Norwood Financial Corp Announces Earnings For The Fourth Quarter And Year

HONESDALE, Pa., Jan. 25, 2013 (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, 2012 of $1,759,000. This represents a decrease of $238,000 from the $1,997,000 earned in the comparable period of 2011 due primarily to increased loan loss provisions. Earnings per share (fully diluted) were $.53 and $.61 for the three-month periods, respectively. Net interest income before the provision for loan losses declined $147,000 over the same period of last year, while other income increased $88,000. The provision for loan losses was $800,000 in the current three-month period compared to $500,000 in the same period of last year, while operating expenses increased $64,000. Annualized return on average assets for the current quarter was 1.02% with an annualized return on equity of 7.54%. For the year ended December 31, 2012 net income totaled a record level of $8,403,000, an increase of $1,047,000 over the $7,356,000 earned in the prior year as an increase in net interest income and securities gains offset higher loan loss provisions and increased operating expenses. Earnings per share on a fully diluted basis were $2.56 for 2012, compared to $2.39 in 2011. The return on average assets for the year was 1.23% with a return on average equity of 9.22% compared to 1.18% and 9.26%, respectively, in 2011. 

Total assets were $672.3 million as of December 31, 2012. Loans receivable totaled $476.7 million as of December 31, 2012, with total deposits of $524.4 million and stockholders' equity of $92.4 million. The Company's capital position remains "well capitalized" in accordance with risk-based capital guidelines established by bank regulators.

Loans receivable grew $18.8 million from the prior year-end due primarily to growth in commercial real estate loans, notwithstanding the sale of $7.0 million of fixed rate residential mortgages for purposes of interest rate risk management.  Excluding these sales, residential mortgage loans would have increased $10.6 million. Total commercial loans grew $15.0 million in 2012, while total installment loans increased $200,000. As of December 31, 2012, total non-performing loans were $13.2 million and represented 2.77% of total loans compared to $7.8 million, or 1.71% as of December 31, 2011. The increase was due primarily to one credit secured by commercial real estate that was transferred to nonaccrual status during the year. For the three months and year ended December 31, 2012, net charge-offs totaled $639,000 and $2,406,000, respectively, compared to $387,000 and $1,733,000, respectively, for the corresponding periods in 2011. The increase in charge-offs in 2012 is due primarily to one credit which has been transferred to non-accrual status based on the borrower's inability to make scheduled payments. Based on the increase in charge-offs and non-performing loans, the Company determined that it would be appropriate to provide $800,000 and $2,450,000 for potential future losses for the three and twelve month periods, respectively, compared to $500,000 in the similar quarter of last year and $1,575,000 for the year of  2011. As of December 31, 2012, the allowance for loan losses totaled $5,502,000 and 1.15% of total loans compared to $5,458,000 and 1.19% of total loans at December 31, 2011. 

Net interest income (fully taxable equivalent) totaled $6,377,000 for the three months ended December 31, 2012, a decrease of $171,000 compared to the same period in 2011. Net interest margin (fte) for the three months ended December 31, 2012 was 3.98% decreasing from 4.21% for the similar period in 2011. The decrease in net interest margin was principally due to growth at historically low interest rate levels and the increase in non-performing loans which resulted in a thirty-six basis point decrease in the yield earned on assets compared to a thirteen basis point reduction in the cost of interest bearing liabilities. For the year, net interest income (fte) totaled $26,006,000, an increase of $2,242,000 or 9.43% over 2011. The net interest margin (fte) improved 2 basis points to 4.10% in 2012. 

Other income for the three months ended December 31, 2012 totaled $1,116,000 compared to $1,028,000 for the similar period in 2011. The increase was due primarily to a $76,000 increase in commissions received on sales of investment products. Other income for the year ended December 31, 2012 totaled $5,206,000 compared to $4,735,000 in 2011, an increase of $471,000. Gains on the sale of investment securities increased $446,000 while earnings on bank owned life insurance policies improved $76,000 in 2012 compared to 2011.  The 2012 period includes $211,000 in gains on sales of loans and servicing rights on the sale of $7.0 million of residential mortgage loans compared to $271,000 in similar gains on sales of $8.7 million of mortgage loans and servicing rights in the 2011 period.

Other expenses totaled $4,053,000 for the three months ended December 31, 2012, compared to $3,989,000 in the similar period of 2011. Salaries and benefit costs decreased $33,000 and occupancy and equipment expense declined $36,000 compared to the same period of last year while foreclosed real estate costs decreased $137,000. The increase in other operating expenses was related to a one-time benefit realized in 2011 related to the acquisition of North Penn Bancorp, Inc. ("North Penn"). For the year ended December 31, 2012, other expenses totaled $16,081,000 compared to $15,813,000 for the similar period in 2011, an increase of $268,000. Employment and occupancy costs rose a combined $713,000 over the 2011 total due primarily to locations and staff added from the acquisition. All other expenses decreased $445,000 compared to 2011 due to approximately $800,000 of merger related costs incurred in 2011, and a $361,000 decrease in foreclosed real estate expenses.

