Norwood Financial Corp. (NWFL) Bundle
Understanding Norwood Financial Corp. (NWFL) Revenue Streams
Understanding Norwood Financial Corp’s Revenue Streams
Norwood Financial Corp's revenue streams primarily stem from interest income and other income generated through various financial services. The following sections provide a detailed breakdown of these revenue sources and their contributions to the company's overall financial performance as of 2024.
Breakdown of Primary Revenue Sources
- Interest Income: For the nine months ended September 30, 2024, interest income (on a fully taxable equivalent basis) totaled $83,696,000, compared to $70,009,000 for the same period in 2023.
- Other Income: Other income reached $6,508,000 for the nine months ended September 30, 2024, up from $6,001,000 in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year growth in interest income reflects a significant increase, with a percentage growth of approximately 19.6% from 2023 to 2024. Other income also experienced a modest increase of about 8.4% during the same period.
Contribution of Different Business Segments to Overall Revenue
The following table illustrates the contributions of different segments to the overall revenue for the nine months ended September 30, 2024:
| Revenue Source | Amount (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Interest Income | $83,696 | 92.5% |
| Other Income | $6,508 | 7.5% |
| Total Revenue | $90,204 | 100% |
Analysis of Significant Changes in Revenue Streams
During the nine-month period ended September 30, 2024, the company saw a notable increase in interest income primarily due to a rise in average loans, which increased by $78.9 million. This was coupled with a higher yield on average earning assets, which rose to 5.20% from 4.59% in the previous year.
The increase in other income was driven by a rise in service charges and fees, which increased by $172,000, and gains on sales of securities and loans, which increased by $327,000.
Overall, the financial performance of Norwood Financial Corp demonstrates a strong reliance on interest income, underscoring the importance of effective asset management and market conditions in driving growth.
A Deep Dive into Norwood Financial Corp. (NWFL) Profitability
A Deep Dive into Norwood Financial Corp. Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the net income amounted to $3,844,000, down from $4,119,000 in the same period in 2023. The basic and diluted earnings per share for this period were $0.48, compared to $0.51 for the prior year.
The net interest income on a fully taxable equivalent basis (FTE) for the same quarter was $16,138,000, which reflects an increase of $914,000 from the prior year. The net interest margin was reported at 2.99% for the quarter, slightly up from 2.92% in 2023.
Trends in Profitability Over Time
For the nine months ended September 30, 2024, the net income totaled $12,491,000, a decrease from $16,405,000 for the same period in 2023. The annualized return on average assets was 0.75% and the return on average equity was 9.09%, compared to 1.04% and 12.54% respectively in the prior year.
Comparison of Profitability Ratios with Industry Averages
The net interest margin of 2.99% and net interest spread of 2.23% for the three months ended September 30, 2024, shows a competitive position within the industry, where the average net interest margin for similar institutions hovers around 3.10%.
Analysis of Operational Efficiency
The provision for credit losses was $1,345,000 for the quarter ended September 30, 2024, compared to $882,000 in the same quarter of 2023. The allowance for credit losses stood at 1.12% of total loans as of September 30, 2024.
The following table summarizes key profitability metrics:
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income | $3,844,000 | $4,119,000 | -6.67% |
| Earnings Per Share (Basic) | $0.48 | $0.51 | -5.88% |
| Net Interest Income (FTE) | $16,138,000 | $15,224,000 | +6.01% |
| Net Interest Margin | 2.99% | 2.92% | +2.40% |
| Return on Average Assets | 0.75% | 1.04% | -27.88% |
| Return on Average Equity | 9.09% | 12.54% | -27.30% |
Overall, while there are some positive trends in net interest income and margins, profitability has been impacted by increased provisions for credit losses and operational expenses, reflecting a need for ongoing cost management and operational efficiency improvements.
Debt vs. Equity: How Norwood Financial Corp. (NWFL) Finances Its Growth
Debt vs. Equity: How Norwood Financial Corp. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Norwood Financial Corp. reported total liabilities of approximately $2.236 billion, reflecting a significant portion of its financing derived from debt. This includes:
- Short-term borrowings of $52.4 million, a decrease from $74.1 million as of December 31, 2023.
- Other borrowings totaling $145.0 million, up from $124.2 million at the end of 2023.
Long-term debt comprises fixed-rate borrowings with the Federal Home Loan Bank (FHLB) and the Federal Reserve Bank, which totaled approximately $84.96 million as of September 30, 2024.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Norwood Financial Corp. as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity
Given total liabilities of $2.236 billion and total stockholders' equity of $195.7 million, the ratio is approximately 11.42, indicating a high reliance on debt financing compared to industry standards, which typically range from 0.5 to 1.5 for similar banks.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In the nine months ended September 30, 2024, Norwood Financial Corp. did not issue new long-term debt but increased its borrowings with the Federal Reserve Bank by $30 million. The company’s credit ratings remain stable, reflecting its consistent performance and management of debt levels.
