8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)      October 18, 2013

NORWOOD FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Pennsylvania	0-28364	23-2828306
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

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

Registrant’s telephone number, including area code: (570) 253-1455

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

NORWOOD FINANCIAL CORP.

INFORMATION TO BE INCLUDED IN THE REPORT

Item 2.02.  Results of Operations and Financial Condition

On October 18, 2013, the Registrant issued a press release announcing its earnings for the quarter and nine months ended September 30, 2013.  A copy of the press release is furnished with this report as exhibit 99.1.

Item 9.01.  Financial Statements and Exhibits

(d)   Exhibits.  The following exhibits are being furnished with this report:

No.           Description

99.1           Press Release, dated October 18, 2013

SIGNATURES

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

	NORWOOD FINANCIAL CORP.
Date:                      October 18, 2013	By:	/s/ Lewis J. Critelli
		Lewis J. Critelli President and Chief Executive Officer (Duly Authorized Representative)

EX-99.1

 FOR IMMEDIATE RELEASE

NORWOOD FINANCIAL CORP

ANNOUNCES THIRD QUARTER EARNINGS

October 18, 2013-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 September 30, 2013 of $2,136,000.  This represents a slight decrease from the $2,200,000 earned in the same three month period of 2012 due to a reduced level of gains recognized from the sale of loans and securities combined with increased expenses related to foreclosed real estate owned, partially offset by a reduced provision for loan losses.  Earnings per share (fully diluted) were $.59 in the 2013 period, decreasing from the $.61 earned in the similar period of last year after adjusting for the retroactive effect of the 10% stock dividend declared during the first quarter of 2013.  Annualized return on average assets for the three months ended September 30, 2013 was 1.22% with an annualized return on average equity of 9.33%.  Net income for the nine months ended September 30, 2013 totaled $6,284,000, which is $360,000 lower than the same period of 2012 due to increased loan loss provisions and operating expenses.  Earnings per share (fully diluted) for the nine months ended September 30, 2013 totaled $1.73 per share compared to $1.84 per share in the 2012 period after adjusting for the 10% stock dividend.

Total assets as of September 30, 2013 were $703.8 million with loans receivable of $487.0 million, deposits of $548.7 million and stockholders’ equity of $91.3 million.  Total assets have increased $5.1 million during the twelve months ended September 30, 2013 due primarily to growth in deposits.

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Loans receivable increased $7.5 million from September 30, 2012, due to an $18.2 million increase in consumer loans which was partially offset by a $10.7 million decrease in commercial lending.

Non-performing assets, which include non-performing loans and foreclosed real estate owned, totaled $11.3 million and 1.60% of total assets as of September 30, 2013 compared to $12.9 million and 1.85% of assets as of June 30, 2013 and $14.4 million or 2.07% of total assets as of September 30, 2012.  Net charge-offs were $590,000 for the quarter and totaled $1,943,000 for the nine months ended September 30, 2013 compared to $1,334,000 and $1,767,000, respectively, for the similar periods in 2012.  Based on the level of charge-offs, the Company determined that it would be appropriate to provide $400,000 and $2,000,000 for potential future loan losses for the three and nine month periods ended September 30, 2013, respectively, compared to $900,000 and $1,650,000, respectively, for the similar periods in 2012.  The allowance for loan losses totaled $5,558,000 as of September 30, 2013 and represented 1.14% of total loans, increasing from $5,341,000 as of September 30, 2012 and 1.11% of total loans.

For the three months ended September 30, 2013, net interest income, on a fully taxable equivalent basis (fte), totaled $6,578,000, which represents an increase of $17,000 compared to the similar period in 2012.  Net interest margin (fte) for the 2013 period was 4.05% compared to 4.07% for the similar period in 2012.  Net interest income (fte) for the nine months ended September 30, 2013 totaled $19,396,000, a decrease of $235,000  compared to the similar period in 2012 due to reduced earnings on loans and securities resulting from reinvestment at current lower market rates.  Net interest margin (fte) year-to- date for the 2013 period was 4.04% compared to 4.10% in 2012.

