To The Moon

$Northwest Bancshares(NWBI)$

Income Statement

Total income increased due to the recent shift in the loan mix to higher-yielding commercial loans, which was also boosted by a one-time pay-off of $13.1 million from a borrower who had stopped paying interest (non-accrual).

Total expenses saw a slight decrease caused by lower borrowed funds (they ended up paying less interest on the remaining borrowings), and reduced the use of higher-cost brokered CDs (certificates of deposit), which is another source of funding for the bank but an expensive one.

The provision for credit losses has increased because expectations for future loan losses are significantly higher compared to the same quarter last year. This is mainly due to the growth of their commercial loan portfolio, which includes larger and riskier loans. Additionally, unfavorable economic forecasts have also been taken into account.

The bank also reported an increase in the classified loans (higher risk) to total loans ratio from 1.99% to 2.49% year over year.

The income tax expense increased due to higher earnings, and the bank’s net income rose 49% year over year.

Balance Sheet

• Average loans receivable was at $11.1 billion, dropped by 1.5%

• Average deposits were at $12.08 billion, increased by 1.7%

• Average borrowed funds were at $224 million, decreased by 52.3%

The average borrowed funds decrease shows that the bank has significantly reduced its debt in borrowed funds, therefore reducing interest expenses (as mentioned earlier in this article).

ROE & Efficiency Ratio

The bank’s return on equity (ROE), which measures how good they are at converting equity financing into profits, was at 10.90% from 7.57% for the same quarter the year before.

The efficiency ratio, which measures whether the bank is generating strong revenue compared to its costs, was at 58.74% down from 68.62% year over year. In this case, the lower the better.

Here’s a comparison table between Northwest and some of the largest banks in the US:

Non-Performing and Delinquent Loans

Non-performing loans experienced another decline, decreasing by 4.35% quarter over quarter and 39.1% year over year to $59.3 million, primarily due to fewer problems in their commercial loan book.

The delinquent loans (loans with missed payments but not yet considered a loss) continue to show us poor borrower creditworthiness. There was an increase of 12% quarter over quarter and 24% year over year to $112 million, where the biggest increase was in the loans delinquent 90 days or more (from $26.1 million to $39.3 million).

For perspective, the total of delinquent loans represents 1% of the total amount of that type of loan outstanding.

2025 Outlook Guidance

Highlights:

On April 23, Northwest Bancshares obtained both regulatory and shareholder approval for its merger with Penns Woods Bancorp.

These approvals are typically the most significant challenges in the merger process. Regulatory approval ensures that the merger does not pose any risks to the financial stability of the bank, while shareholder approval shows that investors support the merger.

The completion of the merger is expected to happen in 3Q25.