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Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

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HONESDALE, Pa., Jan. 24, 2019 (GLOBE NEWSWIRE) -- 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 December 31, 2018 of $3,299,000 compared to $157,000 earned in the corresponding period of 2017. The increase in earnings is due primarily to the $545,000 improvement in net interest income and the $3,060,000 of non-recurring additional tax expense recorded in the fourth quarter of 2017 resulting from the enactment of the Tax Cuts and Jobs Act (the “Act”). For the year ended December 31, 2018, net income totaled $13,651,000, an increase of $5,453,000 from the $8,198,000 earned in the prior year. The increase reflects improvement in net interest income and other income, as well as a reduction in the provision for loan losses. Income tax expense was reduced $3,998,000 due to the non-recurring expense recognized in 2017 combined with the impact of the reduced corporate tax rate. In 2018, income before tax improved $1,455,000, or 9.9%.

Earnings per share (fully diluted) were $0.53 and $0.03 for the three-month periods ended December 31, 2018 and 2017, respectively. For the year, earnings per share on a fully diluted basis were $2.17 for 2018 compared to $1.31 in 2017. The return on average assets for the year was 1.19% with a return on average equity of 11.71% compared to 0.73% and 7.04%, respectively, in 2017.

Total assets were $1.185 billion as of December 31, 2018. Loans receivable totaled $850.2 million as of December 31, 2018, with total deposits of $946.8 million and stockholders’ equity of $122.3 million.

Loans receivable increased $86.1 million, or 11.3%, from the prior year-end due primarily to a $41.0 million increase in consumer loans and a $31.9 million increase in commercial real estate loans. Other commercial loans increased $13.1 million. For the three months and year ended December 31, 2018, net charge-offs totaled $203,000 and $907,000, respectively, compared to $527,000 and $1,029,000, respectively, for the corresponding periods in 2017.

Net interest income, on a fully taxable equivalent basis (fte), totaled $9,687,000 for the three months ended December 31, 2018, an increase of $259,000 compared to the same period in 2017 despite the lower tax-equivalent adjustment resulting from the Act. For the year, net interest income (fte) totaled $37,899,000, an increase of $809,000 compared to 2017 due primarily to the higher volume of earning assets, including a $63.2 million increase in average loans outstanding.

Other income for the three months ended December 31, 2018 totaled $1,600,000 compared to $1,754,000 for the similar period in 2017. Gains on the sale of securities decreased $181,000, while all other items of other income increased $27,000 in the aggregate due primarily to service charges and fees. Other income for the year ended December 31, 2018 totaled $7,065,000 compared to $6,911,000 in 2017, an increase of $154,000. Gains on the sale of loans and investment securities decreased $187,000 in the aggregate, while all other items of other income increased $341,000, net.

Other expenses totaled $6,803,000 for the three months ended December 31, 2018, compared to $5,886,000 in the similar period of 2017. The $917,000 increase includes a $364,000 increase in salaries and benefits costs. All other operating expenses increased $553,000, net. For the year ended December 31, 2018, other expenses totaled $25,975,000 compared to $24,870,000 for 2017, an increase of $1,105,000. An increase of $1,170,000 in salaries and benefits was largely offset by reduced expenses on foreclosed real estate. All other operating expenses increased $927,000, net.

Mr. Critelli commented, “In 2018, our earnings increased $5,453,000 over the 2017 level which included the $3,060,000 of non-recurring tax expense resulting from the Tax Cuts and Jobs Act. Our income before taxes improved $1,455,000, or 9.9%. Our Return on Average Assets was 1.19% and our Return on Average Equity was 11.71%, both well above last year’s level. Our cash dividend of $0.24 per share declared in the fourth quarter of 2018 represents a 9.1% increase over the same period of last year. Earnings per share (fully diluted) also improved to $2.17 from $1.31 in 2017. Our loan growth exceeded 11%, operating expenses remain well controlled, and our capital base remains above regulatory “Well Capitalized” targets. Please know that we continue to search out opportunities available to us, and look forward to serving our growing base of stockholders and customers.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates fourteen offices throughout Northeastern Pennsylvania and twelve offices in the Southern Tier of New York. 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, the ability to control costs and expenses, demand for real estate, government fiscal and trade policies, cybersecurity 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 interest income and 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 21% for 2018 and 34% for 2017. We believe the presentation of interest income on a tax–equivalent basis ensures comparability of interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income to net interest income on a tax-equivalent basis:

