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Norwood Financial Corp. Announces First Quarter Earnings

HONESDALE, Pa., April 22, 2015 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq:NWFL) and its subsidiary, Wayne Bank, announced earnings of $2,041,000 for the three months ended March 31, 2015 which represents an increase of 3.9% from the $1,964,000 recorded during the same three-month period of last year. Earnings per share on a fully diluted basis were $.55 in the first quarter of this year compared to $.54 in the first quarter of 2014. The annualized return on average assets was 1.15% in the first quarter of 2015 and the annualized return on average equity was 8.22%.

Total assets were $734.4 million as of March 31, 2015, an increase of $31.2 million, or 4.4%, compared to the prior year total. Total loans increased $22.9 million compared to March 31, 2014 consisting of a $16.6 million increase in commercial lending and $6.3 million of growth in retail loans. Commercial financing increased $17.8 million, installment loans grew $5.2 million and residential mortgage loan balances increased $1.1 million during the first quarter, while construction loans decreased $1.2 million. Total deposits increased $30.1 million over the past twelve months which consists of a $13.2 million increase in time deposits, $8.9 million of growth in interest-bearing demand and savings deposits, and an $8.0 million increase in non-interest bearing demand deposits. Stockholders' equity increased $6.3 million during the past year, due principally to the retention of earnings and an increase in accumulated other comprehensive income.

Non-performing assets totaled $7.4 million or 1.01% of total assets at March 31, 2015 comprised of $5.7 million of non-performing loans and $1.7 million of foreclosed real estate owned, compared to $9.3 million of non-performing assets or 1.31% of total assets at December 31, 2014. The decrease recorded during the quarter includes a $2.0 million reduction in foreclosed real estate owned due primarily to the disposition of a property with a carrying value of $1.9 million at December 31, 2014. As of March 31, 2014, non-performing assets totaled $10.9 million. Net charge-offs for the three-month period ending March 31, 2015 were $488,000 compared to $400,000 of net charge-offs in the first quarter of last year. Based on the current composition of the loan portfolio, management determined that it would be prudent to provide additional reserves and added $620,000 to the allowance for loan losses in the current period compared to $420,000 during the same period of last year. The increase in the provision for loan losses reflects the higher level of net charge-offs and the significant loan growth recorded in the first quarter of this year. The allowance for loan losses was 1.16% of total loans outstanding on March 31, 2015 compared to 1.17% on December 31, 2014 and 1.15% on March 31, 2014.

Net interest income (fully taxable equivalent) was $6,602,000 during the first quarter of 2015 which is $140,000 higher than the comparable three-month period of last year. The net interest margin was positively impacted by several non-recurring events in the first quarter, including earnings on two loans returned to accrual status and a special cash dividend from the Federal Home Loan Bank. A $5.4 million increase in average loans outstanding also added to the improved margin. The yield on interest-earning assets increased six basis points compared to the prior quarter while the cost of funds decreased one basis point. As a result, the net interest margin (fte) improved from 3.87% to 3.94% compared to the quarter ended December 31, 2014. In comparison to the quarter ended March 31, 2014, the net interest margin (fte) increased from 3.91% to 3.94%.

Other income totaled $1,279,000 in the first quarter of 2015 compared to $1,053,000 during the same period of last year. During the current period, the Company recognized a net gain of $311,000 from the sale of securities compared to $95,000 in the prior-year period. All other components of other income increased $10,000, net.

Operating expenses totaled $4,187,000 in the first quarter and were $55,000 higher than the same period of last year. Foreclosed real estate costs were $93,000 higher than the same period of last year due primarily to a $64,000 loss on the disposition of a commercial property. All other operating costs decreased $38,000, net.

Mr. Critelli stated that: "Our first quarter results provide a good start for 2015. Net interest income improved over the prior quarter and the same period of last year due to a significant amount of loan growth, while operating expenses remain well controlled. Working with borrowers experiencing cash flow pressure will remain a top priority as we make our way through this difficult economic environment. We expect that stress on loan quality will continue into 2015. Our net interest margin exceeds peer banks, core operating expenses are 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 as the local economy in Northeast Pennsylvania rebounds from the extended economic downturn."

