Norwood Financial Corp Announces Earnings for the Fourth

HONESDALE, Pa., Jan. 29, 2016 (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 December 31, 2015 of $128,000. This represents a decrease from the $1,541,000 earned in the comparable period of 2014 due primarily to a $2,400,000 increase in the provision for loan losses. Earnings per share (fully diluted) were $.04 and $.42 for the three-month periods ended December 31, 2015 and 2014 respectively. Net interest income before the provision for loan losses increased $7,000 compared to the same period of last year, while other income decreased $111,000. A provision for loan losses of $2,820,000 was recorded in the current three-month period compared to $420,000 in the same period of last year in order to replenish the reserve for loan losses after recognizing $1,268,000 of net charge-offs during the 2015 period. Operating expenses decreased $323,000 due primarily to a $347,000 decrease in foreclosed real estate costs. For the year ended December 31, 2015, net income totaled $5,908,000, a decrease of $1,749,000 from the $7,657,000 earned in the prior year as a $2,900,000 increase in the provision for loan losses offset a $644,000 decrease in foreclosed real estate costs. Earnings per share on a fully diluted basis were $1.60 for 2015 compared to $2.10 in 2014. The return on average assets for the year was 0.80% with a return on average equity of 5.83% compared to 1.08% and 7.92%, respectively, in 2014.

Total assets were $750.5 million as of December 31, 2015. Loans receivable totaled $559.9 million as of December 31, 2015, with total deposits of $550.9 million and stockholders’ equity of $101.0 million.

Loans receivable increased $58.8 million from the prior year-end due primarily to a $28.6 million increase in commercial loans which includes a $21.3 million increase in municipal financing. Commercial real estate loans also increased $17.2 million during the year. Residential mortgage loans and construction loans increased $3.5 million after the sale of $4.3 million of fixed-rate residential mortgage loans for the purpose of interest rate risk management. Consumer loans increased $9.5 million in 2015 due primarily to a $9.2 million increase in indirect auto and marine financing. As of December 31, 2015, total non-performing loans were $7.1 million and represented 1.27% of total loans compared to $5.6 million, or 1.12% as of December 31, 2014. For the three months and year ended December 31, 2015, net charge-offs totaled $1,268,000 and $3,157,000, respectively, compared to $196,000 and $1,513,000, respectively, for the corresponding periods in 2014. Based on the level of charge-offs, the Company determined that it would be appropriate to provide $2,820,000 and $4,580,000 for potential future losses for the three and twelve month periods ended December 31, 2015, respectively, compared to $420,000 in the similar quarter of last year and $1,680,000 for the year of 2014. As of December 31, 2015, the allowance for loan losses totaled $7,298,000 and 1.30% of total loans compared to $5,875,000 and 1.17% of total loans at December 31, 2014.

Net interest income (fully taxable equivalent) totaled $6,477,000 for the three months ended December 31, 2015, an increase of $78,000 compared to the same period in 2014. Net interest margin (fte) for the three months ended December 31, 2015 was 3.73% decreasing from 3.87% for the similar period in 2014. The decrease in net interest margin was principally due to loan production at historically low interest rate levels which resulted in a 13 basis point decrease in the yield earned on assets. The net interest margin was further impacted by a 1 basis point increase in the cost of interest-bearing liabilities. For the year, net interest income (fte) totaled $25,882,000, an increase of $64,000 compared to 2014. The net interest margin (fte) declined 15 basis points to 3.75% in 2015.

Other income for the three months ended December 31, 2015 totaled $1,216,000 compared to $1,327,000 for the similar period in 2014. Although gains on the sale of loans and securities decreased $168,000, all other items of other income increased $57,000 in the aggregate. Other income for the year ended December 31, 2015 totaled $4,699,000 compared to $5,110,000 in 2014, a decrease of $411,000. Gains on the sale of loans and investment securities decreased $572,000 in the aggregate, while all other items of other income increased $161,000, net.

