​

​

103

​

​

4,761

​

​

(791)

​

​

511

​

​

(2,570)

​

​

3,344

​

Ending balance

​

$

7,205

​

$

1,516

​

$

24,596

​

$

4,191

​

$

1,336

​

$

1,936

​

$

40,780

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2025

​

​

​

​

​

​

​

​

​

Real Estate

​

​

​

​

Equipment

​

​

​

​

(Dollars in thousands)

​ ​ ​

Commercial

​ ​ ​

Municipal

​ ​ ​

Commercial

​ ​ ​

Residential

​

Consumer

​

Financing

​

Total

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning balance January 1, 2025

​

$

6,004

​

$

1,072

​

$

21,804

​

$

4,924

​

$

2,540

​

$

5,432

​

$

41,776

​

Charge-offs

​

(572)

​

​

​

(157)

​

(92)

​

(797)

​

(1,255)

​

(2,873)

​

Recoveries

​

317

​

​

​

682

​

85

​

427

​

306

​

1,817

​

(Credits) provisions

​

(1)

​

331

​

(1,119)

​

(176)

​

(377)

​

465

​

(877)

​

Ending balance

​

$

5,748

​

$

1,403

​

$

21,210

​

$

4,741

​

$

1,793

​

$

4,948

​

$

39,843

​

​

​

19

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The following table represents the allowance for credit losses by major classification of loans and whether the loans were individually or collectively evaluated and collateral dependent by class of loans at September 30, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2026

​

​

​

​

​

​

​

​

Real Estate

​

​

​

​

Equipment

​

​

​

(Dollars in thousands)

​ ​ ​

Commercial

​ ​ ​

Municipal

​ ​ ​

Commercial

​ ​ ​

Residential

​ ​ ​

Consumer

​ ​ ​

Financing

​ ​ ​

Total

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

7,205

​

$

1,516

​

$

24,596

​

$

4,191

​

$

1,336

​

$

1,936

​

$

40,780

Ending balance: individually evaluated for impairment

297

​

​

​

​

414

​

​

​

​

​

​

​

​

232

​

943

Ending balance: collectively evaluated for impairment

$

6,908

​

$

1,516

​

$

24,182

​

$

4,191

​

$

1,336

​

$

1,704

​

$

39,837

Loans receivable:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

729,735

​

$

205,792

​

$

2,512,967

​

$

658,698

​

$

97,195

​

$

159,093

​

$

4,363,480

Individually evaluated - collateral dependent - real estate

​

​

​

​

​

​

​

4,414

​

​

1,704

​

​

​

​

​

​

​

6,118

Individually evaluated - collateral dependent - non-real estate

​

​

1,019

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1,172

​

​

2,191

Collectively evaluated

​

$

728,716

​

$

205,792

​

$

2,508,553

​

$

656,994

​

$

97,195

​

$

157,921

​

$

4,355,171

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

​

​

​

​

​

Real Estate

​

​

​

​

Equipment

​

​

​

(Dollars in thousands)

​ ​ ​

Commercial

​ ​ ​

Municipal

​ ​ ​

Commercial

​ ​ ​

Residential

​ ​ ​

Consumer

​ ​ ​

Financing

​ ​ ​

Total

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

6,036

​

$

1,413

​

$

19,998

​

$

4,963

​

$

1,759

​

$

4,838

​

$

39,007

Ending balance: individually evaluated for impairment

404

​

​

​

​

451

​

​

78

​

​

​

​

​

399

​

1,332

Ending balance: collectively evaluated for impairment

$

5,632

​

$

1,413

​

$

19,547

​

$

4,885

​

$

1,759

​

$

4,439

​

$

37,675

Loans receivable:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ending balance

​

$

667,948

​

$

202,303

​

$

2,314,110

​

$

602,309

​

$

111,238

​

$

168,988

​

$

4,066,896

Individually evaluated - collateral dependent - real estate

​

1,470

​

​

​

​

​

4,056

​

​

3,039

​

​

​

​

​

​

​

8,565

Individually evaluated - collateral dependent - non-real estate

​

​

485

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1,153

​

​

1,638

Collectively evaluated

​

$

665,993

​

$

202,303

​

$

2,310,054

​

$

599,270

​

$

111,238

​

$

167,835

​

$

4,056,693

​

​

20

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Nonaccrual Loans

​

The following table presents the Company’s nonaccrual loans, including non-purchased credit deteriorated (“PCD”) nonaccrual loans, at September 30, 2026 and December 31, 2025.

​

​

​	​	​	​	​	​	​	​	​	​
​	​	​
​	​	​	September 30, 2026
​	​	​	Total	​	​	Nonaccrual with	​	​	Nonaccrual with
​	​	​	Nonaccrual	​	​	an Allowance for	​	​	no Allowance for
(Dollars in thousands)	​ ​ ​	​	Loans	​	​	Credit Losses	​	​	Credit Losses
Commercial and industrial	​	$	1,190	​	$	910	​	$	280
Municipal	​	​	​	​	​	​	​	​	​
Real estate:	​	​	​	​	​	​	​	​	​
Commercial	​		4,965	​		1,141	​		3,824
Residential	​		2,423	​		​	​		2,423
Consumer	​		303	​		​	​		303
Equipment financing	​	​	1,188	​	​	864	​	​	324
Total	​	$	10,069	​	$	2,915	​	$	7,154

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​	​	​	December 31, 2025
​	​	​	Total	​	​	Nonaccrual with	​	​	Nonaccrual with
​	​	​	Nonaccrual	​	​	an Allowance for	​	​	no Allowance for
(Dollars in thousands)	​ ​ ​	​	Loans	​	​	Credit Losses	​	​	Credit Losses
Commercial and industrial	​	$	1,955	​	$	1,016	​	$	939
Municipal	​	​	​	​	​	​	​	​	​
Real estate:	​	​	​	​	​	​	​	​	​
Commercial	​		4,152	​		1,178	​		2,974
Residential	​		2,511	​		67	​		2,444
Consumer	​		1,048	​		​	​		1,048
Equipment financing	​	​	1,130	​	​	828	​	​	302
Total	​	$	10,796	​	$	3,089	​	$	7,707

​

Interest income recorded on nonaccrual loans was $98 thousand and $515 thousand for the three and nine months ended September 30, 2026, respectively, and $160 thousand and $887 thousand for the three and nine months ended September 30, 2025, respectively.

​

The Company segments loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are individually analyzed for credit risk by classifying them within the Company’s internal risk rating system. The Company’s risk rating classifications are defined as follows:

​

● Pass - A loan to a borrower with acceptable credit quality and risk that is not adversely classified as Substandard, Doubtful, Loss nor designated as Special Mention.

● Special Mention - A loan that has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special Mention loans are not adversely classified since they do not expose the Company to sufficient risk to warrant adverse classification.

21

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

● Substandard - A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

● Doubtful – A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

● Loss - A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable loan is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be realized in the future.

22

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The following table presents the amortized cost of loans and gross charge-offs by year of origination and by major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at September 30, 2026 and December 31, 2025:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of September 30, 2026

(Dollars in thousands)

​ ​ ​

​

2026

​ ​ ​

​

2025

​ ​ ​

​

2024

​ ​ ​

​

2023

​ ​ ​

​

2022

​ ​ ​

​

Prior

​ ​ ​

​

Revolving Loans Amortized Cost Basis

​ ​ ​

​

Revolving Loans Converted to Term

​ ​ ​

​

Total

Commercial and industrial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

99,513

​

$

77,615

​

$

64,241

​

$

32,702

​

$

43,068

​

$

115,513

​

$

280,300

​

$

200

​

$

713,152

Special mention

​

35

​

​

​

​

​

​

​

​

​

​

​

385

​

​

5

​

​

1,304

​

​

​

​

1,729

Substandard

​

44

​

​

353

​

​

509

​

​

113

​

​

1,709

​

​

538

​

​

11,588

​

​

​

​

​

14,854

Total commercial and industrial

​

99,592

​

77,968

​

64,750

​

32,815

​

45,162

​

116,056

​

293,192

​

200

​

729,735

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

25908

​

​

11,868

​

​

4,243

​

​

1,143

​

​

43,281

​

​

117,341

​

​

2,008

​

​

​

​

205,792

Special mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Substandard

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total municipal

​

​

25,908

​

11,868

​

4,243

​

1,143

​

43,281

​

117,341

​

2,008

​

​

​

205,792

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

422,407

​

​

400,739

​

​

114,030

​

​

142,126

​

​

502,166

​

​

886,529

​

​

​

​

​

​

​

2,467,997

Special mention

​

​

​

​

​

556

​

​

​

​

​

5,719

​

​

1,286

​

​

7,554

​

​

​

​

​

​

​

15,115

Substandard

​

​

96

​

​

1,132

​

​

1,141

​

​

1,508

​

​

5,919

​

​

20,059

​

​

​

​

​

​

​

29,855

Total commercial real estate

​

​

422,503

​

​

402,427

​

​

115,171

​

​

149,353

​

​

509,371

​

​

914,142

​

​

​

​

​

​

​

​

2,512,967

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

53,666

​

​

52,695

​

​

36,446

​

​

37,391

​

​

62,760

​

​

229,931

​

​

184,475

​

​

​

​

657,364

Special mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Substandard

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

933

​

​

401

​

​

​

​

1,334

Total residential real estate

​

​

53,666

​

52,695

​

36,446

​

37,391

​

62,760

​

230,864

​

184,876

​

​

​

658,698

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

21,329

​

​

19,466

​

​

13,895

​

​

15,792

​

​

12,361

​

​

6,667

​

​

7,410

​

​

​

​

96,920

Special mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Substandard

​

​

3

​

​

22

​

​

15

​

​

117

​

​

81

​

​

32

​

​

5

​

​

​

​

275

Total consumer

​

21,332

​

19,488

​

13,910

​

15,909

​

12,442

​

6,699

​

7,415

​

​

​

97,195

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Equipment financing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

41,126

​

​

41,461

​

​

36,336

​

​

27,182

​

​

9,716

​

​

971

​

​

​

​

​

​

​

​

156,792

Special mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Substandard

​

​

​

​

​

479

​

​

676

​

​

851

​

​

295

​

​

​

​

​

​

​

​

​

​

​

2,301

Total equipment financing

​

​

41,126

​

​

41,940

​

​

37,012

​

​

28,033

​

​

10,011

​

​

971

​

​

​

​

​

​

​

​

159,093

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Loans

​

$

664,127

​

$

606,386

​

$

271,532

​

$

264,644

​

$

683,027

​

$

1,386,073

​

$

487,491

​

$

200

​

$

4,363,480

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross charge-offs

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and industrial

​

$

​

​

$

​

​

$

98

​

$

19

​

$

16

​

$

58

​

$

​

​

$

​

​

$

191

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

166

​

​

​

​

​

​

​

​

166

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

47

​

​

202

​

​

355

​

​

243

​

​

222

​

​

241

​

​

​

​

​

​

​

​

1,310

Equipment financing

​

​

54

​

​

10

​

​

221

​

​

79

​

​

183

​

​

​

​

​

​

​

​

​

​

​

547

Total gross charge-offs

​

$

101

​

$

212

​

$

674

​

$

341

​

$

421

​

$

465

​

$

​

​

$

​

​

$

2,214

​

23

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of December 31, 2025

(Dollars in thousands)

​ ​ ​

​

2025

​ ​ ​

​

2024

​ ​ ​

​

2023

​ ​ ​

​

2022

​ ​ ​

​

2021

​ ​ ​

​

Prior

​ ​ ​

​

Revolving Loans Amortized Cost Basis

​ ​ ​

​

Revolving Loans Converted to Term

​ ​ ​

​

Total

Commercial and industrial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

81,246

​

$

69,710

​

$

57,789

​

$

53,915

​

$

38,907

​

$

94,729

​

$

251,834

​

$

100

​

$

648,230

Special mention

​

300

​

​

572

​

​

​

​

​

2,725

​

​

36

​

​

9

​

​

8,718

​

​

​

​

12,360

Substandard

​

​

​

​

111

​

​

400

​

​

579

​

​

664

​

​

30

​

​

5,574

​

​

​

​

​

7,358

Total commercial and industrial

​

81,546

​

70,393

​

58,189

​

57,219

​

39,607

​

94,768

​

266,126

​

100

​

667,948

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

23,125

​

​

4,324

​

​

1,354

​

​

45,369

​

​

88,165

​

​

38,331

​

​

1,635

​

​

​

​

202,303

Special mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Substandard

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total municipal

​

​

23,125

​

4,324

​

1,354

​

45,369

​

88,165

​

38,331

​

1,635

​

​

​

202,303

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

359,323

​

​

146,483

​

​

175,145

​

​

566,480

​

​

441,660

​

​

586,189

​

​

​

​

​

71

​

2,275,351

Special mention

​

​

573

​

​

​

​

​

​

​

​

1,508

​

​

2,174

​

​

9,149

​

​

​

​

​

​

​

13,404

Substandard

​

​

542

​

​

508

​

​

1,217

​

​

7,841

​

​

6,870

​

​

8,377

​

​

​

​

​

​

​

25,355

Total commercial real estate

​

​

360,438

​

​

146,991

​

​

176,362

​

​

575,829

​

​

450,704

​

​

603,715

​

​

​

​

​

71

​

​

2,314,110

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

56,021

​

​

38,109

​

​

40,913

​

​

66,927

​

​

104,534

​

​

148,121

​

​

146,380

​

​

​

​

601,005

Special mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Substandard

​

​

​

​

​

​

​

​

​

​

​

​

​

​

258

​

​

869

​

​

177

​

​

​

​

1,304

Total residential real estate

​

​

56,021

​

38,109

​

40,913

​

66,927

​

104,792

​

148,990

​

146,557

​

​

​

602,309

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

25,443

​

​

19,746

​

​

24,017

​

​

21,716

​

​

9,574

​

​

3,153

​

​

6,493

​

​

​

​

110,142

Special mention

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Substandard

​

​

158

​

​

161

​

​

137

​

​

338

​

​

177

​

​

113

​

​

12

​

​

​

​

1,096

Total consumer

​

25,601

​

19,907

​

24,154

​

22,054

​

9,751

​

3,266

​

6,505

​

​

​

111,238

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Equipment financing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

​

50,357

​

​

51,024

​

​

43,364

​

​

21,050

​

​

724

​

​

​

​

​

​

​

​

​

​

​

166,519

Special mention

​

​

​

​

​

​

​

​

129

​

​

12

​

​

​

​

​

​

​

​

​

​

​

​

​

​

141

Substandard

​

​

287

​

​

664

​

​

691

​

​

686

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2,328

Total equipment financing

​

​

50,644

​

​

51,688

​

​

44,184

​

​

21,748

​

​

724

​

​

​

​

​

​

​

​

​

​

​

168,988

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Loans

​

$

597,375

​

$

331,412

​

$

345,156

​

$

789,146

​

$

693,743

​

$

889,070

​

$

420,823

​

$

171

​

$

4,066,896

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross charge-offs

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and industrial

​

$

​

​

$

300

​

$

​

​

$

24

​

$

57

​

$

493

​

$

​

​

$

​

​

$

874

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

853

​

​

​

​

​

95

​

​

​

​

​

​

​

​

948

Residential real estate

​

​

​

​

​

​

​

​

​

​

​

92

​

​

​

​

​

​

​

​

​

​

​

​

​

​

92

Consumer

​

​

​

​

​

195

​

​

361

​

​

342

​

​

116

​

​

55

​

​

​

​

​

​

​

​

1,069

Equipment Financing

​

​

210

​

​

201

​

​

778

​

​

661

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1,850

Total gross charge-offs

​

$

210

​

$

696

​

$

1,139

​

$

1,972

​

$

173

​

$

643

​

$

​

​

$

​

​

$

4,833

​

24

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The major classifications of loans by past due status are summarized as follows at September 30, 2026 and December 31, 2025:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

September 30, 2026

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

Greater

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

Loans > 90

​

​

30-59 Days

​

60-89 Days

​

than 90

​

Total Past

​

​

​

​

​

​

​

Days and

(Dollars in thousands)

​

Past Due

​

Past Due

​

Days

​

Due

​

Current

​

Total Loans

​

Accruing

Commercial and industrial

​

$

250

​

$

118

​

$

814

​

$

1,182

​

$

728,553

​

$

729,735

​

$

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

205,792

​

​

205,792

​

​

​

​

Real estate:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

331

​

​

366

​

​

4,430

​

5,127

​

2,507,840

​

2,512,967

​

​

​

​

Residential

​

1,834

​

​

592

​

​

1,333

​

​

3,759

​

654,939

​

658,698

​

​

226

​

Consumer

​

1,066

​

​

282

​

127

​

1,475

​

95,720

​

97,195

​

4

​

Equipment financing

​

​

772

​

​

175

​

​

377

​

​

1,324

​

​

157,769

​

​

159,093

​

​

​

​

Total

​

$

4,253

​

$

1,533

​

$

7,081

​

$

12,867

​

$

4,350,613

​

$

4,363,480

​

$

230

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

December 31, 2025

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

Greater

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

Loans > 90

​

​

30-59 Days

​

60-89 Days

​

than 90

​

Total Past

​

​

​

​

​

​

​

Days and

(Dollars in thousands)

​

Past Due

​

Past Due

​

Days

​

Due

​

Current

​

Total Loans

​

Accruing

Commercial and industrial

​

$

1,090

​

$

147

​

$

1,827

​

$

3,064

​

$

664,884

​

$

667,948

​

$

​

​

Municipal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

202,303

​

​

202,303

​

​

​

​

Real estate:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

3,943

​

​

1,459

​

3,550

​

8,952

​

2,305,158

​

2,314,110

​

​

​

​

Residential

​

2,948

​

1,413

​

1,748

​

6,109

​

596,200

​

602,309

​

​

524

​

Consumer

​

2,527

​

500

​

776

​

3,803

​

107,435

​

111,238

​

​

​

Equipment financing

​

​

733

​

​

747

​

​

495

​

​

1,975

​

​

167,013

​

​

168,988

​

​

​

​

Total

​

$

11,241

​

$

4,266

​

$

8,396

​

$

23,903

​

$

4,042,993

​

$

4,066,896

​

$

524

​

​

There were no residential real estate loans in the formal process of foreclosure at September 30, 2026. Residential real estate loans in the formal process of foreclosure were $0.6 million at December 31, 2025.

