Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

January 27, 2017 – Honesdale, Pennsylvania

 

Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp (Nasdaq Global Market – NWFL) and its subsidiary Wayne Bank, announced earnings for the three months ended December 31, 2016 of $2,346,000.  This represents an increase of $2,218,000 from the $128,000 earned in the comparable period of 2015 due primarily to a $2,370,000 decrease in the provision for loan losses and the benefits realized from the acquisition of Delaware Bancshares, Inc. ("Delaware") on July 31, 2016.  Earnings per share (fully diluted) were $.56 and $.04 for the three-month periods ended December 31, 2016 and 2015, respectively.  Net interest income before the provision for loan losses increased $2,339,000 compared to the same period of last year due to higher loan volume, while other income increased $274,000 due to the larger customer base.  A provision for loan losses of $450,000 was recorded in the current three-month period compared to $2,820,000 in the same period of last year. Operating expenses increased $1,894,000 due primarily to costs resulting from the twelve new community offices acquired.  For the year ended December 31, 2016, net income totaled $6,711,000, an increase of $803,000 from the $5,908,000 earned in the prior year.  Earnings and expenses increased as a result of the acquisition, while the provision for loan losses decreased from $4,580,000 in 2015 to $2,050,000 in 2016.  The increase in operating expenses in 2016 includes $1,806,000 of one-time merger

 

 

 

 

 

 

related expenses.  Earnings per share on a fully diluted basis were $1.73 for 2016 compared to $1.60 in 2015.  The return on average assets for the year was 0.74% with a return on average equity of 6.17% compared to 0.80% and 5.83%, respectively, in 2015.

 

Total assets were $1.1 billion as of December 31, 2016.  Loans receivable totaled $713.9 million as of December 31, 2016, with total deposits of $925.4 million and stockholders' equity of $111.1 million.

 

Loans receivable increased $154.0 million from the prior year-end due primarily to the $112.1 million of loans acquired from Delaware.  Organic loan growth included a $22.8 million increase in commercial loans due primarily to an $18.6 million increase in commercial real estate loans.  Residential mortgage loans and construction loans increased $5.4 million internally after the sale of $1.7 million of fixed-rate residential mortgage loans for the purpose of interest rate risk management.  Consumer loans increased $13.7 million internally in 2016 due to a $16.5 million increase in indirect auto and marine financing.  As of December 31, 2016, total non-performing loans were $1.8 million and represented 0.25% of total loans compared to $7.1 million, or 1.27% as of December 31, 2015.  The significant decrease includes the transfer of one loan relationship with a balance of $5,015,000 on December 31, 2015 to foreclosed real estate owned in 2016.  For the three months and year ended December 31, 2016, net charge-offs totaled $151,000 and $2,885,000, respectively, compared to $1,268,000 and $3,157,000, respectively, for the corresponding periods in 2015.  Based on management's analysis, the Company determined that it would be appropriate to provide $450,000 and $2,050,000 for potential future losses for the three and twelve

 

 

 

 

 

 

month periods ended December 31, 2016, respectively, compared to $2,820,000 in the similar quarter of last year and $4,580,000 for the year of 2015.  As of December 31, 2016, the allowance for loan losses totaled $6,463,000 and 0.91% of total loans compared to $7,298,000 and 1.30% of total loans at December 31, 2015.  Additionally, as of December 31, 2016 the allowance for loan losses represented 356% of total non-performing loans, compared to 102% as of December 31, 2015.

 

Net interest income, on a fully taxable equivalent basis (fte), totaled $8,991,000 for the three months ended December 31, 2016, an increase of $2,514,000 compared to the same period in 2015.  Net interest margin (fte) for the three months ended December 31, 2016 was 3.49% decreasing from 3.73% for the similar period in 2015.  The decrease in net interest margin was principally due to the mix and yield on interest-earning assets acquired from Delaware which resulted in a 33 basis point decrease in the yield earned on assets.  The decrease in the yield on earning assets was partially offset by a 13 basis point decrease in the cost of interest-bearing liabilities due to the favorable mix and cost of interest-bearing liabilities acquired. For the year, net interest income (fte) totaled $30,339,000, an increase of $4,457,000 compared to 2015.  The net interest margin (fte) declined 15 basis points to 3.60% in 2016.

 

Other income for the three months ended December 31, 2016 totaled $1,490,000 compared to $1,216,000 for the similar period in 2015.  Gains on the sale of loans and securities decreased $164,000, while all other items of other income increased $438,000 in the aggregate due primarily to service charges and fees resulting from the acquisition.  Other income for the year ended December 31, 2016 totaled $5,179,000 compared to $4,699,000 in 2015, an increase of $480,000.  Gains on the sale of loans

 

 

 

 

 

 

and investment securities decreased $392,000 in the aggregate, while all other items of other income increased $872,000, net due primarily to the acquisition.

 

Other expenses totaled $6,568,000 for the three months ended December 31, 2016, compared to $4,674,000 in the similar period of 2015 due to costs related to the acquisition and operation of twelve new community offices.  For the year ended December 31, 2016, other expenses totaled $23,124,000 compared to $17,100,000 for the similar period in 2015, an increase of $6,024,000.  Included in the increased expenses are $1.8 million of one-time merger related expenses and the cost of operating the new community offices.

 

Mr. Critelli commented, "In 2016, we successfully completed the acquisition of Delaware Bancshares, Inc. and integrated all operating systems.  Our balance sheet reflects the growth related to the acquisition, while our earnings improved $803,000 compared to last year despite over $1.8 million of one-time merger costs recognized in 2016.  Our fourth quarter results have begun to reflect the full benefit of the transaction, and we expect to grow from this base as we move forward into 2017.  During 2016, our cash dividend per share increased from $1.24 per share to $1.25 per share, which resulted in a dividend yield of 3.77% based on our year-end closing stock price of $33.14.  This year-end price represents an increase of over 15% in the value of our stock compared to the $28.75 reported at year-end 2015, while our earnings per share also improved from $1.60 in 2015 to $1.73.  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 is a non-GAAP (Generally Accepted Accounting Principles) financial measure.  Tax-equivalent net interest income is derived from GAAP interest income and net interest income using an assumed tax rate of 34%.  We believe the presentation of interest income on a tax–equivalent basis ensures comparability of 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:

 

 

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

 

 

---

---

---

---