Norwood Financial (NWFL) 8-K/A Financial Statements and Exhibits

Exhibit 99.3

Upstate New York Bancorp, Inc.

Consolidated Balance Sheet (unaudited)

(In Thousands, Except Share and Per Share Data)

	March 31,			December 31,
	2020			2019
ASSETS:
Cash and due from banks	$	20,897		$	14,854
Interest bearing deposits with banks		4,443			12,439
Cash and cash equivalents		25,340			27,293
Securities held-to-maturity		2,610			2,824
Securities available-for-sale		18,765			17,030
Total Securities		21,375			19,854
Loans receivable		392,186			388,493
Less: Allowance for loan losses		(8,209	)		(7,767	)
Net loans receivable		383,977			380,726
Regulatory stock, at cost		2,502			2,439
Premises and equipment, net		5,718			5,811
Accrued interest receivable		1,702			1,803
Foreclosed real estate owned		866			—
Deferred tax asset		1,525			1,441
Other assets		288			215
TOTAL ASSETS	$	443,293		$	439,582
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest bearing demand	$	65,084		$	60,673
Interest-bearing		328,785			327,240
Total Deposits		393,869			387,913
Short term borrowings		—			2,000
Other borrowings		1,627			1,761
Accrued interest payable		231			258
Other liabilities		1,057			1,210
TOTAL LIABILITIES		396,784			393,142
STOCKHOLDERS’ EQUITY
Common stock, $5 par value per share, authorized 4,000,000 shares; issued 2,208,000 shares at March 31, 2020; and 2,208,000 shares at December 31, 2019		10,935			10,935
Surplus		6,749			6,695
Retained earnings		28,923			28,593
Accumulated other comprehensive (loss) income		(98	)		217
TOTAL STOCKHOLDERS’ EQUITY		46,509			46,440
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	443,293		$	439,582

Upstate New York Bancorp, Inc.

Consolidated Statements of Income (unaudited)

(In Thousands, Except Share and Per Share Data)

	Three Months
	Ended March 31,
	2020		2019
INTEREST INCOME
Loans receivable, including fees	$	4,898	$	4,836
Securities		150		145
Other		34		39
Total interest income		5,082		5,020
INTEREST EXPENSE
Deposits		1,248		1,316
Other borrowings		10		13
Total interest expense		1,258		1,329
NET INTEREST INCOME		3,824		3,691
PROVISION FOR LOAN LOSSES		898		155
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		2,926		3,536
Other income
Service charges and fees		119		116
Net realized gains on sales of securities		—		169
Gain on sale of loans and servicing rights, net		99		21
Other		58		52
Total other income		276		358
OTHER EXPENSES
Salaries and employee benefits		902		1,249
Occupancy, furniture and equipment, net		365		350
Data processing		174		153
Professional fees		84		116
Federal Deposit Insurance Corporation insurance		37		33
Merger related		610		—
Other		450		399
Total Other Expenses		2,622		2,300
INCOME BEFORE INCOME TAXES		580		1,594
INCOME TAX (BENEFIT) EXPENSE		250		351
NET INCOME	$	330	$	1,243
BASIC EARNINGS PER SHARE	$	0.15	$	0.56
DILUTED EARNINGS PER SHARE	$	0.15	$	0.56

UpState New York Bancorp, Inc.

CONSOLIDATE STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Three Months Ended March 31
	2020			2019
Net income (loss)	$	330		$	1,243
Other comprehensive income:
Change in unrealized net gains (losses) on available-for-sale securities, net of tax of $26 and $11 for 2020 and 2019, respectively	($	98	)	$	41
COMPREHENSIVE INCOME	$	232		$	1,284

