Norwood Financial Corp Announces Third Quarter Earnings

Honesdale, Pennsylvania, UNITED STATES


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 shares632  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 LOSSES9,591  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%