GlobeNewswire Inc | Oct 23, 2020 08:15AM EDT

October 23, 2020

HONESDALE, Pa., Oct. 23, 2020 (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 September 30, 2020 of $4,999,000 which represents an increase of $1,092,000, or 28.0%, over the $3,907,000 earned in the same three-month period of 2019. The increase in earnings reflects the benefits derived from the Companys acquisition of UpState New York Bancorp, Inc. (UpState), which closed on July 7, 2020. Earnings per share (fully diluted) were $0.62 in the three-months ended September 30, 2020, which equals the $0.62 earned in the same period of 2019. The annualized returns on average assets and average equity for the current three-month period were 1.11% and 10.64%, respectively, compared to 1.27% and 11.56% for the three-month period ended September 30, 2019.

Net income for the nine months ended September 30, 2020 totaled $9,567,000, which is $1,052,000 lower than the same period of 2019 primarily due to a $2,800,000 increase in the provision for loan losses and approximately $1,983,000 of merger related expenses. Earnings per share (fully diluted) for the nine months ended September 30, 2020 totaled $1.39 per share compared to $1.68 per share in the 2019 period.

Total assets as of September 30, 2020 were $1.842 billion with loans receivable of $1.415 billion, deposits of $1.516 billion and stockholders equity of $190.5 million. Total assets have increased $626.3 million during the past twelve months while loans and deposits have increased $509.1 million and $541.5 million, respectively. All increases reflect growth due to the UpState acquisition and significant stimulus funds resulting from the Paycheck protection Program (PPP) and CARES Act.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $13.6 million or 0.74% of total assets as of September 30, 2020 compared to $3.0 million or 0.24% of total assets as of September 30, 2019. The increase in nonperforming assets includes $9.5 million of purchased credit impaired loans resulting from the acquisition of UpState.

For the three months ended September 30, 2020, net interest income, on a fully taxable equivalent basis (fte), totaled $15,547,000, which represents an increase of $5,414,000 compared to the same period in 2019. A $493.2 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the 2020 period was 3.73% compared to 3.60% for the similar period in 2019. Net interest income (fte) for the nine months ended September 30, 2020 totaled $35,538,000, an increase of $5,992,000, compared to the similar period in 2019 due primarily to a higher volume of earning assets. The net interest margin (fte) year-to-date for the 2020 period was 3.51%, which equaled the 3.51% recorded in the same period of 2019. All increases reflect the benefits derived from the acquisition of UpState.

Other income for the three months ended September 30, 2020 totaled $2,072,000 compared to $1,882,000 for the similar period in 2019. The increase can be attributed to a higher level of service charges and a $149,000 increase in gains recognized on the sale of loans. For the nine months ended September 30, 2020, other income totaled $5,119,000 compared to $5,083,000 in the 2019 period.

Other expenses totaled $9,380,000 for the three months ended September 30, 2020, compared to $6,791,000 in the similar period of 2019. The higher level of expense during the 2020 period includes costs related to the acquisition of UpState and the operations of four additional community offices acquired in the UpState acquisition. For the nine months ended September 30, 2020, other expenses totaled $24,531,000 compared to $20,224,000 for the similar period in 2019. The increase includes $1,983,000 of merger related expenses and increases related to the operation of four additional community offices.

Mr. Critelli commented, Our results for the first nine months of 2020 have been significantly impacted by our efforts to assist our customers during the COVID-19 pandemic, restrictions on business activity and the costs associated with our acquisition of UpState New York Bancorp, Inc. During the third quarter, we have begun to realize the anticipated benefits of the acquisition through increased net interest income. Our balance sheet reflects the full impact of the UpState acquisition, resulting in a Company with over $1.8 billion of total assets, $1.4 billion of loans and $1.5 billion of deposits. We appreciate the opportunity to serve our Wayne Bank customers and our new customers at the Bank of the Finger Lakes and Bank of Cooperstown locations. We continue to search out 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 fifteen offices throughout Northeastern Pennsylvania and sixteen offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York. The Companys 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 Companys 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 interest income and net interest income, which are non-GAAP (Generally Accepted Accounting Principles) financial measures. Tax-equivalent interest income and net interest income are 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 tax-equivalent basis ensures comparability of interest income and 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 taxable equivalent basis:

