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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                
Foreclosed real estate owned   1,386     4,523                
Accrued interest receivable   3,672     3,417                
Goodwill   11,331     11,331                
Other intangible assets   394     531                
Deferred tax asset   5,885     8,181                
Other assets   3,237     2,690                
TOTAL ASSETS $ 1,150,593   $ 1,127,313                
                     
LIABILITIES                      
Deposits:                      
Non-interest bearing demand $ 216,472   $ 200,364                
Interest-bearing   734,417     732,107                
Total deposits   950,889     932,471                
Short-term borrowings   43,325     42,192                
Other borrowings   30,283     25,330                
Accrued interest payable   1,461     942                
Other liabilities   9,102     10,211                
TOTAL LIABILITIES   1,035,060     1,011,146                
                     
STOCKHOLDERS' EQUITY                      
Common Stock, $.10 par value, authorized 10,000,000 shares                      
issued:  2018: 6,266,388 shares, 2017:  6,247,085 shares   627     416                
Surplus   47,815     47,645                
Retained earnings   74,315     69,660                
Treasury stock, at cost: 2018: 5,729 shares, 2017: 849 shares   (188 )   (22 )              
Accumulated other comprehensive loss   (7,036 )   (1,532 )              
TOTAL STOCKHOLDERS' EQUITY   115,533     116,167                
                     
TOTAL LIABILITIES AND                      
STOCKHOLDERS' EQUITY $ 1,150,593   $ 1,127,313                
                     
                       
                       
                     
NORWOOD FINANCIAL CORP.                      
Consolidated Statements of Income                   
(dollars in thousands, except per share data)                      
(unaudited)                  
    Three Months Ended June 30,       Six Months Ended June 30,  
  2018   2017       2018   2017  
INTEREST INCOME          
Loans receivable, including fees $ 8,857   $ 7,925       $ 17,344   $ 15,731    
Securities   1,536     1,633         3,060     3,251    
Other   43     24         61     35    
Total Interest income   10,436     9,582         20,465     19,017    
                       
INTEREST EXPENSE                      
Deposits   1,052     797         2,082     1,563    
Short-term borrowings   38     28         90     56    
Other borrowings   131     101         271     244    
Total Interest expense   1,221     926         2,443     1,863    
NET INTEREST INCOME   9,215     8,656         18,022     17,154    
PROVISION FOR LOAN LOSSES   425     600         975     1,200    
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   8,790     8,056         17,047     15,954    
                       
OTHER INCOME                      
Service charges and fees   1,101     1,016         2,082     1,951    
Income from fiduciary activities   175     128         311     235    
Net realized gains on sales of securities   58     31         200     37    
Gains on sales of loans, net   -     67         -     67    
Gains on sale of deposits   -     -         -     209    
Earnings and proceeds on life insurance policies   279     275         552     530    
Other   161     139         323     270    
Total other income   1,774     1,656         3,468     3,299    
                       
OTHER EXPENSES                      
Salaries and  employee benefits   3,406     3,212         6,868     6,430    
Occupancy, furniture and equipment   857     809         1,749     1,720    
Data processing  and related operations   340     324         658     668    
Taxes, other than income   153     227         327     460    
Professional fees   229     240         459     489    
FDIC Insurance assessment   86     91         178     186    
Foreclosed real estate   114     152         95     724    
Amortization of intangibles   33     39         68     80    
Other   1,135     1,036         2,198     1,987    
Total other expenses   6,353     6,130         12,600     12,744    
                       
INCOME BEFORE TAX   4,211     3,582         7,915     6,509    
INCOME TAX EXPENSE   698     858         1,273     1,409    
NET INCOME  $ 3,513   $ 2,724        $ 6,642   $ 5,100    
                       
Basic earnings per share  * $ 0.57   $ 0.44       $ 1.07   $ 0.82    
                       
Diluted earnings per share  * $ 0.56   $ 0.43       $ 1.06   $ 0.81    
                 
 * Per share data for 2017 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 June 30   2018   2017              
                     
