HONESDALE, Pa., Oct. 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 September 30, 2014 of $2,118,000. This represents a slight decrease from the $2,136,000 earned in the same three-month period of 2013 due to a reduced level of interest income on loans combined with increased expenses related to foreclosed real estate owned. Earnings per share (fully diluted) were $.58 in the 2014 period, decreasing from the $.59 earned in the similar period of last year. Annualized return on average assets for the three months ended September 30, 2014 was 1.18% with an annualized return on average equity of 8.62%. Net income for the nine months ended September 30, 2014 totaled $6,116,000, which is $168,000 lower than the same period of 2013. Earnings per share (fully diluted) for the nine months ended September 30, 2014 totaled $1.68 per share compared to $1.73 per share in the 2013 period. The annualized return on average assets and average equity for the nine month period was 1.15% and 8.53%, respectively.
Total assets as of September 30, 2014 were $718.2 million with loans receivable of $500.8 million, deposits of $548.3 million and stockholders' equity of $97.4 million. Total assets have increased $14.4 million during the past twelve months due primarily to growth in loans which increased $13.9 million, including an $11.9 million increase in commercial lending. Total deposits decreased $360,000 over the past twelve months with a $711,000 increase in non-interest bearing demand deposits only partially offsetting a $1.1 million decrease in interest-bearing deposits. Stockholders' equity increased $6.1 million over the past year, due principally to the retention of earnings and a reduction in accumulated other comprehensive loss.
Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $10.9 million and 1.52% of total assets as of September 30, 2014 compared to $11.8 million and 1.65% of assets as of June 30, 2014 and $11.3 million or 1.60% of total assets as of September 30, 2013. Net charge-offs were $380,000 for the quarter and totaled $1,317,000 for the nine months ended September 30, 2014 compared to $590,000 and $1,943,000, respectively, for the similar periods in 2013. Based on management's analysis, the Company added $420,000 and $1,260,000 to the allowance for loan losses for the three and nine month periods ended September 30, 2014, respectively, compared to $400,000 and $2,000,000, respectively, for the similar periods in 2013. The allowance for loan losses totaled $5,651,000 as of September 30, 2014 and represented 1.13% of total loans, compared to $5,559,000 as of September 30, 2013 and 1.14% of total loans.
For the three months ended September 30, 2014, net interest income, on a fully taxable equivalent basis (fte), totaled $6,467,000, which represents a decrease of $111,000 compared to the similar period in 2013. Net interest margin (fte) for the 2014 period was 3.92% compared to 4.05% for the similar period in 2013 due primarily to a 33 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, 2014 totaled $19,418,000, an increase of $22,000 compared to the similar period in 2013. Net interest margin (fte) year-to-date for the 2014 period was 3.91% compared to 4.04% in 2013.
Other income for the three months ended September 30, 2014 totaled $1,262,000 compared to $1,216,000 for the similar period in 2013. The increase was principally due to increased gains on the sales of investment securities during the period. For the nine months ended September 30, 2014, other income totaled $3,783,000 compared to $4,305,000 in the 2013 period. Gains on the sales of investment securities totaled $904,000 on sales of $38.2 million for the 2014 year-to-date period compared to $590,000 on sales of $30.0 million in the corresponding 2013 period. The increase in securities gains during the nine-month period was offset by a $765,000 decrease in earnings and proceeds from bank-owned life insurance policies. During the 2013 period, the Company recorded a non-recurring gain of $770,000 from proceeds on a bank-owned life insurance policy, compared to $5,000 in the 2014 period.
Other expenses totaled $4,124,000 for the three months ended September 30, 2014, compared to $4,173,000 in the similar period of 2013. Foreclosed real estate costs increased $54,000 due to real estate taxes, maintenance costs and write-downs on foreclosed properties. All other operating expenses decreased $103,000, net. For the nine months ended September 30, 2014, other expenses totaled $12,729,000 compared to $12,607,000 for the similar period in 2013, an increase of $122,000, which includes a $239,000 increase in foreclosed real estate costs. All other operating expenses decreased $117,000, net.
Mr. Critelli commented, "We are continuing to feel the impact of a slow economy, as evidenced by reduced loan demand and increased costs of maintaining and disposing of foreclosed properties. Working with borrowers to resolve problem credits will remain a top priority throughout the year. The ongoing low interest rate environment and competition for quality credits also places pressure on our net interest margin, however, our year-to-date margin and our capital levels remain well above peer. 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."
