Norwood Financial Corp Announces Third Quarter Earnings

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HONESDALE, Pa., Oct. 18, 2013 (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, 2013 of $2,136,000. This represents a slight decrease from the $2,200,000 earned in the same three month period of 2012 due to a reduced level of gains recognized from the sale of loans and securities combined with increased expenses related to foreclosed real estate owned, partially offset by a reduced provision for loan losses. Earnings per share (fully diluted) were $.59 in the 2013 period, decreasing from the $.61 earned in the similar period of last year after adjusting for the retroactive effect of the 10% stock dividend declared during the first quarter of 2013. Annualized return on average assets for the three months ended September 30, 2013 was 1.22% with an annualized return on average equity of 9.33%. Net income for the nine months ended September 30, 2013 totaled $6,284,000, which is $360,000 lower than the same period of 2012 due to increased loan loss provisions and operating expenses. Earnings per share (fully diluted) for the nine months ended September 30, 2013 totaled $1.73 per share compared to $1.84 per share in the 2012 period after adjusting for the 10% stock dividend.

Total assets as of September 30, 2013 were $703.8 million with loans receivable of $487.0 million, deposits of $548.7 million and stockholders' equity of $91.3 million. Total assets have increased $5.1 million during the twelve months ended September 30, 2013 due primarily to growth in deposits.

Loans receivable increased $7.5 million from September 30, 2012, due to an $18.2 million increase in consumer loans which was partially offset by a $10.7 million decrease in commercial lending.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $11.3 million and 1.60% of total assets as of September 30, 2013 compared to $12.9 million and 1.85% of assets as of June 30, 2013 and $14.4 million or 2.07% of total assets as of September 30, 2012. Net charge-offs were $590,000 for the quarter and totaled $1,943,000 for the nine months ended September 30, 2013 compared to $1,334,000 and $1,767,000, respectively, for the similar periods in 2012. Based on the level of charge-offs, the Company determined that it would be appropriate to provide $400,000 and $2,000,000 for potential future loan losses for the three and nine month periods ended September 30, 2013, respectively, compared to $900,000 and $1,650,000, respectively, for the similar periods in 2012. The allowance for loan losses totaled $5,558,000 as of September 30, 2013 and represented 1.14% of total loans, increasing from $5,341,000 as of September 30, 2012 and 1.11% of total loans.

For the three months ended September 30, 2013, net interest income, on a fully taxable equivalent basis (fte), totaled $6,578,000, which represents an increase of $17,000 compared to the similar period in 2012. Net interest margin (fte) for the 2013 period was 4.05% compared to 4.07% for the similar period in 2012. Net interest income (fte) for the nine months ended September 30, 2013 totaled $19,396,000, a decrease of $235,000 compared to the similar period in 2012 due to reduced earnings on loans and securities resulting from reinvestment at current lower market rates. Net interest margin (fte) year-to- date for the 2013 period was 4.04% compared to 4.10% in 2012.

Other income for the three months ended September 30, 2013 totaled $1,216,000 compared to $1,591,000 for the similar period in 2012. The decrease was principally due to reduced gains on the sales of loans and investment securities during the period. For the nine months ended September 30, 2013, other income totaled $4,305,000 compared to $4,088,000 in the 2012 period. Gains on the sales of investment securities totaled $590,000 on sales of $30.0 million for the 2013 year-to-date period compared to $1,318,000 on sales of $23.3 million in the corresponding 2012 period. The proceeds from investment securities sales were reinvested to improve the quality of the Company's bond portfolio as well as to fund new securities purchases and loan growth. Gains from the sale of loans were down $95,000 in the current three month period and $152,000 for the nine months ending September 30, 2013 when compared to the corresponding periods in the prior year due to reduced activity in this area. The decline in gains on sales during the nine-month period was offset by $770,000 of insurance proceeds from a bank-owned life insurance policy.

