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    NWBI
    Earnings call· Jun 2026(Q2 FY26)

    Northwest Bancshares Q2 FY26 earnings call NWBI

    Jul 28, 2026 Source

    Executive summary

    Northwest Bancshares Q2 FY26 — Record Net Income and Strong Efficiency Gains

    Northwest Bancshares delivered a record-breaking second quarter, driven by strong net interest margin expansion and significant efficiency gains, marking its fourth consecutive quarter of improvement in both metrics. The company also achieved its Penns Woods acquisition tangible book value earn-back ahead of schedule, demonstrating successful integration and strategic execution. Management is focused on organic growth, expanding its financial center network, and optimizing financial performance for continued momentum in the second half of the year.

    Highlights

    5

    • Achieved record net income of $54 million, representing over 59% year-over-year growth.

    • Delivered diluted earnings per share of $0.36, also a record for the bank.

    • Recorded net interest margin of 3.75%, marking the fourth consecutive quarter of improvement.

    • Adjusted efficiency ratio improved to 56.2%, a 158 basis point improvement quarter-over-quarter.

    • Achieved the full tangible book value earn-back from the Penns Woods acquisition within 1 year, significantly ahead of expectations.

    Concerns

    3

    • Classified loans increased, attributable to the continued migration of acquired loans and downgrades in the healthcare book.

    • Noninterest expense is expected to step up in the second half of FY26, with a run rate of $107 million to $109 million, due to investments and a rebound in FDIC premiums.

    • Elevated runoff in the commercial real estate (CRE) portfolio continues to offset organic loan production.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year 2026 revenue
    middle of our stated range
    medium materiality
    Medium
    Full-year 2026 net interest margin
    373 to 375 basis points range
    high materiality
    High
    Full-year 2026 noninterest income
    high end of our range
    medium materiality
    Medium
    Full-year 2026 noninterest expense
    middle of our range
    medium materiality
    Medium
    Full-year 2026 net charge-offs
    low to middle of our range
    medium materiality
    Medium
    Full-year 2026 tax rate
    drift up to 24%
    medium materiality
    High
    Penns Woods tangible book value earn-back (crossover basis)
    by the end of 2026
    high materiality
    High
    Sub debt restructuring
    extinguishing it
    medium materiality
    High

    Operational metrics

    25
    Adjusted EPS
    $0.37up $0.02 QoQ
    Q2 FY26

    GAAP EPS was $0.36 per share.

    Total revenue
    $181.2 millionup 3.5% QoQ; up 20.5% YoY
    Q2 FY26

    Represents total revenue for the quarter.

    Positive operating leverage
    330 bpsQoQ
    Q2 FY26

    Achieved significant positive operating leverage.

    Pretax pre-provision net revenue (adjusted)
    $77.3 millionup 8% QoQ; up 31% YoY
    Q2 FY26

    Represents adjusted pretax pre-provision net revenue.

    Average C&I loan growth
    $148 millionup 5.6% QoQ; up 32.2% YoY
    Q2 FY26

    Continued strong performance in many new verticals and other commercial loan portfolios.

    C&I nationwide business verticals as % of commercial lending portfolio
    27%
    Q2 FY26

    Represents the proportion of the commercial lending portfolio from nationwide business verticals.

    Loan yield
    5.61%down 1 bp QoQ
    Q2 FY26

    Loan yield remained relatively stable.

    Average total deposits growth
    $87 millionQoQ
    Q2 FY26

    Partially benefiting from growth in money market and savings accounts and deepening customer relationships.

    Average balance per customer deposit account
    $19,800
    Q2 FY26

    Reflects the granular and diversified deposit book.

    Number of customer deposit accounts
    716,000
    Q2 FY26

    Reflects the granular and diversified deposit book.

    Average tenure of customer deposit accounts
    >12.5 years
    Q2 FY26

    Reflects the stability of the deposit base.

    Cost of deposits
    1.43%down 5 bps QoQ
    Q2 FY26

    Third consecutive quarter of decline, a product of proactive management.

    CD portfolio matured in Q2 FY26
    34%
    Q2 FY26

    New volumes coming on with rates in the low 3% are driving an overall decline in CD costs.

    Noninterest income increase
    $1.6 millionQoQ
    Q2 FY26

    Driven by growth in wealth management business, resulting in an increase in trust and financial services income. Increased $3.3 million or 10.6% YoY.

    FDIC insurance premium decrease
    $3.2 million
    Q2 FY26

    Lower due to a prior period assessment rate change driven by the amendment of prior period call reports.

    Quarterly annualized net charge-offs
    15 bps
    Q2 FY26

    Below the low end of full year guidance.

    NPAs as % of average loans
    70 bpsflat QoQ
    Q2 FY26

    Nonperforming assets remained mostly flat this quarter.

    Total delinquency
    0.90%down from 1.30% QoQ
    Q2 FY26

    Primarily as a result of the 30-day month effect on the mortgage portfolio and payoffs in the health care portfolio.

    90-day plus delinquencies
    49 bpsup from 34 bps QoQ
    Q2 FY26

    Increased quarter-over-quarter.

    Sub debt restructuring impact on NIM
    +2 bps
    future

    Expected impact on net interest margin from extinguishing sub debt within the next quarter.

    Penns Woods TBV earn-back (static)
    <1 year
    Q2 FY26

    Achieved the full tangible book value earn-back on a static basis within one year of the acquisition closing.

    Penns Woods TBV per share (post-acquisition)
    $9.88
    Q2 FY26

    Tangible book value per share as of June 30, 2026.

