NWFL Norwood Financial Corporation

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 $4,433,000 for the three months ended March 31, 2024, a decrease of $1,349,000, from net income of $5,782,000 for the three months ended March 31, 2023. The decrease was due primarily to a $1,383,000 decrease in net interest income and a $1,296,000 increase in total other expenses. Earnings per share on a fully diluted basis were $0.55 for the three-month period ended March 31, 2024, compared to $0.71 in the three-month period ended March 31, 2023. The annualized return on average assets was 0.80% in the first quarter of 2024 and the annualized return on average equity was 9.79%, compared to 1.13% and 13.61%, respectively, in the first quarter of 2023.

Total assets were $2.260 billion as of March 31, 2024, an increase of $156.1 million, compared to March 31, 2023. As of March 31, 2024, loans receivable were $1.621 billion, total deposits were $1.839 billion and total stockholders’ equity was $181.2 million.

Net interest income on a fully taxable equivalent basis (fte), was $14,905,000 during the three months ended March 31, 2024, compared to $16,275,000 in the comparable three-month period of 2023. During the three-months ended March 31, 2024, the fte yield on interest-earning assets increased 71 basis points compared to the three months ended March 31, 2023, while the cost of funds increased 147 basis points. As a result, the annualized net interest spread (fte) decreased to 2.07% from 2.83% in the quarter ended March 31, 2024 compared to the corresponding three-month period in 2023.

Total other income was $2,006,000 for the three months ended March 31, 2024, compared to $1,912,000 during the corresponding three-month period in 2023. The increase in other income was due primarily to a $55,000 increase in earnings and proceeds on bank-owned life insurance. All other categories of other income increased $39,000, net.

During the three months ended March 31, 2024, operating expenses increased $1,296,000 to $11,732,000 as compared to operating expenses of $10,436,000 during the comparable three-month period of 2023.

During the three months ended March 31, 2024, the provision for credit losses decreased $924,000 compared to the corresponding three-month period of 2023 based on the Company’s analysis of the allowance for credit losses. A lower level of non-performing loans and reduced charge-offs contributed to the decreased provision for credit losses.

Mr. Donnelly stated, “Our first quarter income decreased from the 2023 level due to the continued pressure on net interest income caused by the rising cost of deposits. We have continued to grow our core business lines, including a 4.5% annualized increase in loans during the quarter, while total deposits increased 9.8% annually during the first quarter of 2024. Our capital base remains above “Well-Capitalized” targets, and our credit quality metrics improved during the first quarter. 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 customers and enhance shareholder value in the Company”.

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, 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 March 31,
	2024		2023
Net interest income	$	14,710	$	16,093
Tax equivalent basis adjustment using 21% marginal tax rate		195		182
Net interest income on a fully taxable equivalent basis	$	14,905	$	16,275

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:

(dollars in thousands)	Three months ended March 31,
		2024			2023
Average equity	$	182,088		$	172,334
Average goodwill and other intangibles		(29,476	)		(29,559	)
Average tangible equity	$	152,612		$	142,775

