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) July 22, 2014

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 July 22, 2014, the Registrant issued a press release announcing its earnings for the quarter and six months ended June 30, 2014.  A copy of the press release is furnished with this report as exhibit 99.1 hereto.

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 July 22, 2014

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:                      July 22, 2014	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 SECOND QUARTER EARNINGS

July 22, 2014-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 June 30, 2014 of $2,034,000.  This represents an increase of $195,000, or 10.6%, from the $1,839,000 earned in the similar period of 2013 due primarily to a decrease in the provision for loan losses and a higher level of gains on sales of securities.  Earnings per share (fully diluted) were $.56 in the 2014 period, increasing from the $.51 earned in the similar period of 2013.  Annualized return on average assets for the three months ended June 30, 2014 was 1.15% with an annualized return on average equity of 8.49%.  Net income for the six months ended June 30, 2014 totaled $3,998,000, which is $149,000 lower than the same six-month period of last year due primarily to proceeds on life insurance received in the first quarter of 2013.  Earnings per share (fully diluted) for the six months ended June 30, 2014 and 2013 totaled $1.10 and $1.14 per share, respectively.

Total assets as of June 30, 2014 were $716.9 million with loans receivable of $502.3 million, deposits of $554.7 million and stockholders’ equity of $96.2 million.

Loans receivable increased $21.6 million since June 30, 2013.  Commercial loans increased $18.2 million which includes a $10.7 million increase in municipal financing and a $2.5 million increase in real estate related loans.  Retail loans grew $3.4 million during the period due to growth in home equity lending and indirect auto loans.  The Company also sold $4.6 million of fixed-rate residential mortgages during the period, principally with 30-year terms, for purposes of interest rate risk management.  Total deposits increased

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$4.6 million over the past twelve months which includes a $10.1 million increase in non-interest bearing demand deposits.  Stockholders’ equity increased $5.7 million over the past year, due principally to the retention of earnings.

Non-performing assets, which include non-performing loans and foreclosed assets, totaled $11.8 million and represented 1.65% of total assets as of June 30, 2014 compared to $12.9 million, or 1.85% of total assets, as of June 30, 2013.  Net charge-offs were $537,000 for the quarter and totaled $937,000 for the six months ended June 30, 2014 compared to $777,000 and $1,353,000, respectively, for the similar periods in 2013.  Based on the levels of non-performing assets and net charge-offs, the Company determined that it was appropriate to provide $420,000 and $840,000 for potential future loan losses for the three and six month periods ended June 30, 2014, respectively, compared to $800,000 and $1.6 million, respectively, for the similar periods in 2013.  The allowance for loan losses totaled $5,611,000 as of June 30, 2014 and represented 1.12% of total loans outstanding, compared to $5,749,000 and 1.20% on June 30, 2013.

For the three months ended June 30, 2014, net interest income, on a fully taxable equivalent basis (fte), totaled $6,489,000, an increase of $59,000 compared to the similar period in 2013.  Net interest margin (fte) for the 2014 period was 3.91% decreasing from 3.99% for the similar period in 2013 due to a decrease of 16 basis points in the yield on interest-earning assets which more than offset the 9 basis point decrease in the cost of funds.  The reduced margin was due primarily to a 37 basis point decrease in the yield earned on loans as new growth and modifications of existing credits continues to negatively impact the net interest margin.  Net interest income (fte) for the six months ended June 30, 2014 totaled $12,951,000, which was a $134,000 higher than the similar period in 2013.  The net interest margin (fte) was 3.91% in the 2014 period and 4.03%

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during the first six months of 2013.  Decreasing yields on loans contributed to the reduced net interest margin.

Other income for the three months ended June 30, 2014 totaled $1,468,000 compared to $1,212,000 for the similar period in 2013.  Net gains from securities sales increased $255,000 compared to the prior-year period.  For the six months ended June 30, 2014, other income totaled $2,521,000 compared to $3,089,000 in the 2013 period.  Other income in the 2013 period includes a non-recurring gain of $770,000 from proceeds on a bank-owned life insurance policy.  Gains on the sales of investment securities totaled $603,000 on sales of $31.9 million for the 2014 period compared to $392,000 on sales of $15.3 million in the 2013 period.

