Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 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 for the three months ended September 30, 2020 of $4,999,000 which represents an increase of $1,092,000, or 28.0%, over the $3,907,000 earned in the same three-month 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. Earnings per share (fully diluted) were $0.62 in the three-months ended September 30, 2020, which equals the $0.62 earned in the same period of 2019. The annualized returns on average assets and average equity for the current three-month period were 1.11% and 10.64%, respectively, compared to 1.27% and 11.56% for the three-month period ended September 30, 2019. 

Net income for the nine months ended September 30, 2020 totaled $9,567,000, which is $1,052,000 lower than the same period of 2019 primarily due to a $2,800,000 increase in the provision for loan losses and approximately $1,983,000 of merger related expenses. Earnings per share (fully diluted) for the nine months ended September 30, 2020 totaled $1.39 per share compared to $1.68 per share in the 2019 period.

Total assets as of September 30, 2020 were $1.842 billion with loans receivable of $1.415 billion, deposits of $1.516 billion and stockholders’ equity of $190.5 million. Total assets have increased $626.3 million during the past twelve months while loans and deposits have increased $509.1 million and $541.5 million, respectively. All increases reflect growth due to the UpState acquisition and significant stimulus funds resulting from the Paycheck protection Program (“PPP”) and CARES Act.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $13.6 million or 0.74% of total assets as of September 30, 2020 compared to $3.0 million or 0.24% of total assets as of September 30, 2019. The increase in nonperforming assets includes $9.5 million of purchased credit impaired loans resulting from the acquisition of UpState.

For the three months ended September 30, 2020, net interest income, on a fully taxable equivalent basis (fte), totaled $15,547,000, which represents an increase of $5,414,000 compared to the same period in 2019. A $493.2 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the 2020 period was 3.73% compared to 3.60% for the similar period in 2019. Net interest income (fte) for the nine months ended September 30, 2020 totaled $35,538,000, an increase of $5,992,000, compared to the similar period in 2019 due primarily to a higher volume of earning assets. The net interest margin (fte) year-to-date for the 2020 period was 3.51%, which equaled the 3.51% recorded in the same period of 2019. All increases reflect the benefits derived from the acquisition of UpState.

Other income for the three months ended September 30, 2020 totaled $2,072,000 compared to $1,882,000 for the similar period in 2019. The increase can be attributed to a higher level of service charges and a $149,000 increase in gains recognized on the sale of loans. For the nine months ended September 30, 2020, other income totaled $5,119,000 compared to $5,083,000 in the 2019 period.

Other expenses totaled $9,380,000 for the three months ended September 30, 2020, compared to $6,791,000 in the similar period of 2019. The higher level of expense during the 2020 period includes costs related to the acquisition of UpState and the operations of four additional community offices acquired in the UpState acquisition. For the nine months ended September 30, 2020, other expenses totaled $24,531,000 compared to $20,224,000 for the similar period in 2019. The increase includes $1,983,000 of merger related expenses and increases related to the operation of four additional community offices.

Mr. Critelli commented, “Our results for the first nine months of 2020 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 our acquisition of UpState New York Bancorp, Inc. During the third quarter, we have begun to realize the anticipated benefits of the acquisition through increased net interest income. 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. 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 fifteen 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 interest income and net interest income are derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income and net interest income on a tax-equivalent basis ensures comparability of interest income and 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						Nine months ended
(dollars in thousands)	September 30						September 30
	2020			2019			2020			2019
Net interest income	$	15,330		$	9,891		$	34,862		$	28,773
Tax equivalent basis adjustment using 21% marginal tax rate		217			242			676			773
Net interest income on a fully taxable equivalent basis	$	15,547		$	10,133		$	35,538		$	29,546

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								Nine months ended
		September 30								September 30
(dollars in thousands)		2020				2019				2020				2019
Average equity		$	187,478			$	134,037			$	157,695			$	129,367
Average goodwill and other intangibles			(17,800	)			(11,597	)			(13,643	)			(11,623	)
Average tangible equity		$	169,678			$	122,440			$	144,052			$	117,744

