Norwood Financial (NWFL) - 2025 Q2 - Quarterly Results

Overview and Highlights The company's strategic repositioning in Q4 2024 led to strengthened performance, robust loan and deposit growth, and a successful brand relaunch, reflected in significant Q2 2025 diluted EPS and net interest margin expansion Management Commentary The CEO attributes the company's strengthening performance to increased yields from a Q4 2024 strategic repositioning, alongside robust growth in both loans and deposits during the first half of 2025. A new 'Every Day Better' rebranding campaign was successfully launched to enhance brand identity and company culture, positioning the company for future growth - The company's performance has strengthened due to increased yields from a Q4 2024 repositioning and improved results across all business lines[2] - Robust growth in both loans and deposits was achieved in the first half of 2025[2] - A full rebrand, the 'Every Day Better' campaign, was launched in the second quarter to articulate company values, differentiate from competitors, and energize the corporate culture[2] Key Financial Highlights Norwood Financial Corp reported significant year-over-year growth for Q2 2025, with diluted EPS increasing 29% to $0.67. The net interest margin expanded by 63 basis points to 3.43%, and the return on assets rose to 1.06%. The company also saw strong annualized growth in loans (8.2% YTD) and deposits (15% YTD), coupled with an improving capital position Q2 2025 Key Performance Indicators vs. Prior Periods | Metric | Q2 2025 | Q2 2024 | Change (YoY) | Q1 2025 | Change (QoQ) | | :--- | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $0.67 | $0.52 | +$0.15 (29%) | $0.63 | +$0.04 | | Net Income (in thousands) | $6,205 | $4,213 | +$1,992 | $5,773 | +$432 | | Net Interest Margin (FTE) | 3.43% | 2.80% | +63 bps | 3.30% | +13 bps | | Return on Average Assets | 1.06% | 0.75% | +31 bps | 1.01% | +5 bps | | Return on Tangible Equity | 12.83% | 9.44% | +339 bps | 12.40% | +43 bps | - Loans grew at an 8.2% annualized rate year-to-date, while deposits grew at a 15% annualized rate year-to-date[4] - Capital position improved due to increased earnings and a lower accumulated other comprehensive income (AOCI) adjustment[4] Financial Performance Analysis The company demonstrated strong financial performance in Q2 2025, marked by increased net income, expanded net interest margin driven by higher asset yields, and significant growth in assets, loans, and deposits, alongside an improved capital position Results of Operations (Income Statement Analysis) For the second quarter of 2025, net income increased by $2.0 million year-over-year to $6.2 million. This was primarily driven by a $4.1 million increase in net interest income, resulting from higher asset yields and lower liability costs. Consequently, the efficiency ratio showed significant improvement, decreasing to 58.7% from 66.7% in the same period last year Income Statement Summary (Three Months Ended June 30) | (dollars in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Interest Income | $19,065 | $14,925 | | Provision for Credit Losses | $950 | $347 | | Total Other Income | $2,248 | $2,207 | | Total Other Expenses | $12,531 | $11,444 | | Net Income | $6,205 | $4,213 | - The efficiency ratio for Q2 2025 improved to 58.7% compared to 66.7% in Q2 2024[6] - For the first six months of 2025, non-interest income increased by $386 thousand, or 9.2%, over the same period in 2024[6] Financial Condition (Balance Sheet Analysis) As of June 30, 2025, total assets grew 5.8% year-over-year to $2.365 billion. This growth was fueled by a 9.1% increase in loans receivable to $1.791 billion and a 10.3% rise in total deposits to $1.997 billion. The company's capital position strengthened, with the Tangible Common Equity ratio improving to 8.39% from 6.92% a year ago, and tangible book value per share increasing to $21.17 Balance Sheet Highlights (As of June 30) | (dollars in thousands) | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $2,365,350 | $2,235,316 | +5.8% | | Loans Receivable | $1,790,574 | $1,641,355 | +9.1% | | Total Deposits | $1,997,834 | $1,811,172 | +10.3% | | Total Stockholders' Equity | $225,425 | $182,187 | +23.7% | - The Tangible Common Equity ratio was 8.39% as of June 30, 2025, a significant improvement from 6.92% at June 30, 2024[6] - Tangible Book Value per share increased by $1.32 from $19.85 at December 31, 2024, to $21.17 at June 30, 2025[6] Net Interest Margin (NIM) Analysis The company's fully taxable equivalent (FTE) net interest margin was 3.43% for Q2 2025, marking a 13 basis point increase from the prior quarter and a 63 basis point increase from Q2 2024. This expansion was driven by a significant rise in the average yield on interest-earning assets to 5.60% (up from 5.17% YoY), while the cost of interest-bearing liabilities fell to 2.84% (down from 3.11% YoY) Net Interest Margin and Spread (FTE) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin | 3.43% | 3.30% | 2.80% | | Net Interest Spread | 2.75% | 2.61% | 2.06% | - The