SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)

[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarter period ended March 31, 2001
                                  --------------

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                     to
                                ------------------    --------------------------

Commission file number   0-28366
                      -----------

                             Norwood Financial Corp.
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Pennsylvania                                 23-2828306
- -------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. employer identification no.)
incorporation or organization)

717 Main Street, Honesdale, Pennsylvania                        18431
- --------------------------------------------------------------------------------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code   (717)253-1455
                                                     -------------

                                      N/A
- --------------------------------------------------------------------------------
Former  name,  former  address and former  fiscal  year,  if changed  since last
report.

         Indicated by check (x) whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

          Class                              Outstanding as of April 30, 2001
- ---------------------------------------      -----------------------------------
common stock, par value $0.10 per share                1,746,633



                             NORWOOD FINANCIAL CORP.
                                    FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2001
                                      INDEX

                                                                          Page
                                                                          Number

Part I  - CONSOLIDATED FINANCIAL INFORMATION OF NORWOOD
          FINANCIAL CORP.

Item 1.   Financial Statements                                                 3
Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                            8
Item 3    Qualitative and Quantitative Disclosures about market risk          15

Part II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                   16
Item 2.   Changes in Securities                                               16
Item 3.   Defaults upon Senior Securities                                     16
Item 4.   Submission of Matters to a Vote of Security Holders                 16
Item 5.   Other Materially Important Events                                   16
Item 6.   Exhibits and Reports on Form 8-K                                    17

Signatures                                                                    18


                                       2


PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements
- ----------------------------
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)



                                                              March 31,   December 31,
                                                                 2001         2000
                                                              ---------    ---------
                                                                   
ASSETS
    Cash and due from banks                                   $   6,239    $   8,991
    Interest bearing deposits with banks                            196          153
    Federal funds sold                                            1,700        2,550
                                                              ---------    ---------
       Cash and cash equivalents                                  8,135       11,694

    Securities available for sale                                79,699       79,646
    Securities held to maturity, fair value 2001
      $7,852, 2000 $7,786                                         7,486        7,484
    Loans receivable (net of unearned income)                   214,827      216,477
     Less: Allowance for loan losses                              3,260        3,300
                                                              ---------    ---------
   Net loans receivable                                         211,567      213,177
    Bank premises and equipment, net                              6,234        6,201
    Other real estate                                                27           27
    Accrued interest receivable                                   1,885        1,983
    Other assets                                                  5,855        6,519
                                                              ---------    ---------
       TOTAL ASSETS                                           $ 320,888    $ 326,731
                                                              =========    =========
LIABILITIES
    Deposits:
       Non-interest bearing demand                            $  27,941    $  28,688
      Interest-bearing deposits                                 219,857      224,271
                                                              ---------    ---------
          Total deposits                                        247,798      252,959
       Short-term borrowings                                      6,558        7,860
      Long-term debt                                             28,000       28,000
      Accrued interest payable                                    2,859        3,128
      Other liabilities                                           3,105        3,414
                                                              ---------    ---------
TOTAL LIABILITIES                                               288,320      295,361

STOCKHOLDERS' EQUITY
 Common Stock, $.10 par value, authorized 10,000,000 shares
        issued 1,803,824 shares                                     180          180
    Surplus                                                       4,639        4,629
    Retained earnings                                            29,075       28,441
    Treasury stock, at cost (59,831 shares)                      (1,213)      (1,213)
    Unearned ESOP shares                                         (1,140)      (1,155)
    Accumulated other comprehensive income                        1,027          488
                                                              ---------    ---------
      TOTAL STOCKHOLDERS' EQUITY                                 32,568       31,370
                                                              ---------    ---------
      TOTAL LIABILITIES AND
             STOCKHOLDERS' EQUITY                             $ 320,888    $ 326,731
                                                              =========    =========


See accompanying notes to the unaudited consolidated financial statements

                                       3


NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)

