Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

HONESDALE, Pa., Jan. 27, 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 December 31, 2020 of $5,513,000 compared to $3,596,000 earned in the corresponding 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. For the year ended December 31, 2020 net income totaled $15,080,000, an increase of $865,000 from the $14,215,000 earned in the prior year. The increase reflects the benefits derived from the acquisition of UpState, which offset a $4,200,000 increase in the provision for loan losses and $2,049,000 of merger related expenses. 

Earnings per share (fully diluted) were $0.67 and $0.57 for the three-month period ended December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, earnings per share on a fully diluted basis were $2.09, compared to $2.25 for the year ended December 31, 2019. For the year ended December 31, 2020, the return on average assets was 0.97%, and the return on average equity was 9.06%, compared to 1.18% and 10.83%, respectively, for the year ended December 31, 2019.

Total assets were $1.852 billion as of December 31, 2020. Loans receivable totaled $1.411 billion as of December 31, 2020, with total deposits of $1.535 billion and stockholders’ equity of $194.8 million as of December 31, 2020.

Loans receivable increased $486.2 million from the prior year-end due primarily to the $420 million of loan balances acquired from UpState and $66 million of Paycheck Protection Program (“PPP”) loans originated during the year ended December 31, 2020. For the three months and year ended December 31, 2020, net charge-offs totaled $125,000 and $809,000, respectively, compared to $96,000 and $1,194,000, respectively, for the corresponding periods in 2019.

Net interest income, on a fully taxable equivalent basis (fte), totaled $15,821,000 for the three months ended December 31, 2020, an increase of $5,755,000 compared to the same period in 2019. For the year ended December 31, 2020, net interest income (fte) totaled $51,359,000, an increase of $11,747,000 compared to 2019 due primarily to the higher volume of earning assets, including a $292.0 million increase in average loans outstanding.   

Other income for the three months ended December 31, 2020 totaled $2,661,000 compared to $1,696,000 for the similar period in 2019. Gains on the sale of loans and securities increased $176,000, while all other items of other income increased $789,000 in the aggregate due primarily to service charges and fees related to the acquisition of UpState. Other income for the year ended December 31, 2020 totaled $7,780,000 compared to $6,778,000 in 2019, an increase of $1,002,000 due primarily to a $665,000 increase in service charges and fees. Gains on the sale of loans and investment securities increased $175,000 in the aggregate, while all other items of other income increased $165,000, net. 

Other expenses totaled $9,909,000 for the three months ended December 31, 2020, compared to $7,088,000 in the similar period of 2019. The $2,821,000 increase reflects the costs of the operations acquired from UpState. For the year ended December 31, 2020, other expenses totaled $34,440,000 compared to $27,311,000 for 2019, an increase of $7,129,000. The increase reflects the costs of operations acquired from UpState, including four new Community Offices, and $2,049,000 of merger related expenses.

Mr. Critelli commented, “Our results for the 2020 year 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 and the revenue generated by our acquisition of UpState New York Bancorp, Inc. 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. Our cash dividend of $0.26 per share declared in the fourth quarter of 2020 represents a 4.0% increase over the same period of last year. 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 fourteen 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 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 interest income on a tax–equivalent basis ensures comparability of interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income to net interest income on a fully tax-equivalent basis:

(dollars in thousands)		Three months ended December 31						Year ended December 31
		2020			2019			2020			2019
Net interest income		$	15,614		$	9,833		$	50,476		$	38,606
Tax equivalent basis adjustment
using 21% marginal tax rate			207			233			883			1,006
Net interest income on a fully
taxable equivalent basis		$	15,821		$	10,066		$	51,359		$	39,612

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						Year ended
		December 31,						December 31,
(dollars in thousands)		2020			2019			2020			2019
Average equity		$	193,740		$	136,920		$	166,427		$	131,271
Average goodwill and other Intangibles			(30,747)			(11,575)			(17,942)			(11,611)
Average tangible equity		$	162,993		$	125,345		$	148,485		$	119,660

