Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 26, 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 September 30, 2021 of $6,981,000 which represents an increase of $1,982,000, or 39.6%, over the $4,999,000 earned in the same three-month period of 2020. The increase in earnings was due to a $1.7 million increase in net interest income, including fee income recognized on Paycheck Protection Program (“PPP”) loans forgiven, and a $1.1 million reduction in the provision for loan losses. Earnings per share (fully diluted) were $0.85 in the three-months ended September 30, 2021, which represents an increase from the $0.62 earned in the same period of 2020. The annualized returns on average assets and average tangible equity for the current three-month period were 1.36% and 15.72%, respectively, compared to 1.11% and 11.72% for the three-month period ended September 30, 2020. Net income for the nine months ended September 30, 2021, totaled $18,277,000, which is $8,710,000, or 91.1%, higher than the same period of 2020, primarily due to the benefits derived from the Company’s acquisition of UpState New York Bancorp, Inc. (“UpState”), which closed on July 7, 2020. Earnings per share (fully diluted) for the nine months ended September 30, 2021, totaled $2.23 per share compared to $1.39 per share in the 2020 period.

Total assets as of September 30, 2021 were $2.054 billion, with loans receivable of $1.371 billion, deposits of $1.723 billion and stockholders’ equity of $202.6 million. Total assets have increased $211.6 million during the past twelve months while loans have decreased $43.7 million and deposits have increased $206.6 million. The increases in assets and deposits reflect growth due to significant stimulus funds received as a result of PPP loans that have been forgiven and the Coronavirus Aid, Relief, and Economic Security Act, (“CARES Act”), while the decrease in loans includes a $59.2 million reduction in PPP loans due to forgiveness.

For the three months ended September 30, 2021, net interest income, on a fully taxable equivalent basis (fte), totaled $17,186,000, which represents an increase of $1,639,000, compared to the same period in 2020. A $150.5 million increase in average securities contributed to the increased income. Net interest margin (fte) for the 2021 period was 3.61%, compared to 3.73% for the similar period in 2020. Net interest income (fte) for the nine months ended September 30, 2021 totaled $49,429,000, an increase of $13,891,000, compared to the similar period in 2020 due primarily to a higher volume of earning assets. The net interest margin (fte) year-to-date for the 2021 period was 3.54%, which exceeded the 3.51% recorded in the same period of 2020. All increases include the benefits derived from the acquisition of UpState.

Total other income for the three months ended September 30, 2021 was $2,128,000, compared to $2,072,000 for the same period in 2020. The increase in total other income is primarily due to a higher level of service charges and fees. For the nine months ended September 30, 2021, total other income was $6,304,000, compared to $5,119,000 in the same period of 2020.

Total other expenses were $9,592,000 for the three months ended September 30, 2021, compared to $9,380,000 in the same period of 2020. The higher level of expense during the three months ended September 30, 2021, was due primarily to a $679,000 increase in salaries and benefits costs. For the nine months ended September 30, 2021, other expenses totaled $28,536,000, compared to $24,531,000 for the same period in 2020. The increase includes costs related to the operation of four additional community offices acquired from UpState in 2020.

Mr. Critelli commented, “Our results for the first nine months of 2021 reflect the positive impact of, and earnings accretion resulting from, our acquisition of UpState, as well as the continued impact of economic stimulus on our earnings and balance sheet. We recently broke ground on our new facility in Penn Yan, New York, and we look forward to serving the community from our new location. We appreciate the opportunity to serve our expanded 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 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 fully taxable equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Fully taxable equivalent net interest income was 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 fully taxable 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:

(dollars in thousands)	Three months ended September 30						Nine months ended September 30
		2021			2020			2021			2020
Net interest income	$	16,989		$	15,330		$	48,817		$	34,862
Tax equivalent basis adjustment using 21% marginal tax rate		197			217			612			676
Net interest income on a fully taxable equivalent basis	$	17,186		$	15,547		$	49,429		$	35,538

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 September 30						Nine months ended September 30
(dollars in thousands)		2021			2020			2021			2020
Average equity	$	205,848		$	187,478		$	201,102		$	157,695
Average goodwill and other intangibles		(29,712	)		(17,800	)		(29,757	)		(13,643	)
Average tangible equity	$	176,136		$	169,678		$	171,345		$	144,052

