Norwood Financial 8K Announces Earnings for the Third Quarter | NWFL 21 Oct 10

FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP

ANNOUNCES EARNINGS FOR THE THIRD QUARTER

October 21, 2010-Honesdale, PA

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, 2010 of $1,890,000. This represents an increase of $115,000, or 6.5%, over the $1,775,000 earned in the third quarter of 2009. Earnings per share (fully diluted) were $.68 in the 2010 period, increasing from the $.64 earned in the similar period of last year. Annualized return on average assets for the three months ended September 30, 2010 was 1.39% with an annualized return on average equity of 10.98%. Net income for the nine months ended September 30, 2010 totaled $5,505,000, which is $244,000, or 4.6% higher than the similar period of 2009. Earnings per share (fully diluted) for th e nine months ended September 30, 2010 totaled $1.99 per share compared to $1.92 per share in the 2009 period.

Total assets as of September 30, 2010 were $534.6 million with loans receivable of $358.4 million, deposits of $398.7 million and stockholders’ equity of $68.4 million. Total assets have increased $19.7 million during the twelve months ended September 30, 2010.

Loans receivable decreased $1.1 million from September 30, 2009 due to the sale of fixed rate residential mortgage loans. The commercial loan portfolio, principally real estate related, increased $5.0 million, while installment loans decreased $2.2 million. During the twelve month period ending September 30, 2010, the Company experienced a significant volume of residential mortgage activity but sold $10.6 million of fixed-rate residential mortgages, principally with 30 year terms, for purposes of interest rate risk

management. As a result, mortgage loans outstanding decreased $3.9 million for the period.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $4,399,000 and represented .82% of total assets as of September 30, 2010 compared to $5,407,000 and 1.02% of assets as of December 31, 2009 and $3,739,000 or .73% of total assets as of September 30, 2009. Net charge-offs were $158,000 for the quarter and totaled $670,000 for the nine months ended September 30, 2010 compared to $51,000 and $155,000, respectively, for the similar periods in 2009. The provision for loan losses totaled $250,000 and $730,000 for the three and nine month periods ended September 30, 2010, respectively, compared to $140,000 and $585,000, respectively, for the similar periods in 2009. The allowance for loan losses totaled $5,513,000 as of September 30, 2010 and represented 1.54% of total loans, increasing from $4,663,000 as of September 30, 2009 and 1.30% of total loans.

For the three months ended September 30, 2010, net interest income, on a fully taxable equivalent basis (fte), totaled $5,192,000, which represents an increase of $219,000, or 4.4%, compared to $4,973,000 for the similar period in 2009. Net interest margin (fte) for the 2010 period was 4.03% compared to 4.07% for the similar period in 2009. The decrease in net interest margin was principally due to growth in lower yielding assets such as interest bearing deposits with banks as well as reduced yields on new investment security purchases. This was partially offset by a decrease of 56 basis points in the cost of funds. Net interest income (fte) for the nine months ended September 30, 2010 totaled $15,461,000, an increase of $624,000, or 4.2%, over th e similar period in 2009. Net interest margin (fte) year to date for the 2010 period was 4.05% compared to 4.08% in 2009.

Other income for the three months ended September 30, 2010 totaled $1,035,000 compared to $1,018,000 for the similar period in 2009. The increase was principally due to increased gains on the sales of investment securities and a higher level of income from fiduciary activities. These increases helped to offset a reduced level of service charges on deposits. For the nine months ended September 30, 2010, other income totaled $3,053,000 compared to $3,467,000 in the 2009 period. The 2010 period includes $208,000 in gains and servicing rights on the sale of $10.5 million of residential mortgage loans compared to $296,000 in similar gains on sales of $21.6 million of mortgage loans in the 2009 period. Gains on the sales of investment securit ies totaled $380,000 on sales of $23.8 million for the 2010 period compared to $423,000 on sales of $14.7 million in the 2009 period. The proceeds from investment securities sales were reinvested to provide current period income and to add protection from rising interest rates. The Company also had a $150,000 gain on the sale of deposits related to a branch closure, in the 2009 period.

