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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(X)     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004,
                                                                                                         or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______

Commission file number 0-23863

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 X No____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No ______

PEOPLES FINANCIAL SERVICES CORP.

FORM 10-Q

For the Quarter Ended June 30, 2004

TABLE OF CONTENTS

PART I
ITEM 1. FINANCIAL STATEMENTS

1.     BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Peoples Financial Services Corp. (the “Corporation” or the “Company”) and its wholly owned subsidiary, Peoples National Bank (the “Bank”). All material intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Operating results for the six-month period ended June 30, 2004, are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

2.     EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

3.     OTHER COMPREHENSIVE INCOME

The components of other comprehensive income and related tax effects for the three months and six months ended June 30, 2004 and 2003 are as follows:

4.     STOCK-BASED COMPENSATION

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation costs have been recognized for options granted. Had compensation costs for stock options granted been determined based on the fair value at the grant dates for awards under the plan consistent with the provisions of SFAS No. 123, the Company’s net income and earnings per share for the six months and three months ended June 30, 2004 and 2003, would have been reduced to the proforma amounts indicated below:

5.     GUARANTEES

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Outstanding letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for standby letters of credit is represented by the contractual amount of those instruments. The Company had $1,928,000 of standby letters of credit as of June 30, 2004. The Bank uses the same credit policies in making conditional obligations as it does for on-balance sheet instruments.

The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Company requires collateral supporting these letters of credit as deemed necessary. The maximum undiscounted exposure related to these commitments at June 30, 2004 was $1,928,000 and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $1,109,000. The current amount of the liability as of June 30, 2004, for guarantees under standby letters of credit is not material.

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                   OPERATIONS

The following discussion and analysis of the consolidated financial statements of the Corporation is presented to provide insight into management’s assessment of financial results. The Corporation’s only subsidiary, Peoples National Bank provides financial services to individuals and businesses within the Bank’s primary market area made up of Susquehanna, Wyoming and northern Lackawanna counties in Pennsylvania, and southern Broome County in New York. The Bank is a member of the Federal Reserve System and subject to regulation, supervision, and examination by the Office of the Comptroller of the Currency.

CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING INFORMATION

Except for historical information, this Report may be deemed to contain “forward looking” information. Examples of forward looking information may include, but are not limited to (a) projections of or statements regarding future earnings, interest income, other income, earnings or loss per share, asset mix and quality, growth prospects, capital structure and other financial terms, (b) statements of plans and objectives of management or the Board of Directors, (c) statements of future economic performance, and (d) statements of assumptions, such as economic conditions in the market areas served by the Corporation and the Bank, underlying other statements and statements about the Corporation and the Bank or their respective businesses. Such forward looking information can be identified by the use of forward looking terminology such as “believes,” “expects,” “may,” “intends,” “will,” “should,” “anticipates,” or the negative of any of the foregoing or other variations thereon or comparable terminology, or by discussion of strategy. No assurance can be given that the future results covered by the forward looking information will be achieved. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward looking information. Important factors that could impact operating results include, but are not limited to, (i) the effects of changing economic conditions in both the market areas served by the Corporation and the Bank and nationally, (ii) credit risks of commercial, real estate, consumer and other lending activities, (iii) significant changes in interest rates, (iv) changes in federal and state banking laws and regulations which could affect operations, (v) funding costs, and (vi) other external developments which could materially affect business and operations.

CRITICAL ACCOUNTING POLICIES

Disclosure of the Company’s significant accounting policies is included in Note 1 to the consolidated financial statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Some of these policies are particularly sensitive requiring significant judgments, estimates and assumptions to be made by Management. Additional information is contained on page 21 of this report for the provision and allowance for loan losses.

OVERVIEW

Net income for the quarter decreased 14.9% to $2.188 million as compared to $2.572 million for the second quarter of 2003. Diluted earnings per share decreased to $0.69 per share for the second quarter of 2004, compared to $0.81 per share in the second quarter of 2003. At June 30, 2004, the Company had total assets of $383.853 million, total net loans of $236.340 million, and total deposits of $285.169 million.

