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Norwood Financial Corp. Announces First Quarter Earnings

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HONESDALE, Pa., April 19, 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 of $3,190,000 for the three months ended March 31, 2019, increasing from the $3,129,000 recorded during the same three-month period of last year. The increase was principally due to a higher level of net interest income, which was partially offset by increased operating expenses. Earnings per share on a fully diluted basis were $0.51 in the first quarter of this year compared to $0.50 in the first quarter of 2018. The annualized return on average assets was 1.09% in the first quarter of 2019 and the annualized return on average equity was 10.37%, compared to 1.13% and 11.00%, respectively, in the first quarter of 2018.

Total assets were $1.204 billion as of March 31, 2019, an increase of $76.6 million compared to the prior year total. Total loans increased $88.5 million compared to March 31, 2018, total deposits increased $34.3 million over the past twelve months, and stockholders’ equity increased $12.9 million during the past year.

Non-performing assets totaled $2.9 million or 0.24% of total assets at March 31, 2019 comprised of $1.1 million of non-performing loans and $1.8 million of foreclosed real estate owned, compared to non-performing assets of $3.1 million, or 0.28% of total assets as of March 31, 2018. Net charge-offs for the three-month period ending March 31, 2019 were $553,000 compared to $84,000 of net charge-offs in the first quarter of last year. The increase in net charge-offs was due to one credit, which was transferred to foreclosed real estate during the first quarter of 2019. The allowance for loan losses totaled $8,349,000 as of March 31, 2019 compared to $8,099,000 as of March 31, 2018. As of March 31, 2019, the allowance for loan losses was 761% of nonperforming loans, compared to 482% on March 31, 2018.

Net interest income (fully taxable equivalent, or fte) was $9,536,000 during the first quarter of 2019, which is $453,000 higher than the comparable three-month period of last year. A $90.0 million increase in average loans outstanding contributed to the increased interest income. The fte yield on interest-earning assets improved 29 basis points compared to the prior year while the cost of funds increased 40 basis points due primarily to a 64 basis point increase in the average rate paid on certificates of deposit. As a result, the annualized net interest margin (fte) decreased to 3.43% from 3.46% in the quarter ended March 31, 2018.

Other income totaled $1,560,000 in the first quarter of 2019 compared to $1,694,000 during the same period of last year. The decrease is attributable to a $142,000 reduction in net gains on sales of securities due to the absence of sales in 2019. All other categories of other income increased $8,000, net.
Operating expenses totaled $6,648,000 in the first quarter and were $400,000 higher than the $6,248,000 recorded in the same period of last year. Salaries and benefits costs rose $187,000 and data processing costs increased $129,000. All other operating expenses increased $84,000, or 3.4%, net.

Mr. Critelli stated, “Our first quarter results provide a good start for 2019 and are in-line with our budget. Our loans have increased 11.4% over the past twelve months, our core operating expenses remain well controlled, and our capital base remains above regulatory “Well Capitalized” targets. We are looking forward to expanding our markets into Luzerne County, Pennsylvania with the upcoming opening of our Hanover Township Office. We will continue to search out opportunities available to us, and we look forward to serving our growing base of stockholders and customers.”

Norwood Financial Corp. is the parent company of Wayne Bank, which operates from thirteen offices throughout Northeastern Pennsylvania and twelve offices in the Southern Tier of New York. The Company’s stock trades 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 net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income is derived from GAAP using an assumed tax rate of 21%. 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:

(dollars in thousands)

Three months ended March 31,

2019

2018

Net interest income

$

9,271

$

8,807

Tax equivalent basis adjustment

265

276

Net interest income on a fully taxable equivalent basis

$

9,536

$

9,083

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:

(dollars in thousands)

Three months ended March 31,

2019

2018

Average equity

$

124,746

$

115,320

Goodwill and other intangibles

(11,650

)

(11,772

)

Average tangible equity

$

113,096

$

103,548

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)

