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Norwood Financial Corp Announces Earnings for the Third Quarter

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HONESDALE, Pa., Oct. 18, 2012 (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, 2012 of $2,200,000. This represents a slight decrease from the $2,215,000 earned in the same three month period of 2011. Earnings per share (fully diluted) were $.67 in the 2012 period, matching the $.67 earned in the similar period of last year. Annualized return on average assets for the three months ended September 30, 2012 was 1.27% with an annualized return on average equity of 9.54%. Net income for the nine months ended September 30, 2012 totaled $6,644,000, which is $1,285,000, or 24% higher than the similar period of 2011. Earnings per share (fully diluted) for the nine months ended September 30, 2012 totaled $2.02 per share compared to $1.79 per share in the 2011 period.

Total assets as of September 30, 2012 were $698.7 million with loans receivable of $479.5 million, deposits of $541.6 million and stockholders' equity of $92.0 million. Total assets have increased $19.8 million during the twelve months ended September 30, 2012 due primarily to growth in deposits and the retention of earnings.

Loans receivable increased $24.7 million from September 30, 2011, including a $22.3 million increase in commercial loans and a $2.4 million increase in retail loans.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $14.4 million and 2.07% of total assets as of September 30, 2012 compared to $10.1 million and 1.48% of assets as of June 30, 2012 and $9.6 million or 1.42% of total assets as of September 30, 2011. The increase in non-performing assets during the current quarter is due primarily to one large commercial real estate credit. The loan was transferred to nonaccrual status based on the borrower's indication that they were no longer able to make the scheduled payments. Net charge-offs were $1,334,000 for the quarter and totaled $1,767,000 for the nine months ended September 30, 2012 compared to $347,000 and $1,346,000, respectively, for the similar periods in 2011. The current quarter includes a $1.0 million charge-off on the loan mentioned previously. Based on the increase in charge-offs, the Company determined that it would be appropriate to provide $900,000 and $1,650,000 for potential future losses for the three and nine month periods ended September 30, 2012, respectively, compared to $425,000 and $1,075,000, respectively, for the similar periods in 2011. The allowance for loan losses totaled $5,341,000 as of September 30, 2012 and represented 1.11% of total loans, decreasing slightly from $5,345,000 as of September 30, 2011 and 1.18% of total loans.

For the three months ended September 30, 2012, net interest income, on a fully taxable equivalent basis (fte), totaled $6,561,000, which represents a decrease of $12,000 compared to the similar period in 2011. The decrease reflects the reduced earnings on loans and securities due to reinvestment at current lower market rates. Net interest margin (fte) for the 2012 period was 4.07% compared to 4.13% for the similar period in 2011. Net interest income (fte) for the nine months ended September 30, 2012 totaled $19,631,000, an increase of $2,415,000, or 14.0%, over the similar period in 2011. The increase reflects loan growth recorded during the period as well as the increase in interest earning assets resulting from the North Penn Bancorp, Inc. ("North Penn") acquisition that closed on May 31, 2011. Net interest margin (fte) year to date for the 2012 period was 4.10% compared to 4.03% in 2011.

Other income for the three months ended September 30, 2012 totaled $1,591,000 compared to $1,506,000 for the similar period in 2011. The increase was principally due to increased gains on the sales of investment securities during the period. For the nine months ended September 30, 2012, other income totaled $4,088,000 compared to $3,707,000 in the 2011 period. The 2012 year-to-date period includes $143,000 in gains on the sale of $4.3 million of residential mortgage loans and servicing rights compared to $282,000 in similar gains on sales of $8.7 million of mortgage loans and servicing rights in the 2011 period. Gains on the sales of investment securities totaled $1,318,000 on sales of $23.3 million for the 2012 year-to-date period compared to $768,000 on sales of $27.7 million in the 2011 period. The proceeds from investment securities sales were reinvested to improve credit quality in the Company's bond portfolio as well as to fund new securities purchases and loan growth.

Other expenses totaled $3,957,000 for the three months ended September 30, 2012, compared to $4,354,000 in the similar period of 2011. Foreclosed real estate costs decreased $395,000 due primarily to costs incurred on one property in 2011 that was subsequently disposed of. For the nine months ended September 30, 2012, other expenses totaled $12,061,000 compared to $11,824,000 for the similar period in 2011, an increase of $237,000 due to costs related to the operation of five offices acquired from North Penn in 2011. The increases which are primarily included in salary and benefit costs, occupancy, and equipment expenses were largely offset by a $753,000 decrease in merger related costs and a $224,000 decrease in foreclosed real estate expenses.

Mr. Critelli commented, "Our results for the first nine months of 2012 reflect the positive impact of the acquisition of North Penn in 2011. This has been somewhat offset by continued pressure from the slow economy on sectors of our customer base which has resulted in an increase in non-performing loans. However, our core earnings remain strong, our net interest margin remains close to 4.00% and our capital levels remain well above peer. We continue to work hard to identify and resolve problem credits, and we believe that we are well positioned to capitalize on opportunities available to us. 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".

