Norwood Financial Corp Announces Second Quarter Earnings

HONESDALE, Pa., July 26, 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 June 30, 2023 of $6,503,000, which was $352,000 lower than the same three-month period of last year. The decrease includes a $1,252,000 decrease in net interest income, a $706,000 decrease in total other income, and a $466,000 increase in total other expense, which was partially offset by a $2,050,000 decrease in the provision for credit losses. Earnings per share (fully diluted) were $0.81 in the three months ended June 30, 2023, compared to $0.84 in the same period of last year. The annualized return on average assets for the three months ended June 30, 2023, was 1.23%, while the annualized return on average tangible equity was 17.66%. Net income for the six months ended June 30, 2023, was $12,285,000, which is $1,698,000 lower than the same six-month period of 2022, due to decreases in net interest income and total other income, and an increase in operating expenses, partially offset by a decrease in the provision for credit losses of $2,050,000.   Earnings per share (fully diluted) for the six months ended June 30, 2023, were $1.51, compared to $1.71 for the six months ended June 30, 2022. The annualized return on average assets for the six months ended June 30, 2023 was 1.18%. The annualized return on average tangible equity for the six months ended June 30, 2023 was 17.06%.

Total assets as of June 30, 2023 were $2.142 billion, compared to $2.066 billion at June 30, 2022. At June 30, 2023, loans receivable were $1.578 billion, total deposits were $1.732 billion and stockholders’ equity was $173.4 million.

For the three months ended June 30, 2023, net interest income, on a fully-taxable equivalent basis (fte), totaled $15,829,000, a decrease of $1,253,000 compared to the same period in 2022. A $122.5 million increase in average time deposits, combined with a 231 basis points increase in the cost of time deposits, contributed to the decreased net interest income. Borrowing costs also increased, offsetting a $5,143,000 increase in total interest income. Net interest margin (fte) for the three months ended June 30, 2023 was 3.09%, compared to 3.49% in the same period of 2022. The tax-equivalent yield on interest-earning assets increased 83 basis points to 4.57% during the three months ended June 30, 2023, compared to the same prior year period, while the cost of interest-bearing liabilities increased 167 basis points to 2.01%. Net interest income (fte) for the six months ended June 30, 2023 totaled $32,104,000, which was $1,261,000 lower than the same period in 2022, due primarily to a $10,767,000 increase in the cost of interest-bearing liabilities. The net interest margin (fte) was 3.17% for the six months ended June 30, 2023, as compared to 3.41% for the six months ended June 30, 2022. The decrease in the net interest margin (fte) was due to a 143 basis points increase in the cost of interest-bearing liabilities, which offset the 82 basis points increase in the yield on interest-earning assets.

Other income for the three months ended June 30, 2023, totaled $1,783,000, compared to $2,489,000 for the same period in 2022. The decrease is due primarily to a $220,000 decrease in earnings and proceeds on bank-owned life insurance policies, and a $212,000 loss on the sale of investment securities.   For the six months ended June 30, 2023, other income totaled $3,695,000, compared to $5,828,000 for the six months ended June 30, 2022.   The decrease includes the reduced earnings and proceeds on bank-owned life insurance, losses recognized on sales of securities, and income recognized in 2022 on previously acquired purchased impaired loans that were carried at a discount.

Other expenses totaled $10,938,000 for the three months ended June 30, 2023, an increase of $466,000, compared to the $10,472,000 for the same period of 2022.   For the six months ended June 30, 2023, other expenses totaled $21,374,000, compared to $20,630,000 for the same period in 2022, due primarily to a $539,000 increase in salaries and employee benefits costs.

