Norwood Financial Q3 Net Income Hits Record as Net Interest Income Rises 37%

Norwood Financial Corp. reported record third-quarter net income and net interest income as stronger lending yields, lower funding costs and the expanded franchise following its Presence Bank acquisition supported earnings. The quarter also benefited from past-due interest associated with rebooked debt, while credit metrics weakened as the bank navigated a customer bankruptcy.

Net income for the three months ended Sept. 30 was $11.8 million, up 41% from $8.3 million a year earlier. Diluted earnings per share rose 21% to $1.08 from $0.89. With no merger-related or other specified adjustments in the quarter, adjusted net income and adjusted diluted EPS were also $11.8 million and $1.08, respectively; adjusted EPS increased 15% from $0.94 a year earlier.

Net interest income climbed 37% year over year to $28.0 million. On a fully taxable-equivalent basis, net interest margin widened 38 basis points to 4.01%, while net interest spread increased 42 basis points to 3.36%. The presentation said rebooked debt and related past-due interest contributed to income and margin during the period.

Adjusted pre-provision net revenue, a non-GAAP measure, increased 45% to $15.4 million. Adjusted annualized return on average assets was 1.60%, up 13 basis points, and adjusted annualized return on average tangible shareholders’ equity reached 18.51%, an increase of 85 basis points.

Larger balance sheet after Presence Bank integration

Norwood ended the quarter with approximately $3.0 billion in assets, including $2.3 billion of loans and $2.5 billion of deposits. Its loans-to-deposits ratio was 91.4%, close to management’s target of about 90%.

The company completed its acquisition of Presence Bank on Jan. 5 and said key integration work, including the core-system conversion and brand consolidation, has been completed. The transaction added four branches and expanded Norwood’s presence into central Pennsylvania. The combined franchise operates 33 offices across two states and 13 counties.

Norwood said the larger organization provides additional scale for serving its markets. Acquisition-related expenses, however, contributed to higher costs compared with the prior year, partially offsetting growth in net interest and other income.

The loan portfolio remained concentrated in commercial real estate, which represented 49% of total loans, followed by indirect loans at 16%, one-to-four-family residential loans at 14% and commercial-and-industrial loans at 11%. Norwood reported limited office exposure of about $2.8 million across six loans. Approximately 44% of loans carried floating rates, 11% were adjustable and 45% were fixed-rate.

Deposits consisted of 41% time deposits, 19% noninterest-bearing demand accounts, 16% money-market accounts, 15% interest-bearing demand deposits and 9% savings accounts. The cost of deposits declined to 2.02% from 2.11% in the second quarter, while the overall cost of funds fell to 2.07% from 2.11%. The bank had $691 million of certificates of deposit scheduled to mature within 12 months at an average rate of 3.27%.

Credit quality and tangible book value

Credit measures deteriorated from year-end levels. Nonperforming loans rose to 0.73% of loans from 0.34% at the end of 2025, and annualized net charge-offs increased to 0.13% from 0.03%. The allowance for credit losses equaled 1.10% of loans, compared with 1.07% at year-end, while reserves covered 143% of nonperforming assets, down from 280%.

The third-quarter provision for credit losses was $100,000, compared with a $502,000 provision benefit in the year-earlier period. Norwood said it maintained a strong financial position while addressing the customer bankruptcy.

Tangible book value per share was $22.35 at quarter-end, down from $22.96 in the second quarter but above $22.19 a year earlier. The sequential decrease reflected lower accumulated other comprehensive income as higher interest rates reduced the market value of the available-for-sale securities portfolio.

Capital remained above regulatory well-capitalized thresholds, with a total capital ratio of 13.396% and Tier 1 and common equity Tier 1 ratios of 12.29%.

Growth and capital priorities

Management continues to target asset growth of at least 6% through a combination of organic expansion and strategic acquisitions, with a longer-term objective of exceeding $5 billion in assets. The company also aims to increase noninterest income from about 12% of total revenue to 20% over the next three to five years by expanding debit-card use, mortgage banking, wealth and trust management, and other services.

Norwood adopted a share-repurchase program in August covering up to approximately 5% of outstanding shares. It also reiterated its commitment to a healthy and growing dividend while funding organic growth and considering geographically adjacent acquisitions.

Execution risks remain centered on the recently completed merger. Norwood cautioned that anticipated cost savings, revenue synergies and operating efficiencies may take longer than expected or may not be fully realized, while integration could prove more costly than anticipated. The company also identified interest-rate changes, weaker demand for banking services, competition, technology costs, regulatory developments and broader economic volatility as potential risks.