ex99-1.htm

FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP. ANNOUNCES FIRST QUARTER EARNINGS

Honesdale, Pennsylvania - April 22, 2016

Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq Global Market – NWFL) and its subsidiary, Wayne Bank, announced earnings of $1,876,000 for the three months ended March 31, 2016 which represents a decrease from the $2,041,000 recorded during the same three-month period of last year. The decrease was principally due to a higher level of gains on sales of securities in the 2015 period. Earnings per share on a fully diluted basis were $0.51 in the first quarter of this year compared to $0.55 in the first quarter of 2015. The annualized return on average assets was 1.00% in the first quarter of 2016 and the annualized return on average equity was 7.33%, compared to 1.15% and 8.22%, respectively, in the first quarter of 2015.

Total assets were $760.1 million as of March 31, 2016, an increase of $25.7 million, or 3.5%, compared to the prior year total. Total loans increased $46.8 million compared to March 31, 2015 consisting of a $33.7 million increase in commercial lending and $13.1 million of growth in retail loans. Total deposits decreased $9.7 million over the past twelve months due to a $25.8 million reduction in jumbo time certificates of deposit from local school districts related to delays in state funding. All other deposits

increased $16.1 million including an $11.8 million increase in demand deposits. Stockholders’ equity increased $2.2 million during the past year, due principally to the retention of earnings and an increase in accumulated other comprehensive income.

Non-performing assets totaled $9.7 million or 1.28% of total assets at March 31, 2016 comprised of $6.9 million of non-performing loans and $2.8 million of foreclosed real estate owned, compared to $10.0 million of non-performing assets or 1.33% of total assets at December 31, 2015. As of March 31, 2015, non-performing assets totaled $7.4 million. Net charge-offs for the three-month period ending March 31, 2016 were $107,000 compared to $488,000 of net charge-offs in the first quarter of last year. Based on the current composition of the loan portfolio, management determined that it would be prudent to provide additional reserves and added $450,000 to the allowance for loan losses in the current period compared to $620,000 during the same period of last year. The increased provision for loan losses in 2015 reflected the higher level of net charge-offs. The allowance for loan losses was 1.35% of total loans outstanding on March 31, 2016 compared to 1.30% on December 31, 2015 and 1.16% on March 31, 2015.

Net interest income (fully taxable equivalent) was $6,534,000 during the first quarter of 2016 which is $68,000 lower than the comparable three-month period of last year. A $58.4 million increase in average loans outstanding had a positive impact on net interest income (fte) but a 40 basis point reduction in average loan yields offset much of the increase. Interest income fte was also impacted by the $17.4 million decrease in average investment securities as many securities were sold to fund the loan growth. The yield on interest-earning assets decreased 22 basis points compared to

the prior year while the cost of funds increased two basis points. As a result, the net interest margin (fte) decreased from 3.94% to 3.70% compared to the quarter ended March 31, 2015. In comparison to the quarter ended December 31, 2015, the net interest margin (fte) decreased from 3.73% to 3.70%.

Other income totaled $1,067,000 in the first quarter of 2016 compared to $1,279,000 during the same period of last year. The decrease can be attributed to a $235,000 decrease in net gains on the sales of loans and securities. All other components of other income increased $23,000, net.

Operating expenses totaled $4,349,000 in the first quarter and were $162,000 higher than the same period of last year. Salaries and employee benefit costs rose $166,000 over the same period of last year due primarily to a $78,000 increase in health care costs and a $57,000 increase in salary expense. Foreclosed real estate costs were $127,000 lower than the same period of last year, while all other operating costs increased $123,000 net.

Mr. Critelli stated that “Our first quarter results provide a good start for 2016 and are in-line with our budget. Net interest income improved over the prior quarter, while credit quality ratios and costs also show improvement. Our net interest margin exceeds peer banks, core operating expenses are well controlled and our capital base remains above regulatory “well capitalized” targets. We are currently focused on our pending acquisition of Delaware Bancshares, Inc., including the integration of twelve new offices into the Wayne Bank system. The transaction is expected to close in the third quarter pending various approvals. For additional information on the transaction, please visit our website at www.waynebank.com/stockholder services. We continue to search out

opportunities available to us, and we look forward to serving our growing base of stockholders and customers as our local economy rebounds from the extended economic downturn.”

