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Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

HONESDALE, Pa., Jan. 29, 2016 (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 December 31, 2015 of $128,000. This represents a decrease from the $1,541,000 earned in the comparable period of 2014 due primarily to a $2,400,000 increase in the provision for loan losses. Earnings per share (fully diluted) were $.04 and $.42 for the three-month periods ended December 31, 2015 and 2014 respectively. Net interest income before the provision for loan losses increased $7,000 compared to the same period of last year, while other income decreased $111,000. A provision for loan losses of $2,820,000 was recorded in the current three-month period compared to $420,000 in the same period of last year in order to replenish the reserve for loan losses after recognizing $1,268,000 of net charge-offs during the 2015 period. Operating expenses decreased $323,000 due primarily to a $347,000 decrease in foreclosed real estate costs. For the year ended December 31, 2015, net income totaled $5,908,000, a decrease of $1,749,000 from the $7,657,000 earned in the prior year as a $2,900,000 increase in the provision for loan losses offset a $644,000 decrease in foreclosed real estate costs. Earnings per share on a fully diluted basis were $1.60 for 2015 compared to $2.10 in 2014. The return on average assets for the year was 0.80% with a return on average equity of 5.83% compared to 1.08% and 7.92%, respectively, in 2014.

Total assets were $750.5 million as of December 31, 2015. Loans receivable totaled $559.9 million as of December 31, 2015, with total deposits of $550.9 million and stockholders’ equity of $101.0 million.

Loans receivable increased $58.8 million from the prior year-end due primarily to a $28.6 million increase in commercial loans which includes a $21.3 million increase in municipal financing. Commercial real estate loans also increased $17.2 million during the year. Residential mortgage loans and construction loans increased $3.5 million after the sale of $4.3 million of fixed-rate residential mortgage loans for the purpose of interest rate risk management. Consumer loans increased $9.5 million in 2015 due primarily to a $9.2 million increase in indirect auto and marine financing. As of December 31, 2015, total non-performing loans were $7.1 million and represented 1.27% of total loans compared to $5.6 million, or 1.12% as of December 31, 2014. For the three months and year ended December 31, 2015, net charge-offs totaled $1,268,000 and $3,157,000, respectively, compared to $196,000 and $1,513,000, respectively, for the corresponding periods in 2014. Based on the level of charge-offs, the Company determined that it would be appropriate to provide $2,820,000 and $4,580,000 for potential future losses for the three and twelve month periods ended December 31, 2015, respectively, compared to $420,000 in the similar quarter of last year and $1,680,000 for the year of 2014. As of December 31, 2015, the allowance for loan losses totaled $7,298,000 and 1.30% of total loans compared to $5,875,000 and 1.17% of total loans at December 31, 2014.

Net interest income (fully taxable equivalent) totaled $6,477,000 for the three months ended December 31, 2015, an increase of $78,000 compared to the same period in 2014. Net interest margin (fte) for the three months ended December 31, 2015 was 3.73% decreasing from 3.87% for the similar period in 2014. The decrease in net interest margin was principally due to loan production at historically low interest rate levels which resulted in a 13 basis point decrease in the yield earned on assets. The net interest margin was further impacted by a 1 basis point increase in the cost of interest-bearing liabilities. For the year, net interest income (fte) totaled $25,882,000, an increase of $64,000 compared to 2014. The net interest margin (fte) declined 15 basis points to 3.75% in 2015.

Other income for the three months ended December 31, 2015 totaled $1,216,000 compared to $1,327,000 for the similar period in 2014. Although gains on the sale of loans and securities decreased $168,000, all other items of other income increased $57,000 in the aggregate. Other income for the year ended December 31, 2015 totaled $4,699,000 compared to $5,110,000 in 2014, a decrease of $411,000. Gains on the sale of loans and investment securities decreased $572,000 in the aggregate, while all other items of other income increased $161,000, net.

