Norwood Financial Corp Announces Earnings for the Fourth Quarter and 2023 Fiscal Year
HONESDALE, Pa., Jan. 29, 2024 (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 for the three months ended December 31, 2023 of $355,000 compared to the net income of $7,140,000 earned in the three months ended December 31, 2022. The decrease in net income was due primarily to a $1,939,000 decrease in net interest income, and a $5,816,000 increase in the provision for credit losses. For the year ended December 31, 2023, net income totaled $16,759,000, a decrease of $12,474,000 from net income of $29,233,000 earned in year ended December 31, 2022. The decrease includes a $6,330,000 decrease in net interest income and a $4,648,000 increase in the provision for credit losses.
Earnings per share (fully diluted) were $0.04 and $0.88 for the three-month periods ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, earnings per share on a fully diluted basis were $2.07, compared to $3.58 for the year ended December 31, 2022. For the year ended December 31, 2023, the return on average assets was 0.79%, and the return on average equity was 9.67%, compared to 1.43% and 16.11%, respectively, for the year ended December 31, 2022.
Total assets were $2.201 billion as of December 31, 2023. As of December 31, 2023, loans receivable were $1.604 billion, total deposits were $1.795 billion and stockholders’ equity was $181.1 million.
Loans receivable increased $129.7 million to $1.604 billion at December 31, 2023, from $1.474 billion at December 31, 2022. The increase in loans receivable in 2023 included an $83.9 million increase in retail loans and a $45.8 million increase in commercial loans. For the three months and year ended December 31, 2023, net charge-offs totaled $3,181,000 and $6,078,000, respectively, compared to $232,000 and $344,000, respectively, for the corresponding periods in 2022. The increase in net charge-offs for the three months and year ended December 31, 2023 was due primarily to losses on one credit relationship in the amount of $2,806,000 and $4,806,000, respectively.
Net interest income, on a fully taxable equivalent basis (fte), totaled $15,488,000 for the three months ended December 31, 2023, a decrease of $1,941,000 compared to the same period in 2022. For the year ended December 31, 2023, net interest income (fte) totaled $62,816,000, a decrease of $6,348,000 compared to 2022, due primarily to the increase in funding costs on interest-bearing liabilities in excess of the increase in the yield earned on interest earning assets.
The provision for credit losses totaled $6,116,000 for the three months ended December 31, 2023, compared to $300,000 for the three months ended December 31, 2022. The increase was required to maintain the allowance for credit losses at an adequate level based on the quarterly analysis and was due primarily to replenish the allowance for credit losses for charge-offs recorded during the period. For the year ended December 31, 2023, the provision for credit losses totaled $5,548,000 compared to $900,000 for the year ended December 31, 2022. The $4,648,000 increase in the provision for credit losses was required to replenish the allowance for credit losses for charge-offs incurred during the year ended December 31, 2023.
Other income for the three months ended December 31, 2023, totaled $2,123,000 compared to $1,926,000 for the similar period in 2022. Gains on the sale of loans, securities and foreclosed real estate increased $98,000, while service charges and fees increased $51,000. All other items of other income increased $48,000, net. Other income for the year ended December 31, 2023, totaled $8,124,000 compared to $9,932,000 in 2022, a decrease of $1,808,000 due primarily to income recognized in 2022 on previously acquired purchased impaired loans that were carried at a discount. For the year ended December 31, 2023, gains on the sale of loans and investment securities decreased $152,000 in the aggregate, compared to the year ended December 31, 2022. Gains on sales of foreclosed real estate owned decreased $347,000 during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Other expenses totaled $10,849,000 for the three months ended December 31, 2023, compared to $10,275,000 in the similar period of 2022. For the year ended December 31, 2023, other expenses totaled $43,497,000 compared to $41,044,000 for 2022, an increase of $2,453,000, or 6.0%.
