Peoples Financial Services Corp., a bank holding company incorporated under
the laws of Pennsylvania, provides a full range of financial services through
its wholly-owned subsidiary, Peoples Security Bank and Trust Company, including
its subsidiary, Peoples Advisors, LLC. On November 30, 2013, Penseco Financial
Services Corporation, a financial holding company incorporated under the laws
of Pennsylvania, referred to as “Penseco,” merged with and into
Peoples Financial Services Corp., with Peoples Financial Services Corp. being
the surviving corporation, pursuant to an Agreement and Plan of Merger dated
June 28, 2013. Such transaction is sometimes referred to in this annual report
as the “Penseco merger” and such agreement as the “Penseco
merger agreement.” In connection with the Penseco merger, on December
1, 2013, Penseco’s former banking subsidiary, Penn Security Bank and Trust
Company, merged with and into Peoples Neighborhood Bank, and the resulting institution
adopted the name, “Peoples Security Bank and Trust Company.”
Peoples Bank is a state-chartered bank and trust company under the jurisdiction
of the Pennsylvania Department of Banking and Securities and the Federal Deposit
Insurance Corporation, or “FDIC.” Peoples Bank’s twenty-four
community banking offices, all similar with respect to economic characteristics,
share a majority of the following aggregation criteria: products and services;
operating processes; customer bases; delivery systems; and regulatory oversight.
Accordingly, they are aggregated into a single operating segment.
Peoples Advisors, LLC, provides investment advisory services through a third
party to individuals and small businesses. Peoples Advisors, LLC did not meet
the quantitative thresholds for required segment disclosure.
Our primary products are loans to small- and medium-sized businesses. Other
lending products include one-to-four family residential mortgages and consumer
loans. We fund our loans, primarily, by offering open time deposits to commercial
enterprises and individuals. Other deposit products include certificates of
deposits and various demand deposit accounts.
Lending Activities
We provide a full range of retail and commercial lending products designed to
meet the borrowing needs of consumers and small- and medium-sized businesses
in our market areas. A significant amount of our loans are to customers located
within our market area. We have no foreign loans or highly leveraged transaction
loans, as defined by the Federal Reserve Board. Although we participate in loans
originated by other banks, we have originated the majority of loans in our portfolio.
Our retail lending products include the following types of loans, among others:
residential real estate; automobiles; manufactured housing; personal; student;
home equity, and credit card. Our commercial lending products include the following
types of loans, among others: commercial real estate; working capital; equipment
and other commercial needs; construction; Small Business Administration, and
agricultural and mineral rights. The terms offered on a loan vary depending
primarily on the type of loan and credit-worthiness of the borrower.
Payment risk is a function of the economic climate in which our lending activities
are conducted. Economic downturns in the economy generally or in a particular
sector could cause cash flow problems for customers and make loan payments more
difficult. We attempt to minimize this risk by not being exposed to loan concentrations
of a single customer or a group of customers, the loss of any one or more of
whom would have a materially adverse effect on its financial condition. One
element of interest rate risk arises from our fixed rate loans in an environment
of changing interest rates. We attempt to mitigate this risk by making adjustable
rate commercial loans and by limiting repricing terms to five years or less
for customers requiring fixed rate loans. Our lending activity also exposes
us to risks that any collateral we take as security is not adequate. We attempt
to manage collateral risk by avoiding loan concentrations to particular borrowers,
by perfecting liens on collateral and by obtaining appraisals on property prior
to extending loans. We attempt to mitigate our exposure to these and other types
of risks by stratifying authorization requirements by loan size and complexity.
We generate interest income from our loan and securities portfolios. Other income
is generated primarily from merchant transaction fees, trust fees and service
charges on deposit accounts. Our primary costs are interest paid on deposits
and borrowings and general operating expenses. We provide a variety of commercial
and retail banking services to business, non-profits, governmental, municipal
agencies and professional customers, as well as retail customers, on a personalized
basis. Our primary lending products are real estate, commercial and consumer
loans. We also offer ATM access, credit cards, active investment accounts, trust
department services and other various lending, depository and related financial
services. Our primary deposit products are savings and demand deposit accounts
and certificates of deposit.
We are not dependent upon a single customer, or a few customers, the loss of
one or more of which would have a material adverse effect on our operations.
In the ordinary course of our business, our operations and earnings are not
materially affected by seasonal changes or by Federal, state or local environmental
laws or regulations.
We offer a variety of loans including commercial, residential and consumer loans
as described above. The consumer portfolio includes automobile loans, educational
loans and lines of credit.
We intend to continue to evaluate commercial real estate, commercial business
and governmental lending opportunities, including small business lending. We
continue to proactively monitor and manage existing credit relationships.
