HONESDALE, Pa., July 22, 2014 (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 June 30, 2014 of $2,034,000. This represents an increase of $195,000, or 10.6%, from the $1,839,000 earned in the similar period of 2013 due primarily to a decrease in the provision for loan losses and a higher level of gains on sales of securities. Earnings per share (fully diluted) were $.56 in the 2014 period, increasing from the $.51 earned in the similar period of 2013. Annualized return on average assets for the three months ended June 30, 2014 was 1.15% with an annualized return on average equity of 8.49%. Net income for the six months ended June 30, 2014 totaled $3,998,000, which is $149,000 lower than the same six-month period of last year due primarily to proceeds on life insurance received in the first quarter of 2013. Earnings per share (fully diluted) for the six months ended June 30, 2014 and 2013 totaled $1.10 and $1.14 per share, respectively.
Total assets as of June 30, 2014 were $716.9 million with loans receivable of $502.3 million, deposits of $554.7 million and stockholders' equity of $96.2 million.
Loans receivable increased $21.6 million since June 30, 2013. Commercial loans increased $18.2 million which includes a $10.7 million increase in municipal financing and a $2.5 million increase in real estate related loans. Retail loans grew $3.4 million during the period due to growth in home equity lending and indirect auto loans. The Company also sold $4.6 million of fixed-rate residential mortgages during the period, principally with 30-year terms, for purposes of interest rate risk management. Total deposits increased $4.6 million over the past twelve months which includes a $10.1 million increase in non-interest bearing demand deposits. Stockholders' equity increased $5.7 million over the past year, due principally to the retention of earnings.
Non-performing assets, which include non-performing loans and foreclosed assets, totaled $11.8 million and represented 1.65% of total assets as of June 30, 2014 compared to $12.9 million, or 1.85% of total assets, as of June 30, 2013. Net charge-offs were $537,000 for the quarter and totaled $937,000 for the six months ended June 30, 2014 compared to $777,000 and $1,353,000, respectively, for the similar periods in 2013. Based on the levels of non-performing assets and net charge-offs, the Company determined that it was appropriate to provide $420,000 and $840,000 for potential future loan losses for the three and six month periods ended June 30, 2014, respectively, compared to $800,000 and $1.6 million, respectively, for the similar periods in 2013. The allowance for loan losses totaled $5,611,000 as of June 30, 2014 and represented 1.12% of total loans outstanding, compared to $5,749,000 and 1.20% on June 30, 2013.
For the three months ended June 30, 2014, net interest income, on a fully taxable equivalent basis (fte), totaled $6,489,000, an increase of $59,000 compared to the similar period in 2013. Net interest margin (fte) for the 2014 period was 3.91% decreasing from 3.99% for the similar period in 2013 due to a decrease of 16 basis points in the yield on interest-earning assets which more than offset the 9 basis point decrease in the cost of funds. The reduced margin was due primarily to a 37 basis point decrease in the yield earned on loans as new growth and modifications of existing credits continues to negatively impact the net interest margin. Net interest income (fte) for the six months ended June 30, 2014 totaled $12,951,000, which was $134,000 higher than the similar period in 2013. The net interest margin (fte) was 3.91% in the 2014 period and 4.03% during the first six months of 2013. Decreasing yields on loans contributed to the reduced net interest margin.
Other income for the three months ended June 30, 2014 totaled $1,468,000 compared to $1,212,000 for the similar period in 2013. Net gains from securities sales increased $255,000 compared to the prior-year period. For the six months ended June 30, 2014, other income totaled $2,521,000 compared to $3,089,000 in the 2013 period. Other income in the 2013 period includes a non-recurring gain of $770,000 from proceeds on a bank-owned life insurance policy. Gains on the sales of investment securities totaled $603,000 on sales of $31.9 million for the 2014 period compared to $392,000 on sales of $15.3 million in the 2013 period.
