PINX:PFIS Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

Form 10-Q

(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2012 or
 
(  ) Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the transition period from
 
0-23863
 (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)
   
82 Franklin Avenue, Hallstead, PA
18822
(Address of principal executive offices)
(Zip code)
   
(570) 879-2175
(Registrant’s telephone number, including area code)

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 X No____
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files.  Yes X No ____
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  __
Accelerated filer  X
Non-accelerated filer __
Smaller reporting company __
 
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.  Yes ____ No X
 
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date:  3,117,706 at April 30, 2012.

Page 1 of 44
Exhibit index on page 44


 
 

 
 


PEOPLES FINANCIAL SERVICES CORP.
FORM 10-Q

For the Quarter Ended March 31, 2012

Contents
Page No.
PART I.
FINANCIAL INFORMATION:
 
Item 1.
Financial Statements (Unaudited)
   
 
Consolidated Balance Sheets at
3
 
March 31, 2012 and December 31, 2011
   
 
Consolidated Statements of Income and Comprehensive Income
4
 
for the Three Months Ended March 31, 2012 and 2011
   
 
Consolidated Statements of Changes in Stockholders’ Equity
5
 
for the Three Months Ended March 31, 2012 and 2011
   
 
Consolidated Statements of Cash Flows
6
 
for the Three Months Ended March 31, 2012 and 2011
   
 
Notes to Consolidated Financial Statements
7
   
Item 2.
Management’s Discussion and Analysis of
25
 
Financial Condition and Results of Operations
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
40
   
Item 4.
Controls and Procedures
40
   
PART II
OTHER INFORMATION
Item 1.
Legal Proceedings
41
Item 1A.
Risk Factors
41
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
41
Item 3.
Defaults upon Senior Securities
41
Item 4.
Mine Safety Disclosures
41
Item 5.
Other Information
41
Item 6.
Exhibits
42
     
 
Signatures
43
   
 

 
2

 
PEOPLES FINANCIAL SERVICES CORP.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except per share data)

   
March 31, 2012
   
December 31, 2011
 
Assets:
           
Cash and due from banks
  $ 8,563     $ 9,488  
Interest-bearing deposits in other banks
    1,075       1,071  
Investment securities available-for-sale
    132,882       139,899  
Loans held for sale
    2,724       569  
Loans, net
    459,223       445,103  
Less:  allowance for loan losses
    5,589       5,349  
Net loans
    453,634       439,754  
Premises and equipment, net
    8,235       7,916  
Accrued interest receivable
    3,472       3,448  
Other assets
    21,164       19,259  
Total assets
  $ 631,749     $ 621,404  
                 
Liabilities:
               
Deposits:
               
  Noninterest-bearing
  $ 97,353     $ 92,985  
  Interest-bearing
    404,779       401,298  
Total deposits
    502,132       494,283  
Short-term borrowings
    45,375       43,791  
Long-term debt
    18,731       18,927  
Accrued interest payable
    244       284  
Other liabilities
    4,106       4,506  
Total liabilities
    570,588       561,791  
                 
Stockholders’ equity:
               
Common stock, par value $2.00; authorized 12,500,000 shares; issued 3,341,251 shares
    6,683       6,683  
Capital surplus
    3,147       3,141  
Retained earnings
    53,108       51,342  
Accumulated other comprehensive income
    3,442       3,645  
Less:  treasury stock, at cost:  March 31, 2012, 222,445 shares; December 31, 2011, 222,395 shares
    5,219       5,198  
Total stockholders’ equity
    61,161       59,613  
Total liabilities and stockholders’ equity
  $ 631,749     $ 621,404  


See Notes to Consolidated Financial Statements

 
3

 
PEOPLES FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
 
For the Three Months Ended March 31
 
2012
   
2011
 
Interest income:
           
Interest and fees on loans:
           
Taxable
  $ 5,515     $ 5,136  
Tax-exempt
    419       357  
Interest and dividends on investment securities available-for-sale:
               
Taxable
    636       666  
Tax-exempt
    359       475  
Dividends
    7       9  
Interest on interest-bearing deposits in other banks
    4       2  
Interest on federal funds sold
            2  
Total interest income
    6,940       6,647  
Interest expense:
               
Interest on deposits
    1,048       1,044  
Interest on short-term borrowings
    62       86  
Interest on long-term debt
    173       257  
Total interest expense
    1,283       1,387  
Net interest income
    5,657       5,260  
Provision for loan losses
    645       421  
Net interest income after provision for loan losses
    5,012       4,839  
Noninterest income:
               
