Norwood Financial Corp Announces First Quarter Earnings

HONESDALE, Pa., April 18, 2022 (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 $7,128,000 for the three months ended March 31, 2022, an increase of 28.6% from the $5,542,000 earned during the corresponding period of 2021. The increase includes a $1,200,000 decrease in the provision for loan losses and a $1,349,000 increase in other income. Earnings per share on a fully diluted basis were $0.87 for the three-month period ended March 31, 2022, compared to $0.67 in the three-month period ended March 31, 2021. The annualized return on average assets was 1.39% in the first quarter of 2022 and the annualized return on average equity was 14.22%, compared to 1.18% and 11.39%, respectively, in the first quarter of 2021.

Total assets were $2.078 billion as of March 31, 2022, an increase of $67.9 million compared to March 31, 2021. As of March 31, 2022, loans totaled $1.372 billion, with deposits of $1.782 billion and stockholders’ equity of $186.8 million.

Net interest income on a fully taxable equivalent basis (fte), was $16,283,000 during the three months ended March 31, 2022, which is $302,000 higher than the comparable three-month period of 2021. A $193.4 million increase in average securities available for sale over the corresponding period in 2021 contributed to the increased interest income. During the three-months ended March 31, 2022, the fte yield on interest-earning assets decreased thirty-six basis points compared to the three months ended March 31, 2021, while the cost of funds decreased twelve basis points. As a result, the annualized net interest spread (fte) decreased to 3.22% from 3.46% in the quarter ended March 31, 2022 compared to the corresponding three-month period in 2021. A $378,000 reduction in loan origination fees recognized on Paycheck Protection Program (“PPP”) loans compared to the three months ended March 31, 2021, contributed to the reduced net interest spread (fte).

Other income totaled $3,338,000 for the three months ended March 31, 2022, compared to $1,992,000 during the corresponding period of last year. The increase is due primarily to $875,000 of income recognized on previously acquired purchased impaired loans that were carried at a discount, and a $427,000 gain on the sale of a property carried in Foreclosed Real Estate Owned. All other categories of other income increased $44,000, net.

Operating expenses totaled $10,157,000 in the three months ended March 31, 2022, and were $705,000, or 7.5%, higher than the $9,452,000 recorded in the same period of last year.

Mr. Critelli stated, “Our first quarter results provide a good start for 2022 and exceed our budget level. Total loans increased 7.7% annually during the quarter after excluding the impact of loan forgiveness related to PPP loans. Our total deposits increased 5.7% annually during the quarter, our core operating expenses remain well-controlled, and our capital base remains above “Well-Capitalized” targets. Additionally, our credit quality metrics continued to improve during the first quarter, which we believe should benefit future results. We appreciate the opportunity to serve our Wayne Bank customers and our customers at the Bank of the Finger Lakes and Bank of Cooperstown locations. We continue to look for 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 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 operations and financial condition, the ability to continue to grow our core business, the ability to have success in the future, the ability to improve our credit quality metrics and benefit future results, 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 interest income and net interest income on a fully taxable equivalent basis (fte), which are non-GAAP (Generally Accepted Accounting Principles) financial measures. Fully 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 and net interest income on a fully taxable 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 taxable equivalent basis:

(dollars in thousands)	Three months ended March 31,
		2022			2021
Net interest income		$16,101			$15,776
Tax equivalent basis adjustment using 21% marginal tax rate		182			205
Net interest income on a fully taxable equivalent basis		$16,283			$15,981

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,
		2022			2021
Average equity	$203,260			$197,243
Average goodwill and other intangibles		(29,656	)		(29,798	)
Average tangible equity		$173,604			$167,445

