Norwood Financial Corp Announces Third Quarter Earnings

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HONESDALE, Pa., Oct. 22, 2018 (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, 2018 of $3,710,000 which represents an increase of $769,000 over the $2,941,000 earned in the same three-month period of 2017.  Net interest income improved $518,000 and other income increased $139,000 over the three-month period ending September 30, 2017.  Earnings per share (fully diluted) were $0.58 in the 2018 period, increasing from the $0.47 earned in the similar period of last year.  The annualized returns on average assets and average equity for the current three-month period were 1.28% and 12.55%, respectively, compared to 1.03% and 9.85% for the three-month period ending September 30, 2017.

Net income for the nine months ended September 30, 2018 totaled $10,352,000, which is $2,311,000 higher than the same period of 2017 primarily due to a $1,387,000 increase in net interest income and a $450,000 reduction in the provision for credit losses.  Earnings per share (fully diluted) for the nine months ended September 30, 2018 totaled $1.64 per share compared to $1.28 per share in the 2017 period. 

Total assets as of September 30, 2018 were $1.157 billion with loans receivable of $819.2 million, deposits of $939.7 million and stockholders' equity of $116.7 million.  Total assets have increased $24.8 million during the past twelve months while loans and deposits have increased $63.2 million and $15.7 million, respectively. 

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $2.4 million or 0.20% of total assets as of September 30, 2018 compared to $2.7 million or 0.23% of assets as of June 30, 2018 and $6.2 million or 0.55% of total assets as of September 30, 2017.  Net charge-offs were $421,000 for the quarter and totaled $704,000 for the nine months ended September 30, 2018 compared to $259,000 and $503,000, respectively, for the similar periods in 2017.  The allowance for loan losses totaled $8,280,000 as of September 30, 2018 and represented 719% of total non-performing loans, compared to $7,760,000 and 387% of non-performing loans as of September 30, 2017.

For the three months ended September 30, 2018, net interest income, on a fully taxable equivalent basis (fte), totaled $9,645,000, which represents an increase of $226,000 compared to the similar period in 2017 despite a lower tax-equivalent adjustment.  A $68.7 million increase in average loans outstanding contributed to the increased income.  Net interest margin (fte) for the 2018 period was 3.57% compared to 3.60% for the similar period in 2017, reflecting the lower tax-equivalent adjustment resulting from the Tax Cuts and Jobs Act.  Net interest income (fte) for the nine months ended September 30, 2018 totaled $28,212,000, an increase of $551,000 compared to the similar period in 2017 due primarily to a higher volume of earning assets.  The net interest margin (fte) year-to-date for the 2018 period was 3.52% compared to 3.55% in the same period of 2017.  The decrease in the net interest margin (fte) reflects the lower tax-equivalent adjustment resulting from the reduced corporate tax rate.

Other income for the three months ended September 30, 2018 totaled $1,997,000 compared to $1,858,000 for the similar period in 2017.  The increase was primarily attributed to non-recurring income related to the settlement of litigation.  For the nine months ended September 30, 2018, other income totaled $5,466,000 compared to $5,158,000 in the 2017 period.  Gains on sales of loans and securities totaled $228,000 in the 2018 year-to-date period compared to $234,000 in the corresponding 2017 period.  The 2017 period also includes a gain on the sale of deposits in the amount of $209,000.  Excluding gains from sales, other income improved $523,000 over the first nine months of 2017 primarily due to the non-recurring income related to the litigation settlement.

Other expenses totaled $6,572,000 for the three months ended September 30, 2018, compared to $6,239,000 in the similar period of 2017.  The higher level of expense during the 2018 period includes an increase of $368,000 for salaries and employee benefits offset partially by reduced foreclosed real estate costs.  For the nine months ended September 30, 2018, other expenses totaled $19,173,000 compared to $18,984,000 for the similar period in 2017, an increase of $189,000, or 1.0%.

