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Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 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 for the three months ended June 30, 2015 of $1,963,000. This represents a decrease of $71,000, from the $2,034,000 earned in the similar period of 2014 due primarily to a decrease in gains on sales of securities which was partially offset by reduced operating expenses. Earnings per share (fully diluted) were $.53 in the 2015 period, decreasing from the $.56 earned in the similar period of 2014. Annualized return on average assets for the three months ended June 30, 2015 was 1.06% with an annualized return on average equity of 7.80%. Net income for the six months ended June 30, 2015 totaled $4,004,000, which is slightly higher than the same six-month period of last year. Earnings per share (fully diluted) for the six months ended June 30, 2015 and 2014 totaled $1.08 and $1.10 per share, respectively.

Total assets as of June 30, 2015 were $751.5 million with loans receivable of $538.9 million, deposits of $575.6 million and stockholders’ equity of $99.9 million.

Loans receivable increased $36.6 million since June 30, 2014. Commercial loans increased $25.2 million which includes a $23.8 million increase in municipal financing. Retail loans grew $11.3 million during the period which includes a $6.8 million increase in indirect auto and marine financing and a $5.2 million increase in residential mortgage loans. The Company also sold $3.8 million of fixed-rate residential mortgages during the period, principally with 30-year terms, for purposes of interest rate risk management. Total deposits increased $20.9 million over the past twelve months which includes a $10.3 million increase in time deposits, a $6.9 million increase in other interest bearing deposits, and a $3.7 million increase in non-interest bearing demand deposits. Stockholders’ equity increased $3.7 million over the past year, due principally to the retention of earnings.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $12.1 million and represented 1.62% of total assets as of June 30, 2015 compared to $11.8 million, or 1.65% of total assets, as of June 30, 2014. Net charge-offs were $479,000 for the quarter and totaled $968,000 for the six months ended June 30, 2015 compared to $537,000 and $937,000, respectively, for the similar periods in 2014. Based on the levels of non-performing assets and net charge-offs, the Company determined that it was appropriate to provide $420,000 and $1,040,000 for potential future loan losses for the three and six month periods ended June 30, 2015, respectively, compared to $420,000 and $840,000, respectively, for the similar periods in 2014. The allowance for loan losses totaled $5,947,000 as of June 30, 2015 and represented 1.10% of total loans outstanding, compared to $5,611,000 and 1.12% on June 30, 2014.

For the three months ended June 30, 2015, net interest income, on a fully taxable equivalent basis (fte), totaled $6,389,000, a decrease of $100,000 compared to the similar period in 2014. Net interest margin (fte) for the 2015 period was 3.68% decreasing from 3.91% for the similar period in 2014 due to a decrease of 24 basis points in the yield on interest-earning assets. The cost of interest-bearing liabilities remained unchanged at 0.63% for both periods. The reduced margin was due primarily to a 20 basis point decrease in the yield earned on loans as new growth and modifications of existing credits continues to negatively impact the net interest margin. The yield earned on securities also decreased 19 basis points. Net interest income (fte) for the six months ended June 30, 2015 totaled $12,991,000, which was $40,000 higher than the similar period in 2014. The net interest margin (fte) was 3.81% in the 2015 period and 3.91% during the first six months of 2014. Decreasing yields on loans and securities contributed to the reduced net interest margin.

Other income for the three months ended June 30, 2015 totaled $1,133,000 compared to $1,468,000 for the similar period in 2014. Net gains from securities sales decreased $375,000 compared to the prior-year period. For the six months ended June 30, 2015, other income totaled $2,412,000 compared to $2,521,000 in the 2014 period. Gains on the sales of investment securities totaled $445,000 on sales of $23.4 million for the 2015 period compared to $603,000 on sales of $31.9 million in the 2014 period.

