Northwest Bancshares, Inc. (NWBI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: stable NIM and noninterest income, but vague responses on key metrics like net charge-offs and NIM improvement. The Q&A reveals cautious optimism in SBA growth and prudent management, yet lacks concrete data. The absence of M&A activity and steady loan growth further temper expectations. Given the market cap, a neutral sentiment is appropriate, with stock movement likely within -2% to 2%.
Key Financial Performance
Revenue Record revenue of $655 million for the full year 2025, driven by the acquisition of Penns Woods and expansion of net interest margin.
Earnings Per Share (EPS) GAAP EPS for the fourth quarter was $0.31 per share, and adjusted EPS was $0.33 per share, an improvement from the prior quarter's $0.29 per share and $0.04 per share, respectively. This was driven by record revenue, net interest margin improvement, and expense management discipline.
Net Interest Income Grew $6.2 million or 4.6% quarter-over-quarter, with net interest margin improving to 3.69%, benefiting from higher average loan yields, increased average earning assets from the acquisition, and purchase accounting accretion.
Noninterest Income Increased by $5.5 million or 17% quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit recorded in the fourth quarter.
Pretax Pre-Provision Net Revenue Increased to $66.4 million in the fourth quarter of 2025, a 92% increase from the third quarter 2025 on a GAAP basis, and $70.6 million, a 7% improvement from the third quarter 2025 on an adjusted basis.
Loan Balances Average loans grew $414 million quarter-over-quarter, benefiting from the acquired balance sheet and organic loan growth. End-of-period loans grew by $66 million in the fourth quarter, ending the year at $13 billion. Loan yield increased to 5.65% in the fourth quarter of 2025, growing by 2 basis points quarter-over-quarter.
Commercial Loans Average commercial loans increased $162 million or 7.1% quarter-over-quarter and $509 million or 26% year-over-year.
Deposit Balances Average total deposits grew by $475 million quarter-over-quarter, benefiting from the acquired balance sheet and organic growth. Customer nonbrokered average deposits increased $507 million quarter-over-quarter, while brokered deposits decreased $32 million quarter-over-quarter. Cost of deposits decreased 2 basis points to 1.53%.
Net Interest Margin Increased 4 basis points to 3.69% in the fourth quarter of 2025, with purchase accounting accretion net impact equating to 4 basis points.
Securities Portfolio Purchased $363 million of securities during the quarter, consistent with existing portfolio risk metrics. Portfolio yield increased 29 basis points to 3.11% in the quarter.
Noninterest Income (Year-over-Year) Decreased $2.3 million year-over-year, as the prior year quarter included a gain on sale of Visa B shares and a gain on low-income housing tax credit investment that did not recur in 2025.
Adjusted Efficiency Ratio Improved to 59.5% in the fourth quarter 2025, improving by 10 basis points quarter-over-quarter and 9 basis points year-over-year, reflecting tight expense management.
Net Charge-Offs Net charge-offs in the current period were 40 basis points annualized, elevated due to a $9.2 million charge-off of a student housing loan. Full-year 2025 net charge-offs were 25 basis points, at the bottom end of the full-year guidance of 25 to 35 basis points.
Credit Quality Total delinquency increased from 1.10% to 1.50% quarter-over-quarter, primarily due to mortgage loans. 90-day plus delinquencies declined from 0.64% to 0.51% quarter-over-quarter, and NPAs decreased by $21 million quarter-over-quarter.
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Operating Highlights
New financial centers: Opened the first new financial center since 2018 in Indianapolis, Indiana, featuring a new design focused on customer hospitality. Developing new financial centers in Columbus, Ohio, to expand presence.
Franchise finance vertical: Introduced a new franchise finance vertical, enhancing nationwide business verticals with experienced industry leaders.
Acquisition of Penns Woods: Acquired and integrated Penns Woods, adding 20 financial centers in Pennsylvania and entering the top 100 U.S. banks by assets.
SBA lending growth: Materially grew SBA lending activity, earning a spot among the top 50 originators in the U.S. and secured significant funding for Columbus-based business.
Net interest margin improvement: Net interest margin improved to 3.69% in Q4 2025, driven by higher average loan yields and purchase accounting accretion.
Expense management: Adjusted efficiency ratio improved to 59.5% in Q4 2025, reflecting tight expense discipline.
Leadership investments: Hired accomplished executives across various domains to drive transformation and growth.
Classified assets reduction: Significantly reduced classified assets, improving credit quality metrics.
