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Norwood Financial Corp. Announces First Quarter Earnings

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HONESDALE, Pa., April 22, 2016 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq: NWFL) and its subsidiary, Wayne Bank, announced earnings of $1,876,000 for the three months ended March 31, 2016 which represents a decrease from the $2,041,000 recorded during the same three-month period of last year.  The decrease was principally due to a higher level of gains on sales of securities in the 2015 period.  Earnings per share on a fully diluted basis were $0.51 in the first quarter of this year compared to $0.55 in the first quarter of 2015.  The annualized return on average assets was 1.00% in the first quarter of 2016 and the annualized return on average equity was 7.33%, compared to 1.15% and 8.22%, respectively, in the first quarter of 2015.

Total assets were $760.1 million as of March 31, 2016, an increase of $25.7 million, or 3.5%, compared to the prior year total.  Total loans increased $46.8 million compared to March 31, 2015 consisting of a $33.7 million increase in commercial lending and $13.1 million of growth in retail loans.  Total deposits decreased $9.7 million over the past twelve months due to a $25.8 million reduction in jumbo time certificates of deposit from local school districts related to delays in state funding.  All other deposits increased $16.1 million including an $11.8 million increase in demand deposits.  Stockholders' equity increased $2.2 million during the past year, due principally to the retention of earnings and an increase in accumulated other comprehensive income.

Non-performing assets totaled $9.7 million or 1.28% of total assets at March 31, 2016 comprised of $6.9 million of non-performing loans and $2.8 million of foreclosed real estate owned, compared to $10.0 million of non-performing assets or 1.33% of total assets at December 31, 2015.  As of March 31, 2015, non-performing assets totaled $7.4 million.  Net charge-offs for the three-month period ending March 31, 2016 were $107,000 compared to $488,000 of net charge-offs in the first quarter of last year.  Based on the current composition of the loan portfolio, management determined that it would be prudent to provide additional reserves and added $450,000 to the allowance for loan losses in the current period compared to $620,000 during the same period of last year.  The increased provision for loan losses in 2015 reflected the higher level of net charge-offs.  The allowance for loan losses was 1.35% of total loans outstanding on March 31, 2016 compared to 1.30% on December 31, 2015 and 1.16% on March 31, 2015.

Net interest income (fully taxable equivalent) was $6,534,000 during the first quarter of 2016 which is $68,000 lower than the comparable three-month period of last year.  A $58.4 million increase in average loans outstanding had a positive impact on net interest income (fte) but a 40 basis point reduction in average loan yields offset much of the increase.  Interest income fte was also impacted by the $17.4 million decrease in average investment securities as many securities were sold to fund the loan growth.  The yield on interest-earning assets decreased 22 basis points compared to the prior year while the cost of funds increased two basis points.  As a result, the net interest margin (fte) decreased from 3.94% to 3.70% compared to the quarter ended March 31, 2015.  In comparison to the quarter ended December 31, 2015, the net interest margin (fte) decreased from 3.73% to 3.70%.

Other income totaled $1,067,000 in the first quarter of 2016 compared to $1,279,000 during the same period of last year.  The decrease can be attributed to a $235,000 decrease in net gains on the sales of loans and securities.  All other components of other income increased $23,000, net.

Operating expenses totaled $4,349,000 in the first quarter and were $162,000 higher than the same period of last year.  Salaries and employee benefit costs rose $166,000 over the same period of last year due primarily to a $78,000 increase in health care costs and a $57,000 increase in salary expense.  Foreclosed real estate costs were $127,000 lower than the same period of last year, while all other operating costs increased $123,000 net. 

Mr. Critelli stated that "Our first quarter results provide a good start for 2016 and are in-line with our budget.  Net interest income improved over the prior quarter, while credit quality ratios and costs also show improvement.  Our net interest margin exceeds peer banks, core operating expenses are well controlled and our capital base remains above regulatory "well capitalized" targets.  We are currently focused on our pending acquisition of Delaware Bancshares, Inc., including the integration of twelve new offices into the Wayne Bank system.  The transaction is expected to close in the third quarter pending various approvals.  For additional information on the transaction, please visit our website at www.waynebank.com/stockholder-services.   We continue to search out opportunities available to us, and we look forward to serving our growing base of stockholders and customers as our local economy rebounds from the extended economic downturn."

