Norwood Financial (NWFL) 8-K Announces Third Quarter Earnings

Exhibit 99.1

 FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP

ANNOUNCES THIRD QUARTER EARNINGS

October 22, 2018 - Honesdale, Pennsylvania

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, 2018 of $3,710,000 which represents an increase of $769,000 over the $2,941,000 earned in the same three-month period of 2017.  Net interest income improved $518,000 and other income increased $139,000 over the three-month period ending September 30, 2017.  Earnings per share (fully diluted) were $0.58 in the 2018 period, increasing from the $0.47 earned in the similar period of last year.  The annualized returns on average assets and average equity for the current three-month period were 1.28% and 12.55%, respectively, compared to 1.03% and 9.85% for the three-month period ending September 30, 2017.

Net income for the nine months ended September 30, 2018 totaled $10,352,000, which is $2,311,000 higher than the same period of 2017 primarily due to a $1,387,000 increase in net interest income and a $450,000 reduction in the provision for credit losses.  Earnings per share (fully diluted) for the nine months ended September 30, 2018 totaled $1.64 per share compared to $1.28 per share in the 2017 period.

Total assets as of September 30, 2018 were $1.157 billion with loans receivable of $819.2 million, deposits of $939.7 million and stockholders' equity of $116.7 million.  Total assets have increased $24.8 million during the past twelve months while loans and deposits have increased $63.2 million and $15.7 million, respectively.

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Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $2.4 million or 0.20% of total assets as of September 30, 2018 compared to $2.7 million or 0.23% of assets as of June 30, 2018 and $6.2 million or 0.55% of total assets as of September 30, 2017.  Net charge-offs were $421,000 for the quarter and totaled $704,000 for the nine months ended September 30, 2018 compared to $259,000 and $503,000, respectively, for the similar periods in 2017.  The allowance for loan losses totaled $8,280,000 as of September 30, 2018 and represented 719% of total non-performing loans, compared to $7,760,000 and 387% of non-performing loans as of September 30, 2017.

For the three months ended September 30, 2018, net interest income, on a fully taxable equivalent basis (fte), totaled $9,645,000, which represents an increase of $226,000 compared to the similar period in 2017 despite a lower tax-equivalent adjustment.  A $68.7 million increase in average loans outstanding contributed to the increased income.  Net interest margin (fte) for the 2018 period was 3.57% compared to 3.60% for the similar period in 2017, reflecting the lower tax-equivalent adjustment resulting from the Tax Cuts and Jobs Act.  Net interest income (fte) for the nine months ended September 30, 2018 totaled $28,212,000, an increase of $551,000 compared to the similar period in 2017 due primarily to a higher volume of earning assets.  The net interest margin (fte) year-to-date for the 2018 period was 3.52% compared to 3.55% in the same period of 2017.  The decrease in the net interest margin (fte) reflects the lower tax-equivalent adjustment resulting from the reduced corporate tax rate.

Other income for the three months ended September 30, 2018 totaled $1,997,000 compared to $1,858,000 for the similar period in 2017.  The increase was primarily attributed to non-recurring income related to the settlement of litigation.  For the nine 

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months ended September 30, 2018, other income totaled $5,466,000 compared to $5,158,000 in the 2017 period.  Gains on sales of loans and securities totaled $228,000 in the 2018 year-to-date period compared to $234,000 in the corresponding 2017 period.  The 2017 period also includes a gain on the sale of deposits in the amount of $209,000.  Excluding gains from sales, other income improved $523,000 over the first nine months of 2017 primarily due to the non-recurring income related to the litigation settlement.

Other expenses totaled $6,572,000 for the three months ended September 30, 2018, compared to $6,239,000 in the similar period of 2017.  The higher level of expense during the 2018 period includes an increase of $368,000 for salaries and employee benefits offset partially by reduced foreclosed real estate costs.  For the nine months ended September 30, 2018, other expenses totaled $19,173,000 compared to $18,984,000 for the similar period in 2017, an increase of $189,000, or 1.0%.

