EX-99.1 2 ex99-1.htm EXHIBIT 99.1 - PRESS RELEASE ex99-1.htm

FOR IMMEDIATE RELEASE
NORWOOD FINANCIAL CORP
ANNOUNCES SECOND QUARTER EARNINGS

July 22, 2014-Honesdale, PA
Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp (Nasdaq Global Market-NWFL) and its subsidiary, Wayne Bank, announced earnings for the three months ended June 30, 2014 of $2,034,000.  This represents an increase of $195,000, or 10.6%, from the $1,839,000 earned in the similar period of 2013 due primarily to a decrease in the provision for loan losses and a higher level of gains on sales of securities.  Earnings per share (fully diluted) were $.56 in the 2014 period, increasing from the $.51 earned in the similar period of 2013.  Annualized return on average assets for the three months ended June 30, 2014 was 1.15% with an annualized return on average equity of 8.49%.  Net income for the six months ended June 30, 2014 totaled $3,998,000, which is $149,000 lower than the same six-month period of last year due primarily to proceeds on life insurance received in the first quarter of 2013.  Earnings per share (fully diluted) for the six months ended June 30, 2014 and 2013 totaled $1.10 and $1.14 per share, respectively.
Total assets as of June 30, 2014 were $716.9 million with loans receivable of $502.3 million, deposits of $554.7 million and stockholders’ equity of $96.2 million.
Loans receivable increased $21.6 million since June 30, 2013.  Commercial loans increased $18.2 million which includes a $10.7 million increase in municipal financing and a $2.5 million increase in real estate related loans.  Retail loans grew $3.4 million during the period due to growth in home equity lending and indirect auto loans.  The Company also sold $4.6 million of fixed-rate residential mortgages during the period, principally with 30-year terms, for purposes of interest rate risk management.  Total deposits increased
 
 
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$4.6 million over the past twelve months which includes a $10.1 million increase in non-interest bearing demand deposits.  Stockholders’ equity increased $5.7 million over the past year, due principally to the retention of earnings.
Non-performing assets, which include non-performing loans and foreclosed assets, totaled $11.8 million and represented 1.65% of total assets as of June 30, 2014 compared to $12.9 million, or 1.85% of total assets, as of June 30, 2013.  Net charge-offs were $537,000 for the quarter and totaled $937,000 for the six months ended June 30, 2014 compared to $777,000 and $1,353,000, respectively, for the similar periods in 2013.  Based on the levels of non-performing assets and net charge-offs, the Company determined that it was appropriate to provide $420,000 and $840,000 for potential future loan losses for the three and six month periods ended June 30, 2014, respectively, compared to $800,000 and $1.6 million, respectively, for the similar periods in 2013.  The allowance for loan losses totaled $5,611,000 as of June 30, 2014 and represented 1.12% of total loans outstanding, compared to $5,749,000 and 1.20% on June 30, 2013.
For the three months ended June 30, 2014, net interest income, on a fully taxable equivalent basis (fte), totaled $6,489,000, an increase of $59,000 compared to the similar period in 2013.  Net interest margin (fte) for the 2014 period was 3.91% decreasing from 3.99% for the similar period in 2013 due to a decrease of 16 basis points in the yield on interest-earning assets which more than offset the 9 basis point decrease in the cost of funds.  The reduced margin was due primarily to a 37 basis point decrease in the yield earned on loans as new growth and modifications of existing credits continues to negatively impact the net interest margin.  Net interest income (fte) for the six months ended June 30, 2014 totaled $12,951,000, which was a $134,000 higher than the similar period in 2013.  The net interest margin (fte) was 3.91% in the 2014 period and 4.03%
 
 
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during the first six months of 2013.  Decreasing yields on loans contributed to the reduced net interest margin.
Other income for the three months ended June 30, 2014 totaled $1,468,000 compared to $1,212,000 for the similar period in 2013.  Net gains from securities sales increased $255,000 compared to the prior-year period.  For the six months ended June 30, 2014, other income totaled $2,521,000 compared to $3,089,000 in the 2013 period.  Other income in the 2013 period includes a non-recurring gain of $770,000 from proceeds on a bank-owned life insurance policy.  Gains on the sales of investment securities totaled $603,000 on sales of $31.9 million for the 2014 period compared to $392,000 on sales of $15.3 million in the 2013 period.
Other expenses totaled $4,473,000 for the three months ended June 30, 2014, an increase of $340,000, from the $4,133,000 reported in the similar period of 2013.  The increase was principally due to costs and write-downs on properties carried in foreclosed real estate owned.  Excluding these costs, all other operating expenses increased $30,000, net.  For the six months ended June 30, 2014, other expenses totaled $8,605,000 compared to $8,434,000 for the similar period in 2013, an increase of $171,000, or 2.0%.  Foreclosed real estate expenses increased $184,000 over the first half of last year, accounting for the increase.
Mr. Critelli commented, “Our earnings for the second quarter reflect an increase of over 10% when compared to 2013.  However, we are continuing to feel the negative impact of a slow economy, primarily in the cost of maintaining and disposing of foreclosed properties.  Working with borrowers to resolve problem loans will remain a top priority throughout 2014.  The ongoing low interest rates, and a competitive lending environment also continues to place pressure on our net interest margin.  However, our year-to-date
 
 
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margin and capital levels remain well above peer.  We look forward to serving our growing base of stockholders and customers as the Northeastern Pennsylvania economy slowly recovers from the extended downturn.”
Norwood Financial Corp., is the parent company of Wayne Bank, which operates 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.
 
 
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Non-GAAP Financial Measures
This release references tax-equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure.  Tax-equivalent net interest income is derived from GAAP net interest income using an assumed tax rate of 34%.  We believe the presentation of net interest income on a tax–equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.
The following reconciles net interest income to net interest income on a fully taxable equivalent basis:
 
   
Three months ended
June 30
   
Six months ended
June 30
 
(dollars in thousands)
 
2014
   
2013
   
2014
   
2013
 
                         
Net Interest Income
  $ 6,155     $ 6,144     $ 12,300     $ 12,245  
Taxable equivalent basis adjustment
  using 34% marginal tax rate
    334       286       651       572  
Net interest income on a fully taxable
  equivalent basis
  $ 6,489     $ 6,430     $ 12,951     $ 12,817  
                                 
                                 

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.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)

    June 30,  
   
2014
   
2013
 
ASSETS
 
 
   
 
 
   Cash and due from banks
  $ 12,196     $ 9,872  
   Interest-bearing deposits with banks
    3,182       17,425  
          Cash and cash equivalents
    15,378       27,297  
                 
  Securities available for sale
    154,925       150,750  
  Securities held to maturity,  fair value 2014: $0 and 2013:  $177
    -       173  
  Loans receivable (net of unearned Income)
    502,316       480,715  
  Less: Allowance for loan losses
    5,611       5,749  
     Net loans receivable
    496,705       474,966  
  Regulatory stock, at cost
    2,437       2,527  
  Bank premises and equipment, net
    6,910       7,206  
  Bank owned life insurance
    18,002       14,527  
  Foreclosed real estate owned
    4,293       1,297  
  Accrued interest receivable
    2,405       2,488  
  Goodwill
    9,715       9,715  
  Other intangible assets
    446       575  
  Deferred tax asset
    3,764       4,454  
  Other assets
    1,882       1,631  
          TOTAL ASSETS
  $ 716,862     $ 697,606  
                 
LIABILITIES
               
   Deposits:
               
     Non-interest bearing demand
  $ 103,954     $ 93,881  
     Interest-bearing
    450,760       456,269  
          Total deposits
    554,714       550,150  
  Short-term borrowings
    38,009       32,075  
  Other borrowings
    22,983       20,150  
  Accrued interest payable
    937       1,037  
  Other liabilities
    4,017       3,734  
            TOTAL LIABILITIES
    620,660       607,146  
                 
STOCKHOLDERS' EQUITY
               
Common Stock, $.10 par value, authorized 10,000,000 shares
         
         issued: 2014: 3,708,718  shares,  2013: 3,708,718 shares
    371       371  
  Surplus
    35,091       34,949  
  Retained earnings
    62,613       58,626  
  Treasury stock, at cost: 2014: 70,747 shares, 2013: 86,749 shares
    (1,878 )     (2,299 )
  Accumulated other comprehensive income (loss)
    5       (1,187 )
           TOTAL STOCKHOLDERS' EQUITY
    96,202       90,460  
                 
          TOTAL LIABILITIES AND
               
                 STOCKHOLDERS' EQUITY
  $ 716,862     $ 697,606  

 
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NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)

 
   
Three Months Ended June 30
   
Six Months Ended June 30
 
   
2014
   
2013
   
2014
   
2013
 
INTEREST INCOME
                       
    Loans receivable, including fees
  $ 5,933     $ 6,169     $ 11,913     $ 12,355  
    Securities
    1,025       877       2,013       1,746  
    Other
    2       10       2       12  
         Total Interest income
    6,960       7,056       13,928       14,113  
                                 
INTEREST EXPENSE
                               
   Deposits
    618       719       1,253       1,473  
   Short-term borrowings
    20       15       42       27  
   Other borrowings
    167       178       333       368  
        Total Interest expense
    805       912       1,628       1,868  
NET INTEREST INCOME
    6,155       6,144       12,300       12,245  
PROVISION FOR LOAN LOSSES
    420       800       840       1,600  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    5,735       5,344       11,460       10,645  
 
