Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

HONESDALE, Pa., Jan. 23, 2020 (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 December 31, 2019 of $3,596,000 compared to $3,299,000 earned in the corresponding period of 2018.  The 9% increase in earnings is due primarily to the $404,000 improvement in net interest income and a lower provision for loan losses.  For the year ended December 31, 2019 net income totaled $14,215,000, an increase of $564,000, or 4.1%, from the $13,651,000 earned in the prior year.  The increase reflects improvement in net interest income, as well as a reduction in the provision for loan losses.

Earnings per share (fully diluted) were $0.57 and $0.53 for the three-month period ended December 31, 2019 and 2018, respectively. For the year, earnings per share on a fully diluted basis were $2.25 for 2019 compared to $2.17 in 2018.  The return on average assets for the year was 1.18% with a return on average equity of 10.83% compared to 1.19% and 11.71%, respectively, in 2018.

Total assets were $1.231 billion as of December 31, 2019.  Loans receivable totaled $924.6 million as of December 31, 2019, with total deposits of $957.5 million and stockholders’ equity of $137.1 million.

Loans receivable increased $74.4 million, or 8.8%, from the prior year-end due primarily to a $40.4 million increase in commercial loans and a $34.0 million increase in consumer loans.  For the three months and year ended December 31, 2019, net charge-offs totaled $96,000 and $1,194,000, respectively, compared to $203,000 and $907,000, respectively, for the corresponding periods in 2018.

Net interest income, on a fully taxable equivalent basis (fte), totaled $10,066,000 for the three months ended December 31, 2019, an increase of $379,000 compared to the same period in 2018.  For the year, net interest income (fte) totaled $39,612,000, an increase of $1,713,000 compared to 2018 due primarily to the higher volume of earning assets, including an $84.8 million increase in average loans outstanding.

Other income for the three months ended December 31, 2019 totaled $1,696,000 compared to $1,600,000 for the similar period in 2018.  Gains on the sale of loans and securities increased $65,000, while all other items of other income increased $31,000 in the aggregate due primarily to service charges and fees.  Other income for the year ended December 31, 2019 totaled $6,778,000 compared to $7,065,000 in 2018, a decrease of $287,000 due primarily to non-recurring income recognized in 2018.  Gains on the sale of loans and investment securities increased $195,000 in the aggregate, while all other items of other income decreased $482,000, net.

Other expenses totaled $7,088,000 for the three months ended December 31, 2019, compared to $6,803,000 in the similar period of 2018.  The $285,000 increase includes a $165,000 increase in salaries and benefits costs.  All other operating expenses increased $120,000 or 3.7%, net.  For the year ended December 31, 2019, other expenses totaled $27,311,000 compared to $25,975,000 for 2018, an increase of $1,336,000.  Salaries and benefits increased $635,000 and data processing related costs increased $442,000.  All other operating expenses increased $262,000, or 2.5%, net.

Mr. Critelli commented, “In 2019, our earnings increased $564,000 over our previous record year of 2018.  Our Return on Average Assets was 1.18% and our Return on Average Equity was 10.83%.  Our cash dividend of $0.25 per share declared in the fourth quarter of 2019 represents a 4.2% increase over the same period of last year.  Earnings per share (fully diluted) also improved to $2.25 from $2.17 in 2018.  Our loan growth exceeded 8%, operating expenses remain well controlled, and our capital base remains above regulatory ‘Well Capitalized’ targets.  Please know that we continue to search out opportunities available to us, and look forward to serving our growing base of stockholders and customers.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates fifteen 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 and trade 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 is a non-GAAP (Generally Accepted Accounting Principles) financial measure.  Tax-equivalent net interest income is derived from GAAP interest income and net interest income using an assumed tax rate of 21%.  We believe the presentation of interest income on a tax–equivalent basis ensures comparability of interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income to net interest income on a tax-equivalent basis:

(dollars in thousands)	Three months ended December 31						Year  ended December 31
	2019			2018			2019			2018
Net interest income	$9,833			$9,429			$38,606			$36,839
Tax equivalent basis adjustment using 21% marginal tax rate	233			258			1,006			1,060
Net interest income on a fully taxable equivalent basis	$10,066			$9,687			$39,612			$37,899

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 December 31,						Year ended December 31,
(dollars in thousands)	2019			2018			2019			2018
Average equity	$136,920			$118,442			$131,271			$116,538
Average goodwill and other Intangibles	(11,575	)		(11,678	)		(11,611	)		(11,723	)
Average tangible equity	$125,345			$106,764			$119,660			$104,815

