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Norwood Financial Corp Announces Second Quarter Earnings

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HONESDALE, Pa., July 26, 2018 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp (NASDAQ:NWFL) and its subsidiary, Wayne Bank, announced earnings for the three months ended June 30, 2018 of $3,513,000.  This represents an increase of $789,000 or 29.0%, from the $2,724,000 earned in the similar period of 2017. Earnings per share (fully diluted) were $0.56 in the 2018 period, increasing from the $0.43 earned in the similar period of 2017 after adjusting for the 50% stock dividend declared in August 2017.  Annualized return on average assets for the three months ended June 30, 2018 was 1.23% with an annualized return on average equity of 12.25%.  Net income for the six months ended June 30, 2018 totaled $6,642,000, which is $1,542,000 higher than the same six-month period of last year due primarily to improved net interest income.  Earnings per share (fully diluted) for the six months ended June 30, 2018 and 2017, totaled $1.06 and $0.81 per share, respectively, after adjusting for the 50% stock dividend.

Total assets as of June 30, 2018 were $1.151 billion with loans receivable of $803.8 million, deposits of $950.9 million and stockholders' equity of $115.5 million.  Loans receivable increased $68.7 million since June 30, 2017 while total deposits increased $18.4 million. 

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $2.7 million and represented 0.23% of total assets as of June 30, 2018 compared to $7.1 million, or 0.63% of total assets, as of June 30, 2017.  The decrease was due primarily to a $3.1 million reduction in foreclosed real estate due to sales.  The allowance for loan losses totaled $8,326,000 as of June 30, 2018 and represented 1.04% of total loans outstanding, compared to $7,419,000 and 1.01%, respectively, on June 30, 2017.  As of June 30, 2018, the reserve for loan losses was 655% of nonperforming loans compared to 308% on December 31, 2017 and 288% on June 30, 2017.

For the three months ended June 30, 2018, net interest income, on a fully taxable equivalent basis (fte), totaled $9,484,000, an increase of $285,000 compared to the similar period in 2017 despite a lower tax-equivalent adjustment.  A $63.9 million increase in average loans outstanding contributed to the increased income.  Net interest margin (fte) for the 2018 period was 3.54%, equal to the corresponding 2017 period.  The tax-equivalent yield on interest-earning assets increased 10 basis points to 4.00% compared to the prior year while the cost of interest-bearing liabilities increased 14 basis points to 0.60%.  Net interest income (fte) for the six months ended June 30, 2018 totaled $18,567,000, which was $324,000 higher than the similar period in 2017 due to the higher volume of earning assets.  The net interest margin (fte) was 3.50% in the 2018 period and 3.53% during the first six months 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 June 30, 2018 totaled $1,774,000 compared to $1,656,000 for the similar period in 2017.  The increase can be attributed to a higher level of service charges and fees.   Net gains from the sale of loans and securities decreased $40,000.  For the six months ended June 30, 2018, other income totaled $3,468,000 compared to $3,299,000 in the 2017 period.  Service charges and fees increased $131,000 and net gains from the sale of loans and securities increased $96,000, while the 2017 period included a non-recurring gain of $209,000 related to the sale of a branch office. 

Other expenses totaled $6,353,000 for the three months ended June 30, 2018, an increase of $223,000, or 3.6%, compared to the $6,130,000 reported in the similar period of 2017.  Salaries and employee benefits rose $194,000 over the same period of last year while all other expenses increased $29,000, net.  For the six months ended June 30, 2018, other expenses totaled $12,600,000 compared to $12,744,000 for the similar period in 2017.  The decrease was due to a $629,000 reduction in foreclosed real estate costs, while all other expenses increased $485,000, or 4.0%, net.

Mr. Critelli commented, "Our earnings for the first half of 2018 have increased significantly over the first six months of last year.  Pre-tax income has improved 21.6%, while net income increased 30.2%, reflecting the benefit of the reduced corporate tax rate.  Our key performance metrics improved over the first quarter of the year, annualized loan growth exceeded 10.0%, 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 net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure.  Tax-equivalent net interest income was derived from GAAP net interest income 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 taxable equivalent basis:

  Three months ended June 30   Six months ended June 30
(dollars in thousands) 2018   2017   2018 2017
           
Net Interest Income $9,215 $8,656   $18,022 $17,154
Taxable equivalent basis adjustment
  using marginal tax rate
269 543   545 1,089
Net interest income on a fully taxable
 equivalent basis
$9,484 $9,199   $18,567 $18,243
           
           
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 June 30   Six months ended June 30
(dollars in thousands) 2018 2017   2018 2017
           
Average equity $115,042 $115,690   $115,180 $114,237
           
Goodwill and other intangibles (11,738)
(11,878)   (11,755) (11,997)
           
Average tangible equity
$103,387 $103,812   $103,425 $102,240
           

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)                      
  June 30              
  2018   2017              
ASSETS                      
Cash and due from banks $ 15,193   $ 16,055                
Interest-bearing deposits with banks   914     348                
Cash and cash equivalents   16,107     16,403                
                     
Securities available for sale   259,442     300,667                
Loans receivable   803,773     735,026                
Less: Allowance for loan losses   8,326     7,419                
Net loans receivable   795,447     727,607                
Regulatory stock, at cost   2,313     2,435                
Bank premises and equipment, net   13,894     12,953                
Bank owned life insurance   37,485     36,575                
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