Mr. Donnelly stated, “Our second quarter income decreased from the 2022 level due to one-time gains recognized in 2022 and the rising cost of deposits and borrowed funds. These decreases were partially offset by a $2,050,000 reduction in our provision for credit losses as a result of our June 30, 2023 current expected credit losses (“CECL”) methodology, due to a reduce level of credit losses within the measurement period. Loan growth was 10.9% annually during the quarter, while total deposits decreased $27.2 million during the second quarter of 2023 due primarily to significant decreases in municipal account balances. Our core operating expenses remain well-controlled, and our capital base remains above “Well-Capitalized” targets. Additionally, our credit quality metrics remained strong during the second quarter, which we believe should benefit future performance. 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 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:

  Three months ended June 30 Six months ended June 30
(dollars in thousands) 2023 2022 2023 2022
      
Net Interest Income $15,642  $16,894  $31,735  $32,995 
Taxable equivalent basis adjustment   using 21% marginal tax rate  187   188   369   370 
Net interest income on a fully taxable equivalent basis $15,829  $17,082  $32,104  $33,365 
      

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 June 30 Six months ended June 30
(dollars in thousands) 2023 2022 2023 2022
      
Average equity $186,111  $181,044  $180,952  $192,090 
      
Average goodwill and other intangibles  (29,536
)
  (29,629
)
  (29,547)  (29,643)
Average tangible equity
 $156,575  $151,415  $151,405  $162,447 
      


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)
  June 30      
  2023 2022      
ASSETS          
Cash and due from banks$30,053 $29,931       
Interest-bearing deposits with banks 3,036  79,735       
Cash and cash equivalents 33,089  109,666       
           
Securities available for sale 403,621  440,877       
Loans receivable 1,577,699  1,404,317       
Less: Allowance for credit losses 17,483  17,017       
Net loans receivable 1,560,216  1,387,300       
Regulatory stock, at cost 7,924  2,396       
Bank premises and equipment, net 17,363  17,032       
Bank owned life insurance 45,806  43,167       
Foreclosed real estate owned 387  346       
Accrued interest receivable 7,276  6,085       
Deferred tax assets, net 23,301  19,134       
Goodwill 29,266  29,266       
Other intangible assets 260  353       
Other assets 13,256  10,762       
TOTAL ASSETS$2,141,765 $2,066,384       
           
LIABILITIES          
Deposits:          
Non-interest bearing demand$425,757 $442,991       
Interest-bearing 1,306,240  1,356,839       
Total deposits 1,731,997  1,799,830       
Short-term borrowings 112,290  70,427       
Other borrowings 99,687  4,412       
Accrued interest payable 7,101  1,138       
Other liabilities 17,266  16,746       
TOTAL LIABILITIES 1,968,341  1,892,553       
           
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 97,268  96,752       
Retained earnings 135,583  119,414       
Treasury stock, at cost: 2023: 223,926 shares, 2022: 110,084 shares(6,007) (2,933)      
Accumulated other comprehensive loss (54,249) (40,230)      
TOTAL STOCKHOLDERS' EQUITY 173,424  173,831       
           
TOTAL LIABILITIES AND          
STOCKHOLDERS' EQUITY$2,141,765 $2,066,384       
           
           
           
           
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,
  2023 2022   2023 2022
INTEREST INCOME          
Loans receivable, including fees$20,702 $15,714   $39,860 $31,089 
Securities 2,481  2,197    4,986  4,091 
Other 53  182    101  260 
Total Interest income 23,236  18,093    44,947  35,440 
           
INTEREST EXPENSE          
Deposits 5,740  1,083    10,102  2,142 
Short-term borrowings 943  60    1,722  108 
Other borrowings 911  56    1,388  195 
Total Interest expense 7,594  1,199    13,212  2,445 
NET INTEREST INCOME 15,642  16,894    31,735  32,995 
(RELEASE OF) PROVISION FOR CREDIT LOSSES$(1,750) 300   $(1,450) 600 
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES 17,392  16,594    33,185  32,395 
           
           
OTHER INCOME          
Service charges and fees 1,353  1,475    2,665  2,946 
Income from fiduciary activities 229  214    441  416 
Net realized gains on sales of securities (212) -    (209) - 
Gains on sales of loans, net 10  -    10  - 
Gains on sales of foreclosed real estate owned -  -    -  427 
Earnings and proceeds on life insurance policies 229  449    442  625 
Other 174  351    346  1,414 
Total other income 1,783  2,489    3,695  5,828 
           
