Peoples Financial Services Corp. Reports Third Quarter 2026 Earnings Growth as Net Income Rises 25.5%
Peoples Financial Services Corp. (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, has announced its unaudited financial results for the third quarter and nine months ended September 30, 2026. The company reported stronger quarterly earnings, improved net interest income, continued loan growth, and higher deposit balances, reflecting the performance of its core banking operations.
For the three months ended September 30, 2026, Peoples Financial Services recorded net income of $19.1 million, or $1.90 per diluted share. This represented an increase of $3.9 million, or 25.5%, compared with net income of $15.2 million, or $1.51 per diluted share, reported for the third quarter of 2025.
For the nine months ended September 30, 2026, net income totaled $48.7 million, equivalent to $4.85 per diluted share. This compared with net income of $47.2 million, or $4.69 per diluted share, for the corresponding nine-month period in 2025. The year-to-date increase amounted to $1.5 million, representing growth of approximately 3.1%.
The company’s profitability ratios also reflected stronger quarterly performance. Return on average assets (ROAA), calculated on an annualized basis, reached 1.41% for the third quarter of 2026, compared with 1.19% for the same period in 2025. Return on average equity (ROAE) increased to 14.07% from 12.02% over the same periods.
For the first nine months of 2026, annualized ROAA was 1.23%, compared with 1.25% in the corresponding period of 2025. Annualized ROAE stood at 12.16%, compared with 12.86% a year earlier.
The improvement in quarterly and year-to-date net income was primarily attributable to higher net interest income and non-interest income. These positive contributions were partially offset by increased non-interest expenses. Additionally, the company recorded a benefit for credit losses during the third quarter of 2026, while the nine-month reporting period included a provision for credit losses that partially reduced the improvement in year-to-date earnings.
CEO Highlights Strong Third-Quarter Performance
Gerard A. Champi, President and Chief Executive Officer of Peoples Financial Services Corp., expressed satisfaction with the company’s third-quarter financial performance, emphasizing the growth in net income and improvements in returns on assets and equity.
Champi noted that higher net interest income and non-interest income reflected the strength of the company’s core business operations, the dedication of its employees, and disciplined execution of its business strategy.
He also highlighted the resilience of the company’s banking franchise and its continued commitment to generating long-term shareholder value.
According to Champi, Peoples remains focused on delivering consistent financial performance while continuing to invest in its customers, employees, and the communities it serves.
Management’s comments reflect the company’s strategy of combining sustainable earnings growth with continued investment in its banking operations and customer relationships.
Loan Portfolio Expands to $4.4 Billion
Peoples Financial Services reported continued growth in its lending activities during the third quarter of 2026.
Total loans increased by $60.7 million, or 5.6% on an annualized basis, reaching approximately $4.4 billion as of September 30, 2026. This compared with $4.3 billion at June 30, 2026.
On a year-over-year basis, total loans increased by $347.1 million, representing annualized growth of 8.6%, compared with approximately $4.0 billion at September 30, 2025.
The expansion of the loan portfolio demonstrates continued lending activity and demand across the company’s banking markets. Loan growth also contributed to the increase in interest income, supporting the improvement in net interest income during both the quarterly and nine-month reporting periods.
The company reported that average taxable loans increased by $245.4 million to $4.0 billion during the first nine months of 2026, compared with $3.7 billion for the same period in 2025.
This increase in average loan balances was an important contributor to the company’s higher interest income. However, the yield on taxable loans declined by 10 basis points to 6.03%, compared with 6.13% in the previous year.
The decrease primarily reflected a 75-basis-point reduction in the prime rate during the second half of 2025, partially offset by a 25-basis-point increase in September 2026.
Despite changes in lending yields, higher average loan balances helped strengthen the company’s overall interest-earning asset base.
Asset Quality Improves During the Third Quarter
Peoples Financial Services reported a significant improvement in its asset quality indicators as of September 30, 2026.
Nonperforming assets totaled $10.3 million at the end of the third quarter, representing a decrease of $4.4 million from $14.7 million at June 30, 2026.
