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%



            

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