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Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa. , July 26, 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 June 30, 2019 of $3,522,000, which represents an increase from the $3,513,000 earned in the similar period of 2018. Earnings per share (fully diluted) were $0.56 in both the 2019 and 2018 periods.  Annualized return on average assets for the three months ended June 30, 2019 was 1.16% with an annualized return on average equity of 10.93%.  Net income for the six months ended June 30, 2019 totaled $6,712,000, which is $70,000 higher than the same six-month period of last year due primarily to improved net interest income.  Earnings per share (fully diluted) for the six months ended June 30, 2019 and 2018, each totaled $1.06.

Total assets as of June 30, 2019 were $1.223 billion with loans receivable of $887.7 million, deposits of $981.2 million and stockholders’ equity of $131.5 million.  Loans receivable increased $83.9 million since June 30, 2018 while total deposits increased $30.3 million. 

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $3.0 million and represented 0.25% of total assets as of June 30, 2019 compared to $2.7 million, or 0.23% of total assets, as of June 30, 2018.  The increase was due primarily to a $291,000 increase in foreclosed real estate owned.  The allowance for loan losses totaled $8,228,000 as of June 30, 2019 and represented 0.93% of total loans outstanding, compared to $8,326,000 and 1.04%, respectively, on June 30, 2018.  As of June 30, 2019, the reserve for loan losses was 607% of nonperforming loans compared to 655% on June 30, 2018.

For the three months ended June 30, 2019, net interest income, on a fully taxable equivalent basis (fte), totaled $9,878,000, an increase of $394,000 compared to the similar period in 2018.  An $88.1 million increase in average loans outstanding contributed to the increased income.  Net interest margin (fte) for the 2019 period was 3.49%, compared to 3.54% in 2018 period.  The tax-equivalent yield on interest-earning assets increased 27 basis points to 4.27% compared to the prior year while the cost of interest-bearing liabilities increased 42 basis points to 1.02%.  Net interest income (fte) for the six months ended June 30, 2019 totaled $19,413,000, which was $846,000 higher than the similar period in 2018 due to the higher volume of earning assets.  The net interest margin (fte) was 3.46% in the 2019 period and 3.50% during the first six months of 2018.  The decrease in the net interest margin (fte) reflects the increase in the rate paid on time deposits due to the renewal of maturing certificates of deposit at market rates.

Other income for the three months ended June 30, 2019 totaled $1,641,000 compared to $1,774,000 for the similar period in 2018.  The decrease can be attributed to a lower level of service charges and fees and a reduction in earnings and proceeds on bank-owned life insurance policies.   Net gains from the sale of loans and securities increased $73,000.  For the six months ended June 30, 2019, other income totaled $3,201,000 compared to $3,468,000 in the 2018 period.  Net gains from the sale of loans and securities decreased $26,000, while earnings and proceeds on bank-owned life insurance policies decreased $144,000. 

Other expenses totaled $6,785,000 for the three months ended June 30, 2019, an increase of $432,000, or 6.8%, compared to the $6,353,000 reported in the similar period of 2018.  Salaries and employee benefits rose $193,000 over the same period of last year while all other expenses increased $239,000, net.  For the six months ended June 30, 2019, other expenses totaled $13,433,000 compared to $12,600,000 for the similar period in 2018.  The increase includes a $380,000 increase in salaries and employee benefits, while all other expenses increased $453,000, or 7.9%, net.

Mr. Critelli commented, “Our earnings for the first half of 2019 have increased over the first six months of last year.  Our annualized loan growth exceeded 8.0%, operating expenses remain well controlled and our capital base remains above regulatory “well capitalized” targets.  The Bank also expanded its market area into Luzerne County, Pennsylvania with the recent opening of our Hanover Township Office.  We 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 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 net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure.  Tax-equivalent net interest income was derived from GAAP net interest income 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 taxable equivalent basis:

    Three months ended June 30   Six months ended June 30
(dollars in thousands)   2019
  2018
  2019
  2018
                                 
Net Interest Income   $ 9,612     $ 9,215     $ 18,882     $ 18,022  
Taxable equivalent basis adjustment  using 21% marginal tax rate     266       269       531       545  
Net interest income on a fully taxable  equivalent basis   $ 9,878     $ 9,484     $ 19,413     $ 18,567  
                                 
                                 
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 June 30   Six months ended June 30
(dollars in thousands)   2019   2018   2019   2018
                                 
