HONESDALE, Pa., Jan. 30, 2015 (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, 2014 of $1,541,000. This represents a decrease of $640,000 from the $2,181,000 earned in the comparable period of 2013 due primarily to a $749,000 increase in foreclosed real estate costs. Earnings per share (fully diluted) were $.42 and $.60 for the three-month periods ended December 31, 2014 and 2013, respectively. Net interest income before the provision for loan losses declined $40,000 compared to the same period of last year, while other income increased $17,000. The provision for loan losses was $420,000 in the current three-month period compared to $400,000 in the same period of last year, while operating expenses increased $899,000 due primarily to the $749,000 increase in foreclosed real estate costs noted above. For the year ended December 31, 2014, net income totaled $7,657,000, a decrease of $808,000 from the $8,465,000 earned in the prior year as increased foreclosed real estate costs and a decreased level of earnings and proceeds on life insurance policies offset a $720,000 reduction in the provision for loan losses. Earnings per share on a fully diluted basis were $2.10 for 2014, compared to $2.33 in 2013. The return on average assets for the year was 1.08% with a return on average equity of 7.92% compared to 1.23% and 9.13%, respectively, in 2013.
Total assets were $711.6 million as of December 31, 2014. Loans receivable totaled $501.1 million as of December 31, 2014, with total deposits of $559.9 million and stockholders' equity of $99.0 million. The Company's capital position remains "well capitalized" in accordance with risk-based capital guidelines established by federal bank regulators.
Loans receivable decreased $2.0 million from the prior year-end due primarily to an $11.2 million reduction in commercial real estate loans which was the result of several significant payoffs received in 2014 and the transfer of nonperforming loans to foreclosed real estate. Other commercial loans increased $6.8 million due to growth in municipal financing, while consumer loans increased $4.4 million. Residential mortgage loans and construction loans decreased $2.0 million, but includes the sale of $4.3 million of fixed-rate residential mortgage loans for the purpose of interest rate risk management. As of December 31, 2014, total non-performing loans were $5.6 million and represented 1.12% of total loans compared to $9.5 million, or 1.90% as of December 31, 2013. For the three months and year ended December 31, 2014, net charge-offs totaled $196,000 and $1,513,000, respectively, compared to $251,000 and $2,194,000, respectively, for the corresponding periods in 2013. Based on the level of charge-offs and non-performing loans, the Company determined that it would be appropriate to provide $420,000 and $1,680,000 for potential future losses for the three and twelve month periods ended December 31, 2014, respectively, compared to $400,000 in the similar quarter of last year and $2,400,000 for the year of 2013. As of December 31, 2014, the allowance for loan losses totaled $5,875,000 and 1.17% of total loans compared to $5,708,000 and 1.13% of total loans at December 31, 2013.
Net interest income (fully taxable equivalent) totaled $6,399,000 for the three months ended December 31, 2014, a decrease of $62,000 compared to the same period in 2013. Net interest margin (fte) for the three months ended December 31, 2014 was 3.87% decreasing from 3.91% for the similar period in 2013. The decrease in net interest margin was principally due to loan production at historically low interest rate levels which resulted in a 9 basis point decrease in the yield earned on assets compared to a 5 basis point reduction in the cost of interest-bearing liabilities. For the year, net interest income (fte) totaled $25,818,000, a decrease of $39,000 compared to 2013. The net interest margin (fte) declined 10 basis points to 3.90% in 2014.
Other income for the three months ended December 31, 2014 totaled $1,327,000 compared to $1,310,000 for the similar period in 2013. Although gains on the sale of loans and securities decreased $65,000, all other items of other income increased $82,000 in the aggregate. Other income for the year ended December 31, 2014 totaled $5,110,000 compared to $5,615,000 in 2013, a decrease of $505,000. Gains on the sale of loans and investment securities increased $309,000 in the aggregate but earnings and proceeds received on bank owned life insurance policies decreased $701,000 while all other items of other income decreased $113,000, net. During 2013, the Company recorded a non-recurring gain of $770,000 from proceeds on a bank-owned life insurance policy.
