Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 26, 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 September 30, 2016 of $612,000. This represents a $1,165,000 decrease from the $1,777,000 earned in the same three-month period of 2015 due primarily to $1,659,000 of merger-related expenses incurred in connection with the acquisition of Delaware Bancshares, Inc. which closed on July 31, 2016. Earnings per share (fully diluted) were $.15 in the 2016 period, decreasing from the $.48 earned in the similar period of last year. Net income for the nine months ended September 30, 2016 totaled $4,365,000, which is $1,416,000 lower than the same period of 2015 primarily due to the merger costs recognized in the 2016 period. Earnings per share (fully diluted) for the nine months ended September 30, 2016 totaled $1.15 per share compared to $1.57 per share in the 2015 period. The annualized return on average assets and average equity for the nine-month period was 0.69% and 5.45%, respectively.

Total assets as of September 30, 2016 were $1.125 billion with loans receivable of $706.2 million, deposits of $922.2 million and stockholders’ equity of $115.7 million. Total assets have increased $375.7 million during the past twelve months while loans, deposits and stockholders’ equity have increased $162.7 million, $350.9 million and $13.8 million, respectively. As a direct result of the acquisition of Delaware Bancshares, Inc., total assets increased $368.6 million while loans, deposits and stockholders’ equity increased $112.1 million, $327.3 million and $12.2 million, respectively.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $7.6 million or 0.68% of total assets as of September 30, 2016 compared to $6.6 million or 0.86% of assets as of June 30, 2016 and $10.5 million or 1.40% of total assets as of September 30, 2015. Net charge-offs were $84,000 for the quarter and totaled $2,733,000 for the nine months ended September 30, 2016 compared to $921,000 and $1,889,000, respectively, for the similar periods in 2015. Based on management’s analysis, the Company added $450,000 and $1,600,000 to the allowance for loan losses for the three and nine-month periods ended September 30, 2016, respectively, compared to $720,000 and $1,760,000, respectively, for the similar periods in 2015. The allowance for loan losses totaled $6,164,000 as of September 30, 2016 and represented 274% of total non-performing loans, compared to $5,747,000 and 63% of non-performing loans as of September 30, 2015.

For the three months ended September 30, 2016, net interest income, on a fully taxable equivalent basis (fte), totaled $8,056,000, which represents an increase of $1,643,000 compared to the similar period in 2015 due primarily to growth from the acquisition. Net interest margin (fte) for the 2016 period was 3.50% compared to 3.68% for the similar period in 2015 due primarily to a 23 basis point decrease in the yield on average earning assets. Net interest income (fte) for the nine months ended September 30, 2016 totaled $21,348,000, an increase of $1,943,000 compared to the similar period in 2015 due primarily to the acquisition. Net interest margin (fte) year-to-date for the 2016 period was 3.65% compared to 3.76% in 2015.

Other income for the three months ended September 30, 2016 totaled $1,399,000 compared to $1,071,000 for the similar period in 2015. The increase reflects fees and service charges related to the twelve community offices acquired from Delaware Bancshares, Inc. For the nine months ended September 30, 2016, other income totaled $3,689,000 compared to $3,483,000 in the 2015 period. Gains on the sales of investment securities totaled $269,000 on sales of $101.8 million for the 2016 year-to-date period compared to $508,000 on sales of $28.3 million in the corresponding 2015 period. The increased volume of sales in the 2016 period includes the repositioning of the portfolio acquired. Excluding gains from the sales of securities, other income improved $445,000 over the first nine months of 2015.

Other expenses totaled $7,679,000 for the three months ended September 30, 2016, compared to $4,070,000 in the similar period of 2015. Merger costs totaled $1,659,000 during the period while expenses related to the operations of the twelve new community offices totaled $795,000. For the nine months ended September 30, 2016, other expenses totaled $16,556,000 compared to $12,425,000 for the similar period in 2015, an increase of $4,131,000, which includes the costs related to the acquisition.

Mr. Critelli commented, “We successfully completed our acquisition of Delaware Bancshares, Inc. and integrated all the operating systems during the third quarter. Norwood now has $1.1 billion in assets and operates 27 branches in a six county area in two states. During the quarter, we recognized the majority of the expenses related to the acquisition, and we expect that fourth quarter earnings will begin to reflect the full benefit of the transaction. 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., through its subsidiary Wayne Bank, operates fifteen offices in Northeastern Pennsylvania and twelve offices in Delaware and Sullivan Counties, New York. The New York offices represent locations that were assumed through the acquisition of Delaware Bancshares, Inc. and its wholly-owned subsidiary, NBDC Bank. 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 interest income and net interest income, which are non-GAAP (Generally Accepted Accounting Principles) financial measures. Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using an assumed tax rate of 34%. We believe the presentation of interest income and net interest income on a tax–equivalent basis ensures comparability of interest income and 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:


(dollars in thousands)
Three months ended
September 30
Nine months ended
September 30
2016 2015 2016 2015
Net interest income $7,570 $6,053 $20,139 $18,409
Tax equivalent basis adjustment using 34% marginal tax rate 486 360 1,209 996
Net interest income on a fully taxable equivalent basis $8,056 $6,413 $21,348 $19,405