Other expenses totaled $4,173,000 for the three months ended September 30, 2013, compared to $3,957,000 in the similar period of 2012. Foreclosed real estate costs increased $240,000 due to maintenance costs and write-downs on foreclosed properties. For the nine months ended September 30, 2013, other expenses totaled $12,607,000 compared to $12,061,000 for the similar period in 2012, an increase of $546,000, or 4.5%, which includes a $310,000 increase in foreclosed real estate costs.

Mr. Critelli commented, "We are continuing to work our way through credit quality issues that have been brought on by the prolonged economic downturn, which has placed stress on customers' cash flow and reduced real estate values. Improving our credit quality will remain a top priority. The ongoing low interest rate environment also continues to place pressure on our net interest margin, however, our year-to-date margin exceeds 4.00% and our capital levels remain well above peer. We look forward to serving our growing base of stockholders and customers as our economy slowly recovers from the extended economic downturn."

Norwood Financial Corp., through its subsidiary Wayne Bank, operates sixteen offices in 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 North Penn Bancorp, the ability to control costs and expenses, demand for real estate, government fiscal policies 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:

Three months ended
September 30
Nine months ended
September 30
(dollars in thousands)
2013 2012 2013 2012
Net interest income $6,270 $6,252 $18,516 $18,686
Tax equivalent basis adjustment using 34% marginal tax rate 308 309 880 945
Net interest income on a fully taxable equivalent basis $6,578 $6,561 $19,396 $19,631
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
September 30
2013 2012
ASSETS
Cash and due from banks $ 15,193 $ 10,514
Interest-bearing deposits with banks 12,221 24,825
Cash and cash equivalents 27,414 35,339
Securities available for sale 150,904 147,639
Securities held to maturity, fair value 2013: $176 and 2012: $175 174 172
Loans receivable (net of unearned Income) 486,968 479,501
Less: Allowance for loan losses 5,558 5,341
Net loans receivable 481,410 474,160
Regulatory stock, at cost 2,141 2,932
Bank premises and equipment, net 7,250 7,453
Bank owned life insurance 14,653 12,234
Foreclosed real estate owned 993 659
Accrued interest receivable 2,373 2,589
Goodwill 9,715 9,715
Other intangible assets 543 684
Other assets 6,201 5,121
TOTAL ASSETS $ 703,771 $ 698,697
LIABILITIES
Deposits:
Non-interest bearing demand $ 101,632 $ 89,218
Interest-bearing 447,066 452,372
Total deposits 548,698 541,590
Short-term borrowings 38,466 32,386
Other borrowings 19,956 27,533
Accrued interest payable 1,075 1,462
Other liabilities 4,230 3,775
TOTAL LIABILITIES 612,425 606,746
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares issued: 2013: 3,708,718 shares, 2012: 3,371,849 shares 371 337
Surplus 34,991 24,728
Retained earnings 59,710 66,005
Treasury stock, at cost: 2013: 81,249 shares, 2012: 94,242 shares (2,154) (2,739)
Accumulated other comprehensive income (loss) (1,572) 3,620
TOTAL STOCKHOLDERS' EQUITY 91,346 91,951
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 703,771 $ 698,697
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
2013 2012 2013 2012
INTEREST INCOME
Loans receivable, including fees $ 6,202 $ 6,429 $ 18,557 $ 19,233
Securities 939 971 2,685 3,004
Other 5 9 17 20
Total Interest income 7,146 7,409 21,259 22,257
