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Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 23, 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 September 30, 2019 of $3,907,000 which represents an increase of $197,000, or 5.3%, over the $3,710,000 earned in the same three-month period of 2018.  Earnings per share (fully diluted) were $0.62 in the 2019 three-month period, increasing from the $0.58 earned in the similar period of last year.  The annualized returns on average assets and average equity for the current three-month period were 1.27% and 11.56%, respectively, compared to 1.28% and 12.55% for the three-month period ended September 30, 2018.

Net income for the nine months ended September 30, 2019 totaled $10,619,000, which is $267,000 higher than the same period of 2018 primarily due to a $1,363,000 increase in net interest income and a $300,000 reduction in the provision for credit losses.  Earnings per share (fully diluted) for the nine months ended September 30, 2019 totaled $1.68 per share compared to $1.64 per share in the 2018 period. 

Total assets as of September 30, 2019 were $1.216 billion with loans receivable of $905.6 million, deposits of $974.4 million and stockholders’ equity of $134.9 million.  Total assets have increased $59.1 million during the past twelve months while loans and deposits have increased $86.4 million and $34.7 million, respectively. 

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $3.0 million or 0.24% of total assets as of September 30, 2019 compared to $2.3 million or 0.20% of total assets as of September 30, 2018.  The allowance for loan losses totaled $8,405,000 as of September 30, 2019 and represented 604% of total non-performing loans, compared to $8,280,000 and 719% of non-performing loans as of September 30, 2018.

For the three months ended September 30, 2019, net interest income, on a fully taxable equivalent basis (fte), totaled $10,133,000, which represents an increase of $488,000 compared to the similar period in 2018.  An $84.8 million increase in average loans outstanding contributed to the increased income.  Net interest margin (fte) for the 2019 period was 3.60% compared to 3.57% for the similar period in 2018.  Net interest income (fte) for the nine months ended September 30, 2019 totaled $29,546,000, an increase of $1,334,000 compared to the similar period in 2018 due primarily to a higher volume of earning assets.  The net interest margin (fte) year-to-date for the 2019 period was 3.51% compared to 3.52% in the same period of 2018. 

Other income for the three months ended September 30, 2019 totaled $1,882,000 compared to $1,997,000 for the similar period in 2018.  The decrease can be attributed to a reduction in earnings and proceeds on bank-owned life insurance policies and non-recurring income related to the settlement of litigation which was recognized in the 2018 period.  For the nine months ended September 30, 2019, other income totaled $5,083,000 compared to $5,466,000 in the 2018 period.  Gains on sales of loans and securities totaled $358,000 in the 2019 year-to-date period compared to $228,000 in the corresponding 2018 period.  Earnings and proceeds on bank-owned life insurance policies decreased $218,000 compared to 2018 while the 2018 period also includes non-recurring income related to the litigation settlement.

Other expenses totaled $6,791,000 for the three months ended September 30, 2019, compared to $6,572,000 in the similar period of 2018.  The higher level of expense during the 2019 period includes an increase of $90,000 for salaries and employee benefits and a $112,000 increase in data processing costs.  All other expenses increased $17,000, net.  For the nine months ended September 30, 2019, other expenses totaled $20,224,000 compared to $19,173,000 for the similar period in 2018, an increase of $1,051,000, or 5.5%.  The increase includes a $470,000 increase in salaries and benefits costs and a $373,000 increase in data processing expense.  All other expenses increased $208,000, net.

Mr. Critelli commented, “Our earnings in 2019 have improved over the first nine months of last year.  Our annualized loan growth exceeds 8% in 2019, operating expenses remain well controlled with an efficiency ratio of 58.4%, and our capital base remains above regulatory 'Well Capitalized' targets.  The Bank also expanded its market area into Luzerne County, Pennsylvania with the opening of our Hanover Township Office in April, 2019 and has received approval to open an office in Exeter later this year.  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 interest income and net interest income, which are non-GAAP (Generally Accepted Accounting Principles) financial measures.  Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using an assumed tax rate of 21%.  We believe the presentation of interest income and net interest income on a tax-equivalent basis ensures comparability of interest income and 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:

 (dollars in thousands) Three months ended
September 30
  Nine months ended
September 30
    2019     2018     2019     2018
Net interest income $9,891   $9,388   $28,773   $27,410
Tax equivalent basis adjustment using 21% marginal tax rate  242   257   773    802
Net interest income on a fully taxable equivalent basis $ 10,133   $9,645   $29,546   $28,212
               


