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Norwood Financial Corp. Announces First Quarter Earnings

HONESDALE, Pa., April 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 of $3,079,000 for the three months ended March 31, 2020, decreasing from the $3,190,000 recorded during the same three-month period of last year.  The decrease was due to an increased provision for loan losses related to the current period of economic uncertainty.  Earnings per share on a fully diluted basis were $0.49 in the first quarter of this year compared to $0.51 in the first quarter of 2019.  The annualized return on average assets was 1.01% in the first quarter of 2020 and the annualized return on average equity was 8.79%, compared to 1.09% and 10.37%, respectively, in the first quarter of 2019.

Total assets were $1.242 billion as of March 31, 2020, an increase of $38.7 million compared to March 31, 2019.  Total loans increased $64.4 million compared to March 31, 2019, total deposits increased $15.7 million compared to March 31, 2019, and stockholders’ equity increased $15.4 million compared to March 31, 2019.        

Non-performing assets totaled $3.8 million or 0.31% of total assets at March 31, 2020 comprised of $2.7 million of non-performing loans and $1.1 million of foreclosed real estate owned, compared to non-performing assets of $2.9 million, or 0.24% of total assets as of March 31, 2019.  The increase reflects the transfer of one loan relationship with an outstanding balance of $1.9 million as of March 31, 2020, to nonaccrual status.  Net charge-offs for the three-month period ended March 31, 2020, were $121,000, compared to $553,000 of net charge-offs in the first quarter of last year.  The allowance for loan losses totaled $9,088,000 as of March 31, 2020 compared to $8,349,000 as of March 31, 2019.  As of March 31, 2020, the allowance for loan losses was 331% of nonperforming loans, compared to 761% as of March 31, 2019.

Net interest income (fully taxable equivalent, or fte) was $9,903,000 during the first quarter of 2020, which is $367,000 higher than the comparable three-month period of last year.  A $69.7 million increase in average loans outstanding contributed to the increased interest income.  The fte yield on interest-earning assets improved four basis points compared to the three months ended March 31, 2019, while the cost of funds increased one basis point.  As a result, the annualized net interest margin (fte) improved to 3.48% from 3.43% in the quarter ended March 31, 2020 compared to the prior year period.  

Other income totaled $1,654,000 in the first quarter of 2020 compared to $1,560,000 during the same period of last year.  The increase is due primarily to a $32,000 increase in service charges and a $38,000 increase net gains on sales of securities.  All other categories of other income increased $24,000, net. 

Operating expenses totaled $7,059,000 in the first quarter and were $411,000 higher than the $6,648,000 recorded in the same period of last year.  Salaries and benefits costs rose $128,000 while all other operating expenses increased $283,000, net.

Mr. Critelli stated, “Our first quarter results were on track for a solid start to the year prior to the impact from the Covid-19 pandemic.  We have since focused our efforts on providing the products and services that will assist our customers through the crisis.  In addition, we are providing the resources to allow our employees the ability to perform their functions in a safe work environment.  We feel we have been successful on both fronts and remain committed to providing the financial resources that will help our customers emerge from the current situation financially sound.  We are doing everything we can to keep current of developments during this period of rapid change, and encourage our customers to contact us for assistance.  We look forward to serving our stockholders and customers during these trying times.”

Norwood Financial Corp. is the parent company of Wayne Bank, which operates from fifteen 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, 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 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 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,
   2020    2019
Net interest income $ 9,665   $ 9,271
Tax equivalent basis adjustment using 21% marginal tax rate      238        265
Net interest income on a fully taxable equivalent basis  $ 9,903   $
9,536

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:

(dollars in thousands) Three months ended March 31,
    2020       2019  
Average equity $ 140,962     $ 124,746  
Average goodwill and other intangibles     (11,552 )       (11,650 )
Average tangible equity  $ 129,410     $
113,096
 


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            
    2020    2019             
ASSETS                    
Cash and due from banks  $ 14,712    $ 13,583              
Interest-bearing deposits with banks   23,706     6,291              
Cash and cash equivalents   38,418     19,874              
                     
Securities available for sale   196,998     240,621              
Loans receivable   928,565     864,198              
Less: Allowance for loan losses   9,088     8,349              
Net loans receivable   919,477     855,849              
Regulatory stock, at cost   3,770     3,132              
Bank premises and equipment, net   14,071     14,165              
Bank owned life insurance   38,971     38,134              
Foreclosed real estate owned   1,077     1,792              
Accrued interest receivable   3,669     4,089              
Goodwill   11,331     11,331              
Other intangible assets   212     307              
Other assets   14,297     14,301              
TOTAL ASSETS  $ 1,242,291    $ 1,203,595              
                     
LIABILITIES                    
Deposits:                    
Non-interest bearing demand  $ 213,359    $ 206,806              
Interest-bearing   776,801     767,609              
Total deposits   990,160     974,415              
Short-term borrowings   40,656     37,824              
Other borrowings   51,350     47,955              
Accrued interest payable   2,895     2,457              
Other liabilities   15,043     14,172              
TOTAL LIABILITIES   1,100,104     1,076,823              
                     