Other expenses totaled $4,473,000 for the three months ended June 30, 2014, an increase of $340,000, from the $4,133,000 reported in the similar period of 2013.  The increase was principally due to costs and write-downs on properties carried in foreclosed real estate owned.  Excluding these costs, all other operating expenses increased $30,000, net.  For the six months ended June 30, 2014, other expenses totaled $8,605,000 compared to $8,434,000 for the similar period in 2013, an increase of $171,000, or 2.0%.  Foreclosed real estate expenses increased $184,000 over the first half of last year, accounting for the increase.

Mr. Critelli commented, “Our earnings for the second quarter reflect an increase of over 10% when compared to 2013.  However, we are continuing to feel the negative impact of a slow economy, primarily in the cost of maintaining and disposing of foreclosed properties.  Working with borrowers to resolve problem loans will remain a top priority throughout 2014.  The ongoing low interest rates, and a competitive lending environment also continues to place pressure on our net interest margin.  However, our year-to-date

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margin and capital levels remain well above peer.  We look forward to serving our growing base of stockholders and customers as the Northeastern Pennsylvania economy slowly recovers from the extended downturn.”

Norwood Financial Corp., is the parent company of Wayne Bank, which operates 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.

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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 net interest income 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:

	Three months ended June 30				Six months ended June 30
(dollars in thousands)	2014		2013		2014		2013
Net Interest Income	$	6,155	$	6,144	$	12,300	$	12,245
Taxable equivalent basis adjustment   using 34% marginal tax rate		334		286		651		572
Net interest income on a fully taxable   equivalent basis	$	6,489	$	6,430	$	12,951	$	12,817

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)

	June 30,
	2014			2013
ASSETS
Cash and due from banks	$	12,196		$	9,872
Interest-bearing deposits with banks		3,182			17,425
Cash and cash equivalents		15,378			27,297
Securities available for sale		154,925			150,750
Securities held to maturity,  fair value 2014: $0 and 2013:  $177		-			173
Loans receivable (net of unearned Income)		502,316			480,715
Less: Allowance for loan losses		5,611			5,749
Net loans receivable		496,705			474,966
Regulatory stock, at cost		2,437			2,527
Bank premises and equipment, net		6,910			7,206
Bank owned life insurance		18,002			14,527
Foreclosed real estate owned		4,293			1,297
Accrued interest receivable		2,405			2,488
Goodwill		9,715			9,715
Other intangible assets		446			575
Deferred tax asset		3,764			4,454
Other assets		1,882			1,631
TOTAL ASSETS	$	716,862		$	697,606
LIABILITIES
Deposits:
Non-interest bearing demand	$	103,954		$	93,881
Interest-bearing		450,760			456,269
Total deposits		554,714			550,150
Short-term borrowings		38,009			32,075
Other borrowings		22,983			20,150
Accrued interest payable		937			1,037
Other liabilities		4,017			3,734
TOTAL LIABILITIES		620,660			607,146
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2014: 3,708,718  shares,  2013: 3,708,718 shares		371			371
Surplus		35,091			34,949
Retained earnings		62,613			58,626
Treasury stock, at cost: 2014: 70,747 shares, 2013: 86,749 shares		(1,878	)		(2,299	)
Accumulated other comprehensive income (loss)		5			(1,187	)
TOTAL STOCKHOLDERS' EQUITY		96,202			90,460
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	716,862		$	697,606

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NORWOOD FINANCIAL CORP.

