FOR IMMEDIATE RELEASE

 

January 24, 2019 – Honesdale, Pennsylvania

 

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 December 31, 2018 of $3,299,000 compared to $157,000 earned in the corresponding period of 2017.   The increase in earnings is due primarily to the $545,000 improvement in net interest income and the $3,060,000 of non-recurring additional tax expense recorded in the fourth quarter of 2017 resulting from the enactment of the Tax Cuts and Jobs Act (the "Act").  For the year ended December 31, 2018, net income totaled $13,651,000, an increase of $5,453,000 from the $8,198,000 earned in the prior year.  The increase reflects improvement in net interest income and other income, as well as a reduction in the provision for loan losses.  Income tax expense was reduced $3,998,000 due to the non-recurring expense recognized in 2017 combined with the impact of the reduced corporate tax rate.  In 2018, income before tax improved $1,455,000, or 9.9%

 

Earnings per share (fully diluted) were $0.53 and $0.03 for the three-month periods ended December 31, 2018 and 2017, respectively. For the year, earnings per share on a fully diluted basis were $2.17 for 2018 compared to $1.31 in 2017.  The return on average assets for the year was 1.19% with a return on average equity of 11.71% compared to 0.73% and 7.04%, respectively, in 2017.

 

 

 

Total assets were $1.185 billion as of December 31, 2018.  Loans receivable totaled $850.2 million as of December 31, 2018, with total deposits of $946.8 million and stockholders' equity of $122.3 million.

 

Loans receivable increased $86.1 million, or 11.3%, from the prior year-end due primarily to a $41.0 million increase in consumer loans and a $31.9 million increase in commercial real estate loans.  Other commercial loans increased $13.1 million.  For the three months and year ended December 31, 2018, net charge-offs totaled $203,000 and $907,000, respectively, compared to $527,000 and $1,029,000, respectively, for the corresponding periods in 2017.

 

Net interest income, on a fully taxable equivalent basis (fte), totaled $9,687,000 for the three months ended December 31, 2018, an increase of $259,000 compared to the same period in 2017 despite the lower tax-equivalent adjustment resulting from the Act.  For the year, net interest income (fte) totaled $37,899,000, an increase of $809,000 compared to 2017 due primarily to the higher volume of earning assets, including a $63.2 million increase in average loans outstanding.

 

Other income for the three months ended December 31, 2018 totaled $1,600,000 compared to $1,754,000 for the similar period in 2017.  Gains on the sale of securities decreased $181,000, while all other items of other income increased $27,000 in the aggregate due primarily to service charges and fees.  Other income for the year ended December 31, 2018 totaled $7,065,000 compared to $6,911,000 in 2017, an increase of $154,000.  Gains on the sale of loans and investment securities decreased $187,000 in the aggregate, while all other items of other income increased $341,000, net.

 

 

 

Other expenses totaled $6,803,000 for the three months ended December 31, 2018, compared to $5,886,000 in the similar period of 2017.   The $917,000 increase includes a $364,000 increase in salaries and benefits costs.  All other operating expenses increased $553,000, net.  For the year ended December 31, 2018, other expenses totaled $25,975,000 compared to $24,870,000 for 2017, an increase of $1,105,000.  An increase of $1,170,000 in salaries and benefits was largely offset by reduced expenses on foreclosed real estate.  All other operating expenses increased $927,000, net.

 

Mr. Critelli commented, "In 2018, our earnings increased $5,453,000 over the 2017 level which included the $3,060,000 of non-recurring tax expense resulting from the Tax Cuts and Jobs Act.  Our income before taxes improved $1,455,000, or 9.9%.  Our Return on Average Assets was 1.19% and our Return on Average Equity was 11.71%, both well above last year's level.  Our cash dividend of $0.24 per share declared in the fourth quarter of 2018 represents a 9.1% increase over the same period of last year.  Earnings per share (fully diluted) also improved to $2.17 from $1.31 in 2017.  Our loan growth exceeded 11%, operating expenses remain well controlled, and our capital base remains above regulatory "Well Capitalized" targets.  Please know that we continue to search out opportunities available to us, and look forward to serving our growing base of stockholders and customers."

 

Norwood Financial Corp., through its subsidiary Wayne Bank, operates 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 is a non-GAAP (Generally Accepted Accounting Principles) financial measure.  Tax-equivalent net interest income is derived from GAAP interest income and net interest income using an assumed tax rate of 21% for 2018 and 34% for 2017.  We believe the presentation of interest income on a tax–equivalent basis ensures comparability of interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income to net interest income on a tax-equivalent basis:

 

 

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:

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)
		December 31
		2018				2017
ASSETS
Cash and due from banks		$	18,039			$	16,212
Interest-bearing deposits with banks			309				485
Cash and cash equivalents			18,348				16,697
Securities available for sale			243,277				281,121
Loans receivable			850,182				764,092
Less: Allowance for loan losses			8,452				7,634
Net loans receivable			841,730				756,458
Regulatory stock, at cost			3,926				3,505
Bank premises and equipment, net			13,846				13,864
Bank owned life insurance			37,932				37,060
Foreclosed real estate owned			1,115				1,661
Accrued interest receivable			3,776				3,716
Goodwill			11,331				11,331
Other intangible assets			336				462
Deferred tax asset			5,594				4,781
Other assets			3,348				2,260
TOTAL ASSETS		$	1,184,559			$	1,132,916
LIABILITIES
Deposits:
Non-interest bearing demand		$	201,457			$	205,138
Interest-bearing			745,323				724,246
Total deposits			946,780				929,384
Short-term borrowings			53,046				42,530
Other borrowings			52,284				35,945
Accrued interest payable			1,806				1,434
Other liabilities			8,358				7,884
TOTAL LIABILITIES			1,062,274				1,017,177
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued:  2018: 6,295,113 shares, 2017:  6,256,063 shares			630				626
Surplus			48,322				47,431
Retained earnings			78,434				70,426
Treasury stock, at cost: 2018: 2,470 shares, 2017: 2,608 shares			(81	)			(77	)
Accumulated other comprehensive loss			(5,020	)			(2,667	)
TOTAL STOCKHOLDERS' EQUITY			122,285				115,739
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY		$	1,184,559			$	1,132,916

 

 

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
		2018				2017				2018				2017
INTEREST INCOME
Loans receivable, including fees		$	9,759			$	8,503			$	36,404			$	32,524
Securities			1,476				1,560				6,019				6,416
Other			10				12				73				48
Total Interest income			11,245				10,075				42,496				38,988
INTEREST EXPENSE
Deposits			1,446				985				4,644				3,377
Short-term borrowings			122				61				323				199
Other borrowings			248				145				690				504
Total Interest expense			1,816				1,191				5,657				4,080
NET INTEREST INCOME			9,429				8,884				36,839				34,908
PROVISION FOR LOAN LOSSES			375				400				1,725				2,200
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			9,054				8,484				35,114				32,708
OTHER INCOME
Service charges and fees			1,085				1,023				4,295				4,079
Income from fiduciary activities			126				116				589				510
Net realized gains on sales of securities			-				181				213				348
Gains on sales of loans, net			-				-				15				67
Gains on sale of deposits			-				-				-				209
Earnings and proceeds on life insurance policies			277				283				1,126				1,133
Other			112				151				827				565
Total other income			1,600				1,754				7,065				6,911
OTHER EXPENSES
Salaries and  employee benefits			3,575				3,211				14,020				12,850
Occupancy, furniture and equipment			1,036				841				3,695				3,361
Data processing  and related operations			400				332				1,427				1,353
Taxes, other than income			92				(32	)			572				661
Professional fees			232				243				993				949
FDIC Insurance assessment			83				94				347				377
Foreclosed real estate			104				136				172				1,164
Amortization of intangibles			29				35				126				150
Other			1,252				1,026				4,623				4,005
Total other expenses			6,803				5,886				25,975				24,870
INCOME BEFORE TAX			3,851				4,352				16,204				14,749
INCOME TAX EXPENSE			552				4,195				2,553				6,551
NET INCOME		$	3,299			$	157			$	13,651			$	8,198
Basic earnings per share		$	0.53			$	0.03			$	2.19			$	1.32
Diluted earnings per share		$	0.53			$	0.03			$	2.17			$	1.31

 

 

 

NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended December 31		2018				2017
Net interest income		$	9,429			$	8,884
Net income			3,299				157
Net interest spread (fully taxable equivalent)			3.33	%			3.43	%
Net interest margin (fully taxable equivalent)			3.54	%			3.58	%
Return on average assets			1.12	%			0.05	%
Return on average equity			11.05	%			0.52	%
Return on average tangible equity			12.26	%			0.58	%
Basic earnings per share		$	0.53			$	0.03
Diluted earnings per share		$	0.53			$	0.03
For the Twelve Months Ended December 31			2018				2017
Net interest income		$	36,839			$	34,908
Net income			13,651				8,198
Net interest spread (fully taxable equivalent)			3.36	%			3.44	%
Net interest margin (fully taxable equivalent)			3.53	%			3.56	%
Return on average assets			1.19	%			0.73	%
Return on average equity			11.71	%			7.04	%
Return on average tangible equity			13.02	%			7.85	%
Basic earnings per share		$	2.19			$	1.32
Diluted earnings per share		$	2.17			$	1.31
As of December 31
Total assets		$	1,184,559			$	1,132,916
Total loans receivable			850,182				764,092
Allowance for loan losses			8,452				7,634
Total deposits			946,780				929,384
Stockholders' equity			122,285				115,739
Trust assets under management			151,224				157,838
Book value per share		$	19.43			$	18.61
Tangible book value per share		$	17.58			$	16.71
Equity to total assets			10.32	%			10.22	%
Allowance to total loans receivable			0.99	%			1.00	%
Nonperforming loans to total loans			0.13	%			0.32	%
Nonperforming assets to total assets			0.19	%			0.37	%

 

 

 

 

 

