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 27, 2021 – 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, 2020 of $5,513,000 compared to $3,596,000 earned in the corresponding 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. For the year ended December 31, 2020 net income totaled $15,080,000, an increase of $865,000 from the $14,215,000 earned in the prior year. The increase reflects the benefits derived from the acquisition of UpState, which offset a $4,200,000 increase in the provision for loan losses and $2,049,000 of merger related expenses.

Earnings per share (fully diluted) were $0.67 and $0.57 for the three-month period ended December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, earnings per share on a fully diluted basis were $2.09, compared to $2.25 for the year ended December 31, 2019. For the year ended December 31, 2020, the return on average assets was 0.97%, and the return on average equity was 9.06%, compared to 1.18% and 10.83%, respectively, for the year ended December 31, 2019.

Total assets were $1.852 billion as of December 31, 2020. Loans receivable totaled $1.411 billion as of December 31, 2020, with total deposits of $1.535 billion and stockholders’ equity of $194.8 million as of December 31, 2020.

Loans receivable increased $486.2 million from the prior year-end due primarily to the $420 million of loan balances acquired from UpState and $66 million of Paycheck Protection Program (“PPP”) loans originated during the year ended December 31, 2020. For the three months and year ended December 31, 2020, net charge-offs totaled $125,000 and $809,000, respectively, compared to $96,000 and $1,194,000, respectively, for the corresponding periods in 2019.

Net interest income, on a fully taxable equivalent basis (fte), totaled $15,821,000 for the three months ended December 31, 2020, an increase of $5,755,000 compared to the same period in 2019. For the year ended December 31, 2020, net interest income (fte) totaled $51,359,000, an increase of $11,747,000 compared to 2019 due primarily to the higher volume of earning assets, including a $292.0 million increase in average loans outstanding.

Other income for the three months ended December 31, 2020 totaled $2,661,000 compared to $1,696,000 for the similar period in 2019. Gains on the sale of loans and securities increased $176,000, while all other items of other income increased $789,000 in the aggregate due primarily to service charges and fees related to the acquisition of UpState. Other income for the year ended December 31, 2020 totaled $7,780,000 compared to $6,778,000 in 2019, an increase of $1,002,000 due primarily to a $665,000 increase in service charges and fees. Gains on the sale of loans and investment securities increased $175,000 in the aggregate, while all other items of other income increased $165,000, net.

Other expenses totaled $9,909,000 for the three months ended December 31, 2020, compared to $7,088,000 in the similar period of 2019. The $2,821,000 increase reflects the costs of the operations acquired from UpState. For the year ended December 31, 2020, other expenses totaled $34,440,000 compared to $27,311,000 for 2019, an increase of $7,129,000. The increase reflects the costs of operations acquired from UpState, including four new Community Offices, and $2,049,000 of merger related expenses.

Mr. Critelli commented, “Our results for the 2020 year 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 and the revenue generated by our acquisition of UpState New York Bancorp, Inc. 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. Our cash dividend of $0.26 per share declared in the fourth quarter of 2020 represents a 4.0% increase over the same period of last year. 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 fourteen 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 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 and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income to net interest income on a fully tax-equivalent basis:

(dollars in thousands)	Three months ended December 31				Year ended December 31
	2020		2019		2020		2019
Net interest income	$	15,614	$	9,833	$	50,476	$	38,606
Tax equivalent basis adjustment using 21% marginal tax rate		207		233		883		1,006
Net interest income on a fully taxable equivalent basis	$	15,821	$	10,066	$	51,359	$	39,612

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 December 31,						Year ended December 31,
(dollars in thousands)	2020			2019			2020			2019
Average equity	$	193,740		$	136,920		$	166,427		$	131,271
Average goodwill and other Intangibles		(30,747	)		(11,575	)		(17,942	)		(11,611	)
Average tangible equity	$	162,993		$	125,345		$	148,485		$	119,660

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
	2020			2019
ASSETS
Cash and due from banks	$	19,445		$	15,038
Interest-bearing deposits with banks		92,248			377
Cash and cash equivalents		111,693			15,415
Securities available for sale		226,586			210,205
Loans receivable		1,410,732			924,581
Less: Allowance for loan losses		13,150			8,509
Net loans receivable		1,397,582			916,072
Regulatory stock, at cost		3,981			4,844
Bank premises and equipment, net		17,814			14,228
Bank owned life insurance		39,608			38,763
Foreclosed real estate owned		965			1,556
Accrued interest receivable		6,232			3,719
Goodwill		29,290			11,331
Other intangible assets		530			235
Other assets		17,583			14,242
TOTAL ASSETS	$	1,851,864		$	1,230,610
LIABILITIES
Deposits:
Non-interest bearing demand	$	359,559		$	207,299
Interest-bearing		1,175,826			750,230
Total deposits		1,535,385			957,529
Short-term borrowings		63,303			62,256
Other borrowings		42,459			56,438
Accrued interest payable		1,601			2,432
Other liabilities		14,331			14,527
TOTAL LIABILITIES		1,657,079			1,093,182
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: 8,236,331 shares, 2019: 6,340,563 shares		824			634
Surplus		95,388			49,471
Retained earnings		93,796			86,536
Treasury stock, at cost: 2020: 10,263 shares, 2019: 12,007 shares		(342	)		(400	)
Accumulated other comprehensive income		5,119			1,187
TOTAL STOCKHOLDERS’ EQUITY		194,785			137,428
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$1,851,864			$1,230,610

