ex99-1.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP ANNOUNCES EARNINGS FOR THE FOURTH QUARTER AND YEAR

January 29, 2016 – Honesdale, PA

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, 2015 of $128,000. This represents a decrease from the $1,541,000 earned in the comparable period of 2014 due primarily to a $2,400,000 increase in the provision for loan losses. Earnings per share (fully diluted) were $.04 and $.42 for the three-month periods ended December 31, 2015 and 2014 respectively. Net interest income before the provision for loan losses increased $7,000 compared to the same period of last year, while other income decreased $111,000. A provision for loan losses of $2,820,000 was recorded in the current three-month period compared to $420,000 in the same period of last year in order to replenish the reserve for loan losses after recognizing $1,268,000 of net charge-offs during the 2015 period. Operating expenses decreased $323,000 due primarily to a $347,000 decrease in foreclosed real estate costs. For the year ended December 31, 2015, net income totaled $5,908,000, a decrease of $1,749,000 from the $7,657,000 earned in the prior year as a $2,900,000 increase in the provision for loan losses offset a $644,000 decrease in foreclosed real estate costs. Earnings per share on a fully diluted basis were $1.60 for 2015 compared to $2.10 in 2014. The return on average assets for the

year was 0.80% with a return on average equity of 5.83% compared to 1.08% and 7.92%, respectively, in 2014.

Total assets were $750.5 million as of December 31, 2015. Loans receivable totaled $559.9 million as of December 31, 2015, with total deposits of $550.9 million and stockholders’ equity of $101.0 million.

Loans receivable increased $58.8 million from the prior year-end due primarily to a $28.6 million increase in commercial loans which includes a $21.3 million increase in municipal financing. Commercial real estate loans also increased $17.2 million during the year. Residential mortgage loans and construction loans increased $3.5 million after the sale of $4.3 million of fixed-rate residential mortgage loans for the purpose of interest rate risk management. Consumer loans increased $9.5 million in 2015 due primarily to a $9.2 million increase in indirect auto and marine financing. As of December 31, 2015, total non-performing loans were $7.1 million and represented 1.27% of total loans compared to $5.6 million, or 1.12% as of December 31, 2014. For the three months and year ended December 31, 2015, net charge-offs totaled $1,268,000 and $3,157,000, respectively, compared to $196,000 and $1,513,000, respectively, for the corresponding periods in 2014. Based on the level of charge-offs, the Company determined that it would be appropriate to provide $2,820,000 and $4,580,000 for potential future losses for the three and twelve month periods ended December 31, 2015, respectively, compared to $420,000 in the similar quarter of last year and $1,680,000 for the year of 2014. As of December 31, 2015, the allowance for loan losses totaled $7,298,000 and 1.30% of total loans compared to $5,875,000 and 1.17% of total loans at December 31, 2014.

Net interest income (fully taxable equivalent) totaled $6,477,000 for the three months ended December 31, 2015, an increase of $78,000 compared to the same period in 2014. Net interest margin (fte) for the three months ended December 31, 2015 was 3.73% decreasing from 3.87% for the similar period in 2014. The decrease in net interest margin was principally due to loan production at historically low interest rate levels which resulted in a 13 basis point decrease in the yield earned on assets. The net interest margin was further impacted by a 1 basis point increase in the cost of interest-bearing liabilities. For the year, net interest income (fte) totaled $25,882,000, an increase of $64,000 compared to 2014. The net interest margin (fte) declined 15 basis points to 3.75% in 2015.

Other income for the three months ended December 31, 2015 totaled $1,216,000 compared to $1,327,000 for the similar period in 2014. Although gains on the sale of loans and securities decreased $168,000, all other items of other income increased $57,000 in the aggregate. Other income for the year ended December 31, 2015 totaled $4,699,000 compared to $5,110,000 in 2014, a decrease of $411,000. Gains on the sale of loans and investment securities decreased $572,000 in the aggregate, while all other items of other income increased $161,000, net.

