FOR IMMEDIATE RELEASE

Honesdale, Pennsylvania - July 19, 2017

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, 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:

Contact:  William S. Lance

                 Executive Vice President &

                 Chief Financial Officer

 NORWOOD FINANCIAL CORP

                 570-253-8505

                 www.waynebank.com

 

 

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