Norwood Financial (NWFL) 8-K Norwood Financial Corp Announces First Quarter 2023 Earnings

Exhibit 99.1

FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP ANNOUNCES FIRST QUARTER 2023 EARNINGS

Honesdale, Pennsylvania - April 21, 2023

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)

	2023			2022
For the Three Months Ended March 31
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

	2023			2022
As of March 31
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 30			June 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	%