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Norwood Financial Corp Announces Second Quarter Earnings

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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 rate 543   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

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