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Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 19, 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 June 30, 2017 of $2,724,000. This represents an increase of $846,000 or 45.0%, from the $1,878,000 earned in the similar period of 2016 due primarily to increases in net interest income and other income resulting from the acquisition of Delaware Bancshares, Inc. in the third quarter of 2016. Earnings per share (fully diluted) were $.65 in the 2017 period, increasing from the $.51 earned in the similar period of 2016. Annualized return on average assets for the three months ended June 30, 2017 was 0.97% with an annualized return on average equity of 9.45%. Net income for the six months ended June 30, 2017 totaled $5,100,000, which is $1,346,000 higher than the same six-month period of last year due to increased income resulting from the acquisition. Earnings per share (fully diluted) for the six months ended June 30, 2017 and 2016, totaled $1.22 and $1.02 per share, respectively.

Total assets as of June 30, 2017 were $1.1 billion with loans receivable of $735.0 million, deposits of $932.5 million and stockholders’ equity of $116.2 million. Loans receivable increased $153.8 million since June 30, 2016 while total deposits increased $348.2 million and stockholders’ equity increased $11.6 million. All such increases are primarily the result of the acquisition.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $7.1 million and represented 0.63% of total assets as of June 30, 2017 compared to $6.6 million, or 0.86% of total assets, as of June 30, 2016. The allowance for loan losses totaled $7,419,000 as of June 30, 2017 and represented 1.01% of total loans outstanding, compared to $5,798,000 and 1.00%, respectively, on June 30, 2016.

For the three months ended June 30, 2017, net interest income, on a fully taxable equivalent basis (fte), totaled $9,199,000, an increase of $2,441,000 compared to the similar period in 2016. A $154.2 million increase in average loans outstanding and a $164.5 million increase in average securities contributed to the increased income. Both increases resulted from loans and securities acquired in the acquisition. Net interest margin (fte) for the 2017 period was 3.54%, decreasing from 3.79% for the similar period in 2016 due primarily to a 52 basis point decrease in the yield earned on investment securities, which resulted from lower yielding securities acquired in the acquisition. The yield on interest-earning assets decreased 36 basis points compared to the prior year while the cost of interest-bearing liabilities decreased 16 basis points to 0.46%. Net interest income (fte) for the six months ended June 30, 2017 totaled $18,243,000, which was $4,951,000 higher than the similar period in 2016 due to the higher volume of earning assets resulting from the acquisition. The net interest margin (fte) was 3.53% in the 2017 period and 3.74% during the first six months of 2016. Decreased yields on securities contributed to the reduced net interest margin.

Other income for the three months ended June 30, 2017 totaled $1,656,000 compared to $1,223,000 for the similar period in 2016. The increase can be attributed to a higher level of service charges and fees attributable to a larger customer base as well as increased earnings on life insurance policies related to the acquisition. For the six months ended June 30, 2017, other income totaled $3,299,000 compared to $2,290,000 in the 2016 period. The 2017 period includes a gain of $209,000 related to the sale of a branch office as well as the previously mentioned increases resulting from the acquisition.

Other expenses totaled $6,130,000 for the three months ended June 30, 2017, an increase of $1,602,000 compared to the $4,528,000 reported in the similar period of 2016. Salaries and employee benefits rose $964,000 over the same period of last year while occupancy, furniture and equipment costs rose $322,000 resulting from the acquisition of twelve community offices. For the six months ended June 30, 2017, other expenses totaled $12,744,000 compared to $8,876,000 for the similar period in 2016, an increase of $3,868,000 resulting primarily from the acquisition.

Mr. Critelli commented, “Our earnings for the first half of 2017 reflect the full benefit of the acquisition of Delaware Bancshares, Inc. and were in-line with projections. Our key performance metrics improved over the first quarter of the year, 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 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 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)2017 2016 2017 2016
Net Interest Income$8,656 $6,394 $17,154 $12,569
Taxable equivalent basis adjustment using 34% marginal tax rate543 364
1,089 723
Net interest income on a fully taxable equivalent basis$9,199 $6,758 $18,243 $13,292