Other expenses totaled $4,473,000 for the three months ended June 30, 2014, an increase of $340,000, from the $4,133,000 reported in the similar period of 2013. The increase was principally due to costs and write-downs on properties carried in foreclosed real estate owned. Excluding these costs, all other operating expenses increased $30,000, net. For the six months ended June 30, 2014, other expenses totaled $8,605,000 compared to $8,434,000 for the similar period in 2013, an increase of $171,000, or 2.0%. Foreclosed real estate expenses increased $184,000 over the first half of last year, accounting for the increase.
Mr. Critelli commented, "Our earnings for the second quarter reflect an increase of over 10% when compared to 2013. However, we are continuing to feel the negative impact of a slow economy, primarily in the cost of maintaining and disposing of foreclosed properties. Working with borrowers to resolve problem loans will remain a top priority throughout 2014. The ongoing low interest rates, and a competitive lending environment also continues to place pressure on our net interest margin. However, our year-to-date margin and capital levels remain well above peer. We look forward to serving our growing base of stockholders and customers as the Northeastern Pennsylvania economy slowly recovers from the extended downturn."
Norwood Financial Corp., is the parent company of Wayne Bank, which operates 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 net interest income 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 June 30 |
Six months ended June 30 |
|||
| (dollars in thousands) | 2014 | 2013 | 2014 | 2013 |
| Net Interest Income | $ 6,155 | $ 6,144 | $ 12,300 | $ 12,245 |
| Taxable equivalent basis adjustment using 34% marginal tax rate | 334 | 286 | 651 | 572 |
| Net interest income on a fully taxable equivalent basis | $ 6,489 | $ 6,430 | $ 12,951 | $ 12,817 |
| NORWOOD FINANCIAL CORP. | ||
| Consolidated Balance Sheets | ||
| (dollars in thousands, except share data) | ||
| (unaudited) | ||
| June 30 | ||
| 2014 | 2013 | |
| ASSETS | ||
| Cash and due from banks | $ 12,196 | $ 9,872 |
| Interest-bearing deposits with banks | 3,182 | 17,425 |
| Cash and cash equivalents | 15,378 | 27,297 |
| Securities available for sale | 154,925 | 150,750 |
| Securities held to maturity, fair value 2014: $0 and 2013: $177 | -- | 173 |
| Loans receivable (net of unearned Income) | 502,316 | 480,715 |
| Less: Allowance for loan losses | 5,611 | 5,749 |
| Net loans receivable | 496,705 | 474,966 |
| Regulatory stock, at cost | 2,437 | 2,527 |
| Bank premises and equipment, net | 6,910 | 7,206 |
| Bank owned life insurance | 18,002 | 14,527 |
| Foreclosed real estate owned | 4,293 | 1,297 |
| Accrued interest receivable | 2,405 | 2,488 |
| Goodwill | 9,715 | 9,715 |
| Other intangible assets | 446 | 575 |
| Deferred tax asset | 3,764 | 4,454 |
| Other assets | 1,882 | 1,631 |
| TOTAL ASSETS | $ 716,862 | $ 697,606 |
| LIABILITIES | ||
| Deposits: | ||
| Non-interest bearing demand | $ 103,954 | $ 93,881 |
| Interest-bearing | 450,760 | 456,269 |