Other expenses totaled $4,674,000 for the three months ended December 31, 2015, compared to $4,997,000 in the similar period of 2014. Foreclosed real estate costs decreased $347,000 from the 2014 level, while all other operating expenses increased $24,000, net. For the year ended December 31, 2015, other expenses totaled $17,100,000 compared to $17,727,000 for the similar period in 2014, a decrease

of $627,000. Foreclosed real estate costs decreased $644,000 from the prior period, while all other expenses increased $17,000, net compared to 2014.

Mr. Critelli commented, “Our earnings in 2015 were impacted by credit quality issues, resulting from the extended period of stress on our local economy, our customer base and real estate values. During the fourth quarter of 2015, we recognized significant losses on several commercial properties as current appraised values supporting sales or future projected sales were significantly lower than those received at the time of the loan origination. In spite of these challenges, we were able to accomplish many of our goals in 2015. Our cash dividend per share increased from $1.20 per share to $1.24 per share, which resulted in a dividend yield in excess of 4.00% annually based on our year-end closing stock price of $28.75. We had loan growth in excess of 10%. The ongoing low level of interest rates and the competitive lending environment also continued to place pressure on our net interest margin; however, our year-to-date margin and our capital levels were well above peer and our operating expenses remain well controlled. We will remain diligent in controlling and minimizing credit-related costs brought on us by our ailing economy. We believe that we are well positioned to take advantage of the opportunities available to us, and we look forward to serving our growing base of stockholders and customers, as the local economy in Northeast Pennsylvania recovers from the extended economic downturn.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates fifteen offices in Wayne, Pike, Monroe and Lackawanna Counties, Pennsylvania. The Company’s stock is traded on the Nasdaq Global Market under the symbol, “NWFL”.

Forward-Looking Statements.

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believes”, “anticipates”, “contemplates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in federal and state laws, changes in interest rates, the ability to control costs and expenses, demand for real estate, government fiscal 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 is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income is derived from GAAP interest income and net interest income using an assumed tax rate of 34%. 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 reconciles net interest income to net interest income on a fully taxable equivalent basis:

(dollars in thousands)	Three months ended December 31				Year ended December 31
	2015		2014		2015		2014
Net interest income	$	6,112	$	6,105	$	24,521	$	24,560
Tax equivalent basis adjustment using 34% marginal tax rate		365		294		1,361		1,258
Net interest income on a fully taxable equivalent basis	$	6,477	$	6,399	$	25,882	$	25,818

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 data)
(unaudited)
	December 31
	2015			2014
ASSETS
Cash and due from banks	$	9,744			8,081
Interest-bearing deposits with banks		266			4,295
Cash and cash equivalents		10,010			12,376

Securities available for sale		138,851			156,395
Loans receivable		559,925			501,135
Less: Allowance for loan losses		7,298			5,875
Net loans receivable		552,627			495,260
Regulatory stock, at cost		3,412			1,714
Bank premises and equipment, net		6,472			6,734
Bank owned life insurance		18,820			18,284
Foreclosed real estate owned		2,847			3,726
Accrued interest receivable		2,363			2,339
Goodwill		9,715			9,715
Other intangible assets		285			389
Deferred tax asset		3,867			3,285
Other assets		1,236			1,418
TOTAL ASSETS	$	750,505			711,635

LIABILITIES
Deposits:
Non-interest bearing demand	$	107,814			98,064
Interest-bearing		443,095			461,880
Total deposits		550,909			559,944
Short-term borrowings		53,235			25,695
Other borrowings		41,126			22,200
Accrued interest payable		957			966
Other liabilities		3,280			3,789
TOTAL LIABILITIES		649,507			612,594

STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2015: 3,724,668 shares, 2014: 3,718,018 shares		373			372
Surplus		35,351			35,206
Retained earnings		65,412			64,078
Treasury stock, at cost: 2015: 23,311 shares, 2014: 40,576 shares		(626	)		(1,077	)
Accumulated other comprehensive income		488			462
TOTAL STOCKHOLDERS' EQUITY		100,998			99,041