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)
		December 31
		2020				2019
ASSETS
Cash and due from banks	$	19,445			$	15,038
Interest-bearing deposits with banks		92,248				377
Cash and cash equivalents		111,693				15,415
Securities available for sale		226,586				210,205
Loans receivable		1,410,732				924,581
Less: Allowance for loan losses		13,150				8,509
Net loans receivable		1,397,582				916,072
Regulatory stock, at cost		3,981				4,844
Bank premises and equipment, net		17,814				14,228
Bank owned life insurance		39,608				38,763
Foreclosed real estate owned		965				1,556
Accrued interest receivable		6,232				3,719
Goodwill		29,290				11,331
Other intangible assets		530				235
Other assets		17,583				14,242
TOTAL ASSETS	$	1,851,864			$	1,230,610
LIABILITIES
Deposits:
Non-interest bearing demand	$	359,559			$	207,299
Interest-bearing		1,175,826				750,230
Total deposits		1,535,385				957,529
Short-term borrowings		63,303				62,256
Other borrowings		42,459				56,438
Accrued interest payable		1,601				2,432
Other liabilities		14,331				14,527
TOTAL LIABILITIES		1,657,079				1,093,182
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: 8,236,331 shares, 2019: 6,340,563 shares		824				634
Surplus		95,388				49,471
Retained earnings		93,796				86,536
Treasury stock, at cost: 2020: 10,263 shares, 2019: 12,007 shares		(342	)			(400	)
Accumulated other comprehensive income		5,119				1,187
TOTAL STOCKHOLDERS' EQUITY		194,785				137,428
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,851,864			$	1,230,610
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended December 31,											Twelve Months Ended December 31,
		2020				2019								2020				2019
INTEREST INCOME
Loans receivable, including fees	$	16,336			$	10,815							$	54,046			$	41,889
Securities		1,064				1,159								4,337				5,314
Other		29				11								72				81
Total Interest income		17,429				11,985								58,455				47,284
INTEREST EXPENSE
Deposits		1,514				1,784								6,610				7,139
Short-term borrowings		81				124								325				468
Other borrowings		220				244								1,044				1,071
Total Interest expense		1,815				2,152								7,979				8,678
NET INTEREST INCOME		15,614				9,833								50,476				38,606
PROVISION FOR LOAN LOSSES		1,600				200								5,450				1,250
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		14,014				9,633								45,026				37,356
OTHER INCOME
Service charges and fees		1,913				1,168								5,115				4,450
Income from fiduciary activities		150				156								682				610
Net realized gains on sales of securities		-				21								71				254
Gains on sales of loans, net		241				44								527				169
Earnings and proceeds on life insurance policies		208				200								845				830
Other		149				107								540				465
Total other income		2,661				1,696								7,780				6,778
OTHER EXPENSES
Salaries and employee benefits		5,243				3,740								17,121				14,655
Occupancy, furniture and equipment		1,165				938								4,148				3,719
Data processing and related operations		808				469								2,457				1,869
Taxes, other than income		356				232								997				751
Professional fees		328				362								1,062				1,113
FDIC Insurance assessment		213				3								399				153
Foreclosed real estate		8				9								53				45
Amortization of intangibles		35				22								114				101
Merger related		66				-								2,049				-
Other		1,687				1,313								6,040				4,905
Total other expenses		9,909				7,088								34,440				27,311
INCOME BEFORE TAX		6,766				4,241								18,366				16,823
INCOME TAX EXPENSE		1,253				645								3,286				2,608
NET INCOME	$	5,513			$	3,596							$	15,080			$	14,215
Basic earnings per share	$	0.67			$	0.57							$	2.09			$	2.27
Diluted earnings per share	$	0.67			$	0.57							$	2.09			$	2.25
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended December 31		2020				2019
Net interest income	$	15,614			$	9,833
Net income		5,513				3,596
Net interest spread (fully taxable equivalent)		3.50	%			3.33	%
Net interest margin (fully taxable equivalent)		3.65	%			3.59	%
Return on average assets		1.18	%			1.18	%
Return on average equity		11.32	%			10.42	%
Return on average tangible equity		13.46	%			11.38	%
Basic earnings per share	$	0.67			$	0.57
Diluted earnings per share	$	0.67			$	0.57
For the Twelve Months Ended December 31		2020				2019
Net interest income	$	50,476			$	38,606
Net income		15,080				14,215
Net interest spread (fully taxable equivalent)		3.36	%			3.28	%
Net interest margin (fully taxable equivalent)		3.55	%			3.53	%
Return on average assets		0.97	%			1.18	%
Return on average equity		9.06	%			10.83	%
Return on average tangible equity		10.16	%			11.88	%
Basic earnings per share	$	2.09			$	2.27
Diluted earnings per share	$	2.09			$	2.25
As of December 31		2020				2019
Total assets	$	1,851,864			$	1,230,610
Total loans receivable		1,410,732				924,581
Allowance for loan losses		13,150				8,509
Total deposits		1,535,385				957,529
Stockholders' equity		194,785				137,428
Trust assets under management		168,085				170,685
Book value per share	$	23.72			$	21.67