OTHER EXPENSES          
Salaries and employee benefits 5,842  5,840    11,810  11,271 
Occupancy, furniture and equipment 1,314  1,206    2,576  2,513 
Data processing and related operations 822  666    1,590  1,295 
Taxes, other than income 162  240    323  533 
Professional fees 323  406    608  981 
FDIC Insurance assessment 244  142    445  326 
Foreclosed real estate 74  10    103  63 
Amortization of intangibles 23  27    46  54 
Other 2,134  1,935    3,873  3,594 
Total other expenses 10,938  10,472    21,374  20,630 
           
INCOME BEFORE TAX 8,237  8,611    15,506  17,593 
INCOME TAX EXPENSE 1,734  1,756    3,221  3,610 
NET INCOME$6,503 $6,855   $12,285 $13,983 
           
Basic earnings per share$0.81 $0.84   $1.52 $1.71 
           
Diluted earnings per share$0.81 $0.84   $1.51 $1.71 
           
           
           
NORWOOD FINANCIAL CORP
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
           
For the Three Months Ended June 30 2023 2022      
           
Net interest income$15,642 $16,894       
Net income 6,503  6,855       
           
Net interest spread (fully taxable equivalent) 2.56% 3.40%      
Net interest margin (fully taxable equivalent) 3.09% 3.49%      
Return on average assets 1.23% 1.35%      
Return on average equity 14.72% 15.19%      
Return on average tangible equity 17.66% 18.16%      
Basic earnings per share$0.81 $0.84       
Diluted earnings per share$0.81 $0.84       
           
For the Six Months Ended June 30 2023
 2022
      
           
Net interest income$31,735 $32,995       
Net income 12,285  13,983       
           
Net interest spread (fully taxable equivalent) 2.69% 3.30%      
Net interest margin (fully taxable equivalent) 3.17% 3.41%      
Return on average assets 1.18% 1.37%      
Return on average equity 14.17% 14.68%      
Return on average tangible equity 17.06% 17.36%      
Basic earnings per share$1.52 $1.71       
Diluted earnings per share$1.51 $1.71       
           
As of June 30 2023
 2022
      
           
Total assets$2,141,765 $2,066,384       
Total loans receivable 1,577,699  1,404,317       
Allowance for credit losses 17,483  17,017       
Total deposits 1,731,997  1,799,830       
Stockholders' equity 173,424  173,831       
Trust assets under management 193,392  174,193       
           
Book value per share$22.24 $21.65       
Tangible book value per share$18.58 $18.02       
Equity to total assets 8.10% 8.41%      
Allowance to total loans receivable 1.11% 1.21%      
Nonperforming loans to total loans 0.20% 0.04%      
Nonperforming assets to total assets 0.17% 0.05%      
           
           
           
NORWOOD FINANCIAL CORP
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
  June 30 March 31 December 31 September 30 June 30
  2023 2023 2022 2022 2022
ASSETS          
Cash and due from banks$30,053 $25,701 $28,847 $23,092 $29,931 
Interest-bearing deposits with banks 3,036  3,314  3,019  17,785  79,735 
Cash and cash equivalents 33,089  29,015  31,866  40,877  109,666 
           
Securities available for sale 403,621  418,245  418,927  427,287  440,877 
Loans receivable 1,577,699  1,535,643  1,473,945  1,432,288  1,404,317 
Less: Allowance for credit losses 17,483  19,445  16,999  16,931  17,017 
Net loans receivable 1,560,216  1,516,198  1,456,946  1,415,357  1,387,300 
Regulatory stock, at cost 7,924  5,963  5,418  2,220  2,396 
Bank owned life insurance 45,806  45,577  43,364  43,169  43,167 
Bank premises and equipment, net 17,363  17,660  17,924  17,427  17,032 
Foreclosed real estate owned 387  346  346  346  346 
Goodwill and other intangibles 29,526  29,549  29,572  29,595  29,619 
Other assets 43,833  41,810  42,707  42,592  35,981 
TOTAL ASSETS$2,141,765 $2,104,363 $2,047,070 $2,018,870 $2,066,384 
           
