Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 23, 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 record earnings for the three months ended June 30, 2021 of $5,755,000, which was $4,267,000, or 287%, higher than the similar period of last year. The increase reflects the benefits derived from the Company’s acquisition of UpState New York Bancorp, Inc. (“UpState”), which closed on July 7, 2020, and fee income related to Paycheck Protection Program (“PPP”) loans. Earnings per share (fully diluted) were $0.70 in the 2021 period compared to $0.24 in the same period of last year. The annualized return on average assets for the three months ended June 30, 2021 was 1.15%, while the annualized return on average tangible equity was 13.63%. Net income for the six months ended June 30, 2021 totaled $11,296,000, which is $6,729,000 higher than the same six-month period of 2020 due to the benefits derived from the acquisition of UpState and PPP fees earned. Earnings per share (fully diluted) for the six months ended June 30, 2021 were $1.38 compared to $0.73 for the six months ended June 30, 2021. The annualized return on average assets for the six months ended June 30, 2021 was 1.16%. The annualized return on average tangible equity for the six months ended June 30, 2021 was 13.53%.

Total assets as of June 30, 2021 were $2.026 billion, with loans receivable of $1.387 billion, deposits of $1.689 billion and stockholders’ equity of $200.5 million.   Loans receivable increased $398.0 million since June 30, 2020, while total deposits increased $602.7 million. The increases reflect the balances acquired from UpState and the impact from economic stimulus, including loans originated through the PPP. During the six months ended June 30, 2021, the Company originated 755 new PPP loans totaling $56.8 million, and had a total of $77.6 million of PPP loans forgiven.   As of June 30, 2021, the total of all PPP loans outstanding was $74.2 million.

For the three months ended June 30, 2021, net interest income, on a fully-taxable equivalent basis (fte), totaled $16,263,000, an increase of $6,175,000 compared to the same period in 2020. A $424.5 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the three months ended June 30, 2021 was 3.44%, compared to 3.25% in the same period of 2020. The tax-equivalent yield on interest-earning assets decreased 14 basis points to 3.75% during the three months ended June 30, 2021, compared to the same prior year period, while the cost of interest-bearing liabilities decreased 43 basis points to 0.43%. Net interest income (fte) for the six months ended June 30, 2021 totaled $32,244,000, which was $12,253,000 higher than the same period in 2020, due to the higher volume of interest-earning assets. The net interest margin (fte) was 3.51% in the six months ended June 30, 2021, as compared to 3.36% during the six months ended June 30, 2020. The increase in the net interest margin (fte) reflects the growth in average loans outstanding resulting from the acquisition of UpState.

Other income for the three months ended June 30, 2021, totaled $2,187,000, compared to $1,392,000 for the same period in 2020. The increase is due primarily to a $695,000 increase in service charges and fees related to the acquisition of UpState.   For the six months ended June 30, 2021, other income totaled $4,176,000, compared to $3,047,000 in the 2020 period.   Service charges on deposits and fees on loans increased $881,000, net, while earnings and proceeds on bank-owned life insurance policies also increased $148,000.

Other expenses totaled $9,492,000 for the three months ended June 30, 2021, an increase of $1,400,000, compared to the $8,092,000 for the same period of 2020.   For the six months ended June 30, 2021, other expenses totaled $18,944,000, compared to $15,152,000 for the same period in 2020. The increases reflect the costs of operations acquired from UpState, including four new Community Offices.

Mr. Critelli commented, “Our results for the first half 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 look forward to continuing 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 tax-equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-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 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:

		Three months ended June 30						Six months ended June 30
(dollars in thousands)			2021			2020			2021			2020
Net Interest Income		$	16,053		$	9,867		$	31,829		$	19,532
Taxable equivalent basis adjustment using 21% marginal tax rate			210			221			415			459
Net interest income on a fully taxable equivalent basis		$	16,263		$	10,088		$	32,244		$	19,991
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 June 30						Six months ended June 30
(dollars in thousands)			2021			2020			2021			2020
Average equity		$	199,777		$	143,472		$	198,689		$	142,217
Average goodwill and other intangibles			(29,762	)		(11,530	)		(29,780	)		(11,541	)
Average tangible equity		$	170,015		$	131,942		$	168,909		$	130,676

