HONESDALE, Pa., Jan. 24, 2019 — 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, 2018 of $3,299,000 compared to $157,000 earned in the corresponding period of 2017. The increase in earnings is due primarily to the $545,000 improvement in net interest income and the $3,060,000 of non-recurring additional tax expense recorded in the fourth quarter of 2017 resulting from the enactment of the Tax Cuts and Jobs Act (the “Act”). For the year ended December 31, 2018, net income totaled $13,651,000, an increase of $5,453,000 from the $8,198,000 earned in the prior year. The increase reflects improvement in net interest income and other income, as well as a reduction in the provision for loan losses. Income tax expense was reduced $3,998,000 due to the non-recurring expense recognized in 2017 combined with the impact of the reduced corporate tax rate. In 2018, income before tax improved $1,455,000, or 9.9%.
Earnings per share (fully diluted) were $0.53 and $0.03 for the three-month periods ended December 31, 2018 and 2017, respectively. For the year, earnings per share on a fully diluted basis were $2.17 for 2018 compared to $1.31 in 2017. The return on average assets for the year was 1.19% with a return on average equity of 11.71% compared to 0.73% and 7.04%, respectively, in 2017.
Total assets were $1.185 billion as of December 31, 2018. Loans receivable totaled $850.2 million as of December 31, 2018, with total deposits of $946.8 million and stockholders’ equity of $122.3 million.
Loans receivable increased $86.1 million, or 11.3%, from the prior year-end due primarily to a $41.0 million increase in consumer loans and a $31.9 million increase in commercial real estate loans. Other commercial loans increased $13.1 million. For the three months and year ended December 31, 2018, net charge-offs totaled $203,000 and $907,000, respectively, compared to $527,000 and $1,029,000, respectively, for the corresponding periods in 2017.
Net interest income, on a fully taxable equivalent basis (fte), totaled $9,687,000 for the three months ended December 31, 2018, an increase of $259,000 compared to the same period in 2017 despite the lower tax-equivalent adjustment resulting from the Act. For the year, net interest income (fte) totaled $37,899,000, an increase of $809,000 compared to 2017 due primarily to the higher volume of earning assets, including a $63.2 million increase in average loans outstanding.
Other income for the three months ended December 31, 2018 totaled $1,600,000 compared to $1,754,000 for the similar period in 2017. Gains on the sale of securities decreased $181,000, while all other items of other income increased $27,000 in the aggregate due primarily to service charges and fees. Other income for the year ended December 31, 2018 totaled $7,065,000 compared to $6,911,000 in 2017, an increase of $154,000. Gains on the sale of loans and investment securities decreased $187,000 in the aggregate, while all other items of other income increased $341,000, net.
Other expenses totaled $6,803,000 for the three months ended December 31, 2018, compared to $5,886,000 in the similar period of 2017. The $917,000 increase includes a $364,000 increase in salaries and benefits costs. All other operating expenses increased $553,000, net. For the year ended December 31, 2018, other expenses totaled $25,975,000 compared to $24,870,000 for 2017, an increase of $1,105,000. An increase of $1,170,000 in salaries and benefits was largely offset by reduced expenses on foreclosed real estate. All other operating expenses increased $927,000, net.
Mr. Critelli commented, “In 2018, our earnings increased $5,453,000 over the 2017 level which included the $3,060,000 of non-recurring tax expense resulting from the Tax Cuts and Jobs Act. Our income before taxes improved $1,455,000, or 9.9%. Our Return on Average Assets was 1.19% and our Return on Average Equity was 11.71%, both well above last year’s level. Our cash dividend of $0.24 per share declared in the fourth quarter of 2018 represents a 9.1% increase over the same period of last year. Earnings per share (fully diluted) also improved to $2.17 from $1.31 in 2017. Our loan growth exceeded 11%, 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 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 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% for 2018 and 34% for 2017. 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|
|Net interest income||$||9,429||$||8,884||$||36,839||$||34,908|
|Tax equivalent basis adjustment using 34% marginal tax rate||258||544||1,060||2,182|
|Net interest income on a fully taxable equivalent basis||$||9,687||$||9,428||$||37,899||$||37,090|
This release also references average tangible equity, which is also a non-GAAP financial measure. Average tangible equity is calculated by deducting average goodwill and other intangible assets from average stockholders’ equity. The Company believes that disclosure of tangible equity ratios enhances investor understanding of our financial position and improves the comparability of our financial data.
