EX-99.1 2 d780769dex991.htm EX-99.1

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP

ANNOUNCES SECOND QUARTER EARNINGS

Honesdale, Pennsylvania - July 26, 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 June 30, 2019 of $3,522,000, which represents an increase from the $3,513,000 earned in the similar period of 2018. Earnings per share (fully diluted) were $0.56 in both the 2019 and 2018 periods. Annualized return on average assets for the three months ended June 30, 2019 was 1.16% with an annualized return on average equity of 10.93%. Net income for the six months ended June 30, 2019 totaled $6,712,000, which is $70,000 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, 2019 and 2018, each totaled $1.06.

Total assets as of June 30, 2019 were $1.223 billion with loans receivable of $887.7 million, deposits of $981.2 million and stockholders’ equity of $131.5 million. Loans receivable increased $83.9 million since June 30, 2018 while total deposits increased $30.3 million.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $3.0 million and represented 0.25% of total assets as of June 30, 2019 compared to $2.7 million, or 0.23% of total assets, as of June 30, 2018. The increase was due primarily to a $291,000 increase in foreclosed real estate owned. The allowance for loan losses totaled $8,228,000 as of June 30, 2019 and represented 0.93% of total loans outstanding, compared to $8,326,000 and 1.04%, respectively, on June 30, 2018. As of June 30, 2019, the reserve for loan losses was 607% of nonperforming loans compared to 655% on June 30, 2018.

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For the three months ended June 30, 2019, net interest income, on a fully taxable equivalent basis (fte), totaled $9,878,000, an increase of $394,000 compared to the similar period in 2018. An $88.1 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the 2019 period was 3.49%, compared to 3.54% in 2018 period. The tax-equivalent yield on interest-earning assets increased 27 basis points to 4.27% compared to the prior year while the cost of interest-bearing liabilities increased 42 basis points to 1.02%. Net interest income (fte) for the six months ended June 30, 2019 totaled $19,413,000, which was $846,000 higher than the similar period in 2018 due to the higher volume of earning assets. The net interest margin (fte) was 3.46% in the 2019 period and 3.50% during the first six months of 2018. The decrease in the net interest margin (fte) reflects the increase in the rate paid on time deposits due to the renewal of maturing certificates of deposit at market rates.

Other income for the three months ended June 30, 2019 totaled $1,641,000 compared to $1,774,000 for the similar period in 2018. The decrease can be attributed to a lower level of service charges and fees and a reduction in earnings and proceeds on bank-owned life insurance policies. Net gains from the sale of loans and securities increased $73,000. For the six months ended June 30, 2019, other income totaled $3,201,000 compared to $3,468,000 in the 2018 period. Net gains from the sale of loans and securities decreased $26,000, while earnings and proceeds on bank-owned life insurance policies decreased $144,000.

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Other expenses totaled $6,785,000 for the three months ended June 30, 2019, an increase of $432,000, or 6.8%, compared to the $6,353,000 reported in the similar period of 2018. Salaries and employee benefits rose $193,000 over the same period of last year while all other expenses increased $239,000, net. For the six months ended June 30, 2019, other expenses totaled $13,433,000 compared to $12,600,000 for the similar period in 2018. The increase includes a $380,000 increase in salaries and employee benefits, while all other expenses increased $453,000, or 7.9%, net.

Mr. Critelli commented, “Our earnings for the first half of 2019 have increased over the first six months of last year. Our annualized loan growth exceeded 8.0%, operating expenses remain well controlled and our capital base remains above regulatory “well capitalized” targets. The Bank also expanded its market area into Luzerne County, Pennsylvania with the recent opening of our Hanover Township Office. 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,

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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 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%. 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)		2019				2018				2019				2018
Net Interest Income		$	9,612			$	9,215			$	18,882			$	18,022
Taxable equivalent basis adjustment using 21% marginal tax rate			266				269				531				545
Net interest income on a fully taxable equivalent basis		$	9,878			$	9,484			$	19,413			$	18,567

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.

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The following reconciles average equity to average tangible equity:

		Three months ended June 30								Six months ended June 30
(dollars in thousands)		2019				2018				2019				2018
Average equity		$	129,215			$	115,042			$	126,993			$	115,180
Average goodwill and other intangibles			(11,621	)			(11,738	)			(11,635	)			(11,755	)
Average tangible equity		$	117,594			$	103,304			$	115,358			$	103,425

Contact: William S. Lance

Executive Vice President &

Chief Financial Officer

NORWOOD FINANCIAL CORP

570-253-8505

www.waynebank.com

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NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets

(dollars in thousands, except share and per share data)

(unaudited)

		June 30
		2019				2018
ASSETS
Cash and due from banks		$	14,207			$	15,193
Interest-bearing deposits with banks			4,265				914
Cash and cash equivalents			18,472				16,107
Securities available for sale			238,083				259,442
Loans receivable			887,673				803,773
Less: Allowance for loan losses			8,228				8,326
Net loans receivable			879,445				795,447
Regulatory stock, at cost			3,155				2,313
Bank premises and equipment, net			13,880				13,894
Bank owned life insurance			38,340				37,485
Foreclosed real estate owned			1,677				1,386
Accrued interest receivable			3,979				3,672
Goodwill			11,331				11,331
Other intangible assets			280				394
Other assets			13,886				9,122
TOTAL ASSETS		$	1,222,528			$	1,150,593
LIABILITIES
Deposits:
Non-interest bearing demand		$	221,764			$	216,472
Interest-bearing			759,460				734,417
Total deposits			981,224				950,889
Short-term borrowings			48,094				43,325
Other borrowings			44,024				30,283
Accrued interest payable			3,008				1,461
Other liabilities			14,695				9,102
TOTAL LIABILITIES			1,091,045				1,035,060
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 issued: 2019: 6,304,413 shares, 2018: 6,266,388 shares			630				627
Surplus			48,741				47,815
Retained earnings			82,127				74,315
Treasury stock, at cost: 2019: 13,807 shares, 2018: 5,729 shares			(455	)			(188	)
Accumulated other comprehensive loss			440				(7,036	)
TOTAL STOCKHOLDERS’ EQUITY			131,483				115,533
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,222,528			$	1,150,593

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,
		2019				2018				2019				2018
INTEREST INCOME
Loans receivable, including fees		$	10,328			$	8,857			$	20,298			$	17,344
Securities			1,435				1,536				2,876				3,060
Other			51				43				66				61
Total Interest income			11,814				10,436				23,240				20,465
INTEREST EXPENSE
Deposits			1,839				1,052				3,568				2,082
Short-term borrowings			85				38				209				90
Other borrowings			278				131				581				271
Total Interest expense			2,202				1,221				4,358				2,443
NET INTEREST INCOME			9,612				9,215				18,882				18,022
PROVISION FOR LOAN LOSSES			300				425				750				975
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			9,312				8,790				18,132				17,047
OTHER INCOME
Service charges and fees			1,052				1,101				2,083				2,082
Income from fiduciary activities			145				175				287				311
Net realized gains on sales of securities			64				58				64				200
Gains on sales of loans, net			67				—				110				—
Earnings and proceeds on life insurance policies			207				279				408				552
Other			106				161				249				323
Total other income			1,641				1,774				3,201				3,468
OTHER EXPENSES
Salaries and employee benefits			3,599				3,406				7,248				6,868
Occupancy, furniture and equipment			940				857				1,864				1,749
Data processing and related operations			472				340				920				658
Taxes, other than income			179				153				340				327
Professional fees			226				229				476				459
FDIC Insurance assessment			84				86				155				178
Foreclosed real estate			(10	)			114				13				95
Amortization of intangibles			27				33				56				68
Other			1,268				1,135				2,361				2,198
Total other expenses			6,785				6,353				13,433				12,600
INCOME BEFORE TAX			4,168				4,211				7,900				7,915
INCOME TAX EXPENSE			646				698				1,188				1,273
NET INCOME		$	3,522			$	3,513			$	6,712			$	6,642
Basic earnings per share		$	0.56			$	0.57			$	1.07			$	1.07
Diluted earnings per share		$	0.56			$	0.56			$	1.06			$	1.06

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended June 30		2019				2018
Net interest income		$	9,612			$	9,215
Net income			3,522				3,513
Net interest spread (fully taxable equivalent)			3.24	%			3.40	%
Net interest margin (fully taxable equivalent)			3.49	%			3.54	%
Return on average assets			1.16	%			1.23	%
Return on average equity			10.93	%			12.25	%
Return on average tangible equity			12.01	%			13.64	%
Basic earnings per share		$	0.56			$	0.57
Diluted earnings per share		$	0.56			$	0.56
For the Six Months Ended June 30
Net interest income		$	18,882			$	18,022
Net income			6,712				6,642
Net interest spread (fully taxable equivalent)			3.22	%			3.35	%
Net interest margin (fully taxable equivalent)			3.46	%			3.50	%
Return on average assets			1.12	%			1.18	%
Return on average equity			10.66	%			11.63	%
Return on average tangible equity			11.73	%			12.95	%
Basic earnings per share		$	1.07			$	1.07
Diluted earnings per share		$	1.06			$	1.06
As of June 30
Total assets		$	1,222,528			$	1,150,593
Total loans receivable			887,673				803,773
Allowance for loan losses			8,228				8,326
Total deposits			981,224				950,889
Stockholders’ equity			131,483				115,533
Trust assets under management			163,103				158,117
Book value per share		$	20.90			$	18.35
Tangible book value per share		$	19.06			$	16.47
Equity to total assets			10.76	%			10.04	%
Allowance to total loans receivable			0.93	%			1.04	%
Nonperforming loans to total loans			0.15	%			0.16	%
Nonperforming assets to total assets			0.25	%			0.23	%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

