Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

HONESDALE, Pa., Jan. 28, 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 earnings for the three months ended December 31, 2021 of $6,638,000 compared to $5,513,000 earned in the corresponding period of 2020. The increase in earnings includes a $1,150,000 reduction in the provision for loan losses, and an $882,000 increase in net interest income. For the year ended December 31, 2021, net income totaled $24,915,000, an increase of $9,835,000 from net income of $15,080,000 earned in the prior year. The increase includes the benefits derived from the Company’s acquisition of UpState New York Bancorp, Inc. (“UpState”), which closed on July 7, 2020, and over $4.5 million of earnings recognized from Paycheck Protection Program (“PPP”) loans.

Earnings per share (fully diluted) were $0.81 and $0.67 for the three-month periods ended December 31, 2021 and 2020, respectively. For the year ended December 31, 2021, earnings per share on a fully diluted basis were $3.04, compared to $2.09 for the year ended December 31, 2020. For the year ended December 31, 2021, the return on average assets was 1.24%, and the return on average equity was 12.35%, compared to 0.97% and 9.06%, respectively, for the year ended December 31, 2020.         

Total assets were $2.069 billion as of December 31, 2021. Loans receivable totaled $1.355 billion as of December 31, 2021, with total deposits of $1.757 billion and stockholders’ equity of $205.3 million as of December 31, 2021.

Loans receivable decreased $55.8 million from the year-ended December 31, 2020, due primarily to the $78.8 million decrease in PPP loans resulting from loan forgiveness. For the three months and year ended December 31, 2021, net charge-offs totaled $111,000 and $907,000, respectively, compared to $125,000 and $809,000, respectively, for the corresponding periods in 2020.

Net interest income, on a fully taxable equivalent basis (fte), totaled $16,671,000 for the three months ended December 31, 2021, an increase of $850,000 compared to the same period in 2020. For the year ended December 31, 2021, net interest income (fte) totaled $66,100,000, an increase of $14,741,000 compared to 2020, due primarily to the higher volume of earning assets, including a $209.1 million increase in average loans outstanding. Loan origination fees related to PPP loans increased $3,072,000 compared to the 2020 total.

Other income for the three months ended December 31, 2021 totaled $2,021,000 compared to $2,661,000 for the similar period in 2020. Gains on the sale of loans and securities decreased $205,000, while service charges and fees decreased $488,000. All other items of other income increased $53,000, net. Other income for the year ended December 31, 2021 totaled $8,325,000 compared to $7,780,000 in 2020, an increase of $545,000 due primarily to a $578,000 increase in service charges and fees. Gains on the sale of loans and investment securities decreased $329,000 in the aggregate, while all other items of other income increased $296,000, net.

Other expenses totaled $10,042,000 for the three months ended December 31, 2021, compared to $9,909,000 in the similar period of 2020. For the year ended December 31, 2021, other expenses totaled $38,578,000 compared to $34,440,000 for 2020, an increase of $4,138,000. The increase reflects the costs of operations acquired from UpState, including four new Community Offices.

Mr. Critelli commented, “In 2021, our earnings increased $9.8 million over our previous record year of 2020. Our Return on Average Assets was 1.24%, and our Return on Average Equity was 12.35%. Earnings per share (fully diluted) also improved to $3.04 per share in 2021 from $2.09 per share in 2020. While a portion of this increase reflects earnings and fees collected on PPP loans, we have continued to grow our core business lines, which bodes well for future success. Our results also reflect a full year accretion to earnings from our acquisition of UpState. During the year, we also made significant progress improving our credit quality metrics, which will benefit future results. Our cash dividend of $0.28 per share declared in the fourth quarter of 2021 represents a 7.7% increase over the same period of last year. 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 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 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 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:

	Three months ended December 31				Year ended December 31
(dollars in thousands)	2021		2020		2021		2020
Net interest income	$16,496		$15,614		$65,313		$50,476
Tax equivalent basis adjustment using 21% marginal tax rate	175		207		787		883
Net interest income on a fully taxable equivalent basis	$16,671		$15,821		$66,100		$51,359

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 December 31,				Year ended December 31,
(dollars in thousands)	2021		2020		2021		2020
Average equity	$205,053		$193,740		$201,681		$166,427
Average goodwill and other Intangibles	(29,683)		(30,747)		(29,738)		(17,942)
Average tangible equity	$175,370		$162,993		$171,943		$148,485

