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| 8-K - FORM 8-K 7-25-12 NORWOOD FINANCIAL CORP. - NORWOOD FINANCIAL CORP | f8k_072512-0160.htm |
FOR IMMEDIATE RELEASE
NORWOOD FINANCIAL CORP
ANNOUNCES SECOND QUARTER EARNINGS
July 25, 2012-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, 2012 of $2,258,000. This represents an increase of $774,000 or 52%, from the $1,484,000 earned in the similar period of 2011. Included in the second quarter of 2011 were approximately $500,000 of expenses related to the acquisition of North Penn Bancorp, Inc. Earnings per share (fully diluted) were $.69 in the 2012 period, increasing from the $.50 earned in the similar period of 2011. Annualized return on average assets for the three months ended June 30, 2012 was 1.33% with an annualized return on average equity of 10.06%. Net income for the six months ended June 30, 2012 totaled $4,444,000, which is $1.3 million higher than the same six month period of last year. Earnings per share (fully diluted) for the six months ended June 30, 2012 and 2011 totaled $1.35 and $1.10 per share, respectively.
Total assets as of June 30, 2012 were $684.9 million with loans receivable of $479.4 million, deposits of $534.2 million and stockholders’ equity of $90.2 million.
Loans receivable increased $14.8 million since June 30, 2011. The commercial loan portfolio, principally real estate related, increased $19.4 million, while retail loans decreased $4.6 million due to a reduction in home equity loans as many were converted to
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permanent financing. The Company also sold $4.4 million of fixed-rate residential mortgages, principally with 30 year terms, for purposes of interest rate risk management.
Non-performing assets, which include non-performing loans and foreclosed assets, totaled $10.1 million and represented 1.48% of total assets as of June 30, 2012 compared to $10.7 million and 1.60% of total assets as of December 31, 2011 and $10.6 million, or 1.50% of total assets, as of June 30, 2011. Net charge-offs were $244,000 for the quarter and totaled $434,000 for the six months ended June 30, 2012 compared to $943,000 and $1.0 million, respectively, for the similar periods in 2011. Based on the level of non-performing assets, the Company determined that it was appropriate to provide $400,000 and $750,000 for potential future loan losses for the three and six month periods ended June 30, 2012, respectively, compared to $430,000 and $650,000, respectively, for the corresponding periods in 2011. The allowance for loan losses totaled $5,775,000 as of June 30, 2012 and represented 1.20% of total loans outstanding, compared to $5,267,000 and 1.13% on June 30, 2011.
For the three months ended June 30, 2012, net interest income, on a fully taxable equivalent basis (fte), totaled $6,565,000, an increase of $972,000 or 17% over the similar period in 2011. The increase can be attributed to the benefits realized from the North Penn transaction. Net interest margin (fte) for the 2012 period was 4.14% increasing from 3.98% for the similar period in 2011 due to a decrease of 22 basis points in the cost of funds which more than offset the 2 basis point decrease in the yield on interest earning assets. Yields on loans in excess of the cost of deposits acquired from North Penn contributed to the improved margin. Net interest income (fte) for the six months ended June 30, 2012 totaled $13,070,000, which was a $2,427,000, or 23% increase, over the
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similar period in 2011. The net interest margin (fte) was 4.16% in the 2012 period and 3.98% during the first six months of 2011.
Other income for the three months ended June 30, 2012 totaled $1,206,000 compared to $993,000 for the similar period in 2011. The increase was due to a $273,000 improvement in gains on the sales of investment securities. For the six months ended June 30, 2012, other income totaled $2,497,000 compared to $2,201,000 in the 2011 period. The 2011 period includes $241,000 of gains on the sale of $6.5 million of residential mortgage loans compared to $60,000 in similar gains on sales of $2.3 million of mortgage loans in the current period. Gains on the sales of investment securities totaled $687,000 on sales of $18.3 million for the 2012 period compared to $224,000 on sales of $10.3 million in the 2011 period. The proceeds from investment securities sales were reinvested to improve credit quality and interest rate risk in the Company’s bond portfolio as well as to fund new loan growth.
Other expenses totaled $3,957,000 for the three months ended June 30, 2012, an increase of $21,000 from the $3,936,000 reported in the similar period of 2011. The increase was due to costs related to the operation of five offices acquired from North Penn in 2011, including a $215,000 increase in salary and benefit costs and an $82,000 increase in occupancy and equipment costs. All other operating expenses increased $212,000 exclusive of the $488,000 of merger-related costs incurred during the same period of last year. For the six months ended June 30, 2012, other expenses totaled $8,104,000 compared to $7,470,000 for the similar period in 2011, an increase of $634,000 due to increased costs of $1.4 million which was partially offset by the $737,000 decrease in merger-related expenses.
