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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 March 31, 2026

☐	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: 10,010,881 at May 1, 2026.

Table of Contents

PEOPLES FINANCIAL SERVICES CORP.

FORM 10-Q

For the Quarter Ended March 31, 2026


Contents		Page No.

PART I.	FINANCIAL INFORMATION:	3

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at March 31, 2026 (Unaudited) and December 31, 2025	3

	Consolidated Statements of Income and Comprehensive Income for the Three Months ended March 31, 2026 and 2025 (Unaudited)	4

	Consolidated Statements of Changes in Stockholders’ Equity for the Three months ended March 31, 2026 and 2025 (Unaudited)	5

	Consolidated Statements of Cash Flows for the Three Months ended March 31, 2026 and 2025 (Unaudited)	6

	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59

Item 4.	Controls and Procedures	61

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	61

Item 1A.	Risk Factors	61

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 3.	Defaults upon Senior Securities	62

Item 4.	Mine Safety Disclosures	62

Item 5.	Other Information	62

Item 6.	Exhibits	62

	Signatures	63

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Peoples Financial Services Corp.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)



		March 31, 2026			December 31, 2025
		(Unaudited)			(Audited)
Assets:
Cash and cash equivalents
Cash and due from banks		$	59,479		$	58,420
Interest-bearing deposits in other banks			7,939			9,321
Federal funds sold			261,194			201,243
Total cash and cash equivalents			328,612			268,984

Investment securities:
Available for sale: Amortized cost of $502,298 and $541,707, respectively, net of allowance for credit losses of $0 at March 31, 2026, and December 31, 2025			469,261			512,563
Held to maturity: Fair value of $60,954 and $62,798, respectively, net of allowance for credit losses of $0 at March 31, 2026, and December 31, 2025			70,557			72,047
Equity investments carried at fair value			3,054			2,598
Total investment securities			542,872			587,208
Loans			4,190,202			4,066,896
Less: allowance for credit losses			39,586			39,007
Net loans			4,150,616			4,027,889
Loans held for sale			1,181			805
Goodwill			75,986			75,986
Premises and equipment, net			79,206			78,496
Bank owned life insurance			83,417			88,645
Deferred tax assets			26,264			26,555
Accrued interest receivable			17,991			17,633
Intangible assets, net			26,161			27,700
Other assets			91,024			70,677
Total assets		$	5,423,330		$	5,270,578

Liabilities:
Deposits:
Noninterest-bearing		$	969,341		$	954,485
Interest-bearing			3,456,028			3,479,584
Total deposits			4,425,369			4,434,069
Short-term borrowings			179,321			32,721
Long-term debt			134,750			134,352
Subordinated debt			83,289			83,187
Junior subordinated debt			8,167			8,140
Accrued interest payable			7,890			6,792
Other liabilities			59,039			51,470
Total liabilities			4,897,825			4,750,731

Stockholders’ equity:
Common stock, par value $2.00, authorized 25,000,000 shares, issued and outstanding 10,010,488, shares at March 31, 2026, and 9,994,595 shares at December 31, 2025			20,047			20,015
Capital surplus			251,065			251,023
Retained earnings			282,001			273,500
Accumulated other comprehensive loss			(27,608)			(24,691)
Total stockholders’ equity			525,505			519,847
Total liabilities and stockholders’ equity		$	5,423,330		$	5,270,578

See notes to unaudited consolidated financial statements.

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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,		2026			2025
Interest income:
Interest and fees on loans:
Taxable		$	56,316		$	55,212
Tax-exempt			2,068			2,245
Interest and dividends on investment securities:
Taxable			4,035			4,134
Tax-exempt			1,133			396
Dividends			259			41
Interest on interest-bearing deposits in other banks			89			113
Interest on federal funds sold			804			285
Total interest income			64,704			62,426

Interest expense:
Interest on deposits			18,139			20,847
Interest on short-term borrowings			372			225
Interest on long-term debt			1,404			1,177
Interest on subordinated debt			1,749			443
Interest on junior subordinated debt			173			186
Total interest expense			21,837			22,878
Net interest income			42,867			39,548
Provision for credit losses			1,387			200
Net interest income after provision for credit losses			41,480			39,348

Noninterest income:
Service charges, fees, commissions and other			3,157			3,404
Merchant services income			180			231
Commission and fees on fiduciary activities			551			537
Wealth management income			646			650
Mortgage banking income			241			114
Increase in cash surrender value of life insurance			497			526
Interest rate swap gain			660			43
Net gains on equity investment securities			456			71
Net gains on sale of investment securities available for sale			510
Net gains on sale of fixed assets						680
Total noninterest income			6,898			6,256

