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Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

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HONESDALE, Pa., Jan. 23, 2020 (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, 2019 of $3,596,000 compared to $3,299,000 earned in the corresponding period of 2018. The 9% increase in earnings is due primarily to the $404,000 improvement in net interest income and a lower provision for loan losses. For the year ended December 31, 2019 net income totaled $14,215,000, an increase of $564,000, or 4.1%, from the $13,651,000 earned in the prior year. The increase reflects improvement in net interest income, as well as a reduction in the provision for loan losses.

Earnings per share (fully diluted) were $0.57 and $0.53 for the three-month period ended December 31, 2019 and 2018, respectively. For the year, earnings per share on a fully diluted basis were $2.25 for 2019 compared to $2.17 in 2018. The return on average assets for the year was 1.18% with a return on average equity of 10.83% compared to 1.19% and 11.71%, respectively, in 2018.

Total assets were $1.231 billion as of December 31, 2019. Loans receivable totaled $924.6 million as of December 31, 2019, with total deposits of $957.5 million and stockholders’ equity of $137.1 million.

Loans receivable increased $74.4 million, or 8.8%, from the prior year-end due primarily to a $40.4 million increase in commercial loans and a $34.0 million increase in consumer loans. For the three months and year ended December 31, 2019, net charge-offs totaled $96,000 and $1,194,000, respectively, compared to $203,000 and $907,000, respectively, for the corresponding periods in 2018.

Net interest income, on a fully taxable equivalent basis (fte), totaled $10,066,000 for the three months ended December 31, 2019, an increase of $379,000 compared to the same period in 2018. For the year, net interest income (fte) totaled $39,612,000, an increase of $1,713,000 compared to 2018 due primarily to the higher volume of earning assets, including an $84.8 million increase in average loans outstanding.

Other income for the three months ended December 31, 2019 totaled $1,696,000 compared to $1,600,000 for the similar period in 2018. Gains on the sale of loans and securities increased $65,000, while all other items of other income increased $31,000 in the aggregate due primarily to service charges and fees. Other income for the year ended December 31, 2019 totaled $6,778,000 compared to $7,065,000 in 2018, a decrease of $287,000 due primarily to non-recurring income recognized in 2018. Gains on the sale of loans and investment securities increased $195,000 in the aggregate, while all other items of other income decreased $482,000, net.

Other expenses totaled $7,088,000 for the three months ended December 31, 2019, compared to $6,803,000 in the similar period of 2018. The $285,000 increase includes a $165,000 increase in salaries and benefits costs. All other operating expenses increased $120,000 or 3.7%, net. For the year ended December 31, 2019, other expenses totaled $27,311,000 compared to $25,975,000 for 2018, an increase of $1,336,000. Salaries and benefits increased $635,000 and data processing related costs increased $442,000. All other operating expenses increased $262,000, or 2.5%, net.

Mr. Critelli commented, “In 2019, our earnings increased $564,000 over our previous record year of 2018. Our Return on Average Assets was 1.18% and our Return on Average Equity was 10.83%. Our cash dividend of $0.25 per share declared in the fourth quarter of 2019 represents a 4.2% increase over the same period of last year. Earnings per share (fully diluted) also improved to $2.25 from $2.17 in 2018. Our loan growth exceeded 8%, 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 fifteen 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%. 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

2019

2018

2019

2018

Net interest income

$9,833

$9,429

$38,606

$36,839

Tax equivalent basis adjustment using 21% marginal tax rate

233

258

1,006

1,060

Net interest income on a fully taxable equivalent basis

$10,066

$9,687

$39,612

$37,899

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)

2019

2018

2019

2018

Average equity

$136,920

$118,442

$131,271

$116,538

Average goodwill and other Intangibles

(11,575

)

(11,678

)

(11,611

)

(11,723

)

Average tangible equity

$125,345

$106,764

$119,660

$104,815

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

2019

2018

ASSETS

Cash and due from banks

$

15,038

$

18,039

Interest-bearing deposits with banks

377

309

Cash and cash equivalents

15,415

18,348

Securities available for sale

210,205

243,277

Loans receivable

924,581

850,182

Less: Allowance for loan losses

8,509

8,452

Net loans receivable

916,072

841,730

Regulatory stock, at cost

4,844

3,926

Bank premises and equipment, net

14,228

13,846

Bank owned life insurance

38,763

37,932

Foreclosed real estate owned

1,556

1,115

Accrued interest receivable

3,719

3,776

Goodwill

11,331

11,331

Other intangible assets

235

336

Other assets

14,242

8,942

TOTAL ASSETS

$

1,230,610

$

1,184,559

LIABILITIES

Deposits:

Non-interest bearing demand

$

207,299

$

201,457

Interest-bearing

750,230

745,323

Total deposits

957,529

946,780

Short-term borrowings

62,256

53,046

Other borrowings

56,438

52,284

Accrued interest payable

2,432

1,806

Other liabilities

14,527

8,358

TOTAL LIABILITIES

1,093,182

1,062,274

STOCKHOLDERS' EQUITY

Preferred Stock, no par value per share, authorized 5,000,000 shares

-

-

Common Stock, $.10 par value per share,

authorized: 2019: 20,000,000 shares, 2018: 10,000,000 shares

634

630

issued: 2019: 6,340,563 shares, 2018: 6,295,113 shares

Surplus

49,471

48,322

Retained earnings

86,536

78,434

Treasury stock, at cost: 2019: 12,007 shares, 2018: 2,470 shares

(400

)

(81

)

Accumulated other comprehensive income (loss)

1,187

(5,020

)

TOTAL STOCKHOLDERS' EQUITY

137,428

122,285

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,230,610

$

1,184,559

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,

2019

2018

2019

2018

INTEREST INCOME

Loans receivable, including fees

$

10,815

$

9,759

$

41,889

$

36,404

Securities

1,159

1,476

5,314

6,019

Other

11

10

81

73

Total Interest income

11,985

11,245

47,284

42,496

INTEREST EXPENSE

Deposits

1,784

1,446

7,139

4,644

Short-term borrowings

124

122

468

323

Other borrowings

244

248

1,071

690

Total Interest expense

2,152

1,816

8,678

5,657

NET INTEREST INCOME

9,833

9,429

38,606

36,839

PROVISION FOR LOAN LOSSES

200

375

1,250

1,725

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

9,633

9,054

37,356

35,114

OTHER INCOME

Service charges and fees

1,168

1,085

4,450

4,295

Income from fiduciary activities

156

126

610

589

Net realized gains on sales of securities

21

-

254

213

Gains on sales of loans, net

44

-

169

15

Earnings and proceeds on life insurance policies

200

277

830

1,126

Other

107

112

465

827

Total other income

1,696

1,600

6,778

7,065

OTHER EXPENSES

Salaries and employee benefits

3,740

3,575

14,655

14,020

Occupancy, furniture and equipment

938

1,036

3,719

3,695

Data processing and related operations

469

400

1,869

1,427

Taxes, other than income

232

92

751

572

Professional fees

362

232

1,113

993

FDIC Insurance assessment

3

83

153

347

Foreclosed real estate

9

104

45

172

Amortization of intangibles

22

29

101

126

Other

1,313

1,252

4,905

4,623

Total other expenses

7,088

6,803

27,311

25,975

INCOME BEFORE TAX

4,241

3,851

16,823

16,204

INCOME TAX EXPENSE

645

552

2,608

2,553

NET INCOME

$

3,596

$

3,299

$

14,215

$

13,651

Basic earnings per share

$

0.57

$

0.53

$

2.27

$

2.19

Diluted earnings per share

$

0.57

$

0.53

$

2.25

$

2.17

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended December 31

2019

2018

Net interest income

$

9,833

$

9,429

Net income

3,596

3,299

Net interest spread (fully taxable equivalent)

3.33

%

3.33

%

Net interest margin (fully taxable equivalent)

3.59

%

3.54

%

Return on average assets

1.18

%

1.12

%

Return on average equity

10.42

%

11.05

%

Return on average tangible equity

11.38

%

12.26

%

Basic earnings per share

$

0.57

$

0.53

Diluted earnings per share

$

0.57

$

0.53

For the Twelve Months Ended December 31

Net interest income

$

38,606

$

36,839

Net income

14,215

13,651

Net interest spread (fully taxable equivalent)

3.28

%

3.36

%

Net interest margin (fully taxable equivalent)

