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Norwood Financial Corp Announces First Quarter 2023 Earnings

HONESDALE, Pa., April 21, 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 net income of $5,782,000 for the three months ended March 31, 2023, a decrease of $1,346,000, from net income of $7,128,000 for the three months ended March 31, 2022. The decrease was due primarily to a $1,426,000 decrease in other income. Earnings per share on a fully diluted basis were $0.71 for the three-month period ended March 31, 2023, compared to $0.87 in the three-month period ended March 31, 2022. The annualized return on average assets was 1.13% in the first quarter of 2023 and the annualized return on average equity was 13.61%, compared to 1.39% and 14.22%, respectively, in the first quarter of 2022.

Total assets were $2.104 billion as of March 31, 2023, an increase of $26.7 million, compared to March 31, 2022. As of March 31, 2023, loans totaled $1.536 billion, with deposits of $1.756 billion and stockholders’ equity of $176.4 million.

Net interest income on a fully taxable equivalent basis (fte), was $16,275,000 during the three months ended March 31, 2023, compared to $16,283,000 in the comparable three-month period of 2022. During the three-months ended March 31, 2023, the fte yield on interest-earning assets increased 80 basis points compared to the three months ended March 31, 2022, while the cost of funds increased 119 basis points. As a result, the annualized net interest spread (fte) decreased to 2.83% from 3.22% in the quarter ended March 31, 2023 compared to the corresponding three-month period in 2022.

Total other income was $1,912,000 for the three months ended March 31, 2023, compared to $3,338,000 during the corresponding period of last year. The decrease in other income includes $875,000 of income recognized in 2022 on previously acquired purchased impaired loans that were carried at a discount, and a $427,000 gain recorded in 2022 on the sale of a property carried in foreclosed real estate owned. All other categories of other income decreased $124,000, net.

Operating expenses totaled $10,436,000 in the three months ended March 31, 2023, and were $279,000, or 2.7%, higher than the $10,157,000 recorded in the same three-month period of last year.

Additionally, effective January 1, 2023, the Company adopted Accounting Standards Update 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, referred to as the current expected credit loss model (“CECL”). This accounting standard requires that credit losses for financial assets and off-balance sheet credit exposures be measured based on expected credit losses, rather than on incurred credit losses as in prior periods. As a result of the adoption of CECL, the allowance for credit losses was increased by $2,216,000, and retained earnings was decreased by $1,751,000, net of tax. The Company also recorded an off-balance sheet reserve for unfunded commitments of $329,000, with a corresponding decrease to retained earnings of $260,000, net of tax.

Mr. Donnelly stated, “Our first quarter income decreased from the 2022 level due to one-time gains recognized in 2022 and the rising cost of deposits and borrowed funds. Loan growth was 16.7% annually during the quarter, while total deposits increased 6.6% annually during the first quarter of 2023. 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 first 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 March 31,
(dollars in thousands)      
 2023 2022
Net interest income$16,093 $16,101
Tax equivalent basis adjustment using 21% marginal tax rate 182  182
Net interest income on a fully taxable equivalent basis$16,275 $
16,283

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 March 31,
(dollars in thousands)        
 2023 2022
Average equity$172,334  $203,260 
Average goodwill and other intangibles (29,559)  (29,656)
Average tangible equity$142,775  $
173,604
 


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)
                    
  March 31         
  2023  2022         
ASSETS              
Cash and due from banks$25,701  $22,394          
Interest-bearing deposits with banks 3,314   143,632          
Cash and cash equivalents 29,015   166,026          
               
Securities available for sale 418,245   434,924          
Loans receivable 1,535,643   1,371,645          
Less: Allowance for credit losses 19,445   16,660          
Net loans receivable 1,516,198   1,354,985          
Regulatory stock, at cost 5,963   3,423          
Bank premises and equipment, net 17,660   17,022          
Bank owned life insurance 45,577   40,215          
Foreclosed real estate owned 346   590          
Accrued interest receivable 6,633   5,876          
Deferred tax assets, net 22,164   14,771          
Goodwill 29,266   29,266          
Other intangible assets 283   380          
Other assets 13,013   10,220          
TOTAL ASSETS$2,104,363  $2,077,698          
               
LIABILITIES              
Deposits:              
Non-interest bearing demand$419,615  $438,979          
Interest-bearing 1,336,320   1,342,798          
Total deposits 1,755,935   1,781,777          
Short-term borrowings 108,555   63,622          
Other borrowings 40,189   26,844          
Accrued interest payable 4,703   1,160          
Other liabilities 18,566   17,489          
TOTAL LIABILITIES 1,927,948   1,890,892          
               