                                             Three Months Ended
                                                   March 31
                                               ---------------
                                                 2001     2000
                                               ------   ------
   INTEREST INCOME
   Loans receivable including fees             $4,674   $4,309
   Securities                                   1,356    1,402
   Other                                           12        7
                                               ------   ------
   Total interest income                        6,042    5,718
INTEREST EXPENSE
   Deposits                                     2,263    2,066
   Short-term borrowings                           70       82
   Long-term debt                                 423      451
                                               ------   ------
 Total interest expense                         2,756    2,599
                                               ------   ------
NET INTEREST INCOME                             3,286    3,119
PROVISION FOR LOAN LOSSES                         170       95
                                               ------   ------
  NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES                     3,116    3,024

OTHER INCOME
   Service charges and fees                       418      364
   Income from fiduciary activities                83       67
   Net realized gains on sales of securities       11        1
   Other                                          154      146
                                               ------   ------
       Total other income                         666      578

OTHER EXPENSES
   Salaries and employee benefits               1,156    1,074
   Occupancy, furniture & equipment, net          335      320
   Data processing related                        124       94
   Losses on lease residuals                      180      181
   Taxes, other than income                        71       66
   Professional fees                               50       71
   Other                                          534      564
                                               ------   ------
        Total other expenses                    2,450    2,370

INCOME BEFORE INCOME TAXES                      1,332    1,232
INCOME TAX EXPENSE                                363      344
                                               ------   ------
NET INCOME                                     $  969   $  888
                                               ======   ======

BASIC AND DILUTED
   EARNINGS PER SHARE                          $ 0.58   $ 0.53
                                               ======   ======

Dividends per share                            $ 0.20   $ 0.17
                                               ======   ======

See accompanying notes to the unaudited consolidated financial statements.

                                       4



NORWOOD FINANCIAL CORP.
Consolidated Statement of Changes in Stockholders' Equity (unaudited)
(dollars in thousands)



                                                                                                       Accumulated
                                                                                           Unearned    Other
                                                 Common             Retained   Treasury    ESOP        Comprehensive
                                                 Stock    Surplus   Earnings    Stock      Shares      Income (loss)    Total
                                                 -----    -------   --------    -----      ------      -------------    -----
                                                                                                
Balance, December 31, 1999                        $180     $4,603    $25,763   ($1,214)    ($1,359)      ($1,319)      $26,654

Comprehensive income:
  Net Income                                                             888                                               888
  Net change in unrealized gains (losses)
   on securities available for sale, net of
   reclassification adjustment and tax effects                                                              (303)         (303)
                                                                                                                       -------
Total comprehensive income                                                                                                 585
                                                                                                                       -------
Cash dividends declared, $.17 per share                                 (283)                                             (283)
Release of earned ESOP shares                                   8                               29                          37
                                                  ----     ------    -------   -------     -------       -------       -------
Balance, March 31, 2000                           $180     $4,611    $26,368   ($1,214)    ($1,330)      ($1,622)      $26,993
                                                  ====     ======    =======   =======     =======       =======       =======


See accompanying notes to the unaudited financial statements


NORWOOD FINANCIAL CORP.
Consolidated Statement of Changes in Stockholders' Equity (unaudited)
(dollars in thousands)



                                                                                                       Accumulated
                                                                                           Unearned    Other
                                                 Common             Retained   Treasury    ESOP        Comprehensive
                                                 Stock    Surplus   Earnings    Stock      Shares      Income (loss)    Total
                                                 -----    -------   --------    -----      ------      -------------    -----
                                                                                               
Balance, December 31, 2000                        $180     $4,629    $28,441   ($1,213)    ($1,155)         $488       $31,370

Comprehensive income:
  Net Income                                                             969                                               969
  Net change in unrealized gains (losses)
   on securities available for sale, net of
   reclassification adjustment and tax effects                                                               539           539
                                                                                                                       -------
Total comprehensive income                                                                                               1,508
                                                                                                                       -------
Cash dividends declared, $.20 per share                                 (335)                                             (335)
Release of earned ESOP shares                                  10                               15                          25
                                                  ----     ------    -------   -------     -------        ------       -------
Balance, March 31, 2001                           $180     $4,639    $29,075   ($1,213)    ($1,140)       $1,027       $32,568
                                                  ====     ======    =======   =======     =======        ======       =======


See accompanying notes to the unaudited financial statements

                                       5


NORWOOD FINANCIAL CORP.
Consolidated Statements of Cashflows (Unaudited)
(dollars in thousands)