Three months ended Nine months ended(dollars in thousands) September 30 September 30 2020 2019 2020 2019Net interest income $ 15,330 $ 9,891 $ 34,862 $ 28,773Tax equivalent basisadjustment using 21% marginal 217 242 676 773tax rateNet interest income on a fully $ 15,547 $ 10,133 $ 35,538 $ 29,546taxable equivalent basis

This release also references average tangible equity, which is also a non-GAAPfinancial measure. Average tangible equity is calculated by deducting averagegoodwill and other intangible assets from average stockholders? equity. TheCompany believes that disclosure of tangible equity ratios enhances investorunderstanding of our financial position and improves the comparability of ourfinancial data.

The following reconciles average equity to average tangible equity:

Three months ended Nine months ended September 30 September 30(dollars in thousands) 2020 2019 2020 2019 Average equity $ 187,478 $ 134,037 $ 157,695 $ 129,367 Average goodwill and other (17,800 ) (11,597 ) (13,643 ) (11,623 )intangiblesAverage tangible equity $ 169,678 $ 122,440 $ 144,052 $ 117,744

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) September 30 2020 2019 ASSETS Cash and due from banks $ 23,874 $ 20,067 Interest-bearing deposits with banks 100,566 848 Cash and cash equivalents 124,440 20,915 Securities available for sale 197,436 211,199 Loans receivable 1,414,662 905,582 Less: Allowance for loan losses 11,674 8,405 Net loans receivable 1,402,988 897,177 Regulatory stock, at cost 3,876 3,137 Bank premises and equipment, net 18,124 13,927 Bank owned life insurance 39,400 38,562 Foreclosed real estate owned 965 1,572 Accrued interest receivable 6,104 3,726 Goodwill 30,213 11,331 Other intangible assets 565 257 Other assets 17,996 14,053 TOTAL ASSETS $ 1,842,107 $ 1,215,856 LIABILITIES Deposits: Non-interest bearing demand $ 372,237 $ 231,211 Interest-bearing 1,143,685 743,222 Total deposits 1,515,922 974,433 Short-term borrowings 69,294 52,778 Other borrowings 46,438 35,906 Accrued interest payable 2,194 2,623 Other liabilities 17,712 15,222 TOTAL LIABILITIES 1,651,560 1,080,962 STOCKHOLDERS' EQUITY Preferred Stock, no par value per share, authorized - - 5,000,000 sharesCommon Stock, $.10 par value per share,authorized: 20,000,000 shares, issued: 2020: 821 632 8,210,982 shares, 2019: 6,314,688 sharesSurplus 95,108 49,052 Retained earnings 90,422 84,522 Treasury stock, at cost: 2020: 13,778 shares, (469 ) (455 ) 2019: 13,807 sharesAccumulated other comprehensive income 4,665 1,143 TOTAL STOCKHOLDERS' 190,547 134,894 EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' $ 1,842,107 $ 1,215,856 EQUITY NORWOOD FINANCIAL CORP.Consolidated Statements of Income (dollars in thousands, except per share data)(unaudited) Three Months Ended September Nine Months Ended September 30, 30, 2020 2019 2020 2019 INTEREST INCOME Loans receivable, including fees $ 16,260 $ 10,776 $ 37,711 $ 31,074 Securities 1,031 1,278 3,272 4,155 Other 18 5 43 70 Total Interest income 17,309 12,059 41,026 35,299 INTEREST EXPENSE Deposits 1,676 1,787 5,096 5,355 Short-term borrowings 61 135 244 344 Other borrowings 242 246 824 827 Total Interest expense 1,979 2,168 6,164 6,526 NET INTEREST INCOME 15,330 9,891 34,862 28,773 PROVISION FOR LOAN LOSSES 1,850 300 3,850 1,050 