×

Norwood Financial Corp. Announces First Quarter Earnings

company logo

HONESDALE, Pa., April 19, 2013 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq:NWFL) and its subsidiary, Wayne Bank, announced earnings of $2,308,000 for the three months ended March 31, 2013 which represents a $122,000 increase from the $2,186,000 recorded during the same three month period of last year. Earnings per share on a fully diluted basis were $.63 in the first quarter of this year compared to $.61 in the first quarter of 2012, after adjusting for the retroactive effect of the 10% stock dividend declared during the quarter ended March 31, 2013. The annualized return on average assets was 1.39% in the first quarter of 2013 and the annualized return on average equity was 10.02%.

Total assets were $680.8 million as of March 31, 2013, a decrease of $4.8 million compared to the prior year total. Total loans decreased $419,000 compared to March 31, 2012 but included the impact from the sale of $7.9 million of residential mortgage loans to reduce the Company's interest rate risk position. Residential mortgage loan balances increased $4.4 million and installment loans increased $0.3 million, while commercial real estate loans have decreased $3.1 million and commercial loan balances decreased $2.1 million compared to the prior year. Total loans have increased $2.0 million as compared to December 31, 2012. Total deposits decreased $10.6 million over the past twelve months which includes a $16.2 million decrease in certificates of deposit. Total deposits have increased $11.2 million as compared to December 31, 2012. Stockholders' equity increased $4.1 million, or 4.6%, during the past year, due principally to the retention of earnings.

Non-performing assets totaled $13.7 million or 2.01% of total assets at March 31, 2013 comprised of $12.6 million of non-performing loans and $1.1 million of Foreclosed Real Estate Owned, compared to $14.1 million of non-performing assets or 2.09% of total assets at December 31, 2012. The decrease recorded during the quarter includes the disposition of properties previously carried in Foreclosed Real Estate Owned as well as write downs of the carrying value of the assets totaling $633,000. As of March 31, 2012, non-performing assets totaled $10.1 million. Net charge-offs for the three month period ending March 31, 2013 were $576,000 which represents an increase compared to $190,000 of net charge-offs over 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 $800,000 to the allowance for loan losses compared to $350,000 during the same period of last year. The allowance for loan losses was 1.20% of total loans outstanding on March 31, 2013 compared to 1.15% on December 31, 2012 and 1.17% on March 31, 2012.

Net interest income (fully taxable equivalent) was $6,387,000 during the first quarter of 2013 which is $10,000 higher than the $6,377,000 recorded during the prior three month period ended December 31, 2012 but $118,000 lower than the comparable three month period of last year. The net interest margin was negatively impacted by lower rates on new loan closings and the downward repricing of investment securities, but a $14.6 million decrease in average overnight liquidity resulted in an increase of three basis points on the yield of earning assets while the cost of funds decreased eight basis points compared to the prior quarter. As a result, the net interest margin (fte) improved from 3.98% in the fourth quarter of 2012 to 4.07% for the three months ended March 31, 2013. Compared to the same period of last year, the net interest margin (fte) declined from 4.18% to 4.07% due to the downward repricing of the balance sheet.

Other income totaled $1,877,000 in the first quarter of 2013 compared to $1,291,000 during the same period of last year. The $586,000 increase in other income includes $770,000 of proceeds from a bank-owned life insurance policy and an $82,000 improvement in all other service charges and fees compared to the first quarter of last year. Net gains recognized on the sale of loans and securities decreased $266,000 compared to the first quarter of last year due to reduced activity in this area. During the current period, the Company recognized a gain of $138,000 from the sale of securities compared to $402,000 in the prior-year period.

Operating expenses totaled $4,301,000 in the first quarter and were $154,000, or 3.7% higher than the same period of last year. Foreclosed real estate costs were $69,000 higher than the first quarter of last year while all other operating costs increased $85,000 combined.

Mr. Critelli stated that: "Our first quarter results provide a good start for 2013. We are feeling the impact of net margin pressure due to the ongoing low interest rate environment. We are continuing to work our way through credit quality issues that have been brought on by the prolonged economic downturn, and improving our credit quality will remain a top priority in 2013. Our net interest margin continues to exceed 4.00%, and our capital base continues to exceed peer and "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 economy slowly recovers from the recent downturn."

