Norwood Financial (NASDAQ:NWFL) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
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Summary
Norwood Financial reported a record net interest income of $24.6 million, marking a 38% increase from Q1 2025, with net income and earnings per share both showing significant growth.
The acquisition of Presence Bank was completed, increasing the company’s assets, loan portfolio, and geographic presence; integration activities are on track, with systems and branding efforts underway.
Strategic priorities for 2026 include completing the integration of Presence Bank, boosting operational efficiency using AI, strengthening the talent pool, and enhancing shareholder value.
The company’s margin improved by 8 basis points, and loan and deposit growth was noted, with a solid pipeline of loans expected to contribute positively.
Management is optimistic about 2026, expecting continued accretion to shareholder value faster than initially projected due to favorable interest rate movements and high-quality acquisitions.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Norwood Financial Corp. First quarter 2026 earnings call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you’ll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today’s conference is being recorded. I’d now like to hand the conference over to Mackenzie Jackson, Corporate Secretary. Please go ahead.
Mackenzie Jackson (Corporate Secretary)
Thank you, Liz. Good morning everyone and welcome to our first quarter 2026 earnings conference call. With me today are Jim Donnelly, our president and CEO, and John McCaffrey, our CFO. The press release we issued earlier this morning, together with the presentation material that accompanies our remarks is available on the Investor Relations section of our webpage. Comments made by by any participant on today’s call may include forward looking statements. These statements are subject to various risks and uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied and we assume no obligation to update any forward looking information. Please refer to our Most recent Form 10K and other subsequent reports filed with the SEC for more information about risks related to forward looking statements. During our discussion we may refer to certain non-GAAP financial measures. These measures are useful for analysts, investors and management to evaluate ongoing performance. A reconciliation of these measures to GAAP financial results is provided in our presentation materials. I will now turn the call over to Jim.
Jim Donnelly (President and CEO)
Thank you Mackenzie. Good morning everyone. We began 2026 with strong performance, extending the momentum we began to build last year. This was the first quarter that included results from the Presence bank acquisition, increasing our assets, loan portfolio, geographic presence and earnings power. I am proud of our team’s ability to focus on our mission to make every day better by serving our customers and communities while making significant progress on our integration activities. Net interest income was a record 24,600,000, an increase of 38% compared with the first quarter of 2025. Net interest income margin expanded by 38 basis points to 3.68%. It was a great quarter for the bank as we benefited from our repositioned bond portfolio and favorable interest rate movement. Net income and earnings per share increase improved 35% and 14% respectively on an adjusted basis with higher adjusted returns on average assets and tangible equity. I am pleased with our first quarter performance and remain optimistic that 2026 will be a great year for the Bank. During our fourth quarter earnings call, I introduced our 2026 strategic priorities. I would like to provide you with an update on these. The first priority is to successfully complete the Presence Bank integration. I am pleased to report that we are on plan with these activities. Our plans include driving uniform systems and operating practices across the new combined entity, uniting the acquired businesses and branches under our new brand, and engaging in open conversations across our locations and functions to identify and adopt the best in class policies that will enable us to better serve our communities while improving our results. Among our early accomplishments is the completion of our core integration unifying our IT and HR systems. We have also begun the work of unifying all acquired locations under our brand including signage, logos and other branded materials to drive consistency and unity across our organization. The integration requires a lot of planning, organization and executing across sites and functions to complete. While we have been actively integrating the systems, we have not taken our eye off serving our customers and communities which have resulted in impressive loan and deposit growth during the same period. I am proud of our team for going above and beyond to ensure our integration plans are being accomplished and for taking great care of our customers while doing so. Our second strategic priority is to increase operating efficiency and elevate the customer experience through AI. This is an area where you’re implementing best practices from Presidents bank and deploying their developed systems and processes across the combined organization. One item I am really excited about is the Commercial credit system which we will integrate in July. This uses embedded AI and machine learning to enhance the productivity of our talented credit officers by bringing automation, speed and quality to the process. For example, automatic spreading will allow our credit analysts to save time. Better reporting will provide our credit officers with helpful insights to make informed decisions and the ability to draft credit memos will improve the speed and