​

25

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Allowance for Credit Losses on Off Balance Sheet Commitments

​

Off balance sheet commitments include commitments to extend credit, unused portions of lines of credit and standby letters of credit. The Company establishes an ACL for off-balance sheet commitments, which is included in other liabilities on the consolidated balance sheets, to provide for expected credit losses that may be incurred related to these instruments. The following table presents the activity in the ACL related to off balance sheet commitments, for the three and nine months ended September 30, 2026 and 2025:

​

​	​	​	​	​	​	​
​	​	​	For the Three Months Ended
(Dollars in thousands)	​	​	September 30, 2026	​	​	September 30, 2025
Beginning balance July 1,	​	$	1,297	​	$	849
Charge-off	​	​	​	​	​	​
Recovery	​	​	3	​	​	​
Provision for credit losses recorded in noninterest expense	​	​	106	​	​	252
Ending balance September 30,	​	$	1,406	​	$	1,101
​	​	​	​	​	​	​
​	​	​	For the Nine Months Ended
(Dollars in thousands)	​	​	September 30, 2026	​	​	September 30, 2025
Beginning balance January 1,	​	$	1,305	​	$	880
Charge-off	​	​	(3)	​	​	(1)
Recovery	​	​	3	​	​	​
Provision for credit losses recorded in noninterest expense	​	​	101	​	​	222
Ending balance September 30,	​	$	1,406	​	$	1,101

​

​

The contractual amounts of off-balance sheet commitments at September 30, 2026 and December 31, 2025 are as follows:

​

​	​	​	​	​	​	​	​
(Dollars in thousands)	​ ​ ​	September 30, 2026		​ ​ ​	December 31, 2025
Commitments to extend credit	​	$	724,601	​	$	660,353	​
Unused portions of lines of credit	​		204,789	​		178,689	​
Standby letters of credit	​		71,899	​		54,970	​
​	​	$	1,001,289	​	$	894,012	​

​

​

26

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Modifications to Borrowers Experiencing Financial Difficulty

​

There were no modifications made to loans to borrowers experiencing financial difficulty during the three months ended September 30, 2026 and 2025. The following table presents, by class of loans, information regarding modified loans to borrowers experiencing financial difficulty during the nine months ended September 30, 2026 and 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other-Than-Insignificant Payment Delay

​

​

For the nine months ended September 30,

​

​

2026

​

2025

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Number of

​

​

Amortized Cost

​

% of Total Class of Financing

​

​

Related

​

Number of

​

​

Amortized Cost

​

% of Total Class of Financing

​

​

Related

(Dollars in thousands)

​

Loans

​

​

Basis

​

Receivable

​

​

Reserve

​

Loans

​

​

Basis

​

Receivable

​

​

Reserve

Modified Loans to Borrowers Experiencing Financial Difficulty:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and industrial

​

​

​

$

​

​

0.00%

​

$

​

​

1

​

$

242

​

0.036%

​

$

​

Total

​

​

​

$

​

​

​

​

$

​

​

1

​

$

242

​

​

​

$

​

​

The following table presents, by class of loans, information regarding the financial effect on modified loans to borrowers experiencing financial difficulty during the nine months ended September 30, 2025.

​

​	​	​	​	​	​	​
​	​	Other-Than-Insignificant Payment Delay
​	​	For the Nine Months Ended September 30, 2025
(Dollars in thousands)	​	No. of Loans	​	​	Balance	Financial Effect
​	​	​	​	​	​	​
Nonaccrual modified loans to borrowers experiencing financial difficulty:	​	​	​	​	​	​
Commercial and industrial	​	1	​	$	242	Modified principal and interest payment to interest only for 4 months
Total	​	1	​	$	242	​

​

​

6. Operating lease commitments and contingencies:

​

The Company leases certain branch locations and its corporate headquarters under noncancelable operating lease agreements. At lease inception, the Company determines whether a contract contains a lease by assessing whether the arrangement conveys the right to control the use of an identified asset in exchange for consideration. For leases with original terms greater than 12 months, the Company recognizes a right-of-use (“ROU”) asset and a corresponding lease liability at the lease commencement date.

​

ROU assets for operating leases are included in premises and equipment, and lease liabilities are included in other liabilities in the consolidated balance sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

​

Certain leases contain renewal options, generally in five-year increments. Renewal periods that are reasonably certain of being exercised are included in the lease term. The Company’s leases had a weighted-average remaining lease term of 18.5 years and 21.3 years at September 30, 2026, and December 31, 2025, respectively. The discount rate used to measure lease liabilities is the Company’s incremental borrowing rate, determined by using the Federal Home Loan Bank fixed-advance rate for terms corresponding to the term of each lease on its commencement date. At September 30, 2026, the discount rates ranged from 1.60 percent to 5.86 percent with a weighted average rate of 4.90 percent. At December 31, 2025, the discount rates ranged from 1.60 percent to 5.86 percent with a weighted average rate of 4.50 percent.

​

27

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

At September 30, 2026, the Company’s operating lease ROU assets were $26.4 million, and were $17.8 million at December 31, 2025. The Company entered into a lease agreement for one branch and recorded an aggregate right of use asset and corresponding lease liability of $0.2 million during the nine months ended September 30, 2026.

​

As of September 30, 2026, the Company also recorded a ROU asset and corresponding lease liability of $8.9 million for a lease that commenced on April 1, 2025, for its corporate headquarters located at 30 E D Preate Drive, Moosic, Pennsylvania. Subsequently, on June 23, 2025, the Bank entered into a Purchase and Sale Agreement (the “Real Estate Purchase Agreement”) to purchase this property for a purchase price of $19.5 million, subject to customary adjustments, prorations and credits as outlined in the Real Estate Purchase Agreement. In addition to the purchase price, the Bank has paid the seller $3.0 million for certain repairs and improvements to the property and $0.5 million for certain office fit out costs. The closing on the property was anticipated for the second quarter of 2026 but no later than June 30, 2026, as stated in the Real Estate Purchase Agreement. As a result of the Real Estate Purchase Agreement, the expected lease term was reduced to 12 months, which met the definition of a short-term lease under ASC 842. The Company recorded monthly rent payments to rent expense which are included in occupancy and equipment expense on the consolidated statements of income and comprehensive (loss) income. As of June 30, 2026, the purchase of this property had not closed according to the provisions of the Real Estate Purchase Agreement. On July 23, 2026, the Company filed a complaint against the seller and its managing member seeking specific performance requiring seller to convey the property to the Bank or, in the alternative, damages or other relief. For the three months ended September 30, 2026, management continued to account for this lease as a short-term lease due to the Bank’s continued actions to pursue the purchase and the seller’s communication of an intent to perform. As of September 30, 2026, the purchase has not been consummated, and management concluded that the progression of litigation, and the inability to reasonably estimate the timing of a closing constituted a significant change in facts and circumstances affecting the expected lease term. Accordingly, management reassessed the lease classification and measurement assumptions as of September 30, 2026.

​

Based on the facts and circumstances existing as of September 30, 2026, management concluded that continued short-term lease accounting was no longer appropriate and determined that recording the operating lease as a ROU asset and corresponding lease liability appropriately reflects the Company’s rights and obligations under ASC 842 given the uncertainty surrounding the timing and ultimate completion of the purchase under the Real Estate Purchase Agreement. Accordingly, the Company recognized a ROU asset and lease liability for this lease as of September 30, 2026, using the remaining lease term and assumptions summarized above.

​

Leases are summarized as follows:

​

​	​	​	​
(Dollars in thousands)	​	​	As of September 30, 2026
2026	​ ​ ​	$	580
2027	​		2,268
2028	​		2,287
2029	​		2,254
2030	​		2,223
Thereafter	​		32,960
Total future minimum lease payments	​	​	42,572
Less amount representing interest	​	​	(15,440)
Present value of future minimum lease payments	​	$	27,132

28

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

7. Other assets:

​

The components of other assets at September 30, 2026 and December 31, 2025 are summarized as follows:

​

​	​	​	​	​	​	​
(Dollars in thousands)	​ ​ ​	​	September 30, 2026	​ ​ ​	​	December 31, 2025
Other real estate owned	​	$	711	​	$	1,682
Mortgage servicing rights (1)	​		1,240	​		1,211
Prepaid shares tax	​		1,259	​		253
Equity investments without readily determinable fair value	​	​	5,146	​	​	4,908
Prepaid pension	​		7,341	​		7,096
Prepaid expenses	​	​	8,393	​	​	7,813
Prepaid income tax	​	​	12,264	​	​	749
Restricted equity securities	​	​	12,604	​	​	12,457
Investment in low-income housing limited partnerships	​		23,543	​		15,454
Interest rate swaps(2)	​	​	21,639	​	​	15,583
Other assets	​	​	5,515	​	​	3,471
Total	​	$	99,655	​	$	70,677

(1) The Company originates one-to-four family residential mortgage loans for sale in the secondary market with servicing rights retained. Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage loans serviced for others were $171.2 million at September 30, 2026, and $174.3 million at December 31, 2025.

(2) Interest rate swaps balance represents the fair value of the commercial loan back-to-back swaps.

Federal Tax Credits

​

During the three months ended September 30, 2026, the Company purchased $12.3 million of 2025 federal income tax credits, which are included in prepaid income tax within other assets on the consolidated balance sheet as of September 30, 2026. The credits will be used to offset federal income tax liability for 2025 and carried back to offset the Company’s 2024, 2023, and 2022 federal tax liabilities with any remaining unused credit carried forward to offset the Company’s future tax liability for up to 22 years, or 2047. Any unused tax credits would then expire. These credits resulted in a $1.2 million income tax benefit included in income tax expense for the three and nine months ended September 30, 2026. The Company did not purchase any federal income tax credits during the three and nine months ended September 30, 2025.

​

Investments in limited partnerships

​

​

The Company is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved low-income housing investment tax credit projects. These investments are accounted for using the proportional amortization method and are included in other assets in the consolidated balance sheets. The limited partnerships are considered to be variable interest entities (“VIEs”) as they generally do not have equity investors with voting rights or have equity investors that do not provide sufficient financial resources to support their activities. The VIEs have not been consolidated because the Company is not considered the primary beneficiary. All of the Company’s investments in limited partnerships are privately held, and their market values are not readily available. As of September 30, 2026, and December 31, 2025, the Company had $23.5 million and $15.5 million, respectively, invested in these partnerships. At September 30, 2026, the Company had unconditional unfunded equity commitments of $10.7 million included in other liabilities on the consolidated balance sheets. There were no unfunded equity commitments recognized at December 31, 2025. The Company classifies the amortization of the investment as a component of income tax expense and

29

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

proportionally amortizes the investment over the tax credit period. Amortization expense related to these investments for the three and nine months ended September 30, 2026 was $0.8 million and $2.4 million, respectively. Amortization expense was $0.3 million and $0.9 million for the three and nine months ended September 30, 2025, respectively. The tax benefits attributed to these partnerships include low-income housing tax credits, which are included in income tax expense, and are projected to total $2.5 million for 2026. For 2025, tax benefits totaled $2.2 million.

​

The following table presents the scheduled equity commitments to be paid to the limited partnerships over the next five years and in the aggregate thereafter as of September 30, 2026.

​

​	​	​	​
(Dollars in thousands)	​ ​ ​	2026
2026	​	$	10,227
2027	​		212
2028	​		23
2029	​	​	24
2030	​		22
2031 and thereafter	​	​	225
Total	​	$	10,733

​

​

​

​

​

​

​

​

​

​

​

8. Fair value estimates:

​

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosure under GAAP. Fair value estimates are calculated without attempting to estimate the value of anticipated future business and the value of certain assets and liabilities that are not considered financial. Accordingly, such assets and liabilities are excluded from disclosure requirements.

​

In accordance with FASB ASC 820, “Fair Value Measurements and Disclosures,” fair value is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets. In many cases, these values cannot be realized in immediate settlement of the instrument.

​

Current fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction that is not a forced liquidation or distressed sale between participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

​

30

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

In accordance with GAAP, the Company groups its assets and liabilities generally measured at fair value into three levels based on market information or other fair value estimates in which the assets and liabilities are traded or valued and the reliability of the assumptions used to determine fair value. These levels include:

​

● Level 1: Unadjusted quoted prices of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

● Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

● Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value estimate.

​

The following methods and assumptions were used by the Company to calculate fair values and related carrying amounts of financial instruments:

​

Investment securities: The fair values of U.S. Treasury securities and marketable equity securities are based on quoted market prices from active exchange markets and are considered to be Level 1 inputs. The fair values of other debt securities are calculated on market prices of similar instruments using a matrix pricing model, which are considered to be Level 2 inputs.

​

Interest rate swaps and floors: The Company’s interest rate swaps and options are reported at fair value utilizing Level 2 inputs. Values of these instruments are obtained through an independent pricing source utilizing information which may include market observed quotations for interest rate, forward rates, rate volatility, and volatility surface. Derivative contracts create exposure to interest rate movements as well as risks from the potential of non-performance of the counterparty.

​

Individually evaluated loans: Fair values for individually evaluated loans are estimated using underlying collateral values, where applicable.

​

Other real estate owned:  Other real estate owned (“OREO”) represents properties that the Company has acquired through foreclosure by either accepting a deed in lieu of foreclosure, or by taking possession of assets that collateralized a loan, and former bank premises that are no longer used for operations or for future expansion. The Company reports OREO at the lower of cost or fair value less estimated cost to sell, adjusted periodically based on a current appraisal. Write-downs and any gain or loss upon the sale of OREO is recorded in other noninterest income. OREO is reported in other assets on the consolidated balance sheets. The carrying value of OREO was $0.7 million at September 30, 2026, and $1.7 million at December 31, 2025. Other real estate owned is classified within Level 3 in the fair value hierarchy based on appraisals, letters of intent or agreements of sale received from third parties.

​

​

31

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Assets and liabilities measured at fair value on a recurring basis at September 30, 2026 and December 31, 2025 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At September 30, 2026

​

​

Fair Value Measurement Using

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

​

​

​

​

Identical Assets

​

Inputs

​

Inputs

(Dollars in thousands)

​ ​ ​

Amount

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

U.S. Treasury securities

​ ​ ​

$

17,892

​ ​ ​

$

17,892

​ ​ ​

$

​

​ ​ ​

$

​

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

54,269

​

​

​

​

54,269

​

​

​

​

Tax-exempt

​

139,774

​

​

​

​

139,774

​

​

​

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

18,328

​

​

​

​

18,328

​

​

​

​

U.S. government-sponsored enterprises

​

131,632

​

​

​

​

131,632

​

​

​

​

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

1,653

​

​

​

​

1,653

​

​

​

​

Private collateralized mortgage obligations

​

45,021

​

​

​

​

45,021

​

​

​

​

Asset backed securities

​

​

13,798

​

​

​

​

13,798

​

​

​

​

Corporate debt securities

​

​

18,460

​

​

​

​

​

18,460

​

​

​

​

Equity securities

​

​

2,592

​

​

2,592

​

​

​

​

​

​

​

Total investment securities

​

$

443,419

​

$

20,484

​

$

422,935

​

$

​

​

Interest rate swap-other assets

​

$

21,639

​

​

​

​

$

21,639

​

​

​

​

Interest rate swap-other liabilities

​

$

(21,254)

​

​

​

​

$

(21,254)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

32

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At December 31, 2025

​

​

Fair Value Measurement Using

​

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

​

​

​

​

Identical Assets

​

Inputs

​

Inputs

(Dollars in thousands)

​ ​ ​

Amount

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

U.S. Treasury securities

​ ​ ​

$

30,998

​ ​ ​

$

30,998

​ ​ ​

$

​

​ ​ ​

$

​

​

State and municipals:

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

61,622

​

​

​

​

61,622

​

​

​

​

Tax-exempt

​

125,117

​

​

​

​

125,117

​

​

​

​

Residential mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government agencies

​

42,699

​

​

​

​

42,699

​

​

​

​

U.S. government-sponsored enterprises

​

160,080

​

​

​

​

160,080

​

​

​

​

Commercial mortgage-backed securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. government-sponsored enterprises

​

​

1,770

​

​

​

​

​

1,770

​

​

​

​

Private collateralized mortgage obligations

​

​

48,484

​

​

​

​

​

48,484

​

​

​

​

Asset backed securities

​

​

16,267

​

​

​

​

​

16,267

​

​

​

​

Corporate debt securities

​

​

24,794

​

​

​

​

​

23,806

​

​

988

​

Negotiable certificates of deposit

​

​

732

​

​

​

​

​

732

​

​

​

​

Equity securities

​

2,598

​

​

2,598

​

​

​

​

​

​

​

Total investment securities

​

$

515,161

​

$

33,596

​

$

480,577

​

$

988

​

Interest rate swap-other assets

​

$

15,583

​

​

​

​

$

15,583

​

​

​

​

Interest rate swap-other liabilities

​

$

(15,345)

​

​

​

​

$

(15,345)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2026, and December 31, 2025, are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2026

​

​

​

Fair Value Measurement

​

​

​

​

​

​

​

​

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

​

​

​

​

​

​

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

​

​

​

Recorded

​

Valuation

​

​

Fair

​

Identical Assets

​

Inputs

​

Inputs

(Dollars in thousands)

​ ​ ​

​

Investments

​ ​ ​

Allowance

​ ​ ​

​

Value

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

Loans individually evaluated for impairment

​ ​ ​

$

8,309

​ ​ ​

$

943

​ ​ ​

$

7,366

​ ​ ​

$

​

​ ​ ​

$

​

​ ​ ​

$

7,366

​

Other real estate owned

​

$

711

​

$

​

​

$

711

​

$

​

​

$

​

​

$

711

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

Fair Value Measurement

​

​

​

​

​

​

​

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

​

​

​

​

​

​

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

​

​

​

Recorded

​

​

Valuation

​

​

Fair

​

Identical Assets

​

Inputs

​

Inputs

(Dollars in thousands)

​

​

Investment

​ ​ ​

Allowance

​ ​ ​

​

Value

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

Loans individually evaluated for impairment

​ ​ ​

$

10,203

​ ​ ​

$

1,332

​ ​ ​

$

8,871

​ ​ ​

$

​

​ ​ ​

$

​

​ ​ ​

$

8,871

​

Other real estate owned

​

$

1,682

​

$

​

​

$

1,682

​

$

​

​

$

​

​

$

1,682

​

​

33

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis at September 30, 2026, and December 31, 2025, and for which the Company has utilized Level 3 inputs to determine fair value:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands, except percents)	​	Fair Value		​	​	​	​	​	Range
September 30, 2026	​ ​ ​	Estimate		​ ​ ​	Valuation Techniques	​ ​ ​	Unobservable Input	​ ​ ​	(Weighted Average)
Loans individually evaluated for credit loss	​ ​ ​	$	7,366	​ ​ ​	Appraisal of collateral	​ ​ ​	Appraisal adjustments	​ ​ ​	0.0% to 100.0% (75.6)%	​
​	​	​	​	​	​		Liquidation expenses		0.0% to 0.0% (0.0)%	​
Other real estate owned	​	$	711		Appraisal of collateral		Appraisal adjustments		0.0% to 10.0% (5.6)%	​
​	​	​	​	​	​		Liquidation expenses		0.0% to 10.0% (4.9)%	​

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands, except percents)	​	Fair Value		​	​	​	​	​	Range
December 31, 2025	​ ​ ​	Estimate		​ ​ ​	Valuation Techniques	​ ​ ​	Unobservable Input	​ ​ ​	(Weighted Average)
Loans individually evaluated for credit loss	​ ​ ​	$	8,871	​ ​ ​	Appraisal of collateral	​ ​ ​	Appraisal adjustments	​ ​ ​	0.0% to 100.0%  (52.4)%	​
​	​	​	​	​	​		Liquidation expenses		0.0% to 12.2% (0.26)%	​
Other real estate owned	​	$	1,682		Appraisal of collateral		Appraisal adjustments		10.0% to 25.0% (16.9)%	​
​	​	​	​	​	​		Liquidation expenses		0.0% to 0.0% (0.0)%	​

​

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

​

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal.

