Norwood Financial Corp. Q3 FY2025 earnings call

• Teams delivered strong Q3 results with over $100 million year-to-date asset growth, loan and deposit growth, and improved margins.
• Bond portfolio repositioning in 2024 Q4 benefited performance, and capital raise via common stock issuance supported growth.
• Filed regulatory applications for merger with Presence Bank announced July 7, applications pending.
• Completed board leadership transition, added 2 new directors.
• Rolled out new brand this year, customers have average 4.7-star bank experiences.
• Employees involved in community donations.

Net interest margin increased by 20 basis points linked quarter basis, resulting in a $1.4 million increase in net interest income. Noninterest income for the 9 months ended September 30 increased 9% year-over-year, driven by wealth and trust activities and loan sales gains. Quarterly expenses up 7.5% Q3 2024, but 2.8% excluding merger charges. CECL model calculated a release of allowance for credit losses with $502,000 release mostly from loans moving out of nonaccrual status.

• NIM outlook still positive, loan book still pricing up, but longer part of curve leveling off; aiming for 4% but uncertain next quarters.
• Opportunistic on M&A, waiting for regulatory approval of Presence Bank merger, not expecting Q4 close due to operational and accounting issues.

• Forward-looking statements subject to various risks and uncertainties.
• Regulatory approval for Presence Bank merger is pending and uncertain in timeline.

Q: Talk about ability to further reduce deposit costs with rate cuts and full cycle beta versus hiking cycle A: Municipal deposits (~$400M+) tied to market rates, beta on way down ~50%, deposit costs already coming down.

Q: Remind on muni amounts and high/low watermark A: ~$450M down to ~$400M, includes NY and PA municipal deposits, school districts with different cycles.

Q: Discuss NIM outlook and stability A: NIM still positive, loan book pricing up, but longer curve leveling off, current NIM 3.63%, aiming for 4% but uncertain next quarters.

Q: M&A window and Presence Bank deal status A: Opportunistic on M&A, Presence Bank merger waiting for reg approval, not expecting Q4 close, proxy not mailed yet.

Q: Impact of 0.25 rate drop on margin A: Accretive to deposit costs, but dollar/basis point amount uncertain depending on timing.

Q: Best loan growth category and continuation A: Loan growth across categories, no one category driving, consumer lending and commercial including C&I performing well