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Northwest Bancshares, Inc. (NWBI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered stable EPS ($0.26 GAAP; $0.27 adjusted) with notable operating momentum: NIM expanded 9 bps to 3.42% (6 bps from a non-accrual interest recovery), and the efficiency ratio improved to 61.8% . Noninterest income surged on gains from Visa B shares and a LIHTC investment .
  • Credit costs were elevated by deliberate de-risking (loan pool sales and healthcare loans moved to held-for-sale), driving provision to $16.6M and NCOs to 0.87% annualized; classified loans fell to 2.44% of loans, NPLs to 0.56% .
  • 2025 guidance: NIM 3.30–3.40%, NII +1–3% YoY, noninterest income $124–129M, expenses +2–4% YoY, NCOs 25–35 bps; loan growth 2–3% and deposits 1–2%, assuming 1–2 cuts; excludes Penns Woods acquisition .
  • Street estimates: S&P Global consensus was unavailable at the time of analysis; we will update estimate comparisons when accessible. In the interim, the new fee income and margin guide likely requires higher 2025 fee and modestly higher provision assumptions (qualitatively) (S&P Global estimates unavailable).

What Went Well and What Went Wrong

  • What Went Well
    • Margin/efficiency: “We saw a significant improvement in our net interest margin as well as in our efficiency ratio,” supported by deposit pricing discipline and stronger funding mix . NIM rose to 3.42% (3.36% ex one-time) and efficiency improved to 61.8% .
    • Fee strength: Noninterest income rose 44% QoQ and 37% YoY, driven by a gain on Visa B shares and a LIHTC investment .
    • De-risking: Classified loans reduced to $272M (2.44% of loans) and NPLs to 0.56% of loans, reflecting loan sales and transfers out of the long-term healthcare book .
  • What Went Wrong
    • Elevated credit costs: Provision rose to $16.6M and NCOs to 0.87% annualized due to de-risking charges (about $15M tied to sales/held-for-sale write-downs) .
    • Personnel normalization offset by tech/merger costs: Personnel expense fell QoQ, but non-personnel rose (tech investments, charitable timing, and ~$3M merger/restructuring) causing total opex to increase 5% QoQ .
    • Loan growth muted: Average loans were modestly lower QoQ as runoff/reinvestment mix continued (C&I up 6.2% QoQ; personal portfolios continued to decline) .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Interest Income ($MM)106.841 111.302 114.197
Total Noninterest Income/(Loss) ($MM)(8.849) 27.833 40.063
NII + Noninterest (ex securities/MSR, non-GAAP) ($MM)137.405 139.135 154.260
Diluted EPS ($)0.04 0.26 0.26
Adjusted Diluted EPS ($)0.27 0.26 0.27
Net Interest Margin (%)3.20 3.33 3.42
Efficiency Ratio (%)94.31 65.24 61.80
Avg Cost of Deposits (%)1.76 1.78 1.68
Total Provision for Credit Losses ($MM)(0.370) 4.875 16.565
Net Charge-offs to Avg Loans (annualized, %)0.07 0.18 0.87

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Average Loans Receivable ($MM)11,368.749 11,223.602 11,204.781
Average Deposits ($MM)12,086.362 12,096.811 12,028.417
Nonperforming Loans / Total Loans (%)0.92 0.69 0.56
ACL / Total Loans (%)1.10 1.11 1.04
Classified Loans ($MM)257.0 319.9 272.3
Classified / Total Loans (%)2.26 2.83 2.44
Equity / Assets (%)10.82 11.09 11.08
Tangible CE / Tangible Assets (%)8.37 8.64 8.65

Notes:

  • Q4 NIM includes ~6 bps benefit from a non-accrual interest recovery; adjusted NIM ~3.36% .
  • Noninterest income in Q2 includes a securities restructuring loss; the non-GAAP total net revenue line removes securities/MSR impacts .

Guidance Changes

MetricPeriodPrevious Guidance (Q3 commentary)Current Guidance (Q4)Change
Net Interest IncomeFY 2025Modest NIM expansion; balance sheet growth low single-digit implied NII tailwind .NII +1–3% YoY .Clarified to quantified growth (raised specificity).
NIMFY 2025“Modest expansion” into Q4/Q1 .Maintain 3.30–3.40% .Formal range provided.
Noninterest IncomeFY 2025Mid-single-digit growth off 9/30 base .$124–129M (absolute) .Higher visibility; explicit range.
Noninterest ExpenseFY 2025Keep flat to low single-digit growth run-rate (~$90M/quarter guidance) .+2–4% YoY .Tightened to full-year growth band.
Tax RateFY 2025Normalize closer to Q3 run-rate .Flat to 2024 .Maintained.
Net Charge-offsFY 2025Trend toward long-term averages .25–35 bps .Quantified normalization band.
Loan GrowthFY 2025Low single-digit .+2–3% YoY .Quantified.
Deposit GrowthFY 2025Largely flat .+1–2% YoY .More constructive.
Rate AssumptionsFY 2025Some cuts contemplated (late 2024/2025) .1–2 cuts in 2025 .Updated.
M&A (Penns Woods)Close timingActive M&A dialogue .Expected close 3Q’25; excluded from guidance .Timed and excluded from base plan.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
NIM trajectory & driversQ2: NIM inflected up 10 bps to 3.20% on securities repositioning and pricing discipline . Q3: +13 bps to 3.33%, ex 4 bps one-time recovery; cost of funds stable/improving .NIM 3.42% (+9 bps), ex 6 bps one-time interest recovery ~3.36%. Cost of deposits down 10 bps QoQ to 1.68% .Improving, underpinned by funding costs.
Deposit costs/mixQ2–Q3: CDs shortened, scope to reprice down; operating in less intense markets .No pushback on lower rates; deposit costs eased; deposit balances steady .Improving.
Mix shift to C&IQ2: C&I +33% YoY; loan growth muted to protect yields . Q3: C&I +25.7% YoY; CRE flat; consumer runoff persisted .Average C&I +6.2% QoQ; personal portfolios still down; strategic emphasis maintained .Continuing shift toward variable-rate C&I.
Credit/HealthcareQ2: Healthcare showing stress but stabilizing; guidance to normalized charge-offs over time . Q3: Classified loans rose to 2.83% (healthcare driven) .De-risking actions (sales/transfers) cut classified loans to 2.44% and NPLs to 0.56%; NCO spike tied to actions .Risk reduced; near-term cost absorbed.
Securities portfolioQ2: 15% sale at loss; reinvestment +420 bps yield; expected earn-back ~3 years . Q3: Yields rising; opportunistic repositioning possible .Yield continues to lift portfolio returns; no major reposition planned unless opportunity arises .Gradual tailwind; opportunistic.
M&A (Penns Woods)Q2–Q3: Active M&A screening; contiguous markets focus .PWOD deal announced (all-stock ~$270M), close 3Q’25; top-100 bank on combine; excluded from 2025 guide .Strategic expansion catalyst (2025E).
Capital & buybacksDividend priority; buybacks a lower-priority lever .Dividend maintained ($0.20); buybacks unlikely near term given payout and M&A .Consistent discipline.
Noninterest incomeQ2: Volatile due to securities loss; SBA/trust improving . Q3: Normalized to ~$28M .$40.1M with discrete gains (Visa B, LIHTC); 2025 guide $124–129M .Higher base with clearer outlook.