UPSTATE NEW YORK BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)	For the three months ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	330		$	1,243
Adjustments to reconcile net income to net cash flow from operating activities:
Amortization of investment security premiums		21			21
Provision for loan losses		898			155
Provision for depreciation and amortization		108			97
Realized investment securities gains		(99	)		(189	)
Stock-based compensation		54			163
Deferred tax expense		(110	)		38
Originations of residential mortgage loans held for sale		(5,170	)		(327	)
Proceeds from sales of residential mortgage loans held for sale		5,386			715
Decrease (increase) in accrued interest receivable and other assets		(922	)		79
Increase (decrease) in accrued interest payable and other liabilities		(180	)		(73	)
Net Cash Provided by Operating Activities		316			1,922
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities available for sale		(3,450	)		(1,000	)
Proceeds from maturities and calls of investment securities available for sale		1,372			94
Purchases of investment securities held to maturity		(41	)		(1,017	)
Proceeds from maturities and calls of investment securities held to maturity		256			522
Redemption (purchase) of investments in restricted stocks		(63	)		29
Net increase in portfolio loans		(4,150	)		(12,657	)
Proceeds from sales of government-guaranteed loans		—			2,067
Purchases of premises and equipment		(15	)		(212	)
Net Cash Used for Investing Activities		(6,091	)		(12,174	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings accounts		30,489			16,837
Net increase in certificates of deposit		(24,532	)		5,079
Repayments of federal funds purchased		(2,000	)		(4,000	)
Repayments of Federal Home Loan Bank		(135	)		(132	)
Net Cash Provided by Financing Activities		3,822			17,784
Net (Decrease) Increase in Cash and Cash Equivalents		(1,953	)		7,532
CASH AND CASH EQUIVALENTS - BEGINNING		27,293			16,031
CASH AND CASH EQUIVALENTS – ENDING	$	25,340		$	23,563

UpState New York Bancorp, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Financial Statement Presentation

The unaudited consolidated financial statements include all accounts of UpState New York Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, USNY Bank (the “Bank”). All significant intercompany balances and transactions have been eliminated in consolidation. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the financial position and results of operations of the Company. These statements should be read in conjunction with the consolidated financial statements and related notes which are incorporated by reference in the Current Report on Form 8-K/A being filed by Norwood Financial Corp (“Norwood”) for the merger of the Company with Norwood which was completed on July 7, 2020.

2. Investment Securities

The following is a summary of held-to maturity and available-for-sale securities:

	Held-to-Maturity Securities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2020
Obligations of states and political subdivisions	$	2,610	$	43	$	—	$	2,653
SECURITIES	$	2,610	$	43	$	—	$	2,653

	Available-for-Sale Securities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2020
U.S. Treasury securities and obligations of U.S. Government agencies and corporations	$	5,491	$	6	$	—	$	5,497
Obligations of states and political subdivisions		13,398		11		141		13,268
TOTAL AVAILABLE FOR SALE SECURITIES	$	18,889	$	17	$	141	$	18,765

	(Dollars in Thousands)
December 31, 2019
Obligations of states and political subdivisions	$	2,824	$	89	$	—	$	2,914
TOTAL HELD-TO-MATURITY SECURITIES	$	2,824	$	89	$	—	$	2,914

	Available-for-Sale Securities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2019
U. S. Treasury securities and obligations of U.S. Government agencies and corporations	$	3,291	$	3	$	5	$	3,290
Obligations of states and Political subdivisions		13,465		276		0		13,740
TOTAL AVAILABLE-FOR-SALE SECURITIES	$	16,756	$	279	$	5	$	17,030

The amortized cost and estimated fair value of investments in debt securities at March 31, 2020, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Held-to-Maturity
Due in one year or less	$	1,724	$	1,736
Due after one year through five years		736		755
Due after five years through ten years		150		162
Due after ten years		0		0
	$	2,610	$	2,653

	Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Available-for-Sale
Due in one year or less	$	1,607	$	1,604
Due after one year through five years		15,779		15,653
Due after five years through ten years		1,503		1,508
Due after ten years		0		0
	$	18,889	$	18,765

The following tables show the investments gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2020 and December 31, 2019.

	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(Dollars in Thousands)
March 31, 2019
U.S. Treasury securities and obligations of U.S. Government agencies and corporations	$	—	$	—	$	—	$	—	$	—	$	—
Obligations of states and political subdivisions		10,576		141		—		—		10,576		141
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	10,576	$	141	$	—	$	—	$	10,576	$	141

	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(Dollars in Thousands)
December 31, 2019
U.S. Treasury securities and obligations of U.S. Government agencies and corporations	$	997	$	4	$	249	$	1	$	1,246	$	5
Obligations of states and political subdivisions		125		—		—		—		125		—
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	1,122	$	4	$	249	$	1	$	1,371	$	5

At March 31, 2020, the Bank had 99 debt securities with unrealized losses in the above table. These unrealized losses relate principally to changes in interest rates. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the Federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary.

