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NORWOOD FINANCIAL CP$28.66($.49)(1.68%)

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 Norwood Financial Corp Announces Second Quarter Earnings
   Wednesday, July 19, 2017 8:30:14 AM ET

Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp (NWFL ) and its subsidiary, Wayne Bank, announced earnings for the three months ended June 30, 2017 of $2,724,000. This represents an increase of $846,000 or 45.0%, from the $1,878,000 earned in the similar period of 2016 due primarily to increases in net interest income and other income resulting from the acquisition of Delaware Bancshares, Inc. in the third quarter of 2016. Earnings per share (fully diluted) were $.65 in the 2017 period, increasing from the $.51 earned in the similar period of 2016. Annualized return on average assets for the three months ended June 30, 2017 was 0.97% with an annualized return on average equity of 9.45%. Net income for the six months ended June 30, 2017 totaled $5,100,000, which is $1,346,000 higher than the same six-month period of last year due to increased income resulting from the acquisition. Earnings per share (fully diluted) for the six months ended June 30, 2017 and 2016, totaled $1.22 and $1.02 per share, respectively.

Total assets as of June 30, 2017 were $1.1 billion with loans receivable of $735.0 million, deposits of $932.5 million and stockholders’ equity of $116.2 million. Loans receivable increased $153.8 million since June 30, 2016 while total deposits increased $348.2 million and stockholders’ equity increased $11.6 million. All such increases are primarily the result of the acquisition.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $7.1 million and represented 0.63% of total assets as of June 30, 2017 compared to $6.6 million, or 0.86% of total assets, as of June 30, 2016. The allowance for loan losses totaled $7,419,000 as of June 30, 2017 and represented 1.01% of total loans outstanding, compared to $5,798,000 and 1.00%, respectively, on June 30, 2016.

For the three months ended June 30, 2017, net interest income, on a fully taxable equivalent basis (fte), totaled $9,199,000, an increase of $2,441,000 compared to the similar period in 2016. A $154.2 million increase in average loans outstanding and a $164.5 million increase in average securities contributed to the increased income. Both increases resulted from loans and securities acquired in the acquisition. Net interest margin (fte) for the 2017 period was 3.54%, decreasing from 3.79% for the similar period in 2016 due primarily to a 52 basis point decrease in the yield earned on investment securities, which resulted from lower yielding securities acquired in the acquisition. The yield on interest-earning assets decreased 36 basis points compared to the prior year while the cost of interest-bearing liabilities decreased 16 basis points to 0.46%. Net interest income (fte) for the six months ended June 30, 2017 totaled $18,243,000, which was $4,951,000 higher than the similar period in 2016 due to the higher volume of earning assets resulting from the acquisition. The net interest margin (fte) was 3.53% in the 2017 period and 3.74% during the first six months of 2016. Decreased yields on securities contributed to the reduced net interest margin.

Other income for the three months ended June 30, 2017 totaled $1,656,000 compared to $1,223,000 for the similar period in 2016. The increase can be attributed to a higher level of service charges and fees attributable to a larger customer base as well as increased earnings on life insurance policies related to the acquisition. For the six months ended June 30, 2017, other income totaled $3,299,000 compared to $2,290,000 in the 2016 period. The 2017 period includes a gain of $209,000 related to the sale of a branch office as well as the previously mentioned increases resulting from the acquisition.

Other expenses totaled $6,130,000 for the three months ended June 30, 2017, an increase of $1,602,000 compared to the $4,528,000 reported in the similar period of 2016. Salaries and employee benefits rose $964,000 over the same period of last year while occupancy, furniture and equipment costs rose $322,000 resulting from the acquisition of twelve community offices. For the six months ended June 30, 2017, other expenses totaled $12,744,000 compared to $8,876,000 for the similar period in 2016, an increase of $3,868,000 resulting primarily from the acquisition.

Mr. Critelli commented, "Our earnings for the first half of 2017 reflect the full benefit of the acquisition of Delaware Bancshares, Inc. and were in-line with projections. Our key performance metrics improved over the first quarter of the year, core operating expenses remain well controlled and our capital base remains above regulatory ’well capitalized’ targets. We continue to search out opportunities available to us and we look forward to serving our growing base of stockholders and customers."

