Norwood Financial (NWFL) 8-K Norwood Financial Corp Announces Earnings for the Fourth Quarter and Year

Exhibit 99.1

FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP ANNOUNCES EARNINGS FOR THE FOURTH QUARTER AND YEAR

January 23, 2020 – 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 December 31, 2019 of $3,596,000 compared to $3,299,000 earned in the corresponding period of 2018. The 9% increase in earnings is due primarily to the $404,000 improvement in net interest income and a lower provision for loan losses. For the year ended December 31, 2019 net income totaled $14,215,000, an increase of $564,000, or 4.1%, from the $13,651,000 earned in the prior year. The increase reflects improvement in net interest income, as well as a reduction in the provision for loan losses.

Earnings per share (fully diluted) were $0.57 and $0.53 for the three-month periods ended December 31, 2019 and 2018, respectively. For the year, earnings per share on a fully diluted basis were $2.25 for 2019 compared to $2.17 in 2018. The return on average assets for the year was 1.18% with a return on average equity of 10.83% compared to 1.19% and 11.71%, respectively, in 2018.

Total assets were $1.231 billion as of December 31, 2019. Loans receivable totaled $924.6 million as of December 31, 2019, with total deposits of $957.5 million and stockholders’ equity of $137.1 million.

Loans receivable increased $74.4 million, or 8.8%, from the prioryear-end due primarily to a $40.4 million increase in commercial loans and a $34.0 million increase in consumer loans. For the three months and year ended December 31, 2019, net charge-offs totaled $96,000 and $1,194,000, respectively, compared to $203,000 and $907,000, respectively, for the corresponding periods in 2018.

Net interest income, on a fully taxable equivalent basis (fte), totaled $10,066,000 for the three months ended December 31, 2019, an increase of $379,000 compared to the same period in 2018. For the year, net interest income (fte) totaled $39,612,000, an increase of $1,713,000 compared to 2018 due primarily to the higher volume of earning assets, including an $84.8 million increase in average loans outstanding.

Other income for the three months ended December 31, 2019 totaled $1,696,000 compared to $1,600,000 for the similar period in 2018. Gains on the sale of loans and securities increased $65,000, while all other items of other income increased $31,000 in the aggregate due primarily to service charges and fees. Other income for the year ended December 31, 2019 totaled $6,778,000 compared to $7,065,000 in 2018, a decrease of $287,000 due primarily tonon-recurring income recognized in 2018. Gains on the sale of loans and investment securities increased $195,000 in the aggregate, while all other items of other income decreased $482,000, net.

Other expenses totaled $7,088,000 for the three months ended December 31, 2019, compared to $6,803,000 in the similar period of 2018. The $285,000 increase includes a $165,000 increase in salaries and benefits costs. All other operating expenses increased $120,000 or 3.7%, net. For the year ended December 31, 2019, other expenses totaled $27,311,000 compared to $25,975,000 for 2018, an increase of $1,336,000. Salaries and benefits increased $635,000 and data processing related costs increased $442,000. All other operating expenses increased $262,000, or 2.5%, net.

Mr. Critelli commented, “In 2019, our earnings increased $564,000 over our previous record year of 2018. Our Return on Average Assets was 1.18% and our Return on Average Equity was 10.83%. Our cash dividend of $0.25 per share declared in the fourth quarter of 2019 represents a 4.2% increase over the same period of last year. Earnings per share (fully diluted) also improved to $2.25 from $2.17 in 2018. Our loan growth exceeded 8%, operating expenses remain well controlled, and our capital base remains above regulatory “Well Capitalized” targets. Please know that we continue to search out opportunities available to us, and look forward to serving our growing base of stockholders and customers.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates fifteen 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, 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 referencestax-equivalent interest income and net interest income, which is anon-GAAP (Generally Accepted Accounting Principles) financial measure.Tax-equivalent net interest income is derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income on a tax–equivalent basis ensures comparability of interest income arising from both taxable andtax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income to net interest income on atax-equivalent basis:

(dollars in thousands)	Three months ended December 31				Year ended December 31
	2019		2018		2019		2018
Net interest income	$	9,833	$	9,429	$	38,606	$	36,839
Tax equivalent basis adjustment using 21% marginal tax rate		233		258		1,006		1,060
Net interest income on a fully taxable equivalent basis	$	10,066	$	9,687	$	39,612	$	37,899

This release also references average tangible equity, which is also anon-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:

(dollars in thousands)	Three months ended December 31						Year ended December 31
	2019			2019			2019			2018
Average equity	$	136,920		$	118,442		$	131,271		$	116,538
Average goodwill and other Intangibles		(11,575	)		(11,678	)		(11,611	)		(11,723	)
Average tangible equity	$	125,345		$	106,764		$	119,660		$	104,815

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)

	December 31
	2019			2018
ASSETS
Cash and due from banks	$	15,038		$	18,039
Interest-bearing deposits with banks		377			309
Cash and cash equivalents		15,415			18,348
Securities available for sale		210,205			243,277
Loans receivable		924,581			850,182
Less: Allowance for loan losses		8,509			8,452
Net loans receivable		916,072			841,730
Regulatory stock, at cost		4,844			3,926
Bank premises and equipment, net		14,228			13,846
Bank owned life insurance		38,763			37,932
Foreclosed real estate owned		1,556			1,115
Accrued interest receivable		3,719			3,776
Goodwill		11,331			11,331
Other intangible assets		235			336
Other assets		14,242			8,942
TOTAL ASSETS	$	1,230,610		$	1,184,559
LIABILITIES
Deposits:
Non-interest bearing demand	$	207,299		$	201,457
Interest-bearing		750,230			745,323
Total deposits		957,529			946,780
Short-term borrowings		62,256			53,046
Other borrowings		56,438			52,284
Accrued interest payable		2,432			1,806
Other liabilities		14,527			8,358
TOTAL LIABILITIES		1,093,182			1,062,274
STOCKHOLDERS' EQUITY
Preferred Stock, no par value per share, authorized 5,000,000 shares		–			–
Common Stock, $.10 par value per share,
authorized: 2019: 20,000,000 shares, 2018: 10,000,000 shares		634			630
issued: 2019: 6,340,563 shares, 2018: 6,295,113 shares
Surplus		49,471			48,322
Retained earnings		86,536			78,434
Treasury stock, at cost: 2019: 12,007 shares, 2018: 2,470 shares		(400	)		(81	)
Accumulated other comprehensive income (loss)		1,187			(5,020	)
TOTAL STOCKHOLDERS' EQUITY		137,428			122,285
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,230,610		$	1,184,559

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2019		2018		2019		2018
INTEREST INCOME
Loans receivable, including fees	$	10,815	$	9,759	$	41,889	$	36,404
Securities		1,159		1,476		5,314		6,019
Other		11		10		81		73
Total Interest income		11,985		11,245		47,284		42,496
INTEREST EXPENSE
Deposits		1,784		1,446		7,139		4,644
Short-term borrowings		124		122		468		323
Other borrowings		244		248		1,071		690
Total Interest expense		2,152		1,816		8,678		5,657
NET INTEREST INCOME		9,833		9,429		38,606		36,839
PROVISION FOR LOAN LOSSES		200		375		1,250		1,725
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		9,633		9,054		37,356		35,114
OTHER INCOME
Service charges and fees		1,168		1,085		4,450		4,295
Income from fiduciary activities		156		126		610		589
Net realized gains on sales of securities		21		–		254		213
Gains on sales of loans, net		44		–		169		15
Earnings and proceeds on life insurance policies		200		277		830		1,126
Other		107		112		465		827
Total other income		1,696		1,600		6,778		7,065
OTHER EXPENSES
Salaries and employee benefits		3,740		3,575		14,655		14,020
Occupancy, furniture and equipment		938		1,036		3,719		3,695
Data processing and related operations		469		400		1,869		1,427
Taxes, other than income		232		92		751		572
Professional fees		362		232		1,113		993
FDIC Insurance assessment		3		83		153		347
Foreclosed real estate		9		104		45		172
Amortization of intangibles		22		29		101		126
Other		1,313		1,252		4,905		4,623
Total other expenses		7,088		6,803		27,311		25,975
INCOME BEFORE TAX		4,241		3,851		16,823		16,204
INCOME TAX EXPENSE		645		552		2,608		2,553
NET INCOME	$	3,596	$	3,299	$	14,215	$	13,651
Basic earnings per share	$	0.57	$	0.53	$	2.27	$	2.19
Diluted earnings per share	$	0.57	$	0.53	$	2.25	$	2.17

