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Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

HONESDALE, Pa., Jan. 27, 2017 (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 December 31, 2016 of $2,346,000. This represents an increase of $2,218,000 from the $128,000 earned in the comparable period of 2015 due primarily to a $2,370,000 decrease in the provision for loan losses and the benefits realized from the acquisition of Delaware Bancshares, Inc. (“Delaware”) on July 31, 2016. Earnings per share (fully diluted) were $.56 and $.04 for the three-month periods ended December 31, 2016 and 2015, respectively. Net interest income before the provision for loan losses increased $2,339,000 compared to the same period of last year due to higher loan volume, while other income increased $274,000 due to the larger customer base. A provision for loan losses of $450,000 was recorded in the current three-month period compared to $2,820,000 in the same period of last year. Operating expenses increased $1,894,000 due primarily to costs resulting from the twelve new community offices acquired. For the year ended December 31, 2016, net income totaled $6,711,000, an increase of $803,000 from the $5,908,000 earned in the prior year. Earnings and expenses increased as a result of the acquisition, while the provision for loan losses decreased from $4,580,000 in 2015 to $2,050,000 in 2016. The increase in operating expenses in 2016 includes $1,806,000 of one-time merger related expenses. Earnings per share on a fully diluted basis were $1.73 for 2016 compared to $1.60 in 2015. The return on average assets for the year was 0.74% with a return on average equity of 6.17% compared to 0.80% and 5.83%, respectively, in 2015.

Total assets were $1.1 billion as of December 31, 2016. Loans receivable totaled $713.9 million as of December 31, 2016, with total deposits of $925.4 million and stockholders’ equity of $111.1 million.

Loans receivable increased $154.0 million from the prior year-end due primarily to the $112.1 million of loans acquired from Delaware. Organic loan growth included a $22.8 million increase in commercial loans due primarily to an $18.6 million increase in commercial real estate loans. Residential mortgage loans and construction loans increased $5.4 million internally after the sale of $1.7 million of fixed-rate residential mortgage loans for the purpose of interest rate risk management. Consumer loans increased $13.7 million internally in 2016 due to a $16.5 million increase in indirect auto and marine financing. As of December 31, 2016, total non-performing loans were $1.8 million and represented 0.25% of total loans compared to $7.1 million, or 1.27% as of December 31, 2015. The significant decrease includes the transfer of one loan relationship with a balance of $5,015,000 on December 31, 2015 to foreclosed real estate owned in 2016. For the three months and year ended December 31, 2016, net charge-offs totaled $151,000 and $2,885,000, respectively, compared to $1,268,000 and $3,157,000, respectively, for the corresponding periods in 2015. Based on management’s analysis, the Company determined that it would be appropriate to provide $450,000 and $2,050,000 for potential future losses for the three and twelve month periods ended December 31, 2016, respectively, compared to $2,820,000 in the similar quarter of last year and $4,580,000 for the year of 2015. As of December 31, 2016, the allowance for loan losses totaled $6,463,000 and 0.91% of total loans compared to $7,298,000 and 1.30% of total loans at December 31, 2015. Additionally, as of December 31, 2016 the allowance for loan losses represented 356% of total non-performing loans, compared to 102% as of December 31, 2015.

Net interest income, on a fully taxable equivalent basis (fte), totaled $8,991,000 for the three months ended December 31, 2016, an increase of $2,514,000 compared to the same period in 2015. Net interest margin (fte) for the three months ended December 31, 2016 was 3.49% decreasing from 3.73% for the similar period in 2015. The decrease in net interest margin was principally due to the mix and yield on interest-earning assets acquired from Delaware which resulted in a 33 basis point decrease in the yield earned on assets. The decrease in the yield on earning assets was partially offset by a 13 basis point decrease in the cost of interest-bearing liabilities due to the favorable mix and cost of interest-bearing liabilities acquired. For the year, net interest income (fte) totaled $30,339,000, an increase of $4,457,000 compared to 2015. The net interest margin (fte) declined 15 basis points to 3.60% in 2016.

