GlobeNewswire Inc | Oct 26, 2021 08:15AM EDT

October 26, 2021

HONESDALE, Pa., Oct. 26, 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 earnings for the three months ended September 30, 2021 of $6,981,000 which represents an increase of $1,982,000, or 39.6%, over the $4,999,000 earned in the same three-month period of 2020. The increase in earnings was due to a $1.7 million increase in net interest income, including fee income recognized on Paycheck Protection Program (PPP) loans forgiven, and a $1.1 million reduction in the provision for loan losses. Earnings per share (fully diluted) were $0.85 in the three-months ended September 30, 2021, which represents an increase from the $0.62 earned in the same period of 2020. The annualized returns on average assets and average tangible equity for the current three-month period were 1.36% and 15.72%, respectively, compared to 1.11% and 11.72% for the three-month period ended September 30, 2020. Net income for the nine months ended September 30, 2021, totaled $18,277,000, which is $8,710,000, or 91.1%, higher than the same period of 2020, primarily due to the benefits derived from the Companys acquisition of UpState New York Bancorp, Inc. (UpState), which closed on July 7, 2020. Earnings per share (fully diluted) for the nine months ended September 30, 2021, totaled $2.23 per share compared to $1.39 per share in the 2020 period.

Total assets as of September 30, 2021 were $2.054 billion, with loans receivable of $1.371 billion, deposits of $1.723 billion and stockholders equity of $202.6 million. Total assets have increased $211.6 million during the past twelve months while loans have decreased $43.7 million and deposits have increased $206.6 million. The increases in assets and deposits reflect growth due to significant stimulus funds received as a result of PPP loans that have been forgiven and the Coronavirus Aid, Relief, and Economic Security Act, (CARES Act), while the decrease in loans includes a $59.2 million reduction in PPP loans due to forgiveness.

For the three months ended September 30, 2021, net interest income, on a fully taxable equivalent basis (fte), totaled $17,186,000, which represents an increase of $1,639,000, compared to the same period in 2020. A $150.5 million increase in average securities contributed to the increased income. Net interest margin (fte) for the 2021 period was 3.61%, compared to 3.73% for the similar period in 2020. Net interest income (fte) for the nine months ended September 30, 2021 totaled $49,429,000, an increase of $13,891,000, compared to the similar period in 2020 due primarily to a higher volume of earning assets. The net interest margin (fte) year-to-date for the 2021 period was 3.54%, which exceeded the 3.51% recorded in the same period of 2020. All increases include the benefits derived from the acquisition of UpState.

Total other income for the three months ended September 30, 2021 was $2,128,000, compared to $2,072,000 for the same period in 2020. The increase in total other income is primarily due to a higher level of service charges and fees. For the nine months ended September 30, 2021, total other income was $6,304,000, compared to $5,119,000 in the same period of 2020.

Total other expenses were $9,592,000 for the three months ended September 30, 2021, compared to $9,380,000 in the same period of 2020. The higher level of expense during the three months ended September 30, 2021, was due primarily to a $679,000 increase in salaries and benefits costs. For the nine months ended September 30, 2021, other expenses totaled $28,536,000, compared to $24,531,000 for the same period in 2020. The increase includes costs related to the operation of four additional community offices acquired from UpState in 2020.

Mr. Critelli commented, Our results for the first nine months 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 recently broke ground on our new facility in Penn Yan, New York, and we look forward to serving the community from our new location. We appreciate the opportunity 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 fully taxable equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Fully taxable 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 fully taxable 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 taxable equivalent basis:

(dollars in thousands) Three months ended Nine months ended September 30 September 30 2021 2020 2021 2020 Net interest income $ 16,989 $ 15,330 $ 48,817 $ 34,862 Tax equivalent basisadjustment using 21% 197 217 612 676 marginal tax rateNet interest income on afullytaxable equivalent $ 17,186 $ 15,547 $ 49,429 $ 35,538 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 Nine months ended September 30 September 30(dollars in thousands) 2021 2020 2021 2020 Average equity $ 205,848 $ 187,478 $ 201,102 $ 157,695 Average goodwill and other (29,712 ) (17,800 ) (29,757 ) (13,643 )intangiblesAverage tangible equity $ 176,136 $ 169,678 $ 171,345 $ 144,052

