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Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 22, 2014 (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, 2014 of $2,118,000. This represents a slight decrease from the $2,136,000 earned in the same three-month period of 2013 due to a reduced level of interest income on loans combined with increased expenses related to foreclosed real estate owned. Earnings per share (fully diluted) were $.58 in the 2014 period, decreasing from the $.59 earned in the similar period of last year. Annualized return on average assets for the three months ended September 30, 2014 was 1.18% with an annualized return on average equity of 8.62%. Net income for the nine months ended September 30, 2014 totaled $6,116,000, which is $168,000 lower than the same period of 2013. Earnings per share (fully diluted) for the nine months ended September 30, 2014 totaled $1.68 per share compared to $1.73 per share in the 2013 period. The annualized return on average assets and average equity for the nine month period was 1.15% and 8.53%, respectively.

Total assets as of September 30, 2014 were $718.2 million with loans receivable of $500.8 million, deposits of $548.3 million and stockholders' equity of $97.4 million. Total assets have increased $14.4 million during the past twelve months due primarily to growth in loans which increased $13.9 million, including an $11.9 million increase in commercial lending. Total deposits decreased $360,000 over the past twelve months with a $711,000 increase in non-interest bearing demand deposits only partially offsetting a $1.1 million decrease in interest-bearing deposits. Stockholders' equity increased $6.1 million over the past year, due principally to the retention of earnings and a reduction in accumulated other comprehensive loss.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $10.9 million and 1.52% of total assets as of September 30, 2014 compared to $11.8 million and 1.65% of assets as of June 30, 2014 and $11.3 million or 1.60% of total assets as of September 30, 2013. Net charge-offs were $380,000 for the quarter and totaled $1,317,000 for the nine months ended September 30, 2014 compared to $590,000 and $1,943,000, respectively, for the similar periods in 2013. Based on management's analysis, the Company added $420,000 and $1,260,000 to the allowance for loan losses for the three and nine month periods ended September 30, 2014, respectively, compared to $400,000 and $2,000,000, respectively, for the similar periods in 2013. The allowance for loan losses totaled $5,651,000 as of September 30, 2014 and represented 1.13% of total loans, compared to $5,559,000 as of September 30, 2013 and 1.14% of total loans.

For the three months ended September 30, 2014, net interest income, on a fully taxable equivalent basis (fte), totaled $6,467,000, which represents a decrease of $111,000 compared to the similar period in 2013. Net interest margin (fte) for the 2014 period was 3.92% compared to 4.05% for the similar period in 2013 due primarily to a 33 basis point decrease in average loan yields reflecting growth and repricing at current market rates. Net interest income (fte) for the nine months ended September 30, 2014 totaled $19,418,000, an increase of $22,000 compared to the similar period in 2013. Net interest margin (fte) year-to-date for the 2014 period was 3.91% compared to 4.04% in 2013.

Other income for the three months ended September 30, 2014 totaled $1,262,000 compared to $1,216,000 for the similar period in 2013. The increase was principally due to increased gains on the sales of investment securities during the period. For the nine months ended September 30, 2014, other income totaled $3,783,000 compared to $4,305,000 in the 2013 period. Gains on the sales of investment securities totaled $904,000 on sales of $38.2 million for the 2014 year-to-date period compared to $590,000 on sales of $30.0 million in the corresponding 2013 period. The increase in securities gains during the nine-month period was offset by a $765,000 decrease in earnings and proceeds from bank-owned life insurance policies. During the 2013 period, the Company recorded a non-recurring gain of $770,000 from proceeds on a bank-owned life insurance policy, compared to $5,000 in the 2014 period.

Other expenses totaled $4,124,000 for the three months ended September 30, 2014, compared to $4,173,000 in the similar period of 2013. Foreclosed real estate costs increased $54,000 due to real estate taxes, maintenance costs and write-downs on foreclosed properties. All other operating expenses decreased $103,000, net. For the nine months ended September 30, 2014, other expenses totaled $12,729,000 compared to $12,607,000 for the similar period in 2013, an increase of $122,000, which includes a $239,000 increase in foreclosed real estate costs. All other operating expenses decreased $117,000, net.