Other expenses totaled $4,168,000 for the three months ended June 30, 2015, a decrease of $305,000, from the $4,473,000 reported in the similar period of 2014. The decrease was principally due to a reduction of costs and write-downs on properties carried in foreclosed real estate owned. Salaries and employee benefits also decreased $101,000 compared to the same three month period of 2014. For the six months ended June 30, 2015, other expenses totaled $8,355,000 compared to $8,605,000 for the similar period in 2014, a decrease of $250,000. Salaries and employee benefits decreased $128,000 compared to the first half of last year, while foreclosed real estate expenses decreased $71,000.

Mr. Critelli commented, “Our earnings for the first half of 2015 are comparable to the 2014 level. Sectors of the local economy remain sluggish, and as a result we continue to have pressure on our loan quality ratios. Working with borrowers experiencing cash flow problems will remain a top priority as we make our way through this difficult economic environment. The ongoing low level of interest rates and a competitive lending environment also continues to place pressure on our net interest margin. However, our year-to-date margin and capital levels remain above peer and operating expenses are well controlled. 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 recovers from the extended downturn.”

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, the ability to control costs and expenses, demand for real estate, 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:

Three months ended
Six months ended
June 30June 30
(dollars in thousands) 2015 2014 2015 2014
Net Interest Income$6,049 $6,155 $12,356 $12,300
Taxable equivalent basis adjustment
using 34% marginal tax rate

