Peoples Financial Services Corp. Reports First Quarter 2016 Earnings

SCRANTON, Pa., April 20, 2016 /PRNewswire/ -- Peoples Financial Services Corp. ("Peoples") (NASDAQ: PFIS), the bank holding company for Peoples Security Bank and Trust Company, today reported unaudited financial results at and for the three months ended March 31, 2016.  Peoples reported net income of $4.9 million, or $0.66 per share for the first quarter of 2016, compared to $5.0 million, or $0.67 per share, for the comparable period of 2015.

Core net income, excluding net gains on sale of investment securities available-for-sale, for the three months ended March 31, 2016 was $4.7 million, a $222 thousand increase from $4.5 million for the same period in 2015. Core net income per share for the three months ended March 31, 2016 was $0.64, compared to $0.60 for the same period in 2015.

In addition to evaluating its results of operations in accordance with accounting principles generally accepted in the United States of America ("GAAP"), Peoples routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders' equity and core net income ratios. The reported results for 2016 and 2015 included herein contain items which Peoples considers non-core, namely net gains on sales of investment securities available-for-sale. Peoples believes the reported non-GAAP financial measures provide information useful to investors in understanding its operating performance and trends. Where non-GAAP disclosures are used in this press release, a reconciliation to the comparable GAAP measure is provided in the accompanying tables. The non-GAAP financial measures Peoples uses may differ from the non-GAAP financial measures of other financial institutions.

NOTABLES

• Loans, net grew $68.8 million, or 20.6% on an annualized basis in the first quarter of 2016 as demand increased throughout all markets.
• Deposits grew $19.6 million, or 5.4% on an annualized basis in the first quarter of 2016.
• Tangible book value per share improved $0.44 to $24.73 at March 31, 2016 from $24.29 at December 31, 2015 and $0.77 from $23.96 at March 31, 2015.
• Tax-equivalent net interest margin increased 2 basis points in the first quarter of 2016 to 3.81% compared to 3.79% for the quarter ended December 31, 2015, and decreased 7 basis points from 3.88% compared to quarter ended March 31, 2015.
• Tax-equivalent net interest income increased $412 thousand for the first quarter of 2016 to $15.8 million compared to $15.4 million for the fourth quarter of 2015 and increased $1.0 million compared to $14.8 million for the first quarter of 2015.
• The effective tax rate for the quarter ended March 31, 2016 decreased to 19.2% from 23.1% for the same period in 2015. The decrease in the effective tax rate was influenced by the recognition of investment tax credits related to a limited partnership in elderly and low-to-moderate-income residential housing programs which mitigate the tax burden.
• The allowance for loan losses to loans, net increased to 1.00% at March 31, 2016 compared to 0.97% at December 31, 2015, and 0.87% at March 31, 2015.
• Consolidated our Front Street, Binghamton office into the West Side, Binghamton office.

INCOME STATEMENT REVIEW

The tax-equivalent net interest margins for the quarter ended March 31, 2016 was 3.81% compared to 3.88% in the first quarter of 2015. Loan accretion included in loan interest income in the first quarter of 2016 related to loans acquired in the fourth quarter of 2013 was $215 thousand, resulting in an increase in the tax-equivalent net interest margin of 5 basis points. Comparatively, loan accretion included in loan interest income in the first quarter of 2015 was $225 thousand, resulting in an increase in the tax-equivalent net interest margin of 6 basis points.

Tax-equivalent net interest income for the quarter ended March 31, increased $1.0 million to $15.8 million in 2016 from $14.8 million in 2015.  The tax-equivalent yield on the loan portfolio decreased to 4.52% for the first quarter of 2016 compared to 4.70% for the comparable period in 2015. For the first quarter, loans, net averaged $1.4 billion in 2016 compared to $1.2 billion in 2015. For the quarter ended March 31, the tax-equivalent yield on total investments increased to 2.86% in 2016 from 2.78% for the same period in 2015. Average investments totaled $287.2 million in the first quarter of 2016 and $313.1 million in the first quarter of 2015. The cost of funds remained the same at 0.54% for the three months ended March 31, 2016 and 2015. Average interest-bearing liabilities were $1.3 billion for the quarter ended March 31, 2016 and $1.2 billion for the same period in 2015.

For the quarter ended March 31, the provision for loan losses was $1.2 million in 2016 and $750 thousand in 2015. The increase in the provision for loan losses in 2016 was a result of loan growth.

