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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  257 549 802 1,638
Net interest income on a fully taxable equivalent basis $9,645 $9,419 $28,212 $27.661

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            
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