    Penns Woods TBV per share (pre-acquisition)
    $9.85
    pre-acquisition

    Tangible book value per share before the Penns Woods acquisition was announced.

    Total associates
    2,200
    Q2 FY26

    Reflects the hard work and dedication of the team.

    Noninterest expense run rate
    $107M-$109Mup from $103M-$104M in H1 FY26
    H2 FY26

    Expected sustainable level for noninterest expenses, primarily $108M, due to investments and FDIC premium rebound.

    Industry KPIs

    10
    MetricValueDetails
    Loans$13.2 billionUSD
    Deposits$87 millionUSD
    Rotce ROE14.9%%
    Capital returns$0.20USD per share
    Fee income lines$1.6 millionUSD
    Allowance reserves1.13%%
    Net interest margin3.75%%
    Net charge offs npls15 bpsbps
    Total operating expenses$107M-$109MUSD
    Efficiency ratio operating leverage56.2%%

    Product announcements

    2
    ProductTypeDetails
    First de novo financial center in Columbuslaunch
    New financial centers in Columbus (total)expansion

    Deals & partnerships

    1
    Penns WoodsAcquisition of Penns Woods Bancorp, Inc.

    Celebrated the one-year anniversary of the closing of the Penns Woods acquisition, which has been a very successful and accretive transaction.

    Risks & headwinds

    4
    Increase in classified loansQ2 FY26

    Attributable partly to the continued migration of acquired loans to our credit administration standards and downgrades in the health care book.

    Mitigation: Strategy to work them down over time; no expectation that the increase would result in higher overall charge-offs.

    Elevated runoff in residential mortgage and legacy CRE portfoliosQ2 FY26, expected to continue in H2 FY26 for CRE.

    Offset organic loan growth in Q2 FY26.

    Mitigation: Retooling the CRE business with new venues, products, and a different go-to-market strategy; leveraging C&I and new verticals for overall growth.

    Competitive environment for loan and deposit growthOngoing, H2 FY26.

    New Columbus branches will attract deposits at 'relatively higher rates'.

    Mitigation: Proactive management of the deposit portfolio; sub-debt restructuring to improve NIM; not compromising on loan structure.

    Noninterest expense step-upH2 FY26.

    Run rate of $107 million to $109 million expected in H2 FY26, up from $103 million to $104 million in H1 FY26.

    Mitigation: Continued focus on expense discipline; expecting positive operating leverage for the full year despite investments in growth.

    What to watch in Q3 FY26

    5

    Penns Woods TBV crossover earn-back

    By end of 2026
    CurrentAchieved static earn-back within 1 year.
    TargetCrossover earn-back by end of 2026.

    Why it matters

    Verifies the long-term accretion and success of a significant acquisition, impacting shareholder value.

    And on a static basis, we have achieved the full tangible book value earn-back within 1 year and expect to achieve the full earn-back on a crossover basis by the end of 2026, significantly ahead of our expectations when we announced the transaction.

    Q&A highlights

    6

    How do you see deposit growth in H2, given the current decline and rising loan-to-deposit ratio? How might this impact deposit pricing?

    Management clarified that average deposits were up $87 million QoQ, and the spot balance decline was due to an intentional shift from brokered CDs to FHLB funding. They expect continued growth, especially with new Columbus branches, and maintain low single-digit guidance for the full year.

    “We look at more critically sort of average deposits, which were up 0.6% for the quarter, $87 million.”

    asked by Daniel Tamayo · answered by Douglas Schosser

    2 min read5 chapters

    Detailed Narrative

    01

    Penns Woods Acquisition Success

    The company celebrated the one-year anniversary of the Penns Woods acquisition, achieving the full tangible book value earn-back on a static basis within one year, significantly ahead of the initial 2.9-year expectation. The crossover earn-back is now anticipated by the end of 2026. This success is attributed to disciplined target selection, effective integration, and cost removal, with management noting lessons learned to further refine their M&A playbook.

    02

    Strategic Growth Initiatives

    Northwest is expanding its footprint with the grand opening of its first de novo financial center in Columbus, part of a plan to open four new centers in Columbus this year and more in 2027. The company is also growing its nationwide business verticals, which now represent approximately 27% of the commercial lending portfolio, and strengthening its SBA lending business with new hires. These initiatives are expected to drive organic growth and deepen customer relationships.

    03

    Deposit Franchise Strength

    The bank's deposit franchise continues to be a core strength, achieving its fourth consecutive quarter of lower deposit costs, down 5 basis points QoQ to 1.43%. Average total deposits grew by $87 million QoQ, with the average balance per customer account at $19,800 across over 716,000 accounts. Management noted an intentional shift from brokered CDs to FHLB funding contributed to the spot balance decline, while customer deposits increased.

    04

    Credit Quality Management

    While overall ACL coverage remained relatively flat at 1.13%, classified loans increased due to the migration of acquired Penns Woods loans to Northwest's credit standards and downgrades in the healthcare book. Management expects to work down these classified loans over time⏳ and does not anticipate higher overall charge-offs, maintaining full-year NCO guidance in the low to middle of their range. Total delinquency declined from 1.30% to 0.90% QoQ.

    05

    Capital Allocation and M&A Strategy

    The immediate capital deployment priority is restructuring sub-debt to improve NIM by approximately 2 basis points. Beyond that, the focus remains on supporting organic growth and maintaining the dividend. While open to M&A opportunities that are highly accretive and strategically aligned, the company emphasizes disciplined execution and integration, leveraging lessons learned from the successful Penns Woods transaction to capitalize on future opportunities.

    AI-generated summary of the company’s earnings call. Not investment advice.