Other expenses totaled $4,997,000 for the three months ended December 31, 2014, compared to $4,098,000 in the similar period of 2013. Foreclosed real estate costs increased $749,000 due to market value adjustments and recurring maintenance costs, while all other operating expenses increased $150,000, or 3.7%, net. For the year ended December 31, 2014, other expenses totaled $17,727,000 compared to $16,705,000 for the similar period in 2013, an increase of $1,022,000. Foreclosed real estate costs increased $988,000 over the prior period, while all other expenses increased $34,000, net compared to 2013.
Mr. Critelli commented, "The past year was extremely challenging, as a continued low interest rate environment and the increased cost of maintaining and disposing of foreclosed properties placed stress on our earnings. Working with borrowers will remain a top priority as we make our way through this difficult economic environment, and we expect that the demands will continue into 2015. In spite of these challenges, we were able to accomplish many of our goals in 2014. Our cash dividend per share increased from $1.16 per share to $1.20 per share, which resulted in a dividend yield in excess of 4.00% annually based on our year-end closing stock price of $29.05. We recorded a Return on Assets of 1.08% and maintained a net interest margin close to 4.00% for the year. We also managed to reduce our level of non-performing loans from 1.90% of total loans to 1.12% and maintain our capital levels in excess of the "Well Capitalized" levels established by our regulators. 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 local economy in Northeast Pennsylvania rebounds 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, 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:
| (dollars in thousands) | Three months ended December 31 | Year ended December 31 | ||
| 2014 | 2013 | 2014 | 2013 | |
| Net interest income | $6,105 | $6,145 | $24,560 | $24,661 |
| Tax equivalent basis adjustment using 34% marginal tax rate | 294 | 316 | 1,258 | 1,196 |
| Net interest income on a fully taxable equivalent basis | $6,399 | $6,461 | $25,818 | $25,857 |
| NORWOOD FINANCIAL CORP. | ||
| Consolidated Balance Sheets | ||
| (dollars in thousands, except share data) | ||
| (unaudited) | ||
| December 31 | ||
| 2014 | 2013 | |
| ASSETS | ||
| Cash and due from banks | $ 8,081 | $ 7,528 |
| Interest-bearing deposits with banks | 4,295 | 335 |
| Cash and cash equivalents | 12,376 | 7,863 |
| Securities available for sale | 156,395 | 158,132 |
| Securities held to maturity, fair value 2013: $177 | -- | 174 |
| Loans receivable (net of unearned Income) | 501,135 | 503,097 |
| Less: Allowance for loan losses | 5,875 | 5,708 |
| Net loans receivable | 495,260 | 497,389 |
| Regulatory stock, at cost | 1,714 | 2,877 |
| Bank premises and equipment, net | 6,734 | 7,125 |
| Bank owned life insurance | 18,284 | 17,790 |
| Foreclosed real estate owned | 3,726 | 1,009 |
| Accrued interest receivable | 2,339 | 2,422 |
| Goodwill | 9,715 | 9,715 |
| Other intangible assets | 389 | 510 |
| Deferred tax asset | 3,779 | 4,819 |
