Norwood Financial Q1 2026 Earnings Report

Norwood Financial EPS Results

• Actual EPS: $0.72
• Consensus EPS: $0.81
• Beat/Miss: Missed by -$0.09
• One Year Ago EPS: N/A

Norwood Financial Revenue Results

• Actual Revenue: $3.12 million
• Expected Revenue: $27.50 million
• Beat/Miss: Missed by -$24.39 million
• YoY Revenue Growth: N/A

Norwood Financial Announcement Details

• Quarter: Q1 2026
• Date: 4/27/2026
• Time: Before Market Opens
• Conference Call Date: Monday, April 27, 2026
• Conference Call Time: 10:30AM ET

Norwood Financial (NASDAQ:NWFL) Corporation is a bank holding company headquartered in Honesdale, Pennsylvania. Through its subsidiary, Wayne Bank, the company provides community banking services to individuals, families, businesses and organizations.

Wayne Bank offers a range of deposit products, including checking, savings, money market and certificate of deposit accounts. Its lending activities include residential and commercial real estate loans, consumer loans, home equity financing and loans to small and mid-sized businesses. The bank also provides online and mobile banking, cash management and other financial services.

The company serves communities in northeastern Pennsylvania and the southern Tier and Catskills regions of New York through its branch network and digital banking channels. Wayne Bank has a history dating to the 19th century and operates with a community-focused banking model designed to support local households and businesses.

Norwood Financial Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Presence Bank acquisition integration on track; core systems (IT and HR) have been unified, branding rollout is underway, and management says accretion to tangible book value is expected sooner than originally projected.
• Positive Sentiment: Record net interest income of $24.6M and NIM expansion to 3.68%, with adjusted net income up ~35% and adjusted EPS up ~14%; loans and deposits have grown meaningfully since the acquisition close.
• Neutral Sentiment: GAAP results were weighed down by merger-related charges (~$5M) and higher quarter-to-quarter provisions; management provided adjusted metrics and says adjusted pre-provision net revenue rose ~11% linked quarter.
• Negative Sentiment: Non-performing loans increased (roughly $11M) and were driven mainly by the commercial portfolio, and management noted this was not attributable to the acquired loans.
• Positive Sentiment: Ongoing tech and AI investments—including an AI-enabled commercial credit system to be integrated in July—are expected to improve underwriting speed, reporting, and long-term operating efficiency, though near-term tech spend lifted expenses.

Presentation

[Operator]

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 at Norwood Financial]

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 McCaffery, our CFO. The press release we issued earlier this morning, together with the presentation material that accompanies our remarks, are available on the Investor Relations section of our webpage. Comments made 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 10-K 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.

[Mackenzie Jackson, Corporate Secretary at Norwood Financial]

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 at Norwood Financial]

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 $24.6 million, 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.

[Jim Donnelly, President and CEO at Norwood Financial]

Net income and earnings per share increased, 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.

[Jim Donnelly, President and CEO at Norwood Financial]

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.

[Jim Donnelly, President and CEO at Norwood Financial]

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.

[Jim Donnelly, President and CEO at Norwood Financial]

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 we're implementing best practices from Presence 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.

[Jim Donnelly, President and CEO at Norwood Financial]

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.

[Jim Donnelly, President and CEO at Norwood Financial]

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, 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. The 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.

[Jim Donnelly, President and CEO at Norwood Financial]

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 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 Presence 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 one quarter 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.

[Jim Donnelly, President and CEO at Norwood Financial]

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 McCaffery, CFO at Norwood Financial]

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.

[John McCaffery, CFO at Norwood Financial]

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're also providing pre-provision net revenue across the entire span of the press release.

[John McCaffery, CFO at Norwood Financial]

The 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 Presence 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 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.

[John McCaffery, CFO at Norwood Financial]

Quarterly expenses were up as a percentage 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 fifth, loans grew approximately $46 million or 8.4% annualized, and deposits grew about $70 million or 11.6% on an annualized basis.

[John McCaffery, CFO at Norwood Financial]

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 one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Daniel Cardenas with Brean Capital.

