FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP. ANNOUNCES FIRST QUARTER EARNINGS

April 19, 2013

Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq Global Market – NWFL) and its subsidiary, Wayne Bank announced earnings of $2,308,000 for the three months ended March 31, 2013 which represents a $122,000 increase from the $2,186,000 recorded during the same three month period of last year.  Earnings per share on a fully diluted basis were $.63 in the first quarter of this year compared to $.61 in the first quarter of 2012, after adjusting for the retroactive effect of the 10% stock dividend declared during the quarter ended March 31, 2013.  The annualized return on average assets was 1.39% in the first quarter of 2013 and the annualized return on average equity was 10.02%.

Total assets were $680.8 million as of March 31, 2013, a decrease of $4.8 million compared to the prior year total.  Total loans decreased $419,000 compared to March 31, 2012 but included the impact from the sale of $7.9 million of residential mortgage loans to reduce the Company’s interest rate risk position.  Residential mortgage loan balances increased $4.4 million and installment loans increased $0.3 million, while commercial real estate loans have decreased $3.1 million and commercial loan balances decreased $2.1 million compared to the prior year. Total loans have increased $2.0 million as compared to December 31, 2012.  Total deposits decreased $10.6 million over the past twelve months which includes a $16.2 million decrease in

certificates of deposit.  Total deposits have increased $11.2 million as compared to December 31, 2012.  Stockholders’ equity increased $4.1 million, or 4.6%, during the past year, due principally to the retention of earnings.

Non-performing assets totaled $13.7 million or 2.01% of total assets at March 31, 2013 comprised of $12.6 million of non-performing loans and $1.1 million of Foreclosed Real Estate Owned, compared to $14.1 million of non-performing assets or 2.09% of total assets at December 31, 2012. The decrease recorded during the quarter includes the disposition of properties previously carried in Foreclosed Real Estate Owned as well as write downs of the carrying value of the assets totaling $633,000.  As of March 31, 2012, non-performing assets totaled $10.1 million.  Net charge-offs for the three month period ending March 31, 2013 were $576,000 which represents an increase compared to $190,000 of net charge-offs over 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 $800,000 to the allowance for loan losses compared to $350,000 during the same period of last year.  The allowance for loan losses was 1.20% of total loans outstanding on March 31, 2013 compared to 1.15% on December 31, 2012 and 1.17% on March 31, 2012.

Net interest income (fully taxable equivalent) was $6,387,000 during the first quarter of 2013 which is $10,000 higher than the $6,377,000 recorded during the prior three month period ended December 31, 2012 but $118,000 lower than the comparable three month period of last year.  The net interest margin was negatively impacted by lower rates on new loan closings and the downward repricing of investment securities, but a $14.6 million decrease in average overnight liquidity resulted in an increase of

three basis points on the yield of earning assets while the cost of funds decreased eight basis points compared to the prior quarter.  As a result, the net interest margin (fte) improved from 3.98% in the fourth quarter of 2012 to 4.07% for the three months ended March 31, 2013.   Compared to the same period of last year, the net interest margin (fte) declined from 4.18% to 4.07% due to the downward repricing of the balance sheet.

Other income totaled $1,877,000 in the first quarter of 2013 compared to $1,291,000 during the same period of last year.  The $586,000 increase in other income includes $770,000 of proceeds from a bank-owned life insurance policy and an $82,000 improvement in all other service charges and fees compared to the first quarter of last year.  Net gains recognized on the sale of loans and securities decreased $266,000 compared to the first quarter of last year due to reduced activity in this area.  During the current period, the Company recognized a gain of $138,000 from the sale of securities compared to $402,000 in the prior-year period.

Operating expenses totaled $4,301,000 in the first quarter and were $154,000, or 3.7% higher than the same period of last year.  Foreclosed real estate costs were $69,000 higher than the first quarter of last year while all other operating costs increased $85,000 combined.

Mr. Critelli stated that “Our first quarter results provide a good start for 2013.  We are feeling the impact of net margin pressure due to the ongoing low interest rate environment.  We are continuing to work our way through credit quality issues that have been brought on by the prolonged economic downturn, and improving our credit quality will remain a top priority in 2013.  Our net interest margin continues to exceed 4.00%, and our capital base continues to exceed peer and “well capitalized” targets.  We

continue to search out opportunities available to us, and we look forward to serving our growing base of stockholders and customers as the economy slowly recovers from the recent downturn.”