Average equity   $ 129,215     $ 115,042     $ 126,993     $ 115,180  
                                 
Average goodwill and other intangibles     (11,621 )     (11,738 )
    (11,635 )     (11,755 )
Average tangible equity

  $ 117,594     $ 103,384     $ 115,358     $ 103,425  
                                 
                                 

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)                    
    June 30            
    2019     2018              
ASSETS                    
Cash and due from banks  $ 14,207   $ 15,193              
Interest-bearing deposits with banks   4,265     914              
Cash and cash equivalents   18,472     16,107              
                     
Securities available for sale   238,083     259,442              
Loans receivable   887,673     803,773              
Less: Allowance for loan losses   8,228     8,326              
Net loans receivable   879,445     795,447              
Regulatory stock, at cost   3,155     2,313              
Bank premises and equipment, net   13,880     13,894              
Bank owned life insurance   38,340     37,485              
Foreclosed real estate owned   1,677     1,386              
Accrued interest receivable   3,979     3,672              
Goodwill   11,331     11,331              
Other intangible assets   280     394              
Other assets   13,886     9,122              
TOTAL ASSETS  $ 1,222,528   $ 1,150,593              
                     
LIABILITIES                    
Deposits:                    
Non-interest bearing demand  $ 221,764   $ 216,472              
Interest-bearing   759,460     734,417              
Total deposits   981,224     950,889              
Short-term borrowings   48,094     43,325              
Other borrowings   44,024     30,283              
Accrued interest payable   3,008     1,461              
Other liabilities   14,695     9,102              
TOTAL LIABILITIES   1,091,045     1,035,060              
                     
STOCKHOLDERS' EQUITY                    
Prefered 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   630     627              
issued: 2019: 6,304,413 shares, 2018: 6,266,388shares                    
Surplus   48,741     47,815              
Retained earnings   82,127     74,315              
Treasury stock, at cost: 2019: 13,807 shares, 2018: 5,729 shares   (455 )   (188 )            
Accumulated other comprehensive loss   440     (7,036 )            
TOTAL STOCKHOLDERS' EQUITY   131,483     115,533              
                     
TOTAL LIABILITIES AND                    
STOCKHOLDERS' EQUITY  $ 1,222,528   $ 1,150,593              
                     
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Consolidated Statements of Income                 
(dollars in thousands, except per share data)                    
  (unaudited)                
  Three Months Ended June 30,     Six Months Ended June 30,
  2019     2018         2019     2018  
INTEREST INCOME        
Loans receivable, including fees $ 10,328   $ 8,857       $ 20,298   $ 17,344  
Securities   1,435     1,536         2,876     3,060  
Other   51     43         66     61  
Total Interest income   11,814     10,436         23,240     20,465  
                     
INTEREST EXPENSE                    
Deposits   1,839     1,052         3,568     2,082  
Short-term borrowings   85     38         209     90  
Other borrowings   278     131         581     271  
Total Interest expense   2,202     1,221         4,358     2,443  
NET INTEREST INCOME   9,612     9,215         18,882     18,022  
PROVISION FOR LOAN LOSSES   300     425         750     975  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   9,312     8,790         18,132     17,047  
                     
OTHER INCOME                    
Service charges and fees   1,052     1,101         2,083     2,082  
Income from fiduciary activities   145     175         287     311  
Net realized gains on sales of securities     64     58           64     200  
Gains on sales of loans, net     67     -           110     -  
Earnings and proceeds on life insurance policies   207     279         408     552  
Other   106     161         249     323  
Total other income   1,641     1,774         3,201     3,468  
                     
OTHER EXPENSES                    
Salaries and  employee benefits   3,599     3,406         7,248     6,868  
Occupancy, furniture and equipment   940     857         1,864     1,749  
Data processing  and related operations   472     340         920     658  
Taxes, other than income   179     153         340     327  
Professional fees   226     229         476     459  
FDIC Insurance assessment   84     86         155     178  
Foreclosed real estate   (10 )   114         13     95  
Amortization of intangibles   27     33         56     68  
Other   1,268     1,135         2,361     2,198  
Total other expenses   6,785     6,353         13,433     12,600  
                     
INCOME BEFORE TAX   4,168     4,211         7,900     7,915  
INCOME TAX EXPENSE   646     698         1,188     1,273  
NET INCOME  $ 3,522   $ 3,513        $ 6,712   $ 6,642  
                     
Basic earnings per share $ 0.56   $ 0.57       $ 1.07   $ 1.07  
                     
Diluted earnings per share $ 0.56   $ 0.56       $ 1.06   $ 1.06  
               
             
                     
