Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 22, 2022 (GLOBE NEWSWIRE) -- James O. Donnelly, 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, 2022 of $6,855,000, which was $1,100,000, or 19.1%, higher than the same three-month period of last year. The increase includes an $841,000 increase in net interest income, a $1,200,000 decrease in the provision for loan losses, and a $302,000 increase in total other income. Earnings per share (fully diluted) were $0.84 in the three months ended June 30, 2022, compared to $0.70 in the same period of last year. The annualized return on average assets for the three months ended June 30, 2022, was 1.35%, while the annualized return on average tangible equity was 18.16%. Net income for the six months ended June 30, 2022, was $13,983,000, which is $2,687,000 higher than the same six-month period of 2021, due to increases in net interest income and total other income, and a decrease in the provision for loan losses of $2,400,000.   Earnings per share (fully diluted) for the six months ended June 30, 2022 were $1.71, compared to $1.38 for the six months ended June 30, 2021. The annualized return on average assets for the six months ended June 30, 2022 was 1.37%. The annualized return on average tangible equity for the six months ended June 30, 2022 was 17.36%.

Total assets as of June 30, 2022 were $2.066 billion, with loans receivable of $1.404 billion, deposits of $1.800 billion and stockholders’ equity of $173.8 million.  

For the three months ended June 30, 2022, net interest income, on a fully-taxable equivalent basis (fte), totaled $17,082,000, an increase of $819,000 compared to the same period in 2021. A $173.1 million increase in average securities available for sale contributed to the increased net interest income. Net interest margin (fte) for the three months ended June 30, 2022 was 3.49%, compared to 3.44% in the same period of 2021. The tax-equivalent yield on interest-earning assets decreased one basis point to 3.74% during the three months ended June 30, 2022, compared to the same prior year period, while the cost of interest-bearing liabilities decreased nine basis points to 0.34%. Net interest income (fte) for the six months ended June 30, 2022 totaled $33,365,000, which was $1,121,000 higher than the same period in 2021, due to a $183.2 million increase in average securities available for sale. The net interest margin (fte) was 3.41% in the six months ended June 30, 2022, as compared to 3.51% during the six months ended June 30, 2021. The decrease in the net interest margin (fte) was due to a $39.6 million decrease in average loans outstanding related to Paycheck Protection Program (“PPP”) loans forgiven during the period.

Other income for the three months ended June 30, 2022, totaled $2,489,000, compared to $2,187,000 for the same period in 2021. The increase is due primarily to a $255,000 increase in earnings and proceeds on bank-owned life insurance policies.   For the six months ended June 30, 2022, other income totaled $5,828,000, compared to $4,176,000 for the six months ended June 30, 2021.   The increase was due primarily to income recognized on previously acquired purchased impaired loans that were carried at a discount.

Other expenses totaled $10,472,000 for the three months ended June 30, 2022, an increase of $980,000, compared to the $9,492,000 for the same period of 2021.   For the six months ended June 30, 2022, other expenses totaled $20,630,000, compared to $18,944,000 for the same period in 2021, due primarily to a $1,146,000 increase in salaries and employee benefits costs.

Mr. Donnelly commented, “Our results for the first half of 2022 reflect the higher level of interest earning assets, and reduced loan loss provisions related to our improved credit quality metrics. Our return on average assets for the six months ended June 30, 2022 was 1.37%, our earnings per share improved 23.9% compared to the same six-month period of last year, and our credit quality metrics remain strong which should bode well for future performance. 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 fifteen 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 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)			2022			2021				2022			2021
Net Interest Income		$	16,894		$	16,053			$	32,995		$	31,829
Taxable equivalent basis adjustment   using 21% marginal tax rate			188			210				370			415
Net interest income on a fully taxable equivalent basis		$	17,082		$	16,263			$	33,365		$	32,244
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)			2022			2021				2022			2021
Average equity		$	181,044		$	199,777			$	192,090		$	198,689
Average goodwill and other intangibles			(29,629	)		(29,762	)			(29,643	)		(29,780	)
Average tangible equity		$	151,415		$	170,015			$	162,447		$	168,909

