NWBI

LLM Evaluations

Transcript Summary

Northwest Bancshares, Inc. delivered a record Q1 2026 with $51 million in net income, a 16% year-over-year increase. Key drivers included robust 28% growth in C&I lending and a disciplined efficiency ratio of 57.8%. The bank's specialty national verticals now represent 23% of its commercial portfolio, providing significant risk diversification and yield. Despite intense competition, deposit costs fell for the third consecutive quarter to 1.48%, maintaining a healthy NIM of 3.70%. Credit metrics were largely positive, with NPAs declining and net charge-offs remaining low at 16 basis points, though management noted a slight uptick in classified loans from two specific C&I borrowers. Strategically, the bank is expanding its financial center footprint in the Columbus market and authorized a new $50 million share buyback program. Management reiterated their 2026 guidance, focusing on organic growth, wealth management, and SBA lending opportunities. While M&A activity remains slow due to market uncertainty, the bank's strong capital position and improving profitability metrics, such as a 14.6% ROTCE, position it well for the remainder of the year.

5-year share-count history (top 10 holders by peak, incl. exited) + price

Revenue Segments

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Northwest Bancshares, Inc.: Forensic scope limited by administrative-only filing data

Full Earnings Call Transcript — Q1 • 2026-04-28

Operator: Hello and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to Northwest Bancshares, Inc. first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star then the number 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Michael Perry, Managing Director of Corporate Development, Strategy, and Investor Relations. You may begin.
Michael Perry: Good morning, everyone, and thank you, operator. Welcome to Northwest Bancshares, Inc. first quarter 2026 earnings call. Joining me today are Louis J. Torchio, President and CEO of Northwest Bancshares, Inc.; Douglas M. Schosser, our Chief Financial Officer; and Thomas K. Creal, our Chief Credit Officer. During this call, we will refer to information included in the supplemental first quarter 2026 earnings presentation, which is available on our investor relations website. If you would like to read our forward-looking and other related disclosures, you can find them on slide 2. Thank you. I will now turn the call over to Louis J. Torchio.
Louis J. Torchio: Good morning, everyone. Thank you for joining us today to discuss our first quarter 2026 results. I will let Douglas M. Schosser take you through the specifics of our first quarter performance, but first, I want to reflect on the growing momentum and continuing transformation at Northwest Bancshares, Inc., and how our achievements in the first quarter have positioned us for continued growth in 2026. On slide 4, you can see some of the financial highlights of the first quarter 2026. We delivered $51 million in net income for the first quarter, a record in the company's history, resulting in more than 16% year-over-year net income growth. Momentum in our C&I business continued with $191 million of average C&I loan growth in the first quarter, representing 28% year-over-year growth. We have continued to grow our nationwide business verticals in a disciplined manner. The first of these was launched in 2023, and collectively, they now represent approximately 23% of our commercial lending portfolio. These verticals are led by experienced and highly networked industry leaders, giving us a strong point of distinction in these specialty finance areas. We continue to focus on growing our SBA lending business both locally and nationally in 2026, building on our momentum from earning a spot among the top originators in the U.S. by volume in 2025. We recorded a net interest margin of 370 basis points in 2026, benefiting from our deposit franchise, which is one of Northwest Bancshares, Inc.'s core strengths. We achieved our third consecutive quarter of lower deposit costs, among the best in class among our peers. Our ongoing expense management discipline allowed us to achieve another quarter of improved performance with our efficiency ratio at 59.4% and our adjusted efficiency ratio of 57.8% for the quarter, and we have now fully recognized all the expense benefits from our recent acquisition. Our record net income in 2026 drove strong returns with an ROAA of 1.22% and ROTCE of 14.6%. In addition, with recent headlines surrounding credit, I want to highlight that we saw our nonperforming assets and overall delinquencies decline this quarter, and we recorded a lower annualized net charge-off ratio of 16 basis points for the quarter, which is below the low end of our full-year guidance. We achieved these results while continuing to invest in talent, technology, and new financial centers to support our future growth. I am pleased with our results, and I am proud of the team for driving strong core performance across the bank. As we have highlighted on previous calls, we continue to execute on our plans to transform the consumer bank. With the opening of our first new financial center since 2018 in the Indianapolis MSA last year, we debuted our new financial center design focused on customer hospitality. We are continuing to build out our presence in our Columbus headquarters market with five new financial centers now under development and due to open later this year in key locations. We expect to open the first of these by the time we have our next earnings call in July. In 2026, we delivered on our commitment to our shareholders, returning more than half of our profits through a quarterly dividend of $0.20 per share. This is the 126th consecutive quarter in which the company has paid a cash dividend. Looking ahead for the rest of 2026, we continue to focus on delivering organic growth and strong financial performance, expanding our financial center network, serving our core customers and communities, and delivering growth across our consumer and commercial lines of business. I will now turn the call over to Douglas M. Schosser to review our first quarter results in more detail.
Douglas M. Schosser: Thank you, Louis, and good morning, everyone. As Louis indicated, we are pleased with our financial performance in the first quarter. This is the product of the efforts of our entire team working tirelessly to deliver these results, and I am grateful to the team for their efforts. Now let us continue on slide 5 of the earnings presentation, where I will walk you through the highlights of Northwest Bancshares, Inc.'s financial performance for the first quarter. Our GAAP EPS for the quarter was $0.34 per share, and on an adjusted basis our EPS was $0.35 per share, an improvement on the prior quarter of $0.31 per share and $0.33 per share, respectively, primarily driven by expense management discipline and a decrease in our overall provision for credit losses. Net interest income grew $300 thousand, or 0.2% quarter over quarter, with net interest margin improving to 370 basis points, benefiting from an increased securities portfolio yield and a decrease in our cost of deposits. On a year-over-year basis, net interest income improved 11.5%. Noninterest income decreased by $5.2 million quarter over quarter, driven by a higher BOLI benefit recorded in 2025. On a year-over-year basis, noninterest income improved 14.9%. Total revenue was $175.1 million for the first quarter, which represented a slight decline quarter over quarter due to a higher BOLI benefit recognized in 2025, but represented a 12.1% increase year over year. I would also point out that we achieved significant positive operating leverage of 560 basis points quarter over quarter in 2026 as we maintained our focus on exercising tight expense discipline and saw the last of our Penns Woods acquisition expense savings materialize. This also translated into an improvement in our adjusted efficiency ratio to 57.8%, which was a 170 basis point improvement quarter over quarter. All of this created an improvement in our pre-tax pre-provision net revenue in 2026, which increased to $71.7 million, a 1.5% increase from fourth quarter 2025 and a 9.3% increase year over year on an adjusted basis. Turning to slide 6, I will spend a moment covering our loan balances. Average loans grew $102 million quarter over quarter, benefiting from organic loan growth in both our commercial and consumer businesses as we continue to experience runoff in our residential mortgage and legacy CRE portfolio. We achieved our second consecutive quarter of period-end loan growth in the first quarter, with period-end loans increasing by $49 million to $13.1 billion, laying a strong foundation for continued growth in 2026. Our loan yield decreased to 5.62%, or 3 basis points, in the first quarter as we saw the impact of the December 2025 rate cut become fully priced into our loan portfolio. Our C&I loan growth continued with strong performance in several of our new verticals and in our other commercial loan portfolios. Average C&I loans increased $191 million, or 7.8%, quarter over quarter and $579 million, or 28.2%, year over year. Our overall interest rate sensitivity position remains slightly asset sensitive with continued growth in floating-rate commercial loans. However, we feel we are appropriately positioned for the current and expected interest rate environment in 2026 based on what we know now. Moving to slide 7 and our deposits, which continue to be a source of strength and stability, our average total deposits grew by $276 million quarter over quarter, partially benefiting from continued focus on commercial growth and deepening consumer relationships. Our granular, diversified deposit book has an average balance of more than $19 thousand 500, with customer deposits consisting of over 719 thousand accounts with an average tenure of more than 12 years. Our cost of deposits decreased 5 basis points to 1.48%, a product of our proactive management of the overall portfolio. As an example, 43% of our CD portfolio matured in 2026 at a weighted average rate of 3.60%. New volumes came on at a weighted average rate of 3.12%, supporting an overall decline in deposit costs. On slide 8, we