Other expenses totaled $4,674,000 for the three months ended December 31, 2015, compared to $4,997,000 in the similar period of 2014. Foreclosed real estate costs decreased $347,000 from the 2014 level, while all other operating expenses increased $24,000, net. For the year ended December 31, 2015, other expenses totaled $17,100,000 compared to $17,727,000 for the similar period in 2014, a decrease of $627,000. Foreclosed real estate costs decreased $644,000 from the prior period, while all other expenses increased $17,000, net compared to 2014.

Mr. Critelli commented, “Our earnings in 2015 were impacted by credit quality issues, resulting from the extended period of stress on our local economy, our customer base and real estate values. During the fourth quarter of 2015, we recognized significant losses on several commercial properties as current appraised values supporting sales or future projected sales were significantly lower than those received at the time of the loan origination. In spite of these challenges, we were able to accomplish many of our goals in 2015. Our cash dividend per share increased from $1.20 per share to $1.24 per share, which resulted in a dividend yield in excess of 4.00% annually based on our year-end closing stock price of $28.75. We had loan growth in excess of 10%. The ongoing low level of interest rates and the competitive lending environment also continued to place pressure on our net interest margin; however, our year-to-date margin and our capital levels were well above peer and our operating expenses remain well controlled. 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 base of stockholders and customers, as the local economy in Northeast Pennsylvania recovers from the extended economic downturn.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates fifteen 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, the ability to control costs and expenses, demand for real estate, government fiscal policies, 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 interest income and 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 interest income on a tax–equivalent basis ensures comparability of 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
		2015		2014		2015		2014
Net interest income	$	6,112	$	6,105	$	24,521	$	24,560
Tax equivalent basis adjustment using 34% marginal tax rate		365		294		1,361		1,258
Net interest income on a fully taxable equivalent basis	$	6,477	$	6,399	$	25,882	$	25,818


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
		December 31
			2015				2014
ASSETS
Cash and due from banks	$		9,744				8,081
Interest-bearing deposits with banks			266				4,295
Cash and cash equivalents			10,010				12,376

Securities available for sale			138,851				156,395
Loans receivable			559,925				501,135
Less: Allowance for loan losses			7,298				5,875
Net loans receivable			552,627				495,260
Regulatory stock, at cost			3,412				1,714
Bank premises and equipment, net			6,472				6,734
Bank owned life insurance			18,820				18,284
Foreclosed real estate owned			2,847				3,726
Accrued interest receivable			2,363				2,339
Goodwill			9,715				9,715
Other intangible assets			285				389
Deferred tax asset			3,867				3,285
Other assets			1,236				1,418
TOTAL ASSETS	$		750,505				711,635

LIABILITIES
Deposits:
Non-interest bearing demand	$		107,814				98,064
Interest-bearing			443,095				461,880
Total deposits			550,909				559,944
Short-term borrowings			53,235				25,695
Other borrowings			41,126				22,200
Accrued interest payable			957				966
Other liabilities			3,280				3,789
TOTAL LIABILITIES			649,507				612,594

STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2015: 3,724,668 shares, 2014: 3,718,018 shares			373				372
Surplus			35,351				35,206
Retained earnings			65,412				64,078
Treasury stock, at cost: 2015: 23,311 shares, 2014: 40,576 shares			(626	)			(1,077	)
Accumulated other comprehensive income			488				462
TOTAL STOCKHOLDERS' EQUITY			100,998				99,041

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$		750,505				711,635



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,
			2015				2014				2015				2014
INTEREST INCOME
Loans receivable, including fees	$		6,058		$		5,954		$		24,002		$		23,841
Securities			877				940				3,761				3,920
Other			1				4				16				7
Total Interest income			6,936				6,898				27,779				27,768

INTEREST EXPENSE
Deposits			587				611				2,421				2,463
Short-term borrowings			38				15				85				77
Other borrowings			199				167				752				668
Total Interest expense			824				793				3,258				3,208
NET INTEREST INCOME			6,112				6,105				24,521				24,560
PROVISION FOR LOAN LOSSES			2,820				420				4,580				1,680
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			3,292				5,685				19,941				22,880

