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Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 22, 2016 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp (Nasdaq:NWFL) and its subsidiary, Wayne Bank, announced earnings for the three months ended June 30, 2016 of $1,878,000. This represents a decrease of $85,000, from the $1,963,000 earned in the similar period of 2015 due primarily to increases in operating expenses and the provision for loan losses. Earnings per share (fully diluted) were $.51 in the 2016 period, decreasing from the $.53 earned in the similar period of 2015. Annualized return on average assets for the three months ended June 30, 2016 was 0.99% with an annualized return on average equity of 7.28%. Net income for the six months ended June 30, 2016 totaled $3,754,000, which is $250,000 lower than the same six-month period of last year due to a lower level of gains on security sales and an increased level of operating expenses. Earnings per share (fully diluted) for the six months ended June 30, 2016 and 2015 totaled $1.02 and $1.08 per share, respectively.

Total assets as of June 30, 2016 were $767.8 million with loans receivable of $581.2 million, deposits of $584.3 million and stockholders’ equity of $104.6 million. Loans receivable increased $42.3 million since June 30, 2015 while total deposits increased $8.6 million over the past twelve months. Stockholders’ equity increased $4.7 million over the past year, due principally to the retention of earnings and an increase in accumulated other comprehensive income.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $6.6 million and represented 0.86% of total assets as of June 30, 2016 compared to $12.1 million, or 1.62% of total assets, as of June 30, 2015. The allowance for loan losses totaled $5,798,000 as of June 30, 2016 and represented 1.00% of total loans outstanding, compared to $5,947,000 and 1.10% on June 30, 2015.

For the three months ended June 30, 2016, net interest income, on a fully taxable equivalent basis (fte), totaled $6,758,000, an increase of $369,000 compared to the similar period in 2015 due primarily to a $465,000 increase in interest income on loans. Net interest margin (fte) for the 2016 period was 3.79% increasing from 3.68% for the similar period in 2015 due to a 10 basis point improvement in the yield on interest-earning assets. The cost of interest-bearing liabilities decreased one basis point to 0.62%. The improved margin reflects a $45.6 million increase in average loans outstanding. The yield earned on securities also improved 13 basis points. Net interest income (fte) for the six months ended June 30, 2016 totaled $13,292,000, which was $301,000 higher than the similar period in 2015. The net interest margin (fte) was 3.74% in the 2016 period and 3.81% during the first six months of 2015. Decreasing yields on loans contributed to the reduced net interest margin.

Other income for the three months ended June 30, 2016 totaled $1,223,000 compared to $1,133,000 for the similar period in 2015. Net gains from securities sales increased $71,000 compared to the prior-year period. For the six months ended June 30, 2016, other income totaled $2,290,000 compared to $2,412,000 in the 2015 period. Gains on the sales of investment securities totaled $445,000 on sales of $23.4 million for the 2015 period compared to $270,000 on sales of $31.8 million in the 2016 period.

Other expenses totaled $4,528,000 for the three months ended June 30, 2016, an increase of $360,000 compared to the $4,168,000 reported in the similar period of 2015. For the six months ended June 30, 2016, other expenses totaled $8,876,000 compared to $8,355,000 for the similar period in 2015, an increase of $521,000.

Mr. Critelli commented, “Our earnings for the first half of 2016 were in-line with projections. Net interest income increased over the prior period and credit quality ratios continue to show improvement. Our net interest margin exceeds peer banks, core operating expenses remain well controlled and our capital base remains above regulatory “well capitalized” targets. We are focused on our pending acquisition of Delaware Bancshares, Inc., including the integration of twelve new community offices located in Delaware and Sullivan Counties, New York, into the Wayne Bank system. All required regulatory and shareholder approvals have been received, and closing is expected in the third quarter of 2016. For additional information on the transaction, please visit our website at www.waynebank.com/stockholder-services. We continue to search out opportunities available to us and we look forward to serving our growing base of stockholders and customers.”

Norwood Financial Corp., is the parent company of Wayne Bank, which operates fifteen offices throughout Wayne, Pike, Monroe and Lackawanna Counties, Pennsylvania. The Company’s stock is traded on the Nasdaq Global Market, under the symbol, “NWFL”.

Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believes”, “anticipates”, “contemplates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in federal and state laws, changes in interest rates, risks associated with the acquisition of Delaware Bancshares, Inc., the ability to control costs and expenses, demand for real estate, government fiscal policies, cybersecurity and general economic conditions. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Measures
This release references tax-equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income is derived from GAAP net interest income using an assumed tax rate of 34%. We believe the presentation of net interest income on a tax–equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following reconciles net interest income to net interest income on a fully taxable equivalent basis:

Three months ended
June 30
Six months ended
June 30
(dollars in thousands) 2016 2015 2016 2015
Net Interest Income$6,394 $6,049 $12,569 $12,356
Taxable equivalent basis adjustment using 34% marginal tax rate 364 340 723 635
Net interest income on a fully taxable equivalent basis$6,758 $6,389 $13,292 $12,991


