Northway Financial, Inc. Announces 2016 Earnings and Declares Semi-Annual Dividend

NORTH CONWAY, N.H., Jan. 27, 2017 (GLOBE NEWSWIRE) -- Northway Financial, Inc. (the “Company”) (OTCQB:NWYF), the parent company of Northway Bank (the “Bank”), today reported net income for the year ended December 31, 2016 of $4.0MM, or $1.46 per basic common share and declared a cash dividend of $0.32 per share.

President and Chief Executive Officer, William J. Woodward, stated, “During 2016, the Company implemented a number of strategic initiatives, which were designed to improve the earnings potential of the Bank. The Bank’s liquidity position provided an opportunity to redeem $33MM in Federal Home Loan Bank advances at an average cost of 4.11%. While this prepayment reduced the Bank’s overall cost of funds, we did incur a prepayment penalty. In addition, the Company terminated its defined benefit plan and replaced it with an enhanced 401(k) defined contribution plan. The cost to administer our defined benefit plan had become disproportionate to the benefit received by our employees. It is anticipated that the reduction in administrative costs will benefit our earnings for years to come.”

Mr. Woodward went on to comment, “The costs associated with the termination of the defined benefit plan and the redemption of the advances are non-recurring items affecting net income in 2016. The Board of Directors took this into consideration in its deliberations regarding the declaration of the semi-annual cash dividend.”

The Board of Directors has declared a semi-annual cash dividend of $0.32 per share, payable on February 13, 2017, to common stockholders of record on February 6, 2017. The 2016 total dividend payment of $0.64 per share results in a 44% payout ratio based on net income available to common stockholders. Based on a share price of $27.95 on January 26, 2017, this semi-annual dividend, when annualized, results in a dividend yield of approximately 2.3%. The Company’s common stock is available through brokers and is quoted on the OTCQB under the stock symbol “NWYF”.

Financial Highlights

  • The current stock price of $27.45 has increased 28% since December 31, 2015.
  • Total assets were $890MM, total loans were $546MM, and total deposits were $738MM at December 31, 2016.
  • Regulatory capital ratios at December 31, 2016 were 9.70% Tier 1 Leverage, 16.09% Total Risk Based Capital, and 14.79% Common Equity Tier 1.
  • YTD noninterest expense included a $3.1MM defined benefit plan termination expense and a $993 thousand prepayment penalty tied to early redemption of $33MM in Federal Home Loan Bank (“FHLB”) advances which had an average rate of 4.11%.
  • Nonperforming loans as a percentage of total loans stood at 0.60% at December 31, 2016 compared to 1.18% at December 31, 2015.
  • Non-maturity deposits increased $36MM at December 31, 2016 compared to December 31, 2015. Time deposit balances decreased $53MM due to a designed effort to reduce excess liquidity.

Earnings Summary

As noted above, the Company recorded net income of $4.0MM or $1.46 per common share for the year ended December 31, 2016 compared to $6.2MM or $2.26 per common share for the same period in 2015.

Net interest and dividend income for the year ended December 31, 2016 decreased $1.2MM to $25.9MM compared to $27.1MM for the same period last year. Interest income decreased $2.4MM to $30.5MM at December 31, 2016 compared to $32.9MM at December 31, 2015 due primarily to a decrease in the yield on earning assets of 18 basis points, a shift in average earning asset balances from higher yielding loans to cash, and an overall decrease in earning assets. Interest expense decreased $1.2MM due primarily to a decrease in the rate paid on balances of 14 basis points and a decrease in the average balance of $25MM.

Based on the continued improvement of the credit quality of our loan portfolio and other factors relevant to the adequacy of our allowance for loan losses, there was no provision for loan losses for the years ended December 31, 2016 and 2015. The allowance for loan losses as a percentage of nonperforming loans increased to 236% at December 31, 2016 compared to 129% at December 31, 2015.

Noninterest income, excluding net gain on sales of loans and net securities gains, increased $835 thousand compared to the same period in 2015 as the cash surrender value of life insurance gain increased $292 thousand and other noninterest income for 2016 included $379 thousand of interest rate swap fee income partially offset by a decrease in service charge revenue which has been negatively impacted by regulatory changes. Net gains on sales of securities were $2.7MM compared to $3.1MM in 2015. Noninterest expense increased $3.3MM in 2016 due primarily to the recognition of $3.1MM in expense related to the termination of the defined benefit plan and the recognition of a prepayment fee on the prepayment of $33MM in FHLB long-term advances of $993 thousand partially offset by lower marketing expense, FDIC insurance expense, and management recruitment expense.