Contact:		William S. Lance
		Executive Vice President &
		Chief Financial Officer
		NORWOODFINANCIAL 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
		2022			2021
ASSETS
Cash and due from banks	$	29,931		$	34,831
Interest-bearing deposits with banks		79,735			170,342
Cash and cash equivalents		109,666			205,173
Securities available for sale		440,877			333,636
Loans receivable		1,404,317			1,386,654
Less: Allowance for loan losses		17,017			15,340
Net loans receivable		1,387,300			1,371,314
Regulatory stock, at cost		2,396			4,084
Bank premises and equipment, net		17,032			17,298
Bank owned life insurance		43,167			39,665
Foreclosed real estate owned		346			844
Accrued interest receivable		6,085			6,190
Goodwill		29,266			29,266
Other intangible assets		353			461
Other assets		29,896			17,633
TOTAL ASSETS	$	2,066,384		$	2,025,564
LIABILITIES
Deposits:
Non-interest bearing demand	$	442,991		$	435,824
Interest-bearing		1,356,839			1,253,117
Total deposits		1,799,830			1,688,941
Short-term borrowings		70,427			83,599
Other borrowings		4,412			36,259
Accrued interest payable		1,138			1,462
Other liabilities		16,746			14,804
TOTAL LIABILITIES		1,892,553			1,825,065
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: 8,275,901 shares, 2021: 8,243,556 shares		828			825
Surplus		96,752			95,951
Retained earnings		119,414			100,818
Treasury stock, at cost: 2022: 110,084 shares, 2021: 21,568 shares		(2,933	)		(656	)
Accumulated other comprehensive (loss) income		(40,230	)		3,561
TOTAL STOCKHOLDERS' EQUITY		173,831			200,499
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,066,384		$	2,025,564
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,
		2022			2021						2022			2021
INTEREST INCOME
Loans receivable, including fees	$	15,714		$	16,102					$	31,089		$	32,248
Securities		2,197			1,356						4,091			2,468
Other		182			59						260			102
Total Interest income		18,093			17,517						35,440			34,818
INTEREST EXPENSE
Deposits		1,083			1,205						2,142			2,459
Short-term borrowings		60			73						108			142
Other borrowings		56			186						195			388
Total Interest expense		1,199			1,464						2,445			2,989
NET INTEREST INCOME		16,894			16,053						32,995			31,829
PROVISION FOR LOAN LOSSES		300			1,500						600			3,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		16,594			14,553						32,395			28,829
OTHER INCOME
Service charges and fees		1,475			1,532						2,946			2,782
Income from fiduciary activities		214			181						416			341
Net realized gains on sales of securities		-			-						-			21
Gains on sales of loans, net		-			109						-			138
Earnings and proceeds on life insurance policies		449			194						625			568
Other		351			171						1,841			326
Total other income		2,489			2,187						5,828			4,176
OTHER EXPENSES
Salaries and employee benefits		5,840			5,171						11,271			10,125
Occupancy, furniture and equipment		1,206			1,186						2,513			2,406
Data processing and related operations		666			562						1,295			1,166
Taxes, other than income		240			229						533			534
Professional fees		406			343						981			883
FDIC Insurance assessment		142			154						326			335
Foreclosed real estate		10			13						63			42
Amortization of intangibles		27			34						54			68
Other		1,935			1,800						3,594			3,385
Total other expenses		10,472			9,492						20,630			18,944
INCOME BEFORE TAX		8,611			7,248						17,593			14,061
INCOME TAX EXPENSE		1,756			1,493						3,610			2,765
NET INCOME	$	6,855		$	5,755					$	13,983		$	11,296
Basic earnings per share	$	0.84		$	0.70					$	1.71		$	1.38
Diluted earnings per share	$	0.84		$	0.70					$	1.71		$	1.38
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended June 30		2022			2021
Net interest income	$	16,894		$	16,053
Net income		6,855			5,755
Net interest spread (fully taxable equivalent)		3.40	%		3.32	%
Net interest margin (fully taxable equivalent)		3.49	%		3.44	%
Return on average assets		1.35	%		1.15	%
Return on average equity		15.19	%		11.59	%
Return on average tangible equity		18.16	%		13.63	%
Basic earnings per share	$	0.84		$	0.70
Diluted earnings per share	$	0.84		$	0.70
For the Six Months Ended June 30		2022			2021
Net interest income	$	32,995		$	31,829
Net income		13,983			11,296
Net interest spread (fully taxable equivalent)		3.30	%		3.39	%
Net interest margin (fully taxable equivalent)		3.41	%		3.51	%
Return on average assets		1.37	%		1.16	%
Return on average equity		14.68	%		11.49	%
Return on average tangible equity		17.36	%		13.53	%
Basic earnings per share	$	1.71		$	1.38
Diluted earnings per share	$	1.71		$	1.35
As of June 30		2022			2021
Total assets	$	2,066,384		$	2,025,564
Total loans receivable		1,404,317			1,386,654
Allowance for loan losses		17,017			15,340
Total deposits		1,799,830			1,688,941
Stockholders' equity		173,831			200,499
Trust assets under management		174,193			180,602
