GlobeNewswire Inc | Jul 22, 2020 08:15AM EDT

July 22, 2020

HONESDALE, Pa., July 22, 2020 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp (Nasdaq Global Market-NWFL) and its subsidiary, Wayne Bank, announced earnings for the three months ended June 30, 2020 of $1,488,000, which was $2,034,000 lower than the similar period of last year due to increased loan loss provisions and $1,597,000 of expenses related to the acquisition of UpState New York Bancorp, Inc. (UpState) which closed on July 7, 2020. Earnings per share (fully diluted) were $0.24 in the 2020 compared to $0.56 in the same period of last year. Annualized return on average assets for the three months ended June 30, 2020 was 0.45% with an annualized return on average equity of 4.17%. Net income for the six months ended June 30, 2020 totaled $4,567,000, which is $2,145,000 lower than the same six-month period of last year due primarily to increased loan loss provisions and merger related expenses. Earnings per share (fully diluted) for the six months ended June 30, 2020 were $0.73 compared to $1.06 in the 2019 period.

Total assets as of June 30, 2020 were $1.355 billion, with loans receivable of $988.7 million, deposits of $1.086 billion and stockholders equity of $142.7 million. Loans receivable increased $101.0 million since June 30, 2019, while total deposits increased $105.0 million. The increase in loans includes $67.3 million of Paycheck Protection Program (PPP) loans, while the increase in deposits also includes significant stimulus funds resulting from the PPP and CARES Act.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $3.9 million and represented 0.29% of total assets as of June 30, 2020 compared to $3.0 million, or 0.25% of total assets, as of June 30, 2019. The allowance for loan losses totaled $10,312,000 as of June 30, 2020 and represented 1.04% of total loans outstanding, compared to $8,228,000 and 0.93%, respectively, on June 30, 2019.

For the three months ended June 30, 2020, net interest income, on a fully-taxable equivalent basis (fte), totaled $10,088,000, an increase of $210,000 compared to the similar period in 2019. A $101.2 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the 2020 period was 3.25%, compared to 3.49% in 2019 period. The tax-equivalent yield on interest-earning assets decreased 38 basis points to 3.89% compared to the prior year while the cost of interest-bearing liabilities decreased 16 basis points to 0.86%. Net interest income (fte) for the six months ended June 30, 2020 totaled $19,991,000, which was $578,000 higher than the similar period in 2019 due to the higher volume of earning assets. The net interest margin (fte) was 3.36% in the 2020 period and 3.46% during the first six months of 2019. The decrease in the net interest margin (fte) reflects the growth in PPP loans and the reduced net interest spread earned due to the 1.00% interest rate on these loans.

Other income for the three months ended June 30, 2020 totaled $1,392,000 compared to $1,641,000 for the similar period in 2019. The decrease can be attributed to a lower level of service charges and fees due to accommodations made to customers as a result of the COVID-19 pandemic. For the six months ended June 30, 2020, other income totaled $3,047,000 compared to $3,201,000 in the 2019 period. Service charges on deposits and fees on loans decreased $182,000, net, due to accommodations made to customers as a result of the COVID-19 pandemic.

Other expenses totaled $8,092,000 for the three months ended June 30, 2020, an increase of $1,307,000 compared to the $6,785,000 reported in the similar period of 2019 due primarily to merger related expenses of $1,597,000. For the six months ended June 30, 2020, other expenses totaled $15,152,000 compared to $13,433,000 for the similar period in 2019. The increase includes the $1,597,000 of merger related expenses.

Mr. Critelli commented, Our results for the first half of 2020 have been significantly impacted by our efforts to assist our customers during the COVID-19 pandemic, restrictions on business activity and the costs associated with our acquisition of UpState New York Bancorp, Inc. Our balance sheet reflects our success providing small business customers with PPP loans and other economic stimulus that has been provided. Mr. Critelli further commented, We are pleased to announce the completion of the merger on July 7th and to welcome Upstates shareholders to Norwood andthe employees to Wayne Bank. We also look forward to serving the customers of Bank of the Finger Lakes and Bank of Cooperstown. We continue to search out opportunities available to us as we service our growing base of stockholders and customers.

Norwood Financial Corp is the parent company of Wayne Bank, which operates from fifteen offices throughout Northeastern Pennsylvania and twelve offices in the Southern Tier of New York. The Companys stock is traded on the Nasdaq Global Market, under the symbol, NWFL.