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: 8,268,401 shares 829   827          
Surplus 95,052   96,619          
Retained earnings 133,427   114,845          
Treasury stock, at cost: 2023: 110,400 shares, 2022: 65,089 shares(2,930)  (1,760)         
Accumulated other comprehensive loss (49,963)  (23,725)         
TOTAL STOCKHOLDERS' EQUITY 176,415   186,806          
               
TOTAL LIABILITIES AND              
   STOCKHOLDERS' EQUITY$2,104,363  $2,077,698          
               
               
               
               
NORWOOD FINANCIAL CORP
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
 
 Three Months Ended March 31,    
  2023  2022         
INTEREST INCOME              
Loans receivable, including fees$19,158  $15,375          
Securities 2,505   1,894          
Other 48   78          
Total Interest income 21,711   17,347          
               
INTEREST EXPENSE              
Deposits 4,362   1,059          
Short-term borrowings 779   48          
Other borrowings 477   139          
Total Interest expense 5,618   1,246          
NET INTEREST INCOME 16,093   16,101          
PROVISION FOR CREDIT LOSSES$300   300          
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 15,793   15,801          
               
OTHER INCOME              
Service charges and fees 1,313   1,470          
Income from fiduciary activities 212   202          
Net realized gains on sales of securities 2   -          
Gains on sales of loans, net -   -          
Gains on sales of foreclosed real estate owned -   427          
Earnings and proceeds on life insurance policies 213   176          
Other 172   1,063          
Total other income 1,912   3,338          
               
OTHER EXPENSES              
Salaries and employee benefits 5,969   5,431          
Occupancy, furniture and equipment 1,262   1,307          
Data processing and related operations 768   628          
Taxes, other than income 161   294          
Professional fees 285   575          
FDIC Insurance assessment 200   183          
Foreclosed real estate 29   53          
Amortization of intangibles 23   27          
Other 1,739   1,659          
Total other expenses 10,436   10,157          
               
INCOME BEFORE TAX 7,269   8,982          
INCOME TAX EXPENSE 1,487   1,854          
NET INCOME$5,782  $7,128          
               
Basic earnings per share$0.71  $0.87          
               
Diluted earnings per share$0.71  $0.87          
               
               
               
NORWOOD FINANCIAL CORP
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
               
For the Three Months Ended March 31 2023  2022         
               
Net interest income$16,093  $16,101          
Net income 5,782   7,128          
               
Net interest spread (fully taxable equivalent) 2.83%  3.22%         
Net interest margin (fully taxable equivalent) 3.25%  3.32%         
Return on average assets 1.13%  1.39%         
Return on average equity 13.61%  14.22%         
Return on average tangible equity 16.42%  16.65%         
Basic earnings per share$0.71  $0.87          
Diluted earnings per share$0.71  $0.87          
               
As of March 31 2023  2022         
               
Total assets$2,104,363  $2,077,698          
Total loans receivable 1,535,643   1,371,645          
Allowance for credit losses 19,445   16,660          
Total deposits 1,755,935   1,781,777          
Stockholders' equity 176,415   186,806          
Trust assets under management 187,345   190,144          
               
Book value per share$21.92  $22.99          
Tangible book value per share$18.31  $19.37          
Equity to total assets 8.38%  8.99%         
Allowance to total loans receivable 1.27%  1.21%         
Nonperforming loans to total loans 0.07%  0.05%         
Nonperforming assets to total assets 0.06%  0.06%         
               
               
               
NORWOOD FINANCIAL CORP
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
 
  March 31  December 31  September 30   June 30  March 31
  2023  2022  2022  2022  2022
ASSETS              
Cash and due from banks$25,701  $28,847  $23,092  $29,931  $22,394 
Interest-bearing deposits with banks 3,314   3,019   17,785   79,735   143,632 
Cash and cash equivalents 29,015   31,866   40,877   109,666   166,026 
               
Securities available for sale 418,245   418,927   427,287   440,877   434,924 
Loans receivable 1,535,643   1,473,945   1,432,288   1,404,317   1,371,645 
Less: Allowance for credit losses 19,445   16,999   16,931   17,017   16,660 
Net loans receivable 1,516,198   1,456,946   1,415,357   1,387,300   1,354,985 
Regulatory stock, at cost 5,963   5,418   2,220   2,396   3,423 
Bank owned life insurance 45,577   43,364   43,169   43,167   40,215 
Bank premises and equipment, net 17,660   17,924   17,427   17,032   17,022 
Foreclosed real estate owned 346   346   346   346   590 
Goodwill and other intangibles 29,549   29,572   29,595   29,619   29,646 
Other assets 41,810   42,707   42,592   35,981   30,867 
TOTAL ASSETS$2,104,363  $2,047,070  $2,018,870  $2,066,384  $2,077,698 
               