Norwood Financial Corp. is the parent company of Wayne Bank which operates from 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, the ability to control costs and expenses, demand for real estate 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:

(dollars in thousands) Three months ended March 31,
2015 2014
Net interest income $6,307 $6,145
Tax equivalent basis adjustment using 34% marginal tax rate 295 317
Net interest income on a fully taxable equivalent basis $6,602 $6,462
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
March 31
2015 2014
ASSETS
Cash and due from banks $ 7,658 $ 8,607
Interest-bearing deposits with banks 11,969 142
Cash and cash equivalents 19,627 8,749
Securities available for sale 155,674 156,165
Securities held to maturity, fair value 2014: $176 -- 175
Loans receivable 518,961 496,016
Less: Allowance for loan losses 6,007 5,727
Net loans receivable 512,954 490,289
Regulatory stock, at cost 1,838 2,741
Bank premises and equipment, net 6,632 7,031
Bank owned life insurance 18,417 17,930
Foreclosed real estate owned 1,698 1,364
Accrued interest receivable 2,329 2,330
Goodwill 9,715 9,715
Other intangible assets 361 477
Deferred tax asset 3,308 4,294
Other assets 1,806 1,974
TOTAL ASSETS $ 734,359 $ 703,234
LIABILITIES
Deposits:
Non-interest bearing demand $ 101,423 $ 93,400
Interest-bearing 468,783 446,676
Total deposits 570,206 540,076
Short-term borrowings 30,581 40,373
Other borrowings 27,807 23,373
Accrued interest payable 955 973
Other liabilities 4,359 4,239
TOTAL LIABILITIES 633,908 609,034
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares issued: 2015: 3,718,018 shares; 2014: 3,708,718 shares 372 371
Surplus 35,239 35,050
Retained earnings 64,975 61,671
Treasury stock, at cost: 2015: 38,972 shares, 2014: 71,297 shares (1,046) (1,892)
Accumulated other comprehensive income (loss) 911 (1,000)
TOTAL STOCKHOLDERS' EQUITY 100,451 94,200
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 734,359 $ 703,234
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended March 31
2015 2014
INTEREST INCOME
Loans receivable, including fees $ 6,061 $ 5,980
Securities 1,023 987
Other 4 1
Total Interest income 7,088 6,968
INTEREST EXPENSE
Deposits 604 635
Short-term borrowings 12 22
Other borrowings 165 166
Total Interest expense 781 823
NET INTEREST INCOME 6,307 6,145
PROVISION FOR LOAN LOSSES 620 420
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,687 5,725
OTHER INCOME
Service charges and fees 572 576
Income from fiduciary activities 105 104
Net realized gains on sales of securities 311 95
Gains on sales of loans, net 18 39
Earnings and proceeds on life insurance policies 165 168
Other 108 71
Total other income 1,279 1,053
OTHER EXPENSES
Salaries and employee benefits 2,137 2,165
Occupancy, furniture and equipment 556 578
Data processing related 234 212
Taxes, other than income 175 165
Professional Fees 183 165
FDIC Insurance assessment 95 114
Foreclosed real estate owned 158 65
Other 649 668
Total other expenses 4,187 4,132
INCOME BEFORE TAX 2,779 2,646
INCOME TAX EXPENSE 738 682
NET INCOME $ 2,041 $ 1,964
Basic earnings per share $ 0.55 $ 0.54
Diluted earnings per share $ 0.55 $ 0.54
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended March 31 2015 2014
Net interest income $ 6,307 $ 6,145
Net income 2,041 1,964
Net interest spread (fully taxable equivalent) 3.80% 3.77%
Net interest margin (fully taxable equivalent) 3.94% 3.91%
Return on average assets 1.15% 1.13%
Return on average equity 8.22% 8.46%
Basic earnings per share $ 0.55 $ 0.54
Diluted earnings per share $ 0.55 $ 0.54
As of March 31
Total assets $ 734,359 $ 703,234
Total loans receivable 518,961 496,016
Allowance for loan losses 6,007 5,727
Total deposits 570,206 540,076
Stockholders' equity 100,451 94,200
Trust assets under management 134,391 129,739
Book value per share $ 27.38 $ 25.88
Equity to total assets 13.68% 13.40%
Allowance to total loans receivable 1.16% 1.15%