show net interest margin increased 1 basis point to 370 basis points in 2026, with purchase accounting accretion's net impact equating to 7 basis points. Turning to our securities portfolio on slide 9. New security purchases in the quarter were consistent with the current composition of the portfolio and continue to strengthen an already strong source of liquidity. Our portfolio yield continues to increase as new securities purchased came on at a higher yield than the runoff portfolio, resulting in a yield increase of 4 basis points to 3.15% in the quarter. Twenty-six percent of this portfolio is in held-to-maturity, to protect tangible common equity. Turning to slide 10, our noninterest income decreased $5.2 million quarter over quarter, driven by a decrease in bank-owned life insurance income due to a higher BOLI benefit in 2025. Noninterest income increased $4.2 million year over year, benefiting from an increase in service charges and fees and a gain on an equity method investment. Regarding noninterest expense, as detailed on slide 11, as previously referenced, the adjusted efficiency ratio was 57.8% in 2026, representing our third consecutive quarter of improvement, continuing the expense management focus over the last year. Overall expense, excluding merger and restructuring expenses, was lower quarter over quarter due to lower compensation and benefits expenses driven by the completion and recognition of all the costs and benefits of the Penns Woods acquisition, combined with more normalized performance-based incentive compensation expenses. On a year-over-year basis, expenses in the first quarter 2026 were higher, but the year-ago quarter did not include the acquired Penns Woods operations. On slide 12, you will see our overall ACL coverage remain flat at 1.15% in 2026, driven by lower net charge-offs in the current period. Our quarterly annualized net charge-offs of 16 basis points were below the low end of our full-year guidance. Our NPAs declined this quarter. While our classified loans did increase this quarter, we have no expectation that the increase would result in higher overall charge-offs. Turning to credit quality on slide 13, our credit risk metrics remain within internal expectations, given the impacts of loans that we acquired. Our total delinquency declined from 1.50% to 1.30% quarter over quarter, primarily as a result of the planned runoff in the CRE criticized portfolio. Our 90-day-plus delinquency declined from 51 basis points to 34 basis points quarter over quarter. NPAs decreased by $16.5 million quarter over quarter to 70 basis points of average loans and are only slightly above the levels of first quarter 2025, mostly due to the payoff of a long-term health care facility. Taking a deeper dive into the breakdown of our credit quality on slide 14, in 2026 we did experience an increase in classified loans as a percentage of total loans and on an absolute basis, which was attributed partially to two C&I borrowers. As we have discussed on earlier calls, our strategy with respect to classified loans is to continue to work with our borrowers and preserve our market relationships. In addition, as we highlighted in the earnings release, the Board of Directors reviewed our share repurchase program, and we now operate with a buyback authorization of up to $50 million. This action, when combined with renewal of our shelf registration, is simply additional and appropriate capital management. Our capital priorities remain unchanged. Finally, on slide 15, we are maintaining our previous outlook for the full year 2026. We continue to be confident about Northwest Bancshares, Inc.'s business, and we are excited about the prospects for the year ahead. I will now turn the call over to the operator.
Operator: We will now open the call for questions. At this time, I would like to remind everyone that in order to ask a question, please press star then the number 1 on your telephone keypad. We will pause for just a moment. Your first question comes from the line of Daniel Tamayo with Raymond James. Please go ahead.