Norwood Financial Corp., is the parent company of Wayne Bank, which operates fourteen offices throughout Northeastern Pennsylvania and twelve offices in the Southern Tier of New York. The Company’s stock is traded 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, risks associated with the acquisition of Delaware Bancshares, Inc., the ability to control costs and expenses, demand for real estate, government fiscal 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 net interest income using an assumed tax rate of 34%. 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)                                          2017    2016        2017     2016
Net Interest Income                                             $8,656  $6,394      $17,154  $12,569
Taxable equivalent basis adjustment using 34% marginal tax rate 543     364         1,089    723
Net interest income on a fully taxable equivalent basis         $9,199  $6,758      $18,243  $13,292
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
                                                                 June 30
                                                                 2017           2016
ASSETS
Cash and due from banks                                        $ 16,055       $ 8,171
Interest-bearing deposits with banks                             348            4,444
Cash and cash equivalents                                        16,403         12,615
Securities available for sale                                    300,667        129,721
Loans receivable                                                 735,026        581,220
Less: Allowance for loan losses                                  7,419          5,798
Net loans receivable                                             727,607        575,422
Regulatory stock, at cost                                        2,435          2,228
Bank premises and equipment, net                                 12,953         6,328
Bank owned life insurance                                        36,575         19,082
Foreclosed real estate owned                                     4,523          5,414
Accrued interest receivable                                      3,417          2,289
Goodwill                                                         11,331         9,715
Other intangible assets                                          531            237
Deferred tax asset                                               8,181          2,222
Other assets                                                     2,690          2,556
TOTAL ASSETS                                                   $ 1,127,313    $ 767,829
LIABILITIES
Deposits:
Non-interest bearing demand                                    $ 200,364      $ 121,743
Interest-bearing                                                 732,107        462,516
Total deposits                                                   932,471        584,259
Short-term borrowings                                            42,192         38,100
Other borrowings                                                 25,330         36,579
Accrued interest payable                                         942            891
Other liabilities                                                10,211         3,409
TOTAL LIABILITIES                                                1,011,146      663,238
STOCKHOLDERS’ EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued:  2017: 4,164,723 shares, 2016:  3,724,668 shares         416            373
Surplus                                                          47,645         35,430
Retained earnings                                                69,660         66,876
Treasury stock, at cost: 2017: 566 shares, 2016: 33,444 shares   (22       )    (926    )
Accumulated other comprehensive (loss) income                    (1,532    )    2,838
TOTAL STOCKHOLDERS’ EQUITY                                       116,167        104,591
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY                                           $ 1,127,313    $ 767,829
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,
                                                           2017     2016                 2017     2016
INTEREST INCOME
Loans receivable, including fees                    $      7,925  $ 6,351         $      15,731 $ 12,485
Securities                                                 1,633    878                  3,251    1,768
Other                                                      24       5                    35       7
Total Interest income                                      9,582    7,234                19,017   14,260
INTEREST EXPENSE
Deposits                                                   797      580                  1,563    1,161
Short-term borrowings                                      28       37                   56       77
Other borrowings                                           101      223                  244      453
Total Interest expense                                     926      840                  1,863    1,691
NET INTEREST INCOME                                        8,656    6,394                17,154   12,569
PROVISION FOR LOAN LOSSES                                  600      700                  1,200    1,150
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES        8,056    5,694                15,954   11,419
OTHER INCOME
Service charges and fees                                   1,016    604                  1,951    1,178
Income from fiduciary activities                           128      114                  235      216
Net realized gains on sales of securities                  31       205                  37       270