Mr. Critelli commented, "We are continuing to feel the impact of a slow economy, as evidenced by reduced loan demand and increased costs of maintaining and disposing of foreclosed properties. Working with borrowers to resolve problem credits will remain a top priority throughout the year. The ongoing low interest rate environment and competition for quality credits also places pressure on our net interest margin, however, our year-to-date margin 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)
2014 2013 2014 2013
Net interest income $6,154 $6,270 $18,454 $18,516
Tax equivalent basis adjustment using 34% marginal tax rate 313 308 964 880
Net interest income on a fully taxable equivalent basis $6,467 $6,578 $19,418 $19,396
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
September 30
2014 2013
ASSETS
Cash and due from banks $ 13,105 $ 15,193
Interest-bearing deposits with banks 158 12,221
Cash and cash equivalents 13,263 27,414
Securities available for sale 158,701 150,904
Securities held to maturity, fair value 2013: $176 -- 174
Loans receivable (net of unearned Income) 500,844 486,968
Less: Allowance for loan losses 5,651 5,559
Net loans receivable 495,193 481,409
Regulatory stock, at cost 3,210 2,141
Bank premises and equipment, net 6,825 7,250
Bank owned life insurance 18,143 14,653
Foreclosed real estate owned 4,962 993
Accrued interest receivable 2,367 2,373
Goodwill 9,715 9,715
Other intangible assets 418 543
Deferred tax asset 3,691 4,584
Other assets 1,725 1,618
TOTAL ASSETS $ 718,213 $ 703,771
LIABILITIES
Deposits:
Non-interest bearing demand $ 102,343 $ 101,632
Interest-bearing 445,995 447,066
Total deposits 548,338 548,698
Short-term borrowings 44,704 38,466
Other borrowings 22,592 19,956
Accrued interest payable 975 1,075
Other liabilities 4,197 4,230
TOTAL LIABILITIES 620,806 612,425
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares issued: 3,708,718 shares 371 371
Surplus 35,143 34,991
Retained earnings 63,637 59,710
Treasury stock, at cost: 2014: 63,019 shares, 2013: 81,249 shares (1,673) (2,154)
Accumulated other comprehensive loss (71) (1,572)
TOTAL STOCKHOLDERS' EQUITY 97,407 91,346
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 718,213 $ 703,771
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
2014 2013 2014 2013
INTEREST INCOME
Loans receivable, including fees $ 5,972 $ 6,202 $ 17,885 $ 18,557
Securities 968 939 2,981 2,685
Other 1 5 3 17
Total Interest income 6,941 7,146 20,869 21,259
INTEREST EXPENSE
Deposits 600 701 1,852 2,174
Short-term borrowings 19 17 62 44
Other borrowings 168 158 501 525
Total Interest expense 787 876 2,415 2,743
NET INTEREST INCOME 6,154 6,270 18,454 18,516
PROVISION FOR LOAN LOSSES 420 400 1,260 2,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,734 5,870 17,194 16,516
OTHER INCOME
Service charges and fees 587 614 1,746 1,834
Income from fiduciary activities 125 111 328 285
Net realized gains on sales of securities 301 198 904 590
Gains on sale of loans (15) (12) 50 (9)
Earnings and proceeds on life insurance policies 170 150 514 1,224
Other 94 155 241 381
Total other income 1,262 1,216 3,783 4,305
OTHER EXPENSES
Salaries and employee benefits 2,028 2,103 6,364 6,438
Occupancy, furniture and equipment 505 507 1,601 1,586
Data processing related 240 221 680 673
Taxes, other than income 161 179 488 531
Professional Fees 136 139 475 498
FDIC Insurance assessment 104 114 320 335
Foreclosed real estate owned 271 217 733 494
Other 679 693 2,068 2,052
Total other expenses 4,124 4,173 12,729 12,607
INCOME BEFORE TAX 2,872 2,913 8,248 8,214
INCOME TAX EXPENSE 754 777 2,132 1,930
NET INCOME $ 2,118 $ 2,136 $ 6,116 $ 6,284
Basic earnings per share $ 0.58 $ 0.59 $ 1.68 $ 1.73
Diluted earnings per share $ 0.58 $ 0.59 $ 1.68 $ 1.73
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30 2014 2013
Net interest income $ 6,154 $ 6,270
Net income 2,118 2,136
Net interest spread (fully taxable equivalent) 3.78% 3.89%
Net interest margin (fully taxable equivalent) 3.92% 4.05%
Return on average assets 1.18% 1.22%
Return on average equity 8.62% 9.33%
Basic earnings per share $ 0.58 $ 0.59
Diluted earnings per share $ 0.58 $ 0.59
For the Nine Months Ended September 30
Net interest income $ 18,454 $ 18,516
Net income 6,116 6,284
Net interest spread (fully taxable equivalent) 3.77% 3.88%
Net interest margin (fully taxable equivalent) 3.91% 4.04%
