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 ended Nine months ended
(dollars in thousands) September 30 September 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: Contact: William S. Lance
             Executive Vice President &
             Chief Financial Officer
             NORWOOD FINANCIAL CORP
             570-253-8505
             www.waynebank.com

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