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

July 23, 2021

HONESDALE, Pa., July 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 for the three months ended June 30, 2021 of $5,755,000, which was $4,267,000, or 287%, higher than the similar period of last year. The increase reflects the benefits derived from the Companys acquisition of UpState New York Bancorp, Inc. (UpState), which closed on July 7, 2020, and fee income related to Paycheck Protection Program (PPP) loans. Earnings per share (fully diluted) were $0.70 in the 2021 period compared to $0.24 in the same period of last year. The annualized return on average assets for the three months ended June 30, 2021 was 1.15%, while the annualized return on average tangible equity was 13.63%. Net income for the six months ended June 30, 2021 totaled $11,296,000, which is $6,729,000 higher than the same six-month period of 2020 due to the benefits derived from the acquisition of UpState and PPP fees earned. Earnings per share (fully diluted) for the six months ended June 30, 2021 were $1.38 compared to $0.73 for the six months ended June 30, 2021. The annualized return on average assets for the six months ended June 30, 2021 was 1.16%. The annualized return on average tangible equity for the six months ended June 30, 2021 was 13.53%.

Total assets as of June 30, 2021 were $2.026 billion, with loans receivable of $1.387 billion, deposits of $1.689 billion and stockholders equity of $200.5 million. Loans receivable increased $398.0 million since June 30, 2020, while total deposits increased $602.7 million. The increases reflect the balances acquired from UpState and the impact from economic stimulus, including loans originated through the PPP. During the six months ended June 30, 2021, the Company originated 755 new PPP loans totaling $56.8 million, and had a total of $77.6 million of PPP loans forgiven. As of June 30, 2021, the total of all PPP loans outstanding was $74.2 million.

For the three months ended June 30, 2021, net interest income, on a fully-taxable equivalent basis (fte), totaled $16,263,000, an increase of $6,175,000 compared to the same period in 2020. A $424.5 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the three months ended June 30, 2021 was 3.44%, compared to 3.25% in the same period of 2020. The tax-equivalent yield on interest-earning assets decreased 14 basis points to 3.75% during the three months ended June 30, 2021, compared to the same prior year period, while the cost of interest-bearing liabilities decreased 43 basis points to 0.43%. Net interest income (fte) for the six months ended June 30, 2021 totaled $32,244,000, which was $12,253,000 higher than the same period in 2020, due to the higher volume of interest-earning assets. The net interest margin (fte) was 3.51% in the six months ended June 30, 2021, as compared to 3.36% during the six months ended June 30, 2020. The increase in the net interest margin (fte) reflects the growth in average loans outstanding resulting from the acquisition of UpState.

Other income for the three months ended June 30, 2021, totaled $2,187,000, compared to $1,392,000 for the same period in 2020. The increase is due primarily to a $695,000 increase in service charges and fees related to the acquisition of UpState. For the six months ended June 30, 2021, other income totaled $4,176,000, compared to $3,047,000 in the 2020 period. Service charges on deposits and fees on loans increased $881,000, net, while earnings and proceeds on bank-owned life insurance policies also increased $148,000.

Other expenses totaled $9,492,000 for the three months ended June 30, 2021, an increase of $1,400,000, compared to the $8,092,000 for the same period of 2020. For the six months ended June 30, 2021, other expenses totaled $18,944,000, compared to $15,152,000 for the same period in 2020. The increases reflect the costs of operations acquired from UpState, including four new Community Offices.

