Attached files
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| 8-K - FORM 8-K - NORWOOD FINANCIAL CORP. - NORWOOD FINANCIAL CORP | f8k_041814-0160.htm |
FOR IMMEDIATE RELEASE
NORWOOD FINANCIAL CORP. ANNOUNCES FIRST QUARTER EARNINGS
April 18, 2014
Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq Global Market – NWFL) and its subsidiary, Wayne Bank, announced earnings of $1,964,000 for the three months ended March 31, 2014 which represents a decrease from the $2,308,000 recorded during the same three month period of last year. Earnings in 2013 were higher due to $770,000 of proceeds from a bank-owned life insurance policy that was recorded in the first quarter of 2013, some of which was offset by higher core earnings in the current year. Earnings per share on a fully diluted basis were $.54 in the first quarter of this year compared to $.63 in the first quarter of 2013. The annualized return on average assets was 1.13% in the first quarter of 2014 and the annualized return on average equity was 8.46%.
Total assets were $703.2 million as of March 31, 2014, an increase of $22.5 million compared to the prior year total. Total loans increased $17.3 million compared to March 31, 2013 notwithstanding the sale of $1.0 million of residential mortgage loans to reduce the Company’s interest rate risk position during the current year. Residential mortgage loan balances increased $3.2 million, commercial financing increased $11.2 million, construction loans increased $6.7 million and installment loans grew $1.3 million, while commercial real estate loans have decreased $5.1 million compared to the prior year. Total deposits increased $4.4 million over the past twelve months which
includes a $9.0 million increase in non-interest bearing demand deposits. Stockholders’ equity increased $1.3 million during the past year, due principally to the retention of earnings.
Non-performing assets totaled $10.9 million or 1.55% of total assets at March 31, 2014 comprised of $9.5 million of non-performing loans and $1.4 million of foreclosed real estate owned, compared to $10.6 million of non-performing assets or 1.48% of total assets at December 31, 2013. The increase recorded during the quarter includes the transfer of four properties into foreclosed real estate owned with a carrying value of $383,000. As of March 31, 2013, non-performing assets totaled $13.7 million. Net charge-offs for the three month period ending March 31, 2014 were $400,000 which represents a decrease compared to $576,000 of net charge-offs in the first quarter of last year. Based on the current composition of the loan portfolio, management determined that it would be prudent to provide additional reserves and added $420,000 to the allowance for loan losses compared to $800,000 during the same period of last year. The decrease in the provision for loan losses reflects the lower levels of net charge-offs and non-performing assets. The allowance for loan losses was 1.15% of total loans outstanding on March 31, 2014 compared to 1.13% on December 31, 2013 and 1.20% on March 31, 2013.
Net interest income (fully taxable equivalent) was $6,462,000 during the first quarter of 2014 which is $75,000 higher than the comparable three month period of last year. The net interest margin was negatively impacted by lower rates on new loan closings, but a $22.0 million increase in average loans outstanding helped to offset much of the decrease due to pricing. A $14.9 million increase in average securities
added $135,000 of additional earnings. The yield on interest earning assets decreased two basis points compared to the prior quarter while the cost of funds decreased three basis points. As a result, the net interest margin (fte) remained stable at 3.91% compared to the quarter ended December 31, 2013. In comparison to the quarter ended March 31, 2013, the net interest margin (fte) declined from 4.07% to 3.91% due to the downward repricing of the balance sheet.
Other income totaled $1,053,000 in the first quarter of 2014 compared to $1,877,000 during the same period of last year. The $824,000 decrease in other income reflects $770,000 of proceeds from a bank-owned life insurance policy recorded in 2013. During the current period, the Company recognized a net gain of $95,000 from the sale of securities compared to $138,000 in the prior-year period.
Operating expenses totaled $4,132,000 in the first quarter and were $169,000, or 3.9%, lower than the same period of last year. Foreclosed real estate costs provided the majority of the decrease and were $126,000 lower than the first quarter of last year while all other operating costs decreased $43,000, net.
