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

Exhibit 99.1

FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP

ANNOUNCES THIRD QUARTER EARNINGS

October 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 September 30, 2020 of $4,999,000 which represents an increase of $1,092,000, or 28.0%, over the $3,907,000 earned in the same three-month period of 2019. The increase in earnings reflects the benefits derived from the Company’s acquisition of UpState New York Bancorp, Inc. (“UpState”), which closed on July 7, 2020. Earnings per share (fully diluted) were $0.62 in the three-months ended September 30, 2020, which equals the $0.62 earned in the same period of 2019. The annualized returns on average assets and average equity for the current three-month period were 1.11% and 10.64%, respectively, compared to 1.27% and 11.56% for the three-month period ended September 30, 2019.

Net income for the nine months ended September 30, 2020 totaled $9,567,000, which is $1,052,000 lower than the same period of 2019 primarily due to a $2,800,000 increase in the provision for loan losses and approximately $1,983,000 of merger related expenses. Earnings per share (fully diluted) for the nine months ended September 30, 2020 totaled $1.39 per share compared to $1.68 per share in the 2019 period.

Total assets as of September 30, 2020 were $1.842 billion with loans receivable of $1.415 billion, deposits of $1.516 billion and stockholders’ equity of $190.5 million. Total assets have increased $626.3 million during the past twelve months while loans and deposits have increased $509.1 million and $541.5 million, respectively. All increases reflect growth due to the UpState acquisition and significant stimulus funds resulting from the Paycheck protection Program (“PPP”) and CARES Act.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $13.6 million or 0.74% of total assets as of September 30, 2020 compared to $3.0 million or 0.24% of total assets as of September 30, 2019. The increase in nonperforming assets includes $9.5 million of purchased credit impaired loans resulting from the acquisition of UpState.

For the three months ended September 30, 2020, net interest income, on a fully taxable equivalent basis (fte), totaled $15,547,000, which represents an increase of $5,414,000 compared to the same period in 2019. A $493.2 million increase in average loans outstanding contributed to the increased income. Net interest margin (fte) for the 2020 period was 3.73% compared to 3.60% for the similar period in 2019. Net interest income (fte) for the nine months ended September 30, 2020 totaled $35,538,000, an increase of $5,992,000, compared to the similar period in 2019 due primarily to a higher volume of earning assets. The net interest margin (fte) year-to-date for the 2020 period was 3.51%, which equaled the 3.51% recorded in the same period of 2019. All increases reflect the benefits derived from the acquisition of UpState.

Other income for the three months ended September 30, 2020 totaled $2,072,000 compared to $1,882,000 for the similar period in 2019. The increase can be attributed to a higher level of service charges and a $149,000 increase in gains recognized on the sale of loans. For the nine months ended September 30, 2020, other income totaled $5,119,000 compared to $5,083,000 in the 2019 period.

Other expenses totaled $9,380,000 for the three months ended September 30, 2020, compared to $6,791,000 in the similar period of 2019. The higher level of expense

during the 2020 period includes costs related to the acquisition of UpState and the operations of four additional community offices acquired in the UpState acquisition. For the nine months ended September 30, 2020, other expenses totaled $24,531,000 compared to $20,224,000 for the similar period in 2019. The increase includes $1,983,000 of merger related expenses and increases related to the operation of four additional community offices.

Mr. Critelli commented, “Our results for the first nine months of 2020 have been significantly impacted by our efforts to assist our customers during the COVID-19 pandemic, restrictions on business activity and the costs associated with our acquisition of UpState New York Bancorp, Inc. During the third quarter, we have begun to realize the anticipated benefits of the acquisition through increased net interest income. Our balance sheet reflects the full impact of the UpState acquisition, resulting in a Company with over $1.8 billion of total assets, $1.4 billion of loans and $1.5 billion of deposits. We appreciate the opportunity to serve our Wayne Bank customers and our new customers at the Bank of the Finger Lakes and Bank of Cooperstown locations. We continue to search out opportunities available to us as we service our growing base of stockholders and customers.”

