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Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

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Norwood Financial Corp.
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HONESDALE, Pa., Jan. 27, 2021 (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, 2020 of $5,513,000 compared to $3,596,000 earned in the corresponding period of 2019. The increase in earnings reflects the benefits derived from the Company’s acquisition of UpState New York Bancorp, Inc. (“UpState”), which closed on July 7, 2020. For the year ended December 31, 2020 net income totaled $15,080,000, an increase of $865,000 from the $14,215,000 earned in the prior year. The increase reflects the benefits derived from the acquisition of UpState, which offset a $4,200,000 increase in the provision for loan losses and $2,049,000 of merger related expenses.

Earnings per share (fully diluted) were $0.67 and $0.57 for the three-month period ended December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, earnings per share on a fully diluted basis were $2.09, compared to $2.25 for the year ended December 31, 2019. For the year ended December 31, 2020, the return on average assets was 0.97%, and the return on average equity was 9.06%, compared to 1.18% and 10.83%, respectively, for the year ended December 31, 2019.

Total assets were $1.852 billion as of December 31, 2020. Loans receivable totaled $1.411 billion as of December 31, 2020, with total deposits of $1.535 billion and stockholders’ equity of $194.8 million as of December 31, 2020.

Loans receivable increased $486.2 million from the prior year-end due primarily to the $420 million of loan balances acquired from UpState and $66 million of Paycheck Protection Program (“PPP”) loans originated during the year ended December 31, 2020. For the three months and year ended December 31, 2020, net charge-offs totaled $125,000 and $809,000, respectively, compared to $96,000 and $1,194,000, respectively, for the corresponding periods in 2019.

Net interest income, on a fully taxable equivalent basis (fte), totaled $15,821,000 for the three months ended December 31, 2020, an increase of $5,755,000 compared to the same period in 2019. For the year ended December 31, 2020, net interest income (fte) totaled $51,359,000, an increase of $11,747,000 compared to 2019 due primarily to the higher volume of earning assets, including a $292.0 million increase in average loans outstanding.

Other income for the three months ended December 31, 2020 totaled $2,661,000 compared to $1,696,000 for the similar period in 2019. Gains on the sale of loans and securities increased $176,000, while all other items of other income increased $789,000 in the aggregate due primarily to service charges and fees related to the acquisition of UpState. Other income for the year ended December 31, 2020 totaled $7,780,000 compared to $6,778,000 in 2019, an increase of $1,002,000 due primarily to a $665,000 increase in service charges and fees. Gains on the sale of loans and investment securities increased $175,000 in the aggregate, while all other items of other income increased $165,000, net.

Other expenses totaled $9,909,000 for the three months ended December 31, 2020, compared to $7,088,000 in the similar period of 2019. The $2,821,000 increase reflects the costs of the operations acquired from UpState. For the year ended December 31, 2020, other expenses totaled $34,440,000 compared to $27,311,000 for 2019, an increase of $7,129,000. The increase reflects the costs of operations acquired from UpState, including four new Community Offices, and $2,049,000 of merger related expenses.

Mr. Critelli commented, “Our results for the 2020 year have been significantly impacted by our efforts to assist our customers during the COVID-19 pandemic, restrictions on business activity, and the costs associated with and the revenue generated by our acquisition of UpState New York Bancorp, Inc. Our balance sheet reflects the full impact of the UpState acquisition, resulting in a Company with over $1.8 billion of total assets, $1.4 billion of loans and $1.5 billion of deposits. Our cash dividend of $0.26 per share declared in the fourth quarter of 2020 represents a 4.0% increase over the same period of last year. We appreciate the opportunity to serve our Wayne Bank customers and our new customers at the Bank of the Finger Lakes and Bank of Cooperstown locations. We continue to search out opportunities available to us as we service 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 sixteen offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, 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 risks and uncertainty posed by, and the effect and impact of, the COVID-19 pandemic on the economy and the Company’s results of operation and financial condition, 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 are non-GAAP (Generally Accepted Accounting Principles) financial measures. 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 fully tax-equivalent basis:

(dollars in thousands)

Three months ended
December 31

Year ended
December 31

2020

2019

2020

2019

Net interest income

$

15,614

$

9,833

$

50,476

$

38,606

Tax equivalent basis adjustment

using 21% marginal tax rate

207

233

883

1,006

Net interest income on a fully

taxable equivalent basis

$

15,821

$

10,066

$

51,359

$

39,612

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

Year ended

December 31,

December 31,

(dollars in thousands)

2020

2019

2020

2019

Average equity

$

193,740

$

136,920

$

166,427

$

131,271

Average goodwill and other Intangibles

(30,747)

(11,575)

(17,942)

(11,611)

Average tangible equity

$

162,993

$

125,345

$

148,485

$

119,660

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

2020

2019

ASSETS

Cash and due from banks

$

19,445

$

15,038

Interest-bearing deposits with banks

92,248

377

Cash and cash equivalents

111,693

15,415

Securities available for sale

226,586

210,205

Loans receivable

1,410,732

924,581

Less: Allowance for loan losses

13,150

8,509

Net loans receivable

1,397,582

916,072

Regulatory stock, at cost

3,981

4,844

Bank premises and equipment, net

17,814

14,228

Bank owned life insurance

39,608

38,763

Foreclosed real estate owned

965

1,556

Accrued interest receivable

6,232

3,719

Goodwill

29,290

11,331

Other intangible assets

530

235

Other assets

17,583

14,242

TOTAL ASSETS

$

1,851,864

$

1,230,610

LIABILITIES

Deposits:

Non-interest bearing demand

$

359,559

$

207,299

Interest-bearing

1,175,826

750,230

Total deposits

1,535,385

957,529

Short-term borrowings

63,303

62,256

Other borrowings

42,459

56,438

Accrued interest payable

1,601

2,432

Other liabilities

14,331

14,527

TOTAL LIABILITIES

1,657,079

1,093,182

STOCKHOLDERS' EQUITY

Preferred Stock, no par value per share, authorized 5,000,000 shares

-

-

Common Stock, $.10 par value per share,

authorized: 20,000,000 shares,

issued: 2020: 8,236,331 shares, 2019: 6,340,563 shares

824

634

Surplus

95,388

49,471

Retained earnings

93,796

86,536

Treasury stock, at cost: 2020: 10,263 shares, 2019: 12,007 shares

(342

)

(400

)

