Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 26, 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 September 30, 2022 of $8,109,000, which represents an increase of $1,128,000, or 16.2%, over the $6,981,000 earned in the same three-month period of 2021. The increase in earnings was due to a $1.2 million increase in net interest income, and a $750,000 reduction in the provision for loan losses during the three-months ended September 30, 2022. Earnings per share (fully diluted) were $1.00 in the three-months ended September 30, 2022, which represents an increase from the $0.85 earned in the same period of 2021. The annualized returns on average assets and average tangible equity for the current three-month period were 1.57% and 21.48%, respectively, compared to 1.36% and 15.78% for the three-month period ended September 30, 2021. Net income for the nine months ended September 30, 2022, totaled $22,093,000, which is $3,816,000, or 20.9%, higher than the same period of 2021. The increase in net income includes a $2,347,000 increase in net interest income, a $3,150,000 reduction in the provision for loan losses, and a $1,671,000 increase in total other income during the nine months ended September 30, 2022. Earnings per share (fully diluted) for the nine months ended September 30, 2022, totaled $2.71 per share compared to $2.23 per share in the same 2021 period.

Total assets as of September 30, 2022 were $2.019 billion, with loans receivable of $1.432 billion, deposits of $1.769 billion and stockholders’ equity of $158.8 million.

For the three months ended September 30, 2022, net interest income, on a fully taxable equivalent basis (fte), totaled $18,369,000, which represents an increase of $1,183,000, compared to the same period in 2021. A $157.7 million increase in average securities contributed to the increased income. Net interest margin (fte) for the 2022 period was 3.74%, compared to 3.61% for the similar period in 2021. Net interest income (fte) for the nine months ended September 30, 2022 totaled $51,734,000, an increase of $2,305,000, compared to the same period in 2021, due primarily to a $174.6 million increase in average securities. The net interest margin (fte) for the nine months ended September 30, 2022 was 3.52%, compared to 3.54% for the same period of 2021.

Total other income for the three months ended September 30, 2022 was $2,178,000, compared to $2,159,000 for the same period in 2021. For the nine months ended September 30, 2022, total other income was $8,006,000, compared to $6,335,000 in the same period of 2021. The increase was due primarily to income recognized on previously acquired purchased impaired loans that were carried at a discount.

Total other expenses were $10,139,000 for the three months ended September 30, 2022, compared to $9,623,000 in the same period of 2021. For the nine months ended September 30, 2022, total other expenses were $30,768,000, compared to $28,567,000 for the same period in 2021. The increase was due primarily to a $1,208,000 increase in salaries and employee benefit costs during the nine months ended September 30, 2022.

Mr. Donnelly commented, “Our results for the first nine months of 2022 reflect increasing net interest spreads due to rising interest rates, 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 nine months ended September 30, 2022 was 1.44%, our fully-diluted earnings per share improved 21.5% compared to the same nine-month period of last year, and our credit quality metrics remain strong, which should bode well for future performance. We appreciate the opportunity 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:

(dollars in thousands)	Three months ended September 30				Nine months ended September 30
		2022		2021		2022		2021
Net interest income	$	18,170	$	16,989	$	51,164	$	48,817
Tax equivalent basis adjustment using 21% marginal tax rate		199		197		570		612
Net interest income on a fully taxable equivalent basis	$	18,369	$	17,186	$	51,734	$	49,429

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 September 30						Nine months ended September 30
(dollars in thousands)			2022			2021			2022			2021
Average equity		$	179,398		$	205,848		$	187,183		$	201,102
Average goodwill and other intangibles			(29,605	)		(29,712	)		(29,630	)		(29,757	)
Average tangible equity		$	149,793		$	176,136		$	157,553		$	171,345