average yield on total interest-earning assets increased to 5.60% in Q2 2025, compared to 5.54% in Q1 2025 and 5.17% in Q2 2024[12] - The average rate on total interest-bearing liabilities decreased to 2.84% in Q2 2025, down from 2.93% in Q1 2025 and 3.11% in Q2 2024[12] Consolidated Financial Statements Consolidated financial statements reveal substantial year-over-year growth in assets, loans, and deposits, with net income significantly increasing in the first half of 2025, recovering from a Q4 2024 loss on securities sales Consolidated Balance Sheets The consolidated balance sheet as of June 30, 2025, shows total assets of $2.365 billion, an increase from $2.235 billion a year prior. The growth was primarily driven by an increase in net loans receivable. Total liabilities stood at $2.140 billion, while total stockholders' equity increased to $225.4 million, benefiting from higher retained earnings and a reduction in accumulated other comprehensive loss Consolidated Balance Sheet Data (in thousands) | | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $53,045 | $69,395 | | Net loans receivable | $1,769,666 | $1,623,549 | | TOTAL ASSETS | $2,365,350 | $2,235,316 | | LIABILITIES | | | | Total deposits | $1,997,834 | $1,811,172 | | TOTAL LIABILITIES | $2,139,925 | $2,053,129 | | STOCKHOLDERS' EQUITY | | | | Accumulated other comprehensive loss | ($27,505) | ($49,819) | | TOTAL STOCKHOLDERS' EQUITY | $225,425 | $182,187 | Consolidated Statements of Income For the six months ended June 30, 2025, net income was $11.978 million, a substantial increase from $8.646 million in the same period of 2024. The improvement was driven by a 24.6% increase in net interest income to $36.923 million, which more than offset a rise in the provision for credit losses and higher operating expenses Consolidated Income Statement Data (in thousands) | | Six Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | | Total Interest Income | $61,291 | $54,608 | | Total Interest Expense | $24,368 | $24,973 | | Net Interest Income | $36,923 | $29,635 | | Provision for (Release of) Credit Losses | $1,807 | ($276) | | Total Other Income | $4,599 | $4,213 | | Total Other Expenses | $24,595 | $23,175 | | Net Income | $11,978 | $8,646 | | Diluted EPS | $1.30 | $1.07 | Quarterly Financial Data The five-quarter financial data highlights a strong recovery and positive momentum. Net interest income has steadily increased from $14.9 million in Q2 2024 to $19.1 million in Q2 2025. The company rebounded from a significant net loss of $12.7 million in Q4 2024, which was caused by a one-time loss on securities sales, to achieve a net income of $6.2 million in Q2 2025. Key profitability and asset quality metrics like ROA, ROE, and NIM have shown consistent improvement throughout the first half of 2025 Quarterly Performance Trend | (in thousands, except per share) | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $19,065 | $17,857 | $16,625 | $15,931 | $14,925 | | Net (Loss) Income | $6,205 | $5,773 | $(12,651) | $3,844 | $4,213 | | Diluted (Loss) EPS | $0.67 | $0.63 | $(1.54) | $0.48 | $0.52 | - The company experienced a significant net loss in Q4 2024, primarily due to a $19.96 million net realized loss on the sale of securities during that quarter[17] - Net interest margin (FTE) has shown consistent quarterly improvement, rising from 2.80% in Q2 2024 to 3.43% in Q2 2025[17] Other Information This section clarifies the use of non-GAAP financial measures, such as fully taxable equivalent net interest income and tangible equity, and provides cautionary notes regarding forward-looking statements and associated risks Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures to their nearest GAAP equivalents. It details the adjustment of net interest income to a fully taxable equivalent (FTE) basis to normalize for tax-exempt income and the calculation of average tangible equity, which excludes goodwill and other intangible assets to offer a different perspective on capital adequacy - Net interest income is adjusted to a fully taxable equivalent (FTE) basis using a 21% marginal tax rate to facilitate comparisons of income from taxable and tax-exempt assets. The adjustment for Q2 2025 was $199 thousand[7] - Average tangible equity is derived by subtracting average goodwill and other intangible assets from average equity. For the three months ended June 30, 2025, average tangible equity was $193,957 thousand[7] Forward-Looking Statements The report includes a standard safe harbor provision under the Private Securities Litigation Reform Act of 1995. It cautions readers that statements about future performance are subject to various risks and uncertainties, such as changes in interest rates, credit quality, and economic conditions, which could cause actual results to differ materially from those projected - The company's forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially[8] - Identified risks include, among others, changes in interest rates, ability to maintain credit quality, control of operating expenses, and general economic conditions[8]