Mr. Critelli stated that “Our first quarter results provide a good start for 2014. While net income was down due to a non-recurring gain recognized in the first quarter of last year, our core earnings improved due to increased net interest income and reduced operating expenses. We are continuing to work our way through credit quality issues that have been brought on by the prolonged economic downturn, and improving our credit quality will remain a top priority in 2014. Our net interest margin continues to exceed peer banks, and our capital base continues to exceed peer and “well capitalized” targets. We continue to search out opportunities available to us, and we
look forward to serving our growing base of stockholders and customers as the economy slowly recovers from the recent downturn.”
Norwood Financial Corp. is the parent company of Wayne Bank which operates from sixteen 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, 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 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:
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(dollars in thousands)
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Three months ended March 31,
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2014
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2013
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|||||||
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Net interest income
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$ | 6,145 | $ | 6,101 | ||||
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Tax equivalent basis adjustment using 34% marginal tax rate
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317 | 286 | ||||||
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Net interest income on a fully taxable equivalent basis
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$ | 6,462 | $ | 6,387 | ||||
Contact: William S. Lance
Executive Vice President &
Chief Financial Officer
NORWOOD FINANCIAL CORP.
570-253-8505
www.waynebank.com
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NORWOOD FINANCIAL CORP.
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Consolidated Balance Sheets
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(dollars in thousands, except share data)
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(unaudited)
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March 31
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2014
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2013
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ASSETS
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Cash and due from banks
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$ | 8,607 | $ | 6,763 | ||||
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Interest-bearing deposits with banks
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142 | 9,182 | ||||||
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Cash and cash equivalents
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8,749 | 15,945 | ||||||
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Securities available for sale
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156,165 | 148,598 | ||||||
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Securities held to maturity, fair value 2014: $176 and 2013: $175
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175 | 173 | ||||||
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Loans receivable (net of unearned Income)
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496,016 | 478,663 | ||||||
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Less: Allowance for loan losses
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5,727 | 5,726 | ||||||
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Net loans receivable
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490,289 | 472,937 | ||||||
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Regulatory stock, at cost
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2,741 | 2,533 | ||||||
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Bank premises and equipment, net
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7,031 | 7,191 | ||||||
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Bank owned life insurance
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17,930 | 14,402 | ||||||
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Foreclosed real estate owned
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1,364 | 1,099 | ||||||
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Accrued interest receivable
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2,330 | 2,456 | ||||||
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Goodwill
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9,715 | 9,715 | ||||||
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Other intangible assets
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477 | 610 | ||||||
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Deferred tax asset
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4,294 | 2,724 | ||||||
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Other assets
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1,974 | 2,370 | ||||||
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TOTAL ASSETS
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$ | 703,234 | $ | 680,753 | ||||
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LIABILITIES
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Deposits:
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Non-interest bearing demand
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$ | 93,400 | $ | 84,357 | ||||
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Interest-bearing
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446,676 | 451,275 | ||||||
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Total deposits
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540,076 | 535,632 | ||||||
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Short-term borrowings
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40,373 | 21,859 | ||||||
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Other borrowings
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23,373 | 25,343 | ||||||
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Accrued interest payable
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973 | 1,082 | ||||||
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Other liabilities
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4,239 | 3,917 | ||||||
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TOTAL LIABILITIES
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609,034 | 587,833 | ||||||
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STOCKHOLDERS' EQUITY
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Common Stock, $.10 par value, authorized 10,000,000 shares
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issued: 2014: 3,708,718 shares, 2013: 3,709,034 shares
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371 | 371 | ||||||
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Surplus
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35,050 | 34,912 | ||||||
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Retained earnings
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61,671 | 57,847 | ||||||
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Treasury stock, at cost: 2014: 71,297 shares, 2013: 80,438 shares
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(1,892 | ) | (2,345 | ) | ||||
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Accumulated other comprehensive income (loss)
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(1,000 | ) | 2,135 | |||||
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TOTAL STOCKHOLDERS' EQUITY
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94,200 | 92,920 | ||||||
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TOTAL LIABILITIES AND
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STOCKHOLDERS' EQUITY
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$ | 703,234 | $ | 680,753 | ||||
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NORWOOD FINANCIAL CORP.