For the three months ended March 31, noninterest income totaled $3.9 million in 2016 and $4.3 million in 2015. Net gains on sale of investment securities were $242 thousand in 2016 compared to $832 thousand in 2015. Increases in revenues from merchant services income, fiduciary activities, wealth management services and life insurance investment income more than offset decreases in service charges, fees and commissions and income from mortgage banking activities.

For the first quarter of 2016, noninterest expense increased to $11.6 million from $11.1 million for the same period in 2015. Increases in salaries and employee benefits, merchant services expense and other expenses were slightly offset by decreases in net occupancy and equipment expense. Amortization of intangible assets were unchanged comparing the first quarters of 2016 and 2015. The buildout of our expansion plan, wealth management platform as well as normal merit increases led to the increases in salaries and employee benefit expense.

BALANCE SHEET REVIEW

Total assets, loans and deposits totaled $1.9 billion, $1.4 billion and $1.5 billion, respectively, at March 31, 2016. Loans, net grew $68.8 million or 20.6% on an annualized basis in the first quarter of 2016. Loans, net increased $172.5 million or 13.9% from March 31, 2015 to March 31, 2016. Deposits grew $19.6 million or 5.4% on an annualized basis in the first quarter of 2016. Total deposits increased $59.2 million or 4.2% at March 31, 2016 when compared to March 31, 2015. Noninterest-bearing deposits increased $2.5 million or 3.1% on an annualized basis while interest-bearing deposits increased $17.1 million or 6.1% on an annualized basis in the first quarter of 2016. Total investments were $275.9 million at March 31, 2016, including $264.2 million securities classified as available-for-sale and $11.7 million classified as held-to-maturity.

Stockholders' equity equaled $251.4 million or $33.98 per share at March 31, 2016, and $248.8 million or $33.57 per share at December 31, 2015. Tangible stockholders' equity improved to $24.73 per share at March 31, 2016, from $24.29 per share at December 31, 2015. Dividends declared for the three months ended March 31, 2016 amounted to $0.31 per share representing a dividend payout ratio of 47.0%.

ASSET QUALITY REVIEW

Nonperforming assets were $12.4 million or 0.88% of loans, net and foreclosed assets at March 31, 2016, compared to $12.5 million or 0.93% at December 31, 2015. The allowance for loan losses equaled $14.2 million or 1.00% of loans, net at March 31, 2016 compared to $13.0 million or 0.97% of loans, net, at December 31, 2015. Loans charged-off, net of recoveries, for the three months ended March 31, 2016, equaled $17 thousand or 0.01% of average loans, compared to $285 thousand or 0.09% of average loans for comparable period last year.

Peoples Financial Services Corp. is the parent company of Peoples Security Bank and Trust Company, a community bank serving Bucks, Lackawanna, Lehigh, Luzerne, Monroe, Montgomery, Susquehanna, Wayne and Wyoming Counties in Pennsylvania and Broome County in New York through 24 offices. Each office, interdependent with the community, offers a comprehensive array of financial products and services to individuals, businesses, not-for-profit organizations and government entities. Peoples' business philosophy includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures and consistently applied credit policies.

Safe Harbor Forward-Looking Statements:

We make statements in this press release, and we may from time to time make other statements regarding our outlook or expectations for future financial or operating results and/or other matters regarding or affecting Peoples Financial Services Corp., Peoples Security Bank and Trust Company, and its subsidiaries (collectively, "Peoples") that are considered "forward-looking statements" as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." For these statements, Peoples claims the protection of the statutory safe harbors for forward-looking statements.

Peoples cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; our ability to identify and address cyber-security risks and other economic, competitive, governmental, regulatory and technological factors affecting Peoples' operations, pricing, products and services and other factors that may be described in Peoples' Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

In addition to these risks, acquisitions and business combinations, present risks other than those presented by the nature of the business acquired. Acquisitions and business combinations may be substantially more expensive to complete than originally anticipated, and the anticipated benefits may be significantly harder-or take longer-to achieve than expected. As regulated financial institutions, our pursuit of attractive acquisition and business combination opportunities could be negatively impacted by regulatory delays or other regulatory issues. Regulatory and/or legal issues related to the pre-acquisition operations of an acquired or combined business may cause reputational harm to Peoples following the acquisition or combination, and integration of the acquired or combined business with ours may result in additional future costs arising as a result of those issues.

The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, Peoples assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

[TABULAR MATERIAL FOLLOWS]