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)
		December 31
		2019			2018
ASSETS
Cash and due from banks	$	15,038		$	18,039
Interest-bearing deposits with banks		377			309
Cash and cash equivalents		15,415			18,348
Securities available for sale		210,205			243,277
Loans receivable		924,581			850,182
Less: Allowance for loan losses		8,509			8,452
Net loans receivable		916,072			841,730
Regulatory stock, at cost		4,844			3,926
Bank premises and equipment, net		14,228			13,846
Bank owned life insurance		38,763			37,932
Foreclosed real estate owned		1,556			1,115
Accrued interest receivable		3,719			3,776
Goodwill		11,331			11,331
Other intangible assets		235			336
Other assets		14,242			8,942
TOTAL ASSETS	$	1,230,610		$	1,184,559
LIABILITIES
Deposits:
Non-interest bearing demand	$	207,299		$	201,457
Interest-bearing		750,230			745,323
Total deposits		957,529			946,780
Short-term borrowings		62,256			53,046
Other borrowings		56,438			52,284
Accrued interest payable		2,432			1,806
Other liabilities		14,527			8,358
TOTAL LIABILITIES		1,093,182			1,062,274
STOCKHOLDERS' EQUITY
Preferred Stock, no par value per share, authorized 5,000,000 shares		-			-
Common Stock, $.10 par value per share,
authorized: 2019: 20,000,000 shares, 2018: 10,000,000 shares		634			630
issued: 2019: 6,340,563 shares, 2018: 6,295,113 shares
Surplus		49,471			48,322
Retained earnings		86,536			78,434
Treasury stock, at cost: 2019: 12,007 shares, 2018: 2,470 shares		(400	)		(81	)
Accumulated other comprehensive income (loss)		1,187			(5,020	)
TOTAL STOCKHOLDERS' EQUITY		137,428			122,285
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,230,610		$	1,184,559
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
		Three Months Ended December 31,									Twelve Months Ended December 31,
		2019			2018						2019			2018
INTEREST INCOME
Loans receivable, including fees	$	10,815		$	9,759					$	41,889		$	36,404
Securities		1,159			1,476						5,314			6,019
Other		11			10						81			73
Total Interest income		11,985			11,245						47,284			42,496
INTEREST EXPENSE
Deposits		1,784			1,446						7,139			4,644
Short-term borrowings		124			122						468			323
Other borrowings		244			248						1,071			690
Total Interest expense		2,152			1,816						8,678			5,657
NET INTEREST INCOME		9,833			9,429						38,606			36,839
PROVISION FOR LOAN LOSSES		200			375						1,250			1,725
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		9,633			9,054						37,356			35,114
OTHER INCOME
Service charges and fees		1,168			1,085						4,450			4,295
Income from fiduciary activities		156			126						610			589
Net realized gains on sales of securities		21			-						254			213
Gains on sales of loans, net		44			-						169			15
Earnings and proceeds on life insurance policies		200			277						830			1,126
Other		107			112						465			827
Total other income		1,696			1,600						6,778			7,065
OTHER EXPENSES
Salaries and employee benefits		3,740			3,575						14,655			14,020
Occupancy, furniture and equipment		938			1,036						3,719			3,695
Data processing and related operations		469			400						1,869			1,427
Taxes, other than income		232			92						751			572
Professional fees		362			232						1,113			993
FDIC Insurance assessment		3			83						153			347
Foreclosed real estate		9			104						45			172
Amortization of intangibles		22			29						101			126
Other		1,313			1,252						4,905			4,623
Total other expenses		7,088			6,803						27,311			25,975
INCOME BEFORE TAX		4,241			3,851						16,823			16,204
INCOME TAX EXPENSE		645			552						2,608			2,553
NET INCOME	$	3,596		$	3,299					$	14,215		$	13,651
Basic earnings per share	$	0.57		$	0.53					$	2.27		$	2.19
Diluted earnings per share	$	0.57		$	0.53					$	2.25		$	2.17
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended December 31		2019			2018
Net interest income	$	9,833		$	9,429
Net income		3,596			3,299
Net interest spread (fully taxable equivalent)		3.33	%		3.33	%
Net interest margin (fully taxable equivalent)		3.59	%		3.54	%
Return on average assets		1.18	%		1.12	%
Return on average equity		10.42	%		11.05	%
Return on average tangible equity		11.38	%		12.26	%
Basic earnings per share	$	0.57		$	0.53
Diluted earnings per share	$	0.57		$	0.53
For the Twelve Months Ended December 31
Net interest income	$	38,606		$	36,839
Net income		14,215			13,651
Net interest spread (fully taxable equivalent)		3.28	%		3.36	%
Net interest margin (fully taxable equivalent)		3.53	%		3.53	%
Return on average assets		1.18	%		1.19	%
Return on average equity		10.83	%		11.71	%
Return on average tangible equity		11.88	%		13.02	%
Basic earnings per share	$	2.27		$	2.19
Diluted earnings per share	$	2.25		$	2.17
As of December 31
Total assets	$	1,230,610		$	1,184,559
Total loans receivable		924,581			850,182
Allowance for loan losses		8,509			8,452
Total deposits		957,529			946,780