FINANCIAL CONDITION

Cash and Cash Equivalents:

At June 30, 2004, cash, federal funds sold, and deposits with other banks totaled $13.981 million as compared to $6.056 million on December 31, 2003. The increase over the six months of 2004, has been due to the increase in Federal Funds Sold which had a balance of $0 at the end of 2003 and now has a balance of $6.390 million.

Management believes the liquidity needs of the Corporation are satisfied by the current balance of cash and cash equivalents, readily available access to traditional funding sources, and the portion of the investment and loan portfolios that matures within one year. The continuous decline in interest rates continues to increase liquidity. The current sources of funds will enable the Corporation to meet all its cash obligations as they come due.

Investments:

Investments totaled $115.335 million on June 30, 2004, decreasing by $791 thousand over the December 31, 2003, total of $116.126 million.

The total investment portfolio is held as available for sale. This strategy was implemented in 1995 to provide more flexibility in using the investment portfolio for liquidity purposes as well as providing more flexibility in selling when market opportunities occur.

Investments available for sale are accounted for at fair value with unrealized gains or losses, net of deferred income taxes, reported as a separate component of stockholders’ equity. The carrying value of investments as of June 30, 2004, included an unrealized loss of $1.782 million reflected as accumulated other comprehensive income (loss) of $(1.176) million in shareholders’ equity, net of deferred income tax benefit of $606 thousand. This compares to an unrealized gain of $1.508 million at December 31, 2003, reflected as accumulated other comprehensive income of $995 thousand, net of deferred income taxes of $513 thousand.

Management monitors the earnings performance and effectiveness of liquidity of the investment portfolio on a monthly basis through the Asset/Liability Committee (“ALCO”). The ALCO also reviews and manages interest rate risk for the Corporation. Through active balance sheet management and analysis of the investment securities portfolio, the Corporation maintains sufficient liquidity to satisfy depositor requirements and various credit needs of its customers.

Loans:

Net loans increased $2.066 million or ..88% to $236.340 million as of June 30, 2004, from $234.274 million as of December 31, 2003. Of the loan growth experienced in the second quarter of 2004, the most significant growth occurred in commercial loans. Commercial loans increased $1.413 million or 1.25% to $114.030 million as of June 30, 2004, compared to $112.617 million as of December 31, 2003.

Increasing the loan to deposit ratio is a goal of the Bank, but loan quality is always considered in this effort. Management has continued its efforts to create good underwriting standards for both commercial and consumer credit. The Bank’s lending continues to consist primarily of retail lending which includes single family residential mortgages and other consumer lending. Most commercial lending is done primarily with locally owned small businesses.

Other Assets:

Other Assets increased $3.363 million or 54.3% to $9.559 million as of June 30, 2004, from $6.196 million as of December 31, 2003. The increase in Other Assets is the result of the purchase of an additional $2 million Bank Owned Life Insurance policy as well as the change in the deferred tax on the net unrealized loss on available for sale securities in the amount of $1.551 million.

Deposits:

Deposits are attracted from within the Bank’s primary market area through the offering of various deposit instruments including NOW accounts, money market accounts, savings accounts, certificates of deposit, and IRA’s. During the six-month period ended June 30, 2004, total deposits increased by $5.469 million or 2.0% to $285.169 million.

Borrowings:

The Bank utilizes borrowings as a source of funds for its asset/liability management. Advances are available from the 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 June 30, 2004 were $10.680 million as compared to $7.085 million as of December 31, 2003, an increase of $3.595 million or 50.74%. Long-term borrowings were $46.497 million as of June 30, 2004, compared to $41.952 million as of December 31, 2003, an increase of 4.545 million or 10.83%. The increase in short-term borrowings was due to increased activity in commercial sweep accounts classified as short-term borrowings. In June of 2004, the Bank borrowed an additional $5 million in term borrowings from the Federal Home Loan Bank. The borrowing was used as the primary funding for a $5 million tax-exempt loan.

Capital:

The adequacy of the Corporation’s capital is reviewed on an ongoing basis with reference to the size, composition and quality of the Corporation’s resources and regulatory guidelines. Management seeks 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. As of June 30, 2004, regulatory capital to total assets was 9.94% as compared to 10.22% on December 31, 2003. The Company repurchases its stock in the open market or from individuals as warranted to leverage the capital account and to provide stock for a dividend reinvestment and stock purchase plan. In the six months ended June 30, 2004, the Company did not purchase any shares for the treasury.