​

34

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The carrying and fair values of the Company’s financial instruments at September 30, 2026, and December 31, 2025, and their placement within the fair value hierarchy are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Hierarchy

​

​

​

​

​

​

​

​

​

Quoted

​ ​

​

​

​ ​

​

​

​

​

​

​

​

​

​

​

Prices in

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Active

​

Significant

​

​

​

​

​

​

​

​

​

​

​

Markets for

​

Other

​

Significant

​

​

​

​

​

​

​

​

Identical

​

Observable

​

Unobservable

(Dollars in thousands)

​

Carrying

​

Fair

​

Assets

​

Inputs

​

Inputs

September 30, 2026

​ ​ ​

Value

​ ​ ​

Value

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

Financial assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

​

$

304,961

​

$

304,961

​

$

304,961

​

$

​

​

$

​

​

Investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available for sale

​

440,827

​

440,827

​

​

17,892

​

​

422,935

​

​

-

​

Held to maturity

​

66,739

​

54,948

​

​

​

​

54,948

​

​

​

​

Equity securities

​

​

2,592

​

​

2,592

​

​

2,592

​

​

​

​

​

​

​

Loans held for sale

​

1,412

​

1,412

​

​

​

​

1,412

​

​

​

​

Net loans

​

4,322,700

​

4,264,707

​

​

​

​

​

​

​

​

4,264,707

​

Accrued interest receivable

​

18,316

​

18,316

​

​

​

​

18,316

​

​

​

​

Mortgage servicing rights

​

1,240

​

2,149

​

​

​

​

2,149

​

​

​

​

Restricted equity securities (FHLB and other)

​

​

12,604

​

12,604

​

​

​

​

12,604

​

​

​

​

Other assets - interest rate swaps

​

21,639

​

21,639

​

​

​

​

21,639

​

​

​

​

Total

​

$

5,193,030

​

$

5,124,155

​

​

​

​

​

​

​

​

​

​

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

$

4,672,137

​

$

4,665,822

​

$

​

​

$

4,665,822

​

$

​

​

Short-term borrowings

​

​

19,720

​

​

19,720

​

​

​

​

​

19,720

​

​

​

​

Long-term debt

​

160,139

​

159,213

​

​

​

​

159,213

​

​

​

​

Subordinated debt

​

83,494

​

87,857

​

​

​

​

87,857

​

​

​

​

Junior subordinated debt

​

​

8,223

​

​

11,293

​

​

​

​

​

11,293

​

​

​

​

Accrued interest payable

​

​

8,619

​

8,619

​

​

​

​

​

8,619

​

​

​

​

Other liabilities - interest rate swaps

​

21,254

​

21,254

​

​

​

​

​

21,254

​

​

​

​

Total

​

$

4,973,586

​

$

4,973,778

​

​

​

​

​

​

​

​

​

​

​

​

35

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

Fair Value Hierarchy

​

​

​

​

​

​

​

​

Quoted

​ ​ ​

​

​

​ ​ ​

​

​

​

​

​

​

​

​

​

​

Prices in

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Active

​

Significant

​

​

​

​

​

​

​

​

​

​

​

Markets for

​

Other

​

Significant

​

​

​

​

​

​

​

​

Identical

​

Observable

​

Unobservable

(Dollars in thousands)

​

Carrying

​

Fair

​

Assets

​

Inputs

​

Inputs

December 31, 2025

​ ​ ​

Value

​ ​ ​

Value

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

Financial assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

​

$

268,984

​

$

268,984

​

$

268,984

​

$

​

​

$

​

​

Investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available for sale

​

512,563

​

512,563

​

​

30,998

​

​

480,577

​

​

988

​

Held to maturity

​

72,047

​

62,798

​

​

​

​

62,798

​

​

​

​

Equity securities

​

​

2,598

​

​

2,598

​

​

2,598

​

​

​

​

​

​

​

Loans held for sale

​

805

​

805

​

​

​

​

805

​

​

​

​

Net loans

​

4,027,889

​

3,953,431

​

​

​

​

​

​

​

​

3,953,431

​

Accrued interest receivable

​

17,633

​

17,633

​

​

​

​

17,633

​

​

​

​

Mortgage servicing rights

​

1,211

​

2,099

​

​

​

​

2,099

​

​

​

​

Restricted equity securities (FHLB and other)

​

12,457

​

12,457

​

​

​

​

12,457

​

​

​

​

Other assets - interest rate swaps

​

​

15,583

​

​

15,583

​

​

​

​

​

15,583

​

​

​

​

Total

​

$

4,931,770

​

$

4,848,951

​

​

​

​

​

​

​

​

​

​

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

$

4,434,069

​

$

4,431,901

​

$

​

​

$

4,431,901

​

$

​

​

Short-term borrowings

​

32,721

​

32,904

​

​

​

​

32,904

​

​

​

​

Long-term debt

​

134,352

​

134,982

​

​

​

​

134,982

​

​

​

​

Subordinated debt

​

​

83,187

​

​

86,456

​

​

​

​

​

86,456

​

​

​

​

Junior subordinated debt

​

​

8,140

​

​

7,293

​

​

​

​

​

7,293

​

​

​

​

Accrued interest payable

​

6,792

​

6,792

​

​

​

​

​

6,792

​

​

​

​

Other liabilities - interest rate swaps

​

​

15,345

​

​

15,345

​

​

​

​

​

15,345

​

​

​

​

Total

​

$

4,714,606

​

$

4,715,673

​

​

​

​

​

​

​

​

​

​

​

​

36

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

9. Employee benefit and stock plans:

​

Employee benefit plans

​

The Company sponsors a Retirement Profit Sharing 401(k) Plan and previously sponsored an Employee Stock Ownership Plan (“ESOP”). On June 25, 2025, the board of directors adopted a resolution to merge the ESOP into the Retirement Profit Sharing 401(k) Plan, which became effective on October 15, 2025. The Company maintains Supplemental Executive Retirement Plans (“SERPs”) for certain of its executive officers, and an Employees’ Pension Plan, which is currently frozen. Expenses related to these plans, which are included in salaries and employee benefits expense, totaled $0.4 million and $1.7 million for the three and nine months ended September 30, 2026, and $0.5 million and $1.7 million for the three and nine months ended September 30, 2025.

​

The components of net periodic pension benefit for the three and nine months ended September 30, 2026 and 2025 are summarized in the following tables:

​

​	​	​	​	​	​	​
​	​	Three Months Ended September 30,
​	​	Pension Benefits
(Dollars in thousands)	​	2026		​	2025
Net periodic pension benefit:	​ ​ ​	​	​	​ ​ ​	​	​
Interest cost	​	$	158	​	$	166
Expected return on plan assets	​		(242)	​		(337)
Amortization of unrecognized net loss	​		2	​		35
Net periodic pension benefit	​	$	(82)	​	$	(136)

​

​	​	​	​	​	​	​
​	​	Nine Months Ended September 30,
​	​	Pension Benefits
(Dollars in thousands)	​	2026		​	2025
Net periodic pension benefit:	​ ​ ​	​	​	​ ​ ​	​	​
Interest cost	​	$	474	​	$	496
Expected return on plan assets	​		(726)	​		(1,011)
Amortization of unrecognized net loss	​		6	​		106
Net periodic pension benefit:	​	$	(246)	​	$	(409)

​

Stock plans

​

In May 2017, the Company’s stockholders approved the 2017 equity incentive plan (“2017 Plan”). In May 2023, the Company’s stockholders approved the 2023 equity incentive plan (“2023 Plan”). The 2017 Plan and 2023 Plan authorize grants of stock options, stock appreciation rights, cash awards, performance awards, restricted stock, and restricted stock units. Under the 2017 Plan and 2023 Plan the compensation committee of the Company’s board of directors has the authority to, among other things:

● Select the persons to be granted awards under the Plan.

● Determine the type, size, and term of awards.

● Determine whether such performance objectives and conditions have been met.

● Accelerate the vesting or exercisability of an award.

​

37

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Persons eligible to receive awards under the 2017 Plan and 2023 Plan include directors, officers, employees, consultants and other service providers of the Company and its subsidiaries.

While the 2017 Plan will remain in effect in accordance with its terms to govern outstanding awards under that plan, the Company intends to make future grants under the 2023 Plan. If any awards outstanding under the 2023 Plan are forfeited by the holder or canceled by the Company, the underlying shares would be available for regrant to others under the 2023 Plan. On May 22, 2026, the Company’s shareholders approved an amendment to the 2023 Plan to increase the number of shares that may be issued under the 2023 Plan. As of September 30, 2026, 135,259 shares of the Company’s common stock were available for grants as awards pursuant to the 2023 Plan.

​

On January 30, 2026, a total of 4,455 shares of restricted stock awards with a fair value of $50.61 per share were granted under the 2023 Plan to the Bank’s non-employee directors with each director receiving 297 shares. On January 31, 2025, a total of 3,080 shares of restricted stock awards with a fair value of $53.64 per share were granted under the 2023 Plan to the Bank’s non-employee directors. The restricted stock awards granted in January 2026 and 2025 vested immediately upon grant. Director compensation expense related to these grants was $56 thousand and $113 thousand for the three and nine months ended September 30, 2026, respectively, and also for the three and nine months ended September 30, 2025 and is included in other expenses in the consolidated statements of income and comprehensive (loss) income.

​

For the nine months ended September 30, 2026, the Company granted 15,660 performance-vested restricted stock units and 12,678 time-vested restricted stock units to employees under the 2023 Plan. For the nine months ended September 30, 2025, the Company granted 38,925 performance-vested restricted stock units and 32,371 time-vested restricted stock units to employees under the 2023 Plan. The time-vested restricted stock awards and restricted stock units granted to employees in 2026, 2025, 2024 and 2023 vest equally over three, five or seven years, as applicable. The performance-vested restricted stock units vest over two or three fiscal years and include conditions based on the Company’s two- and three-year cumulative diluted earnings per share and two- and three-year average return on tangible common equity which determines the number of restricted stock units that may vest.

​

The Company expenses the fair value of all employee share-based compensation over the requisite service period commencing at grant date. The fair value of restricted stock is expensed on a straight-line basis. Compensation is recognized over the vesting period and adjusted based on the performance criteria. The Company classifies share-based compensation for employees within “salaries and employee benefits expense” on the consolidated statements of income and comprehensive (loss) income. The Company recognized compensation costs of $584 thousand and $1.0 million for the three and nine months ended September 30, 2026, respectively, for awards granted under the 2023 Plan. The Company recognized net compensation costs of $252 thousand and $707 thousand for the three and nine months ended September 30, 2025, respectively, for the awards granted under the 2023 Plan. In addition, during the nine months ended September 30, 2025, the Company reversed $491 thousand in accrued expenses related to the vesting of performance stock units awarded in 2022 and $213 thousand related to performance stock units awarded in 2024.

​

As of September 30, 2026, the Company had $3.4 million of unrecognized compensation expense associated with restricted stock and restricted stock unit awards. The remaining cost is expected to be recognized over a weighted average vesting period of 3 years.

​

​

​

​

38

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

10. Derivatives and hedging activities

​

Risk Management Objective of Using Derivatives

​

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts principally related to the Company’s assets and borrowings.

​

Cash Flow Hedges of Interest Rate Risk

​

The Company’s objectives in using interest rate derivatives are to add stability to interest income/expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and floors as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up-front premium. Such derivatives have been used to hedge the variable cash flows associated with existing variable-rate assets and issuances of debt.

​

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCL and subsequently reclassified into interest expense/income in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCL related to derivatives will be reclassified to interest expense/income as interest payments are made/received on the Company’s variable-rate debt/assets. During the next twelve months, the Company estimates that no amount will be reclassified as a reduction to interest income.

​

Fair Value Hedges of Interest Rate Risk

​

The Company is exposed to changes in the fair value of certain of its fixed-rate pools of assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate, the Secured Overnight Financing Rate (“SOFR”). Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.

​

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

​

39

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

As of September 30, 2026 and December 31, 2025, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustment for fair value hedges:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included

​

​

Amortized Amount of the Hedged Assets/(Liabilities)

​

​

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)

(Dollars in thousands)

​

​

September 30, 2026

​

​

December 31, 2025

​

​

September 30, 2026

​

​

December 31, 2025

AFS Securities (1)

​

$

125,506

​

$

139,219

​

$

14

​

$

303

Total

​

$

125,506

​

$

139,219

​

$

14

​

$

303

(1) Fixed Rate AFS Securities. These amounts include the amortized cost basis of closed portfolios of fixed rate assets used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2026, the amortized cost basis of the closed portfolios used in these hedging relationships was $125.5 million. The amounts of the designated hedged items were $25.0 million. At December 31, 2025, the amortized cost basis of the closed portfolios used in these hedging relationships was $139.2 million. The amounts of the designated hedged items were $75.0 million.

​

​

Non-designated Hedges

​

Certain credit-related derivatives not designated as hedges, which include interest rate swaps and risk participation agreements, are not speculative and result from a service the Company provides to certain customers and lenders that participate in loans.

​

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. As of September 30, 2026, the Company had 179 interest rate swaps with an asset notional amount of $438.3 million and a liability notional amount of $410.2 million related to this program. As of December 31, 2025, the Company had 164 interest rate swaps with an asset notional amount of $402.5 million and a liability notional amount of $374.3 million related to this program.

​

The Company’s existing risk-participation agreements result from participations in or out of interest rate swaps provided by or to external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities.

​

40

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Values of Derivative Instruments

​

​

​

Derivative Assets

​

​

Derivative Liabilities

​

​

​

As of September 30, 2026 (1)

​

As of December 31, 2025 (1)

As of September 30, 2026 (1)

​

As of December 31, 2025 (1)

(Dollars in thousands)

​

​

Notional Amount

​

Balance Sheet Location

​

​

Fair Value

​

Balance Sheet Location

​

​

Fair Value

​

​

Notional Amount

​

Balance Sheet Location

​

​

Fair Value

​

Balance Sheet Location

​

​

Fair Value

Derivatives designated as hedging instruments

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate products

​

$

​

​

Other assets

​

$

​

​

Other assets

​

$

​

​

$

25,000

​

Other liabilities

​

$

25

​

Other liabilities

​

$

329

Total derivatives designated as hedging instruments

​

​

​

​

​

​

$

​

​

​

​

$

​

​

​

​

​

​

​

$

25

​

​

​

$

329

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives not designated as hedging instruments

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate products

​

$

404,527

​

Other assets

​

$

21,866

​

Other assets

​

$

15,896

​

$

404,527

​

Other liabilities

​

$

21,480

​

Other liabilities

​

$

15,659

Other contracts

​

​

33,790

​

Other assets

​

​

​

​

Other assets

​

​

2

​

​

5,686

​

Other liabilities

​

​

​

​

Other liabilities

​

​

​

Total derivatives not designated as hedging instruments

​

​

​

​

​

​

$

21,866

​

​

​

$

15,898

​

​

​

​

​

​

$

21,480

​

​

​

$

15,659

​

(1) The notional asset amount of interest rate swaps and risk participation agreements were $404.5 million and $33.8 million, respectively, at September 30, 2026, and $368.5 million and $34.0 million, respectively, at December 31, 2025.

​

41

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income and Comprehensive (Loss) Income

The tables below present the effect of fair value and cash flow hedge accounting on the consolidated statements of income and comprehensive (loss) income for the three and nine months ended September 30, 2026 and 2025.

​

​

​	​	​	​	​	​	​	​
​	​	Location and Amount of Gain or (Loss)					​
​	​	Recognized in Income on Fair Value and					​
​	​	Cash Flow Hedging Relationships					​
​	​	For the Three Months Ended September 30,					​
​	​	​	2026	​	​	2025	​
(Dollars in thousands)	​	​	Interest Income	​	​	Interest Income	​
Total amounts of income and expense line items presented in the consolidated statements of income and	​	​	​	​	​	​	​
comprehensive (loss) income in which the effects of fair value or cash flow hedges are recorded.	​	$	(40)	​	$	(11)	​
The effects of fair value and cash flow hedging:	​	​	​	​	​	​	​
Gain or (loss) on fair value hedging relationships	​	​	​	​	​	​	​
Interest contracts	​	​	​	​	​	​	​
Hedged items	​	​	(53)	​	​	(57)	​
Derivatives designated as hedging instruments	​	​	13	​	​	46	​
Gain or (loss) on cash flow hedging relationships	​	​	​	​	​	​	​
Interest contracts	​	​	​	​	​	​	​
Amount of (loss) reclassified from AOCI into income	​	​	​	​	​	​	​
Amount of gain reclassified from AOCI into income - Included Component	​	​	​	​	​	​	​
Amount of (loss) reclassified from AOCI into income - Excluded Component	​	​	​	​	​	​	​

​

​

​

​	​	​	​	​	​	​	​
​	​	​	Location and Amount of Gain or (Loss)
​	​	​	Recognized in Income on Fair Value and
​	​	​	Cash Flow Hedging Relationships
​	​	​	For the nine months ended September 30,
​	​	​	2026	​	​	2025	​
(Dollars in thousands)	​	​	Interest Income	​	​	Interest Income	​
Total amounts of income and expense line items presented in the consolidated statements of income and	​	​	​	​	​	​	​
comprehensive income in which the effects of fair value or cash flow hedges are recorded	​	$	(149)	​	$	(63)	​
The effects of fair value and cash flow hedging:	​	​	​	​	​	​	​
Gain or (loss) on fair value hedging relationships	​	​	​	​	​	​	​
Interest contracts	​	​	​	​	​	​	​
Hedged items	​	​	(289)	​	​	(56)	​
Derivatives designated as hedging instruments	​	​	140	​	​	(7)	​
in earnings based on an amortization approach	​	​	​	​	​	​	​
Gain or (loss) on cash flow hedging relationships	​	​	​	​	​	​	​
Interest contracts	​	​	​	​	​	​	​
Amount of (loss) reclassified from AOCI into income	​	​	​	​	​	​	​
Amount of gain reclassified from AOCI into income - Included Component	​	​	​	​	​	​	​
Amount of (loss) reclassified from AOCI into income - Excluded Component	​	​	​	​	​	​	​

​

​

42

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Effect of Derivative Instruments Not Designated as Hedging Instruments on the Consolidated Statements of Income and Comprehensive (Loss) Income

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of income and comprehensive (loss) income for the three and nine months ended September 30, 2026 and 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of Gain or (Loss)

​

Amount of Gain or (Loss)

​

Amount of Gain or (Loss)

​

Amount of Gain or (Loss)

​

​

​

​

Recognized in

​

Recognized in

​

Recognized in

​

Recognized in

​

​

Location of Gain or (Loss)

​

Income on Derivative

​

Income on Derivative

​

Income on Derivative

​

Income on Derivative

​

​

Recognized in Income

​

Three Months Ended

​

Three Months Ended

​

Nine Months Ended

​

Nine Months Ended

(Dollars in thousands)

​ ​ ​

on Derivatives

​ ​ ​

September 30, 2026

​ ​ ​

September 30, 2025

​ ​ ​

September 30, 2026

​ ​ ​

September 30, 2025

​ ​ ​

Derivatives not designated as hedging instruments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate products

Noninterest income (expense)

​

$

126

​

$

(36)

​

$

148

​

​

$

(148)

​

Other contracts

​

Noninterest income (expense)

​

​

(1)

​

​

​

​

​

(55)

​

​

​

(4)

​

Total

​

​

$

125

​

$

(36)

​

$

93

​

​

$

(152)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fee income

​

Noninterest income

​

$

44

​

$

219

​

$

868

​

​

$

537

​

​

43

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Offsetting Derivatives

​

The table below presents a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of September 30, 2026 and December 31, 2025. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of September 30, 2026

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Assets

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

​

Assets

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

21,866

​

$

​

​

$

21,866

​

$

​

​

$

19,720

​

$

2,146

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Liabilities

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of September 30, 2026

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Liabilities

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

​

Liabilities

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted(1)

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

21,505

​

$

​

​

$

21,505

​

$

21,505

​

$

​

​

$

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of December 31, 2025

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Assets

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

​

Assets

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

15,896

​

$

​

​

$

15,896

​

$

​

​

$

8,960

​

$

6,936

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offsetting of Derivative Liabilities

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as of December 31, 2025

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not Offset in the Balance Sheet

​

​

Gross

​

​

​

Net Amounts

​

​

​

​

​

​

​

​

​

​

​

Amounts of

​

Gross Amounts

​

of Liabilities

​

​

​

​

​

​

​

​

​

​

​

Recognized

​

Offset in the

​

presented in the

​

Financial

​

Cash Collateral

​

Net

(Dollars in thousands)

​

Liabilities

​

Balance Sheet

​

Balance Sheet

​

Instruments

​

Posted(1)

​

Amount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivatives

​

$

15,988

​

$

​

​

$

15,988

​

$

15,988

​

$

​

​

$

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(1) No cash collateral was paid as of September 30, 2026. Cash collateral of $2.2 million was paid as of December 31, 2025, but not presented as an offset above.