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,
	2020		2019		2020		2019
INTEREST INCOME
Loans receivable, including fees	$	16,336	$	10,815	$	54,046	$	41,889
Securities		1,064		1,159		4,337		5,314
Other		29		11		72		81
Total Interest income		17,429		11,985		58,455		47,284
INTEREST EXPENSE
Deposits		1,514		1,784		6,610		7,139
Short-term borrowings		81		124		325		468
Other borrowings		220		244		1,044		1,071
Total Interest expense		1,815		2,152		7,979		8,678
NET INTEREST INCOME		15,614		9,833		50,476		38,606
PROVISION FOR LOAN LOSSES		1,600		200		5,450		1,250
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		14,014		9,633		45,026		37,356
OTHER INCOME
Service charges and fees		1,913		1,168		5,115		4,450
Income from fiduciary activities		150		156		682		610
Net realized gains on sales of securities		—		21		71		254
Gains on sales of loans, net		241		44		527		169
Earnings and proceeds on life insurance policies		208		200		845		830
Other		149		107		540		465
Total other income		2,661		1,696		7,780		6,778
OTHER EXPENSES
Salaries and employee benefits		5,243		3,740		17,121		14,655
Occupancy, furniture and equipment		1,165		938		4,148		3,719
Data processing and related operations		808		469		2,457		1,869
Taxes, other than income		356		232		997		751
Professional fees		328		362		1,062		1,113
FDIC Insurance assessment		213		3		399		153
Foreclosed real estate		8		9		53		45
Amortization of intangibles		35		22		114		101
Merger related		66		—		2,049		—
Other		1,687		1,313		6,040		4,905
Total other expenses		9,909		7,088		34,440		27,311
INCOME BEFORE TAX		6,766		4,241		18,366		16,823
INCOME TAX EXPENSE		1,253		645		3,286		2,608
NET INCOME	$	5,513	$	3,596	$	15,080	$	14,215
Basic earnings per share	$	0.67	$	0.57	$	2.09	$	2.27
Diluted earnings per share	$	0.67	$	0.57	$	2.09	$	2.25

NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended December 31	2020			2019
Net interest income	$	15,614		$	9,833
Net income		5,513			3,596
Net interest spread (fully taxable equivalent)		3.50	%		3.33	%
Net interest margin (fully taxable equivalent)		3.65	%		3.59	%
Return on average assets		1.18	%		1.18	%
Return on average equity		11.32	%		10.42	%
Return on average tangible equity		13.46	%		11.38	%
Basic earnings per share	$	0.67		$	0.57
Diluted earnings per share	$	0.67		$	0.57
For the Twelve Months Ended December 31	2020			2019
Net interest income	$	50,476		$	38,606
Net income		15,080			14,215
Net interest spread (fully taxable equivalent)		3.36	%		3.28	%
Net interest margin (fully taxable equivalent)		3.55	%		3.53	%
Return on average assets		0.97	%		1.18	%
Return on average equity		9.06	%		10.83	%
Return on average tangible equity		10.16	%		11.88	%
Basic earnings per share	$	2.09		$	2.27
Diluted earnings per share	$	2.09		$	2.25
As of December 31	2020			2019
Total assets	$	1,851,864		$	1,230,610
Total loans receivable		1,410,732			924,581
Allowance for loan losses		13,150			8,509
Total deposits		1,535,385			957,529
Stockholders’ equity		194,785			137,428
Trust assets under management		168,085			170,685
Book value per share	$	23.72		$	21.67
Tangible book value per share	$	20.10		$	19.84
Equity to total assets		10.52	%		11.17	%
Allowance to total loans receivable		0.93	%		0.92	%
Nonperforming loans to total loans		0.85	%		0.09	%
Nonperforming assets to total assets		0.70	%		0.19	%