The Corporation has complied with the standards of capital adequacy mandated by the banking regulators. The bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets the banks hold in their portfolios. A weight category of either 0% (lowest risk asset), 20%, 50%, or 100% (highest risk assets) is assigned to each asset on the balance sheet. Capital is being maintained in compliance with risk-based capital guidelines. The Company’s Tier 1 capital to risk weighted asset ratio was 14.40% and the total capital ratio to risk weighted assets ratio was 15.40% at June 30, 2004. The Corporation is deemed to be well-capitalized under regulatory standards.

Liquidity:

Liquidity measures an organization’s ability to meet cash obligations as they come due. The consolidated statement of cash flows presented in the accompanying financial statements included in Part I of this Form 10Q provide analysis of the Corporation’s cash and cash equivalents. Additionally, management considers that portion of the loan and investment portfolio that matures within one year as part of the Corporation’s liquid assets.

The Company’s Asset/Liability Committee (ALCO) addresses the liquidity needs of the Bank to see that sufficient funds are available to meet credit demands and deposit withdrawals as well as to the placement of available funds in the investment portfolio. In assessing liquidity requirements, equal consideration is given to the current position as well as the future outlook.

The following table represents the aggregate on and off-balance sheet contractual obligations to make future payments.

Off-Balance Sheet Arrangements:

The Company’s financial statements do not reflect various off-balance sheet arrangements that are made in the normal course of business, which may involve some liquidity risk. These commitments consist primarily of commitments to grant new loans and unfunded commitments of existing loans and letters of credit made under the same standards as on-balance sheet instruments. Unused commitments on June 30, 2004, totaled $26.665 million, which consisted of $21.047 million in unfunded commitments of existing loans, $3.696 million to grant new loans and $1.922 thousand in letters of credit. Due to fixed maturity dates and specified conditions within these instruments, many will expire without being drawn upon. Management believes that amounts actually drawn upon can be funded in the normal course of operations and therefore, do not represent a significant liquidity risk to the Company.

Interest Rate Sensitivity:

The management of interest rate sensitivity seeks to avoid fluctuating net interest margins and to provide consistent net interest income through periods of changing interest rates.

The Company’s risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is composed primarily of interest rate risk. The primary objective of the Company’s asset/liability management activities is to maximize net interest income while maintaining acceptable levels of interest rate risk. The Company’s Asset/Liability Committee (ALCO) is responsible for establishing policies to limit exposure to interest rate risk, and to ensure procedures are established to monitor compliance with those policies. The guidelines established by ALCO are reviewed by the Company’s Board of Directors.

The tools used to monitor sensitivity are the Statement of Interest Sensitivity Gap and the interest rate shock analysis. The Bank uses a software model to measure and to keep track. In addition, an outside source does a quarterly analysis to make sure our internal analysis is current and correct. The statement of Interest Sensitivity Gap is a good assessment of current position and is a very useful tool for the ALCO in performing its job. This report is monitored in an effort to “match” maturities or repricing opportunities of assets and liabilities in order to attain the maximum interest within risk tolerance policy guidelines. The statement does, although, have inherent limitations in that certain assets and liabilities may react to changes in interest rates in different ways with some categories reacting in advance of changes and some lagging behind the changes. In addition, there are estimates used in determining the actual propensity to change of certain items such as deposits without maturities.

The following table sets forth the Company’s interest sensitivity analysis as of June 30, 2004:

RESULTS OF OPERATIONS

Net Interest Income:

For the three months ended June 30, 2004, total interest income increased by $20 thousand, or .41%, to $4.926 million as compared to $4.906 million for the three months ended June 30, 2003. The yield on earnings assets was 5.47% as compared to 5.81% for the second quarter of 2003. Average earning assets increased to $362.212 million for the three months ended June 30, 2004, as compared to $338.958 million for the three months ended June 30, 2003.

For the six months ended June 30, 2004, total interest income increased by $16 thousand, or .16% to $9.899 million as compared to $9.883 million for the six months ended June 30, 2003. The yield on earning assets was 5.57% compared to 5.97% for the six months ended June 30,2003. Average earning assets increased to $357.282 million for the six months ended June 30, 2004, as compared to $333.894 million for the six months ended June 30, 2003.