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Other income for the three months ended September 30, 2013 totaled $1,216,000 compared to $1,591,000 for the similar period in 2012.  The decrease was principally due to reduced gains on the sales of loans and investment securities during the period.  For the nine months ended September 30, 2013, other income totaled $4,305,000 compared to $4,088,000 in the 2012 period.  Gains on the sales of investment securities totaled $590,000 on sales of $30.0 million for the 2013 year-to-date period compared to $1,318,000 on sales of $23.3 million in the corresponding 2012 period.  The proceeds from investment securities sales were reinvested to improve the quality of the Company’s bond portfolio as well as to fund new securities purchases and loan growth.  Gains from the sale of loans were down $95,000 in the current three month period and $152,000 for the nine months ending September 30, 2013 when compared to the corresponding periods in the prior year due to reduced activity in this area.  The decline in gains on sales during the nine-month period was offset by $770,000 of insurance proceeds from a bank-owned life insurance policy.

Other expenses totaled $4,173,000 for the three months ended September 30, 2013, compared to $3,957,000 in the similar period of 2012.  Foreclosed real estate costs increased $240,000 due to maintenance costs and write-downs on foreclosed properties.  For the nine months ended September 30, 2013, other expenses totaled $12,607,000 compared to $12,061,000 for the similar period in 2012, an increase of $546,000, or 4.5%, which includes a $310,000 increase in foreclosed real estate costs.

Mr. Critelli commented, “We are continuing to work our way through credit quality issues that have been brought on by the prolonged economic downturn, which has placed stress on customers’ cash flow and reduced real estate values.  Improving our credit quality will remain a top priority.  The ongoing low interest rate environment also continues

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to place pressure on our net interest margin, however, our year-to-date margin exceeds 4.00% and our capital levels remain well above peer.  We look forward to serving our growing base of stockholders and customers as our economy slowly recovers from the extended economic downturn.”

Norwood Financial Corp., through its subsidiary Wayne Bank, operates sixteen 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, risks associated with the acquisition of North Penn Bancorp, the ability to control costs and expenses, demand for real estate, government fiscal policies and general economic conditions.  The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Measures

This release references tax-equivalent interest income and net interest income, which are non-GAAP (Generally Accepted Accounting Principles) financial measures.  Tax-equivalent interest income and net interest income are derived from GAAP interest

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income and net interest income using an assumed tax rate of 34%.  We believe the presentation of interest income and net interest income on a tax–equivalent basis ensures comparability of interest income and 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 September 30				Nine months ended September 30
	2013		2012		2013		2012
Net interest income	$	6,270	$	6,252	$	18,516	$	18,686
Tax equivalent basis adjustment    using 34% marginal tax rate		308		309		880		945
Net interest income on a fully    taxable equivalent basis	$	6,578	$	6,561	$	19,396	$	19,631

Contact:    William S. Lance

    Executive Vice President &

                   Chief Financial Officer

    NORWOOD FINANCIAL CORP

    570-253-8505

                   www.waynebank.com

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NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
	September 30
	2013			2012
ASSETS
Cash and due from banks	$	15,193		$	10,514
Interest-bearing deposits with banks		12,221			24,825
Cash and cash equivalents		27,414			35,339
Securities available for sale		150,904			147,639
Securities held to maturity,  fair value 2013: $176 and 2012:  $175		174			172
Loans receivable (net of unearned Income)		486,968			479,501
Less: Allowance for loan losses		5,558			5,341
Net loans receivable		481,410			474,160
Regulatory stock, at cost		2,141			2,932
Bank premises and equipment, net		7,250			7,453
Bank owned life insurance		14,653			12,234
Foreclosed real estate owned		993			659
Accrued interest receivable		2,373			2,589
Goodwill		9,715			9,715
Other intangible assets		543			684
Other assets		6,201			5,121
TOTAL ASSETS	$	703,771		$	698,697
LIABILITIES
Deposits:
Non-interest bearing demand	$	101,632		$	89,218
Interest-bearing		447,066			452,372
Total deposits		548,698			541,590
Short-term borrowings		38,466			32,386
Other borrowings		19,956			27,533
Accrued interest payable		1,075			1,462
Other liabilities		4,230			3,775
TOTAL LIABILITIES		612,425			606,746
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2013: 3,708,718  shares,  2012: 3,371,849 shares		371			337
Surplus		34,991			24,728
Retained earnings		59,710			66,005
Treasury stock, at cost: 2013: 81,249 shares, 2012: 94,242 shares		(2,154	)		(2,739	)
Accumulated other comprehensive income (loss)		(1,572	)		3,620
TOTAL STOCKHOLDERS' EQUITY		91,346			91,951
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	703,771		$	698,697

