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. | |||||||||||||||
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