How the Company Balances Between Debt Financing and Equity Funding
Norwood Financial Corp. maintains a balance between debt and equity financing through a strategy focused on optimizing its capital structure while managing costs. The company’s total stockholders' equity increased from $181.1 million to $195.7 million in the same period, reflecting retained earnings and comprehensive income adjustments.
| Financial Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Liabilities | $2,236.5 million | $2,146.8 million |
| Total Stockholders' Equity | $195.7 million | $181.1 million |
| Debt-to-Equity Ratio | 11.42 | 11.85 |
| Short-term Borrowings | $52.4 million | $74.1 million |
| Other Borrowings | $145.0 million | $124.2 million |
Assessing Norwood Financial Corp. (NWFL) Liquidity
Assessing Norwood Financial Corp.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Norwood Financial Corp. was calculated at 1.27, indicating a solid liquidity position, as the company can cover its short-term liabilities with its short-term assets. The quick ratio, which excludes inventory, stood at 1.14, suggesting that even without liquidating inventory, the company maintains adequate liquidity to meet its obligations.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, amounted to $54.7 million as of September 30, 2024, an increase from $49.3 million in the previous quarter. This upward trend reflects effective management of receivables and payables, enhancing the company's operational efficiency.
Cash Flow Statements Overview
In the nine months ended September 30, 2024, the cash flow from operating activities was $13.2 million, driven primarily by net income of $12.5 million and adjustments for non-cash items. Cash used in investing activities totaled $10.8 million, largely due to purchases of securities. Financing activities contributed $1.7 million, mainly from net borrowings. The net increase in cash and cash equivalents for the period was $4.1 million.
| Cash Flow Activities | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash from Operating Activities | $13,200 | $16,405 |
| Net Cash used in Investing Activities | ($10,800) | ($7,500) |
| Net Cash from Financing Activities | $1,700 | $2,000 |
| Net Increase in Cash and Equivalents | $4,100 | $10,905 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total liquidity, defined as cash, cash equivalents, and securities available for sale, stood at $479.8 million, constituting 21.0% of total assets. This is a slight decrease from 21.5% at year-end 2023, reflecting a small contraction in liquidity relative to asset growth. The company has no outstanding borrowings against its available lines of credit totaling $17 million, providing further liquidity flexibility.
Conclusion on Liquidity and Solvency
Overall, Norwood Financial Corp. presents a robust liquidity profile with sufficient working capital and a healthy current ratio. The cash flow from operations remains strong, supporting the company's ability to meet both short-term and long-term obligations effectively.
Is Norwood Financial Corp. (NWFL) Overvalued or Undervalued?
Valuation Analysis
The valuation of Norwood Financial Corp. (NWFL) involves a detailed examination of key financial ratios and stock performance metrics that offer insights into whether the company is overvalued or undervalued in the market.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical metric for assessing valuation. As of September 30, 2024, the earnings per share (EPS) was $1.55 for the nine-month period, compared to $2.03 for the same period in 2023. This results in a trailing P/E ratio of approximately 17.8 based on a stock price of $27.58 as of the same date.
Price-to-Book (P/B) Ratio
The company's book value per share is calculated from total stockholders' equity. As of September 30, 2024, total stockholders' equity was $195.7 million with 8.31 million shares outstanding, resulting in a book value per share of approximately $23.55. This gives a P/B ratio of approximately 1.17.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. With a market cap of $229.5 million, total debt of $145 million, and cash of $82.9 million, the EV is approximately $291.6 million. The EBITDA for the trailing twelve months is approximately $20 million, leading to an EV/EBITDA ratio of approximately 14.58.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 17.8 |
| P/B Ratio | 1.17 |
| EV/EBITDA Ratio | 14.58 |
Stock Price Trends
Over the past 12 months, NWFL's stock price has experienced fluctuations, starting at approximately $25.76 in September 2023 and rising to $27.58 by September 2024, reflecting a growth of around 7.06%.
Dividend Yield and Payout Ratios
The company declared a cash dividend of $0.30 per share for the third quarter of 2024. With a stock price of $27.58, this results in a dividend yield of approximately 1.09%. The payout ratio is calculated at approximately 19.4% based on the EPS of $1.55.
Analyst Consensus on Stock Valuation
As of the latest reports, analysts have a consensus rating of Hold on NWFL, indicating that the stock is fairly valued given the current market conditions.
| Metric | Value |
|---|---|
| Dividend per Share | $0.30 |
| Dividend Yield | 1.09% |
| Payout Ratio | 19.4% |
| Analyst Consensus | Hold |
The combination of these metrics provides a comprehensive view of Norwood Financial Corp.'s valuation landscape as of 2024.
Key Risks Facing Norwood Financial Corp. (NWFL)
Key Risks Facing Norwood Financial Corp.
The financial health of Norwood Financial Corp. is influenced by a variety of internal and external risk factors. This section highlights the significant risks that could impact the company’s performance in 2024.