March 31

2019

2018

ASSETS

Cash and due from banks

$

13,583

$

10,103

Interest-bearing deposits with banks

6,291

2,039

Cash and cash equivalents

19,874

12,142

Securities available for sale

240,621

265,862

Loans receivable

864,198

775,681

Less: Allowance for loan losses

8,349

8,099

Net loans receivable

855,849

767,582

Regulatory stock, at cost

3,132

2,545

Bank premises and equipment, net

14,165

13,808

Bank owned life insurance

38,134

37,270

Foreclosed real estate owned

1,792

1,436

Accrued interest receivable

4,089

3,687

Goodwill

11,331

11,331

Other intangible assets

307

427

Other assets

14,301

10,947

TOTAL ASSETS

$

1,203,595

$

1,127,037

LIABILITIES

Deposits:

Non-interest bearing demand

$

206,806

$

204,027

Interest-bearing

767,609

736,122

Total deposits

974,415

940,149

Short-term borrowings

37,824

29,905

Other borrowings

47,955

33,093

Accrued interest payable

2,457

1,456

Other liabilities

14,172

8,596

TOTAL LIABILITIES

1,076,823

1,013,199

STOCKHOLDERS' EQUITY

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

issued: 2019: 6,301,263 shares, 2018: 6,257,563 shares

630

626

Surplus

48,559

47,548

Retained earnings

80,115

72,179

Treasury stock, at cost: 2019: 13,807 shares, 2018: 5,729 shares

(455

)

(188

)

Accumulated other comprehensive loss

(2,077

)

(6,327

)

TOTAL STOCKHOLDERS' EQUITY

126,772

113,838

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,203,595

$

1,127,037

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)

Three Months Ended March 31,

2019

2018

INTEREST INCOME

Loans receivable, including fees

$

9,970

$

8,487

Securities

1,441

1,524

Other

15

18

Total Interest income

11,426

10,029

INTEREST EXPENSE

Deposits

1,729

1,029

Short-term borrowings

123

52

Other borrowings

303

141

Total Interest expense

2,155

1,222

NET INTEREST INCOME

9,271

8,807

PROVISION FOR LOAN LOSSES

450

550

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

8,821

8,257

OTHER INCOME

Service charges and fees

1,031

980

Income from fiduciary activities

142

137

Net realized gains on sales of securities

-

142

Gains on sales of loans, net

42

-

Earnings and proceeds on life insurance policies

202

273

Other

143

162

Total other income

1,560

1,694

OTHER EXPENSES

Salaries and employee benefits

3,649

3,462

Occupancy, furniture and equipment

924

892

Data processing and related operations

448

319

Taxes, other than income

161

175

Professional fees

250

230

FDIC Insurance assessment

71

92

Foreclosed real estate

23

(19

)

Amortization of intangibles

29

34

Other

1,093

1,063

Total other expenses

6,648

6,248

INCOME BEFORE TAX

3,733

3,703

INCOME TAX EXPENSE

543

574

NET INCOME

$

3,190

$

3,129

Basic earnings per share

$

0.51

$

0.50

Diluted earnings per share

$

0.51

$

0.50

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended March 31

2019

2018

Net interest income

$

9,271

$

8,807

Net income

3,190

3,129

Net interest spread (fully taxable equivalent)

3.20

%

3.31

%

Net interest margin (fully taxable equivalent)