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
		2020			2019
ASSETS
Cash and due from banks	$	23,874		$	20,067
Interest-bearing deposits with banks		100,566			848
Cash and cash equivalents		124,440			20,915
Securities available for sale		197,436			211,199
Loans receivable		1,414,662			905,582
Less: Allowance for loan losses		11,674			8,405
Net loans receivable		1,402,988			897,177
Regulatory stock, at cost		3,876			3,137
Bank premises and equipment, net		18,124			13,927
Bank owned life insurance		39,400			38,562
Foreclosed real estate owned		965			1,572
Accrued interest receivable		6,104			3,726
Goodwill		30,213			11,331
Other intangible assets		565			257
Other assets		17,996			14,053
TOTAL ASSETS	$	1,842,107		$	1,215,856
LIABILITIES
Deposits:
Non-interest bearing demand	$	372,237		$	231,211
Interest-bearing		1,143,685			743,222
Total deposits		1,515,922			974,433
Short-term borrowings		69,294			52,778
Other borrowings		46,438			35,906
Accrued interest payable		2,194			2,623
Other liabilities		17,712			15,222
TOTAL LIABILITIES		1,651,560			1,080,962
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: 8,210,982 shares, 2019: 6,314,688 shares		821			632
Surplus		95,108			49,052
Retained earnings		90,422			84,522
Treasury stock, at cost: 2020: 13,778 shares, 2019: 13,807 shares		(469	)		(455	)
Accumulated other comprehensive income		4,665			1,143
TOTAL STOCKHOLDERS' EQUITY		190,547			134,894
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,842,107		$	1,215,856
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,
		2020			2019						2020			2019
INTEREST INCOME
Loans receivable, including fees	$	16,260		$	10,776					$	37,711		$	31,074
Securities		1,031			1,278						3,272			4,155
Other		18			5						43			70
Total Interest income		17,309			12,059						41,026			35,299
INTEREST EXPENSE
Deposits		1,676			1,787						5,096			5,355
Short-term borrowings		61			135						244			344
Other borrowings		242			246						824			827
Total Interest expense		1,979			2,168						6,164			6,526
NET INTEREST INCOME		15,330			9,891						34,862			28,773
PROVISION FOR LOAN LOSSES		1,850			300						3,850			1,050
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		13,480			9,591						31,012			27,723
OTHER INCOME
Service charges and fees		1,301			1,200						3,201			3,283
Income from fiduciary activities		205			167						533			454
Net realized gains on sales of securities		33			169						71			233
Gains on sales of loans, net		164			15						285			125
Earnings and proceeds on life insurance policies		217			222						638			630
Other		152			109						391			358
Total other income		2,072			1,882						5,119			5,083
OTHER EXPENSES
Salaries and employee benefits		4,812			3,667						11,878			10,915
Occupancy, furniture and equipment		1,109			916						2,983			2,780
Data processing and related operations		746			480						1,649			1,400
Taxes, other than income		214			179						641			520
Professional fees		292			276						735			752
FDIC Insurance assessment		144			(5	)					186			150
Foreclosed real estate		31			24						44			37
Amortization of intangibles		35			23						79			79
Merger related		386			-						1,983			-
Other		1,611			1,231						4,353			3,591
Total other expenses		9,380			6,791						24,531			20,224
INCOME BEFORE TAX		6,172			4,682						11,600			12,582
INCOME TAX EXPENSE		1,173			775						2,033			1,963
NET INCOME	$	4,999		$	3,907					$	9,567		$	10,619
Basic earnings per share	$	0.62		$	0.62					$	1.39		$	1.70
Diluted earnings per share	$	0.62		$	0.62					$	1.39		$	1.68
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30		2020			2019
Net interest income	$	15,330		$	9,891
Net income		4,999			3,907
Net interest spread (fully taxable equivalent)		3.55	%		3.35	%
Net interest margin (fully taxable equivalent)		3.73	%		3.60	%
Return on average assets		1.11	%		1.27	%
Return on average equity		10.64	%		11.56	%
Return on average tangible equity		11.75	%		12.66	%
Basic earnings per share	$	0.62		$	0.62
Diluted earnings per share	$	0.62		$	0.62
For the Nine Months Ended September 30		2020			2019
Net interest income	$	34,862		$	28,773
Net income		9,567			10,619
Net interest spread (fully taxable equivalent)		3.30	%		3.26	%
Net interest margin (fully taxable equivalent)		3.51	%		3.51	%
Return on average assets		0.88	%		1.17	%
Return on average equity		8.13	%		10.97	%
Return on average tangible equity		8.90	%		12.06	%
Basic earnings per share	$	1.39		$	1.70
Diluted earnings per share	$	1.39		$	1.68
As of September 30		2020			2019
Total assets	$	1,842,107		$	1,215,856
Total loans receivable		1,414,662			905,582
Allowance for loan losses		11,674			8,405
Total deposits		1,515,922			974,433
Stockholders' equity		190,547			134,894
Trust assets under management		155,166			160,230
