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Norwood Financial Corp Announces Second Quarter Earnings

| Source: Norwood Financial Corp.

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 %  
                       

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