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		December 31				September 30				June 30				March 31				December 31
		2018				2018				2018				2018				2017
ASSETS
Cash and due from banks		$	18,039			$	17,073			$	15,193			$	10,103			$	16,212
Interest-bearing deposits with banks			309				295				914				2,039				485
Cash and cash equivalents			18,348				17,368				16,107				12,142				16,697
Securities available for sale			243,277				247,517				259,442				265,862				281,121
Loans receivable			850,182				819,197				803,773				775,681				764,092
Less: Allowance for loan losses			8,452				8,280				8,326				8,099				7,634
Net loans receivable			841,730				810,917				795,447				767,582				756,458
Regulatory stock, at cost			3,926				3,261				2,313				2,545				3,505
Bank owned life insurance			37,932				37,718				37,485				37,270				37,060
Bank premises and equipment, net			13,846				13,797				13,894				13,808				13,864
Foreclosed real estate owned			1,115				1,209				1,386				1,436				1,661
Goodwill and other intangibles			11,667				11,695				11,725				11,758				11,793
Other assets			12,718				13,266				12,794				14,634				10,757
TOTAL ASSETS		$	1,184,559			$	1,156,748			$	1,150,593			$	1,127,037			$	1,132,916
LIABILITIES
Deposits:
Non-interest bearing demand		$	201,457			$	218,979			$	216,472			$	204,027			$	205,138
Interest-bearing deposits			745,323				720,735				734,417				736,122				724,246
Total deposits			946,780				939,714				950,889				940,149				929,384
Borrowings			105,330				89,469				73,608				62,998				78,475
Other liabilities			10,164				10,885				10,563				10,052				9,318
TOTAL LIABILITIES			1,062,274				1,040,068				1,035,060				1,013,199				1,017,177
STOCKHOLDERS' EQUITY			122,285				116,680				115,533				113,838				115,739
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY		$	1,184,559			$	1,156,748			$	1,150,593			$	1,127,037			$	1,132,916

 

 

 

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		December 31				September 30				June 30				March 31				December 31
Three months ended		2018				2018				2018				2018				2017
INTEREST INCOME
Loans receivable, including fees		$	9,759			$	9,301			$	8,857			$	8,487			$	8,503
Securities			1,476				1,483				1,536				1,524				1,560
Other			10				2				43				18				12
Total interest income			11,245				10,786				10,436				10,029				10,075
INTEREST EXPENSE
Deposits			1,446				1,116				1,052				1,029				985
Borrowings			370				282				169				193				206
Total interest expense			1,816				1,398				1,221				1,222				1,191
NET INTEREST INCOME			9,429				9,388				9,215				8,807				8,884
PROVISION FOR LOAN LOSSES			375				375				425				550				400
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES			9,054				9,013				8,790				8,257				8,484
OTHER INCOME
Service charges and fees			1,085				1,129				1,101				980				1,023
Income from fiduciary activities			126				151				175				137				116
Net realized gains on sales of securities			-				13				58				142				181
Gains on sales of loans, net			-				15				-				-				-
Earnings and proceeds on life insurance policies			277				297				279				273				283
Other			112				392				161				162				151
Total other income			1,600				1,997				1,774				1,694				1,754
OTHER EXPENSES
Salaries and  employee benefits			3,575				3,577				3,406				3,462				3,211
Occupancy, furniture and equipment, net			1,036				910				857				892				841
Foreclosed real estate			104				(26	)			114				(19	)			136
FDIC insurance assessment			83				87				86				92				94
Other			2,005				2,024				1,890				1,821				1,604
Total other expenses			6,803				6,572				6,353				6,248				5,886
INCOME BEFORE TAX			3,851				4,438				4,211				3,703				4,352
INCOME TAX EXPENSE			552				728				698				574				4,195
NET INCOME		$	3,299			$	3,710			$	3,513			$	3,129			$	157
Basic earnings per share		$	0.53			$	0.59			$	0.57			$	0.50			$	0.03
Diluted earnings per share		$	0.53			$	0.58			$	0.56			$	0.50			$	0.03
Book Value per share		$	19.43			$	18.49			$	18.35			$	18.45			$	18.61
Tangible Book Value per share			17.58				16.62				16.47				16.56				16.71
Return on average assets (annualized)			1.12	%			1.28	%			1.23	%			1.13	%			0.05	%
Return on average equity (annualized)			11.02	%			12.55	%			12.25	%			11.00	%			0.52	%
Return on average tangible equity (annualized)			12.23	%			13.94	%			13.64	%			12.25	%			0.58	%
Net interest spread (fte)			3.33	%			3.40	%			3.40	%			3.31	%			3.44	%
Net interest margin (fte)			3.54	%			3.57	%			3.54	%			3.46	%			3.56	%
Allowance for loan losses to total loans			0.99	%			1.01	%			1.04	%			1.04	%			1.00	%
Net charge-offs to average loans (annualized)			0.10	%			0.21	%			0.10	%			0.04	%			0.28	%
Nonperforming loans to total loans			0.13	%			0.14	%			0.16	%			0.22	%			0.32	%
Nonperforming assets to total assets			0.19	%			0.20	%			0.23	%			0.28	%			0.37	%