INTEREST EXPENSE
Deposits 701 897 2,174 2,800
Short-term borrowings 17 14 44 38
Other borrowings 158 246 525 733
Total Interest expense 876 1,157 2,743 3,571
NET INTEREST INCOME 6,270 6,252 18,516 18,686
PROVISION FOR LOAN LOSSES 400 900 2,000 1,650
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,870 5,352 16,516 17,036
OTHER INCOME
Service charges and fees 614 561 1,834 1,674
Income from fiduciary activities 111 96 285 274
Net realized gains on sales of securities 198 631 590 1,318
Gains(losses) on sale of loans (12) 83 (9) 143
Earnings and proceeds on life insurance policies 150 132 1,224 395
Other 155 88 381 284
Total other income 1,216 1,591 4,305 4,088
OTHER EXPENSES
Salaries and employee benefits 2,103 2,102 6,438 6,300
Occupancy, furniture and equipment 507 512 1,586 1,489
Data processing related 221 222 673 670
Taxes, other than income 179 150 531 451
Professional Fees 139 157 498 601
FDIC Insurance assessment 114 94 335 290
Foreclosed real estate owned 217 (23) 494 184
Other 693 743 2,052 2,076
Total other expenses 4,173 3,957 12,607 12,061
INCOME BEFORE TAX 2,913 2,986 8,214 9,063
INCOME TAX EXPENSE 777 786 1,930 2,419
NET INCOME $ 2,136 $ 2,200 $ 6,284 $ 6,644
Basic earnings per share $ 0.59 $ 0.61 $ 1.73 $ 1.85
Diluted earnings per share $ 0.59 $ 0.61 $ 1.73 $ 1.84
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30 2013 2012
Net interest income $ 6,270 $ 6,252
Net income 2,136 2,200
Net interest spread (fully taxable equivalent) 3.89% 3.87%
Net interest margin (fully taxable equivalent) 4.05% 4.07%
Return on average assets 1.22% 1.27%
Return on average equity 9.33% 9.54%
Basic earnings per share $ 0.59 $ 0.61
Diluted earnings per share $ 0.59 $ 0.61
For the Nine Months Ended September 30
Net interest income $ 18,516 $ 18,686
Net income 6,284 6,644
Net interest spread (fully taxable equivalent) 3.88% 3.91%
Net interest margin (fully taxable equivalent) 4.04% 4.10%
Return on average assets 1.22% 1.30%
Return on average equity 9.07% 9.80%
Basic earnings per share $ 1.73 $ 1.85
Diluted earnings per share $ 1.73 $ 1.84
As of September 30
Total assets $ 703,771 $ 698,697
Total loans receivable 486,968 479,501
Allowance for loan losses 5,558 5,341
Total deposits 548,698 541,590
Stockholders' equity 91,346 91,951
Trust assets under management 124,147 113,233
Book value per share $ 25.54 $ 25.50
Equity to total assets 12.98% 13.16%
Allowance to total loans receivable 1.14% 1.11%
Nonperforming loans to total loans 2.11% 2.87%
Nonperforming assets to total assets 1.60% 2.07%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
Sept 30
2013
June 30
2013
March 31
2013
December 31
2012
Sept 30
2012
ASSETS
Cash and due from banks $ 15,193 $ 9,872 $ 6,763 $ 10,867 $ 10,514
Interest-bearing deposits with banks 12,221 17,425 9,182 1,428 24,825
Cash and cash equivalents 27,414 27,297 15,945 12,295 35,339
Securities available for sale 150,904 150,750 148,598 145,390 147,557
Securities held to maturity 174 173 173 173 172
Loans receivable (net of unearned Income) 486,968 480,715 478,663 476,710 479,501
Less: Allowance for loan losses 5,558 5,749 5,726 5,502 5,341
Net loans receivable 481,410 474,966 472,937 471,208 474,160
Regulatory stock, at cost 2,141 2,527 2,533 2,630 3,014
Bank premises and equipment, net 7,250 7,206 7,191 7,326 7,453
Foreclosed real estate owned 993 1,297 1,099 852 659
Goodwill and other intangibles 10,258 10,290 10,325 10,362 10,399
Other assets 23,227 23,100 21,952 22,063 19,944
TOTAL ASSETS $ 703,771 $ 697,606 $ 680,753 $ 672,299 $ 698,697