Mr. Critelli commented, Our results for the first half of 2021 reflect the positive impact of, and earnings accretion resulting from, our acquisition of UpState, as well as the continued impact of economic stimulus on our earnings and balance sheet. 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 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) 2021 2020 2021 2020 Net Interest Income $ 16,053 $ 9,867 $ 31,829 $ 19,532 Taxable equivalent basisadjustment using 21% marginal 210 221 415 459 tax rateNet interest income on afully taxable equivalent $ 16,263 $ 10,088 $ 32,244 $ 19,991 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) 2021 2020 2021 2020 Average equity $ 199,777 $ 143,472 $ 198,689 $ 142,217 Average goodwill and other (29,762 ) (11,530 ) (29,780 ) (11,541 )intangiblesAverage tangible equity $ 170,015 $ 131,942 $ 168,909 $ 130,676

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 and pershare data)(unaudited) June 30 2021 2020ASSETS Cash and due from $ 34,831 $ 15,387banksInterest-bearingdeposits with 170,342 67,989banksCash and cash 205,173 83,376equivalents Securitiesavailable for 333,636 196,735saleLoans receivable 1,386,654 988,679Less: Allowance 15,340 10,312for loan lossesNet loans 1,371,314 978,367receivableRegulatory stock, 4,084 3,677at costBank premises and 17,298 14,040equipment, netBank owned life 39,665 39,183insuranceForeclosed real 844 965estate ownedAccrued interest 6,190 4,383receivableGoodwill 29,266 11,331Other intangible 461 191assetsOther assets 17,633 22,293TOTAL ASSETS $ 2,025,564 $ 1,354,541 LIABILITIES Deposits: Non-interest $ 435,824 $ 284,754bearing demandInterest-bearing 1,253,117 801,484Total deposits 1,688,941 1,086,238Short-term 83,599 55,204borrowingsOther borrowings 36,259 50,823Accrued interest 1,462 2,826payableOther liabilities 14,804 16,786TOTAL LIABILITIES 1,825,065 1,211,877 STOCKHOLDERS' EQUITYPreferred Stock,no par value per -share, authorized -5,000,000 sharesCommon Stock,$.10 par value per share,authorized:20,000,000 shares,issued: 2021:8,243,556 shares, 825 6342020: 6,342,568sharesSurplus 95,951 49,778Retained earnings 100,818 87,939Treasury stock,at cost: 2021:21,568 shares, (656) (469)2020: 13,778sharesAccumulated othercomprehensive 3,561 4,782incomeTOTALSTOCKHOLDERS' 200,499 142,664EQUITY TOTAL LIABILITIES ANDSTOCKHOLDERS' $ 2,025,564 $ 1,354,541EQUITY

NORWOODFINANCIAL CORP.ConsolidatedStatements of Income(dollars inthousands, except pershare data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 INTEREST INCOMELoansreceivable, $ 16,102 $ 10,767 $ 32,248 $ 21,450 includingfeesSecurities 1,356 1,063 2,468 2,242 Other 59 19 102 25 TotalInterest 17,517 11,849 34,818 23,717 income INTEREST EXPENSEDeposits 1,205 1,630 2,459 3,420 Short-term 73 73 142 184 borrowingsOther 186 279 388 581 borrowingsTotalInterest 1,464 1,982 2,989 4,185 expenseNET INTEREST 16,053 9,867 31,829 19,532 INCOMEPROVISIONFOR LOAN 1,500 1,300 3,000 2,000 LOSSESNET INTERESTINCOME AFTERPROVISION 14,553 8,567 28,829 17,532 FOR LOANLOSSES OTHER INCOME Servicecharges and 1,532 837 2,782 1,901 feesIncome fromfiduciary 181 175 341 328 activitiesNet realizedgains on - 38 sales of - 21securitiesGains onsales of 109 65 138 121 loans, netEarnings andproceeds onlife 194 212 568 420 insurancepoliciesOther 171 103 326 239 Total other 2,187 1,392 4,176 3,047 income OTHER EXPENSESSalariesand 5,171 3,289 10,125 7,065 employeebenefitsOccupancy,furniture 1,186 906 2,406 1,875 andequipmentDataprocessing 562 466 1,166 903 and relatedoperationsTaxes, other 229 214 534 427 than incomeProfessional 343 225 883 443 feesFDICInsurance 154 42 335 42 assessmentForeclosed 13 (2) 42 14 real estateAmortizationof 34 21 68 44 intangiblesMerger 1,597 0 1,597 related -Other 1,800 1,334 3,385 2,742 Total other 9,492 8,092 18,944 15,152 expenses INCOME 7,248 1,867 14,061 5,427 BEFORE TAXINCOME TAX 1,493 379 2,765 860 EXPENSENET INCOME $ 5,755 $ 1,488 $ 11,296 $ 4,567 Basicearnings per $ 0.70 $ 0.24 $ 1.38 $ 0.73 share Dilutedearnings per $ 0.70 $ 0.24 $ 1.38 $ 0.73 share