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
(unaudited)
		September 30
			2022			2021
ASSETS
Cash and due from banks	$		23,092		$	28,353
Interest-bearing deposits with banks			17,785			191,580
Cash and cash equivalents			40,877			219,933
Securities available for sale			427,287			361,988
Loans receivable			1,432,288			1,371,002
Less: Allowance for loan losses			16,931			16,103
Net loans receivable			1,415,357			1,354,899
Regulatory stock, at cost			2,220			3,898
Bank premises and equipment, net			17,427			17,364
Bank owned life insurance			43,169			39,864
Foreclosed real estate owned			346			1,876
Accrued interest receivable			6,303			6,049
Goodwill			29,266			29,266
Other intangible assets			329			434
Other assets			36,289			18,120
TOTAL ASSETS	$		2,018,870		$	2,053,691
LIABILITIES
Deposits:
Non-interest bearing demand	$		453,560		$	442,534
Interest-bearing			1,315,236			1,279,988
Total deposits			1,768,796			1,722,522
Short-term borrowings			71,754			78,246
Other borrowings			-			33,136
Accrued interest payable			1,425			1,341
Other liabilities			18,046			15,838
TOTAL LIABILITIES			1,860,021			1,851,083
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: 8,245,951 shares			828			825
Surplus			96,785			96,100
Retained earnings			125,243			105,668
Treasury stock, at cost: 2022: 130,046 shares, 2021: 51,568 shares			(3,442	)		(1,423	)
Accumulated other comprehensive (loss) income			(60,565	)		1,438
TOTAL STOCKHOLDERS' EQUITY			158,849			202,608
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$		2,018,870		$	2,053,691
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,
			2022			2021						2022			2021
INTEREST INCOME
Loans receivable, including fees	$		17,114		$	16,859					$	48,203		$	49,107
Securities			2,473			1,468						6,564			3,936
Other			245			72						504			174
Total Interest income			19,832			18,399						55,271			53,217
INTEREST EXPENSE
Deposits			1,557			1,167						3,699			3,627
Short-term borrowings			88			71						196			214
Other borrowings			17			172						212			559
Total Interest expense			1,662			1,410						4,107			4,400
NET INTEREST INCOME			18,170			16,989						51,164			48,817
PROVISION FOR LOAN LOSSES		$	-			750						600			3,750
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			18,170			16,239						50,564			45,067
OTHER INCOME
Service charges and fees			1,346			1,485						4,292			4,268
Income from fiduciary activities			219			209						634			550
Net realized gains on sales of securities			-			35						-			56
Gains on sales of loans, net			1			39						1			177
Gains on sales of foreclosed real estate owned			-			31						427			31
Earnings and proceeds on life insurance policies			267			200						892			767
Other			345			160						1,760			486
Total other income			2,178			2,159						8,006			6,335
OTHER EXPENSES
Salaries and employee benefits			5,553			5,491						16,824			15,616
Occupancy, furniture and equipment			1,191			1,163						3,704			3,568
Data processing and related operations			736			594						2,031			1,760
Taxes, other than income			240			229						773			763
Professional fees			354			189						1,336			1,072
FDIC Insurance assessment			143			177						468			512
Foreclosed real estate			4			16						66			58
Amortization of intangibles			24			28						78			96
Other			1,894			1,736						5,488			5,122
Total other expenses			10,139			9,623						30,768			28,567
INCOME BEFORE TAX			10,209			8,775						27,802			22,835
INCOME TAX EXPENSE			2,100			1,794						5,709			4,558
NET INCOME	$		8,109		$	6,981					$	22,093		$	18,277
Basic earnings per share	$		1.00		$	0.85					$	2.71		$	2.23
Diluted earnings per share	$		1.00		$	0.85					$	2.71		$	2.23
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30			2022			2021
Net interest income	$		18,170		$	16,989
Net income			8,109			6,981
Net interest spread (fully taxable equivalent)			3.61	%		3.49	%
Net interest margin (fully taxable equivalent)			3.74	%		3.61	%
Return on average assets			1.57	%		1.36	%
Return on average equity			17.93	%		13.50	%
Return on average tangible equity			21.48	%		15.78	%
Basic earnings per share	$		1.00		$	0.85
Diluted earnings per share	$		1.00		$	0.85
For the Nine Months Ended September 30			2022			2021
Net interest income	$		51,164		$	48,817
Net income			22,093			18,277
Net interest spread (fully taxable equivalent)			3.41	%		3.43	%
Net interest margin (fully taxable equivalent)			3.52	%		3.54	%
Return on average assets			1.44	%		1.23	%
Return on average equity			15.73	%		12.19	%
Return on average tangible equity			18.67	%		14.31	%
Basic earnings per share	$		2.71		$	2.23
Diluted earnings per share	$		2.71		$	2.23
As of September 30			2022			2021
Total assets	$		2,018,870		$	2,053,691
Total loans receivable			1,432,288			1,371,002
Allowance for loan losses			16,931			16,103
Total deposits			1,768,796			1,722,522
Stockholders' equity			158,849			202,608
Trust assets under management			172,037			187,689
Book value per share	$		19.92		$	24.90
Tangible book value per share	$		16.29		$	21.27
