Form 8-K - Current report

NORWOOD FINANCIAL CORP

Date:July 26, 2024

/s/ John M. McCaffery

John M. McCaffery

Executive Vice President and Chief Financial Officer

(Duly Authorized Representative)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 26, 2024

NORWOOD FINANCIAL CORP

(Exact name of registrant as specified in its charter)

Pennsylvania

0-28364

23-2828306

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)


717 Main Street, Honesdale, Pennsylvania		18431
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (570) 253-1455

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

symbol(s)

Name of each exchange

on which registered

Common Stock, par value $0.10 per share

NWFL

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

NORWOOD FINANCIAL CORP

INFORMATION TO BE INCLUDED IN THE REPORT

Item 2.02

Results of Operations and Financial Condition.

On July 26, 2024, Norwood Financial Corp (the “Company”) issued a press release announcing its earnings for the quarter ended June 30, 2024. A copy of the press release is furnished with this report as exhibit 99.1 hereto and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

Item 9.01

Financial Statements and Exhibits.

(d)

Exhibits:

The following exhibits are being furnished with this report.


No.		Description

99.1		Press Release dated July 26, 2024.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

LOGO

For Immediate Release

Contact:

John M. McCaffery

Executive Vice President &

Chief Financial Officer

272-304-3003

wayne.bank

NORWOOD FINANCIAL CORP

ANNOUNCES SECOND QUARTER EARNINGS

Honesdale, Pennsylvania – July 26, 2024

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, 2024 of $4,213,000, which was $2,290,000 lower than the same three-month period of last year. The decrease includes a $717,000 decrease in net interest income, a $424,000 increase in total other income, a $506,000 increase in total other expense, and a $2,097,000 increase in the provision for credit losses. Earnings per share (fully diluted) were $0.52 in the three months ended June 30, 2024, compared to $0.81 in the same period of last year. The annualized return on average assets for the three months ended June 30, 2024, was 0.75%, while the annualized return on average tangible equity was 11.26%.

Net income for the six months ended June 30, 2024, was $8,646,000, which is $3,639,000 lower than the same six-month period of 2023, due to a decrease in net interest income an increase in the provision for credit losses and an increase in operating expenses, partially offset by an increase in total other income. Earnings per share (fully diluted) for the six months ended June 30, 2024, were $1.07, compared to $1.51 for the six months ended June 30, 2023. The annualized return on average assets for the six months ended June 30, 2024 was 0.78%. The annualized return on average tangible equity for the six months ended June 30, 2024 was 11.46%.

Total assets as of June 30, 2024 were $2.235 billion, compared to $2.142 billion at June 30, 2023. At June 30, 2024, loans receivable were $1.623 billion, total deposits were $1.811 billion and stockholders’ equity was $182.2 million.

For the three months ended June 30, 2024, net interest income, on a fully-taxable equivalent basis (fte), totaled $15,124,000, a decrease of $705,000 compared to the same period in 2023. A $150.8 million increase in average time deposits, combined with a 126 basis points increase in the cost of time deposits, contributed to the decreased net interest income. Borrowing costs also increased, offsetting a $4,447,000 increase in total interest income. Net interest margin (fte) for the three months ended June 30, 2024 was 2.79%, compared to 3.09% in the same period of 2023. The tax-equivalent yield on interest-earning assets increased 57 basis points to 5.14% during the three months ended June 30, 2024, compared to the same prior year period, while the cost of interest-bearing liabilities increased 108 basis points to 3.09%.

Net interest income (fte) for the six months ended June 30, 2024 totaled $30,029,000, which was $2,075,000 lower than the same period in 2023, due primarily to a $11,762,000 increase in the cost of interest-bearing liabilities. The net interest margin (fte) was 2.79% for the six months ended June 30, 2024, as compared to 3.17% for the six months ended June 30, 2023. The decrease in the net interest margin (fte) was due to a 127 basis points increase in the cost of interest-bearing liabilities, which offset the 64 basis points increase in the yield on interest-earning assets.

Other income for the three months ended June 30, 2024, totaled $2,207,000, compared to $1,783,000 for the same period in 2023. The increase is due primarily to a $151,000 increase in service charges on deposit accounts, and a $212,000 loss on the sale of investment securities in 2023. For the six months ended June 30, 2024, other income totaled $4,213,000, compared to $3,695,000 for the six months ended June 30, 2023.

Other expenses totaled $11,444,000 for the three months ended June 30, 2024, an increase of $506,000, compared to the $10,938,000 for the same period of 2023. For the six months ended June 30, 2024, other expenses totaled $23,175,000, compared to $21,374,000 for the same period in 2023, due primarily to an increase in professional fees, data processing costs and FDIC insurance.

