10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

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

for the quarterly period ended September 30, 2015

or

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

for the transition period from

001-36388

(Commission File Number)

PEOPLES FINANCIAL SERVICES CORP.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2391852
(State of incorporation)	(IRS Employer ID Number)
150 North Washington Avenue, Scranton, PA	18503
(Address of principal executive offices)	(Zip code)

(570) 346-7741

(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  ☒    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  ☒    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	☒
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  ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date: 7,426,282 at October 30, 2015.

PEOPLES FINANCIAL SERVICES CORP.

FORM 10-Q

For the Quarter Ended September 30, 2015

Contents		Page No.
PART I.	FINANCIAL INFORMATION:
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets at September 30, 2015 and December 31, 2014	3
	Consolidated Statements of Income and Comprehensive Income for the Three and Nine months ended September 30, 2015 and 2014	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Nine months ended September 30, 2015 and 2014	5
	Consolidated Statements of Cash Flows for the Nine months ended September 30, 2015 and 2014	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
	Signatures	41

2

Peoples Financial Services Corp.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except share data)

		September 30, 2015		December 31, 2014
Assets:
Cash and due from banks	$	36,015	$	24,656
Interest-bearing deposits in other banks		4,970		6,770
Federal funds sold
Investment securities:
Available-for-sale		299,832		339,586
Held-to-maturity: Fair value September 30, 2015, $13,582; December 31, 2014, $15,215		13,107		14,665
Total investment securities		312,939		354,251
Loans held for sale		3,439		3,486
Loans, net		1,270,545		1,209,894
Less: allowance for loan losses		12,043		10,338
Net loans		1,258,502		1,199,556
Premises and equipment, net		27,002		25,433
Accrued interest receivable		5,327		5,580
Goodwill		63,370		63,370
Intangible assets		4,606		5,501
Other assets		56,600		53,066
Total assets	$	1,772,770	$	1,741,669
Liabilities:
Deposits:
Noninterest-bearing	$	303,741	$	313,498
Interest-bearing		1,140,909		1,112,060
Total deposits		1,444,650		1,425,558
Short-term borrowings		30,250		19,557
Long-term debt		31,000		33,140
Accrued interest payable		496		574
Other liabilities		14,286		16,061
Total liabilities		1,520,682		1,494,890
Stockholders’ equity:
Common stock, par value $2.00, authorized 25,000,000 shares, issued and outstanding:September 30, 2015,  7,519,109 shares; December 31, 2014,  7,548,358 shares		15,038		15,097
Capital surplus		139,263		140,214
Retained earnings		99,165		92,297
Accumulated other comprehensive loss		(1,378)		(829)
Total stockholders’ equity		252,088		246,779
Total liabilities and stockholders’ equity	$	1,772,770	$	1,741,669

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)

	Three Months Ended				Nine Months Ended
September 30,	2015		2014		2015		2014
Interest income:
Interest and fees on loans:
Taxable	$	13,341	$	13,876	$	40,072	$	41,035
Tax-exempt		585		465		1,714		1,607
Interest and dividends on investment securities:
Taxable		792		1,007		2,508		2,877
Tax-exempt		858		816		2,498		2,462
Dividends		9		2		24		32
Interest on interest-bearing deposits in other banks		13		10		39		29
Interest on federal funds sold				16		9		64
Total interest income		15,598		16,192		46,864		48,106
Interest expense:
Interest on deposits		1,229		1,354		3,689		4,125
Interest on short-term borrowings		11		9		23		67
Interest on long-term debt		245		279		756		864
Total interest expense		1,485		1,642		4,468		5,056
Net interest income		14,113		14,550		42,396		43,050
Provision for loan losses		900		666		2,400		2,724
Net interest income after provision for loan losses		13,213		13,884		39,996		40,326
Noninterest income:
Service charges, fees and commissions		1,531		1,634		4,685		4,815
Merchant services income		1,183		1,002		2,936		2,784
Commission and fees on fiduciary activities		541		575		1,487		1,690
Wealth management income		224		217		627		569
Mortgage banking income		197		142		667		434
Life insurance investment income		192		109		569		565
Net gain on sale of investment securities available-for-sale		147		701		979		861
Total noninterest income		4,015		4,380		11,950		11,718
Noninterest expense:
Salaries and employee benefits expense		5,397		4,754		16,243		14,883
Net occupancy and equipment expense		2,246		2,020		6,863		6,080
Merchant services expense		823		662		2,006		1,722
Amortization of intangible assets		296		334		896		1,010
Acquisition related expense				109				1,725
Other expenses		2,944		3,205		8,303		9,190
Total noninterest expense		11,706		11,084		34,311		34,610
Income before income taxes		5,522		7,180		17,635		17,434
Income tax expense		1,113		1,944		3,751		4,169
Net income		4,409		5,236		13,884		13,265
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available-for-sale		826		(825)		134		2,811
Reclassification adjustment for net gain on sales included in net income		(147)		(701)		(979)		(861)
Other comprehensive income (loss)		679		(1,526)		(845)		1,950
Income tax expense (benefit) related to other comprehensive loss		237		(534)		(296)		682
Other comprehensive income (loss), net of income taxes		442		(992)		(549)		1,268
Comprehensive income	$	4,851	$	4,244	$	13,335	$	14,533
Per share data:
Net income:
Basic	$	0.58	$	0.70	$	1.84	$	1.76
Diluted	$	0.58	$	0.70	$	1.84	$	1.76
Average common shares outstanding:
Basic		7,536,824		7,548,358		7,543,751		7,548,983
Diluted		7,536,824		7,548,358		7,543,751		7,566,456
Dividends declared	$	0.31	$	0.31	$	0.93	$	0.93

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)

							Accumulated
							Other
	Common		Capital		Retained		Comprehensive		Treasury
	Stock		Surplus		Earnings		Income/(Loss)		Stock		Total
Balance, January 1, 2015	$	15,097	$	140,214	$	92,297	$	(829)	$		$	246,779
Stock based compensation				52								52
Net income						13,884						13,884
Other comprehensive loss, net of income taxes								(549)				(549)
Dividends declared: $0.93 per share						(7,016)						(7,016)
Shares retired: 29,249 shares		(59)		(1,003)								(1,062)
Balance, September 30, 2015		15,038		139,263		99,165		(1,378)				252,088
Balance, January 1, 2014		15,614		146,109		84,008		(698)		(6,241)		238,792
Net income						13,265						13,265
Other comprehensive income, net of income taxes								1,268				1,268
Dividends declared: $0.93 per share						(7,021)						(7,021)
Shares retired: 3,386 shares		(7)		(102)								(109)
Reissuance under option plan: 600 shares				28						11		39
Repurchase and held: 1,800 shares										(70)		(70)
Retirement of stock options				(95)								(95)
Retirement of treasury stock		(510)		(5,790)						6,300
Balance, September 30, 2014	$	15,097	$	140,150	$	90,252	$	570	$		$	246,069

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 Nine Months Ended September 30,	2015		2014
Cash flows from operating activities:
Net income	$	13,884	$	13,265
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		1,178		1,322
Amortization of deferred loan costs		440		171
Amortization of intangibles		896		1,010
Net accretion of purchase accounting adjustments on tangible assets		(708)		(2,683)
Provision for loan losses		2,400		2,724
Net gain on sale of other real estate owned		(132)		(60)
Net loss on disposal of equipment		87		63
Loans originated for sale		(20,664)		(7,346)
Proceeds from sale of loans originated for sale		21,378		6,752
Net gain on sale of loans originated for sale		(667)		(610)
Net amortization of investment securities		3,171		3,230
Net gain on sale of investment securities		(979)		(861)
Life insurance investment income		(569)		(592)
Deferred income tax expense		119
Stock based compensation		52		11
Net change in:
Accrued interest receivable		253		485
Other assets		(3,062)		(3,455)
Accrued interest payable		(78)		(126)
Other liabilities		(1,827)		1,546
Net cash provided by operating activities		15,172		14,846
Cash flows from investing activities:
Proceeds from sales of investment securities available-for-sale		65,858		15,389
Proceeds from repayments of investment securities:
Available-for-sale		41,659		32,022
Held-to-maturity		1,526		1,989
Purchases of investment securities:
Available-for-sale		(70,768)		(98,898)
Held-to-maturity
Net redemption of restricted equity securities		343		56
Net increase in lending activities		(61,940)		(3,341)
Purchases of premises and equipment		(2,924)		(1,059)
Proceeds from the sale of premises and equipment		14		25
Proceeds from sale of other real estate owned		484		409
Net cash used in investing activities		(25,748)		(53,408)
Cash flows from financing activities:
Net increase in deposits		19,619		46,939
Repayment of long-term debt		(2,099)		(2,682)
Net increase (decrease) in short-term borrowings		10,693		(15,538)
Redemption of common stock		(1,062)		(70)
Settlement of stock options				(95)
Purchase of treasury stock				(70)
Cash dividends paid		(7,016)		(7,021)
Net cash provided by financing activities		20,135		21,463
Net increase (decrease) in cash and cash equivalents		9,559		(17,099)
Cash and cash equivalents at beginning of year		31,426		51,310
Cash and cash equivalents at end of year	$	40,985	$	34,211

6

Peoples Financial Services Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands, except per share data)

For the Nine Months Ended September 30,	2015		2014
Supplemental disclosures:
Cash paid during the period for:
Interest	$	5,114	$	5,182
Income taxes		2,900		3,100
Noncash items:
Transfers of loans to other real estate	$	370	$	541
Retirement of treasury shares				6,300
Acquisition:
Fair value of assets acquired:
Loans, net	$	216	$	1,900
Premises and equipment		(76)		(76)
Core deposit and other intangible assets		(896)		(1,010)
	$	(756)	$	814
Fair value of liabilities assumed:
Deposits	$	527	$	818
Long-term debt		41		41
	$	568	$	859

See notes to consolidated financial statements

7

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 subsidiary, Peoples Security Bank and Trust Company (“Peoples Bank”), including its subsidiaries, Peoples Advisors, LLC and Penseco Realty, Inc. (collectively, the “Company” or “Peoples”). The Company services its retail and commercial customers through twenty-six full-service community banking offices located within the Lackawanna, Lehigh, Luzerne, Monroe, Susquehanna, Wayne and Wyoming Counties of Pennsylvania and Broome County of New York.

Basis of presentation:

The accompanying unaudited consolidated financial statements of 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 to 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 and nine months ended and as of September 30, 2015, are not necessarily indicative of the results of operations and financial position that may be expected in the future.

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 loan losses, fair value of financial instruments, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the valuation of deferred tax assets, determination of other-than-temporary impairment losses on securities, impairment of goodwill and fair value of assets acquired and liabilities assumed in business combinations. 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, 2014.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2015, 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.

Recent accounting standards:

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.”

ASU 2015-03 requires that debt issuance costs be reported in the balance sheet as a direct deduction from the face amount of the related liability, consistent with the presentation of debt discounts. Prior to the amendments, debt issuance costs were presented as a deferred charge (i.e., an asset) on the balance sheet. The ASU provides examples illustrating the balance sheet presentation of notes net of their related discounts and debt issuance costs. Further, the amendments require the amortization of debt issuance costs to be reported as interest expense. Similarly, debt issuance costs and any discount or premium are considered in the aggregate when determining the effective interest rate on the debt.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The amendments must be applied retrospectively. The adoption of ASU 2015-03 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

8

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

In July 2015, the FASB issued ASU 2015-12, “Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient.”

The amendments in ASU 2015-12 (i) require fully benefit-responsive investment contracts to be measured, presented and disclosed only at contract value, not fair value; (ii) simplify the investment disclosure requirements; and (iii) provide a measurement date practical expedient for employee benefit plans.

Part I. Fully Benefit-Responsive Investment Contracts – the amendments designate contract value as the only required measurement for fully benefit-responsive investments contracts within the scope of Topics 962 and 965, eliminating the requirement to measure, present and disclose such contracts also at fair value and reconcile fair value to contract value.

Part II. Plan Investment Disclosures – the amendments eliminate certain disclosure requirements for both participant-directed investments and nonparticipant-directed investments, and also reduce disclosures required specifically for investments using the net asset value per share practical expedient. The amendments also require that both participant-directed and nonparticipant-directed investments be grouped only by general type, eliminating the need to disaggregate the investments in multiple ways (i.e., also on the basis of nature, characteristics, and risks as required by Topic 820, Fair Value Measurement).

Part III. Measurement Date Practical Expedient – the amendments provide a measurement date practical expedient for employee benefit plans similar to the practical expedient allowing employers to measure defined benefit plan assets on a month-end date that is nearest to the employer’s fiscal year-end, when the fiscal period does not coincide with a month-end.

The amendments are effective for fiscal years beginning after December 15, 2015. Early adoption is permitted for all three parts individually or in the aggregate. Parts I and II of the ASU should be applied retrospectively, while Part III should be applied prospectively. Only the nature and reason for the change in accounting principle is required to be disclosed in the annual period of adoption. The adoption of ASU 2015-12 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

InAugust 2015, the FASB issued ASU 2015-14, “Revenue from Contracts (Topic 606): Deferral of the Effective Date.”

ASU 2015-14 defers the effective date of the new revenue recognition standard by one year. As such, it now takes effect for public entities in fiscal years beginning after December 15, 2017.  Early adoption is permitted for any entity that chooses to adopt the new standard as of the original effective date. The adoption of ASU 2015-14 on January 1, 2018, is not expected to have a material effect on the operating results or financial position of the Company.

In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.”

ASU 2015-15 codifies a Securities and Exchange Commission (“SEC”) staff announcement that entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. ASU 2015-15 clarifies that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 is effective immediately. The adoption of ASU 2015-15 did not have a material effect on the operating results or financial position of the Company.

In September, 2015, the FASB issued ASU 2015-16, “Business Combination (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.”

ASU 2015-16 requires adjustments to provisional amounts that are identified during the measurement period to be recognized in the reporting period in which the adjustment amounts are determined. This includes any effect on earnings

9

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

of changes in depreciation, amortization, or other income effects as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.

In addition, the amendments in the proposed Update would require an entity to disclose, either on the face of the income statement or in the notes, the nature and amount of measurement-period adjustments recognized in the current period, including separately the amounts in current-period income statement line items that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.

The amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The amendments in this Update should be applied prospectively to measurement-period adjustments that occur after the effective date of this ASU. The adoption of ASU 2015-16 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

2. Other comprehensive income (loss):

The components of other comprehensive loss and their related tax effects are reported in the Consolidated Statements of Income and Comprehensive Income. The accumulated other comprehensive income (loss) included in the Consolidated Balance Sheets relates to net unrealized gains and losses on investment securities available-for-sale and benefit plan adjustments.

The components of accumulated other comprehensive loss included in stockholders’ equity at September 30, 2015 and December 31, 2014 is as follows:

		September 30, 2015		December 31, 2014
Net unrealized gain on investment securities available-for-sale	$	5,447	$	6,292
Income tax expense (benefit)		1,906		2,202
Net of income taxes		3,541		4,090
Benefit plan adjustments		(7,567)		(7,567)
Income tax expense (benefit)		(2,648)		(2,648)
Net of income taxes		(4,919)		(4,919)
Accumulated other comprehensive loss	$	(1,378)	$	(829)

10

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Other comprehensive income (loss) and related tax effects for the three and nine months ended September 30, 2015 and 2014 is as follows:

Three Months Ended September 30,	2015		2014
Unrealized gain (loss) on investment securities available-for-sale	$	826	$	(825)
Net gain on the sale of investment securities available-for-sale(1)		(147)		(701)
Other comprehensive income (loss) gain before taxes		679		(1,526)
Income tax expense (benefit)		237		(534)
Other comprehensive income (loss)	$	442	$	(992)
Nine Months Ended September 30,	2015		2014
Unrealized gain (loss) on investment securities available-for-sale	$	134	$	2,811
Net gain on the sale of investment securities available-for-sale(1)		(979)		(861)
Other comprehensive income (loss) gain before taxes		(845)		1,950
Income tax expense (benefit)		(296)		682
Other comprehensive income (loss)	$	(549)	$	1,268

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

3. 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.

There were no shares considered anti-dilutive for the three and nine month periods ended September 30, 2015 and 2014.

	2015				2014
For the Three Months Ended September 30,	Basic		Diluted		Basic		Diluted
Net Income (Numerator)	$	4,409	$	4,409	$	5,236	$	5,236
Average common shares outstanding (Denominator)		7,536,824		7,536,824		7,548,358		7,548,358
Earnings per share	$	0.58	$	0.58	$	0.70	$	0.70
	2015				2014
For the Nine Months Ended September 30,	Basic		Diluted		Basic		Diluted
Net Income (Numerator)	$	13,884	$	13,884	$	13,265	$	13,265
Average common shares outstanding (Denominator)		7,543,751		7,543,751		7,548,983		7,566,456
Earnings per share	$	1.84	$	1.84	$	1.76	$	1.76

11

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

4. Investment securities:

The amortized cost and fair value of investment securities aggregated by investment category at September 30, 2015 and December 31, 2014 are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2015	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	15,915	$	152		—	$	16,067
U.S. Government-sponsored enterprises		79,077		547	$	1		79,623
State and municipals:
Taxable		15,886		864		19		16,731
Tax-exempt		113,198		3,913		302		116,809
Mortgage-backed securities:
U.S. Government agencies		34,027		198		31		34,194
U.S. Government-sponsored enterprises		36,282		235		109		36,408
Total	$	294,385	$	5,909	$	462	$	299,832
Held-to-maturity:
Tax-exempt state and municipals	$	7,369	$	125	$	50	$	7,444
Mortgage-backed securities:
U.S. Government agencies		88		1		—		89
U.S. Government-sponsored enterprises		5,650		399		—		6,049
Total	$	13,107	$	525	$	50	$	13,582

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2014	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	48,393	$	157			$	48,550
U.S. Government-sponsored enterprises		95,990		337	$	82		96,245
State and municipals:
Taxable		16,490		943		26		17,407
Tax-exempt		87,954		4,971		24		92,901
Mortgage-backed securities:
U.S. Government agencies		37,511		132		167		37,476
U.S. Government-sponsored enterprises		46,956		277		226		47,007
Total	$	333,294	$	6,817	$	525	$	339,586
Held-to-maturity:
Tax-exempt state and municipals	$	7,370	$	105	$	38	$	7,437
Mortgage-backed securities:
U.S. Government agencies		100		2				102
U.S. Government-sponsored enterprises		7,195		481				7,676
Total		14,665	$	588	$	38	$	15,215

12

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified as available-for-sale at September 30, 2015, is summarized as follows:

	Fair
September 30, 2015	Value
Within one year	$	33,161
After one but within five years		98,388
After five but within ten years		46,705
After ten years		50,976
		229,230
Mortgage-backed securities		70,602
Total	$	299,832

The maturity distribution of the amortized cost and fair value, of debt securities classified as held-to-maturity at September 30, 2015, is summarized as follows:

	Amortized		Fair
September 30, 2015	Cost		Value
Within one year
After one but within five years	$	503	$	515
After five but within ten years		—		—
After ten years		6,866		6,929
		7,369		7,444
Mortgage-backed securities		5,738		6,138
Total	$	13,107	$	13,582

Securities with a carrying value of $206,467 and $216,192 at September 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits and repurchase agreements as required or permitted by law.

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on a case-by-case basis. At September 30, 2015 and December 31, 2014, there were no significant concentrations of credit risk from any one issuer, with the exception of 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 with unrealized losses for which an other-than-temporary impairment (“OTTI”) has not been recognized at September 30, 2015 and December 31, 2014, 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
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2015	Value		Losses		Value		Losses		Value		Losses
U.S. Government-sponsored enterprises	$	3,006	$	1	$		$		$	3,006	$	1
State and municipals:
Taxable						546		19		546		19
Tax-exempt		41,034		325		789		27		41,823		352
Mortgage-backed securities:
U.S. Government agencies		877		7		5,119		24		5,996		31
U.S. Government-sponsored enterprises		9,819		20		6,682		89		16,501		109
Total	$	54,736	$	353	$	13,136	$	159	$	67,872	$	512

13

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2014	Value		Losses		Value		Losses		Value		Losses
U.S. Government-sponsored enterprises	$	21,228	$	33	$	7,954	$	49	$	29,182	$	82
State and municipals:
Taxable						544		26		544		26
Tax-exempt		4,702		23		2,423		39		7,125		62
Mortgage-backed securities:
U.S. Government agencies		20,148		167						20,148		167
U.S. Government-sponsored enterprises		22,870		226						22,870		226
Total	$	68,948	$	449	$	10,921	$	114	$	79,869	$	563

The Company had 97 investment securities, consisting of 76 tax-exempt state and municipal obligations, one taxable state and municipal obligation, one U.S. Government-sponsored enterprise security, and 19 mortgage-backed securities that were in unrealized loss positions at September 30, 2015. Of these securities, one taxable state and municipal obligation, eight mortgage-backed securities and three tax-exempt state and municipal securities were in a continuous unrealized loss position for twelve months or more. 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 September 30, 2015. There was no OTTI recognized for the three or nine months ended September 30, 2015 and 2014.

The Company had 52 investment securities, consisting of 16 tax-exempt state and municipal obligations, one taxable state and municipal obligation, nine U.S. Government-sponsored enterprise securities and 26 mortgage-backed securities that were in unrealized loss positions at December 31, 2014. Of these securities, two U.S. Government-sponsored enterprise securities, four tax-exempt state and municipal securities, and one taxable state and municipal obligation were in a continuous unrealized loss position for twelve months or more.

5. Loans, net and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at September 30, 2015 and December 31, 2014 are summarized as follows. Net deferred loan costs were $686 and $651 at September 30, 2015 and December 31, 2014.