                                                            Three Months Ended March 31,
                                                            ----------------------------
                                                                  2001        2000
                                                                --------    --------
                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                      $    969    $    888
Adjustments to reconcile net income to net cash provided
   by operating activities:
  Provision for loan losses                                          170          95
  Depreciation                                                       156         169
  Amortization of intangible assets                                   44          44
  Deferred income taxes                                             (297)       (317)
  Net realized gain on sales of securities                           (11)         (1)
  Gain(loss) on sale of other real estate, net                         -           -
  Net gain on sale of mortgage loans and servicing                  (130)         (3)
  Mortgage loans originated for sale                              (1,270)       (463)
  Proceeds from sale of mortgage loans                             1,401         466
  Decrease (increase) in accrued interest receivable                  98         (99)
  Increase (decrease) in accrued interest payable                   (269)        117
  (Increase) in cash surrender value of life insurance               (42)        (41)
Other, net                                                           763         723
                                                                --------    --------
     Net cash provided by operating activities                     1,582       1,578
                                                                --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES
 Securities available for sale:
         Proceeds from sales                                       5,224       2,002
         Proceeds from maturities and principal reductions on
                  mortgage-backed securities                       9,995         971
         Purchases                                               (14,457)     (4,788)
  Net decrease (increase) in loans                                 1,089      (2,201)
 Purchase of bank premises and equipment, net                       (189)        (11)
 Proceeds from sales of other real estate                             30           -
                                                                --------    --------
                  Net cash used in investing activities            1,692      (4,027)

CASH FLOWS FROM FINANCING ACTIVITIES
 Net increase (decrease) in deposits                              (5,162)      2,353
 Net increase (decrease) in short term borrowings                 (4,302)     (1,846)
 Proceeds from other borrowings                                    3,000           -
 Release and (buyback) of ESOP shares                                (35)        (19)
 Cash dividends paid                                                (334)       (283)
                                                                --------    --------
         Net cash used in financing activities                    (6,833)        205
                                                                --------    --------
         (Decrease) in cash and cash equivalents                  (3,559)     (2,244)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                    11,694      10,798
                                                                --------    --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                        $  8,135    $  8,554
                                                                ========    ========


See accompanying notes to consolidated financial statement

                                       6


Notes to Unaudited Consolidated Financial Statements
- ----------------------------------------------------
1.       Basis of Presentation
         ---------------------
         The consolidated  financial  statements include the accounts of Norwood
Financial Corp. (Company) and its wholly-owned subsidiary, Wayne Bank (Bank) and
the Bank's wholly-owned subsidiaries, WCB Realty Corp., Norwood Investment Corp.
and  WTRO  Properties.  All  significant  intercompany  transactions  have  been
eliminated in consolidation.

2.       Estimate
         --------
         The  financial   statements  have  been  prepared  in  conformity  with
generally accepted accounting principles. 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
of the Company. The operating results for the three month period ended March 31,
2001 are not necessarily  indicative of the results that may be expected for the
year ended December 31, 2001 or any other future interim period.

         These  statements  should be read in conjunction  with the consolidated
financial  statements and related notes which are  incorporated  by reference in
the Company's Annual Report on Form 10-K for the year-ended December 31, 2000.

3.       Earnings Per Share
         ------------------
         Basic  earnings  per  share  represents   income  available  to  common
stockholders divided by the weighted average number of common shares outstanding
during the period.  Diluted earnings per share reflects additional common shares
that would have been  outstanding if dilutive  potential  common shares had been
issued,  as well as any  adjustment to income that would result from the assumed
issuance.  Potential  common  shares  that may be issued by the  Company  relate
solely to outstanding  stock options and are determined using the treasury stock
method.

4.       Cash Flow Information
         ---------------------
         For the purposes of  reporting  cash flows,  cash and cash  equivalents
include cash on hand,  amounts due from banks,  interest-bearing  deposits  with
banks and federal funds sold.

         Cash  payments for interest for the period March 31, 2001 and 2000 were
$3,025,000 and $2,482,000  respectively.  Cash payments for income taxes in 2001
were $132,000 compared to $406,000 in 2000. Non-cash investing activity for 2001
and 2000 included foreclosed mortgage loans transferred to real estate owned and
repossession of other assets of $330,000 and $222,000.