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, government fiscal policies 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 September 30 |
Nine months ended September 30 |
|||
| (dollars in thousands) | ||||
| 2014 | 2013 | 2014 | 2013 | |
| Net interest income | $6,154 | $6,270 | $18,454 | $18,516 |
| Tax equivalent basis adjustment using 34% marginal tax rate | 313 | 308 | 964 | 880 |
| Net interest income on a fully taxable equivalent basis | $6,467 | $6,578 | $19,418 | $19,396 |
| NORWOOD FINANCIAL CORP. | ||
| Consolidated Balance Sheets | ||
| (dollars in thousands, except share data) | ||
| (unaudited) | ||
| September 30 | ||
| 2014 | 2013 | |
| ASSETS | ||
| Cash and due from banks | $ 13,105 | $ 15,193 |
| Interest-bearing deposits with banks | 158 | 12,221 |
| Cash and cash equivalents | 13,263 | 27,414 |
| Securities available for sale | 158,701 | 150,904 |
| Securities held to maturity, fair value 2013: $176 | -- | 174 |
| Loans receivable (net of unearned Income) | 500,844 | 486,968 |
| Less: Allowance for loan losses | 5,651 | 5,559 |
| Net loans receivable | 495,193 | 481,409 |
| Regulatory stock, at cost | 3,210 | 2,141 |
| Bank premises and equipment, net | 6,825 | 7,250 |
| Bank owned life insurance | 18,143 | 14,653 |
| Foreclosed real estate owned | 4,962 | 993 |
| Accrued interest receivable | 2,367 | 2,373 |
| Goodwill | 9,715 | 9,715 |
| Other intangible assets | 418 | 543 |
| Deferred tax asset | 3,691 | 4,584 |
| Other assets | 1,725 | 1,618 |
| TOTAL ASSETS | $ 718,213 | $ 703,771 |
| LIABILITIES | ||
| Deposits: | ||
| Non-interest bearing demand | $ 102,343 | $ 101,632 |
| Interest-bearing | 445,995 | 447,066 |
| Total deposits | 548,338 | 548,698 |
| Short-term borrowings | 44,704 | 38,466 |
| Other borrowings | 22,592 | 19,956 |
| Accrued interest payable | 975 | 1,075 |
| Other liabilities | 4,197 | 4,230 |
| TOTAL LIABILITIES | 620,806 | 612,425 |
| STOCKHOLDERS' EQUITY | ||
| Common Stock, $.10 par value, authorized 10,000,000 shares issued: 3,708,718 shares | 371 | 371 |
| Surplus | 35,143 | 34,991 |
| Retained earnings | 63,637 | 59,710 |
| Treasury stock, at cost: 2014: 63,019 shares, 2013: 81,249 shares | (1,673) | (2,154) |
| Accumulated other comprehensive loss | (71) | (1,572) |
| TOTAL STOCKHOLDERS' EQUITY | 97,407 | 91,346 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 718,213 | $ 703,771 |
| 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 | |||
| 2014 | 2013 | 2014 | 2013 | |
| INTEREST INCOME | ||||
| Loans receivable, including fees | $ 5,972 | $ 6,202 | $ 17,885 | $ 18,557 |
| Securities | 968 | 939 | 2,981 | 2,685 |
| Other | 1 | 5 | 3 | 17 |
| Total Interest income | 6,941 | 7,146 | 20,869 | 21,259 |
| INTEREST EXPENSE | ||||
| Deposits | 600 | 701 | 1,852 | 2,174 |
| Short-term borrowings | 19 | 17 | 62 | 44 |
| Other borrowings | 168 | 158 | 501 | 525 |
| Total Interest expense | 787 | 876 | 2,415 | 2,743 |
| NET INTEREST INCOME | 6,154 | 6,270 | 18,454 | 18,516 |
| PROVISION FOR LOAN LOSSES | 420 | 400 | 1,260 | 2,000 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 5,734 | 5,870 | 17,194 | 16,516 |
| OTHER INCOME | ||||
| Service charges and fees | 587 | 614 | 1,746 | 1,834 |
| Income from fiduciary activities | 125 | 111 | 328 | 285 |
| Net realized gains on sales of securities | 301 | 198 | 904 | 590 |
| Gains on sale of loans | (15) | (12) | 50 | (9) |
| Earnings and proceeds on life insurance policies | 170 | 150 | 514 | 1,224 |
| Other | 94 | 155 | 241 | 381 |
| Total other income | 1,262 | 1,216 | 3,783 | 4,305 |