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) September 30 2021 2020 ASSETS Cash and due from banks $ 28,353 $ 23,874 Interest-bearing deposits with banks 191,580 100,566 Cash and cash equivalents 219,933 124,440 Securities available for sale 361,988 197,436 Loans receivable 1,371,002 1,414,662 Less: Allowance for loan losses 16,103 11,674 Net loans receivable 1,354,899 1,402,988 Regulatory stock, at cost 3,898 3,876 Bank premises and equipment, net 17,364 18,124 Bank owned life insurance 39,864 39,400 Foreclosed real estate owned 1,876 965 Accrued interest receivable 6,049 6,104 Goodwill 29,266 30,213 Other intangible assets 434 565 Other assets 18,120 17,996 TOTAL ASSETS $ 2,053,691 $ 1,842,107 LIABILITIES Deposits: Non-interest bearing demand $ 442,534 $ 372,237 Interest-bearing 1,279,988 1,143,685 Total deposits 1,722,522 1,515,922 Short-term borrowings 78,246 69,294 Other borrowings 33,136 46,438 Accrued interest payable 1,341 2,194 Other liabilities 15,838 17,712 TOTAL LIABILITIES 1,851,083 1,651,560 STOCKHOLDERS' EQUITY Preferred Stock, no par value per share, - - authorized 5,000,000 sharesCommon Stock, $.10 par value per share, authorized: 20,000,000 shares, issued: 2021: 8,245,951 shares, 2020: 8,210,982 825 821 sharesSurplus 96,100 95,108 Retained earnings 105,668 90,422 Treasury stock, at cost: 2021: 51,568 shares, (1,423 ) (469 )2020: 13,778 sharesAccumulated other comprehensive income 1,438 4,665 TOTAL STOCKHOLDERS' EQUITY 202,608 190,547 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,053,691 $ 1,842,107

NORWOOD FINANCIAL CORP. Consolidated Statements of Income(dollars in thousands, except per share data)(unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020INTEREST INCOME Loans receivable, including $ 16,859 $ 16,260 $ 49,107 $ 37,711feesSecurities 1,468 1,031 3,936 3,272Other 72 18 174 43Total Interest income 18,399 17,309 53,217 41,026 INTEREST EXPENSE Deposits 1,167 1,676 3,627 5,096Short-term borrowings 71 61 214 244Other borrowings 172 242 559 824Total Interest expense 1,410 1,979 4,400 6,164NET INTEREST INCOME 16,989 15,330 48,817 34,862PROVISION FOR LOAN LOSSES 750 1,850 3,750 3,850NET INTEREST INCOME AFTER 16,239 13,480 45,067 31,012PROVISION FOR LOAN LOSSES OTHER INCOME Service charges and fees 1,485 1,301 4,268 3,201Income from fiduciary 209 205 550 533activitiesNet realized gains on sales of 35 33 56 71securitiesGains on sales of loans, net 39 164 177 285Earnings and proceeds on life 200 217 767 638insurance policiesOther 160 152 486 391Total other income 2,128 2,072 6,304 5,119 OTHER EXPENSES Salaries and employee benefits 5,491 4,812 15,616 11,878Occupancy, furniture and 1,163 1,109 3,568 2,983equipmentData processing and related 594 746 1,760 1,649operationsTaxes, other than income 229 214 763 641Professional fees 189 292 1,072 735FDIC Insurance assessment 177 144 512 186Foreclosed real estate (15 ) 31 27 44Amortization of intangibles 28 35 96 79Merger related - 386 0 1,983Other 1,736 1,611 5,122 4,353Total other expenses 9,592 9,380 28,536 24,531 INCOME BEFORE TAX 8,775 6,172 22,835 11,600INCOME TAX EXPENSE 1,794 1,173 4,558 2,033NET INCOME $ 6,981 $ 4,999 $ 18,277 $ 9,567 Basic earnings per share $ 0.85 $ 0.62 $ 2.23 $ 1.39 Diluted earnings per share $ 0.85 $ 0.62 $ 2.23 $ 1.39