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	750,505			711,635

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,
	2015			2014		2015		2014
INTEREST INCOME
Loans receivable, including fees	$	6,058		$	5,954	$	24,002	$	23,841
Securities		877			940		3,761		3,920
Other		1			4		16		7
Total Interest income		6,936			6,898		27,779		27,768

INTEREST EXPENSE
Deposits		587			611		2,421		2,463
Short-term borrowings		38			15		85		77
Other borrowings		199			167		752		668
Total Interest expense		824			793		3,258		3,208
NET INTEREST INCOME		6,112			6,105		24,521		24,560
PROVISION FOR LOAN LOSSES		2,820			420		4,580		1,680
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		3,292			5,685		19,941		22,880

OTHER INCOME
Service charges and fees		651			604		2,440		2,350
Income from fiduciary activities		99			109		439		437
Net realized gains on sales of securities		118			265		626		1,170
Gains on sales of loans, net		61			82		104		132
Earnings and proceeds on life insurance policies		167			171		665		685
Other		120			96		425		336
Total other income		1,216			1,327		4,699		5,110

OTHER EXPENSES
Salaries and employee benefits		2,152			2,252		8,535		8,616
Occupancy, furniture and equipment		511			516		2,082		2,117
Data processing related		261			249		943		929
Taxes, other than income		185			161		711		649
Professional fees		283			196		730		671
FDIC Insurance assessment		133			100		411		420
Foreclosed real estate owned		475			822		911		1,555
Other		674			701		2,777		2,770
Total other expenses		4,674			4,997		17,100		17,727

INCOME (LOSS) BEFORE TAX		(166	)		2,015		7,540		10,263
INCOME TAX EXPENSE (BENEFIT)		(294	)		474		1,632		2,606
NET INCOME	$	128		$	1,541	$	5,908	$	7,657

Basic earnings per share	$	0.04		$	0.42	$	1.60	$	2.10

Diluted earnings per share	$	0.04		$	0.42	$	1.60	$	2.10

NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)

For the Three Months Ended December 31	2015			2014

Net interest income	$	6,112		$	6,105
Net income		128			1,541

Net interest spread (fully taxable equivalent)		3.58	%		3.72	%
Net interest margin (fully taxable equivalent)		3.73	%		3.87	%
Return on average assets		0.07	%		0.86	%
Return on average equity		0.50	%		6.17	%
Basic earnings per share	$	0.04		$	0.42
Diluted earnings per share	$	0.04		$	0.42

For the Twelve Months Ended December 31

Net interest income	$	24,521		$	24,560
Net income		5,908			7,657

Net interest spread (fully taxable equivalent)		3.61	%		3.76	%
Net interest margin (fully taxable equivalent)		3.75	%		3.90	%
Return on average assets		0.80	%		1.08	%
Return on average equity		5.83	%		7.92	%
Basic earnings per share	$	1.60		$	2.10
Diluted earnings per share	$	1.60		$	2.10

As of December 31

Total assets	$	750,505		$	711,635
Total loans receivable		559,925			501,135
Allowance for loan losses		7,298			5,875
Total deposits		550,909			559,944
Stockholders' equity		100,998			99,041
Trust assets under management		131,690			134,888

Book value per share	$	27.39		$	26.30
Equity to total assets		13.46	%		13.92	%
Allowance to total loans receivable		1.30	%		1.17	%
Nonperforming loans to total loans		1.27	%		1.12	%
Nonperforming assets to total assets		1.33	%		1.31	%

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
	December 31		September 30		June 30		March 31		December 31
	2015		2015		2015		2015		2014
ASSETS
Cash and due from banks	$	9,744	$	11,164	$	8,505	$	7,658	$	8,081
Interest-bearing deposits with banks		266		552		11,937		11,969		4,295
Cash and cash equivalents		10,010		11,716		20,442		19,627		12,376