Total interest expense decreased by $185 thousand, or 9.52% to $1.758 million for the three months ended June 30, 2004, from $1.943 million for the three months ended June 30, 2003. This decrease was attributable to the decrease in the cost of funds, which decreased to 2.37% as compared to 2.76% for the second quarter of 2003. Average interest-bearing liabilities increased to $298.498 million for the three months ended June 30, 2004, as compared to $282.752 million for the three months ended June 30, 2003.

Total interest expense decreased by $362 thousand, or 9.33% to $3.520 million for the six months ended June 30, 2004, from $3.882 million for the six months ended June 30, 2003. This decrease was attributable to the decrease in the cost of funds, which decreased to 2.40% as compared to 2.80% for the first six months of 2003. Average interest bearing liabilities increased to $294.871 million for the six months ended June 30, 2004, as compared to $279.293 million for the six months ended June 30, 2003.

Net interest income increased by $205 thousand, or 6.92%, to $3.168 million for the three months ended June 30, 2004, from $2.963 million for the three months ended June 30, 2003. The Bank’s net interest spread increased to 3.10% for the second quarter of 2004 from 3.05% for the second quarter of 2003. The net interest margin increased to 3.52% from 3.51% for the three-month periods ended June 30, 2004 and 2003 respectively.

Net interest income increased by $378 thousand, or 6.30%, to $6.379 million for the six months ended June 30, 2004, from $6.001 million for the six months ended June 30, 2003. The Bank’s net interest spread was the same at 3.17% for the first six months of 2004 when compared to the first six months of 2003. The net interest margin decreased to 3.59% from 3.62% for the six-month periods ended June 30, 2004 and 2003 respectively.

The average loan yield was 6.28% during the second quarter of 2004, a decrease of 7.37% from 6.78% during the comparable period in 2003. Average loan balances increased $11.887 million, or 5.24%, to $238.523 million during the second quarter of 2004 from $226.636 million during the same period in 2003.

Yields on securities were 4.26% for the second quarter of 2004, a decrease of 2.07% from 4.35% during the comparable period in 2003. Average security balances increased $10.454 million, or 10.05%, to $114.466 million during the second quarter of 2004 from $104.012 million during the same period in 2003.

The decrease in yields on earning assets was offset by a decrease in rates paid on deposits and borrowings. Average rates paid on deposits decreased 18.95% to 2.01% for the six months ended June 30, 2004, from 2.48% for the comparable period in 2003. Average rates paid on borrowings decreased 1.62% to 4.26% for the first six months of 2004 from 4.33% for the comparable period in 2003.

Below are the tables which set forth Average balances and corresponding yields for both the three month and six month periods ended June 30, 2004.

Provision for Loan Loss:

For the three month period ended June 30, 2004, the provision for loan loss increased by $681,000 to $741,000 as compared to $60,000 for the three months ended June 30, 2003. This increase was due to the provision for an impaired loan relationship booked in May of 2004. This increased provision was due to bankruptcy proceedings entered into by this commercial loan customer.

The provision for loan loss for the six months ended June 30, 2004, was $900,000, an increase of $780,000 or 650.00% from $120,000 for the same period in 2003. The Bank’s loan volume continues to be strong. One of the Bank’s main goals is to increase the loan to deposit ratio without jeopardizing loan quality. To reach its goal, management has continued its efforts to create strong underwriting standards for both commercial and consumer credit. The Bank’s lending consists primarily of retail lending which includes single family residential mortgages and other consumer lending and commercial lending primarily to locally owned small businesses.

In the three-month period ended June 30, 2004, charge-offs totaled $17,000 while net charge-offs totaled $12,000 as compared to $23,000 and $16,000 respectively for the same three-month period in 2003.

In the six-month period ended June 30, 2004, charge-offs totaled $396,000 while net charge-offs totaled $378,000 as compared to $42,000 and $27,000 respectively for the same six-month period in 2003.

Monthly, senior management uses a detailed analysis of the loan portfolio to determine loan loss reserve adequacy. The process considers all “problem loans” including classified, criticized, and monitored loans. Prior loan loss history and current market trends, both nationally and locally, are taken into consideration. A watch list of potential problem loans is maintained and monitored on a monthly basis by the board of directors. The Bank has not had nor presently has any foreign loans. Based upon this analysis, senior management has concluded that the allowance of loan loss is adequate.