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 13,480 9,591 31,012 27,723 OTHER INCOME Service charges and fees 1,301 1,200 3,201 3,283 Income from fiduciary activities 205 167 533 454 Net realized gains on sales of 33 169 71 233 securitiesGains on sales of loans, net 164 15 285 125 Earnings and proceeds on life insurance 217 222 638 630 policiesOther 152 109 391 358 Total other income 2,072 1,882 5,119 5,083 OTHER EXPENSES Salaries and employee benefits 4,812 3,667 11,878 10,915 Occupancy, furniture and equipment 1,109 916 2,983 2,780 Data processing and related 746 480 1,649 1,400 operationsTaxes, other than income 214 179 641 520 Professional fees 292 276 735 752 FDIC Insurance assessment 144 (5 ) 186 150 Foreclosed real estate 31 24 44 37 Amortization of intangibles 35 23 79 79 Merger related 386 - 1,983 - Other 1,611 1,231 4,353 3,591 Total other expenses 9,380 6,791 24,531 20,224 INCOME BEFORE TAX 6,172 4,682 11,600 12,582 INCOME TAX EXPENSE 1,173 775 2,033 1,963 NET INCOME $ 4,999 $ 3,907 $ 9,567 $ 10,619 Basic earnings per share $ 0.62 $ 0.62 $ 1.39 $ 1.70 Diluted earnings per share $ 0.62 $ 0.62 $ 1.39 $ 1.68 NORWOOD FINANCIAL CORP.Financial Highlights (Unaudited)(dollars in thousands, except per share data) For the Three Months Ended September 30 2020 2019 Net interest income $ 15,330 $ 9,891 Net income 4,999 3,907 Net interest spread (fully taxable equivalent) 3.55 % 3.35 % Net interest margin (fully taxable equivalent) 3.73 % 3.60 % Return on average assets 1.11 % 1.27 % Return on average equity 10.64 % 11.56 % Return on average tangible equity 11.75 % 12.66 % Basic earnings per share $ 0.62 $ 0.62 Diluted earnings per share $ 0.62 $ 0.62 For the Nine Months Ended September 30 2020 2019 Net interest income $ 34,862 $ 28,773 Net income 9,567 10,619 Net interest spread (fully taxable equivalent) 3.30 % 3.26 % Net interest margin (fully taxable equivalent) 3.51 % 3.51 % Return on average assets 0.88 % 1.17 % Return on average equity 8.13 % 10.97 % Return on average tangible equity 8.90 % 12.06 % Basic earnings per share $ 1.39 $ 1.70 Diluted earnings per share $ 1.39 $ 1.68 As of September 30 2020 2019 Total assets $ 1,842,107 $ 1,215,856 Total loans receivable 1,414,662 905,582 Allowance for loan losses 11,674 8,405 Total deposits 1,515,922 974,433 Stockholders' equity 190,547 134,894 Trust assets under management 155,166 160,230 Book value per share $ 23.30 $ 21.41 Tangible book value per share $ 19.55 $ 19.57 Equity to total assets 10.34 % 11.09 % Allowance to total loans receivable 0.83 % 0.93 % Nonperforming loans to total loans 0.89 % 0.15 % Nonperforming assets to total assets 0.74 % 0.24 % NORWOOD FINANCIAL CORP.Consolidated Balance Sheets (unaudited)(dollars in thousands) September 30 June 30 March 31 December 31 September 30 2020 2020 2020 2019 2019 ASSETS Cash and due from banks $ 23,874 $ 15,387 $ 14,712 $ 15,038 $ 20,067 Interest-bearing deposits with banks 100,566 67,989 23,706 377 848 Cash and cash equivalents 124,440 83,376 38,418 15,415 20,915 Securities available for sale 197,436 196,735 196,998 210,205 211,199 Loans receivable 1,414,662 988,679 928,565 924,581 905,582 Less: Allowance for loan losses 11,674 10,312 9,088 8,509 8,405 Net loans receivable 1,402,988 978,367 919,477 916,072 897,177 Regulatory stock, at cost 3,876 