Forward-Looking StatementsThe Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words believes, anticipates, contemplates, expects, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in federal and state laws, changes in interest rates, the risks and uncertainty posed by, and the effect and impact of, the COVID-19 pandemic on the economy and the Companys results of operation and financial condition, the ability to control costs and expenses, demand for real estate, government fiscal and trade policies, cybersecurity and general economic conditions. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial MeasuresThis release references tax-equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income was derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of net interest income on a tax-equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following reconciles net interest income to net interest income on a fully taxable-equivalent basis:

Three months ended Six months ended June 30 June 30(dollars in thousands) 2020 2019 2020 2019 Net Interest Income $ 9,867 $ 9,612 $ 19,532 $ 18,882 Taxable equivalent basisadjustment using 21% 221 266 459 531 marginal tax rateNet interest income on afully taxable equivalent $ 10,088 $ 9,878 $ 19,991 $ 19,413 basis



This release also references average tangible equity, which is also a non-GAAPfinancial measure. Average tangible equity is calculated by deducting averagegoodwill and other intangible assets from average stockholders? equity. TheCompany believes that disclosure of tangible equity ratios enhances investorunderstanding of our financial position and improves the comparability of ourfinancial data.

The following reconciles average equity to average tangible equity:

Three months ended Six months ended June 30 June 30(dollars in thousands) 2020 2019 2020 2019 Average equity $ 143,472 $ 129,215 $ 142,217 $ 126,993 Average goodwill and other (11,530 ) (11,621 ) (11,541 ) (11,635 )intangiblesAverage tangible equity $ 131,942 $ 117,594 $ 130,676 $ 115,358

Contact: William S. Lance Executive Vice President & Chief Financial Officer NORWOOD FINANCIAL CORP 570-253-8505 www.waynebank.com

NORWOOD FINANCIAL CORP.Consolidated Balance Sheets (dollars in thousands, except share and per share data)(unaudited) June 30 2020 2019 ASSETS Cash and due $ 15,387 $ 14,207 from banks