Mr. Critelli commented, "We are pleased with the results we achieved in 2012, which represents a record level of earnings. In addition, we increased our cash dividend for the twenty-first consecutive year in 2012 to $1.21 per share, which results in a dividend yield in excess of 4.00% based on our recent closing stock price.  These results reflect the positive impact from the acquisition of North Penn in 2011. A portion of the benefits have been partially offset by continued pressure related to the fragile economy on sectors of our customer base which has resulted in increases in non-performing loans, net charge-offs and loan loss provisions. As we continue to move through 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 recent difficulties."

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".

The Norwood Financial Corp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13244

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
  2012 2011 2012 2011
Net interest income $6,079 $6,226 $24,764 $22,588
Tax equivalent basis adjustment using 34% marginal tax rate 298 322 1,242 1,176
Net interest income on a fully taxable equivalent basis $6,377 $6,548 $26,006 $23,764
       
       
NORWOOD FINANCIAL CORP.      
Consolidated Balance Sheets      
(dollars in thousands, except share data)      
(unaudited)      
  December 31      
  2012 2011      
ASSETS          
Cash and due from banks  $ 10,867  $ 8,974      
Interest-bearing deposits with banks 1,428 12,449      
Federal funds sold 0 0      
Cash and cash equivalents 12,295 21,423      
           
Securities available for sale 145,390 150,181      
Securities held to maturity, fair value 2012: $177 and 2011: $177 173 171      
Loans receivable (net of unearned Income) 476,710 457,907      
Less: Allowance for loan losses 5,502 5,458      
Net loans receivable 471,208 452,449      
Regulatory stock, at cost 2,630 3,675      
Bank premises and equipment, net 7,326 7,479      
Bank owned life insurance 15,357 11,887      
Foreclosed real estate owned 852 2,910      
Accrued interest receivable 2,393 2,468      
Goodwill 9,715 9,715      
Other intangible assets 647 800      
Other assets 4,313 5,656      
TOTAL ASSETS  $ 672,299  $ 668,814      
           
LIABILITIES          
Deposits:          
Non-interest bearing demand  $ 82,075  $ 71,959      
Interest-bearing 442,350 453,808      
Total deposits 524,425 525,767      
Short-term borrowings 28,697 21,794      
Other borrowings 22,487 27,670      
Accrued interest payable 1,242 1,321      
Other liabilities 3,027 4,201      
TOTAL LIABILITIES 579,878 580,753      
           
STOCKHOLDERS' EQUITY          
Common Stock, $.10 par value, authorized 10,000,000 shares issued: 2012: 3,371,849 shares, 2011: 3,371,866 shares 337 337      
Surplus 24,737 24,660      
Retained earnings 66,742 62,308      
Treasury stock, at cost: 2012: 75,426 shares, 2011: 87,370 shares (2,192) (2,559)      
Accumulated other comprehensive income 2,797 3,315      
TOTAL STOCKHOLDERS' EQUITY 92,421 88,061      
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 672,299  $ 668,814      
           
           
           
NORWOOD FINANCIAL CORP.  
Consolidated Statements of Income  
(dollars in thousands, except per share data)  
(unaudited)          
  Three Months Ended December 31 Year Ended December 31  
  2012 2011 2012 2011  
INTEREST INCOME          
Loans receivable, including fees  $ 6,261  $ 6,372  $ 25,494  $ 23,289  
Securities 884 1,087 3,888 4,428  
Other 12 11 32 53  
  Total Interest income 7,157 7,470 29,414 27,770  
           
INTEREST EXPENSE          
Deposits 860 980 3,660 3,851  
Short-term borrowings 15 17 53 92  
Other borrowings 203 247 937 1,239  
  Total Interest expense 1,078 1,244 4,650 5,182  
NET INTEREST INCOME 6,079 6,226 24,764 22,588  
PROVISION FOR LOAN LOSSES 800 500 2,450 1,575  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,279 5,726 22,314 21,013  
           
OTHER INCOME          
Service charges and fees 563 533 2,237 2,255  
Income from fiduciary activities 81 85 355 409  
Net realized gains on sales of securities 100 205 1,419 973  
Gains on sale of loans and servicing rights 67 (11) 211 271  
Earnings and proceeds on life insurance policies 144 133 539 463  
Other 161 83 445 364  
          Total other income 1,116 1,028 5,206 4,735  
           