LIABILITIES
Deposits:
Non-interest bearing demand $ 101,632 $ 93,881 $ 84,357 $ 82,075 $ 89,218
Interest-bearing deposits 447,066 456,269 451,275 442,350 452,372
Total deposits 548,698 550,150 535,632 524,425 541,590
Other borrowings 58,422 52,225 47,202 51,184 59,919
Other liabilities 5,305 4,771 4,999 4,269 5,237
TOTAL LIABILITIES 612,425 607,146 587,833 579,878 606,746
STOCKHOLDERS' EQUITY 91,346 90,460 92,920 92,421 91,951
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 703,771 $ 697,606 $ 680,753 $ 672,299 $ 698,697
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
Three months ended Sept 30
2013
June 30
2013
March 31
2013
Dec 31
2012
Sept 30
2012
INTEREST INCOME
Loans receivable, including fees $ 6,202 $ 6,169 $ 6,186 $ 6,261 $ 6,429
Securities 939 877 868 884 971
Other 5 10 3 12 9
Total interest income 7,146 7,056 7,057 7,157 7,409
INTEREST EXPENSE
Deposits 701 719 754 860 897
Borrowings 175 193 202 218 260
Total interest expense 876 912 956 1,078 1,157
NET INTEREST INCOME 6,270 6,144 6,101 6,079 6,252
PROVISION FOR LOAN LOSSES 400 800 800 800 900
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,870 5,344 5,301 5,279 5,352
OTHER INCOME
Service charges and fees 614 620 600 563 561
Income from fiduciary activities 111 89 85 81 96
Net realized gains (losses) on sales of securities 198 254 138 100 631
Gains (losses) on sale of loans and servicing rights (12) 1 3 67 83
Earnings and proceeds on life insurance 150 148 925 144 132
Other 155 100 126 161 88
Total other income 1,216 1,212 1,877 1,116 1,591
OTHER EXPENSES
Salaries and employee benefits 2,103 2,124 2,211 2,103 2,102
Occupancy, furniture and equipment , net 507 550 529 506 512
Foreclosed real estate owned 217 86 191 33 (23)
FDIC insurance assessment 114 110 111 108 94
Other 1,232 1,263 1,259 1,303 1,272
Total other expenses 4,173 4,133 4,301 4,053 3,957
INCOME BEFORE TAX 2,913 2,423 2,877 2,342 2,986
INCOME TAX EXPENSE 777 584 569 583 786
NET INCOME $ 2,136 $ 1,839 $ 2,308 $ 1,759 $ 2,200
Basic earnings per share $ 0.59 $ 0.51 $ 0.64 $ 0.48 $ 0.61
Diluted earnings per share $ 0.59 $ 0.51 $ 0.63 $ 0.48 $ 0.61
Book Value per share $ 25.54 $ 24.98 $ 25.66 $ 25.49 $ 25.50
Return on average equity (annualized) 9.33% 7.87% 10.02% 7.54% 9.54%
Return on average assets (annualized) 1.22% 1.07% 1.39% 1.02% 1.27%
Net interest spread (fte) 3.89% 3.83% 3.91% 3.80% 3.87%
Net interest margin (fte) 4.05% 3.99% 4.07% 3.98% 4.07%
Allowance for loan losses to total loans 1.14% 1.20% 1.20% 1.15% 1.11%
Net charge-offs to average loans (annualized) 0.49% 0.65% 0.48% 0.53% 1.11%
Nonperforming loans to total loans 2.11% 2.41% 2.63% 2.77% 2.87%
Nonperforming assets to total assets 1.60% 1.85% 2.01% 2.09% 2.07%
total NAL 10,285,183 11,581,355 12,581,664 13,199,804 13,713,658
past due 90+ -- -- -- -- 67,429
total non performing loans 10,285,183 11,581,355 12,581,664 13,199,804 13,781,087
OREO 993,200 1,297,441 1,098,549 857,913 659,120
total Non performing assets 11,278,383 12,878,796 13,680,213 14,057,717 14,440,207
total loans 486,968,324 480,714,607 478,662,892 476,709,780 479,500,946
total assets 703,771,392 697,606,133 680,753,430 672,298,577 698,697,624
net charge off's, this quarter 590,000 776,960 575,726 639,000 1,333,000
average loans, this quarter 483,332,965 481,366,215 478,170,128 479,908,993 481,841,357
Loan loss reserve 5,558,636 5,749,100 5,726,060 5,501,786 5,340,701

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

Source:Norwood Financial Corp