Balance Sheet Summary

At December 31, 2016, the Company had total assets of $890MM compared to $934MM at December 31, 2015. Deposits have decreased $20MM due primarily to management’s decision to not renew maturing higher rate customer and institutional certificates of deposits. Additionally, during the third quarter, the Bank prepaid $33MM of FHLB long-term advances, reducing these borrowings to zero. As a result of these changes in liability balances, interest-bearing deposits of the Bank decreased $47MM compared to December 31, 2015. Equity has increased $4.1MM since December 31, 2015 due to net income and an increase in other comprehensive income partially offset by dividends paid to shareholders. The increase in other comprehensive income was due primarily to the termination of the defined benefit plan and an increase in the valuation allowance for equity securities partially offset by a decrease in the valuation allowance for debt securities.

Compared to December 31, 2015, net loans decreased $1.7MM and securities available-for-sale increased $6.5MM.

Stockholders’ equity available to common stockholders totaled $74.4MM at December 31, 2016 resulting in a book value per common share of $27.04, based on 2,751,650 shares of common stock outstanding; an increase of $1.49 compared to December 31, 2015. Tangible book value per common share increased $1.51 to $23.40 at December 31, 2016, compared to $21.89 at December 31, 2015.

About Northway Financial, Inc.

Northway Financial, Inc., headquartered in North Conway, New Hampshire, is a bank holding company. Through its subsidiary bank, Northway Bank, the Company offers a broad range of financial products and services to individuals, businesses and the public sector from its 17 full-service banking offices and its loan production offices located in Bedford and Portsmouth, New Hampshire.

Forward-looking Statements

Statements included in this press release that are not historical or current fact are “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Northway Financial, Inc. disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Northway Financial, Inc.
Selected Financial Highlights
(Dollars in thousands, except per share data) Year Ended
12/31/2016 12/31/2015
Interest and Dividend Income $ 30,507 $ 32,872
Interest Expense 4,596 5,792
Net Interest and Dividend Income 25,911 27,080
Provision for Loan Losses - -
All Other Noninterest Income 5,691 4,836
Noninterest Expense 29,302 26,018
Net Income Before Securities Gains 2,300 5,898
Securities Gains, Net 2,661 3,067
Net Income Before Taxes 4,961 8,965
Provision for Income Tax 946 2,480
Net Income $ 4,015 $ 6,485
Net Income Available to Common Stockholders $ 4,015 $ 6,211
Earnings per Common Share, Basic $ 1.46 $ 2.26
12/31/2016 12/31/2015
Balance Sheet
Total Assets $ 889,598 $ 933,604
Cash and Due from Banks and Interest-Bearing Deposits 44,854 91,727
Securities Available-for-Sale, at Fair Value 261,008 254,476
Loans, Net 545,594 547,299
Total Deposits 737,732 757,922
Federal Home Loan Bank Advances - 34,907
Securities Sold Under Agreements to Repurchase 50,528 44,042
Junior Subordinated Debentures 20,620 20,620
Stockholders' Equity 74,403 70,307
Profitability and Efficiency
Net Interest Margin 3.17% 3.23%
Yield on Earning Assets 3.70 3.88
Cost of Interest Bearing Liabilities 0.65 0.79
Book Value Per Share of Common Shares Outstanding $ 27.04 $ 25.55
Tangible Book Value Per Share of Common Shares Outstanding 23.40 21.89
Capital and Credit
Tier 1 Core Capital to Average Assets 9.70% 9.08%
Common Equity Risk-Based Capital 14.79 11.63
Tier 1 Risk-Based Capital 14.79 15.14
Total Risk-Based Capital 16.09 16.39
Common Shares Outstanding 2,751,650 2,751,650
Weighted Average Number of Common Shares, Basic 2,751,650 2,751,650
Return on Average Assets 0.44% 0.69%
Return on Average Equity 5.38 7.01
Nonperforming Loans as a % of Total Loans 0.60 1.18
Allowance for Loan Losses as a % of Nonperforming Loans 236.02 128.83

Contact: Gary Laurash Chief Financial Officer 603-326-7377

Source:Northway Financial Inc.