Net interest income $ 9,215   $ 8,656                
Net income   3,513     2,724                
                     
Net interest spread (fully taxable equivalent)   3.40 %   3.44 %              
Net interest margin (fully taxable equivalent)   3.54 %   3.54 %              
Return on average assets   1.23 %   0.97 %              
Return on average equity   12.25 %   9.45 %              
Return on average tangible equity   13.64 %   10.53 %              
Basic earnings per share  * $ 0.57   $ 0.44                
Diluted earnings per share * $ 0.56   $ 0.43                
                       
For the Six Months Ended June 30   2018     2017                
                     
Net interest income $ 18,022   $ 17,154                
Net income   6,642     5,100                
                     
Net interest spread (fully taxable equivalent)   3.35 %   3.42 %              
Net interest margin (fully taxable equivalent)   3.50 %   3.53 %              
Return on average assets   1.18 %   0.92 %              
Return on average equity   11.63 %   9.00 %              
Return on average tangible equity   12.95 %   10.06 %              
Basic earnings per share  * $ 1.07   $ 0.82                
Diluted earnings per share * $ 1.06   $ 0.81                
                       
As of June 30                  
                 
Total assets $ 1,150,593   $ 1,127,313                
Total loans receivable   803,773     735,026                
Allowance for loan losses   8,326     7,419                
Total deposits   950,889     932,471                
Stockholders' equity   115,533     116,167                
Trust assets under management   158,117     146,307                
                 
Book value per share * $ 18.35   $ 18.29                
Tangible book value per share * $ 16.47   $ 16.37                
Equity to total assets   10.04 %   10.30 %              
Allowance to total loans receivable   1.04 %   1.01 %              
Nonperforming loans to total loans   0.16 %   0.35 %              
Nonperforming assets to total assets   0.23 %   0.63 %              
                     
 * Per share data for 2017 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)  
  June 30   March 31   December 31   September 30   June 30  
  2018   2018   2017   2017   2017  
ASSETS  
Cash and due from banks $ 15,193   $ 10,103   $ 16,212   $ 13,947   $ 16,055    
Interest-bearing deposits with banks   914     2,039     485     368     348    
Cash and cash equivalents   16,107     12,142     16,697     14,315     16,403    
                     
Securities available for sale   259,442     265,862     281,121     285,706     300,667    
Loans receivable   803,773     775,681     764,092     756,014     735,026    
 Less: Allowance for loan losses   8,326     8,099     7,634     7,760     7,419    
 Net loans receivable   795,447     767,582     756,458     748,254     727,607    
Regulatory stock, at cost   2,313     2,545     3,505     3,115     2,435    
Bank owned life insurance   37,485     37,270     37,060     36,839     36,575    
Bank premises and equipment, net   13,894     13,808     13,864     12,922     12,953    
Foreclosed real estate owned   1,386     1,436     1,661     4,243     4,523    
Goodwill and other intangibles   11,725     11,758     11,793     11,827     11,862    
Other assets   12,794     14,634     10,757     14,732     14,288    
TOTAL ASSETS $ 1,150,593   $ 1,127,037   $ 1,132,916   $ 1,131,953   $ 1,127,313    
                     
LIABILITIES                      
Deposits:                      
Non-interest bearing demand $ 216,472   $ 204,027   $ 205,138   $ 212,844   $ 200,364    
Interest-bearing deposits   734,417     736,122     724,246     711,178     732,107    
Total deposits   950,889     940,149     929,384     924,022     932,471    
Other borrowings   73,608     62,998     78,475     79,000     67,522    
Other liabilities   10,563     10,052     9,318     11,239     11,153    
  TOTAL LIABILITIES   1,035,060     1,013,199     1,017,177     1,014,261     1,011,146    
                     
STOCKHOLDERS' EQUITY   115,533     113,838     115,739     117,692     116,167    
                     
TOTAL LIABILITIES AND                      
  STOCKHOLDERS' EQUITY $ 1,150,593   $ 1,127,037   $ 1,132,916   $ 1,131,953   $ 1,127,313    
 