Other Income:

Total non-interest income was $624 thousand for the three-months ended June 30, 2004, a decrease of $3 thousand, or .48% from the comparable period in 2003.

Total non-interest income was $1.241 million for the six months ended June 30, 2004, an increase of $81 thousand or 6.98% over the comparable period in 2003.

Service charges and fees increased 9.20%, or $30 thousand, to $356 thousand for the three month period ended June 30, 2004, from $326 thousand in the same period in 2003. The overdraft fee was increased to $30 from $25 in the fourth quarter of 2003. This accounts for the difference in service charges between the two periods.

Service charges and fees increased 10.25%, or $65 thousand, to $699 thousand in the second quarter of 2004 from $634 thousand in the second quarter of 2003.

Other income was $247 thousand for the three-months ended June 30, 2004, from $162 thousand for the same period in 2003. This is an increase of $85 thousand or 52.47%.

Other income was $466 thousand for the six-months ended June 30, 2004, an increase of $136 thousand, or 41.21% over the comparable period in 2003. Additional commission income from investment division activity of $147 thousand and premiums and fees earned through mortgage sales to the Federal Home Loan Bank of $23 thousand more than accounted for the increase in 2004 when compared to the same period in 2003. Conversely, application fee income and other service related fees were down slightly in 2004 when compared to the same period in 2003. The addition of Licensed Bank Employees in the branch network in 2004 has increased the volume of investment sales and related commissions for the Company. The Licensed Bank Employees are licensed to sell life insurance products as well as fixed annuities.

Gains on security sales were $21 thousand for the quarter ended June 30, 2004, compared to $139 thousand for the comparable period in 2003, a decrease of $118 thousand, or 84.89%.

Gains on security sales were $76 thousand for the six-month period ended June 30, 2004, compared to a gain of $196 thousand for the comparable period in 2003, a decrease of $120 thousand, or 61.22%.

Other Operating Expenses:

Total other expenses increased 11.98%, or $218 thousand, to $2.037 million during the three month period ended June 30, 2004, compared to $1.819 million for the comparable period in 2003.

Total other expenses increased 11.98%, or $429 thousand, to $4.011 million during the second quarter of 2004, compared to $3.582 million for the comparable period in 2003.

Salaries and benefits increased 4.99%, or $47 thousand, to $989 thousand for the three month period ended June 30, 2004, compared to $942 thousand for the same period in 2003 due to normal pay increases and increased staff.

Salaries and benefits increased 7.20%, or $133 thousand, to $1.980 million for the second quarter of 2004, compared to $1.847 million for the same period in 2003 due to normal pay increases and increased staff. The full-time equivalent number of employees was 101 as of June 30, 2004, compared to 98 as of June 30, 2003. The variance between periods is in line with the 2004 budget.

Occupancy expenses increased 21.50%, or $23 thousand, to $130 thousand for the three month period ended June 30, 2004, compared to $107 thousand for the same period in 2003. Furniture and fixtures expense decreased 13.48%, or $12 thousand to $77 thousand for the second quarter of 2004, compared to $89 thousand for the second quarter of 2003. The decrease in furniture and fixtures expense between the two periods was due to non-reoccurring expenses incurred at various office locations of the Company in the second quarter of 2003.

Occupancy expenses increased 20.27%, or $45 thousand, to $267 thousand for the six months ended June 30, 2004, compared to $222 thousand for the same period in 2003. Winter heating costs for 2004 and maintenance performed on the parking lots at four office locations accounted for much of this increase when compared to the same period in 2003. Furniture and fixtures expense increased 3.33%, or $5 thousand, to $155 thousand for the six months ended June 30, 2004, compared to $150 thousand for the six months ended June 30, 2003. This increase was due to the increase of depreciation expense on computer equipment during the six months ended June 30, 2004, compared to the same period in 2003. During 2003, the Company purchased various components made necessary by technological advancements in the banking industry, the full effect of which is evident in 2004.

All other operating expenses increased $160 thousand, or 23.49%, to $841 thousand for the three months ended June 30, 2004, compared to $681 thousand for the same period in 2003.

