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Norwood Financial Corp. Announces First Quarter Earnings

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HONESDALE, Pa., April 20, 2018 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (NASDAQ:NWFL) and its subsidiary, Wayne Bank, announced earnings of $3,129,000 for the three months ended March 31, 2018 which represents a $753,000, or 31.7%, increase from the $2,376,000 recorded during the same three-month period of last year.  The increase was principally due to a higher level of net interest income and reduced operating expenses.  Earnings per share on a fully diluted basis were $0.50 in the first quarter of this year compared to $0.38 in the first quarter of 2017, after adjusting for the 50% stock dividend declared in August, 2017.  The annualized return on average assets was 1.13% in the first quarter of 2018 and the annualized return on average equity was 11.00%, compared to 0.87% and 8.54%, respectively, in the first quarter of 2017.

Total assets were $1.127 billion as of March 31, 2018, an increase of $15.4 million compared to the prior year total.  Total loans increased $56.2 million compared to March 31, 2017, total deposits increased $8.7 million over the past twelve months, and stockholders' equity increased $886,000 during the past year. 

Non-performing assets totaled $3.1 million or 0.28% of total assets at March 31, 2018 comprised of $1.7 million of non-performing loans and $1.4 million of foreclosed real estate owned, compared to $4.1 million of non-performing assets or 0.37% of total assets at December 31, 2017.  As of March 31, 2017, non-performing assets totaled $6.7 million, or 0.60% of total assets.  Net charge-offs for the three-month period ending March 31, 2018 were $84,000 compared to $162,000 of net charge-offs in the first quarter of last year.  Based on management's analysis, the Company determined that it would be appropriate to provide additional reserves and added $550,000 to the allowance for loan losses in the current period compared to $600,000 during the same period of last year.  The allowance for loan losses was 1.04% of total loans outstanding on March 31, 2018 compared to 1.00% on December 31, 2017 and 0.96% on March 31, 2017.  As of March 31, 2018, the reserve for loan losses was 482% of non-performing loans, compared to 308% on December 31, 2017 and 345% on March 31, 2017.

Net interest income (fully taxable equivalent, or fte) was $9,083,000 during the first quarter of 2018 which is $40,000 higher than the comparable three-month period of last year, despite a lower tax-equivalent adjustment.  A $48.2 million increase in average loans outstanding contributed to the increased interest income.  Interest income fte was negatively impacted by the reduction in the corporate tax rate and a lower level of tax-exempt securities, as reflected in the $270,000 decrease in the tax-equivalent adjustment.  The fte yield on interest-earning assets improved 5 basis points compared to the prior year while the cost of funds increased 14 basis points.  As a result, the net interest margin (fte) decreased to 3.46% from 3.51% in the quarter ended March 31, 2017.  

Other income totaled $1,694,000 in the first quarter of 2018 compared to $1,643,000 during the same period of last year, notwithstanding a non-recurring gain of $209,000 in the 2017 period relating to the sale of the Bank's former West Scranton Office.  The increase is attributable to a $136,000 increase in net gains on sales of securities as well as a higher level of service charges and fees and increased earnings on life insurance policies.

Operating expenses totaled $6,248,000 in the first quarter and were $366,000 lower than the $6,614,000 recorded in the same period of last year due primarily to a $591,000 decrease in foreclosed real estate costs.  All other operating expenses increased $225,000, or 3.7%, net.

Mr. Critelli stated, "Our first quarter results provide a good start for 2018 and are in-line with our budget.  Our annualized loan growth was over 6%, our core operating expenses remain well controlled, the reduced corporate tax rate had a positive impact on earnings 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 trades 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, risks associated with the acquisition of Delaware Bancshares, Inc., 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 net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure.  Tax-equivalent net interest income is derived from GAAP using an assumed tax rate of 21% for 2018 and 34% for 2017.  We believe the presentation of net interest income on a tax–equivalent basis ensures comparability of 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 fully taxable-equivalent basis:

   
(dollars in thousands) Three months ended March 31,
  2018   2017
Net interest income $8,807   $8,497
Tax equivalent basis adjustment 276   546
Net interest income on a fully taxable equivalent basis $9,083   $9,043
         

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)                      
  March 31              
  2018    2017               
ASSETS                      
Cash and due from banks $ 10,103   $ 12,057                
Interest-bearing deposits with banks   2,039     7,785                
Cash and cash equivalents   12,142     19,842                
                     
Securities available for sale   265,862     295,801                
Loans receivable   775,681     719,443                
Less: Allowance for loan losses   8,099     6,901                
Net loans receivable   767,582     712,542                
Regulatory stock, at cost   2,545     1,939                
Bank premises and equipment, net   13,808     13,073                
Bank owned life insurance   37,270     36,352                
Foreclosed real estate owned   1,436     4,703                
Accrued interest receivable   3,687     3,532                
Goodwill   11,331     11,331                
Other intangible assets   427     571                
Deferred tax asset   5,622     8,923                
Other assets   5,325     3,006                
TOTAL ASSETS $ 1,127,037   $ 1,111,615                
                     
LIABILITIES                      
Deposits:                      
Non-interest bearing demand $ 204,027   $ 192,735                
Interest-bearing   736,122     738,678                
Total deposits   940,149     931,413                
Short-term borrowings   29,905     28,383                
Other borrowings   33,093     28,877                
Accrued interest payable   1,456     909                
Other liabilities   8,596     9,081                
TOTAL LIABILITIES   1,013,199     998,663                
                     
STOCKHOLDERS' EQUITY                      
Common Stock, $.10 par value, authorized 10,000,000 shares                      
issued:  2018: 6,257,563 shares, 2017:  4,164,723 shares   626     416                
Surplus   47,548     47,678                
Retained earnings   72,179     68,268                
Treasury stock, at cost: 2018: 5,729 shares, 2017: 2,566 shares   (188 )   (93 )              
Accumulated other comprehensive loss   (6,327 )   (3,317 )              
TOTAL STOCKHOLDERS' EQUITY   113,838     112,952                
                     
TOTAL LIABILITIES AND                      
STOCKHOLDERS' EQUITY $ 1,127,037   $ 1,111,615                
                     
                       
                       
                     
NORWOOD FINANCIAL CORP.                      
Consolidated Statements of Income                   
(dollars in thousands, except per share data)                      
(unaudited)                  
  Three Months Ended March 31,        
  2018    2017               
INTEREST INCOME                
Loans receivable, including fees $ 8,487   $ 7,806                
Securities   1,524     1,618                
Other   18     10                
Total Interest income   10,029     9,434                
                       
INTEREST EXPENSE                      
Deposits   1,029     766                
Short-term borrowings   52     28                
Other borrowings   141     143                
Total Interest expense   1,222     937                
NET INTEREST INCOME   8,807     8,497                
PROVISION FOR LOAN LOSSES   550     600                
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   8,257     7,897                
                       
OTHER INCOME                      
Service charges and fees   980     936                
Income from fiduciary activities   137     106                
Net realized gains on sales of securities   142     6                
Gains on sale of deposits   -     209                
Earnings and proceeds on life insurance policies   273     255                
Other   162     131                
Total other income   1,694     1,643                
                       
OTHER EXPENSES                      
Salaries and employee benefits   3,462     3,219                
Occupancy, furniture and equipment   892     911                
Data processing and related operations   319     344                
Taxes, other than income   175     233                
Professional fees   230     249                
FDIC Insurance assessment   92     95                
Foreclosed real estate   (19 )   572                
Amortization of intangibles   34     41                
Other   1,063     950                
Total other expenses   6,248     6,614                
                       
INCOME BEFORE TAX   3,703     2,926                
INCOME TAX EXPENSE   574     550                
NET INCOME $ 3,129   $ 2,376                
                       
Basic earnings per share * $ 0.50   $ 0.38                
                       
Diluted earnings per share * $ 0.50   $ 0.38                
                 
 * Per share data has been restated to give retroactive effect to the 50% stock dividend declared August 8, 2017.          
                       
