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Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 24, 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 September 30, 2017 of $2,941,000 which represents an increase of $2,329,000 over the $612,000 earned in the same three-month period of 2016. Net interest income improved $1,300,000 and other income increased $459,000 due primarily to benefits derived from the acquisition of Delaware Bancshares, Inc. (“Delaware”) which closed on July 31, 2016. The 2016 period included $1,659,000 of non-recurring merger-related expenses incurred in connection with the acquisition of Delaware. Earnings per share (fully diluted) were $0.47 in the 2017 period, increasing from the $0.10 earned in the similar period of last year after adjusting for the retroactive effect of the 50% stock dividend declared August 8, 2017. Net income for the nine months ended September 30, 2017 totaled $8,041,000, which is $3,676,000 higher than the same period of 2016 primarily due to the positive impact of the merger realized during the entire 2017 period. Earnings per share (fully diluted) for the nine months ended September 30, 2017 totaled $1.28 per share compared to $0.77 per share in the 2016 period after adjusting for the 50% stock dividend. The annualized returns on average assets and average equity for the current three-month period were 1.03% and 9.85%, respectively.

Total assets as of September 30, 2017 were $1.132 billion with loans receivable of $756.0 million, deposits of $924.0 million and stockholders’ equity of $117.7 million. Total assets have increased $6.9 million during the past twelve months while loans, deposits and stockholders’ equity have increased $49.8 million, $1.8 million and $2.0 million, respectively.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $6.2 million or 0.55% of total assets as of September 30, 2017 compared to $7.1 million or 0.63% of assets as of June 30, 2017 and $7.6 million or 0.68% of total assets as of September 30, 2016. Net charge-offs were $259,000 for the quarter and totaled $503,000 for the nine months ended September 30, 2017 compared to $84,000 and $2,733,000, respectively, for the similar periods in 2016. Based on management’s analysis, the Company added $600,000 and $1,800,000 to the allowance for loan losses for the three and nine-month periods ended September 30, 2017, respectively, compared to $450,000 and $1,600,000, respectively, for the similar periods in 2016. The allowance for loan losses totaled $7,760,000 as of September 30, 2017 and represented 387% of total non-performing loans, compared to $6,164,000 and 274% of non-performing loans as of September 30, 2016.

For the three months ended September 30, 2017, net interest income, on a fully taxable equivalent basis (fte), totaled $9,419,000, which represents an increase of $1,363,000 compared to the similar period in 2016 due primarily to an $82.6 million increase in average loans outstanding and a $58.7 million increase in average securities. Both increases were due to growth and assets acquired from Delaware in 2016. Net interest margin (fte) for the 2017 period was 3.60% compared to 3.50% for the similar period in 2016 due primarily to a $126.2 million increase in average interest-earning assets resulting from both organic growth and the acquisition in 2016. Net interest income (fte) for the nine months ended September 30, 2017 totaled $27,661,000, an increase of $6,313,000 compared to the similar period in 2016 due primarily to the acquisition. Net interest margin (fte) year-to-date for the 2017 period was 3.55% compared to 3.65% in 2016.

Other income for the three months ended September 30, 2017 totaled $1,858,000 compared to $1,399,000 for the similar period in 2016. The increase reflects fees and service charges related to the additional customers acquired from Delaware. For the nine months ended September 30, 2017, other income totaled $5,158,000 compared to $3,689,000 in the 2016 period. Gains on the sales of loans, investment securities, deposits and other assets totaled $543,000 in the 2017 year-to-date period compared to $323,000 in the corresponding 2016 period. Excluding gains from sales, other income improved $1,249,000 over the first nine months of 2016.

Other expenses totaled $6,239,000 for the three months ended September 30, 2017, compared to $7,679,000 in the similar period of 2016. The higher level of expense during the 2016 period reflects non-recurring merger costs of $1,659,000. For the nine months ended September 30, 2017, other expenses totaled $18,984,000 compared to $16,556,000 for the similar period in 2016, an increase of $2,428,000.

Mr. Critelli commented, “Our earnings now reflect the full benefit of the acquisition of Delaware and are in-line with projections. Our key performance metrics improved over last year, core operating expenses remain well controlled and our capital base remains above regulatory “Well Capitalized” targets. During the third quarter, we declared a 50% stock dividend as another method to deliver shareholder value and enhance the liquidity of our stock. 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 fourteen 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 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
2017 2016 2017 2016
Net interest income$8,870$7,570 $26,023$20,139
Tax equivalent basis adjustment
using 34% marginal tax rate
549 486 1,638 1,209
Net interest income on a fully
taxable equivalent basis
$9,419$8,056 $27,661$21,348