STOCKHOLDERS' EQUITY                    
Preferred Stock, no par value per share, authorized 5,000,000 shares -     -              
Common Stock, $.10 par value per share,                    
authorized: 2020: 20,000,000 shares, 2019: 10,000,000 shares 634     630              
issued: 2020: 6,342,568 shares, 2019: 6,301,263 shares                    
Surplus   49,644     48,559              
Retained earnings   88,032     80,115              
Treasury stock, at cost: 2020: 12,007 shares, 2019: 13,807 shares   (400 )   (455 )            
Accumulated other comprehensive income (loss)   4,277     (2,077 )            
TOTAL STOCKHOLDERS' EQUITY   142,187     126,772              
                     
TOTAL LIABILITIES AND                    
   STOCKHOLDERS' EQUITY  $ 1,242,291    $ 1,203,595              
                     
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Consolidated Statements of Income                    
(dollars in thousands, except per share data)                    
  (unaudited)                    
  Three Months Ended March 31,                
    2020   2019            
INTEREST INCOME                    
Loans receivable, including fees $ 10,683   $ 9,970              
Securities   1,179     1,441              
Other   6     15              
Total Interest income   11,868     11,426              
                     
INTEREST EXPENSE                    
Deposits   1,790     1,729              
Short-term borrowings   111     123              
Other borrowings   302     303              
Total Interest expense   2,203     2,155              
NET INTEREST INCOME   9,665     9,271              
PROVISION FOR LOAN LOSSES   700     450              
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,965     8,821              
                     
OTHER INCOME                    
Service charges and fees   1,063     1,031              
Income from fiduciary activities   153     142              
Net realized gains on sales of securities   38     -              
Gains on sales of loans, net   56     42              
Earnings and proceeds on life insurance policies   208     202              
Other   136     143              
Total other income   1,654     1,560              
                     
OTHER EXPENSES                    
Salaries and employee benefits   3,777     3,649              
Occupancy, furniture and equipment   968     924              
Data processing and related operations   437     448              
Taxes, other than income   214     161              
Professional fees   218     250              
FDIC Insurance assessment   -     71              
Foreclosed real estate   16     23              
Amortization of intangibles   22     29              
Other   1,407     1,093              
Total other expenses   7,059     6,648              
                     
INCOME BEFORE TAX   3,560     3,733              
INCOME TAX EXPENSE   481     543              
NET INCOME $ 3,079   $ 3,190              
                     
Basic earnings per share $ 0.49   $ 0.51              
                     
Diluted earnings per share $ 0.49   $ 0.51              
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Financial Highlights (Unaudited)                    
(dollars in thousands, except per share data)                    
                     
For the Three Months Ended March 31   2020   2019            
                     
Net interest income $ 9,665   $ 9,271              
Net income   3,079     3,190              
                     
Net interest spread (fully taxable equivalent)   3.23 %   3.20 %            
Net interest margin (fully taxable equivalent)   3.48 %   3.43 %            
Return on average assets   1.01 %   1.09 %            
Return on average equity   8.79 %   10.37 %            
Return on average tangible equity   9.57 %   11.44 %            
Basic earnings per share $ 0.49    $ 0.51              
Diluted earnings per share $ 0.49    $ 0.51              
                     
                     
As of March 31                    
                     
Total assets $ 1,242,291    $ 1,203,595              
Total loans receivable   928,565     864,198              
Allowance for loan losses   9,088     8,349              
Total deposits   990,160     974,415              
Stockholders' equity   142,187     126,772              
Trust assets under management   137,059     159,339              
                     
Book value per share $ 22.52    $ 20.16              
Tangible book value per share $ 20.70    $ 18.31              
Equity to total assets   11.45 %   10.53 %            
Allowance to total loans receivable   0.98 %   0.97 %            
Nonperforming loans to total loans   0.30 %   0.13 %            
Nonperforming assets to total assets   0.31 %   0.24 %            
                     
                     
                     
NORWOOD FINANCIAL CORP.                    
Consolidated Balance Sheets (unaudited)                    
(dollars in thousands)                    
    March 31   December 31   September 30   June 30   March 31
    2020   2019   2019   2019   2019
ASSETS                    
Cash and due from banks $ 14,712   $ 15,038   $ 20,067   $ 14,207   $ 13,583  
Interest-bearing deposits with banks   23,706     377     848     4,265     6,291  
Cash and cash equivalents   38,418     15,415     20,915     18,472     19,874  
                     