Mr. Critelli commented, "Our earnings in 2018 have improved significantly over the first nine months of last year.  Pre-tax income has improved 18.8%, while net income increased 28.7%, reflecting the benefit of the reduced corporate tax rate.  Our key performance metrics improved over last year, annualized loan growth exceeds 9% in 2018, operating expenses remain well controlled and our capital base remains above regulatory "Well Capitalized" targets.  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 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% for 2018 and 34% for 2017.  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
   2018  2017  2018  2017
Net interest income$9,388$8,870$27,410$26,023
Tax equivalent basis adjustment using marginal tax rate 2575498021,638
Net interest income on a fully taxable equivalent basis$9,645$9,419$28,212$27.661
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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)2018 2017 2018 2017 
     
Average equity$117,306 $118,420 $115,897 $115,647 
     
Goodwill and other intangibles(11,707
)(11,842)(11,739)(11,944)
         
Average tangible equity$105,599 $106.578 $104,158 $103,703 

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      
  2018 2017      
ASSETS          
  Cash and due from banks $17,073 $13,947      
  Interest-bearing deposits with banks 295 368      
  Cash and cash equivalents 17,368 14,315      
           
  Securities available for sale 247,517 285,706      
  Loans receivable  819,197 756,014      
  Less: Allowance for loan losses 8,280 7,760      
  Net loans receivable 810,917 748,254      
  Regulatory stock, at cost 3,261 3,115      
  Bank premises and equipment, net 13,797 12,922      
  Bank owned life insurance 37,718 36,839      
  Foreclosed real estate owned 1,209 4,243      
  Accrued interest receivable 3,792 3,729      
  Goodwill 11,331 11,331      
  Other intangible assets 364 496      
  Deferred tax asset 6,268 8,304      
  Other assets 3,206 2,699      
  TOTAL ASSETS $1,156,748 $1,131,953      
           
LIABILITIES          
  Deposits:          
  Non-interest bearing demand  $218,979 $212,844      
  Interest-bearing  720,735 711,178      
  Total deposits 939,714 924,022      
  Short-term borrowings 52,820 47,229      
  Other borrowings 36,649 31,771      
  Accrued interest payable 1,705 1,167      
  Other liabilities 9,180 10,072      
  TOTAL LIABILITIES 1,040,068 1,014,261      
           
STOCKHOLDERS' EQUITY          
  Common Stock, $.10 par value, authorized 10,000,000 shares          
  issued:  2018: 6,274,513 shares, 2017:  6,246,662 shares 628 625      
  Surplus 48,087 47,467      
  Retained earnings 76,645 71,210      
  Treasury stock, at cost: 2018: 5,729 shares, 2017: 11,724 shares (188) (341)      
  Accumulated other comprehensive loss (8,492) (1,269)      
  TOTAL STOCKHOLDERS' EQUITY 116,680 117,692      
           
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,156,748 $1,131,953      
           
           
           
           
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,
  2018 2017   2018 2017
INTEREST INCOME          
  Loans receivable, including fees$9,301$8,289  $26,645$24,020
  Securities 1,483 1,605   4,543 4,856
  Other 2 2   63 37
  Total Interest income 10,786 9,896   31,251 28,913
           
INTEREST EXPENSE          
  Deposits 1,116 828   3,198 2,392
  Short-term borrowings 111 82   201 138
  Other borrowings 171 116   442 360
  Total Interest expense 1,398 1,026   3,841 2,890
NET INTEREST INCOME 9,388 8,870   27,410 26,023
PROVISION FOR LOAN LOSSES 375 600   1,350 1,800
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,013 8,270   26,060 24,223
           
OTHER INCOME          
  Service charges and fees 1,129 1,105   3,211 3,056
  Income from fiduciary activities 151 160   463 395
  Net realized gains on sales of securities   13   129     213   167
  Gains on sales of loans, net    15   -     15   67
  Gains on sale of deposits   -   -     -   209
  Earnings and proceeds on life insurance policies 297 320   848 850
  Other  392 144   716 414
  Total other income 1,997 1,858   5,466 5,158
           
