nwfl-20220630x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 0-28364

Norwood Financial Corp

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2828306
(State or other jurisdiction of incorporation or organization)		(I.R.S. 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

N/A

Former name, former address and former fiscal year, if changed since last report.

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 (x) whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding as of August 1, 2022
Common stock, par value $0.10 per share		8,165,279

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NORWOOD FINANCIAL CORP

Consolidated Balance Sheets (unaudited)

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



	June 30,		December 31,
	2022		2021
ASSETS
Cash and due from banks	$	29,931	$	21,073
Interest-bearing deposits with banks		79,735		185,608
Cash and cash equivalents		109,666		206,681
Securities available for sale, at fair value		440,877		406,782
Loans receivable		1,404,317		1,354,931
Less: Allowance for loan losses		17,017		16,442
Net loans receivable		1,387,300		1,338,489
Regulatory stock, at cost		2,396		3,927
Bank premises and equipment, net		17,032		17,289
Bank owned life insurance		43,167		40,038
Accrued interest receivable		6,085		5,889
Foreclosed real estate owned		346		1,742
Goodwill		29,266		29,266
Other intangibles		353		407
Other assets		29,896		17,994
TOTAL ASSETS	$	2,066,384	$	2,068,504
LIABILITIES
Deposits:
Non-interest bearing demand	$	442,991	$	440,652
Interest-bearing		1,356,839		1,316,141
Total deposits		1,799,830		1,756,793
Short-term borrowings		70,427		60,822
Other borrowings		4,412		29,998
Accrued interest payable		1,138		1,203
Other liabilities		16,746		14,426
TOTAL LIABILITIES		1,892,553		1,863,242
STOCKHOLDERS’ EQUITY
Preferred stock, no par value per share,
authorized: 5,000,000 shares; issued: none		—		—
Common stock, $0.10 par value per share,
authorized: 20,000,000 shares,
issued: 2022: 8,275,901 shares, 2021: 8,266,751 shares		828		827
Surplus		96,752		96,443
Retained earnings		119,414		110,015
Treasury stock at cost: 2022: 110,084 shares; 2021: 65,328 shares		(2,933)		(1,767)
Accumulated other comprehensive loss		(40,230)		(256)
TOTAL STOCKHOLDERS’ EQUITY		173,831		205,262
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,066,384	$	2,068,504

See accompanying notes to the unaudited consolidated financial statements.
‎

NORWOOD FINANCIAL CORP

Consolidated Statements of Income (unaudited)

(dollars in thousan ds, except per share data)




	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
INTEREST INCOME
Loans receivable, including fees	$	15,714	$	16,102	$	31,089	$	32,248
Securities		2,197		1,356		4,091		2,468
Other		182		59		260		102
Total interest income		18,093		17,517		35,440		34,818
INTEREST EXPENSE
Deposits		1,083		1,205		2,142		2,459
Short-term borrowings		60		73		108		142
Other borrowings		56		186		195		388
Total interest expense		1,199		1,464		2,445		2,989
NET INTEREST INCOME		16,894		16,053		32,995		31,829
PROVISION FOR LOAN LOSSES		300		1,500		600		3,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		16,594		14,553		32,395		28,829
OTHER INCOME
Service charges and fees		1,475		1,532		2,946		2,782
Income from fiduciary activities		214		181		416		341
Net realized gains on sales of securities		—		—		—		21
Gain on sale of loans, net		—		109		—		138
Gain on sales of foreclosed real estate owned		—		—		427		—
Earnings and proceeds on bank owned life insurance		449		194		625		568
Other		351		171		1,414		326
Total other income		2,489		2,187		5,828		4,176
OTHER EXPENSES
Salaries and employee benefits		5,840		5,171		11,271		10,125
Occupancy, furniture & equipment, net		1,206		1,186		2,513		2,406
Data processing and related operations		666		562		1,295		1,166
Taxes, other than income		240		229		533		534
Professional fees		406		343		981		883
Federal Deposit Insurance Corporation insurance		142		154		326		335
Foreclosed real estate		10		13		63		42
Amortization of intangibles		27		34		54		69
Other		1,935		1,800		3,594		3,384
Total other expenses		10,472		9,492		20,630		18,944
INCOME BEFORE INCOME TAXES		8,611		7,248		17,593		14,061
INCOME TAX EXPENSE		1,756		1,493		3,610		2,765
NET INCOME	$	6,855	$	5,755	$	13,983	$	11,296
BASIC EARNINGS PER SHARE	$	0.84	$	0.70	$	1.71	$	1.38
DILUTED EARNINGS PER SHARE	$	0.84	$	0.70	$	1.71	$	1.38

See accompanying notes to the unaudited consolidated financial statements.

‎

NORWOOD FINANCIAL CORP

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(dollars in thousands)



	Three Months Ended
	June 30,
	2022		2021
Net income	$	6,855	$	5,755
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding loss		(20,893)		1,949
Tax effect		4,388		(409)
Reclassification of investment securities gains
recognized in net income		—		—
Tax effect		—		—
Other comprehensive (loss) income		(16,505)		1,540
Comprehensive Income (Loss)	$	(9,650)	$	7,295



	Six Months Ended
	June 30,
	2022		2021
Net income	$	13,983	$	11,296
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding (loss) gain		(50,602)		(1,952)
Tax effect		10,628		411
Reclassification of investment securities gains
recognized in net income		—		(21)
Tax effect		—		4
Other comprehensive (loss)		(39,974)		(1,558)
Comprehensive Income (Loss)	$	(25,991)	$	9,738

See accompanying notes to the unaudited consolidated financial statements.

‎


		Page Number

PART I -	CONSOLIDATED FINANCIAL INFORMATION OF NORWOOD FINANCIAL CORP	3

Item 1.	Financial Statements (unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	46

PART II -	OTHER INFORMATION	47

Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48

Signatures		49