| Other assets | 924 | 1,409 |
| TOTAL ASSETS | $ 711,635 | $ 711,234 |
| LIABILITIES | ||
| Deposits: | ||
| Non-interest bearing demand | $ 98,064 | $ 92,684 |
| Interest-bearing | 461,880 | 448,498 |
| Total deposits | 559,944 | 541,182 |
| Short-term borrowings | 25,695 | 49,914 |
| Other borrowings | 22,200 | 23,761 |
| Accrued interest payable | 966 | 1,022 |
| Other liabilities | 3,789 | 3,491 |
| TOTAL LIABILITIES | 612,594 | 619,370 |
| STOCKHOLDERS' EQUITY | ||
| Common Stock, $.10 par value, authorized 10,000,000 shares issued: 2014: 3,718,018 shares; 2013: 3,708,718 shares | 372 | 371 |
| Surplus | 35,206 | 35,010 |
| Retained earnings | 64,078 | 60,798 |
| Treasury stock, at cost: 2014: 40,576 shares, 2013: 64,628 shares | (1,077) | (1,713) |
| Accumulated other comprehensive income (loss) | 462 | (2,602) |
| TOTAL STOCKHOLDERS' EQUITY | 99,041 | 91,864 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 711,635 | $ 711,234 |
| 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 | |||
| 2014 | 2013 | 2014 | 2013 | |
| INTEREST INCOME | ||||
| Loans receivable, including fees | $ 5,954 | $ 6,019 | $ 23,841 | $ 24,576 |
| Securities | 940 | 972 | 3,920 | 3,657 |
| Other | 4 | 9 | 7 | 26 |
| Total Interest income | 6,898 | 7,000 | 27,768 | 28,259 |
| INTEREST EXPENSE | ||||
| Deposits | 611 | 674 | 2,463 | 2,848 |
| Short-term borrowings | 15 | 22 | 77 | 66 |
| Other borrowings | 167 | 159 | 668 | 684 |
| Total Interest expense | 793 | 855 | 3,208 | 3,598 |
| NET INTEREST INCOME | 6,105 | 6,145 | 24,560 | 24,661 |
| PROVISION FOR LOAN LOSSES | 420 | 400 | 1,680 | 2,400 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 5,685 | 5,745 | 22,880 | 22,261 |
| OTHER INCOME | ||||
| Service charges and fees | 604 | 578 | 2,350 | 2,412 |
| Income from fiduciary activities | 109 | 94 | 437 | 379 |
| Net realized gains on sales of securities | 265 | 291 | 1,170 | 881 |
| Gains on sale of loans | 82 | 121 | 132 | 112 |
| Earnings and proceeds on life insurance policies | 171 | 162 | 685 | 1,386 |
| Other | 96 | 64 | 336 | 445 |
| Total other income | 1,327 | 1,310 | 5,110 | 5,615 |
| OTHER EXPENSES | ||||
| Salaries and employee benefits | 2,252 | 2,009 | 8,616 | 8,447 |
| Occupancy, furniture and equipment | 516 | 550 | 2,117 | 2,136 |
| Data processing related | 249 | 218 | 929 | 891 |
| Taxes, other than income | 161 | 179 | 649 | 710 |
| Professional Fees | 196 | 128 | 671 | 626 |
| FDIC Insurance assessment | 100 | 109 | 420 | 444 |
| Foreclosed real estate owned | 822 | 73 | 1,555 | 567 |
| Other | 701 | 832 | 2,770 | 2,884 |
| Total other expenses | 4,997 | 4,098 | 17,727 | 16,705 |
| INCOME BEFORE TAX | 2,015 | 2,957 | 10,263 | 11,171 |
| INCOME TAX EXPENSE | 474 | 776 | 2,606 | 2,706 |
| NET INCOME | $ 1,541 | $ 2,181 | $ 7,657 | $ 8,465 |
| Basic earnings per share | $ 0.42 | $ 0.60 | $ 2.10 | $ 2.33 |
| Diluted earnings per share | $ 0.42 | $ 0.60 | $ 2.10 | $ 2.33 |
| NORWOOD FINANCIAL CORP. | ||
| Financial Highlights (Unaudited) | ||
| (dollars in thousands, except per share data) | ||
| For the Three Months Ended December 31 | 2014 | 2013 |