Norwood Financial Corp. is the parent company of Wayne Bank which operates from sixteen 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 North Penn Bancorp, the ability to control costs and expenses, demand for real estate 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,
	2013		2012
Net interest income	$	6,101	$	6,187
Tax equivalent basis adjustment using 34% marginal tax rate		286		318
Net interest income on a fully taxable equivalent basis	$	6,387	$	6,505

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
	2013			2012
ASSETS
Cash and due from banks	$	6,763		$	14,250
Interest-bearing deposits with banks		9,182			5,991
Federal funds sold		0			0
Cash and cash equivalents		15,945			20,241
Securities available for sale		148,598			148,407
Securities held to maturity,  fair value 2013: $175 and 2012:  $175		173			171
Loans receivable (net of unearned Income)		478,663			479,082
Less: Allowance for loan losses		5,726			5,618
Net loans receivable		472,937			473,464
Regulatory stock, at cost		2,533			3,495
Bank premises and equipment, net		7,191			7,468
Bank owned life insurance		14,402			12,003
Foreclosed real estate owned		1,099			1,143
Accrued interest receivable		2,456			2,690
Goodwill		9,715			9,715
Other intangible assets		610			760
Other assets		5,094			5,972
TOTAL ASSETS	$	680,753		$	685,529
LIABILITIES
Deposits:
Non-interest bearing demand	$	84,357		$	78,339
Interest-bearing		451,275			467,853
Total deposits		535,632			546,192
Short-term borrowings		21,859			15,854
Other borrowings		25,343			27,625
Accrued interest payable		1,082			1,333
Other liabilities		3,917			5,664
TOTAL LIABILITIES		587,833			596,668
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2013: 3,709,034 shares,  2012: 3,371,866 shares		371			337
Surplus		34,912			24,686
Retained earnings		57,847			63,513
Treasury stock, at cost: 2013: 80,438 shares, 2012: 97,392 shares		(2,345	)		(2,831	)
Accumulated other comprehensive income		2,135			3,156
TOTAL STOCKHOLDERS' EQUITY		92,920			88,861
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	680,753		$	685,529

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended March 31
	2013		2012
INTEREST INCOME
Loans receivable, including fees	$	6,186	$	6,373
Securities		868		1,026
Other		3		4
Total Interest income		7,057		7,403
INTEREST EXPENSE
Deposits		754		961
Short-term borrowings		12		11
Other borrowings		190		244
Total Interest expense		956		1,216
NET INTEREST INCOME		6,101		6,187
PROVISION FOR LOAN LOSSES		800		350
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,301		5,837
OTHER INCOME
Service charges and fees		600		554
Income from fiduciary activities		85		98
Net realized gains on sales of securities		138		402
Gains on sale of loans		3		5
Earnings and proceeds on life insurance policies		925		132
Other		126		100
Total other income		1,877		1,291
OTHER EXPENSES
Salaries and  employee benefits		2,211		2,151
Occupancy, furniture and equipment		529		487
Data processing related		221		232
Taxes, other than income		174		152
Professional Fees		187		227
FDIC Insurance assessment		111		99
Foreclosed real estate owned		191		122
Other		677		677
Total other expenses		4,301		4,147
INCOME BEFORE TAX		2,877		2,981
INCOME TAX EXPENSE		569		795
NET INCOME	$	2,308	$	2,186
Basic earnings per share	$	0.64	$	0.61
Diluted earnings per share	$	0.63	$	0.61

NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended March 31	2013			2012
Net interest income	$	6,101		$	6,187
Net income		2,308			2,186
Net interest spread (fully taxable equivalent)		3.91	%		4.00	%
Net interest margin (fully taxable equivalent)		4.07	%		4.18	%
Return on average assets		1.39	%		1.31	%
Return on average equity		10.02	%		9.81	%
Basic earnings per share	$	0.64		$	0.61
Diluted earnings per share	$	0.63		$	0.61
As of March 31
Total assets	$	680,753		$	685,529
Total loans receivable		478,663			479,082
Allowance for loan losses		5,726			5,618
Total deposits		535,632			546,192
Stockholders' equity		92,920			88,861
Trust assets under management		118,091			112,476
Book value per share	$	25.66		$	24.67
Equity to total assets		13.65	%		12.96	%
Allowance to total loans receivable		1.20	%		1.17	%
Nonperforming loans to total loans		2.63	%		1.88	%
Nonperforming assets to total assets		2.01	%		1.48	%

NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
	March 31		December 31		Sept 30		June 30		March 31
	2013		2012		2012		2012		2012
ASSETS
Cash and due from banks	$	6,763	$	10,867	$	10,514	$	9,135	$	14,250
Interest-bearing deposits with banks		9,182		1,428		24,825		15,261		5,991
Federal funds sold		0		0		0		0		0
Cash and cash equivalents		15,945		12,295		35,339		24,396		20,241
Securities available for sale		148,598		145,390		147,557		144,638		148,407
Securities held to maturity		173		173		172		172		171
Loans receivable (net of unearned Income)		478,663		476,710		479,501		479,421		479,082
Less: Allowance for loan losses		5,726		5,502		5,341		5,775		5,618
Net loans receivable		472,937		471,208		474,160		473,646		473,464
Regulatory stock, at cost		2,533		2,630		3,014		3,325		3,495
Bank premises and equipment, net		7,191		7,326		7,453		7,371		7,468
Foreclosed real estate owned		1,099		852		659		1,268		1,143
Goodwill and other intangibles		10,325		10,362		10,399		10,435		10,475
Other assets		21,952		22,063		19,944		19,616		20,665
TOTAL ASSETS	$	680,753	$	672,299	$	698,697	$	684,867	$	685,529
LIABILITIES
Deposits:
Non-interest bearing demand	$	84,357	$	82,075	$	89,218	$	82,525	$	78,339
Interest-bearing deposits		451,275		442,350		452,372		451,632		467,853
Total deposits		535,632		524,425		541,590		534,157		546,192
Other borrowings		47,202		51,184		59,919		54,771		43,479
Other liabilities		4,999		4,269		5,237		5,698		6,997
TOTAL LIABILITIES		587,833		579,878		606,746		594,626		596,668
STOCKHOLDERS' EQUITY		92,920		92,421		91,951		90,241		88,861
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	680,753	$	672,299	$	698,697	$	684,867	$	685,529

NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	March 31			Dec 31			Sept 30			June 30			March 31
Three months ended	2013			2012			2012			2012			2012
INTEREST INCOME
Loans receivable, including fees	$	6,186		$	6,261		$	6,429		$	6,431		$	6,373
Securities		868			884			971			1,007			1,026
Other		3			12			9			7			4
Total Interest income		7,057			7,157			7,409			7,445			7,403
INTEREST EXPENSE
Deposits		754			860			897			942			961
Borrowings		202			218			260			256			255
Total Interest expense		956			1,078			1,157			1,198			1,216
NET INTEREST INCOME		6,101			6,079			6,252			6,247			6,187
PROVISION FOR LOAN LOSSES		800			800			900			400			350
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		5,301			5,279			5,352			5,847			5,837
OTHER INCOME
Service charges and fees		600			563			561			559			554
Income from fiduciary activities		85			81			96			80			98
Net realized gains (losses) on sales of securities		138			100			631			285			402
Gains on sale of loans and servicing rights		3			67			83			66			(6	)
Earnings and proceeds on life insurance		925			144			132			131			132
Other		126			161			88			85			111
Total other income		1,877			1,116			1,591			1,206			1,291
OTHER EXPENSES
Salaries and  employee benefits		2,211			2,103			2,102			2,047			2,151
Occupancy, furniture and equipment , net		529			506			512			490			487
Foreclosed real estate owned		191			33			(23	)		85			122
FDIC insurance assessment		111			108			94			97			99
Other		1,259			1,303			1,272			1,238			1,288
Total other expenses		4,301			4,053			3,957			3,957			4,147
INCOME BEFORE TAX		2,877			2,342			2,986			3,096			2,981
INCOME TAX EXPENSE		569			583			786			838			795
NET INCOME	$	2,308		$	1,759		$	2,200		$	2,258		$	2,186
Basic  earnings per share	$	0.64		$	0.48		$	0.61		$	0.63		$	0.61
Diluted earnings per share	$	0.63		$	0.48		$	0.61		$	0.63		$	0.61
Book Value per share	$	25.66		$	25.49		$	25.50		$	25.03		$	24.67
Return on average equity (annualized)		10.02	%		7.54	%		9.54	%		10.06	%		9.81	%
Return on average assets (annualized)		1.39	%		1.02	%		1.27	%		1.33	%		1.31	%
Net interest spread (fte)		3.91	%		3.80	%		3.87	%		3.95	%		4.00	%
Net interest margin (fte)		4.07	%		3.98	%		4.07	%		4.14	%		4.18	%
Allowance for loan losses to total loans		1.20	%		1.15	%		1.11	%		1.20	%		1.17	%
Net charge-offs to average loans (annualized)		0.48	%		0.53	%		1.11	%		0.20	%		0.16	%
Nonperforming loans to total loans		2.63	%		2.77	%		2.87	%		1.85	%		1.88	%
Nonperforming assets to total assets		2.01	%		2.09	%		2.07	%		1.48	%		1.48	%