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)

	Three Months Ended June 30				Six Months Ended June 30
	2014		2013		2014		2013
INTEREST INCOME
Loans receivable, including fees	$	5,933	$	6,169	$	11,913	$	12,355
Securities		1,025		877		2,013		1,746
Other		2		10		2		12
Total Interest income		6,960		7,056		13,928		14,113
INTEREST EXPENSE
Deposits		618		719		1,253		1,473
Short-term borrowings		20		15		42		27
Other borrowings		167		178		333		368
Total Interest expense		805		912		1,628		1,868
NET INTEREST INCOME		6,155		6,144		12,300		12,245
PROVISION FOR LOAN LOSSES		420		800		840		1,600
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,735		5,344		11,460		10,645
OTHER INCOME
Service charges and fees		583		620		1,159		1,221
Income from fiduciary activities		99		89		203		174
Net realized gains on sales of securities		509		254		603		392
Gains on sale of loans		26		1		66		3
Earnings and proceeds on life insurance policies		175		148		343		1,073
Other		76		100		147		226
Total other income		1,468		1,212		2,521		3,089
OTHER EXPENSES
Salaries and  employee benefits		2,172		2,124		4,336		4,335
Occupancy, furniture and equipment		518		550		1,096		1,079
Data processing related		229		230		441		452
Taxes, other than income		161		179		326		352
Professional Fees		174		172		340		359
FDIC Insurance assessment		102		110		216		221
Foreclosed real estate owned		396		86		461		277
Other		721		682		1,389		1,359
Total other expenses		4,473		4,133		8,605		8,434
INCOME BEFORE TAX		2,730		2,423		5,376		5,300
INCOME TAX EXPENSE		696		584		1,378		1,153
NET INCOME	$	2,034	$	1,839	$	3,998	$	4,147
Basic earnings per share	$	0.56	$	0.51	$	1.10	$	1.15
Diluted earnings per share	$	0.56	$	0.51	$	1.10	$	1.14

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NORWOOD FINANCIAL CORP.

Financial Highlights (Unaudited)

(dollars in thousands, except per share data)

For the Three Months Ended June 30	2014			2013
Net interest income	$	6,155		$	6,144
Net income		2,034			1,839
Net interest spread (fully taxable equivalent)		3.77	%		3.83	%
Net interest margin (fully taxable equivalent)		3.91	%		3.99	%
Return on average assets		1.15	%		1.07	%
Return on average equity		8.49	%		7.87	%
Basic earnings per share	$	0.56		$	0.51
Diluted earnings per share	$	0.56		$	0.51
For the Six Months Ended June 30
Net interest income	$	12,300		$	12,245
Net income		3,998			4,147
Net interest spread (fully taxable equivalent)		3.77	%		3.87	%
Net interest margin (fully taxable equivalent)		3.91	%		4.03	%
Return on average assets		1.14	%		1.22	%
Return on average equity		8.48	%		8.94	%
Basic earnings per share	$	1.10		$	1.15
Diluted earnings per share	$	1.10		$	1.14
As of June 30
Total assets	$	716,862		$	697,606
Total loans receivable		502,316			480,715
Allowance for loan losses		5,611			5,749
Total deposits		554,714			550,150
Stockholders' equity		96,202			90,460
Trust assets under management		132,760			120,802
Book value per share	$	26.14		$	24.98
Equity to total assets		13.42	%		12.97	%
Allowance to total loans receivable		1.12	%		1.20	%
Nonperforming loans to total loans		1.49	%		2.41	%
Nonperforming assets to total assets		1.65	%		1.85	%

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NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets (unaudited)

(dollars in thousands)