Book value per share	$	21.65		$	24.47
Tangible book value per share	$	18.02		$	20.85
Equity to total assets		8.41	%		9.90	%
Allowance to total loans receivable		1.21	%		1.11	%
Nonperforming loans to total loans		0.04	%		0.28	%
Nonperforming assets to total assets		0.05	%		0.24	%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		June 30			March 31			December 31			September 30			June 30
		2022			2022			2021			2021			2021
ASSETS
Cash and due from banks	$	29,931		$	22,394		$	21,073		$	28,353		$	34,831
Interest-bearing deposits with banks		79,735			143,632			185,608			191,580			170,342
Cash and cash equivalents		109,666			166,026			206,681			219,933			205,173
Securities available for sale		440,877			434,924			406,782			361,988			333,636
Loans receivable		1,404,317			1,371,645			1,354,931			1,371,002			1,386,654
Less: Allowance for loan losses		17,017			16,660			16,442			16,103			15,340
Net loans receivable		1,387,300			1,354,985			1,338,489			1,354,899			1,371,314
Regulatory stock, at cost		2,396			3,423			3,927			3,898			4,084
Bank owned life insurance		43,167			40,215			40,038			39,864			39,665
Bank premises and equipment, net		17,032			17,022			17,289			17,364			17,298
Foreclosed real estate owned		346			590			1,742			1,876			844
Goodwill and other intangibles		29,619			29,646			29,673			29,700			29,727
Other assets		35,981			30,867			23,883			24,169			23,823
TOTAL ASSETS	$	2,066,384		$	2,077,698		$	2,068,504		$	2,053,691		$	2,025,564
LIABILITIES
Deposits:
Non-interest bearing demand	$	442,991		$	438,979		$	440,652		$	442,534		$	435,824
Interest-bearing deposits		1,356,839			1,342,798			1,316,141			1,279,988			1,253,117
Total deposits		1,799,830			1,781,777			1,756,793			1,722,522			1,688,941
Borrowings		74,839			90,466			90,820			111,382			119,858
Other liabilities		17,884			18,649			15,629			17,179			16,266
TOTAL LIABILITIES		1,892,553			1,890,892			1,863,242			1,851,083			1,825,065
STOCKHOLDERS' EQUITY		173,831			186,806			205,262			202,608			200,499
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,066,384		$	2,077,698		$	2,068,504		$	2,053,691		$	2,025,564
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		2022			2022			2021			2021			2021
INTEREST INCOME
Loans receivable, including fees	$	15,714		$	15,375		$	16,149		$	16,859		$	16,102
Securities		2,197			1,894			1,612			1,468			1,356
Other		182			78			92			72			59
Total interest income		18,093			17,347			17,853			18,399			17,517
INTEREST EXPENSE
Deposits		1,083			1,059			1,130			1,167			1,205
Borrowings		116			187			227			243			259
Total interest expense		1,199			1,246			1,357			1,410			1,464
NET INTEREST INCOME		16,894			16,101			16,496			16,989			16,053
PROVISION FOR LOAN LOSSES		300			300			450			750			1,500
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		16,594			15,801			16,046			16,239			14,553
OTHER INCOME
Service charges and fees		1,475			1,470			1,425			1,485			1,532
Income from fiduciary activities		214			202			198			209			181
Net realized gains on sales of securities		-			-			36			35			-
Gains on sales of loans, net		-			-			-			39			109
Gains on sales of foreclosed real estate owned		-			427			-			31			2
Earnings and proceeds on life insurance policies		449			176			174			200			194
Other		351			1,063			188			160			171
Total other income		2,489			3,338			2,021			2,159			2,189
OTHER EXPENSES
Salaries and employee benefits		5,840			5,431			4,992			5,491			5,171
Occupancy, furniture and equipment, net		1,206			1,307			1,254			1,163			1,186
Foreclosed real estate		10			53			88			16			15
FDIC insurance assessment		142			183			169			177			154
Other		3,274			3,183			3,539			2,776			2,968
Total other expenses		10,472			10,157			10,042			9,623			9,494
INCOME BEFORE TAX		8,611			8,982			8,025			8,775			7,248
INCOME TAX EXPENSE		1,756			1,854			1,387			1,794			1,493
NET INCOME	$	6,855		$	7,128		$	6,638		$	6,981		$	5,755
Basic earnings per share	$	0.84		$	0.87		$	0.81		$	0.85		$	0.70
Diluted earnings per share	$	0.84		$	0.87		$	0.81		$	0.85		$	0.70
Book Value per share	$	21.65		$	22.99		$	25.24		$	24.90		$	24.47
Tangible Book Value per share		18.02			19.37			21.63			21.27			20.85
Return on average assets (annualized)		1.35	%		1.39	%		1.26	%		1.36	%		1.15	%
Return on average equity (annualized)		15.19	%		14.22	%		12.84	%		13.50	%		11.59	%
Return on average tangible equity (annualized)		18.16	%		16.65	%		15.02	%		15.78	%		13.63	%
Net interest spread (fte)		3.40	%		3.22	%		3.29	%		3.49	%		3.32	%
Net interest margin (fte)		3.49	%		3.32	%		3.39	%		3.61	%		3.44	%
Allowance for loan losses to total loans		1.21	%		1.21	%		1.21	%		1.17	%		1.11	%
Net charge-offs to average loans (annualized)		-0.02	%		0.02	%		0.03	%		-0.00	%		0.19	%
Nonperforming loans to total loans		0.04	%		0.05	%		0.05	%		0.20	%		0.28	%
Nonperforming assets to total assets		0.05	%		0.06	%		0.12	%		0.22	%		0.24	%