3.43

%

3.46

%

Return on average assets

1.09

%

1.13

%

Return on average equity

10.37

%

11.00

%

Return on average tangible equity

11.44

%

12.25

%

Basic earnings per share

$

0.51

$

0.50

Diluted earnings per share

$

0.51

$

0.50

As of March 31

Total assets

$

1,203,595

$

1,127,037

Total loans receivable

864,198

775,681

Allowance for loan losses

8,349

8,099

Total deposits

974,415

940,149

Stockholders' equity

126,772

113,838

Trust assets under management

159,339

153,190

Book value per share

$

20.16

$

18.45

Tangible book value per share

$

18.31

$

16.56

Equity to total assets

10.53

%

10.10

%

Allowance to total loans receivable

0.97

%

1.04

%

Nonperforming loans to total loans

0.13

%

0.22

%

Nonperforming assets to total assets

0.24

%

0.28

%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

March 31

December 31

September 30

June 30

March 31

2019

2018

2018

2018

2018

ASSETS

Cash and due from banks

$

13,583

$

18,039

$

17,073

$

15,193

$

10,103

Interest-bearing deposits with banks

6,291

309

295

914

2,039

Cash and cash equivalents

19,874

18,348

17,368

16,107

12,142

Securities available for sale

240,621

243,277

247,517

259,442

265,862

Loans receivable

864,198

850,182

819,197

803,773

775,681

Less: Allowance for loan losses

8,349

8,452

8,280

8,326

8,099

Net loans receivable

855,849

841,730

810,917

795,447

767,582

Regulatory stock, at cost

3,132

3,926

3,261

2,313

2,545

Bank owned life insurance

38,134

37,932

37,718

37,485

37,270

Bank premises and equipment, net

14,165

13,846

13,797

13,894

13,808

Foreclosed real estate owned

1,792

1,115

1,209

1,386

1,436

Goodwill and other intangibles

11,638

11,667

11,695

11,725

11,758

Other assets

18,390

12,718

13,266

12,794

14,634

TOTAL ASSETS

$

1,203,595

$

1,184,559

$

1,156,748

$

1,150,593

$

1,127,037

LIABILITIES

Deposits:

Non-interest bearing demand

$

206,806

$

201,457

$

218,979

$

216,472

$

204,027

Interest-bearing deposits

767,609

745,323

720,735

734,417

736,122

Total deposits

974,415

946,780

939,714

950,889

940,149

Borrowings

85,779

105,330

89,469

73,608

62,998

Other liabilities

16,629

10,164

10,885

10,563

10,052

TOTAL LIABILITIES

1,076,823

1,062,274

1,040,068

1,035,060

1,013,199

STOCKHOLDERS' EQUITY

126,772

122,285

116,680

115,533

113,838

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,203,595

$

1,184,559

$

1,156,748

$

1,150,593

$

1,127,037

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

March 31

December 31

September 30

June 30

March 31

Three months ended

2019

2018

2018

2018

2018

INTEREST INCOME

Loans receivable, including fees

$

9,970

$

9,759

$

9,301

$

8,857

$

8,487

Securities

1,441

1,476

1,483

1,536

1,524

Other

15

10

2

43

18

Total interest income

11,426

11,245

10,786

10,436

10,029

INTEREST EXPENSE

Deposits

1,729

1,446

1,116

1,052

1,029

Borrowings

426

370

282

169

193

Total interest expense

2,155

1,816

1,398

1,221

1,222

NET INTEREST INCOME

9,271

9,429

9,388

9,215

8,807

PROVISION FOR LOAN LOSSES

450

375

375

425

550

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

8,821

9,054

9,013

8,790

8,257

OTHER INCOME

Service charges and fees

1,031

1,085

1,129

1,101

980

Income from fiduciary activities

142

126

151

175

137

Net realized gains on sales of securities

-

-

13

58

142

Gains on sales of loans, net

42

-

15

-

-

Earnings and proceeds on life insurance policies

202

277

297

279

273

Other

143

112

392

161

162

Total other income

1,560

1,600

1,997

1,774

1,694

OTHER EXPENSES

Salaries and employee benefits

3,649

3,575

3,577

3,406

3,462

Occupancy, furniture and equipment, net

924

1,036

910

857

892

Foreclosed real estate

23

104

(26

)

114

(19

)

FDIC insurance assessment

71

83

87

86

92

Other

1,981

2,005

2,024

1,890

1,821

Total other expenses

6,648

6,803

6,572

6,353

6,248

INCOME BEFORE TAX

3,733

3,851

4,438

4,211

3,703

INCOME TAX EXPENSE

543

552

728

698

574

NET INCOME

$

3,190

$

3,299

$

3,710

$

3,513

$

3,129

Basic earnings per share

$

0.51

$

0.53

$

0.59

$

0.57

$

0.50

Diluted earnings per share

$

0.51

$

0.53

$

0.58

$

0.56

$

0.50