Norwood Financial Corp. Announces First Quarter Earnings

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.