Credit-risk-related Contingent Features

The Company has agreements with certain of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

44

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions, and the Company would be required to settle its obligations under the agreements.

The termination value of derivatives in a net liability position related to these agreements, including accrued interest but excluding any adjustment for nonperformance risk, was $0 and $2.3 million as of September 30, 2026, and December 31, 2025, respectively.

The Company has minimum collateral posting thresholds with certain of its derivative counterparties. There was no cash collateral posted at September 30, 2026. The Company posted cash collateral of $2.2 million at December 31, 2025. Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the agreements. The cash collateral is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at the termination value.

​

11. Deposits

​

The major components of interest-bearing and noninterest-bearing deposits at September 30, 2026 and December 31, 2025 are summarized as follows:

​

​

​	​	​	​	​	​	​
(Dollars in thousands)	​ ​ ​	​	September 30, 2026	​ ​ ​	​	December 31, 2025
Interest-bearing deposits:	​	​	​	​	​	​
Money market accounts	​	$	1,143,195	​	$	989,230
Interest-bearing demand and NOW accounts	​		1,272,769	​		1,285,767
Savings accounts	​		506,039	​		497,523
Time deposits less than $250	​		568,908	​		477,115
Time deposits $250 or more	​		210,156	​		229,949
Total interest-bearing deposits	​		3,701,067	​		3,479,584
Noninterest-bearing deposits	​		971,070	​		954,485
Total deposits	​	$	4,672,137	​	$	4,434,069

​

Time deposits less than $250 thousand included brokered deposits of $253.5 million at September 30, 2026 and $152.3 million at December 31, 2025.

​

The scheduled maturities of all time deposits through September 30 of each year are summarized as follows:

​

​	​	​	​	​
(Dollars in thousands)	​ ​ ​	​	​	​
2027	​ ​ ​	$	650,849	​
2028	​		84,194	​
2029	​		31,287	​
2030	​		7,146	​
2031	​		5,398	​
Thereafter	​		190	​
​	​	$	779,064	​

​

​

45

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

12. Borrowings

​

Short-term borrowings generally consist of FHLB overnight borrowings or advances with stated original terms of less than twelve months, and other borrowings associated with collateral held from derivative counterparties, totaled $19.7 million at September 30, 2026, and $32.7 million at December 31, 2025.

​

The table below presents short-term borrowings at and for the nine months ended September 30, 2026, and at and for the year ended December 31, 2025:   

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At and for the nine months ended September 30, 2026

​

​

​

​

​

​

​

​

​

​

​

Weighted

​

Weighted

​

​

​

​

​

​

​

​

Maximum

​

Average

​

Average

​

​

Ending

​

Average

​

Month-End

​

Rate for

​

Rate at End

(Dollars in thousands, except percents)

​ ​ ​

Balance

​ ​ ​

Balance

​ ​ ​

Balance

​ ​ ​

the Period

​ ​ ​

of the Period

FHLB advances

​ ​ ​

$

​

​ ​ ​

$

25,328

​ ​ ​

$

169,261

​ ​ ​

3.95

%

​

%

Other borrowings

​

​

19,720

​

​

11,640

​

​

19,720

3.55

​

3.88

​

Total short-term borrowings

​

$

19,720

​

$

36,968

​

$

188,981

3.82

%

3.88

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At and for the year ended December 31, 2025

​

​

​

​

​

​

​

​

​

​

​

Weighted

​

Weighted

​

​

​

​

​

​

​

​

Maximum

​

Average

​

Average

​

​

Ending

​

Average

​

Month-End

​

Rate for

​

Rate at End

(Dollars in thousands, except percents)

​ ​ ​

Balance

​ ​ ​

Balance

​ ​ ​

Balance

​ ​ ​

the Year

​ ​ ​

of the Year

FHLB advances

​

$

23,761

​

$

16,452

​

$

65,350

4.44

%

3.76

%

Other borrowings

​

​

8,960

​

​

12,789

​

​

18,160

​

4.35

​

3.67

​

Total short-term borrowings

​

$

32,721

​

$

29,241

​

$

83,510

​

4.40

%

3.74

%

​

The Company’s agreement with the FHLB permits borrowings up to a maximum capacity determined by a percentage of qualifying collateral assets. FHLB advances are secured under a blanket collateral agreement by pledged FHLB stock and other qualifying collateral, including investments, mortgage-backed securities and mortgage loans. Interest on FHLB advances accrues daily based on FHLB discount note rates. The overnight borrowing rate resets daily.

​

At September 30, 2026, loans pledged to the FHLB totaled $2.6 billion, providing maximum borrowing capacity of $1.8 billion. Of this capacity, $160.2 million was used for outstanding long-term advances and $511.0 million for standby letters of credit, primarily to collateralize public fund deposits.

​

The Company has access to the Federal Reserve Bank’s Discount Window borrower-in-custody program, which allows depository institutions to pledge loans as collateral for Discount Window advances while retaining the loan documentation. At September 30, 2026, pledged loans totaled $742.6 million, providing $587.6 million in borrowing capacity. No borrowings were outstanding under this program at September 30, 2026 or December 31, 2025.

​

46

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Long-term debt consists of fixed-rate and floating-rate advances from the FHLB. The Company’s holdings of long-term debt at September 30, 2026 and December 31, 2025 is presented in the following table:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​ ​ ​	​	​	​ ​ ​	​	​
(Dollars in thousands, except percents)	​ ​ ​	Interest Rate	​	​	​	September 30, 2026	​	​	December 31, 2025
Fixed-rate advances:	​	​	​	​	​	​	​	​	​	​
March 2026	​	4.78	%	​	$	​	​	$	4,292	​
March 2026	​	4.20	​	​	​	​	​	​	15,000	​
May 2026	​	4.08	​	​	​	​	​	​	5,000	​
August 2026	​	3.98	​	​	​	​	​	​	12,047	​
October 2026	​	3.95	​	​	​	15,284	​	​	15,284	​
March 2027	​	3.89	​	​	​	10,000	​	​	​	​
March 2027	​	3.51	​	​	​	12,198	​	​	12,198	​
June 2027	​	4.16	​	​	​	5,224	​	​	5,224	​
July 2027	​	4.01	​	​	​	21,773	​	​	21,773	​
August 2027	​	4.40	​	​	​	6,461	​	​	6,461	​
October 2027	​	5.29	​	​	​	1,577	​	​	2,617	​
October 2027	​	5.18	​	​	​	5,475	​	​	5,475	​
November 2027	​	3.61	​	​	​	14,937	​	​	14,937	​
January 2028	​	3.95	​	​	​	10,000	​	​	​	​
March 2028	​	4.45	​	​	​	14,188	​	​	14,188	​
Total fixed-rate advances	​	​	​	​	​	117,117	​	​	134,496	​
Floating-rate advances:	​	​	​	​	​	​	​	​	​	​
August 2027	​	3.99	​	​	​	9,050	​	​	​	​
February 2028	​	4.03	​	​	​	9,000	​	​	​	​
May 2028	​	4.06	​	​	​	12,500	​	​	​	​
May 2029	​	4.11	​	​	​	12,545	​	​	​	​
Total floating-rate advances	​	​	​	​	​	43,095	​	​	​	​
Total FHLB long-term debt	​	​	​	​	​	160,212	​	​	134,496	​
Less net fair value discount	​	​	​	​	​	(73)	​	​	(144)	​
Total long-term debt	​	​	​	​	$	160,139	​	$	134,352	​

​

Maturities of long-term debt, by contractual maturity, for the remainder of 2026 and subsequent years are as follows:

​

​	​	​	​	​
(Dollars in thousands)	​	​	​	​
2026	​	$	15,284	​
2027	​	​	86,695	​
2028	​		45,688	​
2029	​	​	12,545	​
Total FHLB long-term debt	​	​	160,212	​
Less net fair value discount	​	​	(73)	​
Total long-term debt	​	$	160,139	​

​

​

​

​

47

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

13. Subordinated debt

​

On June 6, 2025, the Company entered into Subordinated Note Purchase Agreements (collectively, the “Subordinated Note Purchase Agreements”) with certain qualified institutional buyers and institutional accredited investors (collectively, the “Subordinated Note Purchasers”) pursuant to which the Company issued and sold $85.0 million in aggregate principal amount of its 7.75% Fixed-to-Floating Rate Subordinated Notes due 2035 (the “Subordinated Notes”) at a price equal to 100 percent of the principal amount. The Subordinated Note Purchase Agreements include customary representations, warranties, and covenants. The Subordinated Notes mature on June 15, 2035, and bear interest at an initial fixed annual rate of 7.75 percent, payable semi-annually in arrears, to but excluding June 15, 2030. From and including June 15, 2030, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an interest rate per annum initially equal to the then-current three-month SOFR plus 411 basis points, payable quarterly in arrears. The Company is entitled to redeem the Subordinated Notes, in whole or in part, any time on or after June 15, 2030, on any interest payment date, and to redeem the Subordinated Notes at any time in whole upon certain other events. Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required. The Subordinated Notes were issued under an Indenture, dated June 6, 2025 (the “Indenture”), by and between the Company and U.S. Bank Trust Company, National Association, as trustee. The Subordinated Notes are not subject to any sinking fund and are not convertible into or, other than with respect to the Exchange Notes, exchangeable for any other securities or assets of the Company or any of its subsidiaries. The Subordinated Notes are not subject to redemption at the option of the holders. The Subordinated Notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Subordinated Notes rank junior in right to payment to the Company’s current and future senior indebtedness. The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes. In connection with the issuance and sales of the Subordinated Notes, the Company entered into registration rights agreements with the Subordinated Note Purchasers, pursuant to which the Company exchanged most of the Subordinated Notes for subordinated notes that are registered under the Securities Act of 1933, as amended, (the “Securities Act”) and have substantially the same terms as the Subordinated Notes. The Subordinated Notes are presented net of unamortized debt issuance costs and included in borrowed funds in the consolidated balance sheets under the caption “Subordinated Debt.” Subordinated debentures were $83.5 million, net of unamortized debt issuance costs of $1.5 million at September 30, 2026, and $83.2 million, net of unamortized debt issuance costs of $1.8 million at December 31, 2025. Interest expense on the Subordinated Notes was $1.7 million and $5.2 million for the three and nine months ended September 30, 2026, respectively, and $1.7 million and $3.2 million for the three and nine months ended September 30, 2025, respectively.

​

On June 30, 2025, the Company redeemed $33.0 million aggregate principal amount of its 5.375% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2020 Notes”) which were sold to accredited investors on June 1, 2020. The 2020 Notes qualified as Tier 2 capital for regulatory capital purposes. The 2020 Notes bore interest at a rate of 5.375 percent per year for the first five years and then repriced to 9.08 percent based on a benchmark rate.

48

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

The Company assumed $10.3 million of floating rate junior subordinated deferrable interest debentures due December 15, 2036 (“Debentures”) in its 2024 merger with FNCB Bancorp, Inc (the “FNCB merger”) at a fair market value of $8.0 million. The Debentures are held by First National Community Statutory Trust I, a Delaware statutory trust (the “Trust”). The Debentures and corresponding trust preferred securities (the “Trust Securities”) have a variable interest rate which resets quarterly to 3-month CME Term SOFR plus a spread adjustment of 0.26161 percent and a margin of 1.67 percent. The Debentures are unsecured and rank subordinate and junior in right to all indebtedness, liabilities and obligations of the Company. The Debentures represent the sole assets of the Trust. The Trust Securities may be prepaid at the election of the Company. The Company’s investment in the Trust is reflected on a deconsolidated basis. At September 30, 2026 and December 31, 2025, the Debentures were $8.2 million and $8.1 million, respectively, and are included in borrowed funds in the consolidated balance sheets under the caption “Junior Subordinated Debentures.” Interest expense on the Debentures was $177 thousand and $524 thousand for the three and nine months ended September 30, 2026, respectively, and $189 thousand and $563 thousand for the three and nine months ended September 30, 2025, respectively.

​

​

​

14. Related party transactions

​

In conducting its business, Peoples has engaged in and intends to continue to engage in banking and financial transactions with directors, executive officers and their related parties.

​

The Bank has granted loans, letters of credit and lines of credit to directors, executive officers and their related parties. The following table summarizes the changes in the total amounts of such outstanding loans, advances under lines of credit, net of any participations sold, as well as repayments for the nine months ended September 30, 2026 and 2025.

​

​	​	​	​	​	​	​
​	​	​	Nine Months Ended September 30,
(Dollars in thousands)	​ ​ ​	​	2026	​ ​ ​	​	2025
Balance, beginning of period	​	$	139,374	​	$	130,563
Additions, new loans and advances	​	​	65,632	​	​	30,809
Repayments and other reductions	​	​	(22,997)	​	​	(18,106)
Balance, end of period	​	$	182,009	​	$	143,266

​

At September 30, 2026 and December 31, 2025, there were no loans to directors, executive officers and their related parties that were not performing in accordance with the original terms of the loan agreements.

​

Deposits from directors, executive officers and their related parties held by the Bank at September 30, 2026, and December 31, 2025, were $155.3 million and $161.5 million, respectively.

​

In the course of its operations, the Bank acquires goods and services from, and transacts business with various companies of related parties, which include, but are not limited to legal services, rent, vehicle repair and dealer reserve payments. The Bank recorded payments to related parties for goods and services of $31 thousand and $256 thousand for the three and nine months ended September 30, 2026, respectively, and $18 thousand and $154 thousand for the three and nine months ended September 30, 2025, respectively.

​

On June 29, 2026, the Company entered into a sale and leaseback agreement with a related party whereby the Company sold its branch office located at 141 North Main Street, Moscow, Lackawanna County, Pennsylvania to a related party for a net sales price of $643 thousand. Management evaluated the June 29, 2026 transaction under the sale and leaseback provisions of ASC 842, “Leases,” and the transaction satisfies the criteria for sale accounting under ASC 606, “Revenue from Contracts with Customers.” The net book value of the property sold was $376 thousand, and the

49

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

Company recognized a gain on sale of $267 thousand which is included in net gains on sale of fixed assets in the consolidated statements of income and comprehensive (loss) income for the nine months ended September 30, 2026.

The Company immediately leased back a portion of the property to operate as a drive-through-only branch under a five-year noncancelable lease with the first monthly rental payment of $3 thousand due on July 1, 2026. On June 29, 2026, the commencement date, the Company recorded a right of use asset and corresponding lease liability of $183 thousand.

​

​

15. Regulatory matters

​

The Company’s ability to pay dividends to its shareholders is largely dependent on the Bank’s ability to pay dividends to the Company. Regulations with respect to the banking industry limit the amount of dividends that may be paid without prior approval of the Bank’s regulatory agency.

​

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Management believes, as of September 30, 2026 and December 31, 2025, that the Company and the Bank met all applicable capital adequacy requirements.