Securities available for sale		138,851		153,305		151,304		155,674		156,395
Loans receivable		559,925		543,536		538,870		518,961		501,135
Less: Allowance for loan losses		7,298		5,747		5,947		6,007		5,875
Net loans receivable		552,627		537,789		532,923		512,954		495,260
Regulatory stock, at cost		3,412		2,488		2,240		1,838		1,714
Bank owned life insurance		18,820		18,686		18,551		18,417		18,284
Bank premises and equipment, net		6,472		6,503		6,555		6,632		6,734
Foreclosed real estate owned		2,847		1,345		1,382		1,698		3,726
Goodwill and other intangibles		10,000		10,024		10,049		10,076		10,104
Other assets		7,466		7,473		8,075		7,443		7,042
TOTAL ASSETS	$	750,505	$	749,329	$	751,521	$	734,359	$	711,635
		.		.
LIABILITIES
Deposits:
Non-interest bearing demand	$	107,814	$	115,313	$	107,610	$	101,423	$	98,064
Interest-bearing deposits		443,095		456,040		468,004		468,783		461,880
Total deposits		550,909		571,353		575,614		570,206		559,944
Other borrowings		94,361		70,708		71,053		58,388		47,895
Other liabilities		4,237		5,328		4,936		5,314		4,755
TOTAL LIABILITIES		649,507		647,389		651,603		633,908		612,594

STOCKHOLDERS' EQUITY		100,998		101,940		99,918		100,451		99,041

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	750,505	$	749,329	$	751,521	$	734,359	$	711,635

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	2015			2015			2015			2015			2014
INTEREST INCOME
Loans receivable, including fees	$	6,058		$	5,958		$	5,924		$	6,061		$	5,954
Securities		877			911			950			1,023			940
Other		1			3			8			4			4
Total interest income		6,936			6,872			6,882			7,088			6,898

INTEREST EXPENSE
Deposits		587			611			618			604			611
Borrowings		237			208			215			177			182
Total interest expense		824			819			833			781			793
NET INTEREST INCOME		6,112			6,053			6,049			6,307			6,105
PROVISION FOR LOAN LOSSES		2,820			720			420			620			420
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		3,292			5,333			5,629			5,687			5,685

OTHER INCOME
Service charges and fees		651			595			622			572			604
Income from fiduciary activities		99			126			109			105			109
Net realized gains on sales of securities		118			63			134			311			265
Gains on sales of loans, net		61			13			12			18			82
Earnings and proceeds on life insurance policies		167			167			166			165			171
Other		120			107			90			108			96
Total other income		1,216			1,071			1,133			1,279			1,327

OTHER EXPENSES
Salaries and employee benefits		2,152			2,175			2,071			2,137			2,252
Occupancy, furniture and equipment, net		511			473			542			556			516
Foreclosed real estate owned		475			47			232			158			822
FDIC insurance assessment		133			119			65			95			100
Other		1,403			1,256			1,258			1,241			1,307
Total other expenses		4,674			4,070			4,168			4,187			4,997

(LOSS) INCOME BEFORE TAX		(166	)		2,334			2,594			2,779			2,015
INCOME TAX (BENEFIT) EXPENSE		(294	)		557			631			738			474
NET INCOME	$	128		$	1,777		$	1,963		$	2,041		$	1,541

Basic earnings per share	$	0.04		$	0.48		$	0.53		$	0.55		$	0.42

Diluted earnings per share	$	0.04		$	0.48		$	0.53		$	0.55		$	0.42

Book Value per share	$	27.39		$	27.42		$	27.40		$	27.38		$	26.30

Return on average equity (annualized)		0.50	%		6.95	%		7.80	%		8.22	%		6.17	%
Return on average assets (annualized)		0.07	%		0.95	%		1.06	%		1.15	%		0.86	%

Net interest spread (fte)		3.58	%		3.53	%		3.53	%		3.80	%		3.72	%
Net interest margin (fte)		3.73	%		3.68	%		3.68	%		3.94	%		3.87	%

Allowance for loan losses to total loans		1.30	%		1.06	%		1.10	%		1.16	%		1.17	%
Net charge-offs to average loans (annualized)		0.92	%		0.68	%		0.37	%		0.39	%		0.16	%
Nonperforming loans to total loans		1.27	%		1.69	%		2.00	%		1.11	%		1.12	%
Nonperforming assets to total assets		1.33	%		1.40	%		1.62	%		1.01	%		1.31	%