Other income for the three months ended December 31, 2016 totaled $1,490,000 compared to $1,216,000 for the similar period in 2015. Gains on the sale of loans and securities decreased $164,000, while all other items of other income increased $438,000 in the aggregate due primarily to service charges and fees resulting from the acquisition. Other income for the year ended December 31, 2016 totaled $5,179,000 compared to $4,699,000 in 2015, an increase of $480,000. Gains on the sale of loans and investment securities decreased $392,000 in the aggregate, while all other items of other income increased $872,000, net due primarily to the acquisition.

Other expenses totaled $6,568,000 for the three months ended December 31, 2016, compared to $4,674,000 in the similar period of 2015 due to costs related to the acquisition and operation of twelve new community offices. For the year ended December 31, 2016, other expenses totaled $23,124,000 compared to $17,100,000 for the similar period in 2015, an increase of $6,024,000. Included in the increased expenses are $1.8 million of one-time merger related expenses and the cost of operating the new community offices.

Mr. Critelli commented, “In 2016, we successfully completed the acquisition of Delaware Bancshares, Inc. and integrated all operating systems. Our balance sheet reflects the growth related to the acquisition, while our earnings improved $803,000 compared to last year despite over $1.8 million of one-time merger costs recognized in 2016. Our fourth quarter results have begun to reflect the full benefit of the transaction, and we expect to grow from this base as we move forward into 2017. During 2016, our cash dividend per share increased from $1.24 per share to $1.25 per share, which resulted in a dividend yield of 3.77% based on our year-end closing stock price of $33.14. This year-end price represents an increase of over 15% in the value of our stock compared to the $28.75 reported at year-end 2015, while our earnings per share also improved from $1.60 in 2015 to $1.73. 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 is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income is derived from GAAP interest income and net interest income using an assumed tax rate of 34%. We believe the presentation of interest income on a tax–equivalent basis ensures comparability of 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 Year ended
(dollars in thousands)December 31 December 31
2016 2015 2016 2015
Net interest income$8,451 $6,112 $28,590 $24,521
Tax equivalent basis adjustment
using 34% marginal tax rate
540 365 1,749 1,361
Net interest income on a fully
taxable equivalent basis
$8,991 $6,477 $30,339 $25,882