Daniel Tamayo: Thank you. Good morning, everyone. Maybe starting on the balance sheet growth on the loan side, can you walk us through expectations for paydowns, what drove them in the first quarter, and thoughts on the pace of slowing paydowns going forward and how that balances against origination activity in the commercial book? Also, it was a good quarter from a credit perspective with NPAs coming down and lower charge-off activity. You touched on the increase in criticized and classified, and you commented you are not expecting higher net charge-offs from that. Can you expand on why that would be the case and what gives you confidence those inflows will come through?
Douglas M. Schosser: Thanks for the question. In the first quarter, as we have discussed on prior calls, we continued to work through our criticized and classified asset book, so there will be some downward pressure from payoffs there. Additionally, there were some payoffs in CRE. A few years ago, we stopped originating a lot of commercial construction loans. Those are now slowly moving into the permanent market, so we continue to have a little bit of runoff there, and we are not necessarily back into that space in a significant way. Those dynamics will continue. One reason we are reiterating and keeping our guidance consistent is we believe there is opportunity around slowing residential mortgage loan payoffs that can help, and we continue to see good pipelines in all the commercial verticals and commercial businesses. Generally speaking, we are comfortable with the forward look on low- to mid-single digit loan growth for the year. On credit, we are reevaluating internal ratings on our loan portfolio. If we believed there was loss content, those credits would migrate into lower ratings and ultimately charge-offs. As we sit here today, we do not see that as a high probability. We continue to work with our borrowers through the cycle to preserve market relationships and help them work out credits in a positive way for both the borrower and the bank. There was nothing in the increase that gave us a lot of pause.
Operator: Your next question comes from the line of Jeff Rulis with D.A. Davidson. Please go ahead.
Jeff Rulis: Thanks. Good morning. On the securities purchases in the quarter, you added quite a bit. Do you feel like you still have appetite where earning asset growth outpaces loan growth, or are you still interested in building that side of the balance sheet? And on reserves, with the charge-off outlook you outlined, is the 1.15% reserve level roughly where you expect to manage it? Lastly, on capital, with the buyback, is that just widening the tools to use, and any update on M&A appetite?
Douglas M. Schosser: On securities, you are seeing a couple of dynamics. We discussed last quarter growing the overall size of the book because we were a little low relative to peers, but that was not meaningful growth. We also took advantage of what we thought the rate market would do. Early in the quarter, when we thought rates were likely to be cut a couple of times, we made some opportunistic purchases for paydowns we knew were occurring later in the first and into the second quarter. You will see the book grow a bit from that, but we are not going to reinvest new cash flows when they come off; they have already been reinvested. That is a more precise, tactical positioning rather than a material change to the composition of the balance sheet. So yes, it may be lumpier this quarter, but if you smooth it over the year, we expect pretty balanced percentages, and we are not anticipating growth in the securities portfolio as a percent of earning assets. On reserves, we are comfortable at the 1.15% coverage. It will be influenced by CECL model economics, charge-offs, and loan growth. With loan growth, we would have some additional reserving, but keeping overall coverage around 1.15% is likely. On the buyback, our prior authorization from 2012 was stale. It is good corporate practice to refresh it and share that with the street. It should be viewed as another tool in the capital management toolbox, much like the shelf registration. No change in capital priorities as a result of that move. I will turn it to Louis for M&A.
Louis J. Torchio: As we noted in our earlier commentary, we are most pleased with core growth and a really clean quarter. Our focus throughout 2026 is to continue to execute post-acquisition, scale our businesses, and improve financial returns, including ROA and ROTCE. Anecdotally, given uncertainty in the marketplace—macroeconomic, geopolitical, interest rates, and Fed policy—the M&A dialogue has slowed. We remain laser-focused on core organic back-to-back quarter results, and that is where we will be focused throughout 2026.
Operator: Your next question comes from the line of Tim Switzer with KBW. Please go ahead.
Tim Switzer: Good morning. My first question is on deposit competition. There have been reports that certain markets have been more competitive recently, particularly as it now looks like the Fed may not lower rates until later this year, if at all. Can you talk about what you are seeing in your markets—are any more competitive than others, and are different deposit categories more intense? Also, can you help us think about the expense trajectory over the course of the year, and where you think we might be sitting at the end of this year heading into 2027?