Mr. Donnelly commented, “Our results in 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. Our Return on Average Assets was 0.79%, and our Return on Average Equity was 9.67%. We have continued to grow our core business lines, including an 8.8% increase in loans outstanding and a 3.90% increase in total deposits. Our cash dividend of $0.30 per share declared in the fourth quarter of 2023, represents a 3.5% increase over the same period of last year. 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 our 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 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”, “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
December 31 Year ended
December 31 2023 2022 2023 2022
Net interest income $ 15,293 $ 17,232 $ 62,067 $ 68,397
Tax equivalent basis adjustment using 21% marginal tax rate 195 197 749 767
Net interest income on a fully taxable equivalent basis $ 15,488 $ 17,429 $ 62,816 $ 69,164 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
December 31 Year ended
December 31 2023 2022 2023 2022
Average equity
$ 168,320 $ 162,762 $ 173,274 $ 181,499
Average goodwill and other Intangibles (29,495
) (29,582
) (29,526
) (29,618
)
Average tangible equity $ 138,825
$ 133,180
$ 143,748
$ 151,881
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)* *December 31* *2023* 2022
ASSETS
Cash and due from banks *$* *28,533* $ 28,847
Interest-bearing deposits with banks *37,587* 3,019
Cash and cash equivalents *66,120* 31,866
Securities available for sale *406,259* 418,927
Loans receivable *1,603,618* 1,473,945
Less: Allowance for credit losses *18,968* 16,999
Net loans receivable *1,584,650* 1,456,946
Regulatory stock, at cost *7,318* 5,418
Bank premises and equipment, net *17,838* 17,924
Bank owned life insurance *46,439* 43,364
Foreclosed real estate owned *97* 346
Accrued interest receivable *8,123* 6,917
Deferred tax assets, net *21,353* 23,549
Goodwill *29,266* 29,266
Other intangible assets *221* 306
Other assets *13,395* 12,241
TOTAL ASSETS *$* *2,201,079* $ *2,047,070*
LIABILITIES
Deposits:
Non-interest bearing demand *$* *399,545* $ 434,529
Interest-bearing *1,395,614* 1,293,198
Total deposits *1,795,159* 1,727,727
Short-term borrowings *74,076* 93,215
Other borrowings *124,236* 40,000
Accrued interest payable *10,510* 2,653
Other liabilities *16,028* 16,390
TOTAL LIABILITIES *2,020,009* 1,879,985
STOCKHOLDERS' EQUITY
Preferred Stock, no par value per share, authorized 5,000,000 shares *-* -
Common Stock, $.10 par value per share, authorized: 20,000,000 shares, issued: 2023: 8,310,847 shares, 2022: 8,291,401 shares *831* 829
Surplus *97,700* 96,897
Retained earnings *135,284* 130,020
Treasury stock, at cost: 2023: 200,690 shares, 2022: 124,650 shares *(5,397* *)* (3,308 )
Accumulated other comprehensive loss *(47,348* *)* (57,353 )
TOTAL STOCKHOLDERS' EQUITY *181,070* 167,085
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY *$* *2,201,079* $ 2,047,070
*NORWOOD FINANCIAL CORP*
*Consolidated Statements of Income*
*(dollars in thousands, except per share data)*
* (unaudited)* Three Months Ended December 31, Twelve Months Ended December 31, *2023* 2022 *2023* 2022
INTEREST INCOME
Loans receivable, including fees *$* *23,328* $ 17,810 *$* *85,209* $ 66,013
Securities *2,504* 2,487 *9,922* 9,051
Other *253* 98 *409* 602
Total Interest income *26,085* 20,395 *95,540* 75,666
INTEREST EXPENSE
Deposits *8,910* 2,772 *26,029* 6,471
Short-term borrowings *346* 329 *3,048* 524
Other borrowings *1,536* 62 *4,396* 274
Total Interest expense *10,792* 3,163 *33,473* 7,269
NET INTEREST INCOME *15,293* 17,232 *62,067* 68,397