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended December 31	2019			2018
Net interest income	$	9,833		$	9,429
Net income		3,596			3,299
Net interest spread (fully taxable equivalent)		3.33	%		3.33	%
Net interest margin (fully taxable equivalent)		3.59	%		3.54	%
Return on average assets		1.18	%		1.12	%
Return on average equity		10.42	%		11.05	%
Return on average tangible equity		11.38	%		12.26	%
Basic earnings per share	$	0.57		$	0.53
Diluted earnings per share	$	0.57		$	0.53
For the Twelve Months Ended December 31
Net interest income	$	38,606		$	36,839
Net income		14,215			13,651
Net interest spread (fully taxable equivalent)		3.28	%		3.36	%
Net interest margin (fully taxable equivalent)		3.53	%		3.53	%
Return on average assets		1.18	%		1.19	%
Return on average equity		10.83	%		11.71	%
Return on average tangible equity		11.88	%		13.02	%
Basic earnings per share	$	2.27		$	2.19
Diluted earnings per share	$	2.25		$	2.17
As of December 31
Total assets	$	1,230,610		$	1,184,559
Total loans receivable		924,581			850,182
Allowance for loan losses		8,509			8,452
Total deposits		957,529			946,780
Stockholders’ equity		137,428			122,285
Trust assets under management		170,685			151,224
Book value per share	$	21.67		$	19.43
Tangible book value per share	$	19.84		$	17.58
Equity to total assets		11.17	%		10.32	%
Allowance to total loans receivable		0.92	%		0.99	%
Nonperforming loans to total loans		0.09	%		0.13	%
Nonperforming assets to total assets		0.19	%		0.19	%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

	December 31 2019		September 30 2019		June 30 2019		March 31 2019		December 31 2018
ASSETS
Cash and due from banks	$	15,038	$	20,067	$	14,207	$	13,583	$	18,039
Interest-bearing deposits with banks		377		848		4,265		6,291		309
Cash and cash equivalents		15,415		20,915		18,472		19,874		18,348
Securities available for sale		210,205		211,199		238,083		240,621		243,277
Loans receivable		924,581		905,582		887,673		864,198		850,182
Less: Allowance for loan losses		8,509		8,405		8,228		8,349		8,452
Net loans receivable		916,072		897,177		879,445		855,849		841,730
Regulatory stock, at cost		4,844		3,137		3,155		3,132		3,926
Bank owned life insurance		38,763		38,562		38,340		38,134		37,932
Bank premises and equipment, net		14,228		13,927		13,880		14,165		13,846
Foreclosed real estate owned		1,556		1,572		1,677		1,792		1,115
Goodwill and other intangibles		11,566		11,588		11,611		11,638		11,667
Other assets		17,961		17,779		17,865		18,390		12,718
TOTAL ASSETS	$	1,230,610	$	1,215,856	$	1,222,528	$	1,203,595	$	1,184,559
LIABILITIES
Deposits:
Non-interest bearing demand	$	207,299	$	231,211	$	221,764	$	206,806	$	201,457
Interest-bearing deposits		750,230		743,222		759,460		767,609		745,323
Total deposits		957,529		974,433		981,224		974,415		946,780
Borrowings		118,694		88,684		92,118		85,779		105,330
Other liabilities		16,959		17,845		17,703		16,629		10,164
TOTAL LIABILITIES		1,093,182		1,080,962		1,091,045		1,076,823		1,062,274
STOCKHOLDERS' EQUITY		137,428		134,894		131,483		126,772		122,285
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,230,610	$	1,215,856	$	1,222,528	$	1,203,595	$	1,184,559