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

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
(unaudited)
September 30
2017 2016
ASSETS
Cash and due from banks$13,947 $19,404
Interest-bearing deposits with banks 368 13,729
Cash and cash equivalents 14,315 33,133
Securities available for sale 285,706 310,126
Loans receivable 756,014 706,199
Less: Allowance for loan losses 7,760 6,164
Net loans receivable 748,254 700,035
Regulatory stock, at cost 3,115 2,351
Bank premises and equipment, net 12,922 13,617
Bank owned life insurance 36,839 35,889
Foreclosed real estate owned 4,243 5,386
Accrued interest receivable 3,729 3,541
Goodwill 11,331 11,679
Other intangible assets 496 652
Deferred tax asset 8,304 5,560
Other assets 2,699 3,088
TOTAL ASSETS$1,131,953 $1,125,057
LIABILITIES
Deposits:
Non-interest bearing demand$212,844 $200,481
Interest-bearing 711,178 721,763
Total deposits 924,022 922,244
Short-term borrowings 47,229 33,156
Other borrowings 31,771 34,294
Junior subordinated debentures - 8,248
Accrued interest payable 1,167 1,040
Other liabilities 10,072 10,375
TOTAL LIABILITIES 1,014,261 1,009,357
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2017: 6,246,663 shares, 2016: 4,156,273 shares 625 416
Surplus 108,730 47,576
Retained earnings 9,947 66,210
Treasury stock, at cost: 2017: 11,724 shares, 2016: 32,797 shares (341) (908)
Accumulated other comprehensive (loss) income (1,269) 2,406
TOTAL STOCKHOLDERS' EQUITY 117,692 115,700
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,131,953 $1,125,057


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,
2017 2016 2017 2016
INTEREST INCOME
Loans receivable, including fees$8,289$7,267 $24,020$19,752
Securities 1,605 1,239 4,856 3,008
Other 2 22 37 28
Total Interest income 9,896 8,528 28,913 22,788
INTEREST EXPENSE
Deposits 828 677 2,392 1,838
Short-term borrowings 82 65 138 142
Other borrowings 116 216 360 669
Total Interest expense 1,026 958 2,890 2,649
NET INTEREST INCOME 8,870 7,570 26,023 20,139
PROVISION FOR LOAN LOSSES 600 450 1,800 1,600
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,270 7,120 24,223 18,539
OTHER INCOME
Service charges and fees 1,105 829 3,056 2,000
Income from fiduciary activities 160 126 395 342
Net realized gains on sales of securities 129 - 167 269
Gains on sales of loans, net - - 67 54
Earnings and proceeds on life insurance policies 320 283 850 616
Other 144 161 623 408
Total other income 1,858 1,399 5,158 3,689
OTHER EXPENSES
Salaries and employee benefits 3,209 3,070 9,639 7,620
Occupancy, furniture and equipment 799 755 2,519 1,736
Data processing and related operations 354 423 1,022 949
Taxes, other than income 233 205 693 535
Professional fees 217 185 706 516
FDIC Insurance assessment 97 170 283 402
Foreclosed real estate 303 119 1,028 582
Amortization of intangibles 35 34 115 81
Merger related - 1,659 - 1,664
Other 992 1,059 2,979 2,471
Total other expenses 6,239 7,679 18,984 16,556
INCOME BEFORE TAX 3,889 840 10,397 5,672
INCOME TAX EXPENSE 948 228 2,356 1,307
NET INCOME$2,941$612 $8,041$4,365
Basic earnings per share$0.47$0.10 $1.29$0.77
Diluted earnings per share$0.47$0.10 $1.28$0.77
* Per share data has been restated to give retroactive effect to the 50% stock dividend declared August 8, 2017.


NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30 2017 2016
Net interest income$8,870 $7,570
Net income 2,941 612
Net interest spread (fully taxable equivalent) 3.48% 3.37%
Net interest margin (fully taxable equivalent) 3.60% 3.50%
Return on average assets 1.03% 0.24%
Return on average equity 9.85% 2.13%
Basic earnings per share *$0.47 $0.10
Diluted earnings per share *$0.47 $0.10
For the Nine Months Ended September 30 2017 2016
Net interest income$26,023 $20,139
Net income 8,041 4,365
Net interest spread (fully taxable equivalent) 3.44% 3.50%
Net interest margin (fully taxable equivalent) 3.55% 3.65%
Return on average assets 0.96% 0.69%
Return on average equity 9.30% 5.45%
Basic earnings per share *$1.29 $0.77
Diluted earnings per share *$1.28 $0.77
As of September 30
Total assets$1,131,953 $1,125,057
Total loans receivable 756,014 706,199
Allowance for loan losses 7,760 6,164
Total deposits 924,022 922,244
Stockholders' equity 117,692 115,700
Trust assets under management 151,373 136,307
Book value per share *$18.46 $17.29
Tangible book value per share *$16.54 $15.59
Equity to total assets 10.40% 10.28%
Allowance to total loans receivable 1.03% 0.87%
Nonperforming loans to total loans 0.27% 0.32%
Nonperforming assets to total assets 0.55% 0.68%
* Per share data has been restated to give retroactive effect to the 50% stock dividend declared August 8, 2017.