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
		2022				2021
ASSETS
Cash and due from banks	$	22,394			$	20,364
Interest-bearing deposits with banks		143,632				190,135
Cash and cash equivalents		166,026				210,499
Securities available for sale		434,924				275,224
Loans receivable		1,371,645				1,421,568
Less: Allowance for loan losses		16,660				14,509
Net loans receivable		1,354,985				1,407,059
Regulatory stock, at cost		3,423				4,043
Bank premises and equipment, net		17,022				17,648
Bank owned life insurance		40,215				39,471
Foreclosed real estate owned		590				844
Accrued interest receivable		5,876				6,317
Goodwill		29,266				29,290
Other intangible assets		380				495
Other assets		24,991				18,946
TOTAL ASSETS	$	2,077,698			$	2,009,836
LIABILITIES
Deposits:
Non-interest bearing demand	$	438,979			$	415,395
Interest-bearing		1,342,798				1,269,793
Total deposits		1,781,777				1,685,188
Short-term borrowings		63,622				72,917
Other borrowings		26,844				39,366
Accrued interest payable		1,160				1,370
Other liabilities		17,489				15,888
TOTAL LIABILITIES		1,890,892				1,814,729
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: 2022: 8,268,401 shares, 2021: 8,240,081 shares		827				824
Surplus		96,619				95,717
Retained earnings		114,845				97,201
Treasury stock, at cost: 2022: 65,089 shares, 2021: 21,568 shares		(1,760	)			(656	)
Accumulated other comprehensive (loss) income		(23,725	)			2,021
TOTAL STOCKHOLDERS' EQUITY		186,806				195,107
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,077,698			$	2,009,836
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended March 31,
		2022				2021
INTEREST INCOME
Loans receivable, including fees	$	15,375			$	16,146
Securities		1,894				1,112
Other		78				43
Total Interest income		17,347				17,301
INTEREST EXPENSE
Deposits		1,059				1,255
Short-term borrowings		48				69
Other borrowings		139				201
Total Interest expense		1,246				1,525
NET INTEREST INCOME		16,101				15,776
PROVISION FOR LOAN LOSSES		300				1,500
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		15,801				14,276
OTHER INCOME
Service charges and fees		1,470				1,247
Income from fiduciary activities		202				160
Net realized gains on sales of securities		-				21
Gains on sales of loans, net		-				29
Gains on sales of foreclosed real estate owned		427				3
Earnings and proceeds on life insurance policies		176				374
Other		1,063				158
Total other income		3,338				1,992
OTHER EXPENSES
Salaries and employee benefits		5,431				4,953
Occupancy, furniture and equipment		1,307				1,220
Data processing and related operations		628				603
Taxes, other than income		294				305
Professional fees		575				540
FDIC Insurance assessment		183				181
Foreclosed real estate		53				33
Amortization of intangibles		27				35
Other		1,659				1,585
Total other expenses		10,157				9,455
INCOME BEFORE TAX		8,982				6,813
INCOME TAX EXPENSE		1,854				1,271
NET INCOME	$	7,128			$	5,542
Basic earnings per share	$	0.87			$	0.68
Diluted earnings per share	$	0.87			$	0.67
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended March 31		2022				2021
Net interest income	$	16,101			$	15,776
Net income		7,128				5,542
Net interest spread (fully taxable equivalent)		3.22	%			3.46	%
Net interest margin (fully taxable equivalent)		3.32	%			3.59	%
Return on average assets		1.39	%			1.18	%
Return on average equity		14.22	%			11.39	%
Return on average tangible equity		16.65	%			13.42	%
Basic earnings per share	$	0.87			$	0.68
Diluted earnings per share	$	0.87			$	0.67
As of March 31		2022				2021
Total assets	$	2,077,698			$	2,009,836
Total loans receivable		1,371,645				1,421,568
Allowance for loan losses		16,660				14,509
Total deposits		1,781,777				1,685,188
Stockholders' equity		186,806				195,107
Trust assets under management		190,144				173,263
Book value per share	$	22.99			$	23.82
Tangible book value per share	$	19.37			$	20.20
Equity to total assets		8.99	%			9.71	%
Allowance to total loans receivable		1.21	%			1.02	%
Nonperforming loans to total loans		0.05	%			0.22	%
Nonperforming assets to total assets		0.06	%			0.20	%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		March 31				December 31				September 30				June 30				March 31
		2022				2021				2021				2021				2021
ASSETS
Cash and due from banks	$	22,394			$	21,073			$	28,353			$	34,831			$	20,364
Interest-bearing deposits with banks		143,632				185,608				191,580				170,342				190,135