Other expenses totaled $3,112,000 for the three months ended September 30, 2010, compared to $3,174,000 in the similar period of 2009. The decrease was principally related to a lower level of foreclosed real estate costs which totaled $3,000 in the 2010 period and $130,000 for the 2009 period. For the nine months ended September 30, 2010, other expenses total $9,448,000 compared to $9,769,000 for the similar period in 2009, a decrease of $321,000 due to reduced FDIC assessments related to a special one-time assessment incurred in 2009 and a lower level of foreclosed real estate owned costs which totaled $32,000 in the 2010 period and $148,000 in 2009.

Mr. Critelli commented, “Even though we are operating in a very challenging environment, we believe the Company had a very solid first three quarters of 2010. Our

core earnings are strong, net interest margin remains close to 4.00% and our capital levels are at the top of our peer group. However, our economy continues to experience a high unemployment rate and a soft real estate market. These factors will continue to have a negative impact on our customers throughout 2010 and into 2011. Though we see near term pressure, we believe that we are well positioned to take advantage of the opportunities available as the economy rebounds.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates eleven offices in Wayne, Pike and Monroe Counties, Pennsylvania. The Company’s stock is traded on the Nasdaq Global Market, under the symbol, “NWFL”.

Forward-Looking Statements. The foregoing material may contain forward-looking statements. We caution that such statements may be subject to a number of uncertainties and actual results could differ materially and therefore readers should not place undue reliance on any forward looking statements. Those risks and uncertainties include changes in federal and state laws, changes in the absolute and relative levels of interest rates, the ability to control costs and expenses, demand for real estate, general economic conditions and the effectiveness of governmental responses thereto. Norwood Financial Corp. does not undertake and specifically disclaims any obligation to publicly release the results of any r evisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Non-GAAP Financial Measures

This release references tax-equivalent interest income and net interest income, which are non-GAAP financial measures. Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using an assumed tax rate

of 34%. We believe the presentation of interest income and net interest income on a tax–equivalent basis ensures comparability of interest income and 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		Nine months ended
(dollars in thousands)	September 30,		September 30,
	2010	2009	2010	2009
Net interest income	$4,919	$4,766	$14,748	$14,282
Tax equivalent basis adjustment using 34% marginal tax rate	273	207	713	555
Net interest income on a fully taxable equivalent basis	$5,192	$4,973	$15,461	$14,837

Contact:	William S. Lance
	Senior 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 data)
(unaudited)
		September 30
		2010			2009
ASSETS
Cash and due from banks	$	9,057		$	8,769
Federal funds sold		3,000			3,000
Interest-bearing deposits with banks		7,696			280
Cash and cash equivalents		19,753			12,049

Securities available for sale		139,308			126,349
Securities held to maturity, fair value 2010: $177 and 2009: $725		169			708
Loans receivable (net of unearned Income)		358,354			359,482
Less: Allowance for loan losses		5,513			4,663
Net loans receivable		352,841			354,819
Investment in FHLB Stock, at cost		3,538			3,538
Bank premises and equipment, net		5,012			5,258
Bank owned life insurance		8,161			8,329
Foreclosed real estate owned		748			562
Accrued interest receivable		2,342			2,315
Other assets		2,685			940
TOTAL ASSETS	$	534,557		$	514,867

LIABILITIES
Deposits:
Non-interest bearing demand	$	66,331		$	63,600
Interest-bearing		332,321			319,263
Total deposits		398,652			382,863
Short-term borrowings		24,530			19,553
Other borrowings		38,000			43,000
Accrued interest payable		1,652			2,365
Other liabilities		3,280			3,350
TOTAL LIABILITIES		466,114			451,131

STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2,840,872		284			284
Surplus		9,815			9,782
Retained earnings		57,642			53,430
Treasury stock, at cost: 2010: 79,977 shares, 2009: 78,089 shares		(2,437	)		(2,420	)
Accumulated other comprehensive income		3,139			2,660
TOTAL STOCKHOLDERS' EQUITY		68,443			63,736

