Company: PFIS
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001558370-25-003995
Chunk: 31

Company: PEOPLES FINANCIAL SERVICES CORP.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 7M
Chunk 31
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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations. 

Management’s Discussion and Analysis 2024 versus 2023 

Management’s Discussion and Analysis appearing on the following pages should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis 2024 versus 2023 contained in this Annual Report on Form 10-K. 

Critical Accounting Estimates: 

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires us to establish critical accounting policies and make accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during those reporting periods. 

An accounting estimate requires assumptions about uncertain matters that could have a material effect on the consolidated financial statements if a different amount within a range of estimates were used or if estimates changed from period to period. Readers of this report should understand that estimates are made considering facts and circumstances at a point in time, and changes in those facts and circumstances could produce results that differ from when those estimates were made. Management is required to make subjective and/or complex judgments about matters that are inherently uncertain and could be subject to revision as new information becomes available.  Critical estimates that are particularly susceptible to material change within future periods relate to the determination of ACL, impairment of goodwill and business combination. Actual amounts could differ from those estimates. 

ACL

The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The methodology for determining the ACL is considered a critical accounting estimate by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. 

We monitor the adequacy of the allowance quarterly and adjust the allowance as necessary through normal operations. The allowance is established through a provision for credit losses that is charged against income. Management cannot ensure that charge-offs in future periods will not exceed the ACL or that additional increases in the ACL will not be required, resulting in an adverse impact on operating results. 

The ACL increased $19.9 million to $41.8 million at December 31, 2024, from $