5.       Reclassification of Comparative Amounts
         ---------------------------------------
         Certain comparative amounts for the prior period have been reclassified
to conform to the current period's presentation.  Such reclassifications did not
affect net income.

                                       7


Item 2. Management Discussion and Analysis of Financial Condition and Results of
        Operations

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 interest  rates,  risks  associated  with the
effect of opening a new branch,  the ability to control costs and expenses,  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.

Changes in Financial Condition
- ------------------------------

General
- -------
         Total assets at March 31, 2001 were $320.9  million  compared to $326.7
million at year-end 2000.

Securities
- ----------
         The fair value of  securities  available for sale at March 31, 2001 was
$79.7 million,  compared to $79.6 million at December 31, 2000.  Total purchases
for the period were  $14,457,000  with  maturities  and principal  reductions of
$9,995,000 and sales of $5,224,000. (See cash flow).

Loans
- -----
         Total loans receivable,  which include automobile  leases,  were $214.8
million at March 31, 2001 compared to $216.5  million at December 31, 2000.  The
decrease  was  principally  due to $1.5  million  of  longer-term,  high  coupon
residential mortgages sold in the secondary market. There was a gain on the sale
of $45,000.  The Company also experienced a slow down in its indirect automobile
lending,  with the balance decreasing  $950,000 from December 31, 2000, to $55.2
million  at  March  31,  2001.  With  interest  rates  declining,   the  Company
anticipates additional mortgage lending activity in the second quarter of 2001.
         The Company no longer originates automobile leases, and as a result the
portfolio declined $1.9 million from December 31, 2000 to $11.8 million at March
31, 2001,  which  includes  residual  value of $9.4  million,  at March 31, 2001
declining  from $10.7 million at year-end.  The Company  liquidates its returned
off-lease  vehicles  through  various  used car dealers and  automobile  auction
centers. At March 31, 2001 the Company had an inventory of vehicles to liquidate
of $781,000.  Total losses  incurred on off-lease  vehicles was $105,000 for the
quarter.  The Company's reserve for future residual value losses was $475,000 at
March 31, 2001 increasing from $400,000 at December 31, 2000.

                                       8


         Set forth below is selected  data  relating to the  composition  of the
loan portfolio at the dates indicated:

Types of loans
(dollars in thousands)



                                            March  31, 2001         December 31, 2000
                                          -------------------      -------------------
                                              $            %           $            %
                                          --------      -----      --------   --------
                                                                  
Real Estate-Residential                   $ 56,969       26.5      $ 59,517       27.5
        Commercial                          60,614       28.2        56,815       26.2
        Construction                         2,222        1.0         2,425        1.1
Commercial, financial and agricultural      17,844        8.3        17,102        7.9
Consumer  loans to individuals              65,706       30.5        67,286       31.0
Lease financing, net of unearned income     11,770        5.5        13,644        6.3
                                          --------      -----      --------   --------
     Total loans                           215,125      100.0%      216,789      100.0%
Less:
  Unearned income and deferred fees            298                      312
  Allowance for loan losses                  3,260                    3,300
                                          --------                 --------
Total loans, net                          $211,567                 $213,177
                                          ========                 ========


Allowance for Loan Losses and Non-performing Assets
- ---------------------------------------------------

         Following is a summary of changes in the  allowance for loan losses for
the periods indicated:

                                   At or for the Three
(dollars in thousands)            Months Ended March 31
                                 -----------------------
                                     2001        2000
                                   -------     -------
Balance, beginning                 $ 3,300     $ 3,344
Provision for loan losses              170          95
Charge-offs                           (240)       (198)
Recoveries                              30         107
                                   -------     -------
Net charge-offs                       (210)        (91)
                                   -------     -------
Balance, ending                    $ 3,260     $ 3,348
                                   =======     =======

Allowance to total loans              1.52%       1.62%
Net charge-offs to average loans
    (annualized)                       .39%        .18%