Equity to total assets			7.87	%		9.87	%
Allowance to total loans receivable			1.18	%		1.17	%
Nonperforming loans to total loans			0.04	%		0.14	%
Nonperforming assets to total assets			0.05	%		0.18	%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		September 30				June 30			March 31			December 31			September 30
			2022			2022			2022			2021			2021
ASSETS
Cash and due from banks	$		23,092		$	29,931		$	22,394		$	21,073		$	28,353
Interest-bearing deposits with banks			17,785			79,735			143,632			185,608			191,580
Cash and cash equivalents			40,877			109,666			166,026			206,681			219,933
Securities available for sale			427,287			440,877			434,924			406,782			361,988
Loans receivable			1,432,288			1,404,317			1,371,645			1,354,931			1,371,002
Less: Allowance for loan losses			16,931			17,017			16,660			16,442			16,103
Net loans receivable			1,415,357			1,387,300			1,354,985			1,338,489			1,354,899
Regulatory stock, at cost			2,220			2,396			3,423			3,927			3,898
Bank owned life insurance			43,169			43,167			40,215			40,038			39,864
Bank premises and equipment, net			17,427			17,032			17,022			17,289			17,364
Foreclosed real estate owned			346			346			590			1,742			1,876
Goodwill and other intangibles			29,595			29,619			29,646			29,673			29,700
Other assets			42,592			35,981			30,867			23,883			24,169
TOTAL ASSETS	$		2,018,870		$	2,066,384		$	2,077,698		$	2,068,504		$	2,053,691
LIABILITIES
Deposits:
Non-interest bearing demand	$		453,560		$	442,991		$	438,979		$	440,652		$	442,534
Interest-bearing deposits			1,315,236			1,356,839			1,342,798			1,316,141			1,279,988
Total deposits			1,768,796			1,799,830			1,781,777			1,756,793			1,722,522
Borrowings			71,754			74,839			90,466			90,820			111,382
Other liabilities			19,471			17,884			18,649			15,629			17,179
TOTAL LIABILITIES			1,860,021			1,892,553			1,890,892			1,863,242			1,851,083
STOCKHOLDERS' EQUITY			158,849			173,831			186,806			205,262			202,608
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$		2,018,870		$	2,066,384		$	2,077,698		$	2,068,504		$	2,053,691
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			2022			2022			2022			2021			2021
INTEREST INCOME
Loans receivable, including fees	$		17,114		$	15,714		$	15,375		$	16,149		$	16,859
Securities			2,473			2,197			1,894			1,612			1,468
Other			245			182			78			92			72
Total interest income			19,832			18,093			17,347			17,853			18,399
INTEREST EXPENSE
Deposits			1,557			1,083			1,059			1,130			1,167
Borrowings			105			116			187			227			243
Total interest expense			1,662			1,199			1,246			1,357			1,410
NET INTEREST INCOME			18,170			16,894			16,101			16,496			16,989
PROVISION FOR LOAN LOSSES			-			300			300			450			750
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES			18,170			16,594			15,801			16,046			16,239
OTHER INCOME
Service charges and fees			1,346			1,475			1,470			1,425			1,485
Income from fiduciary activities			219			214			202			198			209
Net realized gains on sales of securities			-			-			-			36			35
Gains on sales of loans, net			1			-			-			-			39
Gains on sales of foreclosed real estate owned			-			-			427			-			31
Earnings and proceeds on life insurance policies			267			449			176			174			200
Other			345			351			1,063			188			160
Total other income			2,178			2,489			3,338			2,021			2,159
OTHER EXPENSES
Salaries and employee benefits			5,553			5,840			5,431			4,992			5,491
Occupancy, furniture and equipment, net			1,191			1,206			1,307			1,254			1,163
Foreclosed real estate			4			10			53			88			16
FDIC insurance assessment			143			142			183			169			177
Other			3,248			3,274			3,183			3,539			2,776
Total other expenses			10,139			10,472			10,157			10,042			9,623
INCOME BEFORE TAX			10,209			8,611			8,982			8,025			8,775
INCOME TAX EXPENSE			2,100			1,756			1,854			1,387			1,794
NET INCOME	$		8,109		$	6,855		$	7,128		$	6,638		$	6,981
Basic earnings per share	$		1.00		$	0.84		$	0.87		$	0.81		$	0.85
Diluted earnings per share	$		1.00		$	0.84		$	0.87		$	0.81		$	0.85
Book Value per share	$		19.92		$	21.65		$	22.99		$	25.24		$	24.90
Tangible Book Value per share			16.29			18.02			19.37			21.63			21.27
Return on average assets (annualized)			1.57	%		1.35	%		1.39	%		1.26	%		1.36	%
Return on average equity (annualized)			17.93	%		15.19	%		14.22	%		12.84	%		13.50	%
Return on average tangible equity (annualized)			21.48	%		18.16	%		16.65	%		15.02	%		15.78	%
Net interest spread (fte)			3.61	%		3.40	%		3.22	%		3.29	%		3.49	%
Net interest margin (fte)			3.74	%		3.49	%		3.32	%		3.39	%		3.61	%
Allowance for loan losses to total loans			1.18	%		1.21	%		1.21	%		1.21	%		1.17	%
Net charge-offs to average loans (annualized)			0.02	%		-0.02	%		0.02	%		0.03	%		-0.00	%
Nonperforming loans to total loans			0.04	%		0.04	%		0.05	%		0.05	%		0.20	%
Nonperforming assets to total assets			0.05	%		0.05	%		0.06	%		0.12	%		0.22	%

Contact:

William S. Lance
Executive Vice President & Chief Financial Officer
NORWOOD FINANCIAL CORP
570-253-8505
www.waynebank.com