OTHER INCOME
Service charges and fees			651				604				2,440				2,350
Income from fiduciary activities			99				109				439				437
Net realized gains on sales of securities			118				265				626				1,170
Gains on sales of loans, net			61				82				104				132
Earnings and proceeds on life insurance policies			167				171				665				685
Other			120				96				425				336
Total other income			1,216				1,327				4,699				5,110

OTHER EXPENSES
Salaries and employee benefits			2,152				2,252				8,535				8,616
Occupancy, furniture and equipment			511				516				2,082				2,117
Data processing related			261				249				943				929
Taxes, other than income			185				161				711				649
Professional fees			283				196				730				671
FDIC Insurance assessment			133				100				411				420
Foreclosed real estate owned			475				822				911				1,555
Other			674				701				2,777				2,770
Total other expenses			4,674				4,997				17,100				17,727

INCOME (LOSS) BEFORE TAX			(166	)			2,015				7,540				10,263
INCOME TAX EXPENSE (BENEFIT)			(294	)			474				1,632				2,606
NET INCOME	$		128		$		1,541		$		5,908		$		7,657

Basic earnings per share	$		0.04		$		0.42		$		1.60		$		2.10

Diluted earnings per share	$		0.04		$		0.42		$		1.60		$		2.10



NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)

For the Three Months Ended December 31			2015				2014

Net interest income	$		6,112		$		6,105
Net income			128				1,541

Net interest spread (fully taxable equivalent)			3.58	%			3.72	%
Net interest margin (fully taxable equivalent)			3.73	%			3.87	%
Return on average assets			0.07	%			0.86	%
Return on average equity			0.50	%			6.17	%
Basic earnings per share	$		0.04		$		0.42
Diluted earnings per share	$		0.04		$		0.42

For the Twelve Months Ended December 31

Net interest income	$		24,521		$		24,560
Net income			5,908				7,657

Net interest spread (fully taxable equivalent)			3.61	%			3.76	%
Net interest margin (fully taxable equivalent)			3.75	%			3.90	%
Return on average assets			0.80	%			1.08	%
Return on average equity			5.83	%			7.92	%
Basic earnings per share	$		1.60		$		2.10
Diluted earnings per share	$		1.60		$		2.10

As of December 31

Total assets	$		750,505		$		711,635
Total loans receivable			559,925				501,135
Allowance for loan losses			7,298				5,875
Total deposits			550,909				559,944
Stockholders' equity			100,998				99,041
Trust assets under management			131,690				134,888

Book value per share	$		27.39		$		26.30
Equity to total assets			13.46	%			13.92	%
Allowance to total loans receivable			1.30	%			1.17	%
Nonperforming loans to total loans			1.27	%			1.12	%
Nonperforming assets to total assets			1.33	%			1.31	%


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		December 31				September 30				June 30				March 31				December 31
			2015				2015				2015				2015				2014
ASSETS
Cash and due from banks	$		9,744		$		11,164		$		8,505		$		7,658		$		8,081
Interest-bearing deposits with banks			266				552				11,937				11,969				4,295
Cash and cash equivalents			10,010				11,716				20,442				19,627				12,376