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Mr. Critelli commented, “We are very pleased with the results reported for the first half of 2012 which now reflects the full benefit of our acquisition of North Penn which closed on May 31, 2011. Our core earnings are at a record level, our net interest margin remains close to 4.00% and capital levels are well above peer. We believe that we are well positioned to capitalize on opportunities available to us in our new and existing markets. We look forward to serving our growing base of stockholders and customers as our economy slowly recovers from the extended economic 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 interest income and net interest income, which are non-GAAP (Generally Accepted Accounting Principles) financial measures. Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using an assumed tax rate of 34%. We believe the presentation of interest income and net interest income on a tax–equivalent basis ensures comparability of interest income and 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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Three months ended June 30
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Six months ended June 30
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(dollars in thousands)
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2012
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2011
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2012
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2011
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Net Interest Income
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$ | 6,247 | $ | 5,318 | $ | 12,434 | $ | 10,099 | ||||||||
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Taxable equivalent basis adjustment
using 34% marginal tax rate
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318 | 275 | 636 | 544 | ||||||||||||
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Net interest income on a fully taxable
equivalent basis
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$ | 6,565 | $ | 5,593 | $ | 13,070 | $ | 10,643 | ||||||||
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Contact:
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William S. Lance
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Executive Vice President &
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Chief Financial Officer
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NORWOOD FINANCIAL CORP
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570-253-8505
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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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June 30
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2012
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2011
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ASSETS
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Cash and due from banks
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$ | 9,135 | $ | 9,269 | ||||
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Interest-bearing deposits with banks
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15,261 | 34,213 | ||||||
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Federal funds sold
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0 | 1,729 | ||||||
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Cash and cash equivalents
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24,396 | 45,211 | ||||||
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Securities available for sale
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144,720 | 152,275 | ||||||
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Securities held to maturity, fair value 2012: $177 and 2011: $178
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172 | 170 | ||||||
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Loans receivable (net of unearned Income)
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479,421 | 464,646 | ||||||
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Less: Allowance for loan losses
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5,775 | 5,267 | ||||||
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Net loans receivable
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473,646 | 459,379 | ||||||
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Investment in FHLB Stock, at cost
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3,243 | 3,981 | ||||||
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Bank premises and equipment, net
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7,371 | 7,672 | ||||||
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Bank owned life insurance
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12,119 | 11,648 | ||||||
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Foreclosed real estate owned
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1,268 | 1,755 | ||||||
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Accrued interest receivable
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2,416 | 2,539 | ||||||
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Goodwill
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9,715 | 9,483 | ||||||
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Other intangible assets
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720 | 881 | ||||||
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Other assets
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5,081 | 8,801 | ||||||
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TOTAL ASSETS
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$ | 684,867 | $ | 703,795 | ||||
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LIABILITIES
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Deposits:
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Non-interest bearing demand
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$ | 82,525 | $ | 73,718 | ||||
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Interest-bearing
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451,632 | 464,571 | ||||||
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Total deposits
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534,157 | 538,289 | ||||||
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Short-term borrowings
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27,192 | 32,181 | ||||||
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Other borrowings
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27,579 | 42,761 | ||||||
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Accrued interest payable
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1,335 | 1,473 | ||||||
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Other liabilities
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4,363 | 4,456 | ||||||
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TOTAL LIABILITIES
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594,626 | 619,160 | ||||||
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STOCKHOLDERS' EQUITY
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Common Stock, $.10 par value, authorized 10,000,000 shares
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issued: 2012: 3,371,849 shares, 2011: 3,371,866 shares
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337 | 337 | ||||||
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Surplus
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24,696 | 24,603 | ||||||
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Retained earnings
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64,788 | 60,036 | ||||||
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Treasury stock, at cost: 2012: 94,242 shares, 2011: 79,500 shares
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(2,739 | ) | (2,404 | ) | ||||
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Accumulated other comprehensive income
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3,159 | 2,063 | ||||||
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TOTAL STOCKHOLDERS' EQUITY
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90,241 | 84,635 | ||||||
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TOTAL LIABILITIES AND
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STOCKHOLDERS' EQUITY
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$ | 684,867 | $ | 703,795 | ||||
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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 June 30
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Six Months Ended June 30
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2012
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2011
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2012
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2011
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INTEREST INCOME
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Loans receivable, including fees
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$ | 6,431 | $ | 5,468 | $ | 12,804 | $ | 10,396 | ||||||||
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Securities
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1,007 | 1,135 | 2,033 | 2,225 | ||||||||||||
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Other
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7 | 16 | 11 | 24 | ||||||||||||
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Total Interest income
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7,445 | 6,619 | 14,848 | 12,645 | ||||||||||||
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INTEREST EXPENSE
