Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

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| Source: Norwood Financial Corp

HONESDALE, Pa., Jan. 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 today for the three months ended December 31, 2013 of $2,181,000. This represents an increase of $422,000, or 24%, from the $1,759,000 earned in the comparable period of 2012 due primarily to lower loan loss provisions and increased gains on sales of securities. Earnings per share (fully diluted) were $.60 and $.48 for the three-month periods ended December 31, 2013 and 2012, respectively, after giving retroactive effect to the 10% stock dividend declared during the first quarter of 2013. Net interest income before the provision for loan losses improved $66,000 over the same period of last year, while other income increased $194,000 primarily due to increased gains on sales of securities. The provision for loan losses was $400,000 in the current three-month period compared to $800,000 in the same period of last year, while operating expenses increased $45,000. Annualized return on average assets for the current quarter was 1.23% with an annualized return on equity of 9.33%. For the year ended December 31, 2013, net income totaled a record level of $8,465,000, an increase of $62,000 over the $8,403,000 earned in the prior year as an increase in other income and a reduction in income tax expense offset increased operating expenses. Earnings per share on a fully diluted basis were $2.33 for 2013, compared to $2.33 in 2012 after adjusting for the stock dividend. The return on average assets for the year was 1.23% with a return on average equity of 9.13% compared to 1.23% and 9.22%, respectively, in 2012.

Total assets were $711.2 million as of December 31, 2013. Loans receivable totaled $503.1 million as of December 31, 2013, with total deposits of $541.2 million and stockholders' equity of $91.9 million. The Company's capital position remains "well capitalized" in accordance with risk-based capital guidelines established by federal bank regulators.

Loans receivable grew $26.4 million from the prior year-end due primarily to growth in commercial loans and residential mortgage loans, notwithstanding the sale of $4.0 million of fixed rate residential mortgages for purposes of interest rate risk management. Residential mortgage loans increased $8.8 million, which is net of loans sold as mentioned above. Total commercial loans grew $9.3 million in 2013, while other retail and construction loans increased $8.3 million. As of December 31, 2013, total non-performing loans were $9.5 million and represented 1.90% of total loans compared to $13.2 million, or 2.77% as of December 31, 2012. For the three months and year ended December 31, 2013, net charge-offs totaled $251,000 and $2,194,000, respectively, compared to $639,000 and $2,406,000, respectively, for the corresponding periods in 2012. Based on the level of charge-offs and non-performing loans, the Company determined that it would be appropriate to provide $400,000 and $2,400,000 for potential future losses for the three and twelve month periods, respectively, compared to $800,000 in the similar quarter of last year and $2,450,000 for the year of 2012. As of December 31, 2013, the allowance for loan losses totaled $5,708,000 and 1.13% of total loans compared to $5,502,000 and 1.15% of total loans at December 31, 2012. 

Net interest income (fully taxable equivalent) totaled $6,461,000 for the three months ended December 31, 2013, an increase of $84,000 compared to the same period in 2012. Net interest margin (fte) for the three months ended December 31, 2013 was 3.91% decreasing from 3.98% for the similar period in 2012. The decrease in net interest margin was principally due to growth and reinvestment at historically low interest rate levels which resulted in a 22 basis point decrease in the yield earned on assets compared to an 18 basis point reduction in the cost of interest bearing liabilities. For the year, net interest income (fte) totaled $25,857,000, a decrease of $149,000 compared to 2012. The net interest margin (fte) declined 10 basis points to 4.00% in 2013. 

Other income for the three months ended December 31, 2013 totaled $1,310,000 compared to $1,116,000 for the similar period in 2012. The increase was due primarily to a $191,000 increase in gains on sales of securities. Other income for the year ended December 31, 2013 totaled $5,615,000 compared to $5,206,000 in 2012, an increase of $409,000. Gains on the sale of loans and investment securities decreased $637,000 in the aggregate while earnings and proceeds received on bank owned life insurance policies increased $847,000 in 2013. All other service charges and fees improved $199,000, or 6.6% over the 2012 total.  The 2013 period includes $112,000 in gains on sales of loans and servicing rights on the sale of $4.0 million of residential mortgage loans compared to $211,000 in similar gains on sales of $7.0 million of mortgage loans and servicing rights in the 2012 period.

Other expenses totaled $4,098,000 for the three months ended December 31, 2013, compared to $4,053,000 in the similar period of 2012. Salaries and benefit costs decreased $94,000 and professional fees declined $81,000 compared to the same period of last year while all other operating expenses increased $220,000, net.  For the year ended December 31, 2013, other expenses totaled $16,705,000 compared to $16,081,000 for the similar period in 2012, an increase of $624,000. Employment and occupancy costs rose a combined $185,000 over the 2012 period, while professional fees declined $185,000. All other expenses increased $624,000, net compared to 2012 due primarily to a $350,000 increase in foreclosed real estate expenses.