quality of the documentation process. These benefits will enable our employees to perform higher value functions as well as underwriting deals more quickly to improve deal flow. Our third objective is to strengthen the talent pool and deepen our leadership bench. As I’ve met with our employees across the sites, including the newly added sites in Chester, Lancaster and Dauphin Counties, I am continually reminded of the great team we have and I firmly believe our key to success is our people. They are dedicated to serving the communities and working hard to find the ways to make every day better. The team became bigger and stronger during the quarter as we welcomed the former Presence Bank employees to our organization, including additions to our executive leadership team. I’m confident that together we can continue to deliver financial solutions that improve the lives of our customers and allowing them to achieve their financial goals. Our fourth and final priority is to ensure everything we do increases shareholder value. The results we reported today demonstrate how we have accomplished this during the quarter accumulation of our performance in Q1 and actions taken in previous periods, including the portfolio rebalancing we completed in 2024. The first three priorities I have reviewed position us to create even more value in future periods. One shining example of how we are creating value for shareholders is through our recent acquisition. Not only did the transition bring immediate and meaningful growth to our bank, but we are also realizing the strategic and financial benefits of our acquisition of more quickly than planned. One demonstration of this is that we now expect accretion to shareholder value ahead of our original projections as a result of the quality of the presidents bank team and assets plus interest rates that have moved in our favor. We anticipate the tangible book value payback to occur more quickly than planned after only 1/4 since we closed the acquisition. It is obvious that we acquired a solid business with high quality credit metrics and an excellent team including several talented executives that have joined the Wayne bank team demonstrating their confidence in our joint future. The strong strategic fit and cultural alignment is contributing to our early success. I’m encouraged by our initial progress and even more optimistic about our future and ability to generate meaningful and lasting shareholder value. I will now turn the call over to John to walk us through the results.
John McCaffrey (Chief Financial Officer)
Thank you Jim Good morning everyone. In the first quarter we delivered improved financial results on an adjusted basis, continuing to benefit from our repositioned balance sheet and the outstanding performance of the entire Norwood team. It was a great start to the year. Continuing the momentum from 2025 we achieved record net interest income increasing $3.6 million on a linked quarter basis due to higher interest earning. Assets margin improved 8 basis points due to a slight decline in deposit costs coupled with a 7 basis point increase in interest earning asset yields below the margin line. Our quarterly results do continue to include merger charges. We had about $5 million in merger charges in the quarter. We provided adjusted returns in the press release to show you performance ratios excluding these expenses. We also providing pre provision net revenue across the entire span of the press release. Provision was higher in Q1 versus the fourth quarter of 2025. Some of the increase was the result of annual updating of historical factors in the model as well as the integration of the President’s bank portfolio. Our coverage ratio stands at 1.09% compared to 1.07 at year end. I Will also note that we elected to adopt early ASU 2025-08 and therefore did not experience a Current Expected Credit Loss (CECL) double count on the acquired non PCD loans. Adjusted pre provision net revenue was up about 11% on a linked quarter basis, mostly due to the improved margin on a larger balance sheet offset by higher expenses. Non interest income increased compared to the same period last year. This was due to higher service charges and debit card income. Quarterly expenses were up as a percent of average assets compared to Q4 2025. Most of this increase is in technology related. This is as we are investing in new systems that will ultimately drive efficiency in the future. On that note, I would like to give a shout out to the finance team who implemented a new accounting system while executing a merger and a core conversion. The first quarter was a transition period as we integrated the acquisition with GAAP results impacted by related expenses. On an adjusted basis, we achieved strong growth in net interest income partially offset by higher expenses. To expand on Jim’s point earlier growth, since January 5, loans grew approximately $46 million or 8.4% annualized and deposits grew about $70 million or $11.6 million on an annualized basis. Overall, we are pleased with our performance and believe that our sound balance sheet management and credit metrics position us well for the future. Jim and I will now be happy to answer any questions you may have. Operator, Please provide instructions for asking questions.
OPERATOR
If you’d like to ask a question at this time, please press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from Daniel Cardenas with Breen Capital.
Daniel Cardenas (Equity Analyst)
Morning guys. Morning, Dan. Morning, Dan. So a couple questions on the operating expense number that came in this quarter. You said part of that was tech related. How much was that? And then are all of the tech related investments? Have those been made? And I’m just trying to get a sense for what’s a good run rate on the operating expenses going forward.