Norwood Financial Corp. is the parent company of Wayne Bank which operates from fifteen offices throughout Wayne, Pike, Monroe and Lackawanna Counties, Pennsylvania.  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, 
  2016  2015 
Net interest income$6,175 $6,307 
Tax equivalent basis adjustment using 34% marginal tax rate 359  295 
Net interest income on a fully taxable equivalent basis$6,534 $
6,602
 


             
NORWOOD FINANCIAL CORP.        
Consolidated Balance Sheets         
(dollars in thousands, except share data)        
 (unaudited)            
   March 31         
  2016   2015         
ASSETS            
  Cash and due from banks $ 8,709   $ 7,658         
  Interest-bearing deposits with banks  254    11,969         
  Cash and cash equivalents  8,963    19,627         
             
  Securities available for sale  143,948    155,674         
  Loans receivable   565,787    518,961         
  Less: Allowance for loan losses  7,642    6,007         
  Net loans receivable  558,145    512,954         
  Regulatory stock, at cost  2,982    1,838         
  Bank premises and equipment, net  6,390    6,632         
  Bank owned life insurance  18,951    18,417         
  Foreclosed real estate owned  2,855    1,698         
  Accrued interest receivable  2,487    2,329         
  Goodwill  9,715    9,715         
  Other intangible assets  260    361         
  Deferred tax asset  3,456    3,308         
  Other assets  1,952    1,806         
  TOTAL ASSETS $ 760,104   $ 734,359         
             
LIABILITIES            
  Deposits:            
  Non-interest bearing demand  $ 113,225   $ 101,423         
  Interest-bearing   447,266    468,783         
  Total deposits  560,491    570,206         
  Short-term borrowings  52,672    30,581         
  Other borrowings  38,856    27,807         
  Accrued interest payable  925    955         
  Other liabilities  4,462    4,359         
  TOTAL LIABILITIES  657,406    633,908         
             
STOCKHOLDERS' EQUITY            
  Common Stock, $.10 par value, authorized 10,000,000 shares            
  issued:  2016: 3,724,668 shares, 2015:  3,718,018 shares  373    372         
  Surplus  35,390    35,239         
  Retained earnings  66,143    64,975         
  Treasury stock, at cost: 2016: 35,649 shares, 2015: 38,972 shares  (987)  (1,046)        
  Accumulated other comprehensive income   1,779    911         
  TOTAL STOCKHOLDERS' EQUITY  102,698    100,451         
             
  TOTAL LIABILITIES AND            
  STOCKHOLDERS' EQUITY $ 760,104   $ 734,359         
            
             
             
            
NORWOOD FINANCIAL CORP.            
Consolidated Statements of Income           
(dollars in thousands, except per share data)            
  (unaudited)          
    Three Months Ended March 31,  Twelve Months Ended December 31,    
   2016   2015   2015   2014     
INTEREST INCOME                    
  Loans receivable, including fees$ 6,135  $ 6,061 $ 24,002  $ 23,841     
  Securities  890    1,023   3,761    3,920     
  Other  1    4   16    7     
  Total Interest income  7,026    7,088   27,779    27,768     
                   
INTEREST EXPENSE                  
  Deposits  581    604   2,421    2,463     
  Short-term borrowings  39    12   85    77     
  Other borrowings  231    165   752    668     
  Total Interest expense  851    781   3,258    3,208     
NET INTEREST INCOME  6,175    6,307   24,521    24,560     
PROVISION FOR LOAN LOSSES  450    620   4,580    1,680     
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES  5,725    5,687   19,941    22,880     
                     