Stockholders' equity		137,428			122,285
Trust assets under management		170,685			151,224
Book value per share	$	21.67		$	19.43
Tangible book value per share	$	19.84		$	17.58
Equity to total assets		11.17	%		10.32	%
Allowance to total loans receivable		0.92	%		0.99	%
Nonperforming loans to total loans		0.09	%		0.13	%
Nonperforming assets to total assets		0.19	%		0.19	%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		December 31			September 30			June 30			March 31			December 31
		2019			2019			2019			2019			2018
ASSETS
Cash and due from banks	$	15,038		$	20,067		$	14,207		$	13,583		$	18,039
Interest-bearing deposits with banks		377			848			4,265			6,291			309
Cash and cash equivalents		15,415			20,915			18,472			19,874			18,348
Securities available for sale		210,205			211,199			238,083			240,621			243,277
Loans receivable		924,581			905,582			887,673			864,198			850,182
Less: Allowance for loan losses		8,509			8,405			8,228			8,349			8,452
Net loans receivable		916,072			897,177			879,445			855,849			841,730
Regulatory stock, at cost		4,844			3,137			3,155			3,132			3,926
Bank owned life insurance		38,763			38,562			38,340			38,134			37,932
Bank premises and equipment, net		14,228			13,927			13,880			14,165			13,846
Foreclosed real estate owned		1,556			1,572			1,677			1,792			1,115
Goodwill and other intangibles		11,566			11,588			11,611			11,638			11,667
Other assets		17,961			17,779			17,865			18,390			12,718
TOTAL ASSETS	$	1,230,610		$	1,215,856		$	1,222,528		$	1,203,595		$	1,184,559
LIABILITIES
Deposits:
Non-interest bearing demand	$	207,299		$	231,211		$	221,764		$	206,806		$	201,457
Interest-bearing deposits		750,230			743,222			759,460			767,609			745,323
Total deposits		957,529			974,433			981,224			974,415			946,780
Borrowings		118,694			88,684			92,118			85,779			105,330
Other liabilities		16,959			17,845			17,703			16,629			10,164
TOTAL LIABILITIES		1,093,182			1,080,962			1,091,045			1,076,823			1,062,274
STOCKHOLDERS' EQUITY		137,428			134,894			131,483			126,772			122,285
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,230,610		$	1,215,856		$	1,222,528		$	1,203,595		$	1,184,559
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		December 31			September 30			June 30			March 31			December 31
Three months ended		2019			2019			2019			2019			2018
INTEREST INCOME
Loans receivable, including fees	$	10,815		$	10,776		$	10,328		$	9,970		$	9,759
Securities		1,159			1,278			1,435			1,441			1,476
Other		11			5			51			15			10
Total interest income		11,985			12,059			11,814			11,426			11,245
INTEREST EXPENSE
Deposits		1,784			1,787			1,839			1,729			1,446
Borrowings		368			381			363			426			370
Total interest expense		2,152			2,168			2,202			2,155			1,816
NET INTEREST INCOME		9,833			9,891			9,612			9,271			9,429
PROVISION FOR LOAN LOSSES		200			300			300			450			375
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		9,633			9,591			9,312			8,821			9,054
OTHER INCOME
Service charges and fees		1,168			1,200			1,052			1,031			1,085
Income from fiduciary activities		156			167			145			142			126
Net realized gains on sales of securities		21			169			64			-			-
Gains on sales of loans, net		44			15			67			42			-
Earnings and proceeds on life insurance policies		200			222			207			202			277
Other		107			109			106			143			112
Total other income		1,696			1,882			1,641			1,560			1,600
OTHER EXPENSES
Salaries and employee benefits		3,740			3,667			3,599			3,649			3,575
Occupancy, furniture and equipment, net		938			916			940			924			1,036
Foreclosed real estate		9			24			(10	)		23			104
FDIC insurance assessment		3			(5	)		84			71			83
Other		2,398			2,189			2,172			1,981			2,005
Total other expenses		7,088			6,791			6,785			6,648			6,803
INCOME BEFORE TAX		4,241			4,682			4,168			3,733			3,851
INCOME TAX EXPENSE		645			775			646			543			552
NET INCOME	$	3,596		$	3,907		$	3,522		$	3,190		$	3,299
Basic earnings per share	$	0.57		$	0.62		$	0.56		$	0.51		$	0.53
Diluted earnings per share	$	0.57		$	0.62		$	0.56		$	0.51		$	0.53
Book Value per share	$	21.67		$	21.41		$	20.90		$	20.16		$	19.43
Tangible Book Value per share		19.84			19.57			19.06			18.31			17.58
Return on average assets (annualized)		1.18	%		1.27	%		1.16	%		1.09	%		1.12	%
Return on average equity (annualized)		10.42	%		11.56	%		10.93	%		10.37	%		11.02	%
Return on average tangible equity (annualized)		11.38	%		12.66	%		12.01	%		11.44	%		12.23	%
Net interest spread (fte)		3.33	%		3.35	%		3.24	%		3.20	%		3.33	%
Net interest margin (fte)		3.59	%		3.60	%		3.49	%		3.43	%		3.54	%
Allowance for loan losses to total loans		0.92	%		0.93	%		0.93	%		0.97	%		0.99	%
Net charge-offs to average loans (annualized)		0.04	%		0.05	%		0.19	%		0.26	%		0.10	%
Nonperforming loans to total loans		0.09	%		0.15	%		0.15	%		0.13	%		0.13	%
Nonperforming assets to total assets		0.19	%		0.24	%		0.25	%		0.24	%		0.19	%