Mr. Donnelly stated, “Our second quarter income decreased from the 2023 level due to a release of provision for credit losses in the three months ended June 30, 2023 and the rising cost of deposits and borrowed funds. These decreases were partially offset by a $424,000 increase in non-interest income. On a linked-quarter basis loan growth was an annualized 4.9%. Total deposits decreased $28 million compared to the first quarter of 2024. This was due to a seasonal outflow of municipal deposits of $53 million offset by inflows of $25 million of other customer funds, a 7.3% annualized increase. The net interest margin was stable at 2.79% for the first and second quarter. Our core operating expenses remain well-controlled at 2% of average assets during the quarter. 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 4 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, among other things, 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:


	Three months ended				Six months ended
(dollars in thousands)	June 30				June 30
	2024		2023		2024		2023
Net Interest Income	$	14,925	$	15,642	$	29,635	$	31,735
Taxable equivalent basis adjustment using 21% marginal tax rate		199		187		394		369
Net interest income on a fully taxable equivalent basis	$	15,124	$	15,829	$	30,029	$	32,104

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						Six months ended
(dollars in thousands)	June 30						June 30
	2024			2023			2024			2023
Average equity	$	179,494		$	186,111		$	180,791		$	180,952
Average goodwill and other intangibles		(29,457	)		(29,536	)		(29,466	)		(29,547	)
Average tangible equity	$	150,037		$	156,575		$	151,325		$	151,405

###

NORWOOD FINANCIAL CORP

Consolidated Balance Sheets

(dollars in thousands, except share and per share data)

(unaudited)


	June 30
	2024			2023
ASSETS
Cash and due from banks	$	29,903		$	30,053
Interest-bearing deposits with banks		39,492			3,036

Cash and cash equivalents		69,395			33,089
Securities available for sale		397,578			403,621
Loans receivable		1,641,355			1,577,699
Less: Allowance for credit losses		17,806			17,483

Net loans receivable		1,623,549			1,560,216
Regulatory stock, at cost		6,443			7,924
Bank premises and equipment, net		18,265			17,363
Bank owned life insurance		46,121			45,806
Foreclosed real estate owned		—			387
Accrued interest receivable		8,329			7,276
Deferred tax assets, net		21,707			23,301
Goodwill		29,266			29,266
Other intangible assets		183			260
Other assets		14,480			13,256

TOTAL ASSETS	$	2,235,316		$	2,141,765

LIABILITIES
Deposits:
Non-interest bearing demand	$	391,849		$	425,757
Interest-bearing		1,419,323			1,306,240

Total deposits		1,811,172			1,731,997
Short-term borrowings		62,335			112,290
Other borrowings		148,087			99,687
Accrued interest payable		13,329			7,101
Other liabilities		18,206			17,266

TOTAL LIABILITIES		2,053,129			1,968,341
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: 8,311,851 shares, 2023: 8,291,401 shares		831			829
Surplus		98,082			97,268
Retained earnings		139,070			135,583
Treasury stock, at cost: 2024: 221,540 shares, 2023: 223,926 shares		(5,977	)		(6,007	)
Accumulated other comprehensive loss		(49,819	)		(54,249	)

TOTAL STOCKHOLDERS’ EQUITY		182,187			173,424

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$2,235,316			$2,141,765

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,
	2024		2023			2024			2023
INTEREST INCOME
Loans receivable, including fees	$	24,121	$	20,702		$	47,802		$	39,860
Securities		2,584		2,481			5,109			4,986
Other		966		53			1,697			101

Total Interest income		27,671		23,236			54,608			44,947
INTEREST EXPENSE
Deposits		10,687		5,740			20,796			10,102
Short-term borrowings		356		943			692			1,722
Other borrowings		1,703		911			3,485			1,388

Total Interest expense		12,746		7,594			24,973			13,212

NET INTEREST INCOME		14,925		15,642			29,635			31,735
(RELEASE OF) PROVISION FOR CREDIT LOSSES		347	$	(1,750	)	$	(276	)	$	(1,450	)

NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES		14,578		17,392			29,911			33,185
OTHER INCOME
Service charges and fees		1,504		1,353			2,847			2,665
Income from fiduciary activities		225		229			463			441
Net realized (losses) gains on sales of securities		—		(212	)		—			(209	)
Gains on sales of loans, net		36		10			42			10
Earnings and proceeds on life insurance policies		253		229			520			442
Other		189		174			341			346

Total other income		2,207		1,783			4,213			3,695
OTHER EXPENSES
Salaries and employee benefits		5,954		5,842			12,090			11,810
Occupancy, furniture and equipment		1,229		1,314			2,489			2,576
Data processing and related operations		1,024		822			2,046			1,590
Taxes, other than income		179		162			272			323
Professional fees		508		323			1,092			608
FDIC Insurance assessment		309		244			670			445
Foreclosed real estate		15		74			36			103
Amortization of intangibles		19		23			38			46
Other		2,207		2,134			4,442			3,873

