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Norwood Financial Corp Announces Third Quarter Earnings

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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

%