NORWOOD FINANCIAL CORP. Financial Highlights (Unaudited) (dollars in thousands, except per share data) For the Three Months Ended June 30 2021 2020 Net interest income $ 16,053 $ 9,867 Net income 5,755 1,488 Net interest spread (fully taxable equivalent) 3.32% 3.03% Net interest margin (fully taxable equivalent) 3.44% 3.25% Return on average assets 1.15% 0.45% Return on average equity 11.59% 4.17% Return on average tangible equity 13.63% 4.54% Basic earnings per share $ 0.70 $ 0.24 Diluted earnings per share $ 0.70 $ 0.24 For the Six Months Ended June 30 2021 2020 Net interest income $ 31,829 $ 19,532 Net income 11,296 4,567 Net interest spread (fully taxable equivalent) 3.39% 3.12% Net interest margin (fully taxable equivalent) 3.51% 3.36% Return on average assets 1.16% 0.72% Return on average equity 11.49% 6.46% Return on average tangible equity 13.53% 7.03% Basic earnings per share $ 1.38 $ 0.73 Diluted earnings per share $ 1.38 $ 0.73 As of June 30 2021 2020 Total assets $ 2,025,564 $ 1,354,541 Total loans receivable 1,386,654 988,679 Allowance for loan losses 15,340 10,312 Total deposits 1,688,941 1,086,238 Stockholders' equity 200,499 142,664 Trust assets under management 180,602 149,535 Book value per share $ 24.47 $ 22.62 Tangible book value per share $ 20.85 $ 20.80 Equity to total assets 9.90% 10.53% Allowance to total loans receivable 1.11% 1.04% Nonperforming loans to total loans 0.28% 0.30% Nonperforming assets to total assets 0.24% 0.29%