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
December 31
2016 2015
ASSETS
Cash and due from banks$14,900 $9,744
Interest-bearing deposits with banks 2,274 266
Cash and cash equivalents 17,174 10,010
Securities available for sale 302,564 138,851
Loans receivable 713,889 559,925
Less: Allowance for loan losses 6,463 7,298
Net loans receivable 707,426 552,627
Regulatory stock, at cost 2,119 3,412
Bank premises and equipment, net 13,531 6,472
Bank owned life insurance 36,133 18,820
Foreclosed real estate owned 5,302 2,847
Accrued interest receivable 3,643 2,363
Goodwill 11,679 9,715
Other intangible assets 612 285
Deferred tax asset 8,989 3,669
Other assets 2,011 1,434
TOTAL ASSETS$1,111,183 $750,505
LIABILITIES
Deposits:
Non-interest bearing demand$191,445 $107,814
Interest-bearing 733,940 443,095
Total deposits 925,385 550,909
Short-term borrowings 32,811 53,235
Other borrowings 32,001 41,126
Accrued interest payable 1,069 957
Other liabilities 8,838 3,280
TOTAL LIABILITIES 1,000,104 649,507
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares 416 373
issued: 2016: 4,164,723 shares, 2015: 3,724,668 shares
Surplus 47,682 35,351
Retained earnings 67,225 65,412
Treasury stock, at cost: 2016: 4,509 shares, 2015: 23,311 shares (125) (626)
Accumulated other comprehensive income (loss) (4,119) 488
TOTAL STOCKHOLDERS' EQUITY 111,079 100,998
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,111,183 $750,505
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended December 31, Twelve Months Ended December 31,
2016 2015 2016 2015
INTEREST INCOME
Loans receivable, including fees$7,858 $6,058 $27,611 $24,002
Securities 1,584 877 4,591 3,761
Other 14 1 42 16
Total Interest income 9,456 6,936 32,244 27,779
INTEREST EXPENSE
Deposits 765 587 2,603 2,421
Short-term borrowings 32 38 174 85
Other borrowings 208 199 877 752
Total Interest expense 1,005 824 3,654 3,258
NET INTEREST INCOME 8,451 6,112 28,590 24,521
PROVISION FOR LOAN LOSSES 450 2,820 2,050 4,580
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,001 3,292 26,540 19,941
OTHER INCOME
Service charges and fees 951 651 2,951 2,440
Income from fiduciary activities 107 99 449 439
Net realized gains on sales of securities 15 118 284 626
Gains on sales of loans, net 0 61 54 104
Earnings and proceeds on life insurance policies 272 167 888 665
Other 145 120 553 425
Total other income 1,490 1,216 5,179 4,699
OTHER EXPENSES
Salaries and employee benefits 3,308 2,152 10,928 8,535
Occupancy, furniture and equipment 889 511 2,625 2,082
Data processing 388 261 1,337 943
Taxes, other than income 196 185 731 711
Professional fees 320 283 836 730
FDIC Insurance assessment 10 133 412 411
Foreclosed real estate owned 98 475 680 911
Merger related 142 0 1,806 0
Other 1,217 674 3,769 2,777
Total other expenses 6,568 4,674 23,124 17,100
INCOME (LOSS) BEFORE TAX 2,923 (166) 8,595 7,540
INCOME TAX EXPENSE (BENEFIT) 577 (294) 1,884 1,632
NET INCOME $2,346 $128 $6,711 $5,908
Basic earnings per share$0.57 $0.04 $1.74 $1.60
Diluted earnings per share$0.56 $0.04 $1.73 $1.60
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended December 31 2016 2015
Net interest income$8,451 $6,112
Net income 2,346 128
Net interest spread (fully taxable equivalent) 3.38% 3.58%
Net interest margin (fully taxable equivalent) 3.49% 3.73%
Return on average assets 0.83% 0.07%
Return on average equity 8.17% 0.50%
Basic earnings per share$0.57 $0.04
Diluted earnings per share$0.56 $0.04
For the Twelve Months Ended December 31
Net interest income$28,590 $24,521
Net income 6,711 5,908
Net interest spread (fully taxable equivalent) 3.46% 3.61%
Net interest margin (fully taxable equivalent) 3.60% 3.75%
Return on average assets 0.74% 0.80%
Return on average equity 6.17% 5.83%
Return on tangible equity 6.84% 6.47%
Basic earnings per share$1.74 $1.60
Diluted earnings per share$1.73 $1.60
As of December 31
Total assets$1,111,183 $750,505
Total loans receivable 713,889 559,925
Allowance for loan losses 6,463 7,298
Total deposits 925,385 550,909
Stockholders' equity 111,079 100,998
Trust assets under management 138,167 131,690