Gains on sales of loans, net                               67       18                   67       47
Earnings and proceeds on life insurance policies           275      166                  530      333
Other                                                      139      116                  479      246
Total other income                                         1,656    1,223                3,299    2,290
OTHER EXPENSES
Salaries and  employee benefits                            3,212    2,248                6,430    4,551
Occupancy, furniture and equipment                         809      487                  1,720    982
Data processing  and related operations                    324      255                  668      526
Taxes, other than income                                   227      124                  460      329
Professional fees                                          240      181                  489      332
FDIC Insurance assessment                                  91       117                  186      231
Foreclosed real estate                                     152      432                  724      462
Other                                                      1,075    684                  2,067    1,463
Total other expenses                                       6,130    4,528                12,744   8,876
INCOME BEFORE TAX                                          3,582    2,389                6,509    4,833
INCOME TAX EXPENSE                                         858      511                  1,409    1,079
NET INCOME                                          $      2,724  $ 1,878         $      5,100  $ 3,754
Basic earnings per share                            $      0.66   $ 0.51          $      1.23   $ 1.02
Diluted earnings per share                          $      0.65   $ 0.51          $      1.22   $ 1.02
NORWOOD FINANCIAL CORP.
Financial Highlights (unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended June 30               2017           2016
Net interest income                            $ 8,656        $ 6,394
Net income                                       2,724          1,878
Net interest spread (fully taxable equivalent)   3.44      %    3.63    %
Net interest margin (fully taxable equivalent)   3.54      %    3.79    %
Return on average assets                         0.97      %    0.99    %
Return on average equity                         9.45      %    7.28    %
Basic earnings per share                       $ 0.66         $ 0.51
Diluted earnings per share                     $ 0.65         $ 0.51
For the Six Months Ended June 30                 2017           2016
Net interest income                            $ 17,154       $ 12,569
Net income                                       5,100          3,754
Net interest spread (fully taxable equivalent)   3.42      %    3.59    %
Net interest margin (fully taxable equivalent)   3.53      %    3.74    %
Return on average assets                         0.92      %    0.99    %
Return on average equity                         9.00      %    7.31    %
Basic earnings per share                       $ 1.23         $ 1.02
Diluted earnings per share                     $ 1.22         $ 1.02
As of June 30
Total assets                                   $ 1,127,313    $ 767,829
Total loans receivable                           735,026        581,220
Allowance for loan losses                        7,419          5,798
Total deposits                                   932,471        584,259
Stockholders’ equity                             116,167        104,591
Trust assets under management                    146,307        134,126
Book value per share                           $ 27.43        $ 27.99
Tangible book value per share                  $ 24.55        $ 25.28
Equity to total assets                           10.30     %    13.62   %
Allowance to total loans receivable              1.01      %    1.00    %
Nonperforming loans to total loans               0.35      %    0.21    %
Nonperforming assets to total assets             0.63      %    0.86    %
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
                                          June 30     March 31    December 31   September 30   June 30
                                          2017        2017        2016          2016           2016
ASSETS
Cash and due from banks                 $ 16,055    $ 12,057    $ 14,900      $ 19,404       $ 8,171
Interest-bearing deposits with banks      348         7,785       2,274         13,729         4,444
Cash and cash equivalents                 16,403      19,842      17,174        33,133         12,615
Securities available for sale             300,667     295,801     302,564       310,126        129,721
Loans receivable                          735,026     719,443     713,889       706,199        581,220
Less: Allowance for loan losses           7,419       6,901       6,463         6,164          5,798
Net loans receivable                      727,607     712,542     707,426       700,035        575,422
Regulatory stock, at cost                 2,435       1,939       2,119         2,351          2,228
Bank owned life insurance                 36,575      36,352      36,133        35,889         19,082
Bank premises and equipment, net          12,953      13,073      13,531        13,617         6,328
Foreclosed real estate owned              4,523       4,703       5,302         5,386          5,414
Goodwill and other intangibles            11,862      11,902      12,291        12,331         9,952
Other assets                              14,288      15,461      14,643        12,189         7,067
TOTAL ASSETS                            $ 1,127,313 $ 1,111,615 $ 1,111,183   $ 1,125,057    $ 767,829