PROVISION FOR CREDIT LOSSES *6,116* 300 *5,548* 900
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES *9,177* 16,932 *56,519* 67,497
OTHER INCOME
Service charges and fees *1,421* 1,370 *5,613* 5,661
Income from fiduciary activities *210* 210 *898* 845
Net realized (losses) gains on sales of securities *-* 3 *(209* *)* 3
Gains on sales of loans, net *36* 1 *63* 3
Gains on sales of foreclosed real estate owned *66* - *80* 427
Earnings and proceeds on life insurance policies *242* 195 *1,012* 1,087
Other *148* 147 *667* 1,906
Total other income *2,123* 1,926 *8,124* 9,932
OTHER EXPENSES
Salaries and employee benefits *5,672* 5,246 *23,565* 22,071
Occupancy, furniture and equipment *1,265* 1,263 *5,083* 4,967
Data processing and related operations *877* 917 *3,342* 2,948
Taxes, other than income *77* 239 *566* 1,013
Professional fees *544* 383 *1,676* 1,719
FDIC Insurance assessment *287* 144 *985* 612
Foreclosed real estate *17* 7 *129* 73
Amortization of intangibles *19* 23 *85* 101
Other *2,091* 2,053 *8,066* 7,540
Total other expenses *10,849* 10,275 *43,497* 41,044
INCOME BEFORE TAX *451* *8,583* *21,146* *36,385*
INCOME TAX EXPENSE *96* 1,443 *4,387* 7,152
NET INCOME *$* *355* $ 7,140 *$* *16,759* $ 29,233
Basic earnings per share *$* *0.04* $ 0.88 *$* *2.08* $ 3.59
Diluted earnings per share *$* *0.04* $ 0.88 *$* *2.07* $ 3.58
*NORWOOD FINANCIAL CORP*
*Financial Highlights (Unaudited)*
*(dollars in thousands, except per share data)*
*For the Three Months Ended December 31* *2023* 2022
Net interest income $ *15,293* $ 17,232
Net income *355* 7,140
Net interest spread (fully taxable equivalent) *2.24* *%* 3.30 %
Net interest margin (fully taxable equivalent) *2.95* *%* 3.55 %
Return on average assets *0.06* *%* 1.40 %
Return on average equity *0.84* *%* 17.40 %
Return on average tangible equity *1.01* *%* 21.27 %
Basic earnings per share $ *0.04* $ 0.88
Diluted earnings per share $ *0.04* $ 0.88
*For the Twelve Months Ended December 31* *2023* 2022
Net interest income $ *62,067* $ 68,397
Net income *16,759* 29,233
Net interest spread (fully taxable equivalent) *2.47* *%* 3.38 %
Net interest margin (fully taxable equivalent) *3.06* *%* 3.53 %
Return on average assets *0.79* *%* 1.43 %
Return on average equity *9.67* *%* 16.11 %
Return on average tangible equity *11.66* *%* 19.25 %
Basic earnings per share $ *2.08* $ 3.59
Diluted earnings per share $ *2.07* $ 3.58
*As of December 31* *2023* 2022
Total assets $ *2,201,079* $ 2,047,070
Total loans receivable *1,603,618* 1,473,945
Allowance for credit losses *18,968* 16,999
Total deposits *1,795,159* 1,727,727
Stockholders' equity *181,070* 167,085
Trust assets under management *192,374* 184,855
Book value per share $ *22.99* $ 20.86
Tangible book value per share $ *19.36* $ 17.24
Equity to total assets *8.23* *%* 8.16 %
Allowance to total loans receivable *1.18* *%* 1.15 %
Nonperforming loans to total loans *0.48* *%* 0.08 %
Nonperforming assets to total assets *0.35* *%* 0.07 %
*NORWOOD FINANCIAL CORP*
*Consolidated Balance Sheets (unaudited)*
*(dollars in thousands)* December 31 September 30 June 30 March 31 December 31 2023 2023 2023 2023 2022
ASSETS
Cash and due from banks $ 28,533 $ 41,141 $ 30,053 $ 25,701 $ 28,847
Interest-bearing deposits with banks 37,587 13,005 3,036 3,314 3,019
Cash and cash equivalents 66,120 54,146 33,089 29,015 31,866
Securities available for sale 406,259 380,499 403,621 418,245 418,927
Loans receivable 1,603,618 1,611,069 1,577,699 1,535,643 1,473,945
Less: Allowance for credit losses 18,968 16,086 17,483 19,445 16,999
Net loans receivable 1,584,650 1,594,983 1,560,216 1,516,198 1,456,946