​

Current quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the tables below) of Total capital, Tier 1 capital, and Tier 1 common equity (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). The following tables present summary information regarding the Company’s and the Bank’s risk-based capital and related ratios at September 30, 2026 and December 31, 2025:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2026

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum to be Well

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Capitalized under

​

​

​

​

​

​

​

​

Minimum For Capital

​

​

Prompt Corrective

​

​

Actual

​

​

Adequacy Purposes

​

​

Action Provisions

(Dollars in thousands, except percents)

​

Amount

​

Ratio

​

​

Amount

​

Ratio

​

​

Amount

​

Ratio

Common equity Tier 1 capital to risk-weighted assets:

​ ​ ​

​

​

​ ​ ​

​

​ ​ ​

​

​

​

​ ​ ​

​

​ ​ ​

​

​

​

​ ​ ​

​

​

Company

​

$

475,973

​

10.86

%

​

$

197,157

4.50

%

​

​

NA

​

NA

​

Bank

​

555,948

​

12.71

​

​

196,853

4.50

​

​

$

284,344

​

6.50

%

Tier 1 capital to risk-weighted assets:

​ ​ ​

​

​

​

​

​ ​ ​

​

​

​

​ ​ ​

​

​ ​ ​

​

​

​

​ ​ ​

​

​

Company

​

​

485,973

​

11.09

​

​

​

262,876

6.00

​

​

​

NA

​

NA

​

Bank

​

555,948

​

12.71

​

​

262,471

6.00

​

​

​

349,961

8.00

​

Total capital to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

611,186

​

13.95

​

​

350,501

8.00

​

​

​

NA

​

NA

​

Bank

​

597,667

​

13.66

​

​

349,961

8.00

​

​

437,452

10.00

​

Tier 1 capital to average assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

485,973

​

9.11

​

​

213,202

4.00

​

​

​

NA

​

NA

​

Bank

​

​

555,948

​

10.44

​

​

​

212,899

4.00

​

​

​

266,123

5.00

​

NA = not applicable

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

50

Table of Contents

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum to be Well

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Capitalized under

​

​

​

​

​

​

​

​

Minimum For Capital

​

​

Prompt Corrective

​

​

Actual

​

​

Adequacy Purposes

​

​

Action Provisions

(Dollars in thousands, except percents)

​

Amount

​

Ratio

​

​

Amount

​

Ratio

​

​

Amount

​

Ratio

Common equity Tier 1 capital to risk-weighted assets:

​ ​ ​

​

​

​ ​ ​

​

​ ​ ​

​

​

​

​ ​ ​

​

​ ​ ​

​

​

​

​ ​ ​

​

​

Company

​

$

440,852

11.03

%

​

$

179,784

4.50

%

​

​

NA

​

NA

​

Bank

​

520,587

13.06

​

​

179,427

4.50

​

​

$

259,172

6.50

%

Tier 1 capital to risk-weighted assets:

​ ​ ​

​

​

​ ​ ​

​

​ ​ ​

​

​

​

​ ​ ​

​

​ ​ ​

​

​

​

​ ​ ​

​

​

Company

​

​

450,852

11.28

​

​

​

239,712

6.00

​

​

​

NA

​

NA

​

Bank

​

520,587

13.06

​

​

239,236

6.00

​

​

​

318,981

8.00

​

Total capital to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

571,887

14.31

​

​

319,617

8.00

​

​

​

NA

​

NA

​

Bank

​

558,435

14.01

​

​

318,981

8.00

​

​

398,726

10.00

​

Tier 1 capital to average assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

450,852

8.84

​

​

204,039

4.00

​

​

​

NA

​

NA

​

Bank

​

​

520,587

10.22

​

​

​

203,726

4.00

​

​

​

254,658

5.00

​

NA = not applicable

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

51

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

​

The following discussion and analysis should be read in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report, and with our audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in the 2025 10-K.

​

Cautionary Note Regarding Forward-Looking Statements:

​

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to risks and uncertainties. These statements are based on assumptions and may describe future plans, strategies and expectations of the Company that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Company’s control). These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. All statements in this report, other than statements of historical facts, are forward-looking statements.

​

The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Important factors that could cause the Company’s actual results to differ materially from those in the forward-looking statements include, but are not limited to: changes in interest rates, including their effect on the Company’s investment values; impairment charges relating to the Company’s investment portfolio; credit risks in connection with the Company’s lending activities; the Company’s exposure to commercial and industrial, construction, commercial real estate, and equipment finance loans; the Company’s ability to maintain an adequate allowance for credit losses; access to liquidity; the strength of the Company’s customer deposit levels; unrealized losses; reliance on the Company’s subsidiaries; accounting procedures, policies and requirements; changes in the value of goodwill; the Company’s ability to attract and retain key personnel; the strength of the Company’s disclosure controls and procedures and internal controls over financial reporting; potential for errors, omissions or fraud; environmental liabilities; reliance on third-party vendors and service providers; the Company’s ability to compete effectively in the Company’s industry and within the Company’s market area, including with respect to competition from financial technology companies and non-bank entities; the development and use of artificial intelligence (“AI”) in business processes, services, and products; including emerging focus among regulators and other officials related to risk in connection with the development and use of AI; the Company’s ability to prevent, detect and respond to cybersecurity threats and incidents; a failure of information technology, whether due to a breach, cybersecurity incident, or ability to keep pace with growth and developments; the Company’s ability to comply with privacy and data protection requirements; changes in U.S. or regional economic conditions; the soundness of other financial institutions; changes in laws and regulations; geopolitical instability, including wars and other conflicts; fiscal and monetary policies of the federal government and its agencies; a failure to meet minimum capital requirements; the Company’s ability to realize the anticipated benefits of future acquisitions or a change in control; and the Company’s ability to pay dividends. Additional factors that may affect the Company’s results are discussed in Part I, Item 1A of the 2025 10-K, and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

​

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

​

Critical Accounting Policies:

​

The Company’s consolidated financial statements are prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to establish critical accounting policies and make accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the

52

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods.

​

An accounting estimate requires assumptions about uncertain matters that could have a material effect on the consolidated financial statements if a different amount within a range of estimates were used or if estimates changed from period to period. Readers of this report should understand that estimates are made considering facts and circumstances at a point in time, and changes in those facts and circumstances could produce results that differ from estimates. Management is required to make subjective and/or complex judgments about matters that are inherently uncertain and could be subject to revision as new information becomes available. Management has identified that the determination of ACL and impairment of goodwill are critical estimates that are particularly susceptible to material change within future periods. Actual amounts could differ from those estimates.

​

For a further discussion of our critical accounting estimates, refer to Note 1 entitled, “Summary of significant accounting policies,” in the Notes to Consolidated Financial Statements included in the 2025 10-K.

​

Goodwill and Other Intangible Assets:

​

The Company has goodwill with a net carrying value of $76.0 million at both September 30, 2026, and December 31, 2025. The Company’s policy is to test goodwill for impairment annually on December 31 or on an interim basis if an event triggering impairment may have occurred. If the Company’s carrying amount exceeds the fair value of the goodwill, the Company will record an impairment charge based on that difference. At September 30, 2026, management noted that no such triggering events had occurred. There is no assurance that changes in events or circumstances in the future will not result in impairment.

​

Core deposit intangibles are amortized on an accelerated basis using an estimated life of ten years. The core deposit intangibles are evaluated annually for impairment in accordance with GAAP. An impairment loss will be recognized if the carrying amount of the intangible asset is not fully recoverable and exceeds fair value. The carrying amount of the intangible asset is not considered fully recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.

​

We believe that the fair values of our intangible assets were in excess of their carrying amounts and therefore there was no impairment of intangible assets at September 30, 2026.

​

Review of Financial Position:

​

Total assets increased $288.7 million, or 5.5 percent, to $5.6 billion at September 30, 2026, from $5.3 billion at December 31, 2025. The balance sheet expansion primarily reflected strong loan growth and increases in our cash and cash equivalents, partially offset by decreases in investment securities. Total loans increased $296.6 million, or 7.3 percent to $4.4 billion, at September 30, 2026, from $4.1 billion at December 31, 2025. Total investment securities decreased $77.0 million to $510.2 million at September 30, 2026, from $587.2 million at December 31, 2025. Cash and cash equivalents increased $36.0 million to $305.0 million at September 30, 2026, from $269.0 million at December 31, 2025. Also contributing to the increase in total assets was a $29.0 million increase in other assets to $99.7 million from $70.7 million at December 31, 2025, which was primarily related to an increase in prepaid income tax associated with the purchase of federal income tax credits, an additional investment in a low-income housing tax credit limited partnership, and an increase in operating lease right-of-use assets associated with the Company's corporate headquarters lease.

​

Total liabilities increased $279.3 million, or 5.9 percent, to $5.0 billion at September 30, 2026, from $4.8 billion at December 31, 2025, which was primarily due to increases in deposits and long-term debt. Total deposits increased $238.1 million to $4.7 billion at September 30, 2026, from $4.4 billion at December 31, 2025. Interest-bearing deposits

53

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

increased $221.5 million to $3.7 billion at September 30, 2026, compared to $3.5 billion at December 31, 2025, while noninterest-bearing deposits increased $16.6 million to $971.1 million at September 30, 2026, from $954.5 million as of December 31, 2025.

​

Total short-term borrowings at September 30, 2026, were $19.7 million, a decrease of $13.0 million from $32.7 million at December 31, 2025. Long term debt increased $25.7 million to $160.1 million at September 30, 2026, from $134.4 million at December 31, 2025.

​

Total stockholders’ equity increased $9.5 million from $519.8 million at year-end 2025 to $529.3 million at September 30, 2026, due largely to net income, partially offset by dividends paid to shareholders and an increase in accumulated other comprehensive loss primarily due to market rate adjustments related to available for sale investments. Book value per share increased $0.86 to $52.87 at September 30, 2026, from $52.01 at December 31, 2025. The Bank and the Company were considered well capitalized at September 30, 2026 and December 31, 2025, with regulatory capital ratios that exceeded minimum regulatory capital ratios required to be well capitalized under applicable regulations.

​

Investment Portfolio:

​

The majority of the investment portfolio is classified as available for sale, which provides greater flexibility in using the investment portfolio for liquidity purposes by allowing securities to be sold when market opportunities occur. Investment securities available for sale totaled $440.8 million at September 30, 2026, a decrease of $71.8 million, or 14.0 percent, from $512.6 million at December 31, 2025. The decrease was primarily due to additional sales associated with a partial portfolio repositioning strategy, coupled with the redirection of cash flows from principal payments into the loan portfolio to fund loan growth.

​

Investment securities held to maturity, which consisted of 84.4 percent mortgage-backed securities issued or guaranteed by U.S. Government agencies and U.S. Government-sponsored entities and 15.6 percent tax-exempt municipal securities, totaled $66.7 million at September 30, 2026, a decrease of $5.3 million, or 7.4 percent from $72.0 million at December 31, 2025. The decrease was primarily due to principal payments on mortgage-backed securities. Held to maturity securities had a market value of $54.9 million at September 30, 2026, compared to $62.8 million at December 31, 2025.

​

The Company also holds a portfolio of equity investments, consisting primarily of publicly traded bank holding companies, which are carried at fair value. Equity investments totaled $2.6 million at both September 30, 2026 and December 31, 2025.

​

For the nine months ended September 30, 2026, investments averaged $588.5 million, a decrease of $52.2 million or 8.2 percent compared to $640.7 million for the same nine months of 2025. Average taxable investments decreased $118.9 million, or 21.6 percent to $430.9 million from $549.8 million for the nine months ended September 30, 2025. Partially offsetting this decrease was an increase in average tax-exempt municipal bonds of $66.7 million to $157.6 million for the nine months ended September 30, 2026, from $90.9 million for the comparable period of 2025. Despite the reduction, portfolio repositioning strategies resulted in a 76-basis point increase in the fully tax-equivalent (“FTE”) yield on the investment portfolio, a non-GAAP measure, to 3.87 percent for the nine months ended September 30, 2026, from 3.11 percent for the comparable period of 2025.

​

Securities available for sale are carried at fair value, with unrealized gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive loss component of stockholders’ equity. We reported net unrealized losses, included as a separate component of stockholders’ equity of $44.2 million net of a deferred income tax benefit of $12.4 million at September 30, 2026, and net unrealized losses of $22.8 million, net of deferred income tax benefit of $6.4 million, at December 31, 2025. The unrealized loss on available-for-sale securities increased primarily due to

54

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

higher market interest rates, particularly U.S. Treasury rates, as investment security values move inversely to interest rates.

​

Our Asset/Liability Committee (“ALCO”) reviews the performance and risk elements of the investment portfolio quarterly. Through active balance sheet management and analysis of the securities portfolio, we endeavor to maintain sufficient liquidity to satisfy depositor requirements and meet the credit needs of our customers.

​

Loan Portfolio:

​

Total loans increased $296.6 million, or 7.3 percent, from $4.1 billion at December 31, 2025, to $4.4 billion at September 30, 2026. The increase was due primarily to strong demand for commercial and residential real estate loans, commercial and industrial loans, and municipal loans, partially offset by reductions in indirect automobile loans, and commercial equipment financing loans during the first nine months of 2026.

​

As a result of the strong demand within the business sector, commercial real estate loans, which were $2.5 billion at September 30, 2026, increased $198.9 million from $2.3 billion at December 31, 2025. Additionally, commercial and industrial loans increased $61.8 million to $729.7 million at September 30, 2026, compared to $667.9 million at December 31, 2025.

​

Residential real estate loans increased $56.4 million to $658.7 million at September 30, 2026, compared to $602.3 million at December 31, 2025. The increase in residential real estate loans was largely concentrated in home equity lines of credit which were driven by a low introductory 6-month fixed-rate offering. As a result, the balance of home equity lines of credit increased $39.7 million to $185.3 million at September 30, 2026 from $145.6 million at December 31, 2025.

​

Consumer loans, which consist primarily of indirect auto loans, decreased $14.0 million to $97.2 million at September 30, 2026, compared to $111.2 million at December 31, 2025.

​

Equipment financing loans decreased $9.9 million to $159.1 million at September 30, 2026, compared to $169.0 million at December 31, 2025.

​

The Company did not aggressively compete for indirect automobile loans and equipment financing during the first nine months of 2026.

​

Municipal loans increased $3.5 million to $205.8 million compared to $202.3 million at December 31, 2025.

​

For the nine months ended September 30, 2026, total loans averaged $4.2 billion, an increase of $235.6 million or 5.9 percent compared to $4.0 billion for the same period of 2025. The FTE yield on the loan portfolio was 5.91 percent for the nine months ended September 30, 2026, an 8-basis point decrease from 5.99 percent for the comparable period of 2025. The reduction in yield largely reflected the 75-basis point reduction in the prime rate during the second half of 2025, as the Company’s adjustable and floating rate loans repriced at lower rates. Loan yields improved during the third quarter of 2026 following a 25-basis point increase in the prime rate in September 2026.

​

In addition to the risks inherent in our loan portfolio, in the normal course of business, we are also a party to financial instruments with off-balance sheet risk to meet certain financing needs of our customers. These instruments include legally binding commitments to extend credit, unused portions of lines of credit and commercial letters of credit made under the same underwriting standards as on-balance sheet instruments, and may involve, to varying degrees, elements of credit risk and interest rate risk (“IRR”) in excess of the amount recognized in the consolidated financial statements.

​

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MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Unused commitments at September 30, 2026 totaled $1.0 billion, and consisted of $929.4 million in unfunded commitments of existing loan facilities and $71.9 million in standby letters of credit. Due to fixed maturity dates, specified conditions within these instruments, and the ultimate needs of our customers, many will expire without being drawn upon. We believe that amounts actually drawn upon can be funded in the normal course of operations and, therefore, do not represent a significant liquidity risk to us. In comparison, unused commitments at December 31, 2025 totaled $894.0 million, which were comprised of $839.0 million in unfunded commitments of existing loans and $55.0 million in standby letters of credit. In order to provide for credit losses associated with these instruments, the Company recorded an allowance for credit losses, included in other liabilities on the consolidated balance sheets of $1.4 million at September 30, 2026, and $1.3 million at December 31, 2025.

​

Asset Quality:

​

Distribution of nonperforming assets

​

​	​	​	​	​	​	​	​
(Dollars in thousands, except percents)	​	​	September 30, 2026	​	​	December 31, 2025	​
Nonaccrual loans	​	$	10,069	​	$	10,796	​
Accruing loans past due 90 days or more:	​	​	230	​	​	524	​
Total nonperforming loans	​	​	10,299	​	​	11,320	​
Foreclosed assets	​	​	​	​	​	750	​
Total nonperforming assets	​	$	10,299	​	$	12,070	​
Total loans held for investment	​	$	4,363,480	​	$	4,066,896	​
Allowance for credit losses	​		40,780	​		39,007	​
Allowance for credit losses as a percentage of loans held for investment	​	​	0.93	%	​	0.96	%
Allowance for credit losses as a percentage of nonaccrual loans	​	​	405.01	%		361.31	%
Allowance for credit losses as a percentage of nonperforming loans	​	​	395.96	%	​	344.58	%
Nonaccrual loans as a percentage of loans held for investment	​	​	0.23	%	​	0.27	%
Nonperforming loans as a percentage of loans held for investment	​		0.24	%		0.28	%
Nonperforming assets as a percentage of total assets	​		0.19	%		0.23	%

​

The Company’s asset quality improved as evidenced by reductions in both non-performing loans and foreclosed assets. Nonperforming assets decreased $1.8 million to $10.3 million, or 0.19 percent of total assets, at September 30, 2026, from $12.1 million, or 0.23 percent of total assets, at December 31, 2025. The decrease was primarily caused by a decline in nonaccrual loans in addition to the final resolution of a foreclosed property in 2026.

​

Loans on nonaccrual status decreased $0.7 million to $10.1 million at September 30, 2026, from $10.8 million at December 31, 2025. The decrease was primarily due to favorable resolutions of several nonaccrual loans during the third quarter of 2026. The Company had one foreclosed commercial property, with a carrying value of $750 thousand at December 31, 2025, that was resolved during the nine months ended September 30, 2026.

​

While we remain focused on growing loans and optimizing our balance sheet to support profitability, we continue to prioritize strong asset quality. We continued our efforts to maintain sound underwriting standards across all lending practices as we pursue high-quality loan growth.

​

The allowance for credit losses equaled $40.8 million or 0.93 percent of loans held for investment, at September 30, 2026, compared to $39.0 million, or 0.96 percent of loans held for investment at December 31, 2025. For the three and nine months ended September 30, 2026, the Company recorded net charge offs of $0.4 million and $1.6 million respectively, compared to net charge offs of $0.2 million and $1.1 million for the three and nine months ended September 30, 2025, respectively. For the three months ended September 30, the Company recorded a release of reserves of $1.1 million in 2026 compared to a release of reserves of $0.8 million in 2025. For the nine months ended September

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(Dollars in thousands, except per share data)

​

30, the provision for credit losses totaled $3.3 million in 2026 compared to a release of reserves of $0.9 million in 2025. The release in the provision for the third quarter of 2026 reflects improved asset quality metrics, seasoning of the equipment loan segment and lower specific reserves resulting from the successful resolution of nonperforming loans. The increase in the provision for the year-to-date period of 2026 was primarily attributable to significant loan growth, while the prior year benefit reflected reductions in non-accrual assets and declines in model loss rates.

​

Deposits:

​

We attract the majority of our deposits from within our market areas through the offering of various deposit instruments including demand deposit accounts, money market deposit accounts, savings accounts, and time deposits, including certificates of deposit and IRAs.

​

Total deposits increased $238.1 million, or 5.4 percent, to $4.7 billion at September 30, 2026, from $4.4 billion at December 31, 2025. Interest-bearing deposits increased $221.5 million, or 6.4 percent, to $3.7 billion at September 30, 2026, from $3.5 billion at December 31, 2025. Noninterest-bearing deposits increased $16.5 million, or 1.7 percent, to $971.0 million at September 30, 2026, from $954.5 million at December 31, 2025. The increase in interest-bearing deposits reflects a strategic deposit growth effort, coupled with an increase in brokered deposits.

​

Interest-bearing demand deposits decreased $13.0 million, and were $1.3 billion at both September 30, 2026 and December 31, 2025. The decrease was primarily caused by cyclical outflows of municipal deposits. Money market accounts increased $154.0 million to $1.1 billion at September 30, 2026 from $989.2 million at December 31, 2025. Savings accounts increased $8.5 million to $506.0 million as of September 30, 2026, from $497.5 million at December 31, 2025. Time deposits less than $250 thousand increased $91.8 million to $568.9 million at September 30, 2026, from $477.1 million at December 31, 2025. Time deposits less than $250 thousand include brokered time deposits. The Company increased its utilization of brokered time deposits, including short-term and longer-term callable instruments, during the nine months ended September 30, 2026, to offset cyclical outflows of municipal deposits. As a result, brokered time deposits increased $101.3 million to $253.5 million at September 30, 2026, from $152.2 million at December 31, 2025. Time deposits of $250 thousand or more decreased $19.8 million to $210.2 million at September 30, 2026, from $230.0 million at year end 2025. The decrease in large denomination time deposits was largely caused by a planned outflow of two certificates of deposit to one municipal customer at their maturity.