Book value per share	$	23.30		$	21.41
Tangible book value per share	$	19.55		$	19.57
Equity to total assets		10.34	%		11.09	%
Allowance to total loans receivable		0.83	%		0.93	%
Nonperforming loans to total loans		0.89	%		0.15	%
Nonperforming assets to total assets		0.74	%		0.24	%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		September 30			June 30			March 31			December 31			September 30
		2020			2020			2020			2019			2019
ASSETS
Cash and due from banks	$	23,874		$	15,387		$	14,712		$	15,038		$	20,067
Interest-bearing deposits with banks		100,566			67,989			23,706			377			848
Cash and cash equivalents		124,440			83,376			38,418			15,415			20,915
Securities available for sale		197,436			196,735			196,998			210,205			211,199
Loans receivable		1,414,662			988,679			928,565			924,581			905,582
Less: Allowance for loan losses		11,674			10,312			9,088			8,509			8,405
Net loans receivable		1,402,988			978,367			919,477			916,072			897,177
Regulatory stock, at cost		3,876			3,677			3,770			4,844			3,137
Bank owned life insurance		39,400			39,183			38,971			38,763			38,562
Bank premises and equipment, net		18,124			14,040			14,071			14,228			13,927
Foreclosed real estate owned		965			965			1,077			1,556			1,572
Goodwill and other intangibles		30,778			11,522			11,543			11,566			11,588
Other assets		24,100			26,676			17,966			17,961			17,779
TOTAL ASSETS	$	1,842,107		$	1,354,541		$	1,242,291		$	1,230,610		$	1,215,856
LIABILITIES
Deposits:
Non-interest bearing demand	$	372,237		$	284,754		$	213,359		$	207,299		$	231,211
Interest-bearing deposits		1,143,685			801,484			776,801			750,230			743,222
Total deposits		1,515,922			1,086,238			990,160			957,529			974,433
Borrowings		115,732			106,027			92,006			118,694			88,684
Other liabilities		19,906			19,612			17,938			16,959			17,845
TOTAL LIABILITIES		1,651,560			1,211,877			1,100,104			1,093,182			1,080,962
STOCKHOLDERS' EQUITY		190,547			142,664			142,187			137,428			134,894
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,842,107		$	1,354,541		$	1,242,291		$	1,230,610		$	1,215,856
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		2020			2020			2020			2019			2019
INTEREST INCOME
Loans receivable, including fees	$	16,260		$	10,767		$	10,683		$	10,815		$	10,776
Securities		1,031			1,063			1,179			1,159			1,278
Other		18			19			6			11			5
Total interest income		17,309			11,849			11,868			11,985			12,059
INTEREST EXPENSE
Deposits		1,676			1,630			1,790			1,784			1,787
Borrowings		303			352			413			368			381
Total interest expense		1,979			1,982			2,203			2,152			2,168
NET INTEREST INCOME		15,330			9,867			9,665			9,833			9,891
PROVISION FOR LOAN LOSSES		1,850			1,300			700			200			300
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		13,480			8,567			8,965			9,633			9,591
OTHER INCOME
Service charges and fees		1,301			837			1,063			1,168			1,200
Income from fiduciary activities		205			175			153			156			167
Net realized gains on sales of securities		33			-			38			21			169
Gains on sales of loans, net		164			65			56			44			15
Earnings and proceeds on life insurance policies		217			212			208			200			222
Other		152			103			136			107			109
Total other income		2,072			1,392			1,654			1,696			1,882
OTHER EXPENSES
Salaries and employee benefits		4,812			3,289			3,777			3,740			3,667
Occupancy, furniture and equipment, net		1,109			906			968			938			916
Foreclosed real estate		31			(2	)		16			9			24
FDIC insurance assessment		144			42			-			3			(5	)
Merger related		386			1,597			-			-			-
Other		2,898			2,260			2,298			2,398			2,189
Total other expenses		9,380			8,092			7,059			7,088			6,791
INCOME BEFORE TAX		6,172			1,867			3,560			4,241			4,682
INCOME TAX EXPENSE		1,173			379			481			645			775
NET INCOME	$	4,999		$	1,488		$	3,079		$	3,596		$	3,907
Basic earnings per share	$	0.62		$	0.24		$	0.49		$	0.57		$	0.62
Diluted earnings per share	$	0.62		$	0.24		$	0.49		$	0.57		$	0.62
Book Value per share	$	23.30		$	22.62		$	22.52		$	21.67		$	21.41
Tangible Book Value per share		19.55			20.80			20.70			19.84			19.57
Return on average assets (annualized)		1.11	%		0.45	%		1.01	%		1.18	%		1.27	%
Return on average equity (annualized)		10.64	%		4.17	%		8.79	%		10.42	%		11.56	%
Return on average tangible equity (annualized)		11.75	%		4.54	%		9.57	%		11.38	%		12.66	%
Net interest spread (fte)		3.55	%		3.03	%		3.23	%		3.33	%		3.35	%
Net interest margin (fte)		3.73	%		3.25	%		3.48	%		3.59	%		3.60	%
Allowance for loan losses to total loans		0.83	%		1.04	%		0.98	%		0.92	%		0.93	%
Net charge-offs to average loans (annualized)		0.14	%		0.03	%		0.05	%		0.04	%		0.05	%
Nonperforming loans to total loans		0.89	%		0.30	%		0.30	%		0.09	%		0.15	%
Nonperforming assets to total assets		0.74	%		0.29	%		0.31	%		0.19	%		0.24	%