| OTHER EXPENSES | ||||
| Salaries and employee benefits | 2,028 | 2,103 | 6,364 | 6,438 |
| Occupancy, furniture and equipment | 505 | 507 | 1,601 | 1,586 |
| Data processing related | 240 | 221 | 680 | 673 |
| Taxes, other than income | 161 | 179 | 488 | 531 |
| Professional Fees | 136 | 139 | 475 | 498 |
| FDIC Insurance assessment | 104 | 114 | 320 | 335 |
| Foreclosed real estate owned | 271 | 217 | 733 | 494 |
| Other | 679 | 693 | 2,068 | 2,052 |
| Total other expenses | 4,124 | 4,173 | 12,729 | 12,607 |
| INCOME BEFORE TAX | 2,872 | 2,913 | 8,248 | 8,214 |
| INCOME TAX EXPENSE | 754 | 777 | 2,132 | 1,930 |
| NET INCOME | $ 2,118 | $ 2,136 | $ 6,116 | $ 6,284 |
| Basic earnings per share | $ 0.58 | $ 0.59 | $ 1.68 | $ 1.73 |
| Diluted earnings per share | $ 0.58 | $ 0.59 | $ 1.68 | $ 1.73 |
| NORWOOD FINANCIAL CORP. | ||
| Financial Highlights (Unaudited) | ||
| (dollars in thousands, except per share data) | ||
| For the Three Months Ended September 30 | 2014 | 2013 |
| Net interest income | $ 6,154 | $ 6,270 |
| Net income | 2,118 | 2,136 |
| Net interest spread (fully taxable equivalent) | 3.78% | 3.89% |
| Net interest margin (fully taxable equivalent) | 3.92% | 4.05% |
| Return on average assets | 1.18% | 1.22% |
| Return on average equity | 8.62% | 9.33% |
| Basic earnings per share | $ 0.58 | $ 0.59 |
| Diluted earnings per share | $ 0.58 | $ 0.59 |
| For the Nine Months Ended September 30 | ||
| Net interest income | $ 18,454 | $ 18,516 |
| Net income | 6,116 | 6,284 |
| Net interest spread (fully taxable equivalent) | 3.77% | 3.88% |
| Net interest margin (fully taxable equivalent) | 3.91% | 4.04% |
| Return on average assets | 1.15% | 1.22% |
| Return on average equity | 8.53% | 9.07% |
| Basic earnings per share | $ 1.68 | $ 1.73 |
| Diluted earnings per share | $ 1.68 | $ 1.73 |
| As of September 30 | ||
| Total assets | $ 718,213 | $ 703,771 |
| Total loans receivable | 500,844 | 486,968 |
| Allowance for loan losses | 5,651 | 5,559 |
| Total deposits | 548,338 | 548,698 |
| Stockholders' equity | 97,407 | 91,346 |
| Trust assets under management | 132,652 | 124,147 |
| Book value per share | $ 26.30 | $ 25.54 |
| Equity to total assets | 13.56% | 12.98% |
| Allowance to total loans receivable | 1.13% | 1.14% |
| Nonperforming loans to total loans | 1.18% | 2.11% |
| Nonperforming assets to total assets | 1.52% | 1.60% |
| NORWOOD FINANCIAL CORP. | |||||
| Consolidated Balance Sheets (unaudited) | |||||
| (dollars in thousands) | |||||
| September 30 | June 30 | March 31 | December 31 | September 30 | |
| 2014 | 2014 | 2014 | 2013 | 2013 | |
| ASSETS | |||||
| Cash and due from banks | $ 13,105 | $ 12,196 | $ 8,607 | $ 7,528 | $ 15,193 |
| Interest-bearing deposits with banks | 158 | 3,182 | 142 | 335 | 12,221 |
| Cash and cash equivalents | 13,263 | 15,378 | 8,749 | 7,863 | 27,414 |
| Securities available for sale | 158,701 | 154,925 | 156,165 | 158,132 | 150,904 |
| Securities held to maturity | -- | -- | 175 | 174 | 174 |
| Loans receivable (net of unearned income) | 500,844 | 502,316 | 496,016 | 503,097 | 486,968 |
| Less: Allowance for loan losses | 5,651 | 5,611 | 5,727 | 5,708 | 5,558 |
| Net loans receivable | 495,193 | 496,705 | 490,289 | 497,389 | 481,410 |
| Regulatory stock, at cost | 3,210 | 2,437 | 2,741 | 2,877 | 2,141 |
| Bank owned life insurance | 18,143 | 18,002 | 17,930 | 17,790 | 14,653 |
| Bank premises and equipment, net | 6,825 | 6,910 | 7,031 | 7,125 | 7,250 |
| Foreclosed real estate owned | 4,962 | 4,293 | 1,364 | 1,009 | 993 |