Compared with September 30, 2025, nonperforming assets declined by $6.5 million from $16.8 million.
Nonperforming assets represented 0.24% of loans, net, and foreclosed assets as of September 30, 2026. This compared with 0.34% at June 30, 2026, and 0.42% at September 30, 2025.
The improvement reflects a reduction in the level of nonperforming assets relative to the company’s loan portfolio and foreclosed assets.
Management attributed the lower credit provisioning during the third quarter partly to improved asset quality metrics, the seasoning of the equipment loan segment, and lower specific reserves following the successful resolution of nonperforming loans.
The company recorded a benefit for credit losses of $1.1 million during the third quarter of 2026, compared with a benefit of $0.8 million during the third quarter of 2025. In contrast, the second quarter of 2026 included a provision for credit losses of $3.1 million.
The improvement in credit provisioning supported third-quarter profitability and contributed to the increase in net income.
However, the company recognized a provision for credit losses during the first nine months of 2026, which partially offset the year-to-date increase in earnings.
Deposit Growth Strengthens Funding Position
Peoples Financial Services also recorded growth in its deposit base during the third quarter of 2026.
Total deposits increased by $163.3 million, or 14.4% on an annualized basis, reaching $4.7 billion as of September 30, 2026. This compared with $4.5 billion at June 30, 2026.
On a year-over-year basis, deposits increased by $382.4 million, or 8.9%, from approximately $4.3 billion at September 30, 2025.
Deposit growth provides an important source of funding for the company’s lending operations and supports its broader banking activities.
The company continued to manage its funding structure while responding to changing interest rate conditions and customer deposit requirements.
During the third quarter, the cost of total deposits increased compared with the linked quarter, reflecting the company’s use of certificates of deposit specials, brokered deposits, and Federal Home Loan Bank (FHLB) advances to support loan growth.
These funding sources contributed to higher interest expenses during the linked-quarter comparison, although the company’s overall cost of funds remained below the level reported in the third quarter of 2025.
Net Interest Income Increases to $47.3 Million
Net interest income was a major contributor to Peoples Financial Services’ improved earnings during the third quarter of 2026.
The company reported net interest income of $47.3 million for the three months ended September 30, 2026, representing an increase of $6.1 million compared with $41.2 million for the third quarter of 2025.
On a fully taxable equivalent (FTE) basis, a non-GAAP financial measure, net interest income increased by $6.4 million to $48.3 million from $41.9 million in the prior-year quarter.
The improvement primarily resulted from a $6.5 million increase in FTE interest income, while interest expense increased by only $0.2 million.
Higher earning asset yields and increased loan volumes supported the growth in interest income. At the same time, lower deposit and borrowing costs helped offset much of the impact of growth in interest-bearing liabilities.
Compared with the second quarter of 2026, net interest income increased by $1.7 million from $45.6 million. FTE net interest income increased by $1.8 million from $46.5 million.
The linked-quarter improvement in FTE net interest income was supported by a $3.8 million increase in FTE interest income, partially offset by a $2.0 million increase in interest expense.
The increase in funding expenses reflected the company’s use of higher-cost funding sources, including special certificate of deposit offerings, brokered deposits, and FHLB advances, to support continued loan growth.
For the nine months ended September 30, 2026, net interest income increased by $12.9 million to $135.8 million from $122.9 million in the corresponding period of 2025.
On an FTE basis, net interest income increased by $13.4 million to $138.5 million from $125.1 million.
The improvement resulted from an $11.6 million increase in tax-equivalent interest income and a $1.8 million decrease in interest expense.
These results demonstrate the contribution of higher earning asset balances and improved funding costs to the company’s overall earnings performance.
Net Interest Margin Records Year-Over-Year Improvement
Peoples Financial Services reported an improvement in its net interest margin during both the third quarter and first nine months of 2026.
The company’s net interest margin, calculated on a fully taxable equivalent basis, reached 3.80% for the third quarter of 2026. This represented an improvement of 26 basis points compared with 3.54% for the third quarter of 2025.
However, the margin declined slightly by two basis points from 3.82% in the second quarter of 2026.