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Consolidated Statements of Income
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(dollars in thousands, except per share data)
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(unaudited)
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Three Months Ended March 31
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2014
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2013
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INTEREST INCOME
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Loans receivable, including fees
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$ | 5,980 | $ | 6,186 | ||||
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Securities
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987 | 868 | ||||||
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Other
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1 | 3 | ||||||
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Total Interest income
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6,968 | 7,057 | ||||||
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INTEREST EXPENSE
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Deposits
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635 | 754 | ||||||
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Short-term borrowings
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22 | 12 | ||||||
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Other borrowings
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166 | 190 | ||||||
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Total Interest expense
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823 | 956 | ||||||
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NET INTEREST INCOME
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6,145 | 6,101 | ||||||
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PROVISION FOR LOAN LOSSES
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420 | 800 | ||||||
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
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5,725 | 5,301 | ||||||
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OTHER INCOME
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Service charges and fees
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575 | 592 | ||||||
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Income from fiduciary activities
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104 | 85 | ||||||
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Net realized gains on sales of securities
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95 | 138 | ||||||
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Gains on sale of loans
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39 | 11 | ||||||
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Earnings and proceeds on life insurance policies
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168 | 925 | ||||||
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Other
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71 | 126 | ||||||
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Total other income
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1,053 | 1,877 | ||||||
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OTHER EXPENSES
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Salaries and employee benefits
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2,165 | 2,211 | ||||||
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Occupancy, furniture and equipment
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578 | 529 | ||||||
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Data processing related
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212 | 221 | ||||||
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Taxes, other than income
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165 | 174 | ||||||
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Professional Fees
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165 | 187 | ||||||
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FDIC Insurance assessment
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114 | 111 | ||||||
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Foreclosed real estate owned
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65 | 191 | ||||||
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Other
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668 | 677 | ||||||
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Total other expenses
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4,132 | 4,301 | ||||||
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INCOME BEFORE TAX
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2,646 | 2,877 | ||||||
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INCOME TAX EXPENSE
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682 | 569 | ||||||
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NET INCOME
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$ | 1,964 | $ | 2,308 | ||||
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Basic earnings per share
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$ | 0.54 | $ | 0.64 | ||||
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Diluted earnings per share
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$ | 0.54 | $ | 0.63 | ||||
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NORWOOD FINANCIAL CORP.
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Financial Highlights (Unaudited)
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(dollars in thousands, except per share data)
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For the Three Months Ended March 31
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2014
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2013
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||||||
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Net interest income
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$ | 6,145 | $ | 6,101 | ||||
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Net income
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1,964 | 2,308 | ||||||
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Net interest spread (fully taxable equivalent)
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3.77 | % | 3.91 | % | ||||
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Net interest margin (fully taxable equivalent)
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3.91 | % | 4.07 | % | ||||
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Return on average assets
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1.13 | % | 1.39 | % | ||||
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Return on average equity
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8.46 | % | 10.02 | % | ||||
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Basic earnings per share
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$ | 0.54 | $ | 0.64 | ||||
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Diluted earnings per share
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$ | 0.54 | $ | 0.63 | ||||
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As of March 31
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||||||||
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Total assets
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$ | 703,234 | $ | 680,753 | ||||
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Total loans receivable
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496,016 | 478,663 | ||||||
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Allowance for loan losses
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5,727 | 5,726 | ||||||
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Total deposits
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540,076 | 535,632 | ||||||
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Stockholders' equity
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94,200 | 92,920 | ||||||
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Trust assets under management
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129,739 | 118,091 | ||||||
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Book value per share
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$ | 25.88 | $ | 25.66 | ||||
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Equity to total assets
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13.40 | % | 13.65 | % | ||||
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Allowance to total loans receivable
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1.15 | % | 1.20 | % | ||||
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Nonperforming loans to total loans
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1.92 | % | 2.63 | % | ||||
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Nonperforming assets to total assets
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1.55 | % | 2.01 | % | ||||
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NORWOOD FINANCIAL CORP.