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	534,557		$	514,867


NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
		Three Months Ended September 30				Nine Months Ended September 30
		2010		2009		2010		2009
INTEREST INCOME
Loans receivable, including fees	$	5,266	$	5,382	$	15,894	$	16,095
Securities		1,115		1,297		3,477		4,010
Other		14		1		43		8
Total Interest income		6,395		6,680		19,414		20,113

INTEREST EXPENSE
Deposits		1,031		1,433		3,332		4,354
Short-term borrowings		26		60		87		229
Other borrowings		419		421		1,247		1,248
Total Interest expense		1,476		1,914		4,666		5,831
NET INTEREST INCOME		4,919		4,766		14,748		14,282
PROVISION FOR LOAN LOSSES		250		140		730		585
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		4,669		4,626		14,018		13,697

OTHER INCOME
Service charges and fees		587		614		1,680		1,854
Income from fiduciary activities		121		99		300		263
Net realized gains on sales of securities		161		90		380		423
Gains on sale of loans and servicing rights		3		42		208		296
Gain on sale of deposits		0		0		0		150
Other		163		173		485		481
Total other income		1,035		1,018		3,053		3,467

OTHER EXPENSES
Salaries and employee benefits		1,657		1,611		4,844		4,820
Occupancy, furniture and equipment		388		367		1,190		1,231
Data processing related		195		194		607		593
Taxes, other than income		77		139		374		414
Professional Fees		81		100		358		302
FDIC Insurance assessment		121		133		357		617
Foreclosed real estate owned		3		130		32		148
Other		590		500		1,686		1,644
Total other expenses		3,112		3,174		9,448		9,769

INCOME BEFORE TAX		2,592		2,470		7,623		7,395
INCOME TAX EXPENSE		702		695		2,118		2,134
NET INCOME	$	1,890	$	1,775	$	5,505	$	5,261

Basic earnings per share	$	0.68	$	0.64	$	1.99	$	1.92

Diluted earnings per share	$	0.68	$	0.64	$	1.99	$	1.90


NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)

For the Three Months Ended September 30		2010		2009

Net interest income	$	4,919	$	4,766
Net income		1,890		1,775

Net interest spread (fully taxable equivalent)		3.72%		3.63%
Net interest margin (fully taxable equivalent)		4.03%		4.07%
Return on average assets		1.39%		1.40%
Return on average equity		10.98%		11.25%
Basic earnings per share	$	0.68	$	0.64
Diluted earnings per share		0.68		0.64

For the Nine Months Ended September 30

Net interest income	$	14,748	$	14,282
Net income		5,505		5,261

Net interest spread (fully taxable equivalent)		3.71%		3.64%
Net interest margin (fully taxable equivalent)		4.05%		4.08%
Return on average assets		1.38%		1.39%
Return on average equity		11.04%		11.51%
Basic earnings per share	$	1.99	$	1.92
Diluted earnings per share		1.99		1.90

As of September 30

Total Assets	$	534,557	$	514,867
Total loans receivable		358,354		359,482
Allowance for loan losses		5,513		4,663
Total deposits		398,652		382,863
Stockholders' equity		68,443		63,736
Trust Assets under management		109,253		99,042

Book value per share	$	24.79	$	23.07
Equity to total assets		12.80%		12.38%
Allowance to total loans receivable		1.54%		1.30%
Nonperforming loans to total loans		1.02%		0.88%
Nonperforming assets to total assets		0.82%		0.73%


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
		Sept 30		June 30		March 31		Dec 31		Sept 30
		2010		2010		2010		2009		2009
ASSETS
Cash and due from banks	$	9,057	$	6,168	$	7,945	$	6,498	$	8,769
Interest-bearing deposits with banks		7,696		25,374		14,672		7,857		280
Federal funds sold		3,000		3,000		3,000		3,000		3,000
Cash and cash equivalents		19,753		34,542		25,617		17,355		12,049