		September 30, 2015		December 31, 2014
Commercial	$	342,937	$	319,590
Real estate:
Commercial		529,499		493,481
Residential		306,740		322,454
Consumer		91,369		74,369
Total	$	1,270,545	$	1,209,894

14

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The changes in the allowance for loan losses account by major classification of loan for the three and nine months ended September 30, 2015 and 2014 are summarized as follows:

			Real estate
September 30, 2015	Commercial		Commercial		Residential			Consumer		Total
Allowance for loan losses:
Beginning Balance July 1, 2015	$	2,435	$	3,190	$	4,027	$		1,776	$	11,428
Charge-offs				(120)		(128)			(67)		(315)
Recoveries		2		2		2			24		30
Provisions				342		369			189		900
Ending balance	$	2,437	$	3,414	$	4,270	$		1,922	$	12,043
			Real estate
September 30, 2014	Commercial		Commercial		Residential			Consumer		Total
Allowance for loan losses:
Beginning Balance July 1, 2014	$	2,201	$	2,675	$	3,458		$	1,288	$	9,622
Charge-offs				(57)		(56)			(64)		(177)
Recoveries		5		22					33		60
Provisions		152		185		239			90		666
Ending balance	$	2,358	$	2,825	$	3,641		$	1,347	$	10,171

			Real estate
September 30, 2015	Commercial		Commercial		Residential		Consumer		Total
Allowance for loan losses:
Beginning Balance January 1, 2015	$	2,321	$	3,037	$	3,690	$	1,290	$	10,338
Charge-offs		(40)		(199)		(362)		(253)		(854)
Recoveries		66		8		10		75		159
Provisions		90		568		932		810		2,400
Ending balance	$	2,437	$	3,414	$	4,270	$	1,922	$	12,043
			Real estate
September 30, 2014	Commercial		Commercial		Residential		Consumer		Total
Allowance for loan losses:
Beginning Balance January 1, 2014	$	2,008	$	2,394	$	3,135	$	1,114	$	8,651
Charge-offs		(376)		(489)		(566)		(219)		(1,650)
Recoveries		6		291		38		111		446
Provisions		720		629		1,034		341		2,724
Ending balance	$	2,358	$	2,825	$	3,641	$	1,347	$	10,171

15

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The allocation of the allowance for loan losses and the related loans by major classifications of loans at September 30, 2015 and December 31, 2014 is summarized as follows:

			Real estate
September 30, 2015	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Ending balance	$	2,437	$	3,414	$	4,270	$	1,922	$	$	12,043
Ending balance: individually evaluated for impairment		2,032		269		1,000		179			3,480
Ending balance: collectively evaluated for impairment		405		3,038		3,270		1,743			8,456
Ending balance: loans acquired with deteriorated credit quality	$		$	107	$		$			$	107
Loans receivable:
Ending balance	$	342,937	$	529,499	$	306,740	$	91,369	$	$	1,270,545
Ending balance: individually evaluated for impairment		3,120		5,309		4,829		191			13,449
Ending balance: collectively evaluated for impairment		338,780		522,812		301,857		91,178			1,254,627
Ending balance: loans acquired with deteriorated credit quality		1,037		1,378		54				$	2,469

			Real estate
December 31, 2014	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Ending balance	$	2,321	$	3,037	$	3,690	$	1,290	$	$	10,338
Ending balance: individually evaluated for impairment		1,072		805		767		38			2,682
Ending balance: collectively evaluated for impairment		1,081		2,125		2,921		1,252			7,379
Ending balance: loans acquired with deteriorated credit quality	$	168	$	107	$	2	$			$	277
Loans receivable:
Ending balance	$	319,590	$	493,481	$	322,454	$	74,369	$	$	1,209,894
Ending balance: individually evaluated for impairment		2,595		5,084		4,001		127			11,807
Ending balance: collectively evaluated for impairment		315,642		487,024		318,395	$	74,242			1,195,303
Ending balance: loans acquired with deteriorated credit quality	$	1,353	$	1,373	$	58			$	$	2,784

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

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

· Special Mention- A loan that has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan

16

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

or in the institution’s credit position at some future date. Special Mention loans are not adversely classified since they do not expose the Company to sufficient risk to warrant adverse classification.

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

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

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

The following tables present the major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at September 30, 2015 and December 31, 2014:

			Special
September 30, 2015	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	329,803	$	3,690	$	9,444	$	$	342,937
Real estate:
Commercial		502,017		10,395		17,087			529,499
Residential		295,998		1,438		9,304			306,740
Consumer		91,178				191			91,369
Total	$	1,218,996	$	15,523	$	36,026	$	$	1,270,545

			Special
December 31, 2014	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	306,066	$	6,135	$	7,389	$	$	319,590
Real estate:
Commercial		472,270		9,858		11,353			493,481
Residential		312,086		2,123		8,245			322,454
Consumer		74,250		13		106			74,369
Total	$	1,164,672	$	18,129	$	27,093	$	$	1,209,894

Information concerning nonaccrual loans by major loan classification at September 30, 2015 and December 31, 2014 is summarized as follows:

		September 30, 2015		December 31, 2014
Commercial	$	1,444	$	1,322
Real estate:
Commercial		3,415		3,732
Residential		4,326		3,523
Consumer		190		122
Total	$	9,375	$	8,699

17

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The major classifications of loans by past due status are summarized as follows:

					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
September 30, 2015	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	503	$		$	1,444	$	1,947	$	340,990	$	342,937
Real estate:
Commercial		1,371		908		3,415		5,694		523,805		529,499
Residential		883		631		5,684		7,198		299,542		306,740	$	1,358
Consumer		608		258		463		1,329		90,040		91,369		273
Total	$	3,365	$	1,797	$	11,006	$	16,168	$	1,254,377	$	1,270,545	$	1,631

					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
December 31, 2014	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	898	$	117	$	1,322	$	2,337	$	317,253	$	319,590
Real estate:
Commercial		2,100		888		3,868		6,856		486,625		493,481	$	136
Residential		3,154		1,239		4,585		8,978		313,476		322,454		1,062
Consumer		848		247		547		1,642		72,727		74,369		425
Total	$	7,000	$	2,491	$	10,322	$	19,813	$	1,190,081	$	1,209,894	$	1,623

The following tables summarize information concerning impaired loans as of and for the three and nine months ended September 30, 2015 and September 30, 2014, and as of and for the year ended, December 31, 2014 by major loan classification:

								This Quarter				Year-to-Date
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
September 30, 2015	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance:
Commercial	$	1,561	$	3,024			$	1,610	$	33	$	1,980	$	70
Real estate:
Commercial		2,410		3,102				2,275		25		2,335		72
Residential		2,784		2,967				2,759		1		2,579		3
Consumer												17
Total		6,755		9,093				6,644		59		6,911		145
With an allowance recorded:
Commercial		2,596		2,596	$	2,032		1,954		13		1,675		40
Real estate:
Commercial		4,277		4,277		376		4,797		21		4,389		86
Residential		2,099		2,099		1,000		1,903		7		1,697		24
Consumer		191		191		179		164				116
Total		9,163		9,163		3,587		8,818		41		7,877		150
Commercial		4,157		5,620		2,032		3,564		46		3,655		110
Real estate:
Commercial		6,687		7,379		376		7,072		46		6,724		158
Residential		4,883		5,066		1,000		4,662		8		4,276		27
Consumer		191		191		179		164				133
Total	$	15,918	$	18,256	$	3,587	$	15,462	$	100	$	14,788	$	295

18

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

							For the Year Ended
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2014	Investment		Balance		Allowance		Investment		Recognized
With no related allowance:
Commercial	$	2,379	$	4,084			$	2,669		141
Real estate:
Commercial		2,932		3,690				7,944		120
Residential		2,672		2,857				2,731		4
Consumer		83		83				94
Total		8,066		10,714				13,438		265
With an allowance recorded:
Commercial		1,569		1,569	$	1,240		1,787	$	58
Real estate:
Commercial		3,525		3,525		912		2,293		28
Residential		1,387		1,387		769		590		10
Consumer		44		44		38		10		1
Total		6,525		6,525		2,959		4,680		97
Commercial		3,948		5,653		1,240		4,456		199
Real estate:
Commercial		6,457		7,215		912		10,237		148
Residential		4,059		4,244		769		3,321		14
Consumer		127		127		38		104		1
Total	$	14,591	$	17,239	$	2,959	$	18,118	$	362

								This Quarter				Year-to-Date
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
September 30, 2014	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance:
Commercial	$	2,352	$	4,076			$	2,501		19	$	2,771		71
Real estate:
Commercial		5,275		6,074				7,587		20		9,238		58
Residential		2,629		2,816				2,675		1		2,758		3
Consumer		64		64				81				101
Total		10,320		13,030				12,844		40		14,868		132
With an allowance recorded:
Commercial		1,781		1,781	$	1,163		1,769	$	20		1,825	$	63
Real estate:
Commercial		3,893		3,893		660		2,640		14		1,816		43
Residential		750		750		275		504		4		428		4
Consumer		17		17		17		9				3
Total		6,441		6,441		2,115		4,922		38		4,072		110
Commercial		4,133		5,857		1,163		4,270		39		4,596		134
Real estate:
Commercial		9,168		9,967		660		10,227		34		11,054		101
Residential		3,379		3,566		275		3,179		5		3,186		7
Consumer		81		81		17		90				104
Total	$	16,761	$	19,471	$	2,115	$	17,766	$	78	$	18,940	$	242

Included in the commercial loan and commercial and residential real estate categories are troubled debt restructurings that are classified as impaired. Troubled debt restructurings totaled $2,962 at September 30, 2015, $2,933 at December 31, 2014 and $2,500 at September 30, 2014.

19

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Troubled debt restructured loans are loans with original terms, interest rate, or both, that have been modified as a result of a deterioration in the borrower’s financial condition and a concession has been granted that the Company would not otherwise consider. Unless on nonaccrual, interest income on these loans is recognized when earned, using the interest method. The Company offers a variety of modifications to borrowers that would be considered concessions. The modification categories offered generally fall within the following categories:

· Rate Modification - A modification in which the interest rate is changed to a below market rate.

· Term Modification - A modification in which the maturity date, timing of payments or frequency of payments is changed.

· Interest Only Modification - A modification in which the loan is converted to interest only payments for a period of time.

· Payment Modification - A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

· Combination Modification - Any other type of modification, including the use of multiple categories above.

There were no  loans modified as troubled debt restructurings for the three months ended September 30, 2015 or September 30, 2014. There were eight loans modified as troubled debt restructurings for the nine months ended September 30, 2015, in the amount of $542. There was one loan modified as a troubled debt restructuring for the nine months ended September 30, 2014 in the amount of $2,500. During the three and nine months ended September 30, 2015 and 2014, there were no defaults on loans restructured within the last twelve months.

6. Other assets:

The components of other assets at September 30, 2015, and December 31, 2014 are summarized as follows:

		September 30, 2015		December 31, 2014
Other real estate owned	$	457	$	561
Investment in residential housing program		6,894		4,329
Mortgage servicing rights		514		676
Bank owned life insurance		30,575		29,983
Restricted equity securities		3,344		3,687
Other assets		14,816		13,830
Total	$	56,600	$	53,066

7. Fair value estimates:

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

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

20

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

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

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

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

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

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

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

Cash and cash equivalents: The carrying values of cash and cash equivalents as reported on the balance sheet approximate fair value.

Investment securities: The fair values of U.S. Treasury securities and marketable equity securities are based on quoted market prices from active exchange markets. The fair values of debt securities are based on pricing from a matrix pricing model.

Loans held for sale: The fair values of loans held for sale are based upon current delivery prices in the secondary mortgage market.

Net loans: For adjustable-rate loans that re-price frequently and with no significant credit risk, fair values are based on carrying values. The fair values of other non-impaired loans are estimated using discounted cash flow analysis, using interest rates currently offered in the market for loans with similar terms to borrowers of similar credit risk. Fair values for impaired loans are estimated using discounted cash flow analysis determined by the loan review function or underlying collateral values, where applicable.

Loans acquired in connection with business combinations are recorded at their acquisition date fair value. In order to record the loans at fair value, management made three different types of fair value adjustments. A market rate adjustment was made to adjust for the movement in market interest rates, irrespective of credit adjustments, compared to the stated rates of the acquired loans. A credit adjustment was made on pools of homogeneous loans representing the changes in credit quality of the underlying borrowers from the loan inception to the acquisition date. The credit adjustment on distressed loans represents the portion of the loan balance that has been deemed uncollectible based on the management’s expectations of future cash flows for each respective loan.

21

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Mortgage servicing rights: To determine the fair value, the Company estimates the present value of future cash flows incorporating assumptions such as cost of servicing, discount rates, prepayment speeds and default rates.

Accrued interest receivable: The carrying value of accrued interest receivable as reported on the balance sheet approximates fair value.

Restricted equity securities: The carrying values of restricted equity securities approximate fair value, due to the lack of marketability for these securities.

Deposits: The fair values of noninterest-bearing deposits and savings, NOW and money market accounts are the amounts payable on demand at the reporting date. The fair value estimates do not include the benefit that results from such low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. The carrying values of adjustable-rate, fixed-term time deposits approximate their fair values at the reporting date. For fixed-rate time deposits, the present value of future cash flows is used to estimate fair values. The discount rates used are the current rates offered for time deposits with similar maturities.

The fair value assigned to the core deposit intangible asset represents the future economic benefit of the potential cost savings from acquiring core deposits in the 2013 Penseco merger compared to the cost of obtaining alternative funding such as brokered deposits from market sources. Management utilized an income valuation approach to present value the estimated future cash savings in order to determine the fair value of the intangible asset.

Short-term borrowings: The carrying values of short-term borrowings approximate fair value.

Long-term debt: The fair value of fixed-rate long-term debt is based on the present value of future cash flows. The discount rate used is the current rate offered for long-term debt with the same maturity.

Accrued interest payable: The carrying value of accrued interest payable as reported on the balance sheet approximates fair value.

Off-balance sheet financial instruments:

The majority of commitments to extend credit, unused portions of lines of credit and standby letters of credit carry current market interest rates if converted to loans. Because such commitments are generally unassignable of either the Company or the borrower, they only have value to the Company and the borrower. None of the commitments are subject to undue credit risk. The estimated fair values of off-balance sheet financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of off-balance sheet financial instruments was not material at September 30, 2015 and December 31, 2014.

22

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Assets and liabilities measured at fair value on a recurring basis at September 30, 2015 and December 31, 2014 are summarized as follows:

	Fair Value Measurement Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
September 30, 2015	Amount		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury securities	$	16,067	$	16,067			$
U.S. Government-sponsored enterprises		79,623		-	$	79,623		-
State and Municipals:
Taxable		16,731		-		16,731		-
Tax-exempt		116,809		-		116,809		-
Mortgage-backed securities:
U.S. Government agencies		34,194		-		34,194		-
U.S. Government-sponsored enterprises		36,408		-		36,408		-
Total	$	299,832	$	16,067	$	283,765	$	—

	Fair Value Measurement Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
December 31, 2014	Amount		(Level 1)		(Level 2)		(Level 3)
U.S. Government-sponsored enterprises	$	48,550		48,550	$		$
U.S. Government-sponsored enterprises		96,245				96,245
State and Municipals:
Taxable		17,407				17,407
Tax-exempt		92,901				92,901
Mortgage-backed securities:
U.S. Government agencies		37,476				37,476
U.S. Government-sponsored enterprises		47,007				47,007
Total	$	339,586	$	48,550	$	291,036	$

Assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014 are summarized as follows:

	Fair Value Measurement Using
			Quoted Prices in	Significant	Significant
			Active Markets for	Other Observable	Unobservable
			Identical Assets	Inputs	Inputs
September 30, 2015	Amount		(Level 1)	(Level 2)	(Level 3)
Impaired loans	$	7,031			$	7,031
Other real estate owned	$	348			$	348

	Fair Value Measurement Using
			Quoted Prices in	Significant Other	Significant
			Active Markets for	Observable	Unobservable
			Identical Assets	Inputs	Inputs
December 31, 2014	Amount		(Level 1)	(Level 2)	(Level 3)
Impaired loans	$	4,414			$	4,414
Other real estate owned	$	218			$	218

Fair values of impaired loans are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

23

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value				Range
September 30, 2015	Estimate		Valuation Techniques	Unobservable Input	(Weighted Average)
Impaired loans	$	7,031	Appraisal of collateral	Appraisal adjustments	3.0% to 77.0%(58.0)%
				Liquidation expenses	3.0% to 6.0%(5.4)%
Other real estate owned	$	348	Appraisal of collateral	Appraisal adjustments	20.0% to 77.9%(42.4)%
				Liquidation expenses	3.0% to 6.0%(5.0)%

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value				Range
December 31, 2014	Estimate		Valuation Techniques	Unobservable Input	(Weighted Average)
Impaired loans	$	4,414	Appraisal of collateral	Appraisal adjustments	2.6% to 61.1%(24.5)%
				Liquidation expenses	3.0% to 6.0%(5.5)%
Other real estate owned	$	218	Appraisal of collateral	Appraisal adjustments	19.7% to 47.8%(30.5)%
				Liquidation expenses	3.0% to 6.0%(5.0)%

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

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

The carrying and fair values of the Company’s financial instruments at September 30, 2015 and December 31, 2014 and their placement within the fair value hierarchy are as follows:

					Fair Value Hierarchy
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
September 30, 2015	Value		Value		(level 1)		(level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	40,985	$	40,985	$	40,985
Investment securities:
Available-for-sale		299,832		299,832	$	16,067	$	283,765
Held-to-maturity		13,107		13,582				13,582
Loans held for sale		3,439		3,445				3,445
Net loans		1,258,502		1,271,728					$	1,271,728
Accrued interest receivable		5,327		5,327				5,327
Mortgage servicing rights		514		1,114				1,114
Restricted equity securities		3,344		3,344				3,344
Total	$	1,625,050	$	1,639,357
Financial liabilities:
Deposits	$	1,444,650	$	1,446,393				1,446,393
Short-term borrowings		30,250		30,250				30,250
Long-term debt		31,000		32,614				32,614
Accrued interest payable		496		496			$	496
Total	$	1,506,396	$	1,509,753

24

Peoples Financial Services Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

					Fair Value Hierarchy
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
December 31, 2014	Value		Value		(level 1)		(level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	31,426	$	31,426	$	31,426
Investment securities:
Available-for-sale		339,586		339,586	$	48,550	$	291,036
Held-to-maturity		14,665		15,215				15,215
Loans held for sale		3,486		3,492				3,492
Net loans		1,199,556		1,210,369					$	1,210,369
Accrued interest receivable		5,580		5,580				5,580
Mortgage servicing rights		676		1,466				1,466
Restricted equity securities		3,687		3,687				3,687
Total	$	1,598,662	$	1,610,821
Financial liabilities:
Deposits	$	1,425,558	$	1,427,081				1,427,081
Short-term borrowings		19,557		19,557				19,557
Long-term debt		33,140		34,772				34,772
Accrued interest payable		574		574			$	574
Total	$	1,478,829	$	1,481,984

8. Employee benefit plans:

The Company provides an Employee Stock Ownership Plan (“ESOP”) and a Retirement Profit Sharing Plan. The Company also maintains a Supplemental Executive Retirement Plan (“SERP”), an Employees’ Pension Plan, which is currently frozen, and a Postretirement Plan Life Insurance plan which was curtailed in 2013.

For the three and nine months ended September 30, salaries and employee benefits expense includes approximately $368 and $820 in 2015 and $581 and $1,744 in 2014 relating to the employee benefit plans.

Components of net periodic benefit cost are as follows:

	Postretirement Life
	Insurance Benefits
	Pension Benefits
Three Months Ended September 30,	2015		2014
Components of net periodic pension cost:
Service cost	$	174	$	169
Interest cost		(233)		(227)
Amortization of unrecognized net gain		50		23
Net periodic other benefit cost	$	(9)	$	(35)
	Pension Benefits
Nine Months Ended September 30,	2015		2014
Components of net periodic pension cost:
Service cost	$	522	$	507
Interest cost		(699)		(681)
Amortization of unrecognized net gain		150		69
Net periodic other benefit cost	$	(27)	$	(105)

25

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

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

The following discussion and analysis should be read in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report, and with our audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our Annual Report on Form 10-K for the year ended December 31, 2014.

Cautionary Note Regarding Forward-Looking Statements:

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties. These statements are based on assumptions and may describe future plans, strategies and expectations of Peoples Financial Services Corp. and its direct and indirect subsidiaries. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. All statements in this report, other than statements of historical facts, are forward-looking statements.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Important factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to: our ability to achieve the intended benefits of the 2013 merger with Penseco Financial Services Corporation or other risks associated with business combinations; changes in interest rates; economic conditions, particularly in our market area; legislative and regulatory changes and the ability to comply with the significant laws and regulations governing the banking and financial services business; monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of Treasury and the Federal Reserve System; credit risk associated with lending activities and changes in the quality and composition of our loan and investment portfolios; demand for loan and other products; deposit flows; competition; changes in the values of real estate and other collateral securing the loan portfolio, particularly in our market area; changes in relevant accounting principles and guidelines; and inability of third party service providers to perform. Additional factors that may affect our results are discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014, and in reports we file with the Securities and Exchange Commission from time to time.

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

Notes to the Consolidated Financial Statements referred to in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are incorporated by reference into the MD&A. Certain prior period amounts may have been reclassified to conform with the current year’s presentation. Any reclassifications did not have any effect on the operating results or financial position of the Company.

Critical Accounting Policies:

Disclosure of our significant accounting policies are included in Note 1 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2014. Some of these policies are particularly sensitive requiring significant judgments, estimates and assumptions.

Operating Environment:

The Federal Open Market Committee (“FOMC”) was expected to begin to raise the federal funds rate starting late in the third quarter of 2015. That time has come and passed and the FOMC did not start the tightening of monetary policy. The FOMC noted improvement in labor markets, and modest improvements to household spending and business fixed investment. Further improvement to the unemployment rate and labor markets were also cited within the minutes of the September FOMC meeting. However, gross domestic product (“GDP”), the value of all goods and services produced in the Nation, grew at an annual rate of 1.5% for the third quarter of 2015, down from 3.9% for the second quarter of 2015 while the consumer price index (“CPI”) increased only moderately for the 12 months ended September 2015 at 1.9%.

26

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

Review of Financial Position:

Total assets increased $31,101, or 2.4% annualized, to $1,772,770 at September 30, 2015, from $1,741,669 at December 31, 2014. Loans, net increased to $1,270,545 at September 30, 2015, compared to $1,209,894 at December 31, 2014, an increase of $60,651 or 6.7% annualized. The increase in loans, net during 2015 has been funded through a decrease in investment securities available-for-sale and an increase in deposits. Investment securities decreased $41,312 or 11.7% in 2015. Interest-bearing deposits increased $28,849, while noninterest-bearing deposits decreased $9,757. Total stockholders’ equity increased $5,309 or at an annual rate of 2.9%, from $246,779 at year-end 2014 to $252,088 at September 30, 2015. In the third quarter of 2015, total assets increased $25,015 or 1.4% while loans, net increased $39,004 or 3.2% and deposits increased $19,883 or 1.4%. For the nine months ended September 30, 2015, total assets averaged $1,730,193, an increase of $19,097 from $1,711,096 for the same period of 2014.