NORWOOD FINANCIAL CORP. Financial Highlights (Unaudited) (dollars in thousands, except per share data) For the Three Months Ended September 30 2021 2020 Net interest income $ 16,989 $ 15,330 Net income 6,981 4,999 Net interest spread (fully taxable equivalent) 3.49% 3.55% Net interest margin (fully taxable equivalent) 3.61% 3.73% Return on average assets 1.36% 1.11% Return on average equity 13.50% 10.64% Return on average tangible equity 15.72% 11.72% Basic earnings per share $ 0.85 $ 0.62 Diluted earnings per share $ 0.85 $ 0.62 For the Nine Months Ended September 30 2021 2020 Net interest income $ 48,817 $ 34,862 Net income 18,277 9,567 Net interest spread (fully taxable equivalent) 3.43% 3.30% Net interest margin (fully taxable equivalent) 3.54% 3.51% Return on average assets 1.23% 0.88% Return on average equity 12.19% 8.13% Return on average tangible equity 14.26% 8.87% Basic earnings per share $ 2.23 $ 1.39 Diluted earnings per share $ 2.23 $ 1.39 As of September 30 2021 2020 Total assets $ 2,053,691 $ 1,842,107 Total loans receivable 1,371,002 1,414,662 Allowance for loan losses 16,103 11,674 Total deposits 1,722,522 1,515,922 Stockholders' equity 202,608 190,547 Trust assets under management 187,689 155,166 Book value per share $ 24.90 $ 23.30 Tangible book value per share $ 21.27 $ 19.55 Equity to total assets 9.87% 10.34% Allowance to total loans receivable 1.17% 0.83% Nonperforming loans to total loans 0.14% 0.29% Nonperforming assets to total assets 0.18% 0.27%