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
		2021			2020
ASSETS
Cash and due from banks	$	21,073		$	19,445
Interest-bearing deposits with banks		185,608			92,248
Cash and cash equivalents		206,681			111,693
Securities available for sale		406,782			226,586
Loans receivable		1,354,931			1,410,732
Less: Allowance for loan losses		16,442			13,150
Net loans receivable		1,338,489			1,397,582
Regulatory stock, at cost		3,927			3,981
Bank premises and equipment, net		17,289			17,814
Bank owned life insurance		40,038			39,608
Foreclosed real estate owned		1,742			965
Accrued interest receivable		5,889			6,232
Goodwill		29,266			29,290
Other intangible assets		407			530
Other assets		17,994			17,583
TOTAL ASSETS	$	2,068,504		$	1,851,864
LIABILITIES
Deposits:
Non-interest bearing demand	$	440,652		$	359,559
Interest-bearing		1,316,141			1,175,826
Total deposits		1,756,793			1,535,385
Short-term borrowings		60,822			63,303
Other borrowings		29,998			42,459
Accrued interest payable		1,203			1,601
Other liabilities		14,426			14,331
TOTAL LIABILITIES		1,863,242			1,657,079
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: 2021: 8,266,751 shares, 2020: 8,236,331 shares		827			824
Surplus		96,443			95,388
Retained earnings		110,015			93,796
Treasury stock, at cost: 2021: 65,328 shares, 2020: 10,263 shares		(1,767	)		(342	)
Accumulated other comprehensive (loss) income		(256	)		5,119
TOTAL STOCKHOLDERS' EQUITY		205,262			194,785
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,068,504		$	1,851,864
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,
		2021			2020						2021			2020
INTEREST INCOME
Loans receivable, including fees	$	16,149		$	16,336					$	65,257		$	54,046
Securities		1,612			1,064						5,547			4,337
Other		92			29						266			72
Total Interest income		17,853			17,429						71,070			58,455
INTEREST EXPENSE
Deposits		1,130			1,514						4,757			6,610
Short-term borrowings		71			81						284			325
Other borrowings		156			220						716			1,044
Total Interest expense		1,357			1,815						5,757			7,979
NET INTEREST INCOME		16,496			15,614						65,313			50,476
PROVISION FOR LOAN LOSSES		450			1,600						4,200			5,450
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		16,046			14,014						61,113			45,026
OTHER INCOME
Service charges and fees		1,425			1,913						5,693			5,115
Income from fiduciary activities		198			150						748			682
Net realized gains on sales of securities		36			-						92			71
Gains on sales of loans, net		-			241						177			527
Earnings and proceeds on life insurance policies		174			208						941			845
Other		188			149						674			540
Total other income		2,021			2,661						8,325			7,780
OTHER EXPENSES
Salaries and employee benefits		4,992			5,243						20,608			17,121
Occupancy, furniture and equipment		1,254			1,165						4,822			4,148
Data processing and related operations		655			808						2,415			2,457
Taxes, other than income		358			356						1,122			997
Professional fees		510			328						1,582			1,062
FDIC Insurance assessment		169			213						681			399
Foreclosed real estate		88			8						115			53
Amortization of intangibles		27			35						123			114
Merger related		-			66						-			2,049
Other		1,989			1,687						7,110			6,040
Total other expenses		10,042			9,909						38,578			34,440
INCOME BEFORE TAX		8,025			6,766						30,860			18,366
INCOME TAX EXPENSE		1,387			1,253						5,945			3,286
NET INCOME	$	6,638		$	5,513					$	24,915		$	15,080
Basic earnings per share	$	0.81		$	0.67					$	3.05		$	2.09
Diluted earnings per share	$	0.81		$	0.67					$	3.04		$	2.09
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended December 31		2021			2020
Net interest income	$	16,496		$	15,614
Net income		6,638			5,513
Net interest spread (fully taxable equivalent)		3.29	%		3.50	%
Net interest margin (fully taxable equivalent)		3.39	%		3.65	%
Return on average assets		1.26	%		1.18	%
Return on average equity		12.84	%		11.32	%
Return on average tangible equity		15.02	%		13.46	%
Basic earnings per share	$	0.81		$	0.67
Diluted earnings per share	$	0.81		$	0.67
For the Twelve Months Ended December 31		2021			2020
Net interest income	$	65,313		$	50,476
Net income		24,915			15,080
Net interest spread (fully taxable equivalent)		3.39	%		3.36	%
Net interest margin (fully taxable equivalent)		3.50	%		3.55	%
Return on average assets		1.24	%		0.97	%
Return on average equity		12.35	%		9.06	%
Return on average tangible equity		14.49	%		10.16	%
Basic earnings per share	$	3.05		$	2.09
Diluted earnings per share	$	3.04		$	2.09
As of December 31		2021			2020
Total assets	$	2,068,504		$	1,851,864
Total loans receivable		1,354,931			1,410,732
Allowance for loan losses		16,442			13,150
Total deposits		1,756,793			1,535,385
Stockholders' equity		205,262			194,785
Trust assets under management		195,958			168,085