Securities available for sale   196,998     210,205     211,199     238,083     240,621  
Loans receivable   928,565     924,581     905,582     887,673     864,198  
Less: Allowance for loan losses   9,088     8,509     8,405     8,228     8,349  
Net loans receivable   919,477     916,072     897,177     879,445     855,849  
Regulatory stock, at cost   3,770     4,844     3,137     3,155     3,132  
Bank owned life insurance   38,971     38,763     38,562     38,340     38,134  
Bank premises and equipment, net   14,071     14,228     13,927     13,880     14,165  
Foreclosed real estate owned   1,077     1,556     1,572     1,677     1,792  
Goodwill and other intangibles   11,543     11,566     11,588     11,611     11,638  
Other assets   17,966     17,961     17,779     17,865     18,390  
TOTAL ASSETS $ 1,242,291    $ 1,230,610    $ 1,215,856    $ 1,222,528    $ 1,203,595  
                     
LIABILITIES                    
Deposits:                    
Non-interest bearing demand $ 213,359    $ 207,299    $ 231,211    $ 221,764    $ 206,806  
Interest-bearing deposits   776,801     750,230     743,222     759,460     767,609  
Total deposits   990,160     957,529     974,433     981,224     974,415  
Borrowings   92,006     118,694     88,684     92,118     85,779  
Other liabilities   17,938     16,959     17,845     17,703     16,629  
TOTAL LIABILITIES   1,100,104     1,093,182     1,080,962     1,091,045     1,076,823  
                     
STOCKHOLDERS' EQUITY   142,187     137,428     134,894     131,483     126,772  
                     
TOTAL LIABILITIES AND                    
   STOCKHOLDERS' EQUITY $ 1,242,291    $ 1,230,610    $ 1,215,856    $ 1,222,528    $ 1,203,595  
                     
                     
                     
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   2020   2019   2019   2019   2019
INTEREST INCOME                    
Loans receivable, including fees $ 10,683    $ 10,815    $ 10,776    $ 10,328    $ 9,970  
Securities   1,179     1,159     1,278     1,435     1,441  
Other   6     11     5     51     15  
Total interest income   11,868     11,985     12,059     11,814     11,426  
                     
INTEREST EXPENSE                    
Deposits   1,790     1,784     1,787     1,839     1,729  
Borrowings   413     368     381     363     426  
Total interest expense   2,203     2,152     2,168     2,202     2,155  
NET INTEREST INCOME   9,665     9,833     9,891     9,612     9,271  
PROVISION FOR LOAN LOSSES   700     200     300     300     450  
NET INTEREST INCOME AFTER PROVISION                    
FOR LOAN LOSSES   8,965     9,633     9,591     9,312     8,821  
                     
OTHER INCOME                    
Service charges and fees   1,063     1,168     1,200     1,052     1,031  
Income from fiduciary activities   153     156     167     145     142  
Net realized gains on sales of securities   38     21     169     64     -  
Gains on sales of loans, net   56     44     15     67     42  
Earnings and proceeds on life insurance policies   208     200     222     207     202  
Other   136     107     109     106     143  
Total other income   1,654     1,696     1,882     1,641     1,560  
                     
OTHER EXPENSES                    
Salaries and employee benefits   3,777     3,740     3,667     3,599     3,649  
Occupancy, furniture and equipment, net   968     938     916     940     924  
Foreclosed real estate   16     9     24     (10 )   23  
FDIC insurance assessment   -     3     (5 )   84     71  
Other   2,298     2,398     2,189     2,172     1,981  
Total other expenses   7,059     7,088     6,791     6,785     6,648  
                     
INCOME BEFORE TAX   3,560     4,241     4,682     4,168     3,733  
INCOME TAX EXPENSE   481     645     775     646     543  
NET INCOME $ 3,079    $ 3,596    $ 3,907    $ 3,522    $ 3,190  
                     
Basic earnings per share $ 0.49    $ 0.57    $ 0.62    $ 0.56    $ 0.51  
                     
Diluted earnings per share $ 0.49    $ 0.57    $ 0.62    $ 0.56    $ 0.51  
                     
Book Value per share $ 22.52   $ 21.67   $ 21.41   $ 20.90   $ 20.16  
Tangible Book Value per share   20.70     19.84     19.57     19.06     18.31  
                     
Return on average assets (annualized)   1.01 %   1.18 %   1.27 %   1.16 %   1.09 %
Return on average equity (annualized)   8.79 %   10.42 %   11.56 %   10.93 %   10.37 %
Return on average tangible equity (annualized)   9.57 %   11.38 %   12.66 %   12.01 %   11.44 %
                     
Net interest spread (fte)   3.23 %   3.33 %   3.35 %   3.24 %   3.20 %
Net interest margin (fte)   3.48 %   3.59 %   3.60 %   3.49 %   3.43 %
                     
Allowance for loan losses to total loans   0.98 %   0.92 %   0.93 %   0.93 %   0.97 %
Net charge-offs to average loans (annualized)   0.05 %   0.04 %   0.05 %   0.19 %   0.26 %
Nonperforming loans to total loans   0.30 %   0.09 %   0.15 %   0.15 %   0.13 %
Nonperforming assets to total assets   0.31 %   0.19 %   0.24 %   0.25 %   0.24 %