Norwood Financial Corp Announces Third Quarter Earnings

Norwood Financial Corp.
·16-min read

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

%