NORWOOD FINANCIAL CORP.                
Financial Highlights (Unaudited)                    
(dollars in thousands, except per share data)                    
                     
For the Three Months Ended June 30   2019     2018              
                   
Net interest income $ 9,612   $ 9,215              
Net income   3,522     3,513              
                   
Net interest spread (fully taxable equivalent)   3.24 %   3.40 %            
Net interest margin (fully taxable equivalent)   3.49 %   3.54 %            
Return on average assets   1.16 %   1.23 %            
Return on average equity   10.93 %   12.25 %            
Return on average tangible equity   12.01 %   13.64 %            
Basic earnings per share $ 0.56   $ 0.57              
Diluted earnings per share $ 0.56   $ 0.56              
                     
For the Six Months Ended June 30                    
                   
Net interest income $ 18,882   $ 18,022              
Net income   6,712     6,642              
                   
Net interest spread (fully taxable equivalent)   3.22 %   3.35 %            
Net interest margin (fully taxable equivalent)   3.46 %   3.50 %            
Return on average assets   1.12 %   1.18 %            
Return on average equity   10.66 %   11.63 %            
Return on average tangible equity   11.73 %   12.95 %            
Basic earnings per share $ 1.07   $ 1.07              
Diluted earnings per share $ 1.06   $ 1.06              
                     
As of June 30                
               
Total assets $ 1,222,528   $ 1,150,593              
Total loans receivable   887,673     803,773              
Allowance for loan losses   8,228     8,326              
Total deposits   981,224     950,889              
Stockholders' equity   131,483     115,533              
Trust assets under management   163,103     158,117              
               
Book value per share $ 20.90   $ 18.35              
Tangible book value per share $ 19.06   $ 16.47              
Equity to total assets   10.76 %   10.04 %            
Allowance to total loans receivable   0.93 %   1.04 %            
Nonperforming loans to total loans   0.15 %   0.16 %            
Nonperforming assets to total assets   0.25 %   0.23 %            
                       
                               
                               
NORWOOD FINANCIAL CORP.                              
Consolidated Balance Sheets (unaudited)            
(dollars in thousands)  
  June 30   March 31   December 31   September 30   June 30
    2019
  2019
  2018
  2018
  2018
ASSETS  
Cash and due from banks $ 14,207   $ 13,583   $ 18,039   $ 17,073   $ 15,193  
Interest-bearing deposits with banks   4,265     6,291     309     295     914  
Cash and cash equivalents   18,472     19,874     18,348     17,368     16,107  
                   
Securities available for sale   238,083     240,621     243,277     247,517     259,442  
Loans receivable   887,673     864,198     850,182     819,197     803,773  
Less: Allowance for loan losses   8,228     8,349     8,452     8,280     8,326  
Net loans receivable   879,445     855,849     841,730     810,917     795,447  
Regulatory stock, at cost   3,155     3,132     3,926     3,261     2,313  
Bank owned life insurance   38,340     38,134     37,932     37,718     37,485  
Bank premises and equipment, net   13,880     14,165     13,846     13,797     13,894  
Foreclosed real estate owned   1,677     1,792     1,115     1,209     1,386  
Goodwill and other intangibles   11,611     11,638     11,667     11,695     11,725  
Other assets   17,865     18,390     12,718     13,266     12,794  
TOTAL ASSETS $ 1,222,528   $ 1,203,595   $ 1,184,559   $ 1,156,748   $ 1,150,593  
                   
LIABILITIES                    
Deposits:                    
Non-interest bearing demand $ 221,764   $ 206,806   $ 201,457   $ 218,979   $ 216,472  
Interest-bearing deposits   759,460     767,609     745,323     720,735     734,417  
Total deposits   981,224     974,415     946,780     939,714     950,889  
Borrowings   92,118     85,779     105,330     89,469     73,608  
Other liabilities   17,703     16,629     10,164     10,885     10,563  
TOTAL LIABILITIES   1,091,045     1,076,823     1,062,274     1,040,068     1,035,060  
                   
STOCKHOLDERS' EQUITY   131,483     126,772     122,285     116,680     115,533  
                   
TOTAL LIABILITIES AND                    
STOCKHOLDERS' EQUITY $ 1,222,528   $ 1,203,595   $ 1,184,559   $ 1,156,748   $ 1,150,593  
 
                               
                               