Book value per share	$	25.24		$	23.72
Tangible book value per share	$	21.63		$	20.10
Equity to total assets		9.92	%		10.52	%
Allowance to total loans receivable		1.21	%		0.93	%
Nonperforming loans to total loans		0.05	%		0.24	%
Nonperforming assets to total assets		0.12	%		0.24	%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		December 31			September 30			June 30			March			December 31
		2021			2021			2021			2021			2020
ASSETS
Cash and due from banks	$	21,073		$	28,353		$	34,831		$	20,364		$	19,445
Interest-bearing deposits with banks		185,608			191,580			170,342			190,135			92,248
Cash and cash equivalents		206,681			219,933			205,173			210,499			111,693
Securities available for sale		406,782			361,988			333,636			275,224			226,586
Loans receivable		1,354,931			1,371,002			1,386,654			1,421,568			1,410,732
Less: Allowance for loan losses		16,442			16,103			15,340			14,509			13,150
Net loans receivable		1,338,489			1,354,899			1,371,314			1,407,059			1,397,582
Regulatory stock, at cost		3,927			3,898			4,084			4,043			3,981
Bank owned life insurance		40,038			39,864			39,665			39,471			39,608
Bank premises and equipment, net		17,289			17,364			17,298			17,648			17,814
Foreclosed real estate owned		1,742			1,876			844			844			965
Goodwill and other intangibles		29,673			29,700			29,727			29,785			29,820
Other assets		23,883			24,169			23,823			25,263			23,815
TOTAL ASSETS	$	2,068,504		$	2,053,691		$	2,025,564		$	2,009,836		$	1,851,864
LIABILITIES
Deposits:
Non-interest bearing demand	$	440,652		$	442,534		$	435,824		$	415,395		$	359,559
Interest-bearing deposits		1,316,141			1,279,988			1,253,117			1,269,793			1,175,826
Total deposits		1,756,793			1,722,522			1,688,941			1,685,188			1,535,385
Borrowings		90,820			111,382			119,858			112,283			105,762
Other liabilities		15,629			17,179			16,266			17,258			15,932
TOTAL LIABILITIES		1,863,242			1,851,083			1,825,065			1,814,729			1,657,079
STOCKHOLDERS' EQUITY		205,262			202,608			200,499			195,107			194,785
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,068,504		$	2,053,691		$	2,025,564		$	2,009,836		$	1,851,864
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		2021			2021			2021			2021			2020
INTEREST INCOME
Loans receivable, including fees	$	16,149		$	16,859		$	16,102		$	16,146		$	16,336
Securities		1,612			1,468			1,356			1,112			1,064
Other		92			72			59			43			29
Total interest income		17,853			18,399			17,517			17,301			17,429
INTEREST EXPENSE
Deposits		1,130			1,167			1,205			1,255			1,514
Borrowings		227			243			259			270			301
Total interest expense		1,357			1,410			1,464			1,525			1,815
NET INTEREST INCOME		16,496			16,989			16,053			15,776			15,614
PROVISION FOR LOAN LOSSES		450			750			1,500			1,500			1,600
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		16,046			16,239			14,553			14,276			14,014
OTHER INCOME
Service charges and fees		1,425			1,485			1,532			1,247			1,913
Income from fiduciary activities		198			209			181			160			150
Net realized gains on sales of securities		36			35			-			21			-
Gains on sales of loans, net		-			39			109			29			241
Earnings and proceeds on life insurance policies		174			200			194			374			208
Other		188			160			171			158			149
Total other income		2,021			2,128			2,187			1,989			2,661
OTHER EXPENSES
Salaries and employee benefits		4,992			5,491			5,171			4,953			5,243
Occupancy, furniture and equipment, net		1,254			1,163			1,186			1,220			1,165
Foreclosed real estate		88			(15	)		13			30			8
FDIC insurance assessment		169			177			154			181			213
Merger related		-			-			-			-			66
Other		3,539			2,776			2,968			3,068			3,214
Total other expenses		10,042			9,592			9,492			9,452			9,909
INCOME BEFORE TAX		8,025			8,775			7,248			6,813			6,766
INCOME TAX EXPENSE		1,387			1,794			1,493			1,271			1,253
NET INCOME	$	6,638		$	6,981		$	5,755		$	5,542		$	5,513
Basic earnings per share	$	0.81		$	0.85		$	0.70		$	0.68		$	0.67
Diluted earnings per share	$	0.81		$	0.85		$	0.70		$	0.67		$	0.67
Book Value per share	$	25.24		$	24.90		$	24.47		$	23.82		$	23.72
Tangible Book Value per share		21.63			21.27			20.85			20.20			20.10
Return on average assets (annualized)		1.26	%		1.36	%		1.15	%		1.18	%		1.18	%
Return on average equity (annualized)		12.84	%		13.50	%		11.59	%		11.39	%		11.32	%
Return on average tangible equity (annualized)		15.02	%		15.78	%		13.63	%		13.42	%		13.46	%
Net interest spread (fte)		3.29	%		3.49	%		3.32	%		3.46	%		3.50	%
Net interest margin (fte)		3.39	%		3.61	%		3.44	%		3.59	%		3.65	%
Allowance for loan losses to total loans		1.21	%		1.17	%		1.11	%		1.02	%		0.93	%
Net charge-offs to average loans (annualized)		0.03	%		0.00	%		0.19	%		0.04	%		0.04	%
Nonperforming loans to total loans		0.05	%		0.20	%		0.28	%		0.22	%		0.24	%
Nonperforming assets to total assets		0.12	%		0.22	%		0.24	%		0.20	%		0.24	%