Q1 2026 Norwood Financial Corp Earnings Call

April 27, 2026

Speaker #2: 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.

Operator: Good day, and thank you for standing by. Welcome to Norwood Financial Corp Q1 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Kristen Lancia, Corporate Secretary. Please go ahead.

Speaker #2: 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, one, one on your telephone.

Speaker #2: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star, one, one again. Please be advised that today's conference is being recorded.

Speaker #2: I'd now like to hand the conference over to Mackenzie Jackson, Corporate Secretary. Please go ahead.

Speaker #3: 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.

Kristen Lancia: Thank you, Liz. Good morning, everyone, and welcome to our Q1 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, 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.

Speaker #3: 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.

Speaker #3: 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.

Kristen Lancia: These statements are subject to various risks, 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.

Speaker #3: 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.

Speaker #3: 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.

Kristen Lancia: 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.

Speaker #3: I will now turn the call over to Jim.

Speaker #4: 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 President's Bank acquisition, increasing our assets, loan portfolio, geographic presence, and earnings power.

Jim Donnelly: Thank you, Kristen Lancia. Good morning, everyone. We began 2026 with strong performance, extending the momentum we began to build last year. This was the Q1 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 Q1 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.

Speaker #4: 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.

Speaker #4: 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%.

Speaker #4: 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 improved 35% and 14%, respectively, on an adjusted basis, with higher adjusted returns on average assets and tangible equity.

Jim Donnelly: 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 Q1 performance and remain optimistic that 2026 will be a great year for the bank. During our Q4 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.

Speaker #4: 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.

Speaker #4: I would like to provide you with an update on these. The first priority is to successfully complete the President's Bank integration. I am pleased to report that we are on plan with these activities.

Speaker #4: 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.

Jim Donnelly: 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.

Speaker #4: 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.

Jim Donnelly: 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.

Speaker #4: 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.

Speaker #4: 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.

Jim Donnelly: 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 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.

Speaker #4: 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 President’s Bank and deploying their developed systems and processes across the combined organization.

Speaker #4: 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.

Speaker #4: 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 be improved, which will improve the speed and quality of the documentation process.

Jim Donnelly: 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.

Speaker #4: These benefits will enable our employees to perform higher-value functions, as well as underwrite deals more quickly to improve deal flow. Our third objective is to strengthen the talent pool and deepen our leadership bench.

Speaker #4: As I have 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.

Speaker #4: They are dedicated to serving the communities and working hard to find ways to make every day better. The team became bigger and stronger during the quarter, as we welcomed the former Presidents Bank employees to our organization.

Jim Donnelly: 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, a culmination 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: The accumulation of our performance in Q1 and actions taken in previous periods, including the portfolio rebalancing we completed in 2024, position us well. The first three priorities I have reviewed position us to create even more value in future periods.

Speaker #4: 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 more quickly than planned.

Jim Donnelly: 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.

Speaker #4: 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 President's 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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.

Jim Donnelly: 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.

Speaker #5: 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.

John McCaffery: Thank you, Jim. Good morning, everyone. In Q1, 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're also providing Pre-Provision Net Revenue across the entire span of the press release.

Speaker #5: 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.

Speaker #5: Margin improved eight basis points due to a slight decline in deposit cost, coupled with a seven basis point increase in interest-earning asset yields.

John McCaffery: 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're also providing Pre-Provision Net Revenue across the entire span of the press release.

Speaker #5: Below the margin line, our quarterly results do continue to include merger charges. We had about $5 million in merger charges in the quarter, and we provided adjusted returns in the press release to show you performance ratios excluding these expenses.

Speaker #5: We also provided pre-provisioned net revenue across the entire span of the press release. The provision was higher in Q1 versus the fourth quarter of 2025.

John McCaffery: Provision was higher in Q1 versus Q4 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.

Speaker #5: 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.

Speaker #5: 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 cease or double count on the acquired non-PCD loans.

Speaker #5: Adjusted pre-provisioned 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.

Speaker #5: 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.

John McCaffery: 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. Q1 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 5 January, loans grew approximately $46 million or 8.4% annualized, and deposits grew about $70 million or 11.6% on an annualized basis.

Speaker #5: Most of this increase is in technology-related areas. This is as we are investing in new systems that will ultimately drive efficiency in the future.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: To expand on Jim's point earlier, growth since January 5th: loans grew approximately $46 million, or 8.4% annualized, and deposits grew about $70 million, or $11.6 million on an annualized basis.

Speaker #5: 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.

John McCaffery: 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.

Speaker #1: If you'd like to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced.

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 Green Capital.

Speaker #1: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Daniel Cardenas with Breen Capital.

Speaker #6: Morning, guys. Morning, Dan. So, a couple of questions on the operating expense number that came in this quarter. You said part of that was tech related.

Daniel Cardenas: Morning, guys.