           The  allowance for loan losses  totaled  $3,260,000 at March 31, 2001
and represented  1.52% of total loans,  compared to $3,300,000 at year-end,  and
$3,348,000 at March 31, 2000. Net  charge-offs  for the three month period ended
March 31, 2001, totaled $210,000 and consisted principally of losses on the sale
of  repossessed  automobiles.  With the  higher  level of net  charge-offs,  the
provision  for loan  losses  increased  to  $170,000  compared to $95,000 in the
similar period in 2000.  Management's loan review function assesses the adequacy
of the allowance for loan losses on a quarterly  basis.  The process  includes a
review of the risks inherent in the loan portfolio.  It includes a credit review
and gives

                                       9


consideration to areas of exposure such as concentration of credit, economic and
industry conditions,  trends in delinquencies,  collections and collateral value
coverage.  General  reserve  percentages  are identified by loan type and credit
grading and  allocated  accordingly.  Larger credit  exposures are  individually
analyzed. Management considers the allowance adequate at March 31, 2001 based on
the loan mix and level of  classifications.  However,  there can be no assurance
that the allowance for loan losses will be adequate to cover significant losses,
if any, that might be incurred in the future.

           At March 31, 2001,  non-performing  loans totaled $475,000,  which is
 .22% of total loans decreasing from $680,000, or .31% of total loans at December
31, 2000. The following table sets forth  information  regarding  non-performing
loans and other real estate owned at the date indicated:


(dollars in thousands)                        March 31, 2001   December 31, 2000
                                              --------------   -----------------
  Loans accounted for on a non-accrual
     basis:
  Commercial and all other                          $ 64              $ 64
  Real Estate                                        323               518
  Instalment                                          69               --
                                                    ----              ----
 Total                                               456               582

 Accruing loans which are contractually
    past due 90 days or more                          19                98
                                                    ----              ----
  Total non-performing loans                        $475              $680
  Other real estate owned                             27                27
                                                    ----              ----
  Total non-performing assets                       $502              $707
                                                    ====              ====
Allowance for loan losses as a
percent of non-performing loans                    686.3%            484.6%
Non-performing loans to total loans                  .22%              .31%
Non-performing assets to total assets                .16%              .22%


Deposits
- --------
           Total deposits at March 31, 2001 were $247.8 million compared to $253
million at December 31, 2000.  Non-interest bearing demand deposits at March 31,
2001 were $27.9  million  compared to $28.7  million at December 31,  2000.  The
change reflects a seasonal  decline in commercial and municipal  accounts.  Time
deposits in  denominations  of $100,000 or more  decreased  to $27.2  million at
March 31,  2001  from  $31.7  million  at  December  31,  2000 due to  scheduled
maturities of school  district and other municipal  deposits.  This decrease was
partially offset by growth in retail time deposits of $3.1 million. In addition,
the Company had $6.0 million of commercial cash management  accounts included in
short-term  borrowings,  which  represents  excess  funds  invested in overnight
securities, which the company considers core funding.

                                       10


Stockholders' Equity and Capital Ratios
- ---------------------------------------
           At March 31,2001, total stockholders' equity totaled $32.6 million, a
net  increase of $1.2  million  from  December  31,  2000.  The net  increase in
stockholders'  equity was  primarily  due to $969,000  in net  income,  that was
partially  offset  by  $324,000  of  dividend  payments.   In  addition,   other
comprehensive  income  increased  $539,000  due to  increase  in fair  value  of
securities in the available  for sale  portfolio.  This increse in fair value is
the result of decrease in interest rates,  which favorably  impacts the value of
the securities.  Because of interest rate volatility,  the Company's accumulated
other income  comprehensive  income could materially  fluctuate for each interim
and year-end period.

A comparison of the Company's capital ratios is as follows:

                                     March 31, 2001         December 31, 2000
                                     --------------         -----------------
Tier 1 Capital
    (To average assets)                    9.85%                  9.44%
Tier 1 Capital
    (To risk-weighted assets)             13.02%                 12.78%
Total Capital
    (To risk-weighted assets)             14.52%                 14.27%

           The minimum  capital  requirements  imposed by the FDIC for leverage,
Tier 1 and  Total  Capital  are 4%, 4% and 8%,  respectively.  The  Company  has
similar  capital  requirements  imposed by the Board of Governors of the Federal
Reserve System (FRB).  The Bank is also subject to more  stringent  Pennsylvania
Department of Banking (PDB) guidelines.  The Bank's capital ratios do not differ
significantly  from the  Company's  ratios.  Although not adopted in  regulation
form, the PDB utilizes  capital  standards  requiring a minimum of 6.5% leverage
capital and 10% total  capital.  The Company and the Bank were in  compliance in
FRB, FDIC and PDB capital requirements at March 31, 2001 and December 31, 2000.