                     
                     
NORWOOD FINANCIAL CORP.  
Consolidated Statements of Income (unaudited)  
(dollars in thousands, except per share data)  
    June 30   March 31   December 31   September 30   June 30  
Three months ended   2018    2018    2017    2017    2017   
INTEREST INCOME                      
Loans receivable, including fees $ 8,857    $ 8,487    $ 8,503    $ 8,289    $ 7,925    
Securities   1,536     1,524     1,560     1,605     1,633    
Other   43     18     12     2     24    
Total interest income   10,436     10,029     10,075     9,896     9,582    
                     
INTEREST EXPENSE                      
Deposits   1,052     1,029     985     828     797    
Borrowings   169     193     206     198     129    
Total interest expense   1,221     1,222     1,191     1,026     926    
NET INTEREST INCOME   9,215     8,807     8,884     8,870     8,656    
PROVISION FOR LOAN LOSSES   425     550     400     600     600    
NET INTEREST INCOME AFTER PROVISION                      
FOR LOAN LOSSES   8,790     8,257     8,484     8,270     8,056    
                     
OTHER INCOME                      
Service charges and fees     1,101       980       1,023       1,105       1,016    
Income from fiduciary activities     175       137       116       160       128    
Net realized gains on sales of securities     58       142       181       129       31    
Gains on sales of loans, net     -       -       -       -       67    
Earnings and proceeds on life insurance policies     279       273       283       320       275    
Other     161       162       151       144       139    
Total other income   1,774     1,694     1,754     1,858     1,656    
                     
OTHER EXPENSES                      
Salaries and  employee benefits     3,406       3,462       3,211       3,209       3,212    
Occupancy, furniture and equipment, net     857       892       841       799       809    
Foreclosed real estate     114       (19 )     136       303       152    
FDIC insurance assessment     86       92       94       97       91    
Other     1,890       1,821       1,604       1,831       1,866    
Total other expenses   6,353     6,248     5,886     6,239     6,130    
                     
INCOME BEFORE TAX   4,211     3,703     4,352     3,889     3,582    
INCOME TAX EXPENSE   698     574     4,195     948     858    
NET INCOME $ 3,513    $ 3,129    $ 157    $ 2,941    $ 2,724    
                     
Basic earnings per share $ 0.57    $ 0.50    $ 0.03    $ 0.47    $ 0.44    
                       
Diluted earnings per share   $ 0.56    $ 0.50    $ 0.03    $ 0.47    $ 0.43    
 
Book Value per share  $ 18.35   $ 18.45   $ 18.61   $ 18.46   $ 18.29    
Tangible Book Value per share   16.47     16.56     16.71     16.54     16.37    
                     
Return on average assets (annualized)   1.23 %   1.13 %   0.05 %   1.03 %   0.97 %  
Return on average equity (annualized)   12.25 %   11.00 %   0.52 %   9.85 %   9.45 %  
Return on average tangible equity (annualized)   13.64 %   12.25 %   0.58 %   10.95 %   10.53 %  
                     
Net interest spread (fte)   3.40 %   3.31 %   3.44 %   3.48 %   3.44 %  
Net interest margin (fte)   3.54 %   3.46 %   3.56 %   3.60 %   3.54 %  
                     
Allowance for loan losses to total loans   1.04 %   1.04 %   1.00 %   1.03 %   1.01 %  
Net charge-offs to average loans (annualized)   0.10 %   0.04 %   0.28 %   0.14 %   0.05 %  
Nonperforming loans to total loans   0.16 %   0.22 %   0.32 %   0.27 %   0.35 %  
Nonperforming assets to total assets   0.23 %   0.28 %   0.37 %   0.55 %   0.63 %  
                     
 * Per share data for the quarter ended June 30, 2017 has been restated to give retroactive effect to the 50% stock dividend declared August 8, 2017.      

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