Total other expenses		11,444		10,938			23,175			21,374
INCOME BEFORE TAX		5,341		8,237			10,949			15,506
INCOME TAX EXPENSE		1,128		1,734			2,303			3,221

NET INCOME	$	4,213	$	6,503		$	8,646		$	12,285

Basic earnings per share	$	0.52	$	0.81		$	1.07		$	1.52

Diluted earnings per share	$	0.52	$	0.81		$	1.07		$	1.51

NORWOOD FINANCIAL CORP

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)


For the Three Months Ended June 30	2024			2023
Net interest income	$	14,925		$	15,642
Net income		4,213			6,503
Net interest spread (fully taxable equivalent)		2.05	%		2.56	%
Net interest margin (fully taxable equivalent)		2.79	%		3.09	%
Return on average assets		0.75	%		1.23	%
Return on average equity		9.41	%		14.72	%
Return on average tangible equity		11.26	%		17.66	%
Basic earnings per share	$	0.52		$	0.81
Diluted earnings per share	$	0.52		$	0.81

For the Six Months Ended June 30	2024			2023
Net interest income	$	29,635		$	31,735
Net income		8,646			12,285
Net interest spread (fully taxable equivalent)		2.06	%		2.69	%
Net interest margin (fully taxable equivalent)		2.79	%		3.17	%
Return on average assets		0.78	%		1.18	%
Return on average equity		9.59	%		14.17	%
Return on average tangible equity		11.46	%		17.06	%
Basic earnings per share	$	1.07		$	1.52
Diluted earnings per share	$	1.07		$	1.51

As of June 30	2024			2023
Total assets	$	2,235,316		$	2,141,765
Total loans receivable		1,641,355			1,577,699
Allowance for credit losses		17,806			17,483
Total deposits		1,811,172			1,731,997
Stockholders’ equity		182,187			173,424
Trust assets under management		201,079			193,392
Book value per share	$	23.26		$	22.24
Tangible book value per share	$	19.62		$	18.58
Equity to total assets		8.15	%		8.10	%
Allowance to total loans receivable		1.08	%		1.11	%
Nonperforming loans to total loans		0.47	%		0.20	%
Nonperforming assets to total assets		0.34	%		0.17	%

NORWOOD FINANCIAL CORP

Consolidated Balance Sheets (unaudited)

(dollars in thousands)


	June 30		March 31		December 31		September 30		June 30
	2024		2024		2023		2023		2023
ASSETS
Cash and due from banks	$	29,903	$	19,519	$	28,533	$	41,141	$	30,053
Interest-bearing deposits with banks		39,492		92,444		37,587		13,005		3,036

Cash and cash equivalents		69,395		111,963		66,120		54,146		33,089
Securities available for sale		397,578		398,374		406,259		380,499		403,621
Loans receivable		1,641,356		1,621,448		1,603,618		1,611,069		1,577,699
Less: Allowance for credit losses		17,807		18,020		18,968		16,086		17,483

Net loans receivable		1,623,549		1,603,428		1,584,650		1,594,983		1,560,216
Regulatory stock, at cost		6,443		6,545		7,318		8,843		7,924
Bank owned life insurance		46,121		45,869		46,439		46,197		45,806
Bank premises and equipment, net		18,264		18,057		17,838		17,254		17,363
Foreclosed real estate owned		0		97		97		290		387
Goodwill and other intangibles		29,449		29,468		29,487		29,506		29,526
Other assets		44,517		46,622		42,871		48,280		43,833

TOTAL ASSETS	$	2,235,316	$	2,260,423	$	2,201,079	$	2,179,998	$	2,141,765

LIABILITIES
Deposits:
Non-interest bearing demand	$	391,849	$	383,362	$	399,545	$	430,242	$	425,757
Interest-bearing deposits		1,419,323		1,455,636		1,395,614		1,316,582		1,306,240

Total deposits		1,811,172		1,838,998		1,795,159		1,746,824		1,731,997
Borrowings		210,422		211,234		198,312		241,328		211,978
Other liabilities		31,534		28,978		26,538		27,144		24,366

TOTAL LIABILITIES		2,053,128		2,079,210		2,020,009		2,015,296		1,968,341
STOCKHOLDERS’ EQUITY		182,188		181,213		181,070		164,702		173,424

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$2,235,316		$2,260,423		$2,201,079		$2,179,998		$2,141,765

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	2024			2024			2023			2023			2023
INTEREST INCOME
Loans receivable, including fees	$	24,121		$	23,681		$	23,328		$	22,021		$	20,702
Securities		2,584			2,526			2,504			2,433			2,481
Other		966			731			253			54			53