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

	December 31		September 30		June 30		March 31		December 31
	2020		2020		2020		2020		2019
ASSETS
Cash and due from banks	$	19,445	$	23,874	$	15,387	$	14,712	$	15,038
Interest-bearing deposits with banks		92,248		100,566		67,989		23,706		377
Cash and cash equivalents		111,693		124,440		83,376		38,418		15,415
Securities available for sale		226,586		197,436		196,735		196,998		210,205
Loans receivable		1,410,732		1,414,662		988,679		928,565		924,581
Less: Allowance for loan losses		13,150		11,674		10,312		9,088		8,509
Net loans receivable		1,397,582		1,402,988		978,367		919,477		916,072
Regulatory stock, at cost		3,981		3,876		3,677		3,770		4,844
Bank owned life insurance		39,608		39,400		39,183		38,971		38,763
Bank premises and equipment, net		17,814		18,124		14,040		14,071		14,228
Foreclosed real estate owned		965		965		965		1,077		1,556
Goodwill and other intangibles		29,820		30,778		11,522		11,543		11,566
Other assets		23,815		24,100		26,676		17,966		17,961
TOTAL ASSETS	$	1,851,864	$	1,842,107	$	1,354,541	$	1,242,291	$	1,230,610
LIABILITIES
Deposits:
Non-interest bearing demand	$	359,559	$	372,237	$	284,754	$	213,359	$	207,299
Interest-bearing deposits		1,175,826		1,143,685		801,484		776,801		750,230
Total deposits		1,535,385		1,515,922		1,086,238		990,160		957,529
Borrowings		105,762		115,732		106,027		92,006		118,694
Other liabilities		15,932		19,906		19,612		17,938		16,959
TOTAL LIABILITIES		1,657,079		1,651,560		1,211,877		1,100,104		1,093,182
STOCKHOLDERS’ EQUITY		194,785		190,547		142,664		142,187		137,428
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,851,864	$	1,842,107	$	1,354,541	$	1,242,291	$	1,230,610

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

	December 31			September 30			June 30			March 31			December 31
Three months ended	2020			2020			2020			2020			2019
INTEREST INCOME
Loans receivable, including fees	$	16,336		$	16,260		$	10,767		$	10,683		$	10,815
Securities		1,064			1,031			1,063			1,179			1,159
Other		29			18			19			6			11
Total interest income		17,429			17,309			11,849			11,868			11,985
INTEREST EXPENSE
Deposits		1,514			1,676			1,630			1,790			1,784
Borrowings		301			303			352			413			368
Total interest expense		1,815			1,979			1,982			2,203			2,152
NET INTEREST INCOME		15,614			15,330			9,867			9,665			9,833
PROVISION FOR LOAN LOSSES		1,600			1,850			1,300			700			200
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		14,014			13,480			8,567			8,965			9,633
OTHER INCOME
Service charges and fees		1,913			1,301			837			1,063			1,168
Income from fiduciary activities		150			205			175			153			156
Net realized gains on sales of securities		—			33			—			38			21
Gains on sales of loans, net		241			164			65			56			44
Earnings and proceeds on life insurance policies		208			217			212			208			200
Other		149			152			103			136			107
Total other income		2,661			2,072			1,392			1,654			1,696
OTHER EXPENSES
Salaries and employee benefits		5,243			4,812			3,289			3,777			3,740
Occupancy, furniture and equipment, net		1,165			1,109			906			968			938
Foreclosed real estate		8			31			(2	)		16			9
FDIC insurance assessment		213			144			42			—			3
Merger related		66			386			1,597			—			—
Other		3,214			2,898			2,260			2,298			2,398
Total other expenses		9,909			9,380			8,092			7,059			7,088
INCOME BEFORE TAX		6,766			6,172			1,867			3,560			4,241
INCOME TAX EXPENSE		1,253			1,173			379			481			645
NET INCOME	$	5,513		$	4,999		$	1,488		$	3,079		$	3,596
Basic earnings per share	$	0.67		$	0.62		$	0.24		$	0.49		$	0.57
Diluted earnings per share	$	0.67		$	0.62		$	0.24		$	0.49		$	0.57
Book Value per share	$	23.72		$	23.30		$	22.62		$	22.52		$	21.67
Tangible Book Value per share		20.10			19.55			20.80			20.70			19.84
Return on average assets (annualized)		1.18	%		1.11	%		0.45	%		1.01	%		1.18	%
Return on average equity (annualized)		11.32	%		10.64	%		4.17	%		8.79	%		10.42	%
Return on average tangible equity (annualized)		13.46	%		11.75	%		4.54	%		9.57	%		11.38	%
Net interest spread (fte)		3.50	%		3.55	%		3.03	%		3.23	%		3.33	%
Net interest margin (fte)		3.65	%		3.73	%		3.25	%		3.48	%		3.59	%
Allowance for loan losses to total loans		0.93	%		0.83	%		1.04	%		0.98	%		0.92	%
Net charge-offs to average loans (annualized)		0.04	%		0.14	%		0.03	%		0.05	%		0.04	%
Nonperforming loans to total loans		0.85	%		0.89	%		0.30	%		0.30	%		0.09	%
Nonperforming assets to total assets		0.70	%		0.74	%		0.29	%		0.31	%		0.19	%