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Deposits
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942 | 932 | 1,903 | 1,817 | ||||||||||||
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Short-term borrowings
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13 | 27 | 24 | 51 | ||||||||||||
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Other borrowings
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243 | 342 | 487 | 678 | ||||||||||||
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Total Interest expense
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1,198 | 1,301 | 2,414 | 2,546 | ||||||||||||
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NET INTEREST INCOME
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6,247 | 5,318 | 12,434 | 10,099 | ||||||||||||
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PROVISION FOR LOAN LOSSES
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400 | 430 | 750 | 650 | ||||||||||||
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
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5,847 | 4,888 | 11,684 | 9,449 | ||||||||||||
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OTHER INCOME
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Service charges and fees
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559 | 592 | 1,113 | 1,141 | ||||||||||||
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Income from fiduciary activities
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80 | 105 | 178 | 218 | ||||||||||||
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Net realized gains on sales of securities
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285 | 12 | 687 | 224 | ||||||||||||
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Gains on sale of loans and servicing rights
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66 | 98 | 60 | 241 | ||||||||||||
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Earnings and proceeds on life insurance policies
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131 | 106 | 263 | 200 | ||||||||||||
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Other
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85 | 80 | 196 | 177 | ||||||||||||
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Total other income
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1,206 | 993 | 2,497 | 2,201 | ||||||||||||
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OTHER EXPENSES
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Salaries and employee benefits
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2,047 | 1,832 | 4,198 | 3,533 | ||||||||||||
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Occupancy, furniture and equipment
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490 | 408 | 977 | 806 | ||||||||||||
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Data processing related
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216 | 187 | 448 | 402 | ||||||||||||
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Taxes, other than income
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149 | 143 | 301 | 272 | ||||||||||||
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Professional Fees
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217 | 126 | 426 | 281 | ||||||||||||
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Merger related expenses
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0 | 488 | 18 | 755 | ||||||||||||
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FDIC Insurance assessment
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97 | 95 | 196 | 215 | ||||||||||||
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Foreclosed real estate owned
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85 | 17 | 207 | 36 | ||||||||||||
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Other
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656 | 640 | 1,333 | 1,170 | ||||||||||||
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Total other expenses
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3,957 | 3,936 | 8,104 | 7,470 | ||||||||||||
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INCOME BEFORE TAX
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3,096 | 1,945 | 6,077 | 4,180 | ||||||||||||
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INCOME TAX EXPENSE
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838 | 461 | 1,633 | 1,036 | ||||||||||||
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NET INCOME
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$ | 2,258 | $ | 1,484 | $ | 4,444 | $ | 3,144 | ||||||||
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Basic earnings per share
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$ | 0.69 | $ | 0.50 | $ | 1.35 | $ | 1.10 | ||||||||
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Diluted earnings per share
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$ | 0.69 | $ | 0.50 | $ | 1.35 | $ | 1.10 | ||||||||
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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 June 30
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2012
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2011
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Net interest income
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$ | 6,247 | $ | 5,318 | ||||
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Net income
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2,258 | 1,484 | ||||||
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Net interest spread (fully taxable equivalent)
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3.95 | % | 3.75 | % | ||||
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Net interest margin (fully taxable equivalent)
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4.14 | % | 3.98 | % | ||||
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Return on average assets
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1.33 | % | 1.00 | % | ||||
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Return on average equity
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10.06 | % | 7.88 | % | ||||
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Basic earnings per share
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$ | 0.69 | $ | 0.50 | ||||
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Diluted earnings per share
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$ | 0.69 | $ | 0.50 | ||||
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For the Six Months Ended June 30
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Net interest income
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$ | 12,434 | $ | 10,099 | ||||
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Net income
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4,444 | 3,144 | ||||||
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Net interest spread (fully taxable equivalent)
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3.97 | % | 3.72 | % | ||||
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Net interest margin (fully taxable equivalent)
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4.16 | % | 3.98 | % | ||||
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Return on average assets
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1.32 | % | 1.12 | % | ||||
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Return on average equity
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9.94 | % | 8.85 | % | ||||
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Basic earnings per share
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$ | 1.35 | $ | 1.10 | ||||
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Diluted earnings per share
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$ | 1.35 | $ | 1.10 | ||||
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As of June 30
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Total assets
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$ | 684,867 | $ | 703,795 | ||||
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Total loans receivable
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479,421 | 464,646 | ||||||
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Allowance for loan losses
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5,775 | 5,267 | ||||||
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Total deposits
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534,157 | 538,289 | ||||||
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Stockholders' equity
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90,241 | 84,635 | ||||||
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Trust assets under management
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110,187 | 115,540 | ||||||
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Book value per share
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$ | 27.53 | $ | 25.71 | ||||
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Equity to total assets
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13.18 | % | 12.03 | % | ||||
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Allowance to total loans receivable
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1.20 | % | 1.13 | % | ||||
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Nonperforming loans to total loans
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1.85 | % | 1.90 | % | ||||
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Nonperforming assets to total assets
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1.48 | % | 1.50 | % | ||||
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