Other expenses totaled $4,674,000 for the three months ended December 31, 2015, compared to $4,997,000 in the similar period of 2014. Foreclosed real estate costs decreased $347,000 from the 2014 level, while all other operating expenses increased $24,000, net. For the year ended December 31, 2015, other expenses totaled $17,100,000 compared to $17,727,000 for the similar period in 2014, a decrease of $627,000. Foreclosed real estate costs decreased $644,000 from the prior period, while all other expenses increased $17,000, net compared to 2014.

Mr. Critelli commented, “Our earnings in 2015 were impacted by credit quality issues, resulting from the extended period of stress on our local economy, our customer base and real estate values. During the fourth quarter of 2015, we recognized significant losses on several commercial properties as current appraised values supporting sales or future projected sales were significantly lower than those received at the time of the loan origination. In spite of these challenges, we were able to accomplish many of our goals in 2015. Our cash dividend per share increased from $1.20 per share to $1.24 per share, which resulted in a dividend yield in excess of 4.00% annually based on our year-end closing stock price of $28.75. We had loan growth in excess of 10%. The ongoing low level of interest rates and the competitive lending environment also continued to place pressure on our net interest margin; however, our year-to-date margin and our capital levels were well above peer and our operating expenses remain well controlled. We will remain diligent in controlling and minimizing credit-related costs brought on us by our ailing economy. We believe that we are well positioned to take advantage of the 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 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 is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income is derived from GAAP interest income and net interest income using an assumed tax rate of 34%. We believe the presentation of interest income on a tax–equivalent basis ensures comparability of 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 endedYear ended
(dollars in thousands)December 31December 31
2015 2014 2015 2014
Net interest income$6,112 $6,105 $24,521 $24,560
Tax equivalent basis adjustment using 34% marginal tax rate 365 294 1,361 1,258
Net interest income on a fully taxable equivalent basis$6,477 $6,399 $25,882 $25,818