| Total deposits | 554,714 | 550,150 |
| Short-term borrowings | 38,009 | 32,075 |
| Other borrowings | 22,983 | 20,150 |
| Accrued interest payable | 937 | 1,037 |
| Other liabilities | 4,017 | 3,734 |
| TOTAL LIABILITIES | 620,660 | 607,146 |
| STOCKHOLDERS' EQUITY | ||
| Common Stock, $.10 par value, authorized 10,000,000 shares issued: 2014: 3,708,718 shares, 2013: 3,708,718 shares | 371 | 371 |
| Surplus | 35,091 | 34,949 |
| Retained earnings | 62,613 | 58,626 |
| Treasury stock, at cost: 2014: 70,747 shares, 2013: 86,749 shares | (1,878) | (2,299) |
| Accumulated other comprehensive income (loss) | 5 | (1,187) |
| TOTAL STOCKHOLDERS' EQUITY | 96,202 | 90,460 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 716,862 | $ 697,606 |
| NORWOOD FINANCIAL CORP. | ||||
| Consolidated Statements of Income | ||||
| (dollars in thousands, except per share data) | ||||
| (unaudited) | ||||
| Three Months Ended June 30 | Six Months Ended June 30 | |||
| 2014 | 2013 | 2014 | 2013 | |
| INTEREST INCOME | ||||
| Loans receivable, including fees | $ 5,933 | $ 6,169 | $ 11,913 | $ 12,355 |
| Securities | 1,025 | 877 | 2,013 | 1,746 |
| Other | 2 | 10 | 2 | 12 |
| Total Interest income | 6,960 | 7,056 | 13,928 | 14,113 |
| INTEREST EXPENSE | ||||
| Deposits | 618 | 719 | 1,253 | 1,473 |
| Short-term borrowings | 20 | 15 | 42 | 27 |
| Other borrowings | 167 | 178 | 333 | 368 |
| Total Interest expense | 805 | 912 | 1,628 | 1,868 |
| NET INTEREST INCOME | 6,155 | 6,144 | 12,300 | 12,245 |
| PROVISION FOR LOAN LOSSES | 420 | 800 | 840 | 1,600 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 5,735 | 5,344 | 11,460 | 10,645 |
| OTHER INCOME | ||||
| Service charges and fees | 583 | 620 | 1,159 | 1,221 |
| Income from fiduciary activities | 99 | 89 | 203 | 174 |
| Net realized gains on sales of securities | 509 | 254 | 603 | 392 |
| Gains on sale of loans | 26 | 1 | 66 | 3 |
| Earnings and proceeds on life insurance policies | 175 | 148 | 343 | 1,073 |
| Other | 76 | 100 | 147 | 226 |
| Total other income | 1,468 | 1,212 | 2,521 | 3,089 |
| OTHER EXPENSES | ||||
| Salaries and employee benefits | 2,172 | 2,124 | 4,336 | 4,335 |
| Occupancy, furniture and equipment | 518 | 550 | 1,096 | 1,079 |
| Data processing related | 229 | 230 | 441 | 452 |
| Taxes, other than income | 161 | 179 | 326 | 352 |
| Professional Fees | 174 | 172 | 340 | 359 |
| FDIC Insurance assessment | 102 | 110 | 216 | 221 |
| Foreclosed real estate owned | 396 | 86 | 461 | 277 |
| Other | 721 | 682 | 1,389 | 1,359 |
| Total other expenses | 4,473 | 4,133 | 8,605 | 8,434 |
| INCOME BEFORE TAX | 2,730 | 2,423 | 5,376 | 5,300 |
| INCOME TAX EXPENSE | 696 | 584 | 1,378 | 1,153 |
| NET INCOME | $ 2,034 | $ 1,839 | $ 3,998 | $ 4,147 |
| Basic earnings per share | $ 0.56 | $ 0.51 | $ 1.10 | $ 1.15 |
| Diluted earnings per share | $ 0.56 | $ 0.51 | $ 1.10 | $ 1.14 |
| NORWOOD FINANCIAL CORP. | ||
| Financial Highlights (Unaudited) | ||
| (dollars in thousands, except per share data) | ||
| For the Three Months Ended June 30 | 2014 | 2013 |
| Net interest income | $ 6,155 | $ 6,144 |