                                       11


Results of Operation
NORWOOD FINANCIAL CORP.
Consolidated Average Balance Sheets with Resultant Interest and Rates
(Tax-Equivalent Basis, dollars in thousands)



                                                                              Three Months Ended March 31,
                                                         -----------------------------------------------------------------------
                                                                        2001                                    2000
                                                         ---------------------------------         -----------------------------
                                                         Average                    Average        Average                Average
                                                         Balance      Interest       Rate          Balance   Interest      Rate
                                                         -------      --------      ------         -------   --------     ------
                                                            (2)          (1)          (3)            (2)        (1)         (3)
                                                                                                       
Assets
Interest-earning assets:
   Federal funds sold                                   $    820       $   11         5.37%       $    532   $    7        5.26%
   Interest bearing deposits with banks                      104            1         3.85             265        1        1.51
   Securities held-to-maturity                             7,485          166         8.87           7,477      162        8.67
   Securities available for sale:
     Taxable                                              71,815        1,150         6.41          75,884    1,258        6.63
     Tax-exempt                                            8,169          146                        3,147       56        7.12
                                                        --------       ------         7.15        --------   ------
        Total securities available for sale               79,984        1,296         6.48          79,031    1,314        6.65
     Loans receivable (4) (5)                            215,735        4,681         8.68         206,798    4,323        8.36
                                                        --------       ------                     --------   ------
        Total interest earning assets                    304,128        6,155         8.10         294,103    5,807        7.90

Non-interest earning assets:
   Cash and due from banks                                 6,699                                     6,546
   Allowance for loan losses                              (3,264)                                   (3,372)
   Other assets                                           14,495                                    15,595
                                                        --------                                  --------
   Total non-interest earning assets                      17,930                                    18,769
                                                        --------                                  --------
Total Assets                                            $322,058                                  $312,872
                                                        ========                                  ========
Liabilities and Shareholders' Equity
Interest bearing liabilities:
   Interest bearing demand deposits                     $ 59,268          365        2.46%        $ 57,919      354      2.44%
   Savings                                                40,722          212        2.08           42,573      231      2.17
   Time                                                  119,914        1,686        5.62          113,948    1,481      5.20
                                                        --------       ------                     --------   ------
      Total interest bearing deposits                    219,904        2,263        4.12          214,440    2,066      3.85
Short-term borrowings                                      7,792           70        3.59            9,021       81      3.59
Long-term debt                                            29,243          423        5.79           30,440      451      5.93
                                                        --------       ------                     --------   ------
   Total interest bearing liabilities                    256,939        2,756        4.29          253,901    2,598      4.09

Non-interest bearing liabilities:
   Demand deposits                                        27,002                                    26,846
   Other liabilities                                       6,273                                     5,627
                                                        --------                                  --------
      Total non-interest bearing liabilities              33,275                                    32,473
   Shareholders' equity                                   31,844                                    26,498
                                                        --------                                  --------
Total Liabilities and Shareholders' Equity              $322,058                                  $312,872
                                                        ========                                  ========

Net interest income (tax equivalent basis)                              3,399        3.81%                    3,209      3.81%
                                                                                     ====                                ====
Tax-equivalent basis adjustment                                          (113)                                  (90)
                                                                      -------                                ------
Net interest income                                                   $ 3,286                                $3,119
                                                                      =======                                ======
Net interest margin (tax equivalent basis)                                           4.47%                               4.36%
                                                                                     ====                                ====

(1)  Interest  and  yields  are  presented  on a  tax-equivalent  basis  using a
     marginal tax rate of 34%.
(2)  Average balances have been calculated based on daily balances.
(3)  Annualized
(4)  Loan balances include non-accrual loans and are net of unearned income.
(5)  Loan yields  include the effect of  amortization  of deferred  fees, net of
     costs.