Mr. Critelli commented, "Our earnings in 2018 have improved significantly over the first nine months of last year.  Pre-tax income has improved 18.8%, while net income increased 28.7%, reflecting the benefit of the reduced corporate tax rate.  Our key performance metrics improved over last year, annualized loan growth exceeds 9% in 2018, 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 from 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".

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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 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 interest income and net interest income, which are non-GAAP (Generally Accepted Accounting Principles) 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 21% for 2018 and 34% for 2017.  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.

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The following reconciles net interest income to net interest income on a taxable equivalent basis:

(dollars in thousands)	Three months ended September 30				Nine months ended September 30
	2018		2017		2018		2017
Net interest income	$	9,388	$	8,870	$	27,410	$	26,023
Tax equivalent basis adjustment    using marginal tax rate		257		549		802		1,638
Net interest income on a fully    taxable equivalent basis	$	9,645	$	9,419	$	28,212	$	27.661

This release also references average tangible equity, which is also a non-GAAP financial measure. Average tangible equity is calculated by deducting average goodwill and other intangible assets from average stockholders' equity. The Company believes that disclosure of tangible equity ratios enhances investor understanding of our financial position and improves the comparability of our financial data.

The following reconciles average equity to average tangible equity:

	Three months ended September 30						Nine months ended September 30
(dollars in thousands)	2018			2017			2018			2017
Average equity	$	117,306		$	118,420		$	115,897		$	115,647
Goodwill and other intangibles		(11,707	)		(11,842	)		(11,739	)		(11,944	)
Average tangible equity	$	105,599		$	106.578		$	104,158		$	103,703

Contact:     William S. Lance

    Executive Vice President &

                    Chief Financial Officer

    NORWOOD FINANCIAL CORP

    570-253-8505

                    www.waynebank.com

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NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
(unaudited)
	September 30
	2018			2017
ASSETS
Cash and due from banks	$	17,073		$	13,947
Interest-bearing deposits with banks		295			368
Cash and cash equivalents		17,368			14,315
Securities available for sale		247,517			285,706
Loans receivable		819,197			756,014
Less: Allowance for loan losses		8,280			7,760
Net loans receivable		810,917			748,254
Regulatory stock, at cost		3,261			3,115
Bank premises and equipment, net		13,797			12,922
Bank owned life insurance		37,718			36,839
Foreclosed real estate owned		1,209			4,243
Accrued interest receivable		3,792			3,729
Goodwill		11,331			11,331
Other intangible assets		364			496
Deferred tax asset		6,268			8,304
Other assets		3,206			2,699
TOTAL ASSETS	$	1,156,748		$	1,131,953
LIABILITIES
Deposits:
Non-interest bearing demand	$	218,979		$	212,844
Interest-bearing		720,735			711,178
Total deposits		939,714			924,022
Short-term borrowings		52,820			47,229
Other borrowings		36,649			31,771
Accrued interest payable		1,705			1,167
Other liabilities		9,180			10,072
TOTAL LIABILITIES		1,040,068			1,014,261
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued:  2018: 6,274,513 shares, 2017:  6,246,662 shares		628			625
Surplus		48,087			47,467
Retained earnings		76,645			71,210
Treasury stock, at cost: 2018: 5,729 shares, 2017: 11,724 shares		(188	)		(341	)
Accumulated other comprehensive loss		(8,492	)		(1,269	)
TOTAL STOCKHOLDERS' EQUITY		116,680			117,692
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,156,748		$	1,131,953