                               
OTHER INCOME
                               
    Service charges and fees
    583       620       1,159       1,221  
    Income from fiduciary activities
    99       89       203       174  
    Net realized gains on sales of securities
    509       254       603       392  
    Gains on sale of loans
    26       1       66       3  
    Earnings and proceeds on life insurance policies
    175       148       343       1,073  
    Other
    76       100       147       226  
           Total other income
    1,468       1,212       2,521       3,089  
                                 
OTHER EXPENSES
                               
      Salaries and  employee benefits
    2,172       2,124       4,336       4,335  
      Occupancy, furniture and equipment
    518       550       1,096       1,079  
      Data processing related
    229       230       441       452  
      Taxes, other than income
    161       179       326       352  
      Professional Fees
    174       172       340       359  
      FDIC Insurance assessment
    102       110       216       221  
      Foreclosed real estate owned
    396       86       461       277  
      Other
    721       682       1,389       1,359  
             Total other expenses
    4,473       4,133       8,605       8,434  
                                 
INCOME BEFORE TAX
    2,730       2,423       5,376       5,300  
INCOME TAX EXPENSE
    696       584       1,378       1,153  
NET INCOME
  $ 2,034     $ 1,839     $ 3,998     $ 4,147  
                                 
Basic earnings per share
  $ 0.56     $ 0.51     $ 1.10     $ 1.15  
                                 
Diluted earnings per share
  $ 0.56     $ 0.51     $ 1.10     $ 1.14  

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

 
For the Three Months Ended June 30
 
2014
   
2013
 
             
Net interest income
  $ 6,155     $ 6,144  
Net income
    2,034       1,839  
                 
Net interest spread (fully taxable equivalent)
    3.77 %     3.83 %
Net interest margin (fully taxable equivalent)
    3.91 %     3.99 %
Return on average assets
    1.15 %     1.07 %
Return on average equity
    8.49 %     7.87 %
Basic earnings per share
  $ 0.56     $ 0.51  
Diluted earnings per share
  $ 0.56     $ 0.51  
                 
                 
For the Six Months Ended June 30
               
                 
Net interest income
  $ 12,300     $ 12,245  
Net income
    3,998       4,147  
                 
Net interest spread (fully taxable equivalent)
    3.77 %     3.87 %
Net interest margin (fully taxable equivalent)
    3.91 %     4.03 %
Return on average assets
    1.14 %     1.22 %
Return on average equity
    8.48 %     8.94 %
Basic earnings per share
  $ 1.10     $ 1.15  
Diluted earnings per share
  $ 1.10     $ 1.14  
                 
                 
                 
As of June 30
               
                 
Total assets
  $ 716,862     $ 697,606  
Total loans receivable
    502,316       480,715  
Allowance for loan losses
    5,611       5,749  
Total deposits
    554,714       550,150  
Stockholders' equity
    96,202       90,460  
Trust assets under management
    132,760       120,802  
                 
Book value per share
  $ 26.14     $ 24.98  
Equity to total assets
    13.42 %     12.97 %
Allowance to total loans receivable
    1.12 %     1.20 %
Nonperforming loans to total loans
    1.49 %     2.41 %
Nonperforming assets to total assets
    1.65 %     1.85 %

 
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NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)

   
June 30
   
March 31
   
December 31
 
September 30
 
June 30
 
   
2014
   
2014
   
2013
   
2013
   
2013
 
ASSETS
                             
   Cash and due from banks
  $ 12,196     $ 8,607     $ 7,528     $ 15,193     $ 9,872  
   Interest-bearing deposits with banks
    3,182       142       335       12,221       17,425  
        Cash and cash equivalents
    15,378       8,749       7,863       27,414       27,297  
                                         
  Securities available for sale
    154,925       156,165       158,132       150,904       150,750  
  Securities held to maturity
    -       175       174       174       173  
  Loans receivable (net of unearned income)
    502,316       496,016       503,097       486,968       480,715  
   Less: Allowance for loan losses
    5,611       5,727       5,708       5,558       5,749  
     Net loans receivable
    496,705       490,289       497,389       481,410       474,966  
  Regulatory stock, at cost
    2,437       2,741       2,877       2,141       2,527  
  Bank owned life insurance
    18,002       17,930       17,790       14,653       14,527  
  Bank premises and equipment, net
    6,910       7,031       7,125       7,250       7,206  
  Foreclosed real estate owned
    4,293       1,364       1,009       993       1,297  
  Goodwill and other intangibles
    10,161       10,192       10,225       10,258       10,290  
  Other assets
    8,051       8,598       8,650       8,574       8,573  
          TOTAL ASSETS
  $ 716,862     $ 703,234     $ 711,234     $ 703,771     $ 697,606  
                                         