3. Loans

The loan portfolio at March 31, 2020 and December 31, 2019, is summarized as follows:

	2020		2019
	(Dollars in Thousands)
Real estate mortgages:
Residential	$	69,986	$	82,446
Commercial		149,210		127,042
Farm		66,852		75,795
Agricultural production and other		42,088		42,315
Commercial		61,299		58,199
Consumer		2,751		2,696
	$	392,186	$	388,493

The loan portfolio includes certain loans, which are considered impaired because, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreements.

Following is a summary of nonaccrual loans and impaired loans as of March 31, 2020 and December 31, 2019, by class of financing receivables (Dollars in Thousands):

	2020		2019
	(Dollars in Thousands)
Nonaccrual Loans
Commercial – Real Estate	$	5,749	$	3,677
Commercial and other business		1,226		626
Farm – Real Estate		1,163		1,170
Agricultural Production and other		—		—
Residential – Real Estate		—		330
Consumer		—		—
TOTAL	$	8,138		5,803

Impaired Loans as of March 31, 2020 (Dollars in Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance Investment		Average Recorded Investment		Interest Income Recognized
Commercial – Real Estate	$	4,332	$	4,332	$	1,680	$	4,434	$	—
Commercial and other business		634		634		465		674		—
Farm – Real Estate		—		—		—		—		—
Agricultural Production and other		—		—		—		—		—
Residential – Real Estate		—		—		—		—		—
Consumer		—		—		—		—		—
TOTAL	$	4,966	$	4,966	$	2,145	$	5,108		—

Impaired Loans as of December 31, 2019 (Dollars in Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance Investment		Average Recorded Investment		Interest Income Recognized
Commercial – Real Estate	$	3,316	$	3,316	$	790	$	2,971	$	—
Commercial and other business		612		612		365		636		—
Farm – Real Estate		361		361		—		362		—
Agricultural Production and other		1,170		1,170		550		1,145		—
Residential – Real Estate		313		313		220		324		—
Consumer		—		—		—		—		—
TOTAL	$	5,772	$	5,772	$	1,925	$	5,438	$	—

Based on management’s analysis, the risk categories of loans are summarized as follows at March 31, 2020 and December 31, 2019:

	2020 (Dollars in Thousands)
	Pass		Special Mention		Substandard		Doubtful		Total Portfolio Loans
Real-Estate Mortgages:
Commercial	$	136,675	$	5,790	$	996	$	5,749	$	149,210
Residential		69,986		—		—		—		69,986
Farm		54,956		10,059		674		1,163		66,852
Total loans secured by real estate		261,617		15,849		1,670		6,912		286,048
Commercial and other business-purpose loans		54,295		5,703		75		1,226		61,299
Consumer		2,751		—		—		—		2,751
Agricultural production and other		32,847		6,662		2,579		—		42,088
TOTAL	$	351,510	$	28,214	$	4,324	$	8,138	$	392,186

	2019 (Dollars in Thousands)
	Pass		Special Mention		Substandard		Doubtful		Total Portfolio Loans
Loans secured by real estate
Commercial	$	116,515	$	4,803	$	2,409	$	3,316	$	127,043
Residential		80,620		957		555		313		82,445
Farm		64,004		9,844		415		1,531		75,794
Total loans secured by real estate		261,139		15,604		3,379		5,160		285,282
Commercial and other business-purpose loans		53,393		3,378		817		612		58,200
Consumer		2,696		—		—		—		2,696
Agricultural production and other		32,598		7,622		2,095		—		42,315
TOTAL	$	349,826	$	26,604	$	6,291	$	5,772	$	388,493

Changes in the allowance for loan losses for the years ended March 31, 2020 and December 31, 2019 are summarized as follows:

	2020 (Dollars in Thousands)
Secured by Real Estate
	Commercial			Residential			Farm		Commercial and other business- purpose loans		Consumer		Agricultural			Total
Beginning balance
ALLL	$	2,907		$	1,114		$	1,052	$	1,419	$	43	$	1,232		$	7,767
Charge-offs		(61	)		(395	)		—		—		—		—			(456	)
Recoveries		—			—			—		—		—		—			—
Provision for loan losses		1,067			28			106		233		4		(540	)		898
Ending balance ALLL		3,913			747			1,158		1,652		47		692			8,209
Individually evaluated for impairment		1,680			—			—		465		—		—			2,145
Collectively evaluated for impairment	$	2,233		$	747		$	1,158	$	1,187	$	47	$	692		$	6,064
Loans Receivable:
Ending balance loans	$	149,210		$	69,986		$	66,852	$	61,299	$	2,751	$	42,088		$	392,186
Individually evaluated for impairment loans	$	4,332			—			—		634		—		—			4,966
Collectively evaluated for impairment loans	$	144,878		$	69,986			66,852		60,665	$	2,751	$	42,088		$	387,220

