Company: PFIS
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001558370-25-003995
Chunk: 12

Company: PEOPLES FINANCIAL SERVICES CORP.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 12
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Item 1A.Risk Factors. 

In addition to the other information set forth in this report, one should carefully consider the factors discussed below, which could materially affect our business, financial condition or future results. The risks described below are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially adversely affect our business, financial condition and/or operating results. 

Risks Related to Interest Rates

Changes in interest rates could adversely impact our financial condition and results of operations. 

The Company’s profitability is dependent to a large extent on its net interest income, which is the difference between the interest income paid on its loans and investments and the interest the Company pays to third parties such as its depositors, lenders and debtholders. Changes in interest rates can impact profits and the fair values of certain assets and liabilities. Models that the Company uses to forecast and plan for the impact of rising and falling interest rates may fail to consider the impact of competition and other conditions affecting loans and deposit cash flow assumptions.

Periods of unusually low or volatile interest rates have a material effect on the Company’s earnings. Interest rate increases often result in larger payment requirements for our borrowers, which increase the potential for default. At the same time, the marketability of collateral securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. Until recently, we were in a rising interest rate environment.  However, in 2024 the FOMC’s interest rate policy shifted as inflationary pressure began to ease and economic growth moderated. Following a period of rate hikes in 2022 and 2023 aimed at curbing inflation, the FOMC began lowering rates in 2024, with the Federal Funds target rate ranging from 5.25% to 5.50% at year-end 2023, compared to a range of 4.25% to 4.50% at year end 2024.