LIABILITIES
                                       
   Deposits:
                                       
     Non-interest bearing demand
  $ 103,954     $ 93,400     $ 92,684     $ 101,632     $ 93,881  
     Interest-bearing deposits
    450,760       446,676       448,498       447,066       456,269  
          Total deposits
    554,714       540,076       541,182       548,698       550,150  
   Other borrowings
    60,992       63,746       73,675       58,422       52,225  
   Other liabilities
    4,954       5,212       4,513       5,305       4,771  
            TOTAL LIABILITIES
    620,660       609,034       619,370       612,425       607,146  
                                         
STOCKHOLDERS' EQUITY
    96,202       94,200       91,864       91,346       90,460  
                                         
          TOTAL LIABILITIES AND
                                       
                 STOCKHOLDERS' EQUITY
  $ 716,862     $ 703,234     $ 711,234     $ 703,771     $ 697,606  
                                         
 
 
 
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NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
 
   
June 30
   
March 31
   
December 31
 
September 30
 
June 30
 
Three months ended
   2014      2014      2013      2013      2013  
INTEREST INCOME
                                       
    Loans receivable, including fees
  $ 5,933     $ 5,980     $ 6,019     $ 6,202     $ 6,169  
    Securities
    1,025       987       972       939       877  
    Other
    2       1       9       5       10  
         Total interest income
    6,960       6,968       7,000       7,146       7,056  
                                         
INTEREST EXPENSE
                                       
    Deposits
    618       635       674       701       719  
    Borrowings
    187       188       181       175       193  
        Total interest expense
    805       823       855       876       912  
NET INTEREST INCOME
    6,155       6,145       6,145       6,270       6,144  
PROVISION FOR LOAN LOSSES
    420       420       400       400       800  
NET INTEREST INCOME AFTER PROVISION
                                       
     FOR LOAN LOSSES
    5,735       5,725       5,745       5,870       5,344  
                                         
OTHER INCOME
                                       
    Service charges and fees
    583       576       578       614       620  
    Income from fiduciary activities
    99       104       94       111       89  
    Net realized gains on sales of securities
    509       95       291       198       254  
    Gains (losses) on sale of loans and servicing rights
    26       39       121       (12 )     1  
    Earnings and proceeds on life insurance  policies
    175       168       162       150       148  
    Other
    76       71       64       155       100  
           Total other income
    1,468       1,053       1,310       1,216       1,212  
                                         
OTHER EXPENSES
                                       
    Salaries and  employee benefits
    2,172       2,165       2,009       2,103       2,124  
    Occupancy, furniture and equipment, net
    518       578       550       507       550  
    Foreclosed real estate owned
    396       65       73       217       86  
    FDIC insurance assessment
    102       114       109       114       110  
    Other
    1,285       1,210       1,357       1,232       1,263  
             Total other expenses
    4,473       4,132       4,098       4,173       4,133  
                                         
INCOME BEFORE TAX
    2,730       2,646       2,957       2,913       2,423  
INCOME TAX EXPENSE
    696       682       776       777       584  
NET INCOME
  $ 2,034     $ 1,964     $ 2,181     $ 2,136     $ 1,839  
                                         
Basic  earnings per share
  $ 0.56     $ 0.54     $ 0.60     $ 0.59     $ 0.51  
 
                                       
Diluted earnings per share
  $ 0.56     $ 0.54     $ 0.60     $ 0.59     $ 0.51  
                                         
Book Value per share
  $ 26.14     $ 25.88     $ 25.43     $ 25.54     $ 24.98  
                                         
Return on average equity (annualized)
    8.49 %     8.46 %     9.33 %     9.33 %     7.87 %
Return on average assets (annualized)
    1.15 %     1.13 %     1.23 %     1.22 %     1.07 %
                                         
Net interest spread (fte)
    3.77 %     3.77 %     3.76 %     3.89 %     3.83 %
Net interest margin (fte)
    3.91 %     3.91 %     3.91 %     4.05 %     3.99 %
                                         
Allowance for loan losses to total loans
    1.12 %     1.15 %     1.13 %     1.14 %     1.20 %
Net charge-offs to average loans (annualized)
    0.43 %     0.32 %     0.21 %     0.49 %     0.65 %
Nonperforming loans to total loans
    1.49 %     1.92 %     1.90 %     2.11 %     2.41 %
Nonperforming assets to total assets
    1.65 %     1.55 %     1.48 %     1.60 %     1.85 %
                                         
 
 10