| Net income | 2,034 | 1,839 |
| Net interest spread (fully taxable equivalent) | 3.77% | 3.83% |
| Net interest margin (fully taxable equivalent) | 3.91% | 3.99% |
| Return on average assets | 1.15% | 1.07% |
| Return on average equity | 8.49% | 7.87% |
| Basic earnings per share | $ 0.56 | $ 0.51 |
| Diluted earnings per share | $ 0.56 | $ 0.51 |
| For the Six Months Ended June 30 | ||
| Net interest income | $ 12,300 | $ 12,245 |
| Net income | 3,998 | 4,147 |
| Net interest spread (fully taxable equivalent) | 3.77% | 3.87% |
| Net interest margin (fully taxable equivalent) | 3.91% | 4.03% |
| Return on average assets | 1.14% | 1.22% |
| Return on average equity | 8.48% | 8.94% |
| Basic earnings per share | $ 1.10 | $ 1.15 |
| Diluted earnings per share | $ 1.10 | $ 1.14 |
| As of June 30 | ||
| Total assets | $ 716,862 | $ 697,606 |
| Total loans receivable | 502,316 | 480,715 |
| Allowance for loan losses | 5,611 | 5,749 |
| Total deposits | 554,714 | 550,150 |
| Stockholders' equity | 96,202 | 90,460 |
| Trust assets under management | 132,760 | 120,802 |
| Book value per share | $ 26.14 | $ 24.98 |
| Equity to total assets | 13.42% | 12.97% |
| Allowance to total loans receivable | 1.12% | 1.20% |
| Nonperforming loans to total loans | 1.49% | 2.41% |
| Nonperforming assets to total assets | 1.65% | 1.85% |
| NORWOOD FINANCIAL CORP. | |||||
| Consolidated Balance Sheets (unaudited) | |||||
| (dollars in thousands) | |||||
|
June 30 2014 |
March 31 2014 |
December 31 2013 |
September 30 2013 |
June 30 2013 |
|
| ASSETS | |||||
| Cash and due from banks | $ 12,196 | $ 8,607 | $ 7,528 | $ 15,193 | $ 9,872 |
| Interest-bearing deposits with banks | 3,182 | 142 | 335 | 12,221 | 17,425 |
| Cash and cash equivalents | 15,378 | 8,749 | 7,863 | 27,414 | 27,297 |
| Securities available for sale | 154,925 | 156,165 | 158,132 | 150,904 | 150,750 |
| Securities held to maturity | -- | 175 | 174 | 174 | 173 |
| Loans receivable (net of unearned income) | 502,316 | 496,016 | 503,097 | 486,968 | 480,715 |
| Less: Allowance for loan losses | 5,611 | 5,727 | 5,708 | 5,558 | 5,749 |
| Net loans receivable | 496,705 | 490,289 | 497,389 | 481,410 | 474,966 |
| Regulatory stock, at cost | 2,437 | 2,741 | 2,877 | 2,141 | 2,527 |
| Bank owned life insurance | 18,002 | 17,930 | 17,790 | 14,653 | 14,527 |
| Bank premises and equipment, net | 6,910 | 7,031 | 7,125 | 7,250 | 7,206 |
| Foreclosed real estate owned | 4,293 | 1,364 | 1,009 | 993 | 1,297 |
| Goodwill and other intangibles | 10,161 | 10,192 | 10,225 | 10,258 | 10,290 |
| Other assets | 8,051 | 8,598 | 8,650 | 8,574 | 8,573 |
| TOTAL ASSETS | $ 716,862 | $ 703,234 | $ 711,234 | $ 703,771 | $ 697,606 |
| LIABILITIES | |||||
| Deposits: | |||||
| Non-interest bearing demand | $ 103,954 | $ 93,400 | $ 92,684 | $ 101,632 | $ 93,881 |
| Interest-bearing deposits | 450,760 | 446,676 | 448,498 | 447,066 | 456,269 |
| Total deposits | 554,714 | 540,076 | 541,182 | 548,698 | 550,150 |
| Other borrowings | 60,992 | 63,746 | 73,675 | 58,422 | 52,225 |
| Other liabilities | 4,954 | 5,212 | 4,513 | 5,305 | 4,771 |