Mr. Critelli commented, "We are pleased with the results we achieved in 2013, which represents a record level of earnings in a very challenging economic environment. We increased our cash dividend for the twenty-second consecutive year to $1.16 per share, which results in a dividend yield in excess of 4.00% annually based on our recent closing stock price, and rewarded our shareholders with a 10% stock dividend in the first quarter of 2013.  We recorded a Return on Assets of 1.23% and maintained a net interest margin of 4.00% for the year. We also managed to reduce our level of non-performing loans from 2.77% of total loans to 1.90% and maintain our capital levels in excess of the "Well Capitalized" levels established by our regulators. As we continue to work our way through the credit quality issues brought on by the prolonged economic downturn, we will remain diligent in controlling and minimizing credit related costs brought on us by our ailing economy.   We believe that we are well positioned to take advantage of the opportunities available to us, and we look forward to serving our growing customer base as the economy rebounds 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 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 interest income and 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 Year ended
(dollars in thousands)  December 31  December 31
  2013 2012 2013 2012
Net interest income $6,145 $6,079 $24,661 $24,764
Tax equivalent basis adjustment using 34% marginal tax rate 316 298 1,196 1,242
Net interest income on a fully taxable equivalent basis $6,461 $6,377 $25,857 $26,006
         
     
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets 
(dollars in thousands, except share data)
 (unaudited)
   December 31
  2013 2012
ASSETS    
 Cash and due from banks  $ 7,528  $ 10,867
 Interest-bearing deposits with banks 335 1,428
 Cash and cash equivalents 7,863 12,295
     
 Securities available for sale 158,132 145,390
 Securities held to maturity, fair value 2013: $177 and 2012: $177 174 173
 Loans receivable (net of unearned Income) 503,097 476,710
 Less: Allowance for loan losses 5,708 5,502
 Net loans receivable 497,389 471,208
 Regulatory stock, at cost 2,877 2,630
 Bank premises and equipment, net 7,125 7,326
 Bank owned life insurance 17,790 15,357
 Foreclosed real estate owned 1,009 852
 Accrued interest receivable 2,422 2,393
 Goodwill 9,715 9,715
 Other intangible assets 510 647
 Deferred tax asset 5,152 2,371
 Other assets 1,076 1,942
 TOTAL ASSETS  $ 711,234  $ 672,299
     
LIABILITIES    
 Deposits:    
 Non-interest bearing demand   $ 92,684  $ 82,075
 Interest-bearing  448,498 442,350
 Total deposits 541,182 524,425
 Short-term borrowings 49,914 28,697
 Other borrowings 23,761 22,487
 Accrued interest payable 1,022 1,242
 Other liabilities 3,491 3,027
 TOTAL LIABILITIES 619,370 579,878
     
STOCKHOLDERS' EQUITY    
 Common Stock, $.10 par value, authorized 10,000,000 shares issued: 2013: 3,708,718 shares, 2012: 3,371,849 shares 371 337
 Surplus 35,010 24,737
 Retained earnings 60,798 66,742
 Treasury stock, at cost: 2013: 64,628 shares, 2012: 75,426 shares (1,713) (2,192)
 Accumulated other comprehensive income (loss) (2,602) 2,797
 TOTAL STOCKHOLDERS' EQUITY 91,864 92,421
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 711,234  $ 672,299
     
         
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income 
(dollars in thousands, except per share data)
(unaudited)        
  Three Months Ended December 31 Twelve Months Ended December 31
  2013 2012 2013 2012
INTEREST INCOME        
 Loans receivable, including fees  $ 6,019  $ 6,261  $ 24,576  $ 25,494
 Securities 972 884 3,657 3,888
 Other 9 12 26 32
 Total Interest income 7,000 7,157 28,259 29,414
         
INTEREST EXPENSE        
 Deposits 674 860 2,848 3,660
 Short-term borrowings 22 15 66 53
 Other borrowings 159 203 684 937
 Total Interest expense 855 1,078 3,598 4,650
NET INTEREST INCOME 6,145 6,079 24,661 24,764
PROVISION FOR LOAN LOSSES 400 800 2,400 2,450
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,745 5,279 22,261 22,314
         
OTHER INCOME        
 Service charges and fees 578 563 2,412 2,237
 Income from fiduciary activities 94 81 379 355
 Net realized gains on sales of securities 291 100 881 1,419
 Gains on sale of loans  121 67 112 211
 Earnings and proceeds on life insurance policies 162 144 1,386 539
 Other  64 161 445 445
 Total other income 1,310 1,116 5,615 5,206
         
OTHER EXPENSES        
 Salaries and employee benefits 2,009 2,103 8,447 8,403
 Occupancy, furniture and equipment 550 506 2,136 1,995
 Data processing related 218 227 891 897
 Taxes, other than income 179 148 710 599
 Professional Fees 128 209 626 811
 FDIC Insurance assessment 109 108 444 398
 Foreclosed real estate owned 73 33 567 217
 Other  832 719 2,884 2,761
 Total other expenses 4,098 4,053 16,705 16,081
         
INCOME BEFORE TAX 2,957 2,342 11,171 11,439
INCOME TAX EXPENSE 776 583 2,706 3,036
NET INCOME  $ 2,181  $ 1,759  $ 8,465  $ 8,403
         
Basic earnings per share   $ 0.60  $ 0.48  $ 2.33  $ 2.33
         
Diluted earnings per share   $ 0.60  $ 0.48  $ 2.33  $ 2.33
         
     
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
     
For the Three Months Ended December 31 2013 2012
     
Net interest income  $ 6,145  $ 6,079
Net income 2,181 1,759
     
Net interest spread (fully taxable equivalent) 3.76% 3.80%
Net interest margin (fully taxable equivalent) 3.91% 3.98%
Return on average assets 1.23% 1.02%
Return on average equity 9.33% 7.54%
Basic earnings per share (*)  $ 0.60  $ 0.48
Diluted earnings per share (*)  $ 0.60  $ 0.48
     
     
For the Year Ended December 31    
     
Net interest income  $ 24,661  $ 24,764
Net income 8,465 8,403
     
Net interest spread (fully taxable equivalent) 3.85% 3.91%
Net interest margin (fully taxable equivalent) 4.00% 4.10%
Return on average assets 1.23% 1.23%
Return on average equity 9.13% 9.22%
Basic earnings per share (*)  $ 2.33  $ 2.33
Diluted earnings per share (*)  $ 2.33  $ 2.33
     
As of December 31    
     
Total assets  $ 711,234  $ 672,299
Total loans receivable 503,097 476,710
Allowance for loan losses 5,708 5,502
Total deposits 541,182 524,425
Stockholders' equity 91,864 92,421
Trust assets under management 126,673 112,081
     
Book value per share (*)  $ 25.43  $ 25.49
Equity to total assets 12.92% 13.75%
Allowance to total loans receivable 1.13% 1.15%
Nonperforming loans to total loans  1.90% 2.77%
Nonperforming assets to total assets 1.48% 2.09%
     
 (*) Per share information has been restated to reflect the 10% stock dividend declared during the 
period ended March 31, 2013.    
     
NORWOOD FINANCIAL CORP.        
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
   December 31  Sept 30  June 30  March 31  December 31
  2013 2013 2013 2013 2012
ASSETS          
 Cash and due from banks  $ 7,528  $ 15,193  $ 9,872  $ 6,763  $ 10,867
 Interest-bearing deposits with banks 335 12,221 17,425 9,182 1,428
 Cash and cash equivalents 7,863 27,414 27,297 15,945 12,295
           
 Securities available for sale 158,132 150,904 150,750 148,598 145,390
 Securities held to maturity 174 174 173 173 173
 Loans receivable (net of unearned income) 503,097 486,968 480,715 478,663 476,710
 Less: Allowance for loan losses 5,708 5,558 5,749 5,726 5,502
 Net loans receivable 497,389 481,410 474,966 472,937 471,208
 Regulatory stock, at cost 2,877 2,141 2,527 2,533 2,630
 Bank premises and equipment, net 7,125 7,250 7,206 7,191 7,326
 Foreclosed real estate owned 1,009 993 1,297 1,099 852
 Goodwill and other intangibles 10,225 10,258 10,290 10,325 10,362
 Other assets 26,440 23,227 23,100 21,952 22,063
 TOTAL ASSETS  $ 711,234  $ 703,771  $ 697,606  $ 680,753  $ 672,299
           
LIABILITIES          
 Deposits:          
 Non-interest bearing demand   $ 92,684  $ 101,632  $ 93,881  $ 84,357  $ 82,075
 Interest-bearing deposits 448,498 447,066 456,269 451,275 442,350
 Total deposits 541,182 548,698 550,150 535,632 524,425
 Other borrowings 73,675 58,422 52,225 47,202 51,184
 Other liabilities 4,513 5,305 4,771 4,999 4,269
 TOTAL LIABILITIES 619,370 612,425 607,146 587,833 579,878
           
STOCKHOLDERS' EQUITY 91,864 91,346 90,460 92,920 92,421
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 711,234  $ 703,771  $ 697,606  $ 680,753  $ 672,299
           
           
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
   December 31  Sept 30  June 30  March 31  December 31
Three months ended 2013 2013 2013 2013 2012
INTEREST INCOME          
 Loans receivable, including fees  $ 6,019  $ 6,202  $ 6,169  $ 6,186  $ 6,261
 Securities 972 939 877 868 884
 Other 9 5 10 3 12
 Total interest income 7,000 7,146 7,056 7,057 7,157
           
INTEREST EXPENSE          
 Deposits 674 701 719 754 860
 Borrowings 181 175 193 202 218
 Total interest expense 855 876 912 956 1,078
NET INTEREST INCOME 6,145 6,270 6,144 6,101 6,079
PROVISION FOR LOAN LOSSES 400 400 800 800 800
           
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,745 5,870 5,344 5,301 5,279
           
OTHER INCOME          
 Service charges and fees 578 614 620 600 563
 Income from fiduciary activities 94 111 89 85 81
 Net realized gains on sales of securities 291 198 254 138 100
 Gains (losses) on sale of loans and servicing rights 121 (12) 1 3 67
 Earnings and proceeds on life insurance  162 150 148 925 144
 Other  64 155 100 126 161
 Total other income 1,310 1,216 1,212 1,877 1,116
           
OTHER EXPENSES          
 Salaries and employee benefits 2,009 2,103 2,124 2,211 2,103
 Occupancy, furniture and equipment, net 550 507 550 529 506
 Foreclosed real estate owned 73 217 86 191 33
 FDIC insurance assessment 109 114 110 111 108
 Other  1,357 1,232 1,263 1,259 1,303
 Total other expenses 4,098 4,173 4,133 4,301 4,053
           
INCOME BEFORE TAX 2,957 2,913 2,423 2,877 2,342
INCOME TAX EXPENSE 776 777 584 569 583
NET INCOME  $ 2,181  $ 2,136  $ 1,839  $ 2,308  $ 1,759
           
Basic earnings per share (*)  $ 0.60  $ 0.59  $ 0.51  $ 0.64  $ 0.48
           
Diluted earnings per share (*)  $ 0.60  $ 0.59  $ 0.51  $ 0.63  $ 0.48
           
Book Value per share (*)  $ 25.43  $ 25.54  $ 24.98  $ 25.66  $ 25.49
           
Return on average equity (annualized) 9.33% 9.33% 7.87% 10.02% 7.54%
Return on average assets (annualized) 1.23% 1.22% 1.07% 1.39% 1.02%
           
Net interest spread (fte) 3.76% 3.89% 3.83% 3.91% 3.80%
Net interest margin (fte) 3.91% 4.05% 3.99% 4.07% 3.98%
           
Allowance for loan losses to total loans 1.13% 1.14% 1.20% 1.20% 1.15%
Net charge-offs to average loans (annualized) 0.21% 0.49% 0.65% 0.48% 0.53%
Nonperforming loans to total loans 1.90% 2.11% 2.41% 2.63% 2.77%
Nonperforming assets to total assets 1.48% 1.60% 1.85% 2.01% 2.09%
           
 (*) Per share information has been restated to reflect the 10% stock dividend declared during the 
period ended March 31, 2013.
           
           
total NAL  9,547,232  10,285,183  11,581,355  12,581,664  13,199,804
past due 90+  --  --  --  --  --
total non performing loans  9,547,232  10,285,183  11,581,355  12,581,664  13,199,804
OREO   1,009,400  993,200  1,297,441  1,098,549  857,913
total Non performing assets  10,556,632  11,278,383  12,878,796  13,680,213  14,057,717
total loans  503,097,035  486,968,324  480,714,607  478,662,892  476,709,780
total assets  711,234,246  703,771,392  697,606,133  680,753,430  672,298,577
net charge off's, this quarter  251,000  590,000  776,960  575,726  639,000
average loans, this quarter  489,170,352  483,332,965  481,366,215  478,170,128  479,908,993
Loan loss reserve 5,707,545 5,558,636 5,749,100 5,726,060 5,501,786
           
William S. Lance
Executive Vice President &
Chief Financial Officer
NORWOOD FINANCIAL CORP.
570-253-8505
www.waynebank.com