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Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 30, 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 September 30, 2015 of $1,777,000. This represents a $341,000 decrease from the $2,118,000 earned in the same three-month period of 2014 due to a reduced level of gains from securities sales and a $300,000 increase in the provision for loan losses. Earnings per share (fully diluted) were $.48 in the 2015 period, decreasing from the $.58 earned in the similar period of last year. Net income for the nine months ended September 30, 2015 totaled $5,781,000, which is $335,000 lower than the same period of 2014 primarily due to an additional $500,000 provision to the allowance for loan losses. Earnings per share (fully diluted) for the nine months ended September 30, 2015 totaled $1.57 per share compared to $1.68 per share in the 2014 period. The annualized return on average assets and average equity for the nine month period was 1.05% and 7.65%, respectively.

Total assets as of September 30, 2015 were $749.3 million with loans receivable of $543.5 million, deposits of $571.3 million and stockholders’ equity of $101.9 million. Total assets have increased $31.1 million during the past twelve months due primarily to growth in loans which increased $42.7 million, including a $31.0 million increase in commercial lending. Total deposits increased $23.0 million over the past twelve months including a $13.0 million increase in non-interest bearing demand deposits. Stockholders’ equity increased $4.5 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 real estate owned, totaled $10.5 million or 1.40% of total assets as of September 30, 2015 compared to $12.1 million or 1.62% of assets as of June 30, 2015 and $10.9 million or 1.52% of total assets as of September 30, 2014. Net charge-offs were $921,000 for the quarter and totaled $1,889,000 for the nine months ended September 30, 2015 compared to $380,000 and $1,317,000, respectively, for the similar periods in 2014. Based on management’s analysis, the Company added $720,000 and $1,760,000 to the allowance for loan losses for the three and nine month periods ended September 30, 2015, respectively, compared to $420,000 and $1,260,000, respectively, for the similar periods in 2014. The increase in the provision for loan losses reflects the higher level of charge-offs in 2015 as well as growth of the loan portfolio. The allowance for loan losses totaled $5,747,000 as of September 30, 2015 and represented 1.06% of total loans, compared to $5,651,000 as of September 30, 2014 and 1.13% of total loans.

For the three months ended September 30, 2015, net interest income, on a fully taxable equivalent basis (fte), totaled $6,413,000, which represents a decrease of $54,000 compared to the similar period in 2014. Net interest margin (fte) for the 2015 period was 3.68% compared to 3.92% for the similar period in 2014 due primarily to a 32 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, 2015 totaled $19,405,000, a decrease of $13,000 compared to the similar period in 2014. Net interest margin (fte) year-to-date for the 2015 period was 3.76% compared to 3.91% in 2014.

Other income for the three months ended September 30, 2015 totaled $1,071,000 compared to $1,262,000 for the similar period in 2014. The decrease was due to reduced gains on the sales of investment securities during the period. For the nine months ended September 30, 2015, other income totaled $3,483,000 compared to $3,783,000 in the 2014 period. Gains on the sales of investment securities totaled $508,000 on sales of $28.3 million for the 2015 year-to-date period compared to $904,000 on sales of $38.2 million in the corresponding 2014 period. Excluding gains from the sales of securities, other income improved $96,000 over the first nine months of 2014.

Other expenses totaled $4,070,000 for the three months ended September 30, 2015, compared to $4,124,000 in the similar period of 2014. Foreclosed real estate costs decreased $224,000 compared to the same three-month period of last year. For the nine months ended September 30, 2015, other expenses totaled $12,425,000 compared to $12,729,000 for the similar period in 2014, a decrease of $304,000, which includes a $297,000 decrease in foreclosed real estate costs. All other operating expenses decreased $7,000, net.

Mr. Critelli commented, “Our earnings in 2015 have been impacted by credit quality issues resulting from the extended period of stress on our local economy and lower real estate values. Working with borrowers experiencing cash flow problems will remain a top priority as we make our way through this challenging economic environment. The ongoing low level of interest rates and the competitive lending environment also continue to place pressure on our net interest margin; however, our year-to-date margin and our capital levels remain well above peer and operating expenses are well controlled. We look forward to serving our growing base of stockholders and customers, as the local economy in Northeast Pennsylvania recovers from the extended economic downturn.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates fifteen 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, 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 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 endedNine months ended
(dollars in thousands)September 30September 30
2015 2014 2015 2014
Net interest income$6,053 $6,154 $18,409 $18,454
Tax equivalent basis adjustment
using 34% marginal tax rate 360 313 996 964
Net interest income on a fully
taxable equivalent basis$6,413 $6,467 $19,405 $19,418