Securities available for sale			138,851				153,305				151,304				155,674				156,395
Loans receivable			559,925				543,536				538,870				518,961				501,135
Less: Allowance for loan losses			7,298				5,747				5,947				6,007				5,875
Net loans receivable			552,627				537,789				532,923				512,954				495,260
Regulatory stock, at cost			3,412				2,488				2,240				1,838				1,714
Bank owned life insurance			18,820				18,686				18,551				18,417				18,284
Bank premises and equipment, net			6,472				6,503				6,555				6,632				6,734
Foreclosed real estate owned			2,847				1,345				1,382				1,698				3,726
Goodwill and other intangibles			10,000				10,024				10,049				10,076				10,104
Other assets			7,466				7,473				8,075				7,443				7,042
TOTAL ASSETS	$		750,505		$		749,329		$		751,521		$		734,359		$		711,635
		.				.
LIABILITIES
Deposits:
Non-interest bearing demand	$		107,814		$		115,313		$		107,610		$		101,423		$		98,064
Interest-bearing deposits			443,095				456,040				468,004				468,783				461,880
Total deposits			550,909				571,353				575,614				570,206				559,944
Other borrowings			94,361				70,708				71,053				58,388				47,895
Other liabilities			4,237				5,328				4,936				5,314				4,755
TOTAL LIABILITIES			649,507				647,389				651,603				633,908				612,594

STOCKHOLDERS' EQUITY			100,998				101,940				99,918				100,451				99,041

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$		750,505		$		749,329		$		751,521		$		734,359		$		711,635



NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		December 31				September 30				June 30				March 31				December 31
Three months ended			2015				2015				2015				2015				2014
INTEREST INCOME
Loans receivable, including fees	$		6,058		$		5,958		$		5,924		$		6,061		$		5,954
Securities			877				911				950				1,023				940
Other			1				3				8				4				4
Total interest income			6,936				6,872				6,882				7,088				6,898

INTEREST EXPENSE
Deposits			587				611				618				604				611
Borrowings			237				208				215				177				182
Total interest expense			824				819				833				781				793
NET INTEREST INCOME			6,112				6,053				6,049				6,307				6,105
PROVISION FOR LOAN LOSSES			2,820				720				420				620				420
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES			3,292				5,333				5,629				5,687				5,685

OTHER INCOME
Service charges and fees			651				595				622				572				604
Income from fiduciary activities			99				126				109				105				109
Net realized gains on sales of securities			118				63				134				311				265
Gains on sales of loans, net			61				13				12				18				82
Earnings and proceeds on life insurance policies			167				167				166				165				171
Other			120				107				90				108				96
Total other income			1,216				1,071				1,133				1,279				1,327

OTHER EXPENSES
Salaries and employee benefits			2,152				2,175				2,071				2,137				2,252
Occupancy, furniture and equipment, net			511				473				542				556				516
Foreclosed real estate owned			475				47				232				158				822
FDIC insurance assessment			133				119				65				95				100
Other			1,403				1,256				1,258				1,241				1,307
Total other expenses			4,674				4,070				4,168				4,187				4,997

(LOSS) INCOME BEFORE TAX			(166	)			2,334				2,594				2,779				2,015
INCOME TAX (BENEFIT) EXPENSE			(294	)			557				631				738				474
NET INCOME	$		128		$		1,777		$		1,963		$		2,041		$		1,541

Basic earnings per share	$		0.04		$		0.48		$		0.53		$		0.55		$		0.42

Diluted earnings per share	$		0.04		$		0.48		$		0.53		$		0.55		$		0.42

Book Value per share	$		27.39		$		27.42		$		27.40		$		27.38		$		26.30

Return on average equity (annualized)			0.50	%			6.95	%			7.80	%			8.22	%			6.17	%
Return on average assets (annualized)			0.07	%			0.95	%			1.06	%			1.15	%			0.86	%

Net interest spread (fte)			3.58	%			3.53	%			3.53	%			3.80	%			3.72	%
Net interest margin (fte)			3.73	%			3.68	%			3.68	%			3.94	%			3.87	%

Allowance for loan losses to total loans			1.30	%			1.06	%			1.10	%			1.16	%			1.17	%
Net charge-offs to average loans (annualized)			0.92	%			0.68	%			0.37	%			0.39	%			0.16	%
Nonperforming loans to total loans			1.27	%			1.69	%			2.00	%			1.11	%			1.12	%
Nonperforming assets to total assets			1.33	%			1.40	%			1.62	%			1.01	%			1.31	%

Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

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