Norwood Financial Corp Announces Third Quarter Earnings

HONESDALE, Pa., Oct. 24, 2023 (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, 2023 of $4,119,000, which represents a decrease of $3,990,000, from the $8,109,000 earned in the same three-month period of 2022. The decrease in earnings was due to a $3.1 million decrease in net interest income, an $882,000 increase in the provision for credit losses, and a $1.1 million increase in total other expenses during the three-months ended September 30, 2023. For the three months ended September 30, 2023, earnings per share (fully diluted) were $0.51, which represents a decrease from the $1.00 earned in the three months ended September 30, 2022. The annualized returns on average assets and average tangible equity for the three-month period ended September 30, 2023, were 0.76% and 11.22%, respectively, compared to 1.57% and 21.48% for the three-month period ended September 30, 2022. Net income for the nine months ended September 30, 2023, totaled $16,405,000, which is $5,688,000 lower than the same period of 2022. The decrease in net income includes a $4,390,000 decrease in net interest income, a $2.0 million decrease in total other income, and a $1.9 million increase in total other expenses during the nine months ended September 30, 2023. Earnings per share (fully diluted) for the nine months ended September 30, 2023, totaled $2.03 per share compared to $2.71 per share for the nine months ended September 30, 2022.

As of September 30, 2023, total assets were $2.179 billion, loans receivable were $1.611 billion, total deposits were $1.747 billion and stockholders’ equity was $164.7 million.

For the three months ended September 30, 2023, net interest income, on a fully taxable equivalent basis (fte), totaled $15,224,000, which represents a decrease of $3,145,000, compared to the three months ended September 30, 2022. Net interest margin (fte) for the three months ended September 30, 2023 was 2.94%, compared to 3.74% for the three months ended September 30, 2022. Net interest income (fte) for the nine months ended September 30, 2023 totaled $47,328,000, a decrease of $4,406,000, compared to the nine months ended September 30,2022, due primarily to the increased cost of interest-bearing liabilities in excess of the increase in the yield earned on interest-earning assets. The net interest margin (fte) for the nine months ended September 30, 2023 was 3.09%, compared to 3.52% for the nine months ended September 30, 2022.

For the three months ended September 30, 2023, the Company recorded a provision for credit losses in the amount of $882,000 compared to $0 in the three-month period ended September 30, 2022. The increase in the provision for credit losses was required to replenish the allowance for credit losses to a level deemed appropriate after recognizing $2.3 million of credit losses during the current period. The current period losses include a $2.0 million charge-off resulting from deterioration in one large commercial relationship. The remaining balance of the relationship was transferred to nonperforming status, resulting in an increase in nonperforming loans and nonperforming assets. For the nine-month period ended September 30, 2023, the Company recorded a release of provision for credit losses in the amount of $568,000, compared to a provision of $600,000 in the nine-month period ended September 30, 2022.

Total other income for the three months ended September 30, 2023 was $2,306,000, compared to $2,178,000 for the three months ended September 30, 2022. For the nine months ended September 30, 2023, total other income was $6,001,000, compared to $8,006,000 in the same period of 2022. The decrease was due primarily to income recognized in 2022 on previously acquired purchased impaired loans that were carried at a discount.

Total other expenses were $11,276,000 for the three months ended September 30, 2023, compared to $10,139,000 for the three months ended September 30, 2022. For the nine months ended September 30, 2023, total other expenses were $32,649,000, compared to $30,768,000 for the nine months ended September 30, 2022. The increase was due primarily to a $1,069,000 increase in salaries and employee benefit costs during the nine months ended September 30, 2023.

Mr. Donnelly commented, “Our results for the first nine months of 2023 reflect decreasing net interest spreads due to rising interest rates, which have impacted our cost of interest-bearing liabilities more than the increase in yield earned on interest-earning assets. We continue to compare favorably to peer banks who have also reported a reduction in their financial performance. We will continue to search out opportunities to maintain our position as a premier community bank, and to serve our local communities with their financial needs. 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”, “bode”, “future performance” 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 continued effect, and impact of, the COVID-19 pandemic on the economy and the Company’s results of operation and financial condition, our ability to maintain strong credit quality metrics, our ability to have future performance, our ability to control core operating expenses and costs, 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 net interest income on a fully taxable-equivalent basis (fte), which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Fully taxable-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 fully taxable-equivalent basis ensures comparability of net 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 taxable-equivalent basis:

(dollars in thousands)Three months ended September 30 Nine months ended September 30
  2023   2022   2023   2022 
Net interest income$15,039  $18,170  $46,774  $51,164 
Tax equivalent basis adjustment using 21% marginal tax rate 185   199   554   570 
Net interest income on a fully taxable equivalent basis$15,224  $18,369  $47,328  $51,734 
                

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 table reconciles average equity to average tangible equity:

 Three months ended September 30 Nine months ended September 30
(dollars in thousands) 2023   2022   2023   2022 
                
Average equity$175,224  $179,398  $174,944  $187,183 
                
Average goodwill and other intangibles (29,514
)
  (29,605)  (29,536)  (29,630)
                
Average tangible equity
$145,710  $149,793  $145,408  $157,553 
                


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
  2023  2022
ASSETS     
Cash and due from banks $41,141   $23,092 
Interest-bearing deposits with banks 13,005    17,785 
Cash and cash equivalents 54,146    40,877 
      
Securities available for sale 380,499    427,287 
Loans receivable 1,611,069    1,432,288 
Less: Allowance for credit losses 16,086    16,931 
Net loans receivable 1,594,983    1,415,357 
Regulatory stock, at cost 8,843    2,220 
Bank premises and equipment, net 17,254    17,427 
Bank owned life insurance 46,197    43,169 
Foreclosed real estate owned 290    346 
Accrued interest receivable 7,759    6,303 
Deferred tax assets, net 25,610    24,405 
Goodwill 29,266    29,266 
Other intangible assets 240    329 
Other assets 14,911    11,884 
TOTAL ASSETS $2,179,998   $2,018,870  
      
LIABILITIES     
Deposits:     
Non-interest bearing demand $430,242   $453,560 
Interest-bearing 1,316,582    1,315,236 
Total deposits 1,746,824    1,768,796 
Short-term borrowings 103,881    71,754 
Other borrowings  137,447    0 
Accrued interest payable 8,605    1,425 
Other liabilities 18,539    18,046 
TOTAL LIABILITIES 2,015,296    1,860,021 
      
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: 2023: 8,291,401 shares, 2022: 8,275,901 shares 829    828 
Surplus 97,449    96,785 
Retained earnings 137,363    125,243 
Treasury stock, at cost: 2023: 222,051 shares, 2022: 130,046 shares (5,957)  (3,442)
Accumulated other comprehensive loss (64,982)  (60,565)
TOTAL STOCKHOLDERS' EQUITY 164,702    158,849 
      
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,179,998   $2,018,870 
        


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,
  2023   2022   2023   2022 
INTEREST INCOME             
Loans receivable, including fees$22,021   $17,114  $61,881   $48,203 
Securities 2,433    2,473   7,418    6,564 
Other 54    245   156    504 
Total Interest income 24,508    19,832   69,455    55,271 
              
INTEREST EXPENSE             
Deposits 7,017    1,557   17,119    3,699 
Short-term borrowings 1,126    88   2,702    196 
Other borrowings 1,326    17   2,860    212 
Total Interest expense 9,469    1,662   22,681    4,107 
NET INTEREST INCOME 15,039    18,170   46,774    51,164 
(RELEASE OF) PROVISION FOR CREDIT LOSSES$ 882    0  $ (568)  600 
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES 14,157    18,170   47,342    50,564 
              
              
OTHER INCOME             
Service charges and fees 1,527    1,346   4,192    4,292 
Income from fiduciary activities 246    219   688    634 
Net realized gains on sales of securities  -    -    (209)  - 
Gains on sales of loans, net  18    1    27    1 
Gains on sales of foreclosed real estate owned  13    -    13    427 
Earnings and proceeds on life insurance policies 328    267   770    892 
Other 174    345   520    1,760 
Total other income 2,306    2,178   6,001    8,006 
              
OTHER EXPENSES             
Salaries and employee benefits 6,083    5,553   17,893    16,824 
Occupancy, furniture and equipment 1,242    1,191   3,818    3,704 
Data processing and related operations 876    736   2,465    2,031 
Taxes, other than income 167    240   490    773 
Professional fees 524    354   1,132    1,336 
FDIC Insurance assessment  254    143    699    468 
Foreclosed real estate 9    4   112    66 
Amortization of intangibles 20    24   66    78 
Other 2,101    1,894   5,974    5,488 
Total other expenses 11,276    10,139   32,649    30,768 
              
INCOME BEFORE TAX 5,187    10,209    20,694    27,802  
INCOME TAX EXPENSE 1,068    2,100   4,289    5,709 
NET INCOME $4,119   $8,109   $16,405   $22,093 
              
Basic earnings per share$0.51   $1.00  $2.03   $2.71 
              
Diluted earnings per share$0.51   $1.00  $2.03   $2.71 
                


NORWOOD FINANCIAL CORP       
Financial Highlights (Unaudited)       
(dollars in thousands, except per share data)       
        
For the Three Months Ended September 30 2023   2022 
        
Net interest income$15,039   $18,170 
Net income 4,119    8,109 
        
Net interest spread (fully taxable equivalent) 2.28%  3.61%
Net interest margin (fully taxable equivalent) 2.94%  3.74%
Return on average assets 0.76%  1.57%
Return on average equity 9.33%  17.93%
Return on average tangible equity 11.22%  21.48%
Basic earnings per share$0.51   $1.00 
Diluted earnings per share$0.51   $1.00 
        
For the Nine Months Ended September 30 2023   2022 
        
Net interest income$46,774   $51,164 
Net income 16,405    22,093 
        
Net interest spread (fully taxable equivalent) 2.55%  3.41%
Net interest margin (fully taxable equivalent) 3.09%  3.52%
Return on average assets 1.04%  1.44%
Return on average equity 12.54%  15.73%
Return on average tangible equity 15.08%  18.67%
Basic earnings per share$2.03   $2.71 
Diluted earnings per share$2.03   $2.71 
        
As of September 30 2023   2022 
        
Total assets$2,179,998   $2,018,870 
Total loans receivable 1,611,069    1,432,288 
Allowance for credit losses 16,086    16,931 
Total deposits 1,746,824    1,768,796 
Stockholders' equity 164,702    158,849 
Trust assets under management 185,913    172,037 
        
Book value per share$21.15   $19.92 
Tangible book value per share$17.49   $16.29 
Equity to total assets 7.56%  7.87%
Allowance to total loans receivable 1.00%  1.18%
Nonperforming loans to total loans 0.65%  0.04%
Nonperforming assets to total assets 0.50%  0.05%
        


NORWOOD FINANCIAL CORP                   
Consolidated Balance Sheets (unaudited)                   
(dollars in thousands)                   
  September 30   June 30   March 31   December 31   September 30 
  2023   2023   2023   2022   2022 
ASSETS                   
Cash and due from banks$41,141  $30,053  $25,701  $28,847  $23,092 
Interest-bearing deposits with banks 13,005   3,036   3,314   3,019   17,785 
Cash and cash equivalents 54,146   33,089   29,015   31,866   40,877 
                    
Securities available for sale 380,499   403,621   418,245   418,927   427,287 
Loans receivable 1,611,069   1,577,699   1,535,643   1,473,945   1,432,288 
Less: Allowance for credit losses 16,086   17,483   19,445   16,999   16,931 
Net loans receivable 1,594,983   1,560,216   1,516,198   1,456,946   1,415,357 
Regulatory stock, at cost 8,843   7,924   5,963   5,418   2,220 
Bank owned life insurance 46,197   45,806   45,577   43,364   43,169 
Bank premises and equipment, net 17,254   17,363   17,660   17,924   17,427 
Foreclosed real estate owned 290   387   346   346   346 
Goodwill and other intangibles 29,506   29,526   29,549   29,572   29,595 
Other assets 48,280   43,833   41,810   42,707   42,592 
TOTAL ASSETS$2,179,998  $2,141,765  $2,104,363  $2,047,070  $2,018,870 
                    