3,677 3,770 4,844 3,137 Bank owned life insurance 39,400 39,183 38,971 38,763 38,562 Bank premises and equipment, net 18,124 14,040 14,071 14,228 13,927 Foreclosed real estate owned 965 965 1,077 1,556 1,572 Goodwill and other intangibles 30,778 11,522 11,543 11,566 11,588 Other assets 24,100 26,676 17,966 17,961 17,779 TOTAL ASSETS $ 1,842,107 $ 1,354,541 $ 1,242,291 $ 1,230,610 $ 1,215,856 LIABILITIES Deposits: Non-interest bearing demand $ 372,237 $ 284,754 $ 213,359 $ 207,299 $ 231,211 Interest-bearing deposits 1,143,685 801,484 776,801 750,230 743,222 Total deposits 1,515,922 1,086,238 990,160 957,529 974,433 Borrowings 115,732 106,027 92,006 118,694 88,684 Other liabilities 19,906 19,612 17,938 16,959 17,845 TOTAL LIABILITIES 1,651,560 1,211,877 1,100,104 1,093,182 1,080,962 STOCKHOLDERS' EQUITY 190,547 142,664 142,187 137,428 134,894 TOTAL LIABILITIES AND STOCKHOLDERS' $ 1,842,107 $ 1,354,541 $ 1,242,291 $ 1,230,610 $ 1,215,856 EQUITY 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 2020 2020 2020 2019 2019 INTEREST INCOME Loans receivable, including fees $ 16,260 $ 10,767 $ 10,683 $ 10,815 $ 10,776 Securities 1,031 1,063 1,179 1,159 1,278 Other 18 19 6 11 5 Total interest income 17,309 11,849 11,868 11,985 12,059 INTEREST EXPENSE Deposits 1,676 1,630 1,790 1,784 1,787 Borrowings 303 352 413 368 381 Total interest expense 1,979 1,982 2,203 2,152 2,168 NET INTEREST INCOME 15,330 9,867 9,665 9,833 9,891 PROVISION FOR LOAN LOSSES 1,850 1,300 700 200 300 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 13,480 8,567 8,965 9,633 9,591 OTHER INCOME Service charges and fees 1,301 837 1,063 1,168 1,200 Income from fiduciary activities 205 175 153 156 167 Net realized gains on sales of 33 - 38 21 169 securitiesGains on sales of loans, net 164 65 56 44 15 Earnings and proceeds on life insurance 217 212 208 200 222 policiesOther 152 103 136 107 109 Total other income 2,072 1,392 1,654 1,696 1,882 OTHER EXPENSES Salaries and employee benefits 4,812 3,289 3,777 3,740 3,667 Occupancy, furniture and equipment, net 1,109 906 968 938 916 Foreclosed real estate 31 (2 ) 16 9 24 FDIC insurance assessment 144 42 - 3 (5 ) Merger related 386 1,597 - - - Other 2,898 2,260 2,298 2,398 2,189 Total other expenses 9,380 8,092 7,059 7,088 6,791 INCOME BEFORE TAX 6,172 1,867 3,560 4,241 4,682 INCOME TAX EXPENSE 1,173 379 481 645 775 NET INCOME $ 4,999 $ 1,488 $ 3,079 $ 3,596 $ 3,907 Basic earnings per share $ 0.62 $ 0.24 $ 0.49 $ 0.57 $ 0.62 Diluted earnings per share $ 0.62 $ 0.24 $ 0.49 $ 0.57 $ 0.62 Book Value per share $ 23.30 $ 22.62 $ 22.52 $ 21.67 $ 21.41 Tangible Book Value per share 19.55 20.80 20.70 19.84 19.57 Return on average assets (annualized) 1.11 % 0.45 % 1.01 % 1.18 % 1.27 % Return on average equity (annualized) 10.64 % 4.17 % 8.79 % 10.42 % 11.56 % Return on average tangible equity (annualized) 11.75 % 4.54 % 9.57 % 11.38 % 12.66 % Net interest spread (fte) 3.55 % 3.03 % 3.23 % 3.33 % 3.35 % Net interest margin (fte) 3.73 % 3.25 % 3.48 % 3.59 % 3.60 % Allowance for loan losses to total loans 0.83 % 1.04 % 0.98 % 0.92 % 0.93 % Net charge-offs to average loans (annualized) 0.14 % 0.03 % 0.05 % 0.04 % 0.05 % Nonperforming loans to total loans 0.89 % 0.30 % 0.30 % 0.09 % 0.15 % Nonperforming assets to total assets 0.74 % 0.29 % 0.31 % 0.19 % 0.24 %