The following reconciles average equity to average tangible equity:
|Three months ended December 31,||Year ended December 31,|
|(dollars in thousands)||2018||2017||2018||2017|
|Goodwill and other||(11,678||)||(11,806||)||(11,723||)||(11,910||)|
|Average tangible equity||$||106,764||$||106,855||$||104,815||$||104,497|
Contact: William S. Lance Executive Vice President & Chief Financial Officer NORWOOD FINANCIAL CORP 570-253-8505 www.waynebank.com
|NORWOOD FINANCIAL CORP.|
|Consolidated Balance Sheets|
|(dollars in thousands, except share and per share data)|
|Cash and due from banks||$||18,039||$||16,212|
|Interest-bearing deposits with banks||309||485|
|Cash and cash equivalents||18,348||16,697|
|Securities available for sale||243,277||281,121|
|Less: Allowance for loan losses||8,452||7,634|
|Net loans receivable||841,730||756,458|
|Regulatory stock, at cost||3,926||3,505|
|Bank premises and equipment, net||13,846||13,864|
|Bank owned life insurance||37,932||37,060|
|Foreclosed real estate owned||1,115||1,661|
|Accrued interest receivable||3,776||3,716|
|Other intangible assets||336||462|
|Deferred tax asset||5,594||4,781|
|Non-interest bearing demand||$||201,457||$||205,138|
|Accrued interest payable||1,806||1,434|
|Common Stock, $.10 par value, authorized 10,000,000 shares|
|issued: 2018: 6,295,113 shares, 2017: 6,256,063 shares||630||626|
|Treasury stock, at cost: 2018: 2,470 shares, 2017: 2,608 shares||(81)||(77)|
|Accumulated other comprehensive loss||(5,020)||(2,667)|
|TOTAL STOCKHOLDERS’ EQUITY||122,285||115,739|
|TOTAL LIABILITIES AND|
|NORWOOD FINANCIAL CORP.|
|Consolidated Statements of Income|
|(dollars in thousands, except per share data)|
|Three Months Ended December 31,||Twelve Months Ended December 31,|
|Loans receivable, including fees||$||9,759||$||8,503||$||36,404||$||32,524|
|Total Interest income||11,245||10,075||42,496||38,988|
|Total Interest expense||1,816||1,191||5,657||4,080|
|NET INTEREST INCOME||9,429||8,884||36,839||34,908|
|PROVISION FOR LOAN LOSSES||375||400||1,725||2,200|
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES||9,054||8,484||35,114||32,708|
|Service charges and fees||1,085||1,023||4,295||4,079|
|Income from fiduciary activities||126||116||589||510|
|Net realized gains on sales of securities||–||181||213||348|
|Gains on sales of loans, net||–||–||15||67|
|Gains on sale of deposits||–||–||–||209|
|Earnings and proceeds on life insurance policies||277||283||1,126||1,133|
|Total other income||1,600||1,754||7,065||6,911|
|Salaries and employee benefits||3,575||3,211||14,020||12,850|
|Occupancy, furniture and equipment||1,036||841||3,695||3,361|
|Data processing and related operations||400||332||1,427||1,353|
|Taxes, other than income||92||(32)||572||661|
|FDIC Insurance assessment||83||94||347||377|
|Foreclosed real estate||104||136||172||1,164|
|Amortization of intangibles||29||35||126||150|
|Total other expenses||6,803||5,886||25,975||24,870|
|INCOME BEFORE TAX||3,851||4,352||16,204||14,749|
|INCOME TAX EXPENSE||552||4,195||2,553||6,551|
|Basic earnings per share||$||0.53||$||0.03||$||2.19||$||1.32|
|Diluted earnings per share||$||0.53||$||0.03||$||2.17||$||1.31|
|NORWOOD FINANCIAL CORP.|
|Financial Highlights (Unaudited)|
|(dollars in thousands, except per share data)|