Norwood Financial Corp. is the parent company of Wayne Bank which operates from fifteen offices throughout 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, risks associated with the acquisition of Delaware Bancshares, Inc., 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 net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net

interest income is derived from GAAP using an assumed tax rate of 34%. We believe the presentation of net interest income on a tax–equivalent basis ensures comparability of 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 fully taxable equivalent basis:

(dollars in thousands)	Three months ended March 31,
	2016		2015

Net interest income	$	6,175	$	6,307
Tax equivalent basis adjustment using 34% marginal tax rate		359		295
Net interest income on a fully taxable equivalent basis	$	6,534	$	6,602

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)
	March 31
	2016			2015
ASSETS
Cash and due from banks	$	8,709		$	7,658
Interest-bearing deposits with banks		254			11,969
Cash and cash equivalents		8,963			19,627

Securities available for sale		143,948			155,674
Loans receivable		565,787			518,961
Less: Allowance for loan losses		7,642			6,007
Net loans receivable		558,145			512,954
Regulatory stock, at cost		2,982			1,838
Bank premises and equipment, net		6,390			6,632
Bank owned life insurance		18,951			18,417
Foreclosed real estate owned		2,855			1,698
Accrued interest receivable		2,487			2,329
Goodwill		9,715			9,715
Other intangible assets		260			361
Deferred tax asset		3,456			3,308
Other assets		1,952			1,806
TOTAL ASSETS	$	760,104		$	734,359

LIABILITIES
Deposits:
Non-interest bearing demand	$	113,225		$	101,423
Interest-bearing		447,266			468,783
Total deposits		560,491			570,206
Short-term borrowings		52,672			30,581
Other borrowings		38,856			27,807
Accrued interest payable		925			955
Other liabilities		4,462			4,359
TOTAL LIABILITIES		657,406			633,908

STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2016: 3,724,668 shares, 2015: 3,718,018 shares		373			372
Surplus		35,390			35,239
Retained earnings		66,143			64,975
Treasury stock, at cost: 2016: 35,649 shares, 2015: 38,972 shares		(987	)		(1,046	)
Accumulated other comprehensive income		1,779			911
TOTAL STOCKHOLDERS' EQUITY		102,698			100,451

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	760,104		$	734,359

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended March 31,
	2016		2015
INTEREST INCOME
Loans receivable, including fees	$	6,135	$	6,061
Securities		890		1,023
Other		1		4
Total Interest income		7,026		7,088

INTEREST EXPENSE
Deposits		581		604
Short-term borrowings		39		12
Other borrowings		231		165
Total Interest expense		851		781
NET INTEREST INCOME		6,175		6,307
PROVISION FOR LOAN LOSSES		450		620
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,725		5,687

OTHER INCOME
Service charges and fees		574		572
Income from fiduciary activities		102		105
Net realized gains on sales of securities		64		311
Gains on sales of loans, net		30		18
Earnings and proceeds on life insurance policies		167		165
Other		130		108
Total other income		1,067		1,279

OTHER EXPENSES
Salaries and employee benefits		2,303		2,137
Occupancy, furniture and equipment		495		556
Data processing		271		234
Taxes, other than income		205		175
Professional fees		151		183
FDIC Insurance assessment		115		95
Foreclosed real estate owned		31		158
Other		778		649
Total other expenses		4,349		4,187

INCOME BEFORE TAX		2,443		2,779
INCOME TAX EXPENSE		567		738
NET INCOME	$	1,876	$	2,041

Basic earnings per share	$	0.51	$	0.55

Diluted earnings per share	$	0.51	$	0.55

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

For the Three Months Ended March 31	2016			2015

Net interest income	$	6,175		$	6,307
Net income		1,876			2,041

Net interest spread (fully taxable equivalent)		3.55	%		3.80	%
Net interest margin (fully taxable equivalent)		3.70	%		3.94	%
Return on average assets		1.00	%		1.15	%
Return on average equity		7.33	%		8.22	%
Basic earnings per share	$	0.51		$	0.55
Diluted earnings per share	$	0.51		$	0.55

As of March 31

Total assets	$	760,104		$	734,359
Total loans receivable		565,787			518,961
Allowance for loan losses		7,642			6,007
Total deposits		560,491			570,206
Stockholders' equity		102,698			100,451
Trust assets under management		133,421			134,391

Book value per share	$	27.88		$	27.38
Equity to total assets		13.51	%		13.68	%
Allowance to total loans receivable		1.35	%		1.16	%
Nonperforming loans to total loans		1.21	%		1.11	%
Nonperforming assets to total assets		1.28	%		1.01	%

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
	March 31		December 31		September 30		June 30		March 31
	2016		2015		2015		2015		2015
ASSETS
Cash and due from banks	$	8,709	$	9,744	$	11,164	$	8,505	$	7,658
Interest-bearing deposits with banks		254		266		552		11,937		11,969
Cash and cash equivalents		8,963		10,010		11,716		20,442		19,627