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
September 30
2015
2014
ASSETS
Cash and due from banks$ 11,164 $ 13,105
Interest-bearing deposits with banks 552 158
Cash and cash equivalents 11,716 13,263
Securities available for sale 153,305 158,701
Loans receivable 543,536 500,844
Less: Allowance for loan losses 5,747 5,651
Net loans receivable 537,789 495,193
Regulatory stock, at cost 2,488 3,210
Bank premises and equipment, net 6,503 6,825
Bank owned life insurance 18,686 18,143
Foreclosed real estate owned 1,345 4,962
Accrued interest receivable 2,499 2,367
Goodwill 9,715 9,715
Other intangible assets 309 418
Deferred tax asset 3,345 3,691
Other assets 1,629 1,725
TOTAL ASSETS$ 749,329 $ 718,213
LIABILITIES
Deposits:
Non-interest bearing demand$ 115,313 $ 102,343
Interest-bearing 456,040 445,995
Total deposits 571,353 548,338
Short-term borrowings 41,546 44,704
Other borrowings 29,162 22,592
Accrued interest payable 996 975
Other liabilities 4,332 4,197
TOTAL LIABILITIES 647,389 620,806
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2015: 3,718,018 shares, 2014: 3,708,718 shares 372 371
Surplus 35,310 35,143
Retained earnings 66,431 63,637
Treasury stock, at cost: 2015: 33,299 shares, 2014: 63,019 shares (894) (1,673)
Accumulated other comprehensive income (loss) 721 (71)
TOTAL STOCKHOLDERS' EQUITY 101,940 97,407
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$ 749,329 $ 718,213
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,
2015
2014
2015
2014
INTEREST INCOME
Loans receivable, including fees$ 5,958 $ 5,972 $ 17,943 $ 17,885
Securities 911 968 2,884 2,981
Other 3 1 15 3
Total Interest income 6,872 6,941 20,842 20,869
INTEREST EXPENSE
Deposits 611 600 1,833 1,852
Short-term borrowings 19 19 47 62
Other borrowings 189 168 553 501
Total Interest expense 819 787 2,433 2,415
NET INTEREST INCOME 6,053 6,154 18,409 18,454
PROVISION FOR LOAN LOSSES 720 420 1,760 1,260
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,333 5,734 16,649 17,194
OTHER INCOME
Service charges and fees 595 587 1,789 1,746
Income from fiduciary activities 126 125 341 328
Net realized gains on sales of securities 63 301 508 904
Gains (losses) on sales of loans, net 13 (15) 43 50
Earnings and proceeds on life insurance policies 167 170 497 514
Other 107 94 305 241
Total other income 1,071 1,262 3,483 3,783
OTHER EXPENSES
Salaries and employee benefits 2,175 2,028 6,383 6,364
Occupancy, furniture and equipment 473 505 1,571 1,601
Data processing related 247 240 682 680
Taxes, other than income 175 161 525 488
Professional fees 140 136 447 475
FDIC Insurance assessment 119 104 278 320
Foreclosed real estate owned 47 271 436 733
Other 694 679 2,103 2,068
Total other expenses 4,070 4,124 12,425 12,729
INCOME BEFORE TAX 2,334 2,872 7,707 8,248
INCOME TAX EXPENSE 557 754 1,926 2,132
NET INCOME $ 1,777 $ 2,118 $ 5,781 $ 6,116
Basic earnings per share$ 0.48 $ 0.58 $ 1.57 $ 1.68
Diluted earnings per share$ 0.48 $ 0.58 $ 1.57 $ 1.68
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30 2015
2014
Net interest income$ 6,053 $ 6,154
Net income 1,777 2,118
Net interest spread (fully taxable equivalent) 3.53% 3.78%
Net interest margin (fully taxable equivalent) 3.68% 3.92%
Return on average assets 0.95% 1.18%
Return on average equity 6.95% 8.62%
Basic earnings per share$ 0.48 $ 0.58
Diluted earnings per share$ 0.48 $ 0.58
For the Nine Months Ended September 30
Net interest income$ 18,409 $ 18,454
Net income 5,781 6,116
Net interest spread (fully taxable equivalent) 3.62% 3.77%
Net interest margin (fully taxable equivalent) 3.76% 3.91%
Return on average assets 1.05% 1.15%
Return on average equity 7.65% 8.53%
Basic earnings per share$ 1.57 $ 1.68
Diluted earnings per share$ 1.57 $ 1.68
As of September 30
Total assets$ 749,329 $ 718,213
Total loans receivable 543,536 500,844
Allowance for loan losses 5,747 5,651
Total deposits 571,353 548,338
Stockholders' equity 101,940 97,407
Trust assets under management 127,815 132,652
