Northwest Bancshares, Inc. Q4 FY2024 earnings call

• Delivered solid Q4 returns with improved net interest margin and efficiency ratio.
• Focused on deposit gathering while maintaining low cost of funds.
• Reduced classified loans and strengthened balance sheet.
• Announced acquisition of Penns Woods Bancorp, expected to close in Q3 2025, marking a key milestone in long-term strategy.
• Declared quarterly dividend of $0.20 per share.
• Commercial and industrial loans growth reflects shift towards commercial banking transformation.
• Deposits remained strong with 2% growth vs prior year and lower cost of funds.
• Non-interest income increased due to gains on Visa B shares and low-income housing tax credit.
• Strong credit quality and robust capital position.

Net income was $33 million, or $0.26 per diluted share. Net interest margin expanded to 3.42%. Loan portfolio: Commercial and industrial loans grew 6.2% QoQ and 23.5% YoY; residential mortgages declined 6.6% YoY; commercial real estate portfolio shrank 0.4% QoQ. Deposits grew 2% vs Q4 2023. Non-interest income increased $12 million, including gains on Visa B shares and low-income housing tax credit. Non-interest expense increased 5%. Credit quality: Allowance coverage decreased to 1.04% of loans. Capital position: Tier 1 capital to risk-weighted assets estimated at 13.8% on Dec 31. Revenue contribution: Commercial and industrial loans grew 23.5% YoY, residential mortgages declined 6.6% YoY, commercial real estate portfolio shrank, deposits grew 2% vs prior year.

• Anticipate low single-digit loan and deposit growth.
• Expect non-interest income to be in the range of $124 million to $129 million for the full year.
• Keep expense growth in the low-single-digits in 2025.
• Tax rate and net charge-offs expected to normalize, with net charge-offs remaining within 25 to 35 basis points.
• Guidance excludes impact of the recently announced acquisition of Penns Woods Bancorp.

Q: Clarify non-interest income outlook excluding Penns Woods and driving factors A: Guidance excludes the impact from Penns Woods, and the firm is focused on driving better fee income performance and more consistent fee income performance strategically within the firm Q: Impact of rate movements on Penns Woods acquisition A: Won't provide updated guidance on the Penns Woods acquisition until closer to the closing date as it changes with stock price fluctuations Q: Update on healthcare portfolio credit quality A: Most stress in the long-term healthcare portfolio has been dealt with, some credits are in held for sale and expected to be exited by Q1 Q: Loan growth momentum, commercial vs consumer A: Strong commercial pipeline expected to be a net positive in 2025, with balanced growth including consumer loans when opportunities arise Q: Securities book roll-off and margin benefit A: Reinvesting cash flows into higher-yielding securities, with opportunistic repositioning of the securities book possible but not a core focus Q: Commercial real estate outlook A: Commercial real estate portfolio is flattish for the year, with strategic approach to opportunities when appropriate Q: Loan and deposit betas, NIM outlook A: Opportunity to lean into current rate environment, guided to continued margin growth in the $3.30 to $3.40 range, with upward sloping yield curve providing benefits Q: Provision and reserve expectations A: Slight increase in provision expected with loan growth, as per CECL models considering future credit losses Q: Capital deployment, buybacks A: Dividend is top priority, followed by organic growth, strategic M&A; buybacks not contemplated in the near or intermediate future Q: Deposit base pressure A: Priced competitively, not experiencing significant pressure as operating in less competitively intense markets