​

Our deposit base is diversified and consisted of 39.5 percent retail accounts, 35.2 percent commercial accounts, 19.8 percent non-brokered municipal relationships and 5.4 percent brokered deposits at September 30, 2026. At September 30, 2026, total estimated uninsured deposits were approximately $1.6 billion, or 34.8 percent of total deposits, as compared to approximately $1.5 billion, or 34.3 percent of total deposits at December 31, 2025.

​

Interest-bearing deposits averaged $3.5 billion for the nine months ended September 30, 2026, an increase of $79.8 million compared to $3.4 billion for the same nine months of 2025. Average noninterest-bearing deposits increased $45.2 million to $937.9 million from $892.7 million comparing the nine months ended September 30, 2026 and 2025, respectively. The cost of interest-bearing deposits was 2.19 percent for the nine months ended September 30, 2026, a decrease of 23 basis points compared to 2.42 percent for the same period of 2025, which reflected overall lower market interest rates for the majority of 2026. The cost of total deposits, which includes the impact of noninterest-bearing deposits, decreased 20 basis points to 1.72 percent for the nine months ended September 30, 2026, from 1.92 percent for the same nine months of 2025.

​

Borrowings:

​

The Bank utilizes borrowings as a secondary source of liquidity for its asset/liability management. Advances are available from the FHLB provided certain standards related to credit worthiness have been met. Repurchase and term

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(Dollars in thousands, except per share data)

​

agreements are also available from the FHLB. In addition, the Bank may borrow from the Federal Reserve Bank utilizing the Discount Window.

​

Overall, total borrowings were $271.6 million at September 30, 2026, which included short-term borrowings, long-term debt, subordinated debt, and junior subordinated debt compared to $258.4 million at December 31, 2025, an increase of $13.2 million. Generally, short-term borrowings include FHLB advances with original maturity terms of less than twelve months and cash collateral pledged by derivative counterparties to offset interest rate exposure. At September 30, 2026, short-term borrowings totaled $19.7 million compared to $32.7 million at December 31, 2025, a decrease of $13.0 million. Long-term debt was $160.1 million at September 30, 2026, compared with $134.4 million at year end 2025, and was comprised exclusively of advances from the FHLB. Junior subordinated debt, which was acquired as part of the 2024 FNCB merger and reported net of discount, totaled $8.2 million and $8.1 million at September 30, 2026, and December 31, 2025, respectively. Subordinated debt, net of unamortized debt issuance costs, was $83.5 million at September 30, 2026, and $83.2 million at December 31, 2025.

​

Liquidity:

​

Liquidity management is essential to our continuing operations and enables us to meet financial obligations as they come due, as well as to take advantage of new business opportunities as they arise. Financial obligations include, but are not limited to, the following:

​

● Funding new and existing loan commitments;

​

● Payment of deposits on demand or at their contractual maturity;

​

● Repayment of borrowings as they mature;

​

● Payment of lease obligations; and

​

● Payment of operating expenses.

​

These obligations are managed daily, thus enabling us to effectively monitor fluctuations in our liquidity position and to adapt that position according to market influences and balance sheet trends. Future liquidity needs are forecasted, and strategies are developed to maintain adequate liquidity.

​

Historically, core deposits have been the primary source of liquidity because of their stability and lower cost, in general, than other types of funding. Providing additional sources of funds are loan and investment payments and prepayments, the ability to sell both available for sale securities and mortgage loans held for sale, and borrowing capacity.

​

Management actively monitors the Company’s liquidity position, sources of available liquidity in relation to funding and cash flow needs. Additionally, the Company’s ALCO generally meets quarterly, and most recently met in August 2026 to review our IRR profile, capital adequacy and liquidity. On September 30, 2026, the Company’s cash and cash equivalents were $305.0 million. In addition to cash and cash equivalents, the Company had ample sources of additional liquidity including available borrowing capacity with the FHLB and Federal Reserve Bank Discount Window and federal fund lines of credit with correspondent banks. Our maximum borrowing capacity with the FHLB as of September 30, 2026, was $1.8 billion, of which $671.2 million was outstanding in the form of borrowings and irrevocable standby letters of credit, with remaining availability of $1.1 billion. Additionally, the Company had $587.6 million in availability at the Federal Reserve Bank Discount Window, through a borrower-in-custody of collateral arrangement, which enables us to pledge certain loans not being used as collateral elsewhere. Additional sources of credit with correspondent banks total $27.0 million, none of which was utilized at September 30, 2026. The Company also maintains an available for sale investment securities portfolio, comprised primarily of highly liquid U.S. Treasury securities, highly rated municipal securities and U.S. agency-backed mortgage-backed securities. This portfolio serves as an additional source of liquidity

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MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

and capital. At September 30, 2026, the Company’s available for sale investment portfolio totaled $440.8 million, of which $145.0 million was unencumbered. We believe our liquidity position is sufficient to meet our current and anticipated financial obligations and commitments in a timely manner.

​

We employ several analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to determine the extent of our reliance on noncore funds to fund our investments and loans maturing after September 30, 2026. Our noncore funds at September 30, 2026 were comprised of time deposits in denominations of $100 thousand or more, brokered deposits and other borrowings. These funds are not considered to be a strong source of liquidity because they are interest rate sensitive and could be highly volatile. On September 30, 2026, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was 13.4 percent, while our net short-term noncore funding dependence ratio, noncore funds maturing within one-year, less short-term investments, to long-term assets equaled 7.8 percent. Our reliance on non-core funding at September 30, 2026 increased as compared to our reliance at December 31, 2025, which primarily reflected an increase in non-core funds outstanding, specifically brokered deposits and long-term FHLB advances. Our overall noncore dependence ratio at December 31, 2025, was 11.2 percent and our net short-term noncore funding dependence ratio was 6.4 percent.

​

The Consolidated Statements of Cash Flows present the changes in cash and cash equivalents from operating, investing and financing activities. Cash and cash equivalents, consisting of cash on hand, cash items in the process of collection, deposit balances with other banks and federal funds sold, increased $36.0 million during the nine months ended September 30, 2026. Comparatively, cash and cash equivalents increased $44.1 million for the same period last year. For the nine months ended September 30, 2026, net cash inflows of $37.0 million from operating activities and $231.4 million from financing activities were offset by $232.4 million used in investing activities. For the same period of 2025, net cash inflows of $38.2 million from operating activities and $11.6 million from financing activities were offset by $5.7 million utilized in investing activities.

​

Operating activities provided net cash of $37.0 million for the nine months ended September 30, 2026, and provided $38.2 million for the corresponding nine months of 2025. Net income, adjusted for the effects of gains and losses along with non-cash transactions such as depreciation, amortization, accretion and the provision for credit losses, are the primary sources of funds from operations.

​

Investing activities primarily include lending activities, and investment portfolio transactions. Investing activities used net cash of $232.4 million for the nine months ended September 30, 2026, compared to using net cash of $5.7 million for the same period of 2025. Cash used to fund loan originations totaled $288.2 million for the nine months ended September 30, 2026, and was the primary factor causing the net cash outflow from investing activities. Also contributing to the outflow was $43.5 million in cash used to purchase available for sale investment securities and $4.8 million in purchases of premises and equipment. Partially offsetting these outflows was $63.4 million in principal payments from investment securities, $32.7 million in proceeds from sales of available for sale investment securities and equity investments and $6.8 million received from bank owned life insurance.

​

Financing activities provided net cash of $231.4 million for the nine months ended September 30, 2026, and provided net cash of $11.6 million for the corresponding nine months of 2025. For the nine months ended September 30, 2026, the net increase was primarily driven by increases in deposits, coupled with net proceeds received from long-term debt, partially offset by dividends paid to shareholders and net repayments from short-term borrowings. Net cash provided by financing activities for the comparative period of 2025 primarily reflected net proceeds from short-term borrowings and long-term debt, partially offset by decreases in deposits and payment of dividends to shareholders.

​

We believe that our future liquidity needs will be satisfied through maintaining an adequate level of cash and cash equivalents, by maintaining readily available access to traditional funding sources, and through proceeds received from the investment and loan portfolios. We believe that our current sources of funds will enable us to meet all cash obligations as they come due.

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Capital:

​

Stockholders’ equity totaled $529.3 million or $52.87 per share at September 30, 2026, an increase of $9.5 million compared to $519.8 million or $52.01 per share at December 31, 2025. The increase in stockholders’ equity was primarily due to net income, partially offset by cash dividends paid to shareholders and an increase in accumulated other comprehensive loss primarily due to changes in market rates related to available for sale investments.

​

Dividends declared equaled $1.88 per share for the nine months ended September 30, 2026, and $1.85 per share for the same period of 2025. The Company has paid cash dividends since its formation as a bank holding company in 1986. On October 23, 2026, the Company’s board of directors declared a fourth quarter dividend of $0.625 per share payable on December 15, 2026, to shareholders of record as of November 30, 2026. It is the present intention of the Company’s board of directors to continue to pay comparable quarterly dividends. Future dividends, however, must necessarily depend upon earnings, financial condition, legal restrictions and other factors relevant at the time the board of directors considers payment of dividends.

​

Current rules, which implemented the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act, call for the following capital requirements: (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent; (ii) a minimum ratio of tier 1 capital to risk-weighted assets of 6 percent; (iii) a minimum ratio of total capital to risk-weighted assets of 8 percent; and (iv) a minimum leverage ratio of 4 percent. In addition, the final rules establish a common equity tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets applicable to all banking organizations. If a banking organization fails to hold capital above the minimum capital ratios and the capital conservation buffer, it will be subject to certain restrictions on capital distributions and discretionary bonus payments.

The adequacy of capital is reviewed on an ongoing basis with reference to the size, composition and quality of resources and regulatory guidelines. We seek to maintain a level of capital sufficient to support existing assets and anticipated asset growth, maintain favorable access to capital markets, and preserve high-quality credit ratings. At September 30, 2026, the Bank’s Tier 1 capital to total average assets was 10.44 percent as compared to 10.22 percent at December 31, 2025. The Bank’s Tier 1 capital to risk weighted asset ratio was 12.71 percent and the Bank’s total capital to risk weighted asset ratio was 13.66 percent at September 30, 2026. The respective ratios were 13.06 percent and 14.01 percent at December 31, 2025. The Bank’s common equity Tier 1 to risk weighted asset ratio was 12.71 percent at September 30, 2026, compared to 13.06 percent at December 31, 2025. The Bank met all capital adequacy requirements and was deemed to be well-capitalized under regulatory standards at September 30, 2026.

​

At September 30, 2026, the Company’s Tier 1 capital to total average assets was 9.11 percent as compared to 8.84 percent at December 31, 2025. The Company’s Tier 1 capital to risk weighted asset ratio was 11.09 percent and the total capital to risk weighted asset ratio was 13.95 percent at September 30, 2026. These ratios were 11.28 percent and 14.31 percent at December 31, 2025. The Company’s common equity Tier 1 to risk weighted asset ratio was 10.86 percent at September 30, 2026, compared to 11.03 percent at December 31, 2025.

​

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Review of Financial Performance:

​

The Company reported net income of $19.1 million or $1.90 per diluted share for the three months ended September 30, 2026, an increase of $3.9 million when compared to net income of $15.2 million or $1.51 per diluted share for the comparable period of 2025. The increase in net income comparing the three months ended September 30, 2026, and 2025 was primarily due to an increase in net interest income and a release in the provision for credit losses due to the successful resolution of nonperforming loans, partially offset by an increase in non-interest expense. The Company recorded a benefit of $1.1 million and $0.8 million for credit losses during the third quarter of 2026 and 2025, respectively. Noninterest expenses increased by $3.0 million, primarily due to increases in salaries and benefits expense, net occupancy and equipment expense, corporate business development expense and professional fees. For the three months ended September 30, 2026, net interest income increased $6.1 million to $47.3 million from $41.2 million for the three months ended September 30, 2025. Noninterest income was $5.7 million and $5.5 million for the three months ended September 30, 2026, and 2025, respectively. The Company recorded a loss on the sales of administrative offices of $0.6 million in the third quarter of 2025. There were no such losses recorded during the third quarter of 2026.

​

Net income for the nine months ended September 30, 2026, totaled $48.7 million, or $4.85 per diluted share, an increase of $1.5 million, compared to $47.2 million, or $4.69 per diluted share for the same nine months of 2025. The increase in year-to-date net income was primarily attributable to an increase in net interest income, partially offset by higher noninterest expense and provision for credit losses, reflecting strong loan growth, while the prior year benefit for credit losses reflected reductions in non-accrual assets and declines in model loss rates.

​

Return on average assets (“ROAA”) measures our net income in relation to total assets. Our annualized ROAA was 1.41 percent for the third quarter of 2026 compared to 1.19 percent for the same period of 2025. Return on average equity (“ROAE”) indicates how effectively we can generate net income on the capital invested by stockholders. Our annualized ROAE was 14.07 percent for the third quarter of 2026 compared to 12.02 percent for the comparable period in 2025. For the nine months ended September 30, 2026 ROAA and ROAE were 1.23 percent and 12.16 percent, respectively, compared to 1.25 percent and 12.86 percent for the respective periods of 2025.

​

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Non-GAAP Financial Measures:

​

In addition to evaluating its results of operations in accordance with GAAP, the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as interest income adjusted to FTE, net interest income adjusted to FTE, efficiency ratio, adjusted noninterest expense, and FTE net interest income plus noninterest income. The Company believes the reported non-GAAP financial measures provide information useful to investors in understanding its operating performance and trends. For the non-GAAP disclosures used in this report, a reconciliation to the comparable GAAP measure is provided in the accompanying tables. The non-GAAP financial measures the Company uses may differ from the non-GAAP financial measures of other financial institutions.

​

The following are non-GAAP financial measures which management believes provide useful insight to the reader of the consolidated financial statements but should be supplemental to GAAP used to prepare the Company’s consolidated financial statements and should not be read in isolation or relied upon as a substitute for GAAP measures. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies. The tax rate used to calculate the fully taxable equivalent (FTE) adjustment was 21.0 percent for 2026 and 2025.

​

The following table reconciles the non-GAAP financial measures of net interest income adjusted to FTE for the three and nine months ended September 30, 2026 and 2025:

​

​	​	​	​	​	​	​	​
​	​	Three Months Ended September 30,
(Dollars in thousands)	​ ​ ​	2026		​ ​ ​	​ ​ ​	2025
Total interest income (GAAP)	​	$	71,456	​	​	$	65,164
Adjustment to FTE	​		969	​	​		714
Interest income adjusted to FTE (non-GAAP)	​		72,425	​	​		65,878
Interest expense	​		24,169	​	​		23,981
Net interest income adjusted to FTE (non-GAAP)	​	$	48,256	​	​	$	41,897

​

​	​	​	​	​	​	​	​
​	​	Nine Months Ended September 30,
(Dollars in thousands)	​ ​ ​	2026		​ ​ ​	​ ​ ​	2025
Total interest income (GAAP)	​	$	203,912	​	​	$	192,925
Adjustment to FTE	​		2,728	​	​		2,134
Interest income adjusted to FTE (non-GAAP)	​		206,640	​	​		195,059
Interest expense	​		68,154	​	​		69,997
Net interest income adjusted to FTE (non-GAAP)	​	$	138,486	​	​	$	125,062

​

​

The efficiency ratio is a non-GAAP measure which we calculated as noninterest expenses, less amortization of intangible assets and acquisition related expenses, as a percentage of FTE net interest income plus noninterest income less gains on equity securities and gains on sale of assets. Management monitors the efficiency ratio to determine how well it is managing its operating expenses; a lower efficiency ratio is generally preferable as it indicates the Company is spending less to generate income. The Company regularly pursues opportunities to enhance net interest income and reduce expenses as a percentage of operating revenues.

​

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Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP for the three and nine months ended September 30, 2026 and 2025:

​

​	​	​	​	​	​	​	​	​
​	​	Three Months Ended September 30,						​
(Dollars in thousands, except percents)	​ ​ ​	2026		​ ​ ​	​ ​ ​	2025		​
Efficiency ratio (non-GAAP):	​	​	​	​	​	​	​	​
Noninterest expense (GAAP)	​	$	31,704	​	​	$	28,678	​
Less: amortization of intangible assets expense	​		1,349	​	​		1,515	​
Less: acquisition related expenses	​	​	​	​	​	​	16	​
Noninterest expense adjusted (non-GAAP)	​	​	30,355	​	​	​	27,147	​
​	​	​	​	​	​	​	​	​
Net interest income (GAAP)	​	​	47,287	​	​	​	41,183	​
Plus: taxable equivalent adjustment	​	​	969	​	​	​	714	​
Noninterest income (GAAP)	​	​	5,679	​	​	​	5,501	​
Less: net losses on equity securities	​	​	(155)	​	​	​	(21)	​
Less: net losses on sale of fixed assets	​	​	​	​	​	​	(615)	​
Net interest income (FTE) plus noninterest income (non-GAAP)	​	$	54,090	​	​	$	48,034	​
Efficiency ratio (non-GAAP)	​	​	56.12	%	​	​	56.52	%

​

​

​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended September 30,						​	​
(Dollars in thousands, except percents)	​ ​ ​	2026		​ ​ ​	​ ​ ​	2025		​	​
Efficiency ratio (non-GAAP):	​	​	​	​	​	​	​	​	​
Noninterest expense (GAAP)	​	$	92,177	​	​	$	84,293	​	​
Less: amortization of intangible assets expense	​		4,384	​	​		4,882	​	​
Less: acquisition related expenses	​	​	​	​	​	​	236	​	​
Noninterest expense adjusted (non-GAAP)	​	​	87,793	​	​	​	79,175	​	​
​	​	​	​	​	​	​	​	​	​
Net interest income (GAAP)	​	​	135,758	​	​	​	122,928	​	​
Plus: taxable equivalent adjustment	​	​	2,728	​	​	​	2,134	​	​
Noninterest income (GAAP)	​	​	19,111	​	​	​	18,004	​	​
Less: net gains on equity securities	​	​	334	​	​	​	43	​	​
Less: net gains on sale of available for sale securities	​	​	510	​	​	​	​	​	​
Less: net gains on sale of fixed assets	​	​	271	​	​	​	65	​	​
Net interest income (FTE) plus noninterest income (non-GAAP)	​	$	156,482	​	​	$	142,958	​	​
Efficiency ratio (non-GAAP)	​	​	56.10	%	​	​	55.38	%	​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

63

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Net Interest Income:

​

Net interest income is the fundamental source of earnings for commercial banks. Fluctuations in the level of net interest income tend to have the greatest impact on net profits. Net interest income is defined as the difference between interest income, interest and fees earned on interest-earning assets, and interest expense, the cost of interest-bearing liabilities supporting those assets. The primary sources of earning assets are loans and investment securities, while interest-bearing deposits, short-term and long-term borrowings, and subordinated debt 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 rates; and

​

● The level of nonperforming assets.