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Consolidated Balance Sheets (unaudited)
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(dollars in thousands)
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March 31
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December 31
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September 30
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June 30
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March 31
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2014
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2013
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2013
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2013
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2013
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ASSETS
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Cash and due from banks
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$ | 8,607 | $ | 7,528 | $ | 15,193 | $ | 9,872 | $ | 6,763 | ||||||||||
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Interest-bearing deposits with banks
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142 | 335 | 12,221 | 17,425 | 9,182 | |||||||||||||||
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Cash and cash equivalents
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8,749 | 7,863 | 27,414 | 27,297 | 15,945 | |||||||||||||||
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Securities available for sale
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156,165 | 158,132 | 150,904 | 150,750 | 148,598 | |||||||||||||||
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Securities held to maturity
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175 | 174 | 174 | 173 | 173 | |||||||||||||||
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Loans receivable (net of unearned income)
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496,016 | 503,097 | 486,968 | 480,715 | 478,663 | |||||||||||||||
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Less: Allowance for loan losses
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5,727 | 5,708 | 5,558 | 5,749 | 5,726 | |||||||||||||||
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Net loans receivable
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490,289 | 497,389 | 481,410 | 474,966 | 472,937 | |||||||||||||||
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Regulatory stock, at cost
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2,741 | 2,877 | 2,141 | 2,527 | 2,533 | |||||||||||||||
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Bank owned life insurance
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17,930 | 17,790 | 14,653 | 14,527 | 14,402 | |||||||||||||||
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Bank premises and equipment, net
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7,031 | 7,125 | 7,250 | 7,206 | 7,191 | |||||||||||||||
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Foreclosed real estate owned
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1,364 | 1,009 | 993 | 1,297 | 1,099 | |||||||||||||||
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Goodwill and other intangibles
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10,192 | 10,225 | 10,258 | 10,290 | 10,325 | |||||||||||||||
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Other assets
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8,598 | 8,650 | 8,574 | 8,573 | 7,550 | |||||||||||||||
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TOTAL ASSETS
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$ | 703,234 | $ | 711,234 | $ | 703,771 | $ | 697,606 | $ | 680,753 | ||||||||||
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LIABILITIES
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Deposits:
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Non-interest bearing demand
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$ | 93,400 | $ | 92,684 | $ | 101,632 | $ | 93,881 | $ | 84,357 | ||||||||||
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Interest-bearing deposits
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446,676 | 448,498 | 447,066 | 456,269 | 451,275 | |||||||||||||||
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Total deposits
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540,076 | 541,182 | 548,698 | 550,150 | 535,632 | |||||||||||||||
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Other borrowings
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63,746 | 73,675 | 58,422 | 52,225 | 47,202 | |||||||||||||||
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Other liabilities
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5,212 | 4,513 | 5,305 | 4,771 | 4,999 | |||||||||||||||
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TOTAL LIABILITIES
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609,034 | 619,370 | 612,425 | 607,146 | 587,833 | |||||||||||||||
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STOCKHOLDERS' EQUITY
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94,200 | 91,864 | 91,346 | 90,460 | 92,920 | |||||||||||||||
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TOTAL LIABILITIES AND
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||||||||||||||||||||
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STOCKHOLDERS' EQUITY
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$ | 703,234 | $ | 711,234 | $ | 703,771 | $ | 697,606 | $ | 680,753 | ||||||||||
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NORWOOD FINANCIAL CORP.