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NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended September 30						Nine Months Ended September 30
	2013			2012			2013			2012
INTEREST INCOME
Loans receivable, including fees	$	6,202		$	6,429		$	18,557		$	19,233
Securities		939			971			2,685			3,004
Other		5			9			17			20
Total Interest income		7,146			7,409			21,259			22,257
INTEREST EXPENSE
Deposits		701			897			2,174			2,800
Short-term borrowings		17			14			44			38
Other borrowings		158			246			525			733
Total Interest expense		876			1,157			2,743			3,571
NET INTEREST INCOME		6,270			6,252			18,516			18,686
PROVISION FOR LOAN LOSSES		400			900			2,000			1,650
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,870			5,352			16,516			17,036
OTHER INCOME
Service charges and fees		614			561			1,834			1,674
Income from fiduciary activities		111			96			285			274
Net realized gains on sales of securities		198			631			590			1,318
Gains (losses) on sale of loans		(12	)		83			(9	)		143
Earnings and proceeds on life insurance policies		150			132			1,224			395
Other		155			88			381			284
Total other income		1,216			1,591			4,305			4,088
OTHER EXPENSES
Salaries and  employee benefits		2,103			2,102			6,438			6,300
Occupancy, furniture and equipment		507			512			1,586			1,489
Data processing related		221			222			673			670
Taxes, other than income		179			150			531			451
Professional Fees		139			157			498			601
FDIC Insurance assessment		114			94			335			290
Foreclosed real estate owned		217			(23	)		494			184
Other		693			743			2,052			2,076
Total other expenses		4,173			3,957			12,607			12,061
INCOME BEFORE TAX		2,913			2,986			8,214			9,063
INCOME TAX EXPENSE		777			786			1,930			2,419
NET INCOME	$	2,136		$	2,200		$	6,284		$	6,644
Basic earnings per share	$	0.59		$	0.61		$	1.73		$	1.85
Diluted earnings per share	$	0.59		$	0.61		$	1.73		$	1.84

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NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended September 30	2013			2012
Net interest income	$	6,270		$	6,252
Net income		2,136			2,200
Net interest spread (fully taxable equivalent)		3.89	%		3.87	%
Net interest margin (fully taxable equivalent)		4.05	%		4.07	%
Return on average assets		1.22	%		1.27	%
Return on average equity		9.33	%		9.54	%
Basic earnings per share	$	0.59		$	0.61
Diluted earnings per share	$	0.59		$	0.61
For the Nine Months Ended September 30
Net interest income	$	18,516		$	18,686
Net income		6,284			6,644
Net interest spread (fully taxable equivalent)		3.88	%		3.91	%
Net interest margin (fully taxable equivalent)		4.04	%		4.10	%
Return on average assets		1.22	%		1.30	%
Return on average equity		9.07	%		9.80	%
Basic earnings per share	$	1.73		$	1.85
Diluted earnings per share	$	1.73		$	1.84
As of September 30
Total assets	$	703,771		$	698,697
Total loans receivable		486,968			479,501
Allowance for loan losses		5,558			5,341
Total deposits		548,698			541,590
Stockholders' equity		91,346			91,951
Trust assets under management		124,147			113,233
Book value per share	$	25.54		$	25.50
Equity to total assets		12.98	%		13.16	%
Allowance to total loans receivable		1.14	%		1.11	%
Nonperforming loans to total loans		2.11	%		2.87	%
Nonperforming assets to total assets		1.60	%		2.07	%

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NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
	Sept 30		June 30		March 31		December 31		Sept 30
	2013		2013		2013		2012		2012
ASSETS
Cash and due from banks	$	15,193	$	9,872	$	6,763	$	10,867	$	10,514
Interest-bearing deposits with banks		12,221		17,425		9,182		1,428		24,825
Cash and cash equivalents		27,414		27,297		15,945		12,295		35,339
Securities available for sale		150,904		150,750		148,598		145,390		147,557
Securities held to maturity		174		173		173		173		172
Loans receivable (net of unearned Income)		486,968		480,715		478,663		476,710		479,501
Less: Allowance for loan losses		5,558		5,749		5,726		5,502		5,341
Net loans receivable		481,410		474,966		472,937		471,208		474,160
Regulatory stock, at cost		2,141		2,527		2,533		2,630		3,014
Bank premises and equipment, net		7,250		7,206		7,191		7,326		7,453
Foreclosed real estate owned		993		1,297		1,099		852		659
Goodwill and other intangibles		10,258		10,290		10,325		10,362		10,399
Other assets		23,227		23,100		21,952		22,063		19,944
TOTAL ASSETS	$	703,771	$	697,606	$	680,753	$	672,299	$	698,697
LIABILITIES
Deposits:
Non-interest bearing demand	$	101,632	$	93,881	$	84,357	$	82,075	$	89,218
Interest-bearing deposits		447,066		456,269		451,275		442,350		452,372
Total deposits		548,698		550,150		535,632		524,425		541,590
Other borrowings		58,422		52,225		47,202		51,184		59,919
Other liabilities		5,305		4,771		4,999		4,269		5,237
TOTAL LIABILITIES		612,425		607,146		587,833		579,878		606,746
STOCKHOLDERS' EQUITY		91,346		90,460		92,920		92,421		91,951
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	703,771	$	697,606	$	680,753	$	672,299	$	698,697

