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DATE
Monday, April 27, 2026, at 10:30 a.m. ET
CALL PARTICIPANTS
- President & Chief Executive Officer — James Donnelly
- Executive Vice President & Chief Financial Officer — John McCaffery
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TAKEAWAYS
- Net Interest Income — $24.6 million, a record result up 38% year over year due to higher interest-earning asset balances from the Presence Bank acquisition.
- Net Interest Margin — 3.68%, a 38 basis point increase, reflecting favorable interest rate movements and a repositioned bond portfolio.
- Adjusted Net Income — Increased 35% year over year, while adjusted earnings per share rose 14%, with higher adjusted returns on average assets and tangible equity.
- Merger Charges — $5 million in Q1, with management excluding these costs from adjusted financial metrics and ratios.
- Loan Growth — $46 million increase since Jan. 5, representing 8.4% annualized growth, driven by organic activity and the acquisition.
- Deposit Growth — $70 million increase since Jan. 5, representing an 11.6% annualized rate, due to integration activities.
- Coverage Ratio — 1.09%, up from 1.07% at year-end after integrating the Presence Bank portfolio and updating model factors.
- Adjusted Pre-Provision Net Revenue — Up approximately 11% sequentially from Q4 2025, reflecting improved margin and balance sheet scale, partially offset by higher expenses.
- Yield Accretion from Purchase Accounting — $435,000 pretax, contributing roughly 6 basis points to margin this quarter.
- Annual Margin Accretion Forecast — $2.2 million for 2026, declining to $2 million in 2027, as provided by management.
- Noninterest Income — Grew year over year, led by higher service charges and increased debit card revenue.
- Quarterly Operating Expenses — Approximately $16.1 million, with management targeting future quarterly levels above $15.08 million due to ongoing technology investments.
- CDs as % of Deposits — Management cited a goal to bring CDs below 40% of total deposit balances to create additional funding levers.
- New Commercial Origination Yields — Last 18 loans booked averaged 7.05%, with most new origination rates above the current portfolio yield.
- Core System and Integration — Presence Bank system integration and core conversion completed in April, now enabling unified performance data collection across the combined organization.
- AI Integration — Commercial credit automation leveraging embedded AI will be implemented in July, targeting productivity gains and improved underwriting quality.
- Nonperforming Loans — Ended period near $11 million, with the increase concentrated in commercial credit and not attributable to acquired Presence Bank balances.
SUMMARY
Norwood Financial (NWFL 5.35%) reported materially higher adjusted profitability, benefiting from the Presence Bank acquisition, system integration, and favorable interest rate trends. Management emphasized ongoing technology investments to drive efficiency, a disciplined approach to credit quality, and a unified bank platform enabling future scale. Initial integration success led to an accelerated tangible book value payback projection compared to prior forecasts, and room remains for modest additional margin expansion through deposit and lending strategies as the year progresses.
- Management stated, “we now expect accretion to shareholder value ahead of our original projections,” citing faster-than-anticipated benefits from the Presence Bank transaction.
- Adjusted metric reporting continues to exclude substantial first-quarter merger-related costs, clarifying core bank performance for investors.
- Fee income initiatives in debit cards, treasury management, brokerage, trust, and mortgage were identified as ongoing growth drivers, with further expansion planned.
- Management reported no significant upward pressure on deposit rates in core markets, while expecting further cost efficiencies as CD balances are reduced relative to total deposits.
- CFO John McCaffery projected “3 to 5 basis points” of margin expansion over the next couple of quarters, while also indicating the margin lift from acquisition-related purchase accounting will decrease in future periods.
- The company adopted ASU 2025-8 early, avoiding a CECL double count on acquired non-PCD loans, directly impacting reported provision results.
INDUSTRY GLOSSARY
- CD: Certificate of Deposit; a fixed-term deposit product with a specified interest rate.
- Purchase Accounting Yield Accretion: The increase in reported net interest margin resulting from recognizing acquired loans at a discount, which accretes into income over time.
- Coverage Ratio: Allowance for credit losses as a percentage of total loans, measuring reserve adequacy.
- Non-PCD Loans: Loans not classified as Purchased Credit Deteriorated at acquisition, affecting how reserves are recorded under CECL accounting standards.
- ASU 2025-8: Accounting Standards Update affecting CECL treatment of acquired loans in business combinations.
Full Conference Call Transcript
James Donnelly: 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 2025. Net interest 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 increased 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 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 and 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 execution 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 has 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 we are implementing best practices from Presence Bank and deploying their developed systems and processes across the combined organization.
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