OTHER INCOME                    
  Service charges and fees  574    572   2,440    2,350     
  Income from fiduciary activities  102    105   439    437     
  Net realized gains on sales of securities  64    311   626    1,170     
  Gains on sales of loans, net   30    18   104    132     
  Earnings and proceeds on life insurance policies  167    165   665    685     
  Other   130    108   425    336     
  Total other income  1,067    1,279   4,699    5,110     
             
OTHER EXPENSES            
  Salaries and  employee benefits  2,303    2,137   8,535    8,616     
  Occupancy, furniture and equipment  495    556   2,082    2,117     
  Data processing   271    234   943    929     
  Taxes, other than income  205    175   711    649     
  Professional fees  151    183   730    671     
  FDIC Insurance assessment  115    95   411    420     
  Foreclosed real estate owned  31    158   911    1,555     
  Other   778    649   2,777    2,770     
  Total other expenses  4,349    4,187   17,100    17,727     
             
INCOME BEFORE TAX  2,443    2,779   7,540    10,263     
INCOME TAX EXPENSE   567    738   1,632    2,606     
NET INCOME $ 1,876   $ 2,041  $ 5,908   $ 7,657     
             
Basic earnings per share $ 0.51  $ 0.55 $ 1.60  $ 2.10     
             
Diluted earnings per share $ 0.51  $ 0.55 $ 1.60  $ 2.10     
                 
                 
             
NORWOOD FINANCIAL CORP.          
Financial Highlights (Unaudited)            
(dollars in thousands, except per share data)            
             
For the Three Months Ended March 31  2016   2015         
            
Net interest income $ 6,175   $ 6,307         
Net income  1,876    2,041         
                 
Net interest spread (fully taxable equivalent)  3.55%  3.80%        
Net interest margin (fully taxable equivalent)  3.70%  3.94%        
Return on average assets  1.00%  1.15%        
Return on average equity  7.33%  8.22%        
Basic earnings per share  $ 0.51   $ 0.55         
Diluted earnings per share  $ 0.51   $ 0.55         
                 
As of March 31                
                 
Total assets $ 760,104   $ 734,359         
Total loans receivable  565,787    518,961         
Allowance for loan losses  7,642    6,007         
Total deposits  560,491    570,206         
Stockholders' equity  102,698    100,451         
Trust assets under management  133,421    134,391         
                 
Book value per share  $ 27.88   $ 27.38         
Equity to total assets  13.51%  13.68%        
Allowance to total loans receivable  1.35%  1.16%        
Nonperforming loans to total loans   1.21%  1.11%        
Nonperforming assets to total assets  1.28%  1.01%        
            
            
NORWOOD FINANCIAL CORP.            
Consolidated Balance Sheets (unaudited)        
(dollars in thousands)                      
 March 31 December 31 September 30 June 30 March 31  
  2016   2015   2015   2015   2015   
ASSETS                      
  Cash and due from banks $ 8,709  $ 9,744  $ 11,164  $ 8,505  $ 7,658   
  Interest-bearing deposits with banks  254   266   552   11,937   11,969   
  Cash and cash equivalents  8,963   10,010   11,716   20,442   19,627   
                       
  Securities available for sale  143,948   138,851   153,305   151,304   155,674   
  Loans receivable   565,787   559,925   543,536   538,870   518,961   
  Less: Allowance for loan losses  7,642   7,298   5,747   5,947   6,007   
  Net loans receivable  558,145   552,627   537,789   532,923   512,954   
  Regulatory stock, at cost  2,982   3,412   2,488   2,240   1,838   
  Bank owned life insurance  18,951   18,820   18,686   18,551   18,417   
  Bank premises and equipment, net  6,390   6,472   6,503   6,555   6,632   
  Foreclosed real estate owned  2,855   2,847   1,345   1,382   1,698   
  Goodwill and other intangibles  9,975   10,000   10,024   10,049   10,076   
  Other assets  7,895   7,466   7,473   8,075   7,443   
  TOTAL ASSETS $ 760,104  $ 750,505  $ 749,329  $ 751,521  $ 734,359   
                       
