The characters are made of sprites. Clothes, hair, head, eyes, mouth...
They are created via an application I'm developing, available on patreon. (NovelStudio)
It can be used to distort shapes and adjust the colors of each character element. You can export the characters you've created for reuse. But the export format is not PSD but png.
I can encourage you to use NovelStudio to create your characters. This page is just the thing to get the word out about the project ;)