OTHER EXPENSES          
  Salaries and  employee benefits 3,577 3,209   10,445 9,639
  Occupancy, furniture and equipment 910 799   2,659 2,519
  Data processing  and related operations 368 354   1,027 1,022
  Taxes, other than income 153 233   480 693
  Professional fees 301 217   760 706
  FDIC Insurance assessment 87 97   265 283
  Foreclosed real estate  (26) 303   68 1,028
  Amortization of intangibles 29 35   97 115
  Other  1,173 992   3,372 2,979
  Total other expenses 6,572 6,239   19,173 18,984
           
INCOME BEFORE TAX 4,438 3,889   12,353 10,397
INCOME TAX EXPENSE  728 948   2,001 2,356
NET INCOME $3,710 $2,941   $10,352 $8,041
           
Basic earnings per share $0.59$0.47  $1.66$1.29
           
Diluted earnings per share $0.58$0.47  $1.64$1.28
           
           
           
NORWOOD FINANCIAL CORP.          
Financial Highlights (Unaudited)          
(dollars in thousands, except per share data)          
           
For the Three Months Ended September 30 2018 2017      
           
Net interest income $9,388 $8,870      
Net income 3,710 2,941      
           
Net interest spread (fully taxable equivalent) 3.40% 3.48%      
Net interest margin (fully taxable equivalent) 3.57% 3.60%      
Return on average assets 1.28% 1.03%      
Return on average equity 12.55% 9.85%      
Return on average tangible equity 13.94% 10.95%      
Basic earnings per share  $0.59 $0.47      
Diluted earnings per share  $0.58 $0.47      
           
For the Nine Months Ended September 30 2018 2017      
           
Net interest income $27,410 $26,023      
Net income 10,352 8,041      
           
Net interest spread (fully taxable equivalent) 3.37% 3.44%      
Net interest margin (fully taxable equivalent) 3.52% 3.55%      
Return on average assets 1.21% 0.96%      
Return on average equity 11.94% 9.30%      
Return on average tangible equity 13.29% 10.37%      
Basic earnings per share  $1.66 $1.29      
Diluted earnings per share  $1.64 $1.28      
           
As of September 30          
           
Total assets $1,156,748 $1,131,953      
Total loans receivable 819,197 756,014      
Allowance for loan losses 8,280 7,760      
Total deposits 939,714 924,022      
Stockholders' equity 116,680 117,692      
Trust assets under management 164,852 151,373      
           
Book value per share  $18.49 $18.46      
Tangible book value per share  $16.62 $16.54      
Equity to total assets 10.09% 10.40%      
Allowance to total loans receivable 1.01% 1.03%      
Nonperforming loans to total loans  0.14% 0.27%      
Nonperforming assets to total assets 0.20% 0.55%      
           
           
           
NORWOOD FINANCIAL CORP.          
Consolidated Balance Sheets (unaudited)          
(dollars in thousands)          
    September 30   June 30   March 31   December 31   September 30
  2018 2018 2018 2017 2017
ASSETS          
  Cash and due from banks $17,073 $15,193 $10,103 $16,212 $13,947
  Interest-bearing deposits with banks 295 914 2,039 485 368
  Cash and cash equivalents 17,368 16,107 12,142 16,697 14,315
           
  Securities available for sale 247,517 259,442 265,862 281,121 285,706
  Loans receivable  819,197 803,773 775,681 764,092 756,014
  Less: Allowance for loan losses 8,280 8,326 8,099 7,634 7,760
  Net loans receivable 810,917 795,447 767,582 756,458 748,254
  Regulatory stock, at cost 3,261 2,313 2,545 3,505 3,115
  Bank owned life insurance 37,718 37,485 37,270 37,060 36,839
  Bank premises and equipment, net 13,797 13,894 13,808 13,864 12,922
  Foreclosed real estate owned 1,209 1,386 1,436 1,661 4,243
  Goodwill and other intangibles 11,695 11,725 11,758 11,793 11,827
  Other assets 13,266 12,794 14,634 10,757 14,732
  TOTAL ASSETS $1,156,748 $1,150,593 $1,127,037 $1,132,916 $1,131,953
           