​

On September 17, 2025, the Federal Open Market Committee (FOMC) reduced the target federal funds rate by 25 basis points to 4.25 percent, after maintaining the rate at 4.50 percent since December 18, 2024. The Committee—whose mandate is to promote maximum employment and maintain inflation at 2 percent over the longer run—cited rising economic uncertainty and increasing risks to the labor market as key reasons for the rate cut. Following this action, the national prime rate declined by 25 basis points, from 7.50 percent to 7.25 percent. The FOMC implemented two additional 25 basis point cuts on October 29 and December 10, 2025, bringing the federal funds target rate to 3.75 percent by year end. In response, the national prime rate also fell, ending 2025 at 6.75 percent. During the first and second quarters of 2026, the FOMC signaled that the existing rate level was sufficiently restrictive to guide inflation lower while avoiding undue pressure on employment. At its meeting on September 16, 2026, the FOMC voted to raise the federal funds target range by 25 basis points to 4 percent as a response to inflation remaining higher than the 2 percent goal. Rates remained unchanged after the FOMC meeting held on October 28, 2026. Due to the ongoing geopolitical tensions and resulting higher energy prices, we expect uncertainty with respect to economic conditions to remain elevated, which may result in future FOMC actions. Any additional rate actions by the FOMC could have a negative impact on the Company’s net interest margin and net interest income.

​

Changes in net interest income are measured by net interest spread and net interest margin. Net interest spread, the difference between the average yield earned on earning assets and the average rate incurred on interest-bearing liabilities, illustrates the effects changing interest rates have on profitability. Net interest margin, net interest income as a percentage of earning assets, is a more comprehensive ratio, as it reflects not only the spread, but also the change in the composition of interest-earning assets and interest-bearing liabilities. Tax-exempt loans and investments carry pre-tax yields lower than their taxable counterparts. Therefore, in order to make the net interest margin analysis more comparable, tax-exempt income and yields are reported in this analysis on a tax-equivalent basis, using the prevailing federal statutory tax rate of 21.0 percent in 2026 and 2025. Tax-exempt loan and investment income is not reported on an FTE basis on the consolidated statements of income and comprehensive (loss) income.

​

For the three months ended September 30, 2026, the average balances included $4.3 billion in loans, $572.1 million in investments, $3.6 billion in interest bearing deposits, and $265.8 million in borrowings, which included $83.4 million in subordinated debt and $8.2 million in junior subordinated debt. For the three months ended September 30, FTE net interest income, a non-GAAP measure, increased $6.4 million to $48.3 million in 2026 from $41.9 million in 2025. The FTE net interest spread increased 30 basis points, to 3.22 percent, for the three months ended September 30, 2026, from 2.92 percent for the three months ended September 30, 2025, which was caused by a 15-basis point decrease in the average rate paid on interest-bearing liabilities, in addition to an increase of 15 basis points in the FTE earning asset yield. The FTE net interest margin increased 26 basis points to 3.80 percent for the third quarter of 2026 from 3.54 percent for the comparable period of 2025. The increase in tax-equivalent net interest margin from the year ago same period was primarily due to decreases in average deposit rates, specifically money market demand accounts, interest-bearing demand accounts and time deposits, coupled with higher earning asset volumes and rates, as higher volumes of interest-bearing liabilities were offset by lower costs.

64

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

For the three months ended September 30, the $6.4 million increase in FTE net interest income, a non-GAAP measure, was primarily due to an increase in FTE interest income, a non-GAAP measure, partially offset by a modest increase in interest expense. FTE interest income increased $6.5 million to $72.4 million in 2026 as compared to $65.9 million in 2025. The increase in interest income reflected improved earning asset yields and an increase in loan volume, while lower deposit and borrowing costs almost entirely offset the impact of growth in interest-bearing liabilities on interest expense. Average earning assets increased $332.8 million to $5.0 billion for the three months ended September 30, 2026, from $4.7 billion for the same three months of 2025. Strong loan demand resulted in a $318.0 million increase in average loans to $4.3 billion from $4.0 billion comparing the third quarters of 2026 and 2025. Additionally, average interest-earning deposits increased $94.5 million to $137.4 million for the three months ended September 30, 2026, from $42.9 million for the same three months of 2025. These increases were partially offset by a $79.7 million reduction in average investment securities to $572.1 million from $651.8 million comparing the third quarters of 2026 and 2025, respectively. The overall yield on earning assets, on an FTE basis, increased 15 basis points for the three months ended September 30, 2026, to 5.71 percent as compared to 5.56 percent for the three months ended September 30, 2025. The yield on loans increased 4 basis points in the third quarter of 2026 to 6.02 percent from 5.98 percent for the third quarter of 2025, while the yield on interest earning deposits decreased 60 basis points to 3.78 percent from 4.38 percent when comparing the third quarters of 2026 and 2025, respectively. FOMC rate actions in the second half of 2025 contributed to the decrease in the yield on interest-earning deposits, offset slightly by the 25-basis point rate increase that occurred in the third quarter of 2026. Partially offsetting the reduction in the yield on interest-earning deposits was a 72-basis point increase in the yield earned on investments to 3.8 percent for the third quarter of 2026, compared to 3.0 percent for the third quarter of 2025.

​

Total interest expense increased $0.2 million to $24.2 million for the three months ended September 30, 2026, from $24.0 million for the three months ended September 30, 2025. The increase in interest expense was primarily due to a higher volume of average interest-bearing liabilities, partially offset by lower funding costs for deposits and borrowings. The cost of funds decreased 15 basis points for the three months ended September 30, 2026, to 2.49 percent as compared to 2.64 percent in the year ago period. Specifically, the cost of interest-bearing deposits decreased 13 basis points to 2.26 percent for the third quarter of 2026 from 2.39 percent for the same quarter of 2025, reflecting reductions in the average rate paid for money market and interest-bearing demand and NOW accounts, as well as time deposits of $100 thousand or more due to lower market rates. Additionally, total borrowing costs decreased 48 basis points to 5.53 percent from 6.01 percent comparing the three months ended September 30, 2026 and 2025, respectively. The average rate paid for short-term and long-term borrowings decreased 89 basis points and 53 basis points, respectively, comparing the third quarters of 2026 and 2025, respectively. In addition, the average rate paid for junior subordinated debt decreased 70 basis points to 8.56 percent for the three months ended September 30, 2026, from 9.26 percent for the same period of 2025.

​

65

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Net interest income changes due to rate and volume for the nine months ended September 30

​

​	​	​	​	​	​	​	​	​	​
​	​	2026 vs 2025
​	​	Increase (decrease)
​	​	attributable to
(Dollars in thousands)	​	Total		​	Rate		​	Volume
Interest income:	​ ​ ​	​	​	​ ​ ​	​	​	​ ​ ​	​	​
Loans:	​	​	​	​	​	​	​	​	​
Taxable	​	$	8,170	​	$	(4,480)	​	$	12,650
Tax-exempt	​		(164)	​	​	203	​	​	(367)
Investments:	​	​	​	​	​	​	​	​	​
Taxable	​		(837)	​	​	3,225	​	​	(4,062)
Tax-exempt	​		2,991	​	​	1,346	​	​	1,645
Interest-earning deposits	​		1,421	​	​	(355)	​	​	1,776
Total interest income	​		11,581	​		(61)	​		11,642
Interest expense:	​	​	​	​	​	​	​	​	​
Money market accounts	​	​	(1,049)	​	​	(3,297)	​	​	2,248
Interest-bearing demand and NOW accounts	​		(899)	​	​	(1,487)	​	​	588
Savings accounts	​		258	​	​	238	​	​	20
Time deposits less than $100	​		(3,227)	​	​	(1,420)	​	​	(1,807)
Time deposits $100 or more	​		361	​	​	(907)	​	​	1,268
Short-term borrowings	​		81	​	​	(255)	​	​	336
Long-term debt	​		640	​	​	(777)	​	​	1,417
Subordinated debt	​	​	2,031	​	​	439	​	​	1,592
Junior subordinated debt	​	​	(39)	​	​	(51)	​	​	12
Total interest expense	​		(1,843)	​		(7,517)	​		5,674
FTE net interest income changes (non-GAAP)	​	$	13,424	​	$	7,456	​	$	5,968

​

​

FTE net interest income, a non-GAAP measure, was $138.5 million for the nine months ended September 30, 2026, and $125.1 million in the comparable period of 2025. Contributing to the $13.4 million increase in FTE net interest income was a positive rate variance and positive volume variance. The positive rate and volume variance resulted in an increase in net interest income of $7.4 million and $6.0 million, respectively, when comparing the first nine months of 2026 and 2025.

​

For the nine months ended September 30, 2026, the favorable rate variance resulted primarily from a 23-basis point decrease in the average rates paid for interest-bearing deposits, which outweighed an 8-basis point reduction in average loan yields. The average rate paid on interest-bearing deposits decreased to 2.19 percent for the year-to-date period of 2026 from 2.42 percent for the same period of 2025, resulting in a decrease in interest expense of $6.9 million. The reduction in interest-bearing deposit costs was largely influenced by decreases in the average rate paid for money market deposits, interest-bearing demand accounts and time deposits. Comparing the first nine months of 2026 and 2025, the average rate paid on money market deposits decreased 35 basis points to 2.61 percent from 2.96 percent, which resulted in a decrease of interest expense of $3.3 million. Comparing the nine months ended September 30, 2026 and 2025, the rate paid for interest-bearing demand deposits decreased by 14 basis points to 1.94 percent from 2.08 percent which resulted in a decrease of interest expense of $1.5 million. Comparing the nine months ended September 30, 2026, and 2025, the rate paid for small denomination time deposits decreased 53 basis points, while the average rate paid for time deposits of $100 thousand or more decreased 23 basis points and resulted in a combined decrease in interest expense of $2.3 million.

​

​

66

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Comparing the nine months ended September 30, the FTE yield on earning assets was 5.62 percent for 2026, an increase of 4 basis points from 5.58 percent for 2025. The positive impact of a 76-basis point increase in the average FTE yield on investments more than offset a 64-basis point decrease in the FTE yield on average interest-earning deposits and an 8-basis point decrease in the yield on average loans. The average FTE yield earned on loans decreased to 5.91 percent from 5.99 percent and resulted in a decrease to interest income of $4.3 million. The yield on the investment portfolio increased to 3.87 percent during the nine months ended September 30, 2026, from 3.11 percent in the year ago period, resulting in an increase of $4.6 million in interest income.

​

Average earning assets increased $241.4 million to $4.9 billion for the nine months ended September 30, 2026, from $4.7 billion for the same nine months of 2025 and accounted for an $11.6 million increase in interest income. The impact of the increase in average earning assets was offset by a $150.8 million increase in average interest-bearing liabilities, which resulted in a $5.7 million increase in interest expense.

​

Average taxable loans, the primary volume driver for interest income, increased $245.4 million, which caused interest income to increase by $12.7 million, while a secondary driver, average tax-exempt investments, increased $66.7 million and contributed a $1.6 million increase in interest income. Offsetting these volume driven increases, average taxable investments decreased $118.9 million, causing a $4.1 million decrease in interest income.

​

Average interest-bearing liabilities increased $150.8 million to $3.7 billion for the nine months ended September 30, 2026, from $3.6 billion for the nine months ended September 30, 2025, resulting in a net increase in interest expense of $5.7 million. Multiple drivers included money market accounts, which increased $74.8 million and resulted in a $2.2 million increase in interest expense, followed by interest bearing demand and NOW accounts, time deposits of $100 thousand or more, long term debt and subordinated debt. Interest bearing demand and NOW accounts increased by $25.2 million, which resulted in a $0.6 million increase to interest expense. Time deposits of $100 thousand or more increased by $39.5 million, which resulted in a $1.3 million increase in interest expense. Subordinated debt increased by $25.9 million, which resulted in a $1.6 million increase to interest expense, and long-term debt increased by $36.4 million and contributed a $1.4 million increase to interest expense. The increases were offset primarily by a decrease in small denomination time deposits. Average small denomination time deposits decreased $68.5 million resulting in a $1.8 million decrease in interest expense.

​

The average balances of assets and liabilities, corresponding interest income and expense and resulting average yields or rates paid are summarized as follows. Averages for earning assets include nonaccrual loans. Investment averages include available for sale securities at amortized cost. Income on investment securities and loans is adjusted to an FTE basis using the prevailing federal statutory tax rate of 21 percent.

​

67

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three months ended

​

​

​

September 30, 2026

​

​

September 30, 2025

​

​

​

Average

​

Interest Income/

​

Yield/

​

​

Average

​

Interest Income/

​

Yield/

​

(Dollars in thousands, except percents)

​ ​ ​

Balance

​ ​ ​

Expense

​ ​ ​

Rate

​ ​ ​

​ ​ ​

Balance

​ ​ ​

Expense

​ ​ ​

Rate

​

Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Earning assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

$

4,043,501

​

$

62,663

​

6.15

%

​

$

3,736,269

​

$

57,621

​

6.12

%

Tax-exempt

​

​

280,483

​

​

2,968

​

4.20

​

​

​

269,757

​

​

2,722

​

4.00

​

Total loans

​

​

4,323,984

​

​

65,631

​

6.02

​

​

​

4,006,026

​

​

60,343

​

5.98

​

Investments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

​

409,260

​

​

3,839

​

3.72

​

​

​

553,151

​

​

4,382

​

3.14

​

Tax-exempt

​

​

162,824

​

​

1,647

​

4.01

​

​

​

98,608

​

​

680

​

2.74

​

Total investments

​

​

572,084

​

​

5,486

​

3.80

​

​

​

651,759

​

​

5,062

​

3.08

​

Interest-bearing deposits

​

​

137,421

​

​

1,308

​

3.78

​

​

​

42,884

​

​

473

​

4.38

​

Total interest-earning assets

​

​

5,033,489

​

​

72,425

​

5.71

%

​

​

4,700,669

​

​

65,878

​

5.56

%

Less: allowance for credit losses

​

​

43,258

​

​

​

​

​

​

​

​

41,576

​

​

​

​

​

​

Other assets

​

​

410,309

​

​

​

​

​

​

​

​

408,385

​

​

​

​

​

​

Total assets

​

$

5,400,540

​

​

​

​

​

​

​

$

5,067,478

​

​

​

​

​

​

Liabilities and stockholders’ equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Money market accounts

​

$

1,029,932

​

$

6,911

​

2.66

%

​

$

986,100

​

$

7,542

​

3.03

%

Interest-bearing demand and NOW accounts

​

​

1,213,719

​

​

5,906

​

1.93

​

​

​

1,181,655

​

​

6,271

​

2.11

​

Savings accounts

​

​

508,203

​

​

498

​

0.39

​

​

​

496,256

​

​

389

​

0.31

​

Time deposits less than $100

​

​

402,067

​

​

3,509

​

3.46

​

​

​

341,825

​

​

2,923

​

3.39

​

Time deposits $100 or more

​

​

430,194

​

​

3,637

​

3.35

​

​

​

347,723

​

​

3,069

​

3.50

​

Total interest-bearing deposits

​

​

3,584,115

​

​

20,461

​

2.26

​

​

​

3,353,559

​

​

20,194

​

2.39

​

Short-term borrowings

​

​

15,816

​

​

149

​

3.74

​

​

​

29,208

​

​

341

​

4.63

​

Long-term debt

​

​

158,373

​

​

1,633

​

4.09

​

​

​

129,524

​

​

1,509

​

4.62

​

Subordinated debt

​

​

83,440

​

​

1,749

​

8.32

​

​

​

83,149

​

​

1,748

​

8.34

​

Junior subordinated debt

​

​

8,205

​

​

177

​

8.56

​

​

​

8,098

​

​

189

​

9.26

​

Total borrowings

​

​

265,834

​

​

3,708

​

5.53

​

​

​

249,979

​

​

3,787

​

6.01

​

Total interest-bearing liabilities

​

​

3,849,949

​

​

24,169

​

2.49

​

​

​

3,603,538

​

​

23,981

​

2.64

​

Noninterest-bearing deposits

​

​

943,352

​

​

​

​

​

​

​

​

905,385

​

​

​

​

​

​

Other liabilities

​

​

67,964

​

​

​

​

​

​

​

​

55,530

​

​

​

​

​

​

Stockholders’ equity

​

​

539,275

​

​

​

​

​

​

​

​

503,025

​

​

​

​

​

​

Total liabilities and stockholders’ equity

​

$

5,400,540

​

​

​

​

​

​

​

$

5,067,478

​

​

​

​

​

​

Net interest income/spread

​

​

​

​

$

48,256

​

3.22

%

​

​

​

​

$

41,897

​

2.92

%

Net interest margin (non-GAAP)

​

​

​

​

​

​

​

3.80

%

​

​

​

​

​

​

​

3.54

%

Tax-equivalent adjustments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

$

623

​

​

​

​

​

​

​

$

571

​

​

​

Investments

​

​

​

​

​

346

​

​

​

​

​

​

​

​

143

​

​

​

Total adjustments

​

​

​

​

$

969

​

​

​

​

​

​

​

$

714

​

​

​

​

​

68

Table of Contents

Peoples Financial Services Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Nine months ended

​

​

September 30, 2026

​

September 30, 2025

​

​

Average

​

Interest Income/

​

Yield/

​

Average

​

Interest Income/

​

Yield/

(Dollars in thousands, except percents)

​ ​ ​

Balance

​ ​ ​

Expense

​ ​ ​

Rate

​ ​ ​

​

Balance

​ ​ ​

Expense

​ ​ ​

Rate

​ ​ ​

Assets:

​ ​ ​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

​

​

​

​ ​ ​

​

​

​ ​ ​

​

​

Earning assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

$

3,959,564

​

$

178,462

6.03

%

​

$

3,714,153

​

$

170,292

6.13

%

Tax-exempt

​

267,733

​

​

8,314

4.15

​

​

​

277,533

​

​

8,478

4.08

​

Total loans

​

​

4,227,297

​

​

186,776

​

5.91

​

​

​

3,991,686

​

​

178,770

​

5.99

​

Investments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

430,876

​

​

12,364

3.84

​

​

​

549,818

​

​

13,201

3.21

​

Tax-exempt

​

157,595

​

​

4,677

3.97

​

​

​

90,902

​

​

1,686

2.48

​

Total investments

​

​

588,471

​

​

17,041

3.87

​

​

​

640,720

​

​

14,887

3.11

​

Interest-bearing deposits

​

100,859

​

​

2,823

3.74

​

​

​

42,798

​

​

1,402

4.38

​

Total interest-earning assets

​

4,916,627

​

​

206,640

5.62

%

​

4,675,204

​

​

195,059

5.58

%

Less: allowance for credit losses

​

41,097

​

​

​

​

​

​

​

41,830

​

​

​

​

​

​

Other assets

​

404,000

​

​

​

​

​

​

​

399,098

​

​

​

​

​

​

Total assets

​

$

5,279,530

​

​

​

​

​

​

​

$

5,032,472

​

​

​

​

​

​

Liabilities and stockholders’ equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Money market accounts