Accumulated other comprehensive income

5,119

1,187

TOTAL STOCKHOLDERS' EQUITY

194,785

137,428

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,851,864

$

1,230,610

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,

2020

2019

2020

2019

INTEREST INCOME

Loans receivable, including fees

$

16,336

$

10,815

$

54,046

$

41,889

Securities

1,064

1,159

4,337

5,314

Other

29

11

72

81

Total Interest income

17,429

11,985

58,455

47,284

INTEREST EXPENSE

Deposits

1,514

1,784

6,610

7,139

Short-term borrowings

81

124

325

468

Other borrowings

220

244

1,044

1,071

Total Interest expense

1,815

2,152

7,979

8,678

NET INTEREST INCOME

15,614

9,833

50,476

38,606

PROVISION FOR LOAN LOSSES

1,600

200

5,450

1,250

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

14,014

9,633

45,026

37,356

OTHER INCOME

Service charges and fees

1,913

1,168

5,115

4,450

Income from fiduciary activities

150

156

682

610

Net realized gains on sales of securities

-

21

71

254

Gains on sales of loans, net

241

44

527

169

Earnings and proceeds on life insurance policies

208

200

845

830

Other

149

107

540

465

Total other income

2,661

1,696

7,780

6,778

OTHER EXPENSES

Salaries and employee benefits

5,243

3,740

17,121

14,655

Occupancy, furniture and equipment

1,165

938

4,148

3,719

Data processing and related operations

808

469

2,457

1,869

Taxes, other than income

356

232

997

751

Professional fees

328

362

1,062

1,113

FDIC Insurance assessment

213

3

399

153

Foreclosed real estate

8

9

53

45

Amortization of intangibles

35

22

114

101

Merger related

66

-

2,049

-

Other

1,687

1,313

6,040

4,905

Total other expenses

9,909

7,088

34,440

27,311

INCOME BEFORE TAX

6,766

4,241

18,366

16,823

INCOME TAX EXPENSE

1,253

645

3,286

2,608

NET INCOME

$

5,513

$

3,596

$

15,080

$

14,215

Basic earnings per share

$

0.67

$

0.57

$

2.09

$

2.27

Diluted earnings per share

$

0.67

$

0.57

$

2.09

$

2.25

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended December 31

2020

2019

Net interest income

$

15,614

$

9,833

Net income

5,513

3,596

Net interest spread (fully taxable equivalent)

3.50

%

3.33

%

Net interest margin (fully taxable equivalent)

3.65

%

3.59

%

Return on average assets

1.18

%

1.18

%

Return on average equity

11.32

%

10.42

%

Return on average tangible equity

13.46

%

11.38

%

Basic earnings per share

$

0.67

$

0.57

Diluted earnings per share

$

0.67

$

0.57

For the Twelve Months Ended December 31

2020

2019

Net interest income

$

50,476

$

38,606

Net income

15,080

14,215

Net interest spread (fully taxable equivalent)

3.36

%

3.28

%

Net interest margin (fully taxable equivalent)

3.55

%

3.53

%

Return on average assets

0.97

%

1.18

%

Return on average equity

9.06

%

10.83

%

Return on average tangible equity

10.16

%

11.88

%

Basic earnings per share

$

2.09

$

2.27

Diluted earnings per share

$

2.09

$

2.25

As of December 31

2020

2019

Total assets

$

1,851,864

$

1,230,610

Total loans receivable

1,410,732

924,581

Allowance for loan losses

13,150

8,509

Total deposits

1,535,385

957,529

Stockholders' equity

194,785

137,428

Trust assets under management

168,085

170,685

Book value per share

$

23.72

$

21.67

Tangible book value per share

$

20.10

$

19.84

Equity to total assets

10.52

%

11.17

%

Allowance to total loans receivable

0.93

%

0.92

%

Nonperforming loans to total loans

0.85

%

0.09

%

Nonperforming assets to total assets

0.70

%

0.19

%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

December 31

September 30

June 30

March 31

December 31

2020

2020

2020

2020

2019

ASSETS

Cash and due from banks

$

19,445

$

23,874

$

15,387

$

14,712

$

15,038

Interest-bearing deposits with banks

92,248

100,566

67,989

23,706

377

Cash and cash equivalents

111,693

124,440

83,376

38,418

15,415

Securities available for sale

226,586

197,436

196,735

196,998

210,205

Loans receivable

1,410,732

1,414,662

988,679

928,565

924,581

Less: Allowance for loan losses

13,150

11,674

10,312

9,088

8,509

Net loans receivable

1,397,582

1,402,988

978,367

919,477

916,072

Regulatory stock, at cost

3,981

3,876

3,677

3,770

4,844

Bank owned life insurance

39,608

39,400

39,183

38,971

38,763

Bank premises and equipment, net

17,814

18,124

14,040

14,071

14,228

Foreclosed real estate owned

965

965

965

1,077

1,556

Goodwill and other intangibles

29,820

30,778

11,522

11,543

11,566

Other assets

23,815

24,100

26,676

17,966

17,961

TOTAL ASSETS

$

1,851,864

$

1,842,107

$

1,354,541

$

1,242,291

$

1,230,610

LIABILITIES

Deposits:

Non-interest bearing demand

$

359,559

$

372,237

$

284,754

$

213,359

$

207,299

Interest-bearing deposits

1,175,826

1,143,685

801,484

776,801

750,230

Total deposits

1,535,385

1,515,922

1,086,238

990,160

957,529

Borrowings

105,762

115,732

106,027

92,006

118,694

Other liabilities

15,932

19,906

19,612

17,938

16,959

TOTAL LIABILITIES

1,657,079

1,651,560

1,211,877

1,100,104

1,093,182

STOCKHOLDERS' EQUITY

194,785

190,547

142,664

142,187

137,428

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

$

1,851,864

$

1,842,107

$

1,354,541

$

1,242,291

$

1,230,610

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

2020

2020

2020

2020

2019

INTEREST INCOME

Loans receivable, including fees

$

16,336

$

16,260

$

10,767

$

10,683

$

10,815

Securities

1,064

1,031

1,063

1,179

1,159

Other

29

18

19

6

11

Total interest income

17,429

17,309

11,849

11,868

11,985

INTEREST EXPENSE

Deposits

1,514

1,676

1,630

1,790

1,784

Borrowings

301

303

352

413

368

Total interest expense

1,815

1,979

1,982

2,203

2,152

NET INTEREST INCOME

15,614

15,330

9,867

9,665

9,833

PROVISION FOR LOAN LOSSES

1,600

1,850

1,300

700

200

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

14,014

13,480

8,567

8,965

9,633

OTHER INCOME

Service charges and fees

1,913

1,301

837

1,063

1,168

Income from fiduciary activities

150

205

175

153

156

Net realized gains on sales of securities

-

33

-

38

21

Gains on sales of loans, net

241

164

65

56

44

Earnings and proceeds on life insurance policies

208

217

212

208

200

Other

149

152

103

136

107

Total other income

2,661

2,072

1,392

1,654

1,696

OTHER EXPENSES

Salaries and employee benefits

5,243

4,812

3,289

3,777

3,740

Occupancy, furniture and equipment, net

1,165

1,109

906

968

938

Foreclosed real estate

8

31

(2

)

16

9

FDIC insurance assessment

213

144

42

-

3

Merger related

66

386

1,597

-

-

Other

3,214

2,898

2,260

2,298

2,398

Total other expenses

9,909

9,380

8,092

7,059

7,088

INCOME BEFORE TAX

6,766

6,172

1,867

3,560

4,241

INCOME TAX EXPENSE

1,253

1,173

379

481

645

NET INCOME

$

5,513

$

4,999

$

1,488

$

3,079

$

3,596

Basic earnings per share

$

0.67

$

0.62

$

0.24

$

0.49

$

0.57

Diluted earnings per share

$

0.67

$

0.62

$

0.24

$

0.49

$

0.57

Book Value per share

$

23.72

$

23.30

$

22.62

$

22.52

$

21.67

Tangible Book Value per share

20.10

19.55

20.80

20.70

19.84

Return on average assets (annualized)

1.18

%

1.11

%

0.45

%

1.01

%

1.18

%

Return on average equity (annualized)

11.32

%

10.64

%

4.17

%

8.79

%

10.42

%

Return on average tangible equity (annualized)

13.46

%

11.75

%

4.54

%

9.57

%

11.38

%

Net interest spread (fte)

3.50

%

3.55

%

3.03

%

3.23

%

3.33

%

Net interest margin (fte)

3.65

%

3.73

%

3.25

%

3.48

%

3.59

%

Allowance for loan losses to total loans

0.93

%

0.83

%

1.04

%

0.98

%

0.92

%

Net charge-offs to average loans (annualized)

0.04

%

0.14

%

0.03

%

0.05

%

0.04

%

Nonperforming loans to total loans

0.85

%

0.89

%

0.30

%

0.30

%

0.09

%

Nonperforming assets to total assets

0.70

%

0.74

%

0.29

%

0.31

%

0.19

%