| Net interest income | $ 6,105 | $ 6,145 |
| Net income | 1,541 | 2,181 |
| Net interest spread (fully taxable equivalent) | 3.72% | 3.76% |
| Net interest margin (fully taxable equivalent) | 3.87% | 3.91% |
| Return on average assets | 0.86% | 1.23% |
| Return on average equity | 6.17% | 9.33% |
| Basic earnings per share | $ 0.42 | $ 0.60 |
| Diluted earnings per share | $ 0.42 | $ 0.60 |
| For the Twelve Months Ended December 31 | ||
| Net interest income | $ 24,560 | $ 24,661 |
| Net income | 7,657 | 8,465 |
| Net interest spread (fully taxable equivalent) | 3.76% | 3.85% |
| Net interest margin (fully taxable equivalent) | 3.90% | 4.00% |
| Return on average assets | 1.08% | 1.23% |
| Return on average equity | 7.92% | 9.13% |
| Basic earnings per share | $ 2.10 | $ 2.33 |
| Diluted earnings per share | $ 2.10 | $ 2.33 |
| As of December 31 | ||
| Total assets | $ 711,635 | $ 711,234 |
| Total loans receivable | 501,135 | 503,097 |
| Allowance for loan losses | 5,875 | 5,708 |
| Total deposits | 559,944 | 541,182 |
| Stockholders' equity | 99,041 | 91,864 |
| Trust assets under management | 134,888 | 126,673 |
| Book value per share | $ 26.30 | $ 25.43 |
| Equity to total assets | 13.92% | 12.92% |
| Allowance to total loans receivable | 1.17% | 1.13% |
| Nonperforming loans to total loans | 1.12% | 1.90% |
| Nonperforming assets to total assets | 1.31% | 1.48% |
| NORWOOD FINANCIAL CORP. | |||||
| Consolidated Balance Sheets (unaudited) | |||||
| (dollars in thousands) | |||||
| December 31 | September 30 | June 30 | March 31 | December 31 | |
| 2014 | 2014 | 2014 | 2014 | 2013 | |
| ASSETS | |||||
| Cash and due from banks | $ 8,081 | $ 13,105 | $ 12,196 | $ 8,607 | $ 7,528 |
| Interest-bearing deposits with banks | 4,295 | 158 | 3,182 | 142 | 335 |
| Cash and cash equivalents | 12,376 | 13,263 | 15,378 | 8,749 | 7,863 |
| Securities available for sale | 156,395 | 158,701 | 154,925 | 156,165 | 158,132 |
| Securities held to maturity | -- | -- | -- | 175 | 174 |
| Loans receivable (net of unearned income) | 501,135 | 500,844 | 502,316 | 496,016 | 503,097 |
| Less: Allowance for loan losses | 5,875 | 5,651 | 5,611 | 5,727 | 5,708 |
| Net loans receivable | 495,260 | 495,193 | 496,705 | 490,289 | 497,389 |
| Regulatory stock, at cost | 1,714 | 3,210 | 2,437 | 2,741 | 2,877 |
| Bank owned life insurance | 18,284 | 18,143 | 18,002 | 17,930 | 17,790 |
| Bank premises and equipment, net | 6,734 | 6,825 | 6,910 | 7,031 | 7,125 |
| Foreclosed real estate owned | 3,726 | 4,962 | 4,293 | 1,364 | 1,009 |
| Goodwill and other intangibles | 10,104 | 10,133 | 10,161 | 10,192 | 10,225 |
| Other assets | 7,042 | 7,783 | 8,051 | 8,598 | 8,650 |
| TOTAL ASSETS | $ 711,635 | $ 718,213 | $ 716,862 | $ 703,234 | $ 711,234 |
| LIABILITIES | |||||
| Deposits: | |||||
| Non-interest bearing demand | $ 98,064 | $ 102,343 | $ 103,954 | $ 93,400 | $ 92,684 |
| Interest-bearing deposits | 461,880 | 445,995 | 450,760 | 446,676 | 448,498 |
| Total deposits | 559,944 | 548,338 | 554,714 | 540,076 | 541,182 |
| Other borrowings | 47,895 | 67,296 | 60,992 | 63,746 | 73,675 |
