Northwest Bancshares' Q2 2025: Unpacking Contradictions in Deposit Growth, Loan Strategies, and Cost Savings

Deposit growth and strategy, loan growth strategy and approach, cost savings expectations, deposit growth expectations, and commercial loan growth strategy are the key contradictions discussed in Northwest Bancshares, Inc.'s latest 2025Q2 earnings call.



Merger Success and Financial Performance:
- Northwest Bancshares successfully closed the largest transaction in its history, the merger with Penns Woods, while maintaining strong operational and financial performance.
- This resulted in Northwest ranking as one of the nation's 100 largest bank holding companies with total assets of approximately $17 billion.
- The merger was executed on target or better than expected, with key metrics including expected cost reductions aligning with initial projections.

Net Interest Margin and Loan Growth:
- Northwest reported a net interest margin of 3.56% for Q2 2025, which compares favorably to the previous quarter's adjusted margin of 3.48%.
- The company achieved a 19% increase in average C&I loans compared to the same period last year.
- The improved margin and loan growth were driven by proactive funding cost management and a strategic shift towards commercial lending.

Deposit Management and Stability:
- Average deposits increased by $66 million or 0.5% quarter-over-quarter and $67 million or about 0.6% year-over-year.
- The cost of deposits decreased by 4 basis points quarter-over-quarter, maintaining a cost of deposits at 1.55%.
- Effective deposit management and proactive portfolio management contributed to these positive trends.

Credit Quality and Allowance Coverage:
- The annualized net charge-offs were 18 basis points for the quarter, below guidance and in line with historic performance.
- The allowance coverage ratio increased to 1.14%, with an overall stable credit quality despite slight increases in classified loans.
- The credit performance was supported by prudent credit risk management and appropriate allowance coverage levels.

Future Outlook and Penns Woods Integration:
- Northwest expects to earn approximately 2/3 of a quarter's worth of revenue and income from Penns Woods by the end of 2025.
- For the fourth quarter of 2025, net interest income is expected to be in the range of $139 million to $141 million, noninterest income in the range of $32 million to $33 million, and net charge-offs are expected to average loans slightly below the previously disclosed range.
- The company anticipates fully realizing cost savings from the Penns Woods acquisition by the second quarter of 2026.