(dollars in thousands)

Three months ended December 31

Year ended December 31

2018

2017

2018

2017

Net interest income

$

9,429

$

8,884

$

36,839

$

34,908

Tax equivalent basis adjustment
using 34% marginal tax rate

258

544

1,060

2,182

Net interest income on a fully
taxable equivalent basis

$

9,687

$

9,428

$

37,899

$

37,090

This release also references average tangible equity, which is also a non-GAAP financial measure. Average tangible equity is calculated by deducting average goodwill and other intangible assets from average stockholders’ equity. The Company believes that disclosure of tangible equity ratios enhances investor understanding of our financial position and improves the comparability of our financial data.

The following reconciles average equity to average tangible equity:

Three months ended December 31,

Year ended December 31,

(dollars in thousands)

2018

2017

2018

2017

Average equity

$

118,442

$

118,661

$

116,538

$

116,407

Goodwill and other

(11,678

)

(11,806

)

(11,723

)

(11,910

)

Intangibles

Average tangible equity

$

106,764

$

106,855

$

104,815

$

104,497

Contact:
William S. Lance
Executive Vice President &
Chief Financial Officer
NORWOOD FINANCIAL CORP
570-253-8505
www.waynebank.com


NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets

(dollars in thousands, except share and per share data)

(unaudited)

December 31

2018

2017

ASSETS

Cash and due from banks

$

18,039

$

16,212

Interest-bearing deposits with banks

309

485

Cash and cash equivalents

18,348

16,697

Securities available for sale

243,277

281,121

Loans receivable

850,182

764,092

Less: Allowance for loan losses

8,452

7,634

Net loans receivable

841,730

756,458

Regulatory stock, at cost

3,926

3,505

Bank premises and equipment, net

13,846

13,864

Bank owned life insurance

37,932

37,060

Foreclosed real estate owned

1,115

1,661

Accrued interest receivable

3,776

3,716

Goodwill

11,331

11,331

Other intangible assets

336

462

Deferred tax asset

5,594

4,781

Other assets

3,348

2,260

TOTAL ASSETS

$

1,184,559

$

1,132,916

LIABILITIES

Deposits:

Non-interest bearing demand

$

201,457

$

205,138

Interest-bearing

745,323

724,246

Total deposits

946,780

929,384

Short-term borrowings

53,046

42,530

Other borrowings

52,284

35,945

Accrued interest payable

1,806

1,434

Other liabilities

8,358

7,884

TOTAL LIABILITIES

1,062,274

1,017,177

STOCKHOLDERS' EQUITY

Common Stock, $.10 par value, authorized 10,000,000 shares

issued: 2018: 6,295,113 shares, 2017: 6,256,063 shares

630

626

Surplus

48,322

47,431

Retained earnings

78,434

70,426

Treasury stock, at cost: 2018: 2,470 shares, 2017: 2,608 shares

(81)

(77)

Accumulated other comprehensive loss

(5,020)

(2,667)