Regulatory stock, at cost 7,318 8,843 7,924 5,963 5,418
Bank owned life insurance 46,439 46,197 45,806 45,577 43,364
Bank premises and equipment, net 17,838 17,254 17,363 17,660 17,924
Foreclosed real estate owned 97 290 387 346 346
Goodwill and other intangibles 29,487 29,506 29,526 29,549 29,572
Other assets 42,871 48,280 43,833 41,810 42,707
TOTAL ASSETS $ 2,201,079 $ 2,179,998 $ 2,141,765 $ 2,104,363 $ 2,047,070
LIABILITIES
Deposits:
Non-interest bearing demand $ 399,545 $ 430,242 $ 425,757 $ 419,615 $ 434,529
Interest-bearing deposits 1,395,614 1,316,582 1,306,240 1,336,320 1,293,198
Total deposits 1,795,159 1,746,824 1,731,997 1,755,935 1,727,727
Borrowings 198,312 241,328 211,978 148,744 133,215
Other liabilities 26,538 27,144 24,366 23,269 19,043
TOTAL LIABILITIES 2,020,009 2,015,296 1,968,341 1,927,948 1,879,985
STOCKHOLDERS' EQUITY 181,070 164,702 173,424 176,415 167,085
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,201,079 $ 2,179,998 $ 2,141,765 $ 2,104,363 $ 2,047,070
*NORWOOD FINANCIAL CORP*
*Consolidated Statements of Income (unaudited)*
*(dollars in thousands, except per share data)* December 31 September 30 June 30 March 31 December 31
Three months ended 2023 2023 2023 2023 2022
INTEREST INCOME
Loans receivable, including fees $ 23,328 $ 22,021 $ 20,702 $ 19,158 $ 17,810
Securities 2,504 2,433 2,481 2,505 2,487
Other 253 54 53 48 98
Total interest income 26,085 24,508 23,236 21,711 20,395
INTEREST EXPENSE
Deposits 8,910 7,017 5,740 4,362 2,772
Borrowings 1,882 2,452 1,854 1,256 391
Total interest expense 10,792 9,469 7,594 5,618 3,163
NET INTEREST INCOME 15,293 15,039 15,642 16,093 17,232
PROVISION FOR (RELEASE OF) CREDIT LOSSES 6,116 882 (1,750 ) 300 300
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES 9,177 14,157 17,392 15,793 16,932
OTHER INCOME
Service charges and fees 1,421 1,527 1,353 1,313 1,370
Income from fiduciary activities 210 246 229 212 210
Net realized (losses) gains on sales of securities - - (212 ) 2 3
Gains on sales of loans, net 36 18 10 - 1
Gains on sales of foreclosed real estate owned 66 13 - - -
Earnings and proceeds on life insurance policies 242 328 229 213 195
Other 148 174 174 172 147
Total other income 2,123 2,306 1,783 1,912 1,926
OTHER EXPENSES
Salaries and employee benefits 5,672 6,083 5,842 5,969 5,246
Occupancy, furniture and equipment, net 1,265 1,242 1,314 1,262 1,263
Foreclosed real estate 17 9 74 29 7
FDIC insurance assessment 287 254 244 200 144
Other 3,608 3,688 3,464 2,976 3,615
Total other expenses 10,849 11,276 10,938 10,436 10,275
INCOME BEFORE TAX 451 5,187 8,237 7,269 8,583
INCOME TAX EXPENSE 96 1,068 1,734 1,487 1,443
NET INCOME $ 355 $ 4,119 $ 6,503 $ 5,782 $ 7,140
Basic earnings per share $ 0.04 $ 0.51 $ 0.81 $ 0.71 $ 0.88
Diluted earnings per share $ 0.04 $ 0.51 $ 0.81 $ 0.71 $ 0.88
Book Value per share $ 22.99 $ 21.15 $ 22.24 $ 21.92 $ 20.86
Tangible Book Value per share 19.36 17.49 18.58 18.31 17.24
Return on average assets (annualized) 0.06 % 0.76 % 1.23 % 1.13 % 1.40 %
Return on average equity (annualized) 0.84 % 9.33 % 14.72 % 13.61 % 17.40 %
Return on average tangible equity (annualized) 1.01 % 11.22 % 17.66 % 16.42 % 21.27 %
Net interest spread (fte) 2.24 % 2.28 % 2.56 % 2.83 % 3.30 %
Net interest margin (fte) 2.95 % 2.94 % 3.09 % 3.25 % 3.55 %
Allowance for credit losses to total loans 1.18 % 1.00 % 1.11 % 1.27 % 1.15 %
Net charge-offs to average loans (annualized) 0.79 % 0.59 % 0.06 % 0.08 % 0.06 %
Nonperforming loans to total loans 0.48 % 0.65 % 0.20 % 0.18 % 0.08 %
Nonperforming assets to total assets 0.35 % 0.50 % 0.17 % 0.15 % 0.07 %