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
June 30
2017
2016
ASSETS
Cash and due from banks$16,055 $8,171
Interest-bearing deposits with banks 348 4,444
Cash and cash equivalents 16,403 12,615
Securities available for sale 300,667 129,721
Loans receivable 735,026 581,220
Less: Allowance for loan losses 7,419 5,798
Net loans receivable 727,607 575,422
Regulatory stock, at cost 2,435 2,228
Bank premises and equipment, net 12,953 6,328
Bank owned life insurance 36,575 19,082
Foreclosed real estate owned 4,523 5,414
Accrued interest receivable 3,417 2,289
Goodwill 11,331 9,715
Other intangible assets 531 237
Deferred tax asset 8,181 2,222
Other assets 2,690 2,556
TOTAL ASSETS$1,127,313 $767,829
LIABILITIES
Deposits:
Non-interest bearing demand$200,364 $121,743
Interest-bearing 732,107 462,516
Total deposits 932,471 584,259
Short-term borrowings 42,192 38,100
Other borrowings 25,330 36,579
Accrued interest payable 942 891
Other liabilities 10,211 3,409
TOTAL LIABILITIES 1,011,146 663,238
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 47,645 35,430
Retained earnings 69,660 66,876
Treasury stock, at cost: 2017: 566 shares, 2016: 33,444 shares (22) (926)
Accumulated other comprehensive (loss) income (1,532) 2,838
TOTAL STOCKHOLDERS' EQUITY 116,167 104,591
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,127,313 $767,829


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,
2017 2016 2017 2016
INTEREST INCOME
Loans receivable, including fees$7,925 $6,351 $15,731 $12,485
Securities 1,633 878 3,251 1,768
Other 24 5 35 7
Total Interest income 9,582 7,234 19,017 14,260
INTEREST EXPENSE
Deposits 797 580 1,563 1,161
Short-term borrowings 28 37 56 77
Other borrowings 101 223 244 453
Total Interest expense 926 840 1,863 1,691
NET INTEREST INCOME 8,656 6,394 17,154 12,569
PROVISION FOR LOAN LOSSES 600 700 1,200 1,150
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,056 5,694 15,954 11,419
OTHER INCOME
Service charges and fees 1,016 604 1,951 1,178
Income from fiduciary activities 128 114 235 216
Net realized gains on sales of securities 31 205 37 270
Gains on sales of loans, net 67 18 67 47
Earnings and proceeds on life insurance policies 275 166 530 333
Other 139 116 479 246
Total other income 1,656 1,223 3,299 2,290
OTHER EXPENSES
Salaries and employee benefits 3,212 2,248 6,430 4,551
Occupancy, furniture and equipment 809 487 1,720 982
Data processing and related operations 324 255 668 526
Taxes, other than income 227 124 460 329
Professional fees 240 181 489 332
FDIC Insurance assessment 91 117 186 231
Foreclosed real estate 152 432 724 462
Other 1,075 684 2,067 1,463
Total other expenses 6,130 4,528 12,744 8,876
INCOME BEFORE TAX 3,582 2,389 6,509 4,833
INCOME TAX EXPENSE 858 511 1,409 1,079
NET INCOME $2,724 $1,878 $5,100 $3,754
Basic earnings per share$0.66 $0.51 $1.23 $1.02
Diluted earnings per share$0.65 $0.51 $1.22 $1.02


NORWOOD FINANCIAL CORP.
Financial Highlights (unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended June 30 2017 2016
Net interest income$8,656 $6,394
Net income 2,724 1,878
Net interest spread (fully taxable equivalent) 3.44% 3.63%
Net interest margin (fully taxable equivalent) 3.54% 3.79%
Return on average assets 0.97% 0.99%
Return on average equity 9.45% 7.28%
Basic earnings per share$0.66 $0.51
Diluted earnings per share$0.65 $0.51
For the Six Months Ended June 30 2017 2016
Net interest income$17,154 $12,569
Net income 5,100 3,754
Net interest spread (fully taxable equivalent) 3.42% 3.59%
Net interest margin (fully taxable equivalent) 3.53% 3.74%
Return on average assets 0.92% 0.99%
Return on average equity 9.00% 7.31%
Basic earnings per share$1.23 $1.02
Diluted earnings per share$1.22 $1.02
As of June 30
Total assets$1,127,313 $767,829
Total loans receivable 735,026 581,220
Allowance for loan losses 7,419 5,798
Total deposits 932,471 584,259
Stockholders' equity 116,167 104,591
Trust assets under management 146,307 134,126
Book value per share$27.43 $27.99
Tangible book value per share$24.55 $25.28
Equity to total assets 10.30% 13.62%
Allowance to total loans receivable 1.01% 1.00%
Nonperforming loans to total loans 0.35% 0.21%
Nonperforming assets to total assets 0.63% 0.86%


