NORWOOD FINANCIAL CORP

Previous wording

Total assets as of March 31, 2024 were $2.260 billion compared to $2.201 billion as of December 31, 2023. The increase was due primarily to a $45.8 million increase in cash and cash equivalents and an $18.0 million increase in loans outstanding.

Current wording

Total assets as of June 30, 2024 were $2.235 billion compared to $2.201 billion as of December 31, 2023. The increase was due primarily to a $37.7 million increase in gross loans outstanding.

Previous wording

The fair value of securities available for sale as of March 31, 2024 was $398.4 million compared to $406.3 million as of December 31, 2023. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decrease in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the three months ended March 31, 2024, or the three months ended March 31, 2023. The Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

Current wording

The fair value of securities available for sale as of June 30, 2024 was $397.6 million compared to $406.3 million as of December 31, 2023. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decrease in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the six months ended June 30, 2024, or the six months ended June 30, 2023. The Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

Previous wording

Loans receivable totaled $1.603 billion at March 31, 2024 compared to $1.585 billion as of December 31, 2023. The $18.0 million increase in loans receivable during the three months ended March 31, 2024, was due primarily to a $16.6 million increase in commercial real estate loans, a $3.4 million increase in commercial loans and a $6.9 million increase in consumer loans, partially offset by a $9.1 million decrease in residential, agricultural and construction loans, net.

Current wording

Loans receivable totaled $1.624 billion at June 30, 2024 compared to $1.585 billion as of December 31, 2023. The $38.9 million increase in net loans receivable during the six months ended June 30, 2024, was due primarily to a $10.1 million increase in commercial real estate loans, a $8.1 million increase in commercial loans and a $25.6 million increase in consumer loans, partially offset by a $6.0 million decrease in residential, agricultural and construction loans, net.

Previous wording

The allowance for credit losses totaled $18,020,000 as of March 31, 2024, and represented 1.11% of total loans outstanding, compared to $18,968,000, or 1.18% of total loans outstanding, at December 31, 2023. The Company had net charge-offs for the three months ended March 31, 2024 of $323,000, compared to $320,000 in the corresponding period in 2023. The Company’s management assesses the adequacy of the allowance for credit losses on a quarterly basis. Based on management’s best judgement, the qualitative factors are applied to the final adjusted loss rate each quarter. Management considers the allowance for credit losses adequate at March 31, 2024 based on the Company’s criteria. However, there can be no assurance that the allowance for credit losses will be adequate to cover significant losses, if any, which might be incurred in the future.

Current wording

The allowance for credit losses totaled $17,806,000 as of June 30, 2024, and represented 1.08% of total loans outstanding, compared to $18,968,000, or 1.18% of total loans outstanding, at December 31, 2023. The Company had net charge-offs for the six months ended June 30, 2024 of $834,000, compared to $548,000 in the corresponding period in 2023. The Company’s management assesses the adequacy of the allowance for credit losses on a quarterly basis. Based on management’s best judgement, the qualitative factors are applied to the final adjusted loss rate each quarter. Management considers the allowance for credit losses adequate at June 30, 2024 based on the Company’s criteria. However, there can be no assurance that the allowance for credit losses will be adequate to cover significant losses, if any, which might be incurred in the future.

Previous wording

As of March 31, 2024, non-performing loans totaled $3,735,000 or 0.23% of total loans compared to $7,622,000, or 0.48%, of total loans at December 31, 2023. The decrease in non-performing loans as of March 31, 2024, is due primarily to a $4,153,000 decrease in commercial loans, which included the pay off of a $4,150,000 commercial relationship. At March 31, 2024, non-performing assets totaled $3,832,000, or 0.17%, of total assets, compared to $7,719,000, or 0.35%, of total assets at December 31, 2023.

Current wording

As of June 30, 2024, non-performing loans totaled $7,641,000 or 0.47% of total loans compared to $7,622,000, or 0.48%, of total loans at December 31, 2023. At June 30, 2024, non-performing assets totaled $7,641,000, or 0.34%, of total assets, compared to $7,719,000, or 0.35%, of total assets at December 31, 2023.

Previous wording

During the three-months ended March 31, 2024, total deposits increased $43.8 million due primarily to a $49.0 million increase in certificates of deposit. The increase in certificates of deposit was due to a migration from lower yielding demand deposits into higher yielding time deposits, as well as growth from to deposit promotions. All other deposit categories decreased $5.2 million, net.

Current wording

During the six-months ended June 30, 2024, total deposits increased $16.0 million due primarily to a $33.7 million increase in certificates of deposit, partially offset by a $17.7 million decrease in other all other deposit categories, net. The increase in certificates of deposit was due to a migration from lower yielding demand deposits into higher yielding time deposits, as well as growth from to deposit promotions.

Previous wording

Short-term borrowings decreased $14.0 million to $60.1 million at March 31, 2024, compared to $74.1 million at December 31, 2023, due primarily to an decrease in overnight borrowings.

Current wording

Short-term borrowings decreased $11.8 million to $62.3 million at June 30, 2024, compared to $74.1 million at December 31, 2023, due primarily to an decrease in overnight borrowings.