Investment Portfolio:

The majority of the investment portfolio is held as available-for-sale, which allows for greater flexibility in using the investment portfolio for liquidity purposes by allowing securities to be sold when market opportunities occur. Investment securities available-for-sale totaled $299,832 at September 30, 2015, a decrease of $39,754, or 11.7% from $339,586 at December 31, 2014. The decrease was primarily a result of the sale of U.S. Treasury securities in response to changes in the slope of the yield curve and in order to fund loan demand. Investment securities held-to-maturity totaled $13,107 at September 30, 2015, a decrease of $1,558 or 10.6% from $14,665 at December 31, 2014 due to payments received from mortgage backed holdings. For the three months ended September 30, 2015, total investments decreased $19,477 resulting primarily from the sale of U.S. Treasury securities.

For the nine months ended September 30, 2015, the investment portfolio averaged $314,919, a decrease of $16,292 or 4.9% compared to $331,211 for the same period last year. The tax-equivalent yield on the investment portfolio remained the same at 2.70% for the nine months ended September 30, 2015, compared to the same period of 2014. The tax-equivalent yield decreased from 2.74% in the second quarter of 2015 to 2.60% in the third quarter of 2015.

Securities available-for-sale are carried at fair value, with unrealized gains or losses net of deferred income taxes reported in the accumulated other comprehensive income (loss) component of stockholders’ equity. We reported net unrealized holding gains, included as a separate component of stockholders’ equity of $3,541, net of deferred income taxes of $1,906, at September 30, 2015, and $4,090, net of deferred income taxes of $2,202, at December 31, 2014.

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

Loan Portfolio:

Loans, net increased for the third quarter of 2015, and the nine month period ended September 30, 2015. Loans, net increased to $1,270,545 at September 30, 2015 from $1,209,894 at December 31, 2014, an increase of $60,651 or 6.7% annualized. The growth reflected increases in commercial loans, commercial real estate loans and consumer loans, partially offset by a decrease inresidential real estate loans. Commercial loans increased $23,347, or 9.8% annualized, to $342,937 at September 30, 2015 compared to $319,590 at December 31, 2014. Commercial real estate loans increased $36,018 or 9.8% annualized, to $529,499 at September 30, 2015 compared to $493,481 at December 31, 2014. Consumer loans increased $17,000, or 30.6% on an annualized basis, to $91,369 at September 30, 2015 compared to $74,369 at December 31, 2014. The primary contributor to the growth in consumer loans was indirect loans which have increased $20,585.

Residential real estate loans decreased $15,714, or 6.5% on an annualized basis, to $306,740 at September 30, 2015 compared to $322,454 at December 31, 2014. In lieu of carrying residential loans in portfolio, the bank is originating more loans held for sale through the first nine months in 2015. Residential loans originated thus far in 2015 classified as held for sale totaled $20,664 compared to $7,346 for the same period in 2014. For the quarter ended September 30, 2015, loans, net in aggregate increased $39,004. Increases in commercial loans of $20,519, commercial real estate loans of $17,664 and consumer loans of $6,648 were offset by a decrease in residential mortgages of $5,827.

27

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

For the nine months ended September 30, 2015, loans, net averaged $1,237,401, an increase of $53,008 or 4.5% compared to $1,184,393 for the same period of 2014. The tax-equivalent yield on the loan portfolio was 4.61% for the nine months ended September 30, 2015, a 30 basis point decrease from the comparable period last year. Loan accretion income in the first nine months of 2015 and 2014, which we recognized as a result of the 2013 Penseco merger, was $475 and $1,900. As a result, the tax-equivalent yield on the loan portfolio would have decreased 14 basis points comparing the nine month ended September 30, 2015 and 2014. The tax-equivalent yield on the loan portfolio decreased 11 basis points in the third quarter of 2015 to 4.52% from 4.63% in the second quarter of 2015.

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

Unused commitments at September 30, 2015, totaled $316,036, consisting of $296,203 in unfunded commitments of existing loan facilities and $19,833 in standby letters of credit. Due to fixed maturity dates, specified conditions within these instruments, and the ultimate needs of our customers, many will expire without being drawn upon. We believe that amounts actually drawn upon can be funded in the normal course of operations and therefore, do not represent a significant liquidity risk to us. In comparison, unused commitments at December 31, 2014 totaled $266,570, consisting of $235,961 in unfunded commitments of existing loans and $30,609 in standby letters of credit.

Asset Quality:

National, Pennsylvania, New York and market area unemployment rates at September 30, 2015 and 2014, are summarized as follows:

	September 30, 2015		September 30, 2014
United States	4.9	%	5.7	%
Pennsylvania (statewide)	4.9		5.1
Lackawanna County	6.0		5.7
Lehigh county	5.6		5.3
Luzerne County	6.6		6.2
Monroe County	6.5		6.6
Susquehanna County	5.2		4.8
Wayne County	5.0		5.1
Wyoming County	5.9		5.7
New York (statewide)	4.8		5.8
Broome County	5.5	%	6.1	%

The employment conditions improved for the Nation, Pennsylvania, and New York but in only three of the seven counties representing our market areas in Pennsylvania and New York from one year ago. Unemployment rates remained elevated relative to historical levels within many of our market areas.

Our asset quality weakened slightly in 2015. Nonperforming assets increased $852 or 7.8% to $11,735 at September 30, 2015, from $10,883 at December 31, 2014. We experienced an increase in nonaccrual and restructured loans and accruing loans past due 90 days or more, which was only partially offset by a decline in other real estate owned. As a percentage of loans, net and foreclosed assets, nonperforming assets equaled 0.92% at September 30, 2015 compared to 0.90% at December 31, 2014.

Loans on nonaccrual status increased $676 to $9,375 at September 30, 2015 from $8,699 at December 31, 2014. The majority of the increase from year end was due to an increase of $803 in residential real estate loans and $122 in commercial loans on nonaccrual status. Nonaccrual commercial real estate loans decreased $317 while nonaccrual consumer loans increased $68. Other real estate owned decreased $104 to $457 at September 30, 2015 from $561 at December 31, 2014.

28

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

For the three months ended September 30, 2015, nonperforming assets increased to $11,735 from $10,549 at June 30, 2015. Increases in nonaccrual and restructured loans of $503, accruing loans past due 90 days or more of $559 and other real estate owned of $124 accounted for the change.

Generally, maintaining a high loan to deposit ratio is our primary goal in order to maximize profitability. However, this objective is superseded by our attempts to assure that asset quality remains strong. We continued our efforts to maintain sound underwriting standards for both commercial and consumer credit. Most commercial lending is done primarily with locally owned small businesses.

We maintain the allowance for loan losses at a level we believe adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred loan losses inherent in the remainder of the loan portfolio as of the balance sheet date. The allowance for loan losses is based on past events and current economic conditions. We employ the Federal Financial Institutions Examination Council Interagency Policy Statement, as amended December 13, 2006, and GAAP in assessing the adequacy of the allowance account. Under GAAP, the adequacy of the allowance account is determined based on the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310, “Receivables,” for loans specifically identified to be individually evaluated for impairment and the requirements of FASB ASC 450, “Contingencies,” for large groups of smaller-balance homogeneous loans to be collectively evaluated for impairment.

We follow our systematic methodology in accordance with procedural discipline by applying it in the same manner regardless of whether the allowance is being determined at a high point or a low point in the economic cycle. Each quarter, loan review identifies those loans to be individually evaluated for impairment and those loans collectively evaluated for impairment utilizing a standard criteria. Internal loan review grades are assigned quarterly to loans identified to be individually evaluated. A loan’s grade may differ from period to period based on current conditions and events, however, we consistently utilize the same grading system each quarter. We consistently use loss experience from the latest twelve quarters in determining the historical loss factor for each pool collectively evaluated for impairment. Qualitative factors are evaluated in the same manner each quarter and are adjusted within a relevant range of values based on current conditions. For additional disclosure related to the allowance for loan losses refer to the note entitled, “Loans, net and Allowance for Loan Losses,” in the Notes to Consolidated Financial Statements to this Quarterly Report.

The allowance for loan losses increased $1,705 to $12,043 at September 30, 2015, from $10,338 at the end of 2014. For the nine months ended September 30, 2015, net charge-offs were $695 or 0.08% of average loans outstanding, a $509 decrease compared to $1,204 or 0.14% of average loans outstanding in the same period of 2014. Net charge-offs were $285 or 0.09% of average loans outstanding in the third quarter of 2015, a $168 increase compared to $117 or 0.04% of average loans outstanding in the third quarter of 2014.

Deposits:

We attract the majority of our deposits from within our eight county market area that stretches from the Lehigh Valley in Pennsylvania to Broome County in the Southern Tier of New York State through the offering of various deposit instruments including demand deposit accounts, NOW accounts, money market deposit accounts, savings accounts, and time deposits, including certificates of deposit and IRA’s. For the nine months ended September 30, 2015, total deposits increased to $1,444,650 from $1,425,558 at December 31, 2014. Interest-bearing deposits increased $28,849 while noninterest-bearing deposits declined $9,757. Interest-bearing transaction accounts, including NOW and money market accounts, increased $30,136, or 8.9% annualized, to $482,502 at September 30, 2015, from $452,366 at December 31, 2014.Time deposits less than $100 increased $7,376, or 5.1% annualized, to $199,266 at September 30, 2015, from $191,890 at December 31, 2014. Declines in savings accounts of $4,259 and time deposits $100 or more of $4,404 were recorded in the nine months ended September 30, 2015.

For the three months ended September 30, 2015, total deposits increased $19,883 or 5.5% annualized. Growth in interest-bearing and noninterest-bearing demand deposits, time deposits less than $100and time deposits of $100 or more, more than offset declines in savings deposits.

29

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

For the nine months ended September 30, 2015 interest-bearing deposits averaged $1,124,689 in 2015 compared to $1,118,101 in 2014. The cost of interest-bearing deposits was 0.44% in 2015 compared to 0.49% for the same period last year. For the first nine months, the overall cost of interest-bearing liabilities including the cost of borrowed funds, was 0.51% in 2015 compared to 0.58% in 2014. The cost of interest-bearing liabilities did not change when comparing the second and third quarters of 2015.

Borrowings:

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

Total short-term borrowings at September 30, 2015, totaled $30,250 compared to $19,557 at December 31, 2014, an increase of $10,693. Long-term debt was $31,000 at September 30, 2015, compared to $33,140 at year end 2014. The increase in short-term borrowing was a function of strong loan demand whereas the decline in long-term debt was a product of monthly contractual amortized payments made during the nine months ended September 30, 2015.

Market Risk Sensitivity:

Market risk is the risk to our earnings or financial position resulting from adverse changes in market rates or prices, such as interest rates, foreign exchange rates or equity prices. Our exposure to market risk is primarily “IRR” associated with our lending, investing and deposit-gathering activities. During the normal course of business, we are not exposed to foreign exchange risk or commodity price risk. Our exposure to IRR can be explained as the potential for change in our reported earnings and/or the market value of our net worth. Variations in interest rates affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. Interest rate changes also affect the underlying economic value of our assets, liabilities and off-balance sheet items. These changes arise because the present value of future cash flows, and often the cash flows themselves, change with interest rates. The effects of the changes in these present values reflect the change in our underlying economic value and provide a basis for the expected change in future earnings related to interest rates. IRR is inherent in the role of banks as financial intermediaries. However, a bank with a high degree of IRR may experience lower earnings, impaired liquidity and capital positions, and most likely, a greater risk of insolvency. Therefore, banks must carefully evaluate IRR to promote safety and soundness in their activities.

As a result of economic uncertainty and a prolonged era of historically low market rates, it has become challenging to manage IRR. Due to these factors, IRR and effectively managing it are very important to both bank management and regulators. Bank regulations require us to develop and maintain an IRR management program, overseen by the Board of Directors and senior management, that involves a comprehensive risk management process in order to effectively identify, measure, monitor and control risk. Should bank regulatory agencies identify a material weakness in our risk management process or high exposure relative to our capital, bank regulatory agencies may take action to remedy these shortcomings. Moreover, the level of IRR exposure and the quality of our risk management process is a determining factor when evaluating capital adequacy.

The ALCO, comprised of members of our Board of Directors, senior management and other appropriate officers, oversees our IRR management program. Specifically, ALCO analyzes economic data and market interest rate trends, as well as competitive pressures, and utilizes computerized modeling techniques to reveal potential exposure to IRR. This allows us to monitor and attempt to control the influence these factors may have on our rate-sensitive assets (“RSA”) and rate-sensitive liabilities (“RSL”), and overall operating results and financial position. One such technique utilizes a static gap model that considers repricing frequencies of RSA and RSL in order to monitor IRR. Gap analysis attempts to measure our interest rate exposure by calculating the net amount of RSA and RSL that reprice within specific time intervals. A positive gap occurs when the amount of RSA repricing in a specific period is greater than the amount of RSL repricing within that same time frame and is indicated by a RSA/RSL ratio greater than 1.0. A negative gap occurs when the amount of RSL repricing is greater than the amount of RSA and is indicated by a RSA/RSL ratio of less than 1.0. A positive gap implies that earnings will be impacted favorably if interest rates rise and adversely if interest rates fall during the period. A negative gap tends to indicate that earnings will be affected inversely to interest rate changes.

30

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

Our cumulative one-year RSA/RSL ratio equaled 2.14% at September 30, 2015. Given the length of time that market rates have been at historical lows and the potential for rates to increase in the future, the focus of ALCO has been to create a positive static gap position. With regard to RSA, we predominantly offer medium- term, fixed-rate loans as well as adjustable rate loans. With respect to RSL, we offer longer term promotional certificates of deposit in an attempt to increase duration. The current position at September 30, 2015, indicates that the amount of RSA repricing within one year would exceed that of RSL, thereby causing increases in market rates, to increase net interest income. However, these forward-looking statements are qualified in the aforementioned section entitled “Forward-Looking Discussion” in this Management’s Discussion and Analysis.

Static gap analysis, although a standard measuring tool, does not fully illustrate the impact of interest rate changes on future earnings. First, market rate changes normally do not equally or simultaneously affect all categories of assets and liabilities. Second, assets and liabilities that can contractually reprice within the same period may not do so at the same time or to the same magnitude. Third, the interest rate sensitivity table presents a one-day position. Variations occur daily as we adjust our rate sensitivity throughout the year. Finally, assumptions must be made in constructing such a table.

As the static gap report fails to address the dynamic changes in the balance sheet composition or prevailing interest rates, we utilize a simulation model to enhance our asset/liability management. This model is used to create pro forma net interest income scenarios under various interest rate shocks. Model results at September 30, 2015, produced results similar to those indicated by the one-year static gap position. In addition, parallel and instantaneous shifts in interest rates under various interest rate shocks resulted in changes in net interest income that were well within ALCO policy limits. We will continue to monitor our IRR throughout 2015 and endeavor to employ deposit and loan pricing strategies and direct the reinvestment of loan and investment repayments in order to manage our IRR position.

Financial institutions are affected differently by inflation than commercial and industrial companies that have significant investments in fixed assets and inventories. Most of our assets are monetary in nature and change correspondingly with variations in the inflation rate. It is difficult to precisely measure the impact inflation has on us, however we believe that our exposure to inflation can be mitigated through asset/liability management.

Liquidity:

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

· Funding new and existing loan commitments;

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

· Repayment of borrowings as they mature;

· Payment of lease obligations; and

· Payment of operating expenses.

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

Historically, core deposits have been the primary source of liquidity because of their stability and lower cost, in general, than other types of funding. Providing additional sources of funds are loan and investment payments and prepayments and the ability to sell both available for sale securities and mortgage loans held for sale. We believe liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis.

We employ a number of analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to determine the extent of our reliance on noncore funds to fund our investments and loans

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Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

maturing after September 30, 2015. Our noncore funds at September 30, 2015, were comprised of time deposits in denominations of $100 or more and other borrowings. These funds are not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly volatile. At September 30, 2015, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was 8.9%, while our net short-term noncore funding dependence ratio, noncore funds maturing within one-year, less short-term investments to long-term assets equaled 3.8%. Comparatively, our overall noncore dependence ratio at year-end 2014 was 8.5% and our net short-term noncore funding dependence ratio was 3.0% at year-end, indicating that our reliance on noncore funds has increased slightly.

The Consolidated Statements of Cash Flows present the changes in cash and cash equivalents from operating, investing and financing activities. Cash and cash equivalents, consisting of cash on hand, cash items in the process of collection, deposit balances with other banks and federal funds sold, increased $9,559 during the nine months ended September 30, 2015. Cash and cash equivalents decreased $17,099 for the same period last year. For the nine months ended September 30, 2015, net cash inflows of $15,172 from operating activities and $20,135 from financing activities were partially offset by net cash outflows of $25,748 from investing activities. For the same period of 2014, net cash inflows of $14,846 from operating activities and $21,463 from financing activities were more than offset by net cash outflows of $53,408 from investing activities.

Operating activities provided net cash of $15,172 for the nine months ended September 30, 2015, and $14,846 for the corresponding nine months of 2014. Net income, adjusted for the effects of gains and losses along with noncash transactions such as depreciation and the provision for loan losses, is the primary source of funds from operations.

Investing activities primarily include transactions related to our lending activities and investment portfolio. Investing activities used net cash of $25,748 for the nine months ended September 30, 2015, compared to $53,408 for the same period of 2014. In 2015, an increase in lending activities was the primary factor causing the net cash outflow from investing activities. Investment portfolio activities was the predominant factor causing the net cash outflow from investing activities in 2014.

Financing activities provided net cash of $20,135 for the nine months ended September 30, 2015, and provided net cash of $21,463 for the corresponding nine months of 2014. Deposit gathering is our predominant financing activity. Deposits increased for both the nine months ended September 30, 2015 and 2014. The net increase in deposits totaled $19,619 in the nine months ended September 30, 2015. Comparatively, deposit gathering provided net cash of $46,939 for the same period of 2014. We continued to attract deposits from new and existing customers, including municipalities and school districts, as well as deposits gathered in relation to natural gas activity within existing markets in Susquehanna and Wyoming Counties of Pennsylvania.

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

Capital:

Stockholders’ equity totaled $252,088 or $33.53 per share at September 30, 2015, compared to $246,779 or $32.69 per share at December 31, 2014. Net income of $13,884 for the nine months ended September 30, 2015 was the primary factor leading to the improved capital position. Stockholders’ equity was also affected by cash dividends declared of $7,016, shares retired of $1,062, stock based compensation of $52, and an other comprehensive loss resulting from market value fluctuations in the investment portfolio of $549.

Dividends declared equaled $0.93 per share in 2015 and 2014. The dividend payout ratio was 50.5% for the nine months ended September 30, 2015 and 52.8% for the same period of 2014. The merger agreement pursuant to which we merged with Penseco in 2013 contemplates that, unless 80 percent of our board of directors determines otherwise, we will pay a quarterly cash dividend in an amount no less than $0.31 per share through 2018, provided that sufficient funds are legally available, and that Peoples and Peoples Bank remain “Well-capitalized” in accordance with applicable regulatory guidelines. It is the intention of the Board of Directors to continue to pay cash dividends in the future. However, these

32

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

decisions are affected by operating results, financial and economic decisions, capital and growth objectives, appropriate dividend restrictions and other relevant factors.

In July 2013, the Board of Directors of the FRB approved the Basel III interim final rule (“Basel III”) which is intended to strengthen the quality and increase the required level of regulatory capital for a more stable and resilient banking system. The changes include: (i) a new regulatory capital measure, Common Equity Tier 1 (“CET1”), which is limited to capital elements of the highest quality; (ii) a new definition and increase of tier 1 capital which is now comprised of CET1 and Additional Tier 1; (iii) changes in calculation of some risk-weighted assets and off-balance sheet exposure; and (iv) a capital conservation buffer that will limit capital distributions, stock redemptions, and certain discretionary bonus payments if the institution does not maintain capital in excess of the minimum capital requirements. These new capital rules took effect for our Bank on January 1, 2015 and reporting began with the March 31, 2015 call report.

The adequacy of capital is reviewed on an ongoing basis with reference to the size, composition and quality of resources and regulatory guidelines. We seek to maintain a level of capital sufficient to support existing assets and anticipated asset growth, maintain favorable access to capital markets, and preserve high quality credit ratings. At September 30, 2015, the Bank’s Tier 1 capital to total average assets was 10.86% as compared to 10.42% at December 31, 2014. The Bank’s Tier 1 capital to risk weighted asset ratio was 13.92% and the total capital to risk weighted asset ratio was 14.84% at September 30, 2015. These ratios were 14.28% and 15.15% at December 31, 2014. The Bank’s common equity Tier 1 to risk weighted asset ratio was 13.92% at September 30, 2015. The Bank was deemed to be well-capitalized under regulatory standards at September 30, 2015.

Review of Financial Performance:

Net income for the third quarter of 2015 equaled $4,409 or $0.58 per share compared to $5,236 or $0.70 per share for the third quarter of 2014. Return on average assets (“ROA”) measures our net income in relation to total assets. Our ROA was 1.00% for the third quarter of 2015 compared to 1.20% for the same period of 2014. Return on average equity (“ROE”) indicates how effectively we can generate net income on the capital invested by stockholders. Our ROE was 7.00% for the third quarter of 2015 compared to 8.49% for the third quarter of 2014. Net income for the nine months ended September 30, 2015 equaled $13,884 or $1.84 per share compared to $13,265 or $1.76 per share for the same period of 2014. Our ROA and ROE were 1.07% and 7.47% through nine months in 2015 compared to 1.04% and 7.37% for the same period of 2014. Gains on sale of investment securities were $979 for the nine months ended September 30, 2015 and $861 for the comparable period in 2014. The results for the nine months ended September 30, 2014 included pre-tax acquisition related expenses of $1,725.

Net Interest Income:

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

· Variations in the volume, rate and composition of earning assets and interest-bearing liabilities;

· Changes in general market rates; and

· The level of nonperforming assets.