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
June 30
2016
2015
ASSETS
Cash and due from banks$ 8,171 $ 8,505
Interest-bearing deposits with banks 4,444 11,937
Cash and cash equivalents 12,615 20,442
Securities available for sale 129,721 151,304
Loans receivable 581,220 538,870
Less: Allowance for loan losses 5,798 5,947
Net loans receivable 575,422 532,923
Regulatory stock, at cost 2,228 2,240
Bank premises and equipment, net 6,328 6,555
Bank owned life insurance 19,082 18,551
Foreclosed real estate owned 5,414 1,382
Accrued interest receivable 2,289 2,340
Goodwill 9,715 9,715
Other intangible assets 237 334
Deferred tax asset 2,222 4,071
Other assets 2,556 1,664
TOTAL ASSETS$ 767,829 $ 751,521
LIABILITIES
Deposits:
Non-interest bearing demand$ 121,743 $ 107,610
Interest-bearing 462,516 468,004
Total deposits 584,259 575,614
Short-term borrowings 38,100 33,842
Other borrowings 36,579 37,211
Accrued interest payable 891 988
Other liabilities 3,409 3,948
TOTAL LIABILITIES 663,238 651,603
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2016: 3,724,668 shares, 2015: 3,718,018 shares 373 372
Surplus 35,430 35,268
Retained earnings 66,876 65,797
Treasury stock, at cost: 2016: 33,444 shares, 2015: 37,162 shares (926) (997)
Accumulated other comprehensive income 2,838 (522)
TOTAL STOCKHOLDERS' EQUITY 104,591 99,918
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$ 767,829 $ 751,521
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2016
2015
2016
2015
INTEREST INCOME
Loans receivable, including fees$ 6,351 $ 5,924 $ 12,485 $ 11,985
Securities 878 950 1,768 1,974
Other 5 8 7 12
Total Interest income 7,234 6,882 14,260 13,971
INTEREST EXPENSE
Deposits 580 618 1,161 1,222
Short-term borrowings 37 16 77 29
Other borrowings 223 199 453 364
Total Interest expense 840 833 1,691 1,615
NET INTEREST INCOME 6,394 6,049 12,569 12,356
PROVISION FOR LOAN LOSSES 700 420 1,150 1,040
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,694 5,629 11,419 11,316
OTHER INCOME
Service charges and fees 604 622 1,178 1,194
Income from fiduciary activities 114 109 216 215
Net realized gains on sales of securities 205 134 270 445
Gains on sales of loans, net 18 12 47 30
Earnings and proceeds on life insurance policies 166 166 333 330
Other 116 90 246 198
Total other income 1,223 1,133 2,290 2,412
OTHER EXPENSES
Salaries and employee benefits 2,248 2,071 4,551 4,208
Occupancy, furniture and equipment 487 542 982 1,098
Data processing 255 201 526 435
Taxes, other than income 124 175 329 350
Professional fees 181 124 332 307
FDIC Insurance assessment 117 65 231 159
Foreclosed real estate owned 432 232 462 390
Other 684 758 1,463 1,408
Total other expenses 4,528 4,168 8,876 8,355
INCOME BEFORE TAX 2,389 2,594 4,833 5,373
INCOME TAX EXPENSE 511 631 1,079 1,369
NET INCOME $ 1,878 $ 1,963 $ 3,754 $ 4,004
Basic earnings per share$ 0.51 $ 0.53 $ 1.02 $ 1.09
Diluted earnings per share$ 0.51 $ 0.53 $ 1.02 $ 1.08
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended June 30 2016
2015
Net interest income$ 6,394 $ 6,049
Net income 1,878 1,963
Net interest spread (fully taxable equivalent) 3.63% 3.53%
Net interest margin (fully taxable equivalent) 3.79% 3.68%
Return on average assets 0.99% 1.06%
Return on average equity 7.28% 7.80%
Basic earnings per share$ 0.51 $ 0.53
Diluted earnings per share$ 0.51 $ 0.53
For the Six Months Ended June 30
Net interest income$ 12,569 $ 12,356
Net income 3,754 4,004
Net interest spread (fully taxable equivalent) 3.59% 3.66%
Net interest margin (fully taxable equivalent) 3.74% 3.81%
Return on average assets 0.99% 1.11%
Return on average equity 7.31% 8.01%
Basic earnings per share$ 1.02 $ 1.09
Diluted earnings per share$ 1.02 $ 1.08
As of June 30
Total assets$ 767,829 $ 751,521
Total loans receivable 581,220 538,870
Allowance for loan losses 5,798 5,947
Total deposits 584,259 575,614
Stockholders' equity 104,591 99,918
Trust assets under management 134,126 134,732
Book value per share$ 27.99 $ 27.40
Equity to total assets 13.62% 13.30%