OTHER EXPENSES          
Salaries and employee benefits 2,103 2,136 8,403 7,848  
Occupancy, furniture and equipment 506 542 1,995 1,837  
Data processing related 227 220 897 855  
Taxes, other than income 148 121 599 535  
Professional Fees 209 266 811 1,283  
FDIC Insurance assessment 108 76 398 393  
Foreclosed real estate owned 33 170 217 578  
Other 719 458 2,761 2,484  
              Total other expenses 4,053 3,989 16,081 15,813  
           
INCOME BEFORE TAX 2,342 2,765 11,439 9,935  
INCOME TAX EXPENSE 583 768 3,036 2,579  
NET INCOME  $ 1,759  $ 1,997  $ 8,403  $ 7,356  
           
Basic earnings per share  $ 0.53  $ 0.61  $ 2.56  $ 2.39  
           
Diluted earnings per share  $ 0.53  $ 0.61  $ 2.56  $ 2.39  
           
           
           
NORWOOD FINANCIAL CORP.      
Financial Highlights (Unaudited)      
(dollars in thousands, except per share data)      
           
For the Three Months Ended December 31 2012 2011      
           
Net interest income  $ 6,079  $ 6,226      
Net income 1,759 1,997      
           
Net interest spread (fully taxable equivalent) 3.80% 4.03%      
Net interest margin (fully taxable equivalent) 3.98% 4.21%      
Return on average assets 1.02% 1.18%      
Return on average equity 7.54% 9.03%      
Basic earnings per share  $ 0.53  $ 0.61      
Diluted earnings per share  $ 0.53  $ 0.61      
           
For the Year Ended December 31          
           
Net interest income  $ 24,764  $ 22,588      
Net income 8,403 7,356      
           
Net interest spread (fully taxable equivalent) 3.91% 3.86%      
Net interest margin (fully taxable equivalent) 4.10% 4.08%      
Return on average assets 1.23% 1.18%      
Return on average equity 9.22% 9.26%      
Basic earnings per share  $ 2.56  $ 2.39      
Diluted earnings per share  $ 2.56  $ 2.39      
           
As of December 31          
           
Total assets  $ 672,299  $ 668,814      
Total loans receivable 476,710 457,907      
Allowance for loan losses 5,502 5,458      
Total deposits 524,425 525,767      
Stockholders' equity 92,421 88,061      
Trust assets under management 112,081 107,696      
           
Book value per share  $ 28.04  $ 26.81      
Equity to total assets 13.75% 13.17%      
Allowance to total loans receivable 1.15% 1.19%      
Nonperforming loans to total loans 2.77% 1.71%      
Nonperforming assets to total assets 2.09% 1.60%      
           
           
           
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
Three months ended Dec 31 2012 Sept 30 2012 June 30 2012 March 31 2012 Dec 31 2011
INTEREST INCOME          
Loans receivable, including fees  $ 6,261  $ 6,429  $ 6,431  $ 6,373  $ 6,372
Securities 884 971 1,007 1,026 1,087
Other 12 9 7 4 11
Total Interest income 7,157 7,409 7,445 7,403 7,470
           
INTEREST EXPENSE          
Deposits 860 897 942 961 980
Borrowings 218 260 256 255 264
Total Interest expense 1,078 1,157 1,198 1,216 1,244
NET INTEREST INCOME 6,079 6,252 6,247 6,187 6,226
PROVISION FOR LOAN LOSSES 800 900 400 350 500
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,279 5,352 5,847 5,837 5,726
           
OTHER INCOME          
Service charges and fees 563 561 559 554 533
Income from fiduciary activities 81 96 80 98 85
Net realized gains (losses) on sales of securities 100 631 285 402 205
Gains on sale of loans and servicing rights 67 83 66 (6) (11)
Earnings and proceeds on life insurance 144 132 131 132 133
Other 161 88 85 111 83
    Total other income 1,116 1,591 1,206 1,291 1,028
           
OTHER EXPENSES          
Salaries and employee benefits 2,103 2,102 2,047 2,151 2,136
Occupancy, furniture and equipment , net 506 512 490 487 542
Foreclosed real estate owned 33 (23) 85 122 170
FDIC insurance assessment 108 94 97 99 76
Other 1,303 1,272 1,238 1,288 1,065
      Total other expenses 4,053 3,957 3,957 4,147 3,989
           
INCOME BEFORE TAX 2,342 2,986 3,096 2,981 2,765
INCOME TAX EXPENSE 583 786 838 795 768
NET INCOME  $ 1,759  $ 2,200  $ 2,258  $ 2,186  $ 1,997
           
Basic earnings per share  $ 0.53  $ 0.67  $ 0.69  $ 0.67  $ 0.61
           
Diluted earnings per share  $ 0.53  $ 0.67  $ 0.69  $ 0.67  $ 0.61
CONTACT: William S. Lance         Executive Vice President &         Chief Financial Officer         NORWOOD FINANCIAL CORP.         570-253-8505         www.waynebank.com

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