Douglas M. Schosser: We continue to see a very strong competitive set for deposits, and we do not see that changing. We also have branch openings and other initiatives where certain markets will be priced differently when you are in a heavy acquisition campaign versus maintenance. We are not seeing a let-up in deposit competition and continue to operate with that mindset. On expenses, we are pleased to have the Penns Woods expense saves behind us, so we would not expect further reductions from that activity. The path now is to manage expense growth consistently. With stronger performance, there can be higher potential costs around incentives and producer compensation. We have not changed our guide. We are slightly below an annualized level on the low end of that guidance, and we have given ourselves some room on expenses. We will continue to manage for positive operating leverage and keep expense growth in line with revenue growth.
Operator: Your next question comes from the line of Brian Foran with Truist. Please go ahead.
Brian Foran: Good morning. You mentioned the national commercial verticals are now 23% of loans. Two questions: Is there an upper limit or range where you are comfortable letting that get to as a percentage of the total loan book? And as you look ahead, is there anywhere you would flag either adding to existing teams or any appetite to add additional verticals? Also, on commercial real estate, is competition leading to pricing or structures where you are having to pass on deals?
Douglas M. Schosser: There is not a hard upper limit, but we remain prudent. The verticals are newer and have not gone through full cycles, so we are mindful of that. We are also looking for balanced commercial opportunities. We would like to see CRE paydowns slow. We have a new leader in that group and are optimistic about the business. We are around 130% of Tier 1 capital on CRE, so there is room there. We will make smart, strategic additions when opportunities arise, but we do not rely on any one area. On CRE competition, it is certainly competitive. We have been able to find spaces where we remain relevant to customers and maintain good pricing and structures. If that changes, we would reevaluate. Right now, structure has not been a binding constraint for us; there can be some pricing give. For well-structured deals with full relationships, that is part of the game.
Louis J. Torchio: Those national verticals provide differentiation and diversification of risk. We have procured industry experts, are scaling prudently, and are watching vintages. We want complementary growth in our core markets across the four states where we operate—lower middle market and business banking. We would like to mitigate some CRE runoff by focusing on light industrial, away from construction multifamily. We are maintaining hurdle rates and prudent underwriting amid economic uncertainty. We would not expect verticals to overtake the portfolio. Our pipeline is much stronger than a year ago, in large part due to scaling those verticals.
Operator: Your next question comes from the line of Manuel Navas. Please go ahead.
Manuel Navas: Thanks for the commentary today. Net charge-off performance was really strong. Is there potential for lower guidance eventually, and could you be looking at a lower long-term rate? Also, near-term NIM—can you talk about the moving parts? Where do you see loan yields from here, what are new pricing levels, and can deposit costs decline more without a Fed rate cut? With new branches opening, do you have room in your NIM guide to win market share in those markets? And lastly, where could you have eventual fee synergies from the Penns Woods acquisition, including C&I-driven fee opportunities? Also, on BOLI, is this quarter the right run rate?
Douglas M. Schosser: Our long-term net charge-off rates are through-the-cycle metrics to accommodate economic transitions, so we are not changing the long-term view. We are very happy with 16 basis points this quarter, but it is too early to pull back on the full-year guide, which is why we did not change it. It remains a wide range, and right now we think it is likely toward the lower side, but we are not changing it yet. On NIM, on the asset yield side with no rate cuts, we feel good about maintaining current levels. There is a push-pull as loans originated at higher rates pay off, creating pressure, but new originations are still priced a few basis points better on average than loans coming off. On deposits, we have originated deposits in a lower-rate environment, especially shorter-term CDs, so as that book rolls, there is still opportunity for cost reduction, but not as large as it has been. That is why we expect a pretty stable margin in the low 3.70% area. Competition is a factor. We are working hard to maintain margin, and it will be more of a grind—no big moves expected either way. On new branches, yes, we have room within our guide to support market-share acquisition with appropriate pricing. They will open throughout the year, and activity will be a relatively small percentage of the total. Pricing will differ by market, and we expect to see marketing and acquisition pricing tied to those openings. On fees, we are excited about growing our wealth business. We have added a new head of wealth and see opportunities, particularly as commercial grows and we connect wealth and commercial for liquidity events. Our offerings span brokerage to trust. SBA continues to be a fee opportunity with room to run. On BOLI, you are closer to the normal run rate now, but it can move around; within the number, we had about $100 thousand of benefit this quarter, so not materially different on a core level.