Changes in net interest income are measured by the net interest spread and net interest margin. Net interest spread, the difference between the average yield earned on earning assets and the average rate incurred on interest-bearing liabilities, illustrates the effects changing interest rates have on profitability. Net interest margin, net interest income as a percentage of earning assets, is a more comprehensive ratio, as it reflects not only the spread, but also the change in the composition of interest-earning assets and interest-bearing liabilities. Tax-exempt loans and investments carry pre-tax yields lower than their taxable counterparts. Therefore, in order to make the analysis of net interest income more comparable, tax-exempt income and yields are reported herein on a tax-equivalent basis using the prevailing federal statutory tax rate of 35.0% in 2015 and 2014.

33

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

For the three months ended September 30, tax-equivalent net interest income decreased $349 to $14,891 in 2015 from $15,240 in 2014. The net interest spread decreased to 3.61% for the three months ended September 30, 2015 from 3.69% for the three months ended September 30, 2014. The tax-equivalent net interest margin decreased to 3.74% for the third quarter of 2015 from 3.84% for the comparable period of 2014. The tax-equivalent net interest margin for the second quarter of 2015 was 3.84%. Loan accretion in the third quarter of 2015 related to loans acquired in the 2013 Penseco merger was $128, resulting in an increase in the tax-equivalent net interest margin of 4 basis points. Comparatively, loan interest recognized on these loans in the third quarter of 2014 was $470 resulting in an increase in the tax-equivalent net interest margin of 12 basis points. Without such interest income, the tax equivalent net interest margin for the three months ended September 30 would have been 3.70% in 2015 and 3.72% in 2014.

For the three months ended September 30, tax-equivalent interest income on earning assets decreased $506, to $16,376 in 2015 as compared to $16,882 in 2014. The overall yield on earning assets, on a fully tax-equivalent basis, decreased 14 basis points for the three months ended September 30, 2015 at 4.11% as compared to 4.25% for the three months ended September 30, 2014. The decrease in the yield on earning assets resulted from lower yielding assets replacing higher yielding assets as the result of loan growth and payments and maturities of the higher yielding assets. The overall yield earned on loans decreased 37 basis points for the third quarter of 2015 to 4.52% from 4.89% for the third quarter of 2014. Average loans increased to $1,250,736 for the quarter ended September 30, 2015 compared to $1,184,102 for the same period in 2014. The resulting tax-equivalent interest earned on loans was $14,242 for the three month period ended September 30, 2015 compared to $14,591 for the same period in 2014, a decrease of $349.

Total interest expense decreased $157, to $1,485 for the three months ended September 30, 2015 from $1,642 for the three months ended September 30, 2014. A favorable rate variance caused the decrease. An increase in the average volume of interest bearing liabilities of $12,536 was more than offset by a 6 basis point decrease in the cost of funds comparing the three months ended September 30, 2015 and 2014.

For the nine months ended September 30, tax-equivalent net interest income decreased $577 to $44,664 in 2015 from $45,241 in 2014. The net interest spread decreased to 3.69% for the nine months ended September 30, 2015 from 3.73% for the nine months ended September 30, 2014. The tax-equivalent net interest margin for the nine months ended September 30 was 3.82% in 2015 compared to 3.88% in 2014. Loan interest income in the nine months ended September 30, 2015 related to loans acquired in the fourth quarter of 2013 was $475, resulting in an increase in the tax-equivalent net interest margin of 4 basis points. Comparatively, loan interest income on these loans recognized in the nine months of 2014 was $1,900 resulting in an increase in the tax-equivalent net interest margin of 16 basis points. Without such interest income, the tax equivalent net interest margin for the nine months ended September 30 would have been 3.78% in 2015 and 3.72% in 2014.

For the nine months ended September 30, 2015, tax-equivalent interest income decreased $1,165, to $49,132 as compared to $50,297 for the nine months ended September 30, 2014. A volume variance attributable to changes in the average volume of earning assets over interest-bearing liabilities was more than offset by an unfavorable rate variance due to a greater reduction in the yield on earning assets compared to the cost of funds.

Average earning assets grew $5,258 compared to a decrease in average interest-bearing liabilities of $4,394 comparing the nine months ended September 30, 2015 and 2014. The yield on earning assets decreased 11 basis points as compared to a 7 basis point drop in fund costs.

The average balances of assets and liabilities, corresponding interest income and expense and resulting average yields or rates paid are summarized as follows. Averages for earning assets include nonaccrual loans. Investment averages include

34

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

available-for-sale securities at amortized cost. Income on investment securities and loans is adjusted to a tax equivalent basis using the prevailing federal statutory tax rate of 35%.

	Nine months ended
	September 2015						September 2014
	Average		Interest Income/		Yield/		Average		Interest Income/		Yield/
	Balance		Interest		Rate		Balance		Interest		Rate
Assets:
Earning assets:
Loans:
Taxable	$	1,165,215	$	40,072	4.60	%	$	1,116,432	$	41,035	4.91	%
Tax-exempt		72,186		2,638	4.89			67,961		2,472	4.86
Investments:
Taxable		210,439		2,507	1.59			231,457		2,909	1.68
Tax-exempt		104,480		3,843	4.92			99,754		3,788	5.08
Interest-bearing deposits		6,473		63	1.30			5,843		29	0.66
Federal funds sold		4,987		9	0.24			37,081		64	0.23
Total earning assets		1,563,780		49,132	4.20	%		1,558,528		50,297	4.31	%
Less: allowance for loan losses		11,028						9,162
Other assets		177,441						161,730
Total assets	$	1,730,193					$	1,711,096
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Money market accounts	$	197,112		485	0.33	%	$	213,230		596	0.37	%
NOW accounts		267,797		726	0.36			225,328		577	0.34
Savings accounts		399,060		623	0.21			374,351		770	0.28
Time deposits less than $100		172,806		1,369	1.06			211,966		1,542	0.97
Time deposits $100 or more		87,914		486	0.74			93,226		640	0.92
Short-term borrowings		8,581		23	0.36			16,160		67	0.55
Long-term debt		32,010		756	3.16			35,413		864	3.26
Total interest-bearing liabilities		1,165,280		4,468	0.51			1,169,674		5,056	0.58
Noninterest-bearing deposits		301,619						288,786
Other liabilities		14,686						12,143
Stockholders’ equity		248,608						240,493
Total liabilities and stockholders’ equity	$	1,730,193					$	1,711,096
Net interest income/spread			$	44,664	3.69	%			$	45,241	3.73	%
Net interest margin					3.82	%					3.88	%
Tax-equivalent adjustments:
Loans			$	923					$	865
Investments				1,345						1,326
Total adjustments			$	2,268					$	2,191

Provision for Loan Losses:

We evaluate the adequacy of the allowance for loan losses account on a quarterly basis utilizing our systematic analysis in accordance with procedural discipline. We take into consideration certain factors such as composition of the loan portfolio, volumes of nonperforming loans, volumes of net charge-offs, prevailing economic conditions and other relevant factors when determining the adequacy of the allowance for loan losses account. We make monthly provisions to the allowance for loan losses account in order to maintain the allowance at the appropriate level indicated by our evaluations. Based on our most current evaluation, we believe that the allowance is adequate to absorb any known and inherent losses in the portfolio as of September 30, 2015.

35

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

For the three and nine months ended September 30, 2015, the provision for loan losses totaled $900 and $2,400, compared to $666 and $2,724 for those same periods in 2014. The increase in the provision in the third quarter of 2015 was a result of an increase in loan growth and the level of nonperforming loans.

Noninterest Income:

For the nine months ended September 30, 2015, noninterest income totaled $11,950, an increase of $232 or 2.0% from $11,718 for the comparable period of 2014. Service charges, fees and commissions decreased $130, or 2.7% to $4,685 through nine months in 2015 from $4,815 for the same period in 2014. Merchant services income increased $152 to $2,936 for the nine months ended September 30, 2015 from $2,784 for the same period last year as a result of an increase in the number of merchant accounts serviced. Income generated from commissions and fees on fiduciary activities decreased $203 to $1,487 for the nine months ended September 30, 2015 in comparison to $1,690 for the same period in 2014 due to a decrease in executor fees settled in 2015. Income generated from our wealth management division increased $58 to $627 through the first nine months of 2015 in comparison to $569 over that same period in 2014. Mortgage banking income increased $233 to $667 for the first nine months of 2015 compared to $434 for the comparable period in 2014 as the volume of loans originated for sale continued to improve. Life insurance investment income increased $4 to $569 for the nine months ended September 30, 2015 from $565 for the same period in 2014. Beginning late in the third quarter of 2014, we began to incur offsets to life insurance income that represent mortality costs to the life insurance and the variance is normalized as of the end of the third quarter of 2015. Gains from the sale of investment securities available-for-sale increased to $979 for the nine months ended September 30, 2015 compared to $861 for the same period in 2014 as we took advantage of the significant improvement in the value of U.S. Treasury securities brought on by the reduction in market yields.

Noninterest income decreased $365 or 8.3% to $4,015 inthe third quarter of 2015 from $4,380 for the same period in 2014. Increases in income from merchant services, wealth management, mortgage banking andlife insurance income were more than offset by declines in service charges, fees and commissions, commissions and fees on fiduciary activities and net gains on sale of investment securities available-for-sale.

Noninterest Expenses:

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

For the third quarter, noninterest expense increased $622 or 5.6% to $11,706 in 2015 from $11,084 in 2014. For the nine months ended September 30, 2015, noninterest expense decreased $299 or 0.9% to $34,311 in 2015 from $34,610 in 2014. Personnel costs increased 9.1%, net occupancy and equipment costs increased 12.9%, merchant services expense increased 16.5% and other expenses decreased by 9.7% comparing year-to-date 2015 and 2014.

Salaries and employee benefits expense, which comprise the majority of noninterest expense, totaled $5,397 for the third quarter of 2015, an increase of $643 or 13.5% when compared to the third quarter of 2014. Salaries and employee benefits expense totaled $16,243 for the nine months ended September 30, 2015 compared to $14,883 for the same period of 2014, an increase of $1,360 or 9.1%. Severances paid out to eliminate certain duplicated positions along with the addition of salaries and benefit costs to add staffing in wealth management, Lehigh Valley and credit more than offset the cost savings associated with certain downsizing initiatives.

Merchant services expense increased $161 or 24.3% to $823 for the three months ended September 30, 2015 from $662 for the same period in 2014. Merchant services expense increased $284 or 16.5% to $2,006 for the nine months ended

36

Peoples Financial Services Corp.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

September 30, 2015 from $1,722 for the year earlier period. Both the quarterly and nine month results were a product of higher interchange fees being paid to the service providers. The increases correlate directly to the increases in merchant services income for the quarter and nine months ended September 30, 2015.

We experienced a $226 or 11.2% increase in net occupancy and equipment expense comparing $2,246 for the third quarter of 2015 and $2,020 for the same period in 2014. Net occupancy and equipment expense increased $783 or 12.9% comparing the nine months ended September 30, 2015 at $6,863 and September 30, 2014 at $6,080. The increase in net occupancy and equipment expense was caused by costs associated with the Lehigh Valley branch during 2015, and costs associated with excessive snow removal costs during the first part of 2015.

For the third quarter, other expenses decreased $261 or 8.1% to $2,944 from $3,205 comparing 2015 to 2014. For the nine months ended September 30, 2015, other expenses decreased $887 or 9.7% to $8,303 as compared to $9,190 for the same period of 2014. The decrease was the result of realizing cost synergies as we begin to achieve certain of the intended benefits of the 2013 merger with Penseco.

Income Taxes:

We recorded income tax expense of $1,113 or 20.2% of pre-tax income, and $1,944 or 27.1% of pre-tax income for the three months ended September 30, 2015 and 2014. We recorded income tax expense of $3,751 or 21.3% of pre-tax income, and $4,169 or 23.9% of pre-tax income for the nine months ended September 30, 2015 and 2014. The nine months ended September 30, 2015 includes before tax investment tax credits of $1,088 compared to $439 for that same period last year.

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Peoples Financial Services Corp.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

A bank with a high degree of IRR may experience lower earnings, impaired liquidity and capital positions, and most likely, a greater risk of insolvency. Therefore, banks must carefully evaluate IRR to promote safety and soundness in their activities.

The projected impacts of instantaneous changes in interest rates on our net interest income and economic value of equity at September 30, 2015, based on our simulation model, as compared to our ALCO policy limits are summarized as follows:

	September 30, 2015
	% Change in
Changes in Interest Rates (basis points)	Net Interest Income		Economic Value of Equity
	Metric	Policy	Metric	Policy
+400	6.1	(20.0)	6.9	(45.0)
+300	4.9	(20.0)	6.6	(35.0)
+200	3.3	(10.0)	5.3	(25.0)
+100	1.6	(10.0)	3.4	(15.0)
Static
-100	(3.2)	(10.0)	(12.4)	(15.0)

Our simulation model creates pro forma net interest income scenarios under various interest rate shocks. Given instantaneous and parallel shifts in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending September 30, 2015, would increase slightly at 1.6 percent from model results using current interest rates. Additional disclosures about market risk are included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2014, under the heading “Market Risk Sensitivity,” and are incorporated into this Item 3 by reference. There were no material changes in our market risk from December 31, 2014.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

At September 30, 2015, the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that the disclosure controls and procedures, at September 30, 2015, were effective to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide

38

Peoples Financial Services Corp.

reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosure.

(b) Changes in internal control.

There were no changes made in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The nature of the Company’s business generates a certain amount of litigation involving matters arising out of the ordinary course of business. In the opinion of management, there were no legal proceedings that had or might have a material effect on the consolidated results of operations, liquidity, or the financial position of the Company in 2014 and through the date of this quarterly report on Form 10-Q.

Item 1A. Risk Factors.  

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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

On January 30, 2015, the Board of Directors authorized the repurchase of up to 370,000 shares of the Company’s common stock. The following purchases were made by or on behalf of the Company or any “affiliated purchaser,” as defined in the Exchange Act Rule 10b-18(a) (3), of the Company’s common stock during each of the months for the quarter ended September 30, 2015. At September 30, 2015, there were 338,951 shares available for repurchase under the 2015 Stock Repurchase Program with an expiration date of December 31, 2015.

				Total Number of	Maximum Number
				Shares Purchased	of Shares that may
				as Part of Publicly	yet be Purchased
	Total Number of		Average Price	Announced	Under the
Month Ending	Shares Purchased		Paid Per Share	Programs(1)	Programs(1)
July 1, 2015 - July 31, 2015					362,567
August 1, 2015 - August 31, 2015	5,540	$	36.26	5,540	357,027
September 1, - September 30, 2015	18,076		35.73	18,076	338,951
Total	23,616	$	35.85	23,616

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.  

None.

39

Peoples Financial Services Corp.

Item 6. Exhibits.  

10.1	Material Contracts-First Amendment to Amended and Restated Deferred Compensation Plan #2, dated August 29, 2015, by and between Peoples Security Bank and Trust Company and Craig Best, incorporated by reference to Exhibit 10.1 to the Registrant’s form 8-K filed with the Commission on September 3, 2015.
31.1	Chief Executive Officer certification pursuant to Rule 13a-14(a)/15d-14(a).
31.2	Chief Financial Officer certification pursuant to Rule 13a-14(a)/15d-14(a).
32	Chief Executive Officer and Chief Financial Officer certifications pursuant to Section 1350.
101+	Interactive Data File

+ As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

40

Peoples Financial Services Corp.

SIGNATURES

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

	Peoples Financial Services Corp.
	(Registrant)
Date: November 6, 2015	/s/ Craig W. Best
	Craig W. Best
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: November 6, 2015	/s/ Scott A. Seasock
	Scott A. Seasock
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

41

Peoples Financial Services Corp.

EXHIBIT INDEX

Item Number	Description	Page
10.1	Material Contracts-First Amendment to Amended and Restated Deferred Compensation Plan #2, dated August 29, 2015, by and between Peoples Security Bank and Trust Company and Craig Best, incorporated by reference to Exhibit 10.1 to the Registrant’s form 8-K filed with the Commission on September 3, 2015.
31.1	CEO Certification Pursuant to Rule 13a-14 (a) /15d-14 (a).	43
31.2	CFO Certification Pursuant to Rule 13a-14 (a) /15d-14 (a).	44
32	CEO and CFO Certifications Pursuant to Section 1350.	45
101	The following materials from Peoples Financial Services Corp. Quarterly Report on Form 10-Q for the period ended September 30, 2015, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

42

EX-31.1

Peoples Financial Services Corp.

Exhibit 31.1

CERTIFICATION

I, Craig W. Best, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2015, of Peoples Financial Services Corp.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13A-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in the quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Craig W. Best

President and Chief Executive Officer

(Principal Executive Officer)

Date: November 6, 2015

43

EX-31.2

Peoples Financial Services Corp.

Exhibit 31.2

CERTIFICATION

I, Scott A. Seasock, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2015, of Peoples Financial Services Corp.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13A-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in the quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Scott A. Seasock

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Date: November 6, 2015

44

EX-32

Peoples Financial Services Corp.

Exhibit 32

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report on Form 10-Q of Peoples Financial Services Corp. (the “Company”) for the period ended September 30, 2015, as filed with the Securities and Exchange Commission (the “Report”), I, Craig W. Best, President and Chief Executive Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. To my knowledge, the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

/s/ Craig W. Best

President and Chief Executive Officer

(Principal Executive Officer)

Date: November 6, 2015

/s/ Scott A. Seasock

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Date: November 6, 2015

A signed copy of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

45

XML

Loans, net and allowance for loan losses - Information Concerning Nonaccrual Loans by Major Loan Classification (Details 6) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans, Total	$ 9,375	$ 8,699
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans, Total	1,444	1,322
Real Estate Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans, Total	3,415	3,732
Real Estate Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans, Total	4,326	3,523
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans, Total	$ 190	$ 122

XML

Employee benefit plans - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Employee Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Salaries and employee benefits expense	$ 368	$ 581	$ 820	$ 1,744

XML

Fair value estimates - Additional Quantitative Information about Assets Measured at Fair Value on Nonrecurring Basis (Details 4) - Nonrecurring Fair Value Measurements [Member] - Significant Unobservable Inputs (Level 3) [Member] - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Estimate	$ 7,031	$ 4,414
Range and weighted average of appraisal adjustments	(58.00%)	(24.50%)
Range and weighted average of liquidation expenses	(5.40%)	(5.50%)
Impaired Loans [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Range and weighted average of appraisal adjustments	3.00%	2.60%
Range and weighted average of liquidation expenses	3.00%	3.00%
Impaired Loans [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Range and weighted average of appraisal adjustments	77.00%	61.10%
Range and weighted average of liquidation expenses	6.00%	6.00%
Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Estimate	$ 348	$ 218
Range and weighted average of appraisal adjustments	(42.40%)	(30.50%)
Range and weighted average of liquidation expenses	(5.00%)	(5.00%)
Other Real Estate Owned [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Range and weighted average of appraisal adjustments	20.00%	19.70%
Range and weighted average of liquidation expenses	3.00%	3.00%
Other Real Estate Owned [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Range and weighted average of appraisal adjustments	77.90%	47.80%
Range and weighted average of liquidation expenses	6.00%	6.00%

XML

Investment securities - Fair Value and Unrealized Losses of Investment Securities in Continuous Unrealized Loss Position (Details 5) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	$ 54,736	$ 68,948
Less Than 12 Months, Unrealized Losses	353	449
12 Months or More, Fair Value	13,136	10,921
12 Months or More, Unrealized Losses	159	114
Total, Fair Value	67,872	79,869
Total, Unrealized Losses	512	563
State and Municipals, Taxable [Member]
Schedule of Available-for-sale Securities [Line Items]
12 Months or More, Fair Value	546	544
12 Months or More, Unrealized Losses	19	26
Total, Fair Value	546	544
Total, Unrealized Losses	19	26
State and Municipals, Tax-Exempt [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	41,034	4,702
Less Than 12 Months, Unrealized Losses	325	23
12 Months or More, Fair Value	789	2,423
12 Months or More, Unrealized Losses	27	39
Total, Fair Value	41,823	7,125
Total, Unrealized Losses	352	62
U.S. Government-Sponsored Enterprises State and Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	3,006	21,228
Less Than 12 Months, Unrealized Losses	1	33
12 Months or More, Fair Value		7,954
12 Months or More, Unrealized Losses		49
Total, Fair Value	3,006	29,182
Total, Unrealized Losses	1	82
Mortgage-Backed Securities, U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	877	20,148
Less Than 12 Months, Unrealized Losses	7	167
12 Months or More, Fair Value	5,119
12 Months or More, Unrealized Losses	24
Total, Fair Value	5,996	20,148
Total, Unrealized Losses	31	167
Mortgage-Backed Securities, U.S. Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	9,819	22,870
Less Than 12 Months, Unrealized Losses	20	226
12 Months or More, Fair Value	6,682
12 Months or More, Unrealized Losses	89
Total, Fair Value	16,501	22,870
Total, Unrealized Losses	$ 109	$ 226

XML

Other comprehensive income (loss) - Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Equity [Abstract]
Net unrealized gain on investment securities available-for-sale	$ 5,447	$ 6,292
Income tax expense (benefit)	1,906	2,202
Net of income taxes	3,541	4,090
Benefit plan adjustments	(7,567)	(7,567)
Income tax expense (benefit)	(2,648)	(2,648)
Net of income taxes	(4,919)	(4,919)
Accumulated other comprehensive loss	$ (1,378)	$ (829)

XML

Other assets - Components of Other Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Other real estate owned	$ 457	$ 561
Investment in residential housing program	6,894	4,329
Mortgage servicing rights	514	676
Bank owned life insurance	30,575	29,983
Restricted equity securities	3,344	3,687
Other assets	14,816	13,830
Total	$ 56,600	$ 53,066

