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Norwood Financial Corp. Announces First Quarter Earnings

HONESDALE, Pa., April 19, 2017 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq Global Market – NWFL) and its subsidiary, Wayne Bank, announced earnings of $2,376,000 for the three months ended March 31, 2017 which represents a $500,000, or 26.6%, increase from the $1,876,000 recorded during the same three-month period of last year. The increase was principally due to a higher level of net interest income and other income resulting from the acquisition of Delaware Bancshares, Inc. in the third quarter of 2016. Earnings per share on a fully diluted basis were $0.57 in the first quarter of this year compared to $0.51 in the first quarter of 2016. The annualized return on average assets was 0.87% in the first quarter of 2017 and the annualized return on average equity was 8.54%, compared to 1.00% and 7.33%, respectively, in the first quarter of 2016.

Total assets were $1.1 billion as of March 31, 2017, an increase of $351.5 million compared to the prior year total. Total loans increased $153.6 million compared to March 31, 2016, total deposits increased $370.9 million over the past twelve months, and stockholders’ equity increased $10.3 million during the past year. All such increases are primarily the result of the acquisition.

Non-performing assets totaled $6.7 million or 0.60% of total assets at March 31, 2017 comprised of $2.0 million of non-performing loans and $4.7 million of foreclosed real estate owned, compared to $7.2 million of non-performing assets or 0.64% of total assets at December 31, 2016. As of March 31, 2016, non-performing assets totaled $9.7 million, or 1.28% of total assets. Net charge-offs for the three-month period ending March 31, 2017 were $162,000 compared to $107,000 of net charge-offs in the first quarter of last year. Based on management’s analysis, the Company determined that it would be prudent to provide additional reserves and added $600,000 to the allowance for loan losses in the current period compared to $450,000 during the same period of last year. The allowance for loan losses was 0.96% of total loans outstanding on March 31, 2017 compared to 0.91% on December 31, 2016 and 1.35% on March 31, 2016. The ratio of the reserve for loan losses to nonperforming loans was 345% at March 31, 2017 compared to 356% on December 31, 2016 and 111% on March 31, 2016.

Net interest income (fully taxable equivalent) was $9,043,000 during the first quarter of 2017 which is $2,509,000 higher than the comparable three-month period of last year. A $155.2 million increase in average loans outstanding and a $166.3 million increase in average securities contributed to the increased interest income. Both increases resulted from the acquisition. Interest income fte was also impacted by the 59 basis point decrease in the yield earned on investment securities, which also resulted from the acquisition. The yield on interest-earning assets decreased 31 basis points compared to the prior year while the cost of funds decreased 16 basis points. As a result, the net interest margin (fte) decreased from 3.70% to 3.51% compared to the quarter ended March 31, 2016. In comparison to the quarter ended December 31, 2016, the net interest margin (fte) increased from 3.49% to 3.51%.

Other income totaled $1,643,000 in the first quarter of 2017 compared to $1,067,000 during the same period of last year. The increase can be attributed to a higher level of service charges and fees as well as increased earnings on life insurance policies related to the acquisition. The first quarter of 2017 also includes a gain of $209,000 related to the sale of the Bank’s former West Scranton Office.

Operating expenses totaled $6,614,000 in the first quarter and were $2,265,000 higher than the same period of last year. Salaries and employee benefit costs rose $916,000 over the same period of last year while occupancy, furniture and equipment costs rose $416,000 resulting from the acquisition of twelve community offices. Foreclosed real estate costs increased $541,000 due primarily to a write-down on one property, while all other operating costs increased $392,000 net.

Mr. Critelli stated that “Our first quarter results provide a good start for 2017 and are in-line with our budget. Our balance sheet reflects the growth related to the acquisition, while our earnings increased $500,000 reflecting the full benefit of the acquisition. Our net interest margin improved over the prior quarter, core operating expenses remain well controlled and our capital base remains above regulatory “well capitalized” targets. 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 from fourteen offices throughout Northeastern Pennsylvania and twelve offices in the Southern Tier of New York. 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 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:

(dollars in thousands)Three months ended March 31,
2017 2016
Net interest income$8,497 $6,175
Tax equivalent basis adjustment using 34% marginal tax rate 546 359
Net interest income on a fully taxable equivalent basis$9,043 $
6,534