TOTAL STOCKHOLDERS' EQUITY

122,285

115,739

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,184,559

$

1,132,916

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2018

2017

2018

2017

INTEREST INCOME

Loans receivable, including fees

$

9,759

$

8,503

$

36,404

$

32,524

Securities

1,476

1,560

6,019

6,416

Other

10

12

73

48

Total Interest income

11,245

10,075

42,496

38,988

INTEREST EXPENSE

Deposits

1,446

985

4,644

3,377

Short-term borrowings

122

61

323

199

Other borrowings

248

145

690

504

Total Interest expense

1,816

1,191

5,657

4,080

NET INTEREST INCOME

9,429

8,884

36,839

34,908

PROVISION FOR LOAN LOSSES

375

400

1,725

2,200

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

9,054

8,484

35,114

32,708

OTHER INCOME

Service charges and fees

1,085

1,023

4,295

4,079

Income from fiduciary activities

126

116

589

510

Net realized gains on sales of securities

-

181

213

348

Gains on sales of loans, net

-

-

15

67

Gains on sale of deposits

-

-

-

209

Earnings and proceeds on life insurance policies

277

283

1,126

1,133

Other

112

151

827

565

Total other income

1,600

1,754

7,065

6,911

OTHER EXPENSES

Salaries and employee benefits

3,575

3,211

14,020

12,850

Occupancy, furniture and equipment

1,036

841

3,695

3,361

Data processing and related operations

400

332

1,427

1,353

Taxes, other than income

92

(32)

572

661

Professional fees

232

243

993

949

FDIC Insurance assessment

83

94

347

377

Foreclosed real estate

104

136

172

1,164

Amortization of intangibles

29

35

126

150

Other

1,252

1,026

4,623

4,005

Total other expenses

6,803

5,886

25,975

24,870

INCOME BEFORE TAX

3,851

4,352

16,204

14,749

INCOME TAX EXPENSE

552

4,195

2,553

6,551

NET INCOME

$

3,299

$

157

$

13,651

$

8,198

Basic earnings per share

$

0.53

$

0.03

$

2.19

$

1.32

Diluted earnings per share

$

0.53

$

0.03

$

2.17

$

1.31

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended December 31

2018

2017

Net interest income

$

9,429

$

8,884

Net income

3,299

157

Net interest spread (fully taxable equivalent)

3.33%

3.43%

Net interest margin (fully taxable equivalent)

3.54%

3.58%

Return on average assets

1.12%

0.05%

Return on average equity

11.05%

0.52%

Return on average tangible equity

12.26%

0.58%

Basic earnings per share

$

0.53

$

0.03

Diluted earnings per share

$

0.53

$

0.03

For the Twelve Months Ended December 31

2018

2017

Net interest income

$

36,839

$

34,908

Net income

13,651

8,198

Net interest spread (fully taxable equivalent)

3.36%

3.44%

Net interest margin (fully taxable equivalent)

3.53%

3.56%

Return on average assets

1.19%

0.73%

Return on average equity

11.71%

7.04%

Return on average tangible equity

13.02%

7.85%

Basic earnings per share

$

2.19

$

1.32

Diluted earnings per share

$

2.17

$

1.31

As of December 31

Total assets

$

1,184,559

$

1,132,916

Total loans receivable

850,182

764,092

Allowance for loan losses

8,452

7,634

Total deposits

946,780

929,384

Stockholders' equity

122,285

115,739

Trust assets under management

151,224

157,838

Book value per share

$

19.43

$

18.61

Tangible book value per share

$

17.58

$

16.71

Equity to total assets

10.32%

10.22%

Allowance to total loans receivable

0.99%

1.00%

Nonperforming loans to total loans

0.13%

0.32%

Nonperforming assets to total assets

0.19%

0.37%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

December 31

September 30

June 30

March 31

December 31

2018

2018

2018

2018

2017

ASSETS

Cash and due from banks

$

18,039

$

17,073

$

15,193

$

10,103

$

16,212

Interest-bearing deposits with banks

309

295

914

2,039

485

Cash and cash equivalents

18,348

17,368

16,107

12,142

16,697

Securities available for sale

243,277

247,517

259,442

265,862

281,121

Loans receivable

850,182

819,197

803,773

775,681

764,092

Less: Allowance for loan losses

8,452

8,280

8,326

8,099

7,634

Net loans receivable

841,730

810,917

795,447

767,582

756,458

Regulatory stock, at cost

3,926

3,261

2,313

2,545

3,505

Bank owned life insurance

37,932

37,718

37,485

37,270

37,060

Bank premises and equipment, net

13,846

13,797

13,894

13,808

13,864

Foreclosed real estate owned

1,115

1,209

1,386

1,436

1,661

Goodwill and other intangibles

11,667

11,695

11,725

11,758

11,793

Other assets

12,718

13,266

12,794

14,634

10,757

TOTAL ASSETS

$

1,184,559

$

1,156,748

$

1,150,593

$

1,127,037

$

1,132,916

LIABILITIES

Deposits:

Non-interest bearing demand

$

201,457

$

218,979

$

216,472

$

204,027

$

205,138

Interest-bearing deposits

745,323

720,735

734,417

736,122

724,246

Total deposits

946,780

939,714

950,889

940,149

929,384

Borrowings

105,330

89,469

73,608

62,998

78,475

Other liabilities

10,164

10,885

10,563

10,052

9,318

TOTAL LIABILITIES

1,062,274

1,040,068

1,035,060

1,013,199

1,017,177

STOCKHOLDERS' EQUITY

122,285

116,680

115,533

113,838

115,739

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,184,559

$

1,156,748

$

1,150,593

$

1,127,037

$

1,132,916

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

December 31

September 30

June 30

March 31

December 31

Three months ended

2018

2018

2018

2018

2017

INTEREST INCOME

Loans receivable, including fees

$

9,759

$

9,301

$

8,857

$

8,487

$

8,503

Securities

1,476

1,483

1,536

1,524

1,560

Other

10

2

43

18

12

Total interest income

11,245

10,786

10,436

10,029

10,075

INTEREST EXPENSE

Deposits

1,446

1,116

1,052

1,029

985

Borrowings

370

282

169

193

206

Total interest expense

1,816

1,398

1,221

1,222

1,191

NET INTEREST INCOME

9,429

9,388

9,215

8,807

8,884

PROVISION FOR LOAN LOSSES

375

375

425

550

400

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

9,054

9,013

8,790

8,257

8,484

OTHER INCOME

Service charges and fees

1,085

1,129

1,101

980

1,023

Income from fiduciary activities

126

151

175

137

116

Net realized gains on sales of securities

-

13

58

142

181

Gains on sales of loans, net

-

15

-

-

-

Earnings and proceeds on life insurance policies

277

297

279

273

283

Other

112

392

161

162

151

Total other income

1,600

1,997

1,774

1,694

1,754

OTHER EXPENSES

Salaries and employee benefits

3,575

3,577

3,406

3,462

3,211

Occupancy, furniture and equipment, net

1,036

910

857

892

841

Foreclosed real estate

104

(26)

114

(19)

136

FDIC insurance assessment

83

87

86

92

94

Other

2,005

2,024

1,890

1,821

1,604

Total other expenses

6,803

6,572

6,353

6,248

5,886

INCOME BEFORE TAX

3,851

4,438

4,211

3,703

4,352

INCOME TAX EXPENSE

552

728

698

574

4,195

NET INCOME

$

3,299

$

3,710

$

3,513

$

3,129

$

157

Basic earnings per share

$

0.53

$

0.59

$

0.57

$

0.50

$

0.03

Diluted earnings per share

$

0.53

$

0.58

$

0.56

$

0.50

$

0.03

Book Value per share

$

19.43

$

18.49

$

18.35

$

18.45

$

18.61

Tangible Book Value per share

17.58

16.62

16.47

16.56

16.71

Return on average assets (annualized)

1.12%

1.28%

1.23%

1.13%

0.05%

Return on average equity (annualized)

11.02%

12.55%

12.25%

11.00%

0.52%

Return on average tangible equity (annualized)

12.23%

13.94%

13.64%

12.25%

0.58%

Net interest spread (fte)

3.33%

3.40%

3.40%

3.31%

3.44%

Net interest margin (fte)

3.54%

3.57%

3.54%

3.46%

3.56%

Allowance for loan losses to total loans

0.99%

1.01%

1.04%

1.04%

1.00%

Net charge-offs to average loans (annualized)

0.10%

0.21%

0.10%

0.04%

0.28%

Nonperforming loans to total loans

0.13%

0.14%

0.16%

0.22%

0.32%

Nonperforming assets to total assets

0.19%

0.20%

0.23%

0.28%

0.37%