Louis J. Torchio: I would add that we are offering a more robust commercial suite—products and services that support fee generation. The Penns Woods acquisition fit nicely into our footprint and was lower risk for us. We are focused on transition and execution and believe we can do even better in-market with wealth, SBA, and commercial offerings. Our mortgage banking and home equity offerings are also robust. In Columbus, where we are headquartered, we see significant opportunity and scale. We are already in-market with hiring across commercial, small business, wealth, and mortgage to support upcoming branch openings.
Operator: Your next question comes from the line of Daniel Edward Cardenas with Green Capital. Please go ahead.
Daniel Edward Cardenas: Good morning, gentlemen. Most of my questions have been asked. Could you give additional color on the increase in classified loans? I think you said two C&I credits accounted for that jump. What industries were they in, and is that indicative of bigger trends?
Douglas M. Schosser: If you look at slide 14, we offered some color there. No one vertical or area stands out, and nothing gives us concern about the overall portfolio. They are somewhat isolated. As new financials come in, there will be migrations in and out. There was nothing that raised significant concern about emerging losses in future periods as a result of those changes.
Operator: Your next question comes from the line of Kyle Gierman with Group. Please go ahead.
Kyle Gierman: Hi. This is Kyle on for Dave Bishop. You had a nice uptick in C&I loans this quarter. Which verticals contributed the most, and what is the outlook for new segments into 2026?
Douglas M. Schosser: We do not break out growth by specific verticals. We continue to see good momentum across our national verticals. We are not planning to add new verticals at the moment and have no current intentions to change how we go to market.
Operator: Last question comes from the line of Matthew M. Breese with Stephens Inc. Please go ahead.
Matthew M. Breese: Good morning. On commercial real estate growth for the remainder of the year, is the expectation stabilization or even growth, or should we expect continued, albeit more moderate, declines from here? Also, on the C&I pipeline, what are the yields and spreads, and are there notable differences between local in-market C&I lending versus the national verticals?
Douglas M. Schosser: We are focused on stabilization rather than leaning into growth near term. We have new leadership, and we are working through prior pressure from construction loans refinancing to permanent that are coming off the book. We have room in CRE; our concentration is relatively low, and CRE remains a product that makes sense in our markets. On pipeline yields and spreads, composition is consistent with what has been going on the book. We are not seeing notable changes. Within our verticals, SBA will have higher spreads given the risk profile. We are comfortable with our opportunity to continue driving similar spreads and yields. In-market deals can be more competitive given different local players, which can create pricing pressure. The national verticals tend to reflect a more market-based perspective on rates and spreads.
Louis J. Torchio: Not all verticals are created equal. Some have broader opportunities for deposits and fees, while others are more transactional and asset-based. While in-market yields can be a little thinner given competition among large and small banks, cross-sell opportunities and integrated product penetration per customer are important to our strategy. Both the national and in-market approaches are important, and we are highly focused in-market to capture our share.
Operator: That concludes our Q&A session. I will now turn the call back over to Louis J. Torchio, CEO, for closing remarks.
Louis J. Torchio: On behalf of the entire leadership team and the Board of Directors, thank you for joining our call this morning. I am excited about our momentum in 2026, as we are well positioned to capitalize on opportunities to drive profitable core growth. I look forward to speaking with you on our second quarter earnings call in the summer.
Operator: That concludes today’s call. Thank you all for joining. You may now disconnect. Everyone, have a great day.