                                                                                               .
LIABILITIES
Deposits:
Non-interest bearing demand             $ 200,364   $ 192,735   $ 191,445     $ 200,481      $ 121,743
Interest-bearing deposits                 732,107     738,678     733,940       721,763        462,516
Total deposits                            932,471     931,413     925,385       922,244        584,259
Other borrowings                          67,522      57,260      64,812        83,946         74,679
Other liabilities                         11,153      9,990       9,907         3,167          4,300
TOTAL LIABILITIES                         1,011,146   998,663     1,000,104     1,009,357      663,238
STOCKHOLDERS’ EQUITY                      116,167     112,952     111,079       115,700        104,591
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY                    $ 1,127,313 $ 1,111,615 $ 1,111,183   $ 1,125,057    $ 767,829
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 ended                                 2017        2017         2016          2016           2016
INTEREST INCOME
Loans receivable, including fees                 $ 7,925     $ 7,806      $ 7,858       $ 7,267        $ 6,351
Securities                                         1,633       1,618        1,584         1,239          878
Other                                              24          10           14            22             5
Total interest income                              9,582       9,434        9,456         8,528          7,234
INTEREST EXPENSE
Deposits                                           797         766          765           677            580
Borrowings                                         129         171          240           281            260
Total interest expense                             926         937          1,005         958            840
NET INTEREST INCOME                                8,656       8,497        8,451         7,570          6,394
PROVISION FOR LOAN LOSSES                          600         600          450           450            700
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES                                    8,056       7,897        8,001         7,120          5,694
OTHER INCOME
Service charges and fees                           1,016       936          951           840            604
Income from fiduciary activities                   128         106          107           126            114
Net realized gains on sales of securities          31          6            15            0              205
Gains (losses) on sales of loans, net              67          0            0             (11    )       18
Earnings and proceeds on life insurance policies   275         255          272           283            166
Other                                              139         340          145           161            116
Total other income                                 1,656       1,643        1,490         1,399          1,223
OTHER EXPENSES
Salaries and employee benefits                     3,212       3,219        3,308         3,070          2,248
Occupancy, furniture and equipment, net            809         911          889           755            487
Foreclosed real estate                             152         572          98            119            432
FDIC insurance assessment                          91          95           10            170            117
Merger related                                     0           0            142           1,659          5
Other                                              1,866       1,817        2,121         1,906          1,239
Total other expenses                               6,130       6,614        6,568         7,679          4,528
INCOME BEFORE TAX                                  3,582       2,926        2,923         840            2,389
INCOME TAX EXPENSE                                 858         550          577           228            511
NET INCOME                                       $ 2,724     $ 2,376      $ 2,346       $ 612          $ 1,878
Basic earnings per share                         $ 0.66      $ 0.57       $ 0.57        $ 0.15         $ 0.51
Diluted earnings per share                       $ 0.65      $ 0.57       $ 0.56        $ 0.15         $ 0.51
Book Value per share                             $ 27.43     $ 27.09      $ 26.15       $ 25.94        $ 27.99
Tangible Book Value per share                      24.55       24.18        23.51         23.39          25.28
Return on average assets (annualized)              0.97  %     0.87  %      0.83  %       0.69   %       0.99  %
Return on average equity (annualized)              9.45  %     8.54  %      8.17  %       5.45   %       7.28  %
Net interest spread (fte)                          3.44  %     3.40  %      3.38  %       3.37   %       3.63  %
Net interest margin (fte)                          3.54  %     3.51  %      3.49  %       3.50   %       3.79  %
Allowance for loan losses to total loans           1.01  %     0.96  %      0.91  %       0.87   %       1.00  %
Net charge-offs to average loans (annualized)      0.05  %     0.09  %      0.09  %       0.05   %       1.78  %
Nonperforming loans to total loans                 0.35  %     0.28  %      0.25  %       0.32   %       0.21  %
Nonperforming assets to total assets               0.63  %     0.60  %      0.64  %       0.68   %       0.86  %
Contact:
William S. Lance
Executive Vice President &
Chief Financial Officer
NORWOOD FINANCIAL CORP
570-253-8505
www.waynebank.com

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