Northwest Bancshares(NWBI) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements The company reported increased total assets and significantly higher Q2 2025 net income, with a major merger completed post-quarter Consolidated Statements of Financial Condition (Balance Sheet) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $14,485,107 | $14,408,224 | | Total cash and marketable securities | $2,181,519 | $2,147,908 | | Loans receivable, net | $11,212,665 | $11,063,195 | | Goodwill | $380,997 | $380,997 | | Total Liabilities | $12,843,039 | $12,811,368 | | Total deposits | $12,201,029 | $12,144,554 | | Borrowed funds | $198,008 | $200,331 | | Total Shareholders' Equity | $1,642,068 | $1,596,856 | Consolidated Statements of Income Highlights | (in thousands, except EPS) | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $119,444 | $106,841 | $247,262 | $210,079 | | Provision for credit losses - loans | $11,456 | $2,169 | $19,712 | $6,403 | | Noninterest Income | $30,938 | $(8,849) | $59,293 | $19,114 | | Noninterest Expense | $97,540 | $92,420 | $189,277 | $182,444 | | Net Income | $33,675 | $4,747 | $77,133 | $33,910 | | Diluted EPS | $0.26 | $0.04 | $0.60 | $0.27 | Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $105,285 | $111,357 | | Net cash used in investing activities | $(135,955) | $87,662 | | Net cash provided by financing activities | $9,367 | $(92,846) | | Net (decrease)/increase in cash | $(21,303) | $106,173 | - On July 25, 2025, the Company completed its merger with Penns Woods Bancorp, Inc. for a total estimated consideration of $234 million, expected to increase total assets to approximately $17 billion[126][128] Notes to Consolidated Financial Statements Notes detail marketable securities, loan portfolio, credit losses, and the impact of the Penns Woods Bancorp merger Marketable Securities Portfolio (June 30, 2025) | (in thousands) | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Available-for-Sale | $1,341,651 | $1,194,883 | | U.S. government and agencies | $43,461 | $34,930 | | Mortgage-backed securities | $1,199,472 | $1,071,192 | | Held-to-Maturity | $719,561 | $628,936 | | U.S. government-sponsored enterprises | $124,463 | $113,867 | | Mortgage-backed securities | $595,098 | $515,069 | - Unrealized losses on investment securities totaled $242.0 million as of June 30, 2025, primarily attributed to changes in the interest rate environment rather than credit quality, with no intent or requirement to sell before recovery[23][24] Loan Portfolio Composition | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Personal Banking | $6,420,921 | $6,322,750 | | Residential mortgage | $3,052,126 | $3,178,269 | | Vehicle loans | $2,084,500 | $1,870,843 | | Commercial Banking | $4,920,903 | $4,857,264 | | Commercial real estate | $2,418,992 | $2,495,726 | | Commercial loans | $2,138,499 | $2,007,402 | | Total Loans Receivable, Gross | $11,341,824 | $11,180,014 | - The allowance for credit losses (ACL) increased to $129.2 million at June 30, 2025, from $116.8 million at December 31, 2024, with a provision for credit losses of $19.7 million for the first six months of 2025[31] - Nonaccrual loans significantly increased to $102.4 million as of June 30, 2025, compared to $61.4 million at December 31, 2024, driven by commercial real estate and commercial loans[33] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant increase in Q2 2025 net income, driven by improved interest and noninterest income, loan growth, and strong capital Comparison of Financial Condition Total assets increased to $14.5 billion due to loan growth and deposit increases, while capital ratios remained strong - Gross loans receivable increased by $162 million from year-end 2024, led by organic growth in the vehicle loan portfolio (+$214 million) and the commercial and industrial (C&I) loan portfolio (+$131 million)[142] - Total deposits increased by $56 million, driven by a $145 million rise in money market accounts and a $40 million increase in savings deposits, as customers shifted funds from maturing time deposits[143][144] Uninsured Deposits (June 30, 2025) | (in thousands) | Balance | % of Total Deposits | | :--- | :--- | :--- | | Uninsured deposits per Call Report | $3,274,416 | 26.8% | | Less: Intercompany & Collateralized | $1,727,231 | 14.1% | | Adjusted Uninsured Deposits | $1,547,185 | 12.7% | Regulatory Capital Ratios (Company) | Ratio | June 30, 2025 | Minimum Requirement* | | :--- | :--- | :--- | | CET1 Capital | 12.84% | 7.00% | | Tier 1 Capital | 14.01% | 8.50% | | Total Capital | 16.32% | 10.50% | | Tier 1 Leverage | 10.55% | 4.00% | *Includes capital conservation buffer Comparison of Operating Results Q2 2025 net income surged from increased net interest and noninterest income, despite higher credit loss provisions and acquisition costs - Net income for Q2 2025 was $34 million, a 609% increase from $5 million in Q2 2024, primarily due to higher net interest income and the absence of a significant loss on investment sales in the prior year[178] - Net interest income (FTE) for Q2 2025 increased by $13 million (12%) year-over-year, with the net interest margin (FTE) expanding by 36 basis points to 3.56%, driven by higher earning asset yields and lower interest expense on borrowings[182] - The provision for credit losses increased by $9 million from Q2 2024, primarily driven by downgrades within the commercial real estate portfolio[208][209] - Noninterest expense increased by $5 million (6%) from Q2 2024, mainly due to a $4 million increase in acquisition expenses related to the Penns Woods merger[219] Quantitative and Qualitative Disclosures about Market Risk Interest rate risk is managed by ALCO, with simulations projecting rate change impacts on net income and equity within policy limits Interest Rate Sensitivity Analysis (Simulated 12-Month Impact) | Parallel Rate Shift | % Change in Net Income | % Change in Market Value of Equity | | :--- | :--- | :--- | | +300 bps | (9.1)% | (13.9)% | | +200 bps | (5.7)% | (9.2)% | | +100 bps | (2.5)% | (4.4)% | | -100 bps | (1.3)% | +2.4% | | -200 bps | (11.1)% | +1.2% | | -300 bps | (15.7)% | +1.1% | - The company manages interest rate risk through its ALCO Committee, which monitors the balance sheet structure, pricing, and cash flows, with quarterly oversight from the Board's Risk Management Committee[226][227] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Based on an evaluation as of June 30, 2025, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective[233] PART II OTHER INFORMATION Legal Proceedings The company does not anticipate any pending or threatened legal proceedings will have a material adverse effect on its consolidated financial statements - The company does not expect any pending legal proceedings to result in a material adverse effect on its financial statements[235] Risk Factors There have been no material updates or additions to the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2024 - No material changes to the risk factors disclosed in the 2024 Form 10-K have occurred[236] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock during Q2 2025, with 2,261,130 shares remaining available for repurchase - No shares were repurchased during Q2 2025. The company has authorization to repurchase up to 2,261,130 additional shares under its current program[237] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files