XML

Loans, net and allowance for loan losses - Allocation of Allowance for Loan Losses and Related Loans by Major Classification of Loans (Details 4) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Allowance for loan losses:
Ending balance	$ 12,043	$ 11,428	$ 10,338	$ 10,171	$ 9,622	$ 8,651
Ending balance: individually evaluated for impairment	3,480		2,682
Ending balance: collectively evaluated for impairment	8,456		7,379
Loans receivable:
Ending balance	1,270,545		1,209,894
Ending balance: individually evaluated for impairment	13,449		11,807
Ending balance: collectively evaluated for impairment	1,254,627		1,195,303
Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses:
Ending balance	107		277
Loans receivable:
Ending balance	2,469		2,784
Commercial [Member]
Allowance for loan losses:
Ending balance	2,437	2,435	2,321	2,358	2,201	2,008
Ending balance: individually evaluated for impairment	2,032		1,072
Ending balance: collectively evaluated for impairment	405		1,081
Loans receivable:
Ending balance	342,937		319,590
Ending balance: individually evaluated for impairment	3,120		2,595
Ending balance: collectively evaluated for impairment	338,780		315,642
Commercial [Member] | Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses:
Ending balance			168
Loans receivable:
Ending balance	1,037		1,353
Real Estate Commercial [Member]
Allowance for loan losses:
Ending balance	3,414	3,190	3,037	2,825	2,675	2,394
Ending balance: individually evaluated for impairment	269		805
Ending balance: collectively evaluated for impairment	3,038		2,125
Loans receivable:
Ending balance	529,499		493,481
Ending balance: individually evaluated for impairment	5,309		5,084
Ending balance: collectively evaluated for impairment	522,812		487,024
Real Estate Commercial [Member] | Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses:
Ending balance	107		107
Loans receivable:
Ending balance	1,378		1,373
Real Estate Residential [Member]
Allowance for loan losses:
Ending balance	4,270	4,027	3,690	3,641	3,458	3,135
Ending balance: individually evaluated for impairment	1,000		767
Ending balance: collectively evaluated for impairment	3,270		2,921
Loans receivable:
Ending balance	306,740		322,454
Ending balance: individually evaluated for impairment	4,829		4,001
Ending balance: collectively evaluated for impairment	301,857		318,395
Real Estate Residential [Member] | Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses:
Ending balance			2
Loans receivable:
Ending balance	54		58
Consumer [Member]
Allowance for loan losses:
Ending balance	1,922	$ 1,776	1,290	$ 1,347	$ 1,288	$ 1,114
Ending balance: individually evaluated for impairment	179		38
Ending balance: collectively evaluated for impairment	1,743		1,252
Loans receivable:
Ending balance	91,369		74,369
Ending balance: individually evaluated for impairment	191		127
Ending balance: collectively evaluated for impairment	$ 91,178		$ 74,242

XML

Fair value estimates - Carrying and Fair Values of Financial Instruments (Details 5) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Investment securities:
Available-for-sale	$ 299,832	$ 339,586
Held-to-maturity	13,582	15,215
Mortgage servicing rights	514	676
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets:
Cash and cash equivalents	40,985	31,426
Investment securities:
Available-for-sale	16,067	48,550
Significant Other Observable Inputs (Level 2) [Member]
Investment securities:
Available-for-sale	283,765	291,036
Held-to-maturity	13,582	15,215
Loans held for sale	3,445	3,492
Accrued interest receivable	5,327	5,580
Mortgage servicing rights	1,114	1,466
Restricted equity securities	3,344	3,687
Financial liabilities:
Deposits	1,446,393	1,427,081
Short-term borrowings	30,250	19,557
Long-term debt	32,614	34,772
Accrued interest payable	496	574
Significant Unobservable Inputs (Level 3) [Member]
Investment securities:
Net loans	1,271,728	1,210,369
Carrying Value [Member]
Financial assets:
Cash and cash equivalents	40,985	31,426
Investment securities:
Available-for-sale	299,832	339,586
Held-to-maturity	13,107	14,665
Loans held for sale	3,439	3,486
Net loans	1,258,502	1,199,556
Accrued interest receivable	5,327	5,580
Mortgage servicing rights	514	676
Restricted equity securities	3,344	3,687
Assets, Fair Value Disclosure	1,625,050	1,598,662
Financial liabilities:
Deposits	1,444,650	1,425,558
Short-term borrowings	30,250	19,557
Long-term debt	31,000	33,140
Accrued interest payable	496	574
Liabilities, total	1,506,396	1,478,829
Fair Value [Member]
Financial assets:
Cash and cash equivalents	40,985	31,426
Investment securities:
Available-for-sale	299,832	339,586
Held-to-maturity	13,582	15,215
Loans held for sale	3,445	3,492
Net loans	1,271,728	1,210,369
Accrued interest receivable	5,327	5,580
Mortgage servicing rights	1,114	1,466
Restricted equity securities	3,344	3,687
Assets, Fair Value Disclosure	1,639,357	1,610,821
Financial liabilities:
Deposits	1,446,393	1,427,081
Short-term borrowings	30,250	19,557
Long-term debt	32,614	34,772
Accrued interest payable	496	574
Liabilities, total	$ 1,509,753	$ 1,481,984

XML

Other comprehensive income (loss)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Other comprehensive income (loss)

2. Other comprehensive income (loss):

The components of other comprehensive loss and their related tax effects are reported in the Consolidated Statements of Income and Comprehensive Income. The accumulated other comprehensive income (loss) included in the Consolidated Balance Sheets relates to net unrealized gains and losses on investment securities available-for-sale and benefit plan adjustments.

The components of accumulated other comprehensive loss included in stockholders’ equity at September 30, 2015 and December 31, 2014 is as follows:

		September 30, 2015		December 31, 2014
Net unrealized gain on investment securities available-for-sale	$	5,447	$	6,292
Income tax expense (benefit)		1,906		2,202
Net of income taxes		3,541		4,090
Benefit plan adjustments		(7,567)		(7,567)
Income tax expense (benefit)		(2,648)		(2,648)
Net of income taxes		(4,919)		(4,919)
Accumulated other comprehensive loss	$	(1,378)	$	(829)

Other comprehensive income (loss) and related tax effects for the three and nine months ended September 30, 2015 and 2014 is as follows:

Three Months Ended September 30,	2015		2014
Unrealized gain (loss) on investment securities available-for-sale	$	826	$	(825)
Net gain on the sale of investment securities available-for-sale(1)		(147)		(701)
Other comprehensive income (loss) gain before taxes		679		(1,526)
Income tax expense (benefit)		237		(534)
Other comprehensive income (loss)	$	442	$	(992)
Nine Months Ended September 30,	2015		2014
Unrealized gain (loss) on investment securities available-for-sale	$	134	$	2,811
Net gain on the sale of investment securities available-for-sale(1)		(979)		(861)
Other comprehensive income (loss) gain before taxes		(845)		1,950
Income tax expense (benefit)		(296)		682
Other comprehensive income (loss)	$	(549)	$	1,268

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

XML

Fair value estimates - Additional Information (Details) $ in Thousands	Sep. 30, 2015 USD ($)
Fair Value Disclosures [Abstract]
Commitments subject to undue credit risk	$ 0

XML

Investment securities - Amortized Cost and Fair Value of Investment Securities Aggregated by Investment Category (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale, Amortized Cost	$ 294,385	$ 333,294
Available-for-sale, Gross Unrealized Gains	5,909	6,817
Available-for-sale, Gross Unrealized Losses	462	525
Available-for-sale, Fair Value	299,832	339,586
Total Amortized Cost, Held to maturity	13,107	14,665
Held-to-maturity, Gross Unrealized Gains	525	588
Held-to-maturity, Gross Unrealized Losses	50	38
Held-to-maturity, Fair Value	13,582	15,215
Mortgage-Backed Securities, U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale, Amortized Cost	34,027	37,511
Available-for-sale, Gross Unrealized Gains	198	132
Available-for-sale, Gross Unrealized Losses	31	167
Available-for-sale, Fair Value	34,194	37,476
Total Amortized Cost, Held to maturity	88	100
Held-to-maturity, Gross Unrealized Gains	1	2
Held-to-maturity, Fair Value	89	102
Mortgage-Backed Securities, U.S. Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale, Amortized Cost	36,282	46,956
Available-for-sale, Gross Unrealized Gains	235	277
Available-for-sale, Gross Unrealized Losses	109	226
Available-for-sale, Fair Value	36,408	47,007
Total Amortized Cost, Held to maturity	5,650	7,195
Held-to-maturity, Gross Unrealized Gains	399	481
Held-to-maturity, Fair Value	6,049	7,676
U.S. Government-Sponsored Enterprises State and Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale, Amortized Cost	79,077	95,990
Available-for-sale, Gross Unrealized Gains	547	337
Available-for-sale, Gross Unrealized Losses	1	82
Available-for-sale, Fair Value	79,623	96,245
U.S. Treasury Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale, Amortized Cost	15,915	48,393
Available-for-sale, Gross Unrealized Gains	152	157
Available-for-sale, Fair Value	16,067	48,550
State and Municipals, Taxable [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale, Amortized Cost	15,886	16,490
Available-for-sale, Gross Unrealized Gains	864	943
Available-for-sale, Gross Unrealized Losses	19	26
Available-for-sale, Fair Value	16,731	17,407
State and Municipals, Tax-Exempt [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale, Amortized Cost	113,198	87,954
Available-for-sale, Gross Unrealized Gains	3,913	4,971
Available-for-sale, Gross Unrealized Losses	302	24
Available-for-sale, Fair Value	116,809	92,901
Total Amortized Cost, Held to maturity	7,369	7,370
Held-to-maturity, Gross Unrealized Gains	125	105
Held-to-maturity, Gross Unrealized Losses	50	38
Held-to-maturity, Fair Value	$ 7,444	$ 7,437

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Earnings per share - Schedule of Earnings per Share (Details 2) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Earnings Per Share [Abstract]
Net Income (Numerator), Basic	$ 4,409	$ 5,236	$ 13,884	$ 13,265
Average common shares outstanding (Denominator), Basic	7,536,824	7,548,358	7,543,751	7,548,983
Earnings per share, Basic	$ 0.58	$ 0.70	$ 1.84	$ 1.76
Net Income (Numerator), Diluted	$ 4,409	$ 5,236	$ 13,884	$ 13,265
Average common shares outstanding (Denominator), Diluted	7,536,824	7,548,358	7,543,751	7,566,456
Earnings per share, Diluted	$ 0.58	$ 0.70	$ 1.84	$ 1.76

XML

Fair value estimates - Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 299,832	$ 339,586
U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	16,067	48,550
U.S. Government-Sponsored Enterprises State and Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	79,623	96,245
State and Municipals, Taxable [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	16,731	17,407
State and Municipals, Tax-Exempt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	116,809	92,901
Mortgage-Backed Securities, U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	34,194	37,476
Mortgage-Backed Securities, U.S. Government-Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	36,408	47,007
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	16,067	48,550
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	16,067	48,550
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	283,765	291,036
Significant Other Observable Inputs (Level 2) [Member] | U.S. Government-Sponsored Enterprises State and Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	79,623	96,245
Significant Other Observable Inputs (Level 2) [Member] | State and Municipals, Taxable [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	16,731	17,407
Significant Other Observable Inputs (Level 2) [Member] | State and Municipals, Tax-Exempt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	116,809	92,901
Significant Other Observable Inputs (Level 2) [Member] | Mortgage-Backed Securities, U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	34,194	37,476
Significant Other Observable Inputs (Level 2) [Member] | Mortgage-Backed Securities, U.S. Government-Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 36,408	$ 47,007

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Investment securities - Maturity Distribution of Debt Securities Classified as Available-for-Sale (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Within one year	$ 33,161
After one but within five years	98,388
After five but within ten years	46,705
After ten years	50,976
Available for sale securities	229,230
Mortgage-backed securities	70,602
Total	$ 299,832	$ 339,586

XML

Investment securities - Summary of Amortized Cost and Fair Value of Securities by Contractual Maturity (Details 3) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Amortized Cost, After one but within five years, Held to maturity	$ 503
Amortized Cost, After ten years, Held to maturity	6,866
Amortized Cost, Held to maturity	7,369
Amortized Cost, Mortgage-backed securities, Held to maturity	5,738
Total Amortized Cost, Held to maturity	13,107	$ 14,665
Fair Value, After one but within five years, Held to maturity	515
Fair Value, After ten years, Held to maturity	6,929
Fair Value, Held to maturity	7,444
Fair Value, Mortgage-backed securities, Held to maturity	6,138
Held to maturity, Fair Value	$ 13,582	$ 15,215

XML

Summary of significant accounting policies

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Summary of significant accounting policies

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 subsidiary, Peoples Security Bank and Trust Company (“Peoples Bank”), including its subsidiaries, Peoples Advisors, LLC and Penseco Realty, Inc. (collectively, the “Company” or “Peoples”). The Company services its retail and commercial customers through twenty-six full-service community banking offices located within the Lackawanna, Lehigh, Luzerne, Monroe, Susquehanna, Wayne and Wyoming Counties of Pennsylvania and Broome County of New York.

Basis of presentation:

The accompanying unaudited consolidated financial statements of 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 to 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 and nine months ended and as of September 30, 2015, are not necessarily indicative of the results of operations and financial position that may be expected in the future.

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 loan losses, fair value of financial instruments, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the valuation of deferred tax assets, determination of other-than-temporary impairment losses on securities, impairment of goodwill and fair value of assets acquired and liabilities assumed in business combinations. 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, 2014.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2015, 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.

Recent accounting standards:

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.”

ASU 2015-03 requires that debt issuance costs be reported in the balance sheet as a direct deduction from the face amount of the related liability, consistent with the presentation of debt discounts. Prior to the amendments, debt issuance costs were presented as a deferred charge (i.e., an asset) on the balance sheet. The ASU provides examples illustrating the balance sheet presentation of notes net of their related discounts and debt issuance costs. Further, the amendments require the amortization of debt issuance costs to be reported as interest expense. Similarly, debt issuance costs and any discount or premium are considered in the aggregate when determining the effective interest rate on the debt.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The amendments must be applied retrospectively. The adoption of ASU 2015-03 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

In July 2015, the FASB issued ASU 2015-12, “Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient.”

The amendments in ASU 2015-12 (i) require fully benefit-responsive investment contracts to be measured, presented and disclosed only at contract value, not fair value; (ii) simplify the investment disclosure requirements; and (iii) provide a measurement date practical expedient for employee benefit plans.

Part I. Fully Benefit-Responsive Investment Contracts – the amendments designate contract value as the only required measurement for fully benefit-responsive investments contracts within the scope of Topics 962 and 965, eliminating the requirement to measure, present and disclose such contracts also at fair value and reconcile fair value to contract value.

Part II. Plan Investment Disclosures – the amendments eliminate certain disclosure requirements for both participant-directed investments and nonparticipant-directed investments, and also reduce disclosures required specifically for investments using the net asset value per share practical expedient. The amendments also require that both participant-directed and nonparticipant-directed investments be grouped only by general type, eliminating the need to disaggregate the investments in multiple ways (i.e., also on the basis of nature, characteristics, and risks as required by Topic 820, Fair Value Measurement).

Part III. Measurement Date Practical Expedient – the amendments provide a measurement date practical expedient for employee benefit plans similar to the practical expedient allowing employers to measure defined benefit plan assets on a month-end date that is nearest to the employer’s fiscal year-end, when the fiscal period does not coincide with a month-end.

The amendments are effective for fiscal years beginning after December 15, 2015. Early adoption is permitted for all three parts individually or in the aggregate. Parts I and II of the ASU should be applied retrospectively, while Part III should be applied prospectively. Only the nature and reason for the change in accounting principle is required to be disclosed in the annual period of adoption. The adoption of ASU 2015-12 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

InAugust 2015, the FASB issued ASU 2015-14, “Revenue from Contracts (Topic 606): Deferral of the Effective Date.”

ASU 2015-14 defers the effective date of the new revenue recognition standard by one year. As such, it now takes effect for public entities in fiscal years beginning after December 15, 2017.  Early adoption is permitted for any entity that chooses to adopt the new standard as of the original effective date. The adoption of ASU 2015-14 on January 1, 2018, is not expected to have a material effect on the operating results or financial position of the Company.

In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.”

ASU 2015-15 codifies a Securities and Exchange Commission (“SEC”) staff announcement that entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. ASU 2015-15 clarifies that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 is effective immediately. The adoption of ASU 2015-15 did not have a material effect on the operating results or financial position of the Company.

In September, 2015, the FASB issued ASU 2015-16, “Business Combination (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.”

ASU 2015-16 requires adjustments to provisional amounts that are identified during the measurement period to be recognized in the reporting period in which the adjustment amounts are determined. This includes any effect on earnings of changes in depreciation, amortization, or other income effects as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.

In addition, the amendments in the proposed Update would require an entity to disclose, either on the face of the income statement or in the notes, the nature and amount of measurement-period adjustments recognized in the current period, including separately the amounts in current-period income statement line items that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.

The amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The amendments in this Update should be applied prospectively to measurement-period adjustments that occur after the effective date of this ASU. The adoption of ASU 2015-16 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

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Investment securities - Additional Information (Details 4) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) security	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Carrying value of securities pledged | $	$ 206,467		$ 206,467		$ 216,192
Number of investment securities held			97		52
State and Municipals, Tax-Exempt [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of investment securities held			76		16
Number of securities in continuous unrealized loss positions 12 months or longer					4
State and Municipals, Taxable [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of investment securities held			1		1
Number of securities in continuous unrealized loss positions 12 months or longer					1
Credit Concentration Risk [Member] | Stockholders' Equity, Total [Member] | Us Government Agency And Sponsored Enterprises [Member] | Greater Than [Member]
Schedule of Available-for-sale Securities [Line Items]
Maximum percentage of stockholders' equity exceeded for securities of any individual issuer			10.00%		10.00%
U.S. Government-Sponsored Enterprises State and Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of investment securities held			1		9
Number of securities in continuous unrealized loss positions 12 months or longer					2
Other-than-temporary impairments recognized | $	$ 0	$ 0	$ 0	$ 0
Mortgage-Backed Securities, U.S. Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of investment securities held			19		26
Number of securities in continuous unrealized loss positions 12 months or longer					8
Mortgage-Backed Securities, U.S. Government-Sponsored Enterprises [Member] | State and Municipals, Tax-Exempt [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities in continuous unrealized loss positions 12 months or longer					3

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Loans, net and allowance for loan losses - Major Classifications of Loans by Past Due Status (Details 7) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 16,168	$ 19,813
Current	1,254,377	1,190,081
Total Loans	1,270,545	1,209,894
Loans > 90 Days and Accruing	1,631	1,623
30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3,365	7,000
60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,797	2,491
Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	11,006	10,322
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,947	2,337
Current	340,990	317,253
Total Loans	342,937	319,590
Commercial [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	503	898
Commercial [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		117
Commercial [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,444	1,322
Real Estate Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	5,694	6,856
Current	523,805	486,625
Total Loans	529,499	493,481
Loans > 90 Days and Accruing		136
Real Estate Commercial [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,371	2,100
Real Estate Commercial [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	908	888
Real Estate Commercial [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3,415	3,868
Real Estate Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	7,198	8,978
Current	299,542	313,476
Total Loans	306,740	322,454
Loans > 90 Days and Accruing	1,358	1,062
Real Estate Residential [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	883	3,154
Real Estate Residential [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	631	1,239
Real Estate Residential [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	5,684	4,585
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,329	1,642
Current	90,040	72,727
Total Loans	91,369	74,369
Loans > 90 Days and Accruing	273	425
Consumer [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	608	848
Consumer [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	258	247
Consumer [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 463	$ 547

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Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets:
Cash and due from banks	$ 36,015	$ 24,656
Interest-bearing deposits in other banks	4,970	6,770
Investment securities:
Available-for-sale	299,832	339,586
Held-to-maturity: Fair value September 30, 2015, $13,582; December 31, 2014, $15,215	13,107	14,665
Total investment securities	312,939	354,251
Loans held for sale	3,439	3,486
Loans, net	1,270,545	1,209,894
Less: allowance for loan losses	12,043	10,338
Net loans	1,258,502	1,199,556
Premises and equipment, net	27,002	25,433
Accrued interest receivable	5,327	5,580
Goodwill	63,370	63,370
Intangible assets	4,606	5,501
Other assets	56,600	53,066
Total assets	1,772,770	1,741,669
Deposits:
Noninterest-bearing	303,741	313,498
Interest-bearing	1,140,909	1,112,060
Total deposits	1,444,650	1,425,558
Short-term borrowings	30,250	19,557
Long-term debt	31,000	33,140
Accrued interest payable	496	574
Other liabilities	14,286	16,061
Total liabilities	1,520,682	1,494,890
Stockholders' equity:
Common stock, par value $2.00, authorized 25,000,000 shares, issued and outstanding: September 30, 2015, 7,519,109 shares; December 31, 2014, 7,548,358 shares	15,038	15,097
Capital surplus	139,263	140,214
Retained earnings	99,165	92,297
Accumulated other comprehensive loss	(1,378)	(829)
Total stockholders' equity	252,088	246,779
Total liabilities and stockholders' equity	$ 1,772,770	$ 1,741,669

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Fair value estimates - Schedule of Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Details 3) - Nonrecurring Fair Value Measurements [Member] - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 7,031	$ 4,414
Other real estate owned	348	218
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	7,031	4,414
Other real estate owned	$ 348	$ 218

XML

Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Statement of Stockholders' Equity [Abstract]
Dividends declared (in dollars per share)	$ 0.93	$ 0.93
Share retired, shares	29,249	3,386
Reissuance under option plan, shares		600
Repurchase and held, shares		1,800

XML

Loans, net and allowance for loan losses - Major Classifications of Loans Outstanding (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	$ 1,270,545	$ 1,209,894
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	342,937	319,590
Real Estate Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	529,499	493,481
Real Estate Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	306,740	322,454
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	$ 91,369	$ 74,369

XML

Fair value estimates (Tables)

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

	Fair Value Measurement Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
September 30, 2015	Amount		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury securities	$	16,067	$	16,067			$
U.S. Government-sponsored enterprises		79,623		-	$	79,623		-
State and Municipals:
Taxable		16,731		-		16,731		-
Tax-exempt		116,809		-		116,809		-
Mortgage-backed securities:
U.S. Government agencies		34,194		-		34,194		-
U.S. Government-sponsored enterprises		36,408		-		36,408		-
Total	$	299,832	$	16,067	$	283,765	$	—

	Fair Value Measurement Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
December 31, 2014	Amount		(Level 1)		(Level 2)		(Level 3)
U.S. Government-sponsored enterprises	$	48,550		48,550	$		$
U.S. Government-sponsored enterprises		96,245				96,245
State and Municipals:
Taxable		17,407				17,407
Tax-exempt		92,901				92,901
Mortgage-backed securities:
U.S. Government agencies		37,476				37,476
U.S. Government-sponsored enterprises		47,007				47,007
Total	$	339,586	$	48,550	$	291,036	$

Schedule of Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

	Fair Value Measurement Using
			Quoted Prices in	Significant	Significant
			Active Markets for	Other Observable	Unobservable
			Identical Assets	Inputs	Inputs
September 30, 2015	Amount		(Level 1)	(Level 2)	(Level 3)
Impaired loans	$	7,031			$	7,031
Other real estate owned	$	348			$	348

