FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP. ANNOUNCES FIRST QUARTER EARNINGS

 

Honesdale, Pennsylvania - April 19, 2017

Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq Global Market – NWFL) and its subsidiary, Wayne Bank, announced earnings of $2,376,000 for the three months ended March 31, 2017 which represents a $500,000, or 26.6%, increase from the $1,876,000 recorded during the same three-month period of last year.  The increase was principally due to a higher level of net interest income and other income resulting from the acquisition of Delaware Bancshares, Inc. in the third quarter of 2016.  Earnings per share on a fully diluted basis were $0.57 in the first quarter of this year compared to $0.51 in the first quarter of 2016.  The annualized return on average assets was 0.87% in the first quarter of 2017 and the annualized return on average equity was 8.54%, compared to 1.00% and 7.33%, respectively, in the first quarter of 2016.

Total assets were $1.1 billion as of March 31, 2017, an increase of $351.5 million compared to the prior year total.  Total loans increased $153.6 million compared to March 31, 2016, total deposits increased $370.9 million over the past twelve months, and stockholders' equity increased $10.3 million during the past year.  All such increases are primarily the result of the acquisition.

 

Non-performing assets totaled $6.7 million or 0.60% of total assets at March 31, 2017 comprised of $2.0 million of non-performing loans and $4.7 million of foreclosed real estate owned, compared to $7.2 million of non-performing assets or 0.64% of total assets at December 31, 2016.  As of March 31, 2016, non-performing assets totaled $9.7 million, or 1.28% of total assets.  Net charge-offs for the three-month period ending March 31, 2017 were $162,000 compared to $107,000 of net charge-offs in the first quarter of last year.  Based on management's analysis, the Company determined that it would be prudent to provide additional reserves and added $600,000 to the allowance for loan losses in the current period compared to $450,000 during the same period of last year.  The allowance for loan losses was 0.96% of total loans outstanding on March 31, 2017 compared to 0.91% on December 31, 2016 and 1.35% on March 31, 2016.  The ratio of the reserve for loan losses to nonperforming loans was 345% at March 31, 2017 compared to 356% on December 31, 2016 and 111% on March 31, 2016.

Net interest income (fully taxable equivalent) was $9,043,000 during the first quarter of 2017 which is $2,509,000 higher than the comparable three-month period of last year.  A $155.2 million increase in average loans outstanding and a $166.3 million increase in average securities contributed to the increased interest income.  Both increases resulted from the acquisition.  Interest income fte was also impacted by the 59 basis point decrease in the yield earned on investment securities, which also resulted from the acquisition. The yield on interest-earning assets decreased 31 basis points compared to the prior year while the cost of funds decreased 16 basis points.  As a result, the net interest margin (fte) decreased from 3.70% to 3.51% compared to the

 

quarter ended March 31, 2016.  In comparison to the quarter ended December 31, 2016, the net interest margin (fte) increased from 3.49% to 3.51%.

Other income totaled $1,643,000 in the first quarter of 2017 compared to $1,067,000 during the same period of last year.  The increase can be attributed to a higher level of service charges and fees as well as increased earnings on life insurance policies related to the acquisition.  The first quarter of 2017 also includes a gain of $209,000 related to the sale of the Bank's former West Scranton Office.

Operating expenses totaled $6,614,000 in the first quarter and were $2,265,000 higher than the same period of last year.  Salaries and employee benefit costs rose $916,000 over the same period of last year while occupancy, furniture and equipment costs rose $416,000 resulting from the acquisition of twelve community offices.  Foreclosed real estate costs increased $541,000 due primarily to a write-down on one property, while all other operating costs increased $392,000 net.

Mr. Critelli stated that "Our first quarter results provide a good start for 2017 and are in-line with our budget.  Our balance sheet reflects the growth related to the acquisition, while our earnings increased $500,000 reflecting the full benefit  of the acquisition.  Our net interest margin improved over the prior quarter, 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 from 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 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:

 

 

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 data)
(unaudited)
		March 31
		2017				2016
ASSETS
Cash and due from banks		$	12,057			$	8,709
Interest-bearing deposits with banks			7,785				254
Cash and cash equivalents			19,842				8,963
Securities available for sale			295,801				143,948
Loans receivable			719,443				565,787
Less: Allowance for loan losses			6,901				7,642
Net loans receivable			712,542				558,145
Regulatory stock, at cost			1,939				2,982
Bank premises and equipment, net			13,073				6,390
Bank owned life insurance			36,352				18,951
Foreclosed real estate owned			4,703				2,855
Accrued interest receivable			3,532				2,487
Goodwill			11,331				9,715
Other intangible assets			571				260
Deferred tax asset			8,923				3,456
Other assets			3,006				1,952
TOTAL ASSETS		$	1,111,615			$	760,104
LIABILITIES
Deposits:
Non-interest bearing demand		$	192,735			$	113,225
Interest-bearing			738,678				447,266
Total deposits			931,413				560,491
Short-term borrowings			28,383				52,672
Other borrowings			28,877				38,856
Accrued interest payable			909				925
Other liabilities			9,081				4,462
TOTAL LIABILITIES			998,663				657,406
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			47,678				35,390
Retained earnings			68,268				66,143
Treasury stock, at cost: 2017: 2,566 shares, 2016: 35,649 shares			(93	)			(987	)
Accumulated other comprehensive (loss) income			(3,317	)			1,779
TOTAL STOCKHOLDERS' EQUITY			112,952				102,698
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY		$	1,111,615			$	760,104

 

 

 

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
		Three Months Ended March 31,
		2017				2016
INTEREST INCOME
Loans receivable, including fees		$	7,806			$	6,135
Securities			1,618				890
Other			10				1
Total Interest income			9,434				7,026
INTEREST EXPENSE
Deposits			766				581
Short-term borrowings			28				39
Other borrowings			143				231
Total Interest expense			937				851
NET INTEREST INCOME			8,497				6,175
PROVISION FOR LOAN LOSSES			600				450
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			7,897				5,725
OTHER INCOME
Service charges and fees			936				574
Income from fiduciary activities			106				102
Net realized gains on sales of securities			6				64
Gains on sales of loans, net			0				30
Earnings and proceeds on life insurance policies			255				167
Other			340				130
Total other income			1,643				1,067
OTHER EXPENSES
Salaries and  employee benefits			3,219				2,303
Occupancy, furniture and equipment			911				495
Data processing  and related operations			344				271
Taxes, other than income			233				205
Professional fees			249				151
FDIC Insurance assessment			95				115
Foreclosed real estate			572				31
Other			991				778
Total other expenses			6,614				4,349
INCOME BEFORE TAX			2,926				2,443
INCOME TAX EXPENSE			550				567
NET INCOME		$	2,376			$	1,876
Basic earnings per share		$	0.57			$	0.51
Diluted earnings per share		$	0.57			$	0.51

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