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)
		September 30
		2021			2020
ASSETS
Cash and due from banks	$	28,353		$	23,874
Interest-bearing deposits with banks		191,580			100,566
Cash and cash equivalents		219,933			124,440
Securities available for sale		361,988			197,436
Loans receivable		1,371,002			1,414,662
Less: Allowance for loan losses		16,103			11,674
Net loans receivable		1,354,899			1,402,988
Regulatory stock, at cost		3,898			3,876
Bank premises and equipment, net		17,364			18,124
Bank owned life insurance		39,864			39,400
Foreclosed real estate owned		1,876			965
Accrued interest receivable		6,049			6,104
Goodwill		29,266			30,213
Other intangible assets		434			565
Other assets		18,120			17,996
TOTAL ASSETS	$	2,053,691		$	1,842,107
LIABILITIES
Deposits:
Non-interest bearing demand	$	442,534		$	372,237
Interest-bearing		1,279,988			1,143,685
Total deposits		1,722,522			1,515,922
Short-term borrowings		78,246			69,294
Other borrowings		33,136			46,438
Accrued interest payable		1,341			2,194
Other liabilities		15,838			17,712
TOTAL LIABILITIES		1,851,083			1,651,560
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: 2021: 8,245,951 shares, 2020: 8,210,982 shares		825			821
Surplus		96,100			95,108
Retained earnings		105,668			90,422
Treasury stock, at cost: 2021: 51,568 shares, 2020: 13,778 shares		(1,423	)		(469	)
Accumulated other comprehensive income		1,438			4,665
TOTAL STOCKHOLDERS' EQUITY		202,608			190,547
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,053,691		$	1,842,107

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended September 30,							Nine Months Ended September 30,
		2021			2020				2021		2020
INTEREST INCOME
Loans receivable, including fees	$	16,859		$	16,260			$	49,107	$	37,711
Securities		1,468			1,031				3,936		3,272
Other		72			18				174		43
Total Interest income		18,399			17,309				53,217		41,026
INTEREST EXPENSE
Deposits		1,167			1,676				3,627		5,096
Short-term borrowings		71			61				214		244
Other borrowings		172			242				559		824
Total Interest expense		1,410			1,979				4,400		6,164
NET INTEREST INCOME		16,989			15,330				48,817		34,862
PROVISION FOR LOAN LOSSES		750			1,850				3,750		3,850
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		16,239			13,480				45,067		31,012
OTHER INCOME
Service charges and fees		1,485			1,301				4,268		3,201
Income from fiduciary activities		209			205				550		533
Net realized gains on sales of securities		35			33				56		71
Gains on sales of loans, net		39			164				177		285
Earnings and proceeds on life insurance policies		200			217				767		638
Other		160			152				486		391
Total other income		2,128			2,072				6,304		5,119
OTHER EXPENSES
Salaries and employee benefits		5,491			4,812				15,616		11,878
Occupancy, furniture and equipment		1,163			1,109				3,568		2,983
Data processing and related operations		594			746				1,760		1,649
Taxes, other than income		229			214				763		641
Professional fees		189			292				1,072		735
FDIC Insurance assessment		177			144				512		186
Foreclosed real estate		(15	)		31				27		44
Amortization of intangibles		28			35				96		79
Merger related		-			386				0		1,983
Other		1,736			1,611				5,122		4,353
Total other expenses		9,592			9,380				28,536		24,531
INCOME BEFORE TAX		8,775			6,172				22,835		11,600
INCOME TAX EXPENSE		1,794			1,173				4,558		2,033
NET INCOME	$	6,981		$	4,999			$	18,277	$	9,567
Basic earnings per share	$	0.85		$	0.62			$	2.23	$	1.39
Diluted earnings per share	$	0.85		$	0.62			$	2.23	$	1.39

NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30		2021			2020
Net interest income	$	16,989		$	15,330
Net income		6,981			4,999
Net interest spread (fully taxable equivalent)		3.49%			3.55%
Net interest margin (fully taxable equivalent)		3.61%			3.73%
Return on average assets		1.36%			1.11%
Return on average equity		13.50%			10.64%
Return on average tangible equity		15.72%			11.72%
Basic earnings per share	$	0.85		$	0.62
Diluted earnings per share	$	0.85		$	0.62
For the Nine Months Ended September 30		2021			2020
Net interest income	$	48,817		$	34,862
Net income		18,277			9,567
Net interest spread (fully taxable equivalent)		3.43%			3.30%
Net interest margin (fully taxable equivalent)		3.54%			3.51%
Return on average assets		1.23%			0.88%
Return on average equity		12.19%			8.13%
Return on average tangible equity		14.26%			8.87%
Basic earnings per share	$	2.23		$	1.39
Diluted earnings per share	$	2.23		$	1.39
As of September 30		2021			2020
Total assets	$	2,053,691		$	1,842,107
Total loans receivable		1,371,002			1,414,662
Allowance for loan losses		16,103			11,674
Total deposits		1,722,522			1,515,922
Stockholders' equity		202,608			190,547
Trust assets under management		187,689			155,166
Book value per share	$	24.90		$	23.30
Tangible book value per share	$	21.27		$	19.55
Equity to total assets		9.87%			10.34%
Allowance to total loans receivable		1.17%			0.83%
Nonperforming loans to total loans		0.14%			0.29%
Nonperforming assets to total assets		0.18%			0.27%

