Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 22, 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 June 30, 2020 of $1,488,000, which was $2,034,000 lower than the similar period of last year due to increased loan loss provisions and $1,597,000 of expenses related to the acquisition of UpState New York Bancorp, Inc. (“UpState”) which closed on July 7, 2020. Earnings per share (fully diluted) were $0.24 in the 2020 compared to $0.56 in the same period of last year. Annualized return on average assets for the three months ended June 30, 2020 was 0.45% with an annualized return on average equity of 4.17%. Net income for the six months ended June 30, 2020 totaled $4,567,000, which is $2,145,000 lower than the same six-month period of last year due primarily to increased loan loss provisions and merger related expenses. Earnings per share (fully diluted) for the six months ended June 30, 2020 were $0.73 compared to $1.06 in the 2019 period.

Total assets as of June 30, 2020 were $1.355 billion, with loans receivable of $988.7 million, deposits of $1.086 billion and stockholders’ equity of $142.7 million. Loans receivable increased $101.0 million since June 30, 2019, while total deposits increased $105.0 million. The increase in loans includes $67.3 million of Paycheck Protection Program (“PPP”) loans, while the increase in deposits also includes significant stimulus funds resulting from the PPP and CARES Act.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $3.9 million and represented 0.29% of total assets as of June 30, 2020 compared to $3.0 million, or 0.25% of total assets, as of June 30, 2019. The allowance for loan losses totaled $10,312,000 as of June 30, 2020 and represented 1.04% of total loans outstanding, compared to $8,228,000 and 0.93%, respectively, on June 30, 2019.

For the three months ended June 30, 2020, net interest income, on a fully-taxable equivalent basis (fte), totaled $10,088,000, an increase of $210,000 compared to the similar period in 2019. A $101.2 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the 2020 period was 3.25%, compared to 3.49% in 2019 period. The tax-equivalent yield on interest-earning assets decreased 38 basis points to 3.89% compared to the prior year while the cost of interest-bearing liabilities decreased 16 basis points to 0.86%. Net interest income (fte) for the six months ended June 30, 2020 totaled $19,991,000, which was $578,000 higher than the similar period in 2019 due to the higher volume of earning assets. The net interest margin (fte) was 3.36% in the 2020 period and 3.46% during the first six months of 2019. The decrease in the net interest margin (fte) reflects the growth in PPP loans and the reduced net interest spread earned due to the 1.00% interest rate on these loans.

Other income for the three months ended June 30, 2020 totaled $1,392,000 compared to $1,641,000 for the similar period in 2019. The decrease can be attributed to a lower level of service charges and fees due to accommodations made to customers as a result of the COVID-19 pandemic. For the six months ended June 30, 2020, other income totaled $3,047,000 compared to $3,201,000 in the 2019 period. Service charges on deposits and fees on loans decreased $182,000, net, due to accommodations made to customers as a result of the COVID-19 pandemic.

Other expenses totaled $8,092,000 for the three months ended June 30, 2020, an increase of $1,307,000 compared to the $6,785,000 reported in the similar period of 2019 due primarily to merger related expenses of $1,597,000. For the six months ended June 30, 2020, other expenses totaled $15,152,000 compared to $13,433,000 for the similar period in 2019. The increase includes the $1,597,000 of merger related expenses.

Mr. Critelli commented, “Our results for the first half 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. Our balance sheet reflects our success providing small business customers with PPP loans and other economic stimulus that has been provided”. Mr. Critelli further commented, “We are pleased to announce the completion of the merger on July 7^th and to welcome Upstate’s shareholders to Norwood and the employees to Wayne Bank. We also look forward to serving the customers of Bank of the Finger Lakes and Bank of Cooperstown. 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 twelve offices in the Southern Tier of 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 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)		2020			2019			2020			2019

Net Interest Income	$	9,867		$	9,612		$	19,532		$	18,882
Taxable equivalent basis adjustment using 21% marginal tax rate		221			266			459			531
Net interest income on a fully taxable equivalent basis	$	10,088		$	9,878		$	19,991		$	19,413


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)		2020			2019			2020			2019

Average equity	$	143,472		$	129,215		$	142,217		$	126,993

Average goodwill and other intangibles		(11,530	)		(11,621	)		(11,541	)		(11,635	)
Average tangible equity	$	131,942		$	117,594		$	130,676		$	115,358

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
		2020			2019
ASSETS
Cash and due from banks	$	15,387		$	14,207
Interest-bearing deposits with banks		67,989			4,265
Cash and cash equivalents		83,376			18,472

Securities available for sale		196,735			238,083
Loans receivable		988,679			887,673
Less: Allowance for loan losses		10,312			8,228
Net loans receivable		978,367			879,445
Regulatory stock, at cost		3,677			3,155
Bank premises and equipment, net		14,040			13,880
Bank owned life insurance		39,183			38,340
Foreclosed real estate owned		965			1,677
Accrued interest receivable		4,383			3,979
Goodwill		11,331			11,331
Other intangible assets		191			280
Other assets		22,293			13,886
TOTAL ASSETS	$	1,354,541		$	1,222,528