NORWOOD FINANCIAL CORP.                  
Financial Highlights (Unaudited)                      
(dollars in thousands, except per share data)                      
                       
For the Three Months Ended March 31   2018    2017               
                     
Net interest income $ 8,807   $ 8,497                
Net income   3,129     2,376                
                     
Net interest spread (fully taxable equivalent)   3.31 %   3.40 %              
Net interest margin (fully taxable equivalent)   3.46 %   3.51 %              
Return on average assets   1.13 %   0.87 %              
Return on average equity   11.00 %   8.54 %              
Return on tangible equity   12.25 %   9.57 %              
Basic earnings per share * $ 0.50   $ 0.38                
Diluted earnings per share * $ 0.50   $ 0.38                
                       
                       
As of March 31                  
                 
Total assets $ 1,127,037   $ 1,111,615                
Total loans receivable   775,681     719,443                
Allowance for loan losses   8,099     6,901                
Total deposits   940,149     931,413                
Stockholders' equity   113,838     112,952                
Trust assets under management   153,190     143,055                
                 
Book value per share * $ 18.45   $ 18.06                
Tangible book value per share * $ 16.56   $ 16.12                
Equity to total assets   10.10 %   10.16 %              
Allowance to total loans receivable   1.04 %   0.96 %              
Non-performing loans to total loans   0.22 %   0.28 %              
Non-performing assets to total assets   0.28 %   0.60 %              
                     
 * Per share data has been restated to give retroactive effect to the 50% stock dividend declared August 8, 2017.          
                     
NORWOOD FINANCIAL CORP.                      
Consolidated Balance Sheets (unaudited)              
(dollars in thousands)  
  March 31   December 31   September 30   June 30   March 31  
  2018    2017    2017    2017    2017   
ASSETS  
Cash and due from banks $ 10,103   $ 16,212   $ 13,947   $ 16,055   $ 12,057    
Interest-bearing deposits with banks   2,039     485     368     348     7,785    
Cash and cash equivalents   12,142     16,697     14,315     16,403     19,842    
                     
Securities available for sale   265,862     281,121     285,706     300,667     295,801    
Loans receivable   775,681     764,092     756,014     735,026     719,443    
Less: Allowance for loan losses   8,099     7,634     7,760     7,419     6,901    
Net loans receivable   767,582     756,458     748,254     727,607     712,542    
Regulatory stock, at cost   2,545     3,505     3,115     2,435     1,939    
Bank owned life insurance   37,270     37,060     36,839     36,575     36,352    
Bank premises and equipment, net   13,808     13,864     12,922     12,953     13,073    
Foreclosed real estate owned   1,436     1,661     4,243     4,523     4,703    
Goodwill and other intangibles   11,758     11,793     11,827     11,862     11,902    
Other assets   14,634     10,757     14,732     14,288     15,461    
TOTAL ASSETS $ 1,127,037   $ 1,132,916   $ 1,131,953   $ 1,127,313   $ 1,111,615    
                     
LIABILITIES                      
Deposits:                      
Non-interest bearing demand $ 204,027   $ 205,138   $ 212,844   $ 200,364   $ 192,735    
Interest-bearing deposits   736,122     724,246     711,178     732,107     738,678    
Total deposits   940,149     929,384     924,022     932,471     931,413    
Other borrowings   62,998     78,475     79,000     67,522     57,260    
Other liabilities   10,052     9,318     11,239     11,153     9,990    
TOTAL LIABILITIES   1,013,199     1,017,177     1,014,261     1,011,146     998,663    
                     