Total interest income		27,671			26,938			26,085			24,508			23,236
INTEREST EXPENSE
Deposits		10,687			10,110			8,910			7,017			5,740
Borrowings		2,059			2,118			1,882			2,452			1,854

Total interest expense		12,746			12,228			10,792			9,469			7,594

NET INTEREST INCOME		14,925			14,710			15,293			15,039			15,642
(RELEASE OF) PROVISION FOR CREDIT LOSSES		347			(624	)		6,116			882			(1,750	)

NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES		14,578			15,334			9,177			14,157			17,392
OTHER INCOME
Service charges and fees		1,504			1,343			1,421			1,527			1,353
Income from fiduciary activities		225			238			210			246			229
Net realized (losses) gains on sales of securities		—			—			—			—			(212	)
Gains on sales of loans, net		36			6			36			18			10
Gains on sales of foreclosed real estate owned		32			—			66			13			—
Earnings and proceeds on life insurance policies		253			268			242			328			229
Other		157			151			148			174			174

Total other income		2,207			2,006			2,123			2,306			1,783
OTHER EXPENSES
Salaries and employee benefits		5,954			6,135			5,672			6,083			5,842
Occupancy, furniture and equipment, net		1,229			1,261			1,265			1,242			1,314
Foreclosed real estate		15			21			17			9			74
FDIC insurance assessment		309			361			287			254			244
Other		3,937			3,954			3,608			3,688			3,464

Total other expenses		11,444			11,732			10,849			11,276			10,938
INCOME BEFORE TAX		5,341			5,608			451			5,187			8,237
INCOME TAX EXPENSE		1,128			1,175			96			1,068			1,734

NET INCOME	$	4,213		$	4,433		$	355		$	4,119		$	6,503

Basic earnings per share	$	0.52		$	0.55		$	0.04		$	0.51		$	0.81

Diluted earnings per share	$	0.52		$	0.55		$	0.04		$	0.51		$	0.81

Book Value per share	$	23.26		$	23.01		$	22.99		$	21.15		$	22.24
Tangible Book Value per share		19.62			19.38			19.36			17.49			18.58
Return on average assets (annualized)		0.75	%		0.80	%		0.06	%		0.76	%		1.23	%
Return on average equity (annualized)		9.41	%		9.79	%		0.84	%		9.33	%		14.72	%
Return on average tangible equity (annualized)		11.26	%		11.68	%		1.01	%		11.22	%		17.66	%
Net interest spread (fte)		2.05	%		2.07	%		2.24	%		2.28	%		2.56	%
Net interest margin (fte)		2.79	%		2.79	%		2.95	%		2.94	%		3.09	%
Allowance for credit losses to total loans		1.08	%		1.11	%		1.18	%		1.00	%		1.11	%
Net charge-offs to average loans (annualized)		0.13	%		0.08	%		0.79	%		0.59	%		0.06	%
Nonperforming loans to total loans		0.47	%		0.23	%		0.48	%		0.65	%		0.20	%
Nonperforming assets to total assets		0.34	%		0.17	%		0.35	%		0.50	%		0.17	%
total NAL		7,641,239			3,726,895			7,620,882			10,535,803			3,223,297
past due 90+		—			7,668			—			—			—
total non performing loans		7,641,239			3,734,563			7,620,882			10,535,803			3,223,297
OREO		—			97,101			97,101			290,000			387,500
total Non performing assets		7,641,239			3,831,664			7,717,983			10,825,803			3,610,797
total loans		1,641,355,515			1,621,447,970			1,603,617,932			1,611,068,445			1,577,699,580
total assets		2,235,315,800			2,260,423,152			2,201,056,938			2,179,998,000			2,141,765,238
net charge off’s, this quarter		510,985			322,892			3,181,233			2,349,697			227,110
average loans, this quarter		1,629,282,567			1,612,105,511			1,605,495,855			1,589,473,633			1,559,251,963
Loan loss reserve		17,806,505			18,019,715			18,967,991			16,085,641			17,483,489

Document and Entity Information	Jul. 26, 2024
Cover [Abstract]
Amendment Flag	false
Entity Central Index Key	0001013272
Document Type	8-K
Document Period End Date	Jul. 26, 2024
Entity Registrant Name	NORWOOD FINANCIAL CORP
Entity Incorporation State Country Code	PA
Entity File Number	0-28364
Entity Tax Identification Number	23-2828306
Entity Address, Address Line One	717 Main Street
Entity Address, City or Town	Honesdale
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	18431
City Area Code	(570)
Local Phone Number	253-1455
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock, par value $0.10 per share
Trading Symbol	NWFL
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false