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
September 30
Nine months ended
September 30
(dollars in thousands) 2019   2018   2019   2018
               
Average equity $134,037   $117,306   $129,367   $115,897
               
Average goodwill and other intangibles (11,597)   (11,707)   (11,623)   (11,739)
Average tangible equity $122,440   $105,599   $117,744   $104,158

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)                    
    September 30            
    2019     2018              
ASSETS                    
  Cash and due from banks  $ 20,067    $ 17,073              
  Interest-bearing deposits with banks   848     295              
  Cash and cash equivalents   20,915     17,368              
                     
  Securities available for sale   211,199     247,517              
  Loans receivable   905,582     819,197              
  Less: Allowance for loan losses   8,405     8,280              
  Net loans receivable   897,177     810,917              
  Regulatory stock, at cost   3,137     3,261              
  Bank premises and equipment, net   13,927     13,797              
  Bank owned life insurance   38,562     37,718              
  Foreclosed real estate owned   1,572     1,209              
  Accrued interest receivable   3,726     3,792              
  Goodwill   11,331     11,331              
  Other intangible assets   257     364              
  Other assets   14,053     9,474              
  TOTAL ASSETS  $ 1,215,856    $ 1,156,748              
                     
LIABILITIES                    
  Deposits:                    
  Non-interest bearing demand  $ 231,211    $ 218,979              
  Interest-bearing   743,222     720,735              
  Total deposits   974,433     939,714              
  Short-term borrowings   52,778     52,820              
  Other borrowings   35,906     36,649              
  Accrued interest payable   2,623     1,705              
  Other liabilities   15,222     9,180              
  TOTAL LIABILITIES   1,080,962     1,040,068              
                     
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 632     628              
    issued: 2019: 6,314,688 shares, 2018: 6,274,513 shares                    
  Surplus   49,052     48,087              
  Retained earnings   84,522     76,645              
  Treasury stock, at cost: 2019: 13,807 shares, 2018: 5,729 shares   (455 )   (188 )            
  Accumulated other comprehensive income (loss)   1,143     (8,492 )            
  TOTAL STOCKHOLDERS' EQUITY   134,894     116,680              
                     
  TOTAL LIABILITIES AND                    
  STOCKHOLDERS' EQUITY  $ 1,215,856    $ 1,156,748              
                     
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Consolidated Statements of Income                    
(dollars in thousands, except per share data)                    
  (unaudited)                    
    Three Months Ended September 30,       Nine Months Ended September 30,
    2019     2018         2019     2018  
INTEREST INCOME                    
  Loans receivable, including fees  $ 10,776    $ 9,301        $ 31,074    $ 26,645  
  Securities   1,278     1,483         4,155     4,543  
  Other   5     2         70     63  
  Total Interest income   12,059     10,786         35,299     31,251  
                     
INTEREST EXPENSE                    
  Deposits   1,787     1,116         5,355     3,198  
  Short-term borrowings   135     111         344     201  
  Other borrowings   246     171         827     442  
  Total Interest expense   2,168     1,398         6,526     3,841  
NET INTEREST INCOME   9,891     9,388         28,773     27,410  
PROVISION FOR LOAN LOSSES   300     375         1,050     1,350  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,591     9,013         27,723     26,060  
                     
OTHER INCOME                    
  Service charges and fees   1,200     1,129         3,283     3,211  
  Income from fiduciary activities   167     151         454     463  
  Net realized gains on sales of securities   169     13         233     213  
  Gains on sales of loans, net   15     15         125     15  
  Earnings and proceeds on life insurance policies   222     297         630     848  
  Other   109     392         358     716  
  Total other income   1,882     1,997         5,083     5,466  
                     
OTHER EXPENSES                    
  Salaries and employee benefits   3,667     3,577         10,915     10,445  
  Occupancy, furniture and equipment   916     910         2,780     2,659  
  Data processing and related operations   480     368         1,400     1,027  
  Taxes, other than income   179     153         520     480  
  Professional fees   276     301         752     760  
  FDIC Insurance assessment   (5 )   87         150     265  
  Foreclosed real estate   24     (26 )       37     68  
  Amortization of intangibles   23     29         79     97  
  Other   1,231     1,173         3,591     3,372  
  Total other expenses   6,791     6,572         20,224     19,173  
                     