LIABILITIES          
Deposits:          
Non-interest bearing demand$425,757 $419,615 $434,529 $453,560 $442,991 
Interest-bearing deposits 1,306,240  1,336,320  1,293,198  1,315,236  1,356,839 
Total deposits 1,731,997  1,755,935  1,727,727  1,768,796  1,799,830 
Borrowings 211,978  148,744  133,215  71,754  74,839 
Other liabilities 24,366  23,269  19,043  19,471  17,884 
TOTAL LIABILITIES 1,968,341  1,927,948  1,879,985  1,860,021  1,892,553 
           
STOCKHOLDERS' EQUITY 173,424  176,415  167,085  158,849  173,831 
           
TOTAL LIABILITIES AND          
STOCKHOLDERS' EQUITY$2,141,765 $2,104,363 $2,047,070 $2,018,870 $2,066,384 
           
           
           
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 2023 2023 2022 2022 2022
INTEREST INCOME          
Loans receivable, including fees$20,702 $19,158 $17,810 $17,114 $15,714 
Securities 2,481  2,505  2,487  2,473  2,197 
Other 53  48  98  245  182 
Total interest income 23,236  21,711  20,395  19,832  18,093 
           
INTEREST EXPENSE          
Deposits 5,740  4,362  2,772  1,557  1,083 
Borrowings 1,854  1,256  391  105  116 
Total interest expense 7,594  5,618  3,163  1,662  1,199 
NET INTEREST INCOME 15,642  16,093  17,232  18,170  16,894 
(RELEASE OF) PROVISION FOR CREDIT LOSSES (1,750) 300  300  -  300 
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION          
FOR CREDIT LOSSES 17,392  15,793  16,932  18,170  16,594 
           
OTHER INCOME          
Service charges and fees 1,353  1,313  1,370  1,346  1,475 
Income from fiduciary activities 229  212  210  219  214 
Net realized (losses) gains on sales of securities (212) 2  3  -  - 
Gains on sales of loans, net 10  -  1  1  - 
Gains on sales of foreclosed real estate owned -  -  -  -  - 
Earnings and proceeds on life insurance policies 229  213  195  267  449 
Other 174  172  147  345  351 
Total other income 1,783  1,912  1,926  2,178  2,489 
           
OTHER EXPENSES          
Salaries and employee benefits 5,842  5,969  5,246  5,553  5,840 
Occupancy, furniture and equipment, net 1,314  1,262  1,263  1,191  1,206 
Foreclosed real estate 74  29  7  4  10 
FDIC insurance assessment 244  200  144  143  142 
Other 3,464  2,976  3,615  3,248  3,274 
Total other expenses 10,938  10,436  10,275  10,139  10,472 
           
INCOME BEFORE TAX 8,237  7,269  8,583  10,209  8,611 
INCOME TAX EXPENSE 1,734  1,487  1,443  2,100  1,756 
NET INCOME$6,503 $5,782 $7,140 $8,109 $6,855 
           
Basic earnings per share$0.81 $0.71 $0.88 $1.00 $0.84 
           
Diluted earnings per share$0.81 $0.71 $0.88 $1.00 $0.84 
           
Book Value per share$22.24 $21.92 $20.86 $19.92 $21.65 
Tangible Book Value per share 18.58  18.31  17.24  16.29  18.02 
           
Return on average assets (annualized) 1.23% 1.13% 1.40% 1.57% 1.35%
Return on average equity (annualized) 14.72% 13.61% 17.40% 17.93% 15.19%
Return on average tangible equity (annualized) 17.66% 16.42% 21.27% 21.48% 18.16%
           
Net interest spread (fte) 2.56% 2.83% 3.30% 3.61% 3.40%
Net interest margin (fte) 3.09% 3.25% 3.55% 3.74% 3.49%
           
Allowance for credit losses to total loans 1.11% 1.27% 1.15% 1.18% 1.21%
Net charge-offs to average loans (annualized) 0.06% 0.08% 0.06% 0.02% -0.02%
Nonperforming loans to total loans 0.20% 0.18% 0.08% 0.04% 0.04%
Nonperforming assets to total assets 0.17% 0.15% 0.07% 0.05% 0.05%
           

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