For the nine months ended September 30, 2026, the FTE net interest margin improved by 19 basis points to 3.77%, compared with 3.58% for the corresponding period of 2025.
The company’s FTE yield on interest-earning assets increased to 5.71% during the third quarter of 2026, compared with 5.56% in the prior-year quarter. This represented an improvement of 15 basis points.
Compared with the second quarter of 2026, the yield increased by seven basis points from 5.64%.
For the first nine months of 2026, the FTE yield on interest-earning assets reached 5.62%, compared with 5.58% in the same period of 2025.
The increase in earning asset yields was supported by higher loan balances and changes in the composition of the company’s investment portfolio.
Funding Costs Decline Compared With the Previous Year
The company reported lower funding costs during the third quarter and first nine months of 2026 compared with the corresponding periods in 2025.
The cost of funds, which represents the average rate paid on total interest-bearing liabilities, declined by 15 basis points to 2.49% for the third quarter of 2026, compared with 2.64% in the third quarter of 2025.
However, the cost of funds increased by nine basis points compared with 2.40% in the second quarter of 2026.
For the nine months ended September 30, 2026, the cost of funds was 2.43%, representing an 18-basis-point reduction from 2.61% in the corresponding period of 2025.
The cost of interest-bearing deposits also improved. It declined by 13 basis points to 2.26% during the third quarter of 2026, compared with 2.39% in the prior-year quarter. However, it increased by 12 basis points from 2.14% in the second quarter of 2026.
For the nine-month period, the cost of interest-bearing deposits decreased by 23 basis points to 2.19%, compared with 2.42% in 2025.
The cost of total deposits, including non-interest-bearing deposits, was 1.79% for the third quarter of 2026, down nine basis points from 1.88% in the third quarter of 2025.
Compared with the second quarter of 2026, however, the cost of total deposits increased by 11 basis points from 1.68%.
For the first nine months of 2026, the cost of deposits was 1.72%, compared with 1.92% in the same period of 2025.
These changes highlight the company’s efforts to manage funding expenses while maintaining sufficient liquidity to support its expanding loan portfolio.
Nine-Month Interest Income Benefits From Higher Earning Assets
For the nine months ended September 30, 2026, Peoples Financial Services recorded an increase in total average earning assets of $241.4 million, reaching approximately $4.9 billion compared with $4.7 billion in the corresponding period of 2025.
Average taxable loans increased by $245.4 million to $4.0 billion from $3.7 billion.
The company’s average tax-exempt investment securities also increased significantly. Average tax-exempt investments totaled $157.6 million during the first nine months of 2026, compared with $90.9 million in the same period of 2025.
This represented an increase of $66.7 million.
Meanwhile, average taxable investments declined to $430.9 million from $549.8 million over the comparable periods.
Average interest-earning deposits increased by $58.1 million to $100.9 million from $42.8 million.
The FTE yield on investments improved by 76 basis points to 3.87% for the nine months ended September 30, 2026, compared with 3.11% in the corresponding period of 2025.
These developments contributed to the increase in tax-equivalent interest income and strengthened the company’s overall net interest income performance.
The company also recorded $9.5 million in accretion associated with purchase accounting fair value discounts on acquired loans during the first nine months of 2026. This compared with $12.2 million during the same period in 2025.
Non-Interest Income Reflects Changes in Banking Activities
Non-interest income totaled $5.7 million for the third quarter of 2026, compared with $5.5 million for the corresponding period in 2025.
The prior-year quarter included a $0.6 million loss related to the sale of administrative offices, while no similar losses were recorded during the third quarter of 2026.
Compared with the second quarter of 2026, non-interest income decreased by $0.8 million from $6.5 million.
The decline was primarily attributable to lower merchant services revenue and service charges, along with the absence of a $0.3 million gain recorded during the second quarter from the sale of a branch property as part of a sale-leaseback transaction.
Non-interest income represents an additional source of revenue for the company beyond traditional lending and deposit activities.
Changes in merchant services, customer service charges, property transactions, and other fee-based activities can influence this component of the company’s financial performance.