	2019 (Dollars in Thousands)
Secured by Real Estate
	Commercial			Residential			Farm		Commercial and other business purpose loans		Consumer		Agricultural		Total
Beginning balance	$	1,915		$	782		$	1,036	$	1,054	$	38	$	1,177	$	6,002
Charge-offs		(189	)		(10	)		—		—		—		—		(199	)
Recoveries		—			—			—		—		1		21		22
Provision for loan losses		1,182			342			15		365		4		34		1,942
Ending balance		2,908			1,114			1,051		1,419		43		1,232		7,767
Individually evaluated for impairment		790			220			—		365		—		550		1,925
Collectively evaluated for impairment	$	2,118		$	894		$	1,051	$	1,054	$	43	$	682	$	5,842
Loans Receivable:
Ending balance loans	$	127,042		$	82,446		$	75,795	$	58,199	$	2,696	$	42,315	$	388,493
Individually evaluated for impairment	$	3,316			313			361		612		—		1,170		5,772
Collectively evaluated for impairment	$	123,726		$	82,133		$	75,434	$	57,587	$	2,696	$	41,145	$	382,721

11. Fair Value Disclosures

FASB authoritative guidance on fair value measurements provides a framework for measuring fair value under accounting principles generally accepted in the United States of America. The guidance applies to all financial instruments that are being measured and reported on a fair value basis. As defined in the guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Bank uses various methods, including market, income, and cost approaches. Based on these approaches, the Bank often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Bank utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Bank is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

• Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

• Level 3 - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Financial assets and financial liabilities measured at fair value on a recurring basis include the following:

Securities available-for-sale: The Bank’s securities available-for-sale are reported at fair value utilizing Level 2 inputs. For these securities, the Bank obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, credit information, and the bond’s terms and conditions, among other things.

Fair value at March 31, 2020 and December 31, 2019, for assets and liabilities measured on a recurring basis is as follows (Dollars in Thousands):

	Quoted Market Price in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
March 31, 2020
Securities available-for-sale	$	—	$	18,765	$	—

	Quoted Market Price in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
December 31, 2019
Securities available-for-sale	$	—	$	17,030	$	—

Impaired Loans Impaired loans are those for which the Bank has measured impairment generally based on the fair value of the loan’s collateral. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These real estate appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income producing property) and the cost approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available, if applicable. Although the fair value of the property normally will be based on an appraisal, the valuation should be consistent with the price that a market participant will pay to purchase the property at the measurement date. Circumstances may exist that indicate that the appraised value is not an accurate measurement of the property’s current fair value. Examples of such circumstances include changed economic conditions since the last appraisal, change in property use, stale appraisals, or imprecision and subjectivity in the appraisal process. Appraisal adjustments may be made by management to reflect these conditions resulting in a discount of the appraised value. In addition, a discount is typically applied to account for estimated costs to sell. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuations, and management’s expertise and knowledge of the client and client’s business. At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive a specific valuation allowance for loan losses. The methods used to determine the fair values of impaired loans typically result in a level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Fair value at March 31, 2020 and December 31, 2019, for assets and liabilities measured on a nonrecurring basis is as follows (Dollars in Thousands):

	Quoted Market Price in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
March 31, 2020
Impaired Loans	$	—	$	—	$	2,820

	Quoted Market Price in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
December 31, 2019
Impaired Loans	$	—	$	—	$	2,126

12. Subsequent Event

In response to the onset of COVID-19, the Bank has participated in the federal government’s Paycheck Protection Program (“PPP”). This program provides borrower guarantees for lenders and envisions a certain amount of loan forgiveness for loan recipients who properly utilize funds, all in accordance with the rules and regulations established by the Small Business Association for the PPP. As of the date of the merger, the Bank had issued PPP loans to borrowers in the amount of $28,522,965. In addition, per discussion above the Bank offered 281 payment deferrals to borrowers who were suffering as a result of the COVID-19 pandemic. Lastly, in order to provide additional financial relief to borrowers and customers, the bank waived NSF and ATM fees for the months of April to June, prior to the merger.