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
March 31
2017 2016
ASSETS
Cash and due from banks$12,057 $8,709
Interest-bearing deposits with banks 7,785 254
Cash and cash equivalents 19,842 8,963
Securities available for sale 295,801 143,948
Loans receivable 719,443 565,787
Less: Allowance for loan losses 6,901 7,642
Net loans receivable 712,542 558,145
Regulatory stock, at cost 1,939 2,982
Bank premises and equipment, net 13,073 6,390
Bank owned life insurance 36,352 18,951
Foreclosed real estate owned 4,703 2,855
Accrued interest receivable 3,532 2,487
Goodwill 11,331 9,715
Other intangible assets 571 260
Deferred tax asset 8,923 3,456
Other assets 3,006 1,952
TOTAL ASSETS$1,111,615 $760,104
LIABILITIES
Deposits:
Non-interest bearing demand$192,735 $113,225
Interest-bearing 738,678 447,266
Total deposits 931,413 560,491
Short-term borrowings 28,383 52,672
Other borrowings 28,877 38,856
Accrued interest payable 909 925
Other liabilities 9,081 4,462
TOTAL LIABILITIES 998,663 657,406
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2017: 4,164,723 shares, 2016: 3,724,668 shares 416 373
Surplus 47,678 35,390
Retained earnings 68,268 66,143
Treasury stock, at cost: 2017: 2,566 shares, 2016: 35,649 shares (93) (987)
Accumulated other comprehensive (loss) income (3,317) 1,779
TOTAL STOCKHOLDERS' EQUITY 112,952 102,698
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,111,615 $760,104


NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
2017 2016
INTEREST INCOME
Loans receivable, including fees$7,806 $6,135
Securities 1,618 890
Other 10 1
Total Interest income 9,434 7,026
INTEREST EXPENSE
Deposits 766 581
Short-term borrowings 28 39
Other borrowings 143 231
Total Interest expense 937 851
NET INTEREST INCOME 8,497 6,175
PROVISION FOR LOAN LOSSES 600 450
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,897 5,725
OTHER INCOME
Service charges and fees 936 574
Income from fiduciary activities 106 102
Net realized gains on sales of securities 6 64
Gains on sales of loans, net 0 30
Earnings and proceeds on life insurance policies 255 167
Other 340 130
Total other income 1,643 1,067
OTHER EXPENSES
Salaries and employee benefits 3,219 2,303
Occupancy, furniture and equipment 911 495
Data processing and related operations 344 271
Taxes, other than income 233 205
Professional fees 249 151
FDIC Insurance assessment 95 115
Foreclosed real estate 572 31
Other 991 778
Total other expenses 6,614 4,349
INCOME BEFORE TAX 2,926 2,443
INCOME TAX EXPENSE 550 567
NET INCOME $2,376 $1,876
Basic earnings per share$0.57 $0.51
Diluted earnings per share$0.57 $0.51


NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended March 31 2017 2016
Net interest income$8,497 $6,175
Net income 2,376 1,876
Net interest spread (fully taxable equivalent) 3.40% 3.55%
Net interest margin (fully taxable equivalent) 3.51% 3.70%
Return on average assets 0.87% 1.00%
Return on average equity 8.54% 7.33%
Basic earnings per share$0.57 $0.51
Diluted earnings per share$0.57 $0.51
As of March 31
Total assets$1,111,615 $760,104
Total loans receivable 719,443 565,787
Allowance for loan losses 6,901 7,642
Total deposits 931,413 560,491
Stockholders' equity 112,952 102,698
Trust assets under management 143,055 133,421
Book value per share$27.09 $27.88
Tangible book value per share$24.18 $25.18
Equity to total assets 10.16% 13.51%
Allowance to total loans receivable 0.96% 1.35%
Nonperforming loans to total loans 0.28% 1.21%
Nonperforming assets to total assets 0.60% 1.28%