Service charges, fees, commissions and other
    743       709  
Wealth management income
    143       139  
Mortgage banking income
    74       48  
Net gain on sale of investment securities available-for-sale
    284       10  
Other-than-temporary impairment of investment equity securities
            (84 )
Net loss on sale of other real estate owned
    (8 )        
Total noninterest income
    1,236       822  
Noninterest expense:
               
Salaries and employee benefits expense
    1,730       1,446  
Net occupancy and equipment expense
    790       676  
Other expenses
    794       1,273  
Total noninterest expense
    3,314       3,395  
Income before income taxes
    2,934       2,266  
Provision for income taxes
    514       467  
Net income
    2,420       1,799  
Other comprehensive income (loss):
               
Unrealized gain (loss) on investment securities available-for-sale
    (23 )     1,100  
Reclassification adjustment for gain on sales included in net income
    (284 )     (10 )
Reclassification adjustment for other-than-temporary impairment
            84  
Income tax expense (benefit) related to other comprehensive income (loss)
    (104 )     399  
Other comprehensive income (loss), net of income taxes
    (203 )     775  
Comprehensive income
  $ 2,217     $ 2,574  
Per share data:
               
Net income:
               
Basic
  $ 0.78     $ 0.57  
Diluted
  $ 0.78     $ 0.57  
Average common shares outstanding:
               
Basic
    3,118,109       3,142,137  
Diluted
    3,119,070       3,144,804  
Dividends declared
  $ 0.21     $ 0.20  

See Notes to Consolidated Financial Statements

 
4

 
PEOPLES FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
(Dollars in thousands, except per share data)

   
Common Stock
   
Capital Surplus
   
Retained Earnings
   
Accumulated Other Comprehensive Income (Loss)
   
Treasury Stock
   
Total
 
Balance, January 1, 2012
  $ 6,683     $ 3,141     $ 51,342     $ 3,645     $ (5,198 )   $ 59,613  
Net income
                    2,420                       2,420  
Other comprehensive loss, net of income taxes
                            (203 )             (203 )
Dividends declared:  $0.21 per share
                    (654 )                     (654 )
Reissuance under option plan: 1,950 shares
            6                       35       41  
Repurchase and held: 2,000 shares
                                    (56 )     (56 )
Balance, March 31, 2012
  $ 6,683     $ 3,147     $ 53,108     $ 3,442     $ (5,219 )   $ 61,161  
                                                 
Balance, January 1, 2011
  $ 6,683     $ 3,118     $ 46,048     $ (834 )   $ (4,499 )   $ 50,516  
Net income
                    1,799                       1,799  
Other comprehensive income, net of income taxes
                            775               775  
Dividends declared:  $0.20 per share
                    (628 )                     (628 )
Reissuance under option plan: 1,550 shares
            4                       28       32  
Balance, March 31, 2011
  $ 6,683     $ 3,122     $ 47,219     $ (59 )   $ (4,471 )   $ 52,494  




See Notes to Consolidated Financial Statements

 
5

 
PEOPLES FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands, except per share data)

For the Three Months Ended March 31
 
2012
   
2011
 
Cash flows from operating activities:
           
Net income
  $ 2,420     $ 1,799  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization of premises and equipment
    202       191  
Amortization of intangibles
    70       92  
Provision for loan losses
    645       421  
Loss on sale of other real estate owned
    8          
Loss on disposal of equipment
            1  
Net amortization of investment securities available-for-sale
    472       96  
Amortization of deferred loan costs
    59       49  
Gain on sale of investment securities available-for-sale
    (284 )     (10 )
Other-than-temporary impairment of investment equity securities
            84  
Net income from investment in life insurance
    (91 )     (81 )
Net change in:
               
Loans held for sale
    (2,155 )     418  
Accrued interest receivable
    (24 )     (17 )
Other assets
    (487 )     283  
Accrued interest payable
    (40 )     87  
Other liabilities
    (400 )     (1,495 )
Net cash provided by operating activities
    395       1,918  
Cash flows from investing activities:
               
Proceeds from sales of investment securities available-for-sale
    3,767       15,149  
Proceeds from repayments on investment securities available-for-sale
    3,019       536  
Purchases of investment securities available-for-sale
    (264 )        
Net increase in loans
    (15,947 )     (17,284 )
Purchases of premises and equipment
    (521 )     (314 )
Purchases of investment in life insurance
            (2,000 )
Proceeds from sale of other real estate owned
    62       141  
Net cash used in investing activities
    (9,884 )     (3,772 )
Cash flows from financing activities:
               