INCOME BEFORE TAX   4,682     4,438         12,582     12,353  
INCOME TAX EXPENSE   775     728         1,963     2,001  
NET INCOME  $ 3,907    $ 3,710        $ 10,619    $ 10,352  
                     
Basic earnings per share  $ 0.62    $ 0.59        $ 1.70    $ 1.66  
                     
Diluted earnings per share  $ 0.62    $ 0.58        $ 1.68    $ 1.64  
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Financial Highlights (Unaudited)                    
(dollars in thousands, except per share data)                    
                     
For the Three Months Ended September 30   2019     2018              
                     
Net interest income  $ 9,891    $ 9,388              
Net income   3,907     3,710              
                     
Net interest spread (fully taxable equivalent)   3.35 %   3.40 %            
Net interest margin (fully taxable equivalent)   3.60 %   3.57 %            
Return on average assets   1.27 %   1.28 %            
Return on average equity   11.56 %   12.55 %            
Return on average tangible equity   12.66 %   13.94 %            
Basic earnings per share  $ 0.62    $ 0.59              
Diluted earnings per share  $ 0.62    $ 0.58              
                     
For the Nine Months Ended September 30                    
                     
Net interest income  $ 28,773    $ 27,410              
Net income   10,619     10,352              
                     
Net interest spread (fully taxable equivalent)   3.26 %   3.37 %            
Net interest margin (fully taxable equivalent)   3.51 %   3.52 %            
Return on average assets   1.17 %   1.21 %            
Return on average equity   10.97 %   11.94 %            
Return on average tangible equity   12.06 %   13.29 %            
Basic earnings per share  $ 1.70    $ 1.66              
Diluted earnings per share  $ 1.68    $ 1.64              
                     
As of September 30                    
                     
Total assets  $ 1,215,856    $ 1,156,748              
Total loans receivable   905,582     819,197              
Allowance for loan losses   8,405     8,280              
Total deposits   974,433     939,714              
Stockholders' equity   134,894     116,680              
Trust assets under management   160,230     164,852              
                     
Book value per share  $ 21.41    $ 18.49              
Tangible book value per share  $ 19.57    $ 16.62              
Equity to total assets   11.09 %   10.09 %            
Allowance to total loans receivable   0.93 %   1.01 %            
Nonperforming loans to total loans   0.15 %   0.14 %            
Nonperforming assets to total assets   0.24 %   0.20 %            
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Consolidated Balance Sheets (unaudited)                    
(dollars in thousands)                    
      September 30       June 30       March 31       December 31       September 30  
    2019      2019      2019      2018      2018   
ASSETS                    
  Cash and due from banks  $ 20,067    $ 14,207    $ 13,583    $ 18,039    $ 17,073  
  Interest-bearing deposits with banks   848     4,265     6,291     309     295  
  Cash and cash equivalents   20,915     18,472     19,874     18,348     17,368  
                     
  Securities available for sale   211,199     238,083     240,621     243,277     247,517  
  Loans receivable   905,582     887,673     864,198     850,182     819,197  
  Less: Allowance for loan losses   8,405     8,228     8,349     8,452     8,280  
  Net loans receivable   897,177     879,445     855,849     841,730     810,917  
  Regulatory stock, at cost   3,137     3,155     3,132     3,926     3,261  
  Bank owned life insurance   38,562     38,340     38,134     37,932     37,718  
  Bank premises and equipment, net   13,927     13,880     14,165     13,846     13,797  
  Foreclosed real estate owned   1,572     1,677     1,792     1,115     1,209  
  Goodwill and other intangibles   11,588     11,611     11,638     11,667     11,695  
  Other assets   17,779     17,865     18,390     12,718     13,266  
  TOTAL ASSETS  $ 1,215,856    $ 1,222,528    $ 1,203,595    $ 1,184,559    $ 1,156,748  
                     
LIABILITIES                    
  Deposits:                    
  Non-interest bearing demand  $ 231,211    $ 221,764    $ 206,806    $ 201,457    $ 218,979  
  Interest-bearing deposits   743,222     759,460     767,609     745,323     720,735  
  Total deposits   974,433     981,224     974,415     946,780     939,714  
  Borrowings   88,684     92,118     85,779     105,330     89,469  
  Other liabilities   17,845     17,703     16,629     10,164     10,885  
  TOTAL LIABILITIES   1,080,962     1,091,045     1,076,823     1,062,274     1,040,068  
                     