Norwood Financial Corp is the parent company of Wayne Bank, which operates from fifteen offices throughout Northeastern Pennsylvania and sixteen offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, 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 risks and uncertainty posed by, and the effect and impact of, the COVID-19 pandemic on the economy and the Company’s results of operation and financial condition, 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 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%. 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 taxable equivalent basis:

	Three months ended				Nine months ended
(dollars in thousands)	September 30				September 30
	2020		2019		2020		2019
Net interest income	$	15,330	$	9,891	$	34,862	$	28,773
Tax equivalent basis adjustment using 21% marginal tax rate		217		242		676		773
Net interest income on a fully taxable equivalent basis	$	15,547	$	10,133	$	35,538	$	29,546

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						Nine months ended
	September 30						September 30
(dollars in thousands)	2020			2019			2020			2019
Average equity	$	187,478		$	134,037		$	157,695		$	129,367
Average goodwill and other intangibles		(17,800	)		(11,597	)		(13,643	)		(11,623	)
Average tangible equity	$	169,678		$	122,440		$	144,052		$	117,744

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)

	September 30
	2020			2019
ASSETS
Cash and due from banks	$	23,874		$	20,067
Interest-bearing deposits with banks		100,566			848
Cash and cash equivalents		124,440			20,915
Securities available for sale		197,436			211,199
Loans receivable		1,414,662			905,582
Less: Allowance for loan losses		11,674			8,405
Net loans receivable		1,402,988			897,177
Regulatory stock, at cost		3,876			3,137
Bank premises and equipment, net		18,124			13,927
Bank owned life insurance		39,400			38,562
Foreclosed real estate owned		965			1,572
Accrued interest receivable		6,104			3,726
Goodwill		30,213			11,331
Other intangible assets		565			257
Other assets		17,996			14,053
TOTAL ASSETS	$	1,842,107		$	1,215,856
LIABILITIES
Deposits:
Non-interest bearing demand	$	372,237		$	231,211
Interest-bearing		1,143,685			743,222
Total deposits		1,515,922			974,433
Short-term borrowings		69,294			52,778
Other borrowings		46,438			35,906
Accrued interest payable		2,194			2,623
Other liabilities		17,712			15,222
TOTAL LIABILITIES		1,651,560			1,080,962
STOCKHOLDERS’ EQUITY
Preferred Stock, no par value per share, authorized 5,000,000 shares		—			—
Common Stock, $.10 par value per share, authorized: 20,000,000 shares, issued: 2020: 8,210,982 shares, 2019: 6,314,688 shares		821			632
Surplus		95,108			49,052
Retained earnings		90,422			84,522
Treasury stock, at cost: 2020: 13,778 shares, 2019: 13,807 shares		(469	)		(455	)
Accumulated other comprehensive income		4,665			1,143
TOTAL STOCKHOLDERS’ EQUITY		190,547			134,894
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,842,107		$	1,215,856

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,
	2020		2019			2020		2019
INTEREST INCOME
Loans receivable, including fees	$	16,260	$	10,776		$	37,711	$	31,074
Securities		1,031		1,278			3,272		4,155
Other		18		5			43		70
Total Interest income		17,309		12,059			41,026		35,299
INTEREST EXPENSE
Deposits		1,676		1,787			5,096		5,355
Short-term borrowings		61		135			244		344
Other borrowings		242		246			824		827
Total Interest expense		1,979		2,168			6,164		6,526
NET INTEREST INCOME		15,330		9,891			34,862		28,773
PROVISION FOR LOAN LOSSES		1,850		300			3,850		1,050
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		13,480		9,591			31,012		27,723
OTHER INCOME
Service charges and fees		1,301		1,200			3,201		3,283
Income from fiduciary activities		205		167			533		454
Net realized gains on sales of securities		33		169			71		233
Gains on sales of loans, net		164		15			285		125
Earnings and proceeds on life insurance policies		217		222			638		630
Other		152		109			391		358
Total other income		2,072		1,882			5,119		5,083
OTHER EXPENSES
Salaries and employee benefits		4,812		3,667			11,878		10,915
Occupancy, furniture and equipment		1,109		916			2,983		2,780
Data processing and related operations		746		480			1,649		1,400
Taxes, other than income		214		179			641		520
Professional fees		292		276			735		752
FDIC Insurance assessment		144		(5	)		186		150
Foreclosed real estate		31		24			44		37
Amortization of intangibles		35		23			79		79
Merger related		386		—			1,983		—
Other		1,611		1,231			4,353		3,591
Total other expenses		9,380		6,791			24,531		20,224
INCOME BEFORE TAX		6,172		4,682			11,600		12,582
INCOME TAX EXPENSE		1,173		775			2,033		1,963
NET INCOME	$	4,999	$	3,907		$	9,567	$	10,619
Basic earnings per share	$	0.62	$	0.62		$	1.39	$	1.70
Diluted earnings per share	$	0.62	$	0.62		$	1.39	$	1.68

