Northwest Bancshares, Inc. Q1 FY2025 earnings call

• Strong first quarter performance with record earnings, net income up 48% from Q1 2024.
• Strategic shift towards commercial lending with 20% increase in average commercial C&I loans in the last year.
• Successful deposit gathering with near best-in-class cost of funds.
• Improved net interest margin and efficiency ratio, reduced classified loans.
• Declared quarterly dividend of $0.20 per share.
• Merger with Penns Woods Bancorp completed regulatory approvals, shareholders approved, integration underway, expected to close by late July.
• Loan portfolio modest growth, shifting towards commercial loans, loan yields increased.
• Deposit base strong, cost of deposits decreased.

Northwest Bancshares reported $156 million of revenue in the first quarter of 2025, with net income of $43 million, an increase of $14 million (48%) compared to Q1 2024. Earnings per diluted share were $0.34 vs. $0.23 in Q1 2024. The loan portfolio saw modest growth, with average commercial loans increasing $121 million or 6.2% compared to the fourth quarter. Loan yields increased 44 basis points quarter-over-quarter to 6.0%. Deposit balances remained strong, with average total deposits increasing $60 million quarter-over-quarter, and the cost of deposits decreased nine basis points to 1.59%. Revenue contribution: Overall revenue was $156 million, net income $43 million, loan portfolio performance with shifts towards commercial loans, deposits contributing to stable funding.

• Margin expected to perform at or above the high end of the range assuming 1-3 Fed cuts in the back half of the year.
• Fee income likely at the lower end of the range.
• Loan growth dependent on the broader economic environment.
• Will provide more guidance on the impact of the Penns Woods acquisition after closing in late July.

• Significant market volatility and uncertainty over the economic outlook.
• Exposure to industries like manufacturing, transportation, warehousing, and hospitality due to tariffs, with 8% of the loan portfolio exposed.
• Uncertainty around loan pull-through rates and competitive landscape affecting margin and growth.

Q: Drilling into the margin guidance, specifically about the conservative nature and impact of Fed cuts, and the acquisition's effect on margin.

A: Doug Schosser stated margin is expected to be at the high end of the range, with one to two rate cuts in guidance, and more guidance on Penns Woods acquisition will be provided after closing.

Q: Regarding deposits, driver of money market growth and deposit growth going forward.

A: Doug Schosser said CDs are transitioning to more liquid products like money markets, with CDs coming due and being moved to liquid products, and new branch opening in Fishers, Indiana to drive deposit growth.

Q: Updates on credit trends, exposure to tariffs, and commercial loan bill.

A: Doug Schosser mentioned exposure to certain industries due to tariffs, and Louis Torchio noted cautiously optimistic on commercial loan pipelines despite tariff effects.

Q: Competitive landscape, spread compression, and consumer loan growth.

A: Doug Schosser and Louis Torchio discussed competitive intensity, disciplined credit pricing, and balancing consumer loan growth with credit quality concerns.

Q: Loan growth guidance, pipelines, and impact of Penns Woods acquisition on NIM.

A: Doug Schosser and Louis Torchio talked about loan growth dependent on economic environment, and no specific guidance on Penns Woods NIM impact until after closing, with future M&A open to accretive deals but current environment tepid.