Nonperforming loans to total loans 1.11% 1.92%
Nonperforming assets to total assets 1.01% 1.55%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
March 31
2015
December 31
2014
September 30
2014
June 30
2014
March 31
2014
ASSETS
Cash and due from banks $ 7,658 $ 8,081 $ 13,105 $ 12,196 $ 8,607
Interest-bearing deposits with banks 11,969 4,295 158 3,182 142
Cash and cash equivalents 19,627 12,376 13,263 15,378 8,749
Securities available for sale 155,674 156,395 158,701 154,925 156,165
Securities held to maturity -- -- -- -- 175
Loans receivable 518,961 501,135 500,844 502,316 496,016
Less: Allowance for loan losses 6,007 5,875 5,651 5,611 5,727
Net loans receivable 512,954 495,260 495,193 496,705 490,289
Regulatory stock, at cost 1,838 1,714 3,210 2,437 2,741
Bank owned life insurance 18,417 18,284 18,143 18,002 17,930
Bank premises and equipment, net 6,632 6,734 6,825 6,910 7,031
Foreclosed real estate owned 1,698 3,726 4,962 4,293 1,364
Goodwill and other intangibles 10,076 10,104 10,133 10,161 10,192
Other assets 7,443 7,042 7,783 8,051 8,598
TOTAL ASSETS $ 734,359 $ 711,635 $ 718,213 $ 716,862 $ 703,234
LIABILITIES
Deposits:
Non-interest bearing demand $ 101,423 $ 98,064 $ 102,343 $ 103,954 $ 93,400
Interest-bearing deposits 468,783 461,880 445,995 450,760 446,676
Total deposits 570,206 559,944 548,338 554,714 540,076
Other borrowings 58,388 47,895 67,296 60,992 63,746
Other liabilities 5,314 4,755 5,172 4,954 5,212
TOTAL LIABILITIES 633,908 612,594 620,806 620,660 609,034
STOCKHOLDERS' EQUITY 100,451 99,041 97,407 96,202 94,200
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 734,359 $ 711,635 $ 718,213 $ 716,862 $ 703,234
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
Three months ended March 31
2015
December 31
2014
September 30
2014
June 30
2014
March 31
2014
INTEREST INCOME
Loans receivable, including fees $ 6,061 $ 5,954 $ 5,972 $ 5,933 $ 5,980
Securities 1,023 940 968 1,025 987
Other 4 4 1 2 1
Total interest income 7,088 6,898 6,941 6,960 6,968
INTEREST EXPENSE
Deposits 604 611 600 618 635
Borrowings 177 182 187 187 188
Total interest expense 781 793 787 805 823
NET INTEREST INCOME 6,307 6,105 6,154 6,155 6,145
PROVISION FOR LOAN LOSSES 620 420 420 420 420
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,687 5,685 5,734 5,735 5,725
OTHER INCOME
Service charges and fees 572 604 587 583 576
Income from fiduciary activities 105 109 125 99 104
Net realized gains on sales of securities 311 265 301 509 95
Gains (losses) on sales of loans, net 18 82 (15) 26 39
Earnings and proceeds on life insurance policies 165 171 170 175 168
Other 108 96 94 76 71
Total other income 1,279 1,327 1,262 1,468 1,053
OTHER EXPENSES
Salaries and employee benefits 2,137 2,252 2,028 2,172 2,165
Occupancy, furniture and equipment, net 556 516 505 518 578
Foreclosed real estate owned 158 822 271 396 65
FDIC insurance assessment 95 100 104 102 114
Other 1,241 1,307 1,216 1,285 1,210
Total other expenses 4,187 4,997 4,124 4,473 4,132
INCOME BEFORE TAX 2,779 2,015 2,872 2,730 2,646
INCOME TAX EXPENSE 738 474 754 696 682
NET INCOME $ 2,041 $ 1,541 $ 2,118 $ 2,034 $ 1,964
Basic earnings per share $ 0.55 $ 0.42 $ 0.58 $ 0.56 $ 0.54
Diluted earnings per share $ 0.55 $ 0.42 $ 0.58 $ 0.56 $ 0.54
Book Value per share $ 27.38 $ 26.30 $ 26.30 $ 26.14 $ 25.88
Return on average equity (annualized) 8.22% 6.17% 8.62% 8.49% 8.46%
Return on average assets (annualized) 1.15% 0.86% 1.18% 1.15% 1.13%
Net interest spread (fte) 3.80% 3.72% 3.78% 3.77% 3.77%
Net interest margin (fte) 3.94% 3.87% 3.92% 3.91% 3.91%
Allowance for loan losses to total loans 1.16% 1.17% 1.13% 1.12% 1.15%
Net charge-offs to average loans (annualized) 0.39% 0.16% 0.30% 0.43% 0.32%
Nonperforming loans to total loans 1.11% 1.12% 1.18% 1.49% 1.92%
Nonperforming assets to total assets 1.01% 1.31% 1.52% 1.65% 1.55%

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

Source:Norwood Financial Corp