Noninterest expense:
Salaries and employee benefits expense			14,517			13,481
Net occupancy and equipment expense			7,675			6,610
Acquisition related expenses						154
Amortization of intangible assets			1,517			1,683
Professional fees and outside services			1,086			1,011
FDIC insurance and assessments			756			1,022
Bank shares tax			744			541
Advertising and corporate business development			1,304			859
Other expenses			2,264			1,992
Total noninterest expense			29,863			27,353
Income before income taxes			18,515			18,251
Income tax expense			3,768			3,242
Net income			14,747			15,009

Other comprehensive (loss) income:
Unrealized (loss) gain on investment securities available for sale			(3,383)			5,572
Reclassification adjustment for net gains on available for sale securities included in net income			(510)
Change in derivative fair value			156			(148)
Other comprehensive (loss) income before income tax (benefit) expense			(3,737)			5,424
Income tax (benefit) expense related to other comprehensive (loss) income			(820)			1,183
Other comprehensive (loss) income, net of income tax (benefit) expense			(2,917)			4,241
Comprehensive income		$	11,830		$	19,250

Per share data:
Net income:
Basic		$	1.47		$	1.50
Diluted		$	1.47		$	1.49
Dividends declared		$	0.6250		$	0.6175
Weighted average common shares outstanding:
Basic			10,002,903			9,992,922
Diluted			10,029,213			10,043,186

See notes to unaudited consolidated financial statements.

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Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except per share data)


												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




												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 common 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

See notes to unaudited consolidated financial statements.

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Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands, except per share data)


For the Three Months Ended March 31,		2026			2025
Cash flows from operating activities:
Net income		$	14,747		$	15,009
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment			916			798
Amortization of right-of-use lease asset			185			258
Amortization of net deferred loan fees			(225)			(278)
Amortization of debt issuance costs			103
Amortization of CDI and other intangibles			1,539			1,709
Amortization expense related to acquired borrowings			58			114
Accretion income related to acquired loans			(3,089)			(4,115)
Amortization expense related to acquired deposits			60			316
Amortization of low-income housing partnerships			828			434
Provision for credit losses			1,387			200
Net unrealized gain on equity investments			(456)			(71)
Loans originated for sale			(6,494)			(859)
Proceeds from sale of loans originated for sale			6,240			437
Net (gain) loss on sale of loans originated for sale			(122)			2
Net accretion of investment securities			(766)			(732)
Net gain on sale of investment securities available for sale			(510)
Net gain on sale of premises and equipment						(680)
Increase in cash surrender value of life insurance			(497)			(526)
Deferred income tax expense			1,110			1,877
Stock compensation, including tax effects and expenses			444			(188)
Net change in:
Accrued interest receivable			(358)			(804)
Other assets			(15,628)			2,408
Accrued interest payable			1,098			(64)
Other liabilities			7,726			(6,174)
Net cash provided by operating activities			8,296			9,071
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale			32,404
Proceeds from repayments of investment securities:
Available for sale			27,988			29,613
Held to maturity			1,469			1,472
Purchases of investment securities:
Available for sale			(19,687)
Net (purchase) redemption of restricted equity securities			(5,478)			944
Purchase of equity securities without readily determinable fair value			(65)
Net (increase) decrease in loans			(120,800)			5,437
Purchases of premises and equipment			(1,811)			(499)
Proceeds from the sale of premises and equipment						3,696
Proceeds from bank owned life insurance			5,721
Net cash (used in) provided by investing activities			(80,259)			40,663
Cash flows from financing activities:
Net decrease in deposits			(8,760)			(90,941)
Proceeds from long-term debt			20,000
Repayment of long-term debt			(19,633)			(10,324)
Net proceeds (repayments) from short-term borrowings			146,600			(1,060)
Cash paid for shares withheld for taxes on compensation			(370)
Cash dividends paid			(6,246)			(6,158)
Net cash provided by (used in) financing activities			131,591			(108,483)
Net increase (decrease) in cash and cash equivalents			59,629			(58,749)
Cash and cash equivalents at beginning of period			268,984			135,851
Cash and cash equivalents at end of period		$	328,612		$	77,102


For the Three Months Ended March 31,		2026			2025
Supplemental disclosures:
Cash paid during the period for:
Interest		$	20,738		$	22,942
Income taxes			19			22
Noncash items:
Origination of mortgage servicing rights			91			8
Initial recognition of right-of-use assets						2,782
Initial recognition of lease liability						2,782

See notes to unaudited consolidated financial statements.