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)
		June 30
		2021		2020
ASSETS
Cash and due from banks	$	34,831	$	15,387
Interest-bearing deposits with banks		170,342		67,989
Cash and cash equivalents		205,173		83,376
Securities available for sale		333,636		196,735
Loans receivable		1,386,654		988,679
Less: Allowance for loan losses		15,340		10,312
Net loans receivable		1,371,314		978,367
Regulatory stock, at cost		4,084		3,677
Bank premises and equipment, net		17,298		14,040
Bank owned life insurance		39,665		39,183
Foreclosed real estate owned		844		965
Accrued interest receivable		6,190		4,383
Goodwill		29,266		11,331
Other intangible assets		461		191
Other assets		17,633		22,293
TOTAL ASSETS	$	2,025,564	$	1,354,541
LIABILITIES
Deposits:
Non-interest bearing demand	$	435,824	$	284,754
Interest-bearing		1,253,117		801,484
Total deposits		1,688,941		1,086,238
Short-term borrowings		83,599		55,204
Other borrowings		36,259		50,823
Accrued interest payable		1,462		2,826
Other liabilities		14,804		16,786
TOTAL LIABILITIES		1,825,065		1,211,877
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: 8,243,556 shares, 2020: 6,342,568 shares		825		634
Surplus		95,951		49,778
Retained earnings		100,818		87,939
Treasury stock, at cost: 2021: 21,568 shares, 2020: 13,778 shares		(656)		(469)
Accumulated other comprehensive income		3,561		4,782
TOTAL STOCKHOLDERS' EQUITY		200,499		142,664
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,025,564	$	1,354,541

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
		2021		2020				2021		2020
INTEREST INCOME
Loans receivable, including fees	$	16,102	$	10,767			$	32,248	$	21,450
Securities		1,356		1,063				2,468		2,242
Other		59		19				102		25
Total Interest income		17,517		11,849				34,818		23,717
INTEREST EXPENSE
Deposits		1,205		1,630				2,459		3,420
Short-term borrowings		73		73				142		184
Other borrowings		186		279				388		581
Total Interest expense		1,464		1,982				2,989		4,185
NET INTEREST INCOME		16,053		9,867				31,829		19,532
PROVISION FOR LOAN LOSSES		1,500		1,300				3,000		2,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		14,553		8,567				28,829		17,532
OTHER INCOME
Service charges and fees		1,532		837				2,782		1,901
Income from fiduciary activities		181		175				341		328
Net realized gains on sales of securities		-		-				21		38
Gains on sales of loans, net		109		65				138		121
Earnings and proceeds on life insurance policies		194		212				568		420
Other		171		103				326		239
Total other income		2,187		1,392				4,176		3,047
OTHER EXPENSES
Salaries and  employee benefits		5,171		3,289				10,125		7,065
Occupancy, furniture and equipment		1,186		906				2,406		1,875
Data processing  and related operations		562		466				1,166		903
Taxes, other than income		229		214				534		427
Professional fees		343		225				883		443
FDIC Insurance assessment		154		42				335		42
Foreclosed real estate		13		(2)				42		14
Amortization of intangibles		34		21				68		44
Merger related		-		1,597				0		1,597
Other		1,800		1,334				3,385		2,742
Total other expenses		9,492		8,092				18,944		15,152
INCOME BEFORE TAX		7,248		1,867				14,061		5,427
INCOME TAX EXPENSE		1,493		379				2,765		860
NET INCOME	$	5,755	$	1,488			$	11,296	$	4,567
Basic earnings per share	$	0.70	$	0.24			$	1.38	$	0.73
Diluted earnings per share	$	0.70	$	0.24			$	1.38	$	0.73

NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended June 30		2021		2020
Net interest income	$	16,053	$	9,867
Net income		5,755		1,488
Net interest spread (fully taxable equivalent)		3.32%		3.03%
Net interest margin (fully taxable equivalent)		3.44%		3.25%
Return on average assets		1.15%		0.45%
Return on average equity		11.59%		4.17%
Return on average tangible equity		13.63%		4.54%
Basic earnings per share	$	0.70	$	0.24
Diluted earnings per share	$	0.70	$	0.24
For the Six Months Ended June 30		2021		2020
Net interest income	$	31,829	$	19,532
Net income		11,296		4,567
Net interest spread (fully taxable equivalent)		3.39%		3.12%
Net interest margin (fully taxable equivalent)		3.51%		3.36%
Return on average assets		1.16%		0.72%
Return on average equity		11.49%		6.46%
Return on average tangible equity		13.53%		7.03%
Basic earnings per share	$	1.38	$	0.73
Diluted earnings per share	$	1.38	$	0.73
As of June 30		2021		2020
Total assets	$	2,025,564	$	1,354,541
Total loans receivable		1,386,654		988,679
Allowance for loan losses		15,340		10,312
Total deposits		1,688,941		1,086,238
Stockholders' equity		200,499		142,664
Trust assets under management		180,602		149,535
Book value per share	$	24.47	$	22.62
Tangible book value per share	$	20.85	$	20.80
Equity to total assets		9.90%		10.53%
Allowance to total loans receivable		1.11%		1.04%
Nonperforming loans to total loans		0.28%		0.30%
Nonperforming assets to total assets		0.24%		0.29%