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		September 30			June 30			March			December 31			September 30
		2021			2021			2021			2020			2020
ASSETS
Cash and due from banks	$	28,353		$	34,831		$	20,364		$	19,445		$	23,874
Interest-bearing deposits with banks		191,580			170,342			190,135			92,248			100,566
Cash and cash equivalents		219,933			205,173			210,499			111,693			124,440
Securities available for sale		361,988			333,636			275,224			226,586			197,436
Loans receivable		1,371,002			1,386,654			1,421,568			1,410,732			1,414,662
Less: Allowance for loan losses		16,103			15,340			14,509			13,150			11,674
Net loans receivable		1,354,899			1,371,314			1,407,059			1,397,582			1,402,988
Regulatory stock, at cost		3,898			4,084			4,043			3,981			3,876
Bank owned life insurance		39,864			39,665			39,471			39,608			39,400
Bank premises and equipment, net		17,364			17,298			17,648			17,814			18,124
Foreclosed real estate owned		1,876			844			844			965			965
Goodwill and other intangibles		29,700			29,727			29,785			29,820			30,778
Other assets		24,169			23,823			25,263			23,815			24,100
TOTAL ASSETS	$	2,053,691		$	2,025,564		$	2,009,836		$	1,851,864		$	1,842,107
LIABILITIES
Deposits:
Non-interest bearing demand	$	442,534		$	435,824		$	415,395		$	359,559		$	372,237
Interest-bearing deposits		1,279,988			1,253,117			1,269,793			1,175,826			1,143,685
Total deposits		1,722,522			1,688,941			1,685,188			1,535,385			1,515,922
Borrowings		111,382			119,858			112,283			105,762			115,732
Other liabilities		17,179			16,266			17,258			15,932			19,906
TOTAL LIABILITIES		1,851,083			1,825,065			1,814,729			1,657,079			1,651,560
STOCKHOLDERS' EQUITY		202,608			200,499			195,107			194,785			190,547
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,053,691		$	2,025,564		$	2,009,836		$	1,851,864		$	1,842,107
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		September 30			June 30			March 31			December 31			September 30
Three months ended		2021			2021			2021			2020			2020
INTEREST INCOME
Loans receivable, including fees	$	16,859		$	16,102		$	16,146		$	16,336		$	16,260
Securities		1,468			1,356			1,112			1,064			1,031
Other		72			59			43			29			18
Total interest income		18,399			17,517			17,301			17,429			17,309
INTEREST EXPENSE
Deposits		1,167			1,205			1,255			1,514			1,676
Borrowings		243			259			270			301			303
Total interest expense		1,410			1,464			1,525			1,815			1,979
NET INTEREST INCOME		16,989			16,053			15,776			15,614			15,330
PROVISION FOR LOAN LOSSES		750			1,500			1,500			1,600			1,850
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		16,239			14,553			14,276			14,014			13,480
OTHER INCOME
Service charges and fees		1,485			1,532			1,247			1,913			1,301
Income from fiduciary activities		209			181			160			150			205
Net realized gains on sales of securities		35			-			21			-			33
Gains on sales of loans, net		39			109			29			241			164
Earnings and proceeds on life insurance policies		200			194			374			208			217
Other		160			171			158			149			152
Total other income		2,128			2,187			1,989			2,661			2,072
OTHER EXPENSES
Salaries and employee benefits		5,491			5,171			4,953			5,243			4,812
Occupancy, furniture and equipment, net		1,163			1,186			1,220			1,165			1,109
Foreclosed real estate		(15	)		13			30			8			31
FDIC insurance assessment		177			154			181			213			144
Merger related		-			-			-			66			386
Other		2,776			2,968			3,068			3,214			2,898
Total other expenses		9,592			9,492			9,452			9,909			9,380
INCOME BEFORE TAX		8,775			7,248			6,813			6,766			6,172
INCOME TAX EXPENSE		1,794			1,493			1,271			1,253			1,173
NET INCOME	$	6,981		$	5,755		$	5,542		$	5,513		$	4,999
Basic earnings per share	$	0.85		$	0.70		$	0.68		$	0.67		$	0.62
Diluted earnings per share	$	0.85		$	0.70		$	0.67		$	0.67		$	0.62
Book Value per share	$	24.90		$	24.47		$	23.82		$	23.72		$	23.30
Tangible Book Value per share		21.27			20.85			20.20			20.10			19.55
Return on average assets (annualized)		1.36	%		1.15	%		1.18	%		1.18	%		1.11	%
Return on average equity (annualized)		13.50	%		11.59	%		11.39	%		11.32	%		10.64	%
Return on average tangible equity (annualized)		15.78	%		13.63	%		13.42	%		13.46	%		11.75	%
Net interest spread (fte)		3.49	%		3.32	%		3.46	%		3.50	%		3.55	%
Net interest margin (fte)		3.61	%		3.44	%		3.59	%		3.65	%		3.73	%
Allowance for loan losses to total loans		1.17	%		1.11	%		1.02	%		0.93	%		0.83	%
Net charge-offs to average loans (annualized)		0.00	%		0.19	%		0.04	%		0.04	%		0.14	%
Nonperforming loans to total loans		0.20	%		0.28	%		0.22	%		0.24	%		0.29	%
Nonperforming assets to total assets		0.22	%		0.24	%		0.20	%		0.24	%		0.27	%