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Risk or Challenges
Loan Charge-Offs: The company experienced a $9.2 million charge-off of a student housing loan, which was originated over 10 years ago and had been in workout for several years. This highlights potential risks in legacy loan portfolios.
Delinquency Rates: Total delinquency increased from 1.10% to 1.50% quarter-over-quarter, primarily due to mortgage loans. This could indicate potential challenges in credit quality.
Classified Loans: Although classified loans have declined, they remain a focus area, indicating ongoing risks in certain loan portfolios.
Merger and Integration Costs: The full quarter of expenses from the Penns Woods acquisition increased overall expenses, which could pressure profitability if not managed effectively.
Economic Sensitivity: The balance sheet has become slightly more asset-sensitive due to growth in floating rate commercial loans, which could pose risks in a volatile interest rate environment.
Deposit Costs: 43% of the CD portfolio matures in Q1 2026 at a weighted average rate of 3.60%. If new volumes are not secured at lower rates, this could increase funding costs.
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Guidance & Outlook
Loan Growth: Expected to grow in the low to mid-single digits in 2026.
Deposit Growth: Anticipated to grow in the low single digits in 2026.
Revenue: Projected to be in the range of $710 million to $730 million for 2026.
Net Interest Margin: Expected to be in the low 3.70s for 2026.
Noninterest Income: Anticipated to range between $125 million and $130 million in 2026.
Noninterest Expense: Expected to be between $420 million and $430 million in 2026.
Net Charge-Offs: Anticipated to range between 20 to 27 basis points in 2026.
Tax Rate: Expected to remain flat at approximately 23% for 2026.
Cost Savings from Merger: Expected to achieve 100% of the cost savings in the first quarter of 2026, ahead of schedule.
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Shareholder Return Plan
Quarterly Dividend: In 2025, the company returned more than half of its profits to shareholders through a quarterly dividend of $0.20 per share. This marks the 125th consecutive quarter in which the company has paid a cash dividend.
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Key Q&A
Q:Can you comment on the trend line with expenses for the year, particularly in Q1?
A:Douglas Schosser explained that expenses typically increase in Q1 due to FICA resets and other factors. He noted that while Q1 might be slightly elevated, it would not reach the same level as Q4. The overall guide of $425 million for the year, averaging $105 million per quarter, remains accurate.
Q:Was some of the performance-based expense in Q4 nonrecurring?
A:Douglas Schosser confirmed that there was a lift in Q4 due to year-end true-ups of incentive and production plans, which were nonrecurring.
Q:Does the margin guidance of 3.30% to 3.70% include accretion, and what are the rate assumptions underlying it?
A:Douglas Schosser stated that the guidance includes normal contractual purchase accounting accretion and assumes two more rate cuts in the year. However, the guidance is not contingent on these rate cuts as the bank is neutrally positioned.
Q:What is the overall net purchase accounting impact to NII this quarter, and is it a good run rate going forward?
A:Douglas Schosser clarified that the impact was $4 million or 4 basis points, which is a reasonable run rate going forward, assuming no significant changes in prepayments.
Q:Can you provide more details on the SBA business and its growth expectations?
A:Douglas Schosser and Louis Torchio discussed the SBA business, highlighting its flexibility for commercial loan growth and fee income. They aim to balance sheet a portion of SBA loans while selling others for gains. The business is scaling prudently, with a focus on quality and customer retention in their footprint. They are now among the top 40 SBA originators by volume.
Q:Where is the talent for the SBA business being sourced from, and how is the business being prudently managed?
A:Louis Torchio mentioned that the team includes experienced professionals from top firms like GE, TD Bank, and LendingClub. The focus is on hiring the best talent and ensuring prudent management through strong underwriting and portfolio management.
Q:What is the timing and appetite for growing the securities portfolio?
A:Douglas Schosser explained that securities were purchased in mid-to-late October and November. The bank aims to grow the portfolio slightly to align with peers, targeting around 17% of loans or assets in securities. They also aim to prepurchase securities maturing within the quarter to benefit from yield.
Q:How should we think about CRE as a contributor to loan growth this year?
A:Douglas Schosser noted that while CRE has some headwinds, the bank is looking to support good developers and operators in their footprint. They aim to turn the CRE business around to achieve flat to slight growth over the next year or two.
Q:What segments and geographic areas are leading loan growth, and how is the pipeline looking?
A:Douglas Schosser stated that loan growth is broad-based, with a focus on national verticals and their four-state footprint. The pipeline looks strong, and opportunities exist in areas like equipment finance due to tax changes.