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
June 30 March 31 December 31 September 30 June 30
2017 2017 2016 2016 2016
ASSETS
Cash and due from banks$16,055 $12,057 $14,900 $19,404 $8,171
Interest-bearing deposits with banks 348 7,785 2,274 13,729 4,444
Cash and cash equivalents 16,403 19,842 17,174 33,133 12,615
Securities available for sale 300,667 295,801 302,564 310,126 129,721
Loans receivable 735,026 719,443 713,889 706,199 581,220
Less: Allowance for loan losses 7,419 6,901 6,463 6,164 5,798
Net loans receivable 727,607 712,542 707,426 700,035 575,422
Regulatory stock, at cost 2,435 1,939 2,119 2,351 2,228
Bank owned life insurance 36,575 36,352 36,133 35,889 19,082
Bank premises and equipment, net 12,953 13,073 13,531 13,617 6,328
Foreclosed real estate owned 4,523 4,703 5,302 5,386 5,414
Goodwill and other intangibles 11,862 11,902 12,291 12,331 9,952
Other assets 14,288 15,461 14,643 12,189 7,067
TOTAL ASSETS$1,127,313$1,111,615$1,111,183$1,125,057$767,829
.
LIABILITIES
Deposits:
Non-interest bearing demand$200,364$192,735$191,445$200,481$121,743
Interest-bearing deposits 732,107 738,678 733,940 721,763 462,516
Total deposits 932,471 931,413 925,385 922,244 584,259
Other borrowings 67,522 57,260 64,812 83,946 74,679
Other liabilities 11,153 9,990 9,907 3,167 4,300
TOTAL LIABILITIES 1,011,146 998,663 1,000,104 1,009,357 663,238
STOCKHOLDERS' EQUITY 116,167 112,952 111,079 115,700 104,591
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,127,313$1,111,615$1,111,183$1,125,057$767,829



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 2017 2017 2016 2016 2016
INTEREST INCOME
Loans receivable, including fees $7,925 $7,806 $7,858 $7,267 $6,351
Securities 1,633 1,618 1,584 1,239 878
Other 24 10 14 22 5
Total interest income 9,582 9,434 9,456 8,528 7,234
INTEREST EXPENSE
Deposits 797 766 765 677 580
Borrowings 129 171 240 281 260
Total interest expense 926 937 1,005 958 840
NET INTEREST INCOME 8,656 8,497 8,451 7,570 6,394
PROVISION FOR LOAN LOSSES 600 600 450 450 700
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 8,056 7,897 8,001 7,120 5,694
OTHER INCOME
Service charges and fees 1,016 936 951 840 604
Income from fiduciary activities 128 106 107 126 114
Net realized gains on sales of securities 31 6 15 0 205
Gains (losses) on sales of loans, net 67 0 0 (11) 18
Earnings and proceeds on life insurance policies 275 255 272 283 166
Other 139 340 145 161 116
Total other income 1,656 1,643 1,490 1,399 1,223
OTHER EXPENSES
Salaries and employee benefits 3,212 3,219 3,308 3,070 2,248
Occupancy, furniture and equipment, net 809 911 889 755 487
Foreclosed real estate 152 572 98 119 432
FDIC insurance assessment 91 95 10 170 117
Merger related 0 0 142 1,659 5
Other 1,866 1,817 2,121 1,906 1,239
Total other expenses 6,130 6,614 6,568 7,679 4,528
INCOME BEFORE TAX 3,582 2,926 2,923 840 2,389
INCOME TAX EXPENSE 858 550 577 228 511
NET INCOME$2,724 $2,376 $2,346 $612 $1,878
Basic earnings per share$0.66 $0.57 $0.57 $0.15 $0.51
Diluted earnings per share$0.65 $0.57 $0.56 $0.15 $0.51
Book Value per share$27.43 $27.09 $26.15 $25.94 $27.99
Tangible Book Value per share 24.55 24.18 23.51 23.39 25.28
Return on average assets (annualized) 0.97% 0.87% 0.83% 0.69% 0.99%
Return on average equity (annualized) 9.45% 8.54% 8.17% 5.45% 7.28%
Net interest spread (fte) 3.44% 3.40% 3.38% 3.37% 3.63%
Net interest margin (fte) 3.54% 3.51% 3.49% 3.50% 3.79%
Allowance for loan losses to total loans 1.01% 0.96% 0.91% 0.87% 1.00%
Net charge-offs to average loans (annualized) 0.05% 0.09% 0.09% 0.05% 1.78%
Nonperforming loans to total loans 0.35% 0.28% 0.25% 0.32% 0.21%
Nonperforming assets to total assets 0.63% 0.60% 0.64% 0.68% 0.86%


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

Source:Norwood Financial Corp