LIABILITIES                   
Deposits:                   
Non-interest bearing demand$430,242  $425,757  $419,615  $434,529  $453,560 
Interest-bearing deposits 1,316,582   1,306,240   1,336,320   1,293,198   1,315,236 
Total deposits 1,746,824   1,731,997   1,755,935   1,727,727   1,768,796 
Borrowings 241,328   211,978   148,744   133,215   71,754 
Other liabilities 27,144   24,366   23,269   19,043   19,471 
TOTAL LIABILITIES 2,015,296   1,968,341   1,927,948   1,879,985   1,860,021 
                    
STOCKHOLDERS' EQUITY 164,702   173,424   176,415   167,085   158,849 
                    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$2,179,998  $2,141,765  $2,104,363  $2,047,070  $2,018,870 
                    


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 2023  2023  2023  2022  2022
INTEREST INCOME              
Loans receivable, including fees$22,021  $20,702  $19,158  $17,810  $17,114 
Securities 2,433   2,481   2,505   2,487   2,473 
Other 54   53   48   98   245 
Total interest income 24,508   23,236   21,711   20,395   19,832 
               
INTEREST EXPENSE              
Deposits 7,017   5,740   4,362   2,772   1,557 
Borrowings 2,452   1,854   1,256   391   105 
Total interest expense 9,469   7,594   5,618   3,163   1,662 
NET INTEREST INCOME 15,039   15,642   16,093   17,232   18,170 
(RELEASE OF) PROVISION FOR CREDIT LOSSES 882   (1,750)  300   300   - 
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES 14,157   17,392   15,793   16,932   18,170 
               
OTHER INCOME              
Service charges and fees 1,527   1,353   1,313   1,370   1,346 
Income from fiduciary activities 246   229   212   210   219 
Net realized (losses) gains on sales of securities -   (212)  2   3   - 
Gains on sales of loans, net 18   10   -   1   1 
Gains on sales of foreclosed real estate owned 13   -   -   -   - 
Earnings and proceeds on life insurance policies 328   229   213   195   267 
Other 174   174   172   147   345 
Total other income 2,306   1,783   1,912   1,926   2,178 
               
OTHER EXPENSES              
Salaries and employee benefits 6,083   5,842   5,969   5,246   5,553 
Occupancy, furniture and equipment, net 1,242   1,314   1,262   1,263   1,191 
Foreclosed real estate 9   74   29   7   4 
FDIC insurance assessment 254   244   200   144   143 
Other 3,688   3,464   2,976   3,615   3,248 
Total other expenses 11,276   10,938   10,436   10,275   10,139 
               
INCOME BEFORE TAX 5,187   8,237   7,269   8,583   10,209 
INCOME TAX EXPENSE 1,068   1,734   1,487   1,443   2,100 
NET INCOME$4,119  $6,503  $5,782  $7,140  $8,109 
               
Basic earnings per share$0.51  $0.81  $0.71  $0.88  $1.00 
               
Diluted earnings per share$0.51  $0.81  $0.71  $0.88  $1.00 
               
Book Value per share$21.15  $22.24  $21.92  $20.86  $19.92 
Tangible Book Value per share 17.49   18.58   18.31   17.24   16.29 
               
Return on average assets (annualized) 0.76%  1.23%  1.13%  1.40%  1.57%
Return on average equity (annualized) 9.33%  14.72%  13.61%  17.40%  17.93%
Return on average tangible equity (annualized)��11.22%  17.66%  16.42%  21.27%  21.48%
               
Net interest spread (fte) 2.28%  2.56%  2.83%  3.30%  3.61%
Net interest margin (fte) 2.94%  3.09%  3.25%  3.55%  3.74%
               
Allowance for credit losses to total loans 1.00%  1.11%  1.27%  1.15%  1.18%
Net charge-offs to average loans (annualized) 0.59%  0.06%  0.08%  0.06%  0.02%
Nonperforming loans to total loans 0.65%  0.20%  0.18%  0.08%  0.04%
Nonperforming assets to total assets 0.50%  0.17%  0.15%  0.07%  0.05%
                    

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