How did PFIS's Q3 2024 earnings surprise analysts?

Peoples Financial Services (PFIS) reported a net loss of $4.34 million for the third quarter (Q3) of 2024, which was a significant decline from the net income of $6.75 million reported in the same quarter of the previous year. This unexpected turn of events can be attributed to several key factors:

1. **Non-Recurring Charges from Mergers and Acquisitions**: PFIS incurred substantial expenses related to the merger with FNCB Bancorp, Inc., which was completed on July 1, 2024. These non-recurring charges had a considerable impact on the net income, contributing to the negative surprise.
2. **Provision for Credit Losses**: The provision for credit losses increased significantly, amounting to $14.5 million. This increase was likely due to the economic conditions and the need to set aside more funds for potential loan defaults, which is a common practice in uncertain economic environments.
3. **Increased Interest Expenses**: The company reported higher interest expenses, which affected the net interest income after provision. This could be a result of the increased cost of deposits and other funding sources.
4. **Operating Expenses**: PFIS experienced higher operating expenses, including those related to the merger and acquisition activities. These increased costs further eroded the net income.

Despite these challenges, PFIS's revenue exceeded analyst estimates by 22%, and the earnings per share (EPS) surpassed expectations by 65%. However, the net loss reported in Q3 2024 was a surprise due to the unexpected magnitude of the non-recurring charges and the higher provisions for credit losses.

|code|Ticker|Name|Date|Net Income|market_code|
|---|---|---|---|---|---|
|PFIS|PFIS.O|Peoples Financial Services|2023 Q4|3630000|185|
|PFIS|PFIS.O|Peoples Financial Services|2024 Q1|3466000|185|
|PFIS|PFIS.O|Peoples Financial Services|2024 Q2|3282000|185|
|PFIS|PFIS.O|Peoples Financial Services|2024 Q3|-4337000|185|