Q:What are the payoff and prepayment trends this quarter?
A:Douglas Schosser mentioned that paydowns were driven by criticized and classified assets and normal business flows. Interest rate changes also led to some refinancing activity.
Q:What was the exact amount of the BOLI death benefit?
A:Douglas Schosser confirmed that the BOLI death benefit was approximately $6.5 million.
Q:What is the blended new cost of CDs, and how much room is there to lower core deposit costs?
A:Douglas Schosser estimated a 10-15 basis point opportunity for CD repricing. Core deposit cost reductions may lag rate reductions by 30-45 days.
Q:What is the appetite for whole bank M&A, and are there ongoing conversations?
A:Louis Torchio stated that the focus is on organic growth and executing the 2026 plan. While open to conversations, there is no imminent M&A activity. Future deals would need to fit culturally and geographically.
Q:What are the drivers and progression of the NIM across the year?
A:Douglas Schosser explained that the NIM is expected to remain in the low 3.70% range, with slight improvement later in the year due to lower funding costs. Asset growth will also be a focus.
Q:What are the assumptions for net charge-offs, and how will they progress?
A:Douglas Schosser stated that net charge-offs are expected to remain steady throughout the year, with no significant spikes anticipated. The long-term guide remains at 25-35 basis points.
Q:What is the mix of loan growth expected this year?
A:Douglas Schosser and Louis Torchio highlighted opportunities across all segments, including consumer, CRE, and national verticals. The bank aims to maintain a balanced portfolio, targeting low to mid-single-digit growth.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the progression of net charge-offs and the exact drivers of NIM improvement across the year. Additionally, while they discussed the SBA business and securities portfolio growth, some responses lacked precise numerical data or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America bank
Bancshares Chief
Bancshares Instructions
CI momentum
Columbus SBA
Columbus headquarters
Corporate Development
Director Corporate
Indiana MSA
Instructions Managing
MSA design
Managing Director
Newsweek America
Northwest achievement
Northwest culture
Northwest integration
SBA bank
Slide highlight
Woods rank
achievement Slide
acquisition digit
acquisition integration
acquisition record
activity spot
advance door
area SBA
asset foundation
bank asset
bank banking
bank branch
bank consumer
bank service
bank talent
banking CI
banking wealth
branch consolidation
center
detail outlook
executive
finance
member
NWBI Transcript
Northwest Bancshares, Inc. (NWBI) Q4 2025 Earnings Call Transcript
Unknown1-27
The earnings call presents a mixed picture: stable NIM and noninterest income, but vague responses on key metrics like net charge-offs and NIM improvement. The Q&A reveals cautious optimism in SBA growth and prudent management, yet lacks concrete data. The absence of M&A activity and steady loan growth further temper expectations. Given the market cap, a neutral sentiment is appropriate, with stock movement likely within -2% to 2%.
Northwest Bancshares, Inc. (NWBI) Q3 2025 Earnings Call Transcript
Positive10-28
The earnings call highlights stable financial performance, strategic growth plans, and effective integration of the Penns Woods acquisition. Management's commitment to maintaining operating leverage while opening new branches suggests positive future growth. The Q&A reveals strong loan pipelines and stable consumer behavior, mitigating risks. Despite some unclear guidance, the overall sentiment is positive, especially with plans for expansion and capital flexibility. Given the company's small-cap status, the stock is likely to experience a positive price movement in the 2% to 8% range over the next two weeks.
Northwest Bancshares, Inc. (NWBI) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call summary presents mixed signals. Basic financial performance and shareholder return plans are positive, but product development and market strategy are unclear. The Q&A section reveals management's reluctance to provide detailed guidance, leading to uncertainty. Despite strong financial metrics, the lack of updated guidance and potential risks in the loan portfolio temper expectations. Given the company's market cap, the stock price is likely to remain stable, resulting in a neutral prediction.
Earnings call transcript: Northwest Bancshares Q1 2025 beats estimates, shares rise
Positive4-29
The company reported strong financial performance with a 19% revenue increase and 48% net income growth, alongside a higher net interest margin. Despite market volatility and competitive pressures, the company shows resilience with strategic money market growth and stable credit quality. The shareholder return plan includes a consistent dividend, though no share repurchase. The Q&A session reflected cautious optimism with ongoing M&A considerations and minimal impact from tariffs. Given the small-cap nature of the stock, the positive financial results and strategic outlook are likely to drive a positive stock price movement.
NWBI Slides
NWBI Report
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