Norwood Financial Corp Announces First Quarter Earnings

Honesdale, Pennsylvania, UNITED STATES


HONESDALE, Pa., April 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 of $5,542,000 for the three months ended March 31, 2021, increasing 80% from the $3,079,000 recorded during the corresponding period of 2020. The increase 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 on a fully diluted basis were $0.67 in the first quarter of 2021 compared to $0.49 in the first quarter of 2020. The annualized return on average assets was 1.18% in the first quarter of 2021 and the annualized return on average equity was 11.39%, compared to 1.01% and 8.79%, respectively, in the first quarter of 2020.

Total assets were $2.010 billion as of March 31, 2021, an increase of $767.5 million compared to March 31, 2020. As of March 31, 2021, total loans increased $493.0 million compared to March 31, 2020, total deposits increased $695.0 million compared to March 31, 2020, and stockholders’ equity increased $52.9 million compared to March 31, 2020. The increases reflect the balances acquired from UpState and the impact from economic stimulus, including loans originated through the Payroll Protection Program (“PPP”). During the three months ended March 31, 2021, we originated 633 new PPP loans totaling $54.3 million, and had $30.0 million of loans forgiven that were originated in previous periods. As of March 31, 2021, the total of all PPP loans outstanding was $119.3 million.

Net interest income (fully taxable equivalent, or fte) was $15,981,000 during the three months ended March 31, 2021, which is $6,078,000 higher than the comparable three-month period of 2020. A $491.3 million increase in average loans outstanding over the corresponding period in 2020 contributed to the increased interest income. During the three-months ended March 31, 2021, the fte yield on interest-earning assets decreased thirty-two basis points compared to the three months ended March 31, 2020, while the cost of funds decreased fifty-five basis points. As a result, the annualized net interest spread (fte) improved to 3.46% from 3.23% in the quarter ended March 31, 2021 compared to the corresponding three-month period in 2020.

Other income totaled $1,989,000 for the three months ended March 31, 2021 compared to $1,654,000 during the corresponding period of last year. The increase is due primarily to an $184,000 increase in service charges due primarily to service charges and fees related to the acquisition of UpState. Earnings and proceeds on bank-owned life insurance policies also increased $166,000 over the first quarter of last year. All other categories of other income decreased $15,000, net.

Operating expenses totaled $9,452,000 in the three months ended March 31, 2021 and were $2,393,000 higher than the $7,059,000 recorded in the same period of last year. The increase reflects the costs of operations acquired from UpState, including four new Community Offices.

Mr. Critelli stated, “Our first quarter results reflect the revenue generated and the costs associated with our acquisition of UpState, as well as the continued impact of economic stimulus on our balance sheet. We remain committed to providing the financial resources that will help our customers emerge from the restrictions related to the COVID-19 pandemic, and continue to provide the resources to allow our employees the ability to perform their functions in a safe work environment. 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 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,
  2021 2020
Net interest income$15,776$9,665
Tax equivalent basis adjustment using 21% marginal tax rate 205 238
Net interest income on a fully taxable equivalent basis$15,981$
9,903

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, 
  2021  2020 
Average equity$197,243 $140,962 
Average goodwill and other intangibles (29,798) (11,552)
Average tangible equity$167,445 $
129,410
 


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      
 2021  2020       
ASSETS          
Cash and due from banks $20,364  $14,712       
Interest-bearing deposits with banks 190,135   23,706       
Cash and cash equivalents 210,499   38,418       
           
Securities available for sale 275,224   196,998       
Loans receivable 1,421,568   928,565       
Less: Allowance for loan losses 14,509   9,088       
Net loans receivable 1,407,059   919,477       
Regulatory stock, at cost 4,043   3,770       
Bank premises and equipment, net 17,648   14,071       
Bank owned life insurance 39,471   38,971       
Foreclosed real estate owned 844   1,077       
Accrued interest receivable 6,317   3,669       
Goodwill 29,290   11,331       
Other intangible assets 495   212       
Other assets 18,946   14,297       
TOTAL ASSETS $2,009,836  $1,242,291       
           
LIABILITIES          
Deposits:          
Non-interest bearing demand $415,395  $213,359       
Interest-bearing 1,269,793   776,801       
Total deposits 1,685,188   990,160       
Short-term borrowings 72,917   40,656       
Other borrowings 39,366   51,350       
Accrued interest payable 1,370   2,895       
Other liabilities 15,888   15,043       
TOTAL LIABILITIES 1,814,729   1,100,104       
           