Net increase in deposits
    7,849       14,838  
Repayment of long-term debt
    (196 )     (236 )
Net increase (decrease) in short-term borrowings
    1,584       (3,431 )
Repurchase of common shares
    (56 )        
Reissuance of common shares
    41       32  
Cash dividends paid
    (654 )     (628 )
Net cash provided by financing activities
    8,568       10,575  
Net  increase (decrease) in cash and cash equivalents
    (921 )     8,721  
Cash and cash equivalents at beginning of year
    10,559       17,841  
Cash and cash equivalents at end of period
    9,638     $ 26,562  
Supplemental disclosures:
               
Cash paid during the period for:
               
Interest
  $ 1,323     $ 1,300  
Income taxes
  $ 450     $ 100  
Noncash items:
               
Transfers from loans to other real estate owned
  $ 1,363          



See Notes to Consolidated Financial Statements

 
6

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

1.  Basis of presentation:

The accompanying unaudited consolidated financial statements of  Peoples Financial Services Corp, and subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10-01 of Regulation S-X. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the 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 with the current year’s presentation. These reclassifications did not have any effect on the operating results or financial position of the Company. The operating results and financial position of the Company for the three months ended and as of March 31, 2012, are not necessarily indicative of the results of operations and financial position that may be expected in the future.

The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. For additional information and disclosures required under GAAP, reference is made to the Company’s Annual Report on Form 10-K for the period ended December 31, 2011.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of March 31, 2012, for items that should potentially be recognized or disclosed in these consolidated financial statements.  The evaluation was conducted through the date these consolidated financial statements were issued.

2.  Earnings per share:

Basic earnings per share represent 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.  Potential common shares that may be issued by the Company relate solely to outstanding stock options, and are determined using the treasury stock method.

Stock options for 6,200 and 9,650 shares of common stock were not considered in computing diluted earnings per share for the three months ended March 31, 2012 and 2011, respectively, because they were antidilutive.

 
7

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

3.  Investment securities available-for-sale:

The amortized cost and fair value of investment securities available-for-sale aggregated by investment category at March 31, 2012 and December 31, 2011 are summarized as follows:

March 31, 2012
 
Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Fair
Value
 
                         
U.S. Government-sponsored enterprises
  $ 29,598     $ 2,879           $ 32,477  
State and municipals:
                             
Taxable
    17,634       1,333             18,967  
Tax-exempt
    35,155       1,546     $ 58       36,643  
Corporate debt securities
    4,041       53       631       3,463  
Mortgage-backed securities:
                               
U.S. Government agencies
    16,089       170       58       16,201  
U.S. Government-sponsored enterprises
    24,520       96       101       24,515  
Equity securities:
                               
Preferred
                               
Common
    629       25       38       616  
Total
  $ 127,666     $ 6,102     $ 886     $ 132,882  
                                 
December 31, 2011
 
Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Fair
Value
 
                                 
U.S. Government-sponsored enterprises
  $ 29,671     $ 3,105             $ 32,776  
State and municipals:
                               
Taxable
    18,120       1,608               19,728  
Tax-exempt
    38,217       1,693     $ 224       39,686  
Corporate debt securities
    4,462       330       942       3,850  
Mortgage-backed securities:
                               
U.S. Government agencies
    16,827       185       100       16,912  
U.S. Government-sponsored enterprises
    26,396       66       199       26,263  
Equity securities:
                               
Preferred
    54       63               117  
Common
    629       22       84       567  
Total
  $ 134,376     $ 7,072     $ 1,549     $ 139,899  


 
8

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

3.  Investment securities available-for-sale (continued)

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified as available-for-sale at March 31, 2012, is summarized as follows:

March 31, 2012
 
Fair
Value
 
Within one year
  $ 496  
After one but within five years
    13,341  
After five but within ten years
    33,601  
After ten years
    44,112  
      91,550  
Mortgage-backed securities
    40,716  
Total
  $ 132,266  

Securities with a carrying value of $103,208 and $105,135 at March 31, 2012 and December 31, 2011, respectively, were pledged to secure public deposits and repurchase agreements as required or permitted by law.

 
9

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

3.  Investment securities available-for-sale (continued)

At March 31, 2012 and December 31, 2011, there were no securities of any individual issuer, except for U.S. Government agencies and sponsored enterprises, that exceeded 10.0 percent of stockholders’ equity.