[Daniel Cardenas, Analyst at Brean Capital]

Morning, guys.

[John McCaffery, CFO at Norwood Financial]

Morning, Dan.

[Jim Donnelly, President and CEO at Norwood Financial]

Morning, Dan.

[Daniel Cardenas, Analyst at Brean Capital]

Couple questions. On the operating expense number that came in this quarter, how much, you said part of that was tech related. How much was that? Then are all of the tech related investments, have those been made? Just trying to get a sense for what's a good run rate on the operating expenses going forward.

[John McCaffery, CFO at Norwood Financial]

The increase in tech expenses were mostly due to well, again, we are increasing investment, as Jim mentioned, in the Abrigo system and our new accounting system. There are ongoing expenses. We try to exclude all of the conversion and other charges that were one-timers in Q1. I think for OpEx going forward, that the level that we're at is probably a pretty good run rate.

[Daniel Cardenas, Analyst at Brean Capital]

Kind of a 16 to 1 per quarter is kind of where you think things will kind of shake out here?

[John McCaffery, CFO at Norwood Financial]

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 related to activity during the quarter because of the merger. I do think we'll get efficiencies, but I wouldn't drop it more than, you know, below 15.8, I think, for the quarter.

[Daniel Cardenas, Analyst at Brean Capital]

Okay. All right. Good. Thank you. On the margin, the 3.68% margin, I probably missed this in the press release, but what was the contribution from yield accretion in the quarter?

[John McCaffery, CFO at Norwood Financial]

The yield accretion in the quarter was, I think actually it was in here. 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, Analyst at Brean Capital]

Probably about 6 basis points this quarter. What kind of impact do you think is yield accretion is gonna contribute on a go-forward basis?

[John McCaffery, CFO at Norwood Financial]

On a go-forward basis for the full year of 2026, we're scheduled at about $2.2 million for 2026, dropping to about $2 million for 2027 in total margin accretion.

[Daniel Cardenas, Analyst at Brean Capital]

Okay.

[John McCaffery, CFO at Norwood Financial]

In 2027, $2 million.

[Daniel Cardenas, Analyst at Brean Capital]

$2 million in 2027. Gotcha. Okay. Then, one more question then I'll step back and let others ask. 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 McCaffery, CFO at Norwood Financial]

I don't think they contributed any non-performing from Presence. That was mostly us. I'm not aware of any large non-performance that came in.

[Daniel Cardenas, Analyst at Brean Capital]

A pretty granular increase. Was 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?

[Jim Donnelly, President and CEO at Norwood Financial]

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 we came back up to about where we were the previous quarter then. I think we leveled off at that amount.

[Daniel Cardenas, Analyst at Brean Capital]

Okay. I'll step back for now. Thank you.

[John McCaffery, CFO at Norwood Financial]

Thanks, Dan.

[Operator]

Our next question comes from Matthew Breese with Stephens.

[Matthew Breese, Analyst at Stephens]

Hey, good morning.

[John McCaffery, CFO at Norwood Financial]

Hey, Matt.

[Jim Donnelly, President and CEO at Norwood Financial]

Good morning, Matt.

[Matthew Breese, Analyst at Stephens]

Good morning. Touch on the components of the margin. You know, first, maybe more broadly, would love just some color on competitive conditions around deposits. I think in the Northeast we've started to hear inklings of, you know, 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, you know, it doesn't seem like we're getting much of any rate cuts.

[John McCaffery, CFO at Norwood Financial]

Even into Q1, I guess, 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. I don't know about the new markets. I think they're a little more competitive than we're used to up here in Northeast Pennsylvania. We're not seeing competitive pressure in our markets on deposit pricing yet, I guess.

[Jim Donnelly, President and CEO at Norwood Financial]

Yeah, Matt, we see some spotty stuff on, you know, if you dig into why they're doing it. They're people with very high loan to deposit ratios, or just interesting business strategies sometimes. We see that we're competitive with our current rates, and we're not seeing a lot of upward pressure. I'm still seeing some competitors bringing their rates down.