Allowance to total loans receivable 1.00% 1.10%
Nonperforming loans to total loans 0.21% 2.00%
Nonperforming assets to total assets 0.86% 1.62%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
June 30 March 31 December 31 September 30 June 30
2016
2016
2015
2015
2015
ASSETS
Cash and due from banks$ 8,171 $ 8,709 $ 9,744 $ 11,164 $ 8,505
Interest-bearing deposits with banks 4,444 254 266 552 11,937
Cash and cash equivalents 12,615 8,963 10,010 11,716 20,442
Securities available for sale 129,721 143,948 138,851 153,305 151,304
Loans receivable 581,220 565,787 559,925 543,536 538,870
Less: Allowance for loan losses 5,798 7,642 7,298 5,747 5,947
Net loans receivable 575,422 558,145 552,627 537,789 532,923
Regulatory stock, at cost 2,228 2,982 3,412 2,488 2,240
Bank owned life insurance 19,082 18,951 18,820 18,686 18,551
Bank premises and equipment, net 6,328 6,390 6,472 6,503 6,555
Foreclosed real estate owned 5,414 2,855 2,847 1,345 1,382
Goodwill and other intangibles 9,952 9,975 10,000 10,024 10,049
Other assets 7,067 7,895 7,466 7,473 8,075
TOTAL ASSETS$ 767,829 $ 760,104 $ 750,505 $ 749,329 $ 751,521
LIABILITIES
Deposits:
Non-interest bearing demand$ 121,743 $ 113,225 $ 107,814 $ 115,313 $ 107,610
Interest-bearing deposits 462,516 447,266 443,095 456,040 468,004
Total deposits 584,259 560,491 550,909 571,353 575,614
Other borrowings 74,679 91,528 94,361 70,708 71,053
Other liabilities 4,300 5,387 4,237 5,328 4,936
TOTAL LIABILITIES 663,238 657,406 649,507 647,389 651,603
STOCKHOLDERS' EQUITY 104,591 102,698 100,998 101,940 99,918
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$ 767,829 $ 760,104 $ 750,505 $ 749,329 $ 751,521
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
June 30 March 31 December 31 September 30 June 30
Three months ended 2016
2016
2015
2015
2015
INTEREST INCOME
Loans receivable, including fees$ 6,351 $ 6,135 $ 6,058 $ 5,958 $ 5,924
Securities 878 890 877 911 950
Other 5 1 1 3 8
Total interest income 7,234 7,026 6,936 6,872 6,882
INTEREST EXPENSE
Deposits 580 581 587 611 618
Borrowings 260 270 237 208 215
Total interest expense 840 851 824 819 833
NET INTEREST INCOME 6,394 6,175 6,112 6,053 6,049
PROVISION FOR LOAN LOSSES 700 450 2,820 720 420
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,694 5,725 3,292 5,333 5,629
OTHER INCOME
Service charges and fees 604 574 651 595 622
Income from fiduciary activities 114 102 99 126 109
Net realized gains on sales of securities 205 64 118 63 134
Gains on sales of loans, net 18 30 61 13 12
Earnings and proceeds on life insurance policies 166 167 167 167 166
Other 116 130 120 107 90
Total other income 1,223 1,067 1,216 1,071 1,133
OTHER EXPENSES
Salaries and employee benefits 2,248 2,303 2,152 2,175 2,071
Occupancy, furniture and equipment, net 487 495 511 473 542
Foreclosed real estate owned 432 31 475 47 232
FDIC insurance assessment 117 115 133 119 65
Other 1,244 1,405 1,403 1,256 1,258
Total other expenses 4,528 4,349 4,674 4,070 4,168
INCOME (LOSS) BEFORE TAX 2,389 2,443 (166) 2,334 2,594
INCOME TAX EXPENSE (BENEFIT) 511 567 (294) 557 631
NET INCOME$ 1,878 $ 1,876 $ 128 $ 1,777 $ 1,963
Basic earnings per share$ 0.51 $ 0.51 $ 0.04 $ 0.48 $ 0.53
Diluted earnings per share$ 0.51 $ 0.51 $ 0.04 $ 0.48 $ 0.53
Book Value per share$ 27.99 $ 27.88 $ 27.39 $ 27.42 $ 27.40
Return on average equity (annualized) 7.28% 7.33% 0.50% 6.95% 7.80%
Return on average assets (annualized) 0.99% 1.00% 0.07% 0.95% 1.06%
Net interest spread (fte) 3.63% 3.55% 3.58% 3.53% 3.53%
Net interest margin (fte) 3.79% 3.70% 3.73% 3.68% 3.68%
Allowance for loan losses to total loans 1.00% 1.35% 1.30% 1.06% 1.10%
Net charge-offs to average loans (annualized) 1.78% 0.08% 0.92% 0.68% 0.37%
Nonperforming loans to total loans 0.21% 1.21% 1.27% 1.69% 2.00%
Nonperforming assets to total assets 0.86% 1.28% 1.33% 1.40% 1.62%

Contact: William S. Lance Executive Vice President & Chief Financial Officer NORWOOD FINANCIAL CORP 570-253-8505 www.waynebank.com

Source:Norwood Financial Corp