STOCKHOLDERS' EQUITY   134,894     131,483     126,772     122,285     116,680  
                     
  TOTAL LIABILITIES AND                    
      STOCKHOLDERS' EQUITY  $ 1,215,856    $ 1,222,528    $ 1,203,595    $ 1,184,559    $ 1,156,748  
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Consolidated Statements of Income (unaudited)                    
(dollars in thousands, except per share data)                    
      September 30       June 30       March 31       December 31       September 30  
Three months ended   2019     2019     2019     2018     2018  
INTEREST INCOME                    
  Loans receivable, including fees  $ 10,776    $ 10,328    $ 9,970    $ 9,759    $ 9,301  
  Securities   1,278     1,435     1,441     1,476     1,483  
  Other   5     51     15     10     2  
  Total interest income   12,059     11,814     11,426     11,245     10,786  
                     
INTEREST EXPENSE                    
  Deposits   1,787     1,839     1,729     1,446     1,116  
  Borrowings   381     363     426     370     282  
  Total interest expense   2,168     2,202     2,155     1,816     1,398  
NET INTEREST INCOME   9,891     9,612     9,271     9,429     9,388  
PROVISION FOR LOAN LOSSES   300     300     450     375     375  
NET INTEREST INCOME AFTER PROVISION                    
  FOR LOAN LOSSES   9,591     9,312     8,821     9,054     9,013  
                     
OTHER INCOME                    
  Service charges and fees   1,200     1,052     1,031     1,085     1,129  
  Income from fiduciary activities   167     145     142     126     151  
  Net realized gains on sales of securities   169     64     -     -     13  
  Gains on sales of loans, net   15     67     42     -     15  
  Earnings and proceeds on life insurance policies   222     207     202     277     297  
  Other   109     106     143     112     392  
  Total other income   1,882     1,641     1,560     1,600     1,997  
                     
OTHER EXPENSES                    
  Salaries and employee benefits   3,667     3,599     3,649     3,575     3,577  
  Occupancy, furniture and equipment, net   916     940     924     1,036     910  
  Foreclosed real estate   24     (10 )   23     104     (26 )
  FDIC insurance assessment   (5 )   84     71     83     87  
  Other   2,189     2,172     1,981     2,005     2,024  
  Total other expenses   6,791     6,785     6,648     6,803     6,572  
                     
INCOME BEFORE TAX   4,682     4,168     3,733     3,851     4,438  
INCOME TAX EXPENSE   775     646     543     552     728  
NET INCOME  $ 3,907    $ 3,522    $ 3,190    $ 3,299    $ 3,710  
                     
Basic earnings per share  $ 0.62    $ 0.56    $ 0.51    $ 0.53    $ 0.59  
                     
Diluted earnings per share  $ 0.62    $ 0.56    $ 0.51    $ 0.53    $ 0.58  
                     
Book Value per share  $ 21.41   $ 20.90    $ 20.16    $ 19.43    $ 18.49  
Tangible Book Value per share   19.57     19.06     18.31     17.58     16.62  
                     
Return on average assets (annualized)   1.27 %   1.16 %   1.09 %   1.12 %   1.28 %
Return on average equity (annualized)   11.56 %   10.93 %   10.37 %   11.02 %   12.55 %
Return on average tangible equity (annualized)   12.66 %   12.01 %   11.44 %   12.23 %   13.94 %
                     
Net interest spread (fte)   3.35 %   3.24 %   3.20 %   3.33 %   3.40 %
Net interest margin (fte)   3.60 %   3.49 %   3.43 %   3.54 %   3.57 %
                     
Allowance for loan losses to total loans   0.93 %   0.93 %   0.97 %   0.99 %   1.01 %
Net charge-offs to average loans (annualized)   0.05 %   0.19 %   0.26 %   0.10 %   0.21 %
Nonperforming loans to total loans   0.15 %   0.15 %   0.13 %   0.13 %   0.14 %
Nonperforming assets to total assets   0.24 %   0.25 %   0.24 %   0.19 %   0.20 %