NORWOOD FINANCIAL CORP.ConsolidatedBalance Sheets (unaudited)(dollars in thousands) September 30 June 30 March December 31 September 30 2021 2021 2021 2020 2020 ASSETS Cash and due $ 28,353 $ 34,831 $ 20,364 $ 19,445 $ 23,874 from banksInterest-bearingdeposits with 191,580 170,342 190,135 92,248 100,566 banksCash and cash 219,933 205,173 210,499 111,693 124,440 equivalents Securitiesavailable for 361,988 333,636 275,224 226,586 197,436 saleLoans receivable 1,371,002 1,386,654 1,421,568 1,410,732 1,414,662 Less: Allowance 16,103 15,340 14,509 13,150 11,674 for loan lossesNet loans 1,354,899 1,371,314 1,407,059 1,397,582 1,402,988 receivableRegulatory 3,898 4,084 4,043 3,981 3,876 stock, at costBank owned life 39,864 39,665 39,471 39,608 39,400 insuranceBank premisesand equipment, 17,364 17,298 17,648 17,814 18,124 netForeclosed real 1,876 844 844 965 965 estate ownedGoodwill andother 29,700 29,727 29,785 29,820 30,778 intangiblesOther assets 24,169 23,823 25,263 23,815 24,100 TOTAL ASSETS $ 2,053,691 $ 2,025,564 $ 2,009,836 $ 1,851,864 $ 1,842,107 LIABILITIES Deposits: Non-interest $ 442,534 $ 435,824 $ 415,395 $ 359,559 $ 372,237 bearing demandInterest-bearing 1,279,988 1,253,117 1,269,793 1,175,826 1,143,685 depositsTotal deposits 1,722,522 1,688,941 1,685,188 1,535,385 1,515,922 Borrowings 111,382 119,858 112,283 105,762 115,732 Other 17,179 16,266 17,258 15,932 19,906 liabilitiesTOTAL 1,851,083 1,825,065 1,814,729 1,657,079 1,651,560 LIABILITIES STOCKHOLDERS' 202,608 200,499 195,107 194,785 190,547 EQUITY TOTAL LIABILITIES ANDSTOCKHOLDERS' $ 2,053,691 $ 2,025,564 $ 2,009,836 $ 1,851,864 $ 1,842,107 EQUITY NORWOOD FINANCIAL CORP.ConsolidatedStatements of Income(unaudited)(dollars inthousands, except per sharedata) September 30 June 30 March 31 December 31 September 30 Three months 2021 2021 2021 2020 2020 endedINTEREST INCOME Loansreceivable, $ 16,859 $ 16,102 $ 16,146 $ 16,336 $ 16,260 including feesSecurities 1,468 1,356 1,112 1,064 1,031 Other 72 59 43 29 18 Total interest 18,399 17,517 17,301 17,429 17,309 income INTEREST EXPENSE Deposits 1,167 1,205 1,255 1,514 1,676 Borrowings 243 259 270 301 303 Total interest 1,410 1,464 1,525 1,815 1,979 expenseNET INTEREST 16,989 16,053 15,776 15,614 15,330 INCOMEPROVISION FOR 750 1,500 1,500 1,600 1,850 LOAN LOSSESNET INTERESTINCOME AFTER PROVISIONFOR LOAN LOSSES 16,239 14,553 14,276 14,014 13,480 OTHER INCOME Service charges 1,485 1,532 1,247 1,913 1,301 and feesIncome fromfiduciary 209 181 160 150 205 activitiesNet realizedgains on sales 35 - 21 - 33 of securitiesGains on sales 39 109 29 241 164 of loans, netEarnings andproceeds on life 200 194 374 208 217 insurancepoliciesOther 160 171 158 149 152 Total other 2,128 2,187 1,989 2,661 2,072 income OTHER EXPENSES Salaries andemployee 5,491 5,171 4,953 5,243 4,812 benefitsOccupancy,furniture and 1,163 1,186 1,220 1,165 1,109 equipment, netForeclosed real (15 ) 13 30 8 31 estateFDIC insurance 177 154 181 213 144 assessmentMerger related - - - 66 386 Other 2,776 2,968 3,068 3,214 2,898 Total other 9,592 9,492 9,452 9,909 9,380 expenses INCOME BEFORE 8,775 7,248 6,813 6,766 6,172 TAXINCOME TAX 1,794 1,493 1,271 1,253 1,173 EXPENSENET INCOME $ 6,981 $ 5,755 $ 5,542 $ 5,513 $ 4,999 Basic earnings $ 0.85 $ 0.70 $ 0.68 $ 0.67 $ 0.62 per share Diluted earnings $ 0.85 $ 0.70 $ 0.67 $ 0.67 $ 0.62 per share Book Value per $ 24.90 $ 24.47 $ 23.82 $ 23.72 $ 23.30 shareTangible Book 21.27 20.85 20.20 20.10 19.55 Value per share Return onaverage assets 1.36 % 1.15 % 1.18 % 1.18 % 1.11 % (annualized)Return onaverage equity 13.50 % 11.59 % 11.39 % 11.32 % 10.64 % (annualized)Return onaverage tangible 15.78 % 13.63 % 13.42 % 13.46 % 11.75 % equity(annualized) Net interest 3.49 % 3.32 % 3.46 % 3.50 % 3.55 % spread (fte)Net interest 3.61 % 3.44 % 3.59 % 3.65 % 3.73 % margin (fte) Allowance forloan losses to 1.17 % 1.11 % 1.02 % 0.93 % 0.83 % total loansNet charge-offsto average loans 0.00 % 0.19 % 0.04 % 0.04 % 0.14 % (annualized)Nonperformingloans to total 0.20 % 0.28 % 0.22 % 0.24 % 0.29 % loansNonperformingassets to total 0.22 % 0.24 % 0.20 % 0.24 % 0.27 % assets