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

Three months ended	December 31 2019			September 30 2019			June 30 2019			March 31 2019			December 31 2018
INTEREST INCOME
Loans receivable, including fees	$	10,815		$	10,776		$	10,328		$	9,970		$	9,759
Securities		1,159			1,278			1,435			1,441			1,476
Other		11			5			51			15			10
Total interest income		11,985			12,059			11,814			11,426			11,245
INTEREST EXPENSE
Deposits		1,784			1,787			1,839			1,729			1,446
Borrowings		368			381			363			426			370
Total interest expense		2,152			2,168			2,202			2,155			1,816
NET INTEREST INCOME		9,833			9,891			9,612			9,271			9,429
PROVISION FOR LOAN LOSSES		200			300			300			450			375
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		9,633			9,591			9,312			8,821			9,054
OTHER INCOME
Service charges and fees		1,168			1,200			1,052			1,031			1,085
Income from fiduciary activities		156			167			145			142			126
Net realized gains on sales of securities		21			169			64			—			—
Gains on sales of loans, net		44			15			67			42			—
Earnings and proceeds on life insurance policies		200			222			207			202			277
Other		107			109			106			143			112
Total other income		1,696			1,882			1,641			1,560			1,600
OTHER EXPENSES
Salaries and employee benefits		3,740			3,667			3,599			3,649			3,575
Occupancy, furniture and equipment, net		938			916			940			924			1,036
Foreclosed real estate		9			24			(10	)		23			104
FDIC insurance assessment		3			(5	)		84			71			83
Other		2,398			2,189			2,172			1,981			2,005
Total other expenses		7,088			6,791			6,785			6,648			6,803
INCOME BEFORE TAX		4,241			4,682			4,168			3,733			3,851
INCOME TAX EXPENSE		645			775			646			543			552
NET INCOME	$	3,596		$	3,907		$	3,522		$	3,190		$	3,299
Basic earnings per share	$	0.57		$	0.62		$	0.56		$	0.51		$	0.53
Diluted earnings per share	$	0.57		$	0.62		$	0.56		$	0.51		$	0.53
Book Value per share	$	21.67		$	21.41		$	20.90		$	20.16		$	19.43
Tangible Book Value per share		19.84			19.57			19.06			18.31			17.58
Return on average assets (annualized)		1.18	%		1.27	%		1.16	%		1.09	%		1.12	%
Return on average equity (annualized)		10.42	%		11.56	%		10.93	%		10.37	%		11.02	%
Return on average tangible equity (annualized)		11.38	%		12.66	%		12.01	%		11.44	%		12.23	%
Net interest spread (fte)		3.33	%		3.35	%		3.24	%		3.20	%		3.33	%
Net interest margin (fte)		3.59	%		3.60	%		3.49	%		3.43	%		3.54	%
Allowance for loan losses to total loans		0.92	%		0.93	%		0.93	%		0.97	%		0.99	%
Net charge-offs to average loans (annualized)		0.04	%		0.05	%		0.19	%		0.26	%		0.10	%
Nonperforming loans to total loans		0.09	%		0.15	%		0.15	%		0.13	%		0.13	%
Nonperforming assets to total assets		0.19	%		0.24	%		0.25	%		0.24	%		0.19	%