Previous wording

Other borrowings as of March 31, 2024, were $151.2 million compared to $124.2 million as of December 31, 2023. Federal Reserve Bank borrowings increased $30.0 million during the three-months ended March 31, 2024, contributing to the increase. Federal Home Loan Bank borrowings decreased $3.1 million during the period.

Current wording

Other borrowings as of June 30, 2024, were $148.1 million compared to $124.2 million as of December 31, 2023. Federal Reserve Bank borrowings increased $30.0 million during the six-months ended June 30, 2024, contributing to the increase. Federal Home Loan Bank borrowings decreased $6.1 million during the period.

Previous wording

As of March 31, 2024, total stockholders’ equity was $181.2 million, compared to $181.1 million as of December 31, 2023. Total stockholders’ equity increased $4.4 million due to net income, offset partially by $2.4 million of dividends declared and a decrease of $ 2.0 million in the fair value of securities in the available-for-sale portfolio, net of tax. The decrease in fair value of securities is the result of a change in interest rates and spreads, which may impact the value of the securities. Because of interest rate volatility, the Company’s accumulated other comprehensive income could materially fluctuate for each interim and year-end period.

Current wording

As of June 30, 2024, total stockholders’ equity was $182.2 million, compared to $181.1 million as of December 31, 2023. Total stockholders’ equity increased $8.6 million due to net income, offset partially by $4.9 million of dividends declared and a decrease of $2.5 million in the fair value of securities in the available-for-sale portfolio, net of tax. The decrease in fair value of securities is the result of a change in interest rates and spreads, which may impact the value of the securities. Because of interest rate volatility, the Company’s accumulated other comprehensive income could materially fluctuate for each interim and year-end period.

Previous wording

As of March 31, 2024, the Company had cash and cash equivalents of $112.0 million in the form of cash, due from banks and short-term deposits with other institutions. In addition, the Company had total securities available for sale of $398.4 million which could be used for liquidity needs. Total liquidity of $510.3 million as of March 31, 2024, represents 22.6% of total assets, compared to $472.4 million and 21.5% of total assets as of December 31, 2023. The Company also monitors other liquidity measures, all of which were within the Company’s policy guidelines as of March 31, 2024 and December 31, 2023. Based upon these measures, the Company believes its liquidity is adequate.

Current wording

As of June 30, 2024, the Company had cash and cash equivalents of $69.4 million in the form of cash, due from banks and short-term deposits with other institutions. In addition, the Company had total securities available for sale of $397.6 million which could be used for liquidity needs. Total liquidity of $467.0 million as of June 30, 2024, represents 20.9% of total assets, compared to $472.4 million and 21.5% of total assets as of December 31, 2023. The Company also monitors other liquidity measures, all of which were within the Company’s policy guidelines as of June 30, 2024 and December 31, 2023. Based upon these measures, the Company believes its liquidity is adequate.

Previous wording

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $675,110,000 as of March 31, 2024, of which $91,179,000 was outstanding in the form of borrowings as of March 31, 2024. As of December 31, 2023, the maximum borrowing capacity was $682,417,000, of which $114,236,000 of borrowings was outstanding as of December 31, 2023. Additionally, as of March 31, 2024, the Bank had secured Letters of Credit from the Federal Home Loan Bank in the amount of $171,075,000 as collateral for specific municipal deposits. These Letters of Credit reduce the availability under the maximum borrowing capacity. As of December 31, 2023, there was $136,650,000 outstanding in the form of Letters of Credit. Advances and Letters of Credit from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

Current wording

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $681,302,000 as of June 30, 2024, of which $88,087,000 was outstanding in the form of borrowings as of June 30, 2024. As of December 31, 2023, the maximum borrowing capacity was $682,417,000, of which $114,236,000 of borrowings was outstanding as of December 31, 2023. Additionally, as of June 30, 2024, the Bank had secured Letters of Credit from the Federal Home Loan Bank in the amount of $168,425,000 as collateral for specific municipal deposits. These Letters of Credit reduce the availability under the maximum borrowing capacity. As of December 31, 2023, there was $136,650,000 outstanding in the form of Letters of Credit. Advances and Letters of Credit from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

Previous wording

This report contains or references fully taxable-equivalent (fte) interest income and net interest income, which are non-GAAP financial measures. Interest income (fte) and net interest income (fte) are derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income (fte) and net interest income (fte) ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (fte) and Net interest income (fte) is reconciled to GAAP interest income and net interest income on page 38. Fully taxable equivalent interest income and net interest income is also reflected in the table on page 39. Although the Company believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP measures.

Current wording

This report contains or references fully taxable-equivalent (fte) interest income and net interest income, which are non-GAAP financial measures. Interest income (fte) and net interest income (fte) are derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income (fte) and net interest income (fte) ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (fte) and Net interest income (fte) is reconciled to GAAP interest income and net interest income on pages 40 and 44. Fully taxable equivalent interest income and net interest income is also reflected in the table on pages 41 and 45. Although the Company believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP measures.