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Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

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 %