GlobeNewswire Inc | Apr 23, 2021 08:15AM EDT

April 23, 2021

HONESDALE, Pa., April 23, 2021 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp (Nasdaq Global Market NWFL) and its subsidiary, Wayne Bank, announced record earnings of $5,542,000 for the three months ended March 31, 2021, increasing 80% from the $3,079,000 recorded during the corresponding period of 2020. The increase reflects the benefits derived from the Companys acquisition of UpState New York Bancorp, Inc. (UpState), which closed on July 7, 2020. Earnings per share on a fully diluted basis were $0.67 in the first quarter of 2021 compared to $0.49 in the first quarter of 2020. The annualized return on average assets was 1.18% in the first quarter of 2021 and the annualized return on average equity was 11.39%, compared to 1.01% and 8.79%, respectively, in the first quarter of 2020.

Total assets were $2.010 billion as of March 31, 2021, an increase of $767.5 million compared to March 31, 2020. As of March 31, 2021, total loans increased $493.0 million compared to March 31, 2020, total deposits increased $695.0 million compared to March 31, 2020, and stockholders equity increased $52.9 million compared to March 31, 2020. The increases reflect the balances acquired from UpState and the impact from economic stimulus, including loans originated through the Payroll Protection Program (PPP). During the three months ended March 31, 2021, we originated 633 new PPP loans totaling $54.3 million, and had $30.0 million of loans forgiven that were originated in previous periods. As of March 31, 2021, the total of all PPP loans outstanding was $119.3 million.

Net interest income (fully taxable equivalent, or fte) was $15,981,000 during the three months ended March 31, 2021, which is $6,078,000 higher than the comparable three-month period of 2020. A $491.3 million increase in average loans outstanding over the corresponding period in 2020 contributed to the increased interest income. During the three-months ended March 31, 2021, the fte yield on interest-earning assets decreased thirty-two basis points compared to the three months ended March 31, 2020, while the cost of funds decreased fifty-five basis points. As a result, the annualized net interest spread (fte) improved to 3.46% from 3.23% in the quarter ended March 31, 2021 compared to the corresponding three-month period in 2020.

Other income totaled $1,989,000 for the three months ended March 31, 2021 compared to $1,654,000 during the corresponding period of last year. The increase is due primarily to an $184,000 increase in service charges due primarily to service charges and fees related to the acquisition of UpState. Earnings and proceeds on bank-owned life insurance policies also increased $166,000 over the first quarter of last year. All other categories of other income decreased $15,000, net.

Operating expenses totaled $9,452,000 in the three months ended March 31, 2021 and were $2,393,000 higher than the $7,059,000 recorded in the same period of last year. The increase reflects the costs of operations acquired from UpState, including four new Community Offices.

Mr. Critelli stated, Our first quarter results reflect the revenue generated and the costs associated with our acquisition of UpState, as well as the continued impact of economic stimulus on our balance sheet. We remain committed to providing the financial resources that will help our customers emerge from the restrictions related to the COVID-19 pandemic, and continue to provide the resources to allow our employees the ability to perform their functions in a safe work environment. We look forward to continuing to serve our expanded base of stockholders and customers.

Norwood Financial Corp. is the parent company of Wayne Bank, which operates from fourteen offices throughout Northeastern Pennsylvania and sixteen offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York. The Companys stock trades on the Nasdaq Global Market under the symbol NWFL.

Forward-Looking Statements.

The 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 Measures This release references tax-equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income is 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 taxequivalent 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:

(dollars in thousands) Three months ended March 31, 2021 2020Net interest income $ 15,776 $ 9,665Tax equivalent basis adjustment using 21% marginal 205 238tax rateNet interest income on a fully taxable equivalent $ 15,981 $ 9,903basis

This release also references average tangible equity, which is also a non-GAAP financial measure. Average tangible equity is calculated by deducting average goodwill and other intangible assets from average stockholders equity. The Company believes that disclosure of tangible equity ratios enhances investor understanding of our financial position and improves the comparability of our financial data. The following reconciles average equity to average tangible equity:

(dollars in thousands) Three months ended March 31, 2021 2020 Average equity $ 197,243 $ 140,962 Average goodwill and other intangibles (29,798 ) (11,552 )Average tangible equity $ 167,445 $ 129,410