	Fair Value Measurement Using
			Quoted Prices in	Significant Other	Significant
			Active Markets for	Observable	Unobservable
			Identical Assets	Inputs	Inputs
December 31, 2014	Amount		(Level 1)	(Level 2)	(Level 3)
Impaired loans	$	4,414			$	4,414
Other real estate owned	$	218			$	218

Additional Quantitative Information about Assets Measured at Fair Value on Nonrecurring Basis

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value				Range
September 30, 2015	Estimate		Valuation Techniques	Unobservable Input	(Weighted Average)
Impaired loans	$	7,031	Appraisal of collateral	Appraisal adjustments	3.0% to 77.0%(58.0)%
				Liquidation expenses	3.0% to 6.0%(5.4)%
Other real estate owned	$	348	Appraisal of collateral	Appraisal adjustments	20.0% to 77.9%(42.4)%
				Liquidation expenses	3.0% to 6.0%(5.0)%

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value				Range
December 31, 2014	Estimate		Valuation Techniques	Unobservable Input	(Weighted Average)
Impaired loans	$	4,414	Appraisal of collateral	Appraisal adjustments	2.6% to 61.1%(24.5)%
				Liquidation expenses	3.0% to 6.0%(5.5)%
Other real estate owned	$	218	Appraisal of collateral	Appraisal adjustments	19.7% to 47.8%(30.5)%
				Liquidation expenses	3.0% to 6.0%(5.0)%

Carrying and Fair Values of Financial Instruments

					Fair Value Hierarchy
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
September 30, 2015	Value		Value		(level 1)		(level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	40,985	$	40,985	$	40,985
Investment securities:
Available-for-sale		299,832		299,832	$	16,067	$	283,765
Held-to-maturity		13,107		13,582				13,582
Loans held for sale		3,439		3,445				3,445
Net loans		1,258,502		1,271,728					$	1,271,728
Accrued interest receivable		5,327		5,327				5,327
Mortgage servicing rights		514		1,114				1,114
Restricted equity securities		3,344		3,344				3,344
Total	$	1,625,050	$	1,639,357
Financial liabilities:
Deposits	$	1,444,650	$	1,446,393				1,446,393
Short-term borrowings		30,250		30,250				30,250
Long-term debt		31,000		32,614				32,614
Accrued interest payable		496		496			$	496
Total	$	1,506,396	$	1,509,753

					Fair Value Hierarchy
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
December 31, 2014	Value		Value		(level 1)		(level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	31,426	$	31,426	$	31,426
Investment securities:
Available-for-sale		339,586		339,586	$	48,550	$	291,036
Held-to-maturity		14,665		15,215				15,215
Loans held for sale		3,486		3,492				3,492
Net loans		1,199,556		1,210,369					$	1,210,369
Accrued interest receivable		5,580		5,580				5,580
Mortgage servicing rights		676		1,466				1,466
Restricted equity securities		3,687		3,687				3,687
Total	$	1,598,662	$	1,610,821
Financial liabilities:
Deposits	$	1,425,558	$	1,427,081				1,427,081
Short-term borrowings		19,557		19,557				19,557
Long-term debt		33,140		34,772				34,772
Accrued interest payable		574		574			$	574
Total	$	1,478,829	$	1,481,984

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Loans, net and allowance for loan losses - Changes in Allowance for Loan Losses Account by Major Classification of Loan (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Allowance for loan losses:
Beginning Balance	$ 11,428	$ 9,622	$ 10,338	$ 8,651
Charge-offs	(315)	(177)	(854)	(1,650)
Recoveries	30	60	159	446
Provisions	900	666	2,400	2,724
Ending balance	12,043	10,171	12,043	10,171
Commercial [Member]
Allowance for loan losses:
Beginning Balance	2,435	2,201	2,321	2,008
Charge-offs			(40)	(376)
Recoveries	2	5	66	6
Provisions		152	90	720
Ending balance	2,437	2,358	2,437	2,358
Real Estate Commercial [Member]
Allowance for loan losses:
Beginning Balance	3,190	2,675	3,037	2,394
Charge-offs	(120)	(57)	(199)	(489)
Recoveries	2	22	8	291
Provisions	342	185	568	629
Ending balance	3,414	2,825	3,414	2,825
Real Estate Residential [Member]
Allowance for loan losses:
Beginning Balance	4,027	3,458	3,690	3,135
Charge-offs	(128)	(56)	(362)	(566)
Recoveries	2		10	38
Provisions	369	239	932	1,034
Ending balance	4,270	3,641	4,270	3,641
Consumer [Member]
Allowance for loan losses:
Beginning Balance	1,776	1,288	1,290	1,114
Charge-offs	(67)	(64)	(253)	(219)
Recoveries	24	33	75	111
Provisions	189	90	810	341
Ending balance	$ 1,922	$ 1,347	$ 1,922	$ 1,347

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Summary of significant accounting policies - Additional Information (Details)	9 Months Ended
	Sep. 30, 2015 Office
Accounting Policies [Abstract]
Number of full-service community banking offices	26

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net income	$ 13,884	$ 13,265
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment	1,178	1,322
Amortization of deferred loan costs	440	171
Amortization of intangibles	896	1,010
Net accretion of purchase accounting adjustments on tangible assets	(708)	(2,683)
Provision for loan losses	2,400	2,724
Net gain on sale of other real estate owned	(132)	(60)
Net loss on disposal of equipment	87	63
Loans originated for sale	(20,664)	(7,346)
Proceeds from sale of loans originated for sale	21,378	6,752
Net gain on sale of loans originated for sale	(667)	(610)
Net amortization of investment securities	3,171	3,230
Net gain on sale of investment securities	(979)	(861)
Life insurance investment income	(569)	(592)
Deferred income tax expense	119
Stock based compensation	52	11
Net change in:
Accrued interest receivable	253	485
Other assets	(3,062)	(3,455)
Accrued interest payable	(78)	(126)
Other liabilities	(1,827)	1,546
Net cash provided by operating activities	15,172	14,846
Cash flows from investing activities:
Proceeds from sales of investment securities available-for-sale	65,858	15,389
Proceeds from repayments of investment securities:
Available-for-sale	41,659	32,022
Held-to-maturity	1,526	1,989
Purchases of investment securities:
Available-for-sale	(70,768)	(98,898)
Net redemption of restricted equity securities	343	56
Net increase in lending activities	(61,940)	(3,341)
Purchases of premises and equipment	(2,924)	(1,059)
Proceeds from the sale of premises and equipment	14	25
Proceeds from sale of other real estate owned	484	409
Net cash used in investing activities	(25,748)	(53,408)
Cash flows from financing activities:
Net increase in deposits	19,619	46,939
Repayment of long-term debt	(2,099)	(2,682)
Net increase (decrease) in short-term borrowings	10,693	(15,538)
Redemption of common stock	(1,062)	(70)
Settlement of stock options		(95)
Purchase of treasury stock		(70)
Cash dividends paid	(7,016)	(7,021)
Net cash provided by financing activities	20,135	21,463
Net increase (decrease) in cash and cash equivalents	9,559	(17,099)
Cash and cash equivalents at beginning of year	31,426	51,310
Cash and cash equivalents at end of year	40,985	34,211
Cash paid during the period for:
Interest	5,114	5,182
Income taxes	2,900	3,100
Noncash items:
Transfers of loans to other real estate	370	541
Retirement of treasury shares		6,300
Fair value of assets acquired:
Loans, net	216	1,900
Premises and equipment	(76)	(76)
Core deposit and other intangible assets	(896)	(1,010)
Fair value of assets acquired, net	(756)	814
Fair value of liabilities assumed:
Deposits	527	818
Long-term debt	41	41
Fair value of liabilities assumed, net	$ 568	$ 859

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Held-to-maturity, Fair Value	$ 13,582	$ 15,215
Common stock, par value	$ 2.00	$ 2.00
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	7,519,109	7,548,358
Common stock, shares outstanding	7,519,109	7,548,358

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Other comprehensive income (loss) (Tables)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Components of Accumulated Other Comprehensive Loss

		September 30, 2015		December 31, 2014
Net unrealized gain on investment securities available-for-sale	$	5,447	$	6,292
Income tax expense (benefit)		1,906		2,202
Net of income taxes		3,541		4,090
Benefit plan adjustments		(7,567)		(7,567)
Income tax expense (benefit)		(2,648)		(2,648)
Net of income taxes		(4,919)		(4,919)
Accumulated other comprehensive loss	$	(1,378)	$	(829)

Other Comprehensive Income (Loss) and Related Tax Effects

Other comprehensive income (loss) and related tax effects for the three and nine months ended September 30, 2015 and 2014 is as follows:

Three Months Ended September 30,	2015		2014
Unrealized gain (loss) on investment securities available-for-sale	$	826	$	(825)
Net gain on the sale of investment securities available-for-sale(1)		(147)		(701)
Other comprehensive income (loss) gain before taxes		679		(1,526)
Income tax expense (benefit)		237		(534)
Other comprehensive income (loss)	$	442	$	(992)
Nine Months Ended September 30,	2015		2014
Unrealized gain (loss) on investment securities available-for-sale	$	134	$	2,811
Net gain on the sale of investment securities available-for-sale(1)		(979)		(861)
Other comprehensive income (loss) gain before taxes		(845)		1,950
Income tax expense (benefit)		(296)		682
Other comprehensive income (loss)	$	(549)	$	1,268

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

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 30, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Trading Symbol	pfis
Entity Registrant Name	PEOPLES FINANCIAL SERVICES CORP.
Entity Central Index Key	0001056943
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		7,426,282

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Earnings per share (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

	2015				2014
For the Three Months Ended September 30,	Basic		Diluted		Basic		Diluted
Net Income (Numerator)	$	4,409	$	4,409	$	5,236	$	5,236
Average common shares outstanding (Denominator)		7,536,824		7,536,824		7,548,358		7,548,358
Earnings per share	$	0.58	$	0.58	$	0.70	$	0.70
	2015				2014
For the Nine Months Ended September 30,	Basic		Diluted		Basic		Diluted
Net Income (Numerator)	$	13,884	$	13,884	$	13,265	$	13,265
Average common shares outstanding (Denominator)		7,543,751		7,543,751		7,548,983		7,566,456
Earnings per share	$	1.84	$	1.84	$	1.76	$	1.76

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Consolidated Statements of Income and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Interest and fees on loans:
Taxable	$ 13,341	$ 13,876	$ 40,072	$ 41,035
Tax-exempt	585	465	1,714	1,607
Interest and dividends on investment securities:
Taxable	792	1,007	2,508	2,877
Tax-exempt	858	816	2,498	2,462
Dividends	9	2	24	32
Interest on interest-bearing deposits in other banks	13	10	39	29
Interest on federal funds sold		16	9	64
Total interest income	15,598	16,192	46,864	48,106
Interest expense:
Interest on deposits	1,229	1,354	3,689	4,125
Interest on short-term borrowings	11	9	23	67
Interest on long-term debt	245	279	756	864
Total interest expense	1,485	1,642	4,468	5,056
Net interest income	14,113	14,550	42,396	43,050
Provision for loan losses	900	666	2,400	2,724
Net interest income after provision for loan losses	13,213	13,884	39,996	40,326
Noninterest income:
Service charges, fees and commissions	1,531	1,634	4,685	4,815
Merchant services income	1,183	1,002	2,936	2,784
Commission and fees on fiduciary activities	541	575	1,487	1,690
Wealth management income	224	217	627	569
Mortgage banking income	197	142	667	434
Life insurance investment income	192	109	569	565
Net gain on sale of investment securities available-for-sale	147	701	979	861
Total noninterest income	4,015	4,380	11,950	11,718
Noninterest expense:
Salaries and employee benefits expense	5,397	4,754	16,243	14,883
Net occupancy and equipment expense	2,246	2,020	6,863	6,080
Merchant services expense	823	662	2,006	1,722
Amortization of intangible assets	296	334	896	1,010
Acquisition related expense		109		1,725
Other expenses	2,944	3,205	8,303	9,190
Total noninterest expense	11,706	11,084	34,311	34,610
Income before income taxes	5,522	7,180	17,635	17,434
Income tax expense	1,113	1,944	3,751	4,169
Net income	4,409	5,236	13,884	13,265
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available-for-sale	826	(825)	134	2,811
Reclassification adjustment for net gain on sales included in net income	(147)	(701)	(979)	(861)
Other comprehensive income (loss)	679	(1,526)	(845)	1,950
Income tax expense (benefit) related to other comprehensive loss	237	(534)	(296)	682
Other comprehensive income (loss), net of income taxes	442	(992)	(549)	1,268
Comprehensive income	$ 4,851	$ 4,244	$ 13,335	$ 14,533
Net income:
Basic	$ 0.58	$ 0.70	$ 1.84	$ 1.76
Diluted	$ 0.58	$ 0.70	$ 1.84	$ 1.76
Average common shares outstanding:
Basic	7,536,824	7,548,358	7,543,751	7,548,983
Diluted	7,536,824	7,548,358	7,543,751	7,566,456
Dividends declared	$ 0.31	$ 0.31	$ 0.93	$ 0.93

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Loans, net and allowance for loan losses

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Loans, net and allowance for loan losses

5. Loans, net and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at September 30, 2015 and December 31, 2014 are summarized as follows. Net deferred loan costs were $686 and $651 at September 30, 2015 and December 31, 2014.

		September 30, 2015		December 31, 2014
Commercial	$	342,937	$	319,590
Real estate:
Commercial		529,499		493,481
Residential		306,740		322,454
Consumer		91,369		74,369
Total	$	1,270,545	$	1,209,894

The changes in the allowance for loan losses account by major classification of loan for the three and nine months ended September 30, 2015 and 2014 are summarized as follows:

			Real estate
September 30, 2015	Commercial		Commercial		Residential			Consumer		Total
Allowance for loan losses:
Beginning Balance July 1, 2015	$	2,435	$	3,190	$	4,027	$		1,776	$	11,428
Charge-offs				(120)		(128)			(67)		(315)
Recoveries		2		2		2			24		30
Provisions				342		369			189		900
Ending balance	$	2,437	$	3,414	$	4,270	$		1,922	$	12,043
			Real estate
September 30, 2014	Commercial		Commercial		Residential			Consumer		Total
Allowance for loan losses:
Beginning Balance July 1, 2014	$	2,201	$	2,675	$	3,458		$	1,288	$	9,622
Charge-offs				(57)		(56)			(64)		(177)
Recoveries		5		22					33		60
Provisions		152		185		239			90		666
Ending balance	$	2,358	$	2,825	$	3,641		$	1,347	$	10,171

			Real estate
September 30, 2015	Commercial		Commercial		Residential		Consumer		Total
Allowance for loan losses:
Beginning Balance January 1, 2015	$	2,321	$	3,037	$	3,690	$	1,290	$	10,338
Charge-offs		(40)		(199)		(362)		(253)		(854)
Recoveries		66		8		10		75		159
Provisions		90		568		932		810		2,400
Ending balance	$	2,437	$	3,414	$	4,270	$	1,922	$	12,043
			Real estate
September 30, 2014	Commercial		Commercial		Residential		Consumer		Total
Allowance for loan losses:
Beginning Balance January 1, 2014	$	2,008	$	2,394	$	3,135	$	1,114	$	8,651
Charge-offs		(376)		(489)		(566)		(219)		(1,650)
Recoveries		6		291		38		111		446
Provisions		720		629		1,034		341		2,724
Ending balance	$	2,358	$	2,825	$	3,641	$	1,347	$	10,171

The allocation of the allowance for loan losses and the related loans by major classifications of loans at September 30, 2015 and December 31, 2014 is summarized as follows:

			Real estate
September 30, 2015	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Ending balance	$	2,437	$	3,414	$	4,270	$	1,922	$	$	12,043
Ending balance: individually evaluated for impairment		2,032		269		1,000		179			3,480
Ending balance: collectively evaluated for impairment		405		3,038		3,270		1,743			8,456
Ending balance: loans acquired with deteriorated credit quality	$		$	107	$		$			$	107
Loans receivable:
Ending balance	$	342,937	$	529,499	$	306,740	$	91,369	$	$	1,270,545
Ending balance: individually evaluated for impairment		3,120		5,309		4,829		191			13,449
Ending balance: collectively evaluated for impairment		338,780		522,812		301,857		91,178			1,254,627
Ending balance: loans acquired with deteriorated credit quality		1,037		1,378		54				$	2,469

			Real estate
December 31, 2014	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Ending balance	$	2,321	$	3,037	$	3,690	$	1,290	$	$	10,338
Ending balance: individually evaluated for impairment		1,072		805		767		38			2,682
Ending balance: collectively evaluated for impairment		1,081		2,125		2,921		1,252			7,379
Ending balance: loans acquired with deteriorated credit quality	$	168	$	107	$	2	$			$	277
Loans receivable:
Ending balance	$	319,590	$	493,481	$	322,454	$	74,369	$	$	1,209,894
Ending balance: individually evaluated for impairment		2,595		5,084		4,001		127			11,807
Ending balance: collectively evaluated for impairment		315,642		487,024		318,395	$	74,242			1,195,303
Ending balance: loans acquired with deteriorated credit quality	$	1,353	$	1,373	$	58			$	$	2,784

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

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

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

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

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

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

The following tables present the major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at September 30, 2015 and December 31, 2014:

			Special
September 30, 2015	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	329,803	$	3,690	$	9,444	$	$	342,937
Real estate:
Commercial		502,017		10,395		17,087			529,499
Residential		295,998		1,438		9,304			306,740
Consumer		91,178				191			91,369
Total	$	1,218,996	$	15,523	$	36,026	$	$	1,270,545

			Special
December 31, 2014	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	306,066	$	6,135	$	7,389	$	$	319,590
Real estate:
Commercial		472,270		9,858		11,353			493,481
Residential		312,086		2,123		8,245			322,454
Consumer		74,250		13		106			74,369
Total	$	1,164,672	$	18,129	$	27,093	$	$	1,209,894

Information concerning nonaccrual loans by major loan classification at September 30, 2015 and December 31, 2014 is summarized as follows:

		September 30, 2015		December 31, 2014
Commercial	$	1,444	$	1,322
Real estate:
Commercial		3,415		3,732
Residential		4,326		3,523
Consumer		190		122
Total	$	9,375	$	8,699

The major classifications of loans by past due status are summarized as follows:

					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
September 30, 2015	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	503	$		$	1,444	$	1,947	$	340,990	$	342,937
Real estate:
Commercial		1,371		908		3,415		5,694		523,805		529,499
Residential		883		631		5,684		7,198		299,542		306,740	$	1,358
Consumer		608		258		463		1,329		90,040		91,369		273
Total	$	3,365	$	1,797	$	11,006	$	16,168	$	1,254,377	$	1,270,545	$	1,631

					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
December 31, 2014	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	898	$	117	$	1,322	$	2,337	$	317,253	$	319,590
Real estate:
Commercial		2,100		888		3,868		6,856		486,625		493,481	$	136
Residential		3,154		1,239		4,585		8,978		313,476		322,454		1,062
Consumer		848		247		547		1,642		72,727		74,369		425
Total	$	7,000	$	2,491	$	10,322	$	19,813	$	1,190,081	$	1,209,894	$	1,623

The following tables summarize information concerning impaired loans as of and for the three and nine months ended September 30, 2015 and September 30, 2014, and as of and for the year ended, December 31, 2014 by major loan classification:

								This Quarter				Year-to-Date
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
September 30, 2015	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance:
Commercial	$	1,561	$	3,024			$	1,610	$	33	$	1,980	$	70
Real estate:
Commercial		2,410		3,102				2,275		25		2,335		72
Residential		2,784		2,967				2,759		1		2,579		3
Consumer												17
Total		6,755		9,093				6,644		59		6,911		145
With an allowance recorded:
Commercial		2,596		2,596	$	2,032		1,954		13		1,675		40
Real estate:
Commercial		4,277		4,277		376		4,797		21		4,389		86
Residential		2,099		2,099		1,000		1,903		7		1,697		24
Consumer		191		191		179		164				116
Total		9,163		9,163		3,587		8,818		41		7,877		150
Commercial		4,157		5,620		2,032		3,564		46		3,655		110
Real estate:
Commercial		6,687		7,379		376		7,072		46		6,724		158
Residential		4,883		5,066		1,000		4,662		8		4,276		27
Consumer		191		191		179		164				133
Total	$	15,918	$	18,256	$	3,587	$	15,462	$	100	$	14,788	$	295

							For the Year Ended
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2014	Investment		Balance		Allowance		Investment		Recognized
With no related allowance:
Commercial	$	2,379	$	4,084			$	2,669		141
Real estate:
Commercial		2,932		3,690				7,944		120
Residential		2,672		2,857				2,731		4
Consumer		83		83				94
Total		8,066		10,714				13,438		265
With an allowance recorded:
Commercial		1,569		1,569	$	1,240		1,787	$	58
Real estate:
Commercial		3,525		3,525		912		2,293		28
Residential		1,387		1,387		769		590		10
Consumer		44		44		38		10		1
Total		6,525		6,525		2,959		4,680		97
Commercial		3,948		5,653		1,240		4,456		199
Real estate:
Commercial		6,457		7,215		912		10,237		148
Residential		4,059		4,244		769		3,321		14
Consumer		127		127		38		104		1
Total	$	14,591	$	17,239	$	2,959	$	18,118	$	362

								This Quarter				Year-to-Date
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
September 30, 2014	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance:
Commercial	$	2,352	$	4,076			$	2,501		19	$	2,771		71
Real estate:
Commercial		5,275		6,074				7,587		20		9,238		58
Residential		2,629		2,816				2,675		1		2,758		3
Consumer		64		64				81				101
Total		10,320		13,030				12,844		40		14,868		132
With an allowance recorded:
Commercial		1,781		1,781	$	1,163		1,769	$	20		1,825	$	63
Real estate:
Commercial		3,893		3,893		660		2,640		14		1,816		43
Residential		750		750		275		504		4		428		4
Consumer		17		17		17		9				3
Total		6,441		6,441		2,115		4,922		38		4,072		110
Commercial		4,133		5,857		1,163		4,270		39		4,596		134
Real estate:
Commercial		9,168		9,967		660		10,227		34		11,054		101
Residential		3,379		3,566		275		3,179		5		3,186		7
Consumer		81		81		17		90				104
Total	$	16,761	$	19,471	$	2,115	$	17,766	$	78	$	18,940	$	242

Included in the commercial loan and commercial and residential real estate categories are troubled debt restructurings that are classified as impaired. Troubled debt restructurings totaled $2,962 at September 30, 2015, $2,933 at December 31, 2014 and $2,500 at September 30, 2014.

