Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 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 for the three months ended June 30, 2016 of $1,878,000.  This represents a decrease of $85,000, from the $1,963,000 earned in the similar period of 2015 due primarily to increases in operating expenses and the provision for loan losses.  Earnings per share (fully diluted) were $.51 in the 2016 period, decreasing from the $.53 earned in the similar period of 2015.  Annualized return on average assets for the three months ended June 30, 2016 was 0.99% with an annualized return on average equity of 7.28%.  Net income for the six months ended June 30, 2016 totaled $3,754,000, which is $250,000 lower than the same six-month period of last year due to a lower level of gains on security sales and an increased level of operating expenses.  Earnings per share (fully diluted) for the six months ended June 30, 2016 and 2015 totaled $1.02 and $1.08 per share, respectively. 

Total assets as of June 30, 2016 were $767.8 million with loans receivable of $581.2 million, deposits of $584.3 million and stockholders’ equity of $104.6 million.  Loans receivable increased $42.3 million since June 30, 2015 while total deposits increased $8.6 million over the past twelve months.  Stockholders’ equity increased $4.7 million over the past year, due principally to the retention of earnings and an increase in accumulated other comprehensive income.   

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $6.6 million and represented 0.86% of total assets as of June 30, 2016 compared to $12.1 million, or 1.62% of total assets, as of June 30, 2015.  The allowance for loan losses totaled $5,798,000 as of June 30, 2016 and represented 1.00% of total loans outstanding, compared to $5,947,000 and 1.10% on June 30, 2015.   

For the three months ended June 30, 2016, net interest income, on a fully taxable equivalent basis (fte), totaled $6,758,000, an increase of $369,000 compared to the similar period in 2015 due primarily to a $465,000 increase in interest income on loans.  Net interest margin (fte) for the 2016 period was 3.79% increasing from 3.68% for the similar period in 2015 due to a 10 basis point improvement in the yield on interest-earning assets.  The cost of interest-bearing liabilities decreased one basis point to 0.62%.  The improved margin reflects a $45.6 million increase in average loans outstanding.  The yield earned on securities also improved 13 basis points.  Net interest income (fte) for the six months ended June 30, 2016 totaled $13,292,000, which was $301,000 higher than the similar period in 2015.  The net interest margin (fte) was 3.74% in the 2016 period and 3.81% during the first six months of 2015.  Decreasing yields on loans contributed to the reduced net interest margin.

Other income for the three months ended June 30, 2016 totaled $1,223,000 compared to $1,133,000 for the similar period in 2015.  Net gains from securities sales increased $71,000 compared to the prior-year period.  For the six months ended June 30, 2016, other income totaled $2,290,000 compared to $2,412,000 in the 2015 period.  Gains on the sales of investment securities totaled $445,000 on sales of $23.4 million for the 2015 period compared to $270,000 on sales of $31.8 million in the 2016 period. 

Other expenses totaled $4,528,000 for the three months ended June 30, 2016, an increase of $360,000 compared to the $4,168,000 reported in the similar period of 2015.  For the six months ended June 30, 2016, other expenses totaled $8,876,000 compared to $8,355,000 for the similar period in 2015, an increase of $521,000. 

Mr. Critelli commented, “Our earnings for the first half of 2016 were in-line with projections.  Net interest income increased over the prior period and credit quality ratios continue to show improvement.  Our net interest margin exceeds peer banks, core operating expenses remain well controlled and our capital base remains above regulatory “well capitalized” targets.  We are focused on our pending acquisition of Delaware Bancshares, Inc., including the integration of twelve new community offices located in Delaware and Sullivan Counties, New York, into the Wayne Bank system.  All required regulatory and shareholder approvals have been received, and closing is expected in the third quarter of 2016.  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.”

Norwood Financial Corp., is the parent company of Wayne Bank, which operates 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 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: