Northwest Bancshares(NWBI) - 2025 Q2 - Quarterly Results

Financial & Operational Highlights Q2 2025 Performance Summary Northwest Bancshares reported Q2 2025 net income of $34 million, or $0.26 per diluted share, a significant increase year-over-year but a decrease from the prior quarter, while maintaining a 3.56% net interest margin and declaring a $0.20 quarterly dividend after completing the Penns Woods merger Q2 2025 Key Financial Results | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $34 million | $43 million | $5 million | | Diluted EPS | $0.26 | $0.34 | $0.04 | | Adjusted Net Income (non-GAAP) | $38 million | $44 million | N/A | | Adjusted Diluted EPS (non-GAAP) | $0.30 | $0.35 | N/A | | Net Interest Margin | 3.56% | 3.87% | 3.20% | - The Board of Directors declared a quarterly cash dividend of $0.20 per share, marking the 123rd consecutive quarterly dividend, representing an annualized dividend yield of approximately 6.3% as of June 30, 2025[4] - Strategic focus is on optimizing operations and financial performance following the successful completion and systems conversion of the Penns Woods merger, with the company continuing to evaluate acquisition opportunities while also expanding its footprint through new branch openings[2][6] Detailed Financial Analysis Balance Sheet Analysis Average loans receivable saw a slight quarterly increase of 0.6% but a decrease of 1.1% year-over-year, driven by a strategic shift from personal banking to commercial portfolios, while average deposits grew modestly and average borrowed funds significantly decreased by 35.5% from the prior year due to strategic pay-downs Average Balance Sheet Highlights (Q2 2025) | Dollars in thousands | Q2 2025 | Change vs. 1Q25 | Change vs. 2Q24 | | :--- | :--- | :--- | :--- | | Average loans receivable | $11,248,954 | 0.6% | (1.1)% | | Average deposits | $12,154,001 | 0.5% | 0.6% | | Average borrowed funds | $208,342 | (7.0)% | (35.5)% | - The decrease in average loans YoY was driven by a $265 million decline in the personal banking portfolio, with cash flows reinvested into the commercial portfolio, which grew by $145 million, and the commercial and industrial portfolio specifically grew by $332 million[11] Net Interest Income and Margin Net interest income increased by 11.8% year-over-year to $119.4 million, with the net interest margin expanding to 3.56% from 3.20%, primarily due to higher loan yields and lower deposit costs, despite a 6.6% quarterly decrease influenced by a prior quarter's non-accrual loan interest recovery Net Interest Income and Margin Performance | Dollars in thousands | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net interest income | $119,444 | $127,818 | $106,841 | | Net interest margin | 3.56% | 3.87% | 3.20% | - The YoY increase in NII was driven by a $5 million increase in interest income from higher loan yields and an $8 million decrease in interest expense due to lower cost of deposits and reduced borrowings[12] - The QoQ decrease in NII was primarily caused by a $9 million drop in interest income, stemming from a large $13.1 million interest recovery on a non-accrual commercial loan in Q1 2025, and excluding this recovery, the prior quarter's net interest margin would have been 3.48%[10] Provision for Credit Losses The total provision for credit losses was $8.7 million for Q2 2025, a significant increase from the prior year, primarily driven by downgrades and individual assessments within the commercial real estate portfolio, leading to classified loans increasing substantially to $518 million or 4.57% of total loans Provision for Credit Losses Expense | Dollars in thousands | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Provision for credit losses - loans | $11,456 | $8,256 | $2,169 | | Provision for credit losses - unfunded commitments | $(2,712) | $(345) | $(2,539) | | Total provision for credit losses expense | $8,744 | $7,911 | $(370) | - Classified loans rose to $518 million (4.57% of total loans) at June 30, 2025, up from $279 million (2.49% of total loans) at March 31, 2025, with this increase driven by a $195 million rise in classified commercial real estate loans[15] Noninterest Income and Expense Total noninterest income was $30.9 million, a significant increase from a loss of $8.8 million in Q2 2024 due to a prior-year investment securities sale loss, while noninterest expense increased 5.5% year-over-year to $97.5 million driven by higher personnel and merger-related costs - Noninterest income increased by $40 million YoY, mainly because Q2 2024 included a $39 million loss on the sale of investment securities, and excluding this item, noninterest income was flat YoY[16] - Noninterest expense rose by $5.1 million YoY to $97.5 million, due to a $2 million increase in personnel expenses and a $3 million increase in non-personnel expenses, which included merger and restructuring costs[17] Consolidated Financial Statements Consolidated Statements of Financial Condition As of June 30, 2025, total assets stood at $14.49 billion, with net loans receivable at $11.21 billion and total deposits at $12.20 billion, contributing to a rise in total shareholders' equity to $1.64 billion and tangible book value per share to $9.85 Key Balance Sheet Items (as of June 30, 2025) | Dollars in thousands | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $14,485,107 | $14,408,224 | $14,385,553 | | Loans receivable, net | $11,212,665 | $11,063,195 | $11,229,294 | | Total Deposits | $12,201,029 | $12,144,554 | $12,087,379 | | Total Shareholders' Equity | $1,642,068 | $1,596,856 | $1,556,598 | | Tangible book value per share* | $9.85 | $9.51 | $9.20 | Consolidated Statements of Income For Q2 2025, the company generated $119.4 million in net interest income, resulting in $33.7 million net income, while for the six months ended June 30, 2025, net income was $77.1 million, more than double the $33.9 million earned in the same period of 2024 Income Statement Summary (Quarter ended June 30, 2025) | Dollars in thousands | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net interest income | $119,444 | $127,818 | $106,841 | | Total noninterest income/(loss) | $30,938 | $28,355 | $(8,849) | | Total noninterest expense | $97,540 | $91,737 | $92,420 | | Net income | $33,675 | $43,458 | $4,747 | | Diluted earnings per share | $0.26 | $0.34 | $0.04 | Income Statement Summary (Six months ended June 30) | Dollars in thousands | 2025 | 2024 | | :--- | :--- | :--- | | Net interest income | $247,262 | $210,079 | | Total noninterest income | $59,293 | $19,114 | | Net income | $77,133 | $33,910 | | Diluted earnings per share | $0.60 | $0.27 | Non-GAAP Financial Measures Reconciliation Reconciliation of Net Income and Key Ratios For Q2 2025, GAAP net income of $33.7 million was adjusted for $6.2 million in merger-related expenses, resulting in an adjusted net income of $38.2 million and an adjusted diluted EPS of $0.30, providing a clearer view of operating performance Reconciliation of Net Income to Adjusted Net Income (Q2 2025) | Dollars in thousands | Q2 2025 | | :--- | :--- | | Net income (GAAP) | $33,675 | | Add: merger, asset disposition and restructuring expense | $6,244 | | Less: tax benefit of non-GAAP adjustments | $(1,748) | | Adjusted net income (non-GAAP) | $38,171 | Supplementary Financial Information Deposit and Capital Analysis As of June 30, 2025, uninsured deposits, excluding intercompany and collateralized accounts, were $1.55 billion, representing 12.7% of total deposits, with the company's regulatory capital ratios remaining well above 'well capitalized' requirements, including a Common Equity Tier 1 (CET1) ratio of 12.84% for the holding company - Uninsured deposits per the Call Report were $3.27 billion (26.8% of total deposits), but after excluding intercompany and collateralized accounts, the adjusted uninsured balance is $1.55 billion, or 12.7% of total deposits[39] Regulatory Capital Ratios (June 30, 2025) | Ratio (Northwest Bancshares, Inc.) | Actual | Minimum Requirement | Well Capitalized | | :--- | :--- | :--- | :--- | | Total capital (to risk weighted assets) | 16.32% | 10.50% | 10.00% | | Tier 1 capital (to risk weighted assets) | 14.01% | 8.50% | 6.00% | | Common equity tier 1 capital | 12.84% | 7.00% | N/A | Asset Quality Analysis Asset quality metrics showed some deterioration during the quarter, with nonperforming loans increasing to 0.91% of total loans from 0.53% in the prior quarter, driven by an increase in nonaccrual commercial real estate and commercial loans, and substandard loans nearly doubling Nonperforming Assets (NPAs) Nonperforming Assets Trend | Dollars in thousands | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total nonaccrual loans | $102,394 | $58,750 | $102,159 | | Nonperforming loans | $102,887 | $59,353 | $104,670 | | Nonperforming assets | $102,935 | $75,535 | $104,744 | | Nonperforming loans to total loans | 0.91% | 0.53% | 0.92% | Loan Portfolio Credit Quality - Substandard loans increased significantly to $518.2 million as of June 30, 2025, up from $279.1 million at March 31, 2025, with the increase concentrated in the Commercial Banking segment, particularly in commercial real estate loans[51] Allowance for Credit Losses (ACL) ACL Roll-Forward (Quarter ended June 30, 2025) | Dollars in thousands | Amount | | :--- | :--- | | Beginning balance | $122,809 | | Provision | $11,456 | | Total Charge-offs | $(7,907) | | Recoveries | $2,801 | | Ending balance | $129,159 | - The allowance for credit losses to total loans stood at 1.14% at the end of Q2 2025, up from 1.09% in the prior quarter[49] Average Balance Sheet and Net Interest Margin Analysis Quarterly and YTD Average Balance Sheet The average yield on interest-earning assets for Q2 2025 was 5.11% (FTE), down from Q1 2025 but up from Q2 2024, while the average cost of interest-bearing liabilities decreased to 2.09% year-over-year, resulting in a net interest margin of 3.56% for the quarter and 3.72% for the first six months of 2025 Quarterly Net Interest Margin Analysis (FTE) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Avg. Yield on Earning Assets | 5.11% | 5.46% | 4.98% | | Avg. Cost of Interest-Bearing Liabilities | 2.09% | 2.15% | 2.40% | | Net Interest Spread | 3.02% | 3.31% | 2.58% | | Net Interest Margin | 3.56% | 3.87% | 3.20% | Six-Month Net Interest Margin Analysis (FTE) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Avg. Yield on Earning Assets | 5.28% | 4.89% | | Avg. Cost of Interest-Bearing Liabilities | 2.12% | 2.34% | | Net Interest Spread | 3.16% | 2.55% | | Net Interest Margin | 3.72% | 3.15% |