LIABILITIES              
Deposits:              
Non-interest bearing demand$419,615  $434,529  $453,560  $442,991  $438,979 
Interest-bearing deposits 1,336,320   1,293,198   1,315,236   1,356,839   1,342,798 
Total deposits 1,755,935   1,727,727   1,768,796   1,799,830   1,781,777 
Borrowings 148,744   133,215   71,754   74,839   90,466 
Other liabilities 23,269   19,043   19,471   17,884   18,649 
TOTAL LIABILITIES 1,927,948   1,879,985   1,860,021   1,892,553   1,890,892 
               
STOCKHOLDERS' EQUITY 176,415   167,085   158,849   173,831   186,806 
               
TOTAL LIABILITIES AND              
   STOCKHOLDERS' EQUITY$2,104,363  $2,047,070  $2,018,870  $2,066,384  $2,077,698 
               
               
               
NORWOOD FINANCIAL CORP              
Consolidated Statements of Income (unaudited)              
(dollars in thousands, except per share data)              
               
  March 31  December 31  September 30June 30  March 31
Three months ended 2023  2022  2022  2022  2022
INTEREST INCOME              
Loans receivable, including fees$19,158  $17,810  $17,114  $15,714  $15,375 
Securities 2,505   2,487   2,473   2,197   1,894 
Other 48   98   245   182   78 
Total interest income 21,711   20,395   19,832   18,093   17,347 
               
INTEREST EXPENSE              
Deposits 4,362   2,772   1,557   1,083   1,059 
Borrowings 1,256   391   105   116   187 
Total interest expense 5,618   3,163   1,662   1,199   1,246 
NET INTEREST INCOME 16,093   17,232   18,170   16,894   16,101 
PROVISION FOR CREDIT LOSSES 300   300   -   300   300 
NET INTEREST INCOME AFTER PROVISION              
FOR CREDIT LOSSES 15,793   16,932   18,170   16,594   15,801 
               
OTHER INCOME              
Service charges and fees 1,313   1,370   1,346   1,475   1,470 
Income from fiduciary activities 212   210   219   214   202 
Net realized gains on sales of securities 2   3   -   -   - 
Gains on sales of loans, net -   1   1   -   - 
Gains on sales of foreclosed real estate owned -   -   -   -   427 
Earnings and proceeds on life insurance policies 213   195   267   449   176 
Other 172   147   345   351   1,063 
Total other income 1,912   1,926   2,178   2,489   3,338 
               
OTHER EXPENSES              
Salaries and employee benefits 5,969   5,246   5,553   5,840   5,431 
Occupancy, furniture and equipment, net 1,262   1,263   1,191   1,206   1,307 
Foreclosed real estate 29   7   4   10   53 
FDIC insurance assessment 200   144   143   142   183 
Other 2,976   3,615   3,248   3,274   3,183 
Total other expenses 10,436   10,275   10,139   10,472   10,157 
               
INCOME BEFORE TAX 7,269   8,583   10,209   8,611   8,982 
INCOME TAX EXPENSE 1,487   1,443   2,100   1,756   1,854 
NET INCOME$5,782  $7,140  $8,109  $6,855  $7,128 
               
Basic earnings per share$0.71  $0.88  $1.00  $0.84  $0.87 
               
Diluted earnings per share$0.71  $0.88  $1.00  $0.84  $0.87 
               
Book Value per share$21.92  $20.86  $19.92  $21.65  $22.99 
Tangible Book Value per share 18.31   17.24   16.29   18.02   19.37 
               
Return on average assets (annualized) 1.13%  1.40%  1.57%  1.35%  1.39%
Return on average equity (annualized) 13.61%  17.40%  17.93%  15.19%  14.22%
Return on average tangible equity (annualized) 16.42%  21.27%  21.48%  18.16%  16.65%
               
Net interest spread (fte) 2.83%  3.30%  3.61%  3.40%  3.22%
Net interest margin (fte) 3.25%  3.55%  3.74%  3.49%  3.32%
               
Allowance for credit losses to total loans 1.27%  1.15%  1.18%  1.21%  1.21%
Net charge-offs to average loans (annualized) 0.08%  0.06%  0.02%  -0.02%  0.02%
Nonperforming loans to total loans 0.07%  0.08%  0.04%  0.04%  0.05%
Nonperforming assets to total assets 0.06%  0.07%  0.05%  0.05%  0.06%

 


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