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NORWOOD FINANCIAL CORP (NWFL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered solid improvement with diluted EPS of $0.63 (+14.5% YoY) and ROA at 1.01%, underpinned by a 26–30 bps linked-quarter expansion in tax-equivalent NIM to 3.30% and lower funding costs .
  • EPS beat Wall Street consensus by $0.07, while S&P Global “Revenue” was modestly below consensus (actual $19.35M vs. $19.92M estimate); note S&P’s bank “Revenue” definition differs from management’s operating revenue (NII + noninterest income = $20.21M) *.
  • Management attributes margin gains to December 2024 portfolio repositioning, deposit growth, and reduced wholesale borrowings; efficiency ratio improved to 59.7% from 70.6% YoY .
  • Dividend increased to $0.31 per share (payable May 1, 2025), signaling confidence in capital strength and earnings trajectory; Board reiterated “well-capitalized” posture .
  • Potential stock catalysts: sustained NIM expansion, disciplined OpEx, continued loan/deposit growth, and benign credit trends (NPLs 0.45% of loans; net charge-offs 0.07% of average loans) .

What Went Well and What Went Wrong

What Went Well

  • NIM expansion and spread improvement: tax-equivalent NIM rose to 3.30% (+26 bps QoQ, +50 bps YoY), with net interest spread at 2.61% (+30 bps QoQ) driven by portfolio repositioning and lower deposit costs .
  • Growth momentum: loans up 9.24% YoY and deposits up 9.00% YoY; assets +5.07% YoY, supporting net interest income growth (+$3.15M YoY) .
  • Management confidence and capital strength: “The portfolio repositioning has improved our net interest margin… deposit growth has allowed us to lower our use of wholesale borrowings” and capital raised in Dec-2024 “will allow our Company to better weather any headwinds” .

What Went Wrong

  • S&P Global “Revenue” slight miss vs consensus despite strong NIM; underscores definitional differences and/or softer noninterest revenue relative to expectations (company operating revenue $20.21M vs S&P “Revenue” actual $19.35M)* .
  • Provision for credit losses increased to $0.86M vs a release of $(0.62)M in Q1 2024 and $1.60M in Q4 2024, reflecting portfolio growth and conservative reserves .
  • Credit metrics ticked up YoY (NPLs to total loans 0.45% vs 0.23% YoY; NPAs to assets 0.33% vs 0.17%), though remain low and stable QoQ; investors may watch for normalization as growth continues .

Financial Results

Income Statement and EPS (USD Millions, except EPS)

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Net Interest Income ($MM)$14.710 $15.931 $16.625 $17.857
Other Income ($MM)$2.006 $2.295 $(17.659) $2.351
Total Operating Revenue (NII + Other) ($MM)$16.716 $18.226 $(1.034) $20.208
Provision for Credit Losses ($MM)$(0.624) $1.345 $1.604 $0.857
Net Income ($MM)$4.433 $3.844 $(12.651) $5.773
Diluted EPS ($)$0.55 $0.48 $(1.54) $0.63

Margins, Returns, Efficiency

MetricQ1 2024Q3 2024Q4 2024Q1 2025
NIM (tax-equivalent)2.80% 2.99% 3.04% 3.30%
Net Interest Spread (fte)2.08% 2.23% 2.31% 2.61%
ROA (annualized)0.80% 0.68% -2.19% 1.01%
ROE (annualized)9.79% 8.09% -26.08% 10.73%
ROTE (annualized)11.68% 9.58% -30.77% 12.40%
Efficiency Ratio70.6% ——59.7%

Balance Sheet and Growth

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Total Assets ($B)$2.260 $2.280 $2.317 $2.376
Loans Receivable ($B)$1.621 $1.675 $1.714 $1.771
Total Deposits ($B)$1.839 $1.855 $1.859 $2.004
Borrowings ($MM)$211.234 $197.412 $214.862 $118.590
Stockholders’ Equity ($MM)$181.213 $195.654 $213.508 $220.707