Book value per share$ 27.42 $ 26.30
Equity to total assets 13.60% 13.56%
Allowance to total loans receivable 1.06% 1.13%
Nonperforming loans to total loans 1.69% 1.18%
Nonperforming assets to total assets 1.40% 1.52%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
September 30 June 30 March 31 December 31 September 30
2015
2015
2015
2014
2014
ASSETS
Cash and due from banks$ 11,164 $ 8,505 $ 7,658 $ 8,081 $ 13,105
Interest-bearing deposits with banks 552 11,937 11,969 4,295 158
Cash and cash equivalents 11,716 20,442 19,627 12,376 13,263
Securities available for sale 153,305 151,304 155,674 156,395 158,701
Loans receivable 543,536 538,870 518,961 501,135 500,844
Less: Allowance for loan losses 5,747 5,947 6,007 5,875 5,651
Net loans receivable 537,789 532,923 512,954 495,260 495,193
Regulatory stock, at cost 2,488 2,240 1,838 1,714 3,210
Bank owned life insurance 18,686 18,551 18,417 18,284 18,143
Bank premises and equipment, net 6,503 6,555 6,632 6,734 6,825
Foreclosed real estate owned 1,345 1,382 1,698 3,726 4,962
Goodwill and other intangibles 10,024 10,049 10,076 10,104 10,133
Other assets 7,473 8,075 7,443 7,042 7,783
TOTAL ASSETS$ 749,329 $ 751,521 $ 734,359 $ 711,635 $ 718,213
.
LIABILITIES
Deposits:
Non-interest bearing demand$ 115,313 $ 107,610 $ 101,423 $ 98,064 $ 102,343
Interest-bearing deposits 456,040 468,004 468,783 461,880 445,995
Total deposits 571,353 575,614 570,206 559,944 548,338
Other borrowings 70,708 71,053 58,388 47,895 67,296
Other liabilities 5,328 4,936 5,314 4,755 5,172
TOTAL LIABILITIES 647,389 651,603 633,908 612,594 620,806
STOCKHOLDERS' EQUITY 101,940 99,918 100,451 99,041 97,407
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$ 749,329 $ 751,521 $ 734,359 $ 711,635 $ 718,213
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 2015
2015
2015
2014
2014
INTEREST INCOME
Loans receivable, including fees$ 5,958 $ 5,924 $ 6,061 $ 5,954 $ 5,972
Securities 911 950 1,023 940 968
Other 3 8 4 4 1
Total interest income 6,872 6,882 7,088 6,898 6,941
INTEREST EXPENSE
Deposits 611 618 604 611 600
Borrowings 208 215 177 182 187
Total interest expense 819 833 781 793 787
NET INTEREST INCOME 6,053 6,049 6,307 6,105 6,154
PROVISION FOR LOAN LOSSES 720 420 620 420 420
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,333 5,629 5,687 5,685 5,734
OTHER INCOME
Service charges and fees 595 622 572 604 587
Income from fiduciary activities 126 109 105 109 125
Net realized gains on sales of securities 63 134 311 265 301
Gains (losses) on sales of loans, net 13 12 18 82 (15)
Earnings and proceeds on life insurance policies 167 166 165 171 170
Other 107 90 108 96 94
Total other income 1,071 1,133 1,279 1,327 1,262
OTHER EXPENSES
Salaries and employee benefits 2,175 2,071 2,137 2,252 2,028
Occupancy, furniture and equipment, net 473 542 556 516 505
Foreclosed real estate owned 47 232 158 822 271
FDIC insurance assessment 119 65 95 100 104
Other 1,256 1,258 1,241 1,307 1,216
Total other expenses 4,070 4,168 4,187 4,997 4,124
INCOME BEFORE TAX 2,334 2,594 2,779 2,015 2,872
INCOME TAX EXPENSE 557 631 738 474 754
NET INCOME$ 1,777 $ 1,963 $ 2,041 $ 1,541 $ 2,118
Basic earnings per share$ 0.48 $ 0.53 $ 0.55 $ 0.42 $ 0.58
Diluted earnings per share$ 0.48 $ 0.53 $ 0.55 $ 0.42 $ 0.58
Book Value per share$ 27.42 $ 27.40 $ 27.38 $ 26.30 $ 26.30
Return on average equity (annualized) 6.95% 7.80% 8.22% 6.17% 8.62%
Return on average assets (annualized) 0.95% 1.06% 1.15% 0.86% 1.18%
Net interest spread (fte) 3.53% 3.53% 3.80% 3.72% 3.78%
Net interest margin (fte) 3.68% 3.68% 3.94% 3.87% 3.92%
Allowance for loan losses to total loans 1.06% 1.10% 1.16% 1.17% 1.13%
Net charge-offs to average loans (annualized) 0.68% 0.37% 0.39% 0.16% 0.30%
Nonperforming loans to total loans 1.69% 2.00% 1.11% 1.12% 1.18%
Nonperforming assets to total assets 1.40% 1.62% 1.01% 1.31% 1.52%

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

Source:Norwood Financial Corp

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