Securities available for sale		143,948		138,851		153,305		151,304		155,674
Loans receivable		565,787		559,925		543,536		538,870		518,961
Less: Allowance for loan losses		7,642		7,298		5,747		5,947		6,007
Net loans receivable		558,145		552,627		537,789		532,923		512,954
Regulatory stock, at cost		2,982		3,412		2,488		2,240		1,838
Bank owned life insurance		18,951		18,820		18,686		18,551		18,417
Bank premises and equipment, net		6,390		6,472		6,503		6,555		6,632
Foreclosed real estate owned		2,855		2,847		1,345		1,382		1,698
Goodwill and other intangibles		9,975		10,000		10,024		10,049		10,076
Other assets		7,895		7,466		7,473		8,075		7,443
TOTAL ASSETS	$	760,104	$	750,505	$	749,329	$	751,521	$	734,359
		.		.		.
LIABILITIES
Deposits:
Non-interest bearing demand	$	113,225	$	107,814	$	115,313	$	107,610	$	101,423
Interest-bearing deposits		447,266		443,095		456,040		468,004		468,783
Total deposits		560,491		550,909		571,353		575,614		570,206
Other borrowings		91,528		94,361		70,708		71,053		58,388
Other liabilities		5,387		4,237		5,328		4,936		5,314
TOTAL LIABILITIES		657,406		649,507		647,389		651,603		633,908

STOCKHOLDERS' EQUITY		102,698		100,998		101,940		99,918		100,451

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	760,104	$	750,505	$	749,329	$	751,521	$	734,359

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	March 31			December 31			September 30			June 30			March 31
Three months ended	2016			2015			2015			2015			2015
INTEREST INCOME
Loans receivable, including fees	$	6,135		$	6,058		$	5,958		$	5,924		$	6,061
Securities		890			877			911			950			1,023
Other		1			1			3			8			4
Total interest income		7,026			6,936			6,872			6,882			7,088

INTEREST EXPENSE
Deposits		581			587			611			618			604
Borrowings		270			237			208			215			177
Total interest expense		851			824			819			833			781
NET INTEREST INCOME		6,175			6,112			6,053			6,049			6,307
PROVISION FOR LOAN LOSSES		450			2,820			720			420			620
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		5,725			3,292			5,333			5,629			5,687

OTHER INCOME
Service charges and fees		574			651			595			622			572
Income from fiduciary activities		102			99			126			109			105
Net realized gains on sales of securities		64			118			63			134			311
Gains on sales of loans, net		30			61			13			12			18
Earnings and proceeds on life insurance policies		167			167			167			166			165
Other		130			120			107			90			108
Total other income		1,067			1,216			1,071			1,133			1,279

OTHER EXPENSES
Salaries and employee benefits		2,303			2,152			2,175			2,071			2,137
Occupancy, furniture and equipment, net		495			511			473			542			556
Foreclosed real estate owned		31			475			47			232			158
FDIC insurance assessment		115			133			119			65			95
Other		1,405			1,403			1,256			1,258			1,241
Total other expenses		4,349			4,674			4,070			4,168			4,187

INCOME (LOSS) BEFORE TAX		2,443			(166	)		2,334			2,594			2,779
INCOME TAX EXPENSE (BENEFIT)		567			(294	)		557			631			738
NET INCOME	$	1,876		$	128		$	1,777		$	1,963		$	2,041

Basic earnings per share	$	0.51		$	0.04		$	0.48		$	0.53		$	0.55

Diluted earnings per share	$	0.51		$	0.04		$	0.48		$	0.53		$	0.55

Book Value per share	$	27.88		$	27.39		$	27.42		$	27.40		$	27.38

Return on average equity (annualized)		1.00	%		0.50	%		6.95	%		7.80	%		8.22	%
Return on average assets (annualized)		7.33	%		0.07	%		0.95	%		1.06	%		1.15	%

Net interest spread (fte)		3.55	%		3.58	%		3.53	%		3.53	%		3.80	%
Net interest margin (fte)		3.70	%		3.73	%		3.68	%		3.68	%		3.94	%

Allowance for loan losses to total loans		1.35	%		1.30	%		1.06	%		1.10	%		1.16	%
Net charge-offs to average loans (annualized)		0.08	%		0.92	%		0.68	%		0.37	%		0.39	%
Nonperforming loans to total loans		1.21	%		1.27	%		1.69	%		2.00	%		1.11	%
Nonperforming assets to total assets		1.28	%		1.33	%		1.40	%		1.62	%		1.01	%