Norwood Financial Corp Announces Earnings for the Fourth Quarter and 2023 Fiscal Year

Rhea-AI Summary

Norwood Financial Corp (NWFL) announced a decrease in net income for the three months and year ended December 31, 2023, compared to the same periods in 2022. The decrease was primarily due to a decrease in net interest income and an 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. The return on average assets was 0.79%, and the return on average equity was 9.67% for the year ended December 31, 2023, 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. Loans receivable were $1.604 billion, total deposits were $1.795 billion, and stockholders’ equity was $181.1 million as of December 31, 2023.

Positive

• Earnings per share for the three months and year ended December 31, 2023, were reported, showing a decrease compared to the same periods in 2022.
• The return on average assets and return on average equity for the year ended December 31, 2023, were provided, indicating a decrease compared to the year ended December 31, 2022.
• Total assets, loans receivable, total deposits, and stockholders’ equity as of December 31, 2023, were disclosed, providing insight into the company's financial position.

Negative

• The decrease in net income for the three months and year ended December 31, 2023, compared to the same periods in 2022, was primarily due to a decrease in net interest income and an increase in the provision for credit losses.
• The earnings per share for the three months and year ended December 31, 2023, showed a significant decrease compared to the same periods in 2022, indicating a decline in profitability.
• The return on average assets and return on average equity for the year ended December 31, 2023, decreased compared to the year ended December 31, 2022, reflecting a decline in financial performance.

Insights

Financial Analyst

The reported decrease in net income for Norwood Financial Corp is a significant indicator of the company's financial health, particularly when juxtaposed against the previous year's performance. A substantial decrease in net interest income and a marked increase in the provision for credit losses are primary concerns. These metrics are crucial as they directly affect the bottom line and are reflective of the company's core income-generating activities. The reported figures suggest a contraction in profitability margins, likely due to rising interest rates which have increased the cost of interest-bearing liabilities more than the yield on interest-earning assets.

Furthermore, the decline in earnings per share (EPS) from $0.88 to $0.04 for the quarter and from $3.58 to $2.07 for the fiscal year is a critical measure for investors, as it indicates a reduction in the amount of profit that each share of stock is entitled to. This can impact investor sentiment and the stock's valuation. The Return on Average Assets (ROAA) and Return on Average Equity (ROAE) have also decreased, which are important indicators of how efficiently the company is utilizing its assets and equity to generate profits.

Market Research Analyst

An 8.8% increase in loans outstanding and a 3.90% increase in total deposits signifies that Norwood Financial Corp is experiencing growth in its core business lines. This growth is a positive sign for the company's market position and future revenue potential. However, this growth must be weighed against the increased provision for credit losses, which suggests potential concerns about credit quality and loan performance going forward.

Additionally, the increase in net charge-offs, particularly those associated with one credit relationship, highlights the importance of credit risk management and diversification. Such a significant impact from a single relationship can be a red flag for investors, as it may indicate concentration risk.

Economist

The overall banking sector is sensitive to changes in interest rates and Norwood Financial Corp's results are indicative of the broader economic climate. Rising interest rates can compress net interest margins as the cost of funding increases. The company's results reflect these macroeconomic headwinds. This is a critical insight for stakeholders, as it suggests that the company's financial performance is tied to economic cycles and monetary policy decisions.

While the dividend increase may be seen as a signal of confidence by the management, it must be sustainable. The cash dividend of $0.30 per share declared in the fourth quarter represents a 3.5% increase, which is a positive return for shareholders but must be considered in the context of the company's overall decreased profitability.

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	%

 

FAQ

What was the net income for Norwood Financial Corp for the three months ended December 31, 2023?

The net income for the three months ended December 31, 2023, was $355,000.

What was the net income for Norwood Financial Corp for the year ended December 31, 2023?

The net income for the year ended December 31, 2023, was $16,759,000.

What were the earnings per share for Norwood Financial Corp for the three months ended December 31, 2023?

The earnings per share (fully diluted) were $0.04 for the three months ended December 31, 2023.

What were the earnings per share for Norwood Financial Corp for the year ended December 31, 2023?

The earnings per share (fully diluted) were $2.07 for the year ended December 31, 2023.

What was the return on average assets for Norwood Financial Corp for the year ended December 31, 2023?

The return on average assets was 0.79% for the year ended December 31, 2023.

What was the return on average equity for Norwood Financial Corp for the year ended December 31, 2023?

The return on average equity was 9.67% for the year ended December 31, 2023.

What were the total assets for Norwood Financial Corp as of December 31, 2023?

Total assets were $2.201 billion as of December 31, 2023.

What were the loans receivable for Norwood Financial Corp as of December 31, 2023?

Loans receivable were $1.604 billion as of December 31, 2023.

What were the total deposits for Norwood Financial Corp as of December 31, 2023?

Total deposits were $1.795 billion as of December 31, 2023.

What was the stockholders’ equity for Norwood Financial Corp as of December 31, 2023?

Stockholders’ equity was $181.1 million as of December 31, 2023.