Troubled debt restructured loans are loans with original terms, interest rate, or both, that have been modified as a result of a deterioration in the borrower’s financial condition and a concession has been granted that the Company would not otherwise consider. Unless on nonaccrual, interest income on these loans is recognized when earned, using the interest method. The Company offers a variety of modifications to borrowers that would be considered concessions. The modification categories offered generally fall within the following categories:

· Rate Modification - A modification in which the interest rate is changed to a below market rate.

· Term Modification - A modification in which the maturity date, timing of payments or frequency of payments is changed.

· Interest Only Modification - A modification in which the loan is converted to interest only payments for a period of time.

· Payment Modification - A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

· Combination Modification - Any other type of modification, including the use of multiple categories above.

There were no  loans modified as troubled debt restructurings for the three months ended September 30, 2015 or September 30, 2014. There were eight loans modified as troubled debt restructurings for the nine months ended September 30, 2015, in the amount of $542. There was one loan modified as a troubled debt restructuring for the nine months ended September 30, 2014 in the amount of $2,500. During the three and nine months ended September 30, 2015 and 2014, there were no defaults on loans restructured within the last twelve months.

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Investment securities

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Investment securities

4. Investment securities:

The amortized cost and fair value of investment securities aggregated by investment category at September 30, 2015 and December 31, 2014 are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2015	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	15,915	$	152		—	$	16,067
U.S. Government-sponsored enterprises		79,077		547	$	1		79,623
State and municipals:
Taxable		15,886		864		19		16,731
Tax-exempt		113,198		3,913		302		116,809
Mortgage-backed securities:
U.S. Government agencies		34,027		198		31		34,194
U.S. Government-sponsored enterprises		36,282		235		109		36,408
Total	$	294,385	$	5,909	$	462	$	299,832
Held-to-maturity:
Tax-exempt state and municipals	$	7,369	$	125	$	50	$	7,444
Mortgage-backed securities:
U.S. Government agencies		88		1		—		89
U.S. Government-sponsored enterprises		5,650		399		—		6,049
Total	$	13,107	$	525	$	50	$	13,582

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2014	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	48,393	$	157			$	48,550
U.S. Government-sponsored enterprises		95,990		337	$	82		96,245
State and municipals:
Taxable		16,490		943		26		17,407
Tax-exempt		87,954		4,971		24		92,901
Mortgage-backed securities:
U.S. Government agencies		37,511		132		167		37,476
U.S. Government-sponsored enterprises		46,956		277		226		47,007
Total	$	333,294	$	6,817	$	525	$	339,586
Held-to-maturity:
Tax-exempt state and municipals	$	7,370	$	105	$	38	$	7,437
Mortgage-backed securities:
U.S. Government agencies		100		2				102
U.S. Government-sponsored enterprises		7,195		481				7,676
Total		14,665	$	588	$	38	$	15,215

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified as available-for-sale at September 30, 2015, is summarized as follows:

	Fair
September 30, 2015	Value
Within one year	$	33,161
After one but within five years		98,388
After five but within ten years		46,705
After ten years		50,976
		229,230
Mortgage-backed securities		70,602
Total	$	299,832

The maturity distribution of the amortized cost and fair value, of debt securities classified as held-to-maturity at September 30, 2015, is summarized as follows:

	Amortized		Fair
September 30, 2015	Cost		Value
Within one year
After one but within five years	$	503	$	515
After five but within ten years		—		—
After ten years		6,866		6,929
		7,369		7,444
Mortgage-backed securities		5,738		6,138
Total	$	13,107	$	13,582

Securities with a carrying value of $206,467 and $216,192 at September 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits and repurchase agreements as required or permitted by law.

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on a case-by-case basis. At September 30, 2015 and December 31, 2014, there were no significant concentrations of credit risk from any one issuer, with the exception of 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 with unrealized losses for which an other-than-temporary impairment (“OTTI”) has not been recognized at September 30, 2015 and December 31, 2014, 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
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2015	Value		Losses		Value		Losses		Value		Losses
U.S. Government-sponsored enterprises	$	3,006	$	1	$		$		$	3,006	$	1
State and municipals:
Taxable						546		19		546		19
Tax-exempt		41,034		325		789		27		41,823		352
Mortgage-backed securities:
U.S. Government agencies		877		7		5,119		24		5,996		31
U.S. Government-sponsored enterprises		9,819		20		6,682		89		16,501		109
Total	$	54,736	$	353	$	13,136	$	159	$	67,872	$	512

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2014	Value		Losses		Value		Losses		Value		Losses
U.S. Government-sponsored enterprises	$	21,228	$	33	$	7,954	$	49	$	29,182	$	82
State and municipals:
Taxable						544		26		544		26
Tax-exempt		4,702		23		2,423		39		7,125		62
Mortgage-backed securities:
U.S. Government agencies		20,148		167						20,148		167
U.S. Government-sponsored enterprises		22,870		226						22,870		226
Total	$	68,948	$	449	$	10,921	$	114	$	79,869	$	563

The Company had 97 investment securities, consisting of 76 tax-exempt state and municipal obligations, one taxable state and municipal obligation, one U.S. Government-sponsored enterprise security, and 19 mortgage-backed securities that were in unrealized loss positions at September 30, 2015. Of these securities, one taxable state and municipal obligation, eight mortgage-backed securities and three tax-exempt state and municipal securities were in a continuous unrealized loss position for twelve months or more. 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 September 30, 2015. There was no OTTI recognized for the three or nine months ended September 30, 2015 and 2014.

The Company had 52 investment securities, consisting of 16 tax-exempt state and municipal obligations, one taxable state and municipal obligation, nine U.S. Government-sponsored enterprise securities and 26 mortgage-backed securities that were in unrealized loss positions at December 31, 2014. Of these securities, two U.S. Government-sponsored enterprise securities, four tax-exempt state and municipal securities, and one taxable state and municipal obligation were in a continuous unrealized loss position for twelve months or more.

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Employee benefit plans (Tables)

9 Months Ended

Sep. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Components of Net Periodic Benefit Cost

	Postretirement Life
	Insurance Benefits
	Pension Benefits
Three Months Ended September 30,	2015		2014
Components of net periodic pension cost:
Service cost	$	174	$	169
Interest cost		(233)		(227)
Amortization of unrecognized net gain		50		23
Net periodic other benefit cost	$	(9)	$	(35)
	Pension Benefits
Nine Months Ended September 30,	2015		2014
Components of net periodic pension cost:
Service cost	$	522	$	507
Interest cost		(699)		(681)
Amortization of unrecognized net gain		150		69
Net periodic other benefit cost	$	(27)	$	(105)

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Investment securities (Tables)

9 Months Ended

Sep. 30, 2015

Amortized Cost and Fair Value of Investment Securities Aggregated by Investment Category

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2015	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	15,915	$	152		—	$	16,067
U.S. Government-sponsored enterprises		79,077		547	$	1		79,623
State and municipals:
Taxable		15,886		864		19		16,731
Tax-exempt		113,198		3,913		302		116,809
Mortgage-backed securities:
U.S. Government agencies		34,027		198		31		34,194
U.S. Government-sponsored enterprises		36,282		235		109		36,408
Total	$	294,385	$	5,909	$	462	$	299,832
Held-to-maturity:
Tax-exempt state and municipals	$	7,369	$	125	$	50	$	7,444
Mortgage-backed securities:
U.S. Government agencies		88		1		—		89
U.S. Government-sponsored enterprises		5,650		399		—		6,049
Total	$	13,107	$	525	$	50	$	13,582

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2014	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	48,393	$	157			$	48,550
U.S. Government-sponsored enterprises		95,990		337	$	82		96,245
State and municipals:
Taxable		16,490		943		26		17,407
Tax-exempt		87,954		4,971		24		92,901
Mortgage-backed securities:
U.S. Government agencies		37,511		132		167		37,476
U.S. Government-sponsored enterprises		46,956		277		226		47,007
Total	$	333,294	$	6,817	$	525	$	339,586
Held-to-maturity:
Tax-exempt state and municipals	$	7,370	$	105	$	38	$	7,437
Mortgage-backed securities:
U.S. Government agencies		100		2				102
U.S. Government-sponsored enterprises		7,195		481				7,676
Total		14,665	$	588	$	38	$	15,215

Fair Value and Unrealized Losses of Investment Securities in Continuous Unrealized Loss Position

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2015	Value		Losses		Value		Losses		Value		Losses
U.S. Government-sponsored enterprises	$	3,006	$	1	$		$		$	3,006	$	1
State and municipals:
Taxable						546		19		546		19
Tax-exempt		41,034		325		789		27		41,823		352
Mortgage-backed securities:
U.S. Government agencies		877		7		5,119		24		5,996		31
U.S. Government-sponsored enterprises		9,819		20		6,682		89		16,501		109
Total	$	54,736	$	353	$	13,136	$	159	$	67,872	$	512

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2014	Value		Losses		Value		Losses		Value		Losses
U.S. Government-sponsored enterprises	$	21,228	$	33	$	7,954	$	49	$	29,182	$	82
State and municipals:
Taxable						544		26		544		26
Tax-exempt		4,702		23		2,423		39		7,125		62
Mortgage-backed securities:
U.S. Government agencies		20,148		167						20,148		167
U.S. Government-sponsored enterprises		22,870		226						22,870		226
Total	$	68,948	$	449	$	10,921	$	114	$	79,869	$	563

Available-for-Sale Securities [Member]

Maturity Distribution of Debt Securities

	Fair
September 30, 2015	Value
Within one year	$	33,161
After one but within five years		98,388
After five but within ten years		46,705
After ten years		50,976
		229,230
Mortgage-backed securities		70,602
Total	$	299,832

Held-to-maturity Securities [Member]

Maturity Distribution of Debt Securities

	Amortized		Fair
September 30, 2015	Cost		Value
Within one year
After one but within five years	$	503	$	515
After five but within ten years		—		—
After ten years		6,866		6,929
		7,369		7,444
Mortgage-backed securities		5,738		6,138
Total	$	13,107	$	13,582

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Employee benefit plans

9 Months Ended

Sep. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Employee benefit plans

8. Employee benefit plans:

The Company provides an Employee Stock Ownership Plan (“ESOP”) and a Retirement Profit Sharing Plan. The Company also maintains a Supplemental Executive Retirement Plan (“SERP”), an Employees’ Pension Plan, which is currently frozen, and a Postretirement Plan Life Insurance plan which was curtailed in 2013.

For the three and nine months ended September 30, salaries and employee benefits expense includes approximately $368 and $820 in 2015 and $581 and $1,744 in 2014 relating to the employee benefit plans.

Components of net periodic benefit cost are as follows:

	Postretirement Life
	Insurance Benefits
	Pension Benefits
Three Months Ended September 30,	2015		2014
Components of net periodic pension cost:
Service cost	$	174	$	169
Interest cost		(233)		(227)
Amortization of unrecognized net gain		50		23
Net periodic other benefit cost	$	(9)	$	(35)
	Pension Benefits
Nine Months Ended September 30,	2015		2014
Components of net periodic pension cost:
Service cost	$	522	$	507
Interest cost		(699)		(681)
Amortization of unrecognized net gain		150		69
Net periodic other benefit cost	$	(27)	$	(105)

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Other assets

9 Months Ended

Sep. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other assets

6. Other assets:

The components of other assets at September 30, 2015, and December 31, 2014 are summarized as follows:

		September 30, 2015		December 31, 2014
Other real estate owned	$	457	$	561
Investment in residential housing program		6,894		4,329
Mortgage servicing rights		514		676
Bank owned life insurance		30,575		29,983
Restricted equity securities		3,344		3,687
Other assets		14,816		13,830
Total	$	56,600	$	53,066

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Fair value estimates

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair value estimates

7. Fair value estimates:

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

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

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

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

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

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

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

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

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

Cash and cash equivalents: The carrying values of cash and cash equivalents as reported on the balance sheet approximate fair value.

Investment securities: The fair values of U.S. Treasury securities and marketable equity securities are based on quoted market prices from active exchange markets. The fair values of debt securities are based on pricing from a matrix pricing model.

Loans held for sale: The fair values of loans held for sale are based upon current delivery prices in the secondary mortgage market.

Net loans: For adjustable-rate loans that re-price frequently and with no significant credit risk, fair values are based on carrying values. The fair values of other non-impaired loans are estimated using discounted cash flow analysis, using interest rates currently offered in the market for loans with similar terms to borrowers of similar credit risk. Fair values for impaired loans are estimated using discounted cash flow analysis determined by the loan review function or underlying collateral values, where applicable.

Loans acquired in connection with business combinations are recorded at their acquisition date fair value. In order to record the loans at fair value, management made three different types of fair value adjustments. A market rate adjustment was made to adjust for the movement in market interest rates, irrespective of credit adjustments, compared to the stated rates of the acquired loans. A credit adjustment was made on pools of homogeneous loans representing the changes in credit quality of the underlying borrowers from the loan inception to the acquisition date. The credit adjustment on distressed loans represents the portion of the loan balance that has been deemed uncollectible based on the management’s expectations of future cash flows for each respective loan.

Mortgage servicing rights: To determine the fair value, the Company estimates the present value of future cash flows incorporating assumptions such as cost of servicing, discount rates, prepayment speeds and default rates.

Accrued interest receivable: The carrying value of accrued interest receivable as reported on the balance sheet approximates fair value.

Restricted equity securities: The carrying values of restricted equity securities approximate fair value, due to the lack of marketability for these securities.

Deposits: The fair values of noninterest-bearing deposits and savings, NOW and money market accounts are the amounts payable on demand at the reporting date. The fair value estimates do not include the benefit that results from such low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. The carrying values of adjustable-rate, fixed-term time deposits approximate their fair values at the reporting date. For fixed-rate time deposits, the present value of future cash flows is used to estimate fair values. The discount rates used are the current rates offered for time deposits with similar maturities.

The fair value assigned to the core deposit intangible asset represents the future economic benefit of the potential cost savings from acquiring core deposits in the 2013 Penseco merger compared to the cost of obtaining alternative funding such as brokered deposits from market sources. Management utilized an income valuation approach to present value the estimated future cash savings in order to determine the fair value of the intangible asset.

Short-term borrowings: The carrying values of short-term borrowings approximate fair value.

Long-term debt: The fair value of fixed-rate long-term debt is based on the present value of future cash flows. The discount rate used is the current rate offered for long-term debt with the same maturity.

Accrued interest payable: The carrying value of accrued interest payable as reported on the balance sheet approximates fair value.

Off-balance sheet financial instruments:

The majority of commitments to extend credit, unused portions of lines of credit and standby letters of credit carry current market interest rates if converted to loans. Because such commitments are generally unassignable of either the Company or the borrower, they only have value to the Company and the borrower. None of the commitments are subject to undue credit risk. The estimated fair values of off-balance sheet financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of off-balance sheet financial instruments was not material at September 30, 2015 and December 31, 2014.

Assets and liabilities measured at fair value on a recurring basis at September 30, 2015 and December 31, 2014 are summarized as follows:

	Fair Value Measurement Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
September 30, 2015	Amount		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury securities	$	16,067	$	16,067			$
U.S. Government-sponsored enterprises		79,623		-	$	79,623		-
State and Municipals:
Taxable		16,731		-		16,731		-
Tax-exempt		116,809		-		116,809		-
Mortgage-backed securities:
U.S. Government agencies		34,194		-		34,194		-
U.S. Government-sponsored enterprises		36,408		-		36,408		-
Total	$	299,832	$	16,067	$	283,765	$	—

	Fair Value Measurement Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
December 31, 2014	Amount		(Level 1)		(Level 2)		(Level 3)
U.S. Government-sponsored enterprises	$	48,550		48,550	$		$
U.S. Government-sponsored enterprises		96,245				96,245
State and Municipals:
Taxable		17,407				17,407
Tax-exempt		92,901				92,901
Mortgage-backed securities:
U.S. Government agencies		37,476				37,476
U.S. Government-sponsored enterprises		47,007				47,007
Total	$	339,586	$	48,550	$	291,036	$

Assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014 are summarized as follows:

	Fair Value Measurement Using
			Quoted Prices in	Significant	Significant
			Active Markets for	Other Observable	Unobservable
			Identical Assets	Inputs	Inputs
September 30, 2015	Amount		(Level 1)	(Level 2)	(Level 3)
Impaired loans	$	7,031			$	7,031
Other real estate owned	$	348			$	348

	Fair Value Measurement Using
			Quoted Prices in	Significant Other	Significant
			Active Markets for	Observable	Unobservable
			Identical Assets	Inputs	Inputs
December 31, 2014	Amount		(Level 1)	(Level 2)	(Level 3)
Impaired loans	$	4,414			$	4,414
Other real estate owned	$	218			$	218

Fair values of impaired loans are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

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

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value				Range
September 30, 2015	Estimate		Valuation Techniques	Unobservable Input	(Weighted Average)
Impaired loans	$	7,031	Appraisal of collateral	Appraisal adjustments	3.0% to 77.0%(58.0)%
				Liquidation expenses	3.0% to 6.0%(5.4)%
Other real estate owned	$	348	Appraisal of collateral	Appraisal adjustments	20.0% to 77.9%(42.4)%
				Liquidation expenses	3.0% to 6.0%(5.0)%

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value				Range
December 31, 2014	Estimate		Valuation Techniques	Unobservable Input	(Weighted Average)
Impaired loans	$	4,414	Appraisal of collateral	Appraisal adjustments	2.6% to 61.1%(24.5)%
				Liquidation expenses	3.0% to 6.0%(5.5)%
Other real estate owned	$	218	Appraisal of collateral	Appraisal adjustments	19.7% to 47.8%(30.5)%
				Liquidation expenses	3.0% to 6.0%(5.0)%

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

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

The carrying and fair values of the Company’s financial instruments at September 30, 2015 and December 31, 2014 and their placement within the fair value hierarchy are as follows:

					Fair Value Hierarchy
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
September 30, 2015	Value		Value		(level 1)		(level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	40,985	$	40,985	$	40,985
Investment securities:
Available-for-sale		299,832		299,832	$	16,067	$	283,765
Held-to-maturity		13,107		13,582				13,582
Loans held for sale		3,439		3,445				3,445
Net loans		1,258,502		1,271,728					$	1,271,728
Accrued interest receivable		5,327		5,327				5,327
Mortgage servicing rights		514		1,114				1,114
Restricted equity securities		3,344		3,344				3,344
Total	$	1,625,050	$	1,639,357
Financial liabilities:
Deposits	$	1,444,650	$	1,446,393				1,446,393
Short-term borrowings		30,250		30,250				30,250
Long-term debt		31,000		32,614				32,614
Accrued interest payable		496		496			$	496
Total	$	1,506,396	$	1,509,753

					Fair Value Hierarchy
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
December 31, 2014	Value		Value		(level 1)		(level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	31,426	$	31,426	$	31,426
Investment securities:
Available-for-sale		339,586		339,586	$	48,550	$	291,036
Held-to-maturity		14,665		15,215				15,215
Loans held for sale		3,486		3,492				3,492
Net loans		1,199,556		1,210,369					$	1,210,369
Accrued interest receivable		5,580		5,580				5,580
Mortgage servicing rights		676		1,466				1,466
Restricted equity securities		3,687		3,687				3,687
Total	$	1,598,662	$	1,610,821
Financial liabilities:
Deposits	$	1,425,558	$	1,427,081				1,427,081
Short-term borrowings		19,557		19,557				19,557
Long-term debt		33,140		34,772				34,772
Accrued interest payable		574		574			$	574
Total	$	1,478,829	$	1,481,984

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Summary of significant accounting policies (Policies)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Nature of operations

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 subsidiary, Peoples Security Bank and Trust Company (“Peoples Bank”), including its subsidiaries, Peoples Advisors, LLC and Penseco Realty, Inc. (collectively, the “Company” or “Peoples”). The Company services its retail and commercial customers through twenty-six full-service community banking offices located within the Lackawanna, Lehigh, Luzerne, Monroe, Susquehanna, Wayne and Wyoming Counties of Pennsylvania and Broome County of New York.

Basis of presentation

Basis of presentation:

The accompanying unaudited consolidated financial statements of 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 to 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 and nine months ended and as of September 30, 2015, are not necessarily indicative of the results of operations and financial position that may be expected in the future.

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 loan losses, fair value of financial instruments, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the valuation of deferred tax assets, determination of other-than-temporary impairment losses on securities, impairment of goodwill and fair value of assets acquired and liabilities assumed in business combinations. 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, 2014.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2015, 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.

Recent accounting standards

Recent accounting standards:

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.”

ASU 2015-03 requires that debt issuance costs be reported in the balance sheet as a direct deduction from the face amount of the related liability, consistent with the presentation of debt discounts. Prior to the amendments, debt issuance costs were presented as a deferred charge (i.e., an asset) on the balance sheet. The ASU provides examples illustrating the balance sheet presentation of notes net of their related discounts and debt issuance costs. Further, the amendments require the amortization of debt issuance costs to be reported as interest expense. Similarly, debt issuance costs and any discount or premium are considered in the aggregate when determining the effective interest rate on the debt.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The amendments must be applied retrospectively. The adoption of ASU 2015-03 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

In July 2015, the FASB issued ASU 2015-12, “Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient.”

The amendments in ASU 2015-12 (i) require fully benefit-responsive investment contracts to be measured, presented and disclosed only at contract value, not fair value; (ii) simplify the investment disclosure requirements; and (iii) provide a measurement date practical expedient for employee benefit plans.

Part I. Fully Benefit-Responsive Investment Contracts – the amendments designate contract value as the only required measurement for fully benefit-responsive investments contracts within the scope of Topics 962 and 965, eliminating the requirement to measure, present and disclose such contracts also at fair value and reconcile fair value to contract value.

Part II. Plan Investment Disclosures – the amendments eliminate certain disclosure requirements for both participant-directed investments and nonparticipant-directed investments, and also reduce disclosures required specifically for investments using the net asset value per share practical expedient. The amendments also require that both participant-directed and nonparticipant-directed investments be grouped only by general type, eliminating the need to disaggregate the investments in multiple ways (i.e., also on the basis of nature, characteristics, and risks as required by Topic 820, Fair Value Measurement).