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
		2024			2023
ASSETS
Cash and due from banks	$	19,519		$	25,701
Interest-bearing deposits with banks		92,444			3,314
Cash and cash equivalents		111,963			29,015
Securities available for sale		398,374			418,245
Loans receivable		1,621,448			1,535,643
Less: Allowance for credit losses		18,020			19,445
Net loans receivable		1,603,428			1,516,198
Regulatory stock, at cost		6,545			5,963
Bank premises and equipment, net		18,057			17,660
Bank owned life insurance		45,869			45,577
Foreclosed real estate owned		97			346
Accrued interest receivable		8,135			6,633
Deferred tax assets, net		21,642			22,164
Goodwill		29,266			29,266
Other intangible assets		202			283
Other assets		16,845			13,013
TOTAL ASSETS	$	2,260,423		$	2,104,363
LIABILITIES
Deposits:
Non-interest bearing demand	$	383,362		$	419,615
Interest-bearing		1,455,636			1,336,320
Total deposits		1,838,998			1,755,935
Short-term borrowings		60,055			108,555
Other borrowings		151,179			40,189
Accrued interest payable		11,737			4,703
Other liabilities		17,241			18,566
TOTAL LIABILITIES		2,079,210			1,927,948
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: 2024: 8,310,847 shares, 2023: 8,291,401 shares		831			829
Surplus		97,893			95,052
Retained earnings		137,285			133,427
Treasury stock, at cost: 2024: 200,690 shares, 2023: 110,400 shares		(5,397	)		(2,930	)
Accumulated other comprehensive loss		(49,399	)		(49,963	)
TOTAL STOCKHOLDERS' EQUITY		181,213			176,415
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,260,423		$	2,104,363
NORWOOD FINANCIAL CORP
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended March 31,
		2024			2023
INTEREST INCOME
Loans receivable, including fees	$	23,681		$	19,158
Securities		2,526			2,505
Other		731			48
Total Interest income		26,938			21,711
INTEREST EXPENSE
Deposits		10,110			4,362
Short-term borrowings		336			779
Other borrowings		1,782			477
Total Interest expense		12,228			5,618
NET INTEREST INCOME		14,710			16,093
(RELEASE OF) PROVISION FOR CREDIT LOSSES		(624	)		300
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES		15,334			15,793
OTHER INCOME
Service charges and fees		1,343			1,313
Income from fiduciary activities		238			212
Net realized (losses) gains on sales of securities		-			2
Gains on sales of loans, net		6			-
Earnings and proceeds on life insurance policies		268			213
Other		151			172
Total other income		2,006			1,912
OTHER EXPENSES
Salaries and employee benefits		6,135			5,969
Occupancy, furniture and equipment		1,261			1,262
Data processing and related operations		1,022			768
Taxes, other than income		93			161
Professional fees		585			285
FDIC Insurance assessment		361			200
Foreclosed real estate		21			29
Amortization of intangibles		19			23
Other		2,235			1,739
Total other expenses		11,732			10,436
INCOME BEFORE TAX		5,608			7,269
INCOME TAX EXPENSE		1,175			1,487
NET INCOME	$	4,433		$	5,782
Basic earnings per share	$	0.55		$	0.71
Diluted earnings per share	$	0.55		$	0.71
NORWOOD FINANCIAL CORP
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended March 31		2024			2023
Net interest income	$	14,710		$	16,093
Net income		4,433			5,782
Net interest spread (fully taxable equivalent)		2.07	%		2.83	%
Net interest margin (fully taxable equivalent)		2.79	%		3.25	%
Return on average assets		0.80	%		1.13	%
Return on average equity		9.79	%		13.61	%
Return on average tangible equity		11.68	%		16.42	%
Basic earnings per share	$	0.55		$	0.71
Diluted earnings per share	$	0.55		$	0.71
As of March 31		2024			2023
Total assets	$	2,260,423		$	2,104,363
Total loans receivable		1,621,448			1,535,643
Allowance for credit losses		18,020			19,445
Total deposits		1,838,998			1,755,935
Stockholders' equity		181,213			176,415
Trust assets under management		202,020			187,345
Book value per share	$	23.01		$	21.92
Tangible book value per share	$	19.38		$	18.31
Equity to total assets		8.02	%		8.38	%
Allowance to total loans receivable		1.11	%		1.27	%
Nonperforming loans to total loans		0.23	%		0.07	%
Nonperforming assets to total assets		0.17	%		0.06	%
NORWOOD FINANCIAL CORP
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		March 31			December 31			September 30			June 30			March 31
		2024			2023			2023			2023			2023
ASSETS
Cash and due from banks	$	19,519		$	28,533		$	41,141		$	30,053		$	25,701
Interest-bearing deposits with banks		92,444			37,587			13,005			3,036			3,314