[Matthew Breese, Analyst at Stephens]

Got it. Okay. How much more room do you think there is to squeeze deposit costs lower then? If I look at your, you know, CD costs this quarter and you know, knocking on 3.6%, is the blended rate of maturities, you know, still in kind of that 3.30% range with some downside?

[John McCaffery, CFO at Norwood Financial]

Yeah. It's most of that's just really churning out the special we've had out there. There is, you know, a push on to, again, try to get our CD number to be down below 40% of total deposits. We hope that will give us some, you know, more levers to push on going forward. I think it's gonna be like I said, we had like a pretty you know with just a couple basis points drop in some of the deposit categories, just one basis point overall. I want to try to get a better feel for the full portfolio now that we have the deposits in one system. It's gonna be easier for me to kinda look at where we are from a go-forward basis.

[John McCaffery, CFO at Norwood Financial]

We completed the core conversion on April fifth, so you know, that kind of data is on the come.

[Jim Donnelly, President and CEO at Norwood Financial]

On the-

[John McCaffery, CFO at Norwood Financial]

Okay.

[Jim Donnelly, President and CEO at Norwood Financial]

Yeah. I think we're not seeing downward pressure on the lending rates to the level that you might be seeing in the Northeast as well. 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 Breese, Analyst at Stephens]

Okay. Then maybe on the lending side, same question around competitive conditions, and we'd love to hear what new origination yields are on the pipeline right now, and how does the pipeline look?

[Jim Donnelly, President and CEO at Norwood Financial]

Pipeline is very healthy and has been. 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, where the closings that we just had averaged 7.05% for the last 18.5 million we booked.

[John McCaffery, CFO at Norwood Financial]

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. We think there's still room there for some expansion.

[Matthew Breese, Analyst at Stephens]

Okay. It sounds like deposit costs are, you know, flat to down a little bit. There's still upward repricing on the loan side. You know, maybe, John, help me out with the margin, how you feel like it's gonna shake out as we progress through the year.

[John McCaffery, CFO at Norwood Financial]

Well, I think we still have room to expand somewhat. You know, I guess I wouldn't put it at, again, what we experienced in the first quarter, given, you know, the different financial, you know, ins and outs with the acquisition that went on. You know, 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, you know, drag on cash in Q1 as well, which we'll be able to deploy more easily going forward, just given the systems issues. Again, I think the margin can increase throughout the year. I wouldn't put it at eight basis points on linked quarter basis, but, you know, maybe three to four, five basis points.

[Matthew Breese, Analyst at Stephens]

Great. I appreciate all that. I'll stop there. Thank you.

[John McCaffery, CFO at Norwood Financial]

Thanks, Matt.

[Operator]

We have a follow-up question from Daniel Cardenas with Brean Capital.

[Daniel Cardenas, Analyst at Brean Capital]

Yeah. Thanks, guys. Just a couple quick questions. Hello. 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 McCaffery, CFO at Norwood Financial]

Over the next couple quarters.

[Daniel Cardenas, Analyst at Brean Capital]

Okay, great. On the fee income side, you know, nice improvement quarter-over-quarter. You know, what are some of the drivers that could potentially drive that number higher, as we look at 2Q and beyond?

[Jim Donnelly, President and CEO at Norwood Financial]

You know, part of it, Dan, is we were an underperformer from debit revenue. We put a strategy in place a couple years ago and changed the way we were looking about that and promoting it. 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 it's 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're able to staff up appropriately to grow our brokerage, trust, and mortgage businesses.

[Daniel Cardenas, Analyst at Brean Capital]

Okay.

[Jim Donnelly, President and CEO at Norwood Financial]

Treasury management is geared up for the second half of the year. Should do a nice job as well.

[Daniel Cardenas, Analyst at Brean Capital]

I was just gonna ask you about that. Okay, perfect. All right. I'll step back. Thank you.

[John McCaffery, CFO at Norwood Financial]

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 at Norwood Financial]

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'll 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.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Jim Donnelly, President and CEO
• John McCaffery, CFO
• Mackenzie Jackson, Corporate Secretary

Analysts

• Daniel Cardenas, Analyst at Brean Capital
• Matthew Breese, Analyst at Stephens