Operating Expenses Increase During the Third Quarter
Peoples Financial Services reported higher non-interest expenses during the third quarter of 2026.
Total non-interest expenses increased by $3.0 million to $31.7 million, compared with $28.7 million in the third quarter of 2025.
Salaries and employee benefits increased by $1.5 million, primarily reflecting merit increases, additional staff, and higher employee benefit costs.
Other expenses increased by $1.1 million, mainly due to higher corporate business development expenses and professional fees.
Compared with the second quarter of 2026, non-interest expenses increased by $1.1 million from $30.6 million.
Salaries increased by $0.5 million, primarily because of additional employees and higher stock-based compensation expenses. Occupancy and equipment expenses increased by $0.4 million, reflecting higher data processing costs.
The company’s efficiency ratio, a non-GAAP financial measure, was 56.12% for the third quarter of 2026.
This represented an increase compared with 55.16% in the second quarter of 2026, but an improvement from 56.52% in the third quarter of 2025.
The efficiency ratio measures the relationship between operating expenses and revenue, with lower figures generally indicating greater operating efficiency.
Income Tax Expense Declines Following Tax Credit Purchases
Income tax expense for the third quarter of 2026 totaled $3.3 million, compared with $3.6 million in the third quarter of 2025 and $3.6 million in the second quarter of 2026.
The effective tax rate declined to 14.6% for the third quarter of 2026, compared with 19.1% in the prior-year quarter and 19.6% in the second quarter of 2026.
The lower effective tax rate was largely attributable to the purchase of 2025 federal tax credits during the third quarter of 2026.
These tax credits reduced the company’s income tax expense by approximately $1.2 million during the reporting period.
The reduction in income tax expense provided additional support for the company’s quarterly net income growth.
Book Value Per Share Continues to Increase
Peoples Financial Services reported an increase in both book value per common share and tangible book value per common share as of September 30, 2026.
Book value per common share reached $52.87, representing an increase of $1.92 from $50.95 at September 30, 2025.
Tangible book value per common share, a non-GAAP measure, increased by $2.52 to $42.95 from $40.43 over the same period.
These measures provide investors with additional information about the company’s equity position and the value attributable to common shareholders.
The improvement in book value per share reflects the company’s ongoing focus on strengthening its financial position and generating long-term shareholder value.
Use of Non-GAAP Financial Measures
In addition to reporting financial performance in accordance with U.S. generally accepted accounting principles (GAAP), Peoples Financial Services uses selected non-GAAP financial measures to provide additional information about its operating results.
These measures include tangible stockholders’ equity, core net income, tax-equivalent net interest income, net interest margin, tangible book value per common share, and the efficiency ratio.
The company uses these measures to help investors better understand its underlying operating performance, financial position, and business trends.
Certain items, including net gains and losses from the sale of available-for-sale investment securities and acquisition-related expenses, are considered non-core by the company.
Peoples provides reconciliations between applicable non-GAAP measures and their comparable GAAP financial measures in the accompanying financial tables.
The company also notes that its non-GAAP measures may differ from similarly named measures used by other financial institutions. These measures should not be considered substitutes for financial information prepared in accordance with GAAP.
Focus on Sustainable Growth and Shareholder Value
Peoples Financial Services Corp.’s third-quarter 2026 results demonstrate stronger quarterly profitability, continued loan and deposit growth, improved asset quality, and higher net interest income.
Net income increased 25.5% year over year to $19.1 million, while diluted earnings per share reached $1.90. The company also reported improvements in quarterly returns on average assets and average equity.
Total loans increased to approximately $4.4 billion, while deposits reached $4.7 billion at September 30, 2026. Nonperforming assets declined significantly compared with both the previous quarter and the prior-year period.
Although operating expenses increased and funding costs rose compared with the linked quarter, lower funding costs relative to the previous year and stronger interest income supported the company’s earnings performance.
Management remains focused on maintaining consistent financial results, strengthening customer relationships, investing in employees, and supporting the communities served by Peoples Security Bank and Trust Company.
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