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
September 30
2016
2015
ASSETS
Cash and due from banks$ 19,404 $ 11,164
Interest-bearing deposits with banks 13,729 552
Cash and cash equivalents 33,133 11,716
Securities available for sale 310,126 153,305
Loans receivable 706,199 543,536
Less: Allowance for loan losses 6,164 5,747
Net loans receivable 700,035 537,789
Regulatory stock, at cost 2,351 2,488
Bank premises and equipment, net 13,617 6,503
Bank owned life insurance 35,889 18,686
Foreclosed real estate owned 5,386 1,345
Accrued interest receivable 3,541 2,499
Goodwill 11,679 9,715
Other intangible assets 652 309
Deferred tax asset 5,560 3,345
Other assets 3,088 1,629
TOTAL ASSETS$ 1,125,057 $ 749,329
LIABILITIES
Deposits:
Non-interest bearing demand$ 200,481 $ 115,313
Interest-bearing 721,763 456,040
Total deposits 922,244 571,353
Short-term borrowings 33,156 41,546
Other borrowings 34,294 29,162
Junior subordinated debentures 8,248 -
Accrued interest payable 1,040 996
Other liabilities 10,375 4,332
TOTAL LIABILITIES 1,009,357 647,389
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2016: 4,156,273 shares, 2015: 3,718,018 shares 416 372
Surplus 47,576 35,310
Retained earnings 66,210 66,431
Treasury stock, at cost: 2016: 32,797 shares, 2015: 33,299 shares (908) (894)
Accumulated other comprehensive income 2,406 721
TOTAL STOCKHOLDERS' EQUITY 115,700 101,940
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$ 1,125,057 $ 749,329
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2016
2015
2016
2015
INTEREST INCOME
Loans receivable, including fees$ 7,267 $ 5,958 $ 19,752 $ 17,943
Securities 1,239 911 3,008 2,884
Other 22 3 28 15
Total Interest income 8,528 6,872 22,788 20,842
INTEREST EXPENSE
Deposits 677 611 1,838 1,833
Short-term borrowings 65 19 142 47
Other borrowings 216 189 669 553
Total Interest expense 958 819 2,649 2,433
NET INTEREST INCOME 7,570 6,053 20,139 18,409
PROVISION FOR LOAN LOSSES 450 720 1,600 1,760
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,120 5,333 18,539 16,649
OTHER INCOME
Service charges and fees 829 592 2,000 1,776
Income from fiduciary activities 126 126 342 341
Net realized gains on sales of securities 0 63 269 508
Gains on sales of loans, net 0 16 54 56
Earnings and proceeds on life insurance policies 283 167 616 497
Other 161 107 408 305
Total other income 1,399 1,071 3,689 3,483
OTHER EXPENSES
Salaries and employee benefits 3,070 2,175 7,620 6,383
Occupancy, furniture and equipment 755 473 1,736 1,571
Data processing 423 247 949 682
Taxes, other than income 205 175 535 525
Professional fees 185 140 516 447
FDIC Insurance assessment 170 119 402 278
Foreclosed real estate owned 119 47 582 436
Merger related 1,659 - 1,664 -
Other 1,093 694 2,552 2,103
Total other expenses 7,679 4,070 16,556 12,425
INCOME BEFORE TAX 840 2,334 5,672 7,707
INCOME TAX EXPENSE 228 557 1,307 1,926
NET INCOME $ 612 $ 1,777 $ 4,365 $ 5,781
Basic earnings per share$ 0.15 $ 0.48 $ 1.16 $ 1.57
Diluted earnings per share$ 0.15 $ 0.48 $ 1.15 $ 1.57
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30 2016
2015
Net interest income$ 7,570 $ 6,053
Net income 612 1,777
Net interest spread (fully taxable equivalent) 3.37% 3.53%
Net interest margin (fully taxable equivalent) 3.50% 3.68%
Return on average assets 0.24% 0.95%
Return on average equity 2.13% 6.95%
Basic earnings per share$ 0.15 $ 0.48
Diluted earnings per share$ 0.15 $ 0.48
For the Nine Months Ended September 30
Net interest income$ 20,139 $ 18,409
Net income 4,365 5,781
Net interest spread (fully taxable equivalent) 3.50% 3.62%
Net interest margin (fully taxable equivalent) 3.65% 3.76%
Return on average assets 0.69% 1.05%
Return on average equity 5.45% 7.65%
Basic earnings per share$ 1.16 $ 1.57
Diluted earnings per share$ 1.15 $ 1.57
As of September 30
Total assets$ 1,125,057 $ 749,329
Total loans receivable 706,199 543,536
Allowance for loan losses 6,164 5,747
Total deposits 922,244 571,353
Stockholders' equity 115,700 101,940
Trust assets under management 136,307 127,815