John McCaffery: Morning, Daniel Cardenas.

Jim Donnelly: Morning, Dan.

Daniel Cardenas: 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? 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.

Speaker #6: How much was that? And then, are all of the tech-related investments—have those been made? I'm just trying to get a sense for what's a good run rate on the operating expenses going forward.

Speaker #5: So the increase in tech expenses was mostly due to, well, again, we are increasing investments—as Jim mentioned—in the Abrigo system and our new accounting system.

John McCaffery: The tech 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. They're 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.

Speaker #5: So, they're 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, the level that we're at is probably a pretty good run rate.

Speaker #6: Okay. But 16.1 per quarter is kind of where you think things will kind of shake out here.

Daniel Cardenas: Kind of a 16.1 per quarter is kind of where you think things will kind of shake out here.

Speaker #5: Yeah, I'd like to see them come down a little bit. Again, we're trying to pull apart how much actually was related to activity during the quarter.

John McCaffery: 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.

Speaker #5: Because of the merger, but I do think we'll get efficiencies. But I wouldn't drop it more than below 15.8, I think, for the quarter.

Daniel Cardenas: Okay. All right, good. Thank you. Then, on the margin, the 3.68 margin, I probably missed it in the press release, but what was the contribution from yield accretion in the quarter?

Speaker #6: Okay. All right. Good. Thank you. And then on the margin, the 3.68 margin, I probably missed it in the press release, but what was the contribution from yield accretion in the quarter?

Speaker #5: The yield accretion in the quarter was—I think it actually was—no, it wasn't here. The total pre-tax impact of purchase accounting was $435.

John McCaffery: 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.

Speaker #5: That's substantially margin-related. There's some for the leases, but that's kind of a minimal amount.

Speaker #6: So probably about six basis points this quarter. And what kind of impact do you think this yield accretion is going to contribute on a go-forward basis?

Daniel Cardenas: Probably about six basis points this quarter. What kind of impact do you think yield accretion is going to contribute on a go-forward basis?

Speaker #5: So, 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.

John McCaffery: 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: Okay.

Speaker #5: In 2027, 2 million dollars.

John McCaffery: In 2027, it's $2 million.

Speaker #6: $2 million for 2027. Gotcha. Okay. And then one more question and 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.

Daniel Cardenas: $2 million in 2027. Gotcha. Okay. Then, one more question, 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?

Speaker #6: Was that all attributable to the acquisition, or were there other issues going on in the portfolio?

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

Speaker #5: I don't think they contributed any non-performing from present, so that was mostly us. I'm not aware of any large non-performance that came in.

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

Daniel Cardenas: 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?

Speaker #6: So, pretty granular increase. Was that mostly on the commercial side, or maybe a little bit of color as to what was making up the linked quarter increase?

Jim Donnelly: Largely, it's largely on the 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. It's, I think, we leveled off at that amount.

Speaker #5: Largely, it's on the commercial side. There's very little, and the indirect and consumer portfolios are about the same as they were in the quarter before.

Speaker #5: We had a little dip in the last quarter on the commercial side, and then we came back up to about where we were the previous quarter then.

Speaker #5: So, I think we leveled off at that amount.

Speaker #6: Okay, I'll step back for now. Thank you.

Daniel Cardenas: Okay. I'll step back for now. Thank you.

Speaker #5: Thanks, Dan.

John McCaffery: Thanks, Dan.

Speaker #1: Our next question comes from Matthew Breeze with Stevens.

Operator: Our next question comes from Matthew Breese with Stephens.

Speaker #5: Hey, good morning. I was hoping to maybe—good morning. Touch on the components of the margin. First, maybe more broadly, we'd love just some color on competitive conditions around deposits.

Matthew Breese: Hey, good morning.

John McCaffery: Hey, Matt.

Jim Donnelly: Good morning, Matt.

Matthew Breese: 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 it doesn't seem like we're getting much of any rate cuts.

Speaker #5: 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.

Speaker #5: And maybe what are your thoughts around deposit cost outlook now that it doesn't seem like we're getting much, if any, rate cuts?

John McCaffery: I mean, 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. I don't know about the new markets, but 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.

Speaker #7: So through the event into, I guess, Q1, we were continuing to lower deposit costs based upon the December rate cut. I'm—we are not talking about raising any of our specials on CDs.

Speaker #7: At all. And I don't know about the new markets, but I think they're a little more competitive than we're used to up here in Northeast Pennsylvania.

Speaker #7: But we're not seeing competitive pressure in our markets on deposit pricing yet, I guess.

Speaker #5: 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.

Jim Donnelly: 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.

Speaker #5: But 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.

Speaker #7: Got it. Okay. How much more room do you think there is to squeeze deposit costs lower, then? If I look at your CD costs, this quarter they're knocking on 3.6%.

Matthew Breese: 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?