The fair value and gross unrealized losses of investment securities available-for-sale with unrealized losses for which an other-than-temporary impairment (“OTTI”) has not been recognized at March 31, 2012 and December 31, 2011, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized as follows:

   
Less Than 12 Months
   
12 Months or More
   
Total
 
March 31, 2012
 
Fair Value
   
Unrealized Losses
   
Fair Value
   
Unrealized Losses
   
Fair Value
   
Unrealized Losses
 
U.S. Government-sponsored enterprises
                                   
State and municipals:
                                   
Taxable
                                   
Tax-Exempt
  $ 1,233     $ 49     $ 295     $ 9     $ 1,528     $ 58  
Corporate debt securities
                    2,381       631       2,381       631  
Mortgage-backed securities:
                                               
U.S. Government agencies
    10,345       58                       10,345       58  
U.S. Government-sponsored enterprises
    14,386       101                       14,386       101  
Equity securities:
                                               
Preferred
                                               
Common
                    241       38       241       38  
Total
  $ 25,964     $ 208     $ 2,917     $ 678     $ 28,881     $ 886  
 

 
   
Less Than 12 Months
   
12 Months or More
   
Total
 
December 31, 2011
 
Fair Value
   
Unrealized Losses
   
Fair Value
   
Unrealized Losses
   
Fair Value
   
Unrealized Losses
 
U.S. Government-sponsored enterprises
                                   
State and municipals:
                                   
Taxable
                                   
Tax-Exempt
  $ 1,142     $ 39     $ 2,859     $ 185     $ 4,001     $ 224  
Corporate debt securities
    970       61       2,130       881       3,100       942  
Mortgage-backed securities:
                                               
U.S. Government agencies
    10,785       100                       10,785       100  
U.S. Government-sponsored enterprises
    21,825       199                       21,825       199  
Equity securities:
                                               
Preferred
                                               
Common
                    195       84       195       84  
Total
  $ 34,722     $ 399     $ 5,184     $ 1,150     $ 39,906     $ 1,549  


 
10

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

3.  Investment securities available-for-sale (continued)

The Company had 26 investment securities, consisting of four tax-exempt state and municipal obligations, two corporate debt securities, 17 mortgage-backed securities and three common equity securities, that were in unrealized loss positions at March 31, 2012.  Of these securities, one state and municipal obligation, two corporate debt securities and each of the common equity securities were in continuous unrealized loss positions for 12 months or more.  The unrealized losses on the common equity securities were a direct reflection of reductions in stock values in the financial industry sector, as a whole, and was not a result of credit or other issues that would cause the Company to recognize an OTTI charge.  Management does not consider the unrealized losses on the debt securities, as a result of changes in interest rates, to be OTTI based on historical evidence that indicates the cost of these securities is recoverable within a reasonable period of time in relation to normal cyclical changes in the market rates of interest. Moreover, because there has been no material change in the credit quality of the issuers or other events or circumstances that may cause a significant adverse impact on the fair value of these securities, and management does not intend to sell these securities and it is unlikely that the Company will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider the unrealized losses to be OTTI at March 31, 2012.

In comparison, the Company had 31 investment securities, consisting of six tax-exempt state and municipal obligations, three corporate debt securities, 18 mortgage-backed securities and four common equity securities, that were in unrealized loss positions at December 31, 2011.  Of these securities, four state and municipal obligations, two corporate debt securities and each of the common equity securities were in continuous unrealized loss positions for 12 months or more.

4.  Loans, net and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at March 31, 2012 and December 31, 2011 are summarized as follows. Net deferred loan costs were $568 at March 31, 2012, and $563 at December 31, 2011.

   
March 31, 2012
   
December 31, 2011
 
Commercial
  $ 172,807     $ 160,828  
Real estate:
               
Commercial
    149,379       145,554  
Residential
    116,810       118,125  
Consumer
    20,227       20,596  
Total
  $ 459,223     $ 445,103  



 
11

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

4.  Loans, net and allowance for loan losses (continued)

The changes in the allowance for loan losses account by major classification of loan for the three months ended March 31, 2012 and 2011, are summarized as follows:

       
Real estate
                   
March 31, 2012
 
Commercial
 
Commercial
 
Residential
   
Consumer
   
Unallocated
   
Total
 
Allowance for loan losses:
                               
Beginning Balance
  $ 2,047   $ 1,515   $ 761     $ 198     $ 828     $ 5,349  
Charge-offs
    (202 )   (100   (21 )     (98 )             (421 )
Recoveries
                        16               16  
Provisions
    341     387     36       82       (201 )     645  
Ending balance
  $ 2,186   $ 1,802   $ 776     $ 198     $ 627     $ 5,589  
                                             