Tangible book value per share	$	20.10			$	19.84
Equity to total assets		10.52	%			11.17	%
Allowance to total loans receivable		0.93	%			0.92	%
Nonperforming loans to total loans		0.85	%			0.09	%
Nonperforming assets to total assets		0.70	%			0.19	%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		December 31				September 30				June 30				March 31				December 31
		2020				2020				2020				2020				2019
ASSETS
Cash and due from banks	$	19,445			$	23,874			$	15,387			$	14,712			$	15,038
Interest-bearing deposits with banks		92,248				100,566				67,989				23,706				377
Cash and cash equivalents		111,693				124,440				83,376				38,418				15,415
Securities available for sale		226,586				197,436				196,735				196,998				210,205
Loans receivable		1,410,732				1,414,662				988,679				928,565				924,581
Less: Allowance for loan losses		13,150				11,674				10,312				9,088				8,509
Net loans receivable		1,397,582				1,402,988				978,367				919,477				916,072
Regulatory stock, at cost		3,981				3,876				3,677				3,770				4,844
Bank owned life insurance		39,608				39,400				39,183				38,971				38,763
Bank premises and equipment, net		17,814				18,124				14,040				14,071				14,228
Foreclosed real estate owned		965				965				965				1,077				1,556
Goodwill and other intangibles		29,820				30,778				11,522				11,543				11,566
Other assets		23,815				24,100				26,676				17,966				17,961
TOTAL ASSETS	$	1,851,864			$	1,842,107			$	1,354,541			$	1,242,291			$	1,230,610
LIABILITIES
Deposits:
Non-interest bearing demand	$	359,559			$	372,237			$	284,754			$	213,359			$	207,299
Interest-bearing deposits		1,175,826				1,143,685				801,484				776,801				750,230
Total deposits		1,535,385				1,515,922				1,086,238				990,160				957,529
Borrowings		105,762				115,732				106,027				92,006				118,694
Other liabilities		15,932				19,906				19,612				17,938				16,959
TOTAL LIABILITIES		1,657,079				1,651,560				1,211,877				1,100,104				1,093,182
STOCKHOLDERS' EQUITY		194,785				190,547				142,664				142,187				137,428
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,851,864			$	1,842,107			$	1,354,541			$	1,242,291			$	1,230,610
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		December 31				September 30				June 30				March 31				December 31
Three months ended		2020				2020				2020				2020				2019
INTEREST INCOME
Loans receivable, including fees	$	16,336			$	16,260			$	10,767			$	10,683			$	10,815
Securities		1,064				1,031				1,063				1,179				1,159
Other		29				18				19				6				11
Total interest income		17,429				17,309				11,849				11,868				11,985
INTEREST EXPENSE
Deposits		1,514				1,676				1,630				1,790				1,784
Borrowings		301				303				352				413				368
Total interest expense		1,815				1,979				1,982				2,203				2,152
NET INTEREST INCOME		15,614				15,330				9,867				9,665				9,833
PROVISION FOR LOAN LOSSES		1,600				1,850				1,300				700				200
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		14,014				13,480				8,567				8,965				9,633
OTHER INCOME
Service charges and fees		1,913				1,301				837				1,063				1,168
Income from fiduciary activities		150				205				175				153				156
Net realized gains on sales of securities		-				33				-				38				21
Gains on sales of loans, net		241				164				65				56				44
Earnings and proceeds on life insurance policies		208				217				212				208				200
Other		149				152				103				136				107
Total other income		2,661				2,072				1,392				1,654				1,696
OTHER EXPENSES
Salaries and employee benefits		5,243				4,812				3,289				3,777				3,740
Occupancy, furniture and equipment, net		1,165				1,109				906				968				938
Foreclosed real estate		8				31				(2	)			16				9
FDIC insurance assessment		213				144				42				-				3
Merger related		66				386				1,597				-				-
Other		3,214				2,898				2,260				2,298				2,398
Total other expenses		9,909				9,380				8,092				7,059				7,088
INCOME BEFORE TAX		6,766				6,172				1,867				3,560				4,241
INCOME TAX EXPENSE		1,253				1,173				379				481				645
NET INCOME	$	5,513			$	4,999			$	1,488			$	3,079			$	3,596
Basic earnings per share	$	0.67			$	0.62			$	0.24			$	0.49			$	0.57
Diluted earnings per share	$	0.67			$	0.62			$	0.24			$	0.49			$	0.57
Book Value per share	$	23.72			$	23.30			$	22.62			$	22.52			$	21.67
Tangible Book Value per share		20.10				19.55				20.80				20.70				19.84
Return on average assets (annualized)		1.18	%			1.11	%			0.45	%			1.01	%			1.18	%
Return on average equity (annualized)		11.32	%			10.64	%			4.17	%			8.79	%			10.42	%
Return on average tangible equity (annualized)		13.46	%			11.75	%			4.54	%			9.57	%			11.38	%
Net interest spread (fte)		3.50	%			3.55	%			3.03	%			3.23	%			3.33	%
Net interest margin (fte)		3.65	%			3.73	%			3.25	%			3.48	%			3.59	%
Allowance for loan losses to total loans		0.93	%			0.83	%			1.04	%			0.98	%			0.92	%
Net charge-offs to average loans (annualized)		0.04	%			0.14	%			0.03	%			0.05	%			0.04	%
Nonperforming loans to total loans		0.85	%			0.89	%			0.30	%			0.30	%			0.09	%
Nonperforming assets to total assets		0.70	%			0.74	%			0.29	%			0.31	%			0.19	%