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 inthousands, except share andper share data)(unaudited) March 31 2021 2020 ASSETS Cash and due $ 20,364 $ 14,712 from banksInterest-bearingdeposits with 190,135 23,706 banksCash and cash 210,499 38,418 equivalents Securitiesavailable for 275,224 196,998 saleLoans receivable 1,421,568 928,565 Less: Allowance 14,509 9,088 for loan lossesNet loans 1,407,059 919,477 receivableRegulatory 4,043 3,770 stock, at costBank premisesand equipment, 17,648 14,071 netBank owned life 39,471 38,971 insuranceForeclosed real 844 1,077 estate ownedAccrued interest 6,317 3,669 receivableGoodwill 29,290 11,331 Other intangible 495 212 assetsOther assets 18,946 14,297 TOTAL ASSETS $ 2,009,836 $ 1,242,291 LIABILITIES Deposits: Non-interest $ 415,395 $ 213,359 bearing demandInterest-bearing 1,269,793 776,801 Total deposits 1,685,188 990,160 Short-term 72,917 40,656 borrowingsOther borrowings 39,366 51,350 Accrued interest 1,370 2,895 payableOther 15,888 15,043 liabilitiesTOTAL 1,814,729 1,100,104 LIABILITIES STOCKHOLDERS' EQUITYPreferred Stock,no par value per share, - - authorized5,000,000 sharesCommon Stock,$.10 par value per share,authorized:20,000,000 shares,issued: 2021:8,240,081 824 634 shares, 2020:6,342,568 sharesSurplus 95,717 49,644 Retained 97,201 88,032 earningsTreasury stock,at cost: 2021:21,568 shares, (656 ) (400 ) 2020: 12,007sharesAccumulatedother 2,021 4,277 comprehensiveincomeTOTALSTOCKHOLDERS' 195,107 142,187 EQUITY TOTAL LIABILITIES ANDSTOCKHOLDERS' $ 2,009,836 $ 1,242,291 EQUITY NORWOOD FINANCIAL CORP.ConsolidatedStatements of Income(dollars inthousands, except per sharedata)(unaudited) Three Months Ended March 31, 2021 2020 INTEREST INCOME Loansreceivable, $ 16,146 $ 10,683 including feesSecurities 1,112 1,179 Other 43 6 Total Interest 17,301 11,868 income INTEREST EXPENSE Deposits 1,255 1,790 Short-term 69 111 borrowingsOther borrowings 201 302 Total Interest 1,525 2,203 expenseNET INTEREST 15,776 9,665 INCOMEPROVISION FOR 1,500 700 LOAN LOSSESNET INTERESTINCOME AFTER 14,276 8,965 PROVISION FORLOAN LOSSES OTHER INCOME Service charges 1,247 1,063 and feesIncome fromfiduciary 160 153 activitiesNet realizedgains on sales 21 38 of securitiesGains on sales 29 56 of loans, netEarnings andproceeds on life 374 208 insurancepoliciesOther 158 136 Total other 1,989 1,654 income OTHER EXPENSES Salaries andemployee 4,953 3,777 benefitsOccupancy,furniture and 1,220 968 equipmentDataprocessing and 603 437 relatedoperationsTaxes, other 305 214 than incomeProfessional 540 218 feesFDIC Insurance 181 0 assessmentForeclosed real 30 16 estateAmortization of 35 22 intangiblesOther 1,585 1,407 Total other 9,452 7,059 expenses INCOME BEFORE 6,813 3,560 TAXINCOME TAX 1,271 481 EXPENSENET INCOME $ 5,542 $ 3,079 Basic earnings $ 0.68 $ 0.49 per share Diluted earnings $ 0.67 $ 0.49 per share NORWOOD FINANCIAL CORP.FinancialHighlights (Unaudited)(dollars inthousands, except per sharedata) For the ThreeMonths Ended 2021 2020 March 31 Net interest $ 15,776 $ 9,665 incomeNet income 5,542 3,079 Net interestspread (fully 3.46 % 3.23 % taxableequivalent)Net interestmargin (fully 3.59 % 3.48 % taxableequivalent)Return on 1.18 % 1.01 % average assetsReturn on 11.39 % 8.79 % average equityReturn onaverage tangible 13.42 % 9.57 % equityBasic earnings $ 0.68 $ 0.49 per shareDiluted earnings $ 0.67 $ 0.49 per share As of March 31 2021 2020 Total assets $ 2,009,836 $ 1,242,291 Total loans 1,421,568 928,565 receivableAllowance for 14,509 9,088 loan lossesTotal deposits 1,685,188 990,160 Stockholders' 195,107 142,187 equityTrust assets 173,263 137,059 under management Book value per $ 23.82 $ 22.52 shareTangible book $ 20.20 $ 20.70 value per shareEquity to total 9.71 % 11.45 % assetsAllowance tototal loans 1.02 % 0.98 % receivableNonperformingloans to total 0.83 % 0.30 % loansNonperformingassets to total 0.63 % 0.31 % assets NORWOOD FINANCIAL CORP.ConsolidatedBalance Sheets (unaudited)(dollars in thousands) March December 31 September 30 June 30 March 31 2021 2020 2020 2020 2020ASSETS Cash and due $ 20,364 $ 19,445 $ 23,874 $ 15,387 $ 14,712 from banksInterest-bearingdeposits with 190,135 92,248 100,566 67,989 23,706 banksCash and cash 210,499 111,693 124,440 83,376 38,418 equivalents Securitiesavailable for 275,224 226,586 197,436 196,735 196,998 saleLoans receivable 1,421,568 1,410,732 1,414,662 988,679 928,565 Less: Allowance 14,509 13,150 11,674 10,312 9,088 for loan lossesNet loans 1,407,059 1,397,582 1,402,988 978,367 919,477 receivableRegulatory 4,043 3,981 3,876 3,677 3,770 stock, at costBank owned life 39,471 39,608 39,400 39,183 38,971 insuranceBank premisesand equipment, 17,648 17,814 18,124 14,040 14,071 netForeclosed real 844 965 965 965 1,077 estate ownedGoodwill andother 29,785 29,820 30,778 11,522 11,543 intangiblesOther assets 25,263 23,815 24,100 26,676 17,966 TOTAL ASSETS $ 2,009,836 $ 1,851,864 $ 1,842,107 $ 1,354,541 $ 1,242,291 LIABILITIES Deposits: Non-interest $ 415,395 $ 359,559 $ 372,237 $ 284,754 $ 213,359 bearing demandInterest-bearing 1,269,793 1,175,826 1,143,685 801,484 776,801 depositsTotal deposits 1,685,188 1,535,385 1,515,922 1,086,238 990,160 Borrowings 112,283 105,762 115,732 106,027 92,006 Other 17,258 15,932 19,906 19,612 17,938 liabilitiesTOTAL 1,814,729 1,657,079 1,651,560 1,211,877 1,100,104 LIABILITIES STOCKHOLDERS' 195,107 194,785 190,547 142,664 142,187 EQUITY TOTAL LIABILITIES ANDSTOCKHOLDERS' $ 2,009,836 $ 1,851,864 $ 1,842,107 $ 1,354,541 $ 1,242,291 EQUITY