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Consolidated Statements of Income (unaudited)
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(dollars in thousands, except per share data)
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March 31
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December 31
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Sept 30
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June 30
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March 31
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Three months ended
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2014
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2013
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2013
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2013
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2013
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INTEREST INCOME
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Loans receivable, including fees
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$ | 5,980 | $ | 6,019 | $ | 6,202 | $ | 6,169 | $ | 6,186 | ||||||||||
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Securities
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987 | 972 | 939 | 877 | 868 | |||||||||||||||
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Other
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1 | 9 | 5 | 10 | 3 | |||||||||||||||
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Total interest income
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6,968 | 7,000 | 7,146 | 7,056 | 7,057 | |||||||||||||||
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INTEREST EXPENSE
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Deposits
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635 | 674 | 701 | 719 | 754 | |||||||||||||||
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Borrowings
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188 | 181 | 175 | 193 | 202 | |||||||||||||||
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Total interest expense
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823 | 855 | 876 | 912 | 956 | |||||||||||||||
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NET INTEREST INCOME
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6,145 | 6,145 | 6,270 | 6,144 | 6,101 | |||||||||||||||
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PROVISION FOR LOAN LOSSES
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420 | 400 | 400 | 800 | 800 | |||||||||||||||
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NET INTEREST INCOME AFTER PROVISION
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||||||||||||||||||||
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FOR LOAN LOSSES
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5,725 | 5,745 | 5,870 | 5,344 | 5,301 | |||||||||||||||
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OTHER INCOME
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Service charges and fees
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575 | 578 | 614 | 620 | 592 | |||||||||||||||
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Income from fiduciary activities
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104 | 94 | 111 | 89 | 85 | |||||||||||||||
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Net realized gains on sales of securities
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95 | 291 | 198 | 254 | 138 | |||||||||||||||
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Gains (losses) on sale of loans and servicing rights
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39 | 121 | (12 | ) | 1 | 11 | ||||||||||||||
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Earnings and proceeds on life insurance
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168 | 162 | 150 | 148 | 925 | |||||||||||||||
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Other
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71 | 64 | 155 | 100 | 126 | |||||||||||||||
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Total other income
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1,053 | 1,310 | 1,216 | 1,212 | 1,877 | |||||||||||||||
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OTHER EXPENSES
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Salaries and employee benefits
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2,165 | 2,009 | 2,103 | 2,124 | 2,211 | |||||||||||||||
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Occupancy, furniture and equipment, net
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578 | 550 | 507 | 550 | 529 | |||||||||||||||
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Foreclosed real estate owned
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65 | 73 | 217 | 86 | 191 | |||||||||||||||
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FDIC insurance assessment
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114 | 109 | 114 | 110 | 111 | |||||||||||||||
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Other
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1,210 | 1,357 | 1,232 | 1,263 | 1,259 | |||||||||||||||
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Total other expenses
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4,132 | 4,098 | 4,173 | 4,133 | 4,301 | |||||||||||||||
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INCOME BEFORE TAX
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2,646 | 2,957 | 2,913 | 2,423 | 2,877 | |||||||||||||||
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INCOME TAX EXPENSE
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682 | 776 | 777 | 584 | 569 | |||||||||||||||
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NET INCOME
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$ | 1,964 | $ | 2,181 | $ | 2,136 | $ | 1,839 | $ | 2,308 | ||||||||||
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Basic earnings per share
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$ | 0.54 | $ | 0.60 | $ | 0.59 | $ | 0.51 | $ | 0.64 | ||||||||||
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Diluted earnings per share
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$ | 0.54 | $ | 0.60 | $ | 0.59 | $ | 0.51 | $ | 0.63 | ||||||||||
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Book Value per share
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$ | 25.88 | $ | 25.43 | $ | 25.54 | $ | 24.98 | $ | 25.66 | ||||||||||
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Return on average equity (annualized)
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8.46 | % | 9.33 | % | 9.33 | % | 7.87 | % | 10.02 | % | ||||||||||
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Return on average assets (annualized)
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1.13 | % | 1.23 | % | 1.22 | % | 1.07 | % | 1.39 | % | ||||||||||
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Net interest spread (fte)
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3.77 | % | 3.76 | % | 3.89 | % | 3.83 | % | 3.91 | % | ||||||||||
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Net interest margin (fte)
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3.91 | % | 3.91 | % | 4.05 | % | 3.99 | % | 4.07 | % | ||||||||||
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Allowance for loan losses to total loans
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1.15 | % | 1.13 | % | 1.14 | % | 1.20 | % | 1.20 | % | ||||||||||
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Net charge-offs to average loans (annualized)
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0.32 | % | 0.21 | % | 0.49 | % | 0.65 | % | 0.48 | % | ||||||||||
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Nonperforming loans to total loans
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1.92 | % | 1.90 | % | 2.11 | % | 2.41 | % | 2.63 | % | ||||||||||
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Nonperforming assets to total assets
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1.55 | % | 1.48 | % | 1.60 | % | 1.85 | % | 2.01 | % | ||||||||||