                                       12


Rate/Volume  Analysis.  The following  table shows the fully taxable  equivalent
effect of changes in volumes and rates on interest income and interest expense.

                               Increase/(Decrease)
                               -------------------
                  Three months ended March 31,2001 Compared to
                  --------------------------------------------
                        Three months ended March 31, 2000
                        ---------------------------------
                                 Variance due to
                                 ---------------


                                             Volume   Rate      Net
                                             -----------------------
                                             (dollars in thousands)

Assets
Interest earning assets:
 Federal funds sold ......................   $   4    $   -    $   4
 Interest bearing deposits with banks ....      (3)       3        -
 Securities held to maturity .............       -        4        4
 Securities available for sale:
    Taxable ..............................     (66)     (42)    (108)
    Tax-exempt securities ................      90        -       90
                                             -----    -----    -----
       Total securities ..................      24      (42)     (18)
 Loans receivable ........................     191      167      358
                                             -----    -----    -----
   Total interest earning assets .........     216      132      348

Interest bearing liabilities:
  Interest-bearing demand deposits .......       8        3       11
  Savings ................................     (10)      (9)     (19)
  Time ...................................      80      125      205
                                             -----    -----    -----
     Total interest bearing deposits .....      78      119      197
 Short-term borrowings ...................     (11)       -      (11)
Long Term debt ...........................     (17)     (11)     (28)
                                             -----    -----    -----
 Total interest bearing liabilities ......      50      108      158

Net interest income (tax-equivalent basis)   $ 165    $  25    $ 190
                                             =====    =====    =====


(1)  Changes in net interest income that could not be specifically identified as
     either a rate or volume change were allocated proportionately to changes in
     volume and changes in rate.

                                       13


Comparison of Operating  Results for Three Months Ended March 31, 2001 and March
- --------------------------------------------------------------------------------
31, 2000
- --------

General
- -------
           For the three months ended March 31, 2001 net income totaled $969,000
or $.58 per share  (basic and diluted)  compared to $888,000,  or $.53 per share
(basic and diluted) earned in the first quarter of 2000. The resulting return on
average  assets  and return on average  equity  for the  quarter  were 1.20% and
12.17%   respectively   compared  to  1.13%  and  13.40%  respectively  for  the
corresponding  period in 1999.  The Company paid  dividends of $.20 per share in
2001 compared to $.17 per share in 2000.

Net Interest Income
- -------------------
           Net  interest  income on a fully  taxable  basis  (fte) for the first
quarter of 2001 totaled  $3,339,000  compared to $3,209,000 in 2000, an increase
of $190,000 or 5.9%.  The  resultant  fte net  interest  spread and net interest
margin  for  the  three  months  ended  March  31,  2001  was  3.80%  and  4.47%
respectively, compared to 3.80% and 4.36% respectively in 2000.
           Interest income on an fte basis totaled  $6,155,000 for the period in
2001  increasing  $348,000 from  $5,807,000 in 2000. The increase was due to $10
million growth in average earning assets and improvement in the yield on earning
assets at 8.10% in 2001, and 7.90% in 2000.
           Securities  available  for sale  averaged  $80  million at a yield of
6.48% in 20001 compared to $79 million at a yield of 6.65% in 2000. The decrease
in yield is principally due to the lower interst rate environment in 2001.
           Loan  receivable  averaged  $215.7  million in 2001 at yield of 8.68%
compared to $206.8 million  yielding 8.36%. The increase in yield is due in part
to growth in higher yielding  commercial  loans,  which replaced  run-off in the
lower yielding automobile leasing portfolio.  In addition,  in the first quarter
of  2001,  the  Company  collected   $30,000  of  delinquent   interest  on  two
non-performing loans.
           Interest  expense for the three months  ending March 31, 2001 totaled
$2,756,000  with a cost of  interest-bearing  liabilities  of 4.29%  compared to
$2,598,000 of expense at 4.08% in 2000. The increase was principally due to time
deposits  at  5.62%,  compared  to  5.20% in 2000.  The  higher  cost was due to
shorter-term  certificates  of deposit  generated in 2000, the majority of which
will mature and reprice in 2001.