		June 30 2019				March 31 2019				December 31 2018				September 30 2018				June 30 2018
ASSETS
Cash and due from banks		$	14,207			$	13,583			$	18,039			$	17,073			$	15,193
Interest-bearing deposits with banks			4,265				6,291				309				295				914
Cash and cash equivalents			18,472				19,874				18,348				17,368				16,107
Securities available for sale			238,083				240,621				243,277				247,517				259,442
Loans receivable			887,673				864,198				850,182				819,197				803,773
Less: Allowance for loan losses			8,228				8,349				8,452				8,280				8,326
Net loans receivable			879,445				855,849				841,730				810,917				795,447
Regulatory stock, at cost			3,155				3,132				3,926				3,261				2,313
Bank owned life insurance			38,340				38,134				37,932				37,718				37,485
Bank premises and equipment, net			13,880				14,165				13,846				13,797				13,894
Foreclosed real estate owned			1,677				1,792				1,115				1,209				1,386
Goodwill and other intangibles			11,611				11,638				11,667				11,695				11,725
Other assets			17,865				18,390				12,718				13,266				12,794
TOTAL ASSETS		$	1,222,528			$	1,203,595			$	1,184,559			$	1,156,748			$	1,150,593
LIABILITIES
Deposits:
Non-interest bearing demand		$	221,764			$	206,806			$	201,457			$	218,979			$	216,472
Interest-bearing deposits			759,460				767,609				745,323				720,735				734,417
Total deposits			981,224				974,415				946,780				939,714				950,889
Borrowings			92,118				85,779				105,330				89,469				73,608
Other liabilities			17,703				16,629				10,164				10,885				10,563
TOTAL LIABILITIES			1,091,045				1,076,823				1,062,274				1,040,068				1,035,060
STOCKHOLDERS’ EQUITY			131,483				126,772				122,285				116,680				115,533
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,222,528			$	1,203,595			$	1,184,559			$	1,156,748			$	1,150,593

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

Three months ended		June 30 2019				March 31 2019				December 31 2018				September 30 2018				June 30 2018
INTEREST INCOME
Loans receivable, including fees		$	10,328			$	9,970			$	9,759			$	9,301			$	8,857
Securities			1,435				1,441				1,476				1,483				1,536
Other			51				15				10				2				43
Total interest income			11,814				11,426				11,245				10,786				10,436
INTEREST EXPENSE
Deposits			1,839				1,729				1,446				1,116				1,052
Borrowings			363				426				370				282				169
Total interest expense			2,202				2,155				1,816				1,398				1,221
NET INTEREST INCOME			9,612				9,271				9,429				9,388				9,215
PROVISION FOR LOAN LOSSES			300				450				375				375				425
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			9,312				8,821				9,054				9,013				8,790
OTHER INCOME
Service charges and fees			1,052				1,031				1,085				1,129				1,101
Income from fiduciary activities			145				142				126				151				175
Net realized gains on sales of securities			64				—				—				13				58
Gains on sales of loans, net			67				42				—				15				—
Earnings and proceeds on life insurance policies			207				202				277				297				279
Other			106				143				112				392				161
Total other income			1,641				1,560				1,600				1,997				1,774
OTHER EXPENSES
Salaries and employee benefits			3,599				3,649				3,575				3,577				3,406
Occupancy, furniture and equipment, net			940				924				1,036				910				857
Foreclosed real estate			(10	)			23				104				(26	)			114
FDIC insurance assessment			84				71				83				87				86
Other			2,172				1,981				2,005				2,024				1,890
Total other expenses			6,785				6,648				6,803				6,572				6,353
INCOME BEFORE TAX			4,168				3,733				3,851				4,438				4,211
INCOME TAX EXPENSE			646				543				552				728				698
NET INCOME		$	3,522			$	3,190			$	3,299			$	3,710			$	3,513
Basic earnings per share		$	0.56			$	0.51			$	0.53			$	0.59			$	0.57
Diluted earnings per share		$	0.56			$	0.51			$	0.53			$	0.58			$	0.56
Book Value per share		$	20.90			$	20.16			$	19.43			$	18.49			$	18.35
Tangible Book Value per share			19.06				18.31				17.58				16.62				16.47
Return on average assets (annualized)			1.16	%			1.09	%			1.12	%			1.28	%			1.23	%
Return on average equity (annualized)			10.93	%			10.37	%			11.02	%			12.55	%			12.25	%
Return on average tangible equity (annualized)			12.01	%			11.44	%			12.23	%			13.94	%			13.64	%
Net interest spread (fte)			3.24	%			3.20	%			3.33	%			3.40	%			3.40	%
Net interest margin (fte)			3.49	%			3.43	%			3.54	%			3.57	%			3.54	%
Allowance for loan losses to total loans			0.93	%			0.97	%			0.99	%			1.01	%			1.04	%
Net charge-offs to average loans (annualized)			0.19	%			0.26	%			0.10	%			0.21	%			0.10	%
Nonperforming loans to total loans			0.15	%			0.13	%			0.13	%			0.14	%			0.16	%
Nonperforming assets to total assets			0.25	%			0.24	%			0.19	%			0.20	%			0.23	%