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% | ||