STOCKHOLDERS' EQUITY   113,838     115,739     117,692     116,167     112,952    
                     
TOTAL LIABILITIES AND                      
STOCKHOLDERS' EQUITY $ 1,127,037   $ 1,132,916   $ 1,131,953   $ 1,127,313   $ 1,111,615    
 
                     
                     
NORWOOD FINANCIAL CORP.  
Consolidated Statements of Income (unaudited)  
(dollars in thousands, except per share data)  
    March 31   December 31   September 30   June 30   March 31  
Three months ended   2018    2017    2017    2017    2017   
INTEREST INCOME                      
Loans receivable, including fees $ 8,487   $ 8,503   $ 8,289   $ 7,925   $ 7,806    
Securities   1,524     1,560     1,605     1,633     1,618    
Other   18     12     2     24     10    
Total interest income   10,029     10,075     9,896     9,582     9,434    
                     
INTEREST EXPENSE                      
Deposits   1,029     985     828     797     766    
Borrowings   193     206     198     129     171    
Total interest expense   1,222     1,191     1,026     926     937    
NET INTEREST INCOME   8,807     8,884     8,870     8,656     8,497    
PROVISION FOR LOAN LOSSES   550     400     600     600     600    
NET INTEREST INCOME AFTER PROVISION                      
FOR LOAN LOSSES   8,257     8,484     8,270     8,056     7,897    
                     
OTHER INCOME                      
Service charges and fees   980     1,023     1,105     1,016     936    
Income from fiduciary activities   137     116     160     128     106    
Net realized gains on sales of securities   142     181     129     31     6    
Gains on sales of loans, net   -     -     -     67     -    
Earnings and proceeds on life insurance policies   273     283     320     275     255    
Other   162     151     144     139     340    
Total other income   1,694     1,754     1,858     1,656     1,643    
                     
OTHER EXPENSES                      
Salaries and employee benefits   3,462     3,211     3,209     3,212     3,219    
Occupancy, furniture and equipment, net   892     841     799     809     911    
Foreclosed real estate   (19 )   136     303     152     572    
FDIC insurance assessment   92     94     97     91     95    
Other   1,821     1,604     1,831     1,866     1,817    
Total other expenses   6,248     5,886     6,239     6,130     6,614    
                     
INCOME BEFORE TAX   3,703     4,352     3,889     3,582     2,926    
INCOME TAX EXPENSE   574     4,195     948     858     550    
NET INCOME $ 3,129   $ 157   $ 2,941   $ 2,724   $ 2,376    
                     
Basic earnings per share $ 0.50   $ 0.03   $ 0.47   $ 0.44   $ 0.38    
                       
Diluted earnings per share $ 0.50   $ 0.03   $ 0.47   $ 0.43   $ 0.38    
 
Book Value per share $ 18.45   $ 18.61   $ 18.46   $ 18.29   $ 18.06    
Tangible Book Value per share   16.56     16.71     16.54     16.37     16.12    
                     
Return on average assets (annualized)   1.13 %   0.05 %   1.03 %   0.97 %   0.87 %  
Return on average equity (annualized)   11.00 %   0.52 %   9.85 %   9.45 %   8.54 %  
                     
Net interest spread (fte)   3.31 %   3.44 %   3.48 %   3.44 %   3.40 %  
Net interest margin (fte)   3.46 %   3.56 %   3.60 %   3.54 %   3.51 %  
                     
Allowance for loan losses to total loans   1.04 %   1.00 %   1.03 %   1.01 %   0.96 %  
Net charge-offs to average loans (annualized)   0.04 %   0.28 %   0.14 %   0.05 %   0.09 %  
Non-performing loans to total loans   0.22 %   0.32 %   0.27 %   0.35 %   0.28 %  
Non-performing assets to total assets   0.28 %   0.37 %   0.55 %   0.63 %   0.60 %  
                     
 * Per share data has been restated to give retroactive effect to the 50% stock dividend declared August 8, 2017.          
                       

 

 

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