Norwood Financial Corp. is the parent company of Wayne Bank which operates from sixteen 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, 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 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:

Three months ended March 31,
(dollars in thousands)
2013 2012
Net interest income $6,101 $6,187
Tax equivalent basis adjustment using 34% marginal tax rate 286 318
Net interest income on a fully taxable equivalent basis $6,387 $6,505
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
March 31
2013 2012
ASSETS
Cash and due from banks $ 6,763 $ 14,250
Interest-bearing deposits with banks 9,182 5,991
Federal funds sold 0 0
Cash and cash equivalents 15,945 20,241
Securities available for sale 148,598 148,407
Securities held to maturity, fair value 2013: $175 and 2012: $175 173 171
Loans receivable (net of unearned Income) 478,663 479,082
Less: Allowance for loan losses 5,726 5,618
Net loans receivable 472,937 473,464
Regulatory stock, at cost 2,533 3,495
Bank premises and equipment, net 7,191 7,468
Bank owned life insurance 14,402 12,003
Foreclosed real estate owned 1,099 1,143
Accrued interest receivable 2,456 2,690
Goodwill 9,715 9,715
Other intangible assets 610 760
Other assets 5,094 5,972
TOTAL ASSETS $ 680,753 $ 685,529
LIABILITIES
Deposits:
Non-interest bearing demand $ 84,357 $ 78,339
Interest-bearing 451,275 467,853
Total deposits 535,632 546,192
Short-term borrowings 21,859 15,854
Other borrowings 25,343 27,625
Accrued interest payable 1,082 1,333
Other liabilities 3,917 5,664
TOTAL LIABILITIES 587,833 596,668
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares issued: 2013: 3,709,034 shares, 2012: 3,371,866 shares 371 337
Surplus 34,912 24,686
Retained earnings 57,847 63,513
Treasury stock, at cost: 2013: 80,438 shares, 2012: 97,392 shares (2,345) (2,831)
Accumulated other comprehensive income 2,135 3,156
TOTAL STOCKHOLDERS' EQUITY 92,920 88,861
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 680,753 $ 685,529
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended March 31
2013 2012
INTEREST INCOME
Loans receivable, including fees $ 6,186 $ 6,373
Securities 868 1,026
Other 3 4
Total Interest income 7,057 7,403
INTEREST EXPENSE
Deposits 754 961
Short-term borrowings 12 11
Other borrowings 190 244
Total Interest expense 956 1,216
NET INTEREST INCOME 6,101 6,187
PROVISION FOR LOAN LOSSES 800 350
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,301 5,837
OTHER INCOME
Service charges and fees 600 554
Income from fiduciary activities 85 98
Net realized gains on sales of securities 138 402
Gains on sale of loans 3 5
Earnings and proceeds on life insurance policies 925 132
Other 126 100
Total other income 1,877 1,291
OTHER EXPENSES
Salaries and employee benefits 2,211 2,151
Occupancy, furniture and equipment 529 487
Data processing related 221 232
Taxes, other than income 174 152
Professional Fees 187 227
FDIC Insurance assessment 111 99
Foreclosed real estate owned 191 122
Other 677 677
Total other expenses 4,301 4,147
INCOME BEFORE TAX 2,877 2,981
INCOME TAX EXPENSE 569 795
NET INCOME $ 2,308 $ 2,186
Basic earnings per share $ 0.64 $ 0.61
Diluted earnings per share $ 0.63 $ 0.61
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended March 31 2013 2012
Net interest income $ 6,101 $ 6,187
Net income 2,308 2,186
Net interest spread (fully taxable equivalent) 3.91% 4.00%
Net interest margin (fully taxable equivalent) 4.07% 4.18%
Return on average assets 1.39% 1.31%
Return on average equity 10.02% 9.81%
Basic earnings per share $ 0.64 $ 0.61
Diluted earnings per share $ 0.63 $ 0.61
As of March 31
Total assets $ 680,753 $ 685,529