The Norwood Financial Corp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13244

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 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:

(dollars in thousands) Three months ended
September 30
Nine months ended
September 30
2012 2011 2012 2011
Net interest income $6,252 $6,263 $18,686 $16,362
Tax equivalent basis adjustment using 34% marginal tax rate 309 310 945 854
Net interest income on a fully taxable equivalent basis $6,561 $6,573 $19,631 $17,216
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
September 30
2012 2011
ASSETS
Cash and due from banks $ 10,514 $ 12,472
Interest-bearing deposits with banks 24,825 25,577
Federal funds sold 0 0
Cash and cash equivalents 35,339 38,049
Securities available for sale 147,639 145,734
Securities held to maturity, fair value 2012: $175 and 2011: $177 172 171
Loans receivable (net of unearned Income) 479,501 454,832
Less: Allowance for loan losses 5,341 5,345
Net loans receivable 474,160 449,487
Investment in FHLB Stock, at cost 2,932 3,782
Bank premises and equipment, net 7,453 7,601
Bank owned life insurance 12,234 11,767
Foreclosed real estate owned 659 3,355
Accrued interest receivable 2,589 2,758
Goodwill 9,715 9,483
Other intangible assets 684 840
Other assets 5,121 5,854
TOTAL ASSETS $ 698,697 $ 678,881
LIABILITIES
Deposits:
Non-interest bearing demand $ 89,218 $ 78,500
Interest-bearing 452,372 448,013
Total deposits 541,590 526,513
Short-term borrowings 32,386 31,976
Other borrowings 27,533 27,716
Accrued interest payable 1,462 1,489
Other liabilities 3,775 4,274
TOTAL LIABILITIES 606,746 591,968
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2012: 3,371,849 shares, 2011: 3,371,866 shares 337 337
Surplus 24,728 24,647
Retained earnings 66,005 61,296
Treasury stock, at cost: 2012: 94,242 shares, 2011: 79,500 shares (2,739) (2,404)
Accumulated other comprehensive income 3,620 3,037
TOTAL STOCKHOLDERS' EQUITY 91,951 86,913
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 698,697 $ 678,881
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
2012 2011 2012 2011
INTEREST INCOME
Loans receivable, including fees $ 6,429 $ 6,521 $ 19,233 $ 16,917
Securities 971 1,116 3,004 3,341
Other 9 18 20 42
Total Interest income 7,409 7,655 22,257 20,300
INTEREST EXPENSE
Deposits 897 1,054 2,800 2,871
Short-term borrowings 14 24 38 75
Other borrowings 246 314 733 992
Total Interest expense 1,157 1,392 3,571 3,938
NET INTEREST INCOME 6,252 6,263 18,686 16,362
PROVISION FOR LOAN LOSSES 900 425 1,650 1,075
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,352 5,838 17,036 15,287
OTHER INCOME
Service charges and fees 561 581 1,674 1,722
Income from fiduciary activities 96 106 274 324
Net realized gains on sales of securities 631 544 1,318 768
Gains on sale of loans and servicing rights 83 41 143 282
Earnings and proceeds on life insurance policies 132 130 395 330
Other 88 104 284 281
Total other income 1,591 1,506 4,088 3,707
OTHER EXPENSES
Salaries and employee benefits 2,102 2,129 6,300 5,662
Occupancy, furniture and equipment 512 489 1,489 1,295
Data processing related 222 233 670 635
Taxes, other than income 150 142 451 414
Professional Fees 157 171 583 296
Merger related expenses -- 16 18 771
FDIC Insurance assessment 94 102 290 317
Foreclosed real estate owned (23) 372 184 408
Other 743 700 2,076 2,026
Total other expenses 3,957 4,354 12,061 11,824
INCOME BEFORE TAX 2,986 2,990 9,063 7,170
INCOME TAX EXPENSE 786 775 2,419 1,811
NET INCOME $ 2,200 $ 2,215 $ 6,644 $ 5,359
Basic earnings per share $ 0.67 $ 0.67 $ 2.03 $ 1.79
Diluted earnings per share $ 0.67 $ 0.67 $ 2.02 $ 1.79
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30 2012 2011
Net interest income $ 6,252 $ 6,263
Net income 2,200 2,215
Net interest spread (fully taxable equivalent) 3.87% 3.94%
Net interest margin (fully taxable equivalent) 4.07% 4.13%
Return on average assets 1.27% 1.28%
Return on average equity 9.54% 10.17%
Basic earnings per share $ 0.67 $ 0.67
Diluted earnings per share $ 0.67 $ 0.67
For the Nine Months Ended September 30
Net interest income $ 18,686 $ 16,362
Net income 6,644 5,359
Net interest spread (fully taxable equivalent) 3.91% 3.80%
Net interest margin (fully taxable equivalent) 4.10% 4.03%
Return on average assets 1.30% 1.18%
Return on average equity 9.80% 9.35%
Basic earnings per share $ 2.03 $ 1.79
Diluted earnings per share $ 2.02 $ 1.79
As of September 30
Total assets $ 698,697 $ 678,881
Total loans receivable 479,501 454,832
Allowance for loan losses 5,341 5,345
Total deposits 541,590 526,513
Stockholders' equity 91,951 86,913
Trust assets under management 113,233 104,331
Book value per share $ 28.05 $ 26.40
Equity to total assets 13.16% 12.80%
Allowance to total loans receivable 1.11% 1.18%
Nonperforming loans to total loans 2.87% 1.38%
Nonperforming assets to total assets 2.07% 1.42%
CONTACT: William S. Lance Executive Vice President & Chief Financial Officer NORWOOD FINANCIAL CORP 570-253-8505 www.waynebank.com

Source:Norwood Financial Corp