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended September 30	2020			2019
Net interest income	$	15,330		$	9,891
Net income		4,999			3,907
Net interest spread (fully taxable equivalent)		3.55	%		3.35	%
Net interest margin (fully taxable equivalent)		3.73	%		3.60	%
Return on average assets		1.11	%		1.27	%
Return on average equity		10.64	%		11.56	%
Return on average tangible equity		11.75	%		12.66	%
Basic earnings per share	$	0.62		$	0.62
Diluted earnings per share	$	0.62		$	0.62
For the Nine Months Ended September 30	2020			2019
Net interest income	$	34,862		$	28,773
Net income		9,567			10,619
Net interest spread (fully taxable equivalent)		3.30	%		3.26	%
Net interest margin (fully taxable equivalent)		3.51	%		3.51	%
Return on average assets		0.88	%		1.17	%
Return on average equity		8.13	%		10.97	%
Return on average tangible equity		8.90	%		12.06	%
Basic earnings per share	$	1.39		$	1.70
Diluted earnings per share	$	1.39		$	1.68
As of September 30	2020			2019
Total assets	$	1,842,107		$	1,215,856
Total loans receivable		1,414,662			905,582
Allowance for loan losses		11,674			8,405
Total deposits		1,515,922			974,433
Stockholders’ equity		190,547			134,894
Trust assets under management		155,166			160,230
Book value per share	$	23.30		$	21.41
Tangible book value per share	$	19.55		$	19.57
Equity to total assets		10.34	%		11.09	%
Allowance to total loans receivable		0.83	%		0.93	%
Nonperforming loans to total loans		0.89	%		0.15	%
Nonperforming assets to total assets		0.74	%		0.24	%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

	September 30 2020		June 30 2020		March 31 2020		December 31 2019		September 30 2019
ASSETS
Cash and due from banks	$	23,874	$	15,387	$	14,712	$	15,038	$	20,067
Interest-bearing deposits with banks		100,566		67,989		23,706		377		848
Cash and cash equivalents		124,440		83,376		38,418		15,415		20,915
Securities available for sale		197,436		196,735		196,998		210,205		211,199
Loans receivable		1,414,662		988,679		928,565		924,581		905,582
Less: Allowance for loan losses		11,674		10,312		9,088		8,509		8,405
Net loans receivable		1,402,988		978,367		919,477		916,072		897,177
Regulatory stock, at cost		3,876		3,677		3,770		4,844		3,137
Bank owned life insurance		39,400		39,183		38,971		38,763		38,562
Bank premises and equipment, net		18,124		14,040		14,071		14,228		13,927
Foreclosed real estate owned		965		965		1,077		1,556		1,572
Goodwill and other intangibles		30,778		11,522		11,543		11,566		11,588
Other assets		24,100		26,676		17,966		17,961		17,779
TOTAL ASSETS	$	1,842,107	$	1,354,541	$	1,242,291	$	1,230,610	$	1,215,856
LIABILITIES
Deposits:
Non-interest bearing demand	$	372,237	$	284,754	$	213,359	$	207,299	$	231,211
Interest-bearing deposits		1,143,685		801,484		776,801		750,230		743,222
Total deposits		1,515,922		1,086,238		990,160		957,529		974,433
Borrowings		115,732		106,027		92,006		118,694		88,684
Other liabilities		19,906		19,612		17,938		16,959		17,845
TOTAL LIABILITIES		1,651,560		1,211,877		1,100,104		1,093,182		1,080,962
STOCKHOLDERS’ EQUITY		190,547		142,664		142,187		137,428		134,894
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY	$	1,842,107	$	1,354,541	$	1,242,291	$	1,230,610	$	1,215,856