LIABILITIES
Deposits:
Non-interest bearing demand	$	284,754		$	221,764
Interest-bearing		801,484			759,460
Total deposits		1,086,238			981,224
Short-term borrowings		55,204			48,094
Other borrowings		50,823			44,024
Accrued interest payable		2,826			3,008
Other liabilities		16,786			14,695
TOTAL LIABILITIES		1,211,877			1,091,045

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: 6,342,568 shares, 2019: 6,304,413 shares		634			630
Surplus		49,778			48,741
Retained earnings		87,939			82,127
Treasury stock, at cost: 2020: 13,778 shares, 2019: 13,807 shares		(469	)		(455	)
Accumulated other comprehensive income		4,782			440
TOTAL STOCKHOLDERS' EQUITY		142,664			131,483

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,354,541		$	1,222,528




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,
		2020			2019						2020			2019
INTEREST INCOME
Loans receivable, including fees	$	10,767		$	10,328					$	21,450		$	20,298
Securities		1,063			1,435						2,242			2,876
Other		19			51						25			66
Total Interest income		11,849			11,814						23,717			23,240

INTEREST EXPENSE
Deposits		1,630			1,839						3,420			3,568
Short-term borrowings		73			85						184			209
Other borrowings		279			278						581			581
Total Interest expense		1,982			2,202						4,185			4,358
NET INTEREST INCOME		9,867			9,612						19,532			18,882
PROVISION FOR LOAN LOSSES		1,300			300						2,000			750
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		8,567			9,312						17,532			18,132

OTHER INCOME
Service charges and fees		837			1,052						1,901			2,083
Income from fiduciary activities		175			145						328			287
Net realized gains on sales of securities		-			64						38			64
Gains on sales of loans, net		65			67						121			110
Earnings and proceeds on life insurance policies		212			207						420			408
Other		103			106						239			249
Total other income		1,392			1,641						3,047			3,201

OTHER EXPENSES
Salaries and employee benefits		3,289			3,599						7,065			7,248
Occupancy, furniture and equipment		906			940						1,875			1,864
Data processing and related operations		466			472						903			920
Taxes, other than income		214			179						427			340
Professional fees		225			226						443			476
FDIC Insurance assessment		42			84						42			155
Foreclosed real estate		(2	)		(10	)					14			13
Amortization of intangibles		21			27						44			56
Merger related		1,597			-						1,597			-
Other		1,334			1,268						2,742			2,361
Total other expenses		8,092			6,785						15,152			13,433

INCOME BEFORE TAX		1,867			4,168						5,427			7,900
INCOME TAX EXPENSE		379			646						860			1,188
NET INCOME	$	1,488		$	3,522					$	4,567		$	6,712

Basic earnings per share	$	0.24		$	0.56					$	0.73		$	1.07

Diluted earnings per share	$	0.24		$	0.56					$	0.73		$	1.06



NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)

For the Three Months Ended June 30		2020			2019

Net interest income	$	9,867		$	9,612
Net income		1,488			3,522

Net interest spread (fully taxable equivalent)		3.03	%		3.24	%
Net interest margin (fully taxable equivalent)		3.25	%		3.49	%
Return on average assets		0.45	%		1.16	%
Return on average equity		4.17	%		10.93	%
Return on average tangible equity		4.54	%		12.01	%
Basic earnings per share	$	0.24		$	0.56
Diluted earnings per share	$	0.24		$	0.56


For the Six Months Ended June 30		2020			2019

Net interest income	$	19,532		$	18,882
Net income		4,567			6,712

Net interest spread (fully taxable equivalent)		3.12	%		3.22	%
Net interest margin (fully taxable equivalent)		3.36	%		3.46	%
Return on average assets		0.72	%		1.12	%
Return on average equity		6.46	%		10.66	%
Return on average tangible equity		7.03	%		11.73	%
Basic earnings per share	$	0.73		$	1.07
Diluted earnings per share	$	0.73		$	1.06


As of June 30		2020			2019

Total assets	$	1,354,541		$	1,222,528
Total loans receivable		988,679			887,673
Allowance for loan losses		10,312			8,228
Total deposits		1,086,238			981,224
Stockholders' equity		142,664			131,483
Trust assets under management		149,535			163,103

Book value per share	$	22.62		$	20.90
Tangible book value per share	$	20.80		$	19.06
Equity to total assets		10.53	%		10.76	%
Allowance to total loans receivable		1.04	%		0.93	%
Nonperforming loans to total loans		0.30	%		0.15	%
Nonperforming assets to total assets		0.29	%		0.25	%



NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		June 30			March 31			December 31			September 30			June 30
		2020			2020			2019			2019			2019
ASSETS
Cash and due from banks	$	15,387		$	14,712		$	15,038		$	20,067		$	14,207
Interest-bearing deposits with banks		67,989			23,706			377			848			4,265
Cash and cash equivalents		83,376			38,418			15,415			20,915			18,472