Other Income
- ------------
           Other income,  excluding net realized  gains on sales of  securities,
totaled  $655,000 for the period ended March 31, 2001, an increase of $78,000 or
13.5% over $577,000 in the same period in 2000.  The increase was due in part to
a loan promotion which generated  $63,000 in fees and gain on sale of fixed rate
residential  mortgages of $45,000. For the quarter, fee income represented 16.1%
of total revenues, increasing from 15.2% in 2000.
           Net realized  gains on securities  transactions  were $11,000 for the
first quarter of 2001 compared to $1,000 in 2000.

                                       14


Other Expense
- -------------
           Other  expenses  totaled  $2,450,000  for the period ending March 31,
2001, an increase of $80,000,  or 3.4% from  $2,370,000  in the prior year.  The
increase is principally  due to higher  salaries and employee  benefit  expense,
$82,000 and data  processing  costs,  $30,000.  These  increases  were partially
offset  by  lower  legal  fees  of  $32,000  in  2001,  which  are  included  in
professional fees.

Income Tax Expense
- ------------------
           Income tax expense  totaled  $363,000 for an effective  rate of 27.3%
compared to $344,000 and 27.9% in first quarter of 2000.  The effective  rate is
below  the  statutory  rate  of 34%  due to  tax  exempt  income  on  loans  and
securities.


Item 3:  Quantitative and Qualitative Disclosures about Market Risk

Market Risk
- -----------
           There were no  significant  changes for the three  months ended March
31,  2001 from the  information  presented  in the Form 10-k for the  year-ended
December 31, 2000.

                                       15


Part II.  Other Information

Item 1. Legal Proceedings

Not applicable

Item 2. Changes in Securities and use of proceeds

Not applicable

Item 3.  Defaults Upon Senior Securities

Not applicable

Item 4.  Submission of Matters to a Vote of Security Holders

Item 5.  Other Materially Important Events

None




Item 6.  Exhibits and Reports on Form 8-K



          
(a)      3(i)      Articles of Incorporation of Norwood Financial Corp*
         3(ii)     Bylaws of Norwood Financial Corp.*
         4.0       Specimen Stock Certificate of Norwood Financial Corp.*
        10.1       Amended Employment Agreement with William W. Davis, Jr.***
        10.2       Amended Employment Agreement with Lewis J. Critelli ***
        10.3       Form of Change-In-Control Severance Agreement with nine key employees of the
                   Bank*
        10.4       Consulting Agreement with Russell L. Ridd**
        10.5       Wayne Bank Stock Option Plan*
        10.6       Salary Continuation Agreement between the Bank and William W. Davis, Jr.***
        10.7       Salary Continuation Agreement between the Bank and Lewis J. Critelli***
        10.8       Salary Continuation Agreement between the Bank and Edward C. Kasper***
        10.9       1999 Directors Stock Compensation Plan***


(b) Reports on Form 8-k

     On January  11,  2001,  the  Registrant  filed a Form 8k (Items 5 and 7) to
     announce a stock repurchase plan to purchase up to 3% or 50,230 shares,  of
     the company's outstanding stock.

- ---------------------------

*        Incorporated herein by reference into the identically numbered exhibits
         of the Registrant's Form 10 Registration Statement initially filed with
         the Commission on April 29, 1996.

**       Incorporated  herein  by  reference  into  the  indentically   numbered
         exhibits of the  Registrant's  Form 10-K filed with the  Commission  on
         March 31, 1997.

***      Incorporated  herein  by  reference  into  the  indentically   numbered
         exhibits of the  Registrant's  Form 10-K filed with the  Commission  on
         March 23, 2001.

                                       17



Signatures

         Pursuant to the  requirements  of the  Securities  and  Exchange Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

                                       NORWOOD FINANCIAL CORP.

Date:  May 14, 2001                    By: /s/William W. Davis, Jr.
                                           -------------------------------------
                                           William W. Davis, Jr.
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)

Date:  May 14, 2001                    By: /s/Lewis J. Critelli
                                           -------------------------------------
                                           Lewis J. Critelli
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial Officer)

                                       18