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

Three months ended	September 30 2020			June 30 2020			March 31 2020			December 31 2019			September 30 2019
INTEREST INCOME
Loans receivable, including fees	$	16,260		$	10,767		$	10,683		$	10,815		$	10,776
Securities		1,031			1,063			1,179			1,159			1,278
Other		18			19			6			11			5
Total interest income		17,309			11,849			11,868			11,985			12,059
INTEREST EXPENSE
Deposits		1,676			1,630			1,790			1,784			1,787
Borrowings		303			352			413			368			381
Total interest expense		1,979			1,982			2,203			2,152			2,168
NET INTEREST INCOME		15,330			9,867			9,665			9,833			9,891
PROVISION FOR LOAN LOSSES		1,850			1,300			700			200			300
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		13,480			8,567			8,965			9,633			9,591
OTHER INCOME
Service charges and fees		1,301			837			1,063			1,168			1,200
Income from fiduciary activities		205			175			153			156			167
Net realized gains on sales of securities		33			—			38			21			169
Gains on sales of loans, net		164			65			56			44			15
Earnings and proceeds on life insurance policies		217			212			208			200			222
Other		152			103			136			107			109
Total other income		2,072			1,392			1,654			1,696			1,882
OTHER EXPENSES
Salaries and employee benefits		4,812			3,289			3,777			3,740			3,667
Occupancy, furniture and equipment, net		1,109			906			968			938			916
Foreclosed real estate		31			(2	)		16			9			24
FDIC insurance assessment		144			42			—			3			(5	)
Merger related		386			1,597			—			—			—
Other		2,898			2,260			2,298			2,398			2,189
Total other expenses		9,380			8,092			7,059			7,088			6,791
INCOME BEFORE TAX		6,172			1,867			3,560			4,241			4,682
INCOME TAX EXPENSE		1,173			379			481			645			775
NET INCOME	$	4,999		$	1,488		$	3,079		$	3,596		$	3,907
Basic earnings per share	$	0.62		$	0.24		$	0.49		$	0.57		$	0.62
Diluted earnings per share	$	0.62		$	0.24		$	0.49		$	0.57		$	0.62
Book Value per share	$	23.30		$	22.62		$	22.52		$	21.67		$	21.41
Tangible Book Value per share		19.55			20.80			20.70			19.84			19.57
Return on average assets (annualized)		1.11	%		0.45	%		1.01	%		1.18	%		1.27	%
Return on average equity (annualized)		10.64	%		4.17	%		8.79	%		10.42	%		11.56	%
Return on average tangible equity (annualized)		11.75	%		4.54	%		9.57	%		11.38	%		12.66	%
Net interest spread (fte)		3.55	%		3.03	%		3.23	%		3.33	%		3.35	%
Net interest margin (fte)		3.73	%		3.25	%		3.48	%		3.59	%		3.60	%
Allowance for loan losses to total loans		0.83	%		1.04	%		0.98	%		0.92	%		0.93	%
Net charge-offs to average loans (annualized)		0.14	%		0.03	%		0.05	%		0.04	%		0.05	%
Nonperforming loans to total loans		0.89	%		0.30	%		0.30	%		0.09	%		0.15	%
Nonperforming assets to total assets		0.74	%		0.29	%		0.31	%		0.19	%		0.24	%