Securities available for sale		196,735			196,998			210,205			211,199			238,083
Loans receivable		988,679			928,565			924,581			905,582			887,673
Less: Allowance for loan losses		10,312			9,088			8,509			8,405			8,228
Net loans receivable		978,367			919,477			916,072			897,177			879,445
Regulatory stock, at cost		3,677			3,770			4,844			3,137			3,155
Bank owned life insurance		39,183			38,971			38,763			38,562			38,340
Bank premises and equipment, net		14,040			14,071			14,228			13,927			13,880
Foreclosed real estate owned		965			1,077			1,556			1,572			1,677
Goodwill and other intangibles		11,522			11,543			11,566			11,588			11,611
Other assets		26,676			17,966			17,961			17,779			17,865
TOTAL ASSETS	$	1,354,541		$	1,242,291		$	1,230,610		$	1,215,856		$	1,222,528

LIABILITIES
Deposits:
Non-interest bearing demand	$	284,754		$	213,359		$	207,299		$	231,211		$	221,764
Interest-bearing deposits		801,484			776,801			750,230			743,222			759,460
Total deposits		1,086,238			990,160			957,529			974,433			981,224
Borrowings		106,027			92,006			118,694			88,684			92,118
Other liabilities		19,612			17,938			16,959			17,845			17,703
TOTAL LIABILITIES		1,211,877			1,100,104			1,093,182			1,080,962			1,091,045

STOCKHOLDERS' EQUITY		142,664			142,187			137,428			134,894			131,483

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,354,541		$	1,242,291		$	1,230,610		$	1,215,856		$	1,222,528



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		2020			2020			2019			2019			2019
INTEREST INCOME
Loans receivable, including fees	$	10,767		$	10,683		$	10,815		$	10,776		$	10,328
Securities		1,063			1,179			1,159			1,278			1,435
Other		19			6			11			5			51
Total interest income		11,849			11,868			11,985			12,059			11,814

INTEREST EXPENSE
Deposits		1,630			1,790			1,784			1,787			1,839
Borrowings		352			413			368			381			363
Total interest expense		1,982			2,203			2,152			2,168			2,202
NET INTEREST INCOME		9,867			9,665			9,833			9,891			9,612
PROVISION FOR LOAN LOSSES		1,300			700			200			300			300
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		8,567			8,965			9,633			9,591			9,312

OTHER INCOME
Service charges and fees		837			1,063			1,168			1,200			1,052
Income from fiduciary activities		175			153			156			167			145
Net realized gains on sales of securities		-			38			21			169			64
Gains on sales of loans, net		65			56			44			15			67
Earnings and proceeds on life insurance policies		212			208			200			222			207
Other		103			136			107			109			106
Total other income		1,392			1,654			1,696			1,882			1,641

OTHER EXPENSES
Salaries and employee benefits		3,289			3,777			3,740			3,667			3,599
Occupancy, furniture and equipment, net		906			968			938			916			940
Foreclosed real estate		(2	)		16			9			24			(10	)
FDIC insurance assessment		42			-			3			(5	)		84
Merger related		1,597			-			-			-			-
Other		2,260			2,298			2,398			2,189			2,172
Total other expenses		8,092			7,059			7,088			6,791			6,785

INCOME BEFORE TAX		1,867			3,560			4,241			4,682			4,168
INCOME TAX EXPENSE		379			481			645			775			646
NET INCOME	$	1,488		$	3,079		$	3,596		$	3,907		$	3,522

Basic earnings per share	$	0.24		$	0.49		$	0.57		$	0.62		$	0.56

Diluted earnings per share	$	0.24		$	0.49		$	0.57		$	0.62		$	0.56

Book Value per share	$	22.62		$	22.52		$	21.67		$	21.41		$	20.90
Tangible Book Value per share		20.80			20.70			19.84			19.57			19.06

Return on average assets (annualized)		0.45	%		1.01	%		1.18	%		1.27	%		1.16	%
Return on average equity (annualized)		4.17	%		8.79	%		10.42	%		11.56	%		10.93	%
Return on average tangible equity (annualized)		4.54	%		9.57	%		11.38	%		12.66	%		12.01	%

Net interest spread (fte)		3.03	%		3.23	%		3.33	%		3.35	%		3.24	%
Net interest margin (fte)		3.25	%		3.48	%		3.59	%		3.60	%		3.49	%

Allowance for loan losses to total loans		1.04	%		0.98	%		0.92	%		0.93	%		0.93	%
Net charge-offs to average loans (annualized)		0.03	%		0.05	%		0.04	%		0.05	%		0.19	%
Nonperforming loans to total loans		0.30	%		0.30	%		0.09	%		0.15	%		0.15	%
Nonperforming assets to total assets		0.29	%		0.31	%		0.19	%		0.24	%		0.25	%

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