Cash and cash equivalents		166,026				206,681				219,933				205,173				210,499
Securities available for sale		434,924				406,782				361,988				333,636				275,224
Loans receivable		1,371,645				1,354,931				1,371,002				1,386,654				1,421,568
Less: Allowance for loan losses		16,660				16,442				16,103				15,340				14,509
Net loans receivable		1,354,985				1,338,489				1,354,899				1,371,314				1,407,059
Regulatory stock, at cost		3,423				3,927				3,898				4,084				4,043
Bank owned life insurance		40,215				40,038				39,864				39,665				39,471
Bank premises and equipment, net		17,022				17,289				17,364				17,298				17,648
Foreclosed real estate owned		590				1,742				1,876				844				844
Goodwill and other intangibles		29,646				29,673				29,700				29,727				29,785
Other assets		30,867				23,883				24,169				23,823				25,263
TOTAL ASSETS	$	2,077,698			$	2,068,504			$	2,053,691			$	2,025,564			$	2,009,836
LIABILITIES
Deposits:
Non-interest bearing demand	$	438,979			$	440,652			$	442,534			$	435,824			$	415,395
Interest-bearing deposits		1,342,798				1,316,141				1,279,988				1,253,117				1,269,793
Total deposits		1,781,777				1,756,793				1,722,522				1,688,941				1,685,188
Borrowings		90,466				90,820				111,382				119,858				112,283
Other liabilities		18,649				15,629				17,179				16,266				17,258
TOTAL LIABILITIES		1,890,892				1,863,242				1,851,083				1,825,065				1,814,729
STOCKHOLDERS' EQUITY		186,806				205,262				202,608				200,499				195,107
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,077,698			$	2,068,504			$	2,053,691			$	2,025,564			$	2,009,836
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		2022				2021				2021				2021				2021
INTEREST INCOME
Loans receivable, including fees	$	15,375			$	16,149			$	16,859			$	16,102			$	16,146
Securities		1,894				1,612				1,468				1,356				1,112
Other		78				92				72				59				43
Total interest income		17,347				17,853				18,399				17,517				17,301
INTEREST EXPENSE
Deposits		1,059				1,130				1,167				1,205				1,255
Borrowings		187				227				243				259				270
Total interest expense		1,246				1,357				1,410				1,464				1,525
NET INTEREST INCOME		16,101				16,496				16,989				16,053				15,776
PROVISION FOR LOAN LOSSES		300				450				750				1,500				1,500
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		15,801				16,046				16,239				14,553				14,276
OTHER INCOME
Service charges and fees		1,470				1,425				1,485				1,532				1,247
Income from fiduciary activities		202				198				209				181				160
Net realized gains on sales of securities		-				36				35				-				21
Gains on sales of loans, net		-				-				39				109				29
Gains on sales of foreclosed real estate owned		427				-				31				2				3
Earnings and proceeds on life insurance policies		176				174				200				194				374
Other		1,063				188				160				171				158
Total other income		3,338				2,021				2,159				2,189				1,992
OTHER EXPENSES
Salaries and employee benefits		5,431				4,992				5,491				5,171				4,953
Occupancy, furniture and equipment, net		1,307				1,254				1,163				1,186				1,220
Foreclosed real estate		53				88				16				15				33
FDIC insurance assessment		183				169				177				154				181
Other		3,183				3,539				2,776				2,968				3,068
Total other expenses		10,157				10,042				9,623				9,494				9,455
INCOME BEFORE TAX		8,982				8,025				8,775				7,248				6,813
INCOME TAX EXPENSE		1,854				1,387				1,794				1,493				1,271
NET INCOME	$	7,128			$	6,638			$	6,981			$	5,755			$	5,542
Basic earnings per share	$	0.87			$	0.81			$	0.85			$	0.70			$	0.68
Diluted earnings per share	$	0.87			$	0.81			$	0.85			$	0.70			$	0.67
Book Value per share	$	22.99			$	25.24			$	24.90			$	24.47			$	23.82
Tangible Book Value per share		19.37				21.63				21.27				20.85				20.20
Return on average assets (annualized)		1.39	%			1.26	%			1.36	%			1.15	%			1.18	%
Return on average equity (annualized)		14.22	%			12.84	%			13.50	%			11.59	%			11.39	%
Return on average tangible equity (annualized)		16.65	%			15.02	%			15.78	%			13.63	%			13.42	%
Net interest spread (fte)		3.22	%			3.29	%			3.49	%			3.32	%			3.46	%
Net interest margin (fte)		3.32	%			3.39	%			3.61	%			3.44	%			3.59	%
Allowance for loan losses to total loans		1.21	%			1.21	%			1.17	%			1.11	%			1.02	%
Net charge-offs to average loans (annualized)		0.02	%			0.03	%			-0.00	%			0.19	%			0.04	%
Nonperforming loans to total loans		0.05	%			0.05	%			0.20	%			0.28	%			0.22	%
Nonperforming assets to total assets		0.06	%			0.12	%			0.22	%			0.24	%			0.20	%