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NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
	Sept 30			June 30			March 31			Dec 31			Sept 30
Three months ended	2013			2013			2013			2012			2012
INTEREST INCOME
Loans receivable, including fees	$	6,202		$	6,169		$	6,186		$	6,261		$	6,429
Securities		939			877			868			884			971
Other		5			10			3			12			9
Total interest income		7,146			7,056			7,057			7,157			7,409
INTEREST EXPENSE
Deposits		701			719			754			860			897
Borrowings		175			193			202			218			260
Total interest expense		876			912			956			1,078			1,157
NET INTEREST INCOME		6,270			6,144			6,101			6,079			6,252
PROVISION FOR LOAN LOSSES		400			800			800			800			900
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		5,870			5,344			5,301			5,279			5,352
OTHER INCOME
Service charges and fees		614			620			600			563			561
Income from fiduciary activities		111			89			85			81			96
Net realized gains (losses) on sales of securities		198			254			138			100			631
Gains (losses) on sale of loans and servicing rights		(12	)		1			3			67			83
Earnings and proceeds on life insurance		150			148			925			144			132
Other		155			100			126			161			88
Total other income		1,216			1,212			1,877			1,116			1,591
OTHER EXPENSES
Salaries and  employee benefits		2,103			2,124			2,211			2,103			2,102
Occupancy, furniture and equipment , net		507			550			529			506			512
Foreclosed real estate owned		217			86			191			33			(23	)
FDIC insurance assessment		114			110			111			108			94
Other		1,232			1,263			1,259			1,303			1,272
Total other expenses		4,173			4,133			4,301			4,053			3,957
INCOME BEFORE TAX		2,913			2,423			2,877			2,342			2,986
INCOME TAX EXPENSE		777			584			569			583			786
NET INCOME	$	2,136		$	1,839		$	2,308		$	1,759		$	2,200
Basic  earnings per share	$	0.59		$	0.51		$	0.64		$	0.48		$	0.61
Diluted earnings per share	$	0.59		$	0.51		$	0.63		$	0.48		$	0.61
Book Value per share	$	25.54		$	24.98		$	25.66		$	25.49		$	25.50
Return on average equity (annualized)		9.33	%		7.87	%		10.02	%		7.54	%		9.54	%
Return on average assets (annualized)		1.22	%		1.07	%		1.39	%		1.02	%		1.27	%
Net interest spread (fte)		3.89	%		3.83	%		3.91	%		3.80	%		3.87	%
Net interest margin (fte)		4.05	%		3.99	%		4.07	%		3.98	%		4.07	%
Allowance for loan losses to total loans		1.14	%		1.20	%		1.20	%		1.15	%		1.11	%
Net charge-offs to average loans (annualized)		0.49	%		0.65	%		0.48	%		0.53	%		1.11	%
Nonperforming loans to total loans		2.11	%		2.41	%		2.63	%		2.77	%		2.87	%
Nonperforming assets to total assets		1.60	%		1.85	%		2.01	%		2.09	%		2.07	%

total NAL	10,285,183	11,581,355	12,581,664	13,199,804	13,713,658
past due 90+	-	-	-	-	67,429
total non performing loans	10,285,183	11,581,355	12,581,664	13,199,804	13,781,087
OREO	993,200	1,297,441	1,098,549	857,913	659,120
total Non performing assets	11,278,383	12,878,796	13,680,213	14,057,717	14,440,207
total loans	486,968,324	480,714,607	478,662,892	476,709,780	479,500,946
total assets	703,771,392	697,606,133	680,753,430	672,298,577	698,697,624
net charge off's, this quarter	590,000	776,960	575,726	639,000	1,333,000
average loans, this quarter	483,332,965	481,366,215	478,170,128	479,908,993	481,841,357
Loan loss reserve	5,558,636	5,749,100	5,726,060	5,501,786	5,340,701

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