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: 8,240,081 shares, 2020: 6,342,568 shares 824   634       
Surplus 95,717   49,644       
Retained earnings 97,201   88,032       
Treasury stock, at cost: 2021: 21,568 shares, 2020: 12,007 shares (656) (400)      
Accumulated other comprehensive income 2,021   4,277       
TOTAL STOCKHOLDERS' EQUITY 195,107   142,187       
           
TOTAL LIABILITIES AND          
 STOCKHOLDERS' EQUITY $2,009,836  $1,242,291       
           
           
           
           
NORWOOD FINANCIAL CORP.          
Consolidated Statements of Income         
(dollars in thousands, except per share data)          
(unaudited)        
 Three Months Ended March 31,   
 2021  2020       
INTEREST INCOME       
Loans receivable, including fees$16,146  $10,683       
Securities 1,112   1,179       
Other 43   6       
Total Interest income 17,301   11,868       
           
INTEREST EXPENSE          
Deposits 1,255   1,790       
Short-term borrowings 69   111       
Other borrowings 201   302       
Total Interest expense 1,525   2,203       
NET INTEREST INCOME 15,776   9,665       
PROVISION FOR LOAN LOSSES 1,500   700       
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 14,276   8,965       
           
OTHER INCOME          
Service charges and fees 1,247   1,063       
Income from fiduciary activities 160   153       
Net realized gains on sales of securities                           21   38       
Gains on sales of loans, net                           29   56       
Earnings and proceeds on life insurance policies 374   208       
Other 158   136       
Total other income 1,989   1,654       
           
OTHER EXPENSES          
Salaries and  employee benefits 4,953   3,777       
Occupancy, furniture and equipment 1,220   968       
Data processing  and related operations 603   437       
Taxes, other than income 305   214       
Professional fees 540   218       
FDIC Insurance assessment                        181   0       
Foreclosed real estate 30   16       
Amortization of intangibles 35   22       
Other 1,585   1,407       
Total other expenses 9,452   7,059       
           
INCOME BEFORE TAX 6,813   3,560       
INCOME TAX EXPENSE 1,271   481       
NET INCOME $5,542  $3,079       
           
Basic earnings per share$0.68  $0.49       
           
Diluted earnings per share$0.67  $0.49       
        
       
           
NORWOOD FINANCIAL CORP.        
Financial Highlights (Unaudited)          
(dollars in thousands, except per share data)          
           
For the Three Months Ended March 31 2021  2020       
          
Net interest income$15,776  $9,665       
Net income 5,542   3,079       
          
Net interest spread (fully taxable equivalent) 3.46% 3.23%      
Net interest margin (fully taxable equivalent) 3.59% 3.48%      
Return on average assets 1.18% 1.01%      
Return on average equity 11.39% 8.79%      
Return on average tangible equity 13.42% 9.57%      
Basic earnings per share$0.68  $0.49       
Diluted earnings per share$0.67  $0.49       
           
           
As of March 31 2021  2020       
        
Total assets$2,009,836  $1,242,291       
Total loans receivable 1,421,568   928,565       
Allowance for loan losses 14,509   9,088       
Total deposits 1,685,188   990,160       
Stockholders' equity 195,107   142,187       
Trust assets under management 173,263   137,059       
        
Book value per share$23.82  $22.52       
Tangible book value per share$20.20  $20.70       
Equity to total assets 9.71% 11.45%      
Allowance to total loans receivable 1.02% 0.98%      
Nonperforming loans to total loans 0.83% 0.30%      
Nonperforming assets to total assets 0.63% 0.31%      
          
       
          
NORWOOD FINANCIAL CORP.          
Consolidated Balance Sheets (unaudited)      
(dollars in thousands) 
 March December 31 September 30 June 30 March 31
 2021 2020 2020 2020 2020
ASSETS 
Cash and due from banks$20,364 $19,445 $23,874 $15,387 $14,712 
Interest-bearing deposits with banks 190,135  92,248  100,566  67,989  23,706 
Cash and cash equivalents 210,499  111,693  124,440  83,376  38,418 
          
Securities available for sale 275,224  226,586  197,436  196,735  196,998 
Loans receivable 1,421,568  1,410,732  1,414,662  988,679  928,565 
Less: Allowance for loan losses 14,509  13,150  11,674  10,312  9,088 
Net loans receivable 1,407,059  1,397,582  1,402,988  978,367  919,477 
Regulatory stock, at cost 4,043  3,981  3,876  3,677  3,770 
Bank owned life insurance 39,471  39,608  39,400  39,183  38,971 
Bank premises and equipment, net 17,648  17,814  18,124  14,040  14,071 
Foreclosed real estate owned 844  965  965  965  1,077 
Goodwill and other intangibles 29,785  29,820  30,778  11,522  11,543 
Other assets 25,263  23,815  24,100  26,676  17,966 
TOTAL ASSETS$2,009,836 $1,851,864 $1,842,107 $1,354,541 $1,242,291 
          