3.53

%

3.53

%

Return on average assets

1.18

%

1.19

%

Return on average equity

10.83

%

11.71

%

Return on average tangible equity

11.88

%

13.02

%

Basic earnings per share

$

2.27

$

2.19

Diluted earnings per share

$

2.25

$

2.17

As of December 31

Total assets

$

1,230,610

$

1,184,559

Total loans receivable

924,581

850,182

Allowance for loan losses

8,509

8,452

Total deposits

957,529

946,780

Stockholders' equity

137,428

122,285

Trust assets under management

170,685

151,224

Book value per share

$

21.67

$

19.43

Tangible book value per share

$

19.84

$

17.58

Equity to total assets

11.17

%

10.32

%

Allowance to total loans receivable

0.92

%

0.99

%

Nonperforming loans to total loans

0.09

%

0.13

%

Nonperforming assets to total assets

0.19

%

0.19

%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

December 31

September 30

June 30

March 31

December 31

2019

2019

2019

2019

2018

ASSETS

Cash and due from banks

$

15,038

$

20,067

$

14,207

$

13,583

$

18,039

Interest-bearing deposits with banks

377

848

4,265

6,291

309

Cash and cash equivalents

15,415

20,915

18,472

19,874

18,348

Securities available for sale

210,205

211,199

238,083

240,621

243,277

Loans receivable

924,581

905,582

887,673

864,198

850,182

Less: Allowance for loan losses

8,509

8,405

8,228

8,349

8,452

Net loans receivable

916,072

897,177

879,445

855,849

841,730

Regulatory stock, at cost

4,844

3,137

3,155

3,132

3,926

Bank owned life insurance

38,763

38,562

38,340

38,134

37,932

Bank premises and equipment, net

14,228

13,927

13,880

14,165

13,846

Foreclosed real estate owned

1,556

1,572

1,677

1,792

1,115

Goodwill and other intangibles

11,566

11,588

11,611

11,638

11,667

Other assets

17,961

17,779

17,865

18,390

12,718

TOTAL ASSETS

$

1,230,610

$

1,215,856

$

1,222,528

$

1,203,595

$

1,184,559

LIABILITIES

Deposits:

Non-interest bearing demand

$

207,299

$

231,211

$

221,764

$

206,806

$

201,457

Interest-bearing deposits

750,230

743,222

759,460

767,609

745,323

Total deposits

957,529

974,433

981,224

974,415

946,780

Borrowings

118,694

88,684

92,118

85,779

105,330

Other liabilities

16,959

17,845

17,703

16,629

10,164

TOTAL LIABILITIES

1,093,182

1,080,962

1,091,045

1,076,823

1,062,274

STOCKHOLDERS' EQUITY

137,428

134,894

131,483

126,772

122,285

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,230,610

$

1,215,856

$

1,222,528

$

1,203,595

$

1,184,559

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

2019

2019

2019

2019

2018

INTEREST INCOME

Loans receivable, including fees

$

10,815

$

10,776

$

10,328

$

9,970

$

9,759

Securities

1,159

1,278

1,435

1,441

1,476

Other

11

5

51

15

10

Total interest income

11,985

12,059

11,814

11,426

11,245

INTEREST EXPENSE

Deposits

1,784

1,787

1,839

1,729

1,446

Borrowings

368

381

363

426

370

Total interest expense

2,152

2,168

2,202

2,155

1,816

NET INTEREST INCOME

9,833

9,891

9,612

9,271

9,429

PROVISION FOR LOAN LOSSES

200

300

300

450

375

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

9,633

9,591

9,312

8,821

9,054

OTHER INCOME

Service charges and fees

1,168

1,200

1,052

1,031

1,085

Income from fiduciary activities

156

167

145

142

126

Net realized gains on sales of securities

21

169

64

-

-

Gains on sales of loans, net

44

15

67

42

-

Earnings and proceeds on life insurance policies

200

222

207

202

277

Other

107

109

106

143

112

Total other income

1,696

1,882

1,641

1,560

1,600

OTHER EXPENSES

Salaries and employee benefits

3,740

3,667

3,599

3,649

3,575

Occupancy, furniture and equipment, net

938

916

940

924

1,036

Foreclosed real estate

9

24

(10

)

23

104

FDIC insurance assessment

3

(5

)

84

71

83

Other

2,398

2,189

2,172

1,981

2,005

Total other expenses

7,088

6,791

6,785

6,648

6,803

INCOME BEFORE TAX

4,241

4,682

4,168

3,733

3,851

INCOME TAX EXPENSE

645

775

646

543

552

NET INCOME

$

3,596

$

3,907

$

3,522

$

3,190

$

3,299

Basic earnings per share

$

0.57

$

0.62

$

0.56

$

0.51

$

0.53

Diluted earnings per share

$

0.57

$

0.62

$

0.56

$

0.51

$

0.53

Book Value per share

$

21.67

$

21.41

$

20.90

$

20.16

$

19.43

Tangible Book Value per share

19.84

19.57

19.06

18.31

17.58

Return on average assets (annualized)

1.18

%

1.27

%

1.16

%

1.09

%

1.12

%

Return on average equity (annualized)

10.42

%

11.56

%

10.93

%

10.37

%

11.02

%

Return on average tangible equity (annualized)

11.38

%

12.66

%

12.01

%

11.44

%

12.23

%

Net interest spread (fte)

3.33

%

3.35

%

3.24

%

3.20

%

3.33

%

Net interest margin (fte)

3.59

%

3.60

%

3.49

%

3.43

%

3.54

%

Allowance for loan losses to total loans

0.92

%

0.93

%

0.93

%

0.97

%

0.99

%

Net charge-offs to average loans (annualized)

0.04

%

0.05

%

0.19

%

0.26

%

0.10

%

Nonperforming loans to total loans

0.09

%

0.15

%

0.15

%

0.13

%

0.13

%

Nonperforming assets to total assets

0.19

%

0.24

%

0.25

%

0.24

%

0.19

%