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,
	2018			2017		2018		2017
INTEREST INCOME
Loans receivable, including fees	$	9,301		$	8,289	$	26,645	$	24,020
Securities		1,483			1,605		4,543		4,856
Other		2			2		63		37
Total Interest income		10,786			9,896		31,251		28,913
INTEREST EXPENSE
Deposits		1,116			828		3,198		2,392
Short-term borrowings		111			82		201		138
Other borrowings		171			116		442		360
Total Interest expense		1,398			1,026		3,841		2,890
NET INTEREST INCOME		9,388			8,870		27,410		26,023
PROVISION FOR LOAN LOSSES		375			600		1,350		1,800
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		9,013			8,270		26,060		24,223
OTHER INCOME
Service charges and fees		1,129			1,105		3,211		3,056
Income from fiduciary activities		151			160		463		395
Net realized gains on sales of securities		13			129		213		167
Gains on sales of loans, net		15			-		15		67
Gains on sale of deposits		-			-		-		209
Earnings and proceeds on life insurance policies		297			320		848		850
Other		392			144		716		414
Total other income		1,997			1,858		5,466		5,158
OTHER EXPENSES
Salaries and  employee benefits		3,577			3,209		10,445		9,639
Occupancy, furniture and equipment		910			799		2,659		2,519
Data processing  and related operations		368			354		1,027		1,022
Taxes, other than income		153			233		480		693
Professional fees		301			217		760		706
FDIC Insurance assessment		87			97		265		283
Foreclosed real estate		(26	)		303		68		1,028
Amortization of intangibles		29			35		97		115
Other		1,173			992		3,372		2,979
Total other expenses		6,572			6,239		19,173		18,984
INCOME BEFORE TAX		4,438			3,889		12,353		10,397
INCOME TAX EXPENSE		728			948		2,001		2,356
NET INCOME	$	3,710		$	2,941	$	10,352	$	8,041
Basic earnings per share	$	0.59		$	0.47	$	1.66	$	1.29
Diluted earnings per share	$	0.58		$	0.47	$	1.64	$	1.28

NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30	2018			2017
Net interest income	$	9,388		$	8,870
Net income		3,710			2,941
Net interest spread (fully taxable equivalent)		3.40	%		3.48	%
Net interest margin (fully taxable equivalent)		3.57	%		3.60	%
Return on average assets		1.28	%		1.03	%
Return on average equity		12.55	%		9.85	%
Return on average tangible equity		13.94	%		10.95	%
Basic earnings per share	$	0.59		$	0.47
Diluted earnings per share	$	0.58		$	0.47
For the Nine Months Ended September 30		2018			2017
Net interest income	$	27,410		$	26,023
Net income		10,352			8,041
Net interest spread (fully taxable equivalent)		3.37	%		3.44	%
Net interest margin (fully taxable equivalent)		3.52	%		3.55	%
Return on average assets		1.21	%		0.96	%
Return on average equity		11.94	%		9.30	%
Return on average tangible equity		13.29	%		10.37	%
Basic earnings per share	$	1.66		$	1.29
Diluted earnings per share	$	1.64		$	1.28
As of September 30
Total assets	$	1,156,748		$	1,131,953
Total loans receivable		819,197			756,014
Allowance for loan losses		8,280			7,760
Total deposits		939,714			924,022
Stockholders' equity		116,680			117,692
Trust assets under management		164,852			151,373
Book value per share	$	18.49		$	18.46
Tangible book value per share	$	16.62		$	16.54
Equity to total assets		10.09	%		10.40	%
Allowance to total loans receivable		1.01	%		1.03	%
Nonperforming loans to total loans		0.14	%		0.27	%
Nonperforming assets to total assets		0.20	%		0.55	%

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
	September 30		June 30		March 31		December 31		September 30
	2018		2018		2018		2017		2017
ASSETS
Cash and due from banks	$	17,073	$	15,193	$	10,103	$	16,212	$	13,947
Interest-bearing deposits with banks		295		914		2,039		485		368
Cash and cash equivalents		17,368		16,107		12,142		16,697		14,315
Securities available for sale		247,517		259,442		265,862		281,121		285,706
Loans receivable		819,197		803,773		775,681		764,092		756,014
Less: Allowance for loan losses		8,280		8,326		8,099		7,634		7,760
Net loans receivable		810,917		795,447		767,582		756,458		748,254
Regulatory stock, at cost		3,261		2,313		2,545		3,505		3,115
Bank owned life insurance		37,718		37,485		37,270		37,060		36,839
Bank premises and equipment, net		13,797		13,894		13,808		13,864		12,922
Foreclosed real estate owned		1,209		1,386		1,436		1,661		4,243
Goodwill and other intangibles		11,695		11,725		11,758		11,793		11,827
Other assets		13,266		12,794		14,634		10,757		14,732
TOTAL ASSETS	$	1,156,748	$	1,150,593	$	1,127,037	$	1,132,916	$	1,131,953
LIABILITIES
Deposits:
Non-interest bearing demand	$	218,979	$	216,472	$	204,027	$	205,138	$	212,844
Interest-bearing deposits		720,735		734,417		736,122		724,246		711,178
Total deposits		939,714		950,889		940,149		929,384		924,022
Borrowings		89,469		73,608		62,998		78,475		79,000
Other liabilities		10,885		10,563		10,052		9,318		11,239
TOTAL LIABILITIES		1,040,068		1,035,060		1,013,199		1,017,177		1,014,261
STOCKHOLDERS' EQUITY		116,680		115,533		113,838		115,739		117,692
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,156,748	$	1,150,593	$	1,127,037	$	1,132,916	$	1,131,953