Book value per share$ 25.94 $ 27.42
Equity to total assets 10.28% 13.60%
Allowance to total loans receivable 0.87% 1.06%
Nonperforming loans to total loans 0.32% 1.69%
Nonperforming assets to total assets 0.68% 1.40%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
September 30 June 30 March 31 December 31 September 30
2016
2016
2016
2015
2015
ASSETS
Cash and due from banks$ 19,404 $ 8,171 $ 8,709 $ 9,744 $ 11,164
Interest-bearing deposits with banks 13,729 4,444 254 266 552
Cash and cash equivalents 33,133 12,615 8,963 10,010 11,716
Securities available for sale 310,126 129,721 143,948 138,851 153,305
Loans receivable 706,199 581,220 565,787 559,925 543,536
Less: Allowance for loan losses 6,164 5,798 7,642 7,298 5,747
Net loans receivable 700,035 575,422 558,145 552,627 537,789
Regulatory stock, at cost 2,351 2,228 2,982 3,412 2,488
Bank owned life insurance 35,889 19,082 18,951 18,820 18,686
Bank premises and equipment, net 13,617 6,328 6,390 6,472 6,503
Foreclosed real estate owned 5,386 5,414 2,855 2,847 1,345
Goodwill and other intangibles 12,331 9,952 9,975 10,000 10,024
Other assets 12,189 7,067 7,895 7,466 7,473
TOTAL ASSETS$ 1,125,057 $ 767,829 $ 760,104 $ 750,505 $ 749,329
. . . .
LIABILITIES
Deposits:
Non-interest bearing demand$ 200,481 $ 121,743 $ 113,225 $ 107,814 $ 115,313
Interest-bearing deposits 721,763 462,516 447,266 443,095 456,040
Total deposits 922,244 584,259 560,491 550,909 571,353
Other borrowings 83,946 74,679 91,528 94,361 70,708
Other liabilities 3,167 4,300 5,387 4,237 5,328
TOTAL LIABILITIES 1,009,357 663,238 657,406 649,507 647,389
STOCKHOLDERS' EQUITY 115,700 104,591 102,698 100,998 101,940
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$ 1,125,057 $ 767,829 $ 760,104 $ 750,505 $ 749,329
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
September 30 June 30 March 31 December 31 September 30
Three months ended 2016
2016
2016
2015
2015
INTEREST INCOME
Loans receivable, including fees$ 7,267 $ 6,351 $ 6,135 $ 6,058 $ 5,958
Securities 1,239 878 890 877 911
Other 22 5 1 1 3
Total interest income 8,528 7,234 7,026 6,936 6,872
INTEREST EXPENSE
Deposits 677 580 581 587 611
Borrowings 281 260 270 237 208
Total interest expense 958 840 851 824 819
NET INTEREST INCOME 7,570 6,394 6,175 6,112 6,053
PROVISION FOR LOAN LOSSES 450 700 450 2,820 720
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,120 5,694 5,725 3,292 5,333
OTHER INCOME
Service charges and fees 840 604 574 651 595
Income from fiduciary activities 126 114 102 99 126
Net realized gains on sales of securities 0 205 64 118 63
Gains on sales of loans, net (11) 18 30 61 13
Earnings and proceeds on life insurance policies 283 166 167 167 167
Other 161 116 130 120 107
Total other income 1,399 1,223 1,067 1,216 1,071
OTHER EXPENSES
Salaries and employee benefits 3,070 2,248 2,303 2,152 2,175
Occupancy, furniture and equipment, net 755 487 495 511 473
Foreclosed real estate owned 119 432 31 475 47
FDIC insurance assessment 170 117 115 133 119
Merger related 1,659 5 - - -
Other 1,906 1,239 1,405 1,403 1,256
Total other expenses 7,679 4,528 4,349 4,674 4,070
INCOME (LOSS) BEFORE TAX 840 2,389 2,443 (166) 2,334
INCOME TAX EXPENSE (BENEFIT) 228 511 567 (294) 557
NET INCOME$ 612 $ 1,878 $ 1,876 $ 128 $ 1,777
Basic earnings per share$ 0.15 $ 0.51 $ 0.51 $ 0.04 $ 0.48
Diluted earnings per share$ 0.15 $ 0.51 $ 0.51 $ 0.04 $ 0.48
Book Value per share$ 25.94 $ 27.99 $ 27.88 $ 27.39 $ 27.42
Return on average equity (annualized) 5.45% 7.28% 7.33% 0.50% 6.95%
Return on average assets (annualized) 0.69% 0.99% 1.00% 0.07% 0.95%
Net interest spread (fte) 3.37% 3.63% 3.55% 3.58% 3.53%
Net interest margin (fte) 3.50% 3.79% 3.70% 3.73% 3.68%
Allowance for loan losses to total loans 0.87% 1.00% 1.35% 1.30% 1.06%
Net charge-offs to average loans (annualized) 0.05% 1.78% 0.08% 0.92% 0.68%
Nonperforming loans to total loans 0.32% 0.21% 1.21% 1.27% 1.69%
Nonperforming assets to total assets 0.68% 0.86% 1.28% 1.33% 1.40%


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

Source:Norwood Financial Corp