LIABILITIES          
Deposits:          
Non-interest bearing demand$415,395 $359,559 $372,237 $284,754 $213,359 
Interest-bearing deposits 1,269,793  1,175,826  1,143,685  801,484  776,801 
Total deposits 1,685,188  1,535,385  1,515,922  1,086,238  990,160 
Borrowings 112,283  105,762  115,732  106,027  92,006 
Other liabilities 17,258  15,932  19,906  19,612  17,938 
TOTAL LIABILITIES 1,814,729  1,657,079  1,651,560  1,211,877  1,100,104 
          
STOCKHOLDERS' EQUITY 195,107  194,785  190,547  142,664  142,187 
          
TOTAL LIABILITIES AND          
 STOCKHOLDERS' EQUITY$2,009,836 $1,851,864 $1,842,107 $1,354,541 $1,242,291 
 
          
          
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 2021  2020  2020  2020  2020 
INTEREST INCOME          
Loans receivable, including fees$16,146 $16,336 $16,260 $10,767 $10,683 
Securities 1,112  1,064  1,031  1,063  1,179 
Other 43  29  18  19  6 
Total interest income 17,301  17,429  17,309  11,849  11,868 
          
INTEREST EXPENSE          
Deposits 1,255  1,514  1,676  1,630  1,790 
Borrowings 270  301  303  352  413 
Total interest expense 1,525  1,815  1,979  1,982  2,203 
NET INTEREST INCOME 15,776  15,614  15,330  9,867  9,665 
PROVISION FOR LOAN LOSSES 1,500  1,600  1,850  1,300  700 
NET INTEREST INCOME AFTER PROVISION          
FOR LOAN LOSSES 14,276  14,014  13,480  8,567  8,965 
          
OTHER INCOME          
Service charges and fees 1,247  1,913  1,301  837  1,063 
Income from fiduciary activities 160  150  205  175  153 
Net realized gains on sales of securities 21  -  33  -  38 
Gains on sales of loans, net 29  241  164  65  56 
Earnings and proceeds on life insurance policies 374  208  217  212  208 
Other 158  149  152  103  136 
Total other income 1,989  2,661  2,072  1,392  1,654 
          
OTHER EXPENSES          
Salaries and  employee benefits 4,953  5,243  4,812  3,289  3,777 
Occupancy, furniture and equipment, net 1,220  1,165  1,109  906  968 
Foreclosed real estate 30  8  31  (2) 16 
FDIC insurance assessment 181  213  144  42  - 
Merger related 22  66  386  1,597  - 
Other 3,046  3,214  2,898  2,260  2,298 
Total other expenses 9,452  9,909  9,380  8,092  7,059 
          
INCOME BEFORE TAX 6,813  6,766  6,172  1,867  3,560 
INCOME TAX EXPENSE 1,271  1,253  1,173  379  481 
NET INCOME$5,542 $5,513 $4,999 $1,488 $3,079 
          
Basic earnings per share$0.68 $0.67 $0.62 $0.24 $0.49 
           
Diluted earnings per share$0.67 $0.67 $0.62 $0.24 $0.49 
 
Book Value per share$23.82 $23.72 $23.30 $22.62 $22.52 
Tangible Book Value per share 20.20  20.10  19.55  20.80  20.70 
          
Return on average assets (annualized) 1.18% 1.18% 1.11% 0.45% 1.01%
Return on average equity (annualized) 11.39% 11.32% 10.64% 4.17% 8.79%
Return on average tangible equity (annualized) 13.42% 13.46% 11.75% 4.54% 9.57%
          
Net interest spread (fte) 3.46% 3.50% 3.55% 3.03% 3.23%
Net interest margin (fte) 3.59% 3.65% 3.73% 3.25% 3.48%
          
Allowance for loan losses to total loans 1.02% 0.93% 0.83% 1.04% 0.98%
Net charge-offs to average loans (annualized) 0.04% 0.04% 0.14% 0.03% 0.05%
Nonperforming loans to total loans 0.83% 0.85% 0.89% 0.30% 0.30%
Nonperforming assets to total assets 0.63% 0.70% 0.74% 0.29% 0.31%