Industry Competition
Norwood operates in a competitive financial services environment. Competition from both traditional banks and fintech companies has intensified. As of September 30, 2024, the company's market position is challenged by increased pressure on net interest margins, which stood at 2.99% compared to 3.10% in the same period in 2023.
Regulatory Changes
Changes in regulatory requirements can significantly impact operational practices. The company must comply with evolving financial regulations, which may lead to increased compliance costs. For the three months ended September 30, 2024, other expenses grew to $12,031,000, marking a $755,000 increase compared to the previous year, largely due to compliance-related expenses.
Market Conditions
Fluctuating interest rates present a notable risk. For the nine months ended September 30, 2024, interest expense totaled $37,529,000 at an average cost of 3.07%, up from $22,681,000 at 2.02% for the same period in 2023.
Operational Risks
Operational risks include potential disruptions in service delivery, which can be exacerbated by technology failures. The company reported a $286,000 increase in data processing expenses for the three months ended September 30, 2024.
Financial Risks
Financial risks are highlighted by the provision for credit losses. The provision increased to $1,345,000 for the three months ended September 30, 2024, up from $882,000 in the same quarter of 2023. This indicates a more cautious approach in light of potential loan defaults.
Strategic Risks
Strategic risks arise from the company's growth initiatives and changes in market demand. For the nine months ended September 30, 2024, net income decreased to $12,491,000 from $16,405,000 in the previous year, reflecting challenges in maintaining profitability amid rising costs.
Mitigation Strategies
To mitigate these risks, Norwood has implemented several strategies:
- Regularly assessing the impact of interest rate changes on net interest income through asset and liability management.
- Maintaining a strong allowance for credit losses, which stood at $18,699,000 or 1.12% of total loans as of September 30, 2024.
- Investing in technology to enhance operational efficiency and reduce the likelihood of service disruptions.
| Risk Factor | Current Status | Impact |
|---|---|---|
| Net Interest Margin | 2.99% (2024) | Pressure on profitability |
| Interest Expense | $37,529,000 (2024) | Increased cost of funds |
| Provision for Credit Losses | $1,345,000 (2024) | Increased risk of defaults |
| Data Processing Expenses | $12,031,000 (2024) | Operational cost increase |
| Net Income | $12,491,000 (2024) | Profitability challenges |
Future Growth Prospects for Norwood Financial Corp. (NWFL)
Future Growth Prospects for Norwood Financial Corp. (NWFL)
The growth opportunities for Norwood Financial Corp. are driven by several key factors, including product innovations, market expansions, and strategic partnerships.
Key Growth Drivers
- Product Innovations: The company has focused on enhancing its loan offerings, with a substantial increase in average loans by $78.9 million for the nine months ended September 30, 2024, compared to the same period in 2023.
- Market Expansions: As of September 30, 2024, total assets reached $2.280 billion, up from $2.201 billion at December 31, 2023, indicating successful market penetration and asset growth.
- Acquisitions: The company has strategically increased its commercial real estate loans by $40.3 million during the nine-month period, showcasing expansion in high-demand sectors.
Future Revenue Growth Projections
Future revenue growth projections are optimistic, driven by the increasing interest income. For the nine months ended September 30, 2024, interest income totaled $83.7 million, a significant increase from $70.0 million in 2023. The yield on average earning assets improved to 5.20% from 4.59%.
Earnings Estimates
Earnings per share (EPS) for the nine months ended September 30, 2024, were $1.55, down from $2.03 in the comparable period of 2023. The decrease is attributed to increased provisions for credit losses, which totaled $1.069 million compared to a release of $568,000 in the prior year.
Strategic Initiatives and Partnerships
Strategic initiatives include enhanced service charges and fees, which increased by $172,000 year-over-year. Additionally, the company has engaged in partnerships to optimize its operational efficiency, which is expected to contribute positively to its revenue streams.
Competitive Advantages
- Strong Loan Portfolio: As of September 30, 2024, total loans receivable stood at $1.675 billion, with a diverse composition that includes residential, commercial, and consumer loans.
- Robust Allowance for Credit Losses: The allowance for credit losses was 1.12% of total loans, providing a cushion against potential defaults.
- Market Positioning: The company maintains a competitive edge with a net interest margin of 2.87%, which is essential for profitability in the banking sector.
| Financial Metric | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Interest Income | $83.7 million | $70.0 million |
| Net Income | $12.491 million | $16.405 million |
| Earnings Per Share | $1.55 | $2.03 |
| Total Loans Receivable | $1.675 billion | $1.604 billion |
| Allowance for Credit Losses | $18.699 million | $18.968 million |
| Total Assets | $2.280 billion | $2.201 billion |
Norwood Financial Corp. (NWFL) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Norwood Financial Corp. (NWFL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Norwood Financial Corp. (NWFL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Norwood Financial Corp. (NWFL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.