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