         
Real estate
                         
March 31, 2011
 
Commercial
 
Commercial
 
Residential
   
Consumer
   
Unallocated
   
Total
 
Allowance for loan losses:
                                           
Beginning Balance
  $ 1,696   $ 1,384   $ 726     $ 243     $ 51     $ 4,100  
Charge-offs
    (58 )   (56   (8 )     (54 )             (176 )
Recoveries
          1             10               11  
Provisions
    57     139     14       85       126       421  
Ending balance
  $ 1,695   $ 1,468   $ 732     $ 284     $ 177     $ 4,356  

The allocation of the allowance for loan losses and the related loans by major classifications of loans at March 31, 2012 and December 31, 2011 is summarized as follows:

       
Real estate
                   
March 31, 2012
 
Commercial
 
Commercial
   
Residential
   
Consumer
   
Unallocated
   
Total
 
Allowance for loan losses:
                                 
Ending balance
  $ 2,186   $ 1,802     $ 776     $ 198     $ 627     $ 5,589  
Ending balance: individually evaluated for impairment
    534     27       73                       634  
Ending balance: collectively evaluated for impairment
  $ 1,652   $ 1,775     $ 703     $ 198     $ 627     $ 4,955  
Loans receivable:
                                             
Ending balance
  $ 172,807   $ 149,379     $ 116,810     $ 20,227             $ 459,223  
Ending balance: individually evaluated  for impairment
    7,277     4,725       1,133                       13,135  
Ending balance: collectively evaluated for impairment
  $ 165,530   $ 144,654     $ 115,677     $ 20,227             $ 446,088  

 
12

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

4.  Loans, net and allowance for loan losses (continued)

         
Real estate
                   
December 31, 2011
 
Commercial
   
Commercial
   
Residential
   
Consumer
   
Unallocated
   
Total
 
Allowance for loan losses:
                                   
Ending balance
  $ 2,047     $ 1,515     $ 761     $ 198     $ 828     $ 5,349  
Ending balance: individually evaluated for impairment
    698       40       71       1               810  
Ending balance: collectively evaluated for impairment
  $ 1,349     $ 1,475     $ 690     $ 197     $ 828     $ 4,539  
Loans receivable:
                                               
Ending balance
  $ 160,828     $ 145,554     $ 118,125     $ 20,596             $ 445,103  
Ending balance: individually evaluated for impairment
    8,433       7,832       1,226       1               17,492  
Ending balance: collectively evaluated for impairment
  $ 152,395     $ 137,722     $ 116,899     $ 20,595             $ 427,611  

The following tables present the major classifications of the loan portfolio 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 March 31, 2012 and December 31, 2011:

March 31, 2012
 
Pass
   
Special Mention
   
Substandard
   
Doubtful
   
Total
 
Commercial
  $ 160,627     $ 5,232     $ 2,537     $ 4,411     $ 172,807  
Real estate:
                                       
Commercial
    137,714       8,601       2,796       268       149,379  
Residential
    115,677                       1,133       116,810  
Consumer
    20,218       9                       20,227  
Total
  $ 434,236     $ 13,842     $ 5,333     $ 5,812     $ 459,223  

December 31, 2011
 
Pass
   
Special Mention
   
Substandard
   
Doubtful
   
Total
 
Commercial
  $ 145,145     $ 7,262     $ 2,550     $ 5,871     $ 160,828  
Real estate:
                                       
Commercial
    136,166       3,223       4,995       1,170       145,554  
Residential
    117,236                       889       118,125  
Consumer
    20,587       9                       20,596  
Total
  $ 419,134     $ 10,494     $ 7,545     $ 7,930     $ 445,103  

 
13

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

4.  Loans, net and allowance for loan losses (continued)

Information concerning nonaccrual loans by major loan category at March 31, 2012 and December 31, 2011, is as follows:

   
March 31, 2012
   
December 31, 2011
 
Commercial
  $ 4,411     $ 5,871  
Real estate:
               
Commercial
    268       1,170  
Residential
    1,133       889  
Consumer
               
Total
  $ 5,812     $ 7,930  

The major categories of the loan portfolio by past due status at March 31, 2012 and December 31, 2011, are summarized as follows:

March 31, 2012
 
30-59 Days Past Due
   
60-89 Days Past Due
   
Greater than 90 Days
   
Total Past Due
   
Current
   
Total Loans
   
Loans > 90 Days and Accruing
 
Commercial
  $ 673           $ 329     $ 1,002     $ 171,805     $ 172,807     $ 329  
Real estate:
                                                     
Commercial
    1,818     $ 94       22       1,934       147,445       149,379       22  
Residential
    1,269       214               1,483       115,327       116,810          
Consumer
    332       122       340       794       19,433       20,227       340  
Total
  $ 4,092     $ 430     $ 691     $ 5,213     $ 454,010     $ 459,223     $ 691  

December 31, 2011
 
30-59 Days Past Due
   
60-89 Days Past Due
   
Greater than 90 Days
   
Total Past Due
   
Current
   
Total Loans
   
Loans > 90 Days and Accruing
 
Commercial
  $ 408     $ 324     $ 12     $ 744     $ 160,084     $ 160,828     $ 12  
Real estate:
                                                       
Commercial
    2,177                       2,177       143,377       145,554          
Residential
    976       217       362       1,555       116,570       118,125       337  
Consumer
    335       98       311       744       19,852       20,596       311  
Total
  $ 3,896     $ 639     $ 685     $ 5,220     $ 439,883     $ 445,103     $ 660  


 
14

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

4.  Loans, net and allowance for loan losses (continued)

The following tables summarize information in regards to impaired loans for the three months ended March 31, 2012 and 2011, and for the year ended December 31, 2011, by loan portfolio class:

                     
For the Quarter Ended
 
March 31, 2012
 
Recorded Investment
   
Unpaid Principal Balance
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
With no related allowance:
                             
Commercial
  $ 4,541     $ 4,541           $ 4,545     $ 16  
Real estate:
                                     
Commercial
    996       996             1,004       20  
Residential
    746       746             760          
Consumer
                                     
Total
    6,283       6,283             6,309       36  
                                       
With an allowance recorded:
                                     
Commercial
    2,736       2,736     $ 534       4,075       4  
Real estate:
                                       
Commercial
    3,729       3,729       27       3,736       57  
Residential
    387       387       73       387          
Consumer
                                       
Total
    6,852       6,852       634       8,198       61  
                                         
Commercial
    7,277       7,277       534       8,620       20  
Real estate:
                                       
Commercial
    4,725       4,725       27       4,740       77  
Residential
    1,133       1,133       73       1,147          
Consumer
                                       
Total
  $ 13,135     $ 13,135     $ 634     $ 14,507     $ 97  



 
15

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

4.  Loans, net and allowance for loan losses (continued)

                     
For the Year Ended
 
December 31, 2011
 
Recorded Investment
   
Unpaid Principal Balance
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
With no related allowance:
                             
Commercial
  $ 4,316     $ 4,316           $ 5,759     $ 198  
Real estate:
                                     
Commercial
    4,136       4,136             4,123       187  
Residential
    889       889             948          
Consumer
                          10       1  
Total
    9,341       9,341             10,840       386  
                                       
With an allowance recorded:
                                     
Commercial
    4,117       4,117     $ 698       3,504       46  
Real estate:
                                       
Commercial
    3,696       3,696       40       2,940       233  
Residential
    337       337       71       108       11  
Consumer
    1       1       1       8          
Total
    8,151       8,151       810       6,560       290  
                                         
Commercial
    8,433       8,433       698       9,263       244  
Real estate:
                                       
Commercial
    7,832       7,832       40       7,063       420  
Residential
    1,226       1,226       71       1,056       11  
Consumer
    1       1       1       18       1  
Total
  $ 17,492     $ 17,492     $ 810     $ 17,400     $ 676  


 
16

 
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

4.  Loans, net and allowance for loan losses (continued)

                     
For the Quarter Ended
 
March 31, 2011
 
Recorded Investment
   
Unpaid Principal Balance
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
With no related allowance:
                             
Commercial
  $ 6,633     $ 6,633           $ 6,762     $ 105  
Real estate:
                                     
Commercial
    3,837       3,837             3,882       36  
Residential
    783       783             826          
Consumer
    14       14             14          
Total
    11,267       11,267             11,484       141  
                                       
With an allowance recorded:
                                     
Commercial
    2,011       2,011     $ 573       2,028       8  
Real estate:
                                       
Commercial
    2,219       2,219       62       2,227       33  
Residential
                                       
Consumer
                                       
Total
    4,230       4,230       635       4,255       41  
                                         
Commercial
    8,644       8,644       573       8,790