NORWOOD FINANCIAL CORP.ConsolidatedStatements of Income(unaudited)(dollars inthousands, except per sharedata) March 31 December 31 September 30 June 30 March 31Three months 2021 2020 2020 2020 2020endedINTEREST INCOME Loansreceivable, $ 16,146 $ 16,336 $ 16,260 $ 10,767 $ 10,683 including feesSecurities 1,112 1,064 1,031 1,063 1,179 Other 43 29 18 19 6 Total interest 17,301 17,429 17,309 11,849 11,868 income INTEREST EXPENSE Deposits 1,255 1,514 1,676 1,630 1,790 Borrowings 270 301 303 352 413 Total interest 1,525 1,815 1,979 1,982 2,203 expenseNET INTEREST 15,776 15,614 15,330 9,867 9,665 INCOMEPROVISION FOR 1,500 1,600 1,850 1,300 700 LOAN LOSSESNET INTERESTINCOME AFTER PROVISIONFOR LOAN LOSSES 14,276 14,014 13,480 8,567 8,965 OTHER INCOME Service charges 1,247 1,913 1,301 837 1,063 and feesIncome fromfiduciary 160 150 205 175 153 activitiesNet realizedgains on sales 21 - 33 - 38 of securitiesGains on sales 29 241 164 65 56 of loans, netEarnings andproceeds on life 374 208 217 212 208 insurancepoliciesOther 158 149 152 103 136 Total other 1,989 2,661 2,072 1,392 1,654 income OTHER EXPENSES Salaries andemployee 4,953 5,243 4,812 3,289 3,777 benefitsOccupancy,furniture and 1,220 1,165 1,109 906 968 equipment, netForeclosed real 30 8 31 (2 ) 16 estateFDIC insurance 181 213 144 42 - assessmentMerger related 22 66 386 1,597 - Other 3,046 3,214 2,898 2,260 2,298 Total other 9,452 9,909 9,380 8,092 7,059 expenses INCOME BEFORE 6,813 6,766 6,172 1,867 3,560 TAXINCOME TAX 1,271 1,253 1,173 379 481 EXPENSENET INCOME $ 5,542 $ 5,513 $ 4,999 $ 1,488 $ 3,079 Basic earnings $ 0.68 $ 0.67 $ 0.62 $ 0.24 $ 0.49 per share Diluted earnings $ 0.67 $ 0.67 $ 0.62 $ 0.24 $ 0.49 per share

Book Value per $ 23.82 $ 23.72 $ 23.30 $ 22.62 $ 22.52 shareTangible Book 20.20 20.10 19.55 20.80 20.70 Value per share Return onaverage assets 1.18 % 1.18 % 1.11 % 0.45 % 1.01 %(annualized)Return onaverage equity 11.39 % 11.32 % 10.64 % 4.17 % 8.79 %(annualized)Return onaverage tangible 13.42 % 13.46 % 11.75 % 4.54 % 9.57 %equity(annualized) Net interest 3.46 % 3.50 % 3.55 % 3.03 % 3.23 %spread (fte)Net interest 3.59 % 3.65 % 3.73 % 3.25 % 3.48 %margin (fte) Allowance forloan losses to 1.02 % 0.93 % 0.83 % 1.04 % 0.98 %total loansNet charge-offsto average loans 0.04 % 0.04 % 0.14 % 0.03 % 0.05 %(annualized)Nonperformingloans to total 0.83 % 0.85 % 0.89 % 0.30 % 0.30 %loansNonperformingassets to total 0.63 % 0.70 % 0.74 % 0.29 % 0.31 %assets