Total loans receivable 478,663 479,082
Allowance for loan losses 5,726 5,618
Total deposits 535,632 546,192
Stockholders' equity 92,920 88,861
Trust assets under management 118,091 112,476
Book value per share $ 25.66 $ 24.67
Equity to total assets 13.65% 12.96%
Allowance to total loans receivable 1.20% 1.17%
Nonperforming loans to total loans 2.63% 1.88%
Nonperforming assets to total assets 2.01% 1.48%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
March 31
2013
December 31
2012
Sept 30
2012
June 30
2012
March 31
2012
ASSETS
Cash and due from banks $ 6,763 $ 10,867 $ 10,514 $ 9,135 $ 14,250
Interest-bearing deposits with banks 9,182 1,428 24,825 15,261 5,991
Federal funds sold 0 0 0 0 0
Cash and cash equivalents 15,945 12,295 35,339 24,396 20,241
Securities available for sale 148,598 145,390 147,557 144,638 148,407
Securities held to maturity 173 173 172 172 171
Loans receivable (net of unearned Income) 478,663 476,710 479,501 479,421 479,082
Less: Allowance for loan losses 5,726 5,502 5,341 5,775 5,618
Net loans receivable 472,937 471,208 474,160 473,646 473,464
Regulatory stock, at cost 2,533 2,630 3,014 3,325 3,495
Bank premises and equipment, net 7,191 7,326 7,453 7,371 7,468
Foreclosed real estate owned 1,099 852 659 1,268 1,143
Goodwill and other intangibles 10,325 10,362 10,399 10,435 10,475
Other assets 21,952 22,063 19,944 19,616 20,665
TOTAL ASSETS $ 680,753 $ 672,299 $ 698,697 $ 684,867 $ 685,529
LIABILITIES
Deposits:
Non-interest bearing demand $ 84,357 $ 82,075 $ 89,218 $ 82,525 $ 78,339
Interest-bearing deposits 451,275 442,350 452,372 451,632 467,853
Total deposits 535,632 524,425 541,590 534,157 546,192
Other borrowings 47,202 51,184 59,919 54,771 43,479
Other liabilities 4,999 4,269 5,237 5,698 6,997
TOTAL LIABILITIES 587,833 579,878 606,746 594,626 596,668
STOCKHOLDERS' EQUITY 92,920 92,421 91,951 90,241 88,861
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 680,753 $ 672,299 $ 698,697 $ 684,867 $ 685,529
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
Three months ended March 31
2013
Dec 31
2012
Sept 30
2012
June 30
2012
March 31
2012
INTEREST INCOME
Loans receivable, including fees $ 6,186 $ 6,261 $ 6,429 $ 6,431 $ 6,373
Securities 868 884 971 1,007 1,026
Other 3 12 9 7 4
Total Interest income 7,057 7,157 7,409 7,445 7,403
INTEREST EXPENSE
Deposits 754 860 897 942 961
Borrowings 202 218 260 256 255
Total Interest expense 956 1,078 1,157 1,198 1,216
NET INTEREST INCOME 6,101 6,079 6,252 6,247 6,187
PROVISION FOR LOAN LOSSES 800 800 900 400 350
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,301 5,279 5,352 5,847 5,837
OTHER INCOME
Service charges and fees 600 563 561 559 554
Income from fiduciary activities 85 81 96 80 98
Net realized gains (losses) on sales of securities 138 100 631 285 402
Gains on sale of loans and servicing rights 3 67 83 66 (6)
Earnings and proceeds on life insurance 925 144 132 131 132
Other 126 161 88 85 111
Total other income 1,877 1,116 1,591 1,206 1,291
OTHER EXPENSES
Salaries and employee benefits 2,211 2,103 2,102 2,047 2,151
Occupancy, furniture and equipment , net 529 506 512 490 487
Foreclosed real estate owned 191 33 (23) 85 122
FDIC insurance assessment 111 108 94 97 99
Other 1,259 1,303 1,272 1,238 1,288
Total other expenses 4,301 4,053 3,957 3,957 4,147
INCOME BEFORE TAX 2,877 2,342 2,986 3,096 2,981
INCOME TAX EXPENSE 569 583 786 838 795
NET INCOME $ 2,308 $ 1,759 $ 2,200 $ 2,258 $ 2,186
Basic earnings per share $ 0.64 $ 0.48 $ 0.61 $ 0.63 $ 0.61
Diluted earnings per share $ 0.63 $ 0.48 $ 0.61 $ 0.63 $ 0.61

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

Source:Norwood Financial Corp