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
December 31
2015 2014
ASSETS
Cash and due from banks $ 9,744 8,081
Interest-bearing deposits with banks 266 4,295
Cash and cash equivalents 10,010 12,376
Securities available for sale 138,851 156,395
Loans receivable 559,925 501,135
Less: Allowance for loan losses 7,298 5,875
Net loans receivable 552,627 495,260
Regulatory stock, at cost 3,412 1,714
Bank premises and equipment, net 6,472 6,734
Bank owned life insurance 18,820 18,284
Foreclosed real estate owned 2,847 3,726
Accrued interest receivable 2,363 2,339
Goodwill 9,715 9,715
Other intangible assets 285 389
Deferred tax asset 3,867 3,285
Other assets 1,236 1,418
TOTAL ASSETS $ 750,505 711,635
LIABILITIES
Deposits:
Non-interest bearing demand $ 107,814 98,064
Interest-bearing 443,095 461,880
Total deposits 550,909 559,944
Short-term borrowings 53,235 25,695
Other borrowings 41,126 22,200
Accrued interest payable 957 966
Other liabilities 3,280 3,789
TOTAL LIABILITIES 649,507 612,594
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2015: 3,724,668 shares, 2014: 3,718,018 shares 373 372
Surplus 35,351 35,206
Retained earnings 65,412 64,078
Treasury stock, at cost: 2015: 23,311 shares, 2014: 40,576 shares (626) (1,077)
Accumulated other comprehensive income 488 462
TOTAL STOCKHOLDERS' EQUITY 100,998 99,041
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 750,505 711,635
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended December 31, Twelve Months Ended December 31,
2015 2014 2015 2014
INTEREST INCOME
Loans receivable, including fees$ 6,058 $ 5,954 $ 24,002 $ 23,841
Securities 877 940 3,761 3,920
Other 1 4 16 7
Total Interest income 6,936 6,898 27,779 27,768
INTEREST EXPENSE
Deposits 587 611 2,421 2,463
Short-term borrowings 38 15 85 77
Other borrowings 199 167 752 668
Total Interest expense 824 793 3,258 3,208
NET INTEREST INCOME 6,112 6,105 24,521 24,560
PROVISION FOR LOAN LOSSES 2,820 420 4,580 1,680
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,292 5,685 19,941 22,880
OTHER INCOME
Service charges and fees 651 604 2,440 2,350
Income from fiduciary activities 99 109 439 437
Net realized gains on sales of securities 118 265 626 1,170
Gains on sales of loans, net 61 82 104 132
Earnings and proceeds on life insurance policies 167 171 665 685
Other 120 96 425 336
Total other income 1,216 1,327 4,699 5,110
OTHER EXPENSES
Salaries and employee benefits 2,152 2,252 8,535 8,616
Occupancy, furniture and equipment 511 516 2,082 2,117
Data processing related 261 249 943 929
Taxes, other than income 185 161 711 649
Professional fees 283 196 730 671
FDIC Insurance assessment 133 100 411 420
Foreclosed real estate owned 475 822 911 1,555
Other 674 701 2,777 2,770
Total other expenses 4,674 4,997 17,100 17,727
INCOME (LOSS) BEFORE TAX (166) 2,015 7,540 10,263
INCOME TAX EXPENSE (BENEFIT) (294) 474 1,632 2,606
NET INCOME $ 128 $ 1,541 $ 5,908 $ 7,657
Basic earnings per share $ 0.04 $ 0.42 $ 1.60 $ 2.10
Diluted earnings per share $ 0.04 $ 0.42 $ 1.60 $ 2.10
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended December 31 2015 2014
Net interest income $ 6,112 $ 6,105
Net income 128 1,541
Net interest spread (fully taxable equivalent) 3.58% 3.72%
Net interest margin (fully taxable equivalent) 3.73% 3.87%
Return on average assets 0.07% 0.86%
Return on average equity 0.50% 6.17%
Basic earnings per share $ 0.04 $ 0.42
Diluted earnings per share $ 0.04 $ 0.42
For the Twelve Months Ended December 31
Net interest income $ 24,521 $ 24,560
Net income 5,908 7,657
Net interest spread (fully taxable equivalent) 3.61% 3.76%
Net interest margin (fully taxable equivalent) 3.75% 3.90%
Return on average assets 0.80% 1.08%
Return on average equity 5.83% 7.92%
Basic earnings per share $ 1.60 $ 2.10
Diluted earnings per share $ 1.60 $ 2.10
As of December 31
Total assets $ 750,505 $ 711,635
Total loans receivable 559,925 501,135
Allowance for loan losses 7,298 5,875
Total deposits 550,909 559,944
Stockholders' equity 100,998 99,041
Trust assets under management 131,690 134,888