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		June 30		March		December 31		September 30		June 30
		2021		2021		2020		2020		2020
ASSETS
Cash and due from banks	$	34,831	$	20,364	$	19,445	$	23,874	$	15,387
Interest-bearing deposits with banks		170,342		190,135		92,248		100,566		67,989
Cash and cash equivalents		205,173		210,499		111,693		124,440		83,376
Securities available for sale		333,636		275,224		226,586		197,436		196,735
Loans receivable		1,386,654		1,421,568		1,410,732		1,414,662		988,679
Less: Allowance for loan losses		15,340		14,509		13,150		11,674		10,312
Net loans receivable		1,371,314		1,407,059		1,397,582		1,402,988		978,367
Regulatory stock, at cost		4,084		4,043		3,981		3,876		3,677
Bank owned life insurance		39,665		39,471		39,608		39,400		39,183
Bank premises and equipment, net		17,298		17,648		17,814		18,124		14,040
Foreclosed real estate owned		844		844		965		965		965
Goodwill and other intangibles		29,727		29,785		29,820		30,778		11,522
Other assets		23,823		25,263		23,815		24,100		26,676
TOTAL ASSETS	$	2,025,564	$	2,009,836	$	1,851,864	$	1,842,107	$	1,354,541
LIABILITIES
Deposits:
Non-interest bearing demand	$	435,824	$	415,395	$	359,559	$	372,237	$	284,754
Interest-bearing deposits		1,253,117		1,269,793		1,175,826		1,143,685		801,484
Total deposits		1,688,941		1,685,188		1,535,385		1,515,922		1,086,238
Borrowings		119,858		112,283		105,762		115,732		106,027
Other liabilities		16,266		17,258		15,932		19,906		19,612
TOTAL LIABILITIES		1,825,065		1,814,729		1,657,079		1,651,560		1,211,877
STOCKHOLDERS' EQUITY		200,499		195,107		194,785		190,547		142,664
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,025,564	$	2,009,836	$	1,851,864	$	1,842,107	$	1,354,541
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		June 30		March 31		December 31		September 30		June 30
Three months ended		2021		2021		2020		2020		2020
INTEREST INCOME
Loans receivable, including fees	$	16,102	$	16,146	$	16,336	$	16,260	$	10,767
Securities		1,356		1,112		1,064		1,031		1,063
Other		59		43		29		18		19
Total interest income		17,517		17,301		17,429		17,309		11,849
INTEREST EXPENSE
Deposits		1,205		1,255		1,514		1,676		1,630
Borrowings		259		270		301		303		352
Total interest expense		1,464		1,525		1,815		1,979		1,982
NET INTEREST INCOME		16,053		15,776		15,614		15,330		9,867
PROVISION FOR LOAN LOSSES		1,500		1,500		1,600		1,850		1,300
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		14,553		14,276		14,014		13,480		8,567
OTHER INCOME
Service charges and fees		1,532		1,247		1,913		1,301		837
Income from fiduciary activities		181		160		150		205		175
Net realized gains on sales of securities		-		21		-		33		-
Gains on sales of loans, net		109		29		241		164		65
Earnings and proceeds on life insurance policies		194		374		208		217		212
Other		171		158		149		152		103
Total other income		2,187		1,989		2,661		2,072		1,392
OTHER EXPENSES
Salaries and  employee benefits		5,171		4,953		5,243		4,812		3,289
Occupancy, furniture and equipment, net		1,186		1,220		1,165		1,109		906
Foreclosed real estate		13		30		8		31		(2)
FDIC insurance assessment		154		181		213		144		42
Merger related		-		-		66		386		1,597
Other		2,968		3,068		3,214		2,898		2,260
Total other expenses		9,492		9,452		9,909		9,380		8,092
INCOME BEFORE TAX		7,248		6,813		6,766		6,172		1,867
INCOME TAX EXPENSE		1,493		1,271		1,253		1,173		379
NET INCOME	$	5,755	$	5,542	$	5,513	$	4,999	$	1,488
Basic earnings per share	$	0.70	$	0.68	$	0.67	$	0.62	$	0.24
Diluted earnings per share	$	0.70	$	0.67	$	0.67	$	0.62	$	0.24
Book Value per share	$	24.47	$	23.82	$	23.72	$	23.30	$	22.62
Tangible Book Value per share		20.85		20.20		20.10		19.55		20.80
Return on average assets (annualized)		1.15%		1.18%		1.18%		1.11%		0.45%
Return on average equity (annualized)		11.59%		11.39%		11.32%		10.64%		4.17%
Return on average tangible equity (annualized)		13.63%		13.42%		13.46%		11.75%		4.54%
Net interest spread (fte)		3.32%		3.46%		3.50%		3.55%		3.03%
Net interest margin (fte)		3.44%		3.59%		3.65%		3.73%		3.25%
Allowance for loan losses to total loans		1.11%		1.02%		0.93%		0.83%		1.04%
Net charge-offs to average loans (annualized)		0.19%		0.04%		0.04%		0.14%		0.03%
Nonperforming loans to total loans		0.28%		0.22%		0.24%		0.29%		0.30%
Nonperforming assets to total assets		0.24%		0.20%		0.24%		0.27%		0.29%