Management Commentary

  • CEO (press release): “Our focus on commercial banking and deposit growth has delivered an increase in average C&I loans and sustainable deposit generation while maintaining a stable cost of funds… improvements in our net interest margin and efficiency ratio” .
  • CEO (call): “We delivered solid returns… significant improvement in our net interest margin as well as in our efficiency ratio… reduce classified loans, helping us further eliminate risk from the balance sheet” .
  • CFO (call): “NIM expanded… to 3.42%, aided partially by an interest recovery… we continue to see our margin increase due to… pricing discipline on our deposit portfolio and… originated loans” . “Noninterest income increased $12 million… includes a $6 million gain on the sale of… Visa B shares and a $4 million gain related to a low-income housing tax credit investment” .

Q&A Highlights

  • Guidance scope: 2025 guidance excludes Penns Woods; fee income range reflects drive toward more consistent fee generation after one-offs in 2024 .
  • Penns Woods modeling: No updated purchase accounting/ TBV dilution guidance until closer to closing due to stock price/yield curve variability .
  • Credit clean-up: Most stress in long-term healthcare addressed via sales/transfers; residual held-for-sale expected to resolve in Q1; broader book stable .
  • Loan growth: Healthy commercial pipelines; balanced growth (C&I focus, opportunistic consumer), with portfolio remix continuing .
  • Securities book: Reinvesting cash flows into higher yields; potential opportunistic reposition if economics warrant .
  • CRE appetite: Selective; no intent to materially grow CRE; preference for C&I and variable-rate dynamics .
  • NIM outlook & betas: Upward bias sustained with upward-sloping curve; CDs likely timed to reissue later as rates fall .
  • Provision: Slight increases likely with loan growth and CECL macro inputs; reserve ratio to reflect mix shift over time .
  • Capital returns: Dividend remains priority; buybacks unlikely near term .
  • Deposit pricing: No notable customer pushback; competitive but manageable markets .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 were not available at the time of this analysis due to a data access limit. We will refresh comparisons vs consensus (EPS, revenue) when the feed is available (S&P Global estimates unavailable).
  • Implications for models: 2025 guidance implies:
    • Higher fee income run-rate ($124–129M) vs 2024 actual $87.0M, aided by SBA, trust, and steadier other income (guidance excludes one-time gains) .
    • NIM maintained in the 3.30–3.40% band and NII +1–3% YoY, with falling deposit costs and mix shift to C&I .
    • Provision assumptions should reflect normalized NCOs of 25–35 bps (vs Q4’s de-risking-driven 0.87% annualized headline, ~0.35% adjusted) .

Key Takeaways for Investors

  • Core earnings momentum is intact: sequential NIM expansion (ex one-time) and better efficiency signal positive operating leverage into 2025 .
  • Funding costs tailwind: Average cost of deposits fell 10 bps QoQ to 1.68%; further benefits likely as CDs reprice and competition moderates .
  • Proactive credit de-risking: Elevated Q4 credit costs were strategic; subsequent quarters should reflect lower classified/NPL levels and normalized NCOs (25–35 bps guide) .
  • Mix shift raises through-cycle earnings power: C&I growth (variable-rate, deposit/fee-rich) continues to replace lower-yield personal portfolios, supporting margin resilience .
  • Fee income visibility improves: 2025 range ($124–129M) suggests a higher, steadier base after 2024’s one-offs, a support for revenue diversification .
  • Expense trajectory manageable: Tech investments and merger costs elevated Q4 non-personnel; 2025 expense growth guided to 2–4% YoY despite ongoing strategic investments .
  • Strategic catalyst: Penns Woods is excluded from guide; expected 3Q’25 close with scale benefits and modeled accretion thereafter .

Additional Q4 2024 Details (for reference)

  • Dividend: $0.20/share; 121st consecutive quarter .
  • One-time items: ~$2.1M interest recovery added ~6 bps to NIM; other operating income boosted by Visa B and LIHTC gains .
  • Capital: CET1/Tier 1 at bank ~12.6%/12.6%; holding company Tier 1 leverage ~10.37% (est.) .