All other operating expenses increased $246 thousand, or 18.05%, to $1.609 million for the six months ended June 30, 2004, compared to $1.363 million for the same period in 2003. The increase was due in part to additional expenses incurred on foreclosed real estate in the amount of $77 thousand, increased expenditures for advertising in the amount of $23 thousand, additional legal and professional costs of $41 thousand, some of which were due to consulting work performed in connection with a new personal computer network and on-line teller system installed at the Bank’s branch offices, computer and proof maintenance costs associated with the personal computer network and on-line teller system (as well as additional software enhancements installed in 2004) in the amount of $28 thousand, and $37 thousand for expenses associated with the accounts receivable financing program due to increased balances financed in 2004 when compared to 2003.

Income Tax Provision:

The Corporation recorded an income tax provision of $123 thousand, or 12.1% of income, and $433 thousand, or 25.3% of income, for the quarters ended June 30, 2004 and 2003 respectively. The decline in the income tax rate is due to increasing tax-exempt income, including tax-exempt loans and bank owned life insurance.

The Corporation recorded an income tax provision of $521 thousand, or 19.2% of income, and $887 thousand, or 25.6% of income, for the quarters ended June 30, 2004 and 2003 respectively. The decrease in the effective income tax rate is due to increases in tax-exempt interest income and bank owned life insurance income from 2003 to 2004.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Fed Funds rate has remained the same for virtually all of the second quarter of 2004. Improving economic conditions prompted the Federal Reserve to increase overnight borrowing rates by 25 basis points on June 30, 2004. The timing and magnitude of future increases are unknown at the present time. As of June 30, 2004, the Bank is currently showing sensitivity to downward rate shift scenarios. The results of the latest financial simulation follow. The simulation shows a possible increase in net interest income of 3.61% or $440,000 in a +200 basis point rate shock scenario over a one-year period. A decrease of 5.32% or $648,000 is shown in the model at a –200 basis point rate shock. The net interest income risk position of the Bank remains within the guidelines established by the Bank’s asset/liability policy. The Bank continuously monitors its rate sensitivity.

Equity value at risk is monitored regularly and is also within established policy limits. Please refer to the Annual Report on Form 10-K filed with the Securities and Exchange Commission for December 31, 2003, for further discussion of this matter.

ITEM 4.     CONTROLS AND PROCEDURES

PART II

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 are no legal proceedings that might have a material effect on the results of operations, liquidity, or the financial position of the Company at this time.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITY SECURITIES

   None.

ITEM 3. DEFAULTS IN SENIOR SECURITIES

   None.

ITEM 4. SUBMISSION OF MATTERS FOR SECURITY HOLDER VOTE

At the Annual Meeting of Stockholders held on April 24, 2004, Chairman Shurtleff reported that the Judge of Election and Proxy had completed the voting tabulations. On the basis of that report, Chairman Shurtleff declared that Gerald R. Pennay and Thomas F. Chamberlain were elected for a three-year term and Richard S. Lochen, Jr. was elected to a one-year term, and Beard Miller Company LLP, had been ratified as the independent auditors for the year-ending December 31, 2004.

The following outlines the items voted on at the meeting as well as the votes cast for, against, and non-vote:

ITEM 5. OTHER INFORMATION

   None.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8K

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

EXHIBIT INDEX

Exhibit 31.1

CERTIFICATION

        I, John W. Ord, certify that:

Date:    August 3, 2004

Exhibit 31.2

CERTIFICATION

I, Debra E. Dissinger, certify that:

Date:    August 3, 2004

Exhibit 32.1

In connection with the Quarterly Report on Form 10-Q of Peoples Financial Services Corp. (the “Company”) for the period ended June 30, 2004, as filed with the Securities and Exchange Commission (the “Report”), I, John W. Ord, Chief Executive Officer and President, 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.

Date:     August 3, 2004

Exhibit 32.2

In connection with the Quarterly Report on Form 10-Q of Peoples Financial Services Corp. (the “Company”) for the period ended June 30, 2004, as filed with the Securities and Exchange Commission (the “Report”), I, Debra E. Dissinger, Executive Vice President, 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.

Date:     August 3, 2004