LIABILITIES          
  Deposits:          
  Non-interest bearing demand  $218,979 $216,472 $204,027 $205,138 $212,844
  Interest-bearing deposits 720,735 734,417 736,122 724,246 711,178
  Total deposits 939,714 950,889 940,149 929,384 924,022
  Borrowings 89,469 73,608 62,998 78,475 79,000
  Other liabilities 10,885 10,563 10,052 9,318 11,239
  TOTAL LIABILITIES 1,040,068 1,035,060 1,013,199 1,017,177 1,014,261
           
STOCKHOLDERS' EQUITY 116,680 115,533 113,838 115,739 117,692
           
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,156,748 $1,150,593 $1,127,037 $1,132,916 $1,131,953
           
           
           
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 2018 2018 2018 2017 2017
INTEREST INCOME          
  Loans receivable, including fees $9,301 $8,857 $8,487 $8,503 $8,289
  Securities 1,483 1,536 1,524 1,560 1,605
  Other 2 43 18 12 2
  Total interest income 10,786 10,436 10,029 10,075 9,896
           
INTEREST EXPENSE          
  Deposits 1,116 1,052 1,029 985 828
  Borrowings 282 169 193 206 198
  Total interest expense 1,398 1,221 1,222 1,191 1,026
NET INTEREST INCOME 9,388 9,215 8,807 8,884 8,870
PROVISION FOR LOAN LOSSES 375 425 550 400 600
NET INTEREST INCOME AFTER PROVISION          
  FOR LOAN LOSSES 9,013 8,790 8,257 8,484 8,270
           
OTHER INCOME          
  Service charges and fees   1,129   1,101   980   1,023   1,105
  Income from fiduciary activities   151   175   137   116   160
  Net realized gains on sales of securities   13   58   142   181   129
  Gains on sales of loans, net   15   -   -   -   -
  Earnings and proceeds on life insurance policies   297   279   273   283   320
  Other    392   161   162   151   144
  Total other income 1,997 1,774 1,694 1,754 1,858
           
OTHER EXPENSES          
  Salaries and  employee benefits   3,577   3,406   3,462   3,211   3,209
  Occupancy, furniture and equipment, net   910   857   892   841   799
  Foreclosed real estate    (26)   114   (19)   136   303
  FDIC insurance assessment   87   86   92   94   97
  Other    2,024   1,890   1,821   1,604   1,831
  Total other expenses 6,572 6,353 6,248 5,886 6,239
           
INCOME BEFORE TAX 4,438 4,211 3,703 4,352 3,889
INCOME TAX EXPENSE  728 698 574 4,195 948
NET INCOME $3,710 $3,513 $3,129 $157 $2,941
           
Basic earnings per share  $0.59 $0.57 $0.50 $0.03 $0.47
           
Diluted earnings per share  $0.58 $0.56 $0.50 $0.03 $0.47
           
Book Value per share $18.49$18.35$18.45$18.61$18.46
Tangible Book Value per share 16.62 16.47 16.56 16.71 16.54
           
Return on average assets (annualized) 1.28% 1.23% 1.13% 0.05% 1.03%
Return on average equity (annualized) 12.55% 12.25% 11.00% 0.52% 9.85%
Return on average tangible equity (annualized) 13.94% 13.64% 12.25% 0.58% 10.95%
           
Net interest spread (fte) 3.40% 3.40% 3.31% 3.44% 3.48%
Net interest margin (fte) 3.57% 3.54% 3.46% 3.56% 3.60%
           
Allowance for loan losses to total loans 1.01% 1.04% 1.04% 1.00% 1.03%
Net charge-offs to average loans (annualized) 0.21% 0.10% 0.04% 0.28% 0.14%
Nonperforming loans to total loans 0.14% 0.16% 0.22% 0.32% 0.27%
Nonperforming assets to total assets 0.20% 0.23% 0.28% 0.37% 0.55%

 

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