Book value per share $ 27.39 $ 26.30
Equity to total assets 13.46% 13.92%
Allowance to total loans receivable 1.30% 1.17%
Nonperforming loans to total loans 1.27% 1.12%
Nonperforming assets to total assets 1.33% 1.31%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
December 31 September 30 June 30 March 31 December 31
2015 2015 2015 2015 2014
ASSETS
Cash and due from banks $ 9,744 $ 11,164 $ 8,505 $ 7,658 $ 8,081
Interest-bearing deposits with banks 266 552 11,937 11,969 4,295
Cash and cash equivalents 10,010 11,716 20,442 19,627 12,376
Securities available for sale 138,851 153,305 151,304 155,674 156,395
Loans receivable 559,925 543,536 538,870 518,961 501,135
Less: Allowance for loan losses 7,298 5,747 5,947 6,007 5,875
Net loans receivable 552,627 537,789 532,923 512,954 495,260
Regulatory stock, at cost 3,412 2,488 2,240 1,838 1,714
Bank owned life insurance 18,820 18,686 18,551 18,417 18,284
Bank premises and equipment, net 6,472 6,503 6,555 6,632 6,734
Foreclosed real estate owned 2,847 1,345 1,382 1,698 3,726
Goodwill and other intangibles 10,000 10,024 10,049 10,076 10,104
Other assets 7,466 7,473 8,075 7,443 7,042
TOTAL ASSETS $ 750,505 $ 749,329 $ 751,521 $ 734,359 $ 711,635
. .
LIABILITIES
Deposits:
Non-interest bearing demand $ 107,814 $ 115,313 $ 107,610 $ 101,423 $ 98,064
Interest-bearing deposits 443,095 456,040 468,004 468,783 461,880
Total deposits 550,909 571,353 575,614 570,206 559,944
Other borrowings 94,361 70,708 71,053 58,388 47,895
Other liabilities 4,237 5,328 4,936 5,314 4,755
TOTAL LIABILITIES 649,507 647,389 651,603 633,908 612,594
STOCKHOLDERS' EQUITY 100,998 101,940 99,918 100,451 99,041
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 750,505 $ 749,329 $ 751,521 $ 734,359 $ 711,635
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
December 31 September 30 June 30 March 31 December 31
Three months ended 2015 2015 2015 2015 2014
INTEREST INCOME
Loans receivable, including fees $ 6,058 $ 5,958 $ 5,924 $ 6,061 $ 5,954
Securities 877 911 950 1,023 940
Other 1 3 8 4 4
Total interest income 6,936 6,872 6,882 7,088 6,898
INTEREST EXPENSE
Deposits 587 611 618 604 611
Borrowings 237 208 215 177 182
Total interest expense 824 819 833 781 793
NET INTEREST INCOME 6,112 6,053 6,049 6,307 6,105
PROVISION FOR LOAN LOSSES 2,820 720 420 620 420
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,292 5,333 5,629 5,687 5,685
OTHER INCOME
Service charges and fees 651 595 622 572 604
Income from fiduciary activities 99 126 109 105 109
Net realized gains on sales of securities 118 63 134 311 265
Gains on sales of loans, net 61 13 12 18 82
Earnings and proceeds on life insurance policies 167 167 166 165 171
Other 120 107 90 108 96
Total other income 1,216 1,071 1,133 1,279 1,327
OTHER EXPENSES
Salaries and employee benefits 2,152 2,175 2,071 2,137 2,252
Occupancy, furniture and equipment, net 511 473 542 556 516
Foreclosed real estate owned 475 47 232 158 822
FDIC insurance assessment 133 119 65 95 100
Other 1,403 1,256 1,258 1,241 1,307
Total other expenses 4,674 4,070 4,168 4,187 4,997
(LOSS) INCOME BEFORE TAX (166) 2,334 2,594 2,779 2,015
INCOME TAX (BENEFIT) EXPENSE (294) 557 631 738 474
NET INCOME $ 128 $ 1,777 $ 1,963 $ 2,041 $ 1,541
Basic earnings per share $ 0.04 $ 0.48 $ 0.53 $ 0.55 $ 0.42
Diluted earnings per share $ 0.04 $ 0.48 $ 0.53 $ 0.55 $ 0.42
Book Value per share $ 27.39 $ 27.42 $ 27.40 $ 27.38 $ 26.30
Return on average equity (annualized) 0.50% 6.95% 7.80% 8.22% 6.17%
Return on average assets (annualized) 0.07% 0.95% 1.06% 1.15% 0.86%
Net interest spread (fte) 3.58% 3.53% 3.53% 3.80% 3.72%
Net interest margin (fte) 3.73% 3.68% 3.68% 3.94% 3.87%
Allowance for loan losses to total loans 1.30% 1.06% 1.10% 1.16% 1.17%
Net charge-offs to average loans (annualized) 0.92% 0.68% 0.37% 0.39% 0.16%
Nonperforming loans to total loans 1.27% 1.69% 2.00% 1.11% 1.12%
Nonperforming assets to total assets 1.33% 1.40% 1.62% 1.01% 1.31%


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

Source:Norwood Financial Corp