LIABILITIES                      
  Deposits:                      
  Non-interest bearing demand  $ 113,225  $ 107,814  $ 115,313  $ 107,610  $ 101,423   
  Interest-bearing deposits  447,266   443,095   456,040   468,004   468,783   
  Total deposits  560,491   550,909   571,353   575,614   570,206   
  Other borrowings  91,528   94,361   70,708   71,053   58,388   
  Other liabilities  5,387   4,237   5,328   4,936   5,314   
  TOTAL LIABILITIES  657,406   649,507   647,389   651,603   633,908   
            
STOCKHOLDERS' EQUITY  102,698   100,998   101,940   99,918   100,451   
            
  TOTAL LIABILITIES AND            
    STOCKHOLDERS' EQUITY $ 760,104  $ 750,505  $ 749,329 $ 751,521 $ 734,359   
                       
            
            
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  2016   2015   2015   2015   2015   
INTEREST INCOME                      
  Loans receivable, including fees $ 6,135  $ 6,058  $ 5,958  $ 5,924  $ 6,061   
  Securities  890   877   911   950   1,023   
  Other  1   1   3   8   4   
  Total interest income  7,026   6,936   6,872   6,882   7,088   
             
INTEREST EXPENSE            
  Deposits  581   587   611   618   604   
  Borrowings  270   237   208   215   177   
  Total interest expense  851   824   819   833   781   
NET INTEREST INCOME  6,175   6,112   6,053   6,049   6,307   
PROVISION FOR LOAN LOSSES  450   2,820   720   420   620   
NET INTEREST INCOME AFTER PROVISION            
  FOR LOAN LOSSES  5,725   3,292   5,333   5,629   5,687   
             
OTHER INCOME            
  Service charges and fees  574   651   595   622   572   
  Income from fiduciary activities  102   99   126   109   105   
  Net realized gains on sales of securities  64   118   63   134   311   
  Gains on sales of loans, net  30   61   13   12   18   
  Earnings and proceeds on life insurance policies  167   167   167   166   165   
  Other   130   120   107   90   108   
  Total other income  1,067   1,216   1,071   1,133   1,279   
             
OTHER EXPENSES            
  Salaries and  employee benefits  2,303   2,152   2,175   2,071   2,137   
  Occupancy, furniture and equipment, net  495   511   473   542   556   
  Foreclosed real estate owned  31   475   47   232   158   
  FDIC insurance assessment  115   133   119   65   95   
  Other   1,405   1,403   1,256   1,258   1,241   
  Total other expenses  4,349   4,674   4,070   4,168   4,187   
             
INCOME (LOSS) BEFORE TAX  2,443   (166)  2,334   2,594   2,779   
INCOME TAX EXPENSE (BENEFIT)  567   (294)  557   631   738   
NET INCOME $ 1,876  $ 128  $ 1,777  $ 1,963  $ 2,041   
                       
Basic earnings per share  $ 0.51  $ 0.04  $ 0.48  $ 0.53  $ 0.55   
             
Diluted earnings per share  $ 0.51  $ 0.04  $ 0.48  $ 0.53  $ 0.55   
                       
Book Value per share $ 27.88 $ 27.39 $ 27.42 $ 27.40 $ 27.38   
            
Return on average equity (annualized)  1.00%  0.50%  6.95%  7.80%  8.22%  
Return on average assets (annualized)  7.33%  0.07%  0.95%  1.06%  1.15%  
                      
Net interest spread (fte)  3.55%  3.58%  3.53%  3.53%  3.80%  
Net interest margin (fte)  3.70%  3.73%  3.68%  3.68%  3.94%  
                      
Allowance for loan losses to total loans  1.35%  1.30%  1.06%  1.10%  1.16%  
Net charge-offs to average loans (annualized)  0.08%  0.92%  0.68%  0.37%  0.39%  
Nonperforming loans to total loans  1.21%  1.27%  1.69%  2.00%  1.11%  
Nonperforming assets to total assets  1.28%  1.33%  1.40%  1.62%  1.01%  
             


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

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