John McCaffrey (Chief Financial Officer)
So the increase in tech expenses were mostly due to. Well again we are increasing investments Jim mentioned in the Abacus system and our new accounting system. So there are ongoing expenses. We tried to exclude all of the conversion and other charges that were one timers in Q1. So I think for OPEX going forward that the level that we’re at is probably a pretty good run rate. Kind of a $161,000 per quarter is kind of where you think things will kind of shake out here. Yeah, I’d like to see them come down a little bit. Again. We’re trying to pull apart, you know, how much actually was. was related to activity during the quarter because of the merger. But I do think we’ll get efficiencies but I wouldn’t drop it more than you know, below 158 I think for the.
Daniel Cardenas (Equity Analyst)
All right, good. Thank you. And then on the margin, 368 margin. I probably missed it in the press release, but what was the contribution from yield accretion in the quarter?
John McCaffrey (Chief Financial Officer)
The yield accretion in the quarter was actually it was in the year the total pre tax impact of purchase accounting was 435. That’s substantially margin related. There’s some for the leases, but that’s kind of a minimal amount.
Daniel Cardenas (Equity Analyst)
So probably about 6 basis points this quarter. And what kind of impact do you think is yield accretion is going to contribute on a go forward basis?
John McCaffrey (Chief Financial Officer)
So on a go forward basis for the full year of 2026. So we’re scheduled at about $2.2 million for 2026 dropping to about $2 million for 2027 in total margin accretion.
Daniel Cardenas (Equity Analyst)
Okay. In 202027 at $2 million. $2 million for 27. Got it. Okay. And then one more question I’ll step back and let others ask. But the non performing number for the quarter, roughly 11 million if I’m calculating that correctly. Was that all attributable to the acquisition or was there other issues going on in the portfolio?
John McCaffrey (Chief Financial Officer)
I don’t think they contributed any nonperforming from presence. So that was mostly us. I’m not aware of any large non performers that came in
Daniel Cardenas (Equity Analyst)
pretty granular increase. So that mostly on the commercial side or maybe a little bit of color as to what, you know, what was making up the linked quarter increase.
John McCaffrey (Chief Financial Officer)
Largely, it’s largely on commercial side. There’s very little. The indirect and consumer portfolios are about the same that they were in the quarter before. We had a little dip in the last quarter on the commercial side and came back up to about where we were the previous quarter then. So it’s. I think we leveled off at that amount.
Daniel Cardenas (Equity Analyst)
Okay, I’ll step back for now. Thank you.
John McCaffrey (Chief Financial Officer)
Thanks, Dan.
OPERATOR
Our next question comes from Matthew Brees with Stevens.
Matthew Brees (Equity Analyst)
Hey, good morning. I was hoping maybe. Good morning. Touch on the components of the margin. You know, first maybe more broadly we’d love just some color on competitive conditions around deposits. I think in the Northeast we’ve started to hear inklings of maybe some high 3 and low 4% promotional rates. Wanted to hear if you’re dealing with that and maybe what your thoughts around deposit cost outlook is. Now that doesn’t seem like we’re getting much of any rate cuts.
John McCaffrey (Chief Financial Officer)
So through the even into I guess Q1 we were continuing to lower deposit costs based upon the December rate cut. You know, we are not talking about raising any of our specials on CDs at all. And I don’t know about the new markets about. I think they’re a little more competitive than we’re used to up here in Northeast Pennsylvania. But we’re not seeing competitive pressure in our markets on deposit pricing yet, I guess.
Jim Donnelly (President and CEO)
Yeah, Matt, we see some spotty stuff if you dig into why they’re doing it. There are people with very high loan to deposit ratios or just interesting business strategies sometimes. But we see that we’re competitive our current rates and we’re not seeing a lot of upward pressure. I’m still seeing some competitors bringing their rates down.
Matthew Brees (Equity Analyst)
Got it. Okay. How much more room do you think there is to squeeze deposit costs lower than if I Look at your CD costs this quarter? Knocking on 3.6%. Is the blended rate of maturities still in kind of that 330 range with some downside?