Book value per share$26.15 $27.39
Tangible book value per share$23.51 $24.67
Equity to total assets 10.00% 13.46%
Allowance to total loans receivable 0.91% 1.30%
Nonperforming loans to total loans 0.25% 1.27%
Nonperforming assets to total assets 0.64% 1.33%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
December 31 September 30 June 30 March 31 December 31
2016 2016 2016 2016 2015
ASSETS
Cash and due from banks$14,900 $19,404 $8,171 $8,709 $9,744
Interest-bearing deposits with banks 2,274 13,729 4,444 254 266
Cash and cash equivalents 17,174 33,133 12,615 8,963 10,010
Securities available for sale 302,564 310,126 129,721 143,948 138,851
Loans receivable 713,889 706,199 581,220 565,787 559,925
Less: Allowance for loan losses 6,463 6,164 5,798 7,642 7,298
Net loans receivable 707,426 700,035 575,422 558,145 552,627
Regulatory stock, at cost 2,119 2,351 2,228 2,982 3,412
Bank owned life insurance 36,133 35,889 19,082 18,951 18,820
Bank premises and equipment, net 13,531 13,617 6,328 6,390 6,472
Foreclosed real estate owned 5,302 5,386 5,414 2,855 2,847
Goodwill and other intangibles 12,291 12,331 9,952 9,975 10,000
Other assets 14,643 12,189 7,067 7,895 7,466
TOTAL ASSETS$1,111,183 $1,125,057 $767,829 $760,104 $750,505
LIABILITIES
Deposits:
Non-interest bearing demand$191,445 $200,481 $121,743 $113,225 $107,814
Interest-bearing deposits 733,940 721,763 462,516 447,266 443,095
Total deposits 925,385 922,244 584,259 560,491 550,909
Other borrowings 64,812 83,946 74,679 91,528 94,361
Other liabilities 9,907 3,167 4,300 5,387 4,237
TOTAL LIABILITIES 1,000,104 1,009,357 663,238 657,406 649,507
STOCKHOLDERS' EQUITY 111,079 115,700 104,591 102,698 100,998
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,111,183 $1,125,057 $767,829 $760,104 $750,505
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
December 31 September 30 June 30 March 31 December 31
Three months ended 2016 2016 2016 2016 2015
INTEREST INCOME
Loans receivable, including fees$7,858 $7,267 $6,351 $6,135 $6,058
Securities 1,584 1,239 878 890 877
Other 14 22 5 1 1
Total interest income 9,456 8,528 7,234 7,026 6,936
INTEREST EXPENSE
Deposits 765 677 580 581 587
Borrowings 240 281 260 270 237
Total interest expense 1,005 958 840 851 824
NET INTEREST INCOME 8,451 7,570 6,394 6,175 6,112
PROVISION FOR LOAN LOSSES 450 450 700 450 2,820
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 8,001 7,120 5,694 5,725 3,292
OTHER INCOME
Service charges and fees 951 840 604 574 651
Income from fiduciary activities 107 126 114 102 99
Net realized gains on sales of securities 15 0 205 64 118
Gains on sales of loans, net 0 (11) 18 30 61
Earnings and proceeds on life insurance policies 272 283 166 167 167
Other 145 161 116 130 120
Total other income 1,490 1,399 1,223 1,067 1,216
OTHER EXPENSES
Salaries and employee benefits 3,308 3,070 2,248 2,303 2,152
Occupancy, furniture and equipment, net 889 755 487 495 511
Foreclosed real estate owned 98 119 432 31 475
FDIC insurance assessment 10 170 117 115 133
Merger related 142 1,659 5 - -
Other 2,121 1,906 1,239 1,405 1,403
Total other expenses 6,568 7,679 4,528 4,349 4,674
INCOME (LOSS) BEFORE TAX 2,923 840 2,389 2,443 (166)
INCOME TAX EXPENSE (BENEFIT) 577 228 511 567 (294)
NET INCOME$2,346 $612 $1,878 $1,876 $128
Basic earnings per share$0.57 $0.15 $0.51 $0.51 $0.04
Diluted earnings per share$0.56 $0.15 $0.51 $0.51 $0.04
Book Value per share$26.15 $25.94 $27.99 $27.88 $27.39
Tangible Book Value per share 23.51 24.89 24.13 25.18 24.67
Return on average assets (annualized) 0.83% 0.69% 0.99% 1.00% 0.07%
Return on average equity (annualized) 8.17% 5.45% 7.28% 7.33% 0.50%
Net interest spread (fte) 3.38% 3.37% 3.63% 3.55% 3.58%
Net interest margin (fte) 3.49% 3.50% 3.79% 3.70% 3.73%
Allowance for loan losses to total loans 0.91% 0.87% 1.00% 1.35% 1.30%
Net charge-offs to average loans (annualized) 0.09% 0.05% 1.78% 0.08% 0.92%
Nonperforming loans to total loans 0.25% 0.32% 0.21% 1.21% 1.27%
Nonperforming assets to total assets 0.64% 0.68% 0.86% 1.28% 1.33%

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

Source:Norwood Financial Corp