340

334

635

651
Net interest income on a fully taxable
equivalent basis

$

6,389

$

6,489

$

12,991

$

12,951


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
June 30
2015 2014
ASSETS
Cash and due from banks $ 8,505 $ 12,196
Interest-bearing deposits with banks 11,937 3,182
Cash and cash equivalents 20,442 15,378
Securities available for sale 151,304 154,925
Loans receivable 538,870 502,316
Less: Allowance for loan losses 5,947 5,611
Net loans receivable 532,923 496,705
Regulatory stock, at cost 2,240 2,437
Bank premises and equipment, net 6,555 6,910
Bank owned life insurance 18,551 18,002
Foreclosed real estate owned 1,382 4,293
Accrued interest receivable 2,340 2,405
Goodwill 9,715 9,715
Other intangible assets 334 446
Deferred tax asset 4,071 3,764
Other assets 1,664 1,882
TOTAL ASSETS $ 751,521 $ 716,862
LIABILITIES
Deposits:
Non-interest bearing demand $ 107,610 $ 103,954
Interest-bearing 468,004 450,760
Total deposits 575,614 554,714
Short-term borrowings 33,842 38,009
Other borrowings 37,211 22,983
Accrued interest payable 988 937
Other liabilities 3,948 4,017
TOTAL LIABILITIES 651,603 620,660
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 3,718,018 shares 372 371
Surplus 35,268 35,091
Retained earnings 65,797 62,613
Treasury stock, at cost: 2015: 37,165 shares, 2014: 70,747 shares (997) (1,878)
Accumulated other comprehensive (loss) income (522) 5
TOTAL STOCKHOLDERS' EQUITY 99,918 96,202
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 751,521 $ 716,862
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
INTEREST INCOME
Loans receivable, including fees$ 5,924 $ 5,933 $ 11,985 $ 11,913
Securities 950 1,025 1,974 2,013
Other 8 2 12 2
Total Interest income 6,882 6,960 13,971 13,928
INTEREST EXPENSE
Deposits 618 618 1,222 1,253
Short-term borrowings 16 20 29 42
Other borrowings 199 167 364 333
Total Interest expense 833 805 1,615 1,628
NET INTEREST INCOME 6,049 6,155 12,356 12,300
PROVISION FOR LOAN LOSSES 420 420 1,040 840
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,629 5,735 11,316 11,460
OTHER INCOME
Service charges and fees 622 583 1,194 1,159
Income from fiduciary activities 109 99 215 203
Net realized gains on sales of securities 134 509 445 603
Gains on sales of loans, net 12 26 30 66
Earnings and proceeds on life insurance policies 166 175 330 343
Other 90 76 198 147
Total other income 1,133 1,468 2,412 2,521
OTHER EXPENSES
Salaries and employee benefits 2,071 2,172 4,208 4,336
Occupancy, furniture and equipment 542 518 1,098 1,096
Data processing related 201 229 435 441
Taxes, other than income 175 161 350 326
Professional fees 124 174 307 340
FDIC Insurance assessment 65 102 159 216
Foreclosed real estate owned 232 396 390 461
Other 758 721 1,408 1,389
Total other expenses 4,168 4,473 8,355 8,605
INCOME BEFORE TAX 2,594 2,730 5,373 5,376
INCOME TAX EXPENSE 631 696 1,369 1,378
NET INCOME$ 1,963 $ 2,034 $ 4,004 $ 3,998
Basic earnings per share $ 0.53 $ 0.56 $ 1.09 $ 1.10
Diluted earnings per share $ 0.53 $ 0.56 $ 1.08 $ 1.10
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended June 30 2015 2014
Net interest income $ 6,049 $ 6,155
Net income 1,963 2,034
Net interest spread (fully taxable equivalent) 3.53% 3.77%
Net interest margin (fully taxable equivalent) 3.68% 3.91%
Return on average assets 1.06% 1.15%
Return on average equity 7.80% 8.49%
Basic earnings per share $ 0.53 $ 0.56
Diluted earnings per share $ 0.53 $ 0.56
For the Six Months Ended June 30
Net interest income $ 12,356 $ 12,300
Net income 4,004 3,998
Net interest spread (fully taxable equivalent) 3.66% 3.77%
Net interest margin (fully taxable equivalent) 3.81% 3.91%
Return on average assets 1.11% 1.14%
Return on average equity 8.01% 8.48%
Basic earnings per share $ 1.09 $ 1.10
Diluted earnings per share $ 1.08 $ 1.10
As of June 30
Total assets $ 751,521 $ 716,862
Total loans receivable 538,870 502,316
Allowance for loan losses 5,947 5,611
Total deposits 575,614 554,714
Stockholders' equity 99,918 96,202
Trust assets under management 134,732 132,760
Book value per share $ 27.40 $ 26.14
Equity to total assets 13.30% 13.42%
Allowance to total loans receivable 1.10% 1.12%
Nonperforming loans to total loans 2.00% 1.49%
Nonperforming assets to total assets 1.62% 1.65%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
June 30 March 31 December 31 September 30 June 30