John McCaffrey (Chief Financial Officer)
Yeah, it’s most of that’s just really churning our, the specialty we’ve had out there. So. And there is a, you know, a push on to again try to get our CD number to be down below 40% of total deposits. So we hope that that will give us some, you know, more levers to push on going forward. But I think it’s going to be like I said, we had like a pretty, you know, with just a couple basis point drop in some of the deposit categories, just one basis point overall. But I want to try to get a better feel for the full portfolio now that I’ve got. Now that we have the deposits in one system it’s going to be easier for me to kind of look at where we are from a go forward basis which we completed the core conversion on April 5th. So you know, get it, you know trying to get that kind of data is on the COVID But on the.
Jim Donnelly (President and CEO)
Yeah, I think there’s. We’re not seeing downward pressure on the lending rates to the level that you might be seeing in the Northeast as well.
John McCaffrey (Chief Financial Officer)
And. But I think our ability to squeeze out of the deposits will be smaller than it had been. It’s there but it will be at a smaller amount.
Matthew Brees (Equity Analyst)
Okay. And then maybe on the, on the lending side, same question around competitive conditions and we’d love to hear kind of what, excuse me, what new origination yields are on the pipeline right now and how does the pipeline look?
Jim Donnelly (President and CEO)
Pipeline is very healthy and has been. So when we look ahead 30, 60, 90, we’re ahead of our general pipeline. Quality is very good and pricing is in line with our expectations. We’re the closings that we just had averaged 7.05 for the last 18 and a half million we booked.
John McCaffrey (Chief Financial Officer)
Yeah, I’m still seeing, I guess most, almost all the rates that are coming across are still higher than what the portfolio yield is. So we think there’s still room there for some expansion.
Matthew Brees (Equity Analyst)
Okay, so it sounds like deposit costs are flat to down a little bit.
John McCaffrey (Chief Financial Officer)
There’s still upward repricing on the loan side. So maybe John, help me out with the margin. How you feel like it’s going to shake out as we progress through the year. Well, I think we still have room to expand somewhat. I guess I wouldn’t put it at again what we experienced in the first quarter given the different financial ins and outs with the acquisition that went on. But if we can get another, let’s say three or four or five basis points on loans going forward, I think we can better use. We had some drag on cash in Q1 as well, which we’ll be able to deploy more easily going forward just given the systems issue. So again, I think the margin can increase throughout the year. I wouldn’t put it at 8 basis points on linked quarter basis, but maybe 3 to 4, 5 basis points.
Matthew Brees (Equity Analyst)
Great, I appreciate all that. I’ll stop there. Thank you.
John McCaffrey (Chief Financial Officer)
Thanks Matt.
OPERATOR
We have a follow up question from Daniel Cardenas with Breen Capital.
Daniel Cardenas (Equity Analyst)
Yeah, thanks guys. Just a couple quick questions. Hello. So the margin discussion that you just had, John, are you talking three to five basis points for the remainder of the year or perhaps over the next couple quarters?
John McCaffrey (Chief Financial Officer)
Over the next couple quarters.
Daniel Cardenas (Equity Analyst)
Okay, good. And then on the fee income side, nice improvement quarter over quarter. You know, what are some of the drivers that could potentially drive that number higher as we look at two Q& beyond?
Jim Donnelly (President and CEO)
So you know, part of it, Dan, is we were an underperformer from debit revenue. So we put a strategy in place a couple years ago and changed the way we were looking about that and promoting it. So part of it is getting more debit cards in more people’s hands and promoting the utilization of it. And then we’ve been working on growing our fee income businesses for the last few years and then starting to pay dividends. But there’s lots of room for us to grow there. It’s just a matter of making sure that we are able to staff up appropriately to grow our brokerage trust and mortgage businesses. Treasury Management is geared up for the second half of the year. Should do a nice job as well.
Daniel Cardenas (Equity Analyst)
I was just going to ask you about that. Okay, perfect. I’ll step back. Thank you. Thanks, Dan.
OPERATOR
That concludes today’s question and answer session. I’d like to turn the call over to Jim Donnelly for closing remarks.
Jim Donnelly (President and CEO)
Thank you once again for joining us this morning. We made a great start to 2026, continuing the momentum built in 2025 as we live out our mission to help our customers and communities build strong financial futures so that every day, every year, every generation is better than the last. As we continue to integrate the presence, bank acquisition and benefit from the shared best practices, we will be better positioned to deliver that better future united to serve our communities as we move forward. Our disciplined approach, high quality credit metrics and careful execution enables us to deliver improved financial results and lasting value for our shareholders. I look forward to updating you on our progress. Have a great day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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