NORWOOD FINANCIAL CORP.ConsolidatedBalance Sheets (unaudited)(dollars in thousands) June 30 March December September June 30 31 30 2021 2021 2020 2020 2020 ASSETS Cash and due $ 34,831 $ 20,364 $ 19,445 $ 23,874 $ 15,387 from banksInterest-bearingdeposits with 170,342 190,135 92,248 100,566 67,989 banksCash and cash 205,173 210,499 111,693 124,440 83,376 equivalents Securitiesavailable for 333,636 275,224 226,586 197,436 196,735 saleLoans receivable 1,386,654 1,421,568 1,410,732 1,414,662 988,679 Less: Allowance 15,340 14,509 13,150 11,674 10,312 for loan lossesNet loans 1,371,314 1,407,059 1,397,582 1,402,988 978,367 receivableRegulatory 4,084 4,043 3,981 3,876 3,677 stock, at costBank owned life 39,665 39,471 39,608 39,400 39,183 insuranceBank premisesand equipment, 17,298 17,648 17,814 18,124 14,040 netForeclosed real 844 844 965 965 965 estate ownedGoodwill andother 29,727 29,785 29,820 30,778 11,522 intangiblesOther assets 23,823 25,263 23,815 24,100 26,676 TOTAL ASSETS $ 2,025,564 $ 2,009,836 $ 1,851,864 $ 1,842,107 $ 1,354,541 LIABILITIES Deposits: Non-interest $ 435,824 $ 415,395 $ 359,559 $ 372,237 $ 284,754 bearing demandInterest-bearing 1,253,117 1,269,793 1,175,826 1,143,685 801,484 depositsTotal deposits 1,688,941 1,685,188 1,535,385 1,515,922 1,086,238 Borrowings 119,858 112,283 105,762 115,732 106,027 Other 16,266 17,258 15,932 19,906 19,612 liabilitiesTOTAL 1,825,065 1,814,729 1,657,079 1,651,560 1,211,877 LIABILITIES STOCKHOLDERS' 200,499 195,107 194,785 190,547 142,664 EQUITY TOTAL LIABILITIES ANDSTOCKHOLDERS' $ 2,025,564 $ 2,009,836 $ 1,851,864 $ 1,842,107 $ 1,354,541 EQUITY NORWOOD FINANCIAL CORP.ConsolidatedStatements of Income(unaudited)(dollars inthousands, except per sharedata) June 30 March 31 December September June 30 31 30Three months 2021 2021 2020 2020 2020 endedINTEREST INCOME Loansreceivable, $ 16,102 $ 16,146 $ 16,336 $ 16,260 $ 10,767 including feesSecurities 1,356 1,112 1,064 1,031 1,063 Other 59 43 29 18 19 Total interest 17,517 17,301 17,429 17,309 11,849 income INTEREST EXPENSE Deposits 1,205 1,255 1,514 1,676 1,630 Borrowings 259 270 301 303 352 Total interest 1,464 1,525 1,815 1,979 1,982 expenseNET INTEREST 16,053 15,776 15,614 15,330 9,867 INCOMEPROVISION FOR 1,500 1,500 1,600 1,850 1,300 LOAN LOSSESNET INTERESTINCOME AFTER PROVISIONFOR LOAN LOSSES 14,553 14,276 14,014 13,480 8,567 OTHER INCOME Service charges 1,532 1,247 1,913 1,301 837 and feesIncome fromfiduciary 181 160 150 205 175 activitiesNet realizedgains on sales - 21 - 33 - of securitiesGains on sales 109 29 241 164 65 of loans, netEarnings andproceeds on life 194 374 208 217 212 insurancepoliciesOther 171 158 149 152 103 Total other 2,187 1,989 2,661 2,072 1,392 income OTHER EXPENSES Salaries andemployee 5,171 4,953 5,243 4,812 3,289 benefitsOccupancy,furniture and 1,186 1,220 1,165 1,109 906 equipment, netForeclosed real 13 30 8 31 (2) estateFDIC insurance 154 181 213 144 42 assessmentMerger related - - 66 386 1,597 Other 2,968 3,068 3,214 2,898 2,260 Total other 9,492 9,452 9,909 9,380 8,092 expenses INCOME BEFORE 7,248 6,813 6,766 6,172 1,867 TAXINCOME TAX 1,493 1,271 1,253 1,173 379 EXPENSENET INCOME $ 5,755 $ 5,542 $ 5,513 $ 4,999 $ 1,488 Basic earnings $ 0.70 $ 0.68 $ 0.67 $ 0.62 $ 0.24 per share Diluted earnings $ 0.70 $ 0.67 $ 0.67 $ 0.62 $ 0.24 per share Book Value per $ 24.47 $ 23.82 $ 23.72 $ 23.30 $ 22.62 shareTangible Book 20.85 20.20 20.10 19.55 20.80 Value per share Return onaverage assets 1.15% 1.18% 1.18% 1.11% 0.45% (annualized)Return onaverage equity 11.59% 11.39% 11.32% 10.64% 4.17% (annualized)Return onaverage tangible 13.63% 13.42% 13.46% 11.75% 4.54% equity(annualized) Net interest 3.32% 3.46% 3.50% 3.55% 3.03% spread (fte)Net interest 3.44% 3.59% 3.65% 3.73% 3.25% margin (fte) Allowance forloan losses to 1.11% 1.02% 0.93% 0.83% 1.04% total loansNet charge-offsto average loans 0.19% 0.04% 0.04% 0.14% 0.03% (annualized)Nonperformingloans to total 0.28% 0.22% 0.24% 0.29% 0.30% loansNonperformingassets to total 0.24% 0.20% 0.24% 0.27% 0.29% assets