Interest-bearing 67,989 4,265 deposits withbanks Cash and cash 83,376 18,472 equivalents Securitiesavailable for 196,735 238,083 sale Loans 988,679 887,673 receivable Less:Allowance for 10,312 8,228 loan losses Net loans 978,367 879,445 receivable Regulatory 3,677 3,155 stock, at cost Bank premisesand equipment, 14,040 13,880 net Bank owned 39,183 38,340 life insurance Foreclosedreal estate 965 1,677 owned Accruedinterest 4,383 3,979 receivable Goodwill 11,331 11,331 Otherintangible 191 280 assets Other assets 22,293 13,886 TOTAL ASSETS $ 1,354,541 $ 1,222,528 LIABILITIES Deposits: Non-interest $ 284,754 $ 221,764 bearing demand 801,484 759,460 Interest-bearing Total 1,086,238 981,224 deposits Short-term 55,204 48,094 borrowings Other 50,823 44,024 borrowings Accrued 2,826 3,008 interest payable Other 16,786 14,695 liabilities TOTAL 1,211,877 1,091,045 LIABILITIES STOCKHOLDERS' EQUITY Preferred Stock,no par value per - - share, authorized5,000,000 shares Common Stock,$.10 par value per share, authorized:20,000,000 shares, issued: 2020:6,342,568 634 630 shares, 2019:6,304,413 shares Surplus 49,778 48,741 Retained 87,939 82,127 earnings Treasurystock, at cost:2020: 13,778 (469 ) (455 ) shares, 2019:13,807 shares Accumulatedother 4,782 440 comprehensiveincome TOTALSTOCKHOLDERS' 142,664 131,483 EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' $ 1,354,541 $ 1,222,528 EQUITY NORWOOD FINANCIAL CORP.Consolidated Statements of Income (dollars in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 INTEREST INCOME Loansreceivable, $ 10,767 $ 10,328 $ 21,450 $ 20,298 including fees Securities 1,063 1,435 2,242 2,876 Other 19 51 25 66 Total 11,849 11,814 23,717 23,240 Interest income INTEREST EXPENSE Deposits 1,630 1,839 3,420 3,568 Short-term 73 85 184 209 borrowings Other 279 278 581 581 borrowings Total 1,982 2,202 4,185 4,358 Interest expenseNET INTEREST 9,867 9,612 19,532 18,882 INCOMEPROVISION FOR 1,300 300 2,000 750 LOAN LOSSESNET INTEREST INCOMEAFTER PROVISION FOR 8,567 9,312 17,532 18,132 LOAN LOSSES OTHER INCOME Service 837 1,052 1,901 2,083 charges and fees Income fromfiduciary 175 145 328 287 activities Net realizedgains on sales - 64 38 64 of securities Gains onsales of loans, 65 67 121 110 net Earnings andproceeds on life 212 207 420 408 insurancepolicies Other 103 106 239 249 Total other 1,392 1,641 3,047 3,201 income OTHER EXPENSES Salaries andemployee 3,289 3,599 7,065 7,248 benefits Occupancy,furniture and 906 940 1,875 1,864 equipment Dataprocessing and 466 472 903 920 relatedoperations Taxes, other 214 179 427 340 than income Professional 225 226 443 476 fees FDICInsurance 42 84 42 155 assessment Foreclosed (2 ) (10 ) 14 13 real estate Amortization 21 27 44 56 of intangibles Merger 1,597 - 1,597 - related Other 1,334 1,268 2,742 2,361 Total other 8,092 6,785 15,152 13,433 expenses INCOME BEFORE 1,867 4,168 5,427 7,900 TAXINCOME TAX 379 646 860 1,188 EXPENSENET INCOME $ 1,488 $ 3,522 $ 4,567 $ 6,712 Basic earnings $ 0.24 $ 0.56 $ 0.73 $ 1.07 per share Diluted earnings $ 0.24 $ 0.56 $ 0.73 $ 1.06 per share NORWOOD FINANCIAL CORP.Financial Highlights (Unaudited)(dollars in thousands, except per share data) For the ThreeMonths Ended 2020 2019 June 30 Net interest $ 9,867 $ 9,612 incomeNet income 1,488 3,522 Net interestspread (fully 3.03 % 3.24 % taxableequivalent)Net interestmargin (fully 3.25 % 3.49 % taxableequivalent)Return on 0.45 % 1.16 % average assetsReturn on 4.17 % 10.93 % average equityReturn onaverage tangible 4.54 % 12.01 % equityBasic earnings $ 0.24 $ 0.56 per shareDiluted earnings $ 0.24 $ 0.56 per share For the SixMonths Ended 2020 2019 June 30 Net interest $ 19,532 $ 18,882 incomeNet income 4,567 6,712 Net interestspread (fully 3.12 % 3.22 % taxableequivalent)Net interestmargin (fully 3.36 % 3.46 % taxableequivalent)Return on 0.72 % 1.12 % average assetsReturn on 6.46 % 10.66 % average equityReturn onaverage tangible 7.03 % 11.73 % equityBasic earnings $ 0.73 $ 1.07 per shareDiluted earnings $ 0.73 $ 1.06 per share As of June 30 2020 2019 Total assets $ 1,354,541 $ 1,222,528 Total loans 988,679 887,673 receivableAllowance for 10,312 8,228 loan lossesTotal deposits 1,086,238 981,224 Stockholders' 142,664 131,483 equityTrust assets 149,535 163,103 under management Book value per $ 22.62 $ 20.90 shareTangible book $ 20.80 $ 19.06 value per shareEquity to total 10.53 % 10.76 % assetsAllowance tototal loans 1.04 % 0.93 % receivableNonperformingloans to total 0.30 % 0.15 % loansNonperformingassets to total 0.29 % 0.25 % assets NORWOOD FINANCIAL CORP.Consolidated Balance Sheets (unaudited)(dollars in thousands) June 30 March 31 December September 30 June 30 31 2020 2020 2019 2019 2019 ASSETS Cash and due $ 15,387 $ 14,712 $ 15,038 $ 20,067 $ 14,207 from banks

Interest-bearing 67,989 23,706 377 848 4,265 deposits withbanks Cash and cash 83,376 38,418 15,415 20,915 18,472 equivalents Securitiesavailable for 196,735 196,998 210,205 211,199 238,083 sale Loans 988,679 928,565 924,581 905,582 887,673 receivable Less:Allowance for 10,312 9,088 8,509 8,405 8,228 loan losses Net loans 978,367 919,477 916,072 897,177 879,445 receivable Regulatory 3,677 3,770 4,844 3,137 3,155 stock, at cost Bank owned 39,183 38,971 38,763 38,562 38,340 life insurance Bank premisesand equipment, 14,040 14,071 14,228 13,927 13,880 net Foreclosedreal estate 965 1,077 1,556 1,572 1,677 owned Goodwill andother 11,522 11,543 11,566 11,588 11,611 intangibles Other assets 26,676 17,966 17,961 17,779 17,865 TOTAL ASSETS $ 1,354,541 $ 1,242,291 $ 1,230,610 $ 1,215,856 $ 1,222,528 LIABILITIES Deposits: Non-interest $ 284,754 $ 213,359 $ 207,299 $ 231,211 $ 221,764 bearing demand