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
March 31 December 31 September 30 June 30 March 31
2017 2016 2016 2016 2016
ASSETS
Cash and due from banks$12,057$14,900$19,404$8,171$8,709
Interest-bearing deposits with banks 7,785 2,274 13,729 4,444 254
Cash and cash equivalents 19,842 17,174 33,133 12,615 8,963
Securities available for sale 295,801 302,564 310,126 129,721 143,948
Loans receivable 719,443 713,889 706,199 581,220 565,787
Less: Allowance for loan losses 6,901 6,463 6,164 5,798 7,642
Net loans receivable 712,542 707,426 700,035 575,422 558,145
Regulatory stock, at cost 1,939 2,119 2,351 2,228 2,982
Bank owned life insurance 36,352 36,133 35,889 19,082 18,951
Bank premises and equipment, net 13,073 13,531 13,617 6,328 6,390
Foreclosed real estate owned 4,703 5,302 5,386 5,414 2,855
Goodwill and other intangibles 11,902 12,291 12,331 9,952 9,975
Other assets 15,461 14,643 12,189 7,067 7,895
TOTAL ASSETS$1,111,615$1,111,183$1,125,057$767,829$760,104
. .
LIABILITIES
Deposits:
Non-interest bearing demand$192,735$191,445$200,481$121,743$113,225
Interest-bearing deposits 738,678 733,940 721,763 462,516 447,266
Total deposits 931,413 925,385 922,244 584,259 560,491
Other borrowings 57,260 64,812 83,946 74,679 91,528
Other liabilities 9,990 9,907 3,167 4,300 5,387
TOTAL LIABILITIES 998,663 1,000,104 1,009,357 663,238 657,406
STOCKHOLDERS' EQUITY 112,952 111,079 115,700 104,591 102,698
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,111,615$1,111,183$1,125,057$767,829$760,104


NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
March 31 December 31 September 30 June 30 March 31
Three months ended 2017
2016
2016
2016
2016
INTEREST INCOME
Loans receivable, including fees$7,806 $7,858 $7,267 $6,351 $6,135
Securities 1,618 1,584 1,239 878 890
Other 10 14 22 5 1
Total interest income 9,434 9,456 8,528 7,234 7,026
INTEREST EXPENSE
Deposits 766 765 677 580 581
Borrowings 171 240 281 260 270
Total interest expense 937 1,005 958 840 851
NET INTEREST INCOME 8,497 8,451 7,570 6,394 6,175
PROVISION FOR LOAN LOSSES 600 450 450 700 450
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,897 8,001 7,120 5,694 5,725
OTHER INCOME
Service charges and fees 936 951 840 604 574
Income from fiduciary activities 106 107 126 114 102
Net realized gains on sales of securities 6 15 0 205 64
Gains on sales of loans, net 0 0 (11) 18 30
Earnings and proceeds on life insurance policies 255 272 283 166 167
Other 340 145 161 116 130
Total other income 1,643 1,490 1,399 1,223 1,067
OTHER EXPENSES
Salaries and employee benefits 3,219 3,308 3,070 2,248 2,303
Occupancy, furniture and equipment, net 911 889 755 487 495
Foreclosed real estate owned 572 98 119 432 31
FDIC insurance assessment 95 10 170 117 115
Merger related 0 142 1,659 5 -
Other 1,817 2,121 1,906 1,239 1,405
Total other expenses 6,614 6,568 7,679 4,528 4,349
INCOME BEFORE TAX 2,926 2,923 840 2,389 2,443
INCOME TAX EXPENSE 550 577 228 511 567
NET INCOME$2,376 $2,346 $612 $1,878 $1,876
Basic earnings per share$0.57 $0.57 $0.15 $0.51 $0.51
Diluted earnings per share$0.57 $0.56 $0.15 $0.51 $0.51
Book Value per share$27.09 $26.15 $25.94 $27.99 $27.88
Tangible Book Value per share 24.18 23.51 24.89 24.13 25.18
Return on average assets (annualized) 0.87% 0.83% 0.69% 0.99% 1.00%
Return on average equity (annualized) 8.54% 8.17% 5.45% 7.28% 7.33%
Net interest spread (fte) 3.40% 3.38% 3.37% 3.63% 3.55%
Net interest margin (fte) 3.51% 3.49% 3.50% 3.79% 3.70%
Allowance for loan losses to total loans 0.96% 0.91% 0.87% 1.00% 1.35%
Net charge-offs to average loans (annualized) 0.09% 0.09% 0.05% 1.78% 0.08%
Nonperforming loans to total loans 0.28% 0.25% 0.32% 0.21% 1.21%
Nonperforming assets to total assets 0.60% 0.64% 0.68% 0.86% 1.28%



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

Source:Norwood Financial Corp