| Other liabilities | 4,755 | 5,172 | 4,954 | 5,212 | 4,513 |
| TOTAL LIABILITIES | 612,594 | 620,806 | 620,660 | 609,034 | 619,370 |
| STOCKHOLDERS' EQUITY | 99,041 | 97,407 | 96,202 | 94,200 | 91,864 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 711,635 | $ 718,213 | $ 716,862 | $ 703,234 | $ 711,234 |
| 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 | 2014 | 2014 | 2014 | 2014 | 2013 |
| INTEREST INCOME | |||||
| Loans receivable, including fees | $ 5,954 | $ 5,972 | $ 5,933 | $ 5,980 | $ 6,019 |
| Securities | 940 | 968 | 1,025 | 987 | 972 |
| Other | 4 | 1 | 2 | 1 | 9 |
| Total interest income | 6,898 | 6,941 | 6,960 | 6,968 | 7,000 |
| INTEREST EXPENSE | |||||
| Deposits | 611 | 600 | 618 | 635 | 674 |
| Borrowings | 182 | 187 | 187 | 188 | 181 |
| Total interest expense | 793 | 787 | 805 | 823 | 855 |
| NET INTEREST INCOME | 6,105 | 6,154 | 6,155 | 6,145 | 6,145 |
| PROVISION FOR LOAN LOSSES | 420 | 420 | 420 | 420 | 400 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 5,685 | 5,734 | 5,735 | 5,725 | 5,745 |
| OTHER INCOME | |||||
| Service charges and fees | 604 | 587 | 583 | 576 | 578 |
| Income from fiduciary activities | 109 | 125 | 99 | 104 | 94 |
| Net realized gains on sales of securities | 265 | 301 | 509 | 95 | 291 |
| Gains (losses) on sale of loans and servicing rights | 82 | (15) | 26 | 39 | 121 |
| Earnings and proceeds on life insurance policies | 171 | 170 | 175 | 168 | 162 |
| Other | 96 | 94 | 76 | 71 | 64 |
| Total other income | 1,327 | 1,262 | 1,468 | 1,053 | 1,310 |
| OTHER EXPENSES | |||||
| Salaries and employee benefits | 2,252 | 2,028 | 2,172 | 2,165 | 2,009 |
| Occupancy, furniture and equipment, net | 516 | 505 | 518 | 578 | 550 |
| Foreclosed real estate owned | 822 | 271 | 396 | 65 | 73 |
| FDIC insurance assessment | 100 | 104 | 102 | 114 | 109 |
| Other | 1,307 | 1,216 | 1,285 | 1,210 | 1,357 |
| Total other expenses | 4,997 | 4,124 | 4,473 | 4,132 | 4,098 |
| INCOME BEFORE TAX | 2,015 | 2,872 | 2,730 | 2,646 | 2,957 |
| INCOME TAX EXPENSE | 474 | 754 | 696 | 682 | 776 |
| NET INCOME | $ 1,541 | $ 2,118 | $ 2,034 | $ 1,964 | $ 2,181 |
| Basic earnings per share | $ 0.42 | $ 0.58 | $ 0.56 | $ 0.54 | $ 0.60 |
| Diluted earnings per share | $ 0.42 | $ 0.58 | $ 0.56 | $ 0.54 | $ 0.60 |
| Book Value per share | $ 26.30 | $ 26.30 | $ 26.14 | $ 25.88 | $ 25.43 |
| Return on average equity (annualized) | 6.17% | 8.62% | 8.49% | 8.46% | 9.33% |
| Return on average assets (annualized) | 0.86% | 1.18% | 1.15% | 1.13% | 1.23% |
| Net interest spread (fte) | 3.72% | 3.78% | 3.77% | 3.77% | 3.76% |
| Net interest margin (fte) | 3.87% | 3.92% | 3.91% | 3.91% | 3.91% |
| Allowance for loan losses to total loans | 1.17% | 1.13% | 1.12% | 1.15% | 1.13% |
| Net charge-offs to average loans (annualized) | 0.16% | 0.30% | 0.43% | 0.32% | 0.21% |
| Nonperforming loans to total loans | 1.12% | 1.18% | 1.49% | 1.92% | 1.90% |
| Nonperforming assets to total assets | 1.31% | 1.52% | 1.65% | 1.55% | 1.48% |
William S. Lance Executive Vice President & Chief Financial Officer NORWOOD FINANCIAL CORP. 570-253-8505 www.waynebank.com