Securities available for sale		139,308		141,245		125,653		130,577		126,349
Securities held to maturity		169		169		168		708		708
Loans receivable (net of unearned Income)		358,354		353,933		357,587		363,474		359,482
Less: Allowance for loan losses		5,513		5,421		5,362		5,453		4,663
Net loans receivable		352,841		348,512		352,225		358,021		354,819
Investment in FHLB stock		3,538		3,538		3,538		3,538		3,538
Bank premises and equipment, net		5,012		5,061		5,126		5,189		5,258
Foreclosed real estate owned		748		382		392		392		562
Other assets		13,188		13,131		13,798		13,916		11,584
TOTAL ASSETS	$	534,557	$	546,580	$	526,517	$	529,696	$	514,867

LIABILITIES
Deposits:
Non-interest bearing demand	$	66,331	$	63,408	$	60,144	$	59,821	$	63,600
Interest-bearing deposits		332,321		344,355		331,512		331,652		319,263
Total deposits		398,652		407,763		391,656		391,473		382,863
Other borrowings		62,530		67,378		64,781		68,803		62,553
Other liabilities		4,932		4,673		4,977		4,949		5,715
TOTAL LIABILITIES		466,114		479,814		461,414		465,225		451,131

STOCKHOLDERS' EQUITY		68,443		66,766		65,103		64,471		63,736

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	534,557	$	546,580	$	526,517	$	529,696	$	514,867


NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
		30-Sep		30-Jun		31-Mar		31-Dec		30-Sep
Three months ended		2010		2010		2010		2009		2009
INTEREST INCOME
Loans receivable, including fees	$	5,266	$	5,218	$	5,410	$	5,428	$	5,382
Securities		1,115		1,141		1,221		1,283		1,297
Other		14		18		11		11		1
Total Interest income		6,395		6,377		6,642		6,722		6,680

INTEREST EXPENSE
Deposits		1,031		1,102		1,199		1,411		1,433
Borrowings		445		443		446		484		481
Total Interest expense		1,476		1,545		1,645		1,895		1,914
NET INTEREST INCOME		4,919		4,832		4,997		4,827		4,766
PROVISION FOR LOAN LOSSES		250		150		330		1,100		140
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		4,669		4,682		4,667		3,727		4,626

OTHER INCOME
Service charges and fees		587		570		523		622		614
Income from fiduciary activities		121		93		86		91		99
Net realized gains (losses) on sales of securities		161		64		155		40		90
Gains on sale of loans and servicing rights		3		130		75		185		42
Gain on sale of deposits		0		0		0		-		-
Earnings and proceeds on life insurance		96		96		102		913		102
Other		67		63		61		74		71
Total other income		1,035		1,016		1,002		1,925		1,018

OTHER EXPENSES
Salaries and employee benefits		1,657		1,572		1,615		2,009		1,611
Occupancy, furniture and equipment , net		388		408		394		360		367
Foreclosed real estate owned		3		13		16		288		130
FDIC insurance assessment		121		118		118		93		133
Other		943		1,065		1,017		952		933
Total other expenses		3,112		3,176		3,160		3,702		3,174

INCOME BEFORE TAX		2,592		2,522		2,509		1,950		2,470
INCOME TAX EXPENSE		702		704		712		148		695
NET INCOME	$	1,890	$	1,818	$	1,797	$	1,802	$	1,775

Basic earnings per share	$	0.68	$	0.66	$	0.65	$	0.65	$	0.64

Diluted earnings per share	$	0.68	$	0.66	$	0.65	$	0.65	$	0.64

Book Value per share	$	24.79	$	24.16	$	23.52	$	23.25	$	23.07

Return on average equity		10.98%		11.03%		11.10%		11.09%		11.25%
Return on average assets		1.39%		1.36%		1.38%		1.39%		1.40%

Net interest spread		3.71%		3.64%		3.79%		3.55%		3.63%
Net interest margin		4.03%		3.96%		4.14%		3.96%		4.07%

Allowance for loan losses to total loans		1.54%		1.53%		1.50%		1.50%		1.30%
Net charge-offs to average loans (annualized)		0.18%		0.10%		0.47%		0.34%		0.06%
Nonperforming loans to total loans		1.02%		1.06%		1.12%		1.38%		0.88%
Nonperforming assets to total assets		0.82%		0.76%		0.83%		1.02%		0.73%

Norwood Financial (NWFL) 8-KAnnounces Earnings for the Third Quarter