NORWOOD FINANCIAL CORP.  
Consolidated Statements of Income (unaudited)  
(dollars in thousands, except per share data)  
    June 30   March 31   December 31   September 30   June 30
Three months ended   2019
  2019
  2018
  2018
  2018
INTEREST INCOME                    
Loans receivable, including fees $ 10,328   $ 9,970   $ 9,759   $ 9,301   $ 8,857  
Securities   1,435     1,441     1,476     1,483     1,536  
Other   51     15     10     2     43  
Total interest income   11,814     11,426     11,245     10,786     10,436  
                   
INTEREST EXPENSE                    
Deposits   1,839     1,729     1,446     1,116     1,052  
Borrowings   363     426     370     282     169  
Total interest expense   2,202     2,155     1,816     1,398     1,221  
NET INTEREST INCOME   9,612     9,271     9,429     9,388     9,215  
PROVISION FOR LOAN LOSSES   300     450     375     375     425  
NET INTEREST INCOME AFTER PROVISION                    
FOR LOAN LOSSES   9,312     8,821     9,054     9,013     8,790  
                   
OTHER INCOME                    
Service charges and fees   1,052     1,031     1,085     1,129     1,101  
Income from fiduciary activities   145     142     126     151     175  
Net realized gains on sales of securities   64     -     -     13     58  
Gains on sales of loans, net   67     42     -     15     -  
Earnings and proceeds on life insurance policies   207     202     277     297     279  
Other   106     143     112     392     161  
Total other income   1,641     1,560     1,600     1,997     1,774  
                   
OTHER EXPENSES                    
Salaries and  employee benefits   3,599     3,649     3,575     3,577     3,406  
Occupancy, furniture and equipment, net   940     924     1,036     910     857  
Foreclosed real estate   (10 )   23     104     (26 )   114  
FDIC insurance assessment   84     71     83     87     86  
Other   2,172     1,981     2,005     2,024     1,890  
Total other expenses   6,785     6,648     6,803     6,572     6,353  
                   
INCOME BEFORE TAX   4,168     3,733     3,851     4,438     4,211  
INCOME TAX EXPENSE   646     543     552     728     698  
NET INCOME $ 3,522   $ 3,190   $ 3,299   $ 3,710   $ 3,513  
                   
Basic earnings per share $ 0.56   $ 0.51   $ 0.53   $ 0.59   $ 0.57  
                     
Diluted earnings per share $ 0.56   $ 0.51   $ 0.53   $ 0.58   $ 0.56  
 
Book Value per share $ 20.90   $ 20.16   $ 19.43   $ 18.49   $ 18.35  
Tangible Book Value per share   19.06     18.31     17.58     16.62     16.47  
                   
Return on average assets (annualized)   1.16 %   1.09 %   1.12 %   1.28 %   1.23 %
Return on average equity (annualized)   10.93 %   10.37 %   11.02 %   12.55 %   12.25 %
Return on average tangible equity (annualized)   12.01 %   11.44 %   12.23 %   13.94 %   13.64 %
                   
Net interest spread (fte)   3.24 %   3.20 %   3.33 %   3.40 %   3.40 %
Net interest margin (fte)   3.49 %   3.43 %   3.54 %   3.57 %   3.54 %
                   
Allowance for loan losses to total loans   0.93 %   0.97 %   0.99 %   1.01 %   1.04 %
Net charge-offs to average loans (annualized)   0.19 %   0.26 %   0.10 %   0.21 %   0.10 %
Nonperforming loans to total loans   0.15 %   0.13 %   0.13 %   0.14 %   0.16 %
Nonperforming assets to total assets   0.25 %   0.24 %   0.19 %   0.20 %   0.23 %
                   
   
                     
                     
total NAL (net of specific credit mark)   1,354,667     1,097,440     1,140,442     1,114,599     1,270,967  
past due 90+   -     -     -     -     -  
total non performing loans   1,354,667     1,097,440     1,140,442     1,114,599     1,270,967  
OREO   1,677,000     1,791,675     1,115,494     1,208,943     1,386,315  
total Non performing assets   3,031,667     2,889,115     2,255,936     2,323,542     2,657,282  
total loans   887,672,717     864,197,793     850,181,654     819,196,863     803,772,975  
total assets   1,222,529,298     1,203,594,916     1,184,559,213     1,156,748,475     1,150,592,577  
net charge off's, this quarter   420,911     553,355     203,024     420,863     197,931  
average loans, this quarter   876,117,767     857,437,767     834,360,524     813,091,861     788,025,551  
Loan loss reserve   8,228,078     8,348,989     8,452,344     8,280,368     8,326,231  
    .   .