Cash and cash equivalents		111,963			66,120			54,146			33,089			29,015
Securities available for sale		398,374			406,259			380,499			403,621			418,245
Loans receivable		1,621,448			1,603,618			1,611,069			1,577,699			1,535,643
Less: Allowance for credit losses		18,020			18,968			16,086			17,483			19,445
Net loans receivable		1,603,428			1,584,650			1,594,983			1,560,216			1,516,198
Regulatory stock, at cost		6,545			7,318			8,843			7,924			5,963
Bank owned life insurance		45,869			46,439			46,197			45,806			45,577
Bank premises and equipment, net		18,057			17,838			17,254			17,363			17,660
Foreclosed real estate owned		97			97			290			387			346
Goodwill and other intangibles		29,468			29,487			29,506			29,526			29,549
Other assets		46,622			42,871			48,280			43,833			41,810
TOTAL ASSETS	$	2,260,423		$	2,201,079		$	2,179,998		$	2,141,765		$	2,104,363
LIABILITIES
Deposits:
Non-interest bearing demand	$	383,362		$	399,545		$	430,242		$	425,757		$	419,615
Interest-bearing deposits		1,455,636			1,395,614			1,316,582			1,306,240			1,336,320
Total deposits		1,838,998			1,795,159			1,746,824			1,731,997			1,755,935
Borrowings		211,234			198,312			241,328			211,978			148,744
Other liabilities		28,978			26,538			27,144			24,366			23,269
TOTAL LIABILITIES		2,079,210			2,020,009			2,015,296			1,968,341			1,927,948
STOCKHOLDERS' EQUITY		181,213			181,070			164,702			173,424			176,415
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,260,423		$	2,201,079		$	2,179,998		$	2,141,765		$	2,104,363
NORWOOD FINANCIAL CORP
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		March 31			December 31			September 30			June 30			March 31
Three months ended		2024			2023			2023			2023			2023
INTEREST INCOME
Loans receivable, including fees	$	23,681		$	23,328		$	22,021		$	20,702		$	19,158
Securities		2,526			2,504			2,433			2,481			2,505
Other		731			253			54			53			48
Total interest income		26,938			26,085			24,508			23,236			21,711
INTEREST EXPENSE
Deposits		10,110			8,910			7,017			5,740			4,362
Borrowings		2,118			1,882			2,452			1,854			1,256
Total interest expense		12,228			10,792			9,469			7,594			5,618
NET INTEREST INCOME		14,710			15,293			15,039			15,642			16,093
(RELEASE OF) PROVISION FOR CREDIT LOSSES		(624	)		6,116			882			(1,750	)		300
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES		15,334			9,177			14,157			17,392			15,793
OTHER INCOME
Service charges and fees		1,343			1,421			1,527			1,353			1,313
Income from fiduciary activities		238			210			246			229			212
Net realized (losses) gains on sales of securities		-			-			-			(212	)		2
Gains on sales of loans, net		6			36			18			10			-
Gains on sales of foreclosed real estate owned		-			66			13			-			-
Earnings and proceeds on life insurance policies		268			242			328			229			213
Other		151			148			174			174			172
Total other income		2,006			2,123			2,306			1,783			1,912
OTHER EXPENSES
Salaries and employee benefits		6,135			5,672			6,083			5,842			5,969
Occupancy, furniture and equipment, net		1,261			1,265			1,242			1,314			1,262
Foreclosed real estate		21			17			9			74			29
FDIC insurance assessment		361			287			254			244			200
Other		3,954			3,608			3,688			3,464			2,976
Total other expenses		11,732			10,849			11,276			10,938			10,436
INCOME BEFORE TAX		5,608			451			5,187			8,237			7,269
INCOME TAX EXPENSE		1,175			96			1,068			1,734			1,487
NET INCOME	$	4,433		$	355		$	4,119		$	6,503		$	5,782
Basic earnings per share	$	0.55		$	0.04		$	0.51		$	0.81		$	0.71
Diluted earnings per share	$	0.55		$	0.04		$	0.51		$	0.81		$	0.71
Book Value per share	$	23.01		$	22.99		$	21.15		$	22.24		$	21.92
Tangible Book Value per share		19.38			19.36			17.49			18.58			18.31
Return on average assets (annualized)		0.80	%		0.06	%		0.76	%		1.23	%		1.13	%
Return on average equity (annualized)		9.79	%		0.84	%		9.33	%		14.72	%		13.61	%
Return on average tangible equity (annualized)		11.68	%		1.01	%		11.22	%		17.66	%		16.42	%
Net interest spread (fte)		2.07	%		2.24	%		2.28	%		2.56	%		2.83	%
Net interest margin (fte)		2.79	%		2.95	%		2.94	%		3.09	%		3.25	%
Allowance for credit losses to total loans		1.11	%		1.18	%		1.00	%		1.11	%		1.27	%
Net charge-offs to average loans (annualized)		0.08	%		0.79	%		0.59	%		0.06	%		0.08	%
Nonperforming loans to total loans		0.23	%		0.48	%		0.65	%		0.20	%		0.07	%
Nonperforming assets to total assets		0.17	%		0.35	%		0.50	%		0.17	%		0.06	%