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

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 full-service community banking offices located within Allegheny, Bucks, Lackawanna, Lancaster, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna, 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.

Subsequent events

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of March 31, 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 April 24, 2026, the Company’s board of directors declared a dividend of $0.6250 per share for the second quarter of 2026. The dividend is payable on June 15, 2026 to shareholders of record as of May 29, 2026. The per share dividend is equal to the per share dividend declared for the first 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

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

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 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 is currently in the process of evaluating this guidance.

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 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 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 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.

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

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


(Dollars in thousands)			March 31, 2026			December 31, 2025
Net unrealized loss on investment securities available for sale		$	(33,037)		$	(29,144)
Income tax benefit			(7,244)			(6,390)
Net of income taxes			(25,793)			(22,754)
Benefit plan adjustments			(2,178)			(2,178)
Income tax benefit			(478)			(478)
Net of income taxes			(1,700)			(1,700)
Derivative adjustments			(147)			(303)
Income tax benefit			(32)			(66)
Net of income taxes			(115)			(237)
Accumulated other comprehensive loss		$	(27,608)		$	(24,691)

Other comprehensive (loss) income and related tax effects for March 31, 2026 and December 31, 2025 are as follows:


(Dollars in thousands)		March 31, 2026			December 31, 2025
Unrealized (loss) gain on investment securities available for sale		$	(3,383)		$	5,572
Net loss (gain) on the sale of investment securities available for sale (1)			(510)
Other comprehensive (loss) income on available-for-sale debt securities			(3,893)			5,572
Net change in derivatives			156			(148)
Other comprehensive (loss) income before taxes			(3,737)			5,424
Income tax (benefit) expense			(820)			1,183
Other comprehensive (loss) income		$	(2,917)		$	4,241

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

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 months ended March 31, 2026 and 2025:


		For the Three Months Ended March 31,
		2026						2025
(Dollars in thousands, except per share data)		Basic			Diluted			Basic			Diluted
Net income		$	14,747		$	14,747		$	15,009		$	15,009
Average common shares outstanding			10,002,903			10,029,213			9,992,922			10,043,186
Earnings (loss) per share		$	1.47		$	1.47		$	1.50		$	1.49

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

4. Investment securities:

The amortized cost and fair value of investment securities aggregated by investment category at March 31, 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 March 31, 2026 and December 31, 2025.


		March 31, 2026
				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)		Cost		Gains		Losses		Value
Available for sale:
U.S. Treasury securities		$	19,136	$		$	1,116	$	18,020
State and municipals:
Taxable			65,273		18		7,077		58,214
Tax-exempt			149,342		173		10,347		139,168
Residential mortgage-backed securities:
U.S. government agencies			20,978				360		20,618
U.S. government-sponsored enterprises			159,987		431		15,075		145,343
Commercial mortgage-backed securities:
U.S. government-sponsored enterprises			1,708				19		1,689
Private collateralized mortgage obligations			48,230		594		361		48,463
Asset backed securities			15,647		22		303		15,366
Corporate debt securities			21,264		651		271		21,644
Negotiable certificates of deposit			733		3				736
Total available for sale		$	502,298	$	1,892	$	34,929	$	469,261
Held to maturity:
Tax-exempt state and municipals		$	10,803	$		$	700	$	10,103
Residential mortgage-backed securities:
U.S. government agencies			12,072				2,054		10,018
U.S. government-sponsored enterprises			47,682				6,849		40,833
Total held to maturity		$	70,557	$		$	9,603	$	60,954

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)


		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

During the three months ended March 31, 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 is included in noninterest income in the consolidated statements of income and comprehensive income for the three months ended March 31, 2026. There were no gross losses realized upon the sales.

There were no available-for-sale securities sold during the three months ended March 31, 2025.

The following table summarizes 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, 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.


		Amortized		Fair
(Dollars in thousands)		Cost		Value
Within one year		$	3,161	$	3,165
After one but within five years			60,820		58,203
After five but within ten years			67,828		60,877
After ten years			123,939		115,537
			255,748		237,782
Mortgage-backed and other amortizing securities			246,550		231,479
Total		$	502,298	$	469,261

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

The maturity distribution of the amortized cost and fair value, of debt securities classified as held to maturity at March 31, 2026, is summarized as follows:


		Amortized		Fair
(Dollars in thousands)		Cost		Value
After one but within five years		$	4,487	$	4,106
After five but within ten years			6,316		5,997
			10,803		10,103
Mortgage-backed securities			59,754		50,851
Total		$	70,557	$	60,954