	June 30		March 31		December 31		September 30		June 30
	2014		2014		2013		2013		2013
ASSETS
Cash and due from banks	$	12,196	$	8,607	$	7,528	$	15,193	$	9,872
Interest-bearing deposits with banks		3,182		142		335		12,221		17,425
Cash and cash equivalents		15,378		8,749		7,863		27,414		27,297
Securities available for sale		154,925		156,165		158,132		150,904		150,750
Securities held to maturity		-		175		174		174		173
Loans receivable (net of unearned income)		502,316		496,016		503,097		486,968		480,715
Less: Allowance for loan losses		5,611		5,727		5,708		5,558		5,749
Net loans receivable		496,705		490,289		497,389		481,410		474,966
Regulatory stock, at cost		2,437		2,741		2,877		2,141		2,527
Bank owned life insurance		18,002		17,930		17,790		14,653		14,527
Bank premises and equipment, net		6,910		7,031		7,125		7,250		7,206
Foreclosed real estate owned		4,293		1,364		1,009		993		1,297
Goodwill and other intangibles		10,161		10,192		10,225		10,258		10,290
Other assets		8,051		8,598		8,650		8,574		8,573
TOTAL ASSETS	$	716,862	$	703,234	$	711,234	$	703,771	$	697,606
LIABILITIES
Deposits:
Non-interest bearing demand	$	103,954	$	93,400	$	92,684	$	101,632	$	93,881
Interest-bearing deposits		450,760		446,676		448,498		447,066		456,269
Total deposits		554,714		540,076		541,182		548,698		550,150
Other borrowings		60,992		63,746		73,675		58,422		52,225
Other liabilities		4,954		5,212		4,513		5,305		4,771
TOTAL LIABILITIES		620,660		609,034		619,370		612,425		607,146
STOCKHOLDERS' EQUITY		96,202		94,200		91,864		91,346		90,460
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	716,862	$	703,234	$	711,234	$	703,771	$	697,606

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NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

	June 30			March 31			December 31			September 30			June 30
Three months ended	2014			2014			2013			2013			2013
INTEREST INCOME
Loans receivable, including fees	$	5,933		$	5,980		$	6,019		$	6,202		$	6,169
Securities		1,025			987			972			939			877
Other		2			1			9			5			10
Total interest income		6,960			6,968			7,000			7,146			7,056
INTEREST EXPENSE
Deposits		618			635			674			701			719
Borrowings		187			188			181			175			193
Total interest expense		805			823			855			876			912
NET INTEREST INCOME		6,155			6,145			6,145			6,270			6,144
PROVISION FOR LOAN LOSSES		420			420			400			400			800
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		5,735			5,725			5,745			5,870			5,344
OTHER INCOME
Service charges and fees		583			576			578			614			620
Income from fiduciary activities		99			104			94			111			89
Net realized gains on sales of securities		509			95			291			198			254
Gains (losses) on sale of loans and servicing rights		26			39			121			(12	)		1
Earnings and proceeds on life insurance  policies		175			168			162			150			148
Other		76			71			64			155			100
Total other income		1,468			1,053			1,310			1,216			1,212
OTHER EXPENSES
Salaries and  employee benefits		2,172			2,165			2,009			2,103			2,124
Occupancy, furniture and equipment, net		518			578			550			507			550
Foreclosed real estate owned		396			65			73			217			86
FDIC insurance assessment		102			114			109			114			110
Other		1,285			1,210			1,357			1,232			1,263
Total other expenses		4,473			4,132			4,098			4,173			4,133
INCOME BEFORE TAX		2,730			2,646			2,957			2,913			2,423
INCOME TAX EXPENSE		696			682			776			777			584
NET INCOME	$	2,034		$	1,964		$	2,181		$	2,136		$	1,839
Basic  earnings per share	$	0.56		$	0.54		$	0.60		$	0.59		$	0.51
Diluted earnings per share	$	0.56		$	0.54		$	0.60		$	0.59		$	0.51
Book Value per share	$	26.14		$	25.88		$	25.43		$	25.54		$	24.98
Return on average equity (annualized)		8.49	%		8.46	%		9.33	%		9.33	%		7.87	%
Return on average assets (annualized)		1.15	%		1.13	%		1.23	%		1.22	%		1.07	%
Net interest spread (fte)		3.77	%		3.77	%		3.76	%		3.89	%		3.83	%
Net interest margin (fte)		3.91	%		3.91	%		3.91	%		4.05	%		3.99	%
Allowance for loan losses to total loans		1.12	%		1.15	%		1.13	%		1.14	%		1.20	%
Net charge-offs to average loans (annualized)		0.43	%		0.32	%		0.21	%		0.49	%		0.65	%
Nonperforming loans to total loans		1.49	%		1.92	%		1.90	%		2.11	%		2.41	%
Nonperforming assets to total assets		1.65	%		1.55	%		1.48	%		1.60	%		1.85	%

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