| TOTAL LIABILITIES | 620,660 | 609,034 | 619,370 | 612,425 | 607,146 |
| STOCKHOLDERS' EQUITY | 96,202 | 94,200 | 91,864 | 91,346 | 90,460 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 716,862 | $ 703,234 | $ 711,234 | $ 703,771 | $ 697,606 |
| NORWOOD FINANCIAL CORP. | |||||
| Consolidated Statements of Income (unaudited) | |||||
| (dollars in thousands, except per share data) | |||||
| Three months ended |
June 30 2014 |
March 31 2014 |
December 31 2013 |
September 30 2013 |
June 30 2013 |
| INTEREST INCOME | |||||
| Loans receivable, including fees | $ 5,933 | $ 5,980 | $ 6,019 | $ 6,202 | $ 6,169 |
| Securities | 1,025 | 987 | 972 | 939 | 877 |
| Other | 2 | 1 | 9 | 5 | 10 |
| Total interest income | 6,960 | 6,968 | 7,000 | 7,146 | 7,056 |
| INTEREST EXPENSE | |||||
| Deposits | 618 | 635 | 674 | 701 | 719 |
| Borrowings | 187 | 188 | 181 | 175 | 193 |
| Total interest expense | 805 | 823 | 855 | 876 | 912 |
| NET INTEREST INCOME | 6,155 | 6,145 | 6,145 | 6,270 | 6,144 |
| PROVISION FOR LOAN LOSSES | 420 | 420 | 400 | 400 | 800 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 5,735 | 5,725 | 5,745 | 5,870 | 5,344 |
| OTHER INCOME | |||||
| Service charges and fees | 583 | 576 | 578 | 614 | 620 |
| Income from fiduciary activities | 99 | 104 | 94 | 111 | 89 |
| Net realized gains on sales of securities | 509 | 95 | 291 | 198 | 254 |
| Gains (losses) on sale of loans and servicing rights | 26 | 39 | 121 | (12) | 1 |
| Earnings and proceeds on life insurance policies | 175 | 168 | 162 | 150 | 148 |
| Other | 76 | 71 | 64 | 155 | 100 |
| Total other income | 1,468 | 1,053 | 1,310 | 1,216 | 1,212 |
| OTHER EXPENSES | |||||
| Salaries and employee benefits | 2,172 | 2,165 | 2,009 | 2,103 | 2,124 |
| Occupancy, furniture and equipment, net | 518 | 578 | 550 | 507 | 550 |
| Foreclosed real estate owned | 396 | 65 | 73 | 217 | 86 |
| FDIC insurance assessment | 102 | 114 | 109 | 114 | 110 |
| Other | 1,285 | 1,210 | 1,357 | 1,232 | 1,263 |
| Total other expenses | 4,473 | 4,132 | 4,098 | 4,173 | 4,133 |
| INCOME BEFORE TAX | 2,730 | 2,646 | 2,957 | 2,913 | 2,423 |
| INCOME TAX EXPENSE | 696 | 682 | 776 | 777 | 584 |
| NET INCOME | $ 2,034 | $ 1,964 | $ 2,181 | $ 2,136 | $ 1,839 |
| Basic earnings per share | $ 0.56 | $ 0.54 | $ 0.60 | $ 0.59 | $ 0.51 |
| Diluted earnings per share | $ 0.56 | $ 0.54 | $ 0.60 | $ 0.59 | $ 0.51 |
| Book Value per share | $ 26.14 | $ 25.88 | $ 25.43 | $ 25.54 | $ 24.98 |
| Return on average equity (annualized) | 8.49% | 8.46% | 9.33% | 9.33% | 7.87% |
| Return on average assets (annualized) | 1.15% | 1.13% | 1.23% | 1.22% | 1.07% |
| Net interest spread (fte) | 3.77% | 3.77% | 3.76% | 3.89% | 3.83% |
| Net interest margin (fte) | 3.91% | 3.91% | 3.91% | 4.05% | 3.99% |
| Allowance for loan losses to total loans | 1.12% | 1.15% | 1.13% | 1.14% | 1.20% |
| Net charge-offs to average loans (annualized) | 0.43% | 0.32% | 0.21% | 0.49% | 0.65% |
| Nonperforming loans to total loans | 1.49% | 1.92% | 1.90% | 2.11% | 2.41% |
| Nonperforming assets to total assets | 1.65% | 1.55% | 1.48% | 1.60% | 1.85% |