Securities with a carrying value of $370.6 million at March 31, 2026 were pledged to secure public deposits and certain other deposits as required or permitted by law. At December 31, 2025, securities with a carrying value of $381.8 million 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 March 31, 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 March 31, 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:


	March 31, 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	$	18,020	$	1,116	5	$	18,020	$	1,116
State and municipals:
Taxable						62		56,721		7,077	62		56,721		7,077
Tax-exempt	73	$	63,456	$	2,090	82		58,395		8,257	155		121,851		10,347
Residential mortgage-backed securities:
U.S. government agencies	5		20,579		360						5		20,579		360
U.S. government-sponsored enterprises	8		17,634		169	29		66,318		14,906	37		83,952		15,075
Commercial mortgage-backed securities:
U.S. government-sponsored enterprises						1		1,689		19	1		1,689		19
Other	14		23,040		138	11		6,760		223	25		29,800		361
Asset-backed securities	3		4,776		22	2		1,822		281	5		6,598		303
Corporate debt securities	2		1,748		2	5		4,054		269	7		5,802		271
Total	105	$	131,233	$	2,781	197	$	213,779	$	32,148	302	$	345,012	$	34,929

Securities Held to Maturity
Tax-exempt state and municipals	6	$	4,012	$	38	10	$	6,091	$	662	16	$	10,103	$	700
Residential mortgage-backed securities:
U.S. government agencies						3		10,018		2,054	3		10,018		2,054
U.S. government-sponsored enterprises						8		40,833		6,849	8		40,833		6,849
Total	6	$	4,012	$	38	21	$	56,942	$	9,565	27	$	60,954	$	9,603

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)


	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
Other	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 were sustained. 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. Based on its assessment, management does not consider the unrealized loss to be credit related, thus no allowance for credit loss was recorded at March 31, 2026 or December 31, 2025.

Equity Securities

Included in equity securities with readily determinable fair values at March 31, 2026, were investments in the common or preferred 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 income.

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

The following table presents unrealized and realized gains recognized in net income on equity securities for the three months ended March 31, 2026, and 2025:


		For the three months ended
		March 31,
(Dollars in thousands)		2026		2025
Net gains recognized on equity securities	$	456	$	71
Less: net gains realized on equity securities sold
Unrealized gains on equity securities	$	456	$	71

Equity Securities without Readily Determinable Fair Values

At March 31, 2026 and December 31, 2025, equity securities without readily determinable fair values consisted primarily of Federal Home Loan Bank (“FHLB”) of Pittsburgh stock totaling $17.9 million and $12.4 million, respectively. Equity securities without readily determinable fair values also included equity interests in two FinTech companies and an equity interest in an insurance agency. 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 March 31, 2026 and December 31, 2025. There were no adjustments for impairment related to these securities for the three months ended March 31, 2026.

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 March 31, 2026, and December 31, 2025 are summarized as follows. The Company had net deferred loan origination costs of $2.1 million and $1.9 million at March 31, 2026 and December 31, 2025, respectively. Unearned income was $1.5 million at March 31, 2026, and $1.5 million at December 31, 2025. The balance of net unaccreted discounts on acquired loans was $39.6 million and $42.7 million at March 31, 2026 and December 31, 2025, respectively.


(Dollars in thousands)		March 31, 2026			December 31, 2025
Commercial and industrial		$	675,446		$	667,948
Municipal			212,586			202,303
Real estate
Commercial			2,423,027			2,314,110
Residential			618,156			602,309
Total			3,041,183			2,916,419
Consumer
Indirect auto			85,726			93,742
Consumer other			15,592			17,496
Total			101,318			111,238
Equipment financing			159,669			168,988
Total		$	4,190,202		$	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

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Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except per share data)

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 unfunded lending commitments and unfunded loan commitments is reported on the consolidated balance sheets in other liabilities while the provision for credit losses related to unfunded commitments is reported in other noninterest expense in the consolidated statements of income and comprehensive 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 is reported as a component of accrued interest receivable on the consolidated balance sheets, totaling $15.2 million and $14.7 million at March 31, 2026 and December 31, 2025, respectively and 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 March 31, 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

The following tables present the changes in and period end balance of the allowance for credit losses at and for the three months ended March 31, 2026 and 2025.

March 31, 2026

 

Real estate

Equipment

(Dollars in thousands)

 

Commercial

 

Municipal

 

Commercial

 

Residential

 

Consumer

 

Financing

 

Total

Allowance for credit losses:

PEOPLES FINANCIAL SERVICES CORP. 10-Q