Part III. Measurement Date Practical Expedient – the amendments provide a measurement date practical expedient for employee benefit plans similar to the practical expedient allowing employers to measure defined benefit plan assets on a month-end date that is nearest to the employer’s fiscal year-end, when the fiscal period does not coincide with a month-end.

The amendments are effective for fiscal years beginning after December 15, 2015. Early adoption is permitted for all three parts individually or in the aggregate. Parts I and II of the ASU should be applied retrospectively, while Part III should be applied prospectively. Only the nature and reason for the change in accounting principle is required to be disclosed in the annual period of adoption. The adoption of ASU 2015-12 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

InAugust 2015, the FASB issued ASU 2015-14, “Revenue from Contracts (Topic 606): Deferral of the Effective Date.”

ASU 2015-14 defers the effective date of the new revenue recognition standard by one year. As such, it now takes effect for public entities in fiscal years beginning after December 15, 2017.  Early adoption is permitted for any entity that chooses to adopt the new standard as of the original effective date. The adoption of ASU 2015-14 on January 1, 2018, is not expected to have a material effect on the operating results or financial position of the Company.

In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.”

ASU 2015-15 codifies a Securities and Exchange Commission (“SEC”) staff announcement that entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. ASU 2015-15 clarifies that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 is effective immediately. The adoption of ASU 2015-15 did not have a material effect on the operating results or financial position of the Company.

In September, 2015, the FASB issued ASU 2015-16, “Business Combination (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.”

ASU 2015-16 requires adjustments to provisional amounts that are identified during the measurement period to be recognized in the reporting period in which the adjustment amounts are determined. This includes any effect on earnings of changes in depreciation, amortization, or other income effects as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.

In addition, the amendments in the proposed Update would require an entity to disclose, either on the face of the income statement or in the notes, the nature and amount of measurement-period adjustments recognized in the current period, including separately the amounts in current-period income statement line items that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.

The amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The amendments in this Update should be applied prospectively to measurement-period adjustments that occur after the effective date of this ASU. The adoption of ASU 2015-16 on January 1, 2016, is not expected to have a material effect on the operating results or financial position of the Company.

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Loans, net and allowance for loan losses - Additional Information (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015 USD ($) security	Sep. 30, 2014 USD ($) security	Sep. 30, 2015 USD ($) security	Sep. 30, 2014 USD ($) security	Dec. 31, 2014 USD ($)
Receivables [Abstract]
Net deferred loan costs	$ 686		$ 686		$ 651
Loans receivable, related parties, considered as nonaccrual, past due or restructured or potential credit risk	$ 2,962	$ 2,500	$ 2,962	$ 2,500	$ 2,933
Number of loans modified as troubled debt restructuring | security	0	1	8	1
Number of defaults on loans restructured	$ 0	$ 0	$ 0	$ 0
Loans modified as troubled debt restructuring			$ 542

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Other assets (Tables)

9 Months Ended

Sep. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Components of Other Assets

		September 30, 2015		December 31, 2014
Other real estate owned	$	457	$	561
Investment in residential housing program		6,894		4,329
Mortgage servicing rights		514		676
Bank owned life insurance		30,575		29,983
Restricted equity securities		3,344		3,687
Other assets		14,816		13,830
Total	$	56,600	$	53,066

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Other comprehensive income (loss) - Other Comprehensive Income (Loss) and Related Tax Effects (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Unrealized gain (loss) on investment securities available-for-sale	$ 826	$ (825)	$ 134	$ 2,811
Net gain on the sale of investment securities available-for-sale(1)	(147)	(701)	(979)	(861)
Other comprehensive income (loss) gain before taxes	679	(1,526)	(845)	1,950
Income tax expense (benefit) related to other comprehensive loss	237	(534)	(296)	682
Other comprehensive income (loss)	442	(992)	(549)	1,268
Reclassification Out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Unrealized gain (loss) on investment securities available-for-sale	826	(825)	134	2,811
Net gain on the sale of investment securities available-for-sale(1)	(147)	(701)	(979)	(861)
Other comprehensive income (loss) gain before taxes	679	(1,526)	(845)	1,950
Income tax expense (benefit) related to other comprehensive loss	237	(534)	(296)	682
Other comprehensive income (loss)	$ 442	$ (992)	$ (549)	$ 1,268

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Employee benefit plans - Additional Information (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Compensation and Retirement Disclosure [Abstract]
Service cost	$ 174	$ 169	$ 522	$ 507
Interest cost	(233)	(227)	(699)	(681)
Amortization of unrecognized net loss	50	23	150	69
Net periodic pension cost	$ (9)	$ (35)	$ (27)	$ (105)

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Loans, net and allowance for loan losses - Summarize Information in Concerning to Impaired Loans (Details 8) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance, Total	$ 6,755	$ 10,320	$ 6,755	$ 10,320	$ 8,066
Unpaid Principal Balance, With no related allowance, Total	9,093	13,030	9,093	13,030	10,714
Average Recorded Investment, With no related allowance, Total	6,644	12,844	6,911	14,868	13,438
Interest Income Recognized, With no related allowance, Total	59	40	145	132	265
Recorded Investment, With an allowance recorded, Total	9,163	6,441	9,163	6,441	6,525
Unpaid Principal Balance, With an allowance recorded, Total	9,163	6,441	9,163	6,441	6,525
Related Allowance, With an allowance recorded, Total	3,587	2,115	3,587	2,115	2,959
Average Recorded Investment, With an allowance recorded, Total	8,818	4,922	7,877	4,072	4,680
Interest Income Recognized, With an allowance recorded, Total	41	38	150	110	97
Recorded Investment, Total	15,918	16,761	15,918	16,761	14,591
Unpaid Principal Balance, Total	18,256	19,471	18,256	19,471	17,239
Related Allowance, With an allowance recorded, Total	3,587	2,115	3,587	2,115	2,959
Average Recorded Investment, Total	15,462	17,766	14,788	18,940	18,118
Interest Income Recognized, Total	100	78	295	242	362
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance, Total	1,561	2,352	1,561	2,352	2,379
Unpaid Principal Balance, With no related allowance, Total	3,024	4,076	3,024	4,076	4,084
Average Recorded Investment, With no related allowance, Total	1,610	2,501	1,980	2,771	2,669
Interest Income Recognized, With no related allowance, Total	33	19	70	71	141
Recorded Investment, With an allowance recorded, Total	2,596	1,781	2,596	1,781	1,569
Unpaid Principal Balance, With an allowance recorded, Total	2,596	1,781	2,596	1,781	1,569
Related Allowance, With an allowance recorded, Total	2,032	1,163	2,032	1,163	1,240
Average Recorded Investment, With an allowance recorded, Total	1,954	1,769	1,675	1,825	1,787
Interest Income Recognized, With an allowance recorded, Total	13	20	40	63	58
Recorded Investment, Total	4,157	4,133	4,157	4,133	3,948
Unpaid Principal Balance, Total	5,620	5,857	5,620	5,857	5,653
Related Allowance, With an allowance recorded, Total	2,032	1,163	2,032	1,163	1,240
Average Recorded Investment, Total	3,564	4,270	3,655	4,596	4,456
Interest Income Recognized, Total	46	39	110	134	199
Real Estate Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance, Total	2,410	5,275	2,410	5,275	2,932
Unpaid Principal Balance, With no related allowance, Total	3,102	6,074	3,102	6,074	3,690
Average Recorded Investment, With no related allowance, Total	2,275	7,587	2,335	9,238	7,944
Interest Income Recognized, With no related allowance, Total	25	20	72	58	120
Recorded Investment, With an allowance recorded, Total	4,277	3,893	4,277	3,893	3,525
Unpaid Principal Balance, With an allowance recorded, Total	4,277	3,893	4,277	3,893	3,525
Related Allowance, With an allowance recorded, Total	376	660	376	660	912
Average Recorded Investment, With an allowance recorded, Total	4,797	2,640	4,389	1,816	2,293
Interest Income Recognized, With an allowance recorded, Total	21	14	86	43	28
Recorded Investment, Total	6,687	9,168	6,687	9,168	6,457
Unpaid Principal Balance, Total	7,379	9,967	7,379	9,967	7,215
Related Allowance, With an allowance recorded, Total	376	660	376	660	912
Average Recorded Investment, Total	7,072	10,227	6,724	11,054	10,237
Interest Income Recognized, Total	46	34	158	101	148
Real Estate Residential [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance, Total	2,784	2,629	2,784	2,629	2,672
Unpaid Principal Balance, With no related allowance, Total	2,967	2,816	2,967	2,816	2,857
Average Recorded Investment, With no related allowance, Total	2,759	2,675	2,579	2,758	2,731
Interest Income Recognized, With no related allowance, Total	1	1	3	3	4
Recorded Investment, With an allowance recorded, Total	2,099	750	2,099	750	1,387
Unpaid Principal Balance, With an allowance recorded, Total	2,099	750	2,099	750	1,387
Related Allowance, With an allowance recorded, Total	1,000	275	1,000	275	769
Average Recorded Investment, With an allowance recorded, Total	1,903	504	1,697	428	590
Interest Income Recognized, With an allowance recorded, Total	7	4	24	4	10
Recorded Investment, Total	4,883	3,379	4,883	3,379	4,059
Unpaid Principal Balance, Total	5,066	3,566	5,066	3,566	4,244
Related Allowance, With an allowance recorded, Total	1,000	275	1,000	275	769
Average Recorded Investment, Total	4,662	3,179	4,276	3,186	3,321
Interest Income Recognized, Total	8	5	27	7	14
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance, Total		64		64	83
Unpaid Principal Balance, With no related allowance, Total		64		64	83
Average Recorded Investment, With no related allowance, Total		81	17	101	94
Recorded Investment, With an allowance recorded, Total	191	17	191	17	44
Unpaid Principal Balance, With an allowance recorded, Total	191	17	191	17	44
Related Allowance, With an allowance recorded, Total	179	17	179	17	38
Average Recorded Investment, With an allowance recorded, Total	164	9	116	3	10
Interest Income Recognized, With an allowance recorded, Total					1
Recorded Investment, Total	191	81	191	81	127
Unpaid Principal Balance, Total	191	81	191	81	127
Related Allowance, With an allowance recorded, Total	179	17	179	17	38
Average Recorded Investment, Total	$ 164	$ 90	$ 133	$ 104	104
Interest Income Recognized, Total					$ 1

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Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2013	$ 15,614	$ 146,109	$ 84,008	$ (698)	$ (6,241)	$ 238,792
Net income			13,265			13,265
Other comprehensive loss, net of income taxes				1,268		1,268
Dividends declared			(7,021)			(7,021)
Shares retired	(7)	(102)				(109)
Reissuance under option plan		28			11	39
Repurchase and held					(70)	(70)
Retirement of stock options		(95)				(95)
Retirement of treasury shares	(510)	(5,790)			$ 6,300
Balance at Sep. 30, 2014	15,097	140,150	90,252	570		246,069
Balance at Dec. 31, 2014	15,097	140,214	92,297	(829)		246,779
Stock based compensation		52				52
Net income			13,884			13,884
Other comprehensive loss, net of income taxes				(549)		(549)
Dividends declared			(7,016)			(7,016)
Shares retired	(59)	(1,003)				(1,062)
Balance at Sep. 30, 2015	$ 15,038	$ 139,263	$ 99,165	$ (1,378)		$ 252,088

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Earnings per share

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Earnings per share

3. 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.

There were no shares considered anti-dilutive for the three and nine month periods ended September 30, 2015 and 2014.

	2015				2014
For the Three Months Ended September 30,	Basic		Diluted		Basic		Diluted
Net Income (Numerator)	$	4,409	$	4,409	$	5,236	$	5,236
Average common shares outstanding (Denominator)		7,536,824		7,536,824		7,548,358		7,548,358
Earnings per share	$	0.58	$	0.58	$	0.70	$	0.70
	2015				2014
For the Nine Months Ended September 30,	Basic		Diluted		Basic		Diluted
Net Income (Numerator)	$	13,884	$	13,884	$	13,265	$	13,265
Average common shares outstanding (Denominator)		7,543,751		7,543,751		7,548,983		7,566,456
Earnings per share	$	1.84	$	1.84	$	1.76	$	1.76

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Earnings per share - Additional Information (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Earnings Per Share [Abstract]
Anti-dilutive shares	0	0	0	0

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Loans, net and allowance for loan losses - Major Classification of Loans Portfolio Summarized by Credit Quality (Details 5) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	$ 1,270,545	$ 1,209,894
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	342,937	319,590
Real Estate Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	529,499	493,481
Real Estate Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	306,740	322,454
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	91,369	74,369
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	1,218,996	1,164,672
Pass [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	329,803	306,066
Pass [Member] | Real Estate Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	502,017	472,270
Pass [Member] | Real Estate Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	295,998	312,086
Pass [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	91,178	74,250
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	15,523	18,129
Special Mention [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	3,690	6,135
Special Mention [Member] | Real Estate Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	10,395	9,858
Special Mention [Member] | Real Estate Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	1,438	2,123
Special Mention [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net		13
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	36,026	27,093
Substandard [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	9,444	7,389
Substandard [Member] | Real Estate Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	17,087	11,353
Substandard [Member] | Real Estate Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	9,304	8,245
Substandard [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net	$ 191	$ 106

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Loans, net and allowance for loan losses (Tables)

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Major Classifications of Loans Outstanding

		September 30, 2015		December 31, 2014
Commercial	$	342,937	$	319,590
Real estate:
Commercial		529,499		493,481
Residential		306,740		322,454
Consumer		91,369		74,369
Total	$	1,270,545	$	1,209,894

Changes in Allowance for Loan Losses Account and Related Loans by Major Classification of Loans

The changes in the allowance for loan losses account by major classification of loan for the three and nine months ended September 30, 2015 and 2014 are summarized as follows:

			Real estate
September 30, 2015	Commercial		Commercial		Residential			Consumer		Total
Allowance for loan losses:
Beginning Balance July 1, 2015	$	2,435	$	3,190	$	4,027	$		1,776	$	11,428
Charge-offs				(120)		(128)			(67)		(315)
Recoveries		2		2		2			24		30
Provisions				342		369			189		900
Ending balance	$	2,437	$	3,414	$	4,270	$		1,922	$	12,043
			Real estate
September 30, 2014	Commercial		Commercial		Residential			Consumer		Total
Allowance for loan losses:
Beginning Balance July 1, 2014	$	2,201	$	2,675	$	3,458		$	1,288	$	9,622
Charge-offs				(57)		(56)			(64)		(177)
Recoveries		5		22					33		60
Provisions		152		185		239			90		666
Ending balance	$	2,358	$	2,825	$	3,641		$	1,347	$	10,171

			Real estate
September 30, 2015	Commercial		Commercial		Residential		Consumer		Total
Allowance for loan losses:
Beginning Balance January 1, 2015	$	2,321	$	3,037	$	3,690	$	1,290	$	10,338
Charge-offs		(40)		(199)		(362)		(253)		(854)
Recoveries		66		8		10		75		159
Provisions		90		568		932		810		2,400
Ending balance	$	2,437	$	3,414	$	4,270	$	1,922	$	12,043
			Real estate
September 30, 2014	Commercial		Commercial		Residential		Consumer		Total
Allowance for loan losses:
Beginning Balance January 1, 2014	$	2,008	$	2,394	$	3,135	$	1,114	$	8,651
Charge-offs		(376)		(489)		(566)		(219)		(1,650)
Recoveries		6		291		38		111		446
Provisions		720		629		1,034		341		2,724
Ending balance	$	2,358	$	2,825	$	3,641	$	1,347	$	10,171

The allocation of the allowance for loan losses and the related loans by major classifications of loans at September 30, 2015 and December 31, 2014 is summarized as follows:

			Real estate
September 30, 2015	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Ending balance	$	2,437	$	3,414	$	4,270	$	1,922	$	$	12,043
Ending balance: individually evaluated for impairment		2,032		269		1,000		179			3,480
Ending balance: collectively evaluated for impairment		405		3,038		3,270		1,743			8,456
Ending balance: loans acquired with deteriorated credit quality	$		$	107	$		$			$	107
Loans receivable:
Ending balance	$	342,937	$	529,499	$	306,740	$	91,369	$	$	1,270,545
Ending balance: individually evaluated for impairment		3,120		5,309		4,829		191			13,449
Ending balance: collectively evaluated for impairment		338,780		522,812		301,857		91,178			1,254,627
Ending balance: loans acquired with deteriorated credit quality		1,037		1,378		54				$	2,469

			Real estate
December 31, 2014	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Ending balance	$	2,321	$	3,037	$	3,690	$	1,290	$	$	10,338
Ending balance: individually evaluated for impairment		1,072		805		767		38			2,682
Ending balance: collectively evaluated for impairment		1,081		2,125		2,921		1,252			7,379
Ending balance: loans acquired with deteriorated credit quality	$	168	$	107	$	2	$			$	277
Loans receivable:
Ending balance	$	319,590	$	493,481	$	322,454	$	74,369	$	$	1,209,894
Ending balance: individually evaluated for impairment		2,595		5,084		4,001		127			11,807
Ending balance: collectively evaluated for impairment		315,642		487,024		318,395	$	74,242			1,195,303
Ending balance: loans acquired with deteriorated credit quality	$	1,353	$	1,373	$	58			$	$	2,784

Major Classification of Loans Portfolio Summarized by Credit Quality

			Special
September 30, 2015	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	329,803	$	3,690	$	9,444	$	$	342,937
Real estate:
Commercial		502,017		10,395		17,087			529,499
Residential		295,998		1,438		9,304			306,740
Consumer		91,178				191			91,369
Total	$	1,218,996	$	15,523	$	36,026	$	$	1,270,545

			Special
December 31, 2014	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	306,066	$	6,135	$	7,389	$	$	319,590
Real estate:
Commercial		472,270		9,858		11,353			493,481
Residential		312,086		2,123		8,245			322,454
Consumer		74,250		13		106			74,369
Total	$	1,164,672	$	18,129	$	27,093	$	$	1,209,894

Information Concerning Nonaccrual Loans by Major Loan Classification

		September 30, 2015		December 31, 2014
Commercial	$	1,444	$	1,322
Real estate:
Commercial		3,415		3,732
Residential		4,326		3,523
Consumer		190		122
Total	$	9,375	$	8,699

Major Classifications of Loans by Past Due Status

					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
September 30, 2015	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	503	$		$	1,444	$	1,947	$	340,990	$	342,937
Real estate:
Commercial		1,371		908		3,415		5,694		523,805		529,499
Residential		883		631		5,684		7,198		299,542		306,740	$	1,358
Consumer		608		258		463		1,329		90,040		91,369		273
Total	$	3,365	$	1,797	$	11,006	$	16,168	$	1,254,377	$	1,270,545	$	1,631

					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
December 31, 2014	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	898	$	117	$	1,322	$	2,337	$	317,253	$	319,590
Real estate:
Commercial		2,100		888		3,868		6,856		486,625		493,481	$	136
Residential		3,154		1,239		4,585		8,978		313,476		322,454		1,062
Consumer		848		247		547		1,642		72,727		74,369		425
Total	$	7,000	$	2,491	$	10,322	$	19,813	$	1,190,081	$	1,209,894	$	1,623

Summarize Information in Concerning to Impaired Loans

								This Quarter				Year-to-Date
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
September 30, 2015	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance:
Commercial	$	1,561	$	3,024			$	1,610	$	33	$	1,980	$	70
Real estate:
Commercial		2,410		3,102				2,275		25		2,335		72
Residential		2,784		2,967				2,759		1		2,579		3
Consumer												17
Total		6,755		9,093				6,644		59		6,911		145
With an allowance recorded:
Commercial		2,596		2,596	$	2,032		1,954		13		1,675		40
Real estate:
Commercial		4,277		4,277		376		4,797		21		4,389		86
Residential		2,099		2,099		1,000		1,903		7		1,697		24
Consumer		191		191		179		164				116
Total		9,163		9,163		3,587		8,818		41		7,877		150
Commercial		4,157		5,620		2,032		3,564		46		3,655		110
Real estate:
Commercial		6,687		7,379		376		7,072		46		6,724		158
Residential		4,883		5,066		1,000		4,662		8		4,276		27
Consumer		191		191		179		164				133
Total	$	15,918	$	18,256	$	3,587	$	15,462	$	100	$	14,788	$	295

							For the Year Ended
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2014	Investment		Balance		Allowance		Investment		Recognized
With no related allowance:
Commercial	$	2,379	$	4,084			$	2,669		141
Real estate:
Commercial		2,932		3,690				7,944		120
Residential		2,672		2,857				2,731		4
Consumer		83		83				94
Total		8,066		10,714				13,438		265
With an allowance recorded:
Commercial		1,569		1,569	$	1,240		1,787	$	58
Real estate:
Commercial		3,525		3,525		912		2,293		28
Residential		1,387		1,387		769		590		10
Consumer		44		44		38		10		1
Total		6,525		6,525		2,959		4,680		97
Commercial		3,948		5,653		1,240		4,456		199
Real estate:
Commercial		6,457		7,215		912		10,237		148
Residential		4,059		4,244		769		3,321		14
Consumer		127		127		38		104		1
Total	$	14,591	$	17,239	$	2,959	$	18,118	$	362

								This Quarter				Year-to-Date
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
September 30, 2014	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance:
Commercial	$	2,352	$	4,076			$	2,501		19	$	2,771		71
Real estate:
Commercial		5,275		6,074				7,587		20		9,238		58
Residential		2,629		2,816				2,675		1		2,758		3
Consumer		64		64				81				101
Total		10,320		13,030				12,844		40		14,868		132
With an allowance recorded:
Commercial		1,781		1,781	$	1,163		1,769	$	20		1,825	$	63
Real estate:
Commercial		3,893		3,893		660		2,640		14		1,816		43
Residential		750		750		275		504		4		428		4
Consumer		17		17		17		9				3
Total		6,441		6,441		2,115		4,922		38		4,072		110
Commercial		4,133		5,857		1,163		4,270		39		4,596		134
Real estate:
Commercial		9,168		9,967		660		10,227		34		11,054		101
Residential		3,379		3,566		275		3,179		5		3,186		7
Consumer		81		81		17		90				104
Total	$	16,761	$	19,471	$	2,115	$	17,766	$	78	$	18,940	$	242