​

$

1,028,456

​

$

20,055

2.61

%

​

$

953,679

​

$

21,104

2.96

%

Interest-bearing demand and NOW accounts

​

1,216,929

​

​

17,669

1.94

​

​

​

1,191,733

​

​

18,568

2.08

​

Savings accounts

​

507,872

​

​

1,385

0.36

​

​

​

498,998

​

​

1,127

0.30

​

Time deposits less than $100

​

321,281

​

​

7,915

3.29

​

​

​

389,807

​

​

11,142

3.82

​

Time deposits $100 or more

​

393,232

​

​

9,764

3.32

​

​

​

353,753

​

​

9,403

3.55

​

Total interest-bearing deposits

​

​

3,467,770

​

​

56,788

2.19

​

​

​

3,387,970

​

​

61,344

2.42

​

Short-term borrowings

​

36,968

​

​

1,057

3.82

​

​

​

28,357

​

​

976

4.60

​

Long-term debt

​

145,992

​

​

4,537

4.15

​

​

​

109,569

​

​

3,897

4.76

​

Subordinated debt

​

​

83,333

​

​

5,248

8.42

​

​

​

57,440

​

​

3,217

7.49

​

Junior subordinated debt

​

​

8,178

​

​

524

8.57

​

​

​

8,075

​

​

563

​

9.32

​

Total borrowings

​

​

274,471

​

​

11,366

5.54

​

​

​

203,441

​

​

8,653

5.69

​

Total interest-bearing liabilities

​

3,742,241

​

​

68,154

2.43

%

​

​

3,591,411

​

​

69,997

2.61

%

Noninterest-bearing deposits

​

937,900

​

​

​

​

​

​

​

892,661

​

​

​

​

​

​

Other liabilities

​

64,147

​

​

​

​

​

​

​

57,466

​

​

​

​

​

​

Stockholders’ equity

​

535,242

​

​

​

​

​

​

​

490,934

​

​

​

​

​

​

Total liabilities and stockholders’ equity

​

$

5,279,530

​

​

​

​

​

​

​

$

5,032,472

​

​

​

​

​

​

Net interest income/spread

​

​

​

​

$

138,486

3.19

%

​

​

​

​

$

125,062

2.97

%

Net interest margin (non-GAAP)

​

​

​

​

​

​

3.77

%

​

​

​

​

​

​

3.58

%

Tax-equivalent adjustments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

$

1,746

​

​

​

​

​

​

​

$

1,780

​

​

​

Investments

​

​

​

​

982

​

​

​

​

​

​

​

354

​

​

​

Total adjustments

​

​

​

​

$

2,728

​

​

​

​

​

​

​

$

2,134

​

​

​

​

​

Provision for Credit Losses:

​

For the three months ended September 30, 2026, the Company recorded a $1.1 million benefit for credit losses compared to a $0.8 million benefit for credit losses for the same three months of 2025. The release of provision in the quarter ended September 30, 2026 reflects improved asset quality metrics, seasoning of the equipment financing loan segment and lower specific reserves resulting from the successful resolution of nonperforming loans. The prior-year same period also benefited from lower specific reserves associated with reduction in non-performing loans. For the nine months ended September 30, 2026, the provision for credit losses was $3.3 million, an increase of $4.2 million from a benefit of $0.9 million recorded for the same nine months of 2025. The increase in loan provisioning for the year-to-date period of 2026 was primarily impacted by significant loan growth, while the prior year benefit reflected reductions in non-accrual

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MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

loans and declines in model loss rates. Based on our most current evaluation, we believe that the ACL appropriately reflects expected credit losses in the loan portfolio as of September 30, 2026.

​

Noninterest Income:

​

Noninterest income increased $0.2 million to $5.7 million from $5.5 million comparing the three months ended September 30, 2026, and 2025, respectively. The Company recorded a loss on the sales of administrative offices of $0.6 million in the third quarter of 2025. There were no such losses recorded during the third quarter of 2026.

​

Noninterest income was $19.1 million and $18.0 million for the nine months ended September 30, 2026, and 2025, respectively. The $1.1 million increase in non-interest income was primarily due to increases in interest rate swap income of $0.6 million, along with combined net gains of $0.5 million on the sale of investment securities available for sale, a $0.3 million gain on the sale and market value appreciation of equity securities and a $0.4 million increase in mortgage banking income, partially offset by a decrease in service charges, fees, commissions and other income of $0.7 million. The current nine-month period ended September 30, 2026, includes a gain on the sale of a branch property of $0.3 million related to a June 29, 2026 sale and leaseback agreement with a related party in relation to a branch location in Lackawanna County; see Note 14, “Related party transactions”. The comparable prior year period included a loss of $0.6 million on the sales of administrative offices, offset by gain of $0.7 million on the sale of the Company’s former corporate headquarters in Scranton, PA.

​

Noninterest Expenses:

​

In general, noninterest expense is categorized into three main groups: employee-related expenses, occupancy and equipment expenses, and other expenses. Employee-related expenses are costs associated with providing salaries, including payroll taxes and benefits, to our employees. Occupancy and equipment expenses, the costs related to the maintenance of facilities and equipment, include depreciation, general maintenance and repairs, real estate taxes, rental expense offset by any rental income, and utility costs. Other expenses include general operating expenses such as advertising, contractual services, insurance, including FDIC assessment, provision for unfunded commitments, other taxes and supplies. Several of these costs and expenses are variable while the remainder are fixed. We utilize budgets and other related strategies to control the variable expenses.

​

Noninterest expense was $31.7 million for the third quarter of 2026, an increase of $3.0 million from $28.7 million for the three months ended September 30, 2025. Salaries and employee benefits increased $1.5 million associated with merit increases, staff additions, and higher benefit cost. Other expenses increased $1.1 million primarily due to increases in corporate business development and professional fees.

​

Noninterest expense increased $7.9 million to $92.2 million for the nine months ended September 30, 2026, from $84.3 million for the nine months ended September 30, 2025. This increase is primarily due to increases in salaries and employee benefits expenses, occupancy and equipment expenses, and other expenses. Salaries and employee benefits expense was $45.2 million for the nine months ended September 30, 2026, compared to $41.4 million for the same nine months in 2025. The $3.8 million increase resulted primarily from annual merit increases, staff additions and higher health insurance and benefits costs. Net occupancy and equipment expenses were $22.7 million for the first nine months of 2026, an increase of $2.6 million from $20.1 million for the same nine-month period in 2025. The increase was largely caused by higher rent expenses associated with the new corporate headquarters and increases in data processing expenses related to the implementation of an on-line account opening platform. Other expenses increased $1.5 million to $24.3 million from $22.8 million for the nine months ended September 30, 2025. This increase in other expenses reflects higher advertising, corporate business development, and legal expenses.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

​

Income Taxes:

​

We recorded an income tax expense of $3.3 million or 14.6 percent of pre-tax income for the three-month period ended September 30, 2026, and $3.6 million or 19.1 percent of pre-tax income for the three-month period ended September 30, 2025. Income tax expense was $10.7 million for the nine months ended September 30, 2026, compared to $10.3 million for the nine months ended September 30, 2025. The effective tax rate was 18.0 percent for the nine months ended September 30, 2026, and 17.9 percent in the prior year’s same nine-month period. The decrease in the effective tax rate for the current quarter was largely due to the purchase of 2025 federal tax credits during the three months ended September 30, 2026, which reduced income tax expense by $1.2 million.

​

​

​

​

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​

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk to our earnings and/or financial position resulting from adverse changes in market rates or prices, such as interest rates, foreign exchange rates or equity prices. Our exposure to market risk is primarily IRR, which arises from our lending, investing and deposit gathering activities. Our market risk sensitive instruments consist of derivative and non-derivative financial instruments, none of which are entered into for trading purposes. During the normal course of business, we are not exposed to foreign exchange risk or commodity price risk. Our exposure to IRR can be explained as the potential for change in reported earnings and/or the market value of net worth. Variations in interest rates affect the underlying economic value of assets, liabilities, and off-balance sheet items. These changes arise because the present value of future cash flows, and often the cash flows themselves, change with interest rates. The effects of the changes in these present values reflect the change in our underlying economic value and provide a basis for the expected change in future earnings related to interest rates. Interest rate changes affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. IRR is inherent in the role of banks as financial intermediaries.

A bank with a high degree of IRR may experience lower earnings, impaired liquidity and capital positions, and most likely, a greater risk of insolvency. Therefore, banks must carefully evaluate IRR to promote safety and soundness in their activities. Interest rate risk is the risk of loss to future earnings due to changes in interest rates. The ALCO is responsible for establishing policy guidelines on liquidity and acceptable exposure to interest rate risk. Generally quarterly, ALCO reports on the status of liquidity and interest rate risk matters to the Company’s board of directors. The objective of the ALCO is to manage assets and funding sources to produce results that are consistent with the Company’s liquidity, capital adequacy, growth, risk and profitability goals and are within policy limits.

The Company utilizes the pricing and structure of loans and deposits, the size and duration of the investment securities portfolio, the size and duration of the wholesale funding portfolio, and off-balance sheet interest rate contracts to manage interest rate risk. The off-balance sheet interest rate contracts may include interest rate swaps, caps and floors. These interest rate contracts involve, to varying degrees, credit risk and IRR. Credit risk is the possibility that a loss may occur if a counterparty to a transaction fails to perform according to the terms of the contract. The notional amount of the interest rate contracts is the amount upon which interest and other payments are based. The notional amount is not exchanged and therefore should not be taken as a measure of credit risk. See Note 16, “Derivatives and hedging activities,” to the Audited Consolidated Financial Statements contained in Part II, Item 8 of the 2025 10-K and Note 10, “Derivatives and hedging activities,” to the Unaudited Consolidated Interim Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

The ALCO uses income simulation to measure IRR inherent in the Company’s on-balance sheet and off-balance sheet financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 24-month horizon and a 60-month horizon. The simulations assume that the size and general composition of the Company’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from low-cost time deposits to higher cost time deposits in selected interest rate scenarios. Additionally, the simulations take into account the specific repricing, maturity, call options, and prepayment characteristics of differing financial instruments that may vary under different interest rate scenarios. The characteristics of financial instrument classes are typically reviewed by the ALCO on a quarterly basis to ensure their accuracy and consistency.

The ALCO reviews simulation results to determine whether the Company’s exposure to a decline in net interest income remains within established tolerance levels over the simulation horizons and to develop appropriate strategies to manage this exposure. As of September 30, 2026 and December 31, 2025, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Company. All changes are measured in comparison to the projected net interest income that would result from an “unchanged” rate scenario where both interest rates and the general composition of the Company’s balance sheet remain stable for a 24-month and 60-month period. In addition to measuring the change in net interest income as compared to an unchanged interest rate scenario, the ALCO also measures the trend of both net interest income and net interest margin over a 24-month and 60-month horizon to ensure the stability and adequacy of net interest income in different interest rate scenarios.

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​

Model results at September 30, 2026 indicated a higher starting level of net interest income (“NII”) compared to the December 31, 2025 model due to the impact of a larger earning asset base, higher earning asset yields coupled with lower deposit costs. During the three months ended September 30, 2026, asset cashflows were repriced into higher yielding instruments, and the Company utilized certificate of deposit specials, brokered deposits and FHLB advances to fund loan growth.

At September 30, 2026, the Company's interest rate risk position remained relatively well balanced in scenarios involving modest changes in interest rates. Rising interest rates are expected to provide the greatest benefit to net interest income, as asset yields generally reprice more quickly than deposits in a higher-rate environment. Conversely, a sustained decline in interest rates, particularly a parallel downward shift in the yield curve, presents the greatest potential risk to net interest income over the longer-term horizon; however, a steeper yield curve would mitigate a portion of the exposure to falling rates. Compared to December 31, 2025, the Company's interest rate risk position at September 30, 2026 was more asset-sensitive, primarily due to changes in deposit assumptions.

The ALCO regularly reviews a wide variety of interest rate shift scenario results to evaluate IRR exposure, including scenarios showing the effect of steepening or flattening changes in the yield curve as well as parallel changes in interest rates of up to 400 basis points. Because income simulations assume that the Company’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts.

Following a series of reductions implemented during the latter half of 2025, the FOMC kept the federal funds target rate unchanged until its September 2026 meeting, at which it raised the target range by 25 basis points from 3.75 percent to 4.00 percent. During the nine months ended September 30, 2026, the Company actively managed its mix of brokered deposits and borrowings to achieve lower funding costs and improve funding flexibility. While the future path of monetary policy remains uncertain, sustained elevated interest rates or any future increases in market interest rates could negatively NII if funding costs, including deposit and wholesale funding rates, increase at a faster pace than yields earned on the Company’s interest-earning assets. In addition, continued competition for deposits in a higher-rate environment may require the Company to retain and attract deposits through higher pricing or increased reliance on alternative funding sources, which could further pressure NII.

​

​	​	​	​	​	​	​	​	​
​	​	September 30, 2026
​	​	% Change in
Changes in Interest Rates (basis points)	​	Net Interest Income			​	Economic Value of Equity
​	​ ​ ​	Metric	​ ​ ​	Policy	​ ​ ​	Metric	​ ​ ​	Policy
+400	​ ​ ​	11.9	​	(20.0)	​	(15.9)	​	(40.0)
+300		9.0	​	(20.0)	​	(11.4)	​	(30.0)
+200		6.1	​	(10.0)	​	(7.2)	​	(20.0)
+100		3.3	​	(10.0)	​	(2.9)	​	(10.0)
Static	​	​	​	​	​	​	​	​
-100		(3.8)	​	(10.0)	​	1.0	​	(10.0)
-200		(7.1)	​	(10.0)	​	0.6	​	(20.0)
-300		(8.8)	​	(20.0)	​	(1.8)	​	(30.0)
-400		N/A	​	(20.0)	​	N/A	​	(40.0)

​

Our simulation model creates pro forma net interest income scenarios under various interest rate shocks. Given instantaneous and parallel shifts in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending September 30, 2027, would increase 3.3 percent from model results using current interest rates. Conversely, parallel shifts in general markets rates of minus 100 basis points indicated projected net interest income for the same time period would decrease 3.8 percent.

Additional disclosures about market risk are included in Part II, Item 7A., “Quantitative and Qualitative Disclosures About Market Risk,” of the 2025 10-K, and are incorporated into this Item 3 by reference.

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​

Item 4. Controls and Procedures.

​

(a) Evaluation of disclosure controls and procedures.

​

At September 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that the disclosure controls and procedures, at September 30, 2026, were effective to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to provide reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosure.

​

(b) Changes in internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the fiscal quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

​

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The nature of the Company’s business generates a certain amount of litigation involving matters arising out of the ordinary course of business. In the opinion of management, other than as discussed below, there were no legal proceedings that had or might have a material effect on the consolidated results of operations, liquidity, or the financial position of the Company during the nine months ended September 30, 2026 and through the date of this Quarterly Report on Form 10-Q.

On June 23, 2025, the Bank entered into the Real Estate Purchase Agreement to purchase the real property commonly known as 30 E.D Preate Drive, Moosic, Pennsylvania from Moosic Holdings, LLC. The purchase price for the Property is $19.5 million, subject to customary adjustments, prorations and credits as outlined in the Real Estate Purchase Agreement. In addition to the purchase price, the Bank agreed to pay the seller $3 million for certain repairs and improvements to the property and up to $500,000 for certain office fit out costs. Closing under the Real Estate Purchase Agreement was to occur no later than June 30, 2026. Seller has failed to close in accordance with the Real Estate Purchase Agreement. On July 23, 2026, the Bank filed a complaint against seller and its managing member in the United States District Court for the Middle District of Pennsylvania seeking specific performance requiring seller to convey the property to the Bank or, in the alternative, damages or other relief.

​

​

Item 1A. Risk Factors.

The 2025 10-K describes market, credit, and business operations risk factors that could affect our business, results of operations or financial condition. There have been no material changes from the risk factors as previously disclosed in the 2025 10-K.

​

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in the Exchange Act Rule 10b-18(a)(3), of the Company’s common stock during any of the months in the quarter ended September 30, 2026.

During the three months ended September 30, 2026, and through the date of this report, the Company did not have any publicly announced share repurchase plans or programs.

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​

​

Item 3. Defaults upon Senior Securities.

None.

​

Item 4. Mine Safety Disclosures.

Not applicable.

​

Item 5. Other Information.

During the fiscal quarter ended September 30, 2026, none of the Company’s directors or officers informed management of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

​

Item 6. Exhibits.

​

Item Number	​	​	Description
​	​	​	​
3.1	​	​	Peoples Financial Services Corp. Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K filed with the Commission on March 17, 2014)
​	​	​	​
3.2	​	​	Articles of Amendment to the Articles of Incorporation of Peoples Financial Services Corp., effective as of May 19, 2020 (incorporated by reference to Exhibit 3.2 to the Company's quarterly report on Form 10-Q filed with the Commission on August 10, 2020)
​	​	​	​
3.3	​	​	Third Amended and Restated Bylaws of Peoples Financial Services Corp., effective May 30, 2025 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed June 3, 2025)
​	​	​	​
10.1	​	​	Amendment to Supplemental Executive Retirement Plan Agreement for the Benefit of Thomas P. Tulaney, effective August 28, 2026 (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with the Commission on September 1, 2026)
​	​	​	​
31.1*	​	​	CEO Certification Pursuant to Rule 13a-14 (a) /15d-14 (a)
​	​	​	​
31.2*	​	​	CFO Certification Pursuant to Rule 13a-14 (a) /15d-14 (a)
​	​	​	​
32*	​	​	CEO and CFO Certifications Pursuant to Section 1350
​	​	​	​
101*	​	​	The following materials from Peoples Financial Services Corp. Quarterly Report on Form 10-Q for the period ended September 30, 2026, formatted in inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive (Loss) Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements
​	​	​	​
104*	​	​	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

​

*Filed herewith

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​

​

SIGNATURES

​

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto, duly authorized.

​

​	Peoples Financial Services Corp.
​	(Registrant)
​	​
Date: November 6, 2026	/s/ Gerard A. Champi
​	Gerard A. Champi
​	President and Chief Executive Officer
​	Principal Executive Officer
​	​
Date: November 6, 2026	/s/ James M. Bone, Jr., CPA
​	James M. Bone, Jr., CPA
​	Executive Vice President and Chief Financial Officer
​	Principal Financial Officer
​	​
Date: November 6, 2026	/s/ Stephanie A. Westington, CPA
​	Stephanie A. Westington, CPA
​	Executive Vice President and Chief Accounting Officer
​	Principal Accounting Officer
​	​

​

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