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
September 30 June 30 March 31 December 31 September 30
2017 2017 2017 2016 2016
ASSETS
Cash and due from banks$13,947$16,055$12,057$14,900$19,404
Interest-bearing deposits with banks 368 348 7,785 2,274 13,729
Cash and cash equivalents 14,315 16,403 19,842 17,174 33,133
Securities available for sale 285,706 300,667 295,801 302,564 310,126
Loans receivable 756,014 735,026 719,443 713,889 706,199
Less: Allowance for loan losses 7,760 7,419 6,901 6,463 6,164
Net loans receivable 748,254 727,607 712,542 707,426 700,035
Regulatory stock, at cost 3,115 2,435 1,939 2,119 2,351
Bank owned life insurance 36,839 36,575 36,352 36,133 35,889
Bank premises and equipment, net 12,922 12,953 13,073 13,531 13,617
Foreclosed real estate owned 4,243 4,523 4,703 5,302 5,386
Goodwill and other intangibles 11,827 11,862 11,902 12,291 12,331
Other assets 14,732 14,288 15,461 14,643 12,189
TOTAL ASSETS$1,131,953$1,127,313$1,111,615$1,111,183$1,125,057
LIABILITIES
Deposits:
Non-interest bearing demand$212,844$200,364$192,735$191,445$200,481
Interest-bearing deposits 711,178 732,107 738,678 733,940 721,763
Total deposits 924,022 932,471 931,413 925,385 922,244
Other borrowings 79,000 67,522 57,260 64,812 75,698
Other liabilities 11,239 11,153 9,990 9,907 11,415
TOTAL LIABILITIES 1,014,261 1,011,146 998,663 1,000,104 1,009,357
STOCKHOLDERS' EQUITY 117,692 116,167 112,952 111,079 115,700
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$1,131,953$1,127,313$1,111,615$1,111,183$1,125,057


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 2017 2017 2017 2016 2016
INTEREST INCOME
Loans receivable, including fees$8,289 $7,925 $7,806 $7,858 $7,267
Securities 1,605 1,633 1,618 1,584 1,239
Other 2 24 10 14 22
Total interest income 9,896 9,582 9,434 9,456 8,528
INTEREST EXPENSE
Deposits 828 797 766 765 677
Borrowings 198 129 171 240 281
Total interest expense 1,026 926 937 1,005 958
NET INTEREST INCOME 8,870 8,656 8,497 8,451 7,570
PROVISION FOR LOAN LOSSES 600 600 600 450 450
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 8,270 8,056 7,897 8,001 7,120
OTHER INCOME
Service charges and fees 1,105 1,016 936 951 829
Income from fiduciary activities 160 128 106 107 126
Net realized gains on sales of securities 129 31 6 15 -
Gains (losses) on sales of loans, net - 67 - - -
Earnings and proceeds on life insurance policies 320 275 255 272 283
Other 144 139 340 145 161
Total other income 1,858 1,656 1,643 1,490 1,399
OTHER EXPENSES
Salaries and employee benefits 3,209 3,212 3,219 3,308 3,070
Occupancy, furniture and equipment, net 799 809 911 889 755
Foreclosed real estate 303 152 572 98 119
FDIC insurance assessment 97 91 95 10 170
Merger related - - - 142 1,659
Other 1,831 1,866 1,817 2,121 1,906
Total other expenses 6,239 6,130 6,614 6,568 7,679
INCOME BEFORE TAX 3,889 3,582 2,926 2,923 840
INCOME TAX EXPENSE 948 858 550 577 228
NET INCOME$2,941 $2,724 $2,376 $2,346 $612
Basic earnings per share$0.47 $0.44 $0.38 $0.38 $0.10
Diluted earnings per share$0.47 $0.43 $0.38 $0.38 $0.10
Book Value per share$18.46 $18.29 $18.06 $17.43 $17.29
Tangible Book Value per share 16.54 16.37 16.12 15.67 15.59
Return on average assets (annualized) 1.03% 0.97% 0.87% 0.83% 0.69%
Return on average equity (annualized) 9.85% 9.45% 8.54% 8.17% 5.45%
Net interest spread (fte) 3.48% 3.44% 3.40% 3.38% 3.37%
Net interest margin (fte) 3.60% 3.54% 3.51% 3.49% 3.50%
Allowance for loan losses to total loans 1.03% 1.01% 0.96% 0.91% 0.87%
Net charge-offs to average loans (annualized) 0.14% 0.05% 0.09% 0.09% 0.05%
Nonperforming loans to total loans 0.27% 0.35% 0.28% 0.25% 0.32%
Nonperforming assets to total assets 0.55% 0.63% 0.60% 0.64% 0.68%
* Per share data has been restated to give retroactive effect to the 50% stock dividend declared August 8, 2017.


Source:Norwood Financial Corp.