| Goodwill and other intangibles | 10,133 | 10,161 | 10,192 | 10,225 | 10,258 |
| Other assets | 7,783 | 8,051 | 8,598 | 8,650 | 8,574 |
| TOTAL ASSETS | $ 718,213 | $ 716,862 | $ 703,234 | $ 711,234 | $ 703,771 |
| LIABILITIES | |||||
| Deposits: | |||||
| Non-interest bearing demand | $ 102,343 | $ 103,954 | $ 93,400 | $ 92,684 | $ 101,632 |
| Interest-bearing deposits | 445,995 | 450,760 | 446,676 | 448,498 | 447,066 |
| Total deposits | 548,338 | 554,714 | 540,076 | 541,182 | 548,698 |
| Other borrowings | 67,296 | 60,992 | 63,746 | 73,675 | 58,422 |
| Other liabilities | 5,172 | 4,954 | 5,212 | 4,513 | 5,305 |
| TOTAL LIABILITIES | 620,806 | 620,660 | 609,034 | 619,370 | 612,425 |
| STOCKHOLDERS' EQUITY | 97,407 | 96,202 | 94,200 | 91,864 | 91,346 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 718,213 | $ 716,862 | $ 703,234 | $ 711,234 | $ 703,771 |
| 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 | 2014 | 2014 | 2014 | 2013 | 2013 |
| INTEREST INCOME | |||||
| Loans receivable, including fees | $ 5,972 | $ 5,933 | $ 5,980 | $ 6,019 | $ 6,202 |
| Securities | 968 | 1,025 | 987 | 972 | 939 |
| Other | 1 | 2 | 1 | 9 | 5 |
| Total interest income | 6,941 | 6,960 | 6,968 | 7,000 | 7,146 |
| INTEREST EXPENSE | |||||
| Deposits | 600 | 618 | 635 | 674 | 701 |
| Borrowings | 187 | 187 | 188 | 181 | 175 |
| Total interest expense | 787 | 805 | 823 | 855 | 876 |
| NET INTEREST INCOME | 6,154 | 6,155 | 6,145 | 6,145 | 6,270 |
| PROVISION FOR LOAN LOSSES | 420 | 420 | 420 | 400 | 400 |
| NET INTEREST INCOME AFTER PROVISION | |||||
| FOR LOAN LOSSES | 5,734 | 5,735 | 5,725 | 5,745 | 5,870 |
| OTHER INCOME | |||||
| Service charges and fees | 587 | 583 | 576 | 578 | 614 |
| Income from fiduciary activities | 125 | 99 | 104 | 94 | 111 |
| Net realized gains on sales of securities | 301 | 509 | 95 | 291 | 198 |
| Gains (losses) on sale of loans and servicing rights | (15) | 26 | 39 | 121 | (12) |
| Earnings and proceeds on life insurance policies | 170 | 175 | 168 | 162 | 150 |
| Other | 94 | 76 | 71 | 64 | 155 |
| Total other income | 1,262 | 1,468 | 1,053 | 1,310 | 1,216 |
| OTHER EXPENSES | |||||
| Salaries and employee benefits | 2,028 | 2,172 | 2,165 | 2,009 | 2,103 |
| Occupancy, furniture and equipment, net | 505 | 518 | 578 | 550 | 507 |
| Foreclosed real estate owned | 271 | 396 | 65 | 73 | 217 |
| FDIC insurance assessment | 104 | 102 | 114 | 109 | 114 |
| Other | 1,216 | 1,285 | 1,210 | 1,357 | 1,232 |
| Total other expenses | 4,124 | 4,473 | 4,132 | 4,098 | 4,173 |
| INCOME BEFORE TAX | 2,872 | 2,730 | 2,646 | 2,957 | 2,913 |
| INCOME TAX EXPENSE | 754 | 696 | 682 | 776 | 777 |
| NET INCOME | $ 2,118 | $ 2,034 | $ 1,964 | $ 2,181 | $ 2,136 |
| Basic earnings per share | $ 0.58 | $ 0.56 | $ 0.54 | $ 0.60 | $ 0.59 |
| Diluted earnings per share | $ 0.58 | $ 0.56 | $ 0.54 | $ 0.60 | $ 0.59 |
| Book Value per share | $ 26.30 | $ 26.14 | $ 25.88 | $ 25.43 | $ 25.54 |
| Return on average equity (annualized) | 8.62% | 8.49% | 8.46% | 9.33% | 9.33% |
| Return on average assets (annualized) | 1.18% | 1.15% | 1.13% | 1.23% | 1.22% |
| Net interest spread (fte) | 3.78% | 3.77% | 3.77% | 3.76% | 3.89% |
| Net interest margin (fte) | 3.92% | 3.91% | 3.91% | 3.91% | 4.05% |
| Allowance for loan losses to total loans | 1.13% | 1.12% | 1.15% | 1.13% | 1.14% |
| Net charge-offs to average loans (annualized) | 0.30% | 0.43% | 0.32% | 0.21% | 0.49% |
| Nonperforming loans to total loans | 1.18% | 1.49% | 1.92% | 1.90% | 2.11% |
| Nonperforming assets to total assets | 1.52% | 1.65% | 1.55% | 1.48% | 1.60% |