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Norwood Financial Corp. Announces First Quarter Earnings

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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

%