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	September 30			June 30			March 31			December 31			September 30
Three months ended	2018			2018			2018			2017			2017
INTEREST INCOME
Loans receivable, including fees	$	9,301		$	8,857		$	8,487		$	8,503		$	8,289
Securities		1,483			1,536			1,524			1,560			1,605
Other		2			43			18			12			2
Total interest income		10,786			10,436			10,029			10,075			9,896
INTEREST EXPENSE
Deposits		1,116			1,052			1,029			985			828
Borrowings		282			169			193			206			198
Total interest expense		1,398			1,221			1,222			1,191			1,026
NET INTEREST INCOME		9,388			9,215			8,807			8,884			8,870
PROVISION FOR LOAN LOSSES		375			425			550			400			600
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		9,013			8,790			8,257			8,484			8,270
OTHER INCOME
Service charges and fees		1,129			1,101			980			1,023			1,105
Income from fiduciary activities		151			175			137			116			160
Net realized gains on sales of securities		13			58			142			181			129
Gains on sales of loans, net		15			-			-			-			-
Earnings and proceeds on life insurance policies		297			279			273			283			320
Other		392			161			162			151			144
Total other income		1,997			1,774			1,694			1,754			1,858
OTHER EXPENSES
Salaries and  employee benefits		3,577			3,406			3,462			3,211			3,209
Occupancy, furniture and equipment, net		910			857			892			841			799
Foreclosed real estate		(26	)		114			(19	)		136			303
FDIC insurance assessment		87			86			92			94			97
Other		2,024			1,890			1,821			1,604			1,831
Total other expenses		6,572			6,353			6,248			5,886			6,239
INCOME BEFORE TAX		4,438			4,211			3,703			4,352			3,889
INCOME TAX EXPENSE		728			698			574			4,195			948
NET INCOME	$	3,710		$	3,513		$	3,129		$	157		$	2,941
Basic earnings per share	$	0.59		$	0.57		$	0.50		$	0.03		$	0.47
Diluted earnings per share	$	0.58		$	0.56		$	0.50		$	0.03		$	0.47
Book Value per share	$	18.49		$	18.35		$	18.45		$	18.61		$	18.46
Tangible Book Value per share		16.62			16.47			16.56			16.71			16.54
Return on average assets (annualized)		1.28	%		1.23	%		1.13	%		0.05	%		1.03	%
Return on average equity (annualized)		12.55	%		12.25	%		11.00	%		0.52	%		9.85	%
Return on average tangible equity (annualized)		13.94	%		13.64	%		12.25	%		0.58	%		10.95	%
Net interest spread (fte)		3.40	%		3.40	%		3.31	%		3.44	%		3.48	%
Net interest margin (fte)		3.57	%		3.54	%		3.46	%		3.56	%		3.60	%
Allowance for loan losses to total loans		1.01	%		1.04	%		1.04	%		1.00	%		1.03	%
Net charge-offs to average loans (annualized)		0.21	%		0.10	%		0.04	%		0.28	%		0.14	%
Nonperforming loans to total loans		0.14	%		0.16	%		0.22	%		0.32	%		0.27	%
Nonperforming assets to total assets		0.20	%		0.23	%		0.28	%		0.37	%		0.55	%