2015 2015 2014 2014 2014
ASSETS
Cash and due from banks $ 8,505 $ 7,658 $ 8,081 $ 13,105 $ 12,196
Interest-bearing deposits with banks 11,937 11,969 4,295 158 3,182
Cash and cash equivalents 20,442 19,627 12,376 13,263 15,378
Securities available for sale 151,304 155,674 156,395 158,701 154,925
Loans receivable 538,870 518,961 501,135 500,844 502,316
Less: Allowance for loan losses 5,947 6,007 5,875 5,651 5,611
Net loans receivable 532,923 512,954 495,260 495,193 496,705
Regulatory stock, at cost 2,240 1,838 1,714 3,210 2,437
Bank owned life insurance 18,551 18,417 18,284 18,143 18,002
Bank premises and equipment, net 6,555 6,632 6,734 6,825 6,910
Foreclosed real estate owned 1,382 1,698 3,726 4,962 4,293
Goodwill and other intangibles 10,049 10,076 10,104 10,133 10,161
Other assets 8,075 7,443 7,042 7,783 8,051
TOTAL ASSETS $ 751,521 $ 734,359 $ 711,635 $ 718,213 $ 716,862
LIABILITIES
Deposits:
�� Non-interest bearing demand $ 107,610 $ 101,423 $ 98,064 $ 102,343 $ 103,954
Interest-bearing deposits 468,004 468,783 461,880 445,995 450,760
Total deposits 575,614 570,206 559,944 548,338 554,714
Other borrowings 71,053 58,388 47,895 67,296 60,992
Other liabilities 4,936 5,314 4,755 5,172 4,954
TOTAL LIABILITIES 651,603 633,908 612,594 620,806 620,660
STOCKHOLDERS' EQUITY 99,918 100,451 99,041 97,407 96,202
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 751,521 $ 734,359 $ 711,635 $ 718,213 $ 716,862
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
June 30 March 31 December 31 September 30 June 30
Three months ended 2015 2015 2014 2014 2014
INTEREST INCOME
Loans receivable, including fees $ 5,924 $ 6,061 $ 5,954 $ 5,972 $ 5,933
Securities 950 1,023 940 968 1,025
Other 8 4 4 1 2
Total interest income 6,882 7,088 6,898 6,941 6,960
INTEREST EXPENSE
Deposits 618 604 611 600 618
Borrowings 215 177 182 187 187
Total interest expense 833 781 793 787 805
NET INTEREST INCOME 6,049 6,307 6,105 6,154 6,155
PROVISION FOR LOAN LOSSES 420 620 420 420 420
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,629 5,687 5,685 5,734 5,735
OTHER INCOME
Service charges and fees 622 572 604 587 583
Income from fiduciary activities 109 105 109 125 99
Net realized gains on sales of securities 134 311 265 301 509
Gains (losses) on sales of loans, net 12 18 82 (15) 26
Earnings and proceeds on life insurance policies 166 165 171 170 175
Other 90 108 96 94 76
Total other income 1,133 1,279 1,327 1,262 1,468
OTHER EXPENSES
Salaries and employee benefits 2,071 2,137 2,252 2,028 2,172
Occupancy, furniture and equipment, net 542 556 516 505 518
Foreclosed real estate owned 232 158 822 271 396
FDIC insurance assessment 65 95 100 104 102
Other 1,258 1,241 1,307 1,216 1,285
Total other expenses 4,168 4,187 4,997 4,124 4,473
INCOME BEFORE TAX 2,594 2,779 2,015 2,872 2,730
INCOME TAX EXPENSE 631 738 474 754 696
NET INCOME $ 1,963 $ 2,041 $ 1,541 $ 2,118 $ 2,034
Basic earnings per share $ 0.53 $ 0.55 $ 0.42 $ 0.58 $ 0.56
Diluted earnings per share $ 0.53 $ 0.55 $ 0.42 $ 0.58 $ 0.56
Book Value per share $ 27.40 $ 27.38 $ 26.30 $ 26.30 $ 26.14
Return on average equity (annualized) 7.80% 8.22% 6.17% 8.62% 8.49%
Return on average assets (annualized) 1.06% 1.15% 0.86% 1.18% 1.15%
Net interest spread (fte) 3.53% 3.80% 3.72% 3.78% 3.77%
Net interest margin (fte) 3.68% 3.94% 3.87% 3.92% 3.91%
Allowance for loan losses to total loans 1.10% 1.16% 1.17% 1.13% 1.12%
Net charge-offs to average loans (annualized) 0.37% 0.39% 0.16% 0.30% 0.43%
Nonperforming loans to total loans 2.00% 1.11% 1.12% 1.18% 1.49%
Nonperforming assets to total assets 1.62% 1.01% 1.31% 1.52% 1.65%
total NAL 10,758,822 5,737,894 5,599,847 5,908,509 7,503,647
past due 90+ - - - 15,510 -
total non performing loans 10,758,822 5,737,894 5,599,847 5,924,019 7,503,647
OREO 1,381,703 1,697,928 3,725,631 4,962,041 4,292,714
total Non performing assets 12,140,525 7,435,822 9,325,478 10,886,060 11,796,361
total loans 538,870,175 518,960,579 501,135,429 500,843,869 502,316,130
total assets 751,520,644 734,358,677 711,635,286 718,212,632 716,862,552
net charge off's, this quarter 479,802 487,774 195,713 380,376 536,517
average loans, this quarter 524,334,561 505,613,214 502,048,413 500,738,758 500,850,813
Loan loss reserve 5,947,364 6,007,165 5,874,939 5,650,652 5,611,028



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

Source:Norwood Financial Corp