Speaker #7: Is the blended rate of maturities still in kind of that 3.30% range, with some downside?

Speaker #5: Yeah, most of that's just really churning out, especially what we've had out there. So, and there is a push on to again try to get our CD number to be down below 40% of total deposits.

John McCaffery: Yeah, it's most of that's just really churning 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. Yeah, I think it's gonna be, like you said, we had like a pretty, you know, with just a couple basis points drop in some of the deposit categories, just 1 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.

Speaker #5: So we hope that that will give us some more levers to push on going forward. But I think it's going to be, like I said, we had a pretty—just a couple of basis points drop in some of the deposit categories.

Speaker #5: 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.

John McCaffery: Which we just completed the core conversion on 5 April. You know, get it, you know, trying to get that kind of data is on the come.

Speaker #5: We completed the core conversion on April 5th. So, trying to get that kind of data is on the come.

Speaker #7: But on the—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.

Jim Donnelly: on the

John McCaffery: on the

John McCaffery: Okay.

Matthew Breese: Okay.

Jim Donnelly: 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. 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.

Speaker #7: 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.

Speaker #7: Okay. And then maybe 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 in the pipeline right now.

Matthew Breese: Okay. Maybe on the lending side, same question around competitive conditions. I would love to hear kind of what, excuse me, what new origination yields are on the pipeline right now, and how does the pipeline look?

Speaker #7: And how does the pipeline look?

Speaker #5: 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.

Jim Donnelly: 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.

Speaker #5: And pricing is in line with our expectations. The closings that we just had averaged 7.05% for the last $18.5 million we booked.

Speaker #7: Yeah, I'm still seeing, I guess, 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.

John McCaffery: Yeah, I'm still seeing, I guess, 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.

Speaker #7: Okay, so it sounds like deposit costs are flattening down a little bit. 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.

Matthew Breese: 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.

Speaker #5: Well, I think it's—yeah, I think we still have room to expand somewhat. I guess I wouldn't put it at, again, what we've experienced in the first quarter.

John McCaffery: 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 Q1, 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.

Speaker #5: Given the different financial ins and outs with the acquisition that went on, if we can get another, let's say, three, 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.

Speaker #5: Which we'll be able to deploy more easily going forward, just given the systems issues. So, again, I think the margin can increase throughout the year.

Speaker #5: I wouldn't put it at eight basis points on a linked-quarter basis, but maybe three to four, five basis points.

Speaker #7: Great. I appreciate all that. I'll stop there. Thank you.

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

Speaker #5: Thanks, Matt.

John McCaffery: Thanks, Matt.

Speaker #1: We have a follow-up question from Daniel Cardenas with Breen Capital.

Operator: We have a follow-up question from Daniel Cardenas with Breen Capital.

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

Speaker #5: Yeah, thanks, guys. Just a couple of quick questions.

Daniel Cardenas: Yeah. Thanks, guys. Just a couple quick questions. Hello. So the margin discussion that you just had, John, are you talking 3 to 5 basis points for the remainder of the year or perhaps over the next couple quarters?

Speaker #7: 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 of quarters?

Speaker #5: Over the next couple of quarters.

John McCaffery: Over the next couple quarters.

Speaker #7: Okay, good. And then on the fee income side, nice improvement quarter over quarter. What are some of the drivers that could potentially drive that number higher as we look at Q2 and beyond?

Daniel Cardenas: 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 Q2 and beyond?

Speaker #5: So part of it, Dan, is we were an underperformer from debit revenue. So we put a strategy in place a couple of years ago and changed the way we were looking at that and promoting it.

Jim Donnelly: 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. We've been working on growing our fee income businesses for the last few years, and it's starting to pay dividends. 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.

Speaker #5: 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.

Speaker #5: 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 are able to staff up appropriately to grow our brokerage, trust, and mortgage businesses.

Speaker #7: Okay.

Speaker #5: Our Treasury Management is geared up for the second half of the year. It should do a nice job as well.

Daniel Cardenas: Okay.

Jim Donnelly: Treasury management is geared up for H2. Should do a nice job as well.

Speaker #7: I was just going to ask you about that. Okay, perfect. All right, I'll step back. Thank you.

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

Speaker #5: Thanks, Dan.

John McCaffery: Thanks, Dan.

Speaker #1: That concludes today's question-and-answer session. I'd like to turn the call over to Jim Donnelly for closing remarks.

Operator: That concludes today's question and answer session. I'd like to turn the call over to Jim Donnelly for closing remarks.

Speaker #5: 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.

Jim Donnelly: 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.

Speaker #5: 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.

Speaker #5: United to serve our communities. As we move forward, our disciplined approach, high-quality credit metrics, and careful execution enable us to deliver improved financial results and lasting value for our shareholders.

Jim Donnelly: 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.

Speaker #5: 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.

Q1 2026 Norwood Financial Corp Earnings Call

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