Interest-bearing 801,484 776,801 750,230 743,222 759,460 deposits Total 1,086,238 990,160 957,529 974,433 981,224 deposits Borrowings 106,027 92,006 118,694 88,684 92,118 Other 19,612 17,938 16,959 17,845 17,703 liabilities TOTAL 1,211,877 1,100,104 1,093,182 1,080,962 1,091,045 LIABILITIES STOCKHOLDERS' 142,664 142,187 137,428 134,894 131,483 EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' $ 1,354,541 $ 1,242,291 $ 1,230,610 $ 1,215,856 $ 1,222,528 EQUITY NORWOOD FINANCIAL CORP.Consolidated Statements of Income (unaudited)(dollars in thousands, except per share data) June 30 March 31 December 31 September 30 June 30 Three months 2020 2020 2019 2019 2019 endedINTEREST INCOME Loansreceivable, $ 10,767 $ 10,683 $ 10,815 $ 10,776 $ 10,328 including fees Securities 1,063 1,179 1,159 1,278 1,435 Other 19 6 11 5 51 Total 11,849 11,868 11,985 12,059 11,814 interest income INTEREST EXPENSE Deposits 1,630 1,790 1,784 1,787 1,839 Borrowings 352 413 368 381 363 Total 1,982 2,203 2,152 2,168 2,202 interest expenseNET INTEREST 9,867 9,665 9,833 9,891 9,612 INCOMEPROVISION FOR 1,300 700 200 300 300 LOAN LOSSESNET INTERESTINCOME AFTER PROVISION FOR LOAN 8,567 8,965 9,633 9,591 9,312 LOSSES OTHER INCOME Service 837 1,063 1,168 1,200 1,052 charges and fees Income fromfiduciary 175 153 156 167 145 activities Net realizedgains on sales - 38 21 169 64 of securities Gains onsales of loans, 65 56 44 15 67 net Earnings andproceeds on life 212 208 200 222 207 insurancepolicies Other 103 136 107 109 106 Total other 1,392 1,654 1,696 1,882 1,641 income OTHER EXPENSES Salaries andemployee 3,289 3,777 3,740 3,667 3,599 benefits Occupancy,furniture and 906 968 938 916 940 equipment, net Foreclosed (2 ) 16 9 24 (10 ) real estate FDICinsurance 42 - 3 (5 ) 84 assessment Merger 1,597 - - - - related Other 2,260 2,298 2,398 2,189 2,172 Total other 8,092 7,059 7,088 6,791 6,785 expenses INCOME BEFORE 1,867 3,560 4,241 4,682 4,168 TAXINCOME TAX 379 481 645 775 646 EXPENSENET INCOME $ 1,488 $ 3,079 $ 3,596 $ 3,907 $ 3,522 Basic earnings $ 0.24 $ 0.49 $ 0.57 $ 0.62 $ 0.56 per share Diluted earnings $ 0.24 $ 0.49 $ 0.57 $ 0.62 $ 0.56 per share Book Value per $ 22.62 $ 22.52 $ 21.67 $ 21.41 $ 20.90 shareTangible Book 20.80 20.70 19.84 19.57 19.06 Value per share Return onaverage assets 0.45 % 1.01 % 1.18 % 1.27 % 1.16 % (annualized)Return onaverage equity 4.17 % 8.79 % 10.42 % 11.56 % 10.93 % (annualized)Return onaverage tangible 4.54 % 9.57 % 11.38 % 12.66 % 12.01 % equity(annualized) Net interest 3.03 % 3.23 % 3.33 % 3.35 % 3.24 % spread (fte)Net interest 3.25 % 3.48 % 3.59 % 3.60 % 3.49 % margin (fte) Allowance forloan losses to 1.04 % 0.98 % 0.92 % 0.93 % 0.93 % total loansNet charge-offsto average loans 0.03 % 0.05 % 0.04 % 0.05 % 0.19 % (annualized)Nonperformingloans to total 0.30 % 0.30 % 0.09 % 0.15 % 0.15 % loansNonperformingassets to total 0.29 % 0.31 % 0.19 % 0.24 % 0.25 % assets