Return on average assets 1.15% 1.22%
Return on average equity 8.53% 9.07%
Basic earnings per share $ 1.68 $ 1.73
Diluted earnings per share $ 1.68 $ 1.73
As of September 30
Total assets $ 718,213 $ 703,771
Total loans receivable 500,844 486,968
Allowance for loan losses 5,651 5,559
Total deposits 548,338 548,698
Stockholders' equity 97,407 91,346
Trust assets under management 132,652 124,147
Book value per share $ 26.30 $ 25.54
Equity to total assets 13.56% 12.98%
Allowance to total loans receivable 1.13% 1.14%
Nonperforming loans to total loans 1.18% 2.11%
Nonperforming assets to total assets 1.52% 1.60%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
September 30 June 30 March 31 December 31 September 30
2014 2014 2014 2013 2013
ASSETS
Cash and due from banks $ 13,105 $ 12,196 $ 8,607 $ 7,528 $ 15,193
Interest-bearing deposits with banks 158 3,182 142 335 12,221
Cash and cash equivalents 13,263 15,378 8,749 7,863 27,414
Securities available for sale 158,701 154,925 156,165 158,132 150,904
Securities held to maturity -- -- 175 174 174
Loans receivable (net of unearned income) 500,844 502,316 496,016 503,097 486,968
Less: Allowance for loan losses 5,651 5,611 5,727 5,708 5,558
Net loans receivable 495,193 496,705 490,289 497,389 481,410
Regulatory stock, at cost 3,210 2,437 2,741 2,877 2,141
Bank owned life insurance 18,143 18,002 17,930 17,790 14,653
Bank premises and equipment, net 6,825 6,910 7,031 7,125 7,250
Foreclosed real estate owned 4,962 4,293 1,364 1,009 993
Goodwill and other intangibles 10,133 10,161 10,192 10,225 10,258
Other assets 7,783 8,051 8,598 8,650 8,574
TOTAL ASSETS $ 718,213 $ 716,862 $ 703,234 $ 711,234 $ 703,771
LIABILITIES
Deposits:
Non-interest bearing demand $ 102,343 $ 103,954 $ 93,400 $ 92,684 $ 101,632
Interest-bearing deposits 445,995 450,760 446,676 448,498 447,066
Total deposits 548,338 554,714 540,076 541,182 548,698
Other borrowings 67,296 60,992 63,746 73,675 58,422
Other liabilities 5,172 4,954 5,212 4,513 5,305
TOTAL LIABILITIES 620,806 620,660 609,034 619,370 612,425
STOCKHOLDERS' EQUITY 97,407 96,202 94,200 91,864 91,346
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 718,213 $ 716,862 $ 703,234 $ 711,234 $ 703,771
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 2014 2014 2014 2013 2013
INTEREST INCOME
Loans receivable, including fees $ 5,972 $ 5,933 $ 5,980 $ 6,019 $ 6,202
Securities 968 1,025 987 972 939
Other 1 2 1 9 5
Total interest income 6,941 6,960 6,968 7,000 7,146
INTEREST EXPENSE
Deposits 600 618 635 674 701
Borrowings 187 187 188 181 175
Total interest expense 787 805 823 855 876
NET INTEREST INCOME 6,154 6,155 6,145 6,145 6,270
PROVISION FOR LOAN LOSSES 420 420 420 400 400
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,734 5,735 5,725 5,745 5,870
OTHER INCOME
Service charges and fees 587 583 576 578 614
Income from fiduciary activities 125 99 104 94 111
Net realized gains on sales of securities 301 509 95 291 198
Gains (losses) on sale of loans and servicing rights (15) 26 39 121 (12)
Earnings and proceeds on life insurance policies 170 175 168 162 150
Other 94 76 71 64 155
Total other income 1,262 1,468 1,053 1,310 1,216
OTHER EXPENSES
Salaries and employee benefits 2,028 2,172 2,165 2,009 2,103
Occupancy, furniture and equipment, net 505 518 578 550 507
Foreclosed real estate owned 271 396 65 73 217
FDIC insurance assessment 104 102 114 109 114
Other 1,216 1,285 1,210 1,357 1,232
Total other expenses 4,124 4,473 4,132 4,098 4,173
INCOME BEFORE TAX 2,872 2,730 2,646 2,957 2,913
INCOME TAX EXPENSE 754 696 682 776 777
NET INCOME $ 2,118 $ 2,034 $ 1,964 $ 2,181 $ 2,136
Basic earnings per share $ 0.58 $ 0.56 $ 0.54 $ 0.60 $ 0.59
Diluted earnings per share $ 0.58 $ 0.56 $ 0.54 $ 0.60 $ 0.59
Book Value per share $ 26.30 $ 26.14 $ 25.88 $ 25.43 $ 25.54
Return on average equity (annualized) 8.62% 8.49% 8.46% 9.33% 9.33%
Return on average assets (annualized) 1.18% 1.15% 1.13% 1.23% 1.22%
Net interest spread (fte) 3.78% 3.77% 3.77% 3.76% 3.89%
Net interest margin (fte) 3.92% 3.91% 3.91% 3.91% 4.05%
Allowance for loan losses to total loans 1.13% 1.12% 1.15% 1.13% 1.14%
Net charge-offs to average loans (annualized) 0.30% 0.43% 0.32% 0.21% 0.49%
Nonperforming loans to total loans 1.18% 1.49% 1.92% 1.90% 2.11%
Nonperforming assets to total assets 1.52% 1.65% 1.55% 1.48% 1.60%

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

Source:Norwood Financial Corp