Credit Quality

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Allowance to Total Loans1.11% 1.12% 1.16% 1.15%
Net Charge-offs / Avg Loans (annualized)0.08% 0.08% 0.12% 0.07%
NPLs / Total Loans0.23% 0.47% 0.46% 0.45%
NPAs / Total Assets0.17% 0.35% 0.34% 0.33%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ1 2025 payout (May 1)$0.30 (Q1 2024) $0.31 Raised
Revenue/Margins/OpEx/Tax rate2025No formal guidanceNo formal guidanceMaintained
Borrowings mixNear-termHigher wholesale borrowings (2024) Lower wholesale borrowings cited by mgmt Improvement narrative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Net interest margin and spreadNIM up 19 bps QoQ in Q3; 3.04% in Q4; asset yields up; deposit costs elevated earlier NIM 3.30%, spread 2.61%; margin uplift from portfolio repositioning and lower deposit costs Improving
Deposit costs and fundingHigher deposit costs in 2024; gradual relief after Fed cuts “Lower deposit costs” and reduced wholesale borrowings Easing
Capital actionsDec-2024 equity raise; investment portfolio repositioned; non-GAAP adjustments Capital “strengthened” and supports resilience; tangible equity up; TBVPS ↑ Stronger
Credit qualityStable; provision increased with loan growth; metrics strong NCOs 0.07%; NPLs/loans 0.45%; conservative provision Stable/benign
Technology initiativesInvesting in platforms (trust, mortgage, lending, treasury) Continued high-tech/high-touch; efficiency focus Ongoing investment
Branch/network expansionEmphasis on footprint growth (NY, PA); new Forty Fort office Continued expansion; community engagement Expanding
Macro/tariffs/regulatoryRate cycle pressure in 2024; macro uncertainty Macro “unsettled”; prudent opportunity assessment Cautious tone

Management Commentary

  • “The portfolio repositioning has improved our net interest margin. That, coupled with strong annualized growth in loans and deposits, put us on a positive trajectory for 2025… deposit growth has allowed us to lower our use of wholesale borrowings.” — CEO Jim Donnelly .
  • “We successfully completed a capital raise that enabled us to reposition our investment portfolio for improved yields… while we incurred a one-time $20 million loss… we believe the portfolio is better positioned for the current and future interest rate environment.” — CEO Jim Donnelly (Q4 release) .
  • “Deposit costs decreased, especially after the Federal Reserve began lowering rates… Net interest margin… began to move higher during the second half of 2024.” — CFO John McCaffery (Annual Meeting) .
  • “Technology is always a focus… new platforms in trust, investments, mortgage, consumer lending and treasury management… should allow us to grow more efficient.” — CEO Jim Donnelly (Annual Meeting) .

Q&A Highlights

  • No public Q1 2025 earnings call transcript was available; the Annual Meeting included prepared remarks and an open Q&A invitation but did not publish detailed Q&A content .
  • Management emphasized the impact of the Dec-2024 capital raise and portfolio repositioning on margin trajectory and capital resilience; discussed deposit cost relief and reduced wholesale borrowings .
  • Strategic emphasis on technology investments and efficiency improvements; continued branch expansion (Forty Fort) to drive growth and customer access .

Estimates Context

MetricConsensus (S&P Global)ActualSurprise
Primary EPS Consensus Mean (Q1 2025)$0.56*$0.63 +$0.07 (beat)
Revenue Consensus Mean (Q1 2025)$19.9245M*$19.3510M*-$0.5735M (miss)
Primary EPS – # of Estimates3*——
Revenue – # of Estimates2*——
Target Price Consensus Mean$28.00*$28.00*—

Values retrieved from S&P Global.*

Note: Company-reported operating revenue (NII + noninterest income) was $20.21M, reflecting a different definition than S&P Global’s “Revenue” for banks .

Key Takeaways for Investors

  • EPS outperformance with margin-led earnings: tax-equivalent NIM expanded to 3.30%, driving a $0.07 EPS beat vs consensus; continued asset yield strength and easing deposit costs are key drivers *.
  • Funding mix improvement: deposits +9% YoY and wholesale borrowings down significantly QoQ, supporting lower interest expense and durability of margin gains .
  • Efficiency improving: the efficiency ratio fell to 59.7% from 70.6% YoY; watch for sustained OpEx discipline alongside technology investments .
  • Credit remains benign: NPLs 0.45%, NPAs 0.33%, NCOs 0.07% annualized; provision normalized with growth, but metrics remain supportive of the thesis .
  • Capital and dividend signal confidence: equity up to $220.7M, TBVPS to $20.66; dividend lifted to $0.31, implying positive capital trajectory and earnings outlook .
  • Near-term trading: watch for confirmation of NIM resilience and deposit cost moderation; any further revenue definition mismatch vs consensus may create headline volatility despite operating strength *.
  • Medium-term: continued growth in loans/deposits, disciplined reserves, and technology-enabled efficiency gains underpin margin sustainability and ROA >1% potential through 2025 .

Appendix: Prior Quarter Context (for trend analysis)

  • Q3 2024: EPS $0.48; NIM 2.99%; net income $3.84M; loan and deposit growth continued; OpEx and provision elevated with growth .
  • Q4 2024: Reported loss from $19.962M realized losses on securities due to portfolio repositioning; excluding one-time loss, adjusted EPS $0.38 and adjusted ROA 0.54% (non-GAAP reconciliations provided) .
  • Q1 2025: Clean quarter with margin uplift and improved efficiency; ROA 1.01%; dividend up; capital strengthened .