Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 22, 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 June 30, 2015 of $1,963,000. This represents a decrease of $71,000, from the $2,034,000 earned in the similar period of 2014 due primarily to a decrease in gains on sales of securities which was partially offset by reduced operating expenses.  Earnings per share (fully diluted) were $.53 in the 2015 period, decreasing from the $.56 earned in the similar period of 2014.  Annualized return on average assets for the three months ended June 30, 2015 was 1.06% with an annualized return on average equity of 7.80%.  Net income for the six months ended June 30, 2015 totaled $4,004,000, which is slightly higher than the same six-month period of last year.  Earnings per share (fully diluted) for the six months ended June 30, 2015 and 2014 totaled $1.08 and $1.10 per share, respectively.

Total assets as of June 30, 2015 were $751.5 million with loans receivable of $538.9 million, deposits of $575.6 million and stockholders’ equity of $99.9 million.

Loans receivable increased $36.6 million since June 30, 2014.  Commercial loans increased $25.2 million which includes a $23.8 million increase in municipal financing.  Retail loans grew $11.3 million during the period which includes a $6.8 million increase in indirect auto and marine financing and a $5.2 million increase in residential mortgage loans.  The Company also sold $3.8 million of fixed-rate residential mortgages during the period, principally with 30-year terms, for purposes of interest rate risk management.  Total deposits increased $20.9 million over the past twelve months which includes a $10.3 million increase in time deposits, a $6.9 million increase in other interest bearing deposits, and a $3.7 million increase in non-interest bearing demand deposits.  Stockholders’ equity increased $3.7 million over the past year, due principally to the retention of earnings.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $12.1 million and represented 1.62% of total assets as of June 30, 2015 compared to $11.8 million, or 1.65% of total assets, as of June 30, 2014.  Net charge-offs were $479,000 for the quarter and totaled $968,000 for the six months ended June 30, 2015 compared to $537,000 and $937,000, respectively, for the similar periods in 2014.  Based on the levels of non-performing assets and net charge-offs, the Company determined that it was appropriate to provide $420,000 and $1,040,000 for potential future loan losses for the three and six month periods ended June 30, 2015, respectively, compared to $420,000 and $840,000, respectively, for the similar periods in 2014.  The allowance for loan losses totaled $5,947,000 as of June 30, 2015 and represented 1.10% of total loans outstanding, compared to $5,611,000 and 1.12% on June 30, 2014.   

For the three months ended June 30, 2015, net interest income, on a fully taxable equivalent basis (fte), totaled $6,389,000, a decrease of $100,000 compared to the similar period in 2014.  Net interest margin (fte) for the 2015 period was 3.68% decreasing from 3.91% for the similar period in 2014 due to a decrease of 24 basis points in the yield on interest-earning assets.  The cost of interest-bearing liabilities remained unchanged at 0.63% for both periods.  The reduced margin was due primarily to a 20 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.  The yield earned on securities also decreased 19 basis points.  Net interest income (fte) for the six months ended June 30, 2015 totaled $12,991,000, which was $40,000 higher than the similar period in 2014.  The net interest margin (fte) was 3.81% in the 2015 period and 3.91% during the first six months of 2014.  Decreasing yields on loans and securities contributed to the reduced net interest margin.

Other income for the three months ended June 30, 2015 totaled $1,133,000 compared to $1,468,000 for the similar period in 2014.  Net gains from securities sales decreased $375,000 compared to the prior-year period.  For the six months ended June 30, 2015, other income totaled $2,412,000 compared to $2,521,000 in the 2014 period.  Gains on the sales of investment securities totaled $445,000 on sales of $23.4 million for the 2015 period compared to $603,000 on sales of $31.9 million in the 2014 period. 

Other expenses totaled $4,168,000 for the three months ended June 30, 2015, a decrease of $305,000, from the $4,473,000 reported in the similar period of 2014.  The decrease was principally due to a reduction of costs and write-downs on properties carried in foreclosed real estate owned.  Salaries and employee benefits also decreased $101,000 compared to the same three month period of 2014.  For the six months ended June 30, 2015, other expenses totaled $8,355,000 compared to $8,605,000 for the similar period in 2014, a decrease of $250,000.  Salaries and employee benefits decreased $128,000 compared to the first half of last year, while foreclosed real estate expenses decreased $71,000.

Mr. Critelli commented, “Our earnings for the first half of 2015 are comparable to the 2014 level.  Sectors of the local economy remain sluggish, and as a result we continue to have pressure on our loan quality ratios.  Working with borrowers experiencing cash flow problems will remain a top priority as we make our way through this difficult economic environment.  The ongoing low level of 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 above peer and operating expenses are well controlled.  We continue to search out opportunities available to us, and we look forward to serving